UMB Financial Corporation Reports Fourth Quarter Net Income of $156.3 Million and Record Full-Year Earnings of $286.5 Million

Rhea-AI Summary

UMB Financial Corporation (Nasdaq: UMBF) reported a strong performance in Q4 2020, achieving net income of $156.3 million, or $3.24 per diluted share, up from $73.1 million in Q3 2020 and $66.5 million in Q4 2019. For the year, net income increased 17.6% to $286.5 million. The noteworthy results include a pre-tax gain of $108.8 million from investments. Furthermore, pre-tax, pre-provision income surged by 91.1% quarter-over-quarter. Loan balances excluding PPP increased 10.4% from the previous year, showcasing robust growth. Credit quality remains strong with net charge-offs at 0.13%.

Positive

• Net income for Q4 2020 increased to $156.3 million from $73.1 million in Q3 2020.
• Full-year 2020 net income rose 17.6% to $286.5 million compared to 2019.
• Pre-tax, pre-provision income soared by 91.1% quarter-over-quarter.
• Average loan balances (excluding PPP) increased by 10.4% from 2019.
• Investment gains contributed $108.8 million to Q4 results.

Negative

• Net interest margin decreased to 2.78% from 3.02% year-over-year.
• Average return on average assets reduced slightly to 1.00% from 1.02% in 2019.

UMB Financial Corporation (Nasdaq: UMBF), a financial services company, announced net income for the fourth quarter of 2020 of $156.3 million, or $3.24 per diluted share, compared to $73.1 million, or $1.52 per diluted share, in the third quarter of 2020 (linked quarter) and $66.5 million, or $1.35 per diluted share, in the fourth quarter of 2019. For the year ended December 31, 2020, net income was $286.5 million, or $5.93 per diluted share, which is an increase of 17.6% compared to $243.6 million, or $4.96 per diluted share, for the year ended December 31, 2019. Results for the fourth quarter and full-year 2020 include a pre-tax gain of $108.8 million on the company’s investment in Tattooed Chef, Inc.

Net operating income, a non-GAAP financial measure reconciled to net income, the nearest comparable GAAP measure, later in this release, was $157.4 million, or $3.26 per diluted share, for the fourth quarter of 2020, compared to $76.4 million, or $1.59 per diluted share, for the linked quarter and $67.0 million, or $1.36 per diluted share, for the fourth quarter of 2019. 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 $202.9 million, or $4.20 per diluted share, for the fourth quarter of 2020, compared to $106.2 million, or $2.21 per diluted share, for the linked quarter, and $85.7 million, or $1.74 per diluted share, for the fourth quarter of 2019. These PTPP-FTE results represent increases of 91.1% on a linked-quarter basis and 136.7% compared to the fourth quarter of 2019.

Summary of quarterly financial results		UMB Financial Corporation
(unaudited, dollars in thousands, except per share data)
		Q4				Q3				Q4
		2020				2020				2019
Net income (GAAP)		$	156,320			$	73,092			$	66,515
Earnings per share (diluted)			3.24				1.52				1.35
Pre-tax, pre-provision income (Non-GAAP)			196,107				99,385				79,268
Pre-tax, pre-provision earnings per share (diluted)			4.06				2.07			1.61
Pre-tax, pre-provision income - FTE (Non-GAAP)			202,946				106,182				85,723
Pre-tax, pre-provision earnings per share - FTE (diluted)			4.20				2.21			1.74
Net operating income (Non-GAAP)			157,405				76,434				67,038
Operating earnings per share (diluted)			3.26				1.59			1.36
GAAP
Return on average assets			2.03	%			0.99	%			1.05	%
Return on average equity			21.18				10.23				10.15
Efficiency ratio			53.44				66.14				71.59
Non-GAAP
Operating return on average assets			2.05	%			1.03	%			1.06	%
Operating return on average equity			21.33				10.70				10.23
Operating efficiency ratio			53.11				64.69				71.35

Summary of year-to-date financial results		UMB Financial Corporation
(unaudited, dollars in thousands, except per share data)		December				December
		YTD				YTD
		2020				2019
Net income (GAAP)		$	286,502			$	243,600
Earnings per share (diluted)			5.93				4.96
Pre-tax, pre-provision income (Non-GAAP)			469,390				318,815
Pre-tax, pre-provision earnings per share (diluted)			9.71			6.49
Pre-tax, pre-provision income - FTE (Non-GAAP)			496,108				342,791
Pre-tax, pre-provision earnings per share - FTE (diluted)			10.26			6.98
Net operating income (Non-GAAP)			295,793				245,016
Operating earnings per share (diluted)			6.12				4.99
GAAP
Return on average assets			1.00	%			1.02	%
Return on average equity			10.21				9.94
Efficiency ratio			63.49				70.66
Non-GAAP
Operating return on average assets			1.04	%			1.03	%
Operating return on average equity			10.55				9.99
Operating efficiency ratio			62.56				70.49

“2020 was a testament to the spirit of UMB’s consistent priorities—delivering the Unparalleled Customer Experience (TUCE), caring for our communities and managing through the adversity of an uncertain and unprecedented operating environment,” said Mariner Kemper, chairman, president and chief executive officer. “Credit quality remains solid, with net charge-offs of just 0.13% of average loans for 2020, while average loan balances, excluding Paycheck Protection Program (PPP) loans, increased 10.4% from 2019. For the full year, our pre-tax, pre-provision income was $469.4 million, an increase of 47.2% compared to 2019. The biggest driver of this outperformance was a gain of $108.8 million in the fourth quarter from our successful investment in Tattooed Chef, Inc.”

