UMB Financial Corporation Reports Fourth Quarter Net Income of $120.0 Million and Net Operating Income(i) of $122.6 Million. Full-Year 2024 Net Income of $441.2 Million; Net Operating Income(i) of $461.7 Million.

Fourth Quarter 2024 Financial Highlights

• GAAP net income of $120.0 million, or $2.44 per diluted share.
• Net operating income⁽ⁱ⁾ of $122.6 million, or $2.49 per diluted share.
• Average loans increased 14.8% on a linked-quarter, annualized basis, to $25.3 billion.
• Average loans increased $2.2 billion, or 9.4%, as compared to the fourth quarter of 2023.
• Average deposits increased 30.9% on a linked-quarter, annualized basis, to $38.0 billion.
• Credit quality remained strong, with net charge-offs of just 0.10% of average loans for the year ended December 31, 2024.

UMB Financial Corporation (NASDAQ:UMBF), a financial services company, announced net income for the fourth quarter of 2024 of $120.0 million, or $2.44 per diluted share, compared to $109.6 million, or $2.23 per diluted share, in the third quarter (linked quarter) and $70.9 million, or $1.45 per diluted share, in the fourth quarter of 2023.

Net operating income, a non-GAAP financial measure reconciled later in this release to net income, the nearest comparable GAAP measure, was $122.6 million, or $2.49 per diluted share, for the fourth quarter of 2024, compared to $110.4 million, or $2.25 per diluted share, for the linked quarter and $112.0 million, or $2.29 per diluted share, for the fourth quarter of 2023. Operating pre-tax, pre-provision income (operating PTPP), a non-GAAP measure reconciled later in this release to the components of net income before taxes, the nearest comparable GAAP measure, was $166.9 million, or $3.39 per diluted share, for the fourth quarter of 2024, compared to $154.6 million, or $3.15 per diluted share, for the linked quarter, and $134.9 million, or $2.76 per diluted share, for the fourth quarter of 2023. These operating PTPP results represent increases of 8.0% on a linked-quarter basis and 23.7% compared to the fourth quarter of 2023.

"Our fourth quarter financial results punctuated a successful year for UMB Financial, driven by strong operating fundamentals that are the core of our investment thesis for shareholders," said Mariner Kemper, UMB Financial Corporation chairman and chief executive officer. "Our 2024 results reflect strong growth on both sides of the balance sheet, continued momentum and new client acquisitions in many of our fee income businesses, excellent credit quality metrics and disciplined expense management. We set new company records with annual net income of $441.2 million, net operating income of $461.7 million, net interest income that surpassed $1.0 billion, and noninterest income of $628.1 million.

"For the fourth quarter, net interest income increased 8.7% sequentially driven by both an 11-basis-point increase in net interest margin and a 15.6% linked-quarter annualized increase in average earning assets. Additionally, the strength of our fee income businesses propelled a 4.1% increase in noninterest income compared to the third quarter of 2024. Average loan balances increased 14.8% on a linked-quarter annualized basis, driven by top line loan production of $1.6 billion, another record for us.

"With the previously announced receipt of necessary approvals, we are excited to close our merger with Heartland Financial, slated for January 31, 2025. Teams at both companies have been diligently working to prepare for the closing and integration of our two franchises."

(i) A non-GAAP financial measure reconciled later in this release to net income, the nearest comparable GAAP measure.

