UMB Financial Corporation Reports Second Quarter Net Income of $87.4 Million; Announces 15.6% Increase to Quarterly Cash Dividend

Second quarter 2021 Financial Highlights (all comparisons to prior year unless otherwise noted)

• GAAP net income of $87.4 million, or $1.79 per diluted share; net operating income of $87.6 million, or $1.80 per diluted share.
• Pre-tax, pre-provision (PTPP) income of $131.3 million, an increase of $41.2 million.
• Quarterly average loan balances increased $1.7 billion, or 11.4%.
• Excluding Paycheck Protection Program (PPP) balances, average loans increased 19.0% on a linked-quarter, annualized basis.
• Quarterly average deposits grew 22.0% to $27.8 billion.
• Noninterest income increased 9.2% and comprised 39.6% of revenue.
• Board of Directors increased quarterly cash dividend by 15.6% to $0.37 per share.

KANSAS CITY, Mo.–(BUSINESS WIRE)–UMB Financial Corporation (Nasdaq: UMBF), a financial services company, announced net income for the second quarter of 2021 of $87.4 million, or $1.79 per diluted share, compared to $92.6 million, or $1.91 per diluted share, in the first quarter of 2021 (linked quarter) and $60.5 million, or $1.26 per diluted share, in the second quarter of 2020.

Net operating income, a non-GAAP financial measure reconciled to net income, the nearest comparable GAAP measure, later in this release, was $87.6 million, or $1.80 per diluted share, for the second quarter of 2021, compared to $92.8 million, or $1.91 per diluted share, for the linked quarter and $63.8 million, or $1.33 per diluted share, for the second quarter of 2020. Pre-tax, pre-provision income on a fully tax equivalent basis (PTPP-FTE), a non-GAAP measure reconciled to the components of net income before taxes, the nearest comparable GAAP measure, later in this release, was $138.0 million, or $2.83 per diluted share, for the second quarter of 2021, compared to $108.7 million, or $2.24 per diluted share, for the linked quarter, and $96.8 million, or $2.01 per diluted share, for the second quarter of 2020. These PTPP-FTE results represent an increase of 26.9% on a linked-quarter basis and an increase of 42.6% compared to the second quarter of 2020.

Summary of quarterly financial results		UMB Financial Corporation
(unaudited, dollars in thousands, except per share data)
		Q2				Q1				Q2
		2021				2021				2020
Net income (GAAP)		$	87,412			$	92,643			$	60,529
Earnings per share (diluted)			1.79				1.91				1.26
Pre-tax, pre-provision income (Non-GAAP)			131,322				102,066				90,152
Pre-tax, pre-provision earnings per share (diluted)			2.70				2.10				1.88
Pre-tax, pre-provision income – FTE (Non-GAAP)			137,951				108,744				96,756
Pre-tax, pre-provision earnings per share – FTE (diluted)			2.83				2.24				2.01
Net operating income (Non-GAAP)			87,634				92,780				63,835
Operating earnings per share (diluted)			1.80				1.91				1.33
GAAP
Return on average assets			1.02	%			1.14	%			0.87	%
Return on average equity			11.43				12.56				8.95
Efficiency ratio			60.41				66.46				70.20
Non-GAAP
Operating return on average assets			1.03	%			1.14	%			0.91	%
Operating return on average equity			11.46				12.58				9.44
Operating efficiency ratio			60.33				66.40				68.76

Summary of year-to-date financial results		UMB Financial Corporation
(unaudited, dollars in thousands, except per share data)		June				June
		YTD				YTD
		2021				2020
Net income (GAAP)		$	180,055			$	57,090
Earnings per share (diluted)			3.70				1.18
Pre-tax, pre-provision income (Non-GAAP)			233,388				173,898
Pre-tax, pre-provision earnings per share (diluted)			4.80				3.59
Pre-tax, pre-provision income – FTE (Non-GAAP)			246,695				186,980
Pre-tax, pre-provision earnings per share – FTE (diluted)			5.08				3.86
Net operating income (Non-GAAP)			180,414				61,954
Operating earnings per share (diluted)			3.71				1.28
GAAP
Return on average assets			1.08	%			0.42	%
Return on average equity			11.98				4.22
Efficiency ratio			63.29				69.59
Non-GAAP
Operating return on average assets			1.08	%			0.46	%
Operating return on average equity			12.01				4.58
Operating efficiency ratio			63.21				68.49

