# UMB Financial Corp: Form 10-Q for the period ended Mar 31, 2024

- Company: [UMB Financial Corp](/companies/umbf.md) (CIK 101382)
- Form: 10-Q
- Filed: 2024-05-07
- Accepted by EDGAR: May 7, 2024, 09:01 ET
- Period: 2024-03-31
- Accession: 0000950170-24-053990
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/101382/000095017024053990/umbf-20240331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/101382/000095017024053990/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Interest expense | 3 months, 2024-01-01 to 2024-03-31 | $280.6m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-01-01 to 2024-03-31 | $23.6m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | $110.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | $2.25 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | $2.27 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 48,920,863 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-01-01 to 2024-03-31 | $56.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-01-01 to 2024-03-31 | $2.4m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2024-01-01 to 2024-03-31 | $19.0m | us-gaap:PaymentsOfDividends |
| Share repurchases | 3 months, 2024-01-01 to 2024-03-31 | $7.5m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-03-31 | $6.94bn | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2024-03-31 | $45.34bn | us-gaap:Assets |
| Total liabilities | at 2024-03-31 | $42.19bn | us-gaap:Liabilities |
| Long-term debt | at 2024-03-31 | $383.7m | us-gaap:LongTermDebt |
| Short-term borrowings | at 2024-03-31 | $1.80bn | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2024-03-31 | $3.15bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 68,241 characters.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations highlights the material changes in the results of operations and changes in financial condition of the Company for the three-month period ended March 31, 2024. It should be read in conjunction with the accompanying Consolidated Financial Statements, Notes to Consolidated Financial Statements and other financial information appearing elsewhere in this Form 10-Q and the 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, in each case as of the date such forward-looking statements are made.

This Form 10-Q, including any information incorporated by reference in this Form 10-Q, contains forward-looking statements. The Company also may make forward-looking statements in other documents that are filed or furnished with the Securities and Exchange Commission. 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;
- 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 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 environments 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;
- decreases in the utilization of, or demand for, office space caused by shifts to work-from-home and hybrid work environments; or
- other assumptions, risks, or uncertainties described in the Notes to Consolidated Financial Statements (Item 1) and Management’s Discussion and Analysis of Financial Condition and Results of Operations (Item 2) in this Form 10-Q, in the Risk Factors (Item 1A) in the Form 10-K, or in any of the Company’s 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.

### Overview

The rapid rise in interest rates during 2022 and 2023, the resulting industry-wide reduction in the fair value of securities portfolios, and the bank runs that led to the failures of some financial institutions in March of 2023, among other events, have resulted in significant volatility in the U.S. banking sector and heightened focus on liquidity, uninsured deposits, deposit composition, unrecognized investment losses, and capital.

During November 2023, the Federal Deposit Insurance Corporation (the FDIC) approved a final rule to implement a special assessment to recover the losses to the Deposit Insurance Fund (the DIF) associated with protecting uninsured depositors following the closures of certain financial institutions in March of 2023. The assessment base for the special assessment is equal to an insured depository institution’s uninsured deposits as of December 31, 2022, adjusted to exclude the first $5 billion, and will be collected at an annual rate of 13.4 basis points for eight quarterly assessment periods. The Company’s portion of this special assessment was $52.8 million and was recognized in noninterest expense during the fourth quarter of 2023. During February 2024, the FDIC increased the estimated loss attributable to the 2023 bank failures by 25%, which in turn increased the special assessment the FDIC will charge to insured depository institutions. The Company recorded $13.0 million of expense related to the updated special assessment in the first quarter of 2024 and its impacts are discussed below.

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 our 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. During the first quarter of 2024, total revenue increased $26.8 million, or 7.2%, as compared to the first quarter of 2023, while noninterest expense increased $17.8 million, or 7.5%, for the same period. As part of the initiative to improve operating efficiencies, 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. During the first quarter of 2024, the Company had a decrease in net interest income of $2.3 million, or 0.9%, from the same period in 2023. The change in net interest income was driven by higher interest expense due to an unfavorable mix shift in the composition of liabilities, partially offset by increased loan growth. These changes are driven by the higher interest rate environment compared to the first quarter of 2023. The increase in interest income was driven by a $2.1 billion, or 9.8%, increase in average loans and a $1.8 billion, or 115.4%, increase in average interest-bearing due from banks, coupled with the impact of higher short-term and long-term interest rates. The funding for these assets was driven primarily by a 20.3% increase in average interest-bearing liabilities, including an increase in average borrowed funds of $983.1 million compared to the same period in 2023. Net interest margin, on a tax-equivalent basis, decreased 28 basis points compared to the same period in 2023, primarily due to increased cost and mix of interest-bearing liabilities, partially offset by increased loan volumes, repricing of earning assets, and the benefit of interest free funds. Net interest spread contracted by 43 basis points during the same period. The Company expects to see continued volatility in the economic markets resulting from governmental responses to inflation and recessionary signs in the economy. These changing conditions could have impacts on the balance sheet and income statement of the Company for the remainder of the year.

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 $29.0 million, or 22.3%, to $159.2 million for the three months ended March 31, 2024, compared to the same period in 2023. This change is primarily due to increases in investment securities gains, trust and securities processing income, other income and bankcard income.

See greater detail below under Noninterest Income. The Company continues to emphasize its asset management, brokerage, bankcard services, healthcare services, and treasury management businesses. For the three-month period ended March 31, 2024, noninterest income represented 39.9% of total revenues, compared to 35.0% for the same period in 2023. The recent economic changes have impacted fee income, especially those with assets tied to market values and interest rates.

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 March 31, 2024, the Company had $3.2 billion in total shareholders’ equity. This is an increase of $338.2 million, or 12.0%, compared to total shareholders’ equity at March 31, 2023. At March 31, 2024, the Company had a total risk-based capital ratio of 13.03%. The Company did not repurchase shares of common stock during the first quarter of 2024, except for shares acquired pursuant to the Company's share-based incentive programs.

### Earnings Summary

The following is a summary regarding the Company’s earnings for the first quarter of 2024. The changes identified in the summary are explained in greater detail below. The Company recorded net income of $110.3 million for the three-month period ended March 31, 2024, compared to net income of $92.4 million for the same period a year earlier. Basic earnings per share for the first quarter of 2024 was $2.27 per share ($2.25 per share fully-diluted) compared to basic earnings per share of $1.91 per share ($1.90 per share fully-diluted) for the first quarter of 2023. Return on average assets and return on average common shareholders’ equity for the three-month period ended March 31, 2024 were 1.06% and 14.11%, respectively, compared to 0.97% and 13.76%, respectively, for the three-month period ended March 31, 2023.

Net interest income for the three-month period ended March 31, 2024 decreased $2.3 million, or 0.9%, compared to the same period in 2023. For the three-month period ended March 31, 2024, average earning assets increased $3.4 billion, or 9.4%, compared to the same period in 2023. Net interest margin, on a tax-equivalent basis, decreased to 2.48% for the three-month period ended March 31, 2024, compared to 2.76% for the same period in 2023.

The provision for credit losses decreased by $13.3 million for the three-month period ended March 31, 2024, as compared to the same period in 2023. Provision expense for both periods is primarily impacted by macro-economic data and portfolio credit metrics. The Company’s nonperforming loans increased $2.3 million to $17.8 million at March 31, 2024, compared to March 31, 2023. The ACL on loans as a percentage of total loans decreased to 0.96% as of March 31, 2024, compared to 0.97% at March 31, 2023. For a description of the Company’s methodology for computing the ACL, please see the summary discussion in the “Provision and Allowance for Credit Losses” section included below.

Noninterest income increased by $29.0 million, or 22.3%, for the three-month period ended March 31, 2024, compared to the same period in 2023. These changes are discussed in greater detail below under Noninterest Income.

Noninterest expense increased by $17.8 million, or 7.5%, for the three-month period ended March 31, 2024, compared to the same period in 2023. These changes are discussed in greater detail 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 rates paid on each affect net interest income. Net interest income for the three-month period ended March 31, 2024 decreased $2.3 million, or 0.9%, compared to the same period in 2023.

