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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, 1999
[_] 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
UMB FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Missouri 43-0903811
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
1010 Grand Avenue, 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, $1.00 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 29, 2000, the aggregate market value of common stock
outstanding held by nonaffiliates of the registrant was approximately
$539,093,000 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 29, 2000
Common Stock, $1.00 Par Value 21,407,273
DOCUMENTS INCORPORATED BY REFERENCE
Company's 2000 Proxy Statement dated March 13, 2000--Part III
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INDEX
Item Page
---- ----
PART I
1. Business.................................................... 1
2. Properties.................................................. 4
3. Legal Proceedings........................................... 5
4. Submission of Matters to a Vote of Security Holders......... 5
PART II
Market for the Registrant's Common Equity and Related Stock-
5. holder Matters.............................................. 5
6. Selected Financial Data..................................... 5
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 5
7a. Quantitative and Qualitative Disclosure about Market Risk.... 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.......... 6
11. Executive Compensation...................................... 6
Security Ownership of Certain Beneficial Owners and Manage-
12. ment........................................................ 6
13. Certain Relationships and Related Transactions.............. 6
PART IV
Exhibits, Financial Statement Schedules and Reports on Form
14. 8-K......................................................... 6-7
Signatures......................................................... 8
Financial Information.............................................. Appendix A
i
PART I
ITEM 1. BUSINESS
General
UMB Financial Corporation (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 all of the
outstanding stock of 7 commercial banks, a credit card bank, a bank real
estate corporation, a reinsurance company, a community development
corporation, a consulting company, a data services company and a trust
company.
The Company's 7 commercial banks are engaged in general commercial banking
business entirely in domestic markets. The banks, 2 each located in Missouri
and Oklahoma, one each in Kansas, Colorado and Nebraska, 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, UMB 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, 1999, is included on page A-50 of the attached Appendix, and is
incorporated herein by reference.
UMB, U.S.A. n.a. is a credit card bank located in Nebraska. UMB, U.S.A. n.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, UMB Community Development Corporation, UMB Consulting
Services, Inc. and UMB Data 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.
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, Nebraska, Oklahoma and Colorado. UMB Consulting
Services, Inc. offers regulatory and compliance assistance to regional banks.
UMB Data Corporation provides complete correspondent services to banks
throughout the region.
On a full-time equivalent basis at December 31, 1999, UMB Financial
Corporation and subsidiaries employed 4,104 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, mutual funds,
mortgage banking companies and credit unions. In recent years, competition has
also increased from institutions, such as mutual fund companies, brokerage
companies and insurance companies, 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 Reserve Board are affected through open market operations in U.S.
Government securities, changes in the discount rate on bank borrowings and
changes in reserve requirements.
1
Supervision and Regulation
As a bank holding company, the Company and its subsidiaries are subject to
extensive regulation. As a consequence of the regulation of the commercial
banking business in the United States, the business of the Company is affected
by the enactment of federal and state legislation. The Company is regulated by
the Federal Reserve Board and is subject to the Bank Holding Company Act of
1956, as amended (the "BHCA").
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 any class of 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 Federal Reserve
Board possesses cease and desist powers over bank holding companies if their
actions represent unsafe or unsound practices or violations of law.
As a result of the enactment of the Interstate Banking and Branching
Efficiency Act of 1994, beginning in September, 1995, bank holding companies
may acquire banks in any state, subject to state deposit caps and a 10%
nationwide cap. Banks may also merge across state lines, creating interstate
branches. Furthermore, a bank may open new branches in a state in which it
does not already have banking operations, if the law of that state does not
prohibit de novo branching by an out of state bank or if the state has not
"opted out" of interstate branching. As a result of the Interstate Banking
Act, the Company has many more opportunities for expansion and has potentially
greater competition in its market area from nationwide or regional banks.
A bank holding company and its subsidiaries are prohibited from engaging in
certain tie-in arrangements in connection with the extension of credit, with
limited exceptions. There are also 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. It is Federal Reserve Board
policy that a bank holding company, such as the Company, should serve as a
source of managerial and financial strength for each of its subsidiaries, and
commit resources to them, even in circumstances in which it might not do so in
absence of such policy.
Five of the commercial banks owned by the Company are national banks and are
subject to supervision and examination by the Comptroller of the Currency.
UMB, U.S.A. n.a., a credit card bank, is located in the state of Nebraska and
is subject to supervision and examination by the Comptroller of the Currency.
One is chartered under the state banking laws of Oklahoma and is subject to
supervision and regular examination by the Oklahoma State Banking Department.
The other remaining bank is chartered under the state banking laws of Missouri
and is subject to supervision and regular examination by the Missouri
Commissioner of Finance. In addition, the national banks and one state bank
that are members of the Federal Reserve System are subject to examination by
that agency. All affiliate banks are members of and subject to examination by
the Federal Deposit Insurance Corporation.
Proposals to change the laws and regulations governing the banking industry
are periodically introduced in the United States Congress, state legislatures
and various bank regulatory agencies. Included within such proposals are those
introduced in the past two years, and those currently pending in Congress,
that would among other things permit some cross ownership of the banking,
insurance and securities industry. The likelihood and timing of any such
proposals or bills, and the impact, if any, that they might have on the
Company and its subsidiaries and their operations, cannot be determined at
this time.
2
Information regarding capital adequacy standards of the Federal banking
regulators is included on pages A-18, A-19, A-35 and A-36 of the attached
Appendix, and is incorporated herein by reference.
Information regarding dividend restrictions is on page A-36 of the attached
Appendix, incorporated herein by reference.
Statistical Disclosure
The information required by Guide 3, "Statistical Disclosure by Bank Holding
Companies," has been integrated throughout pages A-2 through A-23 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........ 73 Chairman of the Board since 1972. Chairman and Chief
Executive Officer of UMB Bank, n.a. (a subsidiary of
the Company) from 1971 through 1995, and as Chairman
through January, 1997.
Alexander C. Kemper..... 34 A son of R. Crosby Kemper. President of the Company
since January, 1995 and as CEO since 1999. President of
UMB Bank, n.a. since January, 1994, President and Chief
Executive Officer since January, 1996, and as Chairman,
President and Chief Executive Officer since January,
1997.
Peter J. Genovese....... 53 Vice Chairman of the Board since 1982. Chairman and
Chief Executive Officer of UMB Bank of St. Louis, n.a.
(a former subsidiary of the Company) from 1979 to 1999.
Rufus Crosby Kemper III. 49 A son of R. Crosby Kemper. Vice Chairman of the Board
since January, 1995. President of UMB Bank of St.
Louis, n.a. from 1993 to 1999. Executive Vice President
of UMB Bank, n.a. prior thereto.
J. Lyle Wells, Jr. ..... 72 Vice Chairman of the Board of the Company since 1993.
Vice Chairman of the Board of UMB Bank, n.a. since
1982.
Royce M. Hammons........ 54 President and Chief Executive Officer of UMB Oklahoma
Bank (a subsidiary of the Company) since 1987.
Richard A. Renfro....... 65 President of UMB National Bank of America, Salina,
Kansas, (a subsidiary of the Company) since 1986.
James A. Sangster....... 45 President of UMB Bank, n.a. since 1999. Divisional
Executive Vice President of UMB Bank, n.a. from 1993 to
1999. Executive Vice President prior thereto.
William C. Tempel....... 61 Divisional Executive Vice President of UMB Bank, n.a.
since 1997, having previously served as President and
Chief Executive Officer of UMB Bank Kansas (a former
subsidiary of the Company).
Douglas F. Page......... 56 Executive Vice President of the Company since 1984 and
Divisional Executive Vice President, Loan
Administration, of UMB Bank, n.a. since 1989.
3
Name Age Position with Registrant
- ---- --- ------------------------
Timothy M. Connealy..... 42 Chief Financial Officer since 1994. Chief Financial
Officer of UMB Bank Kansas prior thereto.
James C. Thompson....... 57 Divisional Executive Vice President of UMB Bank, n.a.
since July, 1994. Executive Vice President of UMB Bank
of St. Louis, n.a. since 1989.
E. Frank Ware........... 55 Executive Vice President of UMB Bank, n.a. since 1985.
James D. Matteoni....... 57 Chief Information Officer of UMB Bank, n.a. since 1996.
Dennis R. Rilinger...... 52 Divisional Executive Vice President and General Counsel
of UMB Bank, n.a. since 1996.
Mark A. Schmidtlein..... 40 Vice Chairman of UMB Bank since 1999. Divisional
Executive Vice President of UMB Bank, n.a. from 1996 to
1999. Senior Vice President prior thereto.
Dennis L. Triplett...... 53 Divisional Executive Vice President of UMB Bank, n.a.
since 1995. Regional Bank President prior thereto.
Shelia Kemper Dietrich.. 43 A daughter of R. Crosby Kemper. Executive Vice
President of UMB Bank, n.a. since 1993.
David D. Kling.......... 53 Divisional Executive Vice President of UMB Bank, n.a.
since 1997.
J. Mariner Kemper....... 27 A son of R. Crosby Kemper. President of UMB Bank
Colorado, n.a. (a subsidiary of the Company) since
1997.
Ned C. Voth............. 40 Chairman and Chief Executive Officer of UMB Bank
Colorado, n.a. since 1997.
ITEM 2. PROPERTIES
The Company's headquarters building, the UMB 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 UMB Bank, n.a. comprise 175,000 square feet. The
remaining 75,000 square feet are available for lease to third parties. The
Company's principal law firm and principal accounting firm are leasees.
The banking facility of UMB Bank, n.a. at 928 Grand Avenue principally
houses that bank's support functions and is connected to the headquarters
building by an enclosed pedestrian walkway. UMB Bank, n.a. also leases 40,000
square feet of space in the Equitable Building, in St. Louis, in the heart of
the downtown commercial sector. A full service banking center, operations and
administrative offices are housed at this location.
At December 31, 1999 the Company's affiliate banks operated a total of 7
main banking houses and 154 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 constructed an 180,000 square foot operations center in downtown
Kansas City, Missouri. This building houses the Company operational and item
processing functions as well as management information systems. Occupancy
began in the second quarter of 1999.
Additional information with respect to premises and equipment is presented
on page A-33 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.
4
ITEM 3. LEGAL PROCEEDINGS
In the normal course of business, the Company and its subsidiaries had
certain lawsuits pending against them at December 31, 1999. 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, 1999.
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 "UMBF." As of December 31, 1999, the Company had 2,403 shareholders.
Dividend and sale prices of stock information, by quarter, for the past two
years is contained on page A-23 of the attached Appendix and is hereby
incorporated by reference.
Information concerning restrictions on the ability of Registrant to pay
dividends and Registrant's subsidiaries to transfer funds to Registrant is
contained on page A-21 and A-22 of the attached Appendix and is hereby
incorporated by reference.
ITEM 6. SELECTED FINANCIAL DATA
See the "Five-Year Financial Summary" on page A-2 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-2 through A-23 of the attached
Appendix, which is incorporated herein by reference.
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See the "Financial Review" on pages A-19 to A-21 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-24 through A-46.
Summary of Operating Results by Quarter -- page A-23.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
5
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors is included in the Company's 2000 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 2000 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 2000 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 2000 Proxy Statement under the
caption "Stock Beneficially Owned by Directors and Nominees and Executive
Officers" and is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information is included in the Company's 2000 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, 1999, 1998
and 1997................................................ A-24
Consolidated Statement of Income for the Three Years
Ended December 31, 1999................................. A-25
Consolidated Statement of Cash Flows for the Three Years
Ended December 31, 1999................................. A-26
Consolidated Statement of Shareholders' Equity for the
Three Years Ended December 31, 1999..................... A-27
Notes to Financial Statements............................ A-28-A-46
Independent Auditors' Report............................. A-47
6
Condensed financial statements for parent company only may be found on page
A-46. 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
1999.
Exhibits
The following Exhibit Index lists the Exhibits to Form 10-K.
Exhibit
Number Description
------- -----------
(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
$1.00 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.
(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 LLP
(24) Powers of Attorney
(27) Financial Data Schedule
- --------
* Exhibit has heretofore been filed with the Securities and Exchange
Commission and is incorporated herein as an exhibit by reference.
7
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.
UMB FINANCIAL CORPORATION
/s/ R. Crosby Kemper
_____________________________________
R. Crosby Kemper, Chairman of the
Board
/s/ Timothy M. Connealy
_____________________________________
Timothy M. Connealy,
Chief Financial Officer
Date: March 29, 2000
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.
Paul D. Bartlett* Director
______________________
Paul D. Bartlett, Jr.
Thomas E. Beal* Director
______________________
Thomas E. Beal
H. Alan Bell* Director
______________________
H. Alan Bell
David R. Bradley, Jr.* Director
______________________
David R. Bradley, Jr.
Newton A. Campbell* Director
______________________
Newton A. Campbell
William Terry Fuldner* Director
______________________
William Terry Fuldner
Director
______________________
Jack T. Gentry
Peter J. Genovese* Director
______________________
Peter J. Genovese
Richard Harvey* Director
______________________
Richard Harvey
C.N. Hoffman, III* Director
______________________
C.N. Hoffman, III
Alexander C. Kemper* Director
______________________
Alexander C. Kemper
R. Crosby Kemper III* Director
______________________
R. Crosby Kemper III
Daniel N. League, Jr.* Director
______________________
Daniel N. League, Jr.
Tom J. McDaniel* Director
______________________
Tom J. McDaniel
William J. McKenna* Director
______________________
William J. McKenna
John H. Mize, Jr.* Director
______________________
John H. Mize, Jr.
