The information in this preliminary prospectus supplement is not complete and may be changed. This preliminary prospectus supplement and the accompanying base prospectus do not constitute an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Filed Pursuant to Rule 424(b)(5)
Registration No. 333-266941

SUBJECT TO COMPLETION, DATED APRIL 28, 2024

PRELIMINARY PROSPECTUS SUPPLEMENT

(To Prospectus dated August 17, 2022)

    Shares

UMB Financial Corporation

Common Stock

 

 

UMB Financial Corporation is entering into a forward sale agreement with BofA Securities, Inc. or its affiliate (the “forward purchaser”), in respect of an aggregate of    shares of our common stock, par value $1.00 per share (our “common stock”). In connection with the forward sale agreement between us and the forward purchaser, the forward purchaser or its affiliate is expected to borrow from third parties an aggregate of    shares of our common stock. Such borrowed shares of our common stock will be delivered by BofA Securities, Inc. (in such capacity, the “forward seller”) for sale to the underwriter in this offering. In the event that (i) the forward purchaser (or its affiliate) is unable through commercially reasonable efforts to borrow and deliver for sale to the underwriter on the anticipated closing date the number of shares of our common stock to be sold to the underwriter or (ii) in the forward purchaser’s commercially reasonable judgment either it is impracticable to do so or the forward purchaser (or its affiliate) would incur a stock loan rate greater than a specified rate to borrow and deliver for sale to the underwriter on the anticipated closing date such number of shares of our common stock, or if certain other conditions to the forward seller’s obligations have not been satisfied, then we will issue and sell directly to the underwriter a number of shares of our common stock equal to the number of shares of our common stock that the forward purchaser or its affiliate does not borrow and deliver. Under such circumstances, the number of shares of our common stock underlying the forward sale agreement will be decreased by the number of shares of our common stock that we issue and sell to the underwriter.

We will not receive any proceeds from the sale of the shares of our common stock sold by the forward seller to the underwriter. We expect to physically settle the forward sale agreement (by the delivery of shares of our common stock) and receive proceeds from the sale of those shares of our common stock upon one or more forward settlement dates within approximately 18 months from the date hereof. We may also elect cash settlement or net share settlement for all or a portion of our obligations under the forward sale agreement. If we elect to cash settle or net share settle the forward sale agreement, then we may not receive any proceeds from the issuance of shares of our common stock in respect of the forward sale agreement, and we will instead receive or pay cash (in the case of cash settlement) or receive or deliver shares of our common stock (in the case of net share settlement). See “Underwriting (Conflicts of Interest) —Forward Sale Agreement” for a description of the forward sale agreement.

Our common stock is listed on the Nasdaq Global Select Market (the “NASDAQ”) under the symbol “UMBF.” The last reported sale price of our common stock on the NASDAQ on April 26, 2024 was $83.17 per share.

The underwriter has agreed to purchase shares of our common stock from the forward seller at a price of $    per share. We expect to receive net proceeds from this offering and the full physical settlement of the forward sale agreement, before expenses, of approximately $    (or approximately $    if the underwriter’s option to purchase additional shares of our common stock is exercised in full), based upon the initial forward sale price of $    per share. The forward sale price is subject to adjustments pursuant to the terms of the forward sale agreement, and the actual proceeds, if any, will be calculated as described in this prospectus supplement.

The underwriter may offer shares of our common stock from time to time for sale in one or more transactions on the NASDAQ, in the over-the-counter market, through negotiated transactions or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or at negotiated prices. See “Underwriting (Conflicts of Interest).”

Investing in our common stock involves certain risks. Please read “Risk Factors” beginning on page S-11 of this prospectus supplement, as well as the risks set forth in our other filings with the Securities and Exchange Commission (“SEC”), which are incorporated by reference in this prospectus supplement and the accompanying base prospectus, for a discussion of certain risks that should be considered in connection with an investment in our common stock.

The underwriter has been granted an option to purchase up to an additional    shares of our common stock at a price of $    per share, exercisable within 30 days from the date of this prospectus supplement. If such option is exercised, then we plan to enter into an additional forward sale agreement with the forward purchaser in respect of the number of shares of our common stock that is subject to the exercise of such option. Unless the context requires otherwise, the term “forward sale agreement” as used in this prospectus supplement includes any additional forward sale agreement that we elect to enter into in connection with the exercise by the underwriter of its option to purchase additional shares. In the event that the forward purchaser (or its affiliate) does not borrow and deliver for sale to the underwriter on the anticipated closing date for the exercise of such option the number of shares of our common stock to be sold to the underwriter, then we will issue and sell directly to the underwriter a number of shares of our common stock equal to the number of shares of our common stock that the forward purchaser or its affiliate does not borrow and deliver. Under such circumstances, the number of shares of our common stock underlying the additional forward sale agreement will be decreased by the number of shares of our common stock that we issue and sell to the underwriter.

None of the SEC, any state securities commission, the Federal Deposit Insurance Corporation (the “FDIC”), the Board of Governors of the Federal Reserve System (the “Federal Reserve”) or any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus supplement or the accompanying base prospectus. Any representation to the contrary is a criminal offense.

These securities are not savings accounts, deposits or other obligations of any bank and are not insured or guaranteed by the FDIC or any other governmental agency.

The underwriter expects to deliver the shares on or about     , 2024.

Sole Book-Running Manager

 

 

 

BofA Securities

 

 

 

The date of this prospectus supplement is April    , 2024.

TABLE OF CONTENTS

Prospectus Supplement

 

		Page
About This Prospectus Supplement		ii
Cautionary Notice Regarding Forward-Looking Statements		iii
Summary		S-1
Risk Factors		S-11
Use of Proceeds		S-20
Unaudited Pro Forma Condensed Combined Financial Data		S-21
Material U.S. Federal Income and Estate Tax Considerations to Non-U.S. Holders		S-31
Underwriting (Conflicts of Interest)		S-34
Validity of Securities		S-45
Experts		S-45
Where You Can Find More Information		S-45

Prospectus

 

		Page
About This Prospectus			1
Incorporation of Certain Information by Reference			3
Cautionary Notice About Forward-Looking Statements			4
Risk Factors			6
The Company			7
Use of Proceeds			8
Description of Capital Stock			9
Description of Depositary Shares			12
Description of Warrants			16
Description of Stock Purchase Contracts and Stock Purchase Units			18
Description of Debt Securities			20
Plan of Distribution (Conflicts of Interest)			32
Legal Matters			35
Experts			35
Where You Can Find More Information			35

 

i

ABOUT THIS PROSPECTUS SUPPLEMENT

Unless the context otherwise requires or except as otherwise indicated, when we refer to “UMB,” the “Company,” “we,” “us,” or “our” in this prospectus or when we otherwise refer to ourselves in this prospectus, we mean UMB Financial Corporation, a financial holding company headquartered in Kansas City, Missouri, and do not include our consolidated subsidiaries or other affiliates. References to “UMB Bank” mean UMB Bank, National Association, UMB’s national bank subsidiary. The term “you” refers to a prospective investor.

This document is comprised of two parts. The first part is this prospectus supplement, which describes the specific terms of this offering. The second part is the accompanying base prospectus, which gives more general information, some of which will not apply to this offering. Generally, when we refer only to the “prospectus,” we are referring to both documents combined. If the information set forth in this prospectus supplement differs in any way from the information in the accompanying base prospectus, you should rely on the information in this prospectus supplement. If the information set forth in this prospectus supplement conflicts with any statement in a document we have incorporated by reference, then you should consider only the statement in the more recent document.

The accompanying base prospectus is part of a registration statement that we filed with the SEC using a shelf registration statement. Under the shelf registration process, from time to time, we may offer and sell to the public any combination of the securities described in the accompanying base prospectus, including our common stock, up to an indeterminate amount.

It is important that you read and consider all of the information contained in this prospectus supplement, the accompanying base prospectus and any free writing prospectus filed by us with the SEC related to this offering in making your investment decision. You should also read and consider the information in the documents to which we have referred you in “Where You Can Find More Information” on page S-45 of this prospectus supplement and “Where You Can Find More Information” on page 45 of the accompanying base prospectus.

The distribution of this prospectus supplement, the accompanying base prospectus and any free writing prospectus and the offering of the shares of our common stock in certain jurisdictions may be restricted by law. Persons into whose possession this prospectus supplement, the accompanying base prospectus and any free writing prospectus come should inform themselves about and observe any such restrictions. This prospectus supplement, the accompanying base prospectus and any free writing prospectus do not constitute, and may not be used in connection with, an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation.

We are responsible only for the information contained in or incorporated by reference into this prospectus supplement and the accompanying base prospectus or information contained in a free writing prospectus that we authorize to be delivered to you. This prospectus supplement and the accompanying base prospectus may be used only for the purpose for which they have been prepared. No one is authorized to give you information other than that contained in this prospectus supplement, the accompanying base prospectus, any related free writing prospectus and the documents incorporated by reference into this prospectus supplement. We, the underwriter, the forward purchaser and the forward seller have not authorized any other person to provide you with different information. We do not, and the underwriter does not, take responsibility for any other information that others may give you.

We, the underwriter, the forward purchaser and the forward seller are not making an offer to sell these securities in any jurisdiction where such an offer or sale is not permitted. You should not assume that the information appearing in this prospectus supplement, the accompanying base prospectus, any related free writing prospectus or any document incorporated by reference is accurate as of any date other than the date of the applicable document. Our business, financial condition, results of operations and

 

ii

prospects may have changed since that date. Neither this prospectus supplement nor the accompanying base prospectus constitutes an offer, or an invitation on our behalf or on behalf of the underwriter, to subscribe for or purchase any of the securities, and may not be used for or in connection with an offer or solicitation by anyone, in any jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation.

CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

From time to time we have 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 our 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 prospectus supplement, including any information incorporated by reference in this prospectus supplement, contains forward-looking statements. We also may make forward-looking statements in other documents that are filed or furnished with the SEC. In addition, we may make forward-looking statements orally or in writing to investors, analysts, members of the media, or others. Forward-looking statements included in this prospectus supplement and the accompanying base prospectus and the documents incorporated by reference herein and therein also include or may include statements about the anticipated benefits of the Merger (as defined below), including future financial and operating results, the combined company’s plans, objectives, expectations and intentions and other statements that are not historical facts.

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 our 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, but are not limited to, (i) the risks described in our Annual Report on Form 10-K for the year ended December 31, 2023 (our “2023 10-K”), and (ii) the risks described in this prospectus supplement and the accompanying base prospectus. Some of these risks are summarized below:

 

•

local, regional, national, or international business, economic, or political conditions or events;

 

•

changes in laws or the regulatory environment, including as a result of financial-services legislation or regulation;

 

•

changes in monetary, fiscal, or trade laws or policies, including as a result of actions by central banks or supranational authorities;

 

•

the pace and magnitude of interest rate movements;

 

•

changes in accounting standards or policies;

 

•

shifts in investor sentiment or behavior in the securities, capital, or other financial markets, including changes in market liquidity or volatility or changes in interest or currency rates;

 

•

changes in spending, borrowing, or saving by businesses or households;

 

•

our ability to effectively manage capital or liquidity or to effectively attract or deploy deposits;

 

•

changes in any credit rating assigned to us or our affiliates;

 

iii

•

adverse publicity or other reputational harm to us;

 

•

changes in our corporate strategies, the composition of our assets, or the way in which we fund those assets;

 

•

our ability to develop, maintain, or market products or services or to absorb unanticipated costs or liabilities associated with those products or services;

 

•

our ability to innovate to anticipate the needs of current or future customers, to successfully compete in our 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 our customers, counterparties, or competitors;

 

•

our 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, us or the financial-services industry;

 

•

our ability to address changing or stricter regulatory or other governmental supervision or requirements;

 

•

our 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 our corporate governance, risk-management framework, compliance programs, or internal controls, including our ability to control lapses or deficiencies in financial reporting or to effectively mitigate or manage operational risk;

 

•

the efficacy of our methods or models in assessing business strategies or opportunities or in valuing, measuring, monitoring, or managing positions or risk;

 

•

our ability to keep pace with changes in technology that affect us or our customers, counterparties, or competitors;

 

•

mergers, acquisitions, or dispositions, including our ability to integrate acquisitions and divest assets;

 

•

the risk that the cost savings and any revenue synergies from the proposed Merger with Heartland Financial USA, Inc., a Delaware corporation (“HTLF”) may not be realized or take longer than anticipated to be realized;

 

•

disruption from the proposed Merger to relationships with our or HTLF’s customers, suppliers, employees, or other business partners;

 

•

the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement (as defined below) we expect to enter into with HTLF;

 

•

the risk of unsuccessful integration of HTLF’s business with our business;

 

•

the failure to obtain the necessary approvals from HTLF’s stockholders or our shareholders, or the relevant regulators, in connection with the proposed Merger;

 

•

the amount of the costs, fees, expenses and charges related to the transactions contemplated by the merger agreement, including the proposed Merger;

 

•

the ability to obtain required government approvals of the transactions contemplated by the merger agreement, including the proposed Merger;

 

•

reputational risk and the risk of adverse reaction of our, HTLF’s and our respective affiliates’ customers, suppliers, employees or other business partners to the proposed Merger;

 

•

the failure of the closing conditions of the transactions contemplated by the merger agreement, including the proposed Merger, to be satisfied or any unexpected delay in closing the transactions contemplated by the merger agreement;

 

iv

•

the risk that the integration of our and HTLF’s operations will be materially delayed or will be more costly or difficult than expected;

 

•

the possibility that the transactions contemplated by the merger agreement, including the proposed Merger, may be more expensive to complete than anticipated, including as result of unexpected factors or events;

 

•

the dilution caused by the issuance of additional shares of our common stock in the proposed Merger;

 

•

the adequacy of our succession planning for key executives or other personnel;

 

•

our 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 the economic and business environment in which we operate;

 

•

the outcome of any legal proceedings instituted against us or HTLF;

 

•

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; and

 

•

other assumptions, risks, or uncertainties described in any of our annual, quarterly or current reports.

Any forward-looking statement made by us or on our behalf speaks only as of the date that it was made. We do 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 we make in any subsequent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K, or other applicable document that is filed or furnished with the SEC.

 

v

 

S-1

 

S-2

 

S-3

 

S-4

 

S-5

 

S-6

		Three Months Ended March 31,
		2024				2023
Acquisition, integration and restructuring costs			1.4				1.7
Partnership investment in tax credit projects			0.5				0.5
Other noninterest expenses			14.1				15.4
Total noninterest expenses			113.6				111.0
Income before income taxes			67.3				68.1
Income taxes			15.6				15.3
Net income		$	51.7			$	52.8

Balance Sheet Data

(unaudited, in millions)

 

		March 31
		2024				2023
Assets
Cash and cash equivalents		$	444.4			$	362.1
Securities			5,327.8				7,001.1
Loans receivable, net			11,520.7				11,382.6
Goodwill			576.0				576.0
Liabilities
Total deposits			15,302.2				17,681.3
Short-term borrowings			650.0				92.3
Other borrowings			372.7				372.1

 

S-7

 

S-8

 

S-9

 

S-10

RISK FACTORS

An investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and other information in this prospectus supplement, in the documents incorporated by reference in this prospectus supplement and in the accompanying base prospectus, including our 2023 10-K, as supplemented or updated by our other filings with the SEC before deciding whether this investment is suited to your particular circumstances. These risks are not the only risks we face. Our business operations could also be affected by additional factors that are not currently known to us or that we currently consider to be immaterial to our operations.

Risk Factors Relating to This Offering, Our Common Stock and the Forward Sale Agreement

The actual financial positions and results of operations of UMB, HTLF and the combined company may differ materially from the unaudited pro forma condensed combined financial data included in this prospectus supplement.

The unaudited pro forma condensed combined financial information contained in this prospectus supplement is presented for illustrative purposes only and may not be an indication of what our financial position or results of operations would have been had the transactions contemplated by the merger agreement been completed on the dates indicated. The unaudited pro forma condensed combined financial information has been derived from the audited historical consolidated financial statements of UMB and HTLF, and certain adjustments and assumptions have been made regarding the combined businesses after giving effect to the transactions. The assets and liabilities of HTLF have been measured at fair value based on various preliminary estimates using assumptions that our management believes are reasonable utilizing information currently available. The process for estimating the fair value of acquired assets and assumed liabilities requires the use of judgment in determining the appropriate assumptions and estimates. These estimates may be revised as additional information becomes available and as additional analyses are performed. Differences between preliminary estimates in the unaudited pro forma condensed combined financial information and the final acquisition accounting will occur and could have a material impact on the unaudited pro forma condensed combined financial information and the combined company’s financial position and future results of operations.

In addition, the assumptions used in preparing the unaudited pro forma condensed combined financial information may not prove to be accurate, and other factors may affect our financial condition or results of operations following the closing of the transactions contemplated by the merger agreement. Any potential decline in our financial condition or results of operations may cause significant variations in our share price.

There may be future sales or other dilution of our equity, which may adversely affect the market price of our common stock.

Except as described under “Underwriting (Conflicts of Interest),” we are not restricted from issuing additional shares of our common stock, including any securities that are convertible into or exchangeable for, or that represent the right to receive, our common stock. The issuance of any common stock by us pursuant to the forward sale agreement upon physical settlement or net share settlement thereof, or in lieu of the forward seller selling our common stock to the underwriter as further described elsewhere in this prospectus supplement, will increase the number of shares of our common stock that we have outstanding.

In order to maintain our or our subsidiaries’ capital at desired or regulatory-required levels, we may issue additional shares of our common stock, or securities convertible into, exchangeable for or representing rights to acquire shares of our common stock. We may sell these shares at prices below the current market price of shares, and the sale of these shares may significantly dilute shareholder ownership. We could also issue additional shares in connection with acquisitions of other financial institutions such as HTLF, which would also dilute shareholder ownership.

 

S-11

The market price of our common stock could decline as a result of sales of shares of our common stock or sales of such other securities made after this offering or the perception that such sales could occur.

The market price of our common stock may be volatile.

The market price of our common stock could be subject to significant fluctuations in response to factors such as the following, some of which are beyond our control:

 

•

variations in our quarterly operating results;

 

•

operating results that vary from the expectations of management, securities analysts, and investors;

 

•

changes in expectations as to future financial performance, including financial estimates by securities analysts and investors;

 

•

developments generally affecting industries in which we operate;

 

•

announcements by us or our competitors of significant contracts, acquisitions, joint marketing relationships, joint ventures, or capital commitments;

 

•

announcements by third parties of significant claims or proceedings against us;

 

•

favorable or adverse regulatory or legislative developments;

 

•

our dividend policy;

 

•

change in our management;

 

•

future sales by us of equity or equity-linked securities;

 

•

general domestic and international economic conditions; and

 

•

the realization of any of the other risks presented in our 2023 10-K.

In addition, the stock market in general has experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations may adversely affect the market price of our common stock.

The trading volume in our common stock at times may be low, which could adversely affect liquidity and stock price.

Although our common stock is listed for trading on the NASDAQ, the trading volume in the stock may at times be low and, in relative terms, less than that of other financial-services companies. A public trading market that is deep, liquid, and orderly depends on the presence in the marketplace of a large number of willing buyers and sellers and narrow bid-ask spreads. These market features, in turn, depend on a number of factors, such as the individual decisions of investors and general economic and market conditions, over which we have no control. During any period of lower trading volume in our common stock, the stock price could be more volatile, and the liquidity of the stock could suffer.

