NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
1. Financial Statement Presentation
The consolidated financial statements include the accounts of UMB Financial Corporation and its subsidiaries (collectively,
the Company) after elimination of all intercompany transactions. In the opinion of management of the Company, all adjustments, which were of a normal recurring nature and necessary for a fair presentation of the financial position and results of
operations have been made. The results of operations and cash flows for the interim periods presented may not be indicative of the results of the full year. The financial statements should be read in conjunction with Item 2. Managements
Discussion and Analysis of Financial Condition and Results of Operations within this Quarterly Report on Form 10-Q and in conjunction with the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2015 filed with the
Securities and Exchange Commission (SEC) on February 25, 2016 (the Form 10-K).
2. Summary of Significant Accounting Policies
The Company is a financial holding company, which offers a wide range of banking and other financial services to its
customers through its branches and offices in the states of Missouri, Kansas, Colorado, Illinois, Oklahoma, Texas, Arizona, Nebraska, Pennsylvania, South Dakota, Indiana, Utah, Minnesota, California, and Wisconsin. The preparation of financial
statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements. These estimates and assumptions also impact reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates. A summary of the significant accounting policies to assist the reader in understanding the financial presentation is provided in the Notes to Consolidated Financial Statements in the Form 10-K.
Cash and cash equivalents
Cash and cash
equivalents include Cash and due from banks and amounts due from the Federal Reserve Bank. Cash on hand, cash items in the process of collection, and amounts due from correspondent banks are included in Cash and due from banks. Amounts due from the
Federal Reserve Bank are interest-bearing for all periods presented and are included in the Interest-bearing due from banks line on the Companys Consolidated Balance Sheets.
This table provides a summary of cash and cash equivalents as presented on the Consolidated Statement of Cash Flows as of March 31, 2016 and
March 31, 2015
(in thousands)
:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
2016
|
|
|
2015
|
|
Due from the Federal Reserve
|
|
$
|
273,672
|
|
|
$
|
585,557
|
|
Cash and due from banks
|
|
|
325,446
|
|
|
|
449,315
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
599,118
|
|
|
$
|
1,034,872
|
|
|
|
|
|
|
|
|
|
|
Also included in the Interest-bearing due from banks line, but not considered cash and cash equivalents are
interest-bearing accounts held at other financial institutions, which totaled $128.3 million and $180.8 million at March 31, 2016 and March 31, 2015, respectively.
Per Share Data
Basic income per share is
computed based on the weighted average number of shares of common stock outstanding during each period. Diluted income per share includes the dilutive effect of 333,799 and 436,823 shares of common stock issuable upon the exercise of
outstanding stock options at March 31, 2016 and 2015, respectively.
Options issued under employee benefit plans to purchase 660,802 and
498,488 shares of common stock were outstanding at March 31, 2016 and 2015, respectively, but were not included in the computation of diluted income per share because the options were anti-dilutive.
8
UMB FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
3. New Accounting Pronouncements
Revenue Recognition
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.
2014-09, Revenue from Contracts with Customers. The issuance is part of a joint effort by the FASB and the International Accounting Standards Board (IASB) to enhance financial reporting by creating common revenue recognition guidance for
U.S. GAAP and International Financial Reporting Standards (IFRS) and, thereby, improving the consistency of requirements, comparability of practices and usefulness of disclosures. The ASU will replace most existing revenue recognition guidance in
U.S. GAAP when it becomes effective. In August 2015, the FASB issued ASU No. 2015-14, which deferred the effective date of ASU No. 2014-09 to annual reporting periods that begin after December 15, 2017. In March 2016, the FASB issued ASU No.
2016-08, which intends to improve the operability and understandability of the implementation guidance on principal versus agent considerations within ASU No. 2014-09. In April 2016, the FASB issued ASU No. 2016-10, which clarifies guidance related
to identifying performance obligations and licensing implementation within ASU No. 2014-09. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is currently evaluating the effect that these
standards will have on its Consolidated Financial Statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.
Stock Compensation
In June 2014, the FASB issued ASU No. 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide that a
Performance Target could be Achieved after the Requisite Service Period. The amendment is intended to reduce diversity in practice by clarifying that a performance target that affects vesting and that could be achieved after the requisite
service period be treated as a performance condition. The amendments in this update were effective for interim and annual periods beginning after December 15, 2015. The adoption of this accounting pronouncement had no impact on the Companys
Consolidated Financial Statements.
Going Concern
In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an
Entitys Ability to Continue as a Going Concern. The amendment addresses managements responsibility in regularly evaluating whether there is substantial doubt about a companys ability to continue as a going concern. The
amendments in this update are effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter, although early adoption is permitted. The adoption of this accounting pronouncement will not impact the
Companys Consolidated Financial Statements.
Derivatives and Hedging
In November 2014, the FASB issued ASU No. 2014-16, Determining
Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share is More Akin to Debt or to Equity. The amendment is intended to address how current U.S. GAAP should be interpreted in evaluating the economic
characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. The amendments in this update were effective for interim and annual periods beginning after December 15, 2015. The adoption of this
accounting pronouncement had no impact on the Companys Consolidated Financial Statements.
Consolidation
In February 2015, the FASB issued
ASU No. 2015-02, Amendments to the Consolidation Analysis. The amendment substantially changes the way reporting entities are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to
reevaluation under the new amendment. Specifically, the amendments modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities, eliminate the presumption that a
general partner should consolidate a limited partnership, and affect the consolidation analysis of reporting entities that are involved with VIEs. The amendments in this update were effective for interim and annual periods beginning after December
15, 2015. The standard permits the use of either the retrospective or cumulative effect transition method. The adoption of this accounting pronouncement had no impact on the Companys Consolidated Financial Statements.
Financial Instruments
In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial
Liabilities. The amendment is intended to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The amendments in this update are effective for interim and annual periods beginning after
December 15, 2017. Except for certain provisions, early adoption is not permitted. The Company is currently evaluating the impact this will have on the Consolidated Financial Statements.
9
UMB FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
Leases
In February 2016, the FASB issued ASU No. 2016-02, Leases. The amendment changes
the accounting treatment of leases, in that lessees will recognize most leases on-balance sheet. This will increase reported assets and liabilities, as lessees will be required to recognize a right-of-use asset along with a lease liability, measured
on a discounted basis. Lessees are allowed to account for short-term leases (those with a term of twelve months or less) off-balance sheet. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including
interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact this will have on the Consolidated Financial Statements.
Extinguishments of Liabilities
In March 2016, the FASB issued ASU No. 2016-04, Recognition of Breakage for Certain Prepaid Stored-Value
Products. The amendment is intended to reduce the diversity in practice related to the recognition of breakage. Breakage refers to the portion of a prepaid stored-value product, such as a gift card, that goes unused wholly or partially for an
indefinite period of time. This amendment requires that breakage be accounted for consistent with the breakage guidance within ASU No. 2014-09, Revenue from Contracts with Customers. The amendments in this update are effective for fiscal
years beginning after December 15, 2018, including interim periods within those fiscal years. The standard permits the use of either the retrospective or cumulative effect transition method. Early adoption is permitted. The Company is currently
evaluating the effect that ASU No. 2016-04 will have on its Consolidated Financial Statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial
reporting. The Company will adopt ASU No. 2016-04 in conjunction with its adoption of ASU No. 2014-09.
Derivatives and Hedging
In March 2016, the
FASB issued ASU No. 2016-05, Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships. The amendment is intended to clarify that the novation of a derivative contract that has been designated to be in a hedging
relationship under Accounting Standards Codification (ASC) Topic 815 does not, in and of itself, represent a termination event for the derivative and does not require dedesignation of the hedging relationship. The amendments in this update are
effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The amendment permits the use of either a prospective or modified retrospective transition method. Early adoption is permitted. The
adoption of this accounting pronouncement will have no impact on the Companys Consolidated Financial Statements.
Stock Compensation
In March
2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting. The amendment is part of the FASBs simplification initiative and is intended to simplify the accounting around share-based payment
award transactions. The amendments include changing the recording of excess tax benefits from being recognized as a part of paid-in capital to being charged directly to the income statement, changing the classification of excess tax benefits within
the statement of cash flows, and allowing companies to account for forfeitures on an actual basis, as well as tax withholding changes. The amendments in this update are effective for fiscal years beginning after December 15, 2016, including interim
periods within those fiscal years. The amendment permits the use of either a prospective or retrospective transition method. Early adoption is permitted. The Company is currently evaluating the impact this will have on the Consolidated Financial
Statements.
10
UMB FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
4. Loans and Allowance for Loan Losses
Loan Origination/Risk Management
The Company has certain lending policies and procedures in place that are designed to minimize the level of risk within the loan portfolio.
Diversification of the loan portfolio manages the risk associated with fluctuations in economic conditions. Authority levels are established for the extension of credit to ensure consistency throughout the Company. It is necessary that policies,
processes and practices implemented to control the risks of individual credit transactions and portfolio segments are sound and adhered to. The Company maintains an independent loan review department that reviews and validates the risk assessment on
a continual basis. Management regularly evaluates the results of the loan reviews. The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel, as well as the
Companys policies and procedures.
Commercial loans are underwritten after evaluating and understanding the borrowers ability
to operate profitably and prudently expand its business. Commercial loans are made based on the identified cash flows of the borrower and on the underlying collateral provided by the borrower. The cash flows of the borrower, however, may not be as
expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee. In
the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts from its customers. Commercial credit cards are generally
unsecured and are underwritten with criteria similar to commercial loans including an analysis of the borrowers cash flow, available business capital, and overall credit-worthiness of the borrower.
Asset-based loans are offered primarily in the form of revolving lines of credit to commercial borrowers that do not generally qualify for
traditional bank financing. Asset-based loans are underwritten based primarily upon the value of the collateral pledged to secure the loan, rather than on the borrowers general financial condition as traditionally reflected by cash flow,
balance sheet strength, operating results, and credit bureau ratings. The Company utilizes pre-loan due diligence techniques, monitoring disciplines, and loan management practices common within the asset-based lending industry to underwrite loans to
these borrowers.
Factoring loans provide working capital through the purchase and/or financing of accounts receivable to borrowers in the
transportation industry and to commercial borrowers that do not generally qualify for traditional bank financing.
Commercial real estate
loans are subject to underwriting standards and processes similar to commercial loans, in addition to those of real estate loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real
estate. Commercial real estate lending typically involves higher loan principal amounts, and the repayment of these loans is largely dependent on the successful operation of the property securing the loan or the business conducted on the
property securing the loan. The Company requires that an appraisal of the collateral be made at origination and on an as-needed basis, in conformity with current market conditions and regulatory requirements. The underwriting standards
address both owner and non-owner occupied real estate.
Construction loans are underwritten using feasibility studies, independent
appraisal reviews, sensitivity analysis or absorption and lease rates and financial analysis of the developers and property owners. Construction loans are based upon estimates of costs and value associated with the complete
project. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent
loans, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate
loans due to their repayment being sensitive to interest rate changes, governmental regulation of real property, economic conditions, and the availability of long-term financing.
11
UMB FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
Underwriting standards for residential real estate and home equity loans are based on the
borrowers loan-to-value percentage, collection remedies, and overall credit history.
Consumer loans are underwritten based on the
borrowers repayment ability. The Company monitors delinquencies on all of its consumer loans and leases and periodically reviews the distribution of FICO scores relative to historical periods to monitor credit risk on its credit card loans.
