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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
For the fiscal year ended: DECEMBER 31, 1993
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to .
Commission file number: 0-4887
UNITED MISSOURI BANCSHARES, INC.
(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, 64106
KANSAS CITY, MISSOURI (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (816) 860-7000
Securities Registered Pursuant to Section 12(b) of the Act:
NONE
Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, $12.50 PAR VALUE
(Title of class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
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
As of February 28, 1994, the aggregate market value of common stock
outstanding held by nonaffiliates of the registrant was approximately
$455,295,000 based on the NASDAQ closing price of that date.
Indicate the number of shares outstanding of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding at February 28, 1994
Common Stock, $12.50 Par Value 17,539,755 shares
DOCUMENTS INCORPORATED BY REFERENCE
Company's 1994 Proxy Statement dated March 17, 1994 -- Part III
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INDEX
ITEM PAGE
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PART I
1. Business................................................................. 1
2. Properties............................................................... 4
3. Legal Proceedings........................................................ 4
4. Submission of Matters to a Vote of Security Holders...................... 4
PART II
5. Market for the Registrant's Common Equity and Related Stockholder
Matters.................................................................. 4
6. Selected Financial Data.................................................. 5
7. Management's Discussion and Analysis of Financial Condition and Results
of
Operations............................................................... 5
8. Financial Statements and Supplementary Data.............................. 5
9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure............................................................... 5
PART III
10. Directors and Executive Officers of the Registrant....................... 5
11. Executive Compensation................................................... 5
12. Security Ownership of Certain Beneficial Owners and Management........... 5
13. Certain Relationships and Related Transactions........................... 6
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.......... 6
8
Signatures.......................................................................
Financial Information............................................................ Appendix A
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PART I
ITEM 1. BUSINESS
GENERAL
United Missouri Bancshares, Inc. (the "Company") was organized in 1967
under Missouri law for the purpose of becoming a bank holding company registered
under the Bank Holding Company Act of 1956. The Company owns substantially all
of the outstanding stock of 30 commercial banks, a consumer credit bank, a bank
real estate corporation, a reinsurance company, a community development
corporation and a discount brokerage company.
The Company's 30 commercial banks are engaged in general commercial banking
business entirely in domestic markets. The banks, 14 located in Missouri, 12 in
Kansas, two in Illinois and two in Colorado, offer a full range of banking
services to commercial, retail, government and correspondent bank customers. In
addition to standard banking functions, the principal affiliate bank, United
Missouri Bank, n.a., provides international banking services, investment and
cash management services, data processing services for correspondent banks and a
full range of trust activities for individuals, estates, business corporations,
governmental bodies and public authorities. A table setting forth the names and
locations of the Company's affiliate banks as well as their total assets, loans,
deposits and shareholders' equity as of December 31, 1993, is included on page
A-50 of the attached Appendix, and is incorporated herein by reference.
United Missouri Bank, U.S.A. is a consumer credit bank chartered in
Delaware. United Missouri Bank, U.S.A. services all incoming credit card
requests, performs data entry services on new card requests and evaluates new
and existing credit lines.
Other subsidiaries of the Company are UMB Properties, Inc., United Missouri
Insurance Company, United Missouri Brokerage Services, Inc., and UMB Community
Development Corporation. UMB Properties, Inc. is a real estate company that
leases facilities to certain subsidiaries and acquires and holds land and
buildings for anticipated future facilities. United Missouri Insurance Company,
an Arizona corporation, is a reinsurance company that reinsures credit life and
disability insurance originated by affiliate banks. United Missouri Brokerage
Services, Inc. provides transaction services in a variety of investment
securities for the general public. This subsidiary offers brokerage and
custodial services to its customers (including affiliate and correspondent
banks) through the facilities of National Financial Services Corporation, a
wholly-owned subsidiary of Fidelity Brokerage Services, Inc. UMB Community
Development Corporation provides low-cost mortgage loans to low-to
moderate-income families for acquiring or rehabing owner-occupied housing in
Missouri, Kansas, Illinois and Colorado.
The Company acquired eight Kansas bank holding companies during 1993. These
acquisitions are discussed in detail on pages A-9 and A-10 of the attached
Appendix, which is incorporated herein by reference.
On a full-time equivalent basis at December 31, 1993, United Missouri
Bancshares, Inc. and subsidiaries employed 3,718 persons.
COMPETITION
The commercial banking business is highly competitive. Affiliate banks
compete with other commercial banks and with other financial institutions,
including savings and loan associations, finance companies, money market mutual
funds, mortgage banking companies and credit unions. In recent years,
competition has also increased from institutions not subject to the same
geographical and other regulatory restrictions as domestic banks and bank
holding companies.
MONETARY POLICY AND ECONOMIC CONDITIONS
The operations of the Company's affiliate banks are affected by general
economic conditions as well as the monetary policy of the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board") which affects the
supply of money available to commercial banks. Monetary policy measures by the
Federal
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Reserve Board are effected through open market operations in U.S. Government
securities, changes in the discount rate on bank borrowings and changes in
reserve requirements.
SUPERVISION AND REGULATION
As a bank holding company, the Company is subject to the Bank Holding
Company Act of 1956, as amended (the "BHCA") and to regulation by the Federal
Reserve Board.
The BHCA requires every bank holding company to obtain the prior approval
of the Federal Reserve Board before it may (i) acquire substantially all the
assets of any bank, (ii) acquire more than 5% of the voting stock of a bank or
bank holding company which is not already majority owned, or (iii) merge or
consolidate with another bank holding company.
Under the BHCA, a bank holding company is prohibited, with certain
exceptions, from acquiring direct or indirect ownership or control of more than
5% of the voting shares of any company which is not a bank and from engaging in
business other than that of banking, managing and controlling banks or
performing services for its banking subsidiaries. However, the BHCA authorizes
the Federal Reserve Board to permit bank holding companies to engage in
activities which are so closely related to banking or managing or controlling
banks as to be a proper incident thereto.
The BHCA prohibits the Federal Reserve Board from approving an application
by a registered bank holding company to acquire shares of a bank located outside
the state in which the operations of the holding company's banking subsidiaries
are principally conducted unless the acquisition is specifically authorized by
the laws of the state in which the bank to be acquired is located. In 1986,
Missouri authorized bank holding companies domiciled in contiguous states to
acquire Missouri banks and bank holding companies, provided their home states
have similar laws. Colorado and all of the eight states contiguous to Missouri
have passed similar legislation.
There are various legal restrictions on the extent to which a bank holding
company and certain of its non-bank subsidiaries can borrow or otherwise obtain
credit from its bank subsidiaries. The Company and its subsidiaries are also
subject to certain restrictions on issuance, underwriting and distribution of
securities.
Nine of the affiliate banks are national banks and are subject to
supervision and examination by the Comptroller of the Currency. United Missouri
Bank, U.S.A. is chartered under the state banking laws of Delaware and is
subject to supervision and regular examination by the Office of the State Bank
Commissioner of Delaware. One of the affiliate banks is chartered under the
state banking laws of Illinois and is subject to supervision and regular
examination by the Office of the Commissioner of Banks and Trust Companies of
Illinois. One of the affiliate banks is chartered under the state banking laws
of Colorado and is subject to supervision and regular examination by the Office
of the State Bank Commissioner of Colorado. Seven of the affiliate banks are
chartered under the state banking laws of Kansas and are subject to supervision
and regular examination by the Kansas Banking Department. The remaining 12 banks
are chartered under the state banking laws of Missouri and are subject to
supervision and regular examination by the Office of the Commissioner of Finance
of Missouri. In addition, the national banks and the one state bank that are
members of the Federal Reserve System are subject to examination by that agency.
All affiliate banks are members of the Federal Deposit Insurance Corporation,
and as such, are subject to examination thereby.
United Missouri Brokerage Services, Inc. is subject to supervision and
regulation by the National Association of Securities Dealers. This subsidiary is
also a member of the Securities Investor Protection Corporation.
Information regarding capital adequacy standards of Federal banking
regulators is included on pages A-28 through A-30 of the attached Appendix, and
is incorporated herein by reference.
Information regarding dividend restrictions is on pages A-12 and A-17 of
the attached Appendix, incorporated herein by reference.
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STATISTICAL DISCLOSURE
The information required by Guide 3, "Statistical Disclosure by Bank
Holding Companies," has been integrated throughout pages A-26 through A-50 of
the attached Appendix under the captions of "Five-Year Financial Summary" and
"Financial Review," and such information is incorporated herein by reference.
EXECUTIVE OFFICERS
The following are the executive officers of the Company, each of whom is
elected annually, and there are no arrangements or understandings between any of
the persons so named and any other person pursuant to which such person was
elected as an officer.
NAME AGE POSITION WITH REGISTRANT
- ------------------------------ --- --------------------------------------------------------
R. Crosby Kemper.............. 67 Chairman of the Board and Chief Executive Officer since
1972. Chief Executive Officer of United Missouri Bank,
n.a.
(a subsidiary of the Company) since 1967.
Malcolm M. Aslin.............. 46 President of the Company since 1982. Chairman of United
Missouri Bank, n.a. since January 1994, having
previously served as President.
Peter J. Genovese............. 47 Vice Chairman of the Board since 1982. Chairman of
United Missouri Bank of St. Louis, n.a. (a subsidiary of
the Company) since 1979.
Alexander C. Kemper........... 28 President of United Missouri Bank, n.a. since January
1994, having previously served as Divisional Executive
Vice President.
Rufus Crosby Kemper III....... 43 President of United Missouri Bank of St. Louis, n.a.
since 1993. Executive Vice President of United Missouri
Bank, n.a. prior thereto.
J. Lyle Wells, Jr............. 66 Vice Chairman of the Board of the Company since 1993.
Vice Chairman of the Board of United Missouri Bank, n.a.
since 1982.
Geoffrey E. Lind.............. 45 Vice Chairman of the Board since 1993. Chairman,
President and Chief Executive Officer of UMB Bank
Colorado (a subsidiary of the Company) since 1991.
Executive Vice President of United Missouri Bank, n.a.
prior thereto.
Richard A. Renfro............. 59 President of UMB National Bank of America, Salina,
Kansas,
(a subsidiary of the Company) since 1986.
James A. Sangster............. 39 Divisional Executive Vice President of United Missouri
Bank, n.a. since 1993. Executive Vice President prior
thereto.
William C. Tempel............. 55 Chairman and President of UMB Commercial National Bank
(a subsidiary of the Company) since 1993, having
previously served as President.
Edward J. McShane, Jr......... 61 Divisional Executive Vice President and Senior Trust
Officer of United Missouri Bank, n.a. since 1989.
Executive Vice President and Head of Personal Trust and
Custody Division prior thereto.
Douglas F. Page............... 50 Executive Vice President of the Company since 1984 and
Divisional Executive Vice President, Loan
Administration, of United Missouri Bank, n.a. since
1989.
Lawrence E. Russell........... 47 Divisional Executive Vice President of United Missouri
Bank, n.a. since 1989. Executive Vice President prior
thereto.
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NAME AGE POSITION WITH REGISTRANT
- ------------------------------ --- --------------------------------------------------------
William M. Teiwes............. 52 Executive Vice President and Treasurer of the Company
since 1985. Executive Vice President and Comptroller of
United Missouri Bank, n.a. since 1981.
E. Frank Ware................. 49 Executive Vice President of United Missouri Bank, n.a.
since 1985.
ITEM 2. PROPERTIES
The Company's headquarters building, the United Missouri Bank Building, is
located at 1010 Grand Avenue in downtown Kansas City, Missouri, and was opened
in July 1986. Of the total 250,000 square feet, the offices of the parent
company and customer service functions of United Missouri Bank, n.a. comprise
175,000 square feet. The remaining 75,000 square feet are leased to the
Company's principal law firm and principal accounting firm.
The banking facility of United Missouri Bank, n.a. at 928 Grand Avenue
principally houses that bank's operations, data processing and other support
functions and is connected to the headquarters building by an enclosed
pedestrian walkway.
At December 31, 1993, the Company's affiliate banks operated a total of 30
main banking houses and 86 detached facilities, the majority of which are owned
by them or a non-bank subsidiary of the Company and leased to the respective
bank.
The Company's affiliate bank in St. Louis leases 40,000 square feet of
space in the Equitable Building in the heart of the downtown commercial sector.
A full service banking center, operations and administrative offices are housed
at this location. The St. Louis affiliate bank provides full service banking at
10 additional offices, which circle the metropolitan area.
Additional information with respect to premises and equipment is presented
on page A-16 of the attached Appendix, which is incorporated herein by
reference.
In the opinion of the management of the Company, the physical properties of
the Company and its subsidiaries are suitable and adequate and are being fully
utilized.
ITEM 3. LEGAL PROCEEDINGS
In the normal course of business, the Company and its subsidiaries had
certain lawsuits pending against them at December 31, 1993. In the opinion of
management, after consultation with legal counsel, none of these suits will have
a significant effect on the financial condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the shareholders for a vote during the fourth
quarter ending December 31, 1993.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's stock is traded on the NASDAQ National Market System under
the symbol "UMSB." As of December 31, 1993, the Company had 2,787 shareholders.
Dividend and sale prices of stock information, by quarter, for the past two
years is contained on page A-47 of the attached Appendix and is hereby
incorporated by reference.
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Information concerning restrictions on the ability of Registrant to pay
dividends and Registrant's subsidiaries to transfer funds to Registrant is
contained on pages A-12 and A-17, respectively, of the attached Appendix and is
hereby incorporated by reference.
ITEM 6. SELECTED FINANCIAL DATA
See the "Five-Year Financial Summary" on page A-26 of the attached
Appendix, which is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
See the "Financial Review" on pages A-26 through A-50 of the attached
Appendix, which is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements and supplementary data
appearing on the indicated pages of the attached Appendix are incorporated
herein by reference:
Consolidated Financial Statements -- pages A-2 through A-24.
Summary of Operating Results by Quarter -- page A-47.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors is included in the Company's 1994 Proxy
Statement under the captions "Election of Directors" and "Compliance with
Section 16(a) of the Securities Exchange Act of 1934" and is hereby incorporated
by reference.
Information regarding executive officers is included in Part I of this Form
10-K under the caption "Executive Officers."
ITEM 11. EXECUTIVE COMPENSATION
This information is included in the Company's 1994 Proxy Statement under
the captions "Executive Compensation", "Report of the Officers Salary and Stock
Option Committee on Executive Compensation," "Director Compensation", "Salary
Committee Interlocks and Insider Participation," and "Performance Graph" and is
hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
This information is included in the Company's 1994 Proxy Statement under
the caption "Principal Shareholders" and is hereby incorporated by reference.
SECURITY OWNERSHIP OF MANAGEMENT
This information is included in the Company's 1994 Proxy Statement under
the caption "Stock Beneficially Owned by Directors and Nominees and Executive
Officers" and is hereby incorporated by reference.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information is included in the Company's 1994 Proxy Statement under
the caption "Certain Transactions" and is hereby incorporated by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Set forth below are the consolidated financial statements of the Company
appearing on the indicated pages of the attached Appendix, which are hereby
incorporated by reference.
PAGE REFERENCE IN
THE ATTACHED APPENDIX
---------------------
Consolidated Balance Sheet as of December 31, 1993, 1992 and 1991......... A-2
Consolidated Statement of Income for the Three Years Ended December 31,
1993.................................................................... A-3
Consolidated Statement of Cash Flows for the Three Years Ended December
31, 1993................................................................ A-4
Consolidated Statement of Shareholders' Equity for the Three Years Ended
December 31, 1993....................................................... A-5
Notes to Financial Statements............................................. A-6 to A-24
Independent Auditors' Report.............................................. A-25
Condensed financial statements for parent company only may be found on page
A-24. All other schedules have been omitted because the required information is
presented in the financial statements or in the notes thereto, the amounts
involved are not significant or the required subject matter is not applicable.
REPORTS ON FORM 8-K
The Company did not file a report on Form 8-K during the fourth quarter of
1993.
EXHIBITS
The following Exhibit Index lists the Exhibits to Form 10-K.
EXHIBIT NUMBER DESCRIPTION
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(3a) Articles of incorporation filed as Exhibit 3a to Form S-4, Registration No.
33-56450*
(3b) Bylaws filed as Exhibit 3b to Form S-4, Registration No. 33-56450*
(4) Description of the Registrant's common stock in Amendment No. 1 on Form 8 to
its General Form for Registration of Securities on Form 10, dated March 5,
1993.*
The Registrant's Articles of Incorporation and Bylaws are attached as Exhibits
3(a) and 3(b), respectively, to the Registrant's Registration Statement on
Form S-4 (Commission file no. 33-56450) and are incorporated herein by
reference in response to Exhibit 3 above. The following portions of those
documents define some of the rights of the holders of the Registrant's common
stock, par value $12.50 per share: Articles III (authorized shares), "X"
(amendment of the Bylaws) and XI (amendment of the Articles of Incorporation)
of the Articles of Incorporation and Articles II (shareholder meetings),
Sections 2 (number and classes of directors) and 3 (Election and Removal of
Directors) of Article III, Section 1 (stock certificates) of Article VII and
Section 4 (indemnification) of Article VIII of the Bylaws.
Note: No long-term debt instrument issued by the Registrant exceeds 10% of the
consolidated total assets of the Registrant and its subsidiaries. In
accordance with paragraph 4 (iii) of Item 601 of Regulation S-K, the
Registrant will furnish to the Commission, upon request, copies of long-term
debt instruments and related agreements.
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EXHIBIT NUMBER DESCRIPTION
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(10a) 1981 Incentive Stock Option Plan as amended November 27, 1985 and October 10,
1989, filed as Exhibit 10 to report on Form 10-K for the fiscal year ended
December 31, 1989*
(10b) 1992 Incentive Stock Option Plan filed as Exhibit 28 to Form S-8, Registration
No. 33-58312*
(10c) An Agreement and Plan of Merger between United Missouri Bancshares, Inc. and
CNB Financial Corporation filed as Exhibit 2 to the Registrant's current
report on Form 8-K dated October 28, 1992*
(10d) Indenture between United Missouri Bancshares, Inc., Issuer and NBD Bank, N.A.,
Trustee, filed as Exhibit 4a to Form S-3, Registration No. 33-55394*
(11) Statement regarding computation of per share earnings
(12) Statement regarding computation of earnings to fixed charges
(21) Subsidiaries of the Registrant
(23) Consent of Deloitte & Touche
(24) Powers of attorney
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* Exhibit has heretofore been filed with the Securities and Exchange Commission
and is incorporated herein as an exhibit by reference.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
UNITED MISSOURI BANCSHARES, INC.
/s/ R. CROSBY KEMPER* /s/ MALCOLM M. ASLIN
- ---------------------------------------- ----------------------------------------
R. Crosby Kemper, Chairman of the Board Malcolm M. Aslin, President
and Chief Executive Officer
/s/ WILLIAM M. TEIWES
- ----------------------------------------
William M. Teiwes,
Executive Vice President and Treasurer
(Principal Accounting and Financial Officer)
Date: March 18, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities on the date indicated.
/s/ MALCOLM M. ASLIN
------------------------------ Director
Malcolm M. Aslin
------------------------------ Director
Paul D. Bartlett, Jr.
THOMAS E. BEAL*
------------------------------ Director
Thomas E. Beal
H. ALAN BELL*
------------------------------ Director
H. Alan Bell
------------------------------ Director
David R. Bradley, Jr.
NEWTON A. CAMPBELL*
------------------------------ Director
Newton A. Campbell
------------------------------ Director
Thom R. Cooper
WILLIAM TERRY FULDNER*
------------------------------ Director
William Terry Fuldner
/s/ CHARLES A. GARNEY*
------------------------------ Director
Charles A. Garney
PETER J. GENOVESE*
------------------------------ Director
Peter J. Genovese
C.N. HOFFMAN, JR.*
------------------------------ Director
C.N. Hoffman, Jr.
ALEXANDER C. KEMPER*
------------------------------ Director
Alexander C. Kemper
R. CROSBY KEMPER*
------------------------------ Director
R. Crosby Kemper
R. CROSBY KEMPER III*
------------------------------ Director
R. Crosby Kemper III
DANIEL N. LEAGUE, JR.*
------------------------------- Director
Daniel N. League, Jr.
