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 September 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 (I.R.S. Employer
of 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 September 30, 1997, UMB Financial Corporation had 19,465,615 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 September 30, 1997 and 1996
(unaudited) and December 31, 1996 (audited) 3
Consolidated Statements of Income for the Three and Nine Months
Ended September 30, 1997 and 1996 (unaudited) 4
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1997 and 1996 (unaudited) 5
Consolidated Statements of Shareholders' Equity for the Nine Months
Ended September 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)
September 30,
(Unaudited) December 31,
------------------------------ ---------------
ASSETS 1997 1996 1996
-------------- -------------- ---------------
Loans:
Commercial, financial and agricultural $ 1,272,474 $ 1,180,019 $ 1,236,092
Consumer (net of unearned interest) 1,059,823 892,575 914,914
Real estate 374,636 416,730 404,039
Leases 2,658 2,368 2,596
Allowance for loan losses (32,770) (34,436) (33,414)
-------------- -------------- ---------------
Net Loans $ 2,676,821 $ 2,457,256 $ 2,524,227
Securities available for sale:
U.S. Treasury and agencies $ 2,048,621 $ 2,131,717 $ 2,257,217
State and political subdivisions 4,022 0 2,464
Commercial paper and other 8,947 6,880 127,641
-------------- -------------- ---------------
Total securities available for sale $ 2,061,590 $ 2,138,597 $ 2,387,322
Securities held to maturity:
State and political subdivisions 391,662 325,628 319,227
-------------- -------------- ---------------
Total securities held to maturity (market value
of $394,777, $324,862 & $313,173, respectively) $ 391,662 $ 325,628 $ 319,227
Federal funds and resell agreements 107,689 109,932 58,960
Trading securities and other earning assets 84,617 81,691 79,814
-------------- -------------- ---------------
Total earning assets $ 5,322,379 $ 5,113,104 $ 5,369,550
Cash and due from banks 818,103 635,724 772,631
Bank premises and equipment, net 167,435 151,242 152,909
Accrued income 74,886 74,698 72,717
Premium on and intangibles of purchased banks 62,103 69,303 67,474
Other assets 68,142 52,538 76,705
-------------- -------------- ---------------
Total assets $ 6,513,048 $ 6,096,609 $ 6,511,986
============== ============== ===============
LIABILITIES
Deposits:
Noninterest-bearing demand $ 1,818,071 $ 1,414,390 $ 1,724,486
Interest-bearing demand and savings 2,032,850 2,027,440 2,171,938
Time deposits under $100,000 892,965 932,360 917,983
Time deposits of $100,000 or more 281,231 225,693 376,127
-------------- -------------- ---------------
Total deposits $ 5,025,117 $ 4,599,883 $ 5,190,534
Federal funds and repurchase agreements 742,718 814,922 614,395
Short-term debt 471 1,995 911
Long-term debt 45,101 51,858 51,350
Accrued expenses and taxes 54,033 41,842 46,887
Other liabilities 34,483 18,652 25,432
-------------- -------------- ---------------
Total liabilities $ 5,901,923 $ 5,529,152 $ 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 558,009 522,720 558,073
Retained earnings 176,143 172,089 142,947
Net unrealized gain (loss) on securities available for sale 3,468 (9,972) (1,755)
Unearned ESOP shares (13,117) (15,628) (15,003)
Treasury stock, 3,720,595, 3,399,722 and
3,424,176 shares, at cost, respectively (136,881) 124,300) (125,288)
-------------- -------------- ---------------
Total shareholders' equity $ 611,125 $ 567,457 $ 582,477
-------------- -------------- ---------------
Total liabilities and shareholders' equity $ 6,513,048 $ 6,096,609 $ 6,511,986
============== ============== ===============
<FN>
See Notes to Consolidated Financial Statements.
