Form 8-K UMB FINANCIAL CORP For: Apr 26

•

GAAP net income of $106.0 million, or $2.17 per diluted share; net operating income (a non-GAAP financial measure) of $106.1 million, or $2.17 per diluted share.

•

Pre-tax, pre-provision income on a fully tax equivalent basis (PTPP-FTE, a non-GAAP financial measure) of $125.7 million, an increase of 10.9% compared to the fourth quarter of 2021.

•

Excluding Paycheck Protection Program (PPP) balances, average loans increased 19.1% on a linked-quarter, annualized basis.

•

Quarterly average deposits grew 21.5% compared to the first quarter of 2021.

•

Noninterest income increased 13.6% as compared to the first quarter of 2021, equal to 37.0% of total revenue.

•

Credit quality remained strong, with net charge-offs of just 0.20% of average loans, consistent with the company’s historical performance.

Summary of quarterly financial results

UMB Financial Corporation

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

Q1

Q4

Q1

2022

2021

2021

Net income (GAAP)

$

105,963

$

78,496

$

92,643

Earnings per share (diluted)

2.17

1.61

1.91

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

119,255

106,869

102,066

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

2.44

2.19

2.10

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

125,654

113,352

108,744

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

2.57

2.32

2.24

Net operating income (Non-GAAP)

106,073

78,921

92,780

Operating earnings per share (diluted)

2.17

1.62

1.91

GAAP

Return on average assets

1.10

%

0.82

%

1.14

%

Return on average equity

14.65

9.91

12.56

Efficiency ratio

63.98

67.78

66.46

Non-GAAP

Operating return on average assets

1.10

%

0.82

%

1.14

%

Operating return on average equity

14.67

9.97

12.58

Operating efficiency ratio

63.93

67.61

66.40

Summary of revenue

UMB Financial Corporation

(unaudited, dollars in thousands)

Q1

Q4

Q1

CQ vs.

CQ vs.

2022

2021

2021

LQ

PY

Net interest income

$

210,355

$

210,570

$

194,115

$

(215

)

$

16,240

Noninterest income:

Trust and securities processing

59,528

58,515

54,834

1,013

4,694

Trading and investment banking

5,440

6,977

9,356

(1,537

)

(3,916

)

Service charges on deposit accounts

24,642

21,607

21,976

3,035

2,666

Insurance fees and commissions

259

359

420

(100

)

(161

)

Brokerage fees

3,456

3,346

3,334

110

122

Bankcard fees

16,635

16,642

14,673

(7

)

1,962

Investment securities (losses) gains, net

(522

)

1,448

(8,336

)

(1,970

)

7,814

Other

14,240

9,888

12,640

4,352

1,600

        Total noninterest income

$

123,678

$

118,782

$

108,897

$

4,896

$

14,781

Total revenue

$

334,033

$

329,352

$

303,012

$

4,681

$

31,021

Net interest income (FTE)

$

216,754

$

217,053

$

200,793

Net interest margin (FTE)

2.35

%

2.37

%

2.59

%

Total noninterest income as a % of total revenue

37.03

36.07

35.94

•

Net interest income totaled $210.4 million, which is flat as compared to the linked quarter. The benefit from growth in average earning assets was partially offset by $4.1 million in reduced income from PPP loans. Average earning assets increased $1.2 billion, or 3.2%, driven by loan

growth and an increase in investment securities purchases, while noninterest-bearing deposits increased $900.7 million, or 6.9% and interest-bearing liabilities increased $406.1 million, or 1.9%.

•

Net interest margin for the first quarter was 2.35%, a decrease of two basis points from the linked quarter, driven by a decline in loan yields primarily due to $4.1 million in reduced income from PPP loans. Earning asset yields declined two basis points from the linked quarter, driven by a twenty-basis-point decline in loan yields and mix changes. The cost of interest-bearing liabilities increased one basis point to 0.21%. Net interest spread decreased three basis points to 2.26% from the linked quarter and was 24 basis points lower than the first quarter of 2021.

•

On a year-over-year basis, net interest income increased $16.2 million, or 8.4%, driven by a $2.8 billion, or 26.2% increase in average securities, coupled with a $1.1 billion, or 6.9%, increase in average loans. These increases were driven by organic loan growth and excess liquidity.