WILLIAM J. MCKENNA*
------------------------------- Director
William J. McKenna
ROY E. MAYES*
------------------------------ Director
Roy E. Mayes
JOHN H. MIZE, JR.*
------------------------------ Director
John H. Mize, Jr.
MARY LYNN OLIVER*
------------------------------ Director
Mary Lynn Oliver
W. L. ORSCHELN*
------------------------------ Director
W. L. Orscheln
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ALAN W. ROLLEY*
----------------------------- Director
Alan W. Rolley
JOSEPH F. RUYSSER*
----------------------------- Director
Joseph F. Ruysser
----------------------------- Director
Thomas D. Sanders
----------------------------- Director
Herman R. Sutherland
E. JACK WEBSTER, JR.*
----------------------------- Director
E. Jack Webster, Jr.
JOHN E. WILLIAMS*
----------------------------- Director
John E. Williams
*/s/ MALCOLM M. ASLIN
-----------------------------
Malcolm M. Aslin
Attorney-in-Fact for each director
Date: March 18, 1994
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UNITED MISSOURI BANCSHARES, INC.
INDEX TO FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA
PAGES
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Consolidated Balance Sheet.................................................... A-2
Consolidated Statement of Income.............................................. A-3
Consolidated Statement of Cash Flows.......................................... A-4
Consolidated Statement of Shareholders' Equity................................ A-5
Notes to Financial Statements................................................. A-6 to A-24
Independent Auditors' Report.................................................. A-25
Selected Financial Data ("Five-Year Financial Summary")....................... A-26
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("Financial Review")............................................. A-26 to A-50
A-1
13
FINANCIAL STATEMENTS
UNITED MISSOURI BANCSHARES, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31,
--------------------------------------
1993 1992 1991
---------- ---------- ----------
(IN THOUSANDS)
ASSETS
Loans:
Commercial, financial and agricultural...................................... $1,103,306 $ 806,085 $ 687,618
Consumer.................................................................... 591,383 427,967 427,861
Real estate................................................................. 466,157 250,339 235,873
Leases...................................................................... 1,627 1,930 2,595
Unearned interest........................................................... (2,712) (3,273) (4,803)
Allowance for loan losses................................................... (35,590) (24,456) (26,241)
---------- ---------- ----------
Net loans................................................................. $2,124,171 $1,458,592 $1,322,903
Securities available for sale:
U.S. Treasury and agencies.................................................. $2,615,783 $2,084,616 $ --
Mortgage-backed securities.................................................. 73,472 -- --
Equity securities and other................................................. 10,957 7,364 --
---------- ---------- ----------
Total securities available for sale (market value 1992-$2,099,087)........ $2,700,212 $2,091,980 $ --
Investment securities:
U.S. Treasury and agencies.................................................. $ -- $ -- $1,479,793
State and political subdivisions............................................ 278,944 201,458 266,140
Equity securities and other................................................. -- -- 7,630
---------- ---------- ----------
Total investment securities (market value of $282,346, $205,185 and
$1,778,034, respectively)............................................... $ 278,944 $ 201,458 $1,753,563
Federal funds sold............................................................ 75,994 144,375 330,657
Securities purchased under agreements to resell............................... 263,181 222,740 209,275
Trading securities and other.................................................. 83,746 39,021 94,411
---------- ---------- ----------
Total earning assets...................................................... $5,526,248 $4,158,166 $3,710,809
Cash and due from banks....................................................... 666,368 612,829 762,114
Bank premises and equipment, net.............................................. 128,898 105,108 96,537
Accrued income................................................................ 72,551 53,881 56,517
Premiums on and intangibles of purchased banks................................ 85,286 24,654 24,544
Other assets.................................................................. 49,475 48,549 41,532
---------- ---------- ----------
Total assets.............................................................. $6,528,826 $5,003,187 $4,692,053
---------- ---------- ----------
---------- ---------- ----------
LIABILITIES
Deposits:
Noninterest-bearing demand.................................................. $1,488,278 $1,053,204 $ 880,215
Interest-bearing demand and savings......................................... 2,364,341 1,807,346 1,426,117
Time deposits under $100,000................................................ 1,058,354 811,961 902,432
Time deposits of $100,000 or more........................................... 250,756 170,655 201,429
---------- ---------- ----------
Total deposits............................................................ $5,161,729 $3,843,166 $3,410,193
Federal funds purchased....................................................... 26,210 131,000 59,000
Securities sold under agreements to repurchase................................ 598,872 529,837 688,958
Short-term debt............................................................... 1,453 1,583 50,547
Long-term debt................................................................ 51,529 33,531 42,226
Accrued expenses and taxes.................................................... 56,754 35,912 40,261
Other liabilities............................................................. 45,636 28,479 28,185
---------- ---------- ----------
Total liabilities......................................................... $5,942,183 $4,603,508 $4,319,370
---------- ---------- ----------
SHAREHOLDERS' EQUITY
Common stock, $12.50 par. Authorized 23,000,000 shares. 18,926,307;
14,785,172; and 14,785,172 shares issued, respectively...................... $ 236,579 $ 184,815 $ 184,815
Capital surplus............................................................... 167,368 63,046 63,353
Retained earnings............................................................. 208,557 180,502 152,177
Net unrealized gain on securities available for sale.......................... 14,333 -- --
Treasury stock, 1,300,346; 1,003,700; and 985,574 shares, at cost,
respectively................................................................ (40,194) (28,684) (27,662)
---------- ---------- ----------
Total shareholders' equity................................................ $ 586,643 $ 399,679 $ 372,683
---------- ---------- ----------
Total liabilities and shareholders' equity................................ $6,528,826 $5,003,187 $4,692,053
---------- ---------- ----------
---------- ---------- ----------
See Notes to Financial Statements, pages A-6 to A-24.
A-2
14
UNITED MISSOURI BANCSHARES, INC.
CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31,
--------------------------------------
1993 1992 1991
---------- ---------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
INTEREST INCOME
Loans.............................................................. $142,713 $119,288 $143,514
Securities available for sale...................................... 116,044 -- --
Investment securities:
Taxable interest................................................. $ -- $102,051 $114,424
Tax-exempt interest.............................................. 11,656 12,496 17,173
Dividends........................................................ -- 407 402
-------- -------- --------
Total investment securities income $ 11,656 $114,954 $131,999
Federal funds and resell agreements................................ 9,888 14,720 17,567
Trading securities and other....................................... 2,914 4,405 5,119
-------- -------- --------
Total interest income............................................ $283,215 $253,367 $298,199
-------- -------- --------
INTEREST EXPENSE
Deposits........................................................... $ 99,127 $103,023 $142,137
Federal funds and repurchase agreements............................ 16,155 16,180 23,300
Short-term debt.................................................... 29 1,036 2,225
Long-term debt..................................................... 4,407 3,547 4,015
-------- -------- --------
Total interest expense........................................... $119,718 $123,786 $171,677
-------- -------- --------
Net interest income................................................ $163,497 $129,581 $126,522
Provision for loan losses.......................................... 3,332 2,981 6,044
-------- -------- --------
Net interest income after provision.............................. $160,165 $126,600 $120,478
-------- -------- --------
NONINTEREST INCOME
Trust fees......................................................... $ 32,048 $ 27,334 $ 24,785
Securities processing.............................................. 13,341 13,715 10,473
Trading and investment banking..................................... 13,629 12,503 12,162
Service charges on deposit accounts................................ 30,168 24,067 21,294
Other service charges and fees..................................... 14,101 9,748 7,105
Bankcard fees...................................................... 22,440 18,263 19,356
Net security gains................................................. 1,607 5,305 116
Other.............................................................. 4,727 2,527 3,400
-------- -------- --------
Total noninterest income......................................... $132,061 $113,462 $ 98,691
-------- -------- --------
NONINTEREST EXPENSE
Salaries and employee benefits..................................... $106,329 $ 87,857 $ 80,760
Occupancy, net..................................................... 14,809 12,180 10,916
Equipment.......................................................... 20,319 15,756 14,192
Supplies and services.............................................. 17,448 14,492 13,545
Bankcard processing................................................ 18,660 15,991 15,805
Marketing and business development................................. 13,563 10,567 8,449
FDIC and regulatory fees........................................... 10,955 8,568 7,236
Amortization of intangibles of purchased banks..................... 5,241 2,196 1,939
Other.............................................................. 23,653 17,340 12,932
-------- -------- --------
Total noninterest expense........................................ $230,977 $184,947 $165,774
-------- -------- --------
Income before income taxes......................................... $ 61,249 $ 55,115 $ 53,395
Income tax provision............................................... 20,130 15,748 13,910
-------- -------- --------
NET INCOME....................................................... $ 41,119 $ 39,367 $ 39,485
-------- -------- --------
-------- -------- --------
Per Share Data
Net income......................................................... $2.57 $2.85 $2.86
Dividends.......................................................... $0.80 $0.80 $0.73
Average shares outstanding......................................... 16,017,547 13,800,197 13,786,984
See Notes to Financial Statements, pages A-6 to A-24.
A-3
15
UNITED MISSOURI BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31,
-----------------------------------------
1993 1992 1991
----------- ----------- -----------
(IN THOUSANDS)
OPERATING ACTIVITIES
Net income...................................................... $ 41,119 $ 39,367 $ 39,485
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses..................................... 3,332 2,981 6,044
Depreciation and amortization................................. 19,222 13,966 12,453
Deferred income taxes and investment tax credits.............. (225) 2,781 832
Net (increase) decrease in trading securities................. (34,731) 55,390 (19,166)
Gains on sales of:
Investment securities....................................... (17) (5,845) (622)
Securities available for sale............................... (1,598) -- --
Losses on sales of:
Investment securities....................................... -- 540 506
Securities available for sale............................... 8 -- --
Amortization of securities premium, net of discount
accretion................................................... 36,853 28,958 10,271
(Increase) decrease in interest receivable.................... (6,334) 3,456 5,912
Increase (decrease) in interest payable....................... 311 (6,228) (5,402)
Other, net.................................................... 2,581 (6,534) (10,128)
----------- ----------- -----------
Net cash provided by operating activities..................... $ 60,521 $ 128,832 $ 40,185
----------- ----------- -----------
INVESTING ACTIVITIES
Proceeds from sales of:
Investment securities......................................... $ 697 $ 1,114,719 $ 23,056
Securities available for sale................................. 225,587 -- --
Proceeds from maturities of:
Investment securities......................................... 131,723 1,604,693 1,431,341
Securities available for sale................................. 654,769 -- --
Purchases of:
Investment securities......................................... (158,018) (3,244,086) (1,538,105)
Securities available for sale................................. (1,025,388) -- --
Net (increase) decrease in loans................................ (146,800) (125,756) 213,560
Net (increase) decrease in federal funds sold and resell
agreements.................................................... 113,147 177,257 (166,202)
Purchases of bank premises and equipment........................ (12,804) (19,342) (16,617)
Proceeds from sales of bank premises and equipment.............. 811 646 7
Purchases of financial organizations, net of cash received...... 57,211 (8,572) (378)
----------- ----------- -----------
Net cash used in investing activities......................... $ (159,065) $ (500,441) $ (53,338)
----------- ----------- -----------
FINANCING ACTIVITIES
Net increase in demand and savings deposits..................... $ 400,373 $ 513,271 $ 260,856
Net decrease in time deposits................................... (131,946) (133,796) (161,830)
Net increase (decrease) in federal funds purchased and
repurchase agreements......................................... (115,439) (87,121) 239,780
Net increase (decrease) in short-term debt...................... (689) (48,964) 11,813
Proceeds from issuance of long-term debt........................ 25,000 -- --
Repayments of long-term debt.................................... (7,801) (8,695) (5,123)
Cash dividends.................................................. (13,064) (11,042) (10,062)
Purchases of treasury stock..................................... (4,859) (1,722) (120)
Proceeds from issuance of treasury stock........................ 508 393 259
----------- ----------- -----------
Net cash provided by financing activities..................... $ 152,083 $ 222,324 $ 335,573
----------- ----------- -----------
Increase (decrease) in cash and due from banks.................... $ 53,539 $ (149,285) $ 322,420
Cash and due from banks at beginning of year...................... 612,829 762,114 439,694
----------- ----------- -----------
Cash and due from banks at end of year............................ $ 666,368 $ 612,829 $ 762,114
----------- ----------- -----------
----------- ----------- -----------
Supplemental disclosures:
Income taxes paid............................................... $ 20,833 $ 13,259 $ 13,252
Total interest paid............................................. 119,407 130,014 177,079
- -------------------------
Note: Certain noncash transactions regarding the adoption of SFAS No. 115 and
common stock issued for acquisitions are disclosed in the accompanying
financial statements and notes to financial statements.
See Notes to Financial Statements, pages A-6 to A-24.
A-4
16
UNITED MISSOURI BANCSHARES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
COMMON CAPITAL RETAINED NET UNREALIZED TREASURY
STOCK SURPLUS EARNINGS HOLDING GAINS STOCK
-------- -------- -------- -------------- --------
(IN THOUSANDS)
Balance -- December 31, 1990........... $169,146 $ 35,830 $166,313 $ -- $(28,168)
Net income............................. -- -- 39,485 -- --
Cash dividends ($0.73 per share)....... -- -- (10,062) -- --
Stock dividend (10%)................... 15,669 27,890 (43,559) -- --
Purchase of treasury stock............. -- -- -- -- (120)
Exercise of stock options.............. -- (367) -- -- 626
-------- -------- -------- -------------- --------
Balance -- December 31, 1991........... $184,815 $ 63,353 $152,177 $ -- $(27,662)
Net income............................. -- -- 39,367 -- --
Cash dividends ($0.80 per share)....... -- -- (11,042) -- --
Purchase of treasury stock............. -- -- -- -- (1,722)
Exercise of stock options.............. -- (307) -- -- 700
-------- -------- -------- -------------- --------
Balance -- December 31, 1992........... $184,815 $ 63,046 $180,502 $ -- $(28,684)
Net income............................. -- -- 41,119 -- --
Cash dividends ($0.80 per share)....... -- -- (13,064) -- --
Issuance of common stock for
acquisitions, net.................... 51,764 104,642 -- -- (7,478)
Purchase of treasury stock............. -- -- -- -- (4,859)
Exercise of stock options.............. -- (320) -- -- 827
Net unrealized gain on securities
available for sale................... -- -- -- 14,333 --
-------- -------- -------- -------------- --------
Balance -- December 31, 1993........... $236,579 $167,368 $208,557 $ 14,333 $(40,194)
-------- -------- -------- -------------- --------
-------- -------- -------- -------------- --------
See Notes to Financial Statements, pages A-6 to A-24.
A-5
17
UNITED MISSOURI BANCSHARES, INC.
NOTES TO FINANCIAL STATEMENTS
SUMMARY OF ACCOUNTING POLICIES
The accounting policies of United Missouri Bancshares, Inc. and its
subsidiaries conform to generally accepted accounting principles applicable to
the banking industry. Following is a summary of the more significant accounting
policies to assist the reader in understanding the financial presentation.
CONSOLIDATION -- All subsidiaries are included in the financial statements.
Intercompany accounts and transactions have been eliminated where significant.
ACQUISITIONS -- Banks acquired and recorded under the purchase method are
recorded at the fair value of the net assets acquired at the acquisition date,
and results of operations are included from that date. Excess of purchase price
over the value of net assets acquired is recorded as premiums on purchased
banks. Premiums on purchases prior to 1982 are being amortized ratably over 40
years. Premiums on purchases in 1982 and after are being amortized ratably over
15 years. Core deposit intangible assets are being amortized ratably over 10
years.
LOANS -- Interest on discount loans is recorded on a method that
approximates income at a level rate of return on the principal amount
outstanding over the term of the loan. Interest on all other loans is recognized
based on the rate times the principal amount outstanding. Interest accrual is
discontinued when, in the opinion of management, the likelihood of collection
becomes doubtful.
Affiliate banks enter into lease financing transactions that are generally
recorded under the financing method of accounting. Income is recognized on a
basis that results in an approximately level rate of return over the life of the
lease.
Annual bankcard fees are recognized on a straight-line basis over the
period that cardholders may use the card.
The adequacy of the allowance is based on management's continuing
evaluation of the pertinent factors underlying the quality of the loan
portfolio, including actual loan loss experience, current and anticipated
economic conditions, detailed analysis of individual loans for which full
collectability may not be assured and determination of the existence and
realizable value of the collateral and guarantees securing such loans. The
actual losses, notwithstanding such considerations, however, could differ
significantly from the amounts estimated by management.
SECURITIES AVAILABLE FOR SALE -- Prior to 1992, the Company acquired debt
securities with the intent to hold to maturity. Accordingly, such securities
were carried at amortized cost.
Effective December 31, 1992, the company classified certain debt securities
as securities available for sale. These securities are considered part of the
company's asset/liability management program that may be sold in response to
changes in interest rates, prepayments, or capital or liquidity needs.
Debt securities available for sale include principally U.S. Treasury and
agency securities and mortgage-backed securities. Until December 31, 1993,
securities available for sale were carried at the lower of aggregate amortized
cost or market value.
Effective December 31, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt
and Equity Securities." Accordingly, equity securities and debt securities
available for sale are measured at fair value. Unrealized holding gains and
losses are excluded from earnings and reported as a separate component of
shareholders' equity until realized. Realized gains and losses on sales are
computed by the specific identification method at the time of disposition and
are shown separately as a component of noninterest income.
Prior to the adoption of SFAS No. 115, marketable equity securities, owned
primarily by the parent company, were carried at the lower of aggregate cost or
market value.
A-6
18
UNITED MISSOURI BANCSHARES, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
INVESTMENT SECURITIES -- Investment securities are carried at amortized
historical cost based on management's intention, and the Company's ability, to
hold them to maturity. The Company classifies securities of state and political
subdivisions as investment securities. Certain significant unforeseeable changes
in circumstances may cause a change in the intent to hold these securities to
maturity. For example, such changes may include a deterioration in the issuer's
creditworthiness that is expected to continue or a change in tax law that
eliminates the tax-exempt status of interest on the security. Once a
determination has been made that securities will be sold, such securities are
classified as securities available for sale. Gains and losses on sales are
computed by the specific identification method at the time of disposition and
are shown separately as a component of noninterest income.
TRADING SECURITIES -- Trading securities, generally acquired for subsequent
sale to customers, are carried at market value. Market adjustments, fees and
gains or losses on the sale of trading securities are considered to be a normal
part of operations and are included in trading and investment banking income.
Interest income on trading securities is included in income from earning assets.
TAXES -- The Company recognizes certain income and expenses in different
time periods for financial reporting and income tax purposes. The provision for
deferred income taxes is based on the liability method and represents the change
in the deferred income tax accounts during the year, including the effect of
enacted tax rate changes.
PER SHARE DATA -- Earnings per share are computed based on the weighted
average number of shares of common stock outstanding during each period. The
dilutive effect of shares issuable under stock options granted by the Company is
immaterial.
RECLASSIFICATIONS -- Certain reclassifications were made to the 1992 and
1991 financial statements to conform to the current year presentation.
INDUSTRY SEGMENT REPORTING -- The Company operates principally in a single
business segment offering general commercial banking services.
ACCOUNTING CHANGES
ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSIONS -- The Financial
Accounting Standards Board issued SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." This Statement, effective for
fiscal years beginning after December 15, 1992, requires accrual of
postretirement benefits (such as health care benefits) during the years an
employee provides services. The Company does not provide any such postretirement
benefits and, consequently, adoption of this Statement did not affect its
financial position or results of operations.
ACCOUNTING FOR INCOME TAXES -- The Financial Accounting Standards Board
issued SFAS No. 109, "Accounting for Income Taxes." This Statement superseded
SFAS No. 96, by the same title, which the Company had adopted in 1989. SFAS No.
109 reduces the complexity of SFAS No. 96 and changes the criteria for
recognition and measurement of deferred tax assets. SFAS No. 109 was adopted by
the Company in 1993 and did not have a material effect on the Company's
financial position or results of operations.
EMPLOYERS' ACCOUNTING FOR POSTEMPLOYMENT BENEFITS -- The Financial
Accounting Standards Board issued SFAS No. 112, "Employers' Accounting for
Postemployment Benefits." This Statement, which becomes effective for fiscal
years beginning after December 15, 1993, establishes accounting standards for
employers who provide certain benefits to former or inactive employees after
employment but before retirement. The Company does not provide any such
postemployment benefits and, consequently, adoption of this Statement will not
affect its financial position or results of operations.
ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN -- The Financial
Accounting Standards Board issued SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan." This Statement, which becomes
A-7
19
UNITED MISSOURI BANCSHARES, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
effective for fiscal years beginning after December 15, 1994, will require that
impaired loans be measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate, at the loan's observable
market price or the fair value of collateral if the loan is collateral
dependent. The impact of the Statement on the Company has not yet been
determined, although the effects are not expected to be material in relation to
the consolidated financial statements.
ACQUISITIONS
On May 1, 1991, the Company acquired Valley Bank Holding Company, the
one-bank holding company of Valley Bank, Colorado Springs, Colorado (now UMB
Bank Colorado). In exchange for all of the shares of the holding company, the
Company paid $4.0 million in cash and other consideration. The acquisition of
this $44 million bank was recorded as a purchase, with $1.3 million recorded as
premium on purchased bank.
On December 11, 1991, the Company acquired National Bank of the West,
Colorado Springs, Colorado (renamed UMB Bank of the West). In exchange for all
of the shares of the bank, the Company paid $1.9 million in cash and other
consideration. The acquisition of this $17 million bank was recorded as a
purchase, with $1.0 million recorded as premium on purchased bank. On April 30,
1993, UMB Bank of the West was merged into UMB Bank Colorado.
On January 23, 1992, the Company acquired Columbine National Bank, Denver,
Colorado (now UMB Columbine National Bank). The Company paid $9.1 million in
cash for all the shares of the bank's holding company, The Village Corporation,
as well as the minority holdings of bank stock. The acquisition of this $62
million bank was recorded as a purchase, with $2.0 million recorded as premium
on purchased bank.
These acquisitions are not deemed to be material in relation to the
consolidated results of the Company.
A-8
20
UNITED MISSOURI BANCSHARES, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
As of June 25, 1993, the Company had consummated the acquisitions of eight
Kansas bank holding companies (the "Kansas banks"). The eight companies, their
subsidiary banks and the ownership percentage in the subsidiary banks are
presented below:
NUMBER OF
ACQUISITION COMPANY/SUBSIDIARY ASSETS AT COMPANY
DATE BANKS (% OWNED) DECEMBER 31, 1993 SHARES ISSUED CASH
- ----------- ------------------------------------- ----------------- ---------------- --------------
(IN MILLIONS) (NET) (IN THOUSANDS)
3/26/93 Farmers Banshares, Inc............... $ 60 168,898 $ 2,329
Farmers National Bank
Abilene (100%)
4/30/93 NBA Bankshares, Inc.................. 130 276,497 4,986
The National Bank of America
at Salina (100%)
5/14/93 M L Bancshares, Inc.................. 157 308,578 6,620
Russell State Bank
Russell/Luray (99.8%)
Security State Bank
Great Bend/Hudson (100%)
5/17/93 Highland Bancshares, Inc............. 97 265,754 2,299
Highland Park Bank & Trust
Topeka (99.9%)
5/17/93 North Plaza Bancshares, Inc.......... 44 -- 7,433
North Plaza State Bank
Topeka (100%)
5/28/93 BellCorp, Inc........................ 107 373,951 2,894
Citizens Bank & Trust Co.
Manhattan (100%)
6/14/93 Overland Park Bancshares, Inc........ 209 1,021,580 --
Overland Park State Bank &
Trust Co.
Overland Park/Olathe (100%)
6/25/93 CNB Financial Corporation............ 546 1,526,770 --
Commercial National Bank
Kansas City/Overland Park (100%)
City National Bank
Atchison (100%)
First Bank & Trust, N.A.
Concordia/Glasco (100%)
Security State Bank
Fort Scott (100%)
------- ------------- --------------
Total................................ $ 1,350 3,942,028 $ 26,561
------- ------------- --------------
------- ------------- --------------
The cash portion of the purchase prices was obtained principally through
the issuance of debt by the Company. On February 24, 1993, the Company issued
$10,000,000 in medium-term notes due 2000 at 6.81% and $15,000,000 in
medium-term notes due 2003 at 7.30%.
The acquisitions of the Kansas banks have been accounted for by the Company
under the purchase method of accounting in accordance with Accounting Principles
Board Opinion No. 16, "Business Combina-
A-9
21
UNITED MISSOURI BANCSHARES, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
tions," as amended. Under this method of accounting, the purchase prices have
been allocated to assets acquired and liabilities assumed based on their
estimated fair values, including applicable income tax effects, at the effective
dates of the acquisitions. Income of the combined company does not include
income of the acquired companies prior to the effective dates of the
acquisitions.
The following table presents supplementary information regarding the
acquisitions of the Kansas banks (dollars in thousands):
Fair values of assets acquired:
Securities...................................................................... $ 529,111
Net loans....................................................................... 522,111
Federal funds sold and resell agreements........................................ 85,207
Core deposit intangible......................................................... 12,756
Other........................................................................... 140,108
----------
Total...................................................................... $1,289,293
----------
Fair values of liabilities assumed:
Deposits........................................................................ $1,062,992
Federal funds purchased and repurchase agreements............................... 74,984
Borrowed funds.................................................................. 6,103
Other........................................................................... 19,190
----------
Total...................................................................... $1,163,269
----------
Fair value of net assets acquired............................................... $ 126,024
----------
Purchase prices of acquisitions:
Issuance of common stock (net of treasury stock acquired)....................... $ 148,928
Cash paid....................................................................... 26,561
Direct costs of acquisitions.................................................... 963
Previous investments in institutions acquired................................... 1,506
----------
Total purchase prices...................................................... $ 177,958
----------
Goodwill (excess of purchase prices over fair value of net assets acquired)..... $ 51,934
----------
----------
The following unaudited pro forma consolidated financial information gives
effect to the Kansas banks as if they were all acquired on January 1, 1992.
These pro forma results have been prepared for comparative purposes only and do
not purport to be indicative of the results of operations which actually would
have resulted had the combinations been in effect on the dates indicated, or
which may result in the future.
1993 1992
-------- --------
(DOLLARS IN
THOUSANDS EXCEPT PER
SHARE DATA)
Net interest income..................................................... $180,663 $170,957
Noninterest income...................................................... 137,937 130,060
Net income.............................................................. 44,715 43,656
Net income per share.................................................... 2.53 2.46
COMMITMENTS AND CONTINGENCIES
The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its customers
and to reduce its own exposure to fluctuations in interest
A-10
22
UNITED MISSOURI BANCSHARES, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
rates. These financial instruments include commitments to extend credit,
commercial letters of credit, standby letters of credit, interest rate caps and
floors written, and forward and futures contracts. Those instruments involve, to
varying degrees, elements of credit and interest rate risk in excess of the
amount recognized in the consolidated balance sheet. The contract or notional
amounts of those instruments reflect the extent of involvement the Company has
in particular classes of financial instruments.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit,
commercial letters of credit and standby letters of credit is represented by the
contract or notional amount of those instruments. The Company uses the same
credit policies in making commitments and conditional obligations as it does for
on-balance-sheet instruments. For interest rate caps, floors, and forward and
futures contracts, the contract or notional amounts do not represent exposure to
credit loss. The Company controls the credit risk of its forward and futures
contracts through credit approvals, limits and monitoring procedures.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the agreement. These
conditions generally include, but are not limited to, each customer being
current as to repayment terms of existing loans and no deterioration in the
customer's financial condition. Commitments generally have fixed expiration
dates or other termination clauses and may require payment of a fee. The
interest rate is generally a variable, or floating, interest rate. If the
commitment has a fixed interest rate, the rate is generally not set until such
time as credit is extended. For its credit card customers, the Company has the
right to change or terminate any terms or conditions of the credit card account
at any time. Since some of the commitments and unused credit card lines are
never actually drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Company evaluates each customer's
creditworthiness on an individual basis. The amount of collateral obtained, if
deemed necessary by the Company, upon extension of credit is based on
management's credit evaluation. Collateral held varies but may include accounts
receivable, inventory, real estate, plant and equipment, stock, securities and
certificates of deposit.
Commercial letters of credit are issued specifically to facilitate trade or
commerce. Under the terms of a commercial letter of credit, as a general rule,
drafts will be drawn when the underlying transaction is consummated as intended.
Standby letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party.
The credit risk involved in issuing letters of credit is essentially the
same as that involved in extending loan facilities to customers. The Company
holds collateral supporting those commitments when deemed necessary. Collateral
varies but may include such items as those described for commitments to extend
credit.
Forward and futures contracts are contracts for delayed delivery of
securities or money market instruments in which the seller agrees to make
delivery at a specified future date of a specified instrument at a specified
yield. Risks arise from the possible inability of counterparties to meet the
terms of their contracts and from movements in securities values and interest
rates. Instruments used in trading activities are carried at market value. Any
changes in the market value are recognized in trading and investment banking
income.
Interest rate caps and floors written by the Company enable customers to
transfer, modify or reduce their interest rate risk.
With respect to group concentrations of credit risk, most of the Company's
business activity is with customers in the states of Missouri, Kansas, Colorado
and Illinois. At December 31, 1993, the Company did not have any significant
credit concentrations in any particular industry.
A-11
23
UNITED MISSOURI BANCSHARES, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
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 these lawsuits will
have a materially adverse effect on the financial position or results of
operations of the Company.
CONTRACT OR NOTIONAL AMOUNT
DECEMBER 31,
--------------------------------
1993 1992 1991
-------- -------- --------
(IN THOUSANDS)
Financial instruments whose contract amounts represent credit
risk:
Commitments to extend credit for loans (excluding credit
card plans).............................................. $592,395 $361,570 $247,092
Commitments to extend credit under credit card plans........ 715,188 586,389 525,037
Commercial letters of credit................................ 17,281 26,588 11,324
Standby letters of credit................................... 74,046 63,883 51,796
Financial instruments whose notional or contract amounts
exceed the amount of credit risk:
Forward and futures contracts............................ $112,379 $ 76,236 $111,170
Interest rate caps and floors written.................... 72,721 18,620 17,387
REGULATORY REQUIREMENTS
Payment of dividends by the affiliate banks to the parent company is
subject to various regulatory restrictions. For national banks, state banks that
are Federal Reserve members and state banks in Colorado, the governing
regulatory agency must approve the declaration of any dividends generally in
excess of the sum of net income for that year and retained net income for the
preceding two years. The state banks in Missouri, Kansas and Illinois are
subject to state laws permitting dividends to be declared from retained
earnings, provided certain specified capital requirements are met. At December
31, 1993, approximately $38,892,000 of the equity of the affiliate banks was
available for distribution as dividends to the parent company without prior
regulatory approval or without reducing the capital of the respective affiliate
banks below prudent levels.
The Company is required to maintain minimum amounts of capital to total
risk weighted assets, as defined by the banking regulators. At December 31,
1993, the Company is required to have minimum Tier 1 and Total capital ratios of
4.00% and 8.00%, respectively. The Company's actual ratios at that date were
17.09% and 18.50%, respectively. The Company's leverage ratio at December 31,
1993, was 7.59%.
Certain affiliate banks maintain reserve balances with the Federal Reserve
Bank as required by law. During 1993, this amount averaged $94,577,000.
LOANS TO MANAGEMENT
Certain Company and principal affiliate bank executive officers and
directors, including companies in which those persons are principal holders of
equity securities or are general partners, borrow in the normal course of
business from affiliate banks of the Company. All such loans have been made on
the same terms, including interest rates and collateral, as those prevailing at
the same time for comparable transactions with other persons. In addition, all
such loans are current as to repayment terms. For the years 1993, 1992 and
A-12
24
UNITED MISSOURI BANCSHARES, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
1991, an analysis of activity with respect to such aggregate loans to related
parties appears below (in thousands):
YEAR ENDED DECEMBER 31,
-----------------------------------
1993 1992 1991
--------- --------- ---------
Balance beginning of year.................................. $ 142,880 $ 123,487 $ 100,867
New loans................................................ 377,601 311,277 277,511
Repayments............................................... (408,560) (291,884) (254,891)
--------- --------- ---------
Balance end of year........................................ $ 111,921 $ 142,880 $ 123,487
--------- --------- ---------
--------- --------- ---------
ALLOWANCE FOR LOAN LOSSES
The table below provides an analysis of the allowance for loan losses for
the three years ended December 31, 1993 (in thousands):
YEAR ENDED DECEMBER 31,
-----------------------------
1993 1992 1991
------- ------- -------
Allowance -- beginning of year................................... $24,456 $26,241 $27,268
Allowances of acquired banks..................................... 12,076 207 352
Additions (deductions):
Charge-offs.................................................... $(7,135) $(6,548) $(9,438)
Recoveries..................................................... 2,861 1,575 2,015
------- ------- -------
Net charge-offs............................................. $(4,274) $(4,973) $(7,423)
Provision charged to expense..................................... 3,332 2,981 6,044
------- ------- -------
Allowance -- end of year......................................... $35,590 $24,456 $26,241
------- ------- -------
------- ------- -------
A-13
25
UNITED MISSOURI BANCSHARES, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
SECURITIES AVAILABLE FOR SALE
The table below provides detailed information for securities available for
sale at December 31, 1993 and 1992:
DECEMBER 31,
----------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- ----------
(IN THOUSANDS)
1993
U.S. Treasury.................................... $2,518,436 $ 23,457 $ (2,414) $2,539,479
U.S. agencies.................................... 76,585 -- (281) 76,304
Mortgage-backed.................................. 73,293 328 (149) 73,472
Federal Reserve Bank stock....................... 4,620 -- -- 4,620
Equity........................................... 3,940 2,187 (60) 6,067
Other............................................ 270 -- -- 270
---------- ---------- ---------- ----------
Total.......................................... $2,677,144 $ 25,972 $ (2,904) $2,700,212
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
1992
U.S. Treasury.................................... $2,011,264 $ 6,184 $ (2,727) $2,014,721
U.S. agencies.................................... 73,352 68 (46) 73,374
Federal Reserve Bank stock....................... 1,702 -- -- 1,702
Equity........................................... 5,352 3,717 (60) 9,009
Other............................................ 310 -- (29) 281
---------- ---------- ---------- ----------
Total.......................................... $2,091,980 $ 9,969 $ (2,862) $2,099,087
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
The following table presents contractual maturity information for
securities available for sale at December 31, 1993. Securities may be disposed
of before contractual maturities due to sales by the Company or because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties.
AMORTIZED FAIR
COST VALUE
---------- ----------
(IN THOUSANDS)
Due in 1 year or less................................................ $ 823,460 $ 827,518
Due after 1 year through 5 years..................................... 1,770,379 1,787,049
Due after 5 years through 10 years................................... 946 952
Due after 10 years................................................... 236 264
---------- ----------
Total.............................................................. $2,595,021 $2,615,783
Mortgage-backed securities........................................... 73,293 73,472
Equity securities and other.......................................... 8,830 10,957
---------- ----------
Total securities available for sale................................ $2,677,144 $2,700,212
---------- ----------
---------- ----------
Securities available for sale with a market value of $1,554,257,000 at
December 31, 1993, and $858,175,000 at December 31, 1992, were pledged to secure
U.S. Government deposits, other public deposits and certain trust deposits as
required by law.
During 1993, proceeds from the sales of securities available for sale were
$225,587,000 and securities transactions resulted in gross realized gains of
$1,598,000 and gross realized losses of $8,000.
A-14
26
UNITED MISSOURI BANCSHARES, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
The net unrealized holding loss on trading securities at December 31, 1993,
was $130,000, and was included in trading and investment banking income.
INVESTMENT SECURITIES
The table below provides detailed information for investment securities at
December 31, 1993, 1992 and 1991 (in thousands):
DECEMBER 31,
----------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- ----------
1993
State and political subdivisions................. $ 278,944 $ 4,111 $ (709) $ 282,346
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
1992
State and political subdivisions................. $ 201,458 $ 4,207 $ (480) $ 205,185
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
1991
U.S. Treasury.................................... $1,397,142 $ 20,006 $ (45) $1,417,103
U.S. agencies.................................... 82,651 777 (70) 83,358
State and political subdivisions................. 266,140 2,769 (462) 268,447
Equity securities and other...................... 7,630 1,847 (351) 9,126
---------- ---------- ---------- ----------
Total....................................... $1,753,563 $ 25,399 $ (928) $1,778,034
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
The following table presents contractual maturity information for
investment securities at December 31, 1993. Expected maturities will differ from
contractual maturities because borrowers may have the rights to call or prepay
obligations with or without call or prepayment penalties.
AMORTIZED COST FAIR VALUE
-------------- ----------
(IN THOUSANDS)
Due in 1 year or less................................................ $114,942 $ 114,274
Due after 1 year through 5 years..................................... 134,922 138,462
Due after 5 years through 10 years................................... 28,544 29,050
Due after 10 years................................................... 536 560
-------------- ----------
Total investment securities..................................... $278,944 $ 282,346
-------------- ----------
-------------- ----------
A-15
27
UNITED MISSOURI BANCSHARES, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
Proceeds from sales of investment securities and gross realized gains and
gross realized losses on such sales for the three years ended December 31, 1993,
were (in thousands):
YEAR ENDED DECEMBER 31,
-----------------------------
1993 1992 1991
---- ---------- -------
Proceeds from sales of:
Debt securities................................................ $697 $1,114,377 $15,728
Equity securities.............................................. -- 342 7,328
---- ---------- -------
Total proceeds............................................ $697 $1,114,719 $23,056
---- ---------- -------
---- ---------- -------
Gross realized gains from sales of:
Debt securities................................................ $ 17 $ 5,832 $ 13
Equity securities.............................................. -- 13 609
---- ---------- -------
Total gross realized gains................................ $ 17 $ 5,845 $ 622
---- ---------- -------
---- ---------- -------
Gross realized losses from sales of:
Debt securities................................................ $ -- $ 540 $ --
Equity securities.............................................. -- -- 506
---- ---------- -------
Total gross realized losses............................... $ -- $ 540 $ 506
---- ---------- -------
---- ---------- -------
During 1993, certain investment securities with a total amortized cost
amount of $680,000 were sold due to significant deterioration in the
creditworthiness of the related issuers.
Investment securities with a market value of $5,356,000 at December 31,
1993, $3,139,000 at December 31, 1992, and $990,094,000 at December 31, 1991,
were pledged to secure U.S. Government deposits, other public deposits and
certain trust deposits as required by law.
BANK PREMISES AND EQUIPMENT
Bank premises and equipment are stated at cost less accumulated
depreciation, which is computed primarily on an accelerated method. Bank
premises are depreciated over a 20-to 40-year life span, while equipment is
depreciated over a life span of 3 to 20 years. Bank premises and equipment
consisted of the following (in thousands):
DECEMBER 31,
-----------------------------------
1993 1992 1991
--------- --------- ---------
Land....................................................... $ 27,622 $ 22,296 $ 21,000
Buildings and leasehold improvements....................... 133,651 102,609 96,664
Equipment.................................................. 111,571 92,279 88,729
--------- --------- ---------
$ 272,844 $ 217,184 $ 206,393
Accumulated depreciation................................... (143,946) (112,076) (109,856)
--------- --------- ---------
Bank premises and equipment, net........................... $ 128,898 $ 105,108 $ 96,537
--------- --------- ---------
--------- --------- ---------
Consolidated rental and operating lease expenses were $2,932,000 in 1993,
$2,422,000 in 1992 and $2,144,000 in 1991. Minimum rental commitments as of
December 31, 1993, for all noncancelable operating leases are: 1994 --
$2,045,000; 1995 -- $2,089,000; 1996 -- $1,937,000; 1997 -- $1,700,000; 1998 --
$1,679,000; and thereafter -- $6,892,000.
A-16
28
UNITED MISSOURI BANCSHARES, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
BORROWED FUNDS
The components of the Company's short-term and long-term debt were as
follows (in thousands):
DECEMBER 31,
-----------------------------
1993 1992 1991
------- ------- -------
Short-term debt
U.S. Treasury demand notes and other............................. $ 1,453 $ 1,583 $50,547
------- ------- -------
Long-term debt
6.81% senior notes due 2000...................................... $10,000 $ -- $ --
7.30% senior notes due 2003...................................... 15,000 -- --
8.83% senior notes due 1996...................................... 4,462 10,712 17,856
9.15% senior notes due 1999...................................... 15,000 15,000 15,000
7.50% notes maturing serially through 1997....................... 6,186 7,732 9,278
8.00% note maturing serially through 2000........................ 799 -- --
7.50% note maturing serially through 2015........................ 82 87 92
------- ------- -------
Total long-term debt........................................ $51,529 $33,531 $42,226
------- ------- -------
Total borrowed funds........................................ $52,982 $35,114 $92,773
------- ------- -------
------- ------- -------
The long-term debt represents direct, unsecured obligations of the parent
company. The senior notes due 2000 and 2003 cannot be redeemed prior to stated
maturity. The senior notes due 1996 require annual redemptions of $3,572,000.
