UMB Financial Corporation (Nasdaq: UMBF), a diversified financial holding company, announced GAAP earnings for the fourth quarter 2016 of $42.9 million or $0.87 per diluted share, compared to $41.9 million or $0.85 per diluted share in the third quarter 2016 (linked quarter) and $29.6 million or $0.60 per diluted share in the fourth quarter 2015. These results represent an increase of 2.4 percent on a linked-quarter basis and 44.8 percent compared to the fourth quarter 2015. For the year ended Dec. 31, 2016, GAAP earnings were $158.8 million or $3.22 per diluted share, an increase of 36.8 percent compared to $116.1 million or $2.44 per diluted share for the year-ended Dec. 31, 2015.

Net operating income, a non-GAAP financial measure which is reconciled to the nearest comparable GAAP measure later in this release, was $45.3 million or $0.91 per diluted share for the fourth quarter 2016, compared to $43.0 million or $0.87 per diluted share for the linked quarter and $34.2 million or $0.70 per diluted share for the fourth quarter 2015. These results represent an increase of 5.4 percent on a linked-quarter basis and 32.3 percent compared to the fourth quarter 2015. Full year 2016 net operating income was $166.5 million or $3.38 per diluted share, an increase of 34.9 percent compared to $123.4 million or $2.59 per diluted share for the full year 2015.

 
Summary of financial results                   UMB Financial Corporation
(unaudited, dollars in thousands) December December
Q4 Q3 Q4 YTD YTD
2016     2016     2015     2016     2015  

GAAP

Net income $ 42,934

 

$

41,946

 

$

29,643

 

$

158,801

 

$

116,073
Earnings per share (diluted) 0.87 0.85 0.60 3.22 2.44
Return on average assets 0.86 % 0.85 % 0.63 % 0.81 %

0.65

%
Return on average equity 8.58 8.25 6.15 8.01 6.43
Efficiency ratio 71.5 % 70.2 % 77.2 % 72.4 % 77.6 %
 

Non-GAAP

Net operating income $ 45,294

 

$

42,985

 

$

34,234

 

$

166,474

 

$

123,360
Operating earnings per share (diluted) 0.91 0.87 0.70 3.38 2.59
Operating return on average assets 0.90 % 0.87 % 0.72 % 0.85 % 0.69 %
Operating return on average equity 9.05 8.46 7.10 8.39 6.83
Operating efficiency ratio 70.1 % 69.6 % 74.1 % 71.2 % 76.3 %
 

“Fourth quarter 2016 net income improved 2.4 percent, or $1.0 million, over the third quarter 2016,” said Mariner Kemper, chairman and chief executive officer. “These results were driven in part by a $164 million increase in average loans, which helped drive a 5.4 percent increase in net interest income. For the full year, we earned a record $158.8 million. 2016 was a year of unprecedented market activity. UMB’s stock posted a 66 percent improvement, outperforming the 26 percent return for the KBW Nasdaq Bank index. During the year, we fully integrated our acquisition of Marquette Financial Companies, executed on our expense initiative, and continued our history of solid loan growth. We are looking forward to 2017 and continuing to improve operating leverage and invest in our business for the future.”

       
Summary of revenue                   UMB Financial Corporation
(unaudited, dollars in thousands)
Q4 Q3 Q4 CQ vs. CQ vs.
2016     2016     2015     LQ     PY
 
Net interest income $ 131,456 $ 124,765 $ 114,454

 

$

6,691

 

$

17,002
Noninterest income:
Trust and securities processing 60,431 60,218 62,194 213 (1,763)
Trading and investment banking 5,040 6,114 5,559 (1,074) (519)
Service charges on deposit accounts 20,949 21,832 21,631 (883) (682)
Insurance fees and commissions 833 698 894 135 (61)
Brokerage fees 4,674 4,712 3,005 (38) 1,669
Bankcard fees 16,113 17,086 17,369 (973) (1,256)
Gains on sales of securities available for sale, net - 2,978 1,998 (2,978) (1,998)
Equity earnings (losses) on alternative investments 504 1,594 (5,189) (1,090) 5,693
Other 7,786     6,716     5,138     1,070     2,648
Total noninterest income $ 116,330 $   121,948 $   112,599

 

$

(5,618)

 

$

3,731
                         
Total Revenue $ 247,786 $   246,713 $   227,053

 

$

1,073

 

$

20,733
 
Net interest margin 3.00 % 2.87 % 2.76 %
 
Total noninterest income as a % of total revenue 46.9 % 49.4 % 49.6 %
 

Net interest income

  • On a linked quarter basis, the increase in net interest income was driven by a 13 basis point improvement in net interest margin, coupled with a 6.5 percent annualized, or $164.2 million, increase in average loans.
  • Earning asset yields improved 14 basis points from the linked quarter while the cost of interest-bearing liabilities increased one basis point to 0.26 percent. Average loan yields improved 10 basis points from the linked quarter to 3.96 percent, in part driven by favorable re-pricing and mix changes within the loan portfolio.
  • On a year-over-year basis, the increase in net interest income was driven by a 12.5 percent or $1.1 billion increase in average loans as well as higher average loan yields, which increased 16 basis points from a year ago.
  • For the fourth quarter 2016, average earning assets stood at $18.6 billion, an increase of 1.0 percent over the linked quarter and 6.8 percent over the fourth quarter 2015.

