UMB Financial Corporation Reports Third Quarter 2020 Net Income of $73.1 Million and Announces 3.2% Dividend Increase

UMB Financial Corporation (Nasdaq: UMBF), a financial services company, announced net income for the third quarter of 2020 of $73.1 million, or $1.52 per diluted share, compared to $60.5 million, or $1.26 per diluted share, in the second quarter of 2020 (linked quarter) and $62.4 million, or $1.27 per diluted share, in the third quarter of 2019.

Net operating income, a non-GAAP financial measure reconciled to net income, the nearest comparable GAAP measure, later in this release, was $76.4 million, or $1.59 per diluted share, for the third quarter of 2020, compared to $63.8 million, or $1.33 per diluted share, for the linked quarter and $62.5 million, or $1.27 per diluted share, for the third quarter of 2019. Pre-tax, pre-provision income (PTPP), a non-GAAP measure reconciled to net income before taxes, the nearest comparable GAAP measure, later in this release, was $99.4 million, or $2.07 per diluted share, for the third quarter of 2020, compared to $90.2 million, or $1.88 per diluted share, for the linked quarter, and $80.5 million, or $1.64 per diluted share, for the third quarter of 2019. These PTPP results represent increases of 10.2% on a linked-quarter basis and 23.5% compared to the third quarter of 2019.

Summary of quarterly financial results		UMB Financial Corporation
(unaudited, dollars in thousands, except per share data)
		Q3				Q2				Q3
		2020				2020				2019
Net income		$	73,092			$	60,529			$	62,382
Earnings per share (diluted)			1.52				1.26				1.27
Pre-tax, pre-provision income			99,385				90,152				80,498
Pre-tax, pre-provision earnings per share (diluted)			2.07				1.88				1.64
Net operating income			76,434				63,835				62,525
Operating earnings per share (diluted)			1.59				1.33				1.27
GAAP
Return on average assets			0.99	%			0.87	%			1.03	%
Return on average equity			10.23				8.95				9.69
Efficiency ratio			66.14				70.20				70.70
Non-GAAP
Operating return on average assets			1.03	%			0.91	%			1.04	%
Operating return on average equity			10.70				9.44				9.72
Operating efficiency ratio			64.69				68.76				70.63

Summary of year-to-date financial results		UMB Financial Corporation
(unaudited, dollars in thousands, except per share data)		September				September
		YTD				YTD
		2020				2019
Net income		$	130,182			$	177,085
Earnings per share (diluted)			2.69				3.61
Pre-tax, pre-provision income			273,283				239,547
Pre-tax, pre-provision earnings per share (diluted)			5.65				4.88
Net operating income			138,388				177,978
Operating earnings per share (diluted)			2.86				3.63
GAAP
Return on average assets			0.62	%			1.01	%
Return on average equity			6.30				9.86
Efficiency ratio			68.40				70.34
Non-GAAP
Operating return on average assets			0.66	%			1.02	%
Operating return on average equity			6.69				9.91
Operating efficiency ratio			67.18				70.20

“Our strong third quarter results were driven by several factors. Despite unprecedented circumstances, average loans, excluding Paycheck Protection Program (PPP) balances, increased 9.7% on a linked-quarter annualized basis and we saw a 47.2% decrease in modified loan balances from the prior quarter. These were modifications designed during the height of the crisis to assist our customers and provide financial relief,” said Mariner Kemper, chairman, president and chief executive officer. “In addition, we saw a 23.5% year-over-year increase in pre-tax, pre-provision income. We had year-over-year double-digit growth on both sides of our balance sheet and launched a successful inaugural subordinated debt issuance at an attractive yield, which further bolsters our capital position. And finally, as disclosed in our SEC filing on October 19, our fourth quarter is off to a great start with expected gains from our investment in Tattooed Chef, Inc.”

Summary of revenue		UMB Financial Corporation
(unaudited, dollars in thousands)
		Q3				Q2				Q3				CQ vs.				CQ vs.
		2020				2020				2019				LQ				PY
Net interest income		$	184,384			$	178,229			$	168,260			$	6,155			$	16,124
Noninterest income:
Trust and securities processing			50,552				46,321				45,218				4,231				5,334
Trading and investment banking			8,678				12,851				5,712				(4,173	)			2,966
Service charges on deposit accounts			19,650				19,074				20,620				576				(970	)
Insurance fees and commissions			259				533				320				(274	)			(61	)
Brokerage fees			4,819				5,753				8,102				(934	)			(3,283	)
Bankcard fees			15,295				12,916				16,895				2,379				(1,600	)
Gains on sales of securities available for sale, net			311				4,006				3,057				(3,695	)			(2,746	)
Other			13,432				19,002				3,711				(5,570	)			9,721
Total noninterest income		$	112,996			$	120,456			$	103,635			$	(7,460	)		$	9,361
Total revenue		$	297,380			$	298,685			$	271,895			$	(1,305	)		$	25,485
Net interest income (FTE)		$	191,181			$	184,833			$	174,415
Net interest margin (FTE)			2.73	%			2.79	%			3.09	%
Total noninterest income as a % of total revenue			38.00				40.33				38.12

