EDGAR 10-K Filing

Company CIK: 101382
Filing Year: 2025
Filename: 101382_10-K_2025_0000950170-25-028420.json

---

ITEM 1. BUSINESS
ITEM 1. BUSINESS
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.
On January 31, 2025, the Company acquired all of the outstanding stock of Heartland Financial USA, Inc., a Delaware corporation (HTLF), in an all-stock transaction, issuing a total of 23.6 million shares of the Company’s common stock and 4.6 million depositary shares, each representing a 1/400th interest in a share of the Company’s 7.00% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A (the Company’s preferred stock). Pursuant to the Agreement and Plan of Merger, dated as of April 28, 2024, (i) HTLF merged with and into the Company, with the Company continuing as the surviving corporation and (ii) one day after the closing date of the acquisition of HTLF by the Company, HTLF’s wholly owned bank subsidiary, a Colorado-chartered non-member bank (HTLF Bank), merged with and into UMB Bank, National Association, the Company’s national bank subsidiary (the Bank), with the Bank continuing as the surviving bank.
On April 29, 2024, the Company also announced that in connection with the execution of the merger agreement, it entered into a forward sale agreement with BofA Securities, Inc. or its affiliate to issue 2.8 million shares of its common stock. The underwriters were granted an option to purchase up to an additional 420 thousand shares of the Company's common stock exercisable within 30 days of April 28, 2024. The underwriters exercised this option in full on April 30, 2024, upon which the Company entered into an additional forward sale agreement relating to the 420 thousand shares of the Company's common stock. The forward sale agreements entered into on April 28, 2024 and April 30, 2024 (collectively, the forward sale agreements) are classified as an equity instrument under ASC 815-40, Contracts in Entity’s Own Equity. The Company expects to receive net proceeds of approximately $231.8 million from the sale of shares of common stock and settlement of the forward sale agreements.
The Bank has its principal office in Missouri and provides financial services primarily throughout the Midwestern and Southwestern regions of the United States. 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, bankcard, and cash-management services.
The Company also owns UMB Fund Services, Inc. (UMBFS), which is a significant nonbank subsidiary that 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.
Business Segments
The Company’s products and services are grouped into three segments: Commercial Banking, Institutional Banking, and 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 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 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. Increasingly, financial-technology (fintech) companies are partnering with financial-services providers to compete with the Company for lending, payments, and other business. Many of the Company’s competitors are not 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 Company’s ability to successfully compete in its chosen markets and regions also depends on its ability to attract, retain, and motivate talented employees, to invest in technology and infrastructure, and to innovate, all 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 their respective communities. On a full-time equivalent basis at December 31, 2024, the Company and its subsidiaries employed 3,698 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 resources and incentives to support wellness 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 candidates. 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 impact is exerted, in particular, by the policies of the Board of Governors of the Federal Reserve System and the Federal Reserve Bank (the FRB), which, through the Federal Open Market Committee, influences monetary and credit conditions in the economy in pursuit of maximum employment and stable prices. 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 direct supervision by various government authorities charged with overseeing the kinds of financial activities conducted by its business segments.
This section summarizes certain 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 that has elected to also become a financial holding company. As a result, the Company-including all of its businesses and operations-is subject to the regulation, supervision, and examination of the FRB and to restrictions on permissible activities. This framework 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), the FDIC, and the Consumer Financial Protection Bureau (the CFPB); (2) UMBFS, UMB Financial Services, Inc., and UMB Asset Management, LLC, by the Securities and Exchange Commission (the SEC) and State regulatory authorities, and UMB Financial Services, Inc., by the Financial Industry Regulatory Authority (FINRA); and (3) UMB Insurance, Inc., by State regulatory authorities. 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 authority to regulate and supervise 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 extensive and costly remediation requirements, 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 authority 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, supervise, and enforce areas within their jurisdiction that could impact the Company’s businesses and operations.
Restrictions on Permissible Activities and Corporate Matters
Bank holding companies and their subsidiaries are generally limited to the business of banking and to closely related activities that are incidental to banking.
As a bank holding company that has elected to become a financial holding company, the Company is also able-directly or indirectly through its subsidiaries, other than the Bank-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 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. Examples of the former are 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 continue 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 (the CRA). 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 consult with the staff 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.
Bank Acquisitions by the Company
The Company may acquire banks outside of its home State of Missouri, subject to limits and may establish new branches in other States to the same extent as banks chartered in those States. The Company must receive 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 standards by which bank and financial institution acquisitions are evaluated have been undergoing review and change by the OCC, FDIC and the Department of Justice (the DOJ), but not by the FRB. These reviews and changes were incorporated into non-binding guidance. Whether and how the guidance might be further changed or interpreted is uncertain. In September 2024, the OCC adopted a final rule and policy statement regarding its review of Bank Merger Act (BMA) applications for OCC-supervised institutions, including the Bank. The final rule removes the ability for BMA applicants to file a streamlined application form for certain types of acquisitions and
removes the expedited review process for BMA applications. The policy statement provides 19 indicators of whether a BMA application is more or less likely to be approved by the OCC. The policy statement also provides heightened expectations around the existing statutory factors the OCC is required to consider in evaluating BMA applications.
In September 2024, the DOJ withdrew its 1995 Bank Merger Guidelines and issued the 2024 Banking Addendum to 2023 Merger Guidelines (the 2024 Banking Addendum). The DOJ clarified that it will assess competition considerations in connection with bank and bank holding company mergers using its 2023 Merger Guidelines, which is the general merger review framework the DOJ now uses to evaluate transactions in all segments of the economy, and 2024 Banking Addendum. The 2024 Banking Addendum provides guidance on how the DOJ will assess competition in the context of bank and bank holding company mergers. An analysis under the 2023 Merger Guidelines and 2024 Banking Addendum may include consideration of theories of harm and relevant markets not considered under the 1995 Bank Merger Guidelines, which focused primarily on concentrations of deposits and branches.
Acquisitions of Ownership of the Company
Acquisitions of the Company’s voting stock above certain thresholds are subject to prior regulatory notice or approval under federal banking laws, including the BHCA and the Change in Bank Control Act of 1978, as amended (the CIBCA). Under the CIBCA, a person or entity generally obtain non-objection from the FRB before acquiring the power to vote 10% or more of any class of voting stock, including the Company’s common stock. Investors should be aware of these requirements when acquiring shares in the Company’s stock.
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 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 FRB or the OCC could also limit the dividends that the Bank or the Company’s other subsidiaries may pay to the Company to prevent any unsafe and unsound practice.
The Company is required by law 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.
A number of laws 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, including certain derivatives and securities lending transactions, with 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.
Stress Testing and Enhanced Prudential Standards
Under the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA), bank holding companies with assets of less than $100 billion, including the Company, are no longer subject to the requirement to conduct forward-looking, company-run stress testing, including publishing a summary of results. The Company continues to run internal stress tests as a component of its comprehensive risk management and capital planning process. In addition, EGRRCPA increased the statutory asset threshold above which the FRB is required to apply enhanced prudential standards from $50 billion to $250 billion subject to certain discretion by the FRB 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 the FRB’s enhanced prudential standards but the Bank will become subject to the OCC’s guidelines that set expectations for the governance and risk management practices of large depository subject to its supervision with more than $50 billion in assets. The guidelines require such institutions to establish and adhere to a written governance framework in order to manage and control their risk-taking activities and to incorporate their risk appetite statement and concentration risk limits into capital and liquidity stress testing and planning processes. See “Regulation and Supervision-Safety and Soundness Guidelines” in Part I, Item 1 of this report for additional information regarding federal guidelines prescribing safety and soundness standards.
Capital-Adequacy Standards
The FRB and the OCC have adopted risk-based capital and leverage regulations that require the capital-to-assets ratios of bank holding companies and national banks 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.
The capital ratios for the Company and the Bank as of December 31, 2024, are set forth below:
Minimum Regulatory Capital Ratio
Minimum Ratio Plus Capital Conservation Buffer
Well-Capitalized Minimums
Actual
Common Equity Tier 1 Capital Ratio
UMB Financial Corporation
4.50
%
7.00
%
N/A
%
11.29
%
UMB Bank, n.a.
4.50
7.00
6.50
11.47
Tier 1 Risk-Based Capital Ratio
UMB Financial Corporation
6.00
8.50
6.00
11.29
UMB Bank, n.a.
6.00
8.50
8.00
11.47
Total Risk-Based Capital Ratio
UMB Financial Corporation
8.00
10.50
10.00
13.21
UMB Bank, n.a.
8.00
10.50
10.00
12.24
Tier 1 Leverage Ratio
UMB Financial Corporation
4.00
N/A
N/A
8.50
UMB Bank, n.a.
4.00
N/A
5.00
8.52
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 PCA is required in connection with one of its depository-institution subsidiaries. Failure to be well-capitalized or to meet minimum capital requirements could result in certain
mandatory and possible additional discretionary actions by regulators that, if undertaken, could have an adverse material effect on the Company’s operations or financial condition. For example, “brokered deposits,” as defined by FDIC regulations, may only be accepted by well capitalized depository institutions without prior regulatory approval or, with a waiver from the FDIC, by adequately capitalized depository institutions. At December 31, 2024, 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 the Basel III endgame), 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. These 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. In July 2023, the federal banking agencies released a proposed rule to implement the Basel III endgame. If enacted as proposed, the proposal would significantly increase capital requirements for banking organizations with $100 billion or more in assets, which could indirectly impact smaller institutions, such as the Company and the Bank. It is uncertain if and when a final rule will be adopted, and if so, whether and to what extent it will differ from the Basel III Finalization Proposal. As a result, the timing and content of any final rule, and the potential effects of any final rule on the Company and the Bank, remain uncertain.
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. 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.
In response to the bank failures in early 2023, the FDIC implemented a special assessment to recover the losses to the DIF at an annual rate of approximately 13.4 basis points over eight quarterly collection periods, which began in 2024, and currently projects that the special assessment will be collected for an additional two quarters beyond the initial eight-quarter collection period, at a lower rate. The base for the special assessment is equal to an insured depository institution’s estimated uninsured deposits reported as of December 31, 2022, adjusted to exclude the first $5 billion. The FDIC may impose additional special assessments from time to time based on the actual losses incurred by the FDIC as a result of the March 2023 bank failures or future failures.
Resolution and Related Matters
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) transfer assets and liabilities of the institution to another person or entity without the approval of the institution’s creditors, (2) require that its claims process be followed and to enforce statutory or other limits on damages claimed by the institution’s creditors, (3) enforce the institution’s contracts or leases according to their terms, (4) repudiate or disaffirm the institution’s contracts or leases, (5) 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) enforce statutory or other injunctions, and (7) 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 Federal Deposit Insurance Act (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.
In June 2024, the FDIC released a final rule amending its requirements for insured depository institutions with more than $50 billion in assets to develop and submit plans demonstrating how they could be resolved in an orderly
and timely manner in the event of receivership. The Bank continues to evaluate the impact of this rule for when it becomes subject to its requirements.
Safety and Soundness Guidelines
The federal banking agencies have adopted guidelines prescribing safety and soundness standards relating to internal controls, risk management, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth and compensation, fees and benefits. These guidelines in general require appropriate systems and practices to identify and manage specified risks and exposures. The guidelines prohibit excessive compensation as an unsafe and unsound practice and characterize compensation as excessive when the amounts paid are unreasonable or disproportionate to the services performed by an executive officer or employee, director or principal shareholder. In addition, the federal banking agencies have adopted regulations that authorize but do not require an agency to order an institution that has been given notice by the agency that it is not in compliance with any of the safety and soundness standards to submit a compliance plan. If after being so notified, an institution fails to submit an acceptable compliance plan, the agency must issue an order directing action to correct the deficiency and may issue an order directing other actions of the types, including those that may limit growth or capital distributions.
Anti-Money Laundering Rules
The Bank Secrecy Act, as amended by the USA PATRIOT Act of 2001, (together, the BSA) and its implementing regulations require financial institutions, including banks and broker dealers, to, among other duties, implement and maintain an effective anti-money laundering (AML) compliance program and file suspicious activity and currency transaction reports when appropriate.
The Anti-Money Laundering Act of 2020, enacted on January 1, 2021 (AMLA), amends the BSA but does not directly impose new requirements on banks. AMLA requires the U.S. Treasury Department to, among other things, issue National Anti-Money Laundering and Countering the Financing of Terrorism Priorities and implementing regulations, and conduct studies and issue regulations that may, over the next few years, significantly alter certain due diligence, recordkeeping and reporting requirements that the BSA and its implementing regulations impose on banks. AMLA also contains provisions that increase penalties for violations of the BSA and includes whistleblower incentives, both of which could increase regulatory enforcement against banks. Implementation of AMLA is ongoing and is anticipated to impact the Bank’s AML compliance program.
In an effort to increase transparency in the U.S. financial system and prevent shell entities from being used to launder money or hide assets, AMLA includes the Corporate Transparency Act (the CTA), which requires the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) to, among other things, establish a national beneficial ownership information registry. In September 2022, FinCEN issued the final Beneficial Ownership Information Reporting Requirements rule (the BOI Reporting Rule) which, effective January 1, 2024, requires certain “reporting companies” to file beneficial ownership information reports with FinCEN that will be stored in the national beneficial ownership registry and will detail the reporting company’s beneficial owners. In December 2023, FinCEN issued the final Beneficial Ownership Information Access and Safeguards rule-the second of three rulemakings that would implement the CTA-which governs access to the national beneficial ownership registry. FinCEN has not yet issued the third CTA-implementing regulation, which will amend the beneficial ownership requirements applicable to banks and other covered financial institutions under FinCEN’s existing Customer Due Diligence (CDD) rule. The constitutionality of the CTA is subject to ongoing litigation and it is not clear what impact the new rules will have on the Bank; however the Company’s compliance costs will likely increase as the Company develops enhanced CDD procedures and recalibrates customer information collection and reporting systems to effectively respond to the CTA’s new requirements.
Violations of the BSA and its implementing regulations can result in substantial civil and criminal penalties, and the federal banking agencies are required to consider the effectiveness of a financial institution’s AML compliance program when reviewing bank mergers and bank holding company acquisitions. In addition to the federal banking agencies, FinCEN is authorized to impose significant civil monetary penalties for violations of the BSA and its implementing regulations and has recently engaged in coordinated enforcement actions with state and federal law enforcement agencies and banking regulators.
OFAC Regulation
The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) is responsible for administering U.S. economic sanctions, which can prohibit certain transactions with designated foreign countries, nationals and others. OFAC-administered sanctions take on many different forms. For example, sanctions may include: (1) restrictions on trade with or investment in a sanctioned country, including prohibitions against direct or indirect imports from and exports to a sanctioned country and prohibitions on U.S. persons engaging in financial transactions relating to, making investments in, or providing investment-related advice or assistance to, a sanctioned country; and (2) blocking assets in which certain sanctioned foreign governments, entities or individuals have an interest, by prohibiting transfers of property subject to U.S. jurisdiction, including property in the possession or control of U.S. persons. OFAC also maintains a list of designated persons, groups or entities that are the target of sanctions, including the “Specially Designated Nationals and Blocked Persons List.” The assets of designated persons, groups or entities are blocked and U.S. persons are generally prohibited from dealing with any such persons. Moreover, blocked assets, for example property and bank deposits, cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. If the Company finds a name on any transaction, account or wire transfer associated with a sanctioned person, the Company must freeze or block such account or transaction, file a blocked property report with OFAC and notify the appropriate authorities. Failure to comply with U.S. economic sanctions could have serious legal and reputational consequences.
Data Privacy and Cybersecurity
Various federal, state and local laws, rules, regulations and standards contain extensive data privacy and cybersecurity provisions, and the legal and regulatory framework for data privacy and cybersecurity is in considerable flux and rapidly evolving. For example, current federal laws, rules, regulations and standards, including the Gramm-Leach-Bliley Act (the “GLBA”), require financial institutions to, among other things, periodically disclose their privacy policies and practices relating to sharing personal information and enable retail customers to opt out of the Company’s ability to share such personal information with unaffiliated third parties under certain circumstances. Such laws and regulations also require financial institutions to implement a comprehensive cybersecurity program that includes administrative, technical and physical safeguards to ensure the security and confidentiality of customer records and information. An amendment to Regulation S-P, an implementing regulation promulgated under the GLBA, was adopted by the SEC on May 16, 2024 and requires broker dealers and registered investment advisers to, among other things, adopt and implement an incident response program as part of their formal cybersecurity policies and procedures and report data breaches to affected individuals whose sensitive customer information was, or is reasonably likely to have been, accessed or used without authorization within 30 days of becoming aware of such data breach. Other federal and state laws, rules, regulations and standards impact the Company’s ability to share certain information with affiliates and non-affiliates for marketing and/or non-marketing purposes, or to contact customers with marketing offers. Federal law also makes it a criminal offense, except in limited circumstances, to obtain or attempt to obtain customer information of a financial nature by fraudulent or deceptive means. The Company and its nonbanking subsidiaries are also subject to rules and regulations issued by the Federal Trade Commission, which regulates unfair or deceptive acts or practices, including with respect to data privacy and cybersecurity. Additionally, like other lenders, the Bank uses credit bureau data in its underwriting activities. Use of such data is regulated under the Fair Credit Reporting Act, which also regulates reporting information to credit bureaus, prescreening individuals for credit offers, sharing of information between affiliates, and using affiliate data for marketing purposes. Similar state laws may impose additional requirements on the Company and its subsidiaries. The United States Congress also is considering, and may pass, additional data privacy and cybersecurity legislation, to which the Company may become subject if passed.
The enactment of the Cyber Incident Reporting for Critical Infrastructure Act (the “CIRCIA”) in 2022, once rulemaking is complete, will require, among other things, certain companies to report significant cyber incidents to the Cybersecurity and Infrastructure Agency (the “CISA”) within 72 hours from the time the company reasonably believes the incident occurred (and within 24 hours of making a ransom payment as a result of a ransomware attack). On April 4, 2024, the CISA proposed a rule under the CIRCIA that would clarify the scope of cyber incidents to be reported and would further define covered entities subject to the CIRCIA to expressly include companies in the financial services industry that are required to report cyber incidents to their primary federal regulators.
The Bank is also subject to federal regulations that, among other things, require a banking organization to notify its primary federal banking agencies as soon as possible and within 36 hours after identifying a “computer-security incident” that has materially disrupted or degraded, or the banking organization believes in good faith is
reasonably likely to materially disrupt or degrade, its business or operations in a manner that would, among other things, jeopardize the viability of its operations, result in customers being unable to access their deposit and other accounts, result in a material loss of revenue, profit or franchise value, or pose a threat to the financial stability of the United States financial sector. Additionally, the federal banking agencies, as well as the SEC and related self-regulatory organizations, regularly issue guidance regarding cybersecurity that is intended to enhance cyber risk management among financial institutions.
Data privacy and cybersecurity are also areas of increasing state legislative focus. For example, the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act of 2020 (collectively, the “CCPA”), among other things, broadly defines personal information and gives California residents the right to request access to or correct personal information collected about them, and whether that personal information has been sold or shared with others, the right to request deletion of personal information (subject to certain exceptions), the right to opt out of certain sharing and sales of their personal information, and the right not to be discriminated against for exercising these rights. The CCPA contains several exemptions, including that many, but not all, requirements of the CCPA are inapplicable to personal information that is collected, sold, disclosed or processed subject to certain federal laws, including the GLBA. The CCPA contemplates civil penalties of up to $2,500 for each violation and up to $7,500 for each intentional violation and includes a private right of action (permitting lawsuits to be brought by private individuals instead of the state Attorney General or other government actor for certain violations). Similar laws have been or may be adopted by other states where the Company does business or collects personal information. In addition, laws in all 50 U.S. states generally require businesses to provide notice under certain circumstances to individuals whose personal information has been disclosed as a result of a data breach.
Broker Dealer and Investment Adviser Regulations
The Company’s broker dealer and investment adviser subsidiaries are subject to regulation by the SEC. FINRA is the primary self-regulatory organization for the Company’s registered broker dealer subsidiaries. The broker dealer and investment adviser subsidiaries also are subject to additional regulation by states or local jurisdictions. The SEC and FINRA have active enforcement functions that oversee broker dealers and investment advisers and can bring actions that result in fines, restitution, a limitation on permitted activities, disqualification to continue to conduct certain activities and an inability to rely on certain favorable exemptions. Certain types of infractions and violations also can affect the Company’s ability to issue new securities expeditiously. In addition, certain changes in the activities of a broker dealer require approval from FINRA, and FINRA takes into account a variety of considerations in acting upon applications for such approval, including internal controls, capital levels, management experience and quality, prior enforcement and disciplinary history, and supervisory concerns.
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.
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. Under the CRA, institutions are assigned a rating of “outstanding,” “satisfactory,” “needs to improve,” or “unsatisfactory.” The Bank received a “satisfactory” rating at its most recent CRA evaluation.
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. For example, in December 2024, the CFPB issued a final rule that would become effective on October 1, 2025, which, if it goes into effect as currently issued, would include imposing certain requirements on overdraft fees, similar to those that apply to credit cards, unless the financial institution limits the overdraft fee to an amount that covers the institution’s costs and losses to provide the service or $5. In addition, the FRB has proposed, but not yet finalized, amendments to Regulation II that would lower the cap on debit interchange fees and institute a process for automatically recalculating the debit interchange fee cap every two years based upon a biennial survey of large debit card issuers. 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.
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.
Name
Age
Position with Registrant
R. Brian Beaird
Mr. Beaird has served as Executive Vice President, Chief Human Resources Officer since October 2019. Prior to this time, he served as Senior Vice President/Director of Associate Experience and Rewards, Director Compensation and Systems, Manager Bank Strategy and Administration, and Manager Commercial Strategy and Administration. Mr. Beaird held these positions from July 2018 until October 2019, August 2017 until July 2018, September 2015 until August 2017, and December 2011 until September 2015, respectively.
Amy Harris
Ms. Harris has served as Executive Vice President and Chief Legal Officer since January 2021. Ms. Harris served the Company as Senior Vice President, Deputy General Counsel and Manager of Legal Operations from January 2020 to January 2021. She also served as Corporate Legal Counsel for the Company from October 2014 to January 2020. Prior to joining the Company, Ms. Harris worked in private practice focusing on commercial, corporate and employment cases.
Shannon A. Johnson
Ms. Johnson has served as Executive Vice President and Chief Administrative Officer since October 2019. Ms. Johnson’s previous positions with the Company include Executive Vice President, Chief Human Resources Officer; Senior Vice President, Executive Director of Talent Management and Development; and Senior Vice President, Director of Talent Management. Ms. Johnson held these positions from April 2015 to October 2019, May 2011 to April 2015, and December 2009 to May 2011, respectively.
J. Mariner Kemper
Mr. Kemper has served as the Chairman and Chief Executive Officer of the Company since May 2004. From November 2015 until January 2024, he served as President of the Company. 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.
Stacy King
Ms. King has served as Executive Vice President, Chief Risk Officer of the Company since March 2020. From May 2019 until March 2020, she served as Senior Director, Operations Management - Benefit Accounts for Willis Towers Watson. Prior to that time, she served as Senior Vice President, Director Healthcare Operations & Compliance; Senior Vice President/Vice President, Director Healthcare Services Risk & Compliance for the Bank; Vice President, Compliance Manager - Bank Operations & Healthcare Services; and Compliance Analyst-Corporate Risk for the Company. Ms. King held these positions from September 2018 until May 2019, October 2015 until September 2018, August 2014 until October 2015, and September 2013 until August 2014, respectively.
Elizabeth Lewis
Ms. Lewis has served as President, Consumer Banking since April of 2024. She has also served as Chief Marketing Officer since May of 2023. Prior to this time, Ms. Lewis served as Senior Vice President with CommunityAmerica Credit Union, leading the retail and commercial banking line of business functions, and Senior Vice President, Commercial Banking Administration with Commerce Bank. She held these positions from January 2017 through May 2023, and from March 2008 through January 2017, respectively.
Phillip Mason
Mr. Mason has served as President of Institutional Banking for the Bank since April 2023. He served as Director of Healthcare Services and Chief Operating Officer Institutional Banking for the Bank from November 2019 until March 2023 and as Chief Operating Officer Institutional Banking for the Bank from June 2015 to October 2019. Prior to this time, Mr. Mason served as Director of Relationship Management and Support Institutional Asset Management for the Bank beginning in
April 2013. Mr. Mason first joined the Company in June of 2005, working in the corporate finance department in a variety of roles.
Nikki Newton
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
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
Mr. Pauls served as Executive Vice President, General Counsel and Corporate Secretary of the Company and the Bank from June 2016 until his retirement in January 2025. Mr. Pauls served as interim General Counsel from April 2016 until his full appointment in June 2016. He was with the Company for over 30 years, and served as a top legal advisor for the Company and the Bank for over 25 years.
James D. Rine
Mr. Rine has served as President of the Company since January 2024, and Vice Chairman of the Company since November 2020. He has additionally served as 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, Mr. Rine served as the President of the Kansas City Region since October 2011. Overall, Mr. Rine has over 20 years of commercial banking experience with the Bank.
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.
Thomas S. Terry
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, and prior to this time, Mr. Terry served as Executive Vice President. Mr. Terry first joined the Company in 1986, and subsequently joined the Commercial Lending department in 1987 where he worked as a loan officer until 2011.
Uma Wilson
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 Implementation and Executive Vice President, Director of Bank Product Group. Ms. Wilson held these positions from January 2020 to September 2021 and May 2015 to January 2020, respectively.
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. Information on the Company’s website is not incorporated by reference into this report and should not be considered part of this document. These reports can also be found on the SEC website at www.sec.gov.

