UMB Financial Corporation Reports 2009 Year-End Results and an 18 Percent Increase in Fourth Quarter Earnings

UMB Financial Corporation (NASDAQ: UMBF), a financial services holding company, announced earnings for the three months ended December 31, 2009, of $23.9 million or $0.59 per share ($0.59 diluted). This is an increase of $3.6 million, or 18.0 percent, compared to fourth quarter 2008 earnings of $20.2 million or $0.50 per share ($0.49 diluted). Earnings for the year ended December 31, 2009, were $89.5 million or $2.22 per share ($2.20 diluted). This is a decrease of $8.6 million, or 8.8 percent, compared to the prior year-to-date earnings of $98.1 million or $2.41 per share ($2.38 diluted).

Excluding the securities transfer product transaction and the Visa, Inc. (Visa)-related transactions during 2008, net income for the year ended December 31, 2009, increased $0.4 million, or 0.4 percent, compared to the same period in 2008. A table reconciling GAAP net income for the securities transfer and Visa-related items is included with this release.

"In what proved to be another very challenging year for the industry, UMB remained focused, executed against our proven business model and delivered sound results,” commented Mariner Kemper, Chairman and Chief Executive Officer. "We continue to meet our customers’ credit needs, build scale in our fee businesses — both organically and through acquisitions — and earn industry accolades. Most recently, we were pleased to be ranked the second-best bank in America by Forbes in an end-of-the-year evaluation of the 100 largest banks and thrifts. This recognition is validation that our business model is the right one in these times and in all times.”

Net Interest Income and Margin

Net interest income for the fourth quarter of 2009 was flat compared to the same period in 2008. Average earning assets increased by $617.8 million, or 6.9 percent, compared to the fourth quarter of 2008. This increase was primarily due to a $461.1 million, or 11.2 percent, increase in average securities. Net interest margin decreased 25 basis points to 3.41 percent for the three months ended December 31, 2009, compared to the same quarter in 2008. Provision for loan losses for the fourth quarter increased $6.0 million to $11.5 million.

Noninterest Income and Expense

Noninterest income increased $13.7 million, or 19.7 percent, for the three months ended December 31, 2009, compared to the same period in 2008. Trust and securities processing income increased $8.0 million, or 30.4 percent, for the three months ended December 31, 2009, compared to the same period in 2008. This increase was primarily due to a $5.5 million, or 60.9 percent, increase in fund administration and custody services, a $2.9 million, or 40.5 percent, increase in fee income from the Scout Funds, offset by a $1.2 million, or 35.0 percent, decrease in corporate trust income. Gains from the sale of securities available for sale of $4.5 million were recognized during the fourth quarter of 2009.

Noninterest expense increased $5.1 million, or 4.4 percent, for the three months ended December 31, 2009, compared to the same period in 2008. Salary and benefits expense increased by $2.4 million, or 4.0 percent, mostly due to higher health insurance costs. Processing fees increased $3.1 million, or 41.0 percent, due to increased third party custodian fees related to international transactions from mutual fund clients and fees paid by the advisor to third-party distributors of the Scout Funds.

"In 2009, we continued to focus on strengthening our competitive position in our diverse fee-based businesses with investments in infrastructure, people and acquisitions,” said Peter deSilva, President and Chief Operating Officer. "Of the acquisitions we made this year, J.D. Clark & Company made the most significant contribution to our fee-based income, and we are pleased with the progress we have made on integrating this business thus far. With the acquisition of American National Bank’s corporate trust business in the fourth quarter, our corporate trust business is primed for growth in 2010. As we have stated, we will continue to evaluate acquisition opportunities as they arise.”

Balance Sheet

Average total assets for the three months ended December 31, 2009, were $10.3 billion compared to $9.7 billion for the same period in 2008, an increase of $615.8 million, or 6.3 percent. Average earning assets increased by $617.8 million for the period, or 6.9 percent.

Actual loan balances on December 31, 2009, of $4.3 billion decreased slightly compared to 2008. Real estate loans increased $205.4 million, or 12.9 percent, due to increases in commercial real estate and home equity loans. Consumer loans decreased $128.5 million, or 22.5 percent, due to the continued reduction in indirect auto loans as we exit the market. Average loan balances for the three months ended December 31, 2009 and 2008 were flat at $4.3 billion.

Nonperforming loans increased to $23.3 million at December 31, 2009, from $8.8 million at December 31, 2008. As a percentage of loans, nonperforming loans increased to 0.54 percent as of December 31, 2009, compared to 0.20 percent at December 31, 2008. This increase is predominately due to one syndicated national credit, which was placed on nonaccrual during 2009. Nonperforming loans are defined as nonaccrual loans and restructured loans. By comparison, the industry average for nonperforming loans as of September 30, 2009, was 3.16 percent. The company’s allowance for loan losses totaled $64.1 million, or 1.49 percent of loans as of December 31, 2009, compared to $52.3 million, or 1.19 percent of loans as of December 31, 2008.

For the three months ended December 31, 2009, average securities, including trading securities, totaled $4.6 billion. This is an increase of $458.5 million, or 11.0 percent, from the same period in 2008. Average federal funds sold and resell agreements for the fourth quarter decreased $116.5 million, or 72.4 percent, to $44.4 million from the same period in 2008.

