KANSAS CITY, Mo.--(BUSINESS WIRE)-- UMB Financial Corporation (Nasdaq: UMBF), a financial holding company, announced income from continuing operations for the second quarter 2018 of $55.4 million, or $1.11 per diluted share, compared to $57.5 million, or $1.15 per diluted share in the first quarter 2018 (linked quarter) and $44.8 million, or $0.90 per diluted share, in the second quarter 2017. The reported GAAP income from continuing operations represents a decrease of 3.7 percent on a linked-quarter basis and an increase of 23.8 percent compared to the second quarter 2017.

Net operating income from continuing operations, a non-GAAP financial measure reconciled to income from continuing operations, the nearest comparable GAAP measure, later in this release, was $56.1 million, or $1.12 per diluted share for the second quarter 2018, compared to $59.1 million, or $1.18 per diluted share, for the linked quarter and $44.9 million, or $0.90 per diluted share, for the second quarter 2017. These results represent a decrease of 5.1 percent on a linked-quarter basis and an increase of 24.8 percent compared to the second quarter 2017.

Summary of quarterly financial results		UMB Financial Corporation
(unaudited, dollars in thousands, except per share data)
		Q2				Q1				Q2
		2018				2018				2017
Income from continuing operations		$	55,424			$	57,533			$	44,771
Loss from discontinued operations			—				(747	)			(1,950	)
Net income			55,424				56,786				42,821
Earnings per share from continuing operations (diluted)			1.11				1.15				0.90
Losses per share from discontinued operations (diluted)			—				(0.01	)			(0.04	)
Earnings per share (diluted)			1.11				1.14				0.86
Net operating income from continuing operations			56,079				59,062				44,948
Operating earnings per share from continuing operations (diluted)		1.12				1.18					0.90
GAAP - continuing operations
Return on average assets			1.08	%			1.12	%			0.88	%
Return on average equity			10.18				10.80				8.69
Efficiency ratio			70.21				68.82				71.02
Non-GAAP - continuing operations
Operating return on average assets			1.09	%			1.15	%			0.89	%
Operating return on average equity			10.30				11.09				8.72
Operating efficiency ratio			69.88				68.04				70.91

Summary of year-to-date financial results		UMB Financial Corporation
(unaudited, dollars in thousands, except per share data)		June				June
		YTD				YTD
		2018				2017
Income from continuing operations		$	112,957			$	86,747
(Loss) income from discontinued operations			(747	)			255
Net income			112,210				87,002
Earnings per share from continuing operations (diluted)			2.26				1.74
(Losses) earnings per share from discontinued operations (diluted)			(0.01	)			0.01
Earnings per share (diluted)			2.25				1.75
Net operating income from continuing operations			115,141				87,228
Operating earnings per share from continuing operations (diluted)			2.30			1.75
GAAP - continuing operations
Return on average assets			1.10	%			0.86	%
Return on average equity			10.49				8.64
Efficiency ratio			69.51				71.77
Non-GAAP - continuing operations
Operating return on average assets			1.12	%			0.87	%
Operating return on average equity			10.69				8.68
Operating efficiency ratio			68.95				71.61

“Highlights for the second quarter included 5.8 percent growth in our loan portfolio, continued positive operating leverage, and a 56 basis point expansion in our loan yields,” said Mariner Kemper, chairman and chief executive officer. “Our net interest margin expanded 12 basis points and drove a 9.3 percent increase in our net interest income.”

Discussion of results from continuing operations

Summary of revenue			UMB Financial Corporation
(unaudited, dollars in thousands)
			Q2				Q1				Q2				CQ vs.				CQ vs.
			2018				2018				2017				LQ				PY
Net interest income			$	150,226			$	147,922			$	137,394			$	2,304			$	12,832
Noninterest income:
Trust and securities processing				42,845				44,002				44,811				(1,157	)			(1,966	)
Trading and investment banking				4,653				4,101				6,173				552				(1,520	)
Service charges on deposit accounts				20,722				21,905				22,731				(1,183	)			(2,009	)
Insurance fees and commissions				340				301				513				39				(173	)
Brokerage fees				6,291				6,353				5,889				(62	)			402
Bankcard fees				17,184				18,123				20,234				(939	)			(3,050	)
Gains on sales of securities available for sale, net				228				139				1,280				89				(1,052	)
Other				8,026				10,601				8,675				(2,575	)			(649	)
Total noninterest income			$	100,289			$	105,525			$	110,306			$	(5,236	)		$	(10,017	)
Total revenue			$	250,515			$	253,447			$	247,700			$	(2,932	)		$	2,815
Net interest margin				3.24	%			3.19	%			3.12	%
Total noninterest income as a % of total revenue				40.03				41.64				44.53

Following the enactment of the Tax Cuts and Jobs Act, beginning in the first quarter of 2018, net interest margin is computed using net interest income adjusted to a fully taxable equivalent (FTE) basis assuming a statutory federal income tax rate of 21 percent and, where applicable, state income taxes; prior period net interest margins are computed using the then-statutory federal income tax rate of 35 percent and, where applicable, state income taxes.