Net interest income

• Net interest income totaled $184.4 million, an increase of $6.2 million, or 3.5%, from the linked quarter, driven by an increase of $1.2 billion, or 4.6%, in average earning assets. The increase in earning assets was driven by an increase of $638 million in securities and an increase of $633 million in loan balances.
• Net interest margin for the third quarter was 2.73%, a decrease of six basis points from the linked quarter, due to loan repricing and mix changes, net changes to securities, and lower contribution of free funds. Earning asset yields declined 10 basis points from the linked quarter, driven by declining yields in the loan portfolio due to reductions in short-term interest rates and an unfavorable earning asset mix shift driven by excess liquidity. The cost of interest-bearing liabilities decreased six basis points to 0.28%, driven by a seven-basis-point decline in the cost of interest-bearing deposits and lower borrowing costs. Net interest spread decreased four basis points to 2.63% from the linked quarter and was one basis point lower than the third quarter of 2019.
• On a year-over-year basis, net interest income increased $16.1 million, or 9.6%, driven by a $2.8 billion, or 22.0%, increase in average loans, and a $1.3 billion, or 15.8%, increase in securities. These increases were driven by organic loan growth and the company’s participation in the PPP.
• Average deposits increased 5.9% on a linked-quarter basis and 25.0% compared to the third quarter of 2019. Average noninterest-bearing demand deposit balances increased 7.8% on a linked-quarter basis and 35.8% compared to the third quarter of 2019.
• During the third quarter, the company terminated a $750.0 million interest rate floor hedge for $34.1 million with a gain, net of unamortized premium, of $18.4 million to be amortized through September 2024.

Noninterest income

• Third quarter 2020 noninterest income decreased $7.5 million, or 6.2%, on a linked-quarter basis, largely due to:
  • A decrease of $6.2 million in company-owned life insurance income, reflecting the impact of lower market valuations of the underlying investments, recorded in other income. The decrease in company-owned life insurance income is offset by a proportionate decrease in deferred compensation expense as noted below.
  • A decrease of $4.2 million in trading and investment banking, primarily due to moderation of trading volumes from strong linked quarter levels, as well as a decrease of $1.9 million in market valuation of investments in the company’s trading portfolio.
  • A decrease of $3.7 million in gains on sales of available-for-sale securities.
  • These decreases were partially offset by increases of $4.2 million in trust and securities processing due to higher trust services and fund services income and $2.4 million in bankcard fees, primarily driven by increased interchange income.

• Compared to the prior year, noninterest income in the third quarter of 2020 increased $9.4 million, or 9.0%, primarily driven by:
  • An increase of $5.3 million in trust and securities processing driven by increases of $3.7 million in fund services income and $1.6 million in corporate trust income.
  • Increases of $5.1 million in company-owned life insurance, $3.3 million in derivative income, and $1.2 million in equity earnings on alternative investments, all recorded in other income. The increase in company-owned life insurance income is offset by a proportionate increase in deferred compensation expense as noted below.
  • These increases were partially offset by decreases of $3.3 million in brokerage fees due to decreased 12b-1 income, and $2.7 million in gains on sales of available-for-sale securities.

Noninterest expense

Summary of noninterest expense		UMB Financial Corporation
(unaudited, dollars in thousands)
		Q3				Q2				Q3				CQ vs.				CQ vs.
		2020				2020				2019				LQ				PY
Salaries and employee benefits		$	124,194			$	130,938			$	110,153			$	(6,744	)		$	14,041
Occupancy, net			12,027				11,411				12,240				616				(213	)
Equipment			20,968				21,502				19,775				(534	)			1,193
Supplies and services			3,442				3,785				4,261				(343	)			(819	)
Marketing and business development			3,038				3,284				5,655				(246	)			(2,617	)
Processing fees			12,812				13,603				13,619				(791	)			(807	)
Legal and consulting			7,244				6,220				8,374				1,024				(1,130	)
Bankcard			4,834				4,549				4,643				285				191
Amortization of other intangible assets			1,524				1,658				1,335				(134	)			189
Regulatory fees			2,309				3,211				2,749				(902	)			(440	)
Other			5,603				8,372				8,593				(2,769	)			(2,990	)
Total noninterest expense		$	197,995			$	208,533			$	191,397			$	(10,538	)		$	6,598

• GAAP noninterest expense for the third quarter of 2020 was $198.0 million, a decrease of $10.5 million, or 5.1%, from the linked quarter and an increase of $6.6 million, or 3.4%, from the third quarter of 2019.
• The linked quarter decrease in noninterest expense was driven by:
  • A decrease of $6.7 million in salaries and employee benefits, largely driven by an $8.0 million decrease in deferred compensation expense, and a decrease of $1.9 million in bonus and commission expense. These decreases were partially offset by an increase of $2.7 million in severance expense. The decrease in deferred compensation expense is offset by the decrease in company-owned life insurance income noted above.
  • A $3.0 million decrease in operational losses, recorded in other noninterest expense.
  • A $0.9 million decrease in regulatory fees due to decreased federal deposit insurance expense.
• The year-over-year increase in noninterest expense was driven by:
  • A $14.0 million increase in salaries and employee benefits, primarily due to increases of $7.3 million in bonus and commission expense, including an increase of $2.7 million in severance expense. Additional increases include $4.2 million in employee benefits expense, including an increase of $3.4 million in deferred compensation expense, and an increase of $2.5 million in salary and wage expense, which included compensation expense tied to the company’s COVID-19 response. The increase in deferred compensation expense was offset by the increase in company-owned life insurance income noted above.
  • These increases were partially offset by the following decreases:
    • A decrease of $2.6 million in marketing and development expense primarily due to a decline in travel and entertainment expense due to the pandemic.
    • Decreases of $1.3 million in operational losses and $1.1 million in derivative expense, both recorded in other noninterest expense.
    • A decrease of $1.8 million in consulting expense, recorded in legal and professional expense, due to timing of multiple technology initiatives.