An investment in our common stock is not an insured deposit and is not guaranteed by the FDIC, so you could lose some or all of your investment.

An investment in our common stock is not a bank deposit and, therefore, is not insured against loss or guaranteed by the FDIC, any other deposit insurance fund or by any other public or private entity. An investment in our common stock is inherently risky for the reasons described herein and you will bear the risk of loss if the value or market price of our common stock is adversely affected.

 

S-12

Settlement provisions contained in the forward sale agreement could result in substantial dilution to our earnings per share and return on equity or result in substantial cash payment obligations.

The forward purchaser will have the right to accelerate the forward sale agreement and require us to physically settle on a date specified by the forward purchaser if:

 

•

it (or its affiliate) (i) is unable to borrow a number of shares of our common stock equal to the number of shares of our common stock underlying the forward sale agreement because of the lack of sufficient shares being made available for share borrowing by lenders or (ii) would incur a stock loan rate greater than the rate specified in the forward sale agreement to continue to borrow such shares;

 

•

certain ownership thresholds applicable to the forward purchaser, its affiliates and other persons who may form a beneficial share ownership group or whose ownership positions would be aggregated with the forward purchaser are exceeded;

 

•

we declare any dividend or distribution on our common stock that constitutes an extraordinary dividend or is payable in (i) cash in excess of a specified amount (other than extraordinary dividends), (ii) securities of another company owned (directly or indirectly) by us as a result of a spin-off or similar transaction or (iii) any other type of securities (other than our common stock), rights, warrants or other assets for payment at less than the prevailing market price, as reasonably determined by the forward purchaser;

 

•

there is an announcement of any event or transaction that, if consummated, would result in certain extraordinary events (as such term is defined in the forward sale agreement and which includes certain mergers and tender offers and the delisting of our common stock); or

 

•

certain other events of default, termination events or other specified events occur, including, among other things, any material misrepresentation made by us in connection with entering into the forward sale agreement or the occurrence of a hedging disruption or a change in law (as such terms are defined in the forward sale agreement).

The forward purchaser’s decision to exercise its right to accelerate the settlement of the forward sale agreement will be made irrespective of our need for capital. In such cases, we could be required to issue and deliver shares of our common stock under the physical settlement provisions of the forward sale agreement irrespective of our capital needs, which would result in dilution to our earnings per share and return on equity.

We expect to physically settle the forward sale agreement (by the delivery of shares of our common stock) and receive proceeds from the sale of those shares of our common stock upon one or more forward settlement dates within approximately 18 months from the date hereof. We may also elect cash settlement or net share settlement for all or a portion of our obligations under the forward sale agreement. Upon physical settlement or, if we so elect, net share settlement of the forward sale agreement, delivery of shares of our common stock in connection with such physical settlement or (to the extent we are obligated to deliver shares of our common stock) net share settlement will result in dilution to our earnings per share and return on equity. If we elect cash settlement or net share settlement with respect to all or a portion of the shares of our common stock underlying the forward sale agreement, then we expect that the forward purchaser (or an affiliate thereof) will purchase a number of shares of our common stock necessary to satisfy its or its affiliate’s obligation to return the shares of our common stock borrowed from third parties in connection with sales of shares of our common stock related to the forward sale agreement and, if applicable in connection with net share settlement, to deliver shares of our common stock to us. If the market value of our common stock at the time of such purchase (as determined pursuant to the terms of the forward sale agreement) is above the forward sale price under the forward sale agreement at that time, then we would pay or deliver, as the case may be, to the forward purchaser under the forward sale agreement, an amount in cash, or a number of shares of our common stock with a market value (as determined pursuant to the terms of the forward sale agreement), equal to such difference. Any such difference could be significant.

 

S-13

In addition, the purchase of shares of our common stock in connection with the forward purchaser or its affiliate unwinding its hedge positions could cause the price of our common stock to increase over such time (or reduce or prevent a decrease over such time), thereby increasing the amount of cash we would owe to the forward purchaser (or decreasing the amount of cash that the forward purchaser would owe us) upon a cash settlement of the forward sale agreement or increasing the number of shares of our common stock we would deliver to the forward purchaser (or decreasing the number of shares of our common stock that the forward purchaser would deliver to us) upon net share settlement of the forward sale agreement.

Moreover, the forward sale price that we expect to receive upon physical settlement of the forward sale agreement will be subject to increase or decrease based on the specified rate less a spread, and subject to price adjustment and other provisions of the forward sale agreement, including a decrease based on amounts related to expected dividends on our common stock on dates specified in the forward sale agreement and if the cost to the forward purchaser (or its affiliate) of borrowing a number of shares of our common stock underlying the forward sale agreement exceeds a specified amount. If the specified rate is less than the spread on any day, the interest rate factor will result in a daily reduction of the applicable forward sale price. Reductions in the applicable forward sale price could also increase the amount of cash we would owe to the forward purchaser (or decrease the amount of cash that the forward purchaser would owe us) upon a cash settlement of the forward sale agreement or increase the number of shares of our common stock we would deliver to the forward purchaser (or decrease the number of shares of our common stock that the forward purchaser would deliver to us) upon net share settlement of the forward sale agreement. See “Underwriting (Conflicts of Interest)—Forward Sale Agreement” for a description of the forward sale agreement.

In case of our bankruptcy or insolvency, the forward sale agreement will automatically terminate, and we would not receive the expected proceeds from any forward sales of our common stock.

If we file for or consent to a proceeding seeking a judgment in bankruptcy or insolvency or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or we or a regulatory authority with jurisdiction over us presents a petition for our winding-up or liquidation, and we consent to such a petition, then the forward sale agreement will automatically terminate. If the forward sale agreement so terminates under these circumstances, we would not be obligated to deliver to the forward purchaser any of our common stock not previously delivered, and the forward purchaser would be discharged from its obligation to pay the applicable forward sale price per share in respect of any of our common stock not previously settled under the forward sale agreement. Therefore, to the extent that there are any shares of our common stock with respect to which the forward sale agreement has not been settled at the time of the commencement of any such bankruptcy or insolvency proceedings, we would not receive the forward sale price per share in respect of those shares of our common stock.

Risks Related to the Merger

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

 

S-14

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.

 

S-15

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

 

S-16

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

 

S-17

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

 

S-18

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.

 

S-19

USE OF PROCEEDS

We will not receive any proceeds from the sale of the shares of our common stock sold by the forward seller to the underwriter.

We expect to receive net proceeds from this offering and the full physical settlement of the forward sale agreement, before expenses, of approximately $   (or approximately $   if the underwriter’s option to purchase additional shares of our common stock is exercised in full), based upon the initial forward sale price of $   per share. The forward sale price that we expect to receive upon physical settlement of the forward sale agreement will be subject to adjustment on a daily basis based on a floating interest rate factor equal to the specified rate less a spread and will be decreased on each of the dates specified in the forward sale agreement during its term. The forward sale price will also be subject to decrease if the cost to the forward purchaser (or its affiliate) of borrowing a number of shares of our common stock underlying the forward sale agreement exceeds a specified amount. If the specified rate is less than the spread on any day, the interest rate factor will result in a daily reduction of the forward sale price. See “Underwriting (Conflicts of Interest)—Forward Sale Agreement” for a description of the forward sale agreement.

We expect to physically settle the forward sale agreement (by the delivery of shares of our common stock) and receive proceeds from the sale of those shares of our common stock upon one or more forward settlement dates within approximately 18 months from the date hereof. We may also elect cash settlement or net share settlement for all or a portion of our obligations under the forward sale agreement. If we elect to cash settle or net share settle the forward sale agreement, then we may not receive any proceeds from the issuance of shares of our common stock in respect of the forward sale agreement, and we will instead receive or pay cash (in the case of cash settlement) or receive or deliver shares of our common stock (in the case of net share settlement).

We intend to use any net proceeds that we receive upon physical settlement of the forward sale agreement and the additional forward sale agreement, if any, for general corporate purposes, which may include, among other uses, contributing Tier 1 capital into UMB Bank. The precise amounts and timing of these uses of proceeds will depend on our funding requirements and the funding requirements of our subsidiaries.

All of the proceeds of this offering (excluding proceeds, if any, paid to us with respect to any shares of our common stock that we issue and sell to the underwriter in lieu of the forward seller delivering and selling shares of our common stock to the underwriter) will be paid to the forward seller. As a result, the forward seller will receive more than 5% of the net proceeds of this offering, not including underwriting compensation. Accordingly, this offering is being made in compliance with the requirements of Rule 5121 of the FINRA. See “Underwriting (Conflicts of Interest).”

 

S-20

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

Defined terms included below have the same meaning as terms defined and included elsewhere in this prospectus supplement, except that, unless the context requires otherwise, the term “forward sale agreement” as used in this section does not include any additional forward sale agreement that we enter into in connection with the exercise by the underwriter of its option to purchase additional shares in the offering.

Introduction

UMB is providing the following unaudited pro forma condensed combined financial data to aid stockholders in their analysis of the financial aspects of the Merger and the forward sale agreement. The unaudited pro forma condensed combined financial data has been prepared in accordance with Article 11 of Regulation S-X and should be read in conjunction with the accompanying notes.

The unaudited pro forma condensed combined balance sheet as of December 31, 2023 combines the audited consolidated balance sheet of UMB as of December 31, 2023 with the audited consolidated balance sheet of HTLF as of December 31, 2023, giving effect to the Merger and the forward sale agreement as if the Merger had been consummated and the forward sale agreement had been fully physically settled on December 31, 2023.