Net interest income

• On a linked quarter basis, the 1.6 percent increase in net interest income was driven by a five basis point improvement in net interest margin, one additional day of net interest income, and a 1.4 percent, or $157.9 million, increase in average loans.
• Earning asset yields improved 18 basis points from the linked quarter primarily due to improved loan yields of 21 basis points to 4.74 percent, in part driven by favorable re-pricing from recent increases in short-term interest rates and earning asset mix changes. The cost of interest-bearing liabilities increased 18 basis points to 0.83 percent driven by a 16 basis point increase in cost of interest-bearing deposits. Total cost of deposits including noninterest-bearing deposits was 45 basis points, an increase of 18 basis points from the linked quarter.
• On a year-over-year basis, the increase in net interest income was driven by a 5.8 percent or $632.4 million increase in average loans as well as higher average loan yields, which increased 56 basis points from one year ago, primarily driven by higher interest rates, volume, and mix changes, offset by the impacts of tax reform on tax equivalent income.
• For the second quarter 2018, average total assets were $20.6 billion, which is an increase of 1.5 percent over the second quarter 2017.

Noninterest income

• Second quarter 2018 noninterest income decreased $5.2 million, or 5.0 percent, on a linked quarter basis largely due to:
  • A $2.6 million decline in other income driven by decreases of $1.8 million in equity earnings on alternative investments and $1.1 million in the fair value of company-owned life insurance.
  • A decrease in trust and securities processing due to a $1.3 million decline in fund servicing revenue.
  • A decrease of $1.2 million in service charges on deposits primarily due to repricing.
  • An increase of $1.0 million in rebates and rewards expense recorded as an offset to bankcard fees driven by higher purchase volume.
  • These impacts were partially offset by an increase of $0.6 million in trading and investment banking.

• Noninterest income in the second quarter of 2018 decreased $10.0 million, or 9.1 percent, compared to the same quarter in 2017 primarily driven by:
  • A $3.7 million increase in rebates and rewards expense recorded as an offset to bankcard fees driven by increased purchase volume.
  • A $2.0 million decrease in service charges on deposit accounts due to repricing.
  • A $2.0 million decline in fund servicing revenue recorded in trust and securities processing due to customer repricing and losses.
  • A $1.1 million decrease in gains on available-for-sale securities.
  • A $0.9 million decrease in trading and investment banking due to market adjustments from the company’s seed investments in certain Scout funds following the liquidation of such investments at the end of the second quarter of 2017.

Noninterest expense

Summary of Noninterest expense		UMB Financial Corporation
(unaudited, dollars in thousands)
		Q2			Q1			Q2			CQ vs.				CQ vs.
		2018			2018			2017			LQ				PY
Salaries and employee benefits		$	104,175		$	107,968		$	102,773		$	(3,793	)		$	1,402
Occupancy, net			10,813			10,953			11,061			(140	)			(248	)
Equipment			18,842			18,826			17,956			16				886
Supplies and services			4,146			3,760			4,792			386				(646	)
Marketing and business development			6,184			5,034			5,732			1,150				452
Processing fees			11,537			11,161			10,743			376				794
Legal and consulting			6,460			3,844			6,467			2,616				(7	)
Bankcard			4,165			4,626			5,033			(461	)			(868	)
Amortization of other intangible assets			1,485			1,562			1,924			(77	)			(439	)
Regulatory fees			3,772			2,905			4,071			867				(299	)
Other			5,639			5,237			6,387			402				(748	)
Total noninterest expense		$	177,218		$	175,876		$	176,939		$	1,342			$	279

• GAAP noninterest expense for the second quarter of 2018 was $177.2 million, an increase of $1.3 million, or 0.8 percent, from the linked quarter and $0.3 million, or 0.2 percent, from the second quarter of 2017.
• On a non-GAAP basis, operating noninterest expense (as reconciled later in this release) was $176.4 million for the second quarter 2018, an increase of $2.5 million, or 1.4 percent, compared to the linked quarter, and a decrease of $0.3 million, or 0.2 percent, compared to the second quarter 2017.
• The linked quarter increase in noninterest expense was driven by:
  • A $2.6 million increase in legal and consulting expense partially due to timing of consulting expenses on projects delayed during the first quarter of 2018.
  • Increased marketing and business development expense of $1.2 million related to timing of multiple projects and increased travel expenses.
  • Increased regulatory expense of $0.9 million from a higher assessment base.
  • These impacts were partially offset by a $3.8 million decline in salaries and employee benefits, largely driven by lower payroll taxes and 401(k) expense as compared the first quarter of 2018.
• The year-over-year increase in noninterest expense was driven by:
  • A $1.4 million increase in salaries and employee benefits, largely due to a $1.7 million increase in salary and wage expense.
  • $0.9 million increase in equipment expense related to investments for regulatory requirements, cyber security, and the ongoing modernization of the company’s core systems.
  • These impacts were partially offset by a $0.9 million decline in bankcard administrative expenses, and decreases of $0.3 million in derivative expense and $0.5 million in operational losses, both recorded in other expense.

