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): 4/28/2020
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 April 28, 2020, UMB Financial Corporation (the “Company”) issued a press release announcing the financial results for the Company for the quarter ended March 31, 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 April 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 July 1, 2020 to shareholders of record of the Company as of the close of business on June 10, 2020.
The press release also announced that the Board has authorized the repurchase of up to two million shares of the Company’s common stock from time to time until the meeting of the Board that immediately follows the 2021 annual meeting of the Company’s shareholders. The Company is not currently repurchasing common stock, other than in connection with the settlement of an accelerated share repurchase entered into during March 2020, but may determine to do so in the future.
In addition, 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 April 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 April 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 ended March 31, 2020, dividend declaration, and share repurchase authorization. |
|---|---|
| 99.2 | Investor Presentation Materials, dated April 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: April 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 First Quarter 2020 Results
KANSAS CITY, Mo. (April 28, 2020) – UMB Financial Corporation (Nasdaq: UMBF), a financial services company, announced results for the first quarter of 2020. "On a GAAP basis, we reported a net loss of $3.4 million, driven by the adoption of a new accounting standard on January 1, 2020, which resulted in significantly higher provision expense based on the possibility of future credit losses under the current environment created by the COVID-19 crisis”, said Mariner Kemper, chairman, president and chief executive officer. “Excluding this impact, business and financial results remained strong as demonstrated by a 5.6 percent increase in pre-tax pre-provision income, to $83.7 million, from the linked quarter. As many industry participants have noted, the ill-timed adoption of this new accounting standard has resulted in adding more undue volatility in this critical environment and rendered comparability of financial results across the banking industry extremely difficult.”
2020 First Quarter Highlights
| • | Average loan balances increased $385 million, or 11.6 percent, on a linked-quarter annualized basis. |
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| • | Average deposits grew $439 million to $20.8 billion compared to the fourth quarter of 2019. |
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| • | GAAP book value per share of $55.33, a 15.5 percent increase, and tangible book value per share of $51.04, a 16.1 percent increase compared to a year ago. |
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| • | Efficiency ratio improved to 68.93 percent compared to 70.00 percent a year ago. |
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| • | Credit quality remained strong, with net charge-offs of just 0.23 percent of average loans, consistent with the company’s historical performance. |
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“As we, as a nation, navigate our way through this unprecedented and challenging time, I have never been prouder of how the banking industry and UMB associates have rallied in response to the COVID-19 crisis,” said Kemper. “Our deepest gratitude goes to all those at the frontline combating this crisis. We are humbled to be in a position to offer critical financial support and services to our clients as we all adapt to these global impacts. As we’ve worked through the CARES Act legislation and helped our customers navigate the Paycheck Protection Program during the past few weeks, I have been inspired by the enduring sense of service, duty and patriotic responsibility demonstrated by UMB associates. To date, we have processed more than 3,000 applications in excess of $1.4 billion as part of this program. Our capital and liquidity remain strong. Our legacy is built on being there for our customers and communities, and our history of prudent risk management gives us the strength and flexibility to serve our customers in their greatest hour of need.”
For the first quarter of 2020, the company recognized a net loss of $3.4 million, or $0.07 per diluted share, compared to net income of $66.5 million, or $1.35 per diluted share, in the fourth quarter of 2019 (linked quarter) and net income of $57.7 million, or $1.18 per diluted share, in the first quarter of 2019. The results for 2020 include significantly higher provision expense related to the implementation of the
current expected credit losses (CECL) methodology for estimating allowance for credit losses, including the current and forecasted economic downturn related to the COVID-19 (coronavirus) pandemic.
Pre-tax, pre-provision income (PTPP), a non-GAAP measure which is reconciled to the nearest comparable GAAP measure later in this release, was $83.7 million, or $1.72 per diluted share, for the first quarter of 2020, compared to $79.3 million, or $1.61 per diluted share, for the linked quarter, and $80.6 million, or $1.65 per diluted share, for the first quarter of 2019. These PTPP results represent increases of 5.6 percent on a linked-quarter basis and 3.9 percent compared to the first quarter of 2019.
| Summary of quarterly financial results | UMB Financial Corporation | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (unaudited, dollars in thousands, except per share data) | |||||||||||||||
| Q1 | Q4 | Q1 | |||||||||||||
| 2020 | 2019 | 2019 | |||||||||||||
| Net (loss) income | $ | (3,439 | ) | $ | 66,515 | $ | 57,744 | ||||||||
| (Losses) earnings per share (diluted) | (0.07 | ) | 1.35 | 1.18 | |||||||||||
| Pre-tax, pre-provision income | 83,746 | 79,268 | 80,624 | ||||||||||||
| Pre-tax, pre-provision earnings per share (diluted) | 1.72 | 1.61 | 1.65 | ||||||||||||
| Net operating (loss) income | (1,881 | ) | 67,038 | 58,208 | |||||||||||
| Operating (losses) earnings per share (diluted) | (0.04 | ) | 1.36 | 1.19 | |||||||||||
| GAAP | |||||||||||||||
| Return on average assets | (0.05 | )% | 1.05 | % | 1.02 | % | |||||||||
| Return on average equity | (0.51 | ) | 10.15 | 10.48 | |||||||||||
| Efficiency ratio | 68.93 | 71.59 | 70.00 | ||||||||||||
| Non-GAAP | |||||||||||||||
| Operating return on average assets | (0.03 | )% | 1.06 | % | 1.03 | % | |||||||||
| Operating return on average equity | (0.28 | ) | 10.23 | 10.56 | |||||||||||
| Operating efficiency ratio | 68.19 | 71.35 | 69.78 | ||||||||||||
| Summary of revenue | UMB Financial Corporation | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (unaudited, dollars in thousands) | |||||||||||||||
| Q1 | Q4 | Q1 | CQ vs. | CQ vs. | |||||||||||
| 2020 | 2019 | 2019 | LQ | PY | |||||||||||
| Net interest income | $ | 173,941 | $ | 172,363 | $ | 163,868 | $ | 1,578 | $ | 10,073 | |||||
| Noninterest income: | |||||||||||||||
| Trust and securities processing | 47,000 | 46,835 | 41,957 | 165 | 5,043 | ||||||||||
