UMB Financial Corporation : Reports Record Earnings of $243.6 Million for the Full-Year 2019

2019 Financial Highlights (all comparisons to the prior year) Average loan balances increased $1.2 billion, or 10.0 percent; annual gross loan production of $3.6 billion increased 39.1 percent Average deposits grew 13.7 percent to $19.3 billion Noninterest income increased 6.2 percent, and comprised 38.9 percent of revenue Credit quality remained strong, with net charge-offs of just 0.27 percent of average loans, consistent with the company’s historical performance

UMB Financial Corporation (Nasdaq: UMBF), a financial services company, announced income from continuing operations for the fourth quarter of 2019 of $66.5 million, or $1.35 per diluted share, compared to $62.4 million, or $1.27 per diluted share, in the third quarter of 2019 (linked quarter) and $25.5 million, or $0.52 per diluted share, in the fourth quarter of 2018. The results for 2018 included increased provision expense related to the charge-off of a single $48.1 million factoring credit. The reported GAAP income from continuing operations represents an increase of 6.6 percent on a linked-quarter basis and an increase of 161.3 percent compared to the fourth quarter of 2018. For the year ended December 31, 2019, income from continuing operations was $243.6 million, or $4.96 per diluted share, which is an increase of 24.1 percent compared to $196.3 million, or $3.94 per diluted share, for the year ended December 31, 2018.

“We capped off another strong year of financial performance, reporting record earnings in 2019. I am particularly pleased with our fourth quarter 2019 results, with income from continuing operations of $66.5 million, an increase of 6.6 percent compared to the third quarter,” said Mariner Kemper, chairman, president and chief executive officer. “Highlights for the quarter include strong balance sheet growth, with average loan balances increasing 2.6 percent compared to the third quarter, and 10.6 percent compared to the fourth quarter 2018. This growth, together with strong fee income, resulted in total revenue increases of 4.0 percent on a linked-quarter basis and 10.1 percent compared to fourth quarter 2018 levels. Expenses were elevated in the fourth quarter, driven largely by incentives tied to business and revenue growth, as well as overall company performance. For the full year 2019, we earned $243.6 million, or $4.96 per diluted share. We saw continued momentum in noninterest income, including a 50.6 percent increase in trading and investment banking income, along with solid performance in corporate trust and many of our other businesses.”

Summary of quarterly financial results		UMB Financial Corporation
(unaudited, dollars in thousands, except per share data)
		Q4				Q3				Q4
		2019				2019				2018
Income from continuing operations		$	66,515			$	62,382			$	25,454
Loss from discontinued operations			—				—				—
Net income			66,515				62,382				25,454
Earnings per share from continuing operations (diluted)			1.35				1.27				0.52
Losses per share from discontinued operations (diluted)			—				—				—
Earnings per share (diluted)			1.35				1.27				0.52
Net operating income from continuing operations			67,038				62,525				27,578
Operating earnings per share from continuing operations (diluted)			1.36				1.27			0.56
GAAP - continuing operations
Return on average assets			1.05	%			1.03	%			0.46	%
Return on average equity			10.15				9.69				4.57
Efficiency ratio			71.59				70.70				71.26
Non-GAAP - continuing operations
Operating return on average assets			1.06	%			1.04	%			0.50	%
Operating return on average equity			10.23				9.72				4.95
Operating efficiency ratio			71.35				70.63				70.19

Summary of year-to-date financial results		UMB Financial Corporation
(unaudited, dollars in thousands, except per share data)		December				December
		YTD				YTD
		2019				2018
Income from continuing operations		$	243,600			$	196,260
Loss from discontinued operations			—				(747	)
Net income			243,600				195,513
Earnings per share from continuing operations (diluted)			4.96				3.94
Losses per share from discontinued operations (diluted)			—				(0.01	)
Earnings per share (diluted)			4.96				3.93
Net operating income from continuing operations			245,016				200,743
Operating earnings per share from continuing operations (diluted)			4.99				4.03
GAAP - continuing operations
Return on average assets			1.02	%			0.93	%
Return on average equity			9.94				8.94
Efficiency ratio			70.66				70.39
Non-GAAP - continuing operations
Operating return on average assets			1.03	%			0.96	%
Operating return on average equity			9.99				9.15
Operating efficiency ratio			70.49				69.82

