Missouri

~~Missouri~~

43-0903811

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)


1010 Grand Boulevard, Kansas City, Missouri		64106
(Address of principal executive offices)		(Zip Code)

(~~Registrant’s~~Registrant's telephone number, including area code): (816) 860-7000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx☒ No ¨☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yesx☒ No ¨☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer”~~filer,” “smaller reporting company,” and ~~“smaller reporting~~“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer	☒	x		Accelerated filer		¨ ☐
Non- accelerated filer	☐
~~Non-accelerated filer~~		¨ ~~(Do~~ (Do not check if a smaller reporting company)		Smaller reporting company	☐
	¨		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes ☐ No ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes¨☐ No x☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

As of October ~~27, 2016,~~26, 2017, UMB Financial Corporation had ~~49,562,002~~49,867,273 shares of common stock outstanding.

UMB FINANCIAL CORPORATION

FORM 10-Q

INDEX


PART I – FINANCIAL INFORMATION		3

ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)		3
CONSOLIDATED BALANCE SHEETS		3
CONSOLIDATED STATEMENTS OF INCOME		4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME		5	6
CONSOLIDATED STATEMENTS OF CHANGES IN ~~SHAREHOLDERS’~~SHAREHOLDERS' EQUITY		6	7
CONSOLIDATED STATEMENTS OF CASH FLOWS		7	8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS		8	10
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		43	37
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		62	53
ITEM 4.	CONTROLS AND PROCEDURES		66	58

PART II - OTHER INFORMATION		67	59

ITEM 1.	LEGAL PROCEEDINGS		67	59
ITEM 1A.	RISK FACTORS		67	59
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		67	59
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES		67	59
ITEM 4.	MINE SAFETY DISCLOSURES		67	59
ITEM 5.	OTHER INFORMATION		68	59
ITEM 6.	EXHIBITS		68	60
SIGNATURES		69	61

PART I – ~~FINANCIAL~~FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

UMB FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(unaudited, dollars in thousands, except share and per share data)

							September 30,			December 31,
	September 30, 2016			December 31, 2015			2017			2016
ASSETS
Loans:	$	10,293,494		$	9,430,761		$	10,997,028		$	10,540,383
Allowance for loan losses		(90,404	)		(81,143	)		(98,389	)		(91,649	)

Net loans		10,203,090			9,349,618			10,898,639			10,448,734

Loans held for sale		11,880			589			4,525			5,279
Investment securities:
Available for sale		6,295,687			6,806,949			5,848,960			6,466,334
Held to maturity (fair value of $1,097,988 and $691,379, respectively)		1,009,117			667,106
Held to maturity (fair value of $1,181,747 and $1,106,027, respectively)								1,276,252			1,115,932
Trading securities		58,062			29,617			60,660			39,536
Other securities		66,853			65,198			63,543			68,306

Total investment securities		7,429,719			7,568,870			7,249,415			7,690,108

Federal funds sold and securities purchased under agreements to resell		244,891			173,627			244,436			324,327
Interest-bearing due from banks		453,189			522,877			221,856			715,823
Cash and due from banks		354,184			458,217			366,169			422,117
Premises and equipment, net		287,267			281,471			277,454			289,007
Accrued income		93,016			90,127			103,076			99,045
Goodwill		228,396			228,346			180,867			180,867
Other intangibles, net		37,419			46,782			23,477			26,630
Other assets		383,095			373,721			655,846			425,205

Discontinued assets – goodwill and other intangibles, net								53,743			55,390
Total assets	$	19,726,146		$	19,094,245		$	20,279,503		$	20,682,532

LIABILITIES
Deposits:
Noninterest-bearing demand	$	6,008,326		$	6,306,895		$	5,812,117		$	6,654,584
Interest-bearing demand and savings		8,288,670			7,529,972			9,063,079			8,780,309
Time deposits under $250,000		658,541			771,973			576,035			613,589
Time deposits of $250,000 or more		422,712			483,912			548,373			522,132

Total deposits		15,378,249			15,092,752			15,999,604			16,570,614
Federal funds purchased and repurchase agreements		2,021,123			1,818,062			1,856,837			1,856,937
Short-term debt		—			5,009
Long-term debt		75,418			86,070			76,071			76,772
Accrued expenses and taxes		163,221			161,245			193,978			172,967
Other liabilities		63,507			37,413			51,470			42,858

Total liabilities		17,701,518			17,200,551			18,177,960			18,720,148

SHAREHOLDERS’ EQUITY
Common stock, $1.00 par value; 80,000,000 shares authorized; 55,056,730 shares issued; and 49,546,069 and 49,396,366 shares outstanding, respectively		55,057			55,057
SHAREHOLDERS' EQUITY
Common stock, $1.00 par value; 80,000,000 shares authorized; 55,056,730 shares issued; and 49,862,453 and 49,673,056 shares outstanding, respectively								55,057			55,057
Capital surplus		1,028,869			1,019,889			1,042,022			1,033,419
Retained earnings		1,112,613			1,033,990			1,239,865			1,142,887
Accumulated other comprehensive income (loss), net		42,512			(3,718	)
Treasury stock, 5,510,661 and 5,660,364 shares, at cost, respectively		(214,423	)		(211,524	)

Total shareholders’ equity		2,024,628			1,893,694

Total liabilities and shareholders’ equity	$	19,726,146		$	19,094,245

Accumulated other comprehensive loss, net								(22,668	)		(57,542	)
Treasury stock, 5,194,277 and 5,383,674 shares, at cost, respectively								(212,733	)		(211,437	)
Total shareholders' equity								2,101,543			1,962,384
Total liabilities and shareholders' equity							$	20,279,503		$	20,682,532

See Notes to Consolidated Financial Statements.

UMB FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(unaudited, dollars in thousands, except share and per share data)

											Three Months Ended					Nine Months Ended
	Three Months Ended September 30,					Nine Months Ended September 30,					September 30,					September 30,
	2016		2015			2016		2015			2017		��	2016		2017			2016
INTEREST INCOME
Loans	$	98,820	$	84,686		$	283,313	$	220,314		$	119,132		$	98,820	$	338,416		$	283,313
Securities:
Taxable interest		17,012		18,498			55,221		56,469			17,720			17,012		55,351			55,221
Tax-exempt interest		14,797		11,320			41,377		31,842			18,893			14,797		54,372			41,377

Total securities income		31,809		29,818			96,598		88,311			36,613			31,809		109,723			96,598
Federal funds and resell agreements		790		175			1,939		377			1,008			790		2,638			1,939
Interest-bearing due from banks		445		475			1,772		1,761			753			445		1,884			1,772
Trading securities		174		75			399		303			389			174		1,135			399

Total interest income		132,038		115,229			384,021		311,066			157,895			132,038		453,796			384,021

INTEREST EXPENSE
Deposits		4,626		3,863			12,817		10,433			10,181			4,626		23,982			12,817
Federal funds and repurchase agreements		1,894		427			4,750		1,389			5,811			1,894		14,274			4,750
Other		753		1,044			2,587		1,631			1,045			753		2,973			2,587

Total interest expense		7,273		5,334			20,154		13,453			17,037			7,273		41,229			20,154

Net interest income		124,765		109,895			363,867		297,613			140,858			124,765		412,567			363,867
Provision for loan losses		13,000		2,500			25,000		10,500			11,500			13,000		35,000			25,000

Net interest income after provision for loan losses		111,765		107,395			338,867		287,113			129,358			111,765		377,567			338,867

NONINTEREST INCOME
Trust and securities processing		60,218		65,182			179,448		199,862			45,060			41,812		132,412			123,984
Trading and investment banking		6,114		2,969			16,382		14,659			4,453			6,114		18,168			16,382
Service charges on deposit accounts		21,832		21,663			65,713		64,829			21,510			21,832		66,316			65,713
Insurance fees and commissions		698		480			3,355		1,636			425			698		1,584			3,355
Brokerage fees		4,712		2,958			13,159		8,748			5,815			4,712		17,081			13,159
Bankcard fees		17,086		17,624			52,636		51,842			17,427			17,086		55,413			52,636
Gain on sales of securities available for sale, net		2,978		101			8,509		8,404			2,390			2,978		4,138			8,509
Equity earnings (loss) on alternative investments		1,594		(5,032	)		2,191		(6,999	)
Equity (losses) earnings on alternative investments												(584	)		1,594		(1,393	)		2,191
Other		6,716		3,153			18,352		10,874			7,810			6,716		23,810			18,352

Total noninterest income		121,948		109,098			359,745		353,855			104,306			103,542		317,529			304,281

NONINTEREST EXPENSE
Salaries and employee benefits		109,369		104,733			325,216		302,855			99,749			99,403		306,174			293,294
Occupancy, net		11,394		11,748			33,505		32,070			11,285			11,224		33,314			32,996
Equipment		16,231		17,228			49,545		46,810			17,880			16,029		53,318			48,807
Supplies and services		4,624		5,371			14,292		14,299			4,076			4,472		12,962			13,875
Marketing and business development		5,332		5,766			16,086		16,914			5,056			5,090		14,929			15,273
Processing fees		11,264		12,795			34,190		38,232			11,151			9,084		31,093			27,118
Legal and consulting		4,450		8,648			14,186		18,943			5,844			4,437		17,361			14,107
Bankcard		5,015		5,266			16,199		14,987			5,130			5,015		15,066			16,199
Amortization of other intangible assets		2,992		3,483			9,363		8,807			1,715			2,088		5,685			6,644
Regulatory fees		3,370		3,176			10,491		8,805			3,798			3,370		11,702			10,491
Other		5,742		7,065			22,497		18,934			6,137			4,999		20,966			20,094

Total noninterest expense		179,783		185,279			545,570		521,656			171,821			165,211		522,570			498,898

Income before income taxes		53,930		31,214			153,042		119,312			61,843			50,096		172,526			144,250
Income tax expense		11,984		8,763			37,175		32,882			12,971			10,674		36,907			34,016

Income from continuing operations												48,872			39,422		135,619			110,234
Discontinued Operations
(Loss) income from discontinued operations before income taxes												(1,030	)		3,834		(722	)		8,792
Income tax (benefit) expense												(300	)		1,310		(247	)		3,159
(Loss) income from discontinued operations												(730	)		2,524		(475	)		5,633
NET INCOME	$	41,946	$	22,451		$	115,867	$	86,430		$	48,142		$	41,946	$	135,144		$	115,867

PER SHARE DATA
Net income - basic	$	0.86	$	0.46		$	2.37	$	1.85
Net income - diluted		0.85		0.46			2.36		1.84
Dividends		0.245		0.235			0.735		0.705
Weighted average shares outstanding - basic		48,849,251		48,577,282			48,792,419		46,619,428
Weighted average shares outstanding - diluted		49,284,280		49,036,332			49,162,200		47,080,009

PER SHARE DATA
Basic:
Income from continuing operations	$	0.99		$	0.81	$	2.76		$	2.26
(Loss) income from discontinued operations		(0.01	)		0.05		(0.01	)		0.11
Net income – basic		0.98			0.86		2.75			2.37
Diluted:
Income from continuing operations		0.98			0.80		2.72			2.24
(Loss) income from discontinued operations		(0.01	)		0.05		(0.01	)		0.12
Net income - diluted		0.97			0.85		2.71			2.36
Dividends		0.255			0.245		0.765			0.735
Weighted average shares outstanding - basic		49,283,322			48,849,251		49,221,629			48,792,419
Weighted average shares outstanding - diluted		49,833,141			49,284,280		49,838,619			49,162,200

See Notes to Consolidated Financial Statements.

UMB FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited, dollars in thousands)

Three Months Ended
September 30,

Nine Months Ended
September 30,

   2016 2015 2016 2015
Net Income
   $ 41,946    $ 22,451    $ 115,867    $ 86,430
Other comprehensive income, net of tax:

Unrealized (losses) gains on securities:

Change in unrealized holding (losses) gains, net
   (16,946 ) 46,166    90,639    33,289
Less: Reclassification adjustment for gains included in net income
   (2,978 ) (101 ) (8,509 ) (8,404 )


Change in unrealized (losses) gains on securities during the period
   (19,924 ) 46,065    82,130    24,885
Change in unrealized losses on derivative hedges
   (643 ) —      (7,677 ) —


Income tax benefit (expense)
   7,784    (17,394 ) (28,223 ) (9,361 )


Other comprehensive (loss) income
   (12,783 ) 28,671    46,230    15,524


Comprehensive income
   $ 29,163    $ 51,122    $ 162,097    $ 101,954

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
Net Income	$	48,142		$	41,946		$	135,144		$	115,867
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on securities:
Change in unrealized holding gains (losses), net		5,064			(16,946	)		62,646			90,639
Less: Reclassification adjustment for gains included in net income		(2,390	)		(2,978	)		(4,138	)		(8,509	)
Change in unrealized gains (losses) on securities during the period		2,674			(19,924	)		58,508			82,130
Change in unrealized losses on derivative hedges		(169	)		(643	)		(1,080	)		(7,677	)
Income tax (expense) benefit		(1,548	)		7,784			(22,554	)		(28,223	)
Other comprehensive income (loss)		957			(12,783	)		34,874			46,230
Comprehensive income	$	49,099		$	29,163		$	170,018		$	162,097

See Notes to Consolidated Financial Statements.

UMB FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN ~~SHAREHOLDERS’~~SHAREHOLDERS' EQUITY

(unaudited, dollars in thousands, except per share data)


	Common Stock		Capital Surplus			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total
Balance - January 1, 2015	$	55,057	$	894,602		$	963,911		$	11,006		$	(280,818	)	$	1,643,758
Total comprehensive income							86,430			15,524						101,954
Cash dividends ($0.705 per share)		—		—			(34,135	)		—			—			(34,135	)
Purchase of treasury stock		—		—			—			—			(6,172	)		(6,172	)
Issuance of equity awards		—		(4,180	)		—			—			4,639			459
Recognition of equity-based compensation		—		9,030			—			—			—			9,030
Net tax benefit related to equity compensation plans		—		732			—			—			—			732
Sale of treasury stock		—		475			—			—			315			790
Exercise of stock options				2,089			—			—			2,615			4,704
Common stock issuance for acquisition		—		112,635			—			—			67,102			179,737

Balance – September 30, 2015	$	55,057	$	1,015,383		$	1,016,206		$	26,530		$	(212,319	)	$	1,900,857
																		Common Stock		Capital Surplus			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Treasury Stock			Total
Balance - January 1, 2016	$	55,057	$	1,019,889		$	1,033,990		$	(3,718	)	$	(211,524	)	$	1,893,694		$	55,057	$	1,019,889		$	1,033,990		$	(3,718	)	$	(211,524	)	$	1,893,694
Total comprehensive income							115,867			46,230			—			162,097			—		—			115,867			46,230			—			162,097
Cash dividends ($0.735 per share)		—		—			(36,388	)		—			—			(36,388	)		—		—			(36,388	)		—			—			(36,388	)
Purchase of treasury stock		—		—			—			—			(14,189	)		(14,189	)		—		—			—			—			(14,189	)		(14,189	)
Issuance of equity awards		—		(3,373	)		—			—			3,802			429			—		(3,373	)		—			—			3,802			429
Recognition of equity-based compensation		—		8,253			—			—			—			8,253			—		8,253			—			—			—			8,253
Sale of treasury stock		—		362			—			—			474			836			—		362			—			—			474			836
Exercise of stock options		—		2,400			—			—			7,014			9,414			—		2,400			—			—			7,014			9,414
Cumulative effect adjustment (1)		—		1,338			(856	)		—			—			482			—		1,338			(856	)		—			—			482

Balance – September 30, 2016	$	55,057	$	1,028,869		$	1,112,613		$	42,512		$	(214,423	)	$	2,024,628

Balance - September 30, 2016																		$	55,057	$	1,028,869		$	1,112,613		$	42,512		$	(214,423	)	$	2,024,628
Balance - January 1, 2017																		$	55,057	$	1,033,419		$	1,142,887		$	(57,542	)	$	(211,437	)	$	1,962,384
Total comprehensive income																			—		—			135,144			34,874			—			170,018
Cash dividends ($0.765 per share)																			—		—			(38,166	)		—			—			(38,166	)
Purchase of treasury stock																			—		—			—			—			(14,369	)		(14,369	)
Issuance of equity awards																			—		(3,364	)		—			—			3,835			471
Recognition of equity-based compensation																			—		9,576			—			—			—			9,576
Sale of treasury stock																			—		468			—			—			381			849
Exercise of stock options																			—		1,923			—			—			8,857			10,780
Balance - September 30, 2017																		$	55,057	$	1,042,022		$	1,239,865		$	(22,668	)	$	(212,733	)	$	2,101,543

(1)	~~Related to~~ See Note 3, “New Accounting Pronouncements,” for a discussion of the adoption of Accounting Standards Update (ASU) 2016-09. ~~See Note 3, New Accounting Pronouncements, for further detail.~~

See Notes to Consolidated Financial Statements.

UMB FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, dollars in thousands)


	Nine Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2016			2015			2017			2016
Operating Activities
Net Income	$	115,867		$	86,430
Net income							$	135,144		$	115,867
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		25,000			10,500			35,000			25,000
Net accretion of premiums and discounts from acquisition		(1,711	)		(1,255	)		(1,810	)		(1,711	)
Depreciation and amortization		40,949			38,498			41,538			40,949
Deferred income tax expense (benefit)		911			(6,276	)
Net (increase) decrease in trading securities		(30,635	)		10,505
Deferred income tax expense								1,555			911
Net increase in trading securities								(17,680	)		(30,635	)
Gains on sales of securities available for sale, net		(8,509	)		(8,404	)		(4,138	)		(8,509	)
Gains on sales of assets		(136	)		(99	)		(484	)		(136	)
Amortization of securities premiums, net of discount accretion		43,467			40,971			36,571			43,467
Originations of loans held for sale		(71,726	)		(78,931	)		(53,207	)		(71,726	)
Net gains on sales of loans held for sale		(1,281	)		(1,131	)
Gains on sales of loans held for sale, net								(1,188	)		(1,281	)
Proceeds from sales of loans held for sale		61,716			79,673			55,149			61,716
Equity-based compensation		8,682			9,489			10,047			8,682
Net tax benefit related to equity compensation plans		(261	)		732
Net tax benefit (expense) related to equity compensation plans								3,149			(261	)
Changes in:
Accrued income		(2,889	)		(4,811	)		(4,031	)		(2,889	)
Accrued expenses and taxes		4,789			146			21,011			4,789
Other assets and liabilities, net		(14,466	)		(2,582	)		(12,336	)		(14,466	)

Net cash provided by operating activities		169,767			173,455			244,290			169,767

Investing Activities
Proceeds from maturities of securities held to maturity		29,757			31,410			64,079			29,757
Proceeds from sales of securities available for sale		951,263			782,789			573,062			951,263
Proceeds from maturities of securities available for sale		1,300,372			925,017			1,005,585			1,300,372
Purchases of securities held to maturity		(373,520	)		(341,773	)		(225,445	)		(373,520	)
Purchases of securities available for sale		(1,689,198	)		(1,293,123	)		(1,107,842	)		(1,689,198	)
Net increase in loans		(876,784	)		(604,895	)		(481,593	)		(876,784	)
Net (increase) decrease in fed funds sold and resell agreements		(71,264	)		29,675
Net decrease (increase) in fed funds sold and resell agreements								79,891			(71,264	)
Net cash activity from acquisitions and branch sales								(2,532	)		—
Net increase in interest bearing balances due from other financial institutions		65,203			40,586			34,164			65,203
Purchases of premises and equipment		(38,950	)		(42,100	)		(24,748	)		(38,950	)
Net cash activity from acquisitions		—			104,611
Proceeds from sales of premises and equipment		2,164			147			1,650			2,164
Increase in COLI/BOLI cash surrender value		(7,095	)		(204,647	)		(62,800	)		(7,095	)

Net cash used in investing activities		(708,052	)		(572,303	)		(146,529	)		(708,052	)

Financing Activities
Net increase in demand and savings deposits		460,129			854,302
Net (decrease) increase in demand and savings deposits								(559,697	)		460,129
Net decrease in time deposits		(173,783	)		(353,137	)		(11,313	)		(173,783	)
Net increase (decrease) in fed funds purchased and repurchase agreements		203,061			(682,532	)
Net (decrease) increase in fed funds purchased and repurchase agreements								(100	)		203,061
Net decrease in short-term debt		(5,000	)		(112,133	)		—			(5,000	)
Repayment of long-term debt		(11,285	)		(10,597	)		(1,491	)		(11,285	)
Payment of contingent consideration on acquisitions		(3,031	)		(18,702	)		—			(3,031	)
Cash dividends paid		(36,385	)		(34,104	)		(38,171	)		(36,385	)
Proceeds from exercise of stock options and sales of treasury shares		10,250			5,494			11,629			10,250
Purchases of treasury stock		(14,189	)		(6,173	)		(14,369	)		(14,189	)

Net cash provided by (used in) financing activities		429,767			(357,582	)

Net cash (used in) provided by financing activities								(613,512	)		429,767
Decrease in cash and cash equivalents		(108,518	)		(756,430	)		(515,751	)		(108,518	)
Cash and cash equivalents at beginning of period		819,112			1,787,230			1,063,967			819,112

Cash and cash equivalents at end of period	$	710,594		$	1,030,800		$	548,216		$	710,594

Supplemental Disclosures:
Income taxes paid	$	30,995		$	36,404
Total interest paid		20,555			12,769
Transactions related to bank acquisitions:
Assets acquired		—			1,321,453
Liabilities assumed		—			1,159,920

Supplemental Disclosures:
Income taxes paid	$	37,109	$	30,995
Total interest paid		40,245		20,555

See Notes to Consolidated Financial Statements.

UMB FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, ~~2016~~2017 (UNAUDITED)

1. Financial Statement Presentation

The ~~consolidated financial statements~~Consolidated Financial Statements include the accounts of UMB Financial Corporation and its subsidiaries (collectively, the Company) after elimination of all intercompany transactions. In the opinion of management of the Company, all adjustments relating to items that are of a normal recurring nature and necessary for a fair presentation of the financial position and results of operations have been made. The results of operations and cash flows for the interim periods presented may not be indicative of the results of the full ~~year.~~year ending December 31, 2017. The financial statements should be read in conjunction with “Item 2. ~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations” within this Quarterly Report on Form 10-Q (the Form 10-Q) and in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2015~~2016 filed with the Securities and Exchange Commission (SEC) on February ~~25, 2016~~23, 2017 (the Form 10-K).

On April 20, 2017, the Company announced the execution of an agreement to sell all of the outstanding stock of Scout Investments, Inc. (Scout), its institutional investment management subsidiary, for $172.5 million in cash, subject to customary purchase price adjustments at closing, which is expected to occur in the fourth quarter of 2017. See Items 1.01 and 5.02 in the Company’s Current Report on Form 8-K that was filed April 20, 2017. In accordance with Accounting Standards Codification (ASC) Topic 205-20, Discontinued Operations, the results of Scout have been presented separately as (Loss) income from discontinued operations in the Company’s Consolidated Statements of Income and Scout’s assets have been presented separately as Discontinued assets – goodwill and other intangibles, net in the Company’s Consolidated Balance Sheets.

2. Summary of Significant Accounting Policies

The Company is a financial holding company, which offers a wide range of banking and other financial services to its customers through its branches and offices in Missouri, Kansas, Colorado, Illinois, Oklahoma, Texas, Arizona, Nebraska, Pennsylvania, South Dakota, Indiana, Utah, Minnesota, California, and Wisconsin. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. These estimates and assumptions also impact reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A summary of the significant accounting policies to assist the reader in understanding the financial presentation is provided in the Notes to Consolidated Financial Statements in the Form 10-K.

Cash and cash equivalents

Cash and cash equivalents include Cash and due from banks and amounts due from the Federal Reserve Bank. Cash on hand, cash items in the process of collection, and amounts due from correspondent banks are included in Cash and due from banks. Amounts due from the Federal Reserve Bank are interest-bearing for all periods presented and are included in the Interest-bearing due from banks line on the Company’s Consolidated Balance Sheets.

This table provides a summary of cash and cash equivalents as presented on the Consolidated Statements of Cash Flows as of September 30, ~~2016~~2017 and September 30, ~~2015~~2016 (in thousands):


	September 30,				September 30,
	2016		2015		2017		2016
Due from the Federal Reserve Bank	$	356,410	$	691,208	$	182,047	$	356,410
Cash and due from banks		354,184		339,592		366,169		354,184

Cash and cash equivalents at end of period	$	710,594	$	1,030,800	$	548,216	$	710,594

Also included in the Interest-bearing due from banks, but not considered cash and cash equivalents, are interest-bearing accounts held at other financial institutions, which totaled ~~$96.8~~$39.8 million and ~~$155.9~~$96.8 million at September 30, ~~2016~~2017 and September 30, ~~2015,~~2016, respectively.

Per Share Data

Basic net income per share is computed based on the weighted average number of shares of common stock outstanding during each period. Diluted quarter-to-date net income per share includes the dilutive effect of ~~435,029~~549,819 and ~~459,050~~435,029 shares issuable upon the exercise of options granted by the Company and outstanding at September 30, ~~2016~~2017 and ~~2015,~~2016, respectively. Diluted year-to-date net income per share includes the dilutive effect of ~~369,781~~616,990 and ~~460,581~~369,781 shares issuable upon the exercise of stock options granted by the Company and outstanding at September 30, 2017 and 2016, respectively.

Options issued under employee benefits plans to purchase 150,739 shares of common stock were outstanding at September 30, 2017, but were not included in the computation of quarter-to-date and ~~2015, respectively.~~

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

year-to-date diluted EPS because the options were anti-dilutive. Options issued under employee benefits plans to purchase 394,863 shares of common stock were outstanding at September 30, 2016, but were not included in the computation of quarter-to-date diluted EPS because the options were anti-dilutive. Options issued under employee benefits plans to purchase 628,698 shares of common stock were outstanding at September 30, 2016, but were not included in the computation of year-to-date diluted EPS because the options were anti-dilutive. Options issued under employee benefits plans to purchase 461,905 shares of common stock were outstanding at September 30, 2015, but were not included in the computation of quarter-to-date and year-to-date diluted EPS because the options were anti-dilutive.

3. New Accounting Pronouncements

Revenue RecognitionIn May 2014, the Financial Accounting Standards Board (FASB) issued ~~Accounting Standards Update (ASU)~~ASU No. 2014-09, “Revenue from Contracts with Customers.” The issuance is part of a joint effort by the FASB and the International Accounting Standards Board (IASB) to enhance financial reporting by creating common revenue recognition guidance for U.S. GAAP and International Financial Reporting Standards (IFRS) and, thereby, improving the consistency of requirements, comparability of practices and usefulness of disclosures. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In ~~November~~August 2015, the FASB issued ASU No. 2015-14, which deferred the effective date of ASU No. 2014-09 to annual reporting periods that begin after December 15, 2017. In March, ~~2016, the FASB issued ASU No. 2016-08, which intends to improve the operability~~April, and understandability of the implementation guidance on principal versus agent considerations within ASU No. 2014-09. In April 2016, the FASB issued ASU No. 2016-10, which clarifies guidance related to identifying performance obligations and licensing implementation within ASU No. 2014-09. In May 2016, the FASB issued ~~ASU Nos. 2016-11 and 2016-12, which further clarify guidance and provide practical expedients related~~implementation amendments to the ~~adoption~~May 2014 ASU (collectively, the amended guidance). The amended guidance affects any entity that enters into contracts with customers to transfer goods and services, unless those contracts are within the scope of ~~ASU No. 2014-09.~~other standards. The ~~standard~~amended guidance specifically excludes interest income, as well as other revenues associated with financial assets and liabilities, including loans, leases, securities, and derivatives. The amended guidance permits the use of either the full retrospective approach or ~~cumulative effect transition method.~~ a modified retrospective approach. The Company plans to adopt the amended guidance using the modified retrospective approach on January 1, 2018. The Company is ~~currently evaluating~~progressing in implementing the ~~effect that these standards will have on its Consolidated Financial Statements and related disclosures.~~amended guidance. The Company has ~~not yet~~assessed its revenue streams and identified those contracts that are specifically excluded from the scope of the amended guidance and those that may be subject to the amended guidance. Subsequent to this initial scoping, the Company selected a ~~transition method.~~

~~Equity-Based Compensation~~~~In June 2014,~~representative sample of contracts from the ~~FASB issued ASU No. 2014-12, “Accounting~~in-scope revenue streams for ~~Share-Based Payments When~~review under the ~~Terms~~amended guidance (key contracts). Upon completion of ~~an Award Provide that a Performance Target could be Achieved after~~ the ~~Requisite Service Period.” The amendment is intended to reduce diversity in practice by clarifying that a performance target that affects vesting~~review of the key contracts, the Company grouped the remaining contracts based on the conclusions reached through the key contract review and evaluated specific contracts that could not be ~~achieved after~~grouped. Based on the ~~requisite service period be treated as a performance condition. The amendments in this update were effective for interim and annual periods beginning after December 15, 2015. The~~evaluation of key contracts performed, the adoption of this accounting pronouncement ~~had no~~is not expected to have a significant impact on the Company’s Consolidated Financial Statements.

