( Mark one)
For the transition period from _______________ to ________________
Incorporated pursuant to the Laws ofMissouri State
Internal Revenue Service — Employer Identification No.43-0903811
1010 Grand Avenue
Kansas City, Missouri 64106
(Address of principal executive offices and zip code)
(816) 860-7000
(Registrant's telephone number, including area code)
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.Yes X No ___
At March 31, 2001, UMB Financial Corporation had 21,122,599 shares of common stock outstanding. This is the only class of stock of the Company.
UMB FINANCIAL CORPORATION FORM
10-Q INDEX
| Item | Page |
PART I. Financial Information
1. Financial Statements
| Consolidated Balance Sheets As of March 31, 2001 and 2000 and December 31, 2000 (unaudited) | 3 |
| ConsolidatedStatements of Income for the Three Months Ended March 31, 2001 and 2000 (unaudited) | 4 |
| Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2001 and 2000 (unaudited) | 5 |
| Consolidated Statements of Shareholders' Equity for the Three Months Ended March 31, 2001 and 2000 (unaudited) | 6 |
| Notes to ConsolidatedFinancial Statements | 7-9 |
Supplemental Financial Data |
| Average Balances/ Yields and Rates | 10 |
| Analysis of Changes in Net Interest Income and Margin | 11 |
| 2. Management's Discussion and Analysis of Financial Condition and Results of Operations | 12-15 |
| PART II. Other Information |
| Exhibits and Reports on Form 8-K | 16 |
| Signatures | 17 |
UMB FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
March 31, December 31,
------------------------------ --------------
ASSETS 2001 2000 2000
-------------- -------------- --------------
Loans:
Commercial, financial and agricultural $ 1,587,146 $ 1,699,608 $ 1,590,365
Consumer (net of unearned interest) 1,018,703 1,001,258 1,055,485
Real estate 416,545 350,249 420,430
Leases 8,247 6,376 7,677
Allowance for loan losses (32,203) (31,274) (31,998)
-------------- -------------- --------------
Net loans $ 2,998,438 $ 3,026,217 $ 3,041,959
Securities available for sale:
U.S. Treasury and agencies $ 975,049 $ 1,334,878 $ 1,456,405
U.S. Treasury and agencies pledged to creditors 853,237 865,600 857,928
State and political subdivisions 17,208 2,138 1,809
Commercial paper and other 295,654 69,035 133,854
-------------- -------------- --------------
Total securities available for sale $ 2,141,148 $ 2,271,651 $ 2,449,996
Securities held to maturity:
State and political subdivisions (market value
of $660,594, $731,506 and $695,219, respectively) $ 651,124 $ 744,757 $ 695,470
Federal funds and resell agreements 99,725 74,558 161,076
Trading securities and other earning assets 79,715 68,233 80,664
-------------- -------------------------------
Total earning assets $ 5,970,150 $ 6,185,416 $ 6,429,165
Cash and due from banks 590,488 689,364 975,324
Bank premises and equipment, net 246,882 237,003 250,700
Accrued income 73,642 80,619 71,642
Premium on and intangibles of purchased banks 41,811 48,901 43,550
Other assets 78,102 62,457 96,502
-------------- -------------- --------------
Total assets $ 7,001,075 $ 7,303,760 $ 7,866,883
============== ============== ==============
LIABILITIES
Deposits:
Noninterest-bearing demand $ 1,643,542 $ 2,039,586 $ 2,179,776
Interest-bearing demand and savings 2,294,968 2,199,919 2,551,326
Time deposits under $100,000 806,983 831,459 792,027
Time deposits of $100,000 or more 289,266 373,192 412,075
-------------- -------------- --------------
Total deposits $ 5,034,759 $ 5,444,156 $ 5,935,204
Federal funds and repurchase agreements 938,293 1,076,274 909,755
Short-term debt 142,616 0 72,184
Long-term debt 29,843 28,362 27,041
Accrued expenses and taxes 62,514 41,159 50,981
Other liabilities 64,407 55,551 168,784
-------------- -------------- --------------
Total liabilities $ 6,272,432 $ 6,645,502 $ 7,163,949
-------------- -------------- --------------
SHAREHOLDERS' EQUITY
Common stock, $1.00 par value; authorized 33,000,000
shares; issued 26,472,039 shares. $ 26,472 $ 26,472 $ 26,472
Capital surplus 683,219 683,407 683,220
Retained earnings 210,168 160,957 196,705
Accumulated other comprehensive income (loss) 14,819 (14,575) 1,776
Unearned ESOP shares (4,366) (6,867) (4,991)
Treasury stock, 5,227,415, 4,925,888 and
5,188,807 shares, at cost, respectively (201,669) (191,136) (200,248)
-------------- -------------- --------------
Total shareholders' equity $ 728,643 $ 658,258 $ 702,934
-------------- -------------- --------------
Total liabilities and shareholders' equity $ 7,001,075 $ 7,303,760 $ 7,866,883
============== ============== ==============
See Notes to Consolidated Financial Statements.
