8-K
UMB FINANCIAL CORP (UMBF)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): 7/28/2020
UMB FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Commission File Number: 001-38481
| Missouri | 43-0903811 |
|---|---|
| (State or other jurisdiction of | (IRS Employer |
| incorporation) | Identification No.) |
1010 Grand Blvd., Kansas City, MO 64106
(Address of principal executive offices, including zip code)
(816) 860-7000
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13c-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities Registered Pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $1.00 Par Value | UMBF | The NASDAQ Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02Results of Operations and Financial Condition
On July 28, 2020, UMB Financial Corporation (the “Company”) issued a press release announcing the financial results for the Company for the quarter and period ended June 30, 2020. A copy of the press release is attached as Exhibit 99.1 and the information is hereby incorporated by reference herein.
The information contained in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 hereto, is being furnished and shall not be deemed to be “filed” with the Securities and Exchange Commission (“SEC”) for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section and is not incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, whether made before or after the date hereof, except as shall be expressly set forth by specific reference to this Current Report on Form 8-K in such a filing.
Item 7.01 Regulation FD Disclosure
On July 28, 2020, the Company announced in the same press release that the Board of Directors of the Company (the “Board”) had declared a quarterly dividend of $0.31 per share that is payable on October 1, 2020 to shareholders of record of the Company as of the close of business on September 10, 2020.
The Company is furnishing a copy of materials that will be used in the Company’s shareholder conference call at 8:30 a.m. (CT) on July 29, 2020. A copy of the materials is attached as Exhibit 99.2 and will be available on the Company’s website at www.umb.com. The materials are dated July 28, 2020, and the Company disclaims any obligation to correct or update any of the materials in the future.
The information provided under Item 7.01 of this Current Report on Form 8-K, including Exhibits 99.1 and 99.2 hereto, is being furnished and is not deemed to be “filed” with the SEC for the purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section and is not incorporated by reference into any filing of the Company under the Securities Act or the Exchange Act, whether made before or after the date hereof, except as shall be expressly set forth by specific reference to this Current Report on Form 8-K in such a filing.
Item 9.01 Financial Statements and Exhibits
| 99.1 | Press Release announcing financial results for quarter and period ended June 30, 2020, and announcing dividend declaration. |
|---|---|
| 99.2 | Investor Presentation Materials, dated July 28, 2020. |
| 104 | The cover page from this Current Report on Form 8-K, formatted in Inline XBRL. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| UMB FINANCIAL CORPORATION | |
|---|---|
| By: | /s/ Ram Shankar |
| Ram Shankar<br><br><br>Chief Financial Officer |
Date: July 28, 2020
umbf-ex991_7.htm
Exhibit 99.1
UMB Financial Corporation News Release
1010 Grand Boulevard
Kansas City, MO 64106
816.860.7000
umb.com
//FOR IMMEDIATE RELEASE//
Media Contact: Stephanie Hague: 816.860.5088
Investor Relations Contact: Kay Gregory: 816.860.7106
UMB Financial Corporation Reports Second Quarter 2020 Net Income of $60.5 Million
Second Quarter 2020 Highlights
| • | GAAP net income of $60.5 million, or $1.26 per diluted share; operating net income of $63.8 million, or $1.33 per diluted share. |
|---|---|
| • | Pre-tax, pre-provision (PTPP) income of $90.2 million, an increase of 7.6% from the linked quarter. |
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| • | Total revenue increased 9.7% to $298.7 million, compared to the linked quarter. |
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| • | Average loans, excluding Paycheck Protection Program (PPP) balances, increased 8.2% on a linked-quarter annualized basis. |
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| • | Loans recorded under the PPP totaled $1.5 billion as of June 30, 2020. |
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| • | Average deposits grew $2.0 billion to $22.8 billion compared to the first quarter of 2020. |
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| • | GAAP book value per share of $57.84, a 14.5% increase, and tangible book value per share of $53.57, a 15.1% increase compared to a year ago. |
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| • | Credit quality remained strong, with net charge-offs of just 0.15% of average loans, consistent with the company’s historical performance. |
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KANSAS CITY, Mo. (July 28, 2020) – UMB Financial Corporation (Nasdaq: UMBF), a financial services company, announced net income for the second quarter of 2020 of $60.5 million, or $1.26 per diluted share, compared to a net loss of $3.4 million in the first quarter of 2020 (linked quarter) and net income of $57.0 million, or $1.16 per diluted share, in the second quarter of 2019.
Net operating income, a non-GAAP financial measure reconciled to net income, the nearest comparable GAAP measure, later in this release, was $63.8 million, or $1.33 per diluted share, for the second quarter of 2020, compared to a net operating loss of $1.9 million for the linked quarter and net operating income of $57.2 million, or $1.17 per diluted share, for the second quarter of 2019. Pre-tax, pre-provision income (PTPP), a non-GAAP measure reconciled to net income before taxes, the nearest comparable GAAP measure, later in this release, was $90.2 million, or $1.88 per diluted share, for the second quarter of 2020, compared to $83.7 million, or $1.72 per diluted share, for the linked quarter, and $78.4 million, or $1.60 per diluted share, for the second quarter of 2019. These PTPP results represent increases of 7.6% on a linked-quarter basis and 15.0% compared to the second quarter of 2019.
| Summary of quarterly financial results | UMB Financial Corporation | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| (unaudited, dollars in thousands, except per share data) | |||||||||
| Q2 | Q1 | Q2 | |||||||
| 2020 | 2020 | 2019 | |||||||
| Net income (loss) | $ | 60,529 | $ | (3,439 | ) | $ | 56,959 | ||
| Earnings (losses) per share (diluted) | 1.26 | (0.07 | ) | 1.16 | |||||
| Pre-tax, pre-provision income | 90,152 | 83,746 | 78,425 | ||||||
| Pre-tax, pre-provision earnings per share (diluted) | 1.88 | 1.72 | 1.60 | ||||||
| Net operating income (loss) | 63,835 | (1,881 | ) | 57,245 | |||||
| Operating earnings (losses) per share (diluted) | 1.33 | (0.04 | ) | 1.17 | |||||
| GAAP | |||||||||
| Return on average assets | 0.87 | % | (0.05 | )% | 0.98 | % | |||
| Return on average equity | 8.95 | (0.51 | ) | 9.46 | |||||
| Efficiency ratio | 70.20 | 68.93 | 70.32 | ||||||
| Non-GAAP | |||||||||
| Operating return on average assets | 0.91 | % | (0.03 | )% | 0.99 | % | |||
| Operating return on average equity | 9.44 | (0.28 | ) | 9.51 | |||||
| Operating efficiency ratio | 68.76 | 68.19 | 70.19 | ||||||
| Summary of year-to-date financial results | UMB Financial Corporation | ||||||||
| --- | --- | --- | --- | --- | --- | --- | |||
| (unaudited, dollars in thousands, except per share data) | June | June | |||||||
| YTD | YTD | ||||||||
| 2020 | 2019 | ||||||||
| Net income | $ | 57,090 | $ | 114,703 | |||||
| Earnings per share (diluted) | 1.18 | 2.34 | |||||||
| Pre-tax, pre-provision income | 173,898 | 159,049 | |||||||
| Pre-tax, pre-provision earnings per share (diluted) | 3.59 | 3.24 | |||||||
| Net operating income | 61,954 | 115,453 | |||||||
| Operating earnings per share (diluted) | 1.28 | 2.36 | |||||||
| GAAP | |||||||||
| Return on average assets | 0.42 | % | 1.00 | % | |||||
| Return on average equity | 4.22 | 9.95 | |||||||
| Efficiency ratio | 69.59 | 70.16 | |||||||
| Non-GAAP | |||||||||
| Operating return on average assets | 0.46 | % | 1.01 | % | |||||
| Operating return on average equity | 4.58 | 10.01 | |||||||
| Operating efficiency ratio | 68.49 | 69.98 |
“As the country continues to navigate its way through an uncertain economic environment, our second quarter results highlight the strength of our fortress balance sheet and the quality of our underwriting practices, as evidenced by just 15 basis points of net charge-offs. Additionally, we added $1.5 billion in loans under the Paycheck Protection Program (PPP) during the quarter,” said Mariner Kemper, chairman, president and chief executive officer. “Despite the unprecedented times, average loans, excluding PPP balances, increased 8.2% on a linked-quarter annualized basis. Finally, we launched our corporate citizenship report outlining some of our 2019 environmental, social and governance efforts, which has
been a collaborative effort of listening to, and engaging with, our associates, customers, and communities.”
