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 (Nasdaq: 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)
	Q2			Q1			Q2			CQ vs.			CQ vs.
	2019			2019			2018			LQ			PY
Deposits:
Noninterest-bearing demand	$	6,078,520		$	5,989,215		$	5,666,364		$	89,305		$	412,156
Interest-bearing demand and savings		11,740,634			11,698,351			9,768,015			42,283			1,972,619
Time deposits		966,719			1,034,763			1,032,000			(68,044	)		(65,281	)
Total deposits	$	18,785,873		$	18,722,329		$	16,466,379		$	63,544		$	2,319,494
Noninterest bearing deposits as % of total		32.36	%		31.99	%		34.41	%

• Average deposits increased 0.3 percent on a linked-quarter basis and 14.1 percent compared to the second quarter of 2018.

Capital

Capital information	UMB Financial Corporation
(unaudited, dollars in thousands, except per share data)
	June 30, 2019			March 31, 2019			June 30, 2018
Total equity	$	2,477,790		$	2,350,843		$	2,201,812
Book value per common share		50.50			47.92			43.96
Regulatory capital:
Common equity Tier 1 capital	$	2,236,930		$	2,188,521		$	2,145,617
Tier 1 capital		2,236,930			2,188,521			2,145,617
Total capital		2,411,510			2,364,465			2,315,483
Regulatory capital ratios:
Common equity Tier 1 capital ratio		12.65	%		12.70	%		13.56	%
Tier 1 risk-based capital ratio		12.65			12.70			13.56
Total risk-based capital ratio		13.63			13.72			14.63
Tier 1 leverage ratio		9.69			9.65			10.50

• At June 30, 2019, the regulatory capital ratios presented in the foregoing table exceeded all “well-capitalized” regulatory thresholds.

Asset Quality

Credit quality	UMB Financial Corporation
(unaudited, dollars in thousands)
	Q2			Q1			Q4			Q3			Q2
	2019			2019			2018			2018			2018
Net charge-offs - Commercial loans	$	11,790		$	10,537		$	44,010		$	624		$	6,137
Net (recoveries) charge-offs - Real estate loans		(714	)		41			28			408			1,035
Net charge-offs - Consumer credit card loans		1,336			1,676			1,606			1,632			1,786
Net charge-offs - Consumer other loans		157			70			23			82			46
Net charge-offs - Total loans		12,569			12,324			45,667			2,746			9,004
Net loan charge-offs as a % of total average loans		0.40	%		0.41	%		1.51	%		0.09	%		0.32	%
Loans over 90 days past due	$	1,825		$	1,874		$	6,009		$	1,927		$	2,883
Loans over 90 days past due as a % of total loans		0.01	%		0.01	%		0.05	%		0.02	%		0.02	%
Nonaccrual and restructured loans	$	53,395		$	63,270		$	43,018		$	50,568		$	56,030
Nonaccrual and restructured loans as a % of total loans		0.41	%		0.50	%		0.35	%		0.42	%		0.48	%
Provision for loan losses	$	11,000		$	12,350		$	48,000		$	5,750		$	7,000

• Nonperforming loans, defined as restructured loans on nonaccrual and all other nonaccrual loans, decreased $9.9 million from the linked quarter and decreased $2.6 million from the second quarter of 2018.
• Net charge-offs were $12.6 million, or 0.40 percent, of average loans, compared to $12.3 million, or 0.41 percent, of average loans in the linked quarter, and $9.0 million, or 0.32 percent, of average loans in the second quarter of 2018.
• Provision for loan losses decreased $1.4 million from the linked quarter, and increased $4.0 million from the second quarter of 2018, consistent with the company’s methodology, which considers the inherent risk in the loan portfolio, as well as other qualitative factors, such as macroeconomic conditions, loan growth, loan impairment changes, loan risk grading changes and net charge-off levels.

Dividend Declaration

At the company’s quarterly board meeting, the Board of Directors declared a $0.30 per share quarterly cash dividend, payable on October 1, 2019, to shareholders of record at the close of business on September 10, 2019.

