UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended: December 31, 20172022
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 000-04887001-38481
UMB FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Missouri | 43-0903811 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
1010 Grand Boulevard, Kansas City, Missouri | 64106 |
(Address of principal executive offices) | (Zip Code) |
(Registrant's telephone number, including area code): (816) 860-7000
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, $1.00 Par Value | UMBF | The NASDAQ Global Select Market |
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☒ Yes ☐ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check One):
Large accelerated filer |
| ☒ |
| Accelerated filer |
| ☐ | ||
Non-accelerated filer |
| ☐ |
| Smaller reporting company |
| ☐ | ||
|
|
|
|
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issues its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No
As of June 30, 2017,2022, the aggregate market value of common stock outstanding held by nonaffiliates of the registrant was approximately $3,379,666,840$3,765,571,733 based on the closing price of the registrant’s common stock on the NASDAQ Global Select Market on that date.
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.
Class | Outstanding at February |
Common Stock, $1.00 Par Value |
|
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Definitive Proxy Statement on Schedule 14A (“Proxy(the “Proxy Statement”) to be delivered to shareholders in connection with the Annual Meeting of Shareholders to be held on April 24, 2018,26, 2023, are incorporated by reference into Part III of this Annual Report on Form 10-K.
INDEX
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 was organized as a corporation under Missouri law in 1967 and is registered as a bank holding company under the Bank Holding Company Act of 1956, as amended (the BHCA) and a financial holding company under the Gramm-Leach-Bliley Act of 1999, as amended (the GLBA). The Company currently owns all of the outstanding stock of one national bank and several nonbank subsidiaries.
The Company’s national bank, UMB Bank, National Association (the Bank), has its principal office in Missouri and also has branches in Arizona, Colorado, Illinois, Kansas, Nebraska, Oklahoma, and Texas. The Bank offers a full complement of banking products and other services to commercial, retail, government, and correspondent-bank customers, including a wide range of asset-management, trust, bank-card,bankcard, and cash-management services.
The Company also owns UMB Fund Services, Inc. (UMBFS), which is a significant nonbank subsidiary and is locatedthat has offices in Milwaukee, Wisconsin, Chadds Ford, Pennsylvania, and Ogden, Utah. UMBFS provides fund accounting, transfer agency, and other services to mutual fund and alternative-investment groups.
Until November 17, 2017,Prior to March 31, 2021, the Company also owned Scout Investments, Inc. (Scout)Prairie Capital Management, LLC (PCM), which is an institutional asset-management company that offered domesticprovided investment management services and internationalalternative investments in hedge funds and private equity strategies throughfunds. The Company sold its Scout Asset Management Divisionmembership interests in PCM during the first quarter of 2021.
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). Such impacts have included significant volatility in the global stock and fixed income strategies throughmarkets, 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.
The Company continues to actively monitor developments related to COVID-19 and its Reams Asset Management division. On November 17, 2017,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 closed onoperates its business. The Company is carefully monitoring the saleactivities of Scoutits vendors and other third-party service providers to Carillon Tower Advisers, Inc., a Florida corporation, for a purchase pricemitigate the risks associated with any potential service disruptions. The length of approximately $172.5 million, after giving effect to customary purchase price adjustments.
On a full-time equivalent basis at December 31, 2017,time the Company may be required to operate under such circumstances and future degrees of disruption remain uncertain. While the Company has not experienced material adverse disruptions to its subsidiaries employed 3,570 persons.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 twothree segments: BankCommercial Banking, Institutional Banking, and Asset Servicing.Personal Banking.
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 pages 32 through 33, 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 pages 87 through 89 of this report.
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. Competition comes from both traditional and non-traditional financial-services providers, including banks, savings associations, finance companies, investment advisors, asset managers, mutual funds, private-equity firms, hedge funds, brokerage firms, mortgage-banking companies, credit-card companies, insurance companies, trust companies, securities processing companies, and credit unions. Recently,Increasingly, financial-technology (fintech) companies have beenare partnering more often with financial-services providers to compete with the Company for lending, payments, and other business.Many of the Company’s competitors mayare not be subject to the same kind or degree of supervision and regulation as the Company.
Competition is based on a number of factors. Banking customers are generally influenced by convenience, interest rates and pricing, personal experience, quality and availability of products and other services, lending limits, transaction execution, and reputation. Investment advisory services compete primarily on returns, expenses, third-party ratings, and the reputation and performance of managers. Asset servicing competes primarily on price, quality of services, and reputation.The Company and its competitors are all impacted to varying degrees by the overall economy and health of
the financial markets.
The degree of impact will vary based on the basis of risk of each competitor and their approachCompany’s ability to managing them.
Successfully competingsuccessfully compete in the Company’sits chosen markets and regions also depends on the Company’sits ability to attract, retain, and motivate talented employees, to invest in technology and infrastructure, and to innovate, all the while effectively managing its expenses. 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. As part of the Company’s efforts to recruit and retain top talent, it strives to offer competitive compensation and benefits programs, while fostering a culture rooted in inclusion of a diverse mix of associates who are empowered to be part of something more. 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’s compensation program is designed to allow it to attract, reward, and retain talented individuals who contribute significant value to the organization. The Company’s compensation programs reward performance, reserving the highest rewards for the highest performers. The Company’s incentive plans are intended to promote the interests of the Company and its shareholders by providing associates with incentives and rewards to encourage them to continue in service of the Company. The Company provides employees with compensation packages that include base salary, annual short-term incentive bonuses, and long-term equity awards tied to management, growth, and protection of the business of the Company. In addition to cash and equity compensation, the Company offers a robust benefits program that includes medical, dental, and vision insurance, health savings accounts and a variety of insurance options, including pet, life, and long-term care. Additionally, the Company also offers associates benefits including paid time off, paid volunteer time off, paid parental leave, adoption assistance, a 401(k) plan, as well as profit sharing and an employee stock ownership plan. 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 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’s business resource groups (BRGs) also play a vital role in deepening the recruitment pipeline of diverse talent and refer candidates to the Company on a regular basis. BRGs are structured to engage associates who share common interests, including associates from traditionally underrepresented groups. Nearly 20% of the Company’s associates participate in one or more BRGs.
Community Involvement. 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. 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. Information on the Company’s website is not incorporated by reference into this report and should not be considered part of this document.
Government Monetary and Fiscal Policies
In addition to the impact of general economic conditions, the Company’s business, results of operations, financial condition, capital, liquidity, and prospects are significantly affected by government monetary and fiscal policies that are announced or implemented in the United States and abroad.
A sizeable influence is exerted, in particular, by the policies of the Board of Governors of the Federal Reserve System (the FRB), which influences monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates. 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.
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. Policies announced or implemented by other central banks around the world have a meaningful effect as well and sometimes may be coordinated with those of the FRB.
Tax and other fiscal policies, moreover, impact not only general economic conditions but also give rise to incentives or disincentives that affect how the Company and its customers prioritize objectives, operate businesses, and deploy resources.
Regulation and Supervision
The Company is subject to regulatory frameworks in the United States at federal, State, and local levels. In addition, the Company is subject to the direct supervision of various government authorities charged with overseeing the kinds of financial activities conducted by its business segments.
This section summarizes some pertinentcertain provisions of the principal laws and regulations that apply to the Company. The descriptions, however, are not complete and are qualified in their entirety by the full text and judicial or administrative interpretations of those laws and regulations and other laws and regulations that affect the Company.
Overview
The Company is a bank holding company under the BHCA and a financial holding company under the GLBA. As a result, the Company—including all of its businesses and operations in the United States and abroad—operations—is subject to the regulation, supervision, and examination of the FRB and to restrictions on permissible activities. This schemeframework of regulation, supervision, and examination is intended primarily for the protection and benefit of depositors and other customers of the Bank, the Deposit Insurance Fund (the DIF) of the Federal Deposit Insurance Corporation (the FDIC), the banking and financial systems as a whole, and the broader economy, not for the protection or benefit of the Company’s shareholders or its non-deposit creditors.
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., and Prairie Capital Management, LLC 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. 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. If the FRB were to take the position that the Company or any of its subsidiaries have violated any law or commitment or engaged in any unsafe or unsound practice, formal or informal corrective or enforcement actions could be taken by the FRB against the Company, its subsidiaries, and institution-affiliated parties (such as directors, officers, and agents). These enforcement actions could include an imposition of civil monetary penalties and could directly affect not only the Company, its subsidiaries, and institution-affiliated parties but also the Company’s counterparties, shareholders, and creditors and its commitments, arrangements, or other dealings with them. The OCC has similarly expansive authorities and powers over the Bank and its subsidiaries, as does the CFPB over matters involving consumer financial laws. The SEC, FINRA, and other domestic or foreign government authorities also have an array of means at their disposal to regulate and enforce matters within their jurisdiction that could impact the Company’s businesses and operations.
Restrictions on Permissible Activities and Corporate Matters
BankUnder the BHCA, bank holding companies and their subsidiaries under the BHCA, are generally limited to the business of banking and to closely-relatedclosely related activities that are incidental to banking.
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. Activities that are financial in nature include: (1) underwriting, dealing in, or making a market in securities, (2) providing financial, investment, or economic advisory services, (3) underwriting insurance, and (4) merchant banking.
The Company’s ability to directly or indirectly engage in these banking and financial activities, however, is subject to conditions and other limits imposed by law or the FRB and, in some cases, requires the approval of the FRB or other government authorities. These conditions or other limits may arise due to the particular type of activity or, in other cases, may apply to the Company’s business more generally. An exampleExamples of the former isare the substantial restrictions on the timing, amount, form, substance, interconnectedness, and management of the Company’s merchant banking investments. An example of the latter is a condition that, in order for the Company to engage in broader financial activities, its depository institutions must remain “well capitalized” and “well managed” under applicable banking laws and must receive at least a “satisfactory” rating under the Community Reinvestment Act (CRA).
Under amendments to the BHCA promulgated by the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 and the Dodd-Frank Act, the Company may acquire banks outside of its home State of Missouri, subject to specified limits and may establish new branches in other States to the same extent as banks chartered in those States. Under the BHCA, however, the Company must procure the prior approval of the FRB and possibly other government authorities to directly or indirectly acquire ownership or control of five percent or more of any class of voting securities of, or substantially all of the assets of, an unaffiliated bank, savings association, or bank holding company. In deciding whether to approve any acquisition or branch, the FRB, the OCC, and other government authorities will consider public or private interests that may not be aligned with those of the Company’s shareholders or non-deposit creditors. The FRB also has the power to require the Company to divest any depository institution that cannot maintain its “well capitalized” or “well managed” status.
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.
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. Without the approval of the OCC, however, dividends payable by the Bank in any calendar year may not exceed the lesser of (1) the current year’s net income combined with the retained net income of the two preceding years and (2) undivided profits. In addition, under the Basel III capital-adequacy standards described below under the heading “Capital-Adequacy Standards,” the Bank is currently required to maintain a capital conservation buffer in excess of its minimum risk-based capital ratios and will be restricted in declaring and paying dividends whenever the buffer is breached. The authorities and powers of the FRB, the OCC, and other government authorities to prevent any unsafe or unsound practice also could be employed to further limit the dividends that the Bank or the Company’s other subsidiaries may declare and pay to the Company.
The Dodd-Frank Act requires a bank holding company like the Company to serve as a source of financial strength for its depository-institution subsidiaries and to commit resources to support those subsidiaries in circumstances when the Company might not otherwise elect to do so. The functional regulator of any nonbank subsidiary of the Company, however, may prevent that subsidiary from directly or indirectly contributing its financial support, and if that were to preclude the Company from serving as an adequate source of financial strength, the FRB may instead require the divestiture of depository-institution subsidiaries and impose operating restrictions pending such a divestiture.
A number of laws, principally Sections 23A and 23B of the Federal Reserve Act (the FRA), and the FRB’s Regulation W, also exist to prevent the Company and its nonbank subsidiaries from taking improper advantage of the benefits afforded to the Bank as a depository institution, including its access to federal deposit insurance and the discount window. 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. The Dodd-Frank Act extended the restrictions to derivatives and securities lending transactions and expanded the restrictions for transactions involving hedge funds or private-equity funds that are owned or sponsored by the Company or its nonbank subsidiaries.
In addition, under the Volcker Rule, the Company is subject to extensive limits on proprietary trading and on owning or sponsoring hedge funds and private-equity funds. The limits on proprietary trading are largely directed toward purchases or sales of financial instruments by a banking entity as principal primarily for the purpose of short-term resale, a benefit from actual or expected short-term price movements, or the realization of short-term arbitrage profits. The limits on owning or sponsoring hedge funds and private-equity funds are designed to ensure that banking entities generally maintain only small positions in managed or advised funds and are not exposed to significant losses arising directly or indirectly from them. The Volcker Rule also provides for increased capital charges, quantitative limits, rigorous compliance programs, and other restrictions on permitted proprietary trading and fund activities, including a prohibition on transactions with a covered fund that would constitute a covered transaction under Sections 23A and 23B of the Federal Reserve Act.FRA.
Additional Requirements underStress Testing and Enhanced Prudential Standards
The Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA) was enacted in May 2018, amending requirements previously established in the Dodd-Frank Act,
On an annual basis, including stress testing and enhanced prudential standards. Bank holding companies with assets of less than $100 billion, including the Company, andare no longer subject to the Bank are required under the Dodd-Frank Actrequirement to conduct forward-looking, company-run stress testing, including publishing a summary of results. The Company continues to run internal stress tests as an aida component of its comprehensive risk management and capital planning process. In addition, the EGRRCPA increased the statutory asset threshold above which the Federal Reserve is required to ensuring that each entity would have sufficient capital to absorb losses and support operations during adverse economic conditions. Summaries of stress-test results for the Company and the Bank are expected to be disclosed each year in the fall.
Several additional requirements under the Dodd-Frank Act and related regulations apply by their terms only to bank holding companies with consolidated assets of $50 billion or more and systemically important nonbank financial companies. These requirements include enhanced prudential standards submissionfrom $50 billion to the comprehensive capital analysis and review, more stringent capital and liquidity requirements, stricter limits on leverage, early remediation requirements, resolution planning, single-counterparty exposure limits, increased liabilities for assessments$250 billion (subject to the FRB and the FDIC, and mandates imposedcertain discretion by the Financial Stability Oversight Council. WhileFederal Reserve to apply any enhanced prudential standard requirement to any bank holding company with between $100 billion and $250 billion in total consolidated assets that would otherwise be exempt under EGRRCPA). The Company remains exempt from applying the Company and its subsidiaries are not expressly subject to these requirements, their imposition on global and super-regional institutions has resulted in heightened supervision of regional institutions like the Company by the FRB, the OCC, and other government authorities and in a more aggressive use of their extensive authorities and powers to regulate the Company’s businesses and operations.enhanced prudential 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.
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 leverage ratio, in contrast, is based on an institution’s average on-balance-sheet exposures alone.
In July 2013, the FRB and the OCC issued comprehensive revisions to the capital-adequacy standards, commonly known as Basel III, to which the Company and the Bank began transitioning on January 1, 2015, with full compliance required by January 1, 2019. Basel III bolsters the quantity and quality of capital required under the capital-adequacy guidelines, in part, by (1) imposing a minimum common-equity tier 1 risk-based capital ratio of 4.5%, (2) raising the minimum tier 1 risk-based capital ratio to 6.0%, (3) establishing a capital conservation buffer of common-equity tier 1 capital to RWAs of 2.5%, (4) amending the definition of qualifying capital to be more conservative, and (5) limiting capital distributions and specified discretionary bonus payments whenever the capital conservation buffer is breached. Basel III also enhances the risk sensitivity of the standardized approach to determining a banking organization’s RWAs.
The capital ratios for the Company and the Bank as of December 31, 2017,2022, 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 |
|
| Tier 1 Leverage Ratio |
|
| Tier 1 Risk-Based Capital Ratio |
|
| Common Equity Tier 1 Capital Ratio |
|
| Total Risk-Based Capital Ratio |
| ||||||||
UMB Financial Corporation |
|
| 9.94 |
|
|
| 12.95 |
|
|
| 12.95 |
|
|
| 14.04 |
|
|
| 8.43 |
|
|
| 10.62 |
|
|
| 10.62 |
|
|
| 12.50 |
|
UMB Bank, n.a. |
|
| 8.57 |
|
|
| 11.19 |
|
|
| 11.19 |
|
|
| 11.85 |
|
|
| 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. Five categories have been established using thresholds for the total risk-based capital ratio, the tier 1 risk-based capital ratio, the common-equity tier 1 risk-based capital ratio, and the leverage ratio: (1) well capitalized, (2) adequately capitalized, (3) undercapitalized, (4) significantly undercapitalized, and (5) critically undercapitalized. 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, 2017,2022, the Bank was categorized as well capitalized under the PCA framework.
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. These include, for example, a supplementary leverage ratio incorporating off-balance-sheet exposures, a liquidity coverage ratio, and a net stable funding ratio. As with the Dodd-Frank Act, theseThese standards may be informally applied or considered by the FRB and the OCC in their regulation, supervision, and examination of the Company and the Bank.
Deposit Insurance and Related Matters
The deposits of the Bank are insured by the FDIC in the standard insurance amount of $250 thousand per depositor for each account ownership category. This insurance is funded through assessments on the Bank and other insured depository institutions. Under the Dodd-Frank Act, each institution’s assessment base is determined based on its average consolidated total assets less average tangible equity, and there is a scorecard method for calculating assessments that combines CAMELS (an acronym that refers to the five components of a bank’s condition that are addressed: capital adequacy, asset quality, management, earnings, and liquidity) ratings and specified forward-looking financial measures to determine each institution’s risk to the DIF. The Dodd-Frank Act also requires the FDIC, in setting assessments, to offset the effect of increasing its reserve for the DIF on institutions with consolidated assets of less than $10 billion. The result of this revised approach to deposit-insurance assessments is generally an increase in costs, on an absolute or relative basis, for institutions with consolidated assets of $10 billion or more.
If an insured depository institution such as the Bank were to become insolvent or if other specified events were to occur relating to its financial condition or the propriety of its actions, the FDIC may be appointed as conservator or receiver for the institution. In that capacity, the FDIC would have the power to (1) to transfer assets and liabilities of the institution to another person or entity without the approval of the institution’s creditors, (2) to require that its claims process be followed and to enforce statutory or other limits on damages claimed by the institution’s creditors, (3) to enforce the institution’s contracts or leases according to their terms, (4) to repudiate or disaffirm the institution’s contracts or leases, (5) to seek to reclaim, recover, or recharacterize transfers of the institution’s assets or to exercise control over assets in which the institution may claim an interest, (6) to enforce statutory or other injunctions, and (7) to exercise a wide range of other rights, powers, and authorities, including those that could impair the rights and interests of all or some of the institution’s 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 FDIA also provides that an insured depository institution can be held liable for any loss incurred or expected to be incurred by the FDIC in connection with another commonly controlled insured depository institution that is in default or in danger of default. This cross-guarantee liability is generally superior in right of payment to claims of the institution’s holding company and its affiliates.
Other Regulatory and Supervisory Matters
As a public company, the Company is subject to the Securities Act of 1933, as amended (the Securities Act), the Securities Exchange Act of 1934, as amended (the Exchange Act), the Sarbanes-Oxley Act of 2002, and other federal and State securities laws. In addition, because the Company’s common stock is listed with The NASDAQ Stock Market LLC (NASDAQ), the Company is subject to the listing rules of that exchange.
The Currency and Foreign Transactions Reporting Act of 1970 (commonly known as the Bank Secrecy Act), the USA PATRIOT Act of 2001, and related laws require all financial institutions, including banks and broker-dealers, to establish a risk-based system of internal controls reasonably designed to prevent money laundering and the financing of terrorism. These laws include a variety of recordkeeping and reporting requirements (such as currency and suspicious activity reporting) as well as know-your-customer and due-diligence rules.
Under the CRA, the Bank has a continuing and affirmative obligation to help meet the credit needs of its local communities—including low- and moderate-income neighborhoods—consistent with safe and sound banking practices. The CRA does not create specific lending programs but does establish the framework and criteria by which the OCC regularly assesses the Bank’s record in meeting these credit needs. 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 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. In addition, the GLBA imposes on the Company and its subsidiaries a number of obligations relating to financial privacy.
Statistical Disclosure
The information required by Guide 3, “Statistical Disclosure by Bank Holding Companies,” has been included in Part II, Items 6, 7, and 7A, pages 19 through 52, of this report.
Executive Officers of the Registrant. 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.
| ||
R. Brian Beaird | 49 | Mr. |
|
|
|
James Cornelius | 61 | Mr. Cornelius has served as the President of Institutional Banking for the Bank since June 2015. 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 |
Shannon A. Johnson |
| Ms. Johnson has served as Executive Vice President and Chief |
Dominic Karaba | 52 | Mr. Karaba has served as President Commercial Banking since September 2021. Mr. 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 |
| Mr. 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. (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. |
|
|
|
|
|
|
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. 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. Odgers has served as Senior Vice President, Chief Accounting Officer of the Company since January 2020, and as the Company’s Controller since January 2014. Mr. Odgers was previously the Company’s Assistant Controller from January 2005 to January 2014. |
John C. Pauls | 59 | Mr. Pauls has served as Executive Vice President, General Counsel and Corporate Secretary of the Company and the Bank since June 2016. Mr. Pauls served as interim General Counsel from April 2016 until his full appointment in June of 2016. 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 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, |
Ram Shankar |
| 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. 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. |
|
|
|
|
|
|
| Mr. Terry has served as Executive Vice President and Chief Credit Officer since October 2019. From January 2011 until October 2019, Mr. Terry served as Executive Vice President and Chief Lending Officer of the Company, | |
|
|
|
Uma Wilson | 44 | Ms. Wilson was named Executive Vice President, Chief Information and Product Officer in September 2021. Previously she served as Executive Vice President, Director of Bank Product, Treasury Management/Card Sales and |
The Company makes available free of charge on its website at www.umb.com/investor, its annual report on Form 10-K, quarterly reports on Form 10-Q, proxy statements, current reports on Form 8-K and amendments to such reports, as soon as reasonably practicable after it electronically files or furnishes such material with or to the SEC. The public may readInformation on the Company’s website is not incorporated by reference into this report and copy any materials filed by the Company withshould not be considered part of this document. These reports can also be found on the SEC website at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.www.sec.gov.
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. 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. Except where otherwise noted, the risk factors address risks and uncertainties that may affect the Company as well as its subsidiaries. These risk factors should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations (which can be found in Part II, Item 7 of this report beginning on page 20)report) and the Notes to the Consolidated Financial Statements (which can be found in Part II, Item 8 of this report beginningreport).
The COVID-19 pandemic is affecting the Company and its customers, counterparties, employees, and third-party service providers, and the continued impacts on page 54).its business, financial position, results of operations, and prospects could potentially be significant. 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. 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. The duration and severity of the COVID-19 pandemic continue to be impossible to accurately predict. |
• | The response of governmental and nongovernmental authorities. 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. 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. 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 |
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. |
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. 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.
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. 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.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. Net interest income is significantly affected by market interest rates, which in turn are influenced by monetary and fiscal policies, general economic conditions, the regulatory environment, competitive pressures, and expectations about future changes in interest rates. The policies and regulations of the federal government, in general, and the FRB, in particular, have a substantial impact on market interest rates. See “Government Monetary and Fiscal Policies” in Part I, Item 1 of this report, beginning on page 4, which is incorporated by reference herein. Additionally, the Company has a significant number of loans, derivative contracts, borrowings and other financial instruments with attributes that are either directly or indirectly dependent on the London Interbank Offered Rate (LIBOR). In 2017, the U.K. 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. 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. 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. 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. Although the Company is currently unable to assess what the ultimate impact of the transition from LIBOR will be, failure to adequately manage the transition could have a material adverse effect on its business, financial condition and results of operations.
The impact of interest rate changes on the Company’s funding costs may differ from some peers given the Company’s concentration of funding from commercial and institutional sources. These deposits, which often include the benefit of other ancillary revenues, are generally more price-sensitive than consumer funding sources. In a rising rate environment, the Company may experience a sharper decline in low-cost funding sources or an increase in cost of deposits due to its customer profile. However, the expectation of higher earning asset growth and the benefit of higher interest rates on our earning assets may help mitigate any impact.
The Company may be adversely affected by policies, regulations, or events that have the effect of altering the difference between long-term and short-term interest rates (commonly known as the yield curve), depressing the interest rates associated with its earning assets to levels near the rates associated with its interest expense, or changing the spreads among different interest-rate indices. In addition, a rapid change in interest rates could result in interest expense increasing faster than interest income because of differences in the maturities of the Company’s assets and liabilities. Further, if laws impacting taxation and interest rates materially change, or if new laws are enacted, certain of the Company’s services and products, including municipal bonds, may be subject to less favorable tax treatment or otherwise adversely impacted. The level of and changes in market interest rates—and, as a result, these risks and uncertainties—are beyond the Company’s control. The dynamics among these risks and uncertainties are also challenging to assess and manage. 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.
The Company’s customers and counterparties also may be negatively impacted by the levels of, or changes in, interest rates, which could increase the risk of delinquency or default on obligations to the Company. The levels of, or changes in, interest rates, moreover, may have an adverse effect on the value of the Company’s investment portfolio, which includes long-term municipal bonds with fixed interest rates, and other financial instruments, the return on or demand for loans, the prepayment speed of loans (including, without limitation, the pace of pay-downs expected or forecasted for commercial real estate and construction loans), the cost or availability of deposits or other funding sources, or the purchase or sale of investment securities. In addition, a rapid change in interest rates could result in interest expense increasing faster than interest income because of differences in the maturities of the Company’s assets and liabilities. Further, if laws impacting taxation and interest rates materially change, or if new laws are enacted, certain of the Company’s services and products, including municipal bonds, may be subject to less favorable tax treatment or otherwise adversely impacted. The level of, and changes in, market interest rates—and, as a result, these risks and uncertainties—are beyond the Company’s control. The dynamics among these risks and uncertainties are also challenging to assess and manage. 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.
See “Quantitative and Qualitative Disclosures About Market Risk—Interest Rate Risk” in Part II, Item 7A of this report beginning on page 46 for a discussion of how the Company monitors and manages interest-rate risk.
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. 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 lending and other banking businesses, in particular, are susceptible to weak or deteriorating economic conditions, which could result in reduced loan demand or utilization rates and at the same time increased delinquencies or defaults. These kinds of conditions also could dampen the demand for products and other services in the Company’s investment-management, asset-servicing, insurance, brokerage, or related businesses. Increased delinquencies or defaults could result as well from the Company adopting—for strategic, competitive, or other reasons—more liberal origination or underwriting standards for extensions of credit or other dealings with its customers or counterparties. If delinquencies or defaults on the Company’s loans or investment securities increase, their value and the income derived from them could be adversely affected, and the Company could incur administrative and other costs in seeking a recovery on its claims and any collateral. Weak or deteriorating economic conditions also may negatively impact the market value and liquidity of the Company’s investment securities, and the Company may be required to record additional impairment charges if investment securities suffer a decline in value that is determined to be other-than-temporary.have resulted from a credit loss. In addition, to the extent that loan charge-offs exceed estimates, an increase to the amount of provision expense related to the allowance for loancredit 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 beginning on page 46 for a discussion of how the Company monitors and manages credit risk. A financial or systemic shock and a failure of a significant counterparty or a significant group of counterparties could negatively impact the Company, possibly to a severe degree, due to its role as a financial intermediary and the interconnectedness of the financial system.
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. At December 31, 2017, 43.7 percent2022, 49.2% of the Company’s aggregate loan portfolio—comprised of commercial real-estate loans (representing 31.6 percent36.2% of the aggregate loan portfolio), construction and consumer real-estate loans (representing 6.4 percent of the aggregate loan portfolio), and residential real-estate loans (representing 5.7 percent13.0% of the aggregate loan portfolio)—was primarily secured by interests in real estate located in the States where the Company operates. Other credit extended by the Company may be secured in part by real estate as well. Real-estate values in the markets where this collateral is located may be different from, and in some instances worse than, real-estate values in other markets or in the United States as a whole and may be affected by general economic conditions and a variety of other factors outside of the control of the Company or its customers. Any deterioration or volatility in these real-estate markets could result in increased delinquencies or defaults, could adversely affect the value of the loans and the income to be derived from them, could give rise to unreimbursed recovery costs, and could reduce the demand for new or additional credit and related banking products and other services, all to the detriment of the Company’s business and performance. In addition, if hazardous or toxic substances were found on any real estate that the Company acquires in foreclosure or otherwise, the Company may incur substantial liability may arise for compliance and remediation costs, personal injury, or property damage.
Challenging business, economic, or market conditions could adversely affect the Company’s fee-based banking, investment-management, asset-servicing, or other businesses. The Company’s fee-based banking, investment-management, asset-servicing, and other businesses are driven by wealth creation in the economy, robust market activity, monetary and fiscal stability, and positive investor, business, and consumer sentiment. Economic downturns, market disruptions, high unemployment or underemployment, unsustainable debt levels, depressed real-estatereal-
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 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. 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. Such a decline or shift could be caused or influenced by any number of factors, such as underperformance in absolute or relative terms, loss of key advisers or other talent, changes in investing preferences or trends, market downturns or volatility, drops in investor confidence, reputational damage, increased competition, or general economic conditions. Any of these factors also could affect clients of UMBFS, and if this were to cause a decline in assets under administration at UMBFS or an adverse shift in the mix of those assets, the performance of UMBFS could suffer.
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, 2017,2022, the Company’s securities portfolio totaled approximately $7.6$13.2 billion, which represented approximately 35.1 percent34.4% of its total assets. 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, 2017,2022, the weighted average yield of the Company’s securities portfolio was 2.5 percent2.33% as compared to 4.3 percent4.30% for its loan portfolio. 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 $6.3$7.0 billion, or 81.9 percent,52.9%, of the Company’s investment securities are classified as available for sale and reported at fair value. Unrealized gains or losses on these securities are excluded from earnings and reported in other comprehensive income, which in turn affects the Company’s reported equity. As a result, to the extent that the Company continues to maintain a significant portfolio of available-for-sale securities, its reported equity may experience greater volatility.
Cyber incidents and other security breaches at the Company, at the Company’s service providers or counterparties, or in the business community or markets may negatively impact the Company’s business or performance. In the ordinary course of its business, the Company collects, stores, and transmits sensitive, confidential, or proprietary data and other information, including intellectual property, business information, funds-transfer instructions, and the personally identifiable information of its customers and employees. 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. For example, despite security measures, the Company’s information technology and infrastructure may be breached or rendered inaccessible through cyber-attacks, ransomware and other computer viruses or malware, pretext calls, electronic phishing, or other means. These risks and uncertainties are rapidly evolving and increasing in complexity, and the Company’s failure to effectively mitigate them could negatively impact its business and operations.
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. The Company can provide no assurances that the safeguards it has in place or may implement in the future will prevent all unauthorized infiltrations or breaches and that the Company will not suffer losses related to a security breach in the future, which losses may be material.
Service providers and counterparties also present a source of risk to the Company if their own security measures or other systems or infrastructure were to be breached, rendered inaccessible or otherwise fail. 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.
Even when an attempted cyber incident or other security breach is successfully avoided or thwarted, the Company may need to expend substantial resources in doing so, may be required to take actions that could adversely affect customer satisfaction or behavior, and may be exposed to reputational damage. If a breach were to occur, moreover, the Company could be exposed to contractual claims, regulatory actions, and litigation by private plaintiffs, and would additionally suffer reputational harm. Despite the Company’s efforts to safeguard the integrity of systems and controls and to manage third-party risk, the Company may not be able to anticipate or implement effective measures to prevent all security breaches or all risks to the sensitive, confidential, or proprietary information that it or its service providers or counterparties collect, store, or transmit.
The trading volume in the Company’s common stock at times may be low, which could adversely affect liquidity and stock price. Although the Company’s common stock is listed for trading on the NASDAQ Global Select Market, the trading volume in the stock may at times be low and, in relative terms, less than that of other financial-services companies. A public trading market that is deep, liquid, and orderly depends on the presence in the marketplace of a large number of willing buyers and sellers and narrow bid-ask spreads. These market features, in turn, depend on a number of factors, such as the individual decisions of investors and general economic and market conditions, over which the Company has no control. During any period of lower trading volume in the Company’s common stock, the stock price could be more volatile, and the liquidity of the stock could suffer.
The Company operates in a highly regulated industry, and its business or performance could be adversely affected by the legal, regulatory and supervisory frameworks applicable to it, changes in those frameworks, and other legal and regulatory risks and uncertainties. The Company is subject to expansive legal and regulatory frameworks in the United States—at the federal, State, and local levels—and in the foreign jurisdictions where its business segments operate. In addition, the Company is subject to the direct supervision of government authorities charged with overseeing the taxation of domestic companies and the kinds of financial activities conducted by the Company in its business segments. These legal, regulatory, and supervisory frameworks are often designed to protect public or private interests that differ from the interests of the Company’s shareholders or non-deposit creditors.See “Government Monetary and Fiscal Policies” and “Regulation and Supervision” in Part I, Item 1 of this report, beginning on page 4, which is incorporated by reference herein. We believeThe Company believes that government scrutiny of all financial-services companies has increased, fundamental changes have been made to the banking, securities, and other laws that govern financial services (with the Dodd-Frank Act and Basel III being two of the more prominent examples), and a host of related business practices have been reexamined and reshaped. As a result, the Company expects to continue devoting increased time and resources to risk management, compliance, and regulatory change management. Risks also exist that government authorities could judge the Company’s business or other practices as unsafe, unsound, or otherwise unadvisable and bring formal or informal corrective or enforcement actions against it, including fines or other penalties and directives to change its products or other services. For practical or other reasons, the Company may not be able to effectively defend itself against these actions, and they in turn could give rise to litigation by private plaintiffs. Further, if the laws, rules, and regulations materially adversely affect the Company, including any changes that would negatively impact the tax treatment of the Company, the Company’s products and services or the Company’s shareholders, the Company may be adversely impacted. All of these and other regulatory risks and uncertainties could adversely affect the Company’s reputation, business, results of operations, financial condition, or prospects.
Regulatory or supervisory requirements, future growth, operating results, or strategic plans may prompt the Company to raise additional capital, but that capital may not be available at all or on favorable
terms and, if raised, may be dilutive. The Company is subject to safety-and-soundness and capital-adequacy standards under applicable law and to the direct supervision of government authorities. See “Regulation and Supervision” in Part I, Item 1 of this report beginning on page 4.report. If the Company is not or is at risk of not satisfying these standards or applicable supervisory requirements—whether due to inadequate operating results that erode capital, future growth that outpaces the accumulation of capital through earnings, or otherwise—the Company may be required to raise capital, restrict dividends, or limit originations of certain types of commercial and mortgage loans. If the Company is required to limit originations of certain types of commercial and mortgage loans, it would thereby reduce the amount of credit available to borrowers and limit opportunities to earn interest income from the loan portfolio. The Company also may be compelled to raise capital if regulatory or supervisory requirements change. In addition, the Company may elect to raise capital for strategic reasons even when it is not required to do so. The Company’s ability to raise capital on favorable terms or at all will depend on general economic and market conditions, which are outside of its control, and on the Company’s operating and financial performance. Accordingly, the Company
cannot be assured of its ability to raise capital when needed or on favorable terms. An inability to raise capital when needed or on favorable terms could damage the performance and value of its business, prompt regulatory intervention, and harm its reputation, and if the condition were to persist for any appreciable period of time, its viability as a going concern could be threatened. If the Company is able to raise capital and does so by issuing common stock or convertible securities, the ownership interest of ourits existing stockholders could be diluted, and the market price of ourits common stock could decline.
The market price of the Company’s common stock could be adversely impacted by banking, antitrust, or corporate laws that have or are perceived as having an anti-takeover effect. Banking and antitrust laws, including associated regulatory-approval requirements, impose significant restrictions on the acquisition of direct or indirect control over any bank holding company, including the Company. Acquisition of ten percent or more of any class of voting stock of a bank holding company or depository institution, including shares of ourits common stock, generally creates a rebuttable presumption that the acquirer “controls” the bank holding company or depository institution. Also, a bank holding company must obtain the prior approval of the Federal Reserve before, among other things, acquiring direct or indirect ownership or control of more than 5 percent of the voting shares of any bank, including our bank.the Bank.
In addition, a non-negotiated acquisition of control over the Company may be inhibited by provisions of the Company’s restated articles of incorporation and bylaws that have been adopted in conformance with applicable corporate law, such as the ability to issue shares of preferred stock and to determine the rights, terms, conditions and privileges of such preferred stock without stockholder approval. If any of these restrictions were to operate or be perceived as operating to hinder or deter a potential acquirer for the Company, the market price of the Company’s common stock could suffer.
The Company’s business relies on systems, employees, service providers, and counterparties, and failures or errors by any of them, intellectual property disputes, or other operational risks could adversely affect the Company. The Company engages in a variety of businesses in diverse markets and relies on hosted and on-premises systems, employees, service providers, and counterparties to properly oversee, administer, and process a high volume of transactions.transactions and otherwise support our day-to-day operations. This gives rise to meaningful operational risk—including the risk of fraud by employees or outside parties, unauthorized access to its premises or systems, errors in processing, failures of technology, breaches of internal controls or compliance safeguards, inadequate integration of acquisitions, human error, unavailability of systems and services, and other breakdowns in business continuity plans. In addition, service providers utilizing technology or other intellectual property in connection with our services may make allegations of patent infringement or other intellectual property rights violations. Depending on the scope of the claim, the Company may have to engage in protracted litigation, which is often time-consuming, expensive and can be disruptive to the Company’s operations. If the Company were found to have infringed an intellectual property right, it may be required to pay substantial damages or royalties to a third-party, not all of which may be covered by insurance policies or subject to indemnification by the Company’s service provider. 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. 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. These same risks arise as well in connection with the systems and employees of the service providers and counterparties on whom the Company depends as well as their own third-party service providers and counterparties. See “Quantitative and Qualitative Disclosures About Market Risk—Operational Risk” in Part II, Item 7A of this report beginning on page 46 for a discussion of how the Company monitors and manages operational risk.
The soundness of other financial institutions could adversely affect us. The soundness of other financial institutions could adversely affect the Company. Financial services institutions are interrelated because of trading, clearing, counterparty and other security breaches at therelationships. The Company at the Company’s service providers orroutinely executes transactions with counterparties or in the business community or markets may negatively impact the Company’s business or performance. In the ordinary course of its business, the Company collects, stores,financial services industry, including brokers and transmits sensitive, confidential, or proprietary datadealers, commercial banks, investment banks, payment processors, and other information, including intellectual property, business information, funds-transfer instructions, and the personally identifiable information of its customers and employees. 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, or stolen or if the Company’s operations were disrupted, the Company could suffer significant financial, business, reputational, regulatory, or other damage. For example, despite security measures, the Company’s information technology and infrastructureinstitutional clients, which may be breached through cyber-attacks, computer viruses or malware, pretext calls, electronic phishing, or other means. These risks and uncertainties are rapidly evolving and increasingresult in complexity, and the Company’s failure to effectively mitigate them could negatively impact its business and operations.
Service providers and counterparties also present a source of riskpayment obligations to the Company if their own security measures or other systemsto its clients due to products it has arranged. Many of these transactions expose the Company to credit and market risk that may cause its counterparty or infrastructure wereclient to default. In addition, the Company is exposed to market risk when the collateral it
holds cannot be breachedrealized or otherwise fail. Likewise, a cyber-attack or other security breach affectingis liquidated at prices not sufficient to recover the business community,full amount of the markets, or parts of them may cycle or cascade through the financial systemsecured obligation. Any losses arising from such occurrences could materially and adversely affect the CompanyCompany’s business, results of operations or its service providers or counterparties. Many of these risks and uncertainties are beyond the Company’s control.
Even when an attempted cyber incident or other security breach is successfully avoided or thwarted, the Company may need to expend substantial resources in doing so, may be required to take actions that could adversely affect customer satisfaction or behavior, and may be exposed to reputational damage. If a breach were to occur, moreover, the Company could be exposed to contractual claims, regulatory actions, and litigation by private plaintiffs, and would additionally suffer reputational harm. Despite the Company’s efforts to safeguard the integrity of systems and controls and to manage third-party risk, the Company may not be able to anticipate or implement effective measures to prevent all security breaches or all risks to the sensitive, confidential, or proprietary information that it or its service providers or counterparties collect, store, or transmit.financial condition.
The Company is heavily reliant on technology, and a failure or delay in effectively implementing technology initiatives or anticipating future technology needs or demands could adversely affect the Company’s business or performance. Like most financial-services companies, the Company significantly depends on technology to deliver its products and other services and to otherwise conduct business. To remain technologically competitive and operationally efficient, the Company invests in system upgrades, new solutions, and other technology initiatives, including for both internally and externally hosted solutions. Many of these initiatives have aare 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. 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. If the Company cannot effectively manage these service providers, the service parties fail to materially perform, or the Company was to falter in any of the other noted areas, its business or performance could be negatively impacted.
Negative publicity outside of the Company’s control, or its failure to successfully manage issues arising from its conduct or in connection with the financial-services industry generally, could damage the Company’s reputation and adversely affect its business or performance. The performance and value of the Company’s business could be negatively impacted by any reputational harm that it may suffer. This harm could arise from negative publicity outside of its control or its failure to adequately address issues arising from its own conduct or in connection with the financial-services industry generally. Risks to the Company’s reputation could arise in any number of contexts—for example, cyber incidents and other security breaches, mergers and acquisitions, lending or investment-management practices, actual or potential conflicts of interest, failures to prevent money laundering, corporate governance, and unethical behavior and practices committed by Company employees or competitors in the financial services industry.
The Company faces intense competition from other financial-services and financial-services technology companies, and competitive pressures could adversely affect the Company’s business or performance. The Company faces intense competition in each of its business segments and in all of its markets and geographic regions, and the Company expects competitive pressures to intensify in the future—especially in light of recent legislative and regulatory initiatives, technological innovations that alter the barriers to entry, current economic and market conditions, and government monetary and fiscal policies. Competition with financial-services technology companies, or technology companies partnering with financial-services companies, may be particularly intense, due to, among other things, differing regulatory environments. See “Competition” in Part I, Item 1 of this report beginning on page 3.report. 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. These pressures also may accelerate actions that the Company might
otherwise elect to defer, such as substantial investments in technology or infrastructure. The Company has certain businesses that utilize wholesale models which can lead to customer concentrations for those businesses that, if negatively impacted by new entrants, competitive pressures, or consolidations, could affect the Company’s fee income. Whatever the reason, actions that the Company takes in response to competition may adversely affect its results of operations and financial condition. These consequences could be exacerbated if the Company is not successful in introducing new products and other services, achieving market acceptance of its products and other services, developing and maintaining a strong customer base, or prudently managing expenses.
The Company’s internal controls, risk-management and compliance programs or functions may not be effective in identifying and mitigating risk and loss. The Company maintains standards on internal controls (including over financial reporting), and related disclosures which are regularly reviewed by management, as well as an enterprise risk-management program that is designed to identify, quantify, monitor, report, and control the risks that it faces. These include interest-rate risk, credit risk, liquidity risk, market risk, operational risk, reputational risk, and compliance risk. The Company also maintains a compliance program to identify, measure, assess, and report on its adherence to applicable law, policies, and procedures. 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. 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. 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 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. 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. These factors include market disruptions, changes in its credit ratings or the sentiment of its investors, the state of the regulatory environment and monetary and fiscal policies, declines in the value of its investment securities, the loss of substantial deposits or customer relationships, financial or systemic shocks, significant counterparty failures, and reputational damage. Unexpected declines or limits on the dividends declared and paid by the Company’s subsidiaries also could adversely affect its liquidity position. While the Company’s policies and controls are designed to ensure that it maintains adequate liquidity to conduct its business in the ordinary course even in a stressed environment, there can be no assurance that its liquidity position will never become compromised. In such an event, the Company may be required to sell assets at a loss in order to continue its operations. This could damage the performance and value of its business, prompt regulatory intervention, and harm its reputation, and if the condition were to persist for any appreciable period of time, its viability as a going concern could be threatened. See “Quantitative and Qualitative Disclosures About Market Risk—Liquidity Risk” in Part II, Item 7A of this report beginning on page 46 for a discussion of how the Company monitors and manages liquidity risk.
If the Company’s subsidiaries are unable to make dividend payments or distributions to the Company, it may be unable to satisfy its obligations to counterparties or creditors or make dividend payments to its stockholders. The Company is a legal entity separate and distinct from its bank and nonbank subsidiaries and depends on dividend payments and distributions from those subsidiaries to fund its obligations to counterparties and creditors and its dividend payments to stockholders. See “Regulation and Supervision—Requirements Affecting the Relationships among the Company, Its Subsidiaries, and Other Affiliates” in Part I, Item 1 of this report beginning on page 6.report. Any of the Company’s subsidiaries, however, may be unable to make dividend payments or distributions to the Company, including as a result of a deterioration in the subsidiary’s performance, investments in the subsidiary’s own future growth, or regulatory or supervisory requirements. If any subsidiary were unable to remain viable as a going concern, moreover, the Company’s right to participate in a distribution of assets would be subject to the prior claims of the subsidiary’s creditors (including, in the case of the Bank, its depositors and the FDIC).
An inability to attract, retain, or motivate qualified employees could adversely affect the Company’s business or performance. Skilled employees are the Company’s most important resource, and competition for talented people is intense. Even though compensation is among the Company’s highest expenses, it may not be able to locate and hire the best people, keep them with the Company, or properly motivate them to perform at a high level. Recent scrutiny of compensation practices, especially in the financial-services industry, has made this only more difficult. In addition, some parts of the Company’s business are particularly dependent on key personnel,
including investment management, asset servicing, and commercial lending. If the Company were to lose and find itself unable to replace these personnel or other skilled employees or if the competition for talent drove its compensation costs to unsustainable levels, the Company’s business, results of operations, and financial condition could be negatively impacted.
The Company is subject to a variety of litigation and other proceedings, which could adversely affect its business or performance. The Company is involved from time to time in a variety of judicial, alternative-dispute, and other proceedings arising out of its business or operations. The Company establishes reserves for claims when appropriate under generally accepted accounting principles, but costs often can be incurred in connection with a matter before any reserve has been created. The Company also maintains insurance policies to mitigate the cost of litigation and other proceedings, but these policies have deductibles, limits, and exclusions that may diminish their value or efficacy. Despite the Company’s efforts to appropriately reserve for claims and insure its business and operations, the actual costs associated with resolving a claim may be substantially higher than amounts reserved or covered. Substantial legal claims, even if not meritorious, could have a detrimental impact on the Company’s business, results of operations, and financial condition and could cause reputational harm.
Changes in accounting standards could impact the Company’s financial statements and reported earnings. 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.
The Company’s selection of accounting methods, assumptions, and estimates could impact its financial statements and reported earnings. To comply with generally accepted accounting principles, management must sometimes exercise judgment in selecting, determining, and applying accounting methods, assumptions, and estimates. This can arise, for example, in the determination of the allowance for loan losses, the calculation of deferred tax assets, the evaluation of goodwill for potential impairments, or the determination of the fair value of assets or liabilities.credit losses. Furthermore, accounting methods, assumptions and estimates are part of acquisition purchase accounting and the calculation of the fair value of assets and liabilities that have been purchased, including credit-impaired loans. The judgments required of management can involve difficult, subjective, or complex matters with a high degree of uncertainty, and several different judgments could be reasonable under the circumstances and yet result in significantly different results being reported. See “Critical Accounting Policies and Estimates” in Part II, Item 7 of this report beginning on page 44.report. If management’s judgments are later determined to have been inaccurate, the Company may experience unexpected losses that could be substantial.
The Company’s ability to successfully makeengage in opportunistic mergers and acquisitions is subject to significant risks, including the risk that government authorities will not provide the requisite approvals, the risk that integrating acquisitions may be more difficult, costly, or time consuming than expected, and the risk that the value of acquisitions may be less than anticipated. The Company may make opportunistic acquisitions of other financial-services companies or businesses from time to time. These acquisitions may be subject to regulatory approval, and there can be no assurance that the Company will be able to obtain that approval in a timely manner or at all. Even when the Company is able to obtain regulatory approval, the failure of other closing conditions to be satisfied or waived could delay the completion of an acquisition for a significant period of time or prevent it from occurring altogether. Any failure or delay in closing an acquisition could adversely affect the Company’s reputation, business, results of operations, financial condition, or prospects.
Additionally, acquisitions involve numerous risks and uncertainties, including lower-than-expected performance or higher-than-expected costs, difficulties related to integration, diversion of management’s attention from other business activities, changes in relationships with customers or counterparties, and the potential loss of key employees. An acquisition also could be dilutive to the Company’s current stockholders if preferred stock, common stock, or securities convertible into preferred stock or common stock were issued to fully or partially pay or fund the purchase price. The Company, moreover, may not be successful in identifying acquisition candidates, integrating acquired companies or businesses, or realizing the expected value from acquisitions. There is significant competition for valuable acquisition targets, and the Company may not be able to acquire other companies or businesses on attractive terms or at all. There can be no assurance that the Company will pursue future acquisitions, and the Company’s ability to grow and successfully compete in its markets and regions may be impaired if it chooses not to pursue, or is unable to successfully complete, acquisitions.
The Company faces risks in connection with its strategic undertakings and new business initiatives. The Company is engaged, and may in the future engage, in strategic activities including acquisitions, joint ventures, partnerships, investments or other business growth initiatives or undertakings. There can be no assurance that the Company will successfully identify appropriate opportunities, that it will be able to negotiate or finance such activities or that such activities, if undertaken, will be successful. The Company is focused on its long-term growth and has undertaken various strategic activities and business initiatives, some of which may involve activities that are new to it. For example, in the future the Company may engage in or focus on new lines of business, financial technologies, and other activities that are outside of its current product offerings. These new initiatives may subject the Company to, among other risks, increased business, reputational and operational risk, as well as more complex legal, regulatory and compliance costs and risks. Its ability to execute strategic activities and new business initiatives successfully will depend on a variety of factors. These factors likely will vary based on the nature of the activity but may include the Company’s success in integrating an acquired company or a new internally-developed growth initiative into its business, operations, services, products, personnel and systems, operating effectively with any partner with whom it elects to do business, meeting applicable regulatory requirements and obtaining applicable regulatory licenses or other approvals, hiring or retaining key employees, achieving anticipated synergies, meeting management's expectations, actually realizing the anticipated benefits of the activities, and overall general market conditions. The Company’s ability to address these matters successfully cannot be assured. In addition, its strategic efforts may divert resources or management's attention from ongoing business operations and may subject the
Company to additional regulatory scrutiny and potential liability. If the Company does not successfully execute a strategic undertaking, it could adversely affect its business, financial condition, results of operations, reputation or growth prospects.
Expectations around Environmental, Social and Governance practices, as well as climate change, and related legislative and regulatory initiatives may result in additional risk and operational changes and expenditures that could significantly impact the Company’s business.Companies are facing increased scrutiny from customers, regulators and other stakeholders with respect to their environmental, social and governance (ESG) practices and disclosures. Institutional investors, and investor advocacy groups, in particular, are increasingly focused on these matters, and expectations in many of these areas can vary widely. In addition, increased ESG related compliance costs could result in increases to the Company’s overall operational costs. Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards, and fluctuations in these standards, could negatively impact the Company’s reputation, ability to do business with certain partners, and its stock price. New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence, and disclosure.
In addition to regulatory and investor expectations on environmental matters in general, the current and anticipated effects of climate change are creating an increasing level of concern for the state of the global environment. As a result, political and social attention to the issue of climate change has increased. In recent years, governments across the world have entered into international agreements to attempt to reduce global temperatures, in part by limiting greenhouse gas emissions. The United States Congress, state legislatures and federal and state regulatory agencies have continued to propose and advance numerous legislative and regulatory initiatives seeking to mitigate the effects of climate change. These agreements and measures may result in the imposition of taxes and fees, the required purchase of emission credits, and the implementation of significant operational changes, each of which may require the Company to expend significant capital and incur compliance, operating, maintenance and remediation costs. Given the lack of empirical data on the credit and other financial risks posed by climate change, it is impossible to predict how climate change may impact the Company’s financial condition and operations; however, as a banking organization, the physical effects of climate change may present certain unique risks to the Company. For example, weather disasters, shifts in local climates and other disruptions related to climate change may adversely affect the value of real properties securing the Company’s loans, which could diminish the value of the Company’s loan portfolio. Such events may also cause reductions in regional and local economic activity that may have an adverse effect on the Company’s customers, which could limit the Company’s ability to raise and invest capital in these areas and communities, each of which could have a material adverse effect on the Company’s financial condition and results of operations.
ITEM 1B. UNRESOLVEDUNRESOLVED STAFF COMMENTS
There are no unresolved comments from the staff of the SEC required to be disclosed herein as of the date of this report.
The Company's headquarters building the UMB Bank Building, is located at 1010 Grand Boulevard in downtown Kansas City, Missouri, andMissouri. The building opened in July 1986. All1986 and all 250,000 square feet isare occupied by departments and customer service functions of the Bank, as well as administrative offices offor the Company.
Other main facilities of the Bank in downtown Kansas City, Missouri are located at 928 Grand Boulevard (185,000(215,000 square feet); 906 Grand Boulevard (140,000 square feet); and 1008 Oak Street (180,000(200,000 square feet). Both the 928 Grand and 906 Grand buildings house backroom support functions. Approximately 27,000 square feet of the 928 Grand building is leased to Scout. Additionally, within the 906 Grand building there is 8,000 square feet of space leased to several small tenants. The 928 Grand building underwent a major renovation during 2004 and 2005. The 928 Grand building is connected tohouses administrative support functions for the UMB Bank Building (1010 Grand) by an enclosed elevated pedestrian walkway.Bank. The 1008 Oak building, which opened during the second quarter of 1999, houses the Company’s operations and data processing functions.
The Bank leases 52,00048,771 square feet in the Hertz Building located at 2 South Broadway in the heart of the commercial sector of downtown St. Louis, Missouri. This location has a full-service banking center and is home to some operational and administrative support functions. functions for the Bank.
The Bank also leases 43,70034,681 square feet on the first, second, third, 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 additional operational and administrative support functions.functions for the Bank.
As of December 31, 2017,2022, the Bank operated a total of 9589 banking centers and four wealth management offices.centers.
UMBFS leases approximately 92,00085,164 square feet at 235 West Galena Street in Milwaukee, Wisconsin, for its fund services operations headquarters.operations. Additionally, UMBFS leases 37,30018,655 square feet at 2225 Washington Boulevard in Ogden, Utah, and 6,3008,339 square feet inat 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 Equipment,Leases,” in the Notes to the Consolidated Financial Statements in Item 8 pages 61 and 80 of this report, and is hereby incorporated by reference herein.
In the normal course of business, the Company and its subsidiaries are named defendants in various legal proceedings. In the opinion of management, after consultation with legal counsel, none of these proceedings are expected to have a material effect on the financial position, results of operations, or cash flows of the Company.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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 15, 2018,16, 2023, the Company had 2,4281,324 shareholders of record. Information regarding the Company’s common stock for each quarterly period within the two most recent fiscal years is set forth in the table below.
Per Share |
| Three Months Ended |
| |||||||||||||
2017 |
| March 31 |
|
| June 30 |
|
| Sept 30 |
|
| Dec 31 |
| ||||
Dividend |
| $ | 0.255 |
|
| $ | 0.255 |
|
| $ | 0.255 |
|
| $ | 0.275 |
|
Book value |
|
| 40.34 |
|
|
| 41.42 |
|
|
| 42.15 |
|
|
| 43.72 |
|
Market price: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
|
| 81.55 |
|
|
| 78.67 |
|
|
| 76.98 |
|
|
| 77.72 |
|
Low |
|
| 70.69 |
|
|
| 66.51 |
|
|
| 62.27 |
|
|
| 68.76 |
|
Close |
|
| 75.31 |
|
|
| 74.86 |
|
|
| 74.49 |
|
|
| 71.92 |
|
Per Share |
| Three Months Ended |
| |||||||||||||
2016 |
| March 31 |
|
| June 30 |
|
| Sept 30 |
|
| Dec 31 |
| ||||
Dividend |
| $ | 0.245 |
|
| $ | 0.245 |
|
| $ | 0.245 |
|
| $ | 0.255 |
|
Book value |
|
| 39.38 |
|
|
| 40.44 |
|
|
| 40.86 |
|
|
| 39.51 |
|
Market price: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
|
| 53.89 |
|
|
| 58.89 |
|
|
| 61.24 |
|
|
| 81.11 |
|
Low |
|
| 39.55 |
|
|
| 48.49 |
|
|
| 50.60 |
|
|
| 58.71 |
|
Close |
|
| 51.63 |
|
|
| 53.21 |
|
|
| 59.45 |
|
|
| 77.12 |
|
Information concerning restrictions on the ability of the Company to pay dividends and the Company's subsidiaries to transfer funds to the Company is presented in Item 1, page 6 and Note 10, “Regulatory Requirements,” in the Notes to the Consolidated Financial Statements provided in Item 8, pages 82 through 84 of this report. Information concerning securities the Company issued under its equity compensation plans is contained in Item 12, pages 110 through 111 and in Note 11, “Employee Benefits,” in the Notes to the Consolidated Financial Statements provided in Item 8, pages 84 through 87 of this report.
Purchases 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, 2017:2022:
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, 2017 |
|
| 6 |
|
| $ | 71.91 |
|
|
| 6 |
|
|
| 1,848,098 |
|
November 1 - November 31, 2017 |
|
| 5,790 |
|
|
| 71.83 |
|
|
| 5,790 |
|
|
| 1,842,308 |
|
December 1 - December 31, 2017 |
|
| 6,668 |
|
|
| 73.56 |
|
|
| 6,668 |
|
|
| 1,835,640 |
|
Total |
|
| 12,464 |
|
| $ | 72.76 |
|
|
| 12,464 |
|
|
|
|
|
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 25, 2017,26, 2022, the Company announced a plan toCompany’s Board of Directors (the Board) authorized the repurchase of up to two million shares of the Company’s common stock. This planstock, which will terminate on April 24, 2018.25, 2023 (a Repurchase Authorization). The Company has not made any repurchases other than through this plan.Repurchase Authorization. The Company is not currently engaging in repurchases. In the future, it may determine to resume repurchases. All open market share purchases under the share repurchase planspursuant to a Repurchase Authorization are intended to be within the scope of Rule 10b-18 promulgated under the Exchange Act.
ITEM 6. SELECTED FINANCIAL DATA
ForRule 10b-18 provides a discussion of factors that may materially affectsafe harbor for purchases in a given day if the comparabilityCompany satisfies the manner, timing and volume conditions of the information below, please see Item 7, Management’s Discussion and Analysisrule when purchasing its own shares of Financial Condition and Results of Operations, pages 20 through 46, of this report.
FIVE-YEAR FINANCIAL SUMMARY
(in thousands except per share data)
As of and for the years ended December 31,common stock.
|
| 2017 |
|
| 2016 |
|
| 2015 |
|
| 2014 |
|
| 2013 |
| |||||
EARNINGS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
| $ | 616,912 |
|
| $ | 523,031 |
|
| $ | 430,681 |
|
| $ | 363,871 |
|
| $ | 348,341 |
|
Interest expense |
|
| 57,999 |
|
|
| 27,708 |
|
|
| 18,614 |
|
|
| 13,816 |
|
|
| 15,072 |
|
Net interest income |
|
| 558,913 |
|
|
| 495,323 |
|
|
| 412,067 |
|
|
| 350,055 |
|
|
| 333,269 |
|
Provision for loan losses |
|
| 41,000 |
|
|
| 32,500 |
|
|
| 15,500 |
|
|
| 17,000 |
|
|
| 17,500 |
|
Noninterest income |
|
| 423,562 |
|
|
| 402,511 |
|
|
| 370,659 |
|
|
| 368,235 |
|
|
| 367,260 |
|
Noninterest expense |
|
| 705,129 |
|
|
| 666,745 |
|
|
| 638,938 |
|
|
| 582,472 |
|
|
| 543,916 |
|
Net income from continuing operations |
|
| 182,976 |
|
|
| 153,634 |
|
|
| 96,558 |
|
|
| 91,145 |
|
|
| 105,555 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVERAGE BALANCES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
| $ | 20,396,428 |
|
| $ | 19,592,685 |
|
| $ | 17,786,442 |
|
| $ | 15,998,893 |
|
| $ | 15,030,762 |
|
Loans and loans held for sale |
|
| 10,843,642 |
|
|
| 9,992,874 |
|
|
| 8,425,107 |
|
|
| 6,975,338 |
|
|
| 6,221,318 |
|
Total investment securities |
|
| 7,632,965 |
|
|
| 7,665,012 |
|
|
| 7,330,246 |
|
|
| 7,053,837 |
|
|
| 7,034,542 |
|
Interest-bearing due from banks |
|
| 351,293 |
|
|
| 410,163 |
|
|
| 664,752 |
|
|
| 843,134 |
|
|
| 663,818 |
|
Deposits |
|
| 15,938,669 |
|
|
| 15,338,741 |
|
|
| 14,078,290 |
|
|
| 12,691,273 |
|
|
| 11,930,318 |
|
Long-term debt |
|
| 76,299 |
|
|
| 81,905 |
|
|
| 58,571 |
|
|
| 6,059 |
|
|
| 4,748 |
|
Shareholders' equity |
|
| 2,080,847 |
|
|
| 1,983,749 |
|
|
| 1,805,856 |
|
|
| 1,599,765 |
|
|
| 1,337,107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR-END BALANCES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
| $ | 21,771,583 |
|
| $ | 20,682,532 |
|
| $ | 19,094,245 |
|
| $ | 17,500,960 |
|
| $ | 16,911,852 |
|
Loans and loans held for sale |
|
| 11,281,973 |
|
|
| 10,545,662 |
|
|
| 9,431,350 |
|
|
| 7,466,418 |
|
|
| 6,521,869 |
|
Total investment securities |
|
| 7,639,543 |
|
|
| 7,690,108 |
|
|
| 7,568,870 |
|
|
| 7,285,667 |
|
|
| 7,051,127 |
|
Interest-bearing due from banks |
|
| 1,351,760 |
|
|
| 715,823 |
|
|
| 522,877 |
|
|
| 1,539,386 |
|
|
| 2,093,467 |
|
Deposits |
|
| 18,023,000 |
|
|
| 16,570,614 |
|
|
| 15,092,752 |
|
|
| 13,616,859 |
|
|
| 13,640,766 |
|
Long-term debt |
|
| 79,281 |
|
|
| 76,772 |
|
|
| 86,070 |
|
|
| 8,810 |
|
|
| 5,055 |
|
Shareholders' equity |
|
| 2,181,531 |
|
|
| 1,962,384 |
|
|
| 1,893,694 |
|
|
| 1,643,758 |
|
|
| 1,506,065 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER SHARE DATA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations - basic |
| $ | 3.72 |
|
| $ | 3.15 |
|
| $ | 2.05 |
|
| $ | 2.03 |
|
| $ | 2.56 |
|
Earnings from continuing operations - diluted |
|
| 3.67 |
|
|
| 3.12 |
|
|
| 2.03 |
|
|
| 2.01 |
|
|
| 2.52 |
|
Cash dividends |
|
| 1.04 |
|
|
| 0.99 |
|
|
| 0.95 |
|
|
| 0.91 |
|
|
| 0.87 |
|
Dividend payout ratio |
|
| 27.96 | % |
|
| 31.43 | % |
|
| 46.34 | % |
|
| 44.83 | % |
|
| 33.98 | % |
Book value |
| $ | 43.72 |
|
| $ | 39.51 |
|
| $ | 38.34 |
|
| $ | 36.10 |
|
| $ | 33.30 |
|
Market price |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
|
| 81.55 |
|
|
| 81.11 |
|
|
| 58.84 |
|
|
| 68.27 |
|
|
| 65.44 |
|
Low |
|
| 62.27 |
|
|
| 39.55 |
|
|
| 45.14 |
|
|
| 51.87 |
|
|
| 43.27 |
|
Close |
|
| 71.92 |
|
|
| 77.12 |
|
|
| 46.55 |
|
|
| 56.89 |
|
|
| 64.28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets |
|
| 0.90 | % |
|
| 0.78 | % |
|
| 0.54 | % |
|
| 0.57 | % |
|
| 0.70 | % |
Return on average equity |
|
| 8.79 |
|
|
| 7.74 |
|
|
| 5.35 |
|
|
| 5.70 |
|
|
| 7.89 |
|
Average equity to average assets |
|
| 10.20 |
|
|
| 10.12 |
|
|
| 10.15 |
|
|
| 10.00 |
|
|
| 8.90 |
|
Total risk-based capital ratio |
|
| 14.04 |
|
|
| 12.87 |
|
|
| 12.80 |
|
|
| 14.04 |
|
|
| 14.43 |
|
Performance Graph
The performance graph below compares the cumulative total shareholder return on UMB Financial Corporation Common Stock with the cumulative total return on the equity securities of companies included in the Standard & Poor’s 500 Stock Index and the S&P US BMI Banks Index, measured at the last trading day of each year shown. The graph assumes an investment of $100 on December 31, 2017 and reinvestment of dividends. The performance graph represents past performance and should not be considered to be an indication of future performance.
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 |
|
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, 2017.2022. It should be read in conjunction with the accompanying Consolidated Financial Statements, Notes to Consolidated Financial Statements, and other financial statistics appearing elsewhere in this Annual Report on Form 10-K. Results of operations for the periods included in this review are not necessarily indicative of results to be attained during any future period.
CAUTIONARY NOTICE ABOUT FORWARD-LOOKING STATEMENTS
From time to time the Company has made, and in the future will make, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “outlook,” “forecast,” “target,” “trend,” “plan,” “goal,” or other words of comparable meaning or future-tense or conditional verbs such as “may,” “will,” “should,” “would,” or “could.” Forward-looking statements convey the Company’s expectations, intentions, or forecasts about future events, circumstances, results, or aspirations.
This report, including any information incorporated by reference in this report, contains forward-looking statements. The Company also may make forward-looking statements in other documents that are filed or furnished with the SEC. In addition, the Company may make forward-looking statements orally or in writing to investors, analysts, members of the media, or others.
All forward-looking statements, by their nature, are subject to assumptions, risks, and uncertainties, which may change over time and many of which are beyond the Company’s control. You should not rely on any forward-looking statement as a prediction or guarantee about the future. Actual future objectives, strategies, plans, prospects, performance, conditions, or results may differ materially from those set forth in any forward-looking statement. 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;
• | local, regional, national, or international business, economic, or political conditions or events; |
changes in laws or the regulatory environment, including as a result of recent financial-services and tax legislation or regulation;
• | 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;
• | changes in monetary, fiscal, or trade laws or policies, including as a result of actions by central banks or supranational authorities; |
changes in accounting standards or policies;
• | the pace and magnitude of interest rate movements; |
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 accounting standards or policies; |
changes in spending, borrowing, or saving by businesses or households;
• | 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; |
the Company’s ability to effectively manage capital or liquidity or to effectively attract or deploy deposits;
• | changes in spending, borrowing, or saving by businesses or households; |
changes in any credit rating assigned to the Company or its affiliates;
• | the Company’s ability to effectively manage capital or liquidity or to effectively attract or deploy deposits; |
adverse publicity or other reputational harm to the Company;
• | changes in any credit rating assigned to the Company or its affiliates; |
changes in the Company’s corporate strategies, the composition of its assets, or the way in which it funds those assets;
• | 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;
• | 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; |
changes in the credit, liquidity, or other condition of the Company’s customers, counterparties, or competitors;
• | 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;
• | 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;
• | 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 stricter or heightened regulatory or other governmental supervision or requirements;
• | 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 ability to withstand cyber-attacks;
• | 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 control over financial reporting, including its ability to control lapses or deficiencies in financial reporting or to effectively mitigate or manage operational risk;
• | 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 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;
• | 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;
• | 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 adequacy of the Company’s succession planning for key executives or other personnel; |
the Company’s ability to grow revenue, control expenses, or attract or retain qualified employees;
• | the Company’s ability to grow revenue, control expenses, or attract and retain qualified employees; |
natural or man-made disasters, calamities, or conflicts, including terrorist events; or
• | 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; |
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.
• | 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. |
Any forward-looking statement made by the Company or on its behalf speaks only as of the date that it was made. The Company does not undertake to update any forward-looking statement to reflect the impact of events, circumstances, or results that arise after the date that the statement was made, except as required by applicable securities laws. You, however, should consult further disclosures (including disclosures of a forward-looking nature) that the Company may make in any subsequent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, or Current Report on Form 8-K.
Results of Operations
Overview
For over two years, the Company has experienced the impacts of the COVID-19 global pandemic (the COVID-19 pandemic, or the pandemic). Such impacts have included significant volatility in the global stock and fixed income markets, the enactment of the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the American Rescue Plan Act of 2021, the Paycheck Protection Program (PPP) administered by the Small Business Administration, and a variety of rulings from the Company’s banking regulators.
The Company continues to actively monitor developments related to COVID-19 and its impact to its business, customers, employees, counterparties, vendors, and service providers. During 2022, the Company’s results of operations included continued maintenance of the allowance for credit losses (ACL) at a level appropriate given the state of key macroeconomic variables utilized in the econometric models. Additionally, the Company continued to see impacts of the volatile equity and debt markets in its fee-based businesses, as well as the impacts of the recent interest rate increases in net interest income.
The COVID-19 pandemic has necessitated certain actions related to the way the Company operates its business. 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 it may be required to operate under such circumstances and future degrees of disruption remain uncertain. 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.
The Company focuses on the following four core strategicfinancial objectives. Management believes these strategic objectives will guide its efforts to achieve its vision, to deliver the unparalleled customer experience,Unparalleled Customer Experience, all the while seeking to improve net income and strengthen the balance sheet while undertaking prudent risk management.management.
The first strategicfinancial objective is to continuously improve operating efficiencies. The Company focuseshas focused on identifying efficiencies that simplify ourits organizational and reporting structures, streamline back officeback-office functions and take advantage of synergies and newer technologies among various platforms and distribution networks. The Company has identified and expects to continue identifying ongoing efficiencies through the normal course of business that, when combined with increased revenue, will contribute to improved operating leverage. For 2017,2022, total revenue increased 9.4 percent, while14.4%, and noninterest expense increased 5.8 percent,7.7%, as compared to the previous year. As partRevenue for 2022 included a $66.2 million gain realized on the sale of this initiative, the Company’s Visa Inc. Class B common shares. Revenue for 2021 included a loss on the Company’s investment in Tattooed Chef, Inc. (TTCF) of $15.4 million. The Company continues to invest in technological advances that it believes will help management drive operating leverage in the future through improved data analysis and automation. The Company also continues to evaluate core systems and will invest in enhancements that it believes will yield operating efficiencies.
The second strategicfinancial objective is to increase on net interest income through profitable loan and deposit growth and the optimization of the balance sheet. For 2017, we made progress on this strategy, as illustrated by an increase in2022, net interest income of $63.6increased $98.3 million, or 12.8 percent,12.1%, as compared to the previous year. The Company has shown increased net interest income through the effects of increased interest ratesvolume and volumes, and the mix of average earning assets, coupled with higher interest rates. This increase was partially offset by higher interest-bearing deposit rates and lower PPP income. There was a low costdecrease of funds$37.7 million in its Consolidated Balance Sheets.interest income for loans recorded under the PPP in 2022 as compared to 2021. Average earning assets increased $2.1 billion, or 6.2%, compared to 2021. Average loan balances increased $850.8$2.2 billion and average securities increased $1.8 billion, partially offset by a decrease in average interest-bearing due from banks of $1.7 billion from prior year. Average PPP loans decreased $755.1 million or 8.5 percent, from December 31, 2016.as compared to 2021. The funding for these assets was driven primarily by a 5.6 percent2.8% increase in average interest-bearing liabilities.liabilities and 17.9% increase in noninterest-bearing deposits. Net interest margin, on a tax-equivalent basis, increased 2713 basis points compared to the same period in 2016.2021 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 spread contracted by 22 basis points during the same period.
The third strategicfinancial objective is to grow the Company’s revenue from noninterest sources. The Company has continuedseeks to emphasize its diverse operationsgrow noninterest revenues throughout all economic cycles. This strategy has provided revenue diversity, helping to reduce the impact of sustained lowand interest rates and position the Companyrate cycles, while positioning itself to benefit in periods of economic growth. Noninterest income increased $21.1$87.1 million, or 5.2 percent,18.6%, to $423.6$554.2 million for the year ended December 31, 2017,2022, compared to the same period in 2016. This change is2021. The increase for 2022 was driven by a $66.2 million gain realized on the sale of the Company’s Visa Inc. Class B common shares, coupled with a loss of $15.4 million on the Company’s investment in TTCF recognized in 2021. The increase was also driven by increased 12b-1 and money market income. These changes are discussed in greater detail below under Noninterest income. The Company continues to emphasize its asset management, brokerage, bankcard services, healthcare services, institutional banking, and treasury management businesses. AtFor the year ended December 31, 2017,2022, noninterest income represented 43.1 percent37.8% of total revenues, as compared to 44.8 percent at December 31, 2016.36.4% for 2021.
The fourth strategicfinancial objective is effective capital management. 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 organicbusiness growth new business development, and
acquisition opportunities. The Company continues to maximize shareholder value through a mix of reinvesting in organic growth, evaluating acquisition opportunities that complement the Company’s strategies, increasing dividends over time, and appropriately utilizing a share repurchase program. At December 31, 2017,2022, the Company had a total risk-based capital ratio of 14.04 percent12.50% and $2.2$2.7 billion in total shareholders’ equity, an increasea decrease of $219.1$478.3 million, or 11.2 percent,15.2%, compared to total shareholders’ equity at December 31, 2016.2021, driven by increased accumulated other comprehensive losses. The Company repurchased 217,071333,185 thousand shares of common stock at an average price of $70.37$96.03 per share during 20172022 and paid $51.9declared $72.6 million in dividends, which represents a 5.8 percent7.9% increase compared to dividends paiddeclared during 2016.2021.
Earnings Summary
The Company recorded consolidated net income from continuing operations of $183.0$431.7 million for the year-ended December 31, 2017. This represents a 19.1 percent increase over 2016. Income from continuing operations for 2016 was $153.6 million, or an increase of 59.1 percent compared to 2015. Basic earnings per share from continuing operations for the year ended December 31, 2017,2022. 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 $3.72$8.93 per share compared to $3.15$7.31 per share in 2016,2021, an increase of 18.1 percent.22.2%. Basic earnings per share from continuing operations were $2.05$5.95 per share in 2015,2020, or an increase of 53.7 percent22.9% from 20152020 to 2016.2021. Fully diluted earnings per share increased 22.4% from continuing operations increased 17.6 percent from 20162021 to 2017,2022 and increased 53.7 percent22.1% from 20152020 to 2016.2021. Return on average assets and return on average common shareholder’s equity for the year ended December 31, 2022 were 1.15% and 15.83%, respectively, compared to 1.00% and 11.43%, respectively, for the year ended December 31, 2021. Return on average assets and return on average common shareholder’s equity for the year ended December 31, 2020 were 1.00% and 10.21%, respectively.
The Company’s net interest income increased to $558.9$913.8 million in 20172022 compared to $495.3$815.5 million in 20162021 and $412.1$731.2 million in 2015.2020. In total, net interest income increased $98.3 million, as compared to 2021, primarily driven by a favorable volume variance coupled withof $109.6 million, offset by a favorable$11.3 million rate variance, resulted in a $63.6 million increase in net interest income in 2017, compared to 2016.variance. See Table 2 on page 26.2. The favorable volume variance on earning assets was predominantly driven by thean increase of $2.1 billion, or 6.2%, in average earning assets. In 2022, average loan balances increased $2.2 billion and average securities balances increased $1.8 billion, partially offset by a decrease of $850.8 million, or 8.5 percent, for 2017$1.7 billion in average interest-bearing due from banks, as compared to the same period in 2016.2021. Net interest margin, on a fully tax-equivalent basis (FTE), increased to 3.15 percent2.63% for 2017,2022, compared to 2.88 percent2.50% for the same period in 2016.2021, driven by the benefit of free funds, higher asset yields, offset by increased cost of interest-bearing liabilities. Net interest spread contracted by 22 basis points during the same period. The Company has seen an increase in the benefit from interest-free funds as compared to 2016.2021 driven by the increase in short-term interest rates. The impact of this benefit increased nine35 basis points compared to 20162021 and is illustrated on Table 3 on page 27.3. 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 on page 48 for an illustration of the impact of an interest rate increase or decrease on net interest income as of December 31, 2017.2022.
The provision for credit losses totaled $37.9 million for the year ended December 31, 2022, which is an increase of $17.9 million, or 89.5%, compared to the same period in 2021. This change is the result of applying the CECL methodology for computing the allowance for credit losses, coupled with the impacts of loan growth, portfolio metric changes, and changes in macro-economic metrics in the current period as compared to the prior period. See further discussion in “Provision and Allowance for Credit Losses” in this report.
The Company had an increase of $21.1$87.1 million, or 5.2 percent,18.6%, in noninterest income in 2017,2022, as compared to 2016,2021, and a $31.9decrease of $93.0 million, or 8.6 percent, increase16.6%, in 2016,2021, compared to 2015.2020. The increase in 20172022 is primarily driven by increased investment securities gains, net of $53.4 million and brokerage fees of $30.8 million. The decrease in 2021 is primarily attributable to a decrease of $115.6 million in investment securities gains, net, offset by an increase in trust and securities processing and increases in bank-owned and company-owned life insurance income, brokerage income, and bankcard income, partially offset by lower gains on sales of available-for-sale securities and equity earnings on alternative investments.$29.5 million. The change in noninterest income in 20172022 from 2016,2021, and 20162021 from 20152020 is illustrated onin Table 6 on page 30.6.
Noninterest expense increased in 20172022 by $38.4$64.5 million, or 5.8 percent,7.7%, compared to 20162021 and increased by $27.8$11.6 million, or 4.4 percent,1.4%, in 20162021 compared to 2015.2020. The increase in 20172022 is primarily driven by anincreases in salary and employee benefits expense, processing fees, other miscellaneous expense, bankcard expense, marketing and business development expense, and legal and consulting expense. The increase of $23.8 million, or 6.1 percent, in 2021 is primarily driven by increases in processing fees and salary and employee benefit expense, an increase of $6.3 million, or 17.6 percent, in processing fees,offset by lower operating losses and an increase of $5.7 million, or 8.5 percent, in equipment expense. The increase in noninterest expense in 20172022 from 2016,2021, and 20162021 from 20152020 is illustrated onin Table 7 on page 31. 7.
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 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 2017, 20162022, 2021 and 2015.2020.
Net interest margin, presented in Table 1, on page 24, is calculated as net interest income on a fully tax equivalenttax-equivalent basis (FTE) 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. 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, 2017, 20162022, 2021 and 2015.2020. Net interest income, average balance sheet amounts and the corresponding yields earned and rates paid for the years 20152020 through 20172022 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.
