KeyBank 2005 Annual Report Download - page 78

Download and view the complete annual report

Please find page 78 of the 2005 KeyBank annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 93

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93

77
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES
NEXT PAGEPREVIOUS PAGE SEARCH BACK TO CONTENTS
CAPITAL ADEQUACY
KeyCorp and KBNA must meet specific capital requirements imposed by
federal banking regulators. Sanctions for failure to meet applicable
capital requirements may include regulatory enforcement actions that
restrict dividend payments, require the adoption of remedial measures
to increase capital, terminate FDIC deposit insurance, and mandate the
appointment of a conservator or receiver in severe cases. In addition,
failure to maintain a well-capitalized status affects the evaluation of
regulatory applications for certain dealings, including acquisitions,
continuation and expansion of existing activities, and commencement
of new activities, and could make our clients and potential investors less
confident. As of December 31, 2005, KeyCorp and KBNA 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,
2005 and 2004, the most recent regulatory notification classified KBNA
as “well capitalized.” Management believes there have not been any
changes in condition or events since the most recent notification that
would cause KBNA’s 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, 2005 and 2004. 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 KBNA’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, 2005
TOTAL CAPITAL TO NET RISK-WEIGHTED ASSETS
Key $11,615 11.47% $8,101 8.00% N/A N/A
KBNA 10,670 10.77 7,916 8.00 $9,895 10.00%
TIER 1 CAPITAL TO NET RISK-WEIGHTED ASSETS
Key $7,687 7.59% $4,051 4.00% N/A N/A
KBNA 6,742 6.81 3,958 4.00 $5,937 6.00%
TIER 1 CAPITAL TO AVERAGE ASSETS
Key $7,687 8.53% $2,766 3.00% N/A N/A
KBNA 6,742 7.74 3,479 4.00 $4,348 5.00%
December 31, 2004
TOTAL CAPITAL TO NET RISK-WEIGHTED ASSETS
Key $11,032 11.47% $7,692 8.00% N/A N/A
KBNA 10,244 10.96 7,467 8.00 $9,334 10.00%
TIER 1 CAPITAL TO NET RISK-WEIGHTED ASSETS
Key $6,944 7.22% $3,846 4.00% N/A N/A
KBNA 6,294 6.74 3,734 4.00 $5,600 6.00%
TIER 1 CAPITAL TO AVERAGE ASSETS
Key $6,944 7.96% $2,617 3.00% N/A N/A
KBNA 6,294 7.56 3,327 4.00 $4,158 5.00%
N/A = Not Applicable
Key’s total stock-based compensation expense was $56 million for
2005, $41 million for 2004 and $24 million for 2003. Included in
these amounts is stock option expense of $32 million for 2005, $23
million for 2004 and $10 million for 2003.
Key’s compensation plans allow KeyCorp to grant primarily stock options,
restricted stock, performance shares, discounted stock purchases and
certain deferred compensation-related awards to eligible employees and
directors. At December 31, 2005, KeyCorp had 74,972,586 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 share grants under
its long-term compensation plans in an amount that exceeds 6% of
KeyCorp’s outstanding common shares in any rolling three-year period.
15. STOCK-BASED COMPENSATION