Exhibit 99.1

 

 

 

UMB Financial Corporation                                                                                                                                       News Release

1010 Grand Boulevard

Kansas City, MO 64106

816.860.7000

umb.com

//FOR IMMEDIATE RELEASE//

Media Contact: Rachael Crocker: 816.860.7775

Investor Relations Contact: Kay Gregory: 816.860.7106

UMB Financial Corporation Reports Record Earnings of $183 Million for the Full-Year 2017

KANSAS CITY, Mo. (Jan. 23, 2018) – UMB Financial Corporation (Nasdaq: UMBF), a financial holding company, announced income from continuing operations for the fourth quarter 2017 of $47.4 million or $0.95 per diluted share, compared to $48.9 million or $0.98 per diluted share in the third quarter 2017 (linked quarter) and $43.4 million or $0.87 per diluted share in the fourth quarter 2016. For the year ended December 31, 2017, income from continuing operations was $183.0 million or $3.67 per diluted share, an increase of 19.1 percent compared to $153.6 million or $3.12 per diluted share for the year ended December 31, 2016. Included in both the fourth quarter and year-to-date 2017 earnings is the impact of an additional $3.0 million of non-recurring tax expense resulting from the recently enacted Tax Cuts and Jobs Act. Results from continuing operations exclude the impact of the divestiture of Scout Investments, Inc., the company’s institutional investment management subsidiary, which was divested on November 17, 2017.

Net operating income from continuing operations, a non-GAAP financial measure which is reconciled to the nearest comparable GAAP measure later in this release, was $47.5 million or $0.95 per diluted share for the fourth quarter 2017, compared to $48.9 million or $0.98 per diluted share for the linked quarter and $44.0 million or $0.89 per diluted share for the fourth quarter 2016. These results represent a decrease of 2.9 percent on a linked-quarter basis and an increase of 8.0 percent compared to the fourth quarter 2016. For the year ended December 31, 2017, net operating income from continuing operations was $183.7 million or $3.69 per diluted share, compared to $158.3 million or $3.21 per diluted share for the year ended December 31, 2016.

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(unaudited, dollars in thousands, except per share data)
		Q4				Q3				Q4
		2017				2017				2016
Income from continuing operations		$	47,357			$	48,872			$	43,400
Income from discontinued operations-general operations (non-GAAP)			205				3,372				1,278
Income (loss) from discontinued operations-non-GAAP adjustments			64,399				(4,102	)			(1,744	)
Income (loss) from discontinued operations-total			64,604				(730	)			(466	)
Net income			111,961				48,142				42,934
Earnings per share from continuing operations (diluted)			0.95				0.98				0.87
Earnings per share from discontinued operations-general operations (non-GAAP) (diluted)			—				0.07				0.03
Earnings (losses) per share from discontinued operations-non-GAAP adjustments (diluted)			1.30				(0.08	)			(0.03	)
Earnings (losses) per share from discontinued operations (diluted)			1.30				(0.01	)			—
Earnings per share (diluted)			2.25				0.97				0.87
GAAP - continuing operations
Return on average assets			0.91	%			0.95	%			0.87	%
Return on average equity			8.72				9.17				8.67
Efficiency ratio			68.90				67.25				69.55
Non-GAAP - continuing operations
Operating return on average assets			0.91	%			0.96	%			0.88	%
Operating return on average equity			8.75				9.18				8.79
Operating efficiency ratio			68.80				67.22				69.15

 

Summary of year-to-date financial results		UMB Financial Corporation
(unaudited, dollars in thousands, except per share data)		December				December
		YTD				YTD
		2017				2016
Income from continuing operations		$	182,976			$	153,634
Income from discontinued operations-general operations (non-GAAP)			8,369				8,197
Income (loss) from discontinued operations-non-GAAP adjustments			55,760				(3,030	)
Income from discontinued operations-total			64,129				5,167
Net income			247,105				158,801
Earnings per share from continuing operations (diluted)			3.67				3.12
Earnings per share from discontinued operations-general operations (non-GAAP) (diluted)			0.17				0.17
Earnings (losses) per share from discontinued operations-non-GAAP adjustments (diluted)			1.12				(0.07	)
Earnings per share from discontinued operations (diluted)			1.29				0.10
Earnings per share (diluted)			4.96				3.22
GAAP - continuing operations
Return on average assets			0.90	%			0.78	%
Return on average equity			8.79				7.74
Efficiency ratio			68.56				71.50
Non-GAAP - continuing operations
Operating return on average assets			0.90	%			0.81	%
Operating return on average equity			8.83				7.98
Operating efficiency ratio			68.45				70.71

“Results for the fourth quarter 2017 were driven by loan growth, fueled by CRE and construction lending, strong credit metrics and continued growth in net interest margin,” said Mariner Kemper, chairman and chief executive officer. “For the full year, we earned a record $183.0 million, or $3.67 per diluted share, an increase of 19.1 percent compared to $153.6 million or $3.12 per diluted share in 2016. These results were driven by a 12.8 percent year-over-year increase in net interest income with continued favorable pricing and increased loan balances. In 2017, average loan balances increased 8.5 percent and stood at $10.8 billion.”