</FN>
UMB FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(unaudited in thousands)
Three Months Nine Months
Ended September 30, Ended September 30,
INTEREST INCOME 1997 1996 1997 1996
-------------- -------------- -------------- -------------
Loans $ 61,232 $ 55,706 $ 175,516 $ 163,992
Securities:
Taxable interest $ 31,035 $ 30,649 $ 95,651 $ 92,817
Tax-exempt interest 4,368 3,677 12,077 10,846
-------------- -------------- -------------- -------------
Total securities income $ 35,403 $ 34,326 $ 107,728 $ 103,663
Federal funds and resell agreements 2,209 2,390 6,179 7,952
Trading securities and other 1,276 968 3,677 3,025
-------------- -------------- -------------- -------------
Total interest income $100,120 $ 93,390 $ 293,100 $ 278,632
-------------- -------------- -------------- -------------
INTEREST EXPENSE
Deposits $ 32,098 $ 30,267 $ 95,108 $ 92,410
Federal funds and repurchase
agreements 10,885 9,502 30,312 28,078
Short-term debt 7 12 27 31
Long-term debt 814 976 2,647 3,078
-------------- -------------- -------------- -------------
Total interest expense $ 43,804 $ 40,757 $ 128,094 $ 123,597
-------------- -------------- -------------- -------------
Net interest income $ 56,316 $ 52,633 $ 165,006 $ 155,035
Provision for loan losses 2,807 1,821 8,109 8,476
-------------- -------------- -------------- -------------
Net interest income after provision $ 53,509 $ 50,812 $ 156,897 $ 146,559
-------------- -------------- -------------- -------------
NONINTEREST INCOME
Trust income $ 11,824 $ 10,565 $ 33,588 $ 31,361
Securities processing 3,138 2,280 8,686 7,086
Trading and investment banking 3,071 2,831 9,920 9,807
Service charges on deposits 9,509 8,106 26,741 24,894
Other service charges and fees 5,746 4,300 15,910 11,232
Bankcard fees 1,784 1,762 5,094 4,546
Net investment security gains 540 0 672 469
Other 1,568 1,347 5,708 13,782
-------------- -------------- -------------- -------------
Total noninterest income $ 37,180 $ 31,191 $ 106,319 $ 103,177
-------------- -------------- -------------- -------------
NONINTEREST EXPENSE
Salaries and employee benefits $ 36,231 $ 32,754 $ 105,080 $ 96,682
Occupancy, net 5,022 4,526 14,290 13,249
Equipment 7,282 5,834 20,396 16,936
Supplies and services 5,024 4,568 15,311 14,121
Bankcard processing 1,407 2,217 4,126 5,374
Marketing and business development 4,547 3,989 13,068 11,130
FDIC and regulatory fees 490 320 1,349 979
Other 8,568 7,083 23,746 21,209
-------------- -------------- -------------- -------------
Total noninterest expense $ 68,571 $ 61,291 $ 197,366 $ 179,680
-------------- -------------- -------------- -------------
Income before income taxes $ 22,118 $ 20,712 $ 65,850 $ 70,056
Income tax provision 7,002 6,678 20,995 23,483
-------------- -------------- -------------- -------------
NET INCOME $ 15,116 $ 14,034 $ 44,855 $ 46,573
============== ============== ============== =============
PER SHARE DATA
Net income $ 0.78 $ 0.71 $ 2.30 $ 2.32
Dividends $ 0.20 $ 0.19 $ 0.60 $ 0.57
Weighted average shares outstanding 19,454,381 19,742,082 19,475,343 20,030,283
<FN>
See Notes to Consolidated Financial Statements.
</FN>
UMB FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited in thousands)
Nine Months Ended
September 30,
-----------------------------------
1997 1996
-------------- --------------
Operating Activities
Net Income $ 44,855 $ 46,573
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 8,109 8,476
Depreciation and amortization 17,804 16,213
Deferred income taxes (336) (4,049)
Net (increase) decrease in trading securities (4,803) 4,320
Gains on sales of securities available for sale (690) (470)
Losses on sales of securities available for sale 18 1
Amortization of securities premiums,
net of discount accretion 11,739 17,565
Earned ESOP shares 1,906 1,595
Changes in:
Accrued income (2,169) 4,451
Accrued expenses and taxes 5,325 (12,713)
Other, net 16,694 (9,682)
-------------- --------------
Net cash provided by operating activities $ 98,452 $ 72,280
-------------- --------------
Investing Activities
Proceeds from maturities of investment securities $ 50,591 $ 73,217
Proceeds from sales of investment securities - -
Proceeds from sales of securities available for sale 86,596 2,095
Proceeds from maturities of securities available for sale 1,585,763 1,422,866
Purchases of investment securities (124,418) (88,736)
Purchases of securities available for sale (1,347,996) (1,264,250)
Net increase in loans (160,703) (45,892)
Net increase in federal funds and resell agreements (48,729) (20,767)
Purchases of bank premises and equipment (27,002) (14,559)
Proceeds from sales of bank premises and equipment 37 231
-------------- --------------
Net cash provided by investing activities $ 14,139 $ 64,205
-------------- --------------
Financing Activities
Net decrease in demand and savings deposits $ (45,503) $ (70,149)
Net decrease in time deposits (119,914) (143,651)
Net increase in federal funds and repurchase agreements 128,323 93,582
Net increase (decrease) in short term borrowings (440) 1,494
Repayment of long term debt (6,249) (6,158)
Cash dividends (11,659) (11,427)
Proceeds from exercise of stock options 194 255
Purchases of treasury stock (11,871) (61,114)
-------------- --------------
Net cash used in financing activities $ (67,119) $ (197,168)
-------------- --------------
Increase (decrease) in cash and due from banks $ 45,472 $ (60,683)
Cash and due from banks at beginning of year 772,631 696,407
-------------- --------------
Cash and due from banks at end of period $ 818,103 $ 635,724
============== ==============
<FN>
See Notes to Consolidated Financial Statements.