“Our strong second quarter results demonstrated the benefits of our diverse business model and validates our investment thesis which includes above-peer loan growth, continued net interest income and strong fee income growth across all operating and interest rate environments,” said Mariner Kemper, chairman, president and chief executive officer. “During the second quarter, average loans, excluding PPP balances, increased 19.0% annualized on a linked-quarter basis. Noninterest income increased 20.8% from the prior quarter and 9.2% over the year-ago period. Our $24.0 million provision was higher than previous levels due to strong loan growth and elevated net charge-offs related to one commercial factoring relationship. Excluding this credit event, we would have had net recoveries in the quarter and the underlying asset quality of our loan portfolio remains strong. Nonperforming loan balances declined 24.1% from prior quarter-end. During the quarter, we monetized 3.5 million shares of our Tattooed Chef, Inc. (TTCF) holdings for net proceeds of approximately $72.8 million. Finally, we are excited to announce that our Board of Directors approved a five cent or 15.6% increase in the quarterly cash dividend to our shareholders.”

Summary of revenue		UMB Financial Corporation
(unaudited, dollars in thousands)
		Q2				Q1				Q2				CQ vs.				CQ vs.
		2021				2021				2020				LQ				PY
Net interest income		$	201,071			$	194,115			$	178,229			$	6,956			$	22,842
Noninterest income:
Trust and securities processing			53,863				54,834				46,321				(971	)			7,542
Trading and investment banking			8,670				9,356				12,851				(686	)			(4,181	)
Service charges on deposit accounts			22,592				21,976				19,074				616				3,518
Insurance fees and commissions			245				420				533				(175	)			(288	)
Brokerage fees			2,592				3,334				5,753				(742	)			(3,161	)
Bankcard fees			16,063				14,673				12,916				1,390				3,147
Investment securities gains (losses), net			15,455				(8,336	)			4,579				23,791				10,876
Other			12,109				12,640				18,429				(531	)			(6,320	)
Total noninterest income		$	131,589			$	108,897			$	120,456			$	22,692			$	11,133
Total revenue		$	332,660			$	303,012			$	298,685			$	29,648			$	33,975
Net interest income (FTE)		$	207,700			$	200,793			$	184,833
Net interest margin (FTE)			2.56	%			2.59	%			2.79	%
Total noninterest income as a % of total revenue			39.56				35.94				40.33

Net interest income

• Net interest income totaled $201.1 million, which is an increase of $7.0 million as compared to the linked quarter. The positive impact from strong balance sheet growth was partially offset by the impacts of lower PPP income in the quarter. Average earning assets increased $1.1 billion, or 3.6%, driven in part by an increase in securities and loans, while interest-bearing liabilities increased $234.5 million, or 1.2%.
• Net interest margin for the second quarter was 2.56%, a decrease of three basis points from the linked quarter, driven in large part by earning asset mix shift and lower market and reinvestment rates. Earning asset yields declined four basis points from the linked quarter, driven by a six-basis-point decline in both loan and securities yields and mix changes. The cost of interest-bearing liabilities decreased one basis point to 0.23%. Net interest spread decreased three basis points to 2.47% from the linked quarter and was 20 basis points lower than the second quarter of 2020.
• On a year-over-year basis, net interest income increased $22.8 million, or 12.8%, driven by a $2.1 billion, or 23.0% increase in average securities, coupled with a $1.7 billion, or 11.4%, increase in average loans. These increases were driven by organic loan growth, excess liquidity, and the company’s PPP participation.
• Average deposits increased 3.6% on a linked-quarter basis and 22.0% compared to the second quarter of 2020. Average noninterest-bearing demand deposit balances increased 9.7% on a linked-quarter basis and 39.7% compared to the second quarter of 2020.

Noninterest income

• Second quarter 2021 noninterest income increased $22.7 million, or 20.8%, on a linked-quarter basis, largely due to:
  • An increase of $23.8 million in investment securities gains, primarily due to an increase of $23.3 million in gains on the company’s equity investment in TTCF.
  • An increase of $1.4 million in bankcard fees, primarily due to increased interchange income.
  • These increases were partially offset by decreases of $1.0 million in trust and securities processing income and $0.7 million in trading and investment banking income. The decrease in trust and securities processing income is primarily driven by the previously announced sale of Prairie Capital Management, LLC (PCM) in March 2021, offset by increased fund services income. The decline in trading and investment banking income is primarily due to decreased trading volume.
• Compared to the prior year, noninterest income in the second quarter of 2021 increased $11.1 million, or 9.2%, primarily driven by:
  • An increase of $10.9 million in investment securities gains, primarily due to an increase of $14.2 million in gains on equity investments, partially offset by decreases of $2.7 million and $0.6 million in gains on the sale of available for sale securities and PCM-related equity earnings on alternative investments, respectively.
  • Increases of $6.7 million and $2.0 million in fund services income and corporate trust income, respectively, both recorded in trust and securities processing.
  • An increase of $3.5 million in service charges on deposits, driven by increased healthcare income related to customer transfer and conversion fees, and increased corporate service charges.
  • An increase of $2.5 million in derivative income, recorded in other income.
  • These increases were partially offset by a decrease of $9.8 million in the market value of company-owned life insurance, recorded in other income, and a decrease of $4.2 million in trading and investment banking, due to decreased trading volumes. The decrease in company-owned life insurance is offset by a proportionate decrease in deferred compensation expense as noted below.