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Discussion of results from continuing operations

 

Summary of revenue										UMB Financial Corporation
(unaudited, dollars in thousands)
		Q4				Q3				Q4				CQ vs.				CQ vs.
		2017				2017				2016				LQ				PY
Net interest income		$	146,346			$	140,858			$	131,456			$	5,488			$	14,890
Noninterest income:
Trust and securities processing			44,234				45,060				42,331				(826	)			1,903
Trading and investment banking			5,015				4,453				5,040				562				(25	)
Service charges on deposit accounts			21,364				21,510				20,949				(146	)			415
Insurance fees and commissions			388				425				833				(37	)			(445	)
Brokerage fees			6,127				5,815				4,674				312				1,453
Bankcard fees			17,617				17,427				16,113				190				1,504
Gains on sales of securities available for sale, net			54				2,390				—				(2,336	)			54
Equity earnings (losses) on alternative investments			285				(584	)			504				869				(219	)
Other			10,949				7,810				7,786				3,139				3,163
Total noninterest income		$	106,033			$	104,306			$	98,230			$	1,727			$	7,803
Total Revenue		$	252,379			$	245,164			$	229,686			$	7,215			$	22,693
Net interest margin			3.21	%			3.16	%			3.00	%
Total noninterest income as a % of total revenue			42.0	%			42.5	%			42.8	%

Net interest income

 

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On a linked quarter basis, the increase in net interest income was driven by both a 2.1 percent increase in average earning assets and a five basis point improvement in net interest margin.

 

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Earning asset yields improved four basis points from the linked quarter driven by improved loan yields of seven basis points to 4.40 percent, in part driven by favorable re-pricing and volume changes within the loan portfolio. The cost of interest-bearing liabilities remained flat at 55 basis points while the mix changed from a decrease in federal funds borrowings and an increase in interest-bearing deposits.

 

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On a year-over-year basis, the increase in net interest income was driven by a 7.1 percent or $738.7 million increase in average loans as well as higher average loan yields, which increased 44 basis points from one year ago, primarily driven by higher interest rates and mix changes.

 

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For the fourth quarter 2017, average earning assets stood at $19.3 billion, which is an increase of 4.2 percent over the fourth quarter 2016.

Noninterest income

 

•

Fourth quarter 2017 noninterest income increased $1.7 million, or 1.7 percent, on a linked quarter basis largely due to:

 

•

an increase of $3.1 million in other noninterest income primarily due to an increase in company-owned and bank-owned life insurance income;

 

•

a $0.9 million increase in equity earnings on alternative investments;

 

•

which were partially offset by a $2.3 million decrease in gains on sales of available-for-sale securities.

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Noninterest income in the fourth quarter of 2017 improved $7.8 million, or 7.9 percent, compared to the same quarter in 2016 primarily driven by:

 

•

a $3.2 million increase in other noninterest income primarily due to increases in company-owned and bank-owned life insurance income.

 

•

a $1.0 million increase in wealth management revenue, a $0.5 million increase in fund servicing revenue, and a $0.5 million increase in corporate trust revenue all recorded in trust and securities processing;

 

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a $1.5 million increase in bankcard fees primarily due to increased interchange income; and

 

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an increase of $1.5 million in brokerage fee income primarily driven by higher 12b-1 income.

Noninterest expense

 

Summary of noninterest expense										UMB Financial Corporation
(unaudited, dollars in thousands)
		Q4				Q3				Q4				CQ vs.				CQ vs.
		2017				2017				2016				LQ				PY
Salaries and employee benefits		$	107,656			$	99,749			$	96,765			$	7,907			$	10,891
Occupancy, net			11,148				11,285				11,259				(137	)			(111	)
Equipment			18,690				17,880				17,530				810				1,160
Supplies and services			4,211				4,076				4,660				135				(449	)
Marketing and business development			6,540				5,056				5,935				1,484				605
Processing fees			11,238				11,151				8,887				87				2,351
Legal and consulting			6,045				5,844				6,694				201				(649	)
Bankcard			4,405				5,130				4,558				(725	)			(153	)
Amortization of other intangible assets			1,641				1,715				2,051				(74	)			(410	)
Regulatory fees			3,825				3,798				3,687				27				138
Other			7,160				6,137				5,821				1,023				1,339
Total noninterest expense		$	182,559			$	171,821			$	167,847			$	10,738			$	14,712

 

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GAAP noninterest expense for the fourth quarter of 2017 was $182.6 million and increased $10.7 million, or 6.2 percent from the linked quarter.

 

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On a non-GAAP basis, operating noninterest expense (as reconciled later in this release) was $182.3 million for the fourth quarter 2017, an increase of $10.5 million, or 6.1 percent, compared to the linked quarter, and an increase of $15.4 million, or 9.2 percent, compared to the fourth quarter 2016.

 

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The linked quarter increase in operating noninterest expense was driven by:

 

•

a $7.8 million increase in salaries and employee benefits expense primarily driven by a $5.4 million increase in bonus and commission expense, and a $2.0 million increase in employee benefits partially due to increased incentive compensation and profit sharing expense from improved company performance;

 

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an increase of $1.5 million in marketing and business development related to timing of multiple projects; and

 

•

a $1.0 million increase in other noninterest expense driven by a $1.0 million contribution made to the UMB Financial Corporation Charitable Foundation.

 

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The year-over-year increase in operating noninterest expense of $15.4 million, or 9.2 percent, was primarily driven by:

 

•

an $11.1 million increase in salaries and benefits expense driven by a $4.2 million increase in bonus and commissions expense, an increase of $2.8 million in salary and wage expense, and an increase of $4.0 million in other employee benefits. These increases were primarily driven by improved company performance during 2017;

 

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higher processing expenses related to investments for regulatory requirements, cyber security, and the ongoing modernization of the company’s core systems; and

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increased charitable contributions and derivative expense, both recorded in other noninterest expense.

