UMB Financial Corporation Reports Fourth Quarter Net Income of $26.9 Million and Full-Year 2014 Net Income of $120.7 Million

UMB Financial Corporation (Nasdaq: UMBF), a diversified financial holding company, announced earnings for the three months ended December 31, 2014, of $26.9 million or $0.60 per share ($0.59 diluted). This is a decrease of $7.7 million, or 22.3 percent, compared to fourth quarter 2013 earnings of $34.7 million or $0.78 per share ($0.77 diluted). Earnings for the year ended December 31, 2014, were $120.7 million or $2.69 per share ($2.65 diluted) or a decrease of $13.3 million, or 9.9 percent, compared to the prior year-end earnings of $134.0 million or $3.25 per share ($3.20 diluted).

“A decrease in equity earnings related to Prairie Capital Management coupled with the associated contingency reserve in 2014 was a primary cause of the change in net income year-over-year, masking the strength in our results,” said Mariner Kemper, chairman and chief executive officer. “All in all, 2014 was another successful year for UMB. We continue to demonstrate strong business fundamentals with double-digit, year-over-year loan growth, excellent credit metrics, diversified revenue streams and strong customer relationships. We once again hold the top deposit market-share position in Kansas City, and we are pleased with the growth across our footprint. Expectations for continuing headwinds in 2015 only reinforce the value of our differentiated business model, which is time-tested, and we believe our long-term performance will continue to set us apart from our peers.”

Net Interest Income and Margin

Net interest income for the fourth quarter of 2014 increased $5.0 million, or 5.8 percent, compared to the same period in 2013. Average earning assets increased by $697.0 million, or 4.8 percent, compared to the fourth quarter of 2013. This increase was due largely to an $837.2 million, or 12.9 percent, increase in average loans and a $177.3 million, or 2.5 percent, increase in average total securities, including trading securities, offset by a decrease of $339.7 million, or 37.3 percent, in interest-bearing due from banks. Net interest margin increased one basis point to 2.52 percent for the three months ended December 31, 2014, compared to the same period in 2013.

Noninterest Income and Expense

Noninterest income decreased $20.4 million, or 15.0 percent, for the three months ended December 31, 2014, compared to the same period in 2013. This decrease is primarily attributable to a decrease in equity earnings on alternative investments related to Prairie Capital Management (PCM) equity method investments of $19.6 million, or 129.7 percent. For the three months ended December 31, 2014, unrealized losses on PCM equity method investments totaled $4.5 million, compared to unrealized gains of $15.1 million for the same period last year. In addition, trust and securities processing income decreased $2.6 million, or 3.7 percent, for the three months ended December 31, 2014, compared to the same period in 2013. The decrease in trust and securities processing income was driven by a $6.7 million, or a 26.2 percent, decrease in advisory fee income from the Scout Funds, offset by a $1.9 million, or 8.3 percent, increase in fees related to institutional and personal investment management services, and a $1.7 million, or 8.3 percent, increase in fund administration and custody services. Other noninterest income decreased $2.5 million, or 40.5 percent, for the three months ended December 31, 2014, compared to the same period in 2013. Bankcard fees increased $3.0 million, or 20.6 percent, due to an increase in interchange income.

Looking at the fee businesses, Kemper said, “In the fourth quarter, noninterest income for Scout Investments decreased $5.7 million due largely to the shift in the mix of assets under management for the fourth quarter 2014 relative to the mix in the fourth quarter of 2013. AUM for the quarter remained approximately the same at $31.2 billion, but equity assets were 33 percent of total AUM in the fourth quarter 2014 compared to 51 percent in the same period a year ago. In other fee businesses, trust and securities processing income for Fund Services increased 8.3 percent in the fourth quarter, compared with the same period a year ago, driven by assets under administration of $198.3 billion as of December 31, 2014. In Payment Solutions, fourth quarter card purchase volume was $2.1 billion, driving bankcard fees to $17.3 million.”

Noninterest expense decreased $3.7 million, or 2.2 percent, for the three months ended December 31, 2014, compared to the same period in 2013. Processing fees decreased $1.4 million, or 9.6 percent, primarily due to a decrease in fees paid by the advisor to third-party distributors of the Scout Funds. Other noninterest expense decreased by $9.7 million, or 64.8 percent, due to a $7.7 million decrease in fair value adjustments on contingent consideration liabilities. Salaries and employee benefits expense increased $1.4 million, or 1.6 percent, due to an increase in salaries and wages of $3.4 million, or 6.2 percent, offset by a decrease in employee benefits expense of $1.6 million or 11.0 percent. Equipment expense increased by $1.4 million, or 10.8 percent, due to an increase in computer hardware and software expenses. Bankcard expenses increased $2.2 million, or 49.3 percent, due to an increase in bankcard fraud losses of $1.9 million. Legal and consulting expenses increased $2.1 million, or 35.7 percent. Included in total noninterest expense for the three month period ended December 31, 2014 is $1.9 million of acquisition-related expenses, including $1.7 million of legal and consulting expenses, related to the pending acquisition of Marquette Financial Companies.

Balance Sheet

Average total assets for the three months ended December 31, 2014, were $16.2 billion compared to $15.5 billion for the same period in 2013, an increase of $0.7 billion, or 4.5 percent. Average earning assets increased by $0.7 billion, or 4.8 percent, for the year.