| Trading and investment banking | 1,723 | 6,720 | 5,581 | (4,997 | ) | (3,858 | ) | ||||||||
| Service charges on deposit accounts | 25,081 | 20,100 | 21,281 | 4,981 | 3,800 | ||||||||||
| Insurance fees and commissions | 259 | 511 | 338 | (252 | ) | (79 | ) | ||||||||
| Brokerage fees | 9,860 | 8,839 | 7,243 | 1,021 | 2,617 | ||||||||||
| Bankcard fees | 16,545 | 16,326 | 17,067 | 219 | (522 | ) | |||||||||
| Gains on sales of securities available for sale, net | 1,227 | 755 | 809 | 472 | 418 | ||||||||||
| Other | (3,271 | ) | 10,269 | 13,106 | (13,540 | ) | (16,377 | ) | |||||||
| Total noninterest income | $ | 98,424 | $ | 110,355 | $ | 107,382 | $ | (11,931 | ) | $ | (8,958 | ) | |||
| Total revenue | $ | 272,365 | $ | 282,718 | $ | 271,250 | $ | (10,353 | ) | $ | 1,115 | ||||
| Net interest margin | 2.97 | % | 3.02 | % | 3.20 | % | |||||||||
| Total noninterest income as a % of total revenue | 36.14 | 39.03 | 39.59 |
Net interest income
| • | Net interest income totaled $173.9 million, an increase of $1.6 million, or 0.9 percent, from linked quarter levels, driven by a $384.7 million, or 2.9 percent, increase in average loans, and a |
|---|---|
| 4.3 percent increase in average earning assets. These benefits were offset by the impact of recent reductions in short-term interest rates on net interest margin. | |
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| • | Net interest spread of 2.67 percent for the first quarter represents an increase of one basis point as compared to the linked quarter despite a 150-basis-point reduction in short-term interest rates. |
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| • | Net interest margin for the first quarter was 2.97 percent, down five basis points from the linked quarter, in large part due to lower short-term interest rates. Earning asset yields declined 18 basis points from the linked quarter, driven by declining yields in the loan portfolio due to recent reductions in short-term interest rates. The cost of interest-bearing liabilities decreased 19 basis points to 0.91 percent, driven by an 18-basis-point decline in the cost of interest-bearing deposits and lower borrowing costs. |
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| • | On a year-over-year basis, the increase in net interest income was driven by a $1.3 billion, or 10.7 percent, increase in average loans, and a $0.8 billion, or 10.5 percent, increase in average investment securities. These benefits were partially offset by declining yields in the loan portfolio due to recent reductions in short-term interest rates. |
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| • | Average deposits increased 2.2 percent on a linked-quarter basis and 11.2 percent compared to the first quarter of 2019. Average noninterest-bearing demand deposit balances increased 1.5 percent on a linked-quarter basis and 8.5 percent compared to the first quarter of 2019. |
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Noninterest income
| • | First quarter 2020 noninterest income decreased $11.9 million, or 10.8 percent, on a linked-quarter basis, largely due to: |
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| o | Decreases of $16.6 million in company-owned life insurance income, reflecting the impact of lower market valuations of the underlying investments, and $0.8 million in derivative income, both recorded in other income. The decrease in company-owned life insurance income is offset by a proportionate decrease in deferred compensation expense noted below. |
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| o | A decrease of $5.0 million in trading and investment banking, primarily driven by a decrease of $3.5 million in market valuation of investments in the company’s trading portfolio due to the overall market decline in March. |
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| o | These decreases were partially offset by the following increases: |
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| ▪ | An increase of $5.7 million in healthcare income, recorded in service charges on deposits, related to customer transfer and conversion fees recorded in the first quarter. |
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| ▪ | An increase of $1.0 million in brokerage fees, primarily driven by higher 12b-1 income. |
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| ▪ | An increase of $2.0 million in equity earnings on alternative investments and a $1.9 million gain on the sale of a building, both recorded in other income. |
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| • | Compared to the prior year, noninterest income in the first quarter of 2020 decreased $9.0 million, or 8.3 percent, primarily driven by: |
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| o | Decreases of $19.2 million in company-owned life insurance and $1.1 million in derivative income, both recorded in other income. The decrease in company-owned life insurance income is offset by a proportionate decrease in deferred compensation expense noted below. |
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| o | A decrease of $3.9 million in trading and investment banking, primarily driven by a decrease of $4.3 million in market valuations of investments in the company’s trading portfolio due to the overall market decline in March. |
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| o | These decreases were partially offset by the following increases: |
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| ▪ | An increase of $5.0 million in trust and securities processing, driven by an increase of $2.7 million in corporate trust income and $1.8 million in fund servicing revenue. |
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| ▪ | An increase of $3.8 million in service charges on deposits, largely driven by healthcare customer transfer and conversion fees recorded in the first quarter of 2020 in the company’s healthcare services business. |
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| ▪ | An increase of $2.6 million in brokerage fees, due to higher 12b-1 and money market income. |
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| ▪ | An increase of $1.9 million in equity earnings on alternative investments and a $1.9 million gain on sale of other assets, both recorded in other income. |
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Noninterest expense
| Summary of noninterest expense | UMB Financial Corporation | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (unaudited, dollars in thousands) | ||||||||||||
| Q1 | Q4 | Q1 | CQ vs. | CQ vs. | ||||||||
| 2020 | 2019 | 2019 | LQ | PY | ||||||||
| Salaries and employee benefits | $ | 111,060 | $ | 120,806 | $ | 116,032 | $ | (9,746 | ) | $ | (4,972 | ) |
| Occupancy, net | 12,180 | 12,249 | 11,743 | (69 | ) | 437 | ||||||
| Equipment | 21,241 | 20,803 | 19,684 | 438 | 1,557 | |||||||
| Supplies and services | 4,185 | 6,280 | 3,873 | (2,095 | ) | 312 | ||||||
| Marketing and business development | 4,640 | 8,385 | 4,913 | (3,745 | ) | (273 | ) | |||||
| Processing fees | 13,390 | 13,351 | 12,132 | 39 | 1,258 | |||||||
| Legal and consulting | 6,110 | 10,001 | 5,633 | (3,891 | ) | 477 | ||||||
| Bankcard | 4,860 | 4,061 | 4,345 | 799 | 515 | |||||||