Discussion of results from continuing operations

Summary of revenue		UMB Financial Corporation
(unaudited, dollars in thousands)
		Q4				Q3				Q4				CQ vs.				CQ vs.
		2019				2019				2018				LQ				PY
Net interest income		$	172,363			$	168,260			$	161,808			$	4,103			$	10,555
Noninterest income:
Trust and securities processing			46,835				45,218				41,891				1,617				4,944
Trading and investment banking			6,720				5,712				3,119				1,008				3,601
Service charges on deposit accounts			20,100				20,620				20,733				(520	)			(633	)
Insurance fees and commissions			511				320				312				191				199
Brokerage fees			8,839				8,102				6,761				737				2,078
Bankcard fees			16,326				16,895				16,375				(569	)			(49	)
Gains on sales of securities available for sale, net			755				3,057				—				(2,302	)			755
Other			10,269				3,711				5,808				6,558				4,461
Total noninterest income		$	110,355			$	103,635			$	94,999			$	6,720			$	15,356
Total revenue		$	282,718			$	271,895			$	256,807			$	10,823			$	25,911
Net interest margin			3.02	%			3.09	%			3.24	%
Total noninterest income as a % of total revenue			39.03				38.12				36.99

Net interest income

• Net interest income totaled $172.4 million, an increase of $4.1 million, or 2.4 percent, from linked quarter levels, driven by a $341.0 million, or 2.6 percent, increase in average loans, and a 4.8 percent increase in average earning assets. These benefits were offset by the impact of recent reductions in short-term interest rates on net interest margin.
• Net interest margin for the fourth quarter was 3.02 percent, down seven basis points from the linked quarter, in large part due to lower short-term interest rates as well as an unfavorable shift in the mix of earning assets. Earning asset yields declined 23 basis points from the linked quarter, driven by declining yields in the loan portfolio due to recent reductions in short-term interest rates and the impact of excess liquidity. The cost of interest-bearing liabilities decreased 24 basis points to 1.10 percent, driven by a 22-basis-point decline in cost of interest-bearing deposits and lower borrowing costs.
• On a year-over-year basis, the increase in net interest income was driven by a $1.3 billion, or 10.6 percent, increase in average loans, and a $1.2 billion, or 16.7 percent, increase in average investment securities. These benefits were coupled with higher average securities yields, which increased 13 basis points compared to 2018.
• For the fourth quarter of 2019, earning assets averaged $23.5 billion, an increase of 14.7 percent compared to the fourth quarter of 2018.

Noninterest income

• Fourth quarter 2019 noninterest income increased $6.7 million, or 6.5 percent, on a linked-quarter basis, largely due to:
  • Increases of $3.0 million in company-owned life insurance income, $2.5 million in equity earnings on alternative investments, and $1.4 million in derivative income, all recorded in other income. The increase in company-owned life insurance income is offset by a proportionate increase in deferred compensation expense noted below.
  • An increase of $1.0 million in trading and investment banking income due to increased trading volume.
  • An increase of $0.9 million and $0.8 million in fund servicing revenue and corporate trust income, both recorded in trust and securities processing.
  • These increases were partially offset by a decrease of $2.3 million in gains on sales of available-for-sale securities.

• Compared to the prior year, noninterest income in the fourth quarter of 2019 increased $15.4 million, or 16.2 percent, primarily driven by:
  • Increases of $6.8 million in company-owned life insurance and $1.8 million in derivative income, both recorded in other income. The increase in company-owned life insurance income is offset by a proportionate increase in deferred compensation expense noted below.
  • An increase of $3.6 million in trading and investment banking income due to increased trading volume.
  • An increase of $2.7 million in fund servicing income and an increase of $2.2 million in corporate trust income, both recorded in trust and securities processing.
  • An increase of $2.1 million in brokerage fees, primarily driven by higher money market and 12b-1 income.
  • These increases were partially offset by a decrease of $2.4 million in gains on sales of assets and $0.9 million on loss recoveries, both recorded in other income in the prior year.

Noninterest expense

Summary of noninterest expense		UMB Financial Corporation
(unaudited, dollars in thousands)
		Q4				Q3				Q4				CQ vs.				CQ vs.
		2019				2019				2018				LQ				PY
Salaries and employee benefits		$	120,806			$	110,153			$	103,992			$	10,653			$	16,814
Occupancy, net			12,249				12,240				11,845				9				404
Equipment			20,803				19,775				18,983				1,028				1,820
Supplies and services			6,280				4,261				3,669				2,019				2,611
Marketing and business development			8,385				5,655				6,483				2,730				1,902
Processing fees			13,351				13,619				11,948				(268	)			1,403
Legal and consulting			10,001				8,374				11,085				1,627				(1,084	)
Bankcard			4,061				4,643				4,316				(582	)			(255	)
Amortization of other intangible assets			1,593				1,335				1,332				258				261
Regulatory fees			2,940				2,749				2,681				191				259
Other			2,981				8,593				7,987				(5,612	)			(5,006	)
Total noninterest expense		$	203,450			$	191,397			$	184,321			$	12,053			$	19,129

