-----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,
 AcERY2qmCo7nVqdCzD3RTiwrOfJJPTHNvyoAwrMIiGNUZ2pAJNcDLYjAl5Ya7U0m
 kcqlKki9U34GkzMPV4QKDA==

<SEC-DOCUMENT>0000950152-01-501895.txt : 20010515
<SEC-HEADER>0000950152-01-501895.hdr.sgml : 20010515
ACCESSION NUMBER:		0000950152-01-501895
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		5
CONFORMED PERIOD OF REPORT:	20010331
FILED AS OF DATE:		20010514

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:		10-Q
		SEC ACT:		
		SEC FILE NUMBER:	001-11302
		FILM NUMBER:		1633310

	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
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>l87949ae10-q.txt
<DESCRIPTION>KEYCORP    FORM 10-Q
<TEXT>

<PAGE>   1
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                              Washington D.C. 20549

                                    Form 10-Q

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the Quarterly Period Ended March 31, 2001

                                       or

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                 For the Transition Period From ______ To ______

                          Commission File Number 0-850

                                 [KEYCORP LOGO]
            ------------------------------------------------------
            (Exact name of registrant as specified in its charter)

<TABLE>
<CAPTION>

<S>                                                                <C>
                    OHIO                                                          34-6542451
- ---------------------------------------------                      ------------------------------------------
      (State or other jurisdiction of                                          (I.R.S. Employer
       incorporation or organization)                                         Identification No.)

     127 PUBLIC SQUARE, CLEVELAND, OHIO                                           44114-1306
- ---------------------------------------------                      ------------------------------------------
  (Address of principal executive offices)                                        (Zip Code)

                                                 (216) 689-6300
                             ------------------------------------------------------
                              (Registrant's telephone number, including area code)
</TABLE>


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X|  No | |

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

<TABLE>
<CAPTION>

<S>                                                               <C>
        Common Shares with a par value of $1 each                         424,518,284 Shares
      ----------------------------------------------              ------------------------------------
                    (Title of class)                                (Outstanding at April 30, 2001)
</TABLE>


<PAGE>   2


                                     KEYCORP

                                TABLE OF CONTENTS


                          PART I. FINANCIAL INFORMATION

<TABLE>
<CAPTION>

<S>        <C>                                                                                <C>
Item 1.    FINANCIAL STATEMENTS                                                               Page Number
                                                                                              -----------
           Consolidated Balance Sheets --
              March 31, 2001, December 31, 2000 and March 31, 2000                                 3

           Consolidated Statements of Income --
              Three months ended March 31, 2001 and 2000                                           4

           Consolidated Statements of Changes in Shareholders' Equity --
              Three months ended March 31, 2001 and 2000                                           5

           Consolidated Statements of Cash Flow --
              Three months ended March 31, 2001 and 2000                                           6

           Notes to Consolidated Financial Statements                                              7

           Independent Accountants' Review Report                                                 24

Item 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
              AND RESULTS OF OPERATIONS                                                           25

Item 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK                                 53



                           PART II. OTHER INFORMATION

Item 1.    LEGAL PROCEEDINGS                                                                      54

Item 6.    EXHIBITS AND REPORTS ON FORM 8-K                                                       54

           Signature                                                                              54
</TABLE>


                                       2
<PAGE>   3
PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                                          MARCH 31,  DECEMBER 31,  MARCH 31,
dollars in millions                                                                         2001         2000        2000
- --------------------------------------------------------------------------------------------------------------------------
                                                                                         (UNAUDITED)             (UNAUDITED)
<S>                                                                                       <C>         <C>         <C>
ASSETS
Cash and due from banks                                                                   $  2,484    $  3,189    $  2,757
Short-term investments                                                                       1,892       1,884       2,567
Securities available for sale                                                                6,900       7,329       6,269
Investment securities (fair value: $1,220, $1,208 and $1,063)                                1,208       1,198       1,053
Loans, net of unearned income of $1,783, $1,789 and $1,618                                  67,027      66,905      64,064
          Less: Allowance for loan losses                                                    1,001       1,001         979
- --------------------------------------------------------------------------------------------------------------------------
          Net loans                                                                         66,026      65,904      63,085
Premises and equipment                                                                         703         717         761
Goodwill                                                                                     1,311       1,324       1,378
Other intangible assets                                                                         40          44          56
Corporate-owned life insurance                                                               2,241       2,215       2,132
Accrued income and other assets                                                              3,652       3,466       3,446
- --------------------------------------------------------------------------------------------------------------------------
          Total assets                                                                    $ 86,457    $ 87,270    $ 83,504
                                                                                          ========    ========    ========

LIABILITIES
Deposits in domestic offices:
     Noninterest-bearing                                                                  $  8,329    $  9,076    $  8,283
     Interest-bearing                                                                       36,152      35,519      34,718
Deposits in foreign office--interest-bearing                                                 1,484       4,054       3,035
- --------------------------------------------------------------------------------------------------------------------------
          Total deposits                                                                    45,965      48,649      46,036
Federal funds purchased and securities sold under repurchase agreements                      4,463       4,936       2,621
Bank notes and other short-term borrowings                                                   8,721       6,957       8,015
Accrued expense and other liabilities                                                        4,803       4,701       4,312
Long-term debt                                                                              14,495      14,161      14,784
Corporation-obligated mandatorily redeemable preferred capital securities
  of subsidiary trusts holding solely subordinated debentures of KeyCorp (See Note 9)        1,308       1,243       1,243
- --------------------------------------------------------------------------------------------------------------------------
          Total liabilities                                                                 79,755      80,647      77,011

SHAREHOLDERS' EQUITY
Preferred stock, $1 par value; authorized 25,000,000 shares, none issued                      --          --          --
Common shares, $1 par value; authorized 1,400,000,000 shares; issued 491,888,780 shares        492         492         492
Capital surplus                                                                              1,399       1,402       1,406
Retained earnings                                                                            6,444       6,352       6,077
Loans to ESOP trustee                                                                          (13)        (13)        (24)
Treasury stock, at cost (67,474,937 and 54,299,186 shares)                                  (1,573)     (1,600)     (1,301)
Accumulated other comprehensive loss                                                           (47)        (10)       (157)
- --------------------------------------------------------------------------------------------------------------------------
          Total shareholders' equity                                                         6,702       6,623       6,493
- --------------------------------------------------------------------------------------------------------------------------
          Total liabilities and shareholders' equity                                      $ 86,457    $ 87,270    $ 83,504
                                                                                          ========    ========    ========
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>

See Notes to Consolidated Financial Statements (Unaudited).


                                       3

<PAGE>   4


                 CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

<TABLE>
<CAPTION>
                                                                          THREE MONTHS ENDED MARCH 31,
                                                                          ----------------------------
dollars in millions, except per share amounts                                        2001         2000
- ------------------------------------------------------------------------------------------------------
<S>                                                                             <C>          <C>
INTEREST INCOME
Loans                                                                           $   1,418    $   1,347
Taxable investment securities                                                           7            4
Tax-exempt investment securities                                                        5            6
Securities available for sale                                                         120          112
Short-term investments                                                                 20           20
- ------------------------------------------------------------------------------------------------------
     Total interest income                                                          1,570        1,489

INTEREST EXPENSE
Deposits                                                                              460          377
Federal funds purchased and securities sold under repurchase agreements                70           48
Bank notes and other short-term borrowings                                            105          126
Long-term debt, including capital securities                                          247          267
- ------------------------------------------------------------------------------------------------------
     Total interest expense                                                           882          818
- ------------------------------------------------------------------------------------------------------
NET INTEREST INCOME                                                                   688          671
Provision for loan losses                                                             110          183
- ------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses                                   578          488

NONINTEREST INCOME
Trust and investment services income                                                  141          160
Investment banking and capital markets income                                          65           89
Service charges on deposit accounts                                                    84           86
Corporate-owned life insurance income                                                  27           25
Letter of credit and loan fees                                                         29           23
Net securities gains                                                                   26            1
Gain from divestiture                                                                  --          332
Other income                                                                           83           90
- ------------------------------------------------------------------------------------------------------
     Total noninterest income                                                         455          806

NONINTEREST EXPENSE
Personnel                                                                             364          382
Net occupancy                                                                          57           57
Computer processing                                                                    62           59
Equipment                                                                              38           48
Marketing                                                                              27           22
Amortization of intangibles                                                            26           25
Professional fees                                                                      18           19
Restructuring charges                                                                  (4)           7
Other expense                                                                         110          108
- ------------------------------------------------------------------------------------------------------
     Total noninterest expense                                                        698          727

INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE                 335          567
Income taxes                                                                          117          200
- ------------------------------------------------------------------------------------------------------
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE                                  218          367
     Cumulative effect of accounting change, net of tax (see Note 1)                   (1)          --
- ------------------------------------------------------------------------------------------------------
NET INCOME                                                                      $     217    $     367
                                                                                =========    =========

Per common share:
     Income before cumulative effect of account change                               $.51         $.83
     Net income                                                                       .51          .83
     Income before cumulative effect of accounting change - assuming dilution         .51          .83
     Net income - assuming dilution                                                   .51          .83
Weighted average common shares outstanding (000)                                  424,024      441,834
Weighted average common shares and potential common shares outstanding (000)      429,917      443,757
- ------------------------------------------------------------------------------------------------------
</TABLE>

See Notes to Consolidated Financial Statements (Unaudited).


                                       4


<PAGE>   5
     CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                         ACCUMULATED
                                                                             LOANS TO      TREASURY            OTHER
Dollars in millions,                        COMMON    CAPITAL     RETAINED       ESOP         STOCK,   COMPREHENSIVE  COMPREHENSIVE
except per share amounts                    SHARES    SURPLUS     EARNINGS    TRUSTEE       AT COST    INCOME (LOSS)  INCOME (LOSS)
- ----------------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>      <C>         <C>          <C>         <C>          <C>                   <C>
BALANCE AT DECEMBER 31, 1999                 $492      $1,412      $5,833       $(24)       $(1,197)       $(127)
Net income                                                            367                                                     $367
Other comprehensive losses:
  Net unrealized losses on securities
   available for sale, net of income
   taxes of ($19)(a)                                                                                         (29)              (29)
  Foreign currency translation adjustments                                                                    (1)               (1)
                                                                                                                              ----
      Total comprehensive income                                                                                              $337
                                                                                                                              ====
Cash dividends on common shares
   ($.28 per share)                                                  (123)
Issuance of common shares:
    Employee benefit and dividend
     reinvestment plans - 528,057
     net shares                                            (6)                                   13
Repurchase of common shares -
   6,365,000 shares                                                                            (117)
- ------------------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 2000                    $492      $1,406      $6,077       $(24)       $(1,301)       $(157)
                                             ====      ======      ======       ====        =======        =====
- ------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 2000                 $492      $1,402      $6,352       $(13)       $(1,600)       $ (10)
Net income                                                            217                                                     $217
Other comprehensive income (losses):
  Net unrealized losses on securities
   available for sale, net of income
   taxes of ($1)(a)                                                                                           (9)               (9)
  Cumulative effect of change in
    accounting for derivative financial
    instruments, net of income taxes
    of ($12)                                                                                                 (22)              (22)
  Net losses on derivative financial
    instruments, net of income
    taxes of ($7)                                                                                            (11)              (11)
  Foreign currency translation adjustments                                                                     5                 5
                                                                                                                              ----
      Total comprehensive income                                                                                              $180
                                                                                                                              ====
Cash dividends on common shares
   ($.295 per share)                                                 (125)
Issuance of common shares:
    Employee benefit and dividend
     reinvestment plans - 1,159,943
     net shares                                            (3)                                   27
- ------------------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 2001                    $492      $1,399      $6,444       $(13)       $(1,573)        $(47)
                                             ====      ======      ======       =====       ========        =====
- ------------------------------------------------------------------------------------------------------------------
</TABLE>


(a) Net of reclassification adjustments.

See Notes to Consolidated Financial Statements (Unaudited).

                                       5

<PAGE>   6

                CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)




<TABLE>
<CAPTION>
                                                                                   THREE MONTHS ENDED MARCH 31,
                                                                                   ----------------------------
in millions                                                                             2001             2000
==============================================================================================================
<S>                                                                                 <C>           <C>
OPERATING ACTIVITIES
Net income                                                                             $   217       $   367
Adjustments to reconcile net income to net cash provided by operating activities:
        Provision for loan losses                                                          110           183
        cumulative effect of accounting change, net of tax                                   1          --
        Depreciation expense and software amortization                                      71            71
        Amortization of intangibles                                                         26            25
        Net gain from divesture                                                           --            (332)
        Net securities gains                                                               (26)           (1)
        Net (gains) losses from venture capital investments                                 16           (15)
        Net gains from loan securitizations and sales                                       (5)           (9)
        Deferred income taxes                                                               43            57
        Net increase in mortgage loans held for sale                                      (190)         (383)
        Net increase in trading account assets                                            (132)         (135)
        Net decrease in accrued restructuring charges                                      (22)          (20)
        Other operating activities, net                                                    (66)          224
- ---------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                                   43            32
INVESTING ACTIVITIES
Net increase in loans, excluding acquisitions, sales and divestitures                     (744)         (992)
Purchase of loans                                                                         (107)         --
Proceeds from loan securitizations and sales                                               796         2,087
Purchase of investment securities                                                          (55)          (83)
Proceeds from sales of investment securities                                                26             5
Proceeds from prepayments and maturities of investment securities                           26            33
Purchases of securities available for sale                                              (1,751)          (20)
Proceeds from sales of securities available for sale                                       110            73
Proceeds from prepayments and maturities of securities
 available for sale                                                                      2,082           225
Net(increase) decrease in other short-term investments                                     124          (573)
Purchases of premises and equipment                                                        (20)          (19)
Proceeds from sales of premises and equipment                                             --              13
Proceeds from sales of other real estate owned                                              10             5
Cash used in acquisitions, net of cash acquired                                             (3)         (357)
- ---------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY INVESTING ACTIVITIES                                                  494           397
FINANCING ACTIVITIES
Net increase (decrease) in deposits                                                     (2,700)        2,803
Net increase (decrease) in short-term borrowings                                         1,278        (1,980)
Net proceeds from issuance of long-term debt, including capital
  securities                                                                             1,256           393
Payments on long-term debt, including capital securities                                  (962)       (1,470)
Purchase of treasury shares                                                               --            (117)
Net proceeds from issuance of common stock                                                  11             6
Cash dividends                                                                            (125)         (123)
- ---------------------------------------------------------------------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES                                                   (1,242)         (488)
- ---------------------------------------------------------------------------------------------------------------
NET DECREASE IN CASH AND DUE FROM BANKS                                                   (705)          (59)
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD                                           3,189         2,816
- ---------------------------------------------------------------------------------------------------------------
CASH AND DUE FROM BANKS AT END OF PERIOD                                               $ 2,484       $ 2,757
                                                                                       =======       =======
- ---------------------------------------------------------------------------------------------------------------
Additional disclosures relative to cash flow:
        Interest paid                                                                     $953          $754
        Income taxes paid                                                                   (8)           49
Noncash items:
        Derivative assets resulting from adoption of
          net accounting standard                                                         $120          --
        Derivative liabilities resulting from adoption
          of new accounting standard                                                       152          --
================================================================================================================
</TABLE>


See Notes to Consolidated Financial Statements (Unaudited).

                                       6
<PAGE>   7
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                            1.  BASIS OF PRESENTATION

The unaudited condensed consolidated interim financial statements include the
accounts of KeyCorp and its subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation. Management believes that
the unaudited condensed consolidated interim financial statements reflect all
adjustments of a normal recurring nature and disclosures which are necessary for
a fair presentation of the results for the interim periods presented. Some
previously reported results have been reclassified to conform to current
reporting practices. The results of operations for the interim periods are not
necessarily indicative of the results of operations to be expected for the full
year. When you read these financial statements, you should also look at the
audited consolidated financial statements and related notes included in Key's
2000 Annual Report to Shareholders.

As used in these Notes, KeyCorp refers solely to the parent company and Key
refers to the consolidated entity consisting of KeyCorp and its subsidiaries.

ACCOUNTING PRONOUNCEMENTS ADOPTED IN 2001

DERIVATIVES AND HEDGING ACTIVITIES. Effective January 1, 2001, Key adopted
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133), which establishes accounting and
reporting standards for derivative instruments ("derivatives") and for hedging
activities. SFAS 133 requires that all derivatives be recognized as either
assets or liabilities on the balance sheet at fair value. The accounting for
changes in the fair value (i.e. gains or losses) of derivatives depends on
whether they have been designated and qualify as part of a hedging relationship
and further, on the type of hedging relationship. Derivatives that are
designated and qualify as hedging instruments must be designated as either a
fair value hedge, a cash flow hedge or a hedge of a net investment in a foreign
operation. Key does not have any derivatives that hedge net investments in
foreign operations.

Derivatives that are used to hedge changes in the fair value of existing assets,
liabilities, and firm commitments against changes in interest rates or other
economic factors are designated as fair value hedges. The gain or loss on the
derivative as well as the related loss or gain on the hedged item attributable
to the hedged risk are recognized in earnings during the period of the change in
fair values. Derivatives that are used to hedge the variability of future cash
flows against changes in interest rates or other economic factors are designated
as cash flow hedges. The effective portion of a gain or loss on a derivative
designated as a cash flow hedge is reported as a component of other
comprehensive income or loss and reclassified into earnings in the same period
or periods that the hedged transaction affects earnings. The ineffective portion
of the derivative gain or loss, if any, is recognized in earnings during the
current period. For derivatives not designated as hedging instruments, the gain
or loss is recognized immediately in earnings.

As a result of adopting SFAS 133, Key recorded a cumulative loss of $1 million
in net income and a cumulative loss of $22 million in other comprehensive income
(loss) during the first quarter of 2001.

ACCOUNTING PRONOUNCEMENTS PENDING ADOPTION

TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES.
In September 2000, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 140, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities" (SFAS 140), which
replaces SFAS 125. SFAS 140 retains most of the SFAS 125 provisions related to
controlling interests and adds three significant new rules. These new rules:

- -    prescribe the test that determines whether a special purpose entity ("SPE")
     is a "qualifying" SPE, and prescribe the amount and type of derivative
     instruments a qualifying SPE can hold and the activities it may pursue;


                                       7
<PAGE>   8

- -    provide more restrictive guidance regarding the circumstances under which a
     company that transfers assets to a qualifying SPE will be deemed to have
     relinquished control of such assets and may account for the transaction as
     a sale; and

- -    require extensive disclosures about collateral, assets securitized and
     accounted for as a sale, and retained interests in securitized assets.

SFAS 140 is effective for transactions entered into after March 31, 2001.
However, the statement was effective for recognition and reclassification of
collateral and for disclosures relating to securitization transactions and
collateral for fiscal years ending after December 15, 2000. Key included the
disclosures required by SFAS 140 in its December 31, 2000, financial statements.

RECOGNITION OF INTEREST INCOME AND IMPAIRMENT ON CERTAIN INVESTMENTS. In July
2000, the Emerging Issues Task Force ("EITF"), a standard-setting group under
the auspices of the Financial Accounting Standards Board, reached a consensus in
EITF 99-20 that provides guidance on how to record interest income and measure
impairment on beneficial interests retained in a securitization transaction
accounted for as a sale under SFAS 140, and purchased beneficial interests in
securitized financial assets. Assets subject to this accounting guidance are
carried on the balance sheet as securities available for sale [see Note 5
("Securities") starting on page 13] or as trading account assets. This
accounting guidance is effective for fiscal quarters beginning after March 15,
2001. Key adopted this guidance on April 1, 2001. As a result, during the second
quarter, Key recorded a cumulative loss of $23 million in net income. This loss
will be presented as a "cumulative effect of accounting change" on Key's second
quarter income statement.

ACCOUNTING GUIDANCE ISSUED DURING 2001

ACCOUNTING AND REPORTING FOR CERTAIN LOANS HELD FOR SALE. The Office of the
Comptroller of the Currency, the Federal Deposit Insurance Corporation, the
Federal Reserve Board, the Office of Thrift Supervision, and the National Credit
Union Administration issued Interagency Guidance in March 2001, instructing
institutions and examiners about the appropriate accounting and reporting
treatment for certain loans that are sold directly from the loan portfolio or
transferred to a held for sale account. This guidance, which is directed toward
loans that have declined in credit quality, did not have a significant impact on
Key in the first quarter, nor would it have had a significant impact on prior
periods had it been issued earlier.

                          2.  EARNINGS PER COMMON SHARE

The computation of Key's basic and diluted earnings per common share is as
follows:

<TABLE>
<CAPTION>

                                                                                           THREE MONTHS ENDED MARCH 31,
                                                                                    ---------------------------------------
dollars in millions, except per share amounts                                               2001                    2000
- ---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                         <C>                     <C>
EARNINGS
   Income before cumulative effect of accounting change                                     $218                    $367
   Net income                                                                                217                     367
- ---------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE COMMON SHARES
    Weighted average common shares outstanding (000)                                     424,024                 441,834
    Effect of dilutive common stock options (000)                                          5,893                   1,923
- ---------------------------------------------------------------------------------------------------------------------------
    Weighted average common shares and potential
        common shares outstanding  (000)                                                 429,917                 443,757
                                                                                         =======                 =======
- ---------------------------------------------------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE
   Income per common share before cumulative effect of accounting change                    $.51                    $.83
   Net income per common share                                                               .51                     .83
   Income per common share before cumulative effect of accounting change
     - assuming dilution                                                                     .51                     .83
   Net income per common share - assuming dilution                                           .51                     .83
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       8
<PAGE>   9


                         3.  ACQUISITIONS AND DIVESTITURE

Business acquisitions and the divestiture that Key completed during 2000 and the
first three months of 2001 are summarized below.

ACQUISITIONS
- ------------

THE WALLACH COMPANY INC.

On January 2, 2001, Key purchased The Wallach Company, Inc., an investment
banking firm headquartered in Denver, Colorado. The purchase price of
approximately $11 million was paid partly in cash and partly in the form of
370,830 Key common shares. Goodwill of approximately $9 million was recorded and
is being amortized using the straight-line method over a period of 10 years.

NEWPORT MORTGAGE COMPANY L.P.

On September 30, 2000, Key purchased certain net assets of Newport Mortgage
Company, L.P., a commercial mortgage company headquartered in Dallas, Texas.
Goodwill of approximately $10 million was recorded and is being amortized using
the straight-line method over a period of 10 years.

NATIONAL REALTY FUNDING L.C.

On January 31, 2000, Key purchased certain net assets of National Realty Funding
L.C., a commercial finance company headquartered in Kansas City, Missouri.
Goodwill of approximately $10 million was recorded and is being amortized using
the straight-line method over a period of 15 years.

DIVESTITURE
- -----------

CREDIT CARD PORTFOLIO

On January 31, 2000, Key sold its credit card portfolio of $1.3 billion in
receivables and nearly 600,000 active VISA and MasterCard accounts to Associates
National Bank (Delaware). Key recognized a gain of $332 million ($207 million
after tax), which is included in "gain from divestiture" on the income
statement.


                                       9
<PAGE>   10


                           4.  LINE OF BUSINESS RESULTS

Key's three major lines of business are Key Consumer Banking, Key Corporate
Finance and Key Capital Partners.

KEY CONSUMER BANKING
RETAIL BANKING (A DIVISION OF KEY CONSUMER BANKING)

Retail Banking delivers a complete line of branch-based financial products and
services to consumers through 922 KeyCenters (retail banking branches). These
KeyCenters are operated by relationship managers supported by a 24-hour
telephone banking call center services group, 2,424 ATMs that access 15
different networks (resulting in one of the largest ATM networks in the United
States) and a leading-edge Internet banking service, Key.com.

HOME EQUITY AND CONSUMER FINANCE (A DIVISION OF KEY CONSUMER BANKING)

Home Equity and Consumer Finance provides indirect, non-branch-based consumer
loan products, including automobile loans and leases, home equity loans,
education loans, and marine and recreational vehicle loans. As of December 31,
2000, based on the volume of loans generated, Home Equity and Consumer Finance
was one of the foremost lenders for education, for automobile purchases and
leases, and for purchases of marine and recreational vehicles in the United
States.

KEY CORPORATE FINANCE

Key Corporate Finance offers a complete range of financing, transaction
processing, electronic commerce and financial advisory services to corporations
nationwide, and operates one of the largest bank-affiliated equipment leasing
companies in the world, with operations in the United States, Europe and Asia.
Based on total transaction volume, Key Corporate Finance is one of the leading
cash management providers in the United States. This line of business also
serves the needs of Key's small business clients.

Key Corporate Finance's business units are organized around six specialized
industry client segments: commercial banking, commercial real estate, lease
financing, healthcare, media/telecommunications and technology. These targeted
client segments can receive a number of specialized services, including
international banking, cash management and corporate finance advisory services.
Key Corporate Finance also offers investment banking, capital markets, 401(k)
and trust custody products in cooperation with Key Capital Partners.

KEY CAPITAL PARTNERS

Key Capital Partners provides asset management, employee benefits services,
brokerage services, investment banking, capital markets and insurance expertise,
and conducts equity capital investing. It also offers specialized services to
high-net-worth clients through the wealth management and private banking
businesses. Key Capital Partners employs a range of distribution outlets,
including those of Key's other lines of business.

The table that spans pages 11 and 12 shows selected financial data for each
major line of business for the three-month periods ended March 31, 2001 and
2000. The financial information was derived from the internal profitability
reporting system that management uses to monitor and manage Key's financial
performance. The selected financial data are based on internal accounting
policies designed to ensure that results are compiled on a consistent basis and
reflect the underlying economics of Key's three major businesses. In accordance
with these policies:

- -    Net interest income for each line of business was determined by assigning a
     standard cost for funds used (or a standard credit for funds provided) to
     assets and liabilities based on their maturity, prepayment and/or repricing
     characteristics. The net effect of this funds transfer pricing is included
     in the "Treasury" columns of the table.


                                       10
<PAGE>   11


- -    Indirect expenses, such as computer servicing costs and corporate overhead,
     were allocated based on the extent to which each line of business actually
     used the service.

- -    The provision for loan losses assigned to each line of business reflects
     credit quality expectations within each line over a normal business cycle.
     This "normalized provision for loan losses" does not necessarily coincide
     with actual net loan charge-offs at any given point in the cycle. The level
     of the consolidated provision is based upon the methodology that Key uses
     to estimate its consolidated allowance for loan losses. This methodology is
     described in Note 1 ("Summary of significant accounting policies") under
     the heading "Allowance for loan losses" on page 66 of Key's 2000 Annual
     Report to Shareholders.

- -    Income taxes were allocated based on the statutory Federal income tax rate
     of 35% (adjusted for tax-exempt income from corporate-owned life insurance,
     nondeductible goodwill amortization and tax credits associated with
     investments in low-income housing projects) and a blended state income tax
     rate (net of the Federal income tax benefit) of 2% for the periods
     presented.

- -    Capital was assigned to each line of business based on management's
     assessment of economic risk factors (primarily credit, operating and market
     risk).

<TABLE>
<CAPTION>

                                                                                     KEY CONSUMER BANKING
                                                                    ---------------------------------------------------------------
                                                                                                            HOME EQUITY AND
THREE MONTHS ENDED MARCH 31,                                               RETAIL BANKING                  CONSUMER FINANCE
                                                                    ------------------------------   ------------------------------
dollars in millions                                                         2001             2000            2001             2000
- -----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>              <C>             <C>              <C>
SUMMARY OF OPERATIONS
Net interest income (taxable equivalent)                                    $228             $226            $142             $128
Noninterest income                                                            98               87               5               17
Revenue sharing(a)                                                            13               16               1                1
- -----------------------------------------------------------------------------------------------------------------------------------
Total revenue(b)                                                             339              329             148              146
Provision for loan losses                                                     12               12              33               33
Depreciation and amortization expense                                         39               40              12               13
Noninterest expense                                                          158              165              68               69
Expense sharing(a)                                                            10               13              --               --
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (taxable equivalent) and
    cumulative effect of accounting change                                   120               99              35               31
Allocated income taxes and taxable equivalent adjustments                     47               39              15               13
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) before cumulative effect of accounting change                   73               60              20               18
    Cumulative effect of accounting change                                    --               --              --               --
- -----------------------------------------------------------------------------------------------------------------------------------
Net income (loss)                                                           $ 73              $60             $20              $18
                                                                            ====              ===             ===              ===

Percent of consolidated net income                                            34%              16%              9%               5%
Percent of total segments' net income                                         32               27               9                8
- -----------------------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCES
Loans                                                                     $7,843           $7,631         $15,868          $14,662
Total assets(b)                                                            9,211            9,131          16,960           15,915
Deposits                                                                  32,570           30,427             144              130
- -----------------------------------------------------------------------------------------------------------------------------------
OTHER FINANCIAL DATA
Efficiency ratio(g)                                                        60.88%           66.28%            N/M              N/M
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>


<TABLE>
<CAPTION>

THREE MONTHS ENDED MARCH 31,                                                  KEY CORPORATE FINANCE
                                                                      ---------------------------------
dollars in millions                                                          2001                2000
- -------------------------------------------------------------------------------------------------------
<S>                                                                          <C>                 <C>
SUMMARY OF OPERATIONS
Net interest income (taxable equivalent)                                     $340                $319
Noninterest income                                                             70                  71
Revenue sharing(a)                                                             36                  29
- ------------------------------------------------------------------------------------------------------
Total revenue(b)                                                              446                 419
Provision for loan losses                                                      52                  48
Depreciation and amortization expense                                          20                  19
Noninterest expense                                                           172                 156
Expense sharing(a)                                                             21                  18
- ------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (taxable equivalent) and
    cumulative effect of accounting change                                    181                 178
Allocated income taxes and taxable equivalent adjustments                      69                  68
- ------------------------------------------------------------------------------------------------------
Income (loss) before cumulative effect of accounting change                   112                 110
    Cumulative effect of accounting change                                     --                  --
- ------------------------------------------------------------------------------------------------------
Net income (loss)                                                            $112                $110
                                                                             ====                ====

Percent of consolidated net income                                             52%                 30%
Percent of total segments' net income                                          50                  50
- ------------------------------------------------------------------------------------------------------
AVERAGE BALANCES
Loans                                                                     $35,629             $33,691
Total assets(b)                                                            37,222              35,437
Deposits                                                                    6,484               6,144
- ------------------------------------------------------------------------------------------------------
OTHER FINANCIAL DATA
Efficiency ratio(g)                                                           N/M                 N/M
- ------------------------------------------------------------------------------------------------------
</TABLE>

(a)  Represents the assignment of Key Capital Partners' revenue and expense to
     the lines of business principally responsible for maintaining the
     relationships with the clients that used Key Capital Partners' products and
     services.

(b)  Substantially all revenue generated by Key's major lines of business is
     derived from clients resident in the United States. Substantially all
     long-lived assets, including premises and equipment, capitalized software
     and goodwill, held by Key's major lines of business are located in the
     United States.

(c)  "Reconciling items" reflect certain nonrecurring items, the results of
     divested businesses and charges related to unallocated nonearning assets of
     corporate support functions. These latter charges are part of net interest
     income and are allocated to the business segments through noninterest
     expense. Noninterest income in the first quarter of 2000 includes a gain of
     $332 million ($207 million after tax) from the sale of Key's credit card
     business and $5 million ($3 million after tax) earned by the divested
     credit card business. This business also added $13 million ($8 million
     after tax) in the first quarter of 2000 to net interest income.

(d)  The provision for loan losses includes an additional provision of $121
     million ($76 million after tax) recorded in the first quarter of 2000. This
     provision resulted from the implementation of an enhanced methodology for
     assessing credit risk, particularly in the commercial loan portfolio.


                                       11
<PAGE>   12

Developing and applying the methodologies that management follows to allocate
items among Key's lines of business is a dynamic process. Accordingly, financial
results may be revised periodically to reflect accounting enhancements, changes
in the risk profile of a particular segment of Key's business or changes in
Key's structure. The financial data for both 2001 and 2000 presented in the
accompanying table reflects the following changes that occurred during the first
quarter of 2001:

- -    A number of businesses have been reclassified. The Key Electronic Services
     unit moved from Treasury to Retail Banking, the Small Business unit moved
     from Retail Banking to Key Corporate Finance, and the Community Development
     unit moved from Key Corporate Finance to Retail Banking.

- -    The methodology used to assign a provision for loan losses to each line of
     business was changed from one based primarily upon actual net charge-offs
     to a methodology based on the credit quality expectations within each line
     over a normal business cycle.

Generally accepted accounting principles guide financial accounting, but there
is no authoritative guidance for "management accounting"--the way management
uses its judgment and experience to guide reporting decisions. Consequently, the
line of business results Key reports cannot necessarily be compared with results
presented by other companies.