Fourth Quarter 2024 earnings discussion

Net interest income

• Fourth quarter 2024 net interest income totaled $269.0 million, an increase of $21.6 million, or 8.7%, from the linked quarter, driven primarily by balance sheet growth, favorable reinvestment yields, as well as decreased interest expense due to the mix shift in the funding composition and repricing of deposits following the reduction in short-term interest rates. These benefits were partially offset by repricing of variable rate loans in response to reductions in the Secured Overnight Financing Rate (SOFR) and Prime rates.
• Average earning assets increased $1.6 billion, or 3.9%, from the linked quarter, largely driven by increases of $902.6 million in average loans, $585.6 million in average securities, and $101.7 million in federal funds sold and resell agreements.
• Average interest-bearing liabilities increased $487.1 million, or 1.6%, from the linked quarter, primarily driven by an increase of $1.6 billion in interest-bearing deposits, partially offset by a decrease of $1.1 billion in borrowed funds driven by the repayment of borrowings under the Bank Term Funding Program (BTFP) and Federal Home Loan Bank (FHLB) advances. Average noninterest-bearing demand deposits increased $1.1 billion, or 12.0%, as compared to the linked quarter.
• Net interest margin for the fourth quarter was 2.57%, an increase of 11 basis points from the linked quarter, driven by the decreased cost of interest-bearing liabilities due to lower short-term interest rates and a favorable mix shift in the funding composition, partially offset by decreased loan yields and earning asset mix changes. The cost of interest-bearing liabilities decreased 39 basis points sequentially to 3.79%. Total cost of funds decreased 36 basis points from the linked quarter to 2.80%. Average loan yields decreased 33 basis points while earning asset yields decreased 23 basis points from the linked quarter.
• On a year-over-year basis, net interest income increased $38.5 million, or 16.7%, driven by a $4.3 billion, or 11.3%, increase in average earning assets, partially offset by higher interest costs due to higher short-term interest rates and unfavorable mix shift in the composition of liabilities.
• Compared to the fourth quarter of 2023, average earning assets increased $4.3 billion, or 11.3%, largely driven by the increase in average loans noted above, an increase of $1.2 billion in interest-bearing due from banks, and an increase of $743.3 million in average securities.
• Average deposits increased 16.3% compared to the fourth quarter of 2023. Average interest-bearing deposits increased 21.4% and noninterest-bearing demand deposit balances increased 5.1% compared to the fourth quarter of 2023. Average demand deposit balances comprised 28.0% of total deposits, compared to 26.9% in the linked quarter and 31.0% in the fourth quarter of 2023.
• Average borrowed funds decreased $1.1 billion as compared to the linked quarter and $1.9 billion as compared to the fourth quarter of 2023, driven by the repayment of borrowings under the BTFP and FHLB advances.

Noninterest income

• Fourth quarter 2024 noninterest income increased $6.5 million, or 4.1%, on a linked-quarter basis, largely due to:
  • A gain of $4.1 million related to the previously announced sale of UMB Distribution Services during the fourth quarter of 2024 recorded in other income.
  • An increase of $2.9 million in brokerage income primarily driven by higher 12b-1 fees and money market income.
  • An increase of $2.6 million in trust and securities processing driven by strong activity in the corporate trust, private wealth, funds services and investor solutions lines of business.
  • An increase of $1.7 million in derivative income, recorded in other income.
• These increases were partially offset by the following decreases:
  • A decrease of $2.0 million in investment securities gains, primarily driven by decreased valuations in the company's non-marketable securities.
  • A decrease of $2.0 million in company-owned life insurance income, recorded in other income. The decrease in company-owned life insurance was offset by a proportionate decrease in deferred compensation expense as noted below.
• Compared to the prior year, noninterest income in the fourth quarter of 2024 increased $25.0 million, or 17.8%, primarily driven by:
  • An increase of $5.2 million in brokerage income primarily driven by higher 12b-1 fees and money market income.
  • Increases of $4.8 million in fund services income, $3.5 million in corporate trust income, and $2.0 million in trust income, all recorded in trust and securities processing.
  • A gain of $4.1 million related to the sale of UMB Distribution Services and a gain of $1.0 million on the sale of art during the fourth quarter of 2024, both recorded in other income.
  • An increase of $2.4 million in bankcard income, primarily due to increased card purchase volume and related interchange income.
  • An increase of $1.2 million in derivative income, recorded in other income.

Noninterest expense

• GAAP noninterest expense for the fourth quarter of 2024 was $270.4 million, an increase of $17.9 million, or 7.1%, from the linked quarter and a decrease of $19.6 million, or 6.8% from the fourth quarter of 2023. Operating noninterest expense, a non-GAAP financial measure reconciled later in this release to noninterest expense, the nearest comparable GAAP measure, was $267.3 million for the fourth quarter of 2024, an increase of $15.8 million, or 6.3%, from the linked quarter and an increase of $31.4 million, or 13.3%, from the fourth quarter of 2023.
• The linked-quarter increase in GAAP noninterest expense was driven by:
  • An increase of $15.4 million in salaries and bonus expense, recorded in salaries and employee benefits, primarily driven by increased bonuses due to improved company performance.
  • An increase of $4.5 million in operational losses, recorded in other expense.
  • An increase of $2.7 million in legal and consulting expense driven by expense related to the announced acquisition of Heartland Financial USA, Inc. and an increase of $2.2 million in marketing and business development due to the timing of multiple advertising campaigns and increased travel and entertainment expense.
  • These increases were partially offset by the following decreases:
    • A decrease of $3.1 million in bankcard expense driven by lower administrative expense.
    • A decrease of $1.8 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.
    • A decrease of $1.8 million in supplies driven by purchases of computers during the third quarter of 2024.
• The year-over-year decrease in GAAP noninterest expense was driven by:
  • A decrease of $53.9 million in regulatory fees expense driven by the $52.8 million expense recorded in the fourth quarter of 2023 related to the industry-wide FDIC special assessment levied as a result of the 2023 bank failures.
  • A decrease of $2.4 million in supplies driven by purchases of computers during the fourth quarter of 2023.
  • These decreases were partially offset by the following increases:
    • An increase of $26.8 million in salaries and employee benefits, primarily driven by increased bonuses due to improved company performance.
    • An increase of $3.8 million in legal and consulting driven by expense related to the announced acquisition of Heartland Financial USA, Inc.
    • Increases of $3.3 million in processing fees expense due to increased software subscription costs and $2.3 million in marketing and business development due to the timing of multiple campaigns and increased travel and entertainment expense.

