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

Rhea-AI Summary

UMB Financial Corporation (Nasdaq: UMBF) reported a net income of $87.4 million for Q2 2021, translating to $1.79 per diluted share. This marks a slight decrease from $92.6 million in Q1 2021 but a significant increase from $60.5 million in Q2 2020. The company experienced a 19.0% annualized increase in average loans, leading to a 20.8% rise in noninterest income compared to Q1. A 15.6% increase in quarterly cash dividend to $0.37 per share was also announced, payable on October 1, 2021.

Positive

• Net income increased from $60.5 million in Q2 2020 to $87.4 million in Q2 2021.
• Average loans rose by 19.0% on a linked-quarter basis.
• Noninterest income grew by 20.8% compared to the prior quarter.
• A 15.6% increase in quarterly dividend to $0.37 per share demonstrates confidence in continued business growth.

Negative

• Net charge-offs increased to $28.4 million, or 0.68% of average loans, from $5.3 million in the previous quarter.
• Provision for credit losses rose significantly to $24 million due to elevated charge-offs.

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. 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, 2020, 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 first-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 first-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. 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,
		2021				2020
ASSETS
Loans		$	16,910,790			$	15,305,097
Allowance for credit losses on loans			(200,563	)			(200,300	)
Net loans			16,710,227				15,104,797
Loans held for sale			5,303				8,213
Securities:
Available for sale			10,347,531				8,483,624
Held to maturity, net of allowance for credit losses			1,081,173				1,111,625
Trading securities			40,552				51,383
Other securities			254,315				154,206
Total securities			11,723,571				9,800,838
Federal funds sold and resell agreements			1,146,521				1,347,643
Interest-bearing due from banks			5,059,098				1,714,478
Cash and due from banks			469,883				462,849
Premises and equipment, net			281,011				300,174
Accrued income			131,188				126,962
Goodwill			174,518				180,867
Other intangibles, net			16,636				24,181
Other assets			901,059				682,606
Total assets		$	36,619,015			$	29,753,608
LIABILITIES
Deposits:
Noninterest-bearing demand		$	12,513,031			$	8,633,603
Interest-bearing demand and savings			16,857,127				15,033,643
Time deposits under $250,000			430,713				546,089
Time deposits of $250,000 or more			247,600				246,069
Total deposits			30,048,471				24,459,404
Federal funds purchased and repurchase agreements			2,783,389				1,963,694
Short-term debt			—				15,000
Long-term debt			270,558				70,996
Accrued expenses and taxes			254,589				239,254
Other liabilities			171,764				227,865
Total liabilities			33,528,771				26,976,213
SHAREHOLDERS' EQUITY
Common stock			55,057				55,057
Capital surplus			1,098,139				1,081,713
Retained earnings			2,040,134				1,692,289
Accumulated other comprehensive income, net			223,107				284,262
Treasury stock			(326,193	)			(335,926	)
Total shareholders' equity			3,090,244				2,777,395
Total liabilities and shareholders' equity		$	36,619,015			$	29,753,608

