UMBF UMB Financial Corporation

UMB Financial Corporation (NASDAQ: UMBF), a Kansas City-based multi-bank holding company, announced earnings of $13.2 million or $0.62 per share ($0.62 diluted) for the three months ended March 31, 2006. This is an increase of $1.7 million or 14.3 percent compared to the three months ended March 31, 2005 earnings of $11.6 million or $0.54 per share ($0.53 diluted). This is also a 17.0 percent increase in diluted earnings per share compared to the three months ended March 31, 2005. The increase in earnings compared to 2005 was a result of higher net interest income and lower noninterest expense partially offset by increased provision for loan losses and lower noninterest income. "Our first quarter financial performance is based on revenue growth in key areas of the corporation, while simultaneously controlling expenses and expanding net interest margin," said Mariner Kemper, Chairman and Chief Executive Officer, UMB Financial Corporation. "Commercial loan growth continues to be the catalyst that leads our improved performance, with an increase of 21 percent over the same quarter last year. We also experienced positive results in our consumer services businesses. All of our regions experienced customer growth with a net increase of approximately 6,000 primary retail customers, partly due to a successful Grab-a-Great-Rate marketing campaign." "UMB's fee business remained strong in the first quarter, led by continued record net flows of $460 million in our Scout Mutual Funds and strength in our treasury management business," said Peter deSilva, President and Chief Operating Officer. "We saw positive results in the first quarter after the integration of our wealth management and brokerage businesses. Additionally, we achieved strong results from our credit card operations and mutual fund servicing business." Net Interest Income Net interest income for the first quarter of 2006 increased $8.0 million compared to the same period in 2005. Net interest margin was 3.23 percent on a tax-equivalent basis for the first quarter of 2006 compared to 2.97 percent for the same period in 2005. Compared to the same quarter a year ago, the primary driver of the $8.0 million increase in net interest income was a $551 million, or 8.7 percent, increase in average earning assets mainly from average loan growth of $538 million, or 18.8 percent. Although net interest spread decreased by 9 basis points as compared to the same period in 2005, net interest margin increased by 26 basis points due to the contribution of noninterest-bearing demand deposits, which make up 34.1 percent of average total deposits. Noninterest Income and Expense Noninterest income decreased $3.9 million for the three months ended March 31, 2006 compared to the same period in 2005. The decrease was due primarily to gains recognized in the first quarter of 2005 including $3.6 million from the sale of employee benefit accounts to Marshall & Ilsley Trust Company, n.a. and a $2.4 million gain on the condemnation sale of one of the bank's downtown Kansas City branches. These reductions in gains from 2005 were partially offset by a $2.2 million, or 10.6 percent increase in trust and securities processing income and a $1.3 million, or 17.4 percent increase in bankcard income. The increase in trust and securities processing income was primarily driven by a $1.6 billion increase in net assets in the UMB Scout Funds at March 31, 2006 as compared to March 31, 2005. The increase in bankcard income was primarily due to higher interchange fee revenue resulting from increased card usage. Noninterest expense remained steady as compared to the same period in 2005. Salaries and employee benefits decreased by $4.8 million, or 9.3 percent compared to the first quarter of 2005. This decrease was primarily a result of a $4.3 million charge in 2005 related to the voluntary separation plan (VSP) of which 99 employees took advantage in the first quarter of 2005. The decrease in salary and benefit expense was offset by increases in other categories including equipment, marketing and business development, processing fees, bankcard expense and other expense. Marketing and business development expense increased as a result of deposit and loan promotions in the first quarter of 2006. Processing fees were higher primarily due to increases in shareholder servicing and other administrative fees paid to investment advisors related to an increase in net assets under management for the Scout Funds. Bankcard fees increased due to higher paid rebates and an increase in fraud losses. The higher rebates were a result of an expansion of the program in late 2005, as well as increased card activity. Other expense was higher due to an increase in operational charge-offs and an increase in directors' fees. Balance Sheet For the three months ended March 31, 2006, average loans were $3.40 billion compared to $2.86 billion for the same period in 2005, an increase of 18.8 percent. Actual loan balances on March 31, 2006 were $3.4 billion, compared to $2.9 billion on March 31, 2005. These balances are as follows: -0- *T Loan by Category (in thousands) March 31, March 31, Percent 2006 2005 Change Change ---------- ---------- -------- -------- Commercial, financial and agricultural $1,562,679 $1,291,305 $271,374 21.0% Real estate construction 49,014 31,123 17,891 57.5% Consumer 957,033 888,021 69,021 7.8% Real estate 843,425 685,490 157,935 23.0% Leases 5,955 5,575 380 6.8% Loans held for sale 17,960 20,998 (3,038) -14.5% ----------------------------------------------- Total Loans and loans held for sale $3,436,066 $2,922,512 $513,554 17.6% ----------------------------------------------- *T Average securities were $3.0 billion for the first quarter of 2006 compared to $3.2 billion for the same period in 2005, a decrease of 7.3 percent. This decrease helped improve the earning asset mix as loans comprise 49.3 percent of the company's earning asset base, as compared to 45.1 percent for the same quarter a year ago. The company also increased its average loan to deposit ratio to 61.8 percent in the first quarter of 2006, compared to 56.1 percent in the first quarter of 2005. Average total deposits increased $399 million, or 7.8 percent, to $5.51 billion for the three months ended March 31, 2006, compared to the same period in 2005. As of March 31, 2006, UMB had total shareholders' equity of $828 million, a 1.6 percent increase from the prior year. The quality of the company's loan portfolio remained high as nonperforming loans on March 31, 2006 totaled $10.2 million compared to $12.5 million a year earlier. As a percentage of total loans, nonperforming loans decreased to 0.30 percent of loans as of March 31, 2006 compared to 0.43 percent as of March 31, 2005. Nonperforming loans are defined as nonaccrual loans and loans more than 90 days past due. The company's allowance for loan losses totaled $40.7 million or 1.19 percent of total loans as of March 31, 2006, compared to $40.9 million, or 1.41 percent of total loans as of March 31, 2005. The company plans to host a conference call to discuss its first quarter results on April 26, 2006, at 4 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/IC/CEPage.asp?ID=103434 or visit 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 Current Report on Form 8-K, any exhibits to this Current Report and other public statements the company may make. While management of UMB believes their assumptions are reasonable, UMB cautions that changes in general economic conditions, changes in interest rates, changes in the securities markets, changes in operations, changes in competition, technology changes, legislative or regulatory changes, the ability of customers to repay loans, changes in loan demand and increases in employee costs, 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 significant 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 nationwide. Its banking subsidiaries own and operate 141 banking centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska and 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. UMB was named one of Business Week's "Web Smart 50" companies in 2005. -0- *T CONSOLIDATED BALANCE SHEETS UMB Financial Corporation ---------------------------------------------------------------------- (all dollars in thousands) (unaudited) March 31, Assets 2006 2005 ------ ----------------------------- Loans $ 3,418,106 $ 2,901,514 Allowance for loan losses (40,679) (40,880) ---------------------------- Net loans 3,377,427 2,860,634 Loans held for sale 17,960 20,998 Investment Securities: Available for sale 2,524,736 2,684,743 Held to maturity 62,453 142,735 Federal Reserve Bank stock and other 15,022 13,810 Trading securities 62,736 55,153 ---------------------------- Total investment securities 2,664,947 2,896,441 Federal funds and resell agreements 759,879 297,534 Cash and due from banks 418,125 465,900 Bank premises and equipment, net 234,198 222,917 Accrued income 49,896 38,057 Goodwill on purchased affiliates 59,727 59,115 Other intangibles 6,857 4,673 Other assets 48,296 48,664 ---------------------------- Total assets $ 7,637,312 $ 6,914,933 ---------------------------- Liabilities ----------- Deposits: Noninterest - bearing demand $ 2,065,218 $ 1,874,871 Interest - bearing demand and savings 2,418,597 2,268,102 Time deposits under $100,000 791,661 612,312 Time deposits of $100,000 or more 351,717 241,017 ---------------------------- Total deposits 5,627,193 4,996,302 Federal funds and repurchase agreements 1,088,953 1,004,023 Short-term debt 5,671 10,170 Long-term debt 37,879 39,733 Accrued expenses and taxes 33,638 25,731 Other liabilities 16,155 23,991 ---------------------------- Total liabilities 6,809,489 6,099,950 ---------------------------- Shareholders' Equity -------------------- Common stock 27,528 27,528 Capital surplus 726,244 726,673 Retained earnings 350,568 312,807 Accumulated other comprehensive loss (28,485) (21,026) Treasury stock (248,032) (230,999) ---------------------------- Total shareholders' equity 827,823 814,983 ---------------------------- Total