---

ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS
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) and the Notes to the Consolidated Financial Statements (which can be found in Part II, Item 8 of this report).
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, which is incorporated by reference herein.
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. For example, the federal government, in recent years, has taken steps to provide stability to and confidence in the financial markets, and these steps could affect the Company’s resource requirements in order to comply with updated laws. 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.
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.
See “Quantitative and Qualitative Disclosures About Market Risk-Interest Rate Risk” in Part II, Item 7A of this report for a discussion of how the Company monitors and manages interest-rate risk.
Weak or deteriorating economic conditions, geopolitical events, 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, or there are impacts stemming from geopolitical events, its business or performance could be adversely affected. The Company provides financial services primarily throughout the Midwestern and Southwestern regions of the United States. As the Company does not have a significant banking presence in other parts of the country, a prolonged economic downturn in these markets could have a material adverse effect on the Company’s financial condition and results of operations. The Company’s lending and other banking businesses, in particular, are susceptible to weak or deteriorating economic conditions, including due to inflation, 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. Financial markets and global supply chains may be adversely affected by the impact of military conflict, including the current conflicts in Ukraine and the Middle East, terrorism or other geopolitical events. 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. Further, changes to U.S. global policy, including as it relates to tariffs, trade disputes and renewing trade agreements with various countries, could affect the Company’s results of operations. The global economy, the strength of the U.S. dollar, international trade conditions, and oil prices may ultimately affect interest rates, business import/export activity, capital expenditures by businesses, and investor confidence. Unfavorable changes in those factors may result in declines in consumer credit usage, increased delinquencies and defaults, and reduced loan demand. 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 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 credit 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 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, the economic environment or associated environmental liabilities. At December 31, 2024, 51.9% of the Company’s aggregate loan portfolio-comprised of commercial real estate loans (representing 39.5% of the aggregate loan portfolio) and consumer real estate loans (representing 12.4% 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 recent years, commercial real estate markets have been particularly impacted by the economic and other disruptions resulting from the COVID-19 pandemic and its aftermath. Repayment of commercial real estate, which typically involves higher loan principal amounts as compared to consumer real estate lending, is often dependent on the successful operation of the business conducted on the property securing the loans. Negative shifts in economic conditions can impact the borrower’s ability to pay. Failures in the Company’s risk management policies, procedures and controls could adversely affect its ability to manage this portfolio going forward and could result in an increased rate of delinquencies in, and increased losses from, this portfolio, which could negatively impact the Company’s operating and financial 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 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 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. Economic conditions can also reduce the usage of credit cards in general and the average purchase amount of transactions, which reduces interest income and transaction fees. Other fee-based banking businesses that could be adversely affected include trading, asset management, custody, trust, and cash and treasury management. In addition, legislative and regulatory changes could reduce the amounts
and types of fees financial institutions may charge, including the FRB’s Regulation II on debit card interchange fees and the CFPB’s regulations on consumer protection, such as the CFPB late fee regulation.
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 the event that the Company’s current sources of liquidity do not satisfy its needs, the Company would be required to seek additional financing. The availability of such financing will depend on a variety of factors, such as market conditions, the general availability of credit to the financial services industry, new regulatory restrictions and requirements, and the Company’s credit ratings. See risk below “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.” There can be no assurance that the Company will be able to obtain financing at desirable terms or at all. In such an event, the Company may also 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 for a discussion of how the Company monitors and manages liquidity risk.
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 investment securities, its income may be adversely affected and its reported equity more volatile, and the portfolio values may be adversely impacted by deterioration in the credit quality of underlying collateral within the various categories of investment securities it owns. As of December 31, 2024, the Company’s securities portfolio totaled approximately $13.7 billion, which represented approximately 27.1% 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, 2024, the weighted average yield of the Company’s securities portfolio was 2.96% as compared to 6.66% 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 $7.8 billion, or 56.9%, 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.
The Company generally invests in liquid, investment-grade securities; however, these securities are subject to changes in market value due to changing interest rates and implied credit spreads. While the Company maintains prudent risk management practices over bonds issued by municipalities and other issuers, credit deterioration in these bonds could occur and result in losses. Under accounting rules, when an available for sale debt security is in an unrealized loss position, the entire loss in fair value is required to be recognized in current earnings if the Company intends to sell the security or believes it is more likely than not that the Company will be required to sell the security before the value recovers. Additionally, the current expected credit losses (CECL) model utilized by the Company requires that lifetime expected credit losses on securities be recorded in current earnings. This could result in significant losses.
The Company may experience increases or fluctuations in delinquencies and credit losses, or the Company may incorrectly estimate expected losses, which could result in inadequate reserves. Like other lenders, the Company faces the risk that its customers will not repay their loans. A customer’s ability and willingness to repay can be adversely affected by decreases in the income of the borrower or increases in their payment obligations to other lenders, whether as a result of a job loss, higher debt levels or rising cost of servicing debt, inflation outpacing wage growth, or by restricted availability of credit generally. The Company may fail to quickly identify and reduce its exposure to customers that are likely to default on their payment obligations, whether by closing credit lines or restricting authorizations. The Company’s ability to manage credit risk also is affected by legal or regulatory changes (such as restrictions on collections, bankruptcy laws, minimum payment regulations and re-age guidance), competitors’ actions and consumer behavior, and depends on the effectiveness of its collections staff, techniques and models.
Rising credit losses or leading indicators of rising credit losses (such as higher delinquencies, higher rates of nonperforming loans, higher bankruptcy rates, lower collateral values, elevated unemployment rates or changing market terms) may require the Company to increase its allowance for credit losses, which would decrease its profitability if it is unable to raise revenue or reduce costs to compensate for higher credit losses, whether actual or expected. In particular, the Company faces the following risks in this area:
•Missed payments: Customers may fail to make required payments on time and may default or become delinquent. Loan charge-offs (including from bankruptcies) are generally preceded by missed payments or other indications of worsening financial conditions for the Company’s customers. Historically, customers are more likely to miss payments during an economic downturn, recession, periods of high unemployment, or prolonged periods of slow economic growth. Customers might also be more likely to miss payments if the payment burdens on their existing debt grow due to rising interest rates, or if inflation outpaces wage growth.
•Incorrect estimates of expected credit losses: The credit quality of the Company’s loan portfolios can have a significant impact on its earnings. The Company allows for and reserves against credit risks based on an assessment of expected credit losses in its loan portfolios. This process, which is critical to the Company’s financial condition and results of operations, requires complex judgments, including forecasts of economic conditions. The Company may underestimate its expected credit losses and fail to hold an allowance for credit losses sufficient to account for these credit losses. Incorrect assumptions could lead to material underestimations of expected credit losses and an inadequate allowance for credit losses. See risk below “The Company’s selection of accounting methods, assumptions, and estimates could impact its financial statements and reported earnings.”
•Inaccurate underwriting: The Company’s ability to accurately assess the creditworthiness of its customers may diminish, which could result in an increase in credit losses and a deterioration of returns.
•Insufficient asset values: The collateral the Company has on secured loans could be insufficient to compensate it for credit losses. When customers default on their secured loans, the Company attempts to recover collateral where permissible and appropriate. However, the value of the collateral may not be sufficient to compensate the Company for the amount of the unpaid loan, and the Company may be unsuccessful in recovering the remaining balance from our customers. Decreases in real estate and other asset values adversely affect the collateral value for the Company’s commercial lending activities. Borrowers may be less likely to continue making payments on loans if the value of the property used as collateral for the loan is less than what the borrower owes, even if the borrower is still financially able to make the payments. In that circumstance, the recovery of such property could be insufficient to compensate the Company for the value of these loans upon a default.
•Geographic and industry concentration: The regional economic conditions in any particular region may affect the demand for the Company’s products and services as well as the ability of its customers to repay their commercial real estate loans and the value of the collateral securing these loans. An economic downturn or prolonged period of slow economic growth in, or a catastrophic event or natural disaster that disproportionately affects a particular region in which the Company is more heavily concentrated could have a material adverse effect on the performance of the Company’s commercial real estate loan portfolio and its results of operations.
Cybersecurity incidents and other security breaches of the Company’s information technology systems, or the information technology systems of the Company’s third-party service providers or their third-party service providers, the Company’s counterparties, or in the business community 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, breached, held hostage or stolen, or if the Company’s operations were disrupted, the Company could suffer significant financial, business, reputational, regulatory, or other damage. Failures or errors in, or breach of the Company’s systems or networks, or those of its third-party service providers or their third-party service providers (collectively, third party service providers), or the Company’s counterparties, may expose the Company to litigation, disclosure requirements, remediation costs, increased costs for security measures, loss of revenue, regulatory scrutiny, governmental investigation and/or other actions, and other potential liability. For example, despite security measures, the Company’s or its third-party service providers’ information technology and infrastructure may be breached or rendered inaccessible due to a variety of factors, including from infrastructure changes or failures, introductions of new functionality, human or software errors, service failures, operational and technological outages, capacity constraints, loss or theft of assets, natural disasters, terrorist attacks, power outages, data breaches, cyber-attacks, denial of service attacks, hacking, ransomware and other computer viruses or malware, or acts of misconduct through pretext calls, electronic phishing or other means, and, as a result, an unauthorized party may obtain access to the Company’s or its customers’ confidential, proprietary, personal, or sensitive data. 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.
Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently or may be designed to remain dormant until a predetermined event, and often are not recognized until launched against a target, the Company or its third-party service providers may be unable to anticipate or detect these techniques or implement adequate preventative or remedial measures. Though it is difficult to determine what harm may directly result from any specific interruption or data breach, any failure to maintain performance, reliability, security, and availability of the Company’s network infrastructure and the information processed thereby may harm the Company’s brand, its ability to retain existing customers and attract new customers, and its ability to operate.
Risks and exposures related to cybersecurity attacks, particularly for financial institutions, 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, its third-party service providers, and its customers. The Company can provide no assurances that the safeguards it or its third-party service providers have 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.
As noted above, third-party service providers also present a source of risk to the Company if their own security measures or other systems or infrastructure were to be breached or subject to another cybersecurity incident, rendered inaccessible or interrupted, experience an outage, downtime or degradation in service, or otherwise fail or experience adverse conditions (including conditions which interfere with the Company’s access to and use of such third-party services). The Company’s ability to monitor its third-party service providers’ cybersecurity practices is inherently limited. Although the agreements that the Company has in place with its third-party service providers generally include requirements relating to privacy, data protection and data security where and as appropriate, the Company cannot guarantee that such agreements will prevent a cyber incident impacting the Company’s systems or information or enable it to obtain adequate or any reimbursement from its third-party service providers in the event the Company should suffer any such incidents. In addition, due to applicable laws and regulations or contractual
obligations, the Company may be held responsible for cyber incidents attributed to its third-party service providers as they relate to the information shared with them.
Likewise, a cyber-attack, hacking incident, 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. Any failure, attempted or successful data breach or other cybersecurity incident or significant disruption in the Company’s information technology infrastructure, or those of the Company’s third-party service providers, could lead to transaction delays, compromised cybersecurity or data, inability to access critical services, and a failure to comply with applicable laws, regulations and standards governing financial transactions, data privacy, and cybersecurity. The consequences of such disruptions could be severe, resulting in financial losses, identity theft, loss of consumer trust, regulatory fines, monetary damages or other penalties or fines as well as a tarnished reputation among customers, partners and other third parties, any of which could adversely affect the Company’s business, results of operations, financial condition and future prospects. Although the Company believes it has appropriate measures in place to help manage the risk, there can be no guarantee that its efforts will be effective in preventing a material loss event.
Even when an attempted cyber-attack, hacking incident or other security breach is successfully avoided or thwarted, the Company may need to expend substantial resources to avoid such breach, may be required to take actions that could adversely affect customer satisfaction or behavior, and may be exposed to reputational damage. 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. In some cases, the Company may not be able to identify the cause or causes of these performance problems immediately or in short order, and may face difficulties detecting, mitigating, remediating, and otherwise responding to any such issues.
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 operates in a highly regulated industry and 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 and examination of government authorities charged with overseeing the kinds of financial activities conducted by the Company in its business segments and the taxation of domestic companies. These legal, regulatory, and supervisory frameworks are designed to protect public or private interests, including protecting depositors and other customers of the Bank, the FDIC’s DIF and the banking and financial systems as a whole, 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, which is incorporated by reference herein.
The Company believes that government scrutiny and the intensity of supervision of all financial-services companies has increased, fundamental changes have been made to the banking, securities, and other laws that govern financial services, and a host of related business practices have been reexamined and reshaped. The Company also may face further government scrutiny due to the increased size of the Company’s business resulting from the acquisition of HTLF. See risk below “The future results of the Company following the acquisition of HTLF may suffer if the Company does not effectively manage its expanded operations.” As a result, the Company expects to continue devoting increased time and resources to risk management, compliance, and regulatory change management. The legislative, regulatory, and supervisory environment is beyond the Company’s control, may change rapidly and unpredictably, and may negatively influence the Company’s revenue, costs, earnings, growth, liquidity and capital levels. For example, the Company is unable to predict what, if any, changes to the regulatory
environment may be enacted by Congress or a new presidential administration and what the impact of any changes will be on the Company. 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 example, the federal banking agencies regularly conduct examinations of the Company’s business. If, as a result of an examination, a banking agency were to determine that the financial condition, capital resources, asset quality, asset concentration, earning prospects, management, liquidity, sensitivity to market risk, consumer compliance, or other aspects of any of the Company’s operations has become unsatisfactory, or that the Company or the Company’s management is in violation of any law or regulation, it could take a number or different remedial actions as it deems appropriate. These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative actions to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in the Company’s capital, to restrict the Company’s growth, to change the asset composition of the Company’s portfolio or balance sheet, to assess civil money penalties against the Company’s officers or directors, to remove officers and directors and, if it is concluded that such conditions cannot be corrected or there is an imminent risk of loss to depositors, to terminate the Bank’s deposit insurance. 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, which are subject to change, and to the direct supervision of government authorities. See “Regulation and Supervision” in Part I, Item 1 of this report. If the Company is not satisfying 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 and as a result of the acquisition of HTLF may face further government scrutiny due to the increased size of the Company’s business. 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 its existing stockholders could be diluted, and the market price of its common stock could decline.
The Company is subject to complex and evolving laws, regulations, rules, standards and contractual obligations related to privacy, data protection and data security, which may increase the Company’s costs of doing business and liability exposure. The Company is subject to a variety of complex and continuously evolving and developing laws, regulations, rules, standards and contractual obligations regarding privacy, data protection and data security, including those related to the collection, storage, handling, use, disclosure, transfer, security and other processing of personal information. Compliance with such laws, regulations, rules, standards and contractual obligations may require the Company to incur significant compliance costs and/or require the Company to change its policies, procedures or operations, and failure to comply with such laws, regulations, rules, standards or contractual obligations could expose the Company to liability, including enforcement actions, fines, penalties and sanctions for non-compliance, governmental investigations and/or reputational damage, and of which could have a material adverse effect on the Company’s business, financial condition and results of operations.
At the federal level, the Company is subject to the GLBA, which requires financial institutions to, among other things, periodically disclose their privacy policies and practices relating to sharing personal information and, in some cases, enables retail customers to opt out of the sharing of certain non-public personal information with unaffiliated third parties, among other laws and regulations. The Company is also subject to the rules and regulations promulgated under the authority of the Federal Trade Commission, which regulates unfair or deceptive acts or practices, including with respect to privacy and cybersecurity. Federal banking agencies also regularly issue guidance regarding cybersecurity intended to enhance cyber risk management standards among financial institutions. Moreover, the U.S. Congress is currently considering various proposals for more comprehensive privacy, data protection and data security legislation, to which the Company may be subject if passed.
State regulators have also been increasingly active in implementing privacy and cybersecurity laws, regulations, rules and standards. Several states, including states where the Company currently conducts, or may in the future conduct, business, such as California, Nebraska, Virginia and Colorado, have implemented, or are considering implementing, comprehensive data privacy and cybersecurity laws and regulations, including regulations requiring certain financial institutions to implement cybersecurity programs. For example, laws in all 50 U.S. states generally require businesses to provide notice under certain circumstances to individuals whose personal information has been disclosed as a result of a data breach. Certain state laws and regulations may be more stringent, broader in scope or offer greater individual rights with respect to personal information than federal or other state laws and regulations, and such laws and regulations may differ from each other, which may complicate compliance efforts and increase compliance costs. This trend of state-level activity is expected to persist and the Company is continually monitoring developments in the states in which the Company’s customers are located.
Further, the Company makes public statements about its use, collection, disclosure and other processing of personal information through its privacy policies, information provided on its website and press statements. Although the Company endeavors to comply with its public statements and documentation, and to ensure that such public statements and documentation are accurate, comprehensive and compliant with applicable laws, it may at times fail to do so or be alleged to have failed to do so. The publication of the Company’s privacy policies and other statements that provide promises and assurances about privacy, data protection and data security can subject the Company to potential government or legal action if they are found to be deceptive, unfair or misrepresentative of its actual practices. Additional risks could arise in connection with any failure or perceived failure by the Company, its service providers or other third parties with which the Company does business to provide adequate disclosure or transparency to individuals, including customers, about the personal information collected from them and its use, to receive, document or honor the privacy preferences expressed by individuals, to protect personal information from unauthorized disclosure, or to maintain proper training on privacy practices for all employees or third parties who have access to personal information in the Company’s possession or control.
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 its common stock, generally creates a rebuttable presumption that the acquirer “controls” the bank holding company or depository institution and requires the acquirer to obtain the non-objection from the FRB under the CIBCA. Also, a bank holding company must obtain the prior approval of the FRB under the BHCA before, among other things, acquiring direct or indirect ownership or control of more than 5 percent of any class of voting stock of any bank, including 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 inability to adequately protect and maintain its intellectual property may increase the Company’s legal exposure and adversely impact its performance. The Company relies on a variety of measures to protect and enhance its intellectual property portfolio, including trademarks, trade secrets and restrictions on disclosure, and undertakes other measures to control access to and distribution of its proprietary and confidentiality information. However, such measures may not prevent misappropriation of the Company’s proprietary or
confidential information or infringement, misappropriation or other violations of its intellectual property rights. Additionally, the Company’s competitors or other third parties may allege that the Company’s systems, processes or technologies (or that the Company’s use of its third-party service providers’ systems, processes or technologies) infringe upon, misappropriate or otherwise violation their intellectual property rights. If the Company’s intellectual property rights are infringed or misappropriated, or if the Company’s competitors or other third parties prevail in any intellectual property-related litigation against the Company, the Company could suffer a competitive disadvantage, be prevented from using technology important to its business for which there may be no appropriate alternative technology available at a commercially reasonable price or at all, lose significant revenues, include significant license, royalty, technology development or other expenses, or pay significant damages, all of which could have a material adverse effect on the Company’s business, financial condition and results of operations.
The Company’s business relies on systems, employees, service providers, and other third parties, and failures or errors by any of them or other operational risks associated with the Company’s reliance on third parties could adversely affect the Company. The Company relies on hosted and on-premises systems, employees, service providers, and other third parties to properly oversee, administer, and process a high volume of transactions and otherwise support the Company’s day-to-day operations. This gives rise to meaningful operational risk-including the risk of fraud by employees or outside parties, unauthorized access to the Company’s premises or systems, errors in processing, failures of technology, breaches of internal controls or compliance safeguards, malware and other security or hacking incidents, inadequate integration of acquisitions, human or software errors, design or performance issues, capacity constraints or unexpected transaction volumes, unavailability of systems and services, including due to electrical or telecommunications outages, bad weather, acts of terrorism or the like, and other breakdowns in business continuity plans or acts of misconduct.
The Company relies on the business infrastructure and technology systems of third parties (and their supply chains) with which it does business and/or to whom it outsources the operation, maintenance and development of its key information technology and communications systems as well as other key components of its business operations. If the Company or its service providers fail to architect, administer or oversee such infrastructure or systems in a well-managed, secure and effective manner, or if such infrastructure or systems become unavailable, are disrupted, fail to scale, do not operate as designed, or do not meet their service level agreements for any reason, the Company may experience unplanned service disruption or unforeseen costs which could result in material harm to the Company’s business and operations. The Company must successfully develop and maintain information, financial reporting, disclosure, privacy, data protection, data security and other controls adapted to the Company’s reliance on outside platforms and providers. The Company faces a risk that its third-party service providers might be unable or unwilling to continue to provide these or other services to meet its current or future needs in an efficient, cost-effective, or favorable manner or may terminate or seek to terminate their contractual relationships with the Company. In addition, service providers utilizing third-party technology or other intellectual property in connection with their provision of services may face allegations of misappropriation, misuse, infringement or other intellectual property rights violations, which could result in the Company losing access to such technology or services. Any transition to alternative third-party service providers or internal solutions may be difficult to implement, may cause the Company to incur significant time and expense and may disrupt or degrade the Company’s ability to deliver its products and services. Thus, the infrastructure and systems that are outsourced to third-party service providers may increase the Company’s risk exposure.
The soundness of other financial institutions could adversely affect the Company. Adverse developments affecting the overall strength and soundness of other financial institutions, the financial services industry as a whole and the general economic climate and the U.S. Treasury market could have a negative impact on perceptions about the strength and soundness of the Company’s business even if the Company is not subject to the same adverse developments. In addition, adverse developments with respect to third parties with whom the Company has important relationships could also negatively impact perceptions about the Company. These perceptions about the Company could cause its business to be negatively affected and exacerbate the other risks that the Company faces.
The Company may be impacted by actual or perceived soundness of other financial institutions, including as a result of the financial or operational failure of a major financial institution, or concerns about the creditworthiness of such a financial institution or its ability to fulfill its obligations, which can cause substantial and cascading disruption within the financial markets and increased expenses, including FDIC insurance premiums, and could affect the Company’s ability to attract and retain depositors and to borrow or raise capital. For example, during 2023 the FDIC took control and was appointed receiver of Silicon Valley Bank, Signature Bank, and First Republic Bank. The failure of other banks and financial institutions and the measures taken by governments, businesses, and other
organizations in response to those events could adversely impact the Company’s business, financial condition and results of operations.
The Company’s ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services institutions are interrelated because of trading, clearing, counterparty and other relationships. The Company routinely executes transactions with counterparties in the financial services industry, including brokers and dealers, the FHLB, commercial banks, investment banks, payment processors, and other institutional clients, which may result in payment obligations to the Company or to its clients due to products it has arranged. As a result, defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, have led to market-wide liquidity problems and losses of depositor, creditor, and counterparty confidence and could lead to losses or defaults by the Company or by other institutions. Many of these transactions expose the Company to credit and market risk that may cause its counterparty or client to default. In addition, the Company is exposed to market risk when the collateral it holds cannot be realized or is liquidated at prices not sufficient to recover the full amount of the secured obligation. Any losses arising from such occurrences could materially and adversely affect the Company’s business, results of operations or 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. The financial services industry is undergoing rapid technological change with frequent introductions of new technology-driven products and services. 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 are of significant duration, are tied to critical systems, and require substantial internal and external resources. Furthermore, to the extent these initiatives may implicate new technologies or solutions such as those related to artificial intelligence or automation, additional risk may be present. 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. Financial services companies are highly vulnerable to reputational damage when they are found to have harmed customers, particularly retail customers, through conduct that is seen as illegal, unfair, deceptive, abusive, manipulative, or otherwise wrongful. 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.
In addition, the speed with which information spreads through news, social media and other sources, including on the internet, means that negative information about the Company can rapidly have a broadly adverse impact on its reputation. This is true whether or not the information is accurate. Once information has gone viral, it can be difficult to counter it effectively, either by correcting inaccuracies or communicating remedial steps taken for actual issues. The potential impact of negative information going viral and the ease with which customers transact means that material reputational harm can result from a single discrete or isolated incident.
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. 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. See risk below “The financial services industry is rapidly evolving and the Company may not be successful in introducing new products or services on a large scale in response to these changes.”
The financial services industry is rapidly evolving and the Company may not be successful in introducing new products or services on a large scale in response to these changes. Technological changes continue to significantly impact the financial services industry. For example, the Company may be unsuccessful in deploying new technologies to strengthen its credit underwriting capabilities, enhance the effectiveness of its marketing efforts, enhance customer service, drive efficiencies in back-office functions or reduce fraud. The competitive mobile, e-wallet and tokenization spaces are expected to continue to bring risks and opportunities to digital banking business.
The process of developing new products and services or enhancing the Company’s existing products and services is complex, costly and uncertain. Difficulties or delays in the development, production, testing and marketing of new products or services may be caused by a number of factors including, among other things, operational, capital and regulatory constraints. The occurrence of such difficulties may affect the success of the Company’s products or services. Developing unsuccessful products and services could result in financial losses as well as decreased capital availability. In addition, the new products and services offered may not be adopted by consumers or financial institution customers. Also, the success of a new product or service may depend upon the Company’s ability to deliver it on a large scale, which may require a significant capital investment that it may not be in a position to make. If the Company is unable to successfully introduce and support new income-generating products and services while also managing expenses, it may impact its ability to compete effectively and materially adversely affect the Company’s business, financial condition and results of operations.
The Company may not be able to successfully integrate HTLF or to realize the anticipated benefits of the acquisition of HTLF. Following consummation of the acquisition of HTLF, the Company began the process of integrating HTLF. A successful integration of its business with the Company will depend substantially on the Company’s ability to consolidate operations, corporate cultures, systems and procedures and to eliminate redundancies and costs. The Company may not be able to combine its business with the business of HTLF without encountering difficulties that could adversely affect the ability to maintain relationships with existing clients, customers, depositors and employees, such as:
•the loss of key employees;
•the disruption of operations and business;
•inability to maintain and increase competitive presence;
•loan and deposit attrition customer loss and revenue loss;
•additional costs or unexpected problems with operations, personnel, third-party service providers, technology and credit;
•inconsistencies in standards, controls, procedures and policies; and/or
•problems with the assimilation of new operations, systems, sites or personnel, which could divert resources from regular banking operations.
Any disruption to the businesses could cause customers to remove their accounts and move their business to a competing financial institution. Integration efforts between the two companies may also divert management attention and resources. Additionally, general market and economic conditions or governmental actions affecting the financial industry generally may inhibit our successful integration of HTLF.
Further, the Company acquired HTLF with the expectation that the acquisition will result in various benefits including, among other things, benefits relating to enhanced revenues, a strengthened market position for the combined company, cross selling opportunities, technological efficiencies, cost savings and operating efficiencies. Achieving the anticipated benefits of the acquisition of HTLF is subject to a number of uncertainties, including whether the Company integrates HTLF in an efficient, effective and timely manner, and general competitive factors in the marketplace. Failure to achieve these anticipated benefits on the anticipated timeframe, or at all, could result in a reduction in the price of the Company’s common stock as well as in increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy and could materially and adversely affect the Company’s business, financial condition and operating results. Additionally, following consummation of the acquisition of HTLF, the Company made fair value estimates of certain assets and liabilities in recording the acquisition. Actual values of these assets and liabilities could differ from the estimates, which could impact regulatory capital ratios and result in the Company not achieving the anticipated benefits of the acquisition of HTLF. Finally, any cost savings that are realized may be offset by losses in revenues or other charges to earnings.
The Company has incurred, and expects to continue to incur, significant transaction and acquisition-related costs in connection with the acquisition of HTLF. The Company has incurred, and expects to continue to incur, significant non-recurring costs associated with combining the operations of HTLF with its operations. These costs include legal, financial advisory, accounting, consulting and other advisory fees, severance/employment-related costs, public company filing fees and other regulatory fees, printing costs and other related costs. The Company has been collecting information in order to formulate detailed integration plans to deliver anticipated cost savings. Additional unanticipated costs may be incurred in the integration of the Company’s business with the business of HTLF, and there are many factors beyond the Company’s control that could affect the total amount or timing of integration costs. Although the Company expects that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, may offset incremental transaction and acquisition-related costs over time, this net benefit may not be achieved in the near term, or at all.
The dilution caused by the issuance of shares of the Company’s common stock in connection with the merger may adversely affect the market price of the Company’s common stock. The Company issued approximately 23.6 million shares of common stock as merger consideration to HTLF stockholders, and assuming full physical settlement, the Company will issue 3.2 million shares of common stock pursuant to the forward sale agreements. The dilution caused by the issuance of the shares of the Company’s common stock to HTLF stockholders in connection with the payment of the merger consideration may result in fluctuations in the market price of the Company’s common stock, including a stock price decrease.
The market price for the Company’s common stock following the acquisition of HTLF may be affected by factors different from those that historically have affected the Company’s common stock. Following the acquisition of HTLF, the Company is now subject to risks related to HTLF’s historical business and has taken on its loans, investments and other obligations. This increased the Company’s credit risk and, if such obligations are not repaid or losses are incurred on such obligations, there could be material and adverse effects on the Company’s business. Additionally, where the Company’s historical business and HTLF’s historical business overlap, any risks the Company faces may be increased due to the acquisition of HTLF. For example, HTLF’s loan portfolio has a large concentration of commercial real estate loans, which the Company has added to its existing portfolio. This may exacerbate the risks the Company already undertakes with its own historical portfolio comprised meaningfully of commercial real estate loans and may result in new ones. Additionally, the value of real estate can fluctuate significantly in a short period of time as a result of market conditions in any of the geographic bank markets in which such real estate is located, as well as because funds are advanced based on estimates of costs and the estimated value of the completed project and therefore have a greater risk of default in a weaker economy. Construction projects require prudent underwriting including determination of a borrower’s ability to complete the project, while staying within budget and on time in accordance with construction plans. Economic events, supply chain issues, labor market disruptions, and other factors outside the Company’s control, or that of the borrowers, could negatively impact the future cash flow and market values of affected properties.
The future results of the Company following the acquisition of HTLF may suffer if the Company does not effectively manage its expanded operations. As a result of the acquisition of HTLF, the size of the business of
the Company will increase significantly. The Company’s future success will depend, in part, upon its ability to manage this expanded business, which may pose challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity. The Company may also face additional regulatory requirements and scrutiny from governmental authorities as a result of the significant increase in the size of its business. The Company’s failure to meet such heightened expectations may expose it to regulatory enforcement actions and civil penalties which could have an adverse material impact on the Company’s business, financial condition, operations and reputation and could jeopardize the Company’s ability to pursue acquisition opportunities.
In addition, HTLF’s historical bank subsidiary (HTLF Bank) was a Colorado state-chartered non-member bank subject to primary federal bank regulatory oversight by the FDIC and state bank regulatory oversight by the Colorado Department of Regulatory Agencies, Division of Banking, while the Bank is a national bank subject to oversight by the OCC. The laws, regulations, regulatory guidance and supervision applicable to HTLF Bank and the Bank therefore differ in ways that may affect the future operations of the Company following the acquisition of HTLF.
Additionally, the internal policies of HTLF Bank and the Bank with regards to their investment portfolios may differ on factors such as hold limits per bond issuer, life of the bond, or credit risk appetite. As a result, there are assets on the balance sheet of HTLF Bank that the Bank does not hold, whether based on differences in regulatory oversight or internal policies. Further, the Company may replace such disposed assets with lower-yielding investments, any of which could impact its future earnings and return on equity.
There can be no assurances that the Company will be successful following the acquisition of HTLF or that it will realize the expected operating efficiencies, cost savings or other benefits currently anticipated from the acquisition of HTLF.
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 strives to improve 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 programs being in place, its risk-management or compliance personnel are ineffective in executing them and mitigating risk and loss.
Some of the Company’s methods of managing risks are based upon use of observed historical market behavior, the use of analytical and/or forecasting models and management’s judgment. These methods may not accurately predict future exposures, which could be significantly greater than the historical measures or modes indicate. For example, credit risk is inherent in the financial services business and results from, among other things, extending credit to customers. The Company’s ability to assess the creditworthiness of its customers may be impaired if the models and approaches used to select, manage and underwrite consumer and commercial customers become less predictive of future charge-offs due to, for example, rapid changes in the economy.
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. 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, including as a result of the acquisition of HTLF, 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. Additionally, the Company may incur costs in connection with the defense or settlement of any shareholder or stockholder lawsuits filed in connection with the acquisition of HTLF. 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 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. 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 engage 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. In addition, regulatory authorities may impose conditions on the completion of the acquisition or require changes to its terms that materially affect the terms of the transaction or the Company’s ability to capture some of the opportunities presented by the transaction. Any failure or delay in, or imposition of conditions on, closing an acquisition could adversely affect the Company’s reputation, business, results of operations, financial condition, or prospects.
Moreover, the standards by which bank and financial institution acquisitions will be evaluated may be subject to change. For example, the OCC adopted a final rule in September 2024 amending its procedures for reviewing applications under the BMA and adding a policy statement on the OCC’s substantive approach to evaluating bank
mergers under the BMA. The policy statement outlines the general principles the OCC will apply when reviewing bank merger applications and clarifies how the OCC would consider the statutory factors under the BMA. The policy statement identifies certain indicators that are more likely to withstand scrutiny and be approved expeditiously and those that would raise supervisory or regulatory concerns. Indicators generally consistent with timely approval, include, among others, appropriate capital and supervisory ratings, lack of enforcement or fair lending actions, lack of significant CRA or consumer compliance concerns or significant adverse effect on competition, and that the resulting institution would have total assets less than $50 billion, which the Company already exceeded prior to the acquisition of HTLF.
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. Further, the Company’s ability to complete future acquisitions may depend on factors outside its control, including changes in the presidential administration or in one or both houses of Congress. 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. See risk above “The financial services industry is rapidly evolving and the Company may not be successful in introducing new products or services on a large scale in response to these changes.” 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. For example, certain federal and state laws and regulations related to ESG issues may include provisions that conflict with other laws and regulations, which may increase the Company’s costs or limit the Company’s ability to conduct business in certain jurisdictions. In particular, there is an increasing number of state-level anti-ESG initiatives in the United States that may conflict with other regulatory requirements or the Company’s various stakeholders’ expectations. Such divergent, sometimes conflicting, views on ESG-related matters increase the risk that any action or lack thereof by the Company on such matters will be perceived negatively by some stakeholders. 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 or conflicts among 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 proposed and advanced 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. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED 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.

---

ITEM 2. PROPERTIES
ITEM 2. PROPERTIES
The Company's headquarters building is located at 1010 Grand Boulevard in downtown Kansas City, Missouri. The building opened in July 1986 and all 250,000 square feet are occupied by departments and customer service functions of the Bank, as well as administrative offices for the Company.
Other main facilities of the Bank in downtown Kansas City, Missouri are located at 928 Grand Boulevard (215,000 square feet) and 1008 Oak Street (200,000 square feet). The 928 Grand building houses administrative support functions for the Bank. The 1008 Oak building, which opened during 1999, houses the Company’s operations and data processing functions.
The Bank leases 48,771 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 administrative support functions for the Bank.
The Bank also leases 34,681 square feet on the first, second, 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 operational and administrative support functions for the Bank.
As of December 31, 2024, the Bank operated a total of 93 branches.
UMBFS leases 85,164 square feet at 235 West Galena Street in Milwaukee, Wisconsin, for its fund services operations. Additionally, UMBFS leases 18,655 square feet at 2225 Washington Boulevard in Ogden, Utah, and 8,339 square feet at 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 Leases,” in the Notes to the Consolidated Financial Statements in Item 8 of this report, and is hereby incorporated by reference herein.