<TABLE>
<CAPTION>

      KEY CAPITAL PARTNERS                  TREASURY                  TOTAL SEGMENTS                  RECONCILING ITEMS
- ------------------------------   ----------------------------  ----------------------------      ---------------------------
         2001            2000             2001          2000            2001          2000           2001          2000
- ----------------------------------------------------------------------------------------------------------------------------
<S>    <C>             <C>             <C>           <C>             <C>           <C>            <C>            <C>
       $   50          $   45          $   (33)      $   (15)        $   727       $   703        $   (32)       $  (25)
          228             265               51            25             452           465              3           341
          (50)            (46)              --            --              --            --             --            --
- ----------------------------------------------------------------------------------------------------------------------------
          228             264               18            10           1,179         1,168            (29) (c)      316 (c)
            3               2                1             2             101            97              9            86 (d)
           25              24               --            --              96            96              1            --
          224             231                3             4             625           625            (24)            6 (e)
          (31)            (31)              --            --              --            --             --            --
- ----------------------------------------------------------------------------------------------------------------------------

            7              38               14             4             357           350            (15)          224
            5              16               (6)           (8)            130           128             (6)           79
- ----------------------------------------------------------------------------------------------------------------------------
            2              22               20            12             227           222             (9)          145
           --              --               (1)           --              (1)           --             --            --
- ----------------------------------------------------------------------------------------------------------------------------
       $    2          $   22          $    19       $    12         $   226       $   222        $    (9)       $  145
       ======          ======          =======       =======         =======       =======        =======        ======
            1%              6%               8%            3%            104%           60%            (4)%          40%
            1              10                8             5             100           100            N/A           N/A
- ----------------------------------------------------------------------------------------------------------------------------

       $5,567          $5,051          $ 2,031       $ 2,440         $66,938       $63,475        $    95        $  611
        9,848           9,595           11,344        10,980          84,585        81,058          1,739 (f)     2,129 (f)
        3,916           3,374            3,647         2,973          46,761        43,048            (37)           27
- ----------------------------------------------------------------------------------------------------------------------------

          N/M             N/M              N/M           N/M             N/M           N/M            N/M           N/M
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>


<TABLE>
<CAPTION>

      KEYCORP CONSOLIDATED
- ------------------------------
       2001           2000
- ------------------------------
    <S>            <C>
    $   695        $   678
        455            806
         --             --
- ------------------------------
      1,150          1,484
        110            183
         97             96
        601            631
         --             --
- ------------------------------

        342            574
        124            207
- ------------------------------
        218            367
         (1)            --
- ------------------------------
    $   217        $   367
    =======        =======
        100%           100%
        N/A            N/A
- ------------------------------

    $67,033        $64,086
     86,324         83,187
     46,724         43,075
- ------------------------------

        N/M            N/M
- ------------------------------
</TABLE>

(e)  Noninterest expense in the first quarter of 2000 includes $14 million ($9
     million after tax) of nonrecurring charges recorded in connection with
     strategic actions taken to improve Key's operating efficiency and
     profitability, including restructuring charges of $9 million ($6 million
     after tax) and $7 million ($4 million after tax) incurred by the divested
     credit card business.

(f)  Total assets represent primarily the unallocated portion of nonearning
     assets of corporate support functions.

(g)  This ratio, which measures the extent to which recurring revenues are
     absorbed by operating expenses, is calculated as follows: noninterest
     expense (excluding significant nonrecurring items) divided by the sum of
     taxable-equivalent net interest income and noninterest income (excluding
     significant nonrecurring items).

N/A = Not Applicable

N/M = Not Meaningful


                                       12
<PAGE>   13


                                  5.  SECURITIES

Key classifies its securities into three categories: trading, investment and
available for sale.

TRADING ACCOUNT SECURITIES. These are debt and equity securities that are
purchased and held by Key with the intent of selling them in the near term.
These securities are reported at fair value ($875 million, $743 million and $903
million at March 31, 2001, December 31, 2000 and March 31, 2000, respectively)
and included in "short-term investments" on the balance sheet. Realized and
unrealized gains and losses on trading account securities are reported in
"investment banking and capital markets income" on the income statement.

INVESTMENT SECURITIES. These include debt securities that Key has the intent and
ability to hold until maturity and equity securities that do not have readily
determinable fair values. The debt securities are carried at cost, adjusted for
amortization of premiums and accretion of discounts using the interest method.
This method produces a constant rate of return on the basis of the adjusted
carrying amount.

SECURITIES AVAILABLE FOR SALE. These are debt and equity securities that Key has
not classified as trading account securities or investment securities.
Securities available for sale are reported at fair value with unrealized gains
and losses (net of income taxes) recorded in shareholders' equity as a component
of "accumulated other comprehensive loss." Actual gains and losses on the sales
of these securities are computed for each specific security sold and included in
"net securities gains " on the income statement.

When Key retains an interest in securitized loans, Key bears the risk that the
loans will be prepaid (which results in less interest income) or not paid at
all. Key's retained interests (which include both certificated and
uncertificated interests) are accounted for like debt securities that are
classified as securities available for sale or as trading account assets.

The amortized cost, unrealized gains and losses, and approximate fair value of
Key's investment securities and securities available for sale were as follows:

<TABLE>
<CAPTION>

                                                                            MARCH 31, 2001
                                                  -----------------------------------------------------------------
                                                                           GROSS            GROSS
                                                       AMORTIZED      UNREALIZED       UNREALIZED          FAIR
in millions                                                 COST           GAINS           LOSSES         VALUE
- -------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>             <C>               <C>         <C>
INVESTMENT SECURITIES
    States and political subdivisions                     $  316          $ 12               --         $  328
    Other securities                                         892            --               --            892
- -------------------------------------------------------------------------------------------------------------------
        Total investment securities                       $1,208          $ 12               --         $1,220
                                                          ======          ====              ===         ======
SECURITIES AVAILABLE FOR SALE
    U.S. Treasury, agencies and corporations              $  220            --               --         $  220
    States and political subdivisions                         31            --               --             31
    Collateralized mortgage obligations                    4,680          $ 85              $57          4,708
    Other mortgage-backed securities                       1,289            20                3          1,306
    Retained interests in securitizations                    320            --               33            287
    Other securities                                         350             4                6            348
- -------------------------------------------------------------------------------------------------------------------
        Total securities available for sale               $6,890          $109              $99         $6,900
                                                          ======          ====              ===         ======
- -------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       13
<PAGE>   14


<TABLE>
<CAPTION>

                                                                           DECEMBER 31, 2000
                                                  -----------------------------------------------------------------
                                                                           GROSS            GROSS
                                                       AMORTIZED      UNREALIZED       UNREALIZED          FAIR
in millions                                                 COST           GAINS           LOSSES         VALUE
- -------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>              <C>              <C>           <C>
INVESTMENT SECURITIES
    States and political subdivisions                    $  323           $ 10              --          $  333
    Other securities                                        875             --              --             875
- -------------------------------------------------------------------------------------------------------------------
        Total investment securities                      $1,198           $ 10              --          $1,208
                                                         ======           ====             ===          ======
SECURITIES AVAILABLE FOR SALE
    U.S. Treasury, agencies and corporations             $  984             --              --          $  984
    States and political subdivisions                        33             --              --              33
    Collateralized mortgage obligations                   4,296           $ 63             $61           4,298
    Other mortgage-backed securities                      1,355             12              12           1,355
    Retained interests in securitizations                   334             --              18             316
    Other securities                                        307             42               6             343
- -------------------------------------------------------------------------------------------------------------------
        Total securities available for sale              $7,309           $117             $97          $7,329
                                                         ======           ====             ===          ======
- -------------------------------------------------------------------------------------------------------------------
</TABLE>


<TABLE>
<CAPTION>

                                                                             MARCH 31, 2000
                                                  -----------------------------------------------------------------
                                                                           GROSS            GROSS
                                                       AMORTIZED      UNREALIZED       UNREALIZED          FAIR
in millions                                                 COST           GAINS           LOSSES         VALUE
- -------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>                <C>           <C>            <C>
INVESTMENT SECURITIES
    States and political subdivisions                    $  432             $10              --         $  442
    Other securities                                        621              --              --            621
- -------------------------------------------------------------------------------------------------------------------
        Total investment securities                      $1,053             $10              --         $1,063
                                                         ======             ===             ===         ======
SECURITIES AVAILABLE FOR SALE
    U.S. Treasury, agencies and corporations             $  121              --            $  1         $  120
    States and political subdivisions                        53              --              --             53
    Collateralized mortgage obligations                   4,295              --             205          4,090
    Other mortgage-backed securities                      1,623             $ 3              37          1,589
    Retained interests in securitizations                   332              --              19            313
    Other securities                                        111               1               8            104
- -------------------------------------------------------------------------------------------------------------------
        Total securities available for sale              $6,535             $ 4            $270         $6,269
                                                         ======             ===             ===         ======
- -------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       14
<PAGE>   15




                                    6.  LOANS

Key's loans by category are summarized as follows:

<TABLE>
<CAPTION>

                                                 March 31,   December 31,   March 31,
in millions                                        2001        2000           2000
- -------------------------------------------------------------------------------------
<S>                                              <C>           <C>           <C>
Commercial, financial and agricultural           $20,214       $20,100       $18,895
Real estate - commercial mortgage                  6,873         6,876         6,941
Real estate - construction                         5,351         5,154         4,565
Commercial lease financing                         7,091         7,164         6,711
- -------------------------------------------------------------------------------------
     Total commercial loans                       39,529        39,294        37,112
Real estate - residential mortgage                 4,125         4,212         4,296
Home equity                                       10,288         9,908         8,338
Consumer - direct                                  2,425         2,539         2,586
Consumer - indirect lease financing                2,855         3,005         3,143
Consumer - indirect other                          5,623         5,718         6,156
- -------------------------------------------------------------------------------------
     Total consumer loans                         25,316        25,382        24,519
Real estate - commercial mortgage                    491           316           527
Real estate - residential mortgage                    57            42            50
Education                                          1,634         1,871         1,856
- -------------------------------------------------------------------------------------
     Total loans held for sale                     2,182         2,229         2,433
- -------------------------------------------------------------------------------------
     Total loans                                 $67,027       $66,905       $64,064
                                                 =======       =======       =======
- -------------------------------------------------------------------------------------
</TABLE>

Key uses interest rate swaps to manage interest rate risk; these swaps modify
the repricing and maturity characteristics of certain loans. For more
information about such swaps at March 31, 2001, see Note 12 ("Derivatives and
Hedging Activities"), which begins on page 21.

Changes in the allowance for loan losses are summarized as follows:


                                              March 31,        March 31,
in millions                                     2001             2000
- -------------------------------------------------------------------------
Balance at beginning of period               $ 1,001          $   930
Charge-offs                                     (135)            (164)
Recoveries                                        26               30
- -------------------------------------------------------------------------
     Net charge-offs                            (109)            (134)
Allowance related to loans sold                   (1)              --
Provision for loan losses                        110              183
- -------------------------------------------------------------------------
     Balance at end of period                $ 1,001          $   979
                                             =======          =======
- -------------------------------------------------------------------------



                                       15
<PAGE>   16

                7. IMPAIRED LOANS AND OTHER NONPERFORMING ASSETS

At March 31, 2001, impaired loans totaled $385 million. This amount includes
$256 million of impaired loans with a specifically allocated allowance for loan
losses of $111 million, and $129 million of impaired loans that are carried at
their estimated fair value without a specifically allocated allowance. At the
end of 2000, impaired loans totaled $364 million, including $213 million of
loans with a specifically allocated allowance of $102 million, and $151 million
that were carried at their estimated fair value. The average investment in
impaired loans for the first quarters of 2001 and 2000 was $375 million and $263
million, respectively.

Key's Nonperforming assets were as follows:

<TABLE>
<CAPTION>

                                                  MARCH 31,   DECEMBER 31,    MARCH 31,
in millions                                         2001        2000            2000
- ----------------------------------------------------------------------------------------
<S>                                               <C>         <C>             <C>
Impaired loans                                    $ 385       $ 364           $ 280
Other nonaccrual loans                              328         283             193
- ----------------------------------------------------------------------------------------
     Total nonaccrual loans                         713         647             473
Restructured loans(a)                                --           3              --
- ----------------------------------------------------------------------------------------
     Total nonperforming loans                      713         650             473
OREO                                                 28          23              28
Allowance for OREO losses                            (1)         (1)             (6)
- ----------------------------------------------------------------------------------------
     OREO, net of allowance                          27          22              22
Other nonperforming assets                           --          --               2
- ----------------------------------------------------------------------------------------
     Total nonperforming assets                   $ 740       $ 672           $ 497
                                                  =====       =====           =====
- ----------------------------------------------------------------------------------------
</TABLE>

(a)  Excludes restructured loans on nonaccrual status.

When appropriate, an impaired loan is assigned a specific allowance. Management
calculates the extent of the impairment, which is the carrying amount of the
loan less the estimated present value of future cash flows and the fair value of
any existing collateral. When expected cash flow and/or collateral value does
not justify the carrying amount of a loan, the amount that management deems
uncollectible (the impaired amount) is charged against the allowance for loan
losses. When collateral value or other sources of repayment appear sufficient,
but management remains uncertain about whether the loan will be repaid in full,
an amount is specifically allocated in the allowance for loan losses.

Key does not perform a specific impairment valuation for smaller-balance,
homogeneous, nonaccrual loans (shown in the preceding table as "Other nonaccrual
loans"). Generally, this portfolio includes loans to finance residential
mortgages, automobiles, recreational vehicles, boats and mobile homes.
Management applies historical loss experience rates to these loans, adjusted
based on assessments of emerging credit trends and other factors, and then
allocates a portion of the allowance for loan losses to each loan type.


                                       16
<PAGE>   17

                                8.  LONG-TERM DEBT

The components of Key's long-term debt, presented net of unamortized discount
where applicable, were as follows:

<TABLE>
<CAPTION>

                                                                          MARCH 31,       DECEMBER 31,         MARCH 31,
dollars in millions                                                            2001               2000              2000
- -------------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>                <C>               <C>
Senior medium-term notes due through 2005(a)                                  $ 546              $ 393             $ 321
Subordinated medium-term notes due through 2005(a)                              103                103               133
7.50%  Subordinated notes due 2006(b)                                           250                250               250
6.75%  Subordinated notes due 2006(b)                                           200                200               200
8.125% Subordinated notes due 2002(b)                                           200                199               199
8.00%  Subordinated notes due 2004(b)                                           125                125               125
8.404% Notes due through 2001                                                    13                 13                24
All other long-term debt(h)                                                      15                 --                 2
- -------------------------------------------------------------------------------------------------------------------------
      Total parent company(i)                                                 1,452              1,283             1,254

Senior medium-term bank notes due through 2039(c)                             5,725              5,979             8,298
Senior euro medium-term bank notes due through 2007(d)                        3,814              3,955             2,491
6.50 %   Subordinated remarketable securities due 2027(e)                       312                312               312
6.95%    Subordinated notes due 2028(e)                                         300                300               300
7.125%   Subordinated notes due 2006(e)                                         250                250               250
7.25%    Subordinated notes due 2005(e)                                         200                200               200
6.75%    Subordinated notes due 2003(e)                                         200                200               200
7.50%    Subordinated notes due 2008(e)                                         165                165               165
7.00%    Subordinated notes due 2011(e)                                         506                 --                --
7.30%    Subordinated notes due 2011(e)                                         107                107               107
7.85%    Subordinated notes due 2002(e)                                          93                 93                93
7.55%    Subordinated notes due 2006(e)                                          75                 75                75
7.375%   Subordinated notes due 2008(e)                                          70                 70                70
Lease financing debt due through 2006(f)                                        569                581               629
Federal Home Loan Bank advances due through 2030(g)                             453                452               246
All other long-term debt(h)                                                     204                139                94
- -------------------------------------------------------------------------------------------------------------------------
      Total subsidiaries                                                     13,043             12,878            13,530
- -------------------------------------------------------------------------------------------------------------------------
          Total long-term debt                                              $14,495            $14,161           $14,784
                                                                            =======            =======           =======
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

Key uses interest rate swaps and caps, which modify the repricing and maturity
characteristics of certain long-term debt, to manage interest rate risk. For
more information about such financial instruments at March 31, 2001, see Note 12
("Derivatives and Hedging Activities"),which begins on page 21.

(a)  At March 31, 2001, December 31, 2000 and March 31,2000, the senior
     medium-term notes had weighted average interest rates of 5.58%, 6.81% and
     6.73%, respectively, and the subordinated medium-term notes had a weighted
     average interest rate of 7.32%, 7.32% and 7.09% at each respective date.
     These notes had a combination of fixed and floating interest rates.

(b)  The notes may not be redeemed or prepaid prior to maturity.

(c)  Senior medium-term bank notes of subsidiaries had weighted average interest
     rates of 5.47%, 6.72% and 6.13%, at March 31, 2001, December 31, 2000 and
     March 31, 2000, respectively. These notes had a combination of fixed and
     floating interest rates.

(d)  Senior euro medium-term notes had weighted average interest rates of 6.15%,
     6.89%, and 6.20%, at March 31, 2001, December 31, 2000 and March 31, 2000,
     respectively. These notes, which are obligations of KeyBank National
     Association, had fixed and floating interest rates based on the three-month
     London Interbank Offered Rate (known as "LIBOR").



                                       17
<PAGE>   18

(e)  These notes and securities are all obligations of KeyBank National
     Association, with the exception of the 7.55% notes, which are obligations
     of Key Bank USA, National Association. None of the subordinated notes may
     be redeemed prior to their maturity dates.

(f)  Lease financing debt had weighted average interest rates of 7.79% at March
     31, 2001, 7.80% at December 31, 2000 and 7.73% at March 31, 2000. This
     category of debt primarily comprises nonrecourse debt collateralized by
     leased equipment under operating, direct financing and sales type.

(g)  Long-term advances from the Federal Home Loan Bank had weighted average
     interest rates of 5.23% at March 31, 2001, 6.66% at December 31, 2000 and
     6.05% at March 31, 2000. These advances, which had a combination of fixed
     and floating interest rates, were secured by $679 million, $678 million,
     and $369 million of real estate loans and securities at March 31, 2001,
     December 31, 2000 and March 31, 2000, respectively.

(h)  Other long-term debt, comprising industrial revenue bonds, capital lease
     obligations, and various secured and unsecured obligations of corporate
     subsidiaries, had weighted average interest rates of 7.88%, 7.91%, and
     8.24% at March 31, 2001, December 31, 2000 and March 31, 2000,
     respectively.

(i)  At March 31, 2001, unused capacity under KeyCorp's shelf registration
     totaled $500 million.


                              9.  CAPITAL SECURITIES

Five subsidiary business trusts of KeyCorp (KeyCorp Institutional Capital A,
KeyCorp Institutional Capital B, KeyCorp Capital I, KeyCorp Capital II and
KeyCorp Capital III) have issued corporation-obligated mandatorily redeemable
preferred capital securities ("capital securities"). As guarantor, KeyCorp
unconditionally guarantees payment of:

- -    accrued and unpaid distributions required to be paid on the capital
     securities;

- -    the redemption price when a capital security is called for redemption; and

- -    amounts due if a trust is liquidated or terminated.

KeyCorp owns all of the outstanding common stock of each of the five trusts. The
trusts used the proceeds from the issuance of their capital securities and
common stock to buy debentures issued by KeyCorp. These debentures are the
trusts' only assets and the interest payments from the debentures finance the
distributions paid on the capital securities. Key's financial statements do not
reflect the debentures or the related income statement effects because they are
eliminated in consolidation.

The capital securities, common securities and related debentures are summarized
as follows:

<TABLE>
<CAPTION>

                                                                                                     PRINCIPAL
                                                          CAPITAL                                    AMOUNT OF
                                                      SECURITIES,             COMMON               DEBENTURES,
dollars in millions                                NET OF DISCOUNT(a)       SECURITIES           NET OF DISCOUNT(b)
- ----------------------------------------------------------------------------------------------------------------------
<S>                                                          <C>                 <C>                     <C>
March 31, 2001
      KeyCorp Institutional Capital A                      $  388                $11                   $  361
      KeyCorp Institutional Capital B                         166                  4                      154
      KeyCorp Capital I                                       247                  8                      255
      KeyCorp Capital II                                      244                  8                      255
      KeyCorp Capital III                                     263                  8                      257
- ----------------------------------------------------------------------------------------------------------------------
          Total                                            $1,308                $39                   $1,282
                                                           ======                ===                   ======
- ----------------------------------------------------------------------------------------------------------------------
December 31, 2000                                          $1,243                $39                   $1,282
                                                           ======                ===                   ======
- ----------------------------------------------------------------------------------------------------------------------
March 31, 2000                                             $1,243                $39                   $1,282
                                                           ======                ===                   ======
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>


<TABLE>
<CAPTION>

                                                      INTEREST RATE                 MATURITY
                                                        OF CAPITAL                OF CAPITAL
                                                      SECURITIES AND             SECURITIES AND
dollars in millions                                    DEBENTURES(c)               DEBENTURES
- ------------------------------------------------------------------------------------------------
<S>                                                         <C>                        <C>
March 31, 2001
      KeyCorp Institutional Capital A                      7.826%                     2026
      KeyCorp Institutional Capital B                      8.250                      2026
      KeyCorp Capital I                                    7.141                      2028
      KeyCorp Capital II                                   6.875                      2029
      KeyCorp Capital III                                  7.750                      2029
- -----------------------------------------------------------------------------------------------
          Total                                            7.558%                       --
- -----------------------------------------------------------------------------------------------
December 31, 2000                                          7.619%                       --
- -----------------------------------------------------------------------------------------------
March 31, 2000                                             7.458%                       --
- -----------------------------------------------------------------------------------------------
</TABLE>

(a)  The capital securities must be redeemed when the related debentures mature,
     or earlier if provided in the governing indenture. Each issue of capital
     securities carries an interest rate identical to that of the related
     debenture. The capital securities constitute minority interests in the
     equity accounts of KeyCorp's consolidated subsidiaries and, therefore,
     qualify as Tier 1 capital under Federal Reserve Board guidelines.

(b)  KeyCorp has the right to redeem its debentures: (i) in whole or in part, on
     or after December 1, 2006 (for debentures owned by Capital A), December 15,
     2006 (for debentures owned by Capital B), July 1, 2008 (for debentures
     owned by Capital I), March



                                       18
<PAGE>   19

     18, 1999 (for debentures owned by Capital II), and July 16, 1999 (for
     debentures owned by Capital III); and (ii) in whole at any time within 90
     days after and during the continuation of a "tax event" or a "capital
     treatment event" (as defined in the applicable offering circular). If the
     debentures purchased by Capital A or Capital B are redeemed before they
     mature, the redemption price will be the principal amount, plus a premium,
     plus any accrued but unpaid interest. If the debentures purchased by
     Capital I are redeemed before they mature, the redemption price will be the
     principal amount, plus any accrued but unpaid interest. If the debentures
     purchased by Capital II or Capital III are redeemed before they mature, the
     redemption price will the greater of: (i) the principal amount, plus any
     accrued but unpaid interest or (ii) the sum of the present values of
     principal and interest payments discounted at the Treasury Rate (as defined
     in the applicable offering circular), plus 20 basis points (25 basis points
     for Capital III), plus any accrued but unpaid interest. When debentures are
     redeemed in response to tax or capital treatment events, the redemption
     price is generally slightly more favorable to Key.

(c)  The interest rates for Capital A, Capital B, Capital II and Capital III are
     fixed. Capital I has a floating interest rate (which reprices quarterly)
     equal to three-month LIBOR plus 74 basis points. The rates shown as the
     total at March 31, 2001, December 31, 2000, and March 31, 2000, are
     weighted average rates.


                            10.  RESTRUCTURING CHARGES

During the first quarter of 2001, KeyCorp recorded a restructuring charge credit
of $4 million ($2 million after tax) in connection with a three-year
"competitiveness initiative" instituted in November 1999 to improve Key's
operating efficiency and profitability. Restructuring charges previously accrued
under this initiative totaled $104 million ($66 million after tax) in 2000 and
$98 million ($62 million after tax) in 1999.

In the first phase of the initiative, Key's primary strategic actions were
outsourcing certain technology and other corporate support functions,
consolidating sites in a number of Key's businesses and reducing the number of
management layers. This phase was completed last year. The final phase, which
started during the second half of 2000, is focusing on:

- -    simplifying Key's business structure by consolidating 22 business lines
     into 12;

- -    streamlining and automating business operations and processes;

- -    standardizing product offerings and internal processes;

- -    consolidating operating facilities and service centers; and

- -    outsourcing certain noncore activities.

As a result of the competitiveness initiative, Key's workforce will be reduced
by approximately 4,000 positions. Those reductions will occur at all levels
throughout the organization. At March 31, 2001, more than 3,100 positions had
been eliminated. Key's management expects the remaining reductions to occur by
the end of 2001.

Changes in the restructuring charge liability associated with the above actions
are as follows:

<TABLE>
<CAPTION>

                                       DECEMBER 31,  RESTRUCTURING       CASH        MARCH 31,
in millions                                2000        CHARGES         PAYMENTS        2001
- ---------------------------------------------------------------------------------------------------
<S>                                       <C>         <C>               <C>           <C>
Severance                                 $ 62        $ (7)             $ 11          $ 44
Site consolidations                         60           3                 7            56
Equipment and other                          2          --                --             2
- ---------------------------------------------------------------------------------------------------
         Total                            $124        $ (4)             $ 18          $102
                                          ====        ====              ====          ====
- ---------------------------------------------------------------------------------------------------
</TABLE>


                                       19
<PAGE>   20


                              11.  LEGAL PROCEEDINGS

In March 1998, McDonald Investments Inc. ("McDonald"), now a subsidiary of
KeyCorp, participated in an offering to institutional investors of certain
securities of Nakornthai Strip Mill Public Company Ltd. ("NSM"), a Thailand
public company, and certain NSM affiliates. The offering was part of the
financing of an NSM steel mini-mill located in Chonburi, Thailand. McDonald
served as a financial advisor to NSM and was an initial purchaser in connection
with the offering (under Rule 144A of the Securities and Exchange Commission) of
the approximately $452 million in NSM debt securities and related warrants. On
December 24, 1998, holders of NSM securities gave a Notice of Default alleging a
number of defaults under the terms of the securities. NSM is currently working
to restructure its obligations, including obligations to holders of the
securities and other creditors.

Certain purchasers of the NSM securities have commenced litigation against
McDonald and several other parties, claiming that McDonald, the other initial
purchasers and certain other of NSM's third party service providers violated
certain state and Federal securities and other laws. The lawsuits are based on
alleged misstatements and omissions in the Offering Memorandum for the
securities, and on certain other information allegedly provided and oral
statements allegedly made to potential investors. In each lawsuit the plaintiffs
allege misrepresentations relating to (among other things) the physical
facilities at the mill, the management of the mill, the supply of inputs to the
mill and the use of the proceeds of the offering.

McDonald and others are currently defending nine separate lawsuits brought by
purchasers of the NSM securities: two in Federal District Court in Minnesota;
two in Federal District Court in New York; two in California; and one in each of
Connecticut, Illinois and New Jersey. The aggregate amount of securities alleged
to have been purchased by the plaintiffs in these nine lawsuits is at least $260
million. While the relief claimed in the lawsuits varies, generally the
plaintiffs seek rescission of the sale of the securities, compensatory damages,
punitive damages, pre- and post judgment interest, legal fees and expenses, and
in the New Jersey action (in which plaintiffs allege damages of approximately
$54 million), treble damages consistent with applicable law.

McDonald is vigorously defending these actions and has filed, or will file,
responses to each complaint denying liability.

In the ordinary course of business, Key is subject to legal actions that involve
claims for substantial monetary relief. Based on information presently known to
management and Key's counsel, management does not believe there is any legal
action (including the actions against McDonald) to which KeyCorp or any of its
subsidiaries is a party, or involving any of their properties, that,
individually or in the aggregate, will have a material adverse effect on Key's
financial condition.



                                       20
<PAGE>   21



                     12.  DERIVATIVES AND HEDGING ACTIVITIES

Key, mainly through its lead bank (KeyBank National Association), is party to
various derivative instruments. These derivatives are used for asset and
liability management and trading purposes. Generally, these instruments help Key
meet clients' financing needs and manage exposure to "market risk"--the
possibility that economic value or net interest income will be adversely
affected by changes in interest rates or other economic factors. However, like
other financial instruments, these contain an element of "credit risk"--the
possibility that Key will incur a loss because a counterparty fails to meet its
contractual obligations.

The primary derivatives that Key uses are interest rate swaps, caps and futures;
and foreign exchange forward contracts. All of the foreign exchange forward
contracts and interest rate swaps and caps held are over-the-counter
instruments.

ACCOUNTING TREATMENT AND VALUATION

Effective January 1, 2001, Key adopted SFAS 133, which establishes accounting
and reporting standards for derivatives and hedging activities. The new
standards are summarized in Note 1 ("Basis of Presentation") under the heading
"Derivatives and hedging activities," on page 7.

As a result of adopting SFAS 133, Key recorded a cumulative loss of $1 million
in net income and a cumulative loss of $22 million in other comprehensive income
(loss) during the first quarter of 2001. Of the $22 million loss, approximately
$13 million will be reclassified to earnings during 2001.

At March 31, 2001, Key had $191 million of derivative assets recorded in
"accrued income and other assets" and $231 million of derivative liabilities
recorded in "accrued expense and other liabilities," on the balance sheet.

ASSET AND LIABILITY MANAGEMENT

FAIR VALUE HEDGING STRATEGIES. Key enters into primarily receive fixed/pay
variable interest rate swap contracts to modify its exposure to interest rate
risk by converting specified fixed-rate deposits, short-term borrowings and
long-term debt to variable rate obligations. These contracts involve the receipt
of fixed-rate interest payments in exchange for variable rate payments over the
life of the contracts without an exchange of the underlying notional amount.

During the first quarter of 2001, Key recognized a net gain of less than $1
million related to the ineffective portion of its fair value hedging
instruments. The ineffective portion of the hedge relationship was recorded in
"other income" on the income statement.

CASH FLOW HEDGING STRATEGIES. Key also enters into primarily pay fixed/receive
variable interest rate swap contracts that effectively convert a portion of its
floating-rate debt to fixed-rate, thereby reducing the potential adverse impact
of interest rate increases on future interest expense. With these contracts,
variable-rate interest payments are exchanged for fixed-rate payments over the
life of the contracts without an exchange of the underlying notional amount.

Similarly, Key has converted certain floating-rate commercial loans to
fixed-rate by entering into receive fixed/pay variable interest rate swap
contracts. With these contracts, Key receives fixed-rate interest payments in
exchange for variable-rate payments over the life of the contracts.

Key also uses pay fixed/receive variable interest rate swaps to manage the
interest rate risk associated with anticipated sales/securitizations of certain
commercial real estate loans. These swaps protect against a possible short-term
decline in the value of the loans between the time they are originated and the
time of the anticipated sale/securitization. Key's policy is to generally sell
or securitize these loans within one year



                                       21
<PAGE>   22


of their origination and to hedge the related interest rate risk over the period
during which the loans are held.

During the first quarter of 2001, the net gain recognized by Key in connection
with the ineffective portion of its cash flow hedging instruments was not
significant. There was no impact on earnings during the first quarter of 2001
related to the exclusion of portions of hedging instruments from the assessment
of hedge effectiveness. Any hedge ineffectiveness was recorded in "other income"
on the income statement.

The change in accumulated other comprehensive income (loss) resulting from cash
flow hedges is as follows:

<TABLE>
<CAPTION>

                                                     CUMULATIVE
                                                        EFFECT
                                   DECEMBER 31,      OF ADOPTING                2001       RECLASSIFICATION     MARCH 31,
in millions                                2000        SFAS 133     HEDGING ACTIVITY           TO EARNINGS            2001
- ---------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>               <C>                       <C>             <C>
Accumulated other comprehensive
  income (loss) resulting from
  cash flow hedges                         --          $(22)             $(14)                     $3              $(33)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

At March 31, 2001, Key expects to reclassify approximately $27 million of net
losses on derivative instruments from accumulated other comprehensive income
(loss) to earnings during the next twelve months, coinciding with the income
statement impact of the hedged item through the payment of variable-rate
interest on debt, the receipt of variable-rate interest on commercial loans and
the sale/securitization of commercial real estate loans.

TRADING PORTFOLIO

FUTURES CONTRACTS AND INTEREST RATE SWAPS, CAPS AND FLOORS. Key uses these
instruments for dealer activities (which are generally limited to the banks'
commercial loan clients), and enters into other positions with third parties to
mitigate the interest rate risk of the client positions. The swaps entered into
with clients are generally limited to conventional swaps. All of the futures
contracts and interest rate swaps, caps and floors are recorded at their
estimated fair values. Adjustments to fair value are included in "investment
banking and capital markets income" on the income statement.

FOREIGN EXCHANGE FORWARD CONTRACTS. Key uses these instruments to accommodate
the business needs of clients and for proprietary trading purposes. Foreign
exchange forward contracts provide for the delayed delivery or purchase of
foreign currency. Key mitigates the associated foreign exchange risk by entering
into other foreign exchange contracts with third parties. Adjustments to the
fair value of all foreign exchange forward contracts are included in "investment
banking and capital markets income" on the income statement.

