UMB Financial Corporation Reports Second Quarter 2020 Net Income of $60.5 Million

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Second Quarter 2020 Highlights  

  • GAAP net income of $60.5 million, or $1.26 per diluted share; operating net income of $63.8 million, or $1.33 per diluted share.

  • Pre-tax, pre-provision (PTPP) income of $90.2 million, an increase of 7.6% from the linked quarter.

  • Total revenue increased 9.7% to $298.7 million, compared to the linked quarter.

  • Average loans, excluding Paycheck Protection Program (PPP) balances, increased 8.2% on a linked-quarter annualized basis.

  • Loans recorded under the PPP totaled $1.5 billion as of June 30, 2020.

  • Average deposits grew $2.0 billion to $22.8 billion compared to the first quarter of 2020.

  • GAAP book value per share of $57.84, a 14.5% increase, and tangible book value per share of $53.57, a 15.1% increase compared to a year ago.

  • Credit quality remained strong, with net charge-offs of just 0.15% of average loans, consistent with the companys historical performance.

UMB Financial Corporation (Nasdaq: UMBF), a financial services company, announced net income for the second quarter of 2020 of $60.5 million, or $1.26 per diluted share, compared to a net loss of $3.4 million in the first quarter of 2020 (linked quarter) and net income of $57.0 million, or $1.16 per diluted share, in the second quarter of 2019.

Net operating income, a non-GAAP financial measure reconciled to net income, the nearest comparable GAAP measure, later in this release, was $63.8 million, or $1.33 per diluted share, for the second quarter of 2020, compared to a net operating loss of $1.9 million for the linked quarter and net operating income of $57.2 million, or $1.17 per diluted share, for the second quarter of 2019. Pre-tax, pre-provision income (PTPP), a non-GAAP measure reconciled to net income before taxes, the nearest comparable GAAP measure, later in this release, was $90.2 million, or $1.88 per diluted share, for the second quarter of 2020, compared to $83.7 million, or $1.72 per diluted share, for the linked quarter, and $78.4 million, or $1.60 per diluted share, for the second quarter of 2019. These PTPP results represent increases of 7.6% on a linked-quarter basis and 15.0% compared to the second quarter of 2019.

Summary of quarterly financial results

 

UMB Financial Corporation

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q2

 

 

Q1

 

 

Q2

 

 

 

2020

 

 

2020

 

 

2019

 

Net income (loss)

 

$

60,529

 

 

$

(3,439

)

 

$

56,959

 

Earnings (losses) per share (diluted)

 

 

1.26

 

 

 

(0.07

)

 

 

1.16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax, pre-provision income

 

 

90,152

 

 

 

83,746

 

 

 

78,425

 

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

 

 

1.88

 

 

 

1.72

 

 

 

1.60

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating income (loss)

 

 

63,835

 

 

 

(1,881

)

 

 

57,245

 

Operating earnings (losses) per share (diluted)

 

 

1.33

 

 

 

(0.04

)

 

 

1.17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets

 

 

0.87

%

 

 

(0.05

)%

 

 

0.98

%

Return on average equity

 

 

8.95

 

 

 

(0.51

)

 

 

9.46

 

Efficiency ratio

 

 

70.20

 

 

 

68.93

 

 

 

70.32

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP

 

 

 

 

 

 

 

 

 

 

 

 

Operating return on average assets

 

 

0.91

%

 

 

(0.03

)%

 

 

0.99

%

Operating return on average equity

 

 

9.44

 

 

 

(0.28

)

 

 

9.51

 

Operating efficiency ratio

 

 

68.76

 

 

 

68.19

 

 

 

70.19

 

Summary of year-to-date financial results

 

UMB Financial Corporation

 

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

 

June

 

 

June

 

 

 

YTD

 

 

YTD

 

 

 

2020

 

 

2019

 

Net income

 

$

57,090

 

 

$

114,703

 

Earnings per share (diluted)

 

 

1.18

 

 

 

2.34

 

 

 

 

 

 

 

 

 

 

Pre-tax, pre-provision income

 

 

173,898

 

 

 

159,049

 

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

 

 

3.59

 

 

 

3.24

 

 

 

 

 

 

 

 

 

 

Net operating income

 

 

61,954

 

 

 

115,453

 

Operating earnings per share (diluted)

 

 

1.28

 

 

 

2.36

 

 

 

 

 

 

 

 

 

 

GAAP

 

 

 

 

 

 

 

 

Return on average assets

 

 

0.42

%

 

 

1.00

%

Return on average equity

 

 

4.22

 

 

 

9.95

 

Efficiency ratio

 

 

69.59

 

 

 

70.16

 

 

 

 

 

 

 

 

 

 

Non-GAAP

 

 

 

 

 

 

 

 

Operating return on average assets

 

 

0.46

%

 

 

1.01

%

Operating return on average equity

 

 

4.58

 

 

 

10.01

 

Operating efficiency ratio

 

 

68.49

 

 

 

69.98

 

"As the country continues to navigate its way through an uncertain economic environment, our second quarter results highlight the strength of our fortress balance sheet and the quality of our underwriting practices, as evidenced by just 15 basis points of net charge-offs. Additionally, we added $1.5 billion in loans under the Paycheck Protection Program (PPP) during the quarter," said Mariner Kemper, chairman, president and chief executive officer. "Despite the unprecedented times, average loans, excluding PPP balances, increased 8.2% on a linked-quarter annualized basis. Finally, we launched our corporate citizenship report outlining some of our 2019 environmental, social and governance efforts, which has been a collaborative effort of listening to, and engaging with, our associates, customers, and communities."