</FN>
UMB FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(unaudited) (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 0 0 46,573 0 0 0
Cash Dividends 0 0 (11,427) 0 0 0
Shares purchased by ESOP 0 0 0 0 0 16,530
Guaranteed ESOP obligation 0 0 0 0 0 (17,281)
Earned ESOP shares 0 (58) 0 0 0 1,653
Purchase of treasury stock 0 0 0 0 (61,114) 29,951
Exercise of stock options 0 (114) 0 0 369 0
Net unrealized loss on securities
available for sale 0 0 0 (13,584) 0 0
----------- -------------- ------------ ------------- ------------ ------------
Balance - September 30, 1996 $ 22,548 $ 522,720 $ 172,089 $ (9,972) $ (124,300) $ (15,628)
=========== ============== ============ ============= ============ ============
Balance - December 31, 1996 $ 23,503 $ 558,073 $ 142,947 $ (1,755) $ (125,288) $ (15,003)
Net income 0 0 44,855 0 0 0
Cash dividends 0 0 (11,659) 0 0 0
Earned ESOP shares 0 20 0 0 0 1,886
Purchase of treasury stock 0 0 0 0 (11,871) 0
Exercise of stock options 0 (84) 0 0 278 0
Net unrealized gain on securities
available for sale 0 0 0 5,223 0 0
----------- -------------- ------------ ------------- ------------ ------------
Balance - September 30, 1997 $ 23,503 $ 558,009 $ 176,143 $ 3,468 $ (136,881) $ (13,117)
=========== ============== ============ ============= ============ ============
<FN>
See Notes to Consolidated Financial Statements.
</FN>
UMB FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 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.
4. Allowance for Loan Losses:
The following is a summary of the Allowance for Loan Losses for the nine months
ended September 30, 1997 and 1996 (in thousands):
Nine Months Ended September 30,
1997 1996
------------ ------------
Balance January 1 $ 33,414 $ 32,685
Additions:
Provision for loan losses 8,109 8,476
------------ ------------
$ 41,523 $ 41,161
------------ ------------
Deductions:
Charge-offs $ (10,579) $ (8,469)
Less recoveries on loans
previously charged-off 1,826 1,744
------------ ------------
Net charge-offs $ (8,753) $ (6,725)
------------ ------------
Balance, September 30 $ 32,770 $ 34,436
============ ============
UMB FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1997
3. Allowance for Loan Losses: (Continued)
At September 30, 1997 the amount of loans that are considered to be impaired
under SFAS No. 114 was $4,763,000 compared to $4,049,000 at June 30, 1997 and
$9,325,000 at December 31, 1996. At September 30, 1997 all of these loans are on
a nonaccrual or restructured basis. Included in the impaired loans is $1,996,000
of loans for which the related allowance for loan losses is $1,205,000. The
remaining $2,767.000 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 September 30, 1997 was
approximately $8,550,000.
