KeyBank 2015 Annual Report Download - page 38

and securities, the amount of interest we pay on deposits and borrowings, our ability to originate loans and obtain
deposits, and the fair value of our financial assets and liabilities. If the interest we pay on deposits and other
borrowings increases at a faster rate than the interest we receive on loans and other investments, net interest
income, and therefore our earnings, would be adversely affected. Conversely, earnings could also be adversely
affected if the interest we receive on loans and other investments falls more quickly than the interest we pay on
deposits and other borrowings.
Our methods for simulating and analyzing our interest rate exposure are discussed more fully under the heading
“Risk Management — Management of interest risk exposure” found in Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operation.
Our profitability depends upon economic conditions in the geographic regions where we have significant
operations and on certain market segments with which we conduct significant business.
We have concentrations of loans and other business activities in geographic regions where our bank branches are
located — Pacific; Rocky Mountains; Indiana; West Ohio/Michigan; East Ohio; Western New York; Eastern
New York; and New England — and potential exposure to geographic regions outside of our branch footprint.
The moderate U.S. economic recovery has been experienced unevenly in the various regions where we operate,
and continued improvement in the overall U.S. economy may not result in similar improvement, or any
improvement at all, in the economy of any particular geographic region. Adverse conditions in a geographic
region such as inflation, unemployment, recession, natural disasters, or other factors beyond our control could
impact the ability of borrowers in these regions to repay their loans, decrease the value of collateral securing
loans made in these regions, or affect the ability of our customers in these regions to continue conducting
business with us.
Additionally, a significant portion of our business activities are concentrated within the real estate, healthcare,
and utilities market segments. The profitability of some of these market segments depends upon the health of the
overall economy, seasonality, the impact of regulation, and other factors that are beyond our control and may be
beyond the control of our customers in these market segments.
An economic downturn in one or more geographic regions where we conduct our business, or any significant or
prolonged impact on the profitability of one or more of the market segments with which we conduct significant
business activity, could adversely affect the demand for our products and services, the ability of our customers to
repay loans, the value of the collateral securing loans, and the stability of our deposit funding sources.
The soundness of other financial institutions could adversely affect us.
Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial
soundness of other financial institutions. We have exposure to many different industries and counterparties in the
financial services industries, and we routinely execute transactions with such counterparties, including brokers
and dealers, commercial banks, investment banks, mutual and hedge funds, and other institutional clients.
Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships.
Defaults by one or more financial services institutions have led to, and may cause, market-wide liquidity
problems and losses. Many of our transactions with other financial institutions expose us to credit risk in the
event of default of a counterparty or client. In addition, our credit risk may be affected when the collateral held
by us cannot be realized or is liquidated at prices not sufficient to recover the full amount of the loan or
derivatives exposure due us.
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