Table 1 shows the impact of earning asset rate changes compared to changes in the cost of interest-bearing liabilities. As illustrated in this table, net interest spread for the three months ended March 31, 2024 decreased 43 basis points as compared to the same period in 2023. Net interest margin for the three months ended March 31, 2024 decreased 28 basis points compared to the same period in 2023. The changes are primarily due to increased cost and mix of interest-bearing liabilities, partially offset by increased loan volumes and repricing of earning assets. The impact of the increased cost and mix of interest-bearing liabilities had a significant impact in the first quarter of 2024. The cost of interest-bearing liabilities increased 112 basis points from the first quarter of 2023 while the yield on earning assets increased 69 basis points compared to the same period. Earning asset balance increases have been primarily driven by higher average loan and interest-bearing due from bank balances. These variances have led to a decrease in the Company’s net interest income during 2024, as compared to results for the same period in 2023. The Company expects to see continued volatility in the economic markets and governmental responses to changes in the economy. These changing conditions could have impacts on the balance sheet and income statement of the Company the remainder of the year. For the impact of the contribution from free funds, see the Analysis of Net Interest Margin within Table 2 below. Table 2 also illustrates how the changes in volume and interest rates have resulted in an increase in net interest income.

#### Table 1

**AVERAGE BALANCE SHEETS/YIELDS AND RATES** *(tax-equivalent basis) (unaudited, dollars in thousands)*

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. All average balances are daily average balances. The average yield on earning assets without the tax-equivalent basis adjustment would have been 5.25% for the three-month period ended March 31, 2024, and 4.55% for the same period in 2023.

| ASSETS | Three Months Ended March 31, 2024 Average Balance | Average Yield/Rate | 2023 Average Balance | Average Yield/Rate |
| --- | ---: | ---: | ---: | ---: |
| Loans, net of unearned interest | $23,354,043 | 6.64% | $21,271,600 | 5.88% |
| Securities: |  |  |  |  |
| Taxable | 9,264,789 | 2.65 | 9,349,351 | 2.30 |
| Tax-exempt | 3,732,122 | 3.42 | 3,845,266 | 3.35 |
| Total securities | 12,996,911 | 2.87 | 13,194,617 | 2.61 |
| Federal funds and resell agreements | 206,443 | 5.97 | 451,188 | 5.08 |
| Interest-bearing due from banks | 3,304,142 | 5.44 | 1,533,704 | 4.27 |
| Other earning assets | 17,893 | 7.33 | 9,258 | 6.31 |
| Total earning assets | 39,879,432 | 5.31 | 36,460,367 | 4.62 |
| Allowance for credit losses | (222,116) |  | (196,128) |  |
| Other assets | 2,360,092 |  | 2,239,140 |  |
| Total assets | $42,017,408 |  | $38,503,379 |  |
| **LIABILITIES AND SHAREHOLDERS' EQUITY** |  |  |  |  |
| Interest-bearing deposits | $23,459,723 | 3.84% | $19,643,168 | 2.64% |
| Federal funds and repurchase agreements | 2,384,754 | 4.67 | 2,461,942 | 3.84 |
| Borrowed funds | 2,183,494 | 5.36 | 1,200,346 | 5.36 |
| Total interest-bearing liabilities | 28,027,971 | 4.03 | 23,305,456 | 2.91 |
| Noninterest-bearing demand deposits | 10,066,409 |  | 11,919,277 |  |
| Other liabilities | 779,510 |  | 554,211 |  |
| Shareholders' equity | 3,143,518 |  | 2,724,435 |  |
| Total liabilities and shareholders' equity | $42,017,408 |  | $38,503,379 |  |
| Net interest spread |  | 1.28% |  | 1.71% |
| Net interest margin |  | 2.48 |  | 2.76 |

Table 2 presents the dollar amount of change in net interest income and margin due to volume and rate. Table 2 also reflects the effect that interest-free funds have on net interest margin. The average balance of interest-free funds (total earning assets less interest-bearing liabilities) decreased $1.3 billion for the three-month period ended March 31, 2024, compared to the same period in 2023. The benefit from interest-free funds increased 15 basis points in the three-month period ended March 31, 2024 compared to the same period in 2023.

#### Table 2

**ANALYSIS OF CHANGES IN NET INTEREST INCOME AND MARGIN** *(unaudited, dollars in thousands)*

### ANALYSIS OF CHANGES IN NET INTEREST INCOME

| Change in interest earned on: | Three Months Ended March 31, 2024 and 2023 Volume | Rate | Total |
| --- | ---: | ---: | ---: |
| Loans | $33,259 | $43,866 | $77,125 |
| Securities: |  |  |  |
| Taxable | (463) | 8,525 | 8,062 |
| Tax-exempt | (768) | 795 | 27 |
| Federal funds sold and resell agreements | (3,463) | 874 | (2,589) |
| Interest-bearing due from banks | 23,075 | 5,447 | 28,522 |
| Trading | 146 | 25 | 171 |
| Interest income | 51,786 | 59,532 | 111,318 |
| Change in interest incurred on: |  |  |  |
| Interest-bearing deposits | 28,786 | 67,190 | 95,976 |
| Federal funds purchased and repurchase agreements | (732) | 5,092 | 4,360 |
| Other borrowed funds | 13,232 | 12 | 13,244 |
| Interest expense | 41,286 | 72,294 | 113,580 |
| Net interest income | $10,500 | $(12,762) | $(2,262) |

### ANALYSIS OF NET INTEREST MARGIN

|  | Three Months Ended March 31, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Average earning assets | $39,879,432 | $36,460,367 | $3,419,065 |
| Interest-bearing liabilities | 28,027,971 | 23,305,456 | 4,722,515 |
| Interest-free funds | $11,851,461 | $13,154,911 | $(1,303,450) |
| Free funds ratio (interest free funds to average earning assets) | 29.72% | 36.08% | (6.36)% |
| Tax-equivalent yield on earning assets | 5.31 | 4.62 | 0.69 |
| Cost of interest-bearing liabilities | 4.03 | 2.91 | 1.12 |
| Net interest spread | 1.28 | 1.71 | (0.43) |
| Benefit of interest-free funds | 1.20 | 1.05 | 0.15 |
| Net interest margin | 2.48% | 2.76% | (0.28)% |

### Provision and Allowance for Credit Losses

The ACL represents management’s judgment of the 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 ASC 326, *Financial Instruments – Credit Losses*. 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.

Based on the factors above, management of the Company recorded $10.0 million as provision for credit losses for the three-month period ended March 31, 2024, compared to $23.3 million for the same period in 2023. This change is the result of applying the methodology for computing the allowance for credit losses, coupled with the impacts of the current and forecasted economic environment. As illustrated in Table 3 below, the ACL on loans decreased to 0.96% of total loans as of March 31, 2024, compared to 0.97% of total loans as of March 31, 2023.

Table 3 presents a summary of the Company’s ACL for the three-month periods ended March 31, 2024 and 2023, and for the year ended December 31, 2023. Net charge-offs were $3.0 million for the three-month period ended March 31, 2024, compared to $4.6 million for the same period in 2023. See “Credit Risk Management” under “Item 3. Quantitative and Qualitative Disclosures About Market Risk” in this report for information relating to nonaccrual loans, past due loans, restructured loans and other credit risk matters.

