NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES 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 equity and to liabilities based on their assumed maturity, prepayment and/or repricing characteristics. The net effect of this funds transfer pricing is included in the “Other Segments” columns. •I ndirect 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, 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 51.  •I ncome 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). • 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. 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 that occurred during 2003:  SUPPLEMENTARY INFORMATION (CONSUMER BANKING LINES OF BUSINESS) SUPPLEMENTARY INFORMATION (CORPORATE AND INVESTMENT BANKING LINES OF BUSINESS) 60 NEXT PAGE PREVIOUS PAGE SEARCH BACK TO CONTENTS Year ended December 31, Retail Banking Small Business Consumer Finance dollars in millions 2003 2002 2001 2003 2002 2001 2003 2002 2001 Total revenue (taxable equivalent) $1,337 $1 , 317 $ 1,335 $ 397 $ 382 $ 380 $ 617 $ 580 $ 595 Provision for loan losses 60 67 58 67 59 44 153 174 200 Noninterest expense 835 817 858 190 181 186 366 344 341 Net income 276 271 254 88 89 92 61 39 5 Average loans 9,973 8,784 7,675 4,403 4,349 4,487 14,529 14,749 15,589 Average deposits 30,014 29,887 31,480 4,396 3,723 3,549 363 330 181 Net loan charge-offs 60 67 60 67 59 44 153 173 246 Return on average allocated equity 43.33% 47.63% 43.34% 21.52% 23.80% 26.59% 5.16% 3.40% .39% Average full-time equivalent employees 6,134 6,124 6,378 397 326 320 1,914 1,993 1,970 Year ended December 31, Corporate Banking KeyBank Real Estate Capital Key Equipment Finance dollars in millions 2003 2002 2001 2003 2002 2001 2003 2002 2001 Total revenue (taxable equivalent) $ 889 $ 944 $ 1,015 $ 383 $ 381 $ 373 $ 282 $ 234 $ 202 Provision for loan losses 167 169 96 7 7 10 30 62 33 Noninterest expense 474 465 498 144 134 122 101 88 95 Net income 155 193 259 145 150 150 94 53 43 Average loans 13,732 15,626 17,880 7,337 7,775 7,930 6,802 5,878 5,299 Average deposits 3,605 2,787 2,584 796 599 525 13 9 7 Net loan charge-offs 212 397 238 7 7 10 30 62 57 Return on average allocated equity 7.86% 9.31% 13.03% 16.63% 19.56% 20.03% 18.61% 12.13% 10.19% Average full-time equivalent employees 1,191 1,267 1,355 655 561 488 613 618 707