Conference Call

The company plans to host a conference call to discuss its second quarter 2019 earnings results on Wednesday, July 31, 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 2Q 2019 Conference Call

A replay of the conference call may be heard through August 14, 2019 by calling (toll-free) 877-344-7529 or (international) 412-317-0088. The replay access code required for playback is 10133170. The call replay may also be accessed at investorrelations.umb.com.

Non-GAAP Financial Information

In this release, we provide information about net operating income from continuing operations (net operating income), operating earnings per share from continuing operations - diluted (operating EPS), operating return on average equity (operating ROE), operating return on average assets (operating ROA), operating noninterest expense, and operating efficiency ratio, all of which are non-GAAP financial measures. This information supplements the results that are reported according to generally accepted accounting principles in the United States (GAAP) and should not be viewed in isolation from, or as a substitute for, GAAP results. The differences between the non-GAAP financial measures – net operating income, operating EPS, operating ROE, operating ROA, operating noninterest expense, and operating efficiency ratio – and the nearest comparable GAAP financial measures are reconciled later in this release. The company believes that these non-GAAP financial measures and the reconciliations may be useful to investors because they adjust for acquisition-, divestiture-, and severance-related items that management does not believe reflect the company’s fundamental operating performance.

Net operating income for the relevant period is defined as GAAP net income, adjusted to reflect the impact of excluding expenses related to acquisitions and divestitures, severance expense, and the cumulative tax impact of these adjustments.

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

Forward-Looking Statements:

This press release contains, and our other communications may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “outlook,” “forecast,” “target,” “trend,” “plan,” “goal,” or other words of comparable meaning or future-tense or conditional verbs such as “may,” “will,” “should,” “would,” or “could.” Forward-looking statements convey our expectations, intentions, or forecasts about future events, circumstances, results, or aspirations. All forward-looking statements are subject to assumptions, risks, and uncertainties, which may change over time and many of which are beyond our control. You should not rely on any forward-looking statement as a prediction or guarantee about the future. Our actual future objectives, strategies, plans, prospects, performance, condition, or results may differ materially from those set forth in any forward-looking statement. Some of the factors that may cause actual results or other future events, circumstances, or aspirations to differ from those in forward-looking statements are described in our Annual Report on Form 10-K for the year ended December 31, 2018, our subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K, or other applicable documents that are filed or furnished with the U.S. Securities and Exchange Commission (SEC). Any forward-looking statement made by us or on our behalf speaks only as of the date that it was made. We do not undertake to update any forward-looking statement to reflect the impact of events, circumstances, or results that arise after the date that the statement was made, except to the extent required by applicable securities laws. You, however, should consult further disclosures (including disclosures of a forward-looking nature) that we may make in any subsequent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K, or other applicable document that is filed or furnished with the SEC.

About UMB:

UMB Financial Corporation (Nasdaq: UMBF) is a financial services company headquartered in Kansas City, Mo. UMB offers personal banking, commercial banking, healthcare services and institutional banking, which includes services to mutual funds and alternative-investment entities and registered investment advisors. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas. For more information, visit UMB.com, UMB Blog or follow us on Twitter at @UMBBank, UMB Facebook and UMB LinkedIn.

Consolidated Balance Sheets	UMB Financial Corporation
(unaudited, dollars in thousands)
	June 30,
	2019			2018
ASSETS
Loans	$	12,900,269		$	11,631,628
Allowance for loan losses		(102,092	)		(98,298	)
Net loans		12,798,177			11,533,330
Loans held for sale		2,771			3,482
Investment Securities:
Available for sale		7,176,351			6,011,684
Held to maturity		1,112,773			1,204,582
Trading securities		81,381			67,091
Other securities		89,302			66,547
Total investment securities		8,459,807			7,349,904
Federal funds sold and resell agreements		283,603			70,346
Interest-bearing due from banks		876,551			113,875
Cash and due from banks		422,648			379,433
Premises and equipment, net		278,725			274,408
Accrued income		124,396			100,133
Goodwill		180,867			180,867
Other intangibles, net		12,425			17,210
Other assets		576,306			508,482
Total assets	$	24,016,276		$	20,531,470
LIABILITIES
Deposits:
Noninterest-bearing demand	$	6,524,428		$	5,994,426
Interest-bearing demand and savings		11,870,782			9,471,698
Time deposits under $250,000		610,711			512,446
Time deposits of $250,000 or more		394,309			407,508
Total deposits		19,400,230			16,386,078
Federal funds purchased and repurchase agreements		1,708,884			1,666,158
Long-term debt		88,569			78,692
Accrued expenses and taxes		198,141			147,608
Other liabilities		142,662			51,122
Total liabilities		21,538,486			18,329,658
SHAREHOLDERS' EQUITY
Common stock		55,057			55,057
Capital surplus		1,065,301			1,050,660
Retained earnings		1,573,586			1,434,342
Accumulated other comprehensive income (loss), net		62,617			(128,959	)
Treasury stock		(278,771	)		(209,288	)
Total shareholders' equity		2,477,790			2,201,812
Total liabilities and shareholders' equity	$	24,016,276		$	20,531,470

