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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): 10/23/2018

 

 

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 incorporation)

 

(IRS Employer

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 October 23, 2018, UMB Financial Corporation (the “Company”) issued a press release announcing the financial results for the Company for the quarter ended September 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 October 23, 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 $0.30 per share that is payable on January 2, 2019 to shareholders of record of the Company on December 10, 2018. This press release is attached as Exhibit 99.1, and the information is hereby incorporated herein by reference.

The Company is also announcing in the press release that it has entered into an agreement with Bank of America Merrill Lynch (“BAML”) to repurchase an aggregate of $50 million of the Company’s common stock through an accelerated share repurchase agreement (the “ASR”). The Company will receive an initial delivery of shares representing approximately 85% of the expected total to be repurchased. The final number of shares repurchased and delivered under the ASR will be based on the volume weighted average share price of the Company’s common stock during the term of the transaction. The final settlement of the transactions under the ASR is expected to occur no later than the end of the first quarter 2019 and may be accelerated at the option of BAML. The ASR is part of the Company’s authorization to repurchase up to two million shares of the Company’s common stock that has been announced for the twelve-month period following each of its April 24, 2018, April 25, 2017, and April 26, 2016 meetings.

The Company is furnishing a copy of materials that will be used in the Company’s shareholder conference call on October 24, 2018 at 8:30 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 October 23, 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 year ended September 30, 2018, announcing dividend declaration, and announcing accelerated share repurchase.
Exhibit 99.2    Investor Presentation Materials, dated October 23, 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: October 23, 2018

(Back To Top)

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 Third Quarter Income from Continuing Operations

of $57.8 Million or $1.16 per Diluted Share

KANSAS CITY, Mo. (October 23, 2018) – UMB Financial Corporation (Nasdaq: UMBF), a financial holding company, announced income from continuing operations for the third quarter 2018 of $57.8 million, or $1.16 per diluted share, compared to $55.4 million, or $1.11 per diluted share, in the second quarter 2018 (linked quarter) and $48.9 million, or $0.98 per diluted share, in the third quarter 2017. The reported GAAP income from continuing operations represents increases of 4.4 percent on a linked-quarter basis and 18.4 percent compared to the third 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 $58.0 million, or $1.16 per diluted share, for the third quarter 2018, compared to $56.1 million, or $1.12 per diluted share, for the linked quarter and $48.9 million, or $0.98 per diluted share, for the third quarter 2017. These results represent increases of 3.5 percent on a linked-quarter basis and 18.6 percent compared to the third quarter 2017.


Summary of quarterly financial results

   UMB Financial Corporation  
(unaudited, dollars in thousands, except per share data)                   
     Q3
2018
    Q2
2018
    Q3
2017
 

Income from continuing operations

   $ 57,849     $ 55,424     $ 48,872  

Loss from discontinued operations

     —         —         (730
  

 

 

   

 

 

   

 

 

 

Net income

     57,849       55,424       48,142  

Earnings per share from continuing operations (diluted)

     1.16       1.11       0.98  

Losses per share from discontinued operations (diluted)

     —         —         (0.01
  

 

 

   

 

 

   

 

 

 

Earnings per share (diluted)

     1.16       1.11       0.97  

Net operating income from continuing operations

     58,024       56,079       48,927  

Operating earnings per share from continuing operations (diluted)

     1.16       1.12       0.98  

GAAP - continuing operations

      

Return on average assets

     1.11     1.08     0.95

Return on average equity

     10.32       10.18       9.17  

Efficiency ratio

     71.27       70.21       70.07  

Non-GAAP - continuing operations

      

Operating return on average assets

     1.11     1.09     0.96

Operating return on average equity

     10.35       10.30       9.18  

Operating efficiency ratio

     71.18       69.88       70.03  

 

Summary of year-to-date financial results

   UMB Financial Corporation  
(unaudited, dollars in thousands, except per share data)    September     September  
     YTD
2018
    YTD
2017
 

Income from continuing operations

   $ 170,806     $ 135,619  

Loss from discontinued operations

     (747     (475
  

 

 

   

 

 

 

Net income

     170,059       135,144  

Earnings per share from continuing operations (diluted)

     3.41       2.72  

Losses per share from discontinued operations (diluted)

     (0.01     (0.01
  

 

 

   

 

 

 

Earnings per share (diluted)

     3.40       2.71  

Net operating income from continuing operations

     173,165       136,155  

Operating earnings per share from continuing operations (diluted)

     3.47       2.73  

GAAP - continuing operations

    

Return on average assets

     1.10     0.89

Return on average equity

     10.43       8.82  

Efficiency ratio

     70.09       71.20  

Non-GAAP - continuing operations

    

Operating return on average assets

     1.12     0.90

Operating return on average equity

     10.57       8.85  

Operating efficiency ratio

     69.69       71.09  

“Highlights for the third quarter 2018 included strong loan growth, with average balances increasing 9.6 percent on a linked-quarter annualized basis, and 7.4 percent compared to the third quarter 2017,” said Mariner Kemper, chairman and chief executive officer. “This compares to 4.0 percent growth on a linked-quarter annualized basis for the industry, per Federal Reserve data. In addition, average deposits for the quarter increased 5.4 percent compared to the third quarter of 2017, driven by continued growth in asset servicing and healthcare balances, and our recent deposit campaigns.”