Noninterest expense

Summary of noninterest expense		UMB Financial Corporation
(unaudited, dollars in thousands)
		Q2				Q1				Q2				CQ vs.				CQ vs.
		2021				2021				2020				LQ				PY
Salaries and employee benefits		$	120,415			$	127,681			$	130,938			$	(7,266	)		$	(10,523	)
Occupancy, net			12,296				11,935				11,411				361				885
Equipment			19,196				19,615				21,502				(419	)			(2,306	)
Supplies and services			3,469				3,492				3,785				(23	)			(316	)
Marketing and business development			4,797				2,345				3,284				2,452				1,513
Processing fees			16,501				15,417				13,603				1,084				2,898
Legal and consulting			8,147				5,755				6,220				2,392				1,927
Bankcard			4,529				4,956				4,549				(427	)			(20	)
Amortization of other intangible assets			1,157				1,380				1,658				(223	)			(501	)
Regulatory fees			2,769				2,546				3,211				223				(442	)
Other			8,062				5,824				8,372				2,238				(310	)
Total noninterest expense		$	201,338			$	200,946			$	208,533			$	392			$	(7,195	)

• Noninterest expense for the second quarter of 2021 was $201.3 million, an increase of $0.4 million, or 0.2%, from the linked quarter and a decrease of $7.2 million, or 3.5%, from the second quarter of 2020.
• The linked-quarter increase in noninterest expense was driven by:
  • Increases of $2.5 million, $2.4 million, and $1.1 million in marketing and business development expense, legal and consulting expense, and processing fees, respectively, due to timing of various marketing initiatives, legal costs, and timing of software projects.
  • Increases of $0.9 million in losses on sales of other real estate, $0.7 million in derivative expense, and $0.7 million in miscellaneous loan fee expense, all recorded in other noninterest expense.
  • These increases were offset by decreases of $5.7 million in payroll taxes, insurance and 401(k) expense, and $1.8 million in bonus and commission expense, both recorded in salary and employee benefits.
• The year-over-year decrease in noninterest expense was driven by:
  • A decrease of $10.5 million in deferred compensation expense, recorded in salaries and employee benefits. The decrease in deferred compensation expense was offset by the decrease in company-owned life insurance income noted above.
  • A decrease of $2.1 million in software expense, recorded in equipment expense.
  • These decreases were partially offset by increases of $2.9 million in processing fees, $1.9 million in legal and professional expense, and $1.5 million in marketing and business development, due to timing of software projects, legal costs, and various marketing initiatives.

Income taxes

• The company’s effective tax rate was 17.0% for the six months ended June 30, 2021, compared to 11.3% for the same period in 2020. The increase in the effective rate for 2021 is primarily attributable to a smaller portion of income being earned from tax-exempt municipal securities.

Balance sheet

• Average total assets for the second quarter of 2021 were $34.3 billion compared to $33.1 billion for the linked quarter and $28.1 billion for the same period in 2020.

Summary of average loans and leases – QTD Average										UMB Financial Corporation
(unaudited, dollars in thousands)
		Q2				Q1				Q2				CQ vs.				CQ vs.
		2021				2021				2020				LQ				PY
Commercial and industrial		$	7,402,653			$	7,139,101			$	6,970,223			$	263,552			$	432,430
Specialty lending			505,687				502,585				471,571				3,102				34,116
Commercial real estate			6,165,780				5,971,047				5,435,428				194,733				730,352
Consumer real estate			2,068,663				1,970,767				1,528,501				97,896				540,162
Consumer			122,439				117,095				146,120				5,344				(23,681	)
Credit cards			386,032				362,051				353,424				23,981				32,608
Leases and other			166,420				183,447				193,099				(17,027	)			(26,679	)
Total loans		$	16,817,674			$	16,246,093			$	15,098,366			$	571,581			$	1,719,308

• Average loans for the second quarter of 2021 increased 3.5% on a linked-quarter basis and 11.4% compared to the second quarter of 2020 primarily due to increased commercial and industrial and commercial real estate loans.

