• UMB Financial Corporation
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  • UMB Financial Corporation Reports Second Quarter Income from Continuing Operations of $55.4 Million or $1.11 Per Diluted Share
    Company Release - 07/24/2018 17:00

    KANSAS CITY, Mo.--(BUSINESS WIRE)-- UMB Financial Corporation (Nasdaq: UMBF), a financial holding company, announced income from continuing operations for the second quarter 2018 of $55.4 million, or $1.11 per diluted share, compared to $57.5 million, or $1.15 per diluted share in the first quarter 2018 (linked quarter) and $44.8 million, or $0.90 per diluted share, in the second quarter 2017. The reported GAAP income from continuing operations represents a decrease of 3.7 percent on a linked-quarter basis and an increase of 23.8 percent compared to the second quarter 2017.

    Net operating income from continuing operations, a non-GAAP financial measure reconciled to income from continuing operations, the nearest comparable GAAP measure, later in this release, was $56.1 million, or $1.12 per diluted share for the second quarter 2018, compared to $59.1 million, or $1.18 per diluted share, for the linked quarter and $44.9 million, or $0.90 per diluted share, for the second quarter 2017. These results represent a decrease of 5.1 percent on a linked-quarter basis and an increase of 24.8 percent compared to the second quarter 2017.

     
    Summary of quarterly financial results   UMB Financial Corporation
    (unaudited, dollars in thousands, except per share data)    
    Q2Q1Q2
    201820182017
    Income from continuing operations $ 55,424 $ 57,533 $ 44,771
    Loss from discontinued operations       (747 )   (1,950 )
    Net income 55,424 56,786 42,821
     
    Earnings per share from continuing operations (diluted) 1.11 1.15 0.90
    Losses per share from discontinued operations (diluted)       (0.01 )   (0.04 )
    Earnings per share (diluted) 1.11 1.14 0.86
     
    Net operating income from continuing operations 56,079 59,062 44,948
    Operating earnings per share from continuing operations (diluted) 1.12 1.18 0.90
     

    GAAP - continuing operations

    Return on average assets 1.08 % 1.12 % 0.88 %
    Return on average equity 10.18 10.80 8.69
    Efficiency ratio 70.21 68.82 71.02
     

    Non-GAAP - continuing operations

    Operating return on average assets 1.09 % 1.15 % 0.89 %
    Operating return on average equity 10.30 11.09 8.72
    Operating efficiency ratio 69.88 68.04 70.91
     
    Summary of year-to-date financial results   UMB Financial Corporation
    (unaudited, dollars in thousands, except per share data)   June   June
    YTDYTD
    20182017
    Income from continuing operations $ 112,957 $ 86,747
    (Loss) income from discontinued operations   (747 )   255  
    Net income 112,210 87,002
     
    Earnings per share from continuing operations (diluted) 2.26 1.74
    (Losses) earnings per share from discontinued operations (diluted)   (0.01 )   0.01  
    Earnings per share (diluted) 2.25 1.75
     
    Net operating income from continuing operations 115,141 87,228
    Operating earnings per share from continuing operations (diluted) 2.30 1.75
     

    GAAP - continuing operations

    Return on average assets 1.10 % 0.86 %
    Return on average equity 10.49 8.64
    Efficiency ratio 69.51 71.77
     

    Non-GAAP - continuing operations

    Operating return on average assets 1.12 % 0.87 %
    Operating return on average equity 10.69 8.68
    Operating efficiency ratio 68.95 71.61
     

    “Highlights for the second quarter included 5.8 percent growth in our loan portfolio, continued positive operating leverage, and a 56 basis point expansion in our loan yields,” said Mariner Kemper, chairman and chief executive officer. “Our net interest margin expanded 12 basis points and drove a 9.3 percent increase in our net interest income.”

    Discussion of results from continuing operations

    Summary of revenue     UMB Financial Corporation
    (unaudited, dollars in thousands)            
    Q2Q1Q2CQ vs.CQ vs.
    201820182017LQPY
    Net interest income $ 150,226 $ 147,922 $ 137,394 $ 2,304 $ 12,832
    Noninterest income:
    Trust and securities processing 42,845 44,002 44,811 (1,157 ) (1,966 )
    Trading and investment banking 4,653 4,101 6,173 552 (1,520 )
    Service charges on deposit accounts 20,722 21,905 22,731 (1,183 ) (2,009 )
    Insurance fees and commissions 340 301 513 39 (173 )
    Brokerage fees 6,291 6,353 5,889 (62 ) 402
    Bankcard fees 17,184 18,123 20,234 (939 ) (3,050 )
    Gains on sales of securities available for sale, net 228 139 1,280 89 (1,052 )
    Other   8,026     10,601     8,675   (2,575 )   (649 )
    Total noninterest income $ 100,289   $ 105,525   $ 110,306 $ (5,236 ) $ (10,017 )
     
    Total revenue $ 250,515   $ 253,447   $ 247,700 $ (2,932 ) $ 2,815  
    Net interest margin 3.24 % 3.19 % 3.12 %
    Total noninterest income as a % of total revenue 40.03 41.64 44.53
     

    Following the enactment of the Tax Cuts and Jobs Act, beginning in the first quarter of 2018, net interest margin is computed using net interest income adjusted to a fully taxable equivalent (FTE) basis assuming a statutory federal income tax rate of 21 percent and, where applicable, state income taxes; prior period net interest margins are computed using the then-statutory federal income tax rate of 35 percent and, where applicable, state income taxes.