OPTIONS AND FUTURES. Key uses these instruments for proprietary trading
purposes. Adjustments to the fair value of options are included in "investment
banking and capital markets income" on the income statement.

The following table shows trading income recognized on interest rate swap,
foreign exchange forward, and option and futures contracts.


                                            THREE MONTHS ENDED MARCH 31,
                                            -----------------------------
in millions                                     2001             2000
- -------------------------------------------------------------------------
Interest rate swap contracts                   $  3              $15
Foreign exchange forward contracts               11                8
Option and futures contracts                     (1)              --
- -------------------------------------------------------------------------



                                       22
<PAGE>   23



CREDIT RISK

Swaps and caps present credit risk because the counterparty may not meet the
terms of the contract. This risk is measured as the cost of replacing
contracts--at current market rates-- that have generated unrealized gains. To
mitigate credit risk, Key deals exclusively with counterparties that have high
credit ratings.

Key uses two additional precautions to manage exposure to credit risk on swap
contracts. First, Key generally enters into bilateral collateral and master
netting arrangements. These agreements include legal rights of setoff that
provide for the net settlement of the subject contracts with the same
counterparty in the event of default. Second, a credit committee monitors credit
risk exposure to the counterparty on each interest rate swap to determine
appropriate limits on Key's total credit exposure and the amount of collateral
required, if any.

At March 31, 2001, Key had 35 different counterparties to hedging swaps and
swaps entered into to offset the risk of client swaps. Key had aggregate credit
exposure of $70 million to 16 of these counterparties, with the largest credit
exposure to an individual counterparty amounting to $22 million. As of the same
date, Key's aggregate credit exposure on its interest rate caps totaled $34
million. Based on management's assessment, as of March 31, 2001, all
counterparties were expected to meet their obligations.



                                       23
<PAGE>   24

                     INDEPENDENT ACCOUNTANTS' REVIEW REPORT


SHAREHOLDERS AND BOARD OF DIRECTORS
KEYCORP

We have reviewed the unaudited condensed consolidated balance sheets of KeyCorp
and subsidiaries ("Key") as of March 31, 2001 and 2000, and the related
condensed consolidated statements of income, changes in shareholders' equity and
cash flow for the three-month periods then ended. These financial statements are
the responsibility of Key's management.

We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States,
which will be performed for the full year with the objective of expressing an
opinion regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with accounting principles generally accepted in the
United States.

We have previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet of Key as of
December 31, 2000, and the related consolidated statements of income, changes in
shareholders' equity, and cash flow for the year then ended (not presented
herein) and in our report dated January 12, 2001, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of December 31, 2000, is fairly stated, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.


                                                           /s/ Ernst & Young LLP


Cleveland, Ohio
April 13, 2001



                                       24
<PAGE>   25

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION
- ------------

This Management's Discussion and Analysis reviews the financial condition and
results of operations of KeyCorp and its subsidiaries for the first quarters of
2001 and 2000. Some tables may cover more than these two quarters to comply with
Securities and Exchange Commission disclosure requirements or to illustrate
trends over a longer period of time. When you read this discussion, you should
also look at the consolidated financial statements and related notes that appear
on pages 3 through 23.

TERMINOLOGY

This report contains some shortened names and industry-specific terms. We want
to explain some of these terms at the outset so you can better understand the
discussion that follows.

- -    KEYCORP refers solely to the parent company.

- -    KEY refers to the consolidated entity consisting of KeyCorp and its
     subsidiaries.

- -    A KEYCENTER is one of Key's full-service retail banking facilities or
     branches.

- -    Key engages in CAPITAL MARKETS ACTIVITIES, primarily through the Key
     Capital Partners line of business. These activities encompass a variety of
     services. Among other things, we trade securities as a dealer, enter into
     derivative contracts (both to accommodate clients' financing needs and for
     proprietary trading purposes), invest in privately held companies (also
     referred to as principal investing) and conduct transactions in foreign
     currencies (both to accommodate clients' needs and to benefit from
     fluctuations in exchange rates).

- -    CORE FINANCIAL RESULTS exclude the effects of significant nonrecurring
     items such as gains from divestitures and restructuring charges.

- -    When we want to draw your attention to a particular item in Key's Notes to
     Consolidated Financial Statements, we refer to NOTE ___, giving the
     particular number, name and starting page number.

- -    All earnings per share data included in this discussion are presented on a
     DILUTED basis, which takes into account all common shares outstanding and
     potential common shares that could result from the exercise of outstanding
     stock options. Some of the financial information tables also include BASIC
     earnings per share, which takes into account only common shares
     outstanding.

- -    For regulatory purposes, capital is divided into several classes. Federal
     regulations prescribe that at least half of a bank or bank holding
     company's TOTAL RISK-ADJUSTED CAPITAL must qualify as TIER 1. Both total
     and Tier 1 capital serve as bases for several measures of capital adequacy,
     which is an important indicator of financial stability and condition. You
     will find a more detailed explanation of total and Tier 1 capital and how
     they are calculated in the section entitled "Capital and dividends," which
     begins on page 52.

OUR PROJECTIONS ARE NOT FOOLPROOF

This report contains "forward-looking statements" about issues like anticipated
cost savings and revenue growth, and the anticipated reduction in Key's
employment base. Forward-looking statements by their nature are subject to
assumptions, risks and uncertainties. For a variety of reasons, including the
following, actual results could differ materially from those contained in or
implied by the forward-looking statements.

- -    Interest rates could change more quickly or more significantly than we
     expect.


                                       25
<PAGE>   26


- -    If the economy or segments of the economy continue to slow, the demand for
     new loans and the ability of borrowers to repay outstanding loans may
     decline.

- -    The stock and bond markets could suffer a disruption, which may have a
     negative effect on our financial condition and that of our borrowers, and
     on our ability to raise money by issuing new securities.

- -    It could take us longer than we anticipate to implement strategic
     initiatives designed to increase revenues or manage expenses, or we may be
     unable to implement those initiatives at all.

- -    Acquisitions and dispositions of assets, business units or affiliates could
     affect us in ways that management has not anticipated.

- -    We may become subject to new legal obligations, or the resolution of
     pending litigation may have a negative effect on our financial condition.

- -    We may become subject to new and unanticipated accounting, tax, or
     regulatory practices or requirements.

HIGHLIGHTS OF KEY'S FIRST QUARTER 2001 PERFORMANCE
- --------------------------------------------------

FINANCIAL PERFORMANCE

Some of the highlights of Key's core financial performance for the first
quarters of 2001 and 2000 are discussed below.

Net income was $217 million, or $.51 per diluted common share, compared with
adjusted core earnings of $234 million or $.53 per share for the first quarter
of 2000. Last year's adjusted core earnings exclude $.28 per share of
significant nonrecurring items and $.02 per share from the divested credit card
business. On a reported basis, Key's net income for the first quarter of 2000
was $367 million or $.83 per diluted common share.

Key's return on average equity for the first quarter of 2001 was 13.28%,
compared with a core return on average equity of 15.02% for the first three
months of last year.

Key's first quarter return on average total assets was 1.02%, compared with a
core return of 1.17% for the first quarter of 2000.

Although there were no significant nonrecurring items affecting Key's first
quarter 2001 results, Key's financial results for the year-ago quarter were
affected by a number of such items. The most significant of these items and
their impact on both earnings and primary financial ratios are summarized in
Figure 1. Each of these items is discussed in greater detail elsewhere in this
report.


                                       26
<PAGE>   27





                    FIGURE 1.  SIGNIFICANT NONRECURRING ITEMS


<TABLE>
<CAPTION>

                                                         THREE MONTHS ENDED MARCH 31,
                                                         ----------------------------
dollars in millions, except per share amounts                2001          2000
- -------------------------------------------------------------------------------------
<S>                                                       <C>          <C>
Net income as reported                                    $   217      $   367
Nonrecurring items (net of tax):
      Gain from sale of credit card portfolio                 --          (207)
      Additional provision for loan losses                    --            77
      Restructuring and other special charges                 --             7
      Other nonrecurring items                                --            (1)
- -------------------------------------------------------------------------------------
Net income - core                                         $   217      $   243
                                                          =======      =======
Net income per diluted common share                       $   .51      $   .83
Net income per diluted common share - core                    .51          .55
Return on average total assets                               1.02%        1.77%
Return on average total assets - core                        1.02         1.17
Return on average equity                                    13.28        22.68
Return on average equity - core                             13.28        15.02
- -------------------------------------------------------------------------------------
</TABLE>

The decline in Key's net income from adjusted core earnings reported a year-ago
was due largely to the significant, adverse effects of a weakening economy. The
impact was particularly noticeable in our more capital markets-sensitive
businesses, such as equity capital investing and brokerage, both within the Key
Capital Partners line of business. While the economic slowdown also impacted our
loan portfolio generally, the erosion in credit quality that we are experiencing
is disproportionately concentrated in two distinct portfolios of limited size in
our Specialty Lending area. More specific information on Key's credit quality is
provided in the section entitled "Asset quality," which begins on page 47.

Despite the unfavorable operating conditions, we were encouraged by continued
strong growth in our home equity lending business and Retail Banking deposits.
We also were pleased with the continued reduction in our noninterest expense,
reflecting the immediate and lasting benefits of Key's comprehensive,
corporate-wide competitiveness initiative, which we began implementing last
fall. We remain confident that we will capture 100 percent of the initiative's
cost savings potential; more than half of our projects have been implemented,
and have begun to favorably impact Key's expenses. In addition, we remain on
schedule to complete the remaining projects. The accumulating benefits of this
initiative provide Key with a distinct advantage; the ability to reduce costs
substantially is critical in an economic environment in which revenue growth is
difficult.

Figure 2 summarizes Key's financial performance on a reported basis for each of
the past five quarters.


                                       27
<PAGE>   28

                        FIGURE 2. SELECTED FINANCIAL DATA


<TABLE>
<CAPTION>

                                                            2001                                 2000
                                                     -----------------    -------------------------------------------------
dollars in millions, except per share amounts              FIRST               FOURTH       THIRD      SECOND      FIRST
- ---------------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>                  <C>         <C>         <C>         <C>
FOR THE PERIOD
Interest income                                         $  1,570             $  1,652    $  1,596    $  1,540    $  1,489
Interest expense                                             882                  950         912         867         818
Net interest income                                          688                  702         684         673         671
Provision for loan losses                                    110                  108         131          68         183
Noninterest income                                           455                  508         405         475         806
Noninterest expense                                          698                  705         787         698         727
Income before income taxes                                   335                  397         171         382         567
Net income                                                   217                  266         121         248         367
- ---------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE
Net income                                              $    .51             $    .63    $    .28    $    .57    $    .83
Net income-assuming dilution                                 .51                  .62         .28         .57         .83
Cash dividends                                              .295                  .28         .28         .28         .28
Book value at period end                                   15.79                15.65       15.26       15.09       14.84
Market price:
      High                                                 27.58                28.50       27.06       23.00       22.25
      Low                                                  22.65                21.50       17.50       17.00       15.56
      Close                                                25.80                28.00       25.31       17.63       19.00
Weighted average common shares (000)                     424,024              425,054     429,584     434,112     441,834
Weighted average common shares and
     potential common shares (000)                       429,917              430,634     431,972     436,022     443,757
- ---------------------------------------------------------------------------------------------------------------------------
AT PERIOD END
Loans                                                   $ 67,027             $ 66,905    $ 66,299    $ 65,612    $ 64,064
Earning assets                                            77,027               77,316      75,786      74,748      73,953
Total assets                                              86,457               87,270      85,500      84,719      83,504
Deposits                                                  45,965               48,649      47,809      49,076      46,036
Long-term debt                                            14,495               14,161      13,800      14,097      14,784
Shareholders' equity                                       6,702                6,623       6,520       6,507       6,493
Full-time equivalent employees                            21,882               22,142      22,457      23,005      23,474
Branches                                                     922                  922         932         938         937
- ---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE RATIOS
Return on average total assets                              1.02%                1.24%        .57%       1.20%       1.77%
Return on average equity                                   13.28                16.16        7.39       15.40       22.68
Net interest margin (taxable equivalent)                    3.63                 3.71        3.68        3.68        3.68
- ---------------------------------------------------------------------------------------------------------------------------
CAPITAL RATIOS AT PERIOD END
Equity to assets                                            7.75%                7.59%       7.63%       7.68%       7.78%
Tangible equity to tangible assets                          6.29                 6.12        6.10        6.12        6.16
Tier 1 risk-adjusted capital                                7.99                 7.72        7.59        7.88        7.98
Total risk-adjusted capital                                12.32                11.48       11.34       11.74       12.04
Leverage                                                    7.79                 7.71        7.76        7.90        7.89
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

Key completed several acquisitions and a divestiture during the five quarters
shown in this table. One or more of these transactions may have had a
significant effect on Key's results, making it difficult to compare results from
one quarter to the next. Note 3 ("Acquisitions and Divestiture") on page 9 has
specific information about the acquisitions and divestiture that Key completed
in the periods presented above to help you understand how those transactions
impacted Key's financial condition and results of operations.



                                       28
<PAGE>   29


CORPORATE STRATEGY

Key's management reviews Key's business lines on an ongoing basis to identify
opportunities to improve earnings by shifting capital from low-growth to
high-growth businesses. We continue to focus on acquiring or developing
businesses that we believe are capable of achieving double-digit earnings growth
rates, and selling portfolios and business units that have low anticipated
growth rates or do not have a competitive advantage or significant market share.

Key's corporate strategy also reflects the growing importance of the Internet
and related information technologies to all daily activities. In particular, the
strategy calls for the continual and thoughtful application of such technologies
to enhance Key's product and service offerings and to streamline our internal
business practices.

This long-standing strategy was supplemented in the fourth quarter of 1999 by a
new three-year competitiveness initiative to improve profitability by reducing
the costs of doing business, sharpening the focus on the most profitable growth
businesses and enhancing revenues. More specific information on the status of
this initiative is provided in the section below entitled "Status of three-year
competitiveness initiative." Importantly, it is Key's plan to convert this
competitiveness initiative into a continuous process in order to improve client
service levels and to control expenses.

In light of the economic downturn, we may accelerate in the second quarter of
2001 our ongoing process of exiting or de-emphasizing low growth or low profit
businesses in order to be better positioned to expand higher growth and higher
profit businesses when the economy improves. Strategic decisions such as these
may necessitate accounting charges.

PRINCIPAL STRATEGIC ACTIONS DURING THE FIRST QUARTER OF 2001

Early in the first quarter, we acquired The Wallach Company, Inc., an
investment-banking firm based in Denver, Colorado. We expect this acquisition to
enhance our position in this fast-growth region and to provide additional
expertise in the information technology and financial institutions sectors.

STATUS OF THREE-YEAR COMPETITIVENESS INITIATIVE

During the third quarter of 2000, we entered the second and final phase of our
three-year competitiveness initiative. Management expects that Key will achieve
an annual savings rate of approximately $360 million from the overall initiative
when actions are fully implemented by the end of 2002. In the initial phase,
which began in November 1999, Key reduced its operating expenses by
approximately $100 million by outsourcing certain nonstrategic support
functions, consolidating sites in a number of our businesses and reducing
management layers. The final phase is focusing on:

- -    simplifying Key's business structure by consolidating 22 business lines
     into 12;

- -    streamlining and automating business operations and processes;

- -    standardizing product offerings and internal processes;

- -    consolidating operating facilities and service centers; and

- -    outsourcing additional noncore activities.

As of March 31, 2001, more than half of the projects related to the final phase
have been completed, although many of the expected benefits from these projects
have just begun to be realized. Management expects that the actions taken in the
final phase will reduce Key's workforce by approximately 2,300 positions by the
end of 2001. This will bring workforce reductions to approximately 4,000
positions for the entire three-year initiative. In the first quarter of 2001, we
reduced restructuring and other special charges in connection with the
competitiveness initiative by $4 million, bringing the cumulative charges
recorded for this initiative to a net $277 million. The section entitled
"Noninterest expense," which begins on page 42, and Note 10 ("Restructuring
Charges"), on page 19, provide more information about Key's restructuring
charges.


                                       29
<PAGE>   30


CASH BASIS FINANCIAL DATA
- -------------------------

The selected financial data presented in Figure 3 highlight Key's performance on
a cash basis for each of the past five quarters. We provide cash basis financial
data because we believe it offers a useful tool for measuring Key's ability to
support future growth, evaluating liquidity and assessing Key's ability to pay
dividends and repurchase shares.

"Cash basis" accounting can mean different things. When we apply "cash basis"
accounting, the only adjustments that we make to get from the information in
Figure 2 (which is presented on an accrual basis) to the comparable line items
in Figure 3 are to exclude goodwill and other intangibles that do not qualify as
Tier 1 capital, and to exclude the amortization of those assets. Figure 3 does
not exclude the impact of other noncash items (such as depreciation and deferred
taxes) and significant nonrecurring items.

Key's goodwill and other intangibles that do not qualify as Tier 1 capital are
the result of business combinations that Key recorded using the "purchase"
method of accounting. Under the purchase method, assets and liabilities of
acquired companies are recorded at their fair values and any amount paid in
excess of the fair value of the net assets acquired is recorded as goodwill. (If
the same transactions had qualified for accounting using the "pooling of
interests" method, the acquired company's financial statements would simply have
been combined with Key's.) After a combination using purchase accounting, Key
must amortize goodwill and other intangibles by taking periodic charges against
income, but those charges are only accounting entries, not actual cash expenses.
Thus, from an investor's perspective, the economic effect of a transaction is
the same whether we account for it as a purchase or a pooling. For the same
reason, the amortization of intangibles does not impact Key's liquidity and
funds management activities.

This is the only section of this Financial Review that discusses Key's financial
results on a cash basis.

                  FIGURE 3. CASH BASIS SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>

                                                          2001                              2000
                                                     ---------         ------------------------------------------------
dollars in millions, except per share amounts            FIRST            FOURTH      THIRD       SECOND      FIRST
- -----------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>                <C>         <C>         <C>         <C>
FOR THE PERIOD
Noninterest expense                                  $    672           $    679    $    763    $    672    $    702
Income before income taxes                                361                423         195         408         592
Net income                                                241                290         143         271         390
- -----------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE
Net income                                           $    .57           $    .68    $    .33    $    .62    $    .88
Net income - assuming dilution                            .56                .67         .33         .62         .88
Weighted average common shares (000)                  424,024            425,054     429,584     434,112     441,834
Weighted average common shares and potential
      common shares (000)                             429,917            430,634     431,972     436,022     443,757
- -----------------------------------------------------------------------------------------------------------------------
PERFORMANCE RATIOS
Return on average total assets                           1.15%              1.37%        .69%       1.33%       1.92%
Return on average equity                                18.57              22.33       11.12       21.56       30.97
- -----------------------------------------------------------------------------------------------------------------------
GOODWILL AND NONQUALIFYING INTANGIBLES
Goodwill average balance                             $  1,323           $  1,335    $  1,346    $  1,370    $  1,386
Nonqualifying intangibles average balance                  42                 46          50          54          58
Goodwill amortization (after tax)                          21                 21          20          21          20
Nonqualifying intangibles amortization (after tax)          3                  3           2           2           3
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

Key completed several acquisitions and a divestiture during the five quarters
presented in this table. One or more of these transactions may have had a
significant effect on Key's results, making it difficult to compare results from
one quarter to the next. Note 3 ("Acquisitions and Divestiture") on page 9 has
specific information about the acquisitions and divestiture that Key completed
in the quarters presented above to help you understand how those transactions
impacted Key's financial condition and results of operations.


                                       30
<PAGE>   31



LINE OF BUSINESS RESULTS
- ------------------------

Key has three major lines of business:

KEY CONSUMER BANKING comprises two of Key's primary divisions: RETAIL BANKING,
AND HOME EQUITY AND CONSUMER FINANCE.

- -    RETAIL BANKING offers branch-based deposit, investment and credit products
     and personal financial services to consumers.

- -    HOME EQUITY AND CONSUMER FINANCE offers non-branch-based consumer loan
     products, such as education loans, home equity loans, automobile loans and
     leases, and marine and recreational vehicle loans.

KEY CORPORATE FINANCE offers financing and specialized services related to,
among other things, transaction processing, corporate electronic commerce,
financial advice and equipment leasing. It also serves the needs of Key's small
business clients.

KEY CAPITAL PARTNERS offers asset management, employee benefits services,
brokerage services, investment banking, capital markets and insurance expertise,
and conducts equity capital investing. It also provides specialized services to
high-net-worth clients through the wealth management and private banking
businesses.

This section summarizes the financial performance of each line of business and
related strategic developments. To better understand this discussion, see Note 4
("Line of Business Results"), which begins on page 10 and discloses the
activities and financial results of each line of business in greater detail.

Figure 4 shows the net income (loss) contributed by each of Key's major lines of
business in the first quarters of 2001 and 2000.

                FIGURE 4. NET INCOME (LOSS) BY LINE OF BUSINESS(a)

<TABLE>
<CAPTION>

                                       THREE MONTHS ENDED MARCH 31,                   CHANGE
                                       -----------------------------        -------------------------
dollars in millions                              2001     2000                AMOUNT          PERCENT
- -----------------------------------------------------------------------------------------------------
<S>                                            <C>        <C>                 <C>             <C>
Key Consumer Banking:
     Retail Banking                            $  73     $  60               $  13             21.7%
     Home Equity and Consumer Finance             20        18                   2             11.1
Key Corporate Finance                            112       110                   2              1.8
Key Capital Partners(b)                            2        22                 (20)           (90.9)
Treasury                                          19        12                   7            (58.3)
- -----------------------------------------------------------------------------------------------------
     Total segments                              226       222                   4              1.8
Reconciling items(c)                              (9)      145                (154)          (106.2)
- -----------------------------------------------------------------------------------------------------
     Total net income                          $ 217     $ 367               $(150)           (40.9)%
                                               =====     =====               =====
- -----------------------------------------------------------------------------------------------------
</TABLE>

(a)  Key's management accounting system utilizes a methodology for loan loss
     provisioning by line of business that reflects credit quality expectations
     within each line of business over a normal business cycle. The "normalized
     provision for loan losses" assigned to each line as a result of this
     methodology does not necessarily coincide with the level of net loan
     charge-offs at any given point in the cycle.

(b)  Noninterest income and expense attributable to Key Capital Partners is
     assigned to Retail Banking, Home Equity and Consumer Finance or Key
     Corporate Finance if one of those businesses is principally responsible for
     maintaining the relationship with the client that used Key Capital
     Partners' products and services. Key Capital Partners had net income of $15
     million in the first quarter of 2001 and $31 million in the first quarter
     of 2000 before its income and expense were reassigned.

(c)  Reconciling items include certain nonrecurring items such as the first
     quarter 2000 gain from the sale of Key's credit card business, charges
     related to unallocated nonearning assets of corporate support functions and
     the results of the divested credit card business.



                                       31
<PAGE>   32


KEY CONSUMER BANKING
RETAIL BANKING (A DIVISION OF KEY CONSUMER BANKING)

Net income for Retail Banking was $73 million for the first quarter of 2001, up
from $60 million for the same period in 2000. The increase in net income is
attributable to growth in total revenue and a reduction in noninterest expense.

Net interest income improved slightly from the first quarter of 2000, reflecting
the positive effects of a 3% increase in average loans outstanding and a 7%
increase in deposits. The positive effects of this growth were substantially
offset by the effect of narrower interest rate spreads used in determining the
profit contribution from deposits generated by Retail Banking. Noninterest
income rose 8% from the year-ago quarter, while noninterest expense decreased
5%, largely due to lower costs associated with personnel, depreciation and
amortization expense, and various indirect charges.

HOME EQUITY AND CONSUMER FINANCE (A DIVISION OF KEY CONSUMER BANKING)

Net income for Home Equity and Consumer Finance was $20 million in the first
quarter of 2001, compared with $18 million for the same period last year. Total
revenue rose slightly from the year-ago quarter, reflecting growth in net
interest income that was largely offset by a decrease in noninterest income. At
the same time, the level of noninterest expense declined.

Although total revenue grew only slightly from the first quarter of 2000, its
composition changed due to our decision to cease securitizing and selling our
home equity loans. These assets have an attractive risk/reward profile and
retaining them was a significant factor in contributing to an 8% increase in
average loans outstanding and a $14 million, or 11%, increase in net interest
income. This decision also contributed to a decline in noninterest income due to
lower fee income from the servicing of securitized assets. Also adding to the
decline in noninterest income was an increase in losses on leased vehicle
residual values. The slight decrease in noninterest expense was primarily due to
lower personnel costs.

KEY CORPORATE FINANCE

Net income for Key Corporate Finance was $112 million for the first three months
of 2001, compared with $110 million for the same period last year and $142
million for the fourth quarter of 2000. The improvement from the year-ago
quarter was driven by revenue growth, but was substantially offset by a rise in
noninterest expense and a higher normalized provision for loan losses.

In comparison with the first quarter of 2000, total average loans grew by 6%,
resulting in a $21 million, or 7%, improvement in net interest income. The
growth in loans was distributed among most major business units. At the same
time, noninterest income rose 6% primarily due to higher income from loan fees
and various investment banking and capital markets activities. These increases
in revenue were largely offset by higher costs associated with investment
banking and capital markets activities, credit extensions and collections, and
personnel.

The decline in earnings from the preceding quarter was due to a decrease in
total revenue (primarily noninterest income) and an increase in noninterest
expense. The decrease in noninterest income was largely attributable to declines
in loan fees and investment banking fees, an area in which the volume of
business is typically higher in the fourth quarter of the year.

KEY CAPITAL PARTNERS

Net income for Key Capital Partners was $2 million in the first quarter of 2001,
compared with $22 million for the same period last year. Prior to assigning
revenue and expense to other business lines whose clients utilize products and
services offered by Key Capital Partners, net income was $15 million in the
first quarter of 2001, compared with $31 million in the first quarter of 2000.


                                       32
<PAGE>   33


Total revenue for Key Capital Partners decreased by $36 million, or 14%, ($32
million, or 10%, prior to revenue sharing) from the year-ago quarter. The
primary factors contributing to the decrease were declines in net gains from
equity capital investments and revenue derived from brokerage services
(principally in our Private Client Group). The reduction in each of these
revenue components reflects the effect of a slower economy and related weakness
in the securities markets. These declines were partially offset by a $6 million,
or 3% decrease in noninterest expense, due primarily to lower personnel costs.

TREASURY

Treasury includes the Treasury business unit, as well as the net effect of funds
transfer pricing. In the first three months of 2001, this segment generated net
income of $19 million, up from $12 million in the same period last year. The
improvement was attributable to a $25 million increase in gains from the sales
of securities, offset in part by a reduction in net interest income.

RECONCILING ITEMS

The "reconciling items" shown in Figure 4 reflect certain nonrecurring items,
charges related to unallocated nonearning assets of corporate support functions
and the results of the divested credit card business. For more specific
information regarding the above items, see notes c, d and e to the table
included in Note 4 ("Line of Business Results"), which begins on page 10.


                                       33
<PAGE>   34


RESULTS OF OPERATIONS
- ---------------------

NET INTEREST INCOME

Key's principal source of earnings is net interest income, which comprises
interest and loan-related fee income less interest expense. There are several
factors that affect net interest income, including:

- -    the volume, pricing, mix and maturity of earning assets and
     interest-bearing liabilities;

- -    the use of off-balance sheet instruments to manage interest rate risk;

- -    interest rate fluctuations; and

- -    asset quality.

To make it easier to compare results among several periods and the yields on
various types of earning assets, we present all net interest income on a
"taxable-equivalent basis." In other words, if we earn $100 of tax-exempt
income, we present those earnings at a higher amount (specifically, $154)
that--if taxed at the statutory Federal income tax rate of 35%--would yield
$100.

Figure 5 shows the various components of Key's balance sheet that affect
interest income and expense, and their respective yields or rates over the past
five quarters. Net interest income for the first quarter of 2001 was $695
million, representing a $17 million, or 3%, increase from the same period last
year. Average earning assets (primarily commercial and home equity loans)
increased by 4% to $76.9 billion, but that improvement was partially offset by a
decline in the net interest margin from 3.68% in the first quarter of 2000 to
3.63% in the first quarter of 2001.

NET INTEREST MARGIN. The decline in the net interest margin from the year-ago
quarter was largely attributable to the divestiture of Key's credit card
business in January 2000. The net interest margin also decreased from the fourth
quarter of 2000, following three consecutive quarters in which the margin was
either unchanged or slightly higher than the previous quarter. There are several
reasons that the net interest margin declined from the fourth quarter:

- -    as a result of competitive factors, we did not lower the rates paid for
     deposits at the same time that the Federal Reserve reduced interest rates
     in the first quarter of 2001; Key made this adjustment later in the first
     quarter;

- -    our commercial demand deposits and loan fees are typically higher in the
     fourth quarter of each year; and

- -    core deposit growth did not keep pace with loan growth.

INTEREST EARNING ASSETS. Average earning assets for the first quarter totaled
$76.9 billion, which was $3.2 billion, or 4%, higher than the first quarter 2000
level. This increase came principally from the loan portfolio, despite the sale
of Key's credit card business in January 2000 and the effect of other loan sales
discussed below. The largest growth from the year-ago quarter occurred in the
commercial and home equity portfolios.

Key's loan growth has been affected by several strategic developments. During
2000, we sold $805 million of low interest spread commercial loans to a loan
conduit. This arrangement allows us to continue to meet our customers' funding
needs and to generate servicing revenue without having to retain these low
interest spread assets on the balance sheet. In addition, during 2000 and the
first three months of 2001, Key sold without recourse $1.0 billion of its
commercial mortgage loans. Our business of originating and servicing commercial
mortgage loans is expected to grow as a result of Key's acquisitions of Newport
Mortgage Company, L.P. and National Realty Funding L.C. last year.


                                       34
<PAGE>   35

     FIGURE 5. AVERAGE BALANCE SHEETS, NET INTEREST INCOME AND YIELDS/RATES

<TABLE>
<CAPTION>

                                                        FIRST QUARTER 2001                          FOURTH QUARTER 2000
                                              ----------------------------------------    -----------------------------------------
                                                 AVERAGE                   YIELD/            AVERAGE                    YIELD/
dollars in millions                              BALANCE      INTEREST       RATE            BALANCE      INTEREST        RATE
- -----------------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>             <C>         <C>             <C>             <C>          <C>
ASSETS
Loans(a),(b)
     Commercial, financial and agricultural      $20,025         $ 406       8.22 %          $20,093         $ 451        8.92 %
     Real estate-- commercial mortgage             6,897           147       8.63              6,855           162        9.42
     Real estate-- construction                    5,273           117       9.03              5,164           129        9.97
     Commercial lease financing                    7,102           125       7.07              6,965           125        7.20
- -----------------------------------------------------------------------------------------------------------------------------------
        Total commercial loans                    39,297           795       8.19             39,077           867        8.84
     Real estate-- residential                     4,172            81       7.74              4,232            81        7.68
     Home equity                                  10,086           233       9.38              9,591           228        9.45
     Consumer - direct                             2,480            64      10.43              2,582            69       10.57
     Consumer - indirect lease financing           2,936            59       8.02              3,023            62        8.16
     Consumer - indirect other                     5,673           136       9.58              5,813           141        9.72
- -----------------------------------------------------------------------------------------------------------------------------------
        Total consumer loans                      25,347           573       9.10             25,241           581        9.18
     Loans held for sale                           2,389            54       9.09              2,220            51        9.13
- -----------------------------------------------------------------------------------------------------------------------------------
        Total loans                               67,033         1,422       8.57             66,538         1,499        8.98
Taxable investment securities                        892             7       3.24                898             8        3.73
Tax-exempt investment securities(a)                  317             8       8.83                344             8        8.73
- -----------------------------------------------------------------------------------------------------------------------------------
        Total investment securities                1,209            15       4.70              1,242            16        5.12
Securities available for sale(a),(c)               7,026           120       6.87              6,807           121        7.02
Short-term investments                             1,604            20       5.00              1,449            23        6.20
- -----------------------------------------------------------------------------------------------------------------------------------
        Total earning assets                      76,872         1,577       8.28             76,036         1,659        8.69
Allowance for loan losses                         (1,006)                                       (989)
Accrued income and other assets                   10,458                                      10,380
- -----------------------------------------------------------------------------------------------------------------------------------
                                                 $86,324                                     $85,427
                                                 ========                                    =======

LIABILITIES AND SHAREHOLDERS' EQUITY
Money market deposit accounts                    $12,070            95       3.17            $11,873           103        3.44
Savings deposits                                   1,993             7       1.34              2,045             7        1.32
NOW accounts                                         602             2       1.54                600             2        1.55
Certificates of deposit ($100,000 or more)(d)      5,994            92       6.25              5,789            94        6.44
Other time deposits                               15,011           224       6.06             15,037           232        6.15
Deposits in foreign office                         2,869            40       5.64              3,265            54        6.60
- -----------------------------------------------------------------------------------------------------------------------------------
        Total interest-bearing deposits           38,539           460       4.84             38,609           492        5.07
Federal funds purchased and securities
     sold under repurchase agreements              5,263            70       5.39              5,859            93        6.33
Bank notes and other short-term borrowings(d)      7,532           105       5.67              6,446           101        6.22
Long-term debt, including capital
     securities(d),(e)                            15,412           247       6.58             15,235           264        6.91
- -----------------------------------------------------------------------------------------------------------------------------------
        Total interest-bearing liabilities        66,746           882       5.38             66,149           950        5.72
Noninterest-bearing deposits                       8,185                                       8,363
Accrued expense and other liabilities              4,766                                       4,368
Common shareholders' equity                        6,627                                       6,547
- -----------------------------------------------------------------------------------------------------------------------------------
                                                 $86,324                                     $85,427
                                                 =======                                     =======

Interest rate spread (TE)                                                    2.90                                         2.97
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income (TE) and net
     interest margin (TE)                                        $695        3.63%                           $709         3.71%
                                                                 =====       ====                            ====         ====
Capital securities                                $1,307           $24                        $1,243           $24
Taxable-equivalent adjustment(a)                                     7                                           7
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a)  Interest income on tax-exempt securities and loans has been adjusted to a
     taxable-equivalent basis using the statutory Federal income tax rate of
     35%.