Summary of average securities – QTD Average		UMB Financial Corporation
(unaudited, dollars in thousands)
		Q2				Q1				Q2				CQ vs.				CQ vs.
		2021				2021				2020				LQ				PY
Securities available for sale:
U.S. Treasury		$	40,013			$	36,032			$	31,150			$	3,981			$	8,863
U.S. Agencies			94,794				95,494				403,290				(700	)			(308,496	)
Mortgage-backed			6,096,099				5,599,987				4,284,374				496,112				1,811,725
State and political subdivisions			3,565,443				3,552,945				3,108,661				12,498				456,782
Commercial Paper			—				—				2,040				—				(2,040	)
Corporates			127,581				83,271				98,089				44,310				29,492
Total securities available for sale		$	9,923,930			$	9,367,729			$	7,927,604			$	556,201			$	1,996,326
Securities held to maturity:
State and political subdivisions		$	1,057,091			$	1,023,418			$	1,100,843			$	33,673			$	(43,752	)
Trading securities			21,409				17,540				37,816				3,869				(16,407	)
Other securities			302,981				308,297				148,918				(5,316	)			154,063
Total securities		$	11,305,411			$	10,716,984			$	9,215,181			$	588,427			$	2,090,230

• Average securities available for sale increased 5.9% on a linked-quarter basis and 25.2% compared to the second quarter of 2020.

Summary of average deposits – QTD Average						UMB Financial Corporation
(unaudited, dollars in thousands)
		Q2				Q1				Q2				CQ vs.				CQ vs.
		2021				2021				2020				LQ				PY
Deposits:
Noninterest-bearing demand		$	10,701,656			$	9,753,680			$	7,662,836			$	947,976			$	3,038,820
Interest-bearing demand and savings			16,421,742				16,302,880				14,160,722				118,862				2,261,020
Time deposits			659,228				769,464				957,007				(110,236	)			(297,779	)
Total deposits		$	27,782,626			$	26,826,024			$	22,780,565			$	956,602			$	5,002,061
Noninterest bearing deposits as % of total			38.52	%			36.36	%			33.64	%

• Average deposits increased 3.6% on a linked-quarter basis and 22.0% compared to the second quarter of 2020.
• Average noninterest-bearing demand deposits increased 9.7% on a linked-quarter basis to $10.7 billion.

Capital

Capital information		UMB Financial Corporation
(unaudited, dollars in thousands, except per share data)
		June 30, 2021				March 31, 2021				June 30, 2020
Total equity		$	3,090,244			$	2,958,239			$	2,777,395
Book value per common share			63.92				61.24				57.84
Tangible book value per common share			59.96				57.26				53.57
Regulatory capital:
Common equity Tier 1 capital		$	2,730,062			$	2,660,102			$	2,335,625
Tier 1 capital			2,730,062				2,660,102				2,335,625
Total capital			3,172,878				3,102,333				2,580,849
Regulatory capital ratios:
Common equity Tier 1 capital ratio			11.91	%			12.25	%			11.92	%
Tier 1 risk-based capital ratio			11.91				12.25				11.92
Total risk-based capital ratio			13.84				14.28				13.17
Tier 1 leverage ratio			8.00				8.08				8.35

• At June 30, 2021, the regulatory capital ratios presented in the foregoing table exceeded all “well-capitalized” regulatory thresholds.

Asset Quality

Credit quality		UMB Financial Corporation
(unaudited, dollars in thousands)
		Q2				Q1				Q4				Q3				Q2
		2021				2021				2020				2020				2020
Net charge-offs – Total loans		$	28,374			$	5,310			$	1,801			$	5,111			$	5,541
Net loan charge-offs as a % of total average loans			0.68	%			0.13	%			0.04	%			0.13	%			0.15	%
Loans over 90 days past due		$	1,265			$	1,773			$	1,952			$	1,372			$	4,588
Loans over 90 days past due as a % of total loans			0.01	%			0.01	%			0.01	%			0.01	%			0.03	%
Nonaccrual and restructured loans		$	58,219			$	76,706			$	87,823			$	93,695			$	82,245
Nonaccrual and restructured loans as a % of total loans			0.34	%			0.46	%			0.55	%			0.59	%			0.54	%
Provision for credit losses		$	24,000			$	(7,500	)		$	5,000			$	16,000			$	21,500

• Provision for credit losses for the second quarter increased $31.5 million from the linked quarter and $2.5 million from the second quarter of 2020. This increase is driven by impacts to the Allowance for Credit Losses by a large charge-off during the second quarter, offset by the impacts of positive macro-economic metrics.
• Net charge-offs for the second quarter totaled $28.4 million, or 0.68%, of average loans, compared to $5.3 million, or 0.13%, of average loans in the linked quarter, and $5.5 million, or 0.15%, of average loans for the second quarter of 2020.
• The increase in net charge-offs in the second quarter of 2021 is due to a $31.9 million loss on one commercial relationship.