    Net interest income

    • On a linked quarter basis, the 1.6 percent increase in net interest income was driven by a five basis point improvement in net interest margin, one additional day of net interest income, and a 1.4 percent, or $157.9 million, increase in average loans.
    • Earning asset yields improved 18 basis points from the linked quarter primarily due to improved loan yields of 21 basis points to 4.74 percent, in part driven by favorable re-pricing from recent increases in short-term interest rates and earning asset mix changes. The cost of interest-bearing liabilities increased 18 basis points to 0.83 percent driven by a 16 basis point increase in cost of interest-bearing deposits. Total cost of deposits including noninterest-bearing deposits was 45 basis points, an increase of 18 basis points from the linked quarter.
    • On a year-over-year basis, the increase in net interest income was driven by a 5.8 percent or $632.4 million increase in average loans as well as higher average loan yields, which increased 56 basis points from one year ago, primarily driven by higher interest rates, volume, and mix changes, offset by the impacts of tax reform on tax equivalent income.
    • For the second quarter 2018, average total assets were $20.6 billion, which is an increase of 1.5 percent over the second quarter 2017.

    Noninterest income

    • Second quarter 2018 noninterest income decreased $5.2 million, or 5.0 percent, on a linked quarter basis largely due to:
      • A $2.6 million decline in other income driven by decreases of $1.8 million in equity earnings on alternative investments and $1.1 million in the fair value of company-owned life insurance.
      • A decrease in trust and securities processing due to a $1.3 million decline in fund servicing revenue.
      • A decrease of $1.2 million in service charges on deposits primarily due to repricing.
      • An increase of $1.0 million in rebates and rewards expense recorded as an offset to bankcard fees driven by higher purchase volume.
      • These impacts were partially offset by an increase of $0.6 million in trading and investment banking.
    • Noninterest income in the second quarter of 2018 decreased $10.0 million, or 9.1 percent, compared to the same quarter in 2017 primarily driven by:
      • A $3.7 million increase in rebates and rewards expense recorded as an offset to bankcard fees driven by increased purchase volume.
      • A $2.0 million decrease in service charges on deposit accounts due to repricing.
      • A $2.0 million decline in fund servicing revenue recorded in trust and securities processing due to customer repricing and losses.
      • A $1.1 million decrease in gains on available-for-sale securities.
      • A $0.9 million decrease in trading and investment banking due to market adjustments from the company’s seed investments in certain Scout funds following the liquidation of such investments at the end of the second quarter of 2017.

    Noninterest expense

    Summary of Noninterest expense   UMB Financial Corporation
    (unaudited, dollars in thousands)          
    Q2Q1Q2CQ vs.CQ vs.
    201820182017LQPY
    Salaries and employee benefits $ 104,175 $ 107,968 $ 102,773 $ (3,793 ) $ 1,402
    Occupancy, net 10,813 10,953 11,061 (140 ) (248 )
    Equipment 18,842 18,826 17,956 16 886
    Supplies and services 4,146 3,760 4,792 386 (646 )
    Marketing and business development 6,184 5,034 5,732 1,150 452
    Processing fees 11,537 11,161 10,743 376 794
    Legal and consulting 6,460 3,844 6,467 2,616 (7 )
    Bankcard 4,165 4,626 5,033 (461 ) (868 )
    Amortization of other intangible assets 1,485 1,562 1,924 (77 ) (439 )
    Regulatory fees 3,772 2,905 4,071 867 (299 )
    Other   5,639   5,237   6,387   402     (748 )
    Total noninterest expense $ 177,218 $ 175,876 $ 176,939 $ 1,342   $ 279  
     
    • GAAP noninterest expense for the second quarter of 2018 was $177.2 million, an increase of $1.3 million, or 0.8 percent, from the linked quarter and $0.3 million, or 0.2 percent, from the second quarter of 2017.
    • On a non-GAAP basis, operating noninterest expense (as reconciled later in this release) was $176.4 million for the second quarter 2018, an increase of $2.5 million, or 1.4 percent, compared to the linked quarter, and a decrease of $0.3 million, or 0.2 percent, compared to the second quarter 2017.
    • The linked quarter increase in noninterest expense was driven by:
      • A $2.6 million increase in legal and consulting expense partially due to timing of consulting expenses on projects delayed during the first quarter of 2018.
      • Increased marketing and business development expense of $1.2 million related to timing of multiple projects and increased travel expenses.
      • Increased regulatory expense of $0.9 million from a higher assessment base.
      • These impacts were partially offset by a $3.8 million decline in salaries and employee benefits, largely driven by lower payroll taxes and 401(k) expense as compared the first quarter of 2018.
    • The year-over-year increase in noninterest expense was driven by:
      • A $1.4 million increase in salaries and employee benefits, largely due to a $1.7 million increase in salary and wage expense.
      • $0.9 million increase in equipment expense related to investments for regulatory requirements, cyber security, and the ongoing modernization of the company’s core systems.
      • These impacts were partially offset by a $0.9 million decline in bankcard administrative expenses, and decreases of $0.3 million in derivative expense and $0.5 million in operational losses, both recorded in other expense.