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. 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. 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)
Nine Months Ended September 30,
1997 1996
Average Average Average Average
Assets Balance Yield/Rate Balance Yield/Rate
-------------- ------------ ------------- ------------
Loans, net of unearned interest $ 2,633,112 8.95% $ 2,420,888 9.13%
Securities:
Taxable $ 2,182,969 5.86 $ 2,186,887 5.62
Tax-exempt 353,905 6.63 315,996 6.72
-------------- ------------ ------------- ------------
Total securities $ 2,536,874 5.97 $ 2,502,883 5.76
Federal funds and resell agreements 142,952 5.78 201,674 5.27
Other earning assets 82,026 6.26 67,989 6.11
-------------- ------------ ------------- ------------
Total earning assets $ 5,394,964 7.42 $ 5,193,434 7.32
Allowance for loan losses (33,077) (34,058)
Other assets 1,109,134 982,422
-------------- --------------
Total assets $ 6,471,021 $ 6,141,798
============== =============
Liabilities and Shareholders' Equity
Interest-bearing deposits $ 3,348,037 3.80% $ 3,296,161 3.74%
Federal funds and repurchase agreements 810,409 5.00 778,467 4.82
Borrowed funds 50,835 7.03 57,549 7.22
-------------- ------------ ------------- ------------
Total interest-bearing liabilities $ 4,209,281 4.07 $ 4,132,177 4.00
Noninterest-bearing demand deposits 1,567,603 1,375,208
Other liabilities 103,007 62,756
Shareholders' equity 591,130 571,657
-------------- --------------
Total liabilities and shareholders' equity $ 6,471,021 $ 6,141,798
============== =============
Net interest spread 3.25% 3.32%
Net interest margin 4.25 4.14
UMB FINANCIAL CORPORATION
ANALYSIS OF CHANGES IN NET INTEREST INCOME AND MARGIN
(tax-equivalent basis) (in thousands)
ANALYSIS OF CHANGES IN NET INTEREST INCOME
Three Months Ended Nine Months Ended
September 30, 1997 vs. 1996 September 30, 1997 vs. 1996
------------------------------------------ ---------------------------------------------
Volume Rate Total Volume Rate Total
Change in interest earned on:
Loans $ 6,883 $ (1,381) $ 5,502 $ 14,137 $ (3,402) $ 10,735
Securities:
Taxable (427) 843 416 (169) 3,780 3,611
Tax-exempt 1,050 19 1,069 1,869 (212) 1,657
Federal funds sold (449) 268 (181) (2,488) 716 (1,772)
Other 378 (14) 364 653 82 735
------------- ------------ ----------- ------------ ------------- ------------
Interest income $ 7,435 $ (265) $ 7,170 $ 14,002 $ 964 $ 14,966
------------- ------------ ----------- ------------ ------------- ------------
Change in interest paid on:
Interest-bearing deposits $ 713 $ 1,117 $ 1,830 $ 1,419 $ 1,279 $ 2,698
Federal funds purchased 745 639 1,384 1,160 1,074 2,234
Borrowed funds (112) (56) (168) (357) (78) (435)
------------- ------------ ----------- ------------ ------------- ------------
Interest expense $ 1,346 $ 1,700 $ 3,046 $ 2,222 $ 2,275 $ 4,497
------------- ------------ ----------- ----------- ----------- -----------
Net interest income $ 6,089 $(1,965) $ 4,124 $ 11,780 $ (1,311) $ 10,469
============= ============ =========== ============ ============= ============
ANALYSIS OF NET INTEREST MARGIN
Three Months Ended Nine Months Ended
September 30, 1997 September 30, 1997
------------------------------------------ ---------------------------------------------
1997 1996 Change 1997 1996 Change
Average earning assets $ 5,442,324 $ 5,229,566 $ 212,758 $ 5,394,964 $ 5,193,434 $ 201,530
Interest-bearing liabilities 4,211,793 4,179,882 31,911 4,209,282 4,132,177 77,105
------------- ------------ ----------- ----------- ------------ -----------
Interest free funds $ 1,230,531 $ 1,049,684 $ 180,847 $ 1,185,682 $ 1,061,257 $ 124,425
============= ============ =========== ============ ============= ============
Free funds ratio 22.61% 20.07% 2.54% 21.98% 20.43% 1.54%
(free funds to earning assets)
Tax-equivalent yield on earning assets 7.49 7.13 0.36 7.42 7.32 0.10
Cost of interest-bearing liabilities 4.14 3.92 0.22 4.07 4.00 0.07
------------- ------------ ----------- ------------ ----------- ------------
Net interest spread 3.35 3.21 0.14 3.35 3.32 0.03
Benefit of interest free funds 0.92 0.83 0.09 0.90 0.82 0.08
------------- ------------ ----------- ----------- ----------- -----------
Net interest margin 4.27 4.04 0.23 4.25 4.14 0.11
============= ============ =========== ============ ============= ============
UMB FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
Summary
UMB Financial Corporation (the Company) earned net income of $15,116,000 for the
three months ended September 30, 1997, compared to $14,034,000 for the same
period a year earlier. This represents per share earnings of $0.78 for the third
quarter of 1997 compared to $0.71 for the third quarter of 1996. On a
year-to-date basis, 1997 earnings were $44,855,000, or $2.30 per share, compared
to $46,573,000, or $2.32 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. Noninterest income increased for both
periods as the Company continues to build on its substantial fee based income.
