Company: UMBFO
Filing Date: 2025-02-27
Form Type: 10-K
Source: 0000950170-25-028420
Chunk: 118

Company: UMB FINANCIAL CORP
Filing Date: 2025-02-27
Form: 10-K
Item: Item 1B
Chunk 118
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 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 200-basis-point upward or a 300-basis-point downward gradual change (e.g. ramp) and immediate change (e.g. shock) of market interest rates over a two-year period.  In ramp scenarios, rates change gradually for a one-year period and remain constant in year two.  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.    

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Table 21 shows the net interest income percentage increase or decrease over the next twelve- and twenty-four-month periods as of December 31, 2024 and 2023 based on hypothetical changes in interest rates and a constant sized balance sheet with runoff being replaced.    

Table 21

MARKET RISK

    Hypothetical change in interest rate – Rate Ramp

    Year One

    Year Two

    December 31,2024

    December 31,2023

    December 31,2024

    December 31,2023

    (basis points)
     
    Percentage change

    Percentage change

    Percentage change

    Percentage