UMB Financial Corporation Reports Second Quarter Income from Continuing Operations of $57.0 Million or $1.16 per Diluted Share

UMB Financial Corporation (Nasdaq: UMBF), a financial services company, announced income from continuing operations for the second quarter 2019 of $57.0 million, or $1.16 per diluted share, compared to $57.7 million, or $1.18 per diluted share, in the first quarter 2019 (linked quarter) and $55.4 million, or $1.11 per diluted share, in the second quarter 2018. The reported GAAP income from continuing operations represents a decrease of 1.4 percent on a linked-quarter basis and an increase of 2.8 percent compared to the second quarter 2018.

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 $57.2 million, or $1.17 per diluted share, for the second quarter 2019, compared to $58.2 million, or $1.19 per diluted share, for the linked quarter and $56.1 million, or $1.12 per diluted share, for the second quarter 2018. These results represent a decrease of 1.7 percent on a linked-quarter basis and an increase of 2.1 percent compared to second quarter 2018.

Summary of quarterly financial results		UMB Financial Corporation
(unaudited, dollars in thousands, except per share data)
		Q2				Q1				Q2
		2019				2019				2018
Income from continuing operations		$	56,959			$	57,744			$	55,424
Loss from discontinued operations			—				—				—
Net income			56,959				57,744				55,424
Earnings per share from continuing operations (diluted)			1.16				1.18				1.11
Losses per share from discontinued operations (diluted)			—				—				—
Earnings per share (diluted)			1.16				1.18				1.11
Net operating income from continuing operations			57,245				58,208				56,079
Operating earnings per share from continuing operations (diluted)			1.17				1.19			1.12
GAAP - continuing operations
Return on average assets			0.98	%			1.02	%			1.08	%
Return on average equity			9.46				10.48				10.18
Efficiency ratio			70.32				70.00				70.21
Non-GAAP - continuing operations
Operating return on average assets			0.99	%			1.03	%			1.09	%
Operating return on average equity			9.51				10.56				10.30
Operating efficiency ratio			70.19				69.78				69.88

Summary of year-to-date financial results		UMB Financial Corporation
(unaudited, dollars in thousands, except per share data)		June				June
		YTD				YTD
		2019				2018
Income from continuing operations		$	114,703			$	112,957
Loss from discontinued operations			—				(747	)
Net income			114,703				112,210
Earnings per share from continuing operations (diluted)			2.34				2.26
Losses per share from discontinued operations (diluted)			—				(0.01	)
Earnings per share (diluted)			2.34				2.25
Net operating income from continuing operations			115,453				115,141
Operating earnings per share from continuing operations (diluted)			2.36				2.30
GAAP - continuing operations
Return on average assets			1.00	%			1.10	%
Return on average equity			9.95				10.49
Efficiency ratio			70.16				69.51
Non-GAAP - continuing operations
Operating return on average assets			1.01	%			1.12	%
Operating return on average equity			10.01				10.69
Operating efficiency ratio			69.98				68.95

“Our results in the second quarter were driven by fee income and balance sheet expansion, which included average loan growth of 10.3 percent on an annualized basis,” said Mariner Kemper, chairman, president and chief executive officer. “Average total assets for the second quarter were $23.3 billion, an increase of 1.8 percent compared to first quarter and 12.9 percent compared to the second quarter 2018.”

Discussion of results from continuing operations

Summary of revenue		UMB Financial Corporation
(unaudited, dollars in thousands)
		Q2				Q1				Q2				CQ vs.				CQ vs.
		2019				2019				2018				LQ				PY
Net interest income		$	166,414			$	163,868			$	150,226			$	2,546			$	16,188
Noninterest income:
Trust and securities processing			42,903				41,957				42,845				946				58
Trading and investment banking			5,453				5,581				4,653				(128	)			800
Service charges on deposit accounts			20,747				21,281				20,722				(534	)			25
Insurance fees and commissions			465				338				340				127				125
Brokerage fees			7,077				7,243				6,291				(166	)			786
Bankcard fees			16,439				17,067				17,184				(628	)			(745	)
(Losses) gains on sales of securities available for sale, net			(1,403	)			809				228				(2,212	)			(1,631	)
Other			13,717				13,106				8,026				611				5,691
Total noninterest income		$	105,398			$	107,382			$	100,289			$	(1,984	)		$	5,109
Total revenue		$	271,812			$	271,250			$	250,515			$	562			$	21,297
Net interest margin			3.19	%			3.20	%			3.24	%
Total noninterest income as a % of total revenue			38.78				39.59				40.03