•

Average deposits increased 3.0% on a linked-quarter basis and 21.5% compared to the first quarter of 2021. Average noninterest-bearing demand deposit balances increased 6.9% on a linked-quarter basis and 43.8% compared to the first quarter of 2021.

•

First quarter 2022 noninterest income increased $4.9 million, or 4.1%, on a linked-quarter basis, largely due to:

o

An increase of $3.0 million in service charges on deposits primarily driven by increased healthcare income related to customer transfer and conversion fees.

o

A gain of $2.4 million on the sale of the company’s factoring loan portfolio during the first quarter of 2022, recorded in other income.

o

An increase of $1.9 million in derivative income and $0.8 million in company-owned life insurance income, 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.

o

Increases of $0.9 million in corporate trust income and $0.4 million in fund services income, both recorded in trust and securities processing.

o

These increases were partially offset by a decrease of $2.7 million in gains on sales of available-for-sale securities, recorded in investment securities gains, and a decrease of $1.5 million in trading and investment banking income driven by decreased trading volume.

•

Compared to the prior year, noninterest income in the first quarter of 2022 increased $14.8 million, or 13.6%, primarily driven by:

o

An increase of $7.8 million in investment securities gains, primarily due to mark-to-market valuations on the company’s equity investment in TTCF.

o

Increases of $5.0 million in derivative income, recorded in other income, and $2.0 million in bankcard income, due to higher interchange revenue.

o

An increase of $4.7 million in trust and securities processing income, primarily driven by increases of $6.4 million and $1.7 million in fund services and corporate trust income, respectively. These increases were partially offset by a decrease of $3.4 million in trust income.

o

An increase of $2.7 million in service charges on deposits driven by increased healthcare income related to customer transfer and conversion fees and increased corporate service charge income.

o

These increases were partially offset by decreases of $3.9 million in trading and investment banking income driven by lower trading volume, $2.1 million in gains on sale of other assets, and $1.2 million in company-owned life insurance income, both recorded

in other income. The decrease in company-owned life insurance is offset by a proportionate decrease in deferred compensation expense as noted below.

Summary of noninterest expense

UMB Financial Corporation

(unaudited, dollars in thousands)

Q1

Q4

Q1

CQ vs.

CQ vs.

2022

2021

2021

LQ

PY

Salaries and employee benefits

$

130,634

$

131,360

$

127,681

$

(726

)

$

2,953

Occupancy, net

12,232

10,907

11,935

1,325

297

Equipment

18,164

19,886

19,615

(1,722

)

(1,451

)

Supplies and services

3,262

4,646

3,492

(1,384

)

(230

)

Marketing and business development

4,932

6,528

2,345

(1,596

)

2,587

Processing fees

18,443

19,083

15,417

(640

)

3,026

Legal and consulting

6,911

10,858

5,755

(3,947

)

1,156

Bankcard

6,567

4,865

4,956

1,702

1,611

Amortization of other intangible assets

1,071

1,110

1,380

(39

)

(309

)

Regulatory fees

3,482

3,393

2,546

89

936

Other

9,080

9,847

5,824

(767

)

3,256

        Total noninterest expense

$

214,778

$

222,483

$

200,946

$

(7,705

)

$

13,832

•

Noninterest expense for the first quarter of 2022 was $214.8 million, a decrease of $7.7 million, or 3.5%, from the linked quarter and an increase of $13.8 million, or 6.9%, from the first quarter of 2021.

•

The linked-quarter decrease in noninterest expense was driven by:

o

A decrease of $11.5 million in salaries and bonus expense, recorded in salaries and employee benefits, driven primarily by increased incentive compensation tied to business growth and higher overall company performance during the fourth quarter of 2021.

o

Decreases of $3.9 million in legal and consulting expense and $1.6 million in marketing and business development due to the timing of multiple projects.

o

Decreases of $1.7 million in equipment expense driven by reduced software expense and $1.4 million in supplies expense primarily due to decreased computer hardware purchases.

o

These decreases were partially offset by increases of $10.7 million in employee benefits expense driven by a seasonal increase of $9.3 million in payroll taxes, insurance, and 401(k) expense recognized in the first quarter, as well as an increase of $1.5 million in deferred compensation expense, all recorded in salaries and employee benefits. The increase in deferred compensation expense was offset by the increase in company-owned life insurance income noted above. Additionally, there was an increase of $1.7 million in bankcard processing expense.

