News Details

KANSAS CITY, Mo.--(BUSINESS WIRE)-- UMB Financial Corporation (Nasdaq: UMBF), a financial services company, announced income from continuing operations for the first quarter of 2019 of $57.7 million, or $1.18 per diluted share, compared to $25.5 million, or $0.52 per diluted share, in the fourth quarter 2018 (linked quarter) and $57.5 million, or $1.15 per diluted share, in the first quarter 2018. The reported GAAP income from continuing operations represents an increase of 126.9 percent on a linked-quarter basis and a 0.4 percent increase compared to the first 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 $58.2 million, or $1.19 per diluted share, for the first quarter 2019, compared to $27.6 million, or $0.56 per diluted share, for the linked quarter and $59.1 million, or $1.18 per diluted share, for the first quarter 2018. These results represent an increase of 111.1 percent on a linked-quarter basis and a decrease of 1.4 percent compared to first quarter 2018.

“2019 is off to a good start, and I’m pleased with the first quarter’s results,” said Mariner Kemper, chairman, president and chief executive officer. “We posted strong balance sheet growth, with average loan balances increasing 2.8 percent, or 11.2 percent on a linked-quarter annualized basis, and average deposits growing by 3.0 percent. Additionally, noninterest income represented 39.6 percent of our revenue for the quarter, and we saw positive trends in several of our lines of business.”

Discussion of results from continuing operations

Net interest income

• Net interest income totaled $163.9 million, an increase of $2.1 million, or 1.3 percent, from linked quarter levels, impacted by a $335.2 million, or 2.8 percent, increase in average loans and higher short-term interest rates.
• Earning asset yields improved seven basis points from the linked quarter, due to improved loan yields of seven basis points to 5.18 percent, in part driven by favorable re-pricing from higher short-term interest rates and improved yields in the securities portfolio. The cost of interest-bearing liabilities increased 13 basis points to 1.34 percent, driven by an increase of $348.4 million in federal funds and repurchase agreements, and a nine-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 9.0 percent, or $1.0 billion, increase in average loans, as well as higher average loan yields, which increased 65 basis points compared to 2018, primarily driven by higher short-term interest rates, volume and asset mix changes.
• For the first quarter 2019, average earning assets stood at $21.5 billion, an increase of 10.4 percent over the first quarter 2018.

Noninterest income

• First quarter 2019 noninterest income increased $12.4 million, or 13.0 percent, on a linked quarter basis, largely due to:
  • Increases of $9.4 million and $2.0 million in company-owned life insurance income and derivative income, respectively, both of which are recorded in other income. These increases were partially offset by decreases of $2.6 million in gains on sales of assets and $0.9 million in loss recoveries, as compared to the fourth quarter 2018.
  • An increase of $2.5 million in trading and investment banking due to increased trading volume and increased market values of trading assets held.
  • An increase of $0.7 million in bankcard fees due to a decrease of $0.9 million in rebates expense recorded as contra-revenues.
  • An increase of $0.8 million in gains on sales of available-for-sale securities.
• Compared to the prior year, noninterest income in the first quarter of 2019 increased $1.9 million, or 1.8 percent, primarily driven by:
  • Increases of $3.1 million and $1.1 million in company-owned life insurance and derivative income, respectively, both of which are recorded in other income. These increases were partially offset by a decrease of $1.8 million in equity earnings on alternative investments.
  • A $1.5 million increase in trading and investment banking income due to increased trading volume.
  • A $0.8 million increase in money market revenue recorded in brokerage fees.
  • These increases were offset by a decrease of $2.5 million in fund servicing revenue due to previously announced customer repricing and losses, which was partially offset by an increase of $1.2 million in corporate trust income, both recorded in trust and securities processing.
  • A $1.1 million decrease in bankcard fees primarily driven by an increase of $0.4 million in rewards expense recorded as contra-revenues, coupled with a decrease of $0.4 million in interchange income.

