UMBF UMB Financial Corporation

UMB Financial Corporation (Nasdaq:UMBF), a Kansas City-based multi-bank holding company, announced third quarter earnings of $16.2 million or $0.75 per share ($0.75 diluted). This is an increase of $4.2 million or 34.7% compared to the prior year third quarter. Income is higher due to increases in net interest income, higher fee-related income and net gains on the sales/closures of branch facilities offset by a higher effective tax rate. The company's Board of Directors also approved an increase in the quarterly dividend to $0.25 per share from $0.22 per share, a 13.6% increase, payable January 3, 2006, to the shareholders of record at the close of business on December 13, 2005. "Our financial performance in the third quarter clearly demonstrates our focus on growth and shareholder returns," said Mariner Kemper, Chairman and Chief Executive Officer, UMB Financial Corporation. "Commercial Loans continued to lead our growth, with an increase of 33.5% over the same quarter last year. We are implementing a number of strategies to improve overall profitability and effectiveness of our distribution network. These efforts are clearly driving a solid year for UMB." "We continued to see growth in UMB's fee business and to gain momentum with strong inflows into Scout Mutual Funds. We also announced the consolidation of the Personal Trust and Brokerage divisions, and hired DeAnna Basler, an industry veteran, to lead the newly formed group," said Peter deSilva, President and Chief Operating Officer. "Additionally, UMB Healthcare Services grew to $34 million in deposits following the addition of new healthcare partner Humana. In our consumer business, we launched a successful 'Grab-a-Great-Rate' marketing campaign that resulted in more than $368 million in deposits and more than 5,000 new customers." Quarter-to-Date Net interest income for the third quarter of 2005 increased $3.5 million, or 7.7% compared to the same period in 2004 due primarily to higher loan balances. Total loans as of September 30, 2005, increased by 19.3% from September 30, 2004. Loan interest income is up $13.2 million, or 37.7%, followed by a $1.9 million or 10.5% increase in securities interest income as compared to the third quarter of 2004. Noninterest income increased $7.7 million, or 13.6%, for the three months ended September 30, 2005, compared to the same period in 2004. The increase was primarily due to gains on the sale of branches in 2005, higher trust and securities processing fees and higher service charges on deposits. Trust and securities processing income is $1.8 million, or 9.4% higher and service charges on deposits increased by $2.1 million, or 11.4%, over the same period in 2004. Net gain on the sales and closures of banking facilities was $4.8 million in the third quarter of 2005 as compared to $1.8 million in the third quarter of 2004. Excluding these items in both years, our third quarter net income would have increased approximately 20.9%. A table reconciling GAAP net income for these items for the quarter and year to date is included with this release to provide a clear portrayal of year over year operating results. Noninterest expense increased $3.0 million, or 3.5%, for the three months ended September 30, 2005, compared to the same period in 2004. This increase is due to higher processing fees, bankcard expenses and losses on deposit accounts. The effective tax rate was 26.7 percent in the third quarter of 2005 as compared to 10.4 percent in the third quarter of 2004. The increase in the effective tax rate is a result of net tax-exempt income representing a smaller percentage of total income and a reduction in rehabilitation tax credits from 2004. In the third quarter of 2004, the company recorded a $1.8 million federal rehabilitation tax credit. For the three months ended September 30, 2005, average loans were $3.26 billion compared to $2.82 billion for the same period in 2004. As of September 30, 2005, UMB had total shareholders' equity of $831 million compared to $820 million at September 30, 2004. The quality of the company's loan portfolio remains high as nonperforming loans at September 30, 2005, totaled $9.7 million compared to $12.6 million a year earlier, a 23% improvement. As a percentage of total loans, nonperforming loans decreased to 0.29 percent