Income taxes

• The company’s effective tax rate was 11.9% for the nine months ended September 30, 2020, compared to 15.1% for the same period in 2019. The decrease in the effective tax rate for 2020 is primarily attributable to a larger portion of pre-tax income being earned from tax-exempt municipal securities.

Balance sheet

• Average total assets for the third quarter of 2020 were $29.5 billion compared to $28.1 billion for the linked quarter and $23.9 billion for the same period in 2019.
• During the third quarter, the company completed its inaugural public offering of $200 million in subordinated notes. These notes carry a rate of 3.7%, mature in September 2030, and are callable in September 2025.

Summary of average loans and leases - QTD Average										UMB Financial Corporation
(unaudited, dollars in thousands)
		Q3				Q2				Q3				CQ vs.				CQ vs.
		2020				2020				2019				LQ				PY
Commercial and industrial		$	7,043,780			$	6,970,223			$	5,303,309			$	73,557			$	1,740,471
Specialty lending			456,847				471,571				630,768				(14,724	)			(173,921	)
Commercial real estate			5,744,344				5,435,428				4,957,810				308,916				786,534
Consumer real estate			1,755,249				1,528,501				1,286,776				226,748				468,473
Consumer			150,814				146,120				136,117				4,694				14,697
Credit cards			371,444				353,424				425,268				18,020				(53,824	)
Leases and other			209,238				193,099				150,830				16,139				58,408
Total loans		$	15,731,716			$	15,098,366			$	12,890,878			$	633,350			$	2,840,838

• Average loans for the third quarter of 2020 increased 4.2% on a linked-quarter basis and 22.0% compared to the third quarter of 2019 due to increased commercial real estate and consumer real estate loans and the company’s participation in PPP, which had an average balance of $1.5 billion in the third quarter.

Summary of average securities - QTD Average		UMB Financial Corporation
(unaudited, dollars in thousands)
		Q3				Q2				Q3				CQ vs.				CQ vs.
		2020				2020				2019				LQ				PY
Securities available for sale:
U.S. Treasury		$	30,881			$	31,150			$	250,552			$	(269	)		$	(219,671	)
U.S. Agencies			242,504				403,290				93,440				(160,786	)			149,064
Mortgage-backed			4,829,586				4,284,374				3,987,463				545,212				842,123
State and political subdivisions			3,407,508				3,108,661				2,795,210				298,847				612,298
Corporates			58,866				98,089				155,656				(39,223	)			(96,790	)
Commercial Paper			3,478				2,040				—				1,438				3,478
Total securities available for sale		$	8,572,823			$	7,927,604			$	7,282,321			$	645,219			$	1,290,502
Securities held to maturity:
State and political subdivisions		$	1,085,297			$	1,100,843			$	1,105,397			$	(15,546	)		$	(20,100	)
Trading securities			32,894				37,816				44,571				(4,922	)			(11,677	)
Other securities			156,816				148,918				90,008				7,898				66,808
Total securities		$	9,847,830			$	9,215,181			$	8,522,297			$	632,649			$	1,325,533

• Average securities available for sale increased 8.1% on a linked-quarter basis and 17.7% compared to the third quarter of 2019.

Summary of average deposits - QTD Average						UMB Financial Corporation
(unaudited, dollars in thousands)
		Q3				Q2				Q3				CQ vs.				CQ vs.
		2020				2020				2019				LQ				PY
Deposits:
Noninterest-bearing demand		$	8,260,170			$	7,662,836			$	6,082,498			$	597,334			$	2,177,672
Interest-bearing demand and savings			15,125,267				14,160,722				12,214,570				964,545				2,910,697
Time deposits			741,750				957,007				1,011,862				(215,257	)			(270,112	)
Total deposits		$	24,127,187			$	22,780,565			$	19,308,930			$	1,346,622			$	4,818,257
Noninterest bearing deposits as % of total			34.24	%			33.64	%			31.50	%

• Average deposits increased 5.9% on a linked-quarter basis and 25.0% compared to the third quarter of 2019.
• Average noninterest-bearing demand deposits increased 7.8% on a linked-quarter basis to $8.3 billion.