| Amortization of other intangible assets | 1,734 | 1,593 | 1,327 | 141 | 407 | |||||||
| Regulatory fees | 2,366 | 2,940 | 2,890 | (574 | ) | (524 | ) | |||||
| Other | 6,853 | 2,981 | 8,054 | 3,872 | (1,201 | ) | ||||||
| Total noninterest expense | $ | 188,619 | $ | 203,450 | $ | 190,626 | $ | (14,831 | ) | $ | (2,007 | ) |
| • | GAAP noninterest expense for the first quarter of 2020 was $188.6 million, a decrease of $14.8 million, or 7.3 percent, from the linked quarter and a decrease of $2.0 million, or 1.1 percent, from the first quarter of 2019. | |||||||||||
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| • | The linked quarter decrease in noninterest expense was driven by: | |||||||||||
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| o | A decrease of $9.7 million in salaries and employee benefits, largely driven by a $15.7 million decrease in deferred compensation expense, which is offset by the decrease in company-owned life insurance income noted above. Additionally, there was a decrease of $2.0 million in bonus and commission expense. These decreases were partially offset by a seasonal increase of $8.1 million in payroll taxes, insurance, and 401(k) expense recognized in the first quarter. | |||||||||||
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| o | A decrease of $3.9 million in legal and consulting expense and $3.7 million in marketing and business development due to the timing of multiple projects. | |||||||||||
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| o | A decrease of $2.1 million in supplies and services expense largely driven by a decline in postage expense related to reduced credit card campaign mailings in the first quarter of 2020. | |||||||||||
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| o | These decreases were partially offset by an increase of $4.2 million in derivative expense, recorded in other expense. | |||||||||||
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| • | The year-over-year decrease in noninterest expense was driven by: | |||||||||||
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| o | A $5.0 million decrease in salaries and employee benefits, primarily due to a decrease of $15.5 million in employee benefits expense, offset by increases of $6.0 million in salary and wage expense and $4.5 million in bonus and commission expense. The decrease in employee benefits expense was primarily driven by a decrease of $18.0 million in | |||||||||||
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| deferred compensation expense, which is offset by the decrease in company-owned life insurance income noted above. | ||||||||||||
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| o | These decreases were partially offset by increases of $1.6 million in equipment expense and $1.3 million in processing fees 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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Income taxes
| • | The company recognized an income tax benefit of $0.8 million, or 19.2 percent, on a pre-tax loss of $4.3 million for the three months ended March 31, 2020, compared to income tax expense of $10.5 million, or 15.4 percent, on pre-tax income of $68.3 million for the same period in 2019. The amount of tax benefit recorded for the three months ended March 31, 2020 reflects management’s estimate of the annual effective tax rate applied to the year-to-date loss adjusted for the tax impact of items discrete to the quarter. |
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Balance sheet
| • | Average total assets for the first quarter of 2020 were $26.0 billion compared to $25.1 billion for the linked quarter and $22.9 billion for the same period in 2019. | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Summary of average loans and leases - QTD Average | UMB Financial Corporation | ||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |
| (unaudited, dollars in thousands) | |||||||||||||
| Q1 | Q4 | Q1 | CQ vs. | CQ vs. | |||||||||
| 2020 | 2019 | 2019 | LQ | PY | |||||||||
| Commercial and industrial | $ | 5,786,545 | $ | 5,451,880 | $ | 5,117,882 | $ | 334,665 | $ | 668,663 | |||
| Specialty lending | 510,316 | 576,091 | 677,113 | (65,775 | ) | (166,797 | ) | ||||||
| Commercial real estate | 5,181,036 | 5,121,794 | 4,561,019 | 59,242 | 620,017 | ||||||||
| Consumer real estate | 1,414,025 | 1,353,544 | 1,225,250 | 60,481 | 188,775 | ||||||||
| Consumer | 141,972 | 135,526 | 145,100 | 6,446 | (3,128 | ) | |||||||
| Credit cards | 418,485 | 438,473 | 413,442 | (19,988 | ) | 5,043 | |||||||
| Leases and other | 164,187 | 154,576 | 163,348 | 9,611 | 839 | ||||||||
| Total loans | $ | 13,616,566 | $ | 13,231,884 | $ | 12,303,154 | $ | 384,682 | $ | 1,313,412 | |||
| • | Average loans for the first quarter of 2020 increased 2.9 percent on a linked-quarter basis and 10.7 percent compared to the first quarter of 2019. | ||||||||||||
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| Summary of average securities - QTD Average | UMB Financial Corporation | ||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |
| (unaudited, dollars in thousands) | |||||||||||||
| Q1 | Q4 | Q1 | CQ vs. | CQ vs. | |||||||||
| 2020 | 2019 | 2019 | LQ | PY | |||||||||
| Securities available for sale: | |||||||||||||
| U.S. Treasury | $ | 49,638 | $ | 220,830 | $ | 256,672 | $ | (171,192 | ) | $ | (207,034 | ) | |
| U.S. Agencies | 94,342 | 93,258 | 53,458 | 1,084 | 40,884 | ||||||||
| Mortgage-backed | 4,133,118 | 3,967,051 | 3,841,449 | 166,067 | 291,669 | ||||||||
| State and political subdivisions | 3,058,594 | 2,968,305 | 2,534,438 | 90,289 | 524,156 | ||||||||
| Corporates | 188,257 | 184,503 | 6,424 | 3,754 | 181,833 | ||||||||
| Total securities available for sale | $ | 7,523,949 | $ | 7,433,947 | $ | 6,692,441 | $ | 90,002 | $ | 831,508 | |||
| Securities held to maturity: | |||||||||||||
| State and political subdivisions | $ | 1,108,716 | $ | 1,117,268 | $ | 1,157,126 | $ | (8,552 | ) | $ | (48,410 | ) | |
| Trading securities | 48,102 | 56,653 | 46,408 | (8,551 | ) | 1,694 | |||||||
| Other securities | 124,795 | 96,994 | 74,718 | 27,801 | 50,077 | ||||||||
| Total securities | $ | 8,805,562 | $ | 8,704,862 | $ | 7,970,693 | $ | 100,700 | $ | 834,869 | |||
| • | Average securities available for sale increased 1.2 percent on a linked-quarter basis and increased 12.4 percent compared to the first quarter of 2019. | ||||||||||||
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| Summary of average deposits - QTD Average | UMB Financial Corporation | ||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (unaudited, dollars in thousands) | |||||||||||||
| Q1 | Q4 | Q1 | CQ vs. | CQ vs. | |||||||||
| 2020 | 2019 | 2019 | LQ | PY | |||||||||
| Deposits: | |||||||||||||
| Noninterest-bearing demand | $ | 6,495,611 | $ | 6,398,309 | $ | 5,989,215 | $ | 97,302 | $ | 506,396 | |||
| Interest-bearing demand and savings | 13,232,370 | 12,959,948 | 11,698,351 | 272,422 | 1,534,019 | ||||||||
| Time deposits | 1,097,780 | 1,028,293 | 1,034,763 | 69,487 | 63,017 | ||||||||
| Total deposits | $ | 20,825,761 | $ | 20,386,550 | $ | 18,722,329 | $ | 439,211 | $ | 2,103,432 | |||