Optional prepayments without premiums were made on the senior notes due 1996 of
$2,678,000 in 1993 and $3,572,000 in 1992. The senior notes due 1999 require
annual redemptions of $3,000,000 beginning in 1995. The 7.50% notes that mature
in 1997 require annual principal payments of $1,546,000. The senior notes
contain financial covenants relating to the issuance of additional debt, payment
of dividends, reacquisition of common stock and maintenance of minimum tangible
capital. Under the most restrictive covenant, approximately $80,113,000 was
available for the payment of dividends at December 31, 1993.
The Company enters into sales of securities with simultaneous agreements to
repurchase ("repurchase agreements"). The amounts received under these
agreements represent short-term borrowings and are reflected as a separate item
in the consolidated balance sheet. The amount outstanding at December 31, 1993,
was $598,872,000 (with accrued interest payable of $1,654,000). Of that amount,
$119,785,000 represented sales of securities in which the securities were
obtained under reverse repurchase agreements ("resell agreements"). The
remainder of $479,087,000 represented sales of U.S. Treasury securities obtained
from the Company's securities portfolio. The carrying amounts and market values
of the securities and the related repurchase liabilities and weighted average
interest rates of the repurchase liabilities (grouped by maturity of the
repurchase agreements) were as follows (amounts in thousands):
SECURITIES WEIGHTED
-------------------- AVERAGE
CARRYING MARKET REPURCHASE INTEREST
Maturity of the Repurchase Liabilities AMOUNT VALUE LIABILITIES RATE
- ----------------------------------------------------- -------- -------- ----------- --------
On demand............................................ $202,020 $212,340 $ 209,644 2.85%
Overnight............................................ 42,595 42,887 37,813 2.48
2 to 30 days......................................... 129,192 135,001 128,776 2.86
31 to 90 days........................................ 21,551 22,424 21,311 3.30
Over 90 days......................................... 81,504 84,653 81,543 4.12
-------- -------- ----------- --------
Total.............................................. $476,862 $497,305 $ 479,087 3.06%
-------- -------- ----------- --------
-------- -------- ----------- --------
A-17
29
UNITED MISSOURI BANCSHARES, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
COMMON STOCK
The following table summarizes the share transactions for the three years
ended December 31, 1993:
SHARES ISSUED SHARES IN TREASURY
------------- ------------------
Balance December 31, 1990....................................... 13,531,674 (1,004,182)
Stock dividend (10%).......................................... 1,253,498 --
Purchase of treasury stock.................................... -- (3,712)
Issued in stock options....................................... -- 22,320
------------- ------------------
Balance December 31, 1991....................................... 14,785,172 (985,574)
Purchase of treasury stock.................................... -- (43,071)
Issued in stock options....................................... -- 24,945
------------- ------------------
Balance December 31, 1992....................................... 14,785,172 (1,003,700)
Issued (received) in acquisitions............................. 4,141,135 (199,107)
Purchase of treasury stock.................................... -- (126,996)
Issued in stock options....................................... -- 29,457
------------- ------------------
Balance December 31, 1993....................................... 18,926,307 (1,300,346)
------------- ------------------
------------- ------------------
EMPLOYEE BENEFITS
The Company has a noncontributory profit sharing plan, which features an
employee stock ownership plan. These plans are for the benefit of substantially
all officers and employees of the Company and its subsidiaries. Contributions to
these plans for the years 1993, 1992 and 1991 were $3,542,000, $3,317,000 and
$2,972,000, respectively.
The Company has a qualified 401(k) profit sharing plan that permits
participants to make contributions by salary reduction. The Company does not
make contributions to this plan.
Substantially all officers and employees are covered by a noncontributory
defined benefit pension plan. Under the plan, retirement benefits are based on
years of service and the average of the employee's highest 120 consecutive
months of compensation. The Company's funding policy is to contribute annually
the maximum amount that can be deducted for federal income tax purposes.
Contributions are intended to provide not only for benefits attributed to
service to date but also for those expected to be earned in the future. To the
extent that these requirements are fully covered by assets in the plan, a
contribution may not be made in a particular year.
The following items are components of the net periodic pension income for
the three years ended December 31, 1993 (in thousands):
YEAR ENDED DECEMBER 31,
-----------------------------
1993 1992 1991
------- ------- -------
Service costs-benefits earned during the year.................... $ 1,463 $ 1,210 $ 1,030
Interest cost on projected benefit obligation.................... 2,059 1,899 1,764
Actual return on plan assets..................................... (2,208) (3,810) (3,106)
Net amortization and deferral.................................... (1,626) (52) (854)
------- ------- -------
Net periodic pension income................................. $ (312) $ (753) $(1,166)
------- ------- -------
------- ------- -------
A-18
30
UNITED MISSOURI BANCSHARES, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
Assumptions used in accounting for the plan were as follows:
1993 1992 1991
---- ---- ----
Weighted average discount rate....................................... 7.50% 8.00% 8.50%
Rate of increase in future compensation levels....................... 4.25 5.50 5.50
Expected long-term rate of return on assets.......................... 8.00 8.50 9.25
The following table sets forth the pension plan's funded status, using
valuation dates of September 30, 1993, 1992 and 1991 (in thousands):
1993 1992 1991
-------- -------- --------
Actuarial present value of benefit obligation:
Vested benefits............................................. $(20,177) $(17,693) $(16,379)
Nonvested benefits.......................................... (1,027) (898) (311)
-------- -------- --------
Accumulated benefit obligation.............................. $(21,204) $(18,591) $(16,690)
Additional benefits based on estimated future salary
levels................................................... (7,804) (6,292) (5,479)
-------- -------- --------
Projected benefit obligation............................. $(29,008) $(24,883) $(22,169)
Plan assets at fair value, primarily U.S. obligations......... 34,701 35,205 33,479
-------- -------- --------
Plan assets in excess of projected benefit obligation......... $ 5,693 $ 10,322 $ 11,310
Unrecognized net loss from past experience different from
that assumed................................................ 6,028 2,133 1,439
Prior service cost not yet recognized in net periodic pension
cost........................................................ 260 284 309
Unrecognized net transition asset being recognized over 10.66
years....................................................... (3,919) (4,990) (6,061)
-------- -------- --------
Prepaid pension cost included in other assets................. $ 8,062 $ 7,749 $ 6,997
-------- -------- --------
-------- -------- --------
On April 16, 1992, the shareholders of the Company approved the 1992
Incentive Stock Option Plan ("the 1992 Plan"), which provides incentive options
to certain key employees for up to 500,000 common shares of the Company. The
options are not exercisable for two years from the date of the grant and are
thereafter exercisable for such periods as the Board of Directors, or a
committee thereof, specify (which may not exceed 10 years), provided that the
optionee has remained in the employment of the Company or its subsidiaries. The
Board or the committee may accelerate the exercise period for an option upon the
optionee's disability, retirement or death. All options expire at the end of the
exercise period. The Company makes no recognition in the balance sheet of the
options until such options are exercised and no amounts applicable thereto are
reflected in net income. Options are granted at not less than 100% of fair
market value at date of grant.
A-19
31
UNITED MISSOURI BANCSHARES, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
Activity in the 1992 Plan for the two years ended December 31, 1993, is
summarized in the following table:
NUMBER OF OPTION PRICE
SHARES PER SHARE
--------- ----------------
Stock Options Under the 1992 Plan
- -----------------------------------------------------------------
Outstanding December 31, 1991.................................... -- --
Granted........................................................ 14,650 $37.00 to $40.70
--------- ----------------
Outstanding December 31, 1992.................................... 14,650 $37.00 to $40.70
Granted........................................................ 15,476 37.38 to 41.11
Canceled....................................................... (400) 37.00
--------- ----------------
Outstanding December 31, 1993.................................... 29,726 $37.00 to $41.11
--------- ----------------
--------- ----------------
Exercisable December 31, 1993.................................... -- --
The 1981 Incentive Stock Option Plan ("the 1981 Plan") was adopted by the
Company on October 22, 1981, and amended November 27, 1985, and October 10,
1989. No further options may be granted under the 1981 Plan. Provisions of the
1981 Plan regarding option price, term and exercisability are generally the same
as that described for the 1992 Plan. Activity in the 1981 Plan for the three
years ended December 31, 1993, is summarized in the following table:
NUMBER OF OPTION PRICE PER
SHARES SHARE
--------- ----------------
Stock Options Under the 1981 Plan
- -----------------------------------------------------------------
Outstanding -- December 31, 1990................................. 194,645 $ 9.05 to $31.74
Granted........................................................ 9,704 32.20 to 35.43
Canceled....................................................... (4,961) 25.76
Exercised...................................................... (24,378) 9.05 to 23.37
--------- ----------------
Outstanding -- December 31, 1991................................. 175,010 $ 9.05 to $35.43
Canceled....................................................... (58) 23.27
Exercised...................................................... (24,945) 9.05 to 26.64
--------- ----------------
Outstanding -- December 31, 1992................................. 150,007 $11.81 to $35.43
Canceled....................................................... (2,970) 23.35 to 32.20
Exercised...................................................... (29,457) 11.81 to 28.86
--------- ----------------
Outstanding -- December 31, 1993................................. 117,580 $14.53 to $35.43
--------- ----------------
--------- ----------------
Exercisable -- December 31, 1993................................. 98,185 $14.53 to $35.43
A-20
32
UNITED MISSOURI BANCSHARES, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
INCOME TAXES
Income taxes as set forth below produce effective federal income tax rates
of 30.17% in 1993, 26.67% in 1992 and 23.22% in 1991. These percentages are
computed by dividing total federal income tax by the sum of such tax and net
income. Income taxes include the following components (in thousands):
YEAR ENDED DECEMBER 31,
-----------------------------
1993 1992 1991
------- ------- -------
Federal
Currently payable................................................ $18,000 $11,557 $11,125
Deferred......................................................... (232) 2,762 818
------- ------- -------
Total federal tax provision................................. $17,768 $14,319 $11,943
State
Currently payable................................................ 2,355 1,410 1,953
Deferred......................................................... 7 19 14
------- ------- -------
Total tax provision......................................... $20,130 $15,748 $13,910
------- ------- -------
------- ------- -------
Tax effect of security gains included above...................... $ 562 $ 1,804 $ 39
The reconciliation between the income tax provision and the amount computed
by applying the statutory federal tax rate of 35% in 1993 and 34% in 1992 and
1991 to income before income taxes is as follows (in thousands):
YEAR ENDED DECEMBER 31,
-----------------------------
1993 1992 1991
------- ------- -------
Provision at statutory rate...................................... $21,437 $18,739 $18,154
Tax-exempt interest income....................................... (4,966) (5,306) (7,399)
Disallowed interest expense...................................... 474 584 1,030
State and local income taxes, net of federal tax benefits........ 1,582 962 1,298
Amortization of intangibles of purchased banks................... 1,420 680 605
Other............................................................ 183 89 222
------- ------- -------
Total tax provision......................................... $20,130 $15,748 $13,910
------- ------- -------
------- ------- -------
Deferred taxes are recorded based upon differences between the financial
statement and tax bases of assets and liabilities. Net deferred tax assets
included in the consolidated balance sheet at December 31, 1992 and 1991, were
$2,273,000 and $5,054,000, respectively.
A-21
33
UNITED MISSOURI BANCSHARES, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
Temporary differences which comprise a significant portion of deferred tax
assets and liabilities at December 31, 1993, were as follows (in thousands):
Deferred tax liabilities:
Net unrealized gain on securities available for sale.............................. $ 8,735
Asset revaluations on purchased banks............................................. 8,130
Depreciation...................................................................... 5,001
Pension........................................................................... 3,078
Tax allowance for loan losses recapture........................................... 1,484
Miscellaneous..................................................................... 54
--------
Total deferred tax liabilities............................................... $ 26,482
--------
Deferred tax assets:
Allowance for loan losses......................................................... $(13,480)
Miscellaneous..................................................................... (333)
--------
Total deferred tax assets.................................................... $(13,813)
--------
Net deferred tax liability........................................................ $ 12,669
--------
--------
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosure about Fair Value of Financial Instruments,"
requires disclosures about the fair value of all financial instruments, whether
or not recognized in the balance sheet. The following methods and assumptions
were used to estimate the fair value of each class of financial instruments for
which it is practicable to estimate that value:
CASH AND SHORT-TERM INVESTMENTS -- The carrying amounts of cash and due
from banks, federal funds sold and resell agreements are reasonable estimates of
their fair values.
SECURITIES AVAILABLE FOR SALE AND INVESTMENT SECURITIES -- Fair values are
based on quoted market prices or dealer quotes, if available. If a quoted market
price is not available, fair value is estimated using quoted market prices for
similar securities.
TRADING SECURITIES -- Fair values for trading securities (including
off-balance-sheet instruments), which also are the amounts recognized in the
balance sheet, are based on quoted market prices where available. If quoted
market prices are not available, fair values are based on quoted market prices
for similar securities.
LOANS -- Fair values are estimated for portfolios with similar financial
characteristics. Loans are segregated by type, such as commercial, real estate,
consumer, and credit card. Each loan category is further segmented into fixed
and variable interest rate categories. The fair value of loans is estimated by
discounting the future cash flows using the current rates at which similar loans
would be made to borrowers with similar credit ratings and for the same
remaining maturities.
DEPOSIT LIABILITIES -- The fair value of demand deposits and savings
accounts is the amount payable on demand at December 31, 1993 and 1992. The fair
value of fixed-maturity certificates of deposit is estimated by discounting the
future cash flows using the rates currently offered for deposits of similar
remaining maturities.
SHORT-TERM DEBT -- The carrying amounts of federal funds purchased,
repurchase agreements and other short-term debt are reasonable estimates of
their fair values.
LONG-TERM DEBT -- Rates currently available to the Company for debt with
similar terms and remaining maturities are used to estimate fair value of
existing debt.
A-22
34
UNITED MISSOURI BANCSHARES, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
OFF-BALANCE-SHEET INSTRUMENTS -- The fair value of a loan commitment and a
letter of credit is determined based on the fees currently charged to enter into
similar agreements, taking into account the remaining terms of the agreement and
the present creditworthiness of the counterparties. Neither the fees earned
during the year or these instruments or their fair value at year-end are
significant to the Company's consolidated financial position.
The estimated fair values of the Company's financial instruments at
December 31, 1993 and 1992, are as follows (in thousands):
1993 1992
------------------------ ------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------- ---------- ---------- ----------
Financial assets:
Cash and short-term investments............. $1,005,543 $1,005,543 $ 979,944 $ 979,944
Securities available for sale............... 2,700,212 2,700,212 2,091,980 2,099,087
Investment securities....................... 278,944 282,346 201,458 205,185
Trading securities.......................... 83,746 83,746 39,021 39,021
Loans....................................... $2,158,134 $2,155,312 $1,481,118 $1,479,087
Less: allowance for loan losses............. (35,574) -- (24,437) --
---------- ---------- ---------- ----------
Net loans.............................. $2,122,560 $2,155,312 $1,456,681 $1,479,087
---------- ---------- ---------- ----------
Total financial assets................. $6,191,005 $6,227,159 $4,769,084 $4,802,324
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Financial liabilities:
Demand and savings deposits................. $3,852,619 $3,852,619 $2,860,550 $2,860,550
Time deposits............................... 1,309,110 1,314,168 982,616 988,908
Federal funds purchased and repurchase
agreements............................... 625,082 625,082 660,837 660,837
Short-term debt............................. 1,453 1,453 1,583 1,583
Long-term debt.............................. 51,529 53,915 33,531 34,740
---------- ---------- ---------- ----------
Total financial liabilities............ $5,839,793 $5,847,237 $4,539,117 $4,546,618
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
The fair value estimates presented herein are based on pertinent
information available to management as of December 31, 1993 and 1992. Although
management is not aware of any factors that would significantly affect the
estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since those dates and,
therefore, current estimates of fair value may differ significantly from the
amounts presented herein.
A-23
35
UNITED MISSOURI BANCSHARES, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
PARENT COMPANY FINANCIAL INFORMATION
DECEMBER 31,
--------------------------------
1993 1992 1991
-------- -------- --------
(IN THOUSANDS)
BALANCE SHEET
Assets:
Investment in subsidiaries:
Banks.......................................................................... $605,148 $404,151 $379,006
Non-banks...................................................................... 7,616 6,921 7,507
-------- -------- --------
Total investment in subsidiaries........................................... $612,764 $411,072 $386,513
Premiums on purchased banks...................................................... 15,803 17,313 18,823
Securities available for sale and other.......................................... 16,511 11,261 15,265
-------- -------- --------
Total assets............................................................... $645,078 $439,646 $420,601
-------- -------- --------
-------- -------- --------
Liabilities and Shareholders' Equity:
Dividends payable................................................................ $ 3,536 $ 2,759 $ 2,542
Note payable to affiliate bank................................................... -- 500 --
Notes payable to others.......................................................... 50,647 33,444 42,134
Accrued expenses and other....................................................... 4,252 3,264 3,242
-------- -------- --------
Total liabilities.......................................................... $ 58,435 $ 39,967 $ 47,918
Shareholders' equity............................................................. 586,643 399,679 372,683
-------- -------- --------
Total liabilities and shareholders' equity................................. $645,078 $439,646 $420,601
-------- -------- --------
-------- -------- --------
STATEMENT OF INCOME
Income:
Dividends received from affiliate banks.......................................... $ 44,500 $ 29,100 $ 24,700
Service fees from subsidiaries................................................... 7,101 9,205 9,423
Net security gains............................................................... 249 13 103
Other............................................................................ 371 384 641
-------- -------- --------
Total income............................................................... $ 52,221 $ 38,702 $ 34,867
-------- -------- --------
Expense:
Salaries and employee benefits................................................... $ 3,162 $ 2,811 $ 2,517
Interest on notes payable:
Affiliate bank................................................................. 46 26 19
Other.......................................................................... 4,334 3,540 4,008
Services from affiliate banks.................................................... 870 762 771
Other............................................................................ 11,058 9,366 7,277
-------- -------- --------
Total expense.............................................................. $ 19,470 $ 16,505 $ 14,592
-------- -------- --------
Income before income taxes and equity in undistributed earnings of
subsidiaries................................................................... $ 32,751 $ 22,197 $ 20,275
Income tax benefit............................................................... (3,639) (2,056) (1,058)
-------- -------- --------
Income before equity in undistributed earnings of subsidiaries................... $ 36,390 $ 24,253 $ 21,333
Equity in undistributed earnings of subsidiaries:
Banks.......................................................................... 4,283 15,701 17,961
Non-banks...................................................................... 446 (587) 191
-------- -------- --------
Net income................................................................. $ 41,119 $ 39,367 $ 39,485
-------- -------- --------
-------- -------- --------
STATEMENT OF CASH FLOWS
Operating Activities:
Net income....................................................................... $ 41,119 $ 39,367 $ 39,485
Equity in earnings of subsidiaries............................................... (49,229) (44,214) (42,852)
Gains from sales of securities available for sale................................ (249) (13) (103)
Other............................................................................ 766 1,704 (352)
-------- -------- --------
Net cash used by operating activities........................................ $ (7,593) $ (3,156) $ (3,822)
-------- -------- --------
Investing Activities:
Proceeds from sales of securities available for sale............................. $ 319 $ 325 $ 7,225
Purchases of securities available for sale....................................... -- (23) --
Net (increase) decrease in repurchase agreements................................. (2,160) 3,685 (3,700)
Investments in and contributions to affiliate banks.............................. (33,004) (9,445) (5,966)
Dividends received from subsidiaries............................................. 44,500 29,100 24,700
Net capital expenditures for premises and equipment.............................. (159) (118) (163)
-------- -------- --------
Net cash provided by investing activities.................................... $ 9,496 $ 23,524 $ 22,096
-------- -------- --------
Financing Activities:
Issuance of long-term debt....................................................... $ 25,000 $ -- $ --
Repayments of long-term debt..................................................... (7,797) (8,690) (5,118)
Net increase (decrease) in short-term debt....................................... (500) 500 (2,900)
Cash dividends paid.............................................................. (13,064) (11,042) (10,062)
Net issuance (purchase) of treasury stock........................................ (4,351) (1,329) 139
-------- -------- --------
Net cash used by financing activities........................................ $ (712) $(20,561) $(17,941)
-------- -------- --------
Net increase (decrease) in cash.................................................. $ 1,191 $ (193) $ 333
-------- -------- --------
-------- -------- --------
A-24
36
INDEPENDENT AUDITORS' REPORT
To the Shareholders and the Board of Directors of United Missouri
Bancshares, Inc.:
We have audited the accompanying consolidated balance sheets of United
Missouri Bancshares, Inc. and subsidiaries as of December 31, 1993, 1992 and
1991, and the related consolidated statements of income, shareholders' equity
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of United Missouri Bancshares,
Inc. and subsidiaries as of December 31, 1993, 1992 and 1991, and the results of
their operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles.