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,
		2021				2020				2021				2020
INTEREST INCOME
Loans		$	154,537			$	140,004			$	304,707			$	291,030
Securities:
Taxable interest			29,780				25,870				56,942				53,082
Tax-exempt interest			24,743				24,612				49,707				49,016
Total securities income			54,523				50,482				106,649				102,098
Federal funds and resell agreements			2,552				1,573				5,373				7,025
Interest-bearing due from banks			833				398				1,536				3,061
Trading securities			189				312				348				966
Total interest income			212,634				192,769				418,613				404,180
INTEREST EXPENSE
Deposits			6,574				11,243				13,372				40,975
Federal funds and repurchase agreements			1,779				1,950				3,665				8,331
Other			3,210				1,347				6,390				2,704
Total interest expense			11,563				14,540				23,427				52,010
Net interest income			201,071				178,229				395,186				352,170
Provision for credit losses			24,000				21,500				16,500				109,500
Net interest income after provision for credit losses			177,071				156,729				378,686				242,670
NONINTEREST INCOME
Trust and securities processing			53,863				46,321				108,697				93,321
Trading and investment banking			8,670				12,851				18,026				14,574
Service charges on deposit accounts			22,592				19,074				44,568				44,155
Insurance fees and commissions			245				533				665				792
Brokerage fees			2,592				5,753				5,926				15,613
Bankcard fees			16,063				12,916				30,736				29,461
Investment securities gains, net			15,455				4,579				7,119				8,099
Other			12,109				18,429				24,749				12,865
Total noninterest income			131,589				120,456				240,486				218,880
NONINTEREST EXPENSE
Salaries and employee benefits			120,415				130,938				248,096				241,998
Occupancy, net			12,296				11,411				24,231				23,591
Equipment			19,196				21,502				38,811				42,743
Supplies and services			3,469				3,785				6,961				7,970
Marketing and business development			4,797				3,284				7,142				7,924
Processing fees			16,501				13,603				31,918				26,993
Legal and consulting			8,147				6,220				13,902				12,330
Bankcard			4,529				4,549				9,485				9,409
Amortization of other intangible assets			1,157				1,658				2,537				3,392
Regulatory fees			2,769				3,211				5,315				5,577
Other			8,062				8,372				13,886				15,225
Total noninterest expense			201,338				208,533				402,284				397,152
Income before income taxes			107,322				68,652				216,888				64,398
Income tax expense			19,910				8,123				36,833				7,308
NET INCOME		$	87,412			$	60,529			$	180,055			$	57,090
PER SHARE DATA
Net income – basic		$	1.81			$	1.26			$	3.74			$	1.18
Net income – diluted			1.79				1.26				3.70				1.18
Dividends			0.32				0.31				0.64				0.62
Weighted average shares outstanding – basic			48,294,952				47,991,283				48,196,345				48,340,579
Weighted average shares outstanding – diluted			48,698,319				48,077,810				48,604,140				48,491,526

Consolidated Statements of Comprehensive Income		UMB Financial Corporation
(unaudited, dollars in thousands)
		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2021				2020				2021				2020
Net income		$	87,412			$	60,529			$	180,055			$	57,090
Other comprehensive income (loss), before tax:
Unrealized gains and losses on debt securities:
Change in unrealized holding gains and losses, net			76,335				84,885				(122,703	)			249,001
Less: Reclassification adjustment for gains included in net income			(1,300	)			(4,006	)			(4,020	)			(5,233	)
Change in unrealized gains and losses on debt securities			75,035				80,879				(126,723	)			243,768
Unrealized gains and losses on derivative hedges:
Change in unrealized gains and losses on derivative hedges, net			(3,422	)			4,612				3,081				19,137
Less: Reclassification adjustment for (gains) losses included in net income			(877	)			(514	)			(1,719	)			254
Change in unrealized gains and losses on derivative hedges			(4,299	)			4,098				1,362				19,391
Other comprehensive income (loss), before tax			70,736				84,977				(125,361	)			263,159
Income tax (expense) benefit			(16,826	)			(20,105	)			30,128				(62,077	)
Other comprehensive income (loss)			53,910				64,872				(95,233	)			201,082
Comprehensive income		$	141,322			$	125,401			$	84,822			$	258,172

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 Income (Loss)				Treasury Stock				Total
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
Balance - January 1, 2021		$	55,057			$	1,090,450			$	1,891,246			$	318,340			$	(338,145	)		$	3,016,948
Total comprehensive income (loss)			—				—				180,055				(95,233	)			—				84,822
Dividends ($0.64 per share)			—				—				(31,167	)			—				—				(31,167	)
Purchase of treasury stock			—				—				—				—				(4,088	)			(4,088	)
Issuances of equity awards, net of forfeitures			—				(4,122	)			—				—				4,817				695
Recognition of equity-based compensation			—				8,609				—				—				—				8,609
Sale of treasury stock			—				148				—				—				153				301
Exercise of stock options			—				3,054				—				—				11,070				14,124
Balance - June 30, 2021		$	55,057			$	1,098,139			$	2,040,134			$	223,107			$	(326,193	)		$	3,090,244