    Income Taxes

    • The company’s effective tax rate was 15.6 percent for the six months ended June 30, 2018 compared to 21.6 percent for the same period in 2017. The decrease is primarily a result of the Tax Cuts and Jobs Act, which lowered the federal corporate income tax rate to 21 percent from 35 percent, effective on January 1, 2018.

    Balance Sheet

    • Average total assets for the second quarter 2018 were $20.6 billion compared to $20.7 billion for the linked quarter, and $20.3 billion for the same period in 2017.
    Summary of average loans and leases - QTD Average     UMB Financial Corporation
    (unaudited, dollars in thousands)            
    Q2Q1Q2CQ vs.CQ vs.
    201820182017LQPY
    Commercial $ 4,478,829 $ 4,456,176 $ 4,597,866 $ 22,653 $ (119,037 )
    Asset-based loans 336,710 336,146 242,719 564 93,991
    Factoring loans 231,035 223,031 155,528 8,004 75,507
    Commercial credit card 191,009 189,891 157,214 1,118 33,795
    Real estate - construction 823,169 763,867 802,350 59,302 20,819
    Real estate - commercial 3,711,417 3,635,455 3,152,317 75,962 559,100
    Real estate - residential 669,177 645,803 592,253 23,374 76,924
    Real estate - HELOC 596,025 630,617 682,889 (34,592 ) (86,864 )
    Consumer credit card 230,971 223,725 254,552 7,246 (23,581 )
    Consumer other 153,427 158,131 139,120 (4,704 ) 14,307
    Leases   22,679   23,680   35,250   (1,001 )   (12,571 )
    Total loans $ 11,444,448 $ 11,286,522 $ 10,812,058 $ 157,926   $ 632,390  
     
    • Average loans for the second quarter 2018 increased 1.4 percent on a linked-quarter basis and 5.8 percent compared to second quarter 2017.
    Summary of average securities - QTD Average     UMB Financial Corporation
    (unaudited, dollars in thousands)            
    Q2Q1Q2CQ vs.CQ vs.
    201820182017LQPY
    Securities available for sale:
    U.S.Treasury $ 37,982 $ 38,197 $ 63,945 $ (215 ) $ (25,963 )
    U.S. Agencies 2,946 10,360 48,914 (7,414 ) (45,968 )
    Mortgage-backed 3,679,835 3,645,891 3,677,797 33,944 2,038
    State and political subdivisions 2,330,454 2,453,334 2,478,358 (122,880 ) (147,904 )
    Corporates 1,476 8,482 60,508 (7,006 ) (59,032 )
    Commercial Paper   7,138   30,955     (23,817 )   7,138  
    Total securities available for sale $ 6,059,831 $ 6,187,219 $ 6,329,522 $ (127,388 ) $ (269,691 )
    Securities held to maturity:
    State and political subdivisions 1,228,849 1,251,771 1,242,519 (22,922 ) (13,670 )
    Trading securities 45,538 44,592 75,075 946 (29,537 )
    Other securities   66,345   65,560   66,199   785     146  
    Total securities $ 7,400,563 $ 7,549,142 $ 7,713,315 $ (148,579 ) $ (312,752 )
     
    • Average securities available for sale decreased 4.3 percent compared to the second quarter of 2017, driven by the ongoing reinvestment of cash flows from such securities to fund growth in the loan portfolio.
    Summary of average deposits - QTD Average   UMB Financial Corporation
    (unaudited, dollars in thousands)            
    Q2Q1Q2CQ vs.CQ vs.
    201820182017LQPY
    Deposits:
    Noninterest-bearing demand $ 5,666,364 $ 6,050,997 $ 5,837,602 $ (384,633 ) $ (171,238 )
    Interest-bearing demand and savings 9,768,015 9,660,150 8,475,782 107,865 1,292,233
    Time deposits   1,032,000     1,047,700     1,258,384     (15,700 )   (226,384 )
    Total deposits $ 16,466,379   $ 16,758,847   $ 15,571,768   $ (292,468 ) $ 894,611  
    Noninterest bearing deposits as % of total 34.41 % 36.11 % 37.49 %
     
    • Average noninterest-bearing deposits declined 6.4 percent on a linked-quarter basis primarily driven by lower balances held by larger commercial customers.