Noninterest income

  • Fourth quarter 2016 noninterest income decreased $5.6 million, or 4.6 percent, on a linked quarter basis largely due to lower gains on available-for-sale securities and equity earnings on alternative investments, which decreased $3.0 million and $1.1 million, respectively.
  • Noninterest income improved $3.7 million, or 3.3 percent, compared to the same quarter in 2015 driven by:
    • a $5.7 million increase in equity earnings on alternative investments from improvements in the valuation of the underlying Prairie Capital Management (PCM) fund investments;
    • a $1.5 million increase in 12b-1 income recorded in brokerage fees;
    • a $1.1 million increase in the fair value of company-owned life insurance, a $0.9 million increase in derivative income, and a $0.6 million gain on the sale of property recorded in other noninterest income;
    • a $1.5 million increase in trust and securities processing income related to the company’s private wealth business; and
    • partially offset by a decrease of $3.1 million, in advisory fee income from the Scout Funds recorded in trust and securities processing income and a $1.2 million decrease in bankcard fees driven by higher retail and commercial card program rewards and rebates expense.
         
Summary of Noninterest expense                 UMB Financial Corporation
(unaudited, dollars in thousands)
Q4 Q3 Q4 CQ vs. CQ vs.
2016     2016     2015     LQ     PY
 
Salaries and employee benefits $ 107,538 $ 109,369 $ 103,617 $ (1,831 ) $ 3,921
Occupancy, net 11,421 11,394 11,791 27 (370 )
Equipment 17,726 16,231 16,723 1,495 1,003
Supplies and services 4,788 4,624 4,280 164 508
Marketing and business development 6,256 5,332 6,816 924 (560 )
Processing fees 11,045 11,264 13,096 (219 ) (2,051 )
Legal and consulting 7,056 4,450 7,447 2,606 (391 )
Bankcard 4,558 5,015 5,301 (457 ) (743 )
Amortization of other intangible assets 2,928 2,992 3,283 (64 ) (355 )
Regulatory fees 3,687 3,370 3,320 317 367
Other 9,321     5,742     6,406 3,579       2,915  
Total noninterest expense $ 186,324   $ 179,783   $ 182,080   $ 6,541     $ 4,244  
 

Noninterest expense

  • On a non-GAAP basis, operating noninterest expense, which excludes the impact of acquisition expenses and other items as reconciled later in this release, was $182.6 million for the fourth quarter 2016, an increase of $4.5 million, or 2.5 percent, compared to the linked quarter, and $7.7 million, or 4.4 percent, compared to the fourth quarter 2015.
  • On a linked quarter GAAP basis, the $6.5 million, or 3.6 percent, increase in noninterest expense was driven by:
    • a $2.7 million non-recurring fee paid for marketing agent termination costs within the company’s institutional investment management business and $0.7 million in operational losses within the bank segment, both of which were recorded in other noninterest expense;
    • higher legal and consulting expenses driven by technology-related consulting services and year-end billings from professional services firms;
    • higher equipment expense for computer and hardware costs related to investments for regulatory requirements, cyber security, and the ongoing modernization of the company’s core systems;
    • an increase in $0.9 million of bonus and commission expense driven, in part, by higher one- and three-year performance-related incentives in the company’s institutional management business; and
    • partially offset by a $2.7 million decrease in salaries and employee benefits expense due to lower employee headcount and decreased benefits expense.
  • The increase in noninterest expense of $4.2 million, or 2.3 percent, compared to the fourth quarter 2015 was primarily driven by:
    • a $2.7 million non-recurring fee paid for marketing agent termination costs within the company’s institutional investment management business recorded in other noninterest expense;
    • increased bonus and commission expense due to improved company performance;
    • higher equipment expense for computer and hardware costs related to investments for regulatory requirements, cyber security, and the ongoing modernization of the company’s core systems; and
    • partially offset by decreased processing fees paid to distributors of the Scout Funds.

Income Taxes

  • The company’s full year effective tax rate as of Dec. 31, 2016 decreased to 23.3 percent, as compared to 27.1 percent for full year Dec. 31, 2015. The decrease is primarily attributable to an increase in federal tax credits and a larger portion of income earned from excludable life insurance policy gains.

Balance Sheet

  • Average total assets for the fourth quarter 2016 were $19.9 billion compared to $18.8 billion for the same period in 2015, an increase of $1.2 billion, or 6.2 percent.
       