Summary of revenue

 

UMB Financial Corporation

 

(unaudited, dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q2

 

 

Q1

 

 

Q2

 

 

CQ vs.

 

 

CQ vs.

 

 

 

2020

 

 

2020

 

 

2019

 

 

LQ

 

 

PY

 

Net interest income

 

$

178,229

 

 

$

173,941

 

 

$

166,414

 

 

$

4,288

 

 

$

11,815

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trust and securities processing

 

 

46,321

 

 

 

47,000

 

 

 

42,903

 

 

 

(679

)

 

 

3,418

 

Trading and investment banking

 

 

12,851

 

 

 

1,723

 

 

 

5,453

 

 

 

11,128

 

 

 

7,398

 

Service charges on deposit accounts

 

 

19,074

 

 

 

25,081

 

 

 

20,747

 

 

 

(6,007

)

 

 

(1,673

)

Insurance fees and commissions

 

 

533

 

 

 

259

 

 

 

465

 

 

 

274

 

 

 

68

 

Brokerage fees

 

 

5,753

 

 

 

9,860

 

 

 

7,077

 

 

 

(4,107

)

 

 

(1,324

)

Bankcard fees

 

 

12,916

 

 

 

16,545

 

 

 

16,439

 

 

 

(3,629

)

 

 

(3,523

)

Gains (losses) on sales of securities available for sale, net

 

 

4,006

 

 

 

1,227

 

 

 

(1,403

)

 

 

2,779

 

 

 

5,409

 

Other

 

 

19,002

 

 

 

(3,271

)

 

 

13,717

 

 

 

22,273

 

 

 

5,285

 

Total noninterest income

 

$

120,456

 

 

$

98,424

 

 

$

105,398

 

 

$

22,032

 

 

$

15,058

 

Total revenue

 

$

298,685

 

 

$

272,365

 

 

$

271,812

 

 

$

26,320

 

 

$

26,873

 

Net interest margin

 

 

2.79

%

 

 

2.97

%

 

 

3.19

%

 

 

 

 

 

 

 

 

Total noninterest income as a % of total revenue

 

 

40.33

 

 

 

36.14

 

 

 

38.78

 

 

 

 

 

 

 

 

 

Net interest income

  • Net interest income totaled $178.2 million, an increase of $4.3 million, or 2.5%, from the linked quarter, driven by a $1.5 billion, or 10.9%, increase in average loans, and an 8.7% increase in average earning assets. The increase in loan balances was primarily driven by the companys participation in the PPP, which contributed $1.5 billion in balances. While new loan production during the quarter remained strong, this growth was negated by normalization of line utilization activity which spiked in the first quarter following the initial impact of the COVID-19 pandemic.

  • Net interest margin for the second quarter was 2.79%, a decrease of 18 basis points from the linked quarter, in large part due to lower short-term interest rates and a build-up of excess liquidity. Earning asset yields declined 57 basis points from the linked quarter, driven by declining yields in the loan portfolio due to recent reductions in short-term interest rates and an unfavorable earning asset mix shift driven by excess liquidity and, to a lesser extent, the impact of lower-yielding PPP loans. Federal funds and resell agreements, interest-bearing due from banks, and trading securities averaged $2.3 billion, an 11.4% increase from $2.1 billion in the linked quarter. The cost of interest-bearing liabilities decreased 58 basis points to 0.34%, driven by a 53-basis-point decline in the cost of interest-bearing deposits and lower borrowing costs. Net interest spread increased one basis point to 2.67 from the linked quarter and was five basis points lower than the second quarter of 2019.

  • On a year-over-year basis, net interest income increased $11.8 million, or 7.1%, driven by a $2.5 billion, or 19.6%, increase in average loans, and a $4.9 billion, or 22.7%, increase in earning assets.

  • Average deposits increased 9.4% on a linked-quarter basis and 21.3% compared to the second quarter of 2019. Average noninterest-bearing demand deposit balances increased 18.0% on a linked-quarter basis and 26.1% compared to the second quarter of 2019.

Noninterest income

  • Second quarter 2020 noninterest income increased $22.0 million, or 22.4%, on a linked-quarter basis, largely due to:

    • An increase of $24.8 million in company-owned life insurance income, reflecting the impact of higher market valuations of the underlying investments, recorded in other income. The increase in company-owned life insurance income is offset by a proportionate increase in deferred compensation expense as noted below.

    • An increase of $11.1 million in trading and investment banking, primarily driven by higher trading volumes, as well as an increase of $4.9 million in market valuation of investments in the companys trading portfolio.

    • These increases were partially offset by the following decreases:

      • A decrease of $5.5 million in healthcare income, recorded in service charges on deposits, related to non-recurring customer transfer and conversion fees recorded in the first quarter.

      • A decrease of $4.1 million in brokerage fees, primarily driven by decreased 12b-1 income.