Consolidated Statements of Income	UMB Financial Corporation
(unaudited, dollars in thousands except share and per share data)
	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2019			2018		2019			2018
INTEREST INCOME
Loans	$	161,838		$	135,150	$	319,099		$	261,284
Securities:
Taxable interest		26,700			20,523		52,091			40,303
Tax-exempt interest		21,988			18,290		42,685			36,993
Total securities income		48,688			38,813		94,776			77,296
Federal funds and resell agreements		2,526			752		6,151			1,790
Interest-bearing due from banks		2,768			1,056		6,667			2,636
Trading securities		842			709		1,276			1,139
Total interest income		216,662			176,480		427,969			344,145
INTEREST EXPENSE
Deposits		39,516			18,334		77,350			32,169
Federal funds and repurchase agreements		9,347			6,666		17,611			11,398
Other		1,385			1,254		2,726			2,430
Total interest expense		50,248			26,254		97,687			45,997
Net interest income		166,414			150,226		330,282			298,148
Provision for loan losses		11,000			7,000		23,350			17,000
Net interest income after provision for loan losses		155,414			143,226		306,932			281,148
NONINTEREST INCOME
Trust and securities processing		42,903			42,845		84,860			86,847
Trading and investment banking		5,453			4,653		11,034			8,754
Service charges on deposit accounts		20,747			20,722		42,028			42,627
Insurance fees and commissions		465			340		803			641
Brokerage fees		7,077			6,291		14,320			12,644
Bankcard fees		16,439			17,184		33,506			35,307
(Losses) gains on sales of securities available for sale, net		(1,403	)		228		(594	)		367
Other		13,717			8,026		26,823			18,627
Total noninterest income		105,398			100,289		212,780			205,814
NONINTEREST EXPENSE
Salaries and employee benefits		114,454			104,175		230,486			212,143
Occupancy, net		11,539			10,813		23,282			21,766
Equipment		18,824			18,842		38,508			37,668
Supplies and services		4,285			4,146		8,158			7,906
Marketing and business development		7,304			6,184		12,217			11,218
Processing fees		13,096			11,537		25,228			22,698
Legal and consulting		7,496			6,460		13,129			10,304
Bankcard		4,701			4,165		9,046			8,791
Amortization of other intangible assets		1,251			1,485		2,578			3,047
Regulatory fees		2,910			3,772		5,800			6,677
Other		7,527			5,639		15,581			10,876
Total noninterest expense		193,387			177,218		384,013			353,094
Income before income taxes		67,425			66,297		135,699			133,868
Income tax expense		10,466			10,873		20,996			20,911
Income from continuing operations		56,959			55,424		114,703			112,957
Discontinued Operations
Loss from discontinued operations before income taxes		—			—		—			(917	)
Income tax benefit		—			—		—			(170	)
Loss from discontinued operations		—			—		—			(747	)
NET INCOME	$	56,959		$	55,424	$	114,703		$	112,210
PER SHARE DATA
Basic:
Income from continuing operations	$	1.17		$	1.12	$	2.35		$	2.28
Loss from discontinued operations		—			—		—			(0.01	)
Net income – basic		1.17			1.12		2.35			2.27
Diluted:
Income from continuing operations		1.16			1.11		2.34			2.26
Loss from discontinued operations		—			—		—			(0.01	)
Net income - diluted		1.16			1.11		2.34			2.25
Dividends		0.30			0.29		0.60			0.58
Weighted average shares outstanding - basic		48,777,732			49,551,920		48,745,124			49,486,626
Weighted average shares outstanding - diluted		49,039,692			50,007,022		49,018,787			49,973,992