Net interest income

• Net interest income totaled $166.4 million, an increase of $2.5 million, or 1.6 percent, from linked-quarter levels, impacted by a $317.8 million, or 2.6 percent, increase in average loans, a $303.6 million, or 3.8 percent, increase in average securities and one additional day in the second quarter.
• Net interest margin for the second quarter was 3.19 percent, down one basis point from the linked quarter, in large part due to lower short-term interest rates. Earning asset yields improved one basis point from the linked quarter in part driven by improved yields in the securities portfolio. The cost of interest-bearing liabilities increased five basis points to 1.39 percent, driven by an increase of $174.2 million in federal funds and repurchase agreements, and a four-basis-point increase in cost of interest-bearing deposits.
• On a year-over-year basis, the increase in net interest income was driven by a 10.3 percent, or $1.2 billion, increase in average loans, as well as higher average loan yields, which increased 40 basis points compared to 2018, primarily driven by higher short-term interest rates, volume and asset mix changes.
• For the second quarter 2019, average earning assets stood at $21.7 billion, an increase of 12.9 percent over the second quarter 2018.

Noninterest income

• Second quarter 2019 noninterest income decreased $2.0 million, or 1.8 percent, on a linked-quarter basis, largely due to:
  • A decrease of $2.2 million in gains on sales of available-for-sale securities. This decrease includes losses of $1.4 million realized in the second quarter of 2019.
  • A decrease of $0.6 million in bankcard fees primarily driven by an increase of $1.7 million in rebates expense recorded as contra-revenue, offset by an increase of $0.8 million in interchange income.
  • A decrease in company-owned life insurance of $3.4 million, recorded in other income, which is offset by a proportionate decrease in deferred compensation expense noted below.
  • These decreases were partially offset by increases of $1.1 million in equity earnings on alternative investments, recorded in other income, and $0.7 million in corporate trust income, recorded in trust and securities processing.

• Compared to the prior year, noninterest income in the second quarter of 2019 increased $5.1 million, or 5.1 percent, primarily driven by:
  • Increases of $1.4 million in derivative income, $1.2 million in equity earnings on alternative investments, and $0.8 million in company-owned life insurance, all of which are recorded in other income. The increase in company-owned life insurance is offset by a proportionate increase in deferred compensation expense noted below.
  • A $0.8 million increase in trading and investment banking income due to increased trading volume.

Noninterest expense

Summary of noninterest expense		UMB Financial Corporation
(unaudited, dollars in thousands)
		Q2				Q1				Q2				CQ vs.				CQ vs.
		2019				2019				2018				LQ				PY
Salaries and employee benefits		$	114,454			$	116,032			$	104,175			$	(1,578	)		$	10,279
Occupancy, net			11,539				11,743				10,813				(204	)			726
Equipment			18,824				19,684				18,842				(860	)			(18	)
Supplies and services			4,285				3,873				4,146				412				139
Marketing and business development			7,304				4,913				6,184				2,391				1,120
Processing fees			13,096				12,132				11,537				964				1,559
Legal and consulting			7,496				5,633				6,460				1,863				1,036
Bankcard			4,701				4,345				4,165				356				536
Amortization of other intangible assets			1,251				1,327				1,485				(76	)			(234	)
Regulatory fees			2,910				2,890				3,772				20				(862	)
Other			7,527				8,054				5,639				(527	)			1,888
Total noninterest expense		$	193,387			$	190,626			$	177,218			$	2,761			$	16,169

• GAAP noninterest expense for the second quarter of 2019 was $193.4 million, an increase of $2.8 million, or 1.4 percent, from the linked quarter and an increase of $16.2 million, or 9.1 percent, from the second quarter of 2018.
• On a non-GAAP basis, operating noninterest expense (as reconciled later in this release) was $193.0 million for the second quarter 2019, an increase of $3.0 million, or 1.6 percent, compared to the linked quarter and an increase of $16.6 million, or 9.4 percent, compared to the second quarter 2018.
• The linked quarter increase in noninterest expense was driven by:
  • An increase of $2.4 million in marketing and development expense and an increase of $1.9 million in legal and consulting expense, due to the timing of multiple technology and product initiatives.
  • These increases were partially offset by a decrease of $1.6 million in salaries and employee benefits, largely driven by lower payroll taxes and deferred compensation expense, partially offset by increased employee salaries and bonus and commission expense, as compared to the first quarter of 2019.
• The year-over-year increase in noninterest expense was driven by:
  • A $10.3 million increase in salaries and employee benefits, largely due to increases of $4.2 million in bonus and commission expense, $4.0 million in salaries and wages expense, and $0.9 million in deferred compensation expense, which is offset by the increase in company-owned life insurance noted above.
  • An increase of $1.6 million in derivative expense, recorded in other noninterest expense.
  • A $1.6 million increase in processing fees expense due to investments in digital channel and integrated platform solutions to support business growth and the ongoing modernization of the company’s core systems.
  • An increase of $1.1 million in marketing and development expense and an increase of $1.0 million in legal and consulting expense, due to the timing of multiple technology and product initiatives.