#### Table 3

**ANALYSIS OF ALLOWANCE FOR CREDIT LOSSES** *(unaudited, dollars in thousands)*

|  | Three Months Ended March 31, 2024 | 2023 | Year Ended December 31, 2023 |
| --- | ---: | ---: | ---: |
| Allowance – January 1 | $222,996 | $194,243 | $194,243 |
| Provision for credit losses | 10,000 | 23,250 | 39,227 |
| Charge-offs: |  |  |  |
| Commercial and industrial | (944) | (2,819) | (5,047) |
| Specialty lending | — | — | (762) |
| Commercial real estate | (250) | (21) | (266) |
| Consumer real estate | (174) | (1,121) | (1,185) |
| Consumer | (408) | (269) | (1,232) |
| Credit cards | (3,701) | (1,604) | (9,181) |
| Leases and other | — | — | — |
| Total charge-offs | (5,477) | (5,834) | (17,673) |
| Recoveries: |  |  |  |
| Commercial and industrial | 1,252 | 788 | 5,295 |
| Specialty lending | 1 | 1 | 1 |
| Commercial real estate | — | — | 111 |
| Consumer real estate | 606 | 13 | 45 |
| Consumer | 76 | 22 | 211 |
| Credit cards | 525 | 367 | 1,536 |
| Leases and other | — | — | — |
| Total recoveries | 2,460 | 1,191 | 7,199 |
| Net charge-offs | (3,017) | (4,643) | (10,474) |
| Allowance for credit losses – end of period | $229,979 | $212,850 | $222,996 |
| Allowance for credit losses on loans | $226,159 | $210,509 | $219,738 |
| Allowance for credit losses on held-to-maturity securities | 3,820 | 2,341 | 3,258 |
| Loans at end of period, net of unearned interest | 23,637,649 | 21,812,972 | 23,172,484 |
| Held-to-maturity securities at end of period | 5,626,437 | 5,861,664 | 5,691,868 |
| Total assets at amortized cost | 29,264,086 | 27,674,636 | 28,864,352 |
| Average loans, net of unearned interest | 23,352,083 | 21,269,730 | 22,334,942 |
| Allowance for credit losses on loans to loans at end of period | 0.96% | 0.97% | 0.95% |
| Allowance for credit losses – end of period to total assets at amortized cost | 0.79% | 0.77% | 0.77% |
| Allowance as a multiple of net charge-offs | 18.95x | 11.30x | 21.29x |
| Net charge-offs to average loans | 0.05% | 0.09% | 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.

The Company offers multiple fee-based products and services, which management believes will more closely align with customer demands. The Company is currently emphasizing fee-based products and 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 4

**SUMMARY OF NONINTEREST INCOME** *(unaudited, dollars in thousands)*

|  | Three Months Ended March 31, 2024 | 2023 | Dollar Change 24-23 | Percent Change 24-23 |
| --- | ---: | ---: | ---: | ---: |
| Trust and securities processing | $69,478 | $62,359 | $7,119 | 11.4% |
| Trading and investment banking | 5,462 | 5,308 | 154 | 2.9 |
| Service charges on deposits | 20,757 | 21,159 | (402) | (1.9) |
| Insurance fees and commissions | 283 | 274 | 9 | 3.3 |
| Brokerage fees | 13,160 | 13,676 | (516) | (3.8) |
| Bankcard fees | 21,968 | 18,172 | 3,796 | 20.9 |
| Investment securities gains (losses), net | 9,371 | (5,324) | 14,695 | 276.0 |
| Other | 18,765 | 14,576 | 4,189 | 28.7 |
| Total noninterest income | $159,244 | $130,200 | $29,044 | 22.3% |

Noninterest income increased by $29.0 million, or 22.3%, during the three-month period ended March 31, 2024, compared to the same period in 2023. Table 4 above summarizes the components of noninterest income and the respective year-over-year comparison for each category.

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, mutual fund assets, and alternative asset servicing. The increase in these fees for the three-month period ended March 31, 2024, compared to the same period in 2023, was primarily due to an increase in fund services revenue, trust services income, and corporate trust revenue. For the three-month period ended March 31, 2024, fund services revenue increased $5.0 million, or 14.5%, trust services income increased $1.1 million, or 8.3%, and corporate trust revenue increased $1.0 million, or 6.8%, in each case compared to the same period in 2023. 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 for the remainder of the year 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.

Bankcard fees for the three-month period ended March 31, 2024 increased $3.8 million, or 20.9%, compared to the same period in 2023. This increase was driven by higher interchange income, coupled with lower rebate and reward costs.

Investment securities gains, net for the three-month period ended March 31, 2024 increased by $14.7 million, or 276.0%, compared to the same period in 2023. This increase was driven by a $10.7 million gain on disposition of one of the Company's securities without readily determinable fair value, coupled with the $4.8 million impairment of an available-for-sale subordinated debt security during the first quarter of 2023. The income in this category is highly correlated to the change in market value of the assets, and the related income for the remainder of the year will be affected by changes in the securities markets. The Company’s investment portfolio is continually evaluated for opportunities to improve its performance and risk profile relative to market conditions and the Company’s interest rate expectations. This can result in differences from quarter to quarter in the amount of realized gains or losses on this portfolio.

Other noninterest income for the three-month period ended March 31, 2024 increased $4.2 million, or 28.7%, compared to the same period in 2023, driven by a $4.0 million legal settlement and a $1.8 million gain on sale of land, both recorded in the first quarter of 2024. These increases were partially offset by a decrease of $2.4 million in derivative income.

#### Table 5

**SUMMARY OF NONINTEREST EXPENSE** *(unaudited, dollars in thousands)*

|  | Three Months Ended March 31, 2024 | 2023 | Dollar Change 24-23 | Percent Change 24-23 |
| --- | ---: | ---: | ---: | ---: |
| Salaries and employee benefits | $143,006 | $142,498 | $508 | 0.4% |
| Occupancy, net | 12,270 | 12,177 | 93 | 0.8 |
| Equipment | 16,503 | 17,849 | (1,346) | (7.5) |
| Supplies and services | 3,301 | 3,875 | (574) | (14.8) |
| Marketing and business development | 6,025 | 5,335 | 690 | 12.9 |
| Processing fees | 27,936 | 23,240 | 4,696 | 20.2 |
| Legal and consulting | 7,894 | 7,285 | 609 | 8.4 |
| Bankcard | 10,567 | 7,133 | 3,434 | 48.1 |
| Amortization of other intangible assets | 1,960 | 2,298 | (338) | (14.7) |
| Regulatory fees | 19,395 | 5,551 | 13,844 | 249.4 |
| Other | 5,947 | 9,811 | (3,864) | (39.4) |
| Total noninterest expense | $254,804 | $237,052 | $17,752 | 7.5% |

Noninterest expense increased by $17.8 million, or 7.5%, for the three-month period ended March 31, 2024, compared to the same period in 2023. Table 5 above summarizes the components of noninterest expense and the respective year-over-year comparison for each category.

Processing fees increased $4.7 million, or 20.2%, for the three-month period ended March 31, 2024, compared to the same period in 2023, primarily due to increased software subscription cost.

Bankcard expense increased $3.4 million, or 48.1%, for the three-month period ended March 31, 2024, compared to the same period in 2023, primarily due to higher administrative expenses and fraud losses.

Regulatory fees increased $13.8 million, or 249.4%, for the three-month period ended March 31, 2024, compared to the same period in 2023, primarily due to the $13.0 million FDIC special assessment recorded in the first quarter of 2024 as discussed above.

### Income Tax Expense

The Company’s effective tax rate was 17.6% for the three months ended March 31, 2024, compared to 17.2% for the same period in 2023.

### Strategic Lines of Business

The Company has strategically aligned its operations into the following three reportable Business Segments: Commercial Banking, Institutional Banking, and Personal Banking. The Company’s 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. For comparability purposes, amounts in all periods are based on methodologies in effect at March 31, 2024. Previously reported results have been reclassified in this Form 10-Q to conform to the Company’s current organizational structure.