Summary of average loans and leases                     UMB Financial Corporation
(unaudited, dollars in thousands)
Q4 Q3 Q4 CQ vs. CQ vs.
2016     2016     2015     LQ   PY
 
Averages:
Commercial $ 4,369,173 $ 4,441,790 $ 4,101,204 $ (72,617 ) $ 267,969
Asset based loans 231,035 228,310 228,709 2,725 2,326
Factoring loans 110,866 101,731 93,535 9,135 17,331
Commercial credit card 150,630 166,617 125,361 (15,987 ) 25,269
Real estate - construction 674,367 591,584 393,251 82,783 281,116
Real estate - commercial 3,089,946 2,976,666 2,573,135 113,280 516,811
Real estate - residential 553,770 505,721 478,653 48,049 75,117
Real estate - HELOC 713,528 735,527 725,640 (21,999 ) (12,112 )
Consumer credit card 271,909 262,937 303,887 8,972 (31,978 )
Consumer other 146,779 137,949 135,378 8,830 11,401
Leases 34,020     32,987     41,208     1,033     (7,188 )
Total loans $ 10,346,023   $ 10,181,819   $ 9,199,961   $ 164,204   $ 1,146,062  
 
  • Average loans for the fourth quarter 2016, increased 1.6 percent, on a linked-quarter basis, and 12.5 percent, compared to fourth quarter 2015.
       
Summary of average securities                     UMB Financial Corporation
(unaudited, dollars in thousands)  
Q4 Q3 Q4 CQ vs. CQ vs.
2016     2016     2015     LQ     PY
 
Securities available for sale:
U.S. Treasury $ 182,891 $ 340,144 $ 351,191 $ (157,253 ) $ (168,300 )
U.S. Agencies 248,329 369,022 682,418 (120,693 ) (434,089 )
Mortgage-backed 3,586,040 3,512,905 3,444,351 73,135 141,689
State and political subdivisions 2,362,178 2,314,875 2,117,875 47,303 244,303
Corporates 67,100     77,645     80,316     (10,545 )     (13,216 )
Total securities available for sale 6,446,538 6,614,591 6,676,151 (168,053 ) (229,613 )
Securities held to maturity:
State and political subdivisions 1,073,509 927,875 631,127 145,634 442,382
Trading securities 50,925 51,280 27,439 (355 ) 23,486
Other securities 66,567     65,986     66,954     581       (387 )
Total securities $ 7,637,539   $ 7,659,732   $ 7,401,671   $ (22,193 )   $ 235,868  
 
  • The growth in the company’s held to maturity securities portfolio is attributed to increased activity in private placement bonds, primarily used to refinance existing revenue bonds in the healthcare and education sectors.
         
Summary of average deposits                     UMB Financial Corporation
(unaudited, dollars in thousands)
Q4 Q3 Q4 CQ vs. CQ vs.
2016     2016     2015     LQ     PY
 
Deposits:
Noninterest-bearing demand

$

6,193,787 $ 5,690,838 $ 6,734,309 $ 502,949 $ (540,522 )
Interest-bearing demand and savings 8,439,920 8,276,491 7,285,061 163,429 1,154,859
Time deposits 1,112,781       1,154,762       1,243,147       (41,981 )     (130,366 )
Total deposits $

15,746,488

    $ 15,122,091       15,262,517       624,397     $ 483,971  
 
Non-interest bearing deposits as % of total 39.3 % 37.6 % 44.1 %
 
  • The cost of interest-bearing liabilities for the fourth quarter 2016 was 26 basis points, and total cost of funds including noninterest-bearing deposits was 13 basis points.

Full Year 2016 Financial Discussion

      
 
Year-to-date results summary           UMB Financial Corporation
(unaudited, dollars in thousands)
CY vs.
As of and for the years-ended December 31, 2016     2015     PY

Earnings - GAAP

Net interest income $ 495,323 $ 412,067 $ 83,256
Noninterest income 476,075 466,454 9,621
Noninterest expense 731,894 703,736 28,158
Net income 158,801 116,073 42,728
 

Average Balances

Loans $ 9,992,874 $ 8,425,107 $ 1,567,767
Total earnings assets 18,256,621 16,496,213 1,760,408
Total assets 19,592,685 17,786,442 1,806,243
Deposits 15,338,741 14,078,290 1,260,451
Total equity 1,983,749 1,805,856 177,893
 
  • The 20.2 percent year-over-year increase in net interest income was driven by a volume variance of $63.0 million and a rate variance of $20.2 million. In 2016, average loan balances increased $1.6 billion and average loan yields increased 21 basis points.
  • Full year noninterest income increased $9.6 million, or 2.1 percent, due to:
    • a $14.9 million increase in equity earnings on alternative investments from improvements in the valuation of the underlying PCM fund investments;
    • a $7.8 million increase in bank-owned and company-owned life insurance income recorded in other noninterest income;
    • a $5.3 million increase in 12b-1 income recorded in brokerage fees; and
    • partially offset by a decrease in trust and securities processing income primarily due to a $22.9 million, or 40.9 percent, decrease in advisory fee income from the Scout Funds.
  • Full year noninterest expense increased 28.2 million, or 4.0 percent, primarily due to increases in bonus and commission expense of $11.4 million, salary expense of $9.1 million, and deferred compensation plan fair-value adjustments of $5.1 million.
  • On a non-GAAP basis, operating noninterest expense, which excludes the impact of acquisition expenses and other items as reconciled later in this release, was $719.9 million for full-year 2016, an increase of $27.6 million, or 4.0 percent, compared to the full-year 2015.
     