• GAAP noninterest expense for the fourth quarter of 2019 was $203.5 million, an increase of $12.1 million, or 6.3 percent, from the linked quarter and an increase of $19.1 million, or 10.4 percent, from the fourth quarter of 2018.
• The linked quarter increase in noninterest expense was driven by:
  • An increase of $10.7 million in salaries and employee benefits, largely driven by a $6.8 million increase in bonus and commission expense tied to higher business volumes and revenue growth, as well as overall company performance, a $1.6 million increase in salary and wage expense, and a $2.5 million increase in deferred compensation expense, which is offset by the increase in company-owned life insurance income noted above.
  • A $2.7 million increase in marketing and business development expense, primarily driven by an increase of $2.3 million in advertising and business development due to the timing of multiple product initiatives and an increase of $0.5 million in travel and entertainment expense.
  • An increase of $2.0 million in supplies and services expense primarily due to expenses related to credit card campaign mailings and an increase of $1.4 million in consulting expense due to the timing of multiple technology initiatives.
  • These increases were partially offset by a decrease of $5.6 million in other expense, primarily driven by a decrease of $5.1 million in derivative valuation expense and $0.7 million in property and real estate taxes.
• The year-over-year increase in noninterest expense was driven by:
  • A $16.8 million increase in salaries and employee benefits, primarily due to increases of $9.2 million in employee benefits expense, $4.5 million in bonus and commission expense, and $3.2 million in salary and wages expense. The increase in employee benefits expense was primarily driven by an increase of $7.5 million in deferred compensation expense, which is offset by the increase in company-owned life insurance income noted above.
  • An increase of $1.6 million in postage due to credit card campaign mailings and $0.8 million in purchases of computers, both recorded in supplies and services expense.
  • An increase of $1.9 million in marketing and business development due to timing of multiple product initiatives.
  • Increases of $1.8 million in equipment expense and $1.4 million 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.
  • These increases were offset by decreases of $4.6 million in derivative valuation expense and $1.1 million in contributions expense, both recorded in other noninterest expense.

Full year 2019 financial discussion

• The 9.9 percent year-over-year increase in net interest income was driven by benefits from higher short-term interest rates, favorable reinvestment yields on cash flows from the investment securities portfolio and increased loan balances. In 2019, average loan balances increased $1.2 billion and average securities increased $957.5 million, with average loan yields increasing 18 basis points and average securities yields increasing 23 basis points. Average interest-bearing liabilities increased $2.1 billion, while the cost of interest-bearing liabilities increased 34 basis points.
• Full-year noninterest income increased $25.1 million, or 6.2 percent, due to:
  • Increases of $8.7 million in company-owned life insurance and $3.3 million in derivative income, both recorded in other noninterest income. The increase in company-owned life insurance income is offset by a proportionate increase in deferred compensation expense noted below.
  • A $7.9 million increase in trading and investment banking due to increased trading volume.
  • An increase of $6.9 million in corporate trust income, recorded in trust and securities processing.
  • A $5.5 million increase in brokerage fees, primarily driven by higher money market and 12b-1 income.
  • These increases were partially offset by a decrease of $2.5 million in equity earnings on alternative investments, recorded in other income, and decreases of $1.4 million in fund servicing revenue and $0.7 million in trust services income, both recorded in trust and securities processing.
• Full-year noninterest expense increased $61.1 million, or 8.5 percent, primarily due to:
  • A $5.2 million increase in processing fees expense and a $3.9 million increase in equipment 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 $3.9 million in operational losses during the current year, recorded in other noninterest expense.
  • An increase of $1.6 million in postage due to credit card campaign mailings and $0.7 million in purchases of computers, both recorded in supplies and services expense.
  • Additional increases of $2.5 million in occupancy expense and $1.9 million in marketing and business development expense.

Income taxes

• The company’s effective tax rate was 14.8 percent for the year ended December 31, 2019, compared to 12.2 percent for the same period in 2018. The effective tax rate for 2018 reflected a net discrete tax benefit of $5.1 million, primarily related to the re-measurement of the company’s estimates for the impacts of the Tax Cuts & Jobs Act.

Balance sheet

• Average total assets for the fourth quarter of 2019 were $25.1 billion compared to $23.9 billion for the linked quarter and $21.9 billion for the same period in 2018.

Summary of average loans and leases - QTD Average										UMB Financial Corporation
(unaudited, dollars in thousands)
		Q4				Q3				Q4				CQ vs.				CQ vs.
		2019				2019				2018				LQ				PY
Commercial		$	5,595,358			$	5,443,718			$	4,977,907			$	151,640			$	617,451
Asset-based loans			350,905				372,938				381,477				(22,033	)			(30,572	)
Factoring loans			188,927				221,862				300,265				(32,935	)			(111,338	)
Commercial credit card			195,970				204,905				178,772				(8,935	)			17,198
Real estate - construction			894,756				819,926				826,310				74,830				68,446
Real estate - commercial			4,254,780				4,164,477				3,663,610				90,303				591,170
Real estate - residential			890,324				805,994				697,927				84,330				192,397
Real estate - HELOC			480,843				498,460				555,161				(17,617	)			(74,318	)
Consumer credit card			242,503				220,363				248,309				22,140				(5,806	)
Consumer other			135,525				136,117				132,812				(592	)			2,713
Leases			1,993				2,118				5,386				(125	)			(3,393	)
Total loans		$	13,231,884			$	12,890,878			$	11,967,936			$	341,006			$	1,263,948

• Average loans for the fourth quarter of 2019 increased 2.6 percent on a linked-quarter basis and 10.6 percent compared to the fourth quarter of 2018.

