UMB FINANCIAL CORP Income Taxes Disclosure
16. INCOME TAXES
Income taxes as set forth below produce effective income tax rates of 19.7% in 2025, 18.5% in 2024, and 17.0% in 2023. These percentages are computed by dividing Income tax expense by Income before income taxes.
Income tax expense includes the following components (in thousands):
|
|
Year Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Current tax |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
$ |
72,805 |
|
|
$ |
107,697 |
|
|
$ |
81,565 |
|
State |
|
|
16,927 |
|
|
|
8,507 |
|
|
|
10,452 |
|
Total current tax expense |
|
|
89,732 |
|
|
|
116,204 |
|
|
|
92,017 |
|
Deferred tax |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
|
84,417 |
|
|
|
(20,072 |
) |
|
|
(19,438 |
) |
State |
|
|
(1,592 |
) |
|
|
3,898 |
|
|
|
(1,001 |
) |
Total deferred tax expense (benefit) |
|
|
82,825 |
|
|
|
(16,174 |
) |
|
|
(20,439 |
) |
Total tax expense |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
|
157,222 |
|
|
|
87,625 |
|
|
|
62,127 |
|
State |
|
|
15,335 |
|
|
|
12,405 |
|
|
|
9,451 |
|
Total tax expense |
|
$ |
172,557 |
|
|
$ |
100,030 |
|
|
$ |
71,578 |
|
The reconciliation between the income tax expense and the amount computed by applying the statutory federal tax rate of 21% for income before income taxes is as follows (in thousands):
|
|
Year Ended December 31, |
|
|||||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||||||||||||||
|
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
||||||
U.S federal statutory income tax rate |
|
$ |
183,741 |
|
|
|
21.0 |
% |
|
$ |
113,667 |
|
|
|
21.0 |
% |
|
$ |
88,536 |
|
|
|
21.0 |
% |
Domestic federal: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Federal tax credits, net of amortization (as applicable) |
|
|
(7,280 |
) |
|
|
(0.8 |
) |
|
|
(8,252 |
) |
|
|
(1.5 |
) |
|
|
(5,049 |
) |
|
|
(1.2 |
) |
Nontaxable and nondeductible items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Tax-exempt interest income |
|
|
(25,916 |
) |
|
|
(3.0 |
) |
|
|
(20,487 |
) |
|
|
(3.8 |
) |
|
|
(20,614 |
) |
|
|
(4.9 |
) |
Other |
|
|
11,174 |
|
|
|
1.3 |
|
|
|
5,235 |
|
|
|
1.0 |
|
|
|
1,168 |
|
|
|
0.3 |
|
Domestic state and local income taxes, net of federal income tax effect (1) |
|
|
10,697 |
|
|
|
1.2 |
|
|
|
11,887 |
|
|
|
2.2 |
|
|
|
6,233 |
|
|
|
1.5 |
|
Changes in unrecognized tax benefits |
|
|
39 |
|
|
|
0.0 |
|
|
|
(2,087 |
) |
|
|
(0.4 |
) |
|
|
1,233 |
|
|
|
0.3 |
|
Other reconciling items |
|
|
102 |
|
|
|
0.0 |
|
|
|
67 |
|
|
|
0.0 |
|
|
|
71 |
|
|
|
0.0 |
|
Total tax expense |
|
$ |
172,557 |
|
|
|
19.7 |
% |
|
$ |
100,030 |
|
|
|
18.5 |
% |
|
$ |
71,578 |
|
|
|
17.0 |
% |
(1) In general, state and local taxes in California, Colorado, Illinois, Minnesota and New York City made up the majority (greater than 50%) of the tax effect in this category.
The income taxes paid, net of refunds, is as follows (in thousands):
|
|
Year Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
U.S. federal |
|
$ |
49,000 |
|
|
$ |
65,500 |
|
|
$ |
69,000 |
|
U.S. state and local: |
|
|
|
|
|
|
|
|
|
|||
Illinois |
|
|
3,674 |
|
|
* |
|
|
* |
|
||
Other |
|
|
10,568 |
|
|
|
11,430 |
|
|
|
10,334 |
|
Foreign |
|
* |
|
|
* |
|
|
* |
|
|||
Total income taxes paid, net of refunds |
|
$ |
63,242 |
|
|
$ |
76,930 |
|
|
$ |
79,334 |
|
|
|
|
|
|
|
|
|
|
|
|||
*The amount of income taxes paid, net of refunds received, during the year does not meet the 5% disaggregation threshold.
