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Section 1: 8-K (8-K)

8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): 7/24/2018

 

 

UMB FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

 

 

Commission File Number: 001-38481

 

MO   43-0903811
(State or other jurisdiction of   (IRS Employer
incorporation)   Identification No.)

1010 Grand Blvd., Kansas City, MO 64106

(Address of principal executive offices, including zip code)

(816) 860-7000

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13c-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Item 2.02 Results of Operations and Financial Condition

On July 24, 2018, UMB Financial Corporation (the “Company”) issued a press release announcing the financial results for the Company for the quarter and period ended June 30, 2018. A copy of the press release is attached as Exhibit 99.1.

The information contained in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 hereto, is being furnished and shall not be deemed to be “filed” with the Securities and Exchange Commission (“SEC”) for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section and are not incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, whether made before or after the date hereof, except as shall be expressly set forth by specific reference to this Current Report on Form 8-K in such a filing.

 

Item 7.01 Regulation FD Disclosure

On July 24, 2018, the Company announced in the same press release that the Board of Directors of the Company (the “Board”) had declared a quarterly dividend of $0.29 per share that is payable on October 1, 2018 to shareholders of record of the Company as of the close of business on September 10, 2018. This press release is attached as Exhibit 99.1, and the information included in the press release is hereby incorporated herein by reference.

The Company is furnishing a copy of materials that will be used in the Company’s shareholder conference call on July 25, 2018 beginning at 9:30 a.m. (CT). A copy of the materials is attached as Exhibit 99.2 and will also be available on the Company’s website at www.umb.com. The materials are dated July 24, 2018, and the Company disclaims any obligation to correct or update any of the materials in the future, except as required by applicable securities laws.

The information provided under Item 7.01 of this Current Report on Form 8-K, including Exhibits 99.1 and 99.2 hereto, is being furnished and is not deemed to be “filed” with the SEC for the purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section and are not incorporated by reference into any filing of the Company under the Securities Act or the Exchange Act, whether made before or after the date hereof, except as shall be expressly set forth by specific reference to this Current Report on Form 8-K in such a filing.

 

Item 9.01 Financial Statements and Exhibits

 

Exhibit 99.1    Press Release announcing financial results for quarter and period ended June 30, 2018, and announcing dividend declaration.
Exhibit 99.2    Investor Presentation Materials, dated July 24, 2018.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    UMB FINANCIAL CORPORATION
    By:   /s/ Ram Shankar
      Ram Shankar
      Chief Financial Officer

Date: July 24, 2018

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Section 2: EX-99.1 (EX-99.1)

EX-99.1

Exhibit 99.1

 

LOGO

 

    

UMB Financial Corporation

1010 Grand Boulevard

Kansas City, MO 64106

816.860.7000

umb.com

   News Release

//FOR IMMEDIATE RELEASE//

Media Contact: Stephanie Hague: 816.860.5088

Investor Relations Contact: Kay Gregory: 816.860.7106

UMB Financial Corporation Reports Second Quarter Income from Continuing Operations

of $55.4 Million or $1.11 per Diluted Share

KANSAS CITY, Mo. (July 24, 2018) — 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)                   
     Q2
2018
    Q1
2018
    Q2
2017
 

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
YTD
2018
    June
YTD
2017
 

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)                               
     Q2
2018
    Q1
2018
    Q2
2017
    CQ vs.
LQ
    CQ vs.
PY
 

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)                                  
     Q2
2018
     Q1
2018
     Q2
2017
     CQ vs.
LQ
    CQ vs.
PY
 

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)                                  
     Q2
2018
     Q1
2018
     Q2
2017
     CQ vs.
LQ
    CQ vs.
PY
 

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)                                  
     Q2
2018
     Q1
2018
     Q2
2017
     CQ vs.
LQ
    CQ vs.
PY
 

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)                               
     Q2
2018
    Q1
2018
    Q2
2017
    CQ vs.
LQ
    CQ vs.
PY
 