Mary Lynn Oliver* Director
______________________
Mary Lynn Oliver
______________________ Director
W. L. Orscheln
8
Robert W. Plaster* Director
_______________________________
Robert W. Plaster
Alan W. Rolley* Director
_______________________________
Alan W. Rolley
Director
_______________________________
Herman R. Sutherland
E. Jack Webster, Jr.* Director
_______________________________
E. Jack Webster, Jr.
Thomas D. Sanders* Director
_______________________________
Thomas D. Sanders
John E. Williams* Director
_______________________________
John E. Williams
L. Joshua Sosland* Director
_______________________________
L. Joshua Sosland
Director
_______________________________
Jon Wefald
*/s/ R. Crosby Kemper
- -------------------------------------
R. Crosby Kemper
Attorney-in-Fact for each director
Date: March 29, 2000
9
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LEFT BLANK
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UMB FINANCIAL CORPORATION
INDEX TO FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA
Pages
-----
Consolidated Balance Sheet........................................ A-24
Consolidated Statement of Income.................................. A-25
Consolidated Statement of Cash Flows.............................. A-26
Consolidated Statement of Shareholders' Equity.................... A-27
Notes to Financial Statements..................................... A-28 to A-46
Independent Auditors' Report...................................... A-47
Selected Financial Data ("Five-Year Financial Summary")........... A-2
Management's Discussion and Analysis of Financial Condition and
Results of Operations
("Financial Review")............................................. A-3 to A-23
A-1
FINANCIAL REVIEW
FIVE-YEAR FINANCIAL SUMMARY
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
(in thousands except per share data)
Earnings
Interest income......... $ 407,183 $ 409,625 $ 393,329 $ 372,077 $ 357,055
Interest expense........ 183,323 187,092 171,794 164,581 157,787
Net interest income..... 223,860 222,533 221,535 207,496 199,268
Provision for loan
losses................. 8,659 10,818 11,875 10,565 5,090
Noninterest income...... 177,898 156,535 139,419 128,245 111,020
Noninterest expense..... 306,047 292,274 259,278 239,646 227,775
Net income.............. 64,077 54,214 61,704 57,532 52,176
Average Balances
Assets.................. $7,439,411 $7,017,417 $6,482,613 $6,137,232 $5,899,169
Loans, net of unearned
interest............... 2,615,978 2,640,933 2,649,023 2,437,829 2,346,325
Securities*............. 3,553,849 3,005,330 2,538,690 2,487,641 2,382,248
Deposits................ 5,348,341 5,318,351 4,929,799 4,667,956 4,581,349
Long-term debt.......... 40,241 42,584 48,907 55,349 44,450
Shareholders' equity.... 657,326 650,078 598,631 574,343 597,401
Year-End Balances
Assets.................. $8,131,321 $7,648,098 $7,054,007 $6,511,986 $6,281,328
Loans, net of unearned
interest............... 2,841,150 2,559,136 2,786,031 2,557,641 2,406,138
Securities*............. 3,897,786 3,755,049 2,884,503 2,706,549 2,694,781
Deposits................ 5,923,935 5,896,804 5,546,997 5,190,534 4,813,683
Long-term debt.......... 37,904 39,153 44,550 51,350 40,736
Shareholders' equity.... 654,991 662,767 624,236 582,477 575,959
Per Share Data
Earnings--basic......... $ 2.94 $ 2.42 $ 2.75 $ 2.50 $ 2.08
Earnings--diluted....... 2.94 2.41 2.74 2.49 2.07
Cash dividends.......... 0.73 0.73 0.69 0.65 0.61
Dividend payout ratio... 24.89% 30.17% 25.09% 26.00% 29.33%
Book value.............. $ 30.38 $ 29.71 $ 27.77 $ 25.57 $ 24.35
Market price
High................... 42.22 58.64 49.55 36.15 37.32
Low.................... 35.23 37.05 32.90 27.83 22.48
Close.................. 37.75 41.71 49.55 35.06 29.06
Ratios
Return on average
assets................. 0.86% 0.77% 0.95% 0.94% 0.88%
Return on average
equity................. 9.75 8.34 10.31 10.02 8.73
Average equity to
average assets......... 8.84 9.26 9.23 9.36 10.13
Total risk-based capital
ratio.................. 14.91 15.57 16.26 15.63 16.16
- --------
*Securities include investment securities and securities available for sale.
A-2
The following financial review presents management's discussion and analysis
of UMB Financial Corporation's consolidated financial condition and results of
operations. This review highlights the major factors affecting results of
operations and any significant changes in financial condition for the three-
year period ending December 31, 1999. It should be read in conjunction with
the accompanying consolidated financial statements, notes to financial
statements and other financial statistics appearing elsewhere in this report.
Estimates and forward-looking statements are included in this review and as
such are subject to certain risks, uncertainties and assumptions that are
beyond the Company's ability to control or estimate precisely. These
statements are based on current financial and economic data and management's
expectations for the future developments and their effects. Actual results
could differ materially from management's current expectations. Factors that
could cause material differences in actual operating results include, but are
not limited to, loan demand, the ability of customers to repay loans, consumer
savings habits, employment costs and interest rate changes.
OVERVIEW
The Company recorded consolidated net income of $64.1 million for the year
ended December 31, 1999. This represents an 18.2% increase over 1998 net
income of $54.2 million. Net income for 1998 represented a 12.2% decrease over
1997 results of $61.7 million. Earnings per share for the year ended December
31, 1999, was $2.94, compared to $2.42 in 1998 and $2.75 in 1997. Earnings per
share for 1999 increased 21.5% over 1998 per share earnings, which was a 12.0%
decrease over 1997. Both the net income and earnings per share results for
1998 were affected by a one-time charge for the termination and liquidation of
the Company's defined benefit pension plan. Excluding this one time charge,
1998 net income was $59.0 million, or $2.64 per share. Earnings per share for
1999 represent an 11.4% increase over 1998 results, exclusive of the pension
charge.
The increase in the Company's earnings in 1999, excluding the impact of the
1998 pension termination, was primarily the result of achieving growth in
noninterest income of 13.6% and an improvement in credit quality which allowed
for a reduction in the provision for loan loss. The decrease in the Company's
earnings for 1998, excluding the impact of the pension termination, was
primarily the result of achieving only minimal growth in net interest income
coupled with expense growth outpacing the increase in noninterst income.
During 1999, the increase in noninterest income was more than able to offset
the increase in operating costs, while in 1998 the increase in noninterest
income did not offset the increase in operating costs. In addition, the
Company was able to reduce the provision for loan losses by 20.0% in 1999,
compared to 1998. During 1998, the provision for loan losses decreased by 8.9%
from the previous year. Return on average assets was 0.86%, 0.77% and 0.95%
for each of the three years ended December 31, 1999, respectively. Return on
average shareholders' equity was 9.75% for 1999, 8.34% for 1998 and 10.31% for
1997. Excluding the 1998 pension termination charge, the Company's return on
assets was 0.84% and return on equity was 9.07% for 1998. The Company's
consolidated asset total was $8.1 billion at December 31, 1999, compared to
$7.6 billion at year-end 1998 and $7.1 billion at year-end 1997. Average
assets for 1999, 1998 and 1997 were $7.4 billion, $7.0 billion and $6.5
billion, respectively. The increase in year-end asset totals, compared to the
average, were primarily the result of year-end tax receipts deposited by
various state and local government entities. Average totals are more
indicative of the Company's asset base on an ongoing basis. Average loans as a
percentage of average assets were 35.2% in 1999, 37.6% in 1998 and 40.9% in
1997. Average deposits were $5.3 billion in 1999, $5.3 billion in 1998 and
$4.9 billion in 1997.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income is a significant source of the Company's earnings and
represents the amount by which interest income on earning assets exceeds the
interest expense paid on the liabilities. Net interest income is affected by
the volumes of interest-earning assets and the related funding sources, the
overall mix of these assets and liabilities and the rates paid on each. Table
1 summarizes the changes in net interest income resulting from changes in
volume and rates for the prior two years. Net interest margin is calculated as
net interest income on a
A-3
fully tax-equivalent basis (FTE) as a percentage of average earning assets. A
critical component of net interest income and related net interest margin is
the percentage of earning assets funded by interest-free funding sources. Net
interest income, average balance sheet amounts and the corresponding yields
earned and rates paid for the years 1995 through 1999 are presented on pages
A-48 and A-49. Net interest income is presented on a tax-equivalent basis to
adjust for the tax-exempt status of earnings from certain loans and
investments, primarily obligations of state and local governments.
Table 1: Tax-Equivalent Rate-Volume Analysis (in thousands)
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
Average Volume Rate Increase (Decrease)
--------------------- ---------- ---------------------------
1999 1998 1999 1998 1999 vs. 1998 Volume Rate Total
---------- ---------- ---- ---- ------------------------ ------- -------- --------
Change in interest
earned on:
$2,615,978 $2,640,933 8.14% 8.66% Loans.................. $(2,144) $(13,812) $(15,956)
Securities:
2,820,009 2,448,290 5.47 5.75 Taxable............... 20,590 (6,893) 13,697
733,840 557,040 6.25 6.43 Tax-exempt............ 11,076 (1,059) 10,017
Federal funds sold and
120,428 224,121 4.84 5.49 resell agreements..... (5,155) (1,333) (6,488)
66,231 72,217 5.68 5.87 Other.................. (343) (138) (481)
---------- ---------- ---- ---- ------- -------- --------
$6,356,486 $5,942,601 6.65% 7.10% Total................. $24,024 $(23,235) $ 789
Change in interest
incurred on:
Interest-bearing
$3,599,415 $3,616,069 3.41% 3.83% deposits............... $ (634) $(14,857) $(15,491)
Federal funds purchased
and repurchase
1,285,200 920,637 4.47 4.94 agreements............. 16,637 (4,631) 12,006
44,077 43,278 6.70 7.48 Other.................. 59 (343) (284)
---------- ---------- ---- ---- ------- -------- --------
$4,928,692 $4,579,984 3.72% 4.08% Total................. $16,062 $(19,831) $ (3,769)
========== ========== ==== ==== ------- -------- --------
Net interest income..... $ 7,962 $ (3,404) $ 4,558
======= ======== ========
Average
Average Volume Rate Increase (Decrease)
--------------------- ---------- ---------------------------
1998 1997 1998 1997 1998 vs. 1997 Volume Rate Total
---------- ---------- ---- ---- ------------------------ ------- -------- --------
Change in interest
earned on:
$2,640,933 $2,649,023 8.66% 8.95% Loans.................. $ (722) $ (7,480) $ (8,202)
Securities:
2,448,290 2,166,628 5.75 5.87 Taxable............... 16,230 (2,616) 13,614
557,040 372,062 6.43 6.61 Tax-exempt............ 11,919 (665) 11,254
Federal funds sold and
224,121 138,787 5.49 6.07 resell agreements..... 4,754 (868) 3,886
72,217 83,668 5.87 6.13 Other.................. (680) (207) (887)
---------- ---------- ---- ---- ------- -------- --------
$5,942,601 $5,410,168 7.10% 7.43% Total................. $31,501 $(11,836) $ 19,665
Change in interest
incurred on:
Interest-bearing
$3,616,069 $3,353,593 3.83% 3.82% deposits............... $10,043 $ 374 $ 10,417
Federal funds purchased
and repurchase
920,637 800,128 4.94 5.06 agreements............. 5,974 (983) 4,991
43,278 49,473 7.48 6.77 Other.................. (443) 333 (110)
---------- ---------- ---- ---- ------- -------- --------
$4,579,984 $4,203,194 4.08% 4.09% Total................. $15,574 $ (276) $ 15,298
========== ========== ==== ==== ------- -------- --------
Net interest income..... $15,927 $(11,560) $ 4,367
======= ======== ========
A-4
FTE interest income increased by $0.8 million during 1999 to $422.7 million
compared to $421.9 million for 1998. Interest income for 1998 represented a
$19.7 million increase over the total for 1997 of $402.2 million. Interest
expense in 1999 amounted to $183.3 million, a $3.8 million decrease over 1998
expense of $187.1 million. Interest expense in 1998 increased by $15.3 million
from 1997 expense of $171.8 million. These changes resulted in an increase in
net interest income for 1999 of $4.6 million to $239.4 million compared to
$234.8 million for 1998 and $230.4 million in 1997.
Table 2: Analysis of Net Interest Margin
1999 1998 Change
---------- ---------- --------
(in thousands)
Average earning assets...................... $6,356,486 $5,942,601 $413,885
Interest-bearing liabilities................ 4,928,692 4,579,984 348,708
---------- ---------- --------
Interest-free funds......................... $1,427,794 $1,362,617 $ 65,177
========== ========== ========
Free funds ratio (free funds to earning
assets).................................... 22.46% 22.93% (0.47)%
========== ========== ========
Tax-equivalent yield on earning assets...... 6.65% 7.10% (0.45)%
Cost of interest-bearing liabilities........ 3.72 4.08 (0.36)
---------- ---------- --------
Net interest spread......................... 2.93% 3.02% (0.09)%
Benefit of interest-free funds.............. 0.84 0.93 (0.09)
---------- ---------- --------
Net interest margin......................... 3.77% 3.95% (0.18)%
========== ========== ========
Average earning assets increased by approximately 7.0% in 1999 compared to
10.0% in 1998. These assets totaled $6.4 billion in 1999 compared to $5.9
billion in 1998 and $5.4 billion in 1997. The increase in average earning
assets for 1999 was entirely attributable to the Company's investment security
portfolio, which increased by 18.3% compared to 1998. Average loans during
1999 decreased by 0.9% compared to the prior year. During 1998, average loans
decreased by 0.3% compared to a 18.4% increase in average investment
securities. During 1998, the Company experienced an increase in loan
reductions as a result of several loan customers selling or merging their
businesses. These reductions impacted the Company's ability to increase its
average loans for both 1999 and 1998. During 1997, average loans increased by
8.7% compared to a 2.1% increase in average investment securities. An increase
in federal funds purchased and repurchase agreements funded the increase in
earning assets for 1999. Increases in both interest-bearing and noninterest-
bearing deposits as well as repurchase agreements funded the increase in
earning assets for 1998. The increase in average earning assets for 1997 was
funded by an increase in both interest-bearing and noninterest-bearing demand
deposits.