UMB FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands)
Three Months
Ended March 31,
INTEREST INCOME 2001 2000
------------ ------------
Loans $ 63,926 $ 58,760
Securities:
Taxable interest $ 32,578 $ 40,563
Tax-exempt interest 7,286 8,014
------------ ------------
Total securities income $ 39,864 $ 48,577
Federal funds and resell agreements 2,965 1,750
Trading securities and other 1,190 1,157
------------ ------------
Total interest income $107,945 $110,244
------------ ------------
INTEREST EXPENSE
Deposits $ 33,697 $ 35,014
Federal funds and repurchase agreements 12,404 16,677
Short-term debt 1,005 0
Long-term debt 478 548
------------ ------------
Total interest expense $ 47,584 $ 52,239
------------ ------------
Net interest income $ 60,361 $ 58,005
Provision for loan losses 2,963 1,905
------------ ------------
Net interest income after provision $ 57,398 $ 56,100
------------ ------------
NONINTEREST INCOME
Trust income $ 13,655 $ 14,128
Securities processing 4,185 4,610
Trading and investment banking 6,357 4,929
Service charges on deposits 12,889 12,478
Other service charges and fees 7,426 6,927
Bankcard fees 4,089 3,276
Net investment security gains 21 1
Other 3,192 2,063
------------ ------------
Total noninterest income $ 51,814 $ 48,412
------------ ------------
NONINTEREST EXPENSE
Salaries and employee benefits $ 48,964 $ 44,818
Occupancy, net 6,865 6,007
Equipment 13,366 11,103
Supplies and services 5,563 5,375
Marketing and business development 4,207 3,937
Processing fees 4,031 3,856
Legal and consulting 2,784 1,336
Amortization of premium on purchased banks 1,739 1,819
Other 4,982 5,154
------------ ------------
Total noninterest expense $ 92,501 $ 83,405
------------ ------------
Minority interest in loss of consolidated sub. $ 8,053 $ 941
------------ ------------
Income before income taxes $ 24,764 $ 22,048
Income tax provision 7,046 5,504
------------ ------------
NET INCOME $ 17,718 $ 16,544
============ ============
PER SHARE DATA
Net income - Basic $ 0.84 $ 0.77
Net income - Diluted $ 0.84 $ 0.77
Dividends $ 0.20 $ 0.20
Weighted average shares outstanding 21,140,603 21,427,786
See Notes to Consolidated Financial Statements.