The unaudited pro forma condensed combined statement of income for the year ended December 31, 2023 combines the audited consolidated statement of income of UMB for the year ended December 31, 2023 with the audited consolidated statement of income of HTLF for the year ended December 31, 2023, giving effect to the Merger and forward sale agreement as if the Merger had been consummated and the forward sale agreement had been fully physically settled on January 1, 2023.

The unaudited pro forma condensed combined financial data was derived from, and should be read in conjunction with, the following historical financial statements and the accompanying notes, which are incorporated by reference into this prospectus supplement and the accompanying base prospectus:

 

•

The historical audited consolidated financial statements of UMB as of and for the year ended December 31, 2023; and

 

•

The historical audited consolidated financial statements of HTLF as of and for the year ended December 31, 2023.

The unaudited pro forma condensed combined financial data should also be read together with other financial data included elsewhere or incorporated by reference into this prospectus supplement.

The foregoing historical financial statements have been prepared in accordance with GAAP. The unaudited pro forma condensed combined financial data has been prepared based on the aforementioned historical financial statements and the assumptions and adjustments as described in the notes to the unaudited pro forma condensed combined financial data. The pro forma adjustments reflect transaction accounting adjustments related to the Merger and the forward sale agreement, both of which are discussed in further detail below. Amounts presented reflect the accounting for the acquisition of HTLF by UMB. The unaudited pro forma condensed combined financial statements are presented for illustrative purposes only and do not purport to represent the combined company’s consolidated results of operations or consolidated financial position that would actually have occurred had the Merger been consummated and the forward sale agreement been fully physically settled on the dates assumed or to project the combined company’s consolidated results of operations or consolidated financial position for any future date or period.

The unaudited pro forma condensed combined financial data appearing below also does not consider any potential effects of changes in market conditions on revenues or expense efficiencies, among other factors. In addition, as explained in more detail in the accompanying notes, the preliminary allocation of the pro forma

 

S-21

purchase price reflected in the unaudited pro forma condensed combined financial data is subject to adjustment and may vary significantly from the actual purchase price allocation that will be recorded upon completion of the Merger.

Accounting for the Merger

The acquisition of HTLF will be accounted for using the purchase method of accounting. The total purchase price will be allocated to the tangible and intangible assets and liabilities acquired based on their respective fair values. The allocation of the purchase price reflected in the following unaudited pro forma condensed combined financial statements is preliminary and is subject to adjustment upon receipt of, among other things, appraisals of some of the assets and liabilities of HTLF.

Forward sale agreement

In connection with the forward sale agreement, the forward purchaser or its affiliate is expected to borrow from third parties an aggregate of    shares of our common stock. Such borrowed shares of our common stock will be delivered by the forward seller for sale to the underwriter in this offering. In the event that (i) the forward purchaser (or its affiliate) is unable through commercially reasonable efforts to borrow and deliver for sale to the underwriter on the anticipated closing date the number of shares of our common stock to be sold to the underwriter or (ii) in the forward purchaser’s commercially reasonable judgment either it is impracticable to do so or the forward purchaser (or its affiliate) would incur a stock loan rate greater than a specified rate to borrow and deliver for sale to the underwriter on the anticipated closing date such number of shares of our common stock, or if certain other conditions to the forward seller’s obligations have not been satisfied, then we will issue and sell directly to the underwriter a number of shares of our common stock equal to the number of shares of our common stock that the forward purchaser or its affiliate does not borrow and deliver. Under such circumstances, the number of shares of our common stock underlying the forward sale agreement will be decreased by the number of shares of our common stock that we issue and sell to the underwriter. For purposes of this section “Unaudited Pro Forma Condensed Combined Financial Data”, we have assumed a total offering size of $100.0 million in the offering contemplated by this prospectus supplement.

We will not receive any proceeds from the sale of the shares of our common stock sold by the forward seller to the underwriter. We expect to physically settle the forward sale agreement at the assumed offering size of $100.0 million (by the delivery of shares of our common stock) and receive proceeds from the sale of those shares of our common stock upon one or more forward settlement dates within approximately 18 months from the date hereof. We may also elect cash settlement or net share settlement for all or a portion of our obligations under the forward sale agreement. If we elect to cash settle or net share settle the forward sale agreement, then we may not receive any proceeds from the issuance of shares of our common stock in respect of the forward sale agreement, and we will instead receive or pay cash (in the case of cash settlement) or receive or deliver shares of our common stock (in the case of net share settlement).

Basis of Pro Forma Presentation

The historical financial data of UMB and HTLF has been adjusted to give pro forma effect to the transaction accounting required for the Merger and the forward sale agreement. The adjustments in the unaudited pro forma condensed combined financial data have been identified and presented to provide relevant information necessary to evaluate the financial overview of the combined company upon closing of the Merger and full physical settlement of the forward sale agreement at the assumed offering size of $100.0 million.

The unaudited pro forma condensed combined financial data is not necessarily indicative of what the combined company’s balance sheet or statement of income would have been had the Merger been completed and the forward sale agreement been fully physically settled at the assumed offering size of $100.0 million as of the dates indicated, nor do they purport to project the future financial position or operating results of the combined company. The unaudited pro forma condensed combined financial data is presented for illustrative purposes only and does not reflect the costs of any integration activities or cost savings or synergies that may be achieved as a result of the Merger. HTLF and UMB have not had any historical material relationship prior to the Merger. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

 

S-22

Unaudited Pro Forma Condensed Combined Balance Sheet

As of December 31, 2023

(in thousands)

 

		UMB Historical				HTLF Historical				Transaction Adjustments								Combined Pro Formas
ASSETS
Loans		$	23,172,484			$	12,068,645			$	(780,326	)			(A)			$	34,460,803
Allowance for credit losses on loans			(219,738	)			(122,566	)			59,199				(A)				(367,803	)
											(84,698	)			(E)
Net loans			22,952,746				11,946,079				(805,825	)							34,093,000
Loans held for sale			4,420				5,071												9,491
Securities:
Available for sale			7,068,613				4,646,891												11,715,504
Held to maturity, net of allowance for credit losses			5,688,610				838,241				(26,278	)			(A)				6,500,573
Trading securities			18,093				—												18,093
Other securities / Other investments at cost			492,935				91,277												584,212
Total securities			13,268,251				5,576,409				(26,278	)							18,818,382
Federal funds sold and securities purchased under agreements to resell			245,344																245,344
Interest-bearing due from banks			5,159,802																5,159,802
Interest bearing deposits with other banks and other short-term investments							47,459												47,459
Cash and due from banks			447,201				275,554				100,000				(B)				607,755
											(215,000	)			(D)
Time deposits in other financial institutions							1,240												1,240
Premises and equipment, net			241,700				177,001												418,701
Premises and equipment held for sale							4,069												4,069
Other real estate, net							12,548												12,548
Accrued income			220,306																220,306
Goodwill			207,385				576,005				207,785				(A)				991,175
Other intangibles, net			71,012				18,415				407,585				(A)				497,012
Cash surrender value on life insurance							197,085												197,085
Deferred tax assets											58,609				(A)				58,609
Other assets			1,193,507				574,772												1,768,279
Total assets			44,011,674				19,411,707				(273,124	)							63,150,257
LIABILITIES
Deposits
Noninterest-bearing demand			12,130,662				4,500,304												16,630,966
Interest-bearing demand and savings			20,588,606				8,805,597												29,394,203
Time deposits under $250,000			2,292,899																2,292,899
Time deposits of $250,000 or more			780,692																780,692
Time deposits							2,895,813				11,015				(A	)			2,906,828
Total deposits			35,792,859				16,201,714				11,015								52,005,588
Federal funds purchased and repurchase agreements			2,119,644																2,119,644
Borrowings							622,255												622,255
Short-term debt			1,800,000																1,800,000
Long-term debt			383,247				372,396				(71,744	)			(A	)			683,899

 

S-23

		UMB Historical				HTLF Historical				Transaction Adjustments								Combined Pro Formas
Accrued expenses and taxes			389,860																389,860
Other liabilities			425,645																425,645
Accrued expenses and other liabilities							282,225												282,225
Total liabilities			40,911,255				17,478,590				(60,729	)							58,329,116
SHAREHOLDER’S EQUITY
Series E Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock							110,705												110,705
Common stock			55,057				42,688				(19,188	)			(A	)			79,781
											1,224				(B	)
Capital surplus			1,134,363				1,090,740				695,475				(A	)			3,019,354
											98,776				(B	)
Retained earnings			2,810,824				1,141,501				(1,141,501	)			(A	)			2,511,126
											(215,000	)			(D	)
											(84,698	)			(E	)
Accumulated other comprehensive loss, net			(556,935	)			(452,517	)			452,517				(A	)			(556,935	)
Treasury stock at cost			(342,890	)			—												(342,890	)
Total shareholder’s equity			3,100,419				1,933,117				(212,395	)							4,821,141
Total liabilities and stockholders’ equity		$	44,011,674			$	19,411,707			$	(273,124	)						$	63,150,257

Please refer to the notes to the unaudited pro forma condensed combined financial data

 

S-24

Unaudited Pro Forma Condensed Combined Statement of Income

As of December 31, 2023

(in thousands)

 

