UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___________________ to ____________________
Commission file number 0-4887
UMB FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Missouri 43-0903811
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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 June 30, 1997, UMB Financial Corporation had 19,449,303 shares of common
stock outstanding. This is the only class of stock of the Company.
UMB FINANCIAL CORPORATION
FORM 10-Q
INDEX
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
as of June 30, 1997 (unaudited) and 1996 and December 31, 1996
(audited) 3
Consolidated Statements of Income for the Three and Six Months
Ended June 30, 1997 and 1996 (unaudited) 4
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1997 and 1996 (unaudited) 5
Consolidated Statements of Shareholders' Equity for the Six Months
Ended June 30, 1997 and 1996 (unaudited) 6
Notes to Consolidated Financial Statements 7-8
Supplemental Financial Data
Average Balances/ Yields and Rates 9
Analysis of Changes in Net Interest Income and Margin 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-13
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
UMB FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, December 31,
(Unaudited) (Audited)
------------------------------ --------------
ASSETS 1997 1996 1996
- ------ -------------- ------------- --------------
Loans:
Commercial and agricultural $1,339,000 $1,202,733 $1,236,092
Consumer (net of unearned interest) 1,009,758 812,135 914,914
Real estate 383,168 435,324 404,039
Leases 2,856 2,114 2,596
Allowance for loan losses (33,426) (34,577) (33,414)
-------------- ------------- --------------
Net Loans $2,701,356 $2,417,729 $2,524,227
Securities available for sale:
U.S. Treasury and agencies $2,192,875 $2,129,527 $2,257,217
State and political subdivisions 4,446 0 2,464
Commercial paper and other 8,882 24,475 127,641
-------------- ------------- --------------
Total securities available for sale $2,206,203 $2,154,002 $2,387,322
Securities held to maturity:
State and political subdivisions 364,151 316,328 319,227
-------------- ------------- --------------
Total securities held to maturity (market value
of $365,654, $314,189 & $319,525, respectively) $ 364,151 $ 316,328 $ 319,227
Federal funds and resell agreements 71,425 163,013 58,960
Trading securities and other earning assets 106,597 70,331 79,814
-------------- ------------- --------------
Total earning assets $5,449,732 $5,121,403 $5,369,550
Cash and due from banks 690,382 556,125 772,631
Bank premises and equipment, net 162,664 150,977 152,909
Accrued income 70,965 76,458 72,717
Premium on and intangibles of purchased banks 63,857 71,132 67,474
Other Assets 54,506 58,678 76,705
-------------- ------------- --------------
Total assets $6,492,106 $6,034,773 $6,511,986
============== ============= ==============
LIABILITIES
Deposits:
Noninterest-bearing demand $1,609,069 $1,362,690 $1,724,486
Interest-bearing demand and savings 2,109,160 2,022,420 2,171,938
Time deposits under $100,000 904,010 955,534 917,983
Time deposits of $100,000 or more 347,449 266,809 376,127
-------------- ------------- --------------
Total deposits $4,969,688 $4,607,453 $5,190,534
Federal funds and repurchase agreements 800,582 745,271 614,395
Short-term debt 1,278 1,673 911
Long-term debt 50,189 56,920 51,350
Accrued expenses and taxes 49,332 48,249 46,887
Other liabilities 26,874 21,278 25,432
-------------- ------------- --------------
Total liabilities $5,897,943 $5,480,844 $5,929,509
-------------- ------------- --------------
SHAREHOLDERS' EQUITY
Common stock, $1.00 par value; authorized 33,000,000
shares; issued 23,503,084; 22,547,521; & 23,503,084 $ 23,503 $ 22,548 $ 23,503
shares respectively
Capital surplus 558,024 522,822 558,073
Retained earnings 164,911 161,805 142,947
Net unrealized gain (loss) on securities available for (1,723) (13,162) (1,755)
sale
Unearned ESOP shares (13,743) (16,253) (15,003)
Treasury stock, 3,721,818, 3,387,367 and
3,424,176 shares, at cost, respectively (136,809) (123,831) (125,288)
-------------- ------------- --------------
Total shareholders' equity $ 594,163 $ 553,929 $ 582,477
-------------- ------------- --------------
Total liabilities and shareholders' equity $6,492,106 $6,034,773 $6,511,986
============== ============= ==============
<FN>
See Notes to Consolidated Financial Statements.
