KeyBank 2015 Annual Report Download - page 140

All inputs, whether observable or unobservable, are ranked in accordance with a prescribed fair value hierarchy
that gives the highest ranking to quoted prices in active markets for identical assets or liabilities (Level 1) and the
lowest ranking to unobservable inputs (Level 3). Fair values for Level 2 assets or liabilities are based on one or a
combination of the following factors: (i) quoted market prices for similar assets or liabilities; (ii) observable
inputs, such as interest rates or yield curves; or (iii) inputs derived principally from or corroborated by observable
market data. The level in the fair value hierarchy ascribed to a fair value measurement in its entirety is based on
the lowest level input that is significant to the measurement. We consider an input to be significant if it drives
10% or more of the total fair value of a particular asset or liability. Assets and liabilities may transfer between
levels based on the observable and unobservable inputs used at the valuation date, as the inputs may be
influenced by certain market conditions. We recognize transfers between levels of the fair value hierarchy at the
end of the reporting period.
Typically, assets and liabilities are considered to be fair valued on a recurring basis if fair value is measured
regularly. However, if the fair value measurement of an instrument does not necessarily result in a change in the
amount recorded on the balance sheet, assets and liabilities are considered to be fair valued on a nonrecurring
basis. This generally occurs when we apply accounting guidance that requires assets and liabilities to be recorded
at the lower of cost or fair value, or assessed for impairment.
At a minimum, we conduct our valuations quarterly. Additional information regarding fair value measurements
and disclosures is provided in Note 6 (“Fair Value Measurements”).
Short-Term Investments
Short-term investments consist of segregated, interest-bearing deposits due from banks, the Federal Reserve, and
certain non-U.S. banks as well as reverse repurchase agreements. Reverse repurchase agreements are further
described under the “Repurchase agreements” heading in this section.
Trading Account Assets
Trading account assets are debt and equity securities, as well as commercial loans, that we purchase and hold but
intend to sell in the near term. These assets are reported at fair value. Realized and unrealized gains and losses on
trading account assets are reported in “other income” on the income statement.
Securities
Securities available for sale. Securities available for sale are securities that we intend to hold for an indefinite
period of time but that may be sold in response to changes in interest rates, prepayment risk, liquidity needs, or
other factors. Securities available for sale are reported at fair value. Unrealized gains and losses (net of income
taxes) deemed temporary are recorded in equity as a component of AOCI on the balance sheet. Unrealized losses
on equity securities deemed “other-than-temporary,” and realized gains and losses resulting from sales of
securities using the specific identification method, are included in “other income” on the income statement.
Unrealized losses on debt securities deemed “other-than-temporary” are included in “other income” on the
income statement or in AOCI in accordance with the applicable accounting guidance, as further described under
the heading “Other-than-Temporary Impairments” in this note and in Note 7 (“Securities”).
“Other securities” held in the available-for-sale portfolio consist of marketable equity securities that are traded on
a public exchange such as the NYSE or NASDAQ and convertible preferred stock of two privately held
companies.
Held-to-maturity securities. Held-to-maturity securities are debt securities that we have the intent and ability to
hold until maturity. Debt securities are carried at cost and adjusted for amortization of premiums and accretion of
discounts using the interest method. This method produces a constant rate of return on the adjusted carrying
amount.
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