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<SEC-DOCUMENT>0000950152-03-005470.txt : 20030514
<SEC-HEADER>0000950152-03-005470.hdr.sgml : 20030514
<ACCEPTANCE-DATETIME>20030514120721
ACCESSION NUMBER:		0000950152-03-005470
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		10
CONFORMED PERIOD OF REPORT:	20030331
FILED AS OF DATE:		20030514

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:		1934 Act
		SEC FILE NUMBER:	001-11302
		FILM NUMBER:		03697621

	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>l00395ae10vq.txt
<DESCRIPTION>KEYCORP
<TEXT>
<PAGE>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                              Washington D.C. 20549

                                    FORM 10-Q

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

                  For the Quarterly Period Ended March 31, 2003

                                       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)

            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)

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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).  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.

  Common Shares with a par value of $1 each           422,799,824 Shares
- ----------------------------------------------    ----------------------------
             (Title of class)                    (Outstanding at April 30, 2003)

<PAGE>

                                     KEYCORP

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                          PART I. FINANCIAL INFORMATION
                                                                                              Page Number
                                                                                              -----------
<S>                                                                                           <C>
Item 1.    Financial Statements

           Consolidated Balance Sheets --
              March 31, 2003, December 31, 2002 and March 31, 2002                                 3

           Consolidated Statements of Income --
              Three months ended March 31, 2003 and 2002                                           4

           Consolidated Statements of Changes in Shareholders' Equity --
              Three months ended March 31, 2003 and 2002                                           5

           Consolidated Statements of Cash Flow --
              Three months ended March 31, 2003 and 2002                                           6

           Notes to Consolidated Financial Statements                                              7

           Independent Accountants' Review Report                                                 29

Item 2.    Management's Discussion and Analysis of Financial Condition
              and Results of Operations                                                           30

Item 3.    Quantitative and Qualitative Disclosure of Market Risk                                 65

Item 4.    Controls and Procedures                                                                65

                           PART II. OTHER INFORMATION

Item 1.    Legal Proceedings                                                                      65

Item 6.    Exhibits and Reports on Form 8-K                                                       65

           Signature                                                                              67

           Management Certifications                                                              68
</TABLE>

                                        2

<PAGE>

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                          MARCH 31,    DECEMBER 31,     MARCH 31,
dollars in millions                                                                         2003           2002           2002
- ---------------------------------------------------------------------------------------------------------------------------------
                                                                                         (UNAUDITED)                   (UNAUDITED)
<S>                                                                                      <C>           <C>             <C>
ASSETS
Cash and due from banks                                                                  $    3,074    $      3,364    $    2,483
Short-term investments                                                                        2,837           1,632         1,487
Securities available for sale                                                                 8,455           8,507         5,859
Investment securities (fair value: $140, $129 and $224)                                         132             120           216
Other investments                                                                               970             919           864
Loans, net of unearned income of $1,813, $1,776 and $1,803                                   62,719          62,457        63,956
     Less: Allowance for loan losses                                                          1,421           1,452         1,607
- ---------------------------------------------------------------------------------------------------------------------------------
     Net loans                                                                               61,298          61,005        62,349
Premises and equipment                                                                          623             644           663
Goodwill                                                                                      1,142           1,142         1,101
Other intangible assets                                                                          34              35            28
Corporate-owned life insurance                                                                2,442           2,414         2,334
Accrued income and other assets                                                               5,483           5,420         3,975
- ---------------------------------------------------------------------------------------------------------------------------------
     Total assets                                                                        $   86,490    $     85,202    $   81,359
                                                                                         ==========    ============    ==========
LIABILITIES
Deposits in domestic offices:
    NOW and money market deposit accounts                                                $   17,356    $     16,249    $   13,534
    Savings deposits                                                                          2,095           2,029         2,014
    Certificates of deposit ($100,000 or more)                                                4,667           4,749         4,505
    Other time deposits                                                                      11,620          11,946        13,231
- ---------------------------------------------------------------------------------------------------------------------------------
     Total interest-bearing                                                                  35,738          34,973        33,284
    Noninterest-bearing                                                                      10,811          10,630         8,688
Deposits in foreign office --  interest-bearing                                               3,906           3,743         1,261
- ---------------------------------------------------------------------------------------------------------------------------------
     Total deposits                                                                          50,455          49,346        43,233
Federal funds purchased and securities sold under repurchase agreements                       3,721           3,862         7,338
Bank notes and other short-term borrowings                                                    2,551           2,823         3,174
Accrued expense and other liabilities                                                         5,346           5,471         4,683
Long-term debt                                                                               16,269          15,605        15,256
Corporation-obligated mandatorily redeemable preferred capital securities of subsidiary
    trusts holding solely subordinated debentures of KeyCorp (See Note 9)                     1,250           1,260         1,273
- ---------------------------------------------------------------------------------------------------------------------------------
     Total liabilities                                                                       79,592          78,367        74,957

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                                                                               1,449           1,449         1,385
Retained earnings                                                                             6,536           6,448         6,096
Treasury stock, at cost (69,108,570, 67,945,135 and 66,434,962 shares)                       (1,621)         (1,593)       (1,551)
Accumulated other comprehensive income (loss)                                                    42              39           (20)
- ---------------------------------------------------------------------------------------------------------------------------------
     Total shareholders' equity                                                               6,898           6,835         6,402
- ---------------------------------------------------------------------------------------------------------------------------------
     Total liabilities and shareholders' equity                                          $   86,490    $     85,202    $   81,359
                                                                                         ==========    ============    ==========
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

See Notes to Consolidated Financial Statements(Unaudited).


                                       3
<PAGE>

                  CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                THREE MONTHS ENDED MARCH 31,
                                                                                ----------------------------
dollars in millions, except per share amounts                                      2003              2002
- ------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>               <C>
INTEREST INCOME
Loans                                                                           $     904         $      985
Tax-exempt investment securities                                                        2                  3
Securities available for sale                                                         101                 89
Short-term investments                                                                  8                  9
Other investments                                                                       6                  6
- ------------------------------------------------------------------------------------------------------------
  Total interest income                                                             1,021              1,092

INTEREST EXPENSE
Deposits                                                                              188                250
Federal funds purchased and securities sold under repurchase agreements                16                 23
Bank notes and other short-term borrowings                                             16                 27
Long-term debt, including capital securities                                          120                138
- ------------------------------------------------------------------------------------------------------------
  Total interest expense                                                              340                438
- ------------------------------------------------------------------------------------------------------------

NET INTEREST INCOME                                                                   681                654
Provision for loan losses                                                             130                136
- ------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses                                   551                518

NONINTEREST INCOME
Trust and investment services income                                                  132                158
Service charges on deposit accounts                                                    92                100
Investment banking and capital markets income                                          34                 49
Letter of credit and loan fees                                                         31                 28
Corporate-owned life insurance income                                                  27                 26
Electronic banking fees                                                                19                 18
Net securities gains                                                                    4                 --
Other income                                                                           58                 64
- ------------------------------------------------------------------------------------------------------------
  Total noninterest income                                                            397                443

NONINTEREST EXPENSE
Personnel                                                                             363                363
Net occupancy                                                                          59                 57
Computer processing                                                                    44                 54
Equipment                                                                              32                 34
Marketing                                                                              25                 26
Professional fees                                                                      25                 21
Other expense                                                                         109                106
- ------------------------------------------------------------------------------------------------------------
  Total noninterest expense                                                           657                661

INCOME BEFORE INCOME TAXES                                                            291                300
Income taxes                                                                           74                 60
- ------------------------------------------------------------------------------------------------------------
NET INCOME                                                                      $     217         $      240
                                                                                =========         ==========

Per common share:
  Net income                                                                    $     .51         $      .56
  Net income -- assuming dilution                                                     .51                .56
Weighted average common shares outstanding (000)                                  425,275            424,855
Weighted average common shares and potential common
  shares outstanding (000)                                                        428,090            430,019
- ------------------------------------------------------------------------------------------------------------
</TABLE>

See Notes to Consolidated Financial Statements (Unaudited).

                                       4
<PAGE>

     CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                       ACCUMULATED
                                                                                           TREASURY       OTHER
                                                             COMMON   CAPITAL   RETAINED    STOCK,    COMPREHENSIVE    COMPREHENSIVE
dollars in millions, except per share amounts                SHARES   SURPLUS   EARNINGS   AT COST    INCOME (LOSS)       INCOME
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                                                          <C>      <C>       <C>        <C>        <C>              <C>
BALANCE AT DECEMBER 31, 2001                                 $  492   $ 1,390   $  5,856   $ (1,585)  $            2

Net income                                                                           240                               $        240

Other comprehensive income (losses):
  Net unrealized losses on securities available
    for sale, net of income taxes of ($13) ( a)                                                                  (24)           (24)
  Net unrealized gains on derivative financial instruments,
    net of income taxes of $1                                                                                      3              3
  Foreign currency translation adjustments                                                                        (1)            (1)
                                                                                                                       ------------
        Total comprehensive income                                                                                     $        218
                                                                                                                       ============

Issuance of common shares:
  Employee benefit and dividend reinvestment
    plans-- 1,448,762 net shares                                           (5)                   34
- --------------------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 2002                                    $  492   $ 1,385   $  6,096   $ (1,551)  $          (20)
                                                             ======   =======   ========   ========   ==============
- --------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 2002                                 $  492   $ 1,449   $  6,448   $(1,593)   $           39

Net income                                                                           217                               $        217

Other comprehensive income (losses):
  Net unrealized losses on securities available
    for sale, net of income taxes of ($15) (a)                                                                   (26)           (26)
  Net unrealized gains on derivative financial instruments,
    net of income taxes of $7                                                                                     13             13
  Foreign currency translation adjustments                                                                        16             16
                                                                                                                       ------------
        Total comprehensive income                                                                                     $        220
                                                                                                                       ============

Deferred compensation obligation                                            1

Cash dividends declared on common shares ($.305 per share)                          (129)

Issuance of common shares:
  Employee benefit and dividend reinvestment
    plans-- 836,565 net shares                                             (1)                   20
Repurchase of common shares - 2,000,000 shares                                                  (48)
- --------------------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 2003                                    $  492   $ 1,449   $  6,536   $ (1,621)  $           42
                                                             ======   =======   ========   ========   ==============
- --------------------------------------------------------------------------------------------------------------------
</TABLE>

(a)  Net of reclassification adjustments.

See Notes to Consolidated Financial Statements (Unaudited).


                                       5

<PAGE>

                CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                THREE MONTHS ENDED MARCH 31,
                                                                                                ----------------------------
in millions                                                                                        2003               2002
- ----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                             <C>                 <C>
OPERATING ACTIVITIES
Net income                                                                                      $     217           $    240
Adjustments to reconcile net income to net cash provided by operating activities:
    Provision for loan losses                                                                         130                136
    Depreciation expense and software amortization                                                     50                 61
    Net securities gains                                                                               (4)                --
    Net (gains) losses from principal investments                                                       3                 (1)
    Net gains from loan securitizations and sales                                                     (15)                (6)
    Deferred income taxes                                                                              74                 (6)
    Net (increase) decrease in mortgage loans held for sale                                           (19)               167
    Net increase in trading account assets                                                           (158)               (95)
    Net decrease in accrued restructuring charges                                                      (3)                (7)
    Other operating activities, net                                                                  (171)              (159)
- ----------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                                             104                330
INVESTING ACTIVITIES
Net (increase) decrease in other short-term investments                                            (1,047)               506
Purchases of securities available for sale                                                         (2,457)            (1,511)
Proceeds from sales of securities available for sale                                                1,631                 84
Proceeds from prepayments and maturities of securities available for sale                             813                936
Purchases of investment securities                                                                    (18)                (7)
Proceeds from prepayments and maturities of investment securities                                       7                 15
Purchases of other investments                                                                        (90)               (28)
Proceeds from sales of other investments                                                               33                 13
Proceeds from prepayments and maturities of other investments                                          26                  2
Net increase in loans, excluding acquisitions, sales and divestitures                                (533)            (1,476)
Purchases of loans                                                                                   (419)                --
Proceeds from loan securitizations and sales                                                          493                450
Purchases of premises and equipment                                                                   (10)               (15)
Proceeds from sales of premises and equipment                                                           1                  5
Proceeds from sales of other real estate owned                                                         11                  7
- ----------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES                                                              (1,559)            (1,019)
FINANCING ACTIVITIES
Net increase (decrease) in deposits                                                                 1,110             (1,555)
Net increase (decrease) in short-term borrowings                                                     (413)             1,228
Net proceeds from issuance of long-term debt, including capital securities                          1,871              2,055
Payments on long-term debt, including capital securities                                           (1,234)            (1,336)
Purchases of treasury shares                                                                          (48)                --
Net proceeds from issuance of common stock                                                              8                 16
Cash dividends paid                                                                                  (129)              (127)
- ----------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                                           1,165                281
- ----------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN CASH AND DUE FROM BANKS                                                              (290)              (408)
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD                                                      3,364              2,891
- ----------------------------------------------------------------------------------------------------------------------------
CASH AND DUE FROM BANKS AT END OF PERIOD                                                        $   3,074           $  2,483
                                                                                                =========           ========
- ----------------------------------------------------------------------------------------------------------------------------
Additional disclosures relative to cash flow:
    Interest paid                                                                               $     325           $    396
    Income taxes paid                                                                                   5                  9
Noncash items:
    Transfer of investment securities to other investments                                             --           $    864
    Transfer of investment securities to securities available for sale                                 --                 64
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>

See Notes to Consolidated Financial Statements (Unaudited).

                                       6
<PAGE>

                   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.

The Financial Accounting Standards Board ("FASB") issued FASB Interpretation No.
46 in January 2003. The "Accounting Pronouncements Pending Adoption" section of
this note, on page 10, and Note 7 ("Variable Interest Entities"), which begins
on page 19, provide information on Interpretation No. 46. This interpretation
changes the method for evaluating when to consolidate an entity depending on
whether the entity is a voting interest entity or a variable interest entity. It
was effective immediately for entities created after January 31, 2003, and
applies to previously existing entities in quarters beginning after June 15,
2003.

Key currently evaluates whether to consolidate entities in which it invested
prior to February 1, 2003, based on the nature and amount of equity contributed
by third parties, the decision-making power granted to those parties and the
extent of their control over the entity's operating and financial policies.
Entities that Key controls, generally through majority ownership, are
consolidated and are considered subsidiaries.

Unconsolidated investments in entities in which Key has significant influence
over operating and financing decisions (usually defined as a voting or economic
interest of 20 to 50%) are accounted for by the equity method. Unconsolidated
investments in entities in which Key has a voting or economic interest of less
than 20% are generally carried at cost. Investments held by KeyCorp's
broker/dealer and investment company subsidiaries (principal investments) are
carried at estimated fair value.

Key uses special purpose entities ("SPEs"), including securitization trusts, in
the normal course of business for funding purposes. SPEs established by Key as
qualifying SPEs under the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 140, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities," are not consolidated. Nonqualifying
SPEs established before February 1, 2003, are evaluated for consolidation by Key
based on the nature and amount of equity contributed by third parties, the risks
and rewards the parties assume and the control the respective parties exercise
over the SPE's activities. Securitization trusts sponsored by Key are not
consolidated since they are qualifying SPEs. Additional information on SFAS No.
140 is summarized in Note 1 ("Summary of Significant Accounting Policies") of
Key's 2002 Annual Report to Shareholders under the heading "Loan
Securitizations" on page 59.

Key also does not consolidate an asset-backed commercial paper conduit for which
it is a referral agent. The conduit is owned by a third party and administered
by an unaffiliated financial institution. Key shares the risks and rewards of
the conduit's activities with multiple third parties. Additional information on
the conduit is summarized in Note 7 ("Variable Interest Entities"), which begins
on page 19 and in Note 10 ("Contingent Liabilities and Guarantees"), which
begins on page 23.

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 2002 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.


                                       7
<PAGE>

STOCK-BASED COMPENSATION

Through December 31, 2002, Key accounted for stock options issued to employees
using the intrinsic value method. This method required that compensation expense
be recognized to the extent that the fair value of the stock exceeded the
exercise price of the option at the grant date. Key's employee stock options
generally have fixed terms and exercise prices that are equal to or greater than
the fair value of Key's common shares at the grant date, so Key generally had
not recognized compensation expense related to stock options.

In September 2002, KeyCorp's Board of Directors approved management's
recommendation to change Key's method of accounting for stock options granted to
eligible employees and directors. Effective January 1, 2003, Key adopted the
fair value method of accounting as outlined in SFAS No. 123, "Accounting for
Stock-Based Compensation." Additional information pertaining to this accounting
change is summarized on page 9 under the heading "Accounting Pronouncements
Adopted in 2003."

SFAS No. 123 requires companies like Key that have used the intrinsic value
method to account for employee stock options to provide pro forma disclosures of
the net income and earnings per share effect of stock options using the fair
value method. Management estimates the fair value of options granted using the
Black-Scholes option-pricing model. This model was originally developed to
estimate the fair value of exchange-traded equity options, which (unlike
employee stock options) have no vesting period or transferability restrictions.
As a result, the Black-Scholes model is not a perfect indicator of the value of
an option, but it is commonly used for this purpose.

The Black-Scholes model requires several assumptions, which management developed
and updates based on historical trends and current market observations. These
assumptions include:

- -        an average option life of 6.0 years for the first three months of 2003
         and 5.0 years for the first three months of 2002;

- -        a future dividend yield of 5.10% for the first three months of 2003 and
         4.87% for the first three months of 2002;

- -        share price volatility of .293 for the first three months of 2003 and
         .276 for the first three months of 2002; and

- -        a weighted average risk-free interest rate of 3.3% for the first three
         months of 2003 and 4.1% for the first three months of 2002.

The level of accuracy achieved in deriving the estimated fair values is directly
related to the accuracy of the underlying assumptions.

The model assumes that the estimated fair value of an option is amortized over
the option's vesting period and would be included in personnel expense on the
income statement. The pro forma effect of applying the fair value method of
accounting to all forms of stock-based compensation (e.g., stock options, stock
purchase plans, restricted stock, etc.) for the first three months of 2003 and
2002 is shown in the following table. The information presented may not be
indicative of the effect in future periods.

<TABLE>
<CAPTION>
                                                                                                THREE MONTHS ENDED MARCH 31,
                                                                                                ----------------------------
in millions, except per share amounts                                                             2003                2002
- ----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                             <C>                 <C>
Net income, as reported                                                                         $     217           $    240
Add:      Stock-based employee compensation expense included in
          reported net income, net of related tax effects                                               2                  1
Deduct:   Total stock-based employee compensation expense determined under
          fair value-based method for all awards, net of related tax effects                            5                  7
- ----------------------------------------------------------------------------------------------------------------------------
Net income -- pro forma                                                                         $     214           $    234
                                                                                                =========           ========
Per common share:
    Net income                                                                                  $     .51           $    .56
    Net income -- pro forma                                                                           .50                .55
    Net income assuming dilution                                                                      .51                .56
    Net income assuming dilution --  pro forma                                                        .50                .54

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

                                       8
<PAGE>

ACCOUNTING PRONOUNCEMENTS ADOPTED IN 2003

ACCOUNTING FOR AND DISCLOSURE OF GUARANTEES. In November 2002, the FASB issued
Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others." This
interpretation requires a guarantor to recognize, at the inception of a
guarantee, a liability for the fair value of obligations undertaken. The
liability that must be recognized is specifically related to the obligation to
stand ready to perform over the term of the guarantee. The initial recognition
and measurement provisions of this guidance became effective on a prospective
basis for guarantees issued or modified on or after January 1, 2003.

For guarantees subject to the liability recognition provisions of this
interpretation for which Key receives a fee, the initial fair value stand ready
obligation is recognized at an amount equal to the fee. For guarantees for which
no fee is received, the fair value of the stand ready obligations is determined
using expected present value measurement techniques, unless observable
transactions for identical or similar guarantees are available. The subsequent
accounting for these stand ready obligations depends on the nature of the
underlying guarantees. Key accounts for its release from risk for a particular
guarantee either upon expiration or settlement, or by a systematic and rational
amortization method depending on the risk profile of the particular guarantee.

This new accounting guidance also expands the disclosures that a guarantor must
make about its obligations under certain guarantees. These disclosure
requirements took effect for financial statements of interim or annual periods
ending after October 15, 2002. The required disclosures for Key are provided in
Note 10 ("Contingent Liabilities and Guarantees"), which begins on page 23.

The adoption of Interpretation No. 45 did not have any material effect on Key's
financial condition or results of operations.

COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES. In July 2002, the FASB issued
SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal
Activities." This new standard took effect for exit or disposal activities
(e.g., activities related to ceasing a line of business, relocating operations,
etc.) initiated after December 31, 2002. SFAS No. 146 substantially changes the
rules for recognizing costs, such as lease or other contract termination costs
and one-time employee termination benefits associated with exit or disposal
activities arising from corporate restructurings. Generally, these costs must be
recognized when incurred. Previously, those costs could be recognized earlier,
for example, when a company committed to an exit or disposal plan. Key adopted
SFAS No. 146 for restructuring activities initiated on or after January 1, 2003.
The adoption of SFAS No. 146 did not significantly affect Key's financial
condition or results of operations.

ASSET RETIREMENT OBLIGATIONS. In August 2001, the FASB issued SFAS No. 143,
"Accounting for Asset Retirement Obligations." The new standard was effective
for fiscal years beginning after June 15, 2002. SFAS No. 143 addresses the
accounting for legal obligations associated with the retirement of tangible
long-lived assets and requires a liability to be recognized for the fair value
of these obligations in the period they are incurred. Related costs are
capitalized as part of the carrying amounts of the assets to be retired and are
amortized over the assets' useful lives. Key adopted SFAS No. 143 as of January
1, 2003. The adoption of this accounting guidance did not significantly affect
Key's financial condition or results of operations.

ACCOUNTING FOR STOCK-BASED COMPENSATION. Under SFAS No. 123, "Accounting for
Stock-Based Compensation," companies may either recognize the compensation cost
associated with stock options as expense over the respective vesting periods or
disclose the pro forma impact on earnings in their financial statements. Key has
historically followed the latter approach, but in September 2002, KeyCorp's
Board of Directors approved management's recommendation to recognize the
compensation cost for stock options. Effective January 1, 2003, Key adopted the
fair value method of accounting as outlined in SFAS No. 123. Management is
applying the change in accounting prospectively (prospective method) to all
awards as permitted under the transition provisions in SFAS No. 148, "Accounting
for Stock-Based Compensation Transition and Disclosure," which was issued in
December 2002. SFAS No. 148 amends SFAS No. 123 to provide alternative methods
of transition for an entity that voluntarily changes to the fair value method of
accounting for stock compensation. These alternative methods include: (i) the
prospective method; (ii) the

                                       9
<PAGE>

modified prospective method; and, (iii) the retroactive restatement method. This
accounting guidance also amends the disclosure requirements of SFAS No. 123 to
require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock compensation and the effect of the
method used on reported financial results. The required interim disclosures for
Key are provided under the heading "Stock-Based Compensation" on page 8.

Based on the valuation and anticipated mid-year timing of option grants in 2003,
management estimates that the accounting change will reduce Key's diluted
earnings per common share by approximately $.02 in 2003. The effect on Key's
earnings per common share in subsequent years will depend on the number and
timing of options granted and the assumptions used to estimate their fair value.

ACCOUNTING PRONOUNCEMENTS PENDING ADOPTION

CONSOLIDATION OF VARIABLE INTEREST ENTITIES. In January 2003, the FASB issued
Interpretation No. 46, "Consolidation of Variable Interest Entities," which
significantly changes how Key and other companies determine when to consolidate
other entities. Under this guidance, entities are classified as either voting
interest entities or variable interest entities ("VIEs"). A voting interest
entity is evaluated for consolidation under existing accounting standards, which
focus on the equity owner with voting control, while a VIE is consolidated by
its primary beneficiary. The primary beneficiary is the party that holds
variable interests that expose it to a majority of the entity's expected losses
and/or residual returns. Variable interests include equity interests,
subordinated debt, derivative contracts, leases, service agreements, guarantees,
standby letters of credit, loan commitments and other instruments.

Interpretation No. 46 was effective immediately for entities created after
January 31, 2003, and applies to previously existing entities in quarters
beginning after June 15, 2003. It requires additional disclosures by primary
beneficiaries and other significant variable interest holders. Management is
currently evaluating Key's involvement with entities created prior to February
1, 2003, to identify those that must be consolidated or only disclosed in
accordance with this guidance. The most significant impact of this new guidance
will be on Key's balance sheet since consolidating additional entities will
increase assets and liabilities and change leverage and capital ratios, as well
as asset concentrations. While the consolidation of previously unconsolidated
entities under Interpretation No. 46 will represent an accounting change, it
will not affect Key's legal rights or obligations to these entities. Additional
information is summarized in Note 7 ("Variable Interest Entities"), which begins
on page 19, and in Note 10 ("Contingent Liabilities and Guarantees"), which
begins on page 23.

                          2. EARNINGS PER COMMON SHARE

Key calculates its basic and diluted earnings per common share as follows:

<TABLE>
<CAPTION>
                                                                                             THREE MONTHS ENDED MARCH 31,
                                                                                             ----------------------------
dollars in millions, except per share amounts                                                   2003              2002
- -------------------------------------------------------------------------------------------------------------------------
<S>                                                                                          <C>               <C>
NET INCOME                                                                                   $      217        $      240
                                                                                             ==========        ==========
- -------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE COMMON SHARES
Weighted average common shares outstanding (000)                                                425,275           424,855
Effect of dilutive common stock options (000)                                                     2,815             5,164
- -------------------------------------------------------------------------------------------------------------------------
Weighted average common shares and potential
    common shares outstanding  (000)                                                            428,090           430,019
                                                                                             ==========        ==========
- -------------------------------------------------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE
Net income per common share                                                                   $     .51        $      .56
Net income per common share-- assuming dilution                                                     .51               .56
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       10
<PAGE>

                         3. ACQUISITIONS AND DIVESTITURE

Business acquisitions and the divestiture that Key completed during 2002 are
summarized below. There were no such transactions completed during the first
quarter of 2003.

ACQUISITIONS

UNION BANKSHARES, LTD.

On December 12, 2002, Key purchased Union Bankshares, Ltd., the holding company
for Union Bank & Trust, a seven-branch bank headquartered in Denver, Colorado.
Key paid $22.63 per Union Bankshares common share for a total cash consideration
of $66 million. Goodwill of approximately $34 million and core deposit
intangibles of $13 million were recorded. Union Bankshares, Ltd. had assets of
$475 million at the date of acquisition. On January 17, 2003, Union Bank & Trust
was merged into Key Bank National Association ("KBNA").

CONNING ASSET MANAGEMENT

On June 28, 2002, Key purchased substantially all of the mortgage loan and real
estate business of Conning Asset Management, headquartered in Hartford,
Connecticut. Conning's mortgage loan and real estate business originates,
securitizes and services multi-family, retail, industrial and office property
mortgage loans on behalf of pension fund and life insurance company investors.
At the date of acquisition, the business had net assets of $17 million and
serviced approximately $4 billion in commercial mortgage loans through its St.
Louis office. In accordance with a confidentiality clause in the purchase
agreement, the terms, which are not material, have not been disclosed.

DIVESTITURE

401(k) RECORDKEEPING BUSINESS

On June 12, 2002, Key sold its 401(k) recordkeeping business. Key recognized a
gain of $3 million ($2 million after tax) on the transaction.

                                       11
<PAGE>

                           4. LINE OF BUSINESS RESULTS

CONSUMER BANKING

RETAIL BANKING provides individuals with branch-based deposit and investment
products, personal finance services and loans, including residential mortgages,
home equity and various types of installment loans.

SMALL BUSINESS provides businesses that have annual sales revenues of $10
million or less with deposit, investment and credit products, and business
advisory services.

CONSUMER FINANCE consists of two primary business units: Indirect Lending and
National Home Equity.

Indirect Lending offers automobile and marine loans to consumers through
dealers, and finances inventory for automobile and marine dealers. This business
unit also provides education loans, insurance and interest-free payment plans
for students and their parents.

National Home Equity provides both prime and nonprime mortgage and home equity
loan products to individuals. These products originate outside of Key's retail
branch system. This business unit also works with mortgage brokers and home
improvement contractors to provide home equity and home improvement solutions.

CORPORATE AND INVESTMENT BANKING

CORPORATE BANKING provides a full array of products and services to large
corporations, middle-market companies, financial institutions and government
organizations. These products and services include: financing, treasury
management, investment banking, derivatives and foreign exchange, equity and
debt trading, and syndicated finance.

KEYBANK REAL ESTATE CAPITAL provides construction and interim lending, permanent
debt placements and servicing, and equity and investment banking services to
developers, brokers and owner-investors. This line of business deals exclusively
with nonowner-occupied properties (i.e., generally properties for which the
owner occupies less than 60% of the premises).

KEY EQUIPMENT FINANCE meets the equipment leasing needs of companies worldwide
and provides equipment manufacturers, distributors and resellers with financing
options for their clients. Lease financing receivables and related revenues are
assigned to Corporate Banking or KeyBank Real Estate Capital if one of those
businesses is principally responsible for maintaining the relationship with the
client.

