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Historic Auction Returns to Fort Worth

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If you asked someone who had no experience with longhorn cattle to describe them, the words “friendly,” “affectionate” and “tame” probably wouldn’t come to mind. However, for those that have grown up around them, such as UMB Fort Worth Commercial Lending Officer Brady Beal (pictured right), these are qualities that he may never forget to include.

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“My family became involved with longhorns about 30 years ago when my mother and stepfather built one of the premier longhorn herds in the country here in Texas,” says Brady. “They are remarkable animals. They’re resilient, very well adapted to Texas conditions, and surprisingly tame.”

“In fact, there was actually a longhorn bull that I helped halter break many years ago, named Funny Face,” Brady continued. “He always wanted to be pet on the top of his head like a dog. It was a lot of fun, but I can also tell you that having a longhorn that is so friendly and affectionate can be a little dangerous. Imagine a dog that comes up and wants to be pet, but has two feet of horn sticking out each side of his head. I was accidentally wacked on more than one occasion. I don’t think Funny Face ever realized he was a longhorn.”

UMB is proud of its long history as a lender to both ranchers and farmers alike (recently recognized as a top 20 ag lender in the United States) and many of our associates, like Brady, have deep connections and understanding of the industries they’re involved in, including commercial, industrial and agriculture. This enables them to better understand and serve a wide range of customers and their needs.

“I like being able to drive around North Texas and see a customer’s place of business and reflect on the stories, how they began, how they expanded, grew and adapted. I think this is the most interesting part of the job. I enjoy getting to know these people as I try to help them with their businesses – I become personally and emotionally invested in the success of these companies.”

Just as Brady continues to build relationships with his customers, UMB also continues to build its relationship with the Fort Worth community, which includes sponsoring the signature Hudson-Valentine Fort Worth Stockyard Auction on September 22.

“The stockyards and Longhorns are big part of Fort Worth’s culture,” says Brady. “This sponsorship helps preserve the rich history of the Fort Worth Stockyards by bringing back the same type of cattle auction you would have seen in the area over 100 years ago.”

While Brady will be there on the first night of the longhorn auction, his days of working with cattle are now limited to attending the auction and helping his mom with the few head of cattle that she keeps at her place in Aledo, Texas.

“Oddly my work with cattle inspired me to choose a banking career. Ranch work is HARD. It’s a 24-hour, seven-day-a-week job, and you still never get it all done. My work with cattle pushed me to know that I wanted a position, where I could help people. At UMB there is an entire culture from the top down that cares about its employees and its customers and wants what’s best for all involved.  In my opinion, the feel of UMB ‘s culture is that it is a family owned organization, which sets it apart as an employer and for our customers.”

Learn more about commercial lending at UMB and our growing presence in Fort Worth.

Learn more about what ag means to UMB and see some of our clients in action.

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.


UMB Financial Corporation (Nasdaq: UMBF) is a diversified financial holding company headquartered in Kansas City, Mo., offering complete banking services, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas, as well as two national specialty-lending businesses. Subsidiaries of the holding company include companies that offer services to mutual funds and alternative-investment entities and registered investment advisors that offer equity and fixed income strategies to institutions and individual investors.



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Monthly Media Update – August

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CNBC discusses the impact of the political drama in Washington on the markets with our CIO, UMB’s Texas team talks about its expansion into Fort Worth’s iconic 777 building, our healthcare services CEO shares tips for employers to help employees be more financially secure, and why our personal banking president thinks each generation should have a retirement plan as distinct as their taste in pop culture are a few media coverage highlights from August.

Stay informed on industry trends and noteworthy company news by visiting our UMB in the News section on umb.com, which is updated weekly for timely viewing.

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UMB Financial Corporation (Nasdaq: UMBF) is a diversified financial holding company headquartered in Kansas City, Mo., offering complete banking services, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas, as well as two national specialty-lending businesses. Subsidiaries of the holding company include companies that offer services to mutual funds and alternative-investment entities and registered investment advisors that offer equity and fixed income strategies to institutions and individual investors.



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Are We Facing an Ag Crisis Like the 1980s?