Income taxes

• The company’s effective tax rate was 15.5 percent for the six months ended June 30, 2019, compared to 15.6 percent for the same period in 2018.

Balance sheet

• Average total assets for the second quarter 2019 were $23.3 billion compared to $22.9 billion for the linked quarter and $20.6 billion for the same period in 2018.

Summary of average loans and leases - QTD Average										UMB Financial Corporation
(unaudited, dollars in thousands)
		Q2				Q1				Q2				CQ vs.				CQ vs.
		2019				2019				2018				LQ				PY
Commercial		$	5,427,498			$	5,270,130			$	4,478,829			$	157,368			$	948,669
Asset-based loans			387,983				378,508				336,710				9,475				51,273
Factoring loans			261,041				263,093				231,035				(2,052	)			30,006
Commercial credit card			196,313				195,872				191,009				441				5,304
Real estate - construction			889,233				787,483				823,169				101,750				66,064
Real estate - commercial			3,831,818				3,797,206				3,711,417				34,612				120,401
Real estate - residential			744,750				714,534				669,177				30,216				75,573
Real estate - HELOC			514,044				528,468				596,025				(14,424	)			(81,981	)
Consumer credit card			230,863				217,570				230,971				13,293				(108	)
Consumer other			132,662				145,100				153,427				(12,438	)			(20,765	)
Leases			4,776				5,190				22,679				(414	)			(17,903	)
Total loans		$	12,620,981			$	12,303,154			$	11,444,448			$	317,827			$	1,176,533

• Average loans for the second quarter 2019 increased 2.6 percent on a linked-quarter basis and 10.3 percent compared to the second quarter of 2018.

Summary of average securities - QTD Average		UMB Financial Corporation
(unaudited, dollars in thousands)
		Q2				Q1				Q2				CQ vs.				CQ vs.
		2019				2019				2018				LQ				PY
Securities available for sale:
U.S. Treasury		$	256,949			$	256,672			$	37,982			$	277			$	218,967
U.S. Agencies			91,822				53,458				2,946				38,364				88,876
Mortgage-backed			3,926,164				3,841,449				3,679,835				84,715				246,329
State and political subdivisions			2,659,397				2,534,438				2,330,454				124,959				328,943
Corporates			84,910				6,424				1,476				78,486				83,434
Commercial Paper			—				—				7,138				—				(7,138	)
Total securities available for sale		$	7,019,242			$	6,692,441			$	6,059,831			$	326,801			$	959,411
Securities held to maturity:
State and political subdivisions			1,128,526				1,157,126				1,228,849				(28,600	)			(100,323	)
Trading securities			61,565				46,408				45,538				15,157				16,027
Other securities			80,097				74,718				66,345				5,379				13,752
Total securities		$	8,289,430			$	7,970,693			$	7,400,563			$	318,737			$	888,867

• Average securities available for sale increased 4.9 percent on a linked-quarter basis and increased 15.8 percent compared to the second quarter of 2018.

Summary of average deposits - QTD Average						UMB Financial Corporation
(unaudited, dollars in thousands)
		Q2				Q1				Q2				CQ vs.				CQ vs.
		2019				2019				2018				LQ				PY
Deposits:
Noninterest-bearing demand		$	6,078,520			$	5,989,215			$	5,666,364			$	89,305			$	412,156
Interest-bearing demand and savings			11,740,634				11,698,351				9,768,015				42,283				1,972,619
Time deposits			966,719				1,034,763				1,032,000				(68,044	)			(65,281	)
Total deposits		$	18,785,873			$	18,722,329			$	16,466,379			$	63,544			$	2,319,494
Noninterest bearing deposits as % of total			32.36	%			31.99	%			34.41	%

• Average deposits increased 0.3 percent on a linked-quarter basis and 14.1 percent compared to the second quarter of 2018.