The underwriting and review practices combined with the relatively small loan amounts that are spread across many individual borrowers, minimizes risk. Consumer loans and leases that are 90 days past due or more are considered non-performing.
Credit risk is a potential loss resulting from nonpayment of either the primary or secondary exposure. Credit risk is mitigated with formal
risk management practices and a thorough initial credit-granting process including consistent underwriting standards and approval process. Control factors or techniques to minimize credit risk include knowing the client, understanding total
exposure, analyzing the client and debtors financial capacity, and monitoring the clients activities. Credit risk and portions of the portfolio risk are managed through concentration considerations, average risk ratings, and other
aggregate characteristics.
The loan portfolio is comprised of loans originated by the Company and loans purchased in connection with the
Companys acquisition of Marquette Financial Companies (Marquette) on May 31, 2015 (the Acquisition Date). The purchased loans were recorded at estimated fair value at the Acquisition Date with no carryover of the related allowance. The
purchased loans were segregated between those considered to be performing, non-purchased credit impaired loans (Non-PCI), and those with evidence of credit deterioration, purchased credit impaired loans (PCI). Purchased loans are considered impaired
if there is evidence of credit deterioration and if it is probable, at acquisition, that all contractually required payments will not be collected.
At the Acquisition Date, gross loans from the Marquette acquisition had a fair value of $980.4 million split between Non-PCI loans totaling
$972.6 million and PCI loans totaling $7.8 million. The gross contractually required principal and interest payments receivable for the Non-PCI loans and PCI loans totaled $983.9 million and $9.3 million, respectively.
The fair value estimates for purchased loans are based on expected prepayments and the amount and timing of discounted expected principal,
interest and other cash flows. Credit discounts representing the principal losses expected over the life of the loan are also a component of the initial fair value. In determining the Acquisition Date fair value of PCI loans, and in subsequent
accounting, the Company generally aggregated purchased commercial, real estate, and consumer loans into pools of loans with common risk characteristics.
The difference between the fair value of Non-PCI loans and contractual amounts due at the Acquisition Date is accreted into income over the
estimated life of the loans. Contractual amounts due represent the total undiscounted amount of all uncollected principal and interest payments.
Loans
accounted for under ASC Topic 310-30
The excess of PCI loans contractual amounts due over the amount of undiscounted cash flows
expected to be collected is referred to as the non-accretable difference. The non-accretable difference, which is neither accreted into income nor recorded on the consolidated balance sheet, reflects estimated future credit losses and uncollectible
contractual interest expected to be incurred over the life of the PCI loans. The excess cash flows expected to be collected over the carrying amount of PCI loans is referred to as the accretable yield. This amount is accreted into interest income
over the remaining life of the purchased loans or pools using the level yield method. The accretable yield is affected by changes in interest rate indices for variable rate loans, changes in prepayment speed assumptions, and changes in expected
principal and interest payments over the estimated lives of the PCI loans.
Each quarter the Company evaluates the remaining contractual
amounts due and estimates cash flows expected to be collected over the life of the PCI loans. Contractual amounts due may increase or decrease for a variety of reasons, for example, when the contractual terms of the loan agreement are modified, when
interest rates on variable rate loans change, or when principal and/or interest payments are received. Cash flows expected to be collected on PCI loans are estimated by incorporating several key assumptions similar to the initial estimate of fair
12
UMB FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
value. These key assumptions include probability of default, loss given default, and the amount of actual prepayments after the Acquisition Date. Prepayments affect the estimated lives of loans
and could change the amount of interest income, and possibly principal, expected to be collected. In re-forecasting future estimated cash flows, credit loss expectations are adjusted as necessary. The adjustments are based, in part, on actual loss
severities recognized for each loan type, as well as changes in the probability of default. For periods in which estimated cash flows are not reforecasted, the prior reporting periods estimated cash flows are adjusted to reflect the actual
cash received and credit events that transpired during the current reporting period.
Increases in expected cash flows of PCI loans
subsequent to the Acquisition Date are recognized prospectively through adjustments of the yield on the loans or pools over their remaining lives, while decreases in expected cash flows are recognized as impairment through a provision for loan
losses and an increase in the allowance.
The PCI loans are accounted for in accordance with ASC Topic 310-30,
Loans and Debt
Securities Purchased with Deteriorated Credit Quality
. At March 31, 2016, the net recorded carrying amount of loans accounted for under ASC 310-30 was $2.5 million and the contractual amount due was $3.3 million.
Below is the composition of the net book value for the PCI loans accounted for under ASC 310-30 at March 31, 2016
(in thousands)
:
|
|
|
|
|
PCI Loans:
|
|
At March 31, 2016
|
|
Contractual cash flows
|
|
$
|
3,302
|
|
Non-accretable difference
|
|
|
(647
|
)
|
Accretable yield
|
|
|
(118
|
)
|
|
|
|
|
|
Loans accounted for under ASC 310-30
|
|
$
|
2,537
|
|
|
|
|
|
|
13
UMB FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
Loan Aging Analysis
This table provides a summary of loan classes and an aging of past due loans at March 31, 2016 and December 31, 2015
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
|
|
30-89
Days Past
Due and
Accruing
|
|
|
Greater
than 90
Days Past
Due and
Accruing
|
|
|
Non-
Accrual
Loans
|
|
|
Total
Past
Due
|
|
|
PCI
Loans
|
|
|
Current
|
|
|
Total Loans
|
|
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
20,035
|
|
|
$
|
465
|
|
|
$
|
39,371
|
|
|
$
|
59,871
|
|
|
$
|
|
|
|
$
|
4,287,197
|
|
|
$
|
4,347,068
|
|
Asset-based
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
212,669
|
|
|
|
212,669
|
|
Factoring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88,534
|
|
|
|
88,534
|
|
Commercial credit card
|
|
|
333
|
|
|
|
20
|
|
|
|
25
|
|
|
|
378
|
|
|
|
|
|
|
|
145,653
|
|
|
|
146,031
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate construction
|
|
|
1,033
|
|
|
|
906
|
|
|
|
232
|
|
|
|
2,171
|
|
|
|
|
|
|
|
495,333
|
|
|
|
497,504
|
|
Real estate commercial
|
|
|
4,234
|
|
|
|
|
|
|
|
8,403
|
|
|
|
12,637
|
|
|
|
1,023
|
|
|
|
2,753,573
|
|
|
|
2,767,233
|
|
Real estate residential
|
|
|
2,326
|
|
|
|
|
|
|
|
836
|
|
|
|
3,162
|
|
|
|
|
|
|
|
482,560
|
|
|
|
485,722
|
|
Real estate HELOC
|
|
|
1,737
|
|
|
|
|
|
|
|
3,094
|
|
|
|
4,831
|
|
|
|
|
|
|
|
719,472
|
|
|
|
724,303
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer credit card
|
|
|
2,085
|
|
|
|
1,780
|
|
|
|
360
|
|
|
|
4,225
|
|
|
|
|
|
|
|
266,333
|
|
|
|
270,558
|
|
Consumer other
|
|
|
6,594
|
|
|
|
145
|
|
|
|
2,613
|
|
|
|
9,352
|
|
|
|
1,514
|
|
|
|
106,105
|
|
|
|
116,971
|
|
Leases
|
|
|
49
|
|
|
|
|
|
|
|
|
|
|
|
49
|
|
|
|
|
|
|
|
42,989
|
|
|
|
43,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
38,426
|
|
|
$
|
3,316
|
|
|
$
|
54,934
|
|
|
$
|
96,676
|
|
|
$
|
2,537
|
|
|
$
|
9,600,418
|
|
|
$
|
9,699,631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
|
|
30-89
Days Past
Due
|
|
|
Greater
than 90
Days Past
Due
|
|
|
Current
|
|
|
Total Loans
|
|
PCI Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Asset-based
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Factoring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial credit card
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate commercial
|
|
|
|
|
|
|
1,023
|
|
|
|
|
|
|
|
1,023
|
|
Real estate residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate HELOC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer credit card
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer other
|
|
|
75
|
|
|
|
35
|
|
|
|
1,404
|
|
|
|
1,514
|
|
Leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total PCI loans
|
|
$
|
75
|
|
|
$
|
1,058
|
|
|
$
|
1,404
|
|
|
$
|
2,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
UMB FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
30-89
Days Past
Due and
Accruing
|
|
|
Greater
than 90
Days Past
Due and
Accruing
|
|
|
Non-
Accrual
Loans
|
|
|
Total
Past
Due
|
|
|
PCI
Loans
|
|
|
Current
|
|
|
Total Loans
|
|
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
5,821
|
|
|
$
|
2,823
|
|
|
$
|
43,841
|
|
|
$
|
52,485
|
|
|
$
|
|
|
|
$
|
4,153,251
|
|
|
$
|
4,205,736
|
|
Asset-based
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
219,244
|
|
|
|
219,244
|
|
Factoring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,686
|
|
|
|
90,686
|
|
Commercial credit card
|
|
|
614
|
|
|
|
24
|
|
|
|
13
|
|
|
|
651
|
|
|
|
|
|
|
|
124,710
|
|
|
|
125,361
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate construction
|
|
|
1,828
|
|
|
|
548
|
|
|
|
331
|
|
|
|
2,707
|
|
|
|
|
|
|
|
413,861
|
|
|
|
416,568
|
|
Real estate commercial
|
|
|
2,125
|
|
|
|
1,630
|
|
|
|
9,578
|
|
|
|
13,333
|
|
|
|
1,055
|
|
|
|
2,648,384
|
|
|
|
2,662,772
|
|
Real estate residential
|
|
|
612
|
|
|
|
35
|
|
|
|
800
|
|
|
|
1,447
|
|
|
|
|
|
|
|
490,780
|
|
|
|
492,227
|
|
Real estate HELOC
|
|
|
129
|
|
|
|
|
|
|
|
3,524
|
|
|
|
3,653
|
|
|
|
|
|
|
|
726,310
|
|
|
|
729,963
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer credit card
|
|
|
2,256
|
|
|
|
2,089
|
|
|
|
468
|
|
|
|
4,813
|
|
|
|
|
|
|
|
286,757
|
|
|
|
291,570
|
|
Consumer other
|
|
|
5,917
|
|
|
|
175
|
|
|
|
2,597
|
|
|
|
8,689
|
|
|
|
2,001
|
|
|
|
144,087
|
|
|
|
154,777
|
|
Leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,857
|
|
|
|
41,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
19,302
|
|
|
$
|
7,324
|
|
|
$
|
61,152
|
|
|
$
|
87,778
|
|
|
$
|
3,056
|
|
|
$
|
9,339,927
|
|
|
$
|
9,430,761
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
30-89
Days Past
Due
|
|
|
Greater
than 90
Days Past
Due
|
|
|
Current
|
|
|
Total Loans
|
|
PCI Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Asset-based
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Factoring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial credit card
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate commercial
|
|
|
|
|
|
|
1,055
|
|
|
|
|
|
|
|
1,055
|
|
Real estate residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate HELOC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer credit card
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer other
|
|
|
58
|
|
|
|
105
|
|
|
|
1,838
|
|
|
|
2,001
|
|
Leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total PCI loans
|
|
$
|
58
|
|
|
$
|
1,160
|
|
|
$
|
1,838
|
|
|
$
|
3,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company sold residential real estate loans with proceeds of $10.3 million and $23.4 million in the
secondary market without recourse during the periods ended March 31, 2016 and March 31, 2015, respectively.