Discussion of results from continuing operations

 

Summary of revenue

   UMB Financial Corporation  
(unaudited, dollars in thousands)                               
     Q3
2018
    Q2
2018
    Q3
2017
    CQ vs.
LQ
    CQ vs.
PY
 

Net interest income

   $ 150,490     $ 150,226     $ 140,858     $ 264     $ 9,632  

Noninterest income:

          

Trust and securities processing

     43,425       42,845       45,060       580       (1,635

Trading and investment banking

     3,711       4,653       4,453       (942     (742

Service charges on deposit accounts

     20,927       20,722       21,510       205       (583

Insurance fees and commissions

     339       340       425       (1     (86

Brokerage fees

     6,402       6,291       5,815       111       587  

Bankcard fees

     16,838       17,184       17,427       (346     (589

Gains on sales of securities available for sale, net

     211       228       2,390       (17     (2,179

Other

     9,032       8,026       7,226       1,006       1,806  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest income

   $ 100,885     $ 100,289     $ 104,306     $ 596     $ (3,421
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

   $ 251,375     $ 250,515     $ 245,164     $ 860     $ 6,211  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest margin

     3.18     3.24     3.16    

Total noninterest income as a % of total revenue

     40.13       40.03       42.55      

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

 

   

Net interest income totaled $150.5 million and increased modestly from linked quarter levels, impacted by a 2.4 percent, or $274.1 million, increase in average loans and one additional day of net interest income. These impacts were offset by increases in cost of certain interest-bearing deposits driven by the cumulative effect of recent increases in short-term rates and recent deposit campaigns.

 

   

Earning asset yields improved 10 basis points from the linked quarter primarily due to earning asset mix changes and improved loan yields of 13 basis points to 4.87 percent, in part driven by favorable re-pricing from recent increases in short-term interest rates. The cost of interest-bearing liabilities increased 24 basis points to 1.07 percent, driven by a 25-basis point increase in cost of interest-bearing deposits. Total cost of deposits, including noninterest-bearing deposits, was 62 basis points, an increase of 17 basis points from the linked quarter.

 

   

On a year-over-year basis, the increase in net interest income was driven by a 7.4 percent, or $807.4 million, increase in average loans as well as higher average loan yields, which increased 54 basis points from one year ago, primarily driven by higher short-term interest rates, volume, and mix changes.

Noninterest income

 

   

Third quarter 2018 noninterest income increased $0.6 million, or 0.6 percent, on a linked quarter basis, largely due to:

 

   

A $1.0 million increase in derivative income recorded in other income.

 

   

An increase in trust and securities processing due to a $0.4 million increase in wealth management revenue.

 

   

These impacts were partially offset by a decrease of $0.9 million in trading and investment banking due to decreased bond trading volume.


   

Noninterest income in the third quarter of 2018 decreased $3.4 million, or 3.3 percent, compared to the same quarter in 2017 primarily driven by:

 

   

A $2.2 million decrease in gains on available-for-sale securities.

 

   

A $2.3 million decline in fund servicing revenue due to customer repricing and losses, which was partially offset by an increase of $1.0 million in corporate trust income, both recorded in trust and securities processing.

 

   

A $0.7 million decrease in trading and investment banking income due to decreased trading volume.

 

   

These impacts were partially offset by an increase of $0.7 million in 12b-1 fees recorded in brokerage fee income, and an increase of $0.7 million in derivative income recorded in other income.

Noninterest expense

 

Summary of Noninterest expense

   UMB Financial Corporation  
(unaudited, dollars in thousands)                                  
     Q3
2018
     Q2
2018
     Q3
2017
     CQ vs.
LQ
    CQ vs.
PY
 

Salaries and employee benefits

   $ 102,956      $ 104,175      $ 99,749      $ (1,219   $ 3,207  

Occupancy, net

     11,628        10,813        11,285        815       343  

Equipment

     18,533        18,842        17,880        (309     653  

Supplies and services

     4,528        4,146        4,076        382       452  

Marketing and business development

     6,671        6,184        5,056        487       1,615  

Processing fees

     12,331        11,537        11,151        794       1,180  

Legal and consulting

     8,470        6,460        5,844        2,010       2,626  

Bankcard

     4,407        4,165        5,130        242       (723

Amortization of other intangible assets

     1,385        1,485        1,715        (100     (330

Regulatory fees

     3,337        3,772        3,798        (435     (461

Other

     6,139        5,639        6,137        500       2  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total noninterest expense

   $ 180,385      $ 177,218      $ 171,821      $ 3,167     $ 8,564  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

   

GAAP noninterest expense for the third quarter of 2018 was $180.4 million, an increase of $3.2 million, or 1.8 percent, from the linked quarter and $8.6 million, or 5.0 percent, from the third quarter of 2017.

 

   

On a non-GAAP basis, operating noninterest expense (as reconciled later in this release) was $180.2 million for the third quarter 2018, an increase of $3.8 million, or 2.1 percent, compared to the linked quarter, and $8.4 million, or 4.9 percent, compared to the third quarter 2017.

 

   

The linked quarter increase in noninterest expense was driven by:

 

   

A $1.9 million increase in consulting expense incurred in conjunction with the company’s ongoing investments in digital channel and integrated platform solutions to support business growth and the continued modernization of its core systems.

 

   

Increased processing fees expense of $0.8 million, primarily related to larger asset servicing transaction volumes as new customers were added.

 

   

These impacts were partially offset by a $1.2 million decline in salaries and employee benefits, largely driven by lower medical insurance expense as compared the second quarter of 2018.

 

   

The year-over-year increase in noninterest expense was driven by:

 

   

A $3.2 million increase in salaries and employee benefits, comprised of a $1.9 million increase in salary and wage expense and a $1.2 million increase in bonus and commission expense.


   

A $2.9 million increase in consulting expense due to investments in digital channel and integrated platform solutions to support business growth and the continued ongoing modernization of the company’s core systems.

 

   

A $1.3 million increase in advertising expense related to timing of multiple projects and campaigns, including recent deposit promotions.