Income Taxes

• The company’s effective tax rate was 15.6 percent for the six months ended June 30, 2018 compared to 21.6 percent for the same period in 2017. The decrease is primarily a result of the Tax Cuts and Jobs Act, which lowered the federal corporate income tax rate to 21 percent from 35 percent, effective on January 1, 2018.

Balance Sheet

• Average total assets for the second quarter 2018 were $20.6 billion compared to $20.7 billion for the linked quarter, and $20.3 billion for the same period in 2017.

Summary of average loans and leases - QTD Average			UMB Financial Corporation
(unaudited, dollars in thousands)
			Q2			Q1			Q2			CQ vs.				CQ vs.
			2018			2018			2017			LQ				PY
Commercial			$	4,478,829		$	4,456,176		$	4,597,866		$	22,653			$	(119,037	)
Asset-based loans				336,710			336,146			242,719			564				93,991
Factoring loans				231,035			223,031			155,528			8,004				75,507
Commercial credit card				191,009			189,891			157,214			1,118				33,795
Real estate - construction				823,169			763,867			802,350			59,302				20,819
Real estate - commercial				3,711,417			3,635,455			3,152,317			75,962				559,100
Real estate - residential				669,177			645,803			592,253			23,374				76,924
Real estate - HELOC				596,025			630,617			682,889			(34,592	)			(86,864	)
Consumer credit card				230,971			223,725			254,552			7,246				(23,581	)
Consumer other				153,427			158,131			139,120			(4,704	)			14,307
Leases				22,679			23,680			35,250			(1,001	)			(12,571	)
Total loans			$	11,444,448		$	11,286,522		$	10,812,058		$	157,926			$	632,390

• Average loans for the second quarter 2018 increased 1.4 percent on a linked-quarter basis and 5.8 percent compared to second quarter 2017.

Summary of average securities - QTD Average			UMB Financial Corporation
(unaudited, dollars in thousands)
			Q2			Q1			Q2			CQ vs.				CQ vs.
			2018			2018			2017			LQ				PY
Securities available for sale:
U.S. Treasury			$	37,982		$	38,197		$	63,945		$	(215	)		$	(25,963	)
U.S. Agencies				2,946			10,360			48,914			(7,414	)			(45,968	)
Mortgage-backed				3,679,835			3,645,891			3,677,797			33,944				2,038
State and political subdivisions				2,330,454			2,453,334			2,478,358			(122,880	)			(147,904	)
Corporates				1,476			8,482			60,508			(7,006	)			(59,032	)
Commercial Paper				7,138			30,955			—			(23,817	)			7,138
Total securities available for sale			$	6,059,831		$	6,187,219		$	6,329,522		$	(127,388	)		$	(269,691	)
Securities held to maturity:
State and political subdivisions				1,228,849			1,251,771			1,242,519			(22,922	)			(13,670	)
Trading securities				45,538			44,592			75,075			946				(29,537	)
Other securities				66,345			65,560			66,199			785				146
Total securities			$	7,400,563		$	7,549,142		$	7,713,315		$	(148,579	)		$	(312,752	)

• Average securities available for sale decreased 4.3 percent compared to the second quarter of 2017, driven by the ongoing reinvestment of cash flows from such securities to fund growth in the loan portfolio.

Summary of average deposits - QTD Average							UMB Financial Corporation
(unaudited, dollars in thousands)
			Q2				Q1				Q2				CQ vs.				CQ vs.
			2018				2018				2017				LQ				PY
Deposits:
Noninterest-bearing demand			$	5,666,364			$	6,050,997			$	5,837,602			$	(384,633	)		$	(171,238	)
Interest-bearing demand and savings				9,768,015				9,660,150				8,475,782				107,865				1,292,233
Time deposits				1,032,000				1,047,700				1,258,384				(15,700	)			(226,384	)
Total deposits			$	16,466,379			$	16,758,847			$	15,571,768			$	(292,468	)		$	894,611
Noninterest bearing deposits as % of total				34.41	%			36.11	%			37.49	%

• Average noninterest-bearing deposits declined 6.4 percent on a linked-quarter basis primarily driven by lower balances held by larger commercial customers.

Capital

Capital information			UMB Financial Corporation
(unaudited, dollars in thousands, except per share data)
			June 30,2018				March 31,2018				June 30,2017
Total equity			$	2,201,812			$	2,167,386			$	2,071,119
Book value per common share				43.96				43.31				41.42
Regulatory capital:
Common equity Tier 1 capital			$	2,145,616			$	2,097,691			$	1,863,359
Tier 1 capital				2,145,616				2,097,691				1,863,359
Total capital				2,315,482				2,269,315				2,031,618
Regulatory capital ratios:
Common equity Tier 1 capital ratio				13.56	%			13.36	%			12.22	%
Tier 1 risk-based capital ratio				13.56				13.36				12.22
Total risk-based capital ratio				14.63				14.45				13.32
Tier 1 leverage ratio				10.50				10.20				9.28

• At June 30, 2018, the company’s risk-based capital ratios presented in the foregoing table exceeded all “well-capitalized” regulatory thresholds.