As discussed in the Accounting Policies note to the financial statements,
the Company changed its method of accounting for certain investments in debt and
equity securities effective December 31, 1993, to conform with Statement of
Financial Accounting Standards No. 115.
/s/ DELOITTE & TOUCHE
Kansas City, Missouri
February 23, 1994
A-25
37
FINANCIAL REVIEW
FIVE-YEAR FINANCIAL SUMMARY
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
EARNINGS
Interest income................ $ 283,215 $ 253,367 $ 298,199 $ 317,756 $ 303,917
Interest expense............... 119,718 123,786 171,677 196,807 184,673
Net interest income............ 163,497 129,581 126,522 120,949 119,244
Provision for loan losses...... 3,332 2,981 6,044 6,604 2,958
Noninterest income............. 132,061 113,462 98,691 89,644 81,025
Noninterest expense............ 230,977 184,947 165,774 155,653 149,301
Change in accounting
principle.................... -- -- -- -- 2,462
Net income..................... 41,119 39,367 39,485 37,159 40,084
AVERAGE BALANCES
Assets......................... $5,766,843 $4,622,968 $4,162,583 $3,959,793 $3,664,155
Loans, net of unearned
interest..................... 1,786,529 1,337,305 1,356,082 1,349,078 1,353,088
Securities*.................... 2,729,270 2,109,121 1,816,711 1,624,617 1,277,285
Deposits....................... 4,559,551 3,595,644 3,189,224 3,191,177 2,999,881
Long-term debt................. 53,522 40,966 46,322 51,413 44,130
Shareholders' equity........... 502,614 385,988 355,570 328,479 314,657
YEAR-END BALANCES
Assets......................... $6,528,826 $5,003,187 $4,692,053 $4,271,606 $4,038,057
Loans, net of unearned
interest..................... 2,159,761 1,483,048 1,349,144 1,548,678 1,397,134
Securities*.................... 2,979,156 2,293,438 1,753,563 1,659,590 1,342,084
Deposits....................... 5,161,729 3,843,166 3,410,193 3,254,106 3,317,544
Long-term debt................. 51,529 33,531 42,226 47,349 52,473
Shareholders' equity........... 586,643 399,679 372,683 343,121 315,980
PER SHARE DATA
Earnings....................... $2.57 $2.85 $2.86 $2.70 $2.80
Cash dividends................. 0.80 0.80 0.73 0.73 0.79
Dividend payout ratio.......... 31.13% 28.07% 25.52% 27.04% 28.21%
Book value..................... $33.28 $29.00 $27.01 $24.90 $22.93
Market price
High......................... 40.75 41.75 37.25 28.18 29.55
Low.......................... 36.50 36.25 23.86 21.14 22.50
Close........................ 37.50 40.00 37.25 24.55 27.50
RATIOS
Return on average assets....... 0.71% 0.85% 0.95% 0.94% 1.09%
Return on average equity....... 8.18 10.20 11.10 11.31 12.74
Average equity to assets....... 8.72 8.35 8.54 8.30 8.59
Total risk-based capital
ratio........................ 18.50 20.16 21.25 17.49 15.79
Earnings to fixed charges**
Excluding interest on
deposits.................. 3.83 3.56 2.76 2.65 2.83
Including interest on
deposits.................. 1.51 1.44 1.31 1.24 1.26
- -------------------------
* Securities include investment securities and securities available for sale.
** For purposes of computing these ratios, earnings represent pretax income plus
fixed charges. Fixed charges include all interest (except interest on
deposits as indicated above), the portion of rental expense deemed
representative of an interest factor and amortization of debt expense.
A-26
38
OVERVIEW
Financial highlights for United Missouri Bancshares, Inc. (the "Company")
for 1993 included:
- net income of $41.1 million, up 4.5% from 1992;
- assets exceeded $6.5 billion at December 31, 1993, an increase of 30.5%
from one year earlier, attributable to the Company's expansion into
Kansas;
- excellent credit quality, with only 0.3% of the loan portfolio classified
as nonperforming at year-end 1993;
- strong capital adequacy, with a total risk-based capital ratio of 18.5%
at December 31, 1993, compared to a regulatory minimum of 8%; and
- fee-based services contributed 43.4% of net revenues for 1993, reflecting
the Company's diverse financial services, which include trust, securities
processing, bond trading, cash management and credit cards.
EXPANSION INTO KANSAS
During 1993, the Company expanded significantly into Kansas. Twelve banks
were added to the UMB family between March 26, 1993 and June 25, 1993 (the
"Kansas banks"). The Kansas banks added assets of $1.3 billion, helping increase
the size of the Company by 30.5%. The Kansas banks are strategically located
around Interstate 70. This complements our "I-70 corridor" of affiliates,
stretching from Denver in the West across Kansas and Missouri to the Metro East
St. Louis area in Illinois.
Additionally, two of the larger Kansas bank acquisitions, UMB Overland Park
Bank and UMB Commercial National Bank give us a meaningful presence in Johnson
County. Johnson County is one of the highest per capita income counties in the
country and lies just over the state line from the Company's headquarters in
Kansas City, Missouri.
The state of Kansas opened its doors to regional interstate banking
effective on July 1, 1992. Even in advance of that date, the Company was either
approaching, or being approached by, several good performing Kansas banks about
possible affiliations. Cross-ownership already existed with UMB Overland Park
Bank and the CNB Financial Corporation group of banks. Management of the Company
made the decision to reach critical mass in Kansas as quickly as possible.
Meaningful market share was felt to be desirable to achieve long-term
profitability.
The total purchase price of the Kansas bank acquisitions was $178.0
million. The consideration given in acquiring these banks consisted of
approximately 3.9 million shares of Company common stock and $26.6 million in
cash. Generally, stock was required in all but one of the acquisitions to meet
sellers' demands for largely tax-free transactions. The source of the cash was a
$25 million public debt offering of seven and ten year notes at a blended rate
of approximately 7.1%. Each of the acquisitions was accounted for under the
purchase method of accounting, in which the earnings of the acquired bank were
added into the consolidated results of operations from the respective date of
acquisition. Additionally, the purchase price for each bank was allocated to
assets acquired and liabilities assumed based on their fair market values at
date of acquisition. An intangible asset of $12.8 million for the value of the
core deposits was recorded and the remaining excess of the purchase prices over
the fair value of net assets acquired was recorded as goodwill in the amount of
$51.9 million. These intangible assets are being amortized over periods of 10
and 15 years, respectively.
The amortization expense associated with the intangible assets has impacted
the earnings of the Kansas banks and their contribution to the Company's results
of operations. Earnings per share were further diluted by the shares issued to
effect these transactions. The dilution in the Company's earnings per share for
1993 as a result of the Kansas bank acquisitions is estimated to be $0.28 per
share, or 9.8%.
The Company is actively pursuing a variety of strategies to eliminate the
earnings dilution as quickly as possible. These strategies include converting
the Kansas banks to the Company's data processing systems; merging the 12 banks
into two banks (Salina and Kansas City, Kansas); consolidating bookkeeping and
other
A-27
39
back room operations; and eliminating redundant functions, such as trust
services, credit card processing and bond portfolio administration.
ROA ANALYSIS
Return on average assets (ROA) was 0.71% for 1993, compared to 0.85% for
1992. The Company's ROA has benefited from relatively low loan loss provisions
as well as the noninterest income generated by fee services. Offsetting these
factors are the Company's overhead and net interest margin.
TABLE 1: ANALYSIS OF RETURN ON ASSETS
The table below expresses each component of net income as a percentage of
average assets.
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
Net interest income (tax-equivalent)................ 2.95% 2.95% 3.27% 3.30% 3.54%
Provision for loan losses........................... (0.06) (0.06) (0.15) (0.16) (0.08)
Noninterest income.................................. 2.26 2.34 2.37 2.24 2.20
Net security gains.................................. 0.03 0.11 0.00 0.02 0.01
Noninterest expense................................. (4.00) (4.00) (3.98) (3.93) (4.07)
Income taxes and tax-equivalent adjustment.......... (0.47) (0.49) (0.56) (0.53) (0.57)
------ ------ ------ ------ ------
Net income........................................ 0.71% 0.85% 0.95% 0.94% 1.03%
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Noninterest expense, or overhead, was 4.0% of average assets in 1993 and
1992. The staffing and automation to support the Company's fee services
contribute to overhead. Plans currently under way to reduce noninterest expenses
in the Kansas banks should have a favorable impact on ROA in 1994 and subsequent
years.
Net interest income (tax-equivalent) as a percent of average assets leveled
off at 2.95% in 1993 compared to 1992, after following a downward trend the
three previous years. Relative to other banks, the Company has a more liquid
balance sheet and a higher percentage of its earning assets represented by
securities. Through much of the five-year period 1989 through 1993, market
interest rates steadily declined and loan demand was sluggish. The Company was
investing the monies from maturing securities and deposit growth into new
securities at lower yields. As a consequence, net interest income contributed
less and less to earnings and the Company's ROA.
Beginning in the fourth quarter of 1992, the effects of the Company's
emphasis on business development and loan generation could be seen. These
efforts, coupled with a strengthening economy, produced loan growth in 1993. A
second step to stabilize and improve net interest income was a repositioning of
the securities portfolio in December 1992. At that time, the Company's affiliate
banks sold approximately $906.3 million of short-term securities prior to
scheduled maturity dates. Securities sold were short-term U.S. Treasury
obligations, most of which were scheduled to mature in 1993. The proceeds of
these sales were reinvested in other securities with similar characteristics,
with maturities in 1994, 1995 and 1996. These transactions resulted in net
realized securities gains of $4.2 million. At December 31, 1992, the average
maturity of the securities portfolio, reflective of the repositioning, was 1
year and 10 months, compared to only 11 months at December 31, 1991.
At December 31, 1993, the average maturity of the securities portfolio had
lengthened slightly to about 2 years, due to relatively longer-term
mortgage-backed securities included in the portfolios of the Kansas banks. Some
additional repositioning of the securities portfolio by management is
anticipated in 1994, as the Company continues to actively manage its securities
portfolio to improve its yield and contribution to earnings.
CAPITAL MANAGEMENT
Management of the Company has consistently maintained a strong capital
position, believing it essential for operating a safe and sound financial
institution and safeguarding the funds entrusted to it by customers and
shareholders. At December 31, 1993, shareholders' equity was $586.6 million, up
$186.9 million or 46.8% from
A-28
40
$399.7 million at year-end 1992. The net increase in shareholders' equity as a
result of the stock issued in acquiring the Kansas banks was $148.9 million. The
equity to asset ratio was 9.0% and 8.0% at December 31, 1993 and 1992,
respectively.
Risk-based capital guidelines established by regulatory agencies set
minimum capital standards based on the level of risk associated with a financial
institution's assets. A financial institution's total capital is required to
equal 8% of risk-weighted assets. At least half of that 8% must consist of Tier
1 core capital, and the remainder may be Tier 2 supplementary capital.
The risk-based capital guidelines indicate the specific risk weightings by
type of asset. Certain off-balance sheet items (such as standby letters of
credit and binding loan commitments) are multiplied by "credit conversion
factors" to translate them into balance sheet equivalents before assigning them
specific risk weightings. Due to the Company's high level of core capital and
substantial portion of earning assets invested in riskless government
securities, the Tier 1 capital ratio of 17.1% and Total capital ratio of 18.5%
substantially exceed the regulatory minimums.
A-29
41
TABLE 2: RISK-BASED CAPITAL
The table below computes risk-based capital in accordance with current
regulatory guidelines. These guidelines as of December 31, 1993, excluded net
unrealized gains on securities available for sale from the computation of
regulatory capital and the related risk-based capital ratios.
RISK-WEIGHTED CATEGORY
----------------------------------------------------------------
RISK-WEIGHTED ASSETS 0% 20% 50% 100% TOTAL
- ------------------------------------ ---------- ---------- -------- ---------- ----------
(IN THOUSANDS)
Loans:
Residential mortgage.............. $ -- $ 1,913 $184,184 $ -- $ 186,097
All other......................... -- 93,434 -- 1,880,230 1,973,664
---------- ---------- -------- ---------- ----------
Total loans.................. $ -- $ 95,347 $184,184 $1,880,230 $2,159,761
Securities available for sale:
U.S. Treasury..................... $2,518,436 $ -- $ -- $ -- $2,518,436
U.S. agencies and
mortgage-backed................ 3,042 146,836 -- -- 149,878
Equity securities and other....... 4,242 411 -- 4,178 8,831
---------- ---------- -------- ---------- ----------
Total securities available
for sale.................. $2,525,720 $ 147,247 $ -- $ 4,178 $2,677,145
Investment securities............... -- 268,757 10,187 -- 278,944
Trading securities.................. 45,085 38,529 -- 132 83,746
Federal funds and resell
agreements........................ -- 339,175 -- -- 339,175
Cash and due from banks............. 289,702 376,666 -- -- 666,368
All other assets.................... -- -- -- 250,924 250,924
---------- ---------- -------- ---------- ----------
Category totals.............. $2,860,507 $1,265,721 $194,371 $2,135,464 $6,456,063
---------- ---------- -------- ---------- ----------
---------- ---------- -------- ---------- ----------
Risk-weighted totals................ $ 0 $ 253,144 $ 97,186 $2,135,464 $2,485,794
Off-balance-sheet items
(risk-weighted)................... -- 1,341 63 361,941 363,345
---------- ---------- -------- ---------- ----------
Total risk-weighted assets... $ 0 $ 254,485 $ 97,249 $2,497,405 $2,849,139
---------- ---------- -------- ---------- ----------
---------- ---------- -------- ---------- ----------
CAPITAL TIER 1 TIER 2 TOTAL
- --------------------------------------------------------------- -------- ------- --------
Shareholders' equity........................................... $572,310 $ -- $572,310
Minority interest in subsidiaries.............................. 32 -- 32
Less premium on purchased banks................................ (85,286) -- (85,286)
Long-term debt*................................................ -- 4,544 4,544
Allowance for loan losses...................................... -- 35,590 35,590
-------- ------- --------
Total capital............................................. $487,056 $40,134 $527,190
-------- ------- --------
-------- ------- --------
CAPITAL RATIOS
- -------------------------------------------------------------------------------------
Tier 1 capital to risk-weighted assets............................................... 17.09%
Total capital to risk-weighted assets................................................ 18.50
Leverage ratio (Tier 1 to total assets less premium on purchased banks).............. 7.59
- -------------------------
* Qualifying amounts.
ASSET QUALITY
LOANS
The quality of the Company's loan portfolio remains strong. A primary
measure of the effectiveness of credit risk management is the percentage of the
loan portfolio that is classified as nonperforming. Nonperforming loans include
nonaccrual loans and restructured loans. The Company's nonperforming loans
A-30
42
totaled $7.2 million at December 31, 1993, representing only 0.3% of the loan
portfolio, compared to $3.1 million and 0.2% one year earlier. At year-end 1993,
the Kansas banks held $5.7 million in nonperforming loans, or 1.2% of the loans
in their combined loan portfolio. The Company's nonperforming loans have not
exceeded 0.5% of total loans in each of the last five years.
TABLE 3: LOAN QUALITY
DECEMBER 31,
------------------------------------------------
1993 1992 1991 1990 1989
------- ------- ------ ------ ------
(IN THOUSANDS)
Nonaccrual loans.................................. $ 4,639 $ 1,887 $4,744 $5,746 $6,236
Restructured loans................................ 2,553 1,205 932 301 692
------- ------- ------ ------ ------
Total nonperforming loans.................... $ 7,192 $ 3,092 $5,676 $6,047 $6,928
Other real estate owned*.......................... 7,187 6,932 2,325 61 69
------- ------- ------ ------ ------
Total nonperforming assets................... $14,379 $10,024 $8,001 $6,108 $6,997
------- ------- ------ ------ ------
------- ------- ------ ------ ------
Nonperforming loans as a % of loans............... 0.33% 0.21% 0.42% 0.39% 0.50%
Allowance as a multiple of nonperforming loans.... 4.95x 7.91x 4.62x 4.51x 3.92x
Nonperforming assets as a % of loans plus other
real estate owned............................... 0.66% 0.67% 0.59% 0.39% 0.50%
Loans past due 90 days or more.................... $ 6,359 $ 4,507 $5,500 $8,543 $2,911
As a % of loans................................. 0.29% 0.30% 0.41% 0.55% 0.21%
- -------------------------
* Includes in-substance foreclosures.
Nonperforming assets include foreclosed real estate with the nonaccrual and
restructured loans. The Company's nonperforming asset ratio (nonperforming
assets divided by loans plus foreclosed real estate) was 0.7% at December 31,
1993 and December 31, 1992.
Key factors of the Company's loan quality program are a sound credit policy
combined with periodic and independent credit reviews. All affiliate banks
operate under written loan policies. Credit decisions continue to be based on
the borrower's cash flow position and the value of underlying collateral, as
well as other relevant factors. Each bank is responsible for evaluating its
loans by using a ranking system. In addition, the Company has an internal loan
review staff that operates independent of the affiliate banks. This review team
performs periodic examinations of each bank's loans for credit quality,
documentation and loan administration.
Another means of ensuring loan quality is diversification. By keeping its
loan portfolio diversified, the Company has avoided problems associated with
undue concentrations of loans within particular industries. Commercial real
estate loans comprise 12.9% of total loans, with a history of no significant
losses. The Company has no significant exposure to highly leveraged transactions
and has no foreign credits in its loan portfolio.
A loan is generally placed on nonaccrual status when payments are past due
90 days or more and when management has considerable doubt about the borrower's
ability to repay on the terms originally contracted. The accrual of interest is
discontinued and recorded thereafter only when actually received in cash. At
year-end 1993, $210,000 of interest due was not recorded as earned, compared to
$168,000 for the prior year.
Certain loans are restructured to provide a reduction or deferral of
interest or principal because of deterioration in the financial condition of the
respective borrowers. Management estimates that approximately $35,000 of
additional interest would have been earned in 1993 if the terms of these loans
were similar to other comparable loans.
In certain instances, the Company continues to accrue interest on loans
past due 90 days or more. Though the loan payments are delinquent, collection of
interest and principal is expected to resume and sufficient collateral is
believed to exist to protect the Company from significant loss. Consequently,
management
A-31
43
considers the ultimate collection of these loans to be reasonable and has
recorded $214,000 of interest due as earned for 1993. The comparative figure for
1992 was $123,000.
In addition to the loans discussed above, management has identified through
its loan ranking system $1,781,000 of potential problem loans. Though the loan
payments are current, the borrowers' abilities to comply with the stated terms
are questioned. Each of these loans is subject to constant management attention,
and its classification is reviewed periodically.
Other real estate that has been acquired through or in lieu of foreclosure
and certain "in-substance" foreclosures have a total carrying value of $7.2
million, which approximates market value, at year-end 1993. The largest real
estate parcel is in Kansas City and represents an in-substance foreclosure of
$5.2 million recorded in the fourth quarter of 1992. Of the remaining 22
parcels, 19 are in Kansas and total $1.3 million.