#### Table 6

**Commercial Banking Operating Results** *(unaudited, dollars in thousands)*

|  | Three Months Ended March 31, 2024 | 2023 | Dollar Change 24-23 | Percent Change 24-23 |
| --- | ---: | ---: | ---: | ---: |
| Net interest income | $157,247 | $151,027 | $6,220 | 4.1% |
| Provision for credit losses | 7,520 | 21,045 | (13,525) | (64.3) |
| Noninterest income | 42,966 | 22,902 | 20,064 | 87.6 |
| Noninterest expense | 92,420 | 84,002 | 8,418 | 10.0 |
| Income before taxes | 100,273 | 68,882 | 31,391 | 45.6 |
| Income tax expense | 17,223 | 11,646 | 5,577 | 47.9 |
| Net income | $83,050 | $57,236 | $25,814 | 45.1% |

For the three-month period ended March 31, 2024, Commercial Banking net income increased $25.8 million to $83.1 million, as compared to the same period in 2023. Net interest income increased $6.2 million, or 4.1%, for the three-month period ended March 31, 2024, compared to the same period in 2023, primarily driven by strong loan growth, earning asset mix changes and the increase in short-term interest rates. Provision for credit losses decreased $13.5 million for the period, driven by portfolio metric changes and changes in macro-economic metrics in 2024 as compared to 2023, partially offset by loan growth. Noninterest income increased $20.1 million, or 87.6%, compared to the same period in 2023, primarily due to an increase of $10.7 million in investment securities gains, an increase of $4.7 million in miscellaneous income driven by a legal settlement in the first quarter of 2024, an increase of $2.4 million in bankcard fees, and an increase of $1.8 million in service charges on deposit accounts. Noninterest expense increased $8.4 million, or 10.0%, to $92.4 million for the three-month period ended March 31, 2024, compared to the same period in 2023. This increase was driven by a $7.4 million increase in regulatory fees driven by the FDIC special assessment in the first quarter of 2024, and an increase of $1.5 million in salaries and employee benefits expense.

#### Table 7

**Institutional Banking Operating Results** *(unaudited, dollars in thousands)*

|  | Three Months Ended March 31, 2024 | 2023 | Dollar Change 24-23 | Percent Change 24-23 |
| --- | ---: | ---: | ---: | ---: |
| Net interest income | $49,860 | $55,085 | $(5,225) | (9.5)% |
| Provision for credit losses | 479 | 96 | 383 | 399.0 |
| Noninterest income | 92,716 | 84,238 | 8,478 | 10.1 |
| Noninterest expense | 100,376 | 89,372 | 11,004 | 12.3 |
| Income before taxes | 41,721 | 49,855 | (8,134) | (16.3) |
| Income tax expense | 7,656 | 8,504 | (848) | (10.0) |
| Net income | $34,065 | $41,351 | $(7,286) | (17.6)% |

For the three-month period ended March 31, 2024, Institutional Banking net income decreased $7.3 million, or 17.6%, compared to the same period last year. Net interest income decreased $5.2 million, or 9.5%, compared to the same period last year, due to higher deposit interest expense driven by the increase in short-term interest rates. Noninterest income increased $8.5 million, or 10.1%, primarily due to increases of $6.1 million in trust and securities processing income driven by higher fund services and corporate trust revenue, and $1.8 million in bankcard fees primarily driven by higher interchange income. Noninterest expense increased $11.0 million, or 12.3%, primarily driven by increases of $6.2 million in regulatory fees driven by the FDIC special assessment in the first quarter of 2024, $2.7 million in salaries and employee benefits expense, $1.7 million in processing fees, $1.6 million in bankcard expense, and $1.0 million in equipment expense. These increases were partially offset by a decrease of $1.3 million in technology, service, and overhead expenses.

#### Table 8

**Personal Banking Operating Results** *(unaudited, dollars in thousands)*

|  | Three Months Ended March 31, 2024 | 2023 | Dollar Change 24-23 | Percent Change 24-23 |
| --- | ---: | ---: | ---: | ---: |
| Net interest income | $32,327 | $35,584 | $(3,257) | (9.2)% |
| Provision for credit losses | 2,001 | 2,109 | (108) | (5.1) |
| Noninterest income | 23,562 | 23,060 | 502 | 2.2 |
| Noninterest expense | 62,008 | 63,678 | (1,670) | (2.6) |
| Loss before taxes | (8,120) | (7,143) | (977) | (13.7) |
| Income tax benefit | (1,263) | (993) | (270) | (27.2) |
| Net loss | $(6,857) | $(6,150) | $(707) | (11.5)% |

For the three-month period ended March 31, 2024, Personal Banking net income decreased $0.7 million to a net loss of $6.9 million, as compared to the same period in 2023. Net interest income decreased $3.3 million, or 9.2%, compared to the same period last year due to higher deposit interest expense driven by the increase in short-term interest rates. Provision for credit losses decreased $0.1 million for the period driven by portfolio metric changes and changes in macro-economic metrics in 2024 as compared to 2023, partially offset by loan growth. Noninterest income increased $0.5 million, or 2.2%, for the same period driven by an increase of $1.1 million in trust and securities processing income, an increase of $1.0 million in miscellaneous other income primarily due to the gain on sale of land during the first quarter of 2024, partially offset by a decrease of $1.3 million in investment securities gains. Noninterest expense decreased $1.7 million, or 2.6%, primarily due to a decrease of $2.0 million in technology, service, and overhead expenses, and a decrease of $1.6 million in operational losses, partially offset by increases of $1.1 million in bankcard expense and $0.5 million in marketing and business development expense.

### Balance Sheet Analysis

Total assets of the Company increased by $1.3 billion, or 3.0%, as of March 31, 2024, compared to December 31, 2023, primarily due to an increase of $1.5 billion, or 29.3% in interest-bearing due from banks and an increase of $465.2 million, or 2.0%, in loan balances, partially offset by a decrease of $527.2 million, or 7.5%, in securities available for sale.

Total assets of the Company increased $4.7 billion, or 11.7%, as of March 31, 2024, compared to March 31, 2023, primarily due to an increase of $3.6 billion, or 113.8%, in interest-bearing due from banks, and an increase of $1.8 billion, or 8.4%, in loan balances, partially offset by a decrease in securities available for sale of $366.5 million, or 5.3%, and a decrease of $236.7 million, or 4.0%, in securities held to maturity.

#### Table 9

**SELECTED FINANCIAL INFORMATION** *(unaudited, dollars in thousands)*

|  | March 31, 2024 | 2023 | December 31, 2023 |
| --- | ---: | ---: | ---: |
| Total assets | $45,343,375 | $40,607,190 | $44,011,674 |
| Loans, net of unearned interest | 23,642,064 | 21,814,394 | 23,176,904 |
| Total securities | 12,681,449 | 13,205,721 | 13,271,509 |
| Interest-bearing due from banks | 6,673,104 | 3,121,323 | 5,159,802 |
| Total earning assets | 43,176,892 | 38,509,596 | 41,853,559 |
| Total deposits | 36,913,610 | 31,931,904 | 35,792,859 |
| Total borrowed funds | 4,409,216 | 5,342,604 | 4,302,891 |

Loans represent the Company’s largest source of interest income. In addition to growing the commercial loan portfolio, management believes its middle market commercial business and its consumer business, including home equity and credit card loan products, are the market niches that represent its best opportunity to cross-sell fee-related services and generate additional noninterest income for the Company.

Actual loan balances totaled $23.6 billion as of March 31, 2024, and increased $465.2 million, or 2.0%, compared to December 31, 2023, and increased $1.8 billion, or 8.4%, compared to March 31, 2023. Compared to December 31, 2023, commercial real estate loans increased $391.2 million, or 4.4%, and credit card loans increased $114.5 million, or 27.0%. Compared to March 31, 2023, commercial real estate loans increased $1.2 billion, or 15.4%, commercial and industrial loans increased $362.7 million, or 3.8%, consumer real estate loans increased $203.8 million, or 7.4%, and credit card loans increased $92.1 million, or 20.6%. The increase in credit card loans in both periods is related to the purchase of $109.4 million in co-branded credit card receivables during the first quarter of 2024. See further information in Note 4, “Loans and Allowance for Credit Losses” in the Notes to Consolidated Financial Statements.