of loans as of September 30, 2005, compared to 0.45 percent of loans as of September 30, 2004. Nonperforming loans are defined as non-accrual loans and loans more than 90 days past due. The company's allowance for loan losses totaled $39.7 million or 1.18 percent of total loans as of September 30, 2005, compared to $45.1 million, or 1.60 percent of total loans as of September 30, 2004. Year-to-Date Earnings for the nine months ended September 30, 2005, were $41.4 million or $1.92 per share ($1.91 diluted). This is an increase of $10.2 million or 32.7 percent compared to prior year earnings of $31.2 million or $1.44 per share ($1.43 diluted). Net interest income for the year to date September 30, 2005, increased $5.9 million, or 4.4%, compared to the same period in 2004 due primarily to higher loan balances and yields. Net interest margin was 3.17 percent for the year to date September 30, 2005, compared to 3.13 percent for the same period in 2004. Noninterest income increased $19.4 million, or 11.3%, for the nine months ended September 30, 2005, compared to the same period in 2004. The increase was driven primarily by one-time gains, as well as an increase in trust income and service charge income. Trust income increased by $5.2 million, or 9.2% due primarily to increases in assets under management. Service charge income increased $4.4 million, or 8.0% mainly because of a $5.9 million increase in overdraft and non-sufficient fund fees, partially offset by a decrease in corporate service charge income. Net gains of $8.8 million were recognized in 2005 mostly attributable to the sales and closures of banking facilities. In 2004, a $1.8 million gain was recognized on the sale of a parking lot in downtown Kansas City. There was a $2.8 million increase related to the sale of employee benefit accounts in 2004 due to income recognized from the final earn out payment received in 2005. Finally, excluding one-time items in both years, our net income would have increased 22.9% year-over-year. Noninterest expense increased $8.8 million, or 3.3%, for the year to date September 30, 2005, compared to the same period in 2004 mostly due to the implementation of a voluntary separation (early retirement) plan. This plan resulted in a one-time charge of approximately $4.4 million related to 102 employees who accepted the offer. Other increases resulted from higher processing fees, bankcard expenses, contributions and deposit account charge-offs partially offset by decreases in marketing and business development expenses. The company plans to host a conference call to discuss its third quarter results on October 26, 2005, at 4:00 p.m. (CST). Interested parties may access the call by dialing U.S. (toll-free) 877-407-8031 or access the following Web link to the live call: www.vcall.com/CEPage.asp?ID=95035 or visit www.umb.com. Forward-Looking Statements This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements rely on a number of assumptions concerning future events and are subject to risks and uncertainties, which could cause actual results to differ materially from those contemplated by the forward-looking statements in this press release and any exhibits to this release and other public statements we make. While management of UMB believes their assumptions are reasonable, UMB cautions that material changes in interest rates, general economic conditions, competition in the financial services industry, and other risks and uncertainties detailed in UMB's filings with the Securities and Exchange Commission, may cause actual results to differ materially from those discussed in this release. UMB has no duty to update such statements, and undertakes no obligation to update or supplement forward-looking statements that become untrue because of new information, future events or otherwise. Non-GAAP Financial Measures Certain financial measures contained in this press release exclude unusual gains and losses relating to the sales and closures of banking facilities, the sale of employee benefits accounts and the voluntary separation plan. Financial measures which exclude those items have not been determined in accordance with generally accepted accounting principles and are therefore "non-GAAP" financial measures. Management of UMB believes that investors' understanding of the company's performance is