KeyBank 2014 Annual Report Download - page 167

Changes in Level 3 Fair Value Measurements
The following table shows the change in the fair values of our Level 3 financial instruments for the years ended
December 31, 2014, and December 31, 2013. We mitigate the credit risk, interest rate risk, and risk of loss
related to many of these Level 3 instruments by using securities and derivative positions classified as Level 1 or
Level 2. Level 1 and Level 2 instruments are not included in the following table. Therefore, the gains or losses
shown do not include the impact of our risk management activities.
in millions
Beginning
of Period
Balance
Gains
(Losses)
Included
in Earnings Purchases Sales Settlements
Transfers
into
Level 3 (e)
Transfers
out of
Level 3 (e)
End of
Period
Balance (g)
Unrealized
Gains
(Losses)
Included in
Earnings
Year ended December 31, 2014
Securities available for sale
Other securities — — $ 10 — — — — $ 10 —
Other investments
Principal investments
Direct $ 141 $ 18 (c) 1 $ (58) — — — 102 $ 13 (c)
Indirect 413 57 (c) 8 (176) — — — 302 (26) (c)
Equity and mezzanine investments
Direct — — — — — — — — —
Indirect 23 (1) (c) — — $ (12) — — 10 (1) (c)
Derivative instruments (a)
Interest rate 25 4 (d) 4 (3) — $ 7 (f) $ (24) (f) 13 —
Commodity — — — — — 1 (f) (1) (f) ——
Credit 3 (17) (d) —— 16— — 2 —
in millions
Beginning
of Period
Balance
Gains
(Losses)
Included
in Earnings Purchases Sales Settlements
Transfers
into
Level 3 (e)
Transfers
out of
Level 3 (e)
End of
Period
Balance (g)
Unrealized
Gains
(Losses)
Included in
Earnings
Year ended December 31, 2013
Trading account assets
Other mortgage-backed securities — $ 4 (b) — $ (4) — — — — —
Other securities — 4 (b) — — $ (4) — — — $ (1) (b)
State and political subdivisions $ 3 — — (3) — — — — —
Other investments
Principal investments
Direct 191 (11) (c) $ 8 (47) — — — $ 141 (23) (c)
Indirect 436 58 (c) 23 (104) — — — 413 18 (c)
Equity and mezzanine investments
Direct — — — — — — — — 8 (c)
Indirect 41 2 (c) — — (20) — — 23 2 (c)
Derivative instruments (a)
Interest rate 19 (10) (d) 1 (2) — $ 46 (f) $ (29) (f) 25 —
Commodity 1 (1) (d) ——— — — — —
Credit 4 (8) (d) —— 7— — 3 —
(a) Amounts represent Level 3 derivative assets less Level 3 derivative liabilities.
(b) Realized and unrealized gains and losses on trading account assets are reported in “other income” on the income statement.
(c) Realized and unrealized gains and losses on principal investments are reported in “net gains (losses) from principal investing” on the
income statement. Realized and unrealized losses on private equity and mezzanine investments are reported in “other income” on the
income statement.
(d) Realized and unrealized gains and losses on derivative instruments are reported in “corporate services income” and “other income” on
the income statement.
(e) Our policy is to recognize transfers into and transfers out of Level 3 as of the end of the reporting period.
(f) Certain derivatives previously classified as Level 2 were transferred to Level 3 because Level 3 unobservable inputs became significant.
Certain derivatives previously classified as Level 3 were transferred to Level 2 because Level 3 unobservable inputs became less
significant.
(g) There were no issuances for the years ended December 31, 2014, and December 31, 2013.
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