UMB FINANCIAL COPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Three Months Ended
March 31,
-------------------------------------------
2001 2000
------------------ ------------------
Operating Activities
Net Income $ 17,718 $ 16,544
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 2,963 1,905
Depreciation and amortization 9,195 9,239
Minority interest in net loss of subsidiary (8,053) (941)
Deferred income taxes (914) 1,545
Net decrease in trading securities 949 10,786
Gains on sales of securities available for sale (21) (1)
Amortization of securities premiums,
net of discount accretion (6,865) (7,211)
Earned ESOP shares 625 624
Changes in:
Accrued income (2,000) (5,079)
Accrued expenses and taxes 4,990 11,222
Other, net (27,982) (22,786)
------------------ ------------------
Net cash provided by (used in) operating activities $ (9,395) $ 15,847
------------------ ------------------
Investing Activities
Proceeds from maturities of investment securities $ 44,973 $ 23,933
Proceeds from sales of securities available for sale - 100
Proceeds from maturities of securities available for sale 6,236,066 3,639,713
Purchases of investment securities (1,399) (21,020)
Purchases of securities available for sale (5,899,060) (2,756,509)
Net (increase) decrease in loans 40,558 (218,165)
Net decrease in fed funds and resell agreements 61,351 56,161
Investment capital contributed to consolidated subsidiary - 25,000
Purchases of bank premises and equipment (3,928) (4,888)
Other, net (49,942) 5,656
Proceeds from sales of bank premises and equipment 290 0
------------------ ------------------
Net cash provided by investing activities $ 428,909 $ 749,981
------------------ ------------------
Financing Activities
Net decrease in demand and savings deposits $ (792,592) $ (254,633)
Net decrease in time deposits (107,853) (225,146)
Net increase(decrease)in fed funds/repurchase agreements 28,538 (341,089)
Net increase in short term borrowings 70,432 0
Proceeds from long term debt 3,700 1,750
Repayment of long term debt (898) (11,292)
Cash dividends (4,255) (4,315)
Proceeds from exercise of stock options 6 17
Purchases of treasury stock (1,428) (7,864)
------------------ ------------------
Net cash used in financing activities $ (804,350) $ (842,572)
------------------ ------------------
Decrease in cash and due from banks $ (384,836) $ (76,744)
Cash and due from banks at beginning of year 975,324 766,108
------------------ ------------------
Cash and due from banks at end of period $ 590,488 $ 689,364
================== ==================
See Notes to Consolidated Financial Statements.
UMB FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(unaudited, in thousands)
Accumulated
Other
Common Capital Retained Comprehensive Treasury Unearned
Stock Surplus Earnings Income (Loss) Stock ESOP Total
------------------------------------------------------------------------------------------------------
Balance - January 1, 2000 $26,472 $ 683,410 $ 148,728 $ (12,836) $ (183,292) $ (7,491) $ 654,991
Net income - - 16,544 - - - 16,544
Comprehensive income,net of tax
Unrealized loss on securities of
$1,740 net of reclassification adj.
for gains included in net income
of $1. - - - (1,739) - - (1,739)
---------------
Total comprehensive income 14,805
Cash Dividends - - (4,315) - - - (4,315)
Earned ESOP shares - - - - - 624 624
Purchase of treasury stock - - - - (7,864) - (7,864)
Exercise of stock options - (3) - - 20 - 17
------------------------------------------------------------------------------------------------------
Balance - March 31, 2000 $26,472 $ 683,407 $ 160,957 $ (14,575) $ (191,136) $ (6,867) $ 658,258
======================================================================================================
Balance - January 1, 2001 $26,472 $ 683,220 $ 196,705 $ 1,776 $ (200,248) $ (4,991) $ 702,934
Net income - - 17,718 - - - 17,718
Comprehensive income,net of tax
Unrealized gain on securities of
$13,064 net of reclassification adj.
for gains included in net income
of $21. - - - 13,043 - - 13,043
---------------
Total comprehensive income 30,761
Cash dividends - - (4,255) - - - (4,255)
Earned ESOP shares - - - - - 625 625
Purchase of treasury stock - - - - (1,428) - (1,428)
Exercise of stock options - (1) - - 7 - 6
------------------------------------------------------------------------------------------------------
Balance - March 31, 2001 $26,472 $ 683,219 $ 210,168 $ 14,819 $ (201,669) $ (4,366) $ 728,643
======================================================================================================
See Notes to Consolidated Financial Statements.
>
UMB FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2001
1. Financial Statement Presentation:
The consolidated financial statements include the accounts of the Company and
its subsidiaries after elimination of all material intercompany transactions. In
the opinion of management of the Company, all adjustments, which were of a
normal recurring nature and necessary for a fair presentation of the financial
position and results of operations, have been made. The financial statements
should be read in conjunction with the Management's Discussion and Analysis of
Financial Condition and results of Operations and with reference to the 2000
Annual Report to Shareholders.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates 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 these estimates.
