8-K
UMB FINANCIAL CORP (UMBF)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): 1/28/2020
UMB FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Commission File Number: 001-38481
| Missouri | 43-0903811 |
|---|---|
| (State or other jurisdiction of | (IRS Employer |
| incorporation) | Identification No.) |
1010 Grand Blvd., Kansas City, MO 64106
(Address of principal executive offices, including zip code)
(816) 860-7000
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13c-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities Registered Pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $1.00 Par Value | UMBF | The NASDAQ Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02Results of Operations and Financial Condition
On January 28, 2020, UMB Financial Corporation (the “Company”) issued a press release announcing the financial results for the Company for the quarter and year ended December 31, 2019. A copy of the press release is attached as Exhibit 99.1 and the information is hereby incorporated by reference herein.
The information contained in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 hereto, is being furnished and shall not be deemed to be “filed” with the Securities and Exchange Commission (“SEC”) for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section and is not incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, whether made before or after the date hereof, except as shall be expressly set forth by specific reference to this Current Report on Form 8-K in such a filing.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
On January 28, 2020, the Board of Directors of the Company appointed Mr. David Odgers to the position of Chief Accounting Officer (“CAO”) of the Company, effective immediately. Mr. Odgers, age 50, has been with the Company for fifteen (15) years, first serving as Assistant Controller, and, for the last six (6) years, serving as the Company’s Controller, a position he will retain. Prior to his time with the Company, Mr. Odgers was with Gold Banc Corporation, in Leawood, Kansas, serving in various capacities, including as Senior Corporate Accountant.
Mr. Odgers replaces Mr. Brian Walker, who, on November 12, 2019, announced his decision to retire, effective March 2, 2020. Mr. Walker will remain with the Company in a consultative role until his retirement date.
Mr. Odgers will receive an annual salary of $230,000 and will participate in the Company’s 2020 Short-Term Incentive Compensation Program at a target of 35% of his annual salary and in the Company’s Long-Term Incentive Compensation Program at 25% of his annual salary. There are no other arrangements or understandings between him and any other person pursuant to which he was selected as an officer. The Company knows of no transactions between him, or any of his related persons, and the Company that need to be reported pursuant to Item 404 (a) of Regulation S-K.
Item 7.01 Regulation FD Disclosure
On January 28, 2020, the Company announced in the same press release that the Board of Directors of the Company (the “Board”) had declared a quarterly dividend of $0.31 per share that is payable on April 1, 2020 to shareholders of record of the Company as of the close of business on March 10, 2020. This press release is attached as Exhibit 99.1, and the information included in the press release is hereby incorporated herein by reference.
The Company is furnishing a copy of materials that will be used in the Company’s shareholder conference call at 8:30 a.m. (CT) on January 29, 2020. A copy of the materials is attached as Exhibit 99.2 and will be available on the Company’s website at www.umb.com. The materials are dated January 28, 2020, and the Company disclaims any obligation to correct or update any of the materials in the future.
The information provided under Item 7.01 of this Current Report on Form 8-K, including Exhibits 99.1 and 99.2 hereto, is being furnished and is not deemed to be “filed” with the SEC for the purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section and is not incorporated by reference into any filing of the Company under the Securities Act or the Exchange Act, whether made before or after the date hereof, except as shall be expressly set forth by specific reference to this Current Report on Form 8-K in such a filing.
Item 9.01 Financial Statements and Exhibits
| 99.1 | Press Release announcing financial results for quarter and year ended December 31, 2019, and announcing dividend declaration. |
|---|---|
| 99.2 | Investor Presentation Materials, dated January 28, 2020. |
| --- | --- |
| 104 | The cover page from this Current Report on Form 8-K, formatted in Inline XBRL. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| UMB FINANCIAL CORPORATION | |
|---|---|
| By: | /s/ Ram Shankar |
| Ram Shankar<br><br><br>Chief Financial Officer |
Date: January 28, 2020
umbf-ex991_6.htm
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: Stephanie Hague: 816.860.5088
Investor Relations Contact: Kay Gregory: 816.860.7106
UMB Financial Corporation Reports Record Earnings of $243.6 Million
for the Full-Year 2019
2019 Financial Highlights (all comparisons to the prior year)
• Average loan balances increased $1.2 billion, or 10.0 percent; annual gross loan production of $3.6 billion increased 39.1 percent
• Average deposits grew 13.7 percent to $19.3 billion
• Noninterest income increased 6.2 percent, and comprised 38.9 percent of revenue
• Credit quality remained strong, with net charge-offs of just 0.27 percent of average loans, consistent with the company’s historical performance
KANSAS CITY, Mo. (January 28, 2020) – UMB Financial Corporation (Nasdaq: UMBF), a financial services company, announced income from continuing operations for the fourth quarter of 2019 of $66.5 million, or $1.35 per diluted share, compared to $62.4 million, or $1.27 per diluted share, in the third quarter of 2019 (linked quarter) and $25.5 million, or $0.52 per diluted share, in the fourth quarter of 2018. The results for 2018 included increased provision expense related to the charge-off of a single $48.1 million factoring credit. The reported GAAP income from continuing operations represents an increase of 6.6 percent on a linked-quarter basis and an increase of 161.3 percent compared to the fourth quarter of 2018. For the year ended December 31, 2019, income from continuing operations was $243.6 million, or $4.96 per diluted share, which is an increase of 24.1 percent compared to $196.3 million, or $3.94 per diluted share, for the year ended December 31, 2018.
“We capped off another strong year of financial performance, reporting record earnings in 2019. I am particularly pleased with our fourth quarter 2019 results, with income from continuing operations of $66.5 million, an increase of 6.6 percent compared to the third quarter,” said Mariner Kemper, chairman, president and chief executive officer. “Highlights for the quarter include strong balance sheet growth, with average loan balances increasing 2.6 percent compared to the third quarter, and 10.6 percent compared to the fourth quarter 2018. This growth, together with strong fee income, resulted in total revenue increases of 4.0 percent on a linked-quarter basis and 10.1 percent compared to fourth quarter 2018 levels. Expenses were elevated in the fourth quarter, driven largely by incentives tied to business and revenue growth, as well as overall company performance. For the full year 2019, we earned $243.6 million, or $4.96 per diluted share. We saw continued momentum in noninterest income, including a 50.6 percent increase in trading and investment banking income, along with solid performance in corporate trust and many of our other businesses.”
| Summary of quarterly financial results | UMB Financial Corporation | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| (unaudited, dollars in thousands, except per share data) | |||||||||
| Q4 | Q3 | Q4 | |||||||
| 2019 | 2019 | 2018 | |||||||
| Income from continuing operations | $ | 66,515 | $ | 62,382 | $ | 25,454 | |||
| Loss from discontinued operations | — | — | — | ||||||
| Net income | 66,515 | 62,382 | 25,454 | ||||||
| Earnings per share from continuing operations (diluted) | 1.35 | 1.27 | 0.52 | ||||||
| Losses per share from discontinued operations (diluted) | — | — | — | ||||||
| Earnings per share (diluted) | 1.35 | 1.27 | 0.52 | ||||||
| Net operating income from continuing operations | 67,038 | 62,525 | 27,578 | ||||||
| Operating earnings per share from continuing operations (diluted) | 1.36 | 1.27 | 0.56 | ||||||
| GAAP - continuing operations | |||||||||
| Return on average assets | 1.05 | % | 1.03 | % | 0.46 | % | |||
| Return on average equity | 10.15 | 9.69 | 4.57 | ||||||
| Efficiency ratio | 71.59 | 70.70 | 71.26 | ||||||
| Non-GAAP - continuing operations | |||||||||
| Operating return on average assets | 1.06 | % | 1.04 | % | 0.50 | % | |||
| Operating return on average equity | 10.23 | 9.72 | 4.95 | ||||||
| Operating efficiency ratio | 71.35 | 70.63 | 70.19 | ||||||
| Summary of year-to-date financial results | UMB Financial Corporation | ||||||||
| --- | --- | --- | --- | --- | --- | --- | |||
| (unaudited, dollars in thousands, except per share data) | December | December | |||||||
| YTD | YTD | ||||||||
| 2019 | 2018 | ||||||||
| Income from continuing operations | $ | 243,600 | $ | 196,260 | |||||
| Loss from discontinued operations | — | (747 | ) | ||||||
| Net income | 243,600 | 195,513 | |||||||
| Earnings per share from continuing operations (diluted) | 4.96 | 3.94 | |||||||
| Losses per share from discontinued operations (diluted) | — | (0.01 | ) | ||||||
| Earnings per share (diluted) | 4.96 | 3.93 | |||||||
| Net operating income from continuing operations | 245,016 | 200,743 | |||||||
| Operating earnings per share from continuing operations (diluted) | 4.99 | 4.03 | |||||||
| GAAP - continuing operations | |||||||||
| Return on average assets | 1.02 | % | 0.93 | % | |||||
| Return on average equity | 9.94 | 8.94 | |||||||
| Efficiency ratio | 70.66 | 70.39 | |||||||
| Non-GAAP - continuing operations | |||||||||
