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

KANSAS CITY, Mo.--(BUSINESS WIRE)--

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

Net operating income from continuing operations, a non-GAAP financial measure reconciled to income from continuing operations, the nearest comparable GAAP measure, later in this release, was $57.2 million, or $1.17 per diluted share, for the second quarter 2019, compared to $58.2 million, or $1.19 per diluted share, for the linked quarter and $56.1 million, or $1.12 per diluted share, for the second quarter 2018. These results represent a decrease of 1.7 percent on a linked-quarter basis and an increase of 2.1 percent compared to second quarter 2018.

Summary of quarterly financial results

 

UMB Financial Corporation

 

(unaudited, dollars in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q2

 

 

Q1

 

 

Q2

 

 

 

2019

 

 

2019

 

 

2018

 

Income from continuing operations

 

$

56,959

 

 

$

57,744

 

 

$

55,424

 

Loss from discontinued operations

 

 

 

 

 

 

 

 

 

Net income

 

 

56,959

 

 

 

57,744

 

 

 

55,424

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share from continuing operations (diluted)

 

 

1.16

 

 

 

1.18

 

 

 

1.11

 

Losses per share from discontinued operations (diluted)

 

 

 

 

 

 

 

 

 

Earnings per share (diluted)

 

 

1.16

 

 

 

1.18

 

 

 

1.11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating income from continuing operations

 

 

57,245

 

 

 

58,208

 

 

 

56,079

 

Operating earnings per share from continuing operations (diluted)

 

 

1.17

 

 

 

1.19

 

 

1.12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP - continuing operations

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets

 

 

0.98

%

 

 

1.02

%

 

 

1.08

%

Return on average equity

 

 

9.46

 

 

 

10.48

 

 

 

10.18

 

Efficiency ratio

 

 

70.32

 

 

 

70.00

 

 

 

70.21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP - continuing operations

 

 

 

 

 

 

 

 

 

 

 

 

Operating return on average assets

 

 

0.99

%

 

 

1.03

%

 

 

1.09

%

Operating return on average equity

 

 

9.51

 

 

 

10.56

 

 

 

10.30

 

Operating efficiency ratio

 

 

70.19

 

 

 

69.78

 

 

 

69.88

 

Summary of year-to-date financial results

 

UMB Financial Corporation

 

(unaudited, dollars in thousands, except per share data)

 

June

 

 

June

 

 

 

YTD

 

 

YTD

 

 

 

2019

 

 

2018

 

Income from continuing operations

 

$

114,703

 

 

$

112,957

 

Loss from discontinued operations

 

 

 

 

 

(747

)

Net income

 

 

114,703

 

 

 

112,210

 

 

 

 

 

 

 

 

 

 

Earnings per share from continuing operations (diluted)

 

 

2.34

 

 

 

2.26

 

Losses per share from discontinued operations (diluted)

 

 

 

 

 

(0.01

)

Earnings per share (diluted)

 

 

2.34

 

 

 

2.25

 

 

 

 

 

 

 

 

 

 

Net operating income from continuing operations

 

 

115,453

 

 

 

115,141

 

Operating earnings per share from continuing operations (diluted)

 

 

2.36

 

 

 

2.30

 

 

 

 

 

 

 

 

 

 

GAAP - continuing operations

 

 

 

 

 

 

 

 

Return on average assets

 

 

1.00

%

 

 

1.10

%

Return on average equity

 

 

9.95

 

 

 

10.49

 

Efficiency ratio

 

 

70.16

 

 

 

69.51

 

 

 

 

 

 

 

 

 

 

Non-GAAP - continuing operations

 

 

 

 

 

 

 

 

Operating return on average assets

 

 

1.01

%

 

 

1.12

%

Operating return on average equity

 

 

10.01

 

 

 

10.69

 

Operating efficiency ratio

 

 

69.98

 

 

 

68.95

 

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

Discussion of results from continuing operations

Summary of revenue

 

UMB Financial Corporation

 

(unaudited, dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q2

 

 

Q1

 

 

Q2

 

 

CQ vs.

 

 

CQ vs.