2. Earnings:
Earnings per share are based on the weighted average number of shares of common
stock outstanding during the interim periods. Diluted earnings per share takes
into account the dilutive effect of 21,654 and 23,298 shares issuable under
options granted by the Company at March 31, 2001 and 2000, respectively.
3. Allowance for Loan Losses:
The following is a summary of the Allowance for Loan Losses for the three months
ended March 31, 2001 and 2000 (in thousands):
Three Months Ended March 31,
2001 2000
Balance January 1 $31,998 $31,193
Additions:
Provision for loan losses 2,963 1,905
_______ _______
Total Before Deductions 34,961 33,098
_______ _______
Deductions:
Charge-offs (3,711) (2,683)
Less recoveries on loans previously charged-off 953 859
_______ _______
Net charge-offs (2,758) (1,824)
_______ _______
Balance, March 31 $32,203 $31,274
======= =======
At March 31, 2001 the amount of loans that are considered to be impaired under
SFAS No. 114 was $10,175,000 compared to $10,676,000 at December 31, 2000 and
$4,553,000 at March 31, 2000. At March 31, 2001 all of these loans are on a
non-accrual or restructured basis. Included in the impaired loans is $1,208,000
of loans for which the related allowance is $1,098,000. This specific allowance
is based on a comparison of the recorded loan value to either an estimate of the
present value of the loan's estimated cash flows, its estimated fair value, or
the fair value of the collateral securing the loan if the loan is collateral
dependent. The remaining $8,967,000 of impaired loans do not have an allowance
for loan losses as a result of write-downs and supporting collateral value. The
average recorded investment in impaired loans during the period ended March 31,
2001 was approximately $10,426,000.
UMB FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2001
4. Segment Reporting:
Public enterprises are required to report certain
information concerning operating segments in annual and interim financial
statements. Operating segments are considered to be components of an enterprise
for which separate financial information is available and evaluated regularly by
key decision-makers for purposes of allocating resources and assessing
performance. During 1999, the Company merged several affiliate banks into the
lead bank, which changed the manner in which various segments are evaluated and
managed. The Company has defined its operations into the following segments:
Commercial Banking: Providing a full range of lending and cash management
services to commercial and governmental entities through the commercial division
of the Company's lead bank. Trust and Securities Processing: Providing estate
planning, trust, employee benefit, asset management and custodial services to
individuals and corporate customers. Investment Banking and Brokerage: Providing
commercial and retail brokerage, investment accounting and safekeeping services
to individuals and corporate customers, as well as the Company's treasury
function. Community Banking: Providing a full range of banking services to
retail and corporate customers through the Company's affiliate banks' and branch
network. Other: The Other category consists primarily of Overhead and Support
departments of the Company. The net revenues and expenses of these departments
are allocated to the other segments of the organization in the Company's
periodic segment reporting. Reported segment revenues, net income and average
assets include revenue and expense distributions for services performed for
other segments within the Company as well as balances due from other segments
within the Company. Such intercompany transactions and balances are eliminated
in the Company's consolidated financial statements. The table below lists
selected financial information by business segment (in thousands):
Three Months Ended March 31,
2001 2000
Revenues
Commercial Banking $ 33,445 $ 28,828
Trust and Securities Processing 15,915 19,203
Investment Banking and Brokerage 11,862 4,482
Community Banking 56,414 55,654
Other (722) 6,198
Less: Intersegment revenues (7,702) (11,451)
_______ _______
Total $ 109,212 $ 102,914
Net Income (loss)
Commercial Banking $ 14,443 $ 11,115
Trust and Securities Processing 1,806 4,741
Investment Banking and Brokerage 2,250 (1,265)
Community Banking (758) 2,228
Other - -
Less: Intersegment (income) loss (23) (275)
_______ ______
Total $ 17,718 $ 16,544
Total Average Assets
Commercial Banking $1,928,401 $2,145,897
Trust and Securities Processing 17,509 23,046
Investment Banking and Brokerage 2,684,534 2,449,404
Community Banking 2,881,888 3,312,705
Other 328,534 436,869
Less: Intersegment assets (524,542) (582,615)
_________ _________
Total $7,316,324 $7,785,306
========= ==========
UMB FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2001
5. Commitments and Contingencies: In the normal course of business, the Company
and its subsidiaries are named defendants in various lawsuits and counterclaims.