As of March 31, 2024 and December 31, 2023, commercial real estate loans comprised approximately 39.3% and 38.4%, respectively, of the Company's loan portfolio. 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 27.8% and 26.5% of total Company loans as of March 31, 2024 and December 31, 2023, respectively. The average investment CRE loan was approximately $6.3 million and $5.8 million, as of March 31, 2024 and December 31, 2023, respectively, and 90% are recourse loans as of the end of each period. These loans have an average loan-to-value of 57% as of both March 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 10

|  | Investment CRE loans by industry as a percentage of total Company Loans March 31, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Industrial | 8.6% | 8.0% |
| Multifamily | 6.0 | 5.0 |
| Office building | 4.2 | 4.2 |
| Retail | 2.0 | 2.2 |
| Hotel | 1.9 | 2.0 |
| Other | 5.1 | 5.1 |
| Total Investment CRE | 27.8% | 26.5% |

68

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 11

|  | Investment CRE loans by State March 31, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Missouri | 14.7% | 14.9% |
| Texas | 12.1 | 12.1 |
| Arizona | 11.9 | 11.9 |
| Colorado | 9.1 | 9.8 |
| Utah | 6.5 | 6.3 |
| Florida | 5.0 | 5.0 |
| All Others | 40.7 | 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 $9.0 million and $9.2 million, as of March 31, 2024 and December 31, 2023, respectively. The average loan-to-value of the office portfolio was 64% as of both March 31, 2024 and December 31, 2023, and 84% are recourse loans as of the end of both periods. Further, only 24% and 30% of the Company's office portfolio as of March 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 12

|  | Office CRE loans by MSA March 31, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Dallas-Fort Worth-Arlington, TX MSA | 22.2% | 22.7% |
| Jacksonville, FL MSA | 9.1 | 9.1 |
| Kansas City, MO-KS MSA | 7.6 | 7.8 |
| Tampa-St. Petersburg-Clearwater, FL | 6.9 | 6.8 |
| St. Louis, MO-IL MSA | 6.7 | 6.7 |
| Raleigh-Cary, NC MSA | 5.9 | 5.9 |
| Cincinnati-Middletown, OH-KY-IN MSA | 5.3 | 5.1 |
| Milwaukee-Waukesha-West Allis, WI MSA | 5.2 | 5.2 |
| All Others | 31.1 | 30.7 |
| Total Office CRE | 100.0% | 100.0% |

Nonaccrual, past due and restructured loans are discussed under “Credit Risk Management” within “Item 3. Quantitative and Qualitative Disclosures About Market Risk” in this report.

### Investment Securities

The Company’s investment portfolio contains trading, AFS, and HTM securities, as well as FRB stock, FHLB stock, and other miscellaneous investments. Investment securities totaled $12.7 billion as of March 31, 2024, and

$13.3 billion as of December 31, 2023, and comprised 29.4% and 31.9% of the Company’s earning assets, respectively, as of those dates.

The Company’s AFS securities portfolio comprised 51.6% of the Company’s investment securities portfolio at March 31, 2024 and 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 was 57.8 months at March 31, 2024, compared to 52.6 months at December 31, 2023, and 59.8 months at March 31, 2023. 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 $9.4 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 March 31, 2024 and December 31, 2023, respectively.

The Company’s HTM securities portfolio consists of U.S. agency-backed securities, mortgage-backed securities, general obligation bonds, and private placement bonds. The HTM portfolio, net of the ACL, totaled $5.6 billion at March 31, 2024 and $5.7 billion as of December 31, 2023. The average life of the HTM portfolio was 9.0 years at March 31, 2024, compared to 8.4 years at December 31, 2023, and 9.1 years at March 31, 2023.

The securities portfolio generates the Company’s second largest component of interest income. The securities portfolio achieved an average yield on a tax-equivalent basis of 2.88% for the three-month period ended March 31, 2024, compared to 2.61% for the same period in 2023.

At March 31, 2024, the unrealized pre-tax net loss on the AFS securities portfolio was $665.9 million, or 9.2% of the $7.2 billion amortized cost value, an increase of $41.7 million as compared to December 31, 2023. At March 31, 2024, the unrealized pre-tax net loss on the securities designated as HTM was $601.3 million, or 10.7% of amortized cost value, compared to $508.5 million at December 31, 2023. During 2022, the Company transferred securities with an amortized cost balance of $4.1 billion and a fair value of $3.8 billion from the AFS category to the HTM category. The transfer of securities was made at fair value at the time of transfer. The remaining balance of unrealized pre-tax losses related to transferred securities was $198.4 million as of March 31, 2024, and $207.2 million as of December 31, 2023, and was included in the amortized cost balance of HTM securities. See further information in Note 5, “Securities” in the Notes to Consolidated Financial Statements.

### Deposits and Borrowed Funds

Deposits increased $1.1 billion, or 3.1%, from December 31, 2023 to March 31, 2024 and increased $5.0 billion, or 15.6%, from March 31, 2023 to March 31, 2024. Total noninterest-bearing deposits increased $1.1 billion and total interest-bearing deposits increased $323 thousand from December 31, 2023 to March 31, 2024. Total noninterest-bearing deposits increased $762.3 million, and interest-bearing deposits increased $4.2 billion from March 31, 2023 to March 31, 2024. Deposits can fluctuate at quarter-end due to the operational nature of our commercial and institutional clients and typical seasonal declines in public funds deposits, particularly in the first quarter. The shift from noninterest-bearing to interest-bearing is related to the recent increases in short-term and long-term interest rates. Noninterest-bearing deposits were 35.9%, 33.9%, and 39.1% of total deposits at March 31, 2024, December 31, 2023, and March 31, 2023, respectively.

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 trust and mutual fund servicing businesses, in order to attract and retain additional deposits. Management believes a strong core deposit composition is one of the Company’s key strengths given its competitive product mix.

As of March 31, 2024, there were an estimated $25.3 billion of uninsured deposits, an increase of $868.5 million as compared to December 31, 2023, and an increase of $4.0 billion as compared to March 31, 2023. Estimated uninsured deposits comprised approximately 68.4%, 68.2%, and 66.6% of total deposits as of March 31, 2024, December 31, 2023, and March 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 UMB Bank, n.a. 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 $2.0 billion and collateralized deposits of $5.4 billion, the adjusted estimated uninsured deposits were $17.9 billion as of March 31, 2024. The adjusted ratio of estimated uninsured deposits, excluding affiliate and collateralized deposits, as a percentage of total deposits was approximately 48.6% as of March 31, 2024. The adjusted ratio of estimated uninsured deposits, excluding affiliate and collateralized deposits, as a percentage of total deposits was approximately 45.3% as of December 31, 2023, and 43.1% as of March 31, 2023.

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. The Company had $1.2 billion, $1.2 billion, and $811.2 million of deposits in the program as of March 31, 2024, December 31, 2023, and March 31, 2023, respectively.

Long-term debt totaled $383.7 million at March 31, 2024, compared to $383.2 million as of December 31, 2023, and $381.8 million as of March 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 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 have an aggregate contractual balance of $103.1 million. 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.

The Company has a revolving line of credit with Wells Fargo Bank, N.A. which allows the Company to borrow up to $30.0 million for general working capital purposes. The interest rate applied to borrowed balances will be at the Company’s option either 1.40% above Term SOFR or 1.75% below the prime rate on the date of an advance. The Company pays a 0.4% unused commitment fee for unused portions of the revolving line of credit. As of March 31, 2024, the Company had no advances outstanding on this revolving line of credit.

Short-term debt totaled $1.8 billion as March 31, 2024 and consists of a $1.0 billion short-term borrowing with the FHLB of Des Moines and an $800.0 million borrowing with the BTFP. The FHLB borrowing has an interest rate of 5.04% and is due in the second quarter of 2024. The BTFP borrowing has a rate of 4.76% and is due in the first quarter of 2025. The level of borrowings could be impacted by earning asset mix changes in the Company’s balance sheet from the impacts of recent industry volatility. See further information in Note 7, “Borrowed Funds” in the Notes to Consolidated Financial Statements.

Federal funds purchased and securities sold under agreements to repurchase totaled $2.2 billion as of March 31, 2024, $2.1 billion as of December 31, 2023, and $2.2 billion at March 31, 2023. 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 or similar issues at an agreed-upon price and date. The level of borrowings could be impacted by earning asset mix changes in the Company’s balance sheet from the impacts of recent industry volatility.

### Capital and Liquidity

The Company places a significant emphasis on the maintenance of a strong capital position, which 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 was $3.2 billion at March 31, 2024, a $52.4 million increase compared to December 31, 2023, and a $338.2 million increase compared to March 31, 2023. Total accumulated other comprehensive loss was $594.5 million at March 31, 2024. This is a decline of $37.6 million as compared to December 31, 2023, and an improvement of $32.2 million as compared to March 31, 2023.