 

 

 

2019

 

 

2019

 

 

2018

 

 

LQ

 

 

PY

 

Net interest income

 

$

166,414

 

 

$

163,868

 

 

$

150,226

 

 

$

2,546

 

 

$

16,188

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trust and securities processing

 

 

42,903

 

 

 

41,957

 

 

 

42,845

 

 

 

946

 

 

 

58

 

Trading and investment banking

 

 

5,453

 

 

 

5,581

 

 

 

4,653

 

 

 

(128

)

 

 

800

 

Service charges on deposit accounts

 

 

20,747

 

 

 

21,281

 

 

 

20,722

 

 

 

(534

)

 

 

25

 

Insurance fees and commissions

 

 

465

 

 

 

338

 

 

 

340

 

 

 

127

 

 

 

125

 

Brokerage fees

 

 

7,077

 

 

 

7,243

 

 

 

6,291

 

 

 

(166

)

 

 

786

 

Bankcard fees

 

 

16,439

 

 

 

17,067

 

 

 

17,184

 

 

 

(628

)

 

 

(745

)

(Losses) gains on sales of securities available for sale, net

 

 

(1,403

)

 

 

809

 

 

 

228

 

 

 

(2,212

)

 

 

(1,631

)

Other

 

 

13,717

 

 

 

13,106

 

 

 

8,026

 

 

 

611

 

 

 

5,691

 

Total noninterest income

 

$

105,398

 

 

$

107,382

 

 

$

100,289

 

 

$

(1,984

)

 

$

5,109

 

Total revenue

 

$

271,812

 

 

$

271,250

 

 

$

250,515

 

 

$

562

 

 

$

21,297

 

Net interest margin

 

 

3.19

%

 

 

3.20

%

 

 

3.24

%

 

 

 

 

 

 

 

 

Total noninterest income as a % of total revenue

 

 

38.78

 

 

 

39.59

 

 

 

40.03

 

 

 

 

 

 

 

 

 

Net interest income

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

Noninterest income

  • Second quarter 2019 noninterest income decreased $2.0 million, or 1.8 percent, on a linked-quarter basis, largely due to:
    • A decrease of $2.2 million in gains on sales of available-for-sale securities. This decrease includes losses of $1.4 million realized in the second quarter of 2019.
    • A decrease of $0.6 million in bankcard fees primarily driven by an increase of $1.7 million in rebates expense recorded as contra-revenue, offset by an increase of $0.8 million in interchange income.
    • A decrease in company-owned life insurance of $3.4 million, recorded in other income, which is offset by a proportionate decrease in deferred compensation expense noted below.
    • These decreases were partially offset by increases of $1.1 million in equity earnings on alternative investments, recorded in other income, and $0.7 million in corporate trust income, recorded in trust and securities processing.
  • Compared to the prior year, noninterest income in the second quarter of 2019 increased $5.1 million, or 5.1 percent, primarily driven by:
    • Increases of $1.4 million in derivative income, $1.2 million in equity earnings on alternative investments, and $0.8 million in company-owned life insurance, all of which are recorded in other income. The increase in company-owned life insurance is offset by a proportionate increase in deferred compensation expense noted below.
    • A $0.8 million increase in trading and investment banking income due to increased trading volume.

Noninterest expense

Summary of noninterest expense

 

UMB Financial Corporation

 

(unaudited, dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q2

 

 

Q1

 

 

Q2

 

 

CQ vs.

 

 

CQ vs.

 

 

 

2019

 

 

2019

 

 

2018

 

 

LQ

 

 

PY

 

Salaries and employee benefits

 

$

114,454

 

 

$

116,032

 

 

$

104,175

 

 

$

(1,578

)

 

$

10,279

 

Occupancy, net

 

 

11,539

 

 

 

11,743

 

 

 

10,813

 

 

 

(204

)

 

 

726

 

Equipment

 

 

18,824

 

 

 

19,684

 

 

 

18,842

 

 

 

(860

)

 

 

(18

)

Supplies and services

 

 

4,285

 

 

 

3,873

 

 

 

4,146

 

 

 

412

 

 

 

139

 

Marketing and business development

 

 

7,304

 

 

 

4,913

 

 

 

6,184

 

 

 

2,391

 

 

 

1,120

 

Processing fees

 

 

13,096

 

 

 

12,132

 

 

 

11,537

 

 

 

964

 

 

 

1,559

 

Legal and consulting

 

 

7,496

 

 

 

5,633

 

 

 

6,460

 

 

 

1,863

 

 

 

1,036

 

Bankcard

 

 

4,701

 

 

 

4,345

 

 

 

4,165

 

 

 

356

 

 

 

536

 

Amortization of other intangible assets

 

 

1,251

 

 

 

1,327

 

 

 

1,485

 

 

 

(76

)

 

 

(234

)

Regulatory fees

 

 

2,910

 

 

 

2,890

 

 

 

3,772

 

 

 

20

 

 

 

(862

)

Other

 

 

7,527

 

 

 

8,054

 

 

 

5,639

 

 

 

(527

)

 

 

1,888

 

Total noninterest expense

 

$

193,387

 

 

$

190,626

 

 

$

177,218

 

 

$

2,761

 

 

$

16,169

 

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

Income taxes

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

Balance sheet

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

Summary of average loans and leases - QTD Average

UMB Financial Corporation

 

(unaudited, dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q2

 

 

Q1

 

 

Q2

 

 

CQ vs.