 

   

Increased processing fees expense of $1.2 million partially attributed to larger asset servicing transaction volumes as new customers were added.

Income Taxes

 

   

The company’s effective tax rate was 14.2 percent for the nine months ended September 30, 2018, compared to 21.4 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 January 1, 2018. The decrease is also attributable to a discrete tax benefit of $3.0 million related to provision-to-return adjustments.

Balance Sheet

 

   

Average total assets for the third quarter 2018 were $20.7 billion compared to $20.6 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)                                  
     Q3
2018
     Q2
2018
     Q3
2017
     CQ vs.
LQ
    CQ vs.
PY
 

Commercial

   $ 4,717,530      $ 4,478,829      $ 4,539,302      $ 238,701     $ 178,228  

Asset-based loans

     382,672        336,710        278,479        45,962       104,193  

Factoring loans

     264,414        231,035        173,876        33,379       90,538  

Commercial credit card

     199,730        191,009        174,892        8,721       24,838  

Real estate - construction

     814,053        823,169        782,898        (9,116     31,155  

Real estate - commercial

     3,701,072        3,711,417        3,284,871        (10,345     416,201  

Real estate - residential

     688,097        669,177        603,865        18,920       84,232  

Real estate - HELOC

     566,460        596,025        668,340        (29,565     (101,880

Consumer credit card

     222,223        230,971        239,529        (8,748     (17,306

Consumer other

     152,894        153,427        140,344        (533     12,550  

Leases

     9,407        22,679        24,758        (13,272     (15,351
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total loans

   $ 11,718,552      $ 11,444,448      $ 10,911,154      $ 274,104     $ 807,398  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

   

Average loans for the third quarter 2018 increased 2.4 percent on a linked-quarter basis and 7.4 percent compared to third quarter 2017.


Summary of average securities - QTD Average

   UMB Financial Corporation  
(unaudited, dollars in thousands)                                  
     Q3
2018
     Q2
2018
     Q3
2017
     CQ vs.
LQ
    CQ vs.
PY
 

Securities available for sale:

             

U.S. Treasury

   $ 38,044      $ 37,982      $ 47,216      $ 62     $ (9,172

U.S. Agencies

     198        2,946        22,743        (2,748     (22,545

Mortgage-backed

     3,590,703        3,679,835        3,564,974        (89,132     25,729  

State and political subdivisions

     2,290,906        2,330,454        2,536,281        (39,548     (245,375

Corporates

     718        1,476        21,848        (758     (21,130

Commercial Paper

     —          7,138        —          (7,138     —    
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total securities available for sale

   $ 5,920,569      $ 6,059,831      $ 6,193,062      $ (139,262   $ (272,493
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Securities held to maturity:

             

State and political subdivisions

     1,205,007        1,228,849        1,283,258        (23,842     (78,251

Trading securities

     45,476        45,538        49,396        (62     (3,920

Other securities

     65,962        66,345        64,294        (383     1,668  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total securities

   $ 7,237,014      $ 7,400,563      $ 7,590,010      $ (163,549   $ (352,996
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

   

Average securities available for sale decreased 2.3 percent on a linked-quarter basis and 4.4 percent compared to the third quarter of 2017 driven by the ongoing reinvestment of cash flows from such securities to partially fund growth in the loan portfolio.

 

Summary of average deposits - QTD Average

   UMB Financial Corporation  
(unaudited, dollars in thousands)                               
     Q3
2018
    Q2
2018
    Q3
2017
    CQ vs.
LQ
    CQ vs.
PY
 

Deposits:

          

Noninterest-bearing demand

   $ 5,547,880     $ 5,666,364     $ 5,728,145     $ (118,484   $ (180,265

Interest-bearing demand and savings

     9,954,008       9,768,015       8,789,217       185,993       1,164,791  

Time deposits

     1,030,411       1,032,000       1,162,383       (1,589     (131,972
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total deposits

   $ 16,532,299     $ 16,466,379     $ 15,679,745     $ 65,920     $ 852,554  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest bearing deposits as % of total

     33.56     34.41     36.53    

 

   

Average deposits increased 5.4 percent compared to the third quarter of 2017, in part driven by recent deposit campaigns.

Capital

 

Capital information

   UMB Financial Corporation  
(unaudited, dollars in thousands, except per share data)                   
     September 30,
2018
    June 30,
2018
    September 30,
2017
 

Total equity

   $ 2,203,464     $ 2,201,812     $ 2,101,543  

Book value per common share

     44.20       43.96       42.15  

Regulatory capital:

      

Common equity Tier 1 capital

   $ 2,175,700     $ 2,145,617     $ 1,893,842  

Tier 1 capital

     2,175,700       2,145,617       1,893,842  

Total capital

     2,348,731       2,315,483       2,062,928  

Regulatory capital ratios:

      

Common equity Tier 1 capital ratio

     13.47     13.56     12.18

Tier 1 risk-based capital ratio

     13.47       13.56       12.18  

Total risk-based capital ratio

     14.54       14.63       13.26  

Tier 1 leverage ratio

     10.58       10.50       9.43  


   

At September 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)                               
     Q3
2018
    Q2
2018
    Q1
2018
    Q4
2017
    Q3
2017
 