Asset Quality

Credit quality			UMB Financial Corporation
(unaudited, dollars in thousands)
			Q2					Q1					Q4					Q3					Q2
			2018					2018					2017					2017					2017
Net charge-offs - Commercial loans			$	6,137				$	6,847				$	2,248				$	8,961				$	7,971
Net charge-offs (recoveries) - Real estate loans				1,035					1,512					(242	)				238					(95	)
Net charge-offs - Consumer credit card loans				1,786					1,849					1,612					1,635					2,079
Net charge-offs - Consumer other loans				46					94					167					74					71
Net charge-offs - Total loans				9,004					10,302					3,785					10,908					10,026
Net loan charge-offs as a % of total average loans				0.32	%				0.37	%				0.14	%				0.40	%				0.37	%
Loans over 90 days past due			$	2,883				$	5,650				$	3,091				$	2,088				$	2,657
Loans over 90 days past due as a % of total loans				0.02	%				0.05	%				0.03	%				0.02	%				0.02	%
Nonaccrual and restructured loans			$	56,030				$	67,604				$	59,142				$	54,231				$	51,390
Nonaccrual and restructured loans as a % of total loans				0.48	%				0.59	%				0.52	%				0.49	%				0.47	%
Provision for loan losses			$	7,000				$	10,000				$	6,000				$	11,500				$	14,500

• Nonperforming loans, defined as restructured loans on nonaccrual and all other nonaccrual loans, decreased $11.6 million from the linked quarter and increased $4.6 million from the prior year period.
• Net charge-offs decreased to $9.0 million, or 0.32 percent of average loans, compared to $10.3 million, or 0.37 percent, of average loans in the linked quarter, and $10.0 million, or 0.37 percent, of average loans in the second quarter of 2017.
• Provision for loan losses decreased $3.0 million from the linked quarter, 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 $0.29 per share quarterly cash dividend, payable on October 1, 2018, to shareholders of record at the close of business on September 10, 2018.

Conference Call

The company plans to host a conference call to discuss its second quarter 2018 earnings results on Wednesday, July 25, 2018, at 9:30 a.m. (CT).

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

UMB Financial 2Q 2018 Conference Call

A replay of the conference call may be heard through August 8, 2018, by calling (toll-free) 877-344-7529 or (international) 412-317-0088. The replay access code required for playback is 10121500. The call replay may also be accessed via the company's website umbfinancial.com by visiting the investor relations area.

Non-GAAP Financial Information

In this release, we provide information about net operating income from continuing operations, operating earnings per share from continuing operations - diluted (operating EPS), operating return on average equity (operating ROE), operating return on average assets (operating ROA), operating noninterest expense, and operating efficiency ratio, all of which are non-GAAP financial measures. This information supplements the results that are reported according to generally accepted accounting principles in the United States (GAAP) and should not be viewed in isolation from, or as a substitute for, GAAP results. The differences between the non-GAAP financial measures – net operating income, operating EPS, operating ROE, operating ROA, operating noninterest expense, and operating efficiency ratio – and the nearest comparable GAAP financial measures are reconciled later in this release. The company believes that these non-GAAP financial measures and the reconciliations may be useful to investors because they adjust for acquisition- and severance-related items and divestiture costs that management does not believe reflect the company’s fundamental operating performance.

Net operating income for the relevant period is defined as GAAP net income, adjusted to reflect the impact of excluding expenses related to acquisitions and divestitures, severance expense, and the cumulative tax impact of these adjustments.

Operating EPS (diluted) is calculated as earnings per share as reported, adjusted to reflect, on a per share basis, the impact of excluding the non-GAAP adjustments described above for the relevant period. Operating ROE is calculated as net operating income from continuing operations, divided by the company’s average total shareholders’ equity for the relevant period. Operating ROA is calculated as net operating income from continuing operations, divided by the company’s average assets for the relevant period. Operating noninterest expense for the relevant period is defined as GAAP noninterest expense, adjusted to reflect the pre-tax impact of non-GAAP adjustments described above. Operating efficiency ratio is calculated as the company’s operating noninterest expense, net of amortization of other intangibles, divided by the company’s total non-GAAP revenue (calculated as net interest income plus noninterest income, less gains on sales of securities available for sale, net).

Forward-Looking Statements:

This release contains, and our other communications may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “outlook,” “forecast,” “target,” “trend,” “plan,” “goal,” or other words of comparable meaning or future-tense or conditional verbs such as “may,” “will,” “should,” “would,” or “could.” Forward-looking statements convey our expectations, intentions, or forecasts about future events, circumstances, results, or aspirations. All forward-looking statements are subject to assumptions, risks, and uncertainties, which may change over time and many of which are beyond our control. You should not rely on any forward-looking statement as a prediction or guarantee about the future. Our actual future objectives, strategies, plans, prospects, performance, condition, or results may differ materially from those set forth in any forward-looking statement. Some of the factors that may cause actual results or other future events, circumstances, or aspirations to differ from those in forward-looking statements are described in our Annual Report on Form 10-K for the year ended December 31, 2017, our subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K, or other applicable documents that are filed or furnished with the U.S. Securities and Exchange Commission (SEC). Any forward-looking statement made by us or on our behalf speaks only as of the date that it was made. We do not undertake to update any forward-looking statement to reflect the impact of events, circumstances, or results that arise after the date that the statement was made, except to the extent required by applicable securities laws. You, however, should consult further disclosures (including disclosures of a forward-looking nature) that we may make in any subsequent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K, or other applicable document that is filed or furnished with the SEC.

