Fourth Quarter 2021 Financial Highlights

• GAAP net income of $78.5 million, or $1.61 per diluted share; net operating income (non-GAAP) of $78.9 million, or $1.62 per diluted share.
• Pre-tax, pre-provision income on a fully tax equivalent basis (PTPP-FTE) of $113.4 million.
• Excluding Paycheck Protection Program (PPP) balances, average loans increased 5.7% on a linked-quarter, annualized basis.
  • Average Commercial & Industrial loan balances, excluding PPP, increased 11.9% on a linked-quarter, annualized basis.
  • Period-end loan balances, excluding PPP, increased by $882.6 million from the linked quarter.
• Noninterest income increased 10.1% on a linked-quarter basis to $118.8 million, equal to 36.1% of total revenue.
• Quarterly average deposits grew 26.7% to $31.6 billion compared to the fourth quarter of 2020.
  • Average demand deposit balances increased 60.5% on a linked-quarter annualized basis to $13.1 billion.

UMB Financial Corporation (Nasdaq: UMBF), a financial services company, announced net income for the fourth quarter of 2021 of $78.5 million, or $1.61 per diluted share, compared to $94.5 million, or $1.94 per diluted share, in the third quarter of 2021 (linked quarter) and $156.3 million, or $3.24 per diluted share, in the fourth quarter of 2020. Results for the fourth quarter and full-year 2020 include a pre-tax gain of $108.8 million on the company’s investment in Tattooed Chef, Inc. (TTCF).

Net operating income, a non-GAAP financial measure reconciled to net income, the nearest comparable GAAP measure, later in this release, was $78.9 million, or $1.62 per diluted share, for the fourth quarter of 2021, compared to $95.1 million, or $1.95 per diluted share, for the linked quarter and $157.4 million, or $3.26 per diluted share, for the fourth quarter of 2020. PTPP-FTE, a non-GAAP measure reconciled to the components of net income before taxes, the nearest comparable GAAP measure, later in this release, was $113.4 million, or $2.32 per diluted share, for the fourth quarter of 2021, compared to $115.3 million, or $2.37 per diluted share, for the linked quarter, and $202.9 million, or $4.20 per diluted share, for the fourth quarter of 2020. These PTPP-FTE results represent decreases of 1.7% on a linked-quarter basis and 44.1% compared to the fourth quarter of 2020.

“Notwithstanding higher-than typical operating expenses tied to profitable business growth, charitable contributions, and timing of other investments in the fourth quarter, our teams executed and delivered exceptional operating and financial results in 2021 through strong growth on both sides of the balance sheet, strong asset quality metrics and continued build-out of our differentiated fee generation businesses,” said Mariner Kemper, chairman, president and chief executive officer. “UMB is positioned to benefit even further from anticipated economic expansion, higher interest rates, our diversified fee income businesses and the franchise investments we are making. In 2021, fee income momentum in our various businesses was offset on a year-over-year basis by the 2020 gain on our investment in Tattooed Chef and ongoing market-related adjustments. Average loans excluding PPP loan balances increased an impressive 12.3%. Average deposits increased 24.8%, including a 43.5% increase in interest-free demand deposit balances. Finally, in January, we pursued and executed the sale of our small, acquired factoring portfolio to an alternative financing company.”

Fourth Quarter 2021 earnings discussion

Net interest income

• Net interest income totaled $210.6 million, which is an increase of $0.8 million as compared to the linked quarter. The benefit from growth in average earning assets was partially offset by $4.0 million in reduced income from PPP loans. Average earning assets increased $2.2 billion, or 6.4%, driven by an increase in liquidity and investment securities purchases, while noninterest-bearing deposits increased $1.7 billion, or 15.1% and interest-bearing liabilities increased $499.1 million, or 2.4%.
• Net interest margin for the fourth quarter was 2.37%, a decrease of 15 basis points from the linked quarter, driven in large part by earning asset mix shift in favor of lower-yielding liquidity balances. Earning asset yields declined 16 basis points from the linked quarter, driven by an eight-basis-point decline in loan yields and mix changes. The cost of interest-bearing liabilities decreased two basis points to 0.20%. Net interest spread decreased 14 basis points to 2.29% from the linked quarter and was 39 basis points lower than the fourth quarter of 2020.
• On a year-over-year basis, net interest income increased $15.9 million, or 8.2%, driven by a $2.6 billion, or 25.5% increase in average securities, coupled with a $651.6 million, or 4.1%, increase in average loans. These increases were driven by organic loan growth, excess liquidity, and the company’s PPP participation.
• Average deposits increased 7.5% on a linked-quarter basis and 26.7% compared to the fourth quarter of 2020. Average noninterest-bearing demand deposit balances increased 15.1% on a linked-quarter basis and 46.7% compared to the fourth quarter of 2020.

