Risk Factors Update Summary

• Total loans increased by $417 million, or 19%, from December 31, 2022, driven by increases across all major loan portfolios.
• Allowance for loan losses increased significantly from $87,000 to $351,094, a $264,094 change.
• The FOMC raised the target range for the federal funds rate from 4.25% to 4.50%.
• Total assets increased by $4.3 billion, or 12%, from $36.7 billion to $41 billion.
• Service charges and deposit account fees increased from $84,122 to $89,854. This change might result in increased revenue.
• Industrial risk increased from $9 to $663 million, with a significant jump in exposure.
• The federal banking agencies issued a proposed rule to revise the regulatory capital framework. This change could result in additional costs and impact future growth.
• Recent banking sector volatility led to failures of SVB, SBNY, and First Republic Bank, impacting share price by 22%.
• Card-based fees increased from $44,132 to $45,121. This change might result in increased fee income.
• The FDIC issued a final rule for a special assessment to recover losses from bank resolutions, estimated at approximately $16.3 billion.
• Addition of Kellogg Asset Management, LLC as a nonbank subsidiary under Delaware law.
• FDIC issued a final rule for a special assessment of $16.3 billion to recover losses from SVB and SBNY.
• Total loans increased from $312,720 to $385,870, a $73,150 change.
• Nonaccrual CRE loans decreased from $291 million to $1 million, less than 1% of the portfolio.
• Commercial real estate - owner-occupied loans increased from 991 to 1,061,700, a substantial rise.
• The Corporation undertook a review of APSN Fees and Representment Fees, potentially impacting fee income.
• Potential problem loans increased by $30 million, or 10%, from December 31, 2022, largely driven by increases in real estate construction and CRE-investor portfolios.
• Noninterest expense increased by $33 million primarily due to higher FDIC assessment and management incentive plan expenses.
• Net cash used in investing activities decreased significantly from $5,254,811 to $1,584,186.
• Net cash provided by operating activities increased significantly from $36 million to $254 million.
• Total agency securities decreased by $2.7 billion from $35.5 billion to $32.8 billion.
• Total loans increased by $417 million, or 1.5%, from $28.8 billion to $29.2 billion.
• Inclusion of new Clawback Policy effective December 1, 2023, for recovery of Erroneously Awarded Compensation.
• Net cash used in investing activities increased by $385 million to $115 million.
• Total nonaccrual loans decreased by $19 million, or 15%, from December 31, 2022, primarily driven by decreases in commercial and industrial and residential mortgage portfolios.
• Income tax expense increased by $56 million to $93 million, impacting net income.
• Noninterest income decreased by $219 million in 2023, primarily due to market-driven decreases in mortgage banking income and wealth management fees.
• Mortgage servicing rights increased from $77,351 to $84,390, a $7,039 change.
• Sale of mortgage portfolio added, contributing $844 million to the revenue stream.
• Commercial and business lending increased from $10 to $793,255, indicating significant growth.
• Noninterest income (in-scope of Topic 606) decreased from $201,953 to $186,560. This change might impact overall income.
• The Company implemented a Clawback Policy requiring Executive Officers to return Erroneously Awarded Compensation.
• Commercial and business lending increased by $1.3 billion, or 17%, from $7.1 billion to $8.4 billion.
• Total obligations of state and political subdivisions (municipal securities) decreased by $1.1 billion.
• Goodwill decreased from 28% to 26% of stockholders' equity, now at $1.1 billion.
• CFPB enforcement actions in 2023 resulted in financial institutions paying substantial penalties for unlawful overdraft practices.
• Mortgage repurchase reserve for 2023 was $6 million, down from $8 million in 2021.
• Commercial real estate - investor loans increased from $5 to $124,245, showing a notable rise.
• Net cash provided by financing activities increased from $1,364,102 to $4,004,185.
• Net interest income increased by $82 million in 2023, driven by strategic initiatives and rising earning assets, despite a decrease in net interest margin.
• Total agency residential mortgage-related securities increased by $1.3 billion from $27.4 billion to $28.7 billion.
• Net income decreased by $16 million to $182,956 million, affecting earnings per common share.
• Net income decreased from $366,122 in 2021 to $350,994 in 2022.
• Proceeds from issuance of long-term funding decreased from $330 million to $292 million.
• The federal banking agencies issued guidance on climate-related financial risk management for larger institutions.
• Executives must sign an Acknowledgment Form agreeing to comply with the Clawback Policy.
• Total deposits increased from $33,446,049 to $29,636,154, a $3,809,895 change.
• Introduction of the Five-year U.S. Treasury Rate determination process for Subordinated Notes.
• Total long-term funding increased from $247,601 in 2022 to $540,886 in 2023.
• Network transaction deposits increased by $587 million, from $979 million to $1.57 billion.
• The federal banking agencies proposed rules that would significantly increase compliance costs for institutions exceeding $50 billion in assets.
• Total short-term funding increased from $326,780 to $605,937, a $279,157 change.
• Proceeds from issuance of long-term funding increased from $292 million to $740 million.
• Redemption of preferred stock decreased by $96 million to $0.
• Provision for credit losses increased to $83 million in 2023 from $33 million in 2022, compared to a release of $88 million in 2021.
• Real estate construction loans increased from $2 to $271,398, indicating a substantial change.
• Provision for credit losses increased by $51 million to $83 million, impacting financial stability.
• Purchase of treasury stock decreased by $132 million to $6 million.
• Proceeds from issuance of common stock for stock-based compensation plans increased from $3,966 to $4,297.
• Average loans increased by $3 billion in 2023, driven by growth in all major loan categories, including commercial, auto finance, and residential mortgages.
• Total long-term funding decreased from $541,269 to $248,071, a $293,198 change.
• Total commercial loans increased from $17 to $18,188,898, showing significant growth.
• Total equity securities increased by $435 million, from $216 million to $651 million.
• The federal banking agencies proposed a rule to implement final components of Basel III standards for institutions with $100 billion or more in assets.
• Total noninterest income decreased by $50 million to $282 million, affecting revenue streams.
• Total assets increased from $4,301,191 in 2022 to $4,734,666 in 2023.
• The FTC and DOJ are evaluating proposed mergers more closely, especially in the financial services sector.
• Total noninterest expense increased by $104 million to $813 million, impacting overall expenses.
• Total capital decreased by $52 million, from $3.68 billion to $3.63 billion.
• Total liabilities increased from $285,693 in 2022 to $560,701 in 2023.
• Redemption of preferred shares removed, impacting the financial structure.
• Average deposits increased by $1.6 billion in 2023, with growth in lower-cost core deposits partially offset by decreases in higher-cost network and time deposits.
• Cash dividends on common stock decreased by $6.5 million to $129.5 million.
• Residential mortgage loans increased from $7,567,310 to $8,511,550, indicating a notable rise.
• Efficiency ratio decreased from 69.7% to 60.4%.
• Comprehensive income decreased by $181 million to $284,659 million, affecting overall financial performance.
• Purchase of treasury stock, stock-based compensation plans decreased from $6,480 to $4,847.
• Net cash used in financing activities decreased by $128 million to $128 million.