~~Going Concern~~ ~~In November 2014,~~ The Company continues to evaluate the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” The amendment addresses management’s responsibility in regularly evaluating whether there is substantial doubt about a company’s ability to continue as a going concern. The amendments in this update are effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter, although early adoption is permitted. The adoption of this accounting pronouncement will not impact the ~~Company’s Consolidated Financial Statements.~~amended guidance will have on its related disclosures.

~~Derivatives and Hedging~~ In November 2014, the FASB issued ASU No. 2014-16, “Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share is More Akin to Debt or to Equity.” The amendment is intended to address how current U.S. GAAP should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. The amendments in this update were effective for interim and annual periods beginning after December 15, 2015. The adoption of this accounting pronouncement had no impact on the Company’s Consolidated Financial Statements.

~~Consolidation~~In February 2015, the FASB issued ASU No. 2015-02, “Amendments to the Consolidation Analysis.” The amendment substantially changes the way reporting entities are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the new amendment. Specifically, the amendments modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities, eliminate the presumption that a general partner should consolidate a limited partnership, and affect the consolidation analysis of reporting entities that are involved with VIEs. The amendments in this update were effective for interim and annual periods beginning after December 15, 2015. The standard permits the use of either the retrospective or cumulative effect transition method. The adoption of this accounting pronouncement had no impact on the Company’s Consolidated Financial Statements.

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

Financial Instruments In January 2016, the FASB issued ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities.” The amendment is intended to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The amendments in this update are effective for interim and annual periods beginning after December 15, 2017. The standard requires the use of the cumulative effect transition method as of the beginning of the year of adoption. Except for certain provisions, early adoption is not permitted. The Company is currently evaluating the impact that this standard will have on its Consolidated Financial Statements.

LeasesIn February 2016, the FASB issued ASU No. 2016-02, “Leases.” The amendment changes the accounting treatment of leases, in that lessees will recognize most leases on-balance sheet. This will increase reported assets and liabilities, as lessees will be required to recognize a right-of-use asset along with a lease liability, measured on a discounted basis. Lessees are allowed to account for short-term leases (those with a term of twelve months or less) off-balance sheet. The amendments in this update are effective for fiscal years beginning after December 15, 2018,

including interim periods within those fiscal years. The standard requires the use of the modified retrospective transition method. Early adoption is permitted. The Company is currently evaluating the impact that this standard will have on its Consolidated Financial Statements.

Extinguishments of LiabilitiesIn March 2016, the FASB issued ASU No. 2016-04, “Recognition of Breakage for Certain Prepaid Stored-Value Products.” The amendment is intended to reduce the diversity in practice related to the recognition of breakage. Breakage refers to the portion of a prepaid stored-value product, such as a gift card, that goes unused wholly or partially for an indefinite period of time. This amendment requires that breakage be accounted for consistent with the breakage guidance within ASU No. 2014-09, “Revenue from Contracts with Customers.” The amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The standard permits the use of either the modified retrospective or full retrospective transition method. Early adoption is permitted. The Company is currently evaluating the effect that ASU No. 2016-04 will have on its Consolidated Financial Statements. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting. The Company will adopt ASU No. 2016-04 in conjunction with its adoption of ASU No. 2014-09.

~~Derivatives and Hedging~~In March 2016, the FASB issued ASU No. 2016-05, “Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships.” The amendment is intended to clarify that the novation of a derivative contract that has been designated to be in a hedging relationship under Accounting Standards Codification (ASC) Topic 815 does not, in and of itself, represent a termination event for the derivative and does not require dedesignation of the hedging relationship. The amendments in this update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The amendment permits the use of either a prospective or modified retrospective transition method. Early adoption is permitted. The adoption of this accounting pronouncement ~~will~~is not expected to have noa significant impact on the Company’s Consolidated Financial Statements.

Equity-Based CompensationIn March 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting.” The amendment is part of the FASB’s simplification initiative and is intended to simplify the accounting around share-based payment award transactions. The amendments include changing the recording of excess tax benefits from being recognized as a part of surplus capital to being charged directly to the income statement, changing the classification of excess tax benefits within the statement of cash flows, and allowing companies to account for forfeitures on an actual basis, as well as tax withholding changes. The amendment requires different transition methods for various components of the standard. The amendments in this update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted.

In September 2016, the Company early adopted ASU No. 2016-09 with an effective date of January 1, 2016. As part of the adoption of this standard, the Company made an accounting policy election to account for forfeitures on an actual basis and ~~discontinue~~discontinued the use of an estimated forfeiture approach. Additionally, the Company selected the retrospective transition method for the reclassification of the “Net tax benefit related to equity compensation plans” from the financing section to the operating section of the Company’s Consolidated Statement of Cash Flows. The

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

impact to the Company’s Consolidated Statements of Income for adopting all provisions of the standard was an increase to net income of $158 thousand for the three-month period ended March 31, 2016 and an increase to net income of $220 thousand for the three-month period ended June 30, 2016. Upon adoption, the Company recorded a cumulative effect adjustment to the Company’s Consolidated Balance Sheets of $482 thousand as an increase to ~~the opening balance of~~ total equity. ~~Prior period financial statements as of and for the three-month and year-to-date periods ended March 31, 2016 and June 30, 2016 will be recast when presented in future filings.~~

Credit LossesIn ~~June~~September 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” This update replaces the current incurred loss methodology for recognizing credit losses with a current expected credit loss model, which requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This amendment broadens the information that an entity must consider in developing its expected credit loss estimates. Additionally, the update amends the accounting for credit losses for available-for-sale debt securities and purchased financial assets with a more-than-insignificant amount of credit deterioration since origination. This update requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of a company’s loan portfolio. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption in fiscal years beginning after December 15, 2018 is permitted. The amendment requires the use of the modified retrospective approach for adoption. The Company is currently evaluating the impact that this standard will have on its Consolidated Financial Statements.

Statement of Cash FlowsIn August 2016, the FASB issued ASU 2016-15,“Classification of Certain Receipts and Cash Payments.” This amendment adds to and clarifies existing guidance regarding the classification of certain cash receipts and payments in the statement of cash flows with the intent of reducing diversity in practice with respect to eight types of cash flows. The amendments in this update require full retrospective adoption and are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption

is permitted. The Company is currently evaluating the impact that this standard will have on its Consolidated ~~Statement~~Statements of Cash Flows.

Derivatives and Hedging In August 2017, the FASB issued ASU No. 2017-12, “Targeted Improvements to Accounting for Hedging Activities.” The purpose of this updated guidance is to better align financial reporting for hedging activities with the economic objectives of those activities. The amendments in this update are effective for fiscal years beginning after December 15, 2018, with early adoption, including adoption in an interim period, permitted. The standard requires the modified retrospective transition approach as of the date of adoption. The Company is currently evaluating the impact that this standard will have on its Consolidated Financial Statements.

4. Loans and Allowance for Loan Losses

Loan Origination/Risk Management

The Company has certain lending policies and procedures in place that are designed to minimize the level of risk within the loan portfolio. Diversification of the loan portfolio manages the risk associated with fluctuations in economic conditions. Authority levels are established for the extension of credit to ensure consistency throughout the Company. It is necessary that policies, processes and practices implemented to control the risks of individual credit transactions and portfolio segments are sound and adhered to. The Company maintains an independent loan review department that reviews and validates the risk assessment on a continual basis. Management regularly evaluates the results of the loan reviews. The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel, as well as the Company’s policies and procedures.

Commercial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably and prudently expand its business. Commercial loans are made based on the identified cash flows of the borrower and on the underlying collateral provided by the borrower. The cash flows of the borrower, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts from its customers. Commercial credit cards are generally unsecured and are underwritten with criteria similar to commercial loans including an analysis of the borrower’s cash flow, available business capital, and overall credit-worthiness of the borrower.

Asset-based loans are offered primarily in the form of revolving lines of credit to commercial borrowers that do not generally qualify for traditional bank financing. Asset-based loans are underwritten based primarily upon the value of the collateral pledged to secure the loan, rather than on the borrower’s general financial condition. The Company utilizes pre-loan due diligence techniques, monitoring disciplines, and loan management practices common within the asset-based lending industry to underwrite loans to these borrowers.

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

Factoring loans provide working capital through the purchase and/or financing of accounts receivable to borrowers in the transportation industry and to commercial borrowers that do not generally qualify for traditional bank financing.

Commercial real estate loans are subject to underwriting standards and processes similar to commercial loans, in addition to those of real estate loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts, and the repayment of these loans is largely dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. The Company requires that an appraisal of the collateral be made at origination and on an as-needed basis, in conformity with current market conditions and regulatory requirements. The underwriting standards address both owner and non-owner occupied real estate.

Construction loans are underwritten using feasibility studies, independent appraisal reviews, sensitivity analysis or absorption and lease rates and financial analysis of the developers and property owners. Construction loans are based upon estimates of costs and value associated with the complete project. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans, sales of developed

property or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their repayment being sensitive to interest rate changes, governmental regulation of real property, economic conditions, and the availability of long-term financing.

Underwriting standards for residential real estate and home equity loans are based on the borrower’s loan-to-value percentage, collection remedies, and overall credit history.

Consumer loans are underwritten based on the borrower’s repayment ability. The Company monitors delinquencies on all of its consumer loans and leases and periodically reviews the distribution of FICO scores relative to historical periods to monitor credit risk on its credit card loans. The underwriting and review practices combined with the relatively small loan amounts that are spread across many individual borrowers, minimizes risk. Consumer loans and leases that are 90 days past due or more are considered non-performing.

Credit risk is a potential loss resulting from nonpayment of either the primary or secondary exposure. Credit risk is mitigated with formal risk management practices and a thorough initial credit-granting process including consistent underwriting standards and approval process. Control factors or techniques to minimize credit risk include knowing the client, understanding total exposure, analyzing the client and debtor’s financial capacity, and monitoring the client’s activities. Credit risk and portions of the portfolio risk are managed through concentration considerations, average risk ratings, and other aggregate characteristics.

The loan portfolio is comprised of loans originated by the Company and loans purchased in connection with the Company’s acquisition of Marquette Financial Companies (Marquette) on May 31, 2015 (the Acquisition Date). The purchased loans were recorded at estimated fair value at the Acquisition Date with no carryover of the related allowance. The purchased loans were segregated between those considered to be performing, non-purchased credit impaired loans (Non-PCI), and those with evidence of credit deterioration, purchased credit impaired loans (PCI). Purchased loans are considered impaired if there is evidence of credit deterioration and if it is probable, at acquisition, that all contractually required payments will not be collected.

At the Acquisition Date, gross loans purchased from the Marquette acquisition had a fair value of $980.4 million split between Non-PCI loans totaling $972.6 million and PCI loans totaling $7.8 million of loans. The gross contractually required principal and interest payments receivable for the Non-PCI loans and PCI loans totaled $983.9 million and $9.3 million, respectively.

The fair value estimates for purchased loans are based on expected prepayments and the amount and timing of discounted expected principal, interest and other cash flows. Credit discounts representing the principal losses

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

expected over the life of the loan are also a component of the initial fair value. In determining the Acquisition Date fair value of PCI loans, and in subsequent accounting, the Company generally aggregated purchased commercial, real estate, and consumer loans into pools of loans with common risk characteristics.

The difference between the fair value of Non-PCI loans and contractual amounts due at the Acquisition Date is accreted into income over the estimated life of the loans. Contractual amounts due represent the total undiscounted amount of all uncollected principal and interest payments.

~~Loans accounted for under ASC Topic 310-30~~

The excess of PCI loans’ contractual amounts due over the amount of undiscounted cash flows expected to be collected is referred to as the non-accretable difference. The non-accretable difference, which is neither accreted into income nor recorded on the consolidated balance sheet, reflects estimated future credit losses and uncollectible contractual interest expected to be incurred over the life of the PCI loans. The excess cash flows expected to be collected over the carrying amount of PCI loans is referred to as the accretable yield. This amount is accreted into interest income over the remaining life of the purchased loans or pools using the level yield method. The accretable yield is affected by changes in interest rate indices for variable rate loans, changes in prepayment speed assumptions, and changes in expected principal and interest payments over the estimated lives of the PCI loans.

Each quarter the Company evaluates the remaining contractual amounts due and estimates cash flows expected to be collected over the life of the PCI loans. Contractual amounts due may increase or decrease for a variety of reasons, for example, when the contractual terms of the loan agreement are modified, when interest rates on variable rate loans change, or when principal and/or interest payments are received. Cash flows expected to be collected on PCI loans are estimated by incorporating several key assumptions similar to the initial estimate of fair value. These key assumptions include probability of default, loss given default, and the amount of actual prepayments after the Acquisition Date. Prepayments affect the estimated lives of loans and could change the amount of interest income, and possibly principal, expected to be collected. In re-forecasting future estimated cash flows, credit loss expectations are adjusted as necessary. The adjustments are based, in part, on actual loss severities recognized for each loan type, as well as changes in the probability of default. For periods in which estimated cash flows are not reforecasted, the prior reporting period’s estimated cash flows are adjusted to reflect the actual cash received and credit events that transpired during the current reporting period.

Increases in expected cash flows of PCI loans subsequent to the Acquisition Date are recognized prospectively through adjustments of the yield on the loans or pools over their remaining lives, while decreases in expected cash flows are recognized as impairment through a provision for loan losses and an increase in the allowance.

~~The PCI loans are accounted for in accordance with ASC Topic 310-30,~~~~Loans and Debt Securities Purchased with Deteriorated Credit Quality~~~~. At September 30, 2016, the net recorded carrying amount of loans accounted for under ASC 310-30 was $1.0 million and the contractual amount due was $1.2 million.~~

~~Below is the composition of the net book value for the PCI loans accounted for under ASC 310-30 at September 30, 2016~~~~(in thousands)~~:

   September 30, 2016
PCI Loans:

Contractual cash flows
   $ 1,224
Non-accretable difference
   (152 )
Accretable yield
   (37 )


Loans accounted for under ASC 310-30
   $ 1,035

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

Loan Aging Analysis

This table provides a summary of loan classes and an aging of past due loans at September 30, ~~2016~~2017 and December 31, ~~2015~~2016 (in thousands):


	September 30, 2016														September 30, 2017
	30-89 Days Past Due and Accruing		Greater than 90 Days Past Due and Accruing		Non- Accrual Loans		Total Past Due		PCI Loans		Current		Total Loans		30-89 Days Past Due and Accruing		Greater than 90 Days Past Due and Accruing		Non- Accrual Loans		Total Past Due		Current		Total Loans
Loans
Commercial:
Commercial	$	8,665	$	24	$	51,880	$	60,569	$	—	$	4,378,010	$	4,438,579	$	15,092	$	59	$	39,107	$	54,258	$	4,367,307	$	4,421,565
Asset-based		—		—		—		—		—		236,566		236,566		—		—		—		—		310,030		310,030
Factoring		—		—		—		—		—		107,762		107,762		—		—		—		—		195,882		195,882
Commercial – credit card		201		306		19		526		—		164,908		165,434		325		98		—		423		174,359		174,782
Real estate:
Real estate – construction		1,723		—		225		1,948		—		680,757		682,705		547		4		93		644		809,416		810,060
Real estate – commercial		1,384		—		19,132		20,516		—		2,990,053		3,010,569		4,522		—		10,769		15,291		3,345,936		3,361,227
Real estate – residential		1,006		—		869		1,875		—		509,257		511,132		943		157		745		1,845		612,751		614,596
Real estate – HELOC		643		—		4,336		4,979		—		716,868		721,847		397		—		3,138		3,535		658,456		661,991
Consumer:
Consumer – credit card		1,967		2,005		434		4,406		—		258,345		262,751		1,913		1,721		357		3,991		239,744		243,735
Consumer – other		11,602		343		2,725		14,670		1,035		108,915		124,620		613		49		22		684		178,031		178,715
Leases		—		—		—		—		—		31,529		31,529		—		—		—		—		24,445		24,445

Total loans	$	27,191	$	2,678	$	79,620	$	109,489	$	1,035	$	10,182,970	$	10,293,494	$	24,352	$	2,088	$	54,231	$	80,671	$	10,916,357	$	10,997,028

	December 31, 2016
	30-89 Days Past Due and Accruing		Greater than 90 Days Past Due and Accruing		Non- Accrual Loans		Total Past Due		PCI Loans		Current		Total Loans
Loans
Commercial:
Commercial	$	3,285	$	49	$	35,777	$	39,111	$	—	$	4,371,695	$	4,410,806
Asset-based		—		—		—		—		—		225,878		225,878
Factoring		—		—		—		—		—		139,902		139,902
Commercial – credit card		612		10		8		630		—		146,105		146,735
Real estate:
Real estate – construction		3		—		181		184		—		741,620		741,804
Real estate – commercial		1,303		1,004		16,423		18,730		—		3,147,192		3,165,922
Real estate – residential		1,034		6		1,344		2,384		—		545,966		548,350
Real estate – HELOC		588		—		4,736		5,324		—		706,470		711,794
Consumer:
Consumer – credit card		2,228		2,115		475		4,818		—		265,280		270,098
Consumer – other		1,061		181		11,315		12,557		800		126,205		139,562
Leases		—		—		—		—		—		39,532		39,532
Total loans	$	10,114	$	3,365	$	70,259	$	83,738	$	800	$	10,455,845	$	10,540,383

   September 30, 2016
   30-89
Days
Past
Due    Greater
than 90
Days Past
Due    Current    Total Loans
PCI Loans

Commercial:

Commercial
   $ —         $ —         $ —         $ —
Asset-based
   —         —         —         —
Factoring
   —         —         —         —
Commercial – credit card
   —         —         —         —
Real estate:

Real estate – construction
   —         —         —         —
Real estate – commercial
   —         —         —         —
Real estate – residential
   —         —         —         —
Real estate – HELOC
   —         —         —         —
Consumer:

Consumer – credit card
   —         —         —         —
Consumer – other
   42       3       990       1,035
Leases
   —         —         —         —








Total PCI loans
   $ 42       $ 3       $ 990       $ 1,035

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

   December 31, 2015
   30-89
Days Past
Due and
Accruing    Greater
than 90
Days Past
Due and
Accruing    Non-
Accrual
Loans    Total
Past
Due    PCI
Loans    Current    Total Loans
Loans

Commercial:

Commercial
   $ 5,821       $ 2,823       $ 43,841       $ 52,485       $ —         $ 4,153,251       $ 4,205,736
Asset-based
   —         —         —         —         —         219,244       219,244
Factoring
   —         —         —         —         —         90,686       90,686
Commercial – credit card
   614       24       13       651       —         124,710       125,361
Real estate:

Real estate – construction
   1,828       548       331       2,707       —         413,861       416,568
Real estate – commercial
   2,125       1,630       9,578       13,333       1,055       2,648,384       2,662,772
Real estate – residential
   612       35       800       1,447       —         490,780       492,227
Real estate – HELOC
   129       —         3,524       3,653       —         726,310       729,963
Consumer:

Consumer – credit card
   2,256       2,089       468       4,813       —         286,757       291,570
Consumer – other
   5,917       175       2,597       8,689       2,001       144,087       154,777
Leases
   —         —         —         —         —         41,857       41,857














Total loans
   $ 19,302       $ 7,324       $ 61,152       $ 87,778       $ 3,056       $ 9,339,927       $ 9,430,761

   December 31, 2015
   30-89
Days
Past
Due    Greater
than 90
Days Past
Due    Current    Total Loans
PCI Loans

Commercial:

Commercial
   $ —         $ —         $ —         $ —
Asset-based
   —         —         —         —
Factoring
   —         —         —         —
Commercial – credit card
   —         —         —         —
Real estate:

Real estate – construction
   —         —         —         —
Real estate – commercial
   —         1,055       —         1,055
Real estate – residential
   —         —         —         —
Real estate – HELOC
   —         —         —         —
Consumer:

Consumer – credit card
   —         —         —         —
Consumer – other
   58       105       1,838       2,001
Leases
   —         —         —         —








Total PCI loans
   $ 58       $ 1,160       $ 1,838       $ 3,056

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

The Company had total purchased credit impaired (PCI) loans from its acquisition of Marquette Financial Companies (Marquette) of $800 thousand as of December 31, 2016. The PCI loans are accounted for in accordance with ASC Topic 310-30, Loans and Debt Securities Purchased with Deteriorated Credit Quality. All of the PCI loans were considered to be performing based on payment activity as of December 31, 2016. Of this amount, $713 thousand were current with their payment terms and $87 thousand were between 30-89 days past due.

The Company sold residential real estate loans with proceeds of ~~$61.7~~$55.1 million and ~~$79.7~~$61.7 million in the secondary market without recourse during the nine months ended September 30, ~~2016~~2017 and September 30, ~~2015,~~2016, respectively.

The Company has ceased the recognition of interest on loans with a carrying value of ~~$79.6~~$54.2 million and ~~$61.2~~$70.3 million at September 30, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively. Restructured loans totaled ~~$54.4~~$49.2 million and ~~$36.6~~$52.5 million at September 30, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively. Loans 90 days past due and still accruing interest amounted to ~~$2.7~~$2.1 million and ~~$7.3~~$3.4 million at September 30, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively. There was an insignificant amount of interest recognized on impaired loans during ~~2016~~2017 and ~~2015.~~2016.

Credit Quality Indicators

As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to the risk grading of specified classes of loans, net charge-offs, non-performing loans, and general economic conditions.

The Company utilizes a risk grading matrix to assign a rating to each of its commercial, commercial real estate, and construction real estate loans. The loan ~~rankings~~ratings are summarized into the following categories: Non-watch list, Watch, Special Mention, and Substandard. Any loan not classified in one of the categories described below is considered to be a Non-watch list loan. A description of the general characteristics of the loan ~~ranking~~rating categories is as follows:

•

Watch – This rating represents credit exposure that presents higher than average risk and warrants greater than routine attention by Company personnel due to conditions affecting the borrower, the

borrower’s industry or the economic environment. These conditions have resulted in some degree of uncertainty that results in higher than average credit risk.

~~Watch~~ – This rating represents credit exposure that presents higher than average risk and warrants greater than routine attention by Company personnel due to conditions affecting the borrower, the borrower’s industry or the economic environment. These conditions have resulted in some degree of uncertainty that results in higher than average credit risk.

Special Mention – This rating reflects a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or the borrower’s credit position at some future date. The rating is not adversely classified and does not expose an institution to sufficient risk to warrant adverse classification.

Substandard – This rating represents an asset inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Loans in this category are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified substandard. This category may include loans where the collection of full principal is doubtful or remote.

All other classes of loans are generally evaluated and monitored based on payment activity. Non-performing loans include restructured loans on non-accrual and all other non-accrual loans.

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

This table provides an analysis of the credit risk profile of each loan class excluded from ASC 310-30 at September 30, ~~2016~~2017 and December 31, ~~2015~~2016 (in thousands):

Credit Exposure

Credit Risk Profile by Risk Rating

~~Originated and Non-PCI Loans~~

	Commercial				Asset-based				Factoring
	September 30,		December 31,		September 30,		December 31,		September 30,		December 31,
	2017		2016		2017		2016		2017		2016
Non-watch list	$	3,987,758	$	4,043,704	$	270,418	$	198,695	$	193,264	$	139,358
Watch		69,066		99,815		—		—		—		—
Special Mention		110,140		32,240		39,612		24,809		2,224		129
Substandard		254,601		235,047		—		2,374		394		415
Total	$	4,421,565	$	4,410,806	$	310,030	$	225,878	$	195,882	$	139,902

													Real estate – construction				Real estate – commercial
	Commercial				Asset-based				Factoring				September 30,		December 31,		September 30,		December 31,
	September 30, 2016		December 31, 2015		September 30, 2016		December 31, 2015		September 30, 2016		December 31, 2015		2017		2016		2017		2016
Non-watch list	$	4,045,383	$	3,880,109	$	211,605	$	198,903	$	106,642	$	90,449	$	804,932	$	741,022	$	3,233,122	$	3,071,804
Watch		130,364		105,539		—		—		—		—		1,445		149		48,898		43,015
Special Mention		41,303		29,397		20,809		18,163		461		237		3,281		—		33,901		5,140
Substandard		221,529		190,691		4,152		2,178		659		—		402		633		45,306		45,963

Total	$	4,438,579	$	4,205,736	$	236,566	$	219,244	$	107,762	$	90,686	$	810,060	$	741,804	$	3,361,227	$	3,165,922

   Real estate – construction    Real estate – commercial
   September 30,
2016    December 31,
2015    September 30,
2016    December 31,
2015
Non-watch list
   $ 677,305       $ 415,258       $ 2,892,722       $ 2,561,401
Watch
   284       370       49,945       51,774
Special Mention
   —         —         7,144       22,544
Substandard
   5,116       940       60,758       25,998








Total
   $ 682,705       $ 416,568       $ 3,010,569       $ 2,661,717

Credit Exposure

Credit Risk Profile Based on Payment Activity

~~Originated and Non-PCI Loans~~

	Commercial – credit card				Real estate – residential				Real estate – HELOC
	September 30,		December 31,		September 30,		December 31,		September 30,		December 31,
	2017		2016		2017		2016		2017		2016
Performing	$	174,782	$	146,727	$	613,851	$	547,006	$	658,853	$	707,058
Non-performing		—		8		745		1,344		3,138		4,736
Total	$	174,782	$	146,735	$	614,596	$	548,350	$	661,991	$	711,794

	Consumer – credit card				Consumer – other				Leases
	September 30,		December 31,		September 30,		December 31,		September 30,		December 31,
	2017		2016		2017		2016		2017		2016
Performing	$	243,378	$	269,623	$	178,693	$	127,447	$	24,445	$	39,532
Non-performing		357		475		22		11,315		—		—
Total	$	243,735	$	270,098	$	178,715	$	138,762	$	24,445	$	39,532

   Commercial – credit card    Real estate – residential    Real estate – HELOC
   September 30,
2016    December 31,
2015    September 30,
2016    December 31,
2015    September 30,
2016    December 31,
2015
Performing
   $ 165,415       $ 125,348       $ 510,263       $ 491,427       $ 717,511       $ 726,439
Non-performing
   19       13       869       800       4,336       3,524












Total
   $ 165,434       $ 125,361       $ 511,132       $ 492,227       $ 721,847       $ 729,963












   Consumer – credit card    Consumer – other    Leases
   September 30,
2016    December 31,
2015    September 30,
2016    December 31,
2015    September 30,
2016    December 31,
2015
Performing
   $ 262,317       $ 291,102       $ 120,860       $ 152,180       $ 31,529       $ 41,857
Non-performing
   434       468       2,725       2,597       —         —












Total
   $ 262,751       $ 291,570       $ 123,585       $ 154,777       $ 31,529       $ 41,857

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

~~This table provides an analysis of the credit risk profile of each loan class accounted for under ASC 310-30 at September 30, 2016 and December 31, 2015 (in thousands):~~

~~Credit Exposure~~

~~Credit Risk Profile by Risk Rating~~

~~PCI Loans~~

   Real estate – commercial
   September 30,
2016    December 31,
2015
Non-watch list
   $ —         $ —
Watch
   —         —
Special Mention
   —         —
Substandard
   —         1,055




Total
   $ —         $ 1,055

~~Credit Exposure~~

~~Credit Risk Profile Based on Payment Activity~~

~~PCI Loans~~

   Consumer – other
   September 30,
2016    December 31,
2015
Performing
   $ 1,035       $ 2,001
Non-performing
   —         —




Total
   $ 1,035       $ 2,001

Allowance for Loan Losses

The allowance for loan losses is a reserve established through a provision for loan losses charged to expense, which represents management’s judgment of inherent probable losses within the Company’s loan portfolio as of the balance sheet date. The allowance is necessary to reserve for estimated loan losses and risks inherent in the loan portfolio. Accordingly, the methodology is based on historical loss trends. The Company’s process for determining the appropriate level of the allowance for loan losses is designed to account for credit deterioration as it occurs. The provision for probable loan losses reflects loan quality trends, including the levels of, and trends related to, non-accrual loans, past due loans, potential problem loans, criticized loans and net charge-offs or recoveries, among other factors.

The level of the allowance reflects management’s continuing evaluation of industry concentrations, specific credit risks, loan loss experience, current loan portfolio quality, present economic, political and regulatory conditions and estimated losses inherent in the current loan portfolio. Portions of the allowance may be allocated for specific loans; however, the entire allowance is available for any loan that, in management’s judgment, should be charged off. While management utilizes its best judgment and information available at the time, the adequacy of the allowance is dependent upon a variety of factors beyond the Company’s control, including, among other things, the performance of the Company’s loan portfolio, the economy, changes in interest rates and changes in the regulatory environment.