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Our agribusiness team has been working with clients in this industry for more than 100 years. So, when we heard rumblings of a potential ag crisis like the one we faced in the 1980s, we wanted to share our insights and research with customers.

Turns out, our customers weren’t the only ones interested in this news. You can read more below for our thoughts or check out some recent media coverage on NPR’s Marketplace, the ABA Banking Journal and Missouri Farmer Today. One thing is certain: Today’s current agriculture climate is a challenge, but comparing it to the 1980’s farm crisis would be a mistake. Let’s take a walk back through history for a refresher.

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The 1980’s farm crisis was born out of the early 1970’s grain boom. Demand for nearly all grains took off in the early ‘70s as several international crops failed and geopolitical conditions made U.S. grain much more valuable.

By 1973, real farm income had reached a record high of $92.1 billion (nationally), nearly double what it was just three years earlier. Exports of U.S. agriculture products grew dramatically in the 1970s as rising incomes and liquidity in developing nations created strong demand.

In 1970, exports contributed only $6.7 billion or 11 percent of the grain produced in the U.S. By 1979, this number had jumped to $31.9 billion and was more than 22 percent of the grain raised in the U.S. that year.

Things were going so well for the American farmer that even Robert Bergland, U.S. ag secretary at the time, commented in 1980 that, “The era of chronic overproduction… is over.”

The equation that followed was simple:

  • Higher grain prices + more available credit = much higher land prices.

The boom eventually went bust, in perhaps one of the most difficult periods in the history of American agriculture. In 1981, there was only one ag bank failure among the 10 bank failures in the U.S.; by 1985, things had become so difficult that the 62 ag bank failures that year accounted for more than half of the bank failures in the U.S.

It may be unbelievable to read this today, but the prime rate averaged 15.3 percent in 1980. Higher interest rates almost automatically drove land prices down by the inherently lower value of the earnings that the land produced. If an investor could receive 13 percent on a CD in the bank, why consider purchasing farm land?

Also, export demand fell precipitously as the U.S. dollar strengthened considerably. In 1981, U.S. ag exports totaled $44 billion and then fell dramatically to $26 billion in 1986. Land values increased every single year from 1970 through 1981, but gross income per acre actually had several year-to-year decreases. Astonishingly, when land prices finally peaked in 1981, returns on investment for corn and soybeans were only one third of what they had been in 1973. Land was a laggard in terms of decline but eventually succumbed to the industry downturn.

Without question, the greatest assailant on the agriculture sector in the mid-1980s farm crisis, was the skyrocketing interest rate situation that devastated cash flows, credit availability and asset values. By comparison, today’s prime rate has been stalled at or below 4 percent for the better part of a decade. Clearly, interest rates are much more favorable for the farm sector today than in the crisis of the 1980s. This is the single greatest and most important difference between the two environments.

Another key distinction to understand when comparing the 1980s to the current environment is the recent trends and current expectations regarding

inflation. The consumer price index (CPI) took off in the early 1970s and the Federal Reserve struggled mightily to tame the beast of rampant inflation. Its only real tool to effectively combat inflation turned out to be much higher interest rates. Today’s CPI is completely dissimilar when compared to that of the 1970s and the early 1980s. As long as inflation remains subdued, rates may moderately increase, but will be nothing like the rates seen in the 1980s.

The recent ag economy has shown signs of stress including much lower grain prices, declining values for land and equipment, and modestly increasing interest rates. Lower net farm income, oversupply, and rising rates are akin to both the current environment and the 1980s. On the other hand, significant differences can be pointed to:

  1. A current prime rate of 4 percent is very manageable.
  2. Aggregate farm debt in terms of overall leverage is significantly less than it was on the cusp of the last big down turn.
  3. Federal crop insurance and other support programs have been bolstered over the past 35 years and provide meaningful support.

These similarities should cause all of us involved in agriculture to carefully make decisions and double our efforts in working together to ensure satisfactory outcomes. It is important to remember the history of our industry so we can all try to maneuver the current times and pave a way forward. By really understanding the similarities and differences of the 1980’s farm crisis to the challenges we are facing today, we can better prepare, understand and plan for the road ahead.