INVESTMENT MANAGEMENT SERVICES

INVESTMENT MANAGEMENT SERVICES consists of two primary business units: Victory
Capital Management and McDonald Financial Group.

Victory Capital Management manages or gives advice regarding investment
portfolios for a national client base, including corporations, labor unions,
not-for-profit organizations, governments and individuals. These portfolios may
be managed in separate accounts, common funds or the Victory family of mutual
funds.

McDonald Financial Group offers financial, estate and retirement planning and
asset management services to assist high-net-worth clients with their banking,
brokerage, trust, portfolio management, insurance, charitable giving and related
needs. This unit also provides banking services to public sector institutions.

OTHER SEGMENTS

Other segments consists primarily of Treasury, Principal Investing and the net
effect of funds transfer pricing.

RECONCILING ITEMS

Total assets included under "Reconciling Items" represent primarily the
unallocated portion of nonearning assets of corporate support functions. Charges
related to the funding of these assets are part of net interest income and are
allocated to the business segments through noninterest expense. Reconciling
Items also

                                       12
<PAGE>

include certain items that are not allocated to the business segments because
they are not reflective of their normal operations.

The table that spans pages 14 and 15 shows selected financial data for each
major business group for the three months ended March 31, 2003 and 2002. This
table is accompanied by additional supplementary information for each of the
lines of business that comprise these groups. The information was derived from
the internal financial reporting system that management uses to monitor and
manage Key's financial performance. Accounting principles generally accepted in
the United States guide financial accounting, but there is no authoritative
guidance for "management accounting"--the way management uses its judgment and
experience to make reporting decisions. Consequently, the line of business
results Key reports may not be comparable with line of business results
presented by other companies.

The selected financial data are based on internal accounting policies designed
to compile results on a consistent basis and in a manner that reflects the
underlying economics of the businesses. As such:

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

- -        Indirect expenses, such as computer servicing costs and corporate
         overhead, are allocated based on assumptions of the extent to which
         each line actually uses the services.

- -        Key's consolidated provision for loan losses is allocated among the
         lines of business based primarily on their actual net charge-offs
         (excluding those discussed on page 57 that are recorded in the
         nonreplenished allowance), adjusted periodically for loan growth and
         changes in risk profile. The level of the consolidated provision is
         based on the methodology that management uses to estimate Key's
         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 58 of Key's 2002 Annual
         Report to Shareholders.

- -        Income taxes are allocated based on the statutory federal income tax
         rate of 35% (adjusted for tax-exempt interest income, income from
         corporate-owned life insurance 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 2.5%.

- -        Capital is assigned based on management's assessment of economic risk
         factors (primarily credit, operating and market risk).

Developing and applying the methodologies that management uses 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 business or changes in Key's organization
structure. The financial data reported for all periods presented in the tables
reflect a number of changes, which occurred during the first quarter of 2003:

- -        Key reorganized and renamed some of its business groups and lines of
         business. Key's Capital Markets line of business moved from the
         Investment Management Services group (formerly Key Capital Partners) to
         the Corporate Banking line within the Corporate and Investment Banking
         group (formerly Key Corporate Finance). Also within Corporate and
         Investment Banking, Key changed the name of its National Commercial
         Real Estate line of business to KeyBank Real Estate Capital, and
         changed the name of its National Equipment Finance line of business to
         Key Equipment Finance. In addition, Key consolidated the reporting of
         its National Home Equity and Indirect Lending lines of business into
         one line of business named Consumer Finance.

- -        Methodologies used to allocate certain overhead and funding costs were
         refined.

                                       13
<PAGE>

<TABLE>
<CAPTION>
                                                                              CORPORATE AND              INVESTMENT
                                                 CONSUMER BANKING          INVESTMENT BANKING        MANAGEMENT SERVICES
                                             ------------------------    -----------------------    ---------------------
THREE MONTHS ENDED MARCH 31,
dollars in millions                             2003          2002          2003         2002          2003          2002
- ---------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>           <C>           <C>          <C>           <C>            <C>
SUMMARY OF OPERATIONS
Net interest income (TE)                     $      450    $      434    $     279    $      284    $        59    $   53
Noninterest income                                  114           117          110           121            133       160
- -------------------------------------------------------------------------------------------------------------------------
Total revenue (TE) (a)                              564           551          389           405            192       213
Provision for loan losses                            78            81           50            52              2         3
Depreciation and amortization expense                34            39            9            11             10        14
Other noninterest expense                           299           302          160           159            148       159
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (TE)              153           129          170           183             32        37
Allocated income taxes and TE adjustments            57            48           64            69             12        14
- -------------------------------------------------------------------------------------------------------------------------
Net income (loss)                            $       96    $       81    $     106    $      114    $        20    $   23
                                             ==========    ==========    =========    ==========    ===========    ======

Percent of consolidated net income                   44 %          34 %         49 %          48 %            9 %      10 %
Percent of total segments net income                 45            37           50            52              9        10
- -------------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCES
Loans                                        $   28,434    $   27,318    $  28,385    $   29,842    $     4,958    $4,699
Total assets(a)                                  30,863        29,660       32,822        33,060          5,913     5,771
Deposits                                         34,360        34,311        4,039         3,134          5,216     3,671
- -------------------------------------------------------------------------------------------------------------------------
OTHER FINANCIAL DATA
Net loan charge-offs                         $       78    $       81    $      79    $      122    $         3    $    3
Return on average allocated equity                18.37 %       16.20 %      13.00 %       14.18 %        13.02 %   15.22 %
Average full-time equivalent employees            8,519         8,514        2,262         2,248          2,944     3,206
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

Supplementary information (Consumer Banking lines of business)

<TABLE>
<CAPTION>
                                                   RETAIL BANKING           SMALL BUSINESS            CONSUMER FINANCE
                                           --------------------------    ---------------------    ------------------------
THREE MONTHS ENDED MARCH 31,
dollars in millions                          2003             2002         2003         2002         2003          2002
- --------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>            <C>            <C>          <C>         <C>           <C>
Total revenue (taxable equivalent)         $     320      $       311    $     94     $     90    $      150    $      150
Provision for loan losses                         16               18          17           14            45            49
Noninterest expense                              205              207          42           43            86            91
Net income                                        62               54          22           21            12             6
Average loans                                  9,571            7,856       4,374        4,303        14,489        15,159
Average deposits                              29,932           30,493       4,076        3,499           352           319
Net loan charge-offs                              16               18          17           14            45            49
Return on average allocated equity             40.49 %          40.71 %     24.85 %      26.70 %        4.27 %        2.08 %
Average full-time equivalent employees         6,192            6,173         378          320         1,949         2,021
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>

Supplementary information (Corporate and Investment Banking lines of business)

<TABLE>
<CAPTION>
                                                CORPORATE BANKING         KEYBANK REAL ESTATE CAPITAL      KEY EQUIPMENT FINANCE
                                           --------------------------    -----------------------------    ------------------------
THREE MONTHS ENDED MARCH 31,
dollars in millions                          2003            2002             2003              2002         2003           2002
- ----------------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>            <C>               <C>               <C>         <C>             <C>
Total revenue (taxable equivalent)         $     234      $       249       $     84          $     90    $       71      $     66
Provision for loan losses                         40               36              4                 3             6            13
Noninterest expense                              112              117             32                30            25            23
Net income                                        51               59             30                36            25            19
Average loans                                 14,261           16,365          7,497             7,832         6,627         5,645
Average deposits                               3,362            2,568            665               558            12             8
Net loan charge-offs                              69              106              4                 3             6            13
Return on average allocated equity             10.25 %          11.56 %        15.08 %           18.99 %       20.99 %       18.26 %
Average full-time equivalent employees         1,021            1,103            635               510           606           635
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       14
<PAGE>

<TABLE>
<CAPTION>
     OTHER SEGMENTS               TOTAL SEGMENTS            RECONCILING ITEMS                  KEY
- ------------------------     -----------------------    -------------------------    ------------------------
   2003          2002          2003          2002           2003          2002          2003          2002
- -------------------------------------------------------------------------------------------------------------
<C>            <C>           <C>          <C>           <C>            <C>           <C>           <C>
$      (59)    $      (39)   $    729     $      732    $       (26)   $      (30)   $      703    $      702
        34             33         391            431              6            12           397           443
- -------------------------------------------------------------------------------------------------------------
       (25)            (6)      1,120          1,163            (20)          (18)        1,100         1,145
        --             --         130            136             --            --           130           136
        --             --          53             64             --            --            53            64
         8              6         615            626            (11)          (29)          604           597
- -------------------------------------------------------------------------------------------------------------
       (33)           (12)        322            337             (9)           11           313           348
       (23)           (15)        110            116            (14)           (8)           96           108
- -------------------------------------------------------------------------------------------------------------
$      (10)    $        3    $    212     $      221    $         5    $       19    $      217    $      240
==========     ==========    ========     ==========    ===========    ==========    ==========    ==========

        (4) %          -- %        98 %           92 %            2 %           8 %         100 %         100 %
        (4)             1         100            100            N/A           N/A           N/A           N/A
- -------------------------------------------------------------------------------------------------------------

$      962     $    1,444    $ 62,739     $   63,303    $       106    $      185    $   62,845    $   63,488
    12,796         10,594      82,394         79,085          1,520         1,786        83,914        80,871
     3,207          2,941      46,822         44,057            (72)          (88)       46,750        43,969
- -------------------------------------------------------------------------------------------------------------

        --             --    $    160     $      206             --            --    $      160    $      206
    (11.05) %        2.97 %     13.40 %        14.20 %          N/M           N/M         12.91 %       15.53 %
        35             31      13,760         13,999          6,687         7,080        20,447        21,079
- -------------------------------------------------------------------------------------------------------------
</TABLE>

(a)  Substantially all revenue generated by Key's major business groups 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 business groups are located in the United
     States.

TE = Taxable Equivalent, N/A = Not Applicable, N/M = Not Meaningful

                                       15
<PAGE>

                                  5. SECURITIES

Key classifies its securities into four categories: trading, available for sale,
investment and other investments.

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, and
certain interests retained in loan securitizations. All of these assets are
reported at fair value ($959 million at March 31, 2003, $801 million at December
31, 2002, and $692 million at March 31, 2002) and are 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.

SECURITIES AVAILABLE FOR SALE. These include securities that Key intends to hold
for an indefinite period of time and that may be sold in response to changes in
interest rates, prepayment risk, liquidity needs or other factors. Securities
available for sale are reported at fair value and include debt and marketable
equity securities with readily determinable fair values. Unrealized gains and
losses (net of income taxes) deemed temporary are recorded in shareholders'
equity as a component of "accumulated other comprehensive income (loss)."
Unrealized gains and losses on specific securities deemed to be "other than
temporary" are included in "net securities gains (losses)" on the income
statement. Also included in "net securities gains (losses)" are actual gains and
losses resulting from sales of specific securities.

When Key retains an interest in loans it securitizes, it bears risk that the
loans will be prepaid (which would reduce expected interest income) or not paid
at all. Key accounts for these retained interests (which include both
certificated and uncertificated interests) as debt securities, classifying them
as available for sale or as trading account assets.

"Other securities" held in the available for sale portfolio primarily are
marketable equity securities, including an internally managed portfolio of
common stock investments in financial services companies.

INVESTMENT SECURITIES. These are debt securities that Key has the intent and
ability to hold until maturity. 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.

OTHER INVESTMENTS. Principal investments - investments in equity and mezzanine
instruments made by Key's Principal Investing unit - represent the majority of
other investments and are carried at fair value. They include direct and
indirect investments predominately in privately-held companies. Direct
investments are those made in a particular company, while indirect investments
are made through funds that include other investors. Changes in estimated fair
values and actual gains and losses on sales of principal investments are
included in "investment banking and capital markets income" on the income
statement.

In addition to principal investments, other investments include equity
securities that do not have readily determinable fair values. These securities
include certain real estate-related investments that are carried at estimated
fair value, as well as other types of securities that are generally carried at
cost. The carrying amount of the securities carried at cost is adjusted for
declines in value that are considered to be "other than temporary." These
adjustments are included in "net securities gains " on the income statement.

The amortized cost, unrealized gains and losses, and approximate fair value of
Key's investment securities, securities available for sale and other investments
are presented in the following tables. Gross "unrealized" gains and losses are
represented by the difference between the amortized cost and the fair values of
securities on the balance sheet as of the dates indicated. Accordingly, the
amount of these gains and losses may change in the future as market conditions
improve or worsen.

                                       16
<PAGE>

<TABLE>
<CAPTION>
                                                             MARCH 31, 2003
                                            -------------------------------------------------
                                                           GROSS         GROSS
                                            AMORTIZED    UNREALIZED    UNREALIZED    FAIR
in millions                                   COST         GAINS         LOSSES      VALUE
- ---------------------------------------------------------------------------------------------
<S>                                         <C>          <C>           <C>           <C>
INVESTMENT SECURITIES
U.S. Treasury, agencies and corporations    $      15            --            --    $     15
States and political subdivisions                 113    $        8            --         121
Other securities                                    4            --            --           4
- ---------------------------------------------------------------------------------------------
     Total investment securities            $     132    $        8            --    $    140
                                            =========    ==========    ==========    ========
- ---------------------------------------------------------------------------------------------
SECURITIES AVAILABLE FOR SALE
U.S. Treasury, agencies and corporations    $      23    $        1            --    $     24
States and political subdivisions                  27             1            --          28
Collateralized mortgage obligations             7,283           103    $       76       7,310
Other mortgage-backed securities                  698            32            --         730
Retained interests in securitizations             148            45            --         193
Other securities                                  200            --            30         170
- ---------------------------------------------------------------------------------------------
    Total securities available for sale     $   8,379    $      182    $      106    $  8,455
                                            =========    ==========    ==========    ========
- ---------------------------------------------------------------------------------------------
OTHER INVESTMENTS
Principal investments                       $     687    $       70    $       59    $    698
Other securities                                  272            --            --         272
- ---------------------------------------------------------------------------------------------
    Total other investments                 $     959    $       70    $       59    $    970
                                            =========    ==========    ==========    ========
- ---------------------------------------------------------------------------------------------
</TABLE>


<TABLE>
<CAPTION>
                                                            DECEMBER 31, 2002
                                            -------------------------------------------------
                                                           GROSS         GROSS
                                            AMORTIZED    UNREALIZED    UNREALIZED    FAIR
in millions                                   COST         GAINS         LOSSES      VALUE
- ---------------------------------------------------------------------------------------------
<S>                                         <C>          <C>           <C>           <C>
INVESTMENT SECURITIES
States and political subdivisions           $     120    $        9            --    $    129
- ---------------------------------------------------------------------------------------------
SECURITIES AVAILABLE FOR SALE
U.S. Treasury, agencies and corporations    $      22    $        1            --    $     23
States and political subdivisions                  35            --            --          35
Collateralized mortgage obligations             7,143           129    $       65       7,207
Other mortgage-backed securities                  815            37            --         852
Retained interests in securitizations             166            43            --         209
Other securities                                  208            --            27         181
- ---------------------------------------------------------------------------------------------
    Total securities available for sale     $   8,389    $      210    $       92    $  8,507
                                            =========    ==========    ==========    ========
- ---------------------------------------------------------------------------------------------
OTHER INVESTMENTS
Principal investments                       $     702    $       36    $       61    $    677
Other securities                                  242            --            --         242
- ---------------------------------------------------------------------------------------------
    Total other investments                 $     944    $       36    $       61    $    919
                                            =========    ==========    ==========    ========
- ---------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                              March 31, 2002
                                            -------------------------------------------------
                                                           GROSS         GROSS
                                            AMORTIZED    UNREALIZED    UNREALIZED    FAIR
in millions                                   COST         GAINS         LOSSES      VALUE
- ---------------------------------------------------------------------------------------------
<S>                                         <C>          <C>           <C>           <C>
INVESTMENT SECURITIES
States and political subdivisions           $     216    $        8            --    $    224
- ---------------------------------------------------------------------------------------------
SECURITIES AVAILABLE FOR SALE
U.S. Treasury, agencies and corporations    $      97            --            --    $     97
States and political subdivisions                  20            --            --          20
Collateralized mortgage obligations             4,409    $       67    $       97       4,379
Other mortgage-backed securities                  900            23            --         923
Retained interests in securitizations             195            27            --         222
Other securities                                  233            --            15         218
- ---------------------------------------------------------------------------------------------
    Total securities available for sale     $   5,854    $      117    $      112    $  5,859
                                            =========    ==========    ==========    ========
- ---------------------------------------------------------------------------------------------
OTHER INVESTMENTS
Principal investments                       $     719            --    $       83    $    636
Other securities                                  228            --            --         228
- ---------------------------------------------------------------------------------------------
    Total other investments                 $     947            --    $       83    $    864
                                            =========    ==========    ==========    ========
- ---------------------------------------------------------------------------------------------
</TABLE>

                                       17
<PAGE>

                                    6. LOANS

Key's loans by category are summarized as follows:

<TABLE>
<CAPTION>
                                                  MARCH 31,    DECEMBER 31,   MARCH 31,
in millions                                         2003           2002         2002
- ---------------------------------------------------------------------------------------
<S>                                              <C>          <C>             <C>
Commercial, financial and agricultural           $  17,292    $     17,425    $  18,247
Commercial real estate:
  Commercial mortgage                                6,029           6,015        6,531
  Construction                                       5,437           5,659        5,884
- ---------------------------------------------------------------------------------------
    Total commercial real estate loans              11,466          11,674       12,415
Commercial lease financing                           7,848           7,513        7,318
- --------------------------------------------------------------------------------------
    Total commercial loans                          36,606          36,612       37,980
Real estate-- residential mortgage                   1,862           1,968        2,195
Home equity                                         14,144          13,804       12,662
Consumer-- direct                                    2,100           2,161        2,256
Consumer-- indirect:
  Automobile lease financing                           680             873        1,669
  Automobile loans                                   2,127           2,181        2,367
  Marine                                             2,197           2,088        1,821
  Other                                                619             667          968
- ---------------------------------------------------------------------------------------
    Total consumer-- indirect loans                  5,623           5,809        6,825
- ---------------------------------------------------------------------------------------
    Total consumer loans                            23,729          23,742       23,938
Loans held for sale:
  Commercial, financial and agricultural                --              41           --
  Real estate-- commercial mortgage                    237             193          186
  Real estate-- residential mortgage                    32              57           15
  Education                                          2,115           1,812        1,837
- ---------------------------------------------------------------------------------------
    Total loans held for sale                        2,384           2,103        2,038
- ---------------------------------------------------------------------------------------
  Total loans                                    $  62,719    $     62,457    $  63,956
                                                 =========    ============    =========
- ---------------------------------------------------------------------------------------
</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, 2003, see Note 20 ("Derivatives and
Hedging Activities"), which begins on page 84 of Key's 2002 Annual Report to
Shareholders.

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

<TABLE>
<CAPTION>
                                            THREE MONTHS ENDED MARCH 31,
                                            ----------------------------
in millions                                    2003              2002
- ------------------------------------------------------------------------
<S>                                         <C>                <C>
Balance at beginning of period              $   1,452          $   1,677
Charge-offs                                      (190)              (233)
Recoveries                                         29                 27
- ------------------------------------------------------------------------
     Net charge-offs                             (161)              (206)
Provision for loan losses                         130                136
- ------------------------------------------------------------------------
     Balance at end of period               $   1,421          $   1,607
                                            =========          =========
- ------------------------------------------------------------------------
</TABLE>

                                       18
<PAGE>

                          7. VARIABLE INTEREST ENTITIES

A variable interest entity ("VIE") is a partnership, limited liability company,
trust or other legal entity that is not controlled through a voting equity
interest and/or does not have enough equity at risk invested to finance its
activities without subordinated financial support from another party. FASB
Interpretation No. 46, "Consolidation of Variable Interest Entities," addresses
the consolidation of VIEs. This interpretation is summarized in Note 1 ("Basis
of Presentation"), under the heading "Accounting Pronouncements Pending
Adoption" on page 10. Under Interpretation No. 46, VIEs are consolidated by the
party (the primary beneficiary) who is exposed to the majority of the VIE's
expected losses and/or residual returns.

Key's securitization trusts are exempt from consolidation under Interpretation
No. 46 because they are qualifying special purpose entities as defined by SFAS
140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities."

As required by Interpretation No. 46, Key is assessing its relationships and
arrangements with legal entities formed prior to February 1, 2003, to identify
VIEs in which Key holds a significant variable interest and to determine if Key
is the primary beneficiary of these entities and should therefore consolidate
them.

Based on the review performed to date, Key expects to consolidate the following
two VIE groups beginning in the third quarter of 2003.

COMMERCIAL PAPER CONDUITS. Key, among others, refers third party assets and
borrowers and provides liquidity and credit enhancement to an asset-backed
commercial paper conduit. The conduit had assets of $408 million at March 31,
2003. As currently structured, Key will be required to consolidate the conduit
in the third quarter of 2003; however, management is assessing restructuring
alternatives that may enable the conduit to meet the criteria for
nonconsolidation.

In addition, Key holds a subordinated note in and provides referral services and
liquidity to one program within another asset-backed commercial paper conduit.
This program, which is in the process of being liquidated, had assets of $61
million at March 31, 2003.

At March 31, 2003, Key's maximum exposure to loss from its interests in these
conduits totaled $78 million, which represents a $68 million committed credit
enhancement facility and a $10 million subordinated note.

Additional information pertaining to Key's involvement with conduits is
summarized in Note 1 ("Basis of Presentation"), which begins on page 7 and in
Note 10 ("Contingent Liabilities and Guarantees") under the heading "Guarantees"
on page 24 and the heading "Other Off-Balance Sheet Risk" on page 26.

LOW-INCOME HOUSING TAX CREDIT ("LIHTC") GUARANTEED FUNDS. Key Affordable Housing
Corporation ("KAHC") forms limited partnerships (funds) which invest in LIHTC
projects. Interests in these funds are offered to qualified investors, who pay a
fee to KAHC for a guaranteed return. Key also earns syndication and asset
management fees from these funds. At March 31, 2003, the guaranteed funds had
unamortized equity of $663 million. Additional information on the return
guaranty agreement with LIHTC investors is summarized in Note 10 ("Contingent
Liabilities and Guarantees") under the heading "Guarantees" on page 24.

Key's maximum exposure to loss from its relationships with guaranteed LIHTC
funds was $834 million at March 31, 2003, which represents undiscounted future
payments due to investors for the return on and of their investments. KAHC has
established a reserve in the amount of $33 million at March 31, 2003, which
management believes will be sufficient to absorb future estimated losses under
the guarantees.

As required by Interpretation No. 46, assets, liabilities and noncontrolling
interests of newly consolidated entities will initially be recorded at their
carrying amounts. If determining the carrying amounts is impractical, fair
values at the date Interpretation No. 46 first applies may be used. Any
difference between

                                       19
<PAGE>

the net assets added to Key's balance sheet and the amount of any previously
recognized interest in the newly consolidated entities will be recognized as a
cumulative effect of an accounting change.

Due to the complexity of Interpretation No. 46 and evolving interpretations of
its provisions, Key has not yet completed its analysis of the impact of this
guidance on the entity groups described below. However, based on the review
performed to date, it is reasonably possible that Key will have to disclose
significant interests in these entities or consolidate them as primary
beneficiary when Interpretation No. 46 is implemented in the third quarter of
2003.

LIHTC NONGUARANTEED FUNDS. KAHC sells investments in certain LIHTC funds without
guaranteeing a return to the investors. Key earns syndication and asset
management fees for services provided to these nonguaranteed funds. At March 31,
2003, assets of nonguaranteed LIHTC funds were estimated to be $311 million.

LIHTC INVESTMENTS. Key makes investments directly in LIHTC projects through the
Retail Banking line of business. As a limited partner in these unconsolidated
projects, Key is allocated tax credits and deductions associated with the
underlying properties. At March 31, 2003, Key's investments in these projects
totaled $304 million.

COMMERCIAL REAL ESTATE INVESTMENTS. Through the KeyBank Real Estate Capital line
of business, Key provides real estate financing for new construction,
acquisition and rehabilitation projects. In certain of these unconsolidated
projects, Key has provided or committed funds through limited partnership
interests, mezzanine investments or standby letters of credit. At March 31,
2003, these investments and facilities totaled $160 million.

As Key continues its implementation efforts, additional entities may be
identified that will need to be consolidated or disclosed.

                                       20
<PAGE>

                8. IMPAIRED LOANS AND OTHER NONPERFORMING ASSETS

Impaired loans, which account for the largest portion of Key's nonperforming
assets, totaled $553 million at March 31, 2003, compared with $610 million at
December 31, 2002. Impaired loans averaged $581 million for the first quarter
of 2003 and $673 million for the first quarter of 2002.

Key's nonperforming assets were as follows:

<TABLE>
<CAPTION>
                                       MARCH 31,    DECEMBER 31,    MARCH 31,
in millions                              2003          2002           2002
- ----------------------------------------------------------------------------
<S>                                   <C>          <C>             <C>
Impaired loans                        $     553    $        610    $     685
Other nonaccrual loans                      351             333          288
- ----------------------------------------------------------------------------
  Total nonperforming loans                 904             943          973
Other real estate owned  ("OREO")            62              48           41
Allowance for OREO losses                    (3)             (3)          (2)
- ----------------------------------------------------------------------------
  OREO, net of allowance                     59              45           39
Other nonperforming assets                    5               5           --
- ----------------------------------------------------------------------------
  Total nonperforming assets          $     968    $        993    $   1,012
                                      =========    ============    =========
- ----------------------------------------------------------------------------
</TABLE>

At March 31, 2003, Key did not have any significant commitments to lend
additional funds to borrowers with loans on nonperforming status.

When expected cash flows or collateral values do not justify the carrying amount
of an impaired loan, the 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. The amount that management deems uncollectible (the
impaired amount) is charged against the allowance for loan losses. Even when
collateral value or other sources of repayment appear sufficient, if management
remains uncertain about whether the loan will be repaid in full, an amount is
specifically allocated in the allowance for loan losses. At March 31, 2003, Key
had $348 million of impaired loans with a specifically allocated allowance for
loan losses of $142 million, and $205 million of impaired loans that were
carried at their estimated fair value without a specifically allocated
allowance. At December 31, 2002, impaired loans included $377 million of loans
with a specifically allocated allowance of $179 million, and $233 million that
were carried at their estimated fair value.

Key does not perform a specific impairment valuation for smaller-balance,
homogeneous, nonaccrual loans (shown in the preceding table as "Other nonaccrual
loans"). These typically are consumer loans, including residential mortgages,
home equity loans and various types of installment loans. Management applies
historical loss experience rates to these loans, adjusted to reflect emerging
credit trends and other factors, and then allocates a portion of the allowance
for loan losses to each loan type.

                                       21
<PAGE>
                              9. CAPITAL SECURITIES

KeyCorp has six fully-consolidated subsidiary business trusts that have issued
corporation-obligated mandatorily redeemable preferred capital securities
("capital securities"). These securities are carried as liabilities on Key's
balance sheet. They provide an attractive source of funds since they constitute
Tier I capital for regulatory reporting purposes, but have the same tax
advantages as debt for federal income tax purposes. As guarantor, KeyCorp
unconditionally guarantees payment of:

- -        required distributions on the capital securities;

- -        the redemption price when a capital security is redeemed; and

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

KeyCorp owns the outstanding common stock of each of the 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;
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 effects on the income statement because they are eliminated in
consolidation.

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

<TABLE>
<CAPTION>
                                                                            PRINCIPAL        INTEREST RATE     MATURITY
                                             CAPITAL                        AMOUNT OF          OF CAPITAL      OF CAPITAL
                                           SECURITIES,        COMMON        DEBENTURES,      SECURITIES AND  SECURITIES AND
dollars in millions                    NET OF DISCOUNT (a)  SECURITIES  NET OF DISCOUNT (b)  DEBENTURES (c)    DEBENTURES
- ---------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>                  <C>         <C>                  <C>             <C>
March 31, 2003
  KeyCorp Institutional Capital A            $  410           $   11          $    361            7.826 %        2026
  KeyCorp Institutional Capital B               176                4               154            8.250          2026
  KeyCorp Capital I                             225                8               233            2.120          2028
  KeyCorp Capital II                            182                8               166            6.875          2029
  KeyCorp Capital III                           247                8               207            7.750          2029
  Union Bankshares Capital Trust I               10                1                11            9.000          2028
- --------------------------------------------------------------------------------------------------------------------------
    Total                                    $1,250           $   40          $  1,132            6.715 %          --
                                             ======           ======          ========
- --------------------------------------------------------------------------------------------------------------------------
December 31, 2002                            $1,260           $   40          $  1,136            6.779 %          --
                                             ======           ======          ========
- --------------------------------------------------------------------------------------------------------------------------
March 31, 2002                               $1,273           $   39          $  1,271            6.680 %          --
                                             ======           ======          ========
- --------------------------------------------------------------------------------------------------------------------------
</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. Included
     in certain capital securities at March 31, 2003, December 31, 2002 and
     March 31,2002, are basis adjustments of $158 million, $164 million and $41
     million, respectively, related to fair value hedges. See Note 20
     ("Derivatives and Hedging Activities"), which begins on page 84 of Key's
     2002 Annual Report to Shareholders, for an explanation of fair value
     hedges.