Summary of average securities - QTD Average		UMB Financial Corporation
(unaudited, dollars in thousands)
		Q4				Q3				Q4				CQ vs.				CQ vs.
		2019				2019				2018				LQ				PY
Securities available for sale:
U.S. Treasury		$	220,830			$	250,552			$	105,509			$	(29,722	)		$	115,321
U.S. Agencies			93,258				93,440				198				(182	)			93,060
Mortgage-backed			3,967,051				3,987,463				3,703,212				(20,412	)			263,839
State and political subdivisions			2,968,305				2,795,210				2,353,816				173,095				614,489
Corporates			184,503				155,656				—				28,847				184,503
Total securities available for sale		$	7,433,947			$	7,282,321			$	6,162,735			$	151,626			$	1,271,212
Securities held to maturity:
State and political subdivisions		$	1,117,268			$	1,105,397			$	1,180,061			$	11,871			$	(62,793	)
Trading securities			56,653				44,571				61,629				12,082				(4,976	)
Other securities			96,994				90,008				66,760				6,986				30,234
Total securities		$	8,704,862			$	8,522,297			$	7,471,185			$	182,565			$	1,233,677

• Average securities available for sale increased 2.1 percent on a linked-quarter basis and increased 20.6 percent compared to the fourth quarter of 2018.

Summary of average deposits - QTD Average						UMB Financial Corporation
(unaudited, dollars in thousands)
		Q4				Q3				Q4				CQ vs.				CQ vs.
		2019				2019				2018				LQ				PY
Deposits:
Noninterest-bearing demand		$	6,398,309			$	6,082,498			$	6,052,011			$	315,811			$	346,298
Interest-bearing demand and savings			12,959,948				12,214,570				11,057,273				745,378				1,902,675
Time deposits			1,028,293				1,011,862				1,060,838				16,431				(32,545	)
Total deposits		$	20,386,550			$	19,308,930			$	18,170,122			$	1,077,620			$	2,216,428
Noninterest bearing deposits as % of total			31.38	%			31.50	%			33.31	%

• Average deposits increased 5.6 percent on a linked-quarter basis and 12.2 percent compared to the fourth quarter of 2018.

Capital

Capital information		UMB Financial Corporation
(unaudited, dollars in thousands, except per share data)
		December 31, 2019				September 30, 2019				December 31, 2018
Total equity		$	2,606,440			$	2,563,866			$	2,228,470
Book value per common share			53.09				52.23				45.37
Regulatory capital:
Common equity Tier 1 capital		$	2,330,533			$	2,284,417			$	2,142,469
Tier 1 capital			2,330,533				2,284,417				2,142,469
Total capital			2,505,397				2,464,698				2,318,145
Regulatory capital ratios:
Common equity Tier 1 capital ratio			12.33	%			12.53	%			12.89	%
Tier 1 risk-based capital ratio			12.33				12.53				12.89
Total risk-based capital ratio			13.26				13.51				13.95
Tier 1 leverage ratio			9.37				9.62				9.87

• At December 31, 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)
		Q4				Q3				Q2				Q1				Q4
		2019				2019				2019				2019				2018
Net charge-offs - Commercial loans		$	6,075			$	568			$	11,790			$	10,537			$	44,010
Net (recoveries) charge-offs - Real estate loans			(166	)			161				(714	)			41				28
Net charge-offs - Consumer credit card loans			1,616				1,377				1,336				1,676				1,606
Net charge-offs - Consumer other loans			93				80				157				70				23
Net charge-offs - Total loans			7,618				2,186				12,569				12,324				45,667
Net loan charge-offs as a % of total average loans			0.23	%			0.07	%			0.40	%			0.41	%			1.51	%
Loans over 90 days past due		$	2,069			$	2,466			$	1,825			$	1,874			$	6,009
Loans over 90 days past due as a % of total loans			0.02	%			0.02	%			0.01	%			0.01	%			0.05	%
Nonaccrual and restructured loans		$	56,347			$	71,838			$	53,395			$	63,270			$	43,018
Nonaccrual and restructured loans as a % of total loans			0.42	%			0.55	%			0.41	%			0.50	%			0.35	%
Provision for loan losses		$	2,000			$	7,500			$	11,000			$	12,350			$	48,000

• Provision for loan losses totaled $2.0 million, a decrease of $5.5 million from the linked quarter, and $46.0 million from the fourth quarter of 2018. The provision expense for 2018 included increased provision expense related to the charge-off of a single $48.1 million factoring credit.
• Net charge-offs totaled $7.6 million, or 0.23 percent, of average loans, compared to $2.2 million, or 0.07 percent, of average loans in the linked quarter.