| Noninterest bearing deposits as % of total | 31.19 | % | 31.38 | % | 31.99 | % | |||||||
| • | Average deposits increased 2.2 percent on a linked-quarter basis and 11.2 percent compared to the first quarter of 2019. | ||||||||||||
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Capital
| Capital information | UMB Financial Corporation | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| (unaudited, dollars in thousands, except per share data) | |||||||||
| March 31, 2020 | December 31, 2019 | March 31, 2019 | |||||||
| Total equity | $ | 2,663,441 | $ | 2,606,440 | $ | 2,350,843 | |||
| Book value per common share | 55.33 | 53.09 | 47.92 | ||||||
| Tangible book value per common share | 51.04 | 48.84 | 43.95 | ||||||
| Regulatory capital: | |||||||||
| Common equity Tier 1 capital | $ | 2,279,039 | $ | 2,330,533 | $ | 2,188,521 | |||
| Tier 1 capital | 2,279,039 | 2,330,533 | 2,188,521 | ||||||
| Total capital | 2,514,445 | 2,505,397 | 2,364,465 | ||||||
| Regulatory capital ratios: | |||||||||
| Common equity Tier 1 capital ratio | 11.90 | % | 12.33 | % | 12.70 | % | |||
| Tier 1 risk-based capital ratio | 11.90 | 12.33 | 12.70 | ||||||
| Total risk-based capital ratio | 13.12 | 13.26 | 13.72 | ||||||
| Tier 1 leverage ratio | 8.81 | 9.37 | 9.65 | ||||||
| • | At March 31, 2020, the regulatory capital ratios presented in the foregoing table exceeded all “well-capitalized” regulatory thresholds. | ||||||||
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| • | The company has elected to adopt the option to use a five-year transition of the impact of CECL on regulatory capital, as allowed by the Interim Final Rule of the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation, for purposes of calculating its March 31, 2020 regulatory capital. | ||||||||
| --- | --- | ||||||||
| • | During and subsequent to the first quarter of 2020, approximately $55 million, or 1.0 million shares, were repurchased through a combination of open market activity and a $30 million accelerated share repurchase (ASR) program entered into in early March. The ASR will be completed during the second quarter. The company has no plans for additional repurchases at this time. | ||||||||
| --- | --- |
Asset Quality
| Credit quality | UMB Financial Corporation | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (unaudited, dollars in thousands) | |||||||||||||||
| Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||
| 2020 | 2019 | 2019 | 2019 | 2019 | |||||||||||
| Net charge-offs - Total loans | $ | 7,672 | $ | 7,618 | $ | 2,186 | $ | 12,569 | $ | 12,324 | |||||
| Net loan charge-offs as a % of total average loans | 0.23 | % | 0.23 | % | 0.07 | % | 0.40 | % | 0.41 | % | |||||
| Loans over 90 days past due | $ | 2,211 | $ | 2,069 | $ | 2,466 | $ | 1,825 | $ | 1,874 | |||||
| Loans over 90 days past due as a % of total loans | 0.02 | % | 0.02 | % | 0.02 | % | 0.01 | % | 0.01 | % | |||||
| Nonaccrual and restructured loans | $ | 97,029 | $ | 56,347 | $ | 71,838 | $ | 53,395 | $ | 63,270 | |||||
| Nonaccrual and restructured loans as a % of total loans | 0.70 | % | 0.42 | % | 0.55 | % | 0.41 | % | 0.50 | % | |||||
| Provision for credit losses | $ | 88,000 | $ | 2,000 | $ | 7,500 | $ | 11,000 | $ | 12,350 | |||||
| • | On January 1, 2020, the company adopted CECL, a new accounting standard that establishes an allowance for credit losses (ACL) on all financial assets. The ACL is based on an estimation of credit losses over the full remaining expected life with consideration to current and expected changes in key macroeconomic conditions. | ||||||||||||||
| --- | --- | ||||||||||||||
| • | At adoption on January 1, 2020, the company’s ACL increased by $9.0 million, or 8.9 percent. This increase in the ACL resulted in a $7.0 million decrease to retained earnings, net of deferred tax balances. | ||||||||||||||
| --- | --- | ||||||||||||||
| • | The subsequent increase in ACL and provision through March 31, 2020 largely reflects the impact of the current and forecasted deterioration of key macroeconomic variables related to the COVID-19 pandemic, and to a lesser extent, to cover net charge-offs, loan growth, and the impairment of one commercial loan transferred to nonaccrual status. | ||||||||||||||
| --- | --- | ||||||||||||||
| • | Provision for credit losses for the first quarter totaled $88.0 million, an increase of $86.0 million from the linked quarter, and $75.7 million from the first quarter of 2019. The provision expense for 2020 includes increased provision expense related to the implementation of CECL, coupled with the impact on various economic variables due to the COVID-19 pandemic. | ||||||||||||||
| --- | --- | ||||||||||||||
| • | Increased expense for credit loss provision under CECL resulted in a buildup of reserves which now stand at a strong 1.3 percent of assets at amortized cost. | ||||||||||||||
| --- | --- | ||||||||||||||
| • | Net charge-offs totaled $7.7 million, or 0.23 percent, of average loans, compared to $7.6 million, or 0.23 percent, of average loans in the linked quarter. | ||||||||||||||
| --- | --- |
Dividend Declaration and Common Share Repurchase Authorization
At the company’s quarterly board meeting, the Board of Directors declared a $0.31 per share quarterly cash dividend, payable on July 1, 2020, to shareholders of record at the close of business on June 10, 2020.
As in prior years, the Board has 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 2021 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 2020 earnings results on Wednesday, April 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 1Q 2020 Conference Call
A replay of the conference call may be heard through May 13, 2020 by calling (toll-free)
877-344-7529 or (international) 412-317-0088. The replay access code required for playback is 10141589. The call replay may also be accessed at investorrelations.umb.com.
Non-GAAP Financial Information
In this release, we provide information about net operating (loss) income, operating (losses) 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), 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 cleaning and janitorial supplies to disinfect 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, 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 | 13,949,710 | $ | 12,549,732 | ||
| Allowance for credit losses on loans | (187,911 | ) | (103,661 | ) | |
| Net loans | 13,761,799 | 12,446,071 | |||
| Loans held for sale | 9,585 | 1,267 | |||
| Securities: | |||||
| Available for sale | 7,639,451 | 6,891,869 | |||
| Held to maturity, net of allowance for credit losses | 1,110,925 | 1,147,947 | |||
| Trading securities | 61,177 | 56,025 | |||
| Other securities | 135,194 | 75,357 | |||
| Total securities | 8,946,747 | 8,171,198 | |||
| Federal funds sold and resell agreements | 784,750 | 264,772 | |||
| Interest-bearing due from banks | 1,109,254 | 1,113,470 | |||
| Cash and due from banks | 340,553 | 399,387 | |||
| Premises and equipment, net | 297,668 | 279,000 | |||
| Accrued income | 111,879 | 117,007 | |||
| Goodwill | 180,867 | 180,867 | |||
| Other intangibles, net | 25,839 | 13,676 | |||
| Other assets | 675,945 | 570,045 | |||
| Total assets | 26,244,886 | $ | 23,556,760 | ||
| LIABILITIES | |||||
| Deposits: | |||||