Full Year 2017 Financial Discussion

 

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The 12.8 percent year-over-year increase in net interest income was driven by benefits from higher short-term interest rates, favorable pricing and increased loan balances. In 2017, average loan balances increased $850.8 million and average loan yields increased 38 basis points. Average interest-bearing liabilities increased $649.9 million, while cost of funds increased 24 basis points.

 

•

Full year noninterest income increased $21.1 million, or 5.2 percent, due to:

 

•

a $5.3 million increase in wealth management revenue, a $3.3 million increase in fund servicing revenue, and a $1.8 million increase in corporate trust revenue all recorded in trust and securities processing;

 

•

a $6.7 million increase in company-owned and bank-owned life insurance income recorded in other noninterest income;

 

•

a $5.4 million increase in brokerage fees, primarily driven by higher 12b-1 income;

 

•

a $5.0 million increase in credit card interchange income recorded in bankcard fees;

 

•

partially offset by a $4.3 million decrease in gains on sales of available-for-sale securities and a $3.8 million decrease in equity earnings on alternative investments.

 

•

Full year noninterest expense increased $38.4 million, or 5.8 percent, primarily due to increases in salary and employee benefit expense of $23.8 million due to improved company performance, processing fees of $6.3 million, and equipment expense of $5.7 million.

 

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On a non-GAAP basis, operating noninterest expense, which excludes the impact of acquisition expenses and other items as reconciled later in this release, was $704.0 million for full-year 2017, an increase of $44.5 million, or 6.8 percent, compared to the full-year 2016.

Income Taxes

 

•

For the year ended December 31, 2017, the company’s effective tax rate remained flat at 22.6 percent as compared to the same period a year earlier.

On December 22, 2017 the Tax Cuts and Jobs Act was signed into law. The new legislation includes numerous changes to existing federal income tax laws and regulations, including a permanent reduction in the federal corporate income tax rate to 21 percent effective January 1, 2018. As a result of the Tax Cuts and Jobs Act, the company was required to revalue its deferred taxes.

Based on currently available information, the company recorded additional income tax expense of $3.0 million during the fourth quarter of 2017 resulting from the Tax Cuts and Jobs Act. The company’s revaluation of its deferred taxes may be subject to further refinement as additional information becomes available and further analysis is completed.

Balance Sheet

 

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Average total assets for the fourth quarter 2017 were $20.7 billion, an increase of $410.5 million from the linked quarter, and up from $19.9 billion for the same period in 2016.

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Summary of average loans and leases - QTD Average														UMB Financial Corporation
(unaudited, dollars in thousands)
		Q4				Q3				Q4				CQ vs.				CQ vs.
		2017				2017				2016				LQ				PY
Commercial		$	4,438,241			$	4,539,302			$	4,369,173			$	(101,061	)		$	69,068
Asset-based loans			326,845				278,479				231,035				48,366				95,810
Factoring loans			212,123				173,876				110,866				38,247				101,257
Commercial credit card			172,193				174,892				150,630				(2,699	)			21,563
Real estate - construction			835,715				782,898				674,367				52,817				161,348
Real estate - commercial			3,394,232				3,284,871				3,089,946				109,361				304,286
Real estate - residential			619,985				603,865				553,770				16,120				66,215
Real estate - HELOC			649,268				668,340				713,528				(19,072	)			(64,260	)
Consumer credit card			247,284				239,529				271,909				7,755				(24,625	)
Consumer other			164,667				140,344				146,779				24,323				17,888
Leases			24,163				24,758				34,020				(595	)			(9,857	)
Total loans		$	11,084,716			$	10,911,154			$	10,346,023			$	173,562			$	738,693

 

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Average loans for the fourth quarter 2017, increased 1.6 percent, on a linked-quarter basis, and 7.1 percent, compared to fourth quarter 2016.

 

Summary of average securities - QTD Average														UMB Financial Corporation
(unaudited, dollars in thousands)
		Q4				Q3				Q4				CQ vs.				CQ vs.
		2017				2017				2016				LQ				PY
Securities available for sale:
U.S. Treasury		$	38,776			$	47,216			$	182,891			$	(8,440	)		$	(144,115	)
U.S. Agencies			14,753				22,743				248,329				(7,990	)			(233,576	)
Mortgage-backed			3,484,304				3,564,974				3,586,040				(80,670	)			(101,736	)
State and political subdivisions			2,555,462				2,536,281				2,362,178				19,181				193,284
Corporates			15,880				21,848				67,100				(5,968	)			(51,220	)
Total securities available for sale			6,109,175				6,193,062				6,446,538				(83,887	)			(337,363	)
Securities held to maturity:
State and political subdivisions			1,269,058				1,283,258				1,073,509				(14,200	)			195,549
Trading securities			43,388				49,396				50,925				(6,008	)			(7,537	)
Other securities			63,543				64,294				66,567				(751	)			(3,024	)
Total securities		$	7,485,164			$	7,590,010			$	7,637,539			$	(104,846	)		$	(152,375	)

 

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The year-over-year growth in the company’s held to maturity securities portfolio is due to increased activity in private placement bonds, primarily used to refinance existing revenue bonds in the healthcare and education sectors.

 

•

Total securities available for sale decreased 1.4 percent on a linked-quarter basis and 5.2 percent compared to the fourth quarter 2016, driven by the ongoing reinvestment of cash flows from such securities to fund growth in the private placement bond and loan portfolios.