---

ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS
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 DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II

---

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
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 21, 2025, the Company had 2,884 shareholders of record.
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, 2024:
ISSUER PURCHASES OF EQUITY SECURITIES
Period
Total Number of Shares (or Units) Purchased (1)
Average Price Paid per Share (or Unit)
Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (2)
Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
October 1 - October 31, 2024
-
$
-
-
1,000,000
November 1 - November 30, 2024
-
-
-
1,000,000
December 1 - December 31, 2024
-
-
-
1,000,000
Total
-
$
-
-
(1) Includes shares acquired pursuant to the Company's share-based incentive programs. Under the terms of the Company's share-based incentive programs, the Company accepts previously owned shares of common stock surrendered to satisfy tax withholding obligations associated with equity compensation. These purchases do not count against the maximum value of shares remaining available for purchase under Repurchase Authorizations.
(2) Includes shares acquired under the Board of Directors approved Repurchase Authorization(s).
On April 30, 2024, the Company’s Board of Directors (the Board) authorized the repurchase of up to one million shares of the Company’s common stock, which will terminate on April 29, 2025 (a Repurchase Authorization). The Company has not made any repurchases other than through the Repurchase Authorization, but did acquire shares pursuant to the Company's share-based incentive programs. The Company is not currently engaging in repurchases. In the future, it may determine to resume repurchases. All share purchases pursuant to a Repurchase Authorization 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 shares of common stock. For discussion of management's intentions regarding dividends, see “Results of Operations” in Part II, Item 7 and “Liquidity Risk” in Part II, Item 7A of this report.
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, 2019 and reinvestment of dividends. The performance graph represents past performance and should not be considered to be an indication of future performance.
Index
UMB Financial Corporation
$
100.00
$
102.64
$
160.16
$
128.18
$
131.02
$
179.94
S&P US BMI Banks Index
100.00
87.24
118.61
98.38
107.32
143.68
S&P 500 Index
100.00
118.40
152.39
124.79
157.59
197.02

---

ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. [RESERVED]

---

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
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, 2024. 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;
•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;
•the pace and magnitude of interest rate movements;
•changes in accounting standards or policies;
•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 spending, borrowing, or saving by businesses or households;
•the Company’s ability to effectively manage capital or liquidity or to effectively attract or deploy deposits;
•changes in any credit rating assigned to the Company or its affiliates;
•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 innovate to anticipate the needs of current or future customers, to successfully compete in its chosen business lines, to increase or hold market share in changing competitive environments, or to deal with pricing or other competitive pressures;
•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;
•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 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 capacity to withstand cyber-attacks;
•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 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 and divest assets;
•the Company’s ability to complete the planned issuance of shares of the Company’s common stock in connection with the forward sale agreements;
•the Company’s ability to manage the expenses associated with the merger with HTLF and the impact these expenses may have on the Company’s financial results;
•the benefits from the merger with HTLF may not be fully realized or may take longer to realize than expected;
•the Company’s ability to promptly and effectively integrate the merger of HTLF;
•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 and retain qualified employees;
•natural disasters, war, terrorist activities, including instability in the Middle East and Russia's military action in Ukraine, pandemics, and their effects on economic and business environment in which the Company operates;
•macroeconomic and adverse developments and uncertainties related to the collateral effects of the collapse of, and challenges for, domestic and international banks, including the impacts to the U.S. and global economies and reputational harm to the U.S. banking system; 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
The Company focuses on the following four core financial objectives. Management believes these objectives will guide its efforts to achieve its vision, to deliver the Unparalleled Customer Experience, all while seeking to improve net income and strengthen the balance sheet while undertaking prudent risk management.
The first financial objective is to continuously improve operating efficiencies. The Company has focused on identifying efficiencies that simplify its organizational and reporting structures, streamline back-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 2024, total revenue increased 11.4%, and noninterest expense increased 2.8%, as compared to the previous year. 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 financial objective is to increase net interest income through profitable loan and deposit growth and the optimization of the balance sheet. For 2024, net interest income increased $80.8 million, or 8.8%, as compared to the previous year. The Company has shown increased net interest income through the effects of increased volume and mix of average earning assets, coupled with higher interest rates. This increase was partially offset by higher interest-bearing deposit rates. Average earning assets increased $3.3 billion, or 8.9%, compared to 2023. Average loan balances increased $1.9 billion, coupled with an increase in average interest-bearing due from banks of $1.4 billion from the prior year. The funding for these assets was driven primarily by a 19.4% increase in average interest-bearing deposits, partially offset by a 37.4% decrease in average borrowed funds and a decrease of 5.3% in noninterest-bearing deposits. Net interest margin, on a fully tax-equivalent (FTE) basis, decreased one basis point compared to the same period in 2023 in large part due to repricing and mix changes of interest-bearing liabilities with the changes in short-term interest rates, partially offset by the repricing of earning assets. Net interest spread contracted by three basis points during the same period.
The third financial objective is to grow the Company’s revenue from noninterest sources. The Company seeks to grow noninterest revenues throughout all economic and interest rate cycles, while positioning itself to benefit in periods of economic growth. Noninterest income increased $86.3 million, or 15.9%, to $628.1 million for the year ended December 31, 2024, compared to the same period in 2023. The increase in 2024 was driven by increased trust and securities processing income, other miscellaneous income, investment securities gains, net, and bankcard income. These changes are discussed in greater detail below under Noninterest income. For the year ended December 31, 2024, noninterest income represented 38.6% of total revenues, as compared to 37.1% for 2023.
The fourth financial 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 business growth 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, 2024, the Company had a total risk-based capital ratio of 13.21% and $3.5 billion in total shareholders’ equity, an increase of $366.1 million, or 11.8%, compared to total shareholders’ equity at December 31, 2023. The Company did not repurchase shares of common stock during 2024 except for shares acquired pursuant to the Company's share-based incentive programs. In 2024, the Company declared $77.1 million in dividends, which represents a 2.4% increase compared to dividends declared during 2023.
Earnings Summary
The Company recorded consolidated net income of $441.2 million for the year ended December 31, 2024. This represents a 26.1% increase over 2023. Net income for 2023 was $350.0 million, or a decrease of 18.9% compared to 2022. Basic earnings per share for the year ended December 31, 2024, were $9.05 per share compared to $7.22 per share in 2023, an increase of 25.3%. Basic earnings per share were $8.93 per share in 2022, or a decrease of 19.1% from 2022 to 2023. Fully diluted earnings per share increased 25.2% from 2023 to 2024 and decreased 19.0% from 2022 to 2023. Return on average assets and return on average common shareholder’s equity
for the year ended December 31, 2024 were 1.02% and 13.24%, respectively, compared to 0.88% and 12.23%, respectively, for the year ended December 31, 2023. 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.
The Company’s net interest income increased to $1.0 billion in 2024 compared to $920.1 million in 2023 and $913.8 million in 2022. In total, net interest income increased $80.8 million, as compared to 2023, primarily driven by a favorable volume variance of $88.5 million, offset by a $7.7 million rate variance. See Table 2. The favorable volume variance on earning assets was predominantly driven by an increase of $3.3 billion, or 8.9%, in average earning assets. In 2024, average loan balances increased $1.9 billion, coupled with an increase in average interest-bearing due from banks of $1.4 billion as compared to 2023. Net interest margin, on an FTE basis, decreased to 2.51% for 2024, compared to 2.52% for the same period in 2023, driven by repricing and mix changes of interest-bearing liabilities with the changes in short-term interest rates, partially offset by the repricing of earning assets. Net interest spread contracted by three basis points during the same period. The Company has seen a small increase in the benefit from interest-free funds as compared to 2023 driven by the changes in short-term interest rates. The impact of this benefit increased two basis points compared to 2023 and is illustrated on Table 3. The magnitude and duration of this impact will be largely dependent upon the FRB’s policy decisions and market movements. See Table 21 in Item 7A for an illustration of the impact of an interest rate increase or decrease on net interest income as of December 31, 2024.
The provision for credit losses totaled $61.1 million for the year ended December 31, 2024, which is an increase of $19.8 million, or 48.1%, compared to the same period in 2023. This change is driven by 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 $86.3 million, or 15.9%, in noninterest income in 2024, as compared to 2023, and a decrease of $12.4 million, or 2.2%, in 2023, compared to 2022. The increase in 2024 is primarily driven by increased trust and securities processing of $33.4 million, increased other income of $14.1 million, increased investment securities gains, net of $13.9 million, and increased bankcard fees of $13.1 million. The decrease in 2023 is primarily driven by decreased investment securities gains, net of $61.6 million, partially offset by an increase in trust and securities processing of $20.0 million and other income of $21.0 million. The change in noninterest income in 2024 from 2023, and 2023 from 2022 is illustrated in Table 6.
Noninterest expense increased in 2024 by $27.5 million, or 2.8%, compared to 2023 and increased by $101.0 million, or 11.2%, in 2023 compared to 2022. The increase in 2024 is primarily driven by increases in salaries and employee benefit expense of $40.5 million, increased legal and consulting fees of $16.2 million, increased processing fees of $14.8 million, and increased bankcard expense of $11.3 million, partially offset by decreased regulatory fees of $45.1 million related to the FDIC special assessment. The increase in 2023 is primarily driven by the FDIC special assessment of $52.8 million, and increases in salaries and employee benefits expense and processing fees. The increase in noninterest expense in 2024 from 2023, and 2023 from 2022 is illustrated in Table 7 and below under Noninterest Expense.
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 2024, 2023 and 2022.
Net interest margin, presented in Table 1, is calculated as net interest income on a fully tax-equivalent basis 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, 2024, 2023 and 2022. Net interest income, average balance sheet amounts and the corresponding yields earned and rates paid for the years 2022 through 2024 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)
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)
$
24,212.6
$
1,613.2
6.66
%
$
22,337.1
$
1,400.2
6.27
%
Securities:
Taxable
9,290.8
257.6
2.77
9,097.1
215.0
2.36
Tax-exempt (FTE)
3,634.6
124.9
3.44
3,790.9
128.2
3.38
Total securities
12,925.4
382.5
2.96
12,888.0
343.2
2.66
Federal funds sold and resell agreements
303.1
17.6
5.82
316.1
17.7
5.58
Interest-bearing due from banks
3,482.4
182.1
5.23
2,046.4
103.2
5.04
Other earning assets (FTE)
22.3
1.5
6.53
14.0
0.8
5.65
Total earning assets (FTE)
40,945.8
2,196.9
5.37
37,601.6
1,865.1
4.96
Allowance for credit losses
(235.4
)
(216.2
)
Cash and due from banks
459.6
456.6
Other assets
2,019.8
1,888.3
Total assets
$
43,189.8
$
39,730.3
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing demand and savings deposits
$
22,949.6
$
882.6
3.85
%
$
18,374.9
$
588.3
3.20
%
Time deposits under $250,000
1,113.1
65.4
5.88
1,967.0
92.4
4.70
Time deposits of $250,000 or more
1,161.5
34.3
2.95
780.4
23.5
3.01
Total interest-bearing deposits
25,224.2
982.3
3.89
21,122.3
704.2
3.33
Short-term debt
1,063.4
53.4
5.02
1,929.0
96.4
5.00
Long-term debt
384.2
27.8
7.24
382.3
25.0
6.54
Federal funds purchased
80.1
4.1
5.05
170.0
8.4
4.97
Securities sold under agreements to repurchase
2,258.4
102.5
4.54
2,005.4
84.6
4.22
Total interest-bearing liabilities
29,010.3
1,170.1
4.03
25,609.0
918.6
3.59
Noninterest-bearing demand deposits
10,077.2
10,640.4
Other
769.5
618.2
Total
39,857.0
36,867.6
Total shareholders' equity
3,332.8
2,862.7
Total liabilities and shareholders' equity
$
43,189.8
$
39,730.3
Net interest income (FTE)
$
1,026.8
$
946.5
Net interest spread (FTE)
1.34
%
1.37
%
Net interest margin (FTE)
2.51
%
2.52
%
(1)Interest income and yields are stated on an FTE basis, using a federal income tax rate of 21% for 2024, 2023, and 2022. The tax-equivalent interest income and yields 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. Rates earned/paid may not compute to the rates shown due to presentation in millions. The tax-equivalent interest income totaled $25.9 million, $26.4 million, and $25.8 million in 2024, 2023, and 2022, respectively.
(2)Loan fees are included in interest income. Such fees totaled $21.4 million, $17.7 million, and $18.2 million in 2024, 2023, and 2022, respectively.
(3)Loans on nonaccrual are included in the computation of average balances. Interest income on these loans is also included in loan income.
THREE YEAR AVERAGE BALANCE SHEETS/YIELDS AND RATES (tax-equivalent basis)
(in millions)
Average Balance
Interest Income/ Expense (1)
Rate Earned/ Paid (1)
ASSETS
Loans and loans held for sale (FTE) (2) (3)
$
18,823.8
$
810.1
4.30
%
Securities:
Taxable
9,616.7
192.1
2.00
Tax-exempt (FTE)
3,885.1
122.8
3.16
Total securities
13,501.8
314.9
2.33
Federal funds sold and resell agreements
965.9
19.1
1.98
Interest-bearing due from banks
2,408.5
18.6
0.77
Other earning assets (FTE)
12.1
0.6
4.96
Total earning assets (FTE)
35,712.1
1,163.3
3.26
Allowance for credit losses
(184.1
)
Cash and due from banks
420.0
Other assets
1,631.0
Total assets
$
37,579.0
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing demand and savings deposits
$
17,333.0
$
162.2
0.94
%
Time deposits under $250,000
95.0
0.7
0.74
Time deposits of $250,000 or more
635.5
4.6
0.72
Total interest-bearing deposits
18,063.5
167.5
0.93
Short-term debt
8.6
0.3
3.49
Long-term debt
300.6
15.2
5.06
Federal funds purchased
249.7
5.2
2.10
Securities sold under agreements to repurchase
2,527.4
35.5
1.40
Total interest-bearing liabilities
21,149.8
223.7
1.06
Noninterest-bearing demand deposits
13,264.1
Other
438.8
Total
34,852.7
Total shareholders' equity
2,726.3
Total liabilities and shareholders' equity
$
37,579.0
Net interest income (FTE)
$
939.6
Net interest spread (FTE)
2.20
%
Net interest margin (FTE)
2.63
%
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 Rate
Increase (Decrease)
2024 vs. 2023
Volume
Rate
Total
Change in interest earned on:
$
24,212,645
$
22,337,119
6.66
%
6.27
%
Loans
$
121,804
$
91,183
$
212,987
Securities:
9,290,809
9,097,110
2.77
2.36
Taxable
4,664
37,917
42,581
3,634,588
3,790,921
3.44
3.38
Tax-exempt
(4,989
)
2,167
(2,822
)
303,096
316,072
5.82
5.58
Federal funds and resell agreements
(739
)
(19
)
3,482,402
2,046,349
5.23
5.04
Interest-bearing due from banks
74,976
3,979
78,955
22,311
14,030
6.53
5.65
Trading securities
40,945,851
37,601,601
5.37
4.96
Total
196,207
136,097
332,304
Change in interest incurred on:
25,224,201
21,122,305
3.89
3.33
Interest-bearing deposits
149,076
129,016
278,092
80,017
169,997
5.05
4.97
Federal funds purchased
(4,538
)
(4,403
)
2,258,438
2,005,418
4.54
4.22
Securities sold under agreements to repurchase
11,179
6,756
17,935
1,447,646
2,311,238
5.61
5.25
Borrowed Funds
(47,986
)
7,890
(40,096
)
$
29,010,302
$
25,608,958
4.03
%
3.59
%
Total
107,731
143,797
251,528
Net interest income
$
88,476
$
(7,700
)
$
80,776
Average Volume
Average Rate
Increase (Decrease)
2023 vs. 2022
Volume
Rate
Total
Change in interest earned on:
$
22,337,119
$
18,823,810
6.27
%
4.30
%
Loans
$
171,189
$
418,765
$
589,954
Securities:
9,097,110
9,616,691
2.36
2.00
Taxable
(10,813
)
33,673
22,860
3,790,921
3,885,153
3.38
3.16
Tax-exempt
(3,142
)
8,149
5,007
316,072
965,911
5.58
1.98
Federal funds and resell agreements
(19,173
)
17,711
(1,462
)
2,046,349
2,408,468
5.04
0.77
Interest-bearing due from banks
(3,203
)
87,811
84,608
14,030
12,076
5.65
4.96
Trading securities
37,601,601
35,712,109
4.96
3.26
Total
134,975
566,210
701,185
Change in interest incurred on:
21,122,305
18,063,498
3.33
0.93
Interest-bearing deposits
32,883
503,774
536,657
169,997
249,663
4.97
2.10
Federal funds purchased
(2,103
)
5,307
3,204
2,005,418
2,527,426
4.22
1.40
Securities sold under agreements to repurchase
(8,697
)
57,816
49,119
2,311,238
309,204
5.25
5.00
Borrowed Funds
105,080
105,886
$
25,608,958
$
21,149,791
3.59
%
1.06
%
Total
127,163
567,703
694,866
Net interest income
$
7,812
$
(1,493
)
$
6,319
Table 3
ANALYSIS OF NET INTEREST MARGIN (in thousands)
Average earning assets
$
40,945,851
$
37,601,601
$
35,712,109
Interest-bearing liabilities
29,010,302
25,608,958
21,149,791
Interest-free funds
$
11,935,549
$
11,992,643
$
14,562,318
Free funds ratio (interest free funds to average earning assets)
29.15
%
31.89
%
40.78
%
Tax-equivalent yield on earning assets
5.37
%
4.96
%
3.26
%
Cost of interest-bearing liabilities
4.03
3.59
1.06
Net interest spread
1.34
%
1.37
%
2.20
%
Benefit of interest-free funds
1.17
1.15
0.43
Net interest margin
2.51
%
2.52
%
2.63
%
The Company experienced an increase in net interest income of $80.8 million, or 8.8%, for the year ended December 31, 2024, compared to 2023. This follows an increase of $6.3 million, or 0.7%, for the year ended December 31, 2023, compared to 2022. Average earning assets for the year ended December 31, 2024 increased by $3.3 billion, or 8.9%, compared to the same period in 2023. Net interest margin, on a tax-equivalent basis, decreased to 2.51% for 2024 compared to 2.52% in 2023.
The Company funds a significant portion of its balance sheet with noninterest-bearing demand deposits. Noninterest-bearing demand deposits represented 31.6%, 33.9% and 40.6% of total outstanding deposits as of December 31, 2024, 2023 and 2022, respectively. The decrease in 2024 is driven by the increase in short-term interest rates. As illustrated in Table 3, the impact from these interest-free funds was 117 basis points in 2024, as compared to 115 basis points in 2023 and 43 basis points in 2022.
The Company experienced an increase in net interest income during 2024 due to a volume variance of $88.5 million, offset by a negative rate variance of $7.7 million. The average rate on earning assets during 2024 increased by 41 basis points, while the average rate on interest-bearing liabilities increased by 44 basis points, resulting in a three basis-point decrease in spread. The volume of loans increased from an average of $22.3 billion in 2023 to an average of $24.2 billion in 2024, driven by organic loan growth. The volume of interest-bearing liabilities increased from $25.6 billion in 2023 to $29.0 billion in 2024. The Company expects to see continued volatility in the economic markets and governmental responses to inflation, geopolitical tensions, and supply chain constraints. These changing economic conditions and governmental responses could have impacts on the balance sheet and income statement of the Company in 2025. 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 2025, approximately $1.5 billion of available-for-sale securities are expected to have principal repayments. This includes approximately $317 million that will have principal repayments during the first quarter of 2025. The available-for-sale investment portfolio had an average life of 56.0 months, 52.6 months, and 62.3 months as of December 31, 2024, 2023, and 2022, respectively.
Provision and Allowance for Credit Losses
The ACL represents management’s judgment of total expected losses included in the Company’s loan portfolio as of the balance sheet date. 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, 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 estimate 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 book and held-to-maturity security portfolio.
The process involves the consideration of quantitative and qualitative factors relevant 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 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 ACL against the risk in the entire loan portfolio and therefore, the allocation of the ACL to a particular loan segment may change in the future. Management of the Company believes the present ACL 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 ACL and/or need to change its current level of provision. For more information on loan portfolio segments and ACL methodology refer to Note 3, “Loans and Allowance for Credit Losses,” in the Notes to the Consolidated Financial Statements.
Table 4
ALLOCATION OF ALLOWANCE FOR CREDIT LOSSES ON LOANS (in thousands)
This table presents an allocation of the allowance for credit losses on loans and percent of loans to total loans by loan portfolio segment, which represents the total 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.
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
$
160,912
42.5
%
$
155,658
42.8
%
Specialty lending
-
1.8
-
2.2
Commercial real estate
77,340
39.5
45,507
38.4
Consumer real estate
4,327
12.4
6,941
12.8
Consumer
0.8
1,089
0.7
Credit cards
14,272
2.3
7,935
1.8
Leases and other
1,272
0.7
2,608
1.3
Total allowance for credit losses on loans
$
259,089
100.0
%
$
219,738
100.0
%
Table 5 presents a summary of the Company’s ACL for the years ended December 31, 2024 and 2023. Also, please see “Quantitative and Qualitative Disclosures About Market Risk - Credit Risk Management” 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 ACL methodology refer to Note 3, “Loans and Allowance for Credit Losses,” in the Notes to the Consolidated Financial Statements.
As illustrated in Table 5 below, the ACL increased as a percentage of total loans to 1.01% as of December 31, 2024, compared to 0.95% as of December 31, 2023. The provision for credit losses, including provision for off-balance sheet credit exposures, totaled $61.1 million for the year ended December 31, 2024, which is an increase of $19.8 million, or 48.1%, compared to the same period in 2023. The provision for credit losses, including provision for off-balance sheet credit exposures, totaled $41.2 million for the year ended December 31, 2023. This increase is the result of the impacts of loan growth, portfolio metric changes, and changes in macro-economic metrics in the current period as compared to the prior period.
Table 5
ANALYSIS OF ALLOWANCE FOR CREDIT LOSSES (in thousands)
Allowance - January 1
$
222,996
$
194,243
Provision for credit losses
62,000
39,227
Charge-offs:
Commercial
(5,441
)
(5,047
)
Specialty lending
-
(762
)
Commercial real estate
(250
)
(266
)
Consumer real estate
(432
)
(1,185
)
Consumer
(1,524
)
(1,232
)
Credit cards
(20,752
)
(9,181
)
Leases and other
(4
)
-
Total charge-offs
(28,403
)
(17,673
)
Recoveries:
Commercial and industrial
1,890
5,295
Specialty lending
Commercial real estate
-
Consumer real estate
Consumer
Credit cards
2,355
1,536
Leases and other
-
Total recoveries
5,141
7,199
Net charge-offs
(23,262
)
(10,474
)
Allowance for credit losses - end of period
$
261,734
$
222,996
Allowance for credit losses on loans
$
259,089
$
219,738
Allowance for credit losses on held-to-maturity securities
2,645
3,258
Loans at end of year, net of unearned interest
25,642,301
23,172,484
Held-to-maturity securities at end of period
5,378,912
5,691,868
Total assets at amortized cost
31,021,213
28,864,352
Average loans, net of unearned interest
24,209,547
22,334,942
Allowance for credit losses on loans to loans at end of period
1.01
%
0.95
%
Allowance for credit losses - end of period to total assets at amortized cost
0.84
%
0.77
%
Allowance as a multiple of net charge-offs
11.25x
21.29x
Net charge-offs to average loans
0.10
%
0.05
%
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 2024 by $86.3 million, or 15.9%, compared to 2023 and decreased in 2023 by $12.4 million, or 2.2%, compared to 2022. The increase in 2024 is primarily driven by increased trust and securities processing income, other miscellaneous income, investment securities gains, net, and bankcard income. The decrease in 2023 is primarily attributable to a decrease in investment securities gains, net, partially offset by an increase in other miscellaneous income and trust securities processing income. Changes in Noninterest income are presented in Table 6 below.
The Company’s fee-based services offer multiple products and services, which management believes will more closely align with customer product 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.
Table 6
SUMMARY OF NONINTEREST INCOME (in thousands)
Year Ended December 31,
Dollar Change
Percent Change
24-23
23-22
24-23
23-22
Trust and securities processing
$
290,571
$
257,200
$
237,207
$
33,371
$
19,993
13.0
%
8.4
%
Trading and investment banking
24,226
19,630
23,201
4,596
(3,571
)
23.4
(15.4
)
Service charges on deposit accounts
84,512
84,950
85,167
(438
)
(217
)
(0.5
)
(0.3
)
Insurance fees and commissions
1,257
1,009
1,338
(329
)
24.6
(24.6
)
Brokerage fees
61,564
54,119
43,019
7,445
11,100
13.8
25.8
Bankcard fees
87,797
74,719
73,451
13,078
1,268
17.5
1.7
Investment securities gains (losses), net
10,720
(3,139
)
58,444
13,859
(61,583
)
441.5
(105.4
)
Other
67,470
53,365
32,406
14,105
20,959
26.4
64.7
Total noninterest income
$
628,117
$
541,853
$
554,233
$
86,264
$
(12,380
)
15.9
%
(2.2
)%
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 2024 compared to 2023, and in 2023 compared to 2022.
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 $33.4 million, or 13.0% in 2024, compared to 2023, and increased by $20.0 million, or 8.4%, in 2023, compared to 2022. During 2024, fund services income increased $20.5 million, corporate trust income increased $7.7 million and wealth management services increased $5.1 million. During 2023, fund services income increased $12.2 million and corporate trust income increased $7.7 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 increased $4.6 million, or 23.4%, in 2024 compared to 2023 and decreased $3.6 million, or 15.4%, in 2023 compared to 2022. The increase in 2024 compared to 2023 and the decrease in 2023 compared to 2022 was driven by increased and decreased bond trading income, respectively.
Service charges on deposits income decreased $0.4 million, or 0.5%, in 2024 compared to 2023 and decreased $0.2 million, or 0.3%, in 2023 compared to 2022. The decrease in both years was driven by decreased healthcare services income, offset by increased commercial service charge income.
Brokerage fees increased $7.4 million, or 13.8%, in 2024 compared to 2023 and increased $11.1 million, or 25.8%, in 2023 compared to 2022. The increase in both years was driven by increased 12b-1 and money market fees driven by the increase in short-term interest rates.
Bankcard fees increased $13.1 million, or 17.5%, in 2024 compared to 2023, and increased $1.3 million, or 1.7%, in 2023 compared to 2022. These increases were primarily driven by increased interchange income.
Investment securities gains, net increased $13.9 million in 2024 compared to 2023 and decreased $61.6 million in 2023 compared to 2022. The increase in 2024 was primarily driven by gain on sale of one of the Company's securities without readily determinable fair value in 2024, coupled with the impairment of one available-for-sale debt security in 2023. The decrease in 2023 was primarily driven by a $66.2 million gain realized on the sale of the Company’s Visa Inc. Class B common shares in 2022.
Other noninterest income increased $14.1 million, or 26.4%, in 2024 compared to 2023 and increased $21.0 million, or 64.7%, in 2023 compared to 2022. The increase in 2024 was primarily driven by the gain on the sale of UMB Distribution Services, LLC, a legal settlement, and gains on the sale of other assets during 2024, coupled with increased bank-owned life insurance income. The increase in 2023 was primarily driven by market value changes in company-owned life insurance income.
Noninterest Expense
Noninterest expense increased in 2024 by $27.5 million, or 2.8%, compared to 2023 and increased in 2023 by $101.0 million, or 11.2%, compared to 2022. From 2023 to 2024 the increase was driven primarily by increased salaries and employee benefits expense, legal and consulting expense, and processing fees, partially offset by a decrease in regulatory fees. From 2022 to 2023 the increase was driven by the $52.8 million FDIC special assessment, increases in salaries and employee benefits expense and processing fees, and partially offset by a decrease in other miscellaneous expense. Table 7 below summarizes the components of noninterest expense and the respective year-over-year changes for each category.
Table 7
SUMMARY OF NONINTEREST EXPENSE (in thousands)
Year Ended December 31,
Dollar Change
Percent Change
24-23
23-22
24-23
23-22
Salaries and employee benefits
$
593,913
$
553,421
$
524,431
$
40,492
$
28,990
7.3
%
5.5
%
Occupancy, net
47,539
48,502
48,848
(963
)
(346
)
(2.0
)
(0.7
)
Equipment
63,406
68,718
74,259
(5,312
)
(5,541
)
(7.7
)
(7.5
)
Supplies and services
14,845
16,829
13,590
(1,984
)
3,239
(11.8
)
23.8
Marketing and business development
28,439
25,749
25,699
2,690
10.4
0.2
Processing fees
117,899
103,099
82,227
14,800
20,872
14.4
25.4
Legal and consulting
46,207
29,998
39,095
16,209
(9,097
)
54.0
(23.3
)
Bankcard
44,265
32,969
26,367
11,296
6,602
34.3
25.0
Amortization of other intangible assets
7,705
8,587
5,037
(882
)
3,550
(10.3
)
70.5
Regulatory fees
31,904
77,010
15,378
(45,106
)
61,632
(58.6
)
400.8
Other
30,564
34,258
43,188
(3,694
)
(8,930
)
(10.8
)
(20.7
)
Total noninterest expense
$
1,026,686
$
999,140
$
898,119
$
27,546
$
101,021
2.8
%
11.2
%
Salaries and employee benefits expense increased $40.5 million, or 7.3%, in 2024 compared to 2023 and $29.0 million, or 5.5%, in 2023 compared to 2022. In 2024, bonus and commission expense increased $22.4 million, or 19.5%, salaries and wage expense increased $14.0 million, or 4.1% and employee benefits expense increased $4.1 million, or 4.1%. In 2023, salaries and wage expense increased $23.8 million, or 7.5% and employee benefits expense increased $20.5 million, or 26.0%. These increases were offset by a decrease in bonus and commission expense of $15.3 million, or 11.8%.
Equipment expense decreased $5.3 million, or 7.7%, in 2024 compared to 2023, and decreased $5.5 million, or 7.5%, from 2022 to 2023. The decreases in both years were driven by lower software expense related to a transition to cloud-based computing solutions.
Marketing and business development expense increased $2.7 million, or 10.4%, in 2024 compared to 2023, and was flat in 2023 compared to 2022. The increase in 2024 was driven by the timing of advertising and business development projects and higher travel expenses as compared to the prior year.
Processing fees expense increased $14.8 million, or 14.4%, in 2024 compared to 2023, and increased $20.9 million, or 25.4%, in 2023 compared to 2022. The increases in 2024 and 2023 were primarily driven by higher software subscription costs due to the transition to cloud computing solutions and ongoing investments in digital channel and integrated platform solutions to support business growth.
Legal and consulting expense increased $16.2 million, or 54.0%, in 2024 compared to 2023 and decreased $9.1 million, or 23.3%, in 2023 compared to 2022. The increase in 2024 was driven by expenses incurred related to
the announced acquisition of HTLF. The decrease in 2023 was primarily driven by fluctuations in legal and consulting expense due to the timing of multiple projects between years.
Bankcard expense increased $11.3 million, or 34.3%, in 2024 compared to 2023 and increased $6.6 million, or 25.0%, in 2023 compared to 2022. These increases in both years were driven by higher card administration costs coupled with higher fraud losses.
Regulatory fees decreased $45.1 million, or 58.6%, in 2024 compared to 2023 and increased $61.6 million, or 400.8%, in 2023 compared to 2022. The decrease in 2024 and the increase in 2023 was driven by the FDIC special assessment of $52.8 million recorded in 2023.
Other noninterest expense decreased $3.7 million, or 10.8%, in 2024 compared to 2023 and decreased $8.9 million, or 20.7%, in 2023 compared to 2022. The decreases in both 2024 and 2023 were driven by lower charitable contribution expenses and operational losses.