The Company’s allowance for loan losses consists of specific valuation allowances and general valuation allowances based on historical loan loss experience for similar loans with similar characteristics and trends, general economic conditions and other qualitative risk factors both internal and external to the Company.

The allowances established for probable losses on specific loans are based on a regular analysis and evaluation of impaired loans. Loans are classified based on an internal risk grading process that evaluates the obligor’s ability to repay, the underlying collateral, if any, and the economic environment and industry in which the

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

borrower operates. When a loan is considered impaired, the loan is analyzed to determine the need, if any, to specifically allocate a portion of the allowance for loan losses to the loan. Specific valuation allowances are determined by analyzing the borrower’s ability to repay amounts owed, collateral deficiencies, the relative risk ~~ranking~~rating of the loan and economic conditions affecting the borrower’s industry.

General valuation allowances are calculated based on the historical loss experience of specific types of loans including an evaluation of the time span and volume of the actual charge-off. The Company calculates historical loss ratios for pools of similar loans with similar characteristics based on the proportion of actual charge-offs experienced to the total population of loans in the pool. The historical loss ratios are updated based on actual charge-off experience. A valuation allowance is established for each pool of similar loans based upon the product of the historical loss ratio, time span to charge-off, and the total dollar amount of the loans in the pool. The Company’s pools of similar loans include similarly risk-graded groups of commercial loans, commercial real estate loans, commercial credit card, home equity loans, consumer real estate loans and consumer and other loans. The Company also considers a loan migration analysis for criticized loans. This analysis includes an assessment of the probability that a loan will move to a loss position based on its risk rating. The consumer credit card pool is evaluated based on delinquencies and credit scores. In addition, a portion of the allowance is determined by a review of qualitative factors by management.

Generally, the unsecured portion of a commercial or commercial real estate loan is charged off when, after analyzing the borrower’s financial condition, it is determined that the borrower is incapable of servicing the debt, little or no prospect for near term improvement exists, and no realistic and significant strengthening action is pending. For collateral dependent commercial or commercial real estate loans, an analysis is completed regarding the Company’s collateral position to determine if the amounts due from the borrower are in excess of the calculated current fair value of the collateral. Specific allocations of the allowance for loan losses are made for any collateral deficiency. If a collateral deficiency is ultimately deemed to be uncollectible, the amount is charged off. Revolving commercial loans (such as commercial credit cards) which are past due 90 cumulative days are classified as a loss and charged off.

Generally, a consumer loan, or a portion thereof, is charged off in accordance with regulatory guidelines which provide that such loans be charged off when the Company becomes aware of the loss, such as from a triggering event that may include, but is not limited to, new information about a borrower’s intent and ability to repay the loan, bankruptcy, fraud, or death. However, the charge-off timeframe should not exceed the specified delinquency time frames, which state that closed-end retail loans (such as real estate mortgages, home equity loans and consumer installment loans) that become past due 120 cumulative days and open-end retail loans (such as home equity lines of credit and consumer credit cards) that become past due 180 cumulative days are classified as a loss and charged off.

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

ALLOWANCE FOR LOAN LOSSES AND RECORDED INVESTMENT IN LOANS

This table provides a ~~roll forward~~rollforward of the allowance for loan losses by portfolio segment for the three and nine months ended September 30, ~~2016~~2017 (in thousands):

   Three Months Ended September 30, 2016
   Commercial Real estate Consumer Leases Total
Allowance for loan losses:

Beginning balance
   $ 64,561    $ 10,683    $ 9,319    $ 103    $ 84,666
Charge-offs
   (5,667 ) (142 ) (2,335 ) —      (8,144 )
Recoveries
   129    209    544    —      882
Provision
   4,844    6,280    1,888    (12 ) 13,000


Ending balance
   $ 63,867    $ 17,030    $ 9,416    $ 91    $ 90,404


   Nine Months Ended September 30, 2016
   Commercial Real estate Consumer Leases Total
Allowance for loan losses:

Beginning balance
   $ 63,847    $ 8,220    $ 8,949    $ 127    $ 81,143
Charge-offs
   (11,542 ) (2,938 ) (6,951 ) —      (21,431 )
Recoveries
   3,477    540    1,675    —      5,692
Provision
   8,085    11,208    5,743    (36 ) 25,000


Ending balance
   $ 63,867    $ 17,030    $ 9,416    $ 91    $ 90,404


Ending balance: individually evaluated for impairment
   $ 1,759    $ 4,726    $ —      $ —      $ 6,485
Ending balance: collectively evaluated for impairment
   62,108    12,304    9,416    91    83,919
Loans:

Ending balance: loans
   $ 4,948,341    $ 4,926,253    $ 387,371    $ 31,529    $ 10,293,494
Ending balance: individually evaluated for impairment
   80,769    16,122    2,158    —      99,049
Ending balance: collectively evaluated for impairment
   4,867,572    4,910,131    384,178    31,529    10,193,410
Ending balance: PCI Loans
   —      —      1,035    —      1,035

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

	Three Months Ended September 30, 2017
	Commercial			Real estate			Consumer			Leases			Total
Allowance for loan losses:
Beginning balance	$	76,858		$	11,905		$	8,961		$	73		$	97,797
Charge-offs		(9,151	)		(439	)		(2,281	)		—			(11,871	)
Recoveries		190			201			572			—			963
Provision		8,166			1,844			1,495			(5	)		11,500
Ending balance	$	76,063		$	13,511		$	8,747		$	68		$	98,389

	Nine Months Ended September 30, 2017
	Commercial			Real estate			Consumer			Leases			Total
Allowance for loan losses:
Beginning balance	$	71,657		$	10,569		$	9,311		$	112		$	91,649
Charge-offs		(24,734	)		(888	)		(7,442	)		—			(33,064	)
Recoveries		2,519			620			1,665			—			4,804
Provision		26,621			3,210			5,213			(44	)		35,000
Ending balance	$	76,063		$	13,511		$	8,747		$	68		$	98,389
Ending balance: individually evaluated for impairment	$	3,060		$	125		$	—		$	—		$	3,185
Ending balance: collectively evaluated for impairment		73,003			13,386			8,747			68			95,204
Loans:
Ending balance: loans	$	5,102,259		$	5,447,874		$	422,450		$	24,445		$	10,997,028
Ending balance: individually evaluated for impairment		62,872			8,310			—			—			71,182
Ending balance: collectively evaluated for impairment		5,039,387			5,439,564			422,450			24,445			10,925,846

This table provides a ~~roll forward~~rollforward of the allowance for loan losses by portfolio segment for the three and nine months ended September 30, ~~2015~~2016 (in thousands):

   Three Months Ended September 30, 2015
   Commercial Real estate Consumer Leases Total
Allowance for loan losses:

Beginning balance
   $ 59,378    $ 8,892    $ 9,288    $ 163    $ 77,721
Charge-offs
   (1,124 ) (68 ) (2,263 ) —      (3,455 )
Recoveries
   488    133    643    —      1,264
Provision
   540    448    1,525    (13 ) 2,500


Ending balance
   $ 59,282    $ 9,405    $ 9,193    $ 150    $ 78,030


   Nine Months Ended September 30, 2015
   Commercial Real estate Consumer Leases Total
Allowance for loan losses:

Beginning balance
   $ 55,349    $ 10,725    $ 9,921    $ 145    $ 76,140
Charge-offs
   (4,624 ) (168 ) (7,413 ) —      (12,205 )
Recoveries
   1,387    225    1,983    —      3,595
Provision
   7,170    (1,377 ) 4,702    5    10,500


Ending balance
   $ 59,282    $ 9,405    $ 9,193    $ 150    $ 78,030


Ending balance: individually evaluated for impairment
   $ 2,504    $ 305    $ 31    $ —      $ 2,840
Ending balance: collectively evaluated for impairment
   56,778    9,100    9,162    150    75,190
Loans:

Ending balance: loans
   $ 4,555,783    $ 4,052,470    $ 397,487    $ 40,386    $ 9,046,126
Ending balance: individually evaluated for impairment
   52,450    8,957    3,365    —      64,772
Ending balance: collectively evaluated for impairment
   4,500,836    4,041,244    391,798    40,386    8,974,264
Ending balance: PCI Loans
   2,497    2,269    2,324    —      7,090

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

	Three Months Ended September 30, 2016
	Commercial			Real estate			Consumer			Leases			Total
Allowance for loan losses:
Beginning balance	$	64,561		$	10,683		$	9,319		$	103		$	84,666
Charge-offs		(5,667	)		(142	)		(2,335	)		—			(8,144	)
Recoveries		129			209			544			—			882
Provision		4,844			6,280			1,888			(12	)		13,000
Ending balance	$	63,867		$	17,030		$	9,416		$	91		$	90,404

	Nine Months Ended September 30, 2016
	Commercial			Real estate			Consumer			Leases			Total
Allowance for loan losses:
Beginning balance	$	63,847		$	8,220		$	8,949		$	127		$	81,143
Charge-offs		(11,542	)		(2,938	)		(6,951	)		—			(21,431	)
Recoveries		3,477			540			1,675			—			5,692
Provision		8,085			11,208			5,743			(36	)		25,000
Ending balance	$	63,867		$	17,030		$	9,416		$	91		$	90,404
Ending balance: individually evaluated for impairment	$	1,759		$	4,726		$	—		$	—		$	6,485
Ending balance: collectively evaluated for impairment		62,108			12,304			9,416			91			83,919
Loans:
Ending balance: loans	$	4,948,341		$	4,926,253		$	387,371		$	31,529		$	10,293,494
Ending balance: individually evaluated for impairment		80,769			16,122			2,158			—			99,049
Ending balance: collectively evaluated for impairment		4,867,572			4,910,131			384,178			31,529			10,193,410
Ending balance: PCI Loans		—			—			1,035			—			1,035

Impaired Loans

This table provides an analysis of impaired loans by class at September 30, ~~2016~~2017 and December 31, ~~2015~~2016 (in thousands):

   As of September 30, 2016
   Unpaid
Principal
Balance    Recorded
Investment
with No
Allowance    Recorded
Investment
with
Allowance    Total
Recorded
Investment    Related
Allowance    Average
Recorded
Investment
Commercial:

Commercial
   $ 95,272       $ 59,619       $ 21,150       $ 80,769       $ 1,759       $ 68,633
Asset-based
   —         —         —         —         —         —
Factoring
   —         —         —         —         —         —
Commercial – credit card
   —         —         —         —         —         —
Real estate:

Real estate – construction
   961       306       114       420       24       433
Real estate – commercial
   17,490       10,425       5,028       15,453       4,702       7,997
Real estate – residential
   249       249       —         249       —         592
Real estate – HELOC
   —         —         —         —         —         99
Consumer:

Consumer – credit card
   —         —         —         —         —         —
Consumer – other
   2,158       2,158       —         2,158       —         2,476
Leases
   —         —         —         —         —         —












Total
   $ 116,130       $ 72,757       $ 26,292       $ 99,049       $ 6,485       $ 80,230












   As of December 31, 2015
   Unpaid
Principal
Balance    Recorded
Investment
with No
Allowance    Recorded
Investment
with
Allowance    Total
Recorded
Investment    Related
Allowance    Average
Recorded
Investment
Commercial:

Commercial
   $ 72,739       $ 40,648       $ 27,356       $ 68,004       $ 5,668       $ 41,394
Asset-based
   —         —         —         —         —         —
Factoring
   —         —         —         —         —         —
Commercial – credit card
   —         —         —         —         —         —
Real estate:

Real estate – construction
   782       331       118       449       42       802
Real estate – commercial
   7,117       4,891       1,275       6,166       154       7,768
Real estate – residential
   1,054       939       —         939       —         1,433
Real estate – HELOC
   214       193       —         193       —         162
Consumer:

Consumer – credit card
   —         —         —         —         —         —
Consumer – other
   2,574       2,574       —         2,574       —         1,795
Leases
   —         —         —         —         —         —












Total
   $ 84,480       $ 49,576       $ 28,749       $ 78,325       $ 5,864       $ 53,354

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

	As of September 30, 2017
	Unpaid Principal Balance		Recorded Investment with No Allowance		Recorded Investment with Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
Commercial:
Commercial	$	83,289	$	42,987	$	19,885	$	62,872	$	3,060	$	68,724
Asset-based		—		—		—		—		—		—
Factoring		—		—		—		—		—		—
Commercial – credit card		—		—		—		—		—		—
Real estate:
Real estate – construction		108		93		—		93		—		199
Real estate – commercial		11,586		6,825		1,173		7,998		51		10,592
Real estate – residential		223		121		98		219		74		174
Real estate – HELOC		—		—		—		—		—		—
Consumer:
Consumer – credit card		—		—		—		—		—		—
Consumer – other		—		—		—		—		—		8
Leases		—		—		—		—		—		—
Total	$	95,206	$	50,026	$	21,156	$	71,182	$	3,185	$	79,697

	As of December 31, 2016
	Unpaid Principal Balance		Recorded Investment with No Allowance			Recorded Investment with Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
Commercial:
Commercial	$	80,405	$	43,260		$	31,091	$	74,351	$	7,866	$	69,776
Asset-based		—		—			—		—		—		—
Factoring		—		—			—		—		—		—
Commercial – credit card		—		—			—		—		—		—
Real estate:
Real estate – construction		510		181			113		294		68		405
Real estate – commercial		18,107		12,303			487		12,790		—		8,956
Real estate – residential		231		230			—		230		—		520
Real estate – HELOC		—		—			—		—		—		79
Consumer:
Consumer – credit card		—		—			—		—		—		—
Consumer – other		—		—			—		—		—		1,981
Leases		—		—			—		—		—		—
Total	$	99,253	$	55,974	��	$	31,691	$	87,665	$	7,934	$	81,717

Troubled Debt Restructurings

A loan modification is considered a troubled debt restructuring (TDR) when a concession has been granted to a debtor experiencing financial difficulties. The Company’s modifications generally include interest rate adjustments, principal reductions, and amortization and maturity date extensions. These modifications allow the debtor short-term cash relief to allow them to improve their financial condition. The Company’s restructured loans are individually evaluated for impairment and evaluated as part of the allowance for loan loss as described above in the Allowance for Loan Losses section of this note.

Purchased loans restructured after acquisition are not considered or reported as troubled debt restructurings if the loans evidenced credit deterioration as of the Acquisition Date and are accounted for in pools. For the three and nine months ended September 30, 2016, no purchased loans were modified as troubled debt restructurings after the Acquisition Date.

The Company had ~~$148 thousand~~$2.4 million and ~~$217~~$148 thousand in commitments to lend to borrowers with loan modifications classified as TDRs as of September 30, ~~2016~~2017 and September 30, ~~2015,~~2016, respectively. The Company monitors loan payments on an on-going basis to determine if a loan is considered to have a payment default. Determination of payment default involves analyzing the economic conditions that exist for each customer and their ability to generate positive cash flows during the loan term. ~~During~~

For the ~~nine~~three month period ended September 30, ~~2015,~~2017, the Company had one residential real estate TDR with a pre-modification loan balance of $97 thousand and a post-modification loan balance of $98 thousand. For the three month period ended September 30, 2016, the Company had one one commercial TDR with a pre- and post-modification loan balance of $12.7 million. For the nine months ended September 30, 2017, the Company had one commercial and one residential real estate ~~loan classified as a~~ TDR with a ~~payment default totaling $178 thousand. A specific valuation allowance for~~pre- and post-modification loan balance of $7.3 million. For the ~~full amount of this loan had previously been established within the Company’s allowance for loan losses, and this loan was charged off against the allowance for loan losses during that period.~~

~~This table provides a summary of loans restructured by class during the three and~~ nine months ended September 30, 2016,~~(in thousands)~~:

   Three Months Ended September 30, 2016    Nine Months Ended September 30, 2016
   Number
of
Contracts    Pre-
Modification
Outstanding
Recorded
Investment    Post-
Modification
Outstanding
Recorded
Investment    Number
of
Contracts    Pre-
Modification
Outstanding
Recorded
Investment    Post-
Modification
Outstanding
Recorded
Investment
Troubled Debt Restructurings

Commercial:

Commercial
   1       $ 12,721       $ 12,721       3       $ 24,778       $ 24,778
Asset-based
   —         —         —         —         —         —
Factoring
   —         —         —         —         —         —
Commercial – credit card
   —         —         —         —         —         —
Real estate:

Real estate – construction
   —         —         —         —         —         —
Real estate – commercial
   —         —         —         —         —         —
Real estate – residential
   —         —         —         —         —         —
Real estate – HELOC
   —         —         —         —         —         —
Consumer:

Consumer – credit card
   —         —         —         —         —         —
Consumer – other
   —         —         —         —         —         —
Leases
   —         —         —         —         —         —












Total
   1       $ 12,721       $ 12,721       3       $ 24,778       $ 24,778

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

~~This table provides~~ the Company had three commercial TDRs with a ~~summary~~pre- and post-modification balance of ~~loans restructured by class during the three and nine months ended September 30, 2015~~~~(in thousands)~~:$24.8 million.

   Three Months Ended September 30, 2015    Nine Months Ended September 30, 2015
   Number
of
Contracts    Pre-
Modification
Outstanding
Recorded
Investment    Post-
Modification
Outstanding
Recorded
Investment    Number
of
Contracts    Pre-
Modification
Outstanding
Recorded
Investment    Post-
Modification
Outstanding
Recorded
Investment
Troubled Debt Restructurings

Commercial:

Commercial
   2       $ 8,675       $ 8,675       16       $ 28,138       $ 28,138
Asset-based
   —         —         —         —         —         —
Factoring
   —         —         —         —         —         —
Commercial – credit card
   —         —         —         —         —         —
Real estate:

Real estate – construction
   —         —         —         —         —         —
Real estate – commercial
   —         —         —         1       261       261
Real estate – residential
   1       261       261       1       121       121
Real estate – HELOC
   —         —         —         —         —         —
Consumer:

Consumer – credit card
   —         —         —         —         —         —
Consumer – other
   —         —         —         —         —         —
Leases
   —         —         —         —         —         —












Total
   3       $ 8,936       $ 8,936       18       $ 28,520       $ 28,520

5. Securities

Securities Available for Sale

This table provides detailed information about securities available for sale at September 30, ~~2016~~2017 and December 31, ~~2015~~~~(in~~2016 (in thousands):

      Gross    Gross
   Amortized    Unrealized    Unrealized    Fair
   Cost    Gains    Losses    Value
September 30, 2016

U.S. Treasury
   $ 249,461       $ 291       $ (226 )    $ 249,526
U.S. Agencies
   289,244       247       (51 )    289,440
Mortgage-backed
   3,322,340       45,857       (5,901 )    3,362,296
State and political subdivisions
   2,291,316       37,450       (1,546 )    2,327,220
Corporates
   67,242       30       (67 )    67,205








Total
   $ 6,219,603       $ 83,875       $ (7,791 )    $ 6,295,687








      Gross    Gross
   Amortized    Unrealized    Unrealized    Fair
   Cost    Gains    Losses    Value
December 31, 2015

U.S. Treasury
   $ 350,354       $ 1       $ (576 )    $ 349,779
U.S. Agencies
   667,414       7       (1,032 )    666,389
Mortgage-backed
   3,598,115       12,420       (38,089 )    3,572,446
State and political subdivisions
   2,116,543       23,965       (2,095 )    2,138,413
Corporates
   80,585       —         (663 )    79,922








Total
   $ 6,813,011       $ 36,393       $ (42,455 )    $ 6,806,949

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

September 30, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury	$	40,090	$	10	$	(1,159	)	$	38,941
U.S. Agencies		14,758		—		(1	)		14,757
Mortgage-backed		3,267,134		3,336		(47,048	)		3,223,422
State and political subdivisions		2,542,275		20,584		(9,595	)		2,553,264
Corporates		18,586		1		(11	)		18,576
Total	$	5,882,843	$	23,931	$	(57,814	)	$	5,848,960

December 31, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury	$	95,315	$	37	$	(1,526	)	$	93,826
U.S. Agencies		198,158		67		(48	)		198,177
Mortgage-backed		3,773,090		7,069		(68,460	)		3,711,699
State and political subdivisions		2,425,155		7,391		(36,789	)		2,395,757
Corporates		66,997		5		(127	)		66,875
Total	$	6,558,715	$	14,569	$	(106,950	)	$	6,466,334

The following table presents contractual maturity information for securities available for sale at September 30, ~~2016~~~~(in~~2017 (in thousands):


	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Due in 1 year or less	$	743,207	$	743,589	$	282,095	$	282,264
Due after 1 year through 5 years		1,065,114		1,078,518		1,128,049		1,136,754
Due after 5 years through 10 years		844,091		864,353		846,560		849,476
Due after 10 years		244,851		246,931		359,005		357,044

Total		2,897,263		2,933,391		2,615,709		2,625,538
Mortgage-backed securities		3,322,340		3,362,296		3,267,134		3,223,422

Total securities available for sale	$	6,219,603	$	6,295,687	$	5,882,843	$	5,848,960

Securities may be disposed of before contractual maturities due to sales by the Company or because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

For the nine months ended September 30, ~~2016,~~2017, proceeds from the sales of securities available for sale were ~~$951.3~~$573.1 million compared to ~~$782.8~~$951.3 million for the same period in ~~2015.~~2016. Securities transactions resulted in gross realized gains of ~~$8.5~~$4.1 million and $8.5 million for the nine months ended September 30, 2017 and 2016, ~~and 2015,~~ respectively. ~~The~~There were no gross realized losses for the nine months ended September 30, ~~2016~~2017 and ~~2015 were~~gross realized losses of $1 thousand ~~and $48 thousand, respectively.~~for the nine months ended September 30, 2016.

Securities available for sale with a market value of ~~$5.1~~$4.9 billion at September 30, ~~2016~~2017 and ~~$5.9~~$5.7 billion at December 31, ~~2015~~2016 were pledged to secure U.S. Government deposits, other public deposits, certain trust deposits, derivative transactions, and repurchase agreements. Of this amount, securities with a market value of ~~$1.4~~$1.8 billion at both September 30, ~~2016~~2017 and ~~$1.6 billion at~~ December 31, ~~2015~~2016 were pledged at the Federal Reserve Discount Window but were unencumbered as of those dates.

The following table shows the Company’s available for sale investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, ~~2016~~2017 and December 31, ~~2015~~2016 (in thousands):

September 30, 2016
   Less than 12 months 12 months or more Total
Description of Securities    Fair Value    Unrealized
Losses Fair Value    Unrealized
Losses Fair Value    Unrealized
Losses
U.S. Treasury
   $ 75,083       $ (226 ) $ —         $ —      $ 75,083       $ (226 )
U.S. Agencies
   62,425       (33 ) 12,994       (18 ) 75,419       (51 )
Mortgage-backed
   424,586       (1,395 ) 291,636       (4,506 ) 716,222       (5,901 )
State and political subdivisions
   427,223       (1,513 ) 6,159       (33 ) 433,382       (1,546 )
Corporates
   20,979       (21 ) 30,539       (46 ) 51,518       (67 )








Total
   $ 1,010,296       $ (3,188 ) $ 341,328       $ (4,603 ) $ 1,351,624       $ (7,791 )

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

September 30, 2017	Less than 12 months					12 months or more					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury	$	—	$	—		$	29,026	$	(1,159	)	$	29,026	$	(1,159	)
U.S. Agencies		11,184		(1	)		—		—			11,184		(1	)
Mortgage-backed		1,680,656		(14,636	)		1,113,725		(32,412	)		2,794,381		(47,048	)
State and political subdivisions		512,368		(2,532	)		369,661		(7,063	)		882,029		(9,595	)
Corporates		16,361		(11	)		—		—			16,361		(11	)
Total	$	2,220,569	$	(17,180	)	$	1,512,412	$	(40,634	)	$	3,732,981	$	(57,814	)


December 31, 2015	Less than 12 months					12 months or more					Total
December 31, 2016																Less than 12 months					12 months or more					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury	$	344,556	$	(576	)	$	—	$	—		$	344,556	$	(576	)	$	48,678	$	(1,526	)	$	—	$	—		$	48,678	$	(1,526	)
U.S. Agencies		615,993		(1,032	)		—		—			615,993		(1,032	)		103,979		(34	)		9,989		(14	)		113,968		(48	)
Mortgage-backed		2,056,316		(21,013	)		426,959		(17,076	)		2,483,275		(38,089	)		2,735,868		(55,035	)		269,637		(13,425	)		3,005,505		(68,460	)
State and political subdivisions		479,197		(1,316	)		60,324		(779	)		539,521		(2,095	)		1,748,922		(36,639	)		8,565		(150	)		1,757,487		(36,789	)
Corporates		29,126		(183	)		50,796		(480	)		79,922		(663	)		41,966		(90	)		17,982		(37	)		59,948		(127	)

Total	$	3,525,188	$	(24,120	)	$	538,079	$	(18,335	)	$	4,063,267	$	(42,455	)	$	4,679,413	$	(93,324	)	$	306,173	$	(13,626	)	$	4,985,586	$	(106,950	)

The unrealized losses in the Company’s investments in U.S. treasury obligations, U.S. government agencies, Government Sponsored Entity (GSE) mortgage-backed securities, municipal securities, and corporates were caused by changes in interest rates. The Company does not have the intent to sell these securities and does not believe it is more likely than not that the Company will be required to sell these securities before a recovery of amortized cost. The Company expects to recover its cost basis in the securities and does not consider these investments to be other-than-temporarily impaired at September 30, ~~2016.~~2017.

Securities Held to Maturity

The following table ~~below provides detailed information for securities~~shows the Company’s held to maturity investments’ amortized cost, fair value, and gross unrealized gains and losses at September 30, ~~2016~~2017 and December 31, ~~2015~~~~(in~~2016, respectively (in thousands):

      Net
   Amortized    Unrealized    Fair
   Cost    Gains    Value
September 30, 2016

State and political subdivisions
   $ 1,009,117       $ 88,871       $ 1,097,988






December 31, 2015

State and political subdivisions
   $ 667,106       $ 24,273       $ 691,379

~~The following table presents contractual maturity information for securities held to maturity at September 30, 2016~~~~(in thousands):~~

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
September 30, 2017	Cost		Gains		Losses			Value
State and political subdivisions:
Due in 1 year or less	$	4,674	$	3	$	(11	)	$	4,666
Due after 1 year through 5 years		103,885		2,756		(2,652	)		103,989
Due after 5 years through 10 years		375,612		5,040		(21,040	)		359,612
Due after 10 years		792,081		5,816		(84,417	)		713,480
Total state and political subdivisions	$	1,276,252	$	13,615	$	(108,120	)	$	1,181,747

							Gross		Gross
	Amortized		Fair		Amortized		Unrealized		Unrealized			Fair
	Cost		Value
December 31, 2016					Cost		Gains		Losses			Value
State and political subdivisions:
Due in 1 year or less	$	17,219	$	18,735	$	6,077	$	5	$	(947	)	$	5,135
Due after 1 year through 5 years		83,572		90,932		82,650		2,376		(1,474	)		83,552
Due after 5 years through 10 years		565,141		614,912		341,741		8,854		(3,021	)		347,574
Due after 10 years		343,185		373,409		685,464		15,717		(31,415	)		669,766

Total securities held to maturity	$	1,009,117	$	1,097,988

Total state and political subdivisions					$	1,115,932	$	26,952	$	(36,857	)	$	1,106,027

Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

There were no sales of securities held to maturity during the nine months ended September 30, ~~2016~~2017 or ~~2015.~~

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

2016.

Trading Securities

The net unrealized losses on trading securities at September 30, 2017 were $214 thousand and the net unrealized gains on trading securities at September 30, 2016 ~~and September 30, 2015~~ were $14 ~~thousand~~thousand. These unrealized gains and ~~$8 thousand, respectively, and~~losses were included in trading and investment banking income on the Consolidated Statements of Income. In order to offset interest rate risk exposure within the trading portfolio, the Company has begun short selling U.S. Treasury and Corporate securities in which the Company enters into agreements to sell securities at a fixed price on a fixed date prior to purchasing the related securities. Securities sold not yet purchased totaled $3.3 million at September 30, 2017 and is classified within the Other liabilities line of the Company’s Consolidated Balance Sheets.