Consolidated Statements of Comprehensive Income	UMB Financial Corporation
(unaudited, dollars in thousands)
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Net income	$	56,959		$	55,424		$	114,703		$	112,210
Other comprehensive income (loss), net of tax:
Unrealized gains and losses on debt securities:
Change in unrealized holding gains and losses, net		107,484			(16,020	)		213,918			(96,682	)
Less: Reclassification adjustment for losses (gains) included in net income		1,403			(228	)		594			(367	)
Change in unrealized gains and losses on debt securities during the period		108,887			(16,248	)		214,512			(97,049	)
Change in unrealized gains and losses on derivative hedges		(3,041	)		910			(5,134	)		3,112
Income tax (expense) benefit		(25,590	)		3,770			(50,979	)		23,552
Other comprehensive income (loss) before reclassifications		80,256			(11,568	)		158,399			(70,385	)
Amounts reclassified from accumulated other comprehensive income		—			—			—			(13,049	)
Net current-period other comprehensive income (loss)		80,256			(11,568	)		158,399			(83,434	)
Comprehensive income	$	137,215		$	43,856		$	273,102		$	28,776

Consolidated Statements of Shareholders' Equity			UMB Financial Corporation
(unaudited, dollars in thousands except per share data)
	Common Stock		Capital Surplus			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Treasury Stock			Total
Balance - January 1, 2018	$	55,057	$	1,046,095		$	1,338,110		$	(45,525	)	$	(212,206	)	$	2,181,531
Total comprehensive income (loss)		—		—			112,210			(83,434	)		—			28,776
Reclassification of certain tax effects		—		—			12,917			—			—			12,917
Dividends ($0.58 per share)		—		—			(29,040	)		—			—			(29,040	)
Purchase of treasury stock		—		—			—			—			(6,211	)		(6,211	)
Issuance of equity awards, net of forfeitures		—		(2,457	)		—			—			2,951			494
Recognition of equity-based compensation		—		5,201			—			—			—			5,201
Sale of treasury stock		—		278			—			—			275			553
Exercise of stock options		—		1,543			—			—			5,903			7,446
Cumulative effect adjustments		—		—			145			—			—			145
Balance - June 30, 2018	$	55,057	$	1,050,660		$	1,434,342		$	(128,959	)	$	(209,288	)	$	2,201,812
Balance - January 1, 2019	$	55,057	$	1,054,601		$	1,488,421		$	(95,782	)	$	(273,827	)	$	2,228,470
Total comprehensive income		—		—			114,703			158,399			—			273,102
Dividends ($0.60 per share)		—		—			(29,538	)		—			—			(29,538	)
Purchase of treasury stock		—		—			—			—			(4,114	)		(4,114	)
Issuance of equity awards, net of forfeitures		—		3,107			—			—			(2,503	)		604
Recognition of equity-based compensation		—		7,006			—			—			—			7,006
Sale of treasury stock		—		185			—			—			274			459
Exercise of stock options		—		402			—			—			1,399			1,801
Balance - June 30, 2019	$	55,057	$	1,065,301		$	1,573,586		$	62,617		$	(278,771	)	$	2,477,790

Average Balances / Yields and Rates	UMB Financial Corporation
(tax - equivalent basis)
(unaudited, dollars in thousands)
	Three Months Ended June 30,
	2019						2018
	Average			Average			Average			Average
	Balance			Yield/Rate			Balance			Yield/Rate
Assets
Loans, net of unearned interest	$	12,620,981			5.14	%	$	11,444,448			4.74	%
Securities:
Taxable		4,502,680			2.38			3,862,378			2.13
Tax-exempt		3,725,185			2.99			3,492,647			2.66
Total securities		8,227,865			2.65			7,355,025			2.38
Federal funds and resell agreements		329,064			3.08			107,343			2.81
Interest bearing due from banks		450,032			2.47			252,292			1.68
Trading securities		61,565			6.07			45,538			6.83
Total earning assets		21,689,507			4.11			19,204,646			3.79
Allowance for loan losses		(109,463	)					(101,801	)
Other assets		1,690,423						1,516,801
Total assets	$	23,270,467					$	20,619,646
Liabilities and Shareholders' Equity
Interest-bearing deposits	$	12,707,353			1.25	%	$	10,800,015			0.68	%
Federal funds and repurchase agreements		1,728,748			2.17			1,737,383			1.54
Borrowed funds		81,742			6.80			78,583			6.40
Total interest-bearing liabilities		14,517,843			1.39			12,615,981			0.83
Noninterest-bearing demand deposits		6,078,520						5,666,364
Other liabilities		259,810						152,491
Shareholders' equity		2,414,294						2,184,810
Total liabilities and shareholders' equity	$	23,270,467					$	20,619,646
Net interest spread					2.72	%					2.96	%
Net interest margin					3.19						3.24