		UMB Historical				HTLF Historical				Transaction Adjustments						Combined Pro Formas
INTEREST INCOME
Loans		$	1,399,961			$	697,997			$	156,065			(AA)		$	2,254,023
Securities:
Taxable interest			214,981				223,521										438,502
Tax-exempt interest			102,197				25,268										127,465
Total securities income			317,718				248,789				—						565,967
Federal funds and resell agreements			17,647				3										17,650
Interest-bearing due from banks			103,190														103,190
Interest on interest bearing deposits in other financial institutions							7,007										7,007
Trading securities			729														729
Total interest income			1,838,705				953,796				156,065						2,948,566
INTEREST EXPENSE
Deposits			704,210				319,688				(11,015	)		(AA)			1,012,883
Federal funds and repurchase agreements			93,026														93,026
Borrowings							10,311										10,311
Term debt							22,560				(8,297	)		(AA)			14,263
Other			121,353														121,353
Total interest expense			918,589				352,559				(19,312	)					1,251,836
Net interest income			920,116				601,237				175,377						1,696,730
Provision for credit losses			41,227				21,707				84,698			(CC)			147,632
Net interest income after provision for credit losses			878,889				579,530				90,679						1,549,098
NONINTEREST INCOME
Trust and securities processing			257,200														257,200
Trading and investment banking			19,630														19,630
Service charges on deposit accounts			84,950				74,024										158,974
Loan servicing income							1,561										1,561
Trust fees							20,715										20,715
Insurance fees and commissions			1,009														1,009
Brokerage fees			54,119														54,119
Brokerage fees and insurance commissions							2,794										2,794
Capital market fee							10,007										10,007
Bankcard fees			74,719														74,719
Investment securities (losses) gains, net			(3,139	)			(141,539	)									(144,678	)
Unrealized gain on equity securities, net							240										240
Net gains on sale of loans held for sale							3,880										3,880
Income on bank owned life insurance							3,771										3,771
Other			53,365				3,621										56,986
Total noninterest income			541,853				(20,926	)			—						520,927

 

S-25

		UMB Historical				HTLF Historical				Transaction Adjustments								Combined Pro Formas
NONINTEREST EXPENSE
Salaries and employee benefits			553,421				251,276												804,697
Occupancy, net			48,502				26,847												75,349
Equipment			68,718				11,599												80,317
Supplies and services			16,829																16,829
Marketing and business development / Advertising expense			25,749				8,347												34,096
Processing Fees			103,099																103,099
Legal and consulting			29,998																29,998
Bankcard			32,969																32,969
Amortization of other intangible assets			8,587				6,739				74,106				(AA	)			89,432
Regulatory fees			77,010																77,010
Professional fees							58,667												58,667
FDIC insurance assessments							19,940												19,940
Other real estate and loan collection expenses							1,489												1,489
(Gain) on sale/valuations of assets, net							(77	)											(77	)
Acquisition, integration and restructuring costs							10,359				215,000				(BB	)			225,359
Partnership investment in tax credit projects							5,401												5,401
Other			34,258				61,240												95,498
Total noninterest expense			999,140				461,827				289,106								1,750,073
Income before taxes			421,602				96,777				(198,427	)							319,952
Income tax expenses			71,578				16,857				(62,937	)			(EE	)			25,498
NET INCOME			350,024				79,920				(135,491	)							294,453
Preferred dividends							(8,050	)											(8,050	)
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS		$	350,024			$	71,870			$	(135,491	)						$	286,403
PER SHARE DATA.
Net income – basic		$	7.22			$	1.68											$	3.91
Net income – diluted		$	7.18			$	1.68											$	3.89
Dividends		$	1.53			$	1.20											$	2.73
Weighted average shares outstanding – basic			48,503,643				42,701,000												73,227,334
Weighted average shares outstanding – diluted			48,763,820				42,792,000												73,537,561

Please refer to the notes to the unaudited pro forma condensed combined financial data

 

S-26

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

1. Basis of Presentation

The pro forma adjustments have been prepared as if the Merger had been consummated and the forward sale agreement had been fully physically settled at the assumed offering size of $100.0 million on December 31, 2023, in the case of the unaudited pro forma condensed combined balance sheet, and, in the case of the unaudited pro forma condensed combined statement of income, as if the Merger had been consummated and the forward sale agreement had been fully physically settled at the assumed offering size of $100.0 million on January 1, 2023, the beginning of the earliest period presented in the unaudited pro forma condensed combined statement of income.

The unaudited pro forma condensed combined financial data has been prepared assuming the purchase method of accounting in accordance with GAAP. Under this method, HTLF’s assets and liabilities as of the date of the Merger will be recorded at their respective fair values and added to those of UMB. Any difference between the purchase price for HTLF and the fair value of the identifiable net assets acquired (including intangibles) will be recorded as goodwill. The goodwill resulting from the acquisition will not be amortized to expense, but instead will be reviewed for impairment at least annually. The pro formas are based on preliminary accounting conclusions and are subject to potential revisions with further analysis.

The pro forma adjustments represent management’s estimates based on information available as of the date of this prospectus supplement and are subject to change as additional information becomes available and additional analyses are performed. UMB management considers this basis of presentation to be reasonable under the circumstances.

One-time direct and incremental transaction costs anticipated to be incurred prior to, or concurrent with, the closing of the Merger will be expensed as incurred under ASC 805 and are assumed to be cash settled.

UMB has performed a preliminary review of HTLF’s and UMB’s accounting policies, and no material impacts are expected to be required as a result of the review performed.

2. Adjustments to the Unaudited Pro Forma Condensed Combined Balance Sheet as of December 31, 2023

The adjustments included in the unaudited pro forma condensed combined balance sheet as of December 31, 2023 are as follows:

 

(A)

Reflects the purchase price allocation adjustments to record HTLF’s assets and liabilities at estimated fair value as of December 31, 2023 based on the consideration conveyed.

The preliminary purchase price was allocated among the identified assets to be acquired, based on a preliminary analysis. Goodwill is expected to be recognized as a result of the acquisition, which represents the excess fair value of consideration over the fair value of the underlying net assets of HTLF. This was considered appropriate based on the determination that the Merger would be accounted for as a business acquisition under ASC 805. The deferred tax assets represent the deferred tax impact associated with the incremental differences in book and tax basis created from the

 

S-27

preliminary purchase price allocation. Deferred taxes associated with estimated fair value adjustments were calculated using an estimated tax rate of 21%. The estimates of fair value are based upon preliminary valuation assumptions believed to be reasonable but which are inherently uncertain and unpredictable; and, as a result, actual results may differ from estimates and the difference may be material.

 

Net Assets Identified		Fair Value as of December 31, 2023 (in thousands)
Loans		$	11,288,319
Allowance for credit losses on loans			(63,367	)
Loans held for sale			5,071
Available for sale			4,646,891
Held to maturity, net of allowance for credit losses			811,963
Other securities / Other investments at cost			91,277
Interest bearing deposits with other banks and other short-term investments			47,459
Cash and due from banks			275,554
Time deposits in other financial institutions			1,240
Premises and equipment, net			177,001
Premises and equipment held for sale			4,069
Other real estate, net			12,548
Goodwill			783,790
Core deposit intangible (“CDI”)			426,000
Cash surrender value on life insurance			197,085
Deferred tax assets			58,609
Other assets			574,772
Noninterest-bearing demand			(4,500,304	)
Interest-bearing demand and savings			(8,805,597	)
Time deposits			(2,906,828	)
Borrowings			(622,255	)
Long-term debt			(300,652	)
Accrued expense and other liabilities			(282,225	)
Total Fair Value			1,920,420

 

Consideration Conveyed		(in thousands except exchange ratio and stock price)
Shares to HTLF common stockholders		$	23,500,000
Current UMB stock price			81.72	(1)
Total preliminary purchase price consideration		$	1,920,420

 

(1)

Reflects opening price of UMB’s common stock as of April 22, 2024. A 10% fluctuation in the market price of UMB’s stock price would affect the estimated value of the Merger Consideration reflected in the unaudited pro forma condensed combined financial data with a corresponding change to goodwill (bargain purchase gain) related to the Merger, as illustrated in the table below:

 

Change in Stock Price		Stock Price				Estimated Merger Consideration (in thousands)				Estimated Goodwill (in thousands)
As presented for consideration conveyed		$	81.72			$	1,920,420			$	783,790
10% increase in stock price		$	89.89			$	2,112,462			$	975,832
10% decrease in stock price		$	73.55			$	1,728,378			$	591,748

 

S-28

(B)

Represents the receipt of $100.0 million from the forward purchaser and the issuance of approximately 1.2 million shares, in accordance with the terms of the forward sale agreement and assuming such shares are issued at $81.72 per share and that the forward sale agreement has been fully physically settled at the assumed size of $100.0 million.

 

(C)

Reflects nonrecurring transaction costs of $215.0 million expected to be incurred as a result of the Merger and the forward sale agreement. This amount is comprised of investment banking fees, legal fees, issuance costs, accounting and audit fees, and other related advisory costs. The nonrecurring expense is reflected at adjustment (BB).

 

(D)	Reflects the recognition of an allowance for loan losses on HTLF’s loans; this adjustment relates to loans that are not considered to be purchase credit deteriorated (“PCD”) assets. The nonrecurring expense is reflected at adjustment (CC).

3. Adjustments and Assumptions to the Unaudited Pro Forma Condensed Combined Statement of Income for the Year ended December 31, 2023

 

(AA)

Reflects the pro forma impacts related to the purchase price allocation discussed at adjustment (A). This includes the following impacts:

 

1)

Interest income related to Loans. Reflects an increase in interest income related to loans due to the reduced fair value of loans per the purchase price allocation.

 

2)

Interest expense related to Time deposits. Reflects a decrease in interest expense related time deposits due to the increase in fair value of this liability per the purchase price allocation.

 

3)

Interest expense related to Long-term debt. Reflects a decrease in interest expense related to long-term debt due to the reduced fair value of this liability per the purchase price allocation.

 

4)

Amortization expense. Reflects an increase in amortization expense related to CDI, calculated using the sum-of-the-year-digits method and an amortization period of 10 years.

 

(BB)

Reflects the recognition of nonrecurring expenses related to estimated transaction costs in the amount of $215.0 million, which are primarily comprised of investment banking fees, legal fees, issuance costs, accounting and audit fees, and other related advisory costs. An equivalent balance sheet adjustment is reflected at adjustment (C).

 

(CC)

Reflects the recognition of nonrecurring expenses related to the provision for credit losses. An equivalent balance sheet adjustment is reflected at adjustment (D).