Net charge-offs - Commercial loans

   $ 624     $ 6,137     $ 6,847     $ 2,248     $ 8,961  

Net charge-offs (recoveries) - Real estate loans

     408       1,035       1,512       (242     238  

Net charge-offs - Consumer credit card loans

     1,632       1,786       1,849       1,612       1,635  

Net charge-offs - Consumer other loans

     82       46       94       167       74  

Net charge-offs - Total loans

     2,746       9,004       10,302       3,785       10,908  

Net loan charge-offs as a % of total average loans

     0.09     0.32     0.37     0.14     0.40

Loans over 90 days past due

   $ 1,927     $ 2,883     $ 5,650     $ 3,091     $ 2,088  

Loans over 90 days past due as a % of total loans

     0.02     0.02     0.05     0.03     0.02

Nonaccrual and restructured loans

   $ 50,568     $ 56,030     $ 67,604     $ 59,142     $ 54,231  

Nonaccrual and restructured loans as a % of total loans

     0.42     0.48     0.59     0.52     0.49

Provision for loan losses

   $ 5,750     $ 7,000     $ 10,000     $ 6,000     $ 11,500  

 

   

Nonperforming loans, defined as restructured loans on nonaccrual and all other nonaccrual loans, decreased $5.5 million from the linked quarter and $3.7 million from the prior year.

 

   

Net charge-offs decreased to $2.7 million, or 0.09 percent of average loans, compared to $9.0 million, or 0.32 percent, of average loans in the linked quarter, and $10.9 million, or 0.40 percent, of average loans in the third quarter of 2017.

 

   

Provision for loan losses decreased $1.3 million from the linked quarter, and $5.8 million from the third quarter of 2017, 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 $0.30 per share quarterly cash dividend, an increase of 3.4 percent or $0.01 per share. The cash dividend will be payable on January 2, 2019, to shareholders of record at the close of business on December 10, 2018.

Accelerated Share Repurchase

The company has entered into an agreement with Bank of America Merrill Lynch (BAML) to repurchase an aggregate of $50 million of the company’s common stock through an accelerated share repurchase (ASR). The company will receive an initial delivery of shares representing approximately 85 percent of the expected total to be repurchased. The final number of shares repurchased and delivered under the ASR will be based on the volume weighted average share price of the company’s common stock during the term of the transaction. The final settlement of the transactions under the ASR is expected to occur no later than the end of the first quarter of 2019 and may be accelerated at the option of BAML. The ASR is part of the company’s authorization to repurchase up to two million shares of the company’s common stock, which was announced April 24, 2018.


Conference Call

The company plans to host a conference call to discuss its third quarter 2018 earnings results on Wednesday, October 24, 2018, at 8:30 a.m. (CT).

Interested parties may access the call by dialing (toll-free) 877-267-8760 or (international) 412-542-4148 and requesting to join the UMB Financial call. The live call may also be accessed by visiting the investor relations area of umbfinancial.com or by using the following the link:

UMB Financial 3Q 2018 Conference Call

A replay of the conference call may be heard through November 7, 2018, by calling (toll-free) 877-344-7529 or (international) 412-317-0088. The replay access code required for playback is 10124649. The call replay may also be accessed at 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 (net operating income), 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 press release contains, and our other communications may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “outlook,” “forecast,” “target,” “trend,” “plan,” “goal,” or other words of comparable meaning or future-tense or conditional verbs such as “may,” “will,” “should,” “would,” or “could.” Forward-looking statements convey our expectations, intentions, or forecasts about future events, circumstances, results, or aspirations. All forward-looking statements are subject to assumptions, risks, and uncertainties, which may change over time and many of which are beyond our control. You should not rely on any forward-looking statement as a prediction or guarantee about the future. Our actual future objectives, strategies, plans, prospects, performance, condition, or results may differ materially from those set forth in any forward-looking statement. Some of the factors that may cause actual results or other future events, circumstances, or aspirations to differ from those in forward-looking statements are described in our Annual Report on Form 10-K for the year ended December 31, 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)             
     September 30,  
     2018     2017  

ASSETS

    

Loans

   $ 11,964,724     $ 10,997,028  

Allowance for loan losses

     (101,302     (98,389
  

 

 

   

 

 

 

Net loans

     11,863,422       10,898,639  

Loans held for sale

     2,222       4,525  

Investment Securities:

    

Available for sale

     5,932,741       5,848,960  

Held to maturity

     1,199,114       1,276,252  

Trading securities

     81,159       60,660  

Other securities

     65,252       63,543  
  

 

 

   

 

 

 

Total investment securities

     7,278,266       7,249,415  

Federal funds sold and resell agreements

     206,412       244,436  

Interest-bearing due from banks

     668,990       221,856  

Cash and due from banks

     348,700       366,169  

Premises and equipment, net

     277,123       277,454  

Accrued income

     104,012       103,076  

Goodwill

     180,867       180,867  

Other intangibles, net

     16,335       23,477  

Other assets

     516,011       655,846  

Discontinued assets - goodwill and other intangibles, net

     —         53,743  
  

 

 

   

 

 

 

Total assets

   $ 21,462,360     $ 20,279,503  
  

 

 

   

 

 

 

LIABILITIES

    

Deposits:

    

Noninterest-bearing demand

   $ 5,757,353     $ 5,812,117  

Interest-bearing demand and savings

     10,938,839       9,063,079  

Time deposits under $250,000

     594,705       576,035  

Time deposits of $250,000 or more

     445,807       548,373  
  

 

 

   

 

 

 

Total deposits

     17,736,704       15,999,604  

Federal funds purchased and repurchase agreements

     1,192,985       1,856,837  

Long-term debt

     78,523       76,071  

Accrued expenses and taxes

     171,548       193,978  

Other liabilities

     79,136       51,470  
  

 

 

   

 

 

 

Total liabilities

     19,258,896       18,177,960  
  

 

 

   

 

 

 

SHAREHOLDERS’ EQUITY

    