Noninterest income

• Fourth quarter 2021 noninterest income increased $10.9 million, or 10.1%, on a linked-quarter basis, largely due to:
  • An increase of $3.3 million in the company’s equity investments, and an increase of $1.7 million in gains on sales of available-for-sale securities, both recorded in investment securities gains.
  • An increase of $3.2 million in derivative income, recorded in other income.
  • An increase of $1.7 million in service charges on deposits primarily driven by an increase of $0.9 million in healthcare income related to customer transfer and conversion fees and increased corporate service charge income.
  • Increases of $1.6 million in trust and securities processing and $1.0 million in trading and investment banking. The increase in trust and securities processing income is primarily due to an increase of $1.0 million in fund services income driven by higher levels of assets administered and $0.6 million in corporate trust income. The increase in trading and investment banking income is driven by increased trading volume.
  • These increases were partially offset by a decrease of $1.6 million in company owned life insurance income, recorded in other income. The decrease in company-owned life insurance is offset by a proportionate decrease in deferred compensation expense as noted below.
• Compared to the prior year, noninterest income in the fourth quarter of 2021 decreased $109.5 million, or 48.0%, primarily driven by:
  • A decrease of $111.6 million in investment securities gains, primarily due to mark-to-market valuations on the company’s equity investment in TTCF. The fourth quarter of 2020 included a pre-tax gain on TTCF of $108.8 million.
  • A decrease of $6.4 million in company-owned life insurance income, recorded in other income. The decrease in company-owned life insurance is offset by a proportionate decrease in deferred compensation expense as noted below.
  • A $2.7 million decrease in trading and investment banking due to decreased trading volumes.
  • These decreases were partially offset by an increase of $7.7 million in trust and securities processing income, an increase of $1.9 million in derivative income, recorded in other income, and an increase of $1.5 million in service charges on deposits. The increase in trust and securities processing was driven by an increase of $8.6 million in fund services income tied to higher levels of assets administered, and an increase of $1.3 million in corporate trust income, partially offset by a decrease of $2.1 million in trust services income.

Noninterest expense

• Noninterest expense for the fourth quarter of 2021 was $222.5 million, an increase of $13.6 million, or 6.5%, from the linked quarter and a decrease of $4.4 million, or 1.9%, from the fourth quarter of 2020.
• The linked-quarter increase in noninterest expense was driven by:
  • An increase of $7.3 million in salaries and bonus expense, recorded in salaries and employee benefits, driven primarily by increased incentive compensation tied to business growth and higher overall company performance.
  • Increases of $3.2 million in legal and consulting expense and $1.7 million in marketing and business development due to the timing of multiple projects.
  • An increase of $2.5 million in processing fees, due to timing of software projects and an increase of $2.1 million in charitable contributions expense, recorded in other expense.
  • These increases were partially offset by decreases of $2.5 million in operational losses, recorded in other expense, and $0.9 million in deferred compensation expense, recorded in salaries and employee benefits. The decrease in deferred compensation expense was offset by the decrease in company-owned life insurance income noted above.
• The year-over-year decrease in noninterest expense was driven by:
  • A decrease of $13.8 million in operational losses, recorded in other expense.
  • A decrease of $4.5 million in deferred compensation expense, recorded in salaries and employee benefits. The decrease in deferred compensation expense was offset by the decrease in company-owned life insurance income noted above.
  • These decreases were partially offset by the following increases:
    • Increases of $4.7 million in processing fees and $2.8 million in marketing and business development due to the timing of multiple software projects and marketing campaigns, respectively.
    • An increase of $4.5 million in salaries and bonus expense, recorded in salaries and employee benefits, driven primarily by increased incentive compensation tied to business growth and higher overall company performance.
    • An increase of $2.1 million in charitable contributions expense, recorded in other expense.