In preparing its tax returns, the Company is required to interpret tax laws and regulations to determine its taxable income. Periodically, the Company is subject to examinations by various taxing authorities that may give rise to differing interpretations of these laws. Upon examination, agreement of tax liabilities between the Company and the multiple tax jurisdictions in which the Company files tax returns may ultimately be different. The Company is in the examination process with two state tax authorities for various years between tax years 2021 and 2023. The
Company believes the aggregate amount of any additional liabilities that may result from these examinations, if any, will not have a material adverse effect on the financial condition, results of operations, or cash flows of the Company.
Deferred income taxes result from differences between the carrying value of assets and liabilities measured for financial reporting and the tax basis of assets and liabilities for income tax return purposes.
The significant components of deferred tax assets and liabilities are reflected in the following table (in thousands):
|
|
December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Deferred tax assets: |
|
|
|
|
|
|
||
Net unrealized loss on securities available for sale |
|
$ |
107,222 |
|
|
$ |
196,594 |
|
Net unrealized loss on cash flow hedges |
|
|
— |
|
|
|
5,035 |
|
Loans, principally due to allowance for credit losses |
|
|
184,805 |
|
|
|
57,553 |
|
Securities |
|
|
119,343 |
|
|
|
— |
|
Equity-based compensation |
|
|
9,631 |
|
|
|
7,067 |
|
Accrued expenses |
|
|
46,886 |
|
|
|
39,008 |
|
Deferred compensation |
|
|
27,088 |
|
|
|
19,981 |
|
Net operating loss carryovers |
|
|
43,502 |
|
|
|
2,507 |
|
Miscellaneous |
|
|
2,217 |
|
|
|
3,541 |
|
Total deferred tax assets before valuation allowance |
|
|
540,694 |
|
|
|
331,286 |
|
Valuation allowance |
|
|
(39,021 |
) |
|
|
(11,106 |
) |
Total deferred tax assets |
|
|
501,673 |
|
|
|
320,180 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
||
Net unrealized gain on fair value hedges |
|
|
(15,549 |
) |
|
|
(16,395 |
) |
Net unrealized gain on cash flow hedges |
|
|
(6,186 |
) |
|
|
— |
|
Securities |
|
|
— |
|
|
|
(83 |
) |
Land, buildings and equipment |
|
|
(38,434 |
) |
|
|
(24,859 |
) |
Prepaid expenses |
|
|
(8,885 |
) |
|
|
(7,245 |
) |
Partnership investments |
|
|
(4,098 |
) |
|
|
(4,190 |
) |
Trust preferred securities |
|
|
(11,051 |
) |
|
|
(6,439 |
) |
Intangibles |
|
|
(132,335 |
) |
|
|
(13,776 |
) |
Miscellaneous |
|
|
(5,999 |
) |
|
|
(3,149 |
) |
Total deferred tax liabilities |
|
|
(222,537 |
) |
|
|
(76,136 |
) |
Net deferred tax asset |
|
$ |
279,136 |
|
|
$ |
244,044 |
|
As of December 31, 2025, the Company’s gross federal net operating loss carryovers, acquired through the HTLF acquisition and subject to annual utilization limitations under Section 382 of the Internal Revenue Code, totaled $93.7 million. The deferred tax asset associated with these federal net operating loss carryovers was $19.7 million at December 31, 2025, and the Company established a valuation allowance of $2.1 million to reflect expected net operating loss expirations. A majority of these federal net operating losses have an indefinite carryforward period, while others expire at various times between 2026 and 2035. The Company also had gross state net operating loss carryovers of $531.5 million, for which a deferred tax asset of $23.8 million was recorded at December 31, 2025. A majority of these state net operating loss carryovers were acquired through the HTLF acquisition and are subject to annual utilization limitations. Most of these state net operating losses expire at various times between 2026 and 2045 and some have an indefinite carryforward. As of December 31, 2025 and 2024, the Company had a valuation allowance of $15.2 million and $2.5 million, respectively, for certain state net operating losses as they are not expected to be realized. In addition, as of December 31, 2025 and 2024, the Company had a valuation allowance of $21.7 million and $8.6 million, respectively, to reduce certain other state deferred tax assets to the amount management believes will be more likely than not realized.
