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UMB Financial Corporation Reports Third Quarter Net Income of $94.5 Million

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

  • GAAP net income of $94.5 million, or $1.94 per diluted share; net operating income of $95.1 million, or $1.95 per diluted share.

  • Pre-tax, pre-provision (PTPP) income of $108.8 million, an increase of $9.4 million.

  • Quarterly average loan balances increased $1.0 billion, or 6.5%.

  • Excluding Paycheck Protection Program (PPP) balances, average loans increased 15.3% on a linked-quarter, annualized basis.

  • Quarterly average deposits grew 22.0% to $29.4 billion.

KANSAS CITY, Mo., October 26, 2021--(BUSINESS WIRE)--UMB Financial Corporation (Nasdaq: UMBF), a financial services company, announced net income for the third quarter of 2021 of $94.5 million, or $1.94 per diluted share, compared to $87.4 million, or $1.79 per diluted share, in the second quarter of 2021 (linked quarter) and $73.1 million, or $1.52 per diluted share, in the third 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 $95.1 million, or $1.95 per diluted share, for the third quarter of 2021, compared to $87.6 million, or $1.80 per diluted share, for the linked quarter and $76.4 million, or $1.59 per diluted share, for the third 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 $115.3 million, or $2.37 per diluted share, for the third quarter of 2021, compared to $138.0 million, or $2.83 per diluted share, for the linked quarter, and $106.2 million, or $2.21 per diluted share, for the third quarter of 2020. These PTPP-FTE results represent a decrease of 16.4% on a linked-quarter basis and an increase of 8.6% compared to the third quarter of 2020.

Summary of quarterly financial results

UMB Financial Corporation

(unaudited, dollars in thousands, except per share data)

Q3

Q2

Q3

2021

2021

2020

Net income (GAAP)

$

94,467

$

87,412

$

73,092

Earnings per share (diluted)

1.94

1.79

1.52

Pre-tax, pre-provision income (Non-GAAP)

108,803

131,322

99,385

Pre-tax, pre-provision earnings per share (diluted)

2.23

2.70

2.07

Pre-tax, pre-provision income - FTE (Non-GAAP)

115,347

137,951

106,182

Pre-tax, pre-provision earnings per share - FTE (diluted)

2.37

2.83

2.21

Net operating income (Non-GAAP)

95,112

87,634

76,434

Operating earnings per share (diluted)

1.95

1.80

1.59

GAAP

Return on average assets

1.04

%

1.02

%

0.99

%

Return on average equity

11.89

11.43

10.23

Efficiency ratio

65.62

60.41

66.14

Non-GAAP

Operating return on average assets

1.05

%

1.03

%

1.03

%

Operating return on average equity

11.97

11.46

10.70

Operating efficiency ratio

65.36

60.33

64.69

Summary of year-to-date financial results

UMB Financial Corporation

(unaudited, dollars in thousands, except per share data)

September

September

YTD

YTD

2021

2020

Net income (GAAP)

$

274,522

$

130,182

Earnings per share (diluted)

5.64

2.69

Pre-tax, pre-provision income (Non-GAAP)

342,191

273,283

Pre-tax, pre-provision earnings per share (diluted)

7.03

5.65

Pre-tax, pre-provision income - FTE (Non-GAAP)

362,042

293,162

Pre-tax, pre-provision earnings per share - FTE (diluted)

7.44

6.06

Net operating income (Non-GAAP)

275,526

138,388

Operating earnings per share (diluted)

5.66

2.86

GAAP

Return on average assets

1.07

%

0.62

%

Return on average equity

11.95

6.30

Efficiency ratio

64.06

68.40

Non-GAAP

Operating return on average assets

1.07

%

0.66

%

Operating return on average equity

11.99

6.69

Operating efficiency ratio

63.93

67.18

"Our market share gains continue to differentiate us from our peers as evidenced in our third quarter 2021 results," said Mariner Kemper, chairman, president and chief executive officer. "Excluding PPP, average loans increased 15.3% on a linked quarter annualized basis, driven by solid performance in commercial and industrial lending, as well as in both commercial and residential real estate. Asset quality remained strong in the quarter, with net charge offs of just seven basis points and a $5.0 million reduction in provision for credit losses. Additionally, on a year-to-date basis, total revenue increased 9.8% compared to 2020 despite a challenging interest rate environment, highlighting the resilience of our business model."

Summary of revenue

UMB Financial Corporation

(unaudited, dollars in thousands)

Q3

Q2

Q3

CQ vs.

CQ vs.