</FN>
UMB FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(unaudited in thousands)
Three Months Six Months
Ended June 30, Ended June 30,
INTEREST INCOME 1997 1996 1997 1996
- --------------- -------------- -------------- -------------- -------------
Loans $ 58,901 $ 53,357 $ 114,284 $ 108,286
Securities:
Taxable interest $ 31,369 $ 30,449 $ 64,616 $ 62,168
Tax-exempt interest 4,001 3,594 7,709 7,169
-------------- -------------- -------------- -------------
Total securities income $ 35,370 $ 34,043 $ 72,325 $ 69,337
Federal funds and resell agreements 2,068 3,338 3,970 5,562
Trading securities and other 1,316 1,085 2,401 2,057
-------------- -------------- -------------- -------------
Total interest income $ 97,655 $ 91,823 $ 192,980 $ 185,242
-------------- -------------- -------------- -------------
INTEREST EXPENSE
Deposits $ 31,564 $ 30,177 $ 63,010 $ 62,143
Federal funds and repurchase
agreements 10,061 9,921 19,427 18,576
Short-term debt 9 8 20 19
Long-term debt 917 1,048 1,833 2,102
-------------- -------------- -------------- -------------
Total interest expense $ 42,551 $ 41,154 $ 84,290 $ 82,840
-------------- -------------- -------------- -------------
Net interest income $ 55,104 $ 50,669 $ 108,690 $ 102,402
Provision for loan losses 3,377 1,828 5,302 6,655
-------------- -------------- -------------- -------------
Net interest income after provision $ 51,727 $ 48,841 $ 103,388 $ 95,747
-------------- -------------- -------------- -------------
NONINTEREST INCOME
Trust income $ 11,048 $ 10,579 $ 21,764 $ 20,796
Securities processing 2,875 2,524 5,548 4,806
Trading and investment banking 3,302 3,412 6,849 6,976
Service charges on deposits 8,321 7,729 17,232 16,788
Other service charges and fees 5,585 4,233 10,164 6,932
Bankcard fees 1,690 1,446 3,310 2,784
Net investment security gains 29 468 132 469
Other 2,736 1,609 4,140 12,435
-------------- -------------- -------------- -------------
Total noninterest income $ 35,586 $ 32,000 $ 69,139 $ 71,986
-------------- -------------- -------------- -------------
NONINTEREST EXPENSE
Salaries and employee benefits $ 35,012 $ 32,103 $ 68,849 $ 63,928
Occupancy, net 4,633 4,328 9,268 8,723
Equipment 6,881 5,675 13,114 11,102
Supplies and services 5,318 4,658 10,287 9,553
Bankcard processing 1,451 1,480 2,719 3,157
Marketing and business development 4,273 3,835 8,521 7,141
FDIC and regulatory fees 460 330 859 659
Goodwill and core deposits 1,807 1,834 3,617 3,678
Other 5,899 4,929 11,561 10,448
-------------- -------------- -------------- -------------
Total noninterest expense $ 65,734 $ 59,172 $ 128,795 $ 118,389
-------------- -------------- -------------- -------------
Income before income taxes $ 21,579 $ 21,669 $ 43,732 $ 49,344
Income tax provision 6,801 7,126 13,993 16,805
-------------- -------------- -------------- -------------
NET INCOME $ 14,778 $ 14,543 $ 29,739 $ 32,539
============== ============== ============== =============
PER SHARE DATA
Net income $ 0.76 $ 0.72 $ 1.53 $ 1.61
Dividends $ 0.20 $ 0.19 $ 0.40 $ 0.38
Weighted average shares outstanding 19,453,395 19,960,372 19,485,997 20,156,567
<FN>
See Notes to Consolidated Financial Statements.