Capital

Capital information		UMB Financial Corporation
(unaudited, dollars in thousands, except per share data)
		June 30, 2019				March 31, 2019				June 30, 2018
Total equity		$	2,477,790			$	2,350,843			$	2,201,812
Book value per common share			50.50				47.92				43.96
Regulatory capital:
Common equity Tier 1 capital		$	2,236,930			$	2,188,521			$	2,145,617
Tier 1 capital			2,236,930				2,188,521				2,145,617
Total capital			2,411,510				2,364,465				2,315,483
Regulatory capital ratios:
Common equity Tier 1 capital ratio			12.65	%			12.70	%			13.56	%
Tier 1 risk-based capital ratio			12.65				12.70				13.56
Total risk-based capital ratio			13.63				13.72				14.63
Tier 1 leverage ratio			9.69				9.65				10.50

• At June 30, 2019, the regulatory capital ratios presented in the foregoing table exceeded all “well-capitalized” regulatory thresholds.

Asset Quality

Credit quality		UMB Financial Corporation
(unaudited, dollars in thousands)
		Q2				Q1				Q4				Q3				Q2
		2019				2019				2018				2018				2018
Net charge-offs - Commercial loans		$	11,790			$	10,537			$	44,010			$	624			$	6,137
Net (recoveries) charge-offs - Real estate loans			(714	)			41				28				408				1,035
Net charge-offs - Consumer credit card loans			1,336				1,676				1,606				1,632				1,786
Net charge-offs - Consumer other loans			157				70				23				82				46
Net charge-offs - Total loans			12,569				12,324				45,667				2,746				9,004
Net loan charge-offs as a % of total average loans			0.40	%			0.41	%			1.51	%			0.09	%			0.32	%
Loans over 90 days past due		$	1,825			$	1,874			$	6,009			$	1,927			$	2,883
Loans over 90 days past due as a % of total loans			0.01	%			0.01	%			0.05	%			0.02	%			0.02	%
Nonaccrual and restructured loans		$	53,395			$	63,270			$	43,018			$	50,568			$	56,030
Nonaccrual and restructured loans as a % of total loans			0.41	%			0.50	%			0.35	%			0.42	%			0.48	%
Provision for loan losses		$	11,000			$	12,350			$	48,000			$	5,750			$	7,000

• Nonperforming loans, defined as restructured loans on nonaccrual and all other nonaccrual loans, decreased $9.9 million from the linked quarter and decreased $2.6 million from the second quarter of 2018.
• Net charge-offs were $12.6 million, or 0.40 percent, of average loans, compared to $12.3 million, or 0.41 percent, of average loans in the linked quarter, and $9.0 million, or 0.32 percent, of average loans in the second quarter of 2018.
• Provision for loan losses decreased $1.4 million from the linked quarter, and increased $4.0 million from the second quarter of 2018, 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, payable on October 1, 2019, to shareholders of record at the close of business on September 10, 2019.

Conference Call

The company plans to host a conference call to discuss its second quarter 2019 earnings results on Wednesday, July 31, 2019, 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 investorrelations.umb.com or by using the following link:

UMB Financial 2Q 2019 Conference Call

A replay of the conference call may be heard through August 14, 2019 by calling (toll-free) 877-344-7529 or (international) 412-317-0088. The replay access code required for playback is 10133170. The call replay may also be accessed at investorrelations.umb.com.

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-, divestiture-, and severance-related items 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, 2018, 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 Blog or follow us on Twitter at @UMBBank, UMB Facebook and UMB LinkedIn.