(b)  For purposes of these computations, nonaccrual loans are included in
     average loan balances.

(c)  Yield is calculated on the basis of amortized cost.

(d)  Rate calculation excludes basis adjustments related to fair value hedges.

(e)  Rate calculation excludes ESOP debt.

TE = Taxable Equivalent

N/M = Not Meaningful


                                       35
<PAGE>   36

              FIGURE 5. AVERAGE BALANCE SHEETS, NET INTEREST INCOME
                          AND YIELDS/RATES (CONTINUED)


<TABLE>
<CAPTION>


                                                        THIRD QUARTER 2000                          SECOND QUARTER 2000
                                               -------------------------------------    -----------------------------------------
                                                AVERAGE                    YIELD/           AVERAGE                    YIELD/
dollars in millions                             BALANCE      INTEREST       RATE            BALANCE      INTEREST       RATE
- ---------------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>            <C>           <C>              <C>          <C>          <C>
ASSETS
Loans(a),(b)
     Commercial, financial and agricultural      $19,647        $  434        8.87%            $19,046      $ 405        8.56%
     Real estate-- commercial mortgage             6,932           160        9.29               6,967        156        9.03
     Real estate-- construction                    4,866           121        9.98               4,625        110        9.51
     Commercial lease financing                    6,861           122        7.14               6,773        124        7.30
- ---------------------------------------------------------------------------------------------------------------------------------
        Total commercial loans                    38,306           837        8.78              37,411        795        8.53
     Real estate-- residential                     4,273            80        7.51               4,276         83        7.80
     Home equity                                   9,095           219        9.68               8,600        196        9.16
     Consumer - direct                             2,595            68       10.50               2,620         66       10.09
     Consumer - indirect lease financing           3,052            62        8.08               3,107         62        7.97
     Consumer - indirect other                     5,952           142        9.55               6,078        142        9.33
- ---------------------------------------------------------------------------------------------------------------------------------
        Total consumer loans                      24,967           571        9.17              24,681        549        8.92
     Loans held for sale                           2,504            56        8.96               2,725         58        8.52
- ---------------------------------------------------------------------------------------------------------------------------------
        Total loans                               65,777         1,464        8.93              64,817      1,402        8.68
Taxable investment securities                        787             8        3.63                 671          6        3.63
Tax-exempt investment securities(a)                  369             7        8.12                 415          9        8.77
- ---------------------------------------------------------------------------------------------------------------------------------
        Total investment securities                1,156            15        5.06               1,086         15        5.60
Securities available for sale(a),(c)               6,275           107        6.67               6,198        107        6.73
Short-term investments                             1,501            17        4.76               1,757         23        5.29
- ---------------------------------------------------------------------------------------------------------------------------------
        Total earning assets                      74,709         1,603        8.61              73,858      1,547        8.40
Allowance for loan losses                           (969)                                         (976)
Accrued income and other assets                   10,365                                        10,523
- ---------------------------------------------------------------------------------------------------------------------------------
                                                 $84,105                                       $83,405
                                                 =======                                       =======

LIABILITIES AND SHAREHOLDERS' EQUITY
Money market deposit accounts                    $11,956           102        3.43             $12,403        105        3.41
Savings deposits                                   2,151             8        1.49               2,275          8        1.44
NOW accounts                                         592             2        1.59                 628          3        1.61
Certificates of deposit ($100,000 or more)(d)      5,269            84        6.40               5,430         82        6.06
Other time deposits                               14,634           218        6.01              13,656        190        5.61
Deposits in foreign office                         2,860            48        6.70               3,029         48        6.39
- ---------------------------------------------------------------------------------------------------------------------------------
        Total interest-bearing deposits           37,462           462        4.96              37,421        436        4.69
Federal funds purchased and securities
     sold under repurchase agreements              5,746            88        6.17               4,096         58        5.64
Bank notes and other short-term borrowings(d)      6,403            99        6.19               6,972        103        5.96
Long-term debt, including capital
     securities(d),(e)                            15,356           263        6.91              15,668        270        6.92
- ---------------------------------------------------------------------------------------------------------------------------------
        Total interest-bearing liabilities        64,967           912        5.65              64,157        867        5.43
Noninterest-bearing deposits                       8,377                                         8,412
Accrued expense and other liabilities              4,248                                         4,357
Common shareholders' equity                        6,513                                         6,479
- ---------------------------------------------------------------------------------------------------------------------------------
                                                 $84,105                                       $83,405
                                                 =======                                       =======

Interest rate spread (TE)                                                     2.96                                       2.97
- ---------------------------------------------------------------------------------------------------------------------------------
Net interest income (TE) and net
     interest margin (TE)                                        $ 691        3.68%                          $680        3.68%
                                                                 =====        ====                           ====        ====
Capital securities                                $1,243           $24                          $1,243        $24
Taxable-equivalent adjustment(a)                                     7                                          7

- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>



<TABLE>
<CAPTION>

                                                                 FIRST QUARTER 2000
                                                   --------------------------------------------
                                                         AVERAGE                     YIELD/
dollars in millions                                      BALANCE      INTEREST        RATE
- -----------------------------------------------------------------------------------------------
<S>                                                       <C>           <C>          <C>
ASSETS
Loans(a),(b)
     Commercial, financial and agricultural               $18,677       $ 379        8.17%
     Real estate-- commercial mortgage                      6,891         150        8.74
     Real estate-- construction                             4,601         104        9.12
     Commercial lease financing                             6,684         122        7.28
- -----------------------------------------------------------------------------------------------
        Total commercial loans                             36,853         755        8.23
     Real estate-- residential                              4,318          81        7.48
     Home equity                                            8,129         179        8.85
     Consumer - direct                                      2,572          62        9.72
     Consumer - indirect lease financing                    3,174          63        7.93
     Consumer - indirect other                              6,286         145        9.22
- -----------------------------------------------------------------------------------------------
        Total consumer loans                               24,479         530        8.67
     Loans held for sale                                    2,692          65        9.80
- -----------------------------------------------------------------------------------------------
        Total loans                                        64,024       1,350        8.47
Taxable investment securities                                 580           4        2.94
Tax-exempt investment securities(a)                           436          10        8.74
- -----------------------------------------------------------------------------------------------
        Total investment securities                         1,016          14        5.43
Securities available for sale(a),(c)                        6,475         112        6.81
Short-term investments                                      2,164          20        3.66
- -----------------------------------------------------------------------------------------------
        Total earning assets                               73,679       1,496        8.15
Allowance for loan losses                                    (899)
Accrued income and other assets                            10,407
- -----------------------------------------------------------------------------------------------
                                                          $83,187
                                                          ======

LIABILITIES AND SHAREHOLDERS' EQUITY
Money market deposit accounts                             $12,617         104        3.32
Savings deposits                                            2,357           9        1.61
NOW accounts                                                  627           3        1.62
Certificates of deposit ($100,000 or more)(d)               5,555          80        5.78
Other time deposits                                        12,552         164        5.25
Deposits in foreign office                                  1,206          17        5.76
- -----------------------------------------------------------------------------------------------
        Total interest-bearing deposits                    34,914         377        4.34
Federal funds purchased and securities
     sold under repurchase agreements                       4,003          48        4.85
Bank notes and other short-term borrowings(d)               8,680         126        5.83
Long-term debt, including capital securities(d),(e)        16,577         267        6.49
- -----------------------------------------------------------------------------------------------
        Total interest-bearing liabilities                 64,174         818        5.13
Noninterest-bearing deposits                                8,160
Accrued expense and other liabilities                       4,344
Common shareholders' equity                                 6,509
- -----------------------------------------------------------------------------------------------
                                                          $83,187
                                                          =======

Interest rate spread (TE)                                                            3.02
- -----------------------------------------------------------------------------------------------
Net interest income (TE) and net
     interest margin (TE)                                                $678        3.68%
                                                                         ====        ====
Capital securities                                         $1,243         $23
Taxable-equivalent adjustment(a)                                            7

- -----------------------------------------------------------------------------------------------
</TABLE>


                                       36
<PAGE>   37

Early in 2000, management announced that Key would de-emphasize the
securitization and sale of home equity loans generated by our home equity
finance affiliate. We have not effected any such transactions since the 1999
year end. By retaining the assets attributable to this growing business on Key's
balance sheet, we intend to replace over time the earnings formerly generated by
the divested credit card business. We will continue, however, to consider
securitizations of other portfolios as a source of alternative funding when
conditions in the capital markets are favorable. Key did not securitize any of
its loans during the first quarter of 2001.

INTEREST RATE SWAPS AND CAPS. Key uses interest rate swaps and caps to help
manage its interest rate sensitivity position. Interest rate swaps and caps are
complicated instruments, but briefly:

- -    INTEREST RATE SWAPS are contracts under which two parties agree to exchange
     interest payment streams that are calculated on agreed-upon amounts (known
     as "notional amounts"). For example, party A will pay interest at a fixed
     rate to, and receive interest at a variable rate from, party B. Key
     generally uses interest rate swaps to mitigate its exposure to interest
     rate risk on certain loans, securities, deposits, short-term borrowings and
     long-term debt.

- -    INTEREST RATE CAPS are contracts that provide for the holder to be
     compensated based on an agreed-upon notional amount when a benchmark
     interest rate exceeds a specified level (known as the "strike rate"). Key
     uses interest rate caps to manage the risk of adverse movements in interest
     rates on certain of our long-term debt and short-term borrowings. A cap
     limits Key's exposure to interest rate increases; caps do not have any
     impact if interest rates decline.

For more information about how Key uses interest rate swaps and caps to manage
its balance sheet, see the next section, entitled "Market risk management" and
Note 12 ("Derivatives and Hedging Activities"), starting on page 21. Figure 6
shows how changes in yields or rates and average balances from the prior year
affected net interest income. The section entitled "Financial Condition," which
begins on page 44, contains more discussion about changes in earning assets and
funding sources.

               FIGURE 6. COMPONENTS OF NET INTEREST INCOME CHANGES

<TABLE>
<CAPTION>

                                                            FROM THREE MONTHS ENDED MARCH 31, 2000
                                                             TO THREE MONTHS ENDED MARCH 31, 2001
                                                   ---------------------------------------------------------
                                                       AVERAGE               YIELD/               NET
in millions                                             VOLUME                 RATE            CHANGE
- ------------------------------------------------------------------------------------------------------------
<S>                                                      <C>                <C>                 <C>
INTEREST INCOME
Loans                                                     $ 64              $  8                $ 72
Taxable investment securities                                2                 1                   3
Tax-exempt investment securities                            (3)                1                  (2)
Securities available for sale                                9                (1)                  8
Short-term investments                                      (6)                6                  --
- ------------------------------------------------------------------------------------------------------------
     Total interest income (taxable equivalent)             66                15                  81

INTEREST EXPENSE
Money market deposit accounts                               (4)               (5)                 (9)
Savings deposits                                            (1)               (1)                 (2)
NOW accounts                                                --                (1)                 (1)
Certificates of deposit ($100,000 or more)                   7                 5                  12
Other time deposits                                         35                25                  60
Deposits in foreign office                                  23                --                  23
- ------------------------------------------------------------------------------------------------------------
     Total interest-bearing deposits                        60                23                  83
Federal funds purchased and securities sold
     under repurchase agreements                            16                 6                  22
Bank notes and other short-term borrowings                 (16)               (5)                (21)
Long-term debt, including capital securities               (19)               (1)                (20)
- ------------------------------------------------------------------------------------------------------------
     Total interest expense                                 41                23                  64
- ------------------------------------------------------------------------------------------------------------
     Net interest income (taxable equivalent)             $ 25              $ (8)               $ 17
                                                          ====              ====                ====
- ------------------------------------------------------------------------------------------------------------
</TABLE>

The change in interest not due solely to volume or rate has been allocated in
proportion to the absolute dollar amounts of the change in each.


                                       37
<PAGE>   38


MARKET RISK MANAGEMENT

The values of some financial instruments vary with changes in external interest
rates, foreign exchange rates, equity prices (the value of equity securities
held as assets), or other market-driven rates or prices. For example, the value
of a fixed-rate bond will decline if market interest rates increase because the
bond will become a less attractive investment. Similarly, the value of the U.S.
dollar regularly fluctuates in relation to other currencies. (Key is not
affected in any material way by changes in foreign exchange rates or the prices
of various equity securities held as assets.) The exposure that instruments tied
to such external factors presents is called "market risk."

ASSET AND LIABILITY MANAGEMENT

Key's Asset/Liability Management Policy Committee has developed a program to
measure and manage interest rate risk. This committee is also responsible for
approving Key's asset/liability management policies, overseeing the formulation
and implementation of strategies to improve balance sheet positioning and
earnings, and reviewing Key's interest rate sensitivity position.

MEASUREMENT OF SHORT-TERM INTEREST RATE EXPOSURE. The primary tool that
management uses to measure interest rate risk is a net interest income
simulation model. These simulations estimate the impact that various changes in
the overall level of interest rates over one- and two-year time horizons would
have on net interest income. The results help Key develop strategies for
managing exposure to interest rate risk.

Like any forecasting technique, interest rate simulation modeling is based on a
large number of assumptions. In this case, the assumptions relate primarily to
loan and deposit growth, asset and liability prepayments, interest rates, and
on- and off-balance sheet management strategies. Management believes that both
individually and in the aggregate the assumptions we make are reasonable.
Nevertheless, the simulation modeling process produces only a sophisticated
estimate, not a precise calculation of exposure.

Key's guidelines for risk management call for preventive measures if a gradual
200 basis point increase or decrease in short-term rates over the next twelve
months would affect net interest income over the same period by more than 2%.
Key has been operating well within these guidelines. As of March 31, 2001, based
on the results of our simulation model, Key would expect net interest income to
increase by approximately .75% if short-term interest rates gradually decrease
by 200 basis points. Conversely, if short-term interest rates gradually increase
by 200 basis points, net interest income would be expected to decrease by
approximately .46%.

MEASUREMENT OF LONG-TERM INTEREST RATE EXPOSURE. Key uses an economic value of
equity model to complement short-term interest rate risk analysis. The benefit
of this model is that it measures exposure to interest rate changes over time
frames longer than two years. The economic value of Key's equity is determined
by aggregating the present value of projected future cash flows for asset,
liability and derivative positions based on the current yield curve.

Economic value analysis has several limitations. For example, the economic
values of asset, liability and off-balance sheet positions do not represent the
true fair values of the positions, since economic values do not consider factors
like credit risk and liquidity. In addition, we must estimate cash flow for
assets and liabilities with indeterminate maturities. Moreover, our present
value calculations do not take into consideration future changes in the balance
sheet that will likely result from ongoing loan and deposit activities conducted
by Key's core businesses. Finally, the analysis requires assumptions about
events that span several years. Despite its limitations, the economic value of
equity model is a relatively sophisticated tool for evaluating the longer-term
effect of possible interest rate movements.


                                       38
<PAGE>   39


Key's guidelines for risk management call for preventive measures if an
immediate 200 basis point increase or decrease in interest rates would reduce
the economic value of equity by more than 15%. Key has been operating well
within these guidelines.

OTHER SOURCES OF INTEREST RATE EXPOSURE. Management uses the results of
short-term and long-term interest rate exposure models to formulate strategies
to improve balance sheet positioning, earnings, or both, within the bounds of
Key's interest rate risk, liquidity and capital guidelines. We also periodically
measure the risk to earnings and economic value arising from various other pro
forma changes in the overall level of interest rates. The many interest rate
scenarios modeled, and their potential impact on earnings and economic value,
quantify the level of Key's interest rate exposure arising from option risk,
basis risk and gap risk.

- -    A financial instrument presents "OPTION RISK" when one party can take
     advantage of changes in interest rates without penalty. For example, when
     interest rates decline, borrowers may choose to prepay fixed-rate loans by
     refinancing at a lower rate. Such a prepayment gives Key a return on its
     investment (the principal plus some interest), but unless there is a
     prepayment penalty, that return will not be as much as the loan would have
     generated had payments been received as originally scheduled. Floating rate
     loans that are capped against potential interest rate increases and
     deposits that can be withdrawn on demand also present option risk.

- -    One approach that Key uses to manage interest rate risk is to offset
     floating-rate liabilities (such as borrowings) with floating-rate assets
     (such as loans). That way, as our interest expense increases, so will our
     interest income. We face "BASIS RISK" when our floating-rate assets and
     floating-rate liabilities reprice in response to different market factors
     or indices. Under those circumstances, even if equal amounts of assets and
     liabilities are repricing at the same time, interest expense and interest
     income may not change by the same amount.

- -    We often use an interest-bearing liability to provide funding for an
     interest-earning asset. For example, Key may sell certificates of deposit
     and use the proceeds to make loans. That strategy presents "GAP RISK" if
     the related liabilities and assets do not mature or reprice at the same
     time.

MANAGEMENT OF INTEREST RATE EXPOSURE. Key manages interest rate risk by using
portfolio swaps and caps, which modify the repricing or maturity characteristics
of some of our assets and liabilities. The decision to use these instruments
rather than securities, debt or other on-balance sheet alternatives depends on
many factors, including the mix and cost of funding sources, liquidity and
capital requirements. In addition, management considers interest rate
implications when adding to Key's securities portfolio, issuing new debt and
packaging loans for securitization.

TRADING PORTFOLIO RISK MANAGEMENT

Key's trading portfolio includes interest rate swap contracts entered into to
accommodate the needs of clients, other positions with third parties that are
intended to mitigate the interest rate risk of client positions, foreign
exchange contracts entered into to accommodate the needs of clients, and
financial assets and liabilities (trading positions) included in "accrued income
and other assets" and "accrued expense and other liabilities," respectively, on
the balance sheet. For more information about these contracts, see Note 12
("Derivatives and Hedging Activities"), which begins on page 21.

Management uses a value at risk ("VAR") model to estimate the potential adverse
effect of changes in interest and foreign exchange rates on the fair value of
Key's trading portfolio. Using statistical methods, this model estimates the
maximum potential one-day loss with 95% certainty. At March 31, 2001, Key's
aggregate daily VAR was $1.6 million compared with $.9 million at March 31,
2000. Aggregate daily VAR averaged $1.4 million for the first three months of
2001, compared with an average of less than $1 million during the same period
last year. VAR modeling augments other controls that Key uses to mitigate the
market risk exposure of the trading portfolio. These controls include loss and
portfolio size limits that are based on market liquidity and the level of
activity and volatility of trading products.


                                       39
<PAGE>   40


NONINTEREST INCOME

Noninterest income for the first quarter of 2001 totaled $455 million, down $351
million, or 44%, from the same period last year. In the prior year, noninterest
income was affected by nonrecurring items. The most significant of these items,
which are shown in Figure 7, is the gain from the January 2000 sale of Key's
credit card business. For more information on this transaction, see Note 3
("Acquisitions and Divestiture"), on page 9.

Core noninterest income, which excludes significant nonrecurring items, was $455
million (40% of total core revenue) in the first quarter of 2001, compared with
$476 million (41% of total core revenue) for the first three months of 2000. One
of management's long-term objectives is to increase core noninterest income as a
percentage of total core revenue to 50%.

The absence of income generated by the divested credit card business accounted
for $5 million of the $21 million decrease in core noninterest income. The
remainder of the decrease was attributable primarily to the effects of weaker
conditions in the securities markets. These adverse conditions led to declines
in revenue derived from various capital markets activities; the impact was
particularly noticeable in our equity capital investing and brokerage
businesses.

Figure 7 shows the major components of Key's noninterest income. The discussion
that follows provides additional information, such as the composition of certain
components and the factors that caused them to change from the first three
months of 2000. For detailed information about investment banking and capital
markets income, and trust and investment services, see Figures 8 and 9,
respectively.

                          FIGURE 7. NONINTEREST INCOME

<TABLE>
<CAPTION>

                                                                        THREE MONTHS ENDED MARCH 31,                CHANGE
                                                                   -----------------------------------    -------------------------
dollars in millions                                                        2001                 2000          AMOUNT      PERCENT
- -----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                  <C>            <C>          <C>
Trust and investment services income                                       $141                 $160           $ (19)       (11.9)%
Investment banking and capital markets income                                65                   89             (24)       (27.0)
Service charges on deposit accounts                                          84                   86              (2)        (2.3)
Corporate-owned life insurance income                                        27                   25               2          8.0
Letter of credit and loan fees                                               29                   23               6         26.1
Net securities gains                                                         26                    1              25          N/M
Other income:
     Electronic banking fees                                                 17                   15               2         13.3
     Insurance income                                                        14                   17              (3)       (17.6)
     Loan securitization servicing fees                                       4                    6              (2)       (33.3)
     Net gains from loan securitizations and sales                            5                    9              (4)       (44.4)
     Miscellaneous income                                                    43                   45              (2)        (4.4)
- -----------------------------------------------------------------------------------------------------------------------------------
          Total other income                                                 83                   92              (9)        (9.8)
- -----------------------------------------------------------------------------------------------------------------------------------
          Total core noninterest income                                     455                  476             (21)        (4.4)

Gain from sale of credit card portfolio                                      --                  332            (332)      (100.0)
Other nonrecurring items                                                     --                   (2)              2       (100.0)
- -----------------------------------------------------------------------------------------------------------------------------------
          Total significant nonrecurring items                               --                  330            (330)      (100.0)
- -----------------------------------------------------------------------------------------------------------------------------------
          Total noninterest income                                         $455                 $806           $(351)       (43.5)%
                                                                           ====                 ====            =====
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

N/M = Not Meaningful


                                       40
<PAGE>   41

             FIGURE 8. INVESTMENT BANKING AND CAPITAL MARKETS INCOME

<TABLE>
<CAPTION>

                                                                 THREE MONTHS ENDED MARCH 31,                  CHANGE
                                                               -------------------------------       ------------------------
dollars in millions                                                   2001              2000           AMOUNT        PERCENT
- -----------------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>               <C>            <C>           <C>
Dealer trading and derivatives income                                  $50               $44            $ 6           13.6%
Investment banking income                                               20                21             (1)          (4.8)
Equity capital gains (losses)                                          (16)               15            (31)           N/M
Foreign exchange income                                                 11                 9              2           22.2
- -----------------------------------------------------------------------------------------------------------------------------
     Total investment banking and capital markets income               $65               $89           $(24)         (27.0)%
                                                                      ====              ====           ====
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>

N/M = Not Meaningful



                     FIGURE 9. TRUST AND INVESTMENT SERVICES

<TABLE>
<CAPTION>

                                                 THREE MONTHS ENDED MARCH 31,             CHANGE
                                                 ----------------------------       --------------------
dollars in millions                                 2001             2000           AMOUNT     PERCENT
- --------------------------------------------------------------------------------------------------------
<S>                                                 <C>              <C>            <C>         <C>
Personal asset management and custody fees          $ 46             $ 47           $ (1)       (2.1)%
Institutional asset management and custody fees       22               24             (2)       (8.3)
Bond services                                         10                9              1        11.1
Brokerage commission income                           26               45            (19)      (42.2)
All other fees                                        37               35              2         5.7
- --------------------------------------------------------------------------------------------------------
    Total trust and investment services income      $141             $160           $(19)      (11.9)%
                                                    ====             ====           ====

dollars in billions
- --------------------------------------------------------------------------------------------------------
MARCH 31,
Discretionary trust assets                          $ 66             $ 72           $ (6)       (8.3)%
Nondiscretionary trust assets                         51               50              1         2.0
- --------------------------------------------------------------------------------------------------------
    Total trust assets                              $117             $122           $ (5)       (4.1)%
                                                    ====             ====            ====
- --------------------------------------------------------------------------------------------------------
</TABLE>


TRUST AND INVESTMENT SERVICES. Trust and investment services provide Key's
largest source of noninterest income. As shown in Figure 9, the decrease in
revenue derived from these services was largely due to a decline in brokerage
commission income, reflecting the impact of a weakening economy. The softer
economic environment also resulted in a decrease in fee income that is based on
the value of assets managed by Key for its clients. At March 31, 2001, Key's
bank, trust and registered investment advisory subsidiaries had assets under
discretionary management (excluding corporate trust assets) of $66 billion,
compared with $72 billion at March 31, 2000.

INVESTMENT BANKING AND CAPITAL MARKETS INCOME. The decrease in this revenue
component also reflects the effects of a weakening economy. As shown in Figure
8, results for the first quarter of 2001 include net equity capital losses of
$16 million (including $21 million of unrealized mark-to-market adjustments),
compared with net equity capital gains of $15 million in the year-ago quarter.
This negative $31 million swing was substantially offset by an increase in net
realized gains from the sales of certain securities held in Key's available for
sale portfolio discussed below.

SECURITIES TRANSACTIONS. During the first quarter of 2001, Key realized $26
million of core net securities gains from the sales of securities held in the
available for sale portfolio, compared with net gains of $1 million a year ago.
Since the sales involved primarily equity securities issued by financial service
companies, management does not expect the sales of these assets to have an
adverse affect on Key's future net interest income.

SIGNIFICANT NONRECURRING ITEMS. Noninterest income for the first three months of
2000 includes a $332 million gain from the sale of Key's credit card business.


                                       41
<PAGE>   42

NONINTEREST EXPENSE

Noninterest expense for the first quarter of 2001 totaled $698 million, down
from $727 million for the first quarter of 2000. Items that hinder a direct
comparison of results between quarters are shown in Figure 10. These items
include restructuring and other special charges recorded during the first
quarter of 2000 in connection with strategic actions that Key is taking to
improve operating efficiency and profitability. You can find more information
about these charges under the heading "Restructuring and other special charges,"
on page 43.

Core noninterest expense, which excludes significant nonrecurring items,
decreased by $20 million, or 3%, from the year-ago quarter. Marketing expense
rose by $5 million, but this was more than offset by an $18 million decrease in
personnel expense and a $10 million decrease in equipment expense.

Figure 10 shows the components of Key's noninterest expense. The discussion that
follows explains the composition of certain components and the factors that
caused them to change from the first three months of 2000.

                         FIGURE 10. NONINTEREST EXPENSE

<TABLE>
<CAPTION>

                                                  THREE MONTHS ENDED MARCH 31,                     CHANGE
                                                 ------------------------------         -----------------------------
dollars in millions                                   2001               2000                 AMOUNT       PERCENT
- ---------------------------------------------------------------------------------------------------------------------
<S>                                              <C>                 <C>                      <C>              <C>
Personnel                                        $    364            $    382                 $    (18)        (4.7)%
Net occupancy                                          57                  57                       --           --
Computer processing                                    62                  59                        3          5.1
Equipment                                              38                  48                      (10)       (20.8)
Marketing                                              27                  22                        5         22.7
Amortization of intangibles                            26                  25                        1          4.0
Professional fees                                      18                  19                       (1)        (5.3)
Other expense:
     Postage and delivery                              17                  17                       --           --
     Telecommunications                                11                  14                       (3)       (21.4)
     Equity- and gross receipts- based taxes            8                   8                       --           --
     OREO expense, net                                  2                   2                       --           --
     Miscellaneous expense                             68                  65                        3          4.6
- -----------------------------------------------------------------------------------------------------------------------
        Total other expense                           106                 106                       --           --
- -----------------------------------------------------------------------------------------------------------------------
        Total core noninterest expense                698                 718                      (20)        (2.8)

Restructuring and other special charges              --                    12                      (12)      (100.0)
Other nonrecurring items                             --                    (3)                       3       (100.0)
- -----------------------------------------------------------------------------------------------------------------------
        Total significant nonrecurring items         --                     9                       (9)      (100.0)
- -----------------------------------------------------------------------------------------------------------------------
        Total noninterest expense                $    698            $    727                 $    (29)        (4.0)%
                                                 ========            ========                  =======

Full-time equivalent employees at period end       21,882              23,474
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

PERSONNEL. Personnel expense, the largest category of Key's noninterest expense,
declined by $18 million from the same period last year. This improvement is
attributable to our competitiveness initiative and to the divestiture of Key's
credit card business in January 2000. Through the competitiveness initiative we
have improved efficiency, reduced the level of personnel required to conduct our
business, and instilled a greater sense of awareness among all employees of the
need to manage costs. Figure 11 shows the major components of Key's core
personnel expense.


                                       42
<PAGE>   43
                        FIGURE 11. CORE PERSONNEL EXPENSE

<TABLE>
<CAPTION>

                                                THREE MONTHS ENDED MARCH 31,                CHANGE
                                           ------------------------------------    --------------------------
dollars in millions                                 2001               2000          AMOUNT        PERCENT
- -------------------------------------------------------------------------------------------------------------
<S>                                                 <C>                <C>            <C>            <C>
Salaries                                            $211               $225           $(14)          (6.2)%
Employee benefits                                     57                 61             (4)          (6.6)
Incentive compensation                                96                 96             --             --
- -------------------------------------------------------------------------------------------------------------
     Total core personnel expense                   $364               $382           $(18)          (4.7)%
                                                    ====               ====           ====
- -------------------------------------------------------------------------------------------------------------
</TABLE>

At March 31, 2001, the number of full-time equivalent employees was 21,882,
compared with 22,142 at the end of 2000 and 23,474 a year ago. The decrease in
the number of employees is primarily a result of Key's competitiveness
initiative.

EQUIPMENT. The decrease in equipment expense was driven by reductions in
depreciation, maintenance expense and rental expense stemming from cost
management efforts and our competitiveness initiative.

MARKETING. The increase in marketing expense was due in part to the launch of
Key's "Achieve anything" brand line early in the first quarter of 2001.

RESTRUCTURING AND OTHER SPECIAL CHARGES. During the first quarter of last year,
Key recorded nonrecurring charges of $14 million (including restructuring
charges of $9 million) in connection with strategic actions related to the
competitiveness initiative. For more information related to the actions taken or
to be taken, anticipated cost savings and expected reductions to Key's
workforce, see the section entitled "Status of three-year competitiveness
initiative," on page 29. Additional information related to the restructuring
charges can be found in Note 10 ("Restructuring Charges"), on page 19. Cash
generated by Key's operations will fund the restructuring charge liability; none
of the charges will have a material impact on Key's liquidity.

INCOME TAXES

The provision for income taxes was $117 million for the three-month period ended
March 31, 2001, compared with $200 million for the comparable period in 2000.
The decrease in income taxes reflects a lower level of taxable income relative
to the year-ago quarter, as well as a decrease in Key's effective tax rate. The
effective tax rate (which is the provision for income taxes as a percentage of
income before income taxes) for the first quarter of 2001 was 34.9%, compared
with 35.3% for the same period last year. The effective tax rate decreased
primarily because Key had larger tax credits, and tax-exempt income from
corporate-owned life insurance and securities accounted for a larger portion of
pretax income. The effect of these items was offset in part by proportionately
higher levels of state income taxes and amortization related to nondeductible
intangible assets. The effective income tax rate remains below Key's combined
statutory Federal and state rate of 37%, primarily because we continue to invest
in tax-advantaged assets (such as tax-exempt securities and corporate-owned life
insurance) and to recognize credits associated with investments in low-income
housing projects.


                                       43
<PAGE>   44


FINANCIAL CONDITION
- -------------------

LOANS

At March 31, 2001, total loans outstanding were $67.0 billion, compared with
$66.9 billion at the end of 2000 and $64.1 billion a year ago. The composition
of the loan portfolio at each of these respective dates is summarized in Note 6
("Loans") on page 15. Despite the effects of a weakening economy, Key achieved a
5% increase in loans over the past twelve months, primarily as a result of
strong growth in the home equity portfolio.

Because of Key's success in generating new loan volume, loan growth has outpaced
deposit growth over the past several years. To mitigate this imbalance, we have
used alternative funding sources like loan sales and securitizations so we can
continue to capitalize on our lending opportunities. Management expects Newport
Mortgage Company, L.P. and National Realty Funding L.C., which were acquired
last year, to improve Key's ability to generate and securitize new loans,
especially in the area of commercial real estate. In addition, early in 2000, we
began selling loans to a loan conduit. This arrangement allows us to continue to
meet our corporate customers' funding needs and to generate servicing revenue
without having to retain certain low interest spread assets on the balance
sheet.