(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, 1999 (for debentures owned by Capital II),
     July 16, 1999 (for debentures owned by Capital III), and December 17, 2003
     (for debentures owned by Union Bankshares Capital Trust I); 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 or Union Bankshares Capital Trust 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 be the greater of: (a) the principal amount, plus any
     accrued but unpaid interest or (b) 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 generally is slightly more favorable to Key.

(c)  The interest rates for Capital A, Capital B, Capital II, Capital III and
     Union Bankshares Capital Trust I are fixed. Capital I has a floating
     interest rate equal to three-month LIBOR plus 74 basis points; it reprices
     quarterly. The rates shown as the total at March 31, 2003, December 31,
     2002 and March 31, 2002, are weighted average rates.

During the first three months of 2003, the subsidiary business trusts
repurchased an aggregate of $5 million of their outstanding capital securities
and KeyCorp repurchased a like amount of the related debentures. Management
intends to replace the capital securities at some future date with capital
securities that will yield a lower cost.

                                       22
<PAGE>

                    10. CONTINGENT LIABILITIES AND GUARANTEES

LEGAL PROCEEDINGS

RESIDUAL VALUE INSURANCE LITIGATION. Key Bank USA, National Association ("Key
Bank USA") obtained two insurance policies from Reliance Insurance Company
("Reliance") insuring the residual value of certain automobiles leased through
Key Bank USA. The two policies ("the Policies"), the "4011 Policy" and the "4019
Policy," together covered leases entered into during the period from January 1,
1997 to January 1, 2001.

The 4019 Policy contains an endorsement stating that Swiss Reinsurance America
Corporation ("Swiss Re") will assume and reinsure 100% of Reliance's obligations
under the 4019 Policy in the event Reliance Group Holdings' ("Reliance's
parent") so-called "claims-paying ability" were to fall below investment grade.
Key Bank USA also entered into an agreement with Swiss Re and Reliance whereby
Swiss Re agreed to issue to Key Bank USA an insurance policy on the same terms
and conditions as the 4011 Policy in the event the financial condition of
Reliance Group Holdings fell below a certain level. Around May 2000, the
conditions under both the 4019 Policy and the Swiss Re agreement were triggered.

The 4011 Policy was canceled and replaced as of May 1, 2000, by a policy issued
by North American Specialty Insurance Company (a subsidiary or affiliate of
Swiss Re) ("the NAS Policy"). Tri-Arc Financial Services, Inc. ("Tri-Arc") acted
as agent for Reliance, Swiss Re and NAS. Since February 2000, Key Bank USA has
been filing claims under the Policies, but none of these claims has been paid.

In July 2000, Key Bank USA filed a claim for arbitration against Reliance, Swiss
Re, NAS and Tri-Arc seeking, among other things, a declaration of the scope of
coverage under the Policies and for damages. On January 8, 2001, Reliance filed
an action (litigation) against Key Bank USA in Federal District Court in Ohio
seeking rescission or reformation of the Policies because they allegedly do not
reflect the intent of the parties with respect to the scope of coverage and how
and when claims were to be paid. Key filed an answer and counterclaim against
Reliance, Swiss Re, NAS and Tri-Arc seeking, among other things, declaratory
relief as to the scope of coverage under the Policies, damages for breach of
contract and failure to act in good faith, and punitive damages. The parties
agreed to proceed with this court action and to dismiss the arbitration without
prejudice.

On May 29, 2001, the Commonwealth Court of Pennsylvania entered an order placing
Reliance in a court supervised "rehabilitation" and purporting to stay all
litigation against Reliance. On July 23, 2001, the Federal District Court in
Ohio stayed the litigation to allow the rehabilitator to complete her task. On
October 3, 2001, the Court in Pennsylvania entered an order placing Reliance
into liquidation and canceling all Reliance insurance policies as of November 2,
2001. On November 20, 2001, the Federal District Court in Ohio entered an order
that, among other things, required Reliance to report to the Court on the
progress of the liquidation. On January 15, 2002, Reliance filed a status report
requesting the continuance of the stay for an indefinite period. On February 20,
2002, Key Bank USA filed a Motion for Partial Lifting of the July 23, 2001, Stay
in which it asked the Court to allow the case to proceed against the parties
other than Reliance. The Court granted Key Bank USA's motion on May 17, 2002. As
of February 19, 2003, all claims against Tri-Arc were dismissed through a
combination of court action and voluntary dismissal by Key Bank USA.

Management believes that Key Bank USA has valid insurance coverage or claims for
damages relating to the residual value of automobiles leased through Key Bank
USA during the four-year period ending January 1, 2001. With respect to each
individual lease, however, it is not until the lease expires and the vehicle is
sold that Key Bank USA can determine the existence and amount of any actual loss
(i.e., the difference between the residual value provided for in the lease
agreement and the vehicle's actual market value at lease expiration). Key Bank
USA's actual total losses for which it will file claims will depend to a large
measure upon the viability of, and pricing within, the market for used cars
throughout the lease run-off period, which extends through 2006. The market for
used cars varies.

                                       23
<PAGE>

Accordingly, the total expected loss on the portfolio for which Key Bank USA
will file claims cannot be determined with certainty at this time. Claims filed
by Key Bank USA through March 31, 2003, total approximately $296 million, and
management currently estimates that approximately $81 million of additional
claims may be filed through year-end 2006 bringing the total aggregate amount of
actual and potential claims to $377 million. As discussed previously, a number
of factors could affect Key Bank USA's actual loss experience, which may be
higher or lower than management's current estimates.

Key is filing insurance claims for the entire amount of its losses and is
recording as a receivable on its balance sheet a portion of the amount of the
insurance claims as and when they are filed. Management believes the amount
being recorded as a receivable due from the insurance carriers is appropriate to
reflect the collectibility risk associated with the insurance litigation;
however, litigation is inherently not without risk, and any actual recovery from
the litigation may be more or less than the receivable. While management does
not expect an adverse decision, if a court were to make an adverse final
determination, such result would cause Key to record a material one-time expense
during the period when such determination is made. An adverse determination
would not have a material effect on Key's financial condition, but could have a
material adverse effect on Key's results of operations in the quarter it occurs.

OTHER LITIGATION. 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, management does not believe there is
any legal action to which KeyCorp or any of its subsidiaries is a party, or
involving any of their properties, that, individually or in the aggregate, could
reasonably be expected to have a material adverse effect on Key's financial
condition or annual results of operations.

GUARANTEES

Key is a guarantor in various agreements with third parties. In accordance with
FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of Others,"
certain guarantees issued or modified on or after January 1, 2003, require the
recognition of a liability on Key's balance sheet for the "stand ready"
obligation associated with such guarantees. The accounting for guarantees
existing at December 31, 2002, was not revised. Thus, the stand ready obligation
related to the majority of Key's guarantees was not recorded on the balance
sheet at December 31, 2002. Additional information pertaining to Interpretation
No. 45 is summarized in Note 1 ("Basis of Presentation") under the heading
"Accounting Pronouncements Adopted in 2003" on page 9. The following table shows
the types of guarantees (as defined by Interpretation No. 45) that Key had
outstanding at March 31, 2003.

<TABLE>
<CAPTION>
                                                                            MAXIMUM POTENTIAL
                                                                              UNDISCOUNTED          LIABILITY
in millions                                                                 FUTURE PAYMENTS          RECORDED
- -------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>                     <C>
Financial Guarantees:
  Standby letters of credit                                                       $4,671               $  5
  Credit enhancement for asset-backed commercial paper conduit                        68                 --
  Recourse agreement with FNMA                                                       273                  4
  Return guaranty agreement with LIHTC investors                                     834                 33
  Default guarantees                                                                   9                 --
  Written interest rate caps (a)                                                      42                 21
- -------------------------------------------------------------------------------------------------------------
    Total                                                                         $5,897               $ 63
                                                                                  ======               ====
- -------------------------------------------------------------------------------------------------------------
</TABLE>

(a)  As of March 31, 2003, the weighted average interest rate of written
     interest rate caps was 1.4%. Maximum potential undiscounted future payments
     were calculated assuming a 10% interest rate.

STANDBY LETTERS OF CREDIT. These instruments obligate Key to pay a third-party
beneficiary when a customer fails to repay an outstanding loan or debt
instrument, or fails to perform some contractual nonfinancial obligation.
Standby letters of credit are issued by many of Key's lines of business to
address clients' financing needs. If amounts are drawn under standby letters of
credit, such amounts are treated as loans; they bear interest (generally at
variable rates) and pose the same credit risk to Key as a loan. At March 31,
2003, Key's standby letters of credit had a remaining weighted average life of
approximately 2 years, with remaining actual lives ranging from less than 1 year
to as many as 17 years.

                                       24
<PAGE>

CREDIT ENHANCEMENT FOR ASSET-BACKED COMMERCIAL PAPER CONDUIT. Key provides
credit enhancement in the form of a committed facility to ensure the continuing
operations of an asset-backed commercial paper conduit, which is owned by a
third party and administered by an unaffiliated financial institution. The
commitment to provide credit enhancement extends until September 26, 2003, and
specifies that in the event of default by certain borrowers whose loans are held
by the conduit, Key will provide financial relief to the conduit in an amount
that is based on defined criteria that consider the level of credit risk
involved and other factors.

At March 31, 2003, Key's funding requirement under the credit enhancement
facility totaled $59 million. However, there were no drawdowns under the
facility during the three-month period ended March 31, 2003. Key has no recourse
or other collateral available to offset any amounts that may be funded under
this credit enhancement facility. Key's commitments to provide increased credit
enhancement to the conduit are periodically evaluated by management.

RECOURSE AGREEMENT WITH FEDERAL NATIONAL MORTGAGE ASSOCIATION. KBNA participates
as a lender in the Federal National Mortgage Association ("FNMA") Delegated
Underwriting and Servicing ("DUS") program. As a condition to FNMA's delegation
of responsibility for originating, underwriting and servicing mortgages, KBNA
has agreed to assume a limited portion of the risk of loss during the remaining
term on each commercial mortgage loan sold. Accordingly, a reserve for such
potential losses has been established and is maintained in an amount estimated
by management to approximate the fair value of the liability undertaken by KBNA.
At March 31, 2003, the outstanding commercial mortgage loans in this program had
a weighted average remaining term of 10 years and the unpaid principal balance
outstanding of loans sold by KBNA as a participant in this program was
approximately $1.4 billion. The maximum potential amount of undiscounted future
payments that may be required under this program is equal to 20% of the
principal balance of loans outstanding at March 31, 2003. If payment is required
under this program, Key would have an interest in the collateral underlying the
commercial mortgage loan on which the loss occurred.

RETURN GUARANTEE AGREEMENT WITH LOW-INCOME HOUSING TAX CREDIT ("LIHTC")
INVESTORS. Key Affordable Housing Corporation ("KAHC"), a subsidiary of KBNA,
offers limited partnership interests to qualified investors. Unconsolidated
partnerships formed by KAHC invest in low-income residential rental properties
that qualify for federal LIHTCs under Section 42 of the Internal Revenue Code.
In certain partnerships, investors pay a fee to KAHC for a guaranteed return
that is dependent on the financial performance of the property and the
property's ability to maintain its LIHTC status throughout the fifteen-year
compliance period. If these two conditions are not achieved, Key is obligated to
make any necessary payments to investors to provide the guaranteed return. KAHC
has the ability to affect changes in the management of the properties to improve
performance. However, other than the underlying income stream from the
properties, no recourse or collateral would be available to offset the guarantee
obligation. These guarantees have expiration dates that extend through 2018. Key
meets its obligations pertaining to the guaranteed returns generally through the
distribution of tax credits and deductions associated with the specific
properties.

As shown in the preceding table, KAHC had established a reserve in the amount of
$33 million at March 31, 2003, which management believes will be sufficient to
cover estimated future obligations under the guarantees. In accordance with
Interpretation No. 45, for any return guarantee agreements entered into or
modified with LIHTC investors on or after January 1, 2003, the amount of all
fees received in consideration for the guarantee has been recognized as the fair
value stand ready obligation.

VARIOUS TYPES OF DEFAULT GUARANTEES. Some lines of business provide or
participate in guarantees that obligate Key to perform if the debtor fails to
pay all or a portion of the subject indebtedness and/or related interest. These
guarantees are generally undertaken when Key is supporting or protecting its
underlying investment or where the risk profile of the debtor should provide an
investment return. The terms of these default guarantees range from less than 1
year to as many as 19 years. Although no collateral is held, Key would have
recourse against the debtors for any payments made under these default
guarantees.

WRITTEN INTEREST RATE CAPS. In the ordinary course of business, Key writes
interest rate caps for commercial loan clients that have variable rate loans
with Key. These caps are purchased by clients to limit their

                                       25
<PAGE>

exposure to interest rate increases and at March 31, 2003, had a weighted
average life of approximately 8.0 years.

Key is obligated to pay the interest rate counterparty if the applicable
benchmark interest rate exceeds a specified level (known as the "strike rate").
These instruments are accounted for as derivatives with the fair value liability
recorded in "other liabilities" on the balance sheet. Key's potential amount of
future payments under these obligations is mitigated by the fact that the
company enters into offsetting positions with third parties.

OTHER OFF-BALANCE SHEET RISK

Other off-balance sheet risk stems from financial instruments that do not meet
the definition of a guarantee as specified in Interpretation No. 45 and from
other relationships.

LIQUIDITY FACILITIES THAT SUPPORT ASSET-BACKED COMMERCIAL PAPER CONDUITS. Key
provides liquidity to all or a portion of two separate asset-backed commercial
paper conduits that are owned by third parties and administered by unaffiliated
financial institutions. These liquidity facilities obligate Key through February
15, 2005, to provide funding if such is required as a result of a disruption in
the markets or other factors. Additional information about these asset-backed
commercial paper conduits is summarized in Note 1 ("Basis of Presentation"),
which begins on page 7 and in Note 7 ("Variable Interest Entities"), which
begins on page 19.

Key provides liquidity to the conduits in the form of committed facilities of
$1.7 billion. The amount available to be drawn on these facilities was $700
million at March 31, 2003. However, there were no drawdowns under either of the
committed facilities at that time. Of the $1.7 billion of liquidity facility
commitments, $107 million is associated with a conduit program that is in the
process of being liquidated. Therefore, Key's commitment will decrease as the
assets in this conduit program decrease. Key's commitments to provide liquidity
are periodically evaluated by management.

INDEMNIFICATIONS PROVIDED IN THE ORDINARY COURSE OF BUSINESS. Key provides
certain indemnifications primarily through representations and warranties in
contracts that are entered into in the ordinary course of business in connection
with purchases and sales of businesses, loan sales and other ongoing activities.
Management's past experience with these indemnifications has been that the
amounts paid, if any, have not had a significant effect on Key's financial
condition or results of operations.

INTERCOMPANY GUARANTEES. KeyCorp and primarily KBNA are parties to various
guarantees that are undertaken to facilitate the ongoing business activities of
other Key affiliates. These business activities encompass debt issuance, certain
lease and insurance obligations, investments and securities, and certain leasing
transactions involving clients.

RELATIONSHIP WITH MASTERCARD INTERNATIONAL INC. AND VISA U.S.A. INC. KBNA and
Key Bank USA are members of MasterCard International Inc. ("MasterCard") and
Visa U.S.A. Inc. ("Visa"). MasterCard's charter documents and bylaws state that
MasterCard may assess its members for certain liabilities that it incurs,
including litigation liabilities. Visa's charter documents state that Visa may
fix fees payable by members in connection with Visa's operations. We understand
that descriptions of significant pending lawsuits and MasterCard's and Visa's
positions regarding the potential impact of those lawsuits on members are set
forth on MasterCard's and Visa's respective websites, as well as in MasterCard's
public filings with the Securities and Exchange Commission. Key is not a party
to any significant litigation by third parties against MasterCard or Visa.

According to published reports, on or about April 30, 2003, MasterCard and Visa
agreed independently to settle a lawsuit that was brought against them by
Wal-mart Stores Inc. and many other retailers. The lawsuit alleged that
MasterCard and Visa violated federal antitrust laws by conspiring to monopolize
the debit card services market and by requiring merchants that accept certain of
their debit and credit card services to also accept their higher priced
"off-line," signature-verified debit card services. The final terms of the
settlement agreements entered into by MasterCard and Visa are not yet publicly
available. However, based on information available to Key, management believes
that the settlement will result in the reduction of fees earned from off-line
debit card transactions. Management estimates that the impact of the settlement
on

                                       26
<PAGE>

Key will be a reduction of less than $10 million of pre-tax net income for the
balance of 2003 and less than $25 million of pre-tax net income in 2004. This
estimate is subject to change once the final terms of the settlement are known
and management evaluates alternative actions that may be available to it in
response to the settlement.

                     11. DERIVATIVES AND HEDGING ACTIVITIES

Key, mainly through its lead bank, KBNA, is party to various derivative
instruments. These instruments 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
derivatives 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 foreign exchange forward contracts
and interest rate swaps and caps held are over-the-counter instruments.

At March 31, 2003, Key had $865 million of derivative assets and $149 million of
derivative liabilities on its balance sheet that arose from derivatives that
were being used for hedging purposes. As of the same date, the fair value of
derivative assets and liabilities classified as trading derivatives totaled $1.5
billion and $1.4 billion, respectively. Derivative assets and liabilities are
recorded in "accrued income and other assets" and "accrued expense and other
liabilities," respectively, on the balance sheet.

Key uses a fair value hedging strategy to modify its exposure to interest rate
risk and a cash flow hedging strategy to reduce the potential adverse impact of
interest rate increases on future interest expense. For more information about
these asset and liability management strategies used to modify Key's exposure to
interest rate risk, see Note 20 ("Derivatives and Hedging Activities"), which
begins on page 84 of Key's 2002 Annual Report to Shareholders.

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

<TABLE>
<CAPTION>
                                                                              RECLASSIFICATION
                                             DECEMBER 31,         2003           OF GAINS TO      MARCH 31,
in millions                                      2002       HEDGING ACTIVITY      NET INCOME        2003
- -----------------------------------------------------------------------------------------------------------
<S>                                          <C>            <C>               <C>                 <C>
Accumulated other comprehensive income
 (loss) resulting from cash flow hedges         $  6              $ 20              $  (7)         $  19
- -----------------------------------------------------------------------------------------------------------
</TABLE>

Key expects to reclassify an estimated $8 million of net gains on derivative
instruments from "accumulated other comprehensive income (loss)" to earnings
during the next twelve months. Reclassifications will coincide 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 or securitization of commercial real estate loans.

TRADING PORTFOLIO

Key's trading portfolio includes:

- -        interest rate swap contracts entered into to accommodate the needs of
         clients;

- -        positions with third parties that are intended to offset or mitigate
         the interest rate risk of client positions;

- -        foreign exchange forward contracts entered into to accommodate the
         needs of clients; and

- -        proprietary trading positions in financial assets and liabilities.

                                       27
<PAGE>

Adjustments to the fair value of these instruments are included in "investment
banking and capital markets income" on the income statement. Additional
information pertaining to these instruments is summarized in Note 20
("Derivatives and Hedging Activities"), which begins on page 84 of Key's 2002
Annual Report to Shareholders.

The following table shows trading income recognized on interest rate swaps and
foreign exchange forward contracts.

<TABLE>
<CAPTION>
                                            THREE MONTHS ENDED MARCH 31,
                                            ----------------------------
in millions                                    2003              2002
- ------------------------------------------------------------------------
<S>                                            <C>               <C>
Interest rate swap contracts                   $  4              $  4
Foreign exchange forward contracts                7                10
- ------------------------------------------------------------------------
</TABLE>

COUNTERPARTY 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 expected positive
replacement value of contracts. 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 related contracts with the same
counterparty in the event of default. Second, Credit Administration monitors
credit risk exposure to the counterparty on each interest rate swap to determine
appropriate limits on Key's total credit exposure and whether it is advisable to
demand collateral.

At March 31, 2003, Key was party to interest rate swaps and caps with 54
different counterparties. Among these were swaps and caps entered into to offset
the risk of client exposure. Key had aggregate credit exposure of $122 million
(net of collateral of $509 million) on these instruments to 31 of the
counterparties. The largest credit exposure to an individual counterparty
amounted to approximately $21 million.

                                       28
<PAGE>

                     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, 2003 and 2002, 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, 2002, 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 13, 2003, 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, 2002, 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 14, 2003

                                       29
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

This section generally reviews the financial condition and results of operations
of KeyCorp and its subsidiaries for the first three months of 2003 and 2002.
Some tables may cover more periods to comply with disclosure requirements or to
illustrate trends in greater depth. When you read this discussion, you should
also refer to the consolidated financial statements and related notes that
appear on pages 3 through 28.

SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

Key's business is dynamic and complex. Consequently, management must exercise
judgment in choosing and applying accounting policies and methodologies in many
areas. These choices are important; not only are they necessary to comply with
accounting principles generally accepted in the United States, they also reflect
management's view of the most appropriate manner in which to record and report
Key's overall financial performance. All accounting policies are important, and
all policies described in Note 1 ("Summary of Significant Accounting Policies"),
which begins on page 57 of Key's 2002 Annual Report to Shareholders, should be
reviewed for a greater understanding of how Key's financial performance is
recorded and reported.

In management's opinion, some accounting policies are more likely than others to
have a significant effect on Key's financial results and to expose those results
to potentially greater volatility. These policies apply to areas of relatively
greater business importance or require management to make assumptions and
estimates that affect amounts reported in the financial statements. Because
these assumptions and estimates are based on current circumstances, they may
change over time or prove to be inaccurate based on actual experience. For Key,
the areas that rely most heavily on the use of assumptions and estimates include
accounting for the allowance for loan losses, loan securitizations, contingent
liabilities and guarantees, principal investments, goodwill, and pension and
other postretirement obligations. A brief discussion of each of these areas
appears below.

ALLOWANCE FOR LOAN LOSSES. Management determines probable losses inherent in
Key's loan portfolio (which represents by far the largest category of assets on
Key's balance sheet) and establishes an allowance that is sufficient to absorb
those losses by considering factors including historical loss rates, expected
cash flows and estimated collateral values. In assessing these factors,
management benefits from a lengthy organizational history and experience with
credit decisions and related outcomes. Nonetheless, if management's underlying
assumptions prove to be inaccurate, the allowance for loan losses would have to
be adjusted. Our accounting policy related to the allowance is disclosed in Note
1 under the heading "Allowance for Loan Losses" on page 58 of the Annual Report.

LOAN SECURITIZATIONS. Key securitizes certain types of loans and accounts for
such transactions as sales when the criteria set forth in SFAS No. 140,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities" are met. If future events were to preclude accounting for such
transactions as sales, the loans would have to be placed back on Key's balance
sheet. This could have a potentially adverse effect on Key's capital ratios and
other unfavorable financial implications. In addition, determining the gain or
loss resulting from securitization transactions and the subsequent carrying
amount of retained interests is dependent on underlying assumptions made by
management, the most significant of which are described in Note 8 ("Loan
Securitizations and Variable Interest Entities"), which begins on page 70 of the
Annual Report. The use of alternative ranges of possible outcomes for these
assumptions would change the amount of the initial gain or loss recognized. It
could also result in changes in the carrying amount of retained interests, with
related effects on results of operations. Our accounting policy related to loan
securitizations is disclosed in Note 1 under the heading "Loan Securitizations"
on page 59 of the Annual Report.

                                       30
<PAGE>

CONTINGENT LIABILITIES AND GUARANTEES. Contingent liabilities arising from
litigation, guarantees in various agreements with third parties in which Key is
a guarantor and the potential effects of these items on Key's results of
operations, are summarized in Note 10 ("Contingent Liabilities and Guarantees"),
which begins on page 23.

Since Key records a liability for only the fair value of the obligation to stand
ready to perform over the term of a guarantee, the risk exists that potential
future payments that would be made by Key in the event of a default by a third
party could exceed the liability recorded on Key's balance sheet. See Note 10
for a comparison of the liability recorded and the maximum potential
undiscounted future payments for the various types of guarantees that Key had
outstanding at March 31, 2003.

In the normal course of business, Key is routinely subject to examinations and
challenges from tax authorities regarding the amount of taxes due in connection
with investments and business activities. Currently, the Internal Revenue
Service is challenging Key's tax treatment of certain leveraged lease
investments. This and other challenges by tax authorities may result in
adjustments to the timing or amount of Key's taxable income or deductions or the
allocation of income among tax jurisdictions. Management believes these
challenges will be resolved without having any material effect on Key's
financial condition or results of operations.

VALUATION METHODOLOGIES. Valuation methodologies employed by management often
involve a significant degree of judgment, particularly when there are no
observable liquid markets for the items being valued. The outcome of valuations
performed by management have a direct bearing on the carrying amounts of certain
assets and liabilities, such as principal investments, goodwill, and pension and
other postretirement benefit obligations. To determine the values of these
assets and liabilities, as well as the extent to which related assets may be
impaired, management makes assumptions and estimates related to discount rates,
asset returns, repayment rates and other factors. The use of different discount
rates or other valuation assumptions could produce significantly different
results, which could have material positive or negative effects on Key's results
of operations.

The valuation methodology management uses for principal investments is
summarized in Note 21 ("Fair Value Disclosures of Financial Instruments") on
page 86 of the Annual Report and the methodology used in the testing for
goodwill impairment is summarized in Note 1 under the heading "Goodwill and
Other Intangible Assets" on page 59 of the Annual Report. The primary
assumptions used in determining Key's pension and other postretirement benefit
obligations and related expenses are presented in Note 16 ("Employee Benefits"),
which begins on page 78 of the Annual Report.

When a potential asset impairment is identified through testing, observable
changes in liquid markets or other means, management must also exercise judgment
in determining the nature of the potential impairment (i.e., whether the
impairment is temporary or other than temporary) in order to apply the
appropriate accounting treatment. For example, unrealized losses on securities
available for sale that are deemed temporary are recorded in shareholders'
equity, whereas those deemed "other than temporary" are recorded in earnings.

REVENUE RECOGNITION

Corporate improprieties related to revenue recognition have received a great
deal of attention by regulatory authorities and the news media. Although all
companies face the risk of intentional or unintentional misstatements, such
misstatements are less likely in the financial services industry because most of
the revenue (i.e., interest accruals) recorded is driven by nondiscretionary
formulas based on written contracts, such as loan agreements.

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 holding company.

                                       31
<PAGE>

- -        KBNA refers to Key's lead bank, KeyBank National Association.

- -        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. These activities encompass a
         variety of products and 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), and conduct transactions in foreign currencies (both to
         accommodate clients' needs and to benefit from fluctuations in exchange
         rates).

- -        All earnings per share data included in this discussion are presented
         on a DILUTED basis, which takes into account all common shares
         outstanding as well as 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 two classes. Federal
         regulations prescribe that at least one-half of a bank or bank holding
         company's TOTAL RISK-BASED 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," which begins on page 62.

- -        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.

FORWARD-LOOKING STATEMENTS

This report may contain "forward-looking statements" about issues like
anticipated earnings, anticipated levels of net loan charge-offs and
nonperforming assets, anticipated improvement in profitability and
competitiveness and long-term goals. These statements usually can be identified
by the use of forward-looking language such as "our goal," "our objective," "our
plan," "will likely result," "will be," "are expected to," "as planned," "is
anticipated," "intends to," "is projected," or similar words. 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, which may have an adverse effect on our financial results.

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

- -        The stock and bond markets could suffer additional declines or
         disruptions, which may have adverse effects 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; we may be
         unable to implement certain initiatives; or the initiatives may be
         unsuccessful.

- -        Acquisitions and dispositions of assets, business units or affiliates
         could adversely 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 an adverse effect on our financial results.

                                       32
<PAGE>

- -        Terrorist activities or military actions could further disrupt the
         economy and the general business climate, which may have an adverse
         effect on our financial results or condition and that of our borrowers.

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

HIGHLIGHTS OF KEY'S PERFORMANCE

FINANCIAL PERFORMANCE

The primary measures of Key's financial performance for the first quarters of
2003 and 2002 are summarized below.

- -        Net income for the first quarter of 2003 was $217 million, or $.51 per
         common share. These results compare with $240 million, or $.56 per
         share, for the first three months of 2002.

- -        Key's return on average equity for the first quarter of 2003 was
         12.91%, down from 15.53% for the year-ago quarter.

- -        Key's first quarter return on average total assets was 1.05%, compared
         with 1.20% for the first quarter of last year.

Key's first quarter results fell short of our expectations, reflecting continued
weakness in the economy. Growing revenue under such conditions has proven
difficult for Key. Contracting interest rate spreads and continuing soft loan
demand are negatively affecting net interest income, while continued pressure on
market-sensitive businesses is adversely affecting noninterest income.

In this challenging environment, Key has continued to focus successfully on
controlling expenses and growing core deposits. Expenses were below the first
quarter 2002 level and were down an annualized 7% from the prior quarter.
Average core deposits grew 8% from the year-ago quarter and an annualized 12%
from the fourth quarter of 2002.

