KeyBank 2008 Annual Report Download - page 122

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES
The following table shows Key’s assets and liabilities measured at fair value on a recurring basis.
December 31, 2008 Netting
in millions Level 1 Level 2 Level 3 Adjustments
(a)
Total
ASSETS MEASURED ON A RECURRING BASIS
Short-term investments — $ 165 — — $ 165
Trading account assets $ 57 367 $ 856 — 1,280
Securities available for sale 44 8,201 — — 8,245
Other investments — 6 1,134 — 1,140
Derivative assets 614 4,841 25 $(3,584) 1,896
Accrued income and other assets 7 74 — — 81
Total assets on a recurring basis at fair value $722 $13,654 $2,015 $(3,584) $12,807
LIABILITIES MEASURED ON A RECURRING BASIS
Federal funds purchased and securities sold under
repurchase agreements — $ 199 — — $ 199
Bank notes and other short-term borrowings $ 32 151 — — 183
Derivative liabilities 572 3,651 $10 $(3,195) 1,038
Accrued expense and other liabilities 4 — — — 4
Total liabilities on a recurring basis at fair value $608 $4,001 $10 $(3,195) $1,424
(a)
Netting adjustments represent the amounts recorded to convert Key’s derivative assets and liabilities from a gross basis to a net basis in conjunction with Key’s January 1, 2008, adoption
of FASB Interpretation No. 39, “Offsetting of Amounts Related to Certain Contracts,” and FASB Staff Position No. FIN 39-1, “Amendment of FASB Interpretation 39.” The net basis takes into
account the impact of master netting agreements that allow Key to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the
related cash collateral.
CHANGES IN LEVEL 3
FAIR VALUE MEASUREMENTS
The following table shows the change in the fair values of Key’s Level 3
financial instruments for the twelve months ended December 31, 2008. An
instrument is classified as Level 3 if unobservable inputs are significant
relative to the overall fair value measurement of the instrument. In
addition to unobservable inputs, Level 3 instruments also may have
inputs that are observable within the market. Management mitigates
the credit risk, interest rate risk and risk of loss related to many of these
Level 3 instruments through the use of securities and derivative positions
classified as Level 1 or Level 2. Level 1 or Level 2 instruments are not
included in the following table. Therefore, the gains or losses shown do
not include the impact of Key’s risk management activities.
Trading Securities
Account Available Other Derivative
in millions Assets for Sale Investments Instruments
(a)
BALANCE ATDECEMBER 31, 2007 $338 $ 4 $1,161 $ 6
(Losses) gains:
Included in earnings (43)
(b)
3
(c)
(51)
(d)
(5)
(b)
Included in other comprehensive income (loss) — (2) — —
Purchases, sales, issuances and settlements 509 (5) 37 (1)
Net transfers in (out) of Level 3 52 — (13) 15
BALANCE AT DECEMBER 31, 2008 $856 — $1,134 $15
Unrealized (losses) gains included in earnings $(33)
(b)
— $(23)
(d)
$(6)
(b)
(a)
Amount represents Level 3 derivative assets less Level 3 derivative liabilities.
(b)
Realized and unrealized gains and losses on trading account assets and derivative instruments are reported in “investment banking and capital markets income” on the income statement.
(c)
Unrealized gains and losses on securities available for sale are reported in “net securities (losses) gains” on the income statement.
(d)
Other investments consist of principal investments, and private equity and mezzanine investments. Realized and unrealized gains and losses on principal investments arereported
in “net (losses) gains from principal investments” on the income statement. Realized and unrealized gains and losses on private equity and mezzanine investments are reported
in “investment banking and capital markets income” on the income statement.