| Noninterest-bearing demand | 7,269,520 | $ | 6,448,422 | ||
| Interest-bearing demand and savings | 12,920,980 | 12,018,580 | |||
| Time deposits under 250,000 | 595,128 | 591,405 | |||
| Time deposits of 250,000 or more | 389,892 | 306,808 | |||
| Total deposits | 21,175,520 | 19,365,215 | |||
| Federal funds purchased and repurchase agreements | 1,890,917 | 1,494,048 | |||
| Short-term debt | 15,000 | — | |||
| Long-term debt | 121,582 | 81,608 | |||
| Accrued expenses and taxes | 216,272 | 142,483 | |||
| Other liabilities | 162,154 | 122,563 | |||
| Total liabilities | 23,581,445 | 21,205,917 | |||
| SHAREHOLDERS' EQUITY | |||||
| Common stock | 55,057 | 55,057 | |||
| Capital surplus | 1,073,089 | 1,060,630 | |||
| Retained earnings | 1,646,751 | 1,531,396 | |||
| Accumulated other comprehensive income (loss), net | 219,390 | (17,639 | ) | ||
| Treasury stock | (330,846 | ) | (278,601 | ) | |
| Total shareholders' equity | 2,663,441 | 2,350,843 | |||
| Total liabilities and shareholders' equity | 26,244,886 | $ | 23,556,760 |
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 | ||||||||||||||||
| March 31, | ||||||||||||||||
| 2020 | 2019 | |||||||||||||||
| INTEREST INCOME | ||||||||||||||||
| Loans | $ | 151,026 | $ | 157,261 | ||||||||||||
| Securities: | ||||||||||||||||
| Taxable interest | 27,212 | 25,391 | ||||||||||||||
| Tax-exempt interest | 24,404 | 20,697 | ||||||||||||||
| Total securities income | 51,616 | 46,088 | ||||||||||||||
| Federal funds and resell agreements | 5,452 | 3,625 | ||||||||||||||
| Interest-bearing due from banks | 2,663 | 3,899 | ||||||||||||||
| Trading securities | 654 | 434 | ||||||||||||||
| Total interest income | 211,411 | 211,307 | ||||||||||||||
| INTEREST EXPENSE | ||||||||||||||||
| Deposits | 29,732 | 37,834 | ||||||||||||||
| Federal funds and repurchase agreements | 6,381 | 8,264 | ||||||||||||||
| Other | 1,357 | 1,341 | ||||||||||||||
| Total interest expense | 37,470 | 47,439 | ||||||||||||||
| Net interest income | 173,941 | 163,868 | ||||||||||||||
| Provision for credit losses | 88,000 | 12,350 | ||||||||||||||
| Net interest income after provision for credit losses | 85,941 | 151,518 | ||||||||||||||
| NONINTEREST INCOME | ||||||||||||||||
| Trust and securities processing | 47,000 | 41,957 | ||||||||||||||
| Trading and investment banking | 1,723 | 5,581 | ||||||||||||||
| Service charges on deposit accounts | 25,081 | 21,281 | ||||||||||||||
| Insurance fees and commissions | 259 | 338 | ||||||||||||||
| Brokerage fees | 9,860 | 7,243 | ||||||||||||||
| Bankcard fees | 16,545 | 17,067 | ||||||||||||||
| Gains on sales of securities available for sale, net | 1,227 | 809 | ||||||||||||||
| Other | (3,271 | ) | 13,106 | |||||||||||||
| Total noninterest income | 98,424 | 107,382 | ||||||||||||||
| NONINTEREST EXPENSE | ||||||||||||||||
| Salaries and employee benefits | 111,060 | 116,032 | ||||||||||||||
| Occupancy, net | 12,180 | 11,743 | ||||||||||||||
| Equipment | 21,241 | 19,684 | ||||||||||||||
| Supplies and services | 4,185 | 3,873 | ||||||||||||||
| Marketing and business development | 4,640 | 4,913 | ||||||||||||||
| Processing fees | 13,390 | 12,132 | ||||||||||||||
| Legal and consulting | 6,110 | 5,633 | ||||||||||||||
| Bankcard | 4,860 | 4,345 | ||||||||||||||
| Amortization of other intangible assets | 1,734 | 1,327 | ||||||||||||||
| Regulatory fees | 2,366 | 2,890 | ||||||||||||||
| Other | 6,853 | 8,054 | ||||||||||||||
| Total noninterest expense | 188,619 | 190,626 | ||||||||||||||
| (Loss) income before income taxes | (4,254 | ) | 68,274 | |||||||||||||
| Income tax (benefit) expense | (815 | ) | 10,530 | |||||||||||||
| NET (LOSS) INCOME | $ | (3,439 | ) | $ | 57,744 | |||||||||||
| PER SHARE DATA | ||||||||||||||||
| Net (loss) income – basic | $ | (0.07 | ) | $ | 1.19 | |||||||||||
| Net (loss) income – diluted | (0.07 | ) | 1.18 | |||||||||||||
| Dividends | 0.31 | 0.30 | ||||||||||||||
| Weighted average shares outstanding – basic | 48,689,876 | 48,712,153 | ||||||||||||||
| Weighted average shares outstanding – diluted | 48,689,876 | 48,998,571 | ||||||||||||||
| Consolidated Statements of Comprehensive Income | UMB Financial Corporation | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | ||||||||||
| (unaudited, dollars in thousands) | ||||||||||||||||
| Three Months Ended | ||||||||||||||||
| March 31, | ||||||||||||||||
| 2020 | 2019 | |||||||||||||||
| Net (loss) income | $ | (3,439 | ) | $ | 57,744 | |||||||||||
| Other comprehensive income, before tax: | ||||||||||||||||
| Unrealized gains and losses on debt securities: | ||||||||||||||||
| Change in unrealized holding gains and losses, net | 164,116 | 106,434 | ||||||||||||||
| Less: Reclassification adjustment for gains included in net income | (1,227 | ) | (809 | ) | ||||||||||||
| Change in unrealized gains and losses on debt securities | 162,889 | 105,625 | ||||||||||||||
| Unrealized gains and losses on derivative hedges: | ||||||||||||||||
| Change in unrealized gains and losses on derivative hedges, net | 14,525 | (2,088 | ) | |||||||||||||
| Less: Reclassification adjustment for losses (gains) included in net income | 768 | (5 | ) | |||||||||||||
| Change in unrealized gains and losses on derivative hedges | 15,293 | (2,093 | ) | |||||||||||||
| Other comprehensive income, before tax | 178,182 | 103,532 | ||||||||||||||
| Income tax expense | (41,972 | ) | (25,389 | ) | ||||||||||||
| Other comprehensive income | 136,210 | 78,143 | ||||||||||||||
| Comprehensive income | $ | 132,771 | $ | 135,887 | ||||||||||||
| 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 | — | — | 57,744 | 78,143 | — | 135,887 | ||||||||||
| Dividends (0.30 per share) | — | — | (14,769 | ) | — | — | (14,769 | ) | ||||||||
| Purchase of treasury stock | — | — | — | — | (4,086 | ) | (4,086 | ) | ||||||||
| Forfeitures of equity awards, net of issuances | — | 2,383 | — | — | (1,779 | ) | 604 | |||||||||
| Recognition of equity-based compensation | — | 3,289 | — | — | — | 3,289 | ||||||||||
| Sale of treasury stock | — | 100 | — | — | 161 | 261 | ||||||||||
| Exercise of stock options | — | 257 | — | — | 930 | 1,187 | ||||||||||
| Balance - March 31, 2019 | 55,057 | $ | 1,060,630 | $ | 1,531,396 | $ | (17,639 | ) | $ | (278,601 | ) | $ | 2,350,843 | |||
| Balance - January 1, 2020 | 55,057 | $ | 1,073,764 | $ | 1,672,438 | $ | 83,180 | $ | (277,999 | ) | $ | 2,606,440 | ||||
| Total comprehensive (loss) income | — | — | (3,439 | ) | 136,210 | — | 132,771 | |||||||||
| Dividends (0.31 per share) | — | — | (15,209 | ) | — | — | (15,209 | ) | ||||||||
| Purchase of treasury stock | — | (4,500 | ) | — | — | (54,886 | ) | (59,386 | ) | |||||||
| Issuances of equity awards, net of forfeitures | — | 521 | — | — | 72 | 593 | ||||||||||
| Recognition of equity-based compensation | — | 2,817 | — | — | — | 2,817 | ||||||||||
| Sale of treasury stock | — | 95 | — | — | 89 | 184 | ||||||||||
| Exercise of stock options | — | 392 | — | — | 1,878 | 2,270 | ||||||||||
| Cumulative effect adjustment | — | — | (7,039 | ) | — | — | (7,039 | ) | ||||||||
| Balance - March 31, 2020 | 55,057 | $ | 1,073,089 | $ | 1,646,751 | $ | 219,390 | $ | (330,846 | ) | $ | 2,663,441 |
All values are in US Dollars.