About UMB:

UMB Financial Corporation (Nasdaq: UMBF) is a financial services company headquartered in Kansas City, Mo. UMB offers personal banking, commercial banking, healthcare services and institutional banking, which includes services to mutual funds and alternative-investment entities and registered investment advisors. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas. For more information, visit UMB.com, UMB Financial.com, UMB Blog or follow us on Twitter at @UMBBank, UMB Facebook and UMB LinkedIn.

Consolidated Balance Sheets		UMB Financial Corporation
(unaudited, dollars in thousands)
		June 30,
		2018					2017
ASSETS
Loans		$	11,631,628				$	10,848,578
Allowance for loan losses			(98,298	)				(97,797	)
Net loans			11,533,330					10,750,781
Loans held for sale			3,482					3,443
Investment Securities:
Available for sale			6,011,684					6,226,041
Held to maturity			1,204,582					1,279,524
Trading securities			67,091					61,833
Other securities			66,547					65,039
Total investment securities			7,349,904					7,632,437
Federal funds sold and resell agreements			70,346					184,521
Interest-bearing due from banks			113,875					332,090
Cash and due from banks			379,433					379,148
Premises and equipment, net			274,408					276,412
Accrued income			100,133					99,122
Goodwill			180,867					180,867
Other intangibles, net			17,210					24,614
Other assets			508,482					436,421
Discontinued assets - goodwill and other intangibles, net			—					53,743
Total assets		$	20,531,470				$	20,353,599
LIABILITIES
Deposits:
Noninterest-bearing demand		$	5,994,426				$	6,433,339
Interest-bearing demand and savings			9,471,698					8,429,180
Time deposits under $250,000			512,446					569,281
Time deposits of $250,000 or more			407,508					664,866
Total deposits			16,386,078					16,096,666
Federal funds purchased and repurchase agreements			1,666,158					1,886,370
Long-term debt			78,692					76,083
Accrued expenses and taxes			147,608					161,470
Other liabilities			51,122					61,891
Total liabilities			18,329,658					18,282,480
SHAREHOLDERS' EQUITY
Common stock			55,057					55,057
Capital surplus			1,050,660					1,037,898
Retained earnings			1,434,342					1,204,436
Accumulated other comprehensive loss, net			(128,959	)				(23,625	)
Treasury stock			(209,288	)				(202,647	)
Total shareholders' equity			2,201,812					2,071,119
Total liabilities and shareholders' equity		$	20,531,470				$	20,353,599

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,
		2018				2017				2018				2017
INTEREST INCOME
Loans		$	135,150			$	112,724			$	261,284			$	219,284
Securities:
Taxable interest			20,523				18,441				40,303				37,631
Tax-exempt interest			18,290				18,296				36,993				35,479
Total securities income			38,813				36,737				77,296				73,110
Federal funds and resell agreements			752				711				1,790				1,630
Interest-bearing due from banks			1,056				580				2,636				1,131
Trading securities			709				459				1,139				746
Total interest income			176,480				151,211				344,145				295,901
INTEREST EXPENSE
Deposits			18,334				7,835				32,169				13,801
Federal funds and repurchase agreements			6,666				4,994				11,398				8,463
Other			1,254				988				2,430				1,928
Total interest expense			26,254				13,817				45,997				24,192
Net interest income			150,226				137,394				298,148				271,709
Provision for loan losses			7,000				14,500				17,000				23,500
Net interest income after provision for loan losses			143,226				122,894				281,148				248,209
NONINTEREST INCOME
Trust and securities processing			42,845				44,811				86,847				87,352
Trading and investment banking			4,653				6,173				8,754				13,715
Service charges on deposit accounts			20,722				22,731				42,627				44,806
Insurance fees and commissions			340				513				641				1,159
Brokerage fees			6,291				5,889				12,644				11,266
Bankcard fees			17,184				20,234				35,307				37,986
Gains on sales of securities available for sale, net			228				1,280				367				1,748
Other			8,026				8,675				18,627				15,191
Total noninterest income			100,289				110,306				205,814				213,223
NONINTEREST EXPENSE
Salaries and employee benefits			104,175				102,773				212,143				206,425
Occupancy, net			10,813				11,061				21,766				22,029
Equipment			18,842				17,956				37,668				35,438
Supplies and services			4,146				4,792				7,906				8,886
Marketing and business development			6,184				5,732				11,218				9,873
Processing fees			11,537				10,743				22,698				19,942
Legal and consulting			6,460				6,467				10,304				11,517
Bankcard			4,165				5,033				8,791				9,936
Amortization of other intangible assets			1,485				1,924				3,047				3,970
Regulatory fees			3,772				4,071				6,677				7,904
Other			5,639				6,387				10,876				14,829
Total noninterest expense			177,218				176,939				353,094				350,749
Income before income taxes			66,297				56,261				133,868				110,683
Income tax expense			10,873				11,490				20,911				23,936
Income from continuing operations			55,424				44,771				112,957				86,747
Discontinued Operations
(Loss) income from discontinued operations before income taxes			—				(2,599	)			(917	)			308
Income tax (benefit) expense			—				(649	)			(170	)			53
(Loss) income from discontinued operations			—				(1,950	)			(747	)			255
NET INCOME		$	55,424			$	42,821			$	112,210			$	87,002
PER SHARE DATA
Basic:
Income from continuing operations		$	1.12			$	0.91			$	2.28			$	1.76
(Loss) income from discontinued operations			—				(0.04	)			(0.01	)			0.01
Net income – basic			1.12				0.87				2.27				1.77
Diluted:
Income from continuing operations			1.11				0.90				2.26				1.74
(Loss) income from discontinued operations			—				(0.04	)			(0.01	)			0.01
Net income - diluted			1.11				0.86				2.25				1.75
Dividends			0.290				0.255				0.580				0.510
Weighted average shares outstanding - basic			49,551,920				49,269,786				49,486,626				49,190,271
Weighted average shares outstanding - diluted			50,007,022				49,848,903				49,973,992				49,829,193