In the opinion of management, after consultation with legal counsel, none of the
suits will have a materially adverse effect on the financial position or results
of the Company
6. New Accounting Pronouncements:
In June 1998, The Financial Accounting
Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" as amended by SFAS No. 137 and No. 138, which deferred the
effective date of SFAS No. 133. This Statement requires entities to recognize
all derivatives as either assets or liabilities in its financial statements and
to measure such instruments at their fair value. The Statements are effective
for the Company's financial statements after January 1, 2001. The Company has
evaluated this Statement and it did not have a significant impact on the
consolidated financial statements upon adoption.
In September 2000, the Financial Accounting Standards Board issued SFAS No. 140,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities." SFAS No. 140 replaces SFAS 125, which has the same title. It
revises the standards for accounting for securitizations and other transfers of
financial assets and collateral and requires certain disclosures. Otherwise,
SFAS No. 140 carried forward most of the provisions of SFAS No. 125. Certain
provisions of SFAS No. 140 relating to pledged collateral, securitized financial
assets and retained interest in securitized financial assets were effective for
the Company's consolidated financial statements as of December 31, 2000. The
remainder of the Statement is effective for transactions occurring after March
31, 2001. The Company does not believe the Statement will have a material impact
on its financial statements.
7. New Subsidiary:
During the first quarter of 2000, the Company's lead bank
formed a subsidiary under the name eScout.com LLC (eScout), minority interests
in which were acquired by several outside investors. eScout's function is to
serve as an electronic commerce network for UMB's commercial customers,
correspondent banks and their commercial customers, and other banks and small
businesses. According to the terms of eScout's operating agreement any initial
operating losses are to be allocated to the outside minority investors.
Therefore results of eScout's start up and initial operations are not
anticipated to have a material impact on the results or operations of the
Company.
UMB FINANCIAL CORPORATION
AVERAGE BALANCES/YIELDS AND RATES
(tax-equivalent basis) (unaudited, in thousands)
Three Months Ended March 31,
2001 2000
Average Average Average Average
Assets Balance Yield/Rate Balance Yield/Rate
---------------------------- ---------------------------
Loans, net of unearned interest $ 3,026,465 8.59 % $ 2,873,033 8.25 %
Securities:
Taxable $ 2,261,013 5.84 $ 2,796,531 5.83
Tax-exempt 673,232 6.39 746,972 6.38
---------------------------- ---------------------------
Total securities $ 2,934,245 5.97 $ 3,543,503 5.95
Federal funds and resell agreements 211,039 5.70 132,144 5.69
Other earning assets 82,050 6.19 81,504 5.82
---------------------------- ---------------------------
Total earning assets $ 6,253,799 7.23 $ 6,630,184 6.94
Allowance for loan losses (32,034) (31,161)
Other assets 1,094,559 1,186,283
---------------- ---------------
Total assets $ 7,316,324 $ 7,785,306
================ ===============
Liabilities and Shareholders' Equity
Interest-bearing deposits $ 3,557,560 3.84 % $ 3,705,580 3.80 %
Federal funds and repurchase agreements 987,852 5.09 1,287,880 5.21
Borrowed funds 102,956 5.84 33,498 6.58
---------------------------- ---------------------------
Total interest-bearing liabilities $ 4,648,368 4.15 $ 5,026,958 4.18
Noninterest-bearing demand deposits 1,815,094 1,993,847
Other liabilities 130,864 106,882
Shareholders' equity 721,998 657,619
---------------- ---------------
Total liabilities and shareholders' equity $ 7,316,324 $ 7,785,306
================ ===============
Net interest spread 3.08 % 2.76 %
Net interest margin 4.15 3.77
UMB FINANCIAL CORPORATION
ANALYSIS OF CHANGES IN NET INTEREST INCOME AND MARGIN
(tax-equivalent basis) (unaudited, in thousands)
ANALYSIS OF CHANGES IN NET INTEREST INCOME
Three Months Ended
March 31, 2001 vs. 2000
------------------------------------------------------------
Volume Rate Total
Change in interest earned on:
Loans $ 2,918 $ 2,243 $ 5,161
Securities:
Taxable (8,049) 64 (7,985)
Tax-exempt (1,259) 15 (1,244)
Federal funds sold 1,088 127 1,215
Other 7 66 73
------------------ ----------------- ----------------
Interest income $ (5,295) $ 2,515 $ (2,780)
------------------ ----------------- ----------------
Change in interest paid on:
Interest-bearing deposits $ (1,627) $ 310 $ (1,317)