| Summary of revenue | UMB Financial Corporation | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (unaudited, dollars in thousands) | |||||||||||||||
| Q2 | Q1 | Q2 | CQ vs. | CQ vs. | |||||||||||
| 2020 | 2020 | 2019 | LQ | PY | |||||||||||
| Net interest income | $ | 178,229 | $ | 173,941 | $ | 166,414 | $ | 4,288 | $ | 11,815 | |||||
| Noninterest income: | |||||||||||||||
| Trust and securities processing | 46,321 | 47,000 | 42,903 | (679 | ) | 3,418 | |||||||||
| Trading and investment banking | 12,851 | 1,723 | 5,453 | 11,128 | 7,398 | ||||||||||
| Service charges on deposit accounts | 19,074 | 25,081 | 20,747 | (6,007 | ) | (1,673 | ) | ||||||||
| Insurance fees and commissions | 533 | 259 | 465 | 274 | 68 | ||||||||||
| Brokerage fees | 5,753 | 9,860 | 7,077 | (4,107 | ) | (1,324 | ) | ||||||||
| Bankcard fees | 12,916 | 16,545 | 16,439 | (3,629 | ) | (3,523 | ) | ||||||||
| Gains (losses) on sales of securities available for sale, net | 4,006 | 1,227 | (1,403 | ) | 2,779 | 5,409 | |||||||||
| Other | 19,002 | (3,271 | ) | 13,717 | 22,273 | 5,285 | |||||||||
| Total noninterest income | $ | 120,456 | $ | 98,424 | $ | 105,398 | $ | 22,032 | $ | 15,058 | |||||
| Total revenue | $ | 298,685 | $ | 272,365 | $ | 271,812 | $ | 26,320 | $ | 26,873 | |||||
| Net interest margin | 2.79 | % | 2.97 | % | 3.19 | % | |||||||||
| Total noninterest income as a % of total revenue | 40.33 | 36.14 | 38.78 |
Net interest income
| • | Net interest income totaled $178.2 million, an increase of $4.3 million, or 2.5%, from the linked quarter, driven by a $1.5 billion, or 10.9%, increase in average loans, and an 8.7% increase in average earning assets. The increase in loan balances was primarily driven by the company’s participation in the PPP, which contributed $1.5 billion in balances. While new loan production during the quarter remained strong, this growth was negated by normalization of line utilization activity which spiked in the first quarter following the initial impact of the COVID-19 pandemic. |
|---|---|
| • | Net interest margin for the second quarter was 2.79%, a decrease of 18 basis points from the linked quarter, in large part due to lower short-term interest rates and a build-up of excess liquidity. Earning asset yields declined 57 basis points from the linked quarter, driven by declining yields in the loan portfolio due to recent reductions in short-term interest rates and an unfavorable earning asset mix shift driven by excess liquidity and, to a lesser extent, the impact of lower-yielding PPP loans. Federal funds and resell agreements, interest-bearing due from banks, and trading securities averaged $2.3 billion, an 11.4% increase from $2.1 billion in the linked quarter. The cost of interest-bearing liabilities decreased 58 basis points to 0.34%, driven by a 53-basis-point decline in the cost of interest-bearing deposits and lower borrowing costs. Net interest spread increased one basis point to 2.67 from the linked quarter and was five basis points lower than the second quarter of 2019. |
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| • | On a year-over-year basis, net interest income increased $11.8 million, or 7.1%, driven by a $2.5 billion, or 19.6%, increase in average loans, and a $4.9 billion, or 22.7%, increase in earning assets. |
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| • | Average deposits increased 9.4% on a linked-quarter basis and 21.3% compared to the second quarter of 2019. Average noninterest-bearing demand deposit balances increased 18.0% on a linked-quarter basis and 26.1% compared to the second quarter of 2019. |
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Noninterest income
| • | Second quarter 2020 noninterest income increased $22.0 million, or 22.4%, on a linked-quarter basis, largely due to: |
|---|---|
| o | An increase of $24.8 million in company-owned life insurance income, reflecting the impact of higher market valuations of the underlying investments, recorded in other |
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| income. The increase in company-owned life insurance income is offset by a proportionate increase in deferred compensation expense as noted below. | |
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| o | An increase of $11.1 million in trading and investment banking, primarily driven by higher trading volumes, as well as an increase of $4.9 million in market valuation of investments in the company’s trading portfolio. |
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| o | These increases were partially offset by the following decreases: |
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| ▪ | A decrease of $5.5 million in healthcare income, recorded in service charges on deposits, related to non-recurring customer transfer and conversion fees recorded in the first quarter. |
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| ▪ | A decrease of $4.1 million in brokerage fees, primarily driven by decreased 12b-1 income. |
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| ▪ | A decrease of $3.6 million in bankcard fees, primarily due to decreased interchange income. |
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| • | Compared to the prior year, noninterest income in the second quarter of 2020 increased $15.1 million, or 14.3%, primarily driven by: |
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| o | An increase of $8.9 million in company-owned life insurance, recorded in other income. The increase in company-owned life insurance income is offset by a proportionate increase in deferred compensation expense as noted below. |
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| o | An increase of $7.4 million in trading and investment banking, primarily driven by higher trading volumes, as well as an increase of $1.1 million in market valuation of investments in the company’s trading portfolio. |
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| o | An increase of $5.4 million in gains on sales of available-for-sale securities. |
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| o | These increases were partially offset by the following decreases: |
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| ▪ | A decrease of $3.5 million in bankcard fees, primarily due to decreased interchange income. |
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| ▪ | A decrease of $1.3 million in brokerage fees, primarily due to decreased 12b-1 income. |
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| ▪ | A decrease of $1.0 million in equity earnings on alternative investments, recorded in other income. |
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Noninterest expense
| Summary of noninterest expense | UMB Financial Corporation | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (unaudited, dollars in thousands) | ||||||||||||
| Q2 | Q1 | Q2 | CQ vs. | CQ vs. | ||||||||
| 2020 | 2020 | 2019 | LQ | PY | ||||||||
| Salaries and employee benefits | $ | 130,938 | $ | 111,060 | $ | 114,454 | $ | 19,878 | $ | 16,484 | ||
| Occupancy, net | 11,411 | 12,180 | 11,539 | (769 | ) | (128 | ) | |||||
| Equipment | 21,502 | 21,241 | 18,824 | 261 | 2,678 | |||||||
| Supplies and services | 3,785 | 4,185 | 4,285 | (400 | ) | (500 | ) | |||||
| Marketing and business development | 3,284 | 4,640 | 7,304 | (1,356 | ) | (4,020 | ) | |||||
| Processing fees | 13,603 | 13,390 | 13,096 | 213 | 507 | |||||||
| Legal and consulting | 6,220 | 6,110 | 7,496 | 110 | (1,276 | ) | ||||||
| Bankcard | 4,549 | 4,860 | 4,701 | (311 | ) | (152 | ) | |||||
| Amortization of other intangible assets | 1,658 | 1,734 | 1,251 | (76 | ) | 407 | ||||||
| Regulatory fees | 3,211 | 2,366 | 2,910 | 845 | 301 | |||||||
| Other | 8,372 | 6,853 | 7,527 | 1,519 | 845 | |||||||
| Total noninterest expense | $ | 208,533 | $ | 188,619 | $ | 193,387 | $ | 19,914 | $ | 15,146 | ||
| • | GAAP noninterest expense for the second quarter of 2020 was $208.5 million, an increase of $19.9 million, or 10.6%, from the linked quarter and an increase of $15.1 million, or 7.8%, from | |||||||||||
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| the second quarter of 2019. Expenses for the quarter included $4.0 million in non-recurring compensation and other costs tied to the company’s COVID-19 response. | ||||||||||||
| --- | ||||||||||||
| • | The linked quarter increase in noninterest expense was driven by: | |||||||||||
| --- | --- | |||||||||||
| o | An increase of $19.9 million in salaries and employee benefits, largely driven by a $24.6 million increase in deferred compensation expense, which was offset by the increase in company-owned life insurance income noted above. This increase was partially offset by a decrease of $5.5 million in payroll taxes and profit sharing and 401(k) expense. | |||||||||||
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| o | An increase of $1.5 million in other expense driven by operational losses in the second quarter. | |||||||||||
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| o | These increases were partially offset by a decrease of $1.4 million in marketing and business development expense due to a decline in travel and entertainment expenses in the second quarter due to the pandemic. | |||||||||||
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| • | The year-over-year increase in noninterest expense was driven by: | |||||||||||