The Company has ceased the
recognition of interest on loans with a carrying value of $54.9 million and $61.2 million at March 31, 2016 and December 31, 2015, respectively. Restructured loans totaled $46.0 million and $36.6 million at March 31, 2016 and December 31,
2015. Loans 90 days past due and still accruing interest amounted to $3.3 million and $7.3 million at March 31, 2016 and December 31, 2015, respectively. There was an insignificant amount of interest recognized on impaired loans during
2016 and 2015.
15
UMB FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
Credit Quality Indicators
As part of the on-going monitoring of the credit quality of the Companys loan portfolio, management tracks certain credit quality
indicators including trends related to the risk grading of specified classes of loans, net charge-offs, non-performing loans, and general economic conditions.
The Company utilizes a risk grading matrix to assign a rating to each of its commercial, commercial real estate, and construction real estate
loans. The loan rankings are summarized into the following categories: Non-watch list, Watch, Special Mention, and Substandard. Any loan not classified in one of the categories described below is considered to be a Non-watch list
loan. A description of the general characteristics of the loan ranking categories is as follows:
|
|
|
Watch
This rating represents credit exposure that presents higher than average risk and warrants greater than routine attention by Company personnel due to conditions affecting the borrower, the
borrowers industry or the economic environment. These conditions have resulted in some degree of uncertainty that results in higher than average credit risk.
|
|
|
|
Special Mention
This rating reflects a potential weakness that deserves managements close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment
prospects for the asset or the institutions credit position at some future date. The rating is not adversely classified and does not expose an institution to sufficient risk to warrant adverse classification.
|
|
|
|
Substandard
This rating represents an asset inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. Assets so classified must have a
well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Loans in this category are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Loss potential,
while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified substandard. This category may include loans where the collection of full principal is doubtful or remote.
|
All other classes of loans are generally evaluated and monitored based on payment activity. Non-performing loans include restructured
loans on non-accrual and all other non-accrual loans.
16
UMB FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
This table provides an analysis of the credit risk profile of each loan class excluded
from ASC 310-30 at March 31, 2016 and December 31, 2015 (in thousands):
Credit Exposure
Credit Risk Profile by Risk Rating
Originated and
Non-PCI Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
Asset-based
|
|
|
Factoring
|
|
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
Non-watch list
|
|
$
|
3,968,381
|
|
|
$
|
3,880,109
|
|
|
$
|
179,027
|
|
|
$
|
198,903
|
|
|
$
|
88,089
|
|
|
$
|
90,449
|
|
Watch
|
|
|
147,208
|
|
|
|
105,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special Mention
|
|
|
40,095
|
|
|
|
29,397
|
|
|
|
28,142
|
|
|
|
18,163
|
|
|
|
9
|
|
|
|
237
|
|
Substandard
|
|
|
191,384
|
|
|
|
190,691
|
|
|
|
5,500
|
|
|
|
2,178
|
|
|
|
436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,347,068
|
|
|
$
|
4,205,736
|
|
|
$
|
212,669
|
|
|
$
|
219,244
|
|
|
$
|
88,534
|
|
|
$
|
90,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate construction
|
|
|
Real estate commercial
|
|
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
Non-watch list
|
|
$
|
488,546
|
|
|
$
|
415,258
|
|
|
$
|
2,673,502
|
|
|
$
|
2,561,401
|
|
Watch
|
|
|
4,346
|
|
|
|
370
|
|
|
|
37,764
|
|
|
|
51,774
|
|
Special Mention
|
|
|
3,835
|
|
|
|
|
|
|
|
19,426
|
|
|
|
22,544
|
|
Substandard
|
|
|
777
|
|
|
|
940
|
|
|
|
35,518
|
|
|
|
25,998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
497,504
|
|
|
$
|
416,568
|
|
|
$
|
2,766,210
|
|
|
$
|
2,661,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Exposure
Credit Risk Profile Based on Payment Activity
Originated and Non-PCI Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial credit card
|
|
|
Real estate residential
|
|
|
Real estate HELOC
|
|
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
Performing
|
|
$
|
146,006
|
|
|
$
|
125,348
|
|
|
$
|
484,886
|
|
|
$
|
491,427
|
|
|
$
|
721,209
|
|
|
$
|
726,439
|
|
Non-performing
|
|
|
25
|
|
|
|
13
|
|
|
|
836
|
|
|
|
800
|
|
|
|
3,094
|
|
|
|
3,524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
146,031
|
|
|
$
|
125,361
|
|
|
$
|
485,722
|
|
|
$
|
492,227
|
|
|
$
|
724,303
|
|
|
$
|
729,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer credit card
|
|
|
Consumer other
|
|
|
Leases
|
|
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
Performing
|
|
$
|
270,198
|
|
|
$
|
291,102
|
|
|
$
|
114,358
|
|
|
$
|
152,180
|
|
|
$
|
43,038
|
|
|
$
|
41,857
|
|
Non-performing
|
|
|
360
|
|
|
|
468
|
|
|
|
2,613
|
|
|
|
2,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
270,558
|
|
|
$
|
291,570
|
|
|
$
|
116,971
|
|
|
$
|
154,777
|
|
|
$
|
43,038
|
|
|
$
|
41,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
UMB FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
This table provides an analysis of the credit risk profile of each loan class accounted
for under ASC 310-30 at March 31, 2016 and December 31, 2015 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Exposure
|
|
|
|
|
Credit Risk Profile by Risk Rating
PCI Loans
|
|
|
Credit Risk Profile Based on Payment Activity
PCI Loans
|
|
|
|
|
|
|
|
Real estate commercial
|
|
|
|
|
Consumer other
|
|
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
|
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
Non-watch list
|
|
$
|
|
|
|
$
|
|
|
|
Performing
|
|
$
|
1,514
|
|
|
$
|
2,001
|
|
Watch
|
|
|
|
|
|
|
|
|
|
Non-performing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special Mention
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,514
|
|
|
$
|
2,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Substandard
|
|
|
1,023
|
|
|
|
1,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,023
|
|
|
$
|
1,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses
The allowance for loan losses is a reserve established through a provision for loan losses charged to expense, which represents
managements judgment of inherent probable losses within the Companys loan portfolio as of the balance sheet date. The allowance is necessary to reserve for estimated loan losses and risks inherent in the loan portfolio. Accordingly, the
methodology is based on historical loss trends. The Companys process for determining the appropriate level of the allowance for loan losses is designed to account for credit deterioration as it occurs. The provision for probable loan losses
reflects loan quality trends, including the levels of and trends related to non-accrual loans, past due loans, potential problem loans, criticized loans and net charge-offs or recoveries, among other factors.
The level of the allowance reflects managements continuing evaluation of industry concentrations, specific credit risks, loan loss
experience, current loan portfolio quality, present economic, political and regulatory conditions and estimated losses inherent in the current loan portfolio. Portions of the allowance may be allocated for specific loans; however, the entire
allowance is available for any loan that, in managements judgment, should be charged off. While management utilizes its best judgment and information available, the adequacy of the allowance is dependent upon a variety of factors beyond the
Companys control, including, among other things, the performance of the Companys loan portfolio, the economy, changes in interest rates and changes in the regulatory environment.
The Companys allowance for loan losses consists of specific valuation allowances and general valuation allowances based on historical
loan loss experience for similar loans with similar characteristics and trends, general economic conditions and other qualitative risk factors both internal and external to the Company.
The allowances established for probable losses on specific loans are based on a regular analysis and evaluation of impaired loans. Loans are
classified based on an internal risk grading process that evaluates the obligors ability to repay, the underlying collateral, if any, and the economic environment and industry in which the borrower operates. When a loan is considered impaired,
the loan is analyzed to determine the need, if any, to specifically allocate a portion of the allowance for loan losses to the loan. Specific valuation allowances are determined by analyzing the borrowers ability to repay amounts owed,
collateral deficiencies, the relative risk ranking of the loan and economic conditions affecting the borrowers industry.
General
valuation allowances are calculated based on the historical loss experience of specific types of loans including an evaluation of the time span and volume of the actual charge-off. The Company calculates historical loss ratios for pools of similar
loans with similar characteristics based on the proportion of actual charge-offs experienced to the total population of loans in the pool. The historical loss ratios are updated based on actual charge-off experience. A valuation allowance is
established for each pool of similar loans based upon the product of the historical loss ratio, time span to charge-off, and the total dollar amount of the loans in the pool. The Companys pools of similar loans include similarly risk-graded
groups of commercial loans, commercial real estate loans, commercial credit card, home equity loans, consumer real estate loans and consumer and other loans. The Company
18
UMB FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
also considers a loan migration analysis for criticized loans. This analysis includes an assessment of the probability that a loan will move to a loss position based on its risk
rating. The consumer credit card pool is evaluated based on delinquencies and credit scores. In addition, a portion of the allowance is determined by a review of qualitative factors by Management.
Generally, the unsecured portion of a commercial or commercial real estate loan is charged off when, after analyzing the borrowers
financial condition, it is determined that the borrower is incapable of servicing the debt, little or no prospect for near term improvement exists, and no realistic and significant strengthening action is pending. For collateral dependent
commercial or commercial real estate loans, an analysis is completed regarding the Companys collateral position to determine if the amounts due from the borrower are in excess of the calculated current fair value of the
collateral. Specific allocations of the allowance for loan losses are made for any collateral deficiency. If a collateral deficiency is ultimately deemed to be uncollectible, the amount is charged off. Revolving commercial loans (such
as commercial credit cards) which are past due 90 cumulative days are classified as a loss and charged off.
Generally, a consumer loan,
or a portion thereof, is charged off in accordance with regulatory guidelines which provide that such loans be charged off when the Company becomes aware of the loss, such as from a triggering event that may include, but is not limited to, new
information about a borrowers intent and ability to repay the loan, bankruptcy, fraud, or death. However, the charge-off timeframe should not exceed the specified delinquency time frames, which state that closed-end retail loans (such as
real estate mortgages, home equity loans and consumer installment loans) that become past due 120 cumulative days and open-end retail loans (such as home equity lines of credit and consumer credit cards) that become past due
180 cumulative days are classified as a loss and charged off.