Our Agribusiness Division serves all areas of agriculture, including producersprocessors, suppliers and manufacturers of equipment and goods, throughout a 12-state area.

Learn more about what ag means to UMB and see some of our clients in action.

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.

 


UMB Financial Corporation (Nasdaq: UMBF) is a diversified financial holding company headquartered in Kansas City, Mo., offering complete banking services, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas, as well as two national specialty-lending businesses. Subsidiaries of the holding company include companies that offer services to mutual funds and alternative-investment entities and registered investment advisors that offer equity and fixed income strategies to institutions and individual investors.



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The New Normal: Outsourced Private Equity Administration

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Private equity continues to gain popularity among investors. According to Preqin the number of private equity funds seeking capital hit a record 1,908 funds at the beginning of Q2 2017.(1) We anticipate that number will continue to grow as investors seek alternatives to more traditional equity and fixed income investments. At UMB Fund Services (UMB), we see that demand reflected in our own business.

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A Case for Outsourcing

As more institutional and retail investors take interest in private equity funds, the need for transparency and accountability increases as do the corresponding reporting requirements. This level of reporting requires a great deal of administrative support and experience.

We are seeing an increase in the number of private equity managers who are outsourcing their back office administration to gain efficiencies, reduce risk and meet regulatory and compliance requirements. Given the various demands and complexities that managers face, many find that outsourcing allows them to spend more time focusing on the fund instead of administrative functions.

There are several benefits of outsourcing that managers should consider, including:

  • Gain efficiencies as providing back-office services to complex fund structures and complex investment types are a strength of fund administrators;
  • Reduce risk by benefitting from proven controls, processes and technologies that can be costly and time consuming to implement in their own shops;
  • Meet regulatory requirements by staying ahead of the curve and responding quickly to evolving regulatory pressures;
  • Meet investor demand by satisfying requests for independent fund and investor valuation.

Overall, the greatest benefits of allowing a third-party administrator to manage the administrative functions for a private equity fund are increased efficiency and reduced operational burden.

Partnering for Success

There are still managers that are leery of outsourcing due to the perceived loss of control, lack of understanding about their product by the administrator or the need for transparency Those concerns are best addressed by partnering with an administrator who is willing to take the time to understand your fund and embrace your unique needs.

In making this decision, managers should conduct extensive due diligence to ensure that the administrator is reputable and has proven policies, procedures and controls in place to ensure all aspects of fund administration will be conducted in accordance with the manager’s expectations.

Key Administrative Services

An experienced administrator can provide a wealth of services to private equity managers, including:

Full back office administration

  • Accounting
  • Tax preparation, compliance and reporting
  • Investor servicing
  • Custody services (2)
  • Product launches/conversions via turnkey solutions

Critical to all of this is the technology platform supporting each function – a key differentiator in the administrator space. Private equity funds are each unique and the technology supporting these funds needs to reflect their specific needs. Quality administrators in this space have technology that is customizable and tailored to manager needs while also evolving with the industry demand for electronic data.

Interested to gain more insights from thought leaders at UMB Fund Services‡? Check out our News and Insights section and follow us on LinkedIn‡ to stay informed of the latest trends in fund administration.

1. Preqin Quarterly Update Private Equity & Venture Captial Q1 2017
2. Typically provided by an affiliated bank or broker-dealer.


Jill Calton is senior vice president, Director of Alternative Investment Operations, for UMB Fund Services and provides leadership and oversight to all of the company’s alternative investment client servicing teams.



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Monthly Media Update – July

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NPR discusses the fears of a emerging farm crisis with our ag division, CNBC Powerlunch and Bloomberg Radio talk to UMB’s CIO, our Colorado Springs community bank president supports the city’s downtown redevelopment, and why hospitals are spending millions of dollars developing electronic health records are a few media coverage highlights from July.

Stay informed on industry trends and noteworthy company news by visiting our UMB in the News section on umb.com, which is updated weekly for timely viewing.