| Operating return on average assets | 1.03 | % | 0.96 | % | |||||
| Operating return on average equity | 9.99 | 9.15 | |||||||
| Operating efficiency ratio | 70.49 | 69.82 |
Discussion of results from continuing operations
| Summary of revenue | UMB Financial Corporation | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (unaudited, dollars in thousands) | |||||||||||||||
| Q4 | Q3 | Q4 | CQ vs. | CQ vs. | |||||||||||
| 2019 | 2019 | 2018 | LQ | PY | |||||||||||
| Net interest income | $ | 172,363 | $ | 168,260 | $ | 161,808 | $ | 4,103 | $ | 10,555 | |||||
| Noninterest income: | |||||||||||||||
| Trust and securities processing | 46,835 | 45,218 | 41,891 | 1,617 | 4,944 | ||||||||||
| Trading and investment banking | 6,720 | 5,712 | 3,119 | 1,008 | 3,601 | ||||||||||
| Service charges on deposit accounts | 20,100 | 20,620 | 20,733 | (520 | ) | (633 | ) | ||||||||
| Insurance fees and commissions | 511 | 320 | 312 | 191 | 199 | ||||||||||
| Brokerage fees | 8,839 | 8,102 | 6,761 | 737 | 2,078 | ||||||||||
| Bankcard fees | 16,326 | 16,895 | 16,375 | (569 | ) | (49 | ) | ||||||||
| Gains on sales of securities available for sale, net | 755 | 3,057 | — | (2,302 | ) | 755 | |||||||||
| Other | 10,269 | 3,711 | 5,808 | 6,558 | 4,461 | ||||||||||
| Total noninterest income | $ | 110,355 | $ | 103,635 | $ | 94,999 | $ | 6,720 | $ | 15,356 | |||||
| Total revenue | $ | 282,718 | $ | 271,895 | $ | 256,807 | $ | 10,823 | $ | 25,911 | |||||
| Net interest margin | 3.02 | % | 3.09 | % | 3.24 | % | |||||||||
| Total noninterest income as a % of total revenue | 39.03 | 38.12 | 36.99 |
Net interest income
| • | Net interest income totaled $172.4 million, an increase of $4.1 million, or 2.4 percent, from linked quarter levels, driven by a $341.0 million, or 2.6 percent, increase in average loans, and a 4.8 percent increase in average earning assets. These benefits were offset by the impact of recent reductions in short-term interest rates on net interest margin. |
|---|---|
| • | Net interest margin for the fourth quarter was 3.02 percent, down seven basis points from the linked quarter, in large part due to lower short-term interest rates as well as an unfavorable shift in the mix of earning assets. Earning asset yields declined 23 basis points from the linked quarter, driven by declining yields in the loan portfolio due to recent reductions in short-term interest rates and the impact of excess liquidity. The cost of interest-bearing liabilities decreased 24 basis points to 1.10 percent, driven by a 22-basis-point decline in cost of interest-bearing deposits and lower borrowing costs. |
| --- | --- |
| • | On a year-over-year basis, the increase in net interest income was driven by a $1.3 billion, or 10.6 percent, increase in average loans, and a $1.2 billion, or 16.7 percent, increase in average investment securities. These benefits were coupled with higher average securities yields, which increased 13 basis points compared to 2018. |
| --- | --- |
| • | For the fourth quarter of 2019, earning assets averaged $23.5 billion, an increase of 14.7 percent compared to the fourth quarter of 2018. |
| --- | --- |
Noninterest income
| • | Fourth quarter 2019 noninterest income increased $6.7 million, or 6.5 percent, on a linked-quarter basis, largely due to: |
|---|---|
| o | Increases of $3.0 million in company-owned life insurance income, $2.5 million in equity earnings on alternative investments, and $1.4 million in derivative income, all recorded in other income. The increase in company-owned life insurance income is offset by a proportionate increase in deferred compensation expense noted below. |
| --- | --- |
| o | An increase of $1.0 million in trading and investment banking income due to increased trading volume. |
| --- | --- |
| o | An increase of $0.9 million and $0.8 million in fund servicing revenue and corporate trust income, both recorded in trust and securities processing. |
| --- | --- |
| o | These increases were partially offset by a decrease of $2.3 million in gains on sales of available-for-sale securities. |
| --- | --- |
| • | Compared to the prior year, noninterest income in the fourth quarter of 2019 increased $15.4 million, or 16.2 percent, primarily driven by: |
| --- | --- |
| o | Increases of $6.8 million in company-owned life insurance and $1.8 million in derivative income, both recorded in other income. The increase in company-owned life insurance income is offset by a proportionate increase in deferred compensation expense noted below. |
| --- | --- |
| o | An increase of $3.6 million in trading and investment banking income due to increased trading volume. |
| --- | --- |
| o | An increase of $2.7 million in fund servicing income and an increase of $2.2 million in corporate trust income, both recorded in trust and securities processing. |
| --- | --- |
| o | An increase of $2.1 million in brokerage fees, primarily driven by higher money market and 12b-1 income. |
| --- | --- |
| o | These increases were partially offset by a decrease of $2.4 million in gains on sales of assets and $0.9 million on loss recoveries, both recorded in other income in the prior year. |
| --- | --- |
Noninterest expense
| Summary of noninterest expense | UMB Financial Corporation | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (unaudited, dollars in thousands) | ||||||||||||
| Q4 | Q3 | Q4 | CQ vs. | CQ vs. | ||||||||
| 2019 | 2019 | 2018 | LQ | PY | ||||||||
| Salaries and employee benefits | $ | 120,806 | $ | 110,153 | $ | 103,992 | $ | 10,653 | $ | 16,814 | ||
| Occupancy, net | 12,249 | 12,240 | 11,845 | 9 | 404 | |||||||
| Equipment | 20,803 | 19,775 | 18,983 | 1,028 | 1,820 | |||||||
| Supplies and services | 6,280 | 4,261 | 3,669 | 2,019 | 2,611 | |||||||
| Marketing and business development | 8,385 | 5,655 | 6,483 | 2,730 | 1,902 | |||||||
| Processing fees | 13,351 | 13,619 | 11,948 | (268 | ) | 1,403 | ||||||
| Legal and consulting | 10,001 | 8,374 | 11,085 | 1,627 | (1,084 | ) | ||||||
| Bankcard | 4,061 | 4,643 | 4,316 | (582 | ) | (255 | ) | |||||
| Amortization of other intangible assets | 1,593 | 1,335 | 1,332 | 258 | 261 | |||||||
| Regulatory fees | 2,940 | 2,749 | 2,681 | 191 | 259 | |||||||
| Other | 2,981 | 8,593 | 7,987 | (5,612 | ) | (5,006 | ) | |||||
| Total noninterest expense | $ | 203,450 | $ | 191,397 | $ | 184,321 | $ | 12,053 | $ | 19,129 | ||
| • | GAAP noninterest expense for the fourth quarter of 2019 was $203.5 million, an increase of $12.1 million, or 6.3 percent, from the linked quarter and an increase of $19.1 million, or 10.4 percent, from the fourth quarter of 2018. | |||||||||||
| --- | --- | |||||||||||
| • | The linked quarter increase in noninterest expense was driven by: | |||||||||||
| --- | --- | |||||||||||
| o | An increase of $10.7 million in salaries and employee benefits, largely driven by a $6.8 million increase in bonus and commission expense tied to higher business volumes and revenue growth, as well as overall company performance, a $1.6 million increase in salary and wage expense, and a $2.5 million increase in deferred compensation expense, which is offset by the increase in company-owned life insurance income noted above. | |||||||||||
| --- | --- | |||||||||||
| o | A $2.7 million increase in marketing and business development expense, primarily driven by an increase of $2.3 million in advertising and business development due to the timing of multiple product initiatives and an increase of $0.5 million in travel and entertainment expense. | |||||||||||
| --- | --- | |||||||||||
| o | An increase of $2.0 million in supplies and services expense primarily due to expenses related to credit card campaign mailings and an increase of $1.4 million in consulting expense due to the timing of multiple technology initiatives. | |||||||||||
| --- | --- | |||||||||||
| o | These increases were partially offset by a decrease of $5.6 million in other expense, primarily driven by a decrease of $5.1 million in derivative valuation expense and $0.7 million in property and real estate taxes. | |||||||||||
| --- | --- | |||||||||||
| • | The year-over-year increase in noninterest expense was driven by: | |||||||||||
| --- | --- | |||||||||||
| o | A $16.8 million increase in salaries and employee benefits, primarily due to increases of $9.2 million in employee benefits expense, $4.5 million in bonus and commission expense, and $3.2 million in salary and wages expense. The increase in employee benefits expense was primarily driven by an increase of $7.5 million in deferred compensation expense, which is offset by the increase in company-owned life insurance income noted above. | |||||||||||
| --- | --- | |||||||||||
| o | An increase of $1.6 million in postage due to credit card campaign mailings and $0.8 million in purchases of computers, both recorded in supplies and services expense. | |||||||||||
| --- | --- | |||||||||||
| o | An increase of $1.9 million in marketing and business development due to timing of multiple product initiatives. | |||||||||||
| --- | --- | |||||||||||
| o | Increases of $1.8 million in equipment expense and $1.4 million in processing fees expense due to investments in digital channel and integrated platform solutions to support business growth and the ongoing modernization of the company’s core systems. | |||||||||||
| --- | --- | |||||||||||
| o | These increases were offset by decreases of $4.6 million in derivative valuation expense and $1.1 million in contributions expense, both recorded in other noninterest expense. | |||||||||||
| --- | --- |
Full year 2019 financial discussion
| • | The 9.9 percent year-over-year increase in net interest income was driven by benefits from higher short-term interest rates, favorable reinvestment yields on cash flows from the investment securities portfolio and increased loan balances. In 2019, average loan balances increased $1.2 billion and average securities increased $957.5 million, with average loan yields increasing 18 basis points and average securities yields increasing 23 basis points. Average interest-bearing liabilities increased $2.1 billion, while the cost of interest-bearing liabilities increased 34 basis points. |
