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Section 1: 10-Q (UMBF-Q2 2018 10Q)

umbf-10q_20180630.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(MARK ONE)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to         

Commission file number001-38481

 

UMB FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

 

 

Missouri

 

43-0903811

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification Number)

 

1010 Grand Boulevard, Kansas City, Missouri

 

64106

(Address of principal executive offices)

 

(Zip Code)

(Registrant's telephone number, including area code): (816) 860-7000

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes      No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer

 

Accelerated filer

Non- accelerated filer

(Do not check if a smaller reporting company)

Smaller reporting company

 

 

 

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. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of July 27, 2018, UMB Financial Corporation had 50,096,718 shares of common stock outstanding.

 

 

 


 

UMB FINANCIAL CORPORATION

FORM 10-Q

INDEX

 

PART I – FINANCIAL INFORMATION

3

 

 

 

ITEM 1.

FINANCIAL STATEMENTS (UNAUDITED)

3

CONSOLIDATED BALANCE SHEETS

3

CONSOLIDATED STATEMENTS OF INCOME

4

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

6

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

7

CONSOLIDATED STATEMENTS OF CASH FLOWS

8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

39

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

56

ITEM 4.

CONTROLS AND PROCEDURES

61

 

 

 

PART II - OTHER INFORMATION

62

 

 

 

ITEM 1.

LEGAL PROCEEDINGS

62

ITEM 1A.

RISK FACTORS

62

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

62

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

62

ITEM 4.

MINE SAFETY DISCLOSURES

62

ITEM 5.

OTHER INFORMATION

62

ITEM 6.

EXHIBITS

63

SIGNATURES

64

 

2


 

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

UMB FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(unaudited, dollars in thousands, except share and per share data)

 

 

 

June 30,

 

 

December 31,

 

 

 

2018

 

 

2017

 

ASSETS

 

 

 

 

 

 

 

 

Loans

 

$

11,631,628

 

 

$

11,280,513

 

Allowance for loan losses

 

 

(98,298

)

 

 

(100,604

)

Net loans

 

 

11,533,330

 

 

 

11,179,909

 

Loans held for sale

 

 

3,482

 

 

 

1,460

 

Securities:

 

 

 

 

 

 

 

 

Available for sale

 

 

6,011,684

 

 

 

6,258,577

 

Held to maturity (fair value of $1,103,937 and $1,207,447, respectively)

 

 

1,204,582

 

 

 

1,261,014

 

Trading securities

 

 

67,091

 

 

 

54,055

 

Other securities

 

 

66,547

 

 

 

65,897

 

Total investment securities

 

 

7,349,904

 

 

 

7,639,543

 

Federal funds sold and securities purchased under agreements to resell

 

 

70,346

 

 

 

191,601

 

Interest-bearing due from banks

 

 

113,875

 

 

 

1,351,760

 

Cash and due from banks

 

 

379,433

 

 

 

392,723

 

Premises and equipment, net

 

 

274,408

 

 

 

275,942

 

Accrued income

 

 

100,133

 

 

 

98,863

 

Goodwill

 

 

180,867

 

 

 

180,867

 

Other intangibles, net

 

 

17,210

 

 

 

20,257

 

Other assets

 

 

508,482

 

 

 

438,658

 

Total assets

 

$

20,531,470

 

 

$

21,771,583

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Noninterest-bearing demand

 

$

5,994,426

 

 

$

6,839,171

 

Interest-bearing demand and savings

 

 

9,471,698

 

 

 

9,903,565

 

Time deposits under $250,000

 

 

512,446

 

 

 

547,990

 

Time deposits of $250,000 or more

 

 

407,508

 

 

 

732,274

 

Total deposits

 

 

16,386,078

 

 

 

18,023,000

 

Federal funds purchased and repurchase agreements

 

 

1,666,158

 

 

 

1,260,704

 

Long-term debt

 

 

78,692

 

 

 

79,281

 

Accrued expenses and taxes

 

 

147,608

 

 

 

191,464

 

Other liabilities

 

 

51,122

 

 

 

35,603

 

Total liabilities

 