Other Securities

The table below provides detailed information for Federal Reserve Bank (FRB) stock and Federal Home Loan Bank (FHLB) stock and other securities at September 30, ~~2016~~2017 and December 31, ~~2015~~2016 (in thousands):

												Gross		Gross
										Amortized		Unrealized		Unrealized		Fair
September 30, 2017										Cost		Gains		Losses		Value
FRB and FHLB stock										$	33,262	$	—	$	—	$	33,262
Other securities – marketable											3		5,167		—		5,170
Other securities – non-marketable											23,328		1,783		—		25,111
Total Other securities										$	56,593	$	6,950	$	—	$	63,543

			Gross		Gross							Gross		Gross
	Amortized		Unrealized		Unrealized			Fair		Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses			Value
September 30, 2016
December 31, 2016										Cost		Gains		Losses		Value
FRB and FHLB stock	$	33,397	$	—	$	—		$	33,397	$	33,262	$	—	$	—	$	33,262
Other securities – marketable		4		9,578		—			9,582		4		9,948		—		9,952
Other securities – non-marketable		23,185		700		(11	)		23,874		24,272		820		—		25,092

Total Other securities	$	56,586	$	10,278	$	(11	)	$	66,853	$	57,538	$	10,768	$	—	$	68,306

December 31, 2015
FRB and FHLB stock	$	33,215	$	—	$	—		$	33,215
Other securities – marketable		5		7,159		—			7,164
Other securities – non-marketable		23,855		964		—			24,819

Total Other securities	$	57,075	$	8,123	$	—		$	65,198

Investment in FRB stock is based on the capital structure of the investing bank, and investment in FHLB stock is mainly tied to the level of borrowings from the FHLB. These holdings are carried at cost. Other marketable and non-marketable securities include Prairie Capital Management (PCM) alternative investments in hedge funds and private equity funds, which are accounted for as equity-method investments. The fair value of other marketable securities includes alternative investment securities of ~~$9.6~~$5.2 million at September 30, ~~2016~~2017 and ~~$7.2~~$10.0 million at December 31, ~~2015.~~2016. The fair value of other non-marketable securities includes alternative investment securities of ~~$1.8~~$3.0 million at September 30, ~~2016~~2017 and $2.0 million at December 31, ~~2015.~~2016. Unrealized gains or losses on alternative investments are recognized in the Equity (losses) earnings ~~(loss)~~line on alternative investments of the Company’s Consolidated Statements of Income.

6. Goodwill and Other Intangibles

Changes in the carrying amount of goodwill for the periods ended September 30, ~~2016~~2017 and December 31, ~~2015~~2016 by reportable segment are as follows (in thousands):

   Bank    Institutional
Investment
Management    Asset
Servicing    Total
Balances as of January 1, 2016
   $ 161,341       $ 47,529       $ 19,476       $ 228,346
Acquisition of Marquette
   50       —         —         50








Balances as of September 30, 2016
   $ 161,391       $ 47,529       $ 19,476       $ 228,396








Balances as of January 1, 2015
   $ 142,753       $ 47,529       $ 19,476       $ 209,758
Acquisition of Marquette
   18,588       —         —         18,588








Balances as of December 31, 2015
   $ 161,341       $ 47,529       $ 19,476       $ 228,346

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

	Bank		Institutional Investment Management			Asset Servicing		Total
Balances as of January 1, 2017	$	161,391	$	47,529		$	19,476	$	228,396
Discontinued assets		—		(47,529	)		—		(47,529	)
Balances as of September 30, 2017	$	161,391	$	—		$	19,476	$	180,867

Balances as of January 1, 2016	$	161,341	$	47,529		$	19,476	$	228,346
Acquisition of Marquette		50		—			—		50
Discontinued assets		—		(47,529	)		—		(47,529	)
Balances as of December 31, 2016	$	161,391	$	—		$	19,476	$	180,867

The following table lists the finite-lived intangible assets that continue to be subject to amortization as of September 30, ~~2016~~2017 and December 31, ~~2015~~2016 (in thousands):

   As of September 30, 2016
   Gross Carrying
Amount    Accumulated
Amortization    Net Carrying
Amount
Core deposit intangible assets
   $ 47,527       $ 38,218       $ 9,309
Customer relationships
   107,460       79,902       27,558
Other intangible assets
   4,198       3,646       552






Total intangible assets
   $ 159,185       $ 121,766       $ 37,419






   As of December 31, 2015
   Gross Carrying
Amount    Accumulated
Amortization    Net Carrying
Amount
Core deposit intangible assets
   $ 36,497       $ 33,613       $ 2,884
Core deposit intangible-Marquette acquisition
   11,030       1,838       9,192
Customer relationships
   104,560       73,496       31,064
Customer relationship-Marquette acquisition
   2,900       338       2,562
Other intangible assets
   3,247       2,841       406
Other intangible assets-Marquette acquisition
   951       277       674






Total intangible assets
   $ 159,185       $ 112,403       $ 46,782

	As of September 30, 2017
	Core Deposit Intangible Assets		Customer Relationships		Other Intangible Assets		Total
Gross carrying amount	$	50,059	$	74,243	$	3,254	$	127,556
Accumulated amortization		41,424		59,401		3,254		104,079
Net carrying amount	$	8,635	$	14,842	$	—	$	23,477

	As of December 31, 2016
	Core Deposit Intangible Assets		Customer Relationships		Other Intangible Assets		Total
Gross carrying amount	$	47,527	$	74,243	$	3,254	$	125,024
Accumulated amortization		39,040		56,352		3,002		98,394
Net carrying amount	$	8,487	$	17,891	$	252	$	26,630

The following table has the aggregate amortization expense recognized in each period(in thousands):

Three Months Ended
September 30,

Nine Months Ended
September 30,

   2016    2015    2016    2015
Aggregate amortization expense
   $ 2,992       $ 3,483       $ 9,363       $ 8,807

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Aggregate amortization expense	$	1,715	$	2,088	$	5,685	$	6,644

The following table lists estimated amortization expense of intangible assets in future periods~~(in~~ (in thousands):

For the three months ending December 31, 2016
   $ 2,928
For the year ending December 31, 2017
   10,180
For the year ending December 31, 2018
   7,202
For the year ending December 31, 2019
   5,822
For the year ending December 31, 2020
   4,487
For the year ending December 31, 2021
   3,101

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

For the three months ending December 31, 2017		$	1,679
For the year ending December 31, 2018	��		6,126
For the year ending December 31, 2019			5,063
For the year ending December 31, 2020			4,044
For the year ending December 31, 2021			2,975
For the year ending December 31, 2022			1,971

7. Securities Sold Under Agreements to Repurchase

The Company utilizes repurchase agreements to facilitate the needs of customers and to facilitate secured short-term funding needs. Repurchase agreements are stated at the amount of cash received in connection with the transaction. The Company monitors collateral levels on a continuous basis and may be required to provide additional collateral based on the fair value of the underlying securities. Securities pledged as collateral under repurchase agreements are maintained with the Company’s safekeeping agents.

The table below presents the remaining contractual maturities of repurchase agreements outstanding at September 30, ~~2016,~~2017, in addition to the various types of marketable securities that have been pledged as collateral for these borrowings(in thousands):


	As of September 30, 2016 Remaining Contractual Maturities of the Agreements						As of September 30, 2017
	Overnight & Continuous		Over 90 Days		Total		Remaining Contractual Maturities of the Agreements
Repurchase agreements, secured by:							On Demand		2-29 Days		Over 90 Days		Total
U.S. Treasury	$	176,297	$	—	$	176,297	$	—	$	13,376	$	—	$	13,376
U.S. Agencies		1,247,635		1,600		1,249,235		2,500		1,019,353		800		1,022,653

Total repurchase agreements	$	1,423,932	$	1,600	$	1,425,532	$	2,500	$	1,032,729	$	800	$	1,036,029

8. Business Segment Reporting

The Company has strategically aligned its operations into the following ~~three~~two reportable segments (collectively, the Business Segments): Bank ~~Institutional Investment Management,~~ and Asset Servicing. Senior executive officers regularly evaluate business segment financial results produced by the Company’s internal reporting system in deciding how to allocate resources and assess performance for individual Business Segments. Previously, the Company had the following ~~four~~three Business Segments: Bank, Institutional Investment Management, and Asset ~~Servicing, and Payment Solutions. In the first quarter of 2016,~~Servicing. On April 20, 2017, the Company ~~merged~~announced the ~~Payments Solutions segment into~~execution of an agreement to sell all of the ~~Bank segment to better reflect how~~outstanding stock of Scout, its institutional investment management subsidiary. As the ~~core businesses, products and services are being evaluated by management currently. The Company’s Payment Solutions leadership structure and financial performance assessments~~operations of Scout are now included in discontinued operations, the ~~Bank segment, and accordingly, the~~Company no longer presents this segment’s operations as one of its business segments. The Company’s reportable segments ~~were realigned to reflect these changes.~~include certain corporate overhead, technology and service costs that are allocated based on methodologies that are applied consistently between periods. For comparability purposes, amounts in all periods are based on methodologies in effect at September 30, ~~2016.~~2017. Previously reported results have been reclassified in this filing to conform to the current organizational structure.

The following summaries provide information about the activities of each segment:

The Bankprovides a full range of banking services to commercial, retail, government and correspondent bank customers through the Company’s branches, call center, internet banking, and ATM network. Services include traditional commercial and consumer banking, treasury management, leasing, foreign exchange, consumer and commercial credit and debit card, prepaid debit card solutions, healthcare services, institutional cash management, merchant bankcard, wealth management, brokerage, insurance, capital markets, investment banking, corporate trust, and correspondent banking.

~~Institutional Investment Management~~ ~~provides equity and fixed income investment strategies in the intermediary and institutional markets via mutual funds, traditional separate accounts and sub-advisory relationships.~~

Asset Servicing provides services to the asset management industry, supporting a range of investment products, including mutual funds, alternative investments and managed accounts. Services include fund administration, fund accounting, investor services, transfer agency, distribution, marketing, custody, alternative investment services, and collective and multiple-series trust services.

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

Business Segment Information

Segment financial results were as follows (in thousands):


	Three Months Ended September 30, 2016								Three Months Ended September 30, 2017
	Bank		Institutional Investment Management		Asset Servicing		Total		Bank		Asset Servicing		Total
Net interest income	$	121,963	$	—	$	2,802	$	124,765	$	137,331	$	3,527	$	140,858
Provision for loan losses		13,000		—		—		13,000		11,500		—		11,500
Noninterest income		80,454		19,413		22,081		121,948		79,759		24,547		104,306
Noninterest expense		142,836		16,874		20,073		179,783		150,057		21,764		171,821

Income before taxes		46,581		2,539		4,810		53,930		55,533		6,310		61,843
Income tax expense		10,427		519		1,038		11,984		11,649		1,322		12,971

Net income	$	36,154	$	2,020	$	3,772	$	41,946

Income from continuing operations									$	43,884	$	4,988	$	48,872
Average assets	$	18,384,000	$	61,000	$	1,247,000	$	19,692,000	$	19,542,050	$	770,950	$	20,313,000

	Three Months Ended September 30, 2015
	Bank		Institutional Investment Management		Asset Servicing		Total
Net interest income	$	108,424	$	49	$	1,422	$	109,895
Provision for loan losses		2,500		—		—		2,500
Noninterest income		65,207		21,398		22,493		109,098
Noninterest expense		149,269		16,495		19,515		185,279

Income before taxes		21,862		4,952		4,400		31,214
Income tax expense		6,120		1,409		1,234		8,763

Net income	$	15,742	$	3,543	$	3,166	$	22,451

Average assets	$	17,045,000	$	66,000	$	1,009,000	$	18,120,000

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

	Three Months Ended September 30, 2016
	Bank		Asset Servicing		Total
Net interest income	$	121,963	$	2,802	$	124,765
Provision for loan losses		13,000		—		13,000
Noninterest income		80,540		23,002		103,542
Noninterest expense		144,450		20,761		165,211
Income before taxes		45,053		5,043		50,096
Income tax expense		9,560		1,114		10,674
Income from continuing operations	$	35,493	$	3,929	$	39,422
Average assets	$	18,441,950	$	1,250,050	$	19,692,000


	Nine Months Ended September 30, 2016								Nine Months Ended September 30, 2017
	Bank		Institutional Investment Management		Asset Servicing		Total		Bank		Asset Servicing		Total
Net interest income	$	355,847	$	—	$	8,020	$	363,867	$	403,450	$	9,117	$	412,567
Provision for loan losses		25,000		—		—		25,000		35,000		—		35,000
Noninterest income		235,915		56,965		66,865		359,745		245,583		71,946		317,529
Noninterest expense		431,594		52,993		60,983		545,570		456,680		65,890		522,570

Income before taxes		135,168		3,972		13,902		153,042		157,353		15,173		172,526
Income tax expense		32,928		899		3,348		37,175		33,733		3,174		36,907

Net income	$	102,240	$	3,073	$	10,554	$	115,867

Income from continuing operations									$	123,620	$	11,999	$	135,619
Average assets	$	18,147,000	$	62,000	$	1,279,000	$	19,488,000	$	19,501,000	$	787,000	$	20,288,000

   Nine Months Ended September 30, 2015
   Bank    Institutional
Investment
Management    Asset Servicing    Total
Net interest income
   $ 294,210       $ 27       $ 3,376       $ 297,613
Provision for loan losses
   10,500       —         —         10,500
Noninterest income
   210,695       74,182       68,978       353,855
Noninterest expense
   407,997       52,799       60,860       521,656








Income before taxes
   86,408       21,410       11,494       119,312
Income tax expense
   23,859       5,899       3,124       32,882








Net income
   $ 62,549       $ 15,511       $ 8,370       $ 86,430








Average assets
   $ 16,419,000       $ 71,000       $ 970,000       $ 17,460,000

~~9. Acquisition~~

As previously disclosed, on May 31, 2015, the Company acquired 100% of the outstanding common shares of Marquette. Marquette was a privately held financial services company with a portfolio of businesses that operated thirteen branches in Arizona and Texas, two national commercial specialty-lending businesses focused on asset-based lending and accounts receivable factoring, and an asset-management firm. As a result of the acquisition, the Company increased its presence in Arizona and Texas and supplemented the Company’s commercial-banking services with factoring and asset-based lending businesses. As of the close of trading on the Acquisition Date, the beneficial owners of Marquette received 9.2295 shares of the Company’s common stock for each share of Marquette common stock owned at that date (approximately 3.47 million shares total). The market value of the shares of the Company’s common stock issued at the effective time of the merger was approximately $179.7 million, based on the Company’s closing stock price of $51.79 on May 29, 2015. The transaction was accounted for using the acquisition method of accounting in accordance with FASB ASC Topic 805,~~Business Combinations~~~~. Accordingly, the purchase price was allocated based on the estimated fair market values of the assets and liabilities acquired.~~

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

	Nine Months Ended September 30, 2016
	Bank		Asset Servicing		Total
Net interest income	$	355,847	$	8,020	$	363,867
Provision for loan losses		25,000		—		25,000
Noninterest income		234,643		69,638		304,281
Noninterest expense		435,708		63,190		498,898
Income before taxes		129,782		14,468		144,250
Income tax expense		30,478		3,538		34,016
Income from continuing operations	$	99,304	$	10,930	$	110,234
Average assets	$	18,205,900	$	1,282,100	$	19,488,000

~~The following table summarizes the net assets acquired (at fair value) and consideration transferred for Marquette~~~~(in thousands, except for per share data)~~:

   Fair Value
May 31, 2015
Assets

Loans
   $ 980,404
Investment securities
   177,694
Cash and due from banks
   95,351
Premises and equipment, net
   11,508
Identifiable intangible assets
   14,881
Other assets
   32,336


Total assets acquired
   1,312,174
Liabilities

Noninterest-bearing deposits
   226,161
Interest-bearing deposits
   708,675
Short-term debt
   112,133
Long-term debt
   89,971
Other liabilities
   14,135


Total liabilities assumed
   1,151,075
Net identifiable assets acquired
   161,099
Goodwill acquired
   18,638


Net assets acquired
   $ 179,737


Consideration:

Company’s common shares issued
   3,470
Purchase price per share of the Company’s common stock
   $ 51.79


Fair value of total consideration transferred
   $ 179,737

In the acquisition, the Company purchased $980.4 million of loans at fair value. All non-performing loans and select other classified loan relationships considered by management to be credit impaired are accounted for pursuant to ASC Topic 310-30, as previously discussed within Note 4, “Loans and Allowance for Loan Losses.”

The Company assumed long-term debt obligations of Marquette with an aggregate balance of $103.1 million and an aggregate fair value of $65.5 million as of the Acquisition Date payable to four unconsolidated trusts (Marquette Capital Trust I, Marquette Capital Trust II, Marquette Capital Trust III, and Marquette Capital Trust IV) that have issued trust preferred securities. Interest rates on trust preferred securities trusts are tied to the three-month London Interbank Offered Rate (LIBOR) with spreads ranging from 133 basis points to 160 basis points and reset quarterly. The trust preferred securities have maturity dates ranging from January 2036 to September 2036.

The amount of goodwill arising from the acquisition reflects the Company’s increased market share and related synergies that are expected to result from combining the operations of UMB and Marquette. All of the goodwill was assigned to the Bank segment. In accordance with ASC 350,~~Intangibles-Goodwill and Other~~, goodwill will not be amortized but will be subject to at least an annual impairment test. As the Company acquired tax deductible goodwill in excess of the amount reported in the consolidated financial statements, the goodwill is expected to be deductible for tax purposes. The fair value of the acquired identifiable intangible assets of $14.9 million is comprised of a core deposit intangible of $11.0 million, customer lists of $2.9 million and non-compete agreements of $1.0 million.

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

The results of operations of Marquette are included in the results of operations of the Company subsequent to the Acquisition Date. For the nine months ended September 30, 2016, acquisition expenses recognized in Noninterest expense in the Company’s Consolidated Statements of Income totaled $4.5 million. This total included $880 thousand of severance in Salaries and employee benefits and $1.7 million in Legal and consulting fees.

~~10.~~9. Commitments, Contingencies and Guarantees

In the normal course of business, the Company is party to financial instruments with off-balance-sheet risk in order to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit, commercial letters of credit, standby letters of credit, forward foreign exchange contracts and spot foreign exchange contracts. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the ~~consolidated balance sheet.~~Consolidated Balance Sheets. The contractual or notional amount of those instruments reflects the extent of involvement the Company has in particular classes of financial instruments. Many of the commitments expire without being drawn upon; therefore, the total amount of these commitments does not necessarily represent the future cash requirements of the Company.

The Company’s exposure to credit loss in the event of nonperformance by the counterparty to the financial instruments for commitments to extend credit, commercial letters of credit, and standby letters of credit is represented by the contract or notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

The following table summarizes the Company’s off-balance sheet financial instruments.

Contract or Notional Amount(in thousands):

	September 30,		December 31,
	2017		2016
Commitments to extend credit for loans (excluding credit card loans)	$	6,451,746	$	6,471,404
Commitments to extend credit under credit card loans		2,952,064		2,798,433
Commercial letters of credit		659		1,098
Standby letters of credit		305,756		376,617
Forward contracts		46,793		49,352
Spot foreign exchange contracts		1,185		3,725

   September 30,    December 31,
   2016    2015
Commitments to extend credit for loans (excluding credit card loans)
   $ 6,517,542       $ 6,671,794
Commitments to extend credit under credit card loans
   2,735,487       2,986,581
Commercial letters of credit
   1,393       11,541
Standby letters of credit
   381,284       360,468
Forward contracts
   64,012       75,611
Spot foreign exchange contracts
   4,145       10,391

~~11.~~10. Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to certain fixed rate assets and liabilities. The Company also has interest rate derivatives that result from a service provided to certain qualifying customers and, therefore, are not used to manage interest rate risk of the Company’s assets or liabilities. The Company has entered into an offsetting position for each of these derivative instruments with a matching instrument from another financial institution in order to minimize its net risk exposure resulting from such transactions.

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

Fair Values of Derivative Instruments on the Consolidated Balance Sheets

The table below presents the fair value of the Company’s derivative financial instruments as of September 30, 2017 and December 31, 2016. The Company’s derivative assets and derivative liabilities are located within Other assets and Other liabilities, respectively, on the Company’s Consolidated Balance Sheets.

This table provides a summary of the fair value of the Company’s derivative assets and liabilities as of September 30, ~~2016~~2017 and December 31, ~~2015~~2016 (in ~~thousands)~~thousands):


	Asset Derivatives				Liability Derivatives				Derivative Assets				Derivative Liabilities
	September 30, 2016		December 31, 2015		September 30, 2016		December 31, 2015		September 30,		December 31,		September 30,		December 31,
Fair Value									2017		2016		2017		2016
Interest Rate Products:
Derivatives not designated as hedging instruments	$	21,499	$	11,700	$	22,588	$	11,921	$	11,692	$	10,555	$	7,276	$	10,581
Derivatives designated as hedging instruments		426		603		8,233		337		102		318		1,608		748

Total	$	21,925	$	12,303	$	30,821	$	12,258	$	11,794	$	10,873	$	8,884	$	11,329

Fair Value Hedges of Interest Rate Risk

The Company is exposed to changes in the fair value of certain of its fixed rate assets and liabilities due to changes in the benchmark interest rate, LIBOR. Interest rate swaps designated as fair value hedges involve either making fixed rate payments to a counterparty in exchange for the Company receiving variable rate payments, or making variable rate payments to a counterparty in exchange for the Company receiving fixed rate payments, over the life of the agreements without the exchange of the underlying notional amount. As of September 30, ~~2016,~~2017, the Company had two interest rate swaps with a notional amount of ~~$15.8~~$15.6 million that were designated as fair value hedges of interest rate risk associated with the Company’s fixed rate loan assets and brokered time deposits.

For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in earnings. The Company includes the gain or loss on the hedged items in the same line item as the offsetting loss or gain on the related derivatives.

Cash Flow Hedges of Interest Rate Risk

The Company is exposed to changes in the fair value of certain of its variable-rate liabilities due to changes in the benchmark interest rate, LIBOR. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. As of September 30, ~~2016,~~2017, the Company had two interest rate swaps with a notional amount of $51.5 million that were designated as cash flow hedges of interest rate risk associated with the Company’s variable rate subordinated debentures issued by Marquette Capital Trusts III and IV. For derivatives designated and that qualify as cash flow hedges, the effective portion of changes in fair value is recorded in accumulated other comprehensive income (AOCI) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly into earnings for the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk. During the three and nine months ended September 30, 2017, the Company recognized net losses of $169 thousand and $1.1 million, respectively, in AOCI for the effective portion of the change in fair value of these cash flow hedges. During the three and nine months ended September 30, 2016, the Company recognized net losses of $643 thousand and $7.7 million, respectively, in AOCI for the effective portion of the change in fair value of these cash flow hedges. During the three and nine months ended September 30, 2017 and September 30, 2016, the Company did not record any hedge ineffectiveness in earnings. Amounts reported in AOCI related to derivatives will be reclassified to Interest expense as interest payments are received or paid on the Company’s derivatives. The Company does not expect to reclassify any amounts from AOCI to Interest expense during the next 12 months as the Company’s derivatives are effective after December 2018. As of September 30, ~~2016,~~2017, the Company is hedging its exposure to the variability in future cash flows for forecasted transactions over a maximum period of 2019.0 years.

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

Non-designated Hedges

The remainder of the Company’s derivatives are not designated in qualifying hedging relationships. Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain customers. The Company executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously offset by interest rate swaps that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. As of September 30, ~~2016,~~2017, the Company had 5076 interest rate swaps with an aggregate notional amount of ~~$595.8~~$947.3 million related to this program. During the three and nine months ended September 30, 2017, the Company recognized $140 thousand and $656 thousand of net losses, respectively, related to changes in fair value of these swaps. During the three and nine months ended September 30, 2016, the Company recognized $76 thousand and $868 thousand of net losses, respectively, related to changes in ~~fair value of these swaps. During the three and nine months ended September 30, 2015, the Company recognized $125 thousand and $211 thousand of net losses, respectively, related to changes in~~ the fair value of these swaps.

Effect of Derivative Instruments on the Consolidated Statements of Income

This table provides a summary of the amount of gain or loss recognized in other noninterest expense in the Consolidated Statements of Income related to the Company’s derivative assets and liabilities for the three and nine months ended September 30, ~~2016~~2017 and September 30, ~~2015~~2016 (in thousands):

													Amount of Gain (Loss) Recognized
	Amount of Gain (Loss) Recognized												For the Three Months Ended						For the Nine Months Ended
	For the Three Months Ended						For the Nine Months Ended						September 30,			September 30,			September 30,			September 30,
	September 30, 2016			September 30, 2015			September 30, 2016			September 30, 2015			2017			2016			2017			2016
Interest Rate Products
Derivatives not designated as hedging instruments	$	(76	)	$	(125	)	$	(868	)	$	(211	)	$	(140	)	$	(76	)	$	(656	)	$	(868	)

Total	$	(76	)	$	(125	)	$	(868	)	$	(211	)	$	(140	)	$	(76	)	$	(656	)	$	(868	)

Interest Rate Products
Derivatives designated as hedging instruments:
Fair value adjustments on derivatives	$	(64	)	$	(178	)	$	(395	)	$	(172	)	$	(56	)	$	(64	)	$	(188	)	$	(395	)
Fair value adjustments on hedged items		63			177			392			173			55			63			189			392

Total	$	(1	)	$	(1	)	$	(3	)	$	1		$	(1	)	$	(1	)	$	1		$	(3	)

This table provides a summary of the amount of gain or loss recognized in AOCI in the Consolidated Statements of Comprehensive Income related to the Company’s derivative assets and liabilities as of September 30, ~~2016~~2017 and September 30, ~~2015~~2016 (in thousands):

Amount of Loss Recognized in Other Comprehensive Income on
Derivatives (Effective Portion)
For the Three Months Ended For the Nine Months Ended
Derivatives in Cash Flow Hedging Relationships
September 30,
2016 September 30,
2015 September 30,
2016 September 30,
2015
Interest rate products

Derivatives designated as cash flow hedging instruments
$ (643 ) $ — $ (7,677 ) $ —

Total
$ (643 ) $ — $ (7,677 ) $ —

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

	Amount of Loss Recognized in Other Comprehensive Income on Derivatives (Effective Portion)
	For the Three Months Ended						For the Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
Derivatives in Cash Flow Hedging Relationships	2017			2016			2017			2016
Interest Rate Products
Derivatives designated as cash flow hedging instruments	$	(169	)	$	(643	)	$	(1,080	)	$	(7,677	)
Total	$	(169	)	$	(643	)	$	(1,080	)	$	(7,677	)

Credit-risk-related Contingent Features

The Company has agreements with certain of its derivative counterparties that contain a provision that if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations.

As of September 30, ~~2016,~~2017, the termination value of derivatives in a net liability position, which includes accrued interest, related to these agreements was ~~$31.1~~$10.7 million. The Company has minimum collateral posting thresholds with certain of its derivative ~~counterparties and has not yet reached its minimum collateral posting threshold under these agreements.~~counterparties. At September 30, 2017 the Company had posted $557 thousand of collateral. If the Company had breached any of these provisions at September 30, ~~2016,~~2017, it could have been required to settle its obligations under the agreements at the termination value.

~~12.~~11. Fair Value Measurements

The following table presents information about the Company’s assets measured at fair value on a recurring basis as of September 30, ~~2016,~~2017, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value.