 

(DD)

Reflects the tax impact of all pro forma adjustments for the year ended December 31, 2023, calculated using the estimated global blended statutory rate of 21%.

4. Earnings per Share Information

The pro forma weighted average shares calculations have been performed for the year ended December 31, 2023 using the historical weighted average shares outstanding, and the issuance of additional shares in connection with the Merger and the forward sale agreement, assuming they occurred, and the forward sale agreement was fully physically settled at the assumed offering size of $100.0 million, on January 1, 2023. As the Merger and the forward sale agreement are being reflected as if they had occurred, and the forward sale agreement was fully physically settled at the assumed offering size of $100.0 million, at the beginning of the period presented, the calculation of weighted average shares outstanding for both basic and diluted earnings per share assumes that the shares issuable relating to the Merger and the forward sale agreement have been outstanding for the entire periods presented.

 

S-29

Pro forma net income per share—basic and diluted

(in thousands except share and per share amounts)

 

		For the Year Ended December 31, 2023
Numerator
Pro forma net income – basic and diluted		$	294,453
Less: Preferred dividends			(8,050	)
Net earnings allocated to common stock			286,403
Denominator
Pro forma weighted average shares of common stock outstanding – basic			73,227,334
Pro forma basic earnings per share		$	3.91
Add: Dilutive effect of stock options and restricted stock			310,227
Pro forma weighted average shares of common stock outstanding – diluted			73,537,561
Pro forma diluted earnings per share		$	3.89

The above calculation excludes the following potential common stock as of December 31, 2023 from the computation of diluted net earnings per share attributable to common shareholders of the combined company for the period indicated because including them would have had an antidilutive effect:

 

		As of December 31, 2023
Outstanding stock options and RSUs of UMB			55,649
Stock units of HTLF			61,600	(1)
Stock options of HTLF			33,000	(2)

 

(1)	Assumes 112,000 stock units of HTLF outstanding, multiplied by the Exchange Ratio.

 

(2)	Assumes 60,000 stock options of HTLF outstanding, multiplied by the Exchange Ratio.

 

S-30

MATERIAL U.S. FEDERAL INCOME AND ESTATE TAX CONSIDERATIONS TO NON-U.S. HOLDERS

The following is a general discussion of the material U.S. federal income and estate tax consequences of the ownership and disposition of our common stock by a “non-U.S. holder.” A “non-U.S. holder” is a beneficial owner of a share of our common stock that is, for U.S. federal income tax purposes:

 

•

a non-resident alien individual, other than a former citizen or resident of the United States subject to U.S. tax as an expatriate,

 

•

a foreign corporation, or

 

•

a foreign estate or trust.

If an entity or arrangement treated as a partnership or other type of pass-through entity for U.S. federal income tax purposes owns our common stock, the tax treatment of a partner or beneficial owner of the entity may depend upon the status of the partner or beneficial owner, the activities of the entity and certain determinations made at the partner or beneficial owner level. Partners and beneficial owners in partnerships or other pass-through entities that own our common stock should consult their own tax advisors as to the particular U.S. federal income and estate tax consequences applicable to them.

This discussion is based on the Internal Revenue Code of 1986, as amended to the date hereof (the “Code”), and administrative pronouncements, judicial decisions and final, temporary and proposed Treasury regulations, changes to any of which subsequent to the date of this prospectus may affect the tax consequences described herein (possibly with retroactive effect). This discussion does not address all aspects of U.S. federal income and estate taxation that may be relevant to non-U.S. holders in light of their particular circumstances and does not address any U.S. federal gift, alternative minimum tax or Medicare contribution tax considerations or any tax consequences arising under the laws of any state, local or non-U.S. jurisdiction. Prospective holders are urged to consult their tax advisors with respect to the particular tax consequences to them of owning and disposing of our common stock, including the consequences under the laws of any state, local or non-U.S. jurisdiction.

Dividends

To the extent that we make a distribution of cash or other property (other than certain pro rata distributions of our stock) in respect of our common stock, the distribution generally will be treated as a dividend for U.S. federal income tax purposes to the extent it is paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Any portion of a distribution that exceeds our current and accumulated earnings and profits generally will be treated first as a tax-free return of capital that reduces a non-U.S. holder’s adjusted tax basis in our common stock, and to the extent the amount of the distribution exceeds a non-U.S. holder’s adjusted tax basis in our common stock, the excess will be treated as gain from the disposition of our common stock (the tax treatment of which is discussed below under “—Gain on Disposition of Common Stock”).

Dividends paid to a non-U.S. holder generally will be subject to U.S. federal withholding tax at a 30% rate, or a reduced rate specified by an applicable income tax treaty, subject to the discussion of FATCA (as defined below) withholding taxes below. In order to obtain a reduced rate of withholding under an applicable income tax treaty, a non-U.S. holder generally will be required to provide a properly executed IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, certifying its entitlement to benefits under the treaty.

A non-U.S. holder eligible for a reduced rate of U.S. federal withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS.

However, dividends paid to a non-U.S. holder that are effectively connected with the non-U.S. holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, are

 

S-31

attributable to a permanent establishment or fixed base maintained by the non-U.S. holder in the United States) will not be subject to U.S. federal withholding tax if the non-U.S. holder provides a properly executed IRS Form W-8ECI. Instead, the effectively connected dividend income will generally be subject to regular U.S. income tax as if the non-U.S. holder were a U.S. person as defined under the Code. A non-U.S. holder that is treated as a corporation for U.S. federal income tax purposes receiving effectively connected dividend income may also be subject to an additional “branch profits tax” imposed at a rate of 30% (or a lower treaty rate) on its effectively connected earnings and profits (subject to certain adjustments).

Gain on Disposition of Common Stock

Subject to the discussions of backup withholding and FATCA withholding taxes below, a non-U.S. holder generally will not be subject to U.S. federal income tax on gain realized on a sale or other disposition of common stock unless:

 

•

the gain is effectively connected with a trade or business of the non-U.S. holder in the United States (and, if required by an applicable tax treaty, the gain is attributable to a permanent establishment or fixed base maintained by the non-U.S. holder in the United States), in which case the gain will be subject to U.S. federal income tax generally in the same manner as if the non-U.S. holder were a U.S. person as defined under the Code;

 

•

the non-U.S. holder is an individual present in the United States for 183 days or more in the taxable year of disposition and certain other conditions are met, in which case the gain (net of certain U.S.-source losses) generally will be subject to U.S. federal income tax at a rate of 30% (or a lower treaty rate); or

 

•

we are or have been a “United States real property holding corporation” (as described below) at any time within the five-year period preceding the disposition or the non-U.S. holder’s holding period, whichever period is shorter, and either (i) our common stock is not regularly traded on an established securities market prior to the beginning of the calendar year in which the sale or disposition occurs or (ii) the non-U.S. holder has owned or is deemed to have owned, at any time within the five-year period preceding the disposition or the non-U.S. holder’s holding period, whichever period is shorter, more than 5% of our common stock.

We will be a United States real property holding corporation at any time that the fair market value of our “United States real property interests,” as defined in the Code and applicable Treasury regulations, equals or exceeds 50% of the aggregate fair market value of our worldwide real property interests and our other assets used or held for use in a trade or business (all as determined for U.S. federal income tax purposes). We believe that we are not, and do not anticipate becoming in the foreseeable future, a United States real property holding corporation.

Information Reporting and Backup Withholding

Distributions paid to a non-U.S. holder and the amount of any tax withheld with respect to such distributions generally will be reported to the IRS. Copies of the information returns reporting such distributions and any withholding may also be made available to the tax authorities in the country in which the non-U.S. holder resides under the provisions of an applicable income tax treaty.

A non-U.S. holder will not be subject to backup withholding on dividends received if such holder certifies under penalty of perjury that it is a non-U.S. holder (and the payor does not have actual knowledge or reason to know that such holder is a U.S. person as defined under the Code), or such holder otherwise establishes an exemption.

Information reporting and, depending on the circumstances, backup withholding will apply to the proceeds of a sale or other disposition of our common stock made within the U.S. or conducted through certain U.S.-

 

S-32

related financial intermediaries, unless the non-U.S. holder complies with certification procedures to establish that it is not a U.S. person in order to avoid additional information reporting and backup withholding. The certification procedures required to claim a reduced rate of withholding under a treaty will generally satisfy the certification requirements necessary to avoid backup withholding as well.

Backup withholding is not an additional tax and the amount of any backup withholding from a payment to a non-U.S. holder will be allowed as a credit against the non-U.S. holder’s U.S. federal income tax liability and may entitle the non-U.S. holder to a refund, provided that the required information is furnished to the IRS in a timely manner.

FATCA

Under Sections 1471 through 1474 of the Code (such Sections commonly referred to as “FATCA”), payments of dividends on and the gross proceeds of dispositions of common stock of a U.S. issuer paid to (i) a “foreign financial institution” (as specifically defined in the Code) or (ii) a “non-financial foreign entity” (as specifically defined in the Code) will be subject to a withholding tax (separate and apart from, but without duplication of, the withholding tax described above) at a rate of 30%, unless various U.S. information reporting and due diligence requirements (generally relating to ownership by U.S. persons of interests in or accounts with those entities) have been satisfied or an exemption from these rules applies. Under proposed U.S. Treasury regulations promulgated by the Treasury Department on December 13, 2018, which state that taxpayers may rely on the proposed Treasury regulations until final Treasury regulations are issued, this withholding tax will not apply to the gross proceeds from the sale or disposition of common stock. An intergovernmental agreement between the United States and an applicable foreign country may modify these requirements. If a dividend payment is both subject to withholding under FATCA and subject to the withholding tax discussed above under “—Dividends,” the withholding under FATCA may be credited against, and therefore reduce, such other withholding tax. Non-U.S. holders should consult their tax advisors regarding the possible implications of this withholding tax on their investment in our common stock.