Noninterest expense

• GAAP noninterest expense for the first quarter of 2019 was $190.6 million, an increase of $6.3 million, or 3.4 percent, from the linked quarter and an increase of $14.8 million, or 8.4 percent, from the first quarter of 2018.
• On a non-GAAP basis, operating noninterest expense (as reconciled later in this release) was $190.0 million for the first quarter 2019, an increase of $8.4 million, or 4.6 percent, compared to the linked quarter and an increase of $16.1 million, or 9.3 percent, compared to the first quarter 2018.
• The linked quarter increase in noninterest expense was driven by:
  • A $12.0 million increase in salaries and employee benefits, largely due to increased deferred compensation expense of $9.9 million and higher payroll taxes and 401(k) expense recognized in the first quarter of 2019.
  • A $0.7 million increase in equipment expense driven by higher software expense in the first quarter of 2019.
  • These increases were partially offset by decreases of $5.5 million in legal and consulting expense and $1.6 million in marketing and business development expense due to the timing of multiple projects.
• The year-over-year increase in noninterest expense was driven by:
  • An $8.1 million increase in salaries and employee benefits, largely due to increased deferred compensation expense of $3.3 million, and increases of $1.8 million in bonus and incentives expense and $1.7 million in salaries and wages expense.
  • An increase in other noninterest expense of $2.8 million primarily driven by an operational loss of $1.5 million and an increase of $1.2 million in derivative expense.
  • A $1.8 million increase in legal and consulting expense and an increase of $1.0 million in processing fees expense due to investments in digital channel and integrated platform solutions to support business growth and the continued ongoing modernization of the company’s core systems.
  • An increase of $0.9 million in equipment expense primarily driven by higher equipment maintenance and software expense in the first quarter of 2019.

Income taxes

• The company’s effective tax rate was 15.4 percent for the quarter ended March 31, 2019, compared to 14.9 percent for the same period in 2018. This increase was primarily a result of a decrease in excess tax benefits associated with stock compensation recorded in the first quarter of 2019 as compared to the same period in 2018.

Balance sheet

• Average total assets for the first quarter 2019 were $22.9 billion compared to $21.9 billion for the linked quarter and $20.7 billion for the same period in 2018.

• Average loans for the first quarter 2019 increased 2.8 percent on a linked-quarter basis and 9.0 percent compared to the first quarter of 2018.

• Average securities available for sale increased 8.6 percent on a linked-quarter basis and increased 8.2 percent compared to the first quarter of 2018.

• Average deposits increased 3.0 percent on a linked-quarter basis and 11.7 percent compared to the first quarter of 2018.

Capital

• At March 31, 2019, the regulatory capital ratios presented in the foregoing table exceeded all “well-capitalized” regulatory thresholds.

Asset Quality

• Nonperforming loans, defined as restructured loans on nonaccrual and all other nonaccrual loans, increased $20.3 million from the linked quarter and decreased $4.3 million from the prior year.
• Net charge-offs were $12.3 million, or 0.41 percent, of average loans, compared to $45.7 million, or 1.51 percent, of average loans in the linked quarter, and $10.3 million, or 0.37 percent, of average loans in the first quarter of 2018.
• Provision for loan losses decreased $35.7 million from the linked quarter, and increased $2.4 million from the first quarter of 2018. This decrease was driven by higher provision during the linked quarter to cover the loss related to a $48.1 million factoring credit relationship, as well as other qualitative factors, such as macroeconomic conditions, loan growth, loan impairment changes, loan risk grading changes and net charge-off levels.

Conference Call

The company plans to host a conference call to discuss its first quarter 2019 earnings results on Wednesday, April 24, 2019, 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 1Q 2019 Conference Call

A replay of the conference call may be heard through May 10, 2019 by calling (toll-free) 877-344-7529 or (international) 412-317-0088. The replay access code required for playback is 10130187. 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.

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 March 31, 2019.

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UMB Financial Corporation
Media Contact:
Kristin Kovach, 816.507.1069

Investor Relations Contact:
Kay Gregory, 816.860.7106

Source: UMB Financial Corporation