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| o | A $16.5 million increase in salaries and employee benefits, primarily due to increases of $9.8 million in deferred compensation expense, $3.5 million in bonus and commission expense, and $3.2 million in salary and wage expense, which included compensation expense tied to the company’s COVID-19 response. The increase in deferred compensation expense was offset by the increase in company-owned life insurance income noted above. | |||||||||||
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| o | An increase of $2.7 million in equipment expense, due to investments in digital channel and integrated platform solutions to support business growth and the ongoing modernization of the company’s core systems. | |||||||||||
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| o | These increases were partially offset by a decrease of $4.0 million in marketing and business development expense primarily due to a decline in travel and entertainment expense due to the pandemic. | |||||||||||
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Income taxes
| • | The company’s effective tax rate was 11.3% for the six months ended June 30, 2020, compared to 15.5% for the same period in 2019. The decrease in the effective rate for 2020 is primarily attributable to a larger portion of income being earned from tax-exempt municipal securities. |
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Balance sheet
| • | Average total assets for the second quarter of 2020 were $28.1 billion compared to $26.0 billion for the linked quarter and $23.3 billion for the same period in 2019. | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Summary of average loans and leases - QTD Average | UMB Financial Corporation | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||
| (unaudited, dollars in thousands) | |||||||||||||||
| Q2 | Q1 | Q2 | CQ vs. | CQ vs. | |||||||||||
| 2020 | 2020 | 2019 | LQ | PY | |||||||||||
| Commercial and industrial | $ | 6,970,223 | $ | 5,786,545 | $ | 5,278,626 | $ | 1,183,678 | $ | 1,691,597 | |||||
| Specialty lending | 471,571 | 510,316 | 682,306 | (38,745 | ) | (210,735 | ) | ||||||||
| Commercial real estate | 5,435,428 | 5,181,036 | 4,696,665 | 254,392 | 738,763 | ||||||||||
| Consumer real estate | 1,528,501 | 1,414,025 | 1,241,078 | 114,476 | 287,423 | ||||||||||
| Consumer | 146,120 | 141,972 | 132,662 | 4,148 | 13,458 | ||||||||||
| Credit cards | 353,424 | 418,485 | 427,176 | (65,061 | ) | (73,752 | ) | ||||||||
| Leases and other | 193,099 | 164,187 | 162,468 | 28,912 | 30,631 | ||||||||||
| Total loans | $ | 15,098,366 | $ | 13,616,566 | $ | 12,620,981 | $ | 1,481,800 | $ | 2,477,385 | |||||
| • | Average loans for the second quarter of 2020 increased 10.9% on a linked-quarter basis and 19.6% compared to the second quarter of 2019, primarily due to the company’s participation in PPP, which had an average balance of $1.2 billion in the second quarter. | ||||||||||||||
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| Summary of average securities - QTD Average | UMB Financial Corporation | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||
| (unaudited, dollars in thousands) | |||||||||||||||
| Q2 | Q1 | Q2 | CQ vs. | CQ vs. | |||||||||||
| 2020 | 2020 | 2019 | LQ | PY | |||||||||||
| Securities available for sale: | |||||||||||||||
| U.S. Treasury | $ | 31,150 | $ | 49,638 | $ | 256,949 | $ | (18,488 | ) | $ | (225,799 | ) | |||
| U.S. Agencies | 403,290 | 94,342 | 91,822 | 308,948 | 311,468 | ||||||||||
| Mortgage-backed | 4,284,374 | 4,133,118 | 3,926,164 | 151,256 | 358,210 | ||||||||||
| State and political subdivisions | 3,108,661 | 3,058,594 | 2,659,397 | 50,067 | 449,264 | ||||||||||
| Corporates | 98,089 | 188,257 | 84,910 | (90,168 | ) | 13,179 | |||||||||
| Commercial Paper | 2,040 | — | — | 2,040 | 2,040 | ||||||||||
| Total securities available for sale | $ | 7,927,604 | $ | 7,523,949 | $ | 7,019,242 | $ | 403,655 | $ | 908,362 | |||||
| Securities held to maturity: | |||||||||||||||
| State and political subdivisions | $ | 1,100,843 | $ | 1,108,716 | $ | 1,128,526 | $ | (7,873 | ) | $ | (27,683 | ) | |||
| Trading securities | 37,816 | 48,102 | 61,565 | (10,286 | ) | (23,749 | ) | ||||||||
| Other securities | 148,918 | 124,795 | 80,097 | 24,123 | 68,821 | ||||||||||
| Total securities | $ | 9,215,181 | $ | 8,805,562 | $ | 8,289,430 | $ | 409,619 | $ | 925,751 | |||||
| • | Average securities available for sale increased 5.4% on a linked-quarter basis and 12.9% compared to the second quarter of 2019. | ||||||||||||||
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| Summary of average deposits - QTD Average | UMB Financial Corporation | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (unaudited, dollars in thousands) | |||||||||||||||
| Q2 | Q1 | Q2 | CQ vs. | CQ vs. | |||||||||||
| 2020 | 2020 | 2019 | LQ | PY | |||||||||||
| Deposits: | |||||||||||||||
| Noninterest-bearing demand | $ | 7,662,836 | $ | 6,495,611 | $ | 6,078,520 | $ | 1,167,225 | $ | 1,584,316 | |||||
| Interest-bearing demand and savings | 14,160,722 | 13,232,370 | 11,740,634 | 928,352 | 2,420,088 | ||||||||||
| Time deposits | 957,007 | 1,097,780 | 966,719 | (140,773 | ) | (9,712 | ) | ||||||||
| Total deposits | $ | 22,780,565 | $ | 20,825,761 | $ | 18,785,873 | $ | 1,954,804 | $ | 3,994,692 | |||||
| Noninterest bearing deposits as % of total | 33.64 | % | 31.19 | % | 32.36 | % | |||||||||
| • | Average deposits increased 9.4% on a linked-quarter basis and 21.3% compared to the second quarter of 2019. | ||||||||||||||
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| • | Average noninterest-bearing demand deposits increased 18.0% on a linked-quarter basis to $7.7 billion. | ||||||||||||||
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Capital
| Capital information | UMB Financial Corporation | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| (unaudited, dollars in thousands, except per share data) | |||||||||
| June 30, 2020 | March 31, 2020 | June 30, 2019 | |||||||
| Total equity | $ | 2,777,395 | $ | 2,663,441 | $ | 2,477,790 | |||
| Book value per common share | 57.84 | 55.33 | 50.50 | ||||||
| Tangible book value per common share | 53.57 | 51.04 | 46.56 | ||||||
| Regulatory capital: | |||||||||
| Common equity Tier 1 capital | $ | 2,335,625 | $ | 2,279,039 | $ | 2,236,930 | |||
| Tier 1 capital | 2,335,625 | 2,279,039 | 2,236,930 | ||||||
| Total capital | 2,580,849 | 2,514,445 | 2,411,510 | ||||||
| Regulatory capital ratios: | |||||||||
| Common equity Tier 1 capital ratio | 11.92 | % | 11.90 | % | 12.65 | % | |||
| Tier 1 risk-based capital ratio | 11.92 | 11.90 | 12.65 | ||||||
| Total risk-based capital ratio | 13.17 | 13.12 | 13.63 | ||||||
| Tier 1 leverage ratio | 8.35 | 8.81 | 9.69 | ||||||
| • | At June 30, 2020, the regulatory capital ratios presented in the foregoing table exceeded all “well-capitalized” regulatory thresholds. | ||||||||
| --- | --- | ||||||||
| • | The company did not execute any open market share repurchases during the second quarter, outside of the completion of the $30 million accelerated share repurchase program that was entered into in early March. | ||||||||
| --- | --- |
Asset Quality
| Credit quality | UMB Financial Corporation | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (unaudited, dollars in thousands) | |||||||||||||||
| Q2 | Q1 | Q4 | Q3 | Q2 | |||||||||||
| 2020 | 2020 | 2019 | 2019 | 2019 | |||||||||||
| Net charge-offs - Total loans | $ | 5,541 | $ | 7,672 | $ | 7,618 | $ | 2,186 | $ | 12,569 | |||||
| Net loan charge-offs as a % of total average loans | 0.15 | % | 0.23 | % | 0.23 | % | 0.07 | % | 0.40 | % | |||||
| Loans over 90 days past due | $ | 4,588 | $ | 2,211 | $ | 2,069 | $ | 2,466 | $ | 1,825 | |||||
| Loans over 90 days past due as a % of total loans | 0.03 | % | 0.02 | % | 0.02 | % | 0.02 | % | 0.01 | % | |||||
| Nonaccrual and restructured loans | $ | 82,245 | $ | 97,029 | $ | 56,347 | $ | 71,838 | $ | 53,395 | |||||
| Nonaccrual and restructured loans as a % of total loans | 0.54 | % | 0.70 | % | 0.42 | % | 0.55 | % | 0.41 | % | |||||
| Provision for credit losses | $ | 21,500 | $ | 88,000 | $ | 2,000 | $ | 7,500 | $ | 11,000 | |||||
| • | Provision for credit losses for the second quarter totaled $21.5 million, a decrease of $66.5 million from the linked quarter, and an increase of $10.5 million from the second quarter of 2019. | ||||||||||||||
| --- | --- | ||||||||||||||
| • | Net charge-offs totaled $5.5 million, or 0.15%, of average loans, compared to $7.7 million, or 0.23%, of average loans in the linked quarter. | ||||||||||||||
| --- | --- | ||||||||||||||
| • | The reserve build during the second quarter reflects the continued impact of the adoption of the current expected credit losses (CECL) accounting standard on January 1, 2020, and changes to key macroeconomic variables due to the COVID-19 pandemic. | ||||||||||||||
| --- | --- |
Dividend Declaration
At the company’s quarterly board meeting, the Board of Directors declared a $0.31 per share quarterly cash dividend, payable on October 1, 2020, to shareholders of record at the close of business on September 10, 2020.
Conference Call
The company plans to host a conference call to discuss its second quarter 2020 earnings results on Wednesday, July 29, 2020, 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 2020 Conference Call
A replay of the conference call may be heard through August 12, 2020 by calling (toll-free)
877-344-7529 or (international) 412-317-0088. The replay access code required for playback is 10145903. 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 (loss), operating earnings (losses) 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), 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, 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.