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UMB Financial Corporation (Nasdaq: UMBF) is a diversified financial holding company headquartered in Kansas City, Mo., offering complete banking services, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas, as well as two national specialty-lending businesses. Subsidiaries of the holding company include companies that offer services to mutual funds and alternative-investment entities and registered investment advisors that offer equity and fixed income strategies to institutions and individual investors.



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July Outlook by the Numbers

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Do you have questions on the housing market, labor market and interest rates? Check out UMB Investment Management team’s July 2017 Outlook by the Numbers for a quick snapshot on these and other economic drivers.

Also, be sure to review the following articles for more market and wealth management information…

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Follow UMB‡ on LinkedIn to stay informed of the latest economic trends.

 Interested in learning more about our Private Wealth Management division? See what we mean when we say, “Your story is our focus.


UMB Financial Corporation (Nasdaq: UMBF) is a diversified financial holding company headquartered in Kansas City, Mo., offering complete banking services, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas, as well as two national specialty-lending businesses. Subsidiaries of the holding company include companies that offer services to mutual funds and alternative-investment entities and registered investment advisors that offer equity and fixed income strategies to institutions and individual investors.



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EHRs: The Facts, Future and Financials

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To comply with Meaningful Use initiatives, more than 95 percent of hospitals have implemented some form of electronic health record (EHR) system since 2011. Some have spent hundreds of thousands of dollars to simply comply and put a system in place, while others have spent millions – even billions – to tailor a program unique to their needs.

The truth is EHRs are expensive to plan for, implement, train and maintain. And today, only a few years after installing new systems, nearly 38 percent of CIOs are already investing in optimization projects to improve or upgrade their current EHR programs, making this the biggest area of spending in healthcare IT.

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While EHR provides many answers and solutions, it presents many questions, as well.

  • What is the ROI for this massive technology upgrade?
  • How will EHRs really improve healthcare for doctors and patients?
  • What does the future of EHRs look like?

These questions and others are being considered and tested at hospitals around the country. Here are some of the more innovative practices and uses for EHRs that may help hospitals and executives plan for the road ahead and get the most out of their EHR investment.

Big Data

Gathering big data from a patient population is one thing. Deciphering and applying that data to solve real-world health issues is another. Hospitals that are successfully doing this are finding it is a game-changer for helping patients, the community and their care outcomes.

Examples:

  • Identifying at-risk or high-risk patients to help reduce readmission rates: This data analysis looks at EHR information, zip codes and socioeconomic data to assign patients a risk score. This can also include monitoring patients with numerous chronic diseases (diabetes, heart failure, cholesterol, cancer, etc.) in real-time to help reduce hospitalizations and drive down the cost of care.
  • Clinical trial enrollment: Using big data could help patients enroll in clinical trials that will help improve quality of care and enhance outcomes. For patients, this helps match them to clinical trials and have access to safety monitoring during the treatment. For healthcare providers/researchers, this means having the data they need to find patients for trials and evaluate therapies.

Telemedicine

A technology that has been talked about and hypothesized for decades is now at its tipping point and gaining the attention of healthcare executives across the industry. More than 83 percent of telemedicine executives who were surveyed in 2017 by the American Telemedicine Association said they are likely to invest in telehealth this year. And more importantly, they see patient-centered healthcare and EHR interoperability as top advancements they are most excited about.

Using EHR systems to treat patients with telehealth can reduce the cost of the care for both patients and providers. This technology allows doctors to stay more organized, save time, log into the patient’s record from anywhere, and prescribe medication in real time.