The net deferred tax asset at December 31, 2025 and December 31, 2024 are included in the Other assets line of the Company’s Consolidated Balance Sheets.
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for tax years prior to 2020 in the jurisdictions in which it files.
Liabilities Associated With Unrecognized Tax Benefits
The gross amount of unrecognized tax benefits totaled $8.9 million and $8.3 million at December 31, 2025 and 2024, respectively. The total amount of unrecognized tax benefits, net of associated deferred tax benefit, that would impact the effective tax rate, if recognized, would be $7.1 million and $6.5 million at December 31, 2025 and December 31, 2024, respectively. The unrecognized tax benefits relate to state tax positions that have a corresponding federal tax benefit.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
|
|
December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Unrecognized tax benefits - opening balance |
|
$ |
8,279 |
|
|
$ |
10,921 |
|
Gross increases - tax positions in prior period |
|
|
10 |
|
|
|
— |
|
Gross decreases - tax positions in prior period |
|
|
— |
|
|
|
(3,051 |
) |
Gross increases - current-period tax positions |
|
|
1,536 |
|
|
|
1,915 |
|
Gross increases - acquisitions |
|
|
616 |
|
|
|
— |
|
Lapse of statute of limitations |
|
|
(1,497 |
) |
|
|
(1,506 |
) |
Unrecognized tax benefits - ending balance |
|
$ |
8,944 |
|
|
$ |
8,279 |
|
Investments in Affordable Housing and Renewable Energy
The Company has invested in affordable housing and renewable energy projects sponsored by third parties, commonly referred to as tax equity investments. The primary return on these investments is derived from the realization of federal tax credits and deductions. Tax equity investments are recorded net of accumulated amortization using the proportional amortization method. These investments are included in Other securities on the Consolidated Balance Sheets and totaled $290.3 million and $251.0 million as of December 31, 2025 and 2024, respectively. Unfunded tax equity obligations are included in Other liabilities on the Consolidated Balance Sheets, and totaled $124.9 million and $116.5 million as of December 31, 2025 and 2024, respectively.
The following table summarizes the amortization expense and tax benefit recognized for the Company’s affordable housing projects and other tax credit investments (in thousands):
|
|
Year Ended December 31, |
|
|||||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||||||||||||||
|
|
Amortization Expense (1) |
|
|
Tax Benefit Recognized (2) |
|
|
Amortization Expense (1) |
|
|
Tax Benefit Recognized (2) |
|
|
Amortization Expense (1) |
|
|
Tax Benefit Recognized (2) |
|
||||||
Low-income housing tax credit |
|
$ |
22,284 |
|
|
$ |
(28,938 |
) |
|
$ |
16,930 |
|
|
$ |
(21,277 |
) |
|
$ |
12,709 |
|
|
$ |
(15,482 |
) |
Historic tax credit |
|
|
1,481 |
|
|
|
(1,776 |
) |
|
|
1,471 |
|
|
|
(1,493 |
) |
|
|
1,464 |
|
|
|
(1,714 |
) |
New markets tax credit |
|
|
303 |
|
|
|
(360 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Renewable energy |
|
|
192 |
|
|
|
(13 |
) |
|
|
20,750 |
|
|
|
(22,318 |
) |
|
|
— |
|
|
|
— |
|
Total |
|
$ |
24,260 |
|
|
$ |
(31,087 |
) |
|
$ |
39,151 |
|
|
$ |
(45,088 |
) |
|
$ |
14,173 |
|
|
$ |
(17,196 |
) |
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Mar 1, 2021 | |
| 2019 | Feb 27, 2020 | |
| 2018 | Mar 1, 2019 | |
| 2017 | Feb 22, 2018 | |
| 2016 | Feb 23, 2017 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.