Fourth Quarter 2020 earnings discussion

Summary of revenue		UMB Financial Corporation
(unaudited, dollars in thousands)
		Q4				Q3				Q4				CQ vs.				CQ vs.
		2020				2020				2019				LQ				PY
Net interest income		$	194,675			$	184,384			$	172,363			$	10,291			$	22,312
Noninterest income:
Trust and securities processing			50,773				50,552				46,835				221				3,938
Trading and investment banking			9,693				8,678				6,720				1,015				2,973
Service charges on deposit accounts			20,074				19,650				20,100				424				(26	)
Insurance fees and commissions			318				259				511				59				(193	)
Brokerage fees			3,918				4,819				8,839				(901	)			(4,921	)
Bankcard fees			15,788				15,295				16,326				493				(538	)
Investment securities gains (losses), net			113,010				(475	)			(308	)			113,485				113,318
Other			14,716				14,218				11,332				498				3,384
Total noninterest income		$	228,290			$	112,996			$	110,355			$	115,294			$	117,935
Total revenue		$	422,965			$	297,380			$	282,718			$	125,585			$	140,247
Net interest income (FTE)		$	201,514			$	191,181			$	178,818
Net interest margin (FTE)			2.78	%			2.73	%			3.02	%
Total noninterest income as a % of total revenue			53.97				38.00				39.03

Net interest income

• Net interest income totaled $194.7 million, an increase of $10.3 million, or 5.6%, from the linked quarter, driven by an increase of $1.0 billion, or 3.7%, in average earning assets and the acceleration of PPP loan origination fees from payoffs. The increase in average earning assets was driven by an increase of $356 million in investment securities and an increase of $309 million in loan balances.
• Net interest margin for the fourth quarter was 2.78%, an increase of five basis points from the linked quarter. Earning asset yields increased four basis points from the linked quarter, driven by origination fee income from the payoff of PPP loan balances during the fourth quarter. The cost of interest-bearing liabilities decreased one basis point to 0.27%, driven by a three-basis-point decline in the cost of interest-bearing deposits and lower borrowing costs. Net interest spread increased five basis points to 2.68% from the linked quarter and was two basis points higher than the fourth quarter of 2019.
• On a year-over-year basis, net interest income increased $22.3 million, or 12.9%, driven by a $2.8 billion, or 21.2%, increase in average loans, and a $1.5 billion, or 17.6%, increase in average securities. These increases were driven by organic loan growth, excess liquidity, and the company’s PPP participation.
• Average deposits increased 3.5% on a linked-quarter basis and 22.5% compared to the fourth quarter of 2019. Average noninterest-bearing demand deposit balances increased 8.3% on a linked-quarter basis and 39.8% compared to the fourth quarter of 2019.

Noninterest income

• Fourth quarter 2020 noninterest income increased $115.3 million, or 102.0%, on a linked-quarter basis, largely due to:
  • An increase of $113.5 million in investment securities gains, primarily due to the $108.8 million gain on the company’s investment in Tattooed Chef, Inc., recorded in the fourth quarter of 2020, an increase of $2.4 million in equity earnings on alternative investments, and an increase of $1.1 million in gains on sales of available for sale securities.

• Compared to the prior year, noninterest income in the fourth quarter of 2020 increased $117.9 million, or 106.9%, primarily driven by:
  • An increase of $113.3 million in investment securities gains, primarily due to the $108.8 million gain on the company’s investment in Tattooed Chef, Inc., an increase of $1.1 million in equity earnings on alternative investments, and an increase of $0.7 million on sales of available for sale securities.
  • Increases of $2.5 million in fund services income and $1.4 million in corporate trust revenue, both recorded in trust and securities processing.
  • An increase of $3.0 million in trading and investment banking due to increased trading volume.
  • Increases of $2.8 million in company-owned life insurance and $0.5 million in bank-owned life insurance, both recorded in other income. The increase in company-owned life insurance is offset by a proportionate increase in deferred compensation expense as noted below.
  • These increases were partially offset by a decrease of $4.9 million in brokerage fees, primarily driven by lower 12b-1 income.

Noninterest expense

Summary of noninterest expense		UMB Financial Corporation
(unaudited, dollars in thousands)
		Q4				Q3				Q4				CQ vs.				CQ vs.
		2020				2020				2019				LQ				PY
Salaries and employee benefits		$	129,272			$	124,194			$	120,806			$	5,078			$	8,466
Occupancy, net			11,858				12,027				12,249				(169	)			(391	)
Equipment			22,008				20,968				20,803				1,040				1,205
Supplies and services			4,125				3,442				6,280

FAQ

What were UMB Financial Corporation's earnings per share for Q4 2020?

UMB Financial Corporation reported earnings per share of $3.24 for Q4 2020.

How much did net income increase for UMB Financial in 2020?

Net income for UMB Financial increased by 17.6% in 2020, totaling $286.5 million.

What contributed to the increase in UMB Financial's Q4 2020 earnings?

The significant increase in Q4 2020 earnings was largely driven by a $108.8 million gain from investment in Tattooed Chef, Inc.

What is UMBF's net charge-off rate for 2020?

UMB Financial reported a net charge-off rate of just 0.13% of average loans for the year 2020.