Common stock

     55,057       55,057  

Capital surplus

     1,054,801       1,042,022  

Retained earnings

     1,477,732       1,239,865  

Accumulated other comprehensive loss, net

     (155,641     (22,668

Treasury stock

     (228,485     (212,733
  

 

 

   

 

 

 

Total shareholders’ equity

     2,203,464       2,101,543  
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 21,462,360     $ 20,279,503  
  

 

 

   

 

 

 


Consolidated Statements of Income

   UMB Financial Corporation  
(unaudited, dollars in thousands except share and per share data)                     
     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2018      2017     2018     2017  

INTEREST INCOME

         

Loans

   $ 143,947      $ 119,132     $ 405,231     $ 338,416  

Securities:

         

Taxable interest

     20,263        17,720       60,566       55,351  

Tax-exempt interest

     18,281        18,893       55,274       54,372  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total securities income

     38,544        36,613       115,840       109,723  

Federal funds and resell agreements

     665        1,008       2,455       2,638  

Interest-bearing due from banks

     1,513        753       4,149       1,884  

Trading securities

     428        389       1,567       1,135  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total interest income

     185,097        157,895       529,242       453,796  
  

 

 

    

 

 

   

 

 

   

 

 

 

INTEREST EXPENSE

         

Deposits

     25,792        10,181       57,961       23,982  

Federal funds and repurchase agreements

     7,524        5,811       18,922       14,274  

Other

     1,291        1,045       3,721       2,973  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total interest expense

     34,607        17,037       80,604       41,229  
  

 

 

    

 

 

   

 

 

   

 

 

 

Net interest income

     150,490        140,858       448,638       412,567  

Provision for loan losses

     5,750        11,500       22,750       35,000  
  

 

 

    

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan losses

     144,740        129,358       425,888       377,567  
  

 

 

    

 

 

   

 

 

   

 

 

 

NONINTEREST INCOME

         

Trust and securities processing

     43,425        45,060       130,272       132,412  

Trading and investment banking

     3,711        4,453       12,465       18,168  

Service charges on deposit accounts

     20,927        21,510       63,554       66,316  

Insurance fees and commissions

     339        425       980       1,584  

Brokerage fees

     6,402        5,815       19,046       17,081  

Bankcard fees

     16,838        17,427       52,145       55,413  

Gains on sales of securities available for sale, net

     211        2,390       578       4,138  

Other

     9,032        7,226       27,659       22,417  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total noninterest income

     100,885        104,306       306,699       317,529  
  

 

 

    

 

 

   

 

 

   

 

 

 

NONINTEREST EXPENSE

         

Salaries and employee benefits

     102,956        99,749       315,099       306,174  

Occupancy, net

     11,628        11,285       33,394       33,314  

Equipment

     18,533        17,880       56,201       53,318  

Supplies and services

     4,528        4,076       12,434       12,962  

Marketing and business development

     6,671        5,056       17,889       14,929  

Processing fees

     12,331        11,151       35,029       31,093  

Legal and consulting

     8,470        5,844       18,774       17,361  

Bankcard

     4,407        5,130       13,198       15,066  

Amortization of other intangible assets

     1,385        1,715       4,432       5,685  

Regulatory fees

     3,337        3,798       10,014       11,702  

Other

     6,139        6,137       17,015       20,966  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total noninterest expense

     180,385        171,821       533,479       522,570  
  

 

 

    

 

 

   

 

 

   

 

 

 

Income before income taxes

     65,240        61,843       199,108       172,526  

Income tax expense

     7,391        12,971       28,302       36,907  
  

 

 

    

 

 

   

 

 

   

 

 

 

Income from continuing operations

     57,849        48,872       170,806       135,619  
  

 

 

    

 

 

   

 

 

   

 

 

 

Discontinued Operations

         

Loss from discontinued operations before income taxes

     —          (1,030     (917     (722

Income tax benefit

     —          (300     (170     (247
  

 

 

    

 

 

   

 

 

   

 

 

 

Loss from discontinued operations

     —          (730     (747     (475
  

 

 

    

 

 

   

 

 

   

 

 

 

NET INCOME

   $ 57,849      $ 48,142     $ 170,059     $ 135,144  
  

 

 

    

 

 

   

 

 

   

 

 

 

PER SHARE DATA

         

Basic:

         

Income from continuing operations

   $ 1.17      $ 0.99     $ 3.45     $ 2.76  

Loss from discontinued operations

     —          (0.01     (0.01     (0.01
  

 

 

    

 

 

   

 

 

   

 

 

 

Net income – basic

     1.17        0.98       3.44       2.75  

Diluted:

         

Income from continuing operations

     1.16        0.98       3.41       2.72  

Loss from discontinued operations

     —          (0.01     (0.01     (0.01
  

 

 

    

 

 

   

 

 

   

 

 

 

Net income - diluted

     1.16        0.97       3.40       2.71  

Dividends

     0.290        0.255       0.870       0.765  

Weighted average shares outstanding - basic

     49,473,157        49,283,322       49,482,087       49,221,629  

Weighted average shares outstanding - diluted

     49,912,084        49,833,141       49,952,984       49,838,619  


Consolidated Statements of Comprehensive Income

   UMB Financial Corporation  
(unaudited, dollars in thousands)                         
     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2018     2017     2018     2017  

Net income

   $ 57,849     $ 48,142     $ 170,059     $ 135,144  

Other comprehensive (loss) income, net of tax:

        

Unrealized gains and losses on debt securities:

        

Change in unrealized holding gains and losses, net

     (36,331     5,064       (133,013     62,646  

Less: Reclassification adjustment for gains included in net income

     (211     (2,390     (578     (4,138
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in unrealized gains and losses on debt securities during the period