Fair values determined by Level 1 inputs utilize quoted prices in active markets for identical assets and liabilities that the Company has the ability to access. Fair values determined by Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the hierarchy. In such cases, the fair value is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Assets measured at fair value on a recurring basis as of September 30, ~~2016~~2017 and December 31, ~~2015~~ ~~(in~~2016 (in thousands):


	Fair Value Measurement at September 30, 2016								Fair Value Measurement at September 30, 2017
Description	September 30, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		September 30, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
U.S. Treasury	$	400	$	400	$	—	$	—	$	25	$	25	$	—	$	—
U.S. Agencies		2,349		—		2,349		—		6,255		—		6,255		—
Mortgage-backed		7,068		—		7,068		—		2,555		—		2,555		—
State and political subdivisions		18,645		—		18,645		—		36,192		—		36,192		—
Trading - other		29,600		29,161		439		—

Corporates										3,294		3,294		—		—
Trading – other										12,339		11,766		573		—
Trading securities		58,062		29,561		28,501		—		60,660		15,085		45,575		—

U.S. Treasury		249,526		249,526		—		—		38,941		38,941		—		—
U.S. Agencies		289,440		—		289,440		—		14,757		—		14,757		—
Mortgage-backed		3,362,296		—		3,362,296		—		3,223,422		—		3,223,422		—
State and political subdivisions		2,327,220		—		2,327,220		—		2,553,264		—		2,553,264		—
Corporates		67,205		67,205				—		18,576		18,576		—		—

Available for sale securities		6,295,687		316,731		5,978,956		—		5,848,960		57,517		5,791,443		—
Company-owned life insurance		40,274		—		40,274		—		59,431		—		59,431		—
Bank-owned life insurance		208,095		—		208,095		—		264,741		—		264,741		—
Derivatives		21,925		—		21,925		—		11,794		—		11,794		—

Total	$	6,624,043	$	346,292	$	6,277,751	$	—	$	6,245,586	$	72,602	$	6,172,984	$	—

Liabilities
Deferred compensation	$	40,804	$	40,804	$	—	$	—	$	57,048	$	57,048	$	—	$	—
Derivatives		30,821		—		30,821		—		8,884		—		8,884		—

Securities sold not yet purchased										3,266		—		3,266		—
Total	$	71,625	$	40,804	$	30,821	$	—	$	69,198	$	57,048	$	12,150	$	—

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

   Fair Value Measurement at December 31, 2015
Description
   December 31,
2015    Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)    Significant
Other
Observable
Inputs
(Level 2)    Significant
Unobservable
Inputs
(Level 3)
Assets

U.S. Treasury
   $ 400       $ 400       $ —         $ —
U.S. Agencies
   1,309       —         1,309       —
State and political subdivisions
   10,200       —         10,200       —
Trading - other
   17,708       17,708       —         —








Trading securities
   29,617       18,108       11,509       —








U.S. Treasury
   349,779       349,779       —         —
U.S. Agencies
   666,389       —         666,389       —
Mortgage-backed
   3,572,446       —         3,572,446       —
State and political subdivisions
   2,138,413       —         2,138,413       —
Corporates
   79,922       79,922       —         —








Available for sale securities
   6,806,949       429,701       6,377,248       —
Company-owned life insurance
   31,205       —         31,205       —
Bank-owned life insurance
   202,991       —         202,991       —
Derivatives
   12,303       —         12,303       —








Total
   $ 7,083,065       $ 447,809       $ 6,635,256       $ —








Liabilities

Deferred compensation
   $ 32,937       $ 32,937       $ —         $ —
Contingent consideration liability
   17,718       —         —         17,718
Derivatives
   12,258       —         12,258       —








Total
   $ 62,913       $ 32,937       $ 12,258       $ 17,718

~~The following table reconciles the beginning and ending balances of the contingent consideration liability for the nine months ended September 30, 2016 and 2015 (~~~~in thousands~~):

   Nine Months Ended September 30,
   2016    2015
Beginning balance
   $ 17,718       $ 53,411
Payment of contingent consideration on acquisitions
   (17,784 )    (18,702 )
Fair value adjustments
   66       (3,477 )




Ending balance
   $ —         $ 31,232

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

	Fair Value Measurement at December 31, 2016
Description	December 31, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
U.S. Treasury	$	—	$	—	$	—	$	—
U.S. Agencies		1,306		—		1,306		—
Mortgage-backed		313		—		313		—
State and political subdivisions		9,295		—		9,295		—
Trading – other		28,622		28,495		127		—
Trading securities		39,536		28,495		11,041		—
U.S. Treasury		93,826		93,826		—		—
U.S. Agencies		198,177		—		198,177		—
Mortgage-backed		3,711,699		—		3,711,699		—
State and political subdivisions		2,395,757		—		2,395,757		—
Corporates		66,875		66,875		—		—
Available for sale securities		6,466,334		160,701		6,305,633		—
Company-owned life insurance		41,333		—		41,333		—
Bank-owned life insurance		209,686		—		209,686		—
Derivatives		10,873		—		10,873		—
Total	$	6,767,762	$	189,196	$	6,578,566	$	—
Liabilities
Deferred compensation	$	42,797	$	42,797	$	—	$	—
Derivatives		11,329		—		11,329		—
Total	$	54,126	$	42,797	$	11,329	$	—

Valuation methods for instruments measured at fair value on a recurring basis

The following methods and assumptions were used to estimate the fair value of each class of financial instruments measured on a recurring basis:

Trading SecuritiesFair values for trading securities (including financial futures), are based on quoted market prices where available. If quoted market prices are not available, fair values are based on quoted market prices for similar securities.

Securities Available for SaleFair values are based on quoted market prices or dealer quotes, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. Prices are provided by third-party pricing services and are based on observable market inputs. On an annual basis, the Company compares a sample of these prices to other independent sources for the same securities. Additionally, throughout the year if securities are sold, comparisons are made between the pricing services prices and the market prices at which the securities were sold. Variances are analyzed, and, if appropriate, additional research is conducted with the third-party pricing services. Based on this research, the pricing services may affirm or revise their quoted price. No significant adjustments have been made to the prices provided by the pricing services. The pricing services also provide documentation on an ongoing basis that includes reference data, inputs and methodology by asset class, which is reviewed to ensure that security placement within the fair value hierarchy is appropriate.

Company-owned Life Insurance Fair value is equal to the cash surrender value of the life insurance policies.

Bank-owned Life InsuranceFair value is equal to the cash surrender value of the life insurance policies.

Derivatives Fair values are determined using valuation techniques including discounted cash flow analysis on the expected cash flows from each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, foreign exchange rates, and implied volatilities. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Deferred CompensationFair values are based on quoted market prices.

~~Contingent Consideration~~~~The~~Securities sold not yet purchased Fair values are based on quoted market prices or dealer quotes, if available. If a quoted market price is not available, fair value ~~of contingent consideration liabilities~~is estimated using quoted market prices for similar securities. Prices are ~~derived from a discounted cash flow model of future contingent payments. The valuation of these liabilities~~provided by third-party pricing services and are ~~estimated by a collaborative effort of the Company’s mergers and acquisitions group, business unit management, and the corporate accounting group. These future contingent payments are calculated~~ based on estimates of future income and expense from each acquisition. These estimated cash flows are projected by the business unit management and reviewed by the mergers and acquisitions group. To obtain a current valuation of these projected cash flows, an expected present value technique is utilized to calculate a discount rate. The cash flow projections and discount rates are reviewed quarterly and updated asobservable market conditions necessitate. Potential valuation adjustments are made as future income and expense projections for each acquisition are made which affect the calculation of the related contingent consideration payment. These adjustments are recorded through noninterest expense.

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

inputs.

Assets measured at fair value on a non-recurring basis as of September 30, ~~2016~~2017 and December 31, ~~2015~~ ~~(in~~2016 (in thousands):


	Fair Value Measurement at September 30, 2016 Using											Fair Value Measurement at September 30, 2017 Using
Description	September 30, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Gains (Losses) Recognized During the Nine Months Ended September 30			September 30, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Gains (Losses) Recognized During the Nine Months Ended September 30
Impaired loans	$	19,807	$	—	$	—	$	19,807	$	(621	)	$	17,971	$	—	$	—	$	17,971	$	4,749
Other real estate owned		202		—		—		202		32			712		—		—		712		—

Total	$	20,009	$	—	$	—	$	20,009	$	(589	)	$	18,683	$	—	$	—	$	18,683	$	4,749


	Fair Value Measurement at December 31, 2015 Using
Description	December 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Gains (Losses) Recognized During the Twelve Months Ended December 31
Impaired loans	$	22,885	$	—	$	—	$	22,885	$	(3,957	)
Other real estate owned		3,269		—		—		3,269		—

Total	$	26,154	$	—	$	—	$	26,154	$	(3,957	)

	Fair Value Measurement at December 31, 2016 Using
Description	December 31, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Gains (Losses) Recognized During the Twelve Months Ended December 31
Impaired loans	$	23,757	$	—	$	—	$	23,757	$	(2,070	)
Other real estate owned		89		—		—		89		—
Total	$	23,846	$	—	$	—	$	23,846	$	(2,070	)

Valuation methods for instruments measured at fair value on a nonrecurring basis

The following methods and assumptions were used to estimate the fair value of each class of financial instruments measured on a non-recurring basis:

Impaired loansWhile the overall loan portfolio is not carried at fair value, adjustments are recorded on certain loans to reflect write-downs that are based on the external appraised value of the underlying collateral. The external appraisals are generally based on recent sales of comparable properties which are then adjusted for the unique characteristics of the property being valued. In the case of non-real estate collateral, reliance is placed on a variety of sources, including external estimates of value and judgments based on the experience and expertise of

internal specialists within the Company’s property management group and the Company’s credit department. The valuation of the impaired loans is reviewed on a quarterly basis. Because many of these inputs are not observable, the measurements are classified as Level 3.

Other real estate ownedOther real estate owned consists of loan collateral which has been repossessed through foreclosure. This collateral is comprised of commercial and residential real estate and other non-real estate property, including auto, recreational and marine vehicles. Other real estate owned is recorded as held for sale initially at the lower of the loan balance or fair value of the collateral. The initial valuation of the foreclosed property is obtained through an appraisal process similar to the process described in the impaired loans paragraph above. Subsequent to foreclosure, valuations are reviewed quarterly and updated periodically, and the assets may be marked down further, reflecting a new cost basis. Fair value measurements may be based upon appraisals, third-party price opinions, or internally developed pricing methods and those measurements are classified as Level 3.

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

GoodwillValuation of goodwill to determine impairment is performed annually, or more frequently if there is an event or circumstance that would indicate impairment may have occurred. The process involves calculations to determine the fair value of each reporting unit on a stand-alone basis. A combination of formulas using current market multiples, based on recent sales of financial institutions within the Company’s geographic marketplace, is used to estimate the fair value of each reporting unit. That fair value is compared to the carrying amount of the reporting unit, including its recorded goodwill. Impairment is considered to have occurred if the fair value of the reporting unit is lower than the carrying amount of the reporting unit. The fair value of the Company’s common stock relative to its computed book value per share is also considered as part of the overall evaluation. These measurements are classified as Level 3.

Fair value disclosures require disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis. The estimated fair value of the Company’s financial instruments at September 30, ~~2016~~2017 and December 31, ~~2015~~2016 are as follows~~(in millions)~~ (in thousands):


	Fair Value Measurement at September 30, 2016 Using										Fair Value Measurement at September 30, 2017 Using
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Estimated Fair Value		Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Estimated Fair Value
FINANCIAL ASSETS
Cash and short-term investments	$	1,052.3	$	826.8	$	225.5	$	—	$	1,052.3	$	832,461	$	591,172	$	241,289	$	—	$	832,461
Securities available for sale		6,295.7		316.7		5,979.0		—		6,295.7		5,848,960		57,517		5,791,443		—		5,848,960
Securities held to maturity		1,009.1		—		1,098.0		—		1,098.0		1,276,252		—		1,181,747		—		1,181,747
Trading securities		58.1		29.6		28.5		—		58.1		60,660		15,085		45,575		—		60,660
Other securities		66.9		—		66.9		—		66.9		63,543		—		63,543		—		63,543
Loans (exclusive of allowance for loan loss)		10,305.4		—		10,426.9		—		10,426.9		11,001,553		—		11,052,253		—		11,052,253
Derivatives		21.9		—		21.9		—		21.9		11,794		—		11,794		—		11,794
FINANCIAL LIABILITIES
Demand and savings deposits		14,297.0		14,297.0		—		—		14,297.0		14,875,196		14,875,196		—		—		14,875,196
Time deposits		1,081.3		—		1,081.3		—		1,081.3		1,124,408		—		1,124,408		—		1,124,408
Other borrowings		2,021.1		595.6		1,425.5		—		2,021.1		1,856,837		820,808		1,036,029		—		1,856,837
Long-term debt		75.4		—		75.8		—		75.8		76,071		—		76,330		—		76,330
Derivatives		30.8		—		30.8		—		30.8		8,884		—		8,884		—		8,884
OFF-BALANCE SHEET ARRANGEMENTS
Commitments to extend credit for loans										4.2										5,140
Commercial letters of credit										0.2										97
Standby letters of credit										1.9										1,887

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

	Fair Value Measurement at December 31, 2016 Using
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Estimated Fair Value
FINANCIAL ASSETS
Cash and short-term investments	$	1,462,267	$	1,138,850	$	323,417	$	—	$	1,462,267
Securities available for sale		6,466,334		160,701		6,305,633		—		6,466,334
Securities held to maturity		1,115,932		—		1,106,027		—		1,106,027
Trading securities		39,536		28,495		11,041		—		39,536
Other securities		68,306		—		68,306		—		68,306
Loans (exclusive of allowance for loan loss)		10,545,662		—		10,572,292		—		10,572,292
Derivatives		10,873		—		10,873		—		10,873
FINANCIAL LIABILITIES
Demand and savings deposits		15,434,893		15,434,893		—		—		15,434,893
Time deposits		1,135,721		—		1,135,721		—		1,135,721
Other borrowings		1,856,937		419,843		1,437,094		—		1,856,937
Long-term debt		76,772		—		77,025		—		77,025
Derivatives		11,329		—		11,329		—		11,329
OFF-BALANCE SHEET ARRANGEMENTS
Commitments to extend credit for loans										5,604
Commercial letters of credit										142
Standby letters of credit										2,527

   Fair Value Measurement at December 31, 2015 Using
   Carrying
Amount    Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)    Significant
Other
Observable
Inputs
(Level 2)    Significant
Unobservable
Inputs
(Level 3)    Total
Estimated
Fair Value
FINANCIAL ASSETS

Cash and short-term investments
   $ 1,154.7       $ 997.0       $ 157.7       $ —         $ 1,154.7
Securities available for sale
   6,806.9       429.7       6,377.2       —         6,806.9
Securities held to maturity
   667.1       —         691.4       —         691.4
Trading securities
   29.6       18.1       11.5       —         29.6
Other securities
   65.2       —         65.2       —         65.2
Loans (exclusive of allowance for loan loss)
   9,431.3       —         9,452.1       —         9,452.1
Derivatives
   12.3       —         12.3       —         12.3
FINANCIAL LIABILITIES

Demand and savings deposits
   13,836.9       13,836.9       —         —         13,836.9
Time deposits
   1,255.9       —         1,255.9       —         1,255.9
Other borrowings
   1,823.1       66.9       1,756.2       —         1,823.1
Long-term debt
   86.1       —         86.4       —         86.4
Derivatives
   12.3       —         12.3       —         12.3
OFF-BALANCE SHEET ARRANGEMENTS

Commitments to extend credit for loans
               4.9
Commercial letters of credit
               0.3
Standby letters of credit
               2.6

Cash and short-term investmentsThe carrying amounts of cash and due from banks, federal funds sold and resell agreements are reasonable estimates of their fair values.

Securities held to maturityFair value of held-to-maturity securities are estimated by discounting the future cash flows using current market rates.

Other securitiesAmount consists of FRB and FHLB stock held by the Company, PCM equity-method investments, and other miscellaneous investments. The carrying amount of the FRB and FHLB stock equals its fair value because the shares can only be redeemed by the FRB and FHLB at their carrying amount. The fair value of PCM marketable equity-method investments are based on quoted market prices used to estimate the value of the underlying investment. For non-marketable equity-method investments, the Company’s proportionate share of the income or loss is recognized on a one-quarter lag based on the valuation of the underlying investment(s).

LoansFair values are estimated for portfolios with similar financial characteristics. Loans are segregated by type, such as commercial, real estate, consumer, and credit card. Each loan category is further segmented into fixed and variable interest rate categories. The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Demand and savings depositsThe fair value of demand deposits and savings accounts is the amount payable on demand at September 30, ~~2016~~2017 and December 31, ~~2015.~~2016.

Time depositsThe fair value of fixed-maturity certificates of deposit is estimated by discounting the future cash flows using the rates that are currently offered for deposits of similar remaining maturities.

Other borrowingsThe carrying amounts of federal funds purchased, repurchase agreements and other short-term debt are reasonable estimates of their fair value because of the short-term nature of their maturities.

Long-term debtRates currently available to the Company for debt with similar terms and remaining maturities are used to estimate fair value of existing debt.

~~UMB FINANCIAL CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –~~~~(CONTINUED)~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)~~

Other off-balance sheet instrumentsThe fair value of loan commitments and letters of credit are determined based on the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreement and the present creditworthiness of the counterparties. Neither the fees earned during the year on these instruments nor their fair value at ~~year-end~~period-end are significant to the Company’s consolidated financial position.

12. Discontinued Operations

On April 20, 2017, the Company announced the execution of an agreement to sell all of the outstanding stock of Scout, its institutional investment management subsidiary, for $172.5 million in cash, subject to customary purchase price adjustments at closing. The Company plans to use the proceeds from the transaction for general corporate purposes and to support its continued organic growth in the commercial, consumer, private wealth, institutional banking, healthcare, and asset servicing businesses.

This table summarizes the components of (loss) income from discontinued operations, net of taxes, for the three and nine months ended September 30, 2017 and September 30, 2016 presented in the Consolidated Statements of Income are as follows (in thousands):

For the Three Months Ended

For the Nine Months Ended

September 30, 2017

September 30, 2016

September 30, 2017

September 30, 2016

Total noninterest income

$
18,193

$
18,406

$
53,912

$
55,464

Total noninterest expense

19,223

14,572

54,634

46,672

(Loss) income from discontinued operations

(1,030
)

3,834

(722
)

8,792

Income tax (benefit) expense

(300
)

1,310

(247
)

3,159

Net (loss) income on discontinued operations

$
(730
)

$
2,524

$
(475
)

$
5,633

The discontinued assets of Scout included on the Consolidated Balance Sheets are as follows (in thousands):

September 30,

December 31,

2017

2016

Goodwill

$
47,529

$
47,529

Other intangibles, net

6,214

7,861

Discontinued assets – goodwill and other intangibles, net

$
53,743

$
55,390

The components of net cash provided by operating activities of discontinued operations included in the Consolidated Statements of Cash Flows are as follows (in thousands):

Nine Months

Ended September 30,

2017

2016

(Loss) income from discontinued operations

$
(475
)

$
5,633

Depreciation and amortization

1,647

2,719

Net cash provided by operating activities of discontinued operations

$
1,172

$
8,352

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations highlights the material changes in the results of operations and changes in financial condition of the Company for the three-month and nine-month periods ended September 30, ~~2016.~~2017. It should be read in conjunction with the accompanying consolidated financial statements, notes to consolidated financial statements and other financial information appearing elsewhere in this Form 10-Q and the Form 10-K. Results of operations for the periods included in this review are not necessarily indicative of results to be attained during any future period.

CAUTIONARY NOTICE ABOUT FORWARD-LOOKING STATEMENTS

From time to time the Company has made, and in the future will make, 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 the Company’s expectations, intentions, or forecasts about future events, circumstances, results, or aspirations.

This report, including any information incorporated by reference in this report, contains forward-looking statements. The Company also may make forward-looking statements in other documents that are filed or furnished with the Securities and Exchange Commission (SEC). In addition, the Company may make forward-looking statements orally or in writing to investors, analysts, members of the media, or others.

All forward-looking statements, by their nature, are subject to assumptions, risks, and uncertainties, which may change over time and many of which are beyond the Company’s control. You should not rely on any forward-looking statement as a prediction or guarantee about the future. Actual future objectives, strategies, plans, prospects, performance, conditions, or results may differ materially from those set forth in any forward-looking statement. While no list of assumptions, risks, or uncertainties could be complete, some of the factors that may cause actual results or other future events, circumstances, or aspirations to differ from those in forward-looking statements include:

local, regional, national, or international business, economic, or political conditions or events;

changes in laws or the regulatory environment, including as a result of financial-services legislation or regulation;

changes in monetary, fiscal, or trade laws or policies, including as a result of actions by central banks or supranational authorities;

changes in accounting standards or policies;

shifts in investor sentiment or behavior in the securities, capital, or other financial markets, including changes in market liquidity or volatility or changes in interest or currency rates;

changes in spending, borrowing, or saving by businesses or households;

the Company’s ability to effectively manage capital or liquidity or to effectively attract or deploy deposits;

changes in any credit rating assigned to the Company or its affiliates;

adverse publicity or other reputational harm to the Company;

changes in the Company’s corporate strategies, the composition of its assets, or the way in which it funds those assets;

the Company’s ability to develop, maintain, or market products or services or to absorb unanticipated costs or liabilities associated with those products or services;

•

the Company’s ability to innovate to anticipate the needs of current or future customers, to successfully compete in its chosen business lines, to increase or hold market share in changing competitive environments, or to deal with pricing or other competitive pressures;

changes in the credit, liquidity, or other condition of the Company’s customers, counterparties, or competitors;

the Company’s ability to effectively deal with economic, business, or market slowdowns or disruptions;

judicial, regulatory, or administrative investigations, proceedings, disputes, or rulings that create uncertainty for, or are adverse to, the Company or the financial-services industry;

the Company’s ability to address stricter or heightened regulatory or other governmental supervision or requirements;

the Company’s ability to maintain secure and functional financial, accounting, technology, data processing, or other operating systems or facilities, including its capacity to withstand cyber-attacks;

the adequacy of the Company’s corporate governance, risk-management framework, compliance programs, or internal controls, including its ability to control lapses or deficiencies in financial reporting or to effectively mitigate or manage operational risk;

the efficacy of the Company’s methods or models in assessing business strategies or opportunities or in valuing, measuring, monitoring, or managing positions or risk;

the Company’s ability to keep pace with changes in technology that affect the Company or its customers, counterparties, or competitors;

mergers, acquisitions, or ~~acquisitions,~~dispositions, including the Company’s ability to integrate ~~acquisitions;~~acquisitions and divest assets;

the adequacy of the Company’s succession planning for key executives or other personnel;

the Company’s ability to grow revenue, control expenses, or attract and retain qualified employees;

natural or man-made disasters, calamities, or conflicts, including terrorist events; or

other assumptions, risks, or uncertainties described in the Notes to Consolidated Financial Statements (Item 1) and Management’s Discussion and Analysis of Financial Condition and Results of Operations (Item 2) in this Form 10-Q, in the Risk Factors (Item 1A) in the Form 10-K, or ~~as described~~ in any of the Company’s quarterly or current reports.

Any forward-looking statement made by the Company or on its behalf speaks only as of the date that it was made. The Company does 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, except to the extent required by

applicable securities laws. You, however, should consult further disclosures (including disclosures of a forward-looking nature) that the Company ~~may make~~makes in any subsequent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, or Current Report on Form 8-K.

Overview

The Company focuses on the following four core strategic objectives. Management believes these strategies will guide our efforts to achieve our vision to deliver the unparalleled customer experience, all while maintaining a focus to improve net income and strengthen the balance sheet.

The first strategic objective is a focus on improving operating efficiencies. ~~During the second half of 2015, an in-depth review of the organization was completed to identify efficiencies.~~ The Company ~~plans to continue to utilize the results of this review to~~has focused on identifying efficiencies that simplify our organizational and reporting structures, streamline back office functions and take advantage of synergies and newer technologies among various platforms and distribution networks. The Company has identified ~~a total of $32.9 million in annual savings that are expected~~and expects to be realized in the future as a result of the elimination of certain employee positions and business process improvements. This total does not include the additional cost savings recognized related to the Marquette integration, or anycontinue identifying ongoing efficiencies ~~identified~~ through ~~our~~the normal course of ~~business. The~~business that, when combined with increased revenue, will contribute to improved operating leverage. During the third quarter of 2017, total revenue increased 7.4 percent compared to the third quarter of 2016, while noninterest

expense increased 4.0 percent. As part of this initiative, the Company continues to invest in technological advances that it believes will help management drive operating ~~efficiencies~~leverage in the future through improved data analysis and automation. The Company also continues to evaluate core systems and will invest in enhancements that it believes will yield operating efficiencies.

The second strategic objective is a focus on net interest income through profitable loan and deposit ~~growth.~~growth and the optimization of the balance sheet. During the third quarter of ~~2016,~~2017, the Company continued to make progress on this strategy as illustrated by an increase in net interest income of ~~$14.9~~$16.1 million, or ~~13.5~~12.9 percent, from the same period in ~~2015.~~2016. The Company has ~~continued to show~~shown increased net interest income ~~in a historically low interest rate environment~~ through the effects of increased rates, volume and mix of average earning assets and a low cost of funds in its Consolidated Balance Sheets. Average ~~earning assets for the third quarter of 2016~~loan balances increased ~~$1.5 billion,~~$729.3 million, or ~~9.1~~7.2 percent ~~from~~compared to the same period in ~~2015.~~2016. The funding for these assets was driven primarily by a ~~14.8~~4.1 percent increase in average interest-bearing liabilities. ~~Average loan balances increased $1.2 billion, or 14.0 percent compared to the same period in 2015.~~ Net interest margin, on a tax-equivalent basis, increased 1429 basis points compared to the same period in ~~2015.~~2016.

The third strategic objective is to grow the Company’s ~~fee-based businesses. As the industry continues to experience economic uncertainty, the~~revenue from noninterest sources. The Company has continued to emphasize its ~~fee-based operations. By maintaining a~~ diverse ~~source of revenues, the Company believes this~~operations throughout all economic cycles. This strategy ~~will help~~has provided revenue diversity, helped to reduce the ~~Company’s exposure to~~impact of sustained low interest ~~rates. During~~rates and positioned the ~~third quarter~~Company to benefit in periods of ~~2016, noninterest~~growth. Noninterest income increased ~~$12.9~~$0.8 million, or ~~11.8~~0.7 percent, to ~~$121.9~~$104.3 million for the three months ended September 30, ~~2016,~~2017, compared to the same period in ~~2015.~~2016. This change is discussed in greater detail below under Noninterest Income. The Company continues to emphasize its asset management, brokerage, bankcard services, healthcare services, and treasury management businesses. At September 30, ~~2016,~~2017, noninterest income represented ~~49.4~~42.5 percent of total revenues, compared to ~~49.8~~45.4 percent at September 30, ~~2015.~~2016.

The fourth strategic objective is a focus on capital management. The Company places a significant emphasis on maintaining a strong capital position, which management believes promotes investor confidence, provides access to funding sources under favorable terms, and enhances the Company’s ability to capitalize on business growth and acquisition opportunities. The Company continues to maximize shareholder value through a mix of reinvesting in organic growth, evaluating acquisition opportunities that complement the strategies, increasing dividends over time, and properly utilizing a share repurchase program. At September 30, ~~2016,~~2017, the Company had ~~$2.0~~$2.1 billion in total shareholders’ equity. This is an increase of ~~$123.8~~$76.9 million, or ~~6.5~~3.8 percent, compared to total shareholders’ equity at September 30, ~~2015.~~2016. At September 30, ~~2016,~~2017, the Company had a total risk-based capital ratio of ~~12.82~~13.26 percent. The Company repurchased ~~10,750~~148,398 shares of common stock at an average price of ~~$56.59~~$67.99 per share during the third quarter of ~~2016.~~2017.

Earnings Summary

The following is a summary regarding the Company’s earnings for the third quarter of ~~2016.~~2017. The changes identified in the summary are explained in greater detail below. The Company recorded ~~consolidated~~ net income from continuing operations of ~~$41.9~~$48.9 million for the three-month period ended September 30, ~~2016,~~2017, compared to ~~$22.5~~$39.4 million for the same period a year earlier. This represents ~~an 86.8~~a 24.0 percent increase over the three-month period ended September 30, ~~2015.~~2016. Basic earnings per share from continuing operations for the third quarter of ~~2016 were $0.86~~2017 was $0.99 per share ($~~0.85~~0.98 per share fully-diluted) compared to ~~$0.46~~$0.81 per share ($~~0.46~~0.80 per share fully-diluted) for the third quarter of ~~2015.~~2016. Return on average assets and return on average common shareholders’ equity for the three-month period ended September 30, ~~2016~~2017 were ~~0.85~~0.95 and ~~8.25~~9.17 percent, respectively, compared to ~~0.49~~0.80 and ~~4.72~~7.76 percent, respectively, for the three-month period ended September 30, ~~2015.~~2016.

The Company recorded ~~consolidated~~ net income from continuing operations of ~~$115.9~~$135.6 million for the nine-month period ended September 30, ~~2016,~~2017, compared to ~~$86.4~~$110.2 million for the same period a year earlier. This represents a ~~34.1~~23.0 percent increase over the nine-month period ended September 30, ~~2015.~~2016. Basic earnings per share for the nine-month period ended September 30, ~~2016~~2017 were ~~$2.37~~$2.76 per share ($~~2.36~~2.72 per share fully-diluted) compared to ~~$1.85~~$2.26 per share ($~~1.84~~2.24 per share fully-diluted) for the same period in ~~2015.~~2016. Return on average assets and return on average common shareholders’ equity for the nine-month period ended September 30, ~~2016~~2017 were ~~0.79~~0.89 and ~~7.81~~8.82 percent, respectively, compared to ~~0.66~~0.76 and ~~6.53~~7.43 percent for the same period in ~~2015.~~2016.

Net interest income for the three and nine-month periods ended September 30, ~~2016~~2017 increased ~~$14.9~~$16.1 million, or ~~13.5~~12.9 percent, and ~~$66.3~~$48.7 million, or ~~22.3~~13.4 percent, respectively, compared to the same periods in ~~2015.~~2016. For the

three-month period ended September 30, ~~2016,~~2017, average earning assets increased by ~~$1.5 billion,~~$572.4 million, or ~~9.1~~3.1 percent, and for the nine-month period ended September 30, ~~2016,~~2017, they increased by ~~$2.0 billion,~~$754.2 million, or ~~12.1~~4.2 percent, compared to the same periods in ~~2015.~~2016. Net interest margin, on a tax-equivalent basis, increased to ~~2.87~~3.16 percent and ~~2.84~~3.12 percent for the three and nine-month periods ended September 30, ~~2016,~~2017, compared to ~~2.73~~2.87 percent and ~~2.60~~2.84 percent for the same periods in 2015. The Marquette acquisition added earning assets with an acquired value of $1.2 billion primarily from loan balances with an acquired value of $980.4 million at May 31, 2015. The Marquette acquisition also added interest-bearing liabilities with an acquired value of $910.8 million primarily from interest-bearing deposits of $708.7 million at May 31, 2015.2016.