19
UMB FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
ALLOWANCE FOR LOAN LOSSES AND RECORDED INVESTMENT IN LOANS
This table provides a rollforward of the allowance for loan losses by portfolio segment for three months ended March 31, 2016
(in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2016
|
|
|
|
Commercial
|
|
|
Real estate
|
|
|
Consumer
|
|
|
Leases
|
|
|
Total
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
63,847
|
|
|
$
|
8,220
|
|
|
$
|
8,949
|
|
|
$
|
127
|
|
|
$
|
81,143
|
|
Charge-offs
|
|
|
(5,075
|
)
|
|
|
(1,445
|
)
|
|
|
(2,515
|
)
|
|
|
|
|
|
|
(9,035
|
)
|
Recoveries
|
|
|
2,489
|
|
|
|
144
|
|
|
|
657
|
|
|
|
|
|
|
|
3,290
|
|
Provision
|
|
|
47
|
|
|
|
2,990
|
|
|
|
1,969
|
|
|
|
(6
|
)
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
61,308
|
|
|
$
|
9,909
|
|
|
$
|
9,060
|
|
|
$
|
121
|
|
|
$
|
80,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually evaluated for impairment
|
|
$
|
4,163
|
|
|
$
|
1,210
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
5,373
|
|
Ending balance: collectively evaluated for impairment
|
|
|
57,145
|
|
|
|
8,699
|
|
|
|
9,060
|
|
|
|
121
|
|
|
|
75,025
|
|
Ending Balance: PCI Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: loans
|
|
$
|
4,794,302
|
|
|
$
|
4,474,762
|
|
|
$
|
387,529
|
|
|
$
|
43,038
|
|
|
$
|
9,699,631
|
|
Ending balance: individually evaluated for impairment
|
|
|
67,486
|
|
|
|
6,278
|
|
|
|
2,612
|
|
|
|
|
|
|
|
76,376
|
|
Ending balance: collectively evaluated for impairment
|
|
|
4,726,816
|
|
|
|
4,467,461
|
|
|
|
383,403
|
|
|
|
43,038
|
|
|
|
9,620,718
|
|
Ending Balance: PCI Loans
|
|
|
|
|
|
|
1,023
|
|
|
|
1,514
|
|
|
|
|
|
|
|
2,537
|
|
ALLOWANCE FOR LOAN LOSSES AND RECORDED INVESTMENT IN LOANS
This table provides a rollforward of the allowance for loan losses by portfolio segment for three months ended March 31, 2015
(in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2015
|
|
|
|
Commercial
|
|
|
Real estate
|
|
|
Consumer
|
|
|
Leases
|
|
|
Total
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
55,349
|
|
|
$
|
10,725
|
|
|
$
|
9,921
|
|
|
$
|
145
|
|
|
$
|
76,140
|
|
Charge-offs
|
|
|
(412
|
)
|
|
|
(32
|
)
|
|
|
(2,704
|
)
|
|
|
|
|
|
|
(3,148
|
)
|
Recoveries
|
|
|
810
|
|
|
|
15
|
|
|
|
662
|
|
|
|
|
|
|
|
1,487
|
|
Provision
|
|
|
(88
|
)
|
|
|
1,204
|
|
|
|
1,901
|
|
|
|
(17
|
)
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
55,659
|
|
|
$
|
11,912
|
|
|
$
|
9,780
|
|
|
$
|
128
|
|
|
$
|
77,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually evaluated for impairment
|
|
$
|
1,223
|
|
|
$
|
2,925
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
4,148
|
|
Ending balance: collectively evaluated for impairment
|
|
|
54,436
|
|
|
|
8,987
|
|
|
|
9,780
|
|
|
|
128
|
|
|
|
73,331
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: loans
|
|
$
|
3,938,523
|
|
|
$
|
3,160,418
|
|
|
$
|
360,550
|
|
|
$
|
38,817
|
|
|
$
|
7,498,308
|
|
Ending balance: individually evaluated for impairment
|
|
|
13,839
|
|
|
|
14,844
|
|
|
|
|
|
|
|
|
|
|
|
28,683
|
|
Ending balance: collectively evaluated for impairment
|
|
|
3,924,684
|
|
|
|
3,145,574
|
|
|
|
360,550
|
|
|
|
38,817
|
|
|
|
7,469,625
|
|
20
UMB FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
Impaired Loans
This table provides an analysis of impaired loans by class at March 31, 2016 and December 31, 2015
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2016
|
|
|
|
Unpaid
Principal
Balance
|
|
|
Recorded
Investment
with No
Allowance
|
|
|
Recorded
Investment
with
Allowance
|
|
|
Total
Recorded
Investment
|
|
|
Related
Allowance
|
|
|
Average
Recorded
Investment
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
72,511
|
|
|
$
|
38,422
|
|
|
$
|
29,064
|
|
|
$
|
67,486
|
|
|
$
|
4,163
|
|
|
$
|
67,744
|
|
Asset-based
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Factoring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial credit card
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate construction
|
|
|
781
|
|
|
|
318
|
|
|
|
118
|
|
|
|
436
|
|
|
|
35
|
|
|
|
443
|
|
Real estate commercial
|
|
|
7,098
|
|
|
|
3,375
|
|
|
|
1,365
|
|
|
|
4,740
|
|
|
|
1,175
|
|
|
|
5,453
|
|
Real estate residential
|
|
|
961
|
|
|
|
899
|
|
|
|
|
|
|
|
899
|
|
|
|
|
|
|
|
919
|
|
Real estate HELOC
|
|
|
231
|
|
|
|
203
|
|
|
|
|
|
|
|
203
|
|
|
|
|
|
|
|
198
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer credit card
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer other
|
|
|
2,594
|
|
|
|
2,594
|
|
|
|
|
|
|
|
2,594
|
|
|
|
|
|
|
|
2,584
|
|
Leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
84,176
|
|
|
$
|
45,811
|
|
|
$
|
30,547
|
|
|
$
|
76,358
|
|
|
$
|
5,373
|
|
|
$
|
77,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2015
|
|
|
|
Unpaid
Principal
Balance
|
|
|
Recorded
Investment
with No
Allowance
|
|
|
Recorded
Investment
with
Allowance
|
|
|
Total
Recorded
Investment
|
|
|
Related
Allowance
|
|
|
Average
Recorded
Investment
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
72,739
|
|
|
$
|
40,648
|
|
|
$
|
27,356
|
|
|
$
|
68,004
|
|
|
$
|
5,668
|
|
|
$
|
41,394
|
|
Asset-based
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Factoring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial credit card
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate construction
|
|
|
782
|
|
|
|
331
|
|
|
|
118
|
|
|
|
449
|
|
|
|
42
|
|
|
|
802
|
|
Real estate commercial
|
|
|
7,117
|
|
|
|
4,891
|
|
|
|
1,275
|
|
|
|
6,166
|
|
|
|
154
|
|
|
|
7,768
|
|
Real estate residential
|
|
|
1,054
|
|
|
|
939
|
|
|
|
|
|
|
|
939
|
|
|
|
|
|
|
|
1,433
|
|
Real estate HELOC
|
|
|
214
|
|
|
|
193
|
|
|
|
|
|
|
|
193
|
|
|
|
|
|
|
|
162
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer credit card
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer other
|
|
|
2,574
|
|
|
|
2,574
|
|
|
|
|
|
|
|
2,574
|
|
|
|
|
|
|
|
1,795
|
|
Leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
84,480
|
|
|
$
|
49,576
|
|
|
$
|
28,749
|
|
|
$
|
78,325
|
|
|
$
|
5,864
|
|
|
$
|
53,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
UMB FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
Troubled Debt Restructurings
A loan modification is considered a troubled debt restructuring (TDR) when a concession has been granted to a debtor experiencing financial
difficulties. The Companys modifications generally include interest rate adjustments, principal reductions, and amortization and maturity date extensions. These modifications allow the debtor short-term cash relief to allow them to improve
their financial condition. The Companys restructured loans are individually evaluated for impairment and evaluated as part of the allowance for loan loss as described above in the Allowance for Loan Losses section of this note.
Purchased loans restructured after acquisition are not considered or reported as troubled debt restructurings if the loans evidenced credit
deterioration as of the Acquisition Date and are accounted for in pools. For the three months ended March 31, 2016, no purchased loans were modified as troubled debt restructurings after the Acquisition Date.
The Company had $823 thousand and $221 thousand in commitments to lend to borrowers with loan modifications classified as TDRs as of
March 31, 2016 and March 31, 2015, respectively. The Company monitors loan payments on an on-going basis to determine if a loan is considered to have a payment default. Determination of payment default involves analyzing the economic conditions that
exist for each customer and their ability to generate positive cash flows during the loan term. During the three month period ended March 31, 2015, the Company had one commercial real estate loan classified as a TDR with a payment default totaling
$178 thousand. A specific valuation allowance for the full amount of this loan had previously been established within the Companys ALL, and this loan was charged off against the ALL during that period.
This table provides a summary of loans restructured by class during the three months ended March 31, 2016 and 2015 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2016
|
|
|
Three Months Ended March 31, 2015
|
|
|
|
Number
of
Contracts
|
|
|
Pre-
Modification
Outstanding
Recorded
Investment
|
|
|
Post-
Modification
Outstanding
Recorded
Investment
|
|
|
Number
of
Contracts
|
|
|
Pre-
Modification
Outstanding
Recorded
Investment
|
|
|
Post-
Modification
Outstanding
Recorded
Investment
|
|
Troubled Debt Restructurings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
2
|
|
|
$
|
12,056
|
|
|
$
|
12,056
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
Asset-based
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Factoring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial credit card
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate HELOC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer credit card
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2
|
|
|
$
|
12,056
|
|
|
$
|
12,056
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
UMB FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
5. Securities
Securities Available for Sale
This table provides detailed information about securities available for sale at March 31, 2016 and December 31, 2015
(in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
U.S. Treasury
|
|
$
|
353,828
|
|
|
$
|
442
|
|
|
$
|
(9
|
)
|
|
$
|
354,261
|
|
U.S. Agencies
|
|
|
593,489
|
|
|
|
424
|
|
|
|
(144
|
)
|
|
|
593,769
|
|
Mortgage-backed
|
|
|
3,645,006
|
|
|
|
35,170
|
|
|
|
(11,638
|
)
|
|
|
3,668,538
|
|
State and political subdivisions
|
|
|
2,154,346
|
|
|
|
33,312
|
|
|
|
(1,056
|
)
|
|
|
2,186,602
|
|
Corporates
|
|
|
80,313
|
|
|
|
30
|
|
|
|
(201
|
)
|
|
|
80,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,826,982
|
|
|
$
|
69,378
|
|
|
$
|
(13,048
|
)
|
|
$
|
6,883,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
December 31, 2015
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
U.S. Treasury
|
|
$
|
350,354
|
|
|
$
|
1
|
|
|
$
|
(576
|
)
|
|
$
|
349,779
|
|
U.S. Agencies
|
|
|
667,414
|
|
|
|
7
|
|
|
|
(1,032
|
)
|
|
|
666,389
|
|
Mortgage-backed
|
|
|
3,598,115
|
|
|
|
12,420
|
|
|
|
(38,089
|
)
|
|
|
3,572,446
|
|
State and political subdivisions
|
|
|
2,116,543
|
|
|
|
23,965
|
|
|
|
(2,095
|
)
|
|
|
2,138,413
|
|
Corporates
|
|
|
80,585
|
|
|
|
|
|
|
|
(663
|
)
|
|
|
79,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,813,011
|
|
|
$
|
36,393
|
|
|
$
|
(42,455
|
)
|
|
$
|
6,806,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents contractual maturity information for securities available for sale at March 31,
2016
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Value
|
|
Due in 1 year or less
|
|
$
|
1,056,562
|
|
|
$
|
1,057,412
|
|
Due after 1 year through 5 years
|
|
|
1,162,717
|
|
|
|
1,176,382
|
|
Due after 5 years through 10 years
|
|
|
849,567
|
|
|
|
866,783
|
|
Due after 10 years
|
|
|
113,130
|
|
|
|
114,197
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,181,976
|
|
|
|
3,214,774
|
|
Mortgage-backed securities
|
|
|
3,645,006
|
|
|
|
3,668,538
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale
|
|
$
|
6,826,982
|
|
|
$
|
6,883,312
|
|
|
|
|
|
|
|
|
|
|
Securities may be disposed of before contractual maturities due to sales by the Company or because borrowers
may have the right to call or prepay obligations with or without call or prepayment penalties.
For the three months ended March 31, 2016,
proceeds from the sales of securities available for sale were $282.0 million compared to $466.4 million for the same period in 2015. Securities transactions resulted in gross realized gains of $2.9 million and $7.3 million for the three months
ended March 31, 2016 and 2015. There were no gross realized losses for the three months ended March 31, 2016 and 2015.