Income Taxes
Income tax expense totaled $100.0 million, $71.6 million, and $100.3 million in 2024, 2023, and 2022 respectively. These amounts equate to effective tax rates of 18.5%, 17.0%, and 18.9% for 2024, 2023 and 2022, respectively. The increase in the effective tax rate from 2023 to 2024 is primarily attributable to a smaller portion of pre-tax income being earned from tax-exempt municipal securities and higher non-deductible acquisition costs in 2024. These increases were partially offset by an increase in federal tax credits, net of related amortization. The decrease in the effective tax rate from 2022 to 2023 is primarily attributable to a larger portion of pre-tax income being earned from tax-exempt municipal securities and excludable life insurance policy gains.
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 three reportable segments: Commercial Banking, Institutional Banking, and Personal Banking (collectively, the Business Segments). Senior executive officers regularly evaluate 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. 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, 2024. Previously reported results have been reclassified in this Form 10-K to conform to the Company’s current organizational structure.
Table 8
COMMERCIAL BANKING OPERATING RESULTS (in thousands)
Year Ended
December 31,
Dollar
Change
Percent
Change
24-23
24-23
Net interest income
$
665,587
$
598,371
$
67,216
11.2
%
Provision for credit losses
50,155
33,184
16,971
51.1
Noninterest income
130,187
97,614
32,573
33.4
Noninterest expense
356,136
365,856
(9,720
)
(2.7
)
Income before taxes
389,483
296,945
92,538
31.2
Income tax expense
71,248
47,874
23,374
48.8
Net income
$
318,235
$
249,071
$
69,164
27.8
%
For the year ended December 31, 2024, Commercial Banking net income increased $69.2 million, or 27.8%, to $318.2 million compared to the same period in 2023. Net interest income increased $67.2 million, or 11.2%, for the year ended December 31, 2024, compared to the same period last year, driven by strong loan growth, earning asset mix changes and the increase in short-term interest rates. Provision for credit losses increased $17.0 million,
or 51.1%, as compared to 2023, driven by loan growth, portfolio metric changes, and changes in macro-economic metrics in 2024 as compared to 2023. Noninterest income increased $32.6 million, or 33.4%, over the same period in 2023. This increase was primarily due to increases of $11.0 million in investment security gains, $7.4 million in bankcard income, $5.8 million in other income driven by a legal settlement in the first quarter of 2024 and increased life insurance income, and $4.0 million in service charges on deposit accounts. Noninterest expense decreased $9.7 million, or 2.7%, as compared to the same period in 2023. This decrease was driven by a decrease of $20.8 million in technology, service, and overhead expenses, partially offset by increases of $7.0 million in salaries and employee benefits expense, $2.1 million in marketing and business development, $1.6 million in processing fees and $1.6 million in bankcard expense.
Table 9
INSTITUTIONAL BANKING OPERATING RESULTS (in thousands)
Year Ended
December 31,
Dollar
Change
Percent
Change
24-23
24-23
Net interest income
$
199,821
$
192,765
$
7,056
3.7
%
Provision for credit losses
2,781
1,406
1,375
97.8
Noninterest income
398,306
347,933
50,373
14.5
Noninterest expense
408,323
382,770
25,553
6.7
Income before taxes
187,023
156,522
30,501
19.5
Income tax expense
33,126
26,664
6,462
24.2
Net income
$
153,897
$
129,858
$
24,039
18.5
%
For the year ended December 31, 2024, Institutional Banking net income increased $24.0 million, or 18.5%, to $153.9 million compared to the same period last year. Net interest income increased $7.1 million, or 3.7%, compared to the same period last year, due to an increase in funds transfer pricing due to the increase in interest rates. Provision for credit losses increased $1.4 million as compared to 2023, driven by loan growth, portfolio metric changes, and changes in the macro-economic metrics in 2024 as compared to 2023. Noninterest income increased $50.4 million, or 14.5%, primarily due to increases of $28.4 million in trust and securities processing income driven by higher fund services and corporate trust revenue, an increase of $7.1 million in brokerage income, $6.5 million in bankcard income, an increase of $4.7 million in bond trading income, and an increase of $4.0 million in other income driven by the gain on the sale of UMB Distribution Services, LLC during the fourth quarter. These increases were partially offset by a decrease of $3.9 million in service charges on deposit accounts. Noninterest expense increased $25.6 million, or 6.7% as compared to 2023, primarily driven by increases of $18.0 million in salaries and employee benefits expense, $8.6 million in bankcard expense, $6.1 million in processing fees, $1.7 million in legal and consulting expense, and $1.2 million in equipment expense. These increases were partially offset by a decrease of $11.1 million in technology, service, and overhead expenses.
Table 10
PERSONAL BANKING OPERATING RESULTS (in thousands)
Year Ended
December 31,
Dollar
Change
Percent
Change
24-23
24-23
Net interest income
$
135,484
$
128,980
$
6,504
5.0
%
Provision for credit losses
8,114
6,637
1,477
22.3
Noninterest income
99,624
96,306
3,318
3.4
Noninterest expense
262,227
250,514
11,713
4.7
Loss before taxes
(35,233
)
(31,865
)
(3,368
)
(10.6
)
Income tax benefit
(4,344
)
(2,960
)
(1,384
)
(46.8
)
Net loss
$
(30,889
)
$
(28,905
)
$
(1,984
)
(6.9
)%
For the year ended December 31, 2024, Personal Banking net income decreased $2.0 million, or 6.9%, to a net loss of $30.9 million as compared to the same period last year. Net interest income increased $6.5 million, or 5.0%, compared to the same period last year due to loan growth and the increase in short-term interest rates. Provision for
credit losses increased $1.5 million, or 22.3%, for the period, driven by loan growth, portfolio metric changes, and changes in macro-economic metrics in 2024 as compared to 2023. Noninterest income increased $3.3 million, or 3.4%, for the same period primarily driven by an increase of $5.0 million in trust and securities processing income, and $2.9 million in life insurance income, partially offset by a decrease of $3.2 million in investment securities gains. Noninterest expense increased $11.7 million, or 4.7%, primarily due to increases of $6.4 million in technology, service, and overhead expenses, $5.2 million in salaries and employee benefits, and $1.0 million in bankcard expense, partially offset by a decrease of $1.7 million in operational losses.
Balance Sheet Analysis
Loans and Loans Held For Sale
Loans represent the Company’s largest source of interest income. Loan balances held for investment increased by $2.5 billion, or 10.7%, in 2024. This increase was primarily driven by an increase of $1.2 billion, or 13.9%, in commercial real estate loans, $971.6 million, or 9.8%, in commercial and industrial loans, and $226.5 million, or 7.7% in consumer real estate loans.
Commercial and industrial loans and commercial real estate loans continue to represent the largest segments of the Company’s loan portfolio, comprising approximately 42.5% and 39.5%, respectively, of total loans and loans held for sale at the end of 2024 and 42.8% and 38.4%, respectively, of total loans and loans held for sale at the end of 2023.
Commercial and industrial loans represent the largest percent of total loans. Commercial and industrial loans at December 31, 2024 increased $971.6 million, or 9.8%, as compared to December 31, 2023.
As a percentage of total loans, commercial real estate comprises 39.5% of total loans compared to 38.4% in 2023. Commercial real estate loans increased $1.2 billion, or 13.9%, compared to 2023. Commercial real estate loans generally involve a greater degree of credit risk than consumer real estate loans because they typically have larger balances and are more affected by adverse conditions in the economy. Because payments on loans secured by commercial real estate often depend upon the successful operation and management of the properties and the businesses which operate from within them, repayment of such loans may be affected by factors outside the borrower’s control, such as adverse conditions in the real estate market or the economy or changes in government regulations. In recent years, commercial real estate markets have been particularly impacted by the economic disruption resulting from the COVID-19 pandemic. The COVID-19 pandemic has also been a catalyst for the evolution of various remote work options, which could impact the long-term performance of some types of office properties within our commercial real estate portfolio. Due to these risks, the Company is actively monitoring its exposure to commercial real estate.
Generally, these loans are made for investment and real estate development or working capital and business expansion purposes and are primarily secured by real estate with a maximum loan-to-value of 80%. Most of these properties are non-owner occupied and have guarantees as additional security. The Company’s investment CRE portfolio (which includes non-owner occupied and construction loans) totaled 28.5% and 26.5% of total Company loans as of December 31, 2024 and December 31, 2023, respectively. The average investment CRE loan was approximately $7.2 million and $5.8 million, as of December 31, 2024 and December 31, 2023, respectively, and 90% are recourse loans as of both December 31, 2024 and December 31, 2023. These loans have an average loan-to-value of 57% as of both December 31, 2024 and December 31, 2023.
The properties securing the commercial real estate portfolio are diverse in terms of type and geographic location. This diversity helps reduce exposure to adverse economic events that affect any single market or industry. Notwithstanding, commercial real estate loans, in general, may be more adversely impacted by conditions in the real estate market or the economy.
The following table presents the Company’s investment CRE (which includes non-owner occupied and construction loans) by industry. The table separately discloses the top five industries as a percentage of the Company’s loan portfolio as of either period presented, while the remainder are included in “Other.”
Table 11
Investment CRE loans by industry as a percentage of total Company Loans
December 31, 2024
December 31, 2023
Industrial
8.8
%
8.0
%
Multifamily
7.4
5.0
Office building
3.9
4.2
Hotel
1.9
2.0
Retail
1.9
2.2
Other
4.6
5.1
Total Investment CRE
28.5
%
26.5
%
The following table presents the Company’s investment CRE (which includes non-owner occupied and construction loans) by state. The table separately discloses all states that represent at least 5.0% of the Company’s investment CRE portfolio as of either period presented, while the remainder are included in “All Others.”
Table 12
Investment CRE loans by State
December 31, 2024
December 31, 2023
Missouri
14.6
%
14.9
%
Arizona
11.6
11.9
Texas
11.4
12.1
Colorado
9.1
9.8
Utah
8.1
6.3
Florida
5.8
5.0
All others
39.4
40.0
Total Investment CRE
100.0
%
100.0
%
The shift to work-from-home and hybrid work environments has caused a decreased utilization of, and demand for, office space. The Company is actively monitoring its exposure to office space in its non-owner occupied commercial real estate portfolio. The average loan size in the Company’s office portfolio was approximately $8.9 million and $9.2 million as of December 31, 2024 and December 31, 2023, respectively. The average loan-to-value of the office portfolio was 63% and 64% as of December 31, 2024 and December 31, 2023, respectively, and 84% are recourse loans as of the end of both periods. Further, only 18% and 30% of the Company’s office portfolio as of December 31, 2024 and December 31, 2023, respectively, is in central business districts, which have been more heavily impacted by the shift to remote work. The remainder of the Company’s office portfolio is in suburban or medical properties.
The table below presents the Company’s portfolio of office commercial real estate by the metropolitan statistical area (MSAs) in which the loan collateral is located. The table separately discloses all MSAs that represent at least 5.0% of the Company's office commercial real estate portfolio as of either period presented, while the remainder are included in “All Others.”
Table 13
Office CRE loans by MSA
December 31, 2024
December 31, 2023
Dallas-Fort Worth-Arlington, TX
23.1
%
22.7
%
Kansas City, MO-KS
10.1
7.8
Jacksonville, FL
9.3
9.1
St. Louis, MO-IL
7.5
6.7
Tampa-St. Petersburg-Clearwater, FL
7.3
6.8
Raleigh-Cary, NC
5.8
5.9
Cincinnati-Middletown, OH-KY-IN
5.8
5.1
Phoenix-Mesa-Scottsdale, AZ
5.3
4.5
Indianapolis-Carmel, IN
5.0
4.9
Milwaukee-Waukesha-West Allis, WI
-
5.2
All others
20.8
21.3
Total Office CRE
100.0
%
100.0
%
Consumer real estate loans increased $226.5 million, or 7.7%, compared to 2023. These loans represented 12.4% of total loans as of December 31, 2024, compared to 12.8% as of December 31, 2023.
For further information on loan portfolio segments refer to Note 3, “Loans and 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 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 $13.7 billion as of December 31, 2024 and $13.3 billion as of December 31, 2023 and comprised 28.5% and 31.9% 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 56.9% of the Company’s investment securities portfolio at December 31, 2024, compared to 53.3% at December 31, 2023. 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 increased from 52.6 months at December 31, 2023 to 56.0 months at December 31, 2024. 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 $10.5 billion of securities pledged to secure U.S. Government deposits, other public deposits, certain trust deposits, derivative transactions, and repurchase agreements at December 31, 2024.
The Company’s HTM securities portfolio consists of U.S. agency-backed securities, mortgage-backed securities, general obligation bonds, and private placement bonds. The Company’s HTM portfolio, net of the ACL totaled $5.4 billion as of December 31, 2024, a decrease of $312.3 million from December 31, 2023. The average life of the HTM portfolio was 9.1 years at December 31, 2024, compared to 8.4 years at December 31, 2023.
The securities portfolio generates the Company’s second largest component of interest income. The AFS, HTM, and Other securities portfolios achieved an average yield on a tax-equivalent basis of 2.96% for 2024, compared to 2.66% in 2023. Securities available for sale had a net unrealized loss of $633.3 million at year-end, compared to a net unrealized loss of $624.2 million the preceding year. This market value change primarily reflects the impact of a longer average life and increasing market interest rates as of December 31, 2024, compared to December 31, 2023. These amounts are reflected, on an after-tax basis, in the Company’s Accumulated other comprehensive income (loss) (AOCI) in shareholders’ equity, as an unrealized loss of $478.5 million at year-end 2024, compared to an unrealized loss of $471.9 million for 2023. The AFS securities portfolio contains securities that have unrealized losses (see the table of these securities in Note 4, “Securities,” in the Notes to the Consolidated Financial Statements). The unrealized losses in the Company’s investments 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, 2024, 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 amortized cost. As of December 31, 2024, 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 14 and 15 are analyses of the fair value and average yield (tax-equivalent basis) of securities available for sale and securities held to maturity.
Table 14
SECURITIES AVAILABLE FOR SALE (in thousands)
U.S. Treasury Securities
U.S. Agency Securities
December 31, 2024
Fair Value
Weighted
Average Yield
Fair Value
Weighted
Average Yield
Due in one year or less
$
164,461
2.94
%
$
75,781
3.10
%
Due after 1 year through 5 years
1,161,612
4.22
53,266
4.38
Due after 5 years through 10 years
-
-
-
-
Due after 10 years
-
-
-
-
Total
$
1,326,073
4.06
%
$
129,047
3.63
%
Mortgage-backed Securities
State and Political
Subdivisions
December 31, 2024
Fair Value
Weighted
Average Yield
Fair Value
Weighted
Average Yield
Due in one year or less
$
12,036
2.34
%
$
97,265
2.91
%
Due after 1 year through 5 years
1,806,392
3.27
446,680
2.97
Due after 5 years through 10 years
2,554,980
2.31
297,816
3.04
Due after 10 years
47,522
4.26
376,808
3.29
Total
$
4,420,930
2.70
%
$
1,218,569
3.08
%
Corporates
Collateralized Loan Obligations
December 31, 2024
Fair Value
Weighted
Average Yield
Fair Value
Weighted
Average Yield
Due in one year or less
$
97,907
2.28
%
$
-
-
%
Due after 1 year through 5 years
124,565
1.88
63,635
6.10
Due after 5 years through 10 years
94,698
3.35
132,289
5.98
Due after 10 years
-
-
166,621
6.14
Total
$
317,170
2.45
%
$
362,545
6.08
%
U.S. Treasury Securities
U.S. Agency Securities
December 31, 2023
Fair Value
Weighted
Average Yield
Fair Value
Weighted
Average Yield
Due in one year or less
$
1,109,140
3.51
%
$
60,985
1.89
%
Due after 1 year through 5 years
189,602
2.86
98,736
3.39
Due after 5 years through 10 years
-
-
-
-
Due after 10 years
-
-
-
-
Total
$
1,298,742
3.40
%
$
159,721
2.81
%
Mortgage-backed Securities
State and Political
Subdivisions
December 31, 2023
Fair Value
Weighted
Average Yield
Fair Value
Weighted
Average Yield
Due in one year or less
$
9,590
2.77
%
$
76,610
2.90
%
Due after 1 year through 5 years
1,211,344
2.55
365,953
2.63
Due after 5 years through 10 years
2,368,394
1.73
422,410
2.92
Due after 10 years
31,457
3.80
422,002
3.29
Total
$
3,620,785
2.01
%
$
1,286,975
2.96
%
Corporates
Collateralized Loan Obligations
December 31, 2023
Fair Value
Weighted
Average Yield
Fair Value
Weighted
Average Yield
Due in one year or less
$
46,746
2.97
%
$
-
-
%
Due after 1 year through 5 years
214,084
1.97
159,371
6.96
Due after 5 years through 10 years
90,445
3.34
151,896
6.81
Due after 10 years
-
-
39,848
7.44
Total
$
351,275
2.48
%
$
351,115
6.95
%
Table 15
SECURITIES HELD TO MATURITY (in thousands)
U.S. Agency Securities
Mortgage-backed Securities
December 31, 2024
Fair Value
Weighted
Average
Yield/Average
Maturity
Fair Value
Weighted
Average
Yield/Average
Maturity
Due in one year or less
$
115,750
3.08
%
$
0.07
%
Due after 1 year through 5 years
-
-
270,326
2.32
Due after 5 years through 10 years
-
-
1,671,839
1.65
Due over 10 years
-
-
162,371
1.85
Total
$
115,750
3.08
%
$
2,104,652
1.74
%
State and Political Subdivisions
December 31, 2024
Fair Value
Weighted
Average
Yield/Average
Maturity
Due in one year or less
$
90,690
4.81
%
Due after 1 year through 5 years
255,828
3.56
Due after 5 years through 10 years
729,501
2.86
Due over 10 years
1,452,517
3.40
Total
$
2,528,536
3.31
%
U.S. Agency Securities
Mortgage-backed Securities
December 31, 2023
Fair Value
Weighted
Average
Yield/Average
Maturity
Fair Value
Weighted
Average
Yield/Average
Maturity
Due in one year or less
$
6,933
2.91
%
$
-
-
%
Due after 1 year through 5 years
113,591
3.08
325,315
2.31
Due after 5 years through 10 years
-
-
1,610,142
1.63
Due over 10 years
-
-
446,157
1.78
Total
$
120,524
3.07
%
$
2,381,614
1.74
%
State and Political Subdivisions
December 31, 2023
Fair Value
Weighted
Average
Yield/Average
Maturity
Due in one year or less
$
96,966
4.81
%
Due after 1 year through 5 years
220,787
3.02
Due after 5 years through 10 years
815,220
2.90
Due over 10 years
1,548,256
3.31
Total
$
2,681,229
3.22
%
The table below provides detailed information for Other securities at December 31, 2024 and 2023:
Table 16
OTHER SECURITIES (in thousands)
December 31,
FRB and FHLB stock
$
42,672
$
87,672
Equity securities with readily determinable fair values
11,596
11,228
Equity securities without readily determinable fair values
416,750
394,035
Total
$
471,018
$
492,935
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.
For further information on the Company’s investment securities, refer to Note 4, “Securities,” in the 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 $70.4 million at December 31, 2024 compared to $8.8 million at December 31, 2023.
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 $161.7 million in 2024 and $192.6 million in 2023.
At December 31, 2024, the Company held securities purchased under agreements to resell of $545.0 million compared to $240.3 million at December 31, 2023. 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 $303.0 million in 2024 and $310.5 million in 2023.
The Company also maintains an active securities trading inventory. The average holdings in the securities trading inventory in 2024 were $22.3 million, compared to $14.0 million in 2023, and were recorded at fair market value. As discussed in “Quantitative and Qualitative Disclosures About Market Risk - Trading Account” in Part II, Item 7A, 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 $8.0 billion as of December 31, 2024 compared to $5.2 billion as of December 31, 2023 and includes amounts due from the FRB and interest-bearing accounts held at other financial institutions. The amount due from the FRB averaged $3.4 billion and $2.0 billion during the years ended December 31, 2024 and 2023, respectively. The increase in the FRB balance at December 31, 2024 compared to the prior year is primarily due to an increase in deposit balances. The interest-bearing accounts held at other financial institutions totaled $110.8 million and $78.7 million at December 31, 2024 and 2023, respectively.
Deposits and Borrowed Funds
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 $43.1 billion at December 31, 2024 and $35.8 billion at December 31, 2023, an increase of $7.3 billion, or 20.5%. There were $1.0 billion and $1.9 billion of brokered deposits as of December 31, 2024 and December 31, 2023, respectively. Deposits averaged $35.3 billion in 2024, and $31.8 billion in 2023.
Noninterest-bearing demand deposits averaged $10.1 billion in 2024 and $10.6 billion in 2023. These deposits represented 28.5% of average deposits in 2024, compared to 33.5% in 2023. 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 17
MATURITIES OF UNINSURED TIME DEPOSITS (in thousands)
December 31,
Maturing within 3 months
$
750,150
$
445,239
After 3 months but within 6 months
72,123
65,985
After 6 months but within 12 months
34,937
44,077
After 12 months
7,075
21,384
Total
$
864,285
$
576,685
As of December 31, 2024, there were an estimated $31.0 billion of uninsured deposits, as compared to $24.4 billion as of December 31, 2023. Estimated uninsured deposits comprised approximately 72.0% and 68.2% of total deposits as of December 31, 2024 and December 31, 2023, respectively. A portion of these uninsured deposits represent affiliate deposits and collateralized deposits. Affiliate deposits represent deposit accounts owned by the wholly owned subsidiaries of UMB Financial Corporation that are on deposit at the Bank. Collateralized deposits are public fund deposits or corporate trust deposits that are collateralized by high quality securities within the investment portfolio. Excluding affiliate deposits of $2.4 billion and collateralized deposits of $6.0 billion, the adjusted estimated uninsured deposits were $22.7 billion as of December 31, 2024. Excluding affiliate deposits of $2.0 billion and collateralized deposits of $6.2 billion, the adjusted estimated uninsured deposits were $16.2 billion as of December 31, 2023. The adjusted ratio of estimated uninsured deposits, excluding affiliate and collateralized deposits, as a percentage of total deposits was approximately 52.6% and 45.3% as of December 31, 2024, and December 31, 2023, respectively.
The Company participates in the IntraFi Cash Service program, which allows its customers to place deposits into the program to receive reciprocal FDIC insurance coverage. As of December 31, 2024 and December 31, 2023, the Company had $1.3 billion and $1.2 billion of deposits in the program, respectively.
Table 18
ANALYSIS OF AVERAGE DEPOSITS (in thousands)
December 31,
Amount:
Noninterest-bearing demand
$
10,077,251
$
10,640,344
Interest-bearing demand and savings
22,949,608
18,374,884
Time deposits under $250,000
1,113,096
1,967,028
Total core deposits
34,139,955
30,982,256
Time deposits of $250,000 or more
1,161,497
780,393
Total deposits
$
35,301,452
$
31,762,649
As a % of total deposits:
Noninterest-bearing demand
28.5
%
33.5
%
Interest-bearing demand and savings
65.0
57.8
Time deposits under $250,000
3.2
6.2
Total core deposits
96.7
97.5
Time deposits of $250,000 or more
3.3
2.5
Total deposits
100.0
%
100.0
%
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 increased $366.1 million, or 11.8% to $3.5 billion at December 31, 2024 as compared to December 31, 2023. The increase in shareholders’ equity from 2023 to 2024 is largely due to an increase in retained earnings.
The Board authorized, at its April 26, 2022 meeting, the repurchase of up to two million shares of the Company’s common stock during the twelve months following the meeting (a Repurchase Authorization). The Board authorized, at its July 25, 2023, and April 30, 2024 meetings, the repurchase of up to one million shares of the Company's common stock. The July 2023 Repurchase Authorization terminated on April 30, 2024, and the April 2024 Repurchase Authorization will terminate on April 29, 2025. During 2024 and 2023, the Company did not
repurchase shares of common stock pursuant to any of its announced Repurchase Authorizations. The Company has not made any repurchase of its securities other than pursuant to the Repurchase Authorizations.
On April 28, 2024, the Company entered into the Merger Agreement with HTLF, a Delaware corporation and Blue Sky Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of the Company. The Merger Agreement and the merger were unanimously approved by the boards of directors of the Company and HTLF. Pending regulatory approval and approval by the shareholders of the Company and HTLF, and the merger closed on January 31, 2025. Under the terms of the Merger Agreement, HTLF stockholders received a fixed exchange ratio of 0.55 shares of the Company’s common stock for each share of HTLF stock, with a total market value of approximately $2.8 billion.
Additionally, on April 29, 2024, the Company also announced that in connection with the execution of the Merger Agreement, it entered into a forward sale agreement with BofA Securities, Inc. or its affiliate to issue 2.8 million shares of its common stock. The underwriters were granted an option to purchase up to an additional 420 thousand shares of the Company's common stock exercisable within 30 days of April 28, 2024. The underwriters exercised this option in full on April 30, 2024, upon which the Company entered into an additional forward sale agreement relating to the 420 thousand shares of the Company's common stock. The forward sale agreements are classified as an equity instrument under ASC 815-40, Contracts in Entity’s Own Equity. The Company expects to receive net proceeds of approximately $231.8 million from the sale of shares of common stock and settlement of the forward sale agreements.
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% and a minimum tier 1 risk-based capital ratio of 6%. A financial institution’s total capital is also required to equal at least 8% of risk-weighted assets.
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%. 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, 2024 is summarized in the table below and exceeded regulatory requirements.
Table 19
RISK-BASED CAPITAL (in thousands)
This table computes risk-based capital in accordance with current regulatory guidelines. These guidelines as of December 31, 2024, 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
0%
20%
50%
100%
150%
Total
Risk-Weighted Assets
Loans held for sale
$
-
$
-
$
2,756
$
-
$
-
$
2,756
Loans and leases
116,100
77,487
2,600,057
22,777,404
71,253
25,642,301
Securities available for sale
2,736,578
5,333,186
7,175
330,737
-
8,407,676
Securities held to maturity
405,827
3,982,199
1,162,167
-
-
5,550,193
Trading securities
1,620
8,369
11,468
7,076
-
28,533
Cash and due from banks
8,018,852
540,593
-
-
-
8,559,445
All other assets
44,123
31,742
34,690
2,124,087
-
2,234,642
Category totals
$
11,323,100
$
9,973,576
$
3,818,313
$
25,239,304
$
71,253
$
50,425,546
Risk-weighted totals
$
-
$
1,994,716
$
1,909,157
$
25,239,304
$
106,880
$
29,250,057
Off-balance-sheet items (3)
-
70,069
10,437
4,335,360
$
4,416,329
Total risk-weighted assets
$
-
$
2,064,785
$
1,919,594
$
29,574,664
$
107,343
$
33,666,386
Total
Regulatory Capital
Shareholders’ equity
$
3,466,541
Less adjustments (1)
335,716
Common equity Tier 1/Tier 1 capital
3,802,257
Additional Tier 2 capital (2)
643,615
Total capital
$
4,445,872
Company
Capital ratios
Common Equity Tier 1 capital to risk-weighted assets
11.29
%
Tier 1 capital to risk-weighted assets
11.29
%
Total capital to risk-weighted assets
13.21
%
Leverage ratio (Tier 1 capital to total average assets less adjustments (1))
8.50
%
(1)Adjustments include a portion of goodwill and intangibles as well as unrealized gains/losses on available-for-sale securities, cash flow hedges, and the impact of the Company’s election to use the five-year CECL transition.
(2)Includes the Company’s ACL (inclusive of the reserve for off-balance sheet arrangements), subordinated long-term debt, and trust preferred subordinated notes.
(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.
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 $2.6 billion at December 31, 2024, and $2.1 billion at December 31, 2023. Repurchase agreements and federal funds purchased averaged $2.3 billion in 2024 and $2.2 billion in 2023. 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 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, 2024, and December 31, 2023, the Company owned $10.2 million and $55.2 million of FHLB stock, respectively.
As of December 31, 2024, the Company had no outstanding advances at the FHLB of Des Moines. As of December 31, 2023, the Company had one short-term advance for $1.0 billion outstanding at the FHLB of Des Moines. Additionally, in both 2024 and 2023, the FHLB of Des Moines issued a letter of credit for $150.0 million on behalf of the Company to secure deposits. The letter of credit outstanding as of December 31, 2024 expired in January 2025 and was subsequently renewed with an expiration date in March 2025. Based on the collateral pledged, the Company had $1.8 billion of borrowing capacity remaining at the FHLB at December 31, 2024.
As of December 31, 2024, the Company had no borrowings outstanding with the Federal Reserve Bank's Bank Term Funding Program (BTFP). As of December 31, 2023, the Company had an $800.0 million short-term borrowing outstanding with the BTFP. The FRB terminated the BTFP during 2024. As of December 31, 2024, the Company's borrowing capacity with the Federal Reserve Discount Window was $12.5 billion.
In addition to the borrowing capacity with the FHLB and at the Federal Reserve Discount Window as described above, the Company had additional liquidity of $12.4 billion available via cash, unpledged bond collateral, the federal funds market, and the IntraFi Cash Service program as of December 31, 2024.
Long-term debt totaled $385.3 million at December 31, 2024, compared to $383.2 million at December 31, 2023. 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 (Marquette) 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 $76.8 million at December 31, 2024 and $75.6 million at December 31, 2023. Interest rates on trust preferred securities are tied to the three-month term SOFR 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 in 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 20 below, as well as Note 15, “Commitments, Contingencies and Guarantees” in the Notes to Consolidated Financial Statements under Item 8 for detailed information and further discussion of these arrangements. Management does not anticipate any material losses from its off-balance sheet arrangements.
Table 20
COMMITMENTS, MATERIAL CASH REQUIREMENTS AND OFF-BALANCE SHEET ARRANGEMENTS (in thousands)
The table below details the commitments, material cash requirements, and off-balance sheet arrangements for the Company as of December 31, 2024 and includes principal payments only. The Company has no capital leases or long-term purchase obligations.
Payments due by Period
Total
Less than 1 year
1-3 years
3-5 years
More than 5 years
Material Cash Requirements
Federal funds purchased and repurchase agreements
$
2,609,715
$
2,609,715
$
-
$
-
$
-
Long-term debt obligations
413,096
-
-
-
413,096
Operating lease obligations
65,796
11,994
21,622
17,473
14,707
Time deposits
2,127,667
2,053,301
62,917
9,016
2,433
Total
$
5,216,274
$
4,675,010
$
84,539
$
26,489
$
430,236
Maturities due by Period
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)
$
12,904,749
$
5,410,009
$
4,978,117
$
1,771,855
$
744,768
Commitments to extend credit under credit card loans
5,474,758
5,474,758
-
-
-
Commercial letters of credit
-
-
-
Standby letters of credit
404,697
275,939
124,341
4,417
-
Forward contracts
55,174
55,174
-
-
-
Spot foreign exchange contracts
50,006
50,006
-
-
-
Commitments to extend credit for securities purchased under agreements to resell
96,000
66,000
30,000
-
-
Total
$
18,985,695
$
11,332,197
$
5,132,458
$
1,776,272
$
744,768
As of December 31, 2024, the Company’s total liabilities for unrecognized tax benefits were $8.3 million. The Company cannot reasonably estimate the settlement 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 credit 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 the allowance for credit losses.
Allowance for Credit Losses
The Company’s ACL represents management’s judgment of the total 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, 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 estimate 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 relevant 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 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 in its estimate.
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 and 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 information 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 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 management’s assumptions in estimating the ACL, refer to the section captioned “Allowance for Credit Losses” within Note 3, “Loans and Allowance for Credit Losses,” in the Notes to the Consolidated Financial Statements.