Dividend Declaration

At the company’s quarterly board meeting, the Board of Directors declared a $0.31 per share quarterly cash dividend, payable on April 1, 2020, to shareholders of record at the close of business on March 10, 2020.

Conference Call

The company plans to host a conference call to discuss its fourth quarter and full year 2019 earnings results on Wednesday, January 29, 2020, 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 4Q 2019 Conference Call

A replay of the conference call may be heard through February 12, 2020 by calling (toll-free)

877-344-7529 or (international) 412-317-0088. The replay access code required for playback is 10137932. 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
(dollars in thousands)
		December 31,
		2019				2018
		(unaudited)				(audited)
ASSETS
Loans		$	13,431,722			$	12,178,150
Allowance for loan losses			(101,788	)			(103,635	)
Net loans			13,329,934				12,074,515
Loans held for sale			7,803				3,192
Securities:
Available for sale			7,447,362				6,542,800
Held to maturity			1,116,102				1,170,646
Trading securities			45,618				61,011
Other securities			108,420				73,692
Total securities			8,717,502				7,848,149
Federal funds sold and resell agreements			1,578,345				627,001
Interest-bearing due from banks			1,225,491				1,047,830
Cash and due from banks			472,958				645,123
Premises and equipment, net			300,334				283,879
Accrued income			124,508				110,168
Goodwill			180,867				180,867
Other intangibles, net			27,597				15,003
Other assets			596,016				515,392
Total assets		$	26,561,355			$	23,351,119
LIABILITIES
Deposits:
Noninterest-bearing demand		$	6,944,465			$	6,680,070
Interest-bearing demand and savings			13,432,415				11,454,442
Time deposits under $250,000			611,587				593,904
Time deposits of $250,000 or more			614,777				552,844
Total deposits			21,603,244				19,281,260
Federal funds purchased and repurchase agreements			1,896,508				1,518,920
Long-term debt			97,490				82,671
Accrued expenses and taxes			232,200				177,731
Other liabilities			125,473				62,067
Total liabilities			23,954,915				21,122,649
SHAREHOLDERS' EQUITY
Common stock			55,057				55,057
Capital surplus			1,073,764				1,054,601
Retained earnings			1,672,438				1,488,421
Accumulated other comprehensive income (loss), net			83,180				(95,782	)
Treasury stock			(277,999	)			(273,827	)
Total shareholders' equity			2,606,440				2,228,470
Total liabilities and shareholders' equity		$	26,561,355			$	23,351,119

Consolidated Statements of Income		UMB Financial Corporation
(dollars in thousands except share and per share data)
		Three Months Ended								Year Ended
		December 31,								December 31,
		2019				2018				2019				2018
		(unaudited)				(unaudited)				(unaudited)				(audited)
INTEREST INCOME
Loans		$	156,503			$	154,120			$	637,845			$	559,351
Securities:
Taxable interest			26,996				22,767				106,053				83,333
Tax-exempt interest			24,177				19,137				90,064				74,411
Total securities income			51,173				41,904				196,117				157,744
Federal funds and resell agreements			4,875				2,353				13,843				4,808
Interest-bearing due from banks			2,765				3,761				12,882				7,910
Trading securities			504				581				2,205				2,148
Total interest income			215,820				202,719				862,892				731,961
INTEREST EXPENSE
Deposits			35,698				34,140				154,192				92,101
Federal funds and repurchase agreements			6,629				5,815				32,553				24,737
Other			1,130				956				5,242				4,677
Total interest expense			43,457				40,911				191,987				121,515
Net interest income			172,363				161,808				670,905				610,446
Provision for loan losses			2,000				48,000				32,850				70,750
Net interest income after provision for loan losses			170,363				113,808				638,055				539,696
NONINTEREST INCOME
Trust and securities processing			46,835				41,891				176,913				172,163
Trading and investment banking			6,720				3,119				23,466				15,584
Service charges on deposit accounts			20,100				20,733				82,748				84,287
Insurance fees and commissions			511				312				1,634				1,292
Brokerage fees			8,839				6,761				31,261				25,807
Bankcard fees			16,326				16,375				66,727				68,520
Gains on sales of securities available for sale, net			755				—				3,218				578
Other			10,269				5,808				40,803				33,467
Total noninterest income			110,355				94,999				426,770				401,698
NONINTEREST EXPENSE
Salaries and employee benefits			120,806				103,992				461,445				419,091
Occupancy, net			12,249				11,845				47,771				45,239
Equipment			20,803				18,983				79,086				75,184
Supplies and services			6,280				3,669				18,699				16,103
Marketing and business development			8,385				6,483				26,257				24,372
Processing fees			13,351				11,948				52,198				46,977
Legal and consulting			10,001				11,085				31,504				29,859
Bankcard			4,061				4,316				17,750				17,514
Amortization of other intangible assets			1,593				1,332				5,506				5,764
Regulatory fees			2,940				2,681				11,489				12,695
Other			2,981				7,987				27,155				25,002
Total noninterest expense			203,450				184,321				778,860				717,800
Income before income taxes			77,268				24,486				285,965				223,594
Income tax expense (benefit)			10,753				(968	)			42,365				27,334
Income from continuing operations			66,515				25,454				243,600				196,260
Discontinued Operations
Loss from discontinued operations before income taxes			—				—				—				(917	)
Income tax benefit			—				—				—				(170	)
Loss from discontinued operations			—				—				—				(747	)
NET INCOME		$	66,515			$	25,454			$	243,600			$	195,513
PER SHARE DATA
Basic:
Income from continuing operations		$	1.36			$	0.52			$	4.99			$	3.98
Loss from discontinued operations			—				—				—				(0.01	)
Net income – basic			1.36				0.52				4.99				3.97
Diluted:
Income from continuing operations			1.35				0.52				4.96				3.94
Loss from discontinued operations			—				—				—				(0.01	)
Net income – diluted			1.35				0.52				4.96				3.93
Dividends			0.31				0.30				1.21				1.17
Weighted average shares outstanding – basic			48,828,509				48,898,286				48,779,263				49,334,937
Weighted average shares outstanding – diluted			49,187,291				49,230,321				49,089,877				49,770,737