Consolidated Balance Sheets		UMB Financial Corporation
(unaudited, dollars in thousands)
		June 30,
		2019				2018
ASSETS
Loans		$	12,900,269			$	11,631,628
Allowance for loan losses			(102,092	)			(98,298	)
Net loans			12,798,177				11,533,330
Loans held for sale			2,771				3,482
Investment Securities:
Available for sale			7,176,351				6,011,684
Held to maturity			1,112,773				1,204,582
Trading securities			81,381				67,091
Other securities			89,302				66,547
Total investment securities			8,459,807				7,349,904
Federal funds sold and resell agreements			283,603				70,346
Interest-bearing due from banks			876,551				113,875
Cash and due from banks			422,648				379,433
Premises and equipment, net			278,725				274,408
Accrued income			124,396				100,133
Goodwill			180,867				180,867
Other intangibles, net			12,425				17,210
Other assets			576,306				508,482
Total assets		$	24,016,276			$	20,531,470
LIABILITIES
Deposits:
Noninterest-bearing demand		$	6,524,428			$	5,994,426
Interest-bearing demand and savings			11,870,782				9,471,698
Time deposits under $250,000			610,711				512,446
Time deposits of $250,000 or more			394,309				407,508
Total deposits			19,400,230				16,386,078
Federal funds purchased and repurchase agreements			1,708,884				1,666,158
Long-term debt			88,569				78,692
Accrued expenses and taxes			198,141				147,608
Other liabilities			142,662				51,122
Total liabilities			21,538,486				18,329,658
SHAREHOLDERS' EQUITY
Common stock			55,057				55,057
Capital surplus			1,065,301				1,050,660
Retained earnings			1,573,586				1,434,342
Accumulated other comprehensive income (loss), net			62,617				(128,959	)
Treasury stock			(278,771	)			(209,288	)
Total shareholders' equity			2,477,790				2,201,812
Total liabilities and shareholders' equity		$	24,016,276			$	20,531,470

Consolidated Statements of Income		UMB Financial Corporation
(unaudited, dollars in thousands except share and per share data)
		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2019				2018				2019				2018
INTEREST INCOME
Loans		$	161,838			$	135,150			$	319,099			$	261,284
Securities:
Taxable interest			26,700				20,523				52,091				40,303
Tax-exempt interest			21,988				18,290				42,685				36,993
Total securities income			48,688				38,813				94,776				77,296
Federal funds and resell agreements			2,526				752				6,151				1,790
Interest-bearing due from banks			2,768				1,056				6,667				2,636
Trading securities			842				709				1,276				1,139
Total interest income			216,662				176,480				427,969				344,145
INTEREST EXPENSE
Deposits			39,516				18,334				77,350				32,169
Federal funds and repurchase agreements			9,347				6,666				17,611				11,398
Other			1,385				1,254				2,726				2,430
Total interest expense			50,248				26,254				97,687				45,997
Net interest income			166,414				150,226				330,282				298,148
Provision for loan losses			11,000				7,000				23,350				17,000
Net interest income after provision for loan losses			155,414				143,226				306,932				281,148
NONINTEREST INCOME
Trust and securities processing			42,903				42,845				84,860				86,847
Trading and investment banking			5,453				4,653				11,034				8,754
Service charges on deposit accounts			20,747				20,722				42,028				42,627
Insurance fees and commissions			465				340				803				641
Brokerage fees			7,077				6,291				14,320				12,644
Bankcard fees			16,439				17,184				33,506				35,307
(Losses) gains on sales of securities available for sale, net			(1,403	)			228				(594	)			367
Other			13,717				8,026				26,823				18,627
Total noninterest income			105,398				100,289				212,780				205,814
NONINTEREST EXPENSE
Salaries and employee benefits			114,454				104,175				230,486				212,143
Occupancy, net			11,539				10,813				23,282				21,766
Equipment			18,824				18,842				38,508				37,668
Supplies and services			4,285				4,146				8,158				7,906
Marketing and business development			7,304				6,184				12,217				11,218
Processing fees			13,096				11,537				25,228				22,698
Legal and consulting			7,496				6,460				13,129				10,304
Bankcard			4,701				4,165				9,046				8,791
Amortization of other intangible assets			1,251				1,485				2,578				3,047
Regulatory fees			2,910				3,772				5,800				6,677
Other			7,527				5,639				15,581				10,876
Total noninterest expense			193,387				177,218				384,013				353,094
Income before income taxes			67,425				66,297				135,699				133,868
Income tax expense			10,466				10,873				20,996				20,911
Income from continuing operations			56,959				55,424				114,703				112,957
Discontinued Operations
Loss from discontinued operations before income taxes			—				—				—				(917	)
Income tax benefit			—				—				—				(170	)
Loss from discontinued operations			—				—				—				(747	)
NET INCOME		$	56,959			$	55,424			$	114,703			$	112,210
PER SHARE DATA
Basic:
Income from continuing operations		$	1.17			$	1.12			$	2.35			$	2.28
Loss from discontinued operations			—				—				—				(0.01	)
Net income – basic			1.17				1.12				2.35				2.27
Diluted:
Income from continuing operations			1.16				1.11				2.34				2.26
Loss from discontinued operations			—				—				—				(0.01	)
Net income - diluted			1.16				1.11				2.34				2.25
Dividends			0.30				0.29				0.60				0.58
Weighted average shares outstanding - basic			48,777,732				49,551,920				48,745,124				49,486,626
Weighted average shares outstanding - diluted			49,039,692				50,007,022				49,018,787				49,973,992

