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What changed in UMB FINANCIAL CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of UMB FINANCIAL CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+306 added−312 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-23)

Top changes in UMB FINANCIAL CORP's 2023 10-K

306 paragraphs added · 312 removed · 261 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

38 edited+6 added−9 removed73 unchanged
Biggest change(a prior subsidiary of the Company) between 2000 and 2012. He was President of UMB Bank Colorado from 1997 to 2000. Mr. Kemper is the brother of Mr. Alexander C. Kemper, who currently serves on the Company’s Board of Directors. Stacy King 47 Ms. King has served as Executive Vice President, Chief Risk Officer of the Company since March 2020.
Biggest changeHe served as the Chairman and Chief Executive Officer of the Bank between December 2012 and January 2014, and as the Chairman of UMB Bank Colorado, n.a. (a prior subsidiary of the Company) between 2000 and 2012. He was President of UMB Bank Colorado from 1997 to 2000. Mr. Kemper is the brother of Mr. Alexander C.
Many of the Company’s subsidiaries are also subject to separate or related forms of regulation, supervision, and examination, including: (1) the Bank, by the Office of the Comptroller of the Currency (the OCC) under the National Banking Acts, the FDIC under the Federal Deposit Insurance Act (the FDIA), and the Consumer Financial Protection Bureau (the CFPB) under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act); (2) UMBFS, UMB Distribution Services, LLC, and UMB Financial Services, Inc., by the Securities and Exchange Commission (the SEC) and State regulatory authorities under federal and State securities laws, and UMB 5 Distribution Services, LLC and UMB Financial Services, Inc. , by the Financial Industry Regulatory Authority (FINRA); and (3) UMB Insurance, Inc. , by State regulatory authorities under applicable State insurance laws.
Many of the Company’s subsidiaries are also subject to separate or related forms of regulation, supervision, and examination, including: (1) the Bank, by the Office of the Comptroller of the Currency (the OCC) under the National Banking Acts, the FDIC under the Federal Deposit Insurance Act (the FDIA), and the Consumer Financial Protection Bureau (the CFPB) under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act); (2) UMBFS, UMB Distribution Services, LLC, and UMB Financial Services, Inc., by the Securities and Exchange Commission (the SEC) and State regulatory authorities under federal and State securities laws, and UMB Distribution Services, LLC and UMB Financial Services, Inc., by the Financial Industry Regulatory Authority (FINRA); and (3) UMB Insurance, Inc., by State regulatory authorities under applicable State insurance laws.
As a bank holding company that has elected to become a financial holding company under the GLBA, the Company is also able—directly or indirectly through its subsidiaries—to engage in activities that are financial in nature, that are incidental to a financial activity, or that are complementary to a financial activity and do not pose a substantial risk to the safety or soundness of depository institutions or the financial system generally.
As a bank holding company that has elected to become a financial holding company under the GLBA, the Company is also able—directly or indirectly through its subsidiaries—to engage in activities that are financial in nature, that are incidental to a financial activity, or that are complementary to a financial activity and do not pose a 6 substantial risk to the safety or soundness of depository institutions or the financial system generally.
Harris served the Company as Senior Vice President, Deputy General Counsel and Manager of Legal Operations from January 2020 to January 2021. She also served as Corporate Legal Counsel for the Company from October 2014 to January 2020. Prior to joining the Company, Ms. Harris worked in private practice focusing on commercial, corporate and employment cases . 9 Shannon A.
Harris served the Company as Senior Vice President, Deputy General Counsel and Manager of Legal Operations from January 2020 to January 2021. She also served as Corporate Legal Counsel for the Company from October 2014 to January 2020. Prior to joining the Company, Ms. Harris worked in private practice focusing on commercial, corporate and employment cases. Shannon A.
For more than a century, the Company has maintained a commitment to the prosperity of each community it serves. In addition to providing financial products built for the needs of its customers, the Company builds strong community partnerships through associate volunteerism, associate financial 4 giving, and corporate philanthropy .
For more than a century, the Company has maintained a commitment to the prosperity of each community it serves. In addition to providing financial products built for the needs of its customers, the Company builds strong community partnerships through associate volunteerism, associate financial giving, and corporate philanthropy.
These laws generally require the Bank and its subsidiaries to deal with the Company and its nonbank subsidiaries only on market terms and, in addition, impose restrictions on the Bank and its subsidiaries in directly or indirectly extending credit to or engaging in other covered transactions with the Company or its nonbank subsidiaries.
These laws generally require the Bank and its subsidiaries to deal with the Company and its nonbank subsidiaries only on market terms and, in addition, impose restrictions on the Bank and its subsidiaries in 7 directly or indirectly extending credit to or engaging in other covered transactions with the Company or its nonbank subsidiaries.
In addition, the administrative expenses of the conservator or receiver could be afforded priority over all or some of the claims of the institution’s creditors, and 8 under the FDIA, the claims of depositors (including the FDIC as subrogee of depositors) would enjoy priority over the claims of the institution’s unsecured creditors.
In addition, the administrative expenses of the conservator or receiver could be afforded priority over all or some of the claims of the institution’s creditors, and under the FDIA, the claims of depositors (including the FDIC as subrogee of depositors) would enjoy priority over the claims of the institution’s unsecured creditors.
The Company expects that competition will likely intensify in the future. Human Capital The Company is dedicated to creating the Unparalleled Customer Experience, and its associates are critical to achieving this mission.
The Company expects that competition will likely intensify in the future. 4 Human Capital The Company is dedicated to creating the Unparalleled Customer Experience, and its associates are critical to achieving this mission.
The Company believes that an equitable and inclusive environment with diverse teams produces more creative solutions, results in better products and services, and is crucial to its efforts to attract and retain key talent. The Company’s talent acquisition team focuses on building recruitment marketing strategies that are designed to identify and attract diverse associates.
The Company believes that an equitable and inclusive environment with diverse teams produces more creative solutions, results in better products and services, and is crucial to its efforts to attract and retain key talent. The Company’s talent acquisition team focuses on building recruitment marketing strategies that are designed to identify and attract diverse candidates.
The following are the executive officers of the Company, each of whom is appointed annually, and there are no arrangements or understandings between any of the executive officers and any other person pursuant to which such person was elected as an executive officer. Name Age Position with Registrant R. Brian Beaird 49 Mr.
The following are the executive officers of the Company, each of whom is appointed annually, and there are no arrangements or understandings between any of the executive officers and any other person pursuant to which such person was elected as an executive officer. Name Age Position with Registrant R. Brian Beaird 50 Mr.
Newton served in various capacities with Waddell & Reed Financial, Inc. or its subsidiary, Ivy Distributors, Inc, including most recently, serving as President of Ivy Distributors, Inc. and Ivy Global from August 2017 to May 2018, and Head of Global Distribution and President of Ivy Global from January 2014 to August 2017. David C. Odgers 53 Mr.
Newton served in various capacities with Waddell & Reed Financial, Inc. or its subsidiary, Ivy Distributors, Inc, including most recently, serving as President of Ivy Distributors, Inc. and Ivy Global from August 2017 to May 2018, and Head of Global Distribution and President of Ivy Global from January 2014 to August 2017. David C. Odgers 54 Mr.
These regulatory schemes, like th ose overseen by the FRB, are designed to protect public or private interests that often are not aligned with those of the Company’s shareholders or non-deposit creditors. The FRB possesses extensive authorities and powers to regulate the conduct of the Company’s businesses and operations.
These regulatory schemes, like those overseen by the FRB, are designed to protect public or private interests that often are not aligned with those of the Company’s shareholders or non-deposit creditors. The FRB possesses extensive authorities and powers to regulate the conduct of the Company’s businesses and operations.
Terry served as Executive Vice President and Chief Lending Officer of the Company, and prior to this time, Mr. Terry served as Executive Vice President. Mr. Terry first joined UMB in 1986, and subsequently joined the Commercial Lending department in 1987 where he worked as a loan officer until 2011. Abigail Wendel 49 Ms.
Terry served as Executive Vice President and Chief Lending Officer of the Company, and prior to this time, Mr. Terry served as Executive Vice President. Mr. Terry first joined UMB in 1986, and subsequently joined the Commercial Lending department in 1987 where he worked as a loan officer until 2011. Abigail Wendel 50 Ms.
Wendel was named President of Consumer Banking of the Bank in September 2018. She has also served as Chief Strategy Officer for the Company from June 2015 until September 2018, and as the Director of Investor and Government Relations for the Company from February 2013 through June 2015. Uma Wilson 44 Ms.
Wendel was named President of Consumer Banking of the Bank in September 2018. She has also served as Chief Strategy Officer for the Company from June 2015 until September 2018, and as the Director of Investor and Government Relations for the Company from February 2013 through June 2015. Uma Wilson 45 Ms.
Shankar spent time at FBR Capital Markets as a senior research analyst and at M&T Bank Corporation in the financial planning measurement and corporate finance/mergers & acquisitions group. 10 Thomas S. Terry 59 Mr. Terry has served as Executive Vice President and Chief Credit Officer since October 2019. From January 2011 until October 2019, Mr.
Shankar spent time at FBR Capital Markets as a senior research analyst and at M&T Bank Corporation in the financial planning measurement and corporate finance/mergers & acquisitions group. Thomas S. Terry 60 Mr. Terry has served as Executive Vice President and Chief Credit Officer since October 2019. From January 2011 until October 2019, Mr.
Johnson 43 Ms. Johnson has served as Executive Vice President and Chief Administrative Officer since October 2019. Ms. Johnson’s previous positions with the Company include Executive Vice President, Chief Human Resources Officer; Senior Vice President, Executive Director of Talent Management and Development; and Senior Vice President, Director of Talent Management. Ms.
Johnson 44 Ms. Johnson has served as Executive Vice President and Chief Administrative Officer since October 2019. Ms. Johnson’s previous positions with the Company include Executive Vice President, Chief Human Resources Officer; Senior Vice President, Executive Director of Talent Management and Development; and Senior Vice President, Director of Talent Management. Ms.
The Company encourages associates to give back to their local communities through vario us programs and initiatives, including paid volunteer time off and matching charitable gift programs. For more information on the Company’s diversity and inclusion and community involvement initiatives, please see its Corporate Citizenship Report available at www.umb.com/corporatecitizenship.
The Company encourages associates to give back to their local communities through various programs and initiatives, including paid volunteer time off and matching charitable gift programs. For more information on the Company’s diversity and inclusion and community involvement initiatives, please see its Corporate Citizenship Report available at www.umb.com/corporatecitizenship .
ITEM 1. BUSINESS General UMB Financial Corporation (together with its consolidated subsidiaries, unless the context requires otherwise, the Company) is a financial holding company that is headquartered in Kansas City, Missouri. The Company provides banking services and asset servicing to its customers in the United States and around the globe.
ITEM 1. B USINESS General UMB Financial Corporation (together with its consolidated subsidiaries, unless the context requires otherwise, the Company) is a financial holding company that is headquartered in Kansas City, Missouri. The Company provides banking services and asset servicing to its customers in the United States and around the globe.
The Company strives to engage and encourage associates to act and take personal responsibility for improving their health and well-being, as well as the health and well-being of their families. To assist associates with their goals, the Company offers wellness incentives and wellness coaches for strategic wellness support strategies. Diversity and Inclusion .
The Company strives to engage and encourage associates to act and take personal responsibility for improving their health and well-being, as well as the health and well-being of their families. To assist associates with their goals, the Company offers wellness resources and incentives to support wellness strategies. Diversity and Inclusion .
The Company believes its associates, customers, and communities mutually benefit by its focus on providing opportunities for its associates to make an impact at work and in its communities. On a full-time equivalent basis at December 31, 2022, the Company and its subsidiaries employed 3,770 associates across the country. Compensation and Benefits Program .
The Company believes its associates, customers, and communities mutually benefit by its focus on providing opportunities for its associates to make an impact at work and in their respective communities. On a full-time equivalent basis at December 31, 2023, the Company and its subsidiaries employed 3,599 associates across the country. Compensation and Benefits Program .
While bank holding companies are not subject to the PCA framework, the FRB is empowered to compel a holding company to take measures—such as the execution of financial or performance guarantees—when prompt corrective action is required in connection with one of its depository-institution subsidiaries. At December 31, 2022, the Bank was categorized as well capitalized under the PCA framework.
While bank holding companies are not subject to the PCA framework, the FRB is empowered to compel a holding company to take measures—such as the execution of financial or performance guarantees—when prompt corrective action is required in connection with one of its depository-institution subsidiaries.
The capital ratios for the Company and the Bank as of December 31, 2022, are set forth below: Tier 1 Leverage Ratio Tier 1 Risk-Based Capital Ratio Common Equity Tier 1 Capital Ratio Total Risk-Based Capital Ratio UMB Financial Corporation 8.43 10.62 10.62 12.50 UMB Bank, n.a. 8.46 10.88 10.88 11.47 These capital-to-assets ratios also play a central role in prompt corrective action (PCA), which is an enforcement framework used by the federal banking agencies to constrain the activities of banking organizations based on their levels of regulatory capital.
The capital ratios for the Company and the Bank as of December 31, 2023, are set forth below: Tier 1 Leverage Ratio Tier 1 Risk-Based Capital Ratio Common Equity Tier 1 Capital Ratio Total Risk-Based Capital Ratio UMB Financial Corporation 8.49 10.94 10.94 12.85 UMB Bank, n.a. 8.52 11.21 11.21 11.90 These capital-to-assets ratios also play a central role in prompt corrective action (PCA), which is an enforcement framework used by the federal banking agencies to constrain the activities of banking organizations based on their levels of regulatory capital.
He has been with UMB for over 25 years, having served as a top legal advisor for the Company and the Bank for over 20 years. James D. Rine 52 Mr. Rine has served as Vice Chairman of the Company since November 2020 and President and Chief Executive Officer of the Bank since October 2018.
He has been with UMB for over 25 years, having served as a top legal advisor for the Company and the Bank for over 20 years. James D. Rine 53 Mr. Rine has served as President of the Company since January 2024, and Vice Chairman of the Company since November 2020.
Among the FRB’s policy tools are (1) open market operations (that is, purchases or sales of securities in the open market to adjust the supply of reserve balances in order to achieve targeted federal funds rates or to put pressure on longer-term interest rates in order to achieve more desirable levels of economic activity and job creation), (2) the discount rate charged on loans by the Federal Reserve Banks, (3) the level of reserves required to be held by depository institutions against specified deposit liabilities, (4) the interest paid or charged on balances maintained with the Federal Reserve Banks by depository institutions, including balances used to satisfy their reserve requirements, and (5) other deposit and loan facilities.
Among the FRB’s policy tools are (1) open market operations (that is, purchases or sales of securities in the open market to adjust the supply of reserve balances in order to achieve targeted federal funds rates or to put pressure on longer-term interest rates in order to achieve more desirable levels of economic activity and job creation), (2) the discount rate charged on loans by the Federal Reserve Banks, (3) the level of reserves required to be held by depository institutions against specified deposit liabilities, (4) the interest paid or charged on balances maintained with the Federal Reserve Banks by depository institutions, including balances used to satisfy their reserve requirements, and (5) other deposit and loan facilities. 5 The FRB and its policies have a substantial impact on the availability and demand for loans and deposits, the rates, and other aspects of pricing for loans and deposits, and the conditions in equity, fixed income, currency, and other markets in which the Company operates.
These segments and their financial results are described in detail in (i) the section of Management’s Discussion and Analysis of Financial Condition and Results of Operations entitled Business Segments , which can be found in Part II, Item 7 of this report and (ii) Note 12, “Business Segment Reporting,” in the Notes to the Consolidated Financial Statements, which can be found in Part II, Item 8 of this report. 3 Competition The Company faces intense competition in each of its business segments and in all of the markets and geographic regions that the Company serves.
These segments and their financial results are described in detail in (i) the section of Management’s Discussion and Analysis of Financial Condition and Results of Operations entitled Business Segments , which can be found in Part II, Item 7 of this report and (ii) Note 12, “Business Segment Reporting,” in the Notes to the Consolidated Financial Statements, which can be found in Part II, Item 8 of this report.
The FRB maintains a targeted policy that requires a bank holding company to inform and consult with the staff of the FRB sufficiently in advance of (1) declaring and paying a dividend that could raise safety and soundness concerns (for example, a dividend that exceeds earnings in the period for which the dividend is being paid), (2) redeeming or repurchasing regulatory capital instruments when the holding company is experiencing financial weaknesses, or (3) redeeming or repurchasing common stock or perpetual preferred stock that would result in a net reduction as of the end of the quarter in the amount of those equity instruments outstanding compared with the beginning of the quarter in which the redemption or repurchase occurred. 6 Requirements Affecting the Relationships among the Company, Its Subsidiaries, and Other Affiliates The Company is a legal entity separate and distinct from the Bank, UMBFS, and its other subsidiaries but receives the vast majority of its revenue in the form of dividends from those subsidiaries.
The FRB maintains a targeted policy that requires a bank holding company to inform and consult with the staff of the FRB sufficiently in advance of (1) declaring and paying a dividend that could raise safety and soundness concerns (for example, a dividend that exceeds earnings in the period for which the dividend is being paid), (2) redeeming or repurchasing regulatory capital instruments when the holding company is experiencing financial weaknesses, or (3) redeeming or repurchasing common stock or perpetual preferred stock that would result in a net reduction as of the end of the quarter in the amount of those equity instruments outstanding compared with the beginning of the quarter in which the redemption or repurchase occurred.