      • A decrease of $3.6 million in bankcard fees, primarily due to decreased interchange income.

  • Compared to the prior year, noninterest income in the second quarter of 2020 increased $15.1 million, or 14.3%, primarily driven by:

    • An increase of $8.9 million in company-owned life insurance, recorded in other income. The increase in company-owned life insurance income is offset by a proportionate increase in deferred compensation expense as noted below.

    • An increase of $7.4 million in trading and investment banking, primarily driven by higher trading volumes, as well as an increase of $1.1 million in market valuation of investments in the companys trading portfolio.

    • An increase of $5.4 million in gains on sales of available-for-sale securities.

    • These increases were partially offset by the following decreases:

      • A decrease of $3.5 million in bankcard fees, primarily due to decreased interchange income.

      • A decrease of $1.3 million in brokerage fees, primarily due to decreased 12b-1 income.

      • A decrease of $1.0 million in equity earnings on alternative investments, recorded in other income.

Noninterest expense

Summary of noninterest expense

 

UMB Financial Corporation

 

(unaudited, dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q2

 

 

Q1

 

 

Q2

 

 

CQ vs.

 

 

CQ vs.

 

 

 

2020

 

 

2020

 

 

2019

 

 

LQ

 

 

PY

 

Salaries and employee benefits

 

$

130,938

 

 

$

111,060

 

 

$

114,454

 

 

$

19,878

 

 

$

16,484

 

Occupancy, net

 

 

11,411

 

 

 

12,180

 

 

 

11,539

 

 

 

(769

)

 

 

(128

)

Equipment

 

 

21,502

 

 

 

21,241

 

 

 

18,824

 

 

 

261

 

 

 

2,678

 

Supplies and services

 

 

3,785

 

 

 

4,185

 

 

 

4,285

 

 

 

(400

)

 

 

(500

)

Marketing and business development

 

 

3,284

 

 

 

4,640

 

 

 

7,304

 

 

 

(1,356

)

 

 

(4,020

)

Processing fees

 

 

13,603

 

 

 

13,390

 

 

 

13,096

 

 

 

213

 

 

 

507

 

Legal and consulting

 

 

6,220

 

 

 

6,110

 

 

 

7,496

 

 

 

110

 

 

 

(1,276

)

Bankcard

 

 

4,549

 

 

 

4,860

 

 

 

4,701

 

 

 

(311

)

 

 

(152

)

Amortization of other intangible assets

 

 

1,658

 

 

 

1,734

 

 

 

1,251

 

 

 

(76

)

 

 

407

 

Regulatory fees

 

 

3,211

 

 

 

2,366

 

 

 

2,910

 

 

 

845

 

 

 

301

 

Other

 

 

8,372

 

 

 

6,853

 

 

 

7,527

 

 

 

1,519

 

 

 

845

 

Total noninterest expense

 

$

208,533

 

 

$

188,619

 

 

$

193,387

 

 

$

19,914

 

 

$

15,146

 

  • GAAP noninterest expense for the second quarter of 2020 was $208.5 million, an increase of $19.9 million, or 10.6%, from the linked quarter and an increase of $15.1 million, or 7.8%, from the second quarter of 2019. Expenses for the quarter included $4.0 million in non-recurring compensation and other costs tied to the companys COVID-19 response.

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

    • An increase of $19.9 million in salaries and employee benefits, largely driven by a $24.6 million increase in deferred compensation expense, which was offset by the increase in company-owned life insurance income noted above. This increase was partially offset by a decrease of $5.5 million in payroll taxes and profit sharing and 401(k) expense.

    • An increase of $1.5 million in other expense driven by operational losses in the second quarter.

    • These increases were partially offset by a decrease of $1.4 million in marketing and business development expense due to a decline in travel and entertainment expenses in the second quarter due to the pandemic.

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

    • A $16.5 million increase in salaries and employee benefits, primarily due to increases of $9.8 million in deferred compensation expense, $3.5 million in bonus and commission expense, and $3.2 million in salary and wage expense, which included compensation expense tied to the companys COVID-19 response. The increase in deferred compensation expense was offset by the increase in company-owned life insurance income noted above.

    • An increase of $2.7 million in equipment expense, due to investments in digital channel and integrated platform solutions to support business growth and the ongoing modernization of the companys core systems.

    • These increases were partially offset by a decrease of $4.0 million in marketing and business development expense primarily due to a decline in travel and entertainment expense due to the pandemic.

Income taxes

  • The companys effective tax rate was 11.3% for the six months ended June 30, 2020, compared to 15.5% for the same period in 2019. The decrease in the effective rate for 2020 is primarily attributable to a larger portion of income being earned from tax-exempt municipal securities.

Balance sheet

  • Average total assets for the second quarter of 2020 were $28.1 billion compared to $26.0 billion for the linked quarter and $23.3 billion for the same period in 2019.

Summary of average loans and leases - QTD Average

UMB Financial Corporation

 

(unaudited, dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q2

 

 

Q1

 

 

Q2

 

 

CQ vs.

 

 

CQ vs.