Consolidated Statements of Comprehensive Income		UMB Financial Corporation
(unaudited, dollars in thousands)
		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2019				2018				2019				2018
Net income		$	56,959			$	55,424			$	114,703			$	112,210
Other comprehensive income (loss), net of tax:
Unrealized gains and losses on debt securities:
Change in unrealized holding gains and losses, net			107,484				(16,020	)			213,918				(96,682	)
Less: Reclassification adjustment for losses (gains) included in net income			1,403				(228	)			594				(367	)
Change in unrealized gains and losses on debt securities during the period			108,887				(16,248	)			214,512				(97,049	)
Change in unrealized gains and losses on derivative hedges			(3,041	)			910				(5,134	)			3,112
Income tax (expense) benefit			(25,590	)			3,770				(50,979	)			23,552
Other comprehensive income (loss) before reclassifications			80,256				(11,568	)			158,399				(70,385	)
Amounts reclassified from accumulated other comprehensive income			—				—				—				(13,049	)
Net current-period other comprehensive income (loss)			80,256				(11,568	)			158,399				(83,434	)
Comprehensive income		$	137,215			$	43,856			$	273,102			$	28,776

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) Income			Treasury Stock			Total
Balance - January 1, 2018	$	55,057		$	1,046,095		$	1,338,110		$	(45,525	)	$	(212,206	)	$	2,181,531
Total comprehensive income (loss)		—			—			112,210			(83,434	)		—			28,776
Reclassification of certain tax effects		—			—			12,917			—			—			12,917
Dividends ($0.58 per share)		—			—			(29,040	)		—			—			(29,040	)
Purchase of treasury stock		—			—			—			—			(6,211	)		(6,211	)
Issuance of equity awards, net of forfeitures		—			(2,457	)		—			—			2,951			494
Recognition of equity-based compensation		—			5,201			—			—			—			5,201
Sale of treasury stock		—			278			—			—			275			553
Exercise of stock options		—			1,543			—			—			5,903			7,446
Cumulative effect adjustments		—			—			145			—			—			145
Balance - June 30, 2018	$	55,057		$	1,050,660		$	1,434,342		$	(128,959	)	$	(209,288	)	$	2,201,812
Balance - January 1, 2019	$	55,057		$	1,054,601		$	1,488,421		$	(95,782	)	$	(273,827	)	$	2,228,470
Total comprehensive income		—			—			114,703			158,399			—			273,102
Dividends ($0.60 per share)		—			—			(29,538	)		—			—			(29,538	)
Purchase of treasury stock		—			—			—			—			(4,114	)		(4,114	)
Issuance of equity awards, net of forfeitures		—			3,107			—			—			(2,503	)		604
Recognition of equity-based compensation		—			7,006			—			—			—			7,006
Sale of treasury stock		—			185			—			—			274			459
Exercise of stock options		—			402			—			—			1,399			1,801
Balance - June 30, 2019	$	55,057		$	1,065,301		$	1,573,586		$	62,617		$	(278,771	)	$	2,477,790

Average Balances / Yields and Rates		UMB Financial Corporation
(tax - equivalent basis)
(unaudited, dollars in thousands)
		Three Months Ended June 30,
		2019								2018
		Average				Average				Average				Average
		Balance				Yield/Rate				Balance				Yield/Rate
Assets
Loans, net of unearned interest		$	12,620,981				5.14	%		$	11,444,448				4.74	%
Securities:
Taxable			4,502,680				2.38				3,862,378				2.13
Tax-exempt			3,725,185				2.99				3,492,647				2.66
Total securities			8,227,865				2.65				7,355,025				2.38
Federal funds and resell agreements			329,064				3.08				107,343				2.81
Interest bearing due from banks			450,032				2.47				252,292				1.68
Trading securities			61,565				6.07				45,538				6.83
Total earning assets			21,689,507				4.11				19,204,646				3.79
Allowance for loan losses			(109,463	)							(101,801	)
Other assets			1,690,423								1,516,801
Total assets		$	23,270,467							$	20,619,646
Liabilities and Shareholders' Equity
Interest-bearing deposits		$	12,707,353				1.25	%		$	10,800,015				0.68	%
Federal funds and repurchase agreements			1,728,748				2.17				1,737,383				1.54
Borrowed funds			81,742				6.80				78,583				6.40
Total interest-bearing liabilities			14,517,843				1.39				12,615,981				0.83
Noninterest-bearing demand deposits			6,078,520								5,666,364
Other liabilities			259,810								152,491
Shareholders' equity			2,414,294								2,184,810
Total liabilities and shareholders' equity		$	23,270,467							$	20,619,646
Net interest spread							2.72	%							2.96	%
Net interest margin							3.19								3.24