Capital-Adequacy Standards The FRB and the OCC have adopted risk-based capital and leverage guidelines that require the capital-to-assets ratios of bank holding companies and national banks, respectively, to meet specified minimum standards. 7 The risk-based capital ratios are based on a banking organization’s risk-weighted asset amounts (RWAs), which are generally determined under the standardized approach applicable to the Company and the Bank by (1) assigning on-balance-sheet exposures to broad risk-weight categories according to the counterparty or, if relevant, the guarantor or collateral (with higher risk weights assigned to categories of exposures perceived as representing greater risk) and (2) multiplying off-balance-sheet exposures by specified credit conversion factors to calculate credit equivalent amounts and assigning those credit equivalent amounts to the relevant risk-weight categories.
The risk-based capital ratios are based on a banking organization’s risk-weighted asset amounts (RWAs), which are generally determined under the standardized approach applicable to the Company and the Bank by (1) assigning on-balance-sheet exposures to broad risk-weight categories according to the counterparty or, if relevant, the guarantor or collateral (with higher risk weights assigned to categories of exposures perceived as representing greater risk) and (2) multiplying off-balance-sheet exposures by specified credit conversion factors to calculate credit equivalent amounts and assigning those credit equivalent amounts to the relevant risk-weight categories.
Basel III, including revisions to the global Basel III capital framework (commonly known as Basel IV), includes a number of more rigorous provisions applicable only to banking organizations that are larger or more internationally active than the Company and the Bank.
At December 31, 2023, the Bank was categorized as well capitalized under the PCA framework. 8 Basel III, including revisions to the global Basel III capital framework (commonly known as Basel IV), includes a number of more rigorous provisions applicable only to banking organizations that are larger or more internationally active than the Company and the Bank.
He served as President of Commercial Banking from December 2017 until October 2018 and as President of Commercial Banking/Western Region from October 2016 to December 2017. Prior to this time, Mr. Rine served as the President of the Kansas City Region since October 2011. Overall, Mr. Rine has over 20 years of commercial banking experience with the Bank.
He has additionally served as President and Chief Executive Officer of the Bank since October 2018. He served as President of Commercial Banking from December 2017 until October 2018 and as President of Commercial Banking/Western Region from October 2016 to December 2017. Prior to this time, Mr. Rine served as the President of the Kansas City Region since October 2011.
Ram Shankar 50 Mr. Shankar was named as Executive Vice President and Chief Financial Officer of the Company effective August 2016. From September 2011 until his employment with the Company commenced, he worked at First Niagara Financial Group, most recently serving as managing director where he headed financial planning and analysis and investor relations. Prior to that, Mr.
From September 2011 until his employment with the Company commenced, he worked at First Niagara Financial Group, most recently serving as managing director where he headed financial planning and analysis and investor relations. Prior to that, Mr.
King held these positions from September 2018 until May 2019, October 2015 until September 2018, August 2014 until October 2015, and September 2013 until August 2014, respectively. Nikki Newton 51 Mr. Newton has served as the President of Private Wealth Management of the Bank since May 2019. From January 1998 until May 2018, Mr.
King held these positions from September 2018 until May 2019, October 2015 until September 2018, August 2014 until October 2015, and September 2013 until August 2014, respectively. Phil Mason 41 Mr. Mason has served as President of Institutional Banking for the Bank since April 2023.
The Bank’s ratings under the CRA are taken into account by the FRB and the OCC when considering merger or other specified applications that the Company or the Bank may submit from time to time.
The Bank’s ratings under the CRA are taken into account by the FRB and the OCC when considering merger or other specified applications that the Company or the Bank may submit from time to time. 9 The Bank is subject as well to a vast array of consumer-protection laws, such as qualified-mortgage and other mortgage-related rules under the jurisdiction of the CFPB.
Beaird held these positions from July 2018 until October 2019, August 2017 until July 2018, September 2015 until August 2017, and December 2011 until September 2015, respectively. James Cornelius 61 Mr. Cornelius has served as the President of Institutional Banking for the Bank since June 2015.
Beaird held these positions from July 2018 until October 2019, August 2017 until July 2018, September 2015 until August 2017, and December 2011 until September 2015, respectively. Amy Harris 38 Ms. Harris has served as Executive Vice President and Chief Legal Officer since January 2021. Ms.
In addition, the GLBA imposes on the Company and its subsidiaries a number of obligations relating to financial privacy. Executive Officers of the Registrant.
Lending limits, restrictions on tying arrangements, limits on permissible interest-rate charges, and other laws governing the conduct of banking or fiduciary activities are also applicable to the Bank. In addition, the GLBA imposes on the Company and its subsidiaries a number of obligations relating to financial privacy. Executive Officers of the Registrant.
Johnson held these positions from April 2015 to October 2019, May 2011 to April 2015, and December 2009 to May 2011, respectively. Dominic Karaba 52 Mr. Karaba has served as President Commercial Banking since September 2021. Mr.
Johnson held these positions from April 2015 to October 2019, May 2011 to April 2015, and December 2009 to May 2011, respectively. J. Mariner Kemper 51 Mr. Kemper has served as the Chairman and Chief Executive Officer of the Company since May 2004. From November 2015 until January 2024, he served as President of the Company.
Prior to this time, he served as the President of Institutional Banking and Investor services from June 2012 until June 2015. Amy Harris 37 Ms. Harris has served as Executive Vice President and Chief Legal Officer since January 2021. Ms.
He served as Director of Healthcare Services and Chief Operating Officer Institutional Banking for the Bank from November 2019 until March 2023 and as Chief Operating Officer Institutional Banking for the Bank from June 2015 to October 2019. Prior to this time, Mr.
While the Company has not experienced material adverse disruptions to its internal operations due to the pandemic, it continues to review evolving risks and developments. Business Segments The Company’s products and services are grouped into three segments: Commercial Banking, Institutional Banking, and Personal Banking.
Business Segments The Company’s products and services are grouped into three segments: Commercial Banking, Institutional Banking, and Personal Banking.
From May 2019 until March 2020, she served as Senior Director, Operations Management – Benefit Accounts for Willis Towers Watson.
Kemper, who served on the Company's Board of Directors during 2023 until his resignation in August, 2023. Stacy King 48 Ms. King has served as Executive Vice President, Chief Risk Officer of the Company since March 2020. From May 2019 until March 2020, she served as Senior Director, Operations Management – Benefit Accounts for Willis Towers Watson.
Removed
COVID-19 For over two years, the Company has experienced the impacts of the COVID-19 global pandemic (the COVID-19 pandemic, or the pandemic).
Added
Competition The Company faces intense competition in each of its business segments and in all of the markets and geographic regions that the Company serves.
Removed
Such impacts have included significant volatility in the global stock and fixed income markets, the enactment of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and the American Rescue Plan Act of 2021, both authorizing the Paycheck Protection Program (PPP) administered by the Small Business Administration, and a variety of rulings from the Company’s banking regulators.
Added
Requirements Affecting the Relationships among the Company, Its Subsidiaries, and Other Affiliates The Company is a legal entity separate and distinct from the Bank, UMBFS, and its other subsidiaries but receives the vast majority of its revenue in the form of dividends from those subsidiaries.
Removed
The Company continues to actively monitor developments related to COVID-19 and its impact to its business, customers, employees, counterparties, vendors, and service providers. The COVID-19 pandemic has necessitated certain actions related to the way the Company operates its business.
Added
The Company remains exempt from applying the enhanced prudential standards. Capital-Adequacy Standards The FRB and the OCC have adopted risk-based capital and leverage guidelines that require the capital-to-assets ratios of bank holding companies and national banks, respectively, to meet specified minimum standards.
Removed
The Company is carefully monitoring the activities of its vendors and other third-party service providers to mitigate the risks associated with any potential service disruptions. The length of time the Company may be required to operate under such circumstances and future degrees of disruption remain uncertain.
Added
Mason served as Director of Relationship Management and Support Institutional Asset Management for the Bank beginning in April 2013. Mr. Mason first joined the Company in June of 2005, working in the corporate finance department in a variety of roles. 10 Nikki Newton 52 Mr.
Removed
The FRB and its policies have a substantial impact on the availability and demand for loans and deposits, the rates, and other aspects of pricing for loans and deposits, and the conditions in equity, fixed income, currency, and other markets in which the Company operates.
Added
Newton has served as the President of Private Wealth Management of the Bank since May 2019. From January 1998 until May 2018, Mr.
Removed
The Company remains exempt from applying the enhanced prudential standards.
Added
Overall, Mr. Rine has over 20 years of commercial banking experience with the Bank. Ram Shankar 51 Mr. Shankar was named as Executive Vice President and Chief Financial Officer of the Company effective August 2016.
Removed
The Bank is subject as well to a vast array of consumer-protection laws, such as qualified-mortgage and other mortgage-related rules under the jurisdiction of the CFPB. Lending limits, restrictions on tying arrangements, limits on permissible interest-rate charges, and other laws governing the conduct of banking or fiduciary activities are also applicable to the Bank.
Removed
Karaba has also served as President Specialty Banking from April 2018 to September 2021 and Executive Vice President – Business Banking Director from August 2013 to April 2018. Overall, Mr. Karaba has over 15 years of experience in the banking industry. J. Mariner Kemper 50 Mr.
Removed
Kemper has served as the President of the Company since November 2015 and as the Chairman and Chief Executive Officer of the Company since May 2004. He served as the Chairman and Chief Executive Officer of the Bank between December 2012 and January 2014, and as the Chairman of UMB Bank Colorado, n.a.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

37 edited+6 added−15 removed123 unchanged
Biggest changeThe Company defines liquidity as the ability to fund increases in assets and meet obligations as they come due, all without incurring unacceptable losses. Banks are especially vulnerable to liquidity risk because of their role in the maturity transformation of demand or short-term deposits into longer-term loans or other extensions of credit.
Biggest changeBanks are especially vulnerable to liquidity risk because of their role in the maturity transformation of demand or short-term deposits into longer-term loans or other extensions of credit. The Company, like other financial-services companies, relies to a significant extent on external sources of funding (such as deposits and borrowings) for the liquidity needed to conduct its business.
Economic downturns, market disruptions, high unemployment or underemployment, unsustainable debt levels, depressed real- 13 estate markets, industry consolidations, or other challenging business, economic, or market conditions could adversely affect these businesses and their results. If the funds or other groups that are clients of UMBFS were to encounter similar difficulties, UMBFS’s revenue could suffer.
Economic downturns, market disruptions, high unemployment or underemployment, unsustainable debt levels, depressed real estate markets, industry consolidations, or other challenging business, economic, or market conditions could adversely affect these businesses and their results. If the funds or other groups that are clients of UMBFS were to encounter similar difficulties, UMBFS’s revenue could suffer.
The Company’s bank-card revenue is driven primarily by transaction volumes in business , healthcare, and consumer spending that generate interchange fees, and any of these conditions could dampen those volumes. Other fee-based banking businesses that could be adversely affected include trading, asset management, custody, trust, and cash and treasury management.
The Company’s bank-card revenue is driven 13 primarily by transaction volumes in business, healthcare, and consumer spending that generate interchange fees, and any of these conditions could dampen those volumes. Other fee-based banking businesses that could be adversely affected include trading, asset management, custody, trust, and cash and treasury management.
Many of these transactions expose the Company to credit and market risk that may cause its counterparty or client to default. In addition, the Company is exposed to market risk when the collateral it 16 holds cannot be realized or is liquidated at prices not sufficient to recover the full amount of the secured obligation.
Many of these transactions expose the Company to credit and market risk that may cause its counterparty or client to default. In addition, the Company is exposed to market risk when the collateral it holds cannot be realized or is liquidated at prices not sufficient to recover the full amount of the secured obligation.
The secure processing, storage, maintenance, and transmission of this information is critical to the Company’s operations and reputation, and if any of this information were mishandled, misused, improperly accessed, lost, held hostage or stolen or if the Company’s operations were disrupted, the Company could suffer significant financial, business, reputational, regulatory, or other damage.
The secure processing, storage, maintenance, and transmission of this information is critical to the Company’s operations and reputation, and if any of this information were mishandled, misused, improperly accessed, lost, held hostage or 14 stolen or if the Company’s operations were disrupted, the Company could suffer significant financial, business, reputational, regulatory, or other damage.
For example, while the highly accommodative monetary policy currently adopted by the FRB may benefit the Company to some degree by spurring economic activity among 12 its customers, such a policy may ultimately cause the Company more harm by inhibiting its ability to grow or sustain net interest income.
For example, while the highly accommodative monetary policy currently adopted by the FRB may benefit the Company to some degree by spurring economic activity among its customers, such a policy may ultimately cause the Company more harm by inhibiting its ability to grow or sustain net interest income.
Likewise, a cyber-attack or other security breach affecting the business community, the markets, or parts of them may cycle or 14 cascade through the financial system and adversely affect the Company or its service providers or counterparties. Many of these risks and uncertainties are beyond the Company’s control.
Likewise, a cyber-attack or other security breach affecting the business community, the markets, or parts of them may cycle or cascade through the financial system and adversely affect the Company or its service providers or counterparties. Many of these risks and uncertainties are beyond the Company’s control.
These amounts could have a material adverse effect on the Company’s business, financial condition and results of operations. Significant financial, business, reputational, regulatory, or other harm could come to the Company as a result of these or related risks and uncertainties.
These amounts could have a material adverse effect on the Company’s business, financial condition and results of operations. 16 Significant financial, business, reputational, regulatory, or other harm could come to the Company as a result of these or related risks and uncertainties.
These risks and uncertainties, however, are not the only ones faced by the Company. Other risks and uncertainties that are not presently known to the Company that it has failed to identify, or that it currently considers immaterial may adversely affect the Company as well.
These risks and uncertainties, however, are not the only ones faced by the 11 Company. Other risks and uncertainties that are not presently known to the Company that it has failed to identify, or that it currently considers immaterial may adversely affect the Company as well.
Competitive pressures may drive the Company to take actions that the Company might otherwise eschew, such as lowering the interest rates or fees on loans or raising the interest rates on deposits in order to keep or attract high-quality customers.
Competitive pressures may drive the Company to take actions that the Company might otherwise eschew, such as 17 lowering the interest rates or fees on loans or raising the interest rates on deposits in order to keep or attract high-quality customers.
If conditions or circumstances arise that expose flaws or gaps in the Company’s risk-management or compliance programs or if its 17 controls break down, the performance and value of the Company’s business could be adversely affected.
If conditions or circumstances arise that expose flaws or gaps in the Company’s risk-management or compliance programs or if its controls break down, the performance and value of the Company’s business could be adversely affected.
All of these and other regulatory risks and uncertainties could adversely affect the Company’s reputation, business, results of operations, financial condition, or prospects.
All of 15 these and other regulatory risks and uncertainties could adversely affect the Company’s reputation, business, results of operations, financial condition, or prospects.
Accordingly, the Company 15 cannot be assured of its ability to raise capital when needed or on favorable terms.
Accordingly, the Company cannot be assured of its ability to raise capital when needed or on favorable terms.
A meaningful part of the Company’s loan portfolio is secured by real estate and, as a result, could be negatively impacted by deteriorating or volatile real-estate markets or associated environmental liabilities.
A meaningful part of the Company’s loan portfolio is secured by real estate and, as a result, could be negatively impacted by deteriorating or volatile real estate markets, the economic environment or associated environmental liabilities.
ITEM 1A. RISK FACTORS Financial-services companies routinely encounter and address risks and uncertainties. In the following paragraphs, the Company describes some of the principal risks and uncertainties that could adversely affect its business, results of operations, financial condition (including capital and liquidity), or prospects or the value of or return on an investment in the Company.
ITEM 1A. RI SK FACTORS Financial-services companies routinely encounter and address risks and uncertainties. In the following paragraphs, the Company describes some of the principal risks and uncertainties that could adversely affect its business, results of operations, financial condition (including capital and liquidity), or prospects or the value of or return on an investment in the Company.
While the Company assesses and improves these controls and programs on an ongoing basis, there can be no assurance that its frameworks or models for risk management, compliance, and related controls will effectively mitigate risk and limit losses in its business.
While the Company assesses and strives to improve these controls and programs on an ongoing basis, there can be no assurance that its frameworks or models for risk management, compliance, and related controls will effectively mitigate risk and limit losses in its business.
Accordingly, to the extent that the Company is unable to effectively deploy its funds to originate or acquire loans or other assets with higher yields than those of its investment securities, the Company’s income may be negatively impacted. Additionally, approximately $7.0 billion, or 52.9%, of the Company’s investment securities are classified as available for sale and reported at fair value.
Accordingly, to the extent that the Company is unable to effectively deploy its funds to originate or acquire loans or other assets with higher yields than those of its investment securities, the Company’s income may be negatively impacted. Additionally, approximately $7.1 billion, or 53.3%, of the Company’s investment securities are classified as available for sale and reported at fair value.
If the Company is able to raise capital and does so by issuing common stock or convertible securities, the ownership interest of its existing stock holders could be diluted, and the market price of its common s tock could decline.
If the Company is able to raise capital and does so by issuing common stock or convertible securities, the ownership interest of its existing stockholders could be diluted, and the market price of its common stock could decline.
Accounting standard-setting bodies, such as the Financial Accounting Standards Board, periodically change the financial accounting and reporting standards that affect the preparation of the Company’s Consolidated Financial S tatements. These changes are beyond the Company’s control and could h ave a meaningful impact on its Consolidated Financial S tatements.
Accounting standard-setting bodies, such as the Financial Accounting Standards Board, periodically change the financial accounting and reporting standards that affect the preparation of the Company’s Consolidated Financial Statements. These changes are beyond the Company’s control and could have a meaningful impact on its Consolidated Financial Statements.
Regulatory restrictions and the Company’s investment policies generally result in the acquisition of securities with lower yields than loans. For the year-ended December 31, 2022, the weighted average yield of the Company’s securities portfolio was 2.33% as compared to 4.30% for its loan portfolio.