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 third-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 third-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 phase in beginning 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.
| Consolidated Balance Sheets | |||||
|---|---|---|---|---|---|
| (unaudited, dollars in thousands) | |||||
| 2019 | |||||
| ASSETS | |||||
| Loans | 15,305,097 | $ | 12,900,269 | ||
| Allowance for credit losses on loans | (200,300 | ) | (102,092 | ) | |
| Net loans | 15,104,797 | 12,798,177 | |||
| Loans held for sale | 8,213 | 2,771 | |||
| Securities: | |||||
| Available for sale | 8,483,624 | 7,176,351 | |||
| Held to maturity, net of allowance for credit losses | 1,111,625 | 1,112,773 | |||
| Trading securities | 51,383 | 81,381 | |||
| Other securities | 154,206 | 89,302 | |||
| Total securities | 9,800,838 | 8,459,807 | |||
| Federal funds sold and resell agreements | 1,347,643 | 283,603 | |||
| Interest-bearing due from banks | 1,714,478 | 876,551 | |||
| Cash and due from banks | 462,849 | 422,648 | |||
| Premises and equipment, net | 300,174 | 278,725 | |||
| Accrued income | 126,962 | 124,396 | |||
| Goodwill | 180,867 | 180,867 | |||
| Other intangibles, net | 24,181 | 12,425 | |||
| Other assets | 682,606 | 576,306 | |||
| Total assets | 29,753,608 | $ | 24,016,276 | ||
| LIABILITIES | |||||
| Deposits: | |||||
| Noninterest-bearing demand | 8,633,603 | $ | 6,524,428 | ||
| Interest-bearing demand and savings | 15,033,643 | 11,870,782 | |||
| Time deposits under 250,000 | 546,089 | 610,711 | |||
| Time deposits of 250,000 or more | 246,069 | 394,309 | |||
| Total deposits | 24,459,404 | 19,400,230 | |||
| Federal funds purchased and repurchase agreements | 1,963,694 | 1,708,884 | |||
| Short-term debt | 15,000 | — | |||
| Long-term debt | 70,996 | 69,825 | |||
| Accrued expenses and taxes | 239,254 | 198,141 | |||
| Other liabilities | 227,865 | 161,406 | |||
| Total liabilities | 26,976,213 | 21,538,486 | |||
| SHAREHOLDERS' EQUITY | |||||
| Common stock | 55,057 | 55,057 | |||
| Capital surplus | 1,081,713 | 1,065,301 | |||
| Retained earnings | 1,692,289 | 1,573,586 | |||
| Accumulated other comprehensive income, net | 284,262 | 62,617 | |||
| Treasury stock | (335,926 | ) | (278,771 | ) | |
| Total shareholders' equity | 2,777,395 | 2,477,790 | |||
| Total liabilities and shareholders' equity | 29,753,608 | $ | 24,016,276 |
All values are in US Dollars.
| 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, | ||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||
| INTEREST INCOME | |||||||||||||||
| Loans | $ | 140,004 | $ | 161,838 | $ | 291,030 | $ | 319,099 | |||||||
| Securities: | |||||||||||||||
| Taxable interest | 25,870 | 26,700 | 53,082 | 52,091 | |||||||||||
| Tax-exempt interest | 24,612 | 21,988 | 49,016 | 42,685 | |||||||||||
| Total securities income | 50,482 | 48,688 | 102,098 | 94,776 | |||||||||||
| Federal funds and resell agreements | 1,573 | 2,526 | 7,025 | 6,151 | |||||||||||
| Interest-bearing due from banks | 398 | 2,768 | 3,061 | 6,667 | |||||||||||
| Trading securities | 312 | 842 | 966 | 1,276 | |||||||||||
| Total interest income | 192,769 | 216,662 | 404,180 | 427,969 | |||||||||||
| INTEREST EXPENSE | |||||||||||||||
| Deposits | 11,243 | 39,516 | 40,975 | 77,350 | |||||||||||
| Federal funds and repurchase agreements | 1,950 | 9,347 | 8,331 | 17,611 | |||||||||||
| Other | 1,347 | 1,385 | 2,704 | 2,726 | |||||||||||
| Total interest expense | 14,540 | 50,248 | 52,010 | 97,687 | |||||||||||
| Net interest income | 178,229 | 166,414 | 352,170 | 330,282 | |||||||||||
| Provision for credit losses | 21,500 | 11,000 | 109,500 | 23,350 | |||||||||||
| Net interest income after provision for credit losses | 156,729 | 155,414 | 242,670 | 306,932 | |||||||||||
| NONINTEREST INCOME | |||||||||||||||
| Trust and securities processing | 46,321 | 42,903 | 93,321 | 84,860 | |||||||||||
| Trading and investment banking | 12,851 | 5,453 | 14,574 | 11,034 | |||||||||||
| Service charges on deposit accounts | 19,074 | 20,747 | 44,155 | 42,028 | |||||||||||
| Insurance fees and commissions | 533 | 465 | 792 | 803 | |||||||||||
| Brokerage fees | 5,753 | 7,077 | 15,613 | 14,320 | |||||||||||
| Bankcard fees | 12,916 | 16,439 | 29,461 | 33,506 | |||||||||||
| Gains (losses) on sales of securities available for sale, net | 4,006 | (1,403 | ) | 5,233 | (594 | ) | |||||||||
| Other | 19,002 | 13,717 | 15,731 | 26,823 | |||||||||||
| Total noninterest income | 120,456 | 105,398 | 218,880 | 212,780 | |||||||||||
| NONINTEREST EXPENSE | |||||||||||||||
| Salaries and employee benefits | 130,938 | 114,454 | 241,998 | 230,486 | |||||||||||
| Occupancy, net | 11,411 | 11,539 | 23,591 | 23,282 | |||||||||||
| Equipment | 21,502 | 18,824 | 42,743 | 38,508 | |||||||||||
| Supplies and services | 3,785 | 4,285 | 7,970 | 8,158 | |||||||||||
| Marketing and business development | 3,284 | 7,304 | 7,924 | 12,217 | |||||||||||
| Processing fees | 13,603 | 13,096 | 26,993 | 25,228 | |||||||||||
| Legal and consulting | 6,220 | 7,496 | 12,330 | 13,129 | |||||||||||
| Bankcard | 4,549 | 4,701 | 9,409 | 9,046 | |||||||||||
| Amortization of other intangible assets | 1,658 | 1,251 | 3,392 | 2,578 | |||||||||||
| Regulatory fees | 3,211 | 2,910 | 5,577 | 5,800 | |||||||||||
| Other | 8,372 | 7,527 | 15,225 | 15,581 | |||||||||||
| Total noninterest expense | 208,533 | 193,387 | 397,152 | 384,013 | |||||||||||
| Income before income taxes | 68,652 | 67,425 | 64,398 | 135,699 | |||||||||||
| Income tax expense | 8,123 | 10,466 | 7,308 | 20,996 | |||||||||||
| NET INCOME | $ | 60,529 | $ | 56,959 | $ | 57,090 | $ | 114,703 | |||||||
| PER SHARE DATA | |||||||||||||||
| Net income – basic | $ | 1.26 | $ | 1.17 | $ | 1.18 | $ | 2.35 | |||||||
| Net income – diluted | 1.26 | 1.16 | 1.18 | 2.34 | |||||||||||
| Dividends | 0.31 | 0.30 | 0.62 | 0.60 | |||||||||||
| Weighted average shares outstanding – basic | 47,991,283 | 48,777,732 | 48,340,579 | 48,745,124 | |||||||||||
| Weighted average shares outstanding – diluted | 48,077,810 | 49,039,692 | 48,491,526 | 49,018,787 | |||||||||||
| Consolidated Statements of Comprehensive Income | UMB Financial Corporation | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||
| (unaudited, dollars in thousands) | |||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||
| June 30, | June 30, | ||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||
| Net income | $ | 60,529 | $ | 56,959 | $ | 57,090 | $ | 114,703 | |||||||
| Other comprehensive income, before tax: | |||||||||||||||
| Unrealized gains and losses on debt securities: | |||||||||||||||
| Change in unrealized holding gains and losses, net | 84,885 | 107,484 | 249,001 | 213,918 | |||||||||||
| Less: Reclassification adjustment for (gains) losses included in net income | (4,006 | ) | 1,403 | (5,233 | ) | 594 | |||||||||
| Change in unrealized gains and losses on debt securities | 80,879 | 108,887 | 243,768 | 214,512 | |||||||||||
| Unrealized gains and losses on derivative hedges: | |||||||||||||||
| Change in unrealized gains and losses on derivative hedges, net | 4,612 | (3,061 | ) | 19,137 | (5,149 | ) | |||||||||
| Less: Reclassification adjustment for (gains) losses included in net income | (514 | ) | 20 | 254 | 15 | ||||||||||
| Change in unrealized gains and losses on derivative hedges | 4,098 | (3,041 | ) | 19,391 | (5,134 | ) | |||||||||
| Other comprehensive income, before tax | 84,977 | 105,846 | 263,159 | 209,378 | |||||||||||
| Income tax expense | (20,105 | ) | (25,590 | ) | (62,077 | ) | (50,979 | ) | |||||||
| Other comprehensive income | 64,872 | 80,256 | 201,082 | 158,399 | |||||||||||
| Comprehensive income | $ | 125,401 | $ | 137,215 | $ | 258,172 | $ | 273,102 | |||||||
| Consolidated Statements of Shareholders' Equity | UMB Financial Corporation | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (unaudited, dollars in thousands except per share data) | |||||||||||||||
| Capital<br><br><br>Surplus | Retained<br><br><br>Earnings | Accumulated Other Comprehensive (Loss) Income | Treasury<br><br><br>Stock | Total | |||||||||||
| Balance - January 1, 2019 | 55,057 | $ | 1,054,601 | $ | 1,488,421 | $ | (95,782 | ) | $ | (273,827 | ) | $ | 2,228,470 | ||
| Total comprehensive income | — | — | 114,703 | 158,399 | — | 273,102 | |||||||||
| Dividends (0.60 per share) | — | — | (29,538 | ) | — | — | (29,538 | ) | |||||||
| Purchase of treasury stock | — | — | — | — | (4,114 | ) | (4,114 | ) | |||||||
| Forfeitures of equity awards, net of issuances | — | 3,107 | — | — | (2,503 | ) | 604 | ||||||||
| Recognition of equity-based compensation | — | 7,006 | — | — | — | 7,006 | |||||||||
| Sale of treasury stock | — | 185 | — | — | 274 | 459 | |||||||||
| Exercise of stock options | — | 402 | — | — | 1,399 | 1,801 | |||||||||
| Balance - June 30, 2019 | 55,057 | $ | 1,065,301 | $ | 1,573,586 | $ | 62,617 | $ | (278,771 | ) | $ | 2,477,790 | |||
| 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 |
All values are in US Dollars.