The Company's net interest spread was 2.93% in 1999, 3.02% in 1998 and 3.34%
in 1997. Net interest spread is calculated as the difference between the yield
earned on earning assets and the rate paid on interest-bearing liabilities. As
a result of the change in the earning asset mix and the related funding
sources, the Company's net interest margin decreased to 3.77% in 1999,
compared to 3.95% in 1998 and 4.26% in 1997. The decrease in both net interest
spread and margin for 1999 was the result of lower rates earned on total
earning assets, which decreased to 6.65% from 7.10% in 1998. This change was
the result of both a decrease in interest rates and a change in the mix of
interest earning assets. During 1999, loans comprised 41% of earning assets,
as compared with 44% during 1998. During 1999, the Company's funding costs did
not decline to the same extent as the change in earning assets. Cost of funds
decreased by 36 basis points, compared to a 45 basis point decline in the
yield on earning assets. The yield on loans during 1998, as compared with
1997, decreased by 29 basis points, while the yield on securities decreased by
10 basis points. The Company's funding mix and cost of funds were relatively
unchanged in 1998 as compared with 1997.
During 1997, the decrease in the rate earned on loans was at least partially
offset by an increase in the yield on the investment portfolio. The rate
pressure on the loan portfolio, resulting from declining interest rates and a
very competitive loan market, continued throughout 1999. The Company was able
to increase the yield on its
A-5
very liquid investment securities portfolio during 1997 by reinvesting
maturities at higher yields and altering the mix of the portfolio. The Company
was unable to increase or maintain its yield on the investment portfolio
during 1998 and 1999. As a result of extended pressure on short-term interest
rates, the Company was unable to reinvest maturing securities at the same rate
as the roll-off.
As discussed above and shown in the information in Table 1, the Company's
balance sheet is slightly asset sensitive. Two fundamental characteristics of
the Company's balance sheet allow for more growth in net interest income
during a period of increasing interest rates. Conversely, during a period of
declining interest rates, as experienced during the greater part of the last
two years, growth in net interest income is more difficult. The Company's
investment portfolio, which is very liquid and has an average maturity of
approximately two years, represents over 56% of total earning assets. Through
the regular reinvestment of scheduled maturities, the Company is able to take
advantage of increases in interest rates on a very timely basis. A significant
portion of the Company's funding is noninterest bearing demand deposit
accounts. These core deposit accounts produce a greater benefit to the Company
as interest rates increase, as higher investment opportunities are not offset
by an increase in funding costs.
The cause and level of the increase in net interest income in 1999 from that
experienced in 1998 can be seen in the information in Table 1. During 1999,
increases in federal funds purchased and repurchase agreements funded the
growth in average earning assets. This growth was limited to increases in
investment securities. The spread earned on this growth was, for the most
part, offset by a reduced rate earned on earning assets, primarily loans and
investment securities. The average rate earned on loans during 1999 decreased
by 52 basis points as compared to 1998, while the average rate earned on
investment securities decreased by 24 basis points during the same period. The
Company's cost of funds during 1999 decreased by 36 basis points. During 1998,
increases in core deposit and repurchase agreements funded the growth in
earning assets. This growth was primarily limited to increases in investment
securities. The spread earned on this growth was, for the most part, offset by
a reduced rate earned on earning assets, primarily loans. The average rate
earned on loans during 1998 decreased by 29 basis points as compared to 1997.
The Company's cost of funds during 1998 decreased by only 1 basis point.
Table 3: Allocation of Allowance for Loan Losses
This table presents an allocation of the allowance for loan losses by loan
categories. The breakdown is based on a number of qualitative factors;
therefore, 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 5.
December 31
---------------------------------------
Loan Category 1999 1998 1997 1996 1995
- ------------- ------- ------- ------- ------- -------
(in thousands)
Commercial.............................. $15,000 $16,000 $17,000 $17,300 $16,150
Consumer................................ 15,300 16,300 15,400 15,000 13,500
Real estate............................. 750 750 750 1,000 2,500
Agricultural............................ 50 50 50 50 450
Leases.................................. 50 50 50 50 50
Unallocated............................. 43 19 24 14 35
------- ------- ------- ------- -------
Total allowance........................ $31,193 $33,169 $33,274 $33,414 $32,685
======= ======= ======= ======= =======
Provision and Allowance for Loan Loss
The allowance for loan losses (ALL) represents management's judgment of the
losses inherent in the Company's loan portfolio. The provision for loan losses
is the amount necessary to adjust the ALL to the level considered appropriate
by management. The adequacy of the ALL is reviewed quarterly, considering such
items as historical loss trends, a review of individual loans, current and
projected economic conditions, loan growth
A-6
and characteristics, industry or segment concentration, and other factors.
Bank regulatory agencies require that the adequacy of the ALL be maintained on
a bank-by-bank basis for each of the Company's subsidiaries. The Company
utilizes a centralized credit administration function, which provides
information on affiliate bank risk levels, delinquencies, an internal ranking
system and overall credit exposure. In addition, loan requests are centrally
reviewed to ensure the consistent application of the loan policy and
standards.
The Company's allowance for loan losses was $31.2 million at December 31,
1999 compared to $33.2 million at year-end 1998 and $33.3 million at year-end
1997. This represents an allowance to total loans of 1.1%, 1.3% and 1.2% as of
December 31, 1999, 1998 and 1997, respectively. A charge-off of the remaining
balance of a commercial credit that had been in liquidation was the primary
cause for the decrease in the year-end 1999 allowance for loan losses. The
Company is pursuing recovery opportunities, which if successful, will increase
the allowance for loan losses. At December 31, 1999 the allowance for loan
losses exceeded total nonperforming loans by $24.9 million. Nonperforming
loans include nonaccrual loans and restructured loans. The year-end 1999
allowance for loan losses was 275% of net credit losses incurred during 1999.
As shown in Table 3, the ALL has been allocated to various loan portfolio
segments. The Company manages the ALL against the risk in the entire loan
portfolio and, therefore, the allocation of the ALL to a particular loan
segment may change in the future. In the opinion of management, the ALL is
adequate based on the inherent losses in the loan portfolio at December 31,
1999. Significant changes in general economic conditions and in the ability of
specific customers to repay loans will impact the level of the provision for
loan losses required in future years.
The Company recorded a provision for loan losses of $8.7 million during
1999, compared to $10.8 million in 1998 and $11.9 million in 1997. The
decrease in the loan loss provision in 1999 from the previous year was
primarily the result of a reduction in losses in bankcard loans. Losses in the
bankcard portfolio decreased as delinquencies and bankruptcies in this area
improved. The decrease in loan loss provision in 1998 was primarily the result
of lower charge-offs related to commercial loans. The increased rate of losses
on other consumer loans that began in 1997 continued throughout 1998. A
significant portion of these losses was related to indirect automobile paper
purchased prior to 1997. Purchasing guidelines in this area were adjusted in
1997 and the rate of losses decreased. Decreasing losses associated with the
Company's bankcard portfolio were experienced in 1999 and 1998, and Management
believes the losses and delinquency levels of the bankcard portfolio will
remain below industry averages. Bankcard loan delinquencies over 30 days
totaled 2.1% of total bankcard loans as of year-end 1999. The Company will
continue to closely monitor the bankcard loan portfolio, the related
collection efforts and underwriting in order to minimize credit losses.
Table 4 presents a five-year summary of the Company's allowance for loan
losses.
A-7
Table 4: Analysis of Allowance for Loan Losses
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
(in thousands)
Allowance--beginning of
year................... $ 33,169 $ 33,274 $ 33,414 $ 32,685 $ 32,527
Provision for loan
losses................. 8,659 10,818 11,875 10,565 5,090
Allowances of acquired
banks.................. 710 -- -- -- 485
Charge-offs:
Commercial............. $ (2,732) $ (322) $ (2,992) $ (2,668) $ (948)
Consumer:
Bankcard.............. (5,377) (7,554) (8,130) (7,592) (5,427)
Other................. (6,393) (6,182) (3,103) (1,904) (1,602)
Real estate............ (11) -- (98) (171) (113)
Agricultural........... (1) (25) (9) -- --
---------- ---------- ---------- ---------- ----------
Total charge-offs... $ (14,514) $ (14,083) $ (14,332) $ (12,335) $ (8,090)
Recoveries:
Commercial............. $ 431 $ 647 $ 268 $ 391 $ 947
Consumer:
Bankcard.............. 1,268 1,289 1,097 1,163 994
Other................. 1,383 1,049 684 532 569
Real estate............ 55 127 117 207 122
Agricultural........... 32 48 151 206 41
---------- ---------- ---------- ---------- ----------
Total recoveries.... $ 3,169 $ 3,160 $ 2,317 $ 2,499 $ 2,673
---------- ---------- ---------- ---------- ----------
Net charge-offs......... $ (11,345) $ (10,923) $ (12,015) $ (9,836) $ (5,417)
---------- ---------- ---------- ---------- ----------
Allowance--end of year.. $ 31,193 $ 33,169 $ 33,274 $ 33,414 $ 32,685
========== ========== ========== ========== ==========
Average loans, net of
unearned interest...... $2,615,978 $2,640,933 $2,649,023 $2,437,829 $2,346,325
Loans at end of year,
net of unearned
interest............... 2,841,150 2,559,136 2,786,031 2,557,641 2,406,138
Allowance to loans at
year-end............... 1.10% 1.30% 1.19% 1.31% 1.36%
Allowance as a multiple
of net charge-offs 2.75x 3.04x 2.77x 3.40x 6.03x
Net charge-offs to:
Provision for loan
losses................ 131.02% 100.97% 101.18% 93.10% 106.42%
Average loans.......... 0.43 0.41 0.45 0.40 0.23
Noninterest Income
A key objective of the Company is the growth of noninterest income to
enhance profitability since fee-based services are non-credit related, provide
steady income and are not directly affected by fluctuations in interest rates.
These activities are also relatively low-risk and do not impact the Company's
regulatory capital needs. Fee-based services provide the opportunity to offer
multiple products and services to customers and, therefore, more closely align
the customer with the Company. The Company's goal is to offer multiple
products and services to its customers, the quality of which will
differentiate us from the competition. Fee-based services that have been
emphasized include trust and securities processing, securities
trading/brokerage and cash management. Noninterest income, exclusive of net
security and asset gains, as a percentage of adjusted operating revenues was
43% in 1999, compared to 40% in 1998 and 37% in 1997. Adjusted operating
revenue is defined as tax-equivalent net interest income plus noninterest
income, excluding net security and asset gains.
Noninterest income, exclusive of net security gains and gains on sale of
assets, was $177.4 million in 1999 compared to $156.5 million in 1998 and
$135.5 million in 1997. This represents a 13.4% increase in 1999 compared to a
growth rate of 15.5% during 1998. This growth in 1999 was driven by a 15.0%
increase in security trading and investment banking fees, a 12.8% increase in
trust fees and a 13.5% increase in service charges and
A-8
fees. The increase in fee income for 1998 was primarily the result of higher
fee income from trust services and increases in nondeposit service charges and
fees.
The Trust Division is the Company's most significant source of fee income.
Trust services have long been an identified strength of the Company and are
expected to continue to be the primary driver of fee income. The Company
offers a full range of trust services including personal and custody services,
investment management and employee benefits processing. The Company has a
Private Client Services division, which offers full trust and personal banking
services to high net worth individuals.
Income from trust services totaled $54.0 million in 1999, $47.9 million in
1998 and $45.3 million in 1997. The largest contributor to the increase in
trust income for 1999 and 1998 was from employee benefit services. The next
largest contributor to trust income is the personal and custodial business.
This more traditional line of business generally experiences more steady
moderate growth and is more directly impacted by fluctuations in the stock and
bond markets. Fee revenue in 1999 and 1998 also benefited from the
appreciation of assets under management. The aggregate value of managed trust
assets was $14.2 billion at December 31, 1999, compared to $14.5 billion at
year-end 1998 and $12.7 billion at year-end 1997.
The Company's securities processing and custody revenue is primarily related
to the mutual fund industry. Revenues from securities processing were $14.4
million in 1999, $14.7 million in 1998 and $11.8 million in 1997. Revenue for
1999 reflects a slight decrease, as new business growth was not sufficient to
offset the loss of revenue from a large securities processing customer that
had moved to a new service provider during the year. Management anticipates
that revenue growth in 2000 should more than offset this lost revenue. The
increase in revenue for 1998 was the result of ongoing efforts to grow this
business line by expanding the Company's customer base. The significant growth
in the number and size of mutual funds has given the Company more opportunity
to develop new customer relationships and has fueled growth from existing
customers. The Company competes with companies many times its size in this
line of business. Though the Company may not have the scale and price
advantages of its much larger competitors, it can compete very effectively in
certain areas due to better attention to customer service and overall
flexibility related to services provided. Revenues from this business line are
subject to more volatility than other fee sources due to the relative size of
the customer base. The Company should be able to adjust its expense structure
accordingly so that revenue volatility should not significantly impact
operating results. Total trust assets under custody decreased to $103.8
billion at December 31, 1999 from $119.5 billion at December 31, 1998,
primarily as a result of the customer loss described above. Trust assets under
custody were $109.5 billion at December 31, 1997.
Fees and service charges on deposit accounts were $46.4 million in 1999,
$41.1 million in 1998 and $36.6 million in 1997. The increases in fees for
1999 and 1998 were primarily related to corporate deposit accounts as a result
of new customer relationships and the sale of additional cash management
services. Corporate and retail deposit fees also increased as a result of
adjusting fee schedules to changes in market pricing. The level of
compensating balances maintained by corporate customers and the earnings
credit rate applied to the balances also impacts the level of fee income
received. Movement of the earnings credit rate in 1999 approximated changes in
the interest rate on short-term Treasury securities. Other service charges and
fees increased to $27.7 million in 1999 from $24.0 million in 1998, which had
increased from $21.0 million in 1997. Significant increases were achieved in
1999, 1998 and 1997 as a result of increased ATM fees, home banking service
fees, and the sale of cash management services to mutual fund companies. The
Company expanded its ATM network to 608 machines at year-end 1999, compared to
557 and 486 at year-end 1998 and 1997, respectively. Bankcard fees, net of
expenses, were $6.3 million in 1999, $3.5 million in 1998 and $1.5 million in
1997.