Consolidated Statements of Comprehensive Income		UMB Financial Corporation
(unaudited, dollars in thousands)
		Three Months Ended										Six Months Ended
		June 30,										June 30,
		2018					2017					2018					2017
Net income		$	55,424				$	42,821				$	112,210				$	87,002
Other comprehensive (loss) income, net of tax:
Unrealized gains and losses on debt securities:
Change in unrealized holding gains and losses, net			(16,020	)				35,311					(96,682	)				57,582
Less: Reclassification adjustment for gains included in net income			(228	)				(1,280	)				(367	)				(1,748	)
Change in unrealized gains and losses on debt securities during the period			(16,248	)				34,031					(97,049	)				55,834
Change in unrealized gains and losses on derivative hedges			910					(1,157	)				3,112					(911	)
Income tax benefit (expense)			3,770					(12,340	)				23,552					(21,006	)
Other comprehensive (loss) income before reclassifications			(11,568	)				20,534					(70,385	)				33,917
Amounts reclassified from accumulated other comprehensive income			—					—					(13,049	)				—
Net current-period other comprehensive (loss) income			(11,568	)				20,534					(83,434	)				33,917
Comprehensive income		$	43,856				$	63,355				$	28,776				$	120,919

Consolidated Statements of Shareholders' Equity						UMB Financial Corporation
(unaudited, dollars in thousands except per share data)
		CommonStock				CapitalSurplus				RetainedEarnings				AccumulatedOtherComprehensiveLoss				TreasuryStock				Total
Balance - January 1, 2017		$	55,057			$	1,033,419			$	1,142,887			$	(57,542	)		$	(211,437	)		$	1,962,384
Total comprehensive income			—				—				87,002				33,917				—				120,919
Cash dividends ($0.51 per share)			—				—				(25,453	)			—				—				(25,453	)
Purchase of treasury stock			—				—				—				—				(4,279	)			(4,279	)
Issuance of equity awards			—				(3,929	)			—				—				4,401				472
Recognition of equity-based compensation			—				6,243				—				—				—				6,243
Sale of treasury stock			—				321				—				—				244				565
Exercise of stock options			—				1,844				—				—				8,424				10,268
Balance - June 30, 2017		$	55,057			$	1,037,898			$	1,204,436			$	(23,625	)		$	(202,647	)		$	2,071,119
Balance - January 1, 2018		$	55,057			$	1,046,095			$	1,338,110			$	(45,525	)		$	(212,206	)		$	2,181,531
Total comprehensive income (loss)			—				—				112,210				(83,434	)			—				28,776
Reclassification of certain tax effects			—				—				12,917				—				—				12,917
Cash dividends ($0.580 per share)			—				—				(29,040	)			—				—				(29,040	)
Purchase of treasury stock			—				—				—				—				(6,211	)			(6,211	)
Issuance of equity awards			—				(2,457	)			—				—				2,951				494
Recognition of equity-based compensation			—				5,201				—				—				—				5,201
Sale of treasury stock			—				278				—				—				275				553
Exercise of stock options			—				1,543				—				—				5,903				7,446
Cumulative effect adjustments			—				—				145				—				—				145
Balance - June 30, 2018		$	55,057			$	1,050,660			$	1,434,342			$	(128,959	)		$	(209,288	)		$	2,201,812