Loans outstanding (excluding loans held for sale) would have grown by $5.3
billion, or 9%, over the past twelve months, if we had not sold $3.7 billion of
loans ($1.0 billion through securitizations) during that time period. Excluding
the impact of loan sales, commercial loans rose by $4.4 billion, or 12% since
March 31, 2000. Four factors contributed to this increase: strong growth in the
middle market and business banking portfolios; a $1.4 billion increase in
commercial real estate mortgage loans; a $786 million increase in real estate
construction loans and a $380 million increase in the equipment lease financing
portfolio. Consumer loans rose (excluding loan sales) by $929 million, or 4%.
This growth reflects a $2.1 billion increase in the home equity portfolio,
partially because we opted to not securitize these loans starting in 2000. By
retaining these assets, we intend to replace over time the revenue generated by
our former credit card business. The growth of the home equity portfolio was
moderated by declines of $694 million in installment loans and $288 million in
automobile lease financing receivables.

SALES, SECURITIZATIONS AND DIVESTITURES. During the past twelve months, Key sold
$1.6 billion of education loans ($1.0 billion through securitizations), $1.4
billion of commercial real estate loans, $478 million of commercial loans, and
$131 million of home equity loans. A small amount of residential real estate
loans were sold in the first quarter of this year.

Among the factors that Key considers in determining which loans to securitize
are:

- -    whether the characteristics of a specific loan portfolio make it conducive
     to securitization;

- -    the relative cost of funds;

- -    the level of credit risk; and

- -    capital requirements.


Figure 12 summarizes Key's loan sales (including securitizations) for the first
three months of 2001 and all of 2000.


                                       44
<PAGE>   45

                       FIGURE 12. LOANS SOLD AND DIVESTED

<TABLE>
<CAPTION>

                                                   Commercial     Residential     Home    Credit Card
in millions                         Commercial     Real Estate    Real Estate    Equity    Receivables    Education    Total
- -----------------------------------------------------------------------------------------------------------------------------------
          2001
- -------------------------
<S>                                       <C>        <C>             <C>          <C>            <C>         <C>         <C>
First quarter                              --       $  327          $    1       $   14           --        $  449      $  791
- -----------------------------------------------------------------------------------------------------------------------------------
Total                                      --       $  327          $    1       $   14           --        $  449      $  791
                                         ======     ======          ======       ======         ======      ======      ======

          2000
- -------------------------
Fourth quarter                             --       $  560            --         $   22           --        $   13      $  595

Third quarter                            $   27         70            --             72           --           618         787

Second quarter                              451        499            --             23           --           518       1,491

First quarter                               354          6            --             24         $1,339          29       1,752
- -----------------------------------------------------------------------------------------------------------------------------------
Total                                    $  832     $1,135            --         $  141         $1,339      $1,178      $4,625
                                         ======     ======          ======       ======         ======      ======      ======
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Figure 13 shows loans that are either administered or serviced by Key, but are
not recorded on the balance sheet. This includes loans that have been both
securitized and sold, or simply sold outright. Key derives income from two
sources when we sell or securitize loans but retain the right to administer or
service them. We earn noninterest income (recorded as "other income") from
servicing or administering the loans, and we earn interest income when we retain
a portion of the securitized assets because those assets are accounted for like
debt securities that are classified as available for sale or trading account
assets.

                    FIGURE 13. LOANS ADMINISTERED OR SERVICED

<TABLE>
<CAPTION>

                                 MARCH 31,   DECEMBER 31,  SEPTEMBER 30,     JUNE 30,    MARCH 31,
in millions                        2001         2000          2000            2000        2000
- --------------------------------------------------------------------------------------------------
<S>                              <C>         <C>            <C>             <C>         <C>
Education loans                  $ 4,428     $ 4,113        $ 3,946         $ 3,783     $ 3,386
Automobile loans                     340         422            505             602         716
Home equity loans                  1,085       1,176          1,266           1,361       1,457
Commercial real estate loans       6,549       5,322          4,071           3,700       3,100
Commercial loans                   1,023         973            916             805         354
- --------------------------------------------------------------------------------------------------
     Total                       $13,425     $12,006        $10,704         $10,251     $ 9,013
                                 =======     =======        =======         =======     =======
- --------------------------------------------------------------------------------------------------
</TABLE>

SECURITIES

At March 31, 2001, the securities portfolio totaled $8.1 billion and included
$6.9 billion of securities available for sale and $1.2 billion of investment
securities. In comparison, the total portfolio at December 31, 2000, was $8.5
billion, including $7.3 billion of securities available for sale and $1.2
billion of investment securities.

Figure 14 shows the composition, yields and remaining maturities of Key's
securities available for sale. Figure 15 provides the same information about
Key's investment securities. For more information about retained interests in
securitizations and gross unrealized gains and losses by type of security, see
Note 5 ("Securities"), which begins on page 13.



                                       45
<PAGE>   46

                    FIGURE 14. SECURITIES AVAILABLE FOR SALE

<TABLE>
<CAPTION>
                                                                                                                          OTHER
                                             U.S. TREASURY,            STATES AND           COLLATERALIZED            MORTGAGE-
                                               AGENCIES AND             POLITICAL                 MORTGAGE               BACKED
dollars in millions                            CORPORATIONS          SUBDIVISIONS           OBLIGATIONS(a)        SECURITIES(a)
- ---------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>                     <C>                <C>                  <C>
MARCH 31, 2001
Remaining maturity:
     One year or less                                  $201                    $1                $  105                $  1
     After one through five years                         6                    12                 4,026                 724
     After five through ten years                         6                    18                   398                 532
     After ten years                                      7                    --                   179                  49
- ---------------------------------------------------------------------------------------------------------------------------------
Fair value                                             $220                   $31                $4,708              $1,306
Amortized cost                                          220                    31                 4,680               1,289
Weighted average yield (b)                             5.10  %               4.63  %               7.07   %            7.17   %
Weighted average maturity                          .7 years             5.4 years             3.7 years           5.0 years
- ---------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 2000
Fair value                                             $984                   $33                $4,298              $1,355
Amortized cost                                          984                    33                 4,296               1,355
- ---------------------------------------------------------------------------------------------------------------------------------
MARCH 31, 2000
Fair value                                             $120                   $53                $4,090              $1,589
Amortized cost                                          121                    53                 4,295               1,623
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>

                                                        RETAINED                                          WEIGHTED
                                                    INTERESTS IN            OTHER                          AVERAGE
dollars in millions                           SECURITIZATIONS(a)       SECURITIES        TOTAL           YIELD (b)
- -------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>                <C>            <C>                <C>
MARCH 31, 2001
Remaining maturity:
     One year or less                                   $ 49               $  9           $  366              6.13 %
     After one through five years                        238                 10            5,016              7.01
     After five through ten years                         --                  6              960              7.38
     After ten years                                      --                323(c)           558              8.46
- -------------------------------------------------------------------------------------------------------------------
Fair value                                              $287               $348           $6,900                --
Amortized cost                                           320                350            6,890              7.08 %
Weighted average yield (b)                              8.39   %           6.90   %         7.08 %              --
Weighted average maturity                          3.6 years         10.9 years        4.2 years                --
- -------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 2000
Fair value                                              $316               $343           $7,329                --
Amortized cost                                           334                307            7,309              7.16 %
- -------------------------------------------------------------------------------------------------------------------
MARCH 31, 2000
Fair value                                              $313               $104           $6,269                --
Amortized cost                                           332                111            6,535              6.82 %
- -------------------------------------------------------------------------------------------------------------------
</TABLE>

(a)  Maturity is based upon expected average lives rather than contractual
     terms.

(b)  Weighted average yields are calculated based on amortized cost and exclude
     equity securities that have no stated yield. Such yields have been adjusted
     to a taxable-equivalent basis using the statutory Federal income tax rate
     of 35%.

(c)  Includes equity securities with no stated maturity.


                        FIGURE 15. INVESTMENT SECURITIES

<TABLE>
<CAPTION>

                                           STATES AND                                            WEIGHTED
                                            POLITICAL             OTHER                           AVERAGE
dollars in millions                      SUBDIVISIONS        SECURITIES            TOTAL          YIELD(a)
- ----------------------------------------------------------------------------------------------------------
<S>                                              <C>                <C>            <C>               <C>
MARCH 31, 2001
Remaining maturity:
     One year or less                            $124              $  5           $  129             8.34 %
     After one through five years                 135                --              135             9.74
     After five through ten years                  52                25               77             8.26
     After ten years                                5               862(b)           867             5.40
- ----------------------------------------------------------------------------------------------------------
Amortized cost                                   $316              $892           $1,208             8.01 %
Fair value                                        328               892            1,220               --
Weighted average yield(a)                        9.12  %           5.46   %         8.01 %             --
Weighted average maturity                   2.5 years         9.9 years        8.0 years               --
- ----------------------------------------------------------------------------------------------------------
DECEMBER 31, 2000
Amortized cost                                   $323              $875           $1,198             8.16 %
Fair value                                        333               875            1,208               --
- ----------------------------------------------------------------------------------------------------------
MARCH 31, 2000
Amortized cost                                   $432              $621           $1,053             5.71 %
Fair value                                        442               621            1,063               --
- ----------------------------------------------------------------------------------------------------------
</TABLE>

(a)  Weighted average yields are calculated based on amortized cost and exclude
     equity securities that have no stated yield. Such yields have been adjusted
     to a taxable-equivalent basis using the statutory Federal income tax rate
     of 35%.

(b)  Includes equity securities with no stated maturity.

                                       46
<PAGE>   47


ASSET QUALITY

Key manages asset quality by following procedures that address the issue from
many perspectives. Specifically, Key has professionals that:

- -    evaluate and monitor the level of risk in credit-related assets;

- -    formulate underwriting standards and guidelines for line management;

- -    develop commercial and consumer credit policies and systems;

- -    establish credit-related concentration limits;

- -    review loans, leases and other corporate assets to evaluate credit quality;
     and

- -    review the adequacy of the allowance for loan losses.

ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses at March 31, 2001, was
$1.0 billion, or 1.49% of loans. This compares with $979 million, or 1.53%, at
March 31, 2000. The allowance includes $111 million (for 2001) and $69 million
(for 2000) that is specifically allocated for impaired loans. For more
information about impaired loans, see Note 7 ("Impaired Loans and Other
Nonperforming Assets") on page 16. At March 31, 2001, the allowance for loan
losses was 140.39% of nonperforming loans, compared with 206.98% at March 31,
2000.

Management estimates the appropriate level of the allowance for loan losses on a
quarterly (and at times more frequent) basis using an iterative methodology. The
methodology is described in Note 1 ("Summary of Significant Accounting
Policies") under the heading "Allowance for Loan Losses," on page 66 of Key's
2000 Annual Report to Shareholders. Since the allowance is established through
the provision for loan losses, this methodology also has a direct impact on the
level of the provision that Key records. In the first quarter of 2001, Key's
provision for loan losses totaled $110 million, compared with a core provision
of $62 million for the first quarter of last year. The core provision in the
year-ago quarter excludes $121 million, which represents an additional amount
added to the provision for an enhancement in Key's methodology for assessing
credit risk.

NET LOAN CHARGE-OFFS. As shown in Figure 16, net loan charge-offs for the first
quarter of 2001 were $109 million, or .66% of average loans, compared with net
charge-offs of $134 million, or .84%, for the same period last year. Net
charge-offs a year ago include $15 million of credit card net charge-offs,
including holdbacks and putbacks related to the January 2000 sale of Key's
credit card portfolio. Also included are $57 million of accelerated consumer
loan charge-offs resulting from the implementation of new Federal charge-off
guidelines applicable to all banking companies.

In comparison with the first quarter of 2000, net charge-offs in the commercial
loan portfolio rose by $25 million, including two specific charge-offs that
accounted for more than half of the increase. The rise in commercial net
charge-offs reflects the growth of the overall portfolio as well as the impact
of a weaker economy. The level of net charge-offs in the consumer portfolio
decreased by $50 million from the year-ago quarter. Net charge-offs of credit
card receivables decreased by $15 million because Key sold the credit card
portfolio, while net charge-offs in the remainder of the consumer portfolio
decreased by $35 million due primarily to the implementation of the new
charge-off guidelines last year. These reductions were partially offset by a $14
million increase in net charge-offs of indirect automobile loans. Management
anticipates that the level of Key's net charge-offs will continue to increase in
the second quarter of 2001.


                                       47
<PAGE>   48


                   FIGURE 16. SUMMARY OF LOAN LOSS EXPERIENCE

<TABLE>
<CAPTION>

                                                        THREE MONTHS ENDED MARCH 31,
                                                        -----------------------------
dollars in millions                                         2001          2000
- -------------------------------------------------------------------------------------
<S>                                                       <C>           <C>
Average loans outstanding during the period               $67,033       $64,024
- -------------------------------------------------------------------------------------
Allowance for loan losses at beginning of period          $ 1,001       $   930
Loans charged off:
     Commercial, financial and agricultural                    53            34
     Real estate-commercial mortgage                            3             2
     Commercial lease financing                                 3             4
- -------------------------------------------------------------------------------------
          Total commercial loans                               59            40
     Real estate-residential mortgage                           2             1
     Home equity                                                6             8
     Credit card                                               --            16
     Consumer-direct                                           12            20
     Consumer-indirect lease financing                          6             7
     Consumer-indirect other                                   50            72
- -------------------------------------------------------------------------------------
          Total consumer loans                                 76           124
- -------------------------------------------------------------------------------------
                                                              135           164
Recoveries:
     Commercial, financial and agricultural                     7            10
     Real estate-commercial mortgage                           --             2
     Commercial lease financing                                 1             2
- -------------------------------------------------------------------------------------
          Total commercial loans                                8            14
     Real estate-residential mortgage                           2            --
     Credit card                                               --             1
     Consumer-direct                                            2             1
     Consumer-indirect lease financing                          2             2
     Consumer-indirect other                                   12            12
- -------------------------------------------------------------------------------------
          Total consumer loans                                 18            16
- -------------------------------------------------------------------------------------
                                                               26            30
- -------------------------------------------------------------------------------------
Net loans charged off                                        (109)         (134)
Provision for loan losses                                     110           183
Allowance related to loans sold, net                           (1)           --
- -------------------------------------------------------------------------------------
Allowance for loan losses at end of period                $ 1,001       $   979
                                                          =======       =======
- -------------------------------------------------------------------------------------
Net loan charge-offs to average loans                         .66 %         .84 %
Allowance for loan losses to period-end loans                1.49          1.53
Allowance for loan losses to nonperforming loans           140.39        206.98
- -------------------------------------------------------------------------------------
</TABLE>

NONPERFORMING ASSETS. Figure 17 shows the composition of Key's nonperforming
assets. These assets totaled $740 million at March 31, 2001, and represented
1.10% of loans, other real estate owned (known as "OREO") and other
nonperforming assets, compared with $672 million, or 1.00%, at December 31,
2000, and $497 million, or .78%, at March 31, 2000. The increase in the level of
nonperforming assets in general is attributable to a number of factors,
including continued economic weakness, the significant growth of the loan
portfolio as a whole and the aging of certain segments of the portfolio. While
the economic slowdown is expected to continue to impact Key's loan portfolio
generally, the erosion in credit quality that we are experiencing is
disproportionately concentrated in two distinct commercial portfolios of limited
size: healthcare and the leveraged lending sector of structured finance.
Although aggregate loans outstanding in these two portfolios account for only 3%
of Key's total loans, these portfolios account for approximately 23% of the
commercial loans on nonperforming status at March 31, 2001. These portfolios are
expected to experience some continued deterioration in credit quality in the
near term.


                                       48
<PAGE>   49


          FIGURE 17. SUMMARY OF NONPERFORMING ASSETS AND PAST DUE LOANS


<TABLE>
<CAPTION>

                                                  MARCH 31,     DECEMBER 31,    MARCH 31,
dollars in millions                                    2001             2000         2000
- --------------------------------------------------------------------------------------------
<S>                                               <C>          <C>              <C>
Commercial, financial and agricultural            $   348      $   301          $   195
Real estate -- commercial mortgage                     84           90               98
Real estate -- construction                            29           28               18
Commercial lease financing                             50           48               39
- --------------------------------------------------------------------------------------------
     Total commercial loans                           511          467              350
Real estate -- residential mortgage                    56           52               46
Home equity                                           102           80               59
Consumer -- direct                                      8            8                4
Consumer -- indirect lease financing                    9            7                2
Consumer -- indirect other                             27           36               12
- --------------------------------------------------------------------------------------------
     Total consumer loans                             202          183              123
- --------------------------------------------------------------------------------------------
     Total nonperforming loans                        713          650              473

OREO                                                   28           23               28
Allowance for OREO losses                              (1)          (1)              (6)
- --------------------------------------------------------------------------------------------
     OREO, net of allowance                            27           22               22

Other nonperforming assets                             --           --                2
- --------------------------------------------------------------------------------------------
     Total nonperforming assets                   $   740      $   672          $   497
                                                  =======      =======          =======
- --------------------------------------------------------------------------------------------
Accruing loans past due 90 days or more           $   299      $   236          $   238
Accruing loans past due 30 through 89 days            962          963            1,078
- --------------------------------------------------------------------------------------------
Nonperforming loans to period-end loans              1.06 %        .97 %            .74 %
Nonperforming assets to period-end loans
     plus OREO and other nonperforming assets        1.10         1.00              .78
- --------------------------------------------------------------------------------------------
</TABLE>

DEPOSITS AND OTHER SOURCES OF FUNDS

"Core deposits" -- domestic deposits other than certificates of deposit of
$100,000 or more -- are Key's primary source of funding. During the first
quarter of 2001, core deposits averaged $37.9 billion, and represented 49% of
the funds Key used to support earning assets, compared with $36.3 billion and
49%, respectively, during the same period last year. As shown in Figure 5 (which
spans pages 35 and 36), the mix of Key's deposits has changed over the past
twelve months. The levels of money market deposits, savings deposits and NOW
accounts declined, while Key's time deposits have grown as a result of our
marketing efforts and client preferences for investments that offer higher
returns. Weaker conditions in the securities markets have also contributed to
the growth of time deposits, which offer a more stable rate of return than
equity investing alternatives. Average deposits in Key's Retail Banking division
grew by 7% from the year-ago quarter and allowed us to moderate our dependence
on higher-cost funds.

Purchased funds, comprising large certificates of deposit, deposits in the
foreign branch and short-term borrowings, averaged $21.7 billion during the
first quarter of 2001, compared with $19.4 billion a year ago. As shown in
Figure 5, Key has relied more heavily on purchased funds over the past several
quarters to fund earning assets. In addition, Key continues to consider loan
securitizations as a funding alternative when market conditions are favorable.
No securitizations were completed during the first three months of 2001.


                                       49
<PAGE>   50

LIQUIDITY

"Liquidity" measures whether an entity has sufficient cash flow to meet its
financial obligations when due. Key has sufficient liquidity when it can meet
the needs of depositors, borrowers and creditors at a reasonable cost, on a
timely basis, and without adverse consequences. KeyCorp, the parent company, has
sufficient liquidity when it can pay dividends to shareholders, service its
debt, and support customary corporate operations and activities, including
acquisitions.

LIQUIDITY FOR KEY. Management actively analyzes and manages Key's liquidity. In
particular, Key's Funding and Investment Management Group monitors the overall
mix of funding sources with the objective of maintaining an appropriate mix in
light of the structure of the asset portfolios. We use several tools to maintain
sufficient liquidity.

- -    We maintain portfolios of short-term money market investments and
     securities available for sale, substantially all of which could be
     converted to cash quickly at a small expense.

- -    Key's portfolio of investment securities generates prepayments (often at a
     premium) and payments at maturity.

- -    We try to structure the maturities of our loans so we receive a relatively
     consistent stream of payments from borrowers. We also selectively
     securitize and package loans for sale.

- -    Our 922 full-service KeyCenters in 13 states generate a sizable volume of
     core deposits. Key's Funding and Investment Management Group monitors
     deposit flows and considers alternate pricing structures to attract
     deposits when necessary. (For more information about core deposits, see the
     previous section entitled "Deposits and other sources of funds.")

- -    Key has access to various sources of money market funding (such as Federal
     funds purchased, securities sold under repurchase agreements, and bank
     notes) and also can borrow from the Federal Reserve Bank to meet short-term
     liquidity requirements. Key did not have any borrowings from the Federal
     Reserve outstanding as of March 31, 2001.

LIQUIDITY FOR THE PARENT COMPANY. KeyCorp meets its liquidity requirements
principally through regular dividends from affiliate banks. During the first
three months of 2001, affiliate banks paid KeyCorp a total of $1 million in
dividends. As of March 31, 2001, the affiliate banks had an additional $943
million available to pay dividends without prior regulatory approval. These
excess funds are generally maintained in short-term investments. During the
first quarter, KeyCorp also received a $450 million distribution of surplus in
the form of cash from KeyBank National Association.

ADDITIONAL SOURCES OF LIQUIDITY. Management has implemented several programs
that enable Key and KeyCorp to raise money in the public and private markets
when necessary. The proceeds from all of these programs can be used for general
corporate purposes, including acquisitions.

BANK NOTE PROGRAM. During the first three months of 2001, Key's affiliate banks
raised $3.0 billion under Key's bank note program. Of the notes issued during
this period of time, $539 million have original maturities in excess of one year
and are included in long-term debt. The remaining notes have original maturities
of one year or less and are included in short-term borrowings. Key's current
bank note program provides for the issuance of both long- and short-term debt up
to $20.0 billion ($19.0 billion by KeyBank National Association and $1.0 billion
by Key Bank USA, National Association).

EURO NOTE PROGRAM. Under Key's euro note program, KeyCorp, KeyBank National
Association and Key Bank USA, National Association may issue both long- and
short-term debt of up to $7.0 billion in the aggregate. The notes are offered
exclusively to non-U.S. investors and can be denominated in U.S. dollars and
many foreign currencies. There were $3.8 billion of borrowings outstanding under
this facility as of March 31, 2001, none of which were issued during the first
quarter.


                                       50
<PAGE>   51


COMMERCIAL PAPER AND REVOLVING CREDIT. KeyCorp has a commercial paper program
and a two-year revolving credit agreement that provide funding availability of
up to $500 million and $400 million, respectively. As of March 31, 2001, $111
million of borrowings were outstanding under the commercial paper program; no
amount was outstanding under the revolving credit agreement.

OTHER PUBLICLY ISSUED SECURITIES. KeyCorp has a universal shelf registration
statement on file with the Securities and Exchange Commission that provides for
the possible issuance of up to $1.5 billion of debt and equity securities in
addition to the unused capacity under a previous shelf registration. At March
31, 2001, unused capacity under the new shelf registration totaled $500 million.
If Key maintains its favorable debt ratings, shown in Figure 18 below,
management believes that, under normal conditions in the capital markets, any
eventual offering of securities would be well-received by investors at a
competitive cost.

                             FIGURE 18. DEBT RATINGS

<TABLE>
<CAPTION>

                                                                      SENIOR      SUBORDINATED
                                              SHORT-TERM           LONG-TERM         LONG-TERM             CAPITAL
MARCH 31, 2001                                BORROWINGS                DEBT              DEBT          SECURITIES
- -------------------------------------------------------------------------------------------------------------------
KeyCorp
- ----------------------------
<S>                                                 <C>               <C>            <C>                  <C>
Standard & Poor's                                 A-2                  A-              BBB+                 BBB
Moody's                                           P-1                  A1                A2                "al"

KeyBank National Association
- ----------------------------
Standard & Poor's                                 A-1                   A                A-                 N/A
Moody's                                           P-1                 Aa3                A1                 N/A
- -------------------------------------------------------------------------------------------------------------------
</TABLE>

N/A=Not Applicable

For more information about Key's sources and uses of cash for the three month
periods ended March 31, 2001 and 2000, see the Consolidated Statements of Cash
Flow on page 6.



                                       51
<PAGE>   52

CAPITAL AND DIVIDENDS

SHAREHOLDERS' EQUITY. Total shareholders' equity at March 31, 2001, was $6.7
billion, up $79 million from the balance at December 31, 2000. Growth in
retained earnings more than offset the effects of net unrealized losses on
securities available for sale, a reduction in capital resulting from the
cumulative effect of a change in accounting for derivative financial
instruments, and net losses incurred on derivative financial instruments during
the first quarter of 2001.

SHARE REPURCHASES. In light of Key's earnings outlook and strong capital
position, in September 2000 the Board of Directors authorized the repurchase of
25,000,000 common shares, including the 3,647,200 shares remaining at the time
from an earlier repurchase program. These shares may be repurchased in the open
market or through negotiated transactions. During the first three months of
2001, Key did not repurchase any of its common shares. At March 31, 2001, a
remaining balance of 18,800,000 shares may be repurchased under the September
2000 authorization.

At March 31, 2001, Key had 67,474,937 treasury shares. Management expects to
reissue those shares over time to support the employee stock purchase, 401(k),
stock option, and dividend reinvestment plans, and for other corporate purposes.
During the first three months of 2001, Key reissued 1,159,943 treasury shares
for employee benefit and dividend reinvestment plans.

CAPITAL ADEQUACY. Capital adequacy is an important indicator of financial
stability and performance. Overall, Key's capital position remains strong: the
ratio of total shareholders' equity to total assets was 7.75% at March 31, 2001,
compared with 7.59% at December 31, 2000, and 7.78% at March 31, 2000.

Banking industry regulators prescribe minimum capital ratios for bank holding
companies and their banking subsidiaries. Risk-based capital guidelines require
a minimum level of capital as a percent of "risk-adjusted assets," which is
total assets plus certain off-balance sheet items that are adjusted for
predefined credit risk factors. Currently, banks and bank holding companies must
maintain, at a minimum, Tier 1 capital as a percent of risk-adjusted assets of
4.0%, and total capital as a percent of risk-adjusted assets of 8.0%. As of
March 31, 2001, Key's Tier 1 capital ratio was 7.99%, and its total capital
ratio was 12.32%.

The leverage ratio is Tier 1 capital as a percentage of average quarterly
tangible assets. Leverage ratio requirements vary with the condition of the
financial institution. Bank holding companies that either have the highest
supervisory rating or have implemented the Federal Reserve's risk-adjusted
measure for market risk--as KeyCorp has--must maintain a minimum leverage ratio
of 3.0%. All other bank holding companies must maintain a minimum ratio of 4%.
As of March 31, 2001, KeyCorp had a leverage ratio of 7.79%, which is
substantially higher than the minimum requirement.

Federal bank regulators group FDIC-insured depository institutions into the
following five categories based on certain capital ratios: "well capitalized,"
"adequately capitalized," "undercapitalized," "significantly undercapitalized"
and "critically undercapitalized." Both of Key's affiliate banks qualified as
"well capitalized" at March 31, 2001, since each exceeded the prescribed
thresholds of 10% for total capital, 6% for Tier 1 capital and 5% for the
leverage ratio. If these provisions applied to bank holding companies, KeyCorp
would also qualify as "well capitalized" at March 31, 2001. The FDIC-defined
capital categories serve a limited regulatory function. Investors should not
treat them as a representation of the overall financial condition or prospects
of Key or its affiliates.

Figure 19 presents the details of Key's regulatory capital position at March 31,
2001, December 31, 2000 and March 31, 2000.



                                       52
<PAGE>   53

             FIGURE 19. CAPITAL COMPONENTS AND RISK-ADJUSTED ASSETS

<TABLE>
<CAPTION>

                                                  MARCH 31,     DECEMBER 31,    MARCH 31,
dollars in millions                                    2001           2000          2000
- --------------------------------------------------------------------------------------------
<S>                                              <C>              <C>           <C>
TIER 1 CAPITAL
Common shareholders' equity(a)                   $ 6,730          $ 6,609       $ 6,641
Qualifying capital securities                      1,243            1,243         1,243
Less:  Goodwill                                    1,311            1,324         1,378
       Other intangible assets(b)                     45               44            53
- --------------------------------------------------------------------------------------------
           Total Tier 1 capital                    6,617            6,484         6,453
- --------------------------------------------------------------------------------------------
TIER 2 CAPITAL
Allowance for loan losses(c)                       1,001            1,001           979
Net unrealized holding gains(d)                        1               16             1
Qualifying long-term debt                          2,587            2,136         2,311
- --------------------------------------------------------------------------------------------
          Total Tier 2 capital                     3,589            3,153         3,291
- --------------------------------------------------------------------------------------------
          Total capital                          $10,206          $ 9,637       $ 9,744
                                                 =======          =======       =======
RISK-ADJUSTED ASSETS
Risk-adjusted assets on balance sheet            $71,251          $71,326       $68,047
Risk-adjusted off-balance sheet exposure          12,747           13,776        14,126
Less:  Goodwill                                    1,311            1,324         1,378
       Other intangible assets(b)                     45               44            53
Plus:  Market risk-equivalent assets                 226              225           162
       Net unrealized holding gains(d)                 1               16             1
- --------------------------------------------------------------------------------------------
       Gross risk-adjusted assets                 82,869           83,975        80,905
Less:  Excess allowance for loan losses(c)          --               --            --
- --------------------------------------------------------------------------------------------
       Net risk-adjusted assets                  $82,869          $83,975       $80,905
                                                 =======          =======       =======

AVERAGE QUARTERLY TOTAL ASSETS                   $86,324          $85,427       $83,187
                                                 =======          =======       =======

CAPITAL RATIOS
Tier 1 risk-adjusted capital ratio                  7.99 %           7.72 %        7.98 %
Total risk-adjusted capital ratio                  12.32            11.48         12.04
Leverage ratio(e)                                   7.79             7.71          7.89
- --------------------------------------------------------------------------------------------
</TABLE>

(a)  Common shareholders' equity does not include net unrealized gains or losses
     on securities, except for net unrealized losses on marketable equity
     securities.

(b)  Intangible assets (excluding goodwill) recorded after February 19, 1992,
     and deductible portions of purchased mortgage servicing rights.

(c)  The allowance for loan losses included in Tier 2 capital is limited by
     regulation to 1.25% of gross risk-adjusted assets.

(d)  Net unrealized holding gains included in Tier 2 capital are limited by
     regulation to 45% of net unrealized holding gains on available for sale
     equity securities with readily determinable fair values.

(e)  Tier 1 capital divided by average quarterly total assets less goodwill and
     other nonqualifying intangible assets as defined in footnote (b).


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK

The information presented in the Market Risk Management section beginning on
page 38 of the Management's Discussion and Analysis of Financial Condition and
Results of Operations is incorporated herein by reference.



                                       53
<PAGE>   54


PART II.   OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

The information presented in Note 11 ("Legal Proceedings"), on page 20, of the
Notes to Consolidated Financial Statements is incorporated herein by reference.

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits

           (10.1)    Amended Stock Option Plan for Directors

           (10.2)    Amended and Restated 1991 Equity Compensation Plan

           (10.3)    Amended Annual Incentive Plan

           (15)      Acknowledgment Letter of Independent Auditors

     (b)  REPORTS ON FORM 8-K

         January 17, 2001 - Item 5. Other Events, Item 7. Financial Statements
         and Exhibits and Item 9. Regulation FD Disclosure. Reporting that on
         January 16, 2001, the Registrant issued a press release announcing its
         earnings results for the three- and twelve-month periods ended December
         31, 2000, and providing a slide presentation reviewed in the related
         conference call/webcast.

         February 14, 2001- Item 7. Financial Statements and Exhibits and Item
         9. Regulation FD Disclosure. Providing a slide presentation to be used
         by the Registrant in meetings with investors and analysts.

         No other reports on Form 8-K were filed during the three-month period
         ended March 31, 2001.

                                    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:  May 11, 2001               /s/  Lee Irving
                                  ------------------------------------
                                  By:  Lee Irving
                                       Executive Vice President
                                       and Chief Accounting Officer


                                       54

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>l87949aex10-1.txt
<DESCRIPTION>EXHIBIT 10.1
<TEXT>

<PAGE>   1

                                                                    Exhibit 10.1

                                     KEYCORP
                             1997 STOCK OPTION PLAN
                                  FOR DIRECTORS
                             (AS OF MARCH 14, 2001)

         1. PURPOSE OF THE PLAN. The purpose of the KeyCorp 1997 Stock Option
Plan for Directors is to encourage Directors to acquire a larger stock ownership
in KeyCorp, thus increasing their proprietary interest in KeyCorp and more
closely aligning their interests with those of the shareholders of KeyCorp.

         2. DEFINITIONS. Unless the context clearly indicates otherwise, the
following terms have the meanings set forth below.

         "Board of Directors" or "Board" means the Board of Directors of
KeyCorp.