In addition, the level of Key's nonperforming loans declined for the second
consecutive quarter and net loan charge-offs fell to their lowest level since
the first quarter of 2001.

We expect the economy to continue posing a significant challenge. While it's a
difficult environment in which to predict future earnings, we expect modest
improvement in the second quarter. For the full year, we expect earnings per
share to be in the range of $2.15 to $2.30. We will continue to focus on expense
control, deposit growth and asset quality improvement so that we are well
positioned for the eventual economic rebound.

The primary reasons that Key's specific revenue and expense components changed
from those of the first quarter of 2002 are reviewed in detail in the remainder
of this discussion.

Figure 1 on page 35 summarizes Key's financial performance for each of the past
five quarters.

LONG-TERM GOALS

Our long-term goals are to achieve an annual return on average equity in the
range of 16% to 18% and to grow earnings per common share at an annual rate of
7% to 8%.

CORPORATE STRATEGY

Our strategy for achieving our long-term goals comprises the following five
primary elements:

- -        FOCUS ON OUR CORE BUSINESSES. We intend to focus on businesses that
         enable us to build relationships with our clients. We will focus on our
         "footprint" businesses that serve individuals, small businesses and
         middle market companies. In addition, we intend to focus nationwide on
         our commercial real estate lending, asset management, home equity
         lending and equipment leasing businesses. These are businesses in which
         we believe we possess resources of the scale necessary to compete
         nationally.

                                       33
<PAGE>

- -        PUT OUR CLIENTS FIRST. We will work to deepen our relationship with our
         existing clients, and to build relationships with new clients who have
         the potential to purchase multiple products and services or to generate
         repeat business. One way in which we are pursuing this goal is by
         emphasizing deposit growth across all of our lines of business.

         We also want to ensure that our clients are receiving a distinctive
         level of service, so we are putting considerable effort into enhancing
         our service quality.

- -        ENHANCE OUR BUSINESS. We intend to build on the success of our
         competitiveness initiative by pursuing a continuous improvement
         process. We will continue to focus on increasing revenues, controlling
         expenses and better serving our clients, and we will also continue to
         leverage technology - both to reduce costs and to enhance service
         quality. Over time, we also intend to diversify our revenue mix by
         emphasizing the growth of fee income while investing in higher-growth
         and higher-return businesses.

- -        CULTIVATE A WORKFORCE THAT DEMONSTRATES KEY'S VALUES AND WORKS TOGETHER
         FOR A COMMON PURPOSE. Key intends to achieve this by:

         --paying for performance, but only if achieved in ways that are
           consistent with Key's values;

         --attracting, developing and retaining a quality, high-performing and
           inclusive workforce;

         --developing leadership at all levels in the company; and

         --creating a positive, stimulating and entrepreneurial work
           environment.

- -        ENHANCE PERFORMANCE MEASUREMENT. We will continue to refine and to rely
         upon performance measurement mechanisms that help us ensure that we are
         maximizing returns for our shareholders, that those returns are
         appropriate considering the inherent levels of risk involved and that
         our incentive compensation plans are commensurate with the
         contributions made to our profitability.

                                       34


<PAGE>

                        FIGURE 1. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                    2003                               2002
                                                 -----------    -----------------------------------------------
dollars in millions, except per share amounts       FIRST         FOURTH        THIRD       SECOND      FIRST
- ---------------------------------------------------------------------------------------------------------------
<S>                                              <C>            <C>           <C>          <C>         <C>
FOR THE QUARTER
Interest income                                  $     1,021    $    1,077    $   1,095    $  1,102    $  1,092
Interest expense                                         340           365          395         419         438
Net interest income                                      681           712          700         683         654
Provision for loan losses                                130           147          135         135         136
Noninterest income                                       397           446          432         448         443
Noninterest expense                                      657           668          659         665         661
Income before income taxes                               291           343          338         331         300
Net income                                               217           245          245         246         240
- ---------------------------------------------------------------------------------------------------------------
PER COMMON SHARE
Net income                                       $       .51    $      .58    $     .57    $    .58    $    .56
Net income--  assuming dilution                          .51           .57          .57         .57         .56
Cash dividends paid                                     .305           .30          .30         .30         .30
Book value at period end                               16.32         16.12        15.66       15.46       15.05
Market price:
  High                                                 27.11         26.75        27.35       29.40       27.26
  Low                                                  22.31         21.25        20.96       25.95       22.92
  Close                                                22.56         25.14        24.97       27.30       26.65
Weighted average common shares (000)                 425,275       424,578      426,274     426,092     424,855
Weighted average common shares and
  potential common shares (000)                      428,090       429,531      431,326     431,935     430,019
- ---------------------------------------------------------------------------------------------------------------
AT PERIOD END
Loans                                            $    62,719    $   62,457    $  62,951    $ 63,881    $ 63,956
Earning assets                                        75,113        73,635       72,548      72,820      72,382
Total assets                                          86,490        85,202       83,518      82,778      81,359
Deposits                                              50,455        49,346       44,610      44,805      43,233
Long-term debt                                        16,269        15,605       16,276      16,895      15,256
Shareholders' equity                                   6,898         6,835        6,654       6,592       6,402
- ---------------------------------------------------------------------------------------------------------------
PERFORMANCE RATIOS
Return on average total assets                          1.05 %        1.17 %       1.19 %      1.21 %      1.20 %
Return on average equity                               12.91         14.46        14.74       15.16       15.53
Net interest margin (taxable equivalent)                3.86          3.98         3.99        3.98        3.93
- ---------------------------------------------------------------------------------------------------------------
CAPITAL RATIOS AT PERIOD END
Equity to assets                                        7.98 %        8.02 %       7.97 %      7.96 %      7.87 %
Tangible equity to tangible assets                      6.71          6.73         6.71        6.69        6.57
Tier 1 risk-based capital                               8.22          8.09         8.34        8.23        7.92
Total risk-based capital                               12.62         12.51        12.69       12.29       12.02
Leverage                                                8.12          8.15         8.15        8.14        8.13
- ---------------------------------------------------------------------------------------------------------------
OTHER DATA
Average full-time equivalent employees                20,447        20,485       20,802      20,903      21,079
KeyCenters                                               911           910          903         905         911
- ---------------------------------------------------------------------------------------------------------------
</TABLE>


                                       35
<PAGE>


LINE OF BUSINESS RESULTS

This section summarizes the financial performance and related strategic
developments of each of Key's three major business groups: Consumer Banking,
Corporate and Investment Banking and Investment Management Services. To better
understand this discussion, see Note 4 ("Line of Business Results"), which
begins on page 12. Note 4 includes a brief description of the products and
services offered by each of the three major business groups, more detailed
financial information pertaining to the groups and their respective lines of
business and brief descriptions of "Other Segments" and "Reconciling Items"
presented in Figure 2.

Figure 2 summarizes the contribution made by each major business group to Key's
taxable-equivalent revenue and net income for the first quarters of 2003 and
2002. Key's line of business results for both quarters reflect a new
organizational structure that took effect earlier this year.

   FIGURE 2. MAJOR BUSINESS GROUPS - TAXABLE-EQUIVALENT REVENUE AND NET INCOME

<TABLE>
<CAPTION>
                                               THREE MONTHS ENDED MARCH 31,             CHANGE
                                               ----------------------------     ----------------------
dollars in millions                               2003              2002         AMOUNT        PERCENT
- ------------------------------------------------------------------------------------------------------
<S>                                            <C>               <C>            <C>            <C>
Revenue (taxable equivalent)
Consumer Banking                               $      564        $      551     $     13           2.4 %
Corporate and Investment Banking                      389               405          (16)         (4.0)
Investment Management Services                        192               213          (21)         (9.9)
Other Segments                                        (25)              (6)          (19)       (316.7)
- ------------------------------------------------------------------------------------------------------
  Total segments                                    1,120             1,163          (43)         (3.7)
Reconciling items                                     (20)              (18)          (2)        (11.1)
- ------------------------------------------------------------------------------------------------------
  Total                                        $    1,100        $    1,145     $    (45)         (3.9)%
                                               ==========        ==========     ========

Net income (loss)
Consumer Banking                               $       96        $       81     $     15          18.5 %
Corporate and Investment Banking                      106               114           (8)         (7.0)
Investment Management Services                         20                23           (3)        (13.0)
Other Segments                                        (10)                3          (13)          N/M
- ------------------------------------------------------------------------------------------------------
  Total segments                                      212               221           (9)         (4.1)
Reconciling items                                       5                19          (14)        (73.7)
- ------------------------------------------------------------------------------------------------------
  Total                                        $      217        $      240     $    (23)         (9.6)%
                                               ==========        ==========     ========
- ------------------------------------------------------------------------------------------------------
</TABLE>

N/M = Not Meaningful

CONSUMER BANKING

As shown in Figure 3, net income for Consumer Banking was $96 million for the
first quarter of 2003, representing a $15 million increase from the year-ago
quarter. The improvement was attributable to an increase in taxable-equivalent
net interest income, a lower provision for loan losses and a reduction in
noninterest expense. These positive results were partially offset by a decline
in noninterest income.

Taxable-equivalent net interest income grew by $16 million, or 4%, from the
first quarter of 2002, due largely to a more favorable deposit mix and a 4%
increase in average loans outstanding, primarily in the home equity and
commercial portfolios. These positive results were offset in part by a decline
in yield-related loan fees in the Indirect Lending unit.

Noninterest income decreased by $3 million, or 3%, due primarily to an aggregate
$6 million reduction in service charges on deposit accounts generated by the
Retail Banking and Small Business lines of business.

                                       36
<PAGE>
 The decrease in deposit service charges reflects the introduction of free
checking products during the second half of 2002. In addition, the year-ago
quarter included a $6 million gain recorded in connection with the change in
control of the majority interest in a merchant credit card processing affiliate
in which Key is part owner. The overall reduction in noninterest income was
moderated, however, by an $8 million increase in net gains from loan sales in
the National Home Equity unit.

Noninterest expense decreased by $8 million, or 2%, from the first quarter of
2002. This decrease includes lower costs for software amortization, collections
and mortgage loan processing activities, partially offset by higher personnel
expense.

The provision for loan losses decreased by $3 million, or 4%, reflecting a lower
level of net charge-offs, primarily in the Indirect Lending unit. This
improvement was largely the result of Key's decision in 2001 to exit the
automobile leasing business and to de-emphasize indirect prime automobile
lending.

                           FIGURE 3. CONSUMER BANKING

<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED MARCH 31,               CHANGE
                                                       ----------------------------     --------------------------
dollars in millions                                        2003            2002          AMOUNT            PERCENT
- ------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>             <C>            <C>               <C>
SUMMARY OF OPERATIONS
  Net interest income (TE)                               $   450         $    434       $     16             3.7 %
  Noninterest income                                         114              117             (3)           (2.6)
- ----------------------------------------------------------------------------------------------------------------
  Total revenue (TE)                                         564              551             13             2.4
  Provision for loan losses                                   78               81             (3)           (3.7)
  Noninterest expense                                        333              341             (8)           (2.3)
- ----------------------------------------------------------------------------------------------------------------
  Income before income taxes (TE)                            153              129             24            18.6
  Allocated income taxes and TE adjustments                   57               48              9            18.8
- ----------------------------------------------------------------------------------------------------------------
  Net income                                             $    96         $     81       $     15            18.5 %
                                                         =======         ========       ========

  Percent of consolidated net income                          44 %             34 %          N/A             N/A

AVERAGE BALANCES
  Loans                                                  $28,434         $ 27,318       $  1,116             4.1 %
  Total assets                                            30,863           29,660          1,203             4.1
  Deposits                                                34,360           34,311             49              .1
- ----------------------------------------------------------------------------------------------------------------
</TABLE>

TE = Taxable Equivalent, N/A = Not Applicable

<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED MARCH 31,                 CHANGE
                                                          ----------------------------      ---------------------------
ADDITIONAL CONSUMER BANKING DATA
dollars in billions                                         2003             2002             AMOUNT            PERCENT
- -----------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>             <C>                <C>               <C>
AVERAGE DEPOSITS OUTSTANDING
Noninterest-bearing                                      $    5,298      $       4,953      $      345            7.0 %
Money market deposit accounts and other savings              14,544             12,910           1,634           12.7
Time                                                         14,518             16,448          (1,930)         (11.7)
- -----------------------------------------------------------------------------------------------------------------------
  Total deposits                                         $   34,360      $      34,311      $       49             .1 %
                                                         ==========      =============      ==========
- -----------------------------------------------------------------------------------------------------------------------

HOME EQUITY LOANS
Retail Banking and Small Business
- ---------------------------------
  Average balance                                              $7.7               $6.0
  Average loan-to-value ratio                                    72 %               72 %
  Percent first lien positions                                   53                 44
National Home Equity
- --------------------
  Average balance                                              $5.0               $4.8
  Average loan-to-value ratio                                    78 %               77 %
  Percent first lien positions                                   82                 83
- --------------------------------------------------------------------------------------
OTHER DATA
On-line clients / percent penetration                    623,039/33 %       450,762/26 %
KeyCenters                                                      911                911
Automated teller machines                                     2,179              2,329
- --------------------------------------------------------------------------------------
</TABLE>


                                       37
<PAGE>

CORPORATE AND INVESTMENT BANKING

As shown in Figure 4, net income for Corporate and Investment Banking was $106
million for the first quarter of 2003, compared with $114 million for the same
period last year. The decrease was due to reductions in both taxable-equivalent
net interest income and noninterest income. These negative changes were offset
in part by a lower provision for loan losses, while noninterest expense was
essentially unchanged.

Taxable-equivalent net interest income decreased by $5 million, or 2%, from the
first quarter of 2002 as the negative effect of declines in average loans
outstanding and yield-related loan fees more than offset the positive effect of
deposit growth.

Noninterest income decreased by $11 million, or 9%, due primarily to lower
income from investment banking and capital markets activities (down $9 million)
and service charges on deposit accounts (down $2 million), both in the Corporate
Banking line of business. These negative changes were partially offset by
increases in gains from the residual values of leased equipment in Key Equipment
Finance and non-yield-related loan fees in KeyBank Real Estate Capital.

Noninterest expense decreased by $1 million, or less than 1%, as higher
professional fees in the Key Equipment Finance and Corporate Banking lines were
more than offset by decreases in various indirect charges.

The provision for loan losses decreased by $2 million, or 4%, reflecting a lower
level of net charge-offs in Corporate Banking and Key Equipment Finance.

                   FIGURE 4. CORPORATE AND INVESTMENT BANKING

<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED MARCH 31,               CHANGE
                                                          ----------------------------       ----------------------
dollars in millions                                        2003               2002            AMOUNT        PERCENT
- -------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>              <C>               <C>            <C>
SUMMARY OF OPERATIONS
  Net interest income (TE)                                $   279          $     284         $    (5)        (1.8)%
  Noninterest income                                          110                121             (11)        (9.1)
- -----------------------------------------------------------------------------------------------------------------
  Total revenue (TE)                                          389                405             (16)        (4.0)
  Provision for loan losses                                    50                 52              (2)        (3.8)
  Noninterest expense                                         169                170              (1)         (.6)
- -----------------------------------------------------------------------------------------------------------------
  Income before income taxes (TE)                             170                183             (13)        (7.1)
  Allocated income taxes and TE adjustments                    64                 69              (5)        (7.2)
- -----------------------------------------------------------------------------------------------------------------
  Net income                                              $   106          $     114         $    (8)        (7.0)%
                                                          =======          =========         =======

  Percent of consolidated net income                           49 %               48 %           N/A          N/A

AVERAGE BALANCES
  Loans                                                   $28,385          $  29,842         $(1,457)        (4.9)%
  Total assets                                             32,822             33,060            (238)         (.7)
  Deposits                                                  4,039              3,134             905         28.9
- -----------------------------------------------------------------------------------------------------------------
</TABLE>

TE = Taxable Equivalent, N/A = Not Applicable

INVESTMENT MANAGEMENT SERVICES

As shown in Figure 5, net income for Investment Management Services was $20
million for the first quarter of 2003, down from $23 million in the first
quarter of last year. The decrease was attributable to a significant reduction
in noninterest income. This reduction more than offset an increase in
taxable-equivalent net interest income and decreases in both noninterest expense
and the provision for loan losses.

                                       38
<PAGE>

Taxable-equivalent net interest income increased by $6 million, or 11%, from the
first quarter of 2002. The growth was due primarily to improved interest rate
spreads on both earning assets and borrowings, along with a significant increase
in average deposits.

Noninterest income decreased by $27 million, or 17%, as market-sensitive
businesses continue to be adversely affected by the weak economy. The reduction
was due primarily to an aggregate decline of $27 million in trust and investment
services income in the McDonald Financial Group and in Victory Capital
Management. This decline was largely attributable to a decrease in the market
value of assets under management. In addition, net asset outflows resulted from
the June 2002 sale of Key's 401(k) recordkeeping business. Funds that clients
elected to move from money market funds under management to an FDIC insured
deposit account with Key also contributed to the decline in assets under
management.

Noninterest expense decreased by $15 million, or 9%, due primarily to lower
variable compensation expense associated with revenue generation, a reduction in
depreciation expense related to equipment, lower costs for software amortization
and declines in various indirect charges.

                    FIGURE 5. INVESTMENT MANAGEMENT SERVICES

<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED MARCH 31,              CHANGE
                                                          ----------------------------     -----------------------
dollars in millions                                        2003               2002          AMOUNT         PERCENT
- ------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>              <C>            <C>              <C>
SUMMARY OF OPERATIONS
  Net interest income (TE)                                $    59          $      53      $      6           11.3 %
  Noninterest income                                          133                160           (27)         (16.9)
- -----------------------------------------------------------------------------------------------------------------
  Total revenue (TE)                                          192                213           (21)          (9.9)
  Provision for loan losses                                     2                  3            (1)         (33.3)
  Noninterest expense                                         158                173           (15)          (8.7)
- -----------------------------------------------------------------------------------------------------------------
  Income before income taxes (TE)                              32                 37            (5)         (13.5)
  Allocated income taxes and TE adjustments                    12                 14            (2)         (14.3)
- -----------------------------------------------------------------------------------------------------------------
  Net income                                              $    20          $      23      $     (3)         (13.0)%
                                                          =======          =========      ========

  Percent of consolidated net income                            9 %               10 %         N/A            N/A

AVERAGE BALANCES

  Loans                                                   $ 4,958          $   4,699      $    259            5.5 %
  Total assets                                              5,913              5,771           142            2.5
  Deposits                                                  5,216              3,671         1,545           42.1
- -----------------------------------------------------------------------------------------------------------------
</TABLE>

TE = Taxable Equivalent, N/A = Not Applicable

<TABLE>
<CAPTION>

ADDITIONAL INVESTMENT MANAGEMENT SERVICES DATA                    MARCH 31,          DECEMBER 31,     MARCH 31,
dollars in billions                                                 2003                 2002           2002
- ---------------------------------------------------------------------------------------------------------------
<S>                                                               <C>                <C>              <C>
Assets under management                                           $    60.8            $  61.7         $  72.4
Nonmanaged and brokerage assets                                        57.9               65.0            77.8
- ---------------------------------------------------------------------------------------------------------------
</TABLE>

OTHER SEGMENTS

Other segments consist primarily of Treasury, Principal Investing and the net
effect of funds transfer pricing. This segment generated a net loss of $10
million for the first quarter of 2003, compared with net income of $3 million
for the same period last year.

                                       39
<PAGE>


RESULTS OF OPERATIONS

NET INTEREST INCOME

Key's principal source of earnings is net interest income, which includes
interest paid to Key on earning assets such as loans and securities, as well as
loan-related fee income; less interest expense paid on deposits and borrowings.
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 derivative instruments to manage interest rate risk;

- -        market 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 7, which spans pages 42 and 43, 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. This figure also
includes a reconciliation to net interest income as reported under generally
accepted accounting principles ("GAAP").

Net interest income for the first quarter of 2003 was $703 million, essentially
unchanged from the year-ago quarter as the effect of a reduction in the net
interest margin was offset by the positive effect of an increase in average
earning assets. Key's net interest margin decreased 7 basis points to 3.86%. The
net interest margin is an indicator of the profitability of the earning asset
portfolio and is calculated by dividing net interest income by average earning
assets. During the same period, average earning assets grew by 2% to $73.4
billion. The significant growth in Key's core deposits was a contributing factor
in both developments. Over the past twelve months, the growth of core deposits
has exceeded net loan growth. The excess funds have been either invested in
securities or used to reduce wholesale funding. These changes in the balance
sheet have placed pressure on the net interest margin; however, they have also
improved Key's liquidity position.

NET INTEREST MARGIN. Key's net interest margin decreased over the past twelve
months, primarily because:

- -        competitive market conditions precluded us from passing on the full
         amount of the Federal Reserve's November 2002 reduction in interest
         rates to clients' deposit accounts;

- -        we have experienced a higher level of loan refinancings and prepayments
         as a result of the low interest rate environment; and

- -        we invested more heavily in securities available for sale since
         opportunities to originate loans have been adversely affected by the
         weak economy.

INTEREST EARNING ASSETS. Average earning assets for the first quarter of 2003
totaled $73.4 billion, which was $1.4 billion, or 2%, higher than the first
quarter 2002 level. This growth came principally from home equity lending and
the securities-available-for-sale portfolio. During the same period, weak loan
demand resulting from the general economic slowdown contributed to a decline in
average commercial loans outstanding.

                                       40
<PAGE>

Over the past twelve months, the growth and composition of Key's loan portfolio
has been affected by several actions:

- -        During the first quarter of 2003, we acquired a $311 million commercial
         lease financing portfolio and a $71 million commercial loan portfolio
         from a Canadian financial institution. The acquisition of the lease
         financing portfolio further diversifies our asset base and is expected
         to result in additional equipment financing opportunities.

- -        During the second quarter of 2001, management announced that Key would
         exit the automobile leasing business, de-emphasize indirect prime
         automobile lending and discontinue certain credit-only commercial
         relationships. As of March 31, 2003, these portfolios, in the
         aggregate, have declined by approximately $3.7 billion since the date
         of the announcement and by approximately $1.7 billion since March 31,
         2002.

- -        We sold commercial mortgage loans of $253 million during the first
         quarter of 2003 and $1.4 billion during 2002. Since some of these loans
         have been sold with limited recourse, Key established a loss reserve of
         an amount estimated by management to be appropriate to reflect the
         recourse risk. More information about the related recourse agreement is
         provided in Note 10 ("Contingent Liabilities and Guarantees") under the
         section entitled "Recourse agreement with Federal National Mortgage
         Association" on page 25. Our business of originating and servicing
         commercial mortgage loans has grown in part as a result of acquiring
         Conning Asset Management in the second quarter of 2002 and both Newport
         Mortgage Company, L.P. and National Realty Funding L.C. in 2000.

- -        We sold education loans of $96 million during the first quarter of 2003
         and $1.1 billion ($750 million through securitizations) during 2002.

Figure 6 shows how the 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 50, 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, 2002
                                                   TO THREE MONTHS ENDED MARCH 31, 2003
                                                   --------------------------------------
                                                     AVERAGE        YIELD/        NET
in millions                                          VOLUME          RATE        CHANGE
- -----------------------------------------------------------------------------------------
<S>                                                  <C>          <C>           <C>
INTEREST INCOME
Loans                                                $   (10)     $    (96)     $   (106)
Tax-exempt investment securities                          (2)           --            (2)
Securities available for sale                             34           (22)           12
Short-term investments                                    (2)            1            (1)
Other investments                                          1            (1)           --
- -----------------------------------------------------------------------------------------
  Total interest income (taxable equivalent)              21          (118)          (97)

INTEREST EXPENSE
NOW and money market deposit accounts                      8             2            10
Certificates of deposit ($100,000 or more)                 2           (11)           (9)
Other time deposits                                      (17)          (42)          (59)
Deposits in foreign office                                (2)           (2)           (4)
- -----------------------------------------------------------------------------------------
  Total interest-bearing deposits                         (9)          (53)          (62)
Federal funds purchased and securities sold
     under repurchase agreements                          (1)           (6)           (7)
Bank notes and other short-term borrowings               (11)           --           (11)
Long-term debt, including capital securities              10           (28)          (18)
- -----------------------------------------------------------------------------------------
  Total interest expense                                 (11)          (87)          (98)
- -----------------------------------------------------------------------------------------
  Net interest income (taxable equivalent)           $    32      $    (31)     $      1
                                                     =======      ========      ========
- -----------------------------------------------------------------------------------------
</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.

                                       41
<PAGE>

     FIGURE 7. AVERAGE BALANCE SHEETS, NET INTEREST INCOME AND YIELDS/RATES

<TABLE>
<CAPTION>
                                                          FIRST QUARTER 2003                       FOURTH QUARTER 2002
                                                  ---------------------------------     -------------------------------------
                                                  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          $17,221      $    206        4.86 %       $17,362      $    220        5.01 %
  Real estate-- commercial mortgage                 6,034            82        5.49           6,168            88        5.66
  Real estate-- construction                        5,683            72        5.16           5,856            78        5.27
  Commercial lease financing                        7,790           123        6.30           7,356           112        6.13
- -----------------------------------------------------------------------------------------------------------------------------
     Total commercial loans                        36,728           483        5.31          36,742           498        5.39
  Real estate-- residential                         1,904            32        6.66           2,029            33        6.72
  Home equity                                      14,005           217        6.29          13,649           226        6.55
  Consumer-- direct                                 2,129            40        7.68           2,153            44        8.17
  Consumer--indirect lease financing                  772            18        9.40           1,001            24        9.42
  Consumer-- indirect other                         4,917           107        8.74           5,117           116        9.05
- -----------------------------------------------------------------------------------------------------------------------------
     Total consumer loans                          23,727           414        7.05          23,949           443        7.36
  Loans held for sale                               2,390            28        4.70           1,986            26        5.28
- -----------------------------------------------------------------------------------------------------------------------------
     Total loans                                   62,845           925        5.95          62,677           967        6.14
Taxable investment securities                           2            --        8.43               1            --        8.85
Tax-exempt investment securities(a)                   125             3        8.89             132             3        9.32
- -----------------------------------------------------------------------------------------------------------------------------
     Total investment securities                      127             3        8.88             133             3        9.31
Securities available for sale(a,c)                  7,790           101        5.21           7,598           106        5.60
Short-term investments                              1,706             8        1.87           1,240             7        2.12
Other investments(c)                                  956             6        2.46             906             6        2.39
- -----------------------------------------------------------------------------------------------------------------------------
     Total earning assets                          73,424         1,043        5.73          72,554         1,089        5.97
Allowance for loan losses                          (1,438)                                   (1,471)
Accrued income and other assets                    11,928                                    11,652
- -----------------------------------------------------------------------------------------------------------------------------
                                                  $83,914                                   $82,735
                                                  =======                                   =======

LIABILITIES AND SHAREHOLDERS' EQUITY
NOW and money market deposit accounts             $16,747            42        1.03         $15,131            40        1.03
Savings deposits                                    2,043             3         .60           1,981             4         .63
Certificates of deposit ($100,000 or more)(d)       4,654            48        4.20           4,741            51        4.29
Other time deposits                                11,799            90        3.09          12,213           101        3.29
Deposits in foreign office                          1,719             5        1.24           1,974             6        1.43
- -----------------------------------------------------------------------------------------------------------------------------
     Total interest-bearing deposits               36,962           188        2.07          36,040           202        2.22
Federal funds purchased and securities
  sold under repurchase agreements                  5,220            16        1.26           5,502            20        1.44
Bank notes and other short-term borrowings (d)      2,382            16        2.75           2,192            14        2.53
Long-term debt, including capital securities (d)   17,278           120        2.90          17,040           129        3.09
- -----------------------------------------------------------------------------------------------------------------------------
     Total interest-bearing liabilities            61,842           340        2.25          60,774           365        2.40
Noninterest-bearing deposits                        9,788                                     9,926
Accrued expense and other liabilities               5,465                                     5,314
Shareholders' equity                                6,819                                     6,721
- -----------------------------------------------------------------------------------------------------------------------------
                                                  $83,914                                   $82,735
                                                  =======                                   =======

Interest rate spread (TE)                                                      3.48 %                                    3.57 %
- -----------------------------------------------------------------------------------------------------------------------------
Net interest income (TE) and net
  interest margin (TE)                                              703        3.86 %                         724        3.98 %
                                                                               ====                                      ====
TE adjustment(a)                                                     22                                        12
- -----------------------------------------------------------------------------------------------------------------------------
Net interest income, GAAP basis                                $    681                                  $    712
                                                               ========                                  ========
Capital securities                               $  1,254      $     18                     $ 1,233      $     18

- -----------------------------------------------------------------------------------------------------------------------------
</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.
     See Note 20 ("Derivatives and Hedging Activities"), which begins on page 84
     of Key's Annual Report to Shareholders, for an explanation of fair value
     hedges.