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)                               
     Q2
2018
    Q1
2018
    Q4
2017
    Q3
2017
    Q2
2017
 

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,  
     2018     2017  

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 Ended

June 30,

   

Six Months Ended

June 30,

 
     2018      2017     2018     2017  

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 Ended

June 30,

   

Six Months Ended

June 30,

 
     2018     2017     2018     2017  

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’ Equity

   UMB 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,  
     2018     2017  
     Average
Balance
    Average
Yield/Rate
    Average
Balance
    Average
Yield/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,  
     2018     2017  
     Average
Balance
    Average
Yield/Rate
    Average
Balance
    Average
Yield/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     2017     2018     2017  

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,
 
     2018     2017     2018     2017  

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%.

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Section 3: EX-99.2 (EX-99.2)

EX-99.2

Slide 1

UMB Financial Second Quarter 2018 July 24, 2018 Exhibit 99.2


Slide 2

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


Slide 3

2Q 2018 Highlights


Slide 4

Earnings Summary – 2Q 2018 $ in thousands, except share and per share data; unaudited Non-GAAP adjustments include acquisition and divestiture income and expense, severance expense and the tax impact of these adjustments. See the non-GAAP reconciliations and additional information on these items on slides 32 and 33.


Slide 5

Key Performance Metrics See slides 32 and 33 for additional disclosures and reconciliations related to these non-GAAP financial measures. Beginning in Q1 2018, the Company revised the denominator of its Efficiency Ratio and Operating Efficiency Ratio calculations to use “Net Interest Income” in place of “Tax Equivalent Net Interest Income”. All prior periods presented here were updated using this revised formula. For first and second quarter 2018, net interest margin is computed using net interest income adjusted to a fully taxable equivalent (“FTE") basis assuming a federal income tax rate of 21 percent; while prior period net interest margins are computed using a federal income tax rate of 35 percent.


Slide 6

Consistent Loan Growth Average Total Loans 5 Year CAGR 12.9%


Slide 7

Net Charge-Off History (1) Commercial Loans includes commercial and industrial, commercial credit card, asset-based and factoring loans. (2) Other includes all real-estate related loans (commercial, residential and HELOC) plus consumer loans and DDA charge-offs.


Slide 8

Loan Classification Trends % of total loans 0.0% 1.0% 2.0% 3.0%


Slide 9

2Q 2018 Financials


Slide 10

Select Balance Sheet Items $ in thousands, average balances; unaudited Three Months Ended For first and second quarter 2018, securities yields, earning asset yields, net interest spread and net interest margin are computed using net interest income adjusted to a fully taxable equivalent (“FTE") basis assuming a federal income tax rate of 21 percent; in prior periods, these metrics are computed using a federal income tax rate of 35 percent.


Slide 11

Loan Paydowns, Payoffs, and Line Changes


Slide 12

Loan Composition Diverse Loan Book (Average Loan Balances for the three months ended June 30 of the indicated year) Commercial Credit Card Commercial & Industrial HELOC Residential Real Estate Real Estate Construction Commercial Real Estate Consumer Credit Card Consumer Other $6.9B $8.1B $9.9B $10.8B $11.4B Factoring Loans Asset-Based Loans Percentages less than 5% have been omitted. Includes leases. (1) (2)


Slide 13

Colorado Kansas City Kansas Greater MO St. Louis Arizona Texas Oklahoma Marquette Transportation Fin (Natl. Sales) Nebraska Marquette Business Credit (Natl. Sales) Geographic Diversity Loans by Region (Average Loan Balances for the three months ended June 30 of the indicated year) High Growth Regions 2Q’18 vs. 2Q’17 Nebraska +23.4% Factoring (national platform) +48.5% Asset Based (national platform) +45.8% Percentages less than 5% have been omitted. $6.9B $8.1B $9.9B $10.8B $11.4B (1)