| Average Balances / Yields and Rates | UMB Financial Corporation | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (tax - equivalent basis) | ||||||||||||
| (unaudited, dollars in thousands) | ||||||||||||
| Three Months Ended March 31, | ||||||||||||
| 2020 | 2019 | |||||||||||
| Average | Average | Average | Average | |||||||||
| Balance | Yield/Rate | Balance | Yield/Rate | |||||||||
| Assets | ||||||||||||
| Loans, net of unearned interest | $ | 13,616,566 | 4.46 | % | $ | 12,303,154 | 5.18 | % | ||||
| Securities: | ||||||||||||
| Taxable | 4,694,418 | 2.33 | 4,301,121 | 2.39 | ||||||||
| Tax-exempt | 4,063,042 | 3.05 | 3,623,164 | 2.93 | ||||||||
| Total securities | 8,757,460 | 2.67 | 7,924,285 | 2.64 | ||||||||
| Federal funds and resell agreements | 1,224,196 | 1.79 | 521,422 | 2.82 | ||||||||
| Interest bearing due from banks | 826,963 | 1.30 | 662,050 | 2.39 | ||||||||
| Trading securities | 48,102 | 5.84 | 46,408 | 4.40 | ||||||||
| Total earning assets | 24,473,287 | 3.58 | 21,457,319 | 4.10 | ||||||||
| Allowance for credit losses | (112,751 | ) | (105,444 | ) | ||||||||
| Other assets | 1,679,390 | 1,502,277 | ||||||||||
| Total assets | $ | 26,039,926 | $ | 22,854,152 | ||||||||
| Liabilities and Shareholders' Equity | ||||||||||||
| Interest-bearing deposits | $ | 14,330,150 | 0.83 | % | $ | 12,733,114 | 1.21 | % | ||||
| Federal funds and repurchase agreements | 2,030,385 | 1.26 | 1,554,570 | 2.16 | ||||||||
| Borrowed funds | 111,591 | 4.89 | 82,416 | 6.60 | ||||||||
| Total interest-bearing liabilities | 16,472,126 | 0.91 | 14,370,100 | 1.34 | ||||||||
| Noninterest-bearing demand deposits | 6,495,611 | 5,989,215 | ||||||||||
| Other liabilities | 351,237 | 259,244 | ||||||||||
| Shareholders' equity | 2,720,952 | 2,235,593 | ||||||||||
| Total liabilities and shareholders' equity | $ | 26,039,926 | $ | 22,854,152 | ||||||||
| Net interest spread | 2.67 | % | 2.76 | % | ||||||||
| Net interest margin | 2.97 | 3.20 | ||||||||||
| Business Segment Information | UMB Financial Corporation | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |
| (unaudited, dollars in thousands) | ||||||||||||
| Three Months Ended March 31, 2020 | ||||||||||||
| Commercial Banking | Institutional Banking | Personal Banking | Total | |||||||||
| Net interest income | $ | 106,948 | $ | 33,036 | $ | 33,957 | $ | 173,941 | ||||
| Provision for credit losses | 82,220 | 275 | 5,505 | 88,000 | ||||||||
| Noninterest income | 11,240 | 61,952 | 25,232 | 98,424 | ||||||||
| Noninterest expense | 59,043 | 68,453 | 61,123 | 188,619 | ||||||||
| (Loss) income before taxes | (23,075 | ) | 26,260 | (7,439 | ) | (4,254 | ) | |||||
| Income tax (benefit) expense | (4,421 | ) | 5,032 | (1,426 | ) | (815 | ) | |||||
| Net (loss) income | $ | (18,654 | ) | $ | 21,228 | $ | (6,013 | ) | $ | (3,439 | ) | |
| Three Months Ended March 31, 2019 | ||||||||||||
| Commercial Banking | Institutional Banking | Personal Banking | Total | |||||||||
| Net interest income | $ | 99,814 | $ | 31,752 | $ | 32,302 | $ | 163,868 | ||||
| Provision for credit losses | 10,329 | 286 | 1,735 | 12,350 | ||||||||
| Noninterest income | 23,181 | 55,850 | 28,351 | 107,382 | ||||||||
| Noninterest expense | 66,820 | 65,398 | 58,408 | 190,626 | ||||||||
| Income before taxes | 45,846 | 21,918 | 510 | 68,274 | ||||||||
| Income tax expense | 7,071 | 3,380 | 79 | 10,530 | ||||||||
| Net income | $ | 38,775 | $ | 18,538 | $ | 431 | $ | 57,744 |
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 March 31, 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 March 31, | ||||||
| 2020 | 2019 | |||||
| Net (loss) income (GAAP) | $ | (3,439 | ) | $ | 57,744 | |
| Adjustments: | ||||||
| Acquisition expense | 123 | 27 | ||||
| Severance expense | 1,652 | 570 | ||||
| COVID-19 related expense | 228 | — | ||||
| Tax-impact of adjustments (i) | (445 | ) | (133 | ) | ||
| Total Non-GAAP adjustments (net of tax) | 1,558 | 464 | ||||
| Net operating (loss) income (Non-GAAP) | $ | (1,881 | ) | $ | 58,208 | |
| (Losses) earnings per share - diluted (GAAP) | $ | (0.07 | ) | $ | 1.18 | |
| Acquisition expense | — | — | ||||
| Severance expense | 0.04 | 0.01 | ||||
| COVID-19 related expense | — | — | ||||
| Tax-impact of adjustments (i) | (0.01 | ) | — | |||
| Operating (losses) earnings per share - diluted (Non-GAAP) | $ | (0.04 | ) | $ | 1.19 | |
| GAAP | ||||||
| Return on average assets | (0.05 | )% | 1.02 | % | ||
| Return on average equity | (0.51 | ) | 10.48 | |||
| Non-GAAP | ||||||
| Operating return on average assets | (0.03 | )% | 1.03 | % | ||
| Operating return on average equity | (0.28 | ) | 10.56 |
(i) Calculated using the company’s marginal tax rate of 22.2 percent.
| Operating noninterest expense and operating efficiency ratio Non-GAAP reconciliations: | UMB Financial Corporation | ||||||
|---|---|---|---|---|---|---|---|
| (unaudited, dollars in thousands) | |||||||
| Three Months Ended March 31, | |||||||
| 2020 | 2019 | ||||||
| Noninterest expense | $ | 188,619 | $ | 190,626 | |||
| Adjustments to arrive at operating noninterest expense (pre-tax): | |||||||
| Acquisition expense | 123 | 27 | |||||
| Severance expense | 1,652 | 570 | |||||
| COVID-19 related expense | 228 | — | |||||
| Total Non-GAAP adjustments (pre-tax) | 2,003 | 597 | |||||
| Operating noninterest expense (Non-GAAP) | $ | 186,616 | $ | 190,029 | |||
| Noninterest expense | $ | 188,619 | $ | 190,626 | |||
| Less: Amortization of other intangibles | 1,734 | 1,327 | |||||
| Noninterest expense, net of amortization of other intangibles (Non-GAAP) (numerator A) | $ | 186,885 | $ | 189,299 | |||
| Operating noninterest expense | $ | 186,616 | $ | 190,029 | |||
| Less: Amortization of other intangibles | 1,734 | 1,327 | |||||
| Operating expense, net of amortization of other intangibles (Non-GAAP) (numerator B) | $ | 184,882 | $ | 188,702 | |||
| Net interest income | $ | 173,941 | $ | 163,868 | |||
| Noninterest income | 98,424 | 107,382 | |||||
| Less: Gains on sales of securities available for sale, net | 1,227 | 809 | |||||
| Total Non-GAAP Revenue (denominator A) | $ | 271,138 | $ | 270,441 | |||
| Efficiency ratio (numerator A/denominator A) | 68.93 | % | 70.00 | % | |||
| Operating efficiency ratio (Non-GAAP) (numerator B/denominator A) | 68.19 | 69.78 | |||||
| Pre-tax, pre-provision income non-GAAP reconciliation: | UMB Financial Corporation | ||||||
| --- | --- | --- | --- | --- | --- | --- | --- |
| (unaudited, dollars in thousands except per share data) | |||||||
| Three Months Ended | |||||||
| March 31, 2020 | December 31, 2019 | March 31, 2019 | |||||
| Net (loss) income before taxes (GAAP) | $ | (4,254 | ) | $ | 77,268 | $ | 68,274 |
| Adjustments: | |||||||
| Provision for credit losses | 88,000 | 2,000 | 12,350 | ||||
| Pre-tax, pre-provision income (Non-GAAP) | $ | 83,746 | $ | 79,268 | $ | 80,624 | |
| Pre-tax (losses) earnings per share - diluted (GAAP) | $ | (0.09 | ) | $ | 1.57 | $ | 1.39 |
| Provision for credit losses | 1.81 | 0.04 | 0.26 | ||||
| Pre-tax, pre-provision earnings per share - diluted (Non-GAAP) | $ | 1.72 | $ | 1.61 | $ | 1.65 | |
| Tangible book value non-GAAP reconciliation: | UMB Financial Corporation | ||||||
| --- | --- | --- | --- | --- | --- | --- | |
| (unaudited, dollars in thousands except share and per share data) | |||||||
| As of | |||||||
| March 31, 2020 | December 31, 2019 | March 31, 2019 | |||||
| Total shareholders' equity (GAAP) | $ | 2,663,441 | $ | 2,606,440 | $ | 2,350,843 | |
| Less: Intangible assets | |||||||
| Goodwill | 180,867 | 180,867 | 180,867 | ||||
| Other intangibles, net | 25,839 | 27,597 | 13,676 | ||||
| Total intangibles, net | 206,706 | 208,464 | 194,543 | ||||
| Total tangible shareholders' equity (Non-GAAP) | $ | 2,456,735 | $ | 2,397,976 | $ | 2,156,300 | |
| Total shares outstanding | 48,134,601 | 49,097,606 | 49,058,246 | ||||
| Ratio of total shareholders' equity (book value) per share | $ | 55.33 | $ | 53.09 | $ | 47.92 | |
| Ratio of total tangible shareholders' equity (tangible book value) per share (Non-GAAP) | 51.04 | 48.84 | 43.95 |
umbf-ex992_67.pptx.htm
First Quarter 2020 April 28, 2020 UMB Financial 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.