Capital

Capital information		UMB Financial Corporation
(unaudited, dollars in thousands, except per share data)
		September 30, 2020				June 30, 2020				September 30, 2019
Total equity		$	2,854,180			$	2,777,395			$	2,563,866
Book value per common share			59.43				57.84				52.23
Tangible book value per common share			55.19				53.57				48.19
Regulatory capital:
Common equity Tier 1 capital		$	2,402,785			$	2,335,625			$	2,284,417
Tier 1 capital			2,402,785				2,335,625				2,284,417
Total capital			2,854,598				2,580,849				2,464,698
Regulatory capital ratios:
Common equity Tier 1 capital ratio			11.93	%			11.92	%			12.53	%
Tier 1 risk-based capital ratio			11.93				11.92				12.53
Total risk-based capital ratio			14.17				13.17				13.51
Tier 1 leverage ratio			8.19				8.35				9.62

• At September 30, 2020, the regulatory capital ratios presented in the foregoing table exceeded all “well-capitalized” regulatory thresholds.
• Total risk-based capital was favorably impacted by the $200 million subordinated note issuance during the third quarter. Additionally, the company contributed $100 million of capital to UMB Bank, n.a. during the third quarter.

Asset Quality

Credit quality		UMB Financial Corporation
(unaudited, dollars in thousands)
		Q3				Q2				Q1				Q4				Q3
		2020				2020				2020				2019				2019
Net charge-offs - Total loans		$	5,111			$	5,541			$	7,672			$	7,618			$	2,186
Net loan charge-offs as a % of total average loans			0.13	%			0.15	%			0.23	%			0.23	%			0.07	%
Loans over 90 days past due		$	1,372			$	4,588			$	2,211			$	2,069			$	2,466
Loans over 90 days past due as a % of total loans			0.01	%			0.03	%			0.02	%			0.02	%			0.02	%
Nonaccrual and restructured loans		$	93,695			$	82,245			$	97,029			$	56,347			$	71,838
Nonaccrual and restructured loans as a % of total loans			0.59	%			0.54	%			0.70	%			0.42	%			0.55	%
Provision for credit losses		$	16,000			$	21,500			$	88,000			$	2,000			$	7,500

• Provision for credit losses for the third quarter totaled $16.0 million, a decrease of $5.5 million from the linked quarter, and an increase of $8.5 million from the third quarter of 2019.
• Net charge-offs totaled $5.1 million, or 0.13%, of average loans, compared to $5.5 million, or 0.15%, of average loans in the linked quarter.

Dividend Declaration

At the company’s quarterly board meeting, the Board of Directors declared a $0.32 per share quarterly cash dividend, an increase of 3.2% or $0.01 per share. The cash dividend will be payable on January 4, 2021, to shareholders of record at the close of business on December 10, 2020.

Conference Call

The company plans to host a conference call to discuss its third quarter 2020 earnings results on Wednesday, October 28, 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 3Q 2020 Conference Call

A replay of the conference call may be heard through November 11, 2020 by calling (toll-free) 877-344-7529 or (international) 412-317-0088. The replay access code required for playback is 10148456. 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), tangible shareholders’ equity, and tangible book value per share, all of which are non-GAAP financial measures. This information supplements the results that are reported according to generally accepted accounting principles in the United States (GAAP) and should not be viewed in isolation from, or as a substitute for, GAAP results. The differences between the non-GAAP financial measures – net operating income, operating EPS, operating ROE, operating ROA, operating noninterest expense, operating efficiency ratio, PTPP, PTPP EPS, tangible shareholders’ equity, and tangible book value per share – and the nearest comparable GAAP financial measures are reconciled later in this release. The company believes that these non-GAAP financial measures and the reconciliations may be useful to investors because they adjust for acquisition-, severance-, and COVID-19 related items that management does not believe reflect the company’s fundamental operating performance. COVID-19 related expense includes hazard pay for branch associates, computer hardware expense to support associates working remotely, and additional equipment, cleaning, and janitorial supplies to protect the well-being of our associates and customers while on the company’s premises.

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

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

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

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

Forward-Looking Statements:

This press release contains, and our other communications may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “outlook,” “forecast,” “target,” “trend,” “plan,” “goal,” or other words of comparable meaning or future-tense or conditional verbs such as “may,” “will,” “should,” “would,” or “could.” Forward-looking statements convey our expectations, intentions, or forecasts about future events, circumstances, results, or aspirations. All forward-looking statements are subject to assumptions, risks, and uncertainties, which may change over time and many of which are beyond our control. You should not rely on any forward-looking statement as a prediction or guarantee about the future. Our actual future objectives, strategies, plans, prospects, performance, condition, or results may differ materially from those set forth in any forward-looking statement. Some of the factors that may cause actual results or other future events, circumstances, or aspirations to differ from those in forward-looking statements are described in our Annual Report on Form 10-K for the year ended December 31, 2019, our subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K, or other applicable documents that are filed or furnished with the U.S. Securities and Exchange Commission (SEC). In addition to such factors that have been disclosed previously, the COVID-19 pandemic (the pandemic) may also cause actual results or other future events, circumstances, or aspirations to differ from our forward-looking statements. The pandemic has created a global public-health crisis that has resulted in widespread volatility and deteriorations in household, business, economic, and market conditions. It is currently adversely affecting the company and its customers, counterparties, employees, and third-party service providers, and the continued adverse impacts on our business, financial position, results of operations, and prospects could be significant. We are not able to accurately predict the extent of the impact of the pandemic on our capital, liquidity, and other financial positions and on our business, results of operations, and prospects at this time, and we believe it will depend on a number of evolving factors, including: (i) the duration, extent and severity of the pandemic; (ii) the response of governmental and non-governmental authorities to the pandemic, which is rapidly changing and not always coordinated or consistent across jurisdictions; (iii) the effect of the pandemic on our customers, counterparties, employees and third-party service providers, which may vary widely, and which is generally expected to increase our credit, counterparty, operational, and other risks; and (iv) the effect of the pandemic on economies and markets, which in turn could adversely affect, among other things, the origination of new loans and the performance of our existing loans. The pandemic is also expected to have a significant impact on our CECL calculation and related provision under a new accounting standard that we were required to adopt in January 2020. The CECL calculation includes periodic estimates of the net amount expected to be collected over the contractual term of certain financial assets, and requires us to take into account, among other things, economic conditions forecasted over the life of the financial asset, including the current and anticipated effects of the pandemic. Any forward-looking statement should be evaluated in light of these considerations. Any forward-looking statement made by us or on our behalf speaks only as of the date that it was made. We do not undertake to update any forward-looking statement to reflect the impact of events, circumstances, or results that arise after the date that the statement was made, except to the extent required by applicable securities laws. You, however, should consult further disclosures (including disclosures of a forward-looking nature) that we may make in any subsequent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K, or other applicable document that is filed or furnished with the SEC.