|---|---|
| • | Full-year noninterest income increased $25.1 million, or 6.2 percent, due to: |
| --- | --- |
| o | Increases of $8.7 million in company-owned life insurance and $3.3 million in derivative income, both recorded in other noninterest income. The increase in company-owned life insurance income is offset by a proportionate increase in deferred compensation expense noted below. |
| --- | --- |
| o | A $7.9 million increase in trading and investment banking due to increased trading volume. |
| --- | --- |
| o | An increase of $6.9 million in corporate trust income, recorded in trust and securities processing. |
| --- | --- |
| o | A $5.5 million increase in brokerage fees, primarily driven by higher money market and 12b-1 income. |
| --- | --- |
| o | These increases were partially offset by a decrease of $2.5 million in equity earnings on alternative investments, recorded in other income, and decreases of $1.4 million in fund servicing revenue and $0.7 million in trust services income, both recorded in trust and securities processing. |
| --- | --- |
| • | Full-year noninterest expense increased $61.1 million, or 8.5 percent, primarily due to: |
| --- | --- |
| o | A $42.4 million increase in salary and employee benefit expense driven in part by increased employee headcount, and increased bonus and sales commission expense tied to business volumes and revenue growth, and overall company performance. |
| --- | --- |
| o | A $5.2 million increase in processing fees expense and a $3.9 million increase in equipment expense due to investments in digital channel and integrated platform solutions to support business growth and the ongoing modernization of the company’s core systems. |
| --- | --- |
| o | An increase of $3.9 million in operational losses during the current year, recorded in other noninterest expense. |
| --- | --- |
| o | An increase of $1.6 million in postage due to credit card campaign mailings and $0.7 million in purchases of computers, both recorded in supplies and services expense. |
| --- | --- |
| o | Additional increases of $2.5 million in occupancy expense and $1.9 million in marketing and business development expense. |
| --- | --- |
Income taxes
| • | The company’s effective tax rate was 14.8 percent for the year ended December 31, 2019, compared to 12.2 percent for the same period in 2018. The effective tax rate for 2018 reflected a net discrete tax benefit of $5.1 million, primarily related to the re-measurement of the company’s estimates for the impacts of the Tax Cuts & Jobs Act. |
|---|
Balance sheet
| • | Average total assets for the fourth quarter of 2019 were $25.1 billion compared to $23.9 billion for the linked quarter and $21.9 billion for the same period in 2018. | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Summary of average loans and leases - QTD Average | UMB Financial Corporation | |||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||
| (unaudited, dollars in thousands) | ||||||||||||||
| Q4 | Q3 | Q4 | CQ vs. | CQ vs. | ||||||||||
| 2019 | 2019 | 2018 | LQ | PY | ||||||||||
| Commercial | $ | 5,595,358 | $ | 5,443,718 | $ | 4,977,907 | $ | 151,640 | $ | 617,451 | ||||
| Asset-based loans | 350,905 | 372,938 | 381,477 | (22,033 | ) | (30,572 | ) | |||||||
| Factoring loans | 188,927 | 221,862 | 300,265 | (32,935 | ) | (111,338 | ) | |||||||
| Commercial credit card | 195,970 | 204,905 | 178,772 | (8,935 | ) | 17,198 | ||||||||
| Real estate - construction | 894,756 | 819,926 | 826,310 | 74,830 | 68,446 | |||||||||
| Real estate - commercial | 4,254,780 | 4,164,477 | 3,663,610 | 90,303 | 591,170 | |||||||||
| Real estate - residential | 890,324 | 805,994 | 697,927 | 84,330 | 192,397 | |||||||||
| Real estate - HELOC | 480,843 | 498,460 | 555,161 | (17,617 | ) | (74,318 | ) | |||||||
| Consumer credit card | 242,503 | 220,363 | 248,309 | 22,140 | (5,806 | ) | ||||||||
| Consumer other | 135,525 | 136,117 | 132,812 | (592 | ) | 2,713 | ||||||||
| Leases | 1,993 | 2,118 | 5,386 | (125 | ) | (3,393 | ) | |||||||
| Total loans | $ | 13,231,884 | $ | 12,890,878 | $ | 11,967,936 | $ | 341,006 | $ | 1,263,948 | ||||
| • | Average loans for the fourth quarter of 2019 increased 2.6 percent on a linked-quarter basis and 10.6 percent compared to the fourth quarter of 2018. | |||||||||||||
| --- | --- | |||||||||||||
| Summary of average securities - QTD Average | UMB Financial Corporation | |||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||
| (unaudited, dollars in thousands) | ||||||||||||||
| Q4 | Q3 | Q4 | CQ vs. | CQ vs. | ||||||||||
| 2019 | 2019 | 2018 | LQ | PY | ||||||||||
| Securities available for sale: | ||||||||||||||
| U.S. Treasury | $ | 220,830 | $ | 250,552 | $ | 105,509 | $ | (29,722 | ) | $ | 115,321 | |||
| U.S. Agencies | 93,258 | 93,440 | 198 | (182 | ) | 93,060 | ||||||||
| Mortgage-backed | 3,967,051 | 3,987,463 | 3,703,212 | (20,412 | ) | 263,839 | ||||||||
| State and political subdivisions | 2,968,305 | 2,795,210 | 2,353,816 | 173,095 | 614,489 | |||||||||
| Corporates | 184,503 | 155,656 | — | 28,847 | 184,503 | |||||||||
| Total securities available for sale | $ | 7,433,947 | $ | 7,282,321 | $ | 6,162,735 | $ | 151,626 | $ | 1,271,212 | ||||
| Securities held to maturity: | ||||||||||||||
| State and political subdivisions | $ | 1,117,268 | $ | 1,105,397 | $ | 1,180,061 | $ | 11,871 | $ | (62,793 | ) | |||
| Trading securities | 56,653 | 44,571 | 61,629 | 12,082 | (4,976 | ) | ||||||||
| Other securities | 96,994 | 90,008 | 66,760 | 6,986 | 30,234 | |||||||||
| Total securities | $ | 8,704,862 | $ | 8,522,297 | $ | 7,471,185 | $ | 182,565 | $ | 1,233,677 | ||||
| • | Average securities available for sale increased 2.1 percent on a linked-quarter basis and increased 20.6 percent compared to the fourth quarter of 2018. | |||||||||||||
| --- | --- | |||||||||||||
| Summary of average deposits - QTD Average | UMB Financial Corporation | |||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (unaudited, dollars in thousands) | ||||||||||||||
| Q4 | Q3 | Q4 | CQ vs. | CQ vs. | ||||||||||
| 2019 | 2019 | 2018 | LQ | PY | ||||||||||
| Deposits: | ||||||||||||||
| Noninterest-bearing demand | $ | 6,398,309 | $ | 6,082,498 | $ | 6,052,011 | $ | 315,811 | $ | 346,298 | ||||
| Interest-bearing demand and savings | 12,959,948 | 12,214,570 | 11,057,273 | 745,378 | 1,902,675 | |||||||||
| Time deposits | 1,028,293 | 1,011,862 | 1,060,838 | 16,431 | (32,545 | ) | ||||||||
| Total deposits | $ | 20,386,550 | $ | 19,308,930 | $ | 18,170,122 | $ | 1,077,620 | $ | 2,216,428 | ||||
| Noninterest bearing deposits as % of total | 31.38 | % | 31.50 | % | 33.31 | % | ||||||||
| • | Average deposits increased 5.6 percent on a linked-quarter basis and 12.2 percent compared to the fourth quarter of 2018. | |||||||||||||
| --- | --- |
Capital
| Capital information | UMB Financial Corporation | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| (unaudited, dollars in thousands, except per share data) | |||||||||
| December 31, 2019 | September 30, 2019 | December 31, 2018 | |||||||
| Total equity | $ | 2,606,440 | $ | 2,563,866 | $ | 2,228,470 | |||
| Book value per common share | 53.09 | 52.23 | 45.37 | ||||||
| Regulatory capital: | |||||||||
| Common equity Tier 1 capital | $ | 2,330,533 | $ | 2,284,417 | $ | 2,142,469 | |||
| Tier 1 capital | 2,330,533 | 2,284,417 | 2,142,469 | ||||||
| Total capital | 2,505,397 | 2,464,698 | 2,318,145 | ||||||
| Regulatory capital ratios: | |||||||||
| Common equity Tier 1 capital ratio | 12.33 | % | 12.53 | % | 12.89 | % | |||
| Tier 1 risk-based capital ratio | 12.33 | 12.53 | 12.89 | ||||||
| Total risk-based capital ratio | 13.26 | 13.51 | 13.95 | ||||||
| Tier 1 leverage ratio | 9.37 | 9.62 | 9.87 | ||||||
| • | At December 31, 2019, the regulatory capital ratios presented in the foregoing table exceeded all “well-capitalized” regulatory thresholds. | ||||||||
| --- | --- |
Asset Quality
| Credit quality | UMB Financial Corporation | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (unaudited, dollars in thousands) | |||||||||||||||
| Q4 | Q3 | Q2 | Q1 | Q4 | |||||||||||
| 2019 | 2019 | 2019 | 2019 | 2018 | |||||||||||
| Net charge-offs - Commercial loans | $ | 6,075 | $ | 568 | $ | 11,790 | $ | 10,537 | $ | 44,010 | |||||
| Net (recoveries) charge-offs - Real estate loans | (166 | ) | 161 | (714 | ) | 41 | 28 | ||||||||
| Net charge-offs - Consumer credit card loans | 1,616 | 1,377 | 1,336 | 1,676 | 1,606 | ||||||||||
| Net charge-offs - Consumer other loans | 93 | 80 | 157 | 70 | 23 | ||||||||||
| Net charge-offs - Total loans | 7,618 | 2,186 | 12,569 | 12,324 | 45,667 | ||||||||||
| Net loan charge-offs as a % of total average loans | 0.23 | % | 0.07 | % | 0.40 | % | 0.41 | % | 1.51 | % | |||||
| Loans over 90 days past due | $ | 2,069 | $ | 2,466 | $ | 1,825 | $ | 1,874 | $ | 6,009 | |||||
| Loans over 90 days past due as a % of total loans | 0.02 | % | 0.02 | % | 0.01 | % | 0.01 | % | 0.05 | % | |||||
| Nonaccrual and restructured loans | $ | 56,347 | $ | 71,838 | $ | 53,395 | $ | 63,270 | $ | 43,018 | |||||
| Nonaccrual and restructured loans as a % of total loans | 0.42 | % | 0.55 | % | 0.41 | % | 0.50 | % | 0.35 | % | |||||
| Provision for loan losses | $ | 2,000 | $ | 7,500 | $ | 11,000 | $ | 12,350 | $ | 48,000 | |||||
| • | Provision for loan losses totaled $2.0 million, a decrease of $5.5 million from the linked quarter, and $46.0 million from the fourth quarter of 2018. The provision expense for 2018 included increased provision expense related to the charge-off of a single $48.1 million factoring credit. | ||||||||||||||
| --- | --- | ||||||||||||||
| • | Net charge-offs totaled $7.6 million, or 0.23 percent, of average loans, compared to $2.2 million, or 0.07 percent, of average loans in the linked quarter. | ||||||||||||||
| --- | --- |
Dividend Declaration
At the company’s quarterly board meeting, the Board of Directors declared a $0.31 per share quarterly cash dividend, payable on April 1, 2020, to shareholders of record at the close of business on March 10, 2020.
