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Net loan charge-offs. Net loan charge-offs for 2003 were $548 million, or .87% of average loans, representing the lowest level of net charge-offs since 2000. These results compare with net charge-offs of $780 million, or 1.23% of average loans, for 2002, and $673 million, or 1.02% of average loans, for 2001. The composition of Key’s loan charge-offs and recoveries by type of loan is shown in Figure 30. The decrease in net charge-offs for 2003 occurred primarily in the healthcare, structured finance and large corporate segments of the commercial loan portfolio. Structured finance refers to a type of lending characterized by a high degree of leverage in the borrower’s financial condition and a relatively low level of tangible loan collateral. 

Included in net charge-offs for 2003, 2002 and 2001 are $47 million, $227 million and $215 million, respectively, of losses charged to the now depleted portion of Key’s allowance for loan losses that had been segregated in connection with management’s decision to discontinue many credit-only relationships in the leveraged financing and nationally syndicated lending businesses and to facilitate sales of distressed loans in other portfolios. Considering the progress that has been made in exiting the commitments related to these two portfolios, management believes that it is no longer necessary to segregate the run-off portfolio for reporting purposes. 

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See Figure 15 and the accompanying discussion on page 26 for more information related to KeyGLYPH<213>s commercial real estate portfolio. 

