Notes from the CEO: Perspective on the recent banking industry news
March 16, 2023 | Mariner Kemper | UMB
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.