The provision for loan losses ~~increased~~decreased by ~~$10.5~~$1.5 million to ~~$13.0~~$11.5 million for the three-month period ended September 30, ~~2016,~~2017, and increased by ~~$14.5~~$10.0 million to ~~$25.0~~$35.0 million for the nine-month period ended September 30, ~~2016,~~2017, as compared to the same periods in ~~2015. This increase is a~~2016. These changes are the result of applying the Company’s methodology for computing the allowance for loan losses. ~~A significant driver of credit quality is nonperforming loans.~~ The Company’s nonperforming loans ~~increased $29.7~~decreased $25.4 million to ~~$79.6~~$54.2 million at September 30, ~~2016,~~2017, compared to September 30, ~~2015,~~2016, and ~~increased $18.5~~decreased $16.0 million, compared to December 31, ~~2015. This increase was primarily related to the migration of two large commercial credits to nonaccrual during the third quarter of~~ 2016. The allowance for loan losses as a percentage of total loans increased to ~~0.88~~0.89 percent as of September 30, ~~2016,~~2017, compared to ~~0.86~~0.88 percent at September 30, ~~2015.~~2016. For a description of the Company’s methodology for computing the allowance for loan losses, please see the summary discussion of the Allowance for Loan Losses within the Critical Accounting Policies and Estimates subsection of the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Form 10-K.

Noninterest income increased by ~~$12.9~~$0.8 million, or ~~11.8~~0.7 percent, for the three-month period ended September 30, ~~2016,~~2017, and increased by ~~$5.9~~$13.2 million, or ~~1.7~~4.4 percent, for the nine-month period ended September 30, ~~2016,~~2017, compared to the same periods in ~~2015.~~2016. These changes are discussed in greater detail below under Noninterest Income.

Noninterest expense ~~decreased~~increased by ~~$5.5~~$6.6 million, or ~~3.0~~4.0 percent, for the three-month period ended September 30, ~~2016,~~2017, and increased by ~~$23.9~~$23.7 million, or ~~4.6~~4.7 percent, for the nine-month period ended September 30, ~~2016,~~2017, compared to the same periods in ~~2015.~~2016. These changes are discussed in greater detail below under Noninterest Expense.

Net Interest Income

Net interest income is a significant source of the Company’s earnings and represents the amount by which interest income on earning assets exceeds the interest expense paid on liabilities. The volume of interest-earning assets and the related funding sources, the overall mix of these assets and liabilities, and the rates paid on each affect net interest income. As noted above, the impacts of the Marquette acquisition are included in these results. For the three-month period ended September 30, 2016, average earning assets increased by $1.5 billion, or 9.1 percent, and for the nine-month period ended September 30, 2016, they increased by $2.0 billion, or 12.1 percent, compared to the same periods in 2015. Net interest ~~margin, on a tax-equivalent basis, increased to 2.87 percent and 2.84 percent~~income for the three and nine-month periods ended September 30, ~~2016,~~2017 increased $16.1 million, or 12.9 percent, and $48.7 million, or 13.4 percent, respectively, compared to ~~2.73 percent and 2.60 percent for~~ the same periods in ~~2015.~~2016.

Table 1 shows the impact of earning asset rate changes compared to changes in the cost of interest-bearing liabilities. As illustrated in this table, net interest spread and margin for the three months ended September 30, ~~2016~~2017 increased by 1319 and 1429 basis points, respectively, compared to the same period in ~~2015.~~2016. Net interest spread and margin for the nine months ended September 30, ~~2016~~2017 increased by 2321 and 2428 basis points, respectively, compared to the same period in ~~2015.~~2016. These increases are primarily due to favorable ~~volume~~interest rate and ~~rate~~volume variances on loans. These interest rate variances have led to an increase in interest income partially offset by an increase in interest expense, resulting in an increase in the Company’s net interest income during ~~2016~~2017 as compared to results for the same periods in ~~2015.~~2016. For the impact of the contribution from free funds, see the Analysis of Net Interest Margin within Table 2 below. Table 2 also illustrates how the changes in volume and rates have resulted in an increase in net interest income.

Table 1

AVERAGE BALANCES/YIELDS AND RATES ~~(tax-equivalent~~(tax-equivalent basis) (unaudited, dollars in thousands)

The following table presents, for the periods indicated, the average earning assets and resulting yields, as well as the average interest-bearing liabilities and resulting yields, expressed in both dollars and rates. All average balances are daily average balances. The average yield on earning assets without the tax equivalent basis adjustment would have been ~~2.86~~3.31 percent for the three-month period ended September 30, ~~2016~~2017 and ~~2.71~~2.86 percent for the same period in ~~2015.~~2016. The average yield on earning assets without the tax equivalent basis adjustment would have been ~~2.83~~3.21 percent for the nine-month period ended September 30, ~~2016~~2017 and ~~2.57~~2.83 percent for the same period in ~~2015.~~2016.

													Three Months Ended September 30,
	Three Months Ended September 30,												2017						2016
	2016						2015						Average			Average			Average			Average
	Average Balance			Average Yield/Rate			Average Balance			Average Yield/Rate			Balance			Yield/Rate			Balance			Yield/Rate
Assets
Loans, net of unearned interest	$	10,181,819			3.86	%	$	8,933,775			3.76	%	$	10,911,154			4.33	%	$	10,181,819			3.86	%
Securities:
Taxable		4,449,485			1.52			4,750,122			1.54			3,794,074			1.85			4,449,485			1.52
Tax-exempt		3,158,966			2.86			2,557,629			2.70			3,746,540			3.06			3,158,966			2.86

Total securities		7,608,451			2.08			7,307,751			1.95			7,540,614			2.46			7,608,451			2.08
Federal funds and resell agreements		217,287			1.45			83,048			0.84			190,036			2.10			217,287			1.45
Interest-bearing due from banks		314,619			0.56			481,575			0.39			254,702			1.17			314,619			0.56
Other earning assets		51,280			1.75			36,171			1.04			49,396			3.95			51,280			1.75

Total earning assets		18,373,456			3.03			16,842,320			2.86			18,945,902			3.52			18,373,456			3.03
Allowance for loan losses		(86,368	)					(78,419	)					(99,954	)					(86,368	)
Other assets		1,405,152						1,356,548						1,467,273						1,405,152

Total assets	$	19,692,240					$	18,120,449					$	20,313,221					$	19,692,240

Liabilities and Shareholders’ Equity
Liabilities and Shareholders' Equity
Interest-bearing deposits	$	9,431,253			0.20	%	$	8,532,814			0.18	%	$	9,951,600			0.41	%	$	9,431,253			0.20	%
Federal funds and repurchase agreements		2,261,863			0.33			1,634,394			0.10			2,234,666			1.03			2,261,863			0.33
Borrowed funds		82,340			3.64			88,468			4.68			76,159			5.44			82,340			3.64

Total interest-bearing liabilities		11,775,456			0.25			10,255,676			0.21			12,262,425			0.55			11,775,456			0.25
Noninterest-bearing demand deposits		5,690,838						5,800,870						5,728,145						5,690,838
Other liabilities		203,953						176,040						207,417						203,953
Shareholders’ equity		2,021,993						1,887,863

Total liabilities and shareholders’ equity	$	19,692,240					$	18,120,449

Shareholders' equity														2,115,234						2,021,993
Total liabilities and shareholders' equity													$	20,313,221					$	19,692,240
Net interest spread					2.78	%					2.65	%					2.97	%					2.78	%
Net interest margin					2.87						2.73	��					3.16						2.87

	Nine Months Ended September 30,
	2017						2016
	Average			Average			Average			Average
	Balance			Yield/Rate			Balance			Yield/Rate
Assets
Loans, net of unearned interest	$	10,762,401			4.20	%	$	9,874,298			3.83	%
Securities:
Taxable		3,995,441			1.85			4,650,111			1.59
Tax-exempt		3,625,727			3.07			2,984,538			2.85
Total securities		7,621,168			2.43			7,634,649			2.08
Federal funds and resell agreements		192,817			1.83			181,854			1.42
Interest-bearing due from banks		271,799			0.93			425,155			0.56
Other earning assets		61,604			3.06			39,588			1.70
Total earning assets		18,909,789			3.42			18,155,544			2.99
Allowance for loan losses		(96,181	)					(82,975	)
Other assets		1,474,177						1,415,325
Total assets	$	20,287,785					$	19,487,894
Liabilities and Shareholders' Equity
Interest-bearing deposits	$	9,777,717			0.33	%	$	9,392,435			0.18	%
Federal funds and repurchase agreements		2,321,144			0.82			2,041,369			0.31
Borrowed funds		76,192			5.22			88,621			3.90
Total interest-bearing liabilities		12,175,053			0.45			11,522,425			0.23
Noninterest-bearing demand deposits		5,853,905						5,809,398
Other liabilities		203,037						174,873
Shareholders' equity		2,055,790						1,981,198
Total liabilities and shareholders' equity	$	20,287,785					$	19,487,894
Net interest spread					2.97	%					2.76	%
Net interest margin					3.12						2.84

   Nine Months Ended September 30,
   2016 2015
   Average    Average Average    Average
   Balance    Yield/Rate Balance    Yield/Rate
Assets

Loans, net of unearned interest
   $ 9,874,298       3.83 % $ 8,163,984       3.61 %
Securities:

Taxable
   4,650,111       1.59    4,864,016       1.55
Tax-exempt
   2,984,538       2.85    2,407,653       2.72






Total securities
   7,634,649       2.08    7,271,669       1.94
Federal funds and resell agreements
   181,854       1.42    62,326       0.81
Interest-bearing due from banks
   425,155       0.56    665,667       0.35
Other earning assets
   39,588       1.70    34,507       1.51






Total earning assets
   18,155,544       2.99    16,198,153       2.71
Allowance for loan losses
   (82,975 )    (77,560 )
Other assets
   1,415,325       1,339,262





Total assets
   $ 19,487,894       $ 17,459,855





Liabilities and Shareholders’ Equity

Interest-bearing deposits
   $ 9,392,435       0.18 % $ 8,023,331       0.17 %
Federal funds and repurchase agreements
   2,041,369       0.31    1,686,766       0.11
Borrowed funds
   88,621       3.90    49,169       4.43






Total interest-bearing liabilities
   11,522,425       0.23    9,759,266       0.18
Noninterest-bearing demand deposits
   5,809,398       5,655,878
Other liabilities
   174,873       274,845
Shareholders’ equity
   1,981,198       1,769,866





Total liabilities and shareholders’ equity
   $ 19,487,894       $ 17,459,855





Net interest spread
      2.76 %    2.53 %
Net interest margin
      2.84       2.60

Table 2 presents the dollar amount of change in net interest income and margin due to volume and rate. Table 2 also reflects the effect that interest-free funds have on net interest margin. ~~Although the~~The average balance of interest-free funds (total earning assets less interest-bearing liabilities) increased ~~$11.4~~$85.5 million for the three-month period and ~~$194.2~~$101.6 million for the nine-month period ended September 30, ~~2016~~2017 compared to the same periods in ~~2015, the~~2016. The benefit from interest free funds ~~was relatively flat, or one~~increased by ten basis ~~point~~points in the three-month and seven basis points in the nine-month periods due to increased yields on earning assets, offset by an increase in interest rates of interest-bearing liabilities.

Table 2

ANALYSIS OF CHANGES IN NET INTEREST INCOME AND MARGIN ~~(unaudited,~~(unaudited, dollars in thousands)

ANALYSIS OF CHANGES IN NET INTEREST INCOME


	Three Months Ended									Nine Months Ended									Three Months Ended							Nine Months Ended
	September 30, 2016 and 2015									September 30, 2016 and 2015									September 30, 2017 and 2016							September 30, 2017 and 2016
	Volume			Rate			Total			Volume			Rate			Total			Volume			Rate		Total		Volume			Rate		Total
Change in interest earned on:
Loans	$	11,867		$	2,267		$	14,134		$	48,566		$	14,433		$	62,999		$	7,519		$	12,793	$	20,312	$	26,522		$	28,581	$	55,103
Securities:
Taxable		(1,194	)		(292	)		(1,486	)		(2,487	)		1,239			(1,248	)		(2,715	)		3,423		708		(8,385	)		8,515		130
Tax-exempt		2,775			702			3,477			8,019			1,516			9,535			2,973			1,123		4,096		9,476			3,519		12,995
Federal funds sold and resell agreements		424			191			615			1,119			443			1,562			(108	)		326		218		122			577		699
Interest-bearing due from banks		(196	)		166			(30	)		(778	)		789			11			(99	)		407		308		(789	)		901		112
Trading		38			61			99			51			45			96			(10	)		225		215		303			433		736

Interest income		13,714			3,095			16,809			54,490			18,465			72,955			7,560			18,297		25,857		27,249			42,526		69,775
Change in interest incurred on:
Interest-bearing deposits		419			344			763			1,857			527			2,384			270			5,285		5,555		545			10,620		11,165
Federal funds purchased and repurchase agreements		216			1,251			1,467			347			3,014			3,361			(23	)		3,940		3,917		732			8,792		9,524
Other borrowed funds		(69	)		(222	)		(291	)		1,174			(218	)		956			(60	)		352		292		(399	)		785		386

Interest expense		566			1,373			1,939			3,378			3,323			6,701			187			9,577		9,764		878			20,197		21,075

Net interest income	$	13,148		$	1,722		$	14,870		$	51,112		$	15,142		$	66,254		$	7,373		$	8,720	$	16,093	$	26,371		$	22,329	$	48,700

ANALYSIS OF NET INTEREST MARGIN


	Three Months Ended									Nine Months Ended
	September 30,									September 30,									Three Months Ended September 30,									Nine Months Ended September 30,
	2016			2015			Change			2016			2015			Change			2017			2016			Change			2017			2016			Change
Average earning assets	$	18,373,456		$	16,842,320		$	1,531,136		$	18,155,544		$	16,198,153		$	1,957,391		$	18,945,902		$	18,373,456		$	572,446		$	18,909,789		$	18,155,544		$	754,245

Interest-bearing liabilities		11,775,456			10,255,676			1,519,780			11,522,425			9,759,266			1,763,159			12,262,425			11,775,456			486,969			12,175,053			11,522,425			652,628

Interest-free funds	$	6,598,000		$	6,586,644		$	11,356		$	6,633,119		$	6,438,887		$	194,232		$	6,683,477		$	6,598,000		$	85,477		$	6,734,736		$	6,633,119		$	101,617

Free funds ratio (free funds to earning assets)		35.91	%		39.11	%		(3.20	)%		36.53	%		39.75	%		(3.22	)%		35.28	%		35.91	%		(0.63	)%		35.62	%		36.53	%		(0.91	)%

Tax-equivalent yield on earning assets		3.03			2.86			0.17			2.99			2.71			0.28			3.52			3.03			0.49			3.42			2.99			0.43
Cost of interest-bearing liabilities		0.25			0.21			0.04			0.23			0.18			0.05			0.55			0.25			0.30			0.45			0.23			0.22

Net interest spread		2.78			2.65			0.13			2.76			2.53			0.23			2.97			2.78			0.19			2.97			2.76			0.21
Benefit of interest-free funds		0.09			0.08			0.01			0.08			0.07			0.01			0.19			0.09			0.10			0.15			0.08			0.07

Net interest margin		2.87	%		2.73	%		0.14	%		2.84	%		2.60	%		0.24	%		3.16			2.87			0.29			3.12			2.84			0.28

Provision and Allowance for Loan Losses

The allowance for loan losses (ALL) represents management’s judgment of the losses inherent in the Company’s loan portfolio as of the balance sheet date. An analysis is performed quarterly to determine the appropriate balance of the ALL. This analysis considers items such as historical loss trends, a review of individual loans, migration analysis, current economic conditions, loan growth and characteristics, industry or segment concentration and other factors. After the balance sheet analysis is performed for the ALL, the provision for loan losses is computed as the amount required to adjust the ALL to the appropriate level.

Based on the factors above, management of the Company recorded ~~$13.0~~$11.5 million and ~~$25.0~~$35.0 million as provision for loan losses for the three and nine-month periods ended September 30, ~~2016,~~2017, compared to ~~$2.5~~$13.0 million and ~~$10.5~~$25.0 million for the same periods in ~~2015,~~2016, respectively. As illustrated in Table 3 below, the ALL increased to ~~0.88~~

0.89 percent of total loans as of September 30, ~~2016,~~2017, compared to ~~0.86~~0.88 percent of total loans as of the same period in ~~2015.~~2016.

Table 3 presents a summary of the Company’s ALL for the nine months ended September 30, ~~2016~~2017 and ~~2015,~~2016, and for the year ended December 31, ~~2015.~~2016. Net charge-offs were ~~$15.7~~$28.3 million for the nine months ended ~~2016,~~September 30, 2017, compared to ~~$8.6~~$15.7 million for the same period in ~~2015.~~2016. See “Credit Risk Management” under “Item 3. Quantitative and Qualitative Disclosures About Market Risk” in this report for information relating to nonaccrual loans, past due loans, restructured loans and other credit risk matters.

Table 3

ANALYSIS OF ALLOWANCE FOR LOAN LOSSES(unaudited, dollars in thousands)


	Nine Months Ended						Year Ended			Nine Months Ended						Year Ended
	September 30,						December 31,			September 30,						December 31,
	2016			2015			2015			2017			2016			2016
Allowance-January 1	$	81,143		$	76,140		$	76,140		$	91,649		$	81,143		$	81,143
Provision for loan losses		25,000			10,500			15,500			35,000			25,000			32,500

Charge-offs:
Commercial		(11,542	)		(4,624	)		(5,239	)		(24,734	)		(11,542	)		(12,788	)
Consumer:
Credit card		(6,348	)		(6,525	)		(8,555	)		(6,753	)		(6,348	)		(8,436	)
Other		(603	)		(888	)		(1,103	)		(689	)		(603	)		(843	)
Real estate		(2,938	)		(168	)		(214	)		(888	)		(2,938	)		(6,756	)

Total charge-offs		(21,431	)		(12,205	)		(15,111	)		(33,064	)		(21,431	)		(28,823	)

Recoveries:
Commercial		3,477			1,387			1,824			2,519			3,477			3,596
Consumer:
Credit card		1,334			1,401			1,802			1,224			1,334			1,730
Other		341			582			667			441			341			518
Real estate		540			225			321			620			540			985

Total recoveries		5,692			3,595			4,614			4,804			5,692			6,829

Net charge-offs		(15,739	)		(8,610	)		(10,497	)		(28,260	)		(15,739	)		(21,994	)

Allowance-end of period	$	90,404		$	78,030		$	81,143		$	98,389		$	90,404		$	91,649

Average loans, net of unearned interest	$	9,868,033		$	8,162,798		$	8,423,997		$	10,760,079		$	9,868,033		$	9,986,151
Loans at end of period, net of unearned interest		10,293,494			9,046,126			9,430,761			10,997,028			10,293,494			10,540,383
Allowance to loans at end of period		0.88	%		0.86	%		0.86	%		0.89	%		0.88	%		0.87	%
Allowance as a multiple of net charge-offs		4.30	x		6.78	x		7.73	x	2.60x			4.30x			4.17x
Net charge-offs to:
Provision for loan losses		62.96	%		82.00	%		67.72	%		80.74	%		62.96	%		67.67	%
Average loans		0.21			0.14			0.12			0.35			0.21			0.22

Noninterest Income

A key objective of the Company is the growth of noninterest income to enhance profitability and provide steady income. This income is non-credit related and not generally affected by fluctuations in interest rates.

The Company’s noninterest income provides the opportunity to offer products and services, which management believes will more closely align the customer with the Company. The Company generates noninterest income from trust and securities processing, bankcard, brokerage, health care services, and treasury management. ~~Management believes it can offer these products and services both efficiently and profitably, as most of these products and services share common platforms and support structures.~~

Table 4

SUMMARY OF NONINTEREST INCOME ~~(unaudited,~~(unaudited, dollars in thousands)

												Three Months Ended					Dollar			Percent
	Three Months Ended September 30,					Dollar Change			Percent Change			September 30,					Change			Change
	2016		2015			16-15			16-15			2017			2016		17-16			17-16
Trust and securities processing	$	60,218	$	65,182		$	(4,964	)		(7.6	)%	$	45,060		$	41,812	$	3,248			7.8	%
Trading and investment banking		6,114		2,969			3,145			>100			4,453			6,114		(1,661	)		(27.2	)
Service charges on deposits		21,832		21,663			169			0.8			21,510			21,832		(322	)		(1.5	)
Insurance fees and commissions		698		480			218			45.4			425			698		(273	)		(39.1	)
Brokerage fees		4,712		2,958			1,754			59.3			5,815			4,712		1,103			23.4
Bankcard fees		17,086		17,624			(538	)		(3.1	)		17,427			17,086		341			2.0
Gains on sales of securities available for sale, net		2,978		101			2,877			>100			2,390			2,978		(588	)		(19.7	)
Equity earnings (losses) on alternative investments		1,594		(5,032	)		6,626			>100
Equity (losses) earnings on alternative investments													(584	)		1,594		(2,178	)	(>100.0)
Other		6,716		3,153			3,563			>100			7,810			6,716		1,094			16.3

Total noninterest income	$	121,948	$	109,098		$	12,850			11.8	%	$	104,306		$	103,542	$	764			0.7	%


	Nine Months Ended September 30,					Dollar Change			Percent Change
	2016		2015			16-15			16-15
Trust and securities processing	$	179,448	$	199,862		$	(20,414	)		(10.2	)%
Trading and investment banking		16,382		14,659			1,723			11.8
Service charges on deposits		65,713		64,829			884			1.4
Insurance fees and commissions		3,355		1,636			1,719			>100
Brokerage fees		13,159		8,748			4,411			50.4
Bankcard fees		52,636		51,842			794			1.5
Gains on sales of securities available for sale, net		8,509		8,404			105			1.2
Equity earnings (losses) on alternative investments		2,191		(6,999	)		9,190			>100
Other		18,352		10,874			7,478			68.8

Total noninterest income	$	359,745	$	353,855		$	5,890			1.7	%

~~Fee-based, or noninterest~~

	Nine Months Ended					Dollar			Percent
	September 30,					Change			Change
	2017			2016		17-16			17-16
Trust and securities processing	$	132,412		$	123,984	$	8,428			6.8	%
Trading and investment banking		18,168			16,382		1,786			10.9
Service charges on deposits		66,316			65,713		603			0.9
Insurance fees and commissions		1,584			3,355		(1,771	)		(52.8	)
Brokerage fees		17,081			13,159		3,922			29.8
Bankcard fees		55,413			52,636		2,777			5.3
Gains on sales of securities available for sale, net		4,138			8,509		(4,371	)		(51.4	)
Equity (losses) earnings on alternative investments		(1,393	)		2,191		(3,584	)	(>100)
Other		23,810			18,352		5,458			29.7
Total noninterest income	$	317,529		$	304,281	$	13,248			4.4	%

Noninterest income (summarized in Table 4), increased by ~~$12.9~~$0.8 million, or ~~11.8~~0.7 percent, during the three months ended September 30, ~~2016,~~2017, and increased by ~~$5.9~~$13.2 million, or ~~1.7~~4.4 percent, during the nine months ended September 30, ~~2016,~~2017, compared to the same periods in ~~2015.~~2016. Table 4 above summarizes the components of noninterest income and the respective year-over-year comparison for each category.

Trust and securities processing consists of fees earned on personal and corporate trust accounts, custody of securities services, trust investments and investment management services, and servicing of mutual fund assets. The ~~decrease~~increase in these fees for the three and nine-month periods compared to the same periods last year was primarily due

to ~~changes~~improvements in ~~two categories of income. First, advisory fee income from the Scout Funds for the three~~wealth management and ~~nine-month periods ended September 30, 2016, decreased~~fund services revenues. Wealth management revenues increased by ~~$4.7~~$1.0 million, or ~~36.5~~6.2 percent, and ~~$19.8~~$4.3 million, or ~~44.0~~9.4 percent, ~~respectively,~~and fund services revenues increased $1.7 million, or 7.9 percent, and $2.8 million, or 4.2 percent, compared to the same periods in 2015, due to declines in the underlying assets under management (AUM) for the respective periods. Additionally, the mix of AUM in the Institutional Investment Management segment has shifted to a higher percentage of fixed income versus equity as of September 30, 2016 compared to September 30, 2015. Second, fund administration and custody services fees for the three and nine-month periods ended September 30, 2016, decreased by $1.0 million, or 4.3 percent, and $2.6 million, or 3.7 percent, respectively, due to a decrease in the underlying assets under administration.2016. Since trust and securities processing fees are primarily asset-based, which are highly correlated to the change in market value of the assets, the related income for the remainder of the year will be affected by changes in the securities markets. Management continues to emphasize sales of services to both new and existing clients as well as increasing and improving the distribution channels.

Trading and investment banking fees for the ~~three-month period~~three and nine-month periods ended September 30, ~~2016 increased $3.1~~2017 decreased $1.7 million, or ~~105.9~~27.2 percent, and increased $1.8 million, or 10.9 percent, respectively. A $1.2 million decrease and $0.8 million increase in the Company’s seed investments in certain Scout Funds contributed to these variances for the three and nine-month ~~period~~periods ended September 30, ~~2016, increased $1.7 million, or 11.8 percent.~~2017, respectively. The income in this category is market driven and impacted by general increases or decreases in trading volume.

Brokerage fees for the three and nine-month periods ended September 30, ~~2016,~~2017, increased ~~$1.8~~$1.1 million, or ~~59.3~~23.4 percent, and increased ~~$4.4~~$3.9 million, or ~~50.4~~29.8 percent, respectively. These increases were driven by higher money market balances and the related 12b-1 fees.

Bankcard fees for the three and nine-month periods ended September 30, 2017, increased $0.3 million, or 2.0 percent, and increased $2.8 million, or 5.3 percent, respectively. These increases were driven by decreases in retail and commercial card program rewards and rebates expense and increases in interchange income.

During the three and nine-month periods ended September 30, ~~2016, $3.0~~2017, $2.4 million and ~~$8.5~~$4.1 million in pre-tax gains were recognized on the sales of securities available for sale, respectively, compared to ~~$0.1~~$3.0 million and ~~$8.4~~$8.5 million for the same periods in ~~2015.~~2016. The investment portfolio is continually evaluated for opportunities to improve its performance and risk profile relative to market conditions and the Company’s interest rate expectations. This can result in differences from quarter to quarter in the amount of realized gains.

During the three and nine-month periods ended September 30, 2016, gains of $1.6 million and $2.2 million of equity earnings on alternative investments were recognized on PCM investments, respectively, compared to losses of $5.0 million and $7.0 million for the same periods in 2015 due to changes in the underlying fund investments.

Other noninterest income for the three and nine-month period ended September 30, ~~2016,~~2017, increased ~~$3.6~~$1.1 million, or ~~113.0~~16.3 percent, and ~~$7.5~~$5.5 million, or ~~68.8~~29.7 percent, respectively, primarily driven by increases ~~of $3.9 million and $6.9 million~~ in company-owned life insurance and ~~bank-owned life insurance.~~

derivative income.