</FN>
UMB FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited in thousands)
Six Months Ended
June 30,
---------------------------
1997 1996
---------------- --------
Operating Activities
Net Income $ 29,739 $ 32,539
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 5,302 6,655
Depreciation and amortization 12,027 11,976
Deferred income taxes (1,087) (3,811)
Net (increase) decrease in trading securities (26,783) 16,845
Gains on sales of securities available for sale (132) (469)
Losses on sales of securities available for sale - 1
Amortization of securities premiums,
net of discount accretion 7,348 11,404
Earned ESOP shares 1,237 1,065
Changes in:
Accrued income 1,752 2,691
Accrued expenses and taxes 492 (3,419)
Other, net 26,637 (15,237)
------------ -----------
Net cash provided by operating activities $ 56,532 $ 60,240
------------ -----------
Investing Activities
Proceeds from maturities of investment securities $ 34,733 $ 54,700
Proceeds from sales of investment securities - 1,349
Proceeds from sales of securities available for sale 31,958 -
Proceeds from maturities of securities available for sale 1,392,682 1,162,384
Purchases of investment securities (80,567) (60,402)
Purchases of securities available for sale (1,249,745) (1,000,266)
Net increase in loans (182,431) (22,501)
Net increase in federal funds and resell agreements (12,465) (73,848)
Purchases of bank premises and equipment (18,174) (11,861)
Proceeds from sales of bank premises and equipment 3 207
------------ -----------
Net cash provided by investing activities $ (84,006) $ 49,762
------------ -----------
Financing Activities
Net decrease in demand and savings deposits $ (178,195) $ (126,869)
Net decrease in time deposits (42,651) (79,361)
Net increase in federal funds and repurchase agreements 186,187 23,931
Net increase in short term borrowings 367 1,172
Repayment of long term debt (1,161) (1,097)
Cash dividends (7,775) (7,677)
Proceeds from exercise of stock options 71 239
Purchases of treasury stock (11,618) (60,622)
------------ -----------
Net cash used in financing activities $ (54,775) $ (250,284)
------------ -----------
Decrease in cash and due from banks $ (82,249) $ (140,282)
Cash and due from banks at beginning of year 772,631 696,407
----------- -----------
Cash and due from banks at end of period $ 690,382 $ 556,125
=========== ===========
<FN>
See Notes to Consolidated Financial Statements.
</FN>
UMB FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
Net
Unrealized Purchase
Common Capital Retained Holding Treasury Commitment/
Stock Surplus Earnings Gain (Loss) Stock Unearned ESOP
----------- ------------- ------------ ------------- ------------- -------------
Balance - December 31, 1995 $22,548 $ 522,892 $136,943 $ 3,612 $ (63,555) $ (46,481)
Net income - - 32,539 - - -
Cash Dividends - - (7,677) - - -
Shares purchased by ESOP - - - - - 16,530
Guaranteed ESOP obligation - - - - - (17,281)
Earned ESOP shares - 37 - - - 1,028
Purchase of treasury stock - - - - (60,622) 29,951
Exercise of stock options - (107) - - 346 -
Net unrealized loss on securities
available for sale - - - (16,774) - -
----------- ------------- ------------ ------------- ------------- ------------
Balance - June 30, 1996 $22,548 $ 522,822 $161,805 $(13,162) $(123,831) $ (16,253)
=========== ============= ============ ============= ============= ============
Balance - December 31, 1996 $23,503 $ 558,073 $142,947 $ (1,755) $(125,288) $ (15,003)
Net income - - 29,739 - - -
Cash dividends - - (7,775) - - -
Earned ESOP shares - (23) - - - 1,260
Purchase of treasury stock - - - - (11,618) -
Exercise of stock options - (26) - - 97 -
Net unrealized gain on securities
available for sale - - - 32 - -
----------- ------------- ------------ ------------- ------------- ------------
Balance - June 30, 1997 $23,503 $ 558,024 $164,911 $ (1,723) $(136,809) $ (13,743)
=========== ============= ============ ============= ============= ============
<FN>
See Notes to Consolidated Financial Statements.