Consolidated Statements of Comprehensive Income		UMB Financial Corporation
(dollars in thousands)
		Three Months Ended								Year Ended
		December 31,								December 31,
		2019				2018				2019				2018
		(unaudited)				(unaudited)				(unaudited)				(audited)
Net income		$	66,515			$	25,454			$	243,600			$	195,513
Other comprehensive (loss) income, before tax:
Unrealized gains and losses on debt securities:
Change in unrealized holding gains and losses, net			(14,209	)			81,742				253,891				(51,271	)
Less: Reclassification adjustment for gains included in net income			(755	)			—				(3,218	)			(578	)
Change in unrealized gains and losses on debt securities			(14,964	)			81,742				250,673				(51,849	)
Unrealized gains and losses on derivative hedges:
Change in unrealized gains and losses on derivative hedges, net			(2,700	)			(2,368	)			(15,318	)			1,906
Less: Reclassification adjustment for losses included in net income			728				—				1,023				—
Change in unrealized gains and losses on derivative hedges			(1,972	)			(2,368	)			(14,295	)			1,906
Other comprehensive (loss) income, before tax			(16,936	)			79,374				236,378				(49,943	)
Income tax benefit (expense)			4,095				(19,515	)			(57,416	)			12,735
Other comprehensive (loss) income before reclassifications			(12,841	)			59,859				178,962				(37,208	)
Amounts reclassified from accumulated other comprehensive income			—				—				—				(13,049	)
Net current-period other comprehensive (loss) income			(12,841	)			59,859				178,962				(50,257	)
Comprehensive income		$	53,674			$	85,313			$	422,562			$	145,256

Consolidated Statements of Shareholders' Equity						UMB Financial Corporation
(dollars in thousands except per share data)
(audited)		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)			—				—				195,513				(50,257	)			—				145,256
Reclassification of certain tax effects			—				—				12,917				—				—				12,917
Dividends ($1.17 per share)			—				—				(58,264	)			—				—				(58,264	)
Purchase of treasury stock			—				(2,807	)			—				—				(73,700	)			(76,507	)
Issuances of equity awards, net of forfeitures			—				(2,004	)			—				—				2,499				495
Recognition of equity-based compensation			—				10,579				—				—				—				10,579
Sale of treasury stock			—				524				—				—				538				1,062
Exercise of stock options			—				2,214				—				—				9,042				11,256
Cumulative effect adjustments			—				—				145				—				—				145
Balance - December 31, 2018		$	55,057			$	1,054,601			$	1,488,421			$	(95,782	)		$	(273,827	)		$	2,228,470
(unaudited)
Balance - January 1, 2019		$	55,057			$	1,054,601			$	1,488,421			$	(95,782	)		$	(273,827	)		$	2,228,470
Total comprehensive income			—				—				243,600				178,962				—				422,562
Dividends ($1.21 per share)			—				—				(59,583	)			—				—				(59,583	)
Purchase of treasury stock			—				—				—				—				(4,496	)			(4,496	)
Forfeitures of equity awards, net of issuances			—				3,820				—				—				(3,204	)			616
Recognition of equity-based compensation			—				14,234				—				—				—				14,234
Sale of treasury stock			—				344				—				—				487				831
Exercise of stock options			—				765				—				—				3,041				3,806
Balance - December 31, 2019		$	55,057			$	1,073,764			$	1,672,438			$	83,180			$	(277,999	)		$	2,606,440