TE = Taxable Equivalent

                                       42

<PAGE>

     FIGURE 7. AVERAGE BALANCE SHEETS, NET INTEREST INCOME AND YIELDS/RATES
                                  (CONTINUED)

<TABLE>
<CAPTION>
         THIRD QUARTER 2002                    SECOND QUARTER 2002                FIRST QUARTER 2002
- -----------------------------------    -------------------------------      -------------------------------
 Average                    Yield/       Average                Yield/      AVERAGE                 YIELD/
 Balance      Interest       Rate        Balance    Interest     Rate       BALANCE    INTEREST     RATE
- -----------------------------------------------------------------------------------------------------------
<C>           <C>           <C>        <C>          <C>         <C>         <C>        <C>          <C>
$   17,485    $    225        5.11 %   $   18,213   $    232     5.11 %     $18,016    $    230     5.18 %
     6,207          93        5.92          6,414         95     5.94         6,598          97     5.97
     5,822          79        5.37          5,870         79     5.40         5,856          79     5.49
     7,215         121        6.72          7,206        126     6.96         7,275         132     7.25
- -----------------------------------------------------------------------------------------------------------
    36,729         518        5.60         37,703        532     5.65        37,745         538     5.76
     2,089          37        7.00          2,148         38     7.04         2,241          41     7.21
    13,505         222        6.52         13,072        229     7.03        11,863         212     7.26
     2,172          46        8.32          2,210         46     8.37         2,289          47     8.30
     1,264          28        8.98          1,514         33     8.84         1,852          41     8.74
     5,143         117        9.13          5,131        118     9.19         5,231         120     9.21
- -----------------------------------------------------------------------------------------------------------
    24,173         450        7.41         24,075        464     7.73        23,476         461     7.91
     2,584          35        5.48          2,150         30     5.58         2,267          32     5.70
- -----------------------------------------------------------------------------------------------------------
    63,486       1,003        6.29         63,928      1,026     6.43        63,488       1,031     6.55
         1          --        8.45              1         --     8.17             2          --     8.88
       166           4        8.76            205          4     8.31           219           5     8.52
- -----------------------------------------------------------------------------------------------------------
       167           4        8.75            206          4     8.31           221           5     8.52
     6,424          98        6.11          6,014         96     6.40         5,379          89     6.69
     1,151           6        2.28          1,561          8     1.97         2,041           9     1.76
       855           6        2.46            870          6     3.14           852           6     2.28
- -----------------------------------------------------------------------------------------------------------
    72,083       1,117        6.17         72,579      1,140     6.30        71,981       1,140     6.38
    (1,509)                                (1,579)                           (1,657)
    11,361                                 10,560                            10,547
- -----------------------------------------------------------------------------------------------------------
$   81,935                             $   81,560                           $80,871
==========                             ==========                           =======

$   13,293          30         .91     $   13,232         29      .88       $13,374          32      .96
     2,002           3         .67          2,014          3      .67         1,947           3      .71
     4,886          54        4.45          4,816         56     4.69         4,516          57     5.10
    12,713         115        3.57         13,085        131     4.02        13,443         149     4.51
     2,593          12        1.76          2,638         12     1.76         2,136           9     1.69
- -----------------------------------------------------------------------------------------------------------
    35,487         214        2.40         35,785        231     2.59        35,416         250     2.86

     5,483          23        1.69          5,541         24     1.71         5,584          23     1.70
     2,581          18        2.73          2,995         20     2.73         4,028          27     2.68
    17,455         140        3.25         17,230        144     3.37        16,103         138     3.46
- -----------------------------------------------------------------------------------------------------------
    61,006         395        2.59         61,551        419     2.73        61,131         438     2.90
     9,177                                  8,719                             8,553
     5,159                                  4,783                             4,918
     6,593                                  6,507                             6,269
- -----------------------------------------------------------------------------------------------------------
$   81,935                             $   81,560                           $80,871
==========                             ==========                           =======

                              3.58 %                             3.57 %                             3.48 %
- -----------------------------------------------------------------------------------------------------------

                   722        3.99 %                     721     3.98 %                     702     3.93 %
                              ====                               ====                               ====
                    22                                    38                                 48
- -----------------------------------------------------------------------------------------------------------
              $    700                              $    683                           $    654
              ========                              ========                           ========

$    1,249    $     19                 $    1,236   $     20                $ 1,298    $     21
- -----------------------------------------------------------------------------------------------------------
</TABLE>


                                       43
<PAGE>

MARKET RISK MANAGEMENT

The values of some financial instruments vary not only with changes in market
interest rates, but also with changes in foreign exchange rates, factors
influencing valuations in the equity securities markets, and other market-driven
rates or prices. For example, the value of a fixed-rate bond will decline if
market interest rates increase. As a result, the bond will become a less
attractive investment to the holder. Similarly, the value of the U.S. dollar
regularly fluctuates in relation to other currencies. The exposure that
instruments tied to such external factors present is called "market risk." Most
of Key's market risk is derived from interest rate fluctuations.

Interest rate risk 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 exposure.

FACTORS CONTRIBUTING TO INTEREST RATE EXPOSURE. Key uses interest rate exposure
models to quantify the potential impact on earnings and economic value of equity
arising from a variety of possible future interest rate scenarios. The many
interest rate scenarios modeled estimate the level of Key's interest rate
exposure arising from option risk, basis risk and gap risk. Each of these types
of risk is defined in the discussion of market risk management, which begins on
page 30 of Key's 2002 Annual Report to Shareholders.

MEASUREMENT OF SHORT-TERM INTEREST RATE EXPOSURE. Key uses a net interest income
simulation model to measure interest rate risk over a short time frame. 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 and judgments. 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 Key makes 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 to be taken if
the simulation modeling demonstrates that a gradual 200 basis point increase or
decrease in short-term rates over the next twelve months would adversely affect
net interest income over the same period by more than 2%. Key is operating
within these guidelines. Since short-term interest rates were relatively low at
March 31, 2003, management modified Key's standard rate scenario of a gradual
decrease of 200 basis points over twelve months to a gradual decrease of 50
basis points over three months and no change over the following nine months. As
of March 31, 2003, based on the results of our simulation model, and assuming
that management does not take action to alter the outcome, Key would expect net
interest income to decrease by approximately .37% if short-term interest rates
gradually increase by 200 basis points. Conversely, if short-term interest rates
gradually decrease by 50 basis points over the next three months, net interest
income would be expected to decrease by approximately .37% over the next twelve
months.

The decline in net interest income under both of the above scenarios reflects
the fact that Key is currently in a liability sensitive position when interest
rates increase and an asset sensitive position when rates decrease. Key's asset
sensitive position to a decrease in interest rates stems from the fact that
short-term rates are at historically low levels. Consequently, the results of
the simulation model reflect management's assumption that deposit rates will not
decline from current levels, while interest rates on earning assets will
continue to do so. To mitigate the risk of a potentially adverse effect on
earnings, management is using interest rate contracts while maintaining the
flexibility to lower rates on deposits, if necessary.

Key has historically been in a liability sensitive position when interest rates
are rising. Management actively monitors the risk to higher rates and would
endeavor to take preventive actions to ensure that net interest income at risk
does not exceed guidelines established by the Asset/Liability Management Policy

                                       44
<PAGE>

Committee. Also, Key's lines of business have the ability to mitigate the
negative effect on net interest income from rising interest rates by growing
loans and deposits with profitable interest rate spreads.

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. However,
economic value does not represent the fair values of asset, liability and
derivative positions since it does not consider factors like credit risk and
liquidity.

Key's guidelines for risk management call for preventive measures to be taken if
an immediate 200 basis point increase or decrease in interest rates is estimated
to reduce the economic value of equity by more than 15%. Key is operating within
these guidelines. Certain short-term interest rates were limited to reductions
of less than 200 basis points since interest rates cannot decrease below zero in
Key's economic value of equity model.

MANAGEMENT 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 manage 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, and interest rate implications. A brief
description of interest rate swaps and caps is included in the discussion of
market risk management, which begins on page 30 of Key's 2002 Annual Report to
Shareholders. For more information about how Key uses interest rate swaps and
caps to manage its balance sheet, see Note 11 ("Derivatives and Hedging
Activities"), which begins on page 27.

Over the past year, we have invested more heavily in collateralized mortgage
obligations as opportunities to originate loans have been adversely affected by
the weak economy, while our core deposits have grown significantly. These
securities, the majority of which have relatively short average lives, have been
used in conjunction with swaps and caps to maintain an approximately neutral
interest rate risk position.

Trading portfolio risk management

Key's trading portfolio includes:

- -        interest rate swap contracts entered into to accommodate the needs of
         clients;

- -        positions with third parties that are intended to offset or mitigate
         the interest rate risk of client positions;

- -        foreign exchange contracts entered into to accommodate the needs of
         clients, and

- -        proprietary trading positions in financial assets and liabilities.

The fair values of these trading portfolio items are included in "accrued income
and other assets" or "accrued expense and other liabilities" on the balance
sheet. For more information about these items, see Note 20 ("Derivatives and
Hedging Activities"), which begins on page 84 of Key's 2002 Annual Report to
Shareholders.

Management uses a value at risk ("VAR") model to estimate the potential adverse
effect of changes in interest and foreign exchange rates, and equity prices on
the fair value of Key's trading portfolio. Using statistical methods, this model
estimates the maximum potential one-day loss with 95% probability. At March 31,
2003, Key's aggregate daily VAR was $1.0 million, compared with $1.1 million at
March 31, 2002. Aggregate daily VAR averaged $1.0 million for the first three
months of 2003, compared with an average of $1.3 million for 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.

                                       45
<PAGE>

NONINTEREST INCOME

Noninterest income for the first quarter of 2003 was $397 million, representing
a $46 million, or 10%, decrease from the same period last year. Continued
weakness in the financial markets resulted in lower income from trust and
investment services (down $26 million) and investment banking and capital
markets activities (down $15 million). Net asset outflows resulting from the
June 2002 sale of Key's 401(k) recordkeeping business also contributed to the
decline in revenue generated from trust and investment services. Until market
conditions improve, Key expects these income components to remain under
pressure.

Figure 8 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 prior year.

                          FIGURE 8. NONINTEREST INCOME

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED MARCH 31,               CHANGE
                                                             ------------------------------   ----------------------------
dollars in millions                                              2003                2002        AMOUNT            PERCENT
- --------------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>                 <C>         <C>               <C>
Trust and investment services income                             $132                $158        $  (26)             (16.5)%
Service charges on deposit accounts                                92                 100            (8)              (8.0)
Investment banking and capital markets income                      34                  49           (15)             (30.6)
Letter of credit and loan fees                                     31                  28             3               10.7
Corporate-owned life insurance income                              27                  26             1                3.8
Electronic banking fees                                            19                  18             1                5.6
Net securities gains                                                4                  --             4                N/M
Other income:
  Insurance income                                                 13                  13            --                 --
  Net gains from loan securitizations and sales                    15                   6             9              150.0
  Loan securitization servicing fees                                2                   3            (1)             (33.3)
  Credit card fees                                                  3                   2             1               50.0
  Miscellaneous income                                             25                  40           (15)             (37.5)
- --------------------------------------------------------------------------------------------------------------------------
    Total other income                                             58                  64            (6)              (9.4)
- --------------------------------------------------------------------------------------------------------------------------
    Total noninterest income                                     $397                $443        $  (46)             (10.4)%
                                                                =====                ====        ======
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>

N/M = Not Meaningful

TRUST AND INVESTMENT SERVICES INCOME. Trust and investment services provide
Key's largest source of noninterest income. Its primary components are shown in
Figure 9. A significant portion of this income is based on the value of assets
under management. Thus, over the past twelve months, the level of revenue
derived from these services has been adversely affected by continued declines in
the equity markets.

                 FIGURE 9. TRUST AND INVESTMENT SERVICES INCOME

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED MARCH 31,               CHANGE
                                                               ----------------------------      -----------------------
dollars in millions                                             2003                   2002         AMOUNT       PERCENT
- ------------------------------------------------------------------------------------------------------------------------
<S>                                                             <C>                    <C>          <C>          <C>
Personal asset management and custody fees                      $ 35                   $ 41          $ ( 6)        (14.6)%
Institutional asset management and custody fees                   11                     20             (9)        (45.0)
Bond services                                                      9                     10             (1)        (10.0)
Brokerage commission income                                       47                     51             (4)         (7.8)
All other fees                                                    30                     36             (6)        (16.7)
- ------------------------------------------------------------------------------------------------------------------------
    Total trust and investment services income                  $132                   $158          $ (26)        (16.5)%
                                                                ====                   ====          =====
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

At March 31, 2003, Key's bank, trust and registered investment advisory
subsidiaries had assets under management of $60.8 billion, compared with $72.4
billion at March 31, 2002. These assets are managed on behalf of both
institutions and individuals through a variety of equity, fixed income and money
market accounts. The composition of Key's assets under management is shown in
Figure 10. Over the past twelve months, the value of total assets under
management decreased by a net 16%. This decrease reflects a decline in the
market value of assets under management, as well as net asset outflows of
approximately $2.5 billion. Included in the net asset outflows is approximately
$2.9 billion of funds that have been transferred to an outside vendor in
connection with Key's sale of the 401(k) recordkeeping business.

                                       46
<PAGE>

Another $880 million of the outflows is attributable to funds which clients have
elected to move from money market funds under management to an FDIC insured
deposit account with Key. As shown in Figure 10, 58% of the assets Key manages
are invested in more stable fixed income or money market funds.

                       FIGURE 10. ASSETS UNDER MANAGEMENT

<TABLE>
<CAPTION>
                                                                 2003                           2002
                                                                -------   ---------------------------------------------
in millions                                                      FIRST       FOURTH       THIRD      SECOND      FIRST
- -----------------------------------------------------------------------------------------------------------------------
Assets under management by investment type:
<S>                                                             <C>          <C>         <C>        <C>         <C>
   Equity                                                       $25,415      $27,224     $25,422    $ 31,064    $34,497
   Fixed income                                                  16,310       16,133      17,588      18,905     18,536
   Money market                                                  19,073       18,337      19,364      20,756     19,413
- -----------------------------------------------------------------------------------------------------------------------
     Total                                                      $60,798      $61,694     $62,374    $ 70,725    $72,446
                                                                =======      =======     =======    ========    =======
Proprietary mutual funds included in assets under management:
   Equity                                                       $ 2,236      $ 2,878     $ 2,965    $  3,709    $ 4,080
   Fixed income                                                   1,125        1,215       1,377       1,262      1,211
   Money market                                                  10,762       11,457      12,129      12,568     13,094
- -----------------------------------------------------------------------------------------------------------------------
     Total                                                      $14,123      $15,550     $16,471    $ 17,539    $18,385
                                                                =======      =======     =======    ========    =======
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

INVESTMENT BANKING AND CAPITAL MARKETS INCOME. As shown in Figure 11, the
decrease in investment banking and capital markets income resulted from declines
in three of its four major revenue sources, reflecting the adverse effects of
continued economic weakness.

Key's principal investing income is susceptible to volatility since it is
derived from investments in small to medium-sized businesses in various stages
of economic development and strategy implementation. Principal investments
consist of direct and indirect investments in predominantly privately-held
companies and are carried on the balance sheet at fair value ($698 million at
March 31, 2003, and $636 million at March 31, 2002). Thus, the net gains and
losses presented in Figure 11 stem from changes in estimated fair values, as
well as actual gains and losses on sales of principal investments.

            FIGURE 11. INVESTMENT BANKING AND CAPITAL MARKETS INCOME

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED MARCH 31,              CHANGE
                                                               ----------------------------        --------------------
dollars in millions                                             2003                 2002          AMOUNT       PERCENT
- -----------------------------------------------------------------------------------------------------------------------
<S>                                                             <C>                  <C>           <C>          <C>
Dealer trading and derivatives income                           $  8                 $ 17           $ (9)        (52.9)%
Investment banking income                                         22                   21              1           4.8
Net gains (losses) from principal investing                       (3)                   1             (4)          N/M
Foreign exchange income                                            7                   10             (3)        (30.0)
- ----------------------------------------------------------------------------------------------------------------------
    Total investment banking and capital markets income         $ 34                 $ 49           $(15)        (30.6)%
                                                                ====                 ====           =====
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

N/M = Not Meaningful

SERVICE CHARGES ON DEPOSIT ACCOUNTS. Income from service charges on deposit
accounts decreased by $8 million, or 8%, from the first quarter of 2002 due in
part to free checking products, which were introduced in the third quarter of
2002 and rolled out to all of Key's markets by the end of the year.

OTHER INCOME. Other income decreased by $6 million, or 9%, from the first
quarter of 2002, due primarily to an $11 million increase in losses from the
residual values of leased equipment included in miscellaneous income. As shown
in Figure 8, these losses were substantially offset by a $9 million increase in
net gains from loan securitizations and sales.

                                       47
<PAGE>

NONINTEREST EXPENSE

Noninterest expense of $657 million for the first quarter of 2003 was down from
$661 million for the same period last year, due primarily to lower incentive
compensation and a decline in software amortization.

Figure 12 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 prior year.

                         FIGURE 12. NONINTEREST EXPENSE

<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED MARCH 31,                   CHANGE
                                                       -----------------------------------       -----------------------
dollars in millions                                     2003                         2002        AMOUNT          PERCENT
- ------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>                        <C>            <C>             <C>
Personnel                                              $   363                    $   363            --               --
Net occupancy                                               59                         57        $    2              3.5 %
Computer processing                                         44                         54           (10)           (18.5)
Equipment                                                   32                         34            (2)            (5.9)
Marketing                                                   25                         26            (1)            (3.8)
Professional fees                                           25                         21             4             19.0
Other expense:
 Postage and delivery                                       15                         15            --               --
 Telecommunications                                          8                          8            --               --
 Equity- and gross receipts-based taxes                      5                          6            (1)           (16.7)
 OREO expense, net                                           1                          1            --               --
 Miscellaneous expense                                      80                         76             4              5.3
- ------------------------------------------------------------------------------------------------------------------------
    Total other expense                                    109                        106             3              2.8
- -------------------------------------------------------------------------------------------------------------------------
    Total noninterest expense                          $   657                    $   661        $   (4)             (.6)%
                                                       =======                    =======        ======

Average full-time equivalent employees                  20,447                     21,079          (632)            (3.0)%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

PERSONNEL. Personnel expense, the largest category of Key's noninterest expense,
was unchanged from the year-ago quarter as increases in salaries and employee
benefit costs (primarily pension costs) were offset by lower incentive
compensation. The level of Key's personnel expense continues to reflect the
benefits derived from our competitiveness initiative completed last year, as
well as the continuous improvement efforts that have evolved from it. We will
continue to evaluate staffing levels and to make appropriate changes when they
can be accomplished without negatively affecting either customer service or our
ability to grow higher return businesses. For the first quarter of 2003, the
number of average full-time equivalent employees was 20,447, compared with
20,485 for the fourth quarter of 2002 and 21,079 for the year-ago quarter.
Figure 13 shows the major components of Key's personnel expense.

Effective January 1, 2003, Key adopted the fair value method of accounting as
outlined in SFAS No. 123, "Accounting for Stock-Based Compensation."
Compensation expense related to stock option grants totaled less than $1 million
in the first quarter of 2003 and is included in incentive compensation in Figure
13. Additional information pertaining to this accounting change is included in
Note 1 ("Basis of Presentation") under the headings "Stock-Based Compensation"
on page 8 and "Accounting Pronouncements Adopted in 2003" on page 9.

                          FIGURE 13. PERSONNEL EXPENSE

<TABLE>
<CAPTION>
                                   THREE MONTHS ENDED MARCH 31,                        CHANGE
                               ------------------------------------        ----------------------------
dollars in millions              2003                         2002           AMOUNT             PERCENT
- -------------------------------------------------------------------------------------------------------
<S>                            <C>                            <C>             <C>               <C>
Salaries                       $    225                       $ 215           $10                 4.7 %
Employee benefits                    72                          63             9                14.3
Incentive compensation               66                          85           (19)              (22.4)
- -------------------------------------------------------------------------------------------------------
  Total personnel expense      $    363                       $ 363            --                  --
                               ========                       =====           ===
- -------------------------------------------------------------------------------------------------------
</TABLE>

                                       48
<PAGE>

COMPUTER PROCESSING. Computer processing expense decreased by $10 million, or
19%, from the first quarter of last year, due primarily to a lower level of
computer software amortization. This reduction is attributable to a decline in
the number of capitalized software projects.

INCOME TAXES

The provision for income taxes was $74 million for the first quarter of 2003,
compared with $60 million for the first three months of 2002. The effective tax
rate, which is the provision for income taxes as a percentage of income before
income taxes, was 25.4% for the first quarter of 2003, compared with 20.0% for
the first quarter of 2002. As discussed below, the management of certain leases
has been transferred to a foreign subsidiary in a lower tax jurisdiction. The
increase in the effective rate was due primarily to the fact that a smaller
number of leases were transferred in the first quarter of this year, compared
with the year-ago quarter.

The effective tax rate for both the current and prior year is substantially
below Key's combined statutory federal and state rate of 37.5% (37% in 2002)
primarily because portions of our equipment leasing portfolio became subject to
a lower income tax rate in the latter half of 2001. Responsibility for the
management of portions of Key's leasing portfolio was transferred to a foreign
subsidiary in a lower tax jurisdiction. Since Key intends to permanently
reinvest the earnings of this subsidiary, no deferred income taxes have been
recorded on those earnings in accordance with SFAS No. 109, "Accounting for
Income Taxes." Other factors that account for the difference between the
effective and statutory tax rates in the current and prior year include tax
deductions associated with dividends paid to Key's 401(k) savings plan, income
from investments in tax-advantaged assets (such as tax-exempt securities and
corporate-owned life insurance) and credits associated with investments in
low-income housing projects.

                                       49

<PAGE>

FINANCIAL CONDITION

LOANS

At March 31, 2003, total loans outstanding were $62.7 billion, compared with
$62.5 billion at the end of 2002 and $64.0 billion a year ago. Among the factors
that contributed to the decrease in our loans from one year ago are:

- -        Loan sales completed to improve the profitability of the overall
         portfolio or to accommodate our funding needs;

- -        Weakening loan demand due to the sluggish economy; and

- -        Our decision to exit the automobile leasing business, de-emphasize
         indirect prime automobile lending and discontinue certain credit-only
         commercial relationships.

Over the past several years, we have used alternative funding sources like loan
sales and securitizations to allow us to continue to capitalize on our loan
origination capabilities. In addition, Key has completed acquisitions that have
improved our ability to generate and securitize new loans, especially in the
area of commercial real estate. These acquisitions include the purchase of
Conning Asset Management in June 2002, and both Newport Mortgage Company, L.P.
and National Realty Funding L.C. in 2000.

The level of Key's total loans outstanding (excluding loans held for sale)
decreased by $1.6 billion, or 3%, from one year ago. In the commercial loan
portfolio, growth in lease financing receivables was more than offset by a net
decline in all other commercial portfolios, reflecting continued weakness in the
economy and our decision to discontinue many credit-only relationships in the
leveraged financing and nationally syndicated lending businesses.

At March 31, 2003, Key's commercial real estate portfolio included mortgage
loans of $6.0 billion and construction loans of $5.4 billion. The average size
of a mortgage loan was $.5 million and the largest mortgage loan had a balance
of $68 million. The average size of a construction loan was $8 million. The
largest construction loan commitment was $47 million, of which $23 million was
outstanding.

Key conducts its commercial real estate lending business through two primary
sources: a 12-state banking franchise and KeyBank Real Estate Capital (a
national line of business that cultivates relationships both within and beyond
the branch system). This line of business deals exclusively with
nonowner-occupied properties (i.e., generally properties in which the owner
occupies less than 60% of the premises) and accounted for approximately 54% of
Key's total average commercial real estate loans during the first quarter of
2003. At March 31, less than 2% of Key's nonowner-occupied portfolio was either
nonperforming or delinquent in payments. Our commercial real estate business as
a whole focuses on larger real estate developers and, as shown in Figure 14, is
diversified by both industry type and geography.

                                       50
<PAGE>

                     FIGURE 14. COMMERCIAL REAL ESTATE LOANS

<TABLE>
<CAPTION>
                                                                  GEOGRAPHIC REGION
MARCH 31, 2003                                     ----------------------------------------------------       TOTAL       PERCENT OF
dollars in millions                                 EAST          MIDWEST        CENTRAL        WEST          AMOUNT        TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>            <C>            <C>            <C>          <C>          <C>
Nonowner-occupied:
     Multi-family properties                       $   621        $   567        $   613        $   818      $ 2,619           22.8%
     Retail properties                                 290            516            118            238        1,162           10.1
     Office buildings                                  184            132            154            248          718            6.3
     Residential properties                             99             58            138            429          724            6.3
     Warehouses                                         53            217             99            107          476            4.2
     Manufacturing facilities                           15             32              6              7           60             .5
     Hotels/Motels                                       6              9              1              9           25             .2
     Other                                             146            281             59            120          606            5.3
- -----------------------------------------------------------------------------------------------------------------------------------
                                                     1,414          1,812          1,188          1,976        6,390           55.7
Owner-occupied                                         682          2,175            634          1,585        5,076           44.3
- -----------------------------------------------------------------------------------------------------------------------------------
     Total                                         $ 2,096        $ 3,987        $ 1,822        $ 3,561      $11,466          100.0%
                                                   =======        =======        =======        =======      =======        =======
- -----------------------------------------------------------------------------------------------------------------------------------
Nonowner-occupied:
     Nonperforming loans                           $     5        $     1        $     3        $     8      $    17            N/M
     Accruing loans past due 90 days or more             8              6              1              -           15            N/M
     Accruing loans past due 30 through 89 days         21             13              1             26           61            N/M
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

N/M = Not Meaningful

Consumer loans decreased by $209 million, or less than 1%, since March 31, 2002.
Excluding loan sales and acquisitions, consumer loans would have increased by
$380 million, or 2%, during the same period. This development was attributable
to a $1.9 billion increase in our home equity portfolio, largely as a result of
our focused efforts to grow this business, facilitated by a period of lower
interest rates. The growth of the home equity portfolio more than offset
declines of $229 million in installment loans, $989 million in automobile lease
financing receivables and $333 million in residential real estate mortgage
loans. The declines in installment loans and automobile lease financing
receivables reflect our decision to de-emphasize indirect prime automobile
lending and exit the automobile leasing business.

Key's home equity portfolio is derived primarily from our Retail Banking line of
business (53% of the home equity portfolio at March 31, 2003) and the National
Home Equity unit within our Consumer Finance line of business.

The National Home Equity unit has two components: Champion Mortgage Company, a
home equity finance company, and Key Home Equity Services, which purchases
individual loans from an extensive network of correspondents and agents. Prior
to the third quarter of 2002, Key Home Equity Services also purchased loans
through bulk portfolio acquisitions from home equity loan companies. The average
loan-to-value ratio at origination for a loan generated by the National Home
Equity unit is 78%. First lien positions comprised 82% of the portfolio for this
unit at March 31, 2003.

Figure 15 summarizes Key's home equity loan portfolio at the end of each of the
last five quarters, as well as certain asset quality statistics and the yields
achieved on the portfolio as a whole.

                                       51
<PAGE>

                          FIGURE 15. HOME EQUITY LOANS

<TABLE>
<CAPTION>
                                                2003                        2002
                                               -------     ------------------------------------------
dollars in millions                             FIRST       FOURTH      THIRD       SECOND      FIRST
- ------------------------------------------------------------------------------------------------------
<S>                                            <C>         <C>         <C>         <C>         <C>
SOURCES OF LOANS OUTSTANDING AT PERIOD END
Retail KeyCenters and other sources            $ 9,145     $ 8,867     $ 8,680     $ 8,381     $ 7,761

Champion Mortgage Company                        2,332       2,210       2,109       2,153       2,031
Key Home Equity Services division                2,667       2,727       2,727       2,845       2,870
- ------------------------------------------------------------------------------------------------------
     National Home Equity unit                   4,999       4,937       4,836       4,998       4,901
- ------------------------------------------------------------------------------------------------------
     Total                                     $14,144     $13,804     $13,516     $13,379     $12,662
                                               =======     =======     =======     =======     =======
- ------------------------------------------------------------------------------------------------------
Nonperforming loans at period end              $   154     $   146     $   125     $   107     $    95
Net charge-offs for the period                      13          13          12          13          14
Yield for the period                              6.29%       6.55%       6.52%       7.03%       7.26%
- ------------------------------------------------------------------------------------------------------
</TABLE>

SALES, SECURITIZATIONS AND DIVESTITURES. During the past twelve months, Key sold
$1.4 billion of commercial real estate loans, $1.1 billion of education loans
($750 million through a securitization) and $955 million of other types of
loans. Since 1999, Key has securitized only education loans.

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 16 summarizes Key's loan sales (including securitizations) for the first
quarter of 2003 and all of 2002.