Table 1
THREE YEAR AVERAGE BALANCE SHEETS/YIELDS AND RATES (tax-equivalent basis)
(in millions)
|
| 2017 |
|
| 2016 |
|
| 2022 |
|
| 2021 |
| ||||||||||||||||||||||||||||||||||||
|
| Average Balance |
|
| Interest Income/ Expense (1) |
|
| Rate Earned/ Paid (1) |
|
| Average Balance |
|
| Interest Income/ Expense (1) |
|
| Rate Earned/ Paid (1) |
|
| Average Balance |
|
| Interest Income/ Expense (1) |
|
| Rate Earned/ Paid (1) |
|
| Average Balance |
|
| Interest Income/ Expense (1) |
|
| Rate Earned/ Paid (1) |
| ||||||||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and loans held for sale (FTE) (2) (3) |
| $ | 10,843.6 |
|
| $ | 461.3 |
|
|
| 4.25 | % |
| $ | 9,992.9 |
|
| $ | 386.3 |
|
|
| 3.87 | % |
| $ | 18,823.8 |
|
| $ | 810.1 |
|
|
| 4.30 | % |
| $ | 16,629.9 |
|
| $ | 619.3 |
|
|
| 3.72 | % |
Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable |
|
| 3,918.0 |
|
|
| 73.1 |
|
|
| 1.87 |
|
|
| 4,545.0 |
|
|
| 73.6 |
|
|
| 1.62 |
|
|
| 9,616.7 |
|
|
| 192.1 |
|
|
| 2.00 |
|
|
| 7,422.4 |
|
|
| 127.6 |
|
|
| 1.72 |
|
Tax-exempt (FTE) |
|
| 3,658.0 |
|
|
| 112.5 |
|
|
| 3.08 |
|
|
| 3,077.6 |
|
|
| 88.3 |
|
|
| 2.87 |
|
|
| 3,885.1 |
|
|
| 122.8 |
|
|
| 3.16 |
|
|
| 4,247.0 |
|
|
| 124.5 |
|
|
| 2.93 |
|
Total securities |
|
| 7,576.0 |
|
|
| 185.6 |
|
|
| 2.45 |
|
|
| 7,622.6 |
|
|
| 161.9 |
|
|
| 2.12 |
|
|
| 13,501.8 |
|
|
| 314.9 |
|
|
| 2.33 |
|
|
| 11,669.4 |
|
|
| 252.1 |
|
|
| 2.16 |
|
Federal funds sold and resell agreements |
|
| 190.0 |
|
|
| 3.7 |
|
|
| 1.95 |
|
|
| 188.5 |
|
|
| 2.7 |
|
|
| 1.44 |
|
|
| 965.9 |
|
|
| 19.1 |
|
|
| 1.98 |
|
|
| 1,234.5 |
|
|
| 10.1 |
|
|
| 0.81 |
|
Interest-bearing due from banks |
|
| 351.3 |
|
|
| 3.9 |
|
|
| 1.10 |
|
|
| 410.2 |
|
|
| 2.3 |
|
|
| 0.57 |
|
|
| 2,408.5 |
|
|
| 18.6 |
|
|
| 0.77 |
|
|
| 4,063.1 |
|
|
| 5.4 |
|
|
| 0.13 |
|
Other earning assets (FTE) |
|
| 57.0 |
|
|
| 1.9 |
|
|
| 3.28 |
|
|
| 42.4 |
|
|
| 0.8 |
|
|
| 1.85 |
|
|
| 12.1 |
|
|
| 0.6 |
|
|
| 4.96 |
|
|
| 23.5 |
|
|
| 1.0 |
|
|
| 4.33 |
|
Total earning assets (FTE) |
|
| 19,017.9 |
|
|
| 656.4 |
|
|
| 3.45 |
|
|
| 18,256.6 |
|
|
| 554.0 |
|
|
| 3.03 |
|
|
| 35,712.1 |
|
|
| 1,163.3 |
|
|
| 3.26 |
|
|
| 33,620.4 |
|
|
| 887.9 |
|
|
| 2.64 |
|
Allowance for loan losses |
|
| (97.2 | ) |
|
|
|
|
|
|
|
|
|
| (85.2 | ) |
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Allowance for credit losses |
|
| (184.1 | ) |
|
|
|
|
|
|
|
|
|
| (204.7 | ) |
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Cash and due from banks |
|
| 379.6 |
|
|
|
|
|
|
|
|
|
|
| 394.7 |
|
|
|
|
|
|
|
|
|
|
| 420.0 |
|
|
|
|
|
|
|
|
|
|
| 460.1 |
|
|
|
|
|
|
|
|
|
Other assets |
|
| 1,096.1 |
|
|
|
|
|
|
|
|
|
|
| 1,026.5 |
|
|
|
|
|
|
|
|
|
|
| 1,631.0 |
|
|
|
|
|
|
|
|
|
|
| 1,452.8 |
|
|
|
|
|
|
|
|
|
Total assets |
| $ | 20,396.4 |
|
|
|
|
|
|
|
|
|
| $ | 19,592.6 |
|
|
|
|
|
|
|
|
|
| $ | 37,579.0 |
|
|
|
|
|
|
|
|
|
| $ | 35,328.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing demand and savings deposits |
| $ | 8,819.4 |
|
| $ | 27.6 |
|
|
| 0.31 | % |
| $ | 8,267.6 |
|
| $ | 11.4 |
|
|
| 0.14 | % |
| $ | 17,333.0 |
|
| $ | 162.2 |
|
|
| 0.94 | % |
| $ | 16,982.9 |
|
| $ | 24.1 |
|
|
| 0.14 | % |
Time deposits under $250,000 |
|
| 373.6 |
|
|
| 2.8 |
|
|
| 0.75 |
|
|
| 601.4 |
|
|
| 3.3 |
|
|
| 0.55 |
|
|
| 95.0 |
|
|
| 0.7 |
|
|
| 0.74 |
|
|
| 242.0 |
|
|
| 0.8 |
|
|
| 0.33 |
|
Time deposits of $250,000 or more |
|
| 809.5 |
|
|
| 6.0 |
|
|
| 0.74 |
|
|
| 563.7 |
|
|
| 3.2 |
|
|
| 0.57 |
|
|
| 635.5 |
|
|
| 4.6 |
|
|
| 0.72 |
|
|
| 453.2 |
|
|
| 1.5 |
|
|
| 0.33 |
|
Total interest bearing deposits |
|
| 10,002.5 |
|
|
| 36.4 |
|
|
| 0.36 |
|
|
| 9,432.7 |
|
|
| 17.9 |
|
|
| 0.19 |
| ||||||||||||||||||||||||
Short-term debt |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3.8 |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||
Long-term debt |
|
| 76.3 |
|
|
| 3.7 |
|
|
| 4.85 |
|
|
| 81.9 |
|
|
| 3.2 |
|
|
| 3.91 |
| ||||||||||||||||||||||||
Federal funds purchased and repurchase agreements |
|
| 2,095.1 |
|
|
| 17.9 |
|
|
| 0.85 |
|
|
| 2,005.6 |
|
|
| 6.6 |
|
|
| 0.33 |
| ||||||||||||||||||||||||
Total interest bearing liabilities |
|
| 12,173.9 |
|
|
| 58.0 |
|
|
| 0.48 |
|
|
| 11,524.0 |
|
|
| 27.7 |
|
|
| 0.24 |
| ||||||||||||||||||||||||
Noninterest bearing demand deposits |
|
| 5,936.2 |
|
|
|
|
|
|
|
|
|
|
| 5,906.0 |
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total interest-bearing deposits |
|
| 18,063.5 |
|
|
| 167.5 |
|
|
| 0.93 |
|
|
| 17,678.1 |
|
|
| 26.4 |
|
|
| 0.15 |
| ||||||||||||||||||||||||
Borrowed funds |
|
| 309.2 |
|
|
| 15.5 |
|
|
| 5.00 |
|
|
| 270.5 |
|
|
| 12.7 |
|
|
| 4.68 |
| ||||||||||||||||||||||||
Federal funds purchased |
|
| 249.7 |
|
|
| 5.2 |
|
|
| 2.10 |
|
|
| 163.8 |
|
|
| — |
|
|
| 0.04 |
| ||||||||||||||||||||||||
Securities sold under agreements to repurchase |
|
| 2,527.4 |
|
|
| 35.5 |
|
|
| 1.40 |
|
|
| 2,454.3 |
|
|
| 6.9 |
|
|
| 0.28 |
| ||||||||||||||||||||||||
Total interest-bearing liabilities |
|
| 21,149.8 |
|
|
| 223.7 |
|
|
| 1.06 |
|
|
| 20,566.7 |
|
|
| 46.0 |
|
|
| 0.22 |
| ||||||||||||||||||||||||
Noninterest-bearing demand deposits |
|
| 13,264.1 |
|
|
|
|
|
|
|
|
|
|
| 11,254.8 |
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Other |
|
| 205.5 |
|
|
|
|
|
|
|
|
|
|
| 178.9 |
|
|
|
|
|
|
|
|
|
|
| 438.8 |
|
|
|
|
|
|
|
|
|
|
| 418.0 |
|
|
|
|
|
|
|
|
|
Total |
|
| 18,315.6 |
|
|
|
|
|
|
|
|
|
|
| 17,608.9 |
|
|
|
|
|
|
|
|
|
|
| 34,852.7 |
|
|
|
|
|
|
|
|
|
|
| 32,239.5 |
|
|
|
|
|
|
|
|
|
Total shareholders' equity |
|
| 2,080.8 |
|
|
|
|
|
|
|
|
|
|
| 1,983.7 |
|
|
|
|
|
|
|
|
|
|
| 2,726.3 |
|
|
|
|
|
|
|
|
|
|
| 3,089.1 |
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders' equity |
| $ | 20,396.4 |
|
|
|
|
|
|
|
|
|
| $ | 19,592.6 |
|
|
|
|
|
|
|
|
|
| $ | 37,579.0 |
|
|
|
|
|
|
|
|
|
| $ | 35,328.6 |
|
|
|
|
|
|
|
|
|
Net interest income (FTE) |
|
|
|
|
| $ | 598.4 |
|
|
|
|
|
|
|
|
|
| $ | 526.3 |
|
|
|
|
|
|
|
|
|
| $ | 939.6 |
|
|
|
|
|
|
|
|
|
| $ | 841.9 |
|
|
|
|
|
Net interest spread (FTE) |
|
|
|
|
|
|
|
|
|
| 2.97 | % |
|
|
|
|
|
|
|
|
|
| 2.79 | % |
|
|
|
|
|
|
|
|
|
| 2.20 | % |
|
|
|
|
|
|
|
|
|
| 2.42 | % |
Net interest margin (FTE) |
|
|
|
|
|
|
|
|
|
| 3.15 | % |
|
|
|
|
|
|
|
|
|
| 2.88 | % |
|
|
|
|
|
|
|
|
|
| 2.63 | % |
|
|
|
|
|
|
|
|
|
| 2.50 | % |
(1) | Interest income and yields are stated on |
(2) | Loan fees are included in interest income. Such fees totaled |
(3) | Loans on |
THREE YEAR AVERAGE BALANCE SHEETS/YIELDS AND RATES (tax-equivalent basis)
(in millions)
|
| 2015 |
|
| 2020 |
| ||||||||||||||||||
|
| Average Balance |
|
| Interest Income/ Expense (1) |
|
| Rate Earned/ Paid (1) |
|
| Average Balance |
|
| Interest Income/ Expense (1) |
|
| Rate Earned/ Paid (1) |
| ||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and loans held for sale (FTE) (2) (3) |
| $ | 8,425.1 |
|
| $ | 308.3 |
|
|
| 3.66 | % |
| $ | 15,126.1 |
|
| $ | 586.0 |
|
|
| 3.87 | % |
Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable |
|
| 4,823.7 |
|
|
| 75.3 |
|
|
| 1.56 |
|
|
| 5,256.7 |
|
|
| 105.7 |
|
|
| 2.01 |
|
Tax-exempt (FTE) |
|
| 2,473.8 |
|
|
| 67.3 |
|
|
| 2.72 |
|
|
| 4,226.4 |
|
|
| 126.3 |
|
|
| 2.99 |
|
Total securities |
|
| 7,297.5 |
|
|
| 142.6 |
|
|
| 1.95 |
|
|
| 9,483.1 |
|
|
| 232.0 |
|
|
| 2.45 |
|
Federal funds sold and resell agreements |
|
| 76.1 |
|
|
| 0.7 |
|
|
| 0.92 |
|
|
| 1,099.4 |
|
|
| 11.8 |
|
|
| 1.08 |
|
Interest-bearing due from banks |
|
| 664.8 |
|
|
| 2.4 |
|
|
| 0.35 |
|
|
| 1,218.9 |
|
|
| 3.8 |
|
|
| 0.31 |
|
Other earning assets (FTE) |
|
| 32.7 |
|
|
| 0.5 |
|
|
| 1.46 |
|
|
| 37.1 |
|
|
| 1.6 |
|
|
| 4.28 |
|
Total earning assets (FTE) |
|
| 16,496.2 |
|
|
| 454.5 |
|
|
| 2.75 |
|
|
| 26,964.6 |
|
|
| 835.2 |
|
|
| 3.10 |
|
Allowance for loan losses |
|
| (77.9 | ) |
|
|
|
|
|
|
|
| ||||||||||||
Allowance for credit losses |
|
| (184.5 | ) |
|
|
|
|
|
|
|
| ||||||||||||
Cash and due from banks |
|
| 496.4 |
|
|
|
|
|
|
|
|
|
|
| 440.5 |
|
|
|
|
|
|
|
|
|
Other assets |
|
| 871.7 |
|
|
|
|
|
|
|
|
|
|
| 1,347.5 |
|
|
|
|
|
|
|
|
|
Total assets |
| $ | 17,786.4 |
|
|
|
|
|
|
|
|
|
| $ | 28,568.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing demand and savings deposits |
| $ | 7,010.3 |
|
| $ | 7.9 |
|
|
| 0.11 | % |
| $ | 14,446.2 |
|
| $ | 49.1 |
|
|
| 0.34 | % |
Time deposits under $250,000 |
|
| 700.9 |
|
|
| 3.9 |
|
|
| 0.56 |
|
|
| 488.3 |
|
|
| 5.0 |
|
|
| 1.02 |
|
Time deposits of $250,000 or more |
|
| 439.4 |
|
|
| 2.5 |
|
|
| 0.57 |
|
|
| 402.0 |
|
|
| 4.1 |
|
|
| 1.02 |
|
Total interest bearing deposits |
|
| 8,150.6 |
|
|
| 14.3 |
|
|
| 0.18 |
| ||||||||||||
Short-term debt |
|
| 1.9 |
|
|
| — |
|
|
| — |
| ||||||||||||
Long-term debt |
|
| 57.3 |
|
|
| 2.5 |
|
|
| 4.36 |
| ||||||||||||
Federal funds purchased and repurchase agreements |
|
| 1,590.8 |
|
|
| 1.8 |
|
|
| 0.11 |
| ||||||||||||
Total interest bearing liabilities |
|
| 9,800.6 |
|
|
| 18.6 |
|
|
| 0.19 |
| ||||||||||||
Noninterest bearing demand deposits |
|
| 5,927.6 |
|
|
|
|
|
|
|
|
| ||||||||||||
Total interest-bearing deposits |
|
| 15,336.5 |
|
|
| 58.2 |
|
|
| 0.38 |
| ||||||||||||
Borrowed funds |
|
| 137.0 |
|
|
| 7.3 |
|
|
| 5.30 |
| ||||||||||||
Federal funds purchased |
|
| 60.3 |
|
|
| 0.2 |
|
|
| 0.26 |
| ||||||||||||
Securities sold under agreements to repurchase |
|
| 1,963.5 |
|
|
| 11.6 |
|
|
| 0.59 |
| ||||||||||||
Total interest-bearing liabilities |
|
| 17,497.3 |
|
|
| 77.3 |
|
|
| 0.44 |
| ||||||||||||
Noninterest-bearing demand deposits |
|
| 7,845.6 |
|
|
|
|
|
|
|
|
| ||||||||||||
Other |
|
| 252.3 |
|
|
|
|
|
|
|
|
|
|
| 420.2 |
|
|
|
|
|
|
|
|
|
Total |
|
| 15,980.5 |
|
|
|
|
|
|
|
|
|
|
| 25,763.1 |
|
|
|
|
|
|
|
|
|
Total shareholders' equity |
|
| 1,805.9 |
|
|
|
|
|
|
|
|
|
|
| 2,805.0 |
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders' equity |
| $ | 17,786.4 |
|
|
|
|
|
|
|
|
|
| $ | 28,568.1 |
|
|
|
|
|
|
|
|
|
Net interest income (FTE) |
|
|
|
|
| $ | 435.9 |
|
|
|
|
|
|
|
|
|
| $ | 757.9 |
|
|
|
|
|
Net interest spread (FTE) |
|
|
|
|
|
|
|
|
|
| 2.56 | % |
|
|
|
|
|
|
|
|
|
| 2.66 | % |
Net interest margin (FTE) |
|
|
|
|
|
|
|
|
|
| 2.64 | % |
|
|
|
|
|
|
|
|
|
| 2.81 | % |
Table 2
RATE-VOLUME ANALYSIS (in thousands)
This analysis attributes changes in net interest income either to changes in average balances or to changes in average interest rates for earning assets and interest-bearing liabilities. The change in net interest income that is due to both volume and interest rate has been allocated to volume and interest rate in proportion to the relationship of the absolute dollar amount of the change in each. All interest rates are presented on a tax-equivalent basis and 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. The loan average balances and rates include nonaccrual loans.
Average Volume | Average Volume |
|
| Average Rate |
|
|
|
| Increase (Decrease) |
| Average Volume |
|
| Average Rate |
|
|
|
| Increase (Decrease) |
| ||||||||||||||||||||||||||||||||||||
2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2017 vs. 2016 |
| Volume |
|
| Rate |
|
| Total |
| |||||||||||||||||||||||||||||||||||
2022 | 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 vs. 2021 |
| Volume |
|
| Rate |
|
| Total |
| ||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Change in interest earned on: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Change in interest earned on: |
|
|
|
|
|
|
|
|
|
|
|
|
$ | 10,843,642 |
|
| $ | 9,992,874 |
|
|
| 4.25 | % |
|
| 3.87 | % |
| Loans |
| $ | 34,405 |
|
| $ | 40,622 |
|
| $ | 75,027 |
| 18,823,810 |
|
| $ | 16,629,867 |
|
|
| 4.30 | % |
|
| 3.72 | % |
| Loans |
| $ | 87,505 |
|
| $ | 103,229 |
|
| $ | 190,734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
| 3,918,001 |
|
|
| 4,545,013 |
|
|
| 1.87 |
|
|
| 1.62 |
|
| Taxable |
|
| (10,884 | ) |
|
| 10,449 |
|
|
| (435 | ) | 9,616,691 |
|
|
| 7,422,432 |
|
|
| 2.00 |
|
|
| 1.72 |
|
| Taxable |
|
| 41,676 |
|
|
| 22,820 |
|
|
| 64,496 |
|
| 3,657,951 |
|
|
| 3,077,562 |
|
|
| 3.08 |
|
|
| 2.87 |
|
| Tax-exempt |
|
| 11,542 |
|
|
| 4,361 |
|
|
| 15,903 |
| 3,885,153 |
|
|
| 4,246,943 |
|
|
| 3.16 |
|
|
| 2.93 |
|
| Tax-exempt |
|
| (10,751 | ) |
|
| 9,636 |
|
|
| (1,115 | ) |
| 190,074 |
|
|
| 188,572 |
|
|
| 1.95 |
|
|
| 1.44 |
|
| Federal funds and resell agreements |
|
| 22 |
|
|
| 970 |
|
|
| 992 |
| 965,911 |
|
|
| 1,234,533 |
|
|
| 1.98 |
|
|
| 0.81 |
|
| Federal funds and resell agreements |
|
| (2,599 | ) |
|
| 11,660 |
|
|
| 9,061 |
|
| 351,293 |
|
|
| 410,163 |
|
|
| 1.10 |
|
|
| 0.57 |
|
| Interest-bearing due from banks |
|
| (378 | ) |
|
| 1,908 |
|
|
| 1,530 |
| 2,408,468 |
|
|
| 4,063,089 |
|
|
| 0.77 |
|
|
| 0.13 |
|
| Interest-bearing due from banks |
|
| (3,034 | ) |
|
| 16,199 |
|
|
| 13,165 |
|
| 57,013 |
|
|
| 42,437 |
|
|
| 3.28 |
|
|
| 1.85 |
|
| Trading securities |
|
| 265 |
|
|
| 599 |
|
|
| 864 |
| 12,076 |
|
|
| 23,480 |
|
|
| 4.96 |
|
|
| 4.33 |
|
| Trading securities |
|
| (492 | ) |
|
| 149 |
|
|
| (343 | ) |
| 19,017,974 |
|
|
| 18,256,621 |
|
|
| 3.45 |
|
|
| 3.03 |
|
| Total |
|
| 34,972 |
|
|
| 58,909 |
|
|
| 93,881 |
| 35,712,109 |
|
|
| 33,620,344 |
|
|
| 3.26 |
|
|
| 2.64 |
|
| Total |
|
| 112,305 |
|
|
| 163,693 |
|
|
| 275,998 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Change in interest incurred on: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Change in interest incurred on: |
|
|
|
|
|
|
|
|
|
|
|
|
| 10,002,497 |
|
|
| 9,432,720 |
|
|
| 0.36 |
|
|
| 0.19 |
|
| Interest-bearing deposits |
|
| 1,144 |
|
|
| 17,274 |
|
|
| 18,418 |
| 18,063,498 |
|
|
| 17,678,122 |
|
|
| 0.93 |
|
|
| 0.15 |
|
| Interest-bearing deposits |
|
| 589 |
|
|
| 140,552 |
|
|
| 141,141 |
|
| 2,095,111 |
|
|
| 2,005,631 |
|
|
| 0.85 |
|
|
| 0.33 |
|
| Federal funds and repurchase agreements |
|
| 304 |
|
|
| 11,078 |
|
|
| 11,382 |
| 249,663 |
|
|
| 163,744 |
|
|
| 2.10 |
|
|
| 0.04 |
|
| Federal funds purchased |
|
| 56 |
|
|
| 5,109 |
|
|
| 5,165 |
|
| 76,301 |
|
|
| 85,658 |
|
|
| 4.90 |
|
|
| 3.79 |
|
| Notes payable |
|
| (383 | ) |
|
| 874 |
|
|
| 491 |
| 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 |
| ||||||||||||||||||||||||||||
$ | 12,173,909 |
|
| $ | 11,524,009 |
|
|
| 0.48 | % |
|
| 0.24 | % |
| Total |
|
| 1,065 |
|
|
| 29,226 |
|
|
| 30,291 |
| 21,149,791 |
|
| $ | 20,566,654 |
|
|
| 1.06 | % |
|
| 0.22 | % |
| Total |
|
| 2,751 |
|
|
| 174,971 |
|
|
| 177,722 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net interest income |
| $ | 33,907 |
|
| $ | 29,683 |
|
| $ | 63,590 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net interest income |
| $ | 109,554 |
|
| $ | (11,278 | ) |
| $ | 98,276 |
|
Average Volume | Average Volume |
|
| Average Rate |
|
|
|
| Increase (Decrease) |
| Average Volume |
|
| Average Rate |
|
|
|
| Increase (Decrease) |
| ||||||||||||||||||||||||||||||||||||
2016 |
|
| 2015 |
|
| 2016 |
|
| 2015 |
|
| 2016 vs. 2015 |
| Volume |
|
| Rate |
|
| Total |
| |||||||||||||||||||||||||||||||||||
2021 | 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2021 vs. 2020 |
| Volume |
|
| Rate |
|
| Total |
| ||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Change in interest earned on: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Change in interest earned on: |
|
|
|
|
|
|
|
|
|
|
|
|
$ | 9,992,874 |
|
| $ | 8,425,107 |
|
|
| 3.87 | % |
|
| 3.66 | % |
| Loans |
| $ | 59,847 |
|
| $ | 18,102 |
|
| $ | 77,949 |
| 16,629,867 |
|
| $ | 15,126,110 |
|
|
| 3.72 | % |
|
| 3.87 | % |
| Loans |
| $ | 56,636 |
|
| $ | (23,320 | ) |
| $ | 33,316 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
| 4,545,013 |
|
|
| 4,823,710 |
|
|
| 1.62 |
|
|
| 1.56 |
|
| Taxable |
|
| (4,450 | ) |
|
| 2,683 |
|
|
| (1,767 | ) | 7,422,432 |
|
|
| 5,256,715 |
|
|
| 1.72 |
|
|
| 2.01 |
|
| Taxable |
|
| 38,880 |
|
|
| (16,956 | ) |
|
| 21,924 |
|
| 3,077,562 |
|
|
| 2,473,811 |
|
|
| 2.87 |
|
|
| 2.72 |
|
| Tax-exempt |
|
| 11,330 |
|
|
| 2,588 |
|
|
| 13,918 |
| 4,246,943 |
|
|
| 4,226,363 |
|
|
| 2.93 |
|
|
| 2.99 |
|
| Tax-exempt |
|
| 689 |
|
|
| (2,204 | ) |
|
| (1,515 | ) |
| 188,572 |
|
|
| 76,108 |
|
|
| 1.44 |
|
|
| 0.92 |
|
| Federal funds and resell agreements |
|
| 1,453 |
|
|
| 558 |
|
|
| 2,011 |
| 1,234,533 |
|
|
| 1,099,447 |
|
|
| 0.81 |
|
|
| 1.08 |
|
| Federal funds and resell agreements |
|
| 1,336 |
|
|
| (3,128 | ) |
|
| (1,792 | ) |
| 410,163 |
|
|
| 664,752 |
|
|
| 0.57 |
|
|
| 0.35 |
|
| Interest-bearing due from banks |
|
| (1,114 | ) |
|
| 1,099 |
|
|
| (15 | ) | 4,063,089 |
|
|
| 1,218,919 |
|
|
| 0.13 |
|
|
| 0.31 |
|
| Interest-bearing due from banks |
|
| 4,757 |
|
|
| (3,084 | ) |
|
| 1,673 |
|
| 42,437 |
|
|
| 32,725 |
|
|
| 1.85 |
|
|
| 1.46 |
|
| Trading securities |
|
| 134 |
|
|
| 120 |
|
|
| 254 |
| 23,480 |
|
|
| 37,086 |
|
|
| 4.33 |
|
|
| 4.28 |
|
| Trading securities |
|
| (592 | ) |
|
| 19 |
|
|
| (573 | ) |
| 18,256,621 |
|
|
| 16,496,213 |
|
|
| 3.03 |
|
|
| 2.75 |
|
| Total |
|
| 67,200 |
|
|
| 25,150 |
|
|
| 92,350 |
| 33,620,344 |
|
|
| 26,964,640 |
|
|
| 2.64 |
|
|
| 3.10 |
|
| Total |
|
| 101,706 |
|
|
| (48,673 | ) |
|
| 53,033 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Change in interest incurred on: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Change in interest incurred on: |
|
|
|
|
|
|
|
|
|
|
|
|
| 9,432,720 |
|
|
| 8,150,588 |
|
|
| 0.19 |
|
|
| 0.18 |
|
| Interest-bearing deposits |
|
| 2,370 |
|
|
| 1,297 |
|
|
| 3,667 |
| 17,678,122 |
|
|
| 15,336,492 |
|
|
| 0.15 |
|
|
| 0.38 |
|
| Interest-bearing deposits |
|
| 7,804 |
|
|
| (39,606 | ) |
|
| (31,802 | ) |
| 2,005,631 |
|
|
| 1,590,776 |
|
|
| 0.33 |
|
|
| 0.11 |
|
| Federal funds and repurchase agreements |
|
| 573 |
|
|
| 4,166 |
|
|
| 4,739 |
| 163,744 |
|
|
| 60,314 |
|
|
| 0.04 |
|
|
| 0.26 |
|
| Federal funds purchased |
|
| 119 |
|
|
| (206 | ) |
|
| (87 | ) |
| 85,658 |
|
|
| 59,174 |
|
|
| 3.79 |
|
|
| 4.33 |
|
| Notes payable |
|
| 1,035 |
|
|
| (347 | ) |
|
| 688 |
| 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 |
| ||||||||||||||||||||||||||||
$ | 11,524,009 |
|
| $ | 9,800,538 |
|
|
| 0.24 | % |
|
| 0.19 | % |
| Total |
|
| 3,978 |
|
|
| 5,116 |
|
|
| 9,094 |
| 20,566,654 |
|
| $ | 17,497,262 |
|
|
| 0.22 | % |
|
| 0.44 | % |
| Total |
|
| 16,674 |
|
|
| (47,933 | ) |
|
| (31,259 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net interest income |
| $ | 63,222 |
|
| $ | 20,034 |
|
| $ | 83,256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net interest income |
| $ | 85,032 |
|
| $ | (740 | ) |
| $ | 84,292 |
|
Table 3
ANALYSIS OF NET INTEREST MARGIN (in thousands)
|
| 2017 |
|
| 2016 |
|
| 2015 |
|
| 2022 |
|
| 2021 |
|
| 2020 |
| ||||||
Average earning assets |
| $ | 19,017,974 |
|
| $ | 18,256,621 |
|
| $ | 16,496,213 |
|
| $ | 35,712,109 |
|
| $ | 33,620,344 |
|
| $ | 26,964,640 |
|
Interest-bearing liabilities |
|
| 12,173,909 |
|
|
| 11,524,009 |
|
|
| 9,800,538 |
|
|
| 21,149,791 |
|
|
| 20,566,654 |
|
|
| 17,497,262 |
|
Interest-free funds |
| $ | 6,844,065 |
|
| $ | 6,732,612 |
|
| $ | 6,695,675 |
|
| $ | 14,562,318 |
|
| $ | 13,053,690 |
|
| $ | 9,467,378 |
|
Free funds ratio (interest free funds to average earning assets) |
|
| 35.99 | % |
|
| 36.88 | % |
|
| 40.59 | % |
|
| 40.78 | % |
|
| 38.83 | % |
|
| 35.11 | % |
Tax-equivalent yield on earning assets |
|
| 3.45 | % |
|
| 3.03 | % |
|
| 2.75 | % |
|
| 3.26 | % |
|
| 2.64 | % |
|
| 3.10 | % |
Cost of interest-bearing liabilities |
|
| 0.48 |
|
|
| 0.24 |
|
|
| 0.19 |
|
|
| 1.06 |
|
|
| 0.22 |
|
|
| 0.44 |
|
Net interest spread |
|
| 2.97 | % |
|
| 2.79 | % |
|
| 2.56 | % |
|
| 2.20 | % |
|
| 2.42 | % |
|
| 2.66 | % |
Benefit of interest-free funds |
|
| 0.18 |
|
|
| 0.09 |
|
|
| 0.08 |
|
|
| 0.43 |
|
|
| 0.08 |
|
|
| 0.15 |
|
Net interest margin |
|
| 3.15 | % |
|
| 2.88 | % |
|
| 2.64 | % |
|
| 2.63 | % |
|
| 2.50 | % |
|
| 2.81 | % |
The Company experienced an increase in net interest income of $63.6$98.3 million, or 12.8 percent,12.1%, for the year-endedyear ended December 31, 2017,2022, compared to 2016.2021. This follows an increase of $83.3$84.3 million, or 20.2 percent,11.5%, for the year-endedyear ended December 31, 2016,2021, compared to 2015.2020. Average earning assets for the year ended December 31, 20172022 increased by $761.4 million,$2.1 billion, or 4.2 percent,6.2%, compared to the same period in 2016.2021. Net interest margin, on a tax-equivalent basis, increased to 3.15 percent2.63% for 20172022 compared to 2.88 percent2.50% in 2016. As illustrated in Table 2, the 2016 and 2015 increases are primarily due to the favorable volume variances in earning assets driven by the impacts of the acquisition of Marquette Financial Companies (Marquette) in 2015.2021.
The Company funds a significant portion of its balance sheet with noninterest-bearing demand deposits. Noninterest-bearing demand deposits represented 37.9 percent, 40.2 percent40.6%, 45.9% and 41.8 percent36.5% of total outstanding deposits atas of December 31, 2017, 20162022, 2021 and 2015,2020, respectively. The decrease in 2022 is driven by the increase in short-term interest rates. As illustrated in Table 3, the impact from these interest-free funds was 1843 basis points in 2017,2022, as compared to nine basis points in 2016 and eight basis points in 2015.2021 and 15 basis points in 2020.
The Company has experienced an increase in net interest income during 20172022 due to a volume variance of $33.9$109.6 million, andoffset by a negative rate variance of $29.7$11.3 million. The average rate on earning assets during 20172022 has increased by 4262 basis points, while the average rate on interest-bearing liabilities increased by 2484 basis points, resulting in an 18 basis point increasea 22 basis-point decrease in spread. The volume of loans has increased from an average of $10.0$16.6 billion in 20162021 to an average of $10.8$18.8 billion in 2017.2022, 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 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. 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 2018,2023, approximately $900 million$1.1 billion of available for saleavailable-for-sale securities are expected to have principal repayments. This includes approximately $243$235 million which will have principal repayments during the first quarter of 2018.2023. The available for saleavailable-for-sale investment portfolio had an average life of 51.762.3 months, 54.367.6 months, and 44.870.1 months as of December 31, 2017, 2016,2022, 2021, and 2015,2020, respectively.
Provision and Allowance for LoanCredit Losses
The allowance for loan losses (ALL)ACL represents management’s judgment of thetotal expected losses inherentincluded in the Company’s loan portfolio as of the balance sheet date. An analysisThe Company’s process for recording the ACL is performed quarterly to determinebased on the appropriate balanceevaluation of the ALL.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.
A mathematical calculation of an estimate is made to assist in determining the adequacy and reasonableness of management’s recorded ACL. To develop the estimate, the Company follows the guidelines in Accounting Standards Codification (ASC) Topic 326, Financial Instruments – Credit Losses (ASC 326). The analysis reflectsestimate 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 quality trends, including book and held-to-maturity security portfolio.
The process involves the levelsconsideration of quantitative and trends related to non-accrual loans, past due loans, potential problem loans, criticized loans and net charge-offs or recoveries, among other factors. After the balance sheet analysis is performed for the ALL, the provision for loan losses is computed as the amount required to adjust the ALLqualitative factors relevant to the appropriate level.specific segmentation of loans. These factors have been established over decades of financial institution experience and include economic observation and loan loss characteristics. This process is designed to produce a lifetime estimate of the losses, at a reporting date, that includes evaluation of historical loss experience, current economic conditions, reasonable and supportable forecasts, and the qualitative framework outlined by the Office of the Comptroller of the Currency in the published 2020 Interagency Policy Statement. This process allows management to take a holistic view of the recorded ACL reserve and ensure that all significant and pertinent information is considered.
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). 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.
The ending result of this process is a recorded consolidated ACL that represents management’s best estimate of the total expected losses included in the loan portfolio, held-to-maturity securities, and credit deterioration in available-for-sale securities.
Table 4 presents the components of the allowance by loan portfolio segment. The Company manages the ALLACL against the risk in the entire loan portfolio and therefore, the allocation of the ALLACL to a particular loan segment may change in the future. Management of the Company believes the present ALLACL is adequate considering the Company’s loss experience, delinquency trends and current economic conditions. Future economic conditions and borrowers’ ability to meet their obligations, however, are uncertainties which could affect the Company’s ALLACL and/or need to change its current level of provision. For more information on loan portfolio segments and ALL
ACL methodology refer to Note 3, “Loans and Allowance for LoanCredit Losses,” in the Notes to the Consolidated Financial Statements.
Table 4
ALLOCATION OF ALLOWANCE FOR LOANCREDIT LOSSES ON LOANS (in thousands)
This table presents an allocation of the allowance for loancredit losses on loans and percent of loans to total loans by loan portfolio segment, which represents the inherent probable losstotal expected losses derived by both quantitative and qualitative methods. The amounts presented are not necessarily indicative of actual future charge-offs in any particular category and are subject to change.
|
| December 31, |
| |||||||||||||||||
Loan Category |
| 2017 |
|
| 2016 |
|
| 2015 |
|
| 2014 |
|
| 2013 |
| |||||
Commercial |
| $ | 81,156 |
|
| $ | 71,657 |
|
| $ | 63,847 |
|
| $ | 55,349 |
|
| $ | 48,886 |
|
Real estate |
|
| 9,312 |
|
|
| 10,569 |
|
|
| 8,220 |
|
|
| 10,725 |
|
|
| 15,342 |
|
Consumer |
|
| 10,083 |
|
|
| 9,311 |
|
|
| 8,949 |
|
|
| 9,921 |
|
|
| 10,447 |
|
Leases |
|
| 53 |
|
|
| 112 |
|
|
| 127 |
|
|
| 145 |
|
|
| 76 |
|
Total allowance |
| $ | 100,604 |
|
| $ | 91,649 |
|
| $ | 81,143 |
|
| $ | 76,140 |
|
| $ | 74,751 |
|
|
| 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 five-year summary of the Company’s ALL.ACL for the years ended December 31, 2022 and 2021. Also, please see “Quantitative and Qualitative Disclosures About Market Risk—Risk – Credit Risk Management” on page 51 in this report for information relating to nonaccrual, past due, restructured loans, and other credit risk matters. For more information on loan portfolio segments and ALLACL methodology refer to Note 3, “Loans and Allowance for LoanCredit Losses,” in the Notes to the Consolidated Financial Statements.
As illustrated in Table 5 below, the ALL increasedACL decreased as a percentage of total loans to 0.89 percent0.91% as of December 31, 2017,2022, compared to 0.87 percent1.13% as of December 31, 2016. Based on the factors above, the2021. The provision for loan losscredit losses, including provision for off-balance sheet credit exposures, totaled $41.0$37.9 million for the year-endedyear ended December 31, 2017,2022, which is an increase of $8.5$17.9 million, or 26.2 percent,89.5%, compared to the same period in 2016. This2021. The provision for loancredit losses, including provision for off-balance sheet credit exposures, totaled $32.5 million and $15.5$20.0 million for the years-endedyear ended December 31, 20162021. This increase is the result of the impacts of loan growth, portfolio metric changes, and 2015, respectively.changes in macro-economic metrics in the current period as compared to the prior period.
ANALYSIS OF ALLOWANCE FOR LOANCREDIT LOSSES (in thousands)
|
| 2017 |
|
| 2016 |
|
| 2015 |
|
| 2014 |
|
| 2013 |
| |||||
Allowance-beginning of year |
| $ | 91,649 |
|
| $ | 81,143 |
|
| $ | 76,140 |
|
| $ | 74,751 |
|
| $ | 71,426 |
|
Provision for loan losses |
|
| 41,000 |
|
|
| 32,500 |
|
|
| 15,500 |
|
|
| 17,000 |
|
|
| 17,500 |
|
Charge-offs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
| (27,985 | ) |
|
| (12,788 | ) |
|
| (5,239 | ) |
|
| (7,307 | ) |
|
| (4,748 | ) |
Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit card |
|
| (8,681 | ) |
|
| (8,436 | ) |
|
| (8,555 | ) |
|
| (10,104 | ) |
|
| (10,531 | ) |
Other |
|
| (948 | ) |
|
| (843 | ) |
|
| (1,103 | ) |
|
| (1,323 | ) |
|
| (1,600 | ) |
Real estate |
|
| (992 | ) |
|
| (6,756 | ) |
|
| (214 | ) |
|
| (259 | ) |
|
| (775 | ) |
Total charge-offs |
|
| (38,606 | ) |
|
| (28,823 | ) |
|
| (15,111 | ) |
|
| (18,993 | ) |
|
| (17,654 | ) |
Recoveries: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
| 3,522 |
|
|
| 3,596 |
|
|
| 1,824 |
|
|
| 848 |
|
|
| 867 |
|
Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit card |
|
| 1,540 |
|
|
| 1,730 |
|
|
| 1,802 |
|
|
| 1,803 |
|
|
| 1,720 |
|
Other |
|
| 533 |
|
|
| 518 |
|
|
| 667 |
|
|
| 687 |
|
|
| 815 |
|
Real estate |
|
| 966 |
|
|
| 985 |
|
|
| 321 |
|
|
| 44 |
|
|
| 77 |
|
Total recoveries |
|
| 6,561 |
|
|
| 6,829 |
|
|
| 4,614 |
|
|
| 3,382 |
|
|
| 3,479 |
|
Net charge-offs |
|
| (32,045 | ) |
|
| (21,994 | ) |
|
| (10,497 | ) |
|
| (15,611 | ) |
|
| (14,175 | ) |
Allowance-end of year |
| $ | 100,604 |
|
| $ | 91,649 |
|
| $ | 81,143 |
|
| $ | 76,140 |
|
| $ | 74,751 |
|
Average loans, net of unearned interest |
| $ | 10,841,486 |
|
| $ | 9,986,151 |
|
| $ | 8,423,997 |
|
| $ | 6,974,246 |
|
| $ | 6,217,240 |
|
Loans at end of year, net of unearned interest |
|
| 11,280,514 |
|
|
| 10,540,383 |
|
|
| 9,430,761 |
|
|
| 7,465,794 |
|
|
| 6,520,512 |
|
Allowance to loans at year-end |
|
| 0.89 | % |
|
| 0.87 | % |
|
| 0.86 | % |
|
| 1.02 | % |
|
| 1.15 | % |
Allowance as a multiple of net charge-offs |
|
| 3.14 | x |
|
| 4.17 | x |
|
| 7.73 | x |
|
| 4.88 | x |
|
| 5.27 | x |
Net charge-offs to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses |
|
| 78.16 | % |
|
| 67.67 | % |
|
| 67.72 | % |
|
| 91.83 | % |
|
| 81.00 | % |
Average loans |
|
| 0.30 |
|
|
| 0.22 |
|
|
| 0.12 |
|
|
| 0.22 |
|
|
| 0.23 |
|
|
| 2022 |
|
| 2021 |
| ||
Allowance – January 1 |
| $ | 196,711 |
|
| $ | 218,583 |
|
Provision for credit losses |
|
| 37,400 |
|
|
| 23,000 |
|
Charge-offs: |
|
|
|
|
|
|
|
|
Commercial |
|
| (37,269 | ) |
|
| (13,981 | ) |
Specialty lending |
|
| — |
|
|
| (31,945 | ) |
Commercial real estate |
|
| (29 | ) |
|
| (1,198 | ) |
Consumer real estate |
|
| (57 | ) |
|
| (96 | ) |
Consumer |
|
| (800 | ) |
|
| (2,424 | ) |
Credit cards |
|
| (6,150 | ) |
|
| (6,011 | ) |
Leases and other |
|
| — |
|
|
| (8 | ) |
Total charge-offs |
|
| (44,305 | ) |
|
| (55,663 | ) |
Recoveries: |
|
|
|
|
|
|
|
|
Commercial and industrial |
|
| 1,550 |
|
|
| 6,694 |
|
Specialty lending |
|
| 433 |
|
|
| 187 |
|
Commercial real estate |
|
| 385 |
|
|
| 1,560 |
|
Consumer real estate |
|
| 131 |
|
|
| 142 |
|
Consumer |
|
| 126 |
|
|
| 223 |
|
Credit cards |
|
| 1,812 |
|
|
| 1,967 |
|
Leases and other |
|
| — |
|
|
| 18 |
|
Total recoveries |
|
| 4,437 |
|
|
| 10,791 |
|
Net charge-offs |
|
| (39,868 | ) |
|
| (44,872 | ) |
Allowance for credit losses – end of period |
| $ | 194,243 |
|
| $ | 196,711 |
|
Allowance for credit losses on loans |
| $ | 191,836 |
|
| $ | 194,771 |
|
Allowance for credit losses on held-to-maturity securities |
|
| 2,407 |
|
|
| 1,940 |
|
Loans at end of year, net of unearned interest |
|
| 21,031,189 |
|
|
| 17,170,871 |
|
Held-to-maturity securities at end of period |
|
| 5,861,599 |
|
|
| 1,480,416 |
|
Total assets at amortized cost |
|
| 26,892,788 |
|
|
| 18,651,287 |
|
Average loans, net of unearned interest |
|
| 18,822,416 |
|
|
| 16,618,350 |
|
Allowance for credit losses on loans to loans at end of period |
|
| 0.91 | % |
|
| 1.13 | % |
Allowance for credit losses – end of period to total assets at amortized cost |
|
| 0.72 | % |
|
| 1.05 | % |
Allowance as a multiple of net charge-offs |
| 4.87x |
|
| 4.38x |
| ||
Net charge-offs to average loans |
|
| 0.21 | % |
|
| 0.27 | % |
Noninterest Income
A key objective of the Company is the growth of noninterest income to provide a diverse source of revenue not directly tied to interest rates. Fee-based services are typically non-credit related and are not generally affected by fluctuations in interest rates. Noninterest income increased in 20172022 by $21.1$87.1 million, or 5.2 percent,18.6%, compared to 20162021 and increaseddecreased in 20162021 by $31.9$93.0 million, or 8.6 percent,16.6%, compared to 2015.2020. The increase in 20172022 is primarily attributable to an increase in investment securities gains, net, coupled with an increase in brokerage fee income and trust and securities processing increaseincome. These were partially offset by a decrease in bank-ownedother miscellaneous income. The decrease in 2021 is primarily attributable to a decrease in investment securities gains, net, and company-owned life insurance income, brokerage income, and bankcard income, partially offset by lower gains on sales of available-for-sale securities and equity earnings on alternative investments. The increase in 2016, compared to 2015, is primarily attributable to higher equity earnings on alternative investments, increases in bank-owned and company-owned life insuranceincreased fund services income, corporate trust income, and brokeragebankcard income. Changes in Noninterest income are presented in Table 6 below.
The Company’s fee-based services offer multiple products and services, to customers which management believes will more closely align to the customer’swith customer product demand with the Company.demands. The Company is currently emphasizing fee-based services including trust and securities processing, bankcard, securities trading &and brokerage and cash &and treasury management. Management believes that it can offer these products and services both efficiently and profitably, as most have common platforms and support structures.
SUMMARY OF NONINTEREST INCOME (in thousands)
|
| Year Ended December 31, |
|
| Dollar Change |
|
| Percent Change |
|
| Year Ended December 31, |
|
| Dollar Change |
|
| Percent Change |
| ||||||||||||||||||||||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2015 |
|
| 17-16 |
|
| 16-15 |
|
| 17-16 |
|
| 16-15 |
|
| 2022 |
|
| 2021 |
|
| 2020 |
|
| 22-21 |
|
| 21-20 |
|
| 22-21 |
|
| 21-20 |
| ||||||||||||||
Trust and securities processing |
| $ | 176,646 |
|
| $ | 166,315 |
|
| $ | 166,261 |
|
| $ | 10,331 |
|
| $ | 54 |
|
|
| 6.2 | % |
|
| — | % |
| $ | 237,207 |
|
| $ | 224,126 |
|
| $ | 194,646 |
|
| $ | 13,081 |
|
| $ | 29,480 |
|
|
| 5.8 | % |
|
| 15.1 | % |
Trading and investment banking |
|
| 23,183 |
|
|
| 21,422 |
|
|
| 20,218 |
|
|
| 1,761 |
|
|
| 1,204 |
|
|
| 8.2 |
|
|
| 6.0 |
|
|
| 23,201 |
|
|
| 30,939 |
|
|
| 32,945 |
|
|
| (7,738 | ) |
|
| (2,006 | ) |
|
| (25.0 | ) |
|
| (6.1 | ) |
Service charges on deposit accounts |
|
| 87,680 |
|
|
| 86,662 |
|
|
| 86,460 |
|
|
| 1,018 |
|
|
| 202 |
|
|
| 1.2 |
|
|
| 0.2 |
|
|
| 85,167 |
|
|
| 86,056 |
|
|
| 83,879 |
|
|
| (889 | ) |
|
| 2,177 |
|
|
| (1.0 | ) |
|
| 2.6 |
|
Insurance fees and commissions |
|
| 1,972 |
|
|
| 4,188 |
|
|
| 2,530 |
|
|
| (2,216 | ) |
|
| 1,658 |
|
|
| (52.9 | ) |
|
| 65.5 |
|
|
| 1,338 |
|
|
| 1,309 |
|
|
| 1,369 |
|
|
| 29 |
|
|
| (60 | ) |
|
| 2.2 |
|
|
| (4.4 | ) |
Brokerage fees |
|
| 23,208 |
|
|
| 17,833 |
|
|
| 11,753 |
|
|
| 5,375 |
|
|
| 6,080 |
|
|
| 30.1 |
|
|
| 51.7 |
|
|
| 43,019 |
|
|
| 12,171 |
|
|
| 24,350 |
|
|
| 30,848 |
|
|
| (12,179 | ) |
|
| 253.5 |
|
|
| (50.0 | ) |
Bankcard fees |
|
| 73,030 |
|
|
| 68,749 |
|
|
| 69,211 |
|
|
| 4,281 |
|
|
| (462 | ) |
|
| 6.2 |
|
|
| (0.7 | ) |
|
| 73,451 |
|
|
| 64,576 |
|
|
| 60,544 |
|
|
| 8,875 |
|
|
| 4,032 |
|
|
| 13.7 |
|
|
| 6.7 |
|
Gains on sales of securities available for sale, net |
|
| 4,192 |
|
|
| 8,509 |
|
|
| 10,402 |
|
|
| (4,317 | ) |
|
| (1,893 | ) |
|
| (50.7 | ) |
|
| (18.2 | ) | ||||||||||||||||||||||||||||
Equity (losses) earnings on alternative investments |
|
| (1,108 | ) |
|
| 2,695 |
|
|
| (12,188 | ) |
|
| (3,803 | ) |
|
| 14,883 |
|
| (>100.0) |
|
| >100.0 |
| ||||||||||||||||||||||||||||||
Investment securities gains, net |
|
| 58,444 |
|
|
| 5,057 |
|
|
| 120,634 |
|
|
| 53,387 |
|
|
| (115,577 | ) |
|
| 1,055.7 |
|
|
| (95.8 | ) | ||||||||||||||||||||||||||||
Other |
|
| 34,759 |
|
|
| 26,138 |
|
|
| 16,012 |
|
|
| 8,621 |
|
|
| 10,126 |
|
|
| 33.0 |
|
|
| 63.2 |
|
|
| 32,406 |
|
|
| 42,941 |
|
|
| 41,799 |
|
|
| (10,535 | ) |
|
| 1,142 |
|
|
| (24.5 | ) |
|
| 2.7 |
|
Total noninterest income |
| $ | 423,562 |
|
| $ | 402,511 |
|
| $ | 370,659 |
|
| $ | 21,051 |
|
| $ | 31,852 |
|
|
| 5.2 | % |
|
| 8.6 | % |
| $ | 554,233 |
|
| $ | 467,175 |
|
| $ | 560,166 |
|
| $ | 87,058 |
|
| $ | (92,991 | ) |
|
| 18.6 | % |
|
| (16.6 | )% |
Noninterest income and the year-over-year changes in noninterest income are summarized in Table 6 above. The dollar change and percent change columns highlight the respective net increase or decrease in the categories of noninterest income in 20172022 compared to 2016,2021, and in 20162021 compared to 2015.2020.
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 $10.3$13.1 million, or 6.2 percent5.8% in 2017,2022, compared to 2016,2021, and was flatincreased by $29.5 million, or 15.1%, in 2016,2021, compared to 2015. The Company2020. During 2022, fund services income increased fee income from wealth management services by $5.3 million, from fund administration and custody services by $3.3$12.9 million and corporate trust revenueincome increased $6.5 million, partially offset by $1.7a decrease in wealth management income of $6.3 million. During 2021, fund services income increased $27.5 million and corporate trust income increased $5.8 million, offset by a decrease in 2017,wealth management income of $3.8 million. The recent volatile markets have impacted the income in this category. Since trust and securities processing fees are primarily asset-based, which are highly correlated to the change in market value of the assets, the related income will be affected by changes in the securities markets. Management continues to emphasize sales of services to both new and existing clients as well as increasing and improving the distribution channels.
Trading and investment banking income decreased $7.7 million, or 25.0%, in 2022 compared to 2016. 2021 and decreased $2.0 million, or 6.1%, in 2021 compared to 2020. These decreases were driven by lower trading volume and lower market values.
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. The increase in 2021 compared to 2020 was driven by increased corporate service charge income.
Brokerage fees increased $5.4$30.8 million, or 30.1 percent,253.5%, in 20172022 compared to 20162021 and increased $6.1decreased $12.2 million, or 51.7 percent,50.0%, in 20162021 compared to 2015 primarily2020. The increase in 2022 compared to 2021 was driven by increased 12b-1 and money market fees driven by the increase in short-term interest rates. The decrease in 2021 compared to 2020 was due to an increase inlower money market and 12b-1 income driven by an increasea decrease in volume and interest rates.
Bankcard fees increased $4.3$8.9 million, or 6.2 percent,13.7%, in 20172022 compared to 20162021, and was flatincreased $4.0 million, or 6.7%, in 20162021 compared to 2015. The increase in 2017 compared to 2016 was2020. These increases were primarily driven by increased interchange income.income, offset by increased rewards and rebate expense.
Gains on sales ofInvestment securities available for sale decreased $4.3gains, net increased $53.4 million in 20172022 compared to 2016 and2021 but decreased by $1.9$115.6 million in 20162021 compared to 2015.2020. The Company’s goal inincrease for 2022 was driven by a $66.2 million gain realized on the managementsale of its available-for-sale securities portfolio is to maximize return within
the Company’s parametersVisa Inc. Class B common shares, coupled with a loss of liquidity goals, interest rate risk$15.4 million on the Company’s investment in TTCF recognized in 2021. The decrease in 2021 was driven by the $108.8 million gain on the Company’s investment in TTCF in 2020 and credit risk. This can result in differences from period to period in the amountloss of realized gains.
Equity (losses) earnings on alternative investments decreased $3.8$15.4 million in 2017 compared to 2016 and increased $14.9 million in 2016 compared to 2015, primarily due to changes in the valuation of the underlying Prairie Capital Management (PCM) fund investments.2021 noted above.
Other noninterest income increased $8.6decreased $10.5 million, or 33.0 percent,24.5%, in 20172022 compared to 20162021 and increased $10.1,$1.1 million, or 63.2 percent,2.7%, in 20162021 compared to 20152020. The decrease in 2022 was primarily due to an increasedriven by market value changes in bank-owned and company-owned life insurance income and increased derivative income. The increase in 2021 was primarily driven by the gain on sale of the Company’s membership interests in PCM during the first quarter of 2021.
Noninterest Expense
Noninterest expense increased in 20172022 by $38.4$64.5 million, or 5.8 percent,7.7%, compared to 20162021 and increased in 20162021 by $27.8$11.6 million, or 4.4 percent,1.4%, compared to 2015. The main drivers of2020. From 2021 to 2022 the increase from 2016 to 2017 were salarieswas driven by increases in salary and employee benefits expense, processing fees, other miscellaneous expense, bankcard expense, and equipmentmarketing and business development expense. The main drivers ofFrom 2020 to 2021 the increase from 2015 to 2016 were salarieswas driven by processing fees and salary and employee benefits expense, offset by other noninterestmiscellaneous expense and equipment expense, offset by a decrease in legal and consulting expense. Table 7 below summarizes the components of noninterest expense and the respective year-over-year changes for each category.
SUMMARY OF NONINTEREST EXPENSE (in thousands)
|
| Year Ended December 31, |
|
| Dollar Change |
|
| Percent Change |
|
| Year Ended December 31, |
|
| Dollar Change |
|
| Percent Change |
| ||||||||||||||||||||||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2015 |
|
| 17-16 |
|
| 16-15 |
|
| 17-16 |
|
| 16-15 |
|
| 2022 |
|
| 2021 |
|
| 2020 |
|
| 22-21 |
|
| 21-20 |
|
| 22-21 |
|
| 21-20 |
| ||||||||||||||
Salaries and employee benefits |
| $ | 413,830 |
|
| $ | 390,059 |
|
| $ | 367,606 |
|
| $ | 23,771 |
|
| $ | 22,453 |
|
|
| 6.1 | % |
|
| 6.1 | % |
| $ | 524,431 |
|
| $ | 504,442 |
|
| $ | 495,464 |
|
| $ | 19,989 |
|
| $ | 8,978 |
|
|
| 4.0 | % |
|
| 1.8 | % |
Occupancy, net |
|
| 44,462 |
|
|
| 44,255 |
|
|
| 43,274 |
|
|
| 207 |
|
|
| 981 |
|
|
| 0.5 |
|
|
| 2.3 |
|
|
| 48,848 |
|
|
| 47,345 |
|
|
| 47,476 |
|
|
| 1,503 |
|
|
| (131 | ) |
|
| 3.2 |
|
|
| (0.3 | ) |
Equipment |
|
| 72,008 |
|
|
| 66,337 |
|
|
| 62,571 |
|
|
| 5,671 |
|
|
| 3,766 |
|
|
| 8.5 |
|
|
| 6.0 |
|
|
| 74,259 |
|
|
| 78,398 |
|
|
| 85,719 |
|
|
| (4,139 | ) |
|
| (7,321 | ) |
|
| (5.3 | ) |
|
| (8.5 | ) |
Supplies and services |
|
| 17,173 |
|
|
| 18,535 |
|
|
| 17,988 |
|
|
| (1,362 | ) |
|
| 547 |
|
|
| (7.3 | ) |
|
| 3.0 |
|
|
| 13,590 |
|
|
| 14,986 |
|
|
| 15,537 |
|
|
| (1,396 | ) |
|
| (551 | ) |
|
| (9.3 | ) |
|
| (3.5 | ) |
Marketing and business development |
|
| 21,469 |
|
|
| 21,208 |
|
|
| 21,996 |
|
|
| 261 |
|
|
| (788 | ) |
|
| 1.2 |
|
|
| (3.6 | ) |
|
| 25,699 |
|
|
| 18,533 |
|
|
| 14,679 |
|
|
| 7,166 |
|
|
| 3,854 |
|
|
| 38.7 |
|
|
| 26.3 |
|
Processing fees |
|
| 42,331 |
|
|
| 36,005 |
|
|
| 36,149 |
|
|
| 6,326 |
|
|
| (144 | ) |
|
| 17.6 |
|
|
| (0.4 | ) |
|
| 82,227 |
|
|
| 67,563 |
|
|
| 54,213 |
|
|
| 14,664 |
|
|
| 13,350 |
|
|
| 21.7 |
|
|
| 24.6 |
|
Legal and consulting |
|
| 23,406 |
|
|
| 20,801 |
|
|
| 26,186 |
|
|
| 2,605 |
|
|
| (5,385 | ) |
|
| 12.5 |
|
|
| (20.6 | ) |
|
| 39,095 |
|
|
| 32,406 |
|
|
| 29,765 |
|
|
| 6,689 |
|
|
| 2,641 |
|
|
| 20.6 |
|
|
| 8.9 |
|
Bankcard |
|
| 19,471 |
|
|
| 20,757 |
|
|
| 20,288 |
|
|
| (1,286 | ) |
|
| 469 |
|
|
| (6.2 | ) |
|
| 2.3 |
|
|
| 26,367 |
|
|
| 19,145 |
|
|
| 18,954 |
|
|
| 7,222 |
|
|
| 191 |
|
|
| 37.7 |
|
|
| 1.0 |
|
Amortization of other intangible assets |
|
| 7,326 |
|
|
| 8,695 |
|
|
| 8,171 |
|
|
| (1,369 | ) |
|
| 524 |
|
|
| (15.7 | ) |
|
| 6.4 |
|
|
| 5,037 |
|
|
| 4,757 |
|
|
| 6,517 |
|
|
| 280 |
|
|
| (1,760 | ) |
|
| 5.9 |
|
|
| (27.0 | ) |
Regulatory fees |
|
| 15,527 |
|
|
| 14,178 |
|
|
| 12,125 |
|
|
| 1,349 |
|
|
| 2,053 |
|
|
| 9.5 |
|
|
| 16.9 |
|
|
| 15,378 |
|
|
| 11,894 |
|
|
| 10,279 |
|
|
| 3,484 |
|
|
| 1,615 |
|
|
| 29.3 |
|
|
| 15.7 |
|
Other |
|
| 28,126 |
|
|
| 25,915 |
|
|
| 22,584 |
|
|
| 2,211 |
|
|
| 3,331 |
|
|
| 8.5 |
|
|
| 14.7 |
|
|
| 43,188 |
|
|
| 34,167 |
|
|
| 43,402 |
|
|
| 9,021 |
|
|
| (9,235 | ) |
|
| 26.4 |
|
|
| (21.3 | ) |
Total noninterest expense |
| $ | 705,129 |
|
| $ | 666,745 |
|
| $ | 638,938 |
|
| $ | 38,384 |
|
| $ | 27,807 |
|
|
| 5.8 | % |
|
| 4.4 | % |
| $ | 898,119 |
|
| $ | 833,636 |
|
| $ | 822,005 |
|
| $ | 64,483 |
|
| $ | 11,631 |
|
|
| 7.7 | % |
|
| 1.4 | % |
Salaries and employee benefits expense increased $23.8$20.0 million, or 6.1 percent,4.0%, in 20172022 compared to 2021 and $22.5$9.0 million, or 6.1 percent,1.8%, in 2016. The increase in both 2017 and 2016 is primarily due2021 compared to higher employee base salaries, higher commissions and bonuses, and higher cost of benefits.2020. In 2017,2022, salary and wage expense increased $9.9$17.5 million, or 4.0 percent, employee benefit expense increased $9.3 million, or 14.0 percent,5.9% and bonus and commission expense increased $4.6$4.4 million, or 6.1 percent. From 2015 to 2016, base salaries increased3.5%, driven by $10.7business volumes and revenue growth, and higher company performance. These increases were offset by a decrease in employee benefits expense of $1.9 million, or 4.5 percent, commissions and bonuses increased by $5.5 million, or 7.9 percent, and employee benefits increased by $6.2 million, or 10.4 percent. Included within2.3%. In 2021, bonus and commission expense in 2016 is non-acquisition relatedincreased $8.7 million, or 7.5%, driven by business volumes and revenue growth, and higher company performance. Salary and wage expense of $4.2 million. The Marquette acquisition contributed $8.2increased $1.7 million, of increased salary andor 0.6%. These increases were offset by a decrease in employee benefits expense in 2016 since it was the first full year of salary and benefits expense after the Marquette acquisition. $1.4 million, or 1.7%.
Equipment expense increased $5.7decreased $4.1 million, or 8.5 percent5.3%, in 2022 compared to 2021, and $3.8decreased $7.3 million, or 6.0 percent8.5%, from 2020 to 2021. The decreases in 2017 and 2016, respectively. This increase isboth years were driven by lower software expense related to a transition to cloud-based computing solutions.
Marketing and business development expense increased computer hardware$7.2 million, or 38.7%, in 2022 compared to 2021, and software expenses for investments for regulatory requirements, cyber security and the ongoing modernization of our core systemsincreased $3.9 million, or 26.3%, in 2021 compared to 2020. The increases in both years.years were driven by the timing of advertising and business development projects and higher travel expenses as compared to the prior year.
Processing fees expense increased $6.3$14.7 million, or 17.6 percent,21.7%, in 20172022 compared to 20162021, and was flatincreased $13.4 million, or 24.6%, in 20162021 compared to 2015. This increase2020. The increases in 2017 is2022 and 2021 were primarily driven by the transition to cloud computing solutions and ongoing investments for regulatory requirements, cyber security,in digital channel and integrated platform solutions to support business growth and the ongoingcontinued modernization of the Company’s core systems.
Legal and consulting expense increased $6.7 million, or 20.6%, in 2022 compared to 2021 and increased $2.6 million, or 12.5 percent,8.9%, in 2017 and decreased $5.42021 compared to 2020. These increases were primarily driven by higher consulting expense due to the timing of multiple projects.
Bankcard expense increased $7.2 million, or 20.6 percent37.7%, in 2016. This2022 compared to 2021 and increased $0.2 million, or 1.0%, in 2021 compared to 2020. The increase in 20172022 compared to 2021 was driven by an increase of $1.4 million in consulting expense and an increase of $1.3 million in legal and professional services expense. The decrease in 2016 was driven by $4.8 million in legal and consulting expense related to the Marquette acquisition recognized in 2015. higher card administration costs coupled with higher fraud losses.
Other noninterest expense increased $2.2$9.0 million, or 8.5 percent26.4%, in 2022 compared to 2021 and increased $3.3decreased $9.2 million, or 14.7 percent,21.3%, in 2017 and 2016, respectively.2021 compared to 2020. The increase in 20172022 was driven by higher operational losses and increased contribution and derivativecharitable contributions expense. The increasedecrease in 20162021 was primarily driven by an increase of $3.1 million in fair value adjustments to the contingent consideration liabilities on acquisitions.lower operational losses, partially offset by higher charitable contributions expense.
Income Taxes
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the Tax Act). The Tax Act includes numerous changes to existing tax law, including among other things, a permanent reduction in the federal corporate income tax rate from 35% to 21% effective January 1, 2018. While the Tax Act is expected to have a significant positive impact on the Company’s after-tax results, technical corrections or other forthcoming guidance could change how provisions of the Tax Act are interpreted, which may impact the Company’s effective tax rate and could affect the Company’s deferred tax assets, tax positions and tax liabilities.
Income tax expense for continuing operations totaled $53.4$100.3 million, $45.0$76.0 million, and $31.7$52.4 million in 2017, 20162022, 2021, and 2015,2020 respectively. These amounts equate to effective tax rates of 22.6 percent, 22.6 percent18.9%, 17.7%, and 24.7
percent15.5% for 2017, 20162022, 2021 and 2015,2020, respectively. The decreaseincrease in the effective tax rate from 20152021 to 20162022 is primarily attributable to an increase in federal tax credits and a largersmaller portion of pre-tax income earned from excludable life insurance policy gains. The effective rate for 2017 remained consistent with 2016 even after taking into consideration the effective rate impact of the Tax Act. The adverse rate impact of the Tax Act was favorably offset by a larger portion of incomebeing earned from tax-exempt interest and anmunicipal securities. The increase in excessthe effective tax benefits associated with stock compensation. With the adoptionrate from 2020 to 2021 is primarily attributable to a smaller portion of Accounting Standards Update (ASU) No. 2016-09, all excess tax benefits related to share-based awards were recognized inpre-tax income tax expense for 2016being earned from tax-exempt municipal securities and 2017.
The Company calculated its best estimate of the impact of the Tax Act in its year endhigher state and local income tax provision in accordance with its understanding of the Tax Act and the guidance available as of the date of this filing and as a result has recorded $3.0 million as additional income tax expense in the fourth quarter of 2017. Given the complexity of the Tax Act, anticipated technical corrections or other forthcoming guidance, the various state income tax interpretations and the detailed analysis required, the adjustments reflected in the current and deferred tax accounts may be subject to further refinement as additional information becomes available and further analysis is performed.
taxes.
For further information on income taxes refer to Note 16, “Income Taxes,” in the Notes to the Consolidated Financial Statements.
Business Segments
The Company has strategically aligned its operations into the following twothree reportable segmentssegments: Commercial Banking, Institutional Banking, and Personal Banking (collectively, the Business Segments): Bank and Asset Servicing.. Senior executive officers regularly evaluate business segmentBusiness Segment financial results produced by the Company’s internal reporting system in deciding how to allocate resources and assess performance for individual Business Segments. Previously, the Company had the following four Business Segments: Bank, Institutional Investment Management, Asset Servicing, and Payment Solutions. In the first quarter of 2016, the Company merged the Payments Solutions segment into the Bank segment to better reflect how the core businesses, products and services are being evaluated by management currently. The Company’s Payment Solutions leadership structure and financial performance assessments are now included in the Bank segment, and accordingly, the reportable segments were realigned to reflect these changes. Additionally, in November 2017, the Company sold all of the outstanding stock of Scout, its institutional investment management subsidiary. As the operations of Scout are now included in discontinued operations, the Company no longer presents this segment’s operations as one of its business segments. The management accounting system assigns balance sheet and income statement items to each Business Segment using methodologies that are refined on an ongoing basis.For comparability purposes, amounts in all periods are based on methodologies in effect at December 31, 2022. Previously reported results have been reclassified in this Form 10-K to conform to the Company’s current organizational structure.
Table 8
Bank Operating ResultsCOMMERCIAL BANKING OPERATING RESULTS (in thousands)
|
| Year Ended December 31, |
|
| Dollar Change |
|
| Percent Change |
| |||||||
|
| 2017 |
|
| 2016 |
|
| 17-16 |
|
| 17-16 |
| ||||
Net interest income |
| $ | 546,000 |
|
| $ | 484,716 |
|
| $ | 61,284 |
|
|
| 12.6 | % |
Provision for loan losses |
|
| 41,000 |
|
|
| 32,500 |
|
|
| 8,500 |
|
|
| 26.2 |
|
Noninterest income |
|
| 328,550 |
|
|
| 309,889 |
|
|
| 18,661 |
|
|
| 6.0 |
|
Noninterest expense |
|
| 616,883 |
|
|
| 582,719 |
|
|
| 34,164 |
|
|
| 5.9 |
|
Income before taxes |
|
| 216,667 |
|
|
| 179,386 |
|
|
| 37,281 |
|
|
| 20.8 |
|
Income tax expense |
|
| 49,522 |
|
|
| 40,406 |
|
|
| 9,116 |
|
|
| 22.6 |
|
Net income |
| $ | 167,145 |
|
| $ | 138,980 |
|
| $ | 28,165 |
|
|
| 20.3 | % |
Bank net income increased by $28.2 million, or 20.3 percent, to $167.1 million for the year ended December 31, 2017, compared to the same period in 2016. Net interest income increased $61.3 million, or 12.6 percent, for the year ended December 31, 2017, compared to the same period in 2016, primarily driven by strong loan growth, a change in the Bank’s earning asset mix, and higher loan yields. Provision for loan losses increased by $8.5 million to adjust the related ALL to the appropriate level based on the inherent risk in the loan portfolio for this segment.
Noninterest income increased $18.7 million, or 6.0 percent, over the same period in 2016 primarily driven by the following increases: bank-owned and company-owned life insurance income of $6.6 million, brokerage and mutual fund income of $5.4 million driven by an increase in 12b-1 fees, wealth management revenue of $5.3 million, card services income of $4.3 million driven by higher interchange and lower rewards costs, corporate trust income of $1.8 million, higher derivative income of $1.3 million, and deposit service charges of $1.0 million driven by higher healthcare service charges. These increases were offset by decreases of $4.3 million in gains on securities available for sale and $3.8 million in equity earnings on alternative investments.
Noninterest expense increased $34.2 million, or 5.9 percent, to $616.9 million for the year ended December 31, 2017, compared to the same period in 2016. The increase in noninterest expense is due to the following increases: $19.5 million in technology, service, and overhead expenses due to the ongoing modernization of our core systems, $10.8 million in salary and benefit expense primarily due to higher deferred compensation expense and profit sharing expense, $2.9 million in processing fees, $2.5 million in regulatory expense, and $0.9 million in legal and consulting expense. These increases were partially offset by a decrease of $1.0 million in bankcard expense and a decrease of $1.0 million in amortization expense.
Table 9
Asset Servicing Operating Results
|
| Year Ended December 31, |
|
| Dollar Change |
|
| Percent Change |
|
| Year Ended December 31, |
|
| Dollar Change |
|
| Percent Change |
| ||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 17-16 |
|
| 17-16 |
|
| 2022 |
|
| 2021 |
|
| 22-21 |
|
| 22-21 |
| ||||||||
Net interest income |
| $ | 12,913 |
|
| $ | 10,607 |
|
| $ | 2,306 |
|
|
| 21.7 | % |
| $ | 596,031 |
|
| $ | 579,992 |
|
| $ | 16,039 |
|
|
| 2.8 | % |
Provision for loan losses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||
Provision for credit losses |
|
| 32,851 |
|
|
| 15,543 |
|
|
| 17,308 |
|
|
| 111.4 |
| ||||||||||||||||
Noninterest income |
|
| 95,012 |
|
|
| 92,622 |
|
|
| 2,390 |
|
|
| 2.6 |
|
|
| 122,614 |
|
|
| 84,417 |
|
|
| 38,197 |
|
|
| 45.2 |
|
Noninterest expense |
|
| 88,246 |
|
|
| 84,026 |
|
|
| 4,220 |
|
|
| 5.0 |
|
|
| 332,912 |
|
|
| 306,424 |
|
|
| 26,488 |
|
|
| 8.6 |
|
Income before taxes |
|
| 19,679 |
|
|
| 19,203 |
|
|
| 476 |
|
|
| 2.5 |
|
|
| 352,882 |
|
|
| 342,442 |
|
|
| 10,440 |
|
|
| 3.0 |
|
Income tax expense |
|
| 3,848 |
|
|
| 4,549 |
|
|
| (701 | ) |
|
| (15.4 | ) |
|
| 66,548 |
|
|
| 60,691 |
|
|
| 5,857 |
|
|
| 9.7 |
|
Net income |
| $ | 15,831 |
|
| $ | 14,654 |
|
| $ | 1,177 |
|
|
| 8.0 | % |
| $ | 286,334 |
|
| $ | 281,751 |
|
| $ | 4,583 |
|
|
| 1.6 | % |
For the year ended December 31, 2017, Asset Servicing2022, Commercial Banking net income increased $1.2$4.6 million, or 8.0 percent,1.6%, to $15.8$286.3 million compared to the same period in 2021. Net interest income increased $16.0 million, or 2.8%, for the year ended December 31, 2022, compared to the same period last year, primarily driven by strong loan growth, earning asset mix changes, and the increase in short-term interest rates. Provision for credit losses increased $17.3 million as compared to 2021, driven by loan growth, portfolio metric changes, and changes in macro-economic metrics in 2022 as compared to 2021. Noninterest income increased $38.2 million, or 45.2%, over the same period in 2021. This increase was primarily due to an allocated portion of the gain on the sale of Visa Inc. Class B
common shares, partially offset by the decline in company-owned life insurance for the year ended December 31, 2022 as compared to the prior year. Additionally, there were increases of $9.7 million in other investment security gains and $4.6 million in other income, driven by the gain on the sale of the Company’s factoring loan portfolio, and $3.8 million in bankcard income, primarily due to increased interchange income. Noninterest expense increased $26.5 million, or 8.6%, as compared to the same period in 2016.2021. This increase was driven by a $17.3 million increase in technology, service, and overhead expenses, an increase of $3.1 million in marketing and business development, an increase of $2.1 million in salary and employee benefits expense, an increase of $1.5 million in regulatory fees, an increase of $0.9 million in bankcard expense, and an increase of $0.9 million in operational losses as compared to 2021.
Table 9
INSTITUTIONAL BANKING OPERATING RESULTS (in thousands)
|
| Year Ended December 31, |
|
| Dollar Change |
|
| Percent Change |
| |||||||
|
| 2022 |
|
| 2021 |
|
| 22-21 |
|
| 22-21 |
| ||||
Net interest income |
| $ | 159,679 |
|
| $ | 87,644 |
|
| $ | 72,035 |
|
|
| 82.2 | % |
Provision for credit losses |
|
| 495 |
|
|
| 630 |
|
|
| (135 | ) |
|
| (21.4 | ) |
Noninterest income |
|
| 323,794 |
|
|
| 273,483 |
|
|
| 50,311 |
|
|
| 18.4 |
|
Noninterest expense |
|
| 320,976 |
|
|
| 292,142 |
|
|
| 28,834 |
|
|
| 9.9 |
|
Income before taxes |
|
| 162,002 |
|
|
| 68,355 |
|
|
| 93,647 |
|
|
| 137.0 |
|
Income tax expense |
|
| 30,551 |
|
|
| 12,113 |
|
|
| 18,438 |
|
|
| 152.2 |
|
Net income |
| $ | 131,451 |
|
| $ | 56,242 |
|
| $ | 75,209 |
|
|
| 133.7 | % |
For the year ended December 31, 2022, Institutional Banking net income increased $75.2 million, or 133.7%, compared to the same period last year. Net interest income increased $2.3$72.0 million, or 82.2%, compared to the same period last year, due to an increase in deposits, coupled with an overallfunds transfer pricing due to the increase in deposit funds transfer credit. interest rates. Noninterest income increased $2.4$50.3 million, or 2.6 percent, largely18.4%, primarily due to increased alternative investment fees. Asincreases of December 31, 2017, assets under administration totaled $206.3 billion$31.1 million in brokerage fees, $12.9 million in fund services income, $6.5 million in corporate trust income, $3.0 million in bankcard fees, and an allocated portion of the gain on the sale of Visa Inc. Class B common shares. These increases were partially offset by decreases of $7.7 million and $3.0 million in bond trading income and service charges on deposits, respectively, coupled with a decline in company-owned life insurance compared to $188.7 billion at December 31, 2016the same period last year. Noninterest expense increased $28.8 million, or 9.9% as compared to 2021. This increase was primarily driven by increases of $18.3 million in salary and $185.6 billion at December 31, 2015. employee benefits expense, $4.7 million in bankcard expense, $4.5 million in technology, service, and overhead expenses, $2.6 million in marketing and business development, and $1.1 million in processing fees. These increases were partially offset by a decrease of $2.6 million in operational losses.
Table 10
PERSONAL BANKING OPERATING RESULTS (in thousands)
|
| Year Ended December 31, |
|
| Dollar Change |
|
| Percent Change |
| |||||||
|
| 2022 |
|
| 2021 |
|
| 22-21 |
|
| 22-21 |
| ||||
Net interest income |
| $ | 158,087 |
|
| $ | 147,885 |
|
| $ | 10,202 |
|
|
| 6.9 | % |
Provision for credit losses |
|
| 4,554 |
|
|
| 3,827 |
|
|
| 727 |
|
|
| 19.0 |
|
Noninterest income |
|
| 107,825 |
|
|
| 109,275 |
|
|
| (1,450 | ) |
|
| (1.3 | ) |
Noninterest expense |
|
| 244,231 |
|
|
| 235,070 |
|
|
| 9,161 |
|
|
| 3.9 |
|
Income before taxes |
|
| 17,127 |
|
|
| 18,263 |
|
|
| (1,136 | ) |
|
| (6.2 | ) |
Income tax expense |
|
| 3,230 |
|
|
| 3,238 |
|
|
| (8 | ) |
|
| (0.2 | ) |
Net income |
| $ | 13,897 |
|
| $ | 15,025 |
|
| $ | (1,128 | ) |
|
| (7.5 | )% |
For the year ended December 31, 2017, noninterest expense increased $4.22022, Personal Banking net income decreased $1.1 million, or 5.0 percent,7.5%, as compared to the same period last year. Net interest income increased $10.2 million, or 6.9%, compared to the same period last year due to increased loan balances and the impact of higher short-term interest rates. Provision for credit losses increased $0.7 million for the period, driven by loan growth, portfolio metric changes, and changes in macro-economic metrics in 2022 as compared to 2021. Noninterest income decreased $1.5 million, or 1.3%,
primarily driven by decreases of $6.2 million in wealth management income, $3.9 million on gains on the sale of mortgage loans, and $3.3 million in investment security gains. These decreases were partially offset by an increase in noninterest income due to an allocated portion of the gain on the sale of Visa Inc. Class B common shares, partially offset by the decline in company-owned life insurance. Noninterest expense increased $9.2 million, or 3.9%, primarily due to increases of $3.5$8.5 million in salarytechnology, service, and benefits expense, $0.3 million in furniture and equipment expense, and $0.3overhead expenses, $4.6 million in processing fees, expense.$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.
Loans and Loans Held For Sale
Loans represent the Company’s largest source of interest income. Loan balances held for investment increased by $740.1 million,$3.9 billion, or 7.0 percent,22.5%, in 2017.2022. This increase was primarily driven by an increase of $397.7 million,$1.9 billion, or 12.6 percent,26.8%, in commercial loans, $1.3 billion, or 21.5%, in commercial real estate loans, $142.2and $403.2 million, or 3.2 percent,17.4% in commercial loans, $110.7 million, or 49.0 percent in asset-basedconsumer real estate loans.
Commercial & industrial loans and $90.2 million, or 16.5 percent in residentialcommercial real estate loans.