Conference Call
The company plans to host a conference call to discuss its fourth quarter and full year 2019 earnings results on Wednesday, January 29, 2020, at 8:30 a.m. (CT).
Interested parties may access the call by dialing (toll-free) 877-267-8760 or (international) 412-542-4148 and requesting to join the UMB Financial call. The live call may also be accessed by visiting investorrelations.umb.com or by using the following link:
UMB Financial 4Q 2019 Conference Call
A replay of the conference call may be heard through February 12, 2020 by calling (toll-free)
877-344-7529 or (international) 412-317-0088. The replay access code required for playback is 10137932. The call replay may also be accessed at investorrelations.umb.com.
Non-GAAP Financial Information
In this release, we provide information about net operating income from continuing operations (net operating income), operating earnings per share from continuing operations - diluted (operating EPS), operating return on average equity (operating ROE), operating return on average assets (operating ROA), operating noninterest expense, and operating efficiency ratio, all of which are non-GAAP financial measures. This information supplements the results that are reported according to generally accepted accounting principles in the United States (GAAP) and should not be viewed in isolation from, or as a substitute for, GAAP results. The differences between the non-GAAP financial measures – net operating income, operating EPS, operating ROE, operating ROA, operating noninterest expense, and operating efficiency ratio – and the nearest comparable GAAP financial measures are reconciled later in this release. The company believes that these non-GAAP financial measures and the reconciliations may be
useful to investors because they adjust for acquisition-, divestiture-, and severance-related items that management does not believe reflect the company’s fundamental operating performance.
Net operating income for the relevant period is defined as GAAP net income, adjusted to reflect the impact of excluding expenses related to acquisitions and divestitures, severance expense, and the cumulative tax impact of these adjustments.
Operating EPS (diluted) is calculated as earnings per share as reported, adjusted to reflect, on a per share basis, the impact of excluding the non-GAAP adjustments described above for the relevant period. Operating ROE is calculated as net operating income from continuing operations, divided by the company’s average total shareholders’ equity for the relevant period. Operating ROA is calculated as net operating income from continuing operations, divided by the company’s average assets for the relevant period. Operating noninterest expense for the relevant period is defined as GAAP noninterest expense, adjusted to reflect the pre-tax impact of non-GAAP adjustments described above. Operating efficiency ratio is calculated as the company’s operating noninterest expense, net of amortization of other intangibles, divided by the company’s total non-GAAP revenue (calculated as net interest income plus noninterest income, less gains on sales of securities available for sale, net).
Forward-Looking Statements:
This press release contains, and our other communications may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “outlook,” “forecast,” “target,” “trend,” “plan,” “goal,” or other words of comparable meaning or future-tense or conditional verbs such as “may,” “will,” “should,” “would,” or “could.” Forward-looking statements convey our expectations, intentions, or forecasts about future events, circumstances, results, or aspirations. All forward-looking statements are subject to assumptions, risks, and uncertainties, which may change over time and many of which are beyond our control. You should not rely on any forward-looking statement as a prediction or guarantee about the future. Our actual future objectives, strategies, plans, prospects, performance, condition, or results may differ materially from those set forth in any forward-looking statement. Some of the factors that may cause actual results or other future events, circumstances, or aspirations to differ from those in forward-looking statements are described in our Annual Report on Form 10-K for the year ended December 31, 2018, our subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K, or other applicable documents that are filed or furnished with the U.S. Securities and Exchange Commission (SEC). Any forward-looking statement made by us or on our behalf speaks only as of the date that it was made. We do not undertake to update any forward-looking statement to reflect the impact of events, circumstances, or results that arise after the date that the statement was made, except to the extent required by applicable securities laws. You, however, should consult further disclosures (including disclosures of a forward-looking nature) that we may make in any subsequent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K, or other applicable document that is filed or furnished with the SEC.
About UMB:
UMB Financial Corporation (Nasdaq: UMBF) is a financial services company headquartered in Kansas City, Mo. UMB offers personal banking, commercial banking, healthcare services and institutional banking, which includes services to mutual funds and alternative-investment entities and registered investment advisors. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas. For more information, visit UMB.com, UMB Blog or follow us on Twitter at @UMBBank, UMB Facebook and UMB LinkedIn.
| Consolidated Balance Sheets | |||||
|---|---|---|---|---|---|
| (dollars in thousands) | |||||
| 2018 | |||||
| (audited) | |||||
| ASSETS | |||||
| Loans | 13,431,722 | $ | 12,178,150 | ||
| Allowance for loan losses | (101,788 | ) | (103,635 | ) | |
| Net loans | 13,329,934 | 12,074,515 | |||
| Loans held for sale | 7,803 | 3,192 | |||
| Securities: | |||||
| Available for sale | 7,447,362 | 6,542,800 | |||
| Held to maturity | 1,116,102 | 1,170,646 | |||
| Trading securities | 45,618 | 61,011 | |||
| Other securities | 108,420 | 73,692 | |||
| Total securities | 8,717,502 | 7,848,149 | |||
| Federal funds sold and resell agreements | 1,578,345 | 627,001 | |||
| Interest-bearing due from banks | 1,225,491 | 1,047,830 | |||
| Cash and due from banks | 472,958 | 645,123 | |||
| Premises and equipment, net | 300,334 | 283,879 | |||
| Accrued income | 124,508 | 110,168 | |||
| Goodwill | 180,867 | 180,867 | |||
| Other intangibles, net | 27,597 | 15,003 | |||
| Other assets | 596,016 | 515,392 | |||
| Total assets | 26,561,355 | $ | 23,351,119 | ||
| LIABILITIES | |||||
| Deposits: | |||||
| Noninterest-bearing demand | 6,944,465 | $ | 6,680,070 | ||
| Interest-bearing demand and savings | 13,432,415 | 11,454,442 | |||
| Time deposits under 250,000 | 611,587 | 593,904 | |||
| Time deposits of 250,000 or more | 614,777 | 552,844 | |||
| Total deposits | 21,603,244 | 19,281,260 | |||
| Federal funds purchased and repurchase agreements | 1,896,508 | 1,518,920 | |||
| Long-term debt | 97,490 | 82,671 | |||
| Accrued expenses and taxes | 232,200 | 177,731 | |||
| Other liabilities | 125,473 | 62,067 | |||
| Total liabilities | 23,954,915 | 21,122,649 | |||
| SHAREHOLDERS' EQUITY | |||||
| Common stock | 55,057 | 55,057 | |||
| Capital surplus | 1,073,764 | 1,054,601 | |||
| Retained earnings | 1,672,438 | 1,488,421 | |||
| Accumulated other comprehensive income (loss), net | 83,180 | (95,782 | ) | ||
| Treasury stock | (277,999 | ) | (273,827 | ) | |
| Total shareholders' equity | 2,606,440 | 2,228,470 | |||
| Total liabilities and shareholders' equity | 26,561,355 | $ | 23,351,119 |
All values are in US Dollars.
