NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES 2. EARNINGS PER COMMON SHARE Key calculates its basic and diluted earnings per common share as follows:  Year ended December 31, dollars in millions, except per share amounts 2003 2002 2001 EARNINGS Income before cumulative effect of accounting changes $903 $976 $157 Net income 903 976 132 WEIGHTED AVERAGE COMMON SHARES Weighted-average common shares outstanding (000) 422,776 425,451 424,275 Effect of dilutive common stock options (000) 3,381 5,252 5,298 Weighted-average common shares and potential common shares outstanding (000) 426,157 430,703 429,573 EARNINGS PER COMMON SHARE Income per common share before cumulative effect of accounting changes $2.13 $2.29 $.37 Net income per common share 2.13 2.29 .31 Income per common share before cumulative effect of accounting changes GLYPH<209> assuming dilution 2.12 2.27 .37 Net income per common share GLYPH<209> assuming dilution 2.12 2.27 .31 3. ACQUISITIONS AND DIVESTITURE Key completed the following acquisitions and divestiture during the past three years. 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, this 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 to Key, have not been disclosed. On January 2, 2001, Key purchased The Wallach Company, Inc., an investment banking firm headquartered in Denver, Colorado. Key paid the purchase price of approximately $11 million using a combination of cash and 370,830 Key common shares. Goodwill of approximately $9 million was recorded and, prior to the adoption of SFAS No. 142, “Goodwill and Other Intangible Assets,” on January 1, 2002, was being amortized using the straight-line method over a period of 10 years. On July 1, 2003, Key acquired NewBridge Partners LLC, a growth equity investment management firm headquartered in New York City with managed assets of $1.8 billion at the date of acquisition. The terms of the transaction are not material to Key and have not been disclosed. 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 KBNA. On June 12, 2002, Key sold its 401(k) plan record-keeping business. Key recognized a gain of $3 million ($2 million after tax) on the transaction, which is included in “other income” on the income statement. 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 PREVIOUS PAGE SEARCH BACK TO CONTENTS NEXT PAGE 57 401(k) Recordkeeping Business  DIVESTITURE Conning Asset Management  Union Bankshares, Ltd. The Wallach Company, Inc. ACQUISITIONS NewBridge Partners LLC