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LIHTC investments. For more than ten years, Key has also made investments directly in LIHTC operating partnerships through the Retail Banking line of business. As a limited partner in these operating partnerships, Key is allocated tax credits and deductions associated with the underlying properties. At December 31, 2003, assets of these unconsolidated LIHTC operating partnerships totaled approximately $850 million. Key’s maximum exposure to loss from its involvement with these partnerships is the unamortized investment balance of $153 million at December 31, 2003, plus $48 million of tax credits claimed, but subject to recapture. During the fourth quarter of 2003, Key did not obtain any significant additional direct interests in LIHTC operating partnerships. 

Key has additional investments in LIHTC operating partnerships as a result of consolidating the LIHTC guaranteed and nonguaranteed funds discussed above. Total assets of these operating partnerships are estimated at $2.2 billion. The tax credits and deductions associated with these properties are allocated to the funds’ investors based on their ownership percentages. Key’s exposure to loss from its involvement with these funds is discussed above. In October 2003, management elected to discontinue new projects under this program. 

Impaired loans totaled $340 million at December 31, 2003, compared with $610 million at December 31, 2002. Impaired loans averaged $492 million for 2003 and $653 million for 2002. 

Key’s nonperforming assets were as follows: 

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

Key evaluates most impaired loans individually as described in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Allowance for Loan Losses” on page 51. At December 31, 2003, Key had $183 million of impaired loans with a specifically allocated allowance for loan losses of $73 million, and $157 million of impaired 

Effective January 1, 2002, Key adopted SFAS No. 142, “Goodwill and Other Intangible Assets,” which prohibits the amortization of goodwill and intangible assets deemed to have indefinite lives. Key’s total intangible asset amortization expense was $13 million for 2003, $11 

## 9. IMPAIRED LOANS AND OTHER NONPERFORMING ASSETS 

## 10. GOODWILL AND OTHER INTANGIBLE ASSETS 

Commercial and residential real estate investments and principal investments. Through the KeyBank Real Estate Capital line of business, Key makes mezzanine investments in construction, acquisition and rehabilitation projects that Key has determined to be VIEs. Key receives underwriting and other fees from these VIEs and, for certain projects, may also provide the senior financing. 

Key’s principal investing unit makes direct investments in equity and mezzanine instruments offered by individual companies, some of which Key has determined to be VIEs. These investments are held by nonregistered investment companies subject to the provisions of the AICPA Audit and Accounting Guide, “Audits of Investment Companies” (“Audit Guide”). In October 2003, the FASB issued final guidance that defers the effective date of Interpretation No. 46 for such nonregistered investment companies until the AICPA clarifies the scope of the Audit Guide. As a result, Key is not currently applying the accounting or disclosure provisions of Interpretation No. 46 to its real estate mezzanine and principal investments, which remain unconsolidated. 

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 without a specifically allocated allowance. 

Key does not perform a loan-specific impairment valuation for smaller- balance, homogeneous, nonaccrual loans (shown in the preceding table as “Other nonaccrual loans”). These typically are smaller-balance commercial loans and 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. 

The following table shows the amount by which loans classified as nonperforming at December 31 reduced Key’s expected interest income. 

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million for 2002 and $245 million for 2001. Estimated amortization expense for intangible assets subject to amortization for each of the next five years is as follows: 2004 — $10 million; 2005 — $5 million; 2006 — $5 million; 2007 — $4 million; and 2008 — $4 million. 

