KEY IMPROVES ASSET QUALITY Key reduced net loan charge-offs by $232 million in 2003, thanks to its aggressive management of problem loans and ongoing work to rebuild a strong credit culture. These internal improvements — combined with an accelerating economy that should fuel demand for credit and increase the likelihood of repayment — position Key for stronger earnings growth. HIGHER QUALITY PORTFOLIO STRONGER COVERAGE Allowance for loan losses to nonperforming loans Net loan charge-offs to average loans This ratio identiGLYPH<222>es the percentage of KeyGLYPH<213>s loans that were charged off during the quarter. Every basis point of improvement equals approximately $6.3 million of annual pre-tax income. Key Peer Median, S&P Regional & DiversiGLYPH<222>ed Bank Indices 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 4Q03 0.00% 0.25% 0.50% 0.75% 1.00% 1.25% 1.50% 1.37% 1.32% 1.27% 1.16% 1.18% 1.04% 0.90% 0.78% 3Q03 0.77% This is one ratio Key uses to identify the relative size of KeyGLYPH<213>s cushion for absorbing  loan losses. 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 4Q03 0% 50% 100% 150% 200% 250% 3Q03 184% 165% 161% 151% 154% 157% 168% 203% 177% Key Peer Median, S&P Regional & DiversiGLYPH<222>ed Bank Indices portfolio will reveal our underlying strength in asset generation. But addressing troubled credits is an interim goal. Our ultimate aim is to regain our long-held reputation for credit quality. To this end, we have taken several important actions. We have: -Adopted more advanced risk-man- agement techniques. Among other benefits, they mean that Key is less likelyto either under- or over-price its loans. -Reinforced the importance of prudent risk-taking among our RMs, especially those who serve commercial clients.  -Begun retaining far more historical data about our clients, which helps us understand their strengths, weak- nesses and likely repayment behavior. -Strengthened the tie between incen- tive-compensation payouts and credit quality.  Board and management changes 2004 priorities I would like to acknowledge the contributions of Cecil D. Andrus, who will retire from the Board at this year’s annual shareholders meeting. Mr. New to our management team is Paul N. Harris, who joined Key in February 2003 as general counsel, a role that was expanded in June to include corporate secretary. The part- ner-in-charge of the Cleveland office Joining our Board in December was Lauralee E. Martin, chief financial officer of Jones Lang LaSalle Inc., (NYSE: JLL). Key will benefit from Mrs. Martin’s outstanding management skills, wealth of financial expertise and deep understanding of our industry. We welcome her to our Board. We also will miss the contributions of Dr. Shirley A. Jackson, president, Rensselaer Polytechnic Institute. Dr. Jackson, who joined our Board in March 2002, was asked in late 2003 to serve on the newly reconfigured Board of the New York Stock Exchange. In light of the significant demands of this new role, she resigned from Key’s Board. We wish her much success. Andrus, a life-long public servant and current chairman of the Andrus Center for Public Policy at Boise State University, has served Key as a director since 1996. We will miss his participation. of Thompson Hine LLP since 1999, Paul’s management ability, extensive experience as a corporate lawyer and his expertise in corporate governance matters will serve Key well. Paul replaces John Mancuso, who retired in February 2003 as Key’s general counsel. Since 1990, he provided Key with excellent legal counsel and judg- ment. We thank John for his contri- butions and wish him well in retirement. Our priorities for 2004 are to grow revenue, manage expenses and improve credit quality.  I am confident that our progress against each will accelerate, largely because the interests of our employees and managers are aligned with those of investors. High levels of stock ownership and a pay-for-performance system support that alignment. In short, Key is well positioned for improved financial results – a view our directors endorsed when they increased Key’s dividend for the 39th consecutive year, a record very few public companies can match.  Key 2003 GLYPH<c5412> 5 NEXT PAGE BACK TO CONTENTS PREVIOUS PAGE SEARCH