Dividend Declaration

At the company’s quarterly board meeting, the Board of Directors declared a $0.37 per share quarterly cash dividend, or an increase of 15.6%. This cash dividend will be payable on October 1, 2021, to shareholders of record at the close of business on September 10, 2021.

Conference Call

The company plans to host a conference call to discuss its second quarter 2021 earnings results on Wednesday, July 28, 2021, at 8:30 a.m. (CT).

Interested parties may access the call by dialing (toll-free) 877-267-8760 or (international) 412-542-4148 and requesting to join the UMB Financial call. The live call may also be accessed by visiting investorrelations.umb.com or by using the following link:

UMB Financial 2Q 2021 Conference Call

A replay of the conference call may be heard through August 11, 2021 by calling (toll-free) 877-344-7529 or (international) 412-317-0088. The replay access code required for playback is 10157858. The call replay may also be accessed at investorrelations.umb.com.

Non-GAAP Financial Information

In this release, we provide information about net operating income, operating earnings per share – diluted (operating EPS), operating return on average equity (operating ROE), operating return on average assets (operating ROA), operating noninterest expense, operating efficiency ratio, pre-tax, pre-provision income, pre-tax, pre-provision earnings per share – diluted (PTPP EPS), pre-tax, pre-provision income on a fully tax equivalent basis (PTPP-FTE), pre-tax, pre-provision FTE earnings per share – diluted (PTPP-FTE EPS), tangible shareholders’ equity, and tangible book value per share, all of which are non-GAAP financial measures. This information supplements the results that are reported according to generally accepted accounting principles in the United States (GAAP) and should not be viewed in isolation from, or as a substitute for, GAAP results. The differences between the non-GAAP financial measures – net operating income, operating EPS, operating ROE, operating ROA, operating noninterest expense, operating efficiency ratio, PTPP, PTPP EPS, PTPP-FTE, PTPP-FTE EPS, tangible shareholders’ equity, and tangible book value per share – and the nearest comparable GAAP financial measures are reconciled later in this release. The company believes that these non-GAAP financial measures and the reconciliations may be useful to investors because they adjust for acquisition-, severance-, and COVID-19 related items that management does not believe reflect the company’s fundamental operating performance. COVID-19 related expense includes hazard pay for branch associates, computer hardware expense to support associates working remotely, and additional equipment, cleaning, and janitorial supplies to protect the well-being of our associates and customers while on the company’s premises.

Net operating income for the relevant period is defined as GAAP net income, adjusted to reflect the impact of excluding expenses related to acquisitions, severance expense, COVID-19 related expense, and the cumulative tax impact of these adjustments.

Operating EPS (diluted) is calculated as earnings per share as reported, adjusted to reflect, on a per share basis, the impact of excluding the non-GAAP adjustments described above for the relevant period. Operating ROE is calculated as net operating income, divided by the company’s average total shareholders’ equity for the relevant period. Operating ROA is calculated as net operating income, divided by the company’s average assets for the relevant period. Operating noninterest expense for the relevant period is defined as GAAP noninterest expense, adjusted to reflect the pre-tax impact of non-GAAP adjustments described above. Operating efficiency ratio is calculated as the company’s operating noninterest expense, net of amortization of other intangibles, divided by the company’s total non-GAAP revenue (calculated as net interest income plus noninterest income, less gains on sales of securities available for sale, net).

Pre-tax, pre-provision income for the relevant period is defined as GAAP net income, adjusted to reflect the impact of excluding income tax and provision expenses.

Pre-tax, pre-provision income on a fully tax equivalent basis for the relevant period is defined as GAAP net interest income on a fully tax equivalent basis plus noninterest income, less noninterest expense.

Tangible shareholders’ equity for the relevant period is defined as GAAP shareholders’ equity, net of intangible assets.

Contacts

Media Contact: Stephanie Hague: 816.860.5088

Investor Relations Contact: Kay Gregory: 816.860.7106

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