 

 

 

2020

 

 

2020

 

 

2019

 

 

LQ

 

 

PY

 

Commercial and industrial

 

$

6,970,223

 

 

$

5,786,545

 

 

$

5,278,626

 

 

$

1,183,678

 

 

$

1,691,597

 

Specialty lending

 

 

471,571

 

 

 

510,316

 

 

 

682,306

 

 

 

(38,745

)

 

 

(210,735

)

Commercial real estate

 

 

5,435,428

 

 

 

5,181,036

 

 

 

4,696,665

 

 

 

254,392

 

 

 

738,763

 

Consumer real estate

 

 

1,528,501

 

 

 

1,414,025

 

 

 

1,241,078

 

 

 

114,476

 

 

 

287,423

 

Consumer

 

 

146,120

 

 

 

141,972

 

 

 

132,662

 

 

 

4,148

 

 

 

13,458

 

Credit cards

 

 

353,424

 

 

 

418,485

 

 

 

427,176

 

 

 

(65,061

)

 

 

(73,752

)

Leases and other

 

 

193,099

 

 

 

164,187

 

 

 

162,468

 

 

 

28,912

 

 

 

30,631

 

Total loans

 

$

15,098,366

 

 

$

13,616,566

 

 

$

12,620,981

 

 

$

1,481,800

 

 

$

2,477,385

 

  • Average loans for the second quarter of 2020 increased 10.9% on a linked-quarter basis and 19.6% compared to the second quarter of 2019, primarily due to the companys participation in PPP, which had an average balance of $1.2 billion in the second quarter.

Summary of average securities - QTD Average

 

UMB Financial Corporation

 

(unaudited, dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q2

 

 

Q1

 

 

Q2

 

 

CQ vs.

 

 

CQ vs.

 

 

 

2020

 

 

2020

 

 

2019

 

 

LQ

 

 

PY

 

Securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

31,150

 

 

$

49,638

 

 

$

256,949

 

 

$

(18,488

)

 

$

(225,799

)

U.S. Agencies

 

 

403,290

 

 

 

94,342

 

 

 

91,822

 

 

 

308,948

 

 

 

311,468

 

Mortgage-backed

 

 

4,284,374

 

 

 

4,133,118

 

 

 

3,926,164

 

 

 

151,256

 

 

 

358,210

 

State and political subdivisions

 

 

3,108,661

 

 

 

3,058,594

 

 

 

2,659,397

 

 

 

50,067

 

 

 

449,264

 

Corporates

 

 

98,089

 

 

 

188,257

 

 

 

84,910

 

 

 

(90,168

)

 

 

13,179

 

Commercial Paper

 

 

2,040

 

 

 

 

 

 

 

 

 

2,040

 

 

 

2,040

 

Total securities available for sale

 

$

7,927,604

 

 

$

7,523,949

 

 

$

7,019,242

 

 

$

403,655

 

 

$

908,362

 

Securities held to maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

State and political subdivisions

 

$

1,100,843

 

 

$

1,108,716

 

 

$

1,128,526

 

 

$

(7,873

)

 

$

(27,683

)

Trading securities

 

 

37,816

 

 

 

48,102

 

 

 

61,565

 

 

 

(10,286

)

 

 

(23,749

)

Other securities

 

 

148,918

 

 

 

124,795

 

 

 

80,097

 

 

 

24,123

 

 

 

68,821

 

Total securities

 

$

9,215,181

 

 

$

8,805,562

 

 

$

8,289,430

 

 

$

409,619

 

 

$

925,751

 

  • Average securities available for sale increased 5.4% on a linked-quarter basis and 12.9% compared to the second quarter of 2019.

Summary of average deposits - QTD Average

UMB Financial Corporation

 

(unaudited, dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q2

 

 

Q1

 

 

Q2

 

 

CQ vs.

 

 

CQ vs.

 

 

 

2020

 

 

2020

 

 

2019

 

 

LQ

 

 

PY

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing demand

 

$

7,662,836

 

 

$

6,495,611

 

 

$

6,078,520

 

 

$

1,167,225

 

 

$

1,584,316

 

Interest-bearing demand and savings

 

 

14,160,722

 

 

 

13,232,370

 

 

 

11,740,634

 

 

 

928,352

 

 

 

2,420,088

 

Time deposits

 

 

...

957,007

1,097,780

966,719

(140,773

)

(9,712

)

Total deposits

$

22,780,565

$

20,825,761

$

18,785,873

$

1,954,804

$

3,994,692

Noninterest bearing deposits as % of total

33.64

%

31.19

%

32.36

%

  • Average deposits increased 9.4% on a linked-quarter basis and 21.3% compared to the second quarter of 2019.

  • Average noninterest-bearing demand deposits increased 18.0% on a linked-quarter basis to $7.7 billion.

Capital

Capital information

UMB Financial Corporation

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

June 30, 2020

March 31, 2020

June 30, 2019

Total equity

$

2,777,395

$

2,663,441

$

2,477,790

Book value per common share

57.84

55.33

50.50

Tangible book value per common share

53.57

51.04

46.56

Regulatory capital:

Common equity Tier 1 capital

$

2,335,625

$

2,279,039

$

2,236,930

Tier 1 capital

2,335,625

2,279,039

2,236,930

Total capital

2,580,849

2,514,445

2,411,510

Regulatory capital ratios:

Common equity Tier 1 capital ratio

11.92

%

11.90

%

12.65

%

Tier 1 risk-based capital ratio

11.92

11.90

12.65

Total risk-based capital ratio

13.17

13.12

13.63

Tier 1 leverage ratio

8.35

8.81

9.69

  • At June 30, 2020, the regulatory capital ratios presented in the foregoing table exceeded all "well-capitalized" regulatory thresholds.

