KeyBank 2006 Annual Report Download - page 81

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81
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES
Of the $114 million of gross unrealized losses at December 31, 2006,
$110 million relates to fixed-rate agency collateralized mortgage
obligations, which Key invests in as part of an overall asset/liability
management strategy. Since these instruments have fixed interest rates,
their fair value is sensitive to movements in market interest rates.
During 2006, interest rates generally increased, so the fair value of these
151 instruments, which had a weighted-average maturity of 2.4 years at
December 31, 2006, remained below their amortized cost.
Other mortgage-backed securities consist of fixed-rate mortgage-backed
securities issued primarily by the Government National Mortgage
Association, with gross unrealized losses of $4 million at December 31,
2006. Similar to the fixed-rate securities discussed above, these
instruments are sensitive to movements in interest rates. During 2006,
therewas a general increase in interest rates, which caused the fair value
of these 91 instruments, which had a weighted-average maturity of 5.0
years at December 31, 2006, to remain below their amortized cost.
The unrealized losses discussed above are considered temporary since Key
has the ability and intent to hold the securities until they matureor
recover in value. Accordingly, these investments have not been reduced
to their fair value through the income statement.
At December 31, 2006, securities available for sale and investment
securities with an aggregate amortized cost of approximately $6.9
billion werepledged to secure public and trust deposits, securities sold
under repurchase agreements, and for other purposes required or
permitted by law.
The following table shows securities by remaining maturity.Collateralized
mortgage obligations, other mortgage-backed securities and retained
interests in securitizations — all of which areincluded in the securities
available-for-sale portfolio — are presented based on their expected
average lives. The remaining securities, including all of those in the
investment securities portfolio, arepresented based on their remaining
contractual maturity. Actual maturities may differ from expected or
contractual maturities since borrowers have the right to prepay obligations
with or without prepayment penalties.
Duration of Unrealized Loss Position
Less Than 12 Months 12 Months or Longer Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
in millions Value Losses Value Losses Value Losses
DECEMBER 31, 2006
Securities available for sale:
Agency collateralized mortgage obligations $766 $1 $4,354 $109 $5,120 $110
Other mortgage-backed securities 138 1 86 3 224 4
Total temporarily impaired securities $904 $2 $4,440 $112 $5,344 $114
DECEMBER 31, 2005
Securities available for sale:
Collateralized mortgage obligations:
Commercial mortgage-backed securities — — $ 14 $ 12 $ 14 $ 12
Agency collateralized mortgage obligations $1,677 $22 4,265 125 5,942 147
Other mortgage-backed securities 32 1 76 3 108 4
Total temporarily impaired securities $1,709 $23 $4,355 $140 $6,064 $163
The following table summarizes Key’s securities that were in an unrealized loss position.
Securities Investment
Available for Sale Securities
December 31, 2006 Amortized Fair Amortized Fair
in millions Cost Value Cost Value
Due in one year or less $ 735 $ 727 $12 $12
Due after one through five years 6,903 6,880 29 29
Due after five through ten years 182 183 — 1
Due after ten years 38 37 — —
Total $7,858 $7,827 $41 $42
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