Trading and investment banking income totaled $20.7 million in 1999,
compared to $18.0 million in 1998 and $13.7 million in 1997. Approximately
half of the increase in 1999 resulted from an increase in retail brokerage
activity. The remaining improvement was the result of an increase in security
sales to corporate customers, primarily correspondent banks. The funding
levels and loan demand of the correspondent bank customers directly impact
this volume. Results for 1998 and 1997 were favorably impacted by increased
demand
A-9
for mortgage-backed security products, which carry a higher profit margin.
Other income was $7.8 million in 1999 compared to $7.3 million in 1998 and
$7.2 million in 1997.
Noninterest Expense
Total 1999 noninterest expense increased 4.7% to $306.0 million compared to
1998 expense of $292.3 million and 1997 expense of $259.3 million. Included in
1998 expense was a $7.4 million charge related to the funding, liquidation and
termination of the Company's defined benefit pension plan. This item is
explained in more detail in the footnotes of the consolidated financial
statements. Net of this charge, operating expenses in 1999 increased by 7.4%
over 1998. The increase in 1999 expense over 1998 was primarily driven by
increases in staffing costs, the opening of the Company's new Technology
Center, as well as upgrades to the Company's computer hardware and network.
Operating expenses in 1998, net of the pension termination charge, increased
by 9.8% over 1997. During both 1998 and 1997 the Company experienced increases
in staffing and other operating costs due to physical, operational and
technological expansion efforts. Costs for all three years were also impacted
by efforts to prepare for year 2000 readiness.
Costs associated with staffing are the largest component of non-interest
expense as they approximate 54% of total costs. Salaries and employee benefits
expense, net of the pension termination charge, increased 6.1% to $166.6
million in 1999 compared to $156.7 million in 1998 and $141.6 million in 1997.
Staffing levels at year-end 1999 were 4,104, compared to 4,070 in 1998 and
4,056 at the end of 1997. The moderate increase in staff and related expense
for 1999 primarily resulted from the expansion of the Company's branch network
and the strategic decision to add resources to certain critical and growth
areas of the Company. Average staffing levels for 1999 were greater than the
year-end total as a result of decreases during the last half of the year
associated with the consolidation of various bank charters and related
operations. During 1999, 1998 and 1997 the Company dedicated significant
resources to improve its infrastructure. This spending has included both the
upgrades of old legacy systems as well as investments in new delivery and
information systems. Some of the initiatives under way or completed during
1999, 1998 and 1997 include the conversion to a new network operating system,
the conversion to a new teller transaction processing system, the conversion
of all affiliate banks to a new deposit processing system, a consolidated call
center, expanded internet capabilities, an upgrade to the core mainframe
computer, a major upgrade of the customer information system, implementation
of an integrated financial accounting system, new processing and information
systems for trust services and the creation of an enterprise data warehouse.
During 1999, 1998 and 1997, the demand for qualified data processing staff
increased due to the limited resources available in the marketplace to address
the millennium date change, causing the Company's costs in this area to
increase. During 1997, the Company also added staffing resources due to
increased demand for employee benefit services and cash management services.
Staffing levels and costs were also impacted by the opening of 3 new
facilities in 1999, 23 in 1998 and 14 in 1997. These new facilities include
mini branches and grocery store branches as well as full service branch
facilities. The control of staffing costs has been and will continue to be an
important goal for the Company. Control of these costs must be tempered with a
view of the long-term strategy of the Company. The Company has and will
continue to evaluate and take advantage of centralization of administrative
and operational functions. At the same time, management will strive to gain
efficiencies in its existing products, services and processes. The growth rate
of staffing costs is expected to moderate during 2000.
Occupancy expense increased to $23.3 million in 1999 from $21.9 million in
1998 and $19.0 million in 1997. Equipment expense increased to $37.9 million
in 1999 compared to $30.6 million in 1998 and $27.7 million in 1997. The
increases in both 1998 and 1997 occupancy and equipment expense were primarily
the result of the expansion efforts noted previously. Purchases of bank
premises and equipment totaled $52 million in 1999, $51 million in 1998, and
$37 million in 1997. The increase in spending for 1999 was impacted by cost
associated with the Company's new Technology Center, which opened mid-year.
Infrastructure costs, such as these, will continue to be evaluated and managed
based on the long-term needs of and benefits to the Company.
Expenses for supplies and services were $21.7 million in 1999, compared to
$20.4 million in both 1998 and 1997. The increase in 1999 primarily resulted
from the opening of the new Technology Center, along with
A-10
expenses associated with the centralization of certain administrative and
operational functions and consolidation of several affiliate bank charters.
Marketing and business development costs decreased in 1999 to $16.8 million
from $17.4 million in 1998 and $17.7 million in 1997. The higher cost in 1998
and 1997 was primarily the result of an increase in system-wide advertising
and expanded business development activities. There continues to be
significant change in the Company's market due to industry consolidation.
Contributing to the higher costs in 1998 and 1997 was additional spending in
new markets and additional campaigns in existing markets to promote the
Company's reputation for stability and long-term vision. Processing fees
increased to $10.5 million in 1999 from $8.9 million in 1998 and $8.6 million
in 1997. The increase in 1999 primarily resulted from costs associated with
outsourcing of the Company's desktop computer support function. The increases
in legal and consulting fees to $5.0 million in 1999 from $3.5 million in 1998
and $2.7 million in 1997 are generally related to the use of third party
contractors to assist with improvements to the Company's infrastructure
referred to previously. Other operating expenses decreased to $17.2 million in
1999 from $18.4 million in 1998, which was an increase from $14.4 million in
1997. The primary factor driving the fluctuation in costs was losses from
fraud and deposit processing, which had decreased in 1999 after increasing in
1998.
Income Taxes
Income tax expense totaled $23.0 million in 1999, compared to $21.8 million
in 1998 and $28.1 million in 1997. These expense levels equate to effective
tax rates of 26.4%, 28.6% and 31.3% for 1999, 1998 and 1997, respectively. The
decrease in the effective tax rate for 1999 was primarily the result of an
increase in tax exempt securities and a reduction in state and local income
taxes. The primary reason for the difference between the Company's effective
tax rate and the statuary rate is the effect of nontaxable income, partially
offset by nondeductible goodwill amortization.
FINANCIAL CONDITION
Loans
Loans represent the Company's largest source of interest income. At December
31, 1999, loans amounted to $2.8 billion compared to $2.6 billion in 1998 and
$2.8 billion in 1997. On average, loans totaled $2.6 billion in 1999, 1998 and
1997. One primary factor in the lack of growth in average loan totals for 1999
and 1998 was the rate of pay-offs. A higher than normal volume of loans paid
off during 1998 as a result of customers being sold or private placement
activity. The market for high quality credits that are consistent with the
Company's underwriting standards remained very competitive. Management
anticipates that new loan volume in 2000 will outpace loan reductions. Both
commercial and consumer loan balances increased during 1999, despite an
increasingly competitive loan market. Commercial loan balances have increased
at year-end 1999 due to the aggressive efforts of the Company's business
development officers to establish new commercial relationships and expand
existing ones. Consumer loan totals increased in 1999 due to new marketing
campaigns throughout the Company's affiliate bank network. During 1998,
emphasis was placed on controlling and reducing the level of losses in the
indirect consumer loan portfolio, and average balances decreased. Although
indirect lending has fueled much of the new activity in consumer loans, the
Company has and will continue to increase its direct consumer lending. There
is a much better opportunity to cross-sell other products to a direct loan
customer. In addition, these loans have a better loss experience and yield
than indirect loans.
The Parent Company's Credit Administration Department performs timely
reviews of loan quality and underwriting procedures in affiliate banks, which
experienced significant increases in consumer loans.
A-11
Table 5: Analysis of Loans by Type
December 31
----------------------------------------------------------
Amount 1999 1998 1997 1996 1995
- ------ ---------- ---------- ---------- ---------- ----------
(in thousands)
Commercial.............. $1,472,376 $1,246,979 $1,325,988 $1,184,443 $1,092,292
Agricultural............ 39,218 44,879 51,392 51,649 60,128
Leases.................. 5,645 4,717 3,991 2,596 2,057
Real estate--commercial. 207,533 199,324 231,510 258,561 300,493
---------- ---------- ---------- ---------- ----------
Total business-
related.............. $1,724,772 $1,495,899 $1,612,881 $1,497,249 $1,454,970
---------- ---------- ---------- ---------- ----------
Bankcard................ $ 163,756 $ 163,197 $ 184,726 $ 183,301 $ 201,048
Other consumer
installment............ 817,732 771,568 854,605 731,661 583,433
Real estate--
residential............ 134,890 128,472 133,819 145,478 167,077
---------- ---------- ---------- ---------- ----------
Total consumer-
related.............. $1,116,378 $1,063,237 $1,173,150 $1,060,440 $ 951,558
---------- ---------- ---------- ---------- ----------
Total loans........... $2,841,150 $2,559,136 $2,786,031 $2,557,689 $2,406,528
Unearned interest....... -- -- -- (48) (390)
Allowance for loan
losses................. (31,193) (33,169) (33,274) (33,414) (32,685)
---------- ---------- ---------- ---------- ----------
Net loans............. $2,809,957 $2,525,967 $2,752,757 $2,524,227 $2,373,453
========== ========== ========== ========== ==========
As a % of total loans
- ---------------------
Commercial.............. 51.8% 48.7% 47.6% 46.3% 45.4%
Agricultural............ 1.4 1.8 1.9 2.0 2.5
Leases.................. 0.2 0.2 0.1 0.1 0.1
Real estate--commercial. 7.3 7.8 8.3 10.1 12.5
---------- ---------- ---------- ---------- ----------
Total business-
related.............. 60.7% 58.5% 57.9% 58.5% 60.5%
---------- ---------- ---------- ---------- ----------
Bankcard................ 5.8% 6.4% 6.6% 7.2% 8.4%
Other consumer
installment............ 28.8 30.1 30.7 28.6 24.2
Real estate--
residential............ 4.7 5.0 4.8 5.7 6.9
---------- ---------- ---------- ---------- ----------
Total consumer-
related.............. 39.3% 41.5% 42.1% 41.5% 39.5%
---------- ---------- ---------- ---------- ----------
Total loans........... 100.0% 100.0% 100.0% 100.0% 100.0%
========== ========== ========== ========== ==========
Included in Table 5 is a five-year breakdown of loans by type. Business-
related loans continue to represent the largest segment of the Company's loan
portfolio, comprising approximately 60% of total loans. The focus of the
Company and each of its affiliate banks is on the small- to medium-sized
commercial companies within their respective trade areas. The Company targets
customers that will utilize multiple banking services and products. The
ownership structure of the Company and the continuity of its management and
relationship officers are generally viewed by customers as a significant
strength of the Company and benefit to the customer. The Company's goal is to
differentiate itself from its large super-regional and national competitors
through superior service, attention to detail, customer knowledge and
responsiveness. The Company's size allows it to meet this goal and at the same
time offer the wide range of products most customers need. This strategy has
worked especially well during a period of bank consolidation and should
continue to be a benefit. The Company has experienced very strong growth in
the new markets it entered during the past three years. There has been a
definite demand in these markets for bank services delivered with the
customer-driven focus that the Company practices. The Company will continue to
expand its efforts to attract customers that understand and seek the
advantages of banking with a Company headquartered in their market.
Commercial real estate loans have increased to $208 million at December 31,
1999, from $199 million at year-end 1998, which was a decrease from $232
million at year-end 1997. As a percentage of total loans, commercial real
estate loans now comprise only 7.3% of totals, compared to 7.8% and 8.3% in
1998 and 1997, respectively. Generally, these loans are made for working
capital or expansion purposes and are primarily
A-12
secured by real estate with a maximum loan-to-value of 80%. Many of these
properties are owner-occupied and have other collateral or guarantees as
security.
Bankcard loans have decreased as a percentage of total loans. They comprise
only 5.8% of total loans at year-end 1999 compared to 6.4% in 1998 and 6.6% in
1997. A significant portion of the decrease in bankcard loans in 1999 was
caused by a reduction in the private label portion of the portfolio. This type
of loan is generally less profitable than traditional bankcard loans and
likely to continue to decrease. The overall growth in the Company's bankcard
portfolio has been hampered by increased competition from banking and
nonbanking card issuers. This competition frequently lessens its credit
standards and offers favorable introductory rates in an effort to obtain
transfer balances from other cards. The Company has elected not to seek loan
volume in such a manner. The Company's credit and underwriting standards have
become stricter as more consumers acquire multiple credit cards with revolving
balances.
Loan Quality
The strength of the Company's credit standards is reflected in the credit
quality of the loan portfolio. A primary indicator of credit quality and risk
management is the level of nonperforming loans. Nonperforming loans include
both nonaccrual loans and restructured loans. The Company's nonperforming
loans decreased to $6.3 million at December 31, 1999, compared to $10.7
million a year earlier. The level of nonperforming loans at year-end 1999
represents 0.22% of total loans compared to 0.42% in 1998 and 0.15% in 1997.
The Company's nonperforming loans have not exceeded 0.5% of total loans in any
of the last six years.
At December 31, 1999, the Company had $2.0 million in other real estate
owned. Totals for year-end 1998 and 1997 were $0.7 million and $2.0 million,
respectively. Loans past due more than 90 days totaled $5.0 million, $7.9
million and $7.8 million at December 31, 1999, 1998 and 1997, respectively.