                       FIGURE 16. LOANS SOLD AND DIVESTED

<TABLE>
<CAPTION>
                             COMMERCIAL    COMMERCIAL        RESIDENTIAL    HOME     CONSUMER
in millions     COMMERCIAL  REAL ESTATE  LEASE FINANCING     REAL ESTATE   EQUITY   -INDIRECT  EDUCATION    TOTAL
- ------------------------------------------------------------------------------------------------------------------
<S>             <C>         <C>          <C>                 <C>           <C>      <C>        <C>          <C>
  2003
- --------------
First quarter      $   52     $  253             --             $    4     $   73         --     $   96     $  478
- ------------------------------------------------------------------------------------------------------------------
  Total            $   52     $  253             --             $    4     $   73         --     $   96     $  478
                   ======     ======         ======             ======     ======     ======     ======     ======
    2002
- --------------
Fourth quarter     $   93     $  603             --             $   65     $  110     $  177     $  100     $1,148
Third quarter          18        352             --                 25        242          3        784      1,424
Second quarter         31        159         $   18                 20         24         --         70        322
First quarter          --        319             --                 --          9         --        116        444
- ------------------------------------------------------------------------------------------------------------------
  Total            $  142     $1,433         $   18             $  110     $  385     $  180     $1,070     $3,338
                   ======     ======         ======             ======     ======     ======     ======     ======
- ------------------------------------------------------------------------------------------------------------------

</TABLE>

Figure 17 shows loans that are either administered or serviced by Key, but not
recorded on the balance sheet. Included are loans that have been both
securitized and sold, or simply sold outright. In the event of default, Key is
subject to recourse with respect to approximately $273 million of the $25.4
billion of loans administered or serviced at March 31, 2003.

                                       52
<PAGE>

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 from any securitized assets retained. Conning Asset Management and
National Realty Funding L.C. service the commercial real estate loans shown in
Figure 17; however, other financial institutions originated most of these loans.
Approximately $77 million of the assets held in the asset-backed commercial
paper conduit, for which Key serves as a referral agent, are also included in
Figure 17. For more information regarding the conduit, see Note 10 ("Contingent
Liabilities and Guarantees") under the heading "Guarantees" on page 24.

                    FIGURE 17. LOANS ADMINISTERED OR SERVICED

<TABLE>
<CAPTION>
                                MARCH 31,  DECEMBER 31,  SEPTEMBER 30,    JUNE 30,      MARCH 31,
in millions                       2003         2002           2002           2002          2002
- ------------------------------------------------------------------------------------------------
<S>                             <C>        <C>           <C>              <C>           <C>
Education loans                  $ 4,381     $ 4,605        $ 4,756       $ 4,095        $ 4,258
Automobile loans                      40          54             69            87            108
Home equity loans                    389         456            519           596            668
Commercial real estate loans      20,508      19,508         17,002        16,483(a)      11,621
Commercial loans                     130         123            110           103            446
- ------------------------------------------------------------------------------------------------
  Total                          $25,448     $24,746        $22,456       $21,364        $17,101
                                 =======     =======        =======       =======        =======
- ------------------------------------------------------------------------------------------------
</TABLE>

(a)      Includes $4.1 billion of serviced loans purchased in the June 28, 2002,
         acquisition of Conning Asset Management.

SECURITIES

At March 31, 2003, the securities portfolio totaled $9.6 billion and included
$8.5 billion of securities available for sale, $132 million of investment
securities and $970 million of other investments (primarily principal
investments). In comparison, the total portfolio at December 31, 2002, was $9.5
billion, including $8.5 billion of securities available for sale, $120 million
of investment securities and $919 million of other investments. The weighted
average maturity of the total portfolio was 3.0 years at March 31, 2003,
unchanged from that at December 31, 2002.

The size and composition of Key's securities portfolio are dependent largely on
our needs for liquidity and the extent to which we are required or elect to hold
these assets as collateral to secure public and trust deposits. Although debt
securities are generally used for this purpose, other assets, such as securities
purchased under resale agreements, may be used temporarily when they provide
more favorable yields.

SECURITIES AVAILABLE FOR SALE. The majority of Key's securities available for
sale portfolio consists of collateralized mortgage obligations that provide a
source of interest income and serve as collateral in connection with pledging
requirements. A collateralized mortgage obligation (sometimes called a "CMO") is
a debt security that is secured by a pool of mortgages, mortgage-backed
securities, U.S. government securities, corporate debt obligations or other
bonds. At March 31, 2003, Key had $8.0 billion invested in collateralized
mortgage obligations and other mortgage-backed securities in the
available-for-sale portfolio, compared with $8.1 billion at December 31, 2002,
and $5.3 billion at March 31, 2002. Over the past twelve months, Key has
invested more heavily in these securities as opportunities to originate loans
(Key's preferred earning asset) have been adversely affected by the weak
economy. Substantially all of these securities were issued or backed by federal
agencies. The CMO securities held by Key are shorter-maturity class bonds that
were structured to have more predictable cash flows during periods of changing
interest rates than other longer-term class bonds.

Figure 18 shows the composition, yields and remaining maturities of Key's
securities available for sale. 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 16.

                                       53
<PAGE>

                    FIGURE 18. SECURITIES AVAILABLE FOR SALE

<TABLE>
<CAPTION>
                                                                                                 OTHER
                                      U.S. TREASURY,     STATES AND      COLLATERALIZED         MORTGAGE-           RETAINED
                                       AGENCIES AND       POLITICAL          MORTGAGE             BACKED          INTERESTS IN
dollars in millions                    CORPORATIONS     SUBDIVISIONS     OBLIGATIONS (a)     SECURITIES (a)   SECURITIZATIONS (a)
=================================================================================================================================
<S>                                   <C>               <C>             <C>                 <C>               <C>
MARCH 31, 2003
Remaining maturity:
     One year or less                  $     2          $    1            $   418            $     19            $     8
     After one through five years            9               4              6,564                 687                185
     After five through ten years            6              10                183                   2                  -
     After ten years                         7              13                145                  22                  -
- ---------------------------------------------------------------------------------------------------------------------------------
Fair value                             $    24          $   28            $ 7,310            $    730            $   193
Amortized cost                              23              27              7,283                 698                148
Weighted average yield                    5.15%           6.40%              4.74%               6.19%             24.21%
Weighted average maturity                  8.3 YEARS      10.8 YEARS          2.8 YEARS           1.9 YEARS          3.4 YEARS
- ---------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 2002
Fair value                             $    23          $   35            $ 7,207            $    852            $   209
Amortized cost                              22              35              7,143                 815                166
- ---------------------------------------------------------------------------------------------------------------------------------
MARCH 31, 2002
Fair value                             $    97          $   20            $ 4,379            $    923            $   222
Amortized cost                              97              20              4,409                 900                195
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                      WEIGHTED
                                          OTHER                        AVERAGE
dollars in millions                     SECURITIES       TOTAL        YIELD (b)
- -------------------------------------------------------------------------------
<S>                                   <C>             <C>             <C>
MARCH 31, 2003
Remaining maturity:
     One year or less                 $     1         $  449            4.62%
     After one through five years          11          7,460            5.06
     After five through ten years           6            207            8.66
     After ten years                      152 (c)        339            8.97
- -------------------------------------------------------------------------------
Fair value                            $   170         $8,455              --
Amortized cost                            200          8,379            5.22%
Weighted average yield                   5.39%(b)       5.22%             --
Weighted average maturity                 9.7 YEARS      3.0 YEARS        --
- -------------------------------------------------------------------------------
DECEMBER 31, 2002
Fair value                            $   181         $8,507              --
Amortized cost                            208          8,389            5.76%
- -------------------------------------------------------------------------------
MARCH 31, 2002
Fair value                            $   218         $5,859              --
Amortized cost                            233          5,854            6.71%
- -------------------------------------------------------------------------------
</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 of $181 million 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 primarily marketable equity securities (including an
         internally managed portfolio of common stock investments in financial
         services companies) with no stated maturity.

INVESTMENT SECURITIES. Securities issued by states and political subdivisions
account for the majority of Key's investment securities. Figure 19 shows the
composition, yields and remaining maturities of these securities.

                        FIGURE 19. INVESTMENT SECURITIES

<TABLE>
<CAPTION>
                                           U.S TREASURY,       STATES AND                                    WEIGHTED
                                           AGENCIES AND        POLITICAL          OTHER                       AVERAGE
dollars in millions                        CORPORATIONS       SUBDIVISIONS      SECURITIES        TOTAL      YIELD (a)
- ---------------------------------------------------------------------------------------------------------------------
<S>                                        <C>                <C>               <C>            <C>           <C>
MARCH 31, 2003
Remaining maturity:
     One year or less                        $15               $ 30               --           $  45            6.95%
     After one through five years             --                 65               --              65            9.49
     After five through ten years             --                 17             $  4              21            7.55
     After ten years                          --                  1               --               1           11.22
- --------------------------------------------------------------------------------------------------------------------
Amortized cost                               $15               $113             $  4           $ 132            8.32%
Fair value                                    15                121                4             140              --
Weighted average maturity                     .1 YEARS          2.7 YEARS        4.7 YEARS       2.5 YEARS        --
- --------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 2002
Amortized cost                                --               $120               --           $ 120            9.43%
Fair value                                    --                129               --             129              --
- --------------------------------------------------------------------------------------------------------------------
MARCH 31, 2002
Amortized cost                                --               $216               --           $ 216            8.52%
Fair value                                    --                224               --             224              --
- --------------------------------------------------------------------------------------------------------------------
</TABLE>

(a)      Weighted average yields are calculated based on amortized cost. Such
         yields have been adjusted to a taxable-equivalent basis using the
         statutory federal income tax rate of 35%.

                                       54
<PAGE>

OTHER INVESTMENTS. Principal investments - investments in equity and mezzanine
instruments made by Key's Principal Investing unit - are carried at fair value,
which aggregated $698 million at March 31, 2003. They represent approximately
72% of other investments and include direct and indirect investments
predominately in privately-held companies. Direct investments are those made in
a particular company, while indirect investments are made through funds that
include other investors.

In addition to principal investments, other investments include securities that
do not have readily determinable fair values. These securities include certain
real estate-related investments. Neither these securities nor principal
investments have stated maturities.

ASSET QUALITY

Key has a multi-faceted program to manage asset quality. Our professionals:

- -        evaluate and monitor credit quality and risk in credit-related assets;

- -        develop commercial and consumer credit policies and systems;

- -        monitor compliance with internal underwriting standards;

- -        establish credit-related concentration limits; and

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

ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses at March 31, 2003, was
$1.4 billion, or 2.27% of loans. This compares with $1.6 billion, or 2.51% of
loans, at March 31, 2002. The allowance includes $142 million that was
specifically allocated for impaired loans of $348 million at March 31, 2003,
compared with $176 million that was allocated for impaired loans of $453 million
a year ago. For more information about impaired loans, see Note 8 ("Impaired
Loans and Other Nonperforming Assets") on page 21. At March 31, 2003, the
allowance for loan losses was 157.19% of nonperforming loans, compared with
165.16% at March 31, 2002.

Management estimates the appropriate level of the allowance for loan losses on a
quarterly (and at times more frequent) basis. The methodology used is described
in Note 1 ("Summary of Significant Accounting Policies") under the heading
"Allowance for Loan Losses" on page 58 of Key's 2002 Annual Report to
Shareholders. Briefly, management assigns a specific allowance to an impaired
loan when the carrying amount of the loan exceeds the estimated present value of
related future cash flows and the fair value of any existing collateral. The
allowance for loan losses arising from nonimpaired loans is determined by
applying historical loss rates to existing loans with similar risk
characteristics and by exercising judgment to assess the impact of factors such
as changes in economic conditions, credit policies or underwriting standards,
and the level of credit risk associated with specific industries and markets.
The aggregate balance of the allowance for loan losses at March 31, 2003,
represents management's best estimate of the losses inherent in the loan
portfolio at that date.

The allowance specifically allocated for Key's impaired loans decreased by $34
million, or 19%, over the past twelve months, reflecting Key's continued efforts
to resolve problem credits, combined with stabilizing credit quality trends in
certain portfolios. During the same period, the allowance allocated for
nonimpaired loans decreased by $152 million, or 11%, due largely to slow loan
growth and stabilizing credit quality trends in certain portfolios.

The level of watch credits in several commercial portfolios decreased from
year-ago levels. Watch credits are loans with the potential for further
deterioration in quality based on the debtor's current financial condition and
related ability to perform in accordance with the terms of the loan. The decline
in watch credits in commercial portfolios was due primarily to more conservative
underwriting. The commercial loan portfolios with the most significant decreases
in watch credits were large corporate and media. Other portfolios, including
middle market, showed signs of stability or modest improvement. At the same
time, the healthcare portfolio experienced a higher level of watch credits.
These changes reflect the fluctuations that occur in loan portfolios from time
to time. Management does not believe that such changes require any adjustment to
the allowance at this time.

                                       55
<PAGE>

RUN-OFF LOAN PORTFOLIO. In the second quarter of 2001, a portion of Key's
allowance for loan losses was segregated in connection with management's
decision to discontinue many credit-only relationships in the leveraged
financing and nationally syndicated lending businesses and to facilitate sales
of distressed loans in other portfolios. The segregated portion of the allowance
is being used to exit approximately $2.7 billion in related commitments (which
were moved to the run-off portfolio in May 2001) and to absorb losses incurred
in connection with sales of distressed loans in the continuing portfolio. As
losses are charged to this segregated allowance, Key does not intend to
replenish it. Within the run-off portfolio, approximately $766 million of
commitments (including $496 million of loans outstanding) remained as of March
31, 2003. Only $58 million of these loans were nonperforming. Management
believes that the $17 million remaining in the segregated allowance is
sufficient to absorb the losses inherent in the run-off portfolio. Considering
the progress that has been made in exiting the commitments discussed above,
management anticipates that sometime during the second quarter it will no longer
be necessary to segregate the run-off portfolio and related allowance for
reporting purposes.

Figure 20 summarizes certain asset quality indicators, segregated between Key's
continuing and run-off loan portfolios. Additional information pertaining to the
run-off portfolio is presented in Figure 21.

  FIGURE 20. ASSET QUALITY INDICATORS -- CONTINUING AND RUN-OFF LOAN PORTFOLIOS

<TABLE>
<CAPTION>
                                                                           RUN-OFF LOAN PORTFOLIO AND
MARCH 31,                                CONTINUING LOAN PORTFOLIO         NONREPLENISHED ALLOWANCE        TOTAL LOAN PORTFOLIO
                                        --------------------------        ---------------------------     -----------------------
in millions                                2003               2002        2003                2002         2003             2002
- ----------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                <C>            <C>                 <C>         <C>             <C>
Loans outstanding                       $62,223            $63,015        $496                $941        $62,719         $63,956
Nonperforming loans                         846                765          58                 208            904             973
Net loan charge-offs for the period         130                136          31 (a)              70 (a)        161             206
Allowance for loan losses                 1,404              1,402          17                 205          1,421           1,607
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a)  Includes activity related to the run-off loan portfolio and to the sales of
     distressed loans in the continuing portfolio.

                        FIGURE 21. RUN-OFF LOAN PORTFOLIO

SUMMARY OF CHANGES IN COMMITMENTS
AND LOANS OUTSTANDING

<TABLE>
<CAPTION>
                                                                   TOTAL                    LOANS
in millions                                                     COMMITMENTS             OUTSTANDING
- ----------------------------------------------------------------------------------------------------
<S>                                                             <C>                     <C>
Balance at December 31, 2002                                       $ 940                    $599
    Charge-offs                                                      (10)                    (10)
    Payments, expirations and other changes, net                    (164)                    (93)
- ----------------------------------------------------------------------------------------------------
Balance at March 31, 2003                                          $ 766                    $496
                                                                   =====                    ====
- ------------------------------------------------------------------------------------------------------
</TABLE>

SUMMARY OF CHANGES IN NONPERFORMING LOANS
AND NONREPLENISHED ALLOWANCE FOR LOAN LOSSES (a)

<TABLE>
<CAPTION>
                                                               NONPERFORMING            NONREPLENISHED
in millions                                                        LOANS                  ALLOWANCE
- ------------------------------------------------------------------------------------------------------
<S>                                                            <C>                      <C>
Balance at December 31, 2002                                       $  85                    $ 48
    Loans placed on nonaccrual status                                  5                     N/A
    Charge-offs                                                      (10)                    (31)
    Payments and other changes, net                                  (22)                    N/A
- ------------------------------------------------------------------------------------------------------
Balance at March 31, 2003                                          $  58                    $ 17
                                                                   =====                    ====
- ------------------------------------------------------------------------------------------------------
</TABLE>

(a)  Includes activity related to the run-off loan portfolio and to sales of
     distressed loans in the continuing portfolio.

N/A = Not Applicable

                                       56
<PAGE>

NET LOAN CHARGE-OFFS. Net loan charge-offs for the first quarter of 2003 totaled
$161 million, or 1.04% of average loans, representing the lowest level of net
charge-offs since the first quarter of 2001. These results compare with net
charge-offs of $206 million, or 1.32% of average loans, for the same period last
year. The composition of Key's loan charge-offs and recoveries by type of loan
is shown in Figure 22. The decrease in net charge-offs from the year-ago quarter
occurred primarily in the commercial mortgage portfolio. As shown in Figure 21,
we used $31 million of Key's nonreplenished allowance during the first quarter
of 2003 to absorb losses arising from the run-off loan portfolio and from sales
of distressed loans in the continuing portfolio.

                   FIGURE 22. SUMMARY OF LOAN LOSS EXPERIENCE

<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED MARCH 31,
                                                  ----------------------------
dollars in millions                                    2003             2002
- -------------------------------------------------------------------------------
<S>                                                  <C>              <C>
Average loans outstanding during the period          $ 62,845         $ 63,488
- ------------------------------------------------------------------------------
Allowance for loan losses at beginning of period     $  1,452         $  1,677
Loans charged off:
     Commercial, financial and agricultural                87               97

     Real estate -- commercial mortgage                    11               35
     Real estate -- construction                            4               --
- ------------------------------------------------------------------------------
          Total commercial real estate loans (a)           15               35
     Commercial lease financing                            12               20
- ------------------------------------------------------------------------------
          Total commercial loans                          114              152
     Real estate -- residential mortgage                    2                1
     Home equity                                           14               14
     Consumer -- direct                                    12               14
     Consumer -- indirect lease financing                   5                7
     Consumer -- indirect other                            43               45
- ------------------------------------------------------------------------------
          Total consumer loans                             76               81
- ------------------------------------------------------------------------------
                                                          190              233
Recoveries:
     Commercial, financial and agricultural                 6               10

     Real estate -- commercial mortgage                     5                1
     Real estate -- construction                            3               --
- ------------------------------------------------------------------------------
          Total commercial real estate loans (a)            8                1
     Commercial lease financing                             1                1
- ------------------------------------------------------------------------------
          Total commercial loans                           15               12
     Real estate -- residential mortgage                   --                1
     Home equity                                            1               --
     Consumer -- direct                                     2                2
     Consumer -- indirect lease financing                   1                2
     Consumer -- indirect other                            10               10
- ------------------------------------------------------------------------------
          Total consumer loans                             14               15
- ------------------------------------------------------------------------------
                                                           29               27
- ------------------------------------------------------------------------------
Net loans charged off                                    (161)            (206)
Provision for loan losses                                 130              136
- ------------------------------------------------------------------------------
Allowance for loan losses at end of period           $  1,421         $  1,607
                                                     ========         ========
- ------------------------------------------------------------------------------
Net loan charge-offs to average loans                    1.04%            1.32%
Allowance for loan losses to period-end loans            2.27             2.51
Allowance for loan losses to nonperforming loans       157.19           165.16
- ------------------------------------------------------------------------------
</TABLE>

(a)  See Figure 14 on page 51 and the accompanying discussion on page 50 for
     more information related to Key's commercial real estate portfolio.

                                       57
<PAGE>

NONPERFORMING ASSETS. Figure 23 shows the composition of Key's nonperforming
assets. These assets totaled $968 million at March 31, 2003, and represented
1.54% of loans, other real estate owned (known as "OREO") and other
nonperforming assets, compared with $993 million, or 1.59%, at December 31,
2002, and $1.0 billion, or 1.58%, at March 31, 2002.

          FIGURE 23. SUMMARY OF NONPERFORMING ASSETS AND PAST DUE LOANS

<TABLE>
<CAPTION>
                                                    MARCH 31,      DECEMBER 31,   SEPTEMBER 30,     JUNE 30,        MARCH 31,
dollars in millions                                   2003             2002            2002           2002            2002
- -----------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>            <C>            <C>               <C>             <C>
Commercial, financial and agricultural               $   381         $   448         $   484         $   471         $   470

Real estate -- commercial mortgage                       165             157             149             179             156
Real estate -- construction                               37              50              79              61              77
- ----------------------------------------------------------------------------------------------------------------------------
     Total commercial real estate loans (a)              202             207             228             240             233
Commercial lease financing                                91              69              88              76             100
- ----------------------------------------------------------------------------------------------------------------------------
     Total commercial loans                              674             724             800             787             803
Real estate -- residential mortgage                       39              36              34              34              33
Home equity                                              154             146             124             107              95
Consumer -- direct                                        13              13               6               6               9
Consumer -- indirect lease financing                       5               5               6               7               8
Consumer -- indirect other                                19              19              17              16              25
- ----------------------------------------------------------------------------------------------------------------------------
     Total consumer loans                                230             219             187             170             170
- ----------------------------------------------------------------------------------------------------------------------------
     Total nonperforming loans                           904             943             987             957             973

OREO                                                      62              48              30              40              41
Allowance for OREO losses                                 (3)             (3)             (2)             (2)             (2)
- ----------------------------------------------------------------------------------------------------------------------------
     OREO, net of allowance                               59              45              28              38              39

Other nonperforming assets                                 5               5               2              --              --
- ----------------------------------------------------------------------------------------------------------------------------
     Total nonperforming assets                      $   968         $   993         $ 1,017         $   995         $ 1,012
                                                     =======         =======         =======         =======         =======
- ----------------------------------------------------------------------------------------------------------------------------
Accruing loans past due 90 days or more              $   207         $   198         $   208         $   186         $   203
Accruing loans past due 30 through 89 days               721             790             787             780             897
- ----------------------------------------------------------------------------------------------------------------------------
Nonperforming loans to period-end loans                 1.44%           1.51%           1.57%           1.50%           1.52%
Nonperforming assets to period-end loans
     plus OREO and other nonperforming assets           1.54            1.59            1.61            1.56            1.58
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a)  See Figure 14 on page 51 and the accompanying discussion on page 50 for
     more information related to Key's commercial real estate portfolio.

The reduction in nonperforming loans during the first quarter was attributable
largely to improvement in the structured finance portfolio. Structured finance
refers to a type of lending characterized by a high degree of leverage in the
borrower's financial condition and a relatively low level of tangible loan
collateral. These extensions of credit are included in the commercial, financial
and agricultural component of the loan portfolio represented in Figure 23.

The economic slowdown can be expected to continue to impact Key's loan portfolio
in general, although Key's nonperforming loans are disproportionately
concentrated. At March 31, 2003, two segments of the commercial, financial and
agricultural portfolio (loans to middle market clients and loans underwritten as
structured finance credits) accounted for $222 million and $118 million,
respectively, of Key's nonperforming loans. Although these two segments
comprised only 14% of Key's total loans, they accounted for 38% of total
nonperforming loans.

At March 31, 2003, our 20 largest nonperforming loans totaled $258 million,
representing 29% of total loans on nonperforming status. At March 31, 2003, the
run-off loan portfolio accounted for $58 million, or 6%, of Key's total
nonperforming loans presented in Figure 23.

Information pertaining to the credit exposure by industry classification
inherent in the largest sector of Key's loan portfolio, commercial, financial
and agricultural loans, is presented in Figure 24. Within the transportation
category, Key had approximately $271 million of exposure to the commercial
passenger airline industry at March 31, 2003. The types of activity that caused
the change in Key's nonperforming loans during the last five quarters are
summarized in Figure 25.

                                       58
<PAGE>

             FIGURE 24. COMMERCIAL, FINANCIAL AND AGRICULTURAL LOANS

<TABLE>
<CAPTION>
                                                                       NONPERFORMING LOANS
                                                                      ---------------------
MARCH 31, 2003                           TOTAL          LOANS                    % OF LOANS
dollars in millions                   COMMITMENTS    OUTSTANDING      AMOUNT    OUTSTANDING
- -------------------------------------------------------------------------------------------
<S>                                   <C>            <C>              <C>       <C>
Industry classification:
    Manufacturing                       $ 9,561        $ 3,964        $   148          3.7%
    Services                              6,228          2,544             65          2.6
    Financial services                    4,833            973              3           .3
    Retail trade                          4,171          2,596             25          1.0
    Property management                   2,733          1,086              6           .6
    Wholesale trade                       2,642          1,247             40          3.2
    Public utilities                      1,532            281             --           --
    Building contractors                  1,359            661             23          3.5
    Communications                        1,243            467             12          2.6
    Agriculture/forestry/fishing          1,068            661             17          2.6
    Transportation                          829            464             19          4.1
    Public administration                   753            256             --           --
    Insurance                               723            149             --           --
    Mining                                  409            176             --           --
    Individuals                             196            129              1           .8
    Other                                 2,503          1,638             22          1.3
- ------------------------------------------------------------------------------------------
       Total                            $40,783        $17,292        $   381          2.2%
                                        =======        =======        =======
- ------------------------------------------------------------------------------------------
</TABLE>

              FIGURE 25. SUMMARY OF CHANGES IN NONPERFORMING LOANS

<TABLE>
<CAPTION>
                                              2003                               2002
                                              -----        ------------------------------------------------
in millions                                   FIRST        FOURTH         THIRD        SECOND         FIRST
- -----------------------------------------------------------------------------------------------------------
<S>                                           <C>          <C>            <C>          <C>            <C>
Balance at beginning of period                $ 943         $ 987         $ 957         $ 973         $ 910
     Loans placed on nonaccrual status          237           339           281           254           294
     Charge-offs                               (161)         (186)         (185)         (203)         (206)
     Loans sold                                 (23)          (36)          (25)          (18)           --
     Payments                                   (58)         (149)          (41)          (49)          (22)
     Transfers to OREO                          (19)           --            --            --            (3)
     Loans returned to accrual status           (15)          (13)           --            --            --
     Acquisition                                 --             1            --            --            --
- -----------------------------------------------------------------------------------------------------------
Balance at end of period                      $ 904         $ 943         $ 987         $ 957         $ 973
                                              =====         =====         =====         =====         =====
- -----------------------------------------------------------------------------------------------------------
</TABLE>


                                       59
<PAGE>


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 2003, core deposits averaged $40.4 billion, and represented 55% of
the funds Key used to support earning assets, compared with $37.3 billion and
52% during the same quarter in 2002. The composition of Key's deposits is shown
in Figure 7, which spans pages 42 and 43.

The increase in the level of Key's core deposits over the past twelve months was
due primarily to higher levels of NOW and money market deposit accounts as well
as noninterest-bearing deposits. The growth of these deposits reflected client
preferences for investments that provide high levels of liquidity in a low
interest rate environment. Also contributing to the significant growth in
noninterest-bearing deposits were our intensified cross-sell efforts and the
introduction of new products, including free checking. A more aggressive pricing
structure implemented in mid 2002 supported the growth in savings deposits.
During the same period, time deposits decreased by 12% in part because, like our
competitors, Key reduced the rates paid for them, as the Federal Reserve reduced
interest rates in general.

Purchased funds, comprising large certificates of deposit, deposits in the
foreign branch and short-term borrowings, averaged $14.0 billion during the
first quarter of 2003, compared with $16.3 billion during the year-ago quarter.
As shown in Figure 7, both short-term borrowings and deposits in the foreign
branch have declined as funding sources. This is attributable in part to reduced
funding needs resulting from deposit growth, loan sales, slow demand for loans
and our decision to scale back or discontinue certain types of lending.

Key continues to consider loan sales and securitizations as a funding
alternative when market conditions are favorable.

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
its obligations to depositors, borrowers and creditors at a reasonable cost, on
a timely basis, and without adverse consequences. KeyCorp has sufficient
liquidity when it can pay dividends to shareholders, service its debt, and
support customary corporate operations and activities, including acquisitions,
at a reasonable cost, in a timely manner and without adverse consequences.

LIQUIDITY RISK. There are both direct and indirect circumstances that could
adversely affect Key's liquidity or materially affect the cost of funds. For
example, events unrelated to Key, such as terrorism or war, natural disasters,
political events, or the default or bankruptcy of a major corporation, mutual
fund or hedge fund can have market-wide consequences. A direct (but
hypothetical) event would be a significant downgrade in Key's public credit
rating by a rating agency due to a deterioration in asset quality, a large
charge to earnings, a significant merger or acquisition or other events.
Similarly, market speculation or rumors about Key or the banking industry in
general may cause normal funding sources to withdraw credit until further
information becomes available.

LIQUIDITY FOR KEY. 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.

                                       60
<PAGE>

- -        We have the ability to access the securitization markets for a variety
         of loan types.

- -        Our 911 full-service KeyCenters in 12 states generate a sizable volume
         of core deposits. We monitor deposit flows and use alternative 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 Bank outstanding at March 31, 2003.

The Consolidated Statements of Cash Flow on page 6 summarize Key's sources and
uses of cash by type of activity for the three-month periods ended March 31,
2003 and 2002. As shown in these statements, Key's largest cash flows relate to
both investing and financing activities. Over the past two years, the primary
sources of cash from investing activities have been loan securitizations and
sales and the sales, prepayments and maturities of securities available for
sale. Investing activities that have required the greatest use of cash include
lending and the purchases of new securities.