Examples:

  • Remote patient monitoring for issues such as weight gain in at-risk heart patients. One of the biggest readmission rates for heart attack patients occurs when they start to gain weight. By using monitoring devices, doctors can receive weight readings every day allowing them to track patients’ health and have an idea of risk for readmission.
  • Doctors, hospitals and nurses are using telemedicine to treat children at school. This type of visit includes a nurse at school using a telehealth cart with video capabilities and high-tech ear, nose and throat scopes to communicate with a pediatric doctor or hospital staff for a remote patient visit. Parents can video in on the visit from work, allowing children to stay in school, parents to stay at work and nurses/doctors to best assess the child. It also allows children who do not have access to health care to see a doctor without going to the ER, further reducing overall healthcare costs for hospitals and patients.
  • Treating at-risk patients with numerous chronic conditions remotely with telehealth. Hospitals can track at-risk patients through their physiological data remotely with biometric sensors. This data can track everything from weight and heart rate to blood pressure and oxygen saturation. This information allows the team to provide remote support and communicate with patients at important times. The pilot program at Banner Health reduced hospitalizations by 45 percent ‡ and drove down the overall cost of care by 27 percent.

Patient Engagement

Enabling patients to access their own EHRs has shown great promise in helping them take control and engage in their overall wellbeing as well as helping providers prioritize patients’ concerns. The practice of allowing patients to collaborate on EHR notes and help set the agenda for their appointment has shown to improve communication between the patient and the provider, increase patient satisfaction, decrease visit times for doctors and optimize the appointment.

Examples

  • A University of Washington pilot study of patients setting agendas for their appointments found that most patients and clinicians felt it enhanced their relationships, and most said they would like to continue the practice. Also, patients who created their own agenda for the visit gave the doctor a more collaborative feeling and increased patient engagement – a key component of accountable care organizations and patient-centered medical homes under the Affordable Care Act.
  • An OpenNotes study found that by reviewing their medical records and clinician notes, patients could spot safety concerns (usually pertaining to medication errors or misreported pre-existing health conditions), and many of the flagged reports were turned into medical record revisions. The findings suggest that patients can help identify mistakes and are eager to have accurate medical records on file.

These are only a few examples of how EHRs are being implemented and used by providers and patients. The truth is that this technology is constantly morphing and evolving to help improve healthcare treatments and outcomes across the board. Clearly, there is an inherent need for healthcare executives, doctors and patients to find more valuable uses for EHRs to enhance patient care, improve outcomes and save costs.

Furthermore, what’s most critical to the evolving world of EHRs is that you have the right partners at the table to help educate, train and effectively adapt this technology to your unique needs. This includes your vendors, IT department, doctors, nurses and users.

Finally, the financial burden of improving and updating your EHR system will be a consistent line item for the foreseeable future. Knowing how to budget and prepare for those costs is vital to the financial success of your organization. And working with a banking partner who understands the complex world of healthcare finance is just as important.

Richard Ziegner is director of healthcare banking at UMB Bank where he is responsible for leading the bank’s efforts in the healthcare sector and providing capital and financial solutions to healthcare providers. He can be reached at Richard.Ziegner@umb.com.

 


Richard Ziegner is executive vice president and director of healthcare banking at UMB Bank where he is responsible for leading the bank’s efforts in the healthcare sector and providing capital and financial solutions to healthcare providers. He graduated from the University of Arizona in Tucson, Ariz. with a Bachelor of Science degree in finance and earned his Master of Business Administration degree from Northern Arizona University in Flagstaff, Ariz.



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Today’s ag climate is tough, but it’s still not the ‘80s

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If history repeats itself, we might ask, “Are we witnessing a farm decline similar to what we saw in the 1980s?” The short answer to that question is no. The current agriculture climate is a challenge, but comparing it to the ‘80’s farm crisis would be a mistake. Let’s take a walk back through history for a refresher.

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The 1980’s farm crisis was born out of the early 1970s grain boom. Demand for nearly all grains took off in the early ‘70s as several international crops failed and geopolitical conditions made U.S. grain much more valuable.

By 1973, real farm income had reached a record high of $92.1 billion, nearly double what it was just three years earlier. Exports of U.S. agriculture products grew dramatically in the 1970s as rising incomes and liquidity in developing nations created strong demand.

In 1970, exports contributed only $6.7 billion or 11% of the grain produced in the U.S. By 1979, this number had jumped to $31.9 billion and was more than 22% of the grain raised in the U.S. that year.

Things were going so well for the American farmer that even Bob Bergland, U.S. ag secretary at the time, commented in 1980 that, “The era of chronic overproduction… is over.”