Federal funds purchased (3,900) (373) (4,273)
Borrowed funds 1,003 (68) 935
------------------ ----------------- ----------------
Interest expense $ (4,524) $ (131) $ (4,655)
------------------ ----------------- ----------------
Net interest income $ (771) $ 2,646 $ 1,875
================== ================= ================
ANALYSIS OF NET INTEREST MARGIN
Three Months Ended
March 31,
------------------------------------------------------------
2000 1999 Change
Average earning assets $ 6,253,799 $ 6,630,184 $ (376,385)
Interest-bearing liabilities 4,648,368 5,026,958 (378,590)
------------------ ----------------- ----------------
Interest free funds $ 1,605,431 $ 1,603,226 $ 2,205
================== ================= ================
Free funds ratio 25.67 % 24.18 % 1.49 %
(free funds to earning assets)
Tax-equivalent yield on earning assets 7.23 % 6.94 % 0.29 %
Cost of interest-bearing liabilities 4.15 4.18 (0.03)
------------------ ----------------- ----------------
Net interest spread 3.08 % 2.76 % 0.32 %
Benefit of interest free funds 1.07 1.01 0.06
------------------ ----------------- ----------------
Net interest margin 4.15 % 3.77 % 0.38 %
================== ================= ================
UMB FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2001
The following financial review presents management's discussion and analysis of the consolidated financial condition and results of operations of UMB Financial Corporation (the Company). This review highlights the major factors affecting results of operations and any significant changes in financial condition for the period ended March 31, 2001. It should be read in conjunction with the accompanying consolidated financial statements, notes to financial statements and other financial statistics appearing elsewhere in this report. Interim results are not necessarily indicative of results for a full year.
Estimates and forward looking statements are included in this review and as such are subject to certain risks, uncertainties and assumptions that are beyond the Company's ability to control or estimate precisely. These statements are based on current financial and economic data and management's expectations concerning future developments and their effects. Actual results could differ materially from management's current expectations. Factors that could cause material differences in actual operating results include, but are not limited to, the impact of competition; changes in pricing, loan demand, consumer savings habits, employee costs and interest rates; the ability of customers to repay loans; changes in U.S. or international economic or political conditions, such as inflation or fluctuation in interest or foreign exchange rates; disruptions in operations due to failures of telecommunications systems, utility systems, security clearing systems, or other elements of the financial industry infrastructure. While the Company periodically reassesses material trends and uncertainties affecting the Company's results of operations and financial condition in connection with the preparation of management's discussion and analysis contained in the Company's annual and quarterly reports, the Company does not intend to review or revise any particular forward-looking statement referenced herein in light of future events.
Summary
The Company earned net income of $17,718,000 for the three months ended March 31, 2001, compared to $16,544,000 for the same period a year earlier. This represents per share earnings of $0.84 for the first quarter of 2001 compared to $0.77 for the first quarter of 2000, an increase of 9.1 percent. The current year results represent the Company's best quarterly performance in terms of earnings from operations, which exclude gains from the sale of assets.
Loan growth and increases in non-interest income have driven the Company's improved performance. During the first three months of 2001, non-interest income increased by 7.0 percent over the same period of 2000. This improvement was fueled by increases in trading and investment banking activities, as well as higher fees from bankcard services. The Company's operating expenses increased by 10.9 percent for the first three months of 2001. Net interest income and non-interest income and expense include the results of operations of eScout.com, LLC, a majority-owned subsidiary of the Company. Due to the terms of the LLC agreement, the net results of operations of this subsidiary are eliminated through minority interest in loss of consolidated subsidiary. The increase in the Company's operating expenses, without the effect of eScout, was only 1.3 percent.