The Company’s Board of Directors authorized, at its April 30, 2024 and April 26, 2022 meetings, the repurchase of up to one million shares and two million shares, respectively, of the Company’s common stock during the twelve months following each meeting (each a Repurchase Authorization). On July 25, 2023, the Company's Board of Directors approved the repurchase of up to one million shares of the Company's common stock, which terminated on April 30, 2024. During the three-month periods ended March 31, 2024 and 2023, the Company did not repurchase shares of common stock pursuant to any of its announced Repurchase Authorizations, but did acquire shares pursuant to the Company's share-based incentive programs.

At the Company’s quarterly board meeting, the Board of Directors declared a $0.39 per share quarterly cash dividend payable on July 1, 2024, to shareholders of record at the close of business on June 10, 2024.

Through the Company’s relationship with the FHLB of Des Moines, the Company owns $55.2 million of 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. The Company had a $1.0 billion short-term advance outstanding at FHLB of Des Moines as of March 31, 2024. Additionally, in the first quarter of 2024, the FHLB of Des Moines issued a letter of credit for $150.0 million on behalf of the Company to secure deposits. This letter of credit will expire in July 2024. The Company’s remaining borrowing capacity with the FHLB was $952.7 million as of March 31, 2024.

The Company had an $800.0 million short-term borrowing outstanding with the Federal Reserve Bank's BTFP as of March 31, 2024. As of March 31, 2024, the Company’s remaining borrowing capacity with the BTFP was $30.0 million and its remaining borrowing capacity at the Federal Reserve Discount Window was $11.0 billion.

In addition to borrowing capacity with the FHLB and at the Federal Reserve Discount Window as described above, the Company had additional liquidity of $9.5 billion available via cash, unpledged bond collateral, the federal funds market, and the IntraFi Cash Service program as of March 31, 2024.

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 calculated as the ratio of tier 1 core capital to total average assets, less goodwill and intangibles.

U.S. banking agencies in December 2018 approved a final rule to address the impact of CECL on regulatory capital by allowing banking organizations the option to phase in the day-one impact of CECL until the first quarter of 2023. In March 2020, the U.S. banking agencies issued an interim final rule that provides banking organizations with an alternative option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period. The Company elected this alternative option instead of the one described in the December 2018 rule.

The Company's capital position as of March 31, 2024 is summarized in the table below and exceeded regulatory requirements.

#### Table 13

| RATIOS | Three Months Ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Common equity tier 1 capital ratio | 11.09% | 10.57% |
| Tier 1 risk-based capital ratio | 11.09 | 10.57 |
| Total risk-based capital ratio | 13.03 | 12.49 |
| Leverage ratio | 8.39 | 8.35 |
| Return on average assets | 1.06 | 0.97 |
| Return on average equity | 14.11 | 13.76 |
| Average equity to assets | 7.48 | 7.08 |

The Company's per share data is summarized in the table below.

| Per Share Data | Three Months Ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Earnings – basic | $2.27 | $1.91 |
| Earnings – diluted | 2.25 | 1.90 |
| Cash dividends | 0.39 | 0.38 |
| Dividend payout ratio | 17.2% | 19.9% |
| Book value | $64.68 | $58.03 |

### Off-balance Sheet Arrangements

The Company’s main off-balance sheet arrangements are loan commitments, commercial and standby letters of credit, futures contracts and forward exchange contracts, which have maturity dates rather than payment due dates. See Note 10, “Commitments, Contingencies and Guarantees” in the Notes to Consolidated Financial Statements for detailed information on these arrangements. The level of the outstanding commitments could be impacted by volatility in the economic markets and governmental responses to inflation, geopolitical tensions, and supply chain constraints. These changing conditions could have impacts on the consolidated balance sheets of the Company for the remainder of the year.

### Critical Accounting Policies and Estimates

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 ongoing 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.

A summary of critical accounting policies is listed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the Form 10-K.

## Market risk

As filed, 18,987 characters.

### 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, floor spreads, and futures contracts to manage interest rate risk on certain loans, trading securities, and trust preferred securities. See further information in Note 11 “Derivatives and Hedging Activities” in the Notes to the Consolidated Financial Statements.

Overall, the Company manages 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 14 shows the net interest income increase or decrease over the next two years as of March 31, 2024 and 2023 based on hypothetical changes in interest rates and a constant sized balance sheet with runoff being replaced.

#### Table 14

**MARKET RISK** *(unaudited)*

| Change in basis points | Hypothetical change in interest rate – Rate Ramp Year One March 31, 2024 Percentage change | March 31, 2023 Percentage change | Year Two March 31, 2024 Percentage change | March 31, 2023 Percentage change |
| ---: | ---: | ---: | ---: | ---: |
| 200 | (1.5)% | (1.8)% | 3.9% | 5.5% |
| 100 | (0.8) | (0.8) | 2.0 | 2.8 |
| Static | — | — | — | — |
| (100) | 1.4 | 0.8 | (0.5) | (3.0) |
| (200) | 3.1 | 1.9 | (0.6) | (6.2) |
| (300) | 4.8 | n/a | (1.0) | n/a |

| Change in basis points | Hypothetical change in interest rate – Rate Shock Year One March 31, 2024 Percentage change | March 31, 2023 Percentage change | Year Two March 31, 2024 Percentage change | March 31, 2023 Percentage change |
| ---: | ---: | ---: | ---: | ---: |
| 200 | 2.2% | 0.8% | 6.9% | 7.9% |
| 100 | 1.1 | 0.4 | 3.5 | 4.0 |
| Static | — | — | — | — |
| (100) | (0.4) | (0.6) | (2.1) | (4.3) |
| (200) | (0.3) | (1.3) | (4.0) | (9.3) |
| (300) | (0.2) | n/a | (6.2) | n/a |

The Company is positioned relatively neutral to changes in interest rates in the next year. Net interest income is predicted to decrease in all upward rate ramp scenarios and increase in all upward rate shock scenarios. In down rate scenarios, net interest income is predicted to increase in rate ramp scenarios and decrease in rate shock scenarios. In year two, net interest income is predicted to rise in all increasing rate scenarios and decrease in falling rate scenarios. The Company’s ability to price deposits consistent with its historical approach is a key assumption in these scenarios.

### Trading Account

The Company carries securities in a trading account that is maintained according to Board-approved policy and procedures. The policy limits the amount and type of securities that can be carried in the trading account, 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 utilizing financial instruments including exchange-traded financial futures as well as short sales of U.S. Treasury and Corporate securities. The trading securities and related hedging instruments are marked-to-market daily. The trading account had a balance of $40.2 million as of March 31, 2024, $18.1 million as of December 31, 2023, and $19.8 million as of March 31, 2023. Securities sold not yet purchased (i.e., short positions) totaled $11.7 million at March 31, 2024, $8.0 million as of December 31, 2023, and $1.8 million at March 31, 2023 and are classified within the Other liabilities line of the Company’s Consolidated Balance Sheets.

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 14 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 ranking 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 authorities governing the Bank also review 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 $2.3 million to $17.8 million at March 31, 2024, compared to March 31, 2023, and increased $4.5 million, compared to December 31, 2023.

The Company had $2.5 million and $1.7 million of other real estate owned as of March 31, 2024 and December 31, 2023, respectively. Loans past due more than 90 days and still accruing interest totaled $3.1 million as of March 31, 2024, compared to $1.7 million at March 31, 2023 and $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 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 $517 thousand of restructured loans at March 31, 2024, $6.0 million at March 31, 2023, and $548 thousand at December 31, 2023.