Table 10
ANALYSIS OF LOANS BY TYPE (in thousands)
|
| December 31, |
| |||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2015 |
|
| 2014 |
|
| 2013 |
| |||||
Commercial |
| $ | 4,553,040 |
|
| $ | 4,410,806 |
|
| $ | 4,205,736 |
|
| $ | 3,814,009 |
|
| $ | 3,301,503 |
|
Asset-based |
|
| 336,614 |
|
|
| 225,878 |
|
|
| 219,244 |
|
|
| — |
|
|
| — |
|
Factoring |
|
| 221,672 |
|
|
| 139,902 |
|
|
| 90,686 |
|
|
| — |
|
|
| — |
|
Commercial - credit card |
|
| 172,291 |
|
|
| 146,735 |
|
|
| 125,361 |
|
|
| 115,709 |
|
|
| 103,270 |
|
Real estate - construction |
|
| 717,849 |
|
|
| 741,804 |
|
|
| 416,568 |
|
|
| 256,006 |
|
|
| 152,875 |
|
Real estate - commercial |
|
| 3,563,630 |
|
|
| 3,165,922 |
|
|
| 2,662,772 |
|
|
| 1,866,301 |
|
|
| 1,702,151 |
|
Leases |
|
| 23,967 |
|
|
| 39,532 |
|
|
| 41,857 |
|
|
| 39,090 |
|
|
| 23,981 |
|
Total business-related |
|
| 9,589,063 |
|
|
| 8,870,579 |
|
|
| 7,762,224 |
|
|
| 6,091,115 |
|
|
| 5,283,780 |
|
Real estate - residential |
|
| 638,591 |
|
|
| 548,350 |
|
|
| 492,227 |
|
|
| 319,827 |
|
|
| 289,356 |
|
Real estate - HELOC |
|
| 648,379 |
|
|
| 711,794 |
|
|
| 729,963 |
|
|
| 643,586 |
|
|
| 566,128 |
|
Consumer - credit card |
|
| 252,697 |
|
|
| 270,098 |
|
|
| 291,570 |
|
|
| 310,296 |
|
|
| 318,336 |
|
Consumer - other |
|
| 151,783 |
|
|
| 139,562 |
|
|
| 154,777 |
|
|
| 100,970 |
|
|
| 62,912 |
|
Total consumer-related |
|
| 1,691,450 |
|
|
| 1,669,804 |
|
|
| 1,668,537 |
|
|
| 1,374,679 |
|
|
| 1,236,732 |
|
Loans before allowance and loans held for sale |
|
| 11,280,513 |
|
|
| 10,540,383 |
|
|
| 9,430,761 |
|
|
| 7,465,794 |
|
|
| 6,520,512 |
|
Allowance for loan losses |
|
| (100,604 | ) |
|
| (91,649 | ) |
|
| (81,143 | ) |
|
| (76,140 | ) |
|
| (74,751 | ) |
Net loans |
|
| 11,179,909 |
|
|
| 10,448,734 |
|
|
| 9,349,618 |
|
|
| 7,389,654 |
|
|
| 6,445,761 |
|
Loans held for sale |
|
| 1,460 |
|
|
| 5,279 |
|
|
| 589 |
|
|
| 624 |
|
|
| 1,357 |
|
Net loans and loans held for sale |
| $ | 11,181,369 |
|
| $ | 10,454,013 |
|
| $ | 9,350,207 |
|
| $ | 7,390,278 |
|
| $ | 6,447,118 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a % of total loans and loans held for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
| 40.36 | % |
|
| 41.84 | % |
|
| 44.60 | % |
|
| 51.08 | % |
|
| 50.63 | % |
Asset-based |
|
| 2.98 |
|
|
| 2.14 |
|
|
| 2.32 |
|
|
| — |
|
|
| — |
|
Factoring |
|
| 1.96 |
|
|
| 1.33 |
|
|
| 0.96 |
|
|
| — |
|
|
| — |
|
Commercial - credit card |
|
| 1.53 |
|
|
| 1.39 |
|
|
| 1.33 |
|
|
| 1.55 |
|
|
| 1.58 |
|
Real estate – construction |
|
| 6.36 |
|
|
| 7.03 |
|
|
| 4.42 |
|
|
| 3.43 |
|
|
| 2.34 |
|
Real estate – commercial |
|
| 31.59 |
|
|
| 30.02 |
|
|
| 28.23 |
|
|
| 25.00 |
|
|
| 26.10 |
|
Leases |
|
| 0.21 |
|
|
| 0.37 |
|
|
| 0.44 |
|
|
| 0.52 |
|
|
| 0.37 |
|
Total business-related |
|
| 84.99 |
|
|
| 84.12 |
|
|
| 82.30 |
|
|
| 81.58 |
|
|
| 81.02 |
|
Real estate - residential |
|
| 5.65 |
|
|
| 5.20 |
|
|
| 5.22 |
|
|
| 4.28 |
|
|
| 4.44 |
|
Real estate - HELOC |
|
| 5.75 |
|
|
| 6.75 |
|
|
| 7.74 |
|
|
| 8.62 |
|
|
| 8.68 |
|
Consumer - credit card |
|
| 2.24 |
|
|
| 2.56 |
|
|
| 3.09 |
|
|
| 4.16 |
|
|
| 4.88 |
|
Consumer - other |
|
| 1.35 |
|
|
| 1.32 |
|
|
| 1.64 |
|
|
| 1.35 |
|
|
| 0.96 |
|
Total consumer-related |
|
| 14.99 |
|
|
| 15.83 |
|
|
| 17.69 |
|
|
| 18.41 |
|
|
| 18.96 |
|
Loans held for sale |
|
| 0.02 |
|
|
| 0.05 |
|
|
| 0.01 |
|
|
| 0.01 |
|
|
| 0.02 |
|
Total loans and loans held for sale |
|
| 100.00 | % |
|
| 100.00 | % |
|
| 100.00 | % |
|
| 100.00 | % |
|
| 100.00 | % |
Included in Table 10 is a five-year breakdown of loans by type. Business-related loans continue to represent the largest segmentsegments of the Company’s loan portfolio, comprising approximately 85.0 percent43.8% and 84.1 percent36.2%, respectively, of total loans and loans held for sale at the end of 20172022 and 2016, respectively. 42.3% and 36.5%, respectively, of total loans and loans held for sale at the end of 2021.
Commercial loans represent the largest percent of total loans. Commercial loans at December 31, 20172022 have increased $142.2 million,$1.9 billion, or 3.2 percent,26.8%, as compared to December 31, 2016,2021, to 40.4 percent43.8% of total loans. Commercial loans represented 41.8 percent42.3% of total loans at December 31, 2016. Despite the Company increasing its capacity to lend through increased commitments during 2017, commercial line utilization has remained low.2021.
As a percentage of total loans, commercial real estate and construction real estate loans now comprise 37.9 percentcomprises 36.2% of total loans compared to 37.1 percent36.5% in 2016.2021. Commercial real estate loans increased $397.7 million,$1.3 billion, or 12.6 percent, and construction real estate loans decreased $24.0 million, or 3.2 percent,21.5%, compared to 2016.2021. Generally, these loans are made for investment and real estate development or working capital orand business expansion purposes and are primarily secured by real estate with a maximum loan-to-value of 80 percent.80%. Most of these properties are owner-occupied and/ornon-owner occupied and have other collateral or guarantees as additional security.
Asset basedConsumer real estate loans increased $110.7$403.2 million, or 49.0 percent, and17.4%, compared to 2021. These loans represented 3.0 percent12.9% of total loans as of December 31, 2017. Factoring loans increased $81.8 million, or 58.4 percent, and represented 2.0 percent of total loans2022, compared to 13.5% as of December 31, 2017.2021.
Residential real estate increased $90.2 million, or 16.5 percent,For further information on loan portfolio segments refer to Note 3, “Loans and represented 5.7 percent of total loans. HELOC loans decreased $63.4 million, or 8.9 percent, and represent 5.8 percent of total loans.Allowance for Credit Losses,” in the Notes to the Consolidated Financial Statements.
Nonaccrual, past due and restructured loans are discussed under “Quantitative and Qualitative Disclosure about Market Risk – Credit Risk Management” in Item 7A on page 51 of this report.
Investment Securities
The Company’s investment portfolio contains trading, available-for-sale (AFS), and held-to-maturity (HTM) securities as well as FRB stock, Federal Home Loan Bank (FHLB) stock, and other miscellaneous investments. Investment securities totaled $7.6$13.2 billion as of December 31, 20172022 and $7.7$13.8 billion as of December 31, 20162021 and comprised 37.5 percent36.5% and 40.1 percent33.8% of the Company’s earning assets, respectively, as of those dates.
During 2022, securities with an amortized cost of $4.1 billion and a fair value of $3.8 billion were transferred from the AFS classification to the HTM classification as the Company has the positive intent and ability to hold these securities to maturity. The transfers of securities were made at fair value at the time of transfer. See further information in Note 4, “Securities” in the Notes to the Consolidated Financial Statements.
The Company’s AFS securities portfolio comprised 81.9 percent52.9% of the Company’s investment securities portfolio at December 31, 2017,2022, compared to 84.1 percent86.7% at year-end 2016.December 31, 2021. The Company’s AFS securities portfolio provides liquidity as a result of the composition and average life of the underlying securities. 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 54.367.6 months at December 31, 20162021 to 51.762.3 months at December 31, 2017 due to portfolio mix changes.2022. 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.
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 $5.7$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, 2017. Of this amount, securities with a market value of $1.8 billion at December 31, 2017 were pledged at the Federal Reserve Discount Window but were unencumbered as of that date.2022.
The Company’s HTM securities portfolio consists of U.S. agency-backed securities, mortgage-backed securities, general obligation bonds, and private placement bonds, which are issued primarily to refinance existing revenue bonds in the healthcare and education sectors.bonds. The Company’s HTM portfolio, net of the ACL totaled $1.3$5.9 billion as of December 31, 2017,2022, an increase of $145.1 million, or 13.0 percent,$4.4 billion from December 31, 2016.2021. The average life of the HTM portfolio was 7.29.3 years at December 31, 2017,2022, compared to 7.45.2 years at December 31, 2016.2021.
The securities portfolio generates the Company’s second largest component of interest income. The AFS, HTM, and HTMOther securities portfolios achieved an average yield on a tax-equivalent basis of 2.45 percent2.33% for 2017,2022, compared to 2.12 percent2.16% in 2016, and 1.95 percent in 2015.2021. Securities available for sale had a net unrealized loss of $75.4$771.6 million at year-end, compared to a net unrealized lossgain of $92.4$153.9 million the preceding year.This market value change primarily reflects the impact of a shorter average life offsetting the impact from rising mid-term market interest rates, as well as relatively unchanged longer-termand increasing market interest rates as of December 31, 2017,2022, compared to
December 31, 2016.2021. 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 $44.5$514.6 million at year-end 2017,2022, compared to an unrealized lossgain of $57.2$118.5 million for 2016.2021. The AFS securities portfolio contains securities that have unrealized losses and are not deemed to be other-than-temporarily impaired (see the table of these securities in Note 4, “Securities,” in the Notes to the Consolidated Financial Statements on page 75 of this document)Statements). The unrealized losses in the Company’s investments in direct obligations of U.S. Treasury obligations, U.S. government agencies, federal agency mortgage-backed securities, municipal securities, and corporates were caused by changes in interest rates, and not from a decline in credit of the underlying issuers. The U.S. Treasury, U.S. Agency, and Government Sponsored Entity (GSE) mortgage-backed securities are all considered to be agency-backed securities with no risk of loss as they are either explicitly or implicitly guaranteed by the U.S. government. The changes in fair value in the agency-backed portfolios are solely driven by change in interest rates caused by changing economic conditions. The Company has no knowledge of any underlying credit issues and the cash flows underlying the debt securities have not changed and are not expected to be impacted by changes in interest rates. 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. For the State and political subdivision portfolio, the majority of the Company’s holdings are in general obligation bonds, which have a very low historical default rate due to issuers generally having unlimited taxing authority to service the debt. For the State and political, Corporates, and Collateralized loan obligations portfolios, the Company has a robust process for monitoring credit risk, including both pre-purchase and ongoing post-purchase credit reviews and analysis. The Company monitors credit ratings of all bond issuers in these segments and reviews available financial data, including market and sector trends. The Company does not have the intent to sell these securities and does not believe it is more likely than not that the Company will be required to sell these securities before a recovery of fair value. The Company expects to recover its cost basis in the securities and does not consider these investments to be other-than-temporarily impaired atamortized cost. As of December 31, 2017.2022, 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 cost, fair value and average yield (tax-equivalent basis) of securities available for sale and securities held to maturity.
Table 11
SECURITIES AVAILABLE FOR SALE (in thousands)
December 31, 2017 |
| Amortized Cost |
|
| Fair Value |
| ||
U.S. Treasury |
| $ | 40,092 |
|
| $ | 38,643 |
|
U.S. Agencies |
|
| 14,762 |
|
|
| 14,752 |
|
Mortgage-backed |
|
| 3,719,369 |
|
|
| 3,649,243 |
|
State and political subdivisions |
|
| 2,546,517 |
|
|
| 2,542,673 |
|
Corporates |
|
| 13,278 |
|
|
| 13,266 |
|
Total |
| $ | 6,334,018 |
|
| $ | 6,258,577 |
|
|
| U.S. Treasury Securities |
|
| 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 | % |
December 31, 2016 |
| Amortized Cost |
|
| Fair Value |
| ||
U.S. Treasury |
| $ | 95,315 |
|
| $ | 93,826 |
|
U.S. Agencies |
|
| 198,158 |
|
|
| 198,177 |
|
Mortgage-backed |
|
| 3,773,090 |
|
|
| 3,711,699 |
|
State and political subdivisions |
|
| 2,425,155 |
|
|
| 2,395,757 |
|
Corporates |
|
| 66,997 |
|
|
| 66,875 |
|
Total |
| $ | 6,558,715 |
|
| $ | 6,466,334 |
|
December 31, 2015 |
| Amortized Cost |
|
| Fair Value |
| ||
U.S. Treasury |
| $ | 350,354 |
|
| $ | 349,779 |
|
U.S. Agencies |
|
| 667,414 |
|
|
| 666,389 |
|
Mortgage-backed |
|
| 3,598,115 |
|
|
| 3,572,446 |
|
State and political subdivisions |
|
| 2,116,543 |
|
|
| 2,138,413 |
|
Corporates |
|
| 80,585 |
|
|
| 79,922 |
|
Total |
| $ | 6,813,011 |
|
| $ | 6,806,949 |
|
|
| 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 | % |
|
| U.S. Treasury Securities |
|
| U.S. Agency Securities |
|
| Corporates |
|
| Collateralized Loan Obligations |
| ||||||||||||||||||||
December 31, 2017 |
| Fair Value |
|
| Weighted Average Yield |
|
| Fair Value |
|
| Weighted Average Yield |
| ||||||||||||||||||||
December 31, 2022 |
| Fair Value |
|
| Weighted Average Yield |
|
| Fair Value |
|
| Weighted Average Yield |
| ||||||||||||||||||||
Due in one year or less |
| $ | — |
|
|
| — | % |
| $ | 14,553 |
|
|
| 1.24 | % |
| $ | 10,563 |
|
|
| 4.82 | % |
| $ | — |
|
|
| — | % |
Due after 1 year through 5 years |
|
| 29,223 |
|
|
| 1.21 |
|
|
| 199 |
|
|
| 1.46 |
|
|
| 253,556 |
|
|
| 2.06 |
|
|
| 148,903 |
|
|
| 5.54 |
|
Due after 5 years through 10 years |
|
| 9,420 |
|
|
| 1.48 |
|
|
| — |
|
|
| — |
|
|
| 103,381 |
|
|
| 3.33 |
|
|
| 152,372 |
|
|
| 5.39 |
|
Due after 10 years |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 44,677 |
|
|
| 5.62 |
|
Total |
| $ | 38,643 |
|
|
| 1.28 | % |
| $ | 14,752 |
|
|
| 1.24 | % |
| $ | 367,500 |
|
|
| 2.51 | % |
| $ | 345,952 |
|
|
| 5.48 | % |
|
| U.S. Treasury Securities |
|
| U.S. Agency Securities |
| ||||||||||
December 31, 2021 |
| Fair Value |
|
| Weighted Average Yield |
|
| Fair Value |
|
| Weighted Average Yield |
| ||||
Due in one year or less |
| $ | — |
|
|
| — | % |
| $ | — |
|
|
| — | % |
Due after 1 year through 5 years |
|
| 69,174 |
|
|
| 0.85 |
|
|
| 124,932 |
|
|
| 2.29 |
|
Due after 5 years through 10 years |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Due after 10 years |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total |
| $ | 69,174 |
|
|
| 0.85 | % |
| $ | 124,932 |
|
|
| 2.29 | % |
| Mortgage-backed Securities |
|
| State and Political Subdivisions |
|
| Mortgage-backed Securities |
|
| State and Political Subdivisions |
| |||||||||||||||||||||
December 31, 2017 |
| Fair Value |
|
| Weighted Average Yield |
|
| Fair Value |
|
| Weighted Average Yield |
| ||||||||||||||||||||
December 31, 2021 |
| Fair Value |
|
| Weighted Average Yield |
|
| Fair Value |
|
| Weighted Average Yield |
| ||||||||||||||||||||
Due in one year or less |
| $ | 12,823 |
|
|
| 2.87 | % |
| $ | 260,957 |
|
|
| 2.06 | % |
| $ | 58,963 |
|
|
| 2.33 | % |
| $ | 163,373 |
|
|
| 2.30 | % |
Due after 1 year through 5 years |
|
| 2,541,152 |
|
|
| 2.08 |
|
|
| 1,096,967 |
|
|
| 2.56 |
|
|
| 4,362,831 |
|
|
| 1.73 |
|
|
| 335,743 |
|
|
| 2.55 |
|
Due after 5 years through 10 years |
|
| 1,057,436 |
|
|
| 2.27 |
|
|
| 822,801 |
|
|
| 2.91 |
|
|
| 3,451,389 |
|
|
| 1.76 |
|
|
| 728,909 |
|
|
| 2.60 |
|
Due after 10 years |
|
| 37,832 |
|
|
| 3.17 |
|
|
| 361,948 |
|
|
| 3.44 |
|
|
| 91,872 |
|
|
| 2.16 |
|
|
| 2,194,663 |
|
|
| 3.30 |
|
Total |
| $ | 3,649,243 |
|
|
| 2.15 | % |
| $ | 2,542,673 |
|
|
| 2.74 | % |
| $ | 7,965,055 |
|
|
| 1.75 | % |
| $ | 3,422,688 |
|
|
| 3.02 | % |
|
| Corporates |
|
| Corporates |
|
| Collateralized Loan Obligations |
| |||||||||||||||
December 31, 2017 |
| Fair Value |
|
| Weighted Average Yield |
| ||||||||||||||||||
December 31, 2021 |
| Fair Value |
|
| Weighted Average Yield |
|
| Fair Value |
|
| Weighted Average Yield |
| ||||||||||||
Due in one year or less |
| $ | 13,266 |
|
|
| 1.31 | % |
| $ | 5,070 |
|
|
| 3.03 | % |
| $ | — |
|
|
| — | % |
Due after 1 year through 5 years |
|
| — |
|
|
| — |
|
|
| 229,789 |
|
|
| 1.78 |
|
|
| — |
|
|
| — |
|
Due after 5 years through 10 years |
|
| — |
|
|
| — |
|
|
| 82,987 |
|
|
| 3.16 |
|
|
| 27,612 |
|
|
| 1.17 |
|
Due after 10 years |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 49,207 |
|
|
| 1.22 |
|
Total |
| $ | 13,266 |
|
|
| 1.31 | % |
| $ | 317,846 |
|
|
| 2.17 | % |
| $ | 76,819 |
|
|
| 1.20 | % |
|
| U.S. Treasury Securities |
|
| U.S. Agency Securities |
| ||||||||||
December 31, 2016 |
| Fair Value |
|
| Weighted Average Yield |
|
| Fair Value |
|
| Weighted Average Yield |
| ||||
Due in one year or less |
| $ | 55,240 |
|
|
| 0.72 | % |
| $ | 181,209 |
|
|
| 0.83 | % |
Due after 1 year through 5 years |
|
| 29,260 |
|
|
| 1.21 |
|
|
| 16,968 |
|
|
| 1.31 |
|
Due after 5 years through 10 years |
|
| 9,326 |
|
|
| 1.48 |
|
|
| — |
|
|
| — |
|
Due after 10 years |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total |
| $ | 93,826 |
|
|
| 0.95 | % |
| $ | 198,177 |
|
|
| 0.87 | % |
|
| Mortgage-backed Securities |
|
| State and Political Subdivisions |
| ||||||||||
December 31, 2016 |
| Fair Value |
|
| Weighted Average Yield |
|
| Fair Value |
|
| Weighted Average Yield |
| ||||
Due in one year or less |
| $ | 21,906 |
|
|
| 3.00 | % |
| $ | 221,261 |
|
|
| 1.99 | % |
Due after 1 year through 5 years |
|
| 2,853,678 |
|
|
| 2.01 |
|
|
| 1,035,482 |
|
|
| 2.46 |
|
Due after 5 years through 10 years |
|
| 812,041 |
|
|
| 1.98 |
|
|
| 853,368 |
|
|
| 2.83 |
|
Due after 10 years |
|
| 24,074 |
|
|
| 3.18 |
|
|
| 285,646 |
|
|
| 3.05 |
|
Total |
| $ | 3,711,699 |
|
|
| 2.02 | % |
| $ | 2,395,757 |
|
|
| 2.62 | % |
|
| Corporates |
| |||||
December 31, 2016 |
| Fair Value |
|
| Weighted Average Yield |
| ||
Due in one year or less |
| $ | 53,205 |
|
|
| 1.09 | % |
Due after 1 year through 5 years |
|
| 13,670 |
|
|
| 1.31 |
|
Due after 5 years through 10 years |
|
| — |
|
|
| — |
|
Due after 10 years |
|
| — |
|
|
| — |
|
Total |
| $ | 66,875 |
|
|
| 1.13 | % |
|
| U.S. Treasury Securities |
|
| U.S. Agency Securities |
| ||||||||||
December 31, 2015 |
| Fair Value |
|
| Weighted Average Yield |
|
| Fair Value |
|
| Weighted Average Yield |
| ||||
Due in one year or less |
| $ | 284,452 |
|
|
| 0.59 | % |
| $ | 416,993 |
|
|
| 0.60 | % |
Due after 1 year through 5 years |
|
| 65,327 |
|
|
| 0.85 |
|
|
| 246,298 |
|
|
| 0.92 |
|
Due after 5 years through 10 years |
|
| — |
|
|
| — |
|
|
| 3,098 |
|
|
| — |
|
Due after 10 years |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total |
| $ | 349,779 |
|
|
| 0.64 | % |
| $ | 666,389 |
|
|
| 0.72 | % |
| Mortgage-backed Securities |
|
| State and Political Subdivisions |
| |||||||||||
December 31, 2015 |
| Fair Value |
|
| Weighted Average Yield |
|
| Fair Value |
|
| Weighted Average Yield |
| ||||
Due in one year or less |
| $ | 43,570 |
|
|
| 3.30 | % |
| $ | 296,543 |
|
|
| 1.69 | % |
Due after 1 year through 5 years |
|
| 3,130,350 |
|
|
| 2.02 |
|
|
| 894,275 |
|
|
| 2.46 |
|
Due after 5 years through 10 years |
|
| 381,369 |
|
|
| 1.99 |
|
|
| 866,060 |
|
|
| 2.92 |
|
Due after 10 years |
|
| 17,157 |
|
|
| 3.28 |
|
|
| 81,535 |
|
|
| 3.34 |
|
Total |
| $ | 3,572,446 |
|
|
| 2.03 | % |
| $ | 2,138,413 |
|
|
| 2.57 | % |
|
| Corporates |
| |||||
December 31, 2015 |
| Fair Value |
|
| Weighted Average Yield |
| ||
Due in one year or less |
| $ | — |
|
|
| — | % |
Due after 1 year through 5 years |
|
| 79,922 |
|
|
| 1.11 |
|
Due after 5 years through 10 years |
|
| — |
|
|
| — |
|
Due after 10 years |
|
| — |
|
|
| — |
|
Total |
| $ | 79,922 |
|
|
| 1.11 | % |
Table 12
SECURITIES HELD TO MATURITY (in thousands)
December 31, 2017 |
| Amortized Cost |
|
| Fair Value |
|
| Weighted Average Yield/Average Maturity |
| |||||||||||||||||||
|
| U.S. 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 |
| $ | 2,275 |
|
| $ | 2,254 |
|
|
| 2.11 | % |
| $ | — |
|
|
| — | % |
| $ | 756 |
|
|
| 1.65 | % |
Due after 1 year through 5 years |
|
| 100,648 |
|
|
| 100,925 |
|
|
| 2.61 |
|
|
| 118,524 |
|
|
| 3.07 |
|
|
| 319,503 |
|
|
| 2.26 |
|
Due after 5 years through 10 years |
|
| 372,234 |
|
|
| 363,123 |
|
|
| 2.29 |
|
|
| — |
|
|
| — |
|
|
| 1,926,672 |
|
|
| 1.67 |
|
Due over 10 years |
|
| 785,857 |
|
|
| 741,145 |
|
|
| 2.65 |
|
|
| — |
|
|
| — |
|
|
| 326,136 |
|
|
| 1.69 |
|
Total |
| $ | 1,261,014 |
|
| $ | 1,207,447 |
|
|
| 2.54 | % |
| $ | 118,524 |
|
|
| 3.07 | % |
| $ | 2,573,067 |
|
|
| 1.73 | % |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
December 31, 2016 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Due in one year or less |
| $ | 6,077 |
|
| $ | 5,135 |
|
|
| 2.13 | % | ||||||||||||||||
Due after 1 year through 5 years |
|
| 82,650 |
|
|
| 83,552 |
|
|
| 2.66 |
| ||||||||||||||||
Due after 5 years through 10 years |
|
| 341,741 |
|
|
| 347,574 |
|
|
| 2.21 |
| ||||||||||||||||
Due over 10 years |
|
| 685,464 |
|
|
| 669,766 |
|
|
| 2.59 |
| ||||||||||||||||
Total |
| $ | 1,115,932 |
|
| $ | 1,106,027 |
|
|
| 2.48 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
December 31, 2015 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Due in one year or less |
| $ | 17,265 |
|
| $ | 17,893 |
|
|
| 2.27 | % | ||||||||||||||||
Due after 1 year through 5 years |
|
| 77,237 |
|
|
| 80,047 |
|
|
| 2.28 |
| ||||||||||||||||
Due after 5 years through 10 years |
|
| 370,631 |
|
|
| 384,117 |
|
|
| 2.52 |
| ||||||||||||||||
Due over 10 years |
|
| 201,973 |
|
|
| 209,322 |
|
|
| 2.00 |
| ||||||||||||||||
Total |
| $ | 667,106 |
|
| $ | 691,379 |
|
|
| 2.33 | % |
|
| 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. Equity securities without readily determinable fair values are generally carried at cost less impairment. Unrealized gains or losses on equity securities with and without readily determinable fair values are recognized in the Investment Securities gains, net line of the Company’s Consolidated Statements of Income.
FEDERAL RESERVE BANK STOCK AND OTHER SECURITIES (in thousands)
|
|
|
| Amortized |
|
| Fair |
| ||
|
|
|
| Cost |
|
| Value |
| ||
2017 |
|
|
|
|
|
|
|
|
|
|
FRB and FHLB stock |
|
|
| $ | 33,262 |
|
| $ | 33,262 |
|
Other securities – marketable |
|
|
|
| 3 |
|
|
| 4,640 |
|
Other securities – non-marketable |
|
|
|
| 26,606 |
|
|
| 27,995 |
|
Total Federal Reserve Bank stock and other |
|
|
| $ | 59,871 |
|
| $ | 65,897 |
|
|
|
|
|
|
|
|
|
|
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
FRB and FHLB stock |
|
|
| $ | 33,262 |
|
| $ | 33,262 |
|
Other securities – marketable |
|
|
|
| 4 |
|
|
| 9,952 |
|
Other securities – non-marketable |
|
|
|
| 24,272 |
|
|
| 25,092 |
|
Total Federal Reserve Bank stock and other |
|
|
| $ | 57,538 |
|
| $ | 68,306 |
|
|
|
|
|
|
|
|
|
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
FRB and FHLB stock |
|
|
| $ | 33,215 |
|
| $ | 33,215 |
|
Other securities – marketable |
|
|
|
| 5 |
|
|
| 7,164 |
|
Other securities – non-marketable |
|
|
|
| 23,855 |
|
|
| 24,819 |
|
Total Federal Reserve Bank stock and other |
|
|
| $ | 57,075 |
|
| $ | 65,198 |
|
Other marketable and non-marketable securities include PCM alternative investments in hedge funds and private equity funds, which are accounted for as equity-method investments. The fair value of other marketable securities includes alternativeFor further information on the Company’s investment securities, of $4.6 million at December 31, 2017, comparedrefer to $10.0 million at December 31, 2016. The fair value of other non-marketable securities includesNote 4, “Securities,” in the alternative investment securities fair value of $3.4 million and $2.0 million at December 31, 2017 and December 31, 2016, respectively. Notes to the Consolidated Financial Statements.
Other Earning Assets
Federal funds transactions essentially are overnight loans between financial institutions, which allow for either the daily investment of excess funds or the daily borrowing of another institution’s funds in order to meet short-term liquidity needs. The net borrowed position was $6.2$55.5 million at December 31, 2017, and $418.92022 compared to $12.6 million at December 31, 2016.2021.
The Bank buys and sells federal funds as agent for non-affiliated banks. Because the transactions are pursuant to agency arrangements, these transactions do not appear on the balance sheet and averaged $217.1$262.9 million in 20172022 and $224.8$394.7 million in 2016.2021.
At December 31, 2017,2022, the Company held securities purchased under agreements to resell of $186.5$951.6 million compared to $323.4 million$1.2 billion at December 31, 2016.2021. The Company uses these instruments as short-term secured investments, in lieu of selling federal funds, or to acquire securities required for collateral purposes. 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 $186.8$959.2 million in 20172022 and $180.7 million$1.2 billion in 2016.2021.
The Company also maintains an active securities trading inventory. The average holdings in the securities trading inventory in 20172022 were $57.0$12.1 million, compared to $42.4$23.5 million in 2016,2021, and were recorded at fair market value. As discussed in “Quantitative and Qualitative Disclosures About Market Risk --– Trading Account” in Part II, Item 7A, on page 50, the Company offsets the trading account securities by the sale of exchange-traded financial futures contracts, with both the trading account and futures contracts marked to market daily.
Interest-bearing due from banks totaled $1.4$1.2 billion as of December 31, 20172022 compared to $715.8 million$8.8 billion as of December 31, 20162021 and includes amounts due from the FRB and interest-bearing accounts held at other financial institutions. The amount due from the FRB totaled $1.3averaged $2.3 billion and $641.8 million at$4.0 billion during the years ended December 31, 20172022 and 2016,2021, respectively. The increasedecrease in the FRB balance from 20162021 to 20172022 is primarily due to an increasea decrease in public fund and institutional deposit balances. The interest-bearing accounts held at other financial institutions totaled $28.2$121.7 million and $74.0$41.2 million at December 31, 20172022 and 2016,2021, respectively.
Deposits represent the Company’s primary funding source for its asset base. In addition to the core deposits garnered by the Company’s retail branch structure, the Company continues to focus on its cash management services, as well as its asset management and mutual fund servicing businesses in order to attract and retain additional core deposits. Deposits totaled $18.0$32.6 billion at December 31, 20172022 and $16.6$35.6 billion at December 31, 2016, an increase2021, a decrease of $1.5$3.0 billion, or 8.8 percent.8.3%. Deposits averaged $15.9$31.3 billion in 2017,2022, and $15.3$28.9 billion in 2016.2021.
Noninterest-bearing demand deposits averaged $5.9$13.3 billion in 20172022 and 2016.$11.3 billion in 2021. These deposits represented 37.2 percent42.3% of average deposits in 2017,2022, compared to 38.5 percent38.9% in 2016.2021. 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.
Table 1314
MATURITIES OF UNINSURED TIME DEPOSITS OF $250,000 OR MORE (in thousands)
|
| December 31, |
|
| December 31, |
| ||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2015 |
|
| 2022 |
|
| 2021 |
| |||||
Maturing within 3 months |
| $ | 524,173 |
|
| $ | 295,395 |
|
| $ | 300,729 |
|
| $ | 389,367 |
|
| $ | 318,112 |
|
After 3 months but within 6 months |
|
| 116,491 |
|
|
| 111,043 |
|
|
| 26,250 |
|
|
| 39,651 |
|
|
| 8,616 |
|
After 6 months but within 12 months |
|
| 44,986 |
|
|
| 47,664 |
|
|
| 55,988 |
|
|
| 28,446 |
|
|
| 46,839 |
|
After 12 months |
|
| 46,624 |
|
|
| 68,030 |
|
|
| 100,945 |
|
|
| 9,837 |
|
|
| 19,664 |
|
Total |
| $ | 732,274 |
|
| $ | 522,132 |
|
| $ | 483,912 |
|
| $ | 467,301 |
|
| $ | 393,231 |
|
Table 14
ANALYSIS OF AVERAGE DEPOSITS (in thousands)
|
| December 31, |
| |||||||||
|
| 2017 |
|
| 2016 |
|
| 2015 |
| |||
Amount: |
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing demand |
| $ | 5,936,172 |
|
| $ | 5,906,021 |
|
| $ | 5,927,702 |
|
Interest-bearing demand and savings |
|
| 8,819,387 |
|
|
| 8,267,634 |
|
|
| 7,010,302 |
|
Time deposits under $250,000 |
|
| 373,553 |
|
|
| 601,383 |
|
|
| 700,916 |
|
Total core deposits |
|
| 15,129,112 |
|
|
| 14,775,038 |
|
|
| 13,638,920 |
|
Time deposits of $250,000 or more |
|
| 809,557 |
|
|
| 563,703 |
|
|
| 439,370 |
|
Total deposits |
| $ | 15,938,669 |
|
| $ | 15,338,741 |
|
| $ | 14,078,290 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a % of total deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing demand |
|
| 37.24 | % |
|
| 38.50 | % |
|
| 42.11 | % |
Interest-bearing demand and savings |
|
| 55.34 |
|
|
| 53.90 |
|
|
| 49.79 |
|
Time deposits under $250,000 |
|
| 2.34 |
|
|
| 3.92 |
|
|
| 4.98 |
|
Total core deposits |
|
| 94.92 |
|
|
| 96.32 |
|
|
| 96.88 |
|
Time deposits of $250,000 or more |
|
| 5.08 |
|
|
| 3.68 |
|
|
| 3.12 |
|
Total deposits |
|
| 100.00 | % |
|
| 100.00 | % |
|
| 100.00 | % |
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 $1.3 billion at December 31, 2017, and $1.9 billion at December 31, 2016. These agreements averaged $2.1 billion in 2017 and $2.0 billion in 2016. The Company enters into these transactions with its downstream correspondent banks, commercial customers, and various trust, mutual fund, and local government relationships.
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. Based on the collateral pledged, the Company had $2.0 billion of borrowing capacity at the FHLB at December 31, 2017. As of December 31, 2017, the FHLB had issued three letters2022, there were $24.7 billion of credit totaling $300.0 million on behalf of the Companyuninsured deposits, as compared to secure public fund deposits, all of which expired in January 2018. The letters of credit reduced the Company’s borrowing capacity with the FHLB to $1.7$27.4 billion as of December 31, 2017. The Company had no outstanding advances at FHLB Des Moines as of December 31, 2017. 2021.
Table 15
SHORT-TERM BORROWINGS ANALYSIS OF AVERAGE DEPOSITS (in thousands)
|
| 2017 |
|
| 2016 |
|
| 2015 |
| |||||||||||||||
|
| Amount |
|
| Rate |
|
| Amount |
|
| Rate |
|
| Amount |
|
| Rate |
| ||||||
At December 31: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds purchased |
| $ | 11,334 |
|
|
| 1.27 | % |
| $ | 419,843 |
|
|
| 0.50 | % |
| $ | 66,855 |
|
|
| 0.19 | % |
Repurchase agreements |
|
| 1,249,370 |
|
|
| 1.10 |
|
|
| 1,437,094 |
|
|
| 0.45 |
|
|
| 1,751,207 |
|
|
| 0.30 |
|
Other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,009 |
|
|
| 0.98 |
|
Total |
| $ | 1,260,704 |
|
|
| 1.10 | % |
| $ | 1,856,937 |
|
|
| 0.46 | % |
| $ | 1,823,071 |
|
|
| 0.30 | % |
Average for year: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds purchased |
| $ | 879,857 |
|
|
| 1.37 | % |
| $ | 439,062 |
|
|
| 0.60 | % |
| $ | 48,318 |
|
|
| 0.28 | % |
Repurchase agreements |
|
| 1,215,254 |
|
|
| 0.76 |
|
|
| 1,566,569 |
|
|
| 0.30 |
|
|
| 1,542,459 |
|
|
| 0.11 |
|
Other |
|
| 3 |
|
|
| — |
|
|
| 3,753 |
|
|
| 0.72 |
|
|
| 1,853 |
|
|
| 0.98 |
|
Total |
| $ | 2,095,114 |
|
|
| 0.85 | % |
| $ | 2,009,384 |
|
|
| 0.33 | % |
| $ | 1,592,630 |
|
|
| 0.11 | % |
Maximum month-end balance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds purchased |
| $ | 1,737,252 |
|
|
|
|
|
| $ | 1,094,017 |
|
|
|
|
|
| $ | 269,379 |
|
|
|
|
|
Repurchase agreements |
|
| 1,475,361 |
|
|
|
|
|
|
| 1,815,830 |
|
|
|
|
|
|
| 1,907,468 |
|
|
|
|
|
Other |
|
| — |
|
|
|
|
|
|
| — |
|
|
|
|
|
|
| 109,522 |
|
|
|
|
|
|
| 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 | % |
Long-term debt totaled $79.3 million at December 31, 2017. The majority of the Company’s long-term debt was assumed from the acquisition of Marquette and consists of debt obligations payable to four unconsolidated trusts (Marquette Capital Trust I, Marquette Capital Trust II, Marquette Capital Trust III, and Marquette Capital Trust IV) that previously issued trust preferred securities. These long-term debt obligations had an aggregate contractual balance of $103.1 million and had a carrying value of $68.3 million at December 31, 2017. Interest rates on trust preferred securities are tied to the three-month London Interbank Offered Rate (LIBOR) with spreads ranging from 133 basis points to 160 basis points, and reset quarterly. The trust preferred securities have maturity dates ranging from January 2036 to September 2036. For further information on long-term debt refer to Note 9, “Borrowed Funds,” in the Notes to the Consolidated Financial Statements.
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. Higher levels of liquidity, however, bear corresponding costs, measured in terms of lower yields on short-term, more liquid earning assets, and higher expenses for extended liability maturities. The Company manages capital for each subsidiary based upon the subsidiary’s respective risks and growth opportunities as well as regulatory requirements.
Total shareholders’ equity was $2.2decreased $478.3 million, or 15.2% to $2.7 billion at December 31, 2017,2022 as compared to $2.0 billion at December 31, 2016, an2021. The decrease in shareholders’ equity from 2021 to 2022 is largely due to a decrease in Accumulated other comprehensive income (AOCI) related to the increase of $219.1 million or 11.2 percent. in losses on the securities portfolio driven by increased market interest rates.
The Company’s Board of Directors (the Board) authorized, at its April 26, 20172022, April 27, 2021, and April 28, 20162020 meetings, the repurchase of up to two million shares of the Company’s common stock during the twelve month periodsmonths following each of the meetings.meeting (each a Repurchase Authorization). During 20172022 and 2016,2021, the Company acquired 217,071333,185 shares and 323,05867,671 shares, respectively, of its common stock respectively.pursuant to the applicable Repurchase Authorization. The Company has not made any repurchasesrepurchase of its securities other than through these plans.
Throughpursuant to the Company’s relationship with the FHLB of Des Moines, 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’s borrowing capacity with the FHLB was $1.7 billion as of December 31, 2017. The Company had no outstanding FHLB advances at FHLB of Des Moines as of December 31, 2017. Repurchase Authorizations.
Risk-based capital guidelines established by regulatory agencies set minimum capital standards based on the level of risk associated with a financial institution’s assets. 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 percent4.5% and a minimum tier 1 risk-based capital ratio of 6 percent.6%. A financial institution’s total capital is also required to equal at least 8 percent8% of risk-weighted assets. At least half of that 8 percent must consist of tier 1 core capital, and the remainder may be tier 2 supplementary capital. The Basel III regulatory capital rules include transitional periods for various components of the rules that require full compliance for the Company by January 1, 2019, including a capital conservation buffer requirement of 2.5 percent of risk-weighted assets for which the transitional period began on January 1, 2016.
The risk-based capital guidelines indicate the specific risk weightings by type of asset. Certain off-balance sheet items (such as standby letters of credit and binding loan commitments) are multiplied by credit conversion factors to translate them into balance sheet equivalents before assigning them specific risk weightings. The Company is also required to maintain a leverage ratio equal to or greater than 4 percent.4%. The leverage ratio is tier 1 core
capital to total average assets less goodwill and intangibles. The Company's capital position as of December 31, 20172022 is summarized in the table below and exceeded regulatory requirements.
For further discussion of capital and liquidity, see the “Quantitative and Qualitative Disclosures about Market Risk – Liquidity Risk” in Item 7A on page 52 of this report.
Table 16
RISK-BASED CAPITAL (in thousands)
This table computes risk-based capital in accordance with current regulatory guidelines. These guidelines as of December 31, 2017,2022, 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.
|
| Risk-Weighted Category |
|
| Risk-Weighted Category |
| ||||||||||||||||||||||||||||||||||||||||||
|
| 0% |
|
| 20% |
|
| 50% |
|
| 100% |
|
| 150% |
|
| Total |
|
| 0% |
|
| 20% |
|
| 50% |
|
| 100% |
|
| 150% |
|
| Total |
| ||||||||||||
Risk-Weighted Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans held for sale |
| $ | — |
|
| $ | — |
|
| $ | 1,460 |
|
| $ | — |
|
| $ | — |
|
| $ | 1,460 |
|
| $ | — |
|
| $ | — |
|
| $ | 1,978 |
|
| $ | — |
|
| $ | — |
|
| $ | 1,978 |
|
Loans and leases |
|
| 11,728 |
|
|
| 41,763 |
|
|
| 789,301 |
|
|
| 10,271,012 |
|
|
| 166,709 |
|
|
| 11,280,513 |
|
|
| 62,586 |
|
|
| 57,770 |
|
|
| 2,385,357 |
|
|
| 18,450,411 |
|
|
| 75,065 |
|
|
| 21,031,189 |
|
Securities available for sale |
|
| 736,136 |
|
|
| 5,569,192 |
|
|
| 15,412 |
|
|
| 13,278 |
|
|
| — |
|
|
| 6,334,018 |
|
|
| 2,204,211 |
|
|
| 5,165,476 |
|
|
| 7,203 |
|
|
| 401,060 |
|
|
| — |
|
|
| 7,777,950 |
|
Securities held to maturity |
|
| — |
|
|
| 30,174 |
|
|
| 1,230,840 |
|
|
| — |
|
|
| — |
|
|
| 1,261,014 |
|
|
| 489,066 |
|
|
| 4,473,882 |
|
|
| 1,145,687 |
|
|
| — |
|
|
| — |
|
|
| 6,108,635 |
|
Federal funds and resell agreements |
|
| — |
|
|
| 5,135 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,135 |
|
|
| — |
|
|
| 7,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7,000 |
|
Trading securities |
|
| 18 |
|
|
| 11,925 |
|
|
| 27,114 |
|
|
| 14,998 |
|
|
| — |
|
|
| 54,055 |
|
|
| 580 |
|
|
| 7,558 |
|
|
| 8,038 |
|
|
| 1,804 |
|
|
| — |
|
|
| 17,980 |
|
Cash and due from banks |
|
| 1,401,107 |
|
|
| 343,376 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,744,483 |
|
|
| 1,129,382 |
|
|
| 550,405 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,679,787 |
|
All other assets |
|
| 23,761 |
|
|
| 17,943 |
|
|
| 27,302 |
|
|
| 800,623 |
|
|
| — |
|
|
| 869,629 |
|
|
| 33,981 |
|
|
| 30,250 |
|
|
| 35,164 |
|
|
| 1,715,602 |
|
|
| — |
|
|
| 1,814,997 |
|
Category totals |
| $ | 2,172,750 |
|
| $ | 6,019,508 |
|
| $ | 2,091,429 |
|
| $ | 11,099,911 |
|
| $ | 166,709 |
|
| $ | 21,550,307 |
|
| $ | 3,919,806 |
|
| $ | 10,292,341 |
|
| $ | 3,583,427 |
|
| $ | 20,568,877 |
|
| $ | 75,065 |
|
| $ | 38,439,516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Risk-weighted totals |
|
| — |
|
|
| 1,203,902 |
|
|
| 1,045,714 |
|
|
| 11,099,911 |
|
|
| 250,064 |
|
|
| 13,599,591 |
|
| $ | — |
|
| $ | 2,058,468 |
|
| $ | 1,791,714 |
|
| $ | 20,568,877 |
|
| $ | 112,598 |
|
| $ | 24,531,657 |
|
Off-balance-sheet items (3) |
|
| — |
|
|
| 9,970 |
|
|
| 17,173 |
|
|
| 2,088,506 |
|
|
| 47,187 |
|
|
| 2,162,836 |
|
|
| — |
|
|
| 64,090 |
|
|
| 86,383 |
|
|
| 4,732,651 |
|
|
| 49,497 |
|
|
| 4,932,621 |
|
Total risk-weighted assets |
| $ | — |
|
| $ | 1,213,872 |
|
| $ | 1,062,887 |
|
| $ | 13,188,417 |
|
| $ | 297,251 |
|
| $ | 15,762,427 |
|
| $ | — |
|
| $ | 2,122,558 |
|
| $ | 1,878,097 |
|
| $ | 25,301,528 |
|
| $ | 162,095 |
|
| $ | 29,464,278 |
|
|
| Total | �� |
| Total |
| ||
Regulatory Capital |
|
|
|
|
|
|
|
|
Shareholders’ equity |
| $ | 2,181,531 |
|
| $ | 2,667,093 |
|
Less adjustments (1) |
|
| (140,027 | ) |
|
| 461,937 |
|
Common equity Tier 1/Tier 1 capital |
|
| 2,041,504 |
|
|
| 3,129,030 |
|
Additional Tier 2 capital (2) |
|
| 171,546 |
|
|
| 553,589 |
|
Total capital |
| $ | 2,213,050 |
|
| $ | 3,682,619 |
|
| Company |
| ||
Capital ratios |
|
|
|
|
Common Equity Tier 1 capital to risk-weighted assets |
|
|
| % |
Tier 1 capital to risk-weighted assets |
|
|
| % |
Total capital to risk-weighted assets |
|
|
| % |
Leverage ratio (Tier 1 capital to total average assets less adjustments (1)) |
|
|
| % |
(1) | Adjustments include a portion of goodwill and intangibles as well as unrealized gains/losses on available-for-sale |
(2) | Includes the Company’s |
(3) | After credit conversion factor and risk weighting is applied. |
For further discussion of regulatory capital requirements, see Note 10, “Regulatory Requirements” within the Notes to Consolidated Financial Statements under Item 8 on pages 82 through 84.8.
Commitments, Contractual Obligations
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 Off-balance Sheet Arrangementsdate.
Securities sold under agreements to repurchase and federal funds purchased totaled $2.2 billion at December 31, 2022, and $3.2 billion at December 31, 2021. Repurchase agreements and federal funds purchased averaged $2.8 billion in 2022 and $2.6 billion in 2021. The Company enters into these transactions with its downstream correspondent banks, commercial customers, and various trust, mutual fund, and local government relationships.
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 mainborrowing capacity is dependent upon the amount of collateral the Company places at the FHLB. Based on the collateral pledged, the Company had $1.9 billion of borrowing capacity at the FHLB at December 31, 2022. The Company had no outstanding advances at FHLB Des Moines as of December 31, 2022.
To enhance general working capital needs, the Company has a revolving line of credit with Wells Fargo Bank, N.A. which allows the Company to borrow up to $30.0 million for general working capital purposes. 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.
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. 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 subordinated notes were issued with a fixed-to-fixed rate of 6.25% and an effective rate of 6.64% due to issuance costs, with an interest rate reset date of September 2027.
In September 2020, the Company issued $200.0 million in aggregate subordinated notes due in September 2030. The Company received $197.7 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 subordinated notes were issued with a fixed-to-fixed rate of 3.70% and an effective rate of 3.93%, due to issuance costs, with an interest rate reset date of September 2025.
The remainder of the Company’s long-term debt was assumed from the acquisition of Marquette Financial Companies in 2015 and consists of debt obligations payable to four unconsolidated trusts (Marquette Capital Trust I, Marquette Capital Trust II, Marquette Capital Trust III, and Marquette Capital Trust IV) that previously issued trust preferred securities. 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. The trust preferred securities have maturity dates ranging from January 2036 to September 2036. For further information on long-term debt refer to Note 9, “Borrowed Funds,” in the Notes to the Consolidated Financial Statements.
The Company has material off-balance sheet arrangements arein the form of loan commitments, commercial and standby letters of credit, futures contracts and forward exchange contracts, which have maturity dates rather than payment due dates. These commitments and contingent liabilities are not required to be recorded on the Company’s balance sheet. Since commitments associated with letters of credit and lending and financing arrangements may expire unused, the amounts shown do not necessarily reflect the actual future cash funding requirements. See Table 17 below, as well as Note 14,15, “Commitments, Contingencies and Guarantees” in the Notes to Consolidated Financial Statements under Item 8 on pages 90 and 91 for detailed information and further discussion of these arrangements. Management does not anticipate any material losses from its off-balance sheet arrangements.
Table 17
COMMITMENTS, CONTRACTUAL OBLIGATIONSMATERIAL CASH REQUIREMENTS AND OFF-BALANCE SHEET ARRANGEMENTS (in thousands)
The table below details the contractual obligationscommitments, material cash requirements, and off-balance sheet arrangements for the Company as of December 31, 2017,2022 and includes principal payments only. The Company has no capital leases or long-term purchase obligations.
|
| Payments due by Period |
|
| Payments due by Period |
| ||||||||||||||||||||||||||||||||||
|
| Total |
|
| Less than 1 year |
|
| 1-3 years |
|
| 3-5 years |
|
| More than 5 years |
|
| Total |
|
| Less than 1 year |
|
| 1-3 years |
|
| 3-5 years |
|
| More than 5 years |
| ||||||||||
Contractual Obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Fed funds purchased and repurchase agreements |
| $ | 1,260,704 |
|
| $ | 1,260,704 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
| ||||||||||||||||||||
Material Cash Requirements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Federal funds purchased and repurchase agreements |
| $ | 2,222,167 |
|
| $ | 2,222,167 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
| ||||||||||||||||||||
Long-term debt obligations |
|
| 79,281 |
|
|
| 1,519 |
|
|
| 3,574 |
|
|
| 2,748 |
|
|
| 71,440 |
|
|
| 384,553 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 384,553 |
|
Operating lease obligations |
|
| 79,028 |
|
|
| 11,163 |
|
|
| 21,085 |
|
|
| 15,561 |
|
|
| 31,219 |
|
|
| 70,988 |
|
|
| 12,278 |
|
|
| 21,657 |
|
|
| 17,623 |
|
|
| 19,430 |
|
Time deposits |
|
| 1,280,264 |
|
|
| 1,048,898 |
|
|
| 191,258 |
|
|
| 40,108 |
|
|
| — |
|
|
| 917,138 |
|
|
| 809,410 |
|
|
| 85,791 |
|
|
| 17,244 |
|
|
| 4,693 |
|
Total |
| $ | 2,699,277 |
|
| $ | 2,322,284 |
|
| $ | 215,917 |
|
| $ | 58,417 |
|
| $ | 102,659 |
|
| $ | 3,594,846 |
|
| $ | 3,043,855 |
|
| $ | 107,448 |
|
| $ | 34,867 |
|
| $ | 408,676 |
|
| Maturities due by Period |
|
| Maturities due by Period |
| |||||||||||||||||||||||||||||||||||
|
| Total |
|
| Less than 1 year |
|
| 1-3 years |
|
| 3-5 years |
|
| More than 5 years |
|
| Total |
|
| Less than 1 year |
|
| 1-3 years |
|
| 3-5 years |
|
| More than 5 years |
| ||||||||||
Commitments, Contingencies and Guarantees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to extend credit for loans (excluding credit card loans) |
| $ | 6,689,467 |
|
| $ | 2,786,683 |
|
| $ | 1,327,210 |
|
| $ | 1,039,850 |
|
| $ | 1,535,724 |
|
| $ | 12,988,231 |
|
| $ | 5,118,670 |
|
| $ | 4,703,332 |
|
| $ | 2,458,066 |
|
| $ | 708,163 |
|
Commitments to extend credit under credit card loans |
|
| 2,975,507 |
|
|
| 2,975,507 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,008,386 |
|
|
| 4,008,386 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Commercial letters of credit |
|
| 813 |
|
|
| 813 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,334 |
|
|
| 3,334 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Standby letters of credit |
|
| 316,054 |
|
|
| 213,611 |
|
|
| 85,085 |
|
|
| 17,283 |
|
|
| 75 |
|
|
| 436,965 |
|
|
| 318,005 |
|
|
| 100,695 |
|
|
| 18,265 |
|
|
| — |
|
Forward contracts |
|
| 29,007 |
|
|
| 29,007 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 32,552 |
|
|
| 32,552 |
|
|
| ��� |
|
|
| — |
|
|
| — |
|
Spot foreign exchange contracts |
|
| 628 |
|
|
| 628 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,112 |
|
|
| 5,112 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total |
| $ | 10,011,476 |
|
| $ | 6,006,249 |
|
| $ | 1,412,295 |
|
| $ | 1,057,133 |
|
| $ | 1,535,799 |
|
| $ | 17,474,580 |
|
| $ | 9,486,059 |
|
| $ | 4,804,027 |
|
| $ | 2,476,331 |
|
| $ | 708,163 |
|
As of December 31, 2017, our2022, the Company’s total liabilities for unrecognized tax benefits were $3.8$9.4 million. The Company cannot reasonably estimate the timing of the future paymentssettlement of these liabilities. Therefore, these liabilities have been excluded from the table above. See Note 16, “Income Taxes,” in the Notes to the Consolidated Financial Statements for information regarding the liabilities associated with unrecognized tax benefits.
For further discussion of capital and liquidity, see the “Quantitative and Qualitative Disclosures about Market Risk – Liquidity Risk” in Item 7A of this report.
Critical Accounting Policies and Estimates
Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses the Company’s Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of these Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to customers and suppliers, allowance for loancredit losses, bad debts, investments, financing operations, long-lived assets, taxes, other contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which have formed the basis for making such judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. 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:to the allowance for loan losses, goodwill and other intangibles, revenue recognition, accounting for uncertainty in income taxes, and fair value measurements. credit losses.
Allowance for LoanCredit Losses
The Company’s allowance for loan lossesACL represents management’s judgment of the loantotal expected losses included in the Company’s assets held at amortized cost. 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.portfolio, and the impact of the current economic environment, coupled with reasonable and supportable economic forecasts.
A mathematical calculation of an estimate is made to assist in determining the adequacy and reasonableness of management’s recorded ACL. To develop the estimate, the Company follows the guidelines in ASC Topic 326, Financial Instruments – Credit Losses. The allowance is reviewed quarterly, considering bothestimate reserves for assets held at amortized cost, which include the Company’s loan and held-to-maturity security portfolios.
The estimation process involves the consideration of quantitative and qualitative factors such asrelevant to the specific segmentation of loans. These factors have been established over decades of financial institution experience and include economic observation and loan loss characteristics. This process is designed to produce a lifetime estimate of the losses, at a reporting date, that is based on evaluation of historical trends, internal ratings, migration analysis,loss experience, current economic conditions, loan growthreasonable and individual impairment testing.
Larger commercial loans are individually reviewed for potential impairment. For these loans, if management deems it probable thatsupportable forecasts, and the borrower cannot meet its contractual obligations with respect to payment or timing such loans are deemed to be impaired under current accounting standards. Such loans are then reviewed for potential impairment based on management’s estimatequalitative framework outlined by the Office of the borrower’s ability to repay the loan given the availability of cash flows, collateral and other legal options. Any allowance related to the impairment of an individually impaired loan is based on the present value of discounted expected future cash flows, the fair valueComptroller of the underlying collateral, orCurrency in the fair valuepublished 2020 Interagency Policy Statement. This process allows management to take a holistic view of the loan. Based on this analysis, some loansrecorded ACL reserve and ensure that are classified as impaired do not have a specific allowance as the discounted expected future cash flows or the fair value of the underlying collateral exceeds the Company’s basisall significant and pertinent information is considered in the impaired loan.its estimate.
The Company also maintains anconsiders 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 grading system for other loans not subject to individual impairment. Anprofile, model validation, and ratio analysis. If the Company’s total ACL estimate, ofas determined in accordance with the inherent loan losses on such risk-graded loansapproved 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.
The ending result of this process is a migration analysis which computes the net charge-off experience related to each risk category.
An estimate of inherent losses is computed on remaining loans based on the type of loan. Each type of loan is segregated into a pool based on the nature of such loans. This includes remaining commercial loansrecorded consolidated ACL that have a low risk grade, as well as other homogenous loans. Homogenous loans include automobile loans, credit card loans and other consumer loans. Allowances are established for each pool based on the loan type using historical loss rates, certain statistical measures and loan growth.
Anrepresents management’s best estimate of the total inherent loss is based on the above three computations. From this an adjustment can be made based on other factors management considers to be important in evaluating the probableexpected losses included in the portfolio such as general economic conditions, loan trends, riskand held-to-maturity security portfolios considering available information, from internal and external sources, relevant to assessing exposure to credit loss over the contractual term of the instrument. While management utilizes its best judgment and loan administrationinformation available, the ultimate adequacy of the ACL is dependent upon a variety of factors beyond the Company’s control, including the performance of its portfolios, the economy, and changes in internal policies. interest rates. As such, significant downturns in circumstances relating to loan quality and economic conditions could result in a requirement for additional allowance. Likewise, an upturn in loan quality and improved economic conditions may allow a reduction in the required allowance. In either instance, unanticipated changes could have a significant impact on the Company’s Provision for credit losses and ACL reported in its Consolidated Income Statements and Consolidated Balance Sheets, respectively.
For more information on loan portfolio segments, the Company’s ACL methodology, and ALL methodologymanagement’s assumptions in estimating the ACL, refer to the section captioned “Allowance for Credit Losses” within Note 3, “Loans and Allowance for LoanCredit Losses,” in the Notes to the Consolidated Financial Statements.
Goodwill and Other Intangibles
Goodwill is tested for impairment annually as of October 1 and more frequently whenever events or changes in circumstance indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying value. To test goodwill for impairment, the Company performs a qualitative assessment of each reporting unit. If the Company determines, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not greater than the carrying amount, the quantitative impairment test is not required. Otherwise, the Company compares the fair value of its reporting units to their carrying amounts to determine if impairment exists and the amount of impairment loss. An impairment loss is measured as the excess of the carrying value of a reporting unit’s goodwill over its fair value. As a result of such impairment analysis, the Company did not recognize an impairment charge in 2017.
For customer-based identifiable intangibles, the Company amortizes the intangibles over their estimated useful lives of up to 17 years. When facts and circumstances indicate potential impairment of amortizing intangible assets, the Company evaluates the fair value of the asset and compares it to the carrying value for possible impairment. For more information see “Goodwill and Other Intangibles” in Note 7 in the Notes to the Consolidated Financial Statements.
Revenue Recognition
Revenue recognition includes the recording of interest on loans and securities and is recognized based on a rate multiplied by the principal amount outstanding and also includes the impact of the amortization of related premiums and discounts. Interest accrual is discontinued when, in the opinion of management, the likelihood of collection becomes doubtful, or the loan is past due for a period of ninety days or more unless the loan is both well-secured and in the process of collection. Other noninterest income is recognized as services are performed or revenue-generating transactions are executed.
Income Taxes
The Company records a provision for income taxes for the anticipated tax consequences of our reported results of operations using the asset and liability method. Deferred income taxes are recognized by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as net operating loss and tax credit carryforwards. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance for any tax benefits for which future realization is uncertain. Although the Company believes its assumptions, judgments and estimates are reasonable, changes in tax laws or our interpretation of tax laws and the resolution of any tax audits could significantly impact the amounts provided for income taxes in the consolidated financial statements.
On December 22, 2017, the Tax Act was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a federal corporate tax rate decrease from 35% to 21% for tax years beginning after December 31, 2017. The Company estimated its provision for income taxes in accordance with the Tax Act and guidance available as of the date of this filing and as a result have recorded $3.0 million as additional income tax expense in the fourth quarter of 2017, the period in which the legislation was enacted.
Accounting for Uncertainty in Income Taxes
The Company is subject to income taxes in the U.S. federal and various state jurisdictions. The calculation of tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in these jurisdictions. The Company records the financial statement effects of an income tax position when it is more likely than not, based on the technical merits, that it will be sustained upon examination. The estimate for any uncertain tax issue is based on management’s best judgment. These estimates may change as a result of changes in tax laws and regulations, interpretations of law by taxing authorities, and income tax examinations among other factors. Due to the complexity of these uncertainties, the ultimate resolution may differ from the current estimate of the tax liabilities. These differences will be reflected as increases or decreases to Income tax expense in the period in which they are determined. See the discussion of “Liabilities Associated with Unrecognized Tax Benefits” under Note 16 in the Notes to the Consolidated Financial Statements.
Fair Value Measurements
Fair value is measured in accordance with GAAP, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques used to measure fair value include the market approach, income approach and cost approach. The market approach uses prices or relevant information generated by market transactions involving identical or comparable assets or liabilities. The income approach involves discounting future amounts to a single present amount and is based on current market expectations about those future amounts. The cost approach is based on the amount that currently would be required to replace the service capacity of the asset.
GAAP establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). An instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the instrument’s fair value measurement. The three levels within the fair value hierarchy are described as follows:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities that are available at the measurement date.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 - Unobservable inputs for the asset or liability for which there is little, if any, market activity at the measurement date. Unobservable inputs reflect assumptions about what market participants would use to price the asset or liability. The inputs are developed based on the best information available in the circumstances, which might include the Company’s own financial data such as internally developed pricing models and discounted cash flow methodologies, as well as instruments for which the fair value determination requires significant management judgment.
The Company’s fair value measurements involve various valuation techniques and models, which involve inputs that are observable, when available, and the most significant of which include available-for-sale, trading securities, and contingent consideration measured at fair value on a recurring basis.
Fair value pricing information obtained from third party data providers and pricing services for investment securities are reviewed for appropriateness on a periodic basis. The third party service providers are also analyzed to understand and evaluate the valuation methodologies utilized. This review includes an analysis of current market prices compared to pricing provided by the third party pricing service to assess the relative accuracy of the data provided.
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. 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. The following discussion of interest rate risk, however, combines instruments held for trading and instruments held for purposes other than trading because the instruments held for trading represent such a small portion of the Company’s portfolio that the interest rate risk associated with them is immaterial.
Interest Rate Risk
In the banking industry, a major risk exposure is changing interest rates. To minimize the effect of interest rate changes to net interest income and exposure levels to economic losses, the Company manages its exposure to changes in interest rates through asset and liability management within guidelines established by its Asset Liability Committee (ALCO) and approved by the Board. The ALCO is responsible for approving and ensuring compliance with asset/liability management policies, including interest rate exposure. The Company’s primary method for measuring and analyzing consolidated interest rate risk is the Net Interest Income Simulation Analysis. The Company also uses a Net Portfolio Value model to measure market value risk under various rate change scenarios and a gap analysis to measure maturity and repricing relationships between interest-earning assets and interest-bearing liabilities at specific points in time. On a limited basis, the Company uses hedges such as swaps, rate floors, and futures contracts to manage interest rate risk on certain loans, trading securities, trust preferred securities, and deposits. See further information in Note 17 “Derivatives and Hedging Activities” in the Notes to the Company’s Consolidated Financial Statements.
Overall, the Company attempts to manage interest rate risk by positioning the balance sheet to maximize net interest income while maintaining an acceptable level of interest rate and credit risk, remaining mindful of the relationship among profitability, liquidity, interest rate risk and credit risk.
Net Interest Income Modeling
The Company’s primary interest rate risk tool, the Net Interest Income Simulation Analysis, measures interest rate risk and the effect of interest rate changes on net interest income and net interest margin. This analysis incorporates all of the Company’s assets and liabilities together with assumptions that reflect the current interest rate environment. Through these simulations, management estimates the impact on net interest income of a 300 basis point300-basis-point upward or a 100 basis point100-basis-point downward gradual change (e.g. ramp) and immediate change (e.g. shock) of market interest rates over a two yeartwo-year period. In ramp scenarios, rates change gradually for a one yearone-year period and remain constant in year two. In shock scenarios, rates change immediately and the change is sustained for the remainder of the two year scenario horizon. Assumptions are made to project rates for new loans and deposits based on historical analysis, management outlook and repricing strategies. Asset prepayments and other market risks are developed from industry estimates of prepayment speeds and other market changes. 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.
Table 18 shows the net interest income percentage increase or decrease over the next twelvetwelve- and twenty-four monthtwenty-four-month periods as of December 31, 20172022 and 20162021 based on hypothetical changes in interest rates and a constant sized balance sheet with runoff being replaced.
Table 18
MARKET RISK
|
| Hypothetical change in interest rate – Rate Ramp |
|
| Hypothetical change in interest rate – Rate Ramp |
| ||||||||||||||||||||||||||
|
| Year One |
|
| Year Two |
|
| Year One |
|
| Year Two |
| ||||||||||||||||||||
|
| December 31, 2017 |
|
| December 31, 2016 |
|
| December 31, 2017 |
|
| December 31, 2016 |
|
| December 31, 2022 |
|
| December 31, 2021 |
|
| December 31, 2022 |
|
| December 31, 2021 |
| ||||||||
(basis points) |
| Percentage change |
|
| Percentage change |
|
| Percentage change |
|
| Percentage change |
|
| Percentage change |
|
| Percentage change |
|
| Percentage change |
|
| Percentage change |
| ||||||||
300 |
|
| 1.3 | % |
|
| 2.2 | % |
|
| 7.1 | % |
|
| 7.8 | % |
|
| (1.4 | )% |
|
| 5.9 | % |
|
| 10.6 | % |
|
| 22.1 | % |
200 |
|
| 0.1 |
|
|
| 1.2 |
|
|
| 3.7 |
|
|
| 5.0 |
|
|
| (1.1 | ) |
|
| 3.7 |
|
|
| 7.1 |
|
|
| 14.9 |
|
100 |
|
| (1.1 | ) |
|
| 0.2 |
|
|
| 0.2 |
|
|
| 2.1 |
|
|
| (0.4 | ) |
|
| 1.5 |
|
|
| 3.6 |
|
|
| 7.3 |
|
Static |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
(100) |
|
| (1.5 | ) |
| N/A |
|
|
| (6.0 | ) |
| N/A |
|
|
| 0.4 |
|
|
| (3.0 | ) |
|
| (3.8 | ) |
|
| (9.7 | ) |
|
| Hypothetical change in interest rate – Rate Shock |
|
| Hypothetical change in interest rate – Rate Shock |
| ||||||||||||||||||||||||||
|
| Year One |
|
| Year Two |
|
| Year One |
|
| Year Two |
| ||||||||||||||||||||
|
| December 31, 2017 |
|
| December 31, 2016 |
|
| December 31, 2017 |
|
| December 31, 2016 |
|
| December 31, 2022 |
|
| December 31, 2021 |
|
| December 31, 2022 |
|
| December 31, 2021 |
| ||||||||
(basis points) |
| Percentage change |
|
| Percentage change |
|
| Percentage change |
|
| Percentage change |
|
| Percentage change |
|
| Percentage change |
|
| Percentage change |
|
| Percentage change |
| ||||||||
300 |
|
| 6.1 | % |
|
| 7.3 | % |
|
| 10.5 | % |
|
| 11.7 | % |
|
| 3.5 | % |
|
| 11.2 | % |
|
| 14.1 | % |
|
| 22.5 | % |
200 |
|
| 3.3 |
|
|
| 4.6 |
|
|
| 5.9 |
|
|
| 7.6 |
|
|
| 2.4 |
|
|
| 7.2 |
|
|
| 9.5 |
|
|
| 15.2 |
|
100 |
|
| 0.5 |
|
|
| 2.0 |
|
|
| 1.4 |
|
|
| 3.5 |
|
|
| 1.2 |
|
|
| 3.1 |
|
|
| 4.8 |
|
|
| 7.5 |
|
Static |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
(100) |
|
| (5.3 | ) |
| N/A |
|
|
| (9.3 | ) |
| N/A |
|
|
| (1.3 | ) |
|
| (6.2 | ) |
|
| (5.0 | ) |
|
| (12.2 | ) |
The Company is positioned relatively neutral to changes in interest rates.rates in the next year. Net interest income is predicted to increase in 200 and 300 bps pointall upward rate shock scenarios and decrease in 100 bps upall upward rate ramp scenarios. In down rate scenarios, net interest income is predicted to decrease in shock scenarios and 100 bps downincrease in ramp scenarios. The increaselargest change in net interest income relative to base in risingeither rate shock or ramp scenarios is due to yields on earning assets increasing more due to changesless than 5% in market rates than the cost of paying liabilities is projected to increase. The decrease inyear one. In year two, net interest income is predicted to rise in year one of the 100 bps scenario is due to liability cost increases outpacing due to changesall increasing rate scenarios and decrease in market rates earning asset yield increases. Net interest income in the down 100 bps scenario is lower due to earning asset yields decreasing more relative to changes in market rates than liability expense.falling rate scenarios. The Company’s ability to price deposits in a rising rate environment consistent with ourits 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. While a traditional repricing mismatch analysis (gap analysis) provides a snapshot of interest rate risk, it does not take into consideration that assets and liabilities with similar repricing characteristics may not, in fact, reprice at the same time or the same degree. Also, it does not necessarily predict the impact of changes in general levels of interest rates on net interest income.
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. Table 20 presents the break-out of fixed and variable rate loans by repricing or maturity characteristics for each loan class.
Table 19
INTEREST RATE SENSITIVITY ANALYSIS (in millions)
|
| 1-90 |
|
| 91-180 |
|
| 181-365 |
|
|
|
|
|
| 1-5 |
|
| Over 5 |
|
|
|
|
|
| 1-90 |
|
| 91-180 |
|
| 181-365 |
|
|
|
|
|
| 1-5 |
|
| Over 5 |
|
|
|
|
| ||||||||||
|
| Days |
|
| Days |
|
| Days |
|
| Total |
|
| Years |
|
| Years |
|
| Total |
|
| Days |
|
| Days |
|
| Days |
|
| Total |
|
| Years |
|
| Years |
|
| Total |
| ||||||||||||||
December 31, 2017 Earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
December 31, 2022 Earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
Loans |
| $ | 6,453.6 |
|
| $ | 466.8 |
|
| $ | 701.5 |
|
| $ | 7,621.9 |
|
| $ | 2,852.8 |
|
| $ | 807.3 |
|
| $ | 11,282.0 |
|
| $ | 12,635.3 |
|
| $ | 748.9 |
|
| $ | 1,196.5 |
|
| $ | 14,580.7 |
|
| $ | 4,571.3 |
|
| $ | 1,881.2 |
|
| $ | 21,033.2 |
|
Securities |
|
| 387.9 |
|
|
| 279.4 |
|
|
| 460.8 |
|
|
| 1,128.1 |
|
|
| 3,613.4 |
|
|
| 2,844.0 |
|
|
| 7,585.5 |
|
|
| 929.3 |
|
|
| 397.7 |
|
|
| 613.6 |
|
|
| 1,940.6 |
|
|
| 5,377.7 |
|
|
| 5,899.4 |
|
|
| 13,217.7 |
|
Federal funds sold and resell agreements |
|
| 191.6 |
|
|
| — |
|
|
| — |
|
|
| 191.6 |
|
|
| — |
|
|
| — |
|
|
| 191.6 |
|
|
| 958.6 |
|
|
| — |
|
|
| — |
|
|
| 958.6 |
|
|
| — |
|
|
| — |
|
|
| 958.6 |
|
Other |
|
| 1,405.0 |
|
|
| 0.8 |
|
|
| — |
|
|
| 1,405.8 |
|
|
| — |
|
|
| — |
|
|
| 1,405.8 |
|
|
| 1,197.1 |
|
|
| — |
|
|
| — |
|
|
| 1,197.1 |
|
|
| — |
|
|
| — |
|
|
| 1,197.1 |
|
Total earning assets |
| $ | 8,438.1 |
|
| $ | 747.0 |
|
| $ | 1,162.3 |
|
| $ | 10,347.4 |
|
| $ | 6,466.2 |
|
| $ | 3,651.3 |
|
| $ | 20,464.9 |
|
| $ | 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 |
|
| 41.2 | % |
|
| 3.7 | % |
|
| 5.7 | % |
|
| 50.6 | % |
|
| 31.6 | % |
|
| 17.8 | % |
|
| 100.0 | % |
|
| 43.2 | % |
|
| 3.1 | % |
|
| 5.0 | % |
|
| 51.3 | % |
|
| 27.3 | % |
|
| 21.4 | % |
|
| 100.0 | % |
Funding sources |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing demand and savings |
| $ | 1,854.0 |
|
| $ | 1,390.4 |
|
| $ | 2,780.7 |
|
| $ | 6,025.1 |
|
| $ | 316.6 |
|
| $ | 3,561.9 |
|
| $ | 9,903.6 |
|
| $ | 18,461.6 |
|
| $ | — |
|
| $ | — |
|
| $ | 18,461.6 |
|
| $ | — |
|
| $ | — |
|
| $ | 18,461.6 |
|
Time deposits |
|
| 639.6 |
|
|
| 215.6 |
|
|
| 193.7 |
|
|
| 1,048.9 |
|
|
| 216.0 |
|
|
| 15.4 |
|
|
| 1,280.3 |
|
|
| 474.3 |
|
|
| 173.9 |
|
|
| 161.2 |
|
|
| 809.4 |
|
|
| 103.0 |
|
|
| 4.7 |
|
|
| 917.1 |
|
Federal funds purchased and repurchase agreements |
|
| 1,260.7 |
|
|
| — |
|
|
| — |
|
|
| 1,260.7 |
|
|
| — |
|
|
| — |
|
|
| 1,260.7 |
|
|
| 2,222.2 |
|
|
| — |
|
|
| — |
|
|
| 2,222.2 |
|
|
| — |
|
|
| — |
|
|
| 2,222.2 |
|
Borrowed funds |
|
| 68.3 |
|
|
| — |
|
|
| 0.2 |
|
|
| 68.5 |
|
|
| 2.4 |
|
|
| 8.4 |
|
|
| 79.3 |
|
|
| 74.6 |
|
|
| — |
|
|
| — |
|
|
| 74.6 |
|
|
| 306.7 |
|
|
| — |
|
|
| 381.3 |
|
Noninterest-bearing sources |
|
| 4,775.9 |
|
|
| 93.8 |
|
|
| 173.2 |
|
|
| 5,042.9 |
|
|
| 472.7 |
|
|
| 2,425.4 |
|
|
| 7,941.0 |
|
|
| 5,238.9 |
|
|
| 282.2 |
|
|
| 520.6 |
|
|
| 6,041.7 |
|
|
| 2,967.2 |
|
|
| 5,415.5 |
|
|
| 14,424.4 |
|
Total funding sources |
| $ | 8,598.5 |
|
| $ | 1,699.8 |
|
| $ | 3,147.8 |
|
| $ | 13,446.1 |
|
| $ | 1,007.7 |
|
| $ | 6,011.1 |
|
| $ | 20,464.9 |
|
| $ | 26,471.6 |
|
| $ | 456.1 |
|
| $ | 681.8 |
|
| $ | 27,609.5 |
|
| $ | 3,376.9 |
|
| $ | 5,420.2 |
|
| $ | 36,406.6 |
|
% of total earning assets |
|
| 42.0 | % |
|
| 8.3 | % |
|
| 15.4 | % |
|
| 65.7 | % |
|
| 4.9 | % |
|
| 29.4 | % |
|
| 100.0 | % |
|
| 72.7 | % |
|
| 1.2 | % |
|
| 1.9 | % |
|
| 75.8 | % |
|
| 9.3 | % |
|
| 14.9 | % |
|
| 100.0 | % |
Interest sensitivity gap |
| $ | (160.4 | ) |
| $ | (952.8 | ) |
| $ | (1,985.5 | ) |
| $ | (3,098.7 | ) |
| $ | 5,458.5 |
|
| $ | (2,359.8 | ) |
|
|
|
|
| $ | (10,751.3 | ) |
| $ | 690.5 |
|
| $ | 1,128.3 |
|
| $ | (8,932.5 | ) |
| $ | 6,572.1 |
|
| $ | 2,360.4 |
|
|
|
|
|
Cumulative gap |
|
| (160.4 | ) |
|
| (1,113.2 | ) |
|
| (3,098.7 | ) |
|
| (3,098.7 | ) |
|
| 2,359.8 |
|
|
| — |
|
|
|
|
|
|
| (10,751.3 | ) |
|
| (10,060.8 | ) |
|
| (8,932.5 | ) |
|
| (8,932.5 | ) |
|
| (2,360.4 | ) |
|
| — |
|
|
|
|
|
As a % of total earning assets |
|
| (0.8 | )% |
|
| (5.4 | )% |
|
| (15.1 | )% |
|
| (15.1 | )% |
|
| 11.6 | % |
|
| — | % |
|
|
|
|
|
| (29.5 | )% |
|
| (27.6 | )% |
|
| (24.5 | )% |
|
| (24.5 | )% |
|
| (6.5 | )% |
|
| — | % |
|
|
|
|
Ratio of earning assets to funding sources |
|
| 0.98 |
|
|
| 0.44 |
|
|
| 0.37 |
|
|
| 0.77 |
|
|
| 6.42 |
|
|
| 0.61 |
|
|
|
|
|
|
| 0.59 |
|
|
| 2.51 |
|
|
| 2.65 |
|
|
| 0.68 |
|
|
| 2.95 |
|
|
| 1.44 |
|
|
|
|
|
Cumulative ratio of earning assets to funding sources |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
| 0.98 |
|
|
| 0.89 |
|
|
| 0.77 |
|
|
| 0.77 |
|
|
| 1.16 |
|
|
| 1.00 |
|
|
|
|
| ||||||||||||||||||||||||||||
2016 |
|
| 0.88 |
|
|
| 0.83 |
|
|
| 0.74 |
|
|
| 0.74 |
|
|
| 1.11 |
|
|
| 1.00 |
|
|
|
|
| ||||||||||||||||||||||||||||
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 |
|
|
|
|
|
Table 20
Maturities and Sensitivities to Changes in Interest Rates
This table details loan maturities by variable and fixed rates as of December 31, 20172022 (in thousands):
|
| Due in one year or less |
|
| Due after one year through five years |
|
| Due after five years |
|
| Total |
| ||||
Variable Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
| $ | 3,097,719 |
|
| $ | 75,728 |
|
| $ | 2,560 |
|
| $ | 3,176,007 |
|
Asset-based |
|
| 334,979 |
|
|
| — |
|
|
| — |
|
|
| 334,979 |
|
Factoring |
|
| 217,649 |
|
|
| — |
|
|
| — |
|
|
| 217,649 |
|
Commercial – Credit Card |
|
| 172,291 |
|
|
| — |
|
|
| — |
|
|
| 172,291 |
|
Real Estate – Construction |
|
| 649,782 |
|
|
| 12,167 |
|
|
| 691 |
|
|
| 662,640 |
|
Real Estate – Commercial |
|
| 1,087,408 |
|
|
| 151,590 |
|
|
| 19,950 |
|
|
| 1,258,948 |
|
Real Estate – Residential |
|
| 24,965 |
|
|
| 98,106 |
|
|
| 34,884 |
|
|
| 157,955 |
|
Real Estate – HELOC |
|
| 427,717 |
|
|
| 213,349 |
|
|
| 393 |
|
|
| 641,459 |
|
Consumer – Credit Card |
|
| (174,384 | ) |
|
| — |
|
|
| — |
|
|
| (174,384 | ) |
Consumer – Other |
|
| 91,294 |
|
|
| 8 |
|
|
| — |
|
|
| 91,302 |
|
Leases |
|
| 23,967 |
|
|
| — |
|
|
| — |
|
|
| 23,967 |
|
Total variable rate loans |
|
| 5,953,387 |
|
|
| 550,948 |
|
|
| 58,478 |
|
|
| 6,562,813 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
| 445,495 |
|
|
| 860,174 |
|
|
| 71,364 |
|
|
| 1,377,033 |
|
Asset-based |
|
| (1,821 | ) |
|
| 3,456 |
|
|
| — |
|
|
| 1,635 |
|
Factoring |
|
| 4,023 |
|
|
| — |
|
|
| — |
|
|
| 4,023 |
|
Commercial – Credit Card |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Real Estate – Construction |
|
| 14,932 |
|
|
| 23,758 |
|
|
| 16,519 |
|
|
| 55,209 |
|
Real Estate – Commercial |
|
| 673,758 |
|
|
| 1,243,029 |
|
|
| 387,895 |
|
|
| 2,304,682 |
|
Real Estate – Residential |
|
| 65,516 |
|
|
| 146,041 |
|
|
| 270,539 |
|
|
| 482,096 |
|
Real Estate – HELOC |
|
| 4,068 |
|
|
| 1,878 |
|
|
| 974 |
|
|
| 6,920 |
|
Consumer – Credit Card |
|
| 427,044 |
|
|
| 37 |
|
|
| — |
|
|
| 427,081 |
|
Consumer – Other |
|
| 35,485 |
|
|
| 23,494 |
|
|
| 1,502 |
|
|
| 60,481 |
|
Leases |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total fixed rate loans |
|
| 1,668,500 |
|
|
| 2,301,867 |
|
|
| 748,793 |
|
|
| 4,719,160 |
|
Total loans and loans held for sale |
| $ | 7,621,887 |
|
| $ | 2,852,815 |
|
| $ | 807,271 |
|
| $ | 11,281,973 |
|
|
| 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. The policy limits the amount and type of securities that can be carried in the trading account and requires compliance with any limits under applicable law and regulations and mandates the use of a value-at-risk methodology to manage price volatility risks within financial parameters. 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 $54.1$18.0 million as of December 31, 2017,2022, compared to $39.5$31.9 million as of December 31, 2016.2021.