    Capital

    Capital information     UMB Financial Corporation
    (unaudited, dollars in thousands, except per share data)        

    June 30,
    2018

    March 31,
    2018

    June 30,
    2017

    Total equity $ 2,201,812 $ 2,167,386 $ 2,071,119
    Book value per common share 43.96 43.31 41.42
     
    Regulatory capital:
    Common equity Tier 1 capital $ 2,145,616 $ 2,097,691 $ 1,863,359
    Tier 1 capital 2,145,616 2,097,691 1,863,359
    Total capital 2,315,482 2,269,315 2,031,618
     
    Regulatory capital ratios:
    Common equity Tier 1 capital ratio 13.56 % 13.36 % 12.22 %
    Tier 1 risk-based capital ratio 13.56 13.36 12.22
    Total risk-based capital ratio 14.63 14.45 13.32
    Tier 1 leverage ratio 10.50 10.20 9.28
     
    • At June 30, 2018, the company’s risk-based capital ratios presented in the foregoing table exceeded all “well-capitalized” regulatory thresholds.

    Asset Quality

    Credit quality     UMB Financial Corporation
    (unaudited, dollars in thousands)                    
    Q2Q1Q4Q3Q2
    20182018201720172017
    Net charge-offs - Commercial loans $ 6,137 $ 6,847 $ 2,248 $ 8,961 $ 7,971
    Net charge-offs (recoveries) - Real estate loans 1,035 1,512 (242 ) 238 (95 )
    Net charge-offs - Consumer credit card loans 1,786 1,849 1,612 1,635 2,079
    Net charge-offs - Consumer other loans 46 94 167 74 71
    Net charge-offs - Total loans 9,004 10,302 3,785 10,908 10,026
    Net loan charge-offs as a % of total average loans 0.32 % 0.37 % 0.14 % 0.40 % 0.37 %
    Loans over 90 days past due $ 2,883 $ 5,650 $ 3,091 $ 2,088 $ 2,657
    Loans over 90 days past due as a % of total loans 0.02 % 0.05 % 0.03 % 0.02 % 0.02 %
    Nonaccrual and restructured loans $ 56,030 $ 67,604 $ 59,142 $ 54,231 $ 51,390
    Nonaccrual and restructured loans as a % of total loans 0.48 % 0.59 % 0.52 % 0.49 % 0.47 %
    Provision for loan losses $ 7,000 $ 10,000 $ 6,000 $ 11,500 $ 14,500
     
    • Nonperforming loans, defined as restructured loans on nonaccrual and all other nonaccrual loans, decreased $11.6 million from the linked quarter and increased $4.6 million from the prior year period.
    • Net charge-offs decreased to $9.0 million, or 0.32 percent of average loans, compared to $10.3 million, or 0.37 percent, of average loans in the linked quarter, and $10.0 million, or 0.37 percent, of average loans in the second quarter of 2017.
    • Provision for loan losses decreased $3.0 million from the linked quarter, consistent with the company’s methodology, which considers the inherent risk in the loan portfolio, as well as other qualitative factors, such as macroeconomic conditions, loan growth, loan impairment changes, loan risk grading changes, and net charge-off levels.

    Dividend Declaration

    At the company’s quarterly board meeting, the Board of Directors declared a $0.29 per share quarterly cash dividend, payable on October 1, 2018, to shareholders of record at the close of business on September 10, 2018.

    Conference Call

    The company plans to host a conference call to discuss its second quarter 2018 earnings results on Wednesday, July 25, 2018, at 9:30 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 the investor relations area of umbfinancial.com or by using the following the link:

    UMB Financial 2Q 2018 Conference Call

    A replay of the conference call may be heard through August 8, 2018, by calling (toll-free) 877-344-7529 or (international) 412-317-0088. The replay access code required for playback is 10121500. The call replay may also be accessed via the company's website umbfinancial.com by visiting the investor relations area.

    Non-GAAP Financial Information

    In this release, we provide information about net operating income from continuing operations, operating earnings per share from continuing operations - diluted (operating EPS), operating return on average equity (operating ROE), operating return on average assets (operating ROA), operating noninterest expense, and operating efficiency ratio, 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, and operating efficiency ratio – 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 divestiture costs 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 and divestitures, severance 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).

    Forward-Looking Statements:

    This 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, 2017, 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). 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, Mo. UMB offers personal banking, commercial banking, healthcare services and institutional banking, which includes services to mutual funds and alternative-investment entities and registered investment advisors. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas. For more information, visit UMB.com, UMB Financial.com, UMB Blog or follow us on Twitter at @UMBBank, UMB Facebook and UMB LinkedIn.