enhanced by disclosing these non-GAAP financial measures as a reasonable basis for comparison of the company's ongoing results of operations. These non-GAAP measures should not be considered a substitute for GAAP-basis measures and results. Our non-GAAP measures may not be comparable to non-GAAP measures of other companies. The attached Non-GAAP Reconciliation Table provides a reconciliation of these non-GAAP financial measures to the most closely analogous measure determined in accordance with GAAP. About UMB UMB Financial Corporation is a multi-bank holding company headquartered in Kansas City, Mo., offering complete banking and related financial services to both individual and business customers. Its banking subsidiaries own and operate 139 banking centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma and Nebraska in addition to a loan production office in Arizona. Subsidiaries of the holding company and the lead bank, UMB Bank, n.a., include an investment services group based in Milwaukee, Wisconsin, a trust management company in South Dakota, and single-purpose companies that deal with brokerage services, consulting services and insurance. -0- *T THIRD QUARTER 2005 FINANCIAL HIGHLIGHTS UMB Financial Corporation ---------------------------------------------------------------------- (all dollars in thousands, except per share data) (unaudited) Nine Months Ended September 30 2005 2004 ------------------------------------------- -------------------------- Net interest income $ 140,136 $ 134,223 Provision for loan losses 2,954 5,420 Noninterest income 190,967 171,587 Noninterest expense 271,162 262,412 Income before income taxes 56,987 37,978 Net income 41,363 31,180 Net income per share - Basic 1.92 1.44 Net income per share - Diluted 1.91 1.43 Return on average assets 0.79 % 0.60 % Return on average equity 6.68 % 5.08 % Three Months Ended September 30 ------------------------------------------- Net interest income $ 48,725 $ 45,235 Provision for loan losses 1,454 1,887 Noninterest income 64,736 56,991 Noninterest expense 89,936 86,931 Income before income taxes 22,071 13,408 Net income 16,171 12,008 Net income per share - Basic 0.75 0.55 Net income per share - Diluted 0.75 0.55 Return on average assets 0.91 % 0.71 % Return on average equity 7.71 % 5.83 % At September 30 ------------------------------------------- Assets $ 7,087,925 $ 6,872,262 Loans, net of unearned interest 3,368,146 2,822,791 Securities 2,637,729 2,741,382 Deposits 5,006,741 4,779,029 Shareholders' equity 830,946 819,550 Book value per share 38.56 37.85 Market price per share 65.68 47.67 Equity to assets 11.72 % 11.93 % Allowance for loan losses $ 39,715 $ 45,070 As a % of loans 1.18 % 1.60 % Nonaccrual and restructured loans $ 6,086 $ 9,595 As a % of loans 0.18 % 0.34 % Loans over 90 days past due $ 3,635 $ 3,034 As a % of loans 0.11 % 0.11 % Other real estate owned $ 35 $ - Common shares outstanding 21,550,945 21,650,414 Average Balances Nine Months Ended September 30 ------------------------------------------- Assets $ 7,025,917 $ 6,888,732 Loans, net of unearned interest 3,063,563 2,759,622 Securities 2,879,214 2,955,837 Deposits 5,068,561 4,961,419 Shareholders' equity 828,031 819,922 *T -0- *T CONSOLIDATED BALANCE SHEETS UMB Financial Corporation ------------------------------------------------------------------- (all dollars in thousands) (unaudited) September 30, Assets 2005 2004 ---------------------------------------- ------------------------- Loans: Commercial, financial and agricultural $ 1,518,749 $ 1,137,912 Real estate construction 42,259 20,420 Consumer (net of unearned interest) 992,547 992,992 Real estate 788,901 643,542 Leases 5,364 5,028 Allowance for loan losses (39,715) (45,070) --------------------------- Net loans 3,308,105 2,754,824 Loans held for sale 20,326 22,897 Securities available for sale: U.S. Treasury and agencies 1,951,885 2,095,339 State and political subdivisions 568,301 417,302 Commercial paper and other - - --------------------------- Total securities available for sale 2,520,186 2,512,641 Securities held to maturity: State and political subdivisions 104,591 220,237 Federal Reserve Bank stock and other 12,952 8,504 Federal funds and resell agreements 285,209 354,748 Interest bearing due from banks 1,834 1,834 Trading securities 57,987 76,756 --------------------------- Total