Average Balances / Yields and Rates		UMB Financial Corporation
(tax - equivalent basis)
(unaudited, dollars in thousands)
		Three Months Ended June 30,
		2018								2017
		Average				Average				Average				Average
		Balance				Yield/Rate				Balance				Yield/Rate
Assets
Loans, net of unearned interest		$	11,444,448				4.74	%		$	10,812,058				4.18	%
Securities:
Taxable			3,862,378				2.13				3,997,904				1.85
Tax-exempt			3,492,647				2.66				3,640,336				3.09
Total securities			7,355,025				2.38				7,638,240				2.44
Federal funds and resell agreements			107,343				2.81				150,745				1.89
Interest bearing due from banks			252,292				1.68				252,169				0.92
Trading securities			45,538				6.83				75,075				2.96
Total earning assets			19,204,646				3.79				18,928,287				3.41
Allowance for loan losses			(101,801	)							(95,410	)
Other assets			1,516,801								1,482,040
Total assets		$	20,619,646							$	20,314,917
Liabilities and Shareholders' Equity
Interest-bearing deposits		$	10,800,015				0.68	%		$	9,734,166				0.32	%
Federal funds and repurchase agreements			1,737,383				1.54				2,400,181				0.83
Borrowed funds			78,583				6.40				75,953				5.22
Total interest-bearing liabilities			12,615,981				0.83				12,210,300				0.45
Noninterest-bearing demand deposits			5,666,364								5,837,602
Other liabilities			152,491								199,386
Shareholders' equity			2,184,810								2,067,629
Total liabilities and shareholders' equity		$	20,619,646							$	20,314,917
Net interest spread							2.96	%							2.96	%
Net interest margin							3.24								3.12

Average Balances / Yields and Rates		UMB Financial Corporation
(tax - equivalent basis)
(unaudited, dollars in thousands)
		Six Months Ended June 30,
		2018								2017
		Average				Average				Average				Average
		Balance				Yield/Rate				Balance				Yield/Rate
Assets
Loans, net of unearned interest		$	11,365,921				4.64	%		$	10,686,792				4.14	%
Securities:
Taxable			3,865,660				2.10				4,097,794				1.85
Tax-exempt			3,563,715				2.65				3,564,319				3.08
Total securities			7,429,375				2.37				7,662,113				2.42
Federal funds and resell agreements			134,009				2.69				194,231				1.69
Interest bearing due from banks			341,469				1.56				280,490				0.81
Trading securities			45,068				5.65				67,809				2.73
Total earning assets			19,315,842				3.70				18,891,435				3.36
Allowance for loan losses			(101,652	)							(94,264	)
Other assets			1,468,793								1,477,685
Total assets		$	20,682,983							$	20,274,856
Liabilities and Shareholders' Equity
Interest-bearing deposits		$	10,754,187				0.60	%		$	9,689,335				0.29	%
Federal funds and repurchase agreements			1,649,758				1.39				2,365,101				0.72
Borrowed funds			78,773				6.22				76,209				5.10
Total interest-bearing liabilities			12,482,718				0.74				12,130,645				0.40
Noninterest-bearing demand deposits			5,857,618								5,917,826
Other liabilities			170,374								200,809
Shareholders' equity			2,172,273								2,025,576
Total liabilities and shareholders' equity		$	20,682,983							$	20,274,856
Net interest spread							2.96	%							2.96	%
Net interest margin							3.22								3.10

Business Segment Information		UMB Financial Corporation
(unaudited, dollars in thousands)
		Three Months Ended June 30, 2018
		CommercialBanking				InstitutionalBanking				PersonalBanking				HealthcareServices				Total
Net interest income		$	93,011			$	16,279			$	31,111			$	9,825			$	150,226
Provision for loan losses			5,139				322				1,539				—				7,000
Noninterest income			19,178				43,411				28,720				8,980				100,289
Noninterest expense			62,859				47,551				54,259				12,549				177,218
Income before taxes			44,191				11,817				4,033				6,256				66,297
Income tax expense			7,246				1,939				662				1,026				10,873
Income from continuing operations		$	36,945			$	9,878			$	3,371			$	5,230			$	55,424
Average assets		$	9,740,000			$	3,934,000			$	4,799,000			$	2,147,000			$	20,620,000
		Three Months Ended June 30, 2017
		CommercialBanking				InstitutionalBanking				PersonalBanking				HealthcareServices				Total
Net interest income		$	86,810			$	12,415			$	30,615			$	7,554			$	137,394
Provision for loan losses			12,114				320				2,066				—				14,500
Noninterest income			21,714				48,161				31,135				9,296				110,306
Noninterest expense			62,545				46,610				56,516				11,268				176,939
Income before taxes			33,865				13,646				3,168				5,582				56,261
Income tax expense			7,188				3,137				106				1,059				11,490
Income from continuing operations		$	26,677			$	10,509			$	3,062			$	4,523			$	44,771
Average assets		$	9,842,000			$	3,316,000			$	5,293,000			$	1,864,000			$	20,315,000
		Six Months Ended June 30, 2018
		CommercialBanking				InstitutionalBanking				PersonalBanking				HealthcareServices				Total
Net interest income		$	185,006			$	32,023			$	62,003			$	19,116			$	298,148
Provision for loan losses			13,117				672				3,211				—				17,000
Noninterest income			39,775				88,830				59,434				17,775				205,814
Noninterest expense			125,131				94,383				109,225				24,355				353,094
Income before taxes			86,533				25,798				9,001				12,536				133,868
Income tax expense			13,516				4,030				1,406				1,959				20,911
Income from continuing operations		$	73,017			$	21,768			$	7,595			$	10,577			$	112,957
Average assets		$	9,765,000			$	3,882,000			$	4,885,000			$	2,151,000			$	20,683,000
		Six Months Ended June 30, 2017
		CommercialBanking				InstitutionalBanking				PersonalBanking				HealthcareServices				Total
Net interest income		$	172,108			$	23,971			$	60,809			$	14,821			$	271,709
Provision for loan losses			18,934				789				3,777				—				23,500
Noninterest income			40,919				93,828				59,671				18,805				213,223
Noninterest expense			125,202				91,362				112,632				21,553				350,749
Income before taxes			68,891				25,648				4,071				12,073				110,683
Income tax expense			14,870				5,456				1,015				2,595				23,936
Income from continuing operations		$	54,021			$	20,192			$	3,056			$	9,478			$	86,747
Average assets		$	9,730,000			$	3,391,000			$	5,317,000			$	1,837,000			$	20,275,000