Average loan balances for the three months ended December 31, 2014, increased $0.8 million, or 12.9 percent, to $7.3 billion compared to the same period in 2013. Actual loan balances on December 31, 2014, were $7.5 billion, an increase of $0.9 billion, or 14.5 percent, compared to December 31, 2013. This increase was primarily driven by an increase in commercial loans of $512.5 million, or 15.5 percent, an increase in commercial real estate loans of $164.2 million, or 9.6 percent, an increase in construction loans of $103.1 million, or 67.5 percent, and an increase in HELOCs of $77.5 million, or 13.7 percent. Nonperforming loans, defined as nonaccrual loans and restructured loans, decreased to $27.4 million on December 31, 2014, from $30.7 million on December 31, 2013. As a percentage of loans, nonperforming loans decreased to 0.37 percent as of December 31, 2014, compared to 0.47 percent as of December 31, 2013. The company’s allowance for loan losses totaled $76.1 million, or 1.02 percent of loans, as of December 31, 2014, compared to $74.8 million, or 1.15 percent of loans, as of December 31, 2013.

For the three months ended December 31, 2014, average securities, including trading securities, totaled $7.2 billion. This is an increase of $177.3 million, or 2.5 percent, from the same period in 2013.

Average total deposits increased $151.1 million, or 1.2 percent, to $12.9 billion for the three months ended December 31, 2014, compared to the same period in 2013. Average noninterest-bearing demand deposits increased $500.4 million, or 10.2 percent, compared to 2013. Average interest-bearing deposits decreased by $349.3 million, or 4.5 percent, in 2014 as compared to 2013. Total deposits as of December 31, 2014 and 2013 remained the same at $13.6 billion. Also, as of December 31, 2014, noninterest-bearing demand deposits were 41.4 percent of total deposits, compared to 38.0 percent as of December 31, 2013.

As of December 31, 2014, UMB had total shareholders’ equity of $1.6 billion, an increase of 9.1 percent, as compared to December 31, 2013.

Year-to-Date

Earnings for the year ended December 31, 2014, were $120.7 million or $2.69 per share ($2.65 diluted). This is a decrease of $13.3 million, or 9.9 percent, compared to the prior year-end earnings of $134.0 million or $3.25 per share ($3.20 diluted).

Net interest income for the year ended December 31, 2014, increased $16.8 million, or 5.0 percent, compared to the same period in 2013. Average earning assets increased by $1.0 billion, or 6.9 percent, compared to the same period in 2013. This increase was due primarily to a $754.0 million, or 12.1 percent, increase in average loans, and a $179.3 million, or 27.0 percent, increase in interest-bearing due from banks. Net interest margin decreased six basis points to 2.49 percent for the year ended December 31, 2014, compared to the same period in 2013.

Noninterest income increased $6.9 million, or 1.4 percent, to $498.7 million for the year ended December 31, 2014, as compared to the same period in 2013. The increase in noninterest income is primarily driven by increased trust and securities processing income of $22.1 million, or 8.3 percent. The increase in trust and securities processing income was primarily due to a $12.8 million, or 15.4 percent, increase in fees related to institutional and personal investment management services, and an $8.4 million, or 10.6 percent, increase in fund administration and custody services, offset by a $1.9 million, or 2.0 percent, decrease in advisory fee income from the Scout Funds. Bankcard fees increased $5.2 million, or 8.4 percent, due to increased interchange income. These increases in noninterest income were offset by a decrease in gains on sales of securities available for sale of $4.4 million, or 51.7 percent, and a decrease in equity earnings on alternative investments on PCM equity method investments of $15.1 million, or 79.1 percent, for the year ended December 31, 2014, compared to the same period in 2013.

Noninterest expense increased $42.7 million, or 6.8 percent, for the year ended December 31, 2014, compared to the same period in 2013. This increase was driven by an increase in salaries and employee benefits expense of $18.9 million, or 5.6 percent, an increase in equipment expense of $4.4 million, or 9.0 percent, and a $20.3 million contingency reserve. These increases were offset by a decrease in other noninterest expense of $4.6 million due to a decline in the fair value adjustments on contingent consideration liabilities.

Dividend Declaration

At the company’s quarterly board meeting, the Board of Directors declared a $0.235 per share quarterly cash dividend, payable on April 1, 2015, to shareholders of record at the close of business on March 10, 2015.

Forward-Looking Statements:

This release contains, and our other communications may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “outlook,” “forecast,” “target,” “trend,” “plan,” “goal,” or other words of comparable meaning or future-tense or conditional verbs such as “may,” “will,” “should,” “would,” or “could.” Forward-looking statements convey our expectations, intentions, or forecasts about future events, circumstances, results, or aspirations. All forward-looking statements are subject to assumptions, risks, and uncertainties, which may change over time and many of which are beyond our control. You should not rely on any forward-looking statement as a prediction or guarantee about the future. Our actual future objectives, strategies, plans, prospects, performance, condition, or results may differ materially from those set forth in any forward-looking statement. Some of the factors that may cause actual results or other future events, circumstances, or aspirations to differ from those in forward-looking statements are described in our Annual Report on Form 10-K for the year ended December 31, 2013, our subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K, or other applicable documents that are filed or furnished with the SEC. Any forward-looking statement made by us or on our behalf speaks only as of the date that it was made. We do not undertake to update any forward-looking statement to reflect the impact of events, circumstances, or results that arise after the date that the statement was made. You, however, should consult further disclosures (including disclosures of a forward-looking nature) that we may make in any subsequent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K, or other applicable document that is filed or furnished with the SEC.

About UMB:

UMB Financial Corporation (Nasdaq: UMBF) is a diversified financial holding company headquartered in Kansas City, Mo., offering complete banking services, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas. Subsidiaries of the holding company include companies that offer services to mutual funds and alternative-investment entities and registered investment advisors that offer equity and fixed income strategies to institutions and individual investors. For more information, visit umb.com, umbfinancial.com, blog.umb.com or follow us on Twitter at @UMBBank, Facebook at facebook.com/UMBBank and LinkedIn at linkedin.com/company/umb-bank.