Federal Estate Tax

Individual non-U.S. holders (as specifically defined for U.S. federal estate tax purposes) and entities the property of which is potentially includible in such an individual’s gross estate for U.S. federal estate tax purposes (for example, a trust funded by such an individual and with respect to which the individual has retained certain interests or powers) should note that the common stock will be treated as U.S. situs property subject to U.S. federal estate tax, unless an applicable estate tax treaty provides otherwise.

 

S-33

UNDERWRITING (CONFLICTS OF INTEREST)

In connection with the forward sale agreement between us and the forward purchaser, the forward purchaser or its affiliate is expected to borrow from third parties an aggregate of    shares of our common stock. Such borrowed shares of our common stock will be delivered by the forward seller for sale to the underwriter in this offering, subject to the terms and conditions of the underwriting agreement among us, the forward seller, the forward purchaser and BofA Securities, Inc., as the underwriter (the “underwriter”).

The underwriter has agreed to purchase all of the shares of our common stock sold under the underwriting agreement if it purchases any shares. The underwriting agreement provides that the obligation of the underwriter to purchase the shares included in this offering is subject to approval of legal matters by counsel and to other conditions contained in the underwriting agreement.

We estimate that the total expenses of this offering and the forward sale agreement payable by us, excluding underwriting discounts and commissions, will be approximately $    .

We have agreed to indemnify the underwriter, the forward seller and the forward purchaser against, or contribute to payments that the underwriter, the forward seller and the forward purchaser may be required to make in respect of, certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”).

The underwriter proposes to offer the shares of our common stock offered hereby from time to time for sale in one or more transactions on the NASDAQ, in the over-the-counter market, through negotiated transactions or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or at negotiated prices, subject to receipt and acceptance by the underwriter and subject to its right to reject any order in whole or in part. The underwriter may effect such transactions by selling the shares of our common stock to or through dealers and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriter and/or purchasers of shares of our common stock for whom they may act as agents or to whom they may sell as principal. The difference between the price at which the underwriter purchases shares of our common stock and the price at which the underwriter resells such shares may be deemed underwriting compensation.

Forward Sale Agreement

We expect to enter into a forward sale agreement on the date of this prospectus supplement with the forward purchaser relating to an aggregate of     shares of our common stock. In connection with the forward sale agreement, the forward purchaser or its affiliate is expected to borrow from third parties an aggregate of    shares of our common stock.

In the event that (i) the forward purchaser (or its affiliate) is unable through commercially reasonable efforts to borrow and deliver for sale to the underwriter on the anticipated closing date the number of shares of our common stock to be sold to the underwriter or (ii) in the forward purchaser’s commercially reasonable judgment either it is impracticable to do so or the forward purchaser (or its affiliate) would incur a stock loan rate greater than a specified rate to borrow and deliver for sale to the underwriter on the anticipated closing date such number of shares of our common stock, or if certain other conditions to the forward seller’s obligations have not been satisfied, then we will issue and sell directly to the underwriter a number of shares of our common stock equal to the number of shares of our common stock that the forward purchaser or its affiliate does not borrow and deliver. Under such circumstances, the number of shares of our common stock underlying the forward sale agreement will be decreased by the number of shares of our common stock that we issue and sell to the underwriter. In such event, we or the underwriter will have the right to postpone the closing date for a period not exceeding one business day to effect any required changes in any documents or arrangements in connection with such closing.

 

S-34

We expect to physically settle the forward sale agreement (by the delivery of shares of our common stock) and receive proceeds from the sale of those shares of our common stock upon one or more forward settlement dates within approximately 18 months from the date hereof at the then applicable forward sale price.

The forward sale price will initially be $    per share, which is the price at which the underwriter has agreed to buy the shares of our common stock offered hereby. The forward sale price will be subject to adjustment on a daily basis based on a floating interest rate factor equal to the specified rate less a spread and will be decreased on each of the dates specified in the forward sale agreement by amounts related to expected dividends on shares of our common stock during its term. The forward sale price will also be subject to decrease if the cost to the forward purchaser (or its affiliate) of borrowing a number of shares of our common stock underlying the forward sale agreement exceeds a specified amount. If the specified rate is less than the spread on any day, the interest rate factor will result in a daily reduction of the forward sale price.

Before any issuance of shares of our common stock upon physical or net share settlement of the forward sale agreement, we expect that the shares issuable upon settlement of the forward sale agreement will be reflected in our diluted earnings per share calculation using the treasury stock method. Under this method, the number of shares of our common stock used in calculating diluted earnings per share is deemed to be increased by the excess, if any, of the number of shares of our common stock that would be issued upon full physical settlement of the forward sale agreement over the number of shares of our common stock that could be purchased by us in the market (based on the average market price of our common stock during the applicable reporting period) using the proceeds receivable upon full physical settlement (based on the adjusted forward sale price at the end of the reporting period).

Consequently, prior to physical or net share settlement of the forward sale agreement and subject to the occurrence of certain events, we anticipate that there will be no dilutive effect on our earnings per share except during periods when the average market price of shares of our common stock is above the applicable adjusted forward sale price, which is initially $   per share (which is the price at which the underwriter agrees to buy the shares of our common stock offered hereby), subject to increase or decrease based on the specified rate less a spread, and subject to price adjustment and other provisions of the forward sale agreement, including a decrease based on amounts related to expected dividends on our common stock on dates specified in the forward sale agreement and if the cost to the forward purchaser (or its affiliate) of borrowing a number of shares of our common stock underlying the forward sale agreement exceeds a specified amount. However, if we decide to physically settle or net share settle the forward sale agreement, then delivery of shares of our common stock to the forward purchaser on any such physical or (to the extent we are obligated to deliver shares of our common stock) net share settlement of the forward sale agreement would result in dilution to our earnings per share.

The forward purchaser will have the right to accelerate the forward sale agreement and require us to physically settle on a date specified by the forward purchaser if:

 

•

it (or its affiliate) (i) is unable to borrow a number of shares of our common stock equal to the number of shares of our common stock underlying the forward sale agreement because of the lack of sufficient shares being made available for share borrowing by lenders or (ii) would incur a stock loan rate greater than the rate specified in the forward sale agreement to continue to borrow such shares;

 

•

certain ownership thresholds applicable to the forward purchaser, its affiliates and other persons who may form a beneficial share ownership group or whose ownership positions would be aggregated with the forward purchaser are exceeded;

 

•

we declare any dividend or distribution on our common stock that constitutes an extraordinary dividend or is payable in (i) cash in excess of a specified amount (other than extraordinary dividends), (ii) securities of another company owned (directly or indirectly) by us as a result of a spin-off or similar transaction or (iii) any other type of securities (other than our common stock), rights, warrants or other assets for payment at less than the prevailing market price, as reasonably determined by the forward purchaser;

 

S-35

•

there is an announcement of any event or transaction that, if consummated, would result in certain extraordinary events (as such term is defined in the forward sale agreement and which includes certain mergers and tender offers and the delisting of our common stock); or

 

•

certain other events of default, termination events or other specified events occur, including, among other things, any material misrepresentation made by us in connection with entering into the forward sale agreement or the occurrence of a hedging disruption or a change in law (as such terms are defined in the forward sale agreement).

The forward purchaser’s decision to exercise its right to accelerate the settlement of the forward sale agreement will be made irrespective of our need for capital. In such cases, we could be required to issue and deliver shares of our common stock under the physical settlement provisions of the forward sale agreement irrespective of our capital needs, which would result in dilution to our earnings per share and return on equity. In addition, upon certain events of bankruptcy or insolvency related to us, the forward sale agreement will automatically terminate without further liability of any party. Following any such termination, we would not issue any shares of our common stock or receive any proceeds pursuant to the forward sale agreement.

We expect to physically settle the forward sale agreement (by the delivery of shares of our common stock) and receive proceeds from the sale of those shares of our common stock upon one or more forward settlement dates within approximately 18 months from the date hereof. We may also elect cash settlement or net share settlement for all or a portion of our obligations under the forward sale agreement. Upon physical settlement or, if we so elect, net share settlement of the forward sale agreement, delivery of shares of our common stock in connection with such physical settlement or (to the extent we are obligated to deliver shares of our common stock) net share settlement will result in dilution to our earnings per share and return on equity. If we elect cash settlement or net share settlement with respect to all or a portion of the shares of our common stock underlying the forward sale agreement, then we expect that the forward purchaser (or an affiliate thereof) will purchase a number of shares of our common stock necessary to satisfy its or its affiliate’s obligation to return the shares of our common stock borrowed from third parties in connection with sales of shares of our common stock related to the forward sale agreement and, if applicable in connection with net share settlement, to deliver shares of our common stock to us. If the market value of our common stock at the time of such purchase (as determined pursuant to the terms of the forward sale agreement) is above the forward sale price under the forward sale agreement at that time, then we would pay or deliver, as the case may be, to the forward purchaser under the forward sale agreement, an amount in cash, or a number of shares of our common stock with a market value (as determined pursuant to the terms of the forward sale agreement), equal to such difference. Any such difference could be significant. Conversely, if the market value of our common stock at the time of such purchase (as determined pursuant to the terms of the forward sale agreement) is below the forward sale price under the forward sale agreement at that time, the forward purchaser will pay or deliver, as the case may be, to us under the forward sale agreement, an amount in cash, or a number of shares of our common stock with a market value (as determined pursuant to the terms of the forward sale agreement), equal to such difference.