| Average Balances / Yields and Rates | UMB Financial Corporation | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (tax - equivalent basis) | ||||||||||||
| (unaudited, dollars in thousands) | ||||||||||||
| Three Months Ended June 30, | ||||||||||||
| 2020 | 2019 | |||||||||||
| Average | Average | Average | Average | |||||||||
| Balance | Yield/Rate | Balance | Yield/Rate | |||||||||
| Assets | ||||||||||||
| Loans, net of unearned interest | $ | 15,098,366 | 3.73 | % | $ | 12,620,981 | 5.14 | % | ||||
| Securities: | ||||||||||||
| Taxable | 5,069,290 | 2.05 | 4,502,680 | 2.38 | ||||||||
| Tax-exempt | 4,108,075 | 3.05 | 3,725,185 | 2.99 | ||||||||
| Total securities | 9,177,365 | 2.50 | 8,227,865 | 2.65 | ||||||||
| Federal funds and resell agreements | 807,245 | 0.78 | 329,064 | 3.08 | ||||||||
| Interest bearing due from banks | 1,492,798 | 0.11 | 450,032 | 2.47 | ||||||||
| Trading securities | 37,816 | 3.79 | 61,565 | 6.07 | ||||||||
| Total earning assets | 26,613,590 | 3.01 | 21,689,507 | 4.11 | ||||||||
| Allowance for credit losses | (195,373 | ) | (109,463 | ) | ||||||||
| Other assets | 1,717,808 | 1,690,423 | ||||||||||
| Total assets | $ | 28,136,025 | $ | 23,270,467 | ||||||||
| Liabilities and Shareholders' Equity | ||||||||||||
| Interest-bearing deposits | $ | 15,117,729 | 0.30 | % | $ | 12,707,353 | 1.25 | % | ||||
| Federal funds and repurchase agreements | 2,138,156 | 0.37 | 1,728,748 | 2.17 | ||||||||
| Borrowed funds | 85,681 | 6.32 | 69,662 | 7.97 | ||||||||
| Total interest-bearing liabilities | 17,341,566 | 0.34 | 14,505,763 | 1.39 | ||||||||
| Noninterest-bearing demand deposits | 7,662,836 | 6,078,520 | ||||||||||
| Other liabilities | 411,964 | 271,890 | ||||||||||
| Shareholders' equity | 2,719,659 | 2,414,294 | ||||||||||
| Total liabilities and shareholders' equity | $ | 28,136,025 | $ | 23,270,467 | ||||||||
| Net interest spread | 2.67 | % | 2.72 | % | ||||||||
| Net interest margin | 2.79 | 3.19 | ||||||||||
| Average Balances / Yields and Rates | UMB Financial Corporation | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (tax - equivalent basis) | ||||||||||||
| (unaudited, dollars in thousands) | ||||||||||||
| Six Months Ended June 30, | ||||||||||||
| 2020 | 2019 | |||||||||||
| Average | Average | Average | Average | |||||||||
| Balance | Yield/Rate | Balance | Yield/Rate | |||||||||
| Assets | ||||||||||||
| Loans, net of unearned interest | $ | 14,357,466 | 4.08 | % | $ | 12,462,946 | 5.16 | % | ||||
| Securities: | ||||||||||||
| Taxable | 4,881,854 | 2.19 | 4,402,458 | 2.39 | ||||||||
| Tax-exempt | 4,085,558 | 3.05 | 3,674,456 | 2.96 | ||||||||
| Total securities | 8,967,412 | 2.58 | 8,076,914 | 2.65 | ||||||||
| Federal funds and resell agreements | 1,015,720 | 1.39 | 424,712 | 2.92 | ||||||||
| Interest bearing due from banks | 1,164,405 | 0.53 | 554,551 | 2.42 | ||||||||
| Trading securities | 42,959 | 4.93 | 54,029 | 5.36 | ||||||||
| Total earning assets | 25,547,962 | 3.28 | 21,573,152 | 4.11 | ||||||||
| Allowance for credit losses | (154,062 | ) | (107,465 | ) | ||||||||
| Other assets | 1,693,684 | 1,597,444 | ||||||||||
| Total assets | $ | 27,087,584 | $ | 23,063,131 | ||||||||
| Liabilities and Shareholders' Equity | ||||||||||||
| Interest-bearing deposits | $ | 14,723,895 | 0.56 | % | $ | 12,729,813 | 1.23 | % | ||||
| Federal funds and repurchase agreements | 2,084,271 | 0.80 | 1,642,140 | 2.16 | ||||||||
| Borrowed funds | 78,164 | 6.96 | 69,539 | 7.91 | ||||||||
| Total interest-bearing liabilities | 16,886,330 | 0.62 | 14,441,492 | 1.36 | ||||||||
| Noninterest-bearing demand deposits | 7,079,224 | 6,028,259 | ||||||||||
| Other liabilities | 401,724 | 267,943 | ||||||||||
| Shareholders' equity | 2,720,306 | 2,325,437 | ||||||||||
| Total liabilities and shareholders' equity | $ | 27,087,584 | $ | 23,063,131 | ||||||||
| Net interest spread | 2.66 | % | 2.75 | % | ||||||||
| Net interest margin | 2.88 | 3.19 | ||||||||||
| Business Segment Information | UMB Financial Corporation | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||
| (unaudited, dollars in thousands) | ||||||||||||
| Three Months Ended June 30, 2020 | ||||||||||||
| Commercial Banking | Institutional Banking | Personal Banking | Total | |||||||||
| Net interest income | $ | 113,085 | $ | 28,129 | $ | 37,015 | $ | 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 | 55,759 | 17,366 | (4,473 | ) | 68,652 | |||||||
| Income tax expense (benefit) | 6,597 | 2,055 | (529 | ) | 8,123 | |||||||
| Net income (loss) | $ | 49,162 | $ | 15,311 | $ | (3,944 | ) | $ | 60,529 | |||
| Three Months Ended June 30, 2019 | ||||||||||||
| Commercial Banking | Institutional Banking | Personal Banking | Total | |||||||||
| Net interest income | $ | 102,579 | $ | 30,501 | $ | 33,334 | $ | 166,414 | ||||
| Provision for credit losses | 9,306 | 181 | 1,513 | 11,000 | ||||||||
| Noninterest income | 20,387 | 55,626 | 29,385 | 105,398 | ||||||||
| Noninterest expense | 68,511 | 64,852 | 60,024 | 193,387 | ||||||||
| Income before taxes | 45,149 | 21,094 | 1,182 | 67,425 | ||||||||
| Income tax expense | 7,008 | 3,274 | 184 | 10,466 | ||||||||
| Net income | $ | 38,141 | $ | 17,820 | $ | 998 | $ | 56,959 | ||||
| Six Months Ended June 30, 2020 | ||||||||||||
| Commercial Banking | Institutional Banking | Personal Banking | Total | |||||||||
| Net interest income | $ | 220,034 | $ | 61,164 | $ | 70,972 | $ | 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 | 32,685 | 43,625 | (11,912 | ) | 64,398 | |||||||
| Income tax expense (benefit) | 3,709 | 4,951 | (1,352 | ) | 7,308 | |||||||
| Net income (loss) | $ | 28,976 | $ | 38,674 | $ | (10,560 | ) | $ | 57,090 | |||
| Six Months Ended June 30, 2019 | ||||||||||||
| Commercial Banking | Institutional Banking | Personal Banking | Total | |||||||||
| Net interest income | $ | 202,393 | $ | 62,252 | $ | 65,637 | $ | 330,282 | ||||
| Provision for credit losses | 19,635 | 467 | 3,248 | 23,350 | ||||||||
| Noninterest income | 43,568 | 111,476 | 57,736 | 212,780 | ||||||||
| Noninterest expense | 135,331 | 130,249 | 118,433 | 384,013 | ||||||||
| Income before taxes | 90,995 | 43,012 | 1,692 | 135,699 | ||||||||
| Income tax expense | 14,079 | 6,655 | 262 | 20,996 | ||||||||
| Net income | $ | 76,916 | $ | 36,357 | $ | 1,430 | $ | 114,703 |
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. Previously, the company had the following four business segments: Commercial Banking, Institutional Banking, Personal Banking, and Healthcare Services. 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, 2020.
