Toggle SGML Header (+)


Section 1: 10-Q (UMBF Q3 2018 10Q)

umbf-10q_20180930.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 September 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 October 25, 2018, UMB Financial Corporation had 49,876,231 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

57

ITEM 4.

CONTROLS AND PROCEDURES

62

 

 

 

PART II - OTHER INFORMATION

63

 

 

 

ITEM 1.

LEGAL PROCEEDINGS

63

ITEM 1A.

RISK FACTORS

63

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

63

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

63

ITEM 4.

MINE SAFETY DISCLOSURES

63

ITEM 5.

OTHER INFORMATION

63

ITEM 6.

EXHIBITS

64

SIGNATURES

65

 

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)

 

 

 

September 30,

 

 

December 31,

 

 

 

2018

 

 

2017

 

ASSETS

 

 

 

 

 

 

 

 

Loans

 

$

11,964,724

 

 

$

11,280,513

 

Allowance for loan losses

 

 

(101,302

)

 

 

(100,604

)

Net loans

 

 

11,863,422

 

 

 

11,179,909

 

Loans held for sale

 

 

2,222

 

 

 

1,460

 

Securities:

 

 

 

 

 

 

 

 

Available for sale

 

 

5,932,741

 

 

 

6,258,577

 

Held to maturity (fair value of $1,091,640 and $1,207,447, respectively)

 

 

1,199,114

 

 

 

1,261,014

 

Trading securities

 

 

81,159

 

 

 

54,055

 

Other securities

 

 

65,252

 

 

 

65,897

 

Total investment securities

 

 

7,278,266

 

 

 

7,639,543

 

Federal funds sold and securities purchased under agreements to resell

 

 

206,412

 

 

 

191,601

 

Interest-bearing due from banks

 

 

668,990

 

 

 

1,351,760

 

Cash and due from banks

 

 

348,700

 

 

 

392,723

 

Premises and equipment, net

 

 

277,123

 

 

 

275,942

 

Accrued income

 

 

104,012

 

 

 

98,863

 

Goodwill

 

 

180,867

 

 

 

180,867

 

Other intangibles, net

 

 

16,335

 

 

 

20,257

 

Other assets

 

 

516,011

 

 

 

438,658

 

Total assets

 

$

21,462,360

 

 

$

21,771,583

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Noninterest-bearing demand

 

$

5,757,353

 

 

$

6,839,171

 

Interest-bearing demand and savings

 

 

10,938,839

 

 

 

9,903,565

 

Time deposits under $250,000

 

 

594,705

 

 

 

547,990

 

Time deposits of $250,000 or more

 

 

445,807

 

 

 

732,274

 

Total deposits

 

 

17,736,704

 

 

 

18,023,000

 

Federal funds purchased and repurchase agreements

 

 

1,192,985

 

 

 

1,260,704

 

Long-term debt

 

 

78,523

 

 

 

79,281

 

Accrued expenses and taxes

 

 

171,548

 

 

 

191,464

 

Other liabilities

 

 

79,136

 

 

 

35,603

 

Total liabilities

 

 

19,258,896

 

 

 

19,590,052

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

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

   shares issued; and 49,847,139 and 49,894,990 shares outstanding, respectively

 

 

55,057

 

 

 

55,057

 

Capital surplus

 

 

1,054,801

 

 

 

1,046,095

 

Retained earnings

 

 

1,477,732

 

 

 

1,338,110

 

Accumulated other comprehensive loss, net

 

 

(155,641

)

 

 

(45,525

)

Treasury stock, 5,209,591 and 5,161,740 shares, at cost, respectively

 

 

(228,485

)

 

 

(212,206

)

Total shareholders' equity

 

 

2,203,464

 

 

 

2,181,531

 

Total liabilities and shareholders' equity

 

$

21,462,360

 

 

$

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

 

 

Nine Months Ended

 

 

 

September 30,

 

 

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

 

Gain 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

See Notes to Consolidated Financial Statements.

5


 

UMB FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited, dollars in thousands)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

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(1)(2)

 

 

 

 

 

 

 

 

(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

 

 

(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

 

 

 

 

 

 

 

 

135,144

 

 

 

34,874

 

 

 

 

 

 

170,018

 

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(1)

 

 

 

 

 

 

 

 

12,917

 

 

 

 

 

 

 

 

 

12,917

 

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(2)

 

 

 

 

 

 

 

 

145

 

 

 

 

 

 

 

 

 

145

 

Balance - September 30, 2018

 

$

55,057

 

 

$

1,054,801

 

 

$

1,477,732

 

 

$

(155,641

)

 

$

(228,485

)

 

$

2,203,464

 

 

(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 Nine Months Ended

 

 

 

September 30,

 

 

 

2018

 

 

2017

 

OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net income

 

$

170,059

 

 

$

135,144

 

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

 

 

 

 

 

 

 

 

Provision for loan losses

 

 

22,750

 

 

 

35,000

 

Net accretion of premiums and discounts from acquisition

 

 

(193

)

 

 

(1,810

)

Depreciation and amortization

 

 

39,781

 

 

 

41,538

 

Deferred income tax (benefit) expense

 

 

(22,535

)

 

 

1,555

 

Net increase in trading securities and other earning assets

 

 

(29,583

)

 

 

(17,680

)

Gains on sales of securities available for sale, net

 

 

(578

)

 

 

(4,138

)

Gains on sales of assets

 

 

(157

)

 

 

(484

)

Amortization of securities premiums, net of discount accretion

 

 

33,906

 

 

 

36,571

 

Originations of loans held for sale

 

 

(40,836

)

 

 

(53,207

)

Gains on sales of loans held for sale, net

 

 

(966

)

 

 

(1,188

)

Proceeds from sales of loans held for sale

 

 

41,040

 

 

 

55,149

 

Equity-based compensation

 

 

8,964

 

 

 

10,047

 

Net tax benefit related to equity compensation plans

 

 

2,241

 

 

 

3,149

 

Changes in:

 

 

 

 

 

 

 

 

Accrued income

 

 

(5,149

)

 

 

(4,031

)

Accrued expenses and taxes

 

 

(19,916

)

 

 

21,011

 

Other assets and liabilities, net

 

 

25,258

 

 

 

(12,336

)

Net cash provided by operating activities

 

 

224,086

 

 

 

244,290

 

INVESTING ACTIVITIES