Company: KEY-PI
Filing Date: 2025-02-21
Form Type: 10-K
Source: 0000091576-25-000038
Chunk: 90

Company: KEYCORP /NEW/
Filing Date: 2025-02-21
Form: 10-K
Item: Item 8
Chunk 90
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 lower loss probability and higher credit rating would positively affect the fair  value of the risk participations. (For purchased risk participation agreements, higher loss probabilities and lower credit ratings would positively affect the fair value.)Level 1, 2, and 3 (primarily level 2)

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Asset/liability classValuation techniqueValuation hierarchy classification(s)Derivatives (continued)We use interest rate lock commitments for our residential mortgage business, which are classified as Level 3 instruments.  The significant components of the valuation model include: •   Interest rates observable in the market•   Investor supplied prices for similar loans and securities• The probability of the loan closing (i.e. the "pull-through" amount, a significant unobservable input).  Increases (decreases) in the probability of the loan closing would have resulted in higher (lower) fair value measurements.Valuation of residential mortgage forward sale commitments utilizes observable market prices of comparable commitments and mortgage securities (Level 2).The fair values of our derivatives include a credit valuation adjustment related to both counterparty and our own creditworthiness.  The credit component considers master netting and collateral agreements and is determined by the individual counterparty based on potential future exposures, expected recovery rates, and market-implied probabilities of default.Level 1, 2, and 3 (primarily level 2)Liability for short positionsThis includes fixed income securities held by our broker dealer in its trading inventory. Fair value of level 1 securities is determined by:•  Quoted market prices available in an active market for identical securitiesFair value of level 2 securities is determined by:•  Observable market prices of similar securities•  Market activity, spreads, credit ratings and interest rates for each security typeLevel 1 and 2We also make liquidity valuation adjustments to the fair value of certain assets to reflect the uncertainty in the pricing and trading of the instruments when we are unable to observe recent market transactions for identical or similar instruments. Liquidity valuation adjustments are based on the following factors: •the amount of time since the last relevant valuation;•whether there is an actual trade or relevant external quote available at the measurement date; and•volatility associated with the primary pricing components.Changes in Level 3 Fair Value MeasurementsThe following table shows the change in the fair values of our Level 3 financial instruments measured at fair value on a recurring basis for the years ended December 31, 2024, and December 31, 2023.  Dollars