Our Response to COVID-19 Operational Readiness 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 Supporting communities by sourcing meals from local customer-owned restaurants -more than 200 to date Options for consumer loan and mortgage deferment or modifications on an individual, customized basis A 90-day moratorium on initiating foreclosure on all mortgages and home equity lines and loans Access to additional credit lines extended on a case-by-case basis Individualized, flexible credit card repayment and payment deferral options, as well as a balance transfer opportunity Increased mobile deposit limits Improved social distancing for those whose roles require them to work onsite utilizing various sites across our footprint Supplemental compensation and additional PTO days for those unable to work remotely Providing lunch from local restaurants for associates on site Easy 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 Launched business continuity plans and executive level pandemic task force Early move to drive-through only branches to protect associates and customers Implemented remote working arrangements for ~80% of our staff Increased and strengthened network capacity Enhanced cleaning and disinfecting Augmented relief program to ensure bank fees do not reduce stimulus proceeds for eligible customers Six-month term loan payment deferral option for current small business customers Processed and received approval for more than 3,000 applications for over $1.4 billion in funded loans in the first wave of the Paycheck Protection Program Had more than 1,700 applications ready to process when the second wave opened up on April 27 to assist small business clients
Earnings Summary – 1Q 2020 The Company adopted ASU 2016-13 as of 1/1/2020. See additional information on slides 9-11. 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 32. Non-GAAP adjustments include provision for credit losses. See the non-GAAP reconciliation and additional information on slide 33. Non-GAAP adjustments include goodwill and other intangibles, net. See ton-GAAP reconciliation and additional information on slide 34. $ in thousands, except share and per share data; unaudited
Noninterest Income – 1Q 2020 1st Quarter ‘20 Drivers As-stated noninterest income decreased $11.9MM, or 10.8%, compared to 4Q’19, primarily driven by: Reductions related to market valuation adjustments due to volatility, including a $16.6MM decrease in company-owned life insurance income, a $3.5MM reduction in income from UMB’s trading portfolio, and an $824k decrease in derivative income. Partially offset by An increase of $5.7MM in healthcare service charge income related to customer transfer and conversion fees; An increase of $1.0MM in brokerage fees, primarily driven by higher 12b-1 income; and An increase of $2.0MM in equity earnings on alternative investments and a $1.9MM gain on the sale of a building, both recorded in other income. Private Wealth new business AUM increased 36% linked-quarter and 80% vs. 1Q’19
Noninterest Income Composition Trust & Securities Processing Composition: ($ in millions) Source of Income: 1Q’20 4Q’19 1Q’19 Personal Banking $ 15.7 $ 16.2 $ 15.3 Institutional Banking 31.3 30.5 26.7 $ 47.0 $ 46.8 $ 42.0 Bankcard Fees Service Charges on Deposit Accounts Trust & Securities Processing Gains on Sales of Securities Trading & Investment Banking Other Brokerage Fees Insurance Fees & Commissions Excludes ($3.3 million) in other noninterest income, which represents (3.4%) of total.
Noninterest Expense – 1Q 2020 Operating noninterest expense, which excludes the impact of acquisition expense, severance expense and COVID-19 related expense, was $186.6 million for the first quarter of 2020, a decrease of $16.2 million, or 8.0 percent, compared to the linked quarter, and a decrease of $3.4 million, or 1.8 percent, compared to the first quarter of 2019. See slide 32 for a reconciliation of this non-GAAP financial measure. Noninterest expense decreased $14.8MM, or 7.3%, compared to 4Q’19, driven by: A decrease of $15.7MM in deferred compensation expense, the offset to the decrease in company-owned life insurance income; A decrease of $3.9MM in legal and consulting and $3.7MM in marketing and business development expense due to the timing of multiple projects; A decrease of $1.4MM in postage expense. These decreases were partially offset by an increase of $8.1MM related to seasonally higher payroll taxes, medical insurance and 401(k) expense; and an increase of $4.2MM in derivative expense. 1st Quarter ‘20 Drivers
Asset Quality
Current Expected Credit Loss (“CECL”) Implementation CECL Methodology and Key Assumptions Macroeconomic forecast Moody’s Baseline forecast as of March 27th 50% probability the economy performs better or worse Catalysts: COVID-19, equity market turmoil and plunge in global oil prices GDP forecasted to contract 2.2% in 2020; 18% contraction in 2Q20 including a 10% benefit from stimulus bill Peak COVID-19 infections by May 2020, and beginning to abate by July 13.7% decline in real consumer spending in 2Q20; heavily affected industries include air transportation, amusement parks, spectator amusements, and restaurants and bars (7% of GDP) 50% of industries locked down in April, 40% in May, and 20% in June 2Q20 avg. national unemployment rate 8.7%, rebound to 6.3% in 3Q20; 6.6% in 2021 10-Year Treasury Yield average of 0.77% in 4Q20 Fed Funds target rate unchanged at effective zero lower bound until 2022 Key Variables Unemployment rate 2-Year Treasury 10-Year Treasury BBB Corporate Yield Home Price Index ~30 different portfolio models Historical Industry loss experience data with scalers for commercial real estate portfolio 1 year reasonable & supportable period Source: Moody's Analytics
CECL: Conservative & Prudent Reserve Build 1Q20 Balances Allowance % of total ACL % Commercial $11,236 $157.9 83% 1.4% National Businesses $523 $3.6 2% 0.7% Consumer real estate $1,445 $4.2 2% 0.3% Credit cards $374 $18.8 10% 5.0% Other $372 $3.4 2% 0.9% Total Loans $13,950 $187.9 98% 1.4% HTM Securities $1,114 $3.2 2% 0.3% Total Loans & HTM Securities $15,064 $191.1 100% 1.3% $ in millions Commercial & Industrial loan portfolio accounted for more than two-thirds of the increase in reserves under COVID economic factors Commercial real estate accounted for 23% of the increase from Day 1 CECL reserves Ending allowance for credit losses of $188 million equals 150% of projected loss estimates under severely adverse scenario; coverage ratio of 1.4% is 2.8x peak NCO rate during financial crisis 1Q’20 provision expense of $88MM is 10.7x trailing 4-quarter avg provision and 11.5x 1Q’20 NCOs Elected 5-year regulatory capital phase-in under recently issued inter-agency guidance
CECL: Drivers of Change to Allowance 12/31/19 Day 1 Adjustment 01/01/20 Net Charge-offs Portfolio Changes 3/31/20 Economic Outlook Allowance for Credit Losses ($ in millions)
Net Charge-Off History (1) Commercial Loans includes commercial and industrial, commercial credit card, asset-based and factoring loans. (2) Other includes all real-estate related loans (commercial, residential and HELOC), plus consumer loans and DDA charge-offs.
