KANSAS CITY, Mo.--(BUSINESS WIRE)--Jul 24, 2018--UMB Financial Corporation (Nasdaq: UMBF), a financial holding company, announced income from continuing operations for the second quarter 2018 of $55.4 million, or $1.11 per diluted share, compared to $57.5 million, or $1.15 per diluted share in the first quarter 2018 (linked quarter) and $44.8 million, or $0.90 per diluted share, in the second quarter 2017. The reported GAAP income from continuing operations represents a decrease of 3.7 percent on a linked-quarter basis and an increase of 23.8 percent compared to the second quarter 2017.

Net operating income from continuing operations, a non-GAAP financial measure reconciled to income from continuing operations, the nearest comparable GAAP measure, later in this release, was $56.1 million, or $1.12 per diluted share for the second quarter 2018, compared to $59.1 million, or $1.18 per diluted share, for the linked quarter and $44.9 million, or $0.90 per diluted share, for the second quarter 2017. These results represent a decrease of 5.1 percent on a linked-quarter basis and an increase of 24.8 percent compared to the second quarter 2017.

“Highlights for the second quarter included 5.8 percent growth in our loan portfolio, continued positive operating leverage, and a 56 basis point expansion in our loan yields,” said Mariner Kemper, chairman and chief executive officer. “Our net interest margin expanded 12 basis points and drove a 9.3 percent increase in our net interest income.”

Discussion of results from continuing operations

Following the enactment of the Tax Cuts and Jobs Act, beginning in the first quarter of 2018, net interest margin is computed using net interest income adjusted to a fully taxable equivalent (FTE) basis assuming a statutory federal income tax rate of 21 percent and, where applicable, state income taxes; prior period net interest margins are computed using the then-statutory federal income tax rate of 35 percent and, where applicable, state income taxes.

Net interest income

On a linked quarter basis, the 1.6 percent increase in net interest income was driven by a five basis point improvement in net interest margin, one additional day of net interest income, and a 1.4 percent, or $157.9 million, increase in average loans. Earning asset yields improved 18 basis points from the linked quarter primarily due to improved loan yields of 21 basis points to 4.74 percent, in part driven by favorable re-pricing from recent increases in short-term interest rates and earning asset mix changes. The cost of interest-bearing liabilities increased 18 basis points to 0.83 percent driven by a 16 basis point increase in cost of interest-bearing deposits. Total cost of deposits including noninterest-bearing deposits was 45 basis points, an increase of 18 basis points from the linked quarter. On a year-over-year basis, the increase in net interest income was driven by a 5.8 percent or $632.4 million increase in average loans as well as higher average loan yields, which increased 56 basis points from one year ago, primarily driven by higher interest rates, volume, and mix changes, offset by the impacts of tax reform on tax equivalent income. For the second quarter 2018, average total assets were $20.6 billion, which is an increase of 1.5 percent over the second quarter 2017.

Noninterest income

Second quarter 2018 noninterest income decreased $5.2 million, or 5.0 percent, on a linked quarter basis largely due to: A $2.6 million decline in other income driven by decreases of $1.8 million in equity earnings on alternative investments and $1.1 million in the fair value of company-owned life insurance.A decrease in trust and securities processing due to a $1.3 million decline in fund servicing revenue.A decrease of $1.2 million in service charges on deposits primarily due to repricing.An increase of $1.0 million in rebates and rewards expense recorded as an offset to bankcard fees driven by higher purchase volume.These impacts were partially offset by an increase of $0.6 million in trading and investment banking. Noninterest income in the second quarter of 2018 decreased $10.0 million, or 9.1 percent, compared to the same quarter in 2017 primarily driven by: A $3.7 million increase in rebates and rewards expense recorded as an offset to bankcard fees driven by increased purchase volume.A $2.0 million decrease in service charges on deposit accounts due to repricing.A $2.0 million decline in fund servicing revenue recorded in trust and securities processing due to customer repricing and losses.A $1.1 million decrease in gains on available-for-sale securities.A $0.9 million decrease in trading and investment banking due to market adjustments from the company’s seed investments in certain Scout funds following the liquidation of such investments at the end of the second quarter of 2017.

Noninterest expense

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