Fourth Quarter 2020 Financial Highlights (all comparisons to prior year)

• GAAP net income of $156.3 million, or $3.24 per diluted share; net operating income of $157.4 million, or $3.26 per diluted share.
• Pre-tax, pre-provision (PTPP) income of $196.1 million, an increase of $116.8 million.
• Quarterly average loan balances increased $2.8 billion, or 21.2%.
• Quarterly average deposits grew 22.5% to $25.0 billion.
• Noninterest income increased 106.9% and comprised 54.0% of revenue.
• Credit quality remained strong, with net charge-offs of just 0.04% of average loans, consistent with the company’s historical performance.

KANSAS CITY, Mo.--(BUSINESS WIRE)-- 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.

“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

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

• GAAP noninterest expense for the fourth quarter of 2020 was $226.9 million, an increase of $28.9 million, or 14.6%, from the linked quarter and an increase of $23.4 million, or 11.5%, from the fourth quarter of 2019.
• The linked-quarter increase in noninterest expense was driven by:
  • Increases of $14.3 million in operational losses, $1.2 million in charitable contributions expense, and $0.9 million in losses on other real estate owned, all recorded in other noninterest expense.
  • An increase of $5.1 million in salaries and employee benefits, largely driven by increased bonus expense due to higher company performance.
  • Increases of $1.8 million in consulting expense and $1.1 million in legal expense, both recorded in legal and professional expense, due to timing of multiple technology initiatives and legal work performed on various matters.
  • An increase of $1.6 million in processing fees, $1.0 million in equipment expense, and $0.7 million in supplies and services expense, due to investments in the digital channel and integrated platform solutions to support business growth and the ongoing modernization of the company’s core systems.
• The year-over-year increase in noninterest expense was driven by:
  • A $13.1 million increase in operational losses, $1.2 million in charitable contributions expense, and $4.4 million in derivative expense, all recorded in other noninterest expense.
  • An $8.5 million increase in salaries and employee benefits, primarily due to increased bonus expense due to higher company performance and an increase of $1.8 million in deferred compensation expense. The increase in deferred compensation expense was offset by the increase in company-owned life insurance income noted above.
  • These increases were partially offset by a decrease of $4.7 million in marketing and development expense, primarily due to a decline in travel and entertainment expense due to the pandemic.

Full year 2020 earnings discussion

• Net interest income increased $60.3 million, or 9.0%, year-over-year due to a $4.7 billion increase in earning assets, primarily driven by organic loan growth and the company’s PPP participation, partially offset by the impact of lower short-term and long-term interest rates. In 2020, average loan balances increased $2.4 billion and average securities increased $1.2 billion. Average interest-bearing liabilities increased $2.6 billion, while the cost of interest-bearing liabilities declined 85 basis points.
• Full-year noninterest income increased $133.4 million, or 31.3%, due to:
  • An increase of $118.4 million in investment securities gains, primarily driven by the $108.8 million gain on the company’s investment in Tattooed Chef, Inc., an increase in gains on sales of available for sale securities of $3.8 million, and a $3.1 million increase in equity earnings on alternative investments.
  • Increases of $10.6 million in fund services income and $7.2 million in corporate trust revenue, both recorded in trust and securities processing.
  • An increase of $9.5 million in trading and investment banking due to increased trading volume.
  • These increases were partially offset by the following decreases:
    • A $6.9 million decline in brokerage fees, primarily driven by lower 12b-1 income.
    • A $6.2 million decrease in bankcard income, due to lower interchange revenue.
• Full-year noninterest expense increased $43.1 million, or 5.5%, primarily due to:
  • A $34.0 million increase in salary and employee benefit expense driven primarily by increased bonus and sales commission expense tied to business volumes, revenue growth, and overall company performance, as well as increased compensation expense tied to the company’s COVID-19 response.
  • A $12.9 million increase in operational losses, an increase of $1.3 million in charitable contributions expense, and an increase of $1.2 million in derivative expense, all recorded in other noninterest expense.
  • An increase of $6.6 million in equipment expense, primarily due to investments in digital channel and integrated platform solutions to support business growth and the ongoing modernization of the company’s core systems.
  • These increases were partially offset by a decrease of $11.6 million in marketing and development expense primarily due to a decline in travel and entertainment expense due to the pandemic.

Income taxes

• The company’s effective tax rate was 15.5% for the year ended December 31, 2020, compared to 14.8% for the same period in 2019. The increase in the effective tax rate for 2020 is primarily attributable to a smaller portion of pre-tax income being earned from tax-exempt municipal securities.

Balance sheet

• Average total assets for the fourth quarter of 2020 were $30.6 billion compared to $29.5 billion for the linked quarter and $25.1 billion for the same period in 2019.

• Average loans for the fourth quarter of 2020 increased 2.0% on a linked-quarter basis and 21.2% compared to the fourth quarter of 2019 due to increased commercial real estate and consumer real estate loans and the company’s PPP participation, which had an average balance of $1.4 billion in the fourth quarter.

• Average securities available for sale increased 3.3% on a linked-quarter basis and 19.2% compared to the fourth quarter of 2019.

• Average deposits increased 3.5% on a linked-quarter basis and 22.5% compared to the fourth quarter of 2019.
• Average noninterest-bearing demand deposits increased 8.3% on a linked-quarter basis to $8.9 billion.

Capital

• At December 31, 2020, the regulatory capital ratios presented in the foregoing table exceeded all “well-capitalized” regulatory thresholds.

Asset Quality

• Provision for credit losses for the fourth quarter totaled $5.0 million, a decrease of $11.0 million from the linked quarter, and an increase of $3.0 million from the fourth quarter of 2019.
• Net charge-offs for the fourth quarter totaled $1.8 million, or 0.04%, of average loans, compared to $5.1 million, or 0.13%, of average loans in the linked quarter.

Dividend Declaration

At the company’s quarterly board meeting, the Board of Directors declared a $0.32 per share quarterly cash dividend, payable on April 1, 2021, to shareholders of record at the close of business on March 10, 2021.

Conference Call

The company plans to host a conference call to discuss its fourth quarter and full-year 2020 earnings results on Wednesday, January 27, 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 4Q 2020 Conference Call

A replay of the conference call may be heard through February 10, 2021 by calling (toll-free) 877-344-7529 or (international) 412-317-0088. The replay access code required for playback is 10150814. 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 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.

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, 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 fourth-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 fourth-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 adopt in 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.