     
    Consolidated Balance Sheets   UMB Financial Corporation
    (unaudited, dollars in thousands)    
    June 30,
    20182017
    ASSETS
    Loans $ 11,631,628 $ 10,848,578
    Allowance for loan losses   (98,298 )   (97,797 )
    Net loans 11,533,330 10,750,781
    Loans held for sale 3,482 3,443
    Investment Securities:
    Available for sale 6,011,684 6,226,041
    Held to maturity 1,204,582 1,279,524
    Trading securities 67,091 61,833
    Other securities   66,547     65,039  
    Total investment securities 7,349,904 7,632,437
    Federal funds sold and resell agreements 70,346 184,521
    Interest-bearing due from banks 113,875 332,090
    Cash and due from banks 379,433 379,148
    Premises and equipment, net 274,408 276,412
    Accrued income 100,133 99,122
    Goodwill 180,867 180,867
    Other intangibles, net 17,210 24,614
    Other assets 508,482 436,421
    Discontinued assets - goodwill and other intangibles, net       53,743  
    Total assets $ 20,531,470   $ 20,353,599  
     
    LIABILITIES
    Deposits:
    Noninterest-bearing demand $ 5,994,426 $ 6,433,339
    Interest-bearing demand and savings 9,471,698 8,429,180
    Time deposits under $250,000 512,446 569,281
    Time deposits of $250,000 or more   407,508       664,866  
    Total deposits 16,386,078 16,096,666
    Federal funds purchased and repurchase agreements 1,666,158 1,886,370
    Long-term debt 78,692 76,083
    Accrued expenses and taxes 147,608 161,470
    Other liabilities   51,122     61,891  
    Total liabilities   18,329,658     18,282,480  
     
    SHAREHOLDERS' EQUITY
    Common stock 55,057 55,057
    Capital surplus 1,050,660 1,037,898
    Retained earnings 1,434,342 1,204,436
    Accumulated other comprehensive loss, net (128,959 ) (23,625 )
    Treasury stock   (209,288 )     (202,647 )
    Total shareholders' equity   2,201,812       2,071,119  
    Total liabilities and shareholders' equity $ 20,531,470   $ 20,353,599  
     
    Consolidated Statements of Income   UMB Financial Corporation
    (unaudited, dollars in thousands except share and per share data)        
      Three Months EndedSix Months Ended
    June 30,June 30,
    2018201720182017
    INTEREST INCOME
    Loans $ 135,150 $ 112,724 $ 261,284 $ 219,284
    Securities:
    Taxable interest 20,523 18,441 40,303 37,631
    Tax-exempt interest   18,290   18,296     36,993     35,479
    Total securities income 38,813 36,737 77,296 73,110
    Federal funds and resell agreements 752 711 1,790 1,630
    Interest-bearing due from banks 1,056 580 2,636 1,131
    Trading securities   709   459     1,139     746
    Total interest income   176,480   151,211     344,145     295,901
    INTEREST EXPENSE
    Deposits 18,334 7,835 32,169 13,801
    Federal funds and repurchase agreements 6,666 4,994 11,398 8,463
    Other   1,254   988     2,430     1,928
    Total interest expense   26,254   13,817     45,997     24,192
    Net interest income 150,226 137,394 298,148 271,709
    Provision for loan losses   7,000   14,500     17,000     23,500
    Net interest income after provision for loan losses   143,226   122,894     281,148     248,209
    NONINTEREST INCOME
    Trust and securities processing 42,845 44,811 86,847 87,352
    Trading and investment banking 4,653 6,173 8,754 13,715
    Service charges on deposit accounts 20,722 22,731 42,627 44,806
    Insurance fees and commissions 340 513 641 1,159
    Brokerage fees 6,291 5,889 12,644 11,266
    Bankcard fees 17,184 20,234 35,307 37,986
    Gains on sales of securities available for sale, net 228 1,280 367 1,748
    Other   8,026   8,675     18,627     15,191
    Total noninterest income   100,289   110,306     205,814     213,223
    NONINTEREST EXPENSE
    Salaries and employee benefits 104,175 102,773 212,143 206,425
    Occupancy, net 10,813 11,061 21,766 22,029
    Equipment 18,842 17,956 37,668 35,438
    Supplies and services 4,146 4,792 7,906 8,886
    Marketing and business development 6,184 5,732 11,218 9,873
    Processing fees 11,537 10,743 22,698 19,942
    Legal and consulting 6,460 6,467 10,304 11,517
    Bankcard 4,165 5,033 8,791 9,936
    Amortization of other intangible assets 1,485 1,924 3,047 3,970
    Regulatory fees 3,772 4,071 6,677 7,904
    Other   5,639   6,387     10,876     14,829
    Total noninterest expense   177,218   176,939     353,094     350,749
    Income before income taxes 66,297 56,261 133,868 110,683
    Income tax expense   10,873   11,490     20,911     23,936
    Income from continuing operations   55,424   44,771     112,957     86,747
    Discontinued Operations
    (Loss) income from discontinued operations before income taxes (2,599 ) (917 ) 308
    Income tax (benefit) expense     (649 )   (170 )   53
    (Loss) income from discontinued operations     (1,950 )   (747 )   255
    NET INCOME $ 55,424 $ 42,821   $ 112,210   $ 87,002
    PER SHARE DATA
    Basic:
    Income from continuing operations $ 1.12 $ 0.91 $ 2.28 $ 1.76
    (Loss) income from discontinued operations     (0.04 )   (0.01 )   0.01
    Net income – basic 1.12 0.87 2.27 1.77
    Diluted:
    Income from continuing operations 1.11 0.90 2.26 1.74
    (Loss) income from discontinued operations     (0.04 )   (0.01 )   0.01
    Net income - diluted 1.11 0.86 2.25 1.75
    Dividends 0.290 0.255 0.580 0.510
    Weighted average shares outstanding - basic 49,551,920 49,269,786 49,486,626 49,190,271
    Weighted average shares outstanding - diluted 50,007,022 49,848,903 49,973,992 49,829,193
     