Full year 2021 earnings discussion

Net income for the year ended December 31, 2021 was $353.0 million, or $7.24 per diluted share, compared to $286.5 million, or $5.93 per diluted share in 2020. Net operating income, a non-GAAP financial measure reconciled to net income, the nearest comparable GAAP measure, later in this release, was $354.4 million, or $7.27 per diluted share, compared to $295.8 million, or $6.12 per diluted share in 2020. These results represent increases of 23.2% and 19.8%, respectively.

• Net interest income increased $84.3 million, or 11.5%, year-over-year due to a $6.7 billion increase in earning assets, primarily driven by increased volume in the company’s investment portfolio, strong organic loan growth and the company’s participation in the PPP. This growth was partially offset by the impact of lower short-term and long-term interest rates. In 2021, average securities increased $2.2 billion and average loan balances increased $1.5 billion. Average interest-bearing liabilities increased $3.1 billion, while the cost of interest-bearing liabilities declined 22 basis points.
• Full-year noninterest income decreased $93.0 million, or 16.6%, due to:
  • A decrease of $115.6 million in investment securities gains. 2020 included a pre-tax gain of $108.8 million on the company’s investment in TTCF, compared to a pre-tax loss of $15.4 million in 2021.
  • A decrease of $12.2 million in brokerage fees, primarily driven by lower 12b-1 and money market income.
  • A decrease of $3.8 million in trust income, recorded in trust and securities processing.
  • These decreases were partially offset by the following increases:
    • Increases of $27.5 million in fund services income driven by higher levels of assets administered and $5.8 million in corporate trust revenue, both recorded in trust and securities processing.
    • An increase of $4.0 million in bankcard income, due to higher interchange revenue, offset by increased rebates and rewards expense.
• Full-year noninterest expense increased $11.6 million, or 1.4%, primarily due to:
  • A $13.4 million increase in processing fees driven by the timing of multiple software projects.
  • An increase of $9.0 million in salary and employee benefit expense driven primarily by increased bonus and sales commission expense tied to business volumes, revenue growth, and overall company performance.
  • Increases of $3.9 million and $2.6 million in marketing and business development and legal and consulting expense, respectively, due to the timing of multiple projects.
  • An increase of $3.9 million in charitable contributions expense, recorded in other expense.
  • These increases were partially offset by a decrease of $14.1 million in operational losses, recorded in other expense, and a decrease of $7.3 million in equipment expense due to lower software amortization expense.

Income taxes

• The company’s effective tax rate was 17.7% for the year ended December 31, 2021, compared to 15.5% for the same period in 2020. The increase in the effective tax rate for 2021 is primarily attributable to a smaller portion of income being earned from tax-exempt municipal securities and higher state and local income taxes.

Balance sheet

• Average total assets for the fourth quarter of 2021 were $38.1 billion compared to $35.9 billion for the linked quarter and $30.6 billion for the same period in 2020.

• Average loans for the fourth quarter of 2021 decreased 0.4% on a linked-quarter basis and increased 4.1% compared to the fourth quarter of 2020 primarily due to the company’s participation in the PPP. Excluding PPP balances, average loans increased 1.4% on a linked-quarter basis.

• Average securities available for sale increased 6.7% on a linked-quarter basis and 27.2% compared to the fourth quarter of 2020.

• Average deposits increased 7.5% on a linked-quarter basis and 26.7% compared to the fourth quarter of 2020.
• Average noninterest-bearing demand deposits increased 15.1% on a linked-quarter basis to $13.1 billion.

Capital

• At December 31, 2021, the regulatory capital ratios presented in the foregoing table exceeded all “well-capitalized” regulatory thresholds.

Asset Quality

• Provision for credit losses for the fourth quarter totaled $8.5 million, an increase of $13.5 million from the linked quarter and an increase of $3.5 million from the fourth quarter of 2020. The fourth quarter provision expense is commensurate with the increases of $701.4 million and $1.1 billion in period-end loan balances as compared to the linked quarter and the fourth quarter of 2020, respectively, as well as considerations for portfolio changes and various macro-economic factors. Provision expense in the third quarter of 2021 represented a release of the Allowance for Credit Losses (ACL) based on positive macro-economic data and portfolio credit metrics.
• Net charge-offs for the fourth quarter totaled $8.1 million, or 0.19%, of average loans, compared to $3.1 million, or 0.07%, of average loans in the linked quarter, and $1.8 million, or 0.04%, of average loans for the fourth quarter of 2020.

