UMB Financial Corporation Reports Second Quarter Net Income of $137.6 Million

Second Quarter 2022 Financial Highlights

• GAAP net income of $137.6 million, or $2.83 per diluted share.

• Operating pre-tax, pre-provision income (Operating PTPP, a non-GAAP financial measure) of $187.1 million, an increase of 56.7% compared to the first quarter of 2022.

• Average loan balances increased $1.5 billion, or 8.9% compared to the second quarter of 2021.

• Excluding Paycheck Protection Program (PPP) balances, average loans increased 23.3% on a linked-quarter, annualized basis.

• Average deposits grew 13.7% compared to the second quarter of 2021.

• Net interest margin expanded 25 basis points from the linked quarter.

• Noninterest income increased 34.0% as compared to the second quarter of 2021, equal to 44.0% of total revenue.

KANSAS CITY, Mo., July 26, 2022--(BUSINESS WIRE)--UMB Financial Corporation (Nasdaq: UMBF), a financial services company, announced net income for the second quarter of 2022 of $137.6 million, or $2.83 per diluted share, compared to $106.0 million, or $2.17 per diluted share, in the first quarter of 2022 (linked quarter) and $87.4 million, or $1.79 per diluted share, in the second quarter of 2021. The results for the second quarter of 2022 include a pre-tax gain of $66.2 million on the sale of the company’s entire investment in Visa Inc. Class B common shares, and a pre-tax $5.0 million contribution to the company’s charitable foundation.

Net operating income, a non-GAAP financial measure reconciled later in this release to net income, the nearest comparable GAAP measure, was $137.6 million, or $2.83 per diluted share, for the second quarter of 2022, compared to $106.1 million, or $2.17 per diluted share, for the linked quarter and $87.6 million, or $1.80 per diluted share, for the second quarter of 2021. Operating PTPP, a non-GAAP measure reconciled later in this release to the components of net income before taxes, the nearest comparable GAAP measure, was $187.1 million, or $3.84 per diluted share, for the second quarter of 2022, compared to $119.4 million, or $2.44 per diluted share, for the linked quarter, and $131.6 million, or $2.71 per diluted share, for the second quarter of 2021. These operating PTPP results represent increases of 56.7% on a linked-quarter basis and 42.1%, compared to the second quarter of 2021, and include the benefit from the aforementioned gain on the sale of the company’s Visa Inc. Class B common shares net of the contribution to the company’s charitable foundation.

"Our strong financial results for the second quarter of 2022 were driven by a 23.3% linked-quarter annualized increase in average loans excluding PPP, strong net interest margin expansion, and continued momentum in our fee income businesses," said Mariner Kemper, chairman, president and chief executive officer. "Our strong loan growth, coupled with the benefits from higher short and long-term interest rates drove a 6.9% linked-quarter increase in net interest income. Our net charge-offs were elevated this quarter driven entirely by a $27.7 million write-down related to one commercial relationship. Nonperforming loans declined 83.6% from the prior quarter as the portfolio continues to perform well. During the quarter, we made a $5.0 million contribution to the UMB Financial Corporation Charitable Foundation to continue our support of diverse and impactful philanthropic organizations within the communities we serve."

Summary of quarterly financial results		UMB Financial Corporation
(unaudited, dollars in thousands, except per share data)
		Q2				Q1				Q2
		2022				2022				2021
Net income (GAAP)		$	137,556			$	105,963			$	87,412
Earnings per share (diluted)			2.83				2.17				1.79
Operating pre-tax, pre-provision income (Non-GAAP)			187,051				119,400				131,607
Operating pre-tax, pre-provision earnings per share (diluted)			3.84				2.44				2.71
Operating pre-tax, pre-provision income - FTE (Non-GAAP)			193,329				125,799				138,236
Operating pre-tax, pre-provision earnings per share - FTE (diluted)			3.97				2.57				2.84
Net operating income (Non-GAAP)			137,596				106,073				87,634
Operating earnings per share (diluted)			2.83				2.17				1.80
GAAP
Return on average assets			1.47	%			1.10	%			1.02	%
Return on average equity			20.83				14.65				11.43
Efficiency ratio			53.08				63.98				60.41
Non-GAAP
Operating return on average assets			1.47	%			1.10	%			1.03	%
Operating return on average equity			20.84				14.67				11.46
Operating efficiency ratio			53.06				63.93				60.33

Summary of year-to-date financial results		UMB Financial Corporation
(unaudited, dollars in thousands, except per share data)		June				June
		YTD				YTD
		2022				2021
Net income (GAAP)		$	243,519			$	180,055
Earnings per share (diluted)			4.99				3.70
Operating pre-tax, pre-provision income (Non-GAAP)			306,451				233,849
Operating pre-tax, pre-provision earnings per share (diluted)			6.29				4.81
Operating pre-tax, pre-provision income - FTE (Non-GAAP)			319,128				247,156
Operating pre-tax, pre-provision earnings per share - FTE (diluted)			6.55				5.09
Net operating income (Non-GAAP)			243,669				180,414
Operating earnings per share (diluted)			4.99				3.71
GAAP
Return on average assets			1.28	%			1.08	%
Return on average equity			17.60				11.98
Efficiency ratio			58.03				63.29
Non-GAAP
Operating return on average assets			1.28	%			1.08	%
Operating return on average equity			17.61				12.01
Operating efficiency ratio			58.00				63.21