     
    Consolidated Statements of Comprehensive Income   UMB Financial Corporation
    (unaudited, dollars in thousands)            
    Three Months EndedSix Months Ended
    June 30,June 30,
    2018201720182017
    Net income $ 55,424 $ 42,821 $ 112,210 $ 87,002
    Other comprehensive (loss) income, net of tax:
    Unrealized gains and losses on debt securities:
    Change in unrealized holding gains and losses, net (16,020 ) 35,311 (96,682 ) 57,582
    Less: Reclassification adjustment for gains included in net income   (228 )   (1,280 )   (367 )   (1,748 )
    Change in unrealized gains and losses on debt securities during the period (16,248 ) 34,031 (97,049 ) 55,834
    Change in unrealized gains and losses on derivative hedges 910 (1,157 ) 3,112 (911 )
    Income tax benefit (expense)   3,770     (12,340 )   23,552     (21,006 )
    Other comprehensive (loss) income before reclassifications (11,568 ) 20,534 (70,385 ) 33,917
    Amounts reclassified from accumulated other comprehensive income           (13,049 )    
    Net current-period other comprehensive (loss) income   (11,568 )   20,534     (83,434 )   33,917  
    Comprehensive income $ 43,856   $ 63,355   $ 28,776   $ 120,919  
     
     
    Consolidated Statements of Shareholders' EquityUMB Financial Corporation
    (unaudited, dollars in thousands except per share data)      
     

    Common
    Stock

     

    Capital
    Surplus

     

    Retained
    Earnings

    Accumulated
    Other
    Comprehensive
    Loss

    Treasury
    Stock

    Total

    Balance - January 1, 2017 $ 55,057 $ 1,033,419 $ 1,142,887 $ (57,542 ) $ (211,437 ) $ 1,962,384
    Total comprehensive income 87,002 33,917 120,919
    Cash dividends ($0.51 per share) (25,453 ) (25,453 )
    Purchase of treasury stock (4,279 ) (4,279 )
    Issuance of equity awards (3,929 ) 4,401 472
    Recognition of equity-based compensation 6,243 6,243
    Sale of treasury stock 321 244 565
    Exercise of stock options     1,844             8,424     10,268  
    Balance - June 30, 2017 $ 55,057 $ 1,037,898   $ 1,204,436   $ (23,625 ) $ (202,647 ) $ 2,071,119  
    Balance - January 1, 2018 $ 55,057 $ 1,046,095 $ 1,338,110 $ (45,525 ) $ (212,206 ) $ 2,181,531
    Total comprehensive income (loss) 112,210 (83,434 ) 28,776
    Reclassification of certain tax effects 12,917 12,917
    Cash dividends ($0.580 per share) (29,040 ) (29,040 )
    Purchase of treasury stock (6,211 ) (6,211 )
    Issuance of equity awards (2,457 ) 2,951 494
    Recognition of equity-based compensation 5,201 5,201
    Sale of treasury stock 278 275 553
    Exercise of stock options 1,543 5,903 7,446
    Cumulative effect adjustments         145             145  
    Balance - June 30, 2018 $ 55,057 $ 1,050,660   $ 1,434,342   $ (128,959 ) $ (209,288 ) $ 2,201,812  
     
     
    Average Balances / Yields and Rates   UMB Financial Corporation
    (tax - equivalent basis)          
    (unaudited, dollars in thousands)
    Three Months Ended June 30,
    20182017
    AverageAverageAverageAverage
    BalanceYield/RateBalanceYield/Rate
    Assets
    Loans, net of unearned interest $ 11,444,448 4.74 % $ 10,812,058 4.18 %
    Securities:
    Taxable 3,862,378 2.13 3,997,904 1.85
    Tax-exempt   3,492,647     2.66     3,640,336     3.09  
    Total securities 7,355,025 2.38 7,638,240 2.44
    Federal funds and resell agreements 107,343 2.81 150,745 1.89
    Interest bearing due from banks 252,292 1.68 252,169 0.92
    Trading securities   45,538     6.83     75,075     2.96  
    Total earning assets 19,204,646 3.79 18,928,287 3.41
    Allowance for loan losses (101,801 ) (95,410 )
    Other assets   1,516,801     1,482,040  
    Total assets $ 20,619,646   $ 20,314,917  
     
    Liabilities and Shareholders' Equity
    Interest-bearing deposits $ 10,800,015 0.68 % $ 9,734,166 0.32 %
    Federal funds and repurchase agreements 1,737,383 1.54 2,400,181 0.83
    Borrowed funds   78,583     6.40     75,953     5.22  
    Total interest-bearing liabilities 12,615,981 0.83 12,210,300 0.45
    Noninterest-bearing demand deposits 5,666,364 5,837,602
    Other liabilities 152,491 199,386
    Shareholders' equity   2,184,810     2,067,629  
    Total liabilities and shareholders' equity $ 20,619,646   $ 20,314,917  
    Net interest spread 2.96 % 2.96 %
    Net interest margin 3.24 3.12
     
