UMB Financial Corporation Reports 32 Percent Growth in Earnings for both Fourth Quarter and Full-Year 2008

UMB Financial Corporation (NASDAQ: UMBF), a financial services holding company, announced earnings for the three months ended December 31, 2008 of $20.2 million or $0.50 per share ($0.49 diluted). This is an increase of $4.9 million, or 32.2 percent, compared to fourth quarter 2007 earnings of $15.3 million or $0.37 per share ($0.37 diluted). Earnings for the year ended December 31, 2008 were $98.1 million or $2.41 per share ($2.38 diluted). This is an increase of $23.9 million, or 32.2 percent, compared to prior year earnings of $74.2 million or $1.78 per share ($1.77 diluted).

Excluding the security transfer product sale and Visa-related transactions in both periods, net income for the fourth quarter increased $2.4 million, or 13.7 percent, compared to the same period in 2007. Excluding the above items, net income for the year ended December 31, 2008 increased $16.6 million, or 22.8 percent, compared to 2007. A table reconciling GAAP net income for these items is included with this release.

"Throughout our 96-year history, a high-quality balance sheet and strong capital ratios have been at the core of our operating performance, and have resulted in UMB posting a strong fourth quarter and record year,” commented Mariner Kemper, Chairman and CEO of UMB Financial Corporation. "While this economic environment has been challenging for the industry, we’ve continued to grow our loan portfolio by sticking to our core lending principles—lend to customers we know, lend in our territory, and originate our own loans. Our record loan balances of $4.4 billion as of December 31, 2008 are proof that this strategy is paying off, while our nonperforming loans are only 0.20 percent of total loans.”

Net Interest Income and Margin

Net interest income for the fourth quarter of 2008 increased $17.5 million, or 28.8 percent, compared to the same period in 2007 due primarily to higher average earning assets and increased net interest margin. Average earning assets increased by $1.7 billion, or 24.4 percent, compared to the fourth quarter of 2007. This increase was due to a $429.0 million, or 11.0 percent, increase in average loans and a $1.2 billion, or 38.8 percent, increase in total securities, including trading securities. Net interest margin increased 12 basis points to 3.66 percent for the three months ended December 31, 2008 compared to the same quarter in 2007. Largely contributing to the margin improvement was a reduction of 198 basis points in the average cost of interest-bearing liabilities, which more than offset a decrease in average earning asset yield of 134 basis points.

Noninterest Income and Expense

Noninterest income decreased $3.2 million, or 4.4 percent, for the three months ended December 31, 2008 compared to the same period in 2007. Trust and securities processing income decreased $4.1 million, or 13.4 percent, for the three months ended December 31, 2008 compared to the same period in 2007. This decrease was primarily due to a $2.2 million, or 23.5 percent, decrease in fee income from UMB Scout Funds and a $1.2 million, or 11.7 percent, decrease in fund administration and custody services. Service charges on deposits increased $0.9 million, or 4.7 percent, for the three months ended December 31, 2008 compared to the same period in 2007 due mostly to a $0.6 million increase in corporate service charges.

"The fourth quarter was a challenging period for U.S. domestic and international equity markets, which lowered our assets under management 10 percent during the same period and resulted in lower fee income. Net fund flows continued to be strong at $125.0 million during the fourth quarter, and were a record $1.1 billion for the year, demonstrating the underlying strength in our investment management business,” said Peter deSilva, President and Chief Operating Officer. "Our Healthcare Services business continues to be a solid performer. We completed 2008 with more than 1.1 million HSA/FSA accounts and over $140 million in total assets. Additional fee income drivers for the year were card services with growth of 8.4 percent and trust and securities processing income, which increased 5.8 percent.”