The equation that followed was simple: Higher grain prices plus more available credit led to much higher land prices. The boom eventually went bust, in perhaps one of the most difficult periods in the history of American agriculture.

In 1981, there was only one ag bank failure among the 10 bank failures in the U.S.; by 1985, things had become so difficult that the 62 ag bank failures that year accounted for more than half of the bank failures in the U.S.

Interest rates up, exports down

It may be unbelievable to read this today, but the prime rate averaged 15.3% in 1980. Higher interest rates almost automatically drove land prices down by the inherently lower value of the earnings that the land produced. If an investor could receive 13% on a CD in the bank, why consider purchasing farm land?

Also, export demand fell precipitously as the U.S. dollar strengthened considerably. In 1981, U.S. ag exports totaled $44 billion and then fell dramatically to $26 billion in 1986. Land values increased every single year from 1970 through 1981, but gross income per acre actually had several year-to-year decreases.

Astonishingly, when land prices finally peaked in 1981, returns on investment for corn and soybeans were only one third of what they had been in 1973. Land was a laggard in terms of decline but eventually succumbed to the industry downturn.

Without question, the greatest assailant on the agriculture sector in the mid-1980s farm crisis, was interest rate devastating cash flows, credit availability and asset values. By comparison, today’s prime rate has been stalled at or below 4% for the better part of a decade.

Inflation worries

Clearly, interest rates are much more favorable for the farm sector today than in the crisis of the 1980s.

Another key distinction to understand when comparing the 1980s to the current environment is the recent trends and current expectations regarding inflation. The consumer price index (CPI) took off in the early 1970s and the Federal Reserve struggled mightily to tame the inflation beast. Its only real tool to effectively combat inflation turned out to be much higher interest rates.

Today’s CPI is completely dissimilar when compared to that of the 1970s and the early 1980s. As long as inflation remains subdued, rates may moderately increase, but will be nothing like the rates seen in the 1980s.

The recent ag economy has shown signs of stress, including much lower grain prices, declining values for land and equipment, and modestly increasing interest rates. Even so, there are three key differences between today’s situation and the 1980s:

  1. A current prime rate of 4%
  2. Aggregate farm debt in terms of overall leverage is significantly less than it was on the cusp of the last big down turn
  3. Federal crop insurance and other support programs have been bolstered over the past 35 years

It is important to remember the history of our industry so we can all try to maneuver the current times and pave a way forward. By really understanding the similarities and differences of the 1980’s farm crisis to the challenges we are facing today, we can better prepare, understand and plan for the road ahead.

Learn more about what ag means to UMB and see some of our clients in action.

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.


UMB Financial Corporation (Nasdaq: UMBF) is a diversified financial holding company headquartered in Kansas City, Mo., offering complete banking services, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas, as well as two national specialty-lending businesses. Subsidiaries of the holding company include companies that offer services to mutual funds and alternative-investment entities and registered investment advisors that offer equity and fixed income strategies to institutions and individual investors.



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Business Owners: Planning a Roadmap for Success in 2017

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We are almost halfway through 2017, which means it is an opportune time to revisit business goals set at the beginning of the year. Conducting a mid-year check-in allows business owners to evaluate if goals for the year are being met as projected and whether plans need to be adapted to help optimize future success.

Several questions business owners should ask include:

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Is the business prepared for rising interest rates?  

Rising interest rates and Federal Reserve sentiment are in the news regularly, with the public continuing to watch rates gradually rise after years of stagnation.

With the country steadily rebounding from the recession, the Federal Reserve increased the interest rate for the second time in three months in March 2017 to a range between 0.75 percent and 1.00 percent (most recently they elected to maintain this rate in early May).

Interest rates are important to business owners to consider as they look at items such as loan terms and evaluating leasing versus purchasing for commercial real estate.

Is refinancing a business option?

As rates fluctuate, it is critical to evaluate refinancing options. This could be the time to consolidate debt or secure a better rate for a loan. Refinancing could open the door for a larger purchase later in the year or allow for a different goal to be reached more quickly.