Average Balances / Yields and Rates	UMB Financial Corporation
(tax - equivalent basis)
(unaudited, dollars in thousands)
	Six Months Ended June 30,
	2019						2018
	Average			Average			Average			Average
	Balance			Yield/Rate			Balance			Yield/Rate
Assets
Loans, net of unearned interest	$	12,462,946			5.16	%	$	11,365,921			4.64	%
Securities:
Taxable		4,402,458			2.39			3,865,660			2.10
Tax-exempt		3,674,456			2.96			3,563,715			2.65
Total securities		8,076,914			2.65			7,429,375			2.37
Federal funds and resell agreements		424,712			2.92			134,009			2.69
Interest bearing due from banks		554,551			2.42			341,469			1.56
Trading securities		54,029			5.36			45,068			5.65
Total earning assets		21,573,152			4.11			19,315,842			3.70
Allowance for loan losses		(107,465	)					(101,652	)
Other assets		1,597,444						1,468,793
Total assets	$	23,063,131					$	20,682,983
Liabilities and Shareholders' Equity
Interest-bearing deposits	$	12,729,813			1.23	%	$	10,754,187			0.60	%
Federal funds and repurchase agreements		1,642,140			2.16			1,649,758			1.39
Borrowed funds		82,077			6.70			78,773			6.22
Total interest-bearing liabilities		14,454,030			1.36			12,482,718			0.74
Noninterest-bearing demand deposits		6,028,259						5,857,618
Other liabilities		255,405						170,374
Shareholders' equity		2,325,437						2,172,273
Total liabilities and shareholders' equity	$	23,063,131					$	20,682,983
Net interest spread					2.75	%					2.96	%
Net interest margin					3.19						3.22

Business Segment Information	UMB Financial Corporation
(unaudited, dollars in thousands)
	Three Months Ended June 30, 2019
	Commercial Banking		Institutional Banking		Personal Banking		Healthcare Services		Total
Net interest income	$	102,579	$	19,164	$	33,334	$	11,337	$	166,414
Provision for loan losses		9,306		181		1,513		—		11,000
Noninterest income		20,387		46,777		29,385		8,849		105,398
Noninterest expense		68,511		52,415		60,024		12,437		193,387
Income before taxes		45,149		13,345		1,182		7,749		67,425
Income tax expense		7,008		2,071		184		1,203		10,466
Income from continuing operations	$	38,141	$	11,274	$	998	$	6,546	$	56,959
	Three Months Ended June 30, 2018
	Commercial Banking		Institutional Banking		Personal Banking		Healthcare Services		Total
Net interest income	$	93,145	$	16,226	$	31,043	$	9,812	$	150,226
Provision for loan losses		5,139		322		1,539		—		7,000
Noninterest income		19,169		43,414		28,724		8,982		100,289
Noninterest expense		62,850		47,554		54,263		12,551		177,218
Income before taxes		44,325		11,764		3,965		6,243		66,297
Income tax expense		7,269		1,929		650		1,025		10,873
Income from continuing operations	$	37,056	$	9,835	$	3,315	$	5,218	$	55,424
	Six Months Ended June 30, 2019
	Commercial Banking		Institutional Banking		Personal Banking		Healthcare Services		Total
Net interest income	$	202,393	$	39,872	$	65,637	$	22,380	$	330,282
Provision for loan losses		19,635		467		3,248		—		23,350
Noninterest income		43,568		92,564		57,736		18,912		212,780
Noninterest expense		135,331		105,027		118,433		25,222		384,013
Income before taxes		90,995		26,942		1,692		16,070		135,699
Income tax expense		14,079		4,169		262		2,486		20,996
Income from continuing operations	$	76,916	$	22,773	$	1,430	$	13,584	$	114,703
	Six Months Ended June 30, 2018
	Commercial Banking		Institutional Banking		Personal Banking		Healthcare Services		Total
Net interest income	$	185,061	$	31,990	$	61,988	$	19,109	$	298,148
Provision for loan losses		13,117		672		3,211		—		17,000
Noninterest income		39,766		88,833		59,439		17,776		205,814
Noninterest expense		124,975		94,433		109,317		24,369		353,094
Income before taxes		86,735		25,718		8,899		12,516		133,868
Income tax expense		13,549		4,017		1,390		1,955		20,911
Income from continuing operations	$	73,186	$	21,701	$	7,509	$	10,561	$	112,957