---

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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 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.
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,
December 31,
December 31,
December 31,
(basis points)
Percentage change
Percentage change
Percentage change
Percentage change
(3.9
)%
(0.7
)%
1.3
%
4.2
%
(2.3
)
(0.3
)
(0.2
)
2.2
Static
-
-
-
-
(100)
3.0
0.3
0.7
(3.1
)
(200)
6.1
0.9
1.6
(5.7
)
(300)
9.1
1.5
1.5
(8.8
)
Hypothetical change in interest rate - Rate Shock
Year One
Year Two
December 31,
December 31,
December 31,
December 31,
(basis points)
Percentage change
Percentage change
Percentage change
Percentage change
(2.7
)%
3.1
%
3.0
%
7.4
%
(2.3
)
1.6
0.6
3.8
Static
-
-
-
-
(100)
3.4
(1.7
)
(0.4
)
(4.7
)
(200)
6.8
(2.8
)
(0.7
)
(9.3
)
(300)
9.1
(3.5
)
(2.3
)
(14.3
)
The Company is liability sensitive to changes in interest rates in the next year. Net interest income is predicted to decrease in all upward rate scenarios and increase in all downward rate scenarios. In year two, net interest income is predicted to increase in all upward rate shock scenarios and decrease in all downward rate shock scenarios. In rate ramp scenarios net interest income is predicted to increase in all scenarios except for the 100-basis-point upward ramp scenario. The Company’s ability to price deposits consistent with its historical approach 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 22 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 23 presents the break-out of fixed and variable rate loans by repricing or maturity characteristics for each loan class.
Table 22
INTEREST RATE SENSITIVITY ANALYSIS (in millions)
1-90
91-180
181-365
1-5
Over 5
Days
Days
Days
Total
Years
Years
Total
December 31, 2024 Earning assets
Loans
$
16,421.1
$
531.3
$
865.8
$
17,818.2
$
5,676.3
$
2,150.6
$
25,645.1
Securities
1,054.4
618.9
657.6
2,330.9
5,538.6
5,754.8
13,624.3
Federal funds sold and resell agreements
545.0
-
-
545.0
-
-
545.0
Other
8,014.2
-
-
8,014.2
0.5
-
8,014.7
Total earning assets
$
26,034.7
$
1,150.2
$
1,523.4
$
28,708.3
$
11,215.4
$
7,905.4
$
47,829.1
% of total earning assets
54.4
%
2.4
%
3.2
%
60.0
%
23.5
%
16.5
%
100.0
%
Funding sources
Interest-bearing demand and savings
$
27,397.2
$
-
$
-
$
27,397.2
$
-
$
-
$
27,397.2
Time deposits
1,412.8
404.8
235.7
2,053.3
72.0
2.4
2,127.7
Federal funds purchased and repurchase agreements
2,609.7
-
-
2,609.7
-
-
2,609.7
Long term debt
76.8
-
199.7
276.5
108.8
-
385.3
Noninterest-bearing sources
13,617.1
-
-
13,617.1
-
1,692.1
15,309.2
Total funding sources
$
45,113.6
$
404.8
$
435.4
$
45,953.8
$
180.8
$
1,694.5
$
47,829.1
% of total earning assets
94.3
%
0.8
%
1.0
%
96.1
%
0.4
%
3.5
%
100.0
%
Interest sensitivity gap
$
(19,078.9
)
$
745.4
$
1,088.0
$
(17,245.5
)
$
11,034.6
$
6,210.9
Cumulative gap
(19,078.9
)
(18,333.5
)
(17,245.5
)
(17,245.5
)
(6,210.9
)
-
As a % of total earning assets
(39.9
)%
(38.3
)%
(36.1
)%
(36.1
)%
(13.0
)%
-
%
Ratio of earning assets to funding sources
0.58
2.84
3.50
0.62
62.03
4.67
Cumulative ratio of earning assets to funding sources
0.58
0.60
0.62
0.62
0.87
1.00
0.61
0.61
0.64
0.64
0.88
1.00
Table 23
Maturities and Sensitivities to Changes in Interest Rates
This table details loan maturities by variable and fixed rates as of December 31, 2024 (in thousands):
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
$
8,154,233
$
32,809
$
$
-
$
8,187,067
Specialty lending
469,194
-
-
-
469,194
Commercial real estate
6,129,672
107,380
2,470
-
6,239,522
Consumer real estate
553,279
557,575
265,245
-
1,376,099
Consumer
107,335
-
-
107,374
Credit cards
578,716
-
-
578,766
Leases and other
155,425
-
-
155,683
Total variable rate loans
16,147,854
698,111
267,740
-
17,113,705
Fixed Rate
Commercial and industrial
634,199
1,884,237
195,999
-
2,714,435
Specialty lending
-
-
-
-
-
Commercial real estate
697,756
2,362,633
829,143
2,231
3,891,763
Consumer real estate
290,643
669,756
636,992
216,396
1,813,787
Consumer
47,724
37,799
86,486
Credit cards
-
-
-
-
-
Leases and other
-
23,712
1,169
-
24,881
Total fixed rate loans
1,670,322
4,978,137
1,664,169
218,724
8,531,352
Total loans and loans held for sale
$
17,818,176
$
5,676,248
$
1,931,909
$
218,724
$
25,645,057
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 $28.5 million as of December 31, 2024, compared to $18.1 million as of December 31, 2023.
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 22 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.
Other Market Risk
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 risk 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’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 increased $6.1 million to $19.3 million at December 31, 2024, compared to December 31, 2023. There was an immaterial amount of interest recognized on nonperforming loans during 2024, 2023, and 2022.
The Company had $1.6 million and $1.7 million of other real estate owned as of December 31, 2024 and December 31, 2022, respectively. Other repossessed assets totaled $26.8 million as of December 31, 2024. Loans past due more than 90 days and still accruing interest totaled $7.6 million as of December 31, 2024, compared to $3.1 million as of December 31, 2023.
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 $196 thousand of restructured loans at December 31, 2024 and $548 thousand at December 31, 2023.
Table 24
LOAN QUALITY (in thousands)
December 31,
Nonaccrual loans
$
19,241
$
12,828
Restructured loans on nonaccrual
Total non-performing loans
19,282
13,212
Other real estate owned
1,612
1,738
Other repossessed assets
26,779
-
Total non-performing assets
$
47,673
$
14,950
Loans past due 90 days or more
$
7,602
$
3,111
Restructured loans accruing
Allowance for credit losses on loans
259,089
219,738
Ratios
Non-performing loans as a % of loans
0.08
%
0.06
%
Non-performing assets as a % of loans plus other real estate owned and other repossessed assets
0.19
0.06
Non-performing assets as a % of total assets
0.09
0.03
Loans past due 90 days or more as a % of loans
0.03
0.01
Allowance for credit losses on loans as a % of loans
1.01
0.95
Allowance for credit losses on loans as a multiple of non-performing loans
13.44x
16.63x
Table 25
SUMMARY OF NET CHARGE-OFFS (in thousands)
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
$
3,551
$
10,169,805
0.03
%
$
(248
)
$
9,669,378
(0.00
)%
Specialty lending
(4
)
497,301
(0.00
)
540,371
0.14
Commercial real estate
9,517,745
0.00
8,359,937
0.00
Consumer real estate
(216
)
3,036,136
(0.01
)
1,140
2,858,510
0.04
Consumer real estate
1,283
166,278
0.77
1,021
147,240
0.69
Credit cards
18,397
587,958
3.13
7,645
478,328
1.60
Leases and other
234,324
0.00
-
281,178
-
Total
$
23,262
$
24,209,547
0.10
%
$
10,474
$
22,334,942
0.05
%
Net charge-offs for the year ended December 31, 2024 were $23.3 million, compared to $10.5 million for the year ended December 31, 2023.
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 $7.8 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, 2024, $10.5 billion, or 80.1%, of securities were pledged or used as collateral, compared to $10.1 billion, or 79.2%, at December 31, 2023.
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, 2024 was $18.8 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 declaration and payment of dividends to shareholders, as well as the amount thereof, are subject to the discretion of the Board and depend on the Company’s results of operations, financial condition, capital levels, cash requirements, future prospects, regulatory requirements and other factors deemed relevant by the Board. There can be no assurance the Company will declare and pay dividends to shareholders. 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.
Additionally, on April 29, 2024, the Company also announced that in connection with the execution of the Merger Agreement, it entered into a forward sale agreement with BofA Securities, Inc. or its affiliate to issue 2.8 million shares of its common stock. The underwriters were granted an option to purchase up to an additional 420 thousand shares of the Company's common stock exercisable within 30 days of April 28, 2024. The underwriters exercised this option in full on April 30, 2024, upon which the Company entered into an additional forward sale agreement relating to the 420 thousand shares of the Company's common stock. The forward sale agreements are classified as an equity instrument under ASC 815-40, Contracts in Entity’s Own Equity. The Company expects to receive net proceeds of approximately $231.8 million from the sale of shares of common stock and settlement of the forward sale agreements.
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 Company is a member bank with the FHLB of Des Moines, and through this relationship, the Company owns 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, 2024, and December 31, 2023, the Company owned $10.2 million and $55.2 million of FHLB stock, respectively.
As of December 31, 2024, the Company had no outstanding advances at the FHLB of Des Moines. As of December 31, 2023, the Company had one short-term advance for $1.0 billion outstanding at the FHLB of Des Moines. Additionally, in both 2024 and 2023, the FHLB of Des Moines issued a letter of credit for $150.0 million on behalf of the Company to secure deposits. The letter of credit outstanding as of December 31, 2024 expired in January 2025 and was subsequently renewed with an expiration date in February 2025. Based on the collateral pledged, the Company had $1.8 billion of borrowing capacity remaining at the FHLB at December 31, 2024.
As of December 31, 2024, the Company had no borrowings outstanding with the Federal Reserve Bank's Bank Term Funding Program (BTFP). As of December 31, 2023, the Company had an $800.0 million short-term borrowing outstanding with the BTFP. The FRB terminated the BTFP during 2024. As of December 31, 2024, the Company's borrowing capacity with the Federal Reserve Discount Window was $12.5 billion.
In addition to the borrowing capacity with the FHLB and at the Federal Reserve Discount Window as described above, the Company had additional liquidity of $12.4 billion available via cash, unpledged bond collateral, the federal funds market, and the IntraFi Cash Service program as of December 31, 2024.
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.
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 STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors
UMB Financial 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, 2024 and 2023, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2024, 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, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, 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, 2024, 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 27, 2025 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 $259.1 million as of December 31, 2024, a substantial portion of which related to the allowance for credit losses for loans evaluated on a collective basis for the commercial and industrial and commercial real estate 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 and commercial real estate segments. For the commercial and industrial segment, the collective ACL is calculated by modeling PD over future periods multiplied by historical LGD multiplied by contractual exposure at default minus any estimated 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 estimated prepayments and charge offs. Primary risk drivers are segment specific and include macro-economic variables and risk ratings of the individual loans within the commercial and industrial and commercial real estate loan segments. 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.
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 average prepayment rates, the economic forecast scenario, macro-economic variables, the reasonable and supportable forecast periods, lengths of time and methods of reversion, and risk ratings, and (2) the qualitative factors and their significant assumptions. The assessment also included an evaluation of the conceptual soundness and performance of the PD and LGD and historical loss rate models.
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:
•design of the collective ACL methodology
•continued use 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
•continued use of the qualitative factors
•performance monitoring of the PD and LGD and historical loss rate models
•analysis of the overall ACL results, trends, and ratios
•risk ratings assigned to loans
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 continued use 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 historical credit cycle period and evaluating the length of the reasonable and supportable forecast period by comparing to specific portfolio risk characteristics and trends
•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.
/s/ KPMG LLP
We have served as the Company’s auditor since 2014.
Kansas City, Missouri
February 27, 2025
UMB FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share and per share data)
December 31,
ASSETS
Loans
$
25,642,301
$
23,172,484
Allowance for credit losses on loans
(259,089
)
(219,738
)
Net loans
25,383,212
22,952,746
Loans held for sale
2,756
4,420
Securities:
Available for sale (amortized cost of $8,407,676 and $7,692,860, respectively)
7,774,334
7,068,613
Held to maturity, net of allowance for credit losses of $2,645 and $3,258, respectively (fair value of $4,748,938 and $5,183,367, respectively)
5,376,267
5,688,610
Trading securities
28,533
18,093
Other securities
471,018
492,935
Total securities
13,650,152
13,268,251
Federal funds sold and securities purchased under agreements to resell
545,000
245,344
Interest-bearing due from banks
7,986,270
5,159,802
Cash and due from banks
573,175
447,201
Premises and equipment, net
221,773
241,700
Accrued income
246,095
220,306
Goodwill
207,385
207,385
Other intangibles, net
63,647
71,012
Other assets
1,530,199
1,193,507
Total assets
$
50,409,664
$
44,011,674
LIABILITIES
Deposits:
Noninterest-bearing demand
$
13,617,167
$
12,130,662
Interest-bearing demand and savings
27,397,195
20,588,606
Time deposits under $250,000
969,132
2,292,899
Time deposits of $250,000 or more
1,158,535
780,692
Total deposits
43,142,029
35,792,859
Federal funds purchased and repurchase agreements
2,609,715
2,119,644
Short-term debt
-
1,800,000
Long-term debt
385,292
383,247
Accrued expenses and taxes
368,457
389,860
Other liabilities
437,630
425,645
Total liabilities
46,943,123
40,911,255
SHAREHOLDERS’ EQUITY
Common stock, $1.00 par value; 80,000,000 shares authorized; 55,056,730 shares issued, 48,814,177 and 48,554,127 shares outstanding, respectively
55,057
55,057
Capital surplus
1,145,638
1,134,363
Retained earnings
3,174,948
2,810,824
Accumulated other comprehensive loss, net
(573,050
)
(556,935
)
Treasury stock, 6,242,553 and 6,502,603 shares, at cost, respectively
(336,052
)
(342,890
)
Total shareholders' equity
3,466,541
3,100,419
Total liabilities and shareholders' equity
$
50,409,664
$
44,011,674
See Notes to Consolidated Financial Statements.
UMB FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except share and per share data)
Year Ended December 31,
INTEREST INCOME
Loans
$
1,612,948
$
1,399,961
$
810,007
Securities:
Taxable interest
257,562
214,981
192,121
Tax-exempt interest
99,375
102,197
97,190
Total securities income
356,937
317,178
289,311
Federal funds and resell agreements
17,628
17,647
19,109
Interest-bearing due from banks
182,145
103,190
18,582
Trading securities
1,351
Total interest income
2,171,009
1,838,705
1,137,520
INTEREST EXPENSE
Deposits
982,302
704,210
167,553
Federal funds and repurchase agreements
106,558
93,026
40,703
Other
81,257
121,353
15,467
Total interest expense
1,170,117
918,589
223,723
Net interest income
1,000,892
920,116
913,797
Provision for credit losses
61,050
41,227
37,900
Net interest income after provision for credit losses
939,842
878,889
875,897
NONINTEREST INCOME
Trust and securities processing
290,571
257,200
237,207
Trading and investment banking
24,226
19,630
23,201
Service charges on deposit accounts
84,512
84,950
85,167
Insurance fees and commissions
1,257
1,009
1,338
Brokerage fees
61,564
54,119
43,019
Bankcard fees
87,797
74,719
73,451
Investment securities gains (losses), net
10,720
(3,139
)
58,444
Other
67,470
53,365
32,406
Total noninterest income
628,117
541,853
554,233
NONINTEREST EXPENSE
Salaries and employee benefits
593,913
553,421
524,431
Occupancy, net
47,539
48,502
48,848
Equipment
63,406
68,718
74,259
Supplies and services
14,845
16,829
13,590
Marketing and business development
28,439
25,749
25,699
Processing fees
117,899
103,099
82,227
Legal and consulting
46,207
29,998
39,095
Bankcard
44,265
32,969
26,367
Amortization of other intangible assets
7,705
8,587
5,037
Regulatory fees
31,904
77,010
15,378
Other
30,564
34,258
43,188
Total noninterest expense
1,026,686
999,140
898,119
Income before income taxes
541,273
421,602
532,011
Income tax expense
100,030
71,578
100,329
NET INCOME
$
441,243
$
350,024
$
431,682
PER SHARE DATA
Net income - basic
$
9.05
$
7.22
$
8.93
Net income - diluted
8.99
7.18
8.86
Dividends
1.57
1.53
1.49
Weighted average shares outstanding - basic
48,747,814
48,503,643
48,340,922
Weighted average shares outstanding - diluted
49,056,956
48,763,820
48,747,399
See Notes to Consolidated Financial Statements.
UMB FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands)
Year Ended December 31,
Net income
$
441,243
$
350,024
$
431,682
Other comprehensive (loss) income, before tax:
Unrealized gains and losses on debt securities:
Change in unrealized holding gains and losses, net
(8,956
)
147,977
(1,137,417
)
Less: Reclassification adjustment for net (gains) losses included in net income
(139
)
-
Amortization of net unrealized loss on securities transferred from available-for-sale to held-to-maturity
35,905
39,851
36,894
Change in unrealized gains and losses on debt securities
26,810
188,107
(1,100,523
)
Unrealized gains and losses on derivative hedges:
Change in unrealized gains and losses on derivative hedges, net
(40,530
)
15,015
12,608
Less: Reclassification adjustment for net gains included in net income
(8,069
)
(10,654
)
(5,353
)
Change in unrealized gains and losses on derivative hedges
(48,599
)
4,361
7,255
Other comprehensive (loss) income, before tax
(21,789
)
192,468
(1,093,268
)
Income tax benefit (expense)
5,674
(46,668
)
264,219
Other comprehensive (loss) income
(16,115
)
145,800
(829,049
)
Comprehensive income (loss)
$
425,128
$
495,824
$
(397,367
)
See Notes to Consolidated Financial Statements.
UMB FINANCIAL CORPORATION
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, 2022
$
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
Recognition of equity-based compensation
-
20,812
-
-
-
20,812
Sale of treasury stock
-
-
-
Exercise of stock options
-
-
-
1,131
1,540
Balance December 31, 2022
$
55,057
$
1,125,949
$
2,536,086
$
(702,735
)
$
(347,264
)
$
2,667,093
Total comprehensive income
-
-
350,024
145,800
-
495,824
Dividends ($1.53 per share)
-
-
(75,286
)
-
-
(75,286
)
Purchase of treasury stock
-
-
-
-
(8,367
)
(8,367
)
Issuances of equity awards, net of forfeitures
-
(10,385
)
-
-
11,104
Recognition of equity-based compensation
-
17,975
-
-
-
17,975
Sale of treasury stock
-
-
-
Exercise of stock options
-
-
-
1,341
1,945
Balance December 31, 2023
$
55,057
$
1,134,363
$
2,810,824
$
(556,935
)
$
(342,890
)
$
3,100,419
Total comprehensive income (loss)
-
-
441,243
(16,115
)
-
425,128
Dividends ($1.57 per share)
-
-
(77,119
)
-
-
(77,119
)
Purchase of treasury stock
-
-
-
-
(7,738
)
(7,738
)
Issuances of equity awards, net of forfeitures
-
(11,220
)
-
-
11,923
Recognition of equity-based compensation
-
21,876
-
-
-
21,876
Sale of treasury stock
-
-
-
Exercise of stock options
-
1,690
-
-
2,413
4,103
Common stock issuance costs
-
(1,413
)
-
-
-
(1,413
)
Balance December 31, 2024
$
55,057
$
1,145,638
$
3,174,948
$
(573,050
)
$
(336,052
)
$
3,466,541
See Notes to Consolidated Financial Statements.
UMB FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Year Ended December 31,
OPERATING ACTIVITIES
Net income
$
441,243
$
350,024
$
431,682
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses
61,050
41,227
37,900
Net amortization of premiums and discounts from acquisition
3,573
1,060
1,340
Depreciation and amortization
52,771
58,723
54,022
Amortization of debt issuance costs
Deferred income tax benefit
(16,174
)
(20,439
)
(6,308
)
Net (increase) decrease in trading securities and other earning assets
(10,440
)
(113
)
13,895
(Gains) losses on investment securities, net
(10,720
)
3,139
(58,444
)
Gains on sales of assets
(3,197
)
(4,343
)
(3,063
)
Amortization of securities premiums, net of discount accretion
44,323
42,037
45,184
Originations of loans held for sale
(87,129
)
(68,673
)
(47,639
)
Gains on sales of loans held for sale, net
(2,279
)
(1,693
)
(1,195
)
Proceeds from sales of loans held for sale
91,072
67,924
48,133
Equity based compensation
22,579
18,694
21,491
Changes in:
Accrued income
(24,592
)
(31,075
)
(58,222
)
Accrued expenses and taxes
(20,453
)
148,154
(10,995
)
Other assets and liabilities, net
(317,217
)
(132,918
)
301,217
Net cash provided by operating activities
225,286
472,604
769,554
INVESTING ACTIVITIES
Securities held to maturity:
Maturities, calls and principal repayments
458,174
424,341
460,413
Purchases
(121,021
)
(227,077
)
(990,648
)
Securities available for sale:
Sales
19,154
22,193
-
Maturities, calls and principal repayments
7,384,085
1,204,346
1,114,560
Purchases
(8,111,653
)
(1,162,115
)
(1,205,396
)
Equity securities with readily determinable fair values:
Sales
-
-
46,379
Purchases
(357
)
(277
)
(1,085
)
Equity securities without readily determinable fair values:
Sales
35,304
5,614
Maturities, calls and principal repayments
71,963
334,898
Purchases
(50,861
)
(404,972
)
(29,660
)
Payment of tax equity investment commitments
(71,244
)
(40,806
)
(35,854
)
Net increase in loans
(2,415,581
)
(2,159,132
)
(3,952,154
)
Net (increase) decrease in fed funds sold and resell agreements
(299,656
)
713,253
257,760
Net cash activity from acquisitions and divestitures
(109,046
)
(793
)
548,624
Net (increase) decrease in interest-bearing balances due from other financial institutions
(31,753
)
43,359
(13,705
)
Purchases of bank premises and equipment
(24,206
)
(26,910
)
(51,716
)
Proceeds from sales of bank premises and equipment
4,197
3,806
6,731
Purchases of bank-owned and company-owned life insurance
-
(3,000
)
-
Net cash used in investing activities
(3,262,501
)
(1,273,272
)
(3,845,385
)
FINANCING ACTIVITIES
Net increase (decrease) in demand and savings deposits
8,295,094
997,273
(3,636,068
)
Net (decrease) increase in time deposits
(945,924
)
2,156,453
65,497
Net increase (decrease) in fed funds purchased and repurchase agreements
490,071
(102,523
)
(1,016,268
)
Proceeds from short-term debt
500,000
32,856,000
-
Repayment of short-term debt
(2,300,000
)
(31,056,000
)
-
Proceeds from long-term debt
-
-
110,000
Payment of debt issuance costs
-
-
(2,129
)
Cash dividends paid
(77,127
)
(74,245
)
(72,030
)
Payment of common stock issuance costs
(1,413
)
-
-
Proceeds from exercise of stock options and sales of treasury shares
4,685
2,461
2,136
Purchases of treasury stock
(7,738
)
(8,367
)
(31,997
)
Net cash provided by (used in) financing activities
5,957,648
4,771,052
(4,580,859
)
Increase (decrease) in cash and cash equivalents
2,920,433
3,970,384
(7,656,690
)
Cash and cash equivalents at beginning of year
5,528,258
1,557,874
9,214,564
Cash and cash equivalents at end of year
$
8,448,691
$
5,528,258
$
1,557,874
Supplemental disclosures:
Income tax payments
$
76,930
$
79,334
$
101,952
Total interest payments
1,204,688
844,397
196,482
Noncash disclosures:
Acquisition of tax equity investments
$
62,958
$
85,555
$
58,337
Commitment to fund tax equity investments
62,958
85,555
58,337
Transfer of loans to other real estate owned
1,738
12,381
Transfer of loans to other repossessed assets
26,779
-
-
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 primarily in the Midwestern and Southwestern regions of the United States. 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 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 multiplied by 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. Noninterest income is recognized when performance obligations are 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, 2024 and 2023 (in thousands):
December 31,
Due from the FRB
$
7,875,516
$
5,081,057
Cash and due from banks
573,175
447,201
Cash and cash equivalents at end of year
$
8,448,691
$
5,528,258
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 $110.8 million and $78.7 million at December 31, 2024 and 2023, respectively.
Loans and Loans Held for Sale
Loans are classified by the portfolio segments of commercial and industrial, specialty lending, commercial real estate, consumer real estate, consumer, credit cards, and leases and other.
A loan is considered to be collateral 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 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.
A loan is accounted for as a modification made to a borrower experiencing financial difficulty when a modification has been granted that is deemed concessionary and not temporary to a debtor experiencing financial difficulty. 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. If a loan modification is determined to be made to a borrower experiencing financial difficulty, the loan is considered to be collateral dependent and is evaluated for credit loss as part of the allowance for credit loss analysis.
Loans, including those that are considered to be collateral dependent, 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 nonaccrual 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 nonaccrual 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 nonaccrual loans are applied to principal unless the remaining principal balance has been determined to be fully collectible.
The adequacy of the ACL on loans is based on management’s judgment 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 current economic environment, reasonable and supportable forecasts, and detailed analysis of loans determined to be collateral dependent. The actual losses incurred over the lifetime of the portfolio, notwithstanding such considerations, however, could differ from the amounts estimated by management.
The Company maintains an allowance for off-balance sheet credit exposures, to address the credit risk 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 allowance for off-balance sheet items at an appropriate level, a provision to increase or reduce the allowance is included in the Provision for credit losses line item in the Company’s Consolidated Statements of Income. 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.
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 Agency securities, GSE mortgage-backed securities, certain securities of state and political subdivisions, corporates, and collateralized 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 AOCI until realized.
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, GSE 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.
Equity-method investments
The Company accounts for certain other investments using equity-method accounting. For 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 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.
No goodwill impairments were recognized in 2024, 2023, or 2022. Other intangible assets, which relate to core deposits, non-compete agreements, and customer relationships, are amortized over their useful life. Intangible assets are evaluated for impairment when events or circumstances dictate. No intangible asset impairments were recognized in 2024, 2023, or 2022. 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-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 2024, 2023, or 2022.
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 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 are not more-likely-than-not 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-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. When the Company determines that an unrecognized tax benefit liability is no longer necessary, the liability is reversed, and a tax benefit is recognized in the period in which it is determined that the unrecognized tax benefit liability is no longer necessary. The recognition, derecognition and measurement of tax positions are based on management’s best judgment given the facts, circumstance and information available at the reporting 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, 2024, 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, 15 of the Company’s derivatives are designated in qualifying hedging relationships. The 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 cash flow hedges are recognized in AOCI and are reclassified to earnings when the hedged 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 309,142, 260,177, and 406,477 shares issuable upon the exercise of stock options and nonvested restricted stock units granted by the Company that were outstanding at December 31, 2024, 2023, and 2022, respectively.
Certain options and restricted stock units issued under employee benefit plans were excluded from the computation of diluted earnings per share because they were anti-dilutive. For the year ended December 31, 2024, there were no outstanding stock options and restricted stock units excluded from the computation of diluted income per share. For the year ended December 31, 2023, there were 55,649 outstanding stock options or restricted stock units excluded from the computation of diluted income per share because their inclusion would have been anti-dilutive. For the year ended December 31, 2022, there were no outstanding stock options and restricted stock units excluded from the computation of diluted income per share.
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. For 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
Troubled Debt Restructurings In March 2022, the FASB issued Accounting Standards Update (ASU) No. 2022-02, “Financial Instruments - Credit Losses: Troubled Debt Restructurings and Vintage Disclosures.” The ASU eliminated the accounting guidance for troubled debt restructurings (TDR) by creditors and enhances disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. The amendments also added requirements to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases, disclosed by credit-quality indicator and class of financing receivable. The amendments in this update were adopted prospectively on January 1, 2023. The adoption of the amendments had no impact on the Consolidated Financial Statements aside from additional and revised financial statement disclosures. See Note 3, “Loans and Allowance for Credit Losses” for related disclosures.
Equity-Method Investments In March 2023, the FASB issued ASU No. 2023-02, “Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method.” The ASU allows entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. Previously, this method was only available for qualifying tax equity investments in low-income housing tax credit structures. The Company adopted the amended guidance on January 1, 2024, upon which the Company elected to continue the use of the practical expedient under ASC 323-740-35-4 to account for low-income housing and historic tax credit investments. Under the practical expedient, the cost of a tax equity investment is amortized in proportion to income tax credits only and is recorded on a net basis within income tax expense. The adoption of this amendment did not have any impact on the Consolidated Financial Statements aside from additional disclosures. See Note 16, “Income Taxes” for related disclosures.
Segment Reporting In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” The ASU requires expanded segment disclosures, including disclosure of significant segment expenses and other segment items on an annual and interim basis. The Company adopted the amended guidance for the annual financial statements in 2024 and the interim disclosure requirements will be effective for interim periods beginning January 1, 2025. The adoption of this amendment did not have any impact on the Consolidated Financial Statements aside from additional disclosures. See Note 12, “Business Segment Reporting” for related disclosures.
Income Taxes In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The ASU is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in this update require additional disclosures primarily related to the rate reconciliation and income taxes paid information. The amendments in this update are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The adoption of this accounting pronouncement will have no impact on the Consolidated Financial Statements aside from additional disclosures.
3. LOANS AND ALLOWANCE FOR CREDIT 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 risk assessment 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.
Specialty lending loans include Asset-based loans, which 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. The Company utilizes pre-loan due diligence techniques, monitoring disciplines, and loan management practices common within the asset-based lending industry to underwrite loans to these borrowers.
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-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, completion of the construction project, and the availability of long-term financing.
Consumer 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. 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. During the first quarter of 2024, the Company purchased a co-branded credit card portfolio. The purchase included $109.4 million in credit card receivables.
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
The following tables provide a summary of loan classes and an aging of past due loans at December 31, 2024 and 2023 (in thousands):
December 31, 2024
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
$
$
$
4,423
$
4,870
$
10,896,632
$
10,901,502
Specialty lending
-
-
-
-
469,194
469,194
Commercial real estate
1,013
-
1,818
10,129,467
10,131,285
Consumer real estate
-
13,614
14,167
3,172,963
3,187,130
Consumer
193,633
193,860
Credit cards
9,316
7,589
17,305
561,461
578,766
Leases and other
-
-
-
-
180,564
180,564
Total loans
$
11,503
$
7,602
$
19,282
$
38,387
$
25,603,914
$
25,642,301
December 31, 2023
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
$
2,851
$
-
$
7,033
$
9,884
$
9,920,045
$
9,929,929
Specialty lending
-
-
-
-
498,786
498,786
Commercial real estate
1,848
-
2,585
8,891,341
8,893,926
Consumer real estate
1,137
-
5,058
6,195
2,954,437
2,960,632
Consumer
163,104
163,291
Credit cards
5,343
3,056
8,684
415,272
423,956
Leases and other
-
-
301,893
301,964
Total loans
$
11,283
$
3,111
$
13,212
$
27,606
$
23,144,878
$
23,172,484
The Company sold consumer real estate loans with proceeds of $91.1 million, $67.9 million, and $48.1 million in the secondary market without recourse during the periods ended December 31, 2024, 2023, and 2022, respectively.
The Company has ceased the recognition of interest on loans with a carrying value of $19.3 million and $13.2 million at December 31, 2024 and 2023, respectively. Restructured loans totaled $196 thousand and $548 thousand at December 31, 2024 and 2023, respectively. Loans 90 days past due and still accruing interest amounted to $7.6 million and $3.1 million at December 31, 2024 and 2023, respectively. All interest accrued but not received for loans placed on nonaccrual is reversed against interest income. There was an insignificant amount of interest reversed related to loans on nonaccrual during 2024 and 2023. Nonaccrual loans with no related allowance for credit losses totaled $19.3 million and $13.2 million at December 31, 2024 and 2023, respectively.
The following tables provide the amortized cost of nonaccrual loans with no related allowance for credit losses by loan class at December 31, 2024 and 2023 (in thousands):
December 31, 2024
Nonaccrual
Loans
Amortized Cost of Nonaccrual Loans with no related Allowance
Loans
Commercial and industrial
$
4,423
$
4,423
Specialty lending
-
-
Commercial real estate
Consumer real estate
13,614
13,614
Consumer
Credit cards
Leases and other
-
-
Total loans
$
19,282
$
19,282
December 31, 2023
Nonaccrual
Loans
Amortized Cost of Nonaccrual Loans with no related Allowance
Loans
Commercial and industrial
$
7,033
$
7,033
Specialty lending
-
-
Commercial real estate
Consumer real estate
5,058
5,058
Consumer
Credit cards
Leases and other
Total loans
$
13,212
$
13,212
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, 2024 and 2023 as well as the gross charge-offs by loan class and origination year for the year ended December 31, 2024 (in thousands):
December 31, 2024
Amortized Cost Basis by Origination Year - Term Loans
Loan Segment
and Type
Prior
Amortized Cost - Revolving Loans
Amortized Cost - Revolving Loans Converted to Term Loans
Total
Commercial and industrial:
Equipment/Accounts Receivable/Inventory
$
2,319,857
$
1,363,616
$
975,325
$
688,580
$
293,194
$
135,072
$
4,915,907
$
20,356
$
10,711,907
Agriculture
9,857
5,750
3,554
2,208
156,546
-
178,368
Overdrafts
-
-
-
-
-
-
11,227
-
11,227
Total Commercial and industrial
2,329,714
1,369,366
978,879
690,788
293,550
135,169
5,083,680
20,356
10,901,502
Current period charge-offs
-
1,870
2,113
-
5,441
Specialty lending:
Asset-based lending
5,803
-
8,026
30,702
29,392
-
395,271
-
469,194
Total Specialty lending
5,803
-
8,026
30,702
29,392
-
395,271
-
469,194
Current period charge-offs
-
-
-
-
-
-
-
-
-
Commercial real estate:
Owner-occupied
352,517
277,049
593,480
442,805
293,799
275,207
4,948
25,266
2,265,071
Non-owner-occupied
784,434
527,773
1,006,769
727,365
404,362
324,839
32,312
-
3,807,854
Farmland
54,656
47,357
58,154
36,127
183,762
23,016
107,468
510,543
5+ Multi-family
161,767
47,136
302,225
256,032
28,819
18,732
9,202
-
823,913
1-4 Family construction
46,096
1,385
-
-
-
-
-
47,486
General construction
493,723
644,885
1,222,539
235,758
4,049
74,950
-
2,676,418
Total Commercial real estate
1,893,193
1,545,585
3,183,167
1,698,087
914,791
642,308
228,885
25,269
10,131,285
Current period charge-offs
-
-
-
-
-
-
Consumer real estate:
HELOC
5,049
390,843
2,484
399,721
First lien: 1-4 family
413,395
361,242
565,017
635,217
496,758
273,628
-
-
2,745,257
Junior lien: 1-4 family
12,516
9,969
10,004
3,978
2,934
2,676
-
42,152
Total Consumer real estate
426,001
371,227
575,471
639,650
500,026
281,353
390,918
2,484
3,187,130
Current period charge-offs
-
-
-
-
Consumer:
Revolving line
-
-
-
-
-
101,407
-
101,442
Auto
8,567
7,429
3,534
1,928
-
-
22,414
Other
13,050
2,876
10,065
25,659
17,216
-
70,004
Total Consumer
21,652
10,305
13,599
27,587
1,015
1,079
118,623
-
193,860
Current period charge-offs
-
-
1,395
-
1,524
Credit cards:
Consumer
-
-
-
-
-
-
328,474
-
328,474
Commercial
-
-
-
-
-
-
250,292
-
250,292
Total Credit cards
-
-
-
-
-
-
578,766
-
578,766
Current period charge-offs
-
-
-
-
-
-
20,752
-
20,752
Leases and other:
Leases
-
-
-
-
-
1,492
-
-
1,492
Other
31,084
50,273
48,801
13,067
12,780
11,116
11,951
-
179,072
Total Leases and other
31,084
50,273
48,801
13,067
12,780
12,608
11,951
-
180,564
Current period charge-offs
-
-
-
-
-
-
Total loans
$
4,707,447
$
3,346,756
$
4,807,943
$
3,099,881
$
1,751,554
$
1,072,517
$
6,808,094
$
48,109
$
25,642,301
December 31, 2023
Amortized Cost Basis by Origination Year - Term Loans
Loan Segment
and Type
Prior
Amortized Cost - Revolving Loans
Amortized Cost - Revolving Loans Converted to Term Loans
Total
Commercial and industrial:
Equipment/Accounts Receivable/Inventory
$
1,787,301
$
1,486,609
$
1,123,732
$
412,276
$
202,827
$
97,130
$
4,615,872
$
6,336
$
9,732,083
Agriculture
13,934
5,840
3,785
169,173
-
194,368
Overdrafts
-
-
-
-
-
-
3,478
-
3,478
Total Commercial and industrial
1,801,235
1,492,449
1,127,517
413,196
203,304
97,369
4,788,523
6,336
9,929,929
Specialty lending:
Asset-based lending
13,938
16,103
35,466
32,229
-
-
401,050
-
498,786
Total Specialty lending
13,938
16,103
35,466
32,229
-
-
401,050
-
498,786
Commercial real estate:
Owner-occupied
276,284
629,514
499,020
335,133
152,539
215,373
30,842
-
2,138,705
Non-owner-occupied
556,369
901,614
849,496
449,547
293,531
185,679
36,313
-
3,272,549
Farmland
75,418
71,087
39,128
195,750
15,608
19,700
89,291
-
505,982
5+ Multi-family
34,714
27,668
240,724
29,840
16,861
4,982
9,274
-
364,063
1-4 Family construction
49,327
51,360
-
-
-
-
3,286
3,394
107,367
General construction
574,661
1,340,152
515,289
4,220
70,172
-
2,505,260
Total Commercial real estate
1,566,773
3,021,395
2,143,657
1,014,490
479,175
425,864
239,178
3,394
8,893,926
Consumer real estate:
HELOC
-
4,958
355,105
1,364
362,806
First lien: 1-4 family
419,312
585,401
682,008
548,859
158,228
165,197
-
2,559,007
Junior lien: 1-4 family
12,117
11,943
6,861
3,927
2,117
1,769
-
38,819
Total Consumer real estate
431,579
597,994
688,869
553,283
160,427
171,924
355,192
1,364
2,960,632
Consumer:
Revolving line
-
-
-
-
-
56,272
-
56,320
Auto
11,509
6,013
3,922
2,170
1,088
-
-
24,860
Other
4,853
22,147
26,125
1,243
26,804
-
82,111
Total Consumer
16,410
28,160
30,047
2,744
1,453
1,401
83,076
-
163,291
Credit cards:
Consumer
-
-
-
-
-
-
197,095
-
197,095
Commercial
-
-
-
-
-
-
226,861
-
226,861
Total Credit cards
-
-
-
-
-
-
423,956
-
423,956
Leases and other:
Leases
-
-
-
-
1,106
-
-
1,716
Other
100,484
95,909
16,968
16,949
1,620
13,966
54,352
-
300,248
Total Leases and other
100,484
95,909
16,968
16,949
2,230
15,072
54,352
-
301,964
Total loans
$
3,930,419
$
5,252,010
$
4,042,524
$
2,032,891
$
846,589
$
711,630
$
6,345,327
$
11,094
$
23,172,484
Accrued interest on loans totaled $125.7 million and $119.6 million as of December 31, 2024 and 2023, 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 ratings are summarized into the following categories: Pass, Special Mention, Substandard, and Doubtful. Any loan not classified in one of the categories described below is considered to be a Pass loan. A description of the general characteristics of the loan rating categories is as follows:
•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.
•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 being 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 any 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 summary of the amortized cost balance by collateral type and risk rating as of December 31, 2024 and 2023 (in thousands):
December 31, 2024
Amortized Cost Basis by Origination Year - Term Loans
Risk by Collateral
Prior
Amortized Cost - Revolving Loans
Amortized Cost - Revolving Loans Converted to Term Loans
Total
Equipment/Accounts Receivable/Inventory
Pass
$
2,294,574
$
1,339,370
$
910,591
$
668,187
$
291,733
$
130,832
$
4,725,721
$
20,356
$
10,381,364
Special Mention
2,044
4,145
6,075
5,949
-
48,897
-
67,749
Substandard
23,044
20,101
58,659
14,444
4,240
141,289
-
262,599
Doubtful
-
-
-
-
-
-
-
Total Equipment/Accounts Receivable/Inventory
$
2,319,857
$
1,363,616
$