Over the past two years, the primary source of cash from financing activities
has been the issuance of long-term debt. However, in 2002, deposits were also a
significant source of cash. In each of the past two years, major outlays of cash
have been made to repay debt issued in prior periods and to reduce the levels of
short-term borrowings.

LIQUIDITY FOR KEYCORP. KeyCorp meets its liquidity requirements principally
through regular dividends from affiliate banks. Federal banking law limits the
amount of capital distributions that banks can make to their holding companies
without obtaining prior regulatory approval. A national bank's dividend paying
capacity is affected by several factors, including the amount of its net profits
(as defined by statute) for the two previous calendar years, and net profits for
the current year up to the date of dividend declaration. Due to this constraint,
and the restructuring charges taken by KBNA and Key Bank USA in 2001, as of
January 1, 2003, neither bank could pay dividends or make other capital
distributions to KeyCorp without prior regulatory approval.

In February 2003, KBNA obtained regulatory approval to make capital
distributions to KeyCorp of up to $365 million in the aggregate in the first and
second quarters. During the first quarter, KeyCorp received a $200 million
distribution of surplus in the form of cash from KBNA. Following distribution of
the remaining $165 million, KBNA will not have further dividend paying capacity
until it accumulates at least $130 million of additional net profits. Management
expects this to occur during the second quarter of 2003. Key Bank USA restored
its dividend paying capacity during the first quarter.

At March 31, 2003, KeyCorp had approximately $1.1 billion of cash or short-term
investments available to pay dividends on its common shares, to service its debt
and to finance its corporate operations. Management does not expect current
constraints on KBNA to pay dividends to KeyCorp to have any material effect on
the ability of KeyCorp to pay dividends to its shareholders, to service its debt
or to meet its other obligations.

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. Each of the programs is replaced or
extended from time to time as needed.

Bank note program. During the first three months of 2003, Key's affiliate banks
raised $1.2 billion under Key's bank note program. Of the notes issued during
the quarter, $825 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 of up to
$20.0 billion ($19.0 billion by KBNA and $1.0 billion by Key Bank USA). At March
31, 2003, $16.9 billion was available for future issuance under this program.

                                       61
<PAGE>

Euro note program. Under Key's euro note program, KeyCorp, KBNA and Key Bank USA
may issue both long- and short-term debt of up to $10.0 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 $197 million
of borrowings issued under this program during the first three months of 2003.
At March 31, 2003, $4.0 billion was available for future issuance.

KeyCorp medium-term note program and other securities. KeyCorp may issue, under
a registration statement filed with the Securities and Exchange Commission, up
to $2.2 billion of securities, which could include long- or short-term debt, or
equity securities. Of the amount registered, $1.0 billion has been allocated for
the issuance of medium-term notes. At March 31, 2003, unused capacity under
KeyCorp's universal shelf registration statement totaled $1.8 billion, including
$575 million allocated for the issuance of medium-term notes.

Commercial paper and revolving credit. KeyCorp has a commercial paper program
and a revolving credit agreement with an unaffiliated financial institution that
provide funding availability of up to $500 million and $400 million,
respectively. As of March 31, 2003, there were no borrowings outstanding under
either the commercial paper program or the revolving credit agreement.

Key has favorable debt ratings as shown in Figure 26 below. As long as those
debt ratings are maintained, management believes that, under normal conditions
in the capital markets, future offerings of securities by KeyCorp or its
affiliate banks would be marketable to investors at a competitive cost.

                             FIGURE 26. DEBT RATINGS

<TABLE>
<CAPTION>
                                                                       SENIOR         SUBORDINATED
                                                 SHORT-TERM           LONG-TERM        LONG-TERM            CAPITAL
March 31, 2003                                   BORROWINGS             DEBT              DEBT            SECURITIES
- --------------------------------------------------------------------------------------------------------------------
<S>                                              <C>                  <C>             <C>                 <C>
KEYCORP
Standard & Poor's                                    A-2                  A-              BBB+                 BBB
Moody's                                              P-1                  A2                A3              "Baal"
Fitch                                                 F1                   A                A-                   A

KBNA
Standard & Poor's                                    A-1                   A                A-                 N/A
Moody's                                              P-1                  A1                A2                 N/A
Fitch                                                 F1                   A                A-                 N/A
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

N/A=Not Applicable

CAPITAL

SHAREHOLDERS' EQUITY. Total shareholders' equity at March 31, 2003, was $6.9
billion, up $63 million from the balance at December 31, 2002. Growth in
retained earnings and the issuance of common shares out of the treasury stock
account in connection with employee stock purchase, 401(k), dividend
reinvestment and stock option programs contributed to the increase. Other
factors contributing to the change in shareholders' equity during the first
quarter of 2003 are shown in the Consolidated Statements of Changes in
Shareholders' Equity presented on page 5.

SHARE REPURCHASES. In September 2000, the Board of Directors authorized the
repurchase of up to 25,000,000 common shares, including 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 2003, Key repurchased a total of 2,000,000 of its common
shares at an average price per share of $23.91. At March 31, 2003, a remaining
balance of 11,764,670 shares may be repurchased under the September 2000
authorization.

At March 31, 2003, Key had 69,108,570 treasury shares. Management expects to
reissue those shares over time to support the employee stock purchase, 401(k),
stock option, deferred compensation and dividend

                                       62
<PAGE>

reinvestment plans, and for other corporate purposes. During the first three
months of 2003, Key reissued 836,565 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 7.98% at March 31, 2003,
and 7.87% at March 31, 2002.

Banking industry regulators prescribe minimum capital ratios for bank holding
companies and their banking subsidiaries. Note 14 ("Shareholders' Equity"),
which begins on page 76 of Key's 2002 Annual Report to Shareholders, explains
the implications of failing to meet specific capital requirements imposed by the
banking regulators. Risk-based capital guidelines require a minimum level of
capital as a percent of "risk-weighted assets," which is total assets plus
certain off-balance sheet items, both 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-weighted assets of 4.00%, and total
capital as a percent of risk-weighted assets of 8.00%. As of March 31, 2003,
Key's Tier 1 capital ratio was 8.22%, and its total capital ratio was 12.62%.

Another indicator of capital adequacy, the leverage ratio, is defined as 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 3.00%. All other bank holding
companies must maintain a minimum ratio of 4.00%. As of March 31, 2003, Key had
a leverage ratio of 8.12%.

Federal bank regulators group FDIC-insured depository institutions into five
categories, ranging from "critically undercapitalized" to "well capitalized."
Both of Key's affiliate banks qualified as "well capitalized" at March 31, 2003,
since each exceeded the prescribed thresholds of 10.00% for total capital, 6.00%
for Tier 1 capital and 5.00% for the leverage ratio. If these provisions applied
to bank holding companies, Key would also qualify as "well capitalized" at March
31, 2002. The FDIC-defined capital categories serve a limited supervisory
function. Investors should not treat them as a representation of the overall
financial condition or prospects of Key or its affiliate banks.

Figure 27 presents the details of Key's regulatory capital position at March 31,
2003, December 31, 2002 and March 31, 2002.

                                       63
<PAGE>

             FIGURE 27. CAPITAL COMPONENTS AND RISK-WEIGHTED ASSETS

<TABLE>
<CAPTION>
                                               MARCH 31,      DECEMBER 31,     MARCH 31,
dollars in millions                              2003            2002            2002
- ----------------------------------------------------------------------------------------
<S>                                            <C>            <C>             <C>
TIER 1 CAPITAL
Common shareholders' equity (a)                 $ 6,813        $ 6,738        $ 6,388
Qualifying capital securities                     1,091          1,096          1,232
Less: Goodwill                                    1,142          1,142          1,101
      Other assets (b)                               61             60             35
- ----------------------------------------------------------------------------------------
      Total Tier 1 capital                        6,701          6,632          6,484
- ----------------------------------------------------------------------------------------
TIER 2 CAPITAL
Allowance for loan losses (c)                       986            986          1,017
Qualifying long-term debt                         2,599          2,639          2,338
- ----------------------------------------------------------------------------------------
      Total Tier 2 capital                        3,585          3,625          3,355
- ----------------------------------------------------------------------------------------
      Total risk-based capital                  $10,286        $10,257        $ 9,839
                                                =======        =======        =======

RISK-WEIGHTED ASSETS
Risk-weighted assets on balance sheet           $67,570        $67,051        $68,090
Risk-weighted off-balance sheet exposure         15,615         16,595         15,270
Less: Goodwill                                    1,142          1,142          1,101
      Other assets (b)                              288            251             35
Plus: Market risk-equivalent assets                 170            192            215
- ----------------------------------------------------------------------------------------
      Gross risk-weighted assets                 81,925         82,445         82,439
Less: Excess allowance for loan losses (c)          435            466            590
- ----------------------------------------------------------------------------------------
      Net risk-weighted assets                  $81,490        $81,979        $81,849
                                                =======        =======        =======

AVERAGE QUARTERLY TOTAL ASSETS                  $83,914        $82,735        $80,871
                                                =======        =======        =======

CAPITAL RATIOS
Tier 1 risk-based capital ratio                    8.22%          8.09%          7.92%
Total risk-based capital ratio                    12.62          12.51          12.02
Leverage ratio (d)                                 8.12           8.15           8.13
- ----------------------------------------------------------------------------------------
</TABLE>

(a)  Common shareholders' equity does not include net unrealized gains or losses
     on securities (except for net unrealized losses on marketable equity
     securities) nor net gains or losses on cash flow hedges.

(b)  "Other assets" deducted from Tier 1 capital consists of intangible assets
     (excluding goodwill) recorded after February 19, 1992, deductible portions
     of purchased mortgage servicing rights and deductible portions of
     nonfinancial equity investments.

     "Other assets" deducted from risk-weighted assets consists of intangible
     assets (excluding goodwill) recorded after February 19, 1992, deductible
     portions of purchased mortgage servicing rights and nonfinancial equity
     investments.

(c)  The allowance for loan losses included in Tier 2 capital is limited by
     regulation to 1.25% of gross risk-weighted assets, excluding those with
     low-level recourse.

(d)  This ratio is Tier 1 capital divided by average quarterly total assets less
     goodwill and the nonqualifying intangible assets described in footnote (b).

                                       64
<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK

The information presented in the Market Risk Management section of the
Management's Discussion and Analysis of Financial Condition and Results of
Operations, which begins on page 44, is incorporated herein by reference.

ITEM 4. CONTROLS AND PROCEDURES

As a bank holding company, KeyCorp is subject to the internal control reporting
requirements of the Federal Deposit Insurance Corporation Improvement Act, which
became effective in 1993 ("FDICIA"). FDICIA requirements include an annual
assessment by our Chief Executive Officer and Chief Financial Officer of the
effectiveness of our internal controls over financial reporting, which generally
include those controls relating to the preparation of our financial statements
in conformity with accounting principles generally accepted in the United
States. In addition, under FDICIA, our independent auditors have annually
examined and attested to, without qualification, management's assertions
regarding the effectiveness of our internal controls. Accordingly, we have had
an established process of maintaining and evaluating our internal controls over
financial reporting.

In connection with recent legislation and regulations, our management has also
focused its attention on our "disclosure controls and procedures" which, as
defined by the SEC, are generally those controls and procedures designed to
ensure that financial and nonfinancial information required to be disclosed in
KeyCorp's reports filed with the SEC is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms and that
such information is accumulated and communicated to KeyCorp's management,
including our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure. In light
of the new requirements, we have engaged in a process of reviewing our
disclosure controls and procedures. As a result of our review, and although we
believe that our pre-existing disclosure controls and procedures were effective
in enabling us to comply with our disclosure obligations, we have implemented
enhancements, which include establishing a disclosure committee and generally
formalizing and documenting disclosure controls and procedures that we already
have in place. Any future refinements to our controls and procedures will
continue to build upon our existing framework.

Following the review described above and the establishment of our disclosure
committee and within the 90-day period prior to the filing of this report,
KeyCorp carried out an evaluation, under the supervision and with the
participation of KeyCorp's management, including our Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of
KeyCorp's disclosure controls and procedures. Based upon that evaluation,
KeyCorp's Chief Executive Officer and Chief Financial Officer concluded that the
design and operation of these disclosure controls and procedures were effective.
There have been no significant changes in internal controls that could
significantly affect internal controls subsequent to the date the Chief
Executive Officer and Chief Financial Officer completed their evaluation.

PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

The information presented in Note 10 ("Contingent Liabilities and Guarantees"),
which begins on page 23 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     Form of Award of Restricted Stock (2003 - 2005).

         10.2     Award of Phantom Stock to Henry L. Meyer III (2003 - 2005).

                                       65
<PAGE>

         10.3     KeyCorp Amended and Restated 1991 Equity Compensation Plan
                  (amended as of March 13, 2003).

         10.4     Second Amendment to KeyCorp Excess Cash Balance Pension Plan,
                  effective January 1, 2003.

         10.5     First Amendment to KeyCorp Supplemental Retirement Plan,
                  effective January 1, 2003.

         10.6     Fourth Amendment to KeyCorp Executive Supplemental Pension
                  Plan, effective January 1, 2003.

         15       Acknowledgment Letter of Independent Auditors.

         99.1     Certification of Chief Executive Officer Pursuant to Section
                  906 of the Sarbanes-Oxley Act of 2002.

         99.2     Certification of Chief Financial Officer Pursuant to Section
                  906 of the Sarbanes-Oxley Act of 2002.

(b)      REPORTS ON FORM 8-K

         January 15, 2003 - Item 5. Other Events and Regulation FD Disclosure,
         Item 7. Financial Statements and Exhibits and Item 9. Regulation FD
         Disclosure. Reporting that on January 15, 2003, the Registrant issued a
         press release announcing its earnings results for the three- and
         twelve-month period ended December 31, 2002, and providing a slide
         presentation reviewed in the related conference call/webcast.

         January 24, 2003 - Item 5. Other Events and Regulation FD Disclosure
         and Item 7. Financial Statements and Exhibits. Reporting that on
         January 24, 2003, the Registrant sent a notice to its directors and
         executive officers informing them that the KeyCorp 401(k) Savings Plan
         is changing its recordkeeper and that, as a result of this change,
         there will be a blackout period from February 20, 2003 through March 5,
         2003.

         No other reports on Form 8-K were filed during the three-month period
         ended March 31, 2003.

INFORMATION AVAILABLE ON WEBSITE

KeyCorp makes available free of charge on its website, www.Key.com, its annual
report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K
and amendments to these reports as soon as reasonably practicable after KeyCorp
electronically files such material with, or furnishes it to, the SEC.

                                       66
<PAGE>

                                    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 12, 2003                 /s/ Lee Irving
                                   ------------------------------------
                                   By: Lee Irving
                                       Executive Vice President
                                       and Chief Accounting Officer

                                       67
<PAGE>

                            CERTIFICATION PURSUANT TO
                               SECTION 302 OF THE
                           SARBANES-OXLEY ACT OF 2002

I, Henry L. Meyer III, certify that:

         1.       I have reviewed this quarterly report on Form 10-Q of KeyCorp;

         2.       Based on my knowledge, this quarterly report does not contain
                  any untrue statement of a material fact or omit to state a
                  material fact necessary to make the statements made, in light
                  of the circumstances under which such statements were made,
                  not misleading with respect to the period covered by this
                  quarterly report;

         3.       Based on my knowledge, the financial statements, and other
                  financial information included in this quarterly report,
                  fairly present in all material respects the financial
                  condition, results of operations and cash flows of the
                  registrant as of, and for, the periods presented in this
                  quarterly report;

         4.       The registrant's other certifying officers and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-14 and 15d-14) for the registrant and we have:

                  a)       Designed such disclosure controls and procedures to
                           ensure that material information relating to the
                           registrant, including its consolidated subsidiaries,
                           is made known to us by others within those entities,
                           particularly during the period in which this
                           quarterly report is being prepared;

                  b)       Evaluated the effectiveness of the registrant's
                           disclosure controls and procedures as of a date
                           within 90 days prior to the filing date of this
                           quarterly report (the "Evaluation Date"); and

                  c)       Presented in this quarterly report our conclusions
                           about the effectiveness of the disclosure controls
                           and procedures based on our evaluation as of the
                           Evaluation Date;

         5.       The registrant's other certifying officers and I have
                  disclosed, based on our most recent evaluation, to the
                  registrant's auditors and the audit committee of registrant's
                  board of directors (or persons performing the equivalent
                  function):

                  a)       All significant deficiencies in the design or
                           operation of internal controls which could adversely
                           affect the registrant's ability to record, process,
                           summarize and report financial data and have
                           identified for the registrant's auditors any material
                           weaknesses in internal controls; and

                  b)       Any fraud, whether or not material, that involves
                           management or other employees who have a significant
                           role in the registrant's internal controls; and

         6.       The registrant's other certifying officers and I have
                  indicated in this quarterly report whether or not there were
                  significant changes in internal controls or in other factors
                  that could significantly affect internal controls subsequent
                  to the date of our most recent evaluation, including any
                  corrective actions with regard to significant deficiencies and
                  material weaknesses.

Date: May 12, 2003                      /s/ Henry L. Meyer III
                                        -------------------------
                                        Henry L. Meyer III
                                        Chairman, President and
                                        Chief Executive Officer

                                       68
<PAGE>

                            CERTIFICATION PURSUANT TO
                               SECTION 302 OF THE
                           SARBANES-OXLEY ACT OF 2002

I, Jeffrey B. Weeden, certify that:

         1.       I have reviewed this quarterly report on Form 10-Q of KeyCorp;

         2.       Based on my knowledge, this quarterly report does not contain
                  any untrue statement of a material fact or omit to state a
                  material fact necessary to make the statements made, in light
                  of the circumstances under which such statements were made,
                  not misleading with respect to the period covered by this
                  quarterly report;

         3.       Based on my knowledge, the financial statements, and other
                  financial information included in this quarterly report,
                  fairly present in all material respects the financial
                  condition, results of operations and cash flows of the
                  registrant as of, and for, the periods presented in this
                  quarterly report;

         4.       The registrant's other certifying officers and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-14 and 15d-14) for the registrant and we have:

                  a)       Designed such disclosure controls and procedures to
                           ensure that material information relating to the
                           registrant, including its consolidated subsidiaries,
                           is made known to us by others within those entities,
                           particularly during the period in which this
                           quarterly report is being prepared;

                  b)       Evaluated the effectiveness of the registrant's
                           disclosure controls and procedures as of a date
                           within 90 days prior to the filing date of this
                           quarterly report (the "Evaluation Date"); and

                  c)       Presented in this quarterly report our conclusions
                           about the effectiveness of the disclosure controls
                           and procedures based on our evaluation as of the
                           Evaluation Date;

         5.       The registrant's other certifying officers and I have
                  disclosed, based on our most recent evaluation, to the
                  registrant's auditors and the audit committee of registrant's
                  board of directors (or persons performing the equivalent
                  function):

                  a)       All significant deficiencies in the design or
                           operation of internal controls which could adversely
                           affect the registrant's ability to record, process,
                           summarize and report financial data and have
                           identified for the registrant's auditors any material
                           weaknesses in internal controls; and

                  b)       Any fraud, whether or not material, that involves
                           management or other employees who have a significant
                           role in the registrant's internal controls; and

         6.       The registrant's other certifying officers and I have
                  indicated in this quarterly report whether or not there were
                  significant changes in internal controls or in other factors
                  that could significantly affect internal controls subsequent
                  to the date of our most recent evaluation, including any
                  corrective actions with regard to significant deficiencies and
                  material weaknesses.

Date: May 12, 2003                               /s/ Jeffrey B. Weeden
                                                 -----------------------
                                                 Jeffrey B. Weeden
                                                 Chief Financial Officer

                                       69

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>l00395aexv10w1.txt
<DESCRIPTION>EX-10.1 FORM OF AWARD OF RESTRICTED STOCK
<TEXT>
<PAGE>

                                                                    EXHIBIT 10.1

                                     KEYCORP

                            AWARD OF RESTRICTED STOCK

<<First>> <<Middle>> <<Last>>

         By action of the Compensation Committee ("Committee") of the Board of
Directors of KeyCorp, taken pursuant to the KeyCorp Amended and Restated 1991
Equity Compensation Plan ("Plan") on January 16, 2003, you have been awarded
<<Restricted_Shares>> shares of Restricted Stock. (Unless otherwise indicated,
the capitalized terms used herein shall have the same meaning as set forth in
the Plan.)

                  1. One-half of the Restricted Stock ("the Time Lapse
         Restricted Shares") may not be sold, transferred, otherwise disposed
         of, pledged or otherwise hypothecated until the earlier of the
         following:

                  a)  December 31, 2005; or

                  b) the date not more than two years on or after a Change of
                  Control upon which your employment terminates under
                  circumstances entitling you to receive severance benefits or
                  salary continuation benefits under KeyCorp Separation Pay Plan
                  or under any employment or change of control or similar
                  arrangement or agreement.

                  2. The remaining one-half of the Restricted Stock ("the
         Performance Accelerated Restricted Shares") may not be sold,
         transferred, otherwise disposed of, pledged, or otherwise hypothecated
         until the earliest of the following shall occur:

                  a)  December 31, 2009;

                  b) the percentage increase in KeyCorp's average daily stock
                  price plus dividends for the years 2003 through 2005 exceeds
                  the percentage increase in the average daily stock price plus
                  dividends of the median of the banks which comprise the
                  Standard & Poor's Regional Bank Index (If at any time the
                  Standard & Poor's Regional Bank Index ceases to be published
                  or is altered in such manner as to make its use as a
                  comparative reference inappropriate, as determined by the
                  Committee in its sole discretion, then the Committee shall (i)
                  select such other index as is then available that the
                  Committee deems most appropriate to use as a substitute for
                  the Standard & Poor's Regional Bank Index and (ii) decide
                  whether to use that other index

                                       1

<PAGE>

                  to determine whether the condition of this paragraph has been
                  met); or

                  c) the first day on which a Change of Control occurs on or
                  before December 31, 2005.

                  3. If you shall die or become Disabled prior to the lapse of
         the restrictions on the Time Lapse Restricted Shares, then a pro rata
         number of the Time Lapse Restricted Shares shall be retained by you or
         your estate and become freely transferable upon death or Disability but
         the remainder shall immediately be forfeited upon your death or
         Disability, as the case may be.

                  4. The restrictions shall lapse upon a pro rata number of the
         Time Lapse Restricted Shares when you have been continuously employed
         by KeyCorp and reach age 65 and each year thereafter that you remain
         employed by KeyCorp on your birthday the restrictions shall lapse on
         the lesser of an additional one-third of the Time Lapse Restricted
         Shares or the number of Time Lapse Restricted Shares remaining in your
         award.

                  5. The Time Lapse Restricted Shares shall immediately be
         forfeited if you retire between the ages of 55 and 65 prior to the
         lapse of the restrictions; provided, however, that the Committee may in
         its sole discretion determine that a pro rata number of the Time Lapse
         Restricted Shares shall be retained by you and become freely
         transferable upon retirement but that the remainder shall immediately
         be forfeited upon your retirement.

                  6. If you retire at age 65 or older, die or become Disabled
         prior to the lapse of the restrictions on the Performance Accelerated
         Restricted Shares and such shares thereafter cease to be restricted
         because of the performance of KeyCorp's average daily stock price plus
         dividends, then a pro rata number of the Performance Accelerated
         Restricted Shares shall be retained by you or your estate and become
         freely transferable if and when the restrictions lapse because of the
         performance of KeyCorp's average daily stock price plus dividends but
         the remainder shall immediately be forfeited upon your retirement,
         death, or Disability, as the case may be, and if the restrictions do
         not lapse as a result of performance of KeyCorp's average daily stock
         price plus dividends, the pro rata number of Performance Accelerated
         Restricted Shares retained by you or your estate shall be forfeited on
         December 31, 2005.

                  7. The Performance Accelerated Restricted Shares shall be
         forfeited if you retire between the ages of 55 and 65 prior to the
         lapse of the restrictions; provided, however, that the Committee may in
         its sole discretion determine that a pro rata number of shares shall be
         retained by you and become freely transferable if and when the
         performance of KeyCorp's average daily stock price plus dividends meets
         the requirements of this Agreement but that the remainder of the shares
         shall immediately be forfeited upon your retirement, and if the
         restrictions do not lapse as

                                       2

<PAGE>

         a result of performance of KeyCorp's average daily stock price plus
         dividends, the pro rata number of Performance Accelerated Restricted
         Shares retained by you shall be forfeited on December 31, 2005.

                  8. For purposes of this Agreement, the pro rata number of
         shares of Restricted Stock granted to you shall be based on a fraction
         the numerator of which is the number of months beginning in January
         2003 that are completed prior to your change of status and the
         denominator of which is 36.

                  9. The Restricted Stock shall be immediately forfeited if your
         employment with KeyCorp terminates prior to the date of the lapse of
         the restrictions as set forth earlier in this Agreement unless your
         employment terminates because of death, Disability, or retirement (in
         which case the specific provisions set forth earlier in this Agreement
         shall apply).

                  10. The Restricted Stock upon which the restrictions have
         lapsed nevertheless may not be sold or otherwise transferred until and
         unless you meet KeyCorp's Stock Ownership Guidelines or terminate your
         employment with KeyCorp; provided, however, that notwithstanding the
         foregoing you shall be permitted to sell the number of shares necessary
         to satisfy any withholding tax obligation that may arise in connection
         with the lapse of any restriction on the Restricted Stock.

                  11. If the lapse of the restrictions on the Restricted Stock
         would result in compensation to you that if earned would not be
         deductible by KeyCorp by reason of the disallowance rules of Section
         162(m) of the Internal Revenue Code but would be deductible if deferred
         until a later year, then the Committee in its sole discretion may
         require that all or a portion of the Restricted Stock shall be
         exchanged for an award of equal value which shall be deferred into and
         remain in the KeyCorp Deferred Compensation Plan ("Deferred Plan")
         Common Stock Account pursuant to the provisions of the Deferred Plan;
         provided that if the Committee shall not require a deferral pursuant to
         this paragraph, then any provision in any KeyCorp Plan, Employment
         Agreement, or similar agreement or arrangement requiring a deferral by
         you because of Section 162(m) shall be deemed waived by KeyCorp with
         respect to the Restricted Stock.

                  12. You may elect to exchange Restricted Stock for an award of
         equal value which shall be deferred into the Deferred Plan Common Stock
         Account; provided, however, that such election shall be made at least
         one year prior to the lapse of the restrictions upon the Restricted
         Stock and provided further that the deferred award may not be
         transferred to another account in the Deferred Plan.

                  13. The Committee reserves the right to (at any time and from
         time to time) make adjustments in or alter the performance criteria
         (i.e., daily average stock price performance) set forth in this
         Agreement, in the Committee's sole discretion, to take into account
         changed circumstances which, in the Committee's judgment, make the

                                        3

<PAGE>

         performance criteria inapplicable, inappropriate, or otherwise
         undesirable. Consistent with the provisions of the Plan, the
         determination by the Committee as to whether the performance criteria
         have been satisfied or should be adjusted or altered shall be final and
         conclusive.

                  14. If you are an officer for purposes of Section 16 of the
         Securities Exchange Act of 1934, you shall be permitted to satisfy, in
         whole or in part, any withholding tax obligation that may arise in
         connection with the lapse of any restriction on the Restricted Stock by
         delivering to KeyCorp in Common Shares an amount equal to the
         withholding tax obligation arising with respect to such lapse.

                  15. Notwithstanding any other provisions of this Agreement, if
         you engage in any "harmful activity" (as defined in Section 16 of the
         Plan) prior to or within six months after the termination of your
         employment with KeyCorp, then any and all shares of Restricted Stock
         which have vested on or after one year prior to termination of
         employment shall be immediately forfeited to KeyCorp and the sales
         price realized upon the sale of any such shares of Restricted Stock by
         you shall inure to and be payable to KeyCorp upon demand.

                  16. The provisions of Section 11 of the Plan entitled
         "Acceleration upon Change of Control" shall not apply to the Time Lapse
         Restricted Shares at any time and shall not apply to the Performance
         Accelerated Restricted Shares after December 31, 2005.

         January 16, 2003                              /s/ Thomas E. Helfrich
                                                       -------------------------
                                                       Thomas E. Helfrich
                                                       Executive Vice President

                                       4

<PAGE>

                      ACCEPTANCE OF RESTRICTED STOCK AWARD

         I acknowledge receipt of the above award and in consideration thereof I
accept such award subject to the terms and conditions of the Plan (including,
without limitation, the Harmful Activity provisions thereof) and the
restrictions upon me as set forth hereinafter.

         My agreement to the following restrictions is (i) in addition to (and
not in limitation of) any other agreements, plans, policies, or practices that
are applicable to me as a KeyCorp or Subsidiary (collectively "Key") employee,
and (ii) independent of any Plan provisions.

         1.       I recognize the importance of preserving the confidentiality
                  of Non-Public Information of Key. Therefore, I acknowledge and
                  agree that: (a) during my employment with Key, I will acquire,
                  reproduce, and use such Non-Public Information only to the
                  extent reasonably necessary for the proper performance of my
                  duties; (b) during and after my employment with Key, I will
                  not use, publish, sell, trade or otherwise disclose such
                  Non-Public Information; and (c) upon termination of my
                  employment with Key, I will immediately return to Key all
                  documents, data, and things in my possession or to which I
                  have access that involve such Non-Public Information. I agree
                  to sign nondisclosure agreements in favor of Key and others
                  doing business with Key with whom Key has a confidential
                  relationship.