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, | |||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||
| Net income (GAAP) | $ | 60,529 | $ | 56,959 | $ | 57,090 | $ | 114,703 | ||||
| Adjustments: | ||||||||||||
| Acquisition expense | 123 | 70 | 246 | 97 | ||||||||
| Severance expense | 137 | 297 | 1,789 | 867 | ||||||||
| COVID-19 related expense | 3,989 | — | 4,217 | — | ||||||||
| Tax-impact of adjustments (i) | (943 | ) | (81 | ) | (1,388 | ) | (214 | ) | ||||
| Total Non-GAAP adjustments (net of tax) | 3,306 | 286 | 4,864 | 750 | ||||||||
| Net operating income (Non-GAAP) | $ | 63,835 | $ | 57,245 | $ | 61,954 | $ | 115,453 | ||||
| Earnings per share - diluted (GAAP) | $ | 1.26 | $ | 1.16 | $ | 1.18 | $ | 2.34 | ||||
| Acquisition expense | — | — | 0.01 | — | ||||||||
| Severance expense | 0.01 | 0.01 | 0.04 | 0.02 | ||||||||
| COVID-19 related expense | 0.08 | — | 0.08 | — | ||||||||
| Tax-impact of adjustments (i) | (0.02 | ) | — | (0.03 | ) | — | ||||||
| Operating earnings per share - diluted (Non-GAAP) | $ | 1.33 | $ | 1.17 | $ | 1.28 | $ | 2.36 | ||||
| GAAP | ||||||||||||
| Return on average assets | 0.87 | % | 0.98 | % | 0.42 | % | 1.00 | % | ||||
| Return on average equity | 8.95 | 9.46 | 4.22 | 9.95 | ||||||||
| Non-GAAP | ||||||||||||
| Operating return on average assets | 0.91 | % | 0.99 | % | 0.46 | % | 1.01 | % | ||||
| Operating return on average equity | 9.44 | 9.51 | 4.58 | 10.01 |
(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, | |||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||
| Noninterest expense | $ | 208,533 | $ | 193,387 | $ | 397,152 | $ | 384,013 | ||||
| Adjustments to arrive at operating noninterest expense (pre-tax): | ||||||||||||
| Acquisition expense | 123 | 70 | 246 | 97 | ||||||||
| Severance expense | 137 | 297 | 1,789 | 867 | ||||||||
| COVID-19 related expense | 3,989 | — | 4,217 | — | ||||||||
| Total Non-GAAP adjustments (pre-tax) | 4,249 | 367 | 6,252 | 964 | ||||||||
| Operating noninterest expense (Non-GAAP) | $ | 204,284 | $ | 193,020 | $ | 390,900 | $ | 383,049 | ||||
| Noninterest expense | $ | 208,533 | $ | 193,387 | $ | 397,152 | $ | 384,013 | ||||
| Less: Amortization of other intangibles | 1,658 | 1,251 | 3,392 | 2,578 | ||||||||
| Noninterest expense, net of amortization of other intangibles (Non-GAAP) (numerator A) | $ | 206,875 | $ | 192,136 | $ | 393,760 | $ | 381,435 | ||||
| Operating noninterest expense | $ | 204,284 | $ | 193,020 | $ | 390,900 | $ | 383,049 | ||||
| Less: Amortization of other intangibles | 1,658 | 1,251 | 3,392 | 2,578 | ||||||||
| Operating expense, net of amortization of other intangibles (Non-GAAP) (numerator B) | $ | 202,626 | $ | 191,769 | $ | 387,508 | $ | 380,471 | ||||
| Net interest income | $ | 178,229 | $ | 166,414 | $ | 352,170 | $ | 330,282 | ||||
| Noninterest income | 120,456 | 105,398 | 218,880 | 212,780 | ||||||||
| Less: Gains (losses) on sales of securities available for sale, net | 4,006 | (1,403 | ) | 5,233 | (594 | ) | ||||||
| Total Non-GAAP Revenue (denominator A) | $ | 294,679 | $ | 273,215 | $ | 565,817 | $ | 543,656 | ||||
| Efficiency ratio (numerator A/denominator A) | 70.20 | % | 70.32 | % | 69.59 | % | 70.16 | % | ||||
| Operating efficiency ratio (Non-GAAP) (numerator B/denominator A) | 68.76 | 70.19 | 68.49 | 69.98 | ||||||||
| Pre-tax, pre-provision income non-GAAP reconciliation: | UMB Financial Corporation | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||
| (unaudited, dollars in thousands except per share data) | ||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||
| Net income before taxes (GAAP) | $ | 68,652 | $ | 67,425 | $ | 64,398 | $ | 135,699 | ||||
| Adjustments: | ||||||||||||
| Provision for credit losses | 21,500 | 11,000 | 109,500 | 23,350 | ||||||||
| Pre-tax, pre-provision income (Non-GAAP) | $ | 90,152 | $ | 78,425 | $ | 173,898 | $ | 159,049 | ||||
| Pre-tax earnings per share - diluted (GAAP) | $ | 1.43 | $ | 1.37 | $ | 1.33 | $ | 2.77 | ||||
| Provision for credit losses | 0.45 | 0.23 | 2.26 | 0.47 | ||||||||
| Pre-tax, pre-provision earnings per share - diluted (Non-GAAP) | $ | 1.88 | $ | 1.60 | $ | 3.59 | $ | 3.24 | ||||
| Tangible book value non-GAAP reconciliation: | UMB Financial Corporation | |||||||||||
| --- | --- | --- | --- | --- | ||||||||
| (unaudited, dollars in thousands except share and per share data) | ||||||||||||
| As of | ||||||||||||
| June 30, 2020 | June 30, 2019 | |||||||||||
| Total shareholders' equity (GAAP) | $ | 2,777,395 | $ | 2,477,790 | ||||||||
| Less: Intangible assets | ||||||||||||
| Goodwill | 180,867 | 180,867 | ||||||||||
| Other intangibles, net | 24,181 | 12,425 | ||||||||||
| Total intangibles, net | 205,048 | 193,292 | ||||||||||
| Total tangible shareholders' equity (Non-GAAP) | $ | 2,572,347 | $ | 2,284,498 | ||||||||
| Total shares outstanding | 48,021,707 | 49,062,900 | ||||||||||
| Ratio of total shareholders' equity (book value) per share | $ | 57.84 | $ | 50.50 | ||||||||
| Ratio of total tangible shareholders' equity (tangible book value) per share (Non-GAAP) | 53.57 | 46.56 |
umbf-ex992_58.pptx.htm
Second Quarter 2020 July 28, 2020 UMB Financial Corporation Exhibit 99.2
Cautionary Notice about Forward-Looking Statements This presentation of UMB Financial Corporation (the “company,” “our,” “us,” or “we”) 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, our 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 third-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 third-party service providers, which may vary widely, and which is generally expected to increase our credit, 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 current expected credit loss (CECL) calculation and related provision under a new accounting standard that we were required to phase in beginning 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 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.