Regulatory restrictions and the Company’s investment policies generally result in the acquisition of securities with lower yields than loans. For the year-ended December 31, 2023, the weighted average yield of the Company’s securities portfolio was 2.66% as compared to 6.27% for its loan portfolio.
The Company’s business, results of operations, and financial condition are highly dependent on net interest income, which is the difference between interest income on earning assets (such as loans and investments) and interest expense on deposits and borrowings.
The levels of, or changes in, interest rates could affect the Company’s business or performance. The Company’s business, results of operations, and financial condition are highly dependent on net interest income, which is the difference between interest income on earning assets (such as loans and investments) and interest expense on deposits and borrowings.
The majority of existing LIBOR-indexed contracts will revert to SOFR. The remainder will be individually negotiated to a mutual preferred replacement index. Since proposed alternative rates are calculated differently, payments under contracts referencing new rates will differ from those referencing LIBOR.
The Company discontinued entering into new LIBOR-indexed financial instruments effective December 31, 2021. The majority of existing LIBOR-indexed contracts will revert to SOFR. The remainder will be individually negotiated to a mutual preferred replacement index. Since proposed alternative rates are calculated differently, payments under contracts referencing new rates will differ from those referencing LIBOR.
To the extent that the Company continues to maintain a sizeable portfolio of available-for-sale investment securities, its income may be adversely affected and its reported equity more volatile. As of December 31, 2022, the Company’s securities portfolio totaled approximately $13.2 billion, which represented approximately 34.4% of its total assets.
To the extent that the Company continues to maintain a sizeable portfolio of investment securities, its income may be adversely affected and its reported equity more volatile. As of December 31, 2023, the Company’s securities portfolio totaled approximately $13.3 billion, which represented approximately 30.1% of its total assets.
Risks and exposures related to cybersecurity attacks have increased as a result of the COVID-19 pandemic and the related increased reliance on remote working, and are expected to remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats and the expanding use of technology-based products and services by the Company and its customers.
Risks and exposures related to cybersecurity attacks are expected to remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats and the expanding use of technology-based products and services by the Company and its customers.
At December 31, 2022, 49.2% of the Company’s aggregate loan portfolio—comprised of commercial real-estate loans (representing 36.2% of the aggregate loan portfolio) and consumer real-estate loans (representing 13.0% of the aggregate loan portfolio)—was primarily secured by interests in real estate located in the States where the Company operates.
At December 31, 2023, 51.2% of the Company’s aggregate loan portfolio—comprised of commercial real estate loans (representing 38.4% of the aggregate loan portfolio) and consumer real estate loans (representing 12.8% of the aggregate loan portfolio)—was primarily secured by interests in real estate located in the States where the Company operates.
The Alternative Reference Rates Committee (ARRC) has proposed that the Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York represents the best alternative to LIBOR for use in derivatives and other financial contracts that are currently indexed to LIBOR. The Company discontinued entering into new LIBOR-indexed financial instruments effective December 31, 2021.
Financial Conduct Authority announced that LIBOR is to be transitioned to alternative rates. The Alternative Reference Rates Committee (ARRC) has proposed that the Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York represents the best alternative to LIBOR for use in derivatives and other financial contracts that are currently indexed to LIBOR.
These businesses generally earn higher fees on equity-based or alternative investments and strategies and lower fees on fixed income investments and strategies. Advisory-fee income may be negatively impacted by an absolute decline in assets under management or by a shift in the mix of assets under management from equities or alternatives to fixed income.
Advisory-fee income may be negatively impacted by an absolute decline in assets under management or by a shift in the mix of assets under management from equities or alternatives to fixed income.
The Company also may not succeed in anticipating its future technology needs, the technology demands of its customers, or the competitive landscape for technology. In addition, the Company relies upon the expertise and support of service providers to help implement, maintain and/or service certain of its core technology solutions.
In addition, the Company relies upon the expertise and support of service providers to help implement, maintain and/or service certain of its core technology solutions.
The Company could be negatively impacted as well if, despite adequate programs being in place, its risk-management or compliance personnel are ineffective in executing them and mitigating risk and loss. Liquidity is essential to the Company and its business or performance could be adversely affected by constraints in, or increased costs for, funding.
The Company could be negatively impacted as well if, despite programs being in place, its risk-management or compliance personnel are ineffective in executing them and mitigating risk and loss.
When those conditions are weak or deteriorating in any of the markets or regions where the Company operates, its business or performance could be adversely affected.
The Company’s business and results of operations depend significantly on general economic conditions. When those conditions are weak or deteriorating in any of the markets or regions where the Company operates, or there are impacts stemming from geopolitical events, its business or performance could be adversely affected.
See “Quantitative and Qualitative Disclosures About Market Risk—Liquidity Risk” in Part II, Item 7A of this report for a discussion of how the Company monitors and manages liquidity risk.
See “Quantitative and Qualitative Disclosures About Market Risk—Liquidity Risk” in Part II, Item 7A of this report for a discussion of how the Company monitors and manages liquidity risk. The Company’s investment-management and asset-servicing businesses could be negatively impacted by declines in assets under management or administration or by shifts in the mix of assets under management or administration.
For example, the Company could be negatively impacted if financial, accounting, data-processing, or other systems were to fail or not fully perform their functions. The Company also could be adversely affected if key personnel or a significant number of employees were to become unavailable due to a pandemic, natural disaster, war, act of terrorism, accident, or other reason.
The Company also could be adversely affected if key personnel or a significant number of employees were to become unavailable due to a pandemic, such as the COVID-19 pandemic, natural disaster, geopolitical events, war, act of terrorism, accident, or other reason.
Many of these initiatives are of significant duration, are tied to critical systems, and require substantial internal and external resources. Although the Company takes steps to mitigate the risks and uncertainties associated with these initiatives, there is no guarantee that they will be implemented on time, within budget, or without negative operational or customer impact.
Although the Company takes steps to mitigate the risks and uncertainties associated with these initiatives, there is no guarantee that they will be implemented on time, within budget, or without negative operational or customer impact. The Company also may not succeed in anticipating its future technology needs, the technology demands of its customers, or the competitive landscape for technology.
See “Quantitative and Qualitative Disclosures About Market Risk—Credit Risk Management” in Part II, Item 7A of this report for a discussion of how the Company monitors and manages credit risk.
In addition, to the extent that loan charge-offs exceed estimates, an increase to the amount of provision expense related to the allowance for credit losses would reduce the Company’s income. See “Quantitative and Qualitative Disclosures About Market Risk—Credit Risk Management” in Part II, Item 7A of this report for a discussion of how the Company monitors and manages credit risk.
The Company, like other financial-services companies, relies to a significant extent on external sources of funding (such as deposits and borrowings) for the liquidity needed to conduct its business. A number of factors beyond the Company’s control, however, could have a detrimental impact on the availability or cost of that funding and thus on its liquidity.
A number of factors beyond the Company’s control, however, could have a detrimental impact on the availability or cost of that funding and thus on its liquidity.
Weak or deteriorating economic conditions, more liberal origination or underwriting standards, or financial or systemic shocks could increase the Company’s credit risk and adversely affect its lending or other banking businesses and the value of its loans or investment securities. The Company’s business and results of operations depend significantly on general economic conditions.
See “Quantitative and Qualitative Disclosures About Market Risk—Interest Rate Risk” in Part II, Item 7A of this report for a discussion of how the Company monitors and manages interest-rate risk. 12 Weak or deteriorating economic conditions, geopolitical events, more liberal origination or underwriting standards, or financial or systemic shocks could increase the Company’s credit risk and adversely affect its lending or other banking businesses and the value of its loans or investment securities.
The Company’s investment-management and asset-servicing businesses could be negatively impacted by declines in assets under management or administration or by shifts in the mix of assets under management or administration. The revenues of the Company’s investment-management businesses are highly dependent on advisory fee income.
The revenues of the Company’s investment-management businesses are highly dependent on advisory fee income. These businesses generally earn higher fees on equity-based or alternative investments and strategies and lower fees on fixed income investments and strategies.
Removed
The COVID-19 pandemic is affecting the Company and its customers, counterparties, employees, and third-party service providers, and the continued impacts on its business, financial position, results of operations, and prospects could potentially be significant.
Added
Financial markets and global supply chains may be adversely affected by the impact of military conflict, including the current conflicts in Ukraine and Israel, terrorism or other geopolitical events.
Removed
The spread of COVID-19 over the past two years has created a global public-health crisis that has resulted in widespread volatility and deteriorations in household, business, economic, and market conditions.
Added
In recent years, commercial real estate markets have been particularly impacted by the economic and other disruptions resulting from the COVID-19 pandemic. Repayment of commercial real estate, which typically involves higher loan principal amounts as compared to consumer real estate lending, is often dependent on the successful operation of the business conducted on the property securing the loans.
Removed
The extent of the impact of the ongoing COVID-19 pandemic on the Company’s capital, liquidity, and other financial positions and on its business, results of operations, and prospects will depend on a number of evolving factors, including: • The duration, extent, and severity of the COVID-19 pandemic . COVID-19 continues to affect households and businesses.
Added
Negative shifts in economic conditions can impact the borrower’s ability to pay. Failures in the Company’s risk management policies, procedures and controls could adversely affect its ability to manage this portfolio going forward and could result in an increased rate of delinquencies in, and increased losses from, this portfolio, which could negatively impact the Company’s operating and financial performance.
Removed
The duration and severity of the COVID-19 pandemic continue to be impossible to accurately predict. • The response of governmental and nongovernmental authorities .
Added
Liquidity is essential to the Company and its business or performance could be adversely affected by constraints in, or increased costs for, funding. The Company defines liquidity as the ability to fund increases in assets and meet obligations as they come due, all without incurring unacceptable losses.
Removed
The actions of many governmental and nongovernmental authorities have been directed toward curtailing household and business activity to contain COVID-19 while simultaneously deploying fiscal- and monetary-policy measures to partially mitigate the adverse effects on individual households and businesses. • The effect on the Company’s customers, counterparties, employees, and third-party service providers .
Added
For example, the Company could be negatively impacted if financial, accounting, data-processing, or other systems were to fail or not fully perform their functions.
Removed
COVID-19 and its associated consequences and uncertainties may affect individuals, households, and businesses differently and unevenly. • The effect on economies and markets . Whether the actions of governmental and nongovernmental authorities will be successful in mitigating the adverse effects of COVID-19 is unclear.
Added
Many of these initiatives are of significant duration, are tied to critical systems, and require substantial internal and external resources. Furthermore, to the extent these initiatives may implicate new technologies or solutions such as those related to artificial intelligence or automation, additional risk may be present.
Removed
National, regional, and local economies and markets have experienced volatility and could suffer further disruptions that are lasting. An economic slowdown could adversely affect the Company’s 11 origination of new loans and the performance of its existing loans. In addition, governmental actions are meaningfully influencing the interest-rate environment, which could adversely affect the Company’s results of operations and financial condition.
Removed
The COVID-19 pandemic could cause the Company to experience higher credit losses in its lending portfolio, impairment of its goodwill and other financial assets, reduced demand for its products and services, and other negative impacts on its financial position, results of operations, and prospects.
Removed
Sustained adverse effects of the COVID-19 pandemic may also prevent the Company from satisfying its minimum regulatory capital ratios and other supervisory requirements, failing to be able to sustain the paying of dividends to its shareholders, or result in downgrades in its credit ratings.
Removed
Because of the current expected credit loss (CECL) accounting standard, the Company’s financial results may be negatively affected as soon as weak or deteriorating economic conditions are forecasted and alter its expectations for credit losses.
Removed
In addition, due to the expansion of the time horizon over which it is required to estimate future credit losses under CECL, the Company may experience increased volatility in its future provisions for credit losses. The levels of, or changes in, interest rates could affect the Company’s business or performance.
Removed
Financial Conduct Authority announced that LIBOR is to be transitioned to alternative rates. U.S. regulatory authorities voiced similar support for phasing out LIBOR. The transition from LIBOR could create considerable costs and additional risk.
Removed
Certain LIBOR rates will continue to be published until June 30, 2023 for existing LIBOR-indexed financial instruments, however no new LIBOR-indexed financial instruments can be originated after December 31, 2021.
Removed
See “Quantitative and Qualitative Disclosures About Market Risk—Interest Rate Risk” in Part II, Item 7A of this report for a discussion of how the Company monitors and manages interest-rate risk.
Removed
In addition, t o the extent that loan charge-offs exceed estimates, an increase to the amount of provision expense related to the allowance for credit losses would reduce the Company’s income.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAdditionally, UMBFS leases 18,655 square feet at 2225 Washington Boulevard in Ogden, Utah, and 8,339 square feet at 223 Wilmington West Chester Pike in Chadds Ford, Pennsylvania.
Biggest changeAs of December 31, 2023, the Bank operated a total of 88 banking centers. UMBFS leases 85,164 square feet at 235 West Galena Street in Milwaukee, Wisconsin, for its fund services operations. Additionally, UMBFS leases 18,655 square feet at 2225 Washington Boulevard in Ogden, Utah, and 8,339 square feet at 223 Wilmington West Chester Pike in Chadds Ford, Pennsylvania.
Additional information with respect to properties, premises and equipment is presented in Note 1, “Summary of Significant Accounting Policies,” and Note 8, “Premises, Equipment, and Leases,” in the Notes to the Consolidated Financial Statements in Item 8 of this report, and is hereby incorporated by reference herein.
Additional information with respect to properties, premises and equipment is presented in Note 1, “Summary of Significant Accounting Policies,” and Note 8, “Premises, Equipment, and Leases,” in the Notes to the Consolidated Financial Statements in Item 8 of this report, and is hereby incorporated by reference herein. 22
ITEM 2. PROPERTIES The Company's headquarters building is located at 1010 Grand Boulevard in downtown Kansas City, Missouri. The building opened in July 1986 and all 250,000 square feet are occupied by departments and customer service functions of the Bank, as well as administrative offices for the Company.
ITEM 2. PR OPERTIES The Company's headquarters building is located at 1010 Grand Boulevard in downtown Kansas City, Missouri. The building opened in July 1986 and all 250,000 square feet are occupied by departments and customer service functions of the Bank, as well as administrative offices for the Company.
The Bank also leases 34,681 square feet on the first, second, and fifth floors of the 1670 Broadway building located in the financial district of downtown Denver, Colorado.
The Bank also leases 34,681 square feet on the first, second, and fifth floors of the 1670 Broadway building located in the financial district of downtown Denver, Colorado. The location has a full-service banking center and is home to operational and administrative support functions for the Bank.
Removed
The location has a full-service banking center and is home to operational and administrative support functions for the Bank. 20 As of December 31, 202 2 , the Bank operated a total of 89 banking centers. UMBFS leases 85,164 square feet at 235 West Galena Street in Milwaukee, Wisconsin, for its fund services operations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed1 unchanged
Biggest changeMINE SAFETY DISCLOSURES Not applicable. 21 PART II
Biggest changeMINE SAF ETY DISCLOSURES Not applicable. 23 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+2 added−0 removed1 unchanged
Biggest changePurchases of Equity Securities by the Issuer and Affiliated Purchasers The following table provides information about common stock repurchase activity by the Company during the quarter ended December 31, 2022: ISSUER PURCHASES OF EQUITY SECURITIES Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs October 1 - October 31, 2022 $ — $ — $ — 1,895,707 November 1 - November 30, 2022 1,623 82.74 1,623 1,894,084 December 1 - December 31, 2022 563 100.25 563 1,893,521 Total 2,186 $ 87.25 2,186 On April 26, 2022, the Company’s Board of Directors (the Board) authorized the repurchase of up to two million shares of the Company’s common stock, which will terminate on April 25, 2023 (a Repurchase Authorization).
Biggest changePurchases of Equity Securities by the Issuer and Affiliated Purchasers The following table provides information about common stock repurchase activity by the Company during the quarter ended December 31, 2023: ISSUER PURCHASES OF EQUITY SECURITIES Period Total Number of Shares (or Units) Purchased (1) Average Price Paid per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs October 1 - October 31, 2023 — $ — — 1,000,000 November 1 - November 30, 2023 — — — 1,000,000 December 1 - December 31, 2023 2,940 91.93 — 1,000,000 Total 2,940 $ 91.93 — (1) Includes shares acquired pursuant to the Company's share-based incentive programs.
The graph assumes an investment of $100 on December 31, 2017 and reinvestment of dividends.
The graph assumes an investment of $100 on December 31, 2018 and reinvestment of dividends.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company's common stock is traded on the NASDAQ Global Select Stock Market under the symbol "UMBF." As of February 16, 2023, the Company had 1,324 shareholders of record.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOC KHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company's common stock is traded on the NASDAQ Global Select Stock Market under the symbol "UMBF." As of February 16, 2024, the Company had 1,268 shareholders of record.
The Company has not made any repurchases other than through this Repurchase Authorization. The Company is not currently engaging in repurchases. In the future, it may determine to resume repurchases. All share purchases pursuant to a Repurchase Authorization are intended to be within the scope of Rule 10b-18 promulgated under the Exchange Act.
In the future, it may determine to resume repurchases. All share purchases pursuant to a Repurchase Authorization are intended to be within the scope of Rule 10b-18 promulgated under the Exchange Act.
Rule 10b-18 provides a safe harbor for purchases in a given day if the Company satisfies the manner, timing and volume conditions of the rule when purchasing its own shares of common stock.
Rule 10b-18 provides a safe harbor for purchases in a given day if the Company satisfies the manner, timing and volume conditions of the rule when purchasing its own shares of common stock. For discussion of management's intentions regarding dividends, see “Results of Operations” in Part II, Item 7 of this report.