| Consolidated Statements of Income | UMB Financial Corporation | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (dollars in thousands except share and per share data) | ||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (audited) | |||||||||||||
| INTEREST INCOME | ||||||||||||||||
| Loans | $ | 156,503 | $ | 154,120 | $ | 637,845 | $ | 559,351 | ||||||||
| Securities: | ||||||||||||||||
| Taxable interest | 26,996 | 22,767 | 106,053 | 83,333 | ||||||||||||
| Tax-exempt interest | 24,177 | 19,137 | 90,064 | 74,411 | ||||||||||||
| Total securities income | 51,173 | 41,904 | 196,117 | 157,744 | ||||||||||||
| Federal funds and resell agreements | 4,875 | 2,353 | 13,843 | 4,808 | ||||||||||||
| Interest-bearing due from banks | 2,765 | 3,761 | 12,882 | 7,910 | ||||||||||||
| Trading securities | 504 | 581 | 2,205 | 2,148 | ||||||||||||
| Total interest income | 215,820 | 202,719 | 862,892 | 731,961 | ||||||||||||
| INTEREST EXPENSE | ||||||||||||||||
| Deposits | 35,698 | 34,140 | 154,192 | 92,101 | ||||||||||||
| Federal funds and repurchase agreements | 6,629 | 5,815 | 32,553 | 24,737 | ||||||||||||
| Other | 1,130 | 956 | 5,242 | 4,677 | ||||||||||||
| Total interest expense | 43,457 | 40,911 | 191,987 | 121,515 | ||||||||||||
| Net interest income | 172,363 | 161,808 | 670,905 | 610,446 | ||||||||||||
| Provision for loan losses | 2,000 | 48,000 | 32,850 | 70,750 | ||||||||||||
| Net interest income after provision for loan losses | 170,363 | 113,808 | 638,055 | 539,696 | ||||||||||||
| NONINTEREST INCOME | ||||||||||||||||
| Trust and securities processing | 46,835 | 41,891 | 176,913 | 172,163 | ||||||||||||
| Trading and investment banking | 6,720 | 3,119 | 23,466 | 15,584 | ||||||||||||
| Service charges on deposit accounts | 20,100 | 20,733 | 82,748 | 84,287 | ||||||||||||
| Insurance fees and commissions | 511 | 312 | 1,634 | 1,292 | ||||||||||||
| Brokerage fees | 8,839 | 6,761 | 31,261 | 25,807 | ||||||||||||
| Bankcard fees | 16,326 | 16,375 | 66,727 | 68,520 | ||||||||||||
| Gains on sales of securities available for sale, net | 755 | — | 3,218 | 578 | ||||||||||||
| Other | 10,269 | 5,808 | 40,803 | 33,467 | ||||||||||||
| Total noninterest income | 110,355 | 94,999 | 426,770 | 401,698 | ||||||||||||
| NONINTEREST EXPENSE | ||||||||||||||||
| Salaries and employee benefits | 120,806 | 103,992 | 461,445 | 419,091 | ||||||||||||
| Occupancy, net | 12,249 | 11,845 | 47,771 | 45,239 | ||||||||||||
| Equipment | 20,803 | 18,983 | 79,086 | 75,184 | ||||||||||||
| Supplies and services | 6,280 | 3,669 | 18,699 | 16,103 | ||||||||||||
| Marketing and business development | 8,385 | 6,483 | 26,257 | 24,372 | ||||||||||||
| Processing fees | 13,351 | 11,948 | 52,198 | 46,977 | ||||||||||||
| Legal and consulting | 10,001 | 11,085 | 31,504 | 29,859 | ||||||||||||
| Bankcard | 4,061 | 4,316 | 17,750 | 17,514 | ||||||||||||
| Amortization of other intangible assets | 1,593 | 1,332 | 5,506 | 5,764 | ||||||||||||
| Regulatory fees | 2,940 | 2,681 | 11,489 | 12,695 | ||||||||||||
| Other | 2,981 | 7,987 | 27,155 | 25,002 | ||||||||||||
| Total noninterest expense | 203,450 | 184,321 | 778,860 | 717,800 | ||||||||||||
| Income before income taxes | 77,268 | 24,486 | 285,965 | 223,594 | ||||||||||||
| Income tax expense (benefit) | 10,753 | (968 | ) | 42,365 | 27,334 | |||||||||||
| Income from continuing operations | 66,515 | 25,454 | 243,600 | 196,260 | ||||||||||||
| Discontinued Operations | ||||||||||||||||
| Loss from discontinued operations before income taxes | — | — | — | (917 | ) | |||||||||||
| Income tax benefit | — | — | — | (170 | ) | |||||||||||
| Loss from discontinued operations | — | — | — | (747 | ) | |||||||||||
| NET INCOME | $ | 66,515 | $ | 25,454 | $ | 243,600 | $ | 195,513 | ||||||||
| PER SHARE DATA | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||||||
| Basic: | ||||||||||||||||
| Income from continuing operations | $ | 1.36 | $ | 0.52 | $ | 4.99 | $ | 3.98 | ||||||||
| Loss from discontinued operations | — | — | — | (0.01 | ) | |||||||||||
| Net income – basic | 1.36 | 0.52 | 4.99 | 3.97 | ||||||||||||
| Diluted: | ||||||||||||||||
| Income from continuing operations | 1.35 | 0.52 | 4.96 | 3.94 | ||||||||||||
| Loss from discontinued operations | — | — | — | (0.01 | ) | |||||||||||
| Net income – diluted | 1.35 | 0.52 | 4.96 | 3.93 | ||||||||||||
| Dividends | 0.31 | 0.30 | 1.21 | 1.17 | ||||||||||||
| Weighted average shares outstanding – basic | 48,828,509 | 48,898,286 | 48,779,263 | 49,334,937 | ||||||||||||
| Weighted average shares outstanding – diluted | 49,187,291 | 49,230,321 | 49,089,877 | 49,770,737 | ||||||||||||
| Consolidated Statements of Comprehensive Income | UMB Financial Corporation | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||
| (dollars in thousands) | ||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (audited) | |||||||||||||
| Net income | $ | 66,515 | $ | 25,454 | $ | 243,600 | $ | 195,513 | ||||||||
| Other comprehensive (loss) income, before tax: | ||||||||||||||||
| Unrealized gains and losses on debt securities: | ||||||||||||||||
| Change in unrealized holding gains and losses, net | (14,209 | ) | 81,742 | 253,891 | (51,271 | ) | ||||||||||
| Less: Reclassification adjustment for gains included in net income | (755 | ) | — | (3,218 | ) | (578 | ) | |||||||||
| Change in unrealized gains and losses on debt securities | (14,964 | ) | 81,742 | 250,673 | (51,849 | ) | ||||||||||
| Unrealized gains and losses on derivative hedges: | ||||||||||||||||
| Change in unrealized gains and losses on derivative hedges, net | (2,700 | ) | (2,368 | ) | (15,318 | ) | 1,906 | |||||||||
| Less: Reclassification adjustment for losses included in net income | 728 | — | 1,023 | — | ||||||||||||
| Change in unrealized gains and losses on derivative hedges | (1,972 | ) | (2,368 | ) | (14,295 | ) | 1,906 | |||||||||
| Other comprehensive (loss) income, before tax | (16,936 | ) | 79,374 | 236,378 | (49,943 | ) | ||||||||||
| Income tax benefit (expense) | 4,095 | (19,515 | ) | (57,416 | ) | 12,735 | ||||||||||
| Other comprehensive (loss) income before reclassifications | (12,841 | ) | 59,859 | 178,962 | (37,208 | ) | ||||||||||
| Amounts reclassified from accumulated other comprehensive income | — | — | — | (13,049 | ) | |||||||||||
| Net current-period other comprehensive (loss) income | (12,841 | ) | 59,859 | 178,962 | (50,257 | ) | ||||||||||
| Comprehensive income | $ | 53,674 | $ | 85,313 | $ | 422,562 | $ | 145,256 | ||||||||
| Consolidated Statements of Shareholders' Equity | UMB Financial Corporation | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (dollars in thousands except per share data) | ||||||||||||||||
| (audited) | Capital<br><br><br>Surplus | Retained<br><br><br>Earnings | Accumulated Other Comprehensive (Loss) Income | Treasury<br><br><br>Stock | Total | |||||||||||
| Balance - January 1, 2018 | 55,057 | $ | 1,046,095 | $ | 1,338,110 | $ | (45,525 | ) | $ | (212,206 | ) | $ | 2,181,531 | |||
| Total comprehensive income (loss) | — | — | 195,513 | (50,257 | ) | — | 145,256 | |||||||||
| Reclassification of certain tax effects | — | — | 12,917 | — | — | 12,917 | ||||||||||
| Dividends (1.17 per share) | — | — | (58,264 | ) | — | — | (58,264 | ) | ||||||||
| Purchase of treasury stock | — | (2,807 | ) | — | — | (73,700 | ) | (76,507 | ) | |||||||
| Issuances of equity awards, net of forfeitures | — | (2,004 | ) | — | — | 2,499 | 495 | |||||||||
| Recognition of equity-based compensation | — | 10,579 | — | — | — | 10,579 | ||||||||||
| Sale of treasury stock | — | 524 | — | — | 538 | 1,062 | ||||||||||
| Exercise of stock options | — | 2,214 | — | — | 9,042 | 11,256 | ||||||||||
| Cumulative effect adjustments | — | — | 145 | — | — | 145 | ||||||||||
| Balance - December 31, 2018 | 55,057 | $ | 1,054,601 | $ | 1,488,421 | $ | (95,782 | ) | $ | (273,827 | ) | $ | 2,228,470 | |||
| (unaudited) | ||||||||||||||||
| Balance - January 1, 2019 | 55,057 | $ | 1,054,601 | $ | 1,488,421 | $ | (95,782 | ) | $ | (273,827 | ) | $ | 2,228,470 | |||
| Total comprehensive income | — | — | 243,600 | 178,962 | — | 422,562 | ||||||||||
| Dividends (1.21 per share) | — | — | (59,583 | ) | — | — | (59,583 | ) | ||||||||
| Purchase of treasury stock | — | — | — | — | (4,496 | ) | (4,496 | ) | ||||||||
| Forfeitures of equity awards, net of issuances | — | 3,820 | — | — | (3,204 | ) | 616 | |||||||||
| Recognition of equity-based compensation | — | 14,234 | — | — | — | 14,234 | ||||||||||
| Sale of treasury stock | — | 344 | — | — | 487 | 831 | ||||||||||
| Exercise of stock options | — | 765 | — | — | 3,041 | 3,806 | ||||||||||
| Balance - December 31, 2019 | 55,057 | $ | 1,073,764 | $ | 1,672,438 | $ | 83,180 | $ | (277,999 | ) | $ | 2,606,440 |
All values are in US Dollars.