     (36,542     2,674       (133,591     58,508  

Change in unrealized gains and losses on derivative hedges

     1,162       (169     4,274       (1,080

Income tax benefit (expense)

     8,698       (1,548     32,250       (22,554
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive (loss) income before reclassifications

     (26,682     957       (97,067     34,874  

Amounts reclassified from accumulated other comprehensive income

     —         —         (13,049     —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Net current-period other comprehensive (loss) income

     (26,682     957       (110,116     34,874  
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 31,167     $ 49,099     $ 59,943     $ 170,018  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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

     —          —         135,144       34,874       —         170,018  

Cash dividends ($0.765 per share)

     —          —         (38,166     —         —         (38,166

Purchase of treasury stock

     —          —         —         —         (14,369     (14,369

Issuance of equity awards

     —          (3,364     —         —         3,835       471  

Recognition of equity-based compensation

     —          9,576       —         —         —         9,576  

Sale of treasury stock

     —          468       —         —         381       849  

Exercise of stock options

     —          1,923       —         —         8,857       10,780  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance - September 30, 2017

   $ 55,057      $ 1,042,022     $ 1,239,865     $ (22,668   $ (212,733   $ 2,101,543  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance - January 1, 2018

   $ 55,057      $ 1,046,095     $ 1,338,110     $ (45,525   $ (212,206   $ 2,181,531  

Total comprehensive income (loss)

     —          —         170,059       (110,116     —         59,943  

Reclassification of certain tax effects

     —          —         12,917       —         —         12,917  

Cash dividends ($0.870 per share)

     —          —         (43,499     —         —         (43,499

Purchase of treasury stock

     —          —         —         —         (26,417     (26,417

Issuance of equity awards

     —          (2,004     —         —         2,499       495  

Recognition of equity-based compensation

     —          8,469       —         —         —         8,469  

Sale of treasury stock

     —          409       —         —         406       815  

Exercise of stock options

     —          1,832       —         —         7,233       9,065  

Cumulative effect adjustments

     —          —         145       —         —         145  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance - September 30, 2018

   $ 55,057      $ 1,054,801     $ 1,477,732     $ (155,641   $ (228,485   $ 2,203,464  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


Average Balances / Yields and Rates

   UMB Financial Corporation  
(tax - equivalent basis)                         
(unaudited, dollars in thousands)                         
     Three Months Ended September 30,  
     2018     2017  
     Average
Balance
    Average
Yield/Rate
    Average
Balance
    Average
Yield/Rate
 

Assets

        

Loans, net of unearned interest

   $ 11,718,552       4.87   $ 10,911,154       4.33

Securities:

        

Taxable

     3,760,332       2.14       3,794,074       1.85  

Tax-exempt

     3,431,206       2.67       3,746,540       3.06  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total securities

     7,191,538       2.39       7,540,614       2.46  

Federal funds and resell agreements

     101,223       2.61       190,036       2.10  

Interest bearing due from banks

     322,882       1.86       254,702       1.17  

Trading securities

     45,476       4.35       49,396       3.95  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total earning assets

     19,379,671       3.89       18,945,902       3.52  

Allowance for loan losses

     (99,289       (99,954  

Other assets

     1,469,283         1,467,273    
  

 

 

     

 

 

   

Total assets

   $ 20,749,665       $ 20,313,221    
  

 

 

     

 

 

   

Liabilities and Shareholders’ Equity

        

Interest-bearing deposits

   $ 10,984,419       0.93   $ 9,951,600       0.41

Federal funds and repurchase agreements

     1,733,884       1.72       2,234,666       1.03  

Borrowed funds

     78,764       6.50       76,159       5.44  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest-bearing liabilities

     12,797,067       1.07       12,262,425       0.55  

Noninterest-bearing demand deposits

     5,547,880         5,728,145    

Other liabilities

     179,775         207,417    

Shareholders’ equity

     2,224,943         2,115,234    
  

 

 

     

 

 

   

Total liabilities and shareholders’ equity

   $ 20,749,665       $ 20,313,221    
  

 

 

     

 

 

   

Net interest spread

       2.82       2.97

Net interest margin

       3.18         3.16  


Average Balances / Yields and Rates

   UMB Financial Corporation  
(tax - equivalent basis)                         
(unaudited, dollars in thousands)                         
     Nine Months Ended September 30,  
     2018     2017  
     Average
Balance
    Average
Yield/Rate
    Average
Balance
    Average
Yield/Rate
 

Assets

        

Loans, net of unearned interest

   $ 11,484,757       4.72   $ 10,762,401       4.20

Securities:

        

Taxable

     3,830,164       2.11       3,995,441       1.85  

Tax-exempt

     3,519,060       2.66       3,625,727       3.07  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total securities

     7,349,224       2.37       7,621,168       2.43  

Federal funds and resell agreements

     122,961       2.67       192,817       1.83  

Interest bearing due from banks

     336,144       1.65       271,799       0.93  

Trading securities

     45,206       5.21       61,604       3.06  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total earning assets

     19,338,292       3.76       18,909,789       3.42  

Allowance for loan losses

     (100,856       (96,181  

Other assets

     1,467,036         1,474,177    
  

 

 

     

 

 

   

Total assets

   $ 20,704,472       $ 20,287,785    
  

 

 

     

 

 

   

Liabilities and Shareholders’ Equity

        

Interest-bearing deposits

   $ 10,831,775       0.72   $ 9,777,717       0.33

Federal funds and repurchase agreements

     1,678,108       1.51       2,321,144       0.82  

Borrowed funds

     78,770       6.32       76,192       5.22  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest-bearing liabilities