Dividend Declaration

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

Conference Call

The company plans to host a conference call to discuss its fourth quarter 2021 earnings results on Wednesday, January 26, 2022, at 8:30 a.m. (CT).

Interested parties may access the call by dialing (toll-free) 877-267-8760 or (international) 412-542-4148 and requesting to join the UMB Financial call. The live call may also be accessed by visiting investorrelations.umb.com or by using the following link:

UMB Financial 4Q 2021 Conference Call

A replay of the conference call may be heard through February 9, 2022 by calling (toll-free) 877-344-7529 or (international) 412-317-0088. The replay access code required for playback is 1378406. The call replay may also be accessed at investorrelations.umb.com.

Non-GAAP Financial Information

In this release, we provide information about net operating income, operating earnings per share - diluted (operating EPS), operating return on average equity (operating ROE), operating return on average assets (operating ROA), operating noninterest expense, operating efficiency ratio, pre-tax, pre-provision income, pre-tax, pre-provision earnings per share – diluted (PTPP EPS), pre-tax, pre-provision income on a fully tax equivalent basis (PTPP-FTE), pre-tax, pre-provision FTE earnings per share – diluted (PTPP-FTE EPS), tangible shareholders’ equity, and tangible book value per share, all of which are non-GAAP financial measures. This information supplements the results that are reported according to generally accepted accounting principles in the United States (GAAP) and should not be viewed in isolation from, or as a substitute for, GAAP results. The differences between the non-GAAP financial measures – net operating income, operating EPS, operating ROE, operating ROA, operating noninterest expense, operating efficiency ratio, PTPP, PTPP EPS, PTPP-FTE, PTPP-FTE EPS, tangible shareholders’ equity, and tangible book value per share – and the nearest comparable GAAP financial measures are reconciled later in this release. The company believes that these non-GAAP financial measures and the reconciliations may be useful to investors because they adjust for acquisition-, severance-, and COVID-19 related items that management does not believe reflect the company’s fundamental operating performance. COVID-19 related expense includes hazard pay for branch associates, computer hardware expense to support associates working remotely, and additional equipment, cleaning, and janitorial supplies to protect the well-being of our associates and customers while on the company’s premises.

Net operating income for the relevant period is defined as GAAP net income, adjusted to reflect the impact of excluding expenses related to acquisitions, severance expense, COVID-19 related expense, and the cumulative tax impact of these adjustments.

Operating EPS (diluted) is calculated as earnings per share as reported, adjusted to reflect, on a per share basis, the impact of excluding the non-GAAP adjustments described above for the relevant period. Operating ROE is calculated as net operating income, divided by the company’s average total shareholders’ equity for the relevant period. Operating ROA is calculated as net operating income, divided by the company’s average assets for the relevant period. Operating noninterest expense for the relevant period is defined as GAAP noninterest expense, adjusted to reflect the pre-tax impact of non-GAAP adjustments described above. Operating efficiency ratio is calculated as the company’s operating noninterest expense, net of amortization of other intangibles, divided by the company’s total non-GAAP revenue (calculated as net interest income plus noninterest income, less gains on sales of securities available for sale, net).

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

PTPP-FTE for the relevant period is defined as GAAP net interest income on a fully tax equivalent basis plus noninterest income, less noninterest expense.

Tangible shareholders’ equity for the relevant period is defined as GAAP shareholders’ equity, net of intangible assets. Tangible book value per share is defined as tangible shareholders’ equity divided by the Company’s total shares outstanding.

Forward-Looking Statements:

This press release contains, and our other communications may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “outlook,” “forecast,” “target,” “trend,” “plan,” “goal,” or other words of comparable meaning or future-tense or conditional verbs such as “may,” “will,” “should,” “would,” or “could.” Forward-looking statements convey our expectations, intentions, or forecasts about future events, circumstances, results, or aspirations. All forward-looking statements are subject to assumptions, risks, and uncertainties, which may change over time and many of which are beyond our control. You should not rely on any forward-looking statement as a prediction or guarantee about the future. Our actual future objectives, strategies, plans, prospects, performance, condition, or results may differ materially from those set forth in any forward-looking statement. Some of the factors that may cause actual results or other future events, circumstances, or aspirations to differ from those in forward-looking statements are described in our Annual Report on Form 10-K for the year ended December 31, 2020, 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 first-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 first-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. 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.