#### Table 15

**LOAN QUALITY** *(unaudited, dollars in thousands)*

|  | March 31, 2024 | 2023 | December 31, 2023 |
| --- | ---: | ---: | ---: |
| Nonaccrual loans | $17,401 | $12,954 | $12,828 |
| Restructured loans on nonaccrual | 355 | 2,526 | 384 |
| Total nonperforming loans | 17,756 | 15,480 | 13,212 |
| Other real estate owned | 2,532 | — | 1,738 |
| Total nonperforming assets | $20,288 | $15,480 | $14,950 |
| Loans past due 90 days or more | $3,076 | $1,723 | $3,111 |
| Restructured loans accruing | 162 | 3,428 | 164 |
| Allowance for credit losses on loans | 226,159 | 210,509 | 219,738 |
| Ratios: |  |  |  |
| Nonperforming loans as a percent of loans | 0.08% | 0.07% | 0.06% |
| Nonperforming assets as a percent of loans plus other real estate owned | 0.09 | 0.07 | 0.06 |
| Nonperforming assets as a percent of total assets | 0.04 | 0.04 | 0.03 |
| Loans past due 90 days or more as a percent of loans | 0.01 | 0.01 | 0.01 |
| Allowance for credit losses on loans as a percent of loans | 0.96 | 0.97 | 0.95 |
| Allowance for credit losses on loans as a multiple of nonperforming loans | 12.74x | 13.60x | 16.63x |

### 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 $6.5 billion of high-quality securities available for sale as of March 31, 2024. 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 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 of due to the pledging restriction. There were $9.4 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 March 31, 2024 and December 31, 2023, respectively.

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 March 31, 2024 was $18.4 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 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 its bank and non-bank subsidiaries to maintain adequate capital as well as fund strategic initiatives.

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.

To enhance general working capital needs, the Company has a revolving line of credit with Wells Fargo Bank, N.A., which allows the Company to borrow up to $30.0 million for general working capital purposes. The interest rate applied to borrowed balances will be at the Company’s option, either 1.40% above SOFR or 1.75% below the prime rate on the date of an advance. The Company pays a 0.4% unused commitment fee for unused portions of the line of credit. The Company had no advances outstanding as of March 31, 2024.

The Company is a member bank of the FHLB. The Company owns $55.2 million of 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. The Company had a $1.0 billion short-term advance outstanding at FHLB of Des Moines as of March 31, 2024. Additionally, in the first quarter of 2024, the FHLB of Des Moines issued a letter of credit for $150.0 million on behalf of the Company to secure deposits. This letter of credit will expire in July 2024. The Company’s remaining borrowing capacity with the FHLB was $952.7 million as of March 31, 2024.

The Company had an $800.0 million short-term borrowing outstanding with the Federal Reserve Bank's BTFP as of March 31, 2024 at an interest rate of 4.76%. As of March 31, 2024, the Company’s remaining borrowing capacity with the BTFP was $30.0 million and its remaining borrowing capacity at the Federal Reserve Discount Window was $11.0 billion.

In addition to borrowing capacity with the FHLB and at the Federal Reserve Discount Window as described above, the Company had additional liquidity of $9.5 billion available via cash, unpledged bond collateral, the federal funds market, and the IntraFi Cash Service program as of March 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 must comply with a number of legal and regulatory requirements.

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.

## Controls and procedures

As filed, 1,866 characters.

The Sarbanes-Oxley Act of 2002, as amended, requires the Chief Executive Officer and the Chief Financial Officer to make certain certifications under this Form 10-Q with respect to the Company’s disclosure controls and procedures and internal control over financial reporting. The Company has a Code of Ethics that expresses the values that drive employee behavior and maintains the Company’s commitment to the highest standards of ethics.

### Disclosure Controls and Procedures

The Company’s management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company's “disclosure controls and procedures” (as such term is defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this Form 10-Q. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Form 10-Q, the Company’s disclosure controls and procedures were effective for ensuring that the Company’s SEC filings are recorded, processed, summarized, and reported within the time period required and that information required to be disclosed by the Company is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

### Internal Control Over Financial Reporting

There has been no change in the Company’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the three-month period ended March 31, 2024 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

## Risk factors

As filed, 20,523 characters.

On April 29, 2024, the Company announced that it had entered into a definitive merger agreement with HTLF under which the Company will acquire HTLF in an all-stock transaction (the Merger). The following represents a material change in the Company's risk factors from those disclosed in Part I, Item 1A of the Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

**The dilution caused by the issuance of shares of our common stock in connection with the Merger may adversely affect the market price of our common stock.**

The dilution caused by the issuance of the new shares of our common stock to HTLF stockholders in connection with the payment of the Merger Consideration may result in fluctuations in the market price of our common stock, including a stock price decrease.

**We may not be able to successfully integrate HTLF or to realize the anticipated benefits of the acquisition.**

Upon consummation of the transactions contemplated by the merger agreement, we will begin the process of integrating HTLF. A successful integration of its business with ours will depend substantially on our ability to consolidate operations, corporate cultures, systems and procedures and to eliminate redundancies and costs. We may not be able to combine our 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;
- possible inconsistencies in standards, control procedures and policies;
- additional costs or unexpected problems with operations, personnel, 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, we expect to enter into the merger agreement to acquire 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 transactions contemplated by the merger agreement is subject to a number of uncertainties, including whether we integrate 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 our 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 our business, financial condition and operating results. Additionally, upon consummation of the transactions contemplated by the merger agreement, we will make fair value estimates of certain assets and liabilities in recording the acquisition. Actual values of these assets and liabilities could differ from our estimates, which could result in our not achieving the anticipated benefits of the acquisition. Finally, any cost savings that are realized may be offset by losses in revenues or other charges to earnings.

**We and HTLF have, and the combined company following the Merger will, incur significant transaction and Merger-related costs in connection with the transactions contemplated by the merger agreement.**

We and HTLF have incurred and expect to incur significant non-recurring costs associated with combining the operations of HTLF with our 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. We have begun collecting information in order to formulate detailed integration plans to deliver anticipated cost savings. Additional unanticipated costs may be incurred in the integration of our business with the business of HTLF, and there are many factors beyond our or HTLF’s control that could affect the total amount or timing of integration costs. Although we expect 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 Merger-related costs over time, this net benefit may not be achieved in the near term, or at all.

Whether or not the Merger is consummated, we, HTLF and the combined company will incur substantial expenses in pursuing the Merger and may adversely impact our and the combined company’s earnings. Completion of the transactions contemplated by the merger agreement will be conditioned upon customary closing conditions, including the receipt of required governmental authorizations, consents, orders and approvals, including approval by certain federal banking regulators. We and HTLF intend to pursue all required approvals in accordance with the merger agreement. However, there can be no assurance that such approvals will be obtained without additional cost, on the anticipated timeframe, or at all.

**Regulatory approvals for the Merger may not be received, may take longer than expected or may impose conditions that are not currently anticipated or that could have an adverse effect on the combined company following the Merger.**

Before the proposed Merger and the Bank Merger, may be completed, various approvals, consents and non-objections must be obtained from regulatory authorities. In determining whether to grant these approvals, regulatory authorities consider a variety of factors, including the regulatory standing of each party. These approvals could be delayed or not obtained at all, including due to any or all of the following: an adverse development in any party’s regulatory standing or any other factors considered by regulators in granting such approvals, governmental, political or community group inquiries, investigations or opposition; changes in legislation or the political environment, including as a result of changes of the U.S. executive administration, or Congressional leadership and regulatory agency leadership.

Even if the approvals are granted, they may impose terms and conditions, limitations, obligations or costs, or place restrictions on the conduct of the combined company’s business or require changes to the terms of the transactions contemplated by the merger agreement. There can be no assurance that regulators will not impose any such conditions, limitations, obligations or restrictions or that such conditions, limitations, obligations or restrictions will not have the effect of delaying the completion of any of the transactions contemplated by the merger agreement, imposing additional material costs on or materially limiting the revenues of the combined company following the Merger or will otherwise reduce the anticipated benefits of the Merger. In addition, there can be no assurance that any such conditions, limitations, obligations or restrictions will not result in the delay or abandonment of the Merger. Additionally, the completion of the Merger is conditioned on the absence of certain orders, injunctions or decrees by any governmental entity of competent jurisdiction that would prohibit or make illegal the completion of the transactions contemplated by the merger agreement.