Bankcard loans represented approximately 23% of these past due totals at
December 31, 1999.
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 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 independently of the affiliate banks. This review team
performs periodic examinations of each bank's loans for credit quality,
documentation and loan administration. The respective regulatory authority of
each affiliate bank also reviews loan portfolios.
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 less than 8% 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/or 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 1999, $276,000 of interest due was not recorded as
earned, compared to $460,000 for the prior year.
Certain loans are restructured to provide a reduction or deferral of
interest or principal due to deterioration in the financial condition of the
respective borrowers. Management estimates that approximately $44,000 of
additional interest would have been earned in 1999 if the terms of these loans
had been performing in accordance with their original contracts. 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
considers the ultimate collection of these loans to be reasonable and has
recorded $644,000 of interest due as earned for 1999. The comparative amount
for 1998 was $547,000.
A-13
Table 6: Loan Quality
December 31
----------------------------------------
1999 1998 1997 1996 1995
------ ------- ------ ------- ------
(in thousands)
Nonaccrual loans..................... $4,818 $ 9,454 $2,600 $10,953 $2,664
Restructured loans................... 1,474 1,292 1,520 523 985
------ ------- ------ ------- ------
Total nonperforming loans.......... $6,292 $10,746 $4,120 $11,476 $3,649
Other real estate owned.............. 2,017 728 1,968 1,646 626
------ ------- ------ ------- ------
Total nonperforming assets......... $8,309 $11,474 $6,088 $13,122 $4,275
====== ======= ====== ======= ======
Nonperforming loans as a % of loans.. 0.22% 0.42% 0.15% 0.45% 0.15%
Allowance as a multiple of
nonperforming loans................. 4.96x 3.09x 8.08x 2.91x 8.96x
Nonperforming assets as a % of loans
plus other real estate owned........ 0.29% 0.45% 0.22% 0.51% 0.18%
Loans past due 90 days or more....... $4,998 $ 7,915 $7,752 $ 6,704 $5,270
As a % of loans...................... 0.18% 0.31% 0.28% 0.26% 0.22%
Securities
The Company's security portfolio provides significant liquidity as a result
of the composition and average life of the underlying securities. This
liquidity can be used to fund loan growth or to offset the outflow of
traditional funding sources. In addition to providing potential liquidity, the
security portfolio is used as a tool to manage interest rate sensitivity. The
Company's goal in the management of its securities portfolio is to maximize
return within the Company's parameters of liquidity goals, interest rate risk
and credit risk. Historically, the Company has maintained very high liquidity
levels while investing in only high-grade securities. The security portfolio
generates the Company's second largest component of interest income.
Securities available for sale and held to maturity comprised 56.3% of earning
assets as of December 31, 1999, compared to 58.9% and 50.0% at year-end 1998
and 1997, respectively. The decrease in 1999 resulted from growth in the loan
portfolio. Securities totaled $3.9 billion at December 31, 1999, compared to
$3.8 billion as of December 31, 1998 and $2.9 billion in 1997. Loan demand is
expected to be the primary factor impacting changes in the level of security
holdings.
Securities available for sale comprised 81% of the Company's securities
portfolio at December 31, 1999, and at year-end 1998. U.S. Treasury
obligations comprised 44% of the available for sale portfolio as of December
31, 1999, compared with 40% one year earlier. U.S. Agency obligations
represented an additional 39% of this portfolio at year-end 1999, compared
with 37% at year-end 1998. In order to improve the yield of the securities
portfolio, the Company periodically will choose to alter the mix of the
portfolio as opposed to significantly lengthening the average life of the
portfolio. Securities available for sale had a net unrealized loss of $20.5
million at year-end 1999 compared to an unrealized gain of $21.2 million the
preceding year. These amounts are reflected, on an after-tax basis, in the
Company's shareholders' equity as an unrealized loss of $12.8 million at year-
end 1999 and an unrealized gain of $13.7 million for 1998.
The securities portfolio achieved an average yield on a tax-equivalent basis
of 5.63% for 1999 compared to 5.87% in 1998 and 5.97% in 1997. The yield on
the portfolio decreased by 24 basis points in 1999 as a result of the impact
of decreases in short-term interest. A significant portion of the investment
portfolio must be reinvested each year as a result of its liquidity. The
Company could not maintain the portfolio yield without significantly impacting
the average life or quality of the investment portfolio. Interest rate
increases during the second half of 1999 have allowed the Company to improve
the yield on its portfolio during this period. The average life of the core
securities portfolio was 26 months at December 31, 1999, compared to 21 months
and 23 months at year-end 1998 and 1997, respectively.
Included in Tables 7 and 8 are analyses of the cost, fair value and average
yield of securities available for sale and securities held to maturity.
A-14
Table 7: Securities Available For Sale
Amortized Fair
Cost Value Yield
---------- ---------- -----
(in thousands)
December 31, 1999
U.S. Treasury...................................... $1,387,543 $1,375,694 5.62%
U.S. Agencies...................................... 1,246,644 1,241,944 5.65
Mortgage-backed.................................... 252,622 248,723 6.19
State and political subdivisions................... 2,985 2,914 5.78
Commercial paper................................... 270,594 270,594 5.97
Federal Reserve Bank Stock......................... 6,744 6,744
Equity and other................................... 2,516 2,522
---------- ----------
Total............................................ $3,169,648 $3,149,135
========== ==========
December 31, 1998
U.S. Treasury...................................... $1,212,563 $1,228,927 5.75%
U.S. Agencies...................................... 1,123,961 1,126,703 5.26
Mortgage-backed.................................... 247,326 249,319 6.27
State and political subdivisions................... 2,541 2,547 5.59
Commercial paper................................... 439,380 439,380 5.31
Federal Reserve Bank Stock......................... 3,760 3,760
Equity and other................................... 2,163 2,253
---------- ----------
Total............................................ $3,031,694 $3,052,889
========== ==========
Table 8: Investment Securities
Yield/
Amortized Fair Average
Cost Value Maturity
--------- -------- -----------
(in thousands)
December 31, 1999
Due in 1 year or less........................... $ 90,659 $ 90,488 6.51%
Due after 1 year through 5 years................ 488,446 483,527 6.28
Due after 5 years through 10 years.............. 169,546 164,155 6.17
-------- --------
Total......................................... $748,651 $738,170 3 yr. 5 mo.
======== ========
December 31, 1998
Due in 1 year or less........................... $ 89,002 $ 89,326 6.27%
Due after 1 year through 5 years................ 378,041 384,348 6.35
Due after 5 years through 10 years.............. 235,117 237,361 6.18
-------- --------
Total......................................... $702,160 $711,035 3 yr. 9 mo.
======== ========
December 31, 1997
Due in 1 year or less........................... $ 71,725 $ 71,742 6.67%
Due after 1 year through 5 years................ 251,256 253,710 6.88
Due after 5 years through 10 years.............. 129,756 131,268 7.00
Due after 10 years.............................. 25 25 9.01
-------- --------
Total......................................... $452,762 $456,745 3 yr. 6 mo.
======== ========
Other Earning Assets
Federal funds transactions essentially are overnight loans between financial
institutions, which allow for either daily investment of excess funds or
borrowing another institution's funds in order to meet short-term
A-15
liquidity needs. The net purchased position at year-end 1999 was $211.9
million, compared to $77.7 million for year-end 1998. During 1999 and 1998,
the Company was a net purchaser of federal funds, and this funding source
averaged $89.4 million in 1999, compared to $30.6 million during 1998.
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 $908.8 million in 1999 and $1,137.1 million in 1998.
At December 31, 1999, the Company had acquired securities under agreements
to resell of $119.2 million compared to $52.8 million at year-end 1998. The
Company uses these instruments as short-term secured investments, in lieu of
selling federal funds, or to acquire securities required for a repurchase
agreement. These investments averaged $90.2 million in 1999.
The Investment Banking Division also maintains an active securities trading
inventory. The average holdings in the securities trading inventory in 1999
were $64.5 million, compared to $70.8 million in 1998, and were recorded at
market value.
Table 9: Maturities of Time Deposits of $100,000 or More
December 31
--------------------------
1999 1998 1997
-------- -------- --------
(in thousands)
Maturing within 3 months............................ $388,838 $431,658 $356,604
After 3 months but within 6......................... 57,096 89,435 47,822
After 6 months but within 12........................ 92,611 62,789 34,009
After 12 months..................................... 27,826 20,544 29,839
-------- -------- --------
Total............................................. $566,371 $604,426 $468,274
======== ======== ========
Deposits and Borrowed Funds
Deposits represent the Company's primary funding source for its asset base.
Deposits are gathered from various sources including commercial customers,
individual retail consumers and mutual fund and trust customers. Deposits
totaled $5.9 billion at December 31, 1999, compared to $5.9 billion and $5.5
billion at year-end 1998 and 1997, respectively. Deposits averaged $5.3
billion, $5.3 billion and $4.9 billion in 1999, 1998 and 1997, respectively.
Deposit growth in 1999 was impacted by the increased use of repurchase
agreements by commercial customers. The increase in average deposits for 1998
was primarily related to commercial and trust customers. The Company has
continued to expand, improve and promote its cash management services in order
to attract and retain commercial funding customers.
Noninterest-bearing demand deposits averaged $1.7 billion, $1.7 billion and
$1.6 billion during 1999, 1998 and 1997, respectively. These deposits
represented 32.7% of average deposits in 1999, compared to 32.0% in 1998 and
1997. The Company's large commercial customer base provides a significant
source of noninterest-bearing deposits. Many of these commercial accounts,
though they do not earn interest, receive an earnings credit to offset the
cost of other services provided by the Company.
Securities sold under agreements to repurchase totaled $1,192.0 million at
December 31, 1999, and $836.0 million at year-end 1998. This liability
averaged $1,165.6 million in 1999 and $778.9 million in 1998. Repurchase
agreements are transactions involving the exchange of investment funds, by the
customer, for securities, by the Company, under an agreement to repurchase the
same or similar issues at an agreed-upon price and date. The Company enters
into these transactions with its downstream correspondent banks, commercial
customers, and various trust, mutual fund and local government relationships.
A-16
The Company's long-term debt includes two senior note issues totaling $25
million and $0.2 million in installment notes. The senior notes represent
funds borrowed in 1993 under a medium-term program to fund bank acquisitions.
Of this total, $10.0 million had an original maturity of seven years at 6.81%,
and $15.0 million was issued with a ten-year maturity at 7.30%. Also included
in long-term debt is the Company's guarantee of a loan incurred in January
1996 by its Employee Stock Ownership Plan. Principal and interest, at 6.10%,
are due quarterly over seven years. The Plan is using Company contributions to
service this debt. The Company also has two fixed-rate advances from the
Federal Home Loan Bank at rates of 4.50% and 5.89%. These collateralized
advances are used to offset interest rate risk of longer term fixed rate
loans.
Table 10 Analysis of Average Deposits
Amount 1999 1998 1997 1996 1995
- ------ ---------- ---------- ---------- ---------- ----------
(in thousands)
Noninterest-bearing
demand................. $1,748,926 $1,702,282 $1,576,206 $1,386,173 $1,336,804
Interest-bearing demand
and savings............ 2,281,458 2,260,240 2,143,869 2,056,681 2,059,661
Time deposits under
$100,000............... 860,456 875,480 898,910 948,626 963,878
---------- ---------- ---------- ---------- ----------
Total core deposits... $4,890,840 $4,838,002 $4,618,985 $4,391,480 $4,360,343
Time deposits of
$100,000 or more....... 457,501 480,349 310,814 276,476 221,006
---------- ---------- ---------- ---------- ----------
Total deposits........ $5,348,341 $5,318,351 $4,929,799 $4,667,956 $4,581,349
========== ========== ========== ========== ==========
As a % of total deposits
- ------------------------
Noninterest-bearing
demand................. 32.7% 32.0% 32.0% 29.7% 29.2%
Interest-bearing demand
and savings............ 42.6 42.5 43.5 44.1 45.0
Time deposits under
$100,000............... 16.1 16.5 18.2 20.3 21.0
---------- ---------- ---------- ---------- ----------
Total core deposits... 91.4% 91.0% 93.7% 94.1% 95.2%
Time deposits of
$100,000 or more....... 8.6 9.0 6.3 5.9 4.8
---------- ---------- ---------- ---------- ----------
Total deposits........ 100.0% 100.0% 100.0% 100.0% 100.0%
========== ========== ========== ========== ==========
Table 11 Short-Term Debt
1999 1998 1997
--------------- ------------- -------------
Amount Rate Amount Rate Amount Rate
---------- ---- -------- ---- -------- ----
(in thousands)
At year-end
- -----------
Federal funds purchased........... $ 225,350 3.31% $ 86,250 4.85% $ 55 5.45%
Repurchase agreements............. 1,192,013 4.60 835,969 4.12 715,490 4.97
Other............................. -- 31 5.04 1,116 4.39
---------- -------- --------
Total........................... $1,417,363 4.40% $922,250 4.19% $716,661 4.97%
========== ======== ========
Average for the year
- --------------------
Federal funds purchased........... $ 119,570 5.16% $141,745 5.74% $182,138 5.62%
Repurchase agreements............. 1,165,630 4.40 778,892 4.80 617,989 4.90
Other............................. 3,836 4.57 694 3.55 567 5.91
---------- -------- --------
Total........................... $1,289,036 4.47% $921,331 4.94% $800,694 5.06%
========== ======== ========
Maximum month-end balance
- -------------------------
Federal funds purchased........... $ 353,836 $225,375 $246,524
Repurchase agreements............. 1,257,460 854,337 715,140
Other............................. 200,380 1,162 1,549
========== ======== ========
A-17
Capital
The Company places a significant emphasis on the maintenance of a strong
capital position, which helps safeguard our customers' funds, promotes
investor confidence, provides access to funding sources under favorable terms,
and enhances the Company's ability to capitalize on business growth and
acquisition opportunities. Capital is managed for each subsidiary based upon
its respective risks and growth opportunities as well as regulatory
requirements.