Securities available for sale with a market value of $5.7 billion at March 31, 2016 and $5.9 billion at December 31, 2015 were pledged to
secure U.S. Government deposits, other public deposits and certain trust deposits as required by law. Of this amount, securities with a market value of $1.5 billion at March 31, 2016 and $1.6 billion at December 31, 2015 were pledged at the
Federal Reserve Discount Window but were unencumbered as of those dates.
23
UMB FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
The following table shows the Companys available for sale investments gross
unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at March 31, 2016 and December 31, 2015
(in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
Less than 12 months
|
|
|
12 months or more
|
|
|
Total
|
|
Description of Securities
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
U.S. Treasury
|
|
$
|
14,962
|
|
|
$
|
(9
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
14,962
|
|
|
$
|
(9
|
)
|
U.S. Agencies
|
|
|
170,523
|
|
|
|
(144
|
)
|
|
|
|
|
|
|
|
|
|
|
170,523
|
|
|
|
(144
|
)
|
Mortgage-backed
|
|
|
437,084
|
|
|
|
(2,352
|
)
|
|
|
447,502
|
|
|
|
(9,286
|
)
|
|
|
884,586
|
|
|
|
(11,638
|
)
|
State and political subdivisions
|
|
|
295,146
|
|
|
|
(906
|
)
|
|
|
20,355
|
|
|
|
(150
|
)
|
|
|
315,501
|
|
|
|
(1,056
|
)
|
Corporates
|
|
|
13,088
|
|
|
|
(14
|
)
|
|
|
50,995
|
|
|
|
(187
|
)
|
|
|
64,083
|
|
|
|
(201
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily-impaired debt securities available for sale
|
|
$
|
930,803
|
|
|
$
|
(3,425
|
)
|
|
$
|
518,852
|
|
|
$
|
(9,623
|
)
|
|
$
|
1,449,655
|
|
|
$
|
(13,048
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Less than 12 months
|
|
|
12 months or more
|
|
|
Total
|
|
Description of Securities
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
U.S. Treasury
|
|
$
|
344,556
|
|
|
$
|
(576
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
344,556
|
|
|
$
|
(576
|
)
|
U.S. Agencies
|
|
|
615,993
|
|
|
|
(1,032
|
)
|
|
|
|
|
|
|
|
|
|
|
615,993
|
|
|
|
(1,032
|
)
|
Mortgage-backed
|
|
|
2,056,316
|
|
|
|
(21,013
|
)
|
|
|
426,959
|
|
|
|
(17,076
|
)
|
|
|
2,483,275
|
|
|
|
(38,089
|
)
|
State and political subdivisions
|
|
|
479,197
|
|
|
|
(1,316
|
)
|
|
|
60,324
|
|
|
|
(779
|
)
|
|
|
539,521
|
|
|
|
(2,095
|
)
|
Corporates
|
|
|
29,126
|
|
|
|
(183
|
)
|
|
|
50,796
|
|
|
|
(480
|
)
|
|
|
79,922
|
|
|
|
(663
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily-impaired debt securities available for sale
|
|
$
|
3,525,188
|
|
|
$
|
(24,120
|
)
|
|
$
|
538,079
|
|
|
$
|
(18,335
|
)
|
|
$
|
4,063,267
|
|
|
$
|
(42,455
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The unrealized losses in the Companys investments in U.S. treasury obligations, U.S. government
agencies, Government Sponsored Entity (GSE) mortgage-backed securities, municipal securities, and corporates were caused by changes in interest rates. The Company does not have the intent to sell these securities and does not believe it is more
likely than not that the Company will be required to sell these securities before a recovery of amortized cost. The Company expects to recover its cost basis in the securities and does not consider these investments to be other-than-temporarily
impaired at March 31, 2016.
Securities Held to Maturity
The table below provides detailed information for securities held to maturity at March 31, 2016 and December 31, 2015
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Fair
|
|
March 31, 2016
|
|
Cost
|
|
|
Gains
|
|
|
Value
|
|
State and political subdivisions
|
|
$
|
804,652
|
|
|
$
|
54,676
|
|
|
$
|
859,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
State and political subdivisions
|
|
$
|
667,106
|
|
|
$
|
24,273
|
|
|
$
|
691,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
UMB FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
The following table presents contractual maturity information for securities held to maturity
at March 31, 2016
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Value
|
|
Due in 1 year or less
|
|
$
|
15,971
|
|
|
$
|
17,056
|
|
Due after 1 year through 5 years
|
|
|
75,674
|
|
|
|
80,816
|
|
Due after 5 years through 10 years
|
|
|
463,546
|
|
|
|
495,044
|
|
Due after 10 years
|
|
|
249,461
|
|
|
|
266,412
|
|
|
|
|
|
|
|
|
|
|
Total securities held to maturity
|
|
$
|
804,652
|
|
|
$
|
859,328
|
|
|
|
|
|
|
|
|
|
|
Expected maturities will differ from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
There were no sales of securities held to maturity during the first
three months of 2016 or 2015.
Trading Securities
The net unrealized gains on trading securities at March 31, 2016 and March 31, 2015 were $48 thousand and $30 thousand, respectively, and were
included in trading and investment banking income on the consolidated statements of income.
Other Securities
The table below provides detailed information for Federal Reserve Bank (FRB) stock and Federal Home Loan Bank (FHLB) stock and other securities
at March 31, 2016 and December 31, 2015
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
March 31, 2016
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
FRB and FHLB stock
|
|
$
|
33,667
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
33,667
|
|
Other securities marketable
|
|
|
4
|
|
|
|
6,768
|
|
|
|
|
|
|
|
6,772
|
|
Other securities non-marketable
|
|
|
23,226
|
|
|
|
927
|
|
|
|
(1
|
)
|
|
|
24,152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other securities
|
|
$
|
56,897
|
|
|
$
|
7,695
|
|
|
$
|
(1
|
)
|
|
$
|
64,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
FRB and FHLB stock
|
|
$
|
33,215
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
33,215
|
|
Other securities marketable
|
|
|
5
|
|
|
|
7,159
|
|
|
|
|
|
|
|
7,164
|
|
Other securities non-marketable
|
|
|
23,855
|
|
|
|
964
|
|
|
|
|
|
|
|
24,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other securities
|
|
$
|
57,075
|
|
|
$
|
8,123
|
|
|
$
|
|
|
|
$
|
65,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in FRB stock is based on the capital structure of the investing bank, and investment in FHLB stock
is mainly tied to the level of borrowings from the FHLB. These holdings are carried at cost. Other marketable and non-marketable securities include Prairie Capital Management (PCM) alternative investments in hedge funds and private equity funds,
which are accounted for as equity-method investments. The fair value of other marketable securities includes alternative investment securities of $6.8 million at March 31, 2016 and $7.2 million at December 31, 2015. The fair value of other
non-marketable securities includes alternative investment securities of $2.1 million at March 31, 2016 and $2.0 million at December 31, 2015. Unrealized gains or losses on alternative investments are recognized in the Equity (loss) earnings on
alternative investments line of the Companys Consolidated Statements of Income.
25
UMB FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
6. Goodwill and Other Intangibles
Changes in the carrying amount of goodwill for the periods ended March 31, 2016 and December 31, 2015 by reportable segment
are as follows
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank
|
|
|
Institutional
Investment
Management
|
|
|
Asset
Servicing
|
|
|
Total
|
|
Balances as of January 1, 2016
|
|
$
|
161,341
|
|
|
$
|
47,529
|
|
|
$
|
19,476
|
|
|
$
|
228,346
|
|
Acquisition of Marquette
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances as of March 31, 2016
|
|
$
|
161,391
|
|
|
$
|
47,529
|
|
|
$
|
19,476
|
|
|
$
|
228,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances as of January 1, 2015
|
|
$
|
142,753
|
|
|
$
|
47,529
|
|
|
$
|
19,476
|
|
|
$
|
209,758
|
|
Acquisition of Marquette
|
|
|
18,588
|
|
|
|
|
|
|
|
|
|
|
|
18,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances as of December 31, 2015
|
|
$
|
161,341
|
|
|
$
|
47,529
|
|
|
$
|
19,476
|
|
|
$
|
228,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Following are the finite-lived intangible assets that continue to be subject to amortization as of March 31,
2016 and December 31, 2015
(in thousands)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2016
|
|
|
|
Gross Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net Carrying
Amount
|
|
Core deposit intangible assets
|
|
$
|
47,527
|
|
|
$
|
36,433
|
|
|
$
|
11,094
|
|
Customer relationships
|
|
|
107,460
|
|
|
|
75,902
|
|
|
|
31,558
|
|
Other intangible assets
|
|
|
4,198
|
|
|
|
3,294
|
|
|
|
904
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets
|
|
$
|
159,185
|
|
|
$
|
115,629
|
|
|
$
|
43,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2015
|
|
|
|
Gross Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net Carrying
Amount
|
|
Core deposit intangible assets
|
|
$
|
36,497
|
|
|
$
|
33,613
|
|
|
$
|
2,884
|
|
Core deposit intangible-Marquette acquisition
|
|
|
11,030
|
|
|
|
1,838
|
|
|
|
9,192
|
|
Customer relationships
|
|
|
104,560
|
|
|
|
73,496
|
|
|
|
31,064
|
|
Customer relationship-Marquette acquisition
|
|
|
2,900
|
|
|
|
338
|
|
|
|
2,562
|
|
Other intangible assets
|
|
|
3,247
|
|
|
|
2,841
|
|
|
|
406
|
|
Other intangible assets-Marquette acquisition
|
|
|
951
|
|
|
|
277
|
|
|
|
674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets
|
|
$
|
159,185
|
|
|
$
|
112,403
|
|
|
$
|
46,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Following is the aggregate amortization expense recognized in each period
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2016
|
|
|
2015
|
Aggregate amortization expense
|
|
$
|
3,226
|
|
|
$2,755
|
|
|
|
|
|
|
|
Estimated amortization expense of intangible assets on future years
(in thousands):
|
|
|
|
|
|
|
|
|
For the nine months ending December 31, 2016
|
|
$
|
9,064
|
|
For the year ending December 31, 2017
|
|
|
10,180
|
|
For the year ending December 31, 2018
|
|
|
7,202
|
|
For the year ending December 31, 2019
|
|
|
5,822
|
|
For the year ending December 31, 2020
|
|
|
4,487
|
|
For the year ending December 31, 2021
|
|
|
3,101
|
|
26
UMB FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
7. Securities Sold Under Agreements to Repurchase
The Company utilizes repurchase agreements to facilitate the needs of customers and to facilitate secured short-term funding
needs. Repurchase agreements are stated at the amount of cash received in connection with the transaction. The Company monitors collateral levels on a continuous basis and may be required to provide additional collateral based on the fair value of
the underlying securities. Securities pledged as collateral under repurchase agreements are maintained with the Companys safekeeping agents.