         2.       I acknowledge and agree that the duties of my position at Key
                  may include the development of Intellectual Property.
                  Accordingly, any Intellectual Property which I create with any
                  of Key's resources or assistance, in whole or in part, during
                  my employment with Key, and which pertains to the business of
                  Key, is the property of Key; and I hereby agree to and do
                  assign to Key all right, title, and interest in and to such
                  Intellectual Property, including, without limitation,
                  copyrights, trademarks, service marks, and patents in or to
                  (or associated with) such Intellectual Property and agree to
                  sign patent applications and assignments thereof, without
                  additional compensation.

         3.       Except in the proper performance of my duties for Key, I
                  acknowledge and agree that from the date hereof through a
                  period of one (1) year after the termination of my employment
                  with Key for any reason, I will not, directly or indirectly,
                  for myself or on behalf of any other person or entity, hire or
                  solicit or entice for employment any Key employee without the
                  written consent of Key, which consent it may grant or withhold
                  in its discretion.

         4.       Except in the proper performance of my duties for Key, I
                  acknowledge and agree that from the date hereof through a
                  period of one (1) year after the termination of my employment
                  with Key for any reason, I will not, directly or indirectly,
                  for myself or on behalf of any other person or entity, call
                  upon, solicit, or do business with (other than for a business
                  which does not

                                       5

<PAGE>

                  compete with any business or business activity conducted by
                  Key) any Key customer or potential customer I interacted with,
                  became acquainted with, or learned of through access to
                  information while I performed services for Key during my
                  employment with Key, without the written consent of Key, which
                  consent it may grant or withhold in its discretion.

         5.       In the event a court of competent jurisdiction determines that
                  any of the restrictions contained in the above numbered
                  paragraphs are excessive because of duration or scope or are
                  otherwise unenforceable, the provisions hereof shall not be
                  void but, with respect to such limitations held to be
                  excessive, they shall be modified to incorporate the maximum
                  limitations such court will permit, not exceeding the
                  limitations contained herein. In the event I engage in any
                  activity in violation hereof, I acknowledge that such activity
                  may cause serious damage and irreparable injury to Key, which
                  will permit Key to terminate my employment (if applicable) and
                  seek monetary damages, and Key shall also be entitled to
                  injunctive, equitable, and other relief. I acknowledge and
                  agree that the validity, interpretation, and performance of
                  this Agreement shall be construed under the laws of Ohio.

BY SIGNING THIS ACCEPTANCE OF RESTRICTED STOCK AWARD, YOU ACKNOWLEDGE THAT YOU
HAVE HAD AMPLE OPPORTUNITY TO READ THIS AGREEMENT AND THE PLAN, MAKE A DILIGENT
INQUIRY, ASK QUESTIONS, AND CONSULT WITH YOUR ATTORNEY IF YOU CHOSE TO DO SO.

______________________________________
Sign Your Name

______________________________________
Date

                                       6

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>4
<FILENAME>l00395aexv10w2.txt
<DESCRIPTION>EX-10.2 AWARD OF PHANTOM STOCK TO HENRY MEYER III
<TEXT>
<PAGE>

                                                                    EXHIBIT 10.2

                                     KEYCORP
                             AWARD OF PHANTOM STOCK

HENRY L. MEYER III

         By action of the Compensation Committee ("Committee") of the Board of
Directors of KeyCorp on January 16, 2003, you have been awarded 40,485 shares of
Phantom Stock.

                  1. Each share of Phantom Stock shall have a value equal to the
         Fair Market Value (as defined in the Amended and Restated 1991 Equity
         Compensation Plan as amended from time to time ("1991 Plan")) of a
         KeyCorp Common Share on the date of this award and shall thereafter
         reflect the gains and losses attributable to such Common Shares.

                  2. An amount equal to the cash dividend payable on an
         equivalent number of Common Shares shall be paid to you on the Phantom
         Stock on each date that a cash dividend is payable on the Common
         Shares; provided however, that additional amounts shall be paid as are
         necessary to put you in the same after-tax position (including the
         gross-up for taxes on the additional amounts paid) as you would have
         been in if for purposes of federal, state, and local taxes you had
         received cash dividends on Common Shares.

                  3. The value of 13,495 shares of the Phantom Stock ("the Time
         Lapse Phantom Shares") shall be paid in cash to you on the earlier of
         the following:

                  a)  December 31, 2005; or

                  b) the date not more than two years on or after a "Change of
                  Control" (as defined in the 1991 Plan) upon which your
                  employment terminates under circumstances entitling you to
                  receive severance benefits or salary continuation benefits
                  under the Corporation's Separation Pay Plan or under any
                  employment or change of control or similar arrangement or
                  agreement.

                  4. The value of the remaining 26,990 shares of the Phantom
         Stock ("the Performance Accelerated Phantom Shares") shall be paid in
         cash to you on the date when the earliest of the following shall occur:

                  a)  December 31, 2009;

                  b) the percentage increase in the Corporation's average daily
                  stock price plus dividends for the years 2003 through 2005
                  exceeds the percentage increase in the average daily stock
                  price plus dividends of the median of the banks which comprise
                  the Standard & Poor's 500 Banks Index (If at any time the
                  Standard & Poor's 500 Banks Index ceases to be published



                                       1
<PAGE>

                  or is altered in such manner as to make its use as a
                  comparative reference inappropriate, as determined by the
                  Committee in its sole discretion, then the Committee shall (i)
                  select such other index as is then available that the
                  Committee deems most appropriate to use as a substitute for
                  the Standard & Poor's 500 Banks Index and (ii) decide whether
                  to use that other index to determine whether the condition of
                  this paragraph has been met); or

                  c)  the first day on which a Change of Control occurs on or
                  before December 31, 2005.

                  5. If you shall die or become disabled prior to the payable
         date for the Time Lapse Phantom Shares, then the value of a pro rata
         number of the Time Lapse Phantom Shares shall be paid to you or your
         estate upon death or "Disability" (as defined in the 1991 Plan) but
         that the remaining shares shall immediately be forfeited upon your
         death or Disability, as the case may be.

                  6. The Time Lapse Phantom Shares shall immediately be
         forfeited if you retire between the ages of 55 and 65 prior to the
         payable date for such Shares; provided, however, that the Committee may
         in its sole discretion determine that the value of a pro rata number of
         the Time Lapse Phantom Shares shall be paid to you upon retirement but
         that the remaining Time Lapse Phantom Shares shall immediately be
         forfeited upon your retirement.

                  7. If you shall die or become Disabled prior to the payable
         date for the Performance Accelerated Phantom Shares and the value of
         such shares thereafter becomes payable because of the performance of
         the Corporation's average daily stock price plus dividends, then the
         value of a pro rata number of the Performance Accelerated Phantom
         Shares shall be paid to you or your estate if and when the value of
         such Shares becomes payable because of the performance of the
         Corporation's average daily stock price plus dividends but the
         remainder of the Performance Accelerated Phantom Shares shall
         immediately be forfeited upon your death or Disability, as the case may
         be, and if the value of such shares does not become payable as a result
         of performance of the Corporation's average daily stock price, the pro
         rata number of Performance Accelerated Phantom Shares shall be
         forfeited on December 31, 2005.

                  8. The Performance Accelerated Performance Shares shall be
         forfeited if you shall retire between the ages of 55 and 65 prior to
         the payable date for such Shares; provided, however, that the Committee
         may in its sole discretion determine that the value of a pro rata
         number of shares shall be paid to you if and when the performance of
         the Corporation's average daily stock price plus dividends meets the
         requirements of this award but that the remainder of the shares shall
         immediately be forfeited upon your retirement, and if the value of such
         Shares does not become payable as a result of performance of the
         Corporation's average daily stock price plus dividends, the pro rata

                                       2

<PAGE>

         number of Performance Accelerated Phantom Shares shall be forfeited on
         December 31, 2005.

                  9. For purposes of this award, the pro rata number of shares
         of Phantom Stock granted to you shall be based on a fraction the
         numerator of which is the number of months beginning in January 2003
         that are completed prior to your change of status and the denominator
         of which is 36.

                  10. The Phantom Stock shall be immediately forfeited if your
         employment with the Corporation terminates prior to the date of payment
         set forth in the preceding provisions of this award unless your
         employment terminates because of death, Disability, or retirement (in
         which case the specific provisions of the foregoing paragraphs of this
         award shall apply).

                  11. If the payment of the value of the Phantom Stock would
         result in compensation to you that if earned would not be deductible by
         the Corporation by reason of the disallowance rules of Section 162(m)
         of the Internal Revenue Code but would be deductible if deferred until
         a later year, then the Committee in its sole discretion may require
         that all or a portion of the Phantom Stock shall be deferred into and
         remain in the Corporation Deferred Compensation Plan ("Deferred Plan")
         Common Stock Account pursuant to the provisions of the Deferred Plan;
         provided that if the Committee shall not require a deferral pursuant to
         this award, then any provision in any Corporation Plan, Employment
         Agreement, or similar agreement or arrangement requiring a deferral by
         you because of Section 162(m) shall be deemed waived by the Corporation
         with respect to the Phantom Stock.

                  12. You may elect to defer the payment of the value of the
         Phantom Stock into the Deferred Plan Common Stock Account; provided,
         however, that such election shall be made at least one year prior to
         the payable date for the Phantom Stock and provided further that the
         deferred award may not be transferred to another account in the
         Deferred Plan.

                  13. The Committee reserves the right to (at any time and from
         time to time) make adjustments in or alter the performance criteria set
         forth in this award, in the Committee's sole discretion, to take into
         account changed circumstances which, in the Committee's judgment, make
         the performance criteria inapplicable, inappropriate, or otherwise
         undesirable and that the determination by the Committee as to whether
         the performance criteria have been satisfied or should be adjusted or
         altered shall be final and conclusive.

                  14. Notwithstanding any other provisions of this award, if you
         engage in any "harmful activity" (as defined in the 1991 Plan) prior
         to or within six months after your termination of employment with the
         Corporation, then any payment of the value of the Phantom Stock on or
         after one year prior to termination of employment shall inure to and be
         payable to the Corporation upon demand.

                                       3

<PAGE>

                  15. Until December 31, 2005 but not thereafter, the payment of
         the value of the Performance Accelerated Phantom Shares shall be
         subject to an "Acceleration upon Change of Control" (as defined in the
         1991 Plan) and the payment of the value of the Time Lapse Phantom
         Shares shall never be subject to an Acceleration upon Change of
         Control.

         January 16, 2003                              /s/ Thomas E. Helfrich
                                                       ------------------------
                                                       Thomas E. Helfrich
                                                       Executive Vice President

                        ACCEPTANCE OF PHANTOM STOCK AWARD

         I acknowledge receipt of the above award and in consideration thereof I
accept such award subject to the restrictions upon me as set forth hereinafter.

         My agreement to the following restrictions is in addition to (and not
in limitation of) any other agreements, plans, policies, or practices that are
applicable to me as a KeyCorp or Subsidiary (collectively "Key") employee.

         1.       I recognize the importance of preserving the confidentiality
                  of Non-Public Information of Key. Therefore, I acknowledge and
                  agree that: (a) during my employment with Key, I will acquire,
                  reproduce, and use such Non-Public Information only to the
                  extent reasonably necessary for the proper performance of my
                  duties; (b) during and after my employment with Key, I will
                  not use, publish, sell, trade or otherwise disclose such
                  Non-Public Information; and (c) upon termination of my
                  employment with Key, I will immediately return to Key all
                  documents, data, and things in my possession or to which I
                  have access that involve such Non-Public Information. I agree
                  to sign nondisclosure agreements in favor of Key and others
                  doing business with Key with whom Key has a confidential
                  relationship.

         2.       I acknowledge and agree that the duties of my position at Key
                  may include the development of Intellectual Property.
                  Accordingly, any Intellectual Property which I create with any
                  of Key's resources or assistance, in whole or in part, during
                  my employment with Key, and which pertains to the business of
                  Key, is the property of Key; and I hereby agree to and do
                  assign to Key all right, title, and interest in and to such
                  Intellectual Property, including, without limitation,
                  copyrights, trademarks, service marks, and patents in or to
                  (or associated with) such Intellectual Property and agree to
                  sign patent applications and assignments thereof, without
                  additional compensation.

                                       4

<PAGE>

         3.       Except in the proper performance of my duties for Key, I
                  acknowledge and agree that from the date hereof through a
                  period of one (1) year after the termination of my employment
                  with Key for any reason, I will not, directly or indirectly,
                  for myself or on behalf of any other person or entity, hire or
                  solicit or entice for employment any Key employee without the
                  written consent of Key, which consent it may grant or withhold
                  in its discretion.

         4.       Except in the proper performance of my duties for Key, I
                  acknowledge and agree that from the date hereof through a
                  period of one (1) year after the termination of my employment
                  with Key for any reason, I will not, directly or indirectly,
                  for myself or on behalf of any other person or entity, call
                  upon, solicit, or do business with (other than for a business
                  which does not compete with any business or business activity
                  conducted by Key) any Key customer or potential customer I
                  interacted with, became acquainted with, or learned of through
                  access to information while I performed services for Key
                  during my employment with Key, without the written consent of
                  Key, which consent it may grant or withhold in its discretion.

         5.       In the event a court of competent jurisdiction determines that
                  any of the restrictions contained in the above numbered
                  paragraphs are excessive because of duration or scope or are
                  otherwise unenforceable, the provisions hereof shall not be
                  void but, with respect to such limitations held to be
                  excessive, they shall be modified to incorporate the maximum
                  limitations such court will permit, not exceeding the
                  limitations contained herein. In the event I engage in any
                  activity in violation hereof, I acknowledge that such activity
                  may cause serious damage and irreparable injury to Key, which
                  will permit Key to terminate my employment (if applicable) and
                  seek monetary damages, and Key shall also be entitled to
                  injunctive, equitable, and other relief. I acknowledge and
                  agree that the validity, interpretation, and performance of
                  this Agreement shall be construed under the laws of Ohio.

BY SIGNING THIS ACCEPTANCE OF PHANTOM STOCK AWARD, YOU ACKNOWLEDGE THAT YOU HAVE
HAD AMPLE OPPORTUNITY TO READ THIS AGREEMENT AND THE PLAN, MAKE A DILIGENT
INQUIRY, ASK QUESTIONS, AND CONSULT WITH YOUR ATTORNEY IF YOU CHOSE TO DO SO.

__________________________________
Sign Your Name

___________________________________
Date

                                       5

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>5
<FILENAME>l00395aexv10w3.txt
<DESCRIPTION>EX-10.3 KEYCORP AMENDED AND RESTATED 1991 EQUITY C
<TEXT>
<PAGE>

                                                                    EXHIBIT 10.3

                              AMENDED AND RESTATED
                          1991 EQUITY COMPENSATION PLAN
                         (AMENDED AS OF MARCH 13, 2003)

         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, if any, required by applicable law
and 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.

                                       1

<PAGE>

         (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

                                       2

<PAGE>

                           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'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

                                       3

<PAGE>

                           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.

         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.

                                       4

<PAGE>

         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.

         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

                                       5

<PAGE>

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

         (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.

                                       6

<PAGE>

         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.

         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

                                       7

<PAGE>

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.

         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.

                                       8

<PAGE>

         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 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.

                                       9

<PAGE>

         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
through January 2, 2009, 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
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.

                                       10

<PAGE>

         (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.

         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.

                                       11

<PAGE>

         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 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

                                       12

<PAGE>

                  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 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.

                                       13

<PAGE>

         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.

         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

                                       14

<PAGE>

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 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

                                       15

<PAGE>

                  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 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

                                       16

<PAGE>

                  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 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

                                       17

<PAGE>

                  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
                  (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

                                       18

<PAGE>

                  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

         (d)      Unless otherwise provided in the relevant Award Instrument,
                  the Employee shall forfeit each Performance Share with respect
                  to

                                       19

<PAGE>

                  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

                                       20

<PAGE>

dividend, stock split, or share combination, and in all other cases, as of such
date as the Committee may determine.

         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

                                       21

<PAGE>

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.

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

                                       22

<PAGE>

         was engaged in for Key during the one year period prior to the
         termination of employment.

                  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.

                                       23

<PAGE>

         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.

         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.

                                       24

<PAGE>

         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.

         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.      DURATION AND TERMINATION OF THE PLAN. The Plan shall remain in
effect through June 30, 2012, and shall then terminate, unless terminated at an
earlier date by action of the Board of Directors or a duly authorized Committee
thereof; provided, however, that termination of the Plan shall not affect Awards
granted prior thereto.

         28.      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

                                       25

<PAGE>

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 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. The Plan was amended on November
14, 2001 to amend Section 2.2 to change the consideration required for
Restricted Stock. The Plan was amended on November 21, 2002 to terminate the
Plan on June 30, 2012. The Plan was amended on March 13, 2003 to amend Section 5
to terminate on January 2, 2009 the automatic replenishment of available Common
Shares.

                                       26

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>6
<FILENAME>l00395aexv10w4.txt
<DESCRIPTION>EX-10.4 SECOND AMENDMENT TO KEYCORP EXCESS CASH BA
<TEXT>
<PAGE>

                                                                    EXHIBIT 10.4

                                     SECOND
                                    AMENDMENT
                                 TO THE KEYCORP
                        EXCESS CASH BALANCE PENSION PLAN

         WHEREAS, KeyCorp has established the KeyCorp Excess Cash Balance
Pension Plan (the "Plan"), and

         WHEREAS, the Board of Directors of KeyCorp has authorized its
Compensation Committee to permit amendments to the Plan, and

         WHEREAS, the Compensation Committee of the Board of Directors of
KeyCorp has determined it desirable to amend the Plan and has accordingly
authorized the execution of this Second Amendment,

         NOW, THEREFORE, pursuant to such action of the Compensation Committee,
the Plan is hereby amended as follows:

         1.       Article III, Section 3.1 shall be amended to delete it in its
     entirety and to substitute therefore the following:

                  "3.1 ELIGIBILITY. A Participant shall be eligible for an
                  Excess Pension Benefit hereunder if the Participant (i)
                  terminates employment with an Employer on or after age 55 with
                  five or more years of Credited Service, (ii) terminates his or
                  her active employment with an Employer upon becoming Disabled
                  after completing five or more years of Credited Service and
                  disability benefits have ceased under the KeyCorp Long-Term
                  Disability Plan due to the Participant's election of an Early
                  or Normal Retirement under the Pension Plan, or (iii) dies
                  after completing five years of Credited Service, and has a
                  Beneficiary who is eligible for a benefit under the Pension
                  Plan.

                  Effective January 1, 2003 a Participant shall also be eligible
                  for an Excess Pension Benefit if the Participant becomes
                  involuntarily terminated from his or her employment with an
                  Employer for reasons other than the Participant's Discharge
                  for Cause, and (i) as of the Participant's termination date
                  the Participant has a minimum of twenty-five (25) or more
                  years of Credited Service, and (ii) the Participant enters
                  into a written non-solicitation and non-compete agreement
                  under terms that are satisfactory to the Employer.

                  For purposes of this Section 3.1, hereof, the term "Discharge
                  for Cause" shall mean a Participant's employment termination
                  that is the result of the Participant's violation of the
                  Employer's policies, practices or procedures, violation of
                  city, state, or federal law, or failure to perform his or her
                  assigned job duties in a satisfactory manner. The Employer in
                  its sole and absolute discretion shall determine whether a
                  Participant has been Discharged for Cause.

                                       1

<PAGE>

                  Notwithstanding any of the forgoing provisions of this Section
                  3.1, however, a Participant's eligibility for an Excess
                  Pension Benefit shall be subject to the election requirements
                  of Article V of the Plan."

         2.       The amendment set forth in Paragraph 1 shall be effective as
                  of January 1, 2003.

         3.       Except as otherwise amended herein, the Plan shall remain in
                  full force and effect.


         IN WITNESS WHEREOF, KeyCorp has caused this Second Amendment to the
Plan to be executed by its duly authorized officer to be effective as of the
first day of January, 2003.

                                    KEYCORP

                                    By: /s/ Steven N. Bulloch
                                       ------------------------------
                                    Title: Assistant Secretary
                                          ---------------------------
                                       2

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.5
<SEQUENCE>7
<FILENAME>l00395aexv10w5.txt
<DESCRIPTION>EX-10.5 FIRST AMENDMENT TO KEYCORP SUPPLEMENTAL RT
<TEXT>
<PAGE>

                                                                    EXHIBIT 10.5

                                      FIRST
                                    AMENDMENT
                                 TO THE KEYCORP
                          SUPPLEMENTAL RETIREMENT PLAN

         WHEREAS, KeyCorp has established the KeyCorp Supplemental Retirement
Plan (the "Plan"), and

         WHEREAS, the Board of Directors of KeyCorp has authorized its
Compensation Committee to permit amendments to the Plan, and

         WHEREAS, the Compensation Committee of the Board of Directors of
KeyCorp has determined it desirable to amend the Plan and has accordingly
authorized the execution of this First Amendment,

         NOW, THEREFORE, pursuant to such action of the Compensation Committee,
the Plan is hereby amended as follows:

         1.       ARTICLE III, Section 3.1, shall be amended to delete it in its
entirety and to substitute therefore the following:

                           "3.1      ELIGIBILITY. A Grandfathered Employee shall
                  be eligible for a Supplemental Retirement Benefit hereunder if
                  the Grandfathered Employee (i) retires on or after age 65 with
                  five or more years of Benefit Service, (ii) terminates
                  employment with an Employer on or after age 55 with ten or
                  more years of Benefit Service, (iii) terminates his or her
                  active employment with an Employer upon becoming Disabled
                  after completing five or more years of Benefit Service and
                  disability benefits have ceased under the KeyCorp Long-Term
                  Disability Plan due to the Grandfathered Employee's election
                  for Early or Normal Retirement under the Retirement Plan, or
                  (iv) dies after completing five or more years of Benefit
                  Service, and has a Beneficiary who is eligible for a benefit
                  under the Retirement Plan.

                  Effective January 1, 2003 a Grandfathered Employee shall also
                  be eligible for a Supplemental Retirement Benefit if the
                  Grandfathered Employee becomes involuntarily terminated from
                  his or her employment with an Employer for reasons other than
                  the Grandfathered Employee's Discharge for Cause, and (i) as
                  of the Grandfathered Employee's termination date the
                  Grandfathered Employee has a minimum of twenty-five (25) or
                  more years of Benefit Service, and (ii) the Grandfathered
                  Employee enters into a written non-solicitation and
                  non-compete agreement under terms that are satisfactory to the
                  Employer.

                  For purposes of this Section 3.1, hereof, the term "Discharge
                  for Cause" shall mean a Grandfathered Employee's employment
                  termination that is the result of the Grandfathered Employee's
                  violation of the Employer's policies, practices or procedures,
                  violation of city, state, or federal law, or failure to
                  perform his or her assigned job duties in a satisfactory
                  manner. The Employer in its sole and absolute discretion shall

                                       1

<PAGE>

                  determine whether a Grandfathered Employee has been Discharged
                  for Cause."

         2.       The amendment set forth in Paragraph 1 shall be effective as
of January 1, 2003.

         3.       Except as otherwise amended herein, the Plan shall remain in
full force and effect.

         IN WITNESS WHEREOF, KeyCorp has caused this First Amendment to the Plan
to be executed by its duly authorized officer to be effective as of the first
day of January, 2003.

                                    KEYCORP

                                    By: /s/ Steven N. Bulloch
                                       ------------------------------
                                    Title: Assistant Secretary
                                          ---------------------------

                                       2

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.6
<SEQUENCE>8
<FILENAME>l00395aexv10w6.txt
<DESCRIPTION>EX-10.6 FOURTH AMENDMENT TO KEYCORP EXECUTIVE SUPP
<TEXT>
<PAGE>

                                                                    EXHIBIT 10.6

                                     FOURTH
                                    AMENDMENT
                                 TO THE KEYCORP
                       EXECUTIVE SUPPLEMENTAL PENSION PLAN

         WHEREAS, KeyCorp has established the KeyCorp Executive Supplemental
Pension Plan (the "Plan"), and

         WHEREAS, the Board of Directors of KeyCorp has authorized its
Compensation Committee to permit amendments to the Plan, and

         WHEREAS, the Compensation Committee of the Board of Directors of
KeyCorp has determined it desirable to amend the Plan and has accordingly
authorized the execution of this Fourth Amendment,

         NOW, THEREFORE, pursuant to such action of the Compensation Committee,
the Plan is hereby amended as follows:

         1.       Article III, Section 3.1 shall be amended to delete it in its
entirety and to substitute therefore the following:

                  "3.1      ELIGIBILITY. Subject to the provisions of Article V
                  hereof, a Participant shall be eligible for a Supplemental
                  Pension Benefit hereunder if the Participant (i) retires on or
                  after age 65 with five or more years of Credited Service, (ii)
                  terminates employment with an Employer on or after age 55 with
                  ten or more years of Credited Service, (iii) terminates active
                  employment with an Employer upon becoming Disabled after
                  completing five or more years of Credited Service and
                  disability benefits have ceased under the KeyCorp Long-Term
                  Disability Plan due to the Participant's election for Early or
                  Normal Retirement under the Pension Plan, or (iv) dies after
                  completing five years of Credited Service, and has a
                  Beneficiary who is eligible for a benefit under the Pension
                  Plan.

                  Effective January 1, 2003 a Participant shall also be eligible
                  for an Supplemental Pension Benefit if the Participant becomes
                  involuntarily terminated from his or her employment with an
                  Employer for reasons other than the Participant's Discharge
                  for Cause, and (i) as of the Participant's termination date
                  the Participant has a minimum of twenty-five (25) or more
                  years of Credited Service, and (ii) the Participant enters
                  into a written non-solicitation and non-compete agreement
                  under terms that are satisfactory to the Employer.

                  For purposes of this Section 3.1, hereof, the term "Discharge
                  for Cause" shall mean a Participant's employment termination
                  that is the result of the Participant's violation of the
                  Employer's policies, practices or procedures, violation of
                  city, state, or federal law, or failure to perform his or her
                  assigned job duties in a satisfactory manner. The Employer in
                  its sole and absolute discretion shall determine whether a
                  Participant has been Discharged for Cause.

                                       1

<PAGE>

                  Notwithstanding any of the forgoing provisions of this Section
                  3.1, however, a Participant's eligibility for an Supplemental
                  Pension Benefit shall be subject to the election requirements
                  of Article V of the Plan."

         2.       The amendment set forth in Paragraph 1 shall be effective as
of January 1, 2003.

         3.       Except as otherwise amended herein, the Plan shall remain in
full force and effect.

         IN WITNESS WHEREOF, KeyCorp has caused this Fourth Amendment to the
Plan to be executed by its duly authorized officer to be effective as of the
first day of January, 2003.

                                        KEYCORP

                                        By: /s/ Steven N. Bulloch
                                           ------------------------------
                                        Title: Assistant Secretary
                                              ---------------------------

                                       2


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-15
<SEQUENCE>9
<FILENAME>l00395aexv15.txt
<DESCRIPTION>EX-15 ACKNOWLEDGEMENT LTR OF INDEPENDENT AUDITORS
<TEXT>
<PAGE>

                                                                      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 14, 2003, 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,
2003.

Form S-3 No. 33-58405
Form S-3 No. 333-10577          (Post-Effective Amendment No. 1)
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. 333-50802
Form S-3 No. 333-56258
Form S-3 No. 333-63104
Form S-3 No. 333-73380          (Amendment No. 1)
Form S-3 No. 333-88934          (Amendment No. 1)

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. 333-99493
Form S-8 No. 333-99495

Form S-8 No. 33-31569           (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. 33-44657           (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, 2003

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>10
<FILENAME>l00395aexv99w1.txt
<DESCRIPTION>EX-99.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER
<TEXT>
<PAGE>

                                                                    Exhibit 99.1

                            CERTIFICATION PURSUANT TO
                               SECTION 906 OF THE
                           SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. 1350, the undersigned officer of KeyCorp (the "Company"),
hereby certifies that the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2003 (the "Report") fully complies with the requirements
of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934
and that the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.

May 12, 2003
                                                       /s/ Henry L. Meyer III
                                                       ------------------------
                                                       Henry L. Meyer III
                                                       Chairman, President and
                                                       Chief Executive Officer

A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>11
<FILENAME>l00395aexv99w2.txt
<DESCRIPTION>EX-99.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER
<TEXT>
<PAGE>

                                                                    Exhibit 99.2

                            CERTIFICATION PURSUANT TO
                               SECTION 906 OF THE
                           SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. 1350, the undersigned officer of KeyCorp (the "Company"),
hereby certifies that the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2003 (the "Report") fully complies with the requirements
of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934
and that the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.

May 12, 2003
                                                 /s/ Jeffrey B. Weeden
                                                 -----------------------
                                                 Jeffrey B. Weeden
                                                 Chief Financial Officer

A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