The performance graph represents past performance and should not be considered to be an indication of future performance. 22 Index 2017 2018 2019 2020 2021 2022 UMB Financial Corporation $ 100.00 $ 86.14 $ 98.81 $ 101.42 $ 158.25 $ 126.66 S&P US BMI Banks Index 100.00 83.54 114.74 100.10 136.10 112.89 S&P 500 Index 100.00 95.62 125.72 148.85 191.58 156.88 23
The performance graph represents past performance and should not be considered to be an indication of future performance. 24 Index 2018 2019 2020 2021 2022 2023 UMB Financial Corporation $ 100.00 $ 114.71 $ 117.74 $ 183.72 $ 147.04 $ 150.29 S&P US BMI Banks Index 100.00 137.36 119.83 162.92 135.13 147.41 S&P 500 Index 100.00 131.49 155.68 200.37 164.08 207.21 ITEM 6. [R ESERVED] 25
Added
Under the terms of the Company's share-based incentive programs, the Company accepts previously owned shares of common stock surrendered to satisfy tax withholding obligations associated with equity compensation. These purchases do not count against the maximum value of shares remaining available for purchase under Repurchase Authorizations. (2) Includes shares acquired under the Board of Directors approved Repurchase Authorization(s).
Added
On July 25, 2023, the Company’s Board of Directors (the Board) authorized the repurchase of up to one million shares of the Company’s common stock, which will terminate on April 30, 2024 (a Repurchase Authorization). The Company has not made any repurchases other than through this Repurchase Authorization. The Company is not currently engaging in repurchases.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

147 edited+27 added−23 removed63 unchanged
Biggest changeAverage Volume Average Rate Increase (Decrease) 2022 2021 2022 2021 2022 vs. 2021 Volume Rate Total Change in interest earned on: $ 18,823,810 $ 16,629,867 4.30 % 3.72 % Loans $ 87,505 $ 103,229 $ 190,734 Securities: 9,616,691 7,422,432 2.00 1.72 Taxable 41,676 22,820 64,496 3,885,153 4,246,943 3.16 2.93 Tax-exempt (10,751 ) 9,636 (1,115 ) 965,911 1,234,533 1.98 0.81 Federal funds and resell agreements (2,599 ) 11,660 9,061 2,408,468 4,063,089 0.77 0.13 Interest-bearing due from banks (3,034 ) 16,199 13,165 12,076 23,480 4.96 4.33 Trading securities (492 ) 149 (343 ) 35,712,109 33,620,344 3.26 2.64 Total 112,305 163,693 275,998 Change in interest incurred on: 18,063,498 17,678,122 0.93 0.15 Interest-bearing deposits 589 140,552 141,141 249,663 163,744 2.10 0.04 Federal funds purchased 56 5,109 5,165 2,527,426 2,454,290 1.40 0.28 Securities sold under agreements to repurchase 211 28,393 28,604 309,204 270,498 5.00 4.68 Borrowed Funds 1,895 917 2,812 $ 21,149,791 $ 20,566,654 1.06 % 0.22 % Total 2,751 174,971 177,722 Net interest income $ 109,554 $ (11,278 ) $ 98,276 Average Volume Average Rate Increase (Decrease) 2021 2020 2021 2020 2021 vs. 2020 Volume Rate Total Change in interest earned on: $ 16,629,867 $ 15,126,110 3.72 % 3.87 % Loans $ 56,636 $ (23,320 ) $ 33,316 Securities: 7,422,432 5,256,715 1.72 2.01 Taxable 38,880 (16,956 ) 21,924 4,246,943 4,226,363 2.93 2.99 Tax-exempt 689 (2,204 ) (1,515 ) 1,234,533 1,099,447 0.81 1.08 Federal funds and resell agreements 1,336 (3,128 ) (1,792 ) 4,063,089 1,218,919 0.13 0.31 Interest-bearing due from banks 4,757 (3,084 ) 1,673 23,480 37,086 4.33 4.28 Trading securities (592 ) 19 (573 ) 33,620,344 26,964,640 2.64 3.10 Total 101,706 (48,673 ) 53,033 Change in interest incurred on: 17,678,122 15,336,492 0.15 0.38 Interest-bearing deposits 7,804 (39,606 ) (31,802 ) 163,744 60,314 0.04 0.26 Federal funds purchased 119 (206 ) (87 ) 2,454,290 1,963,499 0.28 0.59 Securities sold under agreements to repurchase 2,414 (7,180 ) (4,766 ) 270,498 136,957 4.68 5.30 Borrowed Funds 6,337 (941 ) 5,396 $ 20,566,654 $ 17,497,262 0.22 % 0.44 % Total 16,674 (47,933 ) (31,259 ) Net interest income $ 85,032 $ (740 ) $ 84,292 31 Table 3 ANALYSIS OF NET INTEREST MARGIN (in thousands) 2022 2021 2020 Average earning assets $ 35,712,109 $ 33,620,344 $ 26,964,640 Interest-bearing liabilities 21,149,791 20,566,654 17,497,262 Interest-free funds $ 14,562,318 $ 13,053,690 $ 9,467,378 Free funds ratio (interest free funds to average earning assets) 40.78 % 38.83 % 35.11 % Tax-equivalent yield on earning assets 3.26 % 2.64 % 3.10 % Cost of interest-bearing liabilities 1.06 0.22 0.44 Net interest spread 2.20 % 2.42 % 2.66 % Benefit of interest-free funds 0.43 0.08 0.15 Net interest margin 2.63 % 2.50 % 2.81 % The Company experienced an increase in net interest income of $98.3 million, or 12.1%, for the year ended December 31, 2022, compared to 2021.
Biggest changeAverage Volume Average Rate Increase (Decrease) 2023 2022 2023 2022 2023 vs. 2022 Volume Rate Total Change in interest earned on: $ 22,337,119 $ 18,823,810 6.27 % 4.30 % Loans $ 171,189 $ 418,765 $ 589,954 Securities: 9,097,110 9,616,691 2.36 2.00 Taxable (10,813 ) 33,673 22,860 3,790,921 3,885,153 3.38 3.16 Tax-exempt (3,142 ) 8,149 5,007 316,072 965,911 5.58 1.98 Federal funds and resell agreements (19,173 ) 17,711 (1,462 ) 2,046,349 2,408,468 5.04 0.77 Interest-bearing due from banks (3,203 ) 87,811 84,608 14,030 12,076 5.65 4.96 Trading securities 117 101 218 37,601,601 35,712,109 4.96 3.26 Total 134,975 566,210 701,185 Change in interest incurred on: 21,122,305 18,063,498 3.33 0.93 Interest-bearing deposits 32,883 503,774 536,657 169,997 249,663 4.97 2.10 Federal funds purchased (2,103 ) 5,307 3,204 2,005,418 2,527,426 4.22 1.40 Securities sold under agreements to repurchase (8,697 ) 57,816 49,119 2,311,238 309,204 5.25 5.00 Borrowed Funds 105,080 806 105,886 $ 25,608,958 $ 21,149,791 3.59 % 1.06 % Total 127,163 567,703 694,866 Net interest income $ 7,812 $ (1,493 ) $ 6,319 Average Volume Average Rate Increase (Decrease) 2022 2021 2022 2021 2022 vs. 2021 Volume Rate Total Change in interest earned on: $ 18,823,810 $ 16,629,867 4.30 % 3.72 % Loans $ 87,505 $ 103,229 $ 190,734 Securities: 9,616,691 7,422,432 2.00 1.72 Taxable 41,676 22,820 64,496 3,885,153 4,246,943 3.16 2.93 Tax-exempt (10,751 ) 9,636 (1,115 ) 965,911 1,234,533 1.98 0.81 Federal funds and resell agreements (2,599 ) 11,660 9,061 2,408,468 4,063,089 0.77 0.13 Interest-bearing due from banks (3,034 ) 16,199 13,165 12,076 23,480 4.96 4.33 Trading securities (492 ) 149 (343 ) 35,712,109 33,620,344 3.26 2.64 Total 112,305 163,693 275,998 Change in interest incurred on: 18,063,498 17,678,122 0.93 0.15 Interest-bearing deposits 589 140,552 141,141 249,663 163,744 2.10 0.04 Federal funds purchased 56 5,109 5,165 2,527,426 2,454,290 1.40 0.28 Securities sold under agreements to repurchase 211 28,393 28,604 309,204 270,498 5.00 4.68 Borrowed Funds 1,895 917 2,812 $ 21,149,791 $ 20,566,654 1.06 % 0.22 % Total 2,751 174,971 177,722 Net interest income $ 109,554 $ (11,278 ) $ 98,276 32 Table 3 ANALYSIS OF NET INTEREST MARGIN (in thousands) 2023 2022 2021 Average earning assets $ 37,601,601 $ 35,712,109 $ 33,620,344 Interest-bearing liabilities 25,608,958 21,149,791 20,566,654 Interest-free funds $ 11,992,643 $ 14,562,318 $ 13,053,690 Free funds ratio (interest free funds to average earning assets) 31.89 % 40.78 % 38.83 % Tax-equivalent yield on earning assets 4.96 % 3.26 % 2.64 % Cost of interest-bearing liabilities 3.59 1.06 0.22 Net interest spread 1.37 % 2.20 % 2.42 % Benefit of interest-free funds 1.15 0.43 0.08 Net interest margin 2.52 % 2.63 % 2.50 % The Company experienced an increase in net interest income of $6.3 million, or 0.7%, for the year ended December 31, 2023, compared to 2022.
The Company’s process for recording the ACL is based on the evaluation of the Company’s lifetime historical loss experience, management’s understanding of the credit quality inherent in the loan portfolio, and the impact of the current economic environment, coupled with reasonable and supportable economic forecasts.
The Company’s process for recording the ACL is based on the evaluation of the Company’s lifetime historical loss experience, management’s understanding of the credit quality inherent in the loan portfolio, and the impact of the current economic environment, coupled with reasonable and supportable economic forecasts.
The Company considers a variety of factors to ensure the safety and soundness of its estimate including a strong internal control framework, extensive methodology documentation, credit underwriting standards which encompass the Company’s desired risk profile, model validation, and ratio analysis.
The Company considers a variety of factors to ensure the safety and soundness of its estimate including a strong internal control framework, extensive methodology documentation, credit underwriting standards which encompass the Company’s desired risk profile, model validation, and ratio analysis.
If the Company’s total ACL estimate, as determined in accordance with the approved ACL methodology, is either outside a reasonable range based on review of economic indicators or by comparison of historical ratio analysis, the ACL estimate is an outlier and management will investigate the underlying reason(s).
If the Company’s total ACL estimate, as determined in accordance with the approved ACL methodology, is either outside a reasonable range based on review of economic indicators or by comparison of historical ratio analysis, the ACL estimate is an outlier and management will investigate the underlying reason(s).
Based on that investigation, issues or factors that previously had not been considered may be identified in the estimation process, which may warrant adjustments to estimated credit losses.
Based on that investigation, issues or factors that previously had not been considered may be identified in the estimation process, which may warrant adjustments to estimated credit losses.
Under different assumptions or conditions, actual results may differ from the recorded estimates. 47 Management believes that the Company’s critical accounting policies and estimates are those relating to the allowance for credit losses. Allowance for Credit Losses The Company’s ACL represents management’s judgment of the total expected losses included in the Company’s assets held at amortized cost.
Under different assumptions or conditions, actual results may differ from the recorded estimates. Management believes that the Company’s critical accounting policies and estimates are those relating to the allowance for credit losses. Allowance for Credit Losses The Company’s ACL represents management’s judgment of the total expected losses included in the Company’s assets held at amortized cost.
Net interest margin, presented in Table 1, is calculated as net interest income on a fully tax-equivalent basis as a percentage of average earning assets. Net interest income is presented on a tax-equivalent basis to adjust for the tax-exempt status of earnings from certain loans and investments, which are primarily obligations of state and local governments.
Net interest margin, presented in Table 1, is calculated as net interest income on a fully tax-equivalent basis as a percentage of average earning assets. Net interest income is presented on a tax-equivalent basis to adjust for the 29 tax-exempt status of earnings from certain loans and investments, which are primarily obligations of state and local governments.
In addition to providing a potential source of liquidity, the AFS securities portfolio can be used as a tool to manage interest rate 39 sensitivity. The Company’s goal in the management of its AFS securities portfolio is to maximize return within the Company’s parameters of liquidity goals, interest rate risk and credit risk.
In addition to providing a potential source of liquidity, the AFS securities portfolio can be used as a tool to manage interest rate sensitivity. The Company’s goal in the management of its AFS securities portfolio is to maximize return within the Company’s parameters of liquidity goals, interest rate risk and credit risk.
The Company places a significant emphasis on maintaining a strong capital position, which management believes promotes investor confidence, provides access to funding sources under favorable terms, and enhances the Company’s ability to capitalize on business growth and 26 acquisition opportunities.
The Company places a significant emphasis on maintaining a strong capital position, which management believes promotes investor confidence, provides access to funding sources under favorable terms, and enhances the Company’s ability to capitalize on business growth and acquisition opportunities.
For more information on loan portfolio segments, the Company’s ACL methodology, and management’s assumptions in estimating the ACL, refer to the section captioned “Allowance for Credit Losses” within Note 3, “Loans and Allowance for Credit Losses,” in the Notes to the Consolidated Financial Statements.
For more information on loan portfolio segments, the Company’s ACL methodology, and management’s assumptions in estimating the ACL, refer to the section captioned “Allowance for Credit Losses” within Note 3, “Loans and Allowance for Credit Losses,” in the Notes to the Consolidated Financial Statements. 50
The tax-equivalent interest income and yields give effect to tax-exempt interest income net of the disallowance of interest expense, for federal income tax purposes related to certain tax-free assets. Rates earned/paid may not compute to the rates shown due to presentation in millions.
The tax-equivalent interest income and yields give effect to tax-exempt interest income net of the disallowance of interest expense, for federal income tax purposes related to certain tax-free assets. Rates 30 earned/paid may not compute to the rates shown due to presentation in millions.
This process allows management to take a holistic view of the recorded ACL reserve and ensure that all significant and pertinent information is considered in its estimate.
This process allows management 49 to take a holistic view of the recorded ACL reserve and ensure that all significant and pertinent information is considered in its estimate.
As of December 31, 2022, there is no ACL related to the Company’s available-for-sale securities as the decline in fair value did not result from credit issues. Included in Tables 11 and 12 are analyses of the fair value and average yield (tax-equivalent basis) of securities available for sale and securities held to maturity.
As of December 31, 2023, there is no ACL related to the Company’s available-for-sale securities as the decline in fair value did not result from credit issues. Included in Tables 11 and 12 are analyses of the fair value and average yield (tax-equivalent basis) of securities available for sale and securities held to maturity.
Net interest spread contracted by 22 basis points during the same period. The third financial objective is to grow the Company’s revenue from noninterest sources. The Company seeks to grow noninterest revenues throughout all economic and interest rate cycles, while positioning itself to benefit in periods of economic growth.
Net interest spread contracted by 83 basis points during the same period. The third financial objective is to grow the Company’s revenue from noninterest sources. The Company seeks to grow noninterest revenues throughout all economic and interest rate cycles, while positioning itself to benefit in periods of economic growth.
The magnitude and duration of this impact will be largely dependent upon the FRB’s policy decisions and market movements. See Table 18 in Item 7A for an illustration of the impact of an interest rate increase or decrease on net interest income as of December 31, 2022.
The magnitude and duration of this impact will be largely dependent upon the FRB’s policy decisions and market movements. See Table 18 in Item 7A for an illustration of the impact of an interest rate increase or decrease on net interest income as of December 31, 2023.
The estimate reserves for assets held at amortized cost and any related credit deterioration in the Company’s available-for-sale debt security portfolio. Assets held at amortized cost include the Company’s loan book and held-to-maturity security portfolio. 32 The process involves the consideration of quantitative and qualitative factors relevant to the specific segmentation of loans.
The estimate reserves for assets held at amortized cost and any related credit deterioration in the Company’s available-for-sale debt security portfolio. Assets held at amortized cost include the Company’s loan book and held-to-maturity security portfolio. 33 The process involves the consideration of quantitative and qualitative factors relevant to the specific segmentation of loans.
In 2022, salary and wage expense increased $17.5 million, or 5.9% and bonus and commission expense increased $4.4 million, or 3.5%, driven by business volumes and revenue growth, and higher company performance. These increases were offset by a decrease in employee benefits expense of $1.9 million, or 2.3%.
In 2022, salaries and wage expense increased $17.5 million, or 5.9% and bonus and commission expense increased $4.4 million, or 3.5%, driven by business volumes and revenue growth, and higher company performance. These increases were offset by a decrease in employee benefits expense of $1.9 million, or 2.3%.
The volume of interest earning assets and the related funding sources, the overall mix of these assets and liabilities, and the interest rates paid on each affect net interest income. Table 2 summarizes the change in net interest income resulting from changes in volume and rates for 2022, 2021 and 2020.
The volume of interest earning-assets and the related funding sources, the overall mix of these assets and liabilities, and the interest rates paid on each affect net interest income. Table 2 summarizes the change in net interest income resulting from changes in volume and rates for 2023, 2022 and 2021.
These guidelines as of December 31, 2022, excluded net unrealized gains or losses on securities available for sale and net unrealized losses on securities held to maturity transferred from the available-for-sale category from the computation of regulatory capital and the related risk-based capital ratios.
These guidelines as of December 31, 2023, excluded net unrealized gains or losses on securities available for sale and net unrealized losses on securities held to maturity transferred from the available-for-sale category from the computation of regulatory capital and the related risk-based capital ratios.
