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UMB Financial Corporation Reports Third Quarter Income from Continuing Operations of $62.4 Million, or $1.27 per Diluted Share

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

UMB Financial Corporation (UMBF), a financial services company, announced income from continuing operations for the third quarter of 2019 of $62.4 million, or $1.27 per diluted share, compared to $57.0 million, or $1.16 per diluted share, in the second quarter of 2019 (linked quarter) and $57.8 million, or $1.16 per diluted share, in the third quarter of 2018. The reported GAAP income from continuing operations represents an increase of 9.5 percent on a linked-quarter basis and an increase of 7.8 percent compared to the third quarter of 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 $62.5 million, or $1.27 per diluted share, for the third quarter of 2019, compared to $57.2 million, or $1.17 per diluted share, for the linked quarter and $58.0 million, or $1.16 per diluted share, for the third quarter of 2018. These results represent an increase of 9.2 percent on a linked-quarter basis and an increase of 7.8 percent compared to the third quarter of 2018.

Summary of quarterly financial results

 

UMB Financial Corporation

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

 

 

 

 

Q3

 

Q2

 

Q3

 

 

2019

 

2019

 

2018

Income from continuing operations

 

$

62,382

 

 

$

56,959

 

 

$

57,849

 

Loss from discontinued operations

 

 

 

 

 

 

 

 

 

Net income

 

 

62,382

 

 

 

56,959

 

 

 

57,849

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share from continuing operations (diluted)

 

 

1.27

 

 

 

1.16

 

 

 

1.16

 

Losses per share from discontinued operations (diluted)

 

 

 

 

 

 

 

 

 

Earnings per share (diluted)

 

 

1.27

 

 

 

1.16

 

 

 

1.16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating income from continuing operations

 

 

62,525

 

 

 

57,245

 

 

 

58,024

 

Operating earnings per share from continuing operations (diluted)

 

 

1.27

 

 

 

1.17

 

 

1.16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP - continuing operations

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets

 

 

1.03

%

 

 

0.98

%

 

 

1.11

%

Return on average equity

 

 

9.69

 

 

 

9.46

 

 

 

10.32

 

Efficiency ratio

 

 

70.70

 

 

 

70.32

 

 

 

71.27

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP - continuing operations

 

 

 

 

 

 

 

 

 

 

 

 

Operating return on average assets

 

 

1.04

%

 

 

0.99

%

 

 

1.11

%

Operating return on average equity

 

 

9.72

 

 

 

9.51

 

 

 

10.35

 

Operating efficiency ratio

 

 

70.63

 

 

 

70.19

 

 

 

71.18

 

 

Summary of year-to-date financial results

 

UMB Financial Corporation

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

 

September

 

 

September

 

 

YTD

 

 

YTD

 

 

2019

 

 

2018

Income from continuing operations

 

$

177,085

 

 

$

170,806

 

Loss from discontinued operations

 

 

 

 

 

(747

)

Net income

 

 

177,085

 

 

 

170,059

 

 

 

 

 

 

 

 

 

 

Earnings per share from continuing operations (diluted)

 

 

3.61

 

 

 

3.41

 

Losses per share from discontinued operations (diluted)

 

 

 

 

 

(0.01

)

Earnings per share (diluted)

 

 

3.61

 

 

 

3.40

 

 

 

 

 

 

 

 

 

 

Net operating income from continuing operations

 

 

177,978

 

 

 

173,165

 

Operating earnings per share from continuing operations (diluted)

 

 

3.63

 

 

 

3.47

 

 

 

 

 

 

 

 

 

 

GAAP - continuing operations

 

 

 

 

 

 

 

 

Return on average assets

 

 

1.01

%

 

 

1.10

%

Return on average equity

 

 

9.86

 

 

 

10.43

 

Efficiency ratio

 

 

70.34

 

 

 

70.09

 

 

 

 

 

 

 

 

 

 

Non-GAAP - continuing operations

 

 

 

 

 

 

 

 

Operating return on average assets

 

 

1.02

%

 

 

1.12

%

Operating return on average equity

 

 

9.91

 

 

 

10.57

 

Operating efficiency ratio

 

 

70.20

 

 

 

69.69

 

“For the third quarter, revenues increased 8.2 percent over the prior year period, driven by an 11.8 percent increase in net interest income,” said Mariner Kemper, chairman, president and chief executive officer. “We are pleased with our reported average loan growth of 10.0 percent over the same period, which is more than double the 4.7 percent growth estimated for the industry as a whole, as reported by the Federal Reserve. Additionally, net charge-offs were just 0.07 percent of average loans for the quarter and 0.29 percent on a year-to-date basis, in line with our long-term historical performance. While the shape of the yield curve and low and declining interest rates pose challenges, strong loan pipelines coupled with our focus on diversified fee income sources will help mitigate some of these headwinds.”