Corporate Snapshot Corporate Trust / Investment Banking Division Fund Services Asset-based lending Accounts receivable financing Healthcare Services Prairie Capital Management Private Wealth Management / Personal Trust 91 banking centers 231 ATMs Our Footprint National Presence UMB Financial Corporation Headquarters UMB Bank Presence Allowance for credit losses for loans only, excludes ACL related to HTM securities. Financial Highlights (at or for quarter-end 06/30/20) ($ in millions) Founded 1913 Ticker UMBF Exchange Nasdaq Market Cap $2,476 Total Assets 29,754 Gross Loans 15,305 Total Deposits 24,459 Common Equity 2,777 Loans / Deposits 66% CET1 11.92% Total Risk Based Capital 13.17% ACL(1) / Total Loans 1.31% ACL(1) / Total Loans ex. PPP 1.45% NPLs / Total Loans 0.54% Net Charge-Offs / Avg Loans 0.15% Fee Income / Revenue 40%
Our Continued Response to COVID-19 Operational Readiness Launched business continuity plans and executive level pandemic task force Increased and strengthened network capacity Early move to drive-through only branches to protect associates and customers; now seeing customers on-site by appointment to ensure safety Implemented remote working arrangements for ~80% of our staff; phased-in plans for a measured return to the office beginning in third quarter Enhanced cleaning and disinfecting, reconfiguration of workspace to allow social distancing, re-thinking common space in facilities, addition of plexiglass dividers in lobbies to protect customers and associates Associates Communities Customers UMB is a founding member of the Kansas City Regional COVID-19 Response and Recovery Fund UMB was able to donate and deliver 2,400 N95 masks to 29 clients in eight states who are on the front line of the crisis, including hospitals and senior living facilities UMB’s matching gift program helps extend the reach of our associates’ generosity Supported communities by sourcing meals from local customer-owned restaurants Improved social distancing for those whose roles require them to work onsite utilizing various sites across our footprint Supplemented compensation and added additional PTO days for those initially unable to work remotely Provided lunch from local restaurants for associates on site Added easier access to our associate assistance fund for associates impacted by the crisis Expanded health insurance coverage for COVID-19 testing and access to telehealth services Initial Assistance Offered a 90-day moratorium on initiating foreclosure on mortgages and home equity lines and loans Offered six-month term loan payment deferral option for current small business customers Ongoing Efforts Options for consumer loan and mortgage deferment or modifications on an individual, customized basis Access to additional credit lines extended on a case-by-case basis Ongoing Efforts (continued) Individualized credit card repayment and deferral options, as well as a balance transfer opportunity Augmented relief program to ensure bank fees did not reduce stimulus proceeds for eligible customers Increased mobile deposit limits Booked more than 5,100 loans for over $1.5 billion in funded loans as part of the Paycheck Protection Program Assisted our customers by providing more than $1.3 billion in loan deferrals or modifications
Our Commitment to Corporate Citizenship Inclusion & Diversity Community Impact Efficient & Sensible Resource Use Strong Corporate Governance As we all navigate a global pandemic and an increasingly polarized environment, we are engaging our associates, customers and communities through pro-active outreach and dialogue. Associate volunteerism and corporate philanthropy help build strong community partnerships. 580 nonprofit organizations had UMB volunteers in 2019 1,052 volunteer days off used in 2019 More than $2.5 million in donations and sponsorships in 2019 $75,000 donated to nonprofits through the UMB Foundation matching gift program Ongoing conversations and events to foster dialogue, break down barriers and educate 8 business resource groups with nearly 20% associate participation Diverse panel hiring approach 2019 new hires were 33% people of color, 47% women and 5% veterans We want our company to be as diverse as the world we live in. UMB recognizes the undeniable importance of sustainable business practices. Effective governance programs help achieve business goals and drive stakeholder value. 13-person board of directors, with 11 independent members Deliberate selection and nomination criteria which includes diversity standards in the board hiring process Robust risk oversight with distinct risk management committees: enterprise risk, asset and liability, and credit. Closely analyzed and competitive compensation practices 64 UMB buildings operate with energy-efficient lighting programs More than 183,000 kilowatt hours generated from solar panels More than 10% reduction in printer impressions YoY 27,000 pounds of co-mingled recycling Read our 2019 Corporate Citizenship Report at UMB.com/CorporateCitizenship
Earnings Summary – 2Q 2020 The Company adopted ASU 2016-13 as of 1/1/2020. See additional information on slides 25-27. Non-GAAP adjustments include provision for credit losses. See the non-GAAP reconciliation and additional information on slide 35. Non-GAAP adjustments include acquisition expense, severance expense, COVID-19 related expenses and the cumulative tax impact of these adjustments. See the non-GAAP reconciliations and additional information on slide 36. Non-GAAP adjustments include goodwill and other intangibles, net. See non-GAAP reconciliation and additional information on slide 38. $ in thousands, except share and per share data; unaudited
Noninterest Income – 2Q 2020 2nd Quarter ‘20 Drivers Noninterest income increased $22.0MM, or 22.4%, compared to 1Q’20, primarily driven by: An increase of $24.8MM in company-owned life insurance income, included in “other income,” reflecting higher market valuations. This increase is offset by a proportionate increase in deferred compensation expense; and An increase of $11.1MM in trading and investment banking, related to higher municipal and MBS trading volumes, and an increase in market valuations in our trading portfolio. Partially offset by A decrease of $5.5MM in healthcare service charge income related to non-recurring customer transfer and conversion fees recognized in 1Q’20; A decrease of $4.1MM in brokerage fees, driven by the impact of lower rates on 12b-1 fees; and A decrease of $3.6MM in bankcard fees, driven by lower card spending activity due to the pandemic.
Noninterest Income Composition – 2Q 2020 Trust & Securities Processing Composition: ($ in millions) Source of Income: 2Q’19 1Q’20 2Q’20 Personal Banking $ 15.6 $ 15.7 $ 15.0 Institutional Banking: Asset Servicing 20.0 22.0 22.5 Corp. Trust & Inst. Asset Mgmt. 7.3 9.3 8.8 $ 42.9 $ 47.0 $ 46.3 Bankcard Fees Service Charges on Deposit Accounts Trust & Securities Processing Gains on Sales of Securities Trading & Investment Banking Other Brokerage Fees Insurance Fees & Commissions
Card Purchase Volumes Purchase Volume & Interchange Revenue Commercial Credit Consumer Credit Consumer Debit Healthcare Debit Institutional Banking – IBIS Debit Interchange ($ in millions)
Noninterest Expense – 2Q 2020 Operating noninterest expense, which excludes the impact of acquisition expense, severance expense and COVID-19 related expense, was $204.3 million for the second quarter of 2020, an increase of $17.7 million, or 9.5 percent, compared to the linked quarter, and an increase of $11.3 million, or 5.8 percent, compared to the second quarter of 2019. See slide 37 for a reconciliation of this non-GAAP financial measure. Noninterest expense increased $19.9MM, or 10.6%, compared to 1Q’20, driven by largely by: An increase of $24.6MM in deferred compensation expense, with a proportional in COLI income noted above; $4.0MM in non-recurring compensation and other costs tied to our COVID-19 response; An increase of $1.5MM in other expense driven by operational losses in the second quarter. Partially offset by a decrease of $5.5MM in payroll taxes and profit sharing and 401(k) expense; and a decrease of $1.4MM in marketing expense related to the decline in travel, entertainment and business development activities due to the pandemic. 2nd Quarter ‘20 Drivers
Balance Sheet
Select Balance Sheet Items $ in thousands, average balances; unaudited Three Months Ended
Strong Capital Position Capital Ratio Trends (%) Total Risk-Based Capital Tier 1 Risk-Based Capital Tier 1 Leverage Common Equity Tier 1 (1) These ratios are reflective of the Company’s election to utilize the 5-year regulatory capital phase-in of the adoption of ASU 2016-13 under recently issued inter-agency guidance. (1) (1)
High Quality Investment Portfolio Securities Held to Maturity $1.1 billion at June 30, 2020 (1) Securities Available for Sale $8.5 billion at June 30, 2020 Governmental Other Higher Education Healthcare Utility Social Service Industrial Cultural Civic K-12 Education NFP - Other Average Balance: $7.9 billion Average Yield: 2.45% Duration: 53 months Average Balance: $1.1 billion Average Yield: 3.03% Duration: 70 months Total Portfolio Average Yield: 2.51% Duration: 55 months Agencies Corporates Municipals Mortgage-Backed Securities Treasuries Net of allowance for credit losses for held to maturity securities.
Securities Portfolio Statistics AFS Portfolio Activity (1) Roll off includes cash flow from maturities, calls or amortizations of securities and excludes roll off related to non-core purchases. (2) Purchased amount is presented net of purchases made related to sales.
Deposit Trends and Composition Average Deposit Growth and Cost 5-yr CAGR: 8.8% (2014-2019) 15-yr CAGR: 9.5% (2004-2019) Long-Term Track Record At June 30 2020 * Includes consumer banking, private wealth and small business. Deposits by Type Deposits by Line of Business Non-Interest Bearing Interest-Bearing MMDA & Savings Time Deposits Interest-Bearing Performance Commercial Personal Institutional Commercial – Regional Banking 33% Personal – Consumer & Private Wealth 25% Commercial – Specialty Banking – 2% Inst. – Corp. Trust & Inv. Banking 12% Inst. – Healthcare Services 11% Inst. – Other 17%
Growth of Diversified Loan Portfolio Average Loans & Yields 5-yr CAGR: 12.8% (2014-2019) 15-yr CAGR: 10.7% (2004-2019) Long-Term Track Record
Loan Portfolio Composition Variable Rate Loans: 55% of loans are variable, $8.4 billion at June 30, 2020 Tied to LIBOR for the next quarter: 68% or ~$5.7 billion Tied to Prime for the next quarter: 28% or ~$2.4 billion Loan Repricing / Maturity Schedule: 50% reprice in 3Q 2020 61% reprice in the next 12 months At June 30, 2020 * Includes C&I, leases and commercial credit card. Loans by Type Loans by Geography Average Yield 3.73% Kansas City CO St Louis AZ 9% KS TX 10% Greater MO 5% NE-2% OK-2% Commercial * Commercial Real Estate Residential Real Estate Consumer 2% Construction PPP Loans MN-1%
Quarterly Loan Activity Commercial Banking Line Draws & Utilization Trends PPP loans of $1.5 billion are included in gross loan production and net loan growth for the second quarter.