Non-interest expense increased $4.7 million, or 4.3 percent, for the three months ended December 31, 2008 compared to the same period in 2007. Salary expense increased by $6.3 million, or 11.5 percent, mostly due to higher employee base salaries, higher commissions and bonuses and higher cost of benefits. Processing fees decreased $1.0 million, or 12.0 percent, due to decreased third party custodian fees related to international transactions from mutual fund clients and fees paid by the advisor to third-party distributors of the UMB Scout Funds. Marketing and business development expense increased $2.2 million, or 57.8 percent, due to several strategic campaigns initiated in 2008 designed to acquire new customers and reinforce existing customer confidence.

Balance Sheet

Average total assets for the three months ended December 31, 2008 were $9.7 billion compared to $8.1 billion for the same period in 2007, an increase of $1.6 billion, or 20.6 percent. Average earning assets increased by $1.7 billion for the period, or 24.4 percent.

Actual loan balances on December 31, 2008 were $4.4 billion, compared to $3.9 billion on December 31, 2007. These balances were as follows:

Nonperforming loans increased to $8.8 million at December 31, 2008 from $6.6 million at December 31, 2007. As a percentage of total loans, nonperforming loans increased to 0.20 percent of loans as of December 31, 2008 compared to 0.17 percent at December 31, 2007. Nonperforming loans are defined as nonaccrual loans and restructured loans. The company’s allowance for loan losses totaled $52.3million, or 1.19 percent of loans before loans held for sale as of December 31, 2008 compared to $46.0 million, or 1.17 percent of loans before loans held for sale as of December 31, 2007.

For the three months ended December 31, 2008, average securities, including trading securities totaled $4.1 billion. This is an increase of $1.2 billion, or 38.8 percent from the same period in 2007. Average federal funds sold and resell agreements for the fourth quarter decreased $103.3 million, or 39.1 percent, from the same period in 2007 to $160.9 million.

"Our focus remains on prudently growing both sides of the balance sheet,” said Mike Hagedorn, Chief Financial Officer. "In this challenging interest rate environment, the net interest margin for the fourth quarter was 3.66 percent, up from 3.54 percent in the fourth quarter of 2007. This net interestmargin improvement is the result of average earning asset growth of 24.4 percent, our continued commitment to maintaining strong liquidity, and a reduction in our interest-bearing deposit costs.”

Average total deposits increased $1.2 billion, or 21.2 percent, to $7.1 billion for the three months ended December 31, 2008 compared to the same period in 2007. The increase in deposits came primarily from our public funds, mutual funds, treasury management accounts, and personal savings accounts. Average savings balances increased $612.3 million for the three months ended December 31, 2008 as compared to 2007. Average money market accounts increased by $247.1 million, or 20.7 percent, in 2008 as compared to 2007. Average noninterest-bearing demand deposits increased $272.2 million, or 15.0 percent, compared to 2007. Total deposits as of December 31, 2008 were $7.7 billion, compared to $6.6 billion at December 31, 2007, a 17.9 percent increase.

As of December 31, 2008, UMB had total shareholders’ equity of $974.8 million, a 9.5 percent increase from the same period last year. For the three months ended December 31, 2008, the company repurchased 17,245 shares at an average price of $48.24 per share for a total cost of $0.8 million.

The company announced a quarterly cash dividend of 17.5 cents per share, payable on April 1, 2009 to shareholders of record at the close of business on March 11, 2009.

Year-to-Date

Earnings for the year ended December 31, 2008 were $98.1 million or $2.41 per share ($2.38 diluted). This is an increase of $23.9 million, or 32.2 percent, compared to the prior year earnings of $74.2 million or $1.78 per share ($1.77 diluted). A $7.2 million pre-tax gain was recognized in 2007 on the sale of the securities transfer product and a $1.1 million pre-tax gain was recognized in the third quarter of 2008 as a result of a final contingent payment received on the sale of the security transfer product. This sale originated in the third quarter of 2007 and was completed in the third quarter of 2008. The fourth quarter of 2007 included a pre-tax liability accrual of $4.6 million related to the company’s estimated share of Visa U.S.A., Inc.’s (Visa) covered litigation provision. As a direct result of Visa’s initial public offering (IPO), a pre-tax gain of $8.9 million from the mandatory redemption of a portion of the company’s Class B shares in Visa was recognized in the first quarter of 2008. The company also reduced its liability accrual in the first quarter of 2008 by $4.0 million related to the company’s estimated share of Visa’s covered litigation. This reduction was a result of funding the covered litigation escrow account as part of its IPO process.