The table below presents the remaining contractual maturities of repurchase agreements outstanding at March 31, 2016, in addition to the
various types of marketable securities that have been pledged as collateral for these borrowings
(in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2016
|
|
|
|
Remaining Contractual Maturities of the Agreements
|
|
|
|
Overnight & Continuous
|
|
|
Over 90 Days
|
|
|
Total
|
|
Repurchase agreements, secured by:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury
|
|
$
|
117,701
|
|
|
$
|
|
|
|
$
|
117,701
|
|
U.S. Agencies
|
|
|
1,496,723
|
|
|
|
3,100
|
|
|
|
1,499,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total repurchase agreements
|
|
$
|
1,614,424
|
|
|
$
|
3,100
|
|
|
$
|
1,617,524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8. Business Segment Reporting
The Company has strategically aligned its operations into the following three reportable segments (collectively, the
Business Segments): Bank, Institutional Investment Management, and Asset Servicing. Senior executive officers regularly evaluate business segment financial results produced by the Companys internal management reporting system in
deciding how to allocate resources and assess performance for individual Business Segments. Previously, the Company had the following four Business Segments: Bank, Institutional Investment Management, Asset Servicing, and Payment
Solutions. In the first quarter of 2016, the Company merged the Payments Solutions segment into the Bank segment to better reflect how the core businesses, products and services are being evaluated by management currently. The
Companys Payment Solutions leadership structure and financial performance assessments are now included in the Bank segment, and accordingly, the reportable segments were realigned to reflect these changes. For comparability purposes, amounts
in all periods are based on methodologies in effect at March 31, 2016. Previously reported results have been reclassified to conform to the current organizational structure.
The following summaries provide information about the activities of each segment:
The
Bank
provides a full range of banking services to commercial, retail, government and correspondent bank customers through the
Companys branches, call center, internet banking, and ATM network. Services
include traditional commercial and consumer banking, treasury management, leasing, foreign exchange, consumer and commercial credit and debit card, prepaid
debit card solutions, healthcare services, institutional cash management, merchant bankcard, wealth management, brokerage, insurance, capital markets, investment banking, corporate trust, and correspondent banking.
Institutional Investment Management
provides equity and fixed income investment strategies in the intermediary and institutional
markets via mutual funds, traditional separate accounts and sub-advisory relationships.
Asset Servicing
provides services to the
asset management industry, supporting a range of investment products, including mutual funds, alternative investments and managed accounts. Services include fund administration, fund accounting, investor services, transfer agency, distribution,
marketing, custody, alternative investment services, and collective and multiple-series trust services.
27
UMB FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
Business Segment Information
Segment financial results were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2016
|
|
|
|
Bank
|
|
|
Institutional
Investment
Management
|
|
|
Asset
Servicing
|
|
|
Total
|
|
Net interest income
|
|
$
|
115,271
|
|
|
$
|
|
|
|
$
|
2,621
|
|
|
$
|
117,892
|
|
Provision for loan losses
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
Noninterest income
|
|
|
75,441
|
|
|
|
18,416
|
|
|
|
22,493
|
|
|
|
116,350
|
|
Noninterest expense
|
|
|
143,361
|
|
|
|
17,233
|
|
|
|
20,150
|
|
|
|
180,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes
|
|
|
42,351
|
|
|
|
1,183
|
|
|
|
4,964
|
|
|
|
48,498
|
|
Income tax expense
|
|
|
10,706
|
|
|
|
289
|
|
|
|
1,258
|
|
|
|
12,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
31,645
|
|
|
$
|
894
|
|
|
$
|
3,706
|
|
|
$
|
36,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets
|
|
$
|
17,885,000
|
|
|
$
|
63,000
|
|
|
$
|
1,387,000
|
|
|
$
|
19,335,000
|
|
|
|
|
|
Three Months Ended March 31, 2015
|
|
|
|
Bank
|
|
|
Institutional
Investment
Management
|
|
|
Asset
Servicing
|
|
|
Total
|
|
Net interest income
|
|
$
|
89,360
|
|
|
$
|
1
|
|
|
$
|
997
|
|
|
$
|
90,358
|
|
Provision for loan losses
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
|
3,000
|
|
Noninterest income
|
|
|
74,689
|
|
|
|
27,084
|
|
|
|
23,434
|
|
|
|
125,207
|
|
Noninterest expense
|
|
|
125,178
|
|
|
|
17,961
|
|
|
|
21,274
|
|
|
|
164,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes
|
|
|
35,871
|
|
|
|
9,124
|
|
|
|
3,157
|
|
|
|
48,152
|
|
Income tax expense
|
|
|
10,715
|
|
|
|
2,750
|
|
|
|
922
|
|
|
|
14,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
25,156
|
|
|
$
|
6,374
|
|
|
$
|
2,235
|
|
|
$
|
33,765
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets
|
|
$
|
15,814,000
|
|
|
$
|
75,000
|
|
|
$
|
943,000
|
|
|
$
|
16,832,000
|
|
9. Acquisition
On May 31, 2015, the Company acquired 100% of the outstanding common shares of Marquette Financial Companies. Marquette was
a privately held financial services company with a portfolio of businesses and operated 13 branches in Arizona and Texas, two national commercial specialty-lending businesses focused on asset-based lending and accounts receivable factoring, as well
as an asset-management firm. As a result of the acquisition, the Company increased its presence in Arizona and Texas and supplemented the Companys commercial-banking services with factoring and asset-based lending businesses. As of the close
of trading on the Acquisition Date, the beneficial owners of Marquette received 9.2295 shares of the Companys common stock for each share of Marquette common stock owned at that date (approximately 3.47 million shares total). The market value
of the shares of the Companys common stock issued at the effective time of the merger was approximately $179.7 million, based on the closing stock price of the Companys common stock of $51.79 on May 29, 2015. The transaction was
accounted for using the purchased method of accounting in accordance with FASB ASC Topic 805,
Business Combinations
. Accordingly, the purchase price was allocated based on the estimated fair market value of the assets and liabilities
acquired.
The following table summarizes the net assets acquired (at fair value) and consideration transferred for Marquette (
in
thousands, except for per share data):
28
UMB FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
|
|
|
|
|
|
|
Fair Value
May 31, 2015
|
|
Assets
|
|
|
|
|
Loans
|
|
$
|
980,404
|
|
Investment securities
|
|
|
177,694
|
|
Cash and due from banks
|
|
|
95,351
|
|
Premises and equipment, net
|
|
|
11,508
|
|
Identifiable intangible assets
|
|
|
14,881
|
|
Other assets
|
|
|
32,336
|
|
|
|
|
|
|
Total assets acquired
|
|
|
1,312,174
|
|
Liabilities
|
|
|
|
|
Noninterest-bearing deposits
|
|
|
226,161
|
|
Interest-bearing deposits
|
|
|
708,675
|
|
Short-term debt
|
|
|
112,133
|
|
Long-term debt
|
|
|
89,971
|
|
Other liabilities
|
|
|
14,135
|
|
|
|
|
|
|
Total liabilities assumed
|
|
|
1,151,075
|
|
Net identifiable assets acquired
|
|
|
161,099
|
|
Goodwill acquired
|
|
|
18,638
|
|
|
|
|
|
|
Net assets acquired
|
|
$
|
179,737
|
|
|
|
|
|
|
Consideration:
|
|
|
|
|
Companys common shares issued
|
|
|
3,470
|
|
Purchase price per share of the Companys common stock
|
|
$
|
51.79
|
|
|
|
|
|
|
Fair value of total consideration transferred
|
|
$
|
179,737
|
|
|
|
|
|
|
In the Marquette acquisition, the Company purchased $980.4 million of loans at fair value. All non-performing
loans and select other classified loan relationships considered by management to be credit impaired are accounted for pursuant to ASC Topic 310-30, as previously discussed within Note 4, Loans and Allowance for Loan Losses.
The Company assumed long-term debt obligations with an aggregate balance of $103.1 million and an aggregate fair value of $65.5 million as of
the Acquisition Date payable to four unconsolidated trusts (Marquette Capital Trust I, Marquette Capital Trust II, Marquette Capital Trust III, and Marquette Capital Trust IV) that have issued trust preferred securities. Interest rates on trust
preferred securities trusts are tied to the three-month LIBOR rate with spreads ranging from 133 basis points to 160 basis points and reset quarterly. The trust preferred securities have maturity dates ranging from January 2036 to September 2036.
The amount of goodwill arising from the acquisition reflects the Companys increased market share and related synergies that are
expected to result from combining the operations of UMB and Marquette. All of the goodwill was assigned to the Bank segment. In accordance with ASC 350,
Intangibles-Goodwill and Other
, goodwill will not be amortized but will be subject to at
least an annual impairment test. As the Company acquired tax deductible goodwill in excess of the amount reported in the consolidated financial statements, the goodwill is expected to be deductible for tax purposes. The fair value of the
acquired identifiable intangible assets of $14.9 million is comprised of a core deposit intangible of $11.0 million, customer lists of $2.9 million and non-compete agreements of $1.0 million.
29
UMB FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
The results of Marquette are included in the results of the Company subsequent to the
Acquisition Date. For the three months ended March 31, 2016, acquisition expenses recognized in Noninterest expense in the Companys Consolidated Statements of Income totaled $3.0 million. This total included $828 thousand of severance in
Salaries and employee benefits and $1.6 million in Legal and consulting fees.
10. Commitments, Contingencies and Guarantees
In the normal course of business, the Company is party to financial instruments with off-balance-sheet risk in order to meet
the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit, commercial letters of credit, standby letters of credit, futures contracts,
forward foreign exchange contracts and spot foreign exchange contracts. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the consolidated balance sheet. The
contract or notional amount of those instruments reflects the extent of involvement the Company has in particular classes of financial instruments. Many of the commitments expire without being drawn upon, therefore, the total amount of these
commitments does not necessarily represent the future cash requirements of the Company.
The Companys exposure to credit loss in the
event of nonperformance by the counterparty to the financial instruments for commitments to extend credit, commercial letters of credit, and standby letters of credit is represented by the contract or notional amount of those instruments. The
Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.
The
following table summarizes the Companys off-balance sheet financial instruments.
Contract or Notional Amount
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Commitments to extend credit for loans (excluding credit card loans)
|
|
$
|
6,392,371
|
|
|
$
|
6,671,794
|
|
Commitments to extend credit under credit card loans
|
|
|
3,049,160
|
|
|
|
2,986,581
|
|
Commercial letters of credit
|
|
|
9,706
|
|
|
|
11,541
|
|
Standby letters of credit
|
|
|
352,526
|
|
|
|
360,468
|
|
Futures contracts
|
|
|
500
|
|
|
|
|
|
Forward contracts
|
|
|
42,078
|
|
|
|
75,611
|
|
Spot foreign exchange contracts
|
|
|
2,084
|
|
|
|
10,391
|
|
11. Derivatives and Hedging Activities
Risk Management Objective of Using Derivatives
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its
exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and
duration of its assets and liabilities. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts,
the values of which are determined by interest rates. The Companys derivative financial instruments are used to manage differences in the amount, timing, and duration of the Companys known or expected cash receipts and its known or
expected cash payments principally related to certain fixed rate assets and liabilities. The Company also has interest rate derivatives that result from a service provided to certain qualifying customers and, therefore, are not used to manage
interest rate risk of the Companys assets or liabilities. The Company has entered into an offsetting position for each of these derivative instruments with a matching instrument from another financial institution in order to minimize its net
risk exposure resulting from such transactions.
30
UMB FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
Fair Values of Derivative Instruments on the Consolidated Balance Sheet
The table below presents the fair value of the Companys derivative financial instruments as of March 31, 2016 and December 31, 2015.
The Companys derivative asset and derivative liability are located within Other assets and Other liabilities, respectively, on the Companys Consolidated Balance Sheets.