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. The discussion in Table 19 above of interest rate risk, however, combines instruments held for trading and instruments held for purposes other than trading, because the instruments held for trading represent such a small portion of the Company’s portfolio that the interest rate risk associated with them is immaterial.
The Company has minimal foreign currency risk as a result of foreign exchange contracts. See Note 10, “Commitments, Contingencies and Guarantees” in the Notes to the Consolidated Financial Statements.
Credit Risk Management
Credit risk represents the risk that a customer or counterparty may not perform in accordance with contractual terms. The Company utilizes a centralized credit administration function, which provides information on the Bank’s risk levels, delinquencies, an internal rankingrisk 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 review team performs periodic examinations of the bank’sBank’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 Company’s nonperforming loans decreased $11.1$73.0 million to $59.1$19.3 million at December 31, 2017,2022, compared to December 31, 2016. This decrease was primarily driven by the migration of two non-energy commercial credits during the third quarter of 2016.2021. There was an immaterial amount of interest recognized on nonperforming loans during 2017, 2016,2022, 2021, and 2015.2020.
The Company had $1.5 million and $0.2 million$68 thousand of other real estate owned as of December 31, 2017 and 2016, respectively.2022. Loans past due more than 90 days and still accruing interest totaled $3.1$1.6 million as of December 31, 2017,2022, compared to $3.4$2.6 million as of December 31, 2016.2021.
A loan is generally placed on nonaccrual status when payments are past due 90 days or more and/or when management has considerable doubt about the borrower’s ability to repay on the terms originally contracted. The accrual of interest is discontinued and recorded thereafter only when actually received in cash.
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 $41.0$5.2 million of restructured loans at December 31, 20172022 and $52.5$7.3 million at December 31, 2016.2021.
Table 21
LOAN QUALITY (in(in thousands)
|
| December 31, |
|
| December 31, |
| ||||||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2015 |
|
| 2014 |
|
| 2013 |
|
| 2022 |
|
| 2021 |
| |||||||
Nonaccrual loans |
| $ | 37,731 |
|
| $ | 41,765 |
|
| $ | 45,589 |
|
| $ | 18,660 |
|
| $ | 19,305 |
|
| $ | 16,838 |
|
| $ | 85,207 |
|
Restructured loans on nonaccrual |
|
| 21,411 |
|
|
| 28,494 |
|
|
| 15,563 |
|
|
| 8,722 |
|
|
| 11,401 |
|
|
| 2,431 |
|
|
| 7,093 |
|
Total non-performing loans |
|
| 59,142 |
|
|
| 70,259 |
|
|
| 61,152 |
|
|
| 27,382 |
|
|
| 30,706 |
|
|
| 19,269 |
|
|
| 92,300 |
|
Other real estate owned |
|
| 1,501 |
|
|
| 194 |
|
|
| 3,307 |
|
|
| 394 |
|
|
| 1,288 |
|
|
| 68 |
|
|
| — |
|
Total non-performing assets |
| $ | 60,643 |
|
| $ | 70,453 |
|
| $ | 64,459 |
|
| $ | 27,776 |
|
| $ | 31,994 |
|
| $ | 19,337 |
|
| $ | 92,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans past due 90 days or more |
| $ | 3,091 |
|
| $ | 3,365 |
|
| $ | 7,324 |
|
| $ | 3,830 |
|
| $ | 3,218 |
|
| $ | 1,617 |
|
| $ | 2,633 |
|
Restructured loans accruing |
|
| 19,603 |
|
|
| 24,013 |
|
|
| 21,029 |
|
|
| 583 |
|
|
| 665 |
|
|
| 2,790 |
|
|
| 189 |
|
Allowance for loans losses |
|
| 100,604 |
|
|
| 91,649 |
|
|
| 81,143 |
|
|
| 76,140 |
|
|
| 74,751 |
| ||||||||
Allowance for credit losses on loans |
|
| 191,836 |
|
|
| 194,771 |
| ||||||||||||||||||||
Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performing loans as a % of loans |
|
| 0.52 | % |
|
| 0.67 | % |
|
| 0.65 | % |
|
| 0.37 | % |
|
| 0.49 | % |
|
| 0.09 | % |
|
| 0.54 | % |
Non-performing assets as a % of loans plus other real estate owned |
|
| 0.54 |
|
|
| 0.67 |
|
|
| 0.68 |
|
|
| 0.37 |
|
|
| 0.49 |
|
|
| 0.09 |
|
|
| 0.54 |
|
Non-performing assets as a % of total assets |
|
| 0.28 |
|
|
| 0.34 |
|
|
| 0.34 |
|
|
| 0.16 |
|
|
| 0.19 |
|
|
| 0.05 |
|
|
| 0.22 |
|
Loans past due 90 days or more as a % of loans |
|
| 0.03 |
|
|
| 0.03 |
|
|
| 0.08 |
|
|
| 0.05 |
|
|
| 0.05 |
|
|
| 0.01 |
|
|
| 0.02 |
|
Allowance for Loan Losses as a % of loans |
|
| 0.89 |
|
|
| 0.87 |
|
|
| 0.86 |
|
|
| 1.02 |
|
|
| 1.15 |
| ||||||||
Allowance for Loan Losses as a multiple of non-performing loans |
| 1.70x |
|
| 1.30x |
|
| 1.33x |
|
| 2.78x |
|
| 2.43x |
| |||||||||||||
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 |
|
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.
Liquidity Risk
Liquidity represents the Company’s ability to meet financial commitments through the maturity and sale of existing assets or availability of additional funds. The Company believes that the most important factor in the preservation of liquidity is maintaining public confidence that facilitates the retention and growth of a large, stable supply of core deposits and wholesale funds. 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 $6.3$7.0 billion of high-quality securities available for sale. The liquidity of the Company and the Bank is also enhanced by its activity in the federal funds market and by its core deposits. Additionally, management believes it can raise debt or equity capital on favorable terms in the future, should the need arise.
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. These pledging requirements affect liquidity risk in that the related security cannot otherwise be disposed due to the pledging restriction. At December 31, 2017, $5.72022, $10.3 billion, or 91.3 percent,80.3%, of the securities available-for-sale were pledged or used as collateral, compared to $5.7$10.2 billion, or 88.6 percent,75.8%, at December 31, 2016. However of2021. Of these amounts, securities with a market value of $1.8 billion$171.2 million at both December 31, 2017 and December 31, 2016,2021, were pledged at the Federal Reserve Discount Window but were unencumbered as of those dates.that date.
The Company also has other commercial commitments that may impact liquidity. 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, 20172022 was $10.0$17.4 billion. Since many of these commitments expire without being drawn upon, the total amount of these commercial commitments does not necessarily represent the future cash requirements of the Company.
The Company’s cash requirements consist primarily of dividends to shareholders, debt service, operating expenses, and treasury stock purchases. Management fees and dividends received from bank and non-bank subsidiaries traditionally have been sufficient to satisfy these requirements and are expected to be sufficient in the future. The Bank is subject to various rules regarding payment of dividends to the Company. 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.
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 subordinated notes were issued with a fixed-to-fixed rate of 6.25% and an effective rate of 6.64%, due to issuance costs, with an interest rate reset date of September 2027.
In September 2020, the Company issued $200.0 million in aggregate subordinated notes due in September 2030. The Company received $197.7 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 subordinated notes were issued with a fixed-to-fixed rate of 3.70% and an effective rate of 3.93%, due to issuance costs, with an interest rate reset date of September 2025.
To enhance general working capital needs, the Company has a revolving line of credit with Wells Fargo Bank, N.A. which allows the Company to borrow up to $50.0$30.0 million for general working capital purposes. The interest rate applied to borrowed balances will be at the Company’s option, either 1.00 percent1.4% above LIBORSOFR or 1.75 percent1.75% below the prime rate on the date of an advance. The Company pays a 0.3 percent0.4% unused commitment fee for unused portions of the line of credit. The Company had no advances outstanding at December 31, 2017.2022.
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 $1.7$1.9 billion through advances at the FHLB of Des Moines but had no outstanding FHLB Des Moines advances as of December 31, 2017.2022.
Operational Risk
Operational risk generally refers to the risk of loss resulting from the Company’s operations, including those operations performed for the Company by third parties. 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 risk of loss also includes the potential legal or regulatory actions that could arise as a result of an operational deficiency, or as a result of noncompliance with applicable regulatory standards. Included in the legal and regulatory issues with which the Company must comply are a number of rules resulting from the enactment of the Sarbanes-Oxley Act of 2002, as amended.
The Company operates in many markets and relies on the ability of its employees and systems to properly process a high number of transactions. In the event of a breakdown in internal control systems, improper operation of systems or improper employee actions, the Company could suffer financial loss, face regulatory action and suffer damage to its reputation. In order to address this risk, management maintains a system of internal controls with the objective of providing proper transaction authorization and execution, safeguarding of assets from misuse or theft, and ensuring the reliability of financial and other data.
The Company maintains systems of internal controls that provide management with timely and accurate information about the Company’s operations. These systems have been designed to manage operational risk at appropriate levels given the Company’s financial strength, the environment in which it operates, and considering factors such as competition and regulation. The Company has also established procedures that are designed to ensure that policies relating to conduct, ethics and business practices are followed on a uniform basis. In certain cases, the Company has experienced losses from operational risk. Such losses have included the effects of operational errors that the Company has discovered and included as expense in the statement of income. 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.
ITEM 8. FINANCIAL STATEMENTSSTATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors and Shareholders
UMB Financial Corporation and Subsidiaries:Corporation:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of UMB Financial Corporation and subsidiaries (the Company) as of December 31, 20172022 and 2016, and2021, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the three‑yearthree-year period ended December 31, 2017,2022, and the related notes (collectively, the consolidated financial statements).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20172022 and 2016,2021, and the results of its operations and its cash flows for each of the years in the three‑yearthree-year period ended December 31, 2017,2022, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2017,2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 22, 201823, 2023 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Allowance for credit losses on certain loans evaluated on a collective basis
As discussed in Notes 1 and 3 to the consolidated financial statements, the Company’s total allowance for credit losses on loans was $191.8 million as of December 31, 2022, a substantial portion of which related to the allowance for credit losses for loans evaluated on a collective basis for the commercial and industrial, commercial real estate, and consumer credit card loan segments (the collective ACL). The collective ACL includes the measure of expected credit losses on a pool basis for loans where similar risk characteristics exist and is determined using relevant available information from internal and external sources related to historical credit loss experience, current conditions, and reasonable and supportable economic forecasts. The Company uses probability of default (PD) and loss given default (LGD) models for the commercial and industrial segment, commercial real estate segment, and revolver activity within the consumer credit card segment. For the commercial and industrial segment and revolver portion of the consumer credit card segment, the collective ACL is calculated by modeling PD over future periods multiplied by historical LGD multiplied by contractual exposure at default minus any modeled prepayments and charge offs. For the commercial real estate segment,
the collective ACL is calculated by modeling PD over future periods based on peer bank data. The PD loss rate is then multiplied by historical LGD multiplied by contractual exposure at default minus any modeled prepayments and charge offs. Primary risk drivers are segment specific and include macro-economic variables, risk ratings of the individual loans within the commercial and industrial and commercial real estate loan segments, and credit score ratings of individual card holders within the consumer credit card segment. After the reasonable and supportable forecast periods, the Company reverts to historical loss experience for each portfolio using a cliff or straight-line reversion method. A portion of the collective ACL is comprised of qualitative factors which represent adjustments to historical loss experience including concentrations of credit and results of internal loan review.
We identified the assessment of the collective ACL as a critical audit matter. A high degree of audit effort, including specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment of the collective ACL. Specifically, the assessment encompassed the evaluation of the collective ACL methodology, including the methods and models used to estimate (1) the PD and LGD and historical loss rates and their significant assumptions, including recovery rates, portfolio segmentation, average prepayment rates, the economic forecast scenario, macro-economic variables, the reasonable and supportable forecast periods, lengths of time and methods of reversion, risk ratings on commercial and industrial and commercial real estate loans, and credit score ratings and the estimated life of the credit card receivables on consumer credit card loans, and (2) the qualitative factors and their significant assumptions, including concentrations of credit and results of internal loan review. The assessment also included an evaluation of the conceptual soundness and performance of the PD and LGD and historical loss rate models. In addition, auditor judgment was required to evaluate the sufficiency of audit evidence obtained.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the measurement of the collective ACL, including controls related to the:
•development and approval of the collective ACL methodology
•development of the PD and LGD and historical loss rate models
• | determination and measurement of the significant assumptions used in the PD and LGD and historical loss rate models |
•development of the qualitative factors, including concentrations of credit and results of internal loan review
•analysis of the overall ACL results, trends, and ratios.
We evaluated the Company’s process to develop the collective ACL estimate by testing certain sources of data, factors, and assumptions that the Company used, and considered the relevance and reliability of such data, factors, and assumptions. In addition, we involved credit risk professionals with specialized skills and knowledge, who assisted in:
• | evaluating the Company’s collective ACL methodology for compliance with U.S. generally accepted accounting principles |
• | evaluating judgments made by the Company relative to the development and performance monitoring of the PD and LGD and historical loss rate models by comparing them to relevant Company specific metrics and trends and the applicable industry and regulatory practices |
• | assessing the conceptual soundness and performance testing of the PD and LGD and historical loss rate models by inspecting the model documentation to determine whether the models are suitable for their intended use |
• | evaluating the methodology used to develop the economic forecast scenario and underlying assumptions by comparing it to the Company’s business environment and relevant industry practices |
• | testing the complete historical credit cycle period and evaluating the length of the reasonable and supportable forecast period by comparing to specific portfolio risk characteristics and trends |
• | determining whether the loan portfolio is segmented by similar risk characteristics by comparing to the Company’s business environment and relevant industry practices |
• | testing individual risk ratings for a selection of commercial and industrial and commercial real estate loans by evaluating the financial performance of the borrower, sources of repayment, and any relevant guarantees or underlying collateral |
• | evaluating the methodology used to develop the qualitative factors and the effect of those factors on the collective ACL compared with relevant credit risk factors and consistency with credit trends and identified limitations of the underlying quantitative models. |
We also assessed the sufficiency of the audit evidence obtained related to the collective ACL by evaluating the:
•cumulative results of the audit procedures
•qualitative aspects of the Company’s accounting practices
•potential bias in the accounting estimates.
/s/ KPMG LLP
We have served as the Company’s auditor since 2014.
Kansas City, Missouri
February 22, 201823, 2023
UMB FINANCIAL CORPORATION
(dollars in thousands, except share and per share data)
|
| December 31, |
|
| December 31, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2022 |
|
| 2021 |
| ||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
| $ | 11,280,513 |
|
| $ | 10,540,383 |
|
| $ | 21,031,189 |
|
| $ | 17,170,871 |
|
Allowance for loan losses |
|
| (100,604 | ) |
|
| (91,649 | ) | ||||||||
Allowance for credit losses on loans |
|
| (191,836 | ) |
|
| (194,771 | ) | ||||||||
Net loans |
|
| 11,179,909 |
|
|
| 10,448,734 |
|
|
| 20,839,353 |
|
|
| 16,976,100 |
|
Loans held for sale |
|
| 1,460 |
|
|
| 5,279 |
|
|
| 1,978 |
|
|
| 1,277 |
|
Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale |
|
| 6,258,577 |
|
|
| 6,466,334 |
| ||||||||
Held to maturity (fair value of $1,207,447 and $1,106,027, respectively) |
|
| 1,261,014 |
|
|
| 1,115,932 |
| ||||||||
Available for sale (amortized cost of $7,777,950 and $11,822,584, respectively) |
|
| 7,006,347 |
|
|
| 11,976,514 |
| ||||||||
Held to maturity, net of allowance for credit losses of $2,407 and $1,940, respectively (fair value of $5,280,659 and $1,442,391, respectively) |
|
| 5,859,192 |
|
|
| 1,478,476 |
| ||||||||
Trading securities |
|
| 54,055 |
|
|
| 39,536 |
|
|
| 17,980 |
|
|
| 31,875 |
|
Other securities |
|
| 65,897 |
|
|
| 68,306 |
|
|
| 349,758 |
|
|
| 327,098 |
|
Total investment securities |
|
| 7,639,543 |
|
|
| 7,690,108 |
| ||||||||
Total securities |
|
| 13,233,277 |
|
|
| 13,813,963 |
| ||||||||
Federal funds sold and securities purchased under agreements to resell |
|
| 191,601 |
|
|
| 324,327 |
|
|
| 958,597 |
|
|
| 1,216,357 |
|
Interest-bearing due from banks |
|
| 1,351,760 |
|
|
| 715,823 |
|
|
| 1,179,105 |
|
|
| 8,841,906 |
|
Cash and due from banks |
|
| 392,723 |
|
|
| 422,117 |
|
|
| 500,682 |
|
|
| 413,821 |
|
Premises and equipment, net |
|
| 275,942 |
|
|
| 289,007 |
|
|
| 263,649 |
|
|
| 270,933 |
|
Accrued income |
|
| 98,863 |
|
|
| 99,045 |
|
|
| 189,231 |
|
|
| 131,102 |
|
Goodwill |
|
| 180,867 |
|
|
| 180,867 |
|
|
| 207,385 |
|
|
| 174,518 |
|
Other intangibles, net |
|
| 20,257 |
|
|
| 26,630 |
|
|
| 78,724 |
|
|
| 14,416 |
|
Other assets |
|
| 438,658 |
|
|
| 425,205 |
|
|
| 1,060,480 |
|
|
| 839,091 |
|
Discontinued Assets |
|
| — |
|
|
| 55,390 |
| ||||||||
Total assets |
| $ | 21,771,583 |
|
| $ | 20,682,532 |
|
| $ | 38,512,461 |
|
| $ | 42,693,484 |
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing demand |
| $ | 6,839,171 |
|
| $ | 6,654,584 |
|
| $ | 13,260,363 |
|
| $ | 16,342,642 |
|
Interest-bearing demand and savings |
|
| 9,903,565 |
|
|
| 8,780,309 |
|
|
| 18,461,632 |
|
|
| 18,405,644 |
|
Time deposits under $250,000 |
|
| 547,990 |
|
|
| 613,589 |
|
|
| 379,087 |
|
|
| 403,660 |
|
Time deposits of $250,000 or more |
|
| 732,274 |
|
|
| 522,132 |
|
|
| 538,051 |
|
|
| 447,981 |
|
Total deposits |
|
| 18,023,000 |
|
|
| 16,570,614 |
|
|
| 32,639,133 |
|
|
| 35,599,927 |
|
Federal funds purchased and repurchase agreements |
|
| 1,260,704 |
|
|
| 1,856,937 |
|
|
| 2,222,167 |
|
|
| 3,238,435 |
|
Long-term debt |
|
| 79,281 |
|
|
| 76,772 |
|
|
| 381,311 |
|
|
| 271,544 |
|
Accrued expenses and taxes |
|
| 191,464 |
|
|
| 172,967 |
|
|
| 239,624 |
|
|
| 249,492 |
|
Other liabilities |
|
| 35,603 |
|
|
| 42,858 |
|
|
| 363,133 |
|
|
| 188,662 |
|
Total liabilities |
|
| 19,590,052 |
|
|
| 18,720,148 |
|
|
| 35,845,368 |
|
|
| 39,548,060 |
|
SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $1.00 par value; 80,000,000 shares authorized, 55,056,730 shares issued and 49,894,990 and 49,673,056 shares outstanding, respectively |
|
| 55,057 |
|
|
| 55,057 |
| ||||||||
Common stock, $1.00 par value; 80,000,000 shares authorized; 55,056,730 shares issued, 48,319,404 and 48,430,805 shares outstanding, respectively |
|
| 55,057 |
|
|
| 55,057 |
| ||||||||
Capital surplus |
|
| 1,046,095 |
|
|
| 1,033,419 |
|
|
| 1,125,949 |
|
|
| 1,110,520 |
|
Retained earnings |
|
| 1,338,110 |
|
|
| 1,142,887 |
|
|
| 2,536,086 |
|
|
| 2,176,998 |
|
Accumulated other comprehensive loss, net |
|
| (45,525 | ) |
|
| (57,542 | ) | ||||||||
Treasury stock, 5,161,740 and 5,383,674 shares, at cost, respectively |
|
| (212,206 | ) |
|
| (211,437 | ) | ||||||||
Accumulated other comprehensive (loss) income, net |
|
| (702,735 | ) |
|
| 126,314 |
| ||||||||
Treasury stock, 6,737,326 and 6,625,925 shares, at cost, respectively |
|
| (347,264 | ) |
|
| (323,465 | ) | ||||||||
Total shareholders' equity |
|
| 2,181,531 |
|
|
| 1,962,384 |
|
|
| 2,667,093 |
|
|
| 3,145,424 |
|
Total liabilities and shareholders' equity |
| $ | 21,771,583 |
|
| $ | 20,682,532 |
|
| $ | 38,512,461 |
|
| $ | 42,693,484 |
|
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except share and per share data)
|
| Year Ended December 31, |
|
| Year Ended December 31, |
| ||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2015 |
|
| 2022 |
|
| 2021 |
|
| 2020 |
| ||||||
INTEREST INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
| $ | 461,301 |
|
| $ | 386,274 |
|
| $ | 308,325 |
|
| $ | 810,007 |
|
| $ | 619,273 |
|
| $ | 585,957 |
|
Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable interest |
|
| 73,125 |
|
|
| 73,560 |
|
|
| 75,327 |
|
|
| 192,121 |
|
|
| 127,625 |
|
|
| 105,701 |
|
Tax-exempt interest |
|
| 73,419 |
|
|
| 57,516 |
|
|
| 43,598 |
|
|
| 97,190 |
|
|
| 98,305 |
|
|
| 99,820 |
|
Total securities income |
|
| 146,544 |
|
|
| 131,076 |
|
|
| 118,925 |
|
|
| 289,311 |
|
|
| 225,930 |
|
|
| 205,521 |
|
Federal funds and resell agreements |
|
| 3,700 |
|
|
| 2,708 |
|
|
| 697 |
|
|
| 19,109 |
|
|
| 10,048 |
|
|
| 11,840 |
|
Interest-bearing due from banks |
|
| 3,871 |
|
|
| 2,341 |
|
|
| 2,356 |
|
|
| 18,582 |
|
|
| 5,417 |
|
|
| 3,744 |
|
Trading securities |
|
| 1,496 |
|
|
| 632 |
|
|
| 378 |
|
|
| 511 |
|
|
| 854 |
|
|
| 1,427 |
|
Total interest income |
|
| 616,912 |
|
|
| 523,031 |
|
|
| 430,681 |
|
|
| 1,137,520 |
|
|
| 861,522 |
|
|
| 808,489 |
|
INTEREST EXPENSE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
| 36,354 |
|
|
| 17,936 |
|
|
| 14,269 |
|
|
| 167,553 |
|
|
| 26,412 |
|
|
| 58,214 |
|
Federal funds and repurchase agreements |
|
| 17,906 |
|
|
| 6,524 |
|
|
| 1,785 |
|
|
| 40,703 |
|
|
| 6,934 |
|
|
| 11,787 |
|
Other |
|
| 3,739 |
|
|
| 3,248 |
|
|
| 2,560 |
|
|
| 15,467 |
|
|
| 12,655 |
|
|
| 7,259 |
|
Total interest expense |
|
| 57,999 |
|
|
| 27,708 |
|
|
| 18,614 |
|
|
| 223,723 |
|
|
| 46,001 |
|
|
| 77,260 |
|
Net interest income |
|
| 558,913 |
|
|
| 495,323 |
|
|
| 412,067 |
|
|
| 913,797 |
|
|
| 815,521 |
|
|
| 731,229 |
|
Provision for loan losses |
|
| 41,000 |
|
|
| 32,500 |
|
|
| 15,500 |
| ||||||||||||
Net interest income after provision for loan losses |
|
| 517,913 |
|
|
| 462,823 |
|
|
| 396,567 |
| ||||||||||||
Provision for credit losses |
|
| 37,900 |
|
|
| 20,000 |
|
|
| 130,500 |
| ||||||||||||
Net interest income after provision for credit losses |
|
| 875,897 |
|
|
| 795,521 |
|
|
| 600,729 |
| ||||||||||||
NONINTEREST INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust and securities processing |
|
| 176,646 |
|
|
| 166,315 |
|
|
| 166,261 |
|
|
| 237,207 |
|
|
| 224,126 |
|
|
| 194,646 |
|
Trading and investment banking |
|
| 23,183 |
|
|
| 21,422 |
|
|
| 20,218 |
|
|
| 23,201 |
|
|
| 30,939 |
|
|
| 32,945 |
|
Service charges on deposit accounts |
|
| 87,680 |
|
|
| 86,662 |
|
|
| 86,460 |
|
|
| 85,167 |
|
|
| 86,056 |
|
|
| 83,879 |
|
Insurance fees and commissions |
|
| 1,972 |
|
|
| 4,188 |
|
|
| 2,530 |
|
|
| 1,338 |
|
|
| 1,309 |
|
|
| 1,369 |
|
Brokerage fees |
|
| 23,208 |
|
|
| 17,833 |
|
|
| 11,753 |
|
|
| 43,019 |
|
|
| 12,171 |
|
|
| 24,350 |
|
Bankcard fees |
|
| 73,030 |
|
|
| 68,749 |
|
|
| 69,211 |
|
|
| 73,451 |
|
|
| 64,576 |
|
|
| 60,544 |
|
Gains on sales of securities available for sale, net |
|
| 4,192 |
|
|
| 8,509 |
|
|
| 10,402 |
| ||||||||||||
Equity (losses) earnings on alternative investments |
|
| (1,108 | ) |
|
| 2,695 |
|
|
| (12,188 | ) | ||||||||||||
Investment securities gains, net |
|
| 58,444 |
|
|
| 5,057 |
|
|
| 120,634 |
| ||||||||||||
Other |
|
| 34,759 |
|
|
| 26,138 |
|
|
| 16,012 |
|
|
| 32,406 |
|
|
| 42,941 |
|
|
| 41,799 |
|
Total noninterest income |
|
| 423,562 |
|
|
| 402,511 |
|
|
| 370,659 |
|
|
| 554,233 |
|
|
| 467,175 |
|
|
| 560,166 |
|
NONINTEREST EXPENSE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
| 413,830 |
|
|
| 390,059 |
|
|
| 367,606 |
|
|
| 524,431 |
|
|
| 504,442 |
|
|
| 495,464 |
|
Occupancy, net |
|
| 44,462 |
|
|
| 44,255 |
|
|
| 43,274 |
|
|
| 48,848 |
|
|
| 47,345 |
|
|
| 47,476 |
|
Equipment |
|
| 72,008 |
|
|
| 66,337 |
|
|
| 62,571 |
|
|
| 74,259 |
|
|
| 78,398 |
|
|
| 85,719 |
|
Supplies and services |
|
| 17,173 |
|
|
| 18,535 |
|
|
| 17,988 |
|
|
| 13,590 |
|
|
| 14,986 |
|
|
| 15,537 |
|
Marketing and business development |
|
| 21,469 |
|
|
| 21,208 |
|
|
| 21,996 |
|
|
| 25,699 |
|
|
| 18,533 |
|
|
| 14,679 |
|
Processing fees |
|
| 42,331 |
|
|
| 36,005 |
|
|
| 36,149 |
|
|
| 82,227 |
|
|
| 67,563 |
|
|
| 54,213 |
|
Legal and consulting |
|
| 23,406 |
|
|
| 20,801 |
|
|
| 26,186 |
|
|
| 39,095 |
|
|
| 32,406 |
|
|
| 29,765 |
|
Bankcard |
|
| 19,471 |
|
|
| 20,757 |
|
|
| 20,288 |
|
|
| 26,367 |
|
|
| 19,145 |
|
|
| 18,954 |
|
Amortization of other intangible assets |
|
| 7,326 |
|
|
| 8,695 |
|
|
| 8,171 |
|
|
| 5,037 |
|
|
| 4,757 |
|
|
| 6,517 |
|
Regulatory fees |
|
| 15,527 |
|
|
| 14,178 |
|
|
| 12,125 |
|
|
| 15,378 |
|
|
| 11,894 |
|
|
| 10,279 |
|
Other |
|
| 28,126 |
|
|
| 25,915 |
|
|
| 22,584 |
|
|
| 43,188 |
|
|
| 34,167 |
|
|
| 43,402 |
|
Total noninterest expense |
|
| 705,129 |
|
|
| 666,745 |
|
|
| 638,938 |
|
|
| 898,119 |
|
|
| 833,636 |
|
|
| 822,005 |
|
Income before income taxes |
|
| 236,346 |
|
|
| 198,589 |
|
|
| 128,288 |
|
|
| 532,011 |
|
|
| 429,060 |
|
|
| 338,890 |
|
Income tax expense |
|
| 53,370 |
|
|
| 44,955 |
|
|
| 31,730 |
|
|
| 100,329 |
|
|
| 76,042 |
|
|
| 52,388 |
|
Income from continuing operations |
|
| 182,976 |
|
|
| 153,634 |
|
|
| 96,558 |
| ||||||||||||
Discontinued Operations |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Income from discontinued operations before taxes |
|
| 101,226 |
|
|
| 8,415 |
|
|
| 30,997 |
| ||||||||||||
Income tax expense |
|
| 37,097 |
|
|
| 3,248 |
|
|
| 11,482 |
| ||||||||||||
Income from discontinued operations |
|
| 64,129 |
|
|
| 5,167 |
|
|
| 19,515 |
| ||||||||||||
NET INCOME |
| $ | 247,105 |
|
| $ | 158,801 |
|
| $ | 116,073 |
|
| $ | 431,682 |
|
| $ | 353,018 |
|
| $ | 286,502 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
PER SHARE DATA |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Net income – basic |
| $ | 8.93 |
|
| $ | 7.31 |
|
| $ | 5.95 |
| ||||||||||||
Net income – diluted |
|
| 8.86 |
|
|
| 7.24 |
|
|
| 5.93 |
| ||||||||||||
Dividends |
|
| 1.49 |
|
|
| 1.38 |
|
|
| 1.25 |
| ||||||||||||
Weighted average shares outstanding – basic |
|
| 48,340,922 |
|
|
| 48,271,462 |
|
|
| 48,137,791 |
| ||||||||||||
Weighted average shares outstanding – diluted |
|
| 48,747,399 |
|
|
| 48,738,292 |
|
|
| 48,343,750 |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER SHARE DATA |
|
|
|
|
|
|
|
|
|
|
|
|
Basic: |
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
| $ | 3.72 |
|
| $ | 3.15 |
|
| $ | 2.05 |
|
Income from discontinued operations |
|
| 1.30 |
|
|
| 0.10 |
|
|
| 0.41 |
|
Net income – basic |
|
| 5.02 |
|
|
| 3.25 |
|
|
| 2.46 |
|
Diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
| 3.67 |
|
|
| 3.12 |
|
|
| 2.03 |
|
Income from discontinued operations |
|
| 1.29 |
|
|
| 0.10 |
|
|
| 0.41 |
|
Net income - diluted |
|
| 4.96 |
|
|
| 3.22 |
|
|
| 2.44 |
|
Weighted average shares outstanding – basic |
|
| 49,223,661 |
|
|
| 48,828,313 |
|
|
| 47,126,252 |
|
Weighted average shares outstanding – diluted |
|
| 49,839,290 |
|
|
| 49,277,055 |
|
|
| 47,579,334 |
|
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands)
|
| Year Ended December 31, |
| |||||||||
|
| 2017 |
|
| 2016 |
|
| 2015 |
| |||
Net income |
| $ | 247,105 |
|
| $ | 158,801 |
|
| $ | 116,073 |
|
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) on securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized holding gains (losses), net |
|
| 21,139 |
|
|
| (77,794 | ) |
|
| (13,393 | ) |
Less: Reclassifications adjustment for net gains included in net income |
|
| (4,192 | ) |
|
| (8,509 | ) |
|
| (10,402 | ) |
Change in unrealized gains (losses) on securities during the period |
|
| 16,947 |
|
|
| (86,303 | ) |
|
| (23,795 | ) |
Change in unrealized losses on derivative hedges |
|
| (1,050 | ) |
|
| (516 | ) |
|
| (10 | ) |
Income tax (expense) benefit |
|
| (3,880 | ) |
|
| 32,995 |
|
|
| 9,081 |
|
Other comprehensive income (loss) |
|
| 12,017 |
|
|
| (53,824 | ) |
|
| (14,724 | ) |
Comprehensive income |
| $ | 259,122 |
|
| $ | 104,977 |
|
| $ | 101,349 |
|
|
| Year Ended December 31, |
| |||||||||
|
| 2022 |
|
| 2021 |
|
| 2020 |
| |||
Net income |
| $ | 431,682 |
|
| $ | 353,018 |
|
| $ | 286,502 |
|
Other comprehensive (loss) income, before tax: |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains and losses on debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized holding gains and losses, net |
|
| (1,137,417 | ) |
|
| (244,695 | ) |
|
| 295,552 |
|
Less: Reclassification adjustment for gains included in net income |
|
| — |
|
|
| (7,817 | ) |
|
| (6,980 | ) |
Amortization of net unrealized loss on securities transferred from available-for-sale to held-to-maturity |
|
| 36,894 |
|
|
| — |
|
|
| — |
|
Change in unrealized gains and losses on debt securities during the period |
|
| (1,100,523 | ) |
|
| (252,512 | ) |
|
| 288,572 |
|
Unrealized gains and losses on derivative hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized gains and losses on derivative hedges |
|
| 12,608 |
|
|
| 3,106 |
|
|
| 20,979 |
|
Less: Reclassification adjustment for gains included in net income |
|
| (5,353 | ) |
|
| (3,352 | ) |
|
| (1,905 | ) |
Change in unrealized gains and losses on derivative hedges |
|
| 7,255 |
|
|
| (246 | ) |
|
| 19,074 |
|
Other comprehensive (loss) income, before tax |
|
| (1,093,268 | ) |
|
| (252,758 | ) |
|
| 307,646 |
|
Income tax benefit (expense) |
|
| 264,219 |
|
|
| 60,732 |
|
|
| (72,486 | ) |
Other comprehensive (loss) income |
|
| (829,049 | ) |
|
| (192,026 | ) |
|
| 235,160 |
|
Comprehensive (loss) income |
| $ | (397,367 | ) |
| $ | 160,992 |
|
| $ | 521,662 |
|
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(dollars in thousands, except per share data)
|
| Common Stock |
|
| Capital Surplus |
|
| Retained Earnings |
|
| Accumulated Other Comprehensive Income (Loss) |
|
| Treasury Stock |
|
| Total |
| ||||||
Balance January 1, 2015 |
| $ | 55,057 |
|
| $ | 894,602 |
|
| $ | 963,911 |
|
| $ | 11,006 |
|
| $ | (280,818 | ) |
| $ | 1,643,758 |
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
| 116,073 |
|
|
| (14,724 | ) |
|
| — |
|
|
| 101,349 |
|
Dividends ($0.95 per share) |
|
| — |
|
|
| — |
|
|
| (45,994 | ) |
|
| — |
|
|
| — |
|
|
| (45,994 | ) |
Purchase of treasury stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8,457 | ) |
|
| (8,457 | ) |
Issuance of equity awards |
|
| — |
|
|
| (3,278 | ) |
|
| — |
|
|
| — |
|
|
| 3,737 |
|
|
| 459 |
|
Recognition of equity based compensation |
|
| — |
|
|
| 10,292 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 10,292 |
|
Net tax benefit related to equity compensation plans |
|
| — |
|
|
| 944 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 944 |
|
Sale of treasury stock |
|
| — |
|
|
| 611 |
|
|
| — |
|
|
| — |
|
|
| 445 |
|
|
| 1,056 |
|
Exercise of stock options |
|
| — |
|
|
| 4,083 |
|
|
| — |
|
|
| — |
|
|
| 6,467 |
|
|
| 10,550 |
|
Common stock issuance for acquisition |
|
| — |
|
|
| 112,635 |
|
|
| — |
|
|
| — |
|
|
| 67,102 |
|
|
| 179,737 |
|
Balance December 31, 2015 |
| $ | 55,057 |
|
| $ | 1,019,889 |
|
| $ | 1,033,990 |
|
| $ | (3,718 | ) |
| $ | (211,524 | ) |
| $ | 1,893,694 |
|
Total comprehensive income |
|
| — |
|
|
| — |
|
|
| 158,801 |
|
|
| (53,824 | ) |
|
| — |
|
|
| 104,977 |
|
Dividends ($0.99 per share) |
|
| — |
|
|
| — |
|
|
| (49,048 | ) |
|
| — |
|
|
| — |
|
|
| (49,048 | ) |
Purchase of treasury stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (16,367 | ) |
|
| (16,367 | ) |
Issuance of equity awards |
|
| — |
|
|
| (3,011 | ) |
|
| — |
|
|
| — |
|
|
| 3,440 |
|
|
| 429 |
|
Recognition of equity based compensation |
|
| — |
|
|
| 11,306 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 11,306 |
|
Sale of treasury stock |
|
| — |
|
|
| 480 |
|
|
| — |
|
|
| — |
|
|
| 616 |
|
|
| 1,096 |
|
Exercise of stock options |
|
| — |
|
|
| 3,417 |
|
|
| — |
|
|
| — |
|
|
| 12,398 |
|
|
| 15,815 |
|
Cumulative effect adjustment (1) |
|
| — |
|
|
| 1,338 |
|
|
| (856 | ) |
|
| — |
|
|
| — |
|
|
| 482 |
|
Balance December 31, 2016 |
| $ | 55,057 |
|
| $ | 1,033,419 |
|
| $ | 1,142,887 |
|
| $ | (57,542 | ) |
| $ | (211,437 | ) |
| $ | 1,962,384 |
|
Total comprehensive income |
|
| — |
|
|
| — |
|
|
| 247,105 |
|
|
| 12,017 |
|
|
| — |
|
|
| 259,122 |
|
Dividends ($1.04 per share) |
|
| — |
|
|
| — |
|
|
| (51,882 | ) |
|
| — |
|
|
| — |
|
|
| (51,882 | ) |
Purchase of treasury stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (15,276 | ) |
|
| (15,276 | ) |
Issuance of equity awards |
|
| — |
|
|
| (2,871 | ) |
|
| — |
|
|
| — |
|
|
| 3,343 |
|
|
| 472 |
|
Recognition of equity based compensation |
|
| — |
|
|
| 12,844 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 12,844 |
|
Sale of treasury stock |
|
| — |
|
|
| 608 |
|
|
| — |
|
|
| — |
|
|
| 512 |
|
|
| 1,120 |
|
Exercise of stock options |
|
| — |
|
|
| 2,095 |
|
|
| — |
|
|
| — |
|
|
| 10,652 |
|
|
| 12,747 |
|
Balance December 31, 2017 |
| $ | 55,057 |
|
| $ | 1,046,095 |
|
| $ | 1,338,110 |
|
| $ | (45,525 | ) |
| $ | (212,206 | ) |
| $ | 2,181,531 |
|
|
| Common Stock |
|
| Capital Surplus |
|
| Retained Earnings |
|
| Accumulated Other Comprehensive Income (Loss) |
|
| Treasury Stock |
|
| Total |
| ||||||
Balance January 1, 2020 |
| $ | 55,057 |
|
| $ | 1,073,764 |
|
| $ | 1,672,438 |
|
| $ | 83,180 |
|
| $ | (277,999 | ) |
| $ | 2,606,440 |
|
Cumulative effect adjustments (1) |
|
| — |
|
|
| — |
|
|
| (7,039 | ) |
|
| — |
|
|
| — |
|
|
| (7,039 | ) |
Adjusted balance – January 1, 2020 |
|
| 55,057 |
|
|
| 1,073,764 |
|
|
| 1,665,399 |
|
|
| 83,180 |
|
|
| (277,999 | ) |
|
| 2,599,401 |
|
Total comprehensive income |
|
| — |
|
|
| — |
|
|
| 286,502 |
|
|
| 235,160 |
|
|
| — |
|
|
| 521,662 |
|
Dividends ($1.25 per share) |
|
| — |
|
|
| — |
|
|
| (60,655 | ) |
|
| — |
|
|
| — |
|
|
| (60,655 | ) |
Purchase of treasury stock |
|
| — |
|
|
| 616 |
|
|
| — |
|
|
| — |
|
|
| (64,382 | ) |
|
| (63,766 | ) |
Forfeitures of equity awards, net of issuances |
|
| — |
|
|
| 624 |
|
|
| — |
|
|
| — |
|
|
| (16 | ) |
|
| 608 |
|
Recognition of equity-based compensation |
|
| — |
|
|
| 14,512 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 14,512 |
|
Sale of treasury stock |
|
| — |
|
|
| 201 |
|
|
| — |
|
|
| — |
|
|
| 414 |
|
|
| 615 |
|
Exercise of stock options |
|
| — |
|
|
| 733 |
|
|
| — |
|
|
| — |
|
|
| 3,838 |
|
|
| 4,571 |
|
Balance December 31, 2020 |
| $ | 55,057 |
|
| $ | 1,090,450 |
|
| $ | 1,891,246 |
|
| $ | 318,340 |
|
| $ | (338,145 | ) |
| $ | 3,016,948 |
|
Total comprehensive income (loss) |
|
| — |
|
|
| — |
|
|
| 353,018 |
|
|
| (192,026 | ) |
|
| — |
|
|
| 160,992 |
|
Dividends ($1.38 per share) |
|
| — |
|
|
| — |
|
|
| (67,266 | ) |
|
| — |
|
|
| — |
|
|
| (67,266 | ) |
Purchase of treasury stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (5,506 | ) |
|
| (5,506 | ) |
Issuances of equity awards, net of forfeitures |
|
| — |
|
|
| (4,605 | ) |
|
| — | �� |
|
| — |
|
|
| 5,299 |
|
|
| 694 |
|
Recognition of equity-based compensation |
|
| — |
|
|
| 20,514 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 20,514 |
|
Sale of treasury stock |
|
| — |
|
|
| 316 |
|
|
| — |
|
|
| — |
|
|
| 283 |
|
|
| 599 |
|
Exercise of stock options |
|
| — |
|
|
| 3,845 |
|
|
| — |
|
|
| — |
|
|
| 14,604 |
|
|
| 18,449 |
|
Balance December 31, 2021 |
| $ | 55,057 |
|
| $ | 1,110,520 |
|
| $ | 2,176,998 |
|
| $ | 126,314 |
|
| $ | (323,465 | ) |
| $ | 3,145,424 |
|
Total comprehensive income (loss) |
|
| — |
|
|
| — |
|
|
| 431,682 |
|
|
| (829,049 | ) |
|
| — |
|
|
| (397,367 | ) |
Dividends ($1.49 per share) |
|
| — |
|
|
| — |
|
|
| (72,594 | ) |
|
| — |
|
|
| — |
|
|
| (72,594 | ) |
Purchase of treasury stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (31,997 | ) |
|
| (31,997 | ) |
Issuances of equity awards, net of forfeitures |
|
| — |
|
|
| (6,143 | ) |
|
| — |
|
|
| — |
|
|
| 6,822 |
|
|
| 679 |
|
Recognition of equity-based compensation |
|
| — |
|
|
| 20,812 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 20,812 |
|
Sale of treasury stock |
|
| — |
|
|
| 351 |
|
|
| — |
|
|
| — |
|
|
| 245 |
|
|
| 596 |
|
Exercise of stock options |
|
| — |
|
|
| 409 |
|
|
| — |
|
|
| — |
|
|
| 1,131 |
|
|
| 1,540 |
|
Balance December 31, 2022 |
| $ | 55,057 |
|
| $ | 1,125,949 |
|
| $ | 2,536,086 |
|
| $ | (702,735 | ) |
| $ | (347,264 | ) |
| $ | 2,667,093 |
|
(1) | Related to the adoption of |
See Notes to Consolidated Financial Statements.
UMB FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
|
| Year Ended December 31, |
| |||||||||
|
| 2017 |
|
| 2016 |
|
| 2015 |
| |||
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 247,105 |
|
| $ | 158,801 |
|
| $ | 116,073 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses |
|
| 41,000 |
|
|
| 32,500 |
|
|
| 15,500 |
|
Net accretion of premiums and discounts from acquisition |
|
| (1,906 | ) |
|
| (2,303 | ) |
|
| (2,727 | ) |
Depreciation and amortization |
|
| 54,875 |
|
|
| 54,556 |
|
|
| 52,751 |
|
Deferred income tax expense (benefit) |
|
| 59,738 |
|
|
| 2,756 |
|
|
| (4,848 | ) |
Net (increase) decrease in trading securities and other earning assets |
|
| (10,805 | ) |
|
| (12,420 | ) |
|
| 10,258 |
|
Gains on sales of securities available for sale, net |
|
| (4,192 | ) |
|
| (8,509 | ) |
|
| (10,402 | ) |
Gains on sales of assets |
|
| (103,346 | ) |
|
| (762 | ) |
|
| (98 | ) |
Amortization of securities premiums, net of discount accretion |
|
| 48,101 |
|
|
| 54,467 |
|
|
| 57,301 |
|
Originations of loans held for sale |
|
| (65,163 | ) |
|
| (92,438 | ) |
|
| (96,324 | ) |
Gains on sales of loans held for sale, net |
|
| (1,561 | ) |
|
| (1,774 | ) |
|
| (1,331 | ) |
Proceeds from sales of loans held for sale |
|
| 70,543 |
|
|
| 89,522 |
|
|
| 97,690 |
|
Equity based compensation |
|
| 13,316 |
|
|
| 11,735 |
|
|
| 10,751 |
|
Net tax benefit related to equity compensation plans |
|
| 3,612 |
|
|
| 1,073 |
|
|
| 944 |
|
Changes in: |
|
|
|
|
|
|
|
|
|
|
|
|
Accrued income |
|
| (9,201 | ) |
|
| (8,918 | ) |
|
| (7,075 | ) |
Accrued expenses and taxes |
|
| (40,806 | ) |
|
| 14,112 |
|
|
| (4,503 | ) |
Other assets and liabilities, net |
|
| 25,216 |
|
|
| 4,042 |
|
|
| (22,055 | ) |
Net cash provided by operating activities |
|
| 326,526 |
|
|
| 296,440 |
|
|
| 211,905 |
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from maturities of securities held to maturity |
|
| 87,595 |
|
|
| 48,539 |
|
|
| 59,775 |
|
Proceeds from sales of securities available for sale |
|
| 578,517 |
|
|
| 951,264 |
|
|
| 946,045 |
|
Proceeds from maturities of securities available for sale |
|
| 1,198,834 |
|
|
| 1,792,357 |
|
|
| 1,200,178 |
|
Purchases of securities held to maturity |
|
| (236,832 | ) |
|
| (500,682 | ) |
|
| (451,350 | ) |
Purchases of securities available for sale |
|
| (1,585,395 | ) |
|
| (2,546,028 | ) |
|
| (1,923,747 | ) |
Net increase in loans |
|
| (770,727 | ) |
|
| (1,129,026 | ) |
|
| (988,434 | ) |
Net decrease (increase) in fed funds sold and resell agreements |
|
| 132,726 |
|
|
| (150,700 | ) |
|
| (45,190 | ) |
Net cash activity from acquisitions and divestitures |
|
| 164,561 |
|
|
| — |
|
|
| 95,351 |
|
Net decrease in interest bearing balances due from other financial institutions |
|
| 45,752 |
|
|
| 88,009 |
|
|
| 34,473 |
|
Purchases of premises and equipment |
|
| (36,447 | ) |
|
| (50,841 | ) |
|
| (53,760 | ) |
Proceeds from sales of premises and equipment |
|
| 3,037 |
|
|
| 1,760 |
|
|
| 1,069 |
|
Purchases of bank-owned and company-owned life insurance |
|
| (62,800 | ) |
|
| (7,095 | ) |
|
| (204,647 | ) |
Proceeds from bank-owned life insurance death benefit |
|
| 2,601 |
|
|
| — |
|
|
| — |
|
Net cash used in investing activities |
|
| (478,578 | ) |
|
| (1,502,443 | ) |
|
| (1,330,237 | ) |
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in demand and savings deposits |
|
| 1,307,843 |
|
|
| 1,598,026 |
|
|
| 894,667 |
|
Net increase (decrease) in time deposits |
|
| 144,543 |
|
|
| (119,315 | ) |
|
| (352,622 | ) |
Net (decrease) increase in fed funds purchased and repurchase agreements |
|
| (596,233 | ) |
|
| 38,875 |
|
|
| (207,070 | ) |
Net decrease in short-term debt |
|
| — |
|
|
| (5,000 | ) |
|
| (112,133 | ) |
Proceeds from long-term debt |
|
| 3,003 |
|
|
| 1,500 |
|
|
| 2,500 |
|
Repayment of long-term debt |
|
| (1,524 | ) |
|
| (11,703 | ) |
|
| (10,816 | ) |
Payment of contingent consideration on acquisitions |
|
| — |
|
|
| (3,031 | ) |
|
| (21,494 | ) |
Cash dividends paid |
|
| (51,876 | ) |
|
| (49,038 | ) |
|
| (45,967 | ) |
Proceeds from exercise of stock options and sales of treasury shares |
|
| 13,867 |
|
|
| 16,911 |
|
|
| 11,606 |
|
Purchases of treasury stock |
|
| (15,276 | ) |
|
| (16,367 | ) |
|
| (8,457 | ) |
Net cash provided by financing activities |
|
| 804,347 |
|
|
| 1,450,858 |
|
|
| 150,214 |
|
Increase (decrease) in cash and cash equivalents |
|
| 652,295 |
|
|
| 244,855 |
|
|
| (968,118 | ) |
Cash and cash equivalents at beginning of year |
|
| 1,063,967 |
|
|
| 819,112 |
|
|
| 1,787,230 |
|
Cash and cash equivalents at end of year |
| $ | 1,716,262 |
|
| $ | 1,063,967 |
|
| $ | 819,112 |
|
Supplemental disclosures: |
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid |
| $ | 45,749 |
|
| $ | 44,076 |
|
| $ | 47,086 |
|
Total interest paid |
|
| 56,820 |
|
|
| 27,999 |
|
|
| 17,812 |
|
Transactions related to Marquette acquisition |
|
|
|
|
|
|
|
|
|
|
|
|
Assets acquired |
|
| — |
|
|
| — |
|
|
| 1,312,174 |
|
Liabilities assumed |
|
| — |
|
|
| — |
|
|
| 1,151,025 |
|
|
| Year Ended December 31, |
| |||||||||
|
| 2022 |
|
| 2021 |
|
| 2020 |
| |||
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 431,682 |
|
| $ | 353,018 |
|
| $ | 286,502 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses |
|
| 37,900 |
|
|
| 20,000 |
|
|
| 130,500 |
|
Net amortization of premiums and discounts from acquisition |
|
| 1,340 |
|
|
| 535 |
|
|
| 251 |
|
Depreciation and amortization |
|
| 54,022 |
|
|
| 55,747 |
|
|
| 62,803 |
|
Amortization of debt issuance costs |
|
| 556 |
|
|
| 450 |
|
|
| 131 |
|
Deferred income tax benefit |
|
| (6,308 | ) |
|
| (12,724 | ) |
|
| (4,836 | ) |
Net decrease (increase) in trading securities and other earning assets |
|
| 13,895 |
|
|
| (10,329 | ) |
|
| 10,598 |
|
Gains on investment securities, net |
|
| (58,444 | ) |
|
| (5,057 | ) |
|
| (120,634 | ) |
Gains on sales of assets |
|
| (3,063 | ) |
|
| (2,666 | ) |
|
| (797 | ) |
Amortization of securities premiums, net of discount accretion |
|
| 45,184 |
|
|
| 53,467 |
|
|
| 44,302 |
|
Originations of loans held for sale |
|
| (47,639 | ) |
|
| (137,337 | ) |
|
| (128,123 | ) |
Gains on sales of loans held for sale, net |
|
| (1,195 | ) |
|
| (5,128 | ) |
|
| (3,964 | ) |
Proceeds from sales of loans held for sale |
|
| 48,133 |
|
|
| 147,896 |
|
|
| 133,182 |
|
Equity based compensation |
|
| 21,491 |
|
|
| 21,208 |
|
|
| 15,120 |
|
Changes in: |
|
|
|
|
|
|
|
|
|
|
|
|
Accrued income |
|
| (58,222 | ) |
|
| 4,587 |
|
|
| (15,384 | ) |
Accrued expenses and taxes |
|
| (10,995 | ) |
|
| (51,740 | ) |
|
| 91,693 |
|
Other assets and liabilities, net |
|
| 301,217 |
|
|
| 102,155 |
|
|
| (127,746 | ) |
Net cash provided by operating activities |
|
| 769,554 |
|
|
| 534,082 |
|
|
| 373,598 |
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Securities held to maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
Maturities, calls and principal repayments |
|
| 460,413 |
|
|
| 198,783 |
|
|
| 193,629 |
|
Purchases |
|
| (990,648 | ) |
|
| (664,661 | ) |
|
| (92,141 | ) |
Securities available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
| — |
|
|
| 372,644 |
|
|
| 315,890 |
|
Maturities, calls and principal repayments |
|
| 1,114,560 |
|
|
| 1,743,809 |
|
|
| 2,455,185 |
|
Purchases |
|
| (1,205,396 | ) |
|
| (5,080,172 | ) |
|
| (4,373,394 | ) |
Equity securities with readily determinable fair values: |
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
| 46,379 |
|
|
| 79,013 |
|
|
| — |
|
Maturities, calls and principal repayments |
|
| — |
|
|
| — |
|
|
| 50,047 |
|
Purchases |
|
| (1,085 | ) |
|
| (6,376 | ) |
|
| (75,177 | ) |
Equity securities without readily determinable fair values: |
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
| 194 |
|
|
| 14 |
|
|
| — |
|
Maturities, calls and principal repayments |
|
| 172 |
|
|
| 2,514 |
|
|
| 16,735 |
|
Purchases |
|
| (29,660 | ) |
|
| (77,709 | ) |
|
| (9,145 | ) |
Payment of low-income housing tax credit (LIHTC) investment commitments |
|
| (35,854 | ) |
|
| (15,410 | ) |
|
| (42,995 | ) |
Net increase in loans |
|
| (3,952,154 | ) |
|
| (1,117,707 | ) |
|
| (2,693,761 | ) |
Net decrease (increase) in fed funds sold and resell agreements |
|
| 257,760 |
|
|
| 433,978 |
|
|
| (71,990 | ) |
Net cash activity from acquisitions and divestitures |
|
| 548,624 |
|
|
| 18,431 |
|
|
| 24 |
|
Net (increase) decrease in interest-bearing balances due from other financial institutions |
|
| (13,705 | ) |
|
| 7,146 |
|
|
| (13,835 | ) |
Purchases of bank premises and equipment |
|
| (51,716 | ) |
|
| (33,687 | ) |
|
| (60,216 | ) |
Proceeds from sales of bank premises and equipment |
|
| 6,731 |
|
|
| 3,900 |
|
|
| 8,568 |
|
Purchases of bank-owned and company-owned life insurance |
|
| — |
|
|
| (100,000 | ) |
|
| (100,000 | ) |
Proceeds from bank-owned and company-owned life insurance death benefit |
|
| — |
|
|
| — |
|
|
| 1,489 |
|
Net cash used in investing activities |
|
| (3,845,385 | ) |
|
| (4,235,490 | ) |
|
| (4,491,087 | ) |
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in demand and savings deposits |
|
| (3,636,068 | ) |
|
| 8,573,130 |
|
|
| 5,798,276 |
|
Net increase (decrease) in time deposits |
|
| 65,497 |
|
|
| (24,454 | ) |
|
| (350,269 | ) |
Net (decrease) increase in fed funds purchased and repurchase agreements |
|
| (1,016,268 | ) |
|
| 922,938 |
|
|
| 418,989 |
|
Proceeds from short-term debt |
|
| — |
|
|
| — |
|
|
| 15,000 |
|
Repayment of short-term debt |
|
| — |
|
|
| — |
|
|
| (15,000 | ) |
Proceeds from long-term debt |
|
| 110,000 |
|
|
| — |
|
|
| 200,000 |
|
Payment of debt issuance costs |
|
| (2,129 | ) |
|
| — |
|
|
| (2,250 | ) |
Cash dividends paid |
|
| (72,030 | ) |
|
| (66,750 | ) |
|
| (60,281 | ) |
Proceeds from exercise of stock options and sales of treasury shares |
|
| 2,136 |
|
|
| 19,048 |
|
|
| 5,186 |
|
Purchases of treasury stock |
|
| (31,997 | ) |
|
| (5,506 | ) |
|
| (63,766 | ) |
Net cash (used in) provided by financing activities |
|
| (4,580,859 | ) |
|
| 9,418,406 |
|
|
| 5,945,885 |
|
(Decrease) increase in cash and cash equivalents |
|
| (7,656,690 | ) |
|
| 5,716,998 |
|
|
| 1,828,396 |
|
Cash and cash equivalents at beginning of year |
|
| 9,214,564 |
|
|
| 3,497,566 |
|
|
| 1,669,170 |
|
Cash and cash equivalents at end of year |
| $ | 1,557,874 |
|
| $ | 9,214,564 |
|
| $ | 3,497,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures: |
|
|
|
|
|
|
|
|
|
|
|
|
Income tax payments |
| $ | 101,952 |
|
| $ | 92,584 |
|
| $ | 34,068 |
|
Total interest payments |
|
| 196,482 |
|
|
| 47,106 |
|
|
| 84,105 |
|
Noncash disclosures: |
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of low-income housing tax credit investments |
| $ | 58,337 |
|
| $ | 30,182 |
|
| $ | 59,072 |
|
Commitment to fund low-income housing tax credit investments |
|
| 58,337 |
|
|
| 30,182 |
|
|
| 59,072 |
|
Transfer of loans to other real estate owned |
|
| 12,381 |
|
|
| — |
|
|
| — |
|
Transfer of securities from available-for-sale to held-to-maturity |
|
| 3,823,670 |
|
|
| — |
|
|
| — |
|
See Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
UMB Financial Corporation is a bank holding company, which offers a wide range of banking and other financial services to its customers through its branches and offices in the states of Missouri, Kansas, Colorado, Illinois, Oklahoma, Texas, Arizona, Nebraska, Iowa, Pennsylvania, South Dakota, Indiana, Utah, Minnesota, California, Wisconsin, Delaware, and Wisconsin.New York. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. These estimates and assumptions also impact reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Following is a summary of the more significant accounting policies to assist the reader in understanding the financial presentation.
Consolidation
The Company and its wholly owned subsidiaries are included in the Consolidated Financial Statements (references hereinafter to the “Company”Company in these Notes to Consolidated Financial Statements include wholly owned subsidiaries). Intercompany accounts and transactions have been eliminated in consolidation.
Revenue Recognition
Interest on loans and securities is recognized based on rate times the principal amount outstanding. This includes the impact of amortization of premiums and discounts. Interest accrual is discontinued when, in the opinion of management, the likelihood of collection becomes doubtful. Other noninterestNoninterest income is recognized as serviceswhen performance obligations are performed or revenue-generating transactions are executed.satisfied.
Cash and cash equivalents
Cash and cash equivalents include Cash and due from banks and amounts due from the FRB. Cash on hand, cash items in the process of collection, and amounts due from correspondent banks are included in Cash and due from banks. Amounts due from the FRB are interest-bearing for all periods presented and are included in the Interest-bearing due from banks line on the Company’s Consolidated Balance Sheets.
This table provides a summary of cash and cash equivalents as presented on the Consolidated Statements of Cash Flows as of December 31, 20172022 and 20162021 (in thousands):
|
| December 31, |
|
| December 31, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2022 |
|
| 2021 |
| ||||
Due from the FRB |
| $ | 1,323,539 |
|
| $ | 641,850 |
|
| $ | 1,057,192 |
|
| $ | 8,800,743 |
|
Cash and due from banks |
|
| 392,723 |
|
|
| 422,117 |
|
|
| 500,682 |
|
|
| 413,821 |
|
Cash and cash equivalents at end of year |
| $ | 1,716,262 |
|
| $ | 1,063,967 |
|
| $ | 1,557,874 |
|
| $ | 9,214,564 |
|
Also included in the Interest-bearing due from banks line, but not considered cash and cash equivalents are interest-bearing accounts held at other financial institutions, which totaled $28.2$121.7 million and $74.0$41.2 million at December 31, 20172022 and 2016,2021, respectively.
Loans and Loans Held for Sale
Loans are classified by the portfolio segments of commercial and industrial, specialty lending, commercial real estate, consumer and leases. The portfolio segments are further disaggregated into the loan classes of commercial, asset-based, factoring, commercial credit card, real estate, – construction, real estate – commercial, real estate – residential, real estate – HELOC, consumer, – credit card, consumer – other,cards, and leases.leases and other.
A loan is considered to be impairedcollateral dependent when management believes it is probable that it will be unable to collect all principal and interest due according to the contractual terms of the loan. If a loan is impaired,collateral dependent, the Company records a valuation allowance equal to the carrying amount of the loan in excess of the present value of the estimated future cash flows discounted at the loan’s effective rate, based on the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent.collateral.
A loan is accounted for as a troubled debt restructuring when a concession had been granted to a debtor experiencing financial difficulties. The Company’s modifications generally include interest rate adjustments, and amortization and maturity date extensions. These modifications allow the debtor short-term cash relief to allow them to improve their financial condition. Restructured loans are considered to be collateral dependent and are individually evaluated for impairmentcredit loss as part of the allowance for loancredit loss analysis.
Loans, including those that are considered to be impaired and restructured,collateral dependent or a troubled debt restructuring, are evaluated regularly by management. Loans are considered delinquent when payment has not been received within 30 days of its contractual due date.Loans are placed on non-accrualnonaccrual status when the collection of interest or principal is 90 days or more past due unless the loan is adequately secured and in the process of collection. When a loan is placed on non-accrualnonaccrual status, any interest previously accrued but not collected is reversed against current income. Loans may be returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Interest payments received on non-accrualnonaccrual loans are applied to principal unless the remaining principal balance has been determined to be fully collectible.
The adequacy of the allowance for loan lossesACL on loans is based on management’s continuingjudgment and continuous evaluation of the pertinent factors underlying the credit quality inherent in the loan portfolio. Consideration of quantitative and qualitative factors relevant to each specific segmentation of loans includes lifetime historical loss experience, the impact of the loan portfolio, including actual loan loss experience, current economic conditions,environment, reasonable and supportable forecasts, and detailed analysis of individual loans for which full collectability may notdetermined to be assured, determinationcollateral dependent. The actual losses incurred over the lifetime of the existence and realizable value of the collateral and guarantees securing such loans. The actual losses,portfolio, notwithstanding such considerations, however, could differ from the amounts estimated by management.
The Company maintains a reserve, separate from thean allowance for loan losses,off-balance sheet credit exposures, to address the credit risk of loss associated with loan contingencies,to which the Company is exposed via a contractual obligation to extend credit, unless that obligation is unconditionally cancelable by the Company. The allowance for off-balance sheet credit exposure is included in the Accrued expenses and taxes line item in the Consolidated Balance Sheets. In order to maintain the reserveallowance for off-balance sheet items at an appropriate level, a provision to increase or reduce the reserveallowance is included in the Provision for credit losses line item in the Company’s Consolidated Statements of Income. The level of the reserve will be adjusted as needed to maintain the reserve at a specified level in relation to contingent loan risk. The risk of loss arising from un-funded loan commitments has been assessed by dividing the contingencies into pools of similar loan commitments andallowance for off-balance sheet credit exposure is calculated by applying two factorsportfolio segment expected credit loss rates to each pool. The grossthe expected amount of contingent exposure is first multiplied by a potential use factor to estimate the degree to which the unused commitments might reasonably be expected to be used in a time of high usage. The resultant figure is then multiplied by a factor to estimate the risk of loss assuming funding of these loans. The potential loss estimates for each segment of the portfolio are added to arrive at a total potential loss estimate that is used to set the reserve.
Purchased loans are recorded at estimated fair value at the acquisition date with no carryover of the related allowance. Purchased loans are segregated between those considered to be performing, non-purchased credit impaired loans (Non-PCI), and those with evidence of credit deterioration, purchased credit impaired loans (PCI). Purchased loans are considered impaired if there is evidence of credit deterioration and if it is probable, at acquisition, that all contractually required payments will not be collected.funded.
Loans held for sale are carried at the lower of aggregate cost or market value. Loan fees (net of certain direct loan origination costs) on loans held for sale are deferred until the related loans are sold or repaid. Gains or losses on loan sales are recognized at the time of sale and determined using the specific identification method.
Securities
Debt securities available for sale principally include U.S. Treasury and agencyAgency securities, Government Sponsored Entity (GSE)GSE mortgage-backed securities, certain securities of state and political subdivisions, corporates, and corporates. Securitiescollateralized loan obligations. Debt securities classified as available for sale are measured at fair value. Unrealized holding gains and losses are excluded from earnings and reported in Accumulated other comprehensive income (loss) (AOCI)AOCI until realized. Realized gains and losses on sales are computed by the specific identification method at the time of disposition and are shown separately as a component of noninterest income.
Securities held to maturity are carried at amortized historical cost, net of the allowance for credit losses, based on management’s intention, and the Company’s ability to hold them to maturity. The Company classifies certain U.S. Agency securities, mortgage-backed securities, and securities of state and political subdivisions as held to maturity.
Trading securities, acquired for subsequent sale to customers, are carried at fair value. Market adjustments, fees and gains or losses on the sale of trading securities are considered to be a normal part of operations and are included in trading and investment banking income.
Securities may be transferred from the available-for-sale classification to the held-to-maturity classification when the Company has the positive intent and ability to hold these securities to maturity. Transfers of securities are made at fair value at the time of transfer. The unrealized holding gain or loss at the time of transfer is retained in AOCI and amortized over the remaining life of the securities, offsetting the related amortization of discount or premium on the transferred securities. No gains or losses are recognized at the time of the transfer.
The Company accounts for certain other investments using equity-method accounting. For non-marketable equity-method investments,equity securities without readily determinable fair values, the Company’s proportionate share of the income or loss is recognized on a one-quarter lag. When transparency in pricing exists, other investments are considered marketable equity-method investments. For marketable equity-method investments, the Company recognizes its proportionate share of income or loss as of the date of the Company’s Consolidated Financial Statements.equity securities with readily determinable fair values.
Goodwill and Other Intangibles
Goodwill is tested for impairment annually and more frequently whenever events or changes in circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying value. To test goodwill for impairment, the Company performs a qualitative assessment of each reporting unit. If the Company determines, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not greater than the carrying amount, the quantitative impairment test is not required. Otherwise, the Company compares the fair value of its reporting units to their carrying amounts to determine if an impairment exists and the amount of impairment loss. An impairment loss is measured as the excess of the carrying value of a reporting unit’s goodwill over its fair value. As a result of such impairment analysis, the Company has not recognized an impairment charge.
No goodwill impairments were recognized in 2017, 2016,2022, 2021, or 2015.2020. Other intangible assets, which relate to core deposits, non-compete agreements, and customer relationships, are amortized over a period of up to 17 years andtheir useful life. Intangible assets are evaluated for impairment when events or circumstances dictate. No intangible asset impairments were recognized in 2017, 2016,2022, 2021, or 2015.2020. The Company does not have any indefinite lived intangible assets.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation, which is computed primarily on the straight linestraight-line method. Premises are depreciated over 15 to 40 year lives, while equipment is depreciated over lives of 3 to 20 years. Gains and losses from the sale of Premises and equipment are included in Other noninterest income and Other noninterest expense, respectively.
Impairment of Long-Lived Assets
Long-lived assets, including Premises and equipment, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or group of assets may not be recoverable. The impairment review includes a comparison of future cash flows expected to be generated by the asset or group of assets to their current carrying value. If the carrying value of the asset or group of assets exceeds expected cash flows (undiscounted and without interest charges), an impairment loss is recognized to the extent the carrying value exceeds fair value. No impairments were recognized in 2017, 2016,2022, 2021, or 2015.2020.
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are measured based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the periods in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The provision for deferred income taxes represents the change in the deferred income tax accounts during the year excluding the tax effect of the change in net unrealized gain (loss) on securities available for sale.sale and certain derivative items.
The Company records deferred tax assets to the extent these assets will more likely than not be realized. All available evidence is considered in making such determination, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. A valuation allowance is recorded for the portion of deferred tax assets that doare not meet the more-likely-than-not threshold,to be realized, and any changes to the valuation allowance are recorded in income tax expense.
The Company records the financial statement effects of an income tax position when it is more likely than not, based on the technical merits, that it will be sustained upon examination. A tax position that meets the more-likely-
than-notmore-likely-than-not recognition threshold is measured and recorded as the largest amount of tax benefit that is greater than 50
percent likely of being realized upon ultimate settlement with a taxing authority. Previously recognized tax positions are derecognized in the first period in which it is no longer more likely than not that the tax position will be sustained. The benefit associated with previously unrecognized tax positions are generally recognized in the first period in which the more-likely-than-not threshold is met at the reporting date, the tax matter is ultimately settled through negotiation or litigation, or when the related statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired. The recognition, derecognition and measurement of tax positions are based on management’s best judgment given the facts, circumstance and information available at the balance sheetreporting date.
The Company recognizes accrued interest related to unrecognized tax benefits in interest expense and penalties in other noninterest expense. Accrued interest and penalties are included within the related liability lines in the Consolidated Balance Sheets. For the year ended December 31, 2017,2022, the Company has recognized an immaterial amount in interest and penalties related to the unrecognized tax benefits.
Derivatives
The Company records all derivatives on the Consolidated Balance Sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Currently, fourfive of the Company’s derivatives are designated in qualifying hedging relationships. However, theThe remainder of the Company’s derivatives are not designated in qualifying hedging relationships, as the derivatives are not used to manage risks within the Company’s assets or liabilities. All changes in fair value of the Company’s non-designated derivatives and fair value hedges are recognized directly in earnings. Changes in fair value of the Company’s fair value hedges are recognized directly in earnings. The effective portion of changes in fair value of the Company’s cash flow hedges are recognized in AOCI. The ineffective portion of changes in fair value ofAOCI and are reclassified to earnings when the cash flow hedges is recognized directly inhedged transaction affects earnings.
Per Share Data
Basic income per share is computed based on the weighted average number of shares of common stock outstanding during each period. Diluted year-to-date income per share includes the dilutive effect of 615,629, 448,742,406,477, 466,830, and 453,082205,959 shares issuable upon the exercise of stock options, nonvested restricted shares, and nonvested restricted sharesstock units, granted by the Company that were outstanding at December 31, 2017, 2016,2022, 2021, and 2015,2020, respectively.
OptionsCertain options, restricted stock and restricted stock units issued under employee benefit plans to purchase 149,413, 390,503, and 455,998 shares of common stock were outstanding at December 31, 2017, 2016, and 2015, respectively, but were not included inexcluded from the computation of diluted earnings per share because they were anti-dilutive. For the years ended December 31, 2022 and 2021, there were no outstanding stock options, restricted stock and restricted stock units excluded from the computation of diluted income per share. Outstanding options, restricted stock and restricted stock units of 198,671 for the year ended December 31, 2020, were excluded from the computation of diluted income per share because their inclusion would have been anti-dilutive.
Accounting for Stock-Based Compensation
The Company measures the cost of employee services received in exchange for an award of equity instruments based on the fair value of the award on the date of the grant. TheFor stock options, restricted stock, and service-based restricted stock unit awards, the grant date fair value is estimated using either an option-pricing model which is consistent with the terms of the award or an observed market price, if such a price exists. For performance-based restricted stock unit awards, the grant date fair value is based on the quoted price of the Company’s common stock on the grant date less the present value of expected dividends not received during the vesting period. Such cost is generally recognized over the vesting period during which an employee is required to provide service in exchange for the award and, in some cases, when performance metrics are met. The Company accounts for forfeitures of stock-based compensation on an actual basis as they occur.
2. NEW ACCOUNTING PRONOUNCEMENTS
Revenue Recognition In May 2014, the Financial Accounting Standards Board (FASB) issued ASU No. 2014-09, “Revenue from Contracts with Customers.” The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In August 2015, the FASB issued ASU No. 2015-14, which deferred the effective date of ASU No. 2014-09 to annual reporting periods that begin after December 15, 2017. In March, April, and May 2016, the FASB issued implementation amendments to the May 2014 ASU (collectively, the amended guidance). The amended guidance affects any entity that enters into contracts with customers to transfer goods and services, unless those contracts are within the scope of other standards. The amended guidance specifically excludes interest income, as well as other revenues associated with financial assets and liabilities, including loans, leases, securities, and derivatives. The amended guidance permits the use of either the full
retrospective approach or a modified retrospective approach. The Company plans to adopt the amended guidance using the modified retrospective approach on January 1, 2018. The Company has assessed its revenue streams and identified those contracts that are specifically excluded from the scope of the amended guidance and those that may be subject to the amended guidance. Subsequent to this initial scoping, the Company selected a representative sample of contracts from the in-scope revenue streams for review under the amended guidance (key contracts). Upon completion of the review of the key contracts, the Company grouped the remaining contracts based on the conclusions reached through the key contract review and evaluated specific contracts that could not be grouped. Based on the evaluation of key contracts performed, the adoption of this accounting pronouncement is not expected to have a significant impact on the Company’s Consolidated Financial Statements. The Company continues to evaluate the impact the amended guidance will have on its related disclosures.
Financial Instruments In January 2016, the FASB issued ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities.” The amendment is intended to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The amendments in this update are effective for interim and annual periods beginning after December 15, 2017. The standard requires the use of the cumulative effect transition method as of the beginning of the year of adoption. Except for certain provisions, early adoption is not permitted. The adoption of this accounting pronouncement is not expected to have a significant impact on the Company’s Consolidated Financial Statements.
Leases In February 2016, the FASB issued ASU No. 2016-02, “Leases.” The amendment changes the accounting treatment of leases, in that lessees will recognize most leases on-balance sheet. This will increase reported assets and liabilities, as lessees will be required to recognize a right-of-use asset along with a lease liability, measured on a discounted basis. Lessees are allowed to account for short-term leases (those with a term of twelve months or less) off-balance sheet. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The standard requires the use of the modified retrospective transition method. Early adoption is permitted. The Company is currently evaluating the impact that this standard will have on its Consolidated Financial Statements.
Extinguishments of Liabilities In March 2016, the FASB issued ASU No. 2016-04, “Recognition of Breakage for Certain Prepaid Stored-Value Products.” The amendment is intended to reduce the diversity in practice related to the recognition of breakage. Breakage refers to the portion of a prepaid stored-value product, such as a gift card, that goes unused wholly or partially for an indefinite period of time. This amendment requires that breakage be accounted for consistent with the breakage guidance within ASU No. 2014-09, “Revenue from Contracts with Customers.” The amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The standard permits the use of either the modified retrospective or full retrospective transition method. The Company will adopt ASU No. 2016-04 in conjunction with its adoption of ASU No. 2014-09. The adoption of this accounting pronouncement is not expected to have a significant impact on the Company’s Consolidated Financial Statements.
Equity-Based Compensation In March 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting.” The amendment is part of the FASB’s simplification initiative and is intended to simplify the accounting around share-based payment award transactions. The amendments include changing the recording of excess tax benefits from being recognized as a part of surplus capital to being charged directly to the income statement, changing the classification of excess tax benefits within the statement of cash flows, and allowing companies to account for forfeitures on an actual basis, as well as tax withholding changes. The amendment requires different transition methods for various components of the standard. The amendments in this update were effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption was permitted.
In September 2016, the Company early adopted ASU No. 2016-09 with an effective date of January 1, 2016. As part of the adoption of this standard, the Company made an accounting policy election to account for forfeitures on an actual basis and discontinue the use of an estimated forfeiture approach. Additionally, the Company selected the retrospective transition method for the reclassification of the “Net tax benefit related to equity compensation plans” from the financing section to the operating section of the Company’s Consolidated Statement of Cash Flows. Upon adoption, the Company recorded a cumulative effect adjustment to the Company’s Consolidated Balance Sheets of $482 thousand as an increase to the opening balance of total equity.
Credit LossesIn June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” This update replacesIn April and November 2019, the FASB issued implementation amendments to the June 2016 ASU (collectively, the amended guidance). The amended guidance replaced the current incurred loss methodology for
recognizing credit losses with a current
expected credit loss model, which requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This amendment broadensThe amended guidance broadened the information that an entity must consider in developing its expected credit loss estimates. Additionally, the update amendsupdates amended the accounting for credit losses for available-for-sale debt securities and purchased financial assets with a more-than-insignificant amount of credit deterioration since origination. This update requiresThe amended guidance required enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of a company’s loan portfolio. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption in fiscal years beginning after December 15, 2018 is permitted. The amendment requiresCompany adopted the use of theamended guidance on January 1, 2020 using a modified retrospective approach for adoption. TheResults for the reporting periods beginning after December 31, 2019 are presented under ASC Topic 326, Financial Instruments – Credit Losses, while prior period amounts continue to be presented in accordance with previously applicable GAAP. Upon adoption, the Company is currently evaluatingrecorded a cumulative effect adjustment to the impact that this standard will have on itsCompany’s Consolidated Financial Statements.Balance Sheets of $9.0 million as an increase to the allowance for credit losses and $7.0 million as a reduction to retained earnings, net of deferred tax balances. See Note 3, “Loans and Allowance for Credit Losses” for related disclosures.
Statement of Cash Flows Troubled Debt Restructurings In August 2016,March 2022, the FASB issued ASU 2016-15, “Classification of Certain ReceiptsNo. 2022-02, “Financial Instruments – Credit Losses: Troubled Debt Restructurings and Cash Payments.Vintage Disclosures.” This amendment adds toThe ASU eliminates the accounting guidance for troubled debt restructurings (TDR) by creditors and clarifies existing guidance regarding the classification ofenhances disclosure requirements for certain cash receiptsloan re-financings and payments in the statement of cash flows with the intent of reducing diversity in practice with respect to eight types of cash flows.restructurings by creditors when a borrower is experiencing financial difficulty. The amendments also add requirements to disclose current-period gross write-offs by year of origination for financing receivables and net investments in this update require full retrospective adoptionleases, disclosed by credit-quality indicator and are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoptionclass of this standard is not expected to have a significant impact on the Company’s Consolidated Statement of Cash Flows.
Goodwill and Other Intangibles In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment.” The amendment eliminates Step 2 from the goodwill impairment test. The amendment also eliminates the requirement for any reporting unit with a zero or negative carrying amount to perform a qualitative test and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. The amendments in this update were adopted on October 1, 2017. The adoption of this accounting pronouncement had no impact on the Company’s Consolidated Financial Statements.
Derivatives and Hedging In August 2017, the FASB issued ASU 2017-12, “Targeted Improvements to Accounting for Hedging Activities.” The purpose of this updated guidance is to better align financial reporting for hedging activities with the economic objectives of those activities.financing receivable. The amendments in this update are effective for fiscal years beginning after December 15, 2018, with early2022, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period, permitted.period. The standard requires the modified retrospective transition approach asadoption of the date of adoption. The Company plans to early adopt ASU 2017-12 as of January 1, 2018. While the Company continues to assess all potential impacts of the standard, we currently expect adoption tothis accounting pronouncement will have an immaterialno impact on the Consolidated Financial Statements.Statements aside from additional and revised disclosures.
3. LOANS AND ALLOWANCE FOR LOANCREDIT LOSSES
Loan Origination/Risk Management
The Company has certain lending policies and procedures in place that are designed to minimize the level of risk within the loan portfolio. Diversification of the loan portfolio manages the risk associated with fluctuations in economic conditions. Authority levels are established for the extension of credit to ensure consistency throughout the Company. It is necessary that policies, processes, and practices implemented to control the risks of individual credit transactions and portfolio segments are sound and adhered to. The Company maintains an independent loan review department that reviews and validates the credit risk programassessment on a continual basis. Management regularly evaluates the results of the loan reviews. The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel, as well as the Company’s policies and procedures.
Commercial and industrial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably and prudently expand its business. Commercial loans are made based on the identified cash flows of the borrower and on the underlying collateral provided by the borrower. The cash flows of the borrower, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts from its customers. Commercial credit cards are generally unsecured
Specialty lending loans include Asset-based and are underwritten with criteria similar to commercial loans including an analysis of the borrower’s cash flow, available business capital, and overall credit-worthiness of the borrower.
Factoring loans. Asset-based loans are offered primarily in the form of revolving lines of credit to commercial borrowers that do not generally qualify for traditional bank financing. Asset-based loans are underwritten based primarily upon the value of the collateral pledged to secure the loan, rather than on the borrower’s general financial condition as traditionally reflected by cash flow, balance sheet strength, operating results, and credit bureau ratings.condition. The Company utilizes pre-loan due diligence techniques, monitoring disciplines, and loan management practices common within the asset-based lending industry to underwrite and manage loans withto these borrowers.