     
    Average Balances / Yields and Rates   UMB Financial Corporation
    (tax - equivalent basis)          
    (unaudited, dollars in thousands)
    Six Months Ended June 30,
    20182017
    AverageAverageAverageAverage
    BalanceYield/RateBalanceYield/Rate
    Assets
    Loans, net of unearned interest $ 11,365,921 4.64 % $ 10,686,792 4.14 %
    Securities:
    Taxable 3,865,660 2.10 4,097,794 1.85
    Tax-exempt   3,563,715     2.65     3,564,319     3.08  
    Total securities 7,429,375 2.37 7,662,113 2.42
    Federal funds and resell agreements 134,009 2.69 194,231 1.69
    Interest bearing due from banks 341,469 1.56 280,490 0.81
    Trading securities   45,068     5.65     67,809     2.73  
    Total earning assets 19,315,842 3.70 18,891,435 3.36
    Allowance for loan losses (101,652 ) (94,264 )
    Other assets   1,468,793     1,477,685  
    Total assets $ 20,682,983   $ 20,274,856  
     
    Liabilities and Shareholders' Equity
    Interest-bearing deposits $ 10,754,187 0.60 % $ 9,689,335 0.29 %
    Federal funds and repurchase agreements 1,649,758 1.39 2,365,101 0.72
    Borrowed funds   78,773     6.22     76,209     5.10  
    Total interest-bearing liabilities 12,482,718 0.74 12,130,645 0.40
    Noninterest-bearing demand deposits 5,857,618 5,917,826
    Other liabilities 170,374 200,809
    Shareholders' equity   2,172,273     2,025,576  
    Total liabilities and shareholders' equity $ 20,682,983   $ 20,274,856  
    Net interest spread 2.96 % 2.96 %
    Net interest margin 3.22 3.10
     
     
    Business Segment Information   UMB Financial Corporation
    (unaudited, dollars in thousands)                
    Three Months Ended June 30, 2018

    Commercial
    Banking

    Institutional
    Banking

    Personal
    Banking

    Healthcare
    Services

    Total
    Net interest income $ 93,011 $ 16,279 $ 31,111 $ 9,825 $ 150,226
    Provision for loan losses 5,139 322 1,539 7,000
    Noninterest income 19,178 43,411 28,720 8,980 100,289
    Noninterest expense   62,859   47,551   54,259   12,549   177,218
    Income before taxes 44,191 11,817 4,033 6,256 66,297
    Income tax expense   7,246   1,939   662   1,026   10,873
    Income from continuing operations $ 36,945 $ 9,878 $ 3,371 $ 5,230 $ 55,424
    Average assets $ 9,740,000 $ 3,934,000 $ 4,799,000 $ 2,147,000 $ 20,620,000
     
    Three Months Ended June 30, 2017

    Commercial
    Banking

    Institutional
    Banking

    Personal
    Banking

    Healthcare
    Services

    Total
    Net interest income $ 86,810 $ 12,415 $ 30,615 $ 7,554 $ 137,394
    Provision for loan losses 12,114 320 2,066 14,500
    Noninterest income 21,714 48,161 31,135 9,296 110,306
    Noninterest expense   62,545   46,610   56,516   11,268   176,939
    Income before taxes 33,865 13,646 3,168 5,582 56,261
    Income tax expense   7,188   3,137   106   1,059   11,490
    Income from continuing operations $ 26,677 $ 10,509 $ 3,062 $ 4,523 $ 44,771
    Average assets $ 9,842,000 $ 3,316,000 $ 5,293,000 $ 1,864,000 $ 20,315,000
     
    Six Months Ended June 30, 2018

    Commercial
    Banking

    Institutional
    Banking

    Personal
    Banking

    Healthcare
    Services

    Total
    Net interest income $ 185,006 $ 32,023 $ 62,003 $ 19,116 $ 298,148
    Provision for loan losses 13,117 672 3,211 17,000
    Noninterest income 39,775 88,830 59,434 17,775 205,814
    Noninterest expense   125,131   94,383   109,225   24,355   353,094
    Income before taxes 86,533 25,798 9,001 12,536 133,868
    Income tax expense   13,516   4,030   1,406   1,959   20,911
    Income from continuing operations $ 73,017 $ 21,768 $ 7,595 $ 10,577 $ 112,957
    Average assets $ 9,765,000 $ 3,882,000 $ 4,885,000 $ 2,151,000 $ 20,683,000
     