975,325
$
688,580
$
293,194
$
135,072
$
4,915,907
$
20,356
$
10,711,907
Agriculture
Pass
$
5,214
$
5,613
$
3,465
$
2,208
$
$
$
153,585
$
-
$
170,538
Special Mention
-
-
-
-
1,068
-
1,294
Substandard
4,643
-
-
-
-
-
1,893
-
6,536
Doubtful
-
-
-
-
-
-
-
-
-
Total Agriculture
$
9,857
$
5,750
$
3,554
$
2,208
$
$
$
156,546
$
-
$
178,368
December 31, 2023
Amortized Cost Basis by Origination Year - Term Loans
Risk by Collateral
Prior
Amortized Cost - Revolving Loans
Amortized Cost - Revolving Loans Converted to Term Loans
Total
Equipment/Accounts Receivable/Inventory
Pass
$
1,767,383
$
1,462,714
$
1,115,205
$
411,441
$
194,181
$
94,606
$
4,473,085
$
6,243
$
9,524,858
Special Mention
3,000
17,857
5,186
-
-
39,059
-
65,316
Substandard
15,708
6,038
3,341
8,646
2,524
103,728
140,699
Doubtful
1,210
-
-
-
-
-
-
-
1,210
Total Equipment/Accounts Receivable/Inventory
$
1,787,301
$
1,486,609
$
1,123,732
$
412,276
$
202,827
$
97,130
$
4,615,872
$
6,336
$
9,732,083
Agriculture
Pass
$
13,934
$
5,122
$
3,785
$
$
$
$
159,565
$
-
$
183,961
Special Mention
-
-
-
-
-
1,236
-
1,302
Substandard
-
-
-
-
8,372
-
9,105
Doubtful
-
-
-
-
-
-
-
-
-
Total Agriculture
$
13,934
$
5,840
$
3,785
$
$
$
$
169,173
$
-
$
194,368
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 secured 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 accounts receivable within 30 to 90 days or converting assets into cash or through goods and services being sold and collected. The Company tracks each individual borrower credit risk based on their loan to collateral 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.
The following table provides a summary of the amortized cost balance by risk rating for asset-based loans as of December 31, 2024 and 2023 (in thousands):
Asset-based lending
Risk
December 31, 2024
December 31, 2023
In-margin
$
469,194
$
498,786
Out-of-margin
-
-
Total
$
469,194
$
498,786
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 in this type of lending 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 the level of economic activity can vary widely from state to state and among metropolitan areas. In addition to geographic considerations, markets can be defined by property type. While all sectors are influenced by economic conditions, some sectors are more sensitive to certain economic factors than others.
Farmland Farmland loans are secured by real estate used for agricultural purposes such as crop and livestock production. Assets used as collateral are long-term assets that carry the ability to have longer amortizations and
maturities. Longer terms carry the risk of added susceptibility to market conditions. The limited purpose of some Agriculture-related collateral 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 local 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 this can result in increased vacancy. Rents may need to be lowered to fill apartment units. Increased vacancy and lower rental rates not only drive the borrower’s ability to repay debt but also contribute to how the collateral is valued.
1-4 Family construction 1-4 family construction loans are secured by 1-4 family residential real estate and are in the process of construction or improvements being made. 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. Market conditions also play an important role in understanding the risk profile. Risk from adverse changes in market conditions from the start of development to completion can result in deflated collateral values.
General construction General construction loans are secured by commercial real estate in 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, 2024 and 2023 (in thousands):
December 31, 2024
Amortized Cost Basis by Origination Year - Term Loans
Risk by Collateral
Prior
Amortized Cost - Revolving Loans
Amortized Cost - Revolving Loans Converted to Term Loans
Total
Owner-occupied
Pass
$
316,858
$
276,546
$
590,337
$
442,768
$
289,219
$
267,944
$
4,948
$
25,266
$
2,213,886
Special Mention
31,213
-
1,512
-
-
-
-
33,192
Substandard
4,446
1,631
4,113
7,263
-
-
17,993
Doubtful
-
-
-
-
-
-
-
-
-
Total Owner-occupied
$
352,517
$
277,049
$
593,480
$
442,805
$
293,799
$
275,207
$
4,948
$
25,266
$
2,265,071
Non-owner-occupied
Pass
$
784,434
$
514,745
$
981,769
$
727,365
$
404,362
$
324,310
$
32,312
$
-
$
3,769,297
Special Mention
-
13,028
25,000
-
-
-
-
-
38,028
Substandard
-
-
-
-
-
-
-
Doubtful
-
-
-
-
-
-
-
-
-
Total Non-owner-occupied
$
784,434
$
527,773
$
1,006,769
$
727,365
$
404,362
$
324,839
$
32,312
$
-
$
3,807,854
Farmland
Pass
$
36,771
$
45,055
$
45,131
$
36,127
$
182,769
$
14,209
$
106,468
$
$
466,533
Special Mention
-
13,023
-
-
2,324
1,000
-
17,329
Substandard
16,903
2,302
-
-
6,483
-
-
26,681
Doubtful
-
-
-
-
-
-
-
-
-
Total Farmland
$
54,656
$
47,357
$
58,154
$
36,127
$
183,762
$
23,016
$
107,468
$
$
510,543
5+ Multi-family
Pass
$
161,767
$
47,136
$
302,225
$
256,032
$
28,819
$
18,732
$
9,202
$
-
$
823,913
Special Mention
-
-
-
-
-
-
-
-
-
Substandard
-
-
-
-
-
-
-
-
-
Doubtful
-
-
-
-
-
-
-
-
-
Total 5+ Multi-family
$
161,767
$
47,136
$
302,225
$
256,032
$
28,819
$
18,732
$
9,202
$
-
$
823,913
1-4 Family construction
Pass
$
46,096
$
1,385
$
-
$
-
$
-
$
-
$
$
-
$
47,486
Special Mention
-
-
-
-
-
-
-
-
-
Substandard
-
-
-
-
-
-
-
-
-
Doubtful
-
-
-
-
-
-
-
-
-
Total 1-4 Family construction
$
46,096
$
1,385
$
-
$
-
$
-
$
-
$
$
-
$
47,486
General construction
Pass
$
493,614
$
643,050
$
1,221,251
$
235,758
$
4,049
$
$
74,950
$
-
$
2,673,176
Special Mention
-
-
-
-
-
-
-
-
-
Substandard
-
1,835
1,288
-
-
-
-
3,133
Doubtful
-
-
-
-
-
-
-
Total General construction
$
493,723
$
644,885
$
1,222,539
$
235,758
$
4,049
$
$
74,950
$
-
$
2,676,418
December 31, 2023
Amortized Cost Basis by Origination Year - Term Loans
Risk by Collateral
Prior
Amortized Cost - Revolving Loans
Amortized Cost - Revolving Loans Converted to Term Loans
Total
Owner-occupied
Pass
$
271,840
$
626,119
$
485,343
$
328,379
$
145,975
$
214,031
$
30,113
$
-
$
2,101,800
Special Mention
-
1,609
12,911
6,741
4,015
-
-
26,005
Substandard
4,444
1,786
2,549
1,342
-
-
10,900
Doubtful
-
-
-
-
-
-
-
-
-
Total Owner-occupied
$
276,284
$
629,514
$
499,020
$
335,133
$
152,539
$
215,373
$
30,842
$
-
$
2,138,705
Non-owner-occupied
Pass
$
531,835
$
901,614
$
824,434
$
449,547
$
293,531
$
185,679
$
36,313
$
-
$
3,222,953
Special Mention
24,534
-
24,404
-
-
-
-
-
48,938
Substandard
-
-
-
-
-
-
-
Doubtful
-
-
-
-
-
-
-
-
-
Total Non-owner-occupied
$
556,369
$
901,614
$
849,496
$
449,547
$
293,531
$
185,679
$
36,313
$
-
$
3,272,549
Farmland
Pass
$
48,615
$
62,594
$
38,806
$
195,234
$
11,735
$
19,168
$
89,291
$
-
$
465,443
Special Mention
2,358
-
3,627
-
-
-
6,906
Substandard
24,445
8,065
-
-
33,633
Doubtful
-
-
-
-
-
-
-
-
-
Total Farmland
$
75,418
$
71,087
$
39,128
$
195,750
$
15,608
$
19,700
$
89,291
$
-
$
505,982
5+ Multi-family
Pass
$
34,714
$
27,668
$
240,724
$
29,840
$
16,861
$
4,982
$
9,274
$
-
$
364,063
Special Mention
-
-
-
-
-
-
-
-
-
Substandard
-
-
-
-
-
-
-
-
-
Doubtful
-
-
-
-
-
-
-
-
-
Total 5+ Multi-family
$
34,714
$
27,668
$
240,724
$
29,840
$
16,861
$
4,982
$
9,274
$
-
$
364,063
1-4 Family construction
Pass
$
49,327
$
51,360
$
-
$
-
$
-
$
-
$
3,286
$
3,394
$
107,367
Special Mention
-
-
-
-
-
-
-
-
-
Substandard
-
-
-
-
-
-
-
-
-
Doubtful
-
-
-
-
-
-
-
-
-
Total 1-4 Family construction
$
49,327
$
51,360
$
-
$
-
$
-
$
-
$
3,286
$
3,394
$
107,367
General construction
Pass
$
574,401
$
1,340,152
$
507,276
$
4,220
$
$
$
70,172
$
-
$
2,496,974
Special Mention
-
-
-
-
-
-
-
Substandard
-
-
8,013
-
-
-
-
8,026
Doubtful
-
-
-
-
-
-
-
Total General construction
$
574,661
$
1,340,152
$
515,289
$
4,220
$
$
$
70,172
$
-
$
2,505,260
Consumer real estate
A discussion of the credit quality 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 amortizations. 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 not 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 has ceased the recognition of interest and the loan is placed on non-accrual. Charge-offs and borrower performance are tracked on a loan origination 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 amortized cost balance by collateral type and risk rating as of December 31, 2024 and 2023 (in thousands):
December 31, 2024
Amortized Cost Basis by Origination Year - Term Loans
Risk by Collateral
Prior
Amortized Cost - Revolving Loans
Amortized Cost - Revolving Loans Converted to Term Loans
Total
HELOC
Performing
$
$
$
$
$
$
3,780
$
390,843
$
1,879
$
397,510
Non-performing
-
-
-
1,269
-
2,211
Total HELOC
$
$
$
$
$
$
5,049
$
390,843
$
2,484
$
399,721
First lien: 1-4 family
Performing
$
413,060
$
358,303
$
559,689
$
633,749
$
496,615
$
272,601
$
-
$
-
$
2,734,017
Non-performing
2,939
5,328
1,468
1,027
-
-
11,240
Total First lien: 1-4 family
$
413,395
$
361,242
$
565,017
$
635,217
$
496,758
$
273,628
$
-
$
-
$
2,745,257
Junior lien: 1-4 family
Performing
$
12,516
$
9,952
$
9,903
$
3,978
$
2,934
$
2,631
$
$
-
$
41,989
Non-performing
-
-
-
-
-
Total Junior lien: 1-4 family
$
12,516
$
9,969
$
10,004
$
3,978
$
2,934
$
2,676
$
$
-
$
42,152
December 31, 2023
Amortized Cost Basis by Origination Year - Term Loans
Risk by Collateral
Prior
Amortized Cost - Revolving Loans
Amortized Cost - Revolving Loans Converted to Term Loans
Total
HELOC
Performing
$
$
$
-
$
$
$
3,737
$
355,047
$
1,308
$
361,369
Non-performing
-
-
-
1,221
1,437
Total HELOC
$
$
$
-
$
$
$
4,958
$
355,105
$
1,364
$
362,806
First lien: 1-4 family
Performing
$
418,766
$
583,711
$
681,921
$
548,736
$
158,037
$
164,315
$
$
-
$
2,555,488
Non-performing
1,690
-
-
3,519
Total First lien: 1-4 family
$
419,312
$
585,401
$
682,008
$
548,859
$
158,228
$
165,197
$
$
-
$
2,559,007
Junior lien: 1-4 family
Performing
$
12,094
$
11,911
$
6,861
$
3,927
$
2,117
$
1,722
$
$
-
$
38,717
Non-performing
-
-
-
-
-
Total Junior lien: 1-4 family
$
12,117
$
11,943
$
6,861
$
3,927
$
2,117
$
1,769
$
$
-
$
38,819
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 origination 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 amortized cost balance by collateral type and risk rating as of December 31, 2024 and 2023 (in thousands):
December 31, 2024
Amortized Cost Basis by Origination Year - Term Loans
Risk by Collateral
Prior
Amortized Cost - Revolving Loans
Amortized Cost - Revolving Loans Converted to Term Loans
Total
Revolving line
Performing
$
$
-
$
-
$
-
$
-
$
-
$
101,407
$
-
$
101,442
Non-performing
-
-
-
-
-
-
-
-
-
Total Revolving line
$
$
-
$
-
$
-
$
-
$
-
$
101,407
$
-
$
101,442
Auto
Performing
$
8,567
$
7,418
$
3,534
$
1,920
$
$
$
-
$
-
$
22,395
Non-performing
-
-
-
-
-
-
Total Auto
$
8,567
$
7,429
$
3,534
$
1,928
$
$
$
-
$
-
$
22,414
Other
Performing
$
13,037
$
2,876
$
10,057
$
25,659
$
$
$
17,216
$
-
$
69,983
Non-performing
-
-
-
-
-
-
Total Other
$
13,050
$
2,876
$
10,065
$
25,659
$
$
$
17,216
$
-
$
70,004
December 31, 2023
Amortized Cost Basis by Origination Year - Term Loans
Risk by Collateral
Prior
Amortized Cost - Revolving Loans
Amortized Cost - Revolving Loans Converted to Term Loans
Total
Revolving line
Performing
$
$
-
$
-
$
-
$
-
$
-
$
56,272
$
-
$
56,320
Non-performing
-
-
-
-
-
-
-
-
-
Total Revolving line
$
$
-
$
-
$
-
$
-
$
-
$
56,272
$
-
$
56,320
Auto
Performing
$
11,509
$
6,013
$
3,908
$
2,170
$
1,088
$
$
-
$
-
$
24,846
Non-performing
-
-
-
-
-
-
-
Total Auto
$
11,509
$
6,013
$
3,922
$
2,170
$
1,088
$
$
-
$
-
$
24,860
Other
Performing
$
4,853
$
22,133
$
26,125
$
$
$
1,243
$
26,804
$
-
$
82,097
Non-performing
-
-
-
-
-
-
-
Total Other
$
4,853
$
22,147
$
26,125
$
$
$
1,243
$
26,804
$
-
$
82,111
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 which 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 portfolio is segmented 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 one 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 which 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, 2024 and 2023 (in thousands):
Consumer
Risk
December 31, 2024
December 31, 2023
Transactor accounts
$
101,688
$
74,330
Revolver accounts (by Credit score):
Less than 600
16,297
7,140
600-619
7,893
3,572
620-639
13,174
5,343
640-659
20,798
9,536
660-679
20,897
9,642
680-699
24,121
11,220
700-719
26,180
13,489
720-739
22,418
12,896
740-759
18,965
12,434
760-779
19,609
12,955
780-799
18,058
11,822
800-819
11,443
7,808
820-839
5,745
4,054
840+
1,188
Total
$
328,474
$
197,095
The following table provides a summary of the amortized cost balance of commercial credit cards by risk rating as of December 31, 2024 and 2023 (in thousands):
Commercial
Risk
December 31, 2024
December 31, 2023
Current
$
231,713
$
207,520
Past Due
18,579
19,341
Total
$
250,292
$
226,861
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 their 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, 2024 and 2023 (in thousands):
Leases
Other
Risk
December 31, 2024
December 31, 2023
December 31, 2024
December 31, 2023
Pass
$
1,492
$
1,716
$
179,047
$
300,152
Special Mention
-
-
-
-
Substandard
-
-
Doubtful
-
-
-
-
Total
$
1,492
$
1,716
$
179,072
$
300,248
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 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 dynamic reasonable and supportable forecast period that ranges from one to three years and changes based on 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 in which the Company reverts immediately to historical losses or straight-line over four quarters.
The ACL is measured on a collective (pool) basis when similar risk characteristics exist. 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 and 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 individual loans along with changes of macro-economic variables. The economic variables utilized are typically comprised of leading and lagging indicators. The ACL for Commercial and industrial loans is calculated by modeling probability of default (PD) over future periods multiplied by historical loss given default rates (LGD) multiplied by contractual exposure at default minus any estimated prepayments and charge offs.
Collateral positions for Specialty lending loans are continuously monitored by the Company and the borrower is required to continually adjust the amount of collateral securing the loan. Credit losses are measured for any position where the amortized cost basis is greater than the fair value of the collateral. The 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 and 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 concessionary loan term has been granted to a borrower experiencing financial difficulty 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 that include modifications deemed concessionary made to borrowers experiencing financial difficulty, 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 include modifications made to borrowers experiencing financial difficulty.
ALLOWANCE FOR CREDIT LOSSES AND RECORDED INVESTMENT IN LOANS
The following tables provide a rollforward of the allowance for credit losses by portfolio segment for the year ended December 31, 2024, 2023, and 2022 (in thousands):
Year Ended December 31, 2024
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
$
155,658
$
-
$
45,507
$
6,941
$
1,089
$
7,935
$
2,608
$
219,738
$
3,258
$
222,996
Charge-offs
(5,441
)
-
(250
)
(432
)
(1,524
)
(20,752
)
(4
)
(28,403
)
-
(28,403
)
Recoveries
1,890
-
2,355
5,141
-
5,141
Provision
8,805
(4
)
32,083
(2,830
)
1,160
24,734
(1,335
)
62,613
(613
)
62,000
Ending balance - ACL
$
160,912
$
-
$
77,340
$
4,327
$
$
14,272
$
1,272
$
259,089
$
2,645
$
261,734
Allowance for credit losses on off-balance sheet credit exposures:
Beginning balance
$
4,092
$
$
$
$
$
-
$
$
5,024
$
$
5,088
Provision
(2,009
)
(186
)
1,281
(47
)
-
(900
)
(50
)
(950
)
Ending balance - ACL on off-balance sheet
$
2,083
$
-
$
1,741
$
$
$
-
$
$
4,124
$
$
4,138
Year Ended December 31, 2023
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
$
136,737
$
-
$
39,370
$
6,148
$
$
6,866
$
2,221
$
191,836
$
2,407
$
194,243
Charge-offs
(5,047
)
(762
)
(266
)
(1,185
)
(1,232
)
(9,181
)
-
(17,673
)
-
(17,673
)
Recoveries
5,295
1,536
-
7,199
-
7,199
Provision
18,673
6,292
1,933
1,616
8,714
38,376
39,227
Ending balance - ACL
$
155,658
$
-
$
45,507
$
6,941
$
1,089
$
7,935
$
2,608
$
219,738
$
3,258
$
222,996
Allowance for credit losses on off-balance sheet credit exposures:
Beginning balance
$
2,178
$
$
$
$
$
-
$
$
2,981
$
$
3,088
Provision
1,914
-
(7
)
(4
)
-
2,043
(43
)
2,000
Ending balance - ACL on off-balance sheet
$
4,092
$
$
$
$
$
-
$
$
5,024
$
$
5,088
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
$
$
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
1,812
-
4,437
-
4,437
Provision
48,724
(2,171
)
(17,251
)
2,153
5,129
36,933
37,400
Ending balance - ACL
$
136,737
$
-
$
39,370
$
6,148
$
$
6,866
$
2,221
$
191,836
$
2,407
$
194,243
Allowance for credit losses on off-balance sheet credit exposures:
Beginning balance
$
1,739
$
$
$
$
-
$
-
$
$
2,500
$
$
2,588
Provision
(62
)
-
Ending balance - ACL on off-balance sheet
$
2,178
$
$
$
$
$
-
$
$
2,981
$
$
3,088
The allowance for credit losses on off-balance sheet credit exposures is recorded in the Accrued expenses and taxes line of the Company’s Consolidated Balance Sheets, see Note 15 “Commitments, Contingencies and Guarantees.”
Collateral Dependent Financial Assets
The following tables provide the amortized cost balance of financial assets considered collateral dependent as of December 31, 2024 and 2023 (in thousands):
December 31, 2024
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
$
4,423
$
-
$
4,423
Agriculture
-
-
-
Total Commercial and industrial
4,423
-
4,423
Specialty lending:
Asset-based lending
-
-
-
Total Specialty lending
-
-
-
Commercial real estate:
Owner-occupied
-
Non-owner-occupied
-
-
-
Farmland
-
5+ Multi-family
-
-
-
1-4 Family construction
-
-
-
General construction
-
Total Commercial real estate
-
Consumer real estate:
HELOC
2,211
-
2,211
First lien: 1-4 family
11,240
-
11,240
Junior lien: 1-4 family
-
Total Consumer real estate
13,614
-
13,614
Consumer:
Revolving line
-
-
-
Auto
-
Other
-
Total Consumer
-
Leases and other:
Leases
-
-
-
Other
-
-
-
Total Leases and other
-
-
-
Total loans
$
19,037
$
-
$
19,037
December 31, 2023
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
$
7,033
$
-
$
7,033
Agriculture
-
-
-
Total Commercial and industrial
7,033
-
7,033
Specialty lending:
Asset-based lending
-
-
-
Total Specialty lending
-
-
-
Commercial real estate:
Owner-occupied
-
Non-owner-occupied
-
-
-
Farmland
-
5+ Multi-family
-
-
-
1-4 Family construction
-
-
-
General construction
-
Total Commercial real estate
-
Consumer real estate:
HELOC
1,437
-
1,437
First lien: 1-4 family
3,519
-
3,519
Junior lien: 1-4 family
-
Total Consumer real estate
5,058
-
5,058
Consumer:
Revolving line
-
-
-
Auto
-
Other
-
Total Consumer
-
Leases and other:
Leases
-
-
-
Other
-
Total Leases and other
-
Total loans
$
13,090
$
-
$
13,090
Modifications made to Borrowers Experiencing Financial Difficulty
In the normal course of business, the Company may execute loan modifications with borrowers. These modifications are analyzed to determine whether the modification is considered concessionary, long term and made to a borrower experiencing financial difficulty. The Company’s modifications generally include interest rate adjustments, principal reductions, and amortization and maturity date extensions. These modifications allow the borrower short-term cash relief to allow them to improve their financial condition. If a loan modification is determined to be made to a borrower experiencing financial difficulty, the loan is considered collateral dependent and evaluated as part of the ACL as described above in the Allowance for Credit Losses section of this note.
For the year ended December 31, 2024, the Company had five modifications on residential real estate loans made to borrowers experiencing financial difficulty with a total pre-modification loan balance of $1.1 million and a total post-modification balance of $1.1 million. For the year ended December 31, 2023, the Company did not modify any loans made to borrowers experiencing financial difficulty.
The Company had no commitments to lend to borrowers experiencing financial difficulty for which the Company has modified an existing loan as of December 31, 2024 and 2023. 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 economic conditions that exist for each customer and their ability to generate positive cash flows during the loan term. For the years ended December 31, 2024 and 2023, the Company had no loan modifications made to borrowers experiencing financial difficulty for which there was a payment default within the 12 months following the modification date.
4. SECURITIES
Securities Available for Sale
This table provides detailed information about securities available for sale at December 31, 2024 and 2023 (in thousands):
Gross
Gross
Amortized
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Value
U.S. Treasury
$
1,331,394
$
2,751
$
(8,072
)
$
1,326,073
U.S. Agencies
129,246
(325
)
129,047
Mortgage-backed
4,945,548
(524,957
)
4,420,930
State and political subdivisions
1,309,126
(91,044
)
1,218,569
Corporates
330,739
(13,629
)
317,170
Collateralized loan obligations
361,623
1,060
(138
)
362,545
Total
$
8,407,676
$
4,823
$
(638,165
)
$
7,774,334
Gross
Gross
Amortized
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Value
U.S. Treasury
$
1,308,689
$
$
(10,201
)
$
1,298,742
U.S. Agencies
162,406
(2,937
)
159,721
Mortgage-backed
4,128,576
(508,740
)
3,620,785
State and political subdivisions
1,359,744
2,218
(74,987
)
1,286,975
Corporates
382,069
-
(30,794
)
351,275
Collateralized loan obligations
351,376
(1,072
)
351,115
Total
$
7,692,860
$
4,484
$
(628,731
)
$
7,068,613
The following table presents contractual maturity information for securities available for sale at December 31, 2024 (in thousands):
Amortized
Fair
Cost
Value
Due in 1 year or less
$
438,163
$
435,414
Due after 1 year through 5 years
1,873,775
1,849,758
Due after 5 years through 10 years
550,573
524,803
Due after 10 years
599,617
543,429
Total
3,462,128
3,353,404
Mortgage-backed securities
4,945,548
4,420,930
Total securities available for sale
$
8,407,676
$
7,774,334
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.
For the years ended December 31, 2024 and December 31, 2023, there were $19.2 million and $22.2 million, respectively, in proceeds from the sales of securities available for sale. Securities transactions resulted in gross realized gains of $139 thousand for the year ended December 31, 2024. There were $154 thousand of gross realized gains and $2 thousand of gross realized losses for the year ended December 31, 2023.
There were $10.5 billion and $10.1 billion of securities pledged to secure U.S. Government deposits, other public deposits, certain trust deposits, derivative transactions, and repurchase agreements at December 31, 2024 and December 31, 2023, respectively.
Accrued interest on securities available for sale totaled $43.1 million and $31.6 million as of December 31, 2024 and 2023, 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-for-sale 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-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, 2024 and 2023 (in thousands):
Less than 12 months
12 months or more
Total
Count
Fair Value
Unrealized
Losses
Count
Fair Value
Unrealized
Losses
Count
Fair Value
Unrealized
Losses
Description of Securities
U.S. Treasury
$
635,739
$
(6,319
)
$
142,518
$
(1,753
)
$
778,257
$
(8,072
)
U.S. Agencies
20,858
(46
)
56,712
(279
)
77,570
(325
)
Mortgage-backed
1,293,953
(22,468
)
3,055,882
(502,489
)
4,349,835
(524,957
)
State and political subdivisions
173,006
(2,392
)
1,629
953,458
(88,652
)
1,893
1,126,464
(91,044
)
Corporates
-
-
-
315,109
(13,629
)
315,109
(13,629
)
Collateralized loan obligations
47,222
(88
)
30,521
(50
)
77,743
(138
)
Total
$
2,170,778
$
(31,313
)
2,721
$
4,554,200
$
(606,852
)
3,248
$
6,724,978
$
(638,165
)
Less than 12 months
12 months or more
Total
Count
Fair Value
Unrealized
Losses
Count
Fair Value
Unrealized
Losses
Count
Fair Value
Unrealized
Losses
Description of Securities
U.S. Treasury
$
509,946
$
(267
)
$
745,573
$
(9,934
)
$
1,255,519
$
(10,201
)
U.S. Agencies
-
-
-
116,324
(2,937
)
116,324
(2,937
)
Mortgage-backed
19,154
(476
)
3,526,296
(508,264
)
3,545,450
(508,740
)
State and political subdivisions
200,835
(9,202
)
1,476
890,545
(65,785
)
1,864
1,091,380
(74,987
)
Corporates
-
-
-
351,275
(30,794
)
351,275
(30,794
)
Collateralized loan obligations
4,246
(4
)
210,872
(1,068
)
215,118
(1,072
)
Total
$
734,181
$
(9,949
)
2,706
$
5,840,885
$
(618,782
)
3,117
$
6,575,066
$
(628,731
)
The unrealized losses in the Company’s investments 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 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.
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.
During the year ended December 31, 2023, the Company recorded a $4.9 million impairment on one Corporate available-for-sale security.
As of both December 31, 2024 and 2023, there was no ACL related to the Company’s available-for-sale securities as the decline in fair value did not result from credit issues.
Securities Held to Maturity
The following table provides detailed information about securities held to maturity at December 31, 2024 and 2023, respectively (in thousands):
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
Allowance for Credit Losses
Net Carrying Amount
U.S. Agency
$
116,331
$
-
$
(581
)
$
115,750
$
-
$
116,331
Mortgage-backed
2,523,134
-
(418,482
)
2,104,652
-
2,523,134
State and political subdivisions
2,739,447
12,035
(222,946
)
2,528,536
(2,645
)
2,736,802
Total
$
5,378,912
$
12,035
$
(642,009
)
$
4,748,938
$
(2,645
)
$
5,376,267
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
Allowance for Credit Losses
Net Carrying Amount
U.S. Agency
$
123,210
$
-
$
(2,686
)
$
120,524
$
-
$
123,210
Mortgage-backed
2,738,253
(356,657
)
2,381,614
-
2,738,253
State and political subdivisions
2,830,405
21,021
(170,197
)
2,681,229
(3,258
)
2,827,147
Total
$
5,691,868
$
21,039
$
(529,540
)
$
5,183,367
$
(3,258
)
$
5,688,610
The following table presents contractual maturity information for securities held to maturity at December 31, 2024 (in thousands):
Amortized
Fair
Cost
Value
Due in 1 year or less
$
207,151
$
206,440
Due after 1 year through 5 years
236,820
231,802
Due after 5 years through 10 years
775,661
732,758
Due after 10 years
1,636,146
1,473,286
Total
2,855,778
2,644,286
Mortgage-backed securities
2,523,134
2,104,652
Total securities held to maturity
$
5,378,912
$
4,748,938
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 2024, 2023, or 2022.
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 $171.3 million and $207.2 million at December 31, 2024 and 2023, respectively.
Accrued interest on securities held to maturity totaled $25.6 million and $27.2 million as of December 31, 2024 and 2023, 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, 2024 and 2023 (in thousands):
Less than 12 months
12 months or more
Total
Count
Fair Value
Unrealized Losses
Count
Fair Value
Unrealized Losses
Count
Fair Value
Unrealized Losses
U.S. Agency
-
$
-
$
-
$
115,750
$
(581
)
$
115,750
$
(581
)
Mortgage-backed
3,527
(103
)
2,101,125
(418,379
)
2,104,652
(418,482
)
State and political subdivisions
52,468
(2,030
)
1,414
1,972,927
(220,916
)
1,461
2,025,395
(222,946
)
Total
$
55,995
$
(2,133
)
1,687
$
4,189,802
$
(639,876
)
1,740
$
4,245,797
$
(642,009
)
Less than 12 months
12 months or more
Total
Count
Fair Value
Unrealized Losses
Count
Fair Value
Unrealized Losses
Count
Fair Value
Unrealized Losses
U.S. Agency
-
$
-
$
-
$
120,524
$
(2,686
)
$
120,524
$
(2,686
)
Mortgage-backed
1,469
(14
)
2,377,922
(356,643
)
2,379,391
(356,657
)
State and political subdivisions
570,950
(22,557
)
1,343
1,612,442
(147,640
)
1,489
2,183,392
(170,197
)
Total
$
572,419
$
(22,571
)
1,617
$
4,110,888
$
(506,969
)
1,765
$
4,683,307
$
(529,540
)
The unrealized losses in the Company’s held-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 evaluated 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 held-to-maturity State and political subdivisions bond investments at December 31, 2024 and 2023 (in thousands):
Amortized Cost Basis by Credit Rating - HTM Debt Securities
AAA
AA
A
BBB
BB
CCC-C
Total
State and political subdivisions:
Competitive
$
-
$
-
$
424,690
$
610,351
$
36,628
$
21,990
$
1,093,659
Utilities
759,798
761,706
99,127
24,509
-
1,645,788
Total state and political subdivisions
$
759,798
$
761,706
$
523,817
$
634,860
$
37,276
$
21,990
$
2,739,447
Amortized Cost Basis by Credit Rating - HTM Debt Securities
AAA
AA
A
BBB
BB
B
CCC-C
Total
State and political subdivisions:
Competitive
$
-
$
7,704
$
464,349
$
641,743
$
30,734
$
15,326
$
2,649
$
1,162,505
Utilities
757,381
795,448
87,736
26,720
-
-
1,667,900
Total state and political subdivisions
$
757,381
$
803,152
$
552,085
$
668,463
$
31,349
$
15,326
$
2,649
$
2,830,405
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, 2024 and 2023.
Trading Securities
The were no net unrealized gains or losses on trading securities as of December 31, 2024. The net unrealized gain on trading securities was $272 thousand and the net unrealized loss on trading securities was $26 thousand as of December 31, 2023 and 2022, respectively. Net unrealized gains and losses are included in trading and investment banking income on the Consolidated Statements of Income. Securities sold not yet purchased totaled $7.1 million and $8.0 million at December 31, 2024 and 2023, respectively, and are classified within the Other liabilities line of the Company’s Consolidated Balance Sheets.
Other Securities
The table below provides detailed information for Other securities at December 31, 2024 and 2023 (in thousands):
December 31,
FRB and FHLB stock
$
42,672
$
87,672
Equity securities with readily determinable fair values
11,596
11,228
Equity securities without readily determinable fair values
416,750
394,035
Total
$
471,018
$
492,935
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. 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 include equity investments which are held by a subsidiary qualified as a Small Business Investment Company, as well as investments in low-income housing partnerships within the areas the Company serves. 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.
The table below presents the changes in equity securities without readily determinable fair values for the years ended December 31, 2024 and 2023 (in thousands):
Year Ended December 31,
Balance - beginning of year
$
394,035
$
297,504
Purchases of securities
91,169
109,487
Observable upward price adjustments
15,467
2,514
Observable downward price adjustments
(5,153
)
(1,250
)
Sales of securities and other activity
(78,768
)
(14,220
)
Balance - end of year
$
416,750
$
394,035
Investment Securities Gains, Net
The following table presents the components of Investment securities gains (losses), net for the years ended December 31, 2024, 2023, and 2022 (in thousands):
Year Ended December 31,
Investment securities gains (losses), net
Available-for-sale debt securities:
Gains realized on sales
$
$
$
-
Losses realized on sales
-
(2
)
-
Impairment on AFS security
-
(4,925
)
-
Equity securities with readily determinable fair values:
Fair value adjustments, net
(8,073
)
Equity securities without readily determinable fair values:
Fair value adjustments, net
(1,733
)
1,334
Sales
12,302
66,162
Total investment securities gains (losses), net
$
10,720
$
(3,139
)
$
58,444
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 $545.0 million and $240.3 million at December 31, 2024 and 2023, 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.
For the years 2024 and 2023, an analysis of activity with respect to such aggregate loans to related parties appears below (in thousands):
Year Ended December 31,
Balance - beginning of year
$
508,507
$
362,853
New loans
62,805
177,354
Repayments
(101,579
)
(27,271
)
Reduction due to change in reportable loans
(91
)
(4,429
)
Balance - end of year
$
469,642
$
508,507
7. GOODWILL AND OTHER INTANGIBLES
Changes in the carrying amount of goodwill for the years ended December 31, 2024 and December 31, 2023 by operating segment are as follows (in thousands):
Commercial Banking
Institutional Banking
Personal Banking
Total
Balances as of January 1, 2024
$
63,113
$
76,492
$
67,780
$
207,385
Balances as of December 31, 2024
$
63,113
$
76,492
$
67,780
$
207,385
Balances as of January 1, 2023
$
63,113
$
76,492
$
67,780
$
207,385
Balances as of December 31, 2023
$
63,113
$
76,492
$
67,780
$
207,385
Following are the intangible assets that continue to be subject to amortization as of December 31, 2024 and 2023 (in thousands):
As of December 31, 2024
Core Deposit Intangible Assets
Customer Relationships
Total
Gross carrying amount
$
2,345
$
86,800
$
89,145
Accumulated amortization
1,600
23,898
25,498
Net carrying amount
$
$
62,902
$
63,647
As of December 31, 2023
Core Deposit Intangible Assets
Customer Relationships
Total
Gross carrying amount
$
2,345
$
109,978
$
112,323
Accumulated amortization
1,135
40,176
41,311
Net carrying amount
$
1,210
$
69,802
$
71,012
Amortization expense for the years ended December 31, 2024, 2023, and 2022 was $7.7 million, $8.6 million, and $5.0 million, respectively.
The following table discloses the estimated amortization expense of intangible assets in future years (in thousands):
For the year ending December 31, 2025
$
7,510
For the year ending December 31, 2026
6,650
For the year ending December 31, 2027
4,678
For the year ending December 31, 2028
4,566
For the year ending December 31, 2029
4,548
8. PREMISES, EQUIPMENT, AND LEASES
Premises and equipment consisted of the following (in thousands):
December 31,
Land
$
40,601
$
41,368
Buildings and leasehold improvements
383,021
370,646
Equipment
199,537
194,171
Software
290,070
287,592
Total
913,229
893,777
Accumulated depreciation
(418,517
)
(394,892
)
Accumulated amortization
(272,939
)
(257,185
)
Premises and equipment, net
$
221,773
$
241,700
Premises and equipment depreciation and amortization expenses were $40.8 million in 2024, $46.5 million in 2023, and $46.8 million in 2022.
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 23 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 or the date a new lease or amendment was entered into, whichever is later. 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, 2024 and 2023, right-of-use assets of $47.6 million and $50.0 million, respectively, were included as part of Other assets on the Company’s Consolidated Balance Sheets. In addition, lease liabilities of $55.1 million and $58.9 million were included as part of Other liabilities on the Company’s Consolidated Balance Sheets as of December 31, 2024 and 2023, respectively. For the years ended December 31, 2024, 2023, and 2022, lease expense of $10.5 million, $11.1 million, and $11.9 million, respectively, was recognized as part of Occupancy expense on the Company’s Consolidated Statements of Income. For the years ended December 31, 2024, 2023, and 2022, cash payments of $12.2 million, $12.2 million, and $12.9 million, respectively, were made for leases 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, 2024 and 2023, leased assets obtained in exchange for new operating lease liabilities were $4.8 million and $5.7 million, respectively. As of December 31, 2024 and 2023, the weighted average remaining lease terms of the Company’s leases were 6.1 years and 6.5 years, respectively, and the weighted average discount rates were 3.36% and 3.17%, respectively.
As of December 31, 2024, future minimum lease payments under non-cancelable operating leases were as follows (in thousands):
$
12,018
11,626
10,567
8,712
7,074
Thereafter
11,386
Total lease payments
61,383
Less: Interest
6,262
Present value of lease liabilities
$
55,121
9. BORROWED FUNDS
The components of the Company's long-term debt are as follows (in thousands):
December 31,
Short-term debt:
Federal Home Loan Bank 5.04% due 2024
$
-
$
1,000,000
Federal Reserve Bank Term Funding Program 4.83% due 2024
-
800,000
Total short-term debt
-
1,800,000
Long-term debt:
Trust Preferred Securities:
Marquette Capital Trust I Subordinated Debentures 6.24% due 2036
18,926
18,607
Marquette Capital Trust II Subordinated Debentures 6.24% due 2036
19,429
19,132
Marquette Capital Trust III Subordinated Debentures 6.10% due 2036
7,631
7,517
Marquette Capital Trust IV Subordinated Debentures 6.22% due 2036
30,796
30,356
Subordinated notes 3.70% due 2030, net of issuance costs
199,681
199,232
Subordinated notes 6.25% due 2032, net of issuance costs
108,829
108,403
Total long-term debt
385,292
383,247
Total borrowed funds
$
385,292
$
2,183,247
The aggregate contractual repayment of long-term debt of $413.1 million is due after December 31, 2029.
The Company assumed long-term debt obligations from the acquisition of 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 $76.8 million and $75.6 million as of December 31, 2024 and 2023, respectively. Interest rates on trust preferred securities are tied to the three-month Term SOFR 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.
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 $0.3 million and $0.8 million as of December 31, 2024 and 2023, respectively. 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 $1.2 million and $1.6 million as of December 31, 2024 and 2023, respectively. 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 and through this relationship, the Company owns 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, 2024 and December 31, 2023 the Company owned $10.2 million and $55.2 million of FHLB stock, respectively. The Company had no outstanding advances at the FHLB of Des Moines as of December 31, 2024. The Company had one short-term advance of $1.0 billion outstanding at FHLB of Des Moines as of December 31, 2023. Additionally, in both 2024 and 2023, the FHLB of Des Moines issued a letter of credit for $150.0 million on behalf of the Company to secure deposits. The letter of credit outstanding as of December 31, 2024 expired in January 2025 and was subsequently renewed with an expiration date in March 2025. The Company’s borrowing capacity with the FHLB was $1.8 billion as of December 31, 2024.
The Company had no short-term borrowings outstanding with the Federal Reserve Bank's BTFP as of December 31, 2024. As of December 31, 2023, the Company had an $800.0 million short-term borrowing outstanding with the BTFP. The FRB terminated the BTFP during 2024. The Company's remaining borrowing capacity with the Federal Reserve Discount Window was $12.5 billion as of December 31, 2024.
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, 2024, was $2.5 billion, with accrued interest payable of $1.7 million. The amount outstanding at December 31, 2023, was $2.1 billion, with accrued interest payable of $1.5 million.
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, 2024 and 2023 (in thousands):
As of December 31, 2024
Securities Fair Market Value
Repurchase
Liabilities
Weighted Average
Interest Rate
Maturity of the Repurchase Liabilities
2 to 29 days
$
2,123,066
$
2,105,512
3.66
%
30 to 90 Days
439,400
431,048
4.78
Over 90 Days
2,750
2,750
2.50
Total
$
2,565,216
$
2,539,310
3.85
%
As of December 31, 2023
Securities Fair Market Value
Repurchase
Liabilities
Weighted Average
Interest Rate
Maturity of the Repurchase Liabilities
2 to 29 days
$
1,544,906
$
1,830,542
4.41
%
30 to 90 Days
188,424
186,289
5.67
Over 90 Days
91,140
89,000
5.08
Total
$
1,824,470
$
2,105,831
4.55
%
The table below presents the remaining contractual maturities of repurchase agreements outstanding at December 31, 2024 and 2023, in addition to the various types of marketable securities that have been pledged as collateral for these borrowings (in thousands):
As of December 31, 2024
Remaining Contractual Maturities of the Agreements
2-29 days
30-90 days
Over 90 Days
Total
Repurchase agreements, secured by:
U.S. Treasury
$
608,836
$
-
$
-
$
608,836
U.S. Agency
1,496,676
431,048
2,750
1,930,474
Total repurchase agreements
$
2,105,512
$
431,048
$
2,750
$
2,539,310
As of December 31, 2023
Remaining Contractual Maturities of the Agreements
2-29 days
30-90 days
Over 90 Days
Total
Repurchase agreements, secured by:
U.S. Treasury
$
119,528
$
-
$
43,618
$
163,146
U.S. Agency
1,711,014
186,289
45,382
1,942,685
Total repurchase agreements
$
1,830,542
$
186,289
$
89,000
$
2,105,831
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 2024, this amount averaged $3.4 billion, compared to $2.0 billion in 2023.
At December 31, 2024, 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 11.29%, 11.29% and 13.21%, respectively. The Company is required to have a minimum leverage ratio of 4.0%, and the leverage ratio at December 31, 2024, was 8.50%.
As of December 31, 2024, 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, benefiting 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.
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, 2024 and 2023 for the Company and the Bank are as follows (in thousands):
Actual
For Capital Adequacy Purposes
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
Common Equity Tier 1 Capital:
UMB Financial Corporation
$
3,802,257
11.29
%
$
1,514,987
4.50
%
$
N/A
N/A
%
UMB Bank, n. a.
3,835,875
11.47
1,505,357
4.50
2,174,405
6.50
Tier 1 Capital:
UMB Financial Corporation
3,802,257
11.29
2,019,983
6.00
N/A
N/A
UMB Bank, n. a.
3,835,875
11.47
2,007,143
6.00
2,676,191
8.00
Total Capital:
UMB Financial Corporation
4,445,872
13.21
2,693,311
8.00
N/A
N/A
UMB Bank, n. a.
4,094,077
12.24
2,676,191
8.00
3,345,239
10.00
Tier 1 Leverage:
UMB Financial Corporation
3,802,257
8.50
1,789,746
4.00
N/A
N/A
UMB Bank, n. a.
3,835,875
8.52
1,801,784
4.00
2,252,230
5.00
Common Equity Tier 1 Capital:
UMB Financial Corporation
$
3,418,676
10.94
%
$
1,406,371
4.50
%
$
N/A
N/A
%
UMB Bank, n. a.
3,477,634
11.21
1,395,873
4.50
2,016,261
6.50
Tier 1 Capital:
UMB Financial Corporation
3,418,676
10.94
1,875,161
6.00
N/A
N/A
UMB Bank, n. a.
3,477,634
11.21
1,861,164
6.00
2,481,551
8.00
Total Capital:
UMB Financial Corporation
4,014,910
12.85
2,500,215
8.00
N/A
N/A
UMB Bank, n. a.
3,690,378
11.90
2,481,551
8.00
3,101,939
10.00
Tier 1 Leverage:
UMB Financial Corporation
3,418,676
8.49
1,611,076
4.00
N/A
N/A
UMB Bank, n. a.
3,477,634
8.52
1,633,347
4.00
2,041,684
5.00
11. EMPLOYEE BENEFITS
The Company has a discretionary noncontributory profit-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 recognized expense related to such contributions of $2.0 million for each of the years ended December 31, 2024, 2023, and 2022.
The Company has a qualified 401(k) profit sharing plan that permits participants to make contributions by salary deduction, to which the Company makes matching contributions. The Company recognized expense related to matching contributions of $15.2 million, $15.2 million, and $13.6 million for the years ended December 31, 2024, 2023 and 2022, respectively.
The Company recognized $21.3 million, $16.2 million, and $20.6 million in expense related to outstanding restricted stock unit grants for the years ended December 31, 2024, 2023 and 2022, respectively. The Company did not recognize any expense related to outstanding restricted stock grants for the years ended December 31, 2024 or 2023. The Company recognized $196 thousand in expense related to outstanding restricted stock grants for the year ended December 31, 2022. The Company had $16.2 million of unrecognized compensation expense related to outstanding restricted stock unit grants at December 31, 2024.