2021

2021

2020

LQ

PY

Net interest income

$

209,765

$

201,071

$

184,384

$

8,694

$

25,381

Noninterest income:

Trust and securities processing

56,914

53,863

50,552

3,051

6,362

Trading and investment banking

5,936

8,670

8,678

(2,734

)

(2,742

)

Service charges on deposit accounts

19,881

22,592

19,650

(2,711

)

231

Insurance fees and commissions

285

245

259

40

26

Brokerage fees

2,899

2,592

4,819

307

(1,920

)

Bankcard fees

17,198

16,063

15,295

1,135

1,903

Investment securities (losses) gains, net

(3,510

)

15,455

(475

)

(18,965

)

(3,035

)

Other

8,304

12,109

14,218

(3,805

)

(5,914

)

Total noninterest income

$

107,907

$

131,589

$

112,996

$

(23,682

)

$

(5,089

)

Total revenue

$

317,672

$

332,660

$

297,380

$

(14,988

)

$

20,292

Net interest income (FTE)

$

216,309

$

207,700

$

191,181

Net interest margin (FTE)

2.52

%

2.56

%

2.73

%

Total noninterest income as a % of total revenue

33.97

39.56

38.00

Net interest income

  • Net interest income totaled $209.8 million, which is an increase of $8.7 million as compared to the linked quarter. The benefit from growth in average earning assets was partially offset by reduced income from PPP loans. Average earning assets increased $1.5 billion, or 4.7%, driven by an increase in liquidity and investment securities, while interest-bearing liabilities increased $799.2 million, or 4.0%.

  • Net interest margin for the third quarter was 2.52%, a decrease of four basis points from the linked quarter, driven in large part by earning asset mix shift. Earning asset yields declined five basis points from the linked quarter, driven by a three-basis-point decline in securities yields and mix changes. The cost of interest-bearing liabilities decreased one basis point to 0.22%. Net interest spread decreased four basis points to 2.43% from the linked quarter and was 20 basis points lower than the third quarter of 2020.

  • On a year-over-year basis, net interest income increased $25.4 million, or 13.8%, driven by a $2.1 billion, or 21.3% increase in average securities, coupled with a $1.0 billion, or 6.5%, increase in average loans. These increases were driven by organic loan growth, excess liquidity, and the company’s PPP participation.

  • Average deposits increased 5.9% on a linked-quarter basis and 22.0% compared to the third quarter of 2020. Average noninterest-bearing demand deposit balances increased 6.5% on a linked-quarter basis and 38.0% compared to the third quarter of 2020.

Noninterest income

  • Third quarter 2021 noninterest income decreased $23.7 million, or 18.0%, on a linked-quarter basis, largely due to:

    • A decrease of $19.0 million in investment securities gains, driven by a mark-to-market decline of $13.2 million on the company’s marketable investments, primarily in Tattooed Chef, Inc. (TTCF), as well as $5.6 million in lower gains on other equity investments that benefited the prior quarter.

    • A decrease of $3.5 million in derivative income, recorded in other income.

    • Decreases of $2.7 million in both trading and investment banking and service charges on deposits due to lower trading volume and reduced healthcare income related to customer transfer and conversion fees realized in the prior quarter, respectively.

    • These decreases were offset by increases of $3.1 million in trust and securities processing income and $1.1 million in bankcard fees. The increase in trust and securities processing income is primarily driven by increases of $2.6 million in fund services income and $0.3 million in trust services income. The increase in bankcard income is due to increased interchange income and reduced rebates expense.

  • Compared to the prior year, noninterest income in the third quarter of 2021 decreased $5.1 million, or 4.5%, primarily driven by:

    • A decrease of $4.0 million and $3.4 million in company-owned life insurance income and derivative income, respectively, both recorded in other income. The decrease in company-owned life insurance is offset by a proportionate decrease in deferred compensation expense as noted below.

    • A decrease of $3.0 million in investment securities gains, primarily due to mark-to-market valuations on the company’s equity investment in TTCF.

    • A $2.7 million decrease in trading and investment banking due to decreased trading volumes.

    • These decreases were offset by an increase of $6.4 million in trust and securities processing income and an increase of $1.1 million in bank-owned life insurance, recorded in other income. The increase in trust and securities processing was driven by increases of $7.2 million and $1.3 million in fund services income and corporate trust income, respectively, partially offset by a decrease of $2.2 million trust services income.

Noninterest expense

Summary of noninterest expense

UMB Financial Corporation

(unaudited, dollars in thousands)

Q3

Q2

Q3

CQ vs.

CQ vs.

2021

2021

2020

LQ

PY

Salaries and employee benefits

$

124,986

$

120,415

$

124,194

$

4,571

$

792

Occupancy, net

12,207

12,296

12,027

(89

)

180

Equipment

19,701

19,196

20,968

505

(1,267

)

Supplies and services

3,379

3,469

3,442

(90

)

(63

)

Marketing and business development

4,863

4,797

3,038

66

1,825

Processing fees

16,562

16,501

12,812

61

3,750

Legal and consulting

7,646

8,147

7,244

(501

)

402

Bankcard

4,795

4,529

4,834

266

(39

)

Amortization of other intangible assets

1,110

1,157

1,524

(47

)

(414

)

Regulatory fees

3,186

2,769

2,309

417

877

Other

10,434

8,062

5,603

2,372

4,831

Total noninterest expense

$

208,869

$

201,338

$

197,995

$

7,531

$

10,874

  • Noninterest expense for the third quarter of 2021 was $208.9 million, an increase of $7.5 million, or 3.7%, from the linked quarter and an increase of $10.9 million, or 5.5%, from the third quarter of 2020.