The Board of Directors of the Company has authorized the purchase of up to one million shares of the Company's stock during 2001, such purchases to be on such terms and conditions as management may deem appropriate. The purchases may be made, from time to time, in both open market and privately negotiated transactions.
UMB FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2001
Results of Operations
For the three months ended March 31, 2001, the Company earned net interest income of $60,361,000 compared to $58,005,000 for the first quarter of 2000. The Company achieved increases in net interest income as a result of both sustained loan growth and more favorable interest rates. Average loans for the quarter ended March 31, 2001, totaled $3.026 billion, an increase of more than 5 percent from the total one year earlier. This loan growth, coupled with an overall increase in interest rates allowed the Company to achieve a net interest margin of 4.15 compared to 3.77 percent one year earlier. The yield on the Company's investment portfolio for 2001 was basically unchanged from the period year, however the average balance on investment securities decreased.
The Company's loan loss provision for the first quarter of 2001 was $2,963,000 compared to $1,905,000 for the same period of 2000. The increase in the provision for loan loss was due to a combination of increases in net loan charge-offs and an increase in non-performing loans. For the three months ended March 31, 2001 the net loan charge-offs were $2,758,000, compared to $1,824,000 for the same period in 2000. The majority of the charge-offs in both periods was from bankcard and consumer loans. The Company will continue to closely monitor its loan positions and related underwriting efforts in order to minimize credit losses.
Non-interest income totaled $51,814,000 for the first quarter of 2001 compared to $48,412,000 for the same period of 2000, an increase of 7.0 percent. Nearly all categories of fee income, other than trust and securities processing, experienced growth for the quarter. The largest areas of increases were from trading and investment banking and bankcard fees, which both showed increases of over 20% from the same period one year earlier. Fee income from deposit services and cash management services also increased as the Company continued its efforts to grow these revenue sources, which do not carry the credit and interest rate risk of interest-based revenue.
Non-interest expense was $92,501,000 for the three months ended March 31, 2001 compared to $83,405,000 for the same period of 2000. The major factors driving the increase in the Company's non-interest expense were higher staffing costs and an increase in equipment related expenses. Staffing for the Company's many growth initiatives, coupled with a tight labor market, have contributed to the increase in salaries and employee benefits. Equipment expense also increased as a result of technology and conversion costs related to the replacement and upgrades of core operating systems. The benefits of the new initiatives and upgrades implemented in prior years are partially underway and should be more fully realized throughout the year. Increases were also occurred in occupancy, and legal and consulting. The Company's non-interest expense has been impacted by the start-up of its e-commerce subsidiary venture eScout.com LLC. Due to the terms of the LLC agreement, the net results of operations of this subsidiary are consolidated in the Company's operating expenses and then eliminated through minority interest in loss of consolidated subsidiary. Without the effect of eScout, non-interest expense at March 31, 2001 only increased 1.3% over the same period of the prior year, and decreased slightly from the costs during the fourth quarter of 2000. The prudent management of non-interest expense will continue to be a priority for the Company.
UMB FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2001
Financial Condition
Total assets at March 31, 2001 were $7.001 billion compared to $7.304 billion at March 31, 2000 and $7.867 billion at December 31, 2000. Loans, net of unearned interest, decreased to $3.031 billion as of March 31, 2001 compared to $3.057 billion at March 31, 2000 and $3.074 billion at December 31, 2000. While loans decreased on an actual basis, average loans increased by 5.3% over the same period of the prior year. This increase in average loans reflects the Company's continuing efforts to expand loan growth despite a very competitive loan market in which the Company operates. Total investment securities decreased to $2.792 billion as of March 31, 2001 compared to $3.016 billion at March 31, 2000 and $3.145 billion at December 31, 2000. Total deposits decreased to $5.035 billion at March 31, 2001 compared to $5.444 billion at March 31, 2000 and $5.935 billion at December 31, 2000. The decrease of deposit balances reflects the outflow of public funds and commercial balances.