Capital information       UMB Financial Corporation
(unaudited, dollars in thousands, except per share data)
December 31, September 30, December 31,
2016   2016   2015
 
Total equity $ 1,962,384 $

2,024,628

$

1,893,694

Book value per common share 39.51 40.86 38.34
 
Regulatory capital:
Common equity Tier 1 capital $ 1,789,581

$

1,749,738

$

1,664,815
Tier 1 capital 1,789,581 1,749,738 1,681,222
Total capital 1,951,078 1,909,583 1,814,705
 
Regulatory capital ratios:
Common equity Tier 1 capital ratio

11.76

%

11.75

%

11.74 %
Tier 1 risk-based capital ratio 11.76 11.75 11.86
Total risk-based capital ratio 12.82 12.82 12.80
Tier 1 leverage ratio 9.09 8.99 9.08
 
Credit quality             UMB Financial Corporation
(unaudited, dollars in thousands)          
Q4 Q3 Q2 Q1 Q4
2016   2016   2016   2016   2015
 
Net charge-offs (recoveries) - Commercial loans $ 1,127 $ 5,538 $ (59 ) $ 2,586 $ 178
Net charge-offs (recoveries) - Real estate loans 3,373 (67 ) 1,164 1,301 (50 )
Net charge-offs - Consumer credit card loans 1,692 1,658 1,575 1,781 1,628
Net charge-offs - Consumer other loans   63       133       52       77       130  
Net charge-offs - Total loans $ 6,255 $ 7,262 $ 2,732 $ 5,745 $ 1,886
Net loan charge-offs as a % of total average loans

0.24

%

0.28

%

0.11

%

0.24

%

0.08

%

Loans over 90 days past due

$

3,365

$

2,678

$

4,700

$

3,334

$

7,324
Loans over 90 days past due as a % of total loans

0.03

%

0.03

%

0.05

%

0.03

%

0.08

%

Nonaccrual and restructured loans

$

70,259

$

79,607

$

58,423

$

54,933

$

61,152
Nonaccrual and restructured loans as a % of total loans

0.67

%

0.77

%

0.58

%

0.57

%

0.65

%

Provision for loan losses $ 7,500

$

13,000

$

7,000

$

5,000

$ 5,000
 
  • Nonperforming loans, defined as restructured loans on nonaccrual and all other nonaccrual loans, decreased $9.4 million from the linked quarter driven primarily due to the sale of one large commercial credit that migrated to nonperforming status last quarter.

Dividend Declaration

At the company’s quarterly board meeting, the Board of Directors declared a $0.255 per share quarterly cash dividend, payable on April 3, 2017, to shareholders of record at the close of business on March 10, 2017.

Conference Call

The company plans to host a conference call to discuss its fourth quarter and year-end 2016 earnings results on Wednesday, Jan. 25, 2017, at 8:30 a.m. (CT).

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

UMB Financial 4Q & Year-End 2016 Conference Call

A replay of the conference call may be heard through Feb. 8, 2017, by calling (toll-free) 877-344-7529 or (U.S.) 412-317-0088. The replay pass code required for playback is 10098797. The call replay may also be accessed via the company's website umbfinancial.com by visiting the investor relations area.

Non-GAAP Financial Information

In this release, we provide information about net operating income, operating earnings per share - diluted (operating EPS), operating return on average equity (operating ROE), operating return on average assets (operating ROA), operating noninterest expense, 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 (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 fair value adjustments, acquisition- and severance-related items and one-time marketing agent termination costs that management does not believe reflect the company’s fundamental operating performance.

Net operating income for the relevant period is defined as GAAP net income, adjusted to reflect the impact of excluding the following: (i) fair value adjustments on contingent consideration for the acquisitions of Prairie Capital Management, LLC (PCM) and Reams Asset Management Company (Reams), (ii) expenses related to acquisitions (iii) non-acquisition related severance expense (iv) expenses related to the buy-out and termination of certain marketing and referral agreements in the company’s institutional investment management business, and (v) the tax impact of the previous adjustments. The company believes that the financial impact of excluding non-acquisition related severance expense will be immaterial in the near future. It is excluded from certain GAAP financial measures as it has an unusually large impact on the company’s financial statements.

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

Forward-Looking Statements:

This release contains, and our other communications may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts—such as our statements about expected cost savings and other results of efficiency initiatives and our statements about reduced regulation, tax reform and our ability to capitalize on changes. 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, 2015, our subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K, or other applicable documents that are filed or furnished with the U.S. Securities and Exchange Commission (SEC). Any forward-looking statement made by us or on our behalf speaks only as of the date that it was made. We do not undertake to update any forward-looking statement to reflect the impact of events, circumstances, or results that arise after the date that the statement was made. You, however, should consult further disclosures (including disclosures of a forward-looking nature) that we may make in any subsequent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K, or other applicable document that is filed or furnished with the SEC.