About UMB:

UMB Financial Corporation (Nasdaq: UMBF) is a financial services company headquartered in Kansas City, Missouri. UMB offers commercial banking, which includes comprehensive deposit, lending and investment services, personal banking, which includes wealth management and financial planning services, and institutional banking, which includes asset servicing, corporate trust solutions, investment banking, and healthcare services. UMB operates branches throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas, and serves business and institutional clients nationwide. For more information, visit UMB.com, UMB Blog, UMB Facebook and UMB LinkedIn, or follow us on Twitter at @UMBBank. For information about UMB’s operations, approach and relief measures during the COVID-19 pandemic, please visit umb.com/COVID-19.

Consolidated Balance Sheets		UMB Financial Corporation
(unaudited, dollars in thousands)
		September 30,
		2020				2019
ASSETS
Loans		$	15,950,177			$	13,043,840
Allowance for credit losses on loans			(211,688	)			(107,406	)
Net loans			15,738,489				12,936,434
Loans held for sale			10,978				11,025
Securities:
Available for sale			8,719,246				7,411,908
Held to maturity, net of allowance for credit losses			1,067,501				1,102,005
Trading securities			49,154				86,074
Other securities			159,994				88,176
Total securities			9,995,895				8,688,163
Federal funds sold and resell agreements			1,101,313				463,392
Interest-bearing due from banks			1,613,675				158,339
Cash and due from banks			440,659				658,198
Premises and equipment, net			295,090				290,273
Accrued income			132,574				119,024
Goodwill			180,867				180,867
Other intangibles, net			22,657				17,190
Other assets			718,775				620,187
Total assets		$	30,250,972			$	24,143,092
LIABILITIES
Deposits:
Noninterest-bearing demand		$	8,752,882			$	6,652,887
Interest-bearing demand and savings			15,298,562				11,689,871
Time deposits under $250,000			491,378				618,301
Time deposits of $250,000 or more			195,085				348,286
Total deposits			24,737,907				19,309,345
Federal funds purchased and repurchase agreements			1,929,004				1,791,000
Short-term debt			15,000				—
Long-term debt			269,044				70,091
Accrued expenses and taxes			255,720				223,210
Other liabilities			190,117				185,580
Total liabilities			27,396,792				21,579,226
SHAREHOLDERS' EQUITY
Common stock			55,057				55,057
Capital surplus			1,085,375				1,069,510
Retained earnings			1,750,389				1,621,198
Accumulated other comprehensive income, net			299,103				96,021
Treasury stock			(335,744	)			(277,920	)
Total shareholders' equity			2,854,180				2,563,866
Total liabilities and shareholders' equity		$	30,250,972			$	24,143,092