Average Balances / Yields and Rates		UMB Financial Corporation
(tax - equivalent basis)
(unaudited, dollars in thousands)
		Three Months Ended June 30,
		2021								2020
		Average				Average				Average				Average
		Balance				Yield/Rate				Balance				Yield/Rate
Assets
Loans, net of unearned interest		$	16,817,674				3.69	%		$	15,098,366				3.73	%
Securities:
Taxable			6,994,559				1.71				5,069,290				2.05
Tax-exempt			4,289,443				2.93				4,108,075				3.05
Total securities			11,284,002				2.17				9,177,365				2.50
Federal funds and resell agreements			1,110,433				0.92				807,245				0.78
Interest bearing due from banks			3,343,311				0.10				1,492,798				0.11
Trading securities			21,409				4.27				37,816				3.79
Total earning assets			32,576,829				2.70				26,613,590				3.01
Allowance for credit losses			(199,379	)							(195,373	)
Other assets			1,886,774								1,717,808
Total assets		$	34,264,224							$	28,136,025
Liabilities and Shareholders' Equity
Interest-bearing deposits		$	17,080,970				0.15	%		$	15,117,729				0.30	%
Federal funds and repurchase agreements			2,744,516				0.26				2,138,156				0.37
Borrowed funds			270,305				4.76				85,681				6.32
Total interest-bearing liabilities			20,095,791				0.23				17,341,566				0.34
Noninterest-bearing demand deposits			10,701,656								7,662,836
Other liabilities			398,319								411,964
Shareholders' equity			3,068,458								2,719,659
Total liabilities and shareholders' equity		$	34,264,224							$	28,136,025
Net interest spread							2.47	%							2.67	%
Net interest margin							2.56								2.79

Average Balances / Yields and Rates		UMB Financial Corporation
(tax - equivalent basis)
(unaudited, dollars in thousands)
		Six Months Ended June 30,
		2021								2020
		Average				Average				Average				Average
		Balance				Yield/Rate				Balance				Yield/Rate
Assets
Loans, net of unearned interest		$	16,533,463				3.72	%		$	14,357,466				4.08	%
Securities:
Taxable			6,698,020				1.71				4,881,854				2.19
Tax-exempt			4,295,317				2.95				4,085,558				3.05
Total securities			10,993,337				2.20				8,967,412				2.58
Federal funds and resell agreements			1,375,689				0.79				1,015,720				1.39
Interest bearing due from banks			3,079,684				0.10				1,164,405				0.53
Trading securities			19,485				4.28				42,959				4.93
Total earning assets			32,001,658				2.72				25,547,962				3.28
Allowance for credit losses			(209,469	)							(154,062	)
Other assets			1,862,036								1,693,684
Total assets		$	33,654,225							$	27,087,584
Liabilities and Shareholders' Equity
Interest-bearing deposits		$	17,076,681				0.16	%		$	14,723,895				0.56	%
Federal funds and repurchase agreements			2,632,567				0.28				2,084,271				0.80
Borrowed funds			269,942				4.77				78,164				6.96
Total interest-bearing liabilities			19,979,190				0.24				16,886,330				0.62
Noninterest-bearing demand deposits			10,230,287								7,079,224
Other liabilities			414,535								401,724
Shareholders' equity			3,030,213								2,720,306
Total liabilities and shareholders' equity		$	33,654,225							$	27,087,584
Net interest spread							2.48	%							2.66	%
Net interest margin							2.57								2.88