ALLOWANCE AND PROVISION FOR LOAN LOSSES
The allowance for loan losses is maintained to absorb potential losses in
the loan portfolio. The allowance is increased by provisions charged to expense
and is reduced by loan charge-offs, net of recoveries.
The Company's allowance for loan losses at December 31, 1993, was $35.6
million, 1.7% of total loans, compared to $24.5 million, 1.7% of total loans,
one year earlier. The allowance at year-end 1993 was 4.9 times the total of
nonperforming loans, exceeding the dollar amount of those loans by $28.4
million. Included in the Company's allowance figure at December 31, 1993, was an
allowance of $11.4 million recorded by the Kansas banks representing 2.3% of
their combined loans and 2.0 times the total of their nonperforming loans.
Net loan charge-offs decreased to $4.3 million in 1993 from $5.0 million in
1992. The 1992 net charge-off figure included principal of $506,000 and interest
of $373,000 charged against the allowance in recording an in-substance
foreclosure of $5.2 million. The net charge-off ratio was 0.24% for 1993 and
0.37% for 1992.
The provision for loan losses was $3.3 million in 1993 and $3.0 million in
1992. During the past five years, due to the consistency in the quality of the
Company's loan portfolio, management has been able to record provisions less
than the amount of actual net charge-offs and still maintain the allowance at
adequate levels. Absent any significant deterioration in the loan portfolio,
management anticipates that the loan loss provision for 1994 should not
materially exceed the provision recorded in 1993.
The adequacy of the allowance is based on management's continuing
evaluation of the pertinent factors underlying the quality of the loan
portfolio, including actual loan loss experience, current and anticipated
economic conditions, detailed analysis of individual loans for which full
collectability may not be assured and determination of the existence and
realizable value of the collateral and guarantees securing such loans. The
actual losses, notwithstanding such considerations, however, could differ
significantly from the amounts estimated by management.
A-32
44
TABLE 4: ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
Allowance -- beginning of year..... $ 24,456 $ 26,241 $ 27,268 $ 27,176 $ 27,123
Provision for loan losses.......... 3,332 2,981 6,044 6,604 2,958
Allowances of acquired banks....... 12,076 207 352 110 532
Charge-offs:
Commercial....................... $ (1,717) $ (1,401) $ (3,823) $ (3,077) $ (516)
Consumer:
Bankcard...................... (3,983) (4,082) (4,657) (4,262) (3,536)
Other......................... (836) (890) (864) (1,264) (1,263)
Real estate...................... (578) (175) (81) (57) (105)
Agricultural..................... (21) -- (13) (5) (10)
Leases........................... -- -- -- -- (134)
---------- ---------- ---------- ---------- ----------
Total charge-offs........ $ (7,135) $ (6,548) $ (9,438) $ (8,665) $ (5,564)
Recoveries:
Commercial....................... $ 1,051 $ 186 $ 680 $ 523 $ 764
Consumer:
Bankcard...................... 1,144 956 1,002 1,051 908
Other......................... 469 363 307 364 364
Real estate...................... 138 70 19 73 43
Agricultural..................... 59 -- 7 32 9
Leases........................... -- -- -- -- 39
---------- ---------- ---------- ---------- ----------
Total recoveries......... $ 2,861 $ 1,575 $ 2,015 $ 2,043 $ 2,127
---------- ---------- ---------- ---------- ----------
Net charge-offs.................... $ (4,274) $ (4,973) $ (7,423) $ (6,622) $ (3,437)
---------- ---------- ---------- ---------- ----------
Allowance -- end of year........... $ 35,590 $ 24,456 $ 26,241 $ 27,268 $ 27,176
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Average loans...................... $1,786,529 $1,337,305 $1,356,082 $1,349,078 $1,353,088
Loans at end of year, net of
unearned interest................ 2,159,761 1,483,048 1,349,144 1,548,678 1,397,134
Allowance to loans at year-end..... 1.65% 1.65% 1.95% 1.76% 1.95%
Allowance as a multiple of net
charge-offs...................... 8.33x 4.92x 3.54x 4.12x 7.91x
Net charge-offs to:
Provision for loan losses........ 128.27% 166.82% 122.82% 100.27% 116.19%
Average loans.................... 0.24 0.37 0.55 0.49 0.25
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45
TABLE 5: ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
This table presents an allocation of the allowance for loan losses by loan
categories; however, the breakdown is based on a number of qualitative factors,
and the amounts presented are not necessarily indicative of actual future
charge-offs in any particular category. The percent of loans in each category to
total loans is provided in Table 13.
DECEMBER 31,
---------------------------------------------------
LOAN CATEGORY 1993 1992 1991 1990 1989
- ----------------------------------------------- ------- ------- ------- ------- -------
(IN THOUSANDS)
Commercial..................................... $17,500 $13,250 $14,000 $14,000 $11,500
Consumer....................................... 13,500 10,500 11,000 11,000 10,600
Real estate.................................... 3,000 500 1,000 1,000 500
Agricultural................................... 1,000 100 100 100 100
Leases......................................... 50 50 50 50 200
Unallocated.................................... 540 56 91 1,118 4,276
------- ------- ------- ------- -------
Total allowance.............................. $35,590 $24,456 $26,241 $27,268 $27,176
------- ------- ------- ------- -------
------- ------- ------- ------- -------
SECURITIES
During 1993, the Company's securities portfolio comprised 55.8% of total
average earning assets. As discussed previously, the average maturity of the
securities portfolio was about 2 years at December 31, 1993, compared to 1 year
and 10 months at December 31, 1992, and 11 months at December 31, 1991.
The Financial Accounting Standards Board issued a new accounting standard
in 1993 that requires companies to value securities available for sale at
current market prices, with unrealized holding gains and losses reported as a
net amount in a separate component of shareholders' equity (net of a deferred
tax liability). The Company elected to adopt this accounting standard early,
effective December 31, 1993.
Securities available for sale include securities considered part of the
Company's asset/liability management that may be sold in response to changes in
interest rates, prepayments, or capital or liquidity needs. This category
includes principally U.S. Treasury and agency securities and mortgage-backed
securities. At December 31, 1993, securities available for sale had an aggregate
amortized cost of $2.68 billion and fair value of $2.70 billion. The amount of
the related net unrealized holding gain reported in equity at year-end 1993 was
$14.3 million.
TABLE 6: SECURITIES AVAILABLE FOR SALE
AMORTIZED FAIR
COST VALUE YIELD
---------- ---------- -----
(IN THOUSANDS)
DECEMBER 31, 1993
U.S. Treasury.................................................. $2,518,436 $2,539,479 4.72 %
U.S. agencies.................................................. 76,585 76,304 5.06
Mortgage-backed................................................ 73,293 73,472 5.43
Equity......................................................... 8,560 10,687
Other.......................................................... 270 270
---------- ----------
Total........................................................ $2,677,144 $2,700,212
---------- ----------
---------- ----------
DECEMBER 31, 1992
U.S. Treasury.................................................. $2,011,264 $2,014,721 4.84 %
U.S. agencies.................................................. 73,352 73,374 3.37
Equity......................................................... 7,054 10,711
Other.......................................................... 310 281
---------- ----------
Total........................................................ $2,091,980 $2,099,087
---------- ----------
---------- ----------
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46
Investment securities are carried at amortized historical cost based on
management's intention and the Company's ability to hold them to maturity.
Generally, the Company classifies securities of state and political subdivisions
as investment securities. At December 31, 1993, investment securities had a
total carrying value of $278.9 million and fair value of $282.3 million.
TABLE 7: INVESTMENT SECURITIES
YIELD/
AMORTIZED FAIR AVERAGE
COST VALUE MATURITY
---------- ---------- -------------
(IN THOUSANDS)
DECEMBER 31, 1993
State and political subdivisions:
Maturing within 1 year................................. $ 114,942 $ 114,274 5.80%
After 1 year but within 5.............................. 134,922 138,462 7.51
After 5 years but within 10............................ 28,544 29,050 7.00
After 10 years......................................... 536 560 8.98
---------- ---------- -------------
Total............................................... $ 278,944 $ 282,346 2 yr. 1 mo.
---------- ---------- -------------
---------- ---------- -------------
DECEMBER 31, 1992
State and political subdivisions......................... $ 201,458 $ 205,185 1 yr. 8 mo.
---------- ---------- -------------
---------- ---------- -------------
DECEMBER 31, 1991
U.S. Treasury.......................................... $1,397,142 $1,417,103 0 yr. 9 mo.
U.S. agencies.......................................... 82,651 83,358 2 yr. 2 mo.
State and political subdivisions....................... 266,140 268,447 1 yr. 8 mo.
Equity securities and other............................ 7,630 9,126
---------- ----------
Total............................................... $1,753,563 $1,778,034
---------- ----------
---------- ----------
EARNINGS PERFORMANCE
NET INTEREST INCOME
Net interest income, the principal source of earnings, is the difference
between the interest income generated by earning assets and the total interest
cost of the liabilities obtained to fund them. Net interest income in 1993 was
$163.5 million, compared to $129.6 million in 1992. However, to provide
comparability among the types of interest earned, the following discussion of
net interest income is on a fully tax-equivalent (FTE) basis, which adjusts for
the tax-exempt status of certain municipal securities and loans. The reported
interest income for these tax-free assets is increased by the amount of the
income tax savings, less the additional taxes for the nondeductible portion of
interest expense incurred to acquire the tax-free assets.
Measured on a tax-equivalent basis, net interest income in 1993 increased
$33.8 million to $170.3 million, an increase of 24.7% from 1992. The Kansas
banks contributed $25.0 million in tax-equivalent net interest income.
Net interest margin measures the Company's ability to generate net interest
income. It is defined as net interest income (FTE) as a percent of earning
assets. The behavior of the margin depends on the interaction of three factors:
1) net interest spread (defined as the difference between the yield on earning
assets and the rate paid on interest-bearing liabilities); 2) yield earned on
assets funded by interest-free funding sources (primarily noninterest-bearing
demand deposits and equity capital); and 3) percentage of earning assets funded
by interest-free funding sources.
During 1993, the economy continued to strengthen modestly. Certain monetary
actions of the Federal Reserve Board over the last four years had cut short-term
rates (as measured by the federal funds rate) from 10% to the current level of
3%, a level that was steady throughout much of 1993. The actions of the Federal
Reserve did not impact long-term rates until 1993, when these rates fell
throughout the year.
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47
The Company's cost of funds decreased from 3.82% in 1992 to 3.05% in 1993,
a reduction of 77 basis points. However, the Company's yield on earning assets
also decreased, from 6.63% in 1992 to 5.92% in 1993, a decrease of 71 basis
points. As a consequence, the Company's net interest spread improved from 2.81%
in 1992 to 2.87% in 1993. However, net interest margin remained level at 3.48%,
as interest-free funds were invested at lower market rates in 1993 compared to
1992. Management believes the repositioning of the securities portfolio in
December 1992 helped stabilize the margin and improve the spread. Additionally,
loan growth has resulted in loans constituting a higher percentage of average
earning assets, 36.5% in 1993 compared to 34.1% in 1992.
The Company expects its spread and margin to improve in 1994 as a result of
the active management of the securities portfolio and a noted increase in
quality loan demand.
TABLE 8: ANALYSIS OF NET INTEREST MARGIN
1993 1992 CHANGE
---------- ---------- --------
(IN THOUSANDS)
Average earning assets.............................. $4,894,346 $3,922,184 $972,162
Interest-bearing liabilities........................ 3,921,946 3,237,727 684,219
---------- ---------- --------
Interest-free funds................................. $ 972,400 $ 684,457 $287,943
---------- ---------- --------
---------- ---------- --------
Free funds ratio (free funds to earning assets)..... 19.87% 17.45% 2.42%
---------- ---------- --------
---------- ---------- --------
Tax-equivalent yield on earning assets.............. 5.92% 6.63% (0.71)%
Cost of interest-bearing liabilities................ 3.05 3.82 (0.77)
---------- ---------- --------
Net interest spread................................. 2.87% 2.81% 0.06%
Benefit of interest-free funds...................... 0.61 0.67 (0.06)
---------- ---------- --------
Net interest margin................................. 3.48% 3.48% --%
---------- ---------- --------
---------- ---------- --------
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48
TABLE 9: TAX-EQUIVALENT RATE-VOLUME ANALYSIS
This analysis attributes changes in net interest income on a tax-equivalent
basis either to changes in average balances or to changes in average rates for
earning assets and interest-bearing liabilities. The change in interest due
jointly to volume and rate has been allocated to volume and rate in proportion
to the relationship of the absolute dollar amount of change in each. All
information is presented on a tax-equivalent basis and gives effect to the
disallowance of interest expense, for federal income tax purposes, related to
certain tax-free assets.
AVERAGE VOLUME AVERAGE RATE INCREASE (DECREASE)
------------------------ ------------- -------------------------------
1993 1992 1993 1992 1993 VS. 1992 TOTAL VOLUME RATE
---------- ---------- ---- ----- --------------------------------- -------- ------- --------
(IN THOUSANDS)
Change in interest earned on:
$1,786,529 $1,337,306 8.06% 9.03% Loans............................ $ 23,220 $37,277 $(14,057)
Securities:
2,468,796 1,868,585 4.70 5.48 Taxable.......................... 13,586 29,658 (16,072)
260,474 240,536 6.53 7.41 Tax-exempt....................... (798) 1,405 (2,203)
Federal funds sold and
320,391 405,240 3.09 3.63 resell agreements................ (4,832) (2,813) (2,019)
58,156 70,517 5.24 6.42 Other............................ (1,480) (722) (758)
---------- ---------- ---- ----- -------- ------- --------
$4,894,346 $3,922,184 5.92% 6.63% Total............................ $ 29,696 $64,805 $(35,109)
---------- ---------- ---- ----- -------- ------- --------
---------- ---------- ---- -----
Change in interest paid on:
$3,285,879 $2,657,322 3.02% 3.88% Interest-bearing deposits........ $ (3,896) $21,579 $(25,475)
Federal funds purchased
581,130 511,090 2.78 3.17 and repurchase agreements........ (25) 2,074 (2,099)
54,937 69,315 8.07 6.61 Other............................ (147) (1,053) 906
---------- ---------- ---- ----- -------- ------- --------
$3,921,946 $3,237,727 3.05% 3.82% Total............................ $ (4,068) $22,600 $(26,668)
---------- ---------- ---- ----- -------- ------- --------
---------- ---------- ---- -----
Net interest income.............. $ 33,764 $42,205 $ (8,441)
-------- ------- --------
-------- ------- --------
AVERAGE VOLUME AVERAGE RATE INCREASE (DECREASE)
------------------------ ------------- -------------------------------
1992 1991 1992 1991 1992 VS. 1991 TOTAL VOLUME RATE
---------- ---------- ---- ----- --------------------------------- -------- ------- --------
(IN THOUSANDS)
Change in interest earned on:
$1,337,306 $1,356,082 9.03% 10.75% Loans............................ $(24,993) $(1,993) $(23,000)
Securities:
1,868,585 1,530,875 5.48 7.50 Taxable.......................... (12,368) 22,261 (34,629)
240,536 285,836 7.41 8.49 Tax-exempt....................... (6,441) (3,573) (2,868)
Federal funds sold and
405,240 314,705 3.63 5.58 resell agreements................ (2,847) 4,257 (7,104)
70,517 73,713 6.42 7.08 Other............................ (697) (219) (478)
---------- ---------- ---- ----- -------- ------- --------
$3,922,184 $3,561,211 6.63% 8.64% Total............................ $(47,346) $20,733 $(68,079)
---------- ---------- ---- ----- -------- ------- --------
---------- ---------- ---- -----
Change in interest paid on:
$2,657,322 $2,458,136 3.88% 5.78% Interest-bearing deposits........ $(39,114) $10,769 $(49,883)
Federal funds purchased
511,090 460,823 3.17 5.06 and repurchase agreements........ (7,120) 2,327 (9,447)
69,315 84,906 6.61 7.35 Other............................ (1,657) (1,072) (585)
---------- ---------- ---- ----- -------- ------- --------
$3,237,727 $3,003,865 3.82% 5.72% Total............................ $(47,891) $12,024 $(59,915)
---------- ---------- ---- ----- -------- ------- --------
---------- ---------- ---- -----
Net interest income.............. $ 545 $ 8,709 $ (8,164)
-------- ------- --------
-------- ------- --------
NONINTEREST INCOME
Management has stressed the importance of growth of noninterest income to
enhance the Company's profitability. Fee-based services, being non-credit
related, provide generally steady income and are not affected by the rise and
fall in interest rates. These activities are also relatively low-risk and do not
impact the Company's regulatory capital needs. Fee-based services that have been
emphasized include trust and securities processing, securities trading, cash
management and credit cards. Fee income (exclusive of net
A-37
49
security gains) as a percent of adjusted operating revenues has increased from
38.4% in 1989 to 43.4% in 1993. Adjusted operating revenues is defined as
tax-equivalent net interest income plus noninterest income, excluding net
security gains.
Noninterest income, exclusive of net security gains, increased to $130.5
million in 1993 from $108.2 million in 1992, an increase of 20.6%. The Kansas
banks contributed $9.0 million in noninterest income, which included $3.7
million in service charges and other fees, $2.5 million in trust fees and $1.6
million in data processing fees.
Trust income is the largest component of noninterest income and increased
17.2% to $32.0 million in 1993 from $27.3 million in 1992. The continuing
improvement in trust income is evidence of increased business activity and
marketing efforts. The aggregate value of managed trust assets at December 31,
1993, was $8.7 billion, compared to $7.5 billion for December 31, 1992. The
managed trust assets of the Kansas banks approximated $800 million.
The Company's custodial trust business, principally from the mutual funds
industry, continued to grow in 1993. Total trust assets under custody at
December 31, 1993, were $178.4 billion, up from $150.6 billion one year earlier,
due to both new customers and increases in the funds of existing customers. The
custodial trust assets of the Kansas banks approximated $300 million. Securities
processing income, which is derived from the custodial business, was $13.3
million for 1993, compared to $13.7 million for 1992. The variance between years
reflects some mutual fund customers maintaining deposit balances in lieu of
paying fees and some adjustments in pricing to meet competition.
Trading and investment banking income increased 9.0% to $13.6 million in
1993. The increase was generated through increased business development efforts
in new markets and increased sales of mortgage-backed and tax-exempt securities
to correspondent bank customers and retail investors.
Service charges on deposits for 1993 were $30.2 million, an increase of
25.4% from 1992, reflecting the contribution of $3.2 million by the Kansas
banks, higher transaction volumes and higher occurrences of fees paid in lieu of
compensating balances. Additionally, adjustments to fee schedules were made
mid-year 1993 in conjunction with modifications to our deposit products to meet
the requirements of consumer banking legislation that became effective at that
time. Other service charges and fees grew 44.7% to $14.1 million, resulting from
increased sales of cash management services to mutual fund and corporate
customers. In October 1992, the Company began providing check processing and
related cash management services for the Fidelity mutual funds.
Bankcard fees for 1993 were $22.4 million, compared to $18.3 million for
1992, an increase of 22.9%. The increase in bankcard fees was due to a higher
volume of credit card transactions processed for merchants. Other noninterest
income increased in 1993 to $4.7 million from $2.5 million in 1992. The increase
was principally due to $1.6 million in data processing fees generated by two of
the Kansas banks.
Realized net security gains were $1.6 million in 1993 and $5.3 million in
1992. In 1992, $4.2 million of the net security gains were attributable to the
repositioning of the Company's securities portfolio, as discussed earlier. In
1993, approximately $714,000 of security gains were recognized in the fourth
quarter from the sales of U.S. Treasury securities with maturities occurring in
the first three months of 1994. The remaining 1993 gains resulted from the sales
of various equity securities.
NONINTEREST EXPENSE
Noninterest expense rose to $231.0 million in 1993, a 24.9% increase from
1992. Without the Kansas banks, the increase in noninterest expense was 9.2%
between years. Principally due to the Kansas bank acquisitions, the net overhead
ratio increased to 33.4% in 1993, up from 31.4% in 1992. Without the Kansas
banks, the net overhead ratio was 30.2% for 1993. The net overhead ratio is
defined as the difference between noninterest expense and noninterest income
(excluding net security gains) as a percent of adjusted operating revenues.
During 1994, the Company will continue to work toward consolidating certain
operations and eliminating redundant costs as the Kansas banks are assimilated
into the Company.