Discussion of results from continuing operations

Summary of revenue

 

UMB Financial Corporation

(unaudited, dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q3

 

Q2

 

Q3

 

CQ vs.

 

CQ vs.

 

 

2019

 

2019

 

2018

 

LQ

 

PY

Net interest income

 

$

168,260

 

 

$

166,414

 

 

$

150,490

 

 

$

1,846

 

 

$

17,770

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trust and securities processing

 

 

45,218

 

 

 

42,903

 

 

 

43,425

 

 

 

2,315

 

 

 

1,793

 

Trading and investment banking

 

 

5,712

 

 

 

5,453

 

 

 

3,711

 

 

 

259

 

 

 

2,001

 

Service charges on deposit accounts

 

 

20,620

 

 

 

20,747

 

 

 

20,927

 

 

 

(127

)

 

 

(307

)

Insurance fees and commissions

 

 

320

 

 

 

465

 

 

 

339

 

 

 

(145

)

 

 

(19

)

Brokerage fees

 

 

8,102

 

 

 

7,077

 

 

 

6,402

 

 

 

1,025

 

 

 

1,700

 

Bankcard fees

 

 

16,895

 

 

 

16,439

 

 

 

16,838

 

 

 

456

 

 

 

57

 

Gains (losses) on sales of securities available for sale, net

 

 

3,057

 

 

 

(1,403

)

 

 

211

 

 

 

4,460

 

 

 

2,846

 

Other

 

 

3,711

 

 

 

13,717

 

 

 

9,032

 

 

 

(10,006

)

 

 

(5,321

)

Total noninterest income

 

$

103,635

 

 

$

105,398

 

 

$

100,885

 

 

$

(1,763

)

 

$

2,750

 

Total revenue

 

$

271,895

 

 

$

271,812

 

 

$

251,375

 

 

$

83

 

 

$

20,520

 

Net interest margin

 

 

3.09

%

 

 

3.19

%

 

 

3.18

%

 

 

 

 

 

 

 

 

Total noninterest income as a % of total revenue

 

 

38.12

 

 

 

38.78

 

 

 

40.13

 

 

 

 

 

 

 

 

 

Net interest income

  • Net interest income totaled $168.3 million, an increase of $1.8 million, or 1.1 percent, from linked quarter levels, impacted by a $269.9 million, or 2.1 percent, increase in average loans, a $249.9 million, or 3.0 percent, increase in average securities and one additional day in the third quarter. These benefits were offset by the impact of recent reductions in short-term interest rates on net interest margin.
  • Net interest margin for the third quarter was 3.09 percent, down 10 basis points from the linked quarter, in large part due to lower short-term interest rates. Earning asset yields declined 12 basis points from the linked quarter, in part driven by declining yields in the loan portfolio due to recent reductions in short-term interest rates. The cost of interest-bearing liabilities decreased five basis points to 1.34 percent, driven by a two-basis-point decline in cost of interest-bearing deposits and lower borrowing costs. Net interest margin was also adversely impacted by a slight reduction in the benefit of interest-free funds and the impact of a $750 million cash flow hedge executed in late August.
  • On a year-over-year basis, the increase in net interest income was driven by a 10.0 percent, or $1.2 billion, increase in average loans, as well as higher average loan yields, which increased 12 basis points compared to 2018.
  • For the third quarter of 2019, earning assets averaged $22.4 billion, an increase of 15.5 percent over the third quarter of 2018.