Slide 14

Securities Held to Maturity $1.2 billion at June 30, 2018 Securities Available for Sale $6.0 billion at June 30, 2018 High Quality Investment Portfolio Agencies (0.0%) Corporates (0.0%) Municipals Mortgage-Backed Securities Treasuries Governmental Other Higher Education Healthcare Utility Social Service Industrial Cultural Civic K-12 Education NFP - Other Average Balance: $6.1 billion Average Yield: 2.13% Duration: 45 months Average Balance: $1.2 billion Average Yield: 3.26% Duration: 74 months Total Portfolio Average Yield: 2.41% Duration: 50 months For second quarter 2018, securities yields are computed using net interest income adjusted to a fully taxable equivalent (“FTE") basis assuming a federal income tax rate of 21 percent; in prior periods, these metrics are computed using a federal income tax rate of 35 percent.


Slide 15

Securities and Loan Statistics (1) Roll off includes cash flow from maturities, calls or amortizations of securities and is presented net of sales.  (2) Purchased amount is presented net of purchases made related to sales. Loan Portfolio Statistics at June 30, 2018 Variable Rate Loans: $7.3 billion or 63% of loan book ~40% of variable loans are tied to Prime for the next quarter ~59% of variable loans are tied to LIBOR for the next quarter Loan Repricing/Maturity Schedule 59% in 3rd quarter 2018 68% in the next 12 months AFS Portfolio Activity For first and second quarter 2018, securities yields are computed using net interest income adjusted to a fully taxable equivalent (“FTE") basis assuming a federal income tax rate of 21 percent; in prior periods, these metrics are computed using a federal income tax rate of 35 percent.


Slide 16

Diverse Sources of Deposits (Average Deposits for the three months ended June 30 of the indicated year) Deposit Composition $12.3B $13.4B $15.0B $15.6B $16.5B Personal Banking - Consumer Commercial Institutional Banking Personal Banking - Private Wealth Institutional Banking - Asset Servicing Healthcare Personal Banking - Small Business Other Percentages less than 5% have been omitted. (1)


Slide 17

Strong Capital Position Capital Ratio Trends (%) 2015 - 2018 ratios calculated under Basel III requirements. Total Risk-Based Capital Tier 1 Risk-Based Capital Tier 1 Leverage Common Equity Tier 1


Slide 18

Noninterest Income – 2Q 2018 Noninterest income decreased $5.2 million, or 5.0%, compared to 1Q’18, primarily driven by: A $1.8MM decline in equity earnings on alternative investments and $1.1MM in the fair value of company-owned life insurance, both of which have near-equal offsets in expense; A $1.3MM decrease in fund servicing revenue in trust and securities processing related to the exit of one large customer who made the decision to consolidate all relationships with one service provider; A decrease of $1.2MM in deposit service charges related to repricing of a larger customer contract in Institutional Banking; and A $1.0MM increase in rebates and rewards expense (contra-revenue) in bankcard fees driven by higher purchase volume. 2nd Quarter ‘18 Drivers Beginning in Q1 2018, “Other” includes “Equity Earnings on Alternative Investments” which was previously separately disclosed.


Slide 19

Bankcard Fees Noninterest Income Composition – 2Q 2018 Service Charges on Deposit Accounts Trust & Securities Processing Insurance Fees & Commissions Other Brokerage Fees Trading & Investment Banking Trust & Securities Processing Composition: ($ in millions) Gains on Sales of Securities Source of Income: 2Q’18 1Q’18 2Q’17 Personal Banking – Private Wealth & Prairie Capital $ 16.2 $ 16.3 $ 17.0 Institutional Banking – Fund Services 21.2 22.5 23.2 Institutional Banking – Corp. Trust & other 5.4 5.2 4.6   $ 42.8 $ 44.0 $ 44.8


Slide 20

Noninterest Expense – 2Q 2018 Operating noninterest expense, which excludes the impact of acquisition and divestiture income and expense and severance expense, 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. See slides 32 and 33 for a reconciliation of this non-GAAP financial measure. 2nd Quarter ‘18 Drivers Noninterest expense increased $1.3 million, or 0.8%, compared to 1Q’18, driven by: A $2.6MM increase in legal and consulting expense partially due to timing of projects delayed during 1Q’18; $1.2MM of Increased marketing and business development related to timing of multiple projects and increased travel expenses; Increased regulatory expense of $867k from a higher assessment base; and Partially offset by a $3.8MM decrease in salaries and employee benefits, largely driven by lower payroll taxes and 401(k) expense.