  • The company did not execute any open market share repurchases during the second quarter, outside of the completion of the $30 million accelerated share repurchase program that was entered into in early March.

Asset Quality

Credit quality

UMB Financial Corporation

(unaudited, dollars in thousands)

Q2

Q1

Q4

Q3

Q2

2020

2020

2019

2019

2019

Net charge-offs - Total loans

$

5,541

$

7,672

$

7,618

$

2,186

$

12,569

Net loan charge-offs as a % of total average loans

0.15

%

0.23

%

0.23

%

0.07

%

0.40

%

Loans over 90 days past due

$

4,588

$

2,211

$

2,069

$

2,466

$

1,825

Loans over 90 days past due as a % of total loans

0.03

%

0.02

%

0.02

%

0.02

%

0.01

%

Nonaccrual and restructured loans

$

82,245

$

97,029

$

56,347

$

71,838

$

53,395

Nonaccrual and restructured loans as a % of total loans

0.54

%

0.70

%

0.42

%

0.55

%

0.41

%

Provision for credit losses

$

21,500

$

88,000

$

2,000

$

7,500

$

11,000

  • Provision for credit losses for the second quarter totaled $21.5 million, a decrease of $66.5 million from the linked quarter, and an increase of $10.5 million from the second quarter of 2019.

  • Net charge-offs totaled $5.5 million, or 0.15%, of average loans, compared to $7.7 million, or 0.23%, of average loans in the linked quarter.

  • The reserve build during the second quarter reflects the continued impact of the adoption of the current expected credit losses (CECL) accounting standard on January 1, 2020, and changes to key macroeconomic variables due to the COVID-19 pandemic.

Dividend Declaration

At the company’s quarterly board meeting, the Board of Directors declared a $0.31 per share quarterly cash dividend, payable on October 1, 2020, to shareholders of record at the close of business on September 10, 2020.

Conference Call

The company plans to host a conference call to discuss its second quarter 2020 earnings results on Wednesday, July 29, 2020, 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 2020 Conference Call

A replay of the conference call may be heard through August 12, 2020 by calling (toll-free) 877-344-7529 or (international) 412-317-0088. The replay access code required for playback is 10145903. 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 (loss), operating earnings (losses) 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), 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, 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 from continuing operations, divided by the company’s average total shareholders’ equity for the relevant period. Operating ROA is calculated as net operating income from continuing operations, 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.

Tangible shareholders’ equity for the relevant period is defined as GAAP shareholders’ equity, net of intangible assets. Tangible book value per share is defined as tangible shareholders’ equity divided by the Company’s total shares outstanding.

Forward-Looking Statements:

This press release contains, and our other communications may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as "believe," "expect," "anticipate," "intend," "estimate," "project," "outlook," "forecast," "target," "trend," "plan," "goal," or other words of comparable meaning or future-tense or conditional verbs such as "may," "will," "should," "would," or "could." Forward-looking statements convey our expectations, intentions, or forecasts about future events, circumstances, results, or aspirations. All forward-looking statements are subject to assumptions, risks, and uncertainties, which may change over time and many of which are beyond our control. You should not rely on any forward-looking statement as a prediction or guarantee about the future. Our actual future objectives, strategies, plans, prospects, performance, condition, or results may differ materially from those set forth in any forward-looking statement. Some of the factors that may cause actual results or other future events, circumstances, or aspirations to differ from those in forward-looking statements are described in our Annual Report on Form 10-K for the year ended December 31, 2019, our subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K, or other applicable documents that are filed or furnished with the U.S. Securities and Exchange Commission (SEC). In addition to such factors that have been disclosed previously, the COVID-19 pandemic (the pandemic) may also cause actual results or other future events, circumstances, or aspirations to differ from our forward-looking statements. The pandemic has created a global public-health crisis that has resulted in widespread volatility and deteriorations in household, business, economic, and market conditions. It is currently adversely affecting the company and its customers, counterparties, employees, and third-party service providers, and the continued adverse impacts on our business, financial position, results of operations, and prospects could be significant. We are not able to accurately predict the extent of the impact of the pandemic on our capital, liquidity, and other financial positions and on our business, results of operations, and prospects at this time, and we believe it will depend on a number of evolving factors, including: (i) the duration, extent and severity of the pandemic; (ii) the response of governmental and non-governmental authorities to the pandemic, which is rapidly changing and not always coordinated or consistent across jurisdictions; (iii) the effect of the pandemic on our customers, counterparties, employees and third-party service providers, which may vary widely, and which is generally expected to increase our credit, counterparty, operational, and other risks; and (iv) the effect of the pandemic on economies and markets, which in turn could adversely affect, among other things, the origination of new loans and the performance of our existing loans. The pandemic is also expected to have a significant impact on our CECL calculation and related provision under a new accounting standard that we were required to phase in beginning January 2020. The CECL calculation includes periodic estimates of the net amount expected to be collected over the contractual term of certain financial assets, and requires us to take into account, among other things, economic conditions forecasted over the life of the financial asset, including the current and anticipated effects of the pandemic. Any forward-looking statement should be evaluated in light of these considerations. Any forward-looking statement made by us or on our behalf speaks only as of the date that it was made. We do not undertake to update any forward-looking statement to reflect the impact of events, circumstances, or results that arise after the date that the statement was made, except to the extent required by applicable securities laws. You, however, should consult further disclosures (including disclosures of a forward-looking nature) that we may make in any subsequent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K, or other applicable document that is filed or furnished with the SEC.