 

Summary of average deposits - QTD Average														UMB Financial Corporation
(unaudited, dollars in thousands)
		Q4				Q3				Q4				CQ vs.				CQ vs.
		2017				2017				2016				LQ				PY
Deposits:
Noninterest-bearing demand		$	6,180,293			$	5,728,145			$	6,193,787			$	452,148			$	(13,494	)
Interest-bearing demand and savings			9,439,202				8,789,217				8,439,920				649,985				999,282
Time deposits			1,230,303				1,162,383				1,112,781				67,920				117,522
Total deposits		$	16,849,798			$	15,679,745			$	15,746,488			$	1,170,053			$	1,103,310
Non-interest bearing deposits as % of total			36.68	%			36.53	%			39.33	%

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Average noninterest-bearing deposits were relatively unchanged compared to the fourth quarter of 2016, but increased 7.9 percent on a linked-quarter basis primarily driven by greater balances held by larger commercial and institutional customers.

 

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Average interest-bearing deposits increased 7.2 percent on a linked-quarter basis and 11.7 percent as compared to the fourth quarter of 2016, primarily driven by the seasonal influx of public fund deposits and increased balances from institutional customers, respectively.

Capital

 

Capital information						UMB Financial Corporation
(unaudited, dollars in thousands, except per share data)
		Q4				Q3				Q4
		2017				2017				2016
Total equity		$	2,181,531			$	2,101,543			$	1,962,384
Book value per common share			43.72				42.15				39.51
Regulatory capital:
Common equity Tier 1 capital		$	2,041,504			$	1,893,842			$	1,789,581
Tier 1 capital			2,041,504				1,893,842				1,789,581
Total capital			2,213,050				2,062,928				1,951,078
Regulatory capital ratios:
Common equity Tier 1 capital ratio			12.95	%			12.18	%			11.80	%
Tier 1 risk-based capital ratio			12.95				12.18				11.80
Total risk-based capital ratio			14.04				13.26				12.87
Tier 1 leverage ratio			9.94				9.43				9.09

 

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At December 31, 2017, the company’s risk-based capital ratios presented in the foregoing table exceeded all of the “well-capitalized” regulatory thresholds.

Asset Quality

 

Credit quality														UMB Financial Corporation
(unaudited, dollars in thousands)
		Q4				Q3				Q2				Q1				Q4
		2017				2017				2017				2017				2016
Net charge-offs - Commercial loans		$	2,248			$	8,961			$	7,971			$	5,283			$	1,127
Net (recoveries) charge-offs - Real estate loans			(242	)			238				(95	)			125				3,373
Net charge-offs - Consumer credit card loans			1,612				1,635				2,079				1,815				1,692
Net charge-offs - Consumer other loans			167				74				71				103				63
Net charge-offs - Total loans			3,785				10,908				10,026				7,326				6,255
Net loan charge-offs as a % of total average loans			0.14	%			0.40	%			0.37	%			0.28	%			0.24	%
Loans over 90 days past due		$	3,091			$	2,088			$	2,657			$	3,369			$	3,365
Loans over 90 days past due as a % of total loans			0.03				0.02	%			0.02	%			0.03	%			0.03	%
Nonaccrual and restructured loans		$	59,142			$	54,231			$	51,390			$	56,594			$	70,259
Nonaccrual and restructured loans as a % of total loans			0.52				0.49	%			0.47	%			0.53	%			0.67	%
Provision for loan losses			6,000				11,500			$	14,500			$	9,000			$	7,500

 

•

Nonperforming loans, defined as restructured loans on nonaccrual and all other nonaccrual loans, increased $4.9 million from the linked quarter and decreased $11.1 million from the prior year period.

 

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Net charge-offs decreased to $3.8 million or 0.14 percent of average loans, compared to $10.9 million, or 0.40 percent of average loans in the linked quarter, and $6.3 million, or 0.24 percent of average loans in the fourth quarter of 2016.

 

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Provision for loan losses decreased $5.5 million from the elevated linked quarter levels driven by both lower net charge-offs and favorable migration within the loan portfolio.

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Dividend Declaration

At the company’s quarterly board meeting, the Board of Directors declared a $0.29 per share quarterly cash dividend, a 5.5 percent increase from previous levels. This cash dividend will be payable on April 2, 2018, to shareholders of record at the close of business on March 9, 2018.

Conference Call

The company plans to host a conference call to discuss its fourth quarter and full year 2017 earnings results on Wednesday, Jan. 24, 2018, at 8:30 a.m. (CT).

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

UMB Financial 4Q 2017 Conference Call

A replay of the conference call may be heard through Feb. 7, 2018, by calling (toll-free) 877-344-7529 or (U.S.) 412-317-0088. The replay pass code required for playback is 10115494. 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, operating earnings per share—diluted (operating EPS), operating return on average equity (operating ROE), operating return on average assets (operating ROA), operating noninterest expense, operating efficiency ratio, net income from discontinued operations-general operations, and earnings per share from discontinued operations-general operations, 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, operating efficiency ratio, net income from discontinued operations-general operations, and earnings per share from discontinued operations-general operations—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 fair value adjustments, acquisition-and severance-related items, one-time marketing agent termination costs, 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 the following: (i) fair value adjustments on contingent consideration for the acquisitions of Reams Asset Management Company (Reams), (ii) expenses related to acquisitions and divestitures, (iii) non-acquisition related severance expense, and (v) the cumulative tax impact of the previous adjustments. The company believes that the financial impact of excluding non-acquisition related severance expense will be immaterial in the near future. It is excluded from certain GAAP financial measures as it has an unusually large impact on the company’s financial statements.

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 in clauses (i)-(v) above for the relevant period. Operating ROE is calculated as net operating income, divided by the company’s average total shareholders’ equity for the relevant period. Operating ROA is calculated as net operating income, 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 in clauses (i)-(iii) 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 revenue (calculated as tax equivalent net interest income, plus noninterest income, less gains on sales of securities available for sale, net).