A critical component of net interest income and related net interest margin is the percentage of earning assets funded by interest-free sources. Table 3 analyzes net interest margin for the three years ended December 31, 2022, 2021 and 2020.
A critical component of net interest income and related net interest margin is the percentage of earning assets funded by interest-free sources. Table 3 analyzes net interest margin for the three years ended December 31, 2023, 2022 and 2021.
Agency Securities December 31, 2022 Fair Value Weighted Average Yield Fair Value Weighted Average Yield Due in one year or less $ 39,041 3.07 % $ 57,796 2.71 % Due after 1 year through 5 years 738,029 2.15 113,500 2.21 Due after 5 years through 10 years — — — — Due after 10 years — — — — Total $ 777,070 2.20 % $ 171,296 2.38 % 40 Mortgage-backed Securities State and Political Subdivisions December 31, 2022 Fair Value Weighted Average Yield Fair Value Weighted Average Yield Due in one year or less $ 11,862 2.70 % $ 63,216 3.06 % Due after 1 year through 5 years 1,101,193 2.26 358,741 2.64 Due after 5 years through 10 years 2,827,094 1.82 504,186 2.88 Due after 10 years 41,973 2.42 436,264 3.30 Total $ 3,982,122 1.94 % $ 1,362,407 2.97 % Corporates Collateralized Loan Obligations December 31, 2022 Fair Value Weighted Average Yield Fair Value Weighted Average Yield Due in one year or less $ 10,563 4.82 % $ — — % Due after 1 year through 5 years 253,556 2.06 148,903 5.54 Due after 5 years through 10 years 103,381 3.33 152,372 5.39 Due after 10 years — — 44,677 5.62 Total $ 367,500 2.51 % $ 345,952 5.48 % U.S.
Agency Securities December 31, 2022 Fair Value Weighted Average Yield Fair Value Weighted Average Yield Due in one year or less $ 39,041 3.07 % $ 57,796 2.71 % Due after 1 year through 5 years 738,029 2.15 113,500 2.21 Due after 5 years through 10 years — — — — Due after 10 years — — — — Total $ 777,070 2.20 % $ 171,296 2.38 % Mortgage-backed Securities State and Political Subdivisions December 31, 2022 Fair Value Weighted Average Yield Fair Value Weighted Average Yield Due in one year or less $ 11,862 2.70 % $ 63,216 3.06 % Due after 1 year through 5 years 1,101,193 2.26 358,741 2.64 Due after 5 years through 10 years 2,827,094 1.82 504,186 2.88 Due after 10 years 41,973 2.42 436,264 3.30 Total $ 3,982,122 1.94 % $ 1,362,407 2.97 % Corporates Collateralized Loan Obligations December 31, 2022 Fair Value Weighted Average Yield Fair Value Weighted Average Yield Due in one year or less $ 10,563 4.82 % $ — — % Due after 1 year through 5 years 253,556 2.06 148,903 5.54 Due after 5 years through 10 years 103,381 3.33 152,372 5.39 Due after 10 years — — 44,677 5.62 Total $ 367,500 2.51 % $ 345,952 5.48 % 42 Table 12 SECURITIES HELD TO MATURITY (in thousands) U.S.
The Board authorized, at its April 26, 2022, April 27, 2021, and April 28, 2020 meetings, the repurchase of up to two million shares of the Company’s common stock during the twelve months following each meeting (each a Repurchase Authorization).
The Board authorized, at its April 26, 2022, and April 27, 2021 meetings, the repurchase of up to two million shares of the Company’s common stock during the twelve months following each meeting (each a Repurchase Authorization).
Loan-related earning assets tend to generate a higher spread than those earned in the Company’s investment portfolio. By design, the Company’s investment portfolio is moderate in duration and liquid in its composition of assets. During 2023, approximately $1.1 billion of available-for-sale securities are expected to have principal repayments.
Loan-related earning assets tend to generate a higher spread than those earned in the Company’s investment portfolio. By design, the Company’s investment portfolio is moderate in duration and liquid in its composition of assets. During 2024, approximately $2.1 billion of available-for-sale securities are expected to have principal repayments.
As of December 31, 2022, the Company does not believe the decline in value in these portfolios is related to credit impairments and instead is due to increasing market interest rates.
As of December 31, 2023, the Company does not believe the decline in value in these portfolios is related to credit impairments and instead is due to increasing market interest rates.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management’s Discussion and Analysis This Management’s Discussion and Analysis highlights the material changes in the results of operations and changes in financial condition for each of the three years in the period ended December 31, 2022.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management’s Discussion and Analysis This Management’s Discussion and Analysis highlights the material changes in the results of operations and changes in financial condition for each of the three years in the period ended December 31, 2023.
Management expects collateral pledging requirements for public funds, loan demand, and deposit funding to be the primary factors impacting changes in the level of AFS securities. There were $10.3 billion of AFS securities pledged to secure U.S. Government deposits, other public deposits, certain trust deposits, derivative transactions, and repurchase agreements at December 31, 2022.
Management expects collateral pledging requirements for public funds, loan demand, and deposit funding to be the primary factors impacting changes in the level of AFS securities. There were $10.1 billion of securities pledged to secure U.S. Government deposits, other public deposits, certain trust deposits, derivative transactions, and repurchase agreements at December 31, 2023.
Equipment expense decreased $4.1 million, or 5.3%, in 2022 compared to 2021, and decreased $7.3 million, or 8.5%, from 2020 to 2021. The decreases in both years were driven by lower software expense related to a transition to cloud-based computing solutions.
Equipment expense decreased $5.5 million, or 7.5%, in 2023 compared to 2022, and decreased $4.1 million, or 5.3%, from 2021 to 2022. The decreases in both years were driven by lower software expense related to a transition to cloud-based computing solutions.
The interest rate applied to borrowed balances will be at the Company’s option, either 1.4% above SOFR or 1.75% below the prime rate on the date of an advance. The Company pays a 0.4% unused commitment fee for unused portions of the line of credit. The Company had no advances outstanding at December 31, 2022.
The interest rate applied to borrowed balances will be at the Company’s option, either 1.40% above SOFR or 1.75% below the 47 prime rate on the date of an advance. The Company pays a 0.4% unused commitment fee for unused portions of the line of credit. The Company had no advances outstanding at December 31, 2023.
The dollar change and percent change columns highlight the respective net increase or decrease in the categories of noninterest income in 2022 compared to 2021, and in 2021 compared to 2020.
The dollar change and percent change columns highlight the respective net increase or decrease in the categories of noninterest income in 2023 compared to 2022, and in 2022 compared to 2021.
The Company is a member bank with the FHLB of Des Moines, and through this relationship, the Company owns $10.0 million of FHLB stock and has access to additional liquidity and funding sources through FHLB advances. The Company’s borrowing capacity is dependent upon the amount of collateral the Company places at the FHLB.
The Company is a member bank with the FHLB of Des Moines, and through this relationship, the Company owns $55.2 million of FHLB stock and has access to additional liquidity and funding sources through FHLB advances. The Company’s borrowing capacity is dependent upon the amount of collateral the Company places at the FHLB.
The tax-equivalent interest income totaled $25.8 million, $26.3 million, and $26.7 million in 2022, 2021, and 2020, respectively. (2) Loan fees are included in interest income. Such fees totaled $18.2 million, $17.1 million, and $13.7 million in 2022, 2021, and 2020, respectively. (3) Loans on nonaccrual are included in the computation of average balances.
The tax-equivalent interest income totaled $26.4 million, $25.8 million, and $26.3 million in 2023, 2022, and 2021, respectively. (2) Loan fees are included in interest income. Such fees totaled $17.7 million, $18.2 million, and $17.1 million in 2023, 2022, and 2021, respectively. (3) Loans on nonaccrual are included in the computation of average balances.
While no list of assumptions, risks, or uncertainties could be complete, some of the factors that may cause actual results or other future events, circumstances, or aspirations to differ from those in forward-looking statements include: • local, regional, national, or international business, economic, or political conditions or events; • changes in laws or the regulatory environment, including as a result of financial-services legislation or regulation; • changes in monetary, fiscal, or trade laws or policies, including as a result of actions by central banks or supranational authorities; • the pace and magnitude of interest rate movements; • changes in accounting standards or policies; • shifts in investor sentiment or behavior in the securities, capital, or other financial markets, including changes in market liquidity or volatility or changes in interest or currency rates; • changes in spending, borrowing, or saving by businesses or households; • the Company’s ability to effectively manage capital or liquidity or to effectively attract or deploy deposits; • changes in any credit rating assigned to the Company or its affiliates; • adverse publicity or other reputational harm to the Company; • changes in the Company’s corporate strategies, the composition of its assets, or the way in which it funds those assets; • the Company’s ability to develop, maintain, or market products or services or to absorb unanticipated costs or liabilities associated with those products or services; 24 • the Company’s ability to innovate to anticipate the needs of current or future customers, to successfully compete in its chosen business lines, to increase or hold market share in changing competitive environments, or to deal with pricing or other competitive pressures; • changes in the credit, liquidity, or other condition of the Company’s customers, counterparties, or competitors; • the Company’s ability to effectively deal with economic, business, or market slowdowns or disruptions; • judicial, regulatory, or administrative investigations, proceedings, disputes, or rulings that create uncertainty for, or are adverse to, the Company or the financial-services industry; • the Company’s ability to address changing or stricter regulatory or other governmental supervision or requirements; • the Company’s ability to maintain secure and functional financial, accounting, technology, data processing, or other operating systems or facilities, including its capacity to withstand cyber-attacks; • the adequacy of the Company’s corporate governance, risk-management framework, compliance programs, or internal controls, including its ability to control lapses or deficiencies in financial reporting or to effectively mitigate or manage operational risk; • the efficacy of the Company’s methods or models in assessing business strategies or opportunities or in valuing, measuring, monitoring, or managing positions or risk; • the Company’s ability to keep pace with changes in technology that affect the Company or its customers, counterparties, or competitors; • mergers, acquisitions, or dispositions, including the Company’s ability to integrate acquisitions and divest assets; • the adequacy of the Company’s succession planning for key executives or other personnel; • the Company’s ability to grow revenue, control expenses, or attract and retain qualified employees; • natural disasters, war, terrorist activities, pandemics, or the outbreak of COVID-19 or similar outbreaks, and their effects on economic and business environment in which the Company operates; • adverse effects due to COVID-19 on the Company and its customers, counterparties, employees, and third-party service providers, and the adverse impacts to its business, financial position, results of operations, and prospects; • impacts related to or resulting from Russia’s military action in Ukraine, such as the broader impacts to financial markets and the global macroeconomic and geopolitical environments; or • other assumptions, risks, or uncertainties described in the Risk Factors (Item 1A), Management’s Discussion and Analysis of Financial Condition and Results of Operations (Item 7), or the Notes to the Consolidated Financial Statements (Item 8) in this Annual Report on Form 10-K or described in any of the Company’s annual, quarterly or current reports.
While no list of assumptions, risks, or uncertainties could be complete, some of the factors that may cause actual results or other future events, circumstances, or aspirations to differ from those in forward-looking statements include: • local, regional, national, or international business, economic, or political conditions or events; • changes in laws or the regulatory environment, including as a result of financial-services legislation or regulation; • changes in monetary, fiscal, or trade laws or policies, including as a result of actions by central banks or supranational authorities; • the pace and magnitude of interest rate movements; • changes in accounting standards or policies; • shifts in investor sentiment or behavior in the securities, capital, or other financial markets, including changes in market liquidity or volatility or changes in interest or currency rates; • changes in spending, borrowing, or saving by businesses or households; • the Company’s ability to effectively manage capital or liquidity or to effectively attract or deploy deposits; • changes in any credit rating assigned to the Company or its affiliates; • adverse publicity or other reputational harm to the Company; • changes in the Company’s corporate strategies, the composition of its assets, or the way in which it funds those assets; • the Company’s ability to develop, maintain, or market products or services or to absorb unanticipated costs or liabilities associated with those products or services; 26 • the Company’s ability to innovate to anticipate the needs of current or future customers, to successfully compete in its chosen business lines, to increase or hold market share in changing competitive environments, or to deal with pricing or other competitive pressures; • changes in the credit, liquidity, or other condition of the Company’s customers, counterparties, or competitors; • the Company’s ability to effectively deal with economic, business, or market slowdowns or disruptions; • judicial, regulatory, or administrative investigations, proceedings, disputes, or rulings that create uncertainty for, or are adverse to, the Company or the financial-services industry; • the Company’s ability to address changing or stricter regulatory or other governmental supervision or requirements; • the Company’s ability to maintain secure and functional financial, accounting, technology, data processing, or other operating systems or facilities, including its capacity to withstand cyber-attacks; • the adequacy of the Company’s corporate governance, risk-management framework, compliance programs, or internal controls, including its ability to control lapses or deficiencies in financial reporting or to effectively mitigate or manage operational risk; • the efficacy of the Company’s methods or models in assessing business strategies or opportunities or in valuing, measuring, monitoring, or managing positions or risk; • the Company’s ability to keep pace with changes in technology that affect the Company or its customers, counterparties, or competitors; • mergers, acquisitions, or dispositions, including the Company’s ability to integrate acquisitions and divest assets; • the adequacy of the Company’s succession planning for key executives or other personnel; • the Company’s ability to grow revenue, control expenses, or attract and retain qualified employees; • natural disasters, war, terrorist activities, including instability in the Middle East and Russia's military action in Ukraine, pandemics, and their effects on economic and business environment in which the Company operates; • macroeconomic and adverse developments and uncertainties related to the collateral effects of the collapse of, and challenges for, domestic and international banks, including the impacts to the U.S. and global economies and reputational harm to the U.S. banking system; or • other assumptions, risks, or uncertainties described in the Risk Factors (Item 1A), Management’s Discussion and Analysis of Financial Condition and Results of Operations (Item 7), or the Notes to the Consolidated Financial Statements (Item 8) in this Annual Report on Form 10-K or described in any of the Company’s annual, quarterly or current reports.
The Company funds a significant portion of its balance sheet with noninterest-bearing demand deposits. Noninterest-bearing demand deposits represented 40.6%, 45.9% and 36.5% of total outstanding deposits as of December 31, 2022, 2021 and 2020, respectively. The decrease in 2022 is driven by the increase in short-term interest rates.
The Company funds a significant portion of its balance sheet with noninterest-bearing demand deposits. Noninterest-bearing demand deposits represented 33.9%, 40.6% and 45.9% of total outstanding deposits as of December 31, 2023, 2022 and 2021, respectively. The decrease in 2023 is driven by the increase in short-term interest rates.
Net interest income, average balance sheet amounts and the corresponding yields earned and rates paid for the years 2020 through 2022 are presented in Table 1 below. 28 The following table presents, for the periods indicated, the average earning assets and resulting yields, as well as the average interest-bearing liabilities and resulting yields, expressed in both dollars and rates.
Net interest income, average balance sheet amounts and the corresponding yields earned and rates paid for the years 2021 through 2023 are presented in Table 1 below. The following table presents, for the periods indicated, the average earning assets and resulting yields, as well as the average interest-bearing liabilities and resulting yields, expressed in both dollars and rates.
Repurchase agreements are transactions involving the exchange of investment funds by the customer for securities by the Company, under an agreement to repurchase the same issues at an agreed-upon price and date. 45 Securities sold under agreements to repurchase and federal funds purchased totaled $ 2.2 billion at December 31, 202 2 , and $ 3.2 billion at December 31, 202 1 .
Repurchase agreements are transactions involving the exchange of investment funds by the customer for securities by the Company, under an agreement to repurchase the same issues at an agreed-upon price and date. Securities sold under agreements to repurchase and federal funds purchased totaled $2.1 billion at December 31, 2023, and $2.2 billion at December 31, 2022.
Interest-bearing due from banks totaled $1.2 billion as of December 31, 2022 compared to $8.8 billion as of December 31, 2021 and includes amounts due from the FRB and interest-bearing accounts held at other financial institutions. The amount due from the FRB averaged $2.3 billion and $4.0 billion during the years ended December 31, 2022 and 2021, respectively.
Interest-bearing due from banks totaled $5.2 billion as of December 31, 2023 compared to $1.2 billion as of December 31, 2022 and includes amounts due from the FRB and interest-bearing accounts held at other financial institutions. The amount due from the FRB averaged $2.0 billion and $2.3 billion during the years ended December 31, 2023 and 2022, respectively.
These long-term debt obligations had an aggregate contractual balance of $103.1 million and had a carrying value of $74.6 million at December 31, 2022 and $73.2 million at December 31, 2021. Interest rates on trust preferred securities are tied to the three-month LIBOR with spreads ranging from 133 basis points to 160 basis points and reset quarterly.
These long-term debt obligations had an aggregate contractual balance of $103.1 million and had a carrying value of $75.6 million at December 31, 2023 and $74.6 million at December 31, 2022. Interest rates on trust preferred securities are tied to the three-month term SOFR with spreads ranging from 133 basis points to 160 basis points and reset quarterly.
The increase in noninterest expense in 2022 from 2021, and 2021 from 2020 is illustrated in Table 7. 27 Net Interest Income Net interest income is a significant source of the Company’s earnings and represents the amount by which interest income on earning assets exceeds the interest expense paid on liabilities.
The increase in noninterest expense in 2023 from 2022, and 2022 from 2021 is illustrated in Table 7 and below under Noninterest Expense. Net Interest Income Net interest income is a significant source of the Company’s earnings and represents the amount by which interest income on earning assets exceeds the interest expense paid on liabilities.
This liquidity can be used to fund loan growth or to offset the outflow of traditional funding sources. The average life of the AFS securities portfolio decreased from 67.6 months at December 31, 2021 to 62.3 months at December 31, 2022.