About UMB:

UMB Financial Corporation (Nasdaq: UMBF) is a financial services company headquartered in Kansas City, Missouri. UMB offers commercial banking, which includes comprehensive deposit, lending and investment services, personal banking, which includes wealth management and financial planning services, and institutional banking, which includes asset servicing, corporate trust solutions, investment banking, and healthcare services. UMB operates branches throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas, and serves business and institutional clients nationwide. For more information, visit UMB.com, UMB Blog, UMB Facebook and UMB LinkedIn, or follow us on Twitter at @UMBBank. For information about UMB’s operations, approach and relief measures during the COVID-19 pandemic, please visit umb.com/COVID-19.

Consolidated Balance Sheets

UMB Financial Corporation

(unaudited, dollars in thousands)

June 30,

2020

2019

ASSETS

Loans

$

15,305,097

$

12,900,269

Allowance for credit losses on loans

(200,300

)

(102,092

)

Net loans

15,104,797

12,798,177

Loans held for sale

8,213

2,771

Securities:

Available for sale

8,483,624

7,176,351

Held to maturity, net of allowance for credit losses

1,111,625

1,112,773

Trading securities

51,383

81,381

Other securities

154,206

89,302

Total securities

9,800,838

8,459,807

Federal funds sold and resell agreements

1,347,643

283,603

Interest-bearing due from banks

1,714,478

876,551

Cash and due from banks

462,849

422,648

Premises and equipment, net

300,174

278,725

Accrued income

126,962

124,396

Goodwill

180,867

180,867

Other intangibles, net

24,181

12,425

Other assets

682,606

576,306

Total assets

$

29,753,608

$

24,016,276

LIABILITIES

Deposits:

Noninterest-bearing demand

$

8,633,603

$

6,524,428

Interest-bearing demand and savings

15,033,643

11,870,782

Time deposits under $250,000

546,089

610,711

Time deposits of $250,000 or more

246,069

394,309

Total deposits

24,459,404

19,400,230

Federal funds purchased and repurchase agreements

1,963,694

1,708,884

Short-term debt

15,000

Long-term debt

70,996

69,825

Accrued expenses and taxes

239,254

198,141

Other liabilities

227,865

161,406

Total liabilities

26,976,213

21,538,486

SHAREHOLDERS' EQUITY

Common stock

55,057

55,057

Capital surplus

1,081,713

1,065,301

Retained earnings

1,692,289

1,573,586

Accumulated other comprehensive income, net

284,262

62,617

Treasury stock

(335,926

)

(278,771

)

Total shareholders' equity

2,777,395

2,477,790

Total liabilities and shareholders' equity

$

29,753,608

$

24,016,276

Consolidated Statements of Income

UMB Financial Corporation

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

Three Months Ended

Six Months Ended

June 30,

June 30,

2020

2019

2020

2019

INTEREST INCOME

Loans

$

140,004

$

161,838

$

291,030

$

319,099

Securities:

Taxable interest

25,870

26,700

53,082

52,091

Tax-exempt interest

24,612

21,988

49,016

42,685

Total securities income

50,482

48,688

102,098

94,776

Federal funds and resell agreements

1,573

2,526

7,025

6,151

Interest-bearing due from banks

398

2,768

3,061

6,667

Trading securities

312

842

966

1,276

Total interest income

192,769

216,662

404,180

427,969

INTEREST EXPENSE

Deposits

11,243

39,516

40,975

77,350

Federal funds and repurchase agreements

1,950

9,347

8,331

17,611

Other

1,347

1,385

2,704

2,726

Total interest expense

14,540

50,248

52,010

97,687

Net interest income

178,229

166,414

352,170

330,282

Provision for credit losses

21,500

11,000

109,500

23,350

Net interest income after provision for credit losses

156,729

155,414

242,670

306,932

NONINTEREST INCOME

Trust and securities processing

46,321

42,903

93,321

84,860

Trading and investment banking

12,851

5,453

14,574

11,034

Service charges on deposit accounts

19,074

20,747

44,155

42,028

Insurance fees and commissions

533

465

792

803

Brokerage fees

5,753

7,077

15,613

14,320

Bankcard fees

12,916

16,439

29,461

33,506

Gains (losses) on sales of securities available for sale, net

4,006

(1,403

)

5,233

(594

)