Consolidated Statements of Income		UMB Financial Corporation
(unaudited, dollars in thousands except share and per share data)
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2020				2019				2020				2019
INTEREST INCOME
Loans		$	142,441			$	162,243			$	433,471			$	481,342
Securities:
Taxable interest			26,393				26,966				79,475				79,057
Tax-exempt interest			25,377				23,202				74,393				65,887
Total securities income			51,770				50,168				153,868				144,944
Federal funds and resell agreements			2,248				2,817				9,273				8,968
Interest-bearing due from banks			299				3,450				3,360				10,117
Trading securities			259				425				1,225				1,701
Total interest income			197,017				219,103				601,197				647,072
INTEREST EXPENSE
Deposits			9,284				41,144				50,259				118,494
Federal funds and repurchase agreements			1,730				8,313				10,061				25,924
Other			1,619				1,386				4,323				4,112
Total interest expense			12,633				50,843				64,643				148,530
Net interest income			184,384				168,260				536,554				498,542
Provision for credit losses			16,000				7,500				125,500				30,850
Net interest income after provision for credit losses			168,384				160,760				411,054				467,692
NONINTEREST INCOME
Trust and securities processing			50,552				45,218				143,873				130,078
Trading and investment banking			8,678				5,712				23,252				16,746
Service charges on deposit accounts			19,650				20,620				63,805				62,648
Insurance fees and commissions			259				320				1,051				1,123
Brokerage fees			4,819				8,102				20,432				22,422
Bankcard fees			15,295				16,895				44,756				50,401
Gains on sales of securities available for sale, net			311				3,057				5,544				2,463
Other			13,432				3,711				29,163				30,534
Total noninterest income			112,996				103,635				331,876				316,415
NONINTEREST EXPENSE
Salaries and employee benefits			124,194				110,153				366,192				340,639
Occupancy, net			12,027				12,240				35,618				35,522
Equipment			20,968				19,775				63,711				58,283
Supplies and services			3,442				4,261				11,412				12,419
Marketing and business development			3,038				5,655				10,962				17,872
Processing fees			12,812				13,619				39,805				38,847
Legal and consulting			7,244				8,374				19,574				21,503
Bankcard			4,834				4,643				14,243				13,689
Amortization of other intangible assets			1,524				1,335				4,916				3,913
Regulatory fees			2,309				2,749				7,886				8,549
Other			5,603				8,593				20,828				24,174
Total noninterest expense			197,995				191,397				595,147				575,410
Income before income taxes			83,385				72,998				147,783				208,697
Income tax expense			10,293				10,616				17,601				31,612
NET INCOME		$	73,092			$	62,382			$	130,182			$	177,085
PER SHARE DATA
Net income – basic		$	1.52			$	1.28			$	2.70			$	3.63
Net income – diluted			1.52				1.27				2.69				3.61
Dividends			0.31				0.30				0.93				0.90
Weighted average shares outstanding – basic			47,947,056				48,797,182				48,208,447				48,762,667
Weighted average shares outstanding – diluted			48,068,438				49,096,196				48,352,145				49,052,329

Consolidated Statements of Comprehensive Income		UMB Financial Corporation
(unaudited, dollars in thousands)
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2020				2019				2020				2019
Net income		$	73,092			$	62,382			$	130,182			$	177,085
Other comprehensive income, before tax:
Unrealized gains and losses on debt securities:
Change in unrealized holding gains and losses, net			20,975				54,182				269,976				268,100
Less: Reclassification adjustment for gains included in net income			(311	)			(3,057	)			(5,544	)			(2,463	)
Change in unrealized gains and losses on debt securities			20,664				51,125				264,432				265,637
Unrealized gains and losses on derivative hedges:
Change in unrealized gains and losses on derivative hedges, net			(122	)			(7,469	)			19,015				(12,618	)
Less: Reclassification adjustment for (gains) losses included in net income			(1,123	)			280				(869	)			295
Change in unrealized gains and losses on derivative hedges			(1,245	)			(7,189	)			18,146				(12,323	)
Other comprehensive income, before tax			19,419				43,936				282,578				253,314
Income tax expense			(4,578	)			(10,532	)			(66,655	)			(61,511	)
Other comprehensive income			14,841				33,404				215,923				191,803
Comprehensive income		$	87,933			$	95,786			$	346,105			$	368,888

Consolidated Statements of Shareholders' Equity						UMB Financial Corporation
(unaudited, dollars in thousands except per share data)
		Common Stock				Capital Surplus				Retained Earnings				Accumulated Other Comprehensive (Loss) Income				Treasury Stock				Total
Balance - January 1, 2019		$	55,057			$	1,054,601			$	1,488,421			$	(95,782	)		$	(273,827	)		$	2,228,470
Total comprehensive income			—				—				177,085				191,803				—				368,888
Dividends ($0.90 per share)			—				—				(44,308	)			—				—				(44,308	)
Purchase of treasury stock			—				—				—				—				(4,335	)			(4,335	)
Forfeitures of equity awards, net of issuances			—				3,113				—				—				(2,497	)			616
Recognition of equity-based compensation			—				10,918				—				—				—				10,918
Sale of treasury stock			—				265				—				—				380				645
Exercise of stock options			—				613				—				—				2,359				2,972
Balance - September 30, 2019		$	55,057			$	1,069,510			$	1,621,198			$	96,021			$	(277,920	)		$	2,563,866
Balance - January 1, 2020		$	55,057			$	1,073,764			$	1,672,438			$	83,180			$	(277,999	)		$	2,606,440
Total comprehensive income			—				—				130,182				215,923				—				346,105
Dividends ($0.93 per share)			—				—				(45,192	)			—				—				(45,192	)
Purchase of treasury stock			—				615				—				—				(60,180	)			(59,565	)
Forfeitures of equity awards, net of issuances			—				565				—				—				43				608
Recognition of equity-based compensation			—				9,834				—				—				—				9,834
Sale of treasury stock			—				158				—				—				311				469
Exercise of stock options			—				439				—				—				2,081				2,520
Cumulative effect adjustment			—				—				(7,039	)			—				—				(7,039	)
Balance - September 30, 2020		$	55,057			$	1,085,375			$	1,750,389			$	299,103			$	(335,744	)		$	2,854,180