Noninterest income

  • Third quarter 2019 noninterest income decreased $1.8 million, or 1.7 percent, on a linked-quarter basis, largely due to:
    • Decreases of $3.7 million in equity earnings on alternative investments, $2.3 million in company-owned life insurance income, and $1.5 million in derivative income, all recorded in other income. The decrease in company-owned life insurance income is offset by a proportionate decrease in deferred compensation expense noted below.
    • These decreases were partially offset by the following increases:
      • An increase of $4.5 million in gains on sales of available-for-sale securities.
      • Increases of $1.1 million in fund servicing revenue, $0.6 million in trust services income and $0.6 million in corporate trust income, all recorded in trust and securities processing.
      • An increase of $1.0 million in brokerage fees, primarily driven by higher 12b-1 income.
  • Compared to the prior year, noninterest income in the third quarter of 2019 increased $2.8 million, or 2.7 percent, primarily driven by:
    • An increase of $2.8 million in gains on sales of available-for-sale securities.
    • A $2.0 million increase in trading and investment banking income due to increased trading volume.
    • An increase of $2.0 million in corporate trust income, recorded in trust and securities processing.
    • An increase of $1.7 million in brokerage fees, primarily driven by higher 12b-1 and money market income.
    • These increases were partially offset by decreases of $2.0 million in company-owned life insurance income, $1.9 million in equity earnings on alternative investments, and $1.0 million in derivative income, all recorded in other income. The decrease in company-owned life insurance income is offset by a proportionate decrease in deferred compensation expense noted below.

Noninterest expense

Summary of noninterest expense

 

UMB Financial Corporation

(unaudited, dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q3

 

 

Q2

 

 

Q3

 

 

CQ vs.

 

CQ vs.

 

 

2019

 

 

2019

 

 

2018

 

 

LQ

 

PY

Salaries and employee benefits

 

$

110,153

 

 

$

114,454

 

 

$

102,956

 

 

$

(4,301

)

 

$

7,197

 

Occupancy, net

 

 

12,240

 

 

 

11,539

 

 

 

11,628

 

 

 

701

 

 

 

612

 

Equipment

 

 

19,775

 

 

 

18,824

 

 

 

18,533

 

 

 

951

 

 

 

1,242

 

Supplies and services

 

 

4,261

 

 

 

4,285

 

 

 

4,528

 

 

 

(24

)

 

 

(267

)

Marketing and business development

 

 

5,655

 

 

 

7,304

 

 

 

6,671

 

 

 

(1,649

)

 

 

(1,016

)

Processing fees

 

 

13,619

 

 

 

13,096

 

 

 

12,331

 

 

 

523

 

 

 

1,288

 

Legal and consulting

 

 

8,374

 

 

 

7,496

 

 

 

8,470

 

 

 

878

 

 

 

(96

)

Bankcard

 

 

4,643

 

 

 

4,701

 

 

 

4,407

 

 

 

(58

)

 

 

236

 

Amortization of other intangible assets

 

 

1,335

 

 

 

1,251

 

 

 

1,385

 

 

 

84

 

 

 

(50

)

Regulatory fees

 

 

2,749

 

 

 

2,910

 

 

 

3,337

 

 

 

(161

)

 

 

(588

)

Other

 

 

8,593

 

 

 

7,527

 

 

 

6,139

 

 

 

1,066

 

 

 

2,454

 

Total noninterest expense

 

$

191,397

 

 

$

193,387

 

 

$

180,385

 

 

$

(1,990

)

 

$

11,012

 

  • GAAP noninterest expense for the third quarter of 2019 was $191.4 million, a decrease of $2.0 million, or 1.0 percent, from the linked quarter and an increase of $11.0 million, or 6.1 percent, from the third quarter of 2018.
  • On a non-GAAP basis, operating noninterest expense (as reconciled later in this release) was $191.2 million for the third quarter of 2019, a decrease of $1.8 million, or 0.9 percent, compared to the linked quarter and an increase of $11.1 million, or 6.1 percent, compared to the third quarter of 2018.
  • The linked quarter decrease in noninterest expense was driven by:
    • A decrease of $4.3 million in salaries and employee benefits, largely driven by a $3.0 million decrease in lower bonus and commission expense and a $1.7 million decrease in deferred compensation expense, which is offset by the decrease in company-owned life insurance income noted above.
    • A $1.6 million decrease in marketing and business development expense, primarily driven by a decrease of $0.9 million in travel expense and $0.5 million in advertising and business development due to the timing of multiple product initiatives.
    • These decreases were partially offset by an increase in other expense driven by a $1.3 million fee paid to partially terminate a building lease, increased software equipment expense of $1.2 million, and increased occupancy and legal and consulting expense, due to the timing of multiple technology initiatives.
  • The year-over-year increase in noninterest expense was driven by:
    • A $7.2 million increase in salaries and employee benefits, primarily due to increases in salaries and wages expense, bonus and commission expense, and higher benefits expense, partially offset by a decrease of $1.6 million in deferred compensation expense, which is offset by the increase in company-owned life insurance income noted above.
    • A $1.3 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 $2.5 million in other noninterest expense, driven by a $1.3 million fee paid to partially terminate a building lease in the third quarter of 2019 and an increase of $1.2 million in derivative expense.

