Shareholders' Equity

12 Months Ended

Dec. 31, 2012

Shareholders' Equity

20. Shareholders’ Equity

Comprehensive Capital Plan

As previously reported, as authorized by our Board and pursuant to our 2012 capital plan submitted to the Federal Reserve as part of CCAR and not objected to by the Federal Reserve, KeyCorp had authority to repurchase up to $344 million of our Common Shares for general repurchase and repurchases in connection with employee elections under our compensation and benefit programs. Our existing repurchase program does not have an expiration date. Common Share repurchases under the current authorization are expected to be executed through the first quarter of 2013. We have remaining authority to repurchase up to $88 million of our Common Shares for general repurchase and repurchases in connection with employee elections under our compensation and benefit programs.

Repurchase of TARP CPP Preferred Stock, Warrant and Completion of Equity and Debt Offerings

During 2011, we completed the repurchase of the $2.5 billion of Series B Preferred Stock and corresponding warrant issued to the U.S. Treasury Department. As a result of the repurchase, we recorded a $49 million one-time deemed dividend in the first quarter of 2011 related to the remaining difference between the repurchase price and the carrying value of the preferred shares at the time of repurchase. On April 20, 2011, we repurchased the warrant directly from the U.S. Treasury for $70 million. Beginning with the second quarter of 2011, the repurchase resulted in the elimination of quarterly dividends of $31 million and discount amortization of $4 million, or $140 million on an annual basis, related to these preferred shares. In total, we paid $2.867 billion to the U.S. Treasury during the investment period in the form of dividends, principal and repurchase of the warrant, resulting in a return to the U.S. Treasury of $367 million above the initial investment of $2.5 billion on November 14, 2008.

Capital Adequacy

KeyCorp and KeyBank 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 how regulators evaluate applications for certain endeavors, including acquisitions, continuation and expansion of existing activities, and commencement of new activities and could make clients and potential investors less confident. As of December 31, 2012, KeyCorp and KeyBank met all regulatory capital requirements.

Federal banking 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.” KeyCorp’s affiliate bank, KeyBank, qualified as “well capitalized” at December 31, 2012, since it exceeded the prescribed threshold ratios of 10.00% for total risk-based capital, 6.00% for Tier 1 risk-based capital, and 5.00% for Tier 1 leverage capital and was not subject to any written agreement, order or directive to meet and maintain a specific capital level for any capital measure. We believe that there has not been any change in condition or event since that date 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, we believe that KeyCorp would satisfy the criteria for a “well capitalized” institution at December 31, 2012. The capital categories defined in the Federal Deposit Insurance Act serve a limited regulatory function and may not accurately represent our overall financial condition or prospects.

	Actual					To Meet Minimum Capital Adequacy Requirements					To Qualify as Well Capitalized Under Federal Deposit Insurance Act
dollars in millions	Amount		Ratio			Amount		Ratio			Amount		Ratio
December 31, 2012
TOTAL CAPITAL TO NET RISK-WEIGHTED ASSETS
Key	$	12,066		15.13	%	$	6,379		8.00	%		N/A		N/A
KeyBank		10,321		13.73			6,013		8.00		$	7,516		10.00	%
TIER 1 CAPITAL TO NET RISK-WEIGHTED ASSETS
Key	$	9,689		12.15	%	$	3,189		4.00	%		N/A		N/A
KeyBank		7,989		10.63			3,006		4.00		$	4,510		6.00	%
TIER 1 CAPITAL TO AVERAGE QUARTERLY TANGIBLE ASSETS
Key	$	9,689		11.41	%	$	2,547		3.00	%		N/A		N/A
KeyBank		7,989		9.69			3,299		4.00		$	4,124		5.00	%
December 31, 2011
TOTAL CAPITAL TO NET RISK-WEIGHTED ASSETS
Key	$	12,748		16.51	%	$	6,177		8.00	%		N/A		N/A
KeyBank		11,656		15.98			5,822		8.00		$	7,278		10.00	%
TIER 1 CAPITAL TO NET RISK-WEIGHTED ASSETS
Key	$	10,034		12.99	%	$	3,089		4.00	%		N/A		N/A
KeyBank		8,997		12.35			2,911		4.00		$	4,367		6.00	%
TIER 1 CAPITAL TO AVERAGE QUARTERLY TANGIBLE ASSETS
Key	$	10,034		11.79	%	$	2,554		3.00	%		N/A		N/A
KeyBank		8,997		10.87			3,306		4.00		$	4,133		5.00	%