UMB Financial's proposed $2 billion acquisition of Heartland Financial USA in Denver has received the Federal Reserve's approval, paving the way for UMB to expand into five more states.
UMB is expected to become the 46th largest bank in the country, with consolidated assets of $65.8 billion, according to the Fed's approval notice on Friday. Post-acquisition, Heartland Financial's subsidiary, HTLF Bank, will become part of UMB Bank, UMB's banking arm.
UMB is Missouri's biggest bank. After the merger, the bank will hold 10.7% of the deposits in Missouri, which falls below the state's cap of 13%, the Fed said.
UMB, based in Kansas City, Missouri, will operate in 13 states, up from eight currently. The new states in which UMB is expected to do business are California, Iowa, Minnesota, New Mexico and Wisconsin.
In Kansas, UMB is set to move from the eighth largest deposit-holder to the seventh, the Fed noted in its approval. In Colorado, it will move from the No. 15 deposit-holder to the ninth and in Arizona it will move from 15th to 10th.
The pending all-stock deal, which was
During UMB's third-quarter earnings call in October, CEO Mariner Kemper said the transaction "will accelerate UMB's growth strategy, further diversifying and derisking" the company's business model.
"The addition of this high-quality franchise is a great fit from a strategic, financial and cultural perspective," Kemper said.
Shortly after plans to acquire Heartland were announced, UMB raised a net $201.6 million in new capital. It is one of several banks that have
The additional capital would provide "ample dry powder" to support the Heartland acquisition and "further bolster" the bank's capital ratios, Kemper told American Banker at the time.
In its approval notice, the Federal Reserve's board of governors concluded that the combination would not hurt competition nationally or within the two banks' markets. The Department of Justice, which reviews bank mergers and acquisitions for potential violations of antitrust laws, also found no issue with the application.
The Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency also did not object to the acquisition.
Transactions grew larger and more frequent this year. As a result, aggregate value more than tripled from 2023 and topped $15 billion.
The Fed noted that both banks have at least satisfactory scores on all relevant examinations. It also found that their proposed combination is unlikely to hinder access to banking services within assessment areas.
One public comment raised concerns about UMB Bank's mortgage-lending practices, accusing the bank of making fewer home loans to African American borrowers than white ones. It also claimed that a high percentage of the bank's deposit accounts exceeded the FDIC coverage limit of $250,000.
The bank said the data on lending cited was misleading and not indicative of discriminatory lending practices, according to the Fed's notice. UMB asserted that it denies borrowers of all racial backgrounds for the same reasons, "namely, an excessive debt-to-income ratio or poor credit history."
Regarding the deposit claims, UMB said the data cited was outdated and its management of liquidity and interest rate risk are appropriate.