liabilities and shareholders' equity $ 7,637,312 $ 6,914,933 ---------------------------- *T -0- *T Consolidated Statements of Income ---------------------------------------------------------------------- (unaudited, dollars in thousands except share and per share data) Three Months Ended March 31, Interest Income 2006 2005 --------------- ----------------------- Loans $ 53,234 $ 37,722 Securities: Taxable Interest 21,753 16,664 Tax-exempt interest 5,683 4,372 ----------------------- Total securities income 27,436 21,036 Federal funds and resell agreements 5,088 1,315 Trading securities and other 715 520 ----------------------- Total interest income 86,473 60,593 ----------------------- Interest Expense ---------------- Deposits 20,762 9,727 Federal funds and repurchase agreements 12,835 6,231 Short-term debt 152 69 Long-term debt 478 275 ----------------------- Total interest expense 34,227 16,302 ----------------------- Net interest income 52,246 44,291 Provision for loan losses 3,159 750 ----------------------- Net interest income after provision for loan losses 49,087 43,541 ----------------------- Noninterest Income ------------------ Trust and securities processing 22,670 20,498 Trading and investment banking 4,113 4,529 Service charges on deposits 17,607 17,976 Insurance fees and commissions 991 828 Brokerage fees 1,518 1,550 Bankcard fees 8,946 7,622 Other gains, net 22 2,592 Gain on sale of employee benefit accounts - 3,600 Gains (loss) on sales of securities available for sale 9 - Other 3,944 4,502 ----------------------- Total noninterest income 59,820 63,697 ----------------------- Noninterest Expense ------------------- Salaries and employee benefits 47,238 52,060 Occupancy, net 6,554 6,417 Equipment 11,115 10,476 Supplies, postage and telephone 5,775 5,549 Marketing and business development 3,622 2,960 Accumulated other comprehensive income 6,311 5,564 Legal and consulting 1,649 1,827 Bankcard 3,291 2,442 Amortization of other intangibles 218 186 Other 5,260 3,844 ----------------------- Total noninterest expense 91,033 91,325 ----------------------- Income before income taxes 17,874 15,913 Income tax provision 4,633 4,333 ----------------------- Net income $ 13,241 $ 11,580 ======================= Per Share Data -------------- Net income- Basic $ 0.62 $ 0.54 Net income- Diluted 0.62 0.53 Dividends 0.25 0.22 Weighted average shares outstanding 21,409,760 21,636,200 ----------------------- *T -0- *T Consolidated Statements of Shareholders' Equity UMB Financial Corporation ---------------------------------------------------------------------- (all dollars in thousands) (unaudited) Accum- ulated Other Re- Compre- Common Capital tained hensive Treasury Stock Surplus Earnings Loss Stock Total ---------------------------------------------------------------------- Balance - January 1, 2005 $27,528 $726,595 $305,986 $(10,619)$(230,308)$$819,182 Comprehensive income Net income - - 11,580 - - 11,580 Other Compre- hensive loss, change in un- realized gains (losses) on secur- ities of $(16,480) net of tax $6,073 - - - (10,407) - (10,407) --------- Total comprehensive income 1,173 Cash dividends ($0.22 per share) - - (4,759) - - (4,759) Purchase of treasury stock - - - - (835) (835) Recognition of restricted stock compen- sation 18 23 41 Sale of treasury stock - 39 - - 39 78 Exercise of stock options - 21 - - 82 103 ------------------------------------------------------- Balance - March 31, 2005 $27,528 $726,673 $312,807 $(21,026)$(230,999)$ 814,983 ------------------------------------------------------- Balance - January 1, 2006 $27,528 $726,204 $342,675 $(21,550)$(241,394)$ 833,463 Comprehensive income Net income - - 13,241 - - 13,241 Other Compre- hensive loss, change in unrealized gains (losses) on securities of $(10,960) net of tax of $4,031; reclassifi- cation adjustment losses included in net income of $(9) net of tax $3 - - - (6,935) - (6,935) --------- Total comprehensive income 6,306 Cash dividends ($0.25 per share) - - (5,348) - - (5,348) Purchase of treasury stock - - - - (6,812) (6,812) Issuance of stock awards 89 61 150 Compensation recognized under stock compensation plans - (126) (126) Sale of treasury stock - 62 - - 46 108 Exercise of stock options - 15 - - 67 82 ------------------------------------------------------- Balance - March 31, 2006 $27,528 $726,244 $350,568 $(28,485)$(248,032)$ 827,823 ------------------------------------------------------- *T -0- *T Average Balances / Yields and Rates UMB Financial Corporation ---------------------------------------------------------------------- (tax - equivalent basis) ------------------------ (all dollars in Three Months Ended March 31, thousands)(unaudited) 2006 2005 ---------------------- ---------------------- Average Average Average Average Assets Balance Yield/Rate Balance Yield/Rate ---------------------- ---------------------- Loans, net of unearned interest $3,403,016 6.35 % $2,864,770 5.35 % Securities: Taxable 2,312,665 3.81 2,633,108 2.57 Tax-exempt 666,494 5.06 580,097 4.57 -------------------- -------------------- Total securities 2,979,159 4.09 3,213,205 2.93 Federal funds and resell agreements 455,737 4.53 210,718 2.53 Other earning assets 62,587 4.78 60,946 3.53 -------------------- -------------------- Total earning assets 6,900,499 5.24 6,349,639 4.02 Allowance for loan losses (40,281) (41,485) Other assets 862,681 860,132 ----------- ----------- Total assets $7,722,899 $7,168,286 ----------- ----------- Liabilities and Shareholders' Equity Interest-bearing deposits $3,631,366 2.32 % $3,226,635 1.22 % Federal funds and repurchase agreements 1,271,599 4.09 1,165,526 2.17 Borrowed funds 53,340 4.79 35,640 3.91 -------------------- -------------------- Total interest- bearing liabilities 4,956,305 2.80 4,427,801 1.49 Noninterest-bearing demand deposits 1,875,395 1,881,065 Other liabilities 55,308 35,659 Shareholders' equity 835,891 823,761 ----------- ----------- Total liabilities and shareholders' equity $7,722,899 $7,168,286 ----------- ----------- Net interest spread 2.44 % 2.53 % Net interest margin 3.23 2.97 *T -0- *T FIRST QUARTER 2006 FINANCIAL HIGHLIGHTS UMB Financial Corporation ---------------------------------------------------------------------- (all dollars in thousands, except per share data) (unaudited) Three Months Ended March 31, 2006 2005 ------------------------------------------ --------------------------- Net interest income $ 52,246 $ 44,291 Provision for loan losses 3,159 750 Noninterest income 59,820 63,697 Noninterest expense 91,033 91,325 Income before income taxes 17,874 15,913 Net income 13,241 11,580 Net income per share - Basic 0.62 0.54 Net income per share - Diluted 0.62 0.53 Return on average assets 0.70 % 0.66 % Return on average equity 6.42 % 5.70 % At March 31 ------------------------------------------ Assets $ 7,637,312 $ 6,914,933 Loans, net of unearned interest 3,436,066 2,922,512 Securities 2,664,947 2,896,441 Deposits 5,627,193 4,996,302 Shareholders' equity 827,823 814,983 Book value per share 38.69 37.68 Market price per share 70.23 56.92 Equity to assets 10.84 % 11.79 % Allowance for loan losses $ 40,679 $ 40,880 As a % of loans 1.19 % 1.41 % Nonaccrual and restructured loans $ 6,369 $ 9,091 As a % of loans 0.19 % 0.31 % Loans over 90 days past due $ 3,879 $ 3,446 As a % of loans 0.11 % 0.12 % Other real estate owned $ 40 $ - Common shares outstanding 21,396,059 21,630,069 Average Balances Three Months Ended March 31 ------------------------------------------ Assets $ 7,722,899 $ 7,168,286 Loans, net of unearned interest 3,403,016 2,864,770 Securities 2,979,159 3,213,205 Deposits 5,506,761 5,107,700 Shareholders' equity 835,891 823,761 *T -0- *T Selected Financial Data of Affiliate Banks UMB Financial Corporation ---------------------------------------------------------------------- (all dollars in March 31, 2006 thousands)(unaudited) Loans Net of Total Unearned Total Shareholder's Missouri Assets Interest Deposits Equity ---------------------------------------------------------------------- UMB Bank, n.a. $6,518,870 $2,863,941 $4,979,364 $ 545,107 UMB Bank Warsaw, N.A. 82,195 30,289 60,716 5,660 Colorado ---------------------------------------------------------------------- UMB Bank Colorado, n. a. 505,121 323,538 388,173 37,778 Kansas ---------------------------------------------------------------------- UMB National Bank of America 510,097 189,283 339,861 75,924 Arizona ---------------------------------------------------------------------- UMB Bank Arizona, n.a. 21,233 17,760 2,632 9,804 Banking - Related Subsidiaries ---------------------------------------------------------------------- UMB Community Development Corporation UMB Banc Leasing Corp. UMB Financial 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. Kansas City Realty Company Kansas City Financial Corporation UMB Redevelopment Corporation UMB Realty Company, LLC UMB National Sales Corporation Grand Distribution Services, LLC UMB Distribution Service, LLC Warsaw Financial Corporation *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 March 31, 2006 2005 ---------- --------- Net interest income after provision 49,087 43,541 Noninterest income 59,820 63,697 Noninterest expense 91,033 91,325 Income tax provision 4,633 4,333 -------------------- Net Income After Taxes 13,241 11,580 Adjustments ----------- Noninterest income Other gains, net $(22) $(2,592) Gains on sale of employee benefit accounts - (3,600) Noninterest expense Voluntary Separation Plan - 4,300 -------------------- Total adjustments pre-tax (22) (1,892) Less: Income taxes (8) (681) -------------------- After Tax Adjustments to GAAP (14) (1,211) -------------------- Adjusted Net Income $13,227 $10,369 ==================== The above table presents the variation in net income on an as reported (GAAP) basis and excluding certain gains and losses related to the sales and closures of banking facilities, the sale of employee benefit accounts and charges related to the voluntary separation plan. The press release includes commentary that compares such GAAP and non-GAAP financial measures. *T