Excluding the security transfer product sale and Visa-related transactions, net income for the year ended December 31, 2008 increased $16.6 million, or 22.8 percent, compared to the same period in 2007. A table reconciling GAAP net income for these items is included with this release.

Net interest income for the year ended December 31, 2008 increased $42.4 million, or 18.2 percent, compared to the same period in 2007 due primarily to higher average earning assets and net interest margin. Net interest margin increased to 3.60 percent for the year ended December 31, 2008 as compared to 3.44 percent for the same period in 2007.

Noninterest income increased $24.0 million, or 8.3 percent, to $312.8 million for the year ended December 31, 2008 as compared to the same period in 2007. The increase is primarily attributable to higher trust and securities processing income, deposit service charges, bankcard fees and the impact from the Visa transactions. Trust and securities processing income increased $6.7 million, or 5.8 percent, for year ended December 31, 2008 as compared to the same period in 2007. Deposit service charges were $5.2 million, or 6.5 percent, higher for the year ended December 31, 2008. Bankcard fees increased $3.4 million, or 8.4 percent, for the year ended December 31, 2008 as compared to the same period in 2007. 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, which originated in the third quarter of 2007. Also during the third quarter of 2008, $2.8 million in pre-tax gains was recognized on the sale of securities available for sale. An $8.9 million pre-tax gain was recognized on the mandatory partial redemption of the company’s holdings of Class B shares of Visa during the first quarter of 2008. This redemption was part of Visa’s IPO.

Noninterest expense increased $23.0 million, or 5.6 percent, for the year ended December 31, 2008 compared to the same period in 2007. Salary expense increased by $21.1 million, or 10.2 percent, mostly due to higher employee base salaries, higher commissions and bonuses and higher employee benefit costs. Processing fees increased by $2.9 million, or 9.6 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 UMB Scout Funds. Occupancy expense increased $2.2 million, or 7.3 percent, from the same period in 2007 due to increased repair and maintenance costs on existing facilities and additional facility security costs. Marketing expense increased $4.0 million, or 25.8 percent, from the same period in 2007 due to increased advertising and business development costs associated with gaining new customer relationships. A covered litigation provision reduction of $4.0 million related to the Visa-covered litigation escrow established due to the Visa IPO was recorded in the first quarter of 2008.

The company plans to host a conference call to discuss its fourth quarter and year-end financial results on January 28, 2009, at 8:30 a.m. (CDT). Interested parties may access the call by dialing U.S./Canada (toll-free) 800.218.8862 or access the following Web link at least ten minutes before the call begins:

http://w.on24.com/r.htm?e=130448&s=1&k=39A3325858A3ADE488D0E7B22F52CC7F or visit umb.com, Investor Relations, to access the link to the live call.

A replay of the conference call may be heard until February, 11, 2009, by calling U.S./Canada (toll-free) 800.405.2236 or 303.590.3000. The replay pass code required for playback is conference 11123985#. 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 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, 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 gains on sale of UMB’s security transfer product. This sale resulted in gains for UMB both in the third and fourth quarter of 2007 as well as the third quarter of 2008. They also exclude certain gains related to the mandatory redemption of class B common shares of Visa, Inc. and the creation and adjustment of the covered litigation provision, which occurred in the fourth quarter of 2007 and the first quarter of 2008. 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, Missouri, 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 137 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 a fund services group based in Milwaukee, Wisconsin, single-purpose companies that deal with brokerage services and insurance, and a registered investment advisor that manages the company’s proprietary mutual funds.