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. Total fair value of shares vested during the year ended December 31, 2022 was $2.5 million. There are no restricted stock grants outstanding under the LTIP as of December 31, 2024 or 2023.
The non-qualified stock options issued under the LTIP carry a service requirement and grants issued prior to 2016 vested 50% after three years, 75% after four years and 100% after five years, while grants issued in 2016 through 2018 vested 50% after two years, 75% after three years and 100% after four years.
The table below discloses the information relating to non-qualified option activity in 2024 under the LTIP:
Number of Shares
Weighted Average Price Per Share
Weighted Average Remaining Contractual Term
Aggregate Intrinsic Value
Stock Options Under the LTIP
Outstanding - December 31, 2023
97,624
$
64.20
Granted
-
-
Canceled
-
-
Expired
(3,934
)
59.72
Exercised
(63,476
)
64.64
Outstanding - December 31, 2024
30,214
$
63.87
1.6
$
1,480,036
Exercisable - December 31, 2024
30,214
$
63.87
1.6
$
1,480,036
There were no options granted during 2024, 2023, or 2022. The total intrinsic value of options exercised during the years ended December 31, 2024, 2023, and 2022, was $2.3 million, $640 thousand and $1.2 million, respectively. As of December 31, 2024, there was no unrecognized compensation cost related to nonvested options.
Cash received from options exercised under all share-based compensation plans was $4.1 million, $1.9 million, and $1.5 million for the years ended December 31, 2024, 2023, and 2022, respectively. The tax benefit realized for stock options exercised was $590 thousand, $1.6 million, and $2.2 million for the years ended December 31, 2024, 2023, and 2022, respectively.
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 Repurchase Authorizations in Note 14, “Common Stock and Earnings Per Share,” in the Notes to the Consolidated Financial Statements provided in Item 8 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.
At the April 30, 2024 shareholders’ meeting, the shareholders of the Company approved an amendment to the OICP pursuant to which, the aggregate number of shares of the Company’s stock available for issuance under the OICP increased by 1.85 million shares. This increased the number of shares of the Company’s stock reserved for issuance under the OICP from 5.40 million shares to 7.25 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. Grants of service-based restricted stock units made beginning in 2023 contain a service requirement with a three-year pro-rata vesting schedule. Certain other grants utilize vesting schedules in which the grants vest ratably over the requisite service period or have a cliff vesting.
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 2024:
Number of Units
Weighted Average Price Per Unit
Service-Based Restricted Stock Units Under the OICP
Nonvested - December 31, 2023
365,110
$
88.47
Granted
193,029
79.79
Canceled
(20,485
)
85.58
Vested
(170,669
)
86.40
Nonvested - December 31, 2024
366,985
$
85.03
As of December 31, 2024, there was $13.0 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 1.6 years.
Total fair value of units vested during the years ended December 31, 2024, 2023, and 2022 was $14.1 million, $9.7 million, and $11.4 million, respectively.
The table below discloses the status of the performance-based restricted stock units during 2024:
Number of Units
Weighted Average Price Per Unit
Performance-Based Restricted Stock Units Under the OICP
Nonvested - December 31, 2023
145,132
$
70.92
Granted
66,306
73.42
Canceled
(6,734
)
79.91
Vested
(97,846
)
70.92
Performance-based adjustment
48,923
70.92
Nonvested - December 31, 2024
155,781
$
71.60
As of December 31, 2024, there was $3.2 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 1.8 years. The fair value of units vested during the years ended December 31, 2024, 2023 and 2022 was $8.2 million, $11.1 million, and $7.4 million, respectively.
12. BUSINESS SEGMENT REPORTING
The Company has strategically aligned its operations into the following three reportable segments: Commercial Banking, Institutional Banking, and Personal Banking (collectively, the Business Segments, and each, a Business Segment). These segments reflect the type of customer served, how products and services are provided, how executive management responsibilities are assigned, and reflect the manner in which financial information is evaluated by the chief operating decision maker (CODM). The Company’s CODM is comprised of a group of senior executive officers led by the Company's chief executive officer, chief administrative officer, chief financial officer, and the Bank's chief executive officer.
Business Segment financial information is produced using an internal reporting system which is based on a series of management estimates for funds transfer pricing (FTP), and allocations of noninterest expense and income taxes. The process for determining FTP is based on a number of factors and assumptions, including prevailing market interest rates, the expected lives of various assets and liabilities, and the Company’s broader funding profile. These estimates and allocations are periodically reviewed and refined. The CODM uses the Business Segment net income in deciding how to allocate resources and assess performance for individual Business Segments, including evaluating the cost or opportunity value of funds within each Business Segment and identifying areas of focus for organic growth or acquisition. For comparability purposes, amounts in all periods are based on methodologies in effect at December 31, 2024. 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:
Commercial Banking serves the commercial banking and treasury management needs of the Company’s small to middle-market businesses through a variety 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, fund services, asset management services, and healthcare services provided to institutional clients. This segment also provides fixed income sales, trading and underwriting, corporate trust and escrow services, as well as institutional custody. Institutional Banking includes UMBFS, which provides fund administration and accounting, investor services and transfer agency, 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 includes private banking, brokerage services, and insurance 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, 2024
Commercial Banking
Institutional Banking
Personal Banking
Total
Net interest income
$
665,587
$
199,821
$
135,484
$
1,000,892
Provision for credit losses
50,155
2,781
8,114
61,050
Noninterest income
130,187
398,306
99,624
628,117
Salaries and employee benefits
110,719
168,669
93,326
372,714
Processing fees
9,117
30,611
13,186
52,914
Bankcard
9,158
23,658
10,873
43,689
Amortization of other intangible assets
-
7,182
7,706
Allocated technology, service, overhead
192,706
137,180
116,749
446,635
Other segment items*
34,436
41,023
27,569
103,028
Noninterest expense
356,136
408,323
262,227
1,026,686
Income (loss) before taxes
389,483
187,023
(35,233
)
541,273
Income tax expense (benefit)
71,248
33,126
(4,344
)
100,030
Net income (loss)
$
318,235
$
153,897
$
(30,889
)
$
441,243
Average assets
$
21,539,000
$
14,578,000
$
7,073,000
$
43,190,000
Year Ended December 31, 2023
Commercial Banking
Institutional Banking
Personal Banking
Total
Net interest income
$
598,371
$
192,765
$
128,980
$
920,116
Provision for credit losses
33,184
1,406
6,637
41,227
Noninterest income
97,614
347,933
96,306
541,853
Salaries and employee benefits
103,674
150,689
88,115
342,478
Processing fees
7,539
24,511
12,754
44,804
Bankcard
7,581
15,043
9,889
32,513
Amortization of other intangible assets
-
7,927
8,586
Allocated technology, service, overhead
213,514
148,257
110,332
472,103
Other segment items*
33,548
36,343
28,765
98,656
Noninterest expense
365,856
382,770
250,514
999,140
Income (loss) before taxes
296,945
156,522
(31,865
)
421,602
Income tax expense (benefit)
47,874
26,664
(2,960
)
71,578
Net income (loss)
$
249,071
$
129,858
$
(28,905
)
$
350,024
Average assets
$
20,676,000
$
12,504,000
$
6,550,000
$
39,730,000
Year Ended December 31, 2022
Commercial Banking
Institutional Banking
Personal Banking
Total
Net interest income
$
596,031
$
159,679
$
158,087
$
913,797
Provision for credit losses
32,851
4,554
37,900
Noninterest income
122,614
323,794
107,825
554,233
Salaries and employee benefits
100,872
131,286
86,265
318,423
Processing fees
5,221
21,870
12,384
39,475
Bankcard
6,373
11,102
8,658
26,133
Amortization of other intangible assets
-
4,350
5,037
Allocated technology, service, overhead
186,766
126,910
111,348
425,024
Other segment items*
33,680
25,458
24,889
84,027
Noninterest expense
332,912
320,976
244,231
898,119
Income before taxes
352,882
162,002
17,127
532,011
Income tax expense
66,651
31,849
1,829
100,329
Net income
$
286,231
$
130,153
$
15,298
$
431,682
Average assets
$
17,489,000
$
13,100,000
$
6,990,000
$
37,579,000
*Other segment items include occupancy, equipment, supplies and services, marketing and business development costs, legal and consulting, and regulatory fees.
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, 2024, 2023 and 2022, the Company also has approximately $39.4 million, $39.7 million, and $34.5 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 and losses 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, 2024 or 2023. Total receivables from revenue recognized under the scope of ASC 606 were $100.2 million and $86.6 million as of December 31, 2024 and December 31, 2023, 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, 2024, 2023, and 2022. As stated in Note 12, “Business Segment Reporting,” for comparability purposes, amounts in all periods are based on methodologies in effect at December 31, 2024 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, 2024
NONINTEREST INCOME
Commercial Banking
Institutional Banking
Personal Banking
Revenue (Expense) out of Scope of ASC 606
Total
Trust and securities processing
$
-
$
232,239
$
58,332
$
-
$
290,571
Trading and investment banking
-
1,131
-
23,095
24,226
Service charges on deposit accounts
42,309
36,665
5,425
84,512
Insurance fees and commissions
-
-
1,257
-
1,257
Brokerage fees
53,532
7,765
-
61,564
Bankcard fees
72,530
33,154
21,395
(39,282
)
87,797
Investment securities gains, net
-
-
-
10,720
10,720
Other
2,008
3,014
2,639
59,809
67,470
Total noninterest income
$
117,114
$
359,735
$
96,813
$
54,455
$
628,117
Year Ended December 31, 2023
NONINTEREST INCOME
Commercial Banking
Institutional Banking
Personal Banking
Revenue (Expense) out of Scope of ASC 606
Total
Trust and securities processing
$
-
$
203,887
$
53,313
$
-
$
257,200
Trading and investment banking
-
-
19,332
19,630
Service charges on deposit accounts
38,358
40,578
5,918
84,950
Insurance fees and commissions
-
-
1,009
-
1,009
Brokerage fees
46,395
7,350
-
54,119
Bankcard fees
65,302
26,153
22,246
(38,982
)
74,719
Investment securities losses, net
-
-
-
(3,139
)
(3,139
)
Other
2,835
2,582
47,186
53,365
Total noninterest income
$
104,796
$
320,146
$
92,418
$
24,493
$
541,853
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
-
-
22,882
23,201
Service charges on deposit accounts
34,399
43,054
7,543
85,167
Insurance fees and commissions
-
-
1,338
-
1,338
Brokerage fees
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
1,812
2,642
27,142
32,406
Total noninterest income
$
97,378
$
286,048
$
95,703
$
75,104
$
554,233
14. COMMON STOCK AND EARNINGS PER SHARE
The following table summarizes the share transactions for the three years ended December 31, 2024 (in thousands, except for share data):
Shares Issued
Shares in Treasury
Balance January 1, 2022
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
)
Purchase of Treasury Stock
-
(94,727
)
Sale of Treasury Stock
-
7,782
Issued for stock options and restricted stock
-
321,668
Balance December 31, 2023
55,056,730
(6,502,603
)
Purchase of Treasury Stock
-
(93,428
)
Sale of Treasury Stock
-
6,330
Issued for stock options and restricted stock
-
347,148
Balance December 31, 2024
55,056,730
(6,242,553
)
The Board authorized, at its April 26, 2022 meeting, the repurchase of up to two million shares of the Company’s common stock during the twelve months following the meeting. The Board authorized, at its July 25, 2023 and April 30, 2024 meetings, the repurchase of up to one million shares of the Company’s common stock. The July 2023 Repurchase Authorization terminated on April 30, 2024, and the April 2024 Repurchase Authorization will terminate on April 29, 2025. All share purchases pursuant to the Repurchase 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 repurchase of its securities other than 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,
Weighted average basic common shares outstanding
48,747,814
48,503,643
48,340,922
Dilutive effect of stock options and restricted stock
309,142
260,177
406,477
Weighted average diluted common shares outstanding
49,056,956
48,763,820
48,747,399
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, 2024 and 2023, was $404.7 million and $407.6 million, respectively. As of December 31, 2024 and 2023, standby letters of credit totaling $26.7 million and $29.7 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 fair value and gains and losses on futures contracts are settled in cash daily. Any changes in the fair 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, 2024 and 2023, there were no notional amounts outstanding for these contracts. There were no open futures contract positions during the years ended December 31, 2024 or 2023. There was no net futures activity for the years ended December 31, 2024, 2023 or 2022. 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 2024, contracts to purchase and to sell foreign currency averaged approximately $46.8 million compared to $19.3 million during 2023. The net gains on these foreign exchange contracts for the years ended December 31, 2024, 2023 and 2022 were $6.1 million, $4.2 million and $3.4 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, 2024, 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 (in thousands):
Contract or Notional Amount December 31,
Commitments to extend credit for loans (excluding credit card loans)
$
12,904,749
$
12,831,831
Commitments to extend credit under credit card loans
5,474,758
4,286,604
Commercial letters of credit
1,224
Standby letters of credit
404,697
407,574
Forward contracts
55,174
26,471
Spot foreign exchange contracts
50,006
4,830
Commitments to extend credit for securities purchased under agreements to resell
96,000
-
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 following 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 credit. 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 letter of credit.
The ACL for off-balance sheet credit exposures was $4.1 million and $5.1 million as of December 31, 2024 and 2023, respectively, and was recorded in the Accrued expenses and taxes line of the Company’s Consolidated Balance Sheets. A reduction of $950 thousand of provision for off-balance sheet credit exposures was recorded for the year ended December 31, 2024. Provision of $2.0 million and $500 thousand were recorded for off-balance sheet credit exposures for the years ended December 31, 2023 and 2022, respectively. Provision for off-balance sheet credit exposures is recorded in the Provision for credit losses line of the Company’s Consolidated Statements of Income.
16. INCOME TAXES
Income taxes as set forth below produce effective income tax rates of 18.5% in 2024, 17.0% in 2023, and 18.9% in 2022. These percentages are computed by dividing Income tax expense by Income before income taxes.
Income tax expense includes the following components (in thousands):
Year Ended December 31,
Current tax
Federal
$
107,697
$
81,565
$
92,673
State
8,507
10,452
13,964
Total current tax expense
116,204
92,017
106,637
Deferred tax
Federal
(20,072
)
(19,438
)
(3,998
)
State
3,898
(1,001
)
(2,310
)
Total deferred tax benefit
(16,174
)
(20,439
)
(6,308
)
Total tax expense
$
100,030
$
71,578
$
100,329
The reconciliation between the income tax expense and the amount computed by applying the statutory federal tax rate of 21% for income before income taxes is as follows (in thousands):
Year Ended December 31,
Statutory federal income tax expense
$
113,667
$
88,536
$
111,722
Tax-exempt interest income
(20,487
)
(20,614
)
(20,206
)
Tax-exempt life insurance related income
(5,492
)
(4,961
)
(723
)
Meals, entertainment and related expenses
1,703
1,582
State and local income taxes, net of federal tax benefits
9,800
7,466
9,207
Equity-based compensation
(505
)
(1,377
)
(1,921
)
Federal tax credits, net of amortization (as applicable)
(8,252
)
(5,049
)
(3,748
)
Other
9,596
5,995
5,144
Total tax expense
$
100,030
$
71,578
$
100,329
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. Upon examination, agreement of tax liabilities between the Company and the multiple tax jurisdictions in which the Company files tax returns may ultimately be different. The Company is in the examination process with four state tax authorities for various years between tax years 2020 and 2022. 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,
Deferred tax assets:
Net unrealized loss on securities available for sale
$
196,594
$
202,804
Net unrealized loss on cash flow hedges
5,035
-
Loans, principally due to allowance for credit losses
57,553
47,995
Equity-based compensation
7,067
7,446
Accrued expenses
39,008
35,779
Deferred compensation
19,981
17,918
Miscellaneous
6,048
3,617
Total deferred tax assets before valuation allowance
331,286
315,559
Valuation allowance
(11,106
)
(3,286
)
Total deferred tax assets
320,180
312,273
Deferred tax liabilities:
Net unrealized gain on fair value hedges
(16,395
)
(17,855
)
Net unrealized gain on cash flow hedges
-
(4,133
)
Land, buildings and equipment
(24,859
)
(27,772
)
Original issue discount
-
(496
)
Prepaid expenses
(7,245
)
(6,672
)
Partnership investments
(4,190
)
(6,059
)
Trust preferred securities
(6,439
)
(6,673
)
Intangibles
(13,776
)
(16,843
)
Miscellaneous
(3,232
)
(3,574
)
Total deferred tax liabilities
(76,136
)
(90,077
)
Net deferred tax asset
$
244,044
$
222,196
As of December 31, 2024, state net operating loss carryforwards of approximately $2.5 million are included in the miscellaneous deferred tax assets line item above. These deferred tax assets include approximately $70.2 million related to net operating loss carryforwards that can be used to offset taxable income in future periods and reduce our income taxes payable in those future periods. Most of these net operating losses expire at various times between 2025 and 2044 and some have an indefinite carryforward. During the year ended December 31, 2024, due to cumulative losses, the Company established a state valuation allowance of $3.8 million, against certain state deferred tax assets. As of December 31, 2024 and 2023, the Company had a valuation allowance of $2.5 million and $1.2 million, respectively, for certain state net operating losses as they are not expected to be realized. In addition, as of December 31, 2024 and 2023, the Company had a valuation allowance of $8.6 million and $2.1 million, respectively, to reduce certain other state deferred tax assets to the amount management believes will be more likely than not realized.
The net deferred tax asset at December 31, 2024 and December 31, 2023 are included in the Other assets line of the Company’s Consolidated Balance Sheets.
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions. 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 2019 in the jurisdictions in which it files.
Liabilities Associated With Unrecognized Tax Benefits
The gross amount of unrecognized tax benefits totaled $8.3 million and $10.9 million at December 31, 2024 and 2023, 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 $6.5 million and $8.6 million at December 31, 2024 and December 31, 2023, 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 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,
Unrecognized tax benefits - opening balance
$
10,921
$
9,360
Gross increases - tax positions in prior period
-
Gross decreases - tax positions in prior period
(3,051
)
-
Gross increases - current-period tax positions
1,915
2,807
Lapse of statute of limitations
(1,506
)
(1,310
)
Unrecognized tax benefits - ending balance
$
8,279
$
10,921
Investments in Affordable Housing and Renewable Energy
The Company has invested in affordable housing and renewable energy projects sponsored by third parties, commonly referred to as tax equity investments. The primary return on these investments is derived from the realization of federal tax credits and deductions. Tax equity investments are recorded net of accumulated amortization using the proportional amortization method. These investments are included in Other securities on the Consolidated Balance Sheets and totaled $251.0 million and $227.2 million as of December 31, 2024 and 2023, respectively. Unfunded tax equity obligations are included in Other liabilities on the Consolidated Balance Sheets, and totaled $116.5 million and $124.8 million as of December 31, 2024 and 2023, respectively.
The following table summarizes the amortization expense and tax benefit recognized for the Company’s affordable housing projects and other tax credit investments (in thousands):
Year Ended December 31,
Amortization Expense (1)
Tax Benefit Recognized (2)
Amortization Expense (1)
Tax Benefit Recognized (2)
Amortization Expense (1)
Tax Benefit Recognized (2)
Low-income housing tax credit
$
16,930
$
(21,277
)
$
12,709
$
(15,482
)
$
9,933
$
(12,427
)
Historic tax credit
1,471
(1,493
)
1,464
(1,714
)
1,464
(1,462
)
Renewable energy
20,750
(22,318
)
-
-
-
-
Total
$
39,151
$
(45,088
)
$
14,173
$
(17,196
)
$
11,397
$
(13,889
)
(1)The credit programs disclosed above met the conditions to apply the proportional amortization method. The amortization expense is included in Income tax expense in the Consolidated Statements of Income and Amortization of securities premiums, net of discount accretion in the Consolidated Statements of Cash Flows. There were no credit programs that were not eligible for the proportional amortization method.
(2)The tax benefit recognized primarily reflects the Federal tax credits generated from the investment, which are included in Income tax expense in the Consolidated Statements of Income.
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 value 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 the Company’s loans and 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, 2024 and 2023. The Company’s derivative assets and derivative liabilities are located within Other assets and Other 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, 2024 and December 31, 2023 (in thousands):
Derivative Assets
Derivative Liabilities
December 31,
December 31,
Fair Value
Interest Rate Products:
Derivatives not designated as hedging instruments
$
102,118
$
99,574
$
107,386
$
105,016
Derivatives designated as hedging instruments
132,325
61,922
Total
$
234,443
$
161,496
$
107,442
$
105,083
Fair Value Hedges of Interest Rate Risk
The Company is exposed to changes in the fair value of certain of its fixed-rate assets and liabilities due to changes in interest rates. Interest rate swaps designated as fair value hedges involve making fixed rate payments to a counterparty in exchange for the Company receiving variable rate payments over the life of the agreements without the exchange of the underlying notional amount. As of both December 31, 2024 and December 31, 2023, the Company did not have any interest rate swaps that were designated as fair value hedges of interest rate risk.
During 2022 and 2023, the Company terminated 10 fair value hedges of interest rate risk associated with the Company's municipal bond securities. For the years ended December 31, 2024 and 2023 the Company reclassified $6.1 million and $4.7 million, respectively, from AOCI to Interest income in connection with these terminated hedges. The unrealized gain on the terminated fair value hedges remaining in AOCI was $50.4 million net of tax, and $55.0 million net of tax, as of December 31, 2024 and 2023, respectively. The 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 Interest income in the Consolidated Statements of 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 primarily uses interest rate swaps, floors, and floor spreads as part of its interest rate 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, 2024 and 2023, the Company had two interest rate swaps that were designated as cash flow hedges of interest rate risk associated with the Company’s variable-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, 2024 and 2023.
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. Interest rate floor spreads designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty if interest rates fall below the purchased floor rate on the contract in exchange for an upfront premium, and involve payment of variable-rate amounts to the counterparty if interest rates fall below the sold floor rate on the contract. As of December 31, 2024, the Company had 13 interest rate floors and floor spreads with an aggregate notional amount of $3.0 billion that were designated as cash flow hedges of interest rate risk. As of December 31, 2023, the Company had three interest rate floors and floor spreads with an aggregate notional amount of $1.0 billion that were designated as cash flow hedges of interest rate risk.
In 2020, the Company terminated an interest rate floor designated as a cash flow hedge. As of December 31, 2024 there was no gross unrealized gain on the terminated interest rate floor remaining in AOCI. As of December 31, 2023, the gross unrealized gain on the terminated interest rate floor remaining in AOCI was $2.7 million, or $2.0 million net of tax. The unrealized gain was reclassified into Interest income as the underlying forecasted transactions impact earnings through the original maturity of the hedged forecasted transactions.
For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in AOCI and is subsequently reclassified into interest expense and interest income in the period during which the hedged forecasted transaction affects 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 hedged items. Amounts reported in AOCI related to interest rate floor and floor spread derivatives will be reclassified to Interest income as interest payments are received or paid on the Company’s items. The Company expects to reclassify $0.8 million from AOCI as a reduction to Interest expense and $9.4 million from AOCI as a reduction to Interest income during the next 12 months. As of December 31, 2024, the Company is hedging its exposure to the variability in future cash flows for forecasted transactions over a maximum period of 11.7 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. 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. The changes in the fair value of both the customer swaps and the offsetting swaps are recognized in Other noninterest expense in the Consolidated Statements of Income. As of December 31, 2024, the Company had 298 interest rate swaps with an aggregate notional amount of $5.5 billion related to this program. As of December 31, 2023, the Company had 258 interest rate swaps with an aggregate notional amount of $4.3 billion.
Effect of Derivative Instruments on the Consolidated Statements of Income and Accumulated Other Comprehensive Income
This table provides a summary of the amount of gain or loss recognized in Interest income and Other noninterest expense in the Consolidated Statements of Income for the years ended December 31, 2024, 2023, and 2022 related to the Company’s derivative assets and liabilities (in thousands):
Amount of Gain (Loss) Recognized
For the Year Ended December 31,
Interest Rate Products
Derivatives not designated as hedging instruments
$
$
(69
)
$
Total
$
$
(69
)
$
Interest Rate Products
Derivatives designated as hedging instruments:
Fair value adjustments on derivatives
$
-
$
$
72,539
Fair value adjustments on hedged items
-
(902
)
(72,047
)
Total
$
-
$
$
These tables provide a summary of the effect of hedges on AOCI in the Consolidated Statements of Comprehensive Income for the years ended December 31, 2024, 2023, and 2022 related to the Company’s derivative assets and liabilities (in thousands):
For the Year Ended December 31, 2024
Derivatives in Cash Flow Hedging Relationships
(Loss) Gain Recognized in OCI on Derivative
(Loss) Gain Recognized in OCI Included Component
Gain Recognized in OCI Excluded Component
Gain Reclassified from AOCI into Earnings
Gain Reclassified from AOCI into Earnings Included Component
Loss Reclassified from AOCI into Earnings Excluded Component
Interest rate floors and floor spreads
$
(44,268
)
$
(70,323
)
$
26,055
$
$
3,857
$
(3,318
)
Interest rate swaps
3,738
3,738
-
1,417
1,417
-
Total
$
(40,530
)
$
(66,585
)
$
26,055
$
1,956
$
5,274
$
(3,318
)
For the Year Ended December 31, 2023
Derivatives in Cash Flow Hedging Relationships
Gain Recognized in OCI on Derivative
Gain Recognized in OCI Included Component
Loss Recognized in OCI Excluded Component
Gain Reclassified from AOCI into Earnings
Gain Reclassified from AOCI into Earnings Included Component
Loss Reclassified from AOCI into Earnings Excluded Component
Interest rate floors and floor spreads
$
14,123
$
24,826
$
(10,703
)
$
4,605
$
6,948
$
(2,343
)
Interest rate swaps
-
1,312
1,312
-
Total
$
15,015
$
25,718
$
(10,703
)
$
5,917
$
8,260
$
(2,343
)
For the Year Ended December 31, 2022
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
$
-
$
-
$
-
$
4,998
$
7,248
$
(2,250
)
Interest rate swaps
12,608
12,608
-
(502
)
(502
)
-
Total
$
12,608
$
12,608
$
-
$
4,496
$
6,746
$
(2,250
)
Credit-risk-related Contingent Features
The Company has agreements with certain of its derivative counterparties that contain a provision that 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.
The Company has minimum collateral posting thresholds with certain of its derivative counterparties. As of December 31, 2024, the Company had not posted any collateral as there were no derivatives in a net liability position. If the Company had breached any of these provisions at December 31, 2024, 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, 2024 and 2023 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, 2024 and 2023 (in thousands):
Fair Value Measurement at December 31, 2024 Using
Description
December 31,
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
$
1,620
$
1,620
$
-
$
-
U.S. Agencies
8,369
-
8,369
-
Mortgage-backed
-
-
-
-
State and political subdivisions
11,469
-
11,469
-
Corporates
6,935
6,935
-
-
Trading - other
-
-
Trading securities
28,533
8,695
19,838
-
U.S. Treasury
1,326,073
1,326,073
-
-
U.S. Agencies
129,047
-
129,047
-
Mortgage-backed
4,420,930
-
4,420,930
-
State and political subdivisions
1,218,569
-
1,218,569
-
Corporates
317,170
317,170
-
-
Collateralized loan obligations
362,545
-
362,545
-
Securities available for sale
7,774,334
1,643,243
6,131,091
-
Equity securities with readily determinable fair values
11,596
11,596
-
-
Company-owned life insurance
79,388
-
79,388
-
Bank-owned life insurance
540,452
-
540,452
-
Derivatives
234,443
-
234,443
-
Total
$
8,668,746
$
1,663,534
$
7,005,212
$
-
Liabilities
Derivatives
$
107,442
$
-
$
107,442
$
-
Securities sold not yet purchased
7,100
-
7,100
-
Total
$
114,542
$
-
$
114,542
$
-
Fair Value Measurement at December 31, 2023 Using
Description
December 31,
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
-
-
-
-
Mortgage-backed
1,738
-
1,738
-
State and political subdivisions
13,482
-
13,482
-
Corporates
1,974
1,974
-
-
Trading - other
-
-
Trading securities
18,093
2,873
15,220
-
U.S. Treasury
1,298,742
1,298,742
-
-
U.S. Agencies
159,721
-
159,721
-
Mortgage-backed
3,620,785
-
3,620,785
-
State and political subdivisions
1,286,975
-
1,286,975
-
Corporates
351,275
351,275
-
-
Collateralized loan obligations
351,115
-
351,115
-
Securities available for sale
7,068,613
1,650,017
5,418,596
-
Equity securities with readily determinable fair values
11,228
11,228
-
-
Company-owned life insurance
69,727
-
69,727
-
Bank-owned life insurance
523,960
-
523,960
-
Derivatives
161,496
-
161,496
-
Total
$
7,853,117
$
1,664,118
$
6,188,999
$
-
Liabilities
Derivatives
$
105,083
$
-
$
105,083
$
-
Securities sold not yet purchased
8,018
-
8,018
-
Total
$
113,101
$
-
$
113,101
$
-
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 values 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 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.
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, 2024 and 2023 (in thousands):
Fair Value Measurement at December 31, 2024 Using
Description
December 31,
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
Collateral dependent assets
$
2,405
$
-
$
-
$
2,405
$
(256
)
Other real estate owned
-
-
-
-
-
Other repossessed assets
26,779
-
-
26,779
-
Total
$
29,184
$
-
$
-
$
29,184
$
(256
)
Fair Value Measurement at December 31, 2023 Using
Description
December 31,
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
Collateral dependent assets
$
2,796
$
-
$
-
$
2,796
$
Other real estate owned
1,738
-
-
1,738
Total
$
4,534
$
-
$
-
$
4,534
$
Valuation methods for instruments measured at fair value on a non-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:
Collateral Dependent Assets Collateral dependent assets are assets evaluated as part of the ACL on an individual basis. Those assets for which there is an associated allowance are considered financial assets measured at fair value on a non-recurring basis. Adjustments are recorded on certain assets to reflect write-downs that are based on the external appraised 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 collateral dependent assets and impaired loans are reviewed on a quarterly basis. Because many of these inputs are not observable, the measurements are classified as Level 3.
Other real estate owned and Other repossessed assets Other real estate owned and other repossessed assets consist 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 and other repossessed assets are recorded as held for sale initially at the fair value of the 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.
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, 2024 and 2023 are as follows (in thousands):
Fair Value Measurement at December 31, 2024 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
FINANCIAL ASSETS
Cash and short-term investments
$
9,104,445
$
8,559,445
$
545,000
$
-
$
9,104,445
Securities available for sale
7,774,334
1,643,243
6,131,091
-
7,774,334
Securities held to maturity (exclusive of allowance for credit losses)
5,378,912
-
4,748,938
-
4,748,938
Trading securities
28,533
8,695
19,838
-
28,533
Other securities
471,018
11,596
459,422
-
471,018
Loans (exclusive of allowance for credit losses)
25,645,057
-
25,665,211
-
25,665,211
Derivatives
234,443
-
234,443
-
234,443
FINANCIAL LIABILITIES
Demand and savings deposits
41,014,362
41,014,362
-
-
41,014,362
Time deposits
2,127,667
-
2,127,667
-
2,127,667
Other borrowings
2,609,715
70,405
2,539,310
-
2,609,715
Long-term debt
385,292
-
417,217
-
417,217
Derivatives
107,442
-
107,442
-
107,442
OFF-BALANCE SHEET ARRANGEMENTS
Commitments to extend credit for loans
12,515
Commitments to extend resell agreements
Commercial letters of credit
Standby letters of credit
4,375
Fair Value Measurement at December 31, 2023 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
FINANCIAL ASSETS
Cash and short-term investments
$
5,852,347
$
5,612,003
$
240,344
$
-
$
5,852,347
Securities available for sale
7,068,613
1,650,017
5,418,596
-
7,068,613
Securities held to maturity (exclusive of allowance for credit losses)
5,691,868
-
5,183,367
-
5,183,367
Trading securities
18,093
2,873
15,220
-
18,093
Other securities
492,935
11,228
481,707
-
492,935
Loans (exclusive of allowance for credit losses)
23,176,904
-
22,969,788
-
22,969,788
Derivatives
161,496
-
161,496
-
161,496
FINANCIAL LIABILITIES
Demand and savings deposits
32,719,268
32,719,268
-
-
32,719,268
Time deposits
3,073,591
-
3,073,591
-
3,073,591
Other borrowings
3,919,644
13,813
3,905,831
-
3,919,644
Long-term debt
383,247
-
413,896
-
413,896
Derivatives
105,083
-
105,083
-
105,083
OFF-BALANCE SHEET ARRANGEMENTS
Commitments to extend credit for loans
11,523
Commitments to extend resell agreements
Commercial letters of credit
Standby letters of credit
4,047
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 For 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 these 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, equity securities with readily determinable fair values, and equity securities without readily determinable fair values, including equity-method investments and other miscellaneous investments. The carrying amount of the FRB and FHLB stock equals its fair value because the shares can only be redeemed by the FRB and FHLB at their carrying amount. Equity securities with readily determinable fair values are measured at fair value using quoted market 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 is estimated by discounting the future cash 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 was the amount payable on demand at period-end.
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 period-end are significant to the Company’s consolidated financial position.
19. PARENT COMPANY FINANCIAL INFORMATION
UMB FINANCIAL CORPORATION
BALANCE SHEETS (in thousands)
December 31,
ASSETS
Investment in subsidiaries:
Banks
$
3,462,767
$
3,123,373
Non-banks
188,605
173,725
Total investment in subsidiaries
3,651,372
3,297,098
Goodwill on purchased affiliates
5,011
5,011
Cash
123,091
109,352
Investment securities and other
151,094
138,721
Total assets
$
3,930,568
$
3,550,182
LIABILITIES AND SHAREHOLDERS' EQUITY
Long-term debt
$
385,292
$
383,247
Accrued expenses and other
78,735
66,516
Total liabilities
464,027
449,763
Shareholders' equity
3,466,541
3,100,419
Total liabilities and shareholders' equity
$
3,930,568
$
3,550,182
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (in thousands)
Year Ended December 31,
INCOME
Dividends and income received from subsidiaries
$
108,500
$
88,500
$
57,000
Service fees from subsidiaries
77,906
66,450
74,472
Other
9,928
13,268
55,988
Total income
196,334
168,218
187,460
EXPENSE
Salaries and employee benefits
75,433
67,015
60,094
Other
59,974
43,418
35,943
Total expense
135,407
110,433
96,037
Income before income taxes and equity in undistributed earnings of subsidiaries
60,927
57,785
91,423
Income tax (benefit) expense
(8,179
)
(9,165
)
10,958
Income before equity in undistributed earnings of subsidiaries
69,106
66,950
80,465
Equity in undistributed earnings of subsidiaries:
Banks
357,257
291,473
344,567
Non-Banks
14,880
(8,399
)
6,650
Net income
$
441,243
$
350,024
$
431,682
Other comprehensive (loss) income
(16,115
)
145,800
(829,049
)
Comprehensive income (loss)
$
425,128
$
495,824
$
(397,367
)
STATEMENTS OF CASH FLOWS (in thousands)
Year Ended December 31,
OPERATING ACTIVITIES
Net income
$
441,243
$
350,024
$
431,682
Adjustments to reconcile net income to cash provided by operating activities:
Equity in earnings of subsidiaries
(480,637
)
(371,574
)
(408,217
)
Dividends received from subsidiaries
108,500
88,500
57,000
Depreciation and amortization
Amortization of debt issuance costs
Equity based compensation
22,579
18,694
21,491
Changes in other assets and liabilities, net
(32,493
)
12,522
Net cash provided by operating activities
93,046
54,045
115,046
INVESTING ACTIVITIES
Net capital investment in subsidiaries
2,319
(3,570
)
(207,575
)
Net (increase) decrease in investment securities
(33
)
(30
)
40,235
Net cash provided by (used in) investing activities
2,286
(3,600
)
(167,340
)
FINANCING ACTIVITIES
Cash dividends paid
(77,127
)
(74,245
)
(72,030
)
Proceeds from long-term debt
-
-
110,000
Payment of debt issuance costs
-
-
(2,129
)
Payment of common stock issuance costs
(1,413
)
-
-
Proceeds from exercise of stock options and sales of treasury stock
4,685
2,461
2,136
Purchases of treasury stock
(7,738
)
(8,367
)
(31,997
)
Net cash (used in) provided by financing activities
(81,593
)
(80,151
)
5,980
Net increase (decrease) in cash
13,739
(29,706
)
(46,314
)
Cash and cash equivalents at beginning of period
109,352
139,058
185,372
Cash and cash equivalents at end of period
$
123,091
$
109,352
$
139,058
20. SUBSEQUENT EVENT
On January 31, 2025, the Company acquired all of the outstanding stock of Heartland Financial USA, Inc., a Delaware corporation (HTLF), in an all-stock transaction, issuing a total of 23.6 million shares of the Company’s common stock and 4.6 million depositary shares, each representing a 1/400th interest in a share of the Company’s 7.00% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A (the Company’s preferred stock). Pursuant to the Agreement and Plan of Merger, dated as of April 28, 2024, (i) HTLF merged with and into the Company, with the Company continuing as the surviving corporation and (ii) one day after the closing date of the acquisition of HTLF by the Company, HTLF’s wholly owned bank subsidiary, a Colorado-chartered non-member bank (HTLF Bank), merged with and into UMB Bank, National Association, the Company’s national bank subsidiary (the Bank), with the Bank continuing as the surviving bank.
Total consideration for the acquisition was $2.9 billion, consisting of the Company’s common stock valued at $2.8 billion (based on the Company’s common stock price of $117.90) and the Company’s preferred stock valued at $115.2 million (based on the Company’s closing preferred stock price of $25.05). Each HTLF common stock share was converted into 0.55 shares of the Company’s common stock. Each HTLF preferred stock share was converted into a share of the Company’s preferred stock. Acquisition-related costs of $15.8 million for the year ending December 31, 2024 were recognized primarily in Legal and consulting expense line of the Company’s Consolidated Statements of Income.
The acquisition of HTLF will be accounted for as a business combination using the purchase method of accounting in accordance with FASB ASC Topic 805, Business Combinations, which requires assets acquired and liabilities assumed to be recognized at fair value as of the acquisition date. The valuation of assets acquired and liabilities assumed has not yet been finalized. Any necessary adjustments from preliminary estimates will be
finalized within one year from the date of acquisition. Measurement period adjustments will be recorded in the period in which they are determined, as if they had been completed at the acquisition date. Due to the timing of the acquisition, the Company has performed limited valuation procedures, and the valuation of all assets acquired and liabilities assumed is not yet complete.