Table 5

SUMMARY OF NONINTEREST EXPENSE ~~(unaudited~~(unaudited in thousands)

											Three Months Ended				Dollar			Percent
	Three Months Ended September 30,				Dollar Change			Percent Change			September 30,				Change			Change
	2016		2015		16-15			16-15			2017		2016		17-16			17-16
Salaries and employee benefits	$	109,369	$	104,733	$	4,636			4.4	%	$	99,749	$	99,403	$	346			0.3	%
Occupancy, net		11,394		11,748		(354	)		(3.0	)		11,285		11,224		61			0.5
Equipment		16,231		17,228		(997	)		(5.8	)		17,880		16,029		1,851			11.5
Supplies and services		4,624		5,371		(747	)		(13.9	)		4,076		4,472		(396	)		(8.9	)
Marketing and business development		5,332		5,766		(434	)		(7.5	)		5,056		5,090		(34	)		(0.7	)
Processing fees		11,264		12,795		(1,531	)		(12.0	)		11,151		9,084		2,067			22.8
Legal and consulting		4,450		8,648		(4,198	)		(48.5	)		5,844		4,437		1,407			31.7
Bankcard		5,015		5,266		(251	)		(4.8	)		5,130		5,015		115			2.3
Amortization of other intangible assets		2,992		3,483		(491	)		(14.1	)		1,715		2,088		(373	)		(17.9	)
Regulatory fees		3,370		3,176		194			6.1			3,798		3,370		428			12.7
Other		5,742		7,065		(1,323	)		(18.7	)		6,137		4,999		1,138			22.8

Total noninterest expense	$	179,783	$	185,279	$	(5,496	)		(3.0	)%	$	171,821	$	165,211	$	6,610			4.0	%


	Nine Months Ended September 30,				Dollar Change			Percent Change
	2016		2015		16-15			16-15
Salaries and employee benefits	$	325,216	$	302,855	$	22,361			7.4	%
Occupancy, net		33,505		32,070		1,435			4.5
Equipment		49,545		46,810		2,735			5.8
Supplies and services		14,292		14,299		(7	)		—
Marketing and business development		16,086		16,914		(828	)		(4.9	)
Processing fees		34,190		38,232		(4,042	)		(10.6	)
Legal and consulting		14,186		18,943		(4,757	)		(25.1	)
Bankcard		16,199		14,987		1,212			8.1
Amortization of other intangible assets		9,363		8,807		556			6.3
Regulatory fees		10,491		8,805		1,686			19.1
Other		22,497		18,934		3,563			18.8

Total noninterest expense	$	545,570	$	521,656	$	23,914			4.6	%

	Nine Months Ended				Dollar			Percent
	September 30,				Change			Change
	2017		2016		17-16			17-16
Salaries and employee benefits	$	306,174	$	293,294	$	12,880			4.4	%
Occupancy, net		33,314		32,996		318			1.0
Equipment		53,318		48,807		4,511			9.2
Supplies and services		12,962		13,875		(913	)		(6.6	)
Marketing and business development		14,929		15,273		(344	)		(2.3	)
Processing fees		31,093		27,118		3,975			14.7
Legal and consulting		17,361		14,107		3,254			23.1
Bankcard		15,066		16,199		(1,133	)		(7.0	)
Amortization of other intangible assets		5,685		6,644		(959	)		(14.4	)
Regulatory fees		11,702		10,491		1,211			11.5
Other		20,966		20,094		872			4.3
Total noninterest expense	$	522,570	$	498,898	$	23,672			4.7	%

Noninterest expense ~~decreased~~increased by ~~$5.5~~$6.6 million, or ~~3.0~~4.0 percent, for the three months ended September 30, ~~2016~~2017 and increased ~~$23.9~~$23.7 million, or ~~4.6~~4.7 percent, for the nine months ended September 30, ~~2016,~~2017, compared to the same periods in ~~2015.~~2016. Table 5 above summarizes the components of noninterest expense and the respective year-over-year comparison for each category.

Salaries and employee benefits increased by ~~$4.6~~$0.3 million, or ~~4.4~~0.3 percent, and increased ~~$22.4~~$12.9 million, or ~~7.4~~4.4 percent, for the three and nine months ended September 30, ~~2016,~~2017, respectively, compared to the same periods in 2015. For the nine month increase, the Marquette acquisition contributed approximately $11.5 million of this increase and is embedded in the breakouts in the following paragraph. Non-acquisition related severances for the three and nine month comparative periods increased $0.3 million and $2.5 million, respectively, and included in the commissions and bonuses line as noted below.

2016. Salaries and wages ~~decreased $0.7~~increased $1.1 million, or ~~1.0~~1.8 percent, for the three months ended September 30, ~~2016~~2017 and increased ~~$9.4~~$7.1 million, or ~~5.0~~3.8 percent, for the nine months ended September 30, ~~2016,~~2017, respectively, compared to the same periods in ~~2015.~~2016. Commissions and bonuses ~~increased $2.0~~decreased $1.5 million, or ~~8.2~~7.8 percent, and ~~$8.0~~increased $0.5 million, or ~~12.1~~0.9 percent, for the three and nine months ended September 30, ~~2016,~~2017, respectively, compared to the same periods in ~~2015 driven by increased company performance.~~2016. Employee benefits expense increased ~~$3.4~~$0.7 million, or ~~26.2~~4.7 percent, and ~~$5.0~~$5.2 million, or 10.1 percent, for the three and nine month period ended September 30, 2016, respectively, compared to the same periods in 2015, due to an increase the fair value of the Company’s deferred compensation plan.

~~Processing fees expense decreased $1.5 million, or 12.0 percent, and $4.0 million, or 10.6~~10.2 percent, for the three and nine months ended September 30, ~~2016,~~2017, respectively, compared to the same periods in ~~2015 primarily~~2016, due to ~~decreased fees paid by~~an increase in the ~~third-party advisor to distributors~~fair value of the ~~Scout Funds.~~Company’s deferred compensation plan and increased health insurance expense.

~~Legal and consulting~~Equipment expense ~~decreased $4.2~~increased $1.9 million, or ~~48.5~~11.5 percent, and ~~$4.8~~$4.5 million, or ~~25.1~~9.2 percent, for the three and nine months ended September 30, ~~2016,~~2017, respectively, compared to the same periods in ~~2015. The decreases in both periods are~~2016 primarily due to software and hardware costs related to investments for regulatory requirements, cyber security, and the ~~reduction~~ongoing modernization of the ~~use of consulting services.~~Company’s core systems.

~~Other noninterest~~Processing fees expense ~~decreased $1.3~~increased $2.1 million, or ~~18.7~~22.8 percent, and $4.0 million, or 14.7 percent, for the three ~~months ended September 30, 2016~~ and ~~increased $3.6 million, or 18.8 percent, for the~~ nine months ended September 30, ~~2016,~~2017, respectively, compared to the same periods in ~~2015. The decrease in the three months period is~~2016 primarily due to ~~a $1.1~~higher processing expenses in healthcare, fund servicing, and institutional businesses.

Legal and consulting expense increased $1.4 million, ~~decrease in off-balance sheet commitment reserves~~or 31.7 percent, and $3.3 million, or 23.1 percent, for the ~~increase in the~~three and nine months ~~period is primarily due to fair value adjustments to contingent consideration liabilities recorded in 2015.~~

~~Total acquisition expenses recognized in noninterest expense during the third quarter 2016 totaled $0.4 million and totaled $4.5 million for the first nine months of 2016,~~ended September 30, 2017, respectively, compared to ~~$4.9 million and $6.4 million for~~ the same periods in ~~2015, respectively.~~2016. The increases are primarily due to the use of consulting services related to investments for regulatory requirements, cyber security, and the ongoing modernization of the Company’s core systems.

Income Tax Expense

~~The Company’s effective tax rate was 24.3 percent for~~

For the nine months ended September 30, ~~2016,~~2017, the company’s effective tax rate decreased to 21.4 percent compared to ~~27.6~~23.6 percent for the same period ~~in 2015.~~a year earlier. The decrease is primarily attributable to ~~an increase in federal tax credits and~~ a larger portion of income being earned from ~~excludable life insurance policy gains.~~tax-exempt municipal securities and an increase in excess tax benefits associated with stock compensation recorded through the third quarter of 2017.

Strategic Lines of Business

Table 6

Bank Operating Results ~~(unaudited,~~(unaudited, dollars in thousands)

											Three Months Ended				Dollar			Percent
	Three Months Ended September 30,				Dollar Change			Percent Change			September 30,				Change			Change
	2016		2015		16-15			16-15			2017		2016		17-16			17-16
Net interest income	$	121,963	$	108,424	$	13,539			12.5	%	$	137,331	$	121,963	$	15,368			12.6	%
Provision for loan losses		13,000		2,500		10,500			>100.0			11,500		13,000		(1,500	)		(11.5	)
Noninterest income		80,454		65,207		15,247			23.4			79,759		80,540		(781	)		(1.0	)
Noninterest expense		142,836		149,269		(6,433	)		(4.3	)		150,057		144,450		5,607			3.9

Income before taxes		46,581		21,862		24,719			>100			55,533		45,053		10,480			23.3
Income tax expense		10,427		6,120		4,307			70.4			11,649		9,560		2,089			21.9

Net income	$	36,154	$	15,742	$	20,412			>100.0	%


	Nine Months Ended September 30,				Dollar Change			Percent Change
	2016		2015		16-15			16-15
Net interest income	$	355,847	$	294,210	$	61,637			21.0	%
Provision for loan losses		25,000		10,500		14,500			>100.0
Noninterest income		235,915		210,695		25,220			12.0
Noninterest expense		431,594		407,997		23,597			5.8

Income before taxes		135,168		86,408		48,760			56.4
Income tax expense		32,928		23,859		9,069			38.0

Net income	$	102,240	$	62,549	$	39,691			63.5	%

Income from continuing operations											$	43,884	$	35,493	$	8,391			23.6	%

	Nine Months Ended				Dollar		Percent
	September 30,				Change		Change
	2017		2016		17-16		17-16
Net interest income	$	403,450	$	355,847	$	47,603		13.4	%
Provision for loan losses		35,000		25,000		10,000		40.0
Noninterest income		245,583		234,643		10,940		4.7
Noninterest expense		456,680		435,708		20,972		4.8
Income before taxes		157,353		129,782		27,571		21.2
Income tax expense		33,733		30,478		3,255		10.7
Income from continuing operations	$	123,620	$	99,304	$	24,316		24.5	%

Bank ~~net~~ income from continuing operations increased by ~~$39.7~~$24.3 million, or ~~63.5~~24.5 percent, to ~~$102.2~~$123.6 million for the nine-month period ended September 30, ~~2016,~~2017, compared to the same period in ~~2015.~~2016. Net interest income increased ~~$61.6~~$47.6 million, or ~~21.0~~13.4 percent, for the nine-month period ended September 30, ~~2016,~~2017, compared to the same period in ~~2015,~~2016 primarily driven by strong loan growth, ~~a change in the Company’s earning asset~~increased interest rates, and mix ~~and higher loan yields.~~changes. Provision for loan losses increased by ~~$14.5~~$10.0 million, ~~to adjust the related ALL to the appropriate level based on~~consistent with our methodology, which considers the inherent risk in ~~the~~our loan portfolio, ~~for this segment.~~as well as other qualitative factors, such as macroeconomic conditions, loan growth, increased impaired loans, and increased net charge-offs. Noninterest income increased ~~$25.2~~$10.9 million, or ~~12.0~~4.7 percent, over the same period in ~~2015~~2016 primarily driven by the following increases: ~~unrealized gains on PCM equity method investments~~wealth management revenue of ~~$9.2~~$4.3 million, corporate trust income of $1.3 million, brokerage and mutual fund income of ~~$4.4~~$3.9 million due to an increase in 12b-1 fees, ~~bank-owned~~card services income of $2.8 million driven by higher interchange revenue and lower rewards costs, company-owned life insurance income of ~~$4.0~~$3.2 million, ~~insurance~~ and ~~annuities~~derivative income of ~~$1.7 million, trust and securities processing income of $1.6 million, and healthcare deposit service charges of $1.4~~$1.5 million. These increases were offset by decreases of $4.4 million in ~~commercial~~gains on securities available for sale and ~~consumer deposit service charges of $1.5 million.~~$3.6 million on equity earnings on alternative investments.

Noninterest expense increased ~~$23.6~~$21.0 million, or ~~5.8~~4.8 percent, to ~~$431.6~~$456.7 million for the nine-month period ended September 30, ~~2016,~~2017, compared to the same period in ~~2015. This~~2016. The increase ~~was primarily driven by increases of $18.8~~in noninterest expense is due to the following increases: $14.8 million in ~~salaries~~technology, service, and ~~benefits, $1.2~~overhead expenses due to the ongoing modernization of our core systems, $5.2 million in salary and benefit expense primarily from deferred compensation expense of $2.8 million, $2.1 million in regulatory expense, $1.8 million in processing fees, $1.1 million in legal and consulting expense, and 0.9 million in losses on the sale of other real estate owned. These increases were partially offset by a decrease of $1.1 million in bankcard expense and a decrease of $1.1 million in ~~services~~marketing and ~~supplies, $1.1 million in amortization of intangibles, $1.3 million in regulatory fees, and $1.0 million in furniture and equipment~~business development expense. The increase in salaries and benefits is driven by increases of $10.7 million in salary and wage expense, $5.1 million in bonus and commission expense, and $3.0 million in employee benefit expense. The increase in employee benefit expense was driven, in part, by a $0.9 million increase in the fair value of the Company’s deferred compensation plan. Additionally, there was an increase in other noninterest expense of $1.2 million, largely due to an increase of $2.4 million in fair value adjustments to contingent consideration liabilities incurred in 2015, offset by a decline in operational losses in the comparative periods.

Table 7

~~Institutional Investment Management~~Asset Servicing Operating Results(unaudited, dollars in thousands)

											Three Months Ended				Dollar		Percent
	Three Months Ended September 30,				Dollar Change			Percent Change			September 30,				Change		Change
	2016		2015		16-15			16-15			2017		2016		17-16		17-16
Net interest income	$	—	$	49	$	(49	)		(>100.0	)%	$	3,527	$	2,802	$	725		25.9	%
Provision for loan losses		—		—		—			—			—		—		—		—
Noninterest income		19,413		21,398		(1,985	)		(9.3	)		24,547		23,002		1,545		6.7
Noninterest expense		16,874		16,495		379			2.3			21,764		20,761		1,003		4.8

Income before taxes		2,539		4,952		(2,413	)		(48.7	)		6,310		5,043		1,267		25.1
Income tax expense		519		1,409		(890	)		(63.2	)		1,322		1,114		208		18.7

Net income	$	2,020	$	3,543	$	(1,523	)		(43.0	)%


	Nine Months Ended September 30,				Dollar Change			Percent Change
	2016		2015		16-15			16-15
Net interest income	$	—	$	27	$	(27	)		(>100.0	)%
Provision for loan losses		—		—		—			—
Noninterest income		56,965		74,182		(17,217	)		(23.2	)
Noninterest expense		52,993		52,799		194			0.4

Income before taxes		3,972		21,410		(17,438	)		(81.4	)
Income tax expense		899		5,899		(5,000	)		(84.8	)

Net income	$	3,073	$	15,511	$	(12,438	)		(80.2	)%

Income from continuing operations											$	4,988	$	3,929	$	1,059		27.0	%

	Nine Months Ended				Dollar			Percent
	September 30,				Change			Change
	2017		2016		17-16			17-16
Net interest income	$	9,117	$	8,020	$	1,097			13.7	%
Provision for loan losses		—		—		—			—
Noninterest income		71,946		69,638		2,308			3.3
Noninterest expense		65,890		63,190		2,700			4.3
Income before taxes		15,173		14,468		705			4.9
Income tax expense		3,174		3,538		(364	)		(10.3	)
Income from continuing operations	$	11,999	$	10,930	$	1,069			9.8	%

For the nine months ended September 30, ~~2016, Institutional Investment Management net~~2017, Asset Servicing income ~~decreased $12.4~~from continuing operations increased $1.1 million, or ~~80.2~~9.8 percent compared to the same period in 2015. Noninterest income decreased $17.2 million, or 23.2 percent, due to a $15.1 million decrease in advisory fees from the Scout Funds offset by an increase of $0.2 million in advisory fees from separately managed accounts, both of which are driven by changes in AUM. During the period of December 31, 2015 to September 30, 2016 total Scout AUM increased from $27.2 billion to $28.1 billion, while during the period of December 31, 2014 to September 30, 2015 Scout AUM decreased from $31.2 billion to $28.0 billion. Additionally, the mix of AUM has shifted between the two periods from 76.0 percent fixed income and 24.0 percent equity as of September 30, 2015 to 82.9 percent fixed income and 17.1 percent equity as of September 30, 2016. The increase in noninterest expense of $0.2 million, or 0.4 percent, as compared to the prior year was primarily driven by increases of $5.7 million in salaries and benefits expense driven by severance and increased incentives and increases in the fair value of the deferred compensation plan, and $1.1 million in fair value adjustments to contingent consideration liabilities incurred in 2015. These increases were offset by decreases of $4.5 million in fees paid by the advisor to third-party distributors of the Scout Funds, $1.6 million in technology, service and overhead expenses as compared to the prior year, and $0.5 million in marketing and business development expense.

~~Table 8~~

~~Asset Servicing Operating Results~~~~(unaudited, dollars in thousands)~~

   Three Months Ended
September 30,    Dollar
Change    Percent
Change
   2016    2015    16-15    16-15
Net interest income
   $ 2,802       $ 1,422       $ 1,380       97.0 %
Provision for loan losses
   —         —         —         —
Noninterest income
   22,081       22,493       (412 )    (1.8 )
Noninterest expense
   20,073       19,515       558       2.9








Income before taxes
   4,810       4,400       410       9.3
Income tax expense
   1,038       1,234       (196 )    (15.9 )








Net income
   $ 3,772       $ 3,166       $ 606       19.1 %








   Nine Months Ended
September 30,    Dollar
Change    Percent
Change
   2016    2015    16-15    16-15
Net interest income
   $ 8,020       $ 3,376       $ 4,644       >100 %
Provision for loan losses
   —         —         —         —
Noninterest income
   66,865       68,978       (2,113 )    (3.1 )
Noninterest expense
   60,983       60,860       123       0.2








Income before taxes
   13,902       11,494       2,408       21.0
Income tax expense
   3,348       3,124       224       7.2








Net income
   $ 10,554       $ 8,370       $ 2,184       26.1 %

~~For the nine months ended September 30, 2016, Asset Servicing net income increased $2.2 million, or 26.1 percent, to $10.6 million as compared to the same period in 2015.~~last year. Net interest income increased ~~$4.6~~$1.1 million, or 13.7 percent, compared to the same period last year. Noninterest income ~~decreased $2.1~~increased $2.3 million, or ~~3.1~~3.3 percent, ~~largely~~primarily due to ~~decreased fund administration, fund transfer agency, and custody fees. As of September 30, 2016, assets~~higher alternative investment fee income. Assets under administration ~~totaled $186.2 billion compared to $192.0~~stood at $207.9 billion at September 30, ~~2015. For the nine months ended September 30, 2016, noninterest expense increased $0.1 million, or 0.2 percent,~~2017, as compared to ~~the same period last year,~~$186.2 billion at September 30, 2016. These increases were offset by an increase in noninterest expense of $2.7 million, or 4.3 percent, primarily due to an increase of ~~$1.5~~$2.2 million in salary and ~~benefits expense partially offset by a decrease of $2.0 million in technology, service and overhead expenses.~~benefit expense.

Balance Sheet Analysis

Total assets of the Company ~~increased~~decreased by ~~$631.9~~$403.0 million, or ~~3.3~~1.9 percent, as of September 30, ~~2016,~~2017, compared to December 31, ~~2015,~~2016, primarily due to a decrease in available-for-sale (AFS) securities of $617.4 million, or 9.5 percent, and a decrease in Federal Reserve account balances of $459.8 million, or 71.6 percent, offset by an increase in loan balances of $456.6 million, or 4.3 percent.

Total assets of the Company increased $553.4 million as of September 30, 2017, or 2.8 percent, compared to September 30, 2016, primarily due to an increase in loan balances of ~~$862.7~~$703.5 million, or ~~9.1~~6.8 percent, and an increase in held-to-maturity (HTM) securities of ~~$342.0~~$267.1 million, or ~~51.3 percent, offset by a decrease in available-for-sale (AFS) securities of $511.3 million, or 7.5 percent.~~

Total assets of the Company increased $1.1 billion as of September 30, 2016, or 6.1 percent, compared to September 30, 2015, primarily due to an increase in loan balances of $1.2 billion, or 13.8 percent, and an increase in HTM securities of $420.6 million, or 71.526.5 percent, which were partially offset by a decrease in AFS securities of ~~$376.1~~$446.7 million, or ~~5.6~~7.1 percent.

The overall increase in total assets from September 30, 2015 and December 31, 2015 to September 30, 2016 is related to an increase in federal funds purchased and securities sold under agreement to repurchase and deposits during those periods. Compared to December 31, 2015, total deposits increased by $285.5 million, or 1.9 percent, and federal funds purchased and securities sold under agreement to repurchase increased $203.1 million, or 11.2 percent, as of September 30, 2016. Federal funds purchased and securities sold under agreement to repurchase increased by $678.5 million, or 50.5 percent, and total deposits increased $316.7 million, or 2.1 percent, from September 30, 2015.Table 8

~~Table 9~~

SELECTED FINANCIAL INFORMATION(unaudited, dollars in thousands)


	September 30,				December 31,		September 30,				December 31,
	2016		2015		2015		2017		2016		2016
Total assets	$	19,726,146	$	18,597,965	$	19,094,245	$	20,279,503	$	19,726,146	$	20,682,532
Loans, net of unearned interest		10,305,374		9,047,139		9,431,350		11,001,553		10,305,374		10,545,662
Total investment securities		7,429,719		7,352,293		7,568,870		7,249,415		7,429,719		7,690,108
Interest-bearing due from banks		453,189		847,077		522,877		221,856		453,189		715,823
Total earning assets		18,342,769		17,267,241		17,615,581		18,618,871		18,342,769		19,184,271
Total deposits		15,378,249		15,061,559		15,092,752		15,999,604		15,378,249		16,570,614
Total borrowed funds		2,096,541		1,431,134		1,909,141		1,932,908		2,096,541		1,933,709

~~Loans~~

Loans represent the Company’s largest source of interest income. In addition to growing the commercial loan portfolio, management believes its middle market commercial business and its consumer business, including home equity and credit card loan products, are the market niches that represent its best opportunity to cross-sell fee-related services and generate additional noninterest income for the Company.

Actual loan balances totaled ~~$10.3~~$11.0 billion as of September 30, ~~2016,~~2017, and increased ~~$862.7~~$456.6 million, or ~~9.1~~4.3 percent, compared to December 31, ~~2015~~2016 and increased ~~$1.2 billion,~~$703.5 million, or ~~13.8~~6.8 percent, compared to September 30, ~~2015.~~2016. Compared to December 31, ~~2015,~~2016, commercial real estate loans increased ~~$347.8~~$195.3 million, or ~~13.1~~6.2 percent, asset based loans increased $84.2 million, or 37.3 percent, construction real estate loans increased ~~$266.1~~$68.3 million, or ~~63.9~~9.2 percent, and ~~commercial~~residential real estate loans ~~increased $232.8~~of $66.2 million, or ~~5.5~~12.1 percent. Compared to September 30, ~~2015,~~2016, commercial real estate loans increased ~~$518.7~~$350.7 million, or ~~20.8~~11.6 percent, ~~commercial loans increased $351.2 million, or 8.6 percent, and~~ construction real estate loans increased ~~$315.6~~$127.4 million, or ~~86.0~~18.7 percent, residential real estate loans increased $103.5 million, or 20.2 percent, and factoring loans increased $88.1 million, or 81.8 percent. The increase in total loans is driven by the Company’s focus on generating higher-yielding earning assets by shifting assets from the securities portfolio to the loan portfolio.

Nonaccrual, past due and restructured loans are discussed under “Credit Risk Management” within “Item 3. Quantitative and Qualitative Disclosures About Market Risk” in this report.

Investment Securities

The Company’s investment portfolio contains trading, AFS, and HTM securities as well as FRB stock, FHLB stock, and other miscellaneous investments. Investment securities totaled ~~$7.4~~$7.2 billion as of September 30, ~~2016~~2017 and ~~$7.6~~$7.7 billion as of December 31, ~~2015~~2016 and comprised ~~40.5~~38.9 percent and ~~43.0~~40.1 percent of the Company’s earning assets, respectively, as of those dates.

The Company’s AFS securities portfolio comprised ~~84.7~~80.7 percent of the Company’s investment securities portfolio at September 30, ~~2016,~~2017, compared to ~~89.9~~84.1 percent at December 31, ~~2015.~~2016. The Company’s AFS securities portfolio provides liquidity as a result of the composition and average life of the underlying securities. This liquidity can be used to fund loan growth or to offset the outflow of traditional funding sources. The average life of the AFS securities portfolio increased from ~~44.2~~52.7 months at September 30, ~~2015~~2017, compared to 54.3 months at December 31, 2016, and 45.0 months at September 30, 2016. In addition to providing a potential source of liquidity, the AFS securities portfolio can be used as a tool to manage interest rate sensitivity. The Company’s goal in the management of its AFS securities portfolio is to maximize return within the Company’s parameters of liquidity goals, interest rate risk, and credit risk.

Management expects collateral pledging requirements for public funds, loan demand, and deposit funding to be the primary factors impacting changes in the level of AFS securities. There were ~~$5.1~~$4.9 billion of AFS securities pledged to secure U.S. Government deposits, other public deposits, certain trust deposits, derivative transactions, and repurchase agreements at September 30, ~~2016.~~2017. Of this amount, securities with a market value of ~~$1.4~~$1.8 billion at September 30, ~~2016~~2017 were pledged at the Federal Reserve Discount Window but were unencumbered as of that date.

The Company’s HTM securities portfolio consists of private placement bonds, which are issued primarily to refinance existing revenue bonds in the healthcare and education sectors. The HTM portfolio totaled ~~$1.0~~$1.3 billion as of September 30, ~~2016,~~2017, an increase of ~~$342.0~~$160.3 million, or ~~51.3~~14.4 percent, from December 31, ~~2015.~~2016. The average life of the HTM portfolio was ~~10.3~~7.3 years at September 30, ~~2016,~~2017, compared to ~~9.8~~7.4 years at December 31, ~~2015.~~2016.

The securities portfolio generates the Company’s second largest component of interest income. The securities portfolio achieved an average yield on a tax-equivalent basis of ~~2.08~~2.43 percent for the nine months ended September 30, ~~2016,~~2017, compared to ~~1.94~~2.08 percent for the same period in ~~2015.~~2016.

Deposits and Borrowed Funds

Deposits ~~increased $285.5~~decreased $571.0 million, or ~~1.9~~3.4 percent, from December 31, ~~2015~~2016 to September 30, ~~2016~~2017 and increased ~~$316.7~~$621.4 million, or ~~2.1~~4.0 percent, from September 30, ~~2015~~2016 to September 30, 2017. Total non-interest bearing deposits decreased $842.5 million, which was partially offset by an increase in interest-bearing deposits of $271.5 million as compared to December 31, 2016. Total interest-bearing deposits increased ~~$584.1~~$817.6 million ~~from December 31, 2015 offset by a decrease of $298.6 million in non-interest bearing deposits. Total interest-bearing~~and noninterest-bearing deposits ~~increased $566.3~~decreased $196.2 million from September 30, ~~2015 offset by a decrease of $249.6 million in noninterest-bearing deposits.~~2016.

Deposits represent the Company’s primary funding source for its asset base. In addition to the core deposits garnered by the Company’s retail branch structure, the Company continues to focus on its cash management services, as well as its trust and mutual fund servicing segments, in order to attract and retain additional core

deposits. Management believes a strong core deposit composition is one of the Company’s key strengths given its competitive product mix.

Long-term debt totaled ~~$75.4~~$76.1 million at September 30, ~~2016,~~2017, compared to ~~$86.1~~$76.8 million as of December 31, ~~2015,~~2016, and ~~$83.5~~$75.4 million as of September 30, ~~2015. As part~~2016. The majority of the ~~Marquette acquisition, the Company assumed~~Company’s long-term debt ~~obligations with an aggregate balance~~was assumed from the acquisition of ~~$103.1 million~~Marquette and ~~an aggregate fair value~~consists of ~~$65.5 million as of May 31, 2015~~debt obligations payable to four unconsolidated trusts (Marquette Capital Trust I, Marquette Capital Trust II, Marquette Capital Trust III, and Marquette Capital Trust IV) that ~~had~~previously issued trust preferred securities. These long-term debt obligations had an aggregate contractual balance of $103.1 million and had an aggregate carrying value of ~~$66.7~~$68.0 million as of September 30, ~~2016. The interest~~2017. Interest rates on trust preferred securities ~~issued by the trusts~~ are tied to the three-month ~~LIBOR~~London Interbank Offered Rate (LIBOR) rate with spreads ranging from 133 basis points to 160 basis points, ~~which~~and reset quarterly. The trust preferred securities have maturity dates ranging from January 2036 to September 2036.

Federal funds purchased and securities sold under agreement to repurchase totaled $1.9 billion at September 30, 2017 and at December 31, 2016, and $2.0 billion at September 30, ~~2016, $1.8 billion at December 31, 2015 and $1.3 billion at September 30, 2015.~~2016. Repurchase agreements are transactions involving the exchange of investment funds by the customer for securities by the Company under an agreement to repurchase the same or similar issues at an agreed-upon price and date.

Capital and Liquidity

The Company places a significant emphasis on the maintenance of a strong capital position, which promotes investor confidence, provides access to funding sources under favorable terms, and enhances the Company’s ability to capitalize on business growth and acquisition opportunities. Higher levels of liquidity, however, bear corresponding costs, measured in terms of lower yields on short-term, more liquid earning assets and higher expenses for extended liability maturities. The Company manages capital for each subsidiary based upon the subsidiary’s respective risks and growth opportunities as well as regulatory requirements.