•

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

o

An increase of $3.0 million in processing fees due to the timing of multiple software projects.

o

Increases of $2.6 million in marketing and business development and $1.2 million in legal and consulting expense due to the timing of multiple projects.

o

Increases of $2.4 million in salaries and bonus expense and $1.3 million in payroll taxes, insurance, and 401(k) expense, both recorded in salaries and employee benefits, primarily driven by increased company performance in the first quarter of 2022.

o

An increase of $1.6 million in bankcard expense primarily due to higher processing expense and bankcard fraud losses.

o

Increases of $1.2 million in operational losses, and $0.9 million in derivative-related expense, both recorded in other expense.

o

These increases were partially offset by a decrease of $1.2 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.

•

The company’s effective tax rate was 15.7% for the three months ended March 31, 2022, compared to 15.4% for the same period in 2021. 

•

Average total assets for the first quarter of 2022 were $39.2 billion compared to $38.1 billion for the linked quarter and $33.1 billion for the same period in 2021.

Summary of average loans and leases - QTD Average

UMB Financial Corporation

(unaudited, dollars in thousands)

Q1

Q4

Q1

CQ vs.

CQ vs.

2022

2021

2021

LQ

PY

Commercial and industrial

$

7,409,623

$

6,994,935

$

7,139,101

$

414,688

$

270,522

Specialty lending

463,793

484,552

502,585

(20,759

)

(38,792

)

Commercial real estate

6,338,160

6,218,138

5,971,047

120,022

367,113

Consumer real estate

2,339,050

2,272,498

1,970,767

66,552

368,283

Consumer

135,942

107,841

117,095

28,101

18,847

Credit cards

399,857

414,267

362,051

(14,410

)

37,806

Leases and other

274,652

200,417

183,447

74,235

91,205

Total loans

$

17,361,077

$

16,692,648

$

16,246,093

$

668,429

$

1,114,984

•

Average loans for the first quarter of 2022 increased 4.0% on a linked-quarter basis and 6.9% compared to the first quarter of 2021. Excluding PPP balances, average loans increased 4.8% on a linked-quarter basis and increased 15.6% as compared to the first quarter of 2021.

Summary of average securities - QTD Average

UMB Financial Corporation

(unaudited, dollars in thousands)

Q1

Q4

Q1

CQ vs.

CQ vs.

2022

2021

2021

LQ

PY

Securities available for sale:

    U.S. Treasury

$

176,476

$

69,398

$

36,032

$

107,078

$

140,444

    U.S. Agencies

125,017

93,619

95,494

31,398

29,523

    Mortgage-backed

7,317,968

7,395,528

5,599,987

(77,560

)

1,717,981

    State and political subdivisions

3,170,757

3,437,841

3,552,945

(267,084

)

(382,188

)

    Corporates

337,526

236,743

83,271

100,783

254,255

    Collateralized loan obligations

150,134

38,099

—

112,035

150,134

Total securities available for sale

$

11,277,878

$

11,271,228

$

9,367,729

$

6,650

$

1,910,149

Securities held to maturity:

    U.S. Agencies

$

133

$

—

$

—

$

133

$

133

    Mortgage-backed

708,075

105,622

—

602,453

708,075

    State and political subdivisions

1,185,609

1,089,587

1,023,418

96,022

162,191

Total securities held to maturity

$

1,893,817

$

1,195,209

$

1,023,418

$

698,608

$

870,399

Trading securities

20,836

29,426

17,540

(8,590

)

3,296

Other securities

329,611

299,829

308,297

29,782

21,314

Total securities

$

13,522,142

$

12,795,692

$

10,716,984

$

726,450

$

2,805,158

•

Average total securities increased 5.7% on a linked-quarter basis and 26.2% compared to the first quarter of 2021.