         "Committee" means the committee appointed by the Board of Directors to
         administer the Plan. The Committee shall be composed of not less than
         three Directors of KeyCorp. The Board of Directors may also appoint one
         or more Directors as alternate members of the Committee. No officer or
         employee of KeyCorp or of any subsidiary of KeyCorp shall be a member
         or alternate member of the Committee. The Committee shall at all times
         be comprised solely of "Non-Employee Directors", as such term is
         defined in Rule 16b-3 promulgated under the Securities Exchange Act of
         1934.

         "Director" means a member of the Board of Directors of KeyCorp.

         "Fair Market Value" means, unless otherwise determined by the
         Committee, (a) if the Common Shares are traded on a national exchange,
         the mean between the high and low sales price per Common Share on that
         national exchange on the date for which the determination of Fair
         Market Value is made or, if there are no sales of Common Shares on that
         date, then on the next preceding date on which there were any sales of
         Common Shares, or (b) if the Common Shares are not traded on a national
         exchange, the mean between the high and low sales price per Common
         Share in the over-the-counter market, National Market System, as
         reported by the National Quotations Bureau, Inc. and NASDAQ on the date
         for which the determination of Fair Market Value is made or, if there
         are no sales of Common Shares on that date, then on the next preceding
         date on which there were any sales of Common Shares.

         "Plan" means this KeyCorp 1997 Stock Option Plan for Directors as it
         may be amended from time to time.


                                       1
<PAGE>   2


         3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Committee. The Board may from time to time remove members from or add members to
the Committee. Vacancies on the Committee, however caused, shall be filled by
the Board. The Board shall select one of the Committee's members as Chair.
Members of the Committee shall be eligible to be granted options to purchase
KeyCorp Common Shares under the Plan while serving on the Committee.

         The Committee shall be vested with full authority to make such rules
and regulations as it deems necessary or desirable to administer the Plan and to
interpret the provisions of the Plan. Any determination, decision or action of
the Committee in connection with the construction, interpretation,
administration or application of the Plan shall be final, conclusive and binding
upon all optionees and any person claiming under or through an optionee, unless
otherwise determined by the Board.

         Any determination, decision or action of the Committee provided for in
the Plan may be made or taken by action of the Board if it so determines, with
the same force and effect as if such determination, decision or action had been
made or taken by the Committee. No member of the Committee or of the Board shall
be liable for any determination, decision or action made in good faith with
respect to the Plan or any option granted under the Plan. The fact that a member
of the Board or the Committee shall at the time be, or shall theretofore have
been or thereafter may be, a person who has received or is eligible to receive
an option shall not disqualify him or her from taking part in and voting at any
time as a member of the Board or of the Committee, as applicable, in favor of or
against any amendment or repeal of the Plan.

         4. STOCK SUBJECT TO THE PLAN.

         (a) The stock to be issued upon exercise of options granted under the
Plan shall be KeyCorp Common Shares which shall be made available from Common
Shares held in treasury. The aggregate number of Common Shares which may be
issued under or subject to options granted under this Plan shall not exceed
1,000,000 shares.

         (b) In the event that any outstanding option or portion thereof under
the Plan for any reason expires or is terminated, the Common Shares allocable to
the unexercised portion of such option may again be made subject to option under
the Plan.

         5. GRANT OF OPTIONS. All options granted under this Plan shall be
"nonqualified stock options" for purposes of the Internal Revenue Code of 1986,
as amended.

         6. OPTION PRICE. The purchase price per Common Share which is subject
to an option shall be 100 percent of the Fair Market Value of a Common Share on
the date the option is granted.


                                       2
<PAGE>   3


         7. ELIGIBILITY OF OPTIONEES.

         (a) Options on KeyCorp Common Shares shall automatically be granted
annually on the third business day following the date of the earnings release of
KeyCorp for the first quarter of each year, commencing in 1998, to those persons
who are then serving as Directors of KeyCorp and who are not then employees or
officers of KeyCorp. The options granted to each Director on an annual basis
shall, as of the option grant date, have a value equal to 2.75 times the annual
cash retainer payable to a Director in the year of the option grant (and the
value of the options shall be determined in accordance with the formula set
forth in Exhibit A to this Plan, which formula is intended to approximate on a
simplified basis the Black-Scholes value of the options).

         (b) Subject to the terms of the Plan and subject to review by the
Board, the Committee shall have exclusive jurisdiction (i) to determine the
dates on which, or the time periods during which, the options may be exercised,
(ii) to determine the purchase price of the shares subject to each option in
accordance with Section 6 of the Plan, and (iii) to prescribe the form, which
shall be consistent with the Plan, of the instrument evidencing any options
granted under the Plan.

         8. NON-TRANSFERABILITY OF OPTIONS. Unless otherwise determined by the
Committee, no option granted under the Plan shall be assignable or transferable
by the optionee other than by will or the laws of descent and distribution, and
during the lifetime of an optionee the option shall be exercisable only by such
optionee.

         9. TERM AND EXERCISE OF OPTIONS.

         (a) Unless otherwise determined by the Committee, each option granted
under the Plan shall terminate on the date which is 10 years after the date of
grant. The Committee in its discretion may provide further limitations on the
exercisability of options granted under the Plan. An option may be exercised
only during the continuance of the optionee's service as a Director, except as
provided in Sections 10 and 11 of the Plan.

         (b) A person electing to exercise an option shall give written notice
to KeyCorp of such election and of the number of shares he or she has elected to
purchase, in such form or forms as the Committee shall have prescribed or
approved, and shall at the time of exercise tender the full purchase price of
the shares he or she has elected to purchase. Unless otherwise determined by the
Committee, the purchase price shall be paid in full in cash upon the exercise of
the option.

         10. TERMINATION OF DIRECTORSHIP. If an optionee's status as a Director
ceases for any reason other than death, any option granted to him or her under
the Plan shall terminate thirty-six months (twenty-four months if the Option was
granted prior to March 14, 2001) after the termination of such optionee as a
Director; provided, however, that no option shall be exercisable after its
expiration date.



                                       3
<PAGE>   4

         11. DEATH OF OPTIONEE. If an optionee dies while serving as a Director,
or after cessation of such service but within the period during which he or she
could have exercised the option under Section 10 of the Plan, then the option
may be exercised by the executors or administrators of the optionee's estate or
by any person or persons who have acquired the option directly from the optionee
by bequest or inheritance, within thirty-six months (twenty-four months if the
Option was granted prior to March 14, 2001) after: (i) the date of the
optionee's death in the case of an optionee who died while still serving as a
director, and (ii) the date the optionee ceased being a director in the case of
an optionee who ceased being a director prior to such optionee's death, except
that in no case shall an option be exercisable after its expiration date.

         12. AMENDMENT OR TERMINATION OF THE PLAN. The Committee may at any time
amend, modify suspend or terminate the Plan or modify any outstanding options
granted under the Plan. No amendment, modification, suspension or termination of
the Plan nor modification of any outstanding option shall in any manner affect,
alter or impair any option theretofore granted under the Plan without the
consent of the optionee or any person validly claiming under or through the
optionee.

         13. ADJUSTMENT UPON CHANGES IN COMMON SHARES. Automatically and without
Committee action in the event of any stock dividend, stock split or share
combination of the Common Shares, or by appropriate Committee action in the
event of any reclassification, recapitalization, merger, consolidation, other
form of business combination, liquidation or dissolution involving KeyCorp or
any spin-off or other distribution to shareholders of KeyCorp (other than normal
cash dividends), (a) appropriate adjustments to the maximum number of Common
Shares that may be issued under or subject to options granted under the Plan
pursuant to Section 4 shall be made, and (b) appropriate adjustments to the
number and kind of shares subject to, the price per share under, and the terms
and conditions of each then outstanding option shall be made to the extent
necessary and in such manner that the benefits of Directors under all then
outstanding options shall be maintained substantially as before the occurrence
of such event. Any such adjustment shall be conclusive and binding for all
purposes of the Plan, in the event of any stock dividend, stock split or share
combination, as of the date of such stock dividend, stock split or share
combination, and in all other cases, as of such date as the Committee may
determine.

         14. AWARDS IN SUBSTITUTION FOR OPTIONS GRANTED BY OTHER COMPANIES.
Options may be granted under the Plan in substitution for awards held by
directors of a company who become Directors of KeyCorp as a result of the merger
or consolidation of such company with KeyCorp, or the acquisition by KeyCorp of
the assets of such company, or the acquisition by KeyCorp of stock of such
company as a result of which it becomes a subsidiary. The terms, provisions and
benefits of the substitute options so granted may vary from the terms,
provisions and benefits set forth in or authorized by the Plan to such extent as
the Committee at the time of the grant may deem appropriate to conform, in whole
or in part, to the terms, provisions and benefits of the awards in substitution
for which they are granted.



                                       4
<PAGE>   5


         15. LEGAL REQUIREMENTS. No options shall be granted and KeyCorp shall
have no obligation to make any payment under the Plan, whether in Common Shares,
cash or any combination thereof, unless such payment is, without further action
by KeyCorp, in compliance with all applicable Federal and state laws and
regulations, including, without limitation, the United States Internal Revenue
Code and Federal and state securities laws.

         16. ABSENCE OF LIABILITY. No member of the Board of Directors of
KeyCorp, of the Committee, of any other committee of the Board of Directors or
any officer or Director of KeyCorp or a subsidiary of KeyCorp shall be liable
for any act or action under the Plan, whether of commission or omission, taken
by any other member, or by any officer, agent or employee, or except in
circumstances involving his or her bad faith or willful misconduct, for any
thing done or omitted to be done by himself or herself.

         17. SEVERABILITY. The invalidity or unenforceability of any particular
provision of the Plan shall not affect any other provision hereof, and the Plan
shall be construed in all respects as if such invalid or unenforceable provision
were omitted herefrom.

         18. GOVERNING LAW. The provisions of the Plan shall be governed and
construed in accordance with the laws of the State of Ohio.

         19. PLAN EFFECTIVE DATE. The Plan was approved by the Board of
Directors of KeyCorp at a meeting held on January 16, 1997 and amended on
November 19, 1997, April 21, 1999, and March 14, 2001.


                                       5
<PAGE>   6


                                    EXHIBIT A
                                    ---------

Formula                                                      Example
- -------                                                    ----------

Amount of annual cash retainer                              $  27,000
payable to a director in year of
option grant

multiply by 2.75                                           X     2.75
                                                           ----------

                                                               74,250

multiply by 3                                              X        3
                                                           ----------

                                                              222,750

divide by Fair Market Value (mean
between high and low sales price                     (divided by)  65
per Common Share) of a Common                              ----------
Share on the date of the option
grant

                                                                 3,426

round up to nearest whole number
divisible by 100. This would be
the  number of Common Shares                                    3,500
covered by the options grant to                                 Common
each Director.                                                  Shares


                                       6

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>l87949aex10-2.txt
<DESCRIPTION>EXHIBIT 10.2
<TEXT>

<PAGE>   1

                                                                    Exhibit 10.2

                                     KEYCORP
                              AMENDED AND RESTATED
                          1991 EQUITY COMPENSATION PLAN
                         (AMENDED AS OF MARCH 14, 2001)

         1. PURPOSE. The KeyCorp Amended and Restated 1991 Equity Compensation
Plan is intended to promote the interests of the Corporation and its
shareholders by providing equity-based incentives for effective service and high
levels of performance to Employees selected by the Committee. To achieve these
purposes, the Corporation may grant Awards of Options, Stock Appreciation
Rights, Limited Stock Appreciation Rights, Restricted Stock, and Performance
Shares to selected Employees, all in accordance with the terms and conditions
hereinafter set forth.

         2. DEFINITIONS.

         2.1 1934 ACT. The term "1934 Act" shall mean the Securities Exchange
Act of 1934, as amended.

         2.2 ACQUISITION PRICE. The term "Acquisition Price" with respect to
Restricted Stock shall mean such amount, not less than the par value per Common
Share, as may be specified by the Committee in the Award Instrument with respect
to that Restricted Stock as the consideration to be paid by the Employee for
that Restricted Stock.

         2.3 AWARD. The term "Award" shall mean an award granted under the Plan
of an Option, of Stock Appreciation Rights, of Limited Stock Appreciation
Rights, of Restricted Stock, or of Performance Shares.

         2.4 AWARD INSTRUMENT. The term "Award Instrument" shall mean a written
instrument evidencing an Award in such form and with such provisions as the
Committee may prescribe, including, without limitation, an agreement to be
executed by the Employee and the Corporation, a certificate issued by the
Corporation, or a letter executed by the Committee or its designee. Acceptance
of the Award Instrument by an Employee constitutes agreement to the terms of the
Award evidenced thereby.

         2.5 CHANGE OF CONTROL. A "Change of Control" shall be deemed to have
occurred if, at any time after the date of the grant of the relevant Award,
there is a Change of Control under any of clauses (a), (b), (c), or (d) below.
For these purposes, the Corporation will be deemed to have become a subsidiary
of another corporation if any other corporation (which term shall include, in
addition to a corporation, a limited liability company, partnership, trust, or
other organization) owns, directly or indirectly, 50 percent or more of the
total combined outstanding voting power of all classes of stock of the
Corporation or any successor to the Corporation.


<PAGE>   2


         (a)      A Change of Control will have occurred under this clause (a)
                  if the Corporation is a party to a transaction pursuant to
                  which the Corporation is merged with or into, or is
                  consolidated with, or becomes the subsidiary of another
                  corporation and either

                  (i)      immediately after giving effect to that transaction,
                           less than 65% of the then outstanding voting
                           securities of the surviving or resulting corporation
                           or (if the Corporation becomes a subsidiary in the
                           transaction) of the ultimate parent of the
                           Corporation represent or were issued in exchange for
                           voting securities of the Corporation outstanding
                           immediately prior to the transaction, or

                  (ii)     immediately after giving effect to that transaction,
                           individuals who were directors of the Corporation on
                           the day before the first public announcement of (A)
                           the pendency of the transaction or (B) the intention
                           of any person or entity to cause the transaction to
                           occur, cease for any reason to constitute at least
                           51% of the directors of the surviving or resulting
                           corporation or (if the Corporation becomes a
                           subsidiary in the transaction) of the ultimate parent
                           of the Corporation.

         (b)      A Change of Control will have occurred under this clause (b)
                  if a tender or exchange offer shall be made and consummated
                  for 35% or more of the outstanding voting stock of the
                  Corporation or any person (as the term "person" is used in
                  Section 13(d) and Section 14(d)(2) of the 1934 Act) is or
                  becomes the beneficial owner of 35% or more of the outstanding
                  voting stock of the Corporation or there is a report filed on
                  Schedule 13D or Schedule 14D-1 (or any successor schedule,
                  form or report), each as adopted under the 1934 Act,
                  disclosing the acquisition of 35% or more of the outstanding
                  voting stock of the Corporation in a transaction or series of
                  transactions by any person (as defined earlier in this clause
                  (b)).

         (c)      A Change of Control will have occurred under this clause (c)
                  if either

                  (i)      without the prior approval, solicitation, invitation,
                           or recommendation of the Corporation's Board of
                           Directors any person or entity makes a public
                           announcement of a bona fide intention (A) to engage
                           in a transaction with the Corporation that, if
                           consummated, would result in a Change Event (as
                           defined below in this clause (c)), or (B) to
                           "solicit" (as defined in Rule 14a-1 under the 1934
                           Act) proxies in connection with a proposal that is
                           not approved



                                       2
<PAGE>   3


                           or recommended by the Corporation's Board of
                           Directors, or

                  (ii)     any person or entity publicly announces a bona fide
                           intention to engage in an election contest relating
                           to the election of directors of the Corporation
                           (pursuant to Regulation 14A, including Rule 14a-11,
                           under the 1934 Act),

         and, at any time within the 24 month period immediately following the
         date of the announcement of that intention, individuals who, on the day
         before that announcement, constituted the directors of the Corporation
         (the "Incumbent Directors") cease for any reason to constitute at least
         a majority thereof unless both (A) the election, or the nomination for
         election by the Corporation's shareholders, of each new director was
         approved by a vote of at least two-thirds of the Incumbent Directors in
         office at the time of the election or nomination for election of such
         new director, and (B) prior to the time that the Incumbent Directors no
         longer constitute a majority of the Board of Directors, the Incumbent
         Directors then in office, by a vote of at least 75% of their number,
         reasonably determine in good faith that the change in Board membership
         that has occurred before the date of that determination and that is
         anticipated to thereafter occur within the balance of the 24 month
         period to cause the Incumbent Directors to no longer be a majority of
         the Board of Directors was not caused by or attributable to, in whole
         or in any significant part, directly or indirectly, proximately or
         remotely, any event under subclause (i) or (ii) of this clause (c).

         For purposes of this clause (c), the term "Change Event" shall mean any
         of the events described in the following subclauses (x), (y), or (z) of
         this clause (c):

                  (x)      A tender or exchange offer shall be made for 25% or
                           more of the outstanding voting stock of the
                           Corporation or any person (as the term "person" is
                           used in Section 13(d) and Section 14(d)(2) of the
                           1934 Act) is or becomes the beneficial owner of 25%
                           or more of the outstanding voting stock of the
                           Corporation or there is a report filed on Schedule
                           13D or Schedule 14D-1 (or any successor schedule,
                           form, or report), each as adopted under the 1934 Act,
                           disclosing the acquisition of 25% or more of the
                           outstanding voting stock of the Corporation in a
                           transaction or series of transactions by any person
                           (as defined earlier in this subclause (x)).

                  (y)      The Corporation is a party to a transaction pursuant
                           to which the Corporation is merged with or into, or
                           is


                                       3
<PAGE>   4


                           consolidated with, or becomes the subsidiary of
                           another corporation and, after giving effect to such
                           transaction, less than 50% of the then outstanding
                           voting securities of the surviving or resulting
                           corporation or (if the Corporation becomes a
                           subsidiary in the transaction) of the ultimate parent
                           of the Corporation represent or were issued in
                           exchange for voting securities of the Corporation
                           outstanding immediately prior to such transaction or
                           less than 51% of the directors of the surviving or
                           resulting corporation or (if the Corporation becomes
                           a subsidiary in the transaction) of the ultimate
                           parent of the Corporation were directors of the
                           Corporation immediately prior to such transaction.

                  (z)      There is a sale, lease, exchange, or other transfer
                           (in one transaction or a series of related
                           transactions) of all or substantially all the assets
                           of the Corporation.

         (d)      A Change of Control will have occurred under this clause (d)
                  if there is a sale, lease, exchange, or other transfer (in one
                  transaction or a series of related transactions) of all or
                  substantially all of the assets of the Corporation.

         2.6 COMMITTEE. The term "Committee" shall mean a committee appointed by
the Board of Directors of the Corporation to administer the Plan. The Committee
shall be composed of not less than three directors of the Corporation. The Board
of Directors may also appoint one or more directors as alternate members of the
Committee. No officer or Employee of the Corporation or of any Subsidiary shall
be a member or alternate member of the Committee. The Committee shall at all
times be so comprised (a) as to satisfy the disinterested administration
standard contained in Rule 16b-3, if required to qualify for the Rule 16b-3
Exemption and (b) as to satisfy the outside director standard under Section
162(m) of the Internal Revenue Code of 1986, as amended, if required to qualify
compensation paid under one or more of the provisions of the Plan as
performance-based compensation within the meaning of that section.

         2.7 COMMON SHARES. The term "Common Shares" shall mean common shares of
the Corporation, with a par value of $1 each.

         2.8 CORPORATION. The term "Corporation" shall mean KeyCorp and its
successors, including the surviving or resulting corporation of any merger of
KeyCorp with or into, or any consolidation of KeyCorp with, any other
corporation or corporations.

         2.9 DISABILITY. The term "Disability" with respect to an Employee shall
mean physical or mental impairment which entitles the Employee to receive
disability payments under any long-term disability plan maintained by the
Corporation.



                                       4
<PAGE>   5


         2.10 EMPLOYEE. The term "Employee" shall mean any individual employed
by the Corporation or by any Subsidiary and shall include officers as well as
all other employees of the Corporation or of any Subsidiary (including employees
who are members of the Board of Directors of the Corporation or any Subsidiary).

         2.11 EMPLOYMENT TERMINATION DATE. The term "Employment Termination
Date" with respect to an Employee shall mean the first date on which the
Employee is no longer employed by the Corporation or any Subsidiary.

         2.12 EXERCISE PRICE. The term "Exercise Price" with respect to an
Option shall mean the price specified in the Option at which the Common Shares
subject to the Option may be purchased by the holder of the Option.

         2.13 FAIR MARKET VALUE. Except as otherwise determined by the Committee
at the time of the grant of an Award, the term "Fair Market Value" with respect
to Common Shares shall mean: (a) if the Common Shares are traded on a national
exchange, the mean between the high and low sales price per Common Share on that
national exchange on the date for which the determination of fair market value
is made or, if there are no sales of Common Shares on that date, then on the
next preceding date on which there were any sales of Common Shares, or (b) if
the Common Shares are not traded on a national exchange, the mean between the
high and low sales price per Common Share in the over-the-counter market,
National Market System, as reported by the National Quotations Bureau, Inc. and
NASDAQ on the date for which the determination of fair market value is made or,
if there are no sales of Common Shares on that date, then on the next preceding
date on which there were any sales of Common Shares.

         2.14 INCENTIVE STOCK OPTION. The term "Incentive Stock Option" shall
mean an Option intended by the Committee to qualify as an "incentive stock
option" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended.

         2.15 LIMITED STOCK APPRECIATION RIGHT. The term "Limited Stock
Appreciation Right" or "Limited SAR" shall mean an Award granted to an Employee
with respect to all or any part of any Option, that entitles the holder thereof
to receive from the Corporation, upon exercise of the Limited SAR and surrender
of the related Option, or any portion of the Limited SAR and the related Option,
an amount equal to (unless the Committee specifies a lesser amount at the time
of the grant of the Award):

         (a)      in the case of a Limited SAR granted with respect to an
                  Incentive Stock Option, 100% of the excess, if any, measured
                  at the time of the exercise of the Limited SAR, of (i) the
                  Fair Market Value of the Common Shares subject to the
                  Incentive Stock Option with respect to which the Limited SAR
                  is exercised over (ii) the Exercise Price of those Common
                  Shares under the Incentive Stock Option, or


                                       5
<PAGE>   6


         (b)      in the case of a Limited SAR granted with respect to a
                  Nonqualified Option, 100% of the highest of:

                  (i)      the excess, measured at the time of the exercise of
                           the Limited SAR, of (A) the Fair Market Value of the
                           Common Shares subject to the Nonqualified Option with
                           respect to which the Limited SAR is exercised over
                           (B) the Exercise Price of those Common Shares under
                           the Nonqualified Option,

                  (ii)     the excess of (A) the highest gross price (before
                           brokerage commissions and soliciting dealers' fees)
                           paid or to be paid for a Common Share (whether in
                           cash or in property and whether by way of exchange,
                           conversion, distribution upon liquidation, or
                           otherwise) in connection with any Change of Control
                           multiplied by the number of Common Shares subject to
                           the Nonqualified Option with respect to which the
                           Limited SAR is exercised over (B) the Exercise Price
                           of those Common Shares under the Nonqualified Option,
                           or

                  (iii)    the excess of (A) the highest Fair Market Value of
                           the Common Shares subject to the Nonqualified Option
                           with respect to which the Limited SAR is exercised on
                           any one day during the period beginning on the
                           sixtieth day prior to the date on which the Limited
                           SAR is exercised multiplied by the number of Common
                           Shares subject to the Nonqualified Option with
                           respect to which the Limited SAR is exercised over
                           (B) the Exercise Price of those Common Shares under
                           the Nonqualified Option.

         2.16 NONQUALIFIED OPTION. The term "Nonqualified Option" shall mean an
Option intended by the Committee not to qualify as an "incentive stock option"
under Section 422 of the Internal Revenue Code of 1986, as amended.

         2.17 OPTION. The term "Option," (a) when used otherwise than in
connection with the term Stock Appreciation Right or Limited Stock Appreciation
Right, shall mean an Award entitling the holder thereof to purchase a specified
number of Common Shares at a specified price during a specified period of time,
and (b) when used in connection with the term Stock Appreciation Right or
Limited Stock Appreciation Right, shall mean (i) any such Award or (ii) any
award under any other plan maintained or assumed by the Corporation entitling
the holder thereof to purchase a specified number of Common Shares at a
specified price during a specified period of time.



                                       6
<PAGE>   7


         2.18 OPTION EXPIRATION DATE. The term "Option Expiration Date" with
respect to any Option shall mean the date selected by the Committee after which,
except as provided in Section 10.4 in the case of the death of the Employee to
whom the option was granted, the Option may not be exercised.

         2.19 PERFORMANCE GOAL. The term "Performance Goal" shall mean a
performance goal specified by the Committee in connection with the potential
grant of Performance Shares and may include, without limitation, goals based
upon cumulative earnings per Common Share, return on investment, return on
shareholders' equity, or achievement of any other goals, whether or not readily
expressed in financial terms, that are related to the performance by the
Corporation, by any Subsidiary, or by any Employee or group of Employees in
connection with services performed by that Employee or those Employees for the
Corporation, a Subsidiary, or any one or more subunits of the Corporation or of
any Subsidiary.

         2.20 PERFORMANCE PERIOD. The term "Performance Period" shall mean such
one or more periods of time, which may be of varying and overlapping durations,
as the Committee may select, over which the attainment of one or more
Performance Goals will be relevant in connection with one or more Awards of
Performance Shares.

         2.21 PERFORMANCE SHARES. The term "Performance Shares" shall mean an
Award denominated in Common Shares and contingent upon attainment of one or more
Performance Goals by the Corporation or a Subsidiary or any subunit of the
Corporation or of any Subsidiary over a Performance Period.

         2.22 PLAN. The term "Plan" shall mean this KeyCorp Amended and Restated
1991 Equity Compensation Plan as from time to time hereafter amended in
accordance with Section 20.

         2.23 RESTRICTED STOCK. The term "Restricted Stock" shall mean Common
Shares of the Corporation delivered to an Employee pursuant to an Award subject
to such restrictions, conditions and contingencies as the Committee may provide
in the relevant Award Instrument, including (a) the restriction that the
Employee not sell, transfer, otherwise dispose of, or pledge or otherwise
hypothecate the Restricted Stock during the applicable Restriction Period, (b)
the requirement that, subject to the provisions of Section 10, if the Employee's
employment terminates so that the Employee is no longer employed by the
Corporation or any Subsidiary before the end of the applicable Restriction
Period, the Employee will offer to sell to the Corporation at the Acquisition
Price each Common Share of Restricted Stock held by the Employee at the
Employment Termination Date with respect to which, as of that date, any
restrictions, conditions, or contingencies have not lapsed, and (c) such other
restrictions, conditions, and contingencies, if any, as the Committee may
provide in the Award Instrument with respect to that Restricted Stock.


                                       7
<PAGE>   8


         2.24 RESTRICTION PERIOD. The term "Restriction Period" with respect to
an Award of Restricted Stock shall mean the period selected by the Committee and
specified in the Award Instrument with respect to that Restricted Stock during
which the Employee may not sell, transfer, otherwise dispose of, or pledge or
otherwise hypothecate that Restricted Stock.

         2.25 RULE 16b-3. Term "Rule 16b-3" shall mean Rule 16b-3 or any rule
promulgated in replacement thereof or in substitution therefor under the 1934
Act.

         2.26 RULE 16b-3 EXEMPTION. The term "Rule 16b-3 Exemption" shall mean
the exemption from Section 16(b) of the 1934 Act that is available under Rule
16b-3.

         2.27 SECTION 16(b) EMPLOYEE. The term "Section 16(b) Employee" shall
mean an individual who is, or at any time within the preceding six months was, a
director, officer, or 10% shareholder of the Corporation within the meaning of
Section 16(b) of the 1934 Act.

         2.28 STOCK APPRECIATION RIGHT. The term "Stock Appreciation Right "or
"SAR" shall mean an Award granted to an Employee with respect to all or any part
of any Option that entitles the holder thereof to receive from the Corporation,
upon exercise of the SAR and surrender of the related Option, or any portion of
the SAR and the related Option, an amount equal to 100%, or such lesser
percentage as the Committee may determine at the time of the grant of the Award,
of the excess, if any, measured at the time of the exercise of the SAR, of (a)
the Fair Market Value of the Common Shares subject to the Option with respect to
which the SAR is exercised over (b) the Exercise Price of those Common Shares
under the Option.

         2.29 SUBSIDIARY. The term "Subsidiary" shall mean any corporation,
partnership, joint venture, or other business entity in which the Corporation
owns, directly or indirectly, 50 percent or more of the total combined voting
power of all classes of stock (in the case of a corporation) or other ownership
interest (in the case of any entity other than a corporation).

         2.30 TANDEM AWARD. The term "Tandem Award" shall mean any two or more
Awards that are linked by the terms of any such Awards so that the exercise of
one such Award, in whole or in part, requires or will automatically result in
the surrender or cancellation, in whole or in proportionate part, of the other
such Awards.

         2.31 TRANSFEREE. The term "Transferee" shall mean, with respect to
Nonqualified Options only, any person or entity to which an Employee is
permitted by the Committee to transfer or assign all or part of his or her
Options.

         3. ADMINISTRATION. The Plan shall be administered by the Committee. No
Award may be made under the Plan to any member or alternate member of the
Committee. The Committee shall have authority, subject to the terms of the Plan,
(a) to determine the Employees who are eligible to participate in the Plan, the
type, size, and terms of Awards to be granted to any Employee, the time or times
at which Awards shall be exercisable or at which restrictions, conditions, and
contingencies shall lapse, and the terms and provisions of the instruments by



                                       8
<PAGE>   9


which Awards shall be evidenced, (b) to establish any other restrictions,
conditions, and contingencies on Awards in addition to those prescribed by the
Plan, (c) to interpret the Plan, and (d) to make all determinations necessary
for the administration of the Plan.

         The construction and interpretation by the Committee of any provision
of the Plan or any Award Instrument delivered pursuant to the Plan and any
determination by the Committee pursuant to any provision of the Plan or any
Award Instrument shall be final and conclusive. No member or alternate member of
the Committee shall be liable for any such action or determination made in good
faith.

         The Committee may act only by a majority of its members. Any
determination of the Committee may be made, without a meeting, by a writing or
writings signed by all of the members of the Committee. In addition, the
Committee may authorize any one or more of their number or any officer of the
Corporation to execute and deliver documents on behalf of the Committee and the
Committee may delegate to one or more employees, agents, or officers of the
Corporation, or to one or more third party consultants, accountants, lawyers, or
other advisors, such ministerial duties related to the operation of the Plan as
it may deem appropriate.

         4. ELIGIBILITY. Awards may be granted to Employees of the Corporation
or any Subsidiary selected by the Committee in its sole discretion. The granting
of any Award to an Employee shall not entitle that Employee to, nor disqualify
the Employee from, participation in any other grant of an Award. The maximum
number of Common Shares with respect to which any Employee may receive Awards
during any calendar year shall be the lesser of 400,000 Common Shares or .2% of
the outstanding Common Shares of the Corporation on the date such award was
made, which maximum number shall be subject to adjustment as provided in Section
13 of the Plan.

         5. STOCK SUBJECT TO THE PLAN. The stock that may be issued and
distributed to Employees in connection with Awards granted under the Plan shall
be Common Shares and may be authorized and unissued Common Shares, treasury
Common Shares, or Common Shares acquired on the open market specifically for
distribution under the Plan, as the Board of Directors may from time to time
determine.

         Subject to adjustment as provided in Section 13, the number of Common
Shares available for grant of Awards under the Plan shall be determined from
time to time as follows: (a) on the date of the 1994 Annual Meeting of
Shareholders of the Corporation (at which meeting an amendment and restatement
of the Plan was submitted for approval of the shareholders of the Corporation),
the number of Common Shares available for grant of Awards under the Plan shall
equal two percent of the total number of Common Shares outstanding on March 31,
1994, and (b) on January 2, 1995 and on each January 2 occurring thereafter
during the life of the Plan, the number of Common Shares available for grant of
Awards under the Plan shall be increased by adding to the number of Common
Shares then available for grant of Awards under the Plan, the number of Common
Shares of the Corporation that, when added to the number of Common Shares that
otherwise remain available for grant of additional Awards under the Plan on that



                                       9
<PAGE>   10


January 2, equals two percent of the total number of Common Shares of the
Corporation outstanding on December 31st of the next proceeding year.

         The number of Common Shares remaining available for grants of
additional Awards under the Plan at any particular time during a calendar year
shall be reduced, upon the granting thereafter of any Award under the Plan, by
the full number of Common Shares subject to that Award except that, in the case
of any particular Tandem Award, the number of Common Shares counted as being
subject to such Tandem Award shall be the maximum number of Common Shares with
respect to which the Employee may receive value under such Tandem Award. If any
Award for any reason expires or is terminated, in whole or in part, without the
receipt by an Employee of Common Shares (or the equivalent thereof in cash or
other property), the Common Shares subject to that part of the Award that has so
expired or terminated shall again be available for the future grant of Awards
under the Plan.