This liquidity can be used to fund loan growth or to offset the outflow of traditional funding sources. The average life of the AFS securities 40 portfolio decreased from 62.3 months at December 31, 2022 to 52.6 months at December 31, 2023.
The Company expects to see continued volatility in the economic markets and governmental responses to inflation, geopolitical tensions, supply chain constraints, and the COVID-19 pandemic. These changing economic conditions and governmental responses could have impacts on the balance sheet and income statement of the Company in 2023.
The Company expects to see continued volatility in the economic markets and governmental responses to inflation, geopolitical tensions, and supply chain constraints. These changing economic conditions and governmental responses could have impacts on the balance sheet and income statement of the Company in 2024.
Repurchase agreements and federal funds purchased averaged $ 2.8 billion in 202 2 and $ 2. 6 billion in 202 1 . The Company enters into these transactions with its downstream correspondent banks, commercial customers, and various trust, mutual fund, and local government relationships.
Repurchase agreements and federal funds purchased averaged $2.2 billion in 2023 and $2.8 billion in 2022. The Company enters into these transactions with its downstream correspondent banks, commercial customers, and various trust, mutual fund, and local government relationships.
See further information in Note 4, “Securities” in the Notes to the Consolidated Financial Statements. The Company’s AFS securities portfolio comprised 52.9% of the Company’s investment securities portfolio at December 31, 2022, compared to 86.7% at December 31, 2021. The Company’s AFS securities portfolio provides liquidity as a result of the composition and average life of the underlying securities.
See further information in Note 4, “Securities” in the Notes to the Consolidated Financial Statements. The Company’s AFS securities portfolio comprised 53.3% of the Company’s investment securities portfolio at December 31, 2023, compared to 52.9% at December 31, 2022. The Company’s AFS securities portfolio provides liquidity as a result of the composition and average life of the underlying securities.
The average life of the HTM portfolio was 9.3 years at December 31, 2022, compared to 5.2 years at December 31, 2021. The securities portfolio generates the Company’s second largest component of interest income. The AFS, HTM, and Other securities portfolios achieved an average yield on a tax-equivalent basis of 2.33% for 2022, compared to 2.16% in 2021.
The average life of the HTM portfolio was 8.4 years at December 31, 2023, compared to 9.3 years at December 31, 2022. The securities portfolio generates the Company’s second largest component of interest income. The AFS, HTM, and Other securities portfolios achieved an average yield on a tax-equivalent basis of 2.66% for 2023, compared to 2.33% in 2022.
Balances will fluctuate based on the Company’s liquidity and investment decisions as well as the Company’s correspondent bank borrowing levels. These investments averaged $959.2 million in 2022 and $1.2 billion in 2021. The Company also maintains an active securities trading inventory.
Balances will fluctuate based on the Company’s liquidity and investment decisions as well as the Company’s correspondent bank borrowing levels. These investments averaged $310.5 million in 2023 and $959.2 million in 2022. The Company also maintains an active securities trading inventory.
Securities available for sale had a net unrealized loss of $771.6 million at year-end, compared to a net unrealized gain of $153.9 million the preceding year. This market value change primarily reflects the impact of a shorter average life and increasing market interest rates as of December 31, 2022, compared to December 31, 2021.
Securities available for sale had a net unrealized loss of $624.2 million at year-end, compared to a net unrealized loss of $771.6 million the preceding year. This market value change primarily reflects the impact of a shorter average life and increasing market interest rates as of December 31, 2023, compared to December 31, 2022.
Trust and securities processing income consists of fees earned on personal and corporate trust accounts, custody of securities services, trust investments and wealth management services, and mutual fund assets servicing. This income category increased by $13.1 million, or 5.8% in 2022, compared to 2021, and increased by $29.5 million, or 15.1%, in 2021, compared to 2020.
Trust and securities processing income consists of fees earned on personal and corporate trust accounts, custody of securities services, trust investments and wealth management services, and mutual fund assets servicing. This income category increased by $20.0 million, or 8.4% in 2023, compared to 2022, and increased by $13.1 million, or 5.8%, in 2022, compared to 2021.
At December 31, 2022, the Company held securities purchased under agreements to resell of $951.6 million compared to $1.2 billion at December 31, 2021. The Company uses these instruments as short-term secured investments, in lieu of selling federal funds, or to acquire securities required for collateral purposes.
At December 31, 2023, the Company held securities purchased under agreements to resell of $240.3 million compared to $951.6 million at December 31, 2022. The Company uses these instruments as short-term secured investments, in lieu of selling federal funds, or to acquire securities required for collateral purposes.
Commercial & industrial loans and commercial real estate loans continue to represent the largest segments of the Company’s loan portfolio, comprising approximately 43.8% and 36.2%, respectively, of total loans and loans held for sale at the end of 2022 and 42.3% and 36.5%, respectively, of total loans and loans held for sale at the end of 2021.
Commercial and industrial loans and commercial real estate loans continue to represent the largest segments of the Company’s loan portfolio, comprising approximately 42.8% and 38.4%, respectively, of total loans and loans held for sale at the end of 2023 and 43.8% and 36.2%, respectively, of total loans and loans held for sale at the end of 2022.
These amounts are reflected, on an after-tax basis, in the Company’s Accumulated other comprehensive income (loss) in shareholders’ equity, as an unrealized loss of $514.6 million at year-end 2022, compared to an unrealized gain of $118.5 million for 2021.
These amounts are reflected, on an after-tax basis, in the Company’s Accumulated other comprehensive income (loss) in shareholders’ equity, as an unrealized loss of $471.9 million at year-end 2023, compared to an unrealized loss of $514.6 million for 2022.
For more information on loan portfolio segments and ACL methodology refer to Note 3, “Loans and Allowance for Credit Losses,” in the Notes to the Consolidated Financial Statements. 33 As illustrated in Table 5 below, the ACL decreased as a percentage of total loans to 0.91% as of December 31, 2022, compared to 1.13% as of December 31, 2021.
For more information on loan portfolio segments and ACL methodology refer to Note 3, “Loans and Allowance for Credit Losses,” in the Notes to the Consolidated Financial Statements. 34 As illustrated in Table 5 below, the ACL increased as a percentage of total loans to 0.95% as of December 31, 2023, compared to 0.91% as of December 31, 2022.
The increase in 2022 is primarily attributable to an increase in investment securities gains, net, coupled with an increase in brokerage fee income and trust and securities processing income. These were partially offset by a decrease in other miscellaneous income.
The decrease in 2023 is primarily driven by decreased investment securities gains, net, partially offset by an increase in other miscellaneous income and trust and securities processing income. The increase in 2022 is primarily attributable to an increase in investment securities gains, net, coupled with an increase in brokerage fee income and trust and securities processing income.
Generally, these loans are made for investment and real estate development or working capital and business expansion purposes and are primarily secured by real estate with a maximum loan-to-value of 80%. Most of these properties are non-owner occupied and have guarantees as additional security. Consumer real estate loans increased $403.2 million, or 17.4%, compared to 2021.
Generally, these loans are made for investment and real estate development or working capital and business expansion purposes and are primarily secured by real estate with a maximum loan-to-value of 80%. Most of these properties are non-owner occupied and have guarantees as additional security.
Long-term debt totaled $381.3 million at December 31, 2022, compared to $271.5 million at December 31, 2021. In September 2022, the Company issued $110.0 million in aggregate subordinated notes due in September 2032.
Long-term debt totaled $383.2 million at December 31, 2023, compared to $381.3 million at December 31, 2022. In September 2022, the Company issued $110.0 million in aggregate subordinated notes due in September 2032.
Service charges on deposits income decreased $0.9 million, or 1.0%, in 2022 compared to 2021 and increased $2.2 million, or 2.6%, in 2021 compared to 2020. The decrease in 2022 compared to 2021 was driven by decreased healthcare services income, partially offset by increased consumer service charge income.
Service charges on deposits income decreased $0.2 million, or 0.3%, in 2023 compared to 2022 and decreased $0.9 million, or 1.0%, in 2022 compared to 2021. The decrease in 2023 compared to 2022 was driven by decreased healthcare services income, offset by increased commercial service charge income.
This includes approximately $235 million which will have principal repayments during the first quarter of 2023. The available-for-sale investment portfolio had an average life of 62.3 months, 67.6 months, and 70.1 months as of December 31, 2022, 2021, and 2020, respectively.
This includes approximately $1.1 billion that will have principal repayments during the first quarter of 2024. The available-for-sale investment portfolio had an average life of 52.6 months, 62.3 months, and 67.6 months as of December 31, 2023, 2022, and 2021, respectively.
Fee-based services are typically non-credit related and are not generally affected by fluctuations in interest rates. Noninterest income increased in 2022 by $87.1 million, or 18.6%, compared to 2021 and decreased in 2021 by $93.0 million, or 16.6%, compared to 2020.
Fee-based services are typically non-credit related and are not generally affected by fluctuations in interest rates. Noninterest income decreased in 2023 by $12.4 million, or 2.2%, compared to 2022 and increased in 2022 by $87.1 million, or 18.6%, compared to 2021.
The volume of loans has increased from an average of $16.6 billion in 2021 to an average of $18.8 billion in 2022, driven by organic loan growth. The volume of interest-bearing liabilities increased from $20.6 billion in 2021 to $21.1 billion in 2022.
The volume of loans has increased from an average of $18.8 billion in 2022 to an average of $22.3 billion in 2023, driven by organic loan growth. The volume of interest-bearing liabilities increased from $21.1 billion in 2022 to $25.6 billion in 2023.
Investment securities totaled $13.2 billion as of December 31, 2022 and $13.8 billion as of December 31, 2021 and comprised 36.5% and 33.8% of the Company’s earning assets, respectively, as of those dates.
Investment securities totaled $13.3 billion as of December 31, 2023 and $13.2 billion as of December 31, 2022 and comprised 31.9% and 36.5% of the Company’s earning assets, respectively, as of those dates.
The second financial objective is to increase net interest income through profitable loan and deposit growth and the optimization of the balance sheet. For 2022, net interest income increased $98.3 million, or 12.1%, as compared to the previous year.
The second financial objective is to increase net interest income through profitable loan and deposit growth and the optimization of the balance sheet. For 2023, net interest income increased $6.3 million, or 0.7%, as compared to the previous year.
This follows an increase of $84.3 million, or 11.5%, for the year ended December 31, 2021, compared to 2020. Average earning assets for the year ended December 31, 2022 increased by $2.1 billion, or 6.2%, compared to the same period in 2021. Net interest margin, on a tax-equivalent basis, increased to 2.63% for 2022 compared to 2.50% in 2021.
This follows an increase of $98.3 million, or 12.1%, for the year ended December 31, 2022, compared to 2021. Average earning assets for the year ended December 31, 2023 increased by $1.9 billion, or 5.3%, compared to the same period in 2022. Net interest margin, on a tax-equivalent basis, decreased to 2.52% for 2023 compared to 2.63% in 2022.
As illustrated in Table 3, the impact from these interest-free funds was 43 basis points in 2022, as compared to eight basis points in 2021 and 15 basis points in 2020. The Company experienced an increase in net interest income during 2022 due to a volume variance of $109.6 million, offset by a negative rate variance of $11.3 million.
As illustrated in Table 3, the impact from these interest-free funds was 115 basis points in 2023, as compared to 43 basis points in 2022 and eight basis points in 2021. The Company experienced an increase in net interest income during 2023 due to a volume variance of $7.8 million, offset by a negative rate variance of $1.5 million.
The Company’s large commercial customer base provides a significant source of noninterest-bearing deposits. Many of these commercial accounts do not earn interest; however, they receive an earnings credit to offset the cost of other services provided by the Company.
These deposits represented 33.5% of average deposits in 2023, compared to 42.3% in 2022. The Company’s large commercial customer base provides a significant source of noninterest-bearing deposits. Many of these commercial accounts do not earn interest; however, they receive an earnings credit to offset the cost of other services provided by the Company.
The average holdings in the securities trading inventory in 2022 were $12.1 million, compared to $23.5 million in 2021, and were recorded at fair market value.
The average holdings in the securities trading inventory in 2023 were $14.0 million, compared to $12.1 million in 2022, and were recorded at fair market value.
The amounts presented are not necessarily indicative of actual future charge-offs in any particular category and are subject to change. 2022 2021 At December 31: Allowance for credit losses Percent of loans to total loans Allowance for credit losses Percent of loans to total loans Commercial and industrial $ 136,737 43.7 % $ 123,732 42.3 % Specialty lending — 2.9 1,738 3.0 Commercial real estate 39,370 36.2 56,265 36.5 Consumer real estate 6,148 12.9 3,921 13.5 Consumer 494 0.7 845 0.8 Credit cards 6,866 2.1 6,075 2.3 Leases and other 2,221 1.5 2,195 1.6 Total allowance for credit losses on loans $ 191,836 100.0 % $ 194,771 100.0 % Table 5 presents a summary of the Company’s ACL for the years ended December 31, 2022 and 2021.
The amounts presented are not necessarily indicative of actual future charge-offs in any particular category and are subject to change. 2023 2022 At December 31: Allowance for credit losses Percent of loans to total loans Allowance for credit losses Percent of loans to total loans Commercial and industrial $ 155,658 42.8 % $ 136,737 43.7 % Specialty lending — 2.2 — 2.9 Commercial real estate 45,507 38.4 39,370 36.2 Consumer real estate 6,941 12.8 6,148 12.9 Consumer 1,089 0.7 494 0.7 Credit cards 7,935 1.8 6,866 2.1 Leases and other 2,608 1.3 2,221 1.5 Total allowance for credit losses on loans $ 219,738 100.0 % $ 191,836 100.0 % Table 5 presents a summary of the Company’s ACL for the years ended December 31, 2023 and 2022.
The decrease in the FRB balance from 2021 to 2022 is primarily due to a decrease in deposit balances. The interest-bearing accounts held at other financial institutions totaled $121.7 million and $41.2 million at December 31, 2022 and 2021, respectively. Deposits and Borrowed Funds Deposits represent the Company’s primary funding source for its asset base.
The increase in the FRB balance at December 31, 2023 compared to the prior year is primarily due to an increase in deposit balances. The interest-bearing accounts held at other financial institutions totaled $78.7 million and $121.7 million at December 31, 2023 and 2022, respectively. Deposits and Borrowed Funds Deposits represent the Company’s primary funding source for its asset base.
Agency Securities Mortgage-backed Securities December 31, 2022 Fair Value Weighted Average Yield/Average Maturity Fair Value Weighted Average Yield/Average Maturity Due in one year or less $ — — % $ 756 1.65 % Due after 1 year through 5 years 118,524 3.07 319,503 2.26 Due after 5 years through 10 years — — 1,926,672 1.67 Due over 10 years — — 326,136 1.69 Total $ 118,524 3.07 % $ 2,573,067 1.73 % State and Political Subdivisions December 31, 2022 Fair Value Weighted Average Yield/Average Maturity Due in one year or less $ 81,893 3.77 % Due after 1 year through 5 years 222,006 2.63 Due after 5 years through 10 years 706,366 2.50 Due over 10 years 1,578,803 3.33 Total $ 2,589,068 3.05 % Mortgage-backed Securities State and Political Subdivisions December 31, 2021 Fair Value Weighted Average Yield/Average Maturity Fair Value Weighted Average Yield/Average Maturity Due in one year or less $ — — % $ 17,797 1.60 % Due after 1 year through 5 years 393,717 1.54 156,927 2.36 Due after 5 years through 10 years — — 481,785 2.49 Due over 10 years — — 392,165 2.08 Total $ 393,717 1.54 % $ 1,048,674 2.30 % The table below provides detailed information for Other securities at December 31, 2022 and 2021: Table 13 OTHER SECURITIES (in thousands) December 31, 2022 2021 FRB and FHLB stock $ 41,472 $ 36,222 Equity securities with readily determinable fair values 10,782 64,149 Equity securities without readily determinable fair values 297,504 226,727 Total $ 349,758 $ 327,098 Equity securities with readily determinable fair values are generally traded on an exchange and market prices are readily available.
Agency Securities Mortgage-backed Securities December 31, 2022 Fair Value Weighted Average Yield/Average Maturity Fair Value Weighted Average Yield/Average Maturity Due in one year or less $ — — % $ 756 1.65 % Due after 1 year through 5 years 118,524 3.07 319,503 2.26 Due after 5 years through 10 years — — 1,926,672 1.67 Due over 10 years — — 326,136 1.69 Total $ 118,524 3.07 % $ 2,573,067 1.73 % State and Political Subdivisions December 31, 2022 Fair Value Weighted Average Yield/Average Maturity Due in one year or less $ 81,893 3.77 % Due after 1 year through 5 years 222,006 2.63 Due after 5 years through 10 years 706,366 2.50 Due over 10 years 1,578,803 3.33 Total $ 2,589,068 3.05 % 43 The table below provides detailed information for Other securities at December 31, 2023 and 2022: Table 13 OTHER SECURITIES (in thousands) December 31, 2023 2022 FRB and FHLB stock $ 87,672 $ 41,472 Equity securities with readily determinable fair values 11,228 10,782 Equity securities without readily determinable fair values 394,035 297,504 Total $ 492,935 $ 349,758 Equity securities with readily determinable fair values are generally traded on an exchange and market prices are readily available.
The Company has seen an increase in the benefit from interest-free funds as compared to 2021 driven by the increase in short-term interest rates. The impact of this benefit increased 35 basis points compared to 2021 and is illustrated on Table 3.