Average total deposits increased $668.7 million, or 9.4 percent, to $7.8 billion for the three months ended December 31, 2009, compared to the same period in 2008. The increase in deposits came primarily from public funds, mutual funds, treasury management accounts, and savings accounts. Average time deposit accounts increased $306.6 million, or 21.9 percent, for the three months ended December 31, 2009, as compared to 2008. Average money market accounts increased by $21.0 million, or 1.5 percent, in 2009 as compared to 2008. Average noninterest-bearing demand deposits increased $406.8 million, or 19.5 percent, compared to 2008. Total deposits as of December 31, 2009, were $8.5 billion, compared to $7.7 billion at December 31, 2008, a 10.5 percent increase.

"Capital and liquidity remain key balance sheet strengths,” said Mike Hagedorn, Chief Financial Officer. "To that end, UMB surpassed $1 billion in capital for the first time in 2009. As we consider operating in the new ‘normal’ of the financial services industry, we believe these same strengths that have served us well for nearly 97 years will continue to do so in the years to come.”

As of December 31, 2009, UMB had total shareholders’ equity of $1.0 billion, an increase of 4.2 percent over December 31, 2008. For the three months ended December 31, 2009, the company repurchased 13,980 shares at an average price of $40.30 per share for a total cost of $0.6 million.

Year-to-Date

Earnings for the year ended December 31, 2009, were $89.5 million or $2.22 per share ($2.20 diluted). This is a decrease of $8.6 million, or 8.8 percent, compared to the prior year-to-date earnings of $98.1 million or $2.41 per share ($2.38 diluted).

Excluding the securities transfer product transaction and the Visa, Inc. (Visa)-related transactions during 2008, net income for the year ended December 31, 2009, increased $0.4 million, or 0.4 percent, compared to the same period in 2008. A table reconciling GAAP net income for the securities transfer and Visa-related items is included with this release.

Net interest income for the year ended December 31, 2009, increased $27.9 million, or 10.2 percent, compared to the same period in 2008 due primarily to higher average earning assets. Net interest margin decreased to 3.43 percent for the year ended December 31, 2009, as compared to 3.60 percent for the same period in 2008. Provision for loan losses for the year ended December 31, 2009, increased $14.3 million to $32.1 million.

Noninterest income decreased $2.6 million, or 0.8 percent, to $310.2 million for the year ended December 31, 2009, as compared to the same period in 2008. Trust and securities processing income decreased $1.7 million, or 1.4 percent, for year-to-date December 31, 2009, as compared to the same period in 2008. Trading and investment banking income was $7.0 million, or 35.4 percent, higher for the year ended December 31, 2009. Service charges on deposits decreased $1.7 million, or 2.0 percent compared to the same period in 2008. Brokerage fees decreased $1.5 million, or 17.2 percent, for the year ended December 31, 2009. Gains on sales of securities available for sale increased $6.4 million compared to 2008. As a direct result of Visa’s Initial Public Offering during the first quarter of 2008, earnings for the year ended December 31, 2008, include a pre-tax gain of $8.9 million from the mandatory redemption of a portion of the company’s Class B shares in Visa. A $1.1 million pre-tax gain was recognized in the third quarter of 2008 as a result of the final contingent payment received on the sale of the securities transfer product.

Noninterest expense increased $30.4 million, or 7.1 percent, for the year ended December 31, 2009, compared to the same period in 2008. Salary expense increased by $12.9 million, or 5.7 percent, mostly due to higher employee base salaries, higher commissions and bonuses and higher cost of benefits. Regulatory fees increased $12.9 million, or 473.2 percent, primarily due to increased deposit insurance assessments from the FDIC and a $4.8 million special assessment paid to the FDIC in the third quarter of 2009. Noninterest expense in 2008 was impacted by a reduction of the covered litigation provision of $4.0 million related to the Visa covered litigation escrow established due to the Visa IPO during the first quarter of 2008.

The company plans to host a conference call to discuss its fourth quarter and year-end results on January 27, 2010, at 8:30 a.m. CST. Interested parties may access the call by dialing U.S. (toll-free) 877-941-2333 or access the following Web link to the live call: http://w.on24.com/r.htm?e=184125&s=1&k=F5D4F769E720E50BEE363ABD8F7FEBEB or visit umb.com.

A replay of the conference call may be heard until February 10, 2010, by calling (toll-free) 800-406-7325 or (U.S.) 303-590-3030. The replay pass code required for playback is conference ID 4193889. The call replay may also be accessed via the company's Web site, umb.com, by visiting the investor relations area.

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 release filed with the Current Report on Form 8-K, any exhibits to the 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, increases in employee costs, our ability to integrate acquisitions 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 the decrease of the liability accrual related to Visa’s covered litigation provision as well as the pre-tax gain from the mandatory redemption of a portion of the company’s Class B shares in Visa. They also exclude the gains on sale of UMB’s securities transfer product. Financial measures, which exclude the above-referenced 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 Schedule 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 (NASDAQ: UMBF) is a financial services holding company headquartered in Kansas City, Mo., offering complete banking, asset management, health spending solutions and related financial services to both individual and business customers nationwide. Its banking subsidiaries own and operate 135 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 mutual fund and alternative investment services groups, single-purpose companies that deal with brokerage services and insurance, and a registered investment advisor that manages the company’s proprietary mutual funds and investment advisory accounts for institutional customers. For more information, visit umb.com or follow us on Twitter at @UMBFinancial.

The above table presents the variation in net income on an as reported (GAAP) basis and excluding the gain on the sale of securities transfer, excluding certain gains related to the redemption of class B common shares of Visa, Inc. and the adjustment of the covered litigation provision. The press release includes commentary that compares both GAAP and non-GAAP financial measures.