 

18,329,658

 

 

 

19,590,052

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Common stock, $1.00 par value; 80,000,000 shares authorized; 55,056,730

   shares issued; and 50,086,844 and 49,894,990 shares outstanding, respectively

 

 

55,057

 

 

 

55,057

 

Capital surplus

 

 

1,050,660

 

 

 

1,046,095

 

Retained earnings

 

 

1,434,342

 

 

 

1,338,110

 

Accumulated other comprehensive loss, net

 

 

(128,959

)

 

 

(45,525

)

Treasury stock, 4,969,886 and 5,161,740 shares, at cost, respectively

 

 

(209,288

)

 

 

(212,206

)

Total shareholders' equity

 

 

2,201,812

 

 

 

2,181,531

 

Total liabilities and shareholders' equity

 

$

20,531,470

 

 

$

21,771,583

 

 

See Notes to Consolidated Financial Statements.

3


 

UMB FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(unaudited, dollars in thousands, except share and per share data)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

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

 

Gain 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

See Notes to Consolidated Financial Statements.

5


 

UMB FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited, dollars in thousands)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

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(1)(2)

 

 

 

 

 

 

 

 

(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

 

 

(1)

See Note 3, “New Accounting Pronouncements,” for discussion of the Company’s adoption of Accounting Standards Update (ASU) No. 2016-01.

 

(2)

See Note 3, “New Accounting Pronouncements,” for discussion of the Company’s adoption of ASU No. 2018-02.

 

See Notes to Consolidated Financial Statements.

6


 

UMB FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(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

 

Dividends ($0.510 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(1)

 

 

 

 

 

 

 

 

12,917

 

 

 

 

 

 

 

 

 

12,917

 

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(2)

 

 

 

 

 

 

 

 

145

 

 

 

 

 

 

 

 

 

145

 

Balance - June 30, 2018

 

$

55,057

 

 

$

1,050,660

 

 

$

1,434,342

 

 

$

(128,959

)

 

$

(209,288

)

 

$

2,201,812

 

 

(1)

Related to the adoption of ASU No. 2018-02. See Note 3, “New Accounting Pronouncements,” for further detail.

 

(2)

Related to the adoption of ASU Nos. 2016-01 and 2017-12. See Note 3, “New Accounting Pronouncements,” for further detail.

 

See Notes to Consolidated Financial Statements.

7


 

UMB FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, dollars in thousands)

 

 

 

For the Six Months Ended

 

 

 

June 30,

 

 

 

2018

 

 

2017

 

OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net income

 

$

112,210

 

 

$

87,002

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Provision for loan losses

 

 

17,000

 

 

 

23,500

 

Net accretion of premiums and discounts from acquisition

 

 

(184

)

 

 

(1,691

)

Depreciation and amortization

 

 

26,544

 

 

 

28,535

 

Deferred income tax benefit

 

 

(34,703

)

 

 

(1,737

)

Net increase in trading securities and other earning assets

 

 

(14,742

)

 

 

(19,209

)

Gains on sales of securities available for sale, net

 

 

(367

)

 

 

(1,748

)

Losses on sales of assets

 

 

212

 

 

 

19

 

Amortization of securities premiums, net of discount accretion

 

 

22,647

 

 

 

24,139

 

Originations of loans held for sale

 

 

(25,502

)

 

 

(32,809

)

Gains on sales of loans held for sale, net

 

 

(550

)

 

 

(745

)

Proceeds from sales of loans held for sale

 

 

24,030

 

 

 

35,390

 

Equity-based compensation

 

 

5,695

 

 

 

6,715

 

Net tax benefit related to equity compensation plans

 

 

2,059

 

 

 

3,100

 

Changes in:

 

 

 

 

 

 

 

 

Accrued income

 

 

(1,270

)

 

 

(77

)

Accrued expenses and taxes

 

 

(43,856

)

 

 

(11,497

)

Other assets and liabilities, net

 

 

9,592

 

 

 

(19,640

)

Net cash provided by operating activities

 

 

98,815

 

 

 

119,247

 

INVESTING ACTIVITIES