Total shareholders' equity was $655.0 million at December 31, 1999, compared
to $662.8 million one year earlier. The Company guarantees the debt of its
ESOP, the proceeds of which were used to acquire shares of the Company's
common stock. The shares acquired by the ESOP that have not been allocated to
plan participants are included as a reduction to shareholders' equity. During
each year, management had the opportunity to repurchase shares of the
Company's stock at prices which in management's opinion would enhance overall
shareholder value. During 1999 and 1998, the Company acquired 926,537 and
235,215 shares, respectively, of its common stock.
Risk-based capital guidelines established by regulatory agencies establish
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 at least 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
government securities, the Tier 1 capital ratio of 14.20% and total capital
ratio of 14.91% substantially exceed the regulatory minimums.
ASSET/LIABILITY MANAGEMENT
Interest Rate Sensitivity
Due to the nature of the Company's business, some degree of interest rate
risk is inherent and appropriate. Management's objective in this area is to
limit the level of earnings exposure arising from interest rate movements.
Analysis of this risk is related to liquidity due to the impact of maturing
assets and liabilities. Many of the Company's financial instruments reprice
prior to maturity.
Interest rate sensitivity is measured by gaps, which are the differences
between interest-earning assets and interest-bearing liabilities, which
reprice or mature within a specific time interval. A positive gap indicates
that interest-earning assets exceed interest-bearing liabilities within a
given interval. A positive gap position results in increased net interest
income when rates increase and the opposite when rates decline.
A-18
Table 12 Risk-Based Capital
The table below computes risk-based capital in accordance with current
regulatory guidelines. These guidelines as of December 31, 1999, excluded net
unrealized gains or losses on securities available for sale from the
computation of regulatory capital and the related risk-based capital ratios.
Risk-Weighted Category
-----------------------------------------------------
Risk-Weighted Assets 20% 50% 100% Total
- -------------------- 0% ---------- -------- ---------- ----------
(in thousands)
Loans:
Residential mortgage.. $ -- $ 194 $111,104 $ -- $ 111,298
All other............. -- 98,962 -- 2,630,890 2,729,852
---------- ---------- -------- ---------- ----------
Total loans.......... $ -- $ 99,156 $111,104 $2,630,890 $2,841,150
Securities available
for sale:
U.S. Treasury......... $1,387,543 $ -- $ -- $ -- $1,387,543
U.S. agencies and
mortgage-backed...... 356 1,498,910 -- -- 1,499,266
State and political
subdivisions......... -- 2,985 -- -- 2,985
Commercial paper and
other................ 6,744 -- -- 273,110 279,854
---------- ---------- -------- ---------- ----------
Total securities
available for sale.. $1,394,643 $1,501,895 $ -- $ 273,110 $3,169,648
Investment securities.. -- 697,212 51,439 -- 748,651
Trading securities..... 6,426 68,814 -- -- 75,240
Federal funds and
resell agreements..... -- 132,664 -- -- 132,664
Cash and due from
banks................. 217,731 550,211 -- -- 767,942
All other assets....... -- -- -- 397,266 397,266
---------- ---------- -------- ---------- ----------
Category totals...... $1,618,800 $3,049,952 $162,543 $3,301,266 $8,132,561
---------- ---------- -------- ---------- ----------
Risk-weighted totals... $ -- $ 609,990 $ 81,272 $3,301,266 $3,992,528
Off-balance-sheet items
(risk-weighted)....... -- 26,168 -- 329,882 356,050
---------- ---------- -------- ---------- ----------
Total risk-weighted
assets.............. $ -- $ 636,158 $ 81,272 $3,631,148 $4,348,578
========== ========== ======== ========== ==========
Capital Tier 1 Tier 2 Total
- ------- -------- ---------- ----------
Shareholders' equity......................... $667,827 $ -- $ 667,827
Less premium on purchased banks.............. (50,466) -- (50,466)
Allowance for loan losses.................... -- 31,193 31,193
-------- ---------- ----------
Total capital.............................. $617,361 $ 31,193 $ 648,554
======== ========== ==========
Capital ratios
- --------------
Tier 1 capital to risk-weighted assets....... 14.20%
Total capital to risk-weighted assets........ 14.91
Leverage ratio (Tier 1 to total assets less
premium on purchased banks)................. 7.64
==========
Management attempts to structure the balance sheet to provide for the
repricing of approximately equal amounts of assets and liabilities within
specific time intervals. Table 14 is a static gap analysis, which presents the
Company's assets and liabilities, based on their repricing or maturity
characteristics. This analysis shows that for the 180-day interval, beginning
January 1, 2000, the Company is in a negative gap position because liabilities
maturing or repricing during this time exceed assets.
In management's opinion, the static gap report tends to overstate the
interest rate risk of the Company due to certain factors, which are not
measured on a static or snapshot analysis. A static gap analysis assumes that
all liabilities reprice based on their contractual term. However, the effect
of rate increases on core deposits, approximately 91% of total deposits, tends
to lag behind the change in market rates. This lag generally lessens the
negative impact of rising interest rates when the Company has more liabilities
subject to repricing than assets.
A-19
In addition, a static analysis ignores the impact of changes in the mix and
volume of interest-bearing assets and liabilities. During 1999, the Company's
loans decreased as a percentage of total earning assets, and noninterest-
bearing demand deposit accounts represented a smaller component of total
funding sources. Due to the limitations of a static gap analysis, the Company
also monitors and manages interest rate risk through the use of simulation
models. These models allow for input of various factors and assumptions, which
influence interest rate risk. This method presents a more realistic view of
the impact on the Company's earnings resulting from movement in interest
rates.
Table 13 Market Risk
Net Portfolio Value
-----------------------------
Rates in Basis Points (Rate Shock) Amount Change % Change
---------------------------------- ---------- -------- --------
(in thousands)
200........................................ $1,475,701 $ (5,402) (0.36)%
100........................................ 1,486,274 5,170 0.35
Static..................................... 1,481,103 -- --
(100)...................................... 1,421,430 (59,673) (4.03)
(200)...................................... 1,356,907 (124,196) (8.39)
Simulation tools will be the primary tool that the Company will use to
manage its interest rate risk. The Company does not use off-balance-sheet
hedges or swaps to manage this risk except for use of futures contracts to
offset interest rate risk on specific securities held in the trading
portfolio.
Table 14 Interest Rate Sensitivity Analysis
1-90 91-180 181-365 Over 365
December 31, 1999 Days Days Days Total Days Total
- ----------------- -------- ------- ------- -------- -------- --------
(in millions)
Earning assets
Loans................... $1,419.5 $ 192.8 $ 182.2 $1,794.5 $1,046.7 $2,841.2
Securities*............. 1,254.9 194.8 406.3 1,856.0 2,041.8 3,897.8
Federal funds sold and
resell agreements...... 132.7 0.0 0.0 132.7 0.0 132.7
Other................... 77.0 0.0 0.0 77.0 0.0 77.0
-------- ------- ------- -------- -------- --------
Total earning assets.. $2,884.1 $ 387.6 $ 588.5 $3,860.2 $3,088.5 $6,948.7
-------- ------- ------- -------- -------- --------
% of total earning
assets............... 41.5% 5.6% 8.5% 55.6% 44.4% 100.0%
-------- ------- ------- -------- -------- --------
Funding sources
Interest-bearing demand
and savings............ $1,420.8 $ 0.0 $ 0.0 $1,420.8 $1,292.2 $2,713.0
Time deposits........... 676.2 230.8 237.6 1,144.6 285.2 1,429.8
Federal funds purchased
and repurchase
agreements............. 1,417.4 0.0 0.0 1,417.4 0.0 1,417.4
Borrowed funds.......... 10.8 0.7 1.4 12.9 25.0 37.9
Noninterest-bearing
sources................ 0.0 0.0 0.0 0.0 1,350.6 1,350.6
-------- ------- ------- -------- -------- --------
Total funding sources. $3,525.2 $ 231.5 $ 239.0 $3,995.7 $2,953.0 $6,948.7
-------- ------- ------- -------- -------- --------
% of total earning
assets............... 50.8% 3.3% 3.4% 57.5% 42.5% 100.0%
-------- ------- ------- -------- -------- --------
Interest sensitivity
gap.................... $ (641.1) $ 156.1 $ 349.5 $ (135.5) $ 135.5
Cumulative gap.......... (641.1) (485.0) (135.5) (135.5) --
As a % of total earning
assets................. 9.2% 7.0% 2.0% 2.0% --
Ratio of earning
assets to funding
sources.............. 0.82 1.67 2.46 0.97 1.05
Cumulative ratio--1999.. 0.82 0.87 0.97 0.97 1.00
--1998........... 0.99 1.01 1.12 1.12 1.00
--1997........... 0.86 0.92 1.05 1.05 1.00
- --------
*Includes securities available for sale based on scheduled maturity dates.
A-20
The Company's interest rate sensitivity is also monitored by management
through the use of a model which internally generates estimates of the change
in net portfolio value (NPV) over a range of instantaneous and sustained
interest rate scenarios. NPV is the present value of expected cash flows from
assets, liabilities, and off-balance sheet contracts. The assets and
liabilities of the Company are comprised primarily of financial instruments
which give rise to cash flows. By projecting the timing and amount of future
net cash flows, an estimated value of that asset or liability can be
determined. Market values of the Company's investment in loans and debt
securities fluctuate with movements in market interest rates. Prepayments of
principal are closely correlated with interest rates and affect future cash
flows. Certain deposits and other borrowings of the Company are also sensitive
to interest rate changes. Table 13 sets forth the Company's NPV as of December
31, 1999. Although the NPV measurements provide an indication of the Company's
interest rate risk exposure at a particular point-in-time, such measurements
are not intended to, and do not provide a precise forecast of the effect of
changes in market rates on the Company's net interest income and may differ
from actual results.
TABLE 15 Rate Sensitivity and Maturity of Loans
The following table presents the rate sensitivity of certain loans maturing
after 2000, compared with the total loan portfolio as of December 31, 1999. Of
the $1,599,379 of loans due after 2000, $1,036,465 are to individuals for the
purchase of residential dwellings and other consumer goods. The remaining
$562,914 is for all other purposes and reflects maturities of $464,428 in 2001
through 2004 and $98,486 after 2004.
December 31, 1999
-----------------
(in thousands)
Loans due 2000:
Residential homes and consumer goods..................... $ 79,913
All other................................................ 1,161,858
----------
Total................................................... $1,241,771
Loans due after 2000:
Variable interest rate................................... $ 364,725
Fixed interest rate...................................... 1,234,654
----------
Total................................................... $1,599,379
----------
Allowance for loan losses................................. (31,193)
----------
Net loans............................................... $2,809,957
==========
Liquidity
Liquidity represents the Company's ability to meet financial commitments
through the maturity and sale of existing assets or availability of additional
funds. The primary source of liquidity for the Company is regularly scheduled
payments on and maturities of assets along with $3.1 billion of high-quality
securities available for sale. The liquidity of the Company and its affiliate
banks is also enhanced by its activity in the federal funds market and by its
core deposits. Neither the Parent Company nor its subsidiaries are active in
the debt market. The traditional funding source for the Company's subsidiary
banks has been core deposits. The Parent Company has not issued any debt since
1993 when $25 million of medium-term notes were issued to fund bank
acquisitions. These notes are rated A3 by Moody's Investor Service and A- by
Standard & Poors. Based upon regular contact with brokerage firms, management
is confident in its ability to raise debt or equity capital on favorable
terms, should the need arise.
The Parent Company's cash requirements consist primarily of dividends to
shareholders, debt service and treasury stock purchases. Management fees and
dividends received from subsidiary banks traditionally have been sufficient to
satisfy these requirements and are expected to be in the future. The Company's
subsidiary banks are subject to various rules, depending on their location and
primary regulator, regarding the payment of dividends to the Parent Company.
For the most part, all banks can pay dividends at least equal to their current
year's
A-21
earnings without seeking prior regulatory approval. From time to time,
approvals have been requested to allow a subsidiary bank to pay a dividend in
excess of its current capacity. All such requests have been approved.
Year 2000
Prior to December 31, 1999, the management of the Company completed its
review of hardware and software systems to identify those systems that could
be affected by the Year 2000 issue. The Company also had a plan in place to
investigate and quantify the Year 2000 issues arising from relationships with
third parties such as customers, vendors, issuers of debt and equity
securities, and service providers. As of the date of this filing, the Company
has experienced no disruptions or other significant problems related to Year
2000 issues. Additionally, to date, there have been no Year 2000 related
failures in respect of supplies or services from vendors and service
providers.
However, if Year 2000 issues develop subsequent to the date of this filing
which impact the ability of vendors or service providers to adequately supply
the Company, there could be a material adverse impact on the Company's future
financial condition and future operating results.
eScout
During the first quarter of 2000, UMB Bank formed a subsidiary under the
name of eScout.com LLC (eScout), minority interests in which were acquired by
several outside investors. eScout's function is to serve as an electronic
commerce network for UMB's commercial customers, correspondent banks and their
commercial customers, and other small businesses. The results of eScout's
start up and initial operations are not anticipated to have a material impact
on the results or operations of the Company.