         Notwithstanding any other provision of the Plan, but subject to
adjustment under Section 13, (a) the maximum number of Common Shares that may be
issued under the Plan pursuant to Incentive Stock Options shall be 9,600,000
Common Shares, and (b) the maximum number of Common Shares that may be issued
under the Plan as Restricted Stock during any calendar year shall be that number
of Common Shares that is equal to five percent of the total number of Common
Shares available for grant of Awards under the Plan as of January 2 of that
calendar year.

         6.       STOCK OPTIONS.

         6.1      TYPE AND DATE OF GRANT OF OPTIONS.

         (a)      The Award Instrument pursuant to which any Incentive Stock
                  Option is granted shall specify that the Option granted
                  thereby shall be treated as an Incentive Stock Option. The
                  Award Instrument pursuant to which any Nonqualified Option is
                  granted shall specify that the Option granted thereby shall
                  not be treated as an Incentive Stock Option.

         (b)      The day on which the Committee authorizes the grant of an
                  Incentive Stock Option shall be the date on which that Option
                  is granted. No Incentive Stock Option may be granted on any
                  date after the tenth anniversary of the date of adoption, on
                  March 17, 1994, by the Board of Directors of the Corporation,
                  of the Plan as amended and restated.

         (c)      The day on which the Committee authorizes the grant of a
                  Nonqualified Option shall be considered the date on which that
                  Option is granted, unless the Committee specifies a later
                  date.



                                       10
<PAGE>   11


         6.2 EXERCISE PRICE. The Exercise Price under any Option shall be not
less than the Fair Market Value of the Common Shares subject to the Option on
the date the Option is granted.

         6.3 OPTION EXPIRATION DATE. The Option Expiration Date under any
Incentive Stock Option shall be not later than ten years from the date on which
the Option is granted. The Option Expiration Date under any Nonqualified Option
shall not be later than ten years and one month from the date on which the
Option is granted.

         6.4      EXERCISE OF OPTIONS.

         (a)      Except as otherwise provided in Section 10, an Option may be
                  exercised only while the Employee to whom the Option was
                  granted is in the employ of the Corporation or of a
                  Subsidiary. Subject to this requirement, each Option shall
                  become exercisable in one or more installments at the time or
                  times provided in the Award Instrument evidencing the Option.
                  Once any portion of an Option becomes exercisable, that
                  portion shall remain exercisable until expiration or
                  termination of the Option. An Employee to whom an Option is
                  granted or, with respect to Nonqualified Options, the
                  Employee's Transferee may exercise the Option from time to
                  time, in whole or in part, up to the total number of Common
                  Shares with respect to which the Option is then exercisable,
                  except that no fraction of a Common Share may be purchased
                  upon the exercise of any Option.

         (b)      An Employee or, with respect to Nonqualified Options, any
                  Transferee electing to exercise an Option shall deliver to the
                  Corporation (i) the Exercise Price payable in accordance with
                  Section 6.5 and (ii) written notice of the election that
                  states the number of whole Common Shares with respect to which
                  the Employee is exercising the Option.

         6.5 PAYMENT FOR COMMON SHARES. Upon exercise of an Option by an
Employee or, with respect to Nonqualified Options, any Transferee, the Exercise
Price shall be payable by the Employee or Transferee in cash or in such other
form of consideration as the Committee determines may be accepted, including
without limitation, securities or other property, or any combination of cash,
securities or other property, or by delivery by the Employee or Transferee (with
the written notice of election to exercise) of irrevocable instructions to a
broker registered under the 1934 Act promptly to deliver to the Corporation the
amount of sale or loan proceeds to pay the Exercise Price. The Committee, in its
sole discretion, may grant to an Employee or, with respect to Nonqualified
Options, any Transferee the right to transfer Common Shares acquired upon the
exercise of a part of an Option in payment of the Exercise Price payable upon
immediate exercise of a further part of the Option.

         6.6 CONVERSION OF INCENTIVE STOCK OPTIONS. The Committee may at any
time in its sole discretion take such actions as may be necessary to convert any
outstanding Incentive Stock Option (or any installments or portions of
installments thereof) into a Nonqualified Option with


                                       11
<PAGE>   12


or without the consent of the Employee to whom that Incentive Stock Option was
granted and whether or not that Employee is an Employee at the time of the
conversion.

         7. STOCK APPRECIATION RIGHTS AND LIMITED STOCK APPRECIATION RIGHTS.

         7.1 GRANT OF SARS AND LIMITED SARS. An SAR may be granted only in
connection with an Option. An SAR granted in connection with an Incentive Stock
Option may be granted only when the Incentive Stock Option is granted. An SAR
granted in connection with a Nonqualified Option may be granted either when the
related Nonqualified Option is granted or at any time thereafter including, in
the case of any Nonqualified Option resulting from the conversion of an
Incentive Stock Option, simultaneously with or after the conversion. Similarly,
a Limited SAR may be granted only in connection with an Option. A Limited SAR
granted in connection with an Incentive Stock Option may be granted only when
the Incentive Stock Option is granted. A Limited SAR granted in connection with
a Nonqualified Option may be granted either when the related Nonqualified Option
is granted or at any time thereafter including, in the case of any Nonqualified
Option resulting from the conversion of an Incentive Stock Option,
simultaneously with or after the conversion.

         7.2 EXERCISE OF SARS AND LIMITED SARS.

         (a)      An Employee electing to exercise an SAR or a Limited SAR shall
                  deliver written notice to the Corporation of the election
                  identifying the SAR or Limited SAR and the related Option with
                  respect to which the SAR or Limited SAR was granted to the
                  Employee and specifying the number of whole Common Shares with
                  respect to which the Employee is exercising the SAR or Limited
                  SAR. Upon exercise of the SAR or Limited SAR, the related
                  Option shall be deemed to be surrendered to the extent that
                  the SAR or Limited SAR is exercised.

         (b)      SARs and Limited SARs may be exercised only (i) after the
                  expiration of six months from the date of grant of the SAR or
                  Limited SAR, (ii) on a date when the SAR or Limited SAR is "in
                  the money" (i.e., when there would be positive consideration
                  received upon exercise of the SAR or Limited SAR), (iii) at a
                  time and to the same extent as the related Option is
                  exercisable, (iv) unless otherwise provided in the relevant
                  Award Instrument, by surrender to the Corporation,
                  unexercised, of the related Option or any applicable portion
                  thereof, and (v) in compliance with all restrictions set forth
                  in or specified by the Committee pursuant to Section 7.2(c)
                  (in the case of SARs) or Section 7.2(d) (in the case of
                  Limited SARs).

         (c)      The Committee may specify in the Award Instrument pursuant to
                  which any SAR is granted waiting periods and restrictions on
                  permissible exercise periods in addition to the restrictions
                  on exercise set forth in


                                       12
<PAGE>   13


                  Section 7.2(b), including, without limitation, any restriction
                  necessary to make applicable the Rule 16b-3 Exemption.

         7.3 PAYMENT FOR SARS AND LIMITED SARS. The amount payable upon exercise
of an SAR or Limited SAR may be paid by the Corporation in cash, or, if the
Committee shall determine in its sole discretion, in whole Common Shares (taken
at their Fair Market Value at the time of exercise of the SAR or Limited SAR) or
in a combination of cash and whole Common Shares; provided, however, that in no
event shall the total number of Common Shares that may be paid to an Employee
pursuant to the exercise of an SAR or Limited SAR exceed the total number of
Common Shares subject to the related Option.

         7.4 TERMINATION, AMENDMENT, OR SUSPENSION OF SARS AND LIMITED SARS.
SARs and Limited SARs shall terminate and may no longer by exercised upon the
first to occur of (a) exercise or termination of the related Option, (b) any
termination date specified by the Committee at the time of grant of the SAR or
Limited SAR, or (c) the transfer by the Employee of the related Option. In
addition, the Committee may in its sole discretion at any time before the
occurrence of a Change of Control amend, suspend, or terminate any SAR or
Limited SAR theretofore granted under the Plan without the holder's consent;
provided that, in the case of amendment, no provision of the SAR or Limited SAR,
as amended, shall be in conflict with any provision of the Plan.

         8. RESTRICTED STOCK.

         8.1 ADDITIONAL CONDITIONS ON RESTRICTED STOCK. In addition to the
restrictions on disposition of Restricted Stock during the Restriction Period
and the requirement to offer Restricted Stock to the Corporation if the
Employee's employment terminates during the Restriction Period, the Committee
may provide in the Award Instrument with respect to any Award of Restricted
Stock other restrictions, conditions, and contingencies, which other
restrictions, conditions, and contingencies, if any, may relate to, in addition
to such other matters as the Committee may deem appropriate, the Employee's
personal performance, corporate performance, or the performance of any subunit
of the Corporation or any Subsidiary, in each case measured in such manner as
may be specified by the Committee. The Committee may impose different
restrictions, conditions, and contingencies on separate Awards of Restricted
Stock granted to different Employees, whether at the same or different times,
and on separate Awards of Restricted Stock granted to the same Employee, whether
at the same or different times. The Committee may specify a single Restriction
Period for all of the Restricted Stock subject to any particular Award
Instrument or may specify multiple Restriction Periods so that the restrictions
with respect to the Restricted Stock subject to the Award will expire in stages
according to a schedule specified by the Committee and set forth in the Award
Instrument; provided, however, that no Restriction Period with respect to any
Restricted Stock shall end earlier than one year after the date on which that
Restricted Stock is granted.



                                       13
<PAGE>   14


         8.2 PAYMENT FOR RESTRICTED STOCK. Each Employee to whom an Award of
Restricted Stock is made shall pay the Acquisition Price with respect to that
Restricted Stock to the Corporation not later than 30 days after the delivery to
the Employee of the Award Instrument with respect to that Restricted Stock. If
any Employee fails to pay the Acquisition Price with respect to any Award of
Restricted Stock within that 30 day period, the Employee's right under that
Award shall be forfeited.

         8.3 RIGHTS AS A SHAREHOLDER. Upon payment by an Employee in full of the
Acquisition Price for Restricted Stock under an Award, the Employee shall have
all of the rights of a shareholder with respect to the Restricted Stock,
including voting and dividend rights, subject only to such restrictions and
requirements referred to in Section 8.1 as may be incorporated in the Award
Instrument with respect to that Restricted Stock.

         9. PERFORMANCE SHARES.

         9.1 DISCRETION OF COMMITTEE WITH RESPECT TO PERFORMANCE SHARES. The
Committee shall have full discretion to select the Employees to whom Awards of
Performance Shares are made, the number of Performance Shares to be granted to
any Employee so selected, the kind and level of the Performance Goals and
whether those Performance Goals are to apply to the Corporation, a Subsidiary,
or any one or more subunits of the Corporation or of any Subsidiary, and the
dates on which each Performance Period shall begin and end, and to determine the
form and provisions of the Award Instrument to be used in connection with any
Award of Performance Shares.

         9.2 CONDITIONS TO PAYMENT FOR PERFORMANCE SHARES.

         (a)      Unless otherwise provided in the relevant Award Instrument, an
                  Employee must be employed by the Corporation or a Subsidiary
                  on the last day of a Performance Period to be entitled to
                  payment for any Performance Shares.

         (b)      The Committee may establish, from time to time, one or more
                  formulas to be applied against the Performance Goals to
                  determine whether all, some portion but less than all, or none
                  of the Performance Shares granted with respect to a
                  Performance Period are treated as earned pursuant to any
                  Award. An Employee will be entitled to receive payments with
                  respect to any Performance Shares only to the extent that
                  those Performance Shares are treated as earned under one or
                  more such formulas.

         9.3 PAYMENT FOR PERFORMANCE SHARES. The Corporation shall pay each
Employee who is entitled to payment for Performance Shares earned with respect
to any Performance Period an amount for those Performance Shares (a) in cash
(based upon the per share Fair Market Value of Common Shares on the last day of
the Performance Period), (b) in Common Shares (one Common Share for each
Performance Share earned), (c) in Restricted Stock (one Common Share of
Restricted Stock for each Performance Share earned), or (d) any combination of
the


                                       14
<PAGE>   15


foregoing, in such proportions as the Committee may determine. Restricted Stock
issued by the Corporation in payment of Performance Shares shall be subject to
all the provisions of Section 8.

         10. TERMINATION OF EMPLOYMENT. After an Employee's Employment
Termination Date, the rules set forth in this Section 10 shall apply. All
factual determinations with respect to the termination of an Employee's
employment that may be relevant under this Section 10 shall be made by the
Committee in its sole discretion.

         10.1 TERMINATION OTHER THAN UPON DEATH, DISABILITY, OR CERTAIN
RETIREMENTS. Upon any termination of an Employee's employment for any reason
other than the Employee's retirement (under any retirement plan of the
Corporation or of a Subsidiary) as provided in Section 10.2, disability as
provided on Section 10.3, or death as provided in Section 10.4:

         (a)      Unless otherwise provided in the relevant Award Instrument,
                  the Employee or, with respect to Nonqualified Options, any
                  Transferee shall have the right (i) during the period ending
                  six months after the Employment Termination Date, but not
                  later than the Option Expiration Date, to exercise any
                  Nonqualified Options and related SARs that were outstanding on
                  the Employment Termination Date, if and to the same extent as
                  those Options and SARs were exercisable by the Employee or
                  Transferee (as the case may be) on the Employment Termination
                  Date, and (ii) during the period ending three months after the
                  Employment Termination Date, but not later that the Option
                  Expiration Date, to exercise any Incentive Stock Options and
                  related SARs that were outstanding on the Employment
                  Termination Date, if and to the same extent as those Options
                  and SARs were exercisable by the Employee on the Employment
                  Termination Date. Notwithstanding the preceding sentence, if
                  within two years after a Change of Control an Employee's
                  Employment Termination Date occurs other than as a result of a
                  Voluntary Resignation, unless otherwise provided in the
                  relevant Award Instrument, the Employee or, with respect to
                  Nonqualified Options, any Transferee shall have the right,
                  during the Extended Period, but not later than the Option
                  Expiration Date, to exercise any Options and related SARs that
                  were outstanding on the Employment Termination Date, if and to
                  the same extent as those Options and SARs were exercisable by
                  the Employee or Transferee (as the case may be) on the
                  Employment Termination Date (even though, in the case of
                  Incentive Stock Options, exercise of those Options more than
                  three months after the Employment Termination Date may cause
                  the Option to fail to qualify for Incentive Stock Option
                  treatment under the Internal Revenue Code of 1986, as
                  amended). As used in the immediately preceding sentence, the
                  term "Extended Period" means the longer of the period that the
                  Option or SAR would otherwise be exercisable in the absence of
                  the immediately preceding sentence or the period ending with
                  the second anniversary date of the Change of Control




                                       15
<PAGE>   16


                  last occurring before the Employment Termination Date and the
                  term "Voluntary Resignation" means that the Employee shall
                  have terminated his or her employment with the Corporation and
                  its Subsidiaries by voluntarily resigning at his or her own
                  instance without having been requested to so resign by the
                  Corporation or its Subsidiaries except that any resignation by
                  the Employee will not be deemed to be a Voluntary Resignation
                  if, after the Change of Control, the Employee's base salary
                  was reduced or the Employee was required to relocate his or
                  her principal place of employment more than 35 miles,

         (b)      Unless otherwise provided in the relevant Award Instrument,
                  the Employee shall offer for resale at the Acquisition Price
                  to the Corporation each Common Share of Restricted Stock held
                  by the Employee at the Employment Termination Date with
                  respect to which, as of that date, any restrictions,
                  conditions, or contingencies have not lapsed, and

         (c)      Unless otherwise provided in the relevant Award Instrument,
                  the Employee shall forfeit each Performance Share with respect
                  to which, as of that date, any restrictions, conditions, or
                  contingencies have not lapsed.

         10.2 TERMINATION DUE TO CERTAIN RETIREMENTS. Upon any termination of an
Employee's employment with the Corporation or any Subsidiary under circumstances
entitling the Employee to immediate payment of normal retirement or early
retirement benefits under any retirement plan of the Corporation or of a
Subsidiary (whether the Employee elects to commence or defer receipt of such
payment):

         (a)      Unless otherwise provided in the relevant Award Instrument,
                  the Employee or, with respect to Nonqualified Options, any
                  Transferee shall have the right (i) to exercise, from time to
                  time during the period ending three years (two years if the
                  Option was granted prior to January 1, 2002) after the
                  Employment Termination Date, but not later than the Option
                  Expiration Date, any Nonqualified Options and related SARs
                  that were outstanding on the Employment Termination Date, if
                  and to the same extent as those Options and SARs were
                  exercisable by the Employee or Transferee (as the case may be)
                  on the Employment Termination Date, and (ii) to exercise, from
                  time to time during the period ending three years (two years
                  if the Option was granted prior to January 1, 2002) after the
                  Employment Termination Date, but no later than the Option
                  Expiration Date, any Incentive Stock Options and related SARs
                  that were outstanding on the Employment Termination Date, if
                  and to the same extent as those Options and SARs were
                  exercisable by the Employee on the Employment Termination Date
                  (even though exercise of the Incentive Stock Option more than
                  three months after the Employment Termination Date may



                                       16
<PAGE>   17


                  cause the Option to fail to qualify for Incentive Stock Option
                  treatment under the Internal Revenue Code of 1986, as
                  amended),

         (b)      The relevant Award Instrument may provide that the Employee
                  or, with respect to Nonqualified Options, any Transferee will
                  have the right to exercise, from time to time until not later
                  than the Option Expiration Date, Nonqualified Stock Options
                  and SARs and Incentive Stock Options and SARs to the extent
                  such Options and SARs become exercisable by their terms prior
                  to the Option Expiration Date (or such earlier date as
                  specified in the relevant Award Instrument), notwithstanding
                  the fact that such Options and SARs were not exercisable in
                  whole or in part (whether because a condition to exercise had
                  not yet occurred or a specified time period had not yet
                  elapsed or otherwise) on the Employment Termination Date,

         (c)      Unless otherwise provided in the relevant Award Instrument,
                  the Employee shall offer for resale at the Acquisition Price
                  to the Corporation each Common Share of Restricted Stock held
                  by the Employee at the Employment Termination Date with
                  respect to which, as of that date, any restrictions,
                  conditions, or contingencies have not lapsed, and

         (d)      Unless otherwise provided in the relevant Award Instrument,
                  the Employee shall forfeit each Performance Share with respect
                  to which, as of that date, any restrictions, conditions, or
                  contingencies have not lapsed.

         10.3 TERMINATION DUE TO DISABILITY. Upon any termination of an
Employee's employment due to disability:

         (a)      Unless otherwise provided in the relevant Award Instrument,
                  the Employee, the Employee's attorney in fact or legal
                  guardian or, with respect to Nonqualified Options, any
                  Transferee shall have the right (i) to exercise, from time to
                  time during the period ending three years (two years if the
                  Option was granted prior to January 1, 2002) after the
                  Employment Termination Date, but not later than the Option
                  Expiration Date, any Nonqualified Options and related SARs
                  that were outstanding on the Employment Termination Date, if
                  and to the same extent those Options and SARs were exercisable
                  by the Employee or Transferee (as the case may be) on the
                  Employment Termination Date, and (ii) to exercise, from time
                  to time during the period ending three years (two years if the
                  Option was granted prior to January 1, 2002) after the
                  Employment Termination Date, but no later than the Option
                  Expiration Date, any Incentive Stock Options and related SARs
                  that were outstanding on the employment Termination Date, if
                  and to the same extent as those Options and SARs were
                  exercisable by the Employee on the Employment Termination Date



                                       17
<PAGE>   18


                  (even though exercise of the Incentive Stock Option more than
                  one year after the Employment Termination Date may cause the
                  Option to fail to qualify for Incentive Stock Option treatment
                  under the Internal Revenue Code of 1986, as amended),

         (b)      Unless otherwise provided in the relevant Award Instrument,
                  the Employee shall offer for resale at the Acquisition Price
                  to the Corporation each Common Share of Restricted Stock held
                  by the Employee at the Employment Termination Date with
                  respect to which, as of that date, any restrictions,
                  conditions, or contingencies have not lapsed, and

         (c)      Unless otherwise provided in the relevant Award Instrument,
                  the Employee shall forfeit each Performance Share with respect
                  to which, as of that date, any restrictions, conditions, or
                  contingencies have not lapsed.

         10.4. DEATH OF AN EMPLOYEE. Upon the death of an Employee while
employed by the Corporation or any Subsidiary or within any of the periods
referred to in any Section 10.1, 10.2, or 10.3 during which any particular
Option or SAR remains potentially exercisable:

         (a)      Unless otherwise provided in the relevant Award Instrument, if
                  the Option Expiration Date of any Nonqualified Option that had
                  not expired before the Employee's death would otherwise expire
                  before the first anniversary of the Employee's death, that
                  Option Expiration Date shall automatically be extended to the
                  first anniversary of the Employee's death or such other date
                  as provided in the relevant Award Instrument,

         (b)      Unless otherwise provided in the relevant Award Instrument,
                  the Employee's executor or administrator, the person or
                  persons to whom the Employee's rights under any Option or SAR
                  are transferred by will or the laws of descent and
                  distribution or, with respect to Nonqualified Options, any
                  Transferee shall have the right to exercise, from time to time
                  during the period ending three years (two years if the Option
                  was granted prior to January 1, 2002) after the date of the
                  Employee's death, but not later than the Option Expiration
                  Date, any Options and related SARs that were outstanding on
                  the date of the Employee's death, if and to the same extent as
                  those Options and SARs were exercisable by the Employee or
                  Transferee (as the case may be) on the date of the Employee's
                  death,

         (c)      Unless otherwise provided in the relevant Award Instrument,
                  the Employee shall offer for resale at the Acquisition Price
                  to the Corporation each Common Share of Restricted Stock held
                  by the Employee at the Employment Termination Date with
                  respect to which, as of that date, any restrictions,
                  conditions, or contingencies have not lapsed, and



                                       18
<PAGE>   19


         (d)      Unless otherwise provided in the relevant Award Instrument,
                  the Employee shall forfeit each Performance Share with respect
                  to which, as of that date, any restrictions, conditions, or
                  contingencies have not lapsed.

         11. ACCELERATION UPON CHANGE OF CONTROL. Unless otherwise specified in
the relevant Award Instrument, upon the occurrence of a Change of Control of the
Corporation, each Award theretofore granted to any Employee that then remains
outstanding shall be automatically treated as follows: (a) any outstanding
Option shall become immediately exercisable in full, (b) SARs and Limited SARs
related to any such Options shall also become immediately exercisable in full,
(c) the Restriction Period with respect to all outstanding Awards of Restricted
Stock shall immediately terminate, and (d) the restrictions, conditions, or
contingencies on any Performance Shares shall be modified in such manner as the
Committee may specify to give the Employee the benefit of those Performance
Shares through the date of Change of Control.

         12. ASSIGNABILITY. Nonqualified Options may not be assigned or
transferred (other than by will or by the laws of descent and distribution)
unless the Committee, in its sole discretion, determines to allow such
assignment or transfer and, if the Committee determines to allow any such
assignment or transfer, the Transferee shall have the power to exercise such
Nonqualified Option in accordance with the terms of the Award and the provisions
of this Plan. No Incentive Stock Option, SAR, Limited SAR, Restricted Stock
during the Restriction Period, or Performance Share may be transferred other
than by will or by the laws of descent and distribution. During an Employee's
lifetime, only the Employee (or in the case of incapacity of an Employee, the
Employee's attorney in fact or legal guardian) may exercise any Incentive Stock
Option, SAR, Limited SAR, Restricted Stock during the Restriction Period, or
Performance Share requiring or permitting exercise

         13. ADJUSTMENT UPON CHANGES IN COMMON SHARES. Automatically and without
Committee action, in the event of any stock dividend, stock split, or share
combination of the Common Shares, or by appropriate Committee action in the
event of any reclassification, recapitalization, merger, consolidation, other
form of business combination, liquidation, or dissolution involving the
Corporation or any spin-off or other distribution to shareholders of the
Corporation (other than normal cash dividends), appropriate adjustments to (a)
the maximum number of Common Shares that may be issued under the Plan pursuant
to Section 5, the maximum number of Common Shares that may be issued under the
Plan pursuant to Incentive Stock Options as provided in Section 5, and the
maximum number of Common Shares with respect to which any Employee may receive
Awards during any calendar year as provided in Section 4, and (b) the number and
kind of shares subject to, the price per share under, and the terms and
conditions of each then outstanding Award shall be made to the extent necessary
and in such manner that the benefits of Employees under all then outstanding
Awards shall be maintained substantially as before the occurrence of such event.
Any such adjustment shall be conclusive and binding for all purposes of the Plan
and shall be effective, in the event of any stock dividend, stock split, or
share combination, as of the date of such stock dividend, stock split, or share
combination, and in all other cases, as of such date as the Committee may
determine.


                                       19
<PAGE>   20


         14. PURCHASE FOR INVESTMENT. Each person acquiring Common Shares
pursuant to any Award may be required by the Corporation to furnish a
representation that he or she is acquiring the Common Shares so acquired as an
investment and not with a view to distribution thereof if the Corporation, in
its sole discretion, determines that such representation is required to insure
that a resale or other disposition of the Common Shares would not involve a
violation of the Securities Act of 1933, as amended, or of applicable blue sky
laws. Any investment representation so furnished shall no longer be applicable
at any time such representation is no longer necessary for such purposes.

         15. WITHHOLDING OF TAXES. The Corporation will withhold from any
payments of cash made pursuant to the Plan such amount as is necessary to
satisfy all applicable federal, state, and local withholding tax obligations.
The Committee may, in its discretion and subject to such rules as the Committee
may adopt from time to time, permit or require an Employee (or other person
exercising an Option with respect to withholding taxes upon exercise of such
Option) to satisfy, in whole or in part, any withholding tax obligation that may
arise in connection with the grant of an Award, the lapse of any restrictions
with respect to an Award, the acquisition of Common Shares pursuant to any
Award, or the disposition of any Common Shares received pursuant to any Award by
having the Corporation hold back some portion of the Common Shares that would
otherwise be delivered pursuant to the Award or by delivering to the Corporation
an amount equal to the withholding tax obligation arising with respect to such
grant, lapse, acquisition, or disposition in (a) cash, (b) Common Shares, or (c)
such combination of cash and Common Shares as the Committee may determine. The
Fair Market Value of the Common Shares to be so held back by the Company or
delivered by the Employee shall be determined as of the date on which the
obligation to withhold first arose.

         16. HARMFUL ACTIVITY. If an Employee shall engage in any "harmful
activity" prior to or within six months after termination of employment with
Key, then any Profits realized upon the exercise of any Covered Option on or
after one year prior to the termination of employment with Key shall inure to
the Corporation. The aforementioned restriction shall not apply in the event
that employment with Key terminates within two years after a Change of Control
of the Corporation if any of the following have occurred: a relocation of an
Employee's principal place of employment more than 35 miles from an Employee's
principal place of employment immediately prior to the Change of Control, a
reduction in an Employee's base salary after a Change of Control, or termination
of employment under circumstances in which an Employee is entitled to severance
benefits or salary continuation or similar benefits under a change of control
agreement, employment agreement, or severance or separation pay plan. If any
Profits realized upon the exercise of any Covered Option inure to the benefit of
the Corporation in accordance with the first sentence of this paragraph, an
Employee shall pay all such Profits to the Corporation within 30 days after
first engaging in any harmful activity and all unexercised Covered Options shall
immediately be forfeited and canceled. Consistent with the provisions of Section
3 of the Plan, the determination by the Committee as to whether an Employee
engaged in "harmful activity" prior to or within six months after termination of
employment with Key shall be final and conclusive.



                                       20
<PAGE>   21


A "harmful activity" shall have occurred if an Employee shall do any one or more
of the following:

                  a. Use, publish, sell, trade or otherwise disclose Non-Public
         Information of the Key unless such prohibited activity was inadvertent,
         done in good faith and did not cause significant harm to Key.

                  b. After notice from the Corporation, fail to return to Key
         any document, data, or thing in an Employee's possession or to which an
         Employee has access that may involve Non-Public Information of Key.

                  c. After notice from the Corporation, fail to assign to Key
         all right, title, and interest in and to any confidential or
         non-confidential Intellectual Property which an Employee created, in
         whole or in part, during employment with Key, including, without
         limitation, copyrights, trademarks, service marks, and patents in or to
         (or associated with) such Intellectual Property.

                  d. After notice from the Corporation, fail to agree to do any
         acts and sign any document reasonably requested by Key to assign and
         convey all right, title, and interest in and to any confidential or
         non-confidential Intellectual Property which an Employee created, in
         whole or in part, during employment with Key, including, without
         limitation, the signing of patent applications and assignments thereof.

                  e. Upon an Employee's own behalf or upon behalf of any other
         person or entity that competes or plans to compete with Key, solicit or
         entice for employment or hire any Employee of Key.

                  f. Upon an Employee's own behalf or upon behalf of any other
         person or entity that competes or plans to compete with Key, call upon,
         solicit, or do business with (other than business which does not
         compete with any business conducted by Key) any customer of Key an
         Employee called upon, solicited, interacted with, or became acquainted
         with, or learned of through access to information (whether or not such
         information is or was non-public) while employed at Key unless such
         prohibited activity was inadvertent, done in good faith, and did not
         involve a customer whom an Employee should have reasonably known was a
         customer of Key.

                  g. Upon an Employee's own behalf or upon behalf of any other
         person or entity that competes or plans to compete with Key, engage in
         any business activity in competition with Key in the same or a closely
         related activity that an Employee was engaged in for Key during the one
         year period prior to the termination of employment.



                                       21
<PAGE>   22


                  For purposes of this Section 16:

                  "Covered Option" means any Option granted on or after January
                  1, 2001 unless the granting resolution expressly excludes the
                  Option from the provisions of this Section 16.

                  "Intellectual Property" shall mean any invention, idea,
                  product, method of doing business, market or business plan,
                  process, program, software, formula, method, work of
                  authorship, or other information, or thing.

                  "Key" shall mean the Corporation and its Subsidiaries
                  collectively.

                  "Non-Public Information" shall mean, but is not limited to,
                  trade secrets, confidential processes, programs, software,
                  formulas, methods, business information or plans, financial
                  information, and listings of names (e.g., employees,
                  customers, and suppliers) that are developed, owned, utilized,
                  or maintained by an employer such as Key, and that of its
                  customers or suppliers, and that are not generally known by
                  the public.

                  "Profit" shall mean, with respect to any Covered Option, the
                  spread between the Fair Market Value of a Common Share on the
                  date of exercise and the exercise price multiplied by the
                  number of shares exercised under the Covered Option.

         17. AWARDS IN SUBSTITUTION FOR AWARDS GRANTED BY OTHER COMPANIES.
Awards, whether Incentive Stock Options, Nonqualified Options, SARs, Limited
SARs Restricted Stock, or Performance Shares, may be granted under the Plan in
substitution for awards held by employees of a company who become Employees of
the Corporation or a Subsidiary as a result of the merger or consolidation of
the employer company with the Corporation or a Subsidiary, or the acquisition by
the Corporation or a Subsidiary of the assets of the employer company, or the
acquisition by the Corporation or a Subsidiary of stock of the employer company
as a result of which it becomes a Subsidiary. The terms, provisions, and
benefits of the substitute Awards so granted may vary from the terms, provisions
and benefits set forth in or authorized by the Plan to such extent as the
Committee at the time of the grant may deem appropriate to conform, in whole or
in part, to the terms, provisions, and benefits of the awards in substitution
for which they are granted.

         18. LEGAL REQUIREMENTS. No Awards shall be granted and the Corporation
shall have no obligation to make any payment under the Plan, whether in Common
Shares, cash, or any combination thereof, unless such payment is, without
further action by the Committee, in compliance with all applicable Federal and
state laws and regulations, including, without limitation, the United States
Internal Revenue Code and Federal and state securities laws.



                                       22
<PAGE>   23


         19. DURATION AND TERMINATION OF THE PLAN. The Plan shall become
effective and shall be deemed to have been adopted on the date on which it is
approved by the shareholders of the Corporation and shall remain in effect
thereafter until terminated by action of the Board of Directors. No termination
of the Plan shall adversely affect the rights of any Employee with respect to
any Award granted before the effective date of the termination.

         20. AMENDMENTS. The Board of Directors, or a duly authorized committee
thereof, may alter or amend the Plan from time to time prior to its termination
in any manner the Board of Directors, or such duly authorized committee, may
deem to be in the best interests of the Corporation and its shareholders, except
that no amendment may be made without shareholder approval if shareholder
approval is required under Rule 16b-3 to qualify for the Rule 16b-3 Exemption,
is required by any applicable securities law or tax law, or is required by the
rules of any exchange on which the Common Shares of the Corporation are traded
or, if the Common Shares are not listed on an exchange, by the rules of the
registered national securities association through whose inter-dealer quotation
system the Common Shares are quoted. The Committee shall have the authority to
amend these terms and conditions applicable to outstanding Awards (a) in any
case where expressly permitted by the terms of the Plan or of the relevant Award
Instrument or (b) in any other case with the consent of the Employee to whom the
Award was granted. Except as expressly provided in the Plan or in the Award
Instrument evidencing the Award, the Committee may not, without the consent of
the holder of an Award granted under the Plan, amend the terms and conditions
applicable to that Award in a manner adverse to the interests of the Employee.