This table provides a summary of the fair value of the Companys derivative assets and liabilities as of March 31, 2016 and December 31,
2015
(in thousands)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives
|
|
|
Liability Derivatives
|
|
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
Fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Products:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments
|
|
$
|
18,882
|
|
|
$
|
11,700
|
|
|
$
|
19,455
|
|
|
$
|
11,921
|
|
Derivatives designated as hedging instruments
|
|
|
605
|
|
|
|
603
|
|
|
|
4,671
|
|
|
|
337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
19,487
|
|
|
$
|
12,303
|
|
|
$
|
24,126
|
|
|
$
|
12,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Hedges of Interest Rate Risk
The Company is exposed to changes in the fair value of certain of its fixed rate assets and liabilities due to changes in the benchmark
interest rate, LIBOR. Interest rate swaps designated as fair value hedges involve either making fixed rate payments to a counterparty in exchange for the Company receiving variable rate payments, or making variable rate payments to a counterparty in
exchange for the Company receiving fixed rate payments, over the life of the agreements without the exchange of the underlying notional amount. As of March 31, 2016, the Company had two interest rate swaps with a notional amount of $16.0 million
that were designated as fair value hedges of interest rate risk associated with the Companys fixed rate loan assets and brokered time deposits.
For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on
the hedged item attributable to the hedged risk are recognized in earnings. The Company includes the gain or loss on the hedged items in the same line item as the offsetting loss or gain on the related derivatives.
Cash Flow Hedges of Interest Rate Risk
The Company is exposed to changes in the fair value of certain of its variable-rate liabilities due to changes in the benchmark interest rate,
LIBOR. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional
amount. As of March 31, 2016, the Company had two interest rate swaps with a notional amount of $51.5 million that were designated as cash flow hedges of interest rate risk associated with the Companys variable rate subordinated debentures
issued by Marquette Capital Trusts III and IV. For derivatives designated and that qualify as cash flow hedges, the effective portion of changes in fair value is recorded in accumulated other comprehensive income (AOCI) and is subsequently
reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly into earnings gain or loss on the derivative as well as
the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in earnings. During the three months ended March 31, 2016, the Company recognized net losses of $4.1 million in AOCI for the effective portion of the
change in fair value of these cash flow hedges. During the three months ended March 31, 2016, the Company did not record any hedge ineffectiveness in earnings. Amounts reported in AOCI related to derivatives will be reclassified to Interest expense
as interest payments are received or paid on the Companys derivatives. The Company does not expect to reclassify any amounts from AOCI to Interest expense during the next 12 months as the Companys derivatives are effective after December
2018. As of March 31, 2016, the Company is hedging its exposure to the variability in future cash flows for forecasted transactions over a maximum period of 20.5 years.
31
UMB FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
Non-designated Hedges
The remainder of the Companys derivatives are not designated in qualifying hedging relationships. Derivatives not designated as hedges
are not speculative and result from a service the Company provides to certain customers which the Company implemented in 2010. The Company executes interest rate swaps with commercial banking customers to facilitate their respective risk management
strategies. Those interest rate swaps are simultaneously offset by interest rate swaps that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate swaps
associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. As of March 31, 2016, the Company had 40 interest
rate swaps with an aggregate notional amount of $511.8 million related to this program. During the three months ended March 31, 2016 and 2015, the Company recognized net losses of $352 thousand and $106 thousand, respectively, related to changes in
the fair value of these swaps.
Effect of Derivative Instruments on the Consolidated Statements of Income and Consolidated Statements of Comprehensive
Income
This table provides a summary of the amount of gain or loss recognized in other noninterest expense in the Consolidated
Statements of Income related to the Companys derivative assets and liabilities as of March 31, 2016 and March 31, 2015
(in thousands)
:
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain (Loss) Recognized
|
|
|
|
For the Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2016
|
|
|
2015
|
|
Interest Rate Products
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments
|
|
$
|
(352
|
)
|
|
$
|
(106
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(352
|
)
|
|
$
|
(106
|
)
|
|
|
|
|
|
|
|
|
|
Interest Rate Products
|
|
|
|
|
|
|
|
|
Derivatives designated as hedging instruments
|
|
|
|
|
|
|
|
|
Fair value adjustments on derivatives
|
|
$
|
(193
|
)
|
|
$
|
(115
|
)
|
Fair value adjustments on hedged items
|
|
|
192
|
|
|
|
110
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(1
|
)
|
|
$
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
This table provides a summary of the amount of gain or loss recognized in AOCI in the Consolidated Statements
of Comprehensive Income related to the Companys derivative assets and liabilities as of March 31, 2016 and March 31, 2015
(in thousands)
:
|
|
|
|
|
|
|
|
|
|
|
Amount of Loss Recognized in Other
Comprehensive Income on Derivatives
(Effective Portion)
|
|
|
|
For the Three Months Ended
|
|
|
|
March 31,
|
|
Derivatives in Cash Flow Hedging Relationships
|
|
2016
|
|
|
2015
|
|
Interest rate products
|
|
|
|
|
|
|
|
|
Derivatives designed as cash flow hedging instruments
|
|
$
|
(4,140
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(4,140
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
32
UMB FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
Credit-risk-related Contingent Features
The Company has agreements with certain of its derivative counterparties that contain a provision where if the Company defaults on any of its
indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations.
As of March 31, 2016 the termination value of derivatives in a net liability position, which includes accrued interest, related to these
agreements was $24.6 million. The Company has minimum collateral posting thresholds with certain of its derivative counterparties and has not yet reached its minimum collateral posting threshold under these agreements. If the Company had breached
any of these provisions at March 31, 2016, it could have been required to settle its obligations under the agreements at the termination value.
12. Fair Value Measurements
The following table presents information about the Companys assets measured at fair value on a recurring basis as of
March 31, 2016, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value.
Fair values determined by Level 1 inputs utilize quoted prices in active markets for identical assets and liabilities that the Company has the
ability to access. Fair values determined by Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for
similar assets or liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are
unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the
hierarchy. In such cases, the fair value is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
33
UMB FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
Assets and liabilities measured at fair value on a recurring basis as of March 31, 2016
and December 31, 2015
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement As of March 31, 2016
|
|
Description
|
|
March 31,
2016
|
|
|
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury
|
|
$
|
400
|
|
|
$
|
400
|
|
|
$
|
|
|
|
$
|
|
|
U.S. Agencies
|
|
|
2,077
|
|
|
|
|
|
|
|
2,077
|
|
|
|
|
|
State and political subdivisions
|
|
|
6,294
|
|
|
|
|
|
|
|
6,294
|
|
|
|
|
|
Trading - other
|
|
|
18,008
|
|
|
|
17,760
|
|
|
|
248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading securities
|
|
|
26,779
|
|
|
|
18,160
|
|
|
|
8,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury
|
|
|
354,261
|
|
|
|
354,261
|
|
|
|
|
|
|
|
|
|
U.S. Agencies
|
|
|
593,769
|
|
|
|
|
|
|
|
593,769
|
|
|
|
|
|
Mortgage-backed
|
|
|
3,668,538
|
|
|
|
|
|
|
|
3,668,538
|
|
|
|
|
|
State and political subdivisions
|
|
|
2,186,602
|
|
|
|
|
|
|
|
2,186,602
|
|
|
|
|
|
Corporates
|
|
|
80,142
|
|
|
|
80,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale securities
|
|
|
6,883,312
|
|
|
|
434,403
|
|
|
|
6,448,909
|
|
|
|
|
|
Company-owned life insurance
|
|
|
31,137
|
|
|
|
|
|
|
|
31,137
|
|
|
|
|
|
Bank-owned life
insurance
|
|
|
204,736
|
|
|
|
|
|
|
|
204,736
|
|
|
|
|
|
Derivatives
|
|
|
19,487
|
|
|
|
|
|
|
|
19,487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
7,165,451
|
|
|
$
|
452,563
|
|
|
$
|
6,712,888
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation
|
|
$
|
39,582
|
|
|
$
|
39,582
|
|
|
$
|
|
|
|
$
|
|
|
Derivatives
|
|
|
24,126
|
|
|
|
|
|
|
|
24,126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
63,708
|
|
|
$
|
39,582
|
|
|
$
|
24,126
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34
UMB FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement as of December 31, 2015
|
|
Description
|
|
December 31,
2015
|
|
|
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury
|
|
$
|
400
|
|
|
$
|
400
|
|
|
$
|
|
|
|
$
|
|
|
U.S. Agencies
|
|
|
1,309
|
|
|
|
|
|
|
|
1,309
|
|
|
|
|
|
State and political subdivisions
|
|
|
10,200
|
|
|
|
|
|
|
|
10,200
|
|
|
|
|
|
Trading - other
|
|
|
17,708
|
|
|
|
17,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading securities
|
|
|
29,617
|
|
|
|
18,108
|
|
|
|
11,509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury
|
|
|
349,779
|
|
|
|
349,779
|
|
|
|
|
|
|
|
|
|
U.S. Agencies
|
|
|
666,389
|
|
|
|
|
|
|
|
666,389
|
|
|
|
|
|
Mortgage-backed
|
|
|
3,572,446
|
|
|
|
|
|
|
|
3,572,446
|
|
|
|
|
|
State and political subdivisions
|
|
|
2,138,413
|
|
|
|
|
|
|
|
2,138,413
|
|
|
|
|
|
Corporates
|
|
|
79,922
|
|
|
|
79,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale securities
|
|
|
6,806,949
|
|
|
|
429,701
|
|
|
|
6,377,248
|
|
|
|
|
|
Company-owned life insurance
|
|
|
31,205
|
|
|
|
|
|
|
|
31,205
|
|
|
|
|
|
Bank-owned life
insurance
|
|
|
202,991
|
|
|
|
|
|
|
|
202,991
|
|
|
|
|
|
Derivatives
|
|
|
12,303
|
|
|
|
|
|
|
|
12,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
7,083,065
|
|
|
$
|
447,809
|
|
|
$
|
6,635,256
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation
|
|
|
32,937
|
|
|
$
|
32,937
|
|
|
$
|
|
|
|
$
|
|
|
Contingent consideration liability
|
|
|
17,718
|
|
|
|
|
|
|
|
|
|
|
|
17,718
|
|
Derivatives
|
|
|
12,258
|
|
|
|
|
|
|
|
12,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
62,913
|
|
|
$
|
32,937
|
|
|
$
|
12,258
|
|
|
$
|
17,718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table reconciles the beginning and ending fair value of balances of the contingent consideration
liability:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2016
|
|
|
2015
|
|
Beginning Balance
|
|
$
|
17,718
|
|
|
$
|
53,411
|
|
Payment of contingent considerations on acquisitions
|
|
|
(17,784
|
)
|
|
|
(18,702
|
)
|
Fair value adjustments
|
|
|
66
|
|
|
|
(2,264
|
)
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
|
|
|
$
|
32,445
|
|
|
|
|
|
|
|
|
|
|
Valuation methods for instruments measured at fair value on a recurring basis
The following methods and assumptions were used to estimate the fair value of each class of financial instruments measured on a recurring
basis:
Trading Securities
Fair values for trading securities (including financial futures), are based on quoted market prices
where available. If quoted market prices are not available, fair values are based on quoted market prices for similar securities.