earning assets 6,311,190 5,952,441 Cash and due from banks 396,416 445,006 Bank premises and equipment, net 226,668 220,396 Accrued income 46,291 37,547 Goodwill on purchased affiliates 59,958 58,884 Other intangibles 4,302 5,045 Other assets 43,100 152,943 --------------------------- Total assets $ 7,087,925 $ 6,872,262 --------------------------- Liabilities ---------------------------------------- ------------------------- Deposits: Noninterest - bearing demand $ 1,931,580 $ 1,811,368 Interest - bearing demand and savings 2,082,229 2,090,748 Time deposits under $100,000 714,943 650,361 Time deposits of $100,000 or more 277,989 226,552 --------------------------- Total deposits 5,006,741 4,779,029 Federal funds and repurchase agreements 1,127,111 1,076,140 Short-term debt 18,491 52,680 Long-term debt 39,083 15,744 Accrued expenses and taxes 37,447 20,842 Other liabilities 28,106 108,277 --------------------------- Total liabilities 6,256,979 6,052,712 --------------------------- Shareholders' Equity ---------------------------------------- ------------------------- Common stock 27,528 27,528 Capital surplus 727,987 726,488 Unearned compensation (2,090) - Retained earnings 333,096 299,084 Accumulated other comprehensive (loss) (18,573) (4,103) Treasury stock (237,002) (229,447) --------------------------- Total shareholders' equity 830,946 819,550 --------------------------- Total liabilities and shareholders' equity $ 7,087,925 $ 6,872,262 --------------------------- *T -0- *T Consolidated Statements of Income UMB Financial Corporation ---------------------------------------------------------------------- (unaudited, dollars in thousands except share and per share data) Three Months Ended Nine Months Ended September 30, September 30, Interest Income 2005 2004 2005 2004 ---------------------- ----------------------------------------------- Loans $ 48,081 $ 34,906 $ 128,726 $ 99,986 Securities: Taxable Interest 15,043 13,767 46,641 42,665 Tax-exempt interest 5,330 4,673 14,459 14,391 ----------------------------------------------- Total securities income 20,373 18,440 61,100 57,056 Federal funds and resell agreements 2,382 1,048 5,057 2,708 Trading securities and other 581 616 1,734 1,549 ----------------------------------------------- Total interest income 71,417 55,010 196,617 161,299 ----------------------------------------------- Interest Expense ---------------------- Deposits 14,233 6,522 34,480 18,929 Federal funds and repurchase agreements 7,833 3,026 20,409 7,364 Short-term debt 108 21 283 109 Long-term debt 518 206 1,309 674 ----------------------------------------------- Total interest expense 22,692 9,775 56,481 27,076 ----------------------------------------------- Net interest income 48,725 45,235 140,136 134,223 Provision for loan losses 1,454 1,887 2,954 5,420 ----------------------------------------------- Net interest income after provision for loan losses 47,271 43,348 137,182 128,803 ----------------------------------------------- Noninterest Income ---------------------- Trust and securities processing 20,590 18,822 61,056 55,896 Trading and investment banking 4,004 3,667 13,516 13,682 Service charges on deposits 20,716 18,599 60,210 55,767 Insurance fees and commissions 837 951 2,580 2,840 Brokerage fees 1,515 1,701 4,575 6,042 Bankcard fees 8,592 8,008 24,705 23,440 Other gains, net 4,801 1,837 8,772 1,852 Gain on sale of employee benefit accounts - - 3,600 764 Gains (loss) on sales of securities available for sale (190) - (223) 141 Other 3,871 3,406 12,176 11,163 ----------------------------------------------- Total noninterest income 64,736 56,991 190,967 171,587 ----------------------------------------------- Noninterest Expense ---------------------- Salaries and employee benefits 47,821 47,271 148,232 144,593 Occupancy, net 6,841 6,643 19,728 19,542 Equipment 11,115 11,175 32,843 32,819 Supplies, postage and telephone 5,288 5,461 16,518 16,690 Marketing and business development 3,473 3,825 10,040 11,280 Processing fees 6,233 5,213 17,320 15,514 Legal and consulting 1,890 1,669 5,613 6,082 Amortization of other intangibles 185 185 557 556 Other 7,090 5,489 20,311 15,336 ----------------------------------------------- Total noninterest expense 89,936 86,931 271,162 262,412 ----------------------------------------------- Income before income