| Average Balances / Yields and Rates | UMB Financial Corporation | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (tax - equivalent basis) | |||||||||||||||
| (unaudited, dollars in thousands) | |||||||||||||||
| Three Months Ended December 31, | |||||||||||||||
| 2019 | 2018 | ||||||||||||||
| Average | Average | Average | Average | ||||||||||||
| Balance | Yield/Rate | Balance | Yield/Rate | ||||||||||||
| Assets | |||||||||||||||
| Loans, net of unearned interest | $ | 13,231,884 | 4.69 | % | $ | 11,967,936 | 5.11 | % | |||||||
| Securities: | |||||||||||||||
| Taxable | 4,654,669 | 2.30 | 3,943,891 | 2.29 | |||||||||||
| Tax-exempt | 3,993,540 | 3.04 | 3,465,665 | 2.77 | |||||||||||
| Total securities | 8,648,209 | 2.64 | 7,409,556 | 2.51 | |||||||||||
| Federal funds and resell agreements | 893,954 | 2.16 | 344,502 | 2.71 | |||||||||||
| Interest bearing due from banks | 633,328 | 1.73 | 672,916 | 2.22 | |||||||||||
| Trading securities | 56,653 | 4.09 | 61,629 | 4.44 | |||||||||||
| Total earning assets | 23,464,028 | 3.76 | 20,456,539 | 4.03 | |||||||||||
| Allowance for loan losses | (109,967 | ) | (101,221 | ) | |||||||||||
| Other assets | 1,716,962 | 1,523,434 | |||||||||||||
| Total assets | $ | 25,071,023 | $ | 21,878,752 | |||||||||||
| Liabilities and Shareholders' Equity | |||||||||||||||
| Interest-bearing deposits | $ | 13,988,241 | 1.01 | % | $ | 12,118,111 | 1.12 | % | |||||||
| Federal funds and repurchase agreements | 1,661,285 | 1.58 | 1,206,152 | 1.91 | |||||||||||
| Borrowed funds | 91,302 | 4.91 | 80,442 | 4.71 | |||||||||||
| Total interest-bearing liabilities | 15,740,828 | 1.10 | 13,404,705 | 1.21 | |||||||||||
| Noninterest-bearing demand deposits | 6,398,309 | 6,052,011 | |||||||||||||
| Other liabilities | 332,771 | 213,107 | |||||||||||||
| Shareholders' equity | 2,599,115 | 2,208,929 | |||||||||||||
| Total liabilities and shareholders' equity | $ | 25,071,023 | $ | 21,878,752 | |||||||||||
| Net interest spread | 2.66 | % | 2.82 | % | |||||||||||
| Net interest margin | 3.02 | 3.24 | |||||||||||||
| Average Balances / Yields and Rates | UMB Financial Corporation | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||
| (tax - equivalent basis) | |||||||||||||||
| (unaudited, dollars in thousands) | |||||||||||||||
| Year Ended December 31, | |||||||||||||||
| 2019 | 2018 | ||||||||||||||
| Average | Average | Average | Average | ||||||||||||
| Balance | Yield/Rate | Balance | Yield/Rate | ||||||||||||
| Assets | |||||||||||||||
| Loans, net of unearned interest | $ | 12,764,623 | 5.00 | % | $ | 11,606,544 | 4.82 | % | |||||||
| Securities: | |||||||||||||||
| Taxable | 4,524,955 | 2.34 | 3,858,829 | 2.16 | |||||||||||
| Tax-exempt | 3,796,983 | 3.00 | 3,505,602 | 2.68 | |||||||||||
| Total securities | 8,321,938 | 2.64 | 7,364,431 | 2.41 | |||||||||||
| Federal funds and resell agreements | 535,393 | 2.59 | 178,801 | 2.69 | |||||||||||
| Interest bearing due from banks | 584,756 | 2.20 | 419,768 | 1.88 | |||||||||||
| Trading securities | 52,306 | 4.79 | 49,345 | 4.97 | |||||||||||
| Total earning assets | 22,259,016 | 3.98 | 19,618,889 | 3.83 | |||||||||||
| Allowance for loan losses | (107,422 | ) | (100,948 | ) | |||||||||||
| Other assets | 1,633,031 | 1,481,936 | |||||||||||||
| Total assets | $ | 23,784,625 | $ | 20,999,877 | |||||||||||
| Liabilities and Shareholders' Equity | |||||||||||||||
| Interest-bearing deposits | $ | 13,172,181 | 1.17 | % | $ | 11,156,002 | 0.83 | % | |||||||
| Federal funds and repurchase agreements | 1,657,283 | 1.96 | 1,559,149 | 1.59 | |||||||||||
| Borrowed funds | 85,920 | 6.10 | 79,191 | 5.91 | |||||||||||
| Total interest-bearing liabilities | 14,915,384 | 1.29 | 12,794,342 | 0.95 | |||||||||||
| Noninterest-bearing demand deposits | 6,132,187 | 5,828,545 | |||||||||||||
| Other liabilities | 285,207 | 182,202 | |||||||||||||
| Shareholders' equity | 2,451,847 | 2,194,788 | |||||||||||||
| Total liabilities and shareholders' equity | $ | 23,784,625 | $ | 20,999,877 | |||||||||||
| Net interest spread | 2.69 | % | 2.88 | % | |||||||||||
| Net interest margin | 3.12 | 3.21 | |||||||||||||
| Business Segment Information | UMB Financial Corporation | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (unaudited, dollars in thousands) | |||||||||||||||
| Three Months Ended December 31, 2019 | |||||||||||||||
| Commercial Banking | Institutional Banking | Personal Banking | Healthcare Services | Total | |||||||||||
| Net interest income | $ | 105,479 | $ | 21,586 | $ | 33,150 | $ | 12,148 | $ | 172,363 | |||||
| Provision for loan losses | 558 | 251 | 1,191 | — | 2,000 | ||||||||||
| Noninterest income | 19,167 | 53,562 | 28,862 | 8,764 | 110,355 | ||||||||||
| Noninterest expense | 65,567 | 59,183 | 66,331 | 12,369 | 203,450 | ||||||||||
| Income (loss) before taxes | 58,521 | 15,714 | (5,510 | ) | 8,543 | 77,268 | |||||||||
| Income tax expense (benefit) | 8,144 | 2,187 | (767 | ) | 1,189 | 10,753 | |||||||||
| Income (loss) from continuing operations | $ | 50,377 | $ | 13,527 | $ | (4,743 | ) | $ | 7,354 | $ | 66,515 | ||||
| Three Months Ended December 31, 2018 | |||||||||||||||
| Commercial Banking | Institutional Banking | Personal Banking | Healthcare Services | Total | |||||||||||
| Net interest income | $ | 100,423 | $ | 19,361 | $ | 31,988 | $ | 10,036 | $ | 161,808 | |||||
| Provision for loan losses | 46,662 | 308 | 1,030 | — | 48,000 | ||||||||||
| Noninterest income | 14,689 | 41,569 | 30,310 | 8,431 | 94,999 | ||||||||||
| Noninterest expense | 65,037 | 48,175 | 59,112 | 11,997 | 184,321 | ||||||||||
| Income before taxes | 3,413 | 12,447 | 2,156 | 6,470 | 24,486 | ||||||||||
| Income tax benefit | (135 | ) | (492 | ) | (85 | ) | (256 | ) | (968 | ) | |||||
| Income from continuing operations | $ | 3,548 | $ | 12,939 | $ | 2,241 | $ | 6,726 | $ | 25,454 | |||||
| Year Ended December 31, 2019 | |||||||||||||||
| Commercial Banking | Institutional Banking | Personal Banking | Healthcare Services | Total | |||||||||||
| Net interest income | $ | 412,232 | $ | 80,185 | $ | 132,082 | $ | 46,406 | $ | 670,905 | |||||
| Provision for loan losses | 26,159 | 975 | 5,716 | — | 32,850 | ||||||||||
| Noninterest income | 81,609 | 195,932 | 112,717 | 36,512 | 426,770 | ||||||||||
| Noninterest expense | 267,345 | 219,490 | 243,092 | 48,933 | 778,860 | ||||||||||
| Income (loss) before taxes | 200,337 | 55,652 | (4,009 | ) | 33,985 | 285,965 | |||||||||
| Income tax expense (benefit) | 29,679 | 8,245 | (594 | ) | 5,035 | 42,365 | |||||||||
| Income (loss) from continuing operations | $ | 170,658 | $ | 47,407 | $ | (3,415 | ) | $ | 28,950 | $ | 243,600 | ||||
| Year Ended December 31, 2018 | |||||||||||||||
| Commercial Banking | Institutional Banking | Personal Banking | Healthcare Services | Total | |||||||||||
| Net interest income | $ | 380,266 | $ | 66,585 | $ | 125,045 | $ | 38,550 | $ | 610,446 | |||||
| Provision for loan losses | 63,841 | 1,335 | 5,574 | — | 70,750 | ||||||||||
| Noninterest income | 74,931 | 173,591 | 118,344 | 34,832 | 401,698 | ||||||||||
| Noninterest expense | 253,740 | 189,708 | 225,406 | 48,946 | 717,800 | ||||||||||
| Income before taxes | 137,616 | 49,133 | 12,409 | 24,436 | 223,594 | ||||||||||
| Income tax expense | 16,824 | 6,007 | 1,517 | 2,986 | 27,334 | ||||||||||
| Income from continuing operations | $ | 120,792 | $ | 43,126 | $ | 10,892 | $ | 21,450 | $ | 196,260 |
The company has strategically aligned its operations into the following four reportable segments: Commercial Banking, Institutional Banking, Personal Banking, and Healthcare Services. Senior executive officers regularly evaluate business segment financial results produced by the company’s internal reporting system in deciding how to allocate resources and assess performance for individual business segments. The company’s reportable segments include certain corporate overhead, technology and service costs that are allocated based on methodologies that are applied consistently between periods. For comparability purposes, amounts in all periods are based on methodologies in effect at December 31, 2019.