In addition, the purchase of shares of our common stock in connection with the forward purchaser or its affiliate unwinding its hedge positions could cause the price of our common stock to increase over such time (or reduce or prevent a decrease over such time), thereby increasing the amount of cash we would owe to the forward purchaser (or decreasing the amount of cash that the forward purchaser would owe us) upon a cash settlement of the forward sale agreement or increasing the number of shares of our common stock we would deliver to the forward purchaser (or decreasing the number of shares of our common stock that the forward purchaser would deliver to us) upon net share settlement of the forward sale agreement. We will not be able to control the manner in which the forward purchaser unwinds its hedge positions.

The foregoing is a description of certain provisions of the forward sale agreement we expect to enter into in connection with this offering, copies of which are available upon request from us at the address set forth under “Where You Can Find More Information.” This description of certain terms of the forward sale agreement is not complete and is subject to, and qualified in its entirety by reference to, the provisions of the forward sale agreement.

 

S-36

Option to Purchase Additional Shares

The underwriter has been granted an option to purchase up to an additional    shares of our common stock at a price of $    per share, exercisable within 30 days from the date of this prospectus supplement. If such option is exercised, then we plan to enter into an additional forward sale agreement with the forward purchaser in respect of the number of shares of our common stock that is subject to the exercise of such option. Unless the context requires otherwise, the term “forward sale agreement” as used in this prospectus supplement includes any additional forward sale agreement that we elect to enter into in connection with the exercise by the underwriter of its option to purchase additional shares. In the event that the forward purchaser (or its affiliate) does not borrow and deliver for sale to the underwriter on the anticipated closing date for the exercise of such option the number of shares of our common stock to be sold to the underwriter, then we will issue and sell directly to the underwriter a number of shares of our common stock equal to the number of shares of our common stock that the forward purchaser or its affiliate does not borrow and deliver. Under such circumstances, the number of shares of our common stock underlying the additional forward sale agreement will be decreased by the number of shares of our common stock that we issue and sell to the underwriter.

Lock-Ups

We have agreed that we will not (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, any shares of our common stock or any securities convertible into or exercisable or exchangeable for our common stock or file any registration statement under the Securities Act with respect to any of the foregoing or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of our common stock, whether any such swap or transaction described in clause (i) or (ii) above is to be settled by delivery of our common stock or other securities, in cash or otherwise, in each case, for a period of 60 days from the date of the final prospectus supplement for this offering, without the prior written consent of the underwriter. The foregoing sentence does not apply to (A) the shares of our common stock to be sold in this offering or that may be issued, sold and/or delivered pursuant to the forward sale agreements, (B) any shares of our common stock issued by us upon the exercise of certain options or warrants or the conversion of certain securities outstanding on the date of the execution of the underwriting agreement for this offering, (C) any shares of our common stock issued or options to purchase our common stock granted pursuant to certain existing equity plans, incentive compensation plans or benefit plans, (D) any shares of our common stock issued in connection with the Merger, or (E) any shares of our common stock issued pursuant to certain non-employee director stock plans or dividend reinvestment plans.

Our directors and executive officers have entered into lock-up agreements with the underwriter pursuant to which each of these persons, with limited exceptions, for a period of 60 days (the “Restricted Period”) after the date of the execution of the underwriting agreement for this offering, may not, without the prior written consent of the underwriter: (i) directly or indirectly, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of any shares of our common stock or any securities convertible into or exercisable or exchangeable for our common stock (including, without limitation, our common stock or such other securities which may be deemed to be beneficially owned by such directors and executive officers in accordance with SEC rules and regulations) and securities which may be issued upon exercise of a stock option or warrant) (collectively, the “Lock-Up Securities”), or exercise any right with respect to the registration of any of the Lock-Up Securities, or file, cause to be filed or cause to be confidentially submitted any registration statement in connection therewith, under the Securities Act, (ii) enter into any hedging, swap, loan or any other agreement or any transaction (including, without limitation, any short sale or the purchase or sale of, or entry into, any put or call option, or combination thereof, forward or any other derivative transaction or instrument, however described or defined) that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Lock-Up Securities, whether any such hedging, swap, loan or transaction is to be settled by delivery of our common stock or other securities, in cash or otherwise, or (iii) publicly disclose the intention to do any of the

 

S-37

foregoing described in clauses (i) and (ii) above. Subject to certain conditions, the foregoing restrictions do not apply to transfers (i) as a bona fide gift or gifts; (ii) by will, testamentary document or intestate succession to the legal representative, heir, beneficiary or a member of the immediate family of such director or executive officer; (iii) by operation of law, such as pursuant to a qualified domestic order, divorce settlement, divorce decree or separation agreement; (iv) pursuant to an order of a court or regulatory agency having jurisdiction over such director or executive officer; (v) to any corporation, partnership, limited liability company or other entity of which such director or executive officer or the immediate family of such director or executive officer are the legal and beneficial owner of all of the outstanding equity securities or similar interests; (vi) to a nominee or custodian of a person or entity to whom a disposition or transfer would be permissible under clauses (i) through (v) above; (vii) to any immediate family member or any trust, partnership, limited liability company or other entity for the direct or indirect benefit of such director or executive officer or one or more immediate family members of such director or executive officer; (viii) to the Company upon such director’s or executive officer’s death, disability or termination of employment or other service relationship with the Company, provided that such shares of our common stock were issued to such director or executive officer pursuant to an agreement or equity award granted pursuant to an employee benefit plan, option, warrant or other right disclosed in the prospectus for this offering; (ix) to the Company pursuant to the vesting, settlement or exercise of restricted stock units, restricted stock, options, warrants or other rights to purchase shares of our common stock (including, in each case, by way of “net” or “cashless” exercise), including for the payment of exercise price and tax and remittance payments due as a result of the vesting, settlement or exercise of such restricted stock units, restricted stock, options, warrants or rights, provided that (1) any such shares of our common stock received upon such exercise, vesting or settlement shall be subject to the restrictions described in this paragraph; (2) any filing under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), required to be made during the Restricted Period shall indicate in the footnotes thereto that the filing relates to circumstances described in this clause (ix); (3) such director or executive officer does not otherwise voluntarily effect any public filing or report regarding such transfers; and (4) any such restricted stock units, restricted stock, options, warrants or rights are held by such director or executive officer pursuant to an agreement or equity award granted under a stock incentive plan or other equity award plan, each of which is disclosed in the prospectus for this offering; or (x) pursuant to a 10b5-1 trading plan that complies with Rule 10b5-1 under the Exchange Act that has been entered into by such director or executive officer prior to the date of the lock-up agreement executed by such director or executive officer; provided, however, that (A) any filing under Section 16 of the Exchange Act made during the Restricted Period shall clearly indicate in the footnotes thereto that the filing relates to the circumstances described above and (B) such director or executive officer does not otherwise voluntarily effect any other public filings or report regarding such sales or transfers during the Restricted Period.

Price Stabilization and Short Positions

In connection with this offering, the underwriter may engage in stabilizing transactions, which involves making bids for, purchasing and selling shares of our common stock in the open market for the purpose of preventing or retarding a decline in the market price of our common stock while this offering is in progress. These stabilizing transactions may include making short sales of our common stock, which involves the sale by the underwriter of a greater number of shares of our common stock than the underwriter is required to purchase in this offering, and purchasing shares of our common stock on the open market to cover positions created by short sales. The underwriter may close out any short position by purchasing shares in the open market. A short position is more likely to be created if the underwriter is concerned that there may be downward pressure on the price of our common stock in the open market that could adversely affect investors who purchase in this offering. To the extent that the underwriter creates a short position, it will purchase shares in the open market to cover the position.

The underwriter has advised us that, pursuant to Regulation M of the Securities Act, it may also engage in other activities that stabilize, maintain or otherwise affect the price of our common stock, including the imposition of penalty bids. This means that if the underwriter purchases our common stock in the open market in stabilizing transactions or to cover short sales the underwriter may be required to repay the underwriting discount received by it.

 

S-38

These activities may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock, and, as a result, the price of our common stock may be higher than the price that otherwise might exist in the open market. If the underwriter commences these activities, it may discontinue them at any time. The underwriter may carry out these transactions on the NASDAQ, in the over-the-counter market or otherwise.

Electronic Distribution

In connection with the offering, the underwriter may distribute prospectuses by electronic means, such as email.

Certain Relationships

The underwriter and its affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory investment management, investment research, principal investment, hedging, financing and brokerage activities. In the ordinary course of business, the underwriter or its affiliates have provided and may in the future provide commercial, financial advisory or investment banking services for us and our subsidiaries for which they have received or will receive customary compensation. The underwriter is acting as financial advisor to us in connection with the transactions contemplated by the merger agreement.

In the ordinary course of their various business activities, the underwriter and its affiliates have made or held, and may in the future make or hold, a broad array of investments including serving as counterparties to certain derivative and hedging arrangements, and may have actively traded, and in the future may actively trade, debt and equity securities (or related derivative securities), and financial instruments (including bank loans) for their own account and for the accounts of their customers and may have in the past and at any time in the future hold long and short positions in such securities and instruments. Such investment and securities activities may have involved, and in the future may involve, securities and instruments of us or our subsidiaries. The underwriter and its affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

Conflicts of Interest

All of the proceeds of this offering (excluding proceeds, if any, paid to us with respect to any shares of our common stock that we issue and sell to the underwriter in lieu of the forward seller delivering and selling shares of our common stock to the underwriter) will be paid to the forward seller. As a result, the forward seller will receive more than 5% of the net proceeds of this offering, not including underwriting compensation, and BofA Securities, Inc. is deemed to have a conflict of interest within the meaning of FINRA Rule 5121. Accordingly, this offering will be conducted in compliance with the applicable provisions of FINRA Rule 5121. Pursuant to that rule, the appointment of a “qualified independent underwriter” is not required in connection with this offering, as the shares of our common stock have a “bona fide public market” (as defined in FINRA Rule 5121).

Notice to Prospective Investors in Canada

The shares of common stock may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the shares of common stock must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.

 

S-39