Summary of revenue		UMB Financial Corporation
(unaudited, dollars in thousands)
		Q2				Q1				Q2				CQ vs.				CQ vs.
		2022				2022				2021				LQ				PY
Net interest income		$	224,791			$	210,355			$	201,071			$	14,436			$	23,720
Noninterest income:
Trust and securities processing			58,886				59,528				53,863				(642	)			5,023
Trading and investment banking			7,123				5,440				8,670				1,683				(1,547	)
Service charges on deposit accounts			20,835				24,642				22,592				(3,807	)			(1,757	)
Insurance fees and commissions			245				259				245				(14	)			—
Brokerage fees			12,391				3,456				2,592				8,935				9,799
Bankcard fees			17,840				16,635				16,063				1,205				1,777
Investment securities gains (losses), net			60,720				(522	)			15,455				61,242				45,265
Other			(1,705	)			14,240				12,109				(15,945	)			(13,814	)
Total noninterest income		$	176,335			$	123,678			$	131,589			$	52,657			$	44,746
Total revenue		$	401,126			$	334,033			$	332,660			$	67,093			$	68,466
Net interest income (FTE)		$	231,069			$	216,754			$	207,700
Net interest margin (FTE)			2.60	%			2.35	%			2.56	%
Total noninterest income as a % of total revenue			44.0				37.0				39.6

Net interest income

• Net interest income totaled $224.8 million, an increase of $14.4 million, or 6.9% from the linked quarter, driven by an increase of $956.9 million in average loans and the impact from increased short-term and long-term interest rates.

• Average earning assets decreased $1.8 billion, or 4.7%, largely driven by a decrease of $2.7 billion in interest-bearing due from banks, partially offset by the increase of $956.9 million in average loans noted above. Average interest-bearing liabilities declined $1.5 billion, or 6.8%, primarily driven by a decrease of $1.2 billion in interest-bearing deposits.

• Net interest margin for the second quarter was 2.60%, an increase of 25 basis points from the linked quarter, driven by an increase in loan yields of 23 basis points. Earning asset yields increased 39 basis points from the linked quarter, driven by the recent increases in short-term and long-term interest rates, mix changes, and the benefit of free funds. The cost of interest-bearing liabilities increased 26 basis points to 0.47%. Net interest spread increased 13 basis points to 2.39% from the linked quarter but was eight basis points lower than the second quarter of 2021.

• On a year-over-year basis, net interest income increased $23.7 million, or 11.8%, driven by a $2.3 billion, or 20.7% increase in average securities, coupled with a $1.5 billion, or 8.9%, increase in average loans. These increases were driven by organic loan growth and excess liquidity.

• Average deposits decreased 3.0% on a linked-quarter basis and increased 13.7% compared to the second quarter of 2021. Average noninterest-bearing demand deposit balances increased 1.3% on a linked-quarter basis and 32.8% compared to the second quarter of 2021.

Noninterest income

• Second quarter 2022 noninterest income increased $52.7 million on a linked-quarter basis, largely due to:

  • A gain of $66.2 million realized on the sale of the company’s Visa Inc. Class B common shares, partially offset by a decline of $3.7 million in mark-to-market gains on marketable securities, both recorded in investment securities gains, net.

  • An increase of $8.9 million in brokerage income, largely driven by increases in 12b-1 fees and money market income.

  • These increases were partially offset by decreases of $10.5 million in company-owned life insurance income and $4.2 million in derivative income, both recorded in other income, and a decrease of $3.8 million in service charges on deposits. The decrease in company-owned life insurance is offset by a proportionate decrease in deferred compensation expense as noted below. The decrease in service charges on deposits was primarily due to lower healthcare income related to customer transfer and conversion fees.

• Compared to the prior year, noninterest income in the second quarter of 2022 increased $44.7 million, or 34.0%, primarily driven by:

  • An increase of $45.3 million in investment securities gains, primarily due to the $66.2 million gain realized on the sale of the company’s Visa Inc. Class B common shares, partially offset by declines of $14.1 million and $5.5 million in mark-to-market gains on marketable securities and non-marketable securities, respectively.

  • An increase of $9.8 million in brokerage income, largely driven by increases in 12b-1 fees and money market income.

  • Increases of $3.7 million and $1.7 million in fund services income and corporate trust income, respectively, both recorded in trust and securities processing.

  • These increases were partially offset by decreases of $11.6 million in company-owned life insurance income and $2.6 million in derivative income, both recorded in other income, and a decrease of $1.8 million in service charges on deposits. The decrease in company-owned life insurance is offset by a proportionate decrease in deferred compensation expense as noted below. The decrease in service charges on deposits was primarily due to lower healthcare income related to customer transfer and conversion fees.

Noninterest expense

Summary of noninterest expense		UMB Financial Corporation
(unaudited, dollars in thousands)
		Q2				Q1				Q2				CQ vs.				CQ vs.
		2022				2022				2021				LQ				PY
Salaries and employee benefits		$	121,390			$	130,634			$	120,415			$	(9,244	)		$	975
Occupancy, net			11,976				12,232				12,296				(256	)			(320	)
Equipment			18,315				18,164				19,196				151				(881	)
Supplies and services			3,492				3,262				3,469				230				23
Marketing and business development			5,308				4,932