KeyBank 2007 Annual Report Download - page 90

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES
of new activities, and could make our clients and potential investors less
confident. As of December 31, 2007, KeyCorp and KeyBank met all
regulatory capital requirements.
Federal bank regulators apply certain capital ratios to assign FDIC-
insured depository institutions to one of five categories: “well
capitalized,” “adequately capitalized,” “undercapitalized,” “significantly
undercapitalized” and “critically undercapitalized.” At December 31,
2007, and 2006, the most recent regulatory notification classified
KeyBank as “well capitalized.” Management believes there has not
been any change in condition or event since the most recent notification
that would cause KeyBank’s capital classification to change.
Bank holding companies are not assigned to any of the five capital
categories applicable to insured depository institutions. However, if those
categories applied to bank holding companies, management believes Key
would satisfy the criteria for a “well capitalized” institution at December
31, 2007, and 2006. The FDIC-defined capital categories serve a limited
regulatory function and may not accurately represent the overall
financial condition or prospects of KeyCorp or its affiliates.
The following table presents Key’s and KeyBank’s actual capital amounts
and ratios, minimum capital amounts and ratios prescribed by regulatory
guidelines, and capital amounts and ratios required to qualify as “well
capitalized” under the Federal Deposit Insurance Act.
To Qualify as
To Meet Minimum Well Capitalized
Capital Adequacy Under Federal Deposit
Actual Requirements Insurance Act
dollars in millions Amount Ratio Amount Ratio Amount Ratio
December 31, 2007
TOTAL CAPITAL TO NET RISK-WEIGHTED ASSETS
Key $12,380 11.38% $8,700 8.00% N/A N/A
KeyBank 11,423 10.68 8,551 8.00 $10,689 10.00%
TIER 1 CAPITAL TO NET RISK-WEIGHTED ASSETS
Key $8,095 7.44% $4,350 4.00% N/A N/A
KeyBank 7,140 6.67 4,275 4.00 $6,413 6.00%
TIER 1 CAPITAL TO AVERAGE QUARTERLY
TANGIBLE ASSETS
Key $8,095 8.39% $2,895 3.00% N/A N/A
KeyBank 7,140 7.60 3,753 4.00 $4,691 5.00%
December 31, 2006
TOTAL CAPITAL TO NET RISK-WEIGHTED ASSETS
Key $12,567 12.43% $8,091 8.00% N/A N/A
KeyBank 11,046 11.13 7,932 8.00 $9,915 10.00%
TIER 1 CAPITAL TO NET RISK-WEIGHTED ASSETS
Key $8,338 8.24% $4,045 4.00% N/A N/A
KeyBank 6,819 6.87 3,966 4.00 $5,949 6.00%
TIER 1 CAPITAL TO AVERAGE QUARTERLY
TANGIBLE ASSETS
Key $8,338 8.98% $2,786 3.00% N/A N/A
KeyBank 6,819 7.56 3,604 4.00 $4,505 5.00%
N/A = Not Applicable
Key maintains several stock-based compensation plans, which are
described below. Total compensation expense for these plans was $62
million for 2007, $64 million for 2006 and $81 million for 2005. The
total income tax benefit recognized in the income statement for these
plans was $23 million for 2007, $24 million for 2006 and $30 million
for 2005. Stock-based compensation expense related to awards granted
to employees is recorded in “personnel expense” on the income
statement; compensation expense related to awards granted to directors
is recorded in “other expense.”
Key’s compensation plans allow KeyCorp to grant stock options,
restricted stock, performance shares, discounted stock purchases, and
the right to make certain deferred compensation-related awards to
eligible employees and directors. At December 31, 2007, KeyCorp had
63,443,819 common shares available for future grant under its
compensation plans. In accordance with a resolution adopted by the
Compensation and Organization Committee of Key’s Board of Directors,
KeyCorp may not grant options to purchase common shares, restricted
stock or other shares under any long-term compensation plan in an
aggregate amount that exceeds 6% of KeyCorp’s outstanding common
shares in any rolling three-year period.
STOCK OPTION PLANS
Stock options granted to employees generally become exercisable at the
rate of 33-1/3% per year beginning one year from their grant date;
options expire no later than ten years from their grant date. The
exercise price is the average of the high and low price of Key’s common
shares on the date of grant, and cannot be less than the fair market value
of Key’s common shares on the grant date.
15. STOCK-BASED COMPENSATION
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