The company has strategically aligned its operations into the following four reportable segments: Commercial Banking, Institutional Banking, Personal Banking, and Healthcare Services. Senior executive officers regularly evaluate business segment financial results produced by the company’s internal reporting system in deciding how to allocate resources and assess performance for individual business segments. Previously, the company had the following two business segments: Bank and Asset Servicing. The company’s reportable segments include certain corporate overhead, technology and service costs that are allocated based on methodologies that are applied consistently between periods. For comparability purposes, amounts in all periods are based on methodologies in effect at June 30, 2018.

Non-GAAP Financial Measures		UMB Financial Corporation
Net operating income Non-GAAP reconciliations:
(unaudited, dollars in thousands except per share data)
		Three Months EndedJune 30,								Six Months EndedJune 30,
		2018				2017				2018				2017
Income from continuing operations (GAAP)		$	55,424			$	44,771				112,957			$	86,747
Adjustments:
Acquisition and divestiture (income) expense			(24	)			17				(6	)			17
Severance expense			867				259				2,814				735
Tax-impact of adjustments (i)			(188	)			(99	)			(624	)			(271	)
Total Non-GAAP adjustments (net of tax)			655				177				2,184				481
Net operating income from continuing operations (Non-GAAP)		$	56,079			$	44,948			$	115,141			$	87,228
Earnings per share from continuing operations - diluted (GAAP)		$	1.11			$	0.90			$	2.26			$	1.74
Acquisition and divestiture (income) expense			—				—				—				—
Severance expense			0.01				—				0.05				0.01
Tax-impact of adjustments (i)			—				—				(0.01	)			—
Operating earnings per share from continuing operations - diluted (Non-GAAP)		$	1.12			$	0.90			$	2.30			$	1.75
GAAP
Return on average assets			1.08	%			0.88	%			1.10	%			0.86	%
Return on average equity			10.18				8.69				10.49				8.64
Non-GAAP
Operating return on average assets			1.09	%			0.89	%			1.12	%			0.87	%
Operating return on average equity			10.30				8.72				10.69				8.68

Operating noninterest expense and operating efficiency ratioNon-GAAP reconciliations:		UMB Financial Corporation
(unaudited, dollars in thousands)
		Three Months EndedJune 30,								Six Months EndedJune 30,
		2018				2017				2018				2017
Noninterest expense		$	177,218			$	176,939			$	353,094			$	350,749
Adjustments to arrive at operating noninterest expense (pre-tax):
Acquisition and divestiture (income) expense			(24	)			17				(6	)			17
Severance expense			867				259				2,814				735
Total Non-GAAP adjustments (pre-tax)			843				276				2,808				752
Operating noninterest expense (Non-GAAP)		$	176,375			$	176,663			$	350,286			$	349,997
Noninterest expense		$	177,218			$	176,939			$	353,094			$	350,749
Less: Amortization of other intangibles			1,485				1,924				3,047				3,970
Noninterest expense, net of amortization of other intangibles (Non-GAAP) (numerator A)		$	175,733			$	175,015			$	350,047			$	346,779
Operating noninterest expense		$	176,375			$	176,663			$	350,286			$	349,997
Less: Amortization of other intangibles			1,485				1,924				3,047				3,970
Operating expense, net of amortization of other intangibles (Non-GAAP) (numerator B)		$	174,890			$	174,739			$	347,239			$	346,027
Net interest income		$	150,226			$	137,394			$	298,148			$	271,709
Noninterest income			100,289				110,306				205,814				213,223
Less: Gains on sales of securities available for sale, net			228				1,280				367				1,748
Total Non-GAAP Revenue (denominator A)		$	250,287			$	246,420			$	503,595			$	483,184
Efficiency ratio (numerator A/denominator A)			70.21	%			71.02	%			69.51	%			71.77	%
Operating efficiency ratio (Non-GAAP) (numerator B/denominator A)			69.88	%			70.91	%			68.95	%			71.61	%

(i) Calculated using the company’s marginal tax rate of 22.2% for periods beginning after December 31, 2017 as a result of the Tax Cuts and Jobs Act. The prior periods were calculated using the company’s marginal tax rate of 36.0%.

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UMB Financial Corporation

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Source: UMB Financial Corporation