 

 

CQ vs.

 

 

 

2019

 

 

2019

 

 

2018

 

 

LQ

 

 

PY

 

Commercial

 

$

5,427,498

 

 

$

5,270,130

 

 

$

4,478,829

 

 

$

157,368

 

 

$

948,669

 

Asset-based loans

 

 

387,983

 

 

 

378,508

 

 

 

336,710

 

 

 

9,475

 

 

 

51,273

 

Factoring loans

 

 

261,041

 

 

 

263,093

 

 

 

231,035

 

 

 

(2,052

)

 

 

30,006

 

Commercial credit card

 

 

196,313

 

 

 

195,872

 

 

 

191,009

 

 

 

441

 

 

 

5,304

 

Real estate - construction

 

 

889,233

 

 

 

787,483

 

 

 

823,169

 

 

 

101,750

 

 

 

66,064

 

Real estate - commercial

 

 

3,831,818

 

 

 

3,797,206

 

 

 

3,711,417

 

 

 

34,612

 

 

 

120,401

 

Real estate - residential

 

 

744,750

 

 

 

714,534

 

 

 

669,177

 

 

 

30,216

 

 

 

75,573

 

Real estate - HELOC

 

 

514,044

 

 

 

528,468

 

 

 

596,025

 

 

 

(14,424

)

 

 

(81,981

)

Consumer credit card

 

 

230,863

 

 

 

217,570

 

 

 

230,971

 

 

 

13,293

 

 

 

(108

)

Consumer other

 

 

132,662

 

 

 

145,100

 

 

 

153,427

 

 

 

(12,438

)

 

 

(20,765

)

Leases

 

 

4,776

 

 

 

5,190

 

 

 

22,679

 

 

 

(414

)

 

 

(17,903

)

Total loans

 

$

12,620,981

 

 

$

12,303,154

 

 

$

11,444,448

 

 

$

317,827

 

 

$

1,176,533

 

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

Summary of average securities - QTD Average

 

UMB Financial Corporation

 

(unaudited, dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q2

 

 

Q1

 

 

Q2

 

 

CQ vs.

 

 

CQ vs.

 

 

 

2019

 

 

2019

 

 

2018

 

 

LQ

 

 

PY

 

Securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

256,949

 

 

$

256,672

 

 

$

37,982

 

 

$

277

 

 

$

218,967

 

U.S. Agencies

 

 

91,822

 

 

 

53,458

 

 

 

2,946

 

 

 

38,364

 

 

 

88,876

 

Mortgage-backed

 

 

3,926,164

 

 

 

3,841,449

 

 

 

3,679,835

 

 

 

84,715

 

 

 

246,329

 

State and political subdivisions

 

 

2,659,397

 

 

 

2,534,438

 

 

 

2,330,454

 

 

 

124,959

 

 

 

328,943

 

Corporates

 

 

84,910

 

 

 

6,424

 

 

 

1,476

 

 

 

78,486

 

 

 

83,434

 

Commercial Paper

 

 

 

 

 

 

 

 

7,138

 

 

 

 

 

 

(7,138

)

Total securities available for sale

 

$

7,019,242

 

 

$

6,692,441

 

 

$

6,059,831

 

 

$

326,801

 

 

$

959,411

 

Securities held to maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

State and political subdivisions

 

 

1,128,526

 

 

 

1,157,126

 

 

 

1,228,849

 

 

 

(28,600

)

 

 

(100,323

)

Trading securities

 

 

61,565

 

 

 

46,408

 

 

 

45,538

 

 

 

15,157

 

 

 

16,027

 

Other securities

 

 

80,097

 

 

 

74,718

 

 

 

66,345

 

 

 

5,379

 

 

 

13,752

 

Total securities

 

$

8,289,430

 

 

$

7,970,693

 

 

$

7,400,563

 

 

$

318,737

 

 

$

888,867

 

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

Summary of average deposits - QTD Average

UMB Financial Corporation

 

(unaudited, dollars in thousands)

 

 

...