Despite the parties’ expected commitment to use their reasonable best efforts to respond to any request for information and resolve any objection that may be asserted by any governmental entity with respect to the merger agreement, neither party is required under the terms of the merger agreement to take any action, commit to take any action, or agree to any condition or restriction in connection with obtaining these approvals, that would reasonably be expected to have a material adverse effect on the combined company and its subsidiaries, taken as a whole, after giving effect to the proposed Merger (measured on a scale relative to HTLF and its subsidiaries, taken as a whole).

**The merger agreement may be terminated in accordance with its terms and the Merger may not be completed. Such failure to complete the transactions contemplated by the merger agreement could cause our results to be adversely affected, our stock price to decline or have a material and adverse effect on our stock price and results of operations.**

If the transactions contemplated by the merger agreement, including the Merger, are not completed for any reason, including as a result of our shareholders failing to approve the issuance of the shares of our common stock constituting the Merger Consideration (the “Share Issuance”) or the amendment to our restated articles of incorporation to increase of the number of authorized shares of our common stock (the “Articles Amendment”) or HTLF stockholders failing to approve the merger agreement, there may be various adverse consequences and we and/or HTLF may experience negative reactions from the financial markets and from our respective customers and employees. Moreover, our stock price may decline because costs related to such transactions, such as legal, accounting and financial advisory fees, must be paid even if such transactions, including the Merger, are not completed. Moreover, we may be required to pay a termination fee of $70 million to HTLF upon a termination of the merger agreement in certain circumstances. In addition, if the transactions contemplated by the merger agreement are not completed, whether because of our failure to receive required regulatory approvals in a timely fashion or because one of the parties has breached its obligations in a way that permits HTLF to terminate the merger agreement, or for any other reason, our stock price may decline to the extent that the current market price reflects a market assumption that the Merger will be completed.

**The market price for our common stock following the closing of the transactions contemplated by the merger agreement may be affected by factors different from those that historically have affected or currently affect our common stock and HTLF common stock.**

Subject to the terms and conditions of the merger agreement, upon completion of the Merger, holders of shares of HTLF common stock will receive shares of our common stock as Merger Consideration. The combined company’s business and financial position will differ from the business and financial position of the Company and HTLF before the completion of the Merger and, accordingly, the results of operations of the combined company will be affected by some factors that are different from those currently affecting our results of operations and those currently affecting the results of operations of HTLF. Accordingly, the market price and performance of our common stock is likely to be different from the performance of our common stock in the absence of the Merger. In addition, general fluctuations in stock markets could have a material adverse effect on the market for, or liquidity of, our common stock, regardless of our actual operating performance.

**Upon completion of the transactions contemplated by the merger agreement, we will be subject to the risks related to HTLF’s business, including its commercial real estate loans.**

Upon completion of the transactions contemplated by the merger agreement, we will be subject to risks related to HTLF’s business and take on its loans, investments and other obligations. This will increase our credit risk and, if such obligations are not repaid or losses are incurred on such obligations, there could be material and adverse effects on our business. Additionally, where our businesses overlap, any risks we face may be increased due to the transactions contemplated by the merger agreement. For example, HTLF’s loan portfolio has a large concentration of commercial real estate loans, which we will add to our existing portfolio. This may exacerbate the risks we already undertake with our own portfolio comprised meaningfully of commercial real estate loans, as described in our 2023 10-K under “Item 1A. Risk Factors—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,” and may result in new ones.

For example, HTLF’s loan portfolio has a large concentration of commercial real estate loans, which involve additional risks because 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 control of HTLF and our control, or that of the borrowers, could negatively impact the future cash flow and market values of affected properties.

**As a result of the transactions contemplated by the merger agreement and our acquisition of HTLF, we will record goodwill in connection with such acquisition, and if it becomes impaired, our earnings could be significantly impacted.**

Under current accounting methods, goodwill is not amortized but, instead, is subject to impairment tests on at least an annual basis and more frequently if an event occurs or circumstances change that reduce the fair value of a reporting unit below its carrying amount. In connection with our acquisition of HTLF, we will record goodwill in the fair value amount of such acquisition. Although we do not anticipate impairment charges, if we conclude that some portion of such goodwill is impaired, a non-cash charge for the amount of such impairment would be recorded against earnings.

Additionally, HTLF records a significant amount of goodwill. At December 31, 2023, HTLF had goodwill of $576.0 million, representing approximately 30% of its stockholders’ equity. Upon the Merger, we will take on HTLF’s goodwill, and if all or some portion of that $576.0 million is impaired following the acquisition, we would be required to take a non-cash charge for such amount against our earnings. A goodwill impairment charge could be caused by a decline in our stock price or the occurrence of a triggering event that compounds negative financial results. Further, because a large portion of HTLF’s portfolio is secured by commercial real estate loans, if such portfolio were to be seen as less valuable in a deteriorating real estate market, we may be required to record an impairment on our HTLF acquisition. Therefore, following the transactions contemplated by the merger agreement, including the Merger, and our recording of goodwill in connection therewith, if such goodwill becomes impaired, our earnings could be significantly and adversely affected.

**The future results of the combined company following the Merger may suffer if the combined company does not effectively manage its expanded operations.**

Following the Merger, the size of the business of the combined company will increase significantly beyond the current size of either our or HTLF’s business. The combined 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 combined company may also face increased scrutiny from governmental authorities as a result of the significant increase in the size of its business.

In addition, HTLF’s bank subsidiary (“HTLF Bank”) is a Colorado state-chartered non-member bank subject to primary federal bank regulatory oversight by the Federal Deposit Insurance Corporation, while UMB Bank is, and the bank subsidiary of the combined company upon completion of the Bank Merger will be, a national bank subject to oversight by the Office of the Comptroller of the Currency (the “OCC”). The laws, regulations and regulatory guidance applicable to HTLF Bank and the bank subsidiary of the combined company will therefore differ in ways that may affect the operations of the combined company. Additionally, the internal policies of UMB Bank and HTLF 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 subsidiary of the combined company is not expected to hold, whether based on differences in regulatory oversight or internal policies, and we may dispose of such assets contemporaneous or subsequent to the closing of the Merger. The disposition of certain assets in a high-interest rate environment, such as we have in the past experienced, are currently experiencing and may experience again in the future, could result in a sale of assets at a market price that is different than the estimated book value of such assets and impact regulatory capital ratios at the time of the closing of the Merger. Further, we may replace such disposed assets with lower-yielding investments, any of which could impact our future earnings and return on equity.

There can be no assurances that the combined company will be successful or that it will realize the expected operating efficiencies, cost savings or other benefits currently anticipated from the Merger.

**We and HTLF will be subject to business uncertainties and contractual restrictions while the Merger is pending.**

Uncertainty about the effect of the Merger on employees and customers may have an adverse effect on us and HTLF. These uncertainties may impair our and HTLF’s ability to attract, retain and motivate key personnel until the Merger is completed, and could cause customers and others that deal with us or HTLF to seek to change existing business relationships with us or HTLF. In addition, subject to certain exceptions, we and HTLF expect to agree to operate our respective businesses in the ordinary course consistent with past practice in all material respects prior to closing, and we and HTLF expect to agree not to take certain actions, which could cause us or HTLF to be unable to pursue other beneficial opportunities that may arise prior to the completion of the Merger.

**Litigation related to the Merger could prevent or delay completion of the Merger or otherwise negatively affect the business and operations of us and HTLF.**

We and HTLF may incur costs in connection with the defense or settlement of any shareholder or stockholder lawsuits filed in connection with the Merger. Such litigation could have an adverse effect on our and HTLF’s financial condition and results of operations and could prevent or delay the completion of the Merger.

**The Merger will not be completed unless important conditions are satisfied or waived, including approval of the merger agreement by HTLF stockholders and approval of the Share Issuance and the Articles Amendment by our shareholders.**

Specified conditions set forth in the merger agreement must be satisfied or waived to complete the Merger. If the conditions are not satisfied or, subject to applicable law, waived, the Merger will not occur or will be delayed and each of HTLF and us may lose some or all of the intended benefits of the Merger.

Filed May 7, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-053990. Last ingested by Listed: Nov 4, 2026, 17:33 ET. No prices; not investment advice.