</FN>
UMB FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1997
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, 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 1996
Annual Report to Shareholders.
The preparation of financial statements in conformity with generally accepted
accounting principles 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 Per Share:
Earnings per share are based on the weighted average number of shares of common
stock outstanding during the interim periods. All share and per share data has
been adjusted to reflect a 5% stock dividend paid on January 2, 1997.
3. Allowance for Loan Losses:
The following is a summary of the Allowance for Loan Losses for the six months
ended June 30, 1997 and 1996 (in thousands):
Six Months Ended June 30,
1997 1996
------------ ---------
Balance January 1 $ 33,414 $ 32,685
Additions:
Provision for loan losses 5,302 6,655
------------ ---------
$ 38,716 $ 39,340
------------ ---------
Deductions:
Charge-offs $ (6,630) $ (5,904)
Less recoveries on loans
previously charged-off 1,340 1,141
------------ ---------
Net charge-offs $ (5,290) $ (4,763)
------------ ---------
Balance, June 30 $ 33,426 $ 34,577
============ =========
UMB FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1997
3. Allowance for Loan Losses: (Continued)
At June 30, 1997 the amount of loans that are considered to be impaired under
SFAS No. 114 was $4,049,000 compared to $16,062,000 at March 31, 1997 and
$9,325,000 at December 31, 1996. At June 30, 1997 all of these loans are on a
nonaccrual or restructured basis. Included in the impaired loans is $1,416,000
of loans for which the related allowance for loan losses is $566,000. The
remaining $2,633.000 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 June 30, 1997 was
approximately $9,812,000.
4. 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 operations of the
Company.
5. New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 128, "Earnings Per Share." SFAS 128
establishes Standards for computing and presenting earnings per share and
applies to entities with publicly held common stock. This statement is effective
for fiscal periods ending after December 15, 1997, and early adoption is not
permitted. The Company will adopt the provisions of SFAS 128 for its fiscal year
ending December 31, 1997. In addition to the Company's current presentation of
net earnings per share, this statement will require the Company to present
diluted net earnings per share, which includes the dilutive effect of stock
options.
In June 1997, FASB issued SFAS No. 130, Reporting Comprehensive Income. The
Statement establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains and losses) in a full set
of general-purpose financial statements. This Statement requires that the
Company (a) classify items of other comprehensive income by their nature in a
financial statement and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of a statement of financial position. The
Statements is effective for the Company's financial statements as of December
31, 1998. The Company does not anticipate that the implementation of this
Statement will have a material impact on the consolidated financial statements.
In June 1997, FASB issued SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information. The Statement establishes standards for the
way that public business enterprises report information about operating segments
in annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports
issued to shareholders. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers. The
Statements is effective to the Company's financial statements for fiscal year
1998. The Company does not anticipate that the implementation of this Statement
will have a material impact on the consolidated financial statements.
UMB FINANCIAL CORPORATION
AVERAGE BALANCES/YIELDS AND RATES
(tax-equivalent basis) (in thousands)
Six Months Ended June 30,
1997 1996
Average Average Average Average
Assets Balance Yield/Rate Balance Yield/Rate
-------------- ------------ ------------- -------------
Loans, net of unearned interest $2,586,754 8.95 % $2,389,945 9.15 %
Securities:
Taxable $2,224,358 5.86 $2,242,139 5.58
Tax-exempt 339,589 6.63 313,771 6.78
-------------- ------------ ------------- -------------
Total securities $2,563,947 5.96 $2,555,910 5.72
Federal funds and resell agreements 140,561 5.70 212,830 5.26
Other earning assets 80,022 6.29 72,211 6.00
-------------- ------------ ------------- -------------
Total earning assets $5,371,284 7.40 $5,230,896 7.28
Allowance for loan losses (32,952) (33,890)
Other assets 1,100,473 995,211
============== =============
Total assets $6,438,805 $6,192,217
============== =============
Liabilities and Shareholders' Equity
Interest-bearing deposits $3,361,196 3.78 % $3,319,346 3.76 %
Federal funds and repurchase agreements 795,056 4.93 776,185 4.81
Borrowed funds 51,773 7.22 58,517 7.29
-------------- ------------ ------------- -------------
Total interest-bearing $4,208,025 4.04 $4,154,048 4.01
liabilities
Noninterest-bearing demand deposits 1,523,177
1,398,189
Other liabilities 123,684 65,337
Shareholders' equity 583,919 574,643
============== =============
Total liabilities and shareholders' equity $6,438,805 $6,192,217
============== =============
Net interest spread 3.36 % 3.27 %
Net interest margin 4.23 4.09
ANALYSIS OF CHANGES IN NET INTEREST INCOME AND MARGIN
(tax-equivalent basis) (in thousands)
ANALYSIS OF CHANGES IN NET INTEREST INCOME
Three Months Ended Six Months Ended
June 30, 1997 vs. 1996 June 30, 1997 vs. 1996
-------------------------------------------- -------------------------------------
Volume Rate Total Volume Rate Total
Change in interest earned on:
Loans $ 4,096 $ 1,487 $ 5,583 $ 8,539 $ (2,527) $ 6,012
Securities:
Taxable (351) 1,272 921 (519) 2,968 2,449
Tax-exempt 543 16 559 830 (242) 588
Federal funds sold (1,833) 563 (1,270) (2,023) 431 (1,592)
Other 213 16 229 236 102 338
---------- -------- -------- -------- --------- -------
Interest income $ 2,668 $ 3,354 $ 6,022 $ 7,063 $ 732 $ 7,795
---------- -------- -------- -------- --------- -------
Change in interest paid on:
Interest-bearing deposits $ 509 $ 878 $ 1,387 $ 654 $ 213 $ 867
Federal funds purchased (702) 842 140 430 421 851
Borrowed funds (135) 5 (130) (247) (21) (268)
---------- -------- -------- -------- --------- -------
Interest expense $ (328) $ 1,725 $ 1,397 $ 837 $ 613 $ 1,450
---------- -------- -------- -------- --------- -------
Net interest income $ 2,996 $ 1,629 $ 4,625 $ 6,226 $ 119 $ 6,345
========== ======== ======== ======== ========= =======
ANALYSIS OF NET INTEREST MARGIN
Three Months Ended Six Months Ended
June 30, 1997 June 30, 1997
-------------------------------------------- ----------------------------------------
1997 1996 Change 1997 1996 Change
---- ---- ------ ---- ---- ------
Average earning assets $5,331,374 $5,229,566 $101,808 $5,371,284 $5,230,896 $ 140,388
Interest-bearing liabilities 4,181,726 4,179,882 1,844 4,208,025 4,154,048 53,977
------------ ----------- --------- ---------- ---------- --------
Interest free funds $1,149,648 $1,049,684 $ 99,964 $1,163,259 $1,076,848 $ 86,411
============ =========== ========= ========== ========== ========
Free funds ratio 21.56 % 20.07 % 1.49 % 21.66 % 20.59 % 1.07 %
(free funds to earning assets)
Tax-equivalent yield on earning assets 7.53 % 7.13 % 0.40 % 7.40 % 7.28 % 0.12 %
Cost of interest-bearing liabilities 4.09 3.92 0.17 4.04 4.01 0.03
------------ ----------- --------- ---------- --------- --------
Net interest spread 3.44 % 3.21 % 0.23 % 3.36 % 3.27 % 0.09 %
Benefit of interest free funds 0.87 0.83 0.04 0.87 0.82 0.05
------------ ----------- --------- ---------- --------- --------
Net interest margin 4.31 % 4.04 % 0.27 % 4.23 % 4.09 % 0.14 %
============ =========== ========= ========== ========= =========
UMB FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
Summary
UMB Financial Corporation (the Company) earned net income of $14,778,000 for the
three months ended June 30, 1997, compared to $14,543,000 for the same period a
year earlier. This represents per share earnings of $0.76 for the second quarter
of 1997 compared to $0.72 for the second quarter of 1996. On a year-to-date
basis, 1997 earnings were $29,739,000, or $1.53 per share, compared to
$32,539,000, or $1.61 per share, for the prior year. Included in the 1996 yearly
results was a gain on the sale of the servicing rights of the merchant bankcard
portfolio of $9.8 million. In addition, the Company recorded a provision for
loan losses of $2.8 million over and above the normal recurring monthly
provision. The approximate net after tax effect of these items in 1996 was $4.3
million or $0.21 per share.
The Company's net interest income increased on a quarterly and year-to-date
basis as a result of an increase in lending activity and the effect of higher
interest rates on investment securities. Non interest income for the second
quarter of 1997 increased 11.21% compared to the second quarter of 1996. The
year-to-date change in non interest income is consistent with the quarterly
change when adjusted for the 1996 gain on the sale of the servicing rights to
the merchant bankcard portfolio. Non interest expense increased by approximately
10.00% during both periods.
Results of Operations
Net interest income totaled $55,104,000 for the second quarter of 1997, an 8.75%
increase over 1996 second quarter net interest income of $ 50,669,000. This
change is consistent with the year-to-date increase in net interest income which
totaled $108,690,000 for the first half of 1997 compared to $102,402,000 for the
same period of 1996. The improvement in the Company's net interest income was
fueled by an increase in loans and higher interest rates. The Company's yield on
interest earning assets increased to 7.40% as of June 30, 1997, compared to
7.28% for the first six months of 1996. Contributing to the increase in net
interest income was an increase in average loans of 8.23%. Also effecting the
increase in earning assets was an increase in rates earned on the Company's
investment security portfolio.
The Company's loan loss provision for the second quarter of 1997 was $3,377,000
compared to $1,828,000 for the same period of 1996. The year-to-date loan loss
provision for the Company in 1997 was $5,302,000 compared to $6,655,000 for
1996. Net loan charge-offs for the first six months of 1997 were $5,290,000
compared to $4,763,000 for the first half of 1996.
UMB FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
Non interest income totaled $35,586,000 for the second quarter of 1997 compared
to $32,000,000 for the same period of 1996. Trust and custody services, service
charges and cash management fees were the largest components of the increases in
non interest income. For the first half of 1997, non interest income decreased
to $69,139,000 from $71,986,000 for the prior year. This decrease was the result
of increases in traditional fee income which were offset by a decrease in other
income. The decrease in other income was the result of a $9.8 million gain on
the sale of the servicing rights of the merchant bankcard portfolio, during the
first half of 1996. The Company's substantial fee income from its diverse
business lines provides on going returns without increased credit risk.
Non interest expense was $65,734,000 for the three months ended June 30, 1997
compared to $59,172,000 for the same period of 1996. For the first six months of
1997 non interest expense was $128,795,000 compared to $118,389,000 for the
first six months of 1996. In comparing the quarter and year-to-date increases,
the Company incurred increases in staffing, occupancy and equipment costs.
Staffing related costs increased primarily due to additional personnel at new
facilities and data processing areas. Occupancy costs increased as a result of
the opening of new branch facilities. Equipment expense also increased due to
the new facilities and as a result of ongoing upgrades to operating systems.
Financial Condition
Total assets at June 30, 1997 were $6.492 billion compared to $6.035 billion at
June 30, 1996 and $6.512 billion at December 31, 1996. Loans, net of unearned
interest, increased to $2.735 billion as of June 30, 1997 compared to $2.452
billion at June 30, 1996. This 11.52% increase in loans reflects management's
goal to increase loans in a very competitive market. Investment securities
increased to $2.570 billion at June 30, 1997 compared to $2.470 billion a year
earlier. Increases in loans and investment securities were funded by increases
in deposits. Total deposits increased to $4.970 billion at June 30, 1997
compared to $4.607 billion at June 30, 1996.
Non accrual and restructured loans totaled $4,769,000, 0.17% of loans at June
30, 1997 compared to $17,193,000, .66% of loans at March 31, 1997 and
$11,476,000 at December 31, 1996. Loans past due 90 days or more were
$8,456,000, 0.31% of loans at June 30, 1997, compared to $5,786,000, .22% of
loans at March 31, 1997. The Company's loan quality remains strong by industry
standards. This decrease in non-accrual loans was achieved at the same time the
Company saw its average loans increase by 8.23%. The total non performing loans
and loans past due 90 days or more were less than 1.0% of total loans. At June
30, 1997 the Company's allowance for loan losses was $33,426,000 or 1.22% of
outstanding loans. The Company has a well-diversified loan portfolio with no
foreign loans and no significant credit exposure to commercial real estate.
Delinquency rates in the Company's bankcard loan portfolio are well below
industry averages.
UMB FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
Liquidity and Capital Resources
The Company's liquidity position continues to be strong. At June 30, 1997, the
Company's average loan to deposit ratio was 53.0% compared to 50.7% at June 30,
1996. At June 30, 1997, the average life of the securities portfolio was 23
months and 29% of the portfolio matures during the next twelve months. The
Company has access to various borrowing markets should there be a need for
additional funding.
Shareholders' equity totaled $594 million at June 30, 1997 compared to $554
million at June 30, 1996 and $582 million at year end 1996. During the twelve
months ended June 30, 1997 the Company increased its treasury stock holdings by
$13 million. Management will continue to consider treasury stock purchases
depending on price, availability and alternative use of funds. At June 30, 1997,
the net unrealized loss on securities available for sale was $1.7 million,
compared to unrealized losses of $13.2 million at June 30, 1996 and $1.8 million
at December 31, 1996.
Included in this report are limited forward looking statements concerning the
Company's future financial condition and results of operations. These statements
are the result of Management's current expectations based on information
presently available. Actual results could differ from these expectations as a
result of many factors including changes in economic conditions impacting
customers ability to repay loans, interest rates and loan demand. Changes in
technology, regulatory requirements and competition will also impact future
results.
The Company's capital position is summarized in the table below and far exceeds
regulatory requirements.
Six Months Ended
June 30,
RATIOS 1997 1996
Return on average assets .93 % 1.06 %
Return on average equity 10.27 11.39
Average equity to assets 9.07 9.28
Tier 1 risk-based capital ratio 15.54 16.36
Total risk-based capital ratio 16.51 17.50
Leverage ratio 8.31 8.32
Per Share Data
Earnings $ 1.53 $ 1.61
Cash Dividends $ .40 $ .38
Dividend payout ratio 26.14 % 23.60 %
Book value $ 30.55 $ 28.09
UMB FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS FOR THE
SIX MONTHS ENDED JUNE 30, 1997
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K
a) The following exhibit is filed herewith:
27-Article 9 of Regulation S-X Financial Data Schedule for June 30,
1997 Form 10-Q.
b) Reports on Form 8-K:
The Company filed no reports on Form 8-K during the quarter ended
June 30, 1997.
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
R. Crosby Kemper
Chairman
/s/ Timothy M. Connealy
Timothy M. Connealy
Chief Financial Officer
Date: August XX, 1997