     12,588,653       0.86       12,175,053       0.45  

Noninterest-bearing demand deposits

     5,753,237         5,853,905    

Other liabilities

     172,560         203,037    

Shareholders’ equity

     2,190,022         2,055,790    
  

 

 

     

 

 

   

Total liabilities and shareholders’ equity

   $ 20,704,472       $ 20,287,785    
  

 

 

     

 

 

   

Net interest spread

       2.90       2.97

Net interest margin

       3.20         3.12  


Business Segment Information

   UMB Financial Corporation  
(unaudited, dollars in thousands)                                   
     Three Months Ended September 30, 2018  
     Commercial
Banking
     Institutional
Banking
     Personal
Banking
     Healthcare
Services
     Total  

Net interest income

   $ 94,633      $ 15,293      $ 31,145      $ 9,419      $ 150,490  

Provision for loan losses

     4,062        355        1,333        —          5,750  

Noninterest income

     20,831        43,169        28,266        8,619        100,885  

Noninterest expense

     64,083        47,081        56,648        12,573        180,385  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income before taxes

     47,319        11,026        1,430        5,465        65,240  

Income tax expense

     5,381        1,241        160        609        7,391  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income from continuing operations

   $ 41,938      $ 9,785      $ 1,270      $ 4,856      $ 57,849  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Average assets

   $ 9,838,000      $ 3,920,000      $ 4,791,000      $ 2,201,000      $ 20,750,000  
     Three Months Ended September 30, 2017  
     Commercial
Banking
     Institutional
Banking
     Personal
Banking
     Healthcare
Services
     Total  

Net interest income

   $ 89,386      $ 12,763      $ 30,675      $ 8,034      $ 140,858  

Provision for loan losses

     9,565        313        1,622        —          11,500  

Noninterest income

     21,094        46,405        28,261        8,546        104,306  

Noninterest expense

     60,620        44,727        56,127        10,347        171,821  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income before taxes

     40,295        14,128        1,187        6,233        61,843  

Income tax expense

     8,454        2,965        244        1,308        12,971  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income from continuing operations

   $ 31,841      $ 11,163      $ 943      $ 4,925      $ 48,872  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Average assets

   $ 9,710,000      $ 3,582,000      $ 5,072,000      $ 1,949,000        20,313,000  
     Nine Months Ended September 30, 2018  
     Commercial
Banking
     Institutional
Banking
     Personal
Banking
     Healthcare
Services
     Total  

Net interest income

   $ 279,521      $ 47,351      $ 93,220      $ 28,546      $ 448,638  

Provision for loan losses

     17,179        1,027        4,544        —          22,750  

Noninterest income

     60,606        131,999        87,700        26,394        306,699  

Noninterest expense

     189,096        141,499        165,945        36,939        533,479  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income before taxes

     133,852        36,824        10,431        18,001        199,108  

Income tax expense

     19,032        5,227        1,484        2,559        28,302  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income from continuing operations

   $ 114,820      $ 31,597      $ 8,947      $ 15,442      $ 170,806  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Average assets

   $ 9,788,000      $ 3,895,000      $ 4,853,000      $ 2,168,000        20,704,000  
     Nine Months Ended September 30, 2017  
     Commercial
Banking
     Institutional
Banking
     Personal
Banking
     Healthcare
Services
     Total  

Net interest income

   $ 261,497      $ 36,731      $ 91,484      $ 22,855      $ 412,567  

Provision for loan losses

     28,500        1,101        5,399        —          35,000  

Noninterest income

     62,014        140,232        87,932        27,351        317,529  

Noninterest expense

     185,825        136,086        168,760        31,899        522,570  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income before taxes

     109,186        39,776        5,257        18,307        172,526  

Income tax expense

     23,297        8,437        1,273        3,900        36,907  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income from continuing operations

   $ 85,889      $ 31,339      $ 3,984      $ 14,407      $ 135,619  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Average assets

   $ 9,723,000      $ 3,457,000      $ 5,233,000      $ 1,875,000        20,288,000  

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 September 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
September 30,
    Nine Months Ended
September 30,
 
     2018     2017     2018     2017  

Income from continuing operations (GAAP)

   $ 57,849     $ 48,872       170,806     $ 135,619  

Adjustments:

        

Acquisition and divestiture expense (income)

     3       5       (3     22  

Severance expense

     221       80       3,035       815  

Tax-impact of adjustments (i)

     (49     (30     (673     (301
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Non-GAAP adjustments (net of tax)

     175       55       2,359       536  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net operating income from continuing operations (Non-GAAP)

   $ 58,024     $ 48,927     $ 173,165     $ 136,155  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share from continuing operations - diluted (GAAP)

   $ 1.16     $ 0.98     $ 3.41     $ 2.72  

Acquisition and divestiture expense (income)

     —         —         —         —    

Severance expense

     —         —         0.07       0.02  

Tax-impact of adjustments (i)

     —         —         (0.01     (0.01
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating earnings per share from continuing operations - diluted (Non-GAAP)

   $ 1.16     $ 0.98     $ 3.47     $ 2.73  
  

 

 

   

 

 

   

 

 

   

 

 

 

GAAP

        

Return on average assets

     1.11     0.95     1.10     0.89

Return on average equity

     10.32       9.17       10.43       8.82  

Non-GAAP

        

Operating return on average assets

     1.11     0.96     1.12     0.90

Operating return on average equity

     10.35       9.18       10.57       8.85  

(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%.