A-22
Table 16: Summary of Operating Results by Quarter (unaudited)
Three Months Ended
---------------------------------------
March 31 June 30 Sept. 30 Dec. 31
-------- -------- -------- --------
(in thousands except per share data)
1999
Interest income......................... $101,883 $ 99,005 $100,568 $105,727
Interest expense........................ 44,840 43,155 46,114 49,214
-------- -------- -------- --------
Net interest income................... $ 57,043 $ 55,850 $ 54,454 $ 56,513
Provision for loan losses............... 2,487 2,468 1,966 1,738
Noninterest income...................... 42,515 44,488 44,821 46,074
Noninterest expense..................... 74,099 75,457 76,759 79,732
Income tax provision.................... 6,555 6,132 5,065 5,223
-------- -------- -------- --------
Net income............................ $ 16,417 $ 16,281 $ 15,485 $ 15,894
======== ======== ======== ========
1998
Interest income......................... $104,454 $100,862 $103,609 $100,700
Interest expense........................ 47,641 45,690 48,603 45,158
-------- -------- -------- --------
Net interest income................... $ 56,813 $ 55,172 $ 55,006 $ 55,542
Provision for loan losses............... 2,858 2,914 2,538 2,508
Noninterest income...................... 36,823 38,661 38,498 42,553
Noninterest expense..................... 69,049 70,280 81,781 71,164
Income tax provision.................... 6,573 6,271 1,811 7,107
-------- -------- -------- --------
Net income............................ $ 15,156 $ 14,368 $ 7,374 $ 17,316
======== ======== ======== ========
Three Months Ended
---------------------------------------
March 31 June 30 Sept. 30 Dec. 31
-------- -------- -------- --------
Per Share 1999
Net income--basic....................... $ 0.74 $ 0.75 $ 0.72 $ 0.74
Net income--diluted..................... 0.74 0.75 0.72 0.74
Dividend................................ 0.18 0.18 0.18 0.18
Book value.............................. 29.84 29.82 30.20 30.38
Market price:
High.................................. 42.22 40.17 41.82 40.11
Low................................... 35.23 35.80 37.95 35.74
Close................................. 41.75 38.98 37.95 37.75
Per Share 1998
Net income--basic....................... $ 0.67 $ 0.65 $ 0.33 $ 0.77
Net income--diluted..................... 0.67 0.64 0.33 0.77
Dividend................................ 0.18 0.18 0.18 0.18
Book value.............................. 28.36 28.71 29.19 29.71
Market price:
High.................................. 56.03 58.64 46.82 44.09
Low................................... 49.09 45.00 37.05 39.55
Close................................. 55.45 45.00 43.13 41.71
A-23
UMB FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31
----------------------------------
1999 1998 1997
---------- ---------- ----------
ASSETS (in thousands)
Loans:
Commercial, financial and agricultural... $1,511,594 $1,291,858 $1,377,380
Consumer................................. 981,488 934,765 1,039,331
Real estate.............................. 342,423 327,796 365,329
Leases................................... 5,645 4,717 3,991
Allowance for loan losses................ (31,193) (33,169) (33,274)
---------- ---------- ----------
Net loans................................ $2,809,957 $2,525,967 $2,752,757
Securities available for sale:
U.S. Treasury and agencies............... $2,617,638 $2,355,630 $2,162,242
State and political subdivisions......... 2,914 2,547 7,904
Mortgage-backed.......................... 248,723 249,319 248,892
Commercial paper and other............... 279,860 445,393 12,703
---------- ---------- ----------
Total securities available for sale...... $3,149,135 $3,052,889 $2,431,741
Investment securities: State and political
subdivisions
(market value of $738,170, $711,035 and
$456,745, respectively).................. 748,651 702,160 452,762
Federal funds sold........................ 13,458 8,599 13,638
Securities purchased under agreements to
resell................................... 119,206 52,770 57,575
Trading securities and other.............. 77,074 36,000 60,548
---------- ---------- ----------
Total earning assets..................... $6,917,481 $6,378,385 $5,769,021
Cash and due from banks................... 766,108 850,532 921,300
Bank premises and equipment, net.......... 239,535 206,194 172,811
Accrued income............................ 75,540 70,045 72,627
Premiums on and intangibles of purchased
banks.................................... 50,710 53,379 60,464
Other assets.............................. 81,947 89,563 57,784
---------- ---------- ----------
Total assets............................. $8,131,321 $7,648,098 $7,054,007
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand............... $1,781,141 $2,045,074 $1,906,627
Interest-bearing demand and savings...... 2,712,997 2,378,814 2,290,923
Time deposits under $100,000............. 863,426 868,490 881,173
Time deposits of $100,000 or more........ 566,371 604,426 468,274
---------- ---------- ----------
Total deposits........................... $5,923,935 $5,896,804 $5,546,997
Federal funds purchased................... 225,350 86,250 55
Securities sold under agreements to
repurchase............................... 1,192,013 835,969 715,490
Short-term debt........................... -- 31 1,116
Long-term debt............................ 37,904 39,153 44,550
Accrued expenses and taxes................ 38,131 52,481 56,735
Other liabilities......................... 58,997 74,643 64,828
---------- ---------- ----------
Total liabilities........................ $7,476,330 $6,985,331 $6,429,771
---------- ---------- ----------
Common stock, $1.00 par, Authorized
33,000,000 shares;
26,472,039; 24,490,189; 24,490,189 shares
issued, respectively..................... $ 26,472 $ 24,490 $ 24,490
Capital surplus........................... 683,410 608,934 608,964
Retained earnings......................... 148,728 175,005 137,230
Accumulated other comprehensive income
(loss)................................... (12,836) 13,693 3,910
Unearned ESOP shares...................... (7,491) (9,992) (12,492)
Treasury stock 4,702,849; 3,957,218; and
3,737,430 shares, at cost, respectively.. (183,292) (149,363) (137,866)
---------- ---------- ----------
Total shareholders' equity............... $ 654,991 $ 662,767 $ 624,236
---------- ---------- ----------
Total liabilities and shareholders'
equity.................................. $8,131,321 $7,648,098 $7,054,007
========== ========== ==========
See Notes to Financial Statements, pages A-28-A-46.
A-24
UMB FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31
--------------------------------
1999 1998 1997
---------- ---------- ----------
(in thousands except share and
per share data)
Interest Income
Loans........................................ $ 212,054 $ 227,919 $ 236,031
Securities available for sale................ 154,512 140,688 127,074
Investment securities:
Taxable interest............................ $ 763 $ 943 $ 753
Tax-exempt interest......................... 30,451 23,764 16,155
---------- ---------- ----------
Total investment securities income.......... $ 31,214 $ 24,707 $ 16,908
---------- ---------- ----------
Federal funds and resell agreements.......... 5,824 12,312 8,426
Trading securities and other................. 3,579 3,999 4,890
---------- ---------- ----------
Total interest income....................... $ 407,183 $ 409,625 $ 393,329
---------- ---------- ----------
Interest Expense
Deposits..................................... $ 122,876 $ 138,367 $ 127,950
Federal funds and repurchase agreements...... 57,493 45,487 40,496
Short-term debt.............................. 175 25 33
Long-term debt............................... 2,779 3,213 3,315
---------- ---------- ----------
Total interest expense...................... $ 183,323 $ 187,092 $ 171,794
---------- ---------- ----------
Net interest income.......................... $ 223,860 $ 222,533 $ 221,535
Provision for loan losses.................... 8,659 10,818 11,875
---------- ---------- ----------
Net interest income after provision......... $ 215,201 $ 211,715 $ 209,660
---------- ---------- ----------
Noninterest Income
Trust fees................................... $ 54,045 $ 47,895 $ 45,279
Securities processing........................ 14,387 14,748 11,753
Trading and investment banking............... 20,734 18,025 13,743
Service charges on deposit accounts.......... 46,415 41,067 36,631
Other service charges and fees............... 27,705 23,982 21,009
Bankcard fees, net of expenses............... 6,268 3,477 1,532
Net security gains........................... 547 -- 2,275
Other........................................ 7,797 7,341 7,197
---------- ---------- ----------
Total noninterest income.................... $ 177,898 $ 156,535 $ 139,419
---------- ---------- ----------
Noninterest Expense
Salaries and employee benefits............... $ 166,582 $ 164,031 $ 141,641
Occupancy, net............................... 23,325 21,933 19,004
Equipment.................................... 37,916 30,615 27,718
Supplies and services........................ 21,677 20,383 20,367
Marketing and business development........... 16,785 17,449 17,727
Processing fees.............................. 10,520 8,888 8,602
Legal and consulting......................... 4,955 3,522 2,692
Amortization of intangibles of purchased
banks....................................... 7,101 7,086 7,142
Other........................................ 17,186 18,367 14,385
---------- ---------- ----------
Total noninterest expense................... $ 306,047 $ 292,274 $ 259,278
---------- ---------- ----------
Income before income taxes................... $ 87,052 $ 75,976 $ 89,801
Income tax provision......................... 22,975 21,762 28,097
---------- ---------- ----------
Net income.................................. $ 64,077 $ 54,214 $ 61,704
========== ========== ==========
Net income per share--basic.................. $ 2.94 $ 2.42 $ 2.75
Net income per share--diluted................ 2.94 2.41 2.74
Dividends per share.......................... 0.73 0.73 0.69
Average shares outstanding................... 21,793,064 22,322,620 22,422,135
========== ========== ==========
See Notes to Financial Statements, pages A-28-A-46.
A-25
UMB FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31
-------------------------------------
1999 1998 1997
----------- ----------- -----------
(in thousands)
Operating Activities
Net income............................. $ 64,077 $ 54,214 $ 61,704
Adjustments to reconcile net income to
net cash provided by operating
activities:
Provision for loan losses.............. 8,659 10,818 11,875
Depreciation and amortization.......... 28,441 24,247 24,479
Deferred income taxes.................. 5,614 1,022 669
Net (increase) decrease in trading
securities............................ (43,019) 24,548 20,835
Gains on sales of securities available
for sale.............................. (598) (12) (2,293)
Losses on sales of securities
available for sale.................... 51 12 18
Earned ESOP shares..................... 2,501 2,568 2,644
Amortization of securities premium,
net of discount accretion............. (26,987) (10,762) 14,707
Changes in:
Accrued income........................ (5,155) 2,582 90
Accrued expenses and taxes............ (14,146) (9,215) 7,330
Other, net............................. 478 51 (95)
----------- ----------- -----------
Net cash provided by operating
activities.......................... $ 19,916 $ 100,073 $ 141,963
----------- ----------- -----------
Investing Activities
Proceeds from sales of securities
available for sale.................... $ 95,435 $ 18,643 $ 89,318
Proceeds from maturities of:
Investment securities.................. 364,950 78,098 62,622
Securities available for sale.......... 9,358,069 9,152,912 1,882,873
Purchases of:
Investment securities.................. (144,632) (330,355) (198,077)
Securities available for sale.......... (9,822,172) (9,764,076) (2,018,141)
Net (increase) decrease in loans....... (258,723) 215,972 (240,405)
Net (increase) decrease in federal
funds sold and resell agreements...... (64,400) 9,844 (12,253)
Purchase of financial organization, net
of cash received...................... (498) -- --
Purchases of bank premises and
equipment............................. (52,207) (50,880) (37,399)
Proceeds from sales of bank premises
and equipment......................... 101 284 124
Other, net............................. (161) (23,248) 56,849
----------- ----------- -----------
Net cash used in investing
activities.......................... $ (524,238) $ (692,806) $ (414,489)
----------- ----------- -----------
Financing Activities
Net increase in demand and savings
deposits.............................. $ 46,764 $ 226,338 $ 301,126
Net increase (decrease) in time
deposits.............................. (65,642) 123,469 55,337
Net increase in federal funds purchased
and repurchase agreements............. 495,144 206,674 101,150
Net increase (decrease) in short-term
debt.................................. (31) (1,085) 205
Proceeds from issuance of long-term
debt.................................. 3,900 -- --
Repayments of long-term debt........... (5,649) (5,397) (6,800)
Cash dividends......................... (16,035) (16,439) (15,598)
Purchases of treasury stock............ (39,006) (11,930) (13,001)
Proceeds from issuance of treasury
stock................................. 453 335 345
----------- ----------- -----------
Net cash provided by financing
activities.......................... $ 419,898 $ 521,965 $ 422,764
----------- ----------- -----------
Increase (decrease) in cash and due from
banks.................................. $ (84,424) $ (70,768) $ 150,238
Cash and due from banks at beginning of
year................................... 850,532 921,300 771,062
----------- ----------- -----------
Cash and due from banks at end of year.. $ 766,108 $ 850,532 $ 921,300
=========== =========== ===========
Supplemental disclosures:
Income taxes paid...................... $ 30,298 $ 16,362 $ 29,412
Total interest paid.................... 228,323 197,777 160,317
=========== =========== ===========
- --------
Note: Certain noncash transactions regarding the adoption of SFAS No. 115, and
guaranteed ESOP debt transactions 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-28-A-46.