Full Year 2024 earnings discussion

Net income for the year ended December 31, 2024, was $441.2 million, or $8.99 per diluted share, compared to $350.0 million, or $7.18 per diluted share in 2023. The results for 2024 include $6.6 million in pre-tax expense for the FDIC special assessment, compared to $52.8 million in pre-tax expense in 2023. Net operating income, a non-GAAP financial measure reconciled to net income, the nearest comparable GAAP measure, later in this release, was $461.7 million, or $9.41 per diluted share, compared to $397.1 million, or $8.14 per diluted share in 2023. These results represent an increase of $64.6 million, or 16.3% as compared to 2023. Operating PTPP, a non-GAAP financial measure reconciled later in this release to the components of net income before taxes, the nearest comparable GAAP measure, was $625.8 million, or $12.75 per diluted share, compared to $524.8 million, or $10.76 per diluted share in 2023. These results represent an increase of 19.2% as compared to 2023.

• Net interest income increased $80.8 million, or 8.8% year-over-year due to a $3.3 billion, or 8.9%, increase in average earning assets, coupled with the impacts from increased short-term and long-term interest rates in 2024 as compared to 2023. The increase in earning assets was driven by an increase of $1.9 billion, or 8.4%, in average loans, and an increase of $1.4 billion, or 70.2%, in average interest-bearing due from banks as compared to 2023. Average interest-bearing liabilities increased $3.4 billion, or 13.3%, while noninterest-bearing demand deposits decreased $563.1 million, or 5.3%, as expected in a higher interest rate environment. The yield on earning assets increased 41 basis points, while the cost of interest-bearing liabilities increased 44 basis points. Net interest margin for 2024 was 2.51%, compared to 2.52% in 2023.
• Full-year noninterest income increased $86.3 million, or 15.9%, due to:
  • Increases of $20.5 million in fund services income, $7.7 million in corporate trust income, and $5.1 million in trust income, all recorded in trust and securities processing.
  • An increase of $14.1 million in other income, primarily driven by gains on the sale of UMB Distribution Services, art, and land, as well as the recognition of $4.0 million from a legal settlement, all recorded during 2024.
  • An increase of $13.9 million in investment securities gains, primarily driven by increased valuations in the company's non-marketable securities in 2024, coupled with the $4.9 million impairment loss on an available-for-sale subordinated debt security recorded in the prior year.
  • Increases of $13.1 million in bankcard income due to higher interchange revenue, $7.4 million in brokerage income, due to higher 12b-1 fees and money market income, and $4.6 million in investment banking due to increased trade volume.
• Full-year GAAP noninterest expense increased $27.5 million, or 2.8% due to:
  • An increase of $40.5 million in salaries and employee benefits, driven by increases of $36.4 million in salaries and bonus expense and $4.1 million in employee benefits expense.
  • An increase of $16.2 million in legal and consulting expense driven by expense related to the announced acquisition of Heartland Financial USA, Inc.
  • Increases of $14.8 million in processing fees, driven by increased software subscription costs, and $11.3 million in bankcard expense driven by higher administrative expense.
  • These increases were partially offset by the following decreases:
    • A decrease of $45.1 million in regulatory fees driven by the reduced FDIC special assessment expense during 2024 as compared to 2023. The results for 2024 and 2023 include expense of $6.6 million and $52.8 million, respectively, for the industry-wide FDIC special assessment.
    • Decreases of $5.3 million in equipment expense, driven by reduced software expense, and $3.7 million in other expense, primarily due to fewer operational losses and decreased charitable contributions in 2024 as compared to 2023.

Income taxes

• The company's effective tax rate was 18.5% for the year ended December 31, 2024, compared to 17.0% for the same period in 2023. The increase in the effective tax rate in 2024 is primarily attributable to a smaller portion of income being earned from tax-exempt municipal securities and higher non-deductible acquisition costs in 2024. These increases were partially offset by an increase in federal tax credits, net of related amortization.

Balance sheet

• Average total assets for the fourth quarter of 2024 were $45.0 billion compared to $43.3 billion for the linked quarter and $40.5 billion for the same period in 2023.