Slide 21

Business Segment Updates


Slide 22

Commercial Banking Commercial Banking Loans $ in billions Commercial Banking Deposits $ in billions Demand Deposits Interest-Bearing Deposits


Slide 23

Commercial Real Estate Portfolio CRE & Construction Lending (Average Loan Balances for the three months ended June 30 of the indicated year) Investment CRE Owner Occ. CRE Construction Farmland Multi-Family CRE Residential Construction (1) Percentages less than 5% have been omitted.


Slide 24

Institutional Banking Institutional Banking Deposits $ in billions Demand Deposits Interest-Bearing Deposits


Slide 25

Institutional Banking – Business Description Banking services for broker-dealers FDIC sweep solutions; liquidity alternative to overnight funds Fixed income services for banks, institutional & corporate clients Underwriting for healthcare, municipalities, educational institutions & corporate clients Fund accounting & administration Alternative Investments Workout defaulted bond deals on behalf of holders Investor Solutions Corporate Trust Investment Banking Public Finance Distressed Debt Asset Servicing Bond trustee and agency services to municipal and corporate issuers Escrow-related and custodial services


Slide 26

Personal Banking Personal Banking Deposits $ in billions Personal Banking Loans $ in billions Consumer & Small Business Private Banking


Slide 27

Home Equity Lines of Credit $ in billions $1.2B $1.4B $1.6B $1.7B $1.5B Assets Under Management $ in billions Personal Banking


Slide 28

Healthcare Services Healthcare Deposits & Assets End-of-period balances; $ in billions 2014 2015 2016 2017 2Q’18 HSA deposits as % of total UMB deposits 6.2% 7.8% 9.7% 11.4% 14.1% HSA Deposits HSA Investment Assets


Slide 29

Multi-Channel Healthcare Strategy UMB offers a modular and configurable platform of applications and services that deliver the underlying core banking functionality to our healthcare partners Broker/Employer TPAs Health Plans Technology Firms Payment Aggregators Healthcare Partners HCS Applications SSO Web Services Contributions Enrollment BIN Sponsor HCS Saver Partner Portal Core Banking Systems


Slide 30

Healthcare Services – Growth & Potential Industry information source: Devenir Research 2017 Year-End HSA Market Statistics & Trends report dated February 22, 2018. Rankings as of December 31, 2017. Deposit and asset growth rates on an annual basis as of December 31st of each respective year. HCS represents a unique asset as one of the top 5 leaders in a high growth, niche market. Growth Rates – Deposits and Assets


Slide 31

Card Purchase Volumes Purchase Volume & Interchange Revenue Commercial Credit Consumer Credit Consumer Debit Healthcare Debit Institutional Banking – IBIS Debit Interchange ($ in millions) $2.8B $2.2B $2.3B $2.6B $2.7B Percentages less than 5% have been omitted. (1)


Slide 32

In this presentation, we provide information about net operating income from continuing operations, operating earnings per share from continuing operations-diluted (operating EPS-diluted), 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 and the nearest comparable GAAP financial measures are reconciled in the tables below and on the next slide. 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 income and 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 and income related to acquisitions and divestitures, severance expense, and the cumulative tax impact of these adjustments. Net Operating Income Non-GAAP Reconciliation (continued on next page)


Slide 33

(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. All prior periods were calculated using the Company’s marginal tax rate of 36.0%. Operating Noninterest Expense & Efficiency Ratio Non-GAAP Reconciliation Operating EPS-diluted is calculated as diluted 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 (which is calculated as net interest income plus noninterest income, less gains on sales of securities available for sale, net).

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