taxes 22,071 13,408 56,987 37,978 Income tax provision 5,900 1,400 15,624 6,798 ------------------------------------------------ Net income $ 16,171 $ 12,008 $ 41,363 $ 31,180 ================================================ Per Share Data ---------------------- Net income - Basic $ 0.75 $ 0.55 $ 1.92 $ 1.44 Net income - Diluted 0.75 0.55 1.91 1.43 Dividends 0.22 0.21 0.66 0.63 Weighted average shares outstanding 21,513,304 21,664,878 21,579,138 21,675,626 ----------------------------------------------- *T -0- *T Consolidated Statements of Shareholders' Equity (all dollars in thousands)(unaudited) UMB Financial Corporation ---------------------------------------------------------------------- Accumulated Other Compre- Unearned hensive Common Capital compens- Retained Income Treasury Stock Surplus ation Earnings (Loss) Stock Total ---------------------------------------------------------------------- Balance - Jan. 1, 2004 $27,528 $726,405 $ - $281,556 $3,183 $(226,749)$811,923 Compre- hensive income Net income - - 31,180 - - 31,180 Other Comprehensive income, change in unrealized gains (losses) on securities of $(11,662) net of tax of $4,286; reclass- ification adjustment included in net income of $141 net of tax $(51) - - - (7,286) - (7,286) Total ------- comprehensive income 23,894 Cash dividends ($0.63 per share) - - (13,652) - - (13,652) Purchase of treasury stock - - - - (3,175) (3,175) Sale of treasury stock - - - - 3 3 Exercise of stock options - 83 - - 474 557 --------------------------------------------------------------- Balance - Sept. 30, 2004 $27,528 $726,488 $ - $299,084 $(4,103) $(229,447)$819,550 --------------------------------------------------------------- --------------------------------------------------------------- Balance - Jan. 1, 2005 $27,528 $726,595 $ - $305,986 $(10,619) $(230,308)$819,182 Compre- hensive income Net income - - 41,363 - - 41,363 Other Comprehensive income, change in unrealized gains (losses) on securities of $(12,618) net of tax of $4,519; reclass- ification adjustment included in net income of $(223) net of tax $78 - - - (7,954) - (7,954) Total ------- comprehensive income 33,409 Cash dividends ($0.66 per share) - - (14,253) - - (14,253) Purchase of treasury stock - - - - (8,506) (8,506) Issuance of restricted stock 1,140 (2,379) 1,239 - Recognition of restricted stock compen- sation - - 289 289 Sale of treasury stock - 131 - - 128 259 Exercise of stock options - 121 - - 445 566 ---------------------------------------------------------------------- Balance - Sept. 30, 2005 $27,528 $727,987 $(2,090)$333,096 $(18,573) $(237,002)$830,946 ---------------------------------------------------------------------- ---------------------------------------------------------------------- *T -0- *T Average Balances / Yields and Rates UMB Financial Corporation ---------------------------------------------------------------------- (tax - equivalent basis) ------------------------- (all dollars in thousands) (unaudited) Nine Months Ended September 30, 2005 2004 ---------------------- ---------------------- Average Average Average Average Assets Balance Yield/Rate Balance Yield/Rate ---------------------- ---------------------- Loans, net of unearned interest $3,063,563 5.63 % $2,759,622 4.85 % Securities: Taxable 2,259,293 2.76 2,336,766 2.44 Tax-exempt 619,921 4.65 619,071 4.73 -------------------- -------------------- Total securities 2,879,214 3.17 2,955,837 2.92 Federal funds and resell agreements 213,957 3.16 268,655 1.35 Other earning assets 61,529 3.86 69,236 3.08 -------------------- -------------------- Total earning assets 6,218,263 4.39 6,053,350 3.73 Allowance for loan losses (40,621) (44,304) Other assets 848,275 879,686 ----------- ----------- Total assets $7,025,917 $6,888,732 ----------- ----------- Liabilities and Shareholders' Equity Interest-bearing deposits $3,182,195 1.45 % $3,098,707 0.82 % Federal funds and repurchase agreements 1,040,823 2.62 1,025,635 0.96 Borrowed funds 47,991 4.44 35,228 2.97 -------------------- -------------------- Total interest- bearing liabilities 4,271,009 1.77 4,159,570 0.87 Noninterest-bearing demand deposits 1,886,366 1,862,712 Other liabilities 40,511 46,528 Shareholders' equity 828,031 819,922 ----------- ----------- Total liabilities and shareholders' equity $7,025,917 $6,888,732 ----------- ----------- Net