About UMB:

UMB Financial Corporation (Nasdaq: UMBF) is a diversified financial holding company headquartered in Kansas City, Mo., offering complete banking services, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas, as well as two national specialty-lending businesses. Subsidiaries of the holding company include companies that offer services to mutual funds and alternative-investment entities and registered investment advisors that offer equity and fixed income strategies to institutions and individual investors. For more information, visit umb.com, umbfinancial.com, blog.umb.com or follow us on Twitter at @UMBBank, Facebook at facebook.com/UMBBank and LinkedIn at linkedin.com/company/umb-bank.

   
Consolidated Balance Sheets       UMB Financial Corporation
(dollars in thousands)    
December 31,

Assets

   2016       2015
(unaudited) (audited)
Loans $ 10,540,383 $ 9,430,761
Allowance for loan losses   (91,649 )       (81,143 )
Net loans   10,448,734         9,349,618  
Loans held for sale 5,279 589
Investment securities:
Available for sale 6,466,334 6,806,949
Held to maturity 1,115,932 667,106
Trading securities 39,536 29,617
Other securities   68,306         65,198  
Total investment securities   7,690,108         7,568,870  
Federal funds and resell agreements 324,327 173,627
Interest-bearing due from banks 715,823 522,877
Cash and due from banks 422,117 458,217
Premises and equipment, net 289,007 281,471
Accrued income 99,045 90,127
Goodwill 228,396 228,346
Other intangibles, net 34,491 46,782
Other assets   425,205         373,721  
Total assets $ 20,682,532       $ 19,094,245  
 
 

Liabilities

Deposits:
Noninterest-bearing demand $ 6,654,584 $ 6,306,895
Interest-bearing demand and savings 8,780,309 7,529,972
Time deposits under $250,000 613,589 771,973
Time deposits of $250,000 or more   522,132         483,912  
Total deposits   16,570,614         15,092,752  
Federal funds and repurchase agreements 1,856,937 1,818,062
Short-term debt - 5,009
Long-term debt 76,772 86,070
Accrued expenses and taxes 172,967 161,245
Other liabilities   42,858         37,413  
Total liabilities   18,720,148         17,200,551  
 

Shareholders' Equity

Common stock 55,057 55,057
Capital surplus 1,033,419 1,019,889
Retained earnings 1,142,887 1,033,990
Accumulated other comprehensive loss, net (57,542 ) (3,718 )
Treasury stock   (211,437 )       (211,524 )
Total shareholders' equity   1,962,384         1,893,694  
Total liabilities and shareholders' equity $ 20,682,532       $ 19,094,245  
 
           
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,

Interest Income

   2016       2015       2016     2015
(unaudited) (unaudited) (unaudited) (audited)
Loans $ 102,961 $ 88,011 $ 386,274 $ 308,325
Securities:
Taxable interest 18,339 18,858 73,560 75,327
Tax-exempt interest 16,139       11,756         57,516       43,598  
Total securities income 34,478 30,614 131,076 118,925
Federal funds and resell agreements 769 320 2,708 697
Interest-bearing due from banks 569 595 2,341 2,356
Trading securities 233       75         632       378  
Total interest income 139,010       119,615         523,031       430,681  
 

Interest Expense

Deposits 5,119 3,836 17,936 14,269
Federal funds and repurchase agreements 1,774 396 6,524 1,785
Other 661       929         3,248       2,560  
Total interest expense 7,554       5,161         27,708       18,614  
Net interest income 131,456 114,454 495,323 412,067
Provision for loan losses 7,500       5,000         32,500       15,500  
Net interest income after provision for loan losses 123,956       109,454         462,823       396,567  
 

Noninterest Income

Trust and securities processing 60,431 62,194 239,879 262,056
Trading and investment banking 5,040 5,559 21,422 20,218
Service charges on deposits 20,949 21,631 86,662 86,460
Insurance fees and commissions 833 894 4,188 2,530
Brokerage fees 4,674 3,005 17,833 11,753
Bankcard fees 16,113 17,369 68,749 69,211
Gains on sale of securities available for sale, net - 1,998 8,509 10,402
Equity earnings (loss) on alternative investments 504 (5,189 ) 2,695 (12,188 )
Other 7,786       5,138         26,138       16,012  
Total noninterest income 116,330       112,599         476,075       466,454  
 

Noninterest Expense

Salaries and employee benefits 107,538 103,617 432,754 406,472
Occupancy, net 11,421 11,791 44,926 43,861
Equipment 17,726 16,723 67,271 63,533
Supplies, postage and telephone 4,788 4,280 19,080 18,579
Marketing and business development 6,256 6,816 22,342 23,730
Processing fees 11,045 13,096 45,235 51,328
Legal and consulting 7,056 7,447 21,242 26,390
Bankcard 4,558 5,301 20,757 20,288
Amortization of other intangibles 2,928 3,283 12,291 12,090
Regulatory fees 3,687 3,320 14,178 12,125
Other 9,321       6,406         31,818       25,340  
Total noninterest expense 186,324 182,080 731,894 703,736
Income before income taxes 53,962 39,973 207,004 159,285
Income tax provision 11,028       10,330         48,203       43,212  
Net income $ 42,934     $ 29,643       $ 158,801     $ 116,073  
 