Business Segment Information		UMB Financial Corporation
(unaudited, dollars in thousands)
		Three Months Ended June 30, 2021
		Commercial Banking				Institutional Banking				Personal Banking				Total
Net interest income		$	135,656			$	21,258			$	44,157			$	201,071
Provision for credit losses			22,009				147				1,844				24,000
Noninterest income			36,391				68,745				26,453				131,589
Noninterest expense			69,144				72,575				59,619				201,338
Income before taxes			80,894				17,281				9,147				107,322
Income tax expense			15,007				3,206				1,697				19,910
Net income		$	65,887			$	14,075			$	7,450			$	87,412
		Three Months Ended June 30, 2020
		Commercial Banking				Institutional Banking				Personal Banking				Total
Net interest income		$	113,095			$	28,124			$	37,010			$	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			55,769				17,361				(4,478	)			68,652
Income tax expense (benefit)			6,597				2,055				(529	)			8,123
Net income (loss)		$	49,172			$	15,306			$	(3,949	)		$	60,529
		Six Months Ended June 30, 2021
		Commercial Banking				Institutional Banking				Personal Banking				Total
Net interest income		$	268,687			$	43,397			$	83,102			$	395,186
Provision for credit losses			13,827				367				2,306				16,500
Noninterest income			43,777				137,166				59,543				240,486
Noninterest expense			134,789				143,857				123,638				402,284
Income before taxes			163,848				36,339				16,701				216,888
Income tax expense			27,825				6,171				2,837				36,833
Net income		$	136,023			$	30,168			$	13,864			$	180,055
		Six Months Ended June 30, 2020
		Commercial Banking				Institutional Banking				Personal Banking				Total
Net interest income		$	220,044			$	61,159			$	70,967			$	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			32,695				43,620				(11,917	)			64,398
Income tax expense (benefit)			3,709				4,951				(1,352	)			7,308
Net income (loss)		$	28,986			$	38,669			$	(10,565	)		$	57,090

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. 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, 2021.

Non-GAAP Financial Measures

Net operating income Non-GAAP reconciliations:		UMB Financial Corporation
(unaudited, dollars in thousands except per share data)
		Three Months Ended June 30,								Six Months Ended June 30,
		2021				2020				2021				2020
Net income (GAAP)		$	87,412			$	60,529			$	180,055			$	57,090
Adjustments:
Acquisition expense			—				123				—				246
Severance expense			103				137				124				1,789
COVID-19 related expense			182				3,989				337				4,217
Tax-impact of adjustments (i)			(63	)			(943	)			(102	)			(1,388	)
Total Non-GAAP adjustments (net of tax)			222				3,306				359				4,864
Net operating income (Non-GAAP)		$	87,634			$	63,835			$	180,414			$	61,954
Earnings per share - diluted (GAAP)		$	1.79			$	1.26			$	3.70			$	1.18
Acquisition expense			—				—				—				0.01
Severance expense			—				0.01				—				0.04
COVID-19 related expense			0.01				0.08				0.01				0.08
Tax-impact of adjustments (i)			—				(0.02	)			—				(0.03	)
Operating earnings per share - diluted (Non-GAAP)		$	1.80			$	1.33			$	3.71			$	1.28
GAAP
Return on average assets			1.02	%			0.87	%			1.08	%			0.42	%
Return on average equity			11.43				8.95				11.98				4.22
Non-GAAP
Operating return on average assets			1.03	%			0.91	%			1.08	%			0.46	%
Operating return on average equity			11.46				9.44				12.01				4.58
(i) Calculated using the company’s marginal tax rate of 22.2%.

Operating noninterest expense and operating efficiency ratio Non-GAAP reconciliations:		UMB Financial Corporation
(unaudited, dollars in thousands)
		Three Months Ended June 30,								Six Months Ended June 30,
		2021				2020				2021				2020
Noninterest expense		$	201,338			$	208,533			$	402,284			$	397,152
Adjustments to arrive at operating noninterest expense (pre-tax):
Acquisition expense			—				123				—				246
Severance expense			103				137				124				1,789
COVID-19 related expense			182				3,989				337				4,217
Total Non-GAAP adjustments (pre-tax)			285				4,249				461				6,252
Operating noninterest expense (Non-GAAP)		$	201,053			$	204,284			$	401,823			$	390,900
Noninterest expense		$	201,338			$	208,533			$	402,284			$	397,152
Less: Amortization of other intangibles			1,157				1,658				2,537				3,392
Noninterest expense, net of amortization of other intangibles (Non-GAAP) (numerator A)		$	200,181			$	206,875			$	399,747			$	393,760
Operating noninterest expense		$	201,053			$	204,284			$	401,823			$	390,900
Less: Amortization of other intangibles			1,157				1,658				2,537				3,392
Operating expense, net of amortization of other intangibles (Non-GAAP) (numerator B)		$	199,896			$	202,626			$	399,286			$	387,508
Net interest income		$	201,071			$	178,229			$	395,186			$	352,170
Noninterest income			131,589				120,456				240,486				218,880
Less: Gains on sales of securities available for sale, net			1,300				4,006				4,020				5,233
Total Non-GAAP Revenue (denominator A)		$	331,360			$	294,679			$	631,652			$	565,817
Efficiency ratio (numerator A/denominator A)			60.41	%			70.20	%			63.29	%			69.59	%
Operating efficiency ratio (Non-GAAP) (numerator B/denominator A)			60.33				68.76				63.21				68.49