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50
TABLE 10: ANALYSIS OF NONINTEREST EXPENSE
1993 % CHANGE
----------------------------------------- ----------------------------
TOTAL WITHOUT WITHOUT WITH
KANSAS BANKS KANSAS BANKS TOTAL 1992 KANSAS BANKS KANSAS BANKS
------------ ------------- -------- -------- ------------ ------------
(IN THOUSANDS)
Personnel.............. $ 13,125 $ 93,204 $106,329 $ 87,857 6.1% 21.0%
Occupancy.............. 2,100 12,709 14,809 12,180 4.3 21.6
Equipment.............. 2,741 17,578 20,319 15,756 11.6 29.0
Supplies and
services............. 1,706 15,742 17,448 14,492 8.6 20.4
Bankcard............... 564 18,096 18,660 15,991 13.2 16.7
Marketing.............. 839 12,724 13,563 10,567 20.4 28.4
FDIC/regulatory........ 1,716 9,239 10,955 8,568 7.8 27.9
Intangibles............ 3,008 2,233 5,241 2,196 1.7 138.7
Other.................. 3,152 20,501 23,653 17,340 18.2 36.4
------------ ------------- -------- -------- ----- ------
Total............. $ 28,951 $ 202,026 $230,977 $184,947 9.2% 24.9%
------------ ------------- -------- -------- ----- ------
------------ ------------- -------- -------- ----- ------
Salaries and employee benefits expense, the largest component of
noninterest expense, increased $18.5 million, or 21.0%, to $106.3 million.
Approximately $13.1 million of the increase was due to the Kansas banks. The
balance of the increase was attributable to merit increases and increased
hospitalization and medical expenses.
Equipment expense increased 29.0% in 1993 to $20.3 million. The increase
without the Kansas banks was 11.6% and was due to a full year's depreciation on
1992 investments in a new computer mainframe and other data processing
equipment, and a new check imaging system. In 1993, a new bond trading system
was implemented at the principal affiliate bank in Kansas City. Additionally,
the data processing equipment used by the Salina bank affiliate in serving its
correspondent bank customers was upgraded.
Supplies and services expense increased 20.4% to $17.4 million, reflecting
more customer mailings and form revisions in conjunction with the bank
acquisitions.
Bankcard processing expense increased 16.7% to $18.7 million in 1993 from
$16.0 million in 1992. This increase was attributed to higher merchant
authorization expenses from processing a greater volume of transactions.
Marketing and business development expenses were $13.6 million in 1993,
compared to $10.6 million in 1992. These expenses increased in 1993 due to the
Kansas bank acquisitions, a campaign for new loans as well as deposit product
modifications resulting from new consumer banking regulations.
Other noninterest expense in 1993 was $23.6 million, compared to $17.3
million in 1992, an increase of $6.3 million, or 36.4%. Approximately $3.2
million of the increase relates to the Kansas banks. The remaining increase was
primarily attributable to higher outside data processing fees paid by the
Company to service its mutual fund customers and higher check processing and
wire transfer fees resulting from increased business.
INCOME TAXES
The increase in the corporate tax rate from 34% to 35% was effective
January 1, 1993. The Company's effective federal tax rate on income was 30.2% in
1993, 26.7% in 1992 and 23.2% in 1991. The Company's tax-exempt income as a
percent of pre-tax income was 23.2% in 1993, 28.3% in 1992 and 40.8% in 1991.
The major difference between the effective federal tax rates and the
federal statutory rate of 35% in 1993 and 34% in 1992 and 1991 results from
tax-exempt interest income on state and political subdivision securities. Since
this interest is not subject to federal income tax, the states and political
subdivisions are able to issue these obligations at lower interest rates.
Accordingly, the Company and other holders of such securities give up additional
interest income that could have been earned on similar taxable investments.
Management
A-39
51
estimates that tax-exempt interest decreased the Company's effective tax rates
for 1993, 1992 and 1991 by 7.2%, 8.6% and 11.9%, respectively.
ASSET/LIABILITY MANAGEMENT
LIQUIDITY
Liquidity represents the ability of the Company to provide a continuing
flow of funds to meet its financial commitments and the borrowing needs and
deposit withdrawal requirements of its customers. Liquidity is primarily
provided through the regularly scheduled maturities of assets and $2.7 billion
of high-quality securities available for sale. Maturities in the loan portfolio
also provide a steady flow of funds, and strict adherence to credit standards
helps ensure the collection of those loans. At December 31, 1993, loans of $1.08
billion, representing 49.9% of total loans, were due to mature in one year or
less. The overall liquidity of the Company is also enhanced by its net federal
funds sold position and significant amount of core deposits.
TABLE 11: RATE SENSITIVITY AND MATURITY OF LOANS
The following table presents the rate sensitivity of certain loans maturing
after 1994 compared with the total loan portfolio as of December 31, 1993. Of
the $1,082,723,000 of loans due after 1994, $615,417,000 are to individuals for
the purchase of residential dwellings and other consumer goods. The remaining
$467,306,000 is for all other purposes and reflects maturities of $380,524,000
in 1995 through 1998 and $86,782,000 after 1998.
DECEMBER 31, 1993
------------------
(IN THOUSANDS)
Loans due 1994:
Residential homes and consumer goods..................................... $ 162,062
All other................................................................ 917,688
------------------
$1,079,750
Loans due after 1994:
Variable interest rate................................................... $ 514,169
Fixed interest rate...................................................... 568,554
------------------
$1,082,723
Unearned interest and allowance for loan losses............................ (38,302)
------------------
Net loans........................................................... $2,124,171
------------------
------------------
The parent company's cash requirements consist primarily of dividends to
shareholders and principal and interest payments on debt. These cash needs are
routinely satisfied by dividends and management fees collected from the
affiliate banks. The parent company's long-term debt position is modest and
compares favorably with its peer group. Principal and interest payments on this
debt total approximately $9.1 million for 1994. Projected cash flows are
adequate to service the debt, given the strong capital levels and continued
profitable operations of the affiliate banks.
INTEREST RATE SENSITIVITY
Interest rate sensitivity indicates a financial institution's potential
earnings exposure to fluctuating interest rates. It is related to liquidity
because each is affected by maturing assets and liabilities. However, interest
rate sensitivity also takes into consideration those assets and liabilities with
interest rates that are subject to change prior to maturity. Interest rate
sensitivity is measured by "gaps," defined as the difference between interest-
earning assets and interest-bearing liabilities within specified time frames.
When the gap is positive, with earning assets in excess of interest-bearing
liabilities, net interest income generally improves if interest rates rise. The
opposite effect occurs in the case of a negative gap.
A-40
52
The Company structures the balance sheet to provide for the repricing of
approximately equal amounts of assets and liabilities at the same time. This
strategy helps maintain relative stability in net interest income despite
unpredictable fluctuations in interest rates. Table 12 is a summary statement
that reflects the repricing dates for various assets and liabilities at December
31, 1993. As depicted in Table 12, the cumulative ratio of earning assets to
funding sources for the one year time period was 1.02 at December 31, 1993,
compared to 0.90 at December 31, 1992. Securities available for sale are
included in Table 12 based on scheduled maturity dates. However, these
securities, as described, may be sold as management determines in accordance
with the Company's asset/liability management program.
TABLE 12: INTEREST RATE SENSITIVITY ANALYSIS
1-90 91-180 181-365 OVER 365
DECEMBER 31, 1993 DAYS DAYS DAYS TOTAL DAYS TOTAL
- ---------------------------- -------- ------- ------- -------- -------- --------
(IN MILLIONS)
Earning assets:
Loans....................... $1,245.6 $ 156.5 $ 189.1 $1,591.2 $ 568.6 $2,159.8
Securities*................. 168.3 249.4 529.3 947.0 2,032.1 2,979.1
Federal funds sold and
resell agreements......... 339.2 -- -- 339.2 -- 339.2
Other....................... 83.7 -- -- 83.7 -- 83.7
-------- ------- ------- -------- -------- --------
Total earning assets... $1,836.8 $ 405.9 $ 718.4 $2,961.1 $2,600.7 $5,561.8
-------- ------- ------- -------- -------- --------
% of total earning
assets............... 33.0% 7.3% 12.9% 53.2% 46.8% 100.0%
-------- ------- ------- -------- -------- --------
Funding sources:
Interest-bearing demand and
savings................... $1,354.4 $ -- $ -- $1,354.4 $1,009.9 $2,364.3
Time deposits............... 441.7 279.0 212.2 932.9 376.2 1,309.1
Federal funds purchased and
repurchase agreements..... 543.6 24.5 27.7 595.8 29.3 625.1
Borrowed funds.............. 1.5 -- 5.2 6.7 46.3 53.0
Noninterest-bearing
sources................... -- -- -- -- 1,210.3 1,210.3
-------- ------- ------- -------- -------- --------
Total funding
sources.............. $2,341.2 $ 303.5 $ 245.1 $2,889.8 $2,672.0 $5,561.8
-------- ------- ------- -------- -------- --------
% of total earning
assets............... 42.1% 5.5% 4.4% 52.0% 48.0% 100.0%
-------- ------- ------- -------- -------- --------
Interest sensitivity gap.... $ (504.4) $ 102.4 $ 473.3 $ 71.3 $ (71.3)
Cumulative gap.............. (504.4) (402.0) 71.3 71.3 --
As a % of total earning
assets................. 9.1% 7.2% 1.3% 1.3% --
Ratio of earning assets to
funding sources........... .78 1.34 2.93 1.02 .97
Cumulative ratio -- 1993.... .78 .85 1.02 1.02 1.00
-- 1992.... .73 .72 .90 .90 1.00
-- 1991.... .70 .79 1.01 1.01 1.00
- -------------------------
* Includes securities available for sale based on scheduled maturity dates.
EARNING ASSETS
Average earning assets in 1993 were $4.9 billion, a 24.8% increase over
1992. Average loans in 1993 were $1.8 billion, up 33.6% from 1992, and accounted
for 36.5% of average earning assets compared to 34.1% for the prior year.
Average securities of $2.7 billion, 29.4% higher than 1992, represented 55.8% of
average earning assets in 1993.
At year-end 1993, loans net of unearned interest were $2.2 billion,
compared to $1.5 billion one year earlier, an increase of 45.6%. The Kansas
banks contributed $508.6 million in loans, distributed as follows: commercial --
$139.5 million; agricultural -- $43.7 million; consumer -- $105.6 million;
bankcard -- $19.9
A-41
53
million; residential real estate -- $80.4 million; and commercial real estate --
$119.5 million. The remainder of the increase in the Company's loans was largely
attributable to growth in the volume of commercial and commercial real estate
loans, as credit demands rose with the strengthening of the economy and from
continued emphasis on business development efforts. The increase was broad-based
and not concentrated by either industry or borrower.
TABLE 13: ANALYSIS OF LOANS BY TYPE
DECEMBER 31,
------------------------------------------------------------------
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
AMOUNT
Commercial......................... $1,035,159 $ 777,205 $ 652,583 $ 877,629 $ 746,572
Agricultural....................... 68,148 28,880 35,035 28,055 28,304
Leases............................. 1,627 1,930 2,595 1,849 2,334
Real estate -- commercial.......... 280,060 140,278 126,326 95,037 101,789
---------- ---------- ---------- ---------- ----------
Total business-related........ $1,384,994 $ 948,293 $ 816,539 $1,002,570 $ 878,999
---------- ---------- ---------- ---------- ----------
Bankcard........................... $ 180,345 $ 145,241 $ 148,361 $ 160,533 $ 163,392
Other consumer installment......... 411,037 282,726 279,500 272,779 293,552
Real estate -- residential......... 186,097 110,061 109,547 122,163 74,199
---------- ---------- ---------- ---------- ----------
Total consumer-related........ $ 777,479 $ 538,028 $ 537,408 $ 555,475 $ 531,143
---------- ---------- ---------- ---------- ----------
Total loans................... $2,162,473 $1,486,321 $1,353,947 $1,558,045 $1,410,142
Unearned interest.................. (2,712) (3,273) (4,803) (9,367) (13,008)
Allowance for loan losses.......... (35,590) (24,456) (26,241) (27,268) (27,176)
---------- ---------- ---------- ---------- ----------
Net loans..................... $2,124,171 $1,458,592 $1,322,903 $1,521,410 $1,369,958
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
AS A % OF TOTAL LOANS
Commercial......................... 47.9% 52.3% 48.2% 56.3% 52.9%
Agricultural....................... 3.2 2.0 2.6 1.8 2.0
Leases............................. 0.1 0.1 0.2 0.1 0.2
Real estate -- commercial.......... 12.9 9.4 9.3 6.1 7.2
----- ----- ----- ----- -----
Total business-related........ 64.1% 63.8% 60.3% 64.3% 62.3%
----- ----- ----- ----- -----
Bankcard........................... 8.3% 9.8% 11.0% 10.3% 11.6%
Other consumer installment......... 19.0 19.0 20.6 17.5 20.8
Real estate -- residential......... 8.6 7.4 8.1 7.9 5.3
----- ----- ----- ----- -----
Total consumer-related........ 35.9% 36.2% 39.7% 35.7% 37.7%
----- ----- ----- ----- -----
Total loans................... 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Commercial real estate loans constituted about 12.9% of the loan portfolio
and were $280.1 million at December 31, 1993, compared to $140.3 million at
December 31, 1992. The commercial real estate loan portfolio includes loans
secured by: farmland of $33.3 million; multifamily residential properties of
$15.7 million; construction loans of $19.8 million; and commercial properties of
$211.3 million. The percentage distribution by area of the loans secured by
commercial properties is as follows: 42% in the Kansas City area; 22% in
outstate Kansas; 19% in St. Louis; 10% in outstate Missouri; 5% in Colorado; and
2% in Illinois.
The Company's commercial real estate loans generally do not exceed a
maximum loan-to-value ratio of 80% and the properties are essentially
owner-occupied. Borrower experience and financial capacity are critical factors
in underwriting and approving loan requests. Loan officers remain in close
contact with the borrowers, monitoring the credits and tracking market
conditions.
Consumer-related loans at year-end 1993 were $777.5 million, an increase of
$239.5 million or 44.5% from one year earlier. The increase without the Kansas
banks was $33.6 million or 6.2%. In addition to the
A-42
54
Kansas banks, $15.2 million was added in bankcard loans due to increased
business development efforts. Approximately $22.7 million was added in other
installment loans due to increased demand and additional indirect loans from
automobile dealers and home improvement dealers.
Federal funds transactions essentially are overnight loans between
financial institutions. During the last five years, the Company's banks have
been net sellers of federal funds. The average net sold position for 1993 was
$36.3 million, compared to $153.9 million for 1992.
The Investment Banking Division of the Company's principal affiliate bank
buys and sells federal funds as agent for nonaffiliated banks. Due to the agency
arrangement, these transactions do not appear on the balance sheet and averaged
$776.8 million in 1993 and $764.2 million in 1992.
The Investment Banking Division also maintains an active securities trading
inventory. The average holdings in the securities trading inventory in 1993 were
$58.1 million, compared to $70.5 million in 1992, and were recorded at market
value.
FUNDING SOURCES
Average interest-bearing liabilities in 1993 were $3.9 billion, an increase
of 21.1% over 1992. Interest-bearing deposits accounted for 83.8% of average
interest-bearing liabilities in 1993. Repurchase agreements and
noninterest-bearing demand deposits are the other principal funding sources.
Total deposits averaged $4.6 billion in 1993, up $963.9 million or 26.8%
from 1992. Average deposits for the Kansas banks were approximately $658.2
million and were distributed as follows: noninterest-bearing demand -- $115.9
million; interest bearing demand and savings -- $290.1 million; time deposits
under $100,000 -- $185.2 million; and time deposits of $100,000 or more -- $67.0
million.
TABLE 14: ANALYSIS OF AVERAGE DEPOSITS
AMOUNT 1993 1992 1991 1990 1989
- ----------------------------------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
Noninterest-bearing demand......... $1,273,672 $ 938,322 $ 731,088 $ 747,897 $ 764,127
Interest-bearing demand and
savings.......................... 2,092,048 1,559,004 1,274,520 1,105,840 1,023,257
Time deposits under $100,000....... 957,677 904,970 930,236 851,568 718,388
---------- ---------- ---------- ---------- ----------
Total core deposits........... $4,323,397 $3,402,296 $2,935,844 $2,705,305 $2,505,772
Time deposits of $100,000 or
more............................. 236,154 193,348 253,380 485,872 494,109
---------- ---------- ---------- ---------- ----------
Total deposits................ $4,559,551 $3,595,644 $3,189,224 $3,191,177 $2,999,881
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
AS A % OF TOTAL DEPOSITS
Noninterest-bearing demand......... 27.9% 26.1% 22.9% 23.4% 25.5%
Interest-bearing demand and
savings.......................... 45.9 43.3 40.0 34.7 34.1
Time deposits under $100,000....... 21.0 25.2 29.2 26.7 23.9
----- ----- ----- ----- -----
Total core deposits........... 94.8% 94.6% 92.1% 84.8% 83.5%
Time deposits of $100,000 or
more............................. 5.2 5.4 7.9 15.2 16.5
----- ----- ----- ----- -----
Total deposits................ 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Interest-bearing demand and savings deposits represent the largest
component of the Company's total deposits and increased $533.0 million, or
34.2%, to $2.1 billion in 1993 over 1992. During 1993, customers remained wary
of tying up their funds in long-term products at relatively low yields.
Consequently, interest-bearing demand and savings deposits grew while the time
deposits under $100,000 category, without the Kansas bank deposits, decreased
from 1992.
Average noninterest-bearing demand deposits comprised approximately 27.9%
of the deposit base in 1993, up from 26.1% in 1992. This increase reflects
increased balances from both correspondent banks and corporate accounts,
including some compensating balances derived from mutual fund customers.
A-43
55
Average time deposits of $100,000 or more in 1993 were $236.2 million, or
5.2% of average deposits, compared to $193.3 million and 5.4% in 1992. This
category, exclusive of the Kansas bank deposits, decreased from the prior year
as a result of the Company promoting repurchase agreements in lieu of large time
deposits.
TABLE 15: SHORT-TERM DEBT
1993 1992 1991
---------------- ---------------- ----------------
AMOUNT RATE AMOUNT RATE AMOUNT RATE
-------- ---- -------- ---- -------- ----
(IN THOUSANDS)
At year-end
- --------------------------------------------
Federal funds purchased..................... $ 26,210 3.03% $131,000 1.95% $ 59,000 3.95%
Repurchase agreements....................... 598,872 2.91 529,837 2.81 688,958 3.77
Other....................................... 1,453 2.76 1,583 2.82 50,547 4.02
-------- ---- -------- ---- -------- ----
Total.................................. $626,535 2.91% $662,420 2.64% $798,505 3.80%
-------- ---- -------- ---- -------- ----
-------- ---- -------- ---- -------- ----
Average for the year
- --------------------------------------------
Federal funds purchased..................... $ 65,184 2.99% $ 36,237 3.20% $ 39,145 5.92%
Repurchase agreements....................... 515,945 2.75 474,853 3.16 421,678 4.98
Other....................................... 1,416 2.08 28,349 3.66 38,584 5.77
-------- ---- -------- ---- -------- ----
Total.................................. $582,545 2.78% $539,439 3.19% $499,407 5.11%
-------- ---- -------- ---- -------- ----
-------- ---- -------- ---- -------- ----
Maximum month-end balance
- --------------------------------------------
Federal funds purchased..................... $134,000 $131,000 $ 59,000
Repurchase agreements....................... 598,872 561,831 688,958
Other....................................... 2,367 62,539 52,617
-------- -------- --------
Total.................................. $735,239 $755,370 $800,575
-------- -------- --------
-------- -------- --------
Repurchase agreements amounted to $598.9 million at December 31, 1993,
compared to $529.8 million one year earlier. Repurchase agreements are
transactions involving investment funds that are exchanged for securities with a
commitment by the seller of the securities to repurchase the same or similar
issues at an agreed-upon price and date. The Investment Banking Division buys
and sells repurchase agreements as principal for nonaffiliated banks. These
agreements are reflected on the balance sheet as both an asset (resell
agreement) and a corresponding liability (repurchase agreement), since such
funds are purchased and then sold to approved dealer banks and primary dealers.
The amount of repurchase agreements handled in this manner was $263.2 million at
December 31, 1993, compared to $222.7 million one year earlier.