Per Share Data

Net income - basic $ 0.88 $ 0.61 $ 3.25 $ 2.46
Net income – diluted 0.87 0.60 3.22 2.44
Dividends 0.255 0.245 0.990 0.950
 
Weighted average shares outstanding 48,935,216 48,630,195 48,828,313 47,126,252
Weighted average shares outstanding – diluted 49,616,121 49,066,566 49,277,055 47,579,334
 
   
Consolidated Statements of Comprehensive (Loss) Income     UMB Financial Corporation
(dollars in thousands)          

Three Months Ended
December 31,

Year Ended
December 31,

2016     2015     2016   2015
(unaudited)     (unaudited) (unaudited) (audited)
Net Income $ 42,934 $ 29,643 $ 158,801 $ 116,073
Other comprehensive loss, net of tax:
Unrealized gains (losses) on securities:
Change in unrealized holding losses, net (168,433 ) (46,682 ) (77,794 ) (13,393 )
Less: Reclassifications adjustment for gains included in net income   -         (1,998 )       (8,509 )     (10,402 )
Change in unrealized losses on securities during the period (168,433 ) (48,680 ) (86,303 ) (23,795 )
Change in unrealized gains (losses) on derivatives   7,161         (10 )       (516 )     (10 )
Income tax benefit   61,218         18,442         32,995       9,081  
Other comprehensive loss   (100,054 )       (30,248 )       (53,824 )     (14,724 )
Comprehensive (loss) income $ (57,120 )     $ (605 )     $ 104,977     $ 101,349  
 
       
Consolidated Statements of Shareholders' Equity                 UMB Financial Corporation
(dollars in thousands, except per share data)        
      Accumulated
Other
Common Capital Retained Comprehensive Treasury
(audited)   Stock       Surplus       Earnings         Income (Loss)         Stock       Total
Balance - January 1, 2015 $ 55,057 $ 894,602 $ 963,911 $ 11,006 $ (280,818 ) $ 1,643,758
Total comprehensive income - - 116,073 (14,724 ) - 101,349
Cash dividends ($0.95 per share) - - (45,994 ) - - (45,994 )
Purchase of treasury stock - - - - (8,457 ) (8,457 )
Issuance of equity awards - (3,278 )

-

-

3,737 459
Recognition of equity based compensation - 10,292 - - - 10,292
Net tax benefit related to equity compensation plans - 944 - - - 944
Sale of treasury stock - 611 - - 445 1,056
Exercise of stock options - 4,083 - - 6,467 10,550
Common stock issuance   -       112,635         -         -         67,102         179,737  
Balance – December 31, 2015 $ 55,057     $ 1,019,889       $ 1,033,990       $ (3,718 )     $ (211,524 )     $ 1,893,694  
 
(unaudited)
Balance - January 1, 2016 $ 55,057 $ 1,019,889 $ 1,033,990 $ (3,718 ) $ (211,524 ) $ 1,893,694
Total comprehensive income - - 158,801 (53,824 ) - 104,977
Cash dividends ($0.99 per share) - - (49,048 ) - - (49,048 )
Purchase of treasury stock - - - - (16,367 ) (16,367 )
Issuance of equity awards - (3,011 ) - - 3,440 429
Recognition of equity based compensation - 11,306 - - - 11,306
Sale of treasury stock - 480 - - 616 1,096
Exercise of stock options - 3,417 - - 12,398 15,815
Cumulative effect adjustment   -       1,338         (856 )       -         -         482  
Balance – December 31, 2016 $ 55,057     $ 1,033,419       $ 1,142,887       $ (57,542 )     $ (211,437 )     $ 1,962,384  
 
       
Average Balances / Yields and Rates               UMB Financial Corporation
(tax - equivalent basis)        
(unaudited, dollars in thousands) Three Months Ended December 31,
  2016       2015
Average Average Average Average

Assets

   Balance     Yield/Rate         Balance     Yield/Rate  
Loans, net of unearned interest $ 10,346,023 3.96 % $ 9,199,961 3.80 %
Securities:
Taxable 4,232,002 1.72 4,704,102 1.59
Tax-exempt 3,354,612       2.94 2,670,130       2.71
Total securities 7,586,614 2.26 7,374,232 2.00
Federal funds and resell agreements 208,581 1.47 117,005 1.09
Interest-bearing due from banks 365,512 0.62 662,036 0.36
Trading securities 50,925       2.18 27,439       1.29
Total earning assets 18,557,655 3.17 17,380,673 2.88
Allowance for loan losses (91,833 ) (78,906 )
Other assets   1,454,616     1,453,790  
Total assets $ 19,920,438   $ 18,755,557  
 