Non-GAAP Financial Measures
| Net operating income Non-GAAP reconciliations: | UMB Financial Corporation | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (unaudited, dollars in thousands except per share data) | ||||||||||||
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||
| Income from continuing operations (GAAP) | $ | 66,515 | $ | 25,454 | $ | 243,600 | $ | 196,260 | ||||
| Adjustments: | ||||||||||||
| Acquisition and divestiture expense | 100 | 5 | 268 | 2 | ||||||||
| Severance expense | 572 | 2,725 | 1,552 | 5,760 | ||||||||
| Tax-impact of adjustments (i) | (149 | ) | (606 | ) | (404 | ) | (1,279 | ) | ||||
| Total Non-GAAP adjustments (net of tax) | 523 | 2,124 | 1,416 | 4,483 | ||||||||
| Net operating income from continuing operations (Non-GAAP) | $ | 67,038 | $ | 27,578 | $ | 245,016 | $ | 200,743 | ||||
| Earnings per share from continuing operations - diluted (GAAP) | $ | 1.35 | $ | 0.52 | $ | 4.96 | $ | 3.94 | ||||
| Acquisition and divestiture expense | — | — | — | — | ||||||||
| Severance expense | 0.01 | 0.05 | 0.03 | 0.12 | ||||||||
| Tax-impact of adjustments (i) | — | (0.01 | ) | — | (0.03 | ) | ||||||
| Operating earnings per share from continuing operations - diluted (Non-GAAP) | $ | 1.36 | $ | 0.56 | $ | 4.99 | $ | 4.03 | ||||
| GAAP | ||||||||||||
| Return on average assets | 1.05 | % | 0.46 | % | 1.02 | % | 0.93 | % | ||||
| Return on average equity | 10.15 | 4.57 | 9.94 | 8.94 | ||||||||
| Non-GAAP | ||||||||||||
| Operating return on average assets | 1.06 | % | 0.50 | % | 1.03 | % | 0.96 | % | ||||
| Operating return on average equity | 10.23 | 4.95 | 9.99 | 9.15 |
(i) Calculated using the company’s marginal tax rate of 22.2 percent.
| Operating noninterest expense and operating efficiency ratio Non-GAAP reconciliations: | UMB Financial Corporation | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (unaudited, dollars in thousands) | ||||||||||||
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||
| Noninterest expense | $ | 203,450 | $ | 184,321 | $ | 778,860 | $ | 717,800 | ||||
| Adjustments to arrive at operating noninterest expense (pre-tax): | ||||||||||||
| Acquisition and divestiture expense | 100 | 5 | 268 | 2 | ||||||||
| Severance expense | 572 | 2,725 | 1,552 | 5,760 | ||||||||
| Total Non-GAAP adjustments (pre-tax) | 672 | 2,730 | 1,820 | 5,762 | ||||||||
| Operating noninterest expense (Non-GAAP) | $ | 202,778 | $ | 181,591 | $ | 777,040 | $ | 712,038 | ||||
| Noninterest expense | $ | 203,450 | $ | 184,321 | $ | 778,860 | $ | 717,800 | ||||
| Less: Amortization of other intangibles | 1,593 | 1,332 | 5,506 | 5,764 | ||||||||
| Noninterest expense, net of amortization of other intangibles (Non-GAAP) (numerator A) | $ | 201,857 | $ | 182,989 | $ | 773,354 | $ | 712,036 | ||||
| Operating noninterest expense | $ | 202,778 | $ | 181,591 | $ | 777,040 | $ | 712,038 | ||||
| Less: Amortization of other intangibles | 1,593 | 1,332 | 5,506 | 5,764 | ||||||||
| Operating expense, net of amortization of other intangibles (Non-GAAP) (numerator B) | $ | 201,185 | $ | 180,259 | $ | 771,534 | $ | 706,274 | ||||
| Net interest income | $ | 172,363 | $ | 161,808 | $ | 670,905 | $ | 610,446 | ||||
| Noninterest income | 110,355 | 94,999 | 426,770 | 401,698 | ||||||||
| Less: Gains on sales of securities available for sale, net | 755 | — | 3,218 | 578 | ||||||||
| Total Non-GAAP Revenue (denominator A) | $ | 281,963 | $ | 256,807 | $ | 1,094,457 | $ | 1,011,566 | ||||
| Efficiency ratio (numerator A/denominator A) | 71.59 | % | 71.26 | % | 70.66 | % | 70.39 | % | ||||
| Operating efficiency ratio (Non-GAAP) (numerator B/denominator A) | 71.35 | 70.19 | 70.49 | 69.82 |
umbf-ex992_232.pptx.htm
UMB Financial Fourth Quarter 2019 January 28, 2020 Exhibit 99.2
Cautionary Notice about Forward-Looking Statements This presentation of UMB Financial Corporation (the “Company,” “our,” “us,” or “we”) 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, our 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 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.
Earnings Summary – 4Q 2019 $ in thousands, except share and per share data; unaudited Non-GAAP adjustments include acquisition and divestiture income and expense, severance expense and the cumulative tax impact of these adjustments. See the non-GAAP reconciliations and additional information on these items on slides 41 and 42.
Earnings Summary – Full-Year 2019 $ in thousands, except share and per share data; unaudited Non-GAAP adjustments include acquisition and divestiture income and expense, severance expense and the cumulative tax impact of these adjustments. See the non-GAAP reconciliations and additional information on these items on slides 41 and 42.
Select Balance Sheet Items $ in thousands, average balances; unaudited Three Months Ended
Key Performance Metrics This represents a non-GAAP measure. See slides 41 and 42 for additional disclosures and reconciliations related to these non-GAAP financial measures.
Balance Sheet
Consistent Loan Growth Average Total Loans 5 Year CAGR 12.5%
Loan Composition Diverse Loan Book (Average loan balances for the three months ended December 31 of the indicated year) Commercial Credit Card Commercial & Industrial HELOC Residential Real Estate Real Estate Construction Commercial Real Estate Consumer Credit Card Consumer Other Factoring Loans Asset-Based Loans Percentages less than 5% have been omitted. Includes leases. (1) (2)
Colorado Kansas City Kansas Greater MO St. Louis Arizona Texas Oklahoma Marquette Transportation Fin (Natl. Sales) Nebraska Marquette Business Credit (Natl. Sales) Geographic Diversity Loans by Region (Average loan balances for the three months ended December 31 of the indicated year) Percentages less than 5% have been omitted. (1)
Loan Activity
High Quality Investment Portfolio Securities Held to Maturity $1.1 billion at December 31, 2019 Securities Available for Sale $7.4 billion at December 31, 2019 Governmental Other Higher Education Healthcare Utility Social Service Industrial Cultural Civic K-12 Education NFP - Other Average Balance: $7.4 billion Average Yield: 2.58% Duration: 54 months Average Balance: $1.1 billion Average Yield: 3.15% Duration: 69 months Total Portfolio Average Yield: 2.65% Duration: 56 months Agencies Corporates Municipals Mortgage-Backed Securities Treasuries
Securities and Loan Statistics (1) Roll off includes cash flow from maturities, calls or amortizations of securities and is presented net of sales. (2) Purchased amount is presented net of purchases made related to sales. Loan Portfolio Statistics at December 31, 2019 Variable Rate Loans: $8.2 billion or 61% of the loan book ~32% of variable loans are tied to Prime for the next quarter ~67% of variable loans are tied to LIBOR for the next quarter Loan Repricing/Maturity Schedule 57% in 1st quarter 2020 65% in the next 12 months AFS Portfolio Activity
Diverse Sources of Deposits (Average deposits for the three months ended December 31 of the indicated year) Deposit Composition Personal Banking - Consumer Commercial Institutional Banking Personal Banking - Private Wealth Institutional Banking - Asset Servicing Healthcare Personal Banking - Small Business Other Percentages less than 5% have been omitted. (1)
Strong Capital Position Capital Ratio Trends (%) Total Risk-Based Capital Tier 1 Risk-Based Capital Tier 1 Leverage Common Equity Tier 1
Asset Quality
Current Expected Credit Loss (“CECL”) Implementation Current capital levels allow us to absorb anticipated CECL Day 1 impact Estimates are subject to change based on continuing review of models and assumptions, portfolio performance, changes in forecasted macroeconomic conditions and loan mix Day 1 Impact Net increase to allowance for credit loss of ~10% Immaterial reduction of CET1, fully-phased in basis ~5 bps Expect to provide final day 1 impact in the 2019 Form 10-K CECL Metrics Key Methodology Assumptions Forecast Components: 2-year reasonable and supportable period Moody’s Baseline Macroeconomic Forecast Significant macroeconomic variables: - Unemployment - 2-Year Treasury - 10-Year Treasury- BBB Corporate Yield - Home Price Index Most Significant Impacts Macroeconomic uncertainty and forecast projections Credit card reserves CECL Reserves Drivers Loan Portfolio Growth Risk Grading Characteristics Economic Uncertainty Methodology Assumptions Day 1 Allowance Composition
Net Charge-Off History (1) Commercial Loans includes commercial and industrial, commercial credit card, asset-based and factoring loans. (2) Other includes all real-estate related loans (commercial, residential and HELOC), plus consumer loans and DDA charge-offs.