A-26
UMB FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Accumulated
Other
Common Capital Retained Comprehensive Treasury Unearned
Stock Surplus Earnings Income (Loss) Stock ESOP Total
------- -------- -------- ------------- --------- -------- --------
(in thousands)
Balance--January 1,
1997................... $23,503 $558,073 $142,947 $ (1,755) $(125,288) $(15,003) $582,477
Comprehensive Income:
Net income............. -- -- 61,704 -- -- -- 61,704
Other comprehensive
income net of tax
Unrealized gains on
securities of $7,075,
net of
reclassification
adjustment for gains
included in net income
of $1,410............. -- -- -- 5,665 -- -- 5,665
-----
Total comprehensive
income................ 67,369
Cash dividends ($0.69
per share)............. -- -- (15,598) -- -- -- (15,598)
Stock dividend (5%)..... 987 50,836 (51,823) -- -- -- --
Earned ESOP shares...... -- 133 -- -- -- 2,511 2,644
Purchase of treasury
stock.................. -- -- -- -- (13,001) -- (13,001)
Exercise of stock
options................ -- (78) -- -- 423 -- 345
------- -------- -------- -------- --------- -------- --------
Balance--December 31,
1997................... $24,490 $608,964 $137,230 $ 3,910 $(137,866) $(12,492) $624,236
Comprehensive Income:
Net income............. -- -- 54,214 -- -- -- 54,214
Other comprehensive
income, net of tax
Unrealized gains on
securities............ -- -- -- 9,783 -- -- 9,783
-----
Total comprehensive
income................ 63,997
Cash dividends ($0.73
per share)............. -- -- (16,439) -- -- -- (16,439)
Earned ESOP shares...... -- 68 -- -- -- 2,500 2,568
Purchase of treasury
stock.................. -- -- -- -- (11,930) -- (11,930)
Exercise of stock
options................ -- (98) -- -- 433 -- 335
------- -------- -------- -------- --------- -------- --------
Balance--December 31,
1998................... $24,490 $608,934 $175,005 $ 13,693 $(149,363) $ (9,992) $662,767
Comprehensive Income:
Net income............. -- -- 64,077 -- -- -- 64,077
Other comprehensive
income, net of tax
Unrealized loss on
securities of $26,868
net of
reclassification
adjustment for gains
included in net income
of $339............... -- -- -- (26,529) -- -- (26,529)
-------
Total comprehensive
income................ 37,548
Cash dividends ($0.73
per share)............. -- -- (16,035) -- -- -- (16,035)
Stock dividend (10%).... 1,982 72,337 (74,319) -- -- -- --
Earned ESOP shares...... -- -- -- -- -- 2,501 2,501
Acquisition--Charter
National Bank.......... -- 2,207 -- -- 4,556 -- 6,763
Purchase of treasury
stock.................. -- -- -- -- (39,006) -- (39,006)
Exercise of stock
options................ -- (68) -- -- 521 -- 453
------- -------- -------- -------- --------- -------- --------
Balance--December 31,
1999................... $26,472 $683,410 $148,728 $(12,836) $(183,292) $ (7,491) $654,991
======= ======== ======== ======== ========= ======== ========
See Notes to Financial Statements, pages A-28-A-46.
A-27
UMB FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
SUMMARY OF ACCOUNTING POLICIES
UMB Financial Corporation is a multi-bank holding company which offers a
wide range of banking services to its customers through its branches and
offices in the states of Missouri, Kansas, Colorado, Illinois, Oklahoma, Iowa
and Nebraska. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. These estimates and assumptions also impact reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. 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 consolidated 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 15-20 years. Core deposit intangible assets are being
amortized ratably over 10 years.
Loans -- Interest on 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.
A loan is considered to be impaired when management believes it is probable
that it will be unable to collect all principal and interest due according to
the contractual terms of the loan. If a loan is impaired, the Company records
a loss valuation allowance equal to the carrying amount of the loan in excess
of the present value of the estimated future cash flows discounted at the
loan's effective rate based on the loan's observable market price or the fair
value of the collateral if the loan is collateral dependent. Real estate and
consumer loans are collectively evaluated for impairment. Commercial loans are
evaluated for impairment on a loan-by-loan basis.
The adequacy of the allowance for loan losses 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
collectibility 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 -- Debt securities available for sale include
principally U.S. Treasury and agency securities and mortgage-backed
securities. Securities classified as available for sale are measured at fair
value. Unrealized holding gains and losses are excluded from earnings and
reported in other comprehensive income (loss) 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.
A-28
UMB FINANCIAL CORPORATION
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 most 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.
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.
Impairment of Long-Lived Assets -- Long-lived assets, including goodwill and
premises and equipment, are reviewed for impairment whenever events or changes
in circumstances indicate the carrying amount of an asset or group of assets
may not be recoverable. The impairment review includes a comparison of future
cash flows expected to be generated by the asset or group of assets with their
associated carrying value. If the carrying value of the asset or group of
assets exceeds expected cash flow, (undiscounted and without interest
charges), an impairment loss is recognized to the extent the carrying value
exceeds its fair value.
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.
Pursuant to SFAS 128 diluted earnings per share takes into account the
dilutive effect of 29,833; 61,441 and 42,460 shares issuable under stock
options granted by the Company at December 31, 1999, 1998 and 1997,
respectively.
Reclassifications -- Certain reclassifications were made to the 1998 and
1997 financial statements to conform to the current year presentation.
ACCOUNTING CHANGES
Accounting for Stock-Based Compensation -- Stock-based compensation is
recognized using the intrinsic value method for disclosure purposes. Pro forma
net income and earnings per share are disclosed as if the fair value method
had been applied.
Accounting for Reporting Comprehensive Income -- In June 1997, the Financial
Accounting Standards Board issued SFAS No. 130, "Reporting Comprehensive
Income." The Statement establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purpose financial statements. This Statement requires
that all items that are to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial statements. This
Statement requires that the Company (a) classify items of other comprehensive
income by their nature in a financial statement and (b) display the
accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement
of financial position. The Statement was effective for the Company's financial
statements as of December 31, 1998.
A-29
UMB FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- Continued
Accounting for Disclosures about Segments and Related Information -- In June
1997, FASB issued SFAS No. 131 "Disclosures about Segments of an Enterprise
and Related Information". The Statement establishes standards for the way that
public enterprises report information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. The Statement was effective for the Company's financial
statements as of December 31, 1998.
Accounting for Derivative instruments -- In June, 1998, the Financial
Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". In June, 1999, the Financial Accounting
Standards Board issued SFAS No. 137 which deferred the effective date of SFAS
No. 133. This standard requires entities to recognize all derivatives as
either assets or liabilities in its financial statements and to measure such
instruments at their fair value. The Statement is effective for the Company's
financial statements for the fiscal year beginning after January 1, 2001. The
Company is in the process of evaluating the potential impact of the new
Statement.
ALLOWANCES FOR LOAN LOSSES
The table below provides an analysis of the allowance for loan losses for
the three years ended December 31, 1999 (in thousands):
Year Ended December 31
----------------------------
1999 1998 1997
-------- -------- --------
Allowance--beginning of year..................... $ 33,169 $ 33,274 $ 33,414
Allowances of acquired banks..................... 710 -- --
Additions (deductions):
Charge-offs.................................... $(14,514) $(14,083) $(14,332)
Recoveries..................................... 3,169 3,160 2,317
-------- -------- --------
Net charge-offs.............................. $(11,345) $(10,923) $(12,015)
-------- -------- --------
Provision charged to expense..................... 8,659 10,818 11,875
-------- -------- --------
Allowance--end of year........................... $ 31,193 $ 33,169 $ 33,274
======== ======== ========
The amount of loans considered to be impaired under SFAS No. 114 was
$4,809,000 at December 31, 1999 and $10,221,000 at December 31, 1998. All of
the loans were on a nonaccrual basis or had been restructured. Included in the
impaired loans, at December 31, 1999 was $1,936,000 of loans for which the
related allowance was $433,000. The remaining $2,873,000 of impaired loans did
not have an allowance for loan losses as a result of write-downs and
supporting collateral value. At December 31, 1998 there was $8,022,000 of
impaired loans with a related allowance of $1,273,000, and $2,199,000 of
impaired loans which did not have an allowance. The average recorded
investment in impaired loans was approximately $7,789,000 during the year
ended December 31, 1999 and $7,901,000 during the year ended December 31,
1998. The Company had no material amount recorded as interest income on
impaired loans for either year.
A-30
UMB FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- Continued
SECURITIES AVAILABLE FOR SALE
The table below provides detailed information for securities available for
sale at December 31, 1999, 1998 and 1997 (in thousands):
December 31
-------------------------------------------
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
---------- ---------- ---------- ----------
1999
U.S. Treasury....................... $1,387,543 $ 491 $(12,340) $1,375,694
U.S. Agencies....................... 1,246,644 20 (4,720) 1,241,944
Mortgage-backed..................... 252,622 27 (3,926) 248,723
State and political subdivisions.... 2,985 6 (77) 2,914
Commercial paper.................... 270,594 -- -- 270,594
Federal Reserve Bank stock.......... 6,744 -- -- 6,744
Equity and other.................... 2,516 84 (78) 2,522
---------- ------- -------- ----------
Total.............................. $3,169,648 $ 628 $(21,141) $3,149,135
========== ======= ======== ==========
1998
U.S. Treasury....................... $1,212,563 $16,559 $ (195) $1,228,927
U.S. Agencies....................... 1,123,961 4,012 (1,270) 1,126,703
Mortgage-backed..................... 247,326 2,122 (129) 249,319
State and political subdivisions.... 2,541 19 (13) 2,547
Commercial paper.................... 439,380 -- -- 439,380
Federal Reserve Bank stock.......... 3,760 -- -- 3,760
Equity and other.................... 2,163 90 -- 2,253
---------- ------- -------- ----------
Total.............................. $3,031,694 $22,802 $ (1,607) $3,052,889
========== ======= ======== ==========
1997
U.S. Treasury....................... $1,475,537 $ 7,539 $ (1,452) $1,481,624
U.S. Agencies....................... 681,106 627 (1,115) 680,618
Mortgage-backed..................... 248,384 798 (290) 248,892
State and political subdivisions.... 7,929 4 (29) 7,904
Commercial paper.................... 6,954 -- -- 6,954
Federal Reserve Bank stock.......... 3,760 -- -- 3,760
Equity and other.................... 1,887 102 -- 1,989
---------- ------- -------- ----------
Total.............................. $2,425,557 $ 9,070 $ (2,886) $2,431,741
========== ======= ======== ==========
A-31
UMB FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- Continued
The following table presents contractual maturity information for securities
available for sale at December 31, 1999. 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.................................... $1,412,454 $1,410,068
Due after 1 year through 5 years......................... 1,222,452 1,208,308
Due after 5 years through 10 years....................... 1,939 1,843
Due after 10 years....................................... 327 333
---------- ----------
Total................................................... $2,637,172 $2,620,552
---------- ----------
Mortgage-backed securities............................... 252,622 248,723
Commercial paper......................................... 270,594 270,594
Equity securities and other.............................. 9,260 9,266
---------- ----------
Total securities available for sale...................... $3,169,648 $3,149,135
========== ==========
Securities available for sale with a market value of $2,793,713,000 at
December 31, 1999, $2,501,417,000 at December 31, 1998, and $2,278,156,000 at
December 31, 1997, were pledged to secure U.S. Government deposits, other
public deposits and certain trust deposits as required by law.
During 1999, proceeds from the sales of securities available for sale were
$95,435,000 compared to $18,643,000 for 1998. Securities transactions resulted
in gross realized gains of $598,000 for 1999 and $12,000 for 1998. The gross
realized losses were $51,000 for 1999 and $12,000 for 1998.
The net unrealized holding gains (losses) on trading securities at December
31, 1999 and 1998, were $(97,300) and $36,000, respectively, and were included
in trading and investment banking income.
INVESTMENT SECURITIES
The table below provides detailed information for investment securities at
December 31, 1999, 1998 and 1997 (in thousands):
December 31
----------------------------------------
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- --------
1999
State and political subdivisions....... $748,651 $ 816 $(11,297) $738,170
======== ======= ======== ========
1998
State and political subdivisions....... $702,160 $10,136 $ (1,261) $711,035
======== ======= ======== ========
1997
State and political subdivisions....... $452,762 $ 4,514 $ (531) $456,745
======== ======= ======== ========
The following table presents contractual maturity information for investment
securities at December 31, 1999. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
A-32
UMB FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- Continued
Amortized Fair
Cost Value
--------- --------
(in thousands)
Due in 1 year or less....................................... $ 90,660 $ 90,488
Due after 1 year through 5 years............................ 488,446 483,527
Due after 5 years through 10 years.......................... 169,545 164,155
-------- --------
Total investment securities............................... $748,651 $738,170
======== ========
There were no sales of investment securities during 1999, 1998 or 1997.
Investment securities with a market value of $689,027,000 at December 31,
1999, $147,988,000 at December 31, 1998 and $116,864,000 at December 31, 1997,
were pledged to secure U.S. Government deposits, other public deposits and
certain trust deposits as required by law.
LOANS TO OFFICERS AND DIRECTORS
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 unrelated parties. In
addition, all such loans are current as to repayment terms. For the years
1999, 1998 and 1997, an analysis of activity with respect to such aggregate
loans to related parties appears below (in thousands):
Year Ended December 31
-----------------------------------
1999 1998 1997
----------- --------- -----------
Balance--beginning of year................. $ 156,358 $ 180,318 $ 183,691
New loans................................. 1,202,308 923,855 1,895,657
Repayments................................ (1,224,636) (947,815) (1,899,030)
----------- --------- -----------
Balance--end of year....................... $ 134,030 $ 156,358 $ 180,318
=========== ========= ===========
BANK PREMISES AND EQUIPMENT
Bank premises and equipment are stated at cost less accumulated
depreciation, which is computed primarily on accelerated methods. Bank
premises are depreciated over 20 to 40 year lives, while equipment is
depreciated over lives of 3 to 20 years. Bank premises and equipment consisted
of the following (in thousands):
December 31
-------------------------------
1999 1998 1997
--------- --------- ---------
Land........................................... $ 42,515 $ 36,829 $ 36,426
Buildings and leasehold improvements........... 208,667 188,247 169,045
Equipment...................................... 212,192 190,625 167,010
--------- --------- ---------
$ 463,374 $ 415,701 $ 372,481
Accumulated depreciation....................... (223,839) (209,507) (199,670)
--------- --------- ---------
Bank premises and equipment, net............... $ 239,535 $ 206,194 $ 172,811
========= ========= =========
Consolidated rental and operating lease expenses were $4,294,000 in 1999,
$3,884,000 in 1998, and $2,305,000 in 1997. Minimum rental commitments as of
December 31, 1999, for all noncancelable operating leases are: 2000--
$3,445,000; 2001--$3,365,000; 2002--$3,250,000; 2003--$3,147,000; 2004--
$3,186,000; and thereafter--$31,594,000.
A-33
UMB FINANCIAL CORPORATION
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
-----------------------
1999 1998 1997
------- ------- -------
Short-term debt
U.S. Treasury demand notes and other................... $ -- $ 31 $ 1,116
Long-term debt
6.81% senior notes due 2000............................ $10,000 $10,000 $10