Average Balances / Yields and Rates		UMB Financial Corporation
(tax - equivalent basis)
(unaudited, dollars in thousands)
		Six Months Ended June 30,
		2019								2018
		Average				Average				Average				Average
		Balance				Yield/Rate				Balance				Yield/Rate
Assets
Loans, net of unearned interest		$	12,462,946				5.16	%		$	11,365,921				4.64	%
Securities:
Taxable			4,402,458				2.39				3,865,660				2.10
Tax-exempt			3,674,456				2.96				3,563,715				2.65
Total securities			8,076,914				2.65				7,429,375				2.37
Federal funds and resell agreements			424,712				2.92				134,009				2.69
Interest bearing due from banks			554,551				2.42				341,469				1.56
Trading securities			54,029				5.36				45,068				5.65
Total earning assets			21,573,152				4.11				19,315,842				3.70
Allowance for loan losses			(107,465	)							(101,652	)
Other assets			1,597,444								1,468,793
Total assets		$	23,063,131							$	20,682,983
Liabilities and Shareholders' Equity
Interest-bearing deposits		$	12,729,813				1.23	%		$	10,754,187				0.60	%
Federal funds and repurchase agreements			1,642,140				2.16				1,649,758				1.39
Borrowed funds			82,077				6.70				78,773				6.22
Total interest-bearing liabilities			14,454,030				1.36				12,482,718				0.74
Noninterest-bearing demand deposits			6,028,259								5,857,618
Other liabilities			255,405								170,374
Shareholders' equity			2,325,437								2,172,273
Total liabilities and shareholders' equity		$	23,063,131							$	20,682,983
Net interest spread							2.75	%							2.96	%
Net interest margin							3.19								3.22

Business Segment Information		UMB Financial Corporation
(unaudited, dollars in thousands)
		Three Months Ended June 30, 2019
		Commercial Banking				Institutional Banking				Personal Banking				Healthcare Services				Total
Net interest income		$	102,579			$	19,164			$	33,334			$	11,337			$	166,414
Provision for loan losses			9,306				181				1,513				—				11,000
Noninterest income			20,387				46,777				29,385				8,849				105,398
Noninterest expense			68,511				52,415				60,024				12,437				193,387
Income before taxes			45,149				13,345				1,182				7,749				67,425
Income tax expense			7,008				2,071				184				1,203				10,466
Income from continuing operations		$	38,141			$	11,274			$	998			$	6,546			$	56,959
		Three Months Ended June 30, 2018
		Commercial Banking				Institutional Banking				Personal Banking				Healthcare Services				Total
Net interest income		$	93,145			$	16,226			$	31,043			$	9,812			$	150,226
Provision for loan losses			5,139				322				1,539				—				7,000
Noninterest income			19,169				43,414				28,724				8,982				100,289
Noninterest expense			62,850				47,554				54,263				12,551				177,218
Income before taxes			44,325				11,764				3,965				6,243				66,297
Income tax expense			7,269				1,929				650				1,025				10,873
Income from continuing operations		$	37,056			$	9,835			$	3,315			$	5,218			$	55,424
		Six Months Ended June 30, 2019
		Commercial Banking				Institutional Banking				Personal Banking				Healthcare Services				Total
Net interest income		$	202,393			$	39,872			$	65,637			$	22,380			$	330,282
Provision for loan losses			19,635				467				3,248				—				23,350
Noninterest income			43,568				92,564				57,736				18,912				212,780
Noninterest expense			135,331				105,027				118,433				25,222				384,013
Income before taxes			90,995				26,942				1,692				16,070				135,699
Income tax expense			14,079				4,169				262				2,486				20,996
Income from continuing operations		$	76,916			$	22,773			$	1,430			$	13,584			$	114,703
		Six Months Ended June 30, 2018
		Commercial Banking				Institutional Banking				Personal Banking				Healthcare Services				Total
Net interest income		$	185,061			$	31,990			$	61,988			$	19,109			$	298,148
Provision for loan losses			13,117				672				3,211				—				17,000
Noninterest income			39,766				88,833				59,439				17,776				205,814
Noninterest expense			124,975				94,433				109,317				24,369				353,094
Income before taxes			86,735				25,718				8,899				12,516				133,868
Income tax expense			13,549				4,017				1,390				1,955				20,911
Income from continuing operations		$	73,186			$	21,701			$	7,509			$	10,561			$	112,957