  • The linked-quarter increase in noninterest expense was driven by:

    • An increase of $4.6 million in salaries and employee benefits, driven primarily by increased bonus expense from higher company performance.

    • An increase of $2.7 million in operational losses, recorded in other expense.

  • The year-over-year increase in noninterest expense was driven by:

    • An increase of $3.8 million in processing fees, due to timing of software projects.

    • Increases of $3.0 million in operational losses and $1.3 million in charitable contributions expense, both recorded in other expense.

    • Increases of $1.2 million in travel and entertainment expense and $0.7 million in advertising expense, both recorded in marketing and business development.

    • An increase of $0.8 million in salary and benefit expense, driven by an increase of $4.5 million in salary and bonus expense, partially offset by a decrease of $3.7 million in employee benefit expense. The decline in employee benefit expense was primarily driven by a decrease of $2.7 million in deferred compensation expense. The decrease in deferred compensation expense was offset by the decrease in company-owned life insurance income noted above.

Income taxes

  • The company’s effective tax rate was 17.0% for the nine months ended September 30, 2021, compared to 11.9% for the same period in 2020. The increase in the effective tax 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 third quarter of 2021 were $35.9 billion compared to $34.3 billion for the linked quarter and $29.5 billion for the same period in 2020.

Summary of average loans and leases - QTD Average

UMB Financial Corporation

(unaudited, dollars in thousands)

Q3

Q2

Q3

CQ vs.

CQ vs.

2021

2021

2020

LQ

PY

Commercial and industrial

$

7,097,248

$

7,402,653

$

7,043,780

$

(305,405

)

$

53,468

Specialty lending

486,021

505,687

456,847

(19,666

)

29,174

Commercial real estate

6,285,348

6,165,780

5,744,344

119,568

541,004

Consumer real estate

2,178,010

2,068,663

1,755,249

109,347

422,761

Consumer

115,702

122,439

150,814

(6,737

)

(35,112

)

Credit cards

400,189

386,032

371,444

14,157

28,745

Leases and other

194,235

166,420

209,238

27,815

(15,003

)

Total loans

$

16,756,753

$

16,817,674

$

15,731,716

$

(60,921

)

$

1,025,037

  • Average loans for the third quarter of 2021 decreased 0.4% on a linked-quarter basis and increased 6.5% compared to the third quarter of 2020 primarily due to the company’s participation in the PPP. Excluding PPP balances, average loans increased 3.8% on a linked-quarter basis.

Summary of average securities - QTD Average

UMB Financial Corporation

(unaudited, dollars in thousands)

Q3

Q2

Q3

CQ vs.

CQ vs.

2021

2021

2020

LQ

PY

Securities available for sale:

U.S. Treasury

$

17,903

$

40,013

$

30,881

$

(22,110

)

$

(12,978

)

U.S. Agencies

94,049

94,794

242,504

(745

)

(148,455

)

Mortgage-backed

6,766,619

6,096,099

4,829,586

670,520

1,937,033

State and political subdivisions

3,530,031

3,565,443

3,407,508

(35,412

)

122,523

Commercial Paper

3,478

(3,478

)

Corporates

158,326

127,581

58,866

30,745

99,460

Total securities available for sale

$

10,566,928

$

9,923,930

$

8,572,823

$

642,998

$

1,994,105

Securities held to maturity:

State and political subdivisions

$

1,073,133

$

1,057,091

$

1,085,297

$

16,042

$

(12,164

)

Trading securities

25,392

21,409

32,894

3,983

(7,502

)

Other securities

262,453

302,981

156,816

(40,528

)

105,637

Total securities

$

11,927,906

$

11,305,411

$

9,847,830

$

622,495

$

2,080,076

  • Average securities available for sale increased 6.5% on a linked-quarter basis and 23.3% compared to the third quarter of 2020.

Summary of average deposits - QTD Average

UMB Financial Corporation

(unaudited, dollars in thousands)

Q3

Q2

Q3

CQ vs.

CQ vs.

2021

2021

2020

LQ

PY

Deposits:

Noninterest-bearing demand

$

11,400,143

$

10,701,656

$

8,260,170

$

698,487

$

3,139,973

Interest-bearing demand and savings

17,376,135

16,421,742

15,125,267

954,393

2,250,868

Time deposits

651,727

659,228

741,750

(7,501

)

(90,023

)

Total deposits

$

29,428,005

$

27,782,626

$

24,127,187

$

1,645,379

$

5,300,818

Noninterest bearing deposits as % of total

38.74

%

38.52

%

34.24

%

  • Average deposits increased 5.9% on a linked-quarter basis and 22.0% compared to the third quarter of 2020.

  • Average noninterest-bearing demand deposits increased 6.5% on a linked-quarter basis to $11.4 billion.

Capital

Capital information

UMB Financial Corporation

(unaudited, dollars in thousands, except per share data)

September 30,
2021

June 30,
2021

September 30,
2020

Total equity

$

3,112,840

$

3,090,244

$

2,854,180

Book value per common share

64.37

63.92

59.43

Tangible book value per common share

60.44

59.96

...

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