Factoring loans provide working capital through the purchase and/or financing of accounts receivable to borrowers in the transportation industry and to commercial borrowers that do not generally qualify for traditional bank financing. During the first quarter of 2022, the Company sold its factoring
loan portfolio to an alternative financing company. The sale included $82.6 million of loans, resulting in a gain of $2.4 million.
Commercial real estate loans are subject to underwriting standards and processes similar to commercial loans, in addition to those of real estate loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts, and the repayment of these loans is largely dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. The Company requires that an appraisal of the collateral be made at origination and on an as-needed basis, in conformity with current market conditions and regulatory requirements. The underwriting standards address both owner and non-owner occupiednon-owner-occupied real estate.
Also included in Commercial real estate are Construction loans that are underwritten using feasibility studies, independent appraisal reviews, sensitivity analysis or absorption and lease rates, and financial analysis of the developers and property owners. Construction loans are based upon estimates of costs and value associated with the complete project. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their repayment being sensitive to interest rate changes, governmental regulation of real property, economic conditions, and the availability of long-term financing.
Underwriting standards forConsumer real estate loans, including residential real estate and home equity loans, are underwritten based on the borrower’s loan-to-value percentage, collection remedies, and overall credit history.
Consumer loans are underwritten based on the borrower’s repayment ability. The Company monitors delinquencies on all of its consumer loans and leases and periodically reviews the distribution of FICO scores relative to historical periods to monitor credit risk on its credit card loans.leases. The underwriting and review practices combined with the relatively small loan amounts that are spread across many individual borrowers, minimizes risk. Consumer loans and leases that are 90 days past due or more are considered non-performing.
Credit cards include both commercial and consumer credit cards. Commercial credit cards are generally unsecured and are underwritten with criteria similar to commercial loans, including an analysis of the borrower’s cash flow, available business capital, and overall creditworthiness of the borrower. Consumer credit cards are underwritten based on the borrower’s repayment ability. The Company monitors delinquencies on all of its consumer credit cards and periodically reviews the distribution of credit scores relative to historical periods to monitor credit risk on its consumer credit card loans.
Credit risk is a potential loss resulting from nonpayment of either the primary or secondary exposure. Credit risk is mitigated with formal risk management practices and a thorough initial credit-granting process including consistent underwriting standards and approval process. Control factors or techniques to minimize credit risk include knowing the client, understanding total exposure, analyzing the client and debtor’s financial capacity, and monitoring the client’s activities. Credit risk and portions of the portfolio risk are managed through concentration considerations, average risk ratings, and other aggregate characteristics.
Loan Aging Analysis
This table providesThe following tables provide a summary of loan classes and an aging of past due loans at December 31, 20172022 and 20162021 (in thousands):
|
| December 31, 2017 |
| |||||||||||||||||||||
|
| 30-89 Days Past Due and Accruing |
|
| Greater than 90 Days Past Due and Accruing |
|
| Non- Accrual Loans |
|
| Total Past Due |
|
| Current |
|
| Total Loans |
| ||||||
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
| $ | 11,216 |
|
| $ | 672 |
|
| $ | 38,644 |
|
| $ | 50,532 |
|
| $ | 4,502,508 |
|
| $ | 4,553,040 |
|
Asset-based |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 336,614 |
|
|
| 336,614 |
|
Factoring |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 221,672 |
|
|
| 221,672 |
|
Commercial – credit card |
|
| 387 |
|
|
| 79 |
|
|
| — |
|
|
| 466 |
|
|
| 171,825 |
|
|
| 172,291 |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate – construction |
|
| 6,666 |
|
|
| 243 |
|
|
| 93 |
|
|
| 7,002 |
|
|
| 710,847 |
|
|
| 717,849 |
|
Real estate – commercial |
|
| 832 |
|
|
| — |
|
|
| 16,115 |
|
|
| 16,947 |
|
|
| 3,546,683 |
|
|
| 3,563,630 |
|
Real estate – residential |
|
| 791 |
|
|
| — |
|
|
| 929 |
|
|
| 1,720 |
|
|
| 636,871 |
|
|
| 638,591 |
|
Real estate – HELOC |
|
| 1,254 |
|
|
| — |
|
|
| 3,013 |
|
|
| 4,267 |
|
|
| 644,112 |
|
|
| 648,379 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer – credit card |
|
| 2,155 |
|
|
| 2,057 |
|
|
| 312 |
|
|
| 4,524 |
|
|
| 248,173 |
|
|
| 252,697 |
|
Consumer – other |
|
| 835 |
|
|
| 40 |
|
|
| 36 |
|
|
| 911 |
|
|
| 150,872 |
|
|
| 151,783 |
|
Leases |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 23,967 |
|
|
| 23,967 |
|
Total loans |
| $ | 24,136 |
|
| $ | 3,091 |
|
| $ | 59,142 |
|
| $ | 86,369 |
|
| $ | 11,194,144 |
|
| $ | 11,280,513 |
|
|
| December 31, 2022 |
| |||||||||||||||||||||
|
| 30-89 Days Past Due and Accruing |
|
| Greater than 90 Days Past Due and Accruing |
|
| Nonaccrual Loans |
|
| Total Past Due |
|
| Current |
|
| Total Loans |
| ||||||
Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
| $ | 2,456 |
|
| $ | 2 |
|
| $ | 11,356 |
|
| $ | 13,814 |
|
| $ | 9,192,172 |
|
| $ | 9,205,986 |
|
Specialty lending |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 602,706 |
|
|
| 602,706 |
|
Commercial real estate |
|
| 2,167 |
|
|
| 191 |
|
|
| 2,505 |
|
|
| 4,863 |
|
|
| 7,611,223 |
|
|
| 7,616,086 |
|
Consumer real estate |
|
| 10 |
|
|
| — |
|
|
| 4,882 |
|
|
| 4,892 |
|
|
| 2,718,377 |
|
|
| 2,723,269 |
|
Consumer |
|
| 613 |
|
|
| 20 |
|
|
| 61 |
|
|
| 694 |
|
|
| 144,972 |
|
|
| 145,666 |
|
Credit cards |
|
| 3,529 |
|
|
| 1,404 |
|
|
| 441 |
|
|
| 5,374 |
|
|
| 426,298 |
|
|
| 431,672 |
|
Leases and other |
|
| — |
|
|
| — |
|
|
| 24 |
|
|
| 24 |
|
|
| 305,780 |
|
|
| 305,804 |
|
Total loans |
| $ | 8,775 |
|
| $ | 1,617 |
|
| $ | 19,269 |
|
| $ | 29,661 |
|
| $ | 21,001,528 |
|
| $ | 21,031,189 |
|
|
| December 31, 2016 |
| |||||||||||||||||||||||||
|
| 30-89 Days Past Due and Accruing |
|
| Greater than 90 Days Past Due and Accruing |
|
| Non- Accrual Loans |
|
| Total Past Due |
|
| PCI Loans |
|
| Current |
|
| Total Loans |
| |||||||
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
| $ | 3,285 |
|
| $ | 49 |
|
| $ | 35,777 |
|
| $ | 39,111 |
|
| $ | — |
|
| $ | 4,371,695 |
|
| $ | 4,410,806 |
|
Asset-based |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 225,878 |
|
|
| 225,878 |
|
Factoring |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 139,902 |
|
|
| 139,902 |
|
Commercial – credit card |
|
| 612 |
|
|
| 10 |
|
|
| 8 |
|
|
| 630 |
|
|
| — |
|
|
| 146,105 |
|
|
| 146,735 |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate – construction |
|
| 3 |
|
|
| — |
|
|
| 181 |
|
|
| 184 |
|
|
| — |
|
|
| 741,620 |
|
|
| 741,804 |
|
Real estate – commercial |
|
| 1,303 |
|
|
| 1,004 |
|
|
| 16,423 |
|
|
| 18,730 |
|
|
|
|
|
|
| 3,147,192 |
|
|
| 3,165,922 |
|
Real estate – residential |
|
| 1,034 |
|
|
| 6 |
|
|
| 1,344 |
|
|
| 2,384 |
|
|
| — |
|
|
| 545,966 |
|
|
| 548,350 |
|
Real estate – HELOC |
|
| 588 |
|
|
| — |
|
|
| 4,736 |
|
|
| 5,324 |
|
|
| — |
|
|
| 706,470 |
|
|
| 711,794 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer – credit card |
|
| 2,228 |
|
|
| 2,115 |
|
|
| 475 |
|
|
| 4,818 |
|
|
| — |
|
|
| 265,280 |
|
|
| 270,098 |
|
Consumer – other |
|
| 1,061 |
|
|
| 181 |
|
|
| 11,315 |
|
|
| 12,557 |
|
|
| 800 |
|
|
| 126,205 |
|
|
| 139,562 |
|
Leases |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 39,532 |
|
|
| 39,532 |
|
Total loans |
| $ | 10,114 |
|
| $ | 3,365 |
|
| $ | 70,259 |
|
| $ | 83,738 |
|
| $ | 800 |
|
| $ | 10,455,845 |
|
| $ | 10,540,383 |
|
|
| December 31, 2021 |
| |||||||||||||||||||||
|
| 30-89 Days Past Due and Accruing |
|
| Greater than 90 Days Past Due and Accruing |
|
| Nonaccrual Loans |
|
| Total Past Due |
|
| Current |
|
| Total Loans |
| ||||||
Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
| $ | 2,827 |
|
| $ | 896 |
|
| $ | 82,845 |
|
| $ | 86,568 |
|
| $ | 7,171,552 |
|
| $ | 7,258,120 |
|
Specialty lending |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 522,362 |
|
|
| 522,362 |
|
Commercial real estate |
|
| 962 |
|
|
| — |
|
|
| 4,688 |
|
|
| 5,650 |
|
|
| 6,261,894 |
|
|
| 6,267,544 |
|
Consumer real estate |
|
| 246 |
|
|
| 489 |
|
|
| 4,210 |
|
|
| 4,945 |
|
|
| 2,315,088 |
|
|
| 2,320,033 |
|
Consumer |
|
| 105 |
|
|
| 2 |
|
|
| 75 |
|
|
| 182 |
|
|
| 128,953 |
|
|
| 129,135 |
|
Credit cards |
|
| 2,369 |
|
|
| 1,246 |
|
|
| 457 |
|
|
| 4,072 |
|
|
| 387,317 |
|
|
| 391,389 |
|
Leases and other |
|
| — |
|
|
| — |
|
|
| 25 |
|
|
| 25 |
|
|
| 282,263 |
|
|
| 282,288 |
|
Total loans |
| $ | 6,509 |
|
| $ | 2,633 |
|
| $ | 92,300 |
|
| $ | 101,442 |
|
| $ | 17,069,429 |
|
| $ | 17,170,871 |
|
Loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement remains unpaid after the due date of the scheduled payment. Non-accrual loans include troubled debt restructurings on non-accrual status. Loan delinquency for all loans is shown in the tables above at December 31, 2017 and December 31, 2016, respectively.
The Company had total PCI loans from its acquisition of Marquette of $800 thousand as of December 31, 2016. The PCI loans are accounted for in accordance with ASC Topic 310-30, Loans and Debt Securities Purchased
with Deteriorated Credit Quality. All of the PCI loans were considered to be performing based on payment activity as of December 31, 2016. Of this amount, $713 thousand were current with their payment terms and $87 thousand were between 30-89 days past due.
The Company sold residentialconsumer real estate loans with proceeds of $70.5$48.1 million, $89.5$147.9 million, and $97.7$133.2 million in the secondary market without recourse during the periods ended December 31, 2017, 2016,2022, 2021, and 2015,2020, respectively.
The Company has ceased the recognition of interest on loans with a carrying value of $59.1$19.3 million and $70.3$92.3 million at December 31, 20172022 and 2016,2021, respectively. Restructured loans totaled $41.0$5.2 million and $52.5$7.3 million at December 31, 20172022 and 2016,2021, respectively. Loans 90 days past due and still accruing interest amounted to $3.1$1.6 million and $3.4$2.6 million at December 31, 20172022 and 2016,2021, respectively. All interest accrued but not received for loans placed on nonaccrual is reversed against interest income. There was an immaterialinsignificant amount of interest recognizedreversed related to loans on impairednonaccrual during 2022 and 2021. Nonaccrual loans during 2017, 2016,with no related allowance for credit losses totaled $16.7 million and 2015.$85.9 million at December 31, 2022 and 2021, respectively.
The following tables provide the amortized cost of nonaccrual loans with no related allowance for credit losses by loan class at December 31, 2022 and 2021 (in thousands):
|
| December 31, 2022 |
| |||||
|
| Nonaccrual Loans |
|
| Amortized Cost of Nonaccrual Loans with no related Allowance |
| ||
Loans |
|
|
|
|
|
|
|
|
Commercial and industrial |
| $ | 11,356 |
|
| $ | 9,447 |
|
Specialty lending |
|
| — |
|
|
| — |
|
Commercial real estate |
|
| 2,505 |
|
|
| 2,505 |
|
Consumer real estate |
|
| 4,882 |
|
|
| 4,226 |
|
Consumer |
|
| 61 |
|
|
| 61 |
|
Credit cards |
|
| 441 |
|
|
| 441 |
|
Leases and other |
|
| 24 |
|
|
| 24 |
|
Total loans |
| $ | 19,269 |
|
| $ | 16,704 |
|
|
| December 31, 2021 |
| |||||
|
| Nonaccrual Loans |
|
| Amortized Cost of Nonaccrual Loans with no related Allowance |
| ||
Loans |
|
|
|
|
|
|
|
|
Commercial and industrial |
| $ | 82,845 |
|
| $ | 76,493 |
|
Specialty lending |
|
| — |
|
|
| — |
|
Commercial real estate |
|
| 4,688 |
|
|
| 4,688 |
|
Consumer real estate |
|
| 4,210 |
|
|
| 4,210 |
|
Consumer |
|
| 75 |
|
|
| 75 |
|
Credit cards |
|
| 457 |
|
|
| 457 |
|
Leases and other |
|
| 25 |
|
|
| 25 |
|
Total loans |
| $ | 92,300 |
|
| $ | 85,948 |
|
Amortized Cost
The following tables provide a summary of the amortized cost balance of each of the Company’s loan classes disaggregated by collateral type and origination year as of December 31, 2022 and 2021 (in thousands):
|
| December 31, 2022 |
| |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Amortized Cost - Revolving Loans |
|
| Amortized Cost - Revolving Loans Converted to Term Loans |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Loan Segment and Type |
| Amortized Cost Basis by Origination Year - Term Loans |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
| 2022 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| Prior |
|
|
|
|
|
| Total |
| ||||||||||||
Commercial and industrial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Equipment/Accounts Receivable/Inventory |
| $ | 2,140,609 |
|
| $ | 1,562,527 |
|
| $ | 642,649 |
|
| $ | 267,444 |
|
| $ | 96,916 |
|
| $ | 86,787 |
|
| $ | 4,223,358 |
|
| $ | 3,926 |
|
| $ | 9,024,216 |
|
Agriculture |
|
| 13,630 |
|
|
| 5,415 |
|
|
| 2,046 |
|
|
| 1,985 |
|
|
| 396 |
|
|
| 541 |
|
|
| 149,266 |
|
|
| 562 |
|
|
| 173,841 |
|
Overdrafts |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7,929 |
|
|
| — |
|
|
| 7,929 |
|
Total Commercial and industrial |
|
| 2,154,239 |
|
|
| 1,567,942 |
|
|
| 644,695 |
|
|
| 269,429 |
|
|
| 97,312 |
|
|
| 87,328 |
|
|
| 4,380,553 |
|
|
| 4,488 |
|
|
| 9,205,986 |
|
Specialty lending: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Asset-based lending |
|
| 18,084 |
|
|
| 55,469 |
|
|
| 36,040 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 493,113 |
|
|
| — |
|
|
| 602,706 |
|
Total Specialty lending |
|
| 18,084 |
|
|
| 55,469 |
|
|
| 36,040 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 493,113 |
|
|
| — |
|
|
| 602,706 |
|
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Owner-occupied |
|
| 656,860 |
|
|
| 593,861 |
|
|
| 388,519 |
|
|
| 180,786 |
|
|
| 136,499 |
|
|
| 167,628 |
|
|
| 8,685 |
|
|
| — |
|
|
| 2,132,838 |
|
Non-owner-occupied |
|
| 1,128,978 |
|
|
| 855,508 |
|
|
| 568,489 |
|
|
| 368,203 |
|
|
| 64,915 |
|
|
| 229,826 |
|
|
| 28,679 |
|
|
| — |
|
|
| 3,244,598 |
|
Farmland |
|
| 94,989 |
|
|
| 47,092 |
|
|
| 220,796 |
|
|
| 24,057 |
|
|
| 15,963 |
|
|
| 24,162 |
|
|
| 121,054 |
|
|
| — |
|
|
| 548,113 |
|
5+ Multi-family |
|
| 30,920 |
|
|
| 35,869 |
|
|
| 68,996 |
|
|
| 18,978 |
|
|
| 1,334 |
|
|
| 5,776 |
|
|
| 4,908 |
|
|
| — |
|
|
| 166,781 |
|
1-4 Family construction |
|
| 61,943 |
|
|
| 15,217 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 19 |
|
|
| — |
|
|
| 77,179 |
|
General construction |
|
| 628,820 |
|
|
| 719,437 |
|
|
| 43,166 |
|
|
| 15,492 |
|
|
| — |
|
|
| 395 |
|
|
| 39,267 |
|
|
| — |
|
|
| 1,446,577 |
|
Total Commercial real estate |
|
| 2,602,510 |
|
|
| 2,266,984 |
|
|
| 1,289,966 |
|
|
| 607,516 |
|
|
| 218,711 |
|
|
| 427,787 |
|
|
| 202,612 |
|
|
| — |
|
|
| 7,616,086 |
|
Consumer real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
HELOC |
|
| 237 |
|
|
| — |
|
|
| 618 |
|
|
| 224 |
|
|
| 654 |
|
|
| 5,389 |
|
|
| 339,066 |
|
|
| 981 |
|
|
| 347,169 |
|
First lien: 1-4 family |
|
| 628,703 |
|
|
| 748,362 |
|
|
| 607,105 |
|
|
| 173,466 |
|
|
| 45,907 |
|
|
| 140,443 |
|
|
| 12 |
|
|
| — |
|
|
| 2,343,998 |
|
Junior lien: 1-4 family |
|
| 13,490 |
|
|
| 8,445 |
|
|
| 5,107 |
|
|
| 2,529 |
|
|
| 940 |
|
|
| 1,504 |
|
|
| 87 |
|
|
| — |
|
|
| 32,102 |
|
Total Consumer real estate |
|
| 642,430 |
|
|
| 756,807 |
|
|
| 612,830 |
|
|
| 176,219 |
|
|
| 47,501 |
|
|
| 147,336 |
|
|
| 339,165 |
|
|
| 981 |
|
|
| 2,723,269 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Revolving line |
|
| 467 |
|
|
| 584 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 58,133 |
|
|
| 1,403 |
|
|
| 60,587 |
|
Auto |
|
| 9,124 |
|
|
| 6,543 |
|
|
| 4,455 |
|
|
| 2,743 |
|
|
| 335 |
|
|
| 159 |
|
|
| — |
|
|
| — |
|
|
| 23,359 |
|
Other |
|
| 26,306 |
|
|
| 27,751 |
|
|
| 1,096 |
|
|
| 876 |
|
|
| 1,133 |
|
|
| 591 |
|
|
| 3,967 |
|
|
| — |
|
|
| 61,720 |
|
Total Consumer |
|
| 35,897 |
|
|
| 34,878 |
|
|
| 5,551 |
|
|
| 3,619 |
|
|
| 1,468 |
|
|
| 750 |
|
|
| 62,100 |
|
|
| 1,403 |
|
|
| 145,666 |
|
Credit cards: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Consumer |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 200,348 |
|
|
| — |
|
|
| 200,348 |
|
Commercial |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 231,324 |
|
|
| — |
|
|
| 231,324 |
|
Total Credit cards |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 431,672 |
|
|
| — |
|
|
| 431,672 |
|
Leases and other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Leases |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 712 |
|
|
| — |
|
|
| 1,224 |
|
|
| — |
|
|
| — |
|
|
| 1,936 |
|
Other |
|
| 125,095 |
|
|
| 34,282 |
|
|
| 22,552 |
|
|
| 32,055 |
|
|
| 17,764 |
|
|
| 1,066 |
|
|
| 71,054 |
|
|
| — |
|
|
| 303,868 |
|
Total Leases and other |
|
| 125,095 |
|
|
| 34,282 |
|
|
| 22,552 |
|
|
| 32,767 |
|
|
| 17,764 |
|
|
| 2,290 |
|
|
| 71,054 |
|
|
| — |
|
|
| 305,804 |
|
Total loans |
| $ | 5,578,255 |
|
| $ | 4,716,362 |
|
| $ | 2,611,634 |
|
| $ | 1,089,550 |
|
| $ | 382,756 |
|
| $ | 665,491 |
|
| $ | 5,980,269 |
|
| $ | 6,872 |
|
| $ | 21,031,189 |
|
|
| December 31, 2021 |
| |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Amortized Cost - Revolving Loans |
|
| Amortized Cost - Revolving Loans Converted to Term Loans |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Loan Segment and Type |
| Amortized Cost Basis by Origination Year - Term Loans |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| Prior |
|
|
|
|
|
| Total |
| ||||||||||||
Commercial and industrial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Equipment/Accounts Receivable/Inventory |
| $ | 2,400,110 |
|
| $ | 945,383 |
|
| $ | 356,348 |
|
| $ | 150,892 |
|
| $ | 115,571 |
|
| $ | 131,900 |
|
| $ | 2,984,740 |
|
| $ | 247 |
|
| $ | 7,085,191 |
|
Agriculture |
|
| 12,077 |
|
|
| 5,884 |
|
|
| 3,308 |
|
|
| 640 |
|
|
| 344 |
|
|
| 1,143 |
|
|
| 130,946 |
|
|
| — |
|
|
| 154,342 |
|
Overdrafts |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 18,587 |
|
|
| — |
|
|
| 18,587 |
|
Total Commercial and industrial |
|
| 2,412,187 |
|
|
| 951,267 |
|
|
| 359,656 |
|
|
| 151,532 |
|
|
| 115,915 |
|
|
| 133,043 |
|
|
| 3,134,273 |
|
|
| 247 |
|
|
| 7,258,120 |
|
Specialty lending: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Asset-based lending |
|
| 34,552 |
|
|
| 49,373 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 331,282 |
|
|
| — |
|
|
| 415,207 |
|
Factoring |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 107,155 |
|
|
| — |
|
|
| 107,155 |
|
Total Specialty lending |
|
| 34,552 |
|
|
| 49,373 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 438,437 |
|
|
| — |
|
|
| 522,362 |
|
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Owner-occupied |
|
| 680,135 |
|
|
| 519,448 |
|
|
| 226,631 |
|
|
| 177,576 |
|
|
| 91,539 |
|
|
| 159,482 |
|
|
| 11,727 |
|
|
| — |
|
|
| 1,866,538 |
|
Non-owner-occupied |
|
| 1,058,025 |
|
|
| 689,167 |
|
|
| 591,886 |
|
|
| 162,491 |
|
|
| 135,100 |
|
|
| 258,541 |
|
|
| 10,969 |
|
|
| — |
|
|
| 2,906,179 |
|
Farmland |
|
| 61,505 |
|
|
| 273,624 |
|
|
| 34,145 |
|
|
| 16,969 |
|
|
| 19,929 |
|
|
| 34,858 |
|
|
| 38,239 |
|
|
| 999 |
|
|
| 480,268 |
|
5+ Multi-family |
|
| 58,268 |
|
|
| 95,024 |
|
|
| 41,426 |
|
|
| 1,206 |
|
|
| 511 |
|
|
| 6,820 |
|
|
| 2,057 |
|
|
| — |
|
|
| 205,312 |
|
1-4 Family construction |
|
| 53,004 |
|
|
| 4,933 |
|
|
| 17,333 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 985 |
|
|
| — |
|
|
| 76,255 |
|
General construction |
|
| 439,973 |
|
|
| 160,553 |
|
|
| 64,283 |
|
|
| 38,505 |
|
|
| 203 |
|
|
| 256 |
|
|
| 29,219 |
|
|
| — |
|
|
| 732,992 |
|
Total Commercial real estate |
|
| 2,350,910 |
|
|
| 1,742,749 |
|
|
| 975,704 |
|
|
| 396,747 |
|
|
| 247,282 |
|
|
| 459,957 |
|
|
| 93,196 |
|
|
| 999 |
|
|
| 6,267,544 |
|
Consumer real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
HELOC |
|
| 248 |
|
|
| 547 |
|
|
| 327 |
|
|
| 574 |
|
|
| 646 |
|
|
| 6,363 |
|
|
| 320,410 |
|
|
| 2,523 |
|
|
| 331,638 |
|
First lien: 1-4 family |
|
| 830,513 |
|
|
| 712,264 |
|
|
| 200,167 |
|
|
| 58,734 |
|
|
| 61,641 |
|
|
| 102,997 |
|
|
| 19 |
|
|
| — |
|
|
| 1,966,335 |
|
Junior lien: 1-4 family |
|
| 9,114 |
|
|
| 6,299 |
|
|
| 3,361 |
|
|
| 1,150 |
|
|
| 820 |
|
|
| 1,299 |
|
|
| 17 |
|
|
| — |
|
|
| 22,060 |
|
Total Consumer real estate |
|
| 839,875 |
|
|
| 719,110 |
|
|
| 203,855 |
|
|
| 60,458 |
|
|
| 63,107 |
|
|
| 110,659 |
|
|
| 320,446 |
|
|
| 2,523 |
|
|
| 2,320,033 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Revolving line |
|
| 974 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 60,049 |
|
|
| 120 |
|
|
| 61,143 |
|
Auto |
|
| 9,886 |
|
|
| 7,775 |
|
|
| 5,462 |
|
|
| 1,107 |
|
|
| 479 |
|
|
| 220 |
|
|
| — |
|
|
| — |
|
|
| 24,929 |
|
Other |
|
| 31,391 |
|
|
| 2,041 |
|
|
| 1,949 |
|
|
| 1,543 |
|
|
| 2,542 |
|
|
| 708 |
|
|
| 2,889 |
|
|
| — |
|
|
| 43,063 |
|
Total Consumer |
|
| 42,251 |
|
|
| 9,816 |
|
|
| 7,411 |
|
|
| 2,650 |
|
|
| 3,021 |
|
|
| 928 |
|
|
| 62,938 |
|
|
| 120 |
|
|
| 129,135 |
|
Credit cards: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Consumer |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 180,296 |
|
|
| — |
|
|
| 180,296 |
|
Commercial |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 211,093 |
|
|
| — |
|
|
| 211,093 |
|
Total Credit cards |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 391,389 |
|
|
| — |
|
|
| 391,389 |
|
Leases and other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Leases |
|
| — |
|
|
| — |
|
|
| 814 |
|
|
| — |
|
|
| 739 |
|
|
| 614 |
|
|
| — |
|
|
| — |
|
|
| 2,167 |
|
Other |
|
| 99,952 |
|
|
| 44,113 |
|
|
| 58,164 |
|
|
| 22,344 |
|
|
| 5,631 |
|
|
| 779 |
|
|
| 49,138 |
|
|
| — |
|
|
| 280,121 |
|
Total Leases and other |
|
| 99,952 |
|
|
| 44,113 |
|
|
| 58,978 |
|
|
| 22,344 |
|
|
| 6,370 |
|
|
| 1,393 |
|
|
| 49,138 |
|
|
| — |
|
|
| 282,288 |
|
Total loans |
| $ | 5,779,727 |
|
| $ | 3,516,428 |
|
| $ | 1,605,604 |
|
| $ | 633,731 |
|
| $ | 435,695 |
|
| $ | 705,980 |
|
| $ | 4,489,817 |
|
| $ | 3,889 |
|
| $ | 17,170,871 |
|
Accrued interest on loans totaled $90.6 million and $45.2 million as of December 31, 2022 and 2021, respectively, and is included in the Accrued income line on the Company’s Consolidated Balance Sheets. The total amount of accrued interest is excluded from the amortized cost basis of loans presented above. Further, the Company has elected not to measure an allowance for credit losses for accrued interest receivable.
Credit Quality Indicators
As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to the risk grading of specified classes of loans, net charge-offs, non-performing loans, and general economic conditions.
The Company utilizes a risk grading matrix to assign a rating to each of its commercial, commercial real estate, and construction real estate loans. Changes in credit risk are monitored on a continuous basis and changes in risk ratings are made when identified. The loan rankingsratings are summarized into the following categories: Non-watch list, Watch, Special Mention, Substandard, and Substandard.Doubtful. Any loan not classified in one of the categories described below is considered to be a Non-watch list loan. A description of the general characteristics of the loan rankingrating categories is as follows:
Watch – This rating represents credit exposure that presents higher than average risk and warrants greater than routine attention by Company personnel due to conditions affecting the borrower, the Borrower’s industry or the economic environment. These conditions have resulted in some degree of uncertainty that results in higher than average credit risk.
• | Watch – This rating represents credit exposure that presents higher than average risk and warrants greater than routine attention by Company personnel due to conditions affecting the borrower, the borrower’s industry, or the economic environment. These conditions have resulted in some degree of uncertainty that results in higher-than-average credit risk. These loans are considered pass-rated credits. |
Special Mention – This rating reflects a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or the institution’s credit position at some future date. The rating is not adversely classified and does not expose an institution to sufficient risk to warrant adverse classification.
• | Special Mention – This rating reflects a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or the borrower’s credit position at some future date. The rating is not adversely classified and does not expose an institution to sufficient risk to warrant adverse classification. |
• Substandard – This rating represents an asset inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Loans in this category are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified as substandard.Substandard
• | Doubtful – This rating represents an asset that has all the weaknesses inherent in an asset classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, based on currently existing facts, conditions and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors, which may work to the advantage of strengthening the asset, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors include proposed merger, acquisition, liquidation procedures, capital injection, or perfecting liens. |
Commercial and industrial
A discussion of the credit quality indicators that impact each type of collateral securing Commercial and industrial loans is included below:
Equipment, accounts receivable, and inventory General commercial and industrial loans are secured by working capital assets and non-real estate assets. The general purpose of these loans is for financing capital expenditures and current operations for commercial and industrial entities. These assets are short-term in nature. In the case of accounts receivable and inventories, the repayment of debt is reliant upon converting assets into cash or through goods and services being sold and collected. Collateral-based risk is due to aged short-term assets, which can be indicative of underlying issues with the borrower and lead to the value of the collateral pledged, if any. Assetsbeing overstated.
Agriculture Agricultural loans are secured by non-real estate agricultural assets. These include shorter-term assets such as equipment, crops, and livestock. The risks associated with loans to finance crops or livestock include the borrower’s ability to successfully raise and market the commodity. Adverse weather conditions and other natural perils can dramatically affect farmers’ or ranchers’ production and ability to service debt. Volatile commodity prices present another significant risk for agriculture borrowers. Market price volatility and production cost volatility can affect both revenues and expenses.
Overdrafts Commercial overdrafts are typically short-term and unsecured. Some commercial borrowers tie their overdraft obligation to their line of credit, so classified must haveany draw on the line of credit will satisfy the overdraft.
Based on the factors noted above for each type of collateral, the Company assigns risk ratings to borrowers based on their most recently assessed financial position.
The following tables provide a well-defined weakness or weaknesses that jeopardize the liquidationsummary of the debt. Loans in this categoryamortized cost balance by collateral type and risk rating as of December 31, 2022 and 2021 (in thousands):
|
| December 31, 2022 |
| |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Amortized Cost - Revolving Loans |
|
| Amortized Cost - Revolving Loans Converted to Term Loans |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Risk by Collateral |
| Amortized Cost Basis by Origination Year - Term Loans |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
| 2022 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| Prior |
|
|
|
|
|
| Total |
| ||||||||||||
Equipment/Accounts Receivable/Inventory |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-watch list – Pass |
| $ | 2,079,002 |
|
| $ | 1,466,120 |
|
| $ | 588,562 |
|
| $ | 246,387 |
|
| $ | 90,656 |
|
| $ | 83,054 |
|
| $ | 3,879,709 |
|
| $ | 3,633 |
|
| $ | 8,437,123 |
|
Watch – Pass |
|
| 28,570 |
|
|
| 78,523 |
|
|
| 52,696 |
|
|
| 7,493 |
|
|
| 3,617 |
|
|
| 2,275 |
|
|
| 213,871 |
|
|
| — |
|
|
| 387,045 |
|
Special Mention |
|
| 4,072 |
|
|
| 5,637 |
|
|
| 1,178 |
|
|
| — |
|
|
| 1,817 |
|
|
| 899 |
|
|
| 34,631 |
|
|
| — |
|
|
| 48,234 |
|
Substandard |
|
| 26,698 |
|
|
| 12,247 |
|
|
| 213 |
|
|
| 13,564 |
|
|
| 826 |
|
|
| 559 |
|
|
| 92,352 |
|
|
| 293 |
|
|
| 146,752 |
|
Doubtful |
|
| 2,267 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,795 |
|
|
| — |
|
|
| 5,062 |
|
Total Equipment/Accounts Receivable/Inventory |
| $ | 2,140,609 |
|
| $ | 1,562,527 |
|
| $ | 642,649 |
|
| $ | 267,444 |
|
| $ | 96,916 |
|
| $ | 86,787 |
|
| $ | 4,223,358 |
|
| $ | 3,926 |
|
| $ | 9,024,216 |
|
Agriculture |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-watch list – Pass |
| $ | 12,252 |
|
| $ | 5,351 |
|
| $ | 1,693 |
|
| $ | 1,985 |
|
| $ | 396 |
|
| $ | 541 |
|
| $ | 137,759 |
|
| $ | — |
|
| $ | 159,977 |
|
Watch – Pass |
|
| 550 |
|
|
| — |
|
|
| 206 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8,512 |
|
|
| 562 |
|
|
| 9,830 |
|
Special Mention |
|
| 828 |
|
|
| 64 |
|
|
| 147 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,539 |
|
|
| — |
|
|
| 2,578 |
|
Substandard |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,456 |
|
|
| — |
|
|
| 1,456 |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total Agriculture |
| $ | 13,630 |
|
| $ | 5,415 |
|
| $ | 2,046 |
|
| $ | 1,985 |
|
| $ | 396 |
|
| $ | 541 |
|
| $ | 149,266 |
|
| $ | 562 |
|
| $ | 173,841 |
|
|
| December 31, 2021 |
| |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Amortized Cost - Revolving Loans |
|
| Amortized Cost - Revolving Loans Converted to Term Loans |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Risk by Collateral |
| Amortized Cost Basis by Origination Year - Term Loans |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| Prior |
|
|
|
|
|
| Total |
| ||||||||||||
Equipment/Accounts Receivable/Inventory |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-watch list – Pass |
| $ | 2,299,784 |
|
| $ | 874,786 |
|
| $ | 325,630 |
|
| $ | 141,667 |
|
| $ | 106,141 |
|
| $ | 130,153 |
|
| $ | 2,750,764 |
|
| $ | 247 |
|
| $ | 6,629,172 |
|
Watch – Pass |
|
| 68,322 |
|
|
| 34,324 |
|
|
| 25,572 |
|
|
| 5,056 |
|
|
| 1,794 |
|
|
| 698 |
|
|
| 106,177 |
|
|
| — |
|
|
| 241,943 |
|
Special Mention |
|
| 5,886 |
|
|
| — |
|
|
| 2,600 |
|
|
| 592 |
|
|
| 1,742 |
|
|
| 997 |
|
|
| 41,209 |
|
|
| — |
|
|
| 53,026 |
|
Substandard |
|
| 25,466 |
|
|
| 3,023 |
|
|
| 2,546 |
|
|
| 3,577 |
|
|
| 1,202 |
|
|
| 52 |
|
|
| 45,053 |
|
|
| — |
|
|
| 80,919 |
|
Doubtful |
|
| 652 |
|
|
| 33,250 |
|
|
| — |
|
|
| — |
|
|
| 4,692 |
|
|
| — |
|
|
| 41,537 |
|
|
| — |
|
|
| 80,131 |
|
Total Equipment/Accounts Receivable/Inventory |
| $ | 2,400,110 |
|
| $ | 945,383 |
|
| $ | 356,348 |
|
| $ | 150,892 |
|
| $ | 115,571 |
|
| $ | 131,900 |
|
| $ | 2,984,740 |
|
| $ | 247 |
|
| $ | 7,085,191 |
|
Agriculture |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-watch list – Pass |
| $ | 11,512 |
|
| $ | 5,394 |
|
| $ | 2,608 |
|
| $ | 212 |
|
| $ | 344 |
|
| $ | 1,143 |
|
| $ | 100,630 |
|
| $ | — |
|
| $ | 121,843 |
|
Watch – Pass |
|
| 500 |
|
|
| 222 |
|
|
| 328 |
|
|
| 428 |
|
|
| — |
|
|
| — |
|
|
| 6,532 |
|
|
| — |
|
|
| 8,010 |
|
Special Mention |
|
| — |
|
|
| — |
|
|
| 372 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,361 |
|
|
| — |
|
|
| 1,733 |
|
Substandard |
|
| 65 |
|
|
| 268 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 22,423 |
|
|
| — |
|
|
| 22,756 |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total Agriculture |
| $ | 12,077 |
|
| $ | 5,884 |
|
| $ | 3,308 |
|
| $ | 640 |
|
| $ | 344 |
|
| $ | 1,143 |
|
| $ | 130,946 |
|
| $ | — |
|
| $ | 154,342 |
|
Specialty lending
A discussion of the credit quality indicators that impact each type of collateral securing Specialty loans is included below:
Asset-based lending General asset-based loans are characterizedsecured by accounts receivable, inventory, equipment, and real estate. The purpose of these loans is for financing current operations for commercial customers. The repayment of debt is reliant upon collection of the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandardaccounts receivable within 30 to 90 days or converting assets does not haveinto cash or through goods and services being sold and collected. The Company tracks each individual borrower credit risk based on their loan to exist in individual assets classified substandard. This category may include loanscollateral position. Any borrower position where the underlying value of collateral is below the fair value of the loan is considered out-of-margin and inherently higher risk.
Factoring During the first quarter of 2022, the Company sold its factoring loan portfolio to an alternative financing company. Prior to the sale of this portfolio, factoring loans were secured by accounts receivable. The purpose of these loans was for financing current operations for trucking or other commercial customers. The repayment of debt was reliant upon collection of full principal is doubtful or remote.
All other classes of loans are generally evaluated and monitoredthe accounts receivable within 30 to 90 days. The Company tracked each individual borrower’s credit risk based on payment activity. Non-performingtheir loan to collateral position. To assess credit risk, the portfolio was separated into two tiers and a specifically impaired category. Tier 1 were loans include restructuredthat had not experienced collateral coverage rates falling below an internally tracked threshold at any time during their relationship history. The internal threshold was lower than each customers’ actual contractual collateral coverage ratio. Tier 2 were loans that had experienced collateral coverage rates falling below the same internally tracked threshold during their relationship history. Loans individually evaluated were loans that had either experienced collateral coverage rates falling below an internally tracked threshold during their relationship history or had balances that were greater than an internally tracked threshold. Individually evaluated loans utilized a practical expedient for the purpose of determining the expected credit loss. Collateral dependent assets were loans placed on non-accrual and all other non-accrual loans.loans considered to be TDRs. The combination of these categories created an associated allowance to this portfolio of $1.0 million as of December 31, 2021.
ThisThe following table provides an analysisa summary of the amortized cost balance by risk rating for asset-based loans as of December 31, 2022 and 2021 (in thousands):
|
| Asset-based lending |
| |||||
Risk |
| December 31, 2022 |
|
| December 31, 2021 |
| ||
In-margin |
| $ | 602,706 |
|
| $ | 409,844 |
|
Out-of-margin |
|
| — |
|
|
| 5,363 |
|
Total |
| $ | 602,706 |
|
| $ | 415,207 |
|
The following table provides a summary of the amortized cost balance by risk rating for factoring loans as of December 31, 2021 (in thousands):
|
| Factoring |
| |
Risk |
| December 31, 2021 |
| |
Tier 1 |
| $ | 9,433 |
|
Tier 2 |
|
| 65,149 |
|
Evaluated for impairment |
|
| 32,573 |
|
Collateral dependent assets |
|
| — |
|
Total |
| $ | 107,155 |
|
Commercial real estate
A discussion of the credit quality indicators that impact each type of collateral securing Commercial real estate loans is included below:
Owner-occupied Owner-occupied loans are secured by commercial real estate. These loans are often longer tenured and susceptible to multiple economic cycles. The loans rely on the owner-occupied operations to service debt which cover a broad spectrum of industries. Real estate debt can carry a significant amount of leverage for a borrower to maintain.
Non-owner-occupied Non-owner-occupied loans are secured by commercial real estate. These loans are often longer tenured and susceptible to multiple economic cycles. The key element of risk profilein this type of each loan class excluded from ASC 310-30, Loanslending is the cyclical nature of real estate markets. Although national conditions affect the overall real estate industry, the effect of national conditions on local markets is equally important. Factors such as unemployment rates, consumer
demand, household formation, and Debt Securities Purchased with Deteriorated Credit Quality, at December 31, 2017 and December 31, 2016 (in thousands):
Credit Exposure
Credit Risk Profile by Risk Rating
Originated and Non-PCI Loans
|
| Commercial |
|
| Asset-based |
|
| Factoring |
| |||||||||||||||
|
| December 31, 2017 |
|
| December 31, 2016 |
|
| December 31, 2017 |
|
| December 31, 2016 |
|
| December 31, 2017 |
|
| December 31, 2016 |
| ||||||
Non-watch list |
| $ | 4,048,238 |
|
| $ | 4,043,704 |
|
| $ | 306,899 |
|
| $ | 198,695 |
|
| $ | 220,795 |
|
| $ | 139,358 |
|
Watch |
|
| 162,788 |
|
|
| 99,815 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Special Mention |
|
| 106,638 |
|
|
| 32,240 |
|
|
| 29,715 |
|
|
| 24,809 |
|
|
| 47 |
|
|
| 129 |
|
Substandard |
|
| 235,376 |
|
|
| 235,047 |
|
|
| — |
|
|
| 2,374 |
|
|
| 830 |
|
|
| 415 |
|
Total |
| $ | 4,553,040 |
|
| $ | 4,410,806 |
|
| $ | 336,614 |
|
| $ | 225,878 |
|
| $ | 221,672 |
|
| $ | 139,902 |
|
|
| Real estate – construction |
|
| Real estate – commercial |
| ||||||||||
|
| December 31, 2017 |
|
| December 31, 2016 |
|
| December 31, 2017 |
|
| December 31, 2016 |
| ||||
Non-watch list |
| $ | 716,830 |
|
| $ | 741,022 |
|
| $ | 3,434,982 |
|
| $ | 3,071,804 |
|
Watch |
|
| 631 |
|
|
| 149 |
|
|
| 50,715 |
|
|
| 43,015 |
|
Special Mention |
|
| — |
|
|
| — |
|
|
| 35,940 |
|
|
| 5,140 |
|
Substandard |
|
| 388 |
|
|
| 633 |
|
|
| 41,993 |
|
|
| 45,963 |
|
Total |
| $ | 717,849 |
|
| $ | 741,804 |
|
| $ | 3,563,630 |
|
| $ | 3,165,922 |
|
Credit Exposure
Credit Risk Profile Based on Payment Activity
Originated and Non-PCI Loans
|
| Commercial – credit card |
|
| Real estate – residential |
|
| Real estate – HELOC |
| |||||||||||||||
|
| December 31, 2017 |
|
| December 31, 2016 |
|
| December 31, 2017 |
|
| December 31, 2016 |
|
| December 31, 2017 |
|
| December 31, 2016 |
| ||||||
Performing |
| $ | 172,291 |
|
| $ | 146,727 |
|
| $ | 637,662 |
|
| $ | 547,006 |
|
| $ | 645,366 |
|
| $ | 707,058 |
|
Non-performing |
|
| — |
|
|
| 8 |
|
|
| 929 |
|
|
| 1,344 |
|
|
| 3,013 |
|
|
| 4,736 |
|
Total |
| $ | 172,291 |
|
| $ | 146,735 |
|
| $ | 638,591 |
|
| $ | 548,350 |
|
| $ | 648,379 |
|
| $ | 711,794 |
|
|
| Consumer – credit card |
|
| Consumer – other |
|
| Leases |
| |||||||||||||||
|
| December 31, 2017 |
|
| December 31, 2016 |
|
| December 31, 2017 |
|
| December 31, 2016 |
|
| December 31, 2017 |
|
| December 31, 2016 |
| ||||||
Performing |
| $ | 252,385 |
|
| $ | 269,623 |
|
| $ | 151,747 |
|
| $ | 127,447 |
|
| $ | 23,967 |
|
| $ | 39,532 |
|
Non-performing |
|
| 312 |
|
|
| 475 |
|
|
| 36 |
|
|
| 11,315 |
|
|
| — |
|
|
| — |
|
Total |
| $ | 252,697 |
|
| $ | 270,098 |
|
| $ | 151,783 |
|
| $ | 138,762 |
|
| $ | 23,967 |
|
| $ | 39,532 |
|
Allowance for Loan Losses
The allowance for loan losses is a reserve established through a provision for loan losses charged to expense, which represents management’s judgment of inherent probable losses within the Company’s loan portfolio as of the balance sheet date. The allowance is necessary to reserve for estimated loan losses and risks inherent in the loan portfolio. Accordingly, the methodology is based on historical loss trends. The Company’s process for determining the appropriate level of the allowance for loan losses is designedeconomic activity can vary widely from state to account for credit deterioration as it occurs. The provision for probable loan losses reflects loan quality trends, including the levels ofstate and trends relatedamong metropolitan areas. In addition to non-accrual loans, past due loans, potential problem loans, criticized loans and net charge-offs or recoveries, among other factors.
The level of the allowance reflects management’s continuing evaluation of industry concentrations, specific credit risks, loan loss experience, current loan portfolio quality, present economic, political and regulatory conditions and unidentified losses inherent in the current loan portfolio. Portions of the allowance maygeographic considerations, markets can be allocated for specific loans; however, the entire allowance is available for any loan that, in management’s judgment, should be charged off.defined by property type. While management utilizes its best judgment and information available, the adequacy of the allowance is dependent upon a variety of factors beyond the Company’s control, including, among other things, the performance of the Company’s loan portfolio, the economy, changes in interest rates and changes in the regulatory environment.
The Company’s allowance for loan losses consists of specific valuation allowances and general valuation allowances based on historical loan loss experience for similar loans with similar characteristics and trends, generalall sectors are influenced by economic conditions, and other qualitative risksome sectors are more sensitive to certain economic factors both internal and external to the Company.than others.
The allowances established for probable losses on specificFarmland Farmland loans are based on a regular analysissecured by real estate used for agricultural purposes such as crop and evaluation of impaired loans. Loanslivestock production. Assets used as collateral are classified based on an internal risk grading processlong-term assets that evaluatescarry the obligor’s ability to repay,have longer amortizations and maturities. Longer terms carry the underlyingrisk of added susceptibility to market conditions. The limited purpose of some Agriculture-related collateral if any,affects credit risk because such collateral may have limited or no other uses to support values when loan repayment problems emerge.
5+ Multi-family 5+ multi-family loans are secured by a multi-family residential property. The primary risks associated with this type of collateral are largely driven by economic conditions. The national and the economic environmentlocal market conditions can change with unemployment rates or competing supply of multi-family housing. Tenants may not be able to afford their housing or have better options and industrythis can result in which the borrower operates. When a loan is considered impaired, the loan is analyzedincreased vacancy. Rents may need to determine the need, if any,be lowered to specifically allocate a portion of the allowance for loan losses to the loan. Specific valuation allowances are determined by analyzingfill apartment units. Increased vacancy and lower rental rates not only drive the borrower’s ability to repay amounts owed,debt but also contribute to how the collateral deficiencies,is valued.
1-4 Family construction 1-4 family construction loans are secured by 1-4 family residential real estate and are in the relativeprocess of construction or improvements being made. The predominant risk rankinginherent to this portfolio is the risk associated with a borrower’s ability to successfully complete a project on time and within budget. Market conditions also play an important role in understanding the risk profile. Risk from adverse changes in market conditions from the start of the loan and economic conditions affecting the borrower’s industry.development to completion can result in deflated collateral values.
General valuation allowancesconstruction General construction loans are calculated based on the historical loss experience of specific types of loans including an evaluation of the time span and volume of the actual charge-off. The Company calculates historical loss ratios for pools of similar loans with similar characteristics based on the proportion of actual charge-offs experienced to the total population of loans in the pool. The historical loss ratios are updated based on actual charge-off experience. A valuation allowance is established for each pool of similar loans based upon the product of the historical loss ratio, time span to charge-off, and the total dollar amount of the loans in the pool. The Company’s pools of similar loans include similarly risk-graded groups of commercial loans,secured by commercial real estate loans, commercialin process of construction or improvements being made and their repayment is dependent on the collateral’s completion. Construction lending presents unique risks not encountered in term financing of existing real estate. The predominant risk inherent to this portfolio is the risk associated with a borrower’s ability to successfully complete a project on time and within budget. Commercial properties under construction are susceptible to market and economic conditions. Demand from prospective customers may erode after construction begins because of a general economic slowdown or an increase in the supply of competing properties.
Based on the factors noted above for each type of collateral, the Company assigns risk ratings to borrowers based on their most recently assessed financial position.
The following tables provide a summary of the amortized cost balance by collateral type and risk rating as of December 31, 2022 and 2021 (in thousands):
|
| December 31, 2022 |
| |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Amortized Cost - Revolving Loans |
|
| Amortized Cost - Revolving Loans Converted to Term Loans |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| �� |
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Risk by Collateral |
| Amortized Cost Basis by Origination Year - Term Loans |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
| 2022 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| Prior |
|
|
|
|
|
| Total |
| ||||||||||||
Owner-occupied |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-watch list – Pass |
| $ | 628,858 |
|
| $ | 559,067 |
|
| $ | 364,760 |
|
| $ | 149,183 |
|
| $ | 133,339 |
|
| $ | 162,412 |
|
| $ | 7,850 |
|
| $ | — |
|
| $ | 2,005,469 |
|
Watch – Pass |
|
| 19,405 |
|
|
| 32,581 |
|
|
| 17,061 |
|
|
| 9,785 |
|
|
| 2,664 |
|
|
| 2,121 |
|
|
| — |
|
|
| — |
|
|
| 83,617 |
|
Special Mention |
|
| 5,435 |
|
|
| 2,213 |
|
|
| 5,120 |
|
|
| 18,946 |
|
|
| — |
|
|
| — |
|
|
| 835 |
|
|
| — |
|
|
| 32,549 |
|
Substandard |
|
| 3,162 |
|
|
| — |
|
|
| 1,578 |
|
|
| 2,872 |
|
|
| 496 |
|
|
| 3,095 |
|
|
| — |
|
|
| — |
|
|
| 11,203 |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total Owner-occupied |
| $ | 656,860 |
|
| $ | 593,861 |
|
| $ | 388,519 |
|
| $ | 180,786 |
|
| $ | 136,499 |
|
| $ | 167,628 |
|
| $ | 8,685 |
|
| $ | — |
|
| $ | 2,132,838 |
|
Non-owner-occupied |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-watch list – Pass |
| $ | 1,075,444 |
|
| $ | 810,926 |
|
| $ | 568,489 |
|
| $ | 356,896 |
|
| $ | 64,915 |
|
| $ | 214,635 |
|
| $ | 28,679 |
|
| $ | — |
|
| $ | 3,119,984 |
|
Watch – Pass |
|
| 53,534 |
|
|
| 44,582 |
|
|
| — |
|
|
| 11,307 |
|
|
| — |
|
|
| 5,071 |
|
|
| — |
|
|
| — |
|
|
| 114,494 |
|
Special Mention |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 10,109 |
|
|
| — |
|
|
| — |
|
|
| 10,109 |
|
Substandard |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 11 |
|
|
| — |
|
|
| — |
|
|
| 11 |
|
Total Non-owner-occupied |
| $ | 1,128,978 |
|
| $ | 855,508 |
|
| $ | 568,489 |
|
| $ | 368,203 |
|
| $ | 64,915 |
|
| $ | 229,826 |
|
| $ | 28,679 |
|
| $ | — |
|
| $ | 3,244,598 |
|
Farmland |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-watch list – Pass |
| $ | 62,357 |
|
| $ | 36,698 |
|
| $ | 218,704 |
|
| $ | 17,563 |
|
| $ | 2,830 |
|
| $ | 20,285 |
|
| $ | 113,385 |
|
| $ | — |
|
| $ | 471,822 |
|
Watch – Pass |
|
| 20,327 |
|
|
| 6,454 |
|
|
| 1,055 |
|
|
| 101 |
|
|
| — |
|
|
| 2,559 |
|
|
| 395 |
|
|
| — |
|
|
| 30,891 |
|
Special Mention |
|
| 5,505 |
|
|
| — |
|
|
| 1,001 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,506 |
|
Substandard |
|
| 6,800 |
|
|
| 3,940 |
|
|
| 36 |
|
|
| 6,393 |
|
|
| 13,133 |
|
|
| 1,318 |
|
|
| 7,274 |
|
|
| — |
|
|
| 38,894 |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total Farmland |
| $ | 94,989 |
|
| $ | 47,092 |
|
| $ | 220,796 |
|
| $ | 24,057 |
|
| $ | 15,963 |
|
| $ | 24,162 |
|
| $ | 121,054 |
|
| $ | — |
|
| $ | 548,113 |
|
5+ Multi-family |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-watch list – Pass |
| $ | 30,920 |
|
| $ | 35,869 |
|
| $ | 68,996 |
|
| $ | 18,978 |
|
| $ | 1,334 |
|
| $ | 5,776 |
|
| $ | 4,908 |
|
| $ | — |
|
| $ | 166,781 |
|
Watch – Pass |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Special Mention |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Substandard |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total 5+ Multi-family |
| $ | 30,920 |
|
| $ | 35,869 |
|
| $ | 68,996 |
|
| $ | 18,978 |
|
| $ | 1,334 |
|
| $ | 5,776 |
|
| $ | 4,908 |
|
| $ | — |
|
| $ | 166,781 |
|
1-4 Family construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-watch list – Pass |
| $ | 61,943 |
|
| $ | 15,217 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 19 |
|
| $ | — |
|
| $ | 77,179 |
|
Watch – Pass |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Special Mention |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Substandard |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total 1-4 Family construction |
| $ | 61,943 |
|
| $ | 15,217 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 19 |
|
| $ | — |
|
| $ | 77,179 |
|
General construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-watch list – Pass |
| $ | 628,479 |
|
| $ | 699,698 |
|
| $ | 43,166 |
|
| $ | 15,384 |
|
| $ | — |
|
| $ | 380 |
|
| $ | 39,267 |
|
| $ | — |
|
| $ | 1,426,374 |
|
Watch – Pass |
|
| 341 |
|
|
| — |
|
|
| — |
|
|
| 22 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 363 |
|
Special Mention |
|
| — |
|
|
| 8,340 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8,340 |
|
Substandard |
|
| — |
|
|
| 11,399 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 15 |
|
|
| — |
|
|
| — |
|
|
| 11,414 |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 86 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 86 |
|
Total General construction |
| $ | 628,820 |
|
| $ | 719,437 |
|
| $ | 43,166 |
|
| $ | 15,492 |
|
| $ | — |
|
| $ | 395 |
|
| $ | 39,267 |
|
| $ | — |
|
| $ | 1,446,577 |
|
|
| December 31, 2021 |
| |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Amortized Cost - Revolving Loans |
|
| Amortized Cost - Revolving Loans Converted to Term Loans |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Risk by Collateral |
| Amortized Cost Basis by Origination Year - Term Loans |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| Prior |
|
|
|
|
|
| Total |
| ||||||||||||
Owner-occupied |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-watch list – Pass |
| $ | 679,662 |
|
| $ | 507,220 |
|
| $ | 208,376 |
|
| $ | 174,352 |
|
| $ | 89,588 |
|
| $ | 154,920 |
|
| $ | 11,627 |
|
| $ | — |
|
| $ | 1,825,745 |
|
Watch – Pass |
|
| 191 |
|
|
| 10,891 |
|
|
| 16,493 |
|
|
| 1,055 |
|
|
| 1,143 |
|
|
| 1,572 |
|
|
| — |
|
|
| — |
|
|
| 31,345 |
|
Special Mention |
|
| 93 |
|
|
| 1,304 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,397 |
|
Substandard |
|
| 189 |
|
|
| 33 |
|
|
| 1,762 |
|
|
| 2,169 |
|
|
| 808 |
|
|
| 2,990 |
|
|
| 100 |
|
|
| — |
|
|
| 8,051 |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total Owner-occupied |
| $ | 680,135 |
|
| $ | 519,448 |
|
| $ | 226,631 |
|
| $ | 177,576 |
|
| $ | 91,539 |
|
| $ | 159,482 |
|
| $ | 11,727 |
|
| $ | — |
|
| $ | 1,866,538 |
|
Non-owner-occupied |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-watch list – Pass |
| $ | 976,097 |
|
| $ | 679,313 |
|
| $ | 536,084 |
|
| $ | 143,243 |
|
| $ | 129,820 |
|
| $ | 219,701 |
|
| $ | 10,969 |
|
| $ | — |
|
| $ | 2,695,227 |
|
Watch – Pass |
|
| 57,052 |
|
|
| 1,277 |
|
|
| 55,802 |
|
|
| 19,248 |
|
|
| 5,280 |
|
|
| 2,587 |
|
|
| — |
|
|
| — |
|
|
| 141,246 |
|
Special Mention |
|
| 24,876 |
|
|
| 8,577 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 36,223 |
|
|
| — |
|
|
| — |
|
|
| 69,676 |
|
Substandard |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 30 |
|
|
| — |
|
|
| — |
|
|
| 30 |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total Non-owner-occupied |
| $ | 1,058,025 |
|
| $ | 689,167 |
|
| $ | 591,886 |
|
| $ | 162,491 |
|
| $ | 135,100 |
|
| $ | 258,541 |
|
| $ | 10,969 |
|
| $ | — |
|
| $ | 2,906,179 |
|
Farmland |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-watch list – Pass |
| $ | 40,526 |
|
| $ | 246,955 |
|
| $ | 26,332 |
|
| $ | 2,147 |
|
| $ | 19,199 |
|
| $ | 29,136 |
|
| $ | 28,276 |
|
| $ | — |
|
| $ | 392,571 |
|
Watch – Pass |
|
| 2,263 |
|
|
| 10,177 |
|
|
| — |
|
|
| 823 |
|
|
| 213 |
|
|
| 4,889 |
|
|
| — |
|
|
| — |
|
|
| 18,365 |
|
Special Mention |
|
| 3,800 |
|
|
| — |
|
|
| 6,875 |
|
|
| 13,983 |
|
|
| 517 |
|
|
| — |
|
|
| 8,999 |
|
|
| — |
|
|
| 34,174 |
|
Substandard |
|
| 14,916 |
|
|
| 16,492 |
|
|
| 938 |
|
|
| 16 |
|
|
| — |
|
|
| 833 |
|
|
| 964 |
|
|
| 999 |
|
|
| 35,158 |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total Farmland |
| $ | 61,505 |
|
| $ | 273,624 |
|
| $ | 34,145 |
|
| $ | 16,969 |
|
| $ | 19,929 |
|
| $ | 34,858 |
|
| $ | 38,239 |
|
| $ | 999 |
|
| $ | 480,268 |
|
5+ Multi-family |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-watch list – Pass |
| $ | 58,268 |
|
| $ | 95,024 |
|
| $ | 41,426 |
|
| $ | 1,206 |
|
| $ | 511 |
|
| $ | 6,820 |
|
| $ | 2,057 |
|
| $ | — |
|
| $ | 205,312 |
|
Watch – Pass |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Special Mention |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Substandard |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total 5+ Multi-family |
| $ | 58,268 |
|
| $ | 95,024 |
|
| $ | 41,426 |
|
| $ | 1,206 |
|
| $ | 511 |
|
| $ | 6,820 |
|
| $ | 2,057 |
|
| $ | — |
|
| $ | 205,312 |
|
1-4 Family construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-watch list – Pass |
| $ | 53,004 |
|
| $ | 4,933 |
|
| $ | 17,333 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 985 |
|
| $ | — |
|
| $ | 76,255 |
|
Watch – Pass |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Special Mention |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Substandard |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total 1-4 Family construction |
| $ | 53,004 |
|
| $ | 4,933 |
|
| $ | 17,333 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 985 |
|
| $ | — |
|
| $ | 76,255 |
|
General construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-watch list – Pass |
| $ | 436,696 |
|
| $ | 160,553 |
|
| $ | 62,675 |
|
| $ | 38,505 |
|
| $ | 203 |
|
| $ | 239 |
|
| $ | 29,219 |
|
| $ | — |
|
| $ | 728,090 |
|
Watch – Pass |
|
| 3,277 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,277 |
|
Special Mention |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Substandard |
|
| — |
|
|
| — |
|
|
| 1,522 |
|
|
| — |
|
|
| — |
|
|
| 17 |
|
|
| — |
|
|
| — |
|
|
| 1,539 |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| 86 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 86 |
|
Total General construction |
| $ | 439,973 |
|
| $ | 160,553 |
|
| $ | 64,283 |
|
| $ | 38,505 |
|
| $ | 203 |
|
| $ | 256 |
|
| $ | 29,219 |
|
| $ | — |
|
| $ | 732,992 |
|
Consumer real estate
A discussion of the credit card, home equity loans, consumerquality indicators that impact each type of collateral securing Consumer real estate loans is included below:
HELOC HELOC loans are revolving lines of credit secured by 1-4 family residential property. The primary risk is the borrower’s inability to repay debt. Revolving notes are often associated with HELOCs that can be secured by real estate without a 1st lien priority. Collateral is susceptible to market volatility impacting home values or economic downturns.
First lien: 1-4 family First lien 1-4 family loans are secured by a first lien on 1-4 family residential property. These term loans carry longer maturities and consumeramortizations. The longer tenure exposes the borrower to multiple economic cycles, coupled with longer amortizations that result in smaller principal reduction early in the life of the loan. Collateral is susceptible to market volatility impacting home values.
Junior lien: 1-4 family Junior lien 1-4 family loans are secured by a junior lien on 1-4 family residential property. The Company’s primary risk is the borrower’s inability to repay debt and other loans. Thenot being in a first lien position. Collateral is susceptible to market volatility impacting home values or economic downturns.
A borrower is considered non-performing if the Company also considershas ceased the recognition of interest and the loan is placed on non-accrual. Charge-offs and borrower performance are tracked on a loan migration analysis for criticized loans. This analysis includes an assessmentorigination vintage basis. Certain vintages, based on their maturation cycle, could be at higher risk due to collateral-based risk factors.
The following tables provide a summary of the probabilityamortized cost balance by collateral type and risk rating as of December 31, 2022 and 2021 (in thousands):
|
| December 31, 2022 |
| |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Amortized Cost - Revolving Loans |
|
| Amortized Cost - Revolving Loans Converted to Term Loans |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Risk by Collateral |
| Amortized Cost Basis by Origination Year - Term Loans |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
| 2022 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| Prior |
|
|
|
|
|
| Total |
| ||||||||||||
HELOC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing |
| $ | 120 |
|
| $ | — |
|
| $ | 592 |
|
| $ | 90 |
|
| $ | 148 |
|
| $ | 3,919 |
|
| $ | 338,979 |
|
| $ | 759 |
|
| $ | 344,607 |
|
Non-performing |
|
| 117 |
|
|
| — |
|
|
| 26 |
|
|
| 134 |
|
|
| 506 |
|
|
| 1,470 |
|
|
| 87 |
|
|
| 222 |
|
|
| 2,562 |
|
Total HELOC |
| $ | 237 |
|
| $ | — |
|
| $ | 618 |
|
| $ | 224 |
|
| $ | 654 |
|
| $ | 5,389 |
|
| $ | 339,066 |
|
| $ | 981 |
|
| $ | 347,169 |
|
First lien: 1-4 family |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing |
| $ | 628,678 |
|
| $ | 748,269 |
|
| $ | 607,055 |
|
| $ | 173,061 |
|
| $ | 45,907 |
|
| $ | 138,764 |
|
| $ | 12 |
|
| $ | — |
|
| $ | 2,341,746 |
|
Non-performing |
|
| 25 |
|
|
| 93 |
|
|
| 50 |
|
|
| 405 |
|
|
| — |
|
|
| 1,679 |
|
|
| — |
|
|
| — |
|
|
| 2,252 |
|
Total First lien: 1-4 family |
| $ | 628,703 |
|
| $ | 748,362 |
|
| $ | 607,105 |
|
| $ | 173,466 |
|
| $ | 45,907 |
|
| $ | 140,443 |
|
| $ | 12 |
|
| $ | — |
|
| $ | 2,343,998 |
|
Junior lien: 1-4 family |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing |
| $ | 13,490 |
|
| $ | 8,445 |
|
| $ | 5,107 |
|
| $ | 2,529 |
|
| $ | 940 |
|
| $ | 1,437 |
|
| $ | 87 |
|
| $ | — |
|
| $ | 32,035 |
|
Non-performing |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 67 |
|
|
| — |
|
|
| — |
|
|
| 67 |
|
Total Junior lien: 1-4 family |
| $ | 13,490 |
|
| $ | 8,445 |
|
| $ | 5,107 |
|
| $ | 2,529 |
|
| $ | 940 |
|
| $ | 1,504 |
|
| $ | 87 |
|
| $ | — |
|
| $ | 32,102 |
|
|
| December 31, 2021 |
| |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Amortized Cost - Revolving Loans |
|
| Amortized Cost - Revolving Loans Converted to Term Loans |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Risk by Collateral |
| Amortized Cost Basis by Origination Year - Term Loans |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| Prior |
|
|
|
|
|
| Total |
| ||||||||||||
HELOC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing |
| $ | 248 |
|
| $ | 531 |
|
| $ | 188 |
|
| $ | 165 |
|
| $ | 381 |
|
| $ | 4,956 |
|
| $ | 320,241 |
|
| $ | 2,440 |
|
| $ | 329,150 |
|
Non-performing |
|
| — |
|
|
| 16 |
|
|
| 139 |
|
|
| 409 |
|
|
| 265 |
|
|
| 1,407 |
|
|
| 169 |
|
|
| 83 |
|
|
| 2,488 |
|
Total HELOC |
| $ | 248 |
|
| $ | 547 |
|
| $ | 327 |
|
| $ | 574 |
|
| $ | 646 |
|
| $ | 6,363 |
|
| $ | 320,410 |
|
| $ | 2,523 |
|
| $ | 331,638 |
|
First lien: 1-4 family |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing |
| $ | 830,513 |
|
| $ | 712,194 |
|
| $ | 199,949 |
|
| $ | 58,585 |
|
| $ | 61,233 |
|
| $ | 102,194 |
|
| $ | 19 |
|
| $ | — |
|
| $ | 1,964,687 |
|
Non-performing |
|
| — |
|
|
| 70 |
|
|
| 218 |
|
|
| 149 |
|
|
| 408 |
|
|
| 803 |
|
|
| — |
|
|
| — |
|
|
| 1,648 |
|
Total First lien: 1-4 family |
| $ | 830,513 |
|
| $ | 712,264 |
|
| $ | 200,167 |
|
| $ | 58,734 |
|
| $ | 61,641 |
|
| $ | 102,997 |
|
| $ | 19 |
|
| $ | — |
|
| $ | 1,966,335 |
|
Junior lien: 1-4 family |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing |
| $ | 9,114 |
|
| $ | 6,299 |
|
| $ | 3,361 |
|
| $ | 1,143 |
|
| $ | 800 |
|
| $ | 1,251 |
|
| $ | 17 |
|
| $ | — |
|
| $ | 21,985 |
|
Non-performing |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7 |
|
|
| 20 |
|
|
| 48 |
|
|
| — |
|
|
| — |
|
|
| 75 |
|
Total Junior lien: 1-4 family |
| $ | 9,114 |
|
| $ | 6,299 |
|
| $ | 3,361 |
|
| $ | 1,150 |
|
| $ | 820 |
|
| $ | 1,299 |
|
| $ | 17 |
|
| $ | — |
|
| $ | 22,060 |
|
Consumer
A discussion of the credit quality indicators that impact each type of collateral securing Consumer loans is included below:
Revolving line Consumer Revolving lines of credit are secured by consumer assets other than real estate. The primary risk associated with this collateral is related to market volatility and the value of the underlying financial assets.
Auto Direct consumer auto loans are secured by new and used consumer vehicles. The primary risk with this collateral class is the rate at which the collateral depreciates.
Other This category includes Other consumer loans made to an individual. The primary risk for this category is for those loans where the loan is unsecured. This collateral type also includes other unsecured lending such as consumer overdrafts.
A borrower is considered non-performing if the Company has ceased the recognition of interest and the loan is placed on non-accrual. Charge-offs and borrower performance are tracked on a loan will move to a loss positionorigination vintage basis. Certain vintages, based on itstheir maturation cycle, could be at higher risk rating. due to collateral-based risk factors.
The following tables provide a summary of the amortized cost balance by collateral type and risk rating as of December 31, 2022 and 2021 (in thousands):
|
| December 31, 2022 |
| |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Amortized Cost - Revolving Loans |
|
| Amortized Cost - Revolving Loans Converted to Term Loans |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Risk by Collateral |
| Amortized Cost Basis by Origination Year - Term Loans |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
| 2022 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| Prior |
|
|
|
|
|
| Total |
| ||||||||||||
Revolving line |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing |
| $ | 467 |
|
| $ | 584 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 58,133 |
|
| $ | 1,403 |
|
| $ | 60,587 |
|
Non-performing |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total Revolving line |
| $ | 467 |
|
| $ | 584 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 58,133 |
|
| $ | 1,403 |
|
| $ | 60,587 |
|
Auto |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing |
| $ | 9,124 |
|
| $ | 6,498 |
|
| $ | 4,454 |
|
| $ | 2,743 |
|
| $ | 335 |
|
| $ | 159 |
|
| $ | — |
|
| $ | — |
|
| $ | 23,313 |
|
Non-performing |
|
| — |
|
|
| 45 |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 46 |
|
Total Auto |
| $ | 9,124 |
|
| $ | 6,543 |
|
| $ | 4,455 |
|
| $ | 2,743 |
|
| $ | 335 |
|
| $ | 159 |
|
| $ | — |
|
| $ | — |
|
| $ | 23,359 |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing |
| $ | 26,291 |
|
| $ | 27,751 |
|
| $ | 1,096 |
|
| $ | 876 |
|
| $ | 1,133 |
|
| $ | 591 |
|
| $ | 3,967 |
|
| $ | — |
|
| $ | 61,705 |
|
Non-performing |
|
| 15 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 15 |
|
Total Other |
| $ | 26,306 |
|
| $ | 27,751 |
|
| $ | 1,096 |
|
| $ | 876 |
|
| $ | 1,133 |
|
| $ | 591 |
|
| $ | 3,967 |
|
| $ | — |
|
| $ | 61,720 |
|
|
| December 31, 2021 |
| |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Amortized Cost - Revolving Loans |
|
| Amortized Cost - Revolving Loans Converted to Term Loans |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Risk by Collateral |
| Amortized Cost Basis by Origination Year - Term Loans |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| Prior |
|
|
|
|
|
| Total |
| ||||||||||||
Revolving line |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing |
| $ | 974 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 60,049 |
|
| $ | 120 |
|
| $ | 61,143 |
|
Non-performing |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total Revolving line |
| $ | 974 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 60,049 |
|
| $ | 120 |
|
| $ | 61,143 |
|
Auto |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing |
| $ | 9,886 |
|
| $ | 7,775 |
|
| $ | 5,424 |
|
| $ | 1,107 |
|
| $ | 479 |
|
| $ | 220 |
|
| $ | — |
|
| $ | — |
|
| $ | 24,891 |
|
Non-performing |
|
| — |
|
|
| — |
|
|
| 38 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 38 |
|
Total Auto |
| $ | 9,886 |
|
| $ | 7,775 |
|
| $ | 5,462 |
|
| $ | 1,107 |
|
| $ | 479 |
|
| $ | 220 |
|
| $ | — |
|
| $ | — |
|
| $ | 24,929 |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing |
| $ | 31,391 |
|
| $ | 2,025 |
|
| $ | 1,949 |
|
| $ | 1,525 |
|
| $ | 2,542 |
|
| $ | 704 |
|
| $ | 2,889 |
|
| $ | — |
|
| $ | 43,025 |
|
Non-performing |
|
| — |
|
|
| 16 |
|
|
| — |
|
|
| 18 |
|
|
| — |
|
|
| 4 |
|
|
| — |
|
|
| — |
|
|
| 38 |
|
Total Other |
| $ | 31,391 |
|
| $ | 2,041 |
|
| $ | 1,949 |
|
| $ | 1,543 |
|
| $ | 2,542 |
|
| $ | 708 |
|
| $ | 2,889 |
|
| $ | — |
|
| $ | 43,063 |
|
Credit cards
A discussion of the credit quality indicators that impact Credit card loans is included below:
Consumer Consumer credit card loans are revolving loans made to individuals. The primary risk associated with this collateral class is credit card debt is generally unsecured; therefore, repayment depends primarily on a borrower’s willingness and capacity to repay. The highly competitive environment for credit card lending provides consumers with ample opportunity to hold several credit cards from different issuers and to pay only minimum monthly payments on outstanding balances. In such an environment, borrowers may become over-extended and unable to repay, particularly in times of an economic downturn or a personal catastrophic event.
The consumer credit card poolportfolio is evaluatedsegmented by borrower payment activity. Transactors are defined as accounts that pay off their balance by the end of each statement cycle. Revolvers are defined as an account that
carries a balance from statement cycle to the next. These accounts incur monthly finance charges, and, sometimes, late fees. Revolvers are inherently higher risk and are tracked by credit score.
Commercial Commercial credit card loans are revolving loans made to small and commercial businesses. The primary risk associated with this collateral class is credit card debt is generally unsecured; therefore, repayment depends primarily on a borrower’s willingness and capacity to repay. Borrowers may become over-extended and unable to repay, particularly in times of an economic downturn or a catastrophic event.
The commercial credit card portfolio is segmented by current and past due payment status. A borrower is past due after 30 days. In general, commercial credit card customers do not have incentive to hold a balance resulting in paying interest on credit card debt as commercial customers will typically have other debt obligations with lower interest rates in which they can utilize for capital.
The following table provides a summary of the amortized cost balance of consumer credit cards by risk rating as of December 31, 2022 and 2021 (in thousands):
|
| Consumer |
| |||||
Risk |
| December 31, 2022 |
|
| December 31, 2021 |
| ||
Transactor accounts |
| $ | 73,670 |
|
| $ | 57,777 |
|
Revolver accounts (by Credit score): |
|
|
|
|
|
|
|
|
Less than 600 |
|
| 4,684 |
|
|
| 6,065 |
|
600-619 |
|
| 2,515 |
|
|
| 2,416 |
|
620-639 |
|
| 4,959 |
|
|
| 4,158 |
|
640-659 |
|
| 8,655 |
|
|
| 7,854 |
|
660-679 |
|
| 9,593 |
|
|
| 13,185 |
|
680-699 |
|
| 12,023 |
|
|
| 15,365 |
|
700-719 |
|
| 14,098 |
|
|
| 16,308 |
|
720-739 |
|
| 15,036 |
|
|
| 14,753 |
|
740-759 |
|
| 13,638 |
|
|
| 12,734 |
|
760-779 |
|
| 13,768 |
|
|
| 8,879 |
|
780-799 |
|
| 13,172 |
|
|
| 7,048 |
|
800-819 |
|
| 9,257 |
|
|
| 5,787 |
|
820-839 |
|
| 4,363 |
|
|
| 5,026 |
|
840+ |
|
| 917 |
|
|
| 2,941 |
|
Total |
| $ | 200,348 |
|
| $ | 180,296 |
|
The following table provides a summary of the amortized cost balance of commercial credit cards by risk rating as of December 31, 2022 and 2021 (in thousands):
|
| Commercial |
| |||||
Risk |
| December 31, 2022 |
|
| December 31, 2021 |
| ||
Current |
| $ | 219,558 |
|
| $ | 200,402 |
|
Past Due |
|
| 11,766 |
|
|
| 10,691 |
|
Total |
| $ | 231,324 |
|
| $ | 211,093 |
|
Leases and other
A discussion of the credit quality indicators that impact each type of collateral securing Leases and other loans is included below:
Leases Leases are either loans to individuals for household, family and other personal expenditures or are loans related to all other direct financing and leveraged leases on property for leasing to lessees other than for household, family, and other personal expenditure purposes. All leases are secured by the lease between the lessor and the lessee. These assignments grant the creditor a security interest in the rent stream from any lease, an important source of cash to pay the note in case of the borrower’s default.
Other Other loans are loans that are obligations of states and political subdivisions in the U.S., loans to non-depository financial institutions, loans for purchasing or carrying securities, or all other non-consumer loans. Risk associated with other loans is tied to the underlying collateral by each type of loan. Collateral is generally
equipment, accounts receivable, inventory, 1-4 family residential construction and susceptible to the same risks mentioned with those collateral types previously. Other risks consist of collateral that is secured by the stock of a non-depository financial institution, which can be unlisted stock with a limited market for the stock, or volatility of asset values driven by market performance.
Based on the factors noted above for each type of collateral, the Company assigns risk ratings to borrowers based on delinquenciestheir most recently assessed financial position.
The following table provides a summary of the amortized cost balance by collateral type and risk rating as of December 31, 2022 and 2021 (in thousands):
|
| Leases |
|
| Other |
| ||||||||||
Risk |
| December 31, 2022 |
|
| December 31, 2021 |
|
| December 31, 2022 |
|
| December 31, 2021 |
| ||||
Non-watch list – Pass |
| $ | 1,936 |
|
| $ | 2,167 |
|
| $ | 303,107 |
|
| $ | 279,401 |
|
Watch – Pass |
|
| — |
|
|
| — |
|
|
| 737 |
|
|
| 695 |
|
Special Mention |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Substandard |
|
| — |
|
|
| — |
|
|
| 24 |
|
|
| 25 |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total |
| $ | 1,936 |
|
| $ | 2,167 |
|
| $ | 303,868 |
|
| $ | 280,121 |
|
Allowance for Credit Losses
The ACL is a valuation account that is deducted from loans’ and HTM securities’ amortized cost bases to present the net amount expected to be collected on the instrument. Loans and HTM securities are charged off against the ACL when management believes the balance has become uncollectible. Expected recoveries are included in the allowance and do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.
Management estimates the allowance balance using relevant available information, from internal and external sources, related to past events, current conditions, and reasonable and supportable economic forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses and is tracked over an economic cycle to capture a ‘through the cycle’ loss history. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in portfolio industry-based segmentation, risk rating and credit scores. In addition,score changes, average prepayment rates, changes in environmental conditions, or other relevant factors. For economic forecasts, the Company uses the Moody’s baseline scenario. The Company has developed a portiondynamic reasonable and supportable forecast period that ranges from one to three years and changes based on economic conditions. Due to current economic conditions, the Company’s reasonable and supportable forecast period is one year. After the reasonable and supportable forecast period, the Company reverts to historical losses. The reversion method applied to each portfolio can either be cliff or straight-line over four quarters.
The ACL is measured on a collective (pool) basis when similar risk characteristics exists. The ACL also incorporates qualitative factors which represent adjustments to historical credit loss experience for items such as concentrations of credit and results of internal loan review. The Company has identified the following portfolio segments and measures the allowance for credit losses using the following methods. The Company’s portfolio segmentation consists of Commercial and industrial, Specialty lending, Commercial real estate, Consumer real estate, Consumer, Credit cards, Leases and other, and Held-to-maturity securities. Multiple modeling techniques are used to measure credit losses based on the portfolio.
The ACL for Commercial & industrial and Leases and other segments are measured using a probability of default and loss given default method. Primary risk drivers within the segment are risk ratings of the allowanceindividual loans along with changes of macro-economic variables such as unemployment rates, industrial production, and farm income. The ACL for commercial & industrial loans is determinedcalculated by a reviewmodeling probability of qualitative factorsdefault (PD) over future periods multiplied by management. historical loss given default rates (LGD) multiplied by contractual exposure at default minus any estimated prepayments and charge offs.