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Net income from discontinued operations-general operations for the relevant period is defined as GAAP income from discontinued operations, adjusted to reflect the impact of excluding non-GAAP adjustments (iii) and (v) above, and (iv) divestiture expenses related to Scout, (vii) the gain on sale of Scout, and (viii) expenses related to the buy-out and termination of certain marketing and referral agreements in Scout’s business. The company believes that the financial impact of excluding non-acquisition related severance expense will be immaterial in the near future. It is excluded from certain GAAP financial measures as it has an unusually large impact on the company’s financial statements.

Earnings per share from discontinued operations-general operations (diluted) is calculated as earnings per share from discontinued operations (diluted) as reported, adjusted to reflect, on a per share basis, the impact of excluding non-GAAP adjustment (iii)-(v), and (vii)-(viii) above for the relevant period.

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—such as our statements about the timeframe or amount of expected proceeds from the closing of the sale of Scout. 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, 2016, 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. 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., offering complete banking services, payment solutions and asset servicing. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas, as well as two national specialty-lending businesses. A subsidiary of the holding company, UMB Fund Services, Inc., offers services to mutual funds and alternative-investment entities and registered investment advisors. For more information, visit UMB.com, UMB Financial.com, UMB Blog or follow us on Twitter at @UMBBank, UMB Facebook and UMB LinkedIn.

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Consolidated Balance Sheets		UMB Financial Corporation
(dollars in thousands)
		December 31,
		2017				2016
		(unaudited)				(audited)
Assets
Loans		$	11,280,513			$	10,540,383
Allowance for loan losses			(100,604	)			(91,649	)
Net loans			11,179,909				10,448,734
Loans held for sale			1,460				5,279
Investment securities:
Available for sale			6,258,577				6,466,334
Held to maturity			1,261,014				1,115,932
Trading securities			54,055				39,536
Other securities			65,897				68,306
Total investment securities			7,639,543				7,690,108
Federal funds and resell agreements			191,601				324,327
Interest-bearing due from banks			1,351,760				715,823
Cash and due from banks			392,723				422,117
Premises and equipment, net			275,942				289,007
Accrued income			98,863				99,045
Goodwill			180,867				180,867
Other intangibles, net			20,257				26,630
Other assets			438,658				425,205
Discontinued assets – goodwill and other intangibles, net			—				55,390
Total assets		$	21,771,583			$	20,682,532
Liabilities
Deposits:
Noninterest-bearing demand		$	6,839,171			$	6,654,584
Interest-bearing demand and savings			9,903,565				8,780,309
Time deposits under $250,000			547,990				613,589
Time deposits of $250,000 or more			732,274				522,132
Total deposits			18,023,000				16,570,614
Federal funds and repurchase agreements			1,260,704				1,856,937
Long-term debt			79,281				76,772
Accrued expenses and taxes			191,464				172,967
Other liabilities			35,603				42,858
Total liabilities			19,590,052				18,720,148
Shareholders’ Equity
Common stock			55,057				55,057
Capital surplus			1,046,095				1,033,419
Retained earnings			1,338,110				1,142,887
Accumulated other comprehensive loss, net			(45,525	)			(57,542	)
Treasury stock			(212,206	)			(211,437	)
Total shareholders’ equity			2,181,531				1,962,384
Total liabilities and shareholders’ equity		$	21,771,583			$	20,682,532

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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,
		2017				2016				2017				2016
		(unaudited)				(unaudited)				(unaudited)				(audited)
Interest Income
Loans		$	122,885			$	102,961			$	461,301			$	386,274
Securities:
Taxable interest			17,774				18,339				73,125				73,560
Tax-exempt interest			19,047				16,139				73,419				57,516
Total securities income			36,821				34,478				146,544				131,076
Federal funds and resell agreements			1,062				769				3,700				2,708
Interest-bearing due from banks			1,987				569				3,871				2,341
Trading securities			361				233				1,496				632
Total interest income			163,116				139,010				616,912				523,031
Interest Expense
Deposits			12,372				5,119				36,354				17,936
Federal funds and repurchase agreements			3,632				1,774				17,906				6,524
Other			766				661				3,739				3,248
Total interest expense			16,770				7,554				57,999				27,708
Net interest income			146,346				131,456				558,913				495,323
Provision for loan losses			6,000				7,500				41,000				32,500
Net interest income after provision for loan losses			140,346				123,956				517,913				462,823
Noninterest Income
Trust and securities processing			44,234				42,331				176,646				166,315
Trading and investment banking			5,015				5,040				23,183				21,422
Service charges on deposits			21,364				20,949				87,680				86,662
Insurance fees and commissions			388				833				1,972				4,188
Brokerage fees			6,127				4,674				23,208				17,833
Bankcard fees			17,617				16,113				73,030				68,749
Gains on sale of securities available for sale, net			54				—				4,192				8,509
Equity earnings (losses) on alternative investments			285				504				(1,108	)			2,695
Other			10,949				7,786				34,759				26,138
Total noninterest income			106,033				98,230				423,562				402,511
Noninterest Expense
Salaries and employee benefits			107,656				96,765				413,830				390,059
Occupancy, net			11,148				11,259				44,462				44,255
Equipment			18,690				17,530				72,008				66,337
Supplies, postage and telephone			4,211				4,660				17,173				18,535
Marketing and business development			6,540				5,935				21,469				21,208
Processing fees			11,238				8,887				42,331				36,005
Legal and consulting			6,045				6,694				23,406				20,801
Bankcard			4,405				4,558				19,471				20,757
Amortization of other intangibles			1,641				2,051				7,326				8,695
Regulatory fees			3,825				3,687				15,527				14,178
Other			7,160				5,821				28,126				25,915
Total noninterest expense			182,559				167,847				705,129				666,745
Income before income taxes			63,820				54,339				236,346				198,589
Income tax provision			16,463				10,939				53,370				44,955
Income from continuing operations		$	47,357			$	43,400			$	182,976			$	153,634
Discontinued operations
Income (loss) from discontinued operations before income taxes			101,948				(377	)			101,226				8,415
Income tax expense			37,344				89				37,097				3,248
Income (loss) on discontinued operations			64,604				(466	)			64,129				5,167
Net income		$	111,961			$	42,934			$	247,105			$	158,801
Per Share Data
Basic:
Income from continuing operations		$	0.96			$	0.89			$	3.72			$	3.15
Income (loss) from discontinued operations			1.31				(0.01	)			1.30				0.10
Net income - basic			2.27				0.88				5.02				3.25
Diluted:
Income from continuing operations			0.95				0.87				3.67				3.12
Income from discontinued operations			1.30				—				1.29				0.10
Net income – diluted			2.25				0.87				4.96				3.22
Dividends			0.275				0.255				1.040				0.990
Weighted average shares outstanding			49,229,693				48,935,216				49,223,661				48,828,313
Weighted average shares outstanding – diluted			49,840,529				49,616,121				49,839,290				49,277,055

