KeyBank 2008 Annual Report Download - page 107

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES
Prior to 2007, the compensation cost of time-lapsed restricted stock
awards granted under the Program was calculated using the average of
the high and low trading price of Key’s common shares on the grant date.
Effective January 1, 2007, the cost of these awards is calculated using
the closing trading price of Key’s common shares on the grant date. The
change did not have a material effect on Key’s financial condition or
results of operations.
Unlike time-lapsed and performance-based restricted stock, performance
shares payable in stock and those payable in cash for over 100% of
targeted performance do not pay dividends during the vesting period.
Consequently, the fair value of performance shares payable in stock and
those payable in cash is calculated by reducing the share price at the date
of grant by the present value of estimated future dividends forgone during
the vesting period, discounted at an appropriate risk-free interest rate.
The weighted-average grant-date fair value of awards granted under the
Program was $22.81 during 2008, $38.06 during 2007 and $33.95 during
2006. As of December 31, 2008, unrecognized compensation cost related
to nonvested shares expected to vest under the Program totaled $10
million. Management expects to recognize this cost over a weighted-
average period of 1.8 years. The total fair value of shares vested was $9
million during 2008, $21 million during 2007 and $.1 million during 2006.
OTHER RESTRICTED STOCK AWARDS
Key also may grant, upon approval by the Compensation and
Organization Committee, other time-lapsed restricted stock awards
under various programs to certain executives and employees in
recognition of outstanding performance. The majority of the nonvested
shares at December 31, 2008, shown in the table below related to July
2008 grants of time-lapsed restricted stock to qualifying executives
and certain other employees identified as high performers. These awards
generally vest after three years of service.
The following table summarizes activity and pricing information for
the nonvested shares under these awards for the year ended December
31, 2008:
The weighted-average grant-date fair value of awards granted was
$13.62 during 2008, $36.81 during 2007 and $33.22 during 2006.
As of December 31, 2008, unrecognized compensation cost related to
nonvested restricted stock expected to vest under these special awards
totaled $36 million. Management expects to recognize this cost over a
weighted-average period of 2.2 years. The total fair value of restricted
stock vested was $2 million during 2008 and 2007, and $4 million
during 2006.
DEFERRED COMPENSATION PLANS
Key’s deferred compensation arrangements include voluntary and
mandatory deferral programs for Key common shares awarded to
certain employees and directors. Mandatory deferred incentive awards,
together with a 15% employer matching contribution, vest at the rate
of 33-1/3% per year beginning one year after the deferral date. Deferrals
under the voluntary programs are immediately vested, except for any
employer match, which generally will vest after three years of service.
The voluntary deferral programs provide an employer match ranging
from 6% to 15% of the deferral.
Several of Key’s deferred compensation arrangements allow participants
to redirect deferrals from Key common shares into other investments that
provide for distributions payable in cash. Key accounts for these
participant-directed deferred compensation arrangements as stock-
based liabilities and remeasures the related compensation cost based on
the most recent fair value of Key’s common shares. Key did not pay any
stock-based liabilities during 2008. Key paid stock-based liabilities of $.1
million during 2007 and $1.8 million during 2006. The compensation
cost of all other nonparticipant-directed deferrals is measured based on
the average of the high and low trading price of Key’s common shares
on the deferral date.
The following table summarizes activity and pricing information for the
nonvested shares in Key’s deferred compensation plans for the year ended
December 31, 2008:
The weighted-average grant-date fair value of awards granted was $12.01
during 2008, $36.13 during 2007 and $36.41 during 2006. As of
December 31, 2008, unrecognized compensation cost related to nonvested
shares expected to vest under Key’s deferred compensation plans totaled
$7 million. Management expects to recognize this cost over a weighted-
average period of 1.7 years. The total fair value of shares vested was $15
million during 2008, $25 million during 2007 and $24 million during
2006. Dividend equivalents presented in the preceding table represent the
value of dividends accumulated during the vesting period.
DISCOUNTED STOCK PURCHASE PLAN
Key’sDiscounted Stock Purchase Plan provides employees the opportunity
to purchase Key’scommon shares at a 10% discount through payroll
deductions or cash payments. Purchases arelimited to $10,000 in any
month and $50,000 in any calendar year and are immediately vested. To
accommodate employee purchases, Key acquires shares on the open
market on or around the fifteenth day of the month following the
Weighted-
Number of Average
Nonvested Grant-Date
Shares Fair Value
OUTSTANDING AT DECEMBER 31, 2007 889,936 $36.25
Granted 2,849,162 13.62
Vested (100,737) 31.63
Forfeited (133,962) 24.40
OUTSTANDING ATDECEMBER 31, 2008 3,504,399 $18.36
Weighted-
Number of Average
Nonvested Grant-Date
Shares Fair Value
OUTSTANDING ATDECEMBER 31, 2007 1,097,709 $35.78
Granted 410,343 12.01
Dividend equivalents 219,132 13.83
Vested (828,299) 25.71
Forfeited (14,977) 35.44
OUTSTANDING ATDECEMBER 31, 2008 883,908 $28.74