Generally,
Collateral positions for Specialty lending loans are continuously monitored by the unsecured portion of a commercial or commercial real estate loan is charged-off when, after analyzing the borrower’s financial condition, it is determined thatCompany and the borrower is incapablerequired to continually adjust the amount of servicingcollateral securing the debt, little or no prospectloan. Credit losses are measured for near term improvement exists, and no realistic and significant strengthening actionany position where the amortized cost basis is pending. For collateral dependent commercial or commercial real estate loans, an analysis is completed regardinggreater than the Company’s collateral position to determine if the amounts due from the borrower are in excess of the calculated current fair value of the collateral. Specific allocationsThe ACL for specialty lending loans is calculated by using a bottom-up approach comparing collateral values to outstanding balances.
The ACL for the Commercial real estate segment is measured using a PD and LGD method. Primary risk characteristics within the segment are risk ratings of the individual loans, along with changes of macro-economic variables, such as interest rates, CRE price index, median household income, construction activity, farm income, and vacancy rates. The ACL for commercial real estate loans is calculated by modeling PD over future periods based on peer bank data. The PD loss rate is then multiplied by historical LGD multiplied by contractual exposure at default minus any estimated prepayments and charge offs.
The ACL for the Consumer real estate and Consumer segments are measured using an origination vintage loss rate method applied to the loans’ amortized cost balance. The primary risk driver within the segments is year of origination along with changes of macro-economic variables such as unemployment and the home price index.
The Credit card segment contains both consumer and commercial credit cards. The ACL for Consumer credit cards is measured using a PD and LGD method for Revolvers and average historical loss rates across a defined lookback period for Transactors. The PD and LGD method used for Revolvers is similar in nature to the method used in the Commercial & industrial and Commercial real estate segments. Primary risk drivers within the segment are credit ratings of the individual card holders along with changes of macro-economic variables such as unemployment and retail sales. The ACL for Commercial credit cards is measured using roll-rate loss rate method based on days past due.
The ACL for the State and political HTM securities segment is measured using a loss rate method based on historical bond rating transitions. Primary risk drivers within the segment are bond ratings in the portfolio along with changes of macro-economic conditions. There is no ACL for the U.S. Agency and GSE mortgage-backed HTM securities portfolios as they are considered to be agency-backed securities with no risk of loss as they are either explicitly or implicitly guaranteed by the U.S. government. For further discussion on these securities, including the aging and amortized cost balance of HTM securities, see Note 4, “Securities.”
See the credit quality indicators presented previously for a summary of current risk in the Company’s portfolio. Changes in economic forecasts will affect all portfolio segments, updated financial records from borrowers will affect portfolio segments by risk rating, updated credit scores will affect consumer credit cards, payment performance will affect consumer and commercial credit card portfolio segments, and updated bond credit ratings will affect held-to-maturity securities. The Company actively monitors all credit quality indicators for risk changes that will influence the current estimate.
Expected credit losses are estimated over the contractual term of the loans, adjusted for prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a TDR will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancelable by the Company.
Credit card receivables do not have stated maturities. In determining the estimated life of a credit card receivable, management first estimates the future cash flows expected to be received and then applies those expected future cash flows to the credit card balance. Expected credit losses for credit cards are determined by estimating the amount and timing of principal payments expected to be received as payment for the balance outstanding as of the reporting period until the expected payments have been fully allocated. The ACL is recorded for the excess of the balance outstanding as of the reporting period over the expected principal payments.
Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually include loans on nonaccrual, loans classified as TDRs, or any loans specifically identified, and are excluded from the collective evaluation. When it is determined that payment of interest or recovery of all principal is questionable, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for undiscounted selling costs as appropriate. All loans are classified as collateral dependent if placed on non-accrual or are considered to be a TDR.
A loan modification is considered a TDR when a concession has been granted to a debtor experiencing financial difficulties. The allowance for credit loss on a TDR is measured using the discounted cash flow method. When the value of a concession is measured using the discounted cash flow method, the allowance for loan losses are made for anycredit loss is determined by discounting the expected future cash flows, including contractual payments and value of collateral deficiency. If a collateral deficiency is ultimately deemed to be uncollectible,at termination, at the amount is charged-off. Revolving commercial loans (such as commercial credit cards) which are past due 90 cumulative days are classified as a loss and charged off.
Generally, a consumer loan, or a portion thereof, is charged-off in accordance with regulatory guidelines which provide that such loans be charged-off when the Company becomes awareoriginal effective interest rate of the loss, such as from a triggering event that may include but is not limited to new information about a borrower’s intent and ability to repay the loan, bankruptcy, fraud, or death. However, the charge-off timeframe should not exceed the specified delinquency time frames, which state that closed-end retail loans (such as real estate mortgages, home equity loans and consumer installment loans) that become past due 120 cumulative days and open-end retail loans (such as home equity lines of credit and consumer credit cards) that become past due 180 cumulative days are classified as a loss and charged-off.loan.
ALLOWANCE FOR LOANCREDIT LOSSES AND RECORDED INVESTMENT IN LOANS
This table providesThe following tables provide a rollforward of the allowance for loancredit losses by portfolio segment for the year ended December 31, 20172022, 2021, and 2020 (in thousands):
|
| Year Ended December 31, 2017 |
| |||||||||||||||||
|
| Commercial |
|
| Real estate |
|
| Consumer |
|
| Leases |
|
| Total |
| |||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| $ | 71,657 |
|
| $ | 10,569 |
|
| $ | 9,311 |
|
| $ | 112 |
|
| $ | 91,649 |
|
Charge-offs |
|
| (27,985 | ) |
|
| (992 | ) |
|
| (9,629 | ) |
|
| — |
|
|
| (38,606 | ) |
Recoveries |
|
| 3,522 |
|
|
| 966 |
|
|
| 2,073 |
|
|
| — |
|
|
| 6,561 |
|
Provision |
|
| 33,962 |
|
|
| (1,231 | ) |
|
| 8,328 |
|
|
| (59 | ) |
|
| 41,000 |
|
Ending Balance |
| $ | 81,156 |
|
| $ | 9,312 |
|
| $ | 10,083 |
|
| $ | 53 |
|
| $ | 100,604 |
|
Ending Balance: individually evaluated for impairment |
| $ | 6,605 |
|
| $ | 78 |
|
| $ | — |
|
| $ | — |
|
| $ | 6,683 |
|
Ending Balance: collectively evaluated for impairment |
|
| 74,551 |
|
|
| 9,234 |
|
|
| 10,083 |
|
|
| 53 |
|
|
| 93,921 |
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance: loans |
| $ | 5,283,617 |
|
| $ | 5,568,449 |
|
| $ | 404,480 |
|
| $ | 23,967 |
|
| $ | 11,280,513 |
|
Ending Balance: individually evaluated for impairment |
|
| 61,820 |
|
|
| 12,956 |
|
|
| — |
|
|
| — |
|
|
| 74,776 |
|
Ending Balance: collectively evaluated for impairment |
|
| 5,221,797 |
|
|
| 5,555,493 |
|
|
| 404,480 |
|
|
| 23,967 |
|
|
| 11,205,737 |
|
|
| Year Ended December 31, 2022 |
| |||||||||||||||||||||||||||||||||||||
|
| Commercial and industrial |
|
| Specialty lending |
|
| Commercial real estate |
|
| Consumer real estate |
|
| Consumer |
|
| Credit cards |
|
| Leases and other |
|
| Total - Loans |
|
| HTM |
|
| Total |
| ||||||||||
Allowance for credit losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Beginning balance |
| $ | 123,732 |
|
| $ | 1,738 |
|
| $ | 56,265 |
|
| $ | 3,921 |
|
| $ | 845 |
|
| $ | 6,075 |
|
| $ | 2,195 |
|
| $ | 194,771 |
|
| $ | 1,940 |
|
| $ | 196,711 |
|
Charge-offs |
|
| (37,269 | ) |
|
| — |
|
|
| (29 | ) |
|
| (57 | ) |
|
| (800 | ) |
|
| (6,150 | ) |
|
| — |
|
|
| (44,305 | ) |
|
| — |
|
|
| (44,305 | ) |
Recoveries |
|
| 1,550 |
|
|
| 433 |
|
|
| 385 |
|
|
| 131 |
|
|
| 126 |
|
|
| 1,812 |
|
|
| — |
|
|
| 4,437 |
|
|
| — |
|
|
| 4,437 |
|
Provision |
|
| 48,724 |
|
|
| (2,171 | ) |
|
| (17,251 | ) |
|
| 2,153 |
|
|
| 323 |
|
|
| 5,129 |
|
|
| 26 |
|
|
| 36,933 |
|
|
| 467 |
|
|
| 37,400 |
|
Ending balance - ACL |
| $ | 136,737 |
|
| $ | — |
|
| $ | 39,370 |
|
| $ | 6,148 |
|
| $ | 494 |
|
| $ | 6,866 |
|
| $ | 2,221 |
|
| $ | 191,836 |
|
| $ | 2,407 |
|
| $ | 194,243 |
|
Allowance for credit losses on off-balance sheet credit exposures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Beginning balance |
| $ | 1,739 |
|
| $ | 160 |
|
| $ | 480 |
|
| $ | 106 |
|
| $ | — |
|
| $ | — |
|
| $ | 15 |
|
| $ | 2,500 |
|
| $ | 88 |
|
| $ | 2,588 |
|
Provision |
|
| 439 |
|
|
| 26 |
|
|
| (62 | ) |
|
| 18 |
|
|
| 13 |
|
|
| — |
|
|
| 47 |
|
|
| 481 |
|
|
| 19 |
|
|
| 500 |
|
Ending balance - ACL on off-balance sheet |
| $ | 2,178 |
|
| $ | 186 |
|
| $ | 418 |
|
| $ | 124 |
|
| $ | 13 |
|
| $ | — |
|
| $ | 62 |
|
| $ | 2,981 |
|
| $ | 107 |
|
| $ | 3,088 |
|
|
| Year Ended December 31, 2021 |
| |||||||||||||||||||||||||||||||||||||
|
| Commercial and industrial |
|
| Specialty lending |
|
| Commercial real estate |
|
| Consumer real estate |
|
| Consumer |
|
| Credit cards |
|
| Leases and other |
|
| Total - Loans |
|
| HTM |
|
| Total |
| ||||||||||
Allowance for credit losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Beginning balance |
| $ | 122,700 |
|
| $ | 5,219 |
|
| $ | 61,931 |
|
| $ | 6,586 |
|
| $ | 1,480 |
|
| $ | 15,786 |
|
| $ | 2,271 |
|
| $ | 215,973 |
|
| $ | 2,610 |
|
| $ | 218,583 |
|
Charge-offs |
|
| (13,981 | ) |
|
| (31,945 | ) |
|
| (1,198 | ) |
|
| (96 | ) |
|
| (2,424 | ) |
|
| (6,011 | ) |
|
| (8 | ) |
|
| (55,663 | ) |
|
| — |
|
|
| (55,663 | ) |
Recoveries |
|
| 6,694 |
|
|
| 187 |
|
|
| 1,560 |
|
|
| 142 |
|
|
| 223 |
|
|
| 1,967 |
|
|
| 18 |
|
|
| 10,791 |
|
|
| — |
|
|
| 10,791 |
|
Provision |
|
| 8,319 |
|
|
| 28,277 |
|
|
| (6,028 | ) |
|
| (2,711 | ) |
|
| 1,566 |
|
|
| (5,667 | ) |
|
| (86 | ) |
|
| 23,670 |
|
|
| (670 | ) |
|
| 23,000 |
|
Ending balance – ACL |
| $ | 123,732 |
|
| $ | 1,738 |
|
| $ | 56,265 |
|
| $ | 3,921 |
|
| $ | 845 |
|
| $ | 6,075 |
|
| $ | 2,195 |
|
| $ | 194,771 |
|
| $ | 1,940 |
|
| $ | 196,711 |
|
Allowance for credit losses on off-balance sheet credit exposures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Beginning balance |
| $ | 3,859 |
|
| $ | 287 |
|
| $ | 447 |
|
| $ | 145 |
|
| $ | 381 |
|
| $ | — |
|
| $ | 414 |
|
| $ | 5,533 |
|
| $ | 55 |
|
| $ | 5,588 |
|
Provision |
|
| (2,120 | ) |
|
| (127 | ) |
|
| 33 |
|
|
| (39 | ) |
|
| (381 | ) |
|
| — |
|
|
| (399 | ) |
|
| (3,033 | ) |
|
| 33 |
|
|
| (3,000 | ) |
Ending balance - ACL on off-balance sheet |
| $ | 1,739 |
|
| $ | 160 |
|
| $ | 480 |
|
| $ | 106 |
|
| $ | — |
|
| $ | — |
|
| $ | 15 |
|
| $ | 2,500 |
|
| $ | 88 |
|
| $ | 2,588 |
|
This table provides a rollforward
|
| Year Ended December 31, 2020 |
| |||||||||||||||||||||||||||||||||||||
|
| Commercial and industrial |
|
| Specialty lending |
|
| Commercial real estate |
|
| Consumer real estate |
|
| Consumer |
|
| Credit cards |
|
| Leases and other |
|
| Total - Loans |
|
| HTM |
|
| Total |
| ||||||||||
Allowance for credit losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Beginning balance |
| $ | 63,313 |
|
| $ | 2,545 |
|
| $ | 15,951 |
|
| $ | 2,623 |
|
| $ | 543 |
|
| $ | 15,739 |
|
| $ | 1,074 |
|
| $ | 101,788 |
|
| $ | — |
|
| $ | 101,788 |
|
ASU 2016-13 adjustment |
|
| 3,677 |
|
|
| 148 |
|
|
| 926 |
|
|
| 152 |
|
|
| 31 |
|
|
| 914 |
|
|
| 62 |
|
|
| 5,910 |
|
|
| 3,120 |
|
|
| 9,030 |
|
Adjusted beginning balance |
|
| 66,990 |
|
|
| 2,693 |
|
|
| 16,877 |
|
|
| 2,775 |
|
|
| 574 |
|
|
| 16,653 |
|
|
| 1,136 |
|
|
| 107,698 |
|
|
| 3,120 |
|
|
| 110,818 |
|
Charge-offs |
|
| (8,587 | ) |
|
| — |
|
|
| (11,939 | ) |
|
| (219 | ) |
|
| (607 | ) |
|
| (7,326 | ) |
|
| (11 | ) |
|
| (28,689 | ) |
|
| — |
|
|
| (28,689 | ) |
Recoveries |
|
| 6,473 |
|
|
| — |
|
|
| 91 |
|
|
| 69 |
|
|
| 307 |
|
|
| 1,618 |
|
|
| 6 |
|
|
| 8,564 |
|
|
| — |
|
|
| 8,564 |
|
Provision |
|
| 57,824 |
|
|
| 2,526 |
|
|
| 56,902 |
|
|
| 3,961 |
|
|
| 1,206 |
|
|
| 4,841 |
|
|
| 1,140 |
|
|
| 128,400 |
|
|
| (510 | ) |
|
| 127,890 |
|
Ending balance - ACL |
| $ | 122,700 |
|
| $ | 5,219 |
|
| $ | 61,931 |
|
| $ | 6,586 |
|
| $ | 1,480 |
|
| $ | 15,786 |
|
| $ | 2,271 |
|
| $ | 215,973 |
|
| $ | 2,610 |
|
| $ | 218,583 |
|
Allowance for credit losses on off-balance sheet credit exposures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Beginning balance |
| $ | 2,263 |
|
| $ | 53 |
|
| $ | 257 |
|
| $ | 102 |
|
| $ | 22 |
|
| $ | — |
|
| $ | 211 |
|
| $ | 2,908 |
|
| $ | 70 |
|
| $ | 2,978 |
|
Provision |
|
| 1,596 |
|
|
| 234 |
|
|
| 190 |
|
|
| 43 |
|
|
| 359 |
|
|
| — |
|
|
| 203 |
|
|
| 2,625 |
|
|
| (15 | ) |
|
| 2,610 |
|
Ending balance - ACL on off-balance sheet |
| $ | 3,859 |
|
| $ | 287 |
|
| $ | 447 |
|
| $ | 145 |
|
| $ | 381 |
|
| $ | — |
|
| $ | 414 |
|
| $ | 5,533 |
|
| $ | 55 |
|
| $ | 5,588 |
|
The allowance for credit losses on off-balance sheet credit exposures is recorded in the Accrued expenses and taxes line of the allowance for loan losses by portfolio segment forCompany’s Consolidated Balance Sheets, see Note 15 “Commitments, Contingencies and Guarantees.”
Collateral Dependent Financial Assets
The following tables provide the year endedamortized cost balance of financial assets considered collateral dependent as of December 31, 20162022 and 2021 (in thousands):
|
| Year Ended December 31, 2016 |
| |||||||||||||||||
|
| Commercial |
|
| Real estate |
|
| Consumer |
|
| Leases |
|
| Total |
| |||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| $ | 63,847 |
|
| $ | 8,220 |
|
| $ | 8,949 |
|
| $ | 127 |
|
| $ | 81,143 |
|
Charge-offs |
|
| (12,788 | ) |
|
| (6,756 | ) |
|
| (9,279 | ) |
|
| — |
|
|
| (28,823 | ) |
Recoveries |
|
| 3,596 |
|
|
| 985 |
|
|
| 2,248 |
|
|
| — |
|
|
| 6,829 |
|
Provision |
|
| 17,002 |
|
|
| 8,120 |
|
|
| 7,393 |
|
|
| (15 | ) |
|
| 32,500 |
|
Ending Balance |
| $ | 71,657 |
|
| $ | 10,569 |
|
| $ | 9,311 |
|
| $ | 112 |
|
| $ | 91,649 |
|
Ending Balance: individually evaluated for impairment |
| $ | 7,866 |
|
| $ | 68 |
|
| $ | — |
|
| $ | — |
|
| $ | 7,934 |
|
Ending Balance: collectively evaluated for impairment |
|
| 63,791 |
|
|
| 10,501 |
|
|
| 9,311 |
|
|
| 112 |
|
|
| 83,715 |
|
Ending Balance: PCI Loans |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance: loans |
| $ | 4,923,321 |
|
| $ | 5,167,870 |
|
| $ | 409,660 |
|
| $ | 39,532 |
|
| $ | 10,540,383 |
|
Ending Balance: individually evaluated for impairment |
|
| 74,351 |
|
|
| 13,314 |
|
|
| — |
|
|
| — |
|
|
| 87,665 |
|
Ending Balance: collectively evaluated for impairment |
|
| 4,848,970 |
|
|
| 5,154,556 |
|
|
| 408,860 |
|
|
| 39,532 |
|
|
| 10,451,918 |
|
Ending Balance: PCI Loans |
|
| — |
|
|
| — |
|
|
| 800 |
|
|
| — |
|
|
| 800 |
|
|
| December 31, 2022 |
| |||||||||
Loan Segment and Type |
| Amortized Cost of Collateral Dependent Assets |
|
| Related Allowance for Credit Losses |
|
| Amortized Cost of Collateral Dependent Assets with no related Allowance |
| |||
Commercial and industrial: |
|
|
|
|
|
|
|
|
|
|
|
|
Equipment/Accounts Receivable/Inventory |
| $ | 13,972 |
|
| $ | 713 |
|
| $ | 11,534 |
|
Agriculture |
|
| — |
|
|
| — |
|
|
| — |
|
Total Commercial and industrial |
|
| 13,972 |
|
|
| 713 |
|
|
| 11,534 |
|
Specialty lending: |
|
|
|
|
|
|
|
|
|
|
|
|
Asset-based lending |
|
| — |
|
|
| — |
|
|
| — |
|
Total Specialty lending |
|
| — |
|
|
| — |
|
|
| — |
|
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
Owner-occupied |
|
| 2,204 |
|
|
| — |
|
|
| 2,204 |
|
Non-owner-occupied |
|
| — |
|
|
| — |
|
|
| — |
|
Farmland |
|
| 374 |
|
|
| — |
|
|
| 374 |
|
5+ Multi-family |
|
| — |
|
|
| — |
|
|
| — |
|
1-4 Family construction |
|
| — |
|
|
| — |
|
|
| — |
|
General construction |
|
| 101 |
|
|
| — |
|
|
| 101 |
|
Total Commercial real estate |
|
| 2,679 |
|
|
| — |
|
|
| 2,679 |
|
Consumer real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
HELOC |
|
| 2,562 |
|
|
| — |
|
|
| 2,562 |
|
First lien: 1-4 family |
|
| 2,253 |
|
|
| 6 |
|
|
| 1,597 |
|
Junior lien: 1-4 family |
|
| 67 |
|
|
| — |
|
|
| 67 |
|
Total Consumer real estate |
|
| 4,882 |
|
|
| 6 |
|
|
| 4,226 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
Revolving line |
|
| — |
|
|
| — |
|
|
| — |
|
Auto |
|
| 46 |
|
|
| — |
|
|
| 46 |
|
Other |
|
| 15 |
|
|
| — |
|
|
| 15 |
|
Total Consumer |
|
| 61 |
|
|
| — |
|
|
| 61 |
|
Leases and other: |
|
|
|
|
|
|
|
|
|
|
|
|
Leases |
|
| — |
|
|
| — |
|
|
| — |
|
Other |
|
| 24 |
|
|
| — |
|
|
| 24 |
|
Total Leases and other |
|
| 24 |
|
|
| — |
|
|
| 24 |
|
Total loans |
| $ | 21,618 |
|
| $ | 719 |
|
| $ | 18,524 |
|
This table provides a rollforward of the allowance for loan losses by portfolio segment for the year ended December 31, 2015 (in thousands):
|
| Year Ended December 31, 2015 |
| |||||||||||||||||
|
| Commercial |
|
| Real estate |
|
| Consumer |
|
| Leases |
|
| Total |
| |||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| $ | 55,349 |
|
| $ | 10,725 |
|
| $ | 9,921 |
|
| $ | 145 |
|
| $ | 76,140 |
|
Charge-offs |
|
| (5,239 | ) |
|
| (214 | ) |
|
| (9,658 | ) |
|
| — |
|
|
| (15,111 | ) |
Recoveries |
|
| 1,824 |
|
|
| 321 |
|
|
| 2,469 |
|
|
| — |
|
|
| 4,614 |
|
Provision |
|
| 11,913 |
|
|
| (2,612 | ) |
|
| 6,217 |
|
|
| (18 | ) |
|
| 15,500 |
|
Ending Balance |
| $ | 63,847 |
|
| $ | 8,220 |
|
| $ | 8,949 |
|
| $ | 127 |
|
| $ | 81,143 |
|
Ending Balance: individually evaluated for impairment |
| $ | 5,668 |
|
| $ | 196 |
|
| $ | — |
|
| $ | — |
|
| $ | 5,864 |
|
Ending Balance: collectively evaluated for impairment |
|
| 58,179 |
|
|
| 8,024 |
|
|
| 8,949 |
|
|
| 127 |
|
|
| 75,279 |
|
Ending Balance: PCI Loans |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance: loans |
| $ | 4,641,027 |
|
| $ | 4,301,530 |
|
| $ | 446,347 |
|
| $ | 41,857 |
|
| $ | 9,430,761 |
|
Ending Balance: individually evaluated for impairment |
|
| 68,004 |
|
|
| 7,747 |
|
|
| 2,574 |
|
|
| — |
|
|
| 78,325 |
|
Ending Balance: collectively evaluated for impairment |
|
| 4,573,023 |
|
|
| 4,292,728 |
|
|
| 441,772 |
|
|
| 41,857 |
|
|
| 9,349,380 |
|
Ending Balance: PCI Loans |
|
| — |
|
|
| 1,055 |
|
|
| 2,001 |
|
|
| — |
|
|
| 3,056 |
|
Impaired Loans
This table provides an analysis of impaired loans by class for the year ended December 31, 2017 (in thousands):
|
| As of December 31, 2017 |
| |||||||||||||||||||||
|
| Unpaid Principal Balance |
|
| Recorded Investment with No Allowance |
|
| Recorded Investment with Allowance |
|
| Total Recorded Investment |
|
| Related Allowance |
|
| Average Recorded Investment |
| ||||||
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
| $ | 84,749 |
|
| $ | 44,525 |
|
| $ | 16,465 |
|
| $ | 60,990 |
|
| $ | 6,299 |
|
| $ | 65,385 |
|
Asset-based |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Factoring |
|
| 830 |
|
|
| — |
|
|
| 830 |
|
|
| 830 |
|
|
| 306 |
|
|
| 207 |
|
Commercial – credit card |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate – construction |
|
| 108 |
|
|
| 93 |
|
|
| — |
|
|
| 93 |
|
|
| — |
|
|
| 148 |
|
Real estate – commercial |
|
| 16,284 |
|
|
| 7,968 |
|
|
| 4,477 |
|
|
| 12,445 |
|
|
| 3 |
|
|
| 10,506 |
|
Real estate – residential |
|
| 427 |
|
|
| 321 |
|
|
| 97 |
|
|
| 418 |
|
|
| 75 |
|
|
| 221 |
|
Real estate – HELOC |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer – credit card |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Consumer – other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8 |
|
Leases |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total |
| $ | 102,398 |
|
| $ | 52,907 |
|
| $ | 21,869 |
|
| $ | 74,776 |
|
| $ | 6,683 |
|
| $ | 76,475 |
|
This table provides an analysis of impaired loans by class for the year ended December 31, 2016 (in thousands):
|
| As of December 31, 2016 |
| |||||||||||||||||||||
|
| Unpaid Principal Balance |
|
| Recorded Investment with No Allowance |
|
| Recorded Investment with Allowance |
|
| Total Recorded Investment |
|
| Related Allowance |
|
| Average Recorded Investment |
| ||||||
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
| $ | 80,405 |
|
| $ | 43,260 |
|
| $ | 31,091 |
|
| $ | 74,351 |
|
| $ | 7,866 |
|
| $ | 69,776 |
|
Asset-based |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Factoring |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Commercial – credit card |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate – construction |
|
| 510 |
|
|
| 181 |
|
|
| 113 |
|
|
| 294 |
|
|
| 68 |
|
|
| 405 |
|
Real estate – commercial |
|
| 18,107 |
|
|
| 12,303 |
|
|
| 487 |
|
|
| 12,790 |
|
|
| — |
|
|
| 8,956 |
|
Real estate – residential |
|
| 231 |
|
|
| 230 |
|
|
| — |
|
|
| 230 |
|
|
| — |
|
|
| 520 |
|
Real estate – HELOC |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 79 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer – credit card |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Consumer – other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,981 |
|
Leases |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total |
| $ | 99,253 |
|
| $ | 55,974 |
|
| $ | 31,691 |
|
| $ | 87,665 |
|
| $ | 7,934 |
|
| $ | 81,717 |
|
This table provides an analysis of impaired loans by class for the year ended December 31, 2015 (in thousands):
|
| As of December 31, 2015 |
| |||||||||||||||||||||
|
| Unpaid Principal Balance |
|
| Recorded Investment with No Allowance |
|
| Recorded Investment with Allowance |
|
| Total Recorded Investment |
|
| Related Allowance |
|
| Average Recorded Investment |
| ||||||
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
| $ | 72,739 |
|
| $ | 40,648 |
|
| $ | 27,356 |
|
| $ | 68,004 |
|
| $ | 5,668 |
|
| $ | 41,394 |
|
Asset-based |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Factoring |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Commercial – credit card |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate – construction |
|
| 782 |
|
|
| 331 |
|
|
| 118 |
|
|
| 449 |
|
|
| 42 |
|
|
| 802 |
|
Real estate – commercial |
|
| 7,117 |
|
|
| 4,891 |
|
|
| 1,275 |
|
|
| 6,166 |
|
|
| 154 |
|
|
| 7,768 |
|
Real estate – residential |
|
| 1,054 |
|
|
| 939 |
|
|
| — |
|
|
| 939 |
|
|
| — |
|
|
| 1,433 |
|
Real estate – HELOC |
|
| 214 |
|
|
| 193 |
|
|
| — |
|
|
| 193 |
|
|
| — |
|
|
| 162 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer – credit card |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Consumer – other |
|
| 2,574 |
|
|
| 2,574 |
|
|
| — |
|
|
| 2,574 |
|
|
| — |
|
|
| 1,795 |
|
Leases |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total |
| $ | 84,480 |
|
| $ | 49,576 |
|
| $ | 28,749 |
|
| $ | 78,325 |
|
| $ | 5,864 |
|
| $ | 53,354 |
|
|
| December 31, 2021 |
| |||||||||
Loan Segment and Type |
| Amortized Cost of Collateral Dependent Assets |
|
| Related Allowance for Credit Losses |
|
| Amortized Cost of Collateral Dependent Assets with no related Allowance |
| |||
Commercial and industrial: |
|
|
|
|
|
|
|
|
|
|
|
|
Equipment/Accounts Receivable/Inventory |
| $ | 82,845 |
|
| $ | 2,421 |
|
| $ | 76,493 |
|
Agriculture |
|
| — |
|
|
| — |
|
|
| — |
|
Total Commercial and industrial |
|
| 82,845 |
|
|
| 2,421 |
|
|
| 76,493 |
|
Specialty lending: |
|
|
|
|
|
|
|
|
|
|
|
|
Asset-based lending |
|
| — |
|
|
| — |
|
|
| — |
|
Factoring |
|
| — |
|
|
| — |
|
|
| — |
|
Total Specialty lending |
|
| — |
|
|
| — |
|
|
| — |
|
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
Owner-occupied |
|
| 2,764 |
|
|
| — |
|
|
| 2,764 |
|
Non-owner-occupied |
|
| — |
|
|
| — |
|
|
| — |
|
Farmland |
|
| 487 |
|
|
| — |
|
|
| 487 |
|
5+ Multi-family |
|
| — |
|
|
| — |
|
|
| — |
|
1-4 Family construction |
|
| — |
|
|
| — |
|
|
| — |
|
General construction |
|
| 1,626 |
|
|
| — |
|
|
| 1,626 |
|
Total Commercial real estate |
|
| 4,877 |
|
|
| — |
|
|
| 4,877 |
|
Consumer real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
HELOC |
|
| 2,488 |
|
|
| — |
|
|
| 2,488 |
|
First lien: 1-4 family |
|
| 1,647 |
|
|
| — |
|
|
| 1,647 |
|
Junior lien: 1-4 family |
|
| 75 |
|
|
| — |
|
|
| 75 |
|
Total Consumer real estate |
|
| 4,210 |
|
|
| — |
|
|
| 4,210 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
Revolving line |
|
| — |
|
|
| — |
|
|
| — |
|
Auto |
|
| 38 |
|
|
| — |
|
|
| 38 |
|
Other |
|
| 37 |
|
|
| — |
|
|
| 37 |
|
Total Consumer |
|
| 75 |
|
|
| — |
|
|
| 75 |
|
Leases and other: |
|
|
|
|
|
|
|
|
|
|
|
|
Leases |
|
| — |
|
|
| — |
|
|
| — |
|
Other |
|
| 25 |
|
|
| — |
|
|
| 25 |
|
Total Leases and other |
|
| 25 |
|
|
| — |
|
|
| 25 |
|
Total loans |
| $ | 92,032 |
|
| $ | 2,421 |
|
| $ | 85,680 |
|
Troubled Debt Restructurings
A loan modification is considered a troubled debt restructuring (TDR)TDR when a concession hadhas been granted to a debtor experiencing financial difficulties. The Company’s modifications generally include interest rate adjustments, principal reductions, and amortization and maturity date extensions. These modifications allow the debtor short-term cash relief to allow them to improve their financial condition. The Company’s restructured loans are individually evaluated for impairmentconsidered collateral dependent and evaluated as part of the allowance for loancredit loss as described above in the Allowance for LoanCredit Losses section of this note.
The Company had $3.1 million and $0.8 million inno commitments to lend to borrowers with loan modifications classified as TDRs as of December 31, 20172022 and December 31, 2016, respectively.2021. The Company monitors loan payments on an on-going basis to determine if a loan is considered to have a payment default. Determination of payment default involves analyzing the economicconditions that exist for each customer and their ability to generate positive cash flows during the loan term. During the year ended December 31, 2017, there were no TDRs with payment defaults. There was an immaterial amount of interest recognized on loans classified as TDRs during 2017 and 2016.
For the year ended December 31, 2017,2022, the Company had one residential real estate TDRtwo commercial TDRs with a pre-modification loan balance of $97 thousand$5.1 million and a post-modification loan balance of $98 thousand, and one commercial TDR with a pre- and post-modification loan balance of $7.2$4.3 million. For the year ended December 31, 2016,2021, the Company had three commercialno new TDRs. For the years ended December 31, 2022 and 2021, the Company had no TDRs with pre- and post-modification balances totaling $24.8 million.for which there was a payment default within the 12 months following the restructure date.
4. SECURITIES
Securities Available for Sale
This table provides detailed information about securities available for sale at December 31, 20172022 and 20162021 (in thousands):
|
|
|
|
|
| Gross |
|
| Gross |
|
|
|
|
|
|
|
|
|
| Gross |
|
| Gross |
|
|
|
|
| ||||
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
| ||||||||
2017 |
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||||||||||||||||||
2022 |
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||||||||||||||||||
U.S. Treasury |
| $ | 40,092 |
|
| $ | — |
|
| $ | (1,449 | ) |
| $ | 38,643 |
|
| $ | 804,158 |
|
| $ | 58 |
|
| $ | (27,146 | ) |
| $ | 777,070 |
|
U.S. Agencies |
|
| 14,762 |
|
|
| — |
|
|
| (10 | ) |
|
| 14,752 |
|
|
| 178,261 |
|
|
| — |
|
|
| (6,965 | ) |
|
| 171,296 |
|
Mortgage-backed |
|
| 3,719,369 |
|
|
| 1,914 |
|
|
| (72,040 | ) |
|
| 3,649,243 |
|
|
| 4,574,905 |
|
|
| 92 |
|
|
| (592,875 | ) |
|
| 3,982,122 |
|
State and political subdivisions |
|
| 2,546,517 |
|
|
| 11,965 |
|
|
| (15,809 | ) |
|
| 2,542,673 |
|
|
| 1,465,598 |
|
|
| 1,608 |
|
|
| (104,799 | ) |
|
| 1,362,407 |
|
Corporates |
|
| 13,278 |
|
|
| — |
|
|
| (12 | ) |
|
| 13,266 |
|
|
| 401,059 |
|
|
| — |
|
|
| (33,559 | ) |
|
| 367,500 |
|
Collateralized loan obligations |
|
| 353,969 |
|
|
| 32 |
|
|
| (8,049 | ) |
|
| 345,952 |
| ||||||||||||||||
Total |
| $ | 6,334,018 |
|
| $ | 13,879 |
|
| $ | (89,320 | ) |
| $ | 6,258,577 |
|
| $ | 7,777,950 |
|
| $ | 1,790 |
|
| $ | (773,393 | ) |
| $ | 7,006,347 |
|
|
|
|
|
|
| Gross |
|
| Gross |
|
|
|
|
|
|
|
|
|
| Gross |
|
| Gross |
|
|
|
|
| ||||
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
| ||||||||
2016 |
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||||||||||||||||||
2021 |
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||||||||||||||||||
U.S. Treasury |
| $ | 95,315 |
|
| $ | 37 |
|
| $ | (1,526 | ) |
| $ | 93,826 |
|
| $ | 69,551 |
|
| $ | 374 |
|
| $ | (751 | ) |
| $ | 69,174 |
|
U.S. Agencies |
|
| 198,158 |
|
|
| 67 |
|
|
| (48 | ) |
|
| 198,177 |
|
|
| 121,681 |
|
|
| 3,252 |
|
|
| (1 | ) |
|
| 124,932 |
|
Mortgage-backed |
|
| 3,773,090 |
|
|
| 7,069 |
|
|
| (68,460 | ) |
|
| 3,711,699 |
|
|
| 7,967,537 |
|
|
| 93,390 |
|
|
| (95,872 | ) |
|
| 7,965,055 |
|
State and political subdivisions |
|
| 2,425,155 |
|
|
| 7,391 |
|
|
| (36,789 | ) |
|
| 2,395,757 |
|
|
| 3,270,160 |
|
|
| 161,674 |
|
|
| (9,146 | ) |
|
| 3,422,688 |
|
Corporates |
|
| 66,997 |
|
|
| 5 |
|
|
| (127 | ) |
|
| 66,875 |
|
|
| 316,840 |
|
|
| 2,504 |
|
|
| (1,498 | ) |
|
| 317,846 |
|
Collateralized loan obligations |
|
| 76,815 |
|
|
| 4 |
|
|
| — |
|
|
| 76,819 |
| ||||||||||||||||
Total |
| $ | 6,558,715 |
|
| $ | 14,569 |
|
| $ | (106,950 | ) |
| $ | 6,466,334 |
|
| $ | 11,822,584 |
|
| $ | 261,198 |
|
| $ | (107,268 | ) |
| $ | 11,976,514 |
|
The following table presents contractual maturity information for securities available for sale at December 31, 20172022 (in thousands):
|
| Amortized |
|
| Fair |
|
| Amortized |
|
| Fair |
| ||||
|
| Cost |
|
| Value |
|
| Cost |
|
| Value |
| ||||
Due in 1 year or less |
| $ | 288,991 |
|
| $ | 288,776 |
|
| $ | 172,698 |
|
| $ | 170,616 |
|
Due after 1 year through 5 years |
|
| 1,128,445 |
|
|
| 1,126,389 |
|
|
| 1,677,013 |
|
|
| 1,612,729 |
|
Due after 5 years through 10 years |
|
| 834,047 |
|
|
| 832,221 |
|
|
| 803,950 |
|
|
| 759,939 |
|
Due after 10 years |
|
| 363,166 |
|
|
| 361,948 |
|
|
| 549,384 |
|
|
| 480,941 |
|
Total |
|
| 2,614,649 |
|
|
| 2,609,334 |
|
|
| 3,203,045 |
|
|
| 3,024,225 |
|
Mortgage-backed securities |
|
| 3,719,369 |
|
|
| 3,649,243 |
|
|
| 4,574,905 |
|
|
| 3,982,122 |
|
Total securities available for sale |
| $ | 6,334,018 |
|
| $ | 6,258,577 |
|
| $ | 7,777,950 |
|
| $ | 7,006,347 |
|
Securities may be disposed of before contractual maturities due to sales by the Company or because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
There were no sales of securities available for sale in 2022. Proceeds from the sales of securities available for sale were $578.5 million, $951.3$372.6 million and $946.0$315.9 million for 2017, 2016,2021 and 2015,2020, respectively. There were no gross realized gains due to securities transactions in 2022. Securities transactions resulted in gross realized gains of $4.2
$7.8 million for 2017, $8.52021 and $7.3 million for 2016, and $10.5 million for 2015.2020. There were no gross realized losses in 2022. The gross realized losses were $10$2 thousand for 2017, $12021 and $274 thousand for 2016,2020.
There were $10.3 billion and $100 thousand for 2015.
Securities available for sale with a fair value$10.2 billion of $5.7 billion at both December 31, 2017 and December 31, 2016, weresecurities pledged to secure U.S. Government deposits, other public deposits, certain trust deposits, derivative transactions, and repurchase agreements.agreements at December 31, 2022 and December 31, 2021, respectively. There were no securities pledged at the Federal Reserve Discount Window at December 31, 2022. Of thisthe amount pledged at December 31, 2021, securities with a fair value of $1.8 billion at both December 31, 2017 and December 31, 2016$171.2 million were pledged at the Federal Reserve Discount Window but were unencumbered as of those dates.that date.
Accrued interest on securities available for sale totaled $32.1 million and $45.8 million as of December 31, 2022 and 2021, respectively, and is included in the Accrued income line on the Company’s Consolidated Balance Sheets. The total amount of accrued interest is excluded from the amortized cost of available securities presented above. Further, the Company has elected not to measure an ACL for accrued interest receivable.
The following table shows the Company’s available for saleavailable-for-sale investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 20172022 and 20162021 (in thousands).:
|
| Less than 12 months |
|
| 12 months or more |
|
| Total |
| |||||||||||||||
2017 |
| Fair Value |
|
| Unrealized Losses |
|
| Fair Value |
|
| Unrealized Losses |
|
| Fair Value |
|
| Unrealized Losses |
| ||||||
Description of Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
| $ | 9,851 |
|
| $ | (64 | ) |
| $ | 28,792 |
|
| $ | (1,385 | ) |
| $ | 38,643 |
|
| $ | (1,449 | ) |
U.S. Agencies |
|
| 14,553 |
|
|
| (10 | ) |
|
| — |
|
|
| — |
|
|
| 14,553 |
|
|
| (10 | ) |
Mortgage-backed |
|
| 1,990,006 |
|
|
| (19,980 | ) |
|
| 1,562,333 |
|
|
| (52,060 | ) |
|
| 3,552,339 |
|
|
| (72,040 | ) |
State and political subdivisions |
|
| 1,076,930 |
|
|
| (7,325 | ) |
|
| 376,560 |
|
|
| (8,484 | ) |
|
| 1,453,490 |
|
|
| (15,809 | ) |
Corporates |
|
| 13,266 |
|
|
| (12 | ) |
|
| — |
|
|
| — |
|
|
| 13,266 |
|
|
| (12 | ) |
Total temporarily-impaired debt securities available for sale |
| $ | 3,104,606 |
|
| $ | (27,391 | ) |
| $ | 1,967,685 |
|
| $ | (61,929 | ) |
| $ | 5,072,291 |
|
| $ | (89,320 | ) |
|
| Less than 12 months |
|
| 12 months or more |
|
| Total |
|
| Less than 12 months |
|
| 12 months or more |
|
| Total |
| ||||||||||||||||||||||||||||||||||||||||||
2016 |
| Fair Value |
|
| Unrealized Losses |
|
| Fair Value |
|
| Unrealized Losses |
|
| Fair Value |
|
| Unrealized Losses |
| ||||||||||||||||||||||||||||||||||||||||||
2022 |
| Count |
|
| Fair Value |
|
| Unrealized Losses |
|
| Count |
|
| Fair Value |
|
| Unrealized Losses |
|
| Count |
|
| Fair Value |
|
| Unrealized Losses |
| |||||||||||||||||||||||||||||||||
Description of Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
| $ | 48,678 |
|
| $ | (1,526 | ) |
| $ | — |
|
| $ | — |
|
| $ | 48,678 |
|
| $ | (1,526 | ) |
|
| 61 |
|
| $ | 688,208 |
|
| $ | (22,731 | ) |
|
| 4 |
|
| $ | 55,314 |
|
| $ | (4,415 | ) |
|
| 65 |
|
| $ | 743,522 |
|
| $ | (27,146 | ) |
U.S. Agencies |
|
| 103,979 |
|
|
| (34 | ) |
|
| 9,989 |
|
|
| (14 | ) |
|
| 113,968 |
|
|
| (48 | ) |
|
| 27 |
|
|
| 140,877 |
|
|
| (4,734 | ) |
|
| 2 |
|
|
| 30,419 |
|
|
| (2,231 | ) |
|
| 29 |
|
|
| 171,296 |
|
|
| (6,965 | ) |
Mortgage-backed |
|
| 2,735,868 |
|
|
| (55,035 | ) |
|
| 269,637 |
|
|
| (13,425 | ) |
|
| 3,005,505 |
|
|
| (68,460 | ) |
|
| 687 |
|
|
| 1,415,169 |
|
|
| (102,881 | ) |
|
| 205 |
|
|
| 2,557,035 |
|
|
| (489,994 | ) |
|
| 892 |
|
|
| 3,972,204 |
|
|
| (592,875 | ) |
State and political subdivisions |
|
| 1,748,922 |
|
|
| (36,639 | ) |
|
| 8,565 |
|
|
| (150 | ) |
|
| 1,757,487 |
|
|
| (36,789 | ) |
|
| 1,744 |
|
|
| 936,865 |
|
|
| (51,427 | ) |
|
| 273 |
|
|
| 233,679 |
|
|
| (53,372 | ) |
|
| 2,017 |
|
|
| 1,170,544 |
|
|
| (104,799 | ) |
Corporates |
|
| 41,966 |
|
|
| (90 | ) |
|
| 17,982 |
|
|
| (37 | ) |
|
| 59,948 |
|
|
| (127 | ) |
|
| 86 |
|
|
| 146,615 |
|
|
| (8,783 | ) |
|
| 189 |
|
|
| 216,885 |
|
|
| (24,776 | ) |
|
| 275 |
|
|
| 363,500 |
|
|
| (33,559 | ) |
Total temporarily-impaired debt securities available for sale |
| $ | 4,679,413 |
|
| $ | (93,324 | ) |
| $ | 306,173 |
|
| $ | (13,626 | ) |
| $ | 4,985,586 |
|
| $ | (106,950 | ) | ||||||||||||||||||||||||||||||||||||
Collateralized loan obligations |
|
| 41 |
|
|
| 326,659 |
|
|
| (7,820 | ) |
|
| 1 |
|
|
| 4,785 |
|
|
| (229 | ) |
|
| 42 |
|
|
| 331,444 |
|
|
| (8,049 | ) | ||||||||||||||||||||||||
Total |
|
| 2,646 |
|
| $ | 3,654,393 |
|
| $ | (198,376 | ) |
|
| 674 |
|
| $ | 3,098,117 |
|
| $ | (575,017 | ) |
|
| 3,320 |
|
| $ | 6,752,510 |
|
| $ | (773,393 | ) |
|
| Less than 12 months |
|
| 12 months or more |
|
| Total |
| |||||||||||||||||||||||||||
2021 |
| Count |
|
| Fair Value |
|
| Unrealized Losses |
|
| Count |
|
| Fair Value |
|
| Unrealized Losses |
|
| Count |
|
| Fair Value |
|
| Unrealized Losses |
| |||||||||
Description of Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
|
| 4 |
|
| $ | 58,867 |
|
| $ | (751 | ) |
|
| — |
|
| $ | — |
|
| $ | — |
|
|
| 4 |
|
| $ | 58,867 |
|
| $ | (751 | ) |
U.S. Agencies |
|
| 1 |
|
|
| 11,149 |
|
|
| (1 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| 11,149 |
|
|
| (1 | ) |
Mortgage-backed |
|
| 344 |
|
|
| 5,404,968 |
|
|
| (87,301 | ) |
|
| 13 |
|
|
| 233,295 |
|
|
| (8,571 | ) |
|
| 357 |
|
|
| 5,638,263 |
|
|
| (95,872 | ) |
State and political subdivisions |
|
| 357 |
|
|
| 329,042 |
|
|
| (6,969 | ) |
|
| 31 |
|
|
| 44,939 |
|
|
| (2,177 | ) |
|
| 388 |
|
|
| 373,981 |
|
|
| (9,146 | ) |
Corporates |
|
| 152 |
|
|
| 193,899 |
|
|
| (1,498 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 152 |
|
|
| 193,899 |
|
|
| (1,498 | ) |
Collateralized loan obligations |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total |
|
| 858 |
|
| $ | 5,997,925 |
|
| $ | (96,520 | ) |
|
| 44 |
|
| $ | 278,234 |
|
| $ | (10,748 | ) |
|
| 902 |
|
| $ | 6,276,159 |
|
| $ | (107,268 | ) |
The unrealized losses in the Company’s investments in U.S. treasury obligations, U.S. government agencies, GSE mortgage-backed securities, municipal securities, and corporates were caused by changes in interest rates, and not from a decline in credit of the underlying issuers. The U.S. Treasury, U.S. Agency, and GSE mortgage-backed securities are all considered to be agency-backed securities with no risk of loss as they are either explicitly or implicitly guaranteed by the U.S. government. The changes in fair value in the agency-backed portfolios are solely driven by change in interest rate environment.rates caused by changing economic conditions. The Company doeshas no knowledge of any underlying credit issues and the cash flows underlying the debt securities have not changed and are not expected to be impacted by changes in interest rates.
For the State and political subdivision portfolio, the majority of the Company’s holdings are in general obligation bonds, which have a very low historical default rate due to issuers generally having unlimited taxing authority to service the intent to sell these securitiesdebt. For the State and does not believe it is more likely than not thatpolitical, Corporates, and Collateralized loan obligations portfolios, the Company will be required to sell these securities beforehas a recovery of amortized cost.robust process for monitoring credit risk, including both pre-purchase and ongoing post-purchase
credit reviews and analysis. The Company expects to recover its cost basismonitors credit ratings of all bond issuers in the securitiesthese segments and does not consider these investments to be other-than-temporarily impaired atreviews available financial data, including market and sector trends.
As of both December 31, 2017.2022 and 2021, 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.
The following table shows the Company’sprovides detailed information about securities held to maturity investments’ amortized cost, fair value, and gross unrealized gains and losses at December 31, 20172022 and net unrealized gains, aggregated by2021, respectively (in thousands):
2022 |
| Amortized Cost |
|
| Gross Unrealized Gains |
|
| Gross Unrealized Losses |
|
| Fair Value |
|
| Allowance for Credit Losses |
|
| Net Carrying Amount |
| ||||||
U.S. Agency |
| $ | 123,091 |
|
| $ | — |
|
| $ | (4,567 | ) |
| $ | 118,524 |
|
| $ | — |
|
| $ | 123,091 |
|
Mortgage-backed |
|
| 2,965,586 |
|
|
| 11 |
|
|
| (392,530 | ) |
|
| 2,573,067 |
|
|
| — |
|
|
| 2,965,586 |
|
State and political subdivisions |
|
| 2,772,922 |
|
|
| 17,618 |
|
|
| (201,472 | ) |
|
| 2,589,068 |
|
|
| (2,407 | ) |
|
| 2,770,515 |
|
Total |
| $ | 5,861,599 |
|
| $ | 17,629 |
|
| $ | (598,569 | ) |
| $ | 5,280,659 |
|
| $ | (2,407 | ) |
| $ | 5,859,192 |
|
2021 |
| Amortized Cost |
|
| Gross Unrealized Gains |
|
| Gross Unrealized Losses |
|
| Fair Value |
|
| Allowance for Credit Losses |
|
| Net Carrying Amount |
| ||||||
Mortgage-backed |
| $ | 396,134 |
|
| $ | 14 |
|
| $ | (2,431 | ) |
| $ | 393,717 |
|
| $ | — |
|
| $ | 396,134 |
|
State and political subdivisions |
|
| 1,084,282 |
|
|
| 3,346 |
|
|
| (38,954 | ) |
|
| 1,048,674 |
|
|
| (1,940 | ) |
|
| 1,082,342 |
|
Total |
| $ | 1,480,416 |
|
| $ | 3,360 |
|
| $ | (41,385 | ) |
| $ | 1,442,391 |
|
| $ | (1,940 | ) |
| $ | 1,478,476 |
|
The following table presents contractual maturity category,information for securities held to maturity at December 31, 2016, respectively2022 (in thousands).:
|
|
|
|
|
| Gross |
|
| Gross |
|
|
|
|
| ||
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
| ||||
2017 |
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||
State and political subdivisions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in 1 year or less |
| $ | 2,275 |
|
| $ | 3 |
|
| $ | (24 | ) |
| $ | 2,254 |
|
Due after 1 year through 5 years |
|
| 100,648 |
|
|
| 3,111 |
|
|
| (2,834 | ) |
|
| 100,925 |
|
Due after 5 years through 10 years |
|
| 372,234 |
|
|
| 5,006 |
|
|
| (14,117 | ) |
|
| 363,123 |
|
Due after 10 years |
|
| 785,857 |
|
|
| 6,952 |
|
|
| (51,664 | ) |
|
| 741,145 |
|
Total state and political subdivisions |
| $ | 1,261,014 |
|
| $ | 15,072 |
|
| $ | (68,639 | ) |
| $ | 1,207,447 |
|
|
|
|
|
|
| Gross |
|
| Gross |
|
|
|
|
|
| Amortized |
|
| Fair |
| ||||
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
|
| Cost |
|
| Value |
| ||||||
2016 |
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||||||||||
State and political subdivisions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Due in 1 year or less |
| $ | 6,077 |
|
| $ | 5 |
|
| $ | (947 | ) |
| $ | 5,135 |
|
| $ | 82,196 |
|
| $ | 81,893 |
|
Due after 1 year through 5 years |
|
| 82,650 |
|
|
| 2,376 |
|
|
| (1,474 | ) |
|
| 83,552 |
|
|
| 347,137 |
|
|
| 338,148 |
|
Due after 5 years through 10 years |
|
| 341,741 |
|
|
| 8,854 |
|
|
| (3,021 | ) |
|
| 347,574 |
|
|
| 743,395 |
|
|
| 704,133 |
|
Due after 10 years |
|
| 685,464 |
|
|
| 15,717 |
|
|
| (31,415 | ) |
|
| 669,766 |
|
|
| 1,723,285 |
|
|
| 1,583,418 |
|
Total state and political subdivisions |
| $ | 1,115,932 |
|
| $ | 26,952 |
|
| $ | (36,857 | ) |
| $ | 1,106,027 |
| ||||||||
Total |
|
| 2,896,013 |
|
|
| 2,707,592 |
| ||||||||||||||||
Mortgage-backed securities |
|
| 2,965,586 |
|
|
| 2,573,067 |
| ||||||||||||||||
Total securities held to maturity |
| $ | 5,861,599 |
|
| $ | 5,280,659 |
|
Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
There were no sales of securities held to maturity during 2017, 2016,2022, 2021, or 2015.2020.
During the year ended December 31, 2022, securities with an amortized cost of $4.1 billion and a fair value of $3.8 billion were transferred from the available-for-sale classification to the held-to-maturity classification as the Company has the positive intent and ability to hold these securities to maturity. The transfers of securities were made at fair value at the time of transfer. The unrealized holding gain or loss at the time of transfer is retained in AOCI and will be amortized over the remaining life of the securities, offsetting the related amortization of discount or premium on the transferred securities. No gains or losses were recognized at the time of the transfers. The amortized cost balance of securities held to maturity in the tables above includes a net unamortized unrealized loss of $247.0 million at December 31, 2022.
Accrued interest on securities held to maturity totaled $27.0 million and $5.3 million as of December 31, 2022 and 2021, respectively, and is included in the Accrued income line on the Company’s Consolidated Balance Sheets. The total amount of accrued interest is excluded from the amortized cost of held-to-maturity securities presented above. Further, the Company has elected not to measure an ACL for accrued interest receivable.
The following table shows the Company’s held-to-maturity investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2022 and 2021 (in thousands):
|
| Less than 12 months |
|
| 12 months or more |
|
| Total |
| |||||||||||||||||||||||||||
2022 |
| Count |
|
| Fair Value |
|
| Unrealized Losses |
|
| Count |
|
| Fair Value |
|
| Unrealized Losses |
|
| Count |
|
| Fair Value |
|
| Unrealized Losses |
| |||||||||
U.S. Agency |
|
| 11 |
|
| $ | 118,524 |
|
| $ | (4,567 | ) |
|
| — |
|
| $ | — |
|
| $ | — |
|
|
| 11 |
|
| $ | 118,524 |
|
| $ | (4,567 | ) |
Mortgage-backed |
|
| 254 |
|
|
| 2,342,656 |
|
|
| (346,611 | ) |
|
| 11 |
|
|
| 228,079 |
|
|
| (45,919 | ) |
|
| 265 |
|
|
| 2,570,735 |
|
|
| (392,530 | ) |
State and political subdivisions |
|
| 1,403 |
|
|
| 1,543,692 |
|
|
| (177,957 | ) |
|
| 61 |
|
|
| 617,805 |
|
|
| (23,515 | ) |
|
| 1,464 |
|
|
| 2,161,497 |
|
|
| (201,472 | ) |
Total |
|
| 1,668 |
|
| $ | 4,004,872 |
|
| $ | (529,135 | ) |
|
| 72 |
|
| $ | 845,884 |
|
| $ | (69,434 | ) |
|
| 1,740 |
|
| $ | 4,850,756 |
|
| $ | (598,569 | ) |
|
| Less than 12 months |
|
| 12 months or more |
|
| Total |
| |||||||||||||||||||||||||||
2021 |
| Count |
|
| Fair Value |
|
| Unrealized Losses |
|
| Count |
|
| Fair Value |
|
| Unrealized Losses |
|
| Count |
|
| Fair Value |
|
| Unrealized Losses |
| |||||||||
Mortgage-backed |
|
| 12 |
|
| $ | 317,887 |
|
| $ | (2,431 | ) |
|
| — |
|
| $ | — |
|
| $ | — |
|
|
| 12 |
|
| $ | 317,887 |
|
| $ | (2,431 | ) |
State and political subdivisions |
|
| 58 |
|
|
| 585,153 |
|
|
| (12,494 | ) |
|
| 28 |
|
|
| 217,579 |
|
|
| (26,460 | ) |
|
| 86 |
|
|
| 802,732 |
|
|
| (38,954 | ) |
Total |
|
| 70 |
|
| $ | 903,040 |
|
| $ | (14,925 | ) |
|
| 28 |
|
| $ | 217,579 |
|
| $ | (26,460 | ) |
|
| 98 |
|
| $ | 1,120,619 |
|
| $ | (41,385 | ) |
The unrealized losses in the Company’s held to maturityheld-to-maturity portfolio were caused by changes in the interest rate environment. The U.S. Agency and GSE mortgage-backed securities are considered to be agency-backed securities with no risk of loss as they are either explicitly or implicitly guaranteed by the U.S. government. Therefore, the Company’s expected lifetime loss for these portfolios is zero and there is no ACL recorded for these portfolios. The Company has no knowledge of any underlying credit issues and the cash flows underlying the debt securities have not changed and are not expected to be impacted by changes in interest rates.
For the State and political subdivision portfolio, the Company’s holdings are in general obligation bonds as well as private placement bonds, which have very low historical default rates due to issuers generally having unlimited taxing authority to service the debt. The Company has a robust process for monitoring credit risk, including both pre-purchase and ongoing post-purchase credit reviews and analysis. The Company monitors credit ratings of all bond issuers in these segments and reviews available financial data, including market and sector trends. The underlying bonds are subject to a risk-ranking process similar toevaluated for credit losses in conjunction with management’s estimate of the ACL based on credit rating.
The following table shows the amortized cost basis by credit rating of the Company’s loan portfolioheld-to-maturity State and evaluated for impairment if deemed necessary. The Company does not have the intent to sell these securities and does not believe it is more likely than not that the Company will be required to sell these securities before a recovery of amortized cost. The Company expects to recover its cost basis in the securities and does not consider thesepolitical subdivisions bond investments to be other-than-temporarily impaired as ofat December 31, 2017.2022 and 2021 (in thousands):
|
| Amortized Cost Basis by Credit Rating - HTM Debt Securities |
| |||||||||||||||||||||||||
2022 |
| AAA |
|
| AA |
|
| A |
|
| BBB |
|
| BB |
|
| CCC-C |
|
| Total |
| |||||||
State and political subdivisions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Competitive |
| $ | — |
|
| $ | — |
|
| $ | 435,953 |
|
| $ | 618,517 |
|
| $ | 17,120 |
|
| $ | 2,934 |
|
| $ | 1,074,524 |
|
Utilities |
|
| 759,539 |
|
|
| 824,386 |
|
|
| 84,293 |
|
|
| 29,599 |
|
|
| 581 |
|
|
| — |
|
|
| 1,698,398 |
|
Total state and political subdivisions |
| $ | 759,539 |
|
| $ | 824,386 |
|
| $ | 520,246 |
|
| $ | 648,116 |
|
| $ | 17,701 |
|
| $ | 2,934 |
|
| $ | 2,772,922 |
|
|
| Amortized Cost Basis by Credit Rating - HTM Debt Securities |
| |||||||||||||||||
2021 |
| A |
|
| BBB |
|
| BB |
|
| CCC-C |
|
| Total |
| |||||
State and political subdivisions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Competitive |
| $ | 372,696 |
|
| $ | 605,104 |
|
| $ | 20,678 |
|
| $ | 870 |
|
| $ | 999,348 |
|
Utilities |
|
| 55,096 |
|
|
| 29,838 |
|
|
| — |
|
|
| — |
|
|
| 84,934 |
|
Total state and political subdivisions |
| $ | 427,792 |
|
| $ | 634,942 |
|
| $ | 20,678 |
|
| $ | 870 |
|
| $ | 1,084,282 |
|
Competitive held-to-maturity securities include not-for-profit enterprises that provide public functions such as housing, higher education, or healthcare, but do so in a competitive environment. It also includes project financings that can have relatively high enterprise risk, such as deals backed by revenues from sports or convention facilities or start-up transportation revenues.
Utilities are public enterprises providing essential services with a monopoly or near-monopoly over the service area. This includes environmental utilities (water, sewer, solid waste), power utilities (electric distribution and generation, gas), and transportation utilities (airports, parking, toll roads, mass transit, ports).
All held-to-maturity securities were current and not past due at December 31, 2022.
The following table presents the aging of past due held-to-maturity securities at December 31, 2021 (in thousands):
2021 |
| 30-89 Days Past Due and Accruing |
|
| Greater than 90 Days Past Due and Accruing |
|
| Non- Accrual |
|
| Total Past Due |
|
| Current |
|
| Total |
| ||||||
State and political subdivisions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Competitive |
| $ | 7,795 |
|
| $ | — |
|
| $ | — |
|
| $ | 7,795 |
|
| $ | 991,553 |
|
| $ | 999,348 |
|
Utilities |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 84,934 |
|
|
| 84,934 |
|
Total state and political subdivisions |
| $ | 7,795 |
|
| $ | — |
|
| $ | — |
|
| $ | 7,795 |
|
| $ | 1,076,487 |
|
| $ | 1,084,282 |
|
Trading Securities
The net unrealized gainsloss on trading securities atwas $26 thousand as of December 31, 2017, 2016, and 2015 were $188 thousand, $2332022.�� The net unrealized gain on trading securities was $2 thousand and $8$13 thousand as of December 31, 2021, and 2020, respectively. Net unrealized gains/gains and losses are included in trading and investment banking income on the Consolidated Statements of Income. Securities sold not yet purchased totaled $3.5 million and $3.2 million at December 31, 2022 and 2021, respectively, and are classified within the Other liabilities line of the Company’s Consolidated Balance Sheets.
The table below provides detailed information for Federal Reserve Bank stock and Federal Home Loan Bank stock and otherOther securities at December 31, 20172022 and 20162021 (in thousands):
|
|
|
|
|
| Gross |
|
| Gross |
|
|
|
|
| ||
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
| ||||
2017 |
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||
FRB and FHLB stock |
| $ | 33,262 |
|
| $ | — |
|
| $ | — |
|
| $ | 33,262 |
|
Other securities – marketable |
|
| 3 |
|
|
| 4,637 |
|
|
| — |
|
|
| 4,640 |
|
Other securities – non-marketable |
|
| 26,606 |
|
|
| 1,389 |
|
|
| — |
|
|
| 27,995 |
|
Total Federal Reserve Bank stock and other |
| $ | 59,871 |
|
| $ | 6,026 |
|
| $ | — |
|
| $ | 65,897 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross |
|
| Gross |
|
|
|
|
| ||
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
| ||||
2016 |
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||
FRB and FHLB stock |
| $ | 33,262 |
|
| $ | — |
|
| $ | — |
|
| $ | 33,262 |
|
Other securities – marketable |
|
| 4 |
|
|
| 9,948 |
|
|
| — |
|
|
| 9,952 |
|
Other securities – non-marketable |
|
| 24,272 |
|
|
| 820 |
|
|
| — |
|
|
| 25,092 |
|
Total Federal Reserve Bank stock and other |
| $ | 57,538 |
|
| $ | 10,768 |
|
| $ | — |
|
| $ | 68,306 |
|
|
| 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 |
|
Investment in FRB stock is based on the capital structure of the investing bank, and investment in FHLB stock is mainly tied to the level of borrowings from the FHLB. These holdings are carried at cost. Other marketableEquity securities with readily determinable fair values are generally traded on an exchange and non-marketable market prices are readily available. Equity
securities without readily determinable fair values include PCM alternativeequity investments which are held by a subsidiary qualified as a Small Business Investment Company, as well as investments in hedge funds and private equity funds, which are accounted for as equity-method investments. The fair value of other marketable securities includes alternative investment securities of $4.6 million at December 31, 2017 and $10.0 million at December 31, 2016. The fair value of other non-marketable securities includes alternative investment securities of $3.4 million at December 31, 2017 and $2.0 million at December 31, 2016.low-income housing partnerships within the areas the Company serves. Unrealized gains or losses on alternative investmentsequity securities with and without readily determinable fair values are recognized in the Equity (losses) earnings on alternative investmentsInvestment securities gains, net line of the Company’s Consolidated Statements of Income.
Investment Securities Gains, Net
The following table presents the components of Investment securities gains, net for the years ended December 31, 2022, 2021, and 2020 (in thousands):
|
| Year Ended December 31, |
| |||||||||
|
| 2022 |
|
| 2021 |
|
| 2020 |
| |||
Investment securities gains, net |
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Gains realized on sales |
| $ | — |
|
| $ | 7,819 |
|
| $ | 7,255 |
|
Losses realized on sales |
|
| — |
|
|
| (2 | ) |
|
| (274 | ) |
Equity securities with readily determinable fair values: |
|
|
|
|
|
|
|
|
|
|
|
|
Fair value adjustments, net |
|
| (8,073 | ) |
|
| (10,881 | ) |
|
| 110,768 |
|
Equity securities without readily determinable fair values: |
|
|
|
|
|
|
|
|
|
|
|
|
Fair value adjustments, net |
|
| 355 |
|
|
| 8,121 |
|
|
| 2,885 |
|
Sales |
|
| 66,162 |
|
|
| — |
|
|
| — |
|
Total investment securities gains, net |
| $ | 58,444 |
|
| $ | 5,057 |
|
| $ | 120,634 |
|
During 2022, the Company sold the entirety of its Visa Inc. Class B common shares in a cash transaction which resulted in a pre-tax gain of $66.2 million. Prior to the sale, the Visa Inc. Class B shares had no carrying value on the Company’s Consolidated Balance Sheets as the Company had no historical cost basis in the shares.
5. SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL
The Company regularly enters into agreements for the purchase of securities with simultaneous agreements to resell (resell agreements). The agreements permit the Company to sell or repledge these securities. Resell agreements were $186.5$951.6 million and $323.4 million$1.2 billion at December 31, 20172022 and 2016,2021, respectively. The Company obtains possession of collateral with a market value equal to or in excess of the principal amount loaned under resell agreements.
6. LOANS TO OFFICERS AND DIRECTORS
Certain executive officers and directors of the Company and the Bank, including companies in which those persons are principal holders of equity securities or are general partners, borrow in the normal course of business from the Bank. All such loans have been made on substantially the same terms, including interest rates and collateral, as those prevailing at the same time for comparable transactions with unrelated parties. In addition, all such loans are current as to repayment terms. In 2016, the composition of the Bank board of directors changed, with membership of the Bank board mirroring membership of the Company’s board. This change resulted in a significant reduction of the number of loans to officers and directors, totaling $501.4 million for the year-ended December 31, 2016. During the year ended December 31, 2017, changes in the composition of the Bank board of directors resulted in a reduction of $101.0 million in the reportable loans to officers and directors.
For the years 20172022 and 2016,2021, an analysis of activity with respect to such aggregate loans to related parties appears below (in thousands):
|
| Year Ended December 31, |
|
| Year Ended December 31, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2022 |
|
| 2021 |
| ||||
Balance – beginning of year |
| $ | 321,392 |
|
| $ | 710,085 |
|
| $ | 279,717 |
|
| $ | 165,395 |
|
New loans |
|
| 61,697 |
|
|
| 125,868 |
|
|
| 192,595 |
|
|
| 176,226 |
|
Repayments |
|
| (94,378 | ) |
|
| (13,148 | ) |
|
| (109,459 | ) |
|
| (61,780 | ) |
Reduction due to change in reportable loans |
|
| (101,049 | ) |
|
| (501,413 | ) |
|
| — |
|
|
| (124 | ) |
Balance – end of year |
| $ | 187,662 |
|
| $ | 321,392 |
|
| $ | 362,853 |
|
| $ | 279,717 |
|
7. GOODWILL AND OTHER INTANGIBLES
Changes in the carrying amount of goodwill for the years ended December 31, 20172022 and December 31, 20162021 by operating segment are as follows (in thousands):
|
| Bank |
|
| Institutional Investment Management |
|
| Asset Servicing |
|
| Total |
| ||||
Balances as of January 1, 2017 |
| $ | 161,391 |
|
| $ | 47,529 |
|
| $ | 19,476 |
|
| $ | 228,396 |
|
Discontinued assets |
|
| — |
|
|
| (47,529 | ) |
|
| — |
|
|
| (47,529 | ) |
Balances as of December 31, 2017 |
| $ | 161,391 |
|
| $ | — |
|
| $ | 19,476 |
|
| $ | 180,867 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances as of January 1, 2016 |
| $ | 161,341 |
|
| $ | 47,529 |
|
| $ | 19,476 |
|
| $ | 228,346 |
|
Acquisition of Marquette |
|
| 50 |
|
|
| — |
|
|
| — |
|
|
| 50 |
|
Discontinued assets |
|
| — |
|
|
| (47,529 | ) |
|
| — |
|
|
| (47,529 | ) |
Balances as of December 31, 2016 |
| $ | 161,391 |
|
| $ | — |
|
| $ | 19,476 |
|
| $ | 180,867 |
|
|
| Commercial Banking |
|
| Institutional Banking |
|
| Personal Banking |
|
| Total |
| ||||
Balances as of January 1, 2022 |
| $ | 59,419 |
|
| $ | 51,332 |
|
| $ | 63,767 |
|
| $ | 174,518 |
|
Healthcare savings account business acquisition |
|
| — |
|
|
| 25,160 |
|
|
| — |
|
|
| 25,160 |
|
Branch acquisition |
|
| 3,694 |
|
|
| — |
|
|
| 4,013 |
|
|
| 7,707 |
|
Balances as of December 31, 2022 |
| $ | 63,113 |
|
| $ | 76,492 |
|
| $ | 67,780 |
|
| $ | 207,385 |
|
|
|
|
| �� |
|
|
|
|
|
|
|
|
|
|
|
|
Balances as of January 1, 2021 |
| $ | 59,419 |
|
| $ | 51,332 |
|
| $ | 70,116 |
|
| $ | 180,867 |
|
Sale of component of business segment |
|
| — |
|
|
| — |
|
|
| (6,349 | ) |
|
| (6,349 | ) |
Balances as of December 31, 2021 |
| $ | 59,419 |
|
| $ | 51,332 |
|
| $ | 63,767 |
|
| $ | 174,518 |
|
Following are the intangible assets that continue to be subject to amortization as of December 31, 20172022 and 20162021 (in thousands):
| As of December 31, 2017 |
| |||||||||||||
| Core Deposit Intangible Assets |
|
| Customer Relationships |
|
| Other Intangible Assets |
|
| Total |
| ||||
Gross Carrying Amount | $ | 50,059 |
|
| $ | 71,342 |
|
| $ | 3,254 |
|
| $ | 124,655 |
|
Accumulated Amortization |
| 42,209 |
|
|
| 58,935 |
|
|
| 3,254 |
|
|
| 104,398 |
|
Net Carrying Amounts | $ | 7,850 |
|
| $ | 12,407 |
|
| $ | — |
|
| $ | 20,257 |
|
| As of December 31, 2022 |
| |||||||||
| Core Deposit Intangible Assets |
|
| Customer Relationships |
|
| Total |
| |||
Gross carrying amount | $ | 16,661 |
|
| $ | 114,978 |
|
| $ | 131,639 |
|
Accumulated amortization |
| 14,827 |
|
|
| 38,088 |
|
|
| 52,915 |
|
Net carrying amount | $ | 1,834 |
|
| $ | 76,890 |
|
| $ | 78,724 |
|
| As of December 31, 2016 |
| |||||||||||||
| Core Deposit Intangible Assets |
|
| Customer Relationships |
|
| Other Intangible Assets |
|
| Total |
| ||||
Gross Carrying Amount | $ | 47,527 |
|
| $ | 74,243 |
|
| $ | 3,254 |
|
| $ | 125,024 |
|
Accumulated Amortization |
| 39,040 |
|
|
| 56,352 |
|
|
| 3,002 |
|
|
| 98,394 |
|
Net Carrying Amounts | $ | 8,487 |
|
| $ | 17,891 |
|
| $ | 252 |
|
| $ | 26,630 |
|
| As of December 31, 2021 |
| |||||||||
| Core Deposit Intangible Assets |
|
| Customer Relationships |
|
| Total |
| |||
Gross carrying amount | $ | 50,059 |
|
| $ | 71,167 |
|
| $ | 121,226 |
|
Accumulated amortization |
| 49,623 |
|
|
| 57,187 |
|
|
| 106,810 |
|
Net carrying amount | $ | 436 |
|
| $ | 13,980 |
|
| $ | 14,416 |
|
On November 18, 2022, the Company acquired a healthcare savings account business, which included $383.0 million of deposits. The purchase resulted in recognition of $25.2 million of goodwill and a $67.0 million customer relationship intangible asset.
On March 28, 2022, the Company acquired a bank branch. Included in the branch acquisition were $43.0 million in loans and $226.8 million of deposits. The purchase resulted in recognition of $7.7 million of goodwill and a $2.3 million core deposit intangible asset.
On March 31, 2021, the Company sold its membership interests in its PCM and UMB Merchant Banc, LLC subsidiaries, components of its Personal Banking segment. The sale included disposition of $6.3 million of goodwill and $1.9 million of net unamortized customer relationship intangibles.
Amortization expense for the years ended December 31, 2017, 2016,2022, 2021, and 20152020 was $7.3$5.0 million, $8.7$4.8 million, and $8.2$6.5 million, respectively.
The following table discloses the estimated amortization expense of intangible assets in future years (in thousands):
For the year ending December 31, 2018 |
| $ | 5,713 |
|
For the year ending December 31, 2019 |
|
| 4,714 |
|
For the year ending December 31, 2020 |
|
| 3,759 |
|
For the year ending December 31, 2021 |
|
| 2,755 |
|
For the year ending December 31, 2022 |
|
| 1,815 |
|
For the year ending December 31, 2023 |
| $ | 8,366 |
|
For the year ending December 31, 2024 |
|
| 7,636 |
|
For the year ending December 31, 2025 |
|
| 7,429 |
|
For the year ending December 31, 2026 |
|
| 6,569 |
|
For the year ending December 31, 2027 |
|
| 4,597 |
|
8. PREMISES, EQUIPMENT, AND EQUIPMENTLEASES
Premises and equipment consisted of the following (in thousands):
|
| December 31, |
|
| December 31, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2022 |
|
| 2021 |
| ||||
Land |
| $ | 46,415 |
|
| $ | 45,634 |
|
| $ | 41,368 |
|
| $ | 41,513 |
|
Buildings and leasehold improvements |
|
| 328,384 |
|
|
| 325,510 |
|
|
| 361,346 |
|
|
| 352,954 |
|
Equipment |
|
| 148,425 |
|
|
| 150,955 |
|
|
| 187,208 |
|
|
| 181,218 |
|
Software |
|
| 186,269 |
|
|
| 178,527 |
|
|
| 285,833 |
|
|
| 273,342 |
|
Total |
|
| 709,493 |
|
|
| 700,626 |
|
|
| 875,755 |
|
|
| 849,027 |
|
Accumulated depreciation |
|
| (300,103 | ) |
|
| (288,956 | ) |
|
| (371,958 | ) |
|
| (357,503 | ) |
Accumulated amortization |
|
| (133,448 | ) |
|
| (122,663 | ) |
|
| (240,148 | ) |
|
| (220,591 | ) |
Premises and equipment, net |
| $ | 275,942 |
|
| $ | 289,007 |
|
| $ | 263,649 |
|
| $ | 270,933 |
|
Premises and equipment depreciation and amortization expenses were $45.6$46.8 million in 2017, $41.92022, $49.6 million in 2016,2021, and $40.2$56.1 million in 2015. Rental2020.
The Company primarily has leases of real estate, including buildings, or portions of buildings, used for bank branches or general office operations. These leases have remaining lease terms that range from less than one year to 25 years and most leases include one or more options to renew, with renewal terms that can extend the lease term from one month to 35 years or more. The exercise of lease renewal options is at the Company’s sole discretion. No renewal options were included in the Company’s calculation of its lease liabilities or right of use assets since it is not reasonably certain that the Company will exercise these options. No leases include options to purchase the leased property. The lease agreements do not contain any material residual value guarantees or material restrictive covenants. An insignificant number of leases include variable lease payments that are based on the Consumer Price Index (CPI). For the calculation of the lease liability and right of use asset for these leases, the Company has included lease payments based on CPI as of the effective date of ASC 842. The Company has made the election not to separate lease and non-lease components for existing real estate leases when determining consideration within the lease contract. All of the Company’s lease agreements are classified as operating leases under ASC 842.
As of December 31, 2022 and 2021, right-of-use assets of $54.6 million and $57.1 million, respectively, were included as part of Other assets on the Company’s Consolidated Balance Sheets. In addition, lease expensesliabilities of $63.5 million and $64.6 million were $14.8 million in 2017, $14.6 million in 2016, and $14.1 million in 2015. included as part of Other liabilities on the Company’s Consolidated Balance
Minimum future rental commitmentsSheets as of December 31, 2017,2022 and 2021, respectively. For the years ended December 31, 2022, 2021, and 2020, lease expense of $11.9 million, $11.8 million, and $12.8 million, respectively, was recognized as part of Occupancy expense on the Company’s Consolidated Statements of Income. For the years ended December 31, 2022, 2021, and 2020, cash payments of $12.9 million, $12.6 million, and $12.3 million, respectively, were made for allleases included in the measurement of lease liabilities and are classified as cash flows from operating activities in the Company’s Consolidated Statements of Cash Flows. For the years ended December 31, 2022 and 2021, leased assets obtained in exchange for new operating lease liabilities were $11.3 million and $2.4 million, respectively. As of December 31, 2022 and 2021, the weighted average remaining lease terms of the Company’s leases were 7.0 years and 7.5 years, respectively, and the weighted average discount rates were 2.96% and 2.74%, respectively.