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Consolidated Statements of Comprehensive Income (Loss)		UMB Financial Corporation
(dollars in thousands)

 

		Three Months Ended December 31,								Year Ended December 31,
		2017				2016				2017				2016
		(unaudited)				(unaudited)				(unaudited)				(audited)
Net Income		$	111,961			$	42,934			$	247,105			$	158,801
Other comprehensive (loss) income, net of tax:
Unrealized (losses) gains on securities:
Change in unrealized holding (losses) gains, net			(41,507	)			(168,433	)			21,139				(77,794	)
Less: Reclassifications adjustment for gains included in net income			(54	)			—				(4,192	)			(8,509	)
Change in unrealized (losses) gains on securities during the period			(41,561	)			(168,433	)			16,947				(86,303	)
Change in unrealized gains (losses) on derivatives			30				7,161				(1,050	)			(516	)
Income tax benefit (expense)			18,674				61,218				(3,880	)			32,995
Other comprehensive (loss) income			(22,857	)			(100,054	)			12,017				(53,824	)
Comprehensive income (loss)		$	89,104			$	(57,120	)		$	259,122			$	104,977

 

Consolidated Statements of Changes in Shareholders’ Equity		UMB Financial Corporation
(dollars in thousands, except per share data)

 

		Common Stock				Capital Surplus				Retained Earnings				Accumulated Other Comprehensive (Loss) Income				Treasury Stock				Total
(audited)
Balance - January 1, 2016		$	55,057			$	1,019,889			$	1,033,990			$	(3,718	)		$	(211,524	)		$	1,893,694
Total comprehensive income			—				—				158,801				(53,824	)			—				104,977
Cash dividends ($0.99 per share)			—				—				(49,048	)			—				—				(49,048	)
Purchase of treasury stock			—				—				—				—				(16,367	)			(16,367	)
Issuance of equity awards			—				(3,011	)			—				—				3,440				429
Recognition of equity based compensation			—				11,306				—				—				—				11,306
Sale of treasury stock			—				480				—				—				616				1,096
Exercise of stock options			—				3,417				—				—				12,398				15,815
Cumulative effect adjustment			—				1,338				(856	)			—				—				482
Balance – December 31, 2016		$	55,057			$	1,033,419			$	1,142,887			$	(57,542	)		$	(211,437	)		$	1,962,384
(unaudited)
Balance - January 1, 2017		$	55,057			$	1,033,419			$	1,142,887			$	(57,542	)		$	(211,437	)		$	1,962,384
Total comprehensive income			—				—				247,105				12,017				—				259,122
Cash dividends ($1.04 per share)			—				—				(51,882	)			—				—				(51,882	)
Purchase of treasury stock			—				—				—				—				(15,276	)			(15,276	)
Issuance of equity awards			—				(2,871	)			—				—				3,343				472
Recognition of equity based compensation			—				12,844				—				—				—				12,844
Sale of treasury stock			—				608				—				—				512				1,120
Exercise of stock options			—				2,095				—				—				10,652				12,747
Balance – December 31, 2017		$	55,057			$	1,046,095			$	1,338,110			$	(45,525	)		$	(212,206	)		$	2,181,531

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Average Balances / Yields and Rates		UMB Financial Corporation
(tax - equivalent basis)

 