Income taxes

  • The company’s effective tax rate was 15.1 percent for the nine months ended September 30, 2019, compared to 14.2 percent for the same period in 2018.

Balance sheet

  • Average total assets for the third quarter of 2019 were $23.9 billion compared to $23.3 billion for the linked quarter and $20.7 billion for the same period in 2018.

Summary of average loans and leases - QTD Average

UMB Financial Corporation

(unaudited, dollars in thousands)

 

 

 

 

Q3

 

 

Q2

 

 

Q3

 

 

CQ vs.

 

CQ vs.

 

 

2019

 

 

2019

 

 

2018

 

 

LQ

 

PY

Commercial

 

$

5,443,718

 

 

$

5,427,498

 

 

$

4,717,530

 

 

$

16,220

 

 

$

726,188

 

Asset-based loans

 

 

372,938

 

 

 

387,983

 

 

 

382,672

 

 

 

(15,045

)

 

 

(9,734

)

Factoring loans

 

 

221,862

 

 

 

261,041

 

 

 

264,414

 

 

 

(39,179

)

 

 

(42,552

)

Commercial credit card

 

 

204,905

 

 

 

196,313

 

 

 

199,730

 

 

 

8,592

 

 

 

5,175

 

Real estate - construction

 

 

819,926

 

 

 

889,233

 

 

 

814,053

 

 

 

(69,307

)

 

 

5,873

 

Real estate - commercial

 

 

4,164,477

 

 

 

3,831,818

 

 

 

3,701,072

 

 

 

332,659

 

 

 

463,405

 

Real estate - residential

 

 

805,994

 

 

 

744,750

 

 

 

688,097

 

 

 

61,244

 

 

 

117,897

 

Real estate - HELOC

 

 

498,460

 

 

 

514,044

 

 

 

566,460

 

 

 

(15,584

)

 

 

(68,000

)

Consumer credit card

 

 

220,363

 

 

 

230,863

 

 

 

222,223

 

 

 

(10,500

)

 

 

(1,860

)

Consumer other

 

 

136,117

 

 

 

132,662

 

 

 

152,894

 

 

 

3,455

 

 

 

(16,777

)

Leases

 

 

2,118

 

 

 

4,776

 

 

 

9,407

 

 

 

(2,658

)

 

 

(7,289

)

Total loans

 

$

12,890,878

 

 

$

12,620,981

 

 

$

11,718,552

 

 

$

269,897

 

 

$

1,172,326

 

  • Average loans for the third quarter of 2019 increased 2.1 percent on a linked-quarter basis and 10.0 percent compared to the third quarter of 2018.

Summary of average securities - QTD Average

 

UMB Financial Corporation

(unaudited, dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q3

 

 

Q2

 

 

Q3

 

 

CQ vs.

 

CQ vs.

 

 

2019

 

 

2019

 

 

2018

 

 

LQ

 

PY

Securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

250,552

 

 

$

256,949

 

 

$

38,044

 

 

$

(6,397

)

$

212,508

 

U.S. Agencies

 

 

93,440

 

 

 

91,822

 

 

 

198

 

 

 

1,618

 

 

93,242

 

Mortgage-backed

 

 

3,987,463

 

 

 

3,926,164

 

 

 

3,590,703

 

 

 

61,299

 

 

396,760

 

State and political subdivisions

 

 

2,795,210

 

 

 

2,659,397

 

 

 

2,290,906

 

 

 

135,813

 

 

504,304

 

Corporates

 

 

155,656

 

 

 

84,910

 

 

 

718

 

 

 

70,746

 

 

154,938

 

Total securities available for sale

 

$

7,282,321

 

 

$

7,019,242

 

 

$

5,920,569

 

 

$

263,079

 

$

1,361,752

 

Securities held to maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

State and political subdivisions

 

$

1,105,397

 

 

$

1,128,526

 

 

$

1,205,007

 

 

$

(23,129

)

$

(99,610

)

Trading securities

 

 

44,571

 

 

 

61,565

 

 

 

45,476

 

 

 

(16,994

)

 

(905

)

Other securities

 

 

90,008

 

 

 

80,097

 

 

 

65,962

 

 

 

9,911

 

 

24,046

 

Total securities

 

$

8,522,297

 

 

$

...