Average Balances / Yields and Rates		UMB Financial Corporation
(tax - equivalent basis)
(unaudited, dollars in thousands)
		Three Months Ended September 30,
		2020								2019
		Average				Average				Average				Average
		Balance				Yield/Rate				Balance				Yield/Rate
Assets
Loans, net of unearned interest		$	15,731,716				3.60	%		$	12,890,878				4.99	%
Securities:
Taxable			5,478,397				1.92				4,636,243				2.31
Tax-exempt			4,336,539				2.95				3,841,483				3.03
Total securities			9,814,936				2.37				8,477,726				2.63
Federal funds and resell agreements			1,177,590				0.76				394,587				2.83
Interest bearing due from banks			1,087,838				0.11				582,116				2.35
Trading securities			32,894				3.54				44,571				4.32
Total earning assets			27,844,974				2.91				22,389,878				3.99
Allowance for credit losses			(211,221	)							(104,795	)
Other assets			1,846,919								1,652,033
Total assets		$	29,480,672							$	23,937,116
Liabilities and Shareholders' Equity
Interest-bearing deposits		$	15,867,017				0.23	%		$	13,226,432				1.23	%
Federal funds and repurchase agreements			1,964,161				0.35				1,683,072				1.96
Borrowed funds			115,943				5.56				69,927				7.86
Total interest-bearing liabilities			17,947,121				0.28				14,979,431				1.35
Noninterest-bearing demand deposits			8,260,170								6,082,498
Other liabilities			431,528								321,909
Shareholders' equity			2,841,853								2,553,278
Total liabilities and shareholders' equity		$	29,480,672							$	23,937,116
Net interest spread							2.63	%							2.64	%
Net interest margin							2.73								3.09

Average Balances / Yields and Rates		UMB Financial Corporation
(tax - equivalent basis)
(unaudited, dollars in thousands)
		Nine Months Ended September 30,
		2020								2019
		Average				Average				Average				Average
		Balance				Yield/Rate				Balance				Yield/Rate
Assets
Loans, net of unearned interest		$	14,818,893				3.91	%		$	12,607,157				5.10	%
Securities:
Taxable			5,082,153				2.09				4,481,242				2.36
Tax-exempt			4,169,829				3.02				3,730,744				2.98
Total securities			9,251,982				2.51				8,211,986				2.64
Federal funds and resell agreements			1,070,071				1.16				414,560				2.89
Interest bearing due from banks			1,140,965				0.39				563,810				2.40
Trading securities			39,580				4.55				50,841				5.05
Total earning assets			26,321,491				3.15				21,848,354				4.07
Allowance for credit losses			(173,254	)							(106,565	)
Other assets			1,742,652								1,607,087
Total assets		$	27,890,889							$	23,348,876
Liabilities and Shareholders' Equity
Interest-bearing deposits		$	15,107,688				0.44	%		$	12,897,172				1.23	%
Federal funds and repurchase agreements			2,043,942				0.66				1,655,934				2.09
Borrowed funds			90,849				6.36				69,669				7.89
Total interest-bearing liabilities			17,242,479				0.50				14,622,775				1.36
Noninterest-bearing demand deposits			7,475,746								6,040,019
Other liabilities			411,547								283,863
Shareholders' equity			2,761,117								2,402,219
Total liabilities and shareholders' equity		$	27,890,889							$	23,348,876
Net interest spread							2.65	%							2.71	%
Net interest margin							2.82								3.16

Business Segment Information		UMB Financial Corporation
(unaudited, dollars in thousands)
		Three Months Ended September 30, 2020
		Commercial Banking				Institutional Banking				Personal Banking				Total
Net interest income		$	122,362			$	23,375			$	38,647			$	184,384
Provision for credit losses			14,032				193				1,775				16,000
Noninterest income			22,464				62,688				27,844				112,996
Noninterest expense			65,175				69,667				63,153				197,995
Income before taxes			65,619				16,203				1,563				83,385
Income tax expense			8,100				2,000				193				10,293
Net income		$	57,519			$	14,203			$	1,370			$	73,092
		Three Months Ended September 30, 2019
		Commercial Banking				Institutional Banking				Personal Banking				Total
Net interest income		$	104,360			$	30,604			$	33,296			$	168,260
Provision for credit losses			5,966				256				1,278				7,500
Noninterest income			18,874				58,643				26,118				103,635
Noninterest expense			66,447				66,622				58,328				191,397
Income (loss) before taxes			50,821				22,369				(192	)			72,998
Income tax expense (benefit)			7,390				3,254				(28	)			10,616
Net income (loss)		$	43,431			$	19,115			$	(164	)		$	62,382
		Nine Months Ended September 30, 2020
		Commercial Banking				Institutional Banking				Personal Banking				Total
Net interest income		$	342,406			$	84,534			$	109,614			$	536,554
Provision for credit losses			115,533				766				9,201				125,500
Noninterest income			57,782				191,128				82,966				331,876
Noninterest expense			186,341				215,073				193,733				595,147
Income (loss) before taxes			98,314				59,823				(10,354	)			147,783
Income tax expense (benefit)			11,709				7,125				(1,233	)			17,601
Net income (loss)		$	86,605			$	52,698			$	(9,121	)		$	130,182
		Nine Months Ended September 30, 2019
		Commercial Banking				Institutional Banking				Personal Banking				Total
Net interest income		$	306,752			$	92,857			$	98,933			$	498,542
Provision for credit losses			25,602				723				4,525				30,850
Noninterest income			62,442				170,118				83,855				316,415
Noninterest expense			201,777				196,871				176,762				575,410
Income before taxes			141,815				65,381				1,501				208,697
Income tax expense			21,482				9,903				227				31,612
Net income		$	120,333			$	55,478			$	1,274			$	177,085

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. Prior to 2020, 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 September 30, 2020.