(unaudited, dollars in thousands)		Three Months Ended December 31,
		2017								2016
		Average Balance				Average Yield/Rate				Average Balance				Average Yield/Rate
Assets
Loans, net of unearned interest		$	11,084,716				4.40	%		$	10,346,023				3.96	%
Securities:
Taxable			3,688,202				1.91				4,232,002				1.72
Tax-exempt			3,753,574				3.08				3,354,612				2.94
Total securities			7,441,776				2.50				7,586,614				2.26
Federal funds and resell agreements			181,933				2.32				208,581				1.47
Interest-bearing due from banks			587,181				1.34				365,512				0.62
Trading securities			43,388				4.21				50,925				2.18
Total earning assets			19,338,994				3.56				18,557,655				3.17
Allowance for loan losses			(100,344	)							(91,833	)
Other assets			1,485,075								1,454,616
Total assets		$	20,723,725							$	19,920,438
Liabilities and Shareholders’ Equity
Interest-bearing deposits		$	10,669,505				0.46	%		$	9,552,701				0.21	%
Federal funds and repurchase agreements			1,424,380				1.01				1,899,196				0.37
Borrowed funds			76,626				3.97				76,831				3.42
Total interest-bearing liabilities			12,170,511				0.55				11,528,728				0.26
Noninterest-bearing demand deposits			6,180,293								6,193,787
Other liabilities			217,721								206,576
Shareholders’ equity			2,155,200								1,991,347
Total liabilities and shareholders’ equity		$	20,723,725							$	19,920,438
Net interest spread							3.01	%							2.91	%
Net interest margin							3.21								3.00

 

Average Balances / Yields and Rates		UMB Financial Corporation
(tax - equivalent basis)

 

(unaudited, dollars in thousands)		Year Ended December 31,
		2017								2016
		Average Balance				Average Yield/Rate				Average Balance				Average Yield/Rate
Assets
Loans, net of unearned interest		$	10,843,642				4.25	%		$	9,992,874				3.87	%
Securities:
Taxable			3,918,001				1.87				4,545,013				1.62
Tax-exempt			3,657,951				3.08				3,077,562				2.87
Total securities			7,575,952				2.45				7,622,575				2.12
Federal funds and resell agreements			190,074				1.95				188,572				1.44
Interest-bearing due from banks			351,293				1.10				410,163				0.57
Trading securities			57,013				3.28				42,437				1.85
Total earning assets			19,017,974				3.45				18,256,621				3.03
Allowance for loan losses			(97,231	)							(85,201	)
Other assets			1,475,685								1,421,265
Total assets		$	20,396,428							$	19,592,685
Liabilities and Shareholders’ Equity
Interest-bearing deposits		$	10,002,497				0.36	%		$	9,432,720				0.19	%
Federal funds and repurchase agreements			2,095,111				0.85				2,005,631				0.33
Borrowed funds			76,301				4.90				85,658				3.79
Total interest-bearing liabilities			12,173,909				0.48				11,524,009				0.24
Noninterest-bearing demand deposits			5,936,172								5,906,021
Other liabilities			205,500								178,906
Shareholders’ equity			2,080,847								1,983,749
Total liabilities and shareholders’ equity		$	20,396,428							$	19,592,685
Net interest spread							2.97	%							2.79	%
Net interest margin							3.15								2.88

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Business Segment Information		UMB Financial Corporation
(unaudited, dollars in thousands)

 

		Three Months Ended December 31, 2017
		Bank				Asset Servicing				Total
Net interest income		$	142,544			$	3,802			$	146,346
Provision for loan losses			6,000				—				6,000
Noninterest income			82,966				23,067				106,033
Noninterest expense			160,202				22,357				182,559
Income before taxes			59,308				4,512				63,820
Income tax expense			15,838				625				16,463
Net income from continuing operations		$	43,470			$	3,887			$	47,357
Average assets		$	19,950,550			$	773,450			$	20,724,000
		Three Months Ended December 31, 2016
		Bank				Asset Servicing				Total
Net interest income		$	128,869			$	2,587			$	131,456
Provision for loan losses			7,500				—				7,500
Noninterest income			75,246				22,984				98,230
Noninterest expense			147,006				20,841				167,847
Income before taxes			49,609				4,730				54,339
Income tax expense			9,951				988				10,939
Net income from continuing operations		$	39,658			$	3,742			$	43,400
Average assets		$	18,879,000			$	1,041,000			$	19,920,000
		Year Ended December 31, 2017
		Bank				Asset Servicing				Total
Net interest income		$	546,000			$	12,913			$	558,913
Provision for loan losses			41,000				—				41,000
Noninterest income			328,550				95,012				423,562
Noninterest expense			616,883				88,246				705,129
Income before taxes			216,667				19,679				236,346
Income tax expense			49,522				3,848				53,370
Net income from continuing operations		$	167,145			$	15,831			$	182,976
Average assets		$	19,612,450			$	783,550			$	20,396,000
		Year Ended December 31, 2016
		Bank				Asset Servicing				Total
Net interest income		$	484,716			$	10,607			$	495,323
Provision for loan losses			32,500				—				32,500
Noninterest income			309,889				92,622				402,511
Noninterest expense			582,719				84,026				666,745
Income before taxes			179,386				19,203				198,589
Income tax expense			40,406				4,549				44,955
Net income from continuing operations		$	138,980			$	14,654			$	153,634
Average assets		$	18,371,950			$	1,221,050			$	19,593,000

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Non-GAAP Financial Measures		UMB Financial Corporation
Net operating income non-GAAP reconciliations:
(unaudited, dollars in thousands, except per share data)

 