Net interest spread contracted by 83 basis points during the same period. The Company has seen an increase in the benefit from interest-free funds as compared to 2022 driven by the increase in short-term interest rates. The impact of this benefit increased 72 basis points compared to 2022 and is illustrated on Table 3.
Noninterest expense in creased $ 9.2 million, or 3.9 % , primarily due to increases of $8.5 million in technology, service, and overhead expenses, $4.6 million in processing fees, $1.5 million in bankcard expense, and $1.1 million in operational losses, partially offset by a decrease of $5.7 million in salaries and employee benefits.
Noninterest expense increased $6.3 million, or 2.6%, primarily due to increases of $2.3 million in operational losses, $2.1 million in regulatory fees, $1.9 million in salaries and employee benefits, and $1.2 million in bankcard expense. These increases were partially offset by a decrease of $1.0 million in technology, service, and overhead expenses.
Basel III capital rules include a minimum ratio of common equity tier 1 capital to risk-weighted assets of 4.5% and a minimum tier 1 risk-based capital ratio of 6%. A financial institution’s total capital is also required to equal at least 8% of risk-weighted assets. The risk-based capital guidelines indicate the specific risk weightings by type of asset.
The Company has implemented the Basel III regulatory capital rules adopted by the FRB. Basel III capital rules include a minimum ratio of common equity tier 1 capital to risk-weighted assets of 4.5% and a minimum tier 1 risk-based capital ratio of 6%. A financial institution’s total capital is also required to equal at least 8% of risk-weighted assets.
The average rate on earning assets during 2022 has increased by 62 basis points, while the average rate on interest-bearing liabilities increased by 84 basis points, resulting in a 22 basis-point decrease in spread.
The average rate on earning assets during 2023 has increased by 170 basis points, while the average rate on interest-bearing liabilities increased by 253 basis points, resulting in a 83 basis-point decrease in spread.
The increase in the effective tax rate from 2021 to 2022 is primarily attributable to a smaller portion of pre-tax income being earned from tax-exempt municipal securities.
The decrease in the effective tax rate from 2022 to 2023 is primarily attributable to a larger portion of pre-tax income being earned from tax-exempt municipal securities and excludable life insurance policy gains. The increase in the effective tax rate from 2021 to 2022 is primarily attributable to a smaller portion of pre-tax income being earned from tax-exempt municipal securities.
Balance Sheet Analysis Loans and Loans Held For Sale Loans represent the Company’s largest source of interest income. Loan balances held for investment increased by $3.9 billion, or 22.5%, in 2022.
Balance Sheet Analysis Loans and Loans Held For Sale Loans represent the Company’s largest source of interest income. Loan balances held for investment increased by $2.1 billion, or 10.2%, in 2023.
From 2020 to 2021 the increase was driven by processing fees and salary and employee benefits expense, offset by other miscellaneous expense and equipment expense. Table 7 below summarizes the components of noninterest expense and the respective year-over-year changes for each category.
From 2021 to 2022 the increase was driven by increases in salaries and employee benefits expense, processing fees, other miscellaneous expense, bankcard expense, and marketing and business development expense. Table 7 below summarizes the components of noninterest expense and the respective year-over-year changes for each category.
As a percentage of total loans, commercial real estate comprises 36.2% of total loans compared to 36.5% in 2021. Commercial real estate loans increased $1.3 billion, or 21.5%, compared to 2021.
As a percentage of total loans, commercial real estate comprises 38.4% of total loans compared to 36.2% in 2022. Commercial real estate loans increased $1.3 billion, or 16.8%, compared to 2022.
These loans represented 12.9% of total loans as of December 31, 2022, compared to 13.5% as of December 31, 2021. For further information on loan portfolio segments refer to Note 3, “Loans and Allowance for Credit Losses,” in the Notes to the Consolidated Financial Statements.
Consumer real estate loans increased $237.4 million, or 8.7%, compared to 2022. These loans represented 12.8% of total loans as of December 31, 2023, compared to 12.9% as of December 31, 2022. For further information on loan portfolio segments refer to Note 3, “Loans and Allowance for Credit Losses,” in the Notes to the Consolidated Financial Statements.
Net interest margin, on a tax-equivalent basis, increased 13 basis points compared to the same period in 2021 in large part due to an increase in the benefit of free funds with the increase in short-term interest rates, coupled with the repricing of earning assets. This increase was partially offset by lower liquidity and the repricing of interest-bearing liabilities.
Net interest margin, on a fully tax-equivalent (FTE) basis, decreased 11 basis points compared to the same period in 2022 in large part due to repricing and mix changes of interest-bearing liabilities with the increase in short-term interest rates, partially offset by an increase in the benefit of free funds and the repricing of earning assets.
Marketing and business development expense increased $7.2 million, or 38.7%, in 2022 compared to 2021, and increased $3.9 million, or 26.3%, in 2021 compared to 2020. The increases in both years were driven by the timing of advertising and business development projects and higher travel expenses as compared to the prior year.
Marketing and business development expense was flat in 2023 compared to 2022, and increased $7.2 million, or 38.7%, in 2022 compared to 2021. The increase in 2022 was driven by the timing of advertising and business development projects and higher travel expenses as compared to the prior year.
This represents a 22.3% increase over 2021. Net income for 2021 was $353.0 million, or an increase of 23.2% compared to 2020. Basic earnings per share for the year ended December 31, 2022, were $8.93 per share compared to $7.31 per share in 2021, an increase of 22.2%.
Net income for 2022 was $431.7 million, or an increase of 22.3% compared to 2021. Basic earnings per share for the year ended December 31, 2023, were $7.22 per share compared to $8.93 per share in 2022, a decrease of 19.1%. Basic earnings per share were $7.31 per share in 2021, or an increase of 22.2% from 2021 to 2022.
The Company’s HTM securities portfolio consists of U.S. agency-backed securities, mortgage-backed securities, general obligation bonds, and private placement bonds. The Company’s HTM portfolio, net of the ACL totaled $5.9 billion as of December 31, 2022, an increase of $4.4 billion from December 31, 2021.
The Company’s HTM securities portfolio consists of U.S. agency-backed securities, mortgage-backed securities, general obligation bonds, and private placement bonds. The Company’s HTM portfolio, net of the ACL totaled $5.7 billion as of December 31, 2023, a decrease of $170.6 million from December 31, 2022.
Table 15 ANALYSIS OF AVERAGE DEPOSITS (in thousands) December 31, 2022 2021 Amount: Noninterest-bearing demand $ 13,264,146 $ 11,254,761 Interest-bearing demand and savings 17,332,972 16,982,864 Time deposits under $250,000 95,013 242,017 Total core deposits 30,692,131 28,479,642 Time deposits of $250,000 or more 635,513 453,241 Total deposits $ 31,327,644 $ 28,932,883 As a % of total deposits: Noninterest-bearing demand 42.4 % 38.9 % Interest-bearing demand and savings 55.3 58.7 Time deposits under $250,000 0.3 0.8 Total core deposits 98.0 98.4 Time deposits of $250,000 or more 2.0 1.6 Total deposits 100.0 % 100.0 % Capital Resources and Liquidity The Company places a significant emphasis on the maintenance of a strong capital position, which it believes promotes investor confidence, provides access to funding sources under favorable terms, and enhances the Company’s ability to capitalize on business growth and acquisition opportunities.
Table 15 ANALYSIS OF AVERAGE DEPOSITS (in thousands) December 31, 2023 2022 Amount: Noninterest-bearing demand $ 10,640,344 $ 13,264,146 Interest-bearing demand and savings 18,374,884 17,332,972 Time deposits under $250,000 1,967,028 95,013 Total core deposits 30,982,256 30,692,131 Time deposits of $250,000 or more 780,393 635,513 Total deposits $ 31,762,649 $ 31,327,644 As a % of total deposits: Noninterest-bearing demand 33.5 % 42.4 % Interest-bearing demand and savings 57.8 55.3 Time deposits under $250,000 6.2 0.3 Total core deposits 97.5 98.0 Time deposits of $250,000 or more 2.5 2.0 Total deposits 100.0 % 100.0 % 45 Capital Resources and Liquidity The Company places a significant emphasis on the maintenance of a strong capital position, which it believes promotes investor confidence, provides access to funding sources under favorable terms, and enhances the Company’s ability to capitalize on business growth and acquisition opportunities.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeTable 19 INTEREST RATE SENSITIVITY ANALYSIS (in millions) 1-90 91-180 181-365 1-5 Over 5 Days Days Days Total Years Years Total December 31, 2022 Earning assets Loans $ 12,635.3 $ 748.9 $ 1,196.5 $ 14,580.7 $ 4,571.3 $ 1,881.2 $ 21,033.2 Securities 929.3 397.7 613.6 1,940.6 5,377.7 5,899.4 13,217.7 Federal funds sold and resell agreements 958.6 — — 958.6 — — 958.6 Other 1,197.1 — — 1,197.1 — — 1,197.1 Total earning assets $ 15,720.3 $ 1,146.6 $ 1,810.1 $ 18,677.0 $ 9,949.0 $ 7,780.6 $ 36,406.6 % of total earning assets 43.2 % 3.1 % 5.0 % 51.3 % 27.3 % 21.4 % 100.0 % Funding sources Interest-bearing demand and savings $ 18,461.6 $ — $ — $ 18,461.6 $ — $ — $ 18,461.6 Time deposits 474.3 173.9 161.2 809.4 103.0 4.7 917.1 Federal funds purchased and repurchase agreements 2,222.2 — — 2,222.2 — — 2,222.2 Borrowed funds 74.6 — — 74.6 306.7 — 381.3 Noninterest-bearing sources 5,238.9 282.2 520.6 6,041.7 2,967.2 5,415.5 14,424.4 Total funding sources $ 26,471.6 $ 456.1 $ 681.8 $ 27,609.5 $ 3,376.9 $ 5,420.2 $ 36,406.6 % of total earning assets 72.7 % 1.2 % 1.9 % 75.8 % 9.3 % 14.9 % 100.0 % Interest sensitivity gap $ (10,751.3 ) $ 690.5 $ 1,128.3 $ (8,932.5 ) $ 6,572.1 $ 2,360.4 Cumulative gap (10,751.3 ) (10,060.8 ) (8,932.5 ) (8,932.5 ) (2,360.4 ) — As a % of total earning assets (29.5 )% (27.6 )% (24.5 )% (24.5 )% (6.5 )% — % Ratio of earning assets to funding sources 0.59 2.51 2.65 0.68 2.95 1.44 Cumulative ratio of earning assets to funding sources 2022 0.59 0.63 0.68 0.68 0.92 1.00 2021 1.44 1.27 1.04 1.04 1.25 1.00 51 Table 20 Maturities and Sensitivities to Changes in Interest Rates This table details loan maturities by variable and fixed rates as of December 31, 2022 (in thousands): Due in one year or less Due after one year through five years Due after five years through fifteen years Due after fifteen years Total Variable Rate Commercial and industrial $ 6,180,115 $ 15,362 $ 626 $ — $ 6,196,103 Specialty lending 602,706 — — — 602,706 Commercial real estate 4,012,740 106,329 11,738 — 4,130,807 Consumer real estate 297,029 248,932 562,379 — 1,108,340 Consumer 64,118 64 — — 64,182 Credit cards 430,114 1,558 — — 431,672 Leases and other 258,137 217 — — 258,354 Total variable rate loans 11,844,959 372,462 574,743 — 12,792,164 Fixed Rate Commercial and industrial 1,183,657 1,650,996 168,853 6,377 3,009,883 Specialty lending — — — — — Commercial real estate 1,299,512 1,883,108 302,636 23 3,485,279 Consumer real estate 202,586 590,812 614,158 209,351 1,616,907 Consumer 28,530 51,983 971 — 81,484 Credit cards — — — — — Leases and other 21,455 21,965 4,030 — 47,450 Total fixed rate loans 2,735,740 4,198,864 1,090,648 215,751 8,241,003 Total loans and loans held for sale $ 14,580,699 $ 4,571,326 $ 1,665,391 $ 215,751 $ 21,033,167 Trading Account The Bank carries taxable governmental securities in a trading account that is maintained in accordance with Board-approved policy and procedures.
Biggest changeTable 19 INTEREST RATE SENSITIVITY ANALYSIS (in millions) 1-90 91-180 181-365 1-5 Over 5 Days Days Days Total Years Years Total December 31, 2023 Earning assets Loans $ 14,520.2 $ 718.9 $ 1,252.4 $ 16,491.5 $ 4,983.0 $ 1,702.4 $ 23,176.9 Securities 2,105.2 598.3 557.6 3,261.1 5,141.9 4,850.5 13,253.5 Federal funds sold and resell agreements 245.3 — — 245.3 — — 245.3 Other 5,177.3 — — 5,177.3 0.6 — 5,177.9 Total earning assets $ 22,048.0 $ 1,317.2 $ 1,810.0 $ 25,175.2 $ 10,125.5 $ 6,552.9 $ 41,853.6 % of total earning assets 52.7 % 3.1 % 4.3 % 60.1 % 24.2 % 15.7 % 100.0 % Funding sources Interest-bearing demand and savings $ 20,588.6 $ — $ — $ 20,588.6 $ — $ — $ 20,588.6 Time deposits 1,019.6 1,627.3 221.4 2,868.3 202.6 2.7 3,073.6 Federal funds purchased and repurchase agreements 2,119.6 — — 2,119.6 — — 2,119.6 Short term debt — 1,000.0 800.0 1,800.0 — — 1,800.0 Long term debt 75.6 — — 75.6 307.6 — 383.2 Noninterest-bearing sources 12,130.8 — — 12,130.8 — 1,757.8 13,888.6 Total funding sources $ 35,934.2 $ 2,627.3 $ 1,021.4 $ 39,582.9 $ 510.2 $ 1,760.5 $ 41,853.6 % of total earning assets 85.9 % 6.2 % 2.4 % 94.5 % 1.3 % 4.2 % 100.0 % Interest sensitivity gap $ (13,886.2 ) $ (1,310.1 ) $ 788.6 $ (14,407.7 ) $ 9,615.3 $ 4,792.4 Cumulative gap (13,886.2 ) (15,196.3 ) (14,407.7 ) (14,407.7 ) (4,792.4 ) — As a % of total earning assets (33.2 )% (36.3 )% (34.4 )% (34.4 )% (11.5 )% — % Ratio of earning assets to funding sources 0.61 0.50 1.77 0.64 19.85 3.72 Cumulative ratio of earning assets to funding sources 2023 0.61 0.61 0.64 0.64 0.88 1.00 2022 0.59 0.63 0.68 0.68 0.92 1.00 Table 20 Maturities and Sensitivities to Changes in Interest Rates This table details loan maturities by variable and fixed rates as of December 31, 2023 (in thousands): Due in one year or less Due after one year through five years Due after five years through fifteen years Due after fifteen years Total Variable Rate Commercial and industrial $ 7,056,626 $ 35,780 $ 171 $ 2,480 $ 7,095,057 Specialty lending 498,786 — — — 498,786 Commercial real estate 5,329,868 176,617 7,459 14 5,513,958 Consumer real estate 444,067 484,648 319,043 — 1,247,758 Consumer 58,787 14 — — 58,801 Credit cards 423,502 454 — — 423,956 Leases and other 251,727 743 28 — 252,498 Total variable rate loans 14,063,363 698,256 326,701 2,494 15,090,814 Fixed Rate Commercial and industrial 988,753 1,685,457 160,662 — 2,834,872 Specialty lending — — — — — Commercial real estate 1,130,647 1,856,898 386,753 5,670 3,379,968 Consumer real estate 241,581 658,767 629,616 187,330 1,717,294 Consumer 58,085 44,976 1,278 151 104,490 Credit cards — — — — — Leases and other 9,127 38,626 1,713 — 49,466 Total fixed rate loans 2,428,193 4,284,724 1,180,022 193,151 8,086,090 Total loans and loans held for sale $ 16,491,556 $ 4,982,980 $ 1,506,723 $ 195,645 $ 23,176,904 53 Trading Account The Bank carries taxable governmental securities in a trading account that is maintained in accordance with Board-approved policy and procedures.
Net interest income is predicted to increase in all upward rate shock scenarios and decrease in all upward rate ramp scenarios. In down rate scenarios, net interest income is predicted to decrease in shock scenarios and increase in ramp scenarios.
Net interest income is predicted to decrease in all upward rate ramp scenarios and increase in all upward rate shock scenarios. In down rate scenarios, net interest income is predicted to increase in rate ramp scenarios and decrease in rate shock scenarios.
Another factor affecting liquidity is the amount of deposits and customer repurchase agreements that have pledging requirements. All customer repurchase agreements require collateral in the form of a security. The U.S. Government, other public entities, and certain trust depositors require the Company to pledge securities if their deposit balances are greater than the FDIC-insured deposit limitations.
Another factor affecting liquidity is the amount of deposits and customer repurchase agreements that have pledging requirements. All customer repurchase agreements require collateral in the form of a security. The U.S. 55 Government, other public entities, and certain trust depositors require the Company to pledge securities if their deposit balances are greater than the FDIC-insured deposit limitations.
The Company utilizes a centralized credit administration function, which provides information on the Bank’s risk levels, delinquencies, an internal risk grading system and overall credit exposure. Loan requests are centrally 52 reviewed to ensure the consistent application of the loan policy and standards. In addition, the Company has an internal loan review staff that operates independently of the Bank.
The Company utilizes a centralized credit administration function, which provides information on the Bank’s risk levels, delinquencies, an internal risk grading system and overall credit exposure. Loan requests are centrally reviewed to ensure the consistent application of the loan policy and standards. In addition, the Company has an internal loan review staff that operates independently of the Bank.