As of December 31, 2022, future minimum lease payments under non-cancelable operating leases arewere as follows (in thousands):
| 2018 |
|
| $ | 11,163 |
| ||||
| 2019 |
|
|
| 10,892 |
| ||||
| 2020 |
|
|
| 10,193 |
| ||||
| 2021 |
|
|
| 8,044 |
| ||||
| 2022 |
|
|
| 7,517 |
| ||||
2023 |
| $ | 12,278 |
| ||||||
2024 |
|
| 11,652 |
| ||||||
2025 |
|
| 10,005 |
| ||||||
2026 |
|
| 9,326 |
| ||||||
2027 |
|
| 8,297 |
| ||||||
Thereafter | Thereafter |
|
|
| 31,219 |
|
|
| 19,430 |
|
Total |
|
| $ | 79,028 |
| |||||
Total lease payments |
|
| 70,988 |
| ||||||
Less: Interest |
|
| 7,516 |
| ||||||
Present value of lease liabilities |
| $ | 63,472 |
|
9. BORROWED FUNDS
The components of the Company's short-term and long-term debt are as follows (in thousands):
|
| December 31, |
| |||||
|
| 2017 |
|
| 2016 |
| ||
Long-term debt: |
|
|
|
|
|
|
|
|
Trust Preferred Securities: |
|
|
|
|
|
|
|
|
Marquette Capital Trust I subordinated debentures 2.69% due 2036 |
|
| 16,636 |
|
|
| 16,356 |
|
Marquette Capital Trust II subordinated debentures 2.69% due 2036 |
|
| 17,285 |
|
|
| 17,020 |
|
Marquette Capital Trust III subordinated debentures 3.17% due 2036 |
|
| 6,804 |
|
|
| 6,705 |
|
Marquette Capital Trust IV subordinated debentures 2.92% due 2036 |
|
| 27,560 |
|
|
| 27,174 |
|
Kansas Equity Fund IV, L.P. 0% due 2017 |
|
| — |
|
|
| 2 |
|
Kansas Equity Fund V, L.P. 0% due 2017 |
|
| — |
|
|
| 7 |
|
Kansas Equity Fund VI, L.P. 0% due 2017 |
|
| — |
|
|
| 23 |
|
Kansas Equity Fund IX, L.P. 0% due 2023 |
|
| 133 |
|
|
| 202 |
|
Kansas Equity Fund X, L.P. 0% due 2021 |
|
| 207 |
|
|
| 272 |
|
Kansas City Equity Fund 2009, L.L.C. 0% due 2017 |
|
| — |
|
|
| 10 |
|
St. Louis Equity Fund 2007 L.L.C. 0% due 2019 |
|
| 13 |
|
|
| 13 |
|
St. Louis Equity Fund 2009 L.L.C. 0% due 2017 |
|
| — |
|
|
| 95 |
|
St. Louis Equity Fund 2012 L.L.C. 0% due 2020 |
|
| 163 |
|
|
| 243 |
|
St. Louis Equity Fund 2013 L.L.C. 0% due 2021 |
|
| 859 |
|
|
| 1,168 |
|
St. Louis Equity Fund 2014 L.L.C. 0% due 2022 |
|
| 1,209 |
|
|
| 1,507 |
|
St. Louis Equity Fund 2015, L.L.C. 0% due 2023 |
|
| 759 |
|
|
| 908 |
|
MHEG Community Fund 41, L.P. 0% due 2024 |
|
| 680 |
|
|
| 815 |
|
MHEG Community Fund 43, L.P. 0% due 2026 |
|
| 1,165 |
|
|
| 1,362 |
|
MHEG Community Fund 45, L.P. 0% due 2027 |
|
| 1,353 |
|
|
| 1,409 |
|
MHEG Community Fund 47, L.P. 0% due 2028 |
|
| 1,485 |
|
|
| 1,481 |
|
MHEG Community Fund 49, L.P. 0% due 2034 |
|
| 2,970 |
|
|
| — |
|
Total long-term debt |
|
| 79,281 |
|
|
| 76,772 |
|
Total borrowed funds |
| $ | 79,281 |
|
| $ | 76,772 |
|
|
| December 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Trust Preferred Securities: |
|
|
|
|
|
|
|
|
Marquette Capital Trust I Subordinated Debentures 5.41% due 2036 |
| $ | 18,319 |
|
| $ | 17,956 |
|
Marquette Capital Trust II Subordinated Debentures 5.41% due 2036 |
|
| 18,863 |
|
|
| 18,526 |
|
Marquette Capital Trust III Subordinated Debentures 6.23% due 2036 |
|
| 7,415 |
|
|
| 7,286 |
|
Marquette Capital Trust IV Subordinated Debentures 6.37% due 2036 |
|
| 29,956 |
|
|
| 29,445 |
|
Subordinated notes 3.70% due 2030, net of issuance costs |
|
| 198,781 |
|
|
| 198,331 |
|
Subordinated notes 6.25% due 2032, net issuance costs |
|
| 107,977 |
|
|
| — |
|
Total long-term debt |
| $ | 381,311 |
|
| $ | 271,544 |
|
Aggregate annual repaymentsThe aggregate contractual repayment of long-term debt atof $413.1 million is due after December 31, 2017, are as follows (in thousands):2027.
| 2018 |
|
| $ | 1,519 |
|
| 2019 |
|
|
| 1,678 |
|
| 2020 |
|
|
| 1,896 |
|
| 2021 |
|
|
| 1,565 |
|
| 2022 |
|
|
| 1,183 |
|
Thereafter |
|
|
| 71,440 |
| |
Total |
|
| $ | 79,281 |
|
The Company assumed long-term debt obligations with an aggregate balance of $103.1 million and an aggregate fair value of $65.5 million as offrom the acquisition date of May 31, 2015,Marquette consisting of debt obligations payable to four unconsolidated trusts (Marquette Capital Trust I, Marquette Capital Trust II, Marquette Capital Trust III, and Marquette Capital Trust IV) that previously issued trust preferred securities. These long-term debt obligations had an aggregate contractual balance of $103.1 million and had a carrying value of $74.6 million as of December 31, 2022. Interest rates on trust preferred securities are tied to the three-month LIBOR rate with spreads ranging from 133 basis points to 160 basis points and reset quarterly. The trust preferred securities have maturity dates ranging from January 2036 to September 2036.2036.
In September 2020, the Company issued $200.0 million of 3.70% fixed-to-fixed rate subordinated notes that mature on September 17, 2030. The notes bear interest at the rate of 3.70% per annum, payable semi-annually on each March 17 and September 17. The Company may redeem the notes, in whole or in part, on September 17, 2025, or on any interest payment date thereafter. Unamortized debt issuance costs related to these notes totaled $1.2 million as of December 31, 2022. Proceeds from the issuance of the notes were used for general corporate purposes, including contributing Tier 1 capital into the Bank.
In September 2022, the Company issued $110.0 million of 6.25% fixed-to-fixed rate subordinated notes that mature on September 28, 2032. The notes bear interest at the rate of 6.25% per annum, payable semi-annually on each March 28 and September 28. The Company may redeem the notes, in whole or in part, on September 28, 2027, or on any interest payment date thereafter. Unamortized debt issuance costs related to these notes totaled $2.0 million as of December 31, 2022. Proceeds from the issuance of the notes were used for general corporate purposes, including contributing Tier 1 capital into the Bank.
The Company is a member bank of the FHLB of Des Moines. Through this relationship, the Company purchased $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. As of December 31, 2017, the FHLB had issued three 30-day letters of credit totaling $300.0 million on behalf of the Company to secure public fund deposits, all of which expired in January 2018. The letters of credit reduced the Company’s borrowing capacity with the FHLB from $2.0 billion to $1.7was $1.9 billion as of December 31, 2017.2022. The Company had no outstanding FHLB advances at FHLB of Des Moines as of December 31, 2017.2022.
The Company has a revolving line of credit with Wells Fargo Bank, N.A. which allows the Company to borrow up to $50.0$30.0 million for general working capital purposes. The interest rate applied to borrowed balances will be at the Company’s option either 1.00 percent1.40% above LIBORTerm SOFR or 1.75 percent1.75% below the prime rate on the date of an advance. The Company pays 0.3 percent0.4% unused commitment fee for unused portions of the line of credit. The Company currently has no outstanding balance on this line of credit.
The Company enters into sales of securities with simultaneous agreements to repurchase (repurchase agreements). The Company utilizes repurchase agreements to facilitate the needs of customers and to facilitate secured short-term funding needs. Repurchase agreements are stated at the amount of cash received in connection with the transaction. The Company monitors collateral levels on a continuous basis and may be required to provide additional collateral based on the fair value of the underlying securities. Securities pledged as collateral under repurchase agreements are maintained with the Company’s safekeeping agents. The amounts received under these agreements represent short-term borrowings. The amount outstanding at December 31, 2017,2022, was $1.2$2.2 billion, (withwith accrued interest payable of $197 thousand).$1.4 million. The amount outstanding at December 31, 2016,2021, was $1.4$3.2 billion, (withwith accrued interest payable of $80 thousand).$245 thousand.
The carrying amounts and market values of the securities and the related repurchase liabilities and weighted average interest rates of the repurchase liabilities (grouped by maturity of the repurchase agreements) were as follows as of December 31, 20172022 and 2021 (in thousands):
|
| As of December 31, 2017 |
| |||||||||
|
| Securities Market Value |
|
| Repurchase Liabilities |
|
| Weighted Average Interest Rate |
| |||
Maturity of the Repurchase Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
On Demand |
| $ | 1,004 |
|
| $ | 1,000 |
|
|
| 2.49 | % |
2 to 30 days |
|
| 1,233,478 |
|
|
| 1,248,370 |
|
|
| 1.10 |
|
Over 90 Days |
|
| — |
|
|
| — |
|
|
| — |
|
Total |
| $ | 1,234,482 |
|
| $ | 1,249,370 |
|
|
| 1.10 | % |
|
| As of December 31, 2022 |
| |||||||||
|
| Securities Fair Market Value |
|
| Repurchase Liabilities |
|
| Weighted Average Interest Rate |
| |||
Maturity of the Repurchase Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
2 to 29 days |
| $ | 1,756,837 |
|
| $ | 1,869,186 |
|
|
| 3.32 | % |
30 to 90 Days |
|
| 295,901 |
|
|
| 290,501 |
|
|
| 4.59 |
|
Total |
| $ | 2,052,738 |
|
| $ | 2,159,687 |
|
|
| 3.49 | % |
|
| As of December 31, 2021 |
| |||||||||
|
| Securities Fair Market Value |
|
| Repurchase Liabilities |
|
| Weighted Average Interest Rate |
| |||
Maturity of the Repurchase Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
2 to 29 days |
| $ | 2,797,268 |
|
| $ | 2,820,788 |
|
|
| 0.19 | % |
30 to 90 Days |
|
| 414,091 |
|
|
| 404,800 |
|
|
| 0.70 |
|
Over 90 Days |
|
| 250 |
|
|
| 250 |
|
|
| 0.01 |
|
Total |
| $ | 3,211,609 |
|
| $ | 3,225,838 |
|
|
| 0.25 | % |
The table below presents the remaining contractual maturities of repurchase agreements outstanding at December 31, 2017,2022 and 2021, in addition to the various types of marketable securities that have been pledged as collateral for these borrowings (in thousands).:
|
| As of December 31, 2022 |
| |||||||||||||||||||||||||
|
| As of December 31, 2017 |
|
| Remaining Contractual Maturities of the Agreements |
| ||||||||||||||||||||||
|
| Remaining Contractual Maturities of the Agreements |
|
| 2-29 days |
|
| 30-90 days |
|
| Total |
| ||||||||||||||||
Repurchase agreements, secured by: |
| On Demand |
|
| 2-29 days |
|
| Over 90 Days |
|
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. Treasury |
| $ | — |
|
| $ | 14,743 |
|
| $ | — |
|
| $ | 14,743 |
|
| $ | 33,888 |
|
| $ | — |
|
| $ | 33,888 |
|
U.S. Agency |
|
| 1,000 |
|
|
| 1,233,627 |
|
|
| — |
|
|
| 1,234,627 |
|
|
| 1,835,298 |
|
|
| 290,501 |
|
|
| 2,125,799 |
|
Total repurchase agreements |
| $ | 1,000 |
|
| $ | 1,248,370 |
|
| $ | — |
|
| $ | 1,249,370 |
|
| $ | 1,869,186 |
|
| $ | 290,501 |
|
| $ | 2,159,687 |
|
|
| As of December 31, 2021 |
| |||||||||||||
|
| Remaining Contractual Maturities of the Agreements |
| |||||||||||||
|
| 2-29 days |
|
| 30-90 days |
|
| Over 90 Days |
|
| Total |
| ||||
Repurchase agreements, secured by: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Agency |
| $ | 2,820,788 |
|
| $ | 404,800 |
|
| $ | 250 |
|
| $ | 3,225,838 |
|
Total repurchase agreements |
| $ | 2,820,788 |
|
| $ | 404,800 |
|
| $ | 250 |
|
| $ | 3,225,838 |
|
10. REGULATORY REQUIREMENTS
Payment of dividends by the Bank to the parent company is subject to various regulatory restrictions. For national banks, the governing regulatory agency must approve the declaration of any dividends generally in excess of the sum of net income for that year and retained net income for the preceding two years.
The Bank maintains a reserve balance with the FRB as required by law. During 2017,2022, this amount averaged $303.8 million,$2.3 billion, compared to $297.4 million$4.0 billion in 2016.2021.
In July 2013, the FRB approved a final rule to implement in the United States the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain changes required by the Dodd-Frank Act. The final rule included a new minimum ratio of common equity tier 1 capital to risk-weighted assets of 4.5% and a common equity tier 1 capital conservation buffer of 2.5% of risk-weighted assets. The final rule also adjusted the methodology for calculating risk-weighted assets to enhance risk sensitivity. Beginning January 1, 2015, the Company was required to be compliant with revised minimum regulatory capital ratios and began the transitional period for definitions of regulatory capital and regulatory capital adjustments and deductions established under the final rule. Compliance with the risk-weighted asset calculations was required on January 1, 2015 and the Company is in compliance with the increased capital standards.
At December 31, 2017,2022, the Company is required to have minimum common equity tier 1, tier 1, and total capital ratios of 4.5%, 6.0% and 8.0%, respectively. The Company’s actual ratios at that date were 12.95%10.62%, 12.95%10.62% and 14.04%12.50%, respectively. The Company is required to have a minimum leverage ratio of 4.0%, and the leverage ratio at December 31, 2017,2022, was 9.94%8.43%.
As of December 31, 2017,2022, the most recent notification from the OCC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well-capitalized the Bank must maintain total risk-based, tier 1 risk-based, common equity tier 1, and tier 1 leverage ratios of 10.0%, 8.0%, 6.5%, and 5.0%, respectively. There are no conditions or events that have occurred since the receipt of the most recent notification that management believes have changed the Bank’s categorization.
In addition, under amendments to the BHCA introduced by the Dodd-Frank Act and commonly known as the Volcker Rule, the Company and its subsidiaries are subject to extensive limits on proprietary trading and on owning or sponsoring hedge funds and private-equity funds. The limits on proprietary trading are largely focused on purchases or sales of financial instruments by a banking entity as principal primarily for the purpose of short-term resale, benefitting from actual or expected short-term price movements, or realizing short-term arbitrage profits. The limits on owning or sponsoring hedge funds and private-equity funds are designed to ensure that banking entities generally maintain only small positions in managed or advised funds and are not exposed to significant losses arising directly or indirectly from them. The Volcker Rule also provides for increased capital charges, quantitative limits, rigorous compliance programs, and other restrictions on permitted proprietary trading and fund activities, including a prohibition on transactions with a covered fund that would constitute a covered transaction under Sections 23A and 23B of the Federal Reserve Act. The fund activities of the Company and its subsidiaries are in conformance with the Volcker Rule, which became effective July 21, 2015.Rule.
Actual capital amounts as well as required and well-capitalized common equity tier 1, tier 1, total and tier 1 leverage ratios as of December 31, 20172022 and 20162021 for the Company and the Bank are as follows (in thousands):
|
| 2017 |
|
| 2022 |
| ||||||||||||||||||||||||||||||||||||||||||
|
| Actual |
|
| For Capital Adequacy Purposes |
|
| To Be Well Capitalized Under Prompt Corrective Action Provisions |
|
| Actual |
|
| For Capital Adequacy Purposes |
|
| To Be Well Capitalized Under Prompt Corrective Action Provisions |
| ||||||||||||||||||||||||||||||
|
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
| ||||||||||||
Common Equity Tier 1 Capital: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UMB Financial Corporation |
| $ | 2,041,504 |
|
|
| 12.95 | % |
| $ | 709,309 |
|
|
| 4.50 | % |
| $ | N/A |
|
|
| N/A | % |
| $ | 3,129,030 |
|
|
| 10.62 | % |
| $ | 1,325,893 |
|
|
| 4.50 | % |
| $ | N/A |
|
|
| N/A | % |
UMB Bank, n. a. |
|
| 1,750,297 |
|
|
| 11.19 |
|
|
| 704,062 |
|
|
| 4.50 |
|
|
| 1,016,979 |
|
|
| 6.50 |
|
|
| 3,184,837 |
|
|
| 10.88 |
|
|
| 1,317,571 |
|
|
| 4.50 |
|
|
| 1,903,158 |
|
|
| 6.50 |
|
Tier 1 Capital: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UMB Financial Corporation |
|
| 2,041,504 |
|
|
| 12.95 |
|
|
| 945,746 |
|
|
| 6.00 |
|
| N/A |
|
| N/A |
|
|
| 3,129,030 |
|
|
| 10.62 |
|
|
| 1,767,857 |
|
|
| 6.00 |
|
| N/A |
|
| N/A |
| ||||
UMB Bank, n. a. |
|
| 1,750,297 |
|
|
| 11.19 |
|
|
| 938,750 |
|
|
| 6.00 |
|
|
| 1,251,666 |
|
|
| 8.00 |
|
|
| 3,184,837 |
|
|
| 10.88 |
|
|
| 1,756,762 |
|
|
| 6.00 |
|
|
| 2,342,349 |
|
|
| 8.00 |
|
Total Capital: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UMB Financial Corporation |
|
| 2,213,050 |
|
|
| 14.04 |
|
|
| 1,260,994 |
|
|
| 8.00 |
|
| N/A |
|
| N/A |
|
|
| 3,682,619 |
|
|
| 12.50 |
|
|
| 2,357,142 |
|
|
| 8.00 |
|
| N/A |
|
| N/A |
| ||||
UMB Bank, n. a. |
|
| 1,853,558 |
|
|
| 11.85 |
|
|
| 1,251,666 |
|
|
| 8.00 |
|
|
| 1,564,583 |
|
|
| 10.00 |
|
|
| 3,359,158 |
|
|
| 11.47 |
|
|
| 2,342,349 |
|
|
| 8.00 |
|
|
| 2,927,936 |
|
|
| 10.00 |
|
Tier 1 Leverage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UMB Financial Corporation |
|
| 2,041,504 |
|
|
| 9.94 |
|
|
| 821,527 |
|
|
| 4.00 |
|
| N/A |
|
| N/A |
|
|
| 3,129,030 |
|
|
| 8.43 |
|
|
| 1,483,953 |
|
|
| 4.00 |
|
| N/A |
|
| N/A |
| ||||
UMB Bank, n. a. |
|
| 1,750,297 |
|
|
| 8.57 |
|
|
| 816,859 |
|
|
| 4.00 |
|
|
| 1,021,073 |
|
|
| 5.00 |
|
|
| 3,184,837 |
|
|
| 8.46 |
|
|
| 1,506,443 |
|
|
| 4.00 |
|
|
| 1,883,054 |
|
|
| 5.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2016 |
|
| 2021 |
| ||||||||||||||||||||||||||||||||||||||||||
Common Equity Tier 1 Capital: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UMB Financial Corporation |
| $ | 1,789,581 |
|
|
| 11.80 | % |
| $ | 682,428 |
|
|
| 4.50 | % |
| $ | N/A |
|
|
| N/A | % |
| $ | 2,885,576 |
|
|
| 12.05 | % |
| $ | 1,077,971 |
|
|
| 4.50 | % |
| $ | N/A |
|
|
| N/A | % |
UMB Bank, n. a. |
|
| 1,613,024 |
|
|
| 10.73 |
|
|
| 676,357 |
|
|
| 4.50 |
|
|
| 976,960 |
|
|
| 6.50 |
|
|
| 2,734,377 |
|
|
| 11.53 |
|
|
| 1,067,154 |
|
|
| 4.50 |
|
|
| 1,541,444 |
|
|
| 6.50 |
|
Tier 1 Capital: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UMB Financial Corporation |
|
| 1,789,581 |
|
|
| 11.80 |
|
|
| 909,903 |
|
|
| 6.00 |
|
| N/A |
|
| N/A |
|
|
| 2,885,576 |
|
|
| 12.05 |
|
|
| 1,437,295 |
|
|
| 6.00 |
|
| N/A |
|
| N/A |
| ||||
UMB Bank, n. a. |
|
| 1,613,024 |
|
|
| 10.73 |
|
|
| 901,809 |
|
|
| 6.00 |
|
|
| 1,202,412 |
|
|
| 8.00 |
|
|
| 2,734,377 |
|
|
| 11.53 |
|
|
| 1,422,872 |
|
|
| 6.00 |
|
|
| 1,897,162 |
|
|
| 8.00 |
|
Total Capital: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UMB Financial Corporation |
|
| 1,951,078 |
|
|
| 12.87 |
|
|
| 1,213,205 |
|
|
| 8.00 |
|
| N/A |
|
| N/A |
|
|
| 3,324,284 |
|
|
| 13.88 |
|
|
| 1,916,393 |
|
|
| 8.00 |
|
| N/A |
|
| N/A |
| ||||
UMB Bank, n. a. |
|
| 1,707,265 |
|
|
| 11.36 |
|
|
| 1,202,412 |
|
|
| 8.00 |
|
|
| 1,503,016 |
|
|
| 10.00 |
|
|
| 2,902,996 |
|
|
| 12.24 |
|
|
| 1,897,162 |
|
|
| 8.00 |
|
|
| 2,371,453 |
|
|
| 10.00 |
|
Tier 1 Leverage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UMB Financial Corporation |
|
| 1,789,581 |
|
|
| 9.09 |
|
|
| 787,604 |
|
|
| 4.00 |
|
| N/A |
|
| N/A |
|
|
| 2,885,576 |
|
|
| 7.61 |
|
|
| 1,517,616 |
|
|
| 4.00 |
|
| N/A |
|
| N/A |
| ||||
UMB Bank, n. a. |
|
| 1,613,024 |
|
|
| 8.24 |
|
|
| 782,638 |
|
|
| 4.00 |
|
|
| 978,297 |
|
|
| 5.00 |
|
|
| 2,734,377 |
|
|
| 7.26 |
|
|
| 1,506,293 |
|
|
| 4.00 |
|
|
| 1,882,866 |
|
|
| 5.00 |
|
11. EMPLOYEE BENEFITS
The Company has a discretionary noncontributory profit sharingprofit-sharing plan, which features an employee stock ownership plan. This plan is for the benefit of substantially all eligible officers and employees of the Company and its subsidiaries. The Company has accruedrecognized expense related to such contributions of $2.0 million, $2.5 million, and anticipates making a discretionary payment of $4.0$2.0 million in March 2018, for 2017. A $1.5 million contribution was paid in 2017, for 2016. A $1.5 million contribution was paid in 2016, for 2015.the years ended December 31, 2022, 2021, and 2020, respectively.
The Company has a qualified 401(k) profit sharing plan that permits participants to make contributions by salary deduction.deduction, to which the Company makes matching contributions. The Company made arecognized expense related to matching contribution to this plancontributions of $6.7$13.6 million, in 2017,$11.4 million, and $11.0 million for 2016the years ended December 31, 2022, 2021 and $6.4 million in 2016, for 2015. The Company anticipates making a matching contribution of $7.2 million in March 2018, for 2017.2020, respectively.
The Company recognized $2.5$20.6 million, $2.1$18.6 million, and $2.2$10.5 million in expense related to outstanding restricted stock optionsunit grants for the years ended December 31, 2022, 2021 and $10.4 million, $9.22020, respectively. The Company recognized $196 thousand, $1.9 million, and $8.1$3.4 million in expense related to outstanding restricted stock grants for the years ended December 31, 2017, 2016,2022, 2021, and 2015,2020, respectively. The Company had $4.7 million of unrecognized compensationalso recognized $40 thousand and $596 thousand in expense related to outstanding stock options for the years ended December 31, 2021 and 2020, respectively. The Company did not recognize any expense related to outstanding stock options and $17.3for the year ended December 31, 2022. The Company had $18.2 million of unrecognized compensation expense related to outstanding restricted stock unit grants at December 31, 2017.2022.
2002 Incentive Stock Option Plan
On April 18, 2002, the shareholders of the Company approved the 2002 Incentive Stock Options Plan (the 2002 Plan), which provides incentive options to certain key employees to receive up to 2 million common shares of the Company. All options that are issued under the 2002 Plan terminate after 10 years (except for any option granted to a person holding more than 10 percent of the Company’s stock, in which case the option terminates after five years). All options issued prior to 2005, under the 2002 Plan, could not be exercised until at least four years and 11 months after the date they are granted. Options issued in 2006, 2007, and 2008 under the 2002 Plan, have a vesting schedule of 50 percent after three years; 75 percent after four years and 100 percent after four years and 11 months. Except under circumstances of death, disability or certain retirements, the options cannot be exercised after the grantee has left the employment of the Company or its subsidiaries. The exercise period for an option may be accelerated upon the optionee’s qualified disability, retirement or death. All options expire at the end of the exercise period. Options are granted at exercise prices of no less than 100 percent of the fair market value of the underlying shares based on the fair value of the option at date of grant. On January 25, 2011, the Board amended and froze the 2002 Plan such that no shares of Company stock shall thereafter be available for grants under the 2002 Plan. Existing awards granted under the 2002 Plan will continue in accordance with their terms under the 2002 Plan. The 2002 Plan expired without modification on April 17, 2012.
The table below discloses the information relating to option activity in 2017, under the 2002 Plan:
|
| Number of Shares |
|
| Weighted Average Price Per Share |
|
| Weighted Average Remaining Contractual Term |
|
| Aggregate Intrinsic Value |
| ||||
Stock Options Under the 2002 Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding - December 31, 2016 |
|
| 91,461 |
|
| $ | 39.63 |
|
|
|
|
|
|
|
|
|
Granted |
|
| — |
|
|
| — |
|
|
|
|
|
|
|
|
|
Expired |
|
| (4,304 | ) |
|
| 38.65 |
|
|
|
|
|
|
|
|
|
Exercised |
|
| (55,471 | ) |
|
| 38.96 |
|
|
|
|
|
|
|
|
|
Outstanding - December 31, 2017 |
|
| 31,686 |
|
| $ | 40.93 |
|
|
| 0.9 |
|
| $ | 981,949 |
|
Exercisable - December 31, 2017 |
|
| 31,686 |
|
| $ | 40.93 |
|
|
| 0.9 |
|
| $ | 981,949 |
|
No options were granted under the 2002 Plan during 2017, 2016, or 2015. The total intrinsic value of options exercised during the year ended December 31, 2017, 2016, and 2015 was $2.0 million, $2.3 million, and $1.1 million, respectively. As of December 31, 2017, there was no unrecognized compensation cost related to the nonvested options.
Long-Term Incentive Compensation Plan
At the April 26, 2005 shareholders’ meeting, the shareholders of the Company approved the UMB Financial Corporation Long-Term Incentive Compensation Plan (LTIP) which became effective as of January 1, 2005. The LTIP permits the issuance to selected officers of the Company service-based restricted stock grants, performance-based restricted stock grants and non-qualified stock options. Service-based restricted stock grants contain a service requirement. The performance-based restricted grants contain performance and service requirements. The non-qualified stock option grants contain a service requirement.
At the April 23, 2013 shareholders’ meeting, the shareholders of the Company approved amendments to the LTIP Plan, including increasing the number of shares of the Company’s stock reserved for issuance under the Plan from 5.25 million shares to 7.44 million shares. Additionally, the shareholders approved increasing the maximum benefits any one eligible employee may receive under the plan during any one fiscal year from $1 million to $2 million taking into account the value of all stock options and restricted stock received.
At the April 24, 2018 shareholders’ meeting, the shareholders of the Company approved the UMB Financial Corporation Omnibus Incentive Compensation Plan which became effective as of April 24, 2018 and replaced the LTIP plan. No service-based restricted stock grants, performance-based restricted stock grants or non-qualified stock options have been issued under the LTIP since 2018.
The service-based restricted stock grants issued under the LTIP contain a service requirement with varying vesting schedules. The majority of these grants issued prior toin 2016 utilizethrough 2018 utilized a vesting schedule in which 50 percent of the shares vest after three years of service, 75 percent after four years of service and 100 percent after five years of service. The majority of these grants issued in 2016 and beyond utilize a vesting schedule in which 50 percent50% of the shares vest after two years of service, 75 percent75% after three years of service and 100 percent100% after four years of service. Certain other
grants utilizeutilized vesting schedules in which the grants vest ratably over the requisite service period or contain a three-year cliff vesting.
The performance-based restricted stock grants contain a service and a performance requirement. The performance requirement is based on a predetermined performance requirement over a three year period. The service requirement portion is a three year cliff vesting. If the performance requirement is not met, the participants do not receive the shares.
The dividends on service and performance-basedservice-based restricted stock grants are treated as two separate transactions. First, cash dividends are paid on the restricted stock. Those cash dividends are then paid to purchase additional shares of restricted stock. Dividends earned as additional shares of restricted stock have the same terms as the associated grant. The dividends paid on the stock are recorded as a reduction to retained earnings, (similarsimilar to all dividend transactions).transactions.
The table below discloses the status of the service-based restricted shares during 2017:2022:
|
| Number of Shares |
|
| Weighted Average Grant Date Fair Value |
|
| Number of Shares |
|
| Weighted Average Grant Date Fair Value |
| ||||
Service-Based Restricted Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested - December 31, 2016 |
|
| 524,515 |
|
| $ | 50.74 |
| ||||||||
Nonvested - December 31, 2021 |
|
| 23,618 |
|
| $ | 72.28 |
| ||||||||
Granted |
|
| 100,671 |
|
|
| 75.00 |
|
|
| — |
|
|
| — |
|
Canceled |
|
| (25,244 | ) |
|
| 55.85 |
|
|
| — |
|
|
| — |
|
Vested |
|
| (129,809 | ) |
|
| 51.72 |
|
|
| (23,618 | ) |
|
| 72.28 |
|
Nonvested - December 31, 2017 |
|
| 470,133 |
|
| $ | 55.39 |
| ||||||||
Nonvested - December 31, 2022 |
|
| — |
|
| $ | — |
|
As of December 31, 2017, there was $14.2 million of unrecognized compensation cost related to the nonvested shares. The cost is expected to be recognized over a period of 2.3 years. Total fair value of shares vested during the year ended December 31, 2017, 2016, and 2015 was $9.9 million, $7.4 million, and $7.2 million, respectively.
The table below discloses the status of the performance-based restricted shares during 2017:
|
| Number of Shares |
|
| Weighted Average Grant Date Fair Value |
| ||
Performance-Based Restricted Stock |
|
|
|
|
|
|
|
|
Nonvested - December 31, 2016 |
|
| 118,686 |
|
| $ | 50.67 |
|
Granted |
|
| 42,078 |
|
|
| 75.25 |
|
Canceled |
|
| (6,942 | ) |
|
| 54.20 |
|
Vested |
|
| (18,608 | ) |
|
| 57.40 |
|
Nonvested - December 31, 2017 |
|
| 135,214 |
|
| $ | 57.22 |
|
As of December 31, 2017, there was $3.1 million of unrecognized compensation cost related to the nonvested shares. The cost is expected to be recognized over a period of 1.7 years. Total fair value of shares vested during the years ended December 31, 2017, 20162022, 2021, and 2015,2020 was $1.4$2.5 million, $1.0$3.2 million, and $1.9$9.2 million, respectively.
The non-qualified stock options carry a service requirement and grants issued prior to 2016 will vest 50 percentvested 50% after three years, 75 percent75% after four years and 100 percent100% after five years, while grants issued in 2016 and beyond will vest 50 percentthrough 2018 vested 50% after two years, 75 percent75% after three years and 100 percent100% after four years.
The table below discloses the information relating to non-qualified option activity in 20172022 under the LTIP:
|
| Number of Shares |
|
| Weighted Average Price Per Share |
|
| Weighted Average Remaining Contractual Term |
|
| Aggregate Intrinsic Value |
|
| Number of Shares |
|
| Weighted Average Price Per Share |
|
| Weighted Average Remaining Contractual Term |
|
| Aggregate Intrinsic Value |
| ||||||||
Stock Options Under the LTIP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding - December 31, 2016 |
|
| 1,163,849 |
|
| $ | 47.10 |
|
|
|
|
|
|
|
|
| ||||||||||||||||
Outstanding - December 31, 2021 |
|
| 171,340 |
|
| $ | 60.19 |
|
|
|
|
|
|
|
|
| ||||||||||||||||
Granted |
|
| 151,279 |
|
|
| 75.25 |
|
|
|
|
|
|
|
|
|
|
| — |
|
|
| — |
|
|
|
|
|
|
|
|
|
Canceled |
|
| (18,291 | ) |
|
| 53.22 |
|
|
|
|
|
|
|
|
|
|
| — |
|
|
| — |
|
|
|
|
|
|
|
|
|
Expired |
|
| (678 | ) |
|
| 49.97 |
|
|
|
|
|
|
|
|
|
|
| (3,783 | ) |
|
| 56.86 |
|
|
|
|
|
|
|
|
|
Exercised |
|
| (248,698 | ) |
|
| 42.57 |
|
|
|
|
|
|
|
|
|
|
| (29,699 | ) |
|
| 51.84 |
|
|
|
|
|
|
|
|
|
Outstanding - December 31, 2017 |
|
| 1,047,461 |
|
| $ | 52.13 |
|
|
| 6.4 |
|
| $ | 20,722,166 |
| ||||||||||||||||
Exercisable - December 31, 2017 |
|
| 345,811 |
|
| $ | 44.89 |
|
|
| 4.0 |
|
| $ | 9,348,718 |
| ||||||||||||||||
Outstanding - December 31, 2022 |
|
| 137,858 |
|
| $ | 62.08 |
|
|
| 3.0 |
|
| $ | 2,955,637 |
| ||||||||||||||||
Exercisable - December 31, 2022 |
|
| 137,858 |
|
| $ | 62.08 |
|
|
| 3.0 |
|
| $ | 2,955,637 |
|
The Company uses the Black-Scholes pricing model to determine the fair value of its options. The assumptions for stock-based awards in the past three years utilized in the model are shown in the table below.
|
| 2017 |
|
| 2016 |
|
| 2015 |
| |||
Black-Scholes pricing model: |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average fair value of the granted option |
| $ | 17.88 |
|
| $ | 9.90 |
|
| $ | 11.95 |
|
Weighted average risk-free interest rate |
|
| 1.29 | % |
|
| 1.30 | % |
|
| 1.62 | % |
Expected option life in years |
|
| 6.25 |
|
|
| 6.25 |
|
|
| 6.25 |
|
Expected volatility |
|
| 24.41 | % |
|
| 25.71 | % |
|
| 26.73 | % |
Expected dividend yield |
|
| 2.03 | % |
|
| 2.02 | % |
|
| 1.74 | % |
The expected option life is derived from historical exercise patterns and represents the amount of time that options granted are expected to be outstanding. The expected volatility is based on historical volatilities of the Company’s stock. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.
The weighted average grant-date fair value ofThere were no options granted during the years 2017, 2016, and 2015 was $17.88, $9.90, and $11.95, respectively.2022, 2021, or 2020. The total intrinsic value of options exercised during the years ended December 31, 2017, 20162022, 2021, and 2015,2020, was $8.1$1.2 million, $5.8$12.9 million and $2.6$2.0 million, respectively. As of December 31, 2017,2022, there was $4.7 million ofno unrecognized compensation cost related to the nonvested options. The cost is expected to be recognized over a period of 2.4 years.
Cash received from options exercised under all share basedshare-based compensation plans was $12.7$1.5 million, $15.8$18.4 million, and $10.5$4.6 million for the years ended December 31, 2017, 2016,2022, 2021, and 2015,2020, respectively. The tax benefit realized for stock options exercised was $3.6$2.2 million, $2.6 million, and $1.1 million$345 thousand for the years ended December 31, 20172022, 2021, and 2016,2020, respectively. The 2016 and 2017 tax benefits were recognized in the Company’s Consolidated Statements of Income due to the Company’s adoption of ASU No. 2016-09 with an effective date of January 1, 2016. See further discussion of this ASU in Note 2, “New Accounting Pronouncements.” The tax benefit realized for stock options exercised in 2015 was $0.9 million, which was recognized in the Company’s Consolidated Statements of Changes in Shareholder’s Equity.
The Company has no specific policy to repurchase common shares to mitigate the dilutive impact of options; however, the Company has historically made adequate discretionary repurchases of common shares in an amount that exceeds stock option exercise activity. See a description of the Company’s share repurchase planRepurchase Authorizations in Note 13,14, “Common Stock and Earnings Per Share,” in the Notes to the Consolidated Financial Statements provided in Item 8 page 89 of this report.
Omnibus Incentive Compensation Plan
At the April 24, 2018 shareholders’ meeting, the shareholders of the Company approved the UMB Financial Corporation Omnibus Incentive Compensation Plan (OICP) which became effective as of April 24, 2018. The OICP permits the issuance to key employees of the Company various types of awards, including stock options, restricted stock and restricted stock units, performance awards and other stock-based awards. Service-based restricted stock unit awards contain a service requirement and the performance-based restricted stock unit awards contain performance and service requirements. The number of shares of the Company’s stock reserved for issuance under the OICP is 5.40 million shares.
The service-based restricted stock unit awards are payable in shares of stock and the majority contain a service requirement with a four-year graded vesting schedule in which 50% of the units are vested after two years, 75% are vested after three years, and 100% are vested after four years. Certain other grants contain a service requirement with either a two-year cliff vesting or a three-year graded vesting schedule in which 50% of the units vest after two years of service and the remaining 50% vest after three years of service.
The performance-based restricted stock unit awards are payable in shares of stock and contain a service and a performance requirement. The performance requirement is based on two predetermined performance requirements over a three-year period. The service requirement portion is a three-year cliff vesting. If the minimum performance requirement is not met, the participants do not receive the shares.
The dividends on service-based restricted stock units are treated as two separate transactions. First, cash dividends are paid on the restricted stock units. Those cash dividends are then paid to purchase additional shares of restricted stock units. Dividends earned as additional shares of restricted stock units have the same terms as the associated grant. The dividends paid on the stock are recorded as a reduction to retained earnings, similar to all dividend transactions. Dividends are not paid on performance-based restricted stock units.
The table below discloses the status of the service-based restricted stock units during 2022:
|
| Number of Units |
|
| Weighted Average Price Per Unit |
| ||
Service Based Restricted Stock Units Under the OICP |
|
|
|
|
|
|
|
|
Nonvested - December 31, 2021 |
|
| 363,148 |
|
| $ | 70.47 |
|
Granted |
|
| 156,869 |
|
|
| 98.76 |
|
Canceled |
|
| (27,880 | ) |
|
| 80.54 |
|
Vested |
|
| (112,151 | ) |
|
| 66.32 |
|
Nonvested - December 31, 2022 |
|
| 379,986 |
|
| $ | 82.64 |
|
As of December 31, 2022, there was $14.5 million of unrecognized compensation cost related to the nonvested service-based restricted stock units. The cost is expected to be recognized over a period of 2.5 years. Total fair value of units vested during the years ended December 31, 2022, 2021, and 2020 was $11.4 million, $6.7 million, and $0.3 million, respectively.
The table below discloses the status of the performance-based restricted stock units during 2022:
|
| Number of Units |
|
| Weighted Average Price Per Unit |
| ||
Performance Based Restricted Stock Units Under the OICP |
|
|
|
|
|
|
|
|
Nonvested - December 31, 2021 |
|
| 165,822 |
|
| $ | 64.08 |
|
Granted |
|
| 48,416 |
|
|
| 93.43 |
|
Canceled |
|
| (1,375 | ) |
|
| 65.02 |
|
Vested |
|
| (71,461 | ) |
|
| 60.35 |
|
Performance based adjustment |
|
| 23,708 |
|
|
| 60.35 |
|
Nonvested - December 31, 2022 |
|
| 165,110 |
|
| $ | 64.21 |
|
As of December 31, 2022, there was $3.7 million of unrecognized compensation cost related to the nonvested performance-based restricted stock units. The cost is expected to be recognized over a period of 1.7 years. The fair value of units vested during the years ended December 31, 2022 and 2021 was $7.4 million and $2.7 million, respectively. There were no units vested during 2020.
12. BUSINESS SEGMENT REPORTING
The Company has strategically aligned its operations into the following twothree reportable segmentssegments: Commercial Banking, Institutional Banking, and Personal Banking (collectively, “Business Segments”): Bankthe Business Segments, and Asset Servicing. Senioreach, a Business Segment). The Company’s senior executive officers regularly evaluate business segment
Business Segment financial results produced by the Company’s internal reporting system in deciding how to allocate resources and assess performance for individual Business Segments. Previously, the Company had the following four Business Segments: Bank, Institutional Investment Management, Asset Servicing, and Payment Solutions. In the first quarter of 2016, the Company merged the Payment Solutions segment into the Bank segment to better reflect how the core businesses, products and services are being evaluated by management currently. The Company’s Payment Solutions leadership structure and financial performance assessments are now included in the Bank segment, and accordingly, the reportable segments were realigned to reflect these changes. Additionally, during 2017, the Company sold all of the outstanding stock of Scout, its institutional investment management subsidiary. As the operations of Scout are now included in discontinued operations, the Company no longer presents this segment’s operations as one of its business segments. The Company’s reportable segmentsBusiness Segments include certain corporate overhead, technology and service costs that are allocated based on methodologies that are applied consistently between periods. For comparability purposes, amounts in all periods are based on methodologies in effect at December 31, 2017.2022. Previously reported results have been reclassified in this filing to conform to the current organizational structure.
The following summaries provide information about the activities of each segment:
The Bank providesCommercial Banking serves the commercial banking and treasury management needs of the Company’s small to middle-market businesses through a full rangevariety of products and services. Such services include commercial loans, commercial real estate financing, commercial credit cards, letters of credit, loan syndication services, and consultative services. In addition, the Company’s specialty lending group offers a variety of business solutions including asset-based lending, mezzanine debt and minority equity investments. Treasury management services include depository services, account reconciliation and cash management tools such as, accounts payable and receivable solutions, electronic fund transfer and automated payments, controlled disbursements, lockbox services, and remote deposit capture services.
Institutional Banking is a combination of banking services, to commercial, retail, governmentfund services, asset management services, and correspondent bank customers through the Company’s branches, call center, internet banking, and ATM network. Services include traditional commercial and consumer banking, treasury management, leasing, foreign exchange, consumer and commercial credit and debit card, prepaid debit card solutions, healthcare services provided to institutional cash management, merchant bankcard, wealth management, brokerage, insurance, capital markets, investment banking,clients. This segment also provides fixed income sales, trading and underwriting, corporate trust and correspondent banking.
Asset Servicingescrow services, as well as institutional custody. Institutional Banking includes UMBFS, which provides services to the asset management industry, supporting a range of investment products, including mutual funds, alternative investments and managed accounts. Services include fund administration fundand accounting, investor services and transfer agency, distribution, marketing, custody,and other services to mutual fund and alternative investment groups. Healthcare services provides healthcare payment solutions including custodial services for health savings accounts (HSAs) and private label, multipurpose debit cards to insurance carriers, third-party administrators, software companies, employers, and financial institutions.
Personal Banking combines consumer banking and wealth management services offered to clients and delivered through personal relationships and the Company’s bank branches, ATM network and internet banking. Products offered include deposit accounts, retail credit cards, private banking, installment loans, home equity lines of credit, and residential mortgages. The range of client services extends from a basic checking account to estate planning and trust services and collectiveincludes private banking, brokerage services, and multiple-seriesinsurance services in addition to a full spectrum of investment advisory, trust, and custody services.
BUSINESS SEGMENT INFORMATION
Segment financial results were as follows (in thousands):
|
| Year Ended December 31, 2017 |
|
| Year Ended December 31, 2022 |
| ||||||||||||||||||||||
|
| Bank |
|
| Asset Servicing |
|
| Total |
|
| Commercial Banking |
|
| Institutional Banking |
|
| Personal Banking |
|
| Total |
| |||||||
Net interest income |
| $ | 546,000 |
|
| $ | 12,913 |
|
| $ | 558,913 |
|
| $ | 596,031 |
|
| $ | 159,679 |
|
| $ | 158,087 |
|
| $ | 913,797 |
|
Provision for loan losses |
|
| 41,000 |
|
|
| — |
|
|
| 41,000 |
| ||||||||||||||||
Provision for credit losses |
|
| 32,851 |
|
|
| 495 |
|
|
| 4,554 |
|
|
| 37,900 |
| ||||||||||||
Noninterest income |
|
| 328,550 |
|
|
| 95,012 |
|
|
| 423,562 |
|
|
| 122,614 |
|
|
| 323,794 |
|
|
| 107,825 |
|
|
| 554,233 |
|
Noninterest expense |
|
| 616,883 |
|
|
| 88,246 |
|
|
| 705,129 |
|
|
| 332,912 |
|
|
| 320,976 |
|
|
| 244,231 |
|
|
| 898,119 |
|
Income before taxes |
|
| 216,667 |
|
|
| 19,679 |
|
|
| 236,346 |
|
|
| 352,882 |
|
|
| 162,002 |
|
|
| 17,127 |
|
|
| 532,011 |
|
Income tax expense |
|
| 49,522 |
|
|
| 3,848 |
|
|
| 53,370 |
|
|
| 66,548 |
|
|
| 30,551 |
|
|
| 3,230 |
|
|
| 100,329 |
|
Income from continuing operations |
| $ | 167,145 |
|
| $ | 15,831 |
|
| $ | 182,976 |
| ||||||||||||||||
Net income |
| $ | 286,334 |
|
| $ | 131,451 |
|
| $ | 13,897 |
|
| $ | 431,682 |
| ||||||||||||
Average assets |
| $ | 19,612,450 |
|
| $ | 783,550 |
|
| $ | 20,396,000 |
|
| $ | 17,489,000 |
|
| $ | 13,100,000 |
|
| $ | 6,990,000 |
|
| $ | 37,579,000 |
|
|
| Year Ended December 31, 2016 |
|
| Year Ended December 31, 2021 |
| ||||||||||||||||||||||
|
| Bank |
|
| Asset Servicing |
|
| Total |
|
| Commercial Banking |
|
| Institutional Banking |
|
| Personal Banking |
|
| Total |
| |||||||
Net interest income |
| $ | 484,716 |
|
| $ | 10,607 |
|
| $ | 495,323 |
|
| $ | 579,992 |
|
| $ | 87,644 |
|
| $ | 147,885 |
|
| $ | 815,521 |
|
Provision for loan losses |
|
| 32,500 |
|
|
| — |
|
|
| 32,500 |
| ||||||||||||||||
Provision for credit losses |
|
| 15,543 |
|
|
| 630 |
|
|
| 3,827 |
|
|
| 20,000 |
| ||||||||||||
Noninterest income |
|
| 309,889 |
|
|
| 92,622 |
|
|
| 402,511 |
|
|
| 84,417 |
|
|
| 273,483 |
|
|
| 109,275 |
|
|
| 467,175 |
|
Noninterest expense |
|
| 582,719 |
|
|
| 84,026 |
|
|
| 666,745 |
|
|
| 306,424 |
|
|
| 292,142 |
|
|
| 235,070 |
|
|
| 833,636 |
|
Income before taxes |
|
| 179,386 |
|
|
| 19,203 |
|
|
| 198,589 |
|
|
| 342,442 |
|
|
| 68,355 |
|
|
| 18,263 |
|
|
| 429,060 |
|
Income tax expense |
|
| 40,406 |
|
|
| 4,549 |
|
|
| 44,955 |
|
|
| 60,691 |
|
|
| 12,113 |
|
|
| 3,238 |
|
|
| 76,042 |
|
Income from continuing operations |
| $ | 138,980 |
|
| $ | 14,654 |
|
| $ | 153,634 |
| ||||||||||||||||
Net income |
| $ | 281,751 |
|
| $ | 56,242 |
|
| $ | 15,025 |
|
| $ | 353,018 |
| ||||||||||||
Average assets |
| $ | 18,371,950 |
|
| $ | 1,221,050 |
|
| $ | 19,593,000 |
|
| $ | 15,243,000 |
|
| $ | 12,255,000 |
|
| $ | 7,831,000 |
|
| $ | 35,329,000 |
|
|
| Year Ended December 31, 2020 |
| |||||||||||||
|
| Commercial Banking |
|
| Institutional Banking |
|
| Personal Banking |
|
| Total |
| ||||
Net interest income |
| $ | 489,501 |
|
| $ | 106,856 |
|
| $ | 134,872 |
|
| $ | 731,229 |
|
Provision for credit losses |
|
| 119,526 |
|
|
| 882 |
|
|
| 10,092 |
|
|
| 130,500 |
|
Noninterest income |
|
| 192,230 |
|
|
| 254,874 |
|
|
| 113,062 |
|
|
| 560,166 |
|
Noninterest expense |
|
| 289,072 |
|
|
| 286,635 |
|
|
| 246,298 |
|
|
| 822,005 |
|
Income (loss) before taxes |
|
| 273,133 |
|
|
| 74,213 |
|
|
| (8,456 | ) |
|
| 338,890 |
|
Income tax expense (benefit) |
|
| 42,223 |
|
|
| 11,472 |
|
|
| (1,307 | ) |
|
| 52,388 |
|
Net income (loss) |
| $ | 230,910 |
|
| $ | 62,741 |
|
| $ | (7,149 | ) |
| $ | 286,502 |
|
Average assets |
| $ | 12,614,000 |
|
| $ | 9,746,000 |
|
| $ | 6,208,000 |
|
| $ | 28,568,000 |
|
| Year Ended December 31, 2015 |
| ||||||||||
|
| Bank |
|
| Asset Servicing |
|
| Total |
| |||
Net interest income |
| $ | 406,884 |
|
| $ | 5,183 |
|
| $ | 412,067 |
|
Provision for loan losses |
|
| 15,500 |
|
|
| — |
|
|
| 15,500 |
|
Noninterest income |
|
| 274,376 |
|
|
| 96,283 |
|
|
| 370,659 |
|
Noninterest expense |
|
| 555,962 |
|
|
| 82,976 |
|
|
| 638,938 |
|
Income before taxes |
|
| 109,798 |
|
|
| 18,490 |
|
|
| 128,288 |
|
Income tax expense |
|
| 26,651 |
|
|
| 5,079 |
|
|
| 31,730 |
|
Income from continuing operations |
| $ | 83,147 |
|
| $ | 13,411 |
|
| $ | 96,558 |
|
Average assets |
| $ | 16,801,000 |
|
| $ | 985,000 |
|
| $ | 17,786,000 |
|
13. REVENUE RECOGNITION
The following is a description of the principal activities from which the Company generates revenue that are within the scope of ASC 606, Revenue from Contracts with Customers:
Trust and securities processing – 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 and alternative asset servicing. The performance obligations related to this revenue include items such as performing full bond trustee service administration, investment advisory services, custody and record-keeping services, and fund administrative and accounting services. These fees are part of long-term contractual agreements and the performance obligations are satisfied upon completion of service and fees are generally a fixed flat monthly rate or based on a percentage of the account’s market value per the contract with the customer. These fees are primarily recorded within the Company’s Institutional and Personal Banking segments.
Trading and investment banking – Trading and investment banking income consists of income earned related to the Company’s trading securities portfolio, including futures hedging, dividends, bond underwriting, and other securities incomes. The vast majority of this revenue is recognized in accordance with ASC 320, Debt and Equity Securities, and is out of the scope of ASC 606. A portion of trading and investment banking represents fees earned for management fees, commissions, and underwriting of corporate bond issuances. The performance obligations related to these fees include reviewing the credit worthiness of the customer, ensuring appropriate regulatory approval and participating in due diligence. The fees are fixed per the bond prospectus and the performance obligations are satisfied upon registration approval of the bonds by the applicable regulatory agencies. Revenue is recognized at the point in time upon completion of service and when approval is granted by the regulators.
Service charges on deposits – Service charges on deposit accounts represent monthly analysis fees recognized for the services related to customer deposit accounts, including account maintenance and depository transactions processing fees. Commercial Banking and Institutional Banking depository accounts charge fees in accordance with the customer’s pricing schedule while Personal Banking account holders are generally charged a flat service fee per month. Deposit service charges for the healthcare accounts included in the Institutional Banking segment are priced according to either standard pricing schedules with individual account holders or according to service agreements between the Company and employer groups or third-party administrators. The Company satisfies the performance obligation related to providing depository accounts monthly as transactions are processed and deposit service charge revenue is recorded monthly. These fees are recognized within all Business Segments.
Insurance fees and commissions – Insurance fees and commissions includes all insurance-related fees earned, including commissions for individual life, variable life, group life, health, group health, fixed annuity, and variable annuity insurance contracts. The performance obligations related to these revenues primarily represent the placement of insurance policies with the insurance company partners. The fees are based on the contracts with insurance company partners and the performance obligations are satisfied when the terms of the policy have been agreed to and the insurance policy becomes effective.
Brokerage fees – Brokerage fees represent income earned related to providing brokerage transaction services, including commissions on equity and commodity trades, and fees for investment management, advisory and administration. The performance obligations related to transaction services are executing the specified trade and are priced according to the customer’s fee schedule. Such income is recognized at a point in time as the trade occurs and the performance obligation is fulfilled. The performance obligations related to investment management, advisory and administration include allocating customer assets across a wide range of mutual funds and other investments, on-going account monitoring and re-balancing of the portfolio. These performance obligations are satisfied over time and the related revenue is calculated monthly based on the assets under management of each customer. All material performance obligations are satisfied as of the end of each accounting period.
Bankcard fees – Bankcard fees primarily represent income earned from interchange revenue from MasterCard and Visa for the Company’s processing of debit, credit, HSA, and flexible spending account transactions. Additionally, the Company earns income and incentives related to various referrals of customers to card programs. The performance obligation for interchange revenue is the processing of each transaction through the Company’s access to the banking system. This performance obligation is completed for each individual transaction and income is recognized per transaction in accordance with interchange rates established by MasterCard and Visa. The performance obligations for various referral and incentive programs include either referring customers to certain card products or issuing exclusively branded cards for certain customer segments. The pricing of these incentive
and referral programs are in accordance with the agreement with the individual card partner. These performance obligations are completed as the referrals are made or over a period of time when the Company is exclusively issuing branded cards. For the years ended December 31, 2022, 2021 and 2020, the Company also has approximately $34.5 million, $34.0 million, and $30.0 million of expense, respectively, recorded within the Bankcard fees line on the Company’s Consolidated Statements of Income related to rebates and rewards programs that are outside of the scope of ASC 606. All material performance obligations are satisfied as of the end of each accounting period.
Investment securities gains, net – In the regular course of business, the Company recognizes gains on the sale of available-for-sale securities. Additionally, the Company recognizes gains and losses on equity securities with readily determinable fair values and equity securities without readily determinable fair values. These gains and losses are recognized in accordance with ASC 320, Debt and Equity Securities, and are outside of the scope of ASC 606.
Other income – The Company recognizes other miscellaneous income through a variety of other revenue streams, the most material of which include letter of credit fees, certain loan origination fees, gains on the sale of assets, derivative income, and bank-owned and company-owned life insurance income. These revenue streams are outside of the scope of ASC 606 and are recognized in accordance with the applicable U.S. GAAP. The remainder of Other income is primarily earned through transactions with personal banking customers, including wire transfer service charges, stop payment charges, and fees for items like money orders and cashier’s checks. The performance obligations of these types of fees are satisfied as transactions are completed and revenue is recognized upon transaction execution according to established fee schedules with the customers.
The Company had no material contract assets, contract liabilities, or remaining performance obligations as of December 31, 2022 or 2021. Total receivables from revenue recognized under the scope of ASC 606 were $76.1 million and $73.6 million as of December 31, 2022 and December 31, 2021, respectively. These receivables are included as part of the Other assets line on the Company’s Consolidated Balance Sheets.
The following tables depict the disaggregation of revenue according to revenue stream and Business Segment for the three years ended December 31, 2022, 2021, and 2020. As stated in Note 12, “Business Segment Reporting,” for comparability purposes, amounts in all periods are based on methodologies in effect at December 31, 2022 and previously reported results have been reclassified in this filing to conform to the current organizational structure.
Disaggregated revenue is as follows (in thousands):
|
| Year Ended December 31, 2022 |
| |||||||||||||||||
NONINTEREST INCOME |
| Commercial Banking |
|
| Institutional Banking |
|
| Personal Banking |
|
| Revenue (Expense) out of Scope of ASC 606 |
|
| Total |
| |||||
Trust and securities processing |
| $ | — |
|
| $ | 183,724 |
|
| $ | 53,483 |
|
| $ | — |
|
| $ | 237,207 |
|
Trading and investment banking |
|
| — |
|
|
| 319 |
|
|
| — |
|
|
| 22,882 |
|
|
| 23,201 |
|
Service charges on deposit accounts |
|
| 34,399 |
|
|
| 43,054 |
|
|
| 7,543 |
|
|
| 171 |
|
|
| 85,167 |
|
Insurance fees and commissions |
|
| — |
|
|
| — |
|
|
| 1,338 |
|
|
| — |
|
|
| 1,338 |
|
Brokerage fees |
|
| 230 |
|
|
| 35,141 |
|
|
| 7,648 |
|
|
| — |
|
|
| 43,019 |
|
Bankcard fees |
|
| 61,939 |
|
|
| 21,998 |
|
|
| 23,049 |
|
|
| (33,535 | ) |
|
| 73,451 |
|
Investment securities gains, net |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 58,444 |
|
|
| 58,444 |
|
Other |
|
| 810 |
|
|
| 1,812 |
|
|
| 2,642 |
|
|
| 27,142 |
|
|
| 32,406 |
|
Total noninterest income |
| $ | 97,378 |
|
| $ | 286,048 |
|
| $ | 95,703 |
|
| $ | 75,104 |
|
| $ | 554,233 |
|
|
| Year Ended December 31, 2021 |
| |||||||||||||||||
NONINTEREST INCOME |
| Commercial Banking |
|
| Institutional Banking |
|
| Personal Banking |
|
| Revenue (Expense) out of Scope of ASC 606 |
|
| Total |
| |||||
Trust and securities processing |
| $ | — |
|
| $ | 164,480 |
|
| $ | 59,646 |
|
| $ | — |
|
| $ | 224,126 |
|
Trading and investment banking |
|
| — |
|
|
| 793 |
|
|
| — |
|
|
| 30,146 |
|
|
| 30,939 |
|
Service charges on deposit accounts |
|
| 33,350 |
|
|
| 45,934 |
|
|
| 6,457 |
|
|
| 315 |
|
|
| 86,056 |
|
Insurance fees and commissions |
|
| — |
|
|
| — |
|
|
| 1,309 |
|
|
| — |
|
|
| 1,309 |
|
Brokerage fees |
|
| 107 |
|
|
| 4,069 |
|
|
| 7,995 |
|
|
| — |
|
|
| 12,171 |
|
Bankcard fees |
|
| 56,918 |
|
|
| 19,117 |
|
|
| 21,779 |
|
|
| (33,238 | ) |
|
| 64,576 |
|
Investment securities gains, net |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,057 |
|
|
| 5,057 |
|
Other |
|
| 889 |
|
|
| 1,634 |
|
|
| 2,622 |
|
|
| 37,796 |
|
|
| 42,941 |
|
Total noninterest income |
| $ | 91,264 |
|
| $ | 236,027 |
|
| $ | 99,808 |
|
| $ | 40,076 |
|
| $ | 467,175 |
|
|
| Year Ended December 31, 2020 |
| |||||||||||||||||
NONINTEREST INCOME |
| Commercial Banking |
|
| Institutional Banking |
|
| Personal Banking |
|
| Revenue (Expense) out of Scope of ASC 606 |
|
| Total |
| |||||
Trust and securities processing |
| $ | — |
|
| $ | 131,249 |
|
| $ | 63,397 |
|
| $ | — |
|
| $ | 194,646 |
|
Trading and investment banking |
|
| — |
|
|
| 755 |
|
|
| — |
|
|
| 32,190 |
|
|
| 32,945 |
|
Service charges on deposit accounts |
|
| 30,470 |
|
|
| 46,611 |
|
|
| 6,587 |
|
|
| 211 |
|
|
| 83,879 |
|
Insurance fees and commissions |
|
| — |
|
|
| — |
|
|
| 1,369 |
|
|
| — |
|
|
| 1,369 |
|
Brokerage fees |
|
| 245 |
|
|
| 16,075 |
|
|
| 8,030 |
|
|
| — |
|
|
| 24,350 |
|
Bankcard fees |
|
| 52,257 |
|
|
| 17,731 |
|
|
| 19,621 |
|
|
| (29,065 | ) |
|
| 60,544 |
|
Investment securities gains, net |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 120,634 |
|
|
| 120,634 |
|
Other |
|
| 1,135 |
|
|
| 1,469 |
|
|
| 2,603 |
|
|
| 36,592 |
|
|
| 41,799 |
|
Total noninterest income |
| $ | 84,107 |
|
| $ | 213,890 |
|
| $ | 101,607 |
|
| $ | 160,562 |
|
| $ | 560,166 |
|
14. COMMON STOCK AND EARNINGS PER SHARE
The following table summarizes the share transactions for the three years ended December 31, 20172022 (in thousands, except for share data):
|
| Shares Issued |
|
| Shares in Treasury |
| ||
Balance December 31, 2014 |
|
| 55,056,730 |
|
|
| (9,524,542 | ) |
Common stock issuance for acquisition |
|
| — |
|
|
| 3,470,478 |
|
Purchase of Treasury Stock |
|
| — |
|
|
| (225,894 | ) |
Sale of Treasury Stock |
|
| — |
|
|
| 19,695 |
|
Issued for stock options & restricted stock |
|
| — |
|
|
| 599,899 |
|
Balance December 31, 2015 |
|
| 55,056,730 |
|
|
| (5,660,364 | ) |
Purchase of Treasury Stock |
|
| — |
|
|
| (399,677 | ) |
Sale of Treasury Stock |
|
| — |
|
|
| 21,036 |
|
Issued for stock options & restricted stock |
|
| — |
|
|
| 655,331 |
|
Balance December 31, 2016 |
|
| 55,056,730 |
|
|
| (5,383,674 | ) |
Purchase of Treasury Stock |
|
| — |
|
|
| (245,982 | ) |
Sale of Treasury Stock |
|
| — |
|
|
| 14,908 |
|
Issued for stock options & restricted stock |
|
| — |
|
|
| 453,008 |
|
Balance December 31, 2017 |
|
| 55,056,730 |
|
|
| (5,161,740 | ) |
|
| Shares Issued |
|
| Shares in Treasury |
| ||
Balance January 1, 2020 |
|
| 55,056,730 |
|
|
| (5,959,124 | ) |
Accelerated Share Repurchase Program |
|
| — |
|
|
| (653,498 | ) |
Purchase of Treasury Stock |
|
| — |
|
|
| (563,830 | ) |
Sale of Treasury Stock |
|
| — |
|
|
| 11,372 |
|
Issued for stock options and restricted stock |
|
| — |
|
|
| 114,736 |
|
Balance December 31, 2020 |
|
| 55,056,730 |
|
|
| (7,050,344 | ) |
Purchase of Treasury Stock |
|
| — |
|
|
| (67,671 | ) |
Sale of Treasury Stock |
|
| — |
|
|
| 6,835 |
|
Issued for stock options and restricted stock |
|
| — |
|
|
| 485,255 |
|
Balance December 31, 2021 |
|
| 55,056,730 |
|
|
| (6,625,925 | ) |
Purchase of Treasury Stock |
|
| — |
|
|
| (341,785 | ) |
Sale of Treasury Stock |
|
| — |
|
|
| 6,487 |
|
Issued for stock options and restricted stock |
|
| — |
|
|
| 223,897 |
|
Balance December 31, 2022 |
|
| 55,056,730 |
|
|
| (6,737,326 | ) |
As noted in the table above, in 2015, the Company issued 3.5 million shares to the owners of Marquette for the purchase of all of the outstanding shares of Marquette. The owners of Marquette as of the close of business on the acquisition date of May 31, 2015 received 9.2295 shares of the Company’s common stock for each share of Marquette common stock owned on that date. The market value of the shares of the Company’s common stock issued at the effective time of the merger was approximately $179.7 million, based on the closing price of the Company’s stock of $51.79 per share on May 29, 2015.
The Board approved a plan toauthorized the repurchase of up to 2 million shares of common stock annually at its 2015, 20162020, 2021 and 20172022 meetings. All open marketDuring 2020, the Company entered into an agreement with BAML to repurchase an aggregate of
$30.0 million of the Company’s common stock through an accelerated share repurchase agreement (ASR). Under the ASR, the Company repurchased a total of 653,498 shares. The final settlement of the transactions under the ASR occurred in the second quarter of 2020. Other than purchases pursuant to the ASR, all share purchases underpursuant to the share repurchase plansRepurchase Authorizations 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 common shares. The Company has not made any repurchasesrepurchase of its securities other than through these plans.pursuant to the Repurchase Authorizations.
Basic earnings per share are computed by dividing income available to common shareholders by the weighted average number of shares outstanding during the year. Diluted earnings per share gives effect to all potential common shares that were outstanding during the year.
The shares used in the calculation of basic and diluted earnings per share, are shown below:
|
| For the Years Ended December 31, |
|
| For the Years Ended December 31, |
| ||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2015 |
|
| 2022 |
|
| 2021 |
|
| 2020 |
| ||||||
Weighted average basic common shares outstanding |
|
| 49,223,661 |
|
|
| 48,828,313 |
|
|
| 47,126,252 |
|
|
| 48,340,922 |
|
|
| 48,271,462 |
|
|
| 48,137,791 |
|
Dilutive effect of stock options and restricted stock |
|
| 615,629 |
|
|
| 448,742 |
|
|
| 453,082 |
|
|
| 406,477 |
|
|
| 466,830 |
|
|
| 205,959 |
|
Weighted average diluted common shares outstanding |
|
| 49,839,290 |
|
|
| 49,277,055 |
|
|
| 47,579,334 |
|
|
| 48,747,399 |
|
|
| 48,738,292 |
|
|
| 48,343,750 |
|
14. 15. COMMITMENTS, CONTINGENCIES AND GUARANTEES
In the normal course of business, the Company is a party to financial instruments with off-balance-sheet risk in order to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit, commercial letters of credit, standby letters of credit, and futures contracts. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Balance Sheets. The contract or notional amount of those instruments reflects the extent of involvement the Company has in particular classes of financial instruments. Many of the commitments expire without being drawn upon; therefore, the total amount of these commitments does not necessarily represent the future cash requirements of the Company.
The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit, commercial letters of credit, and standby letters of credit is represented by the contract or notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the agreement. These conditions generally include, but are not limited to, each customer being current as to repayment terms of existing loans and no deterioration in the customer’s financial condition. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The interest rate is generally a variable rate. If the commitment has a fixed interest rate, the rate is generally not set until such time as credit is extended. For credit card customers, the Company has the right to change or terminate terms or conditions of the credit card account at any time. Since a large portion of the commitments and unused credit card lines are never actually drawn upon, the total commitment amount does not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on an individual basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation. Collateral pledged by customers varies but may include accounts receivable, inventory, real estate, plant and equipment, stock, securities and certificates of deposit.
Commercial letters of credit are issued specifically to facilitate trade or commerce. Under the terms of a commercial letter of credit, as a general rule, drafts will be drawn when the underlying transaction is consummated as intended.
Standby letters of credit are conditional commitments issued by the Company payable upon the non-performance of a customer’s obligation to a third party. The Company issues standby letters of credit for terms ranging from three months to six years. The Company generally requires the customer to pledge collateral to support the letter of credit. The maximum liability to the Company under standby letters of credit at December 31, 2017
2022 and 2016,2021, was $316.1$437.0 million and $376.6$365.0 million, respectively. As of December 31, 20172022 and 2016,2021, standby letters of credit totaling $42.5$25.5 million and $67.4$28.6 million, respectively, were with related parties to the Company.
The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities. The Company holds collateral supporting those commitments when deemed necessary. Collateral varies but may include such items as those described for commitments to extend credit.
Futures contracts are contracts for delayed delivery of securities or money market instruments in which the seller agrees to make delivery at a specified future date, of a specified instrument, at a specified yield. Risks arise from the possible inability of counterparties to meet the terms of their contracts and from movement in securities values and interest rates. Instruments used in trading activities are carried at marketfair value and gains and losses on futures contracts are settled in cash daily. Any changes in the marketfair value are recognized in trading and investment banking income.
The Company uses contracts to offset interest rate risk on specific securities held in the trading portfolio. As of December 31, 20172022 and 2016,2021, there were no notional amounts outstanding for these contracts. There were no open futures contract positions during the yearyears ended December 31, 2017. Open2022 or 2021. There was no net futures contract positions average notional amount was $0.4 million duringactivity for the yearyears ended December 31, 2016. Net futures activity resulted in losses of $6 thousand and of $142 thousand and gains of $35 thousand for 2017, 2016, and 2015, respectively.2022, 2021, or 2020. The Company controls the credit risk of its futures contracts through credit approvals, limits and monitoring procedures.
The Company also enters into foreign exchange contracts on a limited basis. For operating purposes, the Company maintains certain balances in foreign banks. Foreign exchange contracts are purchased on a monthly basis to avoid foreign exchange risk on these foreign balances. The Company will also enter into foreign exchange contracts to facilitate foreign exchange needs of customers. The Company will enter into a contract to buy or sell a foreign currency at a future date only as part of a contract to sell or buy the foreign currency at the same future date to a customer. During 2017,2022, contracts to purchase and to sell foreign currency averaged approximately $36.8$13.8 million compared to $40.5$21.4 million during 2016.2021. The net gains on these foreign exchange contracts for 2017, 20162022, 2021 and 20152020 were $1.9$3.4 million, $1.6$2.6 million and $1.8$1.9 million, respectively.
With respect to group concentrations of credit risk, most of the Company’s business activity is with customers in the states of Missouri, Kansas, Colorado, Oklahoma, Nebraska, Arizona, Illinois, and Texas. At December 31, 2017,2022, the Company did not have any significant credit concentrations in any particular industry.
The following table summarizes the Company’s off-balance sheet financial instruments as described above.
|
| Contract or Notional Amount December 31, |
| |||||
|
| 2017 |
|
| 2016 |
| ||
Commitments to extend credit for loans (excluding credit card loans) |
| $ | 6,689,467 |
|
| $ | 6,471,404 |
|
Commitments to extend credit under credit card loans |
|
| 2,975,507 |
|
|
| 2,798,433 |
|
Commercial letters of credit |
|
| 813 |
|
|
| 1,098 |
|
Standby letters of credit |
|
| 316,054 |
|
|
| 376,617 |
|
Forward contracts |
|
| 29,007 |
|
|
| 49,352 |
|
Spot foreign exchange contracts |
|
| 628 |
|
|
| 3,725 |
|
15. DIVESTITURES AND ACQUISITIONS
On November 17, 2017, the Company closed the previously announced sale of all of the outstanding stock of Scout, its institutional investment management subsidiary, for $172.5 million in cash, which remains subject to customary post-closing purchase adjustments. The gain recorded on the disposal of Scout was $103.6 million. The Company plans to use the proceeds from the transaction for general corporate purposes and to support its continued organic growth in the commercial, consumer, private wealth, institutional banking, healthcare, and asset servicing businesses.
This table summarizes the components of income from discontinued operations, net of taxes, for the years ended December 31, 2017, 2016, and 2015 presented in the Consolidated Statements of Incomeabove (in thousands):
|
| For the years ended December 31, |
| |||||||||
|
| 2017 |
|
| 2016 |
|
| 2015 |
| |||
Total noninterest income |
| $ | 63,416 |
|
| $ | 73,564 |
|
| $ | 95,795 |
|
Total noninterest expense |
|
| 65,834 |
|
|
| 65,149 |
|
|
| 64,798 |
|
(Loss) income from discontinued operations |
|
| (2,418 | ) |
|
| 8,415 |
|
|
| 30,997 |
|
Gain on the disposal of discontinued operations |
|
| 103,644 |
|
|
| — |
|
|
| — |
|
Total income from discontinued operations |
|
| 101,226 |
|
|
| 8,415 |
|
|
| 30,997 |
|
Income tax expense |
|
| 37,097 |
|
|
| 3,248 |
|
|
| 11,482 |
|
Net income on discontinued operations |
| $ | 64,129 |
|
| $ | 5,167 |
|
| $ | 19,515 |
|
|
| Contract or Notional Amount December 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Commitments to extend credit for loans (excluding credit card loans) |
| $ | 12,988,231 |
|
| $ | 10,122,617 |
|
Commitments to extend credit under credit card loans |
|
| 4,008,386 |
|
|
| 3,743,165 |
|
Commercial letters of credit |
|
| 3,334 |
|
|
| 2,754 |
|
Standby letters of credit |
|
| 436,965 |
|
|
| 365,030 |
|
Forward contracts |
|
| 32,552 |
|
|
| 9,729 |
|
Spot foreign exchange contracts |
|
| 5,112 |
|
|
| 2,946 |
|
Allowance for Credit Losses on Off-Balance Sheet Credit Exposure
The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancelable by the Company. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The estimate is based on expected utilization rates by portfolio segment. Utilization rates are influenced by historical trends and current conditions. The expected utilization rates are applied to the total commitment to determine the expected amount to be funded. The allowance for off-balance sheet credit exposure is calculated by applying portfolio segment expected credit loss rates to the expected amount to be funded.
The discontinuedfollowing categories of off-balance sheet credit exposures have been identified:
Revolving Lines of Credit: includes commercial, construction, agricultural, personal, and home-equity. Risk inherent to revolving lines of credit often are related to the susceptibility of an individual or business experiencing unpredictable cash flow or financial troubles, thus leading to payment default. During these financial troubles, the borrower could have less than desirable assets collateralizing the revolving line of Scout includedcredit. The financial strain the borrower is experiencing could lead to drawing against the line without the ability to pay the line down.
Non-Revolving Lines of Credit: include commercial and personal. Lines that do not carry a revolving feature are generally associated with a specific expenditure or project, such as to purchase equipment or the construction of real estate. The predominate risk associated with non-revolving lines is the diversion of funds for other expenditures. If the funds get diverted, the contributory value to collateral suffers.
Letters of Credit: includes standby letters of credit. Generally, a standby letter of credit is established to provide assurance to the beneficiary that the applicant will perform certain obligations arising out of a separate transaction between the beneficiary and the applicant. These obligations might be the performance of a service or delivery of a product. If the obligations are not met, it gives the beneficiary the right to draw on the Consolidated Balance Sheets are as follows (in thousands):
|
| December 31, 2017 |
|
| December 31, 2016 |
| ||
Goodwill |
| $ | — |
|
| $ | 47,529 |
|
Other intangibles, net |
|
| — |
|
|
| 7,861 |
|
Discontinued assets – goodwill and other intangibles, net |
| $ | — |
|
| $ | 55,390 |
|
letter of credit.
The componentsACL for off-balance sheet credit exposures was $3.1 million and $2.6 million as of net cash provided by operatingDecember 31, 2022 and investing activities of discontinued operations included2021, respectively, and was recorded in the Consolidated Statements of Cash Flows are as follows (in thousands):
|
| For the years ended December 31, |
| |||||||||
|
| 2017 |
|
| 2016 |
|
| 2015 |
| |||
Income from discontinued operations |
| $ | 64,129 |
|
| $ | 5,167 |
|
| $ | 19,515 |
|
Gain on the disposal of discontinued operations |
|
| (103,644 | ) |
|
| — |
|
|
| — |
|
Depreciation and amortization |
|
| 1,647 |
|
|
| 3,596 |
|
|
| 3,919 |
|
Net cash (used in) provided by operating activities of discontinued operations |
| $ | (37,868 | ) |
| $ | 8,763 |
|
| $ | 23,434 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds on disposal of discontinued operations |
| $ | 167,183 |
|
| $ | — |
|
| $ | — |
|
Net cash provided by investing activities of discontinued operations |
| $ | 167,183 |
|
| $ | — |
|
| $ | — |
|
On May 31, 2015, the Company acquired all of the outstanding common shares of Marquette. Marquette was a privately-held financial services company with a portfolio of businessesAccrued expenses and operated thirteen branches in Arizona and Texas, two national commercial specialty-lending businesses focused on asset-based lending and accounts receivable factoring, as well as an asset-management firm. As of the close of trading on the acquisition date of May 31, 2015, the beneficial owners of Marquette received 9.2295 sharestaxes line of the Company’s common stockConsolidated Balance Sheets. Provision of $500 thousand was recorded for each share of Marquette common stock owned at that date (approximately 3.47 million shares total). The market value of the Company’s common stock issued at the effective time of the merger was approximately $179.7 million, based on the closing stock price of the Company’s common stock of $51.79 per share on May 29, 2015. The transaction was accountedoff-balance sheet credit exposures for using the acquisition method of accounting in accordance with FASB ASC Topic 805, Business Combinations. Accordingly, the purchase price was allocated based on the estimated fair market values of the assets and liabilities acquired.
The following table summarizes the net assets acquired (at fair value) and consideration transferred for Marquette (in thousands, except for per share data):
|
| Fair Value |
| |
|
| May 31, 2015 |
| |
Assets |
|
|
|
|
Loans |
| $ | 980,404 |
|
Investment securities |
|
| 177,694 |
|
Cash and due from banks |
|
| 95,351 |
|
Premises and equipment, net |
|
| 11,508 |
|
Identifiable intangible assets |
|
| 14,881 |
|
Other assets |
|
| 32,336 |
|
Total assets acquired |
|
| 1,312,174 |
|
Liabilities |
|
|
|
|
Noninterest-bearing deposits |
|
| 226,161 |
|
Interest-bearing deposits |
|
| 708,675 |
|
Short-term debt |
|
| 112,133 |
|
Long-term debt |
|
| 89,971 |
|
Other liabilities |
|
| 14,135 |
|
Total liabilities assumed |
|
| 1,151,075 |
|
Net identifiable assets acquired |
|
| 161,099 |
|
Preliminary goodwill |
|
| 18,638 |
|
Net assets acquired |
| $ | 179,737 |
|
Consideration: |
|
|
|
|
Company's common shares issued |
|
| 3,470 |
|
Purchase price per share of the Company's common stock |
| $ | 51.79 |
|
Fair value of total consideration transferred |
| $ | 179,737 |
|
In the acquisition, the Company purchased $980.4 million of loans at fair value. All non-performing loans and select other classified loan relationships considered by management to be credit impaired are accounted for pursuant to ASC Topic 310-30, as previously discussed within Note 3, “Loans and Allowance for Loan Losses.”
The Company assumed long-term debt obligations with an aggregate balance of $103.1 million and an aggregate fair value of $65.5 million as of the acquisition date of May 31, 2015 payable to four unconsolidated trusts (Marquette Capital Trust I, Marquette Capital Trust II, Marquette Capital Trust III, and Marquette Capital Trust IV) that previously issued trust preferred securities. The interest rate on the trust preferred securities issued by Marquette Capital Trust II was fixed at 6.30 percent until January 2016, and is reset each quarter at a variable rate tied to the three-month LIBOR plus 133 basis points thereafter. Interest rates on trust preferred securities issued by the remaining three trusts are tied to the three-month LIBOR rate with spreads ranging from 133 basis points to 160 basis points and reset quarterly. The trust preferred securities have maturity dates ranging from January 2036 to September 2036.
The amount of goodwill arising from the acquisition reflects the Company’s increased market share and related synergies that are expected to result from combining the operations of UMB and Marquette. All of the goodwill was assigned to the Bank segment. In accordance with ASC 350, Intangibles-Goodwill and Other, goodwill will not be amortized but will be subject to at least an annual impairment test. As the Company acquired tax deductible goodwill in excess of the amount reported in the Consolidated Financial Statements, the goodwill is expected to be deductible for tax purposes. The fair value of the acquired identifiable intangible assets of $14.9 million was comprised of a core deposit intangible of $11.0 million, customer lists of $2.9 million and non-compete agreements of $1.0 million.
The results of Marquette are included in the results of the Company subsequent to May 31, 2015. For the year ended December 31, 2016, acquisition expenses recognized2022. A reduction of $3.0 million of provision for off-balance sheet credit exposures was recorded for the year ended December 31, 2021. Provision for off-balance sheet credit exposures is recorded in Noninterest expense inthe Provision for credit losses line of the Company’s Consolidated Statements of Income totaled $4.8 million. This total included $896 thousand of severance in Salaries and employee benefits and $1.7 million in Legal and consulting fees. For the year ended December 31, 2015, acquisition expensesIncome.
recognized in Noninterest expense totaled $9.8 million. This total included $2.4 million of severance in Salaries and employee benefits and $4.8 million in Legal and consulting fees.
16. INCOME TAXES
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act ("the Tax Act”). The Tax Act includes numerous changes to existing tax law, including among other things, a permanent reduction in the federal corporate income tax rate from 35% to 21% effective January 1, 2018. The Company recognized the income tax effects of the Tax Act in its 2017 financial statements. The changes included in the Tax Act are broad and complex. Given the complexity of the Tax Act and the detailed analysis required, the adjustments reflected in the current and deferred tax accounts may be subject to further refinement as additional information becomes available and further analysis performed. Upon completion of our 2017 U.S. income tax return in 2018 we may identify additional remeasurement adjustments to our recorded deferred tax liabilities. We will continue to assess our provision for income taxes as further guidance is issued, but do not currently anticipate significant revisions will be necessary.
Income taxes on continuing operationsas set forth below produce effective income tax rates of 22.6 percent18.9% in 2017, 22.6 percent2022, 17.7% in 2016,2021, and 24.7 percent15.5% in 2015.2020. These percentages are computed by dividing incomeIncome tax expense by Income from continuing operations before income taxes.
Income tax expense from continuing operations includes the following components (in thousands):
|
| Year Ended December 31, |
|
| Year Ended December 31, |
| ||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2015 |
|
| 2022 |
|
| 2021 |
|
| 2020 |
| ||||||
Current tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
| $ | (8,260 | ) |
| $ | 41,860 |
|
| $ | 29,622 |
|
| $ | 92,673 |
|
| $ | 72,410 |
|
| $ | 49,053 |
|
State |
|
| 1,889 |
|
|
| 1,570 |
|
|
| 2,753 |
|
|
| 13,964 |
|
|
| 16,356 |
|
|
| 8,171 |
|
Total current tax (benefit) expense |
|
| (6,371 | ) |
|
| 43,430 |
|
|
| 32,375 |
| ||||||||||||
Total current tax expense |
|
| 106,637 |
|
|
| 88,766 |
|
|
| 57,224 |
| ||||||||||||
Deferred tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
| 57,851 |
|
|
| 1,145 |
|
|
| 301 |
|
|
| (3,998 | ) |
|
| (9,872 | ) |
|
| (4,045 | ) |
State |
|
| 1,890 |
|
|
| 380 |
|
|
| (946 | ) |
|
| (2,310 | ) |
|
| (2,852 | ) |
|
| (791 | ) |
Total deferred tax expense (benefit) |
|
| 59,741 |
|
|
| 1,525 |
|
|
| (645 | ) | ||||||||||||
Total deferred tax benefit |
|
| (6,308 | ) |
|
| (12,724 | ) |
|
| (4,836 | ) | ||||||||||||
Total tax expense |
| $ | 53,370 |
|
| $ | 44,955 |
|
| $ | 31,730 |
|
| $ | 100,329 |
|
| $ | 76,042 |
|
| $ | 52,388 |
|
Income taxes from discontinued operations produce effective income tax rates of 36.6 percent in 2017, 38.6 percent in 2016, and 37.0 percent in 2015. These percentages are computed by dividing income tax expense by Income from discontinued operations before income taxes.