 

Liabilities and Shareholders' Equity

Interest-bearing deposits $ 9,552,701 0.21 % $ 8,528,207 0.18 %
Federal funds and repurchase agreements 1,899,196 0.37 1,305,939 0.12
Borrowed funds 76,831       3.42 88,862       4.15
Total interest-bearing liabilities 11,528,728 0.26 9,923,008 0.21
Noninterest-bearing demand deposits 6,193,787 6,734,309
Other liabilities 206,576 185,586
Shareholders' equity   1,991,347     1,912,654  
Total liabilities and shareholders' equity $ 19,920,438   $ 18,755,557  
Net interest spread 2.91

%

2.67 %

Net interest margin

3.00

%

2.76

%

 
         
Average Balances / Yields and Rates               UMB Financial Corporation
(tax - equivalent basis)      
(unaudited, dollars in thousands) Year Ended December 31,
  2016       2015
Average     Average Average     Average

Assets

   Balance     Yield/Rate         Balance     Yield/Rate  
Loans, net of unearned interest $ 9,992,874 3.87 % $ 8,425,107 3.66 %
Securities:
Taxable 4,545,013 1.62 4,823,710 1.56
Tax-exempt 3,077,562       2.87 2,473,811       2.72
Total securities 7,622,575 2.12 7,297,521 1.95
Federal funds and resell agreements 188,572 1.44 76,108 0.92
Interest-bearing due from banks 410,163 0.57 664,752 0.35
Trading securities 42,437       1.85 32,725       1.46
Total earning assets 18,256,621 3.03 16,496,213 2.75
Allowance for loan losses (85,201 ) (77,899 )
Other assets   1,421,265     1,368,128  
Total assets $ 19,592,685   $ 17,786,442  
 
 

Liabilities and Shareholders' Equity

Interest-bearing deposits $ 9,432,720 0.19 % $ 8,150,588 0.18 %
Federal funds and repurchase agreements 2,005,631 0.33 1,590,776 0.11
Borrowed funds 85,658       3.79 59,174       4.33
Total interest-bearing liabilities 11,524,009 0.24 9,800,538 0.19
Noninterest-bearing demand deposits 5,906,021 5,927,702
Other liabilities 178,906 252,346
Shareholders' equity   1,983,749     1,805,856  
Total liabilities and shareholders' equity $ 19,592,685   $ 17,786,442  
Net interest spread 2.79 % 2.56 %
Net interest margin 2.88 2.64
 
 
Business Segment Information UMB Financial Corporation
(unaudited, dollars in thousands)
    Three Months Ended December 31, 2016
Bank    

Institutional
Investment
Management

     Asset Servicing     Total
Net interest income $ 128,869     $ -     $ 2,587     $ 131,456
Provision for loan losses 7,500 - - 7,500
Noninterest income 75,393 18,858 22,079 116,330
Noninterest expense   145,959       20,448       19,917       186,324
Income (loss) before taxes 50,803 (1,590) 4,749 53,962
Income tax expense (benefit)   10,145       (102)       985       11,028
Net income (loss) $ 40,658     $ (1,488)     $ 3,764     $ 42,934
 
Average assets $ 18,821,000 $ 60,000 $ 1,039,000 $ 19,920,000
 
 
Three Months Ended December 31, 2015
Bank    

Institutional
Investment
Management

     Asset Servicing     Total
Net interest income $ 112,647 $ - $ 1,807 $ 114,454
Provision for loan losses 5,000 - - 5,000
Noninterest income 69,202 20,882 22,515 112,599
Noninterest expense   144,525       18,690       18,865       182,080
Income before taxes 32,324 2,192 5,457 39,973
Income tax expense   8,346       573       1,411       10,330
Net income $ 23,978     $ 1,619     $ 4,046     $ 29,643
 
Average assets $ 17,660,000 $ 65,000 $ 1,031,000 $ 18,756,000
 
   
Year Ended December 31, 2016
Bank    

Institutional
Investment
Management

     Asset Servicing     Total
Net interest income $ 484,716     $ -     $ 10,607     $ 495,323
Provision for loan losses 32,500 - - 32,500
Noninterest income 311,309 75,822 88,944 476,075
Noninterest expense   577,683       73,442       80,769       731,894
Income before taxes 185,842 2,380 18,782 207,004
Income tax expense   43,039       798       4,366       48,203
Net income $ 142,803     $ 1,582     $ 14,416     $ 158,801
 
Average assets $ 18,314,000 $ 61,000 $ 1,218,000 $ 19,593,000
 
 
Year Ended December 31, 2015
Bank    

Institutional
Investment
Management

     Asset Servicing     Total
Net interest income $ 406,884 $ - $ 5,183 $ 412,067
Provision for loan losses 15,500 - - 15,500
Noninterest income 279,897 95,064 91,493 466,454
Noninterest expense   552,514       71,498       79,724       703,736
Income before taxes 118,767 23,566 16,952 159,285
Income tax expense   32,208       6,469       4,535       43,212
Net income $ 86,559     $ 17,097     $ 12,417     $ 116,073
 