At year-end 1993, the Company had repurchase agreements of $335.7 million
for its own funding needs, compared to $307.1 million at December 31, 1992.
The Company's other short-term borrowings consist primarily of U.S.
Treasury demand notes. These demand notes represent treasury tax deposits
remitted to the Federal Reserve Bank other than daily. The rate paid on these
funds is 0.25% below the weekly average federal funds rate.
The Company's long-term borrowings consist of four senior note issues and
some installment notes. The Company's ratio of long-term debt to total capital,
a measure of debt capacity, was 8.8% at December 31, 1993, which compares very
favorably with its peer group.
The Company borrowed $25.0 million in 1993 under a medium-term note program
to fund the cash portions of the Kansas bank acquisitions. Of the total, $10.0
million of notes were issued with a seven-year maturity at 6.81% and $15.0
million of notes were issued with a 10-year maturity at 7.30%.
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56
TABLE 16: MATURITIES OF TIME DEPOSITS OF $100,000 OR MORE
DECEMBER 31,
--------------------------------
1993 1992 1991
-------- -------- --------
(IN THOUSANDS)
Maturing within 3 months...................................... $160,893 $114,555 $142,763
After 3 months but within 6................................... 29,482 20,416 33,255
After 6 months but within 12.................................. 30,099 15,309 14,746
After 12 months............................................... 30,282 20,375 10,665
-------- -------- --------
Total.................................................... $250,756 $170,655 $201,429
-------- -------- --------
-------- -------- --------
COMPARISON OF 1992 VERSUS 1991
Net income for 1992 was $39.4 million, relatively unchanged from 1991.
Measured on a tax-equivalent basis, net interest income in 1992 was $136.5
million, an increase of 0.4% from 1991. During 1992, as short-term market rates
went down, the rates on interest-bearing funds fell 190 basis points. However,
the yields on earning assets fell 201 basis points due to the lack of quality
loan demand and the reinvestment of funds from maturing securities into similar
securities at yields lower than the preceding year. Consequently, the net
interest spread narrowed to 2.81% in 1992 from 2.92% in 1991. Lower market
interest rates also meant that interest-free funds were invested at lower yields
during 1992. These factors resulted in a decrease in the net interest margin
from 3.82% in 1991 to 3.48% in 1992.
The provision for loan losses was $3.0 million in 1992, compared to $6.0
million in 1991. With average loan volume level in 1992, management was able to
record a provision less than the amount of actual net charge-offs and still
maintain the allowance at an adequate level.
Noninterest income, exclusive of net security gains, increased to $108.2
million in 1992 from $98.6 million in 1991, an increase of 9.7%. Trust fees
increased 10.3% to $27.3 million. Trust assets under management increased to
$7.5 billion at December 31, 1992, from $6.8 billion one year earlier.
Securities processing income was $13.7 million in 1992 and $10.5 million in
1991. The Company's custodial assets increased to $150.6 billion at December 31,
1992, from $119.6 billion at December 31, 1991, due to both new customers and
increases in the funds of existing customers.
Trading and investment banking income increased 2.8% to $12.5 million in
1992, from increased business development efforts in new markets, partially
offset by a decrease in trading volumes resulting from lower interest rates.
Service charges on deposit accounts increased 13.0% to $24.1 million in
1992 from $21.3 million in 1991. This increase reflected higher transaction
volumes and higher occurrences of fees paid in lieu of compensating balances.
Cash management and other service charges and fees increased to $9.7 million in
1992 from $7.1 million in 1991, due to increased sales of cash management
services to mutual fund and corporate customers. In October 1992, the Company
began providing check processing and related cash management services for the
Fidelity mutual funds.
Bankcard fees for 1992 were $18.3 million, compared to $19.4 million for
1991. The decrease was due to reducing annual fees for consumers and a reduction
in discounts charged to merchants to meet competition. Other noninterest income
decreased in 1992 due to gains realized in 1991 on the sales of assets
previously held under lease financing transactions with customers.
Realized net investment security gains were $5.3 million in 1992, compared
to $116,000 in 1991. Of the 1992 gains, $4.2 million were attributable to the
repositioning of the Company's securities portfolio.
Noninterest expense rose to $184.9 million in 1992, 11.6% higher than 1991.
Salaries and employee benefits expense increased $7.1 million, or 8.8%, to $87.9
million. The increase was attributable to Colorado banking offices opened since
May 1991, a higher staffing level from increased business at other existing
locations as well as merit increases.
A-45
57
Net occupancy expense in 1992 of $12.2 million was 11.6% higher than 1991
because of locations added by acquisitions or new branches constructed since May
1991 and renovations of the operations facility in Kansas City. Equipment
expense increased 11.0% in 1992 to $15.8 million due to investments in a new
computer mainframe and other data processing equipment, a new check imaging
system, and additional furniture and equipment expense from the new banking
locations.
Supplies and services expense increased 7.0% to $14.5 million, reflecting
more customer mailings and form revisions in conjunction with the bank mergers
and acquisitions.
Bankcard processing expense increased slightly to $16.0 million in 1992
from $15.8 million in 1991 because of a higher volume of merchant transactions
and costs associated with marketing a new variable rate credit card.
Marketing and business development expense was $10.6 million in 1992,
compared to $8.4 million in 1991. There were advertising expenses in 1992
associated with the new Colorado locations and a Company reidentification
program. Additionally, marketing programs had been curtailed in 1991, resulting
in lower expense.
FDIC insurance and regulatory fees increased 18.4% to $8.6 million in 1992
from $7.2 million in 1991. The FDIC rate for 1992 was 0.23% of domestic
deposits, having been increased from 0.195% effective July 1, 1991.
Other noninterest expense in 1992 was $17.3 million, compared to $12.9
million in 1991, an increase of $4.4 million, or 34.1%. Approximately $1.7
million of the increase relates to outside data processing fees paid by the
Company to service its mutual fund customers. Other factors contributing to this
increase included higher Federal Reserve Bank check processing charges, expenses
associated with foreclosed real estate and an increase in legal and consulting
fees.
A-46
58
TABLE 17: SUMMARY OF OPERATING RESULTS BY QUARTER (UNAUDITED)
THREE MONTHS ENDED
------------------------------------------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31
-------- ------- -------- -------
(IN THOUSANDS)
1993
Interest income......................................... $59,817 $69,535 $ 77,192 $76,671
Interest expense........................................ 26,256 29,591 32,604 31,267
-------- ------- -------- -------
Net interest income................................ $33,561 $39,944 $ 44,588 $45,404
Provision for loan losses............................... 738 845 901 848
Noninterest income...................................... 28,915 32,901 34,290 35,955
Noninterest expense..................................... 47,763 56,305 62,951 63,958
Income tax provision.................................... 4,521 5,123 5,166 5,320
-------- ------- -------- -------
Net income......................................... $ 9,454 $10,572 $ 9,860 $11,233
-------- ------- -------- -------
-------- ------- -------- -------
1992
Interest income......................................... $68,757 $65,299 $ 61,118 $58,193
Interest expense........................................ 36,196 32,135 28,666 26,789
-------- ------- -------- -------
Net interest income................................ $32,561 $33,164 $ 32,452 $31,404
Provision for loan losses............................... 1,270 982 253 476
Noninterest income...................................... 26,749 26,935 27,654 32,124*
Noninterest expense..................................... 43,296 46,109 47,108 48,434
Income tax provision.................................... 4,406 3,733 3,531 4,078
-------- ------- -------- -------
Net income......................................... $10,338 $ 9,275 $ 9,214 $10,540
-------- ------- -------- -------
-------- ------- -------- -------
THREE MONTHS ENDED
------------------------------------------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31
-------- ------- -------- -------
PER SHARE 1993
Net income.............................................. $0.69 $0.71 $0.56 $0.64
Dividend................................................ 0.20 0.20 0.20 0.20
Book value.............................................. 29.58 31.73 32.06 33.28
Market price:
High.................................................. 40.75 40.50 39.75 40.25
Low................................................... 36.75 36.75 38.25 36.50
Close................................................. 39.75 38.50 39.00 37.50
PER SHARE 1992
Net income.............................................. $0.75 $0.67 $0.67 $0.76
Dividend................................................ 0.20 0.20 0.20 0.20
Book value.............................................. 27.54 28.01 28.45 29.00
Market price:
High.................................................. 40.00 41.75 41.50 40.00
Low................................................... 36.50 38.75 36.75 36.25
Close................................................. 38.88 41.50 37.25 40.00
- -------------------------
* Net investment security gains of $4,220,000 were recorded for the three months
ended December 31, 1992.
A-47
59
UNITED MISSOURI BANCSHARES, INC.
FINANCIAL STATISTICS
FIVE-YEAR AVERAGE BALANCE SHEETS/YIELDS AND RATES
1993 1992
--------------------------------- ---------------------------------
INTEREST RATE INTEREST RATE
AVERAGE INCOME/ EARNED/ AVERAGE INCOME/ EARNED/
BALANCE EXPENSE(1) PAID(1) BALANCE EXPENSE(1) PAID(1)
-------- ---------- ------- -------- ---------- -------
(IN MILLIONS)
(UNAUDITED)
ASSETS
Loans, net of unearned interest
(FTE)(2)................................ $1,786.5 $144.0 8.06% $1,337.3 $120.8 9.03%
Securities:
Taxable................................. $2,468.8 $116.0 4.70 $1,868.6 $102.5 5.48
Tax-exempt (FTE)........................ 260.5 17.0 6.53 240.5 17.8 7.41
-------- ---------- ------- -------- ---------- -------
Total securities...................... $2,729.3 $133.0 4.88 $2,109.1 $120.3 5.70
Federal funds sold and resell
agreements.............................. 320.4 9.9 3.09 405.3 14.7 3.63
Other earning assets (FTE)................ 58.1 3.1 5.24 70.5 4.5 6.42
-------- ---------- ------- -------- ---------- -------
Total earning assets (FTE)............ $4,894.3 $290.0 5.92 $3,922.2 $260.3 6.63
Allowance for loan losses................. (31.9) (26.1)
Cash and due from banks................... 604.4 494.1
Other assets.............................. 300.0 232.8
-------- --------
Total assets.......................... $5,766.8 $4,623.0
-------- --------
-------- --------
LIABILITIES
Interest-bearing demand and savings
deposits................................ $2,092.1 $ 50.9 2.43% $1,559.0 $ 51.1 3.28%
Time deposits under $100,000.............. 957.7 41.4 4.32 905.0 44.8 4.95
Time deposits of $100,000 or more......... 236.1 6.8 2.91 193.3 7.1 3.69
-------- ---------- ------- -------- ---------- -------
Total interest-bearing deposits....... $3,285.9 $ 99.1 3.02 $2,657.3 $103.0 3.88
Commercial paper.......................... -- -- -- -- -- --
Short-term borrowings..................... 1.4 -- 2.08 28.3 1.0 3.66
Long-term debt............................ 53.5.... 4.4 8.23 41.0 3.6 8.65
Federal funds purchased and repurchase
agreements.............................. 581.1 16.2 2.78 511.1 16.2 3.17
-------- ---------- ------- -------- ---------- -------
Total interest-bearing liabilities.... $3,921.9 $119.7 3.05 $3,237.7 $123.8 3.82
Noninterest-bearing demand deposits....... 1,273.7 938.3
Other liabilities......................... 68.6 61.0
-------- --------
Total liabilities..................... $5,264.2 $4,237.0
-------- --------
SHAREHOLDERS' EQUITY
Common stock.............................. $ 214.1 $ 184.8
Capital surplus........................... 122.7 63.1
Retained earnings......................... 195.6 165.9
Treasury stock............................ (29.8) (27.8)
-------- --------
Total shareholders' equity............ $ 502.6 $ 386.0
-------- --------
Total liabilities and shareholders'
equity.............................. $5,766.8 $4,623.0
-------- ---------- -------- ----------
-------- --------
Net interest income (FTE)................. $170.3 $136.5
---------- ----------
---------- ----------
Net interest spread....................... 2.87% 2.81%
Net interest margin....................... 3.48 3.48
- -------------------------
(1) Interest income and yields are stated on a fully tax-equivalent (FTE) basis,
using a rate of 34% for 1989 through 1992 and 35% for 1993. The
tax-equivalent interest income and yields give effect to the disallowance of
interest expense, for federal income tax purposes, related to certain
tax-free assets. Rates earned/paid may not compute to the rates shown due to
presentation in millions.
(2) Loan fees and income from loans on nonaccrual status are included in loan
income.
A-48
60
1991 1990 1989
----------------------------------- ----------------------------------- -----------------------------------
INTEREST RATE INTEREST RATE INTEREST RATE
AVERAGE INCOME/ EARNED/ AVERAGE INCOME/ EARNED/ AVERAGE INCOME EARNED/
BALANCE EXPENSE(1) PAID(1) BALANCE EXPENSE(1) PAID(1) BALANCE EXPENSE(1) PAID
-------- ---------- ------- -------- ---------- ------- -------- ---------- -------
$1,356.1 $145.8 10.75% $1,349.1 $156.9 11.63% $1,353.1 $162.8 12.03%
$1,530.9 $114.8 7.50 $1,398.9 $116.4 8.32 $1,102.8 $ 92.9 8.43
285.8 24.3 8.49 225.7 20.8 9.23 174.5 17.4 9.93
-------- ---------- ------- -------- ---------- ------- -------- ---------- -------
$1,816.7 $139.1 7.66 $1,624.6 $137.2 8.45 $1,277.3 $110.3 8.63
314.7 17.6 5.58 380.2 30.5 8.02 430.9 39.5 9.17
73.7 5.2 7.08 34.2 2.9 8.39 23.0 2.0 8.78
-------- ---------- ------- -------- ---------- ------- -------- ---------- -------
$3,561.2 $307.7 8.64 $3,388.1 $327.5 9.67 $3,084.3 $314.6 10.20
(26.2) (26.8) (27.5)
404.1 401.2 426.8
223.5 197.3 180.6
-------- -------- --------
$4,162.6 $3,959.8 $3,664.2
-------- -------- --------
-------- -------- --------
$1,274.5 $ 63.6 4.99% $1,105.8 $ 66.7 6.03% $1,023.3 $ 63.6 6.21%
930.2 63.6 6.83 851.6 67.5 7.92 718.4 56.7 7.90
253.4 15.0 5.92 485.9 34.0 7.00 494.1 38.8 7.85
-------- ---------- ------- -------- ---------- ------- -------- ---------- -------
$2,458.1 $142.2 5.78 $2,443.3 $168.2 6.88 $2,235.8 $159.1 7.12
-- -- -- -- -- -- .3 .1 9.63
38.6 2.2 5.77 34.4 2.8 8.03 29.6 2.8 9.45
46.3 4.0 8.67 51.4 4.4 8.65 44.1 3.7 8.50
460.8 23.3 5.06 297.6 21.4 7.20 227.9 19.0 8.32
-------- ---------- ------- -------- ---------- ------- -------- ---------- -------
$3,003.8 $171.7 5.72 $2,826.7 $196.8 6.97 $2,537.7 $184.7 7.28
731.1 747.9 764.1
72.1 56.7 47.7
-------- -------- --------
$3,807.0 $3,631.3 $3,349.5
-------- -------- --------
$ 169.4 $ 169.1 $ 168.5
36.1 35.9 35.4
178.1 151.7 124.1
(28.0) (28.2) (13.3)
-------- -------- --------
$ 355.6 $ 328.5 $ 314.7
-------- -------- --------
$4,162.6 $3,959.8 $3,664.2
-------- ---------- -------- ---------- -------- ----------
-------- -------- --------
$136.0 $130.7 $129.9
---------- ---------- ----------
---------- ---------- ----------
2.92% 2.70% 2.92%
3.82 3.86 4.21
AVERAGE BALANCE
FIVE-YEAR
COMPOUND GROWTH
RATE
---------------
6.45%
19.93
3.77
---------------
17.64
(2.47)
25.32
---------------
11.03
6.67
8.07
11.26
---------------
10.74
---------------
---------------
16.29%
8.16
(7.48)
---------------
10.67
(100.00)
(43.77)
6.09
21.22
---------------
11.59
8.51
4.83
---------------
10.70
---------------
6.00%
36.07
11.42
49.43
---------------
11.15
---------------
10.74
---------------
---------------
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61
UNITED MISSOURI BANCSHARES, INC.
FINANCIAL STATISTICS
SELECTED FINANCIAL DATA OF AFFILIATE BANKS
DECEMBER 31, 1993
---------------------------------------------------------------
LOANS
NUMBER OF TOTAL NET OF TOTAL SHAREHOLDERS'
LOCATIONS ASSETS UNEARNED DEPOSITS EQUITY
--------- ---------- ---------- ---------- ------------
(IN THOUSANDS)
WESTERN MISSOURI
United Missouri Bank, n.a. (Kansas City)........ 26 $3,139,380 $1,041,119 $2,628,918 $239,150
United Missouri Bank of Cass County
(Peculiar).................................... 1 31,395 7,749 27,996 2,766
United Missouri Bank Northwest (St. Joseph)..... 9 199,028 31,031 174,512 16,030
EASTERN MISSOURI AND ILLINOIS
United Missouri Bank of St. Louis, n.a.......... 11 $ 596,218 $ 224,493 $ 410,121 $ 43,368
United Missouri Bank Northeast (Monroe City).... 2 68,560 19,839 50,224 7,370
UMB First National Bank (Collinsville,
Illinois)..................................... 8 245,866 69,695 221,932 18,909
UMB First State Bank of Morrisonville
(Illinois).................................... 1 9,522 1,810 8,515 974
SOUTHWESTERN MISSOURI
United Missouri Bank of Carthage................ 2 $ 71,913 $ 17,450 $ 55,365 $ 5,698
United Missouri Bank of Joplin.................. 3 62,218 20,776 54,951 4,947
United Missouri Bank of Monett.................. 1 98,076 18,319 70,017 8,728
United Missouri Bank of Springfield............. 2 112,936 35,667 44,497 5,542
United Missouri Bank of Warsaw.................. 3 63,276 10,790 52,258 7,168
CENTRAL MISSOURI
United Missouri Bank of Boonville............... 2 $ 49,082 $ 11,449 $ 38,236 $ 4,653
United Missouri Bank of Jefferson City.......... 2 57,909 26,869 31,536 5,025
United Missouri Bank North Central
(Brookfield).................................. 5 91,971 14,553 69,875 8,795
United Missouri Bank of Warrensburg............. 4 113,119 19,620 99,164 9,782
COLORADO
UMB Bank Colorado (Colorado Springs)............ 5 $ 96,154 $ 25,892 $ 88,717 $ 5,973
UMB Columbine National Bank (Denver)............ 1 94,215 19,073 83,455 10,087
EASTERN KANSAS
UMB City National Bank (Atchison)............... 2 $ 60,021 $ 16,097 $ 52,208 $ 7,171
UMB Commercial National Bank (Kansas City)...... 4 371,927 132,559 226,584 39,764
UMB Highland Park Bank & Trust (Topeka)......... 3 97,071 34,461 70,468 12,233
UMB North Plaza State Bank (Topeka)............. 1 44,171 20,787 35,591 7,798
UMB Overland Park Bank (Overland Park).......... 4 208,722 90,422 164,496 39,516
UMB Security State Bank (Fort Scott)............ 1 41,727 17,860 36,462 4,994
CENTRAL KANSAS
UMB Citizens Bank & Trust Co. (Manhattan)....... 2 $ 106,971 $ 50,149 $ 85,616 $ 18,306
UMB Farmers National Bank (Abilene)............. 1 59,948 18,437 49,896 9,116
UMB First Bank & Trust, n.a. (Concordia)........ 3 72,201 13,664 60,612 9,008
UMB National Bank of America (Salina)........... 2 129,933 53,135 110,954 16,297
UMB Russell State Bank (Russell)................ 2 87,314 21,945 66,821 10,229
UMB Security State Bank (Great Bend)............ 3 69,320 19,192 57,887 8,350
BANKING-RELATED SUBSIDIARIES
UMB Community Development Corporation
UMB Properties, Inc.
United Missouri Banc Leasing Corporation
United Missouri Bank, U.S.A.
United Missouri Brokerage Services, Inc.
United Missouri Capital Corporation
United Missouri Insurance Company
United Missouri Mortgage Company
United Missouri Trust Company of New York
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