This post was updated March 16, 2023 to add Mariner’s appearance on CNN Live.
Watch Mariner Kemper on CNN Live
UMB’s strong position and our perspective
The news cycle has been dominated by the banking industry, and specifically developments related to the failures of Silicon Valley Bank (SVB) and Signature Bank. I would like to provide an update and perspective that summarizes our reaction to the events and news.
Regarding stock performance, the entire banking sector saw a significant decline in stock prices on Monday. Investors reacted to the news media and other sources without the benefit of context from UMB. After the market closed, we filed a Form-8K to explain our position.
UMB shows up as having a high “unrealized loss” position. It’s important to note that any loss only becomes realized if it is sold prior to maturity. In the rapidly rising rate environment, all banks have experienced a reduction in the value of their securities portfolio, as represented by the unrealized losses, or “AOCI.” UMB’s AOCI represents approximately 10% of our available-for-sale (AFS) portfolio balances, which is in line with peer levels. This does not impact regulatory capital ratios, which is the true measure of safety and soundness. UMB doesn’t intend to sell AFS securities.
Another factor that may have impacted our stock is that we report a larger percentage of uninsured deposits. UMB’s commercial and institutional customer base has different characteristics than many consumer-based banks. Reported uninsured deposits at December 31, 2022 were 75%, however, that does not take into account that a portion of these deposits are collateralized with our high-quality bonds. Excluding these collateralized deposits, we estimate that approximately 57% of our deposits are uninsured, putting us more in line with peers. UMB is very liquid with a loan-to-deposit ratio of 65%.
It’s also important to remember that a stock price is not an indicator of the strength of a bank. UMB’s strengths are strong liquidity, our diversified deposit base, excellent capital ratios and strong credit metrics.
Separately, Moody’s rating agency informed us that they are reviewing our rating for possible downgrade along with other banks, given the current situation. The rationale for the review is their perceived view about our elevated level of uninsured deposits and the unrealized losses embedded in our securities portfolio as I outlined above.
While the timing and the commentary by Moody’s is disappointing, our ratings are still in the top tier at each of the three agencies.
The main message I want to impart is that there is a lot of industry noise based on SVB and Signature Bank’s collapse. UMB remains in a position of strength, and we expect these market ripples to calm in the near future.
- UMB’s deposit base is well diversified among multiple lines of business and across multiple customer segments and geographies.
- Consumer deposits have an average account size of less than $25,000, while commercial deposits have an average size of less than $500,000, as of March 2023.
- Within our commercial deposits, no one sector represents more than 6% of total deposits as of March 2023.
- UMB has long-tenured relationships with our depositors. Approximately 53% of our deposit accounts have been with us for more than 10 years.
- Additionally, we have deep business relationships with depositors, with many using other products and services such as asset servicing, corporate trust, payments and treasury management.
Finally, UMB does not have meaningful deposit exposure to crypto currency clients. We have no crypto currency product offerings nor have we made material investments into crypto currency as an institution.
Please be assured that UMB remains steadfast in our commitment to our customers and to being a strong partner and service provider at all times.
Learn more about UMB’s history of stability as a 110-year old financial institution. Stay informed on industry trends and noteworthy company news by visiting our Industry News section on umb.com. Follow UMB on LinkedIn, Facebook‡ and Twitter‡ to see regular updates about our company, people and timely financial perspectives.