Commercial & Industrial Loan Portfolio (2) Other - 14% Undefined or misc. industries – 4% Auto Related – 3% Other smaller categories – 7% Transp. / Warehouse Diversified Technology Materials Manufacturing Retail Healthcare Comm. Services Other (2) Agribusiness RE & Construction Finance & Insurance Energy-Related C&I Portfolio Statistics C&I Industry Diversification $5.7B 41% of total UMB loans Oil & Gas $444M 3.2% of total UMB loans Upstream Service Midstream Down- stream C&I loans (1) at 06/30/20: $5.7 billion, 41% of total UMB loans, excluding PPP balances Average loan size: $4.2 million Considerations Internal limits on loan size and projects per sponsor Concentration guidelines for all lending verticals, monitored for changing conditions Includes commercial & industrial loans and leases; Excludes commercial credit card balances and PPP loans. Food/Beverage Manufacturing Entertainment/Recreation Consumer Services Government/Education Textile Manufacturing
Commercial Real Estate – Disciplined Expansion Construction / Land Dev. 17% Owner-Occupied 29% Investment CRE 44% $5.6B At June 30, 2020 Resi. Construction = 1% of total Farmland 9% * Other - 10% Mixed Use Self Storage Home Builder for-sale Vacant Land Healthcare Special Purpose Manufactured Housing Total Portfolio: Average Loan-to-value: 63% Recourse: 91% Regulatory Concentrations: Total non-farmland CRE / Total RBC: 146% Construction & Development Loans / Total RBC: 42% Largest Property Types / Avg. LTV: Industrial / 66% Office / 63% Multifamily / 59% Retail / 61% Hotel / 62% Sr. Living / 65% Student Housing / 64% Investment CRE Statistics Investment CRE / Construction Portfolio Retail Multifamily Other * Office Building Hotel Industrial Sr. Living Student Housing Resi. Rental $3.4B 25% of total UMB loans
Exposure to Sensitive Industries We analyzed our portfolios in each category for specific characteristics based on what is currently known, such as guarantees, recourse, liquidity positions and hedging strategies that provide protection, as well as those which may carry more risk if the current environment is prolonged. This “more impacted subset” are balances that we’re monitoring more closely. PPP loams are excluded from the denominator when calculating percentages of total loans. Multifamily / Student Housing 48% to top sponsors LTVs 59% multifamily / 64% student housing 90%+ of multifamily properties reported collecting rent in June/July Student housing occupancy rates have increased Close monitoring as campuses make decisions for fall classes Retail CRE 50% to top sponsors; LTV 61% ~40% grocery-anchored Free-standing restaurants are < 5% of portfolio Closely monitoring re-opening of non-essential businesses Hotel CRE 48% to top sponsors; LTV 62% 100% flagged, national-brand properties Majority limited service / extended stay Occupancy rates increasing slowly from lows in March/April Senior Living CRE Defined as independent and assisted living and memory care facilities 24% to top sponsors; LTV 65% Monitoring occupancy rates impacted by COVID limitations on showing and move-in activities Oil & Gas Long-term relationships with seasoned operators Multiple clients well-hedged against commodity prices Oil has shown price improvement Continue to monitor service sector 10.3% 89.7% (2) $1.4B All Other Loans $12.4B (2)
Paycheck Protection Program (“PPP”) PPP Loans by Region PPP Loans by Industry Retail: Auto-related 58%; building materials 13%; clothing/home goods 11%; gas stations 3% Transportation: Freight 45%; warehousing 12%; non-passenger air 15% Accommodation & Food Service: Limited-service hotel 46%; limited-service restaurant 30%; full-service restaurant 19% Originated more than 5,100 PPP loans totaling $1.5 billion; median size $56k Approximate concentrations in certain categories:
Asset Quality
Current Expected Credit Loss (“CECL”) Implementation CECL Methodology and Key Assumptions Macroeconomic forecast Moody’s Baseline forecast as of June 9th 50% probability the economy performs better or worse Assumptions: Assumes no second wave of COVID-19 that causes states to shut down again or lead people to self-quarantine No meaningful boost to consumer spending through the remainder of 2020 due to rising equity prices The Federal Reserve keeps the target range for the fed funds rate at 0% to 0.25% into 2023 10-year Treasury Yield average of 0.70% in 4Q20 Average unemployment of 9.1% in 2020 and remaining at 9.3% through 2021 Key Risks: Delay of the next round of fiscal stimulus including the failure to extend the expansion of unemployment insurance benefits, currently scheduled for July 31 and providing no aid to state and local governments Larger than anticipated wave of small-business bankruptcies that prevents unemployment from falling quickly as anticipated Key Variables Interest Rates including: Fed Funds Rate 2-Year Treasury Unemployment rate Home Price Index Source: Moody's Analytics 1 year reasonable & supportable period 10-Year Treasury BBB Corporate Yield
CECL: Allocation of Allowance 2Q20 Balances Allowance % of total ACL % Commercial $11,086 $170.4 84% 1.5% National Businesses $414 $0.9 0% 0.2% Consumer real estate $1,631 $6.0 3% 0.4% Credit cards $340 $19.6 10% 5.8% Other $351 $3.4 2% 1.0% Total Loans, ex. PPP $13,822 $200.3 98% 1.4% PPP Loans $1,483 Total Loans $15,305 $200.3 98% 1.3% HTM Securities $1,115 $3.3 2% 0.3% Total Loans & HTM Securities $16,420 $203.6 100% 1.2% $ in millions The reserve build in 2Q20 reflects the continued impact of the adoption of CECL on January 1, 2020 and changes to key macroeconomic variables due to the COVID-19 pandemic Commercial & Industrial and Commercial Real Estate loan portfolios accounted for 84% of the allowance 2Q’20 provision expense of $21.5MM is 3.9x 2Q’20 NCOs Total loan reserves to nonperforming loans is 2.4x Elected 5-year regulatory capital phase-in under recently issued inter-agency guidance
Changes to Allowance – 2Q 2020 Allowance for Credit Losses ($ in millions) $191.1 $203.6 ($5.5) $5.6 $8.1 $4.3 Net Charge-offs Credit Risk Changes Economic Outlook COVID Modifications ACL 03/31/20 ACL 06/30/20
Net Charge-Off History Loan categories for disclosure were updated in Q1 2020 with the adoption of ASU 2016-13. In prior periods, net charge-offs for “Commercial Loans” included C&I, commercial credit card, asset-based and factoring loans. Net charge-offs for “Other” included consumer credit cards, all real-estate related loans, consumer loans and DDA.
Loan Risk Profile – 2Q 2020 Loan modifications / deferrals of $1.3 billion at June 30, 2020 Originally approved ~$2.1 billion in modifications Booked just 62% percent of approved amount based on reduced customer need Total past due and accruing amounts include loans 30-89 days past due of $21.4 million and loans > 90 days past due of $4.6 million.
Excess Liquidity Long-Term History of Quality Credit Metrics Leading Fee Income Strong Capital Position Net Charge-offs / Average Loans Liquidity to deploy in favorable rate environments Capital provides flexibility in downturns Fee income provides a revenue buffer in low-rate environments Unwavering underwriting standards Peer Source: S&P Global *Industry NCO/Avg Loans source: FDIC Quarterly Banking Profile Loans / Deposits 100% 50% Common Equity Tier 1 $272.4 $298.7 $282.7 $271.9 $271.8 Well-Positioned for the Current Environment ___ Industry* Peers ___ ___
Appendix
Dividend increase = 165.9% Industry Median* +59% increase *Industry is defined as publicly traded banks with dividend data reported for both 2005 and 2019. Source: S&P Global Returning Capital to Our Shareholders Annual Dividends Declared 2005 - 2019
Long-Term Value Creation (1) See reconciliation of tangible book value per share on slide 38. *KBW Nasdaq Regional Bank Index (50 banks); **All publicly-traded banks with data reported for both 2004 and 2019; ***UMB traditional peer group (15 banks). Source: S&P Global. 15-Year Compound Annual Growth Rates 2004 - 2019 Diluted Earnings Per Share Tangible Book Value Per Share (1) UMBF KRX* Industry** Peer Median***
Non-GAAP Reconciliations In this presentation, we provide information about pre-tax pre-provision income, net operating income (loss), operating earnings (losses) per share-diluted (operating EPS-diluted), operating return on average equity (operating ROE), operating return on average assets (operating ROA), operating noninterest expense, operating efficiency ratio, pre-tax, pre-provision earnings per share-diluted (PTPP EPS), tangible shareholders’ equity, tangible assets, tangible common equity ratio 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 and the nearest comparable GAAP financial measures are reconciled on the next 4 slides. 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. 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 expense. Net operating income (loss) for the relevant period is defined as GAAP net income (loss), 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 diluted earnings (losses) 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 (loss), divided by the Company’s average total shareholders’ equity for the relevant period. Operating ROA is calculated as net operating income (loss), 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 (which is calculated as net interest income plus noninterest income, less gains on sales of securities available for sale, net). Tangible book value per shares is defined as the Company’s total shareholders’ equity, net of intangible assets, divided by the Company’s total shares outstanding. Tangible common equity ratio is calculated as the Company’s total shareholders’ equity, net of intangible assets, divided by the Company’s total assets, net of intangible assets.
Non-GAAP Reconciliations Pre-Tax, Pre-Provision Income
Non-GAAP Reconciliations (i) Calculated using the Company's marginal tax rate of 22.2%. Net Operating Income
Non-GAAP Reconciliations (i) Calculated using the Company's marginal tax rate of 22.2%. Operating Noninterest Expense & Efficiency Ratio
Non-GAAP Reconciliations Tangible Book Value Share count for December 31, 2004 adjusted for Company’s 2-for-1 stock split on May 31, 2006.
Non-GAAP Reconciliations Tangible Common Equity Ratio