Operating noninterest expense and operating efficiency

ratio Non-GAAP reconciliations:

   UMB Financial Corporation  
(unaudited, dollars in thousands)                         
     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2018     2017     2018     2017  

Noninterest expense

   $ 180,385     $ 171,821     $ 533,479     $ 522,570  

Adjustments to arrive at operating noninterest expense (pre-tax):

        

Acquisition and divestiture expense (income)

     3       5       (3     22  

Severance expense

     221       80       3,035       815  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Non-GAAP adjustments (pre-tax)

     224       85       3,032       837  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating noninterest expense (Non-GAAP)

   $ 180,161     $ 171,736     $ 530,447     $ 521,733  
  

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest expense

   $ 180,385     $ 171,821     $ 533,479     $ 522,570  

Less: Amortization of other intangibles

     1,385       1,715       4,432       5,685  
  

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest expense, net of amortization of other intangibles (Non-GAAP) (numerator A)

   $ 179,000     $ 170,106     $ 529,047     $ 516,885  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating noninterest expense

   $ 180,161     $ 171,736     $ 530,447     $ 521,733  

Less: Amortization of other intangibles

     1,385       1,715       4,432       5,685  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expense, net of amortization of other intangibles (Non-GAAP) (numerator B)

   $ 178,776     $ 170,021     $ 526,015     $ 516,048  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

   $ 150,490     $ 140,858     $ 448,638     $ 412,567  

Noninterest income

     100,885       104,306       306,699       317,529  

Less: Gains on sales of securities available for sale, net

     211       2,390       578       4,138  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Non-GAAP Revenue (denominator A)

   $ 251,164     $ 242,774     $ 754,759     $ 725,958  
  

 

 

   

 

 

   

 

 

   

 

 

 

Efficiency ratio (numerator A/denominator A)

     71.27     70.07     70.09     71.20

Operating efficiency ratio (Non-GAAP) (numerator B/denominator A)

     71.18       70.03       69.69       71.09  
(Back To Top)

Section 3: EX-99.2 (EX-99.2)

EX-99.2

Slide 1

UMB Financial Third Quarter 2018 October 23, 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

3Q 2018 Highlights


Slide 4

Earnings Summary – 3Q 2018 $ in thousands, except share and per share data; unaudited Non-GAAP adjustments include acquisition and divestiture expense and income, severance expense and the cumulative 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, second and third quarter of 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 13.0%


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

3Q 2018 Financials


Slide 10

Select Balance Sheet Items $ in thousands, average balances; unaudited Three Months Ended For second and third quarter of 2018, securities yields, earning asset yields, net interest spread and net interest margin were 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 were 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 September 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 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 September 30 of the indicated year) High Growth Regions 3Q’18 vs. 3Q’17 Texas +27.0% Factoring (national platform) +52.1% Asset Based (national platform) +45.1% Percentages less than 5% have been omitted. (1)


Slide 14

Securities Held to Maturity $1.2 billion at September 30, 2018 Securities Available for Sale $5.9 billion at September 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: $5.9 billion Average Yield: 2.16% Duration: 47 months Average Balance: $1.2 billion Average Yield: 3.29% Duration: 72 months Total Portfolio Average Yield: 2.40% Duration: 51 months For third 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 September 30, 2018 Variable Rate Loans: $7.4 billion or 63% of loan book ~39% of variable loans are tied to Prime for the next quarter ~60% of variable loans are tied to LIBOR for the next quarter Loan Repricing/Maturity Schedule 59% in 4th quarter 2018 68% in the next 12 months AFS Portfolio Activity For first, second and third quarter of 2018, securities yields were 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 were computed using a federal income tax rate of 35 percent.


Slide 16

Diverse Sources of Deposits (Average Deposits for the three months ended September 30 of the indicated year) Deposit Composition 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 – 3Q 2018 Noninterest income increased $596 thousand, or 0.6%, compared to 2Q’18, primarily driven by: A $1.0MM increase in derivative income recorded in other income; A $416k increase in wealth management revenue and a $153k increase in corporate trust revenue impacting trust and securities processing; and, partially offset by A decrease of $942k in trading and investment banking due to decreased bond trading volume. 3rd 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 – 3Q 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: 3Q’18 2Q’18 3Q’17 Personal Banking – Private Wealth & Prairie Capital $ 16.4 $ 16.2 $ 16.8 Institutional Banking – Fund Services 21.2 21.2 23.5 Institutional Banking – Corp. Trust & other 5.8 5.4 4.8   $ 43.4 $ 42.8 $ 45.1


Slide 20

Noninterest Expense – 3Q 2018 Operating noninterest expense, which excludes the impact of acquisition and divestiture expense and severance expense, was $180.2 million for the third quarter of 2018, an increase of $3.8 million, or 2.1 percent, compared to the linked quarter, and an increase of $8.4 million, or 4.9 percent, compared to the third quarter of 2017. See slides 32 and 33 for a reconciliation of this non-GAAP financial measure. 3rd Quarter ‘18 Drivers Noninterest expense increased $3.2 million, or 1.8%, compared to 2Q’18, driven by: A $1.9MM increase in consulting expense related to ongoing investments in digital channels and integrated platforms support growth; Increased processing fees expense of $794k related to higher data processing costs; and Partially offset by a $1.2MM decline in salaries and employee benefits, largely due to lower medical insurance 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 September 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 Assets Under Management $ in billions Personal Banking


Slide 28

Healthcare Services Healthcare Deposits & Assets End-of-period balances; $ in billions 2014 2015 2016 2017 3Q’18 HSA deposits as % of total UMB deposits 6.2% 7.8% 9.7% 11.4% 13.7% 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 2018 Midyear HSA Market Statistics & Trends report dated August 22, 2018. Rankings as of June 30, 2018. Deposit and asset growth rates on an annual basis as of June 30, 2018. 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) 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 table above 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 costs and income 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 previous 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 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 (which is calculated as net interest income plus noninterest income, less gains on sales of securities available for sale, net).

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