Additionally, refinancing into a fixed rate loan may provide some peace of mind for business owners who are nervous about the impact of rising rates on an existing variable rate loan. A fixed rate offers something that business owners crave – predictability.

Do you have the right product for your needs?

It is also important for business owners to ensure they understand all the aspects of the loan. Take time to research the different terms, and make sure they are still in line with business goals. There are several different financing options available to small businesses, and it might be time to explore a different type of product that better suits the needs of that particular business or the current business environment.

Make a list of business goals, and discuss these options with an experienced banker, as they should be able to help clients prepare and best navigate any economic environment with sound lending advice.

Is it time to make a large purchase?   

Mid-year is the perfect time to evaluate what is needed to help business owners navigate the rest of 2017. Since interest rates are unpredictable and have been on the rise, it is important to understand how a purchase now will impact the business down the road. For example, it might be worth considering owning instead of renting equipment or property.

Real estate is also a key consideration for business owners, as it is often one of the largest expenses they face. Purchasing a space instead of renting could be a better long-term solution, given rents in many cities continue to rise at a pace that makes long-term agreements a less attractive option.

Ultimately, the window for low rates seems to be closing, so moving to a more entrepreneurial mindset and investing through capital expenditures may be beneficial. Bankers can help owners evaluate these options for the short- and long-term.

Be in regular communication with your banker.

Finally, it is critical to maintain regular communication with your banker. Business owners should consistently share what is happening and ask the tough questions to see what changes can be made for the time ahead.

Bankers are here to support owners and to help businesses succeed—having the full picture will result in sound advice and recommendations.

Interested in learning more about UMB Business Banking Solutions? See what we mean when we say, “Grow with Confidence.


Dominic is a executive vice president for the Business Banking division at UMB. He joined UMB in 2013 and has more than 20 years of experience in the financial services industry.



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Focus Items for Small Business Owners

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In December, the NFIB Small Business Optimism Index‡ had its highest reading in 12 years. In the report seven of the 10 index components rose, including small business owners expecting better business conditions and higher sales.

Optimism is currently at a high point allowing for owners to focus on their next big idea, their bottom line and how they can make things better for their employees. Their bankers should be thinking about those things, too.

If you’re a small business owner, make sure you’re talking with your financial partner about these business-critical items as you venture into 2017 and beyond.

Top Talent Identification and Retention
Companies requiring vocational talent can face challenges finding the right type of employee. As businesses look to expand, growth can be difficult without a sound workforce and could potentially force companies to outsource to other cities or move operations entirely.

As part of their talent acquisition and retention efforts, small businesses should ensure they are offering solid compensation and benefits to build and retain a strong workforce.

Business Growth
With an ultimate goal of growing their company, small businesses need to evaluate what other potential clients exist and if there are new segments where they can introduce their product or service.

Companies that did not survive the 2008 economic downturn left behind certain voids that need to be filled. Existing companies should evaluate this as an opportunity to expand to a new business target.

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Employee compensation and benefits
Currently, there are two big issues that could pose a threat to small businesses: the minimum wage discussion and health care. If minimum wage increases, many businesses will face challenges with revenue and cash flow, particularly if they employ lower-wage workers. With no offsetting revenue increase, this would affect a company’s cash flow and could create unprecedented challenges within the business.

The other topic of note for business owners is healthcare. The rules and regulations of the Affordable Care Act may change with the current administration discussing extensive healthcare reform. This could mean an extra expense without incurring any additional revenue for small businesses.

Fraud and Protection
Fraud continues to be a top concern among business owners, and the latest statistics prove it is a legitimate fear. In the 2016 Association for Financial Professionals Payments Fraud and Control survey, 62 percent of companies were subject to fraud during the survey period, and wire fraud has nearly doubled from 14 percent to 27 percent.

The truth is, businesses can plug one gap and another one opens up somewhere else. The key is to stay vigilant with your employees, train them and understand the latest tactics that are being used to commit fraud.

 

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Dominic is a executive vice president for the Business Banking division at UMB. He joined UMB in 2013 and has more than 20 years of experience in the financial services industry.



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