Average Balances / Yields and Rates		UMB Financial Corporation
(tax - equivalent basis)
(unaudited, dollars in thousands)
		Three Months Ended December 31,
		2019								2018
		Average				Average				Average				Average
		Balance				Yield/Rate				Balance				Yield/Rate
Assets
Loans, net of unearned interest		$	13,231,884				4.69	%		$	11,967,936				5.11	%
Securities:
Taxable			4,654,669				2.30				3,943,891				2.29
Tax-exempt			3,993,540				3.04				3,465,665				2.77
Total securities			8,648,209				2.64				7,409,556				2.51
Federal funds and resell agreements			893,954				2.16				344,502				2.71
Interest bearing due from banks			633,328				1.73				672,916				2.22
Trading securities			56,653				4.09				61,629				4.44
Total earning assets			23,464,028				3.76				20,456,539				4.03
Allowance for loan losses			(109,967	)							(101,221	)
Other assets			1,716,962								1,523,434
Total assets		$	25,071,023							$	21,878,752
Liabilities and Shareholders' Equity
Interest-bearing deposits		$	13,988,241				1.01	%		$	12,118,111				1.12	%
Federal funds and repurchase agreements			1,661,285				1.58				1,206,152				1.91
Borrowed funds			91,302				4.91				80,442				4.71
Total interest-bearing liabilities			15,740,828				1.10				13,404,705				1.21
Noninterest-bearing demand deposits			6,398,309								6,052,011
Other liabilities			332,771								213,107
Shareholders' equity			2,599,115								2,208,929
Total liabilities and shareholders' equity		$	25,071,023							$	21,878,752
Net interest spread							2.66	%							2.82	%
Net interest margin							3.02								3.24

Average Balances / Yields and Rates		UMB Financial Corporation
(tax - equivalent basis)
(unaudited, dollars in thousands)
		Year Ended December 31,
		2019								2018
		Average				Average				Average				Average
		Balance				Yield/Rate				Balance				Yield/Rate
Assets
Loans, net of unearned interest		$	12,764,623				5.00	%		$	11,606,544				4.82	%
Securities:
Taxable			4,524,955				2.34				3,858,829				2.16
Tax-exempt			3,796,983				3.00				3,505,602				2.68
Total securities			8,321,938				2.64				7,364,431				2.41
Federal funds and resell agreements			535,393				2.59				178,801				2.69
Interest bearing due from banks			584,756				2.20				419,768				1.88
Trading securities			52,306				4.79				49,345				4.97
Total earning assets			22,259,016				3.98				19,618,889				3.83
Allowance for loan losses			(107,422	)							(100,948	)
Other assets			1,633,031								1,481,936
Total assets		$	23,784,625							$	20,999,877
Liabilities and Shareholders' Equity
Interest-bearing deposits		$	13,172,181				1.17	%		$	11,156,002				0.83	%
Federal funds and repurchase agreements			1,657,283				1.96				1,559,149				1.59
Borrowed funds			85,920				6.10				79,191				5.91
Total interest-bearing liabilities			14,915,384				1.29				12,794,342				0.95
Noninterest-bearing demand deposits			6,132,187								5,828,545
Other liabilities			285,207								182,202
Shareholders' equity			2,451,847								2,194,788
Total liabilities and shareholders' equity		$	23,784,625							$	20,999,877
Net interest spread							2.69	%							2.88	%
Net interest margin							3.12								3.21