Other

19,002

13,717

15,731

26,823

Total noninterest income

120,456

105,398

218,880

212,780

NONINTEREST EXPENSE

Salaries and employee benefits

130,938

114,454

241,998

230,486

Occupancy, net

11,411

11,539

23,591

23,282

Equipment

21,502

18,824

42,743

38,508

Supplies and services

3,785

4,285

7,970

8,158

Marketing and business development

3,284

7,304

7,924

12,217

Processing fees

13,603

13,096

26,993

25,228

Legal and consulting

6,220

7,496

12,330

13,129

Bankcard

4,549

4,701

9,409

9,046

Amortization of other intangible assets

1,658

1,251

3,392

2,578

Regulatory fees

3,211

2,910

5,577

5,800

Other

8,372

7,527

15,225

15,581

Total noninterest expense

208,533

193,387

397,152

384,013

Income before income taxes

68,652

67,425

64,398

135,699

Income tax expense

8,123

10,466

7,308

20,996

NET INCOME

$

60,529

$

56,959

$

57,090

$

114,703

PER SHARE DATA

Net income – basic

$

1.26

$

1.17

$

1.18

$

2.35

Net income – diluted

1.26

1.16

1.18

2.34

Dividends

0.31

0.30

0.62

0.60

Weighted average shares outstanding – basic

47,991,283

48,777,732

48,340,579

48,745,124

Weighted average shares outstanding – diluted

48,077,810

49,039,692

48,491,526

49,018,787

Consolidated Statements of Comprehensive Income

UMB Financial Corporation

(unaudited, dollars in thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

2020

2019

2020

2019

Net income

$

60,529

$

56,959

$

57,090

$

114,703

Other comprehensive income, before tax:

Unrealized gains and losses on debt securities:

Change in unrealized holding gains and losses, net

84,885

107,484

249,001

213,918

Less: Reclassification adjustment for (gains) losses included in net income

(4,006

)

1,403

(5,233

)

594

Change in unrealized gains and losses on debt securities

80,879

108,887

243,768

214,512

Unrealized gains and losses on derivative hedges:

Change in unrealized gains and losses on derivative hedges, net

4,612

(3,061

)

19,137

(5,149

)

Less: Reclassification adjustment for (gains) losses included in net income

(514

)

20

254

15

Change in unrealized gains and losses on derivative hedges

4,098

(3,041

)

19,391

(5,134

)

Other comprehensive income, before tax

84,977

105,846

263,159

209,378

Income tax expense

(20,105

)

(25,590

)

(62,077

)

(50,979

)

Other comprehensive income

64,872

80,256

201,082

158,399

Comprehensive income

$

125,401

$

137,215

$

258,172

$

273,102

Consolidated Statements of Shareholders' Equity

UMB Financial Corporation

(unaudited, dollars in thousands except per share data)

Common

Stock

Capital

Surplus

Retained

Earnings

Accumulated Other Comprehensive (Loss) Income

Treasury

Stock

Total

Balance - January 1, 2019

$

55,057

$

1,054,601

$

1,488,421

$

(95,782

)

$

(273,827

)

$

2,228,470

Total comprehensive income

114,703

158,399

273,102

Dividends ($0.60 per share)

(29,538

)

(29,538

)

Purchase of treasury stock

(4,114

)

(4,114

)

Forfeitures of equity awards, net of issuances

3,107

(2,503

)

604

Recognition of equity-based compensation

7,006

7,006

Sale of treasury stock

185

274

459

Exercise of stock options

402

1,399

1,801

Balance - June 30, 2019

$

55,057

$

1,065,301

$

1,573,586

$

62,617

$

(278,771

)

$

2,477,790

Balance - January 1, 2020

$

55,057

$

1,073,764

$

1,672,438

$

83,180

$

(277,999

)

$

2,606,440

Total comprehensive income

57,090

201,082

258,172

Dividends ($0.62 per share)

(30,200

)

(30,200

)

Purchase of treasury stock

615

(60,074

)

(59,459

)

Forfeitures of equity awards, net of issuances

676

(83

)

593

Recognition of equity-based compensation

6,109

6,109

Sale of treasury stock

120

201

321

Exercise of stock options

429

2,029

2,458

Cumulative effect adjustment

(7,039

)

(7,039

)

Balance - June 30, 2020

$

55,057

$

1,081,713

$

1,692,289

$

284,262

$

(335,926

)

$

2,777,395

Average Balances / Yields and Rates

UMB Financial Corporation

(tax - equivalent basis)

(unaudited, dollars in thousands)

Three Months Ended June 30,

2020

2019

Average

Average

Average

Average

Balance

Yield/Rate

Balance

Yield/Rate

Assets

Loans, net of unearned interest

$

15,098,366

3.73

%

$

12,620,981

5.14

%

Securities:

Taxable

5,069,290

2.05

4,502,680

2.38

Tax-exempt

4,108,075

3.05

3,725,185

2.99

Total securities

9,177,365

2.50

8,227,865

2.65

Federal funds and resell agreements

807,245

0.78

329,064

3.08

Interest bearing due from banks

1,492,798

0.11

450,032

2.47

Trading securities

37,816

3.79

61,565

6.07

Total earning assets

26,613,590

3.01

21,689,507

4.11

Allowance for credit losses

(195,373

)

(109,463

)