Supporting Customers In Need Loan Modifications Commercial Banking Credit Line Draws & Utilization Paycheck Protection Program Size $2k - $10M Median size $122k Actively working to process applications in second round Modification requests represent ~12% of loan portfolio Business banking – proactive outreach to provide deferrals
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.
High Quality Investment Portfolio Securities Held to Maturity $1.1 billion at March 31, 2020 Securities Available for Sale $7.6 billion at March 31, 2020 Governmental Other Higher Education Healthcare Utility Social Service Industrial Cultural Civic K-12 Education NFP - Other Average Balance: $7.5 billion Average Yield: 2.62% Duration: 50 months Average Balance: $1.1 billion Average Yield: 3.16% Duration: 70 months Total Portfolio Average Yield: 2.67% Duration: 53 months Agencies Corporates Municipals Mortgage-Backed Securities Treasuries
Securities Portfolio Statistics (1) Roll off includes cash flow from maturities, calls or amortizations of securities and is presented net of sales. (2) Purchased amount is presented net of purchases made related to sales. AFS Portfolio Activity
Deposit Trends and Composition Commercial 29.5% Consumer* 26.7% Healthcare 13.2% Institutional 30.6% Non-Interest Bearing 34.3% Interest-Bearing MMDA & Savings 26.0% Time Deposits * Includes consumer banking, private wealth and small business By Type By Line of Business Deposit Growth & Cost Deposit Mix at March 31, 2020 Interest-Bearing Performance 35.0% 15-yr CAGR: 9.5% (2004-2019)
Growth of Diversified Loan Portfolio Average Loans & Yields 15-yr CAGR: 10.7% (2004-2019) Long-Term Track Record
Loan Portfolio Composition Loan Repricing / Maturity Schedule 55% of loans reprice in 2Q 2020 65% of loans reprice in the next 12 months Variable Rate Loans 64% of loans are variable, $8.9 billion at March 31, 2020 Tied to LIBOR for the next quarter: 68% or ~$6.1 billion Tied to Prime for the next quarter: 31% or ~$2.8 billion By Geography Loan Mix at March 31, 2020 Kansas City CO St Louis AZ 9.6% KS TX 11.0% Greater MO 5.8% NE-2.3% OK-1.9% MN-1.2% By Type Commercial* Construction Commercial Real Estate & Land Development Resi. Real Estate Consumer * Includes C&I, leases and commercial credit card.
Quarterly Loan Activity
Commercial & Industrial Loan Portfolio C&I Portfolio Statistics C&I Industry Composition * Other - 10% Auto-Related: 3.0% Food/Bev Manufacturing: 2.5% Entertain/Recreation: 2.1% Government/Education: 1.3% Consumer Services: 0.4% Utilities: 0.4% Textile Manufacturing: 0.3% C&I loans (including leases) at 03/31/20: $6.2 billion, 45% of total UMB loans 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 C&I Growth Trends $ billions Transp. / Warehouse Diversified Technology Materials Manufacturing Retail Healthcare Comm. Services Other * Agriculture RE & Construction Finance & Insurance Oil & Gas $6.2B 45% of loans
Commercial Real Estate – Disciplined Expansion Total CRE Composition CRE Growth Trends Construction / Land Dev. Owner-Occ CRE Retail Construction 1% Investment CRE $ billions Farmland Investment CRE and construction / land development managed by Real Estate Group (“REG”); details on following slide Commercial Real Estate & Construction at 03/31/20 $5.3 billion, 38% of total UMB loans $5.3B 38% of loans
Investment CRE / Construction Retail Multifamily Other * Office Building Hotel Industrial Sr. Living Student Housing Resi. Rental Investment CRE and Construction/Development loans $3.4 billion, 24% of total UMB loans Average Loan-to-value: 63% Recourse: 91% of portfolio Regulatory Concentrations: Total non-farmland CRE / Total RBC: 143% Construction & Development Loans / Total RBC: 42% Real Estate Group Overview UMB Investment CRE Composition * Other - 10% Self Storage: 2.1% Mixed Use: 1.9% Home Builder for-sale: 1.7% Healthcare: 1.5% Special Purpose: 1.5% Vacant Land: 1.2% Manufactured Housing Park: 0.1% $3.4B 24% of loans
Exposure to Sensitive Industries We analyzed our portfolios in each category for specific characteristics based on what is currently known, such as guarantees, recourse, liquidity positions and hedging strategies that provide protection, as well as those which may carry more risk if the current environment is prolonged. This “more impacted subset” are balances that we’re monitoring more closely. Proactive dialog and customized solutions for clients Continuous monitoring of customer liquidity and outlooks for at-risk portfolios Oil & Gas ** Excludes construction properties that will come to market within 6 months.
Card Purchase Volumes Purchase Volume & Interchange Revenue Commercial Credit Consumer Credit Consumer Debit Healthcare Debit Institutional Banking – IBIS Debit Interchange ($ in millions)
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, available at time of printing, 1/25/20. (142 banks) Source: S&P Global Returning Capital to Our Shareholders Annual Dividends Declared 2005 - 2019
Long-Term Value Creation Data as available at time of printing, 01/25/20. (1) See reconciliation of tangible book value per share on slide 34. *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 (loss) income, operating (losses) earnings 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 3 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 cleaning and janitorial supplies to disinfect 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 (loss) income for the relevant period is defined as GAAP net (loss) 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 diluted (losses) 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 (loss) income, divided by the Company’s average total shareholders’ equity for the relevant period. Operating ROA is calculated as net operating (loss) 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 (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 (i) Calculated using the Company's marginal tax rate of 22.2%. Net Operating Income Operating Noninterest Expense & Efficiency Ratio
Non-GAAP Reconciliations Pre-Tax, Pre-Provision Income Tangible Common Equity Ratio (unaudited; $ in thousands except per share data) (unaudited; $ in thousands)
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. (1)