Non-GAAP Financial Measures

Net operating income Non-GAAP reconciliations:		UMB Financial Corporation
(unaudited, dollars in thousands except per share data)
		Three Months Ended September 30,								Nine Months Ended September 30,
		2020				2019				2020				2019
Net income (GAAP)		$	73,092			$	62,382			$	130,182			$	177,085
Adjustments:
Acquisition expense			78				71				324				168
Severance expense			2,859				113				4,648				980
COVID-19 related expense			1,358				—				5,575				—
Tax-impact of adjustments (i)			(953	)			(41	)			(2,341	)			(255	)
Total Non-GAAP adjustments (net of tax)			3,342				143				8,206				893
Net operating income (Non-GAAP)		$	76,434			$	62,525			$	138,388			$	177,978
Earnings per share - diluted (GAAP)		$	1.52			$	1.27			$	2.69			$	3.61
Acquisition expense			—				—				0.01				—
Severance expense			0.06				—				0.10				0.02
COVID-19 related expense			0.03				—				0.11				—
Tax-impact of adjustments (i)			(0.02	)			—				(0.05	)			—
Operating earnings per share - diluted (Non-GAAP)		$	1.59			$	1.27			$	2.86			$	3.63
GAAP
Return on average assets			0.99	%			1.03	%			0.62	%			1.01	%
Return on average equity			10.23				9.69				6.30				9.86
Non-GAAP
Operating return on average assets			1.03	%			1.04	%			0.66	%			1.02	%
Operating return on average equity			10.70				9.72				6.69				9.91

(i) Calculated using the company’s marginal tax rate of 22.2%.

Operating noninterest expense and operating efficiency ratio Non-GAAP reconciliations:		UMB Financial Corporation
(unaudited, dollars in thousands)
		Three Months Ended September 30,								Nine Months Ended September 30,
		2020				2019				2020				2019
Noninterest expense		$	197,995			$	191,397			$	595,147			$	575,410
Adjustments to arrive at operating noninterest expense (pre-tax):
Acquisition expense			78				71				324				168
Severance expense			2,859				113				4,648				980
COVID-19 related expense			1,358				—				5,575				—
Total Non-GAAP adjustments (pre-tax)			4,295				184				10,547				1,148
Operating noninterest expense (Non-GAAP)		$	193,700			$	191,213			$	584,600			$	574,262
Noninterest expense		$	197,995			$	191,397			$	595,147			$	575,410
Less: Amortization of other intangibles			1,524				1,335				4,916				3,913
Noninterest expense, net of amortization of other intangibles (Non-GAAP) (numerator A)		$	196,471			$	190,062			$	590,231			$	571,497
Operating noninterest expense		$	193,700			$	191,213			$	584,600			$	574,262
Less: Amortization of other intangibles			1,524				1,335				4,916				3,913
Operating expense, net of amortization of other intangibles (Non-GAAP) (numerator B)		$	192,176			$	189,878			$	579,684			$	570,349
Net interest income		$	184,384			$	168,260			$	536,554			$	498,542
Noninterest income			112,996				103,635				331,876				316,415
Less: Gains on sales of securities available for sale, net			311				3,057				5,544				2,463
Total Non-GAAP Revenue (denominator A)		$	297,069			$	268,838			$	862,886			$	812,494
Efficiency ratio (numerator A/denominator A)			66.14	%			70.70	%			68.40	%			70.34	%
Operating efficiency ratio (Non-GAAP) (numerator B/denominator A)			64.69				70.63				67.18				70.20

Pre-tax, pre-provision income non-GAAP reconciliation:		UMB Financial Corporation
(unaudited, dollars in thousands except per share data)
		Three Months Ended September 30,								Nine Months Ended September 30,
		2020				2019				2020				2019
Net income before taxes (GAAP)		$	83,385			$	72,998			$	147,783			$	208,697
Adjustments:
Provision for credit losses			16,000				7,500				125,500				30,850
Pre-tax, pre-provision income (Non-GAAP)		$	99,385			$	80,498			$	273,283			$	239,547
Pre-tax earnings per share - diluted (GAAP)		$	1.74			$	1.49			$	3.06			$	4.25
Provision for credit losses			0.33				0.15				2.59				0.63
Pre-tax, pre-provision earnings per share - diluted (Non-GAAP)		$	2.07			$	1.64			$	5.65			$	4.88

Tangible book value non-GAAP reconciliation:		UMB Financial Corporation
(unaudited, dollars in thousands except share and per share data)
		As of
		September 30, 2020				September 30, 2019
Total shareholders' equity (GAAP)		$	2,854,180			$	2,563,866
Less: Intangible assets
Goodwill			180,867				180,867
Other intangibles, net			22,657				17,190
Total intangibles, net			203,524				198,057
Total tangible shareholders' equity (Non-GAAP)		$	2,650,656			$	2,365,809
Total shares outstanding			48,028,679				49,088,331
Ratio of total shareholders' equity (book value) per share		$	59.43			$	52.23
Ratio of total tangible shareholders' equity (tangible book value) per share (Non-GAAP)			55.19				48.19

 

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