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. The company’s reportable segments include certain corporate overhead, technology and service costs that are allocated based on methodologies that are applied consistently between periods. For comparability purposes, amounts in all periods are based on methodologies in effect at June 30, 2019.

Non-GAAP Financial Measures		UMB Financial Corporation
Net operating income Non-GAAP reconciliations:
(unaudited, dollars in thousands except per share data)
		Three Months Ended June 30,								Six Months Ended June 30,
		2019				2018				2019				2018
Income from continuing operations (GAAP)		$	56,959			$	55,424			$	114,703			$	112,957
Adjustments:
Acquisition and divestiture expense (income)			70				(24	)			97				(6	)
Severance expense			297				867				867				2,814
Tax-impact of adjustments (i)			(81	)			(188	)			(214	)			(624	)
Total Non-GAAP adjustments (net of tax)			286				655				750				2,184
Net operating income from continuing operations (Non-GAAP)		$	57,245			$	56,079			$	115,453			$	115,141
Earnings per share from continuing operations - diluted (GAAP)		$	1.16			$	1.11			$	2.34			$	2.26
Acquisition and divestiture expense			—				—				—				—
Severance expense			0.01				0.01				0.02				0.05
Tax-impact of adjustments (i)			—				—				—				(0.01	)
Operating earnings per share from continuing operations - diluted (Non-GAAP)		$	1.17			$	1.12			$	2.36			$	2.30
GAAP
Return on average assets			0.98	%			1.08	%			1.00	%			1.10	%
Return on average equity			9.46				10.18				9.95				10.49
Non-GAAP
Operating return on average assets			0.99	%			1.09	%			1.01	%			1.12	%
Operating return on average equity			9.51				10.30				10.01				10.69
(i) Calculated using the company’s marginal tax rate of 22.2 percent.

Operating noninterest expense and operating efficiency ratio Non-GAAP reconciliations:		UMB Financial Corporation
(unaudited, dollars in thousands)
		Three Months Ended June 30,								Six Months Ended June 30,
		2019				2018				2019				2018
Noninterest expense		$	193,387			$	177,218			$	384,013			$	353,094
Adjustments to arrive at operating noninterest expense (pre-tax):
Acquisition and divestiture expense (income)			70				(24	)			97				(6	)
Severance expense			297				867				867				2,814
Total Non-GAAP adjustments (pre-tax)			367				843				964				2,808
Operating noninterest expense (Non-GAAP)		$	193,020			$	176,375			$	383,049			$	350,286
Noninterest expense		$	193,387			$	177,218			$	384,013			$	353,094
Less: Amortization of other intangibles			1,251				1,485				2,578				3,047
Noninterest expense, net of amortization of other intangibles (Non-GAAP) (numerator A)		$	192,136			$	175,733			$	381,435			$	350,047
Operating noninterest expense		$	193,020			$	176,375			$	383,049			$	350,286
Less: Amortization of other intangibles			1,251				1,485				2,578				3,047
Operating expense, net of amortization of other intangibles (Non-GAAP) (numerator B)		$	191,769			$	174,890			$	380,471			$	347,239
Net interest income		$	166,414			$	150,226			$	330,282			$	298,148
Noninterest income			105,398				100,289				212,780				205,814
Less: (Losses) gains on sales of securities available for sale, net			(1,403	)			228				(594	)			367
Total Non-GAAP Revenue (denominator A)		$	273,215			$	250,287			$	543,656			$	503,595
Efficiency ratio (numerator A/denominator A)			70.32	%			70.21	%			70.16	%			69.51	%
Operating efficiency ratio (Non-GAAP) (numerator B/denominator A)			70.19				69.88				69.98				68.95

 

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