Non accrual and restructured loans totaled $11,487,000, 0.38% of loans, at March 31, 2001 compared to $5,642,000, 0.18% of loans, at March 31, 2000, and $11,511,000 at December 31, 2000, 0.37% of loans. Loans past due 90 days or more were $6,902,000, 0.23% of loans at March 31, 2001, compared to $7,081,000, 0.23% of loans at March 31, 2000, and $7,680,000 at December 31,2000, 0.25% of loans. The Company's loan quality remains strong by industry standards. The total non-performing loans and loans past due 90 days or more were less than 1.0% of total loans. At March 31, 2001 the Company's allowance for loan losses was $32,203,000 or 1.06% of outstanding loans. The adequacy of the Company's allowance for loan losses is evaluated based on reserves for specific loans, and reserves on homogeneous groups of loans based on historical loss experience and current loss trends. The Company has a well-diversified loan portfolio with no foreign loans and no significant credit exposure to commercial real estate.
UMB FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2001
Liquidity and Capital Resources
The Company's liquidity position continues to be strong. At March 31, 2001, the Company's average loan to deposit ratio was 56.3% compared to 50.4% at March 31, 2000. At March 31, 2001, the average life of the securities portfolio was 17 months with 48% of the portfolio maturing during the next twelve months. The Company has access to various borrowing markets should there be a need for additional funding.
Shareholders' equity totaled $729 million at March 31, 2001 compared to $658 million at March 31, 2000 and $703 million at year-end 2000. During the twelve months ended March 31, 2001 the Company increased its treasury stock holdings by $10.5 million. Management will continue to consider treasury stock purchases depending on price, availability and alternative use of funds. At March 31, 2001, the net unrealized gain on securities available for sale was $14.8 million, compared to a net unrealized loss of $14.6 million at March 31, 2000 and an unrealized gain of $1.8 million at December 31, 2000.
The Company will continue to manage its interest rate risk using static gap analysis along with other tools that help measure the impact of various interest rate scenarios. One of these tools is a model that internally generates estimates of the change in net portfolio value (NPV). NPV is the present value of expected cash flows from assets, liabilities and off-balance sheet contracts. By projecting the timing and amount of future net cash flows an estimated value of that asset or liability can be determined. The following table sets forth the Company's NPV as of March 31, 2001
Net Portfolio Value
Dollar Change Percentage
Amount Change
200 $1,438,084 $103,959 7.79 %
100 1,361,829 27,704 2.08 %
Static 1,334,125 - - %
(100) 1,233,301 (100,824) (7.56)%
(200) 1,124,482 (209,643) (15.71)%
The Company's capital position is summarized in the table below and exceeds regulatory requirements.
Three Months Ended
March 31,
RATIOS 2001 2000
Return on average assets 0.98 % 0.86 %
Return on average equity 9.95 10.12
Average equity to assets 9.87 8.45
Tier 1 risk-based capital ratio 15.63 15.15
Total risk-based capital ratio 16.38 15.91
Leverage ratio 9.24 8.02
Per Share Data
Earnings Basic $ 0.84 $ 0.77
Earnings Diluted $ 0.84 $ 0.77
Cash Dividends $ 0.20 $ 0.20
Dividend payout ratio 23.81 % 25.97 %
Book value $ 34.50 $ 30.83
PART II. Other Information Item 6. Exhibits and Reports on form 8-Ka) The following exhibit is filed herewith:
None.
b) Reports on Form 8-K:
The Company filed two reports on Form 8-K during the quarter ended March 31, 2001. The first report was filed on January 30, 2001 stating the Company's intent to purchase Sunstone Financial Group, Inc. The other report was filed on March 21, 2001 when the Company signed a definitive agreement to acquire State Street Bank and Trust Company of Missouri, N. A.
UMB FINANCIAL CORPORATION
FORM 10-Q
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
/s/R. Crosby Kemper III
R. Crosby Kemper III
Chairman and Chief Executive Officer
/s/Daniel C. Stevens
Daniel C. Stevens
Chief Financial Officer
Date:May 14, 2001