Average assets $ 16,732,000 $ 69,000 $ 985,000 $ 17,786,000
 
 
Non-GAAP Financial Measures       UMB Financial Corporation
Net operating income and operating earnings per share non-GAAP reconciliations:  
(unaudited, dollars in thousands, except share and per share data)
     
Three Months Ended Year Ended
December 31, December 31,
  2016     2015     2016     2015  
Net income (GAAP) $ 42,934 $ 29,643 $ 158,801 $ 116,073
Adjustments:
Fair value adjustments on contingent consideration (i) - 469 67 (3,008)
Acquisition expenses (ii) 547 3,427 5,020 9,833
Non-acquisition severance expense (iii) 415 3,278 4,177 4,561
Marketing agent termination costs (iv) 2,725 - 2,725 -
Tax-impact of adjustments (v)   (1,327)     (2,583)     (4,316)     (4,099)  
Total Non-GAAP adjustments (net of tax)   2,360     4,591     7,673     7,287  
Net operating income (Non-GAAP) $ 45,294   $ 34,234   $ 166,474   $ 123,360  
 
Earnings per share as reported - diluted $ 0.87 $ 0.60 $ 3.22 $ 2.44
Fair value adjustments on contingent consideration (i) - 0.01 - (0.06)
Acquisition expenses (ii) 0.01 0.07 0.11 0.20
Non-acquisition severance expense (iii) 0.01 0.07 0.08 0.10
Marketing agent termination costs (iv) 0.05 - 0.06 -
Tax-impact of adjustments (v)   (0.03)     (0.05)     (0.09)     (0.09)  
Operating earnings per share - diluted $ 0.91   $ 0.70   $ 3.38   $ 2.59  
 

GAAP

Return on average assets 0.86 % 0.63 % 0.81 % 0.65 %
Return on average equity 8.58 6.15 8.01 6.43
 

Non-GAAP

Operating return on average assets 0.90 % 0.72 % 0.85 % 0.69 %
Operating return on average equity 9.05 7.10 8.39 6.83
 
 
Operating noninterest expense and operating efficiency ratio non-GAAP reconciliations:     UMB Financial Corporation  
(unaudited, dollars in thousands except share and per share data)      
Three Months Ended Year Ended
December 31,     December 31,
  2016     2015     2016     2015  
Noninterest expense $ 186,324   $ 182,080 $ 731,894 $ 703,736
Adjustments to arrive at operating noninterest expense (pre-tax):
Fair value adjustments on contingent consideration (i) - 469 67 (3,008)
Acquisition expenses (ii) 547 3,427 5,020 9,833
Non-acquisition severance expense (iii) 415 3,278 4,177 4,561
Marketing agent termination costs (iv)   2,725     -     2,725     -  
Total Non-GAAP adjustments (pre-tax)   3,687     7,174     11,989     11,386  
Operating noninterest expense $ 182,637   $ 174,906   $ 719,905   $ 692,350  
 
Noninterest expense $ 186,324 $ 182,080 $ 731,894 $ 703,736
Less: Amortization of other intangibles   2,928     3,283     12,291     12,090  
Noninterest expense, net of amortization of other intangibles (numerator A) $ 183,396   $ 178,797   $ 719,603   $ 691,646  
 
Operating noninterest expense $ 182,637 $ 174,906 $ 719,905 $ 692,350
Less: Amortization of other intangibles   2,928     3,283     12,291     12,090  
Operating expense, net of amortization of other intangibles (numerator B) $ 179,709   $ 171,623   $ 707,614   $ 680,260  
 
Net interest income (tax equivalent) (vi) $ 140,147 $ 120,966 $ 526,337 $ 435,852
Noninterest income 116,330 112,599 476,075 466,454
Less: Gains on sales of securities available for sale, net   -     1,998     8,509     10,402  
Total (denominator A) $ 256,477   $ 231,567   $ 993,903   $ 891,904  
 
Efficiency ratio (numerator A/denominator A) 71.51 % 77.21 % 72.40 % 77.55 %
Operating efficiency ratio (numerator B/denominator A) 70.07 74.11 71.20 76.27
(i) Represents fair value adjustments to contingent consideration for the acquisitions of PCM and Reams.
(ii) Represents expenses related to the acquisition of Marquette.
(iii) Represents non-acquisition severance expense related to UMB-legacy employees as management excludes severance expense from its internal evaluation of company performance. Severance expense for Marquette-legacy employees is included in item (ii).
(iv) Represents expenses related to the buy-out and termination of certain marketing and referral agreements in the company’s institutional investment management business.
(v) Calculated using the company's marginal tax rate of 36%.
(vi) Tax-exempt interest income has been adjusted to a tax equivalent basis. The amount of such adjustment was an addition to net interest income of $8.7 million and $6.5 million for the three months ended December 31, 2016 and 2015, respectively and $31.0 million and $23.8 million for the year ended December 31, 2016 and 2015, respectively.