KeyBank 2009 Annual Report Download - page 112

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES
Year ended December 31, 2009 2008 2007
Average option life 6.0 years 5.9 years 7.0 years
Future dividend yield .72% 5.80% 4.04%
Historical share price volatility .460 .284 .231
Weighted-average risk-free
interest rate 3.0% 3.6% 4.9%
Weighted-Average Weighted-Average Aggregate
Number of Exercise Price Remaining Life Intrinsic
Options Per Option (Years) Value
(a)
OUTSTANDING AT DECEMBER 31, 2008 32,816,394 $27.96
Granted 5,396,235 5.79
Lapsed or canceled (4,189,683) 28.99
OUTSTANDING AT DECEMBER 31, 2009 34,022,946 $24.32 5.6 —
Expected to vest 33,072,862 $24.65 5.5 —
Exercisable at December 31, 2009 26,652,931 $27.70 4.7 —
(a)
The intrinsic value of a stock option is the amount by which the fair value of the underlying stock exceeds the exercise price of the option. At December 31, 2009, the fair value of the
underlying stock was less than the weighted-average exercise price per option.
Vesting Contingent on
Vesting Contingent on Performance and
Service Conditions Service Conditions
Weighted- Weighted-
Number of Average Number of Average
Nonvested Grant-Date Nonvested Grant-Date
Shares Fair Value Shares Fair Value
OUTSTANDING AT DECEMBER 31, 2008 797,563 $28.52 1,774,457 $31.23
Granted 47,111 7.96 4,694,172 6.55
Vested (130,710) 30.89 (78,272) 34.59
Forfeited (147,163) 31.63 (948,117) 26.06
OUTSTANDING AT DECEMBER 31, 2009 566,801 $25.45 5,442,240 $10.78
Our determination of the fair value of options is only as accurate as the underlying assumptions. The assumptions pertaining to options issued during
2009, 2008 and 2007 are shown in the following table.
Our stock option grants occur upon approval by the Compensation and Organization Committee. The following table summarizes activity, pricing
and other information for our stock options for the year ended December 31, 2009.
The weighted-average grant-date fair value of options was $2.37 for
options granted during 2009, $1.78 for options granted during 2008 and
$7.13 for options granted during 2007. No options wereexercised
during 2009. The total intrinsic value of exercised options for 2008 and
2007 was $2 million and $44 million, respectively. As of December 31,
2009, unrecognized compensation cost related to nonvested options
expected to vest under the plans totaled $7 million. We expect to
recognize this cost over a weighted-average period of 2.0 years.
Cash received from options exercised was $6 million for 2008 and $112
million for 2007. The actual tax benefit realized for the tax deductions
from options exercised totaled $.3 million for 2008 and $13 million
for 2007.
LONG-TERM INCENTIVE
COMPENSATION PROGRAM
Our Long-Term Incentive Compensation Program rewards senior
executives critical to our long-term financial success. The Program
covers three-year performance cycles, with a new cycle beginning each
year. Awards are primarily in the form of deferred cash payments,
time-lapsed restricted stock, performance-based restricted stock and
performance shares payable in stock.
The time-lapsed restricted stock generally vests after the end of the three-
year cycle for which it was granted. Performance-based restricted stock
and performance shares will not vest unless Key attains defined
performance levels. During 2009, we did not pay cash awards in
connection with vested performance shares. During 2008 and 2007, we
paid cash awards in connection with vested performance shares of $1
million and $3 million, respectively.
The following table summarizes activity and pricing information for the nonvested shares in the Program for the year ended December 31, 2009.