Business Segment Information		UMB Financial Corporation
(unaudited, dollars in thousands)
		Three Months Ended December 31, 2019
		Commercial Banking				Institutional Banking				Personal Banking				Healthcare Services				Total
Net interest income		$	105,479			$	21,586			$	33,150			$	12,148			$	172,363
Provision for loan losses			558				251				1,191				—				2,000
Noninterest income			19,167				53,562				28,862				8,764				110,355
Noninterest expense			65,567				59,183				66,331				12,369				203,450
Income (loss) before taxes			58,521				15,714				(5,510	)			8,543				77,268
Income tax expense (benefit)			8,144				2,187				(767	)			1,189				10,753
Income (loss) from continuing operations		$	50,377			$	13,527			$	(4,743	)		$	7,354			$	66,515
		Three Months Ended December 31, 2018
		Commercial Banking				Institutional Banking				Personal Banking				Healthcare Services				Total
Net interest income		$	100,423			$	19,361			$	31,988			$	10,036			$	161,808
Provision for loan losses			46,662				308				1,030				—				48,000
Noninterest income			14,689				41,569				30,310				8,431				94,999
Noninterest expense			65,037				48,175				59,112				11,997				184,321
Income before taxes			3,413				12,447				2,156				6,470				24,486
Income tax benefit			(135	)			(492	)			(85	)			(256	)			(968	)
Income from continuing operations		$	3,548			$	12,939			$	2,241			$	6,726			$	25,454
		Year Ended December 31, 2019
		Commercial Banking				Institutional Banking				Personal Banking				Healthcare Services				Total
Net interest income		$	412,232			$	80,185			$	132,082			$	46,406			$	670,905
Provision for loan losses			26,159				975				5,716				—				32,850
Noninterest income			81,609				195,932				112,717				36,512				426,770
Noninterest expense			267,345				219,490				243,092				48,933				778,860
Income (loss) before taxes			200,337				55,652				(4,009	)			33,985				285,965
Income tax expense (benefit)			29,679				8,245				(594	)			5,035				42,365
Income (loss) from continuing operations		$	170,658			$	47,407			$	(3,415	)		$	28,950			$	243,600
		Year Ended December 31, 2018
		Commercial Banking				Institutional Banking				Personal Banking				Healthcare Services				Total
Net interest income		$	380,266			$	66,585			$	125,045			$	38,550			$	610,446
Provision for loan losses			63,841				1,335				5,574				—				70,750
Noninterest income			74,931				173,591				118,344				34,832				401,698
Noninterest expense			253,740				189,708				225,406				48,946				717,800
Income before taxes			137,616				49,133				12,409				24,436				223,594
Income tax expense			16,824				6,007				1,517				2,986				27,334
Income from continuing operations		$	120,792			$	43,126			$	10,892			$	21,450			$	196,260

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 December 31, 2019.

Non-GAAP Financial Measures

Net operating income Non-GAAP reconciliations:		UMB Financial Corporation
(unaudited, dollars in thousands except per share data)
		Three Months Ended December 31,								Year Ended December 31,
		2019				2018				2019				2018
Income from continuing operations (GAAP)		$	66,515			$	25,454			$	243,600			$	196,260
Adjustments:
Acquisition and divestiture expense			100				5				268				2
Severance expense			572				2,725				1,552				5,760
Tax-impact of adjustments (i)			(149	)			(606	)			(404	)			(1,279	)
Total Non-GAAP adjustments (net of tax)			523				2,124				1,416				4,483
Net operating income from continuing operations (Non-GAAP)		$	67,038			$	27,578			$	245,016			$	200,743
Earnings per share from continuing operations - diluted (GAAP)		$	1.35			$	0.52			$	4.96			$	3.94
Acquisition and divestiture expense			—				—				—				—
Severance expense			0.01				0.05				0.03				0.12
Tax-impact of adjustments (i)			—				(0.01	)			—				(0.03	)
Operating earnings per share from continuing operations - diluted (Non-GAAP)		$	1.36			$	0.56			$	4.99			$	4.03
GAAP
Return on average assets			1.05	%			0.46	%			1.02	%			0.93	%
Return on average equity			10.15				4.57				9.94				8.94
Non-GAAP
Operating return on average assets			1.06	%			0.50	%			1.03	%			0.96	%
Operating return on average equity			10.23				4.95				9.99				9.15

(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 December 31,								Year Ended December 31,
		2019				2018				2019				2018
Noninterest expense		$	203,450			$	184,321			$	778,860			$	717,800
Adjustments to arrive at operating noninterest expense (pre-tax):
Acquisition and divestiture expense			100				5				268				2
Severance expense			572				2,725				1,552				5,760
Total Non-GAAP adjustments (pre-tax)			672				2,730				1,820				5,762
Operating noninterest expense (Non-GAAP)		$	202,778			$	181,591			$	777,040			$	712,038
Noninterest expense		$	203,450			$	184,321			$	778,860			$	717,800
Less: Amortization of other intangibles			1,593				1,332				5,506				5,764
Noninterest expense, net of amortization of other intangibles (Non-GAAP) (numerator A)		$	201,857			$	182,989			$	773,354			$	712,036
Operating noninterest expense		$	202,778			$	181,591			$	777,040			$	712,038
Less: Amortization of other intangibles			1,593				1,332				5,506				5,764
Operating expense, net of amortization of other intangibles (Non-GAAP) (numerator B)		$	201,185			$	180,259			$	771,534			$	706,274
Net interest income		$	172,363			$	161,808			$	670,905			$	610,446
Noninterest income			110,355				94,999				426,770				401,698
Less: Gains on sales of securities available for sale, net			755				—				3,218				578
Total Non-GAAP Revenue (denominator A)		$	281,963			$	256,807			$	1,094,457			$	1,011,566
Efficiency ratio (numerator A/denominator A)			71.59	%			71.26	%			70.66	%			70.39	%
Operating efficiency ratio (Non-GAAP) (numerator B/denominator A)			71.35				70.19				70.49				69.82

 

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