•

In March 2022, securities with an amortized cost of $3.0 billion and a fair value of $2.9 billion were transferred from the available-for-sale classification to the held-to-maturity classification in order to reduce volatility in the company’s equity as a result of higher interest rates.

Summary of average deposits - QTD Average

UMB Financial Corporation

(unaudited, dollars in thousands)

Q1

Q4

Q1

CQ vs.

CQ vs.

2022

2021

2021

LQ

PY

Deposits:

    Noninterest-bearing demand

$

14,025,585

$

13,124,918

$

9,753,680

$

900,667

$

4,271,905

    Interest-bearing demand and savings

17,852,721

17,809,817

16,302,880

42,904

1,549,841

    Time deposits

701,973

701,836

769,464

137

(67,491

)

        Total deposits

$

32,580,279

$

31,636,571

$

26,826,024

$

943,708

$

5,754,255

Noninterest bearing deposits as % of total

43.05

%

41.49

%

36.36

%

•

Average deposits increased 3.0% on a linked-quarter basis and 21.5% compared to the first quarter of 2021.

•

Average noninterest-bearing demand deposits increased 6.9% on a linked-quarter basis to $14.0 billion.

Capital information

UMB Financial Corporation

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

March 31, 2022

December 31, 2021

March 31, 2021

Total equity

$

2,748,405

$

3,145,424

$

2,958,239

Book value per common share

56.78

64.95

61.24

Tangible book value per common share

52.69

61.05

57.26

Regulatory capital:

Common equity Tier 1 capital

$

2,938,100

$

2,885,576

$

2,660,102

Tier 1 capital

2,938,100

2,885,576

2,660,102

Total capital

3,369,866

3,324,284

3,102,333

Regulatory capital ratios:

Common equity Tier 1 capital ratio

11.81

%

12.05

%

12.25

%

Tier 1 risk-based capital ratio

11.81

12.05

12.25

Total risk-based capital ratio

13.55

13.88

14.28

Tier 1 leverage ratio

7.53

7.61

8.08

•

At March 31, 2022, the regulatory capital ratios presented in the foregoing table exceeded all “well-capitalized” regulatory thresholds.

Credit quality

UMB Financial Corporation

(unaudited, dollars in thousands)

Q1

Q4

Q3

Q2

Q1

2022

2021

2021

2021

2021

Net charge-offs - Total loans

$

8,378

$

8,061

$

3,127

$

28,374

$

5,310

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

0.20

%

0.19

%

0.07

%

0.68

%

0.13

%

Loans over 90 days past due

$

3,600

$

2,633

$

2,319

$

1,265

$

1,773

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

0.02

%

0.02

%

0.01

%

0.01

%

0.01

%

Nonaccrual and restructured loans

$

110,356

$

92,300

$

96,536

$

58,219

$

76,706

Nonaccrual and restructured loans as a % of total loans

0.62

%

0.54

%

0.59

%

0.34

%

0.46

%

Provision for credit losses

$

(6,500

)

$

8,500

$

(5,000

)

$

24,000

$

(7,500

)

•

Provision for credit losses for the first quarter decreased $15.0 million from the linked quarter and increased $1.0 million from the first quarter of 2021. Provision expense in the first quarter of 2022 represented a release of the Allowance for Credit Losses (ACL) based on positive macro-economic data and portfolio credit metrics.

•

Net charge-offs for the first quarter totaled $8.4 million, or 0.20%, of average loans, compared to $8.1 million, or 0.19%, of average loans in the linked quarter, and $5.3 million, or 0.13%, of average loans for the first quarter of 2021.

Consolidated Balance Sheets

UMB Financial Corporation

(unaudited, dollars in thousands)

March 31,

2022

2021

ASSETS

Loans

$

17,731,700

$

16,497,385

Allowance for credit losses on loans

(179,288

)

(202,814

)

Net loans

17,552,412

16,294,571

Loans held for sale

384

10,275

Securities:

Available for sale

8,550,093

9,753,392

Held to maturity, net of allowance for credit losses

4,600,187

1,039,711

Trading securities

17,059

29,099

Other securities

332,123

298,209

Total securities

13,499,462

11,120,411

Federal funds sold and resell agreements

1,319,809

1,629,813

Interest-bearing due from banks

6,355,941

3,860,763

Cash and due from banks

357,772

387,230

Premises and equipment, net

264,519

286,068

Accrued income

127,139

131,533

Goodwill

182,225

174,518

Other intangibles, net

15,690

17,793

Other assets

930,389

756,414

Total assets

$

40,605,742

$

34,669,389

LIABILITIES

Deposits:

Noninterest-bearing demand

$

15,946,738

$

11,604,415

Interest-bearing demand and savings

17,828,794

16,011,812

Time deposits under $250,000

399,467

457,290

Time deposits of $250,000 or more

187,566

207,275

Total deposits

34,362,565

28,280,792

Federal funds purchased and repurchase agreements

2,840,535

2,759,818

Long-term debt

272,036

270,074

Accrued expenses and taxes

178,130

239,001

Other liabilities

204,071

161,465

Total liabilities

37,857,337

31,711,150

SHAREHOLDERS' EQUITY

Common stock

55,057

55,057

Capital surplus

1,109,585

1,093,667

Retained earnings

2,265,129

1,968,318

Accumulated other comprehensive (loss) income, net

(343,128

)

169,197

Treasury stock

(338,238

)

(328,000

)

Total shareholders' equity

2,748,405

2,958,239

Total liabilities and shareholders' equity

$

40,605,742

$

34,669,389

Consolidated Statements of Income

UMB Financial Corporation

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

Three Months Ended

March 31,

2022

2021

INTEREST INCOME

Loans

$

149,470

$

150,170

Securities:

Taxable interest

43,382

27,162

Tax-exempt interest

23,855

24,964

Total securities income

67,237

52,126

Federal funds and resell agreements

2,450

2,821

Interest-bearing due from banks

2,457

703

Trading securities

185

159

Total interest income

221,799

205,979

INTEREST EXPENSE

Deposits

6,173

6,798

Federal funds and repurchase agreements

2,148

1,886

Other

3,123

3,180

Total interest expense

11,444

11,864

Net interest income

210,355

194,115

Provision for credit losses

(6,500

)

(7,500

)

Net interest income after provision for credit losses

216,855

201,615

NONINTEREST INCOME

Trust and securities processing

59,528

54,834

Trading and investment banking

5,440

9,356

Service charges on deposit accounts

24,642

21,976

Insurance fees and commissions

259

420

Brokerage fees

3,456

3,334

Bankcard fees

16,635

14,673

Investment securities losses, net

(522

)

(8,336

)

Other

14,240

12,640

Total noninterest income

123,678

108,897

NONINTEREST EXPENSE

Salaries and employee benefits

130,634

127,681

Occupancy, net

12,232

11,935

Equipment

18,164

19,615

Supplies and services

3,262

3,492

Marketing and business development

4,932

2,345

Processing fees

18,443

15,417

Legal and consulting

6,911

5,755

Bankcard

6,567

4,956

Amortization of other intangible assets

1,071

1,380

Regulatory fees

3,482

2,546

Other

9,080

5,824

Total noninterest expense

214,778

200,946

Income before income taxes

125,755

109,566

Income tax expense

19,792

16,923

NET INCOME

$

105,963

$

92,643

PER SHARE DATA

Net income – basic

$

2.19

$

1.93

Net income – diluted

2.17

1.91

Dividends

0.37

0.32

Weighted average shares outstanding – basic

48,406,840

48,096,643

Weighted average shares outstanding – diluted

48,832,177

48,520,752

Consolidated Statements of Comprehensive Income

UMB Financial Corporation

(unaudited, dollars in thousands)

Three Months Ended

March 31,

2022

2021

Net income

$

105,963

$

92,643

Other comprehensive loss, before tax:

Unrealized gains and losses on debt securities:

Change in unrealized holding gains and losses, net

(622,910

)

(199,038

)

Less: Reclassification adjustment for gains included in net income

—

(2,720

)

Amortization of net unrealized loss on securities transferred from available-for-sale to held-to-maturity

582

—

Change in unrealized gains and losses on debt securities

(622,328

)

(201,758

)

Unrealized gains and losses on derivative hedges:

Change in unrealized gains and losses on derivative hedges, net