Income tax expense from discontinued operations includes the following components (in thousands):
|
| Year Ended December 31, |
| |||||||||
|
| 2017 |
|
| 2016 |
|
| 2015 |
| |||
Current tax |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
| $ | 35,169 |
|
| $ | 1,759 |
|
| $ | 14,847 |
|
State |
|
| 1,930 |
|
|
| 258 |
|
|
| 838 |
|
Total current tax expense (benefit) |
|
| 37,099 |
|
|
| 2,017 |
|
|
| 15,685 |
|
Deferred tax |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
| 260 |
|
|
| 1,187 |
|
|
| (3,998 | ) |
State |
|
| (262 | ) |
|
| 44 |
|
|
| (205 | ) |
Total deferred tax (benefit) expense |
|
| (2 | ) |
|
| 1,231 |
|
|
| (4,203 | ) |
Total tax expense |
| $ | 37,097 |
|
| $ | 3,248 |
|
| $ | 11,482 |
|
The reconciliation between the income tax expense and the amount computed by applying the statutory federal tax rate of 35% to21% for income from continuing operations before income taxes is as follows (in thousands):
|
| Year Ended December 31, |
|
| Year Ended December 31, |
| ||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2015 |
|
| 2022 |
|
| 2021 |
|
| 2020 |
| ||||||
Statutory federal income tax expense |
| $ | 82,721 |
|
| $ | 69,506 |
|
| $ | 44,901 |
|
| $ | 111,722 |
|
| $ | 90,103 |
|
| $ | 71,167 |
|
Tax-exempt interest income |
|
| (25,697 | ) |
|
| (20,196 | ) |
|
| (15,405 | ) |
|
| (20,206 | ) |
|
| (20,635 | ) |
|
| (20,914 | ) |
Tax-exempt life insurance related income |
|
| (5,769 | ) |
|
| (3,405 | ) |
|
| (932 | ) |
|
| (723 | ) |
|
| (2,631 | ) |
|
| (3,420 | ) |
Meals, entertainment and related expenses |
|
| 854 |
|
|
| 580 |
|
|
| 924 |
| ||||||||||||
State and local income taxes, net of federal tax benefits |
|
| 9,207 |
|
|
| 10,659 |
|
|
| 5,835 |
| ||||||||||||
Equity-based compensation |
|
| (3,297 | ) |
|
| (1,095 | ) |
|
| — |
|
|
| (1,921 | ) |
|
| (1,889 | ) |
|
| (299 | ) |
State and local income taxes, net of federal tax benefits |
|
| 2,439 |
|
|
| 1,365 |
|
|
| 1,399 |
| ||||||||||||
Federal tax credits, net of amortization of LIHTC(1) investments |
|
| (1,119 | ) |
|
| (2,480 | ) |
|
| (688 | ) | ||||||||||||
Impacts related to the 2017 Tax Act |
|
| 2,997 |
|
|
| — |
|
|
| — |
| ||||||||||||
Federal tax credits, net of amortization of LIHTC investments |
|
| (3,748 | ) |
|
| (2,634 | ) |
|
| (1,772 | ) | ||||||||||||
Other |
|
| 1,095 |
|
|
| 1,260 |
|
|
| 2,455 |
|
|
| 5,144 |
|
|
| 2,489 |
|
|
| 867 |
|
Total tax expense |
| $ | 53,370 |
|
| $ | 44,955 |
|
| $ | 31,730 |
|
| $ | 100,329 |
|
| $ | 76,042 |
|
| $ | 52,388 |
|
|
|
In preparing its tax returns, the Company is required to interpret tax laws and regulations to determine its taxable income. Periodically, the Company is subject to examinations by various taxing authorities that may give rise to differing interpretations of these laws. The Company is not in the examination process with any tax jurisdictions at December 31, 2017. However, uponUpon examination, agreement of tax liabilities between the Company and the multiple tax jurisdictions in which the Company files tax returns may ultimately be different. During 2022, the Internal Revenue Service closed the examination of tax years 2014 and 2015 with no changes to the tax returns as filed. The Company is in the examination process with two state tax authorities for tax years 2018, 2019, and 2020. The Company believes the aggregate amount of any additional liabilities that may result from these examinations, if any, will not have a material adverse effect on the financial condition, results of operations, or cash flows of the Company.
Deferred income taxes result from differences between the carrying value of assets and liabilities measured for financial reporting and the tax basis of assets and liabilities for income tax return purposes.
The significant components of deferred tax assets and liabilities are reflected in the following table (in thousands):
|
| December 31, |
|
| December 31, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2022 |
|
| 2021 |
| ||||
Deferred tax assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized loss on securities available for sale |
| $ | 18,023 |
|
| $ | 34,998 |
|
| $ | 248,001 |
|
| $ | — |
|
Loans, principally due to allowance for loan losses |
|
| 23,646 |
|
|
| 40,564 |
| ||||||||
Loans, principally due to allowance for credit losses |
|
| 43,129 |
|
|
| 45,029 |
| ||||||||
Equity-based compensation |
|
| 4,975 |
|
|
| 7,824 |
|
|
| 7,743 |
|
|
| 6,493 |
|
Accrued expenses |
|
| 17,248 |
|
|
| 37,263 |
|
|
| 25,007 |
|
|
| 23,032 |
|
Deferred compensation |
|
| 15,375 |
|
|
| 16,320 |
| ||||||||
Miscellaneous |
|
| 3,762 |
|
|
| 4,587 |
|
|
| 2,289 |
|
|
| 5,515 |
|
Total deferred tax assets before valuation allowance |
|
| 67,654 |
|
|
| 125,236 |
|
|
| 341,544 |
|
|
| 96,389 |
|
Valuation allowance |
|
| (3,498 | ) |
|
| (2,860 | ) |
|
| (180 | ) |
|
| (1,335 | ) |
Total deferred tax assets |
|
| 64,156 |
|
|
| 122,376 |
|
|
| 341,364 |
|
|
| 95,054 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate Investment Trust dividend |
|
| (32,591 | ) |
|
| — |
| ||||||||
Net unrealized gain on securities available for sale |
|
| — |
|
|
| (35,447 | ) | ||||||||
Net unrealized gain on fair value hedges |
|
| (18,617 | ) |
|
| (1,336 | ) | ||||||||
Securities |
|
| (87 | ) |
|
| (788 | ) | ||||||||
Land, buildings and equipment |
|
| (17,783 | ) |
|
| (31,335 | ) |
|
| (33,036 | ) |
|
| (37,370 | ) |
Original issue discount |
|
| (2,580 | ) |
|
| (4,507 | ) |
|
| (992 | ) |
|
| (1,486 | ) |
Prepaid expenses |
|
| (5,862 | ) |
|
| (4,359 | ) | ||||||||
Partnership investments |
|
| (1,005 | ) |
|
| (3,776 | ) |
|
| (6,737 | ) |
|
| (5,627 | ) |
Trust preferred securities |
|
| (7,202 | ) |
|
| (13,780 | ) |
|
| (6,912 | ) |
|
| (7,250 | ) |
Intangibles |
|
| (5,769 | ) |
|
| (3,623 | ) |
|
| (17,225 | ) |
|
| (20,067 | ) |
Miscellaneous |
|
| (3,117 | ) |
|
| (7,148 | ) |
|
| (3,471 | ) |
|
| (3,426 | ) |
Total deferred tax liabilities |
|
| (70,047 | ) |
|
| (64,169 | ) |
|
| (92,939 | ) |
|
| (117,156 | ) |
Net deferred tax (liability) asset |
| $ | (5,891 | ) |
| $ | 58,207 |
| ||||||||
Net deferred tax asset (liability) |
| $ | 248,425 |
|
| $ | (22,102 | ) |
The Company had various
As of December 31, 2022, state net operating loss carryforwards of approximately $0.8$544 thousand are included in the miscellaneous deferred tax assets line item above. These deferred tax assets include approximately $16.5 million asrelated to net operating losses that can be used to offset taxable income in future periods and reduce our income taxes payable in those future periods. Most of December 31, 2017. Thesethese net operating losses expire at various times between 20182023 and 2037. The2041 and some have an indefinite carryforward. During the year ended December 31, 2022, the Company hasreleased a fullportion of the state valuation allowance of $1.2 million, due to positive evidence outweighing negative evidence, specifically no longer being in a cumulative loss position in certain jurisdictions. As of December 31, 2022 and 2021, the Company had a valuation allowance of $13 thousand and $514 thousand, respectively, for thesecertain state net operating losses as they are not expected to be realized. In addition, as of December 31, 2022 and 2021, the Company hashad a valuation allowance of $2.7 million$167 thousand and $821 thousand, respectively, to reduce certain other state deferred tax assets to the amount of tax benefit management believes it will be more likely than not realize.realized.
The net deferred tax asset at December 31, 2022 is included in the Other assets line of the Company’s Consolidated Balance Sheets while the net deferred tax liability at December 31, 20172021 is included in the Accrued expenses and taxes line of the Company’s Consolidated Balance Sheets while the net deferred tax asset at December 31, 2016 is included in the Other assets line of the Company’s Consolidated Balance Sheets. The Company remeasured the deferred tax assets and liabilities at the newly enacted statutory tax rate of 21 percent in accordance with the Tax Act.
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states. With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for tax years prior to 20142017 in the jurisdictions in which it files.
Liabilities Associated With Unrecognized Tax Benefits
The gross amount of unrecognized tax benefits totaled $3.8$9.4 million and $4.4$8.8 million at December 31, 20172022 and 2016,2021, respectively. The total amount of unrecognized tax benefits, net of associated deferred tax benefit, that would impact the effective tax rate, if recognized, would be $3.0$7.4 million and $3.5$7.0 million at December 31, 20172022 and December 31, 2016,2021, respectively. The unrecognized tax benefits relate to state tax positions that have a corresponding federal tax benefit. While it is expected that the amount of unrecognized tax benefits will change in the next twelve months, the Company does not expect this change to have a material adverse impact on the financial condition, results of operations, or cash flows of the Company.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
|
| December 31, |
|
| December 31, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2022 |
|
| 2021 |
| ||||
Unrecognized tax benefits - opening balance |
| $ | 4,375 |
|
| $ | 4,680 |
|
| $ | 8,798 |
|
| $ | 6,717 |
|
Gross increases - tax positions in prior period |
|
| 323 |
|
|
| — |
|
|
| — |
|
|
| 291 |
|
Gross decreases - tax positions in prior period |
|
| — |
|
|
| (269 | ) |
|
| (63 | ) |
|
| — |
|
Gross increases - current-period tax positions |
|
| 228 |
|
|
| 924 |
|
|
| 2,621 |
|
|
| 2,201 |
|
Lapse of statute of limitations |
|
| (1,080 | ) |
|
| (960 | ) |
|
| (1,996 | ) |
|
| (411 | ) |
Unrecognized tax benefits - ending balance |
| $ | 3,846 |
|
| $ | 4,375 |
|
| $ | 9,360 |
|
| $ | 8,798 |
|
17. DERIVATIVES AND HEDGING ACTIVITIES
Risk Management Objective of Using Derivatives
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the valuesvalue of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to certain fixed rate assetsthe Company’s loans and liabilities.borrowings. The Company also has interest rate derivatives that result from a service provided to certain qualifying customers and, therefore, are not used to manage interest rate risk of the Company’s assets or liabilities. The Company has entered into an offsetting position for each of these
derivative instruments with a matching instrument from another financial institution in order to minimize its net risk exposure resulting from such transactions.
Fair Values of Derivative Instruments on the Consolidated Balance Sheets
The table below presents the fair value of the Company’s derivative financial instruments as of December 31, 20172022 and 2016.2021. The Company’s derivative assets and derivative liabilities are located within Other Assetsassets and Other Liabilities,liabilities, respectively, on the Company’s Consolidated Balance Sheets.
Derivative fair values are determined using valuation techniques including discounted cash flow analysis on the expected cash flows from each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, foreign exchange rates, and implied volatilities. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.
This table provides a summary of the fair value of the Company’s derivative assets and liabilities as of December 31, 20172022 and December 31, 20162021(in thousands):
|
| Derivative Assets |
|
| Derivative Liabilities |
|
| Derivative Assets |
|
| Derivative Liabilities |
| ||||||||||||||||||||
|
| December 31, |
|
| December 31, |
|
| December 31, |
|
| December 31, |
| ||||||||||||||||||||
Fair Value |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||
Interest Rate Products: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments |
| $ | 10,116 |
|
| $ | 10,555 |
|
| $ | 7,326 |
|
| $ | 10,581 |
|
| $ | 47,638 |
|
| $ | 57,134 |
|
| $ | 126,231 |
|
| $ | 13,944 |
|
Derivatives designated as hedging instruments |
|
| 33 |
|
|
| 318 |
|
|
| 1,580 |
|
|
| 748 |
|
|
| 483 |
|
|
| 546 |
|
|
| 103 |
|
|
| — |
|
Total |
| $ | 10,149 |
|
| $ | 10,873 |
|
| $ | 8,906 |
|
| $ | 11,329 |
|
| $ | 48,121 |
|
| $ | 57,680 |
|
| $ | 126,334 |
|
| $ | 13,944 |
|
Fair Value Hedges of Interest Rate Risk
The Company is exposed to changes in the fair value of certain of its fixed ratefixed-rate assets and liabilities due to changes in the benchmark interest rate, LIBOR. Interest rate swaps designated as fair value hedges involve either making fixed rate payments to a counterparty in exchange for the Company receiving variable rate payments, or making variable rate payments to a counterparty in exchange for the Company receiving fixed rate payments over the life of the agreements without the exchange of the underlying notional amount. As of December 31, 2017,2022, the Company had twothree interest rate swaps with a notional amount of $15.5 million that were designated as fair value hedges of interest rate risk associated with the Company’s fixedmunicipal bond securities. These swaps had a notional amount of $254.6 million as of December 31, 2022. As of December 31, 2021, the Company had 10 interest rate loan assets and brokered time deposits. swaps that were designated as fair value hedges of interest rate risk associated with the Company’s municipal bond securities. These swaps had a notional amount of $1.0 billion as of December 31, 2021. During the year ended December 31, 2022, the Company terminated seven fair value hedges. In connection with these terminated hedges, $58.1 million of hedging adjustments will be amortized through the contractual maturity date of each respective hedged item.
For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in earnings. The Company includes the gain or loss on the hedged itemsInterest income in the same line item as the offsetting loss or gain on the related derivatives. During the year ended December 31, 2017, the Company recognized net gainsConsolidated Statements of $4 thousand in other noninterest expense related to hedge ineffectiveness and net gains of $5 thousand during the year ended December 31, 2016.Income.
Cash Flow Hedges of Interest Rate Risk
The Company’s objective in using interest rate derivatives is to manage its exposure to interest rate movements. To accomplish this objective, the Company is exposed to changes in the fair value of certainprimarily uses interest rate swaps and floors as part of its variable-rate liabilities due to changes in the benchmark interest rate LIBOR.risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. As of December 31, 2017,2022 and 2021, the Company had two interest rate swaps with a notional amount of $51.5 million that were designated as cash flow hedges of interest rate risk associated with the Company’s variable ratevariable-rate subordinated debentures issued by Marquette Capital Trusts III and IV. These swaps had an aggregate notional amount of $51.5 million at both December 31, 2022 and 2021. Interest rate floors designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty if interest rates fall below the
strike rate on the contract in exchange for an upfront premium. On August 28, 2020, the Company terminated an interest rate floor with a notional amount of $750.0 million. At the date of termination, the interest rate floor had a net asset fair value of $34.1 million. The gross unrealized gain on the terminated interest rate floor remaining in AOCI was $7.4 million, or $5.6 million net of tax, and $12.3 million, or $9.4 million net of tax, as of December 31, 2022 and 2021, respectively. The unrealized gain will be reclassified into Interest income as the underlying forecasted transactions impact earnings through the original maturity of the hedged forecasted transactions. The total remaining term over which the unrealized gain will be reclassified into earnings is 1.7 years.
For derivatives designated and that qualify as cash flow hedges of interest rate risk, the effective portion of changes in fair valuegain or loss on the derivative is recorded in AOCI and is subsequently reclassified into earningsinterest expense and interest income in the period thatduring which the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly into earnings gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in earnings. During the years ended December 31, 2017 and 2016, the Company recognized net losses of $1.1 million and $0.5 million, respectively, in AOCI for the effective portion of the change in fair value of these cash flow hedges. During the years ended December 31, 2017 and 2016, the Company did not record any hedge ineffectiveness in earnings. Amounts reported in AOCI related to interest rate swap derivatives will be reclassified to Interest expense as interest payments are received or paid on the Company’s derivatives.hedged items. Amounts reported in AOCI related to interest rate floor derivatives will be reclassified to Interest income as interest payments are received or paid on the Company’s hedged items. The Company does not expectexpects to reclassify any amounts$1.2 million from AOCI as a reduction to Interest expense and $4.7 million from AOCI to Interest expenseincome during the next 12 months as the Company’s derivatives are effective after December 2018.months. As of December 31, 2017,2022, the Company is hedging its exposure to the variability in future cash flows for forecasted transactions over a maximum period of 18.7513.7 years.
Non-designated Hedges
The remainder of the Company’s derivatives are not designated in qualifying hedging relationships. Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain customers, which the Company implemented in 2010.customers. The Company executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously offset by interest rate swaps that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the
offsetting swaps are recognized directly in earnings. As of December 31, 2017,2022, the Company had 80230 interest rate swaps with an aggregate notional amount of $931.2 million$3.5 billion related to this program. During the years endedAs of December 31, 2017 and 2016,2021, the Company recognized net losseshad 188 interest rate swaps with an aggregate notional amount of $579 thousand and net gains of $195 thousand, respectively, related to changes in the fair value of these swaps.$2.9 billion.
Effect of Derivative Instruments on the Consolidated Statements of Income and Consolidated Statements ofAccumulated Other Comprehensive Income
This table provides a summary of the amount of gain or loss recognized in otherOther noninterest expense in the Consolidated Statements of Income for the years ended December 31, 2022, 2021, and 2020 related to the Company’s derivative assetassets and liability as of December 31, 2017 and December 31, 2016liabilities (in thousands):
|
| Amount of Gain (Loss) Recognized |
| |||||||||||||||||||||
|
| For the Year Ended |
|
| Amount of Gain (Loss) Recognized |
| ||||||||||||||||||
|
| December 31, |
|
| For the Year Ended December 31, |
| ||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2015 |
|
| 2022 |
|
| 2021 |
|
| 2020 |
| ||||||
Interest Rate Products |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments |
| $ | (579 | ) |
| $ | 195 |
|
| $ | (110 | ) |
| $ | 423 |
|
| $ | 387 |
|
| $ | (720 | ) |
Total |
| $ | (579 | ) |
| $ | 195 |
|
| $ | (110 | ) |
| $ | 423 |
|
| $ | 387 |
|
| $ | (720 | ) |
Interest Rate Products |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as fair value hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Fair value adjustments on derivatives |
| $ | (189 | ) |
| $ | (181 | ) |
| $ | (234 | ) |
| $ | 72,539 |
|
| $ | 5,231 |
|
| $ | (139 | ) |
Fair value adjustments on hedged items |
|
| 193 |
|
|
| 186 |
|
|
| 234 |
|
|
| (72,047 | ) |
|
| (5,832 | ) |
|
| 139 |
|
Total |
| $ | 4 |
|
| $ | 5 |
|
| $ | — |
|
| $ | 492 |
|
| $ | (601 | ) |
| $ | — |
|
This table provides a summary of the amounteffect of loss recognized inhedges on AOCI in the Consolidated Statements of Comprehensive Income for the years ended December 31, 2022, 2021, and 2020 related to the Company’s derivative assetassets and liability as of December 31, 2017 and December 31, 2016liabilities (in thousands):
|
| Amount of Loss Recognized in Other Comprehensive Income on Derivatives (Effective Portion) |
| |||||||||||||||||||||||||||||||||
|
| For the Year Ended |
| |||||||||||||||||||||||||||||||||
|
| December 31, |
|
| For the Year Ended December 31, 2022 |
| ||||||||||||||||||||||||||||||
Derivatives in Cash Flow Hedging Relationships |
| 2017 |
|
| 2016 |
|
| 2015 |
|
| Gain Recognized in OCI on Derivative |
|
| Gain Recognized in OCI Included Component |
|
| Gain Recognized in OCI Excluded Component |
|
| Gain (Loss) Reclassified from AOCI into Earnings |
|
| Gain (Loss) Reclassified from AOCI into Earnings Included Component |
|
| Loss Reclassified from AOCI into Earnings Excluded Component |
| |||||||||
Interest rate products |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Derivatives designed as cash flow hedging instruments |
| $ | (1,050 | ) |
| $ | (516 | ) |
| $ | (10 | ) | ||||||||||||||||||||||||
Interest rate floor |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 4,998 |
|
| $ | 7,248 |
|
| $ | (2,250 | ) | ||||||||||||
Interest rate swaps |
|
| 12,608 |
|
|
| 12,608 |
|
|
| — |
|
|
| (502 | ) |
|
| (502 | ) |
|
| — |
| ||||||||||||
Total |
| $ | (1,050 | ) |
| $ | (516 | ) |
| $ | (10 | ) |
| $ | 12,608 |
|
| $ | 12,608 |
|
| $ | — |
|
| $ | 4,496 |
|
| $ | 6,746 |
|
| $ | (2,250 | ) |
|
| For the Year Ended December 31, 2021 |
| |||||||||||||||||||||
Derivatives in Cash Flow Hedging Relationships |
| Gain Recognized in OCI on Derivative |
|
| Gain Recognized in OCI Included Component |
|
| Gain Recognized in OCI Excluded Component |
|
| Gain (Loss) Reclassified from AOCI into Earnings |
|
| Gain (Loss) Reclassified from AOCI into Earnings Included Component |
|
| Loss Reclassified from AOCI into Earnings Excluded Component |
| ||||||
Interest rate floor |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 4,696 |
|
| $ | 6,946 |
|
| $ | (2,250 | ) |
Interest rate swaps |
|
| 3,106 |
|
|
| 3,106 |
|
|
| — |
|
|
| (1,344 | ) |
|
| (1,344 | ) |
|
| — |
|
Total |
| $ | 3,106 |
|
| $ | 3,106 |
|
| $ | — |
|
| $ | 3,352 |
|
| $ | 5,602 |
|
| $ | (2,250 | ) |
|
| For the Year Ended December 31, 2020 |
| |||||||||||||||||||||
Derivatives in Cash Flow Hedging Relationships |
| Gain (Loss) Recognized in OCI on Derivative |
|
| Gain (Loss) Recognized in OCI Included Component |
|
| Loss Recognized in OCI Excluded Component |
|
| Gain (Loss) Reclassified from AOCI into Earnings |
|
| Gain (Loss) Reclassified from AOCI into Earnings Included Component |
|
| Loss Reclassified from AOCI into Earnings Excluded Component |
| ||||||
Interest rate floor |
| $ | 28,390 |
|
| $ | 34,917 |
|
| $ | (6,527 | ) |
| $ | 2,943 |
|
| $ | 5,398 |
|
| $ | (2,455 | ) |
Interest rate swaps |
|
| (7,411 | ) |
|
| (7,411 | ) |
|
| — |
|
|
| (1,038 | ) |
|
| (1,038 | ) |
|
| — |
|
Total |
| $ | 20,979 |
|
| $ | 27,506 |
|
| $ | (6,527 | ) |
| $ | 1,905 |
|
| $ | 4,360 |
|
| $ | (2,455 | ) |
Credit-risk-related Contingent Features
The Company has agreements with certain of its derivative counterparties that contain a provision wherethat if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations.
As of December 31, 2017, the termination value of derivatives in a net liability position, which includes accrued interest, related to these agreements was $7.4 million. The Company has minimum collateral posting thresholds with certain of its derivative counterparties. As of December 31, 20172022, the Company had not posted $1.6 million of collateral.any collateral as there were no derivatives in a net liability position. If the Company had breached any of these provisions at December 31, 2017,2022, it could have been required to settle its obligations under the agreements at the termination value.
18. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2017,2022 and 2021 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value.
Fair values determined by Level 1 inputs utilize quoted prices in active markets for identical assets and liabilities that the Company has the ability to access. Fair values determined by Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the hierarchy. In such cases, the fair value is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
Assets and liabilities measured at fair value on a recurring basis as of December 31, 20172022 and 2016 (in2021(in thousands):
|
| Fair Value Measurement at Reporting Date Using |
|
| Fair Value Measurement at December 31, 2022 Using |
| ||||||||||||||||||||||||||
Description |
| December 31, 2017 |
|
| Quoted Prices in Active Markets for Identical Assets (Level 1) |
|
| Significant Other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| December 31, 2022 |
|
| Quoted Prices in Active Markets for Identical Assets (Level 1) |
|
| Significant Other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
| ||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
| $ | 18 |
|
| $ | 18 |
|
| $ | — |
|
| $ | — |
|
| $ | 580 |
|
| $ | 580 |
|
| $ | — |
|
| $ | — |
|
U.S. Agencies |
|
| 9,976 |
|
|
| — |
|
|
| 9,976 |
|
|
| — |
|
|
| 7,558 |
|
|
| — |
|
|
| 7,558 |
|
|
| — |
|
Mortgage-backed |
|
| 1,949 |
|
|
| — |
|
|
| 1,949 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
State and political subdivisions |
|
| 27,114 |
|
|
| — |
|
|
| 27,114 |
|
|
| — |
|
|
| 8,038 |
|
|
| — |
|
|
| 8,038 |
|
|
| — |
|
Corporates |
|
| 1,885 |
|
|
| 1,885 |
|
|
| — |
|
|
|
|
|
|
| 1,024 |
|
|
| 1,024 |
|
|
| — |
|
|
| — |
|
Trading - other |
|
| 13,113 |
|
|
| 12,434 |
|
|
| 679 |
|
|
| — |
| ||||||||||||||||
Trading – other |
|
| 780 |
|
|
| 780 |
|
|
| — |
|
|
| — |
| ||||||||||||||||
Trading securities |
|
| 54,055 |
|
|
| 14,337 |
|
|
| 39,718 |
|
|
| — |
|
|
| 17,980 |
|
|
| 2,384 |
|
|
| 15,596 |
|
|
| — |
|
U.S. Treasury |
|
| 38,643 |
|
|
| 38,643 |
|
|
| — |
|
|
| — |
|
|
| 777,070 |
|
|
| 777,070 |
|
|
| — |
|
|
| — |
|
U.S. Agencies |
|
| 14,752 |
|
|
| — |
|
|
| 14,752 |
|
|
| — |
|
|
| 171,296 |
|
|
| — |
|
|
| 171,296 |
|
|
| — |
|
Mortgage-backed |
|
| 3,649,243 |
|
|
| — |
|
|
| 3,649,243 |
|
|
| — |
|
|
| 3,982,122 |
|
|
| — |
|
|
| 3,982,122 |
|
|
| — |
|
State and political subdivisions |
|
| 2,542,673 |
|
|
| — |
|
|
| 2,542,673 |
|
|
| — |
|
|
| 1,362,407 |
|
|
| — |
|
|
| 1,362,407 |
|
|
| — |
|
Corporates |
|
| 13,266 |
|
|
| 13,266 |
|
|
| — |
|
|
| — |
|
|
| 367,500 |
|
|
| 367,500 |
|
|
| — |
|
|
| — |
|
Available for sale securities |
|
| 6,258,577 |
|
|
| 51,909 |
|
|
| 6,206,668 |
|
|
| — |
| ||||||||||||||||
Collateralized loan obligations |
|
| 345,952 |
|
|
| — |
|
|
| 345,952 |
|
|
| — |
| ||||||||||||||||
Securities available for sale |
|
| 7,006,347 |
|
|
| 1,144,570 |
|
|
| 5,861,777 |
|
|
| — |
| ||||||||||||||||
Equity securities with readily determinable fair values |
|
| 10,782 |
|
|
| 10,782 |
|
|
| — |
|
|
| — |
| ||||||||||||||||
Company-owned life insurance |
|
| 53,577 |
|
|
| — |
|
|
| 53,577 |
|
|
| — |
|
|
| 56,769 |
|
|
| — |
|
|
| 56,769 |
|
|
| — |
|
Bank-owned life insurance |
|
| 265,823 |
|
|
| — |
|
|
| 265,823 |
|
|
| — |
|
|
| 510,293 |
|
|
| — |
|
|
| 510,293 |
|
|
| — |
|
Derivatives |
|
| 10,149 |
|
|
| — |
|
|
| 10,149 |
|
|
| — |
|
|
| 48,121 |
|
|
| — |
|
|
| 48,121 |
|
|
| — |
|
Total |
| $ | 6,642,181 |
|
| $ | 66,246 |
|
| $ | 6,575,935 |
|
| $ | — |
|
| $ | 7,650,292 |
|
| $ | 1,157,736 |
|
| $ | 6,492,556 |
|
| $ | — |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation |
| $ | 50,963 |
|
| $ | 50,963 |
|
| $ | — |
|
| $ | — |
| ||||||||||||||||
Derivatives |
|
| 8,906 |
|
|
| — |
|
|
| 8,906 |
|
|
| — |
|
| $ | 126,334 |
|
| $ | — |
|
| $ | 126,334 |
|
| $ | — |
|
Securities sold not yet purchased |
|
| 4,130 |
|
|
| — |
|
|
| 4,130 |
|
|
| — |
|
|
| 3,503 |
|
|
| — |
|
|
| 3,503 |
|
|
| — |
|
Total |
| $ | 63,999 |
|
| $ | 50,963 |
|
| $ | 13,036 |
|
| $ | — |
|
| $ | 129,837 |
|
| $ | — |
|
| $ | 129,837 |
|
| $ | — |
|
|
| Fair Value Measurement at December 31, 2021 Using |
| |||||||||||||
Description |
| December 31, 2021 |
|
| Quoted Prices in Active Markets for Identical Assets (Level 1) |
|
| Significant Other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
| $ | 1,625 |
|
| $ | 1,625 |
|
| $ | — |
|
| $ | — |
|
U.S. Agencies |
|
| 2,159 |
|
|
| — |
|
|
| 2,159 |
|
|
| — |
|
Mortgage-backed |
|
| 2,060 |
|
|
| — |
|
|
| 2,060 |
|
|
| — |
|
State and political subdivisions |
|
| 21,671 |
|
|
| — |
|
|
| 21,671 |
|
|
| — |
|
Corporates |
|
| 4,000 |
|
|
| 4,000 |
|
|
| — |
|
|
| — |
|
Trading – other |
|
| 360 |
|
|
| 360 |
|
|
| — |
|
|
| — |
|
Trading securities |
|
| 31,875 |
|
|
| 5,985 |
|
|
| 25,890 |
|
|
| — |
|
U.S. Treasury |
|
| 69,174 |
|
|
| 69,174 |
|
|
| — |
|
|
| — |
|
U.S. Agencies |
|
| 124,932 |
|
|
| — |
|
|
| 124,932 |
|
|
| — |
|
Mortgage-backed |
|
| 7,965,055 |
|
|
| — |
|
|
| 7,965,055 |
|
|
| — |
|
State and political subdivisions |
|
| 3,422,688 |
|
|
| — |
|
|
| 3,422,688 |
|
|
| — |
|
Corporates |
|
| 317,846 |
|
|
| 317,846 |
|
|
| — |
|
|
| — |
|
Collateralized loan obligations |
|
| 76,819 |
|
|
| — |
|
|
| 76,819 |
|
|
| — |
|
Securities available for sale |
|
| 11,976,514 |
|
|
| 387,020 |
|
|
| 11,589,494 |
|
|
| — |
|
Equity securities with readily determinable fair values |
|
| 64,149 |
|
|
| 64,149 |
|
|
| — |
|
|
| — |
|
Company-owned life insurance |
|
| 65,245 |
|
|
| — |
|
|
| 65,245 |
|
|
| — |
|
Bank-owned life insurance |
|
| 498,373 |
|
|
| — |
|
|
| 498,373 |
|
|
| — |
|
Derivatives |
|
| 57,680 |
|
|
| — |
|
|
| 57,680 |
|
|
| — |
|
Total |
| $ | 12,693,836 |
|
| $ | 457,154 |
|
| $ | 12,236,682 |
|
| $ | — |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives |
| $ | 13,944 |
|
| $ | — |
|
| $ | 13,944 |
|
| $ | — |
|
Securities sold not yet purchased |
|
| 3,197 |
|
|
| — |
|
|
| 3,197 |
|
|
| — |
|
Total |
| $ | 17,141 |
|
| $ | — |
|
| $ | 17,141 |
|
| $ | — |
|
| Fair Value Measurement at Reporting Date Using |
| ||||||||||||||
Description |
| December 31, 2016 |
|
| Quoted Prices in Active Markets for Identical Assets (Level 1) |
|
| Significant Other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
U.S. Agencies |
|
| 1,306 |
|
|
| — |
|
|
| 1,306 |
|
|
| — |
|
Mortgage-backed |
|
| 313 |
|
|
| — |
|
|
| 313 |
|
|
| — |
|
State and political subdivisions |
|
| 9,295 |
|
|
| — |
|
|
| 9,295 |
|
|
| — |
|
Trading - other |
|
| 28,622 |
|
|
| 28,495 |
|
|
| 127 |
|
|
| — |
|
Trading securities |
|
| 39,536 |
|
|
| 28,495 |
|
|
| 11,041 |
|
|
| — |
|
U.S. Treasury |
|
| 93,826 |
|
|
| 93,826 |
|
|
| — |
|
|
| — |
|
U.S. Agencies |
|
| 198,177 |
|
|
| — |
|
|
| 198,177 |
|
|
| — |
|
Mortgage-backed |
|
| 3,711,699 |
|
|
| — |
|
|
| 3,711,699 |
|
|
| — |
|
State and political subdivisions |
|
| 2,395,757 |
|
|
| — |
|
|
| 2,395,757 |
|
|
| — |
|
Corporates |
|
| 66,875 |
|
|
| 66,875 |
|
|
| — |
|
|
| — |
|
Available for sale securities |
|
| 6,466,334 |
|
|
| 160,701 |
|
|
| 6,305,633 |
|
|
| — |
|
Company-owned life insurance |
|
| 41,333 |
|
|
| — |
|
|
| 41,333 |
|
|
| — |
|
Bank-owned life insurance |
|
| 209,686 |
|
|
| — |
|
|
| 209,686 |
|
|
|
|
|
Derivatives |
|
| 10,873 |
|
|
| — |
|
|
| 10,873 |
|
|
| — |
|
Total |
| $ | 6,767,762 |
|
| $ | 189,196 |
|
| $ | 6,578,566 |
|
| $ | — |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation |
| $ | 42,797 |
|
| $ | 42,797 |
|
| $ | — |
|
| $ | — |
|
Derivatives |
|
| 11,329 |
|
|
| — |
|
|
| 11,329 |
|
|
| — |
|
Total |
| $ | 54,126 |
|
| $ | 42,797 |
|
| $ | 11,329 |
|
| $ | — |
|
Valuation methods for instruments measured at fair value on a recurring basis
The following methods and assumptions were used to estimate the fair value of each class of financial instruments measured on a recurring basis:
Trading Securities Fair values for trading securities (including financial futures), are based on quoted market prices where available. If quoted market prices are not available, fair value is estimated usingvalues are based on quoted market prices for similar securities.
Securities Available for Sale Fair values are based on quoted market prices or dealer quotes, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. Prices are provided by third-party pricing services and are based on observable market inputs. On an annual basis, the Company compares a sample of these prices to other independent sources for the same securities. Additionally, throughout the year, if securities are sold, comparisons are made between the pricing services prices and the market prices at which the securities were sold. Variances are analyzed, and, if appropriate, additional research is conducted with the third-party pricing services. Based on this research, the pricing services may affirm or revise their quoted price. No significant adjustments have been made to the prices provided by the pricing services. The pricing services also provide documentation on an ongoing basis that includes reference data, inputs and methodology by asset class, which is reviewed to ensure that security placement within the fair value hierarchy is appropriate.
Equity securities with readily determinable fair values Fair values are based on quoted market prices.
Company-owned Life Insurance Fair value is equal to the cash surrender value of the life insurance policies.
Bank-owned Life Insurance Fair value is equal to the cash surrender value of the life insurance policies.
Derivatives Fair values are determined using valuation techniques including discounted cash flow analysis on the expected cash flows offrom each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, foreign exchange rates, and implied volatilities. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements.
In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.
Deferred Compensation Fair values are based on quoted market prices or dealer quotes.
Securities sold not yet purchased Fair values are based on quoted market prices or dealer quotes, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. Prices are provided by third-party pricing services and are based on observable market inputs.
Assets measured at fair value on a non-recurring basis as of December 31, 20172022 and 2016 (in2021(in thousands):
|
|
|
|
|
| Fair Value Measurement at December 31, 2017 Using |
|
|
|
|
|
| Fair Value Measurement at December 31, 2022 Using |
| ||||||||||||||||||||||||||
Description |
| December 31, 2017 |
|
| Quoted Prices in Active Markets for Identical Assets (Level 1) |
|
| Significant Other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| Total Gains Recognized During the Twelve Months Ended December 31 |
|
| December 31, 2022 |
|
| Quoted Prices in Active Markets for Identical Assets (Level 1) |
|
| Significant Other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| Total Losses Recognized During the Twelve Months Ended December 31 |
| ||||||||||
Impaired loans |
| $ | 15,186 |
|
| $ | — |
|
| $ | — |
|
| $ | 15,186 |
|
| $ | 1,251 |
| ||||||||||||||||||||
Collateral dependent assets |
| $ | 4,373 |
|
| $ | — |
|
| $ | — |
|
| $ | 4,373 |
|
| $ | (2,998 | ) | ||||||||||||||||||||
Other real estate owned |
|
| 1,488 |
|
|
| — |
|
|
| — |
|
|
| 1,488 |
|
|
| 13 |
|
|
| 68 |
|
|
| — |
|
|
| — |
|
|
| 68 |
|
|
| — |
|
Total |
| $ | 16,674 |
|
| $ | — |
|
| $ | — |
|
| $ | 16,674 |
|
| $ | 1,264 |
|
| $ | 4,441 |
|
| $ | — |
|
| $ | — |
|
| $ | 4,441 |
|
| $ | (2,998 | ) |
|
|
|
|
|
| Fair Value Measurement at December 31, 2016 Using |
|
|
|
|
|
| Fair Value Measurement at December 31, 2021 Using |
| ||||||||||||||||||||||||||
Description |
| December 31, 2016 |
|
| Quoted Prices in Active Markets for Identical Assets (Level 1) |
|
| Significant Other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| Total (Losses) Recognized During the Twelve Months Ended December 31 |
|
| December 31, 2021 |
|
| Quoted Prices in Active Markets for Identical Assets (Level 1) |
|
| Significant Other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| Total Gains Recognized During the Twelve Months Ended December 31 |
| ||||||||||
Impaired loans |
| $ | 23,757 |
|
| $ | — |
|
| $ | — |
|
| $ | 23,757 |
|
| $ | (2,070 | ) | ||||||||||||||||||||
Collateral dependent assets |
| $ | 46,979 |
|
| $ | — |
|
| $ | — |
|
| $ | 46,979 |
|
| $ | 1,521 |
| ||||||||||||||||||||
Other real estate owned |
|
| 89 |
|
|
| — |
|
|
| — |
|
|
| 89 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total |
| $ | 23,846 |
|
| $ | — |
|
| $ | — |
|
| $ | 23,846 |
|
| $ | (2,070 | ) |
| $ | 46,979 |
|
| $ | — |
|
| $ | — |
|
| $ | 46,979 |
|
| $ | 1,521 |
|
Valuation methods for instruments measured at fair value on a nonrecurringnon-recurring basis
The following methods and assumptions were used to estimate the fair value of each class of financial instruments measured on a non-recurring basis:
Impaired loans WhileCollateral Dependent Assets Collateral dependent assets are assets evaluated as part of the overall loan portfolioACL on an individual basis. Those assets for which there is not carriedan associated allowance are considered financial assets measured at fair value adjustmentson a non-recurring basis. Adjustments are recorded on certain loansassets to reflect write-downs that are based on the external appraisalappraised value of the underlying collateral. The external appraisals are generally based on recent sales of comparable properties which are then adjusted for the unique characteristics of the property being valued. In the case of non-real estate collateral, reliance is placed on a variety of sources, including external estimates of value and judgments based on the experience and expertise of internal specialists within the Company’s property management group and the Company’s credit department. The valuation of thecollateral dependent assets and impaired loans isare reviewed on a quarterly basis. Because many of these inputs are not observable, the measurements are classified as Level 3.
Other real estate owned Other real estate owned consists of loan collateral which has been repossessed through foreclosure. This collateral is comprised of commercial and residential real estate and other non-real estate property, including auto, recreational and marine vehicles. Other real estate owned is recorded as held for sale initially at the lower of the loan balance or fair value of the collateral.collateral less estimated selling costs. The initial valuation of the foreclosed property
is obtained through an appraisal process similar to the process described in the collateral dependent/impaired loans paragraph above. Subsequent to foreclosure, valuations are reviewed quarterly and updated periodically, and the assets may be marked down further, reflecting a new cost basis. Fair value measurements may be based upon appraisals, third-party price opinions, or internally developed pricing methods and those measurements are classified as Level 3.
Goodwill Valuation of goodwill to determine impairment is performed annually, or more frequently if there is an event or circumstance that would indicate impairment may have occurred. The process involves calculations to
determine the fair value of each reporting unit on a stand-alone basis. A combination of formulas using current market multiples, based on recent sales of financial institutions within the Company’s geographic marketplace, is used to estimate the fair value of each reporting unit. That fair value is compared to the carrying amount of the reporting unit, including its recorded goodwill. Impairment is considered to have occurred if the fair value of the reporting unit is lower than the carrying amount of the reporting unit. The fair value of the Company’s common stock relative to its computed book value per share is also considered as part of the overall evaluation. These measurements are classified as Level 3.
Fair value disclosures require disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis.
The estimated fair value of the Company’s financial instruments at December 31, 20172022 and 20162021 are as follows (in thousands):
|
| Fair Value Measurement at December 31, 2017 Using |
|
| Fair Value Measurement at December 31, 2022 Using |
| ||||||||||||||||||||||||||||||||||
|
| Carrying Amount |
|
| Quoted Prices in Active Markets for Identical Assets (Level 1) |
|
| Significant Other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| Total Estimated Fair Value |
|
| Carrying Amount |
|
| Quoted Prices in Active Markets for Identical Assets (Level 1) |
|
| Significant Other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| Total Estimated Fair Value |
| ||||||||||
FINANCIAL ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and short-term investments |
| $ | 1,936,084 |
|
| $ | 1,749,618 |
|
| $ | 186,466 |
|
| $ | — |
|
| $ | 1,936,084 |
|
| $ | 2,638,384 |
|
| $ | 1,686,787 |
|
| $ | 951,597 |
|
| $ | — |
|
| $ | 2,638,384 |
|
Securities available for sale |
|
| 6,258,577 |
|
|
| 51,909 |
|
|
| 6,206,668 |
|
|
| — |
|
|
| 6,258,577 |
|
|
| 7,006,347 |
|
|
| 1,144,570 |
|
|
| 5,861,777 |
|
|
| — |
|
|
| 7,006,347 |
|
Securities held to maturity |
|
| 1,261,014 |
|
|
| — |
|
|
| 1,207,447 |
|
|
| — |
|
|
| 1,207,447 |
| ||||||||||||||||||||
Securities held to maturity (exclusive of allowance for credit losses) |
|
| 5,861,599 |
|
|
| — |
|
|
| 5,280,659 |
|
|
| — |
|
|
| 5,280,659 |
| ||||||||||||||||||||
Trading securities |
|
| 54,055 |
|
|
| 14,337 |
|
|
| 39,718 |
|
|
| — |
|
|
| 54,055 |
|
|
| 17,980 |
|
|
| 2,384 |
|
|
| 15,596 |
|
|
| — |
|
|
| 17,980 |
|
Other securities |
|
| 65,897 |
|
|
| — |
|
|
| 65,897 |
|
|
| — |
|
|
| 65,897 |
|
|
| 349,758 |
|
|
| 10,782 |
|
|
| 338,976 |
|
|
| — |
|
|
| 349,758 |
|
Loans (exclusive of allowance for loan loss) |
|
| 11,281,973 |
|
|
| — |
|
|
| 11,318,764 |
|
|
| — |
|
|
| 11,318,764 |
| ||||||||||||||||||||
Loans (exclusive of allowance for credit losses) |
|
| 21,033,167 |
|
|
| — |
|
|
| 20,816,899 |
|
|
| — |
|
|
| 20,816,899 |
| ||||||||||||||||||||
Derivatives |
|
| 10,149 |
|
|
| — |
|
|
| 10,149 |
|
|
| — |
|
|
| 10,149 |
|
|
| 48,121 |
|
|
| — |
|
|
| 48,121 |
|
|
| — |
|
|
| 48,121 |
|
FINANCIAL LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand and savings deposits |
|
| 16,742,736 |
|
|
| 16,742,736 |
|
|
| — |
|
|
| — |
|
|
| 16,742,736 |
|
|
| 31,721,995 |
|
|
| 31,721,995 |
|
|
| — |
|
|
| — |
|
|
| 31,721,995 |
|
Time deposits |
|
| 1,280,264 |
|
|
| — |
|
|
| 1,280,264 |
|
|
| — |
|
|
| 1,280,264 |
|
|
| 917,138 |
|
|
| — |
|
|
| 917,138 |
|
|
| — |
|
|
| 917,138 |
|
Other borrowings |
|
| 1,260,704 |
|
|
| 11,334 |
|
|
| 1,249,370 |
|
|
| — |
|
|
| 1,260,704 |
|
|
| 2,222,167 |
|
|
| 62,480 |
|
|
| 2,159,687 |
|
|
| — |
|
|
| 2,222,167 |
|
Long-term debt |
|
| 79,281 |
|
|
| — |
|
|
| 79,496 |
|
|
| — |
|
|
| 79,496 |
|
|
| 381,311 |
|
|
| — |
|
|
| 418,737 |
|
|
| — |
|
|
| 418,737 |
|
Derivatives |
|
| 8,906 |
|
|
| — |
|
|
| 8,906 |
|
|
| — |
|
|
| 8,906 |
|
|
| 126,334 |
|
|
| — |
|
|
| 126,334 |
|
|
| — |
|
|
| 126,334 |
|
OFF-BALANCE SHEET ARRANGEMENTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to extend credit for loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 6,654 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 9,260 |
|
Commercial letters of credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 136 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 185 |
|
Standby letters of credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2,514 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3,982 |
|
|
| Fair Value Measurement at December 31, 2016 Using |
|
| Fair Value Measurement at December 31, 2021 Using |
| ||||||||||||||||||||||||||||||||||
|
| Carrying Amount |
|
| Quoted Prices in Active Markets for Identical Assets (Level 1) |
|
| Significant Other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| Total Estimated Fair Value |
|
| Carrying Amount |
|
| Quoted Prices in Active Markets for Identical Assets (Level 1) |
|
| Significant Other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| Total Estimated Fair Value |
| ||||||||||
FINANCIAL ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and short-term investments |
| $ | 1,462,267 |
|
| $ | 1,138,850 |
|
| $ | 323,417 |
|
| $ | — |
|
| $ | 1,462,267 |
|
| $ | 10,472,084 |
|
| $ | 9,255,727 |
|
| $ | 1,216,357 |
|
| $ | — |
|
| $ | 10,472,084 |
|
Securities available for sale |
|
| 6,466,334 |
|
|
| 160,701 |
|
|
| 6,305,633 |
|
|
| — |
|
|
| 6,466,334 |
|
|
| 11,976,514 |
|
|
| 387,020 |
|
|
| 11,589,494 |
|
|
| — |
|
|
| 11,976,514 |
|
Securities held to maturity |
|
| 1,115,932 |
|
|
| — |
|
|
| 1,106,068 |
|
|
| — |
|
|
| 1,106,068 |
| ||||||||||||||||||||
Securities held to maturity (exclusive of allowance for credit losses) |
|
| 1,480,416 |
|
|
| — |
|
|
| 1,442,391 |
|
|
| — |
|
|
| 1,442,391 |
| ||||||||||||||||||||
Trading securities |
|
| 39,536 |
|
|
| 28,495 |
|
|
| 11,041 |
|
|
| — |
|
|
| 39,536 |
|
|
| 31,875 |
|
|
| 5,985 |
|
|
| 25,890 |
|
|
| — |
|
|
| 31,875 |
|
Other securities |
|
| 68,306 |
|
|
| — |
|
|
| 68,306 |
|
|
| — |
|
|
| 68,306 |
|
|
| 327,098 |
|
|
| 64,149 |
|
|
| 262,949 |
|
|
| — |
|
|
| 327,098 |
|
Loans (exclusive of allowance for loan loss) |
|
| 10,545,662 |
|
|
| — |
|
|
| 10,572,292 |
|
|
| — |
|
|
| 10,572,292 |
| ||||||||||||||||||||
Loans (exclusive of allowance for credit losses) |
|
| 17,172,148 |
|
|
| — |
|
|
| 17,506,662 |
|
|
| — |
|
|
| 17,506,662 |
| ||||||||||||||||||||
Derivatives |
|
| 10,873 |
|
|
| — |
|
|
| 10,873 |
|
|
| — |
|
|
| 10,873 |
|
|
| 57,680 |
|
|
| — |
|
|
| 57,680 |
|
|
| — |
|
|
| 57,680 |
|
FINANCIAL LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand and savings deposits |
|
| 15,434,893 |
|
|
| 15,434,893 |
|
|
| — |
|
|
| — |
|
|
| 15,434,893 |
|
|
| 34,748,286 |
|
|
| 34,748,286 |
|
|
| — |
|
|
| — |
|
|
| 34,748,286 |
|
Time deposits |
|
| 1,135,721 |
|
|
| — |
|
|
| 1,135,721 |
|
|
| — |
|
|
| 1,135,721 |
|
|
| 851,641 |
|
|
| — |
|
|
| 851,641 |
|
|
| — |
|
|
| 851,641 |
|
Other borrowings |
|
| 1,856,937 |
|
|
| 419,843 |
|
|
| 1,437,094 |
|
|
| — |
|
|
| 1,856,937 |
|
|
| 3,238,435 |
|
|
| 12,597 |
|
|
| 3,225,838 |
|
|
| — |
|
|
| 3,238,435 |
|
Long-term debt |
|
| 76,772 |
|
|
| — |
|
|
| 77,025 |
|
|
| — |
|
|
| 77,025 |
|
|
| 271,544 |
|
|
| — |
|
|
| 285,961 |
|
|
| — |
|
|
| 285,961 |
|
Derivatives |
|
| 11,329 |
|
|
| — |
|
|
| 11,329 |
|
|
| — |
|
|
| 11,329 |
|
|
| 13,944 |
|
|
| — |
|
|
| 13,944 |
|
|
| — |
|
|
| 13,944 |
|
OFF-BALANCE SHEET ARRANGEMENTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to extend credit for loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 5,604 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 7,841 |
|
Commercial letters of credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 179 |
|
Standby letters of credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2,527 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3,553 |
|
Cash and short-term investments The carrying amounts of cash and due from banks, federal funds sold and resell agreements are reasonable estimates of their fair values.
Securities held to maturity FairFor U.S. Agency and mortgage-backed securities, as well as general obligation bonds in the State and political subdivision portfolio, fair values are based on quoted market prices or dealer quotes, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. Prices are provided by third-party pricing services and are based on observable market inputs. On an annual basis, the Company compares a sample of held-to-maturity securitiesthese prices to other independent sources for the same securities. Variances are analyzed, and, if appropriate, additional research is conducted with the third-party pricing services. Based on this research, the pricing services may affirm or revise their quoted price. No significant adjustments have been made to the prices provided by the pricing services. The pricing services also provide documentation on an ongoing basis that includes reference data, inputs and methodology by asset class, which is reviewed to ensure that security placement within the fair value hierarchy is appropriate. For private placement bonds in the State and political subdivision portfolio, fair values are estimated by discounting the future cash flows using current market rates.
Other securities Amount consists of FRB and FHLB stock held by the Company, PCMequity securities with readily determinable fair values, and equity securities without readily determinable fair values, including equity-method investments and other miscellaneous investments. The fair valuecarrying amount of the FRB and FHLB stock is considered to beequals its fair value because the carrying value as no readily determinable market exists for these investments because theyshares can only be redeemed withby the FRB or FHLB. Theand FHLB at their carrying amount. Equity securities with readily determinable fair values are measured at fair value of PCM marketable equity-method investments are based onusing quoted market prices used to estimate the value of the underlying investment. For non-marketable equity-method investments, the Company’s proportionate share of the income or loss is recognized on a one-quarter lag based on the valuation of the underlying investments.prices. Equity securities without readily determinable fair values are carried at cost, which approximates fair value.
Loans Fair values are estimated for portfolios with similar financial characteristics. Loans are segregated by type, such as commercial, real estate, consumer, and credit card. Each loan category is further segmented into fixed and variable interest rate categories. The fair value of loans are based on quoted market prices for similar instruments oris estimated usingby discounting the future cash flow analysis.flows. The discount rates used are estimated using comparable market rates for similar types of instruments adjusted to be commensurate with the credit risk, overhead costs, and optionality of such instruments.
Demand and savings deposits The fair value of demand deposits and savings accounts iswas the amount payable on demand at December 31, 20172022 and 2016. 2021.
Time deposits The fair value of fixed-maturity certificates of deposit is estimated by discounting the future cash flows using the rates that are currently offered for deposits of similar remaining maturities.
Other borrowings The carrying amounts of federal funds purchased, repurchase agreements and other short-term debt are reasonable estimates of their fair value because of the short-term nature of their maturities.Federal funds purchased are classified as Level 1 based on availability of quoted market prices and repurchase agreements and other short-term debt are classified as Level 2.
Long-term debt Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate fair value of existing debt.
Other off-balance sheet instruments The fair value of loan commitments and letters of credit are determined based on the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreement and the present creditworthiness of the counterparties. Neither the fees earned during the year on these instruments nor their fair value at year-endperiod-end are significant to the Company’s consolidated financial position.
19. PARENT COMPANY FINANCIAL INFORMATION
UMB FINANCIAL CORPORATION
BALANCE SHEETS (in thousands)
|
| December 31, |
|
| December 31, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2022 |
|
| 2021 |
| ||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in subsidiaries: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks |
| $ | 1,815,953 |
|
| $ | 1,662,326 |
|
| $ | 2,685,783 |
|
| $ | 2,970,227 |
|
Non-banks |
|
| 149,145 |
|
|
| 214,633 |
|
|
| 178,973 |
|
|
| 169,123 |
|
Total investment in subsidiaries |
|
| 1,965,098 |
|
|
| 1,876,959 |
|
|
| 2,864,756 |
|
|
| 3,139,350 |
|
Goodwill on purchased affiliates |
|
| 5,011 |
|
|
| 5,011 |
|
|
| 5,011 |
|
|
| 5,011 |
|
Cash |
|
| 260,621 |
|
|
| 65,254 |
|
|
| 139,058 |
|
|
| 185,372 |
|
Securities available for sale and other |
|
| 68,550 |
|
|
| 90,759 |
| ||||||||
Investment securities and other |
|
| 106,294 |
|
|
| 155,196 |
| ||||||||
Total assets |
| $ | 2,299,280 |
|
| $ | 2,037,983 |
|
| $ | 3,115,119 |
|
| $ | 3,484,929 |
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
| $ | 68,285 |
|
| $ | 67,256 |
|
| $ | 381,311 |
|
| $ | 271,544 |
|
Accrued expenses and other |
|
| 49,464 |
|
|
| 8,343 |
|
|
| 66,715 |
|
|
| 67,961 |
|
Total liabilities |
|
| 117,749 |
|
|
| 75,599 |
|
|
| 448,026 |
|
|
| 339,505 |
|
Shareholders' equity |
|
| 2,181,531 |
|
|
| 1,962,384 |
|
|
| 2,667,093 |
|
|
| 3,145,424 |
|
Total liabilities and shareholders' equity |
| $ | 2,299,280 |
|
| $ | 2,037,983 |
|
| $ | 3,115,119 |
|
| $ | 3,484,929 |
|
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (in thousands)
|
| Year Ended December 31, |
|
| Year Ended December 31, |
| ||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2015 |
|
| 2022 |
|
| 2021 |
|
| 2020 |
| ||||||
INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends and income received from subsidiaries |
| $ | 55,000 |
|
| $ | 47,000 |
|
| $ | 27,913 |
|
| $ | 57,000 |
|
| $ | 129,217 |
|
| $ | 78,360 |
|
Service fees from subsidiaries |
|
| 43,691 |
|
|
| 40,579 |
|
|
| 42,212 |
|
|
| 74,472 |
|
|
| 60,346 |
|
|
| 49,191 |
|
Other |
|
| 10,390 |
|
|
| 4,207 |
|
|
| 891 |
|
|
| 55,988 |
|
|
| 12,771 |
|
|
| 9,241 |
|
Total income |
|
| 109,081 |
|
|
| 91,786 |
|
|
| 71,016 |
|
|
| 187,460 |
|
|
| 202,334 |
|
|
| 136,792 |
|
EXPENSE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
| 43,716 |
|
|
| 38,198 |
|
|
| 41,019 |
|
|
| 60,094 |
|
|
| 62,109 |
|
|
| 56,919 |
|
Other |
|
| 18,652 |
|
|
| 20,436 |
|
|
| 22,051 |
|
|
| 35,943 |
|
|
| 31,022 |
|
|
| 22,657 |
|
Total expense |
|
| 62,368 |
|
|
| 58,634 |
|
|
| 63,070 |
|
|
| 96,037 |
|
|
| 93,131 |
|
|
| 79,576 |
|
Income before income taxes and equity in undistributed earnings of subsidiaries |
|
| 46,713 |
|
|
| 33,152 |
|
|
| 7,946 |
|
|
| 91,423 |
|
|
| 109,203 |
|
|
| 57,216 |
|
Income tax benefit |
|
| (1,202 | ) |
|
| (3,903 | ) |
|
| (4,703 | ) | ||||||||||||
Income tax expense (benefit) |
|
| 10,958 |
|
|
| (10,322 | ) |
|
| (6,230 | ) | ||||||||||||
Income before equity in undistributed earnings of subsidiaries |
|
| 47,915 |
|
|
| 37,055 |
|
|
| 12,649 |
|
|
| 80,465 |
|
|
| 119,525 |
|
|
| 63,446 |
|
Equity in undistributed earnings of subsidiaries: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks |
|
| 140,873 |
|
|
| 119,551 |
|
|
| 95,942 |
|
|
| 344,567 |
|
|
| 263,084 |
|
|
| 234,014 |
|
Non-Banks |
|
| (5,812 | ) |
|
| (2,972 | ) |
|
| (12,033 | ) |
|
| 6,650 |
|
|
| (29,591 | ) |
|
| (10,958 | ) |
Income from continuing operations |
|
| 182,976 |
|
|
| 153,634 |
|
|
| 96,558 |
| ||||||||||||
Income from discontinued operations |
|
| 64,129 |
|
|
| 5,167 |
|
|
| 19,515 |
| ||||||||||||
Net income |
| $ | 247,105 |
|
| $ | 158,801 |
|
| $ | 116,073 |
|
| $ | 431,682 |
|
| $ | 353,018 |
|
| $ | 286,502 |
|
Other comprehensive income (loss) |
|
| 12,017 |
|
|
| (53,824 | ) |
|
| (14,724 | ) | ||||||||||||
Comprehensive income |
| $ | 259,122 |
|
| $ | 104,977 |
|
| $ | 101,349 |
| ||||||||||||
Other comprehensive (loss) income |
|
| (829,049 | ) |
|
| (192,026 | ) |
|
| 235,160 |
| ||||||||||||
Comprehensive (loss) income |
| $ | (397,367 | ) |
| $ | 160,992 |
|
| $ | 521,662 |
|
STATEMENTS OF CASH FLOWS (in thousands)
|
| Year Ended December 31, |
|
| Year Ended December 31, |
| ||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2015 |
|
| 2022 |
|
| 2021 |
|
| 2020 |
| ||||||
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
| 247,105 |
|
| $ | 158,801 |
|
| $ | 116,073 |
|
| $ | 431,682 |
|
| $ | 353,018 |
|
| $ | 286,502 |
|
Adjustments to reconcile net income to cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of subsidiaries |
|
| (146,367 | ) |
|
| (163,993 | ) |
|
| (128,601 | ) |
|
| (408,217 | ) |
|
| (362,709 | ) |
|
| (301,415 | ) |
Dividends received from subsidiaries |
|
| 96,391 |
|
|
| 54,000 |
|
|
| 27,913 |
|
|
| 57,000 |
|
|
| 129,217 |
|
|
| 78,360 |
|
Depreciation and amortization |
|
| 424 |
|
|
| 457 |
|
|
| 332 |
|
|
| 12 |
|
|
| 15 |
|
|
| 15 |
|
Amortization of debt issuance costs |
|
| 556 |
|
|
| 450 |
|
|
| 131 |
| ||||||||||||
Equity based compensation |
|
| 13,316 |
|
|
| 11,735 |
|
|
| 10,751 |
|
|
| 21,491 |
|
|
| 21,208 |
|
|
| 15,120 |
|
Net tax benefit related to equity compensation plans |
|
| 3,612 |
|
|
| 1,073 |
|
|
| 944 |
| ||||||||||||
Gains on sales of assets |
|
| (103,715 | ) |
|
| — |
|
|
| — |
| ||||||||||||
Changes in other assets and liabilities, net |
|
| 5,424 |
|
|
| (11,717 | ) |
|
| 220 |
|
|
| 12,522 |
|
|
| (4,049 | ) |
|
| (1,724 | ) |
Net cash provided by operating activities |
|
| 116,190 |
|
|
| 50,356 |
|
|
| 27,632 |
|
|
| 115,046 |
|
|
| 137,150 |
|
|
| 76,989 |
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net capital investment in subsidiaries |
|
| (37,474 | ) |
|
| (10,006 | ) |
|
| (16,513 | ) |
|
| (207,575 | ) |
|
| (60,264 | ) |
|
| (96,678 | ) |
Net cash activity from divestitures and acquisitions |
|
| 168,361 |
|
|
| — |
|
|
| 24,962 |
| ||||||||||||
Net (increase) decrease in securities available for sale |
|
| 1,575 |
|
|
| (1,034 | ) |
|
| 211 |
| ||||||||||||
Net cash (used in) provided by investing activities |
|
| 132,462 |
|
|
| (11,040 | ) |
|
| 8,660 |
| ||||||||||||
Net decrease (increase) in investment securities |
|
| 40,235 |
|
|
| (11,051 | ) |
|
| (29,648 | ) | ||||||||||||
Net cash used in investing activities |
|
| (167,340 | ) |
|
| (71,315 | ) |
|
| (126,326 | ) | ||||||||||||
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid |
|
| (51,876 | ) |
|
| (49,038 | ) |
|
| (45,967 | ) |
|
| (72,030 | ) |
|
| (66,750 | ) |
|
| (60,281 | ) |
Proceeds from short-term debt |
|
| — |
|
|
| — |
|
|
| 15,000 |
| ||||||||||||
Repayment of short-term debt |
|
| — |
|
|
| — |
|
|
| (15,000 | ) | ||||||||||||
Proceeds from long-term debt |
|
| 110,000 |
|
|
| — |
|
|
| 200,000 |
| ||||||||||||
Payment of debt issuance costs |
|
| (2,129 | ) |
|
| — |
|
|
| (2,250 | ) | ||||||||||||
Proceeds from exercise of stock options and sales of treasury stock |
|
| 13,867 |
|
|
| 16,911 |
|
|
| 11,606 |
|
|
| 2,136 |
|
|
| 19,048 |
|
|
| 5,186 |
|
Purchases of treasury stock |
|
| (15,276 | ) |
|
| (16,367 | ) |
|
| (8,457 | ) |
|
| (31,997 | ) |
|
| (5,506 | ) |
|
| (63,766 | ) |
Net cash used in financing activities |
|
| (53,285 | ) |
|
| (48,494 | ) |
|
| (42,818 | ) | ||||||||||||
Net decrease in cash |
|
| 195,367 |
|
|
| (9,178 | ) |
|
| (6,526 | ) | ||||||||||||
Net cash provided by (used in) in financing activities |
|
| 5,980 |
|
|
| (53,208 | ) |
|
| 78,889 |
| ||||||||||||
Net (decrease) increase in cash |
|
| (46,314 | ) |
|
| 12,627 |
|
|
| 29,552 |
| ||||||||||||
Cash and cash equivalents at beginning of period |
|
| 65,254 |
|
|
| 74,432 |
|
|
| 80,958 |
|
|
| 185,372 |
|
|
| 172,745 |
|
|
| 143,193 |
|
Cash and cash equivalents at end of period |
| $ | 260,621 |
|
| $ | 65,254 |
|
| $ | 74,432 |
|
| $ | 139,058 |
|
| $ | 185,372 |
|
| $ | 172,745 |
|
20. SUMMARY OF OPERATING RESULTS BY QUARTER (unaudited) (in thousands except per share data)
|
| Three Months Ended |
| |||||||||||||
2017 |
| March 31 |
|
| June 30 |
|
| Sept 30 |
|
| Dec 31 |
| ||||
Interest income |
| $ | 144,690 |
|
| $ | 151,211 |
|
| $ | 157,895 |
|
| $ | 163,116 |
|
Interest expense |
|
| 10,375 |
|
|
| 13,817 |
|
|
| 17,037 |
|
|
| 16,770 |
|
Net interest income |
|
| 134,315 |
|
|
| 137,394 |
|
|
| 140,858 |
|
|
| 146,346 |
|
Provision for loan losses |
|
| 9,000 |
|
|
| 14,500 |
|
|
| 11,500 |
|
|
| 6,000 |
|
Noninterest income |
|
| 102,917 |
|
|
| 110,306 |
|
|
| 104,306 |
|
|
| 106,033 |
|
Noninterest expense |
|
| 173,810 |
|
|
| 176,939 |
|
|
| 171,821 |
|
|
| 182,559 |
|
Income tax expense |
|
| 12,446 |
|
|
| 11,490 |
|
|
| 12,971 |
|
|
| 16,463 |
|
Net income from continuing operations |
| $ | 41,976 |
|
| $ | 44,771 |
|
| $ | 48,872 |
|
| $ | 47,357 |
|
| March 31 (1) |
|
| June 30 (1) |
|
| Sept 30 |
|
| Dec 31 |
| |||||
Interest income |
| $ | 124,086 |
|
| $ | 127,897 |
|
| $ | 132,038 |
|
| $ | 139,010 |
|
Interest expense |
|
| 6,194 |
|
|
| 6,687 |
|
|
| 7,273 |
|
|
| 7,554 |
|
Net interest income |
|
| 117,892 |
|
|
| 121,210 |
|
|
| 124,765 |
|
|
| 131,456 |
|
Provision for loan losses |
|
| 5,000 |
|
|
| 7,000 |
|
|
| 13,000 |
|
|
| 7,500 |
|
Noninterest income |
|
| 97,965 |
|
|
| 102,774 |
|
|
| 103,542 |
|
|
| 98,230 |
|
Noninterest expense |
|
| 165,268 |
|
|
| 168,419 |
|
|
| 165,211 |
|
|
| 167,847 |
|
Income tax expense |
|
| 11,240 |
|
|
| 12,102 |
|
|
| 10,674 |
|
|
| 10,939 |
|
Net income from continuing operations |
| $ | 34,349 |
|
| $ | 36,463 |
|
| $ | 39,422 |
|
| $ | 43,400 |
|
Per Share |
| Three Months Ended |
| |||||||||||||
2017 |
| March 31 |
|
| June 30 |
|
| Sept 30 |
|
| Dec 31 |
| ||||
Net income from continuing operations - basic |
| $ | 0.85 |
|
| $ | 0.91 |
|
| $ | 0.99 |
|
| $ | 0.96 |
|
Net income from continuing operations - diluted |
|
| 0.84 |
|
|
| 0.90 |
|
|
| 0.98 |
|
|
| 0.95 |
|
Dividend |
|
| 0.255 |
|
|
| 0.255 |
|
|
| 0.255 |
|
|
| 0.275 |
|
Book value |
|
| 40.34 |
|
|
| 41.42 |
|
|
| 42.15 |
|
|
| 43.72 |
|
Per Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 |
| March 31 (1) |
|
| June 30 (1) |
|
| Sept 30 |
|
| Dec 31 |
| ||||
Net income from continuing operations - basic |
| $ | 0.70 |
|
| $ | 0.75 |
|
| $ | 0.81 |
|
| $ | 0.89 |
|
Net income from continuing operations - diluted |
|
| 0.70 |
|
|
| 0.74 |
|
|
| 0.80 |
|
|
| 0.87 |
|
Dividend |
|
| 0.245 |
|
|
| 0.245 |
|
|
| 0.245 |
|
|
| 0.255 |
|
Book value |
|
| 39.38 |
|
|
| 40.44 |
|
|
| 40.86 |
|
|
| 39.51 |
|
|
|
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures At the end of the period covered by this Annual Report on Form 10-K, the Company’s Chief Executive Officer and Chief Financial Officer have each evaluated the effectiveness of the Company’s “Disclosure Controls and Procedures” (as defined in Rule 13a-15(e) of the Exchange Act) and have concluded that the Company’s Disclosure Controls and Procedures were effective as of the end of the period covered by this Annual Report on Form 10-K.
Management’s Report on Internal Control Over Financial Reporting Management of the Company is responsible for establishing and maintaining adequate “internal“internal control over financial reporting,” as such term is defined in Rule 13a-15(f) promulgated under the Exchange Act. Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer of the Company,and effected by the Board, management and other personnel, an evaluation of the effectiveness of internal control over financial reporting was conducted based on the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission's Internal Control - Integrated Framework (2013).
Because this assessment was conductedof its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Also, projections of any evaluation of effectiveness to meet the reporting requirements of Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA), it included controls over the preparation of the schedules equivalentfuture periods are subject to the basic financial statementsrisk that controls may become inadequate because of changes in accordanceconditions or that the degree of compliance with the instructions forpolicies or procedures may deteriorate. In addition, given the Consolidated Financial Statements for Bank Holding Companies (Form FR Y-9C).Company’s size, operations and footprint, lapses or deficiencies in internal controls may occur from time to time.
Based on thethe evaluation under the framework in Internal Control -Integrated Framework (2013), management (with the participation of the Company’s Chief Executive Officer and Chief Financial Officer have eachOfficer) under the oversight of the Board of Directors, has concluded that internal control over financial reporting was effective at the end of the period covered by this Annual ReportReport on Form 10-K. KPMG LLP, Kansas City, Missouri, (U.S. PCAOB Auditor Firm ID: 185), the independent registered public accounting firm that audited the financial statements included within this report, has issued an attestation report on the effectiveness of internal control over financial reporting at the end of the period covered by this report. KPMG LLP's LLP's attestation report is set forth below.
Changes in Internal Control Over Financial Reporting No change in the Company’s internal control over financial reporting occurred during the last quarter of the period covered by this Annual Report on Form 10-K that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over finanicalfinancial reporting.
REPORT OF INDEPENDENT REGISTEREDREGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors and Shareholders
UMB Financial Corporation:
Opinion on Internal Control Over Financial Reporting
We have audited UMB Financial Corporation’sCorporation and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2017,2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 20172022 and 2016,2021, the related consolidated statements of income, comprehensive income, changes in shareholders'shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2017,2022, and the related notes (collectively, the consolidated financial statements), and our report dated February 22, 201823, 2023 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’sManagement's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and LimitationLimitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because management’s assessment and our audit were conducted to also meet the reporting requirements of Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA), management’s assessment and our audit of the Company’s internal control over financial reporting included controls over the preparation of the schedules equivalent to the basic financial statements in accordance with the instructions to the Consolidated Financial Statements for Bank Holding Companies (Form FR Y-9 C). A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
Kansas City, Missouri
February 22, 201823, 2023
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item relating to executive officers is included in Part I of this Annual Report on Form 10-K (pages 9 and 10) under the caption "Executive Officers of the Registrants.Registrant."
The information required by this item regarding Directors is incorporated herein by reference to information to be included under the caption "Proposal #1: Election of Directors" of the Company's Proxy Statement for the Annual Meeting of Shareholders to be held on April 24, 201825, 2023 (the 20182023 Annual Meeting of Shareholders), which will be provided to shareholders within 120 days after December 31, 2017.2022.
The information required by this item regarding the Audit Committee and the Audit Committee financial experts is incorporated herein by reference to information to be included under the caption "Corporate Governance – Committees of the Board of Directors – Audit Committee" of the Company's Proxy Statement for the 20182023 Annual Meeting of Shareholders, which will be provided to shareholders within 120 days after December 31, 2017.2022.
The information required by this item concerning Section 16(a) beneficial ownership reporting compliance is incorporated herein by reference to information to be included under the caption "Stock Ownership – Section 16(a) Beneficial Ownership Reporting Compliance" of the Company's Proxy Statement for the 20182023 Annual Meeting of Shareholders, which will be provided to shareholders within 120 days after December 31, 2017.2022.
The Company has adopted a code of ethics that applies to all directors, officers and employees, including its chief executive officer, chief financial officer and chief accounting officer. You can find the Company's code of ethics on its website by going to the following address: www.umb.com/aboutumb/investorrelations.http://investorrelations.umb.com. Information on the Company’s website is not incorporated by reference into this report and should not be considered part of this document. The Company will post on its website any amendments or waivers to its code of ethics that are required to be disclosed under the rules of either the SEC or NASDAQ. A copy of the code of ethics will be provided, at no charge, to any person requesting the same, by written notice sent to the Company's Corporate Secretary, 6th floor, 1010 Grand Blvd., Kansas City, Missouri 64106.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by reference to information to be included under the Executive Compensation sections of the Company's Proxy Statement for the 20182023 Annual Meeting of Shareholders, which will be provided to shareholders within 120 days after December 31, 2017.2022.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Security Ownership of Certain Beneficial Owners
The information required by this item is incorporated herein by reference to the Company's 2018 Proxy Statement for the 2023 Annual Meeting of Shareholders to information to be included under the caption "Stock Ownership - Principal Shareholders," which will be provided to shareholders within 120 days after December 31, 2017.2022.
Security Ownership of Management
The information required by this item is incorporated herein by reference to the Company's Proxy Statement for the 20182022 Annual Meeting of Shareholders, which will be provided to shareholders within 120 days after
December 31, 2017,2022, under the caption "Stock Ownership – Stock Owned by Directors, Nominees, and Executive Officers."
The following table summarizes shares authorized for issuance under the Company’s equity compensation plans.plans as of December 31, 2022:
Plan Category |
| Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) |
|
| Weighted average exercise price of outstanding options, warrants and rights (b) |
|
| Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) |
|
| Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) |
|
| Weighted average exercise price of outstanding options, warrants and rights (b) |
|
| Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) |
| ||||||
Equity compensation plans approved by security holders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2002 Incentive Stock Option Plan |
|
| 31,686 |
|
| $ | 40.93 |
|
| None |
| |||||||||||||
2005 Long Term Incentive Plan |
|
| 1,047,461 |
|
|
| 52.13 |
|
|
| 4,697,966 |
|
|
| 137,858 |
|
| $ | 62.08 |
|
| None |
| |
2018 Omnibus Incentive Compensation Plan |
| None |
|
| None |
|
|
| 2,379,522 |
| ||||||||||||||
Equity compensation plans not approved by security holders |
| None |
|
| None |
|
| None |
|
| None |
|
| None |
|
| None |
| ||||||
Total |
|
| 1,079,147 |
|
| $ | 51.81 |
|
|
| 4,697,966 |
|
|
| 137,858 |
|
| $ | 62.08 |
|
|
| 2,379,522 |
|
For additional information concerning the Company’s equity compensation plans, see Note 11, “Employee Benefits,” in the Notes to the Consolidated Financial Statements provided in Item 8 pages 84 through 87 of this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item is incorporated herein by reference to the information to be provided under the captions “Corporate Governance – Transactions with Related Persons”, “Corporate Governance – The Board of Directors – Independent Directors” and “Corporate Governance – Committees of the Board of Directors” of the Company's Proxy Statement for the 20182023 Annual Meeting of Shareholders, which will be provided to shareholders within 120 days after December 31, 2017.2022.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item is incorporated herein by reference to the information to be provided under the caption "Proposal #3: Ratification of the Corporate Audit Committee’s Engagement of KPMG LLP as UMB’s Independent Public Accounting Firm for 2018”2023” of the Company's Proxy Statement for the 20182023 Annual Meeting of Shareholders, which will be provided to shareholders within 120 days after December 31, 2017.2022.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Consolidated Financial Statements and Financial Statement Schedules
The following Consolidated Financial Statements of the Company are included in itemItem 8 of this Annual Report on Form 10-K.
Consolidated Balance Sheets as of December 31, 20172022 and 20162021
Consolidated Statements of Income for the ThreeThree Years Ended December 31, 20172022
Consolidated Statements of Comprehensive Income for the Three Years Ended December 31, 20172022
Consolidated Statements of Changes in Shareholders' Equity for the Three Years Ended December 31, 20172022
Consolidated Statements of Cash Flows for the Three Years Ended December 31, 20172022
Notes to Consolidated Financial Statements
Report of Independent Auditors' ReportRegistered Public Accounting Firm
Condensed Consolidated Financial Statements for the parent company only may be found in Item 8 above. All other schedules have been omitted because the required information is presented in the Consolidated Financial Statements or in the notes thereto, the amounts involved are not significant or the required subject matter is not applicable.
Exhibits
The following Exhibit Index lists the Exhibits to Form 10-K:
3.1 | |
3.2 | |
| |
4.2 | |
4.3 | |
4.4 | |
4.5 | |
4.6 | |
4.7 |
4.8 | |
10.1 | |
| |
| |
| |
| |
| |
| |
|
10.6 | |
| |
| |
| |
21.1 | |
23.1 | Consent of Independent |
24.1 | |
31.1 | CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act filed herewith. |
31.2 | CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act filed herewith. |
32.1 | CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act filed herewith. |
32.2 | CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act filed herewith. |
101.INS | XBRL Instance |
101.SCH | Inline XBRL Taxonomy Extension Schema Document filed herewith. |
101.CAL | Inline XBRL Taxonomy Extension Calculation Document filed herewith. |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document filed herewith. |
101.LAB | Inline XBRL Taxonomy Extension |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document filed herewith. |
104 | The cover page of our Form 10-K for the year ended December 31, 2022, formatted in iXBRL. |
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, as of February 22, 2018.23, 2023.
|
| UMB FINANCIAL CORPORATION |
|
|
|
|
| /s/ J. Mariner Kemper |
|
| J. Mariner Kemper |
|
| Chairman of the Board, |
|
| Chief Executive Officer |
|
|
|
|
| /s/ Ram Shankar |
|
| Ram Shankar |
|
| Chief Financial Officer |
|
|
|
|
| /s/ |
|
|
|
|
| Chief Accounting Officer |
Date: February 22, 201823, 2023
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities on the date indicated.
Robin C. Beery | Director |
| Director |
Robin C. Beery | Leroy J. Williams | ||
Janine A. Davidson | Director | Kevin C. Gallagher | Director |
Janine A. Davidson | Kevin C. Gallagher | ||
|
|
|
|
Greg M. Graves | Director | Alexander C. Kemper | Director |
Greg M. Graves | Alexander C. Kemper | ||
|
|
|
|
Gordon E. Lansford III | Director | Timothy R. Murphy | Director |
Gordon E. Lansford III | Timothy R. Murphy | ||
|
|
|
|
Tamara M. Peterman | Director | Kris A. Robbins | Director |
|
| ||
Kris A. Robbins |
| ||
|
|
|
|
|
|
|
|
|
| ||
| Director | /s/ J. Mariner Kemper | Director, Chairman of the Board, Chief Executive Officer |
| J. Mariner Kemper | ||
|
| Attorney-in-Fact for each director |
|
114132