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 June 30, 2019.

Non-GAAP Financial Measures	UMB Financial Corporation
Net operating income Non-GAAP reconciliations:
(unaudited, dollars in thousands except per share data)
	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Income from continuing operations (GAAP)	$	56,959		$	55,424		$	114,703		$	112,957
Adjustments:
Acquisition and divestiture expense (income)		70			(24	)		97			(6	)
Severance expense		297			867			867			2,814
Tax-impact of adjustments (i)		(81	)		(188	)		(214	)		(624	)
Total Non-GAAP adjustments (net of tax)		286			655			750			2,184
Net operating income from continuing operations (Non-GAAP)	$	57,245		$	56,079		$	115,453		$	115,141
Earnings per share from continuing operations - diluted (GAAP)	$	1.16		$	1.11		$	2.34		$	2.26
Acquisition and divestiture expense		—			—			—			—
Severance expense		0.01			0.01			0.02			0.05
Tax-impact of adjustments (i)		—			—			—			(0.01	)
Operating earnings per share from continuing operations - diluted (Non-GAAP)	$	1.17		$	1.12		$	2.36		$	2.30
GAAP
Return on average assets		0.98	%		1.08	%		1.00	%		1.10	%
Return on average equity		9.46			10.18			9.95			10.49
Non-GAAP
Operating return on average assets		0.99	%		1.09	%		1.01	%		1.12	%
Operating return on average equity		9.51			10.30			10.01			10.69
(i) Calculated using the company’s marginal tax rate of 22.2 percent.

Operating noninterest expense and operating efficiency ratio Non-GAAP reconciliations:	UMB Financial Corporation
(unaudited, dollars in thousands)
	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Noninterest expense	$	193,387		$	177,218		$	384,013		$	353,094
Adjustments to arrive at operating noninterest expense (pre-tax):
Acquisition and divestiture expense (income)		70			(24	)		97			(6	)
Severance expense		297			867			867			2,814
Total Non-GAAP adjustments (pre-tax)		367			843			964			2,808
Operating noninterest expense (Non-GAAP)	$	193,020		$	176,375		$	383,049		$	350,286
Noninterest expense	$	193,387		$	177,218		$	384,013		$	353,094
Less: Amortization of other intangibles		1,251			1,485			2,578			3,047
Noninterest expense, net of amortization of other intangibles (Non-GAAP) (numerator A)	$	192,136		$	175,733		$	381,435		$	350,047
Operating noninterest expense	$	193,020		$	176,375		$	383,049		$	350,286
Less: Amortization of other intangibles		1,251			1,485			2,578			3,047
Operating expense, net of amortization of other intangibles (Non-GAAP) (numerator B)	$	191,769		$	174,890		$	380,471		$	347,239
Net interest income	$	166,414		$	150,226		$	330,282		$	298,148
Noninterest income		105,398			100,289			212,780			205,814
Less: (Losses) gains on sales of securities available for sale, net		(1,403	)		228			(594	)		367
Total Non-GAAP Revenue (denominator A)	$	273,215		$	250,287		$	543,656		$	503,595
Efficiency ratio (numerator A/denominator A)		70.32	%		70.21	%		70.16	%		69.51	%
Operating efficiency ratio (Non-GAAP) (numerator B/denominator A)		70.19			69.88			69.98			68.95