Total shareholders’ equity was ~~$2.0~~$2.1 billion at September 30, ~~2016,~~2017, a ~~$130.9~~$139.2 million increase compared to December 31, ~~2015,~~2016, and a ~~$123.8~~$76.9 million increase compared to September 30, ~~2015.~~2016.

The Company’s Board of Directors authorized, at its April ~~26, 2016~~25, 2017 and April ~~28, 2015~~26, 2016 meetings, the repurchase of up to two million shares of the Company’s common stock during the twelve months following the ~~meetings.~~meeting. During the nine months ended September 30, ~~2016~~2017 and ~~2015,~~2016, the Company acquired ~~292,624~~204,607 shares and ~~119,690~~292,624 shares of its common stock under the ~~2016~~2017 and ~~2015~~2016 repurchase plans, respectively. The Company has not made any repurchase of its securities other than through these plans.

~~On October 25, 2016,~~At the Company’s quarterly board meeting, the Board of Directors declared a ~~$0.255~~$0.275 per share quarterly cash dividend payable on January ~~3, 2017,~~2, 2018, to shareholders of record at the close of business on December ~~9, 2016.~~8, 2017.

Through the Company’s relationship with the FHLB of Des Moines, the Company owns $10.0 million of FHLB stock and has access to additional liquidity and funding sources through FHLB advances. The Company’s borrowing capacity is dependent upon the amount of collateral the Company places at the FHLB. The Company’s borrowing capacity with the FHLB was ~~$499.0 million~~$1.2 billion as of September 30, ~~2016.~~2017. The Company had no outstanding FHLB advances at FHLB of Des Moines as of September 30, 2016. Additionally, the Company owns $0.1 million of FHLB of San Francisco stock, acquired as part of the Marquette acquisition. The Company paid off $15.0 million of FHLB of San Francisco advances during the three-month period ended September 30, 2016 and had no outstanding advances at FHLB of San Francisco as of September 30, 2016.2017.

Risk-based capital guidelines established by regulatory agencies set minimum capital standards based on the level of risk associated with a financial institution’s assets. ~~Effective January 1, 2015, the~~The Company has implemented the Basel III regulatory capital rules adopted by the ~~FRB in July 2013.~~FRB. Basel III capital ~~rules increase minimum requirements for both the quantity and quality of capital held by banking organizations. The~~ rules include a minimum ratio of common equity tier 1 capital to risk-weighted assets of 4.5 percent and a minimum tier 1 risk-based capital ratio of 6 percent. A financial institution’s total capital is also required to equal at least 8 percent of risk-weighted assets. At least half of that 8 percent must consist of tier 1 core capital, and the remainder may be tier 2 supplementary capital. The Basel III regulatory capital rules include transitional periods for various components of the rules that require full compliance for the Company by January 1, 2019, including a capital conservation buffer requirement of 2.5 percent of risk-weighted assets for which the transitional period began on January 1, 2016.

The risk-based capital guidelines indicate the specific risk weightings by type of asset. Certain off-balance sheet items (such as standby letters of credit and binding loan commitments) are multiplied by credit conversion factors to translate them into balance sheet equivalents before assigning them specific risk weightings. The Company is also required to maintain a leverage ratio equal to or greater than 4 percent. The leverage ratio is calculated as ratio of tier 1 core capital to total average assets, less goodwill and intangibles. The ~~Company’s~~Company's capital position as of September 30, ~~2016~~2017 is summarized in the table below and exceeded regulatory requirements.

Table 109


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended						Nine Months Ended
	2016			2015			2016			2015			September 30,						September 30,
RATIOS													2017			2016			2017			2016
Common equity tier 1 capital ratio		11.75	%		12.39	%		11.75	%		12.39	%		12.18	%		11.75	%		12.18	%		11.75	%
Tier 1 risk-based capital ratio		11.75			12.51			11.75			12.51			12.18			11.75			12.18			11.75
Total risk-based capital ratio		12.82			13.50			12.82			13.50			13.26			12.82			13.26			12.82
Leverage ratio		8.99			9.27			8.99			9.27			9.43			8.99			9.43			8.99
Return on average assets		0.85			0.49			0.79			0.66			0.95			0.80			0.89			0.76
Return on average equity		8.25			4.72			7.81			6.53			9.17			7.76			8.82			7.43
Average equity to assets		10.27			10.42			10.17			10.14			10.41			10.27			10.13			10.17

The ~~Company’s~~Company's per share data is summarized in the table below.


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended						Nine Months Ended
	2016			2015			2016			2015			September 30,						September 30,
Per Share Data													2017			2016			2017			2016
Earnings basic	$	0.86		$	0.46		$	2.37		$	1.85
Earnings diluted		0.85			0.46			2.36			1.84
Earnings from continuing operations basic													$	0.99		$	0.81		$	2.76		$	2.26
Earnings from continuing operations diluted														0.98			0.80			2.72			2.24
Cash dividends		0.245			0.235			0.735			0.705			0.255			0.245			0.765			0.735
Dividend payout ratio		28.49	%		51.09	%		31.01	%		38.11	%		25.76	%		30.25	%		27.72	%		32.52	%
Book value	$	40.86		$	38.56		$	40.86		$	38.56		$	42.15		$	40.86		$	42.15		$	40.86

Off-balance Sheet Arrangements

The Company’s main off-balance sheet arrangements are loan commitments, commercial and standby letters of credit, futures contracts and forward exchange contracts, which have maturity dates rather than payment due dates. Please see Note ~~10,~~9, “Commitments, Contingencies and Guarantees” in the Notes to Consolidated Financial Statements for detailed information on these arrangements.

Critical Accounting Policies and Estimates

The preparation of these Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to customers and suppliers, allowance for loan losses, bad debts, investments, financing operations, long-lived assets, taxes, other contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which have formed the basis for making such judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Under different assumptions or conditions, actual results may differ from the recorded estimates.

A summary of critical accounting policies is listed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the Form 10-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~ITEM 3.~~ ~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

Risk Management

Market risk is a broad term for the risk of economic loss due to adverse changes in the fair value of a financial instrument. These changes may be the result of various factors, including interest rates, foreign exchange prices, commodity prices, or equity prices. Financial instruments that are subject to market risk can be classified either as held for trading or held for purposes other than trading.

The Company is subject to market risk primarily through the effect of changes in interest rates of its assets held for purposes other than trading. The following discussion of interest rate risk, however, combines instruments held for trading and instruments held for purposes other than trading because the instruments held for trading represent such a small portion of the Company’s portfolio that the interest rate risk associated with them is immaterial.

Interest Rate Risk

In the banking industry, a major risk exposure is changing interest rates. To minimize the effect of interest rate changes to net interest income and exposure levels to economic losses, the Company manages its exposure to changes in interest rates through asset and liability management within guidelines established by its Asset Liability Committee (ALCO) and approved by the Board. The ALCO is responsible for approving and ensuring compliance with asset/liability management policies, including interest rate exposure. The Company’s primary method for measuring and analyzing consolidated interest rate risk is the Net Interest Income Simulation Analysis. The Company also uses a Net Portfolio Value model to measure market value risk under various rate change scenarios and a gap analysis to measure maturity and repricing relationships between interest-earning assets and interest-bearing liabilities at specific points in time. On a limited basis, the Company uses hedges such as swaps and futures contracts to manage interest rate risk on certain loans, trading securities, trust preferred securities, and deposits. See further information in Note 1110 “Derivatives and Hedging Activities” in the Notes to the Consolidated Financial Statements.

Overall, the Company manages interest rate risk by positioning the balance sheet to maximize net interest income while maintaining an acceptable level of interest rate and credit risk, remaining mindful of the relationship among profitability, liquidity, interest rate risk, and credit risk.

Net Interest Income Modeling

The Company’s primary interest rate risk tool, the Net Interest Income Simulation Analysis, measures interest rate risk and the effect of interest rate changes on net interest income and net interest margin. This analysis incorporates all of the Company’s assets and liabilities together with assumptions that reflect the current interest rate environment. Through these simulations, management estimates the impact on net interest income of a 300 basis point upward or a 100 basis point downward gradual change (e.g. ramp) and immediate change (e.g. shock) of market interest rates over a two year period. In ramp scenarios, rates change gradually for a one year period and remain constant in year two. In shock scenarios, rates change immediately and the change is sustained for the remainder of the two year scenario horizon. Assumptions are made to project rates for new loans and deposits based on historical analysis, management outlook and repricing strategies. Asset prepayments and other market risks are developed from industry estimates of prepayment speeds and other market changes. The results of these simulations can be significantly influenced by assumptions utilized and management evaluates the sensitivity of the simulation results on a regular basis.

Table 1110 shows the net interest income ~~percentage~~ increase or decrease over the next twelve ~~and twenty-four month periods~~months as of September 30, ~~2016~~2017 and ~~2015~~2016 based on hypothetical changes in interest rates and a constant sized balance sheet with runoff being replaced.

Table 1110

MARKET RISK(unaudited)

													Hypothetical change in interest rate – Rate Ramp
	Hypothetical change in interest rate – Rate Ramp												Year One						Year Two
	Year One						Year Two						September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016
(basis points)	September 30, 2016 Percentage change			September 30, 2015 Percentage change			September 30, 2016 Percentage change			September 30, 2015 Percentage change			Percentage change			Percentage change			Percentage change			Percentage change
300		3.7	%		5.1	%		9.7	%		15.5	%		0.6	%		3.7	%		6.3	%		9.7	%
200		2.3	%		3.3	%		6.3	%		10.5	%		(0.2	)		2.3			3.5			6.3
100		0.8	%		1.6	%		2.9	%		5.3	%		(1.0	)		0.8			0.7			2.9
Static		—			—			—			—			—			—			—			—
(100)		N/A			N/A			N/A			N/A			(0.9	)	N/A				(5.7	)	N/A

	Hypothetical change in interest rate – Rate Shock
	Year One						Year Two
(basis points)	September 30, 2016 Percentage change			September 30, 2015 Percentage change			September 30, 2016 Percentage change			September 30, 2015 Percentage change
300		10.0	%		10.6	%		14.4	%		19.4	%
200		6.5	%		7.0	%		9.5	%		13.2	%
100		2.9	%		3.5	%		4.5	%		6.9	%
Static		—			—			—			—
(100)		N/A			N/A			N/A			N/A

	Hypothetical change in interest rate – Rate Shock
	Year One						Year Two
	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016
(basis points)	Percentage change			Percentage change			Percentage change			Percentage change
300		4.2	%		10.0	%		9.3	%		14.4	%
200		2.2			6.5			5.5			9.5
100		0.2			2.9			1.7			4.5
Static		—			—			—			—
(100)		(4.4	)	N/A				(8.6	)	N/A

The Company is positioned relatively neutral over the next year in a rising rate environment. Net interest income is expected to ~~benefit from increases~~be slightly lower in ~~interest rates. Net~~the up 100 basis point ramp scenario and higher in the up 300 basis points ramp scenario. In year two net interest income is projected to increase in rising interest rate scenarios due to expected increases in earning asset yields ~~on earning assets increasing more due to changes in market rates~~at a pace that is greater and earlier than the impacts on cost of ~~paying liabilities is~~interest bearing liabilities. The Company’s level of sensitivity has declined over the past year due primarily to: 1) balance sheet changes and recent rate increases which have significantly increased actual and projected static net interest income, resulting in a larger base net interest income and 2) the Company’s modeling assumptions that deposit pricing will revert to higher levels under these scenarios. These assumptions are based upon analysis of the Company’s deposit pricing during the last rate cycle. Since actual sensitivity on deposit pricing has been lower than projected to ~~increase. The~~date, the Company’s ~~ability~~modeling continues to ~~price deposits in~~assume a ~~rising rate environment consistent with our history is a key assumption in these scenarios. Due~~reversion of expected deposit re-pricing to ~~the already low interest rate environment, the Company did not include a 100 basis point falling scenario. There is little room for projected yields on liabilities to decrease.~~historical norms.

Trading Account

The ~~Company’s subsidiary, UMB Bank, n.a. (the Bank),~~Company carries ~~taxable governmental~~ securities in a trading account that is maintained ~~in accordance with~~according to Board-approved policy and procedures. The policy limits the amount and type of securities that can be carried in the trading account and requires compliance with any limits under applicable law and regulations, and mandates the use of a value-at-risk methodology to manage price volatility risks within financial parameters. The risk associated with the carrying of trading securities is offset by ~~the sale of~~utilizing financial instruments including exchange-traded financial futures ~~contracts, with both the~~as well as short sales of U.S. Treasury and Corporate securities. The trading ~~account~~securities and ~~futures contracts marked to market~~related hedging instruments are marked-to-market daily. ~~This~~The trading account had a balance of $60.7 million as of September 30, 2017, $39.5 million as of December 31, 2016, and $58.1 million as of September 30, ~~2016, $29.6~~2016. Securities sold not yet purchased (i.e. short positions) totaled $3.3 million ~~as of December 31, 2015 and $23.7 million as of~~at September 30, ~~2015.~~2017 and is classified within the Other liabilities line of the Company’s Consolidated Balance Sheets.

The Company is subject to market risk primarily through the effect of changes in interest rates of its assets held for purposes other than trading. The discussion in Table 1110 above of interest rate risk, however, combines instruments held for trading and instruments held for purposes other than trading, because the instruments held for trading represent such a small portion of the Company’s portfolio that the interest rate risk associated with them is immaterial.

Other Market Risk

The Company does have ~~minimal~~ foreign currency risk that it does not consider material as a result of foreign exchange contracts. See Note 109 “Commitments, Contingencies and Guarantees” in the ~~Notes~~notes to the Consolidated Financial Statements.

Credit Risk Management

Credit risk represents the risk that a customer or counterparty may not perform in accordance with contractual terms. The Company utilizes a centralized credit administration function, which provides information on the Bank’s risk levels, delinquencies, an internal ~~ranking~~rating system and overall credit exposure. Loan requests are centrally reviewed to ensure the consistent application of the loan policy and standards. In addition, the Company has an internal loan review staff that operates independently of the Bank. This review team performs periodic examinations of the bank’s loans for credit quality, documentation and loan administration. The respective regulatory ~~authority of~~authorities governing the Bank also ~~reviews~~review loan portfolios.

A primary indicator of credit quality and risk management is the level of nonperforming loans. Nonperforming loans include both nonaccrual loans and restructured loans on nonaccrual. The Company’s nonperforming loans ~~increased $29.7~~decreased $25.4 million to ~~$79.6~~$54.2 million at September 30, ~~2016,~~2017, compared to September 30, ~~2015,~~2016, and ~~increased $18.5~~decreased $16.0 million, compared to December 31, ~~2015. This increase was primarily driven by the migration of two non-energy commercial credits during the third quarter of~~ 2016.

The Company had $0.7 million, $0.3 million, and ~~$2.6~~$0.2 million of other real estate owned as of September 30, 2017 and 2016, and ~~2015, respectively, and $3.3 million of other real estate owned as of~~ December 31, ~~2015.~~2016, respectively. Loans past due more than 90 days totaled ~~$2.7~~$2.1 million as of September 30, ~~2016,~~2017, compared to ~~$2.6~~$2.7 million at September 30, ~~2015~~2016 and ~~$7.3~~$3.4 million as of December 31, ~~2015.~~2016.

A loan is generally placed on nonaccrual status when payments are past due 90 days or more and/or when management has considerable doubt about the borrower’s ability to repay on the terms originally contracted. The accrual of interest is discontinued and recorded thereafter only when actually received in cash.

Certain loans are restructured to provide a reduction or deferral of interest or principal due to deterioration in the financial condition of the respective borrowers. The Company had ~~$54.4~~$49.2 million of restructured loans at September 30, ~~2016, $35.3~~2017, $54.4 million at September 30, ~~2015,~~2016, and ~~$36.6~~$52.5 million at December 31, ~~2015.~~2016.

Table 11

~~Table 12~~

LOAN QUALITY ~~(unaudited,~~(unaudited, dollars in thousands)


	September 30,						December 31,			September 30,						December 31,
	2016			2015			2015			2017			2016			2016
Nonaccrual loans	$	50,711		$	33,259		$	45,589		$	26,101		$	50,711		$	41,765
Restructured loans on nonaccrual		28,909			16,696			15,563			28,130			28,909			28,494

Total nonperforming loans		79,620			49,955			61,152			54,231			79,620			70,259
Other real estate owned		290			2,586			3,307			712			290			194

Total nonperforming assets	$	79,910		$	52,541		$	64,459		$	54,943		$	79,910		$	70,453

Loans past due 90 days or more	$	2,678		$	2,552		$	7,324		$	2,088		$	2,678		$	3,365
Restructured loans accruing		25,464			18,591			21,029			21,091			25,464			24,013
Allowance for loan losses		90,404			78,030			81,143			98,389			90,404			91,649
Ratios
Nonperforming loans as a percent of loans		0.77	%		0.55	%		0.65	%		0.49	%		0.77	%		0.67	%
Nonperforming assets as a percent of loans plus other real estate owned		0.78			0.58			0.68			0.50			0.78			0.67
Nonperforming assets as a percent of total assets		0.41			0.28			0.34			0.27			0.41			0.34
Loans past due 90 days or more as a percent of loans		0.03			0.03			0.08			0.02			0.03			0.03
Allowance for loan losses as a percent of loans		0.88			0.86			0.86			0.89			0.88			0.87
Allowance for loan losses as a multiple of nonperforming loans		1.14	x		1.56	x		1.33	x	1.81x			1.14x			1.30x

Liquidity Risk

Liquidity represents the Company’s ability to meet financial commitments through the maturity and sale of existing assets or availability of additional funds. The Company believes that the most important factor in the preservation of liquidity is maintaining public confidence that facilitates the retention and growth of a large, stable supply of core deposits and wholesale funds. Ultimately, the Company believes public confidence is generated through profitable operations, sound credit quality and a strong capital position. The primary source of liquidity for the Company is regularly scheduled payments on and maturity of assets, which include ~~$6.3~~$5.8 billion of high-quality securities available for sale. The liquidity of the Company and the Bank is also enhanced by its activity in the federal funds market and by its core deposits. Additionally, management believes it can raise debt or equity capital on favorable terms in the future, should the need arise.

Another factor affecting liquidity is the amount of deposits and customer repurchase agreements that have pledging requirements. All customer repurchase agreements require collateral in the form of a security. The U.S. Government, other public entities, and certain trust depositors require the Company to pledge securities if their deposit balances are greater than the FDIC-insured deposit limitations. These pledging requirements affect liquidity risk in that the related security cannot otherwise be disposed due to the pledging restriction. At September 30, ~~2016, $5.1~~2017, $4.9 billion, or ~~81.5~~83.2 percent, of the securities available-for-sale were pledged or used as collateral, compared to ~~$5.9~~$5.7 billion, or ~~86.7~~88.6 percent, at December 31, ~~2015.~~2016. However of these amounts, securities with a market value of ~~$1.4~~$1.8 billion at September 30, ~~2016~~2017 and ~~$1.6~~$1.8 billion at December 31, ~~2015~~2016 were pledged at the Federal Reserve Discount Window but were unencumbered as of those dates.

The Company also has other commercial commitments that may impact liquidity. These commitments include unused commitments to extend credit, standby letters of credit and financial guarantees, and commercial letters of credit. The total amount of these commercial commitments at September 30, ~~2016~~2017 was ~~$9.6~~$9.7 billion. Since many of these commitments expire without being drawn upon, the total amount of these commercial commitments does not necessarily represent the future cash requirements of the Company.

The Company’s cash requirements consist primarily of dividends to shareholders, debt service, operating expenses, and treasury stock purchases. Management fees and dividends received from bank and non-bank subsidiaries traditionally have been sufficient to satisfy these requirements and are expected to be sufficient in the future. The Bank is subject to various rules regarding payment of dividends to the Company. For the most part, the Bank can pay dividends at least equal to its current year’s earnings without seeking prior regulatory approval. The Company also uses cash to inject capital into its bank and non-bank subsidiaries to maintain adequate capital as well as fund strategic initiatives.

To enhance general working capital needs, the Company has a revolving line of credit with Wells Fargo Bank, N.A. which allows the Company to borrow up to ~~$50.0~~$75.0 million for general working capital purposes. The interest rate applied to borrowed balances will be at the Company’s option, either 1.00 percent above LIBOR or 1.75 percent below ~~Prime~~the prime rate on the date of an advance. The Company ~~will also pay~~pays a 0.3 percent unused commitment fee for unused portions of the line of credit. The Company had no advances outstanding at September 30, ~~2016.~~2017.

The Company is a member bank of the FHLB. The Company owns $10.0 million of FHLB stock and has access to additional liquidity and funding sources through FHLB advances. Additionally, the Company has access to borrow up to ~~$499.0 million~~$1.2 billion through advances at the FHLB of Des Moines, but had no outstanding FHLB Des Moines advances as of September 30, ~~2016.~~2017.

Operational Risk

Operational risk generally refers to the risk of loss resulting from the Company’s operations, including those operations performed for the Company by third parties. This would include but is not limited to the risk of fraud by employees or persons outside the Company, the execution of unauthorized transactions by employees or others, errors relating to transaction processing, breaches of the internal control ~~over financial reporting~~system and compliance requirements, and unplanned interruptions in service. This risk of loss also includes the potential legal or regulatory actions that could arise as a result of an operational deficiency, or as a result of noncompliance with applicable regulatory standards. ~~Included in the~~The Company must comply with a number of legal and regulatory ~~issues with which the Company must comply are a number of imposed rules resulting from the enactment of~~requirements, including those under the Sarbanes-Oxley Act of 2002, as amended.

The Company operates in many markets and relies on the ability of its employees and systems to properly process a high number of transactions. In the event of a breakdown in ~~the~~ internal control systems, improper operation of systems or improper employee actions, the Company could suffer financial loss, face regulatory action and suffer damage to its reputation. In order to address this risk, management maintains a system of internal controls ~~over financial reporting~~ with the objective of providing proper transaction authorization and execution, safeguarding of assets from misuse or theft, and ensuring the reliability of financial and other data.

The Company maintains systems of internal controls that provide management with timely and accurate information about the Company’s operations. These systems have been designed to manage operational risk at appropriate levels given the Company’s financial strength, the environment in which it operates, and considering factors such as competition and regulation. The Company has also established procedures that are designed to ensure that policies relating to conduct, ethics and business practices are followed on a uniform basis. In certain cases, the Company has experienced losses from operational risk. Such losses have included the effects of operational errors that the Company has discovered and included as expense in the statement of income. While there can be no assurance that the Company will not suffer such losses in the future, management continually monitors and works to improve its internal ~~control over financial reporting,~~controls, systems and corporate-wide processes and procedures.

ITEM 4. CONTROLS AND PROCEDURES

~~ITEM 4.~~

~~CONTROLS AND PROCEDURES~~

The Sarbanes-Oxley Act of 2002, as amended, requires the Chief Executive Officer and the Chief Financial Officer to make certain certifications with respect to this ~~Form 10-Q~~report and to the Company’s disclosure controls and procedures and internal control over financial reporting. The Company has a Code of Ethics that expresses the values that drive employee behavior and maintains the Company’s commitment to the highest standards of ethics.

Disclosure Controls and Procedures

The Company’s management, with the participation of the ~~Company’s~~Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the ~~Company’s “disclosure~~Company's "disclosure controls and ~~procedures”~~procedures" (as such term is defined inRule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer ~~have~~ concluded that, as of the end of the period covered by ~~this~~the report, the Company’s disclosure controls and procedures were effective for ensuring that SEC filings are recorded, processed, summarized, and reported within the time period required and that information required to be disclosed by the Company ~~in the reports that it files or submits under the Exchange Act~~ is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required ~~disclosure.~~disclosures.

Internal Control Over Financial Reporting

During the quarter ended June 30, 2016, the Company completed the implementation of FIS Global’s IBS Loan system. This implementation was subject to various testing and review procedures prior to execution. The Company believes the conversion to, and implementation of, this new system further strengthened its existing internal control over financial reporting by enhancing certain business processes. Additionally, as a result of the acquisition of Marquette, we continue to integrate certain business processes and systems of Marquette. Accordingly, certain changes have been made and will continue to be made to our internal control over financial reporting until such time as this integration is complete.

~~Other than the changes described above, there have~~There has been no ~~other changes~~change in the Company’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the three months ended September 30, 2017 that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, ~~such~~the Company’s internal control over financial reporting ~~during the period covered by this Form 10-Q.~~.

PART II – ~~OTHER~~OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

~~ITEM 1.~~

~~LEGAL PROCEEDINGS~~

In the normal course of business, the Company and its subsidiaries are named defendants in various legal proceedings. In the opinion of management, after consultation with legal counsel, none of these ~~proceedings~~lawsuits are expected to ~~be material to~~have a materially adverse effect on the financial position, results of operations, or cash flows of the Company.

ITEM 1A. RISK FACTORS

~~ITEM 1A.~~

~~RISK FACTORS~~

There were no material changes to the risk factors as previously disclosed in response to Item 1A to Part 1 of the Company’s Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~ITEM 2.~~

~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

The table below sets forth the information with respect to purchases made by or on behalf of the Company or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Exchange Act) of our common stock during the three months ended September 30, ~~2016.~~2017.

ISSUER PURCHASE OF EQUITY SECURITIES

Period    (a)
Total
Number
of Shares
(or Units)
Purchased    (b) Average Price Paid per
Share
(or Unit)    (c)
Total
Number of
Shares (or
Units)
Purchased
as Part of
Publicly
Announced
Plans or
Programs    (d)
Maximum
Number (or
Approximate
Dollar
Value) of
Shares (or
Units) that
May Yet Be
Purchased
Under the
Plans or
Programs
July 1-July 31, 2016
   4,546       55.77       4,546       1,983,274
August 1-August 31, 2016
   5,214       56.77       5,214       1,978,060
September 1-September 30, 2016
   990       59.39       990       1,977,070







Total
   10,750       $ 56.59       10,750

Period	(a) Total Number of Shares (or Units) Purchased		(b) Average Price Paid per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
July 1 – July 31, 2017		580		74.26		580		1,995,922
August 1 – August 31, 2017		147,799		67.97		147,799		1,848,123
September 1 - September 30, 2017		19		66.81		19		1,848,104
Total		148,398	$	67.99		148,398

On April 26, 2016, the Company announced a plan to repurchase up to two million shares of common stock, which terminated on April 25, 2017. On April 25, 2017, the Company announced a plan to repurchase up to two million shares of common stock which will terminate on April ~~25, 2017.~~24, 2018. The Company has not made any repurchases ~~during the three month period ended September 30, 2016~~ other than through ~~this plan.~~these plans. All open market share purchases under the share repurchase plan are intended to be within the scope of Rule 10b-18 promulgated under the Exchange Act. Rule 10b-18 provides a safe harbor for purchases in a given day if the Company satisfies the manner, timing and volume conditions of the rule when purchasing its own common ~~stock.~~shares.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS

~~ITEM 3.~~

3.1

~~DEFAULTS UPON SENIOR SECURITIES~~

~~None.~~

~~ITEM 4.~~

~~MINE SAFETY DISCLOSURES~~

~~None.~~

~~ITEM 5.~~ ~~OTHER INFORMATION~~

~~None.~~

~~ITEM 6.~~

~~EXHIBITS~~

~~a) The following exhibits are filed herewith:~~



~~3.1~~		Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the ~~Registrant’s~~Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 which was filed with the Commission on May 9, 2006).

3.2		Bylaws, ~~(incorporated~~amended as of October 28, 2014 incorporated by reference to Exhibit 3.2 to the ~~Registrant’s~~Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 which was filed with the Commission on August 2, ~~2016).~~2016.

~~10.1~~ 31.1		Employment Offer Letter between the UMB Financial Corporation and Ram Shankar dated July 26, 2016 (incorporated by reference to Exhibit 99.3 to the Registrant’s Current Report on Form 8-K filed with the Commission on July 26, 2016).

~~10.2~~		UMB Relocation Assistance Agreement between UMB Bank, N.A and Ram Shankar dated July 26, 2016 (incorporated by reference to Exhibit 99.4 of the Registrant’s Current Report on Form 8-K filed with the Commission on July 26, 2016).

~~31.1~~		CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act filed herewith.

31.2		CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act filed herewith.

32.1		CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act filed herewith.

32.2		CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act filed herewith.

101.INS		XBRL Instance filed herewith.

101.SCH		XBRL Taxonomy Extension Schema filed herewith.

101.CAL		XBRL Taxonomy Extension Calculation filed herewith.

101.DEF		XBRL Taxonomy Extension Definition filed herewith.

101.LAB		XBRL Taxonomy Extension Labels filed herewith.

101.PRE		XBRL Taxonomy Extension Presentation filed herewith.

~~SIGNATURES~~SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		UMB FINANCIAL CORPORATION
~~UMB FINANCIAL CORPORATION~~

/s/ Brian J. Walker
Brian J. Walker
Chief Accounting Officer

Date: November ~~1, 2016~~2, 2017

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