interest spread 2.62 % 2.86 % Net interest margin 3.17 3.13 Three Months Ended September 30, 2005 2004 ---------------------- ---------------------- Average Average Average Average Assets Balance Yield/Rate Balance Yield/Rate ---------------------- ---------------------- Loans, net of unearned interest $3,257,584 5.86 % $2,816,287 4.94 % Securities: Taxable 2,020,836 2.95 2,139,770 2.56 Tax-exempt 661,749 4.75 608,824 4.63 -------------------- -------------------- Total securities 2,682,585 3.40 2,748,594 3.02 Federal funds and resell agreements 259,151 3.65 245,774 1.70 Other earning assets 57,975 4.06 74,188 3.39 -------------------- -------------------- Total earning assets 6,257,295 4.70 5,884,843 3.89 Allowance for loan losses (39,991) (44,662) Other assets 809,211 844,946 ----------- ----------- Total assets $7,026,515 $6,685,127 ----------- ----------- Liabilities and Shareholders' Equity Interest-bearing deposits $3,225,571 1.75 % $3,028,446 0.86 % Federal funds and repurchase agreements 994,099 3.13 981,900 1.23 Borrowed funds 52,320 4.75 22,388 4.03 -------------------- -------------------- Total interest- bearing liabilities 4,271,990 2.11 4,032,734 0.96 Noninterest-bearing demand deposits 1,873,330 1,788,181 Other liabilities 49,573 45,023 Shareholders' equity 831,622 819,188 ----------- ----------- Total liabilities and shareholders' equity $7,026,515 $6,685,126 ----------- ----------- Net interest spread 2.59 % 2.92 % Net interest margin 3.26 3.23 *T -0- *T Selected Financial Data of Affiliate Banks UMB Financial Corporation ---------------------------------------------------------------------- (all dollars in thousands) September 30, 2005 (unaudited) Loans Net of Total Unearned Total Shareholder's Missouri Assets Interest Deposits Equity ---------------------------------------------------------------------- UMB Bank, n.a. $6,160,567 $2,963,321 $4,553,751 $ 548,494 UMB Bank Warsaw, N.A. 78,688 28,796 58,082 5,551 Colorado ---------------------------------------------------------------------- UMB Bank Colorado, n.a. 479,488 309,093 339,567 36,052 Kansas ---------------------------------------------------------------------- UMB National Bank of America 498,715 179,815 309,349 75,724 Banking - Related Subsidiaries ---------------------------------------------------------------------- UMB Community Development Corporation UMB Banc Leasing Corp. UMB Scout Brokerage Services, Inc. UMB Scout Insurance Services, Inc. UMB Capital Corporation United Missouri Insurance Company UMB Trust Company of South Dakota Scout Investment Advisors, Inc. UMB Fund Services, Inc. UMB Consulting Services, Inc. *T -0- *T UMB Financial Corporation Non-GAAP Reconciliation Schedule (unaudited, dollars in thousands) The following tables present the reconciliation of non-GAAP financial measures to reported GAAP financial measures. Three months ended Nine months ended September 30, September 30, 2005 2004 2005 2004 ---- ---- ---- ----- As reported ---------------------------------------------------------------------- Net Interest Income after provision $47,271 $43,348 $137,182 $128,803 Noninterest Income 64,736 56,991 190,967 171,587 Noninterest Expense 89,936 86,931 271,162 262,412 Income tax provision 5,900 1,400 15,624 6,798 Net Income after taxes 16,171 12,008 41,363 31,180 Adjustments ---------------------------------------------------------------------- Noninterest Income Other gains, net 4,801 1,837 8,772 1,852 Gains on sale of employee benefit accounts - - 3,600 764 Noninterest Expense Voluntary Separation Plan - - (4,400) - ---------------------------------------------------------------------- Total Adjustments pre-tax 4,801 1,837 7,972 2,616 Less: Income Taxes 1,728 661 2,870 942 After Tax Adjustments to GAAP 3,073 1,176 5,102 1,674 ---------------------------------------------------------------------- Adjusted Net Income $13,098 $10,832 $36,261 $29,506 ====================================================================== The above table presents the variation in net income on an as reported (GAAP) basis and excluding certain unusual gains and losses relating to the sales and closures of banking facilities, the sale of employee benefits accounts and the voluntary separation plan. The press release includes commentary that compares such GAAP and non-GAAP financial measures. *T