KeyBank 2007 Annual Report Download - page 42

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40
MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES
FIGURE 22. MORTGAGE-BACKED
SECURITIES BY ISSUER
December 31,
in millions 2007 2006 2005
Federal Home Loan
Mortgage Corporation $4,566 $4,938 $4,788
Federal National
Mortgage Association 2,748 1,979 1,304
Government National
Mortgage Association 256 418 440
Total $7,570 $7,335 $6,532
During 2007, net gains from Key’s mortgage-backed securities totaled
$60 million. These net gains include net unrealized gains of $109
million, caused by the decline in benchmark Treasury yields, offset in part
by the widening of interest rate spreads on these securities. The net gains
also include the $49 million net realized loss recorded during the first
quarter in connection with the repositioning of the securities portfolio.
The net unrealized gains were recorded in the “accumulated other
comprehensive income (loss)” component of shareholders’ equity, while
the net realized loss was recorded in “net securities (losses) gains” on the
income statement.
Figure 23 shows the composition, yields and remaining maturities
of Key’s securities available for sale. For more information about
securities, including gross unrealized gains and losses by type of
security and securities pledged, see Note 6 (“Securities”), which begins
on page 79.
Other
U.S. Treasury, States and Collateralized Mortgage- Retained Weighted
Agencies and Political Mortgage Backed Interests in Other Average
dollars in millions Corporations Subdivisions Obligations
a
Securities
a
Securitizations
a
Securities
b
Total Yield
c
DECEMBER 31, 2007
Remaining maturity:
One year or less $ 1 — $ 5 $ 7 — $15 $ 28 4.70%
After one through five years 10 $ 3 6,158 1,207 $ 90 53 7,521 5.12
After five through ten years 6 4 3 186 95 4 298 7.87
After ten years 2 3 1 3 — 4 13 6.14
Fair value $19 $10 $6,167 $1,403 $185 $76 $7,860 —
Amortized cost 19 10 6,167 1,393 149 72 7,810 5.22%
Weighted-average yield
c
4.67% 8.36% 4.88% 5.15% 19.72% 5.63%
d
5.22%
d
—
Weighted-average maturity 5.8 years 8.0 years 3.0 years 4.6 years 5.3 years 5.8 years 3.4 years —
DECEMBER 31, 2006
Fair value $94 $15 $7,001 $334 $208 $175 $7,827 —
Amortized cost 94 14 7,098 336 151 165 7,858 4.78%
DECEMBER 31, 2005
Fair value $268 $18 $6,298 $234 $182 $269 $7,269 —
Amortized cost 267 17 6,455 233 115 261 7,348 4.42%
a
Maturity is based upon expected average lives rather than contractual terms.
b
Includes primarily marketable equity securities.
c
Weighted-average yields are calculated based on amortized cost. Such yields have been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 35%.
d
Excludes securities of $63 million at December 31, 2007, that have no stated yield.
FIGURE 23. SECURITIES AVAILABLE FOR SALE
The valuations derived from the models are reviewed by management for
reasonableness to ensure they are consistent with the values placed on
similar securities traded in the secondary markets.