• Average loans for the fourth quarter of 2024 increased $902.6 million, or 3.7%, on a linked-quarter basis and $2.2 billion, or 9.4%, compared to the fourth quarter of 2023.

• Average total securities increased 4.6% on a linked-quarter basis and increased 5.9% compared to the fourth quarter of 2023.
• At December 31, 2024, the unrealized pre-tax net loss on the available-for-sale securities portfolio was $633.3 million, or 7.5% of the $8.4 billion amortized cost balance. At December 31, 2024, the unrealized pre-tax net loss on the securities designated as held to maturity was $630.0 million, or 11.7% of the $5.4 billion amortized cost value.

• Average deposits increased 7.7% on a linked-quarter basis and 16.3% compared to the fourth quarter of 2023.

Capital

• At December 31, 2024, 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 increased $1.0 million from the linked quarter and $19.0 million from the fourth quarter of 2023. These changes are driven largely by provision tied to the $651.5 million and $2.5 billion increases, respectively, in period-end loans from the prior periods, as well as general portfolio trends in the current period as compared to the prior periods.
• Net charge-offs for the fourth quarter totaled $8.9 million, or 0.14% of average loans, compared to $8.5 million, or 0.14% of average loans in the linked quarter, and $1.4 million, or 0.02% of average loans for the fourth quarter of 2023.

Dividend Declaration

At the company's quarterly board meeting, the Board of Directors declared a $0.40 per share quarterly cash dividend, payable on April 1, 2025, to stockholders of record of the company's common stock at the close of business on March 10, 2025.

Conference Call

The company will host a conference call to discuss its fourth quarter 2024 earnings results on Wednesday, January 29, 2025, at 8:30 a.m. (CT).

Interested parties may access the call by dialing (toll-free) 833-470-1428 or (international) 404-975-4839 and requesting to join the UMB Financial call with access code 099512. The live call may also be accessed by visiting investorrelations.umb.com or by using the following link:

UMB Financial 4Q 2024 Conference Call

A replay of the conference call may be heard through February 12, 2025, by calling (toll-free) 866-813-9403 or (international) 929-458-6194. The replay access code required for playback is 612758. 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, operating pre-tax, pre-provision income (operating PTPP), operating pre-tax, pre-provision earnings per share – diluted (operating PTPP EPS), operating pre-tax, pre-provision income on a fully tax equivalent basis (operating PTPP-FTE), operating pre-tax, pre-provision FTE earnings per share – diluted (operating 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, operating PTPP, operating PTPP EPS, operating PTPP-FTE, operating 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- and severance-related items, and the FDIC special assessment that management does not believe reflect the company's fundamental operating performance.

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, the FDIC special assessment, 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).

Operating PTPP income for the relevant period is defined as GAAP net interest income plus GAAP noninterest income, less noninterest expense, adjusted to reflect the impact of excluding expenses related to acquisitions and severance, and the FDIC special assessment.

Operating PTPP-FTE for the relevant period is defined as GAAP net interest income on a fully tax equivalent basis plus GAAP noninterest income, less noninterest expense, adjusted to reflect the impact of excluding expenses related to acquisitions and severance, and the FDIC special assessment.

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, 2023, our subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K, or other applicable documents that are filed or furnished with the U.S. Securities and Exchange Commission (SEC). In addition to such factors that have been disclosed previously: macroeconomic and adverse developments and uncertainties related to the collateral effects of the collapse of, and challenges for, domestic and international banks, including the impacts to the U.S. and global economies; sustained levels of high inflation and the potential for an economic recession on the heels of aggressive quantitative tightening by the Federal Reserve; and impacts related to or resulting from instability in the Middle East and Russia's military action in Ukraine, such as the broader impacts to financial markets and the global macroeconomic and geopolitical environments, may also cause actual results or other future events, circumstances, or aspirations to differ from our forward-looking statements. Any forward-looking statement made by us or on our behalf speaks only as of the date that it was made. We do not undertake to update any forward-looking statement to reflect the impact of events, circumstances, or results that arise after the date that the statement was made, except to the extent required by applicable securities laws. You, however, should consult further disclosures (including disclosures of a forward-looking nature) that we may make in any subsequent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K, or other applicable document that is filed or furnished with the SEC.

About UMB:

UMB Financial Corporation (NASDAQ:UMBF) is a financial services company headquartered in Kansas City, Missouri. UMB offers commercial banking, which includes comprehensive deposit, lending and investment services, personal banking, which includes wealth management and financial planning services, and institutional banking, which includes asset servicing, corporate trust solutions, investment banking, and healthcare services. UMB operates branches throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas. As the company's reach continues to grow, it also serves business clients nationwide and institutional clients in several countries. For more information, visit UMB.com, UMB Blog, UMB Facebook and UMB LinkedIn.