Pre-tax, pre-provision income non-GAAP reconciliations:		UMB Financial Corporation
(unaudited, dollars in thousands except per share data)
		Three Months Ended June 30,								Six Months Ended June 30,
		2021				2020				2021				2020
Net income before taxes (GAAP)		$	107,322			$	68,652			$	216,888			$	64,398
Adjustments:
Provision for credit losses			24,000				21,500				16,500				109,500
Pre-tax, pre-provision income (Non-GAAP)		$	131,322			$	90,152			$	233,388			$	173,898
Pre-tax earnings per share - diluted (GAAP)		$	2.20			$	1.43			$	4.46			$	1.33
Provision for credit losses			0.50				0.45				0.34				2.26
Pre-tax, pre-provision earnings per share - diluted (Non-GAAP)		$	2.70			$	1.88			$	4.80			$	3.59

Pre-tax, pre-provision income - FTE Non-GAAP reconciliations:		UMB Financial Corporation
(unaudited, dollars in thousands except per share data)
		Three Months Ended June 30,								Six Months Ended June 30,
		2021				2020				2021				2020
Net interest income		$	201,071			$	178,229			$	395,186			$	352,170
Adjustments to arrive at net interest income - FTE:
Tax equivalent interest			6,629				6,604				13,307				13,082
Net interest income - FTE		$	207,700			$	184,833			$	408,493			$	365,252
Noninterest income			131,589				120,456				240,486				218,880
Less: Noninterest expense			201,338				208,533				402,284				397,152
Pre-tax, pre-provision income - FTE (Non-GAAP)		$	137,951			$	96,756			$	246,695			$	186,980
Net interest income earnings per share - diluted		$	4.13			$	3.71			$	8.13			$	7.26
Tax equivalent interest			0.13				0.14				0.28				0.27
Net interest income - FTE			4.26				3.85				8.41				7.53
Noninterest income			2.70				2.50				4.95				4.52
Less: Noninterest expense			4.13				4.34				8.28				8.19
Pre-tax, pre-provision income - FTE earnings per share - diluted (Non-GAAP)		$	2.83			$	2.01			$	5.08			$	3.86

Tangible book value non-GAAP reconciliations:		UMB Financial Corporation
(unaudited, dollars in thousands except share and per share data)
		As of June 30,
		2021				2020
Total shareholders' equity (GAAP)		$	3,090,244			$	2,777,395
Less: Intangible assets
Goodwill			174,518				180,867
Other intangibles, net			16,636				24,181
Total intangibles, net			191,154				205,048
Total tangible shareholders' equity (Non-GAAP)		$	2,899,090			$	2,572,347
Total shares outstanding			48,346,371				48,021,707
Ratio of total shareholders' equity (book value) per share		$	63.92			$	57.84
Ratio of total tangible shareholders' equity (tangible book value) per share (Non-GAAP)			59.96				53.57

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20210727005159/en/

FAQ

What is UMB Financial Corporation's net income for Q2 2021?

UMB Financial Corporation reported a net income of $87.4 million for Q2 2021.

How much did UMBF increase its cash dividend in Q2 2021?

UMB Financial Corporation increased its quarterly cash dividend by 15.6% to $0.37 per share.

When will UMBF's cash dividend be paid?

The cash dividend will be payable on October 1, 2021.

What was the percentage increase in noninterest income for UMBF in Q2 2021?

Noninterest income increased by 20.8% compared to the previous quarter.

What is the significance of the provision for credit losses for UMB Financial?

The provision for credit losses increased to $24 million, indicating concerns about asset quality and potential loan defaults.