MANAGEMENTGLYPH<213>S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES FIGURE 32. COMMERCIAL, FINANCIAL AND AGRICULTURAL LOANS Liquidity Liquidity for Key Nonperforming Loans December 31, 2003 Total Loans % of Loans dollars in millions Commitments Outstanding Amount Outstanding Industry classiGLYPH<222>cation: Manufacturing $ 9,769 $ 3,191 $ 97 3.0% Services 6,820 2,485 52 2.1 Retail trade 4,752 2,816 10 .4 Financial services 4,438 918 1 .1 Property management 3,231 1,159 4 .3 Wholesale trade 2,780 1,224 12 1.0 Public utilities 2,493 420 2 .5 Building contractors 1,462 618 27 4.4 Insurance 1,331 120 GLYPH<209> GLYPH<209> Communications 1,289 414 13 3.1 Agriculture/forestry/GLYPH<222>shing 1,047 671 11 1.6 Transportation 841 404 9 2.2 Public administration 662 223 GLYPH<209> GLYPH<209> Mining 385 135 2 1.5 Individuals 152 110 GLYPH<209> GLYPH<209> Other 2,437 2,104 12 .6 Total $43,889 $17,012 $252 1.5% 2003 Quarters in millions 2003 Fourth Third Second First 2002 BALANCE AT BEGINNING OF PERIOD $ 943 $ 795 $ 837 $ 904 $ 943 $ 910 Loans placed on nonaccrual status 756 111 240 168 237 1,168 Charge-offs (548) (123) (123) (141) (161) (780) Loans sold (178) (40) (73) (42) (23) (79) Payments (203) (46) (73) (26) (58) (261) Transfers to OREO (26) GLYPH<209> (6) (1) (19) (3) Loans returned to accrual status (50) (3) (7) (25) (15) (13) Acquisition GLYPH<209> GLYPH<209> GLYPH<209> GLYPH<209> GLYPH<209> 1 BALANCE AT END OF PERIOD $ 694 $ 694 $ 795 $ 837 $ 904 $ 943 FIGURE 33. SUMMARY OF CHANGES IN NONPERFORMING LOANS Key’s liquidity could be adversely affected by both direct and indirect circumstances. An example of a direct (but hypothetical) event would be a significant downgrade in Key’s public credit rating by a rating agency due to deterioration in asset quality, a large charge to earnings, or a significant merger or acquisition. Examples of indirect (but hypothetical) events unrelated to Key that could have market-wide consequences would be terrorism or war, natural disasters, political events, or the default or bankruptcy of a major corporation, mutual fund or hedge fund. Similarly, market speculation or rumors about Key or the banking industry in general may cause normal funding sources to tighten or withdraw for a period of time. 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. •W e 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. •W e try to structure the maturities of our loans so we receive a relatively consistent stream of payments from borrowers. •W e have the ability to access the securitization markets for a variety of loan types. • Our 906 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 section entitled “Deposits and other sources of funds,” which begins on page 29. NEXT PAGE PREVIOUS PAGE SEARCH BACK TO CONTENTS 41