		Three Months Ended								Year Ended
		December 31,								December 31,
		2017				2016				2017				2016
Income from continuing operations (GAAP)		$	47,357			$	43,400			$	182,976			$	153,634
Adjustments:
Fair value adjustments on contingent consideration (i)			—				—				—				67
Acquisition expenses (ii)			52				547				74				5,020
Non-acquisition severance expense (iii)			224				415				1,039				2,167
Tax-impact of adjustments (v)			(100	)			(346	)			(401	)			(2,611	)
Total Non-GAAP adjustments (net of tax)			176				616				712				4,643
Net operating income from continuing operations (Non-GAAP)		$	47,533			$	44,016			$	183,688			$	158,277
Earnings per share from continuing operations - diluted (GAAP)		$	0.95			$	0.87			$	3.67			$	3.12
Fair value adjustments on contingent consideration (i)			—				—				—				—
Acquisition expenses (ii)			—				0.01				—				0.10
Non-acquisition severance expense (iii)			—				0.01				0.02				0.04
Tax-impact of adjustments (v)			—				—				—				(0.05	)
Operating earnings per share from continuing operations - diluted (Non-GAAP)		$	0.95			$	0.89			$	3.69			$	3.21
GAAP
Return on average assets			0.91	%			0.87	%			0.90	%			0.78	%
Return on average equity			8.72				8.67				8.79				7.74
Non-GAAP
Operating return on average assets			0.91	%			0.88	%			0.90	%			0.81	%
Operating return on average equity			8.75				8.79				8.83				7.98

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Operating noninterest expense and operating efficiency ratio non-GAAP reconciliations:		UMB Financial Corporation
(unaudited, dollars in thousands)

 

		Three Months Ended								Year Ended
		December 31,								December 31,
		2017				2016				2017				2016
Noninterest expense		$	182,559			$	167,847			$	705,129			$	666,745
Adjustments to arrive at operating noninterest expense (pre-tax):
Fair value adjustments on contingent consideration (i)			—				—				—				67
Acquisition expenses (ii)			52				547				74				5,020
Non-acquisition severance expense (iii)			224				415				1,039				2,167
Total Non-GAAP adjustments (pre-tax)			276				962				1,113				7,254
Operating noninterest expense (Non-GAAP)		$	182,283			$	166,885			$	704,016			$	659,491
Noninterest expense		$	182,559			$	167,847			$	705,129			$	666,745
Less: Amortization of other intangibles			1,641				2,051				7,326				8,695
Noninterest expense, net of amortization of other intangibles (Non-GAAP) (numerator A)		$	180,918			$	165,796			$	697,803			$	658,050
Operating noninterest expense		$	182,283			$	166,885			$	704,016			$	659,491
Less: Amortization of other intangibles			1,641				2,051				7,326				8,695
Operating expense, net of amortization of other intangibles (Non-GAAP) (numerator B)		$	180,642			$	164,834			$	696,690			$	650,796
Net interest income (tax equivalent) (vi)		$	156,583			$	140,147			$	598,392			$	526,337
Noninterest income			106,033				98,230				423,562				402,511
Less: Gains on sales of securities available for sale, net			54				—				4,192				8,509
Total (Non-GAAP) (denominator A)		$	262,562			$	238,377			$	1,017,762			$	920,339
Efficiency ratio (numerator A/denominator A)			68.90	%			69.55	%			68.56	%			71.50	%
Operating efficiency ratio (Non-GAAP) (numerator B/denominator A)			68.80				69.15				68.45				70.71

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Net income from discontinued operations-general operations non-GAAP reconciliation:		UMB Financial Corporation
(unaudited, dollars in thousands, except per share data)

 

		Three Months Ended								Year Ended
		December 31,								December 31,
		2017				2016				2017				2016
Income (loss) from discontinued operations (GAAP)		$	64,604			$	(466	)		$	64,129			$	5,167
Adjustments:
Divestiture expense (iv)			3,021				—				16,519				—
Non-acquisition severance expense (iii)			—				—				—				2,010
Gain on sale of discontinued operations (vii)			(103,644	)			—				(103,644	)			—
Marketing agent termination costs (viii)			—				2,725				—				2,725
Tax-impact of adjustments (v)			36,224				(981	)			31,365				(1,705	)
Total Non-GAAP adjustments (net of tax)			(64,399	)			1,744				(55,760	)			3,030
Net income from discontinued operations-general operations (Non-GAAP)		$	205			$	1,278			$	8,369			$	8,197
Earnings per share from discontinued operations—diluted		$	1.30			$	—			$	1.29			$	0.10
Divestiture expense (iv)			0.06				—				0.33				—
Non-acquisition severance expense (iii)			—				—				—				0.04
Gain on sale of discontinued operations (vii)			(2.08	)			—				(2.08	)			—
Marketing agent termination costs (viii)			—				0.05				—				0.06
Tax-impact of adjustments (v)			0.72				(0.02	)			0.63				(0.03	)
Total Non-GAAP adjustments (net of tax)			(1.30	)			0.03				(1.12	)			0.07
Earnings per share from discontinued operations-general operations—diluted (Non-GAAP)		$	—			$	0.03			$	0.17			$	0.17

 

(i)	Represents fair value adjustments to contingent consideration for the acquisitions of Reams.

(ii)	Represents expenses related to acquisitions and divestitures.

(iii)

Represents non-acquisition severance expense related to UMB-legacy employees as management excludes severance expense from its internal evaluation of company performance. Severance expense for Marquette-legacy employees is included in item (ii). Severance expense for Scout employees is included in item (iv)

(iv)	Represents expenses related to the divestiture of Scout.

(v)	Calculated using the company’s marginal tax rate of 36%.

(vi)

Tax-exempt interest income has been adjusted to a tax equivalent basis. The amount of such adjustment was an addition to net interest income of $10.3 million and $8.7 million for the three months ended December 31, 2017 and 2016, respectively. The amount of such adjustment was an addition to net interest income of $39.5 million and $31.0 million for the years ended December 31, 2017 and 2016, respectively.

(vii)

Represents the gain on the sale of Scout. As this gain does not represent income from the normal course of business, it is removed from the calculation of discontinued operations-general operations.

(viii)

Represents expenses related to the buy-out and termination of certain marketing and referral agreements in the company’s institutional investment management business.