This would include but is not limited to the risk of fraud by employees or persons outside the Company, the execution of unauthorized transactions by employees or others, errors relating to transaction processing, breaches of the internal control system and compliance requirements, and unplanned interruptions in service.
This would include but is not limited to the risk of fraud by 56 employees or persons outside the Company, the execution of unauthorized transactions by employees or others, errors relating to transaction processing, breaches of the internal control system and compliance requirements, and unplanned interruptions in service.
Financial instruments that are subject to market risk can be classified either as held for trading or held for purposes other than trading. 48 The Company is subject to market risk primarily through the effect of changes in interest rates of its assets held for purposes other than trading.
Financial instruments that are subject to market risk can be classified either as held for trading or held for purposes other than trading. The Company is subject to market risk primarily through the effect of changes in interest rates of its assets held for purposes other than trading.
Through these simulations, management estimates the impact on net interest income of a 300-basis-point upward or a 100-basis-point downward gradual change (e.g. ramp) and immediate change (e.g. shock) of market interest rates over a two-year period. In ramp scenarios, rates change gradually for a one-year period and remain constant in year two.
Through these simulations, management estimates the impact on net interest income of a 200-basis-point upward or a 300-basis-point downward gradual change (e.g. ramp) and immediate change (e.g. shock) of market interest rates over a two-year period. In ramp scenarios, rates change gradually for a one-year period and remain constant in year two.
Also, it does not necessarily predict the impact of changes in general levels of interest rates on net interest income. 50 Table 19 is a static gap analysis, which presents the Company’s assets and liabilities, based on their repricing or maturity characteristics and reflecting principal amortization.
Also, it does not necessarily predict the impact of changes in general levels of interest rates on net interest income. 52 Table 19 is a static gap analysis, which presents the Company’s assets and liabilities, based on their repricing or maturity characteristics and reflecting principal amortization.
Ultimately, the Company believes public confidence is generated through profitable operations, sound credit quality and a strong capital position. The primary source of liquidity for the Company is regularly scheduled payments on and maturity of assets, which include $7.0 billion of high-quality securities available for sale.
Ultimately, the Company believes public confidence is generated through profitable operations, sound credit quality and a strong capital position. The primary source of liquidity for the Company is regularly scheduled payments on and maturity of assets, which include $7.1 billion of high-quality securities available for sale.
The Company’s ability to price deposits consistent with its history is a key assumption in these scenarios. Repricing Mismatch Analysis The Company also evaluates its interest rate sensitivity position in an attempt to maintain a balance between the amount of interest-bearing assets and interest-bearing liabilities which are expected to mature or reprice at any point in time.
The Company’s ability to price deposits consistent with its historical approach is a key assumption in these scenarios. Repricing Mismatch Analysis The Company also evaluates its interest rate sensitivity position in an attempt to maintain a balance between the amount of interest-bearing assets and interest-bearing liabilities which are expected to mature or reprice at any point in time.
While there can be no assurance that the Company will not suffer such losses in the future, management continually monitors and works to improve its internal controls, systems and corporate-wide processes and procedures. 55
While there can be no assurance that the Company will not suffer such losses in the future, management continually monitors and works to improve its internal controls, systems and corporate-wide processes and procedures. 57
The largest change in net interest income relative to base in either rate shock or ramp scenarios is less than 5% in year one. In year two, net interest income is predicted to rise in all increasing rate scenarios and decrease in falling rate scenarios.
The largest change in net interest income relative to base in either rate ramp or rate shock scenarios is less than 4% in year one. In year two, net interest income is predicted to rise in all increasing rate scenarios and decrease in falling rate scenarios.
The interest rate applied to borrowed balances will be at the Company’s option, either 1.4% above SOFR or 1.75% below the prime rate on the date of an advance. The Company pays a 0.4% unused commitment fee for unused portions of the line of credit. The Company had no advances outstanding at December 31, 2022.
The interest rate applied to borrowed balances will be at the Company’s option, either 1.4% above Term SOFR or 1.75% below the prime rate on the date of an advance. The Company pays a 0.4% unused commitment fee for unused portions of the line of credit. The Company had no advances outstanding at December 31, 2023.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Risk Management Market risk is a broad term for the risk of economic loss due to adverse changes in the fair value of a financial instrument. These changes may be the result of various factors, including interest rates, foreign exchange prices, commodity prices, or equity prices.
ITEM 7A. QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK Risk Management Market risk is a broad term for the risk of economic loss due to adverse changes in the fair value of a financial instrument. These changes may be the result of various factors, including interest rates, foreign exchange prices, commodity prices, or equity prices.
This review team performs periodic examinations of the B ank’s loans for credit quality, documentation and loan administration. The respective regulatory authority of the Bank also reviews loan portfolios. A primary indicator of credit quality and risk management is the level of nonperforming loans. Nonperforming loans include both nonaccrual loans and restructured loans on nonaccrual.
This review team performs periodic examinations of the Bank’s loans for credit quality, documentation and loan administration. The respective regulatory authority of the Bank also reviews loan portfolios. A primary indicator of credit quality and risk management is the level of nonperforming loans. Nonperforming loans include both nonaccrual loans and restructured loans on nonaccrual.
The risk associated with the carrying of trading securities is offset by the sale of exchange-traded financial futures contracts, with both the trading account and futures contracts marked to market daily. This account had a balance of $18.0 million as of December 31, 2022, compared to $31.9 million as of December 31, 2021.
The risk associated with the carrying of trading securities is offset by the sale of exchange-traded financial futures contracts, with both the trading account and futures contracts marked to market daily. This account had a balance of $18.1 million as of December 31, 2023, compared to $18.0 million as of December 31, 2022.
Table 2 0 presents the break-out of fixed and variable rate loans by repricing or maturity characteristics for each loan class.
Table 20 presents the break-out of fixed and variable rate loans by repricing or maturity characteristics for each loan class.
These commitments include unused commitments to extend credit, standby letters of credit and financial guarantees, and commercial letters of credit. The total amount of these commercial commitments at December 31, 2022 was $17.4 billion.
These commitments include unused commitments to extend credit, standby letters of credit and financial guarantees, and commercial letters of credit. The total amount of these commercial commitments at December 31, 2023 was $17.5 billion.
Loans past due more than 90 days and still accruing interest totaled $1.6 million as of December 31, 2022, compared to $2.6 million as of December 31, 2021.
Loans past due more than 90 days and still accruing interest totaled $3.1 million as of December 31, 2023, compared to $1.6 million as of December 31, 2022.
Table 18 MARKET RISK Hypothetical change in interest rate – Rate Ramp Year One Year Two December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 (basis points) Percentage change Percentage change Percentage change Percentage change 300 (1.4 )% 5.9 % 10.6 % 22.1 % 200 (1.1 ) 3.7 7.1 14.9 100 (0.4 ) 1.5 3.6 7.3 Static — — — — (100) 0.4 (3.0 ) (3.8 ) (9.7 ) 49 Hypothetical change in interest rate – Rate Shock Year One Year Two December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 (basis points) Percentage change Percentage change Percentage change Percentage change 300 3.5 % 11.2 % 14.1 % 22.5 % 200 2.4 7.2 9.5 15.2 100 1.2 3.1 4.8 7.5 Static — — — — (100) (1.3 ) (6.2 ) (5.0 ) (12.2 ) The Company is positioned relatively neutral to changes in interest rates in the next year.
Table 18 MARKET RISK Hypothetical change in interest rate – Rate Ramp Year One Year Two December 31, 2023 December 31, 2022 December 31, 2023 December 31, 2022 (basis points) Percentage change Percentage change Percentage change Percentage change 200 (0.7 )% (1.1 )% 4.2 % 7.1 % 100 (0.3 ) (0.4 ) 2.2 3.6 Static — — — — (100) 0.3 0.4 (3.1 ) (3.8 ) (200) 0.9 n/a (5.7 ) n/a (300) 1.5 n/a (8.8 ) n/a Hypothetical change in interest rate – Rate Shock Year One Year Two December 31, 2023 December 31, 2022 December 31, 2023 December 31, 2022 (basis points) Percentage change Percentage change Percentage change Percentage change 200 3.1 % 2.4 % 7.4 % 9.5 % 100 1.6 1.2 3.8 4.8 Static — — — — (100) (1.7 ) (1.3 ) (4.7 ) (5.0 ) (200) (2.8 ) n/a (9.3 ) n/a (300) (3.5 ) n/a (14.3 ) n/a The Company is positioned relatively neutral to changes in interest rates in the next year.
The Company received $107.9 million, after deducting underwriting discounts and commissions and offering expenses, and used the proceeds from the offering for general corporate purposes, including, among other uses, contributing Tier 1 capital into the Bank.
In September 2022, the Company issued $110.0 million in aggregate subordinated notes due in September 2032. The Company received $107.9 million, after deducting underwriting discounts and commissions and offering expenses, and used the proceeds from the offering for general corporate purposes, including, among other uses, contributing Tier 1 capital into the Bank.
The Company’s nonperforming loans decreased $73.0 million to $19.3 million at December 31, 2022, compared to December 31, 2021. There was an immaterial amount of interest recognized on nonperforming loans during 2022, 2021, and 2020. The Company had $68 thousand of other real estate owned as of December 31, 2022.
The Company’s nonperforming loans decreased $6.1 million to $13.2 million at December 31, 2023, compared to December 31, 2022. There was an immaterial amount of interest recognized on nonperforming loans during 2023, 2022, and 2021. The Company had $1.7 million and $68 thousand of other real estate owned as of December 31, 2023 and December 31, 2022, respectively.
These pledging requirements affect liquidity risk in that the related security cannot otherwise be disposed due to the pledging restriction. At December 31, 2022, $10.3 billion, or 80.3%, of securities were pledged or used as collateral, compared to $10.2 billion, or 75.8%, at December 31, 2021.
These pledging requirements affect liquidity risk in that the related security cannot otherwise be disposed due to the pledging restriction. At December 31, 2023, $10.1 billion, or 79.2%, of securities were pledged or used as collateral, compared to $10.3 billion, or 80.3%, at December 31, 2022. The Company also has other commercial commitments that may impact liquidity.
Table 18 shows the net interest income percentage increase or decrease over the next twelve- and twenty-four-month periods as of December 31, 2022 and 2021 based on hypothetical changes in interest rates and a constant sized balance sheet with runoff being replaced.
The results of these simulations can be significantly influenced by assumptions utilized and management evaluates the sensitivity of the simulation results on a regular basis. 51 Table 18 shows the net interest income percentage increase or decrease over the next twelve- and twenty-four-month periods as of December 31, 2023 and 2022 based on hypothetical changes in interest rates and a constant sized balance sheet with runoff being replaced.
Certain loans are restructured to provide a reduction or deferral of interest or principal due to deterioration in the financial condition of the respective borrowers. The Company had $5.2 million of restructured loans at December 31, 2022 and $7.3 million at December 31, 2021.
Certain loans are restructured to provide a reduction or deferral of interest or principal due to deterioration in the financial condition of the respective borrowers.
Table 21 LOAN QUALITY (in thousands) December 31, 2022 2021 Nonaccrual loans $ 16,838 $ 85,207 Restructured loans on nonaccrual 2,431 7,093 Total non-performing loans 19,269 92,300 Other real estate owned 68 — Total non-performing assets $ 19,337 $ 92,300 Loans past due 90 days or more $ 1,617 $ 2,633 Restructured loans accruing 2,790 189 Allowance for credit losses on loans 191,836 194,771 Ratios Non-performing loans as a % of loans 0.09 % 0.54 % Non-performing assets as a % of loans plus other real estate owned 0.09 0.54 Non-performing assets as a % of total assets 0.05 0.22 Loans past due 90 days or more as a % of loans 0.01 0.02 Allowance for credit losses on loans as a % of loans 0.91 1.13 Allowance for credit losses on loans as a multiple of non-performing loans 9.96x 2.11x 53 Table 22 SUMMARY OF NET CHARGE-OFFS (in thousands) 2022 2021 Net Charge-Offs (Recoveries) Average Loans Outstanding Net Charge-Offs (Recoveries) to Average Loans Outstanding Net Charge-Offs (Recoveries) Average Loans Outstanding Net Charge-Offs (Recoveries) to Average Loans Outstanding At December 31: Commercial and industrial $ 35,719 $ 8,160,147 0.44 % $ 7,287 $ 7,160,288 0.10 % Specialty lending (433 ) 525,697 (0.08 ) 31,758 494,637 6.42 Commercial real estate (356 ) 6,784,082 (0.01 ) (362 ) 6,161,097 (0.01 ) Consumer real estate (74 ) 2,512,597 — (46 ) 2,111,948 — Consumer real estate 674 146,949 0.46 2,201 113,377 1.94 Credit cards 4,338 431,003 1.01 4,044 390,804 1.03 Leases and other — 261,941 — (10 ) 186,199 (0.01 ) Total $ 39,868 $ 18,822,416 0.21 % $ 44,872 $ 16,618,350 0.27 % Net charge-offs for the year ended December 31, 2022 were $39.9 million, compared to $44.9 million for the year ended December 31, 2021.
The Company had $548 thousand of restructured loans at December 31, 2023 and $5.2 million at December 31, 2022. 54 Table 21 LOAN QUALITY (in thousands) December 31, 2023 2022 Nonaccrual loans $ 12,828 $ 16,838 Restructured loans on nonaccrual 384 2,431 Total non-performing loans 13,212 19,269 Other real estate owned 1,738 68 Total non-performing assets $ 14,950 $ 19,337 Loans past due 90 days or more $ 3,111 $ 1,617 Restructured loans accruing 164 2,790 Allowance for credit losses on loans 219,738 191,836 Ratios Non-performing loans as a % of loans 0.06 % 0.09 % Non-performing assets as a % of loans plus other real estate owned 0.06 0.09 Non-performing assets as a % of total assets 0.03 0.05 Loans past due 90 days or more as a % of loans 0.01 0.01 Allowance for credit losses on loans as a % of loans 0.95 0.91 Allowance for credit losses on loans as a multiple of non-performing loans 16.63x 9.96x Table 22 SUMMARY OF NET CHARGE-OFFS (in thousands) 2023 2022 Net Charge-Offs (Recoveries) Average Loans Outstanding Net Charge-Offs (Recoveries) to Average Loans Outstanding Net Charge-Offs (Recoveries) Average Loans Outstanding Net Charge-Offs (Recoveries) to Average Loans Outstanding At December 31: Commercial and industrial $ (248 ) $ 9,669,378 (0.00 )% $ 35,719 $ 8,160,147 0.44 % Specialty lending 761 540,371 0.14 (433 ) 525,697 (0.08 ) Commercial real estate 155 8,359,937 0.00 (356 ) 6,784,082 (0.01 ) Consumer real estate 1,140 2,858,510 0.04 (74 ) 2,512,597 (0.00 ) Consumer real estate 1,021 147,240 0.69 674 146,949 0.46 Credit cards 7,645 478,328 1.60 4,338 431,003 1.01 Leases and other — 281,178 — — 261,941 — Total $ 10,474 $ 22,334,942 0.05 % $ 39,868 $ 18,822,416 0.21 % Net charge-offs for the year ended December 31, 2023 were $10.5 million, compared to $39.9 million for the year ended December 31, 2022.
For the most part, the Bank can pay dividends at least equal to its current year’s earnings without seeking prior regulatory approval.
For the most part, the Bank can pay dividends at least equal to its current year’s earnings without seeking prior regulatory approval. The Company also uses cash to inject capital into the Bank and its non-Bank subsidiaries to maintain adequate capital as well as to fund strategic initiatives.
The Company is a member bank of the FHLB. The Company owns $10.0 million of FHLB stock and has access to additional liquidity and funding sources through FHLB advances. The Company has access to borrow up to $1.9 billion through advances at the FHLB of Des Moines but had no outstanding FHLB Des Moines advances as of December 31, 2022.
The Company is a member bank with the FHLB of Des Moines, and through this relationship, the Company owns $55.2 million of FHLB stock and has access to additional liquidity and funding sources through FHLB advances. The Company’s borrowing capacity is dependent upon the amount of collateral the Company places at the FHLB.
Removed
The results of these simulations can be significantly influenced by assumptions utilized and management evaluates the sensitivity of the simulation results on a regular basis.
Added
As of December 31, 2023, the Company had one short-term advance for $1.0 billion outstanding at the FHLB of Des Moines. Additionally, in 2023, the FHLB of Des Moines issued a letter of credit for $150.0 million on behalf of the Company to secure deposits. This letter of credit expired in January 2024.
Removed
Of these amounts, securities with a market value of $171.2 million at December 31, 2021, were pledged at the Federal Reserve Discount Window but were unencumbered as of that date. The Company also has other commercial commitments that may impact liquidity.
Added
The Company had no outstanding advances at FHLB Des Moines as of December 31, 2022. Based on the collateral pledged, the Company had $975.3 million of borrowing capacity remaining at the FHLB at December 31, 2023. As of December 31, 2023, the Company had an $800.0 million short-term borrowing outstanding with the Federal Reserve Bank's BTFP.
Removed
The Company also uses cash to inject capital into the Bank and its non-Bank subsidiaries to maintain adequate capital as well as to fund strategic initiatives. 54 In September 2022, the Company issued $110.0 million in aggregate subordinated notes due in September 2032.
Added
As of December 31, 2023, the Company's borrowing capacity with the BTFP was $5.0 million and its remaining borrowing capacity at the Federal Reserve Discount Window was $10.5 billion.
Added
In addition to the borrowing capacity with the FHLB and at the Federal Reserve Discount Window as described above, the Company had additional liquidity of $7.9 billion available via cash, unpledged bond collateral, the federal funds market, and the IntraFi Cash Service program as of December 31, 2023.

Other UMBF 10-K year-over-year comparisons