---

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

---

ITEM 9A. CONTROLS AND PROCEDURES
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 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 of its inherent limitations, internal control over financial reporting may not prevent or detect all 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. In addition, given the Company’s size, operations and footprint, lapses or deficiencies in internal controls may occur from time to time.
Based on the 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) 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 Report 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 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 financial reporting.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors
UMB Financial Corporation:
Opinion on Internal Control Over Financial Reporting
We have audited UMB Financial Corporation and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2024, 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, 2024, 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, 2024 and 2023, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively, the consolidated financial statements), and our report dated February 27, 2025 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'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 Limitations 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. 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 27, 2025

---

ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
None.

---

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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 under the caption "Executive Officers of the 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 29, 2025 (the 2025 Annual Meeting of Shareholders), which will be provided to shareholders within 120 days after December 31, 2024.
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 2025 Annual Meeting of Shareholders, which will be provided to shareholders within 120 days after December 31, 2024.
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 2025 Annual Meeting of Shareholders, which will be provided to shareholders within 120 days after December 31, 2024.
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: 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.
The Company has adopted an insider trading policy (the Insider Trading Policy) applicable to our officers, directors, employees, certain other persons and entities, as well as activities of the Company, that the Company believes is reasonably designed to promote compliance with insider trading laws, rules, and regulations, and the Nasdaq listing standards. The foregoing summary of the Insider Trading Policy is not complete and is qualified in its entirety by reference to the Insider Trading Policy attached hereto as Exhibit 19.1.

---

ITEM 11. EXECUTIVE COMPENSATION
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 2025 Annual Meeting of Shareholders, which will be provided to shareholders within 120 days after December 31, 2024.

---

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
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 Proxy Statement for the 2025 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, 2024.
Security Ownership of Management
The information required by this item is incorporated herein by reference to the Company's Proxy Statement for the 2025 Annual Meeting of Shareholders, which will be provided to shareholders within 120 days after December 31, 2024, 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 as of December 31, 2024:
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)
Equity compensation plans approved by security holders
2005 Long Term Incentive Plan
30,214
$
63.87
None
2018 Omnibus Incentive Compensation Plan
None
None
2,654,281
Equity compensation plans not approved by security holders
None
None
None
Total
30,214
$
63.87
2,654,281
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 of this report.

---

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 2025 Annual Meeting of Shareholders, which will be provided to shareholders within 120 days after December 31, 2024.

---

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
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 2025” of the Company's Proxy Statement for the 2025 Annual Meeting of Shareholders, which will be provided to shareholders within 120 days after December 31, 2024.
PART IV

---

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
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 Item 8 of this Annual Report on Form 10-K.
Consolidated Balance Sheets as of December 31, 2024 and 2023
Consolidated Statements of Income for the Three Years Ended December 31, 2024
Consolidated Statements of Comprehensive Income for the Three Years Ended December 31, 2024
Consolidated Statements of Changes in Shareholders' Equity for the Three Years Ended December 31, 2024
Consolidated Statements of Cash Flows for the Three Years Ended December 31, 2024
Notes to Consolidated Financial Statements
Report of Independent Registered 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:
2.1
Agreement and Plan of Merger, dated as of April 28, 2024, by and among Heartland Financial USA, Inc., UMB Financial Corporation and Blue Sky Merger Sub Inc. (incorporated by reference to Annex A to the joint proxy statement/prospectus forming a part of the registration statement on Form S-4 and filed with the Commission on July 2, 2024).
3.1
Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 and filed with the Commission on May 9, 2006).
3.2
Amendment of Articles of Incorporation, dated as of January 31, 2025 (incorporated by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K dated January 31, 2025 and filed with the Commission on February 3, 2025).
3.3
Bylaws, amended as of April 13, 2023 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K dated April 13, 2023 and filed with the Commission on April 13, 2023).
3.4
Certificate of Designation for the UMB Preferred Stock, dated as of January 31, 2025 (incorporated by reference to Exhibit 3.2 of the Company's Current Report on Form 8-K dated January 31, 2025 and filed with the Commission on February 3, 2025).
4.1
Description of the capital stock included in the Registration Statement on Form 8-A (incorporated by reference to the Registration Statement on Form 8-A dated May 1, 2018 and filed with the Commission on May 1, 2018).
4.2
Description of the capital stock included in the Registration Statement on Form S-3 (incorporated by reference to the Registration Statement on Form S-3 ASR dated August 17, 2022 and filed with the Commission on August 17, 2022).
4.3
Description of UMB Financial Corporation’s Securities (incorporated by reference to Exhibit 4.3 to the Company’s Form 10-K for December 31, 2019 and filed with the Commission on February 27, 2020).
4.4
Indenture, dated as of September 17, 2020, by and between UMB Financial Corporation and Wells Fargo, National Association (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K dated September 17, 2020 and filed with the Commission on September 22, 2020).
4.5
Supplemental Indenture, dated as of September 17, 2020, by and between UMB Financial Corporation and Wells Fargo, National Association, as Trustee, with respect to the 3.700% Fixed-to-Fixed Rate
Subordinated Notes due 2030 (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K dated September 17, 2020 and filed with the Commission on September 22, 2020).
4.6
Form of 3.700% Fixed-to-Fixed Rate Subordinated Notes due 2030 (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K dated September 17, 2020 and filed with the Commission on September 22, 2020).
4.7
Second Supplemental Indenture, dated as of September 28, 2022, by and between UMB Financial Corporation and Wells Fargo, National Association, as Trustee, with respect to the 6.250% Fixed-to-Fixed Rate Subordinated Notes due 2032 (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K dated September 28, 2022 and filed with the Commission on September 28, 2022).
4.8
Form of 6.250% Fixed-to-Fixed Rate Subordinated Notes due 2032 (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K dated September 28, 2022 and filed with the Commission on September 28, 2022).
4.9
Form of 7.00% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A, par value $0.01 per share (incorporated by reference to the Registration Statement on Form 8-A dated January 28, 2025 and filed with the Commission on January 28, 2025).
4.10
Form of Deposit Agreement among UMB Financial Corporation, Computershare Trust Company, N.A., Computershare, Inc. and the holders from time to time of the depositary receipts described therein (incorporated by reference to Exhibit 4.3 of the joint proxy statement/prospectus forming a part of the registration statement on Form S-4 and filed with the Commission on July 2, 2024).
4.11
Form of Depositary Receipt representing Depositary Shares (included in Exhibit 4.10 hereto).
10.1
UMB Financial Corporation Long-Term Incentive Compensation Plan amended and restated as of April 23, 2013 (incorporated by reference to Appendix A of the Company’s Proxy Statement for the Company’s April 23, 2013 Annual Meeting filed with the Commission on March 13, 2013).
10.2
Deferred Compensation Plan, dated as of December 1, 2008 (incorporated by reference to Exhibit 10.3 to the Company’s Form 10-K for December 31, 2017 and filed with the Commission on February 22, 2018).
10.3
UMBF 2005 Short-Term Incentive Plan (incorporated by reference to Exhibit 10.7 to the Company’s Form 10-K for December 31, 2004 and filed with the Commission on March 14, 2005).
10.4
Performance Share Unit Award Agreement for the UMB Financial Corporation Omnibus Incentive Compensation Plan (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K dated June 8, 2018 and filed with the Commission on June 14, 2018).
10.5
Restricted Share Unit Award Agreement for the UMB Financial Corporation Omnibus Incentive Compensation Plan (incorporated by reference to Exhibit 10.5 to the Company's Form 10-K for December 31, 2022 and filed with the Commission on February 23, 2023).
10.6
Form of 2016 Stock Option Award Agreement for the UMB Financial Corporation Long-Term Incentive Compensation Plan (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on August 2, 2016).
10.7
UMBF Omnibus Incentive Compensation Plan (incorporated by reference to Appendix A of the Company’s Proxy Statement for the Company’s April 24, 2018 Annual Meeting filed with the Commission on March 13, 2018).
10.8
Performance Share Unit Award Agreement with Shannon A. Johnson (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated July 25, 2022 and filed with the Commission on July 29, 2022).
10.9
Forward Sale Agreement, dated as of April 28, 2024, between UMB Financial Corporation and Bank of America, N.A. (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K dated April 29, 2024 and filed with the Commission on April 29, 2024).
10.10
Additional Forward Sale Agreement, dated as of April 30, 2024, between UMB Financial Corporation and Bank of America, N.A. (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated May 1, 2024 and filed with the Commission on May 1, 2024).
19.1
Insider Trading Policy filed herewith.
21.1
Subsidiaries of the Registrant filed herewith.
23.1
Consent of Independent Registered Public Accounting Firm - KPMG LLP filed herewith.
24.1
Power of Attorney filed herewith.
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.
97.1
Compensation Recovery Policy filed herewith.
101.INS
XBRL Instance Document - The instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH
Inline XBRL Taxonomy Extension Schema With Embedded Linkbases Document filed herewith.
The cover page of our Form 10-K for the year ended December 31, 2024, formatted in iXBRL.
In accordance with Item 601(b)(4)(iii)(A) of Regulation S-K, copies of certain instruments defining the rights of holders of long-term debt of the Company or its subsidiaries are not filed herewith. We hereby agree to furnish a copy of any such instrument to the Commission upon request.