Loan Classification Trends % of total loans 0.0% 1.0% 2.0% 3.0% Definitions: “Watch” – This rating represents credit exposure that presents higher than average risk and warrants greater than routine attention due to conditions affecting the borrower, the borrower’s industry or the economic environment. “Special Mention” – This rating reflects a potential weakness that deserves management’s close attention and that, if left uncorrected, may result in deterioration of the repayment prospects. “Substandard” – Loans in this category are inadequately protected by the current paying capacity of the borrower or by the collateral pledged, if any, and are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. “Non-Performing” – Includes restructured loans on non-accrual and all other non-accrual loans.
Income Statement
Noninterest Income – 4Q 2019 4th Quarter ‘19 Drivers Noninterest income increased $6.7MM, or 6.5%, compared to 3Q’19, primarily driven by: A $1.6MM, or 3.6% increase in trust and securities processing, related to improvements in fund services and corporate trust revenue; A $1.0MM increase in trading and investment banking income due to higher trading volumes; and Increases of the following market-related metrics, recorded in “other” income +$3.0MM in company-owned life insurance income (offset by a proportionate increase in deferred compensation expense noted below); +$2.5MM in equity earnings on alternative investments; and +$1.4MM in derivative income. Partially offset by A $2.3MM decrease in gains on sales of securities.
Bankcard Fees Noninterest Income Composition – 4Q 2019 Service Charges on Deposit Accounts Trust & Securities Processing Gains on Sales of Securities Trading & Investment Banking Other Brokerage Fees Trust & Securities Processing Composition: ($ in millions) Insurance Fees & Commissions Source of Income: 4Q’19 3Q’19 4Q’18 Personal Banking – Private Wealth & Prairie Capital $ 16.2 $ 16.4 $ 16.2 Institutional Banking – Fund Services 21.8 20.9 19.1 Institutional Banking – Corp. Trust & other 8.8 7.9 6.6 $ 46.8 $ 45.2 $ 41.9
Noninterest Income – Full-Year 2019 Note: Table represents noninterest income from continuing operations and excludes income from Scout Investments, which was sold in 2017.
Bankcard Fees Noninterest Income Composition – Full-Year 2019 Service Charges on Deposit Accounts Trust & Securities Processing Gains on Sales of Securities Trading & Investment Banking Other Brokerage Fees Trust & Securities Processing Composition: ($ in millions) Insurance Fees & Commissions Source of Income: 2019 2018 Personal Banking – Private Wealth & Prairie Capital $ 63.6 $ 64.9 Institutional Banking – Fund Services 82.5 84.0 Institutional Banking – Corp. Trust & other 30.8 23.3 $ 176.9 $ 172.2
Noninterest Expense – 4Q 2019 Operating noninterest expense, which excludes the impact of acquisition and divestiture expense and severance expense, was $202.8 million for the fourth quarter of 2019, an increase of $11.6 million, or 6.0 percent, compared to the linked quarter, and an increase of $21.2 million, or 11.7 percent, compared to the fourth quarter of 2018. See slides 41 and 42 for a reconciliation of this non-GAAP financial measure. Noninterest expense increased $12.1MM, or 6.3%, compared to 3Q’19, driven by: An increase of $10.7MM in salary and employee benefit expense due to $6.8MM increased bonus and commission expense tied to incentives for business and revenue growth; $1.6MM increased salary expense driven by hiring in several growing businesses; and $2.5MM higher deferred compensation expense (offset by the increase in company-owned life insurance income noted above). A $2.7MM increase in marketing and business development expense related to advertising costs for multiple product initiatives; and An increase of $2.0MM in supplies and services expense, primarily for credit card campaigns. These increases were partially offset by a decrease of $5.6MM in other expense, driven by a decrease of $5.1MM in derivative valuation expense and $700k in property and real estate taxes. 4th Quarter ‘19 Drivers
Noninterest Expense – Full-Year 2019 Operating noninterest expense, which excludes the impact of acquisition and divestiture expense and severance expense, was $777.0 million for 2019, an increase of $65.0 million, or 9.1 percent, compared to 2018. See slides 41 and 42 for a reconciliation of this non-GAAP financial measure. Note: Table represents noninterest expense from continuing operations and excludes expense related to Scout Investments, which was sold in 2017.
Segment Updates
Commercial Banking Commercial Banking Loans Average $ in billions Commercial Banking Deposits Average $ in billions Demand Deposits Interest-Bearing Deposits
Commercial Real Estate Portfolio CRE & Construction Lending (Average loan balances for the three months ended December 31 of the indicated year) Investment CRE Owner Occ. CRE Construction Farmland Multi-Family CRE Residential Construction (1) Percentages less than 5% have been omitted.
Institutional Banking Demand Deposits Interest-Bearing Deposits Institutional Banking Deposits Average $ in billions
Institutional Banking – Business Description Banking services for 4 of the top 10 broker-dealers FDIC sweep solutions; liquidity alternative to overnight funds Expanded to include Fintech clients as a channel for services in 2019 Fixed income services for banks, institutional, municipal & corporate clients $39.4 billion par value bonds traded YTD 2019 Fund accounting & administration Alternative Investments $254 billion in assets under administration Specialty corporate trust Aviation lease transactions Workout defaulted bond deals on behalf of holders Investor Solutions Corporate Trust Investment Banking Distressed Debt/ Specialty Finance Institutional Custody Asset Servicing Bond trustee and agency services to municipal and corporate issuers Approximately $21.7 billion in assets under administration #3 trustee and #3 paying agent in U.S. based on number of new deals Provides custodial services to municipalities, corporations, fund companies and more Among top 10 U.S. fund custodians as measured by AUC (MFSG)
Personal Banking Personal Banking Deposits Average $ in billions Personal Banking Loans Average $ in billions Consumer & Small Business Private Banking
Home Equity Lines of Credit $ in billions Assets Under Management $ in billions Personal Banking
Healthcare Services Healthcare Deposits & Assets End-of-period balances; $ in billions 2015 2016 2017 2018 2019 HSA deposits as % of total UMB deposits 7.8% 9.7% 11.4% 12.5% 12.7% HSA Deposits HSA Investment Assets
Multi-Channel Healthcare Strategy UMB offers a modular and configurable platform of applications and services that deliver the underlying core banking functionality to our healthcare partners Broker/Employer TPAs Health Plans Technology Firms Payment Aggregators Healthcare Partners HCS Applications SSO Web Services Contributions Enrollment BIN Sponsor HCS Saver Partner Portal Core Banking Systems
Healthcare Services – Industry Statistics Industry information source: Devenir Research 2019 Mid-Year HSA Market Statistics & Trends report dated August 27, 2019. Rankings as of 06/30/19. HCS represents a unique asset as one of the top 5 leaders in a growing niche market. Growth Rates – Deposits and Assets
Card Purchase Volumes Purchase Volume & Interchange Revenue Commercial Credit Consumer Credit Consumer Debit Healthcare Debit Institutional Banking – IBIS Debit Interchange ($ in millions) Percentages less than 5% have been omitted. (1)
Appendix
Dividend increase = 165.9% Industry Median* +59% increase *Industry is defined as publicly traded banks with dividend data reported for both 2005 and 2019, available at time of printing, 1/25/20. (142 banks) Source: S&P Global Returning Capital to Our Shareholders Annual Dividends Declared 2005 - 2019
Long-Term Value Creation Data as available at time of printing, 01/25/20. (1) See reconciliation of tangible book value per share on slide 43. *KBW Nasdaq Regional Bank Index (50 banks); **All publicly-traded banks with data reported for both 2004 and 2019; ***UMB traditional peer group (15 banks). Source: S&P Global. 15-Year Compound Annual Growth Rates 2004 - 2019 Diluted Earnings Per Share Tangible Book Value Per Share (1) UMBF KRX* Industry** Peer Median***
In this presentation, we provide information about net operating income from continuing operations, operating earnings per share from continuing operations-diluted (operating EPS-diluted), operating return on average equity (operating ROE), operating return on average assets (operating ROA), operating noninterest expense, operating efficiency ratio and tangible book value per share, 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 and the nearest comparable GAAP financial measures are reconciled in the table above and on the next 2 slides. The Company believes that these non-GAAP financial measures and the reconciliations may be useful to investors because they adjust for acquisition-, divestiture-, and severance-related items that management does not believe reflect the Company’s fundamental operating performance, and additionally show an important measure of the strength of the Company’s capital and its ability to generate earnings on tangible equity invested by our shareholders. 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. Net Operating Income Non-GAAP Reconciliation (continued on next page)
(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. All prior periods were calculated using the Company’s pervious marginal tax rate of 36.0% Operating Noninterest Expense & Efficiency Ratio Non-GAAP Reconciliation Operating EPS-diluted is calculated as diluted 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 (which is calculated as net interest income plus noninterest income, less gains (losses) on sales of securities available for sale, net). Tangible book value ratio is calculated as the Company’s total shareholders’ equity, net of intangible assets, divided by the Company’s total shares outstanding.
Tangible Book Value Non-GAAP Reconciliation Share count for December 31, 2004 adjusted for Company’s 2-for-1 stock split on May 31, 2006.