    Six Months Ended June 30, 2017

    Commercial
    Banking

    Institutional
    Banking

    Personal
    Banking

    Healthcare
    Services

    Total
    Net interest income $ 172,108 $ 23,971 $ 60,809 $ 14,821 $ 271,709
    Provision for loan losses 18,934 789 3,777 23,500
    Noninterest income 40,919 93,828 59,671 18,805 213,223
    Noninterest expense   125,202   91,362   112,632   21,553   350,749
    Income before taxes 68,891 25,648 4,071 12,073 110,683
    Income tax expense   14,870   5,456   1,015   2,595   23,936
    Income from continuing operations $ 54,021 $ 20,192 $ 3,056 $ 9,478 $ 86,747
    Average assets $ 9,730,000 $ 3,391,000 $ 5,317,000 $ 1,837,000 $ 20,275,000
     

    The company has strategically aligned its operations into the following four reportable segments:Commercial Banking, Institutional Banking, Personal Banking, and Healthcare Services.Senior executive officers regularly evaluate business segment financial results produced by the company’s internal reporting system in deciding how to allocate resources and assess performance for individual business segments.Previously, the company had the following two business segments:Bank and Asset Servicing.The company’s reportable segments include certain corporate overhead, technology and service costs that are allocated based on methodologies that are applied consistently between periods.For comparability purposes, amounts in all periods are based on methodologies in effect at June 30, 2018.

     
    Non-GAAP Financial Measures   UMB Financial Corporation
    Net operating income Non-GAAP reconciliations:
    (unaudited, dollars in thousands except per share data)    

    Three Months Ended
    June 30,

    Six Months Ended
    June 30,

    2018   201720182017
    Income from continuing operations (GAAP) $ 55,424 $ 44,771 112,957 $ 86,747
    Adjustments:
    Acquisition and divestiture (income) expense (24 ) 17 (6 ) 17
    Severance expense 867 259 2,814 735
    Tax-impact of adjustments (i)   (188 )   (99 )   (624 )   (271 )
    Total Non-GAAP adjustments (net of tax)   655     177     2,184     481  
    Net operating income from continuing operations (Non-GAAP) $ 56,079   $ 44,948   $ 115,141   $ 87,228  
     
    Earnings per share from continuing operations - diluted (GAAP) $ 1.11 $ 0.90 $ 2.26 $ 1.74
    Acquisition and divestiture (income) expense
    Severance expense 0.01 0.05 0.01
    Tax-impact of adjustments (i)           (0.01 )    
    Operating earnings per share from continuing operations - diluted (Non-GAAP) $ 1.12   $ 0.90   $ 2.30   $ 1.75  
     
    GAAP
    Return on average assets 1.08 % 0.88 % 1.10 % 0.86 %
    Return on average equity 10.18 8.69 10.49 8.64
     
    Non-GAAP
    Operating return on average assets 1.09 % 0.89 % 1.12 % 0.87 %
    Operating return on average equity 10.30 8.72 10.69 8.68
     
     

    Operating noninterest expense and operating efficiency ratio
    Non-GAAP reconciliations:

      UMB Financial Corporation
    (unaudited, dollars in thousands)      

    Three Months Ended
    June 30,

    Six Months Ended
    June 30,

    2018201720182017
    Noninterest expense $ 177,218 $ 176,939 $ 353,094 $ 350,749
    Adjustments to arrive at operating noninterest expense (pre-tax):
    Acquisition and divestiture (income) expense (24 ) 17 (6 ) 17
    Severance expense   867     259     2,814     735  
    Total Non-GAAP adjustments (pre-tax)   843     276     2,808     752  
    Operating noninterest expense (Non-GAAP) $ 176,375   $ 176,663   $ 350,286   $ 349,997  
     
    Noninterest expense $ 177,218 $ 176,939 $ 353,094 $ 350,749
    Less: Amortization of other intangibles   1,485     1,924     3,047     3,970  
    Noninterest expense, net of amortization of other intangibles (Non-GAAP) (numerator A) $ 175,733   $ 175,015   $ 350,047   $ 346,779  
     
    Operating noninterest expense $ 176,375 $ 176,663 $ 350,286 $ 349,997
    Less: Amortization of other intangibles   1,485     1,924     3,047     3,970  
    Operating expense, net of amortization of other intangibles (Non-GAAP) (numerator B) $ 174,890   $ 174,739   $ 347,239   $ 346,027  
     
    Net interest income $ 150,226 $ 137,394 $ 298,148 $ 271,709
    Noninterest income 100,289 110,306 205,814 213,223
    Less: Gains on sales of securities available for sale, net   228     1,280     367     1,748  
    Total Non-GAAP Revenue (denominator A) $ 250,287   $ 246,420   $ 503,595   $ 483,184  
     
    Efficiency ratio (numerator A/denominator A) 70.21 % 71.02 % 69.51 % 71.77 %
    Operating efficiency ratio (Non-GAAP) (numerator B/denominator A) 69.88 % 70.91 % 68.95 % 71.61 %

    (i) Calculated using the company’s marginal tax rate of 22.2% for periods beginning after December 31, 2017 as a result of the Tax Cuts and Jobs Act. The prior periods were calculated using the company’s marginal tax rate of 36.0%.

    UMB Financial Corporation
    Media Contact:
    Stephanie Hague, 816-860-5088
    or
    Investor Relations Contact:
    Kay Gregory, 816-860-7106

    Source: UMB Financial Corporation