UMB Financial Corporation Reports First Quarter Net Income of $106.0 Million

First Quarter 2022 Financial Highlights

• 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.

UMB Financial Corporation (Nasdaq: UMBF), a financial services company, announced net income for the first quarter of 2022 of $106.0 million, or $2.17 per diluted share, compared to $78.5 million, or $1.61 per diluted share, in the fourth quarter of 2021 (linked quarter) and $92.6 million, or $1.91 per diluted share, in the first quarter of 2021.

Net operating income, a non-GAAP financial measure reconciled to net income, the nearest comparable GAAP measure, later in this release, was $106.1 million, or $2.17 per diluted share, for the first quarter of 2022, compared to $78.9 million, or $1.62 per diluted share, for the linked quarter and $92.8 million, or $1.91 per diluted share, for the first quarter of 2021. 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 $125.7 million, or $2.57 per diluted share, for the first quarter of 2022, compared to $113.4 million, or $2.32 per diluted share, for the linked quarter, and $108.7 million, or $2.24 per diluted share, for the first quarter of 2021. These PTPP-FTE results represent increases of 10.9% on a linked-quarter basis and 15.6% compared to the first quarter of 2021.

“Our results for the first quarter of 2022 reflect the team’s continued execution of our differentiated business model, with robust growth on both sides of our balance sheet, strong asset quality metrics, and sustained momentum in our fee income businesses,” said Mariner Kemper, chairman, president and chief executive officer. “Compared to the first quarter of 2021, average loans excluding PPP balances and average deposits increased 15.6% and 21.5%, respectively. Together with a 13.6% increase in fee income, our first quarter revenues increased 10.2% compared to the prior period. In addition, our results benefited from a provision release of $6.5 million in the first quarter, driven by favorable portfolio metrics and the improving macro-economic outlook. I am also extremely proud of the team’s continued commitment to the communities we serve, which you may read about in our 2022 corporate citizenship and ESG report.”

Net interest income

• 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.

Noninterest income

• First quarter 2022 noninterest income increased $4.9 million, or 4.1%, on a linked-quarter basis, largely due to:
  • An increase of $3.0 million in service charges on deposits primarily driven by increased healthcare income related to customer transfer and conversion fees.
  • 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.
  • 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.
  • Increases of $0.9 million in corporate trust income and $0.4 million in fund services income, both recorded in trust and securities processing.
  • 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:
  • 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.
  • Increases of $5.0 million in derivative income, recorded in other income, and $2.0 million in bankcard income, due to higher interchange revenue.
  • 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.
  • 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.
  • 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.

Noninterest expense

• 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:
  • 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.
  • 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.
  • 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.
  • 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:
  • An increase of $3.0 million in processing fees due to the timing of multiple software projects.
  • 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.
  • 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.
  • An increase of $1.6 million in bankcard expense primarily due to higher processing expense and bankcard fraud losses.
  • Increases of $1.2 million in operational losses, and $0.9 million in derivative-related expense, both recorded in other expense.
  • 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.

Income taxes

• 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.

Balance sheet

• 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.

• 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.

• 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.

• 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

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

Asset Quality

• 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.

Dividend Declaration and Share Repurchase Authorization

At the company’s quarterly board meeting, the Board of Directors declared a $0.37 per share quarterly cash dividend, payable on July 1, 2022, to shareholders of record at the close of business on June 10, 2022.

As in prior years, the Board also approved the repurchase of up to 2,000,000 shares of the company’s common stock. Share repurchases may occur from time to time at any point until the regular meeting of the Board that immediately follows the 2023 annual meeting of the company’s shareholders. Shares acquired under the repurchase program may be available for reissuance or resale, including in connection with the company's compensation plans and dividend reinvestment plan. Under the repurchase program, the company may acquire the shares from time to time in open market or privately negotiated transactions, at the discretion of management.

Conference Call

The company plans to host a conference call to discuss its first quarter 2022 earnings results on Wednesday, April 27, 2022, at 8:30 a.m. (CT).

Interested parties may access the call by dialing (toll-free) 844-200-6205 or (international) 929-526-1599 and requesting to join the UMB Financial call with access code 758098. The live call may also be accessed by visiting investorrelations.umb.com or by using the following link:

UMB Financial 1Q 2022 Conference Call

A replay of the conference call may be heard through May 11, 2022 by calling (toll-free) 866-813-9403 or (international) 929-458-6194. The replay access code required for playback is 176268. 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).

PTPP income for the relevant period is defined as GAAP net income, adjusted to reflect the impact of excluding income tax and provision expenses.

PTPP-FTE 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, 2021, 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: macroeconomic and other challenges and uncertainties related to the COVID-19 pandemic, such as the impacts to the U.S. and global economies; and impacts related to or resulting from Russia’s military action in Ukraine, such as the broader impacts to financial markets and the global macroeconomic and geopolitical environments, may also cause actual results or other future events, circumstances, or aspirations to differ from our forward-looking statements. 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. As the company’s reach continues to grow, it also serves business clients nationwide and institutional clients in several countries. For more information, visit UMB.com, UMB Blog, UMB Facebook and UMB LinkedIn, or follow us on Twitter at @UMBBank.