         21. PLAN NONCONTRACTUAL. Nothing herein contained shall be construed as
a commitment to or agreement with any person employed by the Corporation or a
Subsidiary to continue such person's employment with the Corporation or the
Subsidiary, and nothing herein contained shall be construed as a commitment or
agreement on the part of the Corporation or any Subsidiary to continue the
employment or the annual rate of compensation of any such person for any period.
All Employees shall remain subject to discharge to the same extent as if the
Plan had never been put into effect.

         22. INTEREST OF EMPLOYEES. Any obligation of the Corporation under the
Plan to make any payment at any future date merely constitutes the unsecured
promise of the Corporation to make such payment from its general assets in
accordance with the Plan, and no Employee shall have any interest in, or lien or
prior claim upon, any property of the Corporation or any Subsidiary by reason of
that obligation.

         23. CLAIMS OF OTHER PERSONS. The provisions of the Plan shall in no
event be construed as giving any person, firm, or corporation any legal or
equitable right against the Corporation or any Subsidiary, their officers,
employees, agents, or directors, except any such rights as are specifically
provided for in the Plan or are hereafter created in accordance with the terms
and provisions of the Plan.



                                       23
<PAGE>   24


         24. ABSENCE OF LIABILITY. No member of the Board of Directors of the
Corporation or a Subsidiary, of the Committee, of any other committee of the
Board of Directors, or any officer or Employee of the Corporation or a
Subsidiary shall be liable for any act or action under the Plan, whether of
commission or omission, taken by any other member, or by any officer, agent, or
Employee, or except in circumstances involving his bad faith or willful
misconduct, for anything done or omitted to be done by himself.

         25. SEVERABILITY. The invalidity or unenforceability of any particular
provision of the Plan shall not affect any other provision hereof, and the Plan
shall be construed in all respects as if such invalid or unenforceable provision
were omitted herefrom.

         26. GOVERNING LAW. The provisions of the Plan shall be governed and
construed in accordance with the laws of the State of Ohio.

         27. PLAN EFFECTIVE DATE. The Plan, originally named the Society
Corporation 1991 Equity Compensation Plan, was approved by the Corporation's
shareholders at the Annual Meeting of Shareholders held on April 16, 1991 and
became effective on that date. On March 17, 1994, the Corporation's Board of
Directors adopted, subject to shareholder approval, certain amendments to the
Plan, then renamed the KeyCorp Amended and Restated 1991 Equity Compensation
Plan. The shareholders approved these amendments at the Corporation's Annual
Meeting of Shareholders held on May 19, 1994. The Plan was further amended by
action of the Committee on July 17, 1996 to amend the definition of Change of
Control as set forth in Section 2.5 of the Plan, which amendment was effective
as of January 1, 1996. If the Corporation hereafter enters into a transaction
intended to be accounted for as a pooling of interests and the Committee
determines, based on the written advice of the Corporation's independent
accountants, that the July 17, 1996 amendment or the operation thereof would
conflict with or jeopardize the pooling of interests accounting treatment for
such transaction, then the July 17, 1996 amendment shall be inoperative and
shall be treated as if it had never been effected so that the definition of
Change of Control would be as in effect prior to such amendment. The Plan was
further amended and restated as of September 19, 1996, to provide for the
transferability of Options granted hereunder. The Plan was further amended by
action of the Equity Based Compensation Subcommittee of the Compensation and
Organization Committee on May 6, 1998 to amend Section 10.1(a) of the Plan to
extend the option exercise period for terminated employees upon a change of
control in certain circumstances. The amendment to Section 10.1(a) only applies
to Awards and Award Instruments granted or entered into on or after January 1,
1999. If the Corporation enters into a transaction intended to qualify as a
pooling of interests for accounting purposes prior to January 1, 1999, the
amendment to Section 10.1(a) shall become null and void. The Subcommittee also
amended the Plan to delete Section 17 of the Plan and all cross-references
thereto. References in the Plan to specific numbers of Common Shares have been
adjusted pursuant to Section 13 to reflect the two-for-one split in the Common
Shares effective March 6, 1998. With respect to clause (a) of the last paragraph
of Section 5, as of May 6, 1998, Incentive Stock Options covering 451,823 Common
Shares had been theretofore granted and not expired or terminated unexercised,
leaving 9,148,177 Common Shares then available for future grant of Incentive
Stock Options (subject to


                                       24
<PAGE>   25



increase in the event that outstanding Incentive Stock Options expire or
terminate unexercised). The Plan was further amended by action of the
Compensation and Organization Committee on March 15, 2000 to amend Section 1 of
the Plan to clarify that Awards under the Plan may be made to any Employee of
the Corporation. The Plan was amended on January 17, 2001 to amend Section
6.4(a) to remove the requirement that an Option will not become exercisable
unless an Optionee has been continuously employed by the Corporation for at
least six months from the date of grant. The Plan was also amended to add a new
Section 16 entitled "Harmful Activity" which states that, if an Optionee
engages in a "harmful activity" prior to or within six months of termination of
employment, profits from the exercise of a Covered Option will inure to the
benefit of the Corporation in certain circumstances. Section 16 does not apply
to Options granted prior to January 1, 2001. The Plan was amended on March 14,
2001 to amend Sections 10.2, 10.3, and 10.4 to extend the period during which
Options are exercisable pursuant to these sections to three years after
retirement, disability, or death. The amendment only applies to Options granted
on or after January 1, 2002.


                                       25

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>4
<FILENAME>l87949aex10-3.txt
<DESCRIPTION>EXHIBIT 10.3
<TEXT>

<PAGE>   1

                                                                    Exhibit 10.3

                                     KEYCORP

                              ANNUAL INCENTIVE PLAN

                         (JANUARY 17, 2001 RESTATEMENT)

         KeyCorp (the "Corporation") hereby establishes this Annual Incentive
Plan for the purpose of providing an incentive to selected key officers of the
Corporation and its subsidiaries.

                                    ARTICLE I

                                   DEFINITIONS
                                   -----------

         For the purposes hereof, the following words and phrases shall have the
meanings indicated:

         1. A "Beneficiary" shall mean any person designated by a Participant in
accordance with the Plan to receive payment of all or a portion of any Incentive
Award for which the Participant is eligible at the time of the Participant's
death.

         2. A "Change of Control" shall mean a Change of Control under any of
clauses (a), (b), (c), or (d) below. A "Non-Initiated Change of Control" shall
mean (i) a Change of Control under clause (c) below (regardless of whether it
also constitutes a Change of Control under any other clause below), and (ii) a
Change of Control under clause (a), (b), or (d) below if such Change of Control
results in whole or in any significant part, directly or indirectly, proximately
or remotely, from or in response or reaction to an offer or proposal (whether to
the Board of Directors or the shareholders of the Corporation) which was not
solicited or invited by the management of the Corporation to engage in a
transaction with the Corporation that, if consummated, would result in a Change
Event under clause (c) below. An "Initiated Change of Control" shall mean all
Changes of Control other than a Non-Initiated Change of Control. The
determination of the Committee whether a Change of Control constitutes an
Initiated or Non-Initiated Change of Control shall be final and conclusive. For
purposes of this definition, the Corporation will be deemed to have become a
subsidiary of another corporation if any other corporation (which term shall
include, in addition to a corporation, a limited liability company, partnership,
trust, or other organization) owns, directly or indirectly, 50 percent or more
of the total combined outstanding voting power of all classes of stock of the
Corporation or any successor to the Corporation.



                                       1
<PAGE>   2


                           (a) A Change of Control will have occurred under this
                  clause (a) if the Corporation is a party to a transaction
                  pursuant to which the Corporation is merged with or into, or
                  is consolidated with, or becomes the subsidiary of another
                  corporation and either

                           (i) immediately after giving effect to that
                           transaction, less than 65% of the then outstanding
                           voting securities of the surviving or resulting
                           corporation or (if the Corporation becomes a
                           subsidiary in the transaction) of the ultimate parent
                           of the Corporation represent or were issued in
                           exchange for voting securities of the Corporation
                           outstanding immediately prior to the transaction, or

                           (ii) immediately after giving effect to that
                           transaction, individuals who were directors of the
                           Corporation on the day before the first public
                           announcement of (x) the pendency of the transaction
                           or (y) the intention of any person or entity to cause
                           the transaction to occur, cease for any reason to
                           constitute at least 51% of the directors of the
                           surviving or resulting corporation or (if the
                           Corporation becomes a subsidiary in the transaction)
                           of the ultimate parent of the Corporation.

                           (b) A Change of Control will have occurred under this
                  clause (b) if a tender or exchange offer shall be made and
                  consummated for 35% or more of the outstanding voting stock of
                  the Corporation or any person (as the term "person" is used in
                  Section 13(d) and Section 14(d)(2) of the 1934 Act) is or
                  becomes the beneficial owner of 35% or more of the outstanding
                  voting stock of the Corporation or there is a report filed on
                  Schedule 13D or Schedule 14D-1 (or any successor schedule,
                  form or report), each as adopted under the 1934 Act,
                  disclosing the acquisition of 35% or more of the outstanding
                  voting stock of the Corporation in a transaction or series of
                  transactions by any person (as defined earlier in this clause
                  (b)).



                                       2
<PAGE>   3


                           (c) A Change of Control will have occurred under this
                           clause (c) if either (i) without the prior approval,
                           solicitation, invitation, or recommendation of the
                           Corporation Board of Directors any person or entity
                           makes a public announcement of a bona fide intention
                           (A) to engage in a transaction with the Corporation
                           that, if consummated, would result in a Change Event
                           (as defined below in this clause (c)), or (B) to
                           "solicit" (as defined in Rule 14a-1 under the 1934
                           Act) proxies in connection with a proposal that is
                           not approved or recommended by the Corporation Board
                           of Directors, or (ii) any person or entity publicly
                           announces a bona fide intention to engage in an
                           election contest relating to the election of
                           directors of the Corporation (pursuant to Regulation
                           14A, including Rule 14a-11, under the 1934 Act),

                  and, at any time within the 24 month period immediately
                  following the date of the announcement of that intention,
                  individuals who, on the day before that announcement,
                  constituted the directors of the Corporation (the "Incumbent
                  Directors") cease for any reason to constitute at least a
                  majority thereof unless both (A) the election, or the
                  nomination for election by the Corporation's shareholders, of
                  each new director was approved by a vote of at least
                  two-thirds of the Incumbent Directors in office at the time of
                  the election or nomination for election of such new director,
                  and (B) prior to the time that the Incumbent Directors no
                  longer constitute a majority of the Board of Directors, the
                  Incumbent Directors then in office, by a vote of at least 75%
                  of their number, reasonably determine in good faith that the
                  change in Board membership that has occurred before the date
                  of that determination and that is anticipated to thereafter
                  occur within the balance of the 24 month period to cause the
                  Incumbent Directors to no longer be a majority of the Board of
                  Directors was not caused by or attributable to, in whole or in
                  any significant part, directly or indirectly, proximately or
                  remotely, any event under subclause (i) or (ii) of this clause
                  (c).




                                       3
<PAGE>   4

                  For purposes of this clause (c), the term "Change Event" shall
                  mean any of the events described in the following subclauses
                  (x), (y), or (z) of this clause (c):

                           (x) A tender or exchange offer shall be made for 25%
                           or more of the outstanding voting stock of the
                           Corporation or any person (as the term "person" is
                           used in Section 13(d) and Section 14(d)(2) of the
                           1934 Act) is or becomes the beneficial owner of 25%
                           or more of the outstanding voting stock of the
                           Corporation or there is a report filed on Schedule
                           13D or Schedule 14D-1 (or any successor schedule,
                           form, or report), each as adopted under the 1934 Act,
                           disclosing the acquisition of 25% or more of the
                           outstanding voting stock of the Corporation in a
                           transaction or series of transactions by any person
                           (as defined earlier in this subclause (x)). (y) the
                           Corporation is a party to a transaction pursuant to
                           which the Corporation is merged with or into, or is
                           consolidated with, or becomes the subsidiary of
                           another corporation and, after giving effect to such
                           transaction, less than 50% of the then outstanding
                           voting securities of the surviving or resulting
                           corporation or (if the Corporation becomes a
                           subsidiary in the transaction) of the ultimate parent
                           of the Corporation represent or were issued in
                           exchange for voting securities of the Corporation
                           outstanding immediately prior to such transaction or
                           less than 51% of the directors of the surviving or
                           resulting corporation or (if the Corporation becomes
                           a subsidiary in the transaction) of the ultimate
                           parent of the Corporation were directors of the
                           Corporation immediately prior to such transaction.
                           (z) There is a sale, lease, exchange, or other
                           transfer (in one transaction or a series of related
                           transactions) of all or substantially all the assets
                           of the Corporation.

                           (d) A Change of Control will have occurred under this
                  clause (d) if there is a sale, lease, exchange, or other
                  transfer (in one transaction or a series of related
                  transactions) of all or substantially all of the assets of the
                  Corporation.


                                       4
<PAGE>   5


         3. The "Committee" shall mean the Compensation and Organization
Committee of the Board of Directors of the Corporation or other Committee of the
Board of Directors hereafter succeeding to the responsibilities currently
performed by the Compensation and Organization Committee with respect to the
Plan.

         4. An "Incentive Award" shall mean the incentive which may be paid to a
Participant pursuant to the Plan.

         5. "Market Point" shall mean for any Participant for any calendar year
the market point (as determined under the Corporation's salary administration
program) of such Participant's job grade at the end of the calendar year;
provided, however, that if the Corporation changes such Participant's job grade
during any such calendar year or such Participant is promoted, transferred, or
otherwise moves into a different job grade during such calendar year, then such
Market Point shall be calculated on a pro rata basis for each of the periods in
which such job grades were in effect for such Participant.

         6. A "Participant" shall mean a senior officer of the Corporation or
one of its subsidiaries who is selected by the Committee to participate in the
Plan.

         7. The "Plan" shall mean this Annual Incentive Plan, together with all
amendments hereto.

         8. "Plan Year" shall mean each calendar year for which the Plan remains
in existence.

         9. "Subsidiary" shall mean a corporation organized and existing under
the laws of the United States or of any state or the District of Columbia of
which 50 percent or more of the issued and outstanding stock is owned by the
Corporation or by a Subsidiary of the Corporation.

         10. The "Target Incentive Pool" shall mean the aggregate amount, as
determined in accordance with Article II of the Plan, of the aggregate
individual target Incentive Awards of Participants.

         11. "Target Pool Percentage" shall mean the percentage determined
pursuant to Article II, Sections 3 and 4 below that will be used to establish
the aggregate amount available for Incentive Awards.

         12. The "1934 Act" shall mean the Securities Exchange Act of 1934 as
from time to time amended.



                                       5
<PAGE>   6


                                   ARTICLE II

                                INCENTIVE AWARDS
                                ----------------

         1. PARTICIPATION. Annually, the Committee shall select the Participants
in the Plan for the Plan Year. In general, the selection will be made prior to
the beginning of each Plan Year or as soon thereafter as is reasonably
practicable; in addition, such selection may be made at any time during a Plan
Year in the case of a newly hired employee or an employee that receives a new
position. Not in limitation of the foregoing, the Committee shall have the
authority to designate at the beginning of a Plan Year, or as soon thereafter as
is reasonably practicable, employees in selected job grades as Participants,
including any employee that may later be hired or promoted into any such job
grade during the Plan Year, without further action on behalf of the Committee.
Participants shall be notified of their selection in writing. In the event that
employees are determined to be Participants by job grade, the Chief Executive
Officer, or his or her designee, may select, subject to the approval of the
Committee or in accordance with guidelines established by the Committee,
additional eligible employees for Plan participation notwithstanding their job
grade. Employees otherwise eligible for participation because of their job grade
may be excluded, by action of the Committee or the Chief Executive Officer (or
his or her designee), if they are participants in business unit or other
incentive compensation plans.

         2. INCENTIVE POOL. The individual target incentives for persons
selected to be in the Plan are set forth in Exhibit A to the Plan, which Exhibit
A may be amended by action of the Committee from time to time. Target incentives
for Participants who are eligible for part of the Plan Year or whose incentive
group assignment changed during the Plan Year will be calculated on a pro rata
basis for both the period of each incentive group assignment and the period
during the Plan Year in which the Participant was an eligible employee. In the
event that an individual whose job does not have an assigned salary grade is
approved for participation in the Plan, the Chief Executive Officer, or his or
her designee, is authorized to select a target incentive percentage for such
individual and base the calculation of target incentive and other calculations
under this Plan on such individual's base salary.


                                       6
<PAGE>   7


         3. FORMULA FOR TARGET POOL PERCENTAGE; KNOCK-OUT FACTOR. Prior to each
Plan Year or as soon as practical thereafter, the Committee shall devise a
formula to determine the Target Pool Percentage which formula shall be based on
one or more financial criteria or other performance goals. The Committee shall
have the discretion to set minimal performance goals which must be met before
any Incentive Awards will be made under the Plan. In its sole discretion the
Committee may revise or waive one or more of such minimal performance goals as a
result of any change in conditions or the occurrence of any events or other
factors which make such goal or goals unsuitable or undesirable. Notwithstanding
that the Corporation has not met a minimal performance goal, if the Committee
determines that one or more lines of business of the Corporation have had a
level of performance deserving of Incentive Awards, the Committee may establish
a pool for Incentive Awards utilizing a Target Pool Percentage fixed at 25% (or
such higher or lower percentage as the Committee, in its sole discretion, shall
determine).

         4. INCENTIVE AWARDS. As soon as practical after the end of the Plan
Year, the Committee shall determine the Target Pool Percentage (not to exceed
300%) to be applied to the Target Incentive Pool to establish the maximum
aggregate amount to be distributed as Incentive Awards. The percentage shall be
based on the formula established in Section 3 hereof but the Committee shall
have the discretion to decrease or increase the otherwise determined Target Pool
Percentage for the Plan Year by not more than thirty per cent (30%) of such
Target Pool Percentage. (For example, if the Target Pool Percentage is
established at 120%, the Committee would have the discretion to increase the
Target Pool Percentage to not more than 156% or to decrease the Target Pool
Percentage to not less than 84%.) In determining whether, and the extent to
which, the formula established in Section 3 hereof has been achieved, the
Committee shall have the discretion to disregard changes in accounting rules or
practices, gains from the sale of subsidiaries or assets outside the ordinary
course of business, or restructuring or other nonrecurring charges or similar
adjustments. It is contemplated that Incentive Awards may, depending upon the
responsibilities of the Participant, be based wholly on corporate performance,
partially on corporate performance and partially on line of business or business
unit performance, or wholly on line of business or business unit performance.
Ordinarily, the Committee will delegate to management responsibility for
determining Target Pool Percentages for each line of business or business unit
provided



                                       7
<PAGE>   8

that the aggregate weighted average Target Pool Percentages for all lines of
business and business units shall be substantially equivalent to the Target Pool
Percentage established by the Committee.

         The Committee shall determine or approve the amount of the Incentive
Award for each Participant above such job grade level as the Committee shall
from time to time select and, with respect to all other Participants, the
Committee shall approve the Incentive Awards based on the methodology utilized
by management consistent with the Committee's overall discretion.

         It may be determined that a Participant shall receive no Incentive
Award for the Plan Year. In addition, the Plan does not restrict the maximum
amount of an Incentive Award that may be paid to an individual Participant.

         5. ACTIVE EMPLOYMENT REQUIREMENT. Ordinarily, Incentive Awards shall be
made only to Participants who are actively employed at the end of the Plan Year;
however, Participants who retire at age 65 or over or become disabled during a
Plan Year, or the Beneficiary(s) or estate of a Participant whose death occurs
during a Plan Year shall be entitled to, on a pro rata basis (for the period of
time the Participant was in the Plan for the Plan Year) the lesser of (i) the
Participant's target incentive or (ii) the Participant's target incentive times
the Target Pool Percentage if the Committee determines a Target Pool Percentage
of less than 100%. Except as provided in Section 6 hereof, no other Participant
who is not actively employed at the end of the Plan Year shall receive an
Incentive Award unless the Committee, in its sole discretion, so determines that
an Incentive Award shall be made.

         6. EFFECT OF CHANGE OF CONTROL. Upon the occurrence of a Non-Initiated
Change of Control during the Plan Year, this Plan shall terminate and each
Participant immediately prior to the occurrence of such Non-Initiated Change of
Control shall promptly receive 300% of such Participant's target incentive
payable under the Plan for the full Plan Year. In the event of the occurrence of
an Initiated Change of Control during the Plan Year, the Committee, in its sole
discretion, shall determine whether the Plan should terminate and the manner of
calculating, and the time for payment, of Incentive Awards (if any) to be made
under the Plan for the Plan Year.

         7. PAYMENT OF INCENTIVE AWARD. Except as provided in the first sentence
of Section 6 hereof, Incentive Awards shall be paid on or prior to March 15 of
the year following the Plan Year.



                                       8
<PAGE>   9


Notwithstanding any other provision of the Plan, the Committee, in its sole
discretion, shall have the authority to authorize payment of all or a portion of
all Incentive Awards prior to the end of the Plan Year, and if a portion, the
Corporation shall pay the remaining portion of the Award on or prior to March 15
of the year following the Plan Year.

         Notwithstanding any other provision of the Plan, the Committee, in its
sole discretion, shall have the authority to require deferral of payment of all
or a portion of all Incentive Awards due to any Plan Participant if the
Committee determines that the Corporation would be denied a deduction for
federal income tax purposes for such Award or the portion thereof by reason of
Section 162(m) of the Internal Revenue Code of 1986, as amended, and the
regulations issued thereunder, if the Award or the portion thereof were not so
deferred. Such deferred Incentive Awards, or the portion thereof, shall be
deferred in accordance with the provisions of the KeyCorp Deferred Compensation
Plan or the KeyCorp Automatic Deferral Plan ("Automatic Deferral Plan"),
whichever is applicable.

                                   ARTICLE III

                               AUTOMATIC DEFERRAL
                               ------------------

         1. ELIGIBILITY AND PARTICIPATION. A Plan Participant who accrues an
Incentive Award under the Plan which exceeds $100,000 for the applicable Plan
year shall automatically and without further action by the Participant defer a
percentage of the Participant's Incentive Award to the Automatic Deferral Plan,
and shall automatically become a participant in the Automatic Deferral Plan.

         2. AUTOMATIC DEFERRAL REQUIREMENTS. Commencing as of January 1, 1999
and thereafter, a Participant meeting the eligibility and participation
requirements contained in Section 1 hereof, as a condition of their continued
participation in the Plan, shall automatically defer the following percentages
of the Participant's accrued Incentive Award for the applicable Plan year to the
Automatic Deferral Plan:

                           (a) THE PORTION OF A PARTICIPANT'S INCENTIVE AWARD
                  BETWEEN $100,000 UP TO AND INCLUDING $500,000. Twenty percent
                  (20%) of the Participant's Incentive Award between $100,000 up
                  to and including $500,000 shall be automatically deferred to
                  the Automatic Deferral Plan.



                                       9
<PAGE>   10


                           (b) THE PORTION OF A PARTICIPANT'S INCENTIVE AWARD
                  BETWEEN $500,000 UP TO AND INCLUDING $1,000,000. Twenty five
                  (25%) of the Participant's Incentive Award between $500,000 up
                  to and including $1,000,000 shall be automatically deferred to
                  the Automatic Deferral Plan.

                           (c) THE PORTION OF A PARTICIPANT'S INCENTIVE AWARD
                  GREATER THAN $1,000,000. Thirty percent (30%) of the
                  Participant's Incentive Award greater than $1,000,000 shall be
                  automatically deferred to the Automatic Deferral Plan.

         3. PLAN VESTING. A Participant shall have no vested interest in that
portion of the Participant's Plan Incentive Award that is automatically deferred
to the Automatic Deferral Plan. Once deferred to the Automatic Deferral Plan,
the Participant's deferred Incentive Award shall be subject to the Automatic
Deferral Plan's vesting, distribution, and forfeiture provisions, and the Plan
Participant shall have no right or entitlement to any such Incentive Award
deferred to the Automatic Deferral Plan except as specifically granted and/or
authorized under the terms of the Automatic Deferral Plan.

         4. TIME OF DEFERRAL. A Participant's accrued Plan Incentive Award
deferred to the Automatic Deferral Plan in accordance with the provisions of
Section 2 hereof, shall be credited on a bookkeeping basis to an Automatic
Deferral Plan account established in the Participant's name as of the payroll
date on which such Incentive Awards are generally otherwise paid under the Plan.

         5. EFFECT OF DISCHARGE FOR CAUSE OR VOLUNTARY TERMINATION. In the event
of a Participant's Discharge for Cause or Voluntary Termination, the Participant
shall automatically forfeit any and all right to receive payment for any
Incentive Award which otherwise would have become subject to the "Automatic
Deferral Requirements" of Section 2, hereof, but for the Participant's Discharge
for Cause or Voluntary Termination prior to the date on which Incentive Awards
are otherwise paid under the Plan.

         6. DEFINITIONS. For purposes of this Article III, the following words
and phrases shall have the meaning hereinafter set forth, unless a different
meaning is clearly required by the context:

                           (a) "Discharge for Cause" shall mean the permanent
                  termination of the Participant's employment from his or her
                  Employer and any other Employer that is the result of (1)
                  serious misconduct as an Employee, including, but not limited
                  to, a continued


                                       10
<PAGE>   11


                  failure after notice to perform a substantial portion of his
                  or her duties and responsibilities unrelated to illness or
                  incapacity, unethical behavior such as acts of self-dealing or
                  self-interest, harassment, violence in the workplace, or
                  theft; (2) the commission of a crime involving a controlled
                  substance, moral turpitude, dishonesty, or breach of trust; or
                  (3) the Employer being directed by a regulatory agency or
                  self-regulatory agency to terminate or suspend the Participant
                  or to prohibit the Participant from performing services for
                  the Employer. The Corporation in its sole and absolute
                  discretion shall determine whether a Participant has been
                  Discharged for Cause, as provided for in this Section 6(a).

                           (b) "Voluntary Termination" shall mean a voluntary
                  and permanent termination of a Participant's employment from
                  his or her Employer and from any other Employer, whether by
                  resignation or otherwise, but shall not include the
                  Participant's Discharge for Cause, Retirement, Involuntary
                  Termination, Termination Under Limited Circumstances, or
                  termination as a result of Disability or death.

         All the capitalized and undefined terms used in this Section 6 shall
have the meanings given them in the Automatic Deferral Plan, unless a different
meaning is plainly required by the context.

                                   ARTICLE IV

                                 ADMINISTRATION
                                 --------------

         The Corporation shall be responsible for the general administration of
the Plan and for carrying out the provisions hereof. The Committee shall have
all such powers as may be necessary to carry out its duties under the Plan,
including the power to determine all questions pertaining to claims for benefits
and procedures for claim review, and the power to resolve all other questions
arising under the Plan, including any questions of construction. The Corporation
and the Committee may take such further action as the Corporation and the
Committee shall deem advisable in the administration of the Plan. The actions
taken and the decisions made by the Corporation and the Committee hereunder
shall be final and binding upon all interested parties. In accordance with the
provisions of Section 503 of the Employee Retirement Income Security Act of
1974, as amended, the Committee shall provide a procedure for handling claims of



                                       11
<PAGE>   12


Participants or their Beneficiaries under this Plan. Such procedure shall be in
accordance with regulations issued by the Secretary of Labor and shall provide
adequate written notice within a reasonable period of time with respect to the
denial of any such claims as well as a reasonable opportunity for a full and
fair review by the Committee of any such denial. Notwithstanding anything to the
contrary contained herein, the Corporation shall be the "administrator" for the
purpose of the Employment Retirement Income Security Act of 1974, as amended.
Any action authorized under the Plan to be done by the Committee may be done by
the Board of Directors or any other Board committee authorized by the Board of
Directors.

                                    ARTICLE V

                            AMENDMENT AND TERMINATION
                            -------------------------

         The Corporation reserves the right to amend or terminate the Plan at
any time by action of the Board of Directors or the Committee, but, from and
after the occurrence of a Non-Initiated Change of Control, no such amendment or
termination shall adversely affect the rights of a Participant which have
accrued prior to such amendment or termination except with the written consent
of such Participant.

                                   ARTICLE VI

                                  MISCELLANEOUS
                                  -------------

         1. NOT AN EMPLOYMENT AGREEMENT. Nothing herein contained shall be
construed as a commitment to or agreement with any person employed by the
Corporation or a Subsidiary to continue such person's employment with the
Corporation or Subsidiary, and nothing herein contained shall be construed as a
commitment or agreement on the part of the Corporation or any Subsidiary to
continue the employment or the annual rate of compensation of any such person
for any period. All Participants shall remain subject to discharge to the same
extent as if the Plan had never been put into effect.

         2. UNFUNDED FOR TAX AND ERISA PURPOSES. It is the intention of the
Corporation and the Participants that the Plan be unfunded for tax purposes and
for the purposes of Title I of the Employee Retirement Income Security Act of
1974, as amended.



                                       12
<PAGE>   13


         3. CLAIMS OF OTHER PERSONS. The provisions of the Plan shall in no
event be construed as giving any person, firm, or corporation any legal or
equitable right against the Corporation or any Subsidiary, their officers,
employees, agents, or directors, except any such rights as are specifically
provided for in the Plan or are hereafter created in accordance with the terms
and provisions of the Plan.

         4. ABSENCE OF LIABILITY. No member of the Board of Directors of the
Corporation or a Subsidiary or any officer or employee of the Corporation or a
Subsidiary shall be liable for any act or action hereunder, whether of
commission or omission.

         5. SEVERABILITY. The invalidity or unenforceability of any particular
provisions of the Plan shall not affect any other provision hereof, and the Plan
shall be construed in all respects as if such invalid or unenforceable provision
were omitted herefrom.

         6. GOVERNING LAW. The provisions of the Plan shall be governed and
construed in accordance with the laws of the State of Ohio.


                               KEYCORP

                               By:
                                  ----------------------------------------------
                                   Thomas E. Helfrich, Executive Vice President




                                       13
<PAGE>   14


                                    EXHIBIT A
                                    ---------

<TABLE>
<CAPTION>
         Incentive            Job                      Target Incentive As a
           Group              Grades                   Percent of Market Point
           -----              ------                   -----------------------

<S>                              <C>                            <C>
               I                 95                             100%
              II                 94                             85%
             III                 92-93                          70%
              IV                 90-91                          55%
               V                 89                             45%
              VI                 88                             35%
             VII                 87                             30%
            VIII                 86                             25%
              IX                 85                             20%
               X                 84 and below                   15%
</TABLE>



                                       14

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-15
<SEQUENCE>5
<FILENAME>l87949aex15.txt
<DESCRIPTION>EXHIBIT 15
<TEXT>

<PAGE>   1
                                                                      EXHIBIT 15


                  ACKNOWLEDGMENT LETTER OF INDEPENDENT AUDITORS


Shareholders and Board of Directors
KeyCorp

We are aware of the incorporation by reference in the following KeyCorp ("Key")
Registration Statements of our review report, dated April 13, 2001, relating to
the unaudited condensed consolidated interim financial statements of Key,
included in the Quarterly Report on Form 10-Q for the quarter ended March 31,
2001.

Form S-3 No. 33-58405
Form S-3 No. 333-10577          (Post-Effective Amendments No. 1 and No. 2)
Form S-3 No. 333-55959
Form S-3 No. 333-64601
Form S-3 No. 333-59175
Form S-3 No. 333-76619          (Post-Effective Amendment No. 1)
Form S-3 No. 333-88063
Form S-3 No. 333-85189
Form S-3 No. 333-50802
Form S-3 No. 333-56258


Form S-4 No. 33-31569
Form S-4 No. 33-44657
Form S-4 No. 33-51717
Form S-4 No. 33-55573
Form S-4 No. 33-57329
Form S-4 No. 33-61539
Form S-4 No. 333-19151
Form S-4 No. 333-61025

Form S-8 No. 2-97452
Form S-8 No. 33-21643
Form S-8 No. 333-49609
Form S-8 No. 333-49633
Form S-8 No. 333-65391
Form S-8 No. 333-70669
Form S-8 No. 333-70703
Form S-8 No. 333-70775
Form S-8 No. 333-72189
Form S-8 No. 333-92881
Form S-8 No. 333-45320
Form S-8 No. 333-45322

Form S-8 No. 33-31569           (Post-Effective Amendment No. 1 to Form S-4)
Form S-8 No. 33-44657           (Post-Effective Amendment No. 1 to Form S-4)
Form S-8 No. 33-51717           (Post-Effective Amendment No. 1 to Form S-4)
Form S-8 No. 333-61025          (Post-Effective Amendment No. 1 to Form S-4)


                                                          /s/  Ernst & Young LLP

Cleveland, Ohio
May 8, 2001
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