Other assets

1,717,808

1,690,423

Total assets

$

28,136,025

$

23,270,467

Liabilities and Shareholders' Equity

Interest-bearing deposits

$

15,117,729

0.30

%

$

12,707,353

1.25

%

Federal funds and repurchase agreements

2,138,156

0.37

1,728,748

2.17

Borrowed funds

85,681

6.32

69,662

7.97

Total interest-bearing liabilities

17,341,566

0.34

14,505,763

1.39

Noninterest-bearing demand deposits

7,662,836

6,078,520

Other liabilities

411,964

271,890

Shareholders' equity

2,719,659

2,414,294

Total liabilities and shareholders' equity

$

28,136,025

$

23,270,467

Net interest spread

2.67

%

2.72

%

Net interest margin

2.79

3.19

Average Balances / Yields and Rates

UMB Financial Corporation

(tax - equivalent basis)

(unaudited, dollars in thousands)

Six Months Ended June 30,

2020

2019

Average

Average

Average

Average

Balance

Yield/Rate

Balance

Yield/Rate

Assets

Loans, net of unearned interest

$

14,357,466

4.08

%

$

12,462,946

5.16

%

Securities:

Taxable

4,881,854

2.19

4,402,458

2.39

Tax-exempt

4,085,558

3.05

3,674,456

2.96

Total securities

8,967,412

2.58

8,076,914

2.65

Federal funds and resell agreements

1,015,720

1.39

424,712

2.92

Interest bearing due from banks

1,164,405

0.53

554,551

2.42

Trading securities

42,959

4.93

54,029

5.36

Total earning assets

25,547,962

3.28

21,573,152

4.11

Allowance for credit losses

(154,062

)

(107,465

)

Other assets

1,693,684

1,597,444

Total assets

$

27,087,584

$

23,063,131

Liabilities and Shareholders' Equity

Interest-bearing deposits

$

14,723,895

0.56

%

$

12,729,813

1.23

%

Federal funds and repurchase agreements

2,084,271

0.80

1,642,140

2.16

Borrowed funds

78,164

6.96

69,539

7.91

Total interest-bearing liabilities

16,886,330

0.62

14,441,492

1.36

Noninterest-bearing demand deposits

7,079,224

6,028,259

Other liabilities

401,724

267,943

Shareholders' equity

2,720,306

2,325,437

Total liabilities and shareholders' equity

$

27,087,584

$

23,063,131

Net interest spread

2.66

%

2.75

%

Net interest margin

2.88

3.19

Business Segment Information

UMB Financial Corporation

(unaudited, dollars in thousands)

Three Months Ended June 30, 2020

Commercial Banking

Institutional Banking

Personal Banking

Total

Net interest income

$

113,085

$

28,129

$

37,015

$

178,229

Provision for credit losses

19,281

298

1,921

21,500

Noninterest income

24,078

66,488

29,890

120,456

Noninterest expense

62,123

76,953

69,457

208,533

Income (loss) before taxes

55,759

17,366

(4,473

)

68,652

Income tax expense (benefit)

6,597

2,055

(529

)

8,123

Net income (loss)

$

49,162

$

15,311

$

(3,944

)

$

60,529

Three Months Ended June 30, 2019

Commercial Banking

Institutional Banking

Personal Banking

Total

Net interest income

$

102,579

$

30,501

$

33,334

$

166,414

Provision for credit losses

9,306

181

1,513

11,000

Noninterest income

20,387

55,626

29,385

105,398

Noninterest expense

68,511

64,852

60,024

193,387

Income before taxes

45,149

21,094

1,182

67,425

Income tax expense

7,008

3,274

184

10,466

Net income

$

38,141

$

17,820

$

998

$

56,959

Six Months Ended June 30, 2020

Commercial Banking

Institutional Banking

Personal Banking

Total

Net interest income

$

220,034

$

61,164

$

70,972

$

352,170

Provision for credit losses

101,501

573

7,426

109,500

Noninterest income

35,318

128,440

55,122

218,880

Noninterest expense

121,166

145,406

130,580

397,152

Income (loss) before taxes

32,685

43,625

(11,912

)

64,398

Income tax expense (benefit)

3,709

4,951

(1,352

)

7,308

Net income (loss)

$

28,976

$

38,674

$

(10,560

)

$

57,090

Six Months Ended June 30, 2019

Commercial Banking

Institutional Banking

Personal Banking

Total

Net interest income

$

202,393

$

62,252

$

65,637

$

330,282

Provision for credit losses

19,635

467

3,248

23,350

Noninterest income

43,568

111,476

57,736

212,780

Noninterest expense

135,331

130,249

118,433

384,013

Income before taxes

90,995

43,012

1,692

135,699

Income tax expense

14,079

6,655

262

20,996

Net income

$

76,916

$

36,357

$

1,430

$

114,703

The company has strategically aligned its operations into the following three reportable segments: Commercial Banking, Institutional Banking, and Personal Banking. Senior executive officers regularly evaluate business segment financial results produced by the company’s internal reporting system in deciding how to allocate resources and assess performance for individual business segments. Previously, the company had the following four business segments: Commercial Banking, Institutional Banking, Personal Banking, and Healthcare Services. The company’s reportable segments include certain corporate overhead, technology and service costs that are allocated based on methodologies that are applied consistently between periods. For comparability purposes, amounts in all periods are based on methodologies in effect at June 30, 2020.

Non-GAAP Financial Measures

Net operating income Non-GAAP reconciliations:

UMB Financial Corporation

(unaudited, dollars in thousands except per share data)