35
UMB FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
Securities Available for Sale and Investment Securities
Fair values are based on
quoted market prices or dealer quotes, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. Prices are provided by third-party pricing services and are based on
observable market inputs. On an annual basis, the Company compares a sample of these prices to other independent sources for the same securities. Additionally, throughout the year if securities are sold, comparisons are made between the pricing
services prices and the market prices at which the securities were sold. Variances are analyzed, and, if appropriate, additional research is conducted with the third-party pricing services. Based on this research, the pricing services may
affirm or revise their quoted price. No significant adjustments have been made to the prices provided by the pricing services. The pricing services also provide documentation on an ongoing basis that includes reference data, inputs and methodology
by asset class, which is reviewed to ensure that security placement within the fair value hierarchy is appropriate.
Company-owned Life
Insurance
Fair value is equal to the cash surrender value of the life insurance policies.
Bank-owned Life Insurance
Fair value
is equal to the cash surrender value of the life insurance policies.
Derivatives
Fair values are determined using valuation
techniques including discounted cash flow analysis on the expected cash flows from each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including
interest rate curves, foreign exchange rates, and implied volatilities. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterpartys nonperformance risk in the
fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds,
mutual puts, and guarantees.
Deferred Compensation
Fair values are based on quoted market prices or dealer quotes.
Contingent Consideration
The fair value of contingent consideration liabilities are derived from a discounted cash flow model of future
contingent payments. The valuation of these liabilities are estimated by a collaborative effort of the Companys mergers and acquisitions group, business unit management, and the corporate accounting group. These future contingent payments are
calculated based on estimates of future income and expense from each acquisition. These estimated cash flows are projected by the business unit management and reviewed by the mergers and acquisitions group. To obtain a current valuation of these
projected cash flows, an expected present value technique is utilized to calculate a discount rate. The cash flow projections and discount rates are reviewed quarterly and updated as market conditions necessitate. Potential valuation adjustments are
made as future income and expense projections for each acquisition are made which affect the calculation of the related contingent consideration payment. These adjustments are recorded through noninterest expense.
Assets measured at fair value on a non-recurring basis as of March 31, 2016 and December 31, 2015
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement at March 31, 2016 Using
|
|
Description
|
|
March 31,
2016
|
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Total
Gains
(Losses)
Recognized
During the
Three Months
Ended
March 31
|
|
Impaired loans
|
|
$
|
25,174
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
25,174
|
|
|
$
|
491
|
|
Other real estate owned
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
25,274
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
25,274
|
|
|
$
|
491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
UMB FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement at December 31, 2015 Using
|
|
Description
|
|
December 31,
2015
|
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Total
Gains
(Losses)
Recognized
During the
Twelve Months
Ended
December 31
|
|
Impaired loans
|
|
$
|
22,885
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
22,885
|
|
|
$
|
(3,957
|
)
|
Other real estate owned
|
|
|
3,269
|
|
|
|
|
|
|
|
|
|
|
|
3,269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
26,154
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
26,154
|
|
|
$
|
(3,957
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation methods for instruments measured at fair value on a nonrecurring basis
The following methods and assumptions were used to estimate the fair value of each class of financial instruments measured on a non-recurring
basis:
Impaired loans
While the overall loan portfolio is not carried at fair value, adjustments are recorded on certain loans to
reflect write-downs that are based on the external appraisal value of the underlying collateral. The external appraisals are generally based on recent sales of comparable properties which are then adjusted for the unique characteristics of the
property being valued. In the case of non-real estate collateral, reliance is placed on a variety of sources, including external estimates of value and judgments based on the experience and expertise of internal specialists within the Companys
property management group and the Companys credit department. The valuation of the impaired loans is reviewed on a quarterly basis. Because many of these inputs are not observable, the measurements are classified as Level 3.
Other real estate owned
Other real estate owned consists of loan collateral which has been repossessed through foreclosure. This
collateral is comprised of commercial and residential real estate and other non-real estate property, including auto, recreational and marine vehicles. Other real estate owned is recorded as held for sale initially at the lower of the loan balance
or fair value of the collateral. The initial valuation of the foreclosed property is obtained through an appraisal process similar to the process described in the impaired loans paragraph above. Subsequent to foreclosure, valuations are
reviewed quarterly and updated periodically, and the assets may be marked down further, reflecting a new cost basis. Fair value measurements may be based upon appraisals, third-party price opinions, or internally developed pricing methods and those
measurements are classified as Level 3.
Goodwill
Valuation of goodwill to determine impairment is performed annually, or more
frequently if there is an event or circumstance that would indicate impairment may have occurred. The process involves calculations to determine the fair value of each reporting unit on a stand-alone basis. A combination of formulas using current
market multiples, based on recent sales of financial institutions within the Companys geographic marketplace, is used to estimate the fair value of each reporting unit. That fair value is compared to the carrying amount of the reporting unit,
including its recorded goodwill. Impairment is considered to have occurred if the fair value of the reporting unit is lower than the carrying amount of the reporting unit. The fair value of the Companys common stock relative to its computed
book value per share is also considered as part of the overall evaluation. These measurements are classified as Level 3.
Fair value
disclosures require disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis.
The estimated fair value of the Companys financial instruments at March, 31, 2016 and December 31, 2015 were as follows
(in millions):
37
UMB FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement at March 31, 2016 Using
|
|
|
|
Carrying
Amount
|
|
|
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Total
Estimated
Fair Value
|
|
FINANCIAL ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and short-term investments
|
|
$
|
898.2
|
|
|
$
|
733.6
|
|
|
$
|
164.6
|
|
|
$
|
|
|
|
$
|
898.2
|
|
Securities available for sale
|
|
|
6,883.3
|
|
|
|
434.4
|
|
|
|
6,448.9
|
|
|
|
|
|
|
|
6,883.3
|
|
Securities held to maturity
|
|
|
804.7
|
|
|
|
|
|
|
|
859.3
|
|
|
|
|
|
|
|
859.3
|
|
Trading securities
|
|
|
26.8
|
|
|
|
18.2
|
|
|
|
8.6
|
|
|
|
|
|
|
|
26.8
|
|
Other securities
|
|
|
64.6
|
|
|
|
|
|
|
|
64.6
|
|
|
|
|
|
|
|
64.6
|
|
Loans (exclusive of allowance for loan loss)
|
|
|
9,704.5
|
|
|
|
|
|
|
|
9,779.7
|
|
|
|
|
|
|
|
9,779.7
|
|
Derivatives
|
|
|
19.5
|
|
|
|
|
|
|
|
19.5
|
|
|
|
|
|
|
|
19.5
|
|
FINANCIAL LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand and savings deposits
|
|
|
14,380.7
|
|
|
|
14,380.7
|
|
|
|
|
|
|
|
|
|
|
|
14,380.7
|
|
Time deposits
|
|
|
1,037.6
|
|
|
|
|
|
|
|
1,037.6
|
|
|
|
|
|
|
|
1,037.6
|
|
Other borrowings
|
|
|
1,686.7
|
|
|
|
64.2
|
|
|
|
1,622.5
|
|
|
|
|
|
|
|
1,686.7
|
|
Long-term debt
|
|
|
85.2
|
|
|
|
|
|
|
|
85.7
|
|
|
|
|
|
|
|
85.7
|
|
Derivatives
|
|
|
24.1
|
|
|
|
|
|
|
|
24.1
|
|
|
|
|
|
|
|
24.1
|
|
OFF-BALANCE SHEET ARRANGEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to extend credit for loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.3
|
|
Commercial letters of credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.1
|
|
Standby letters of credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.6
|
|
|
|
|
|
Fair Value Measurement at December 31, 2015 Using
|
|
|
|
Carrying
Amount
|
|
|
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Total
Estimated
Fair Value
|
|
FINANCIAL ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and short-term investments
|
|
$
|
1,154.7
|
|
|
$
|
997.0
|
|
|
$
|
157.7
|
|
|
$
|
|
|
|
$
|
1,154.7
|
|
Securities available for sale
|
|
|
6,806.9
|
|
|
|
429.7
|
|
|
|
6,377.2
|
|
|
|
|
|
|
|
6,806.9
|
|
Securities held to maturity
|
|
|
667.1
|
|
|
|
|
|
|
|
691.4
|
|
|
|
|
|
|
|
691.4
|
|
Trading securities
|
|
|
29.6
|
|
|
|
18.1
|
|
|
|
11.5
|
|
|
|
|
|
|
|
29.6
|
|
Other securities
|
|
|
65.2
|
|
|
|
|
|
|
|
65.2
|
|
|
|
|
|
|
|
65.2
|
|
Loans (exclusive of allowance for loan loss)
|
|
|
9,431.3
|
|
|
|
|
|
|
|
9,452.1
|
|
|
|
|
|
|
|
9,452.1
|
|
Derivatives
|
|
|
12.3
|
|
|
|
|
|
|
|
12.3
|
|
|
|
|
|
|
|
12.3
|
|
FINANCIAL LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand and savings deposits
|
|
|
13,836.9
|
|
|
|
13,836.9
|
|
|
|
|
|
|
|
|
|
|
|
13,836.9
|
|
Time deposits
|
|
|
1,255.9
|
|
|
|
|
|
|
|
1,255.9
|
|
|
|
|
|
|
|
1,255.9
|
|
Other borrowings
|
|
|
1,823.1
|
|
|
|
66.9
|
|
|
|
1,756.2
|
|
|
|
|
|
|
|
1,823.1
|
|
Long-term debt
|
|
|
86.1
|
|
|
|
|
|
|
|
86.4
|
|
|
|
|
|
|
|
86.4
|
|
Derivatives
|
|
|
12.3
|
|
|
|
|
|
|
|
12.3
|
|
|
|
|
|
|
|
12.3
|
|
OFF-BALANCE SHEET ARRANGEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to extend credit for loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.9
|
|
Commercial letters of credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.3
|
|
Standby letters of credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.6
|
|
38
UMB FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED)
Cash and short-term investments
The carrying amounts of cash and due from banks,
federal funds sold and resell agreements are reasonable estimates of their fair values.
Securities held to maturity
Fair value of
held-to-maturity securities are estimated by discounting the expected future cash flows using current market rates.
Other securities
Amount consists of FRB and FHLB stock held by the Company, PCM equity-method investments, and other miscellaneous investments. The fair value of FRB and FHLB stock is considered to be the carrying value as no readily determinable market exists
for these investments because they can only be redeemed with the FRB or FHLB. The fair value of PCM marketable equity-method investments are based on quoted market prices used to estimate the value of the underlying investment. For non-marketable
equity-method investments, the Companys proportionate share of the income or loss is recognized on a one-quarter lag based on the valuation of the underlying investment(s).
Loans
Fair values are estimated for portfolios with similar financial characteristics. Loans are segregated by type, such as
commercial, real estate, consumer, and credit card. Each loan category is further segmented into fixed and variable interest rate categories. The fair value of loans is estimated by discounting the future cash flows using the current rates
at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.
Demand and
savings deposits
The fair value of demand deposits and savings accounts is the amount payable on demand at March 31, 2016 and December 31, 2015.
Time deposits
The fair value of fixed-maturity certificates of deposit is estimated by discounting the future cash flows using the
rates that are currently offered for deposits of similar remaining maturities.
Other borrowings
The carrying amounts of federal
funds purchased, repurchase agreements and other short-term debt are reasonable estimates of their fair value because of the short-term nature of their maturities.
Long-term debt
Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate fair
value of existing debt.
Other off-balance sheet instruments
The fair value of loan commitments and letters of credit are
determined based on the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreement and the present creditworthiness of the counterparties. Neither the fees earned during the year on these
instruments nor their fair value at year-end are significant to the Companys consolidated financial position.
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