Noninterest expenses were higher for both the quarterly and year-to-date
periods fueled by increases in technology spending and costs associated with new
business opportunities.
Results of Operations
Net interest income totaled $56,316,000 for the third quarter of 1997, a 7.00%
increase over 1996 third quarter net interest income of $ 52,633,000. This
change is consistent with the year-to-date increase in net interest income which
totaled $165,006,000 for the first nine months of 1997 compared to $155,035,000
for the same period of 1996. The improvement in the Company's net interest
income was fueled by an increase in average loans of 8.77% on a year-to-date
basis. The Company's yield on interest earning assets increased to 7.42% as of
September 30, 1997, compared to 7.32% for the first nine months of 1996. Also
effecting the increase in yield on earning assets was an increase in rates
earned on the Company's investment security portfolio. This increase in rates
for investment securities resulted from replacing maturing securities with
higher yielding bonds.
The Company's loan loss provision for the third quarter of 1997 was $2,807,000
compared to $1,821,000 for the same period of 1996. The year-to-date loan loss
provision for the Company in 1997 was $8,109,000 compared to $8,476,000 for
1996. Net loan charge-offs increased for both the quarterly and year-to-date
periods. This increase in charge-offs was seen in the consumer and bankcard
areas.
UMB FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
Non interest income totaled $37,180,000 for the third quarter of 1997 compared
to $31,191,000 for the same period of 1996, an increase of 19.20%. Trust and
custody services, service charges and cash management fees were the largest
components of the increases in non interest income. For the first nine months of
1997, non interest income increased to $106,319,000 from $103,177,000 for the
prior year. The results on a year-to-date basis do not represent the same
percentage increase as the quarterly results due to the $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 ongoing returns without increased credit risk.
Non interest expense was $68,571,000 for the three months ended September 30,
1997 compared to $61,291,000 for the same period of 1996. For the first nine
months of 1997 non interest expense was $197,366,000 compared to $179,680,000
for the first nine 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 September 30, 1997 were $6.513 billion compared to $6.097
billion at September 30, 1996 and $6.512 billion at December 31, 1996. Loans,
net of unearned interest, increased to $2.710 billion as of September 30, 1997
compared to $2.492 billion at September 30, 1996. This 8.75% increase in loans
reflects management's goal to increase loans in a very competitive market. The
increases in loans was consistent with increases in deposits. Total deposits
increased to $5.025 billion at September 30, 1997 compared to $4.600 billion at
September 30, 1996.
Non accrual and restructured loans totaled $6,948,000, 0.26% of loans, at
September 30, 1997 compared to $13,639,000, 0.55% of loans, at September 30,
1996 and $11,476,000 at December 31, 1996, 0.45% of loans. Loans past due 90
days or more were $9,383,000, 0.35% of loans at September 30, 1997, compared to
$6,569,000, 0.26% of loans at September 30, 1996. The Company's loan quality
remains strong by industry standards. This decrease in non-accrual loans was
achieved at the same time the Company's average loans increased by 8.77%. The
total non performing loans and loans past due 90 days or more were less than
1.0% of total loans. At September 30, 1997 the Company's allowance for loan
losses was $32,770,000 or 1.21% 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 NINE MONTHS ENDED SEPTEMBER 30, 1997
Liquidity and Capital Resources
The Company's liquidity position continues to be strong. At September 30, 1997,
the Company's average loan to deposit ratio was 53.6% compared to 51.8% at
September 30, 1996. At September 30, 1997, the average life of the securities
portfolio was 23 months and 28% 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 $611 million at September 30, 1997 compared to $567
million at September 30, 1996 and $582 million at year end 1996. During the
twelve months ended September 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
September 30, 1997, the net unrealized gain on securities available for sale was
$3.5 million, compared to unrealized losses of $10.0 million at September 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.
Nine Months Ended
September 30,
RATIOS 1997 1996
Return on average assets 0.93 % 1.01 %
Return on average equity 10.15 10.88
Average equity to assets 9.14 9.31
Tier 1 risk-based capital ratio 15.52 15.86
Total risk-based capital ratio 16.45 16.93
Leverage ratio 8.52 8.42
Per Share Data
Earnings $ 2.30 $ 2.32
Cash Dividends $ .60 $ .57
Dividend payout ratio 26.09 % 24.57 %
Book value $ 31.40 $ 28.72
UMB FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS FOR THE
NINE MONTHS ENDED SEPTEMBER 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 September 30, 1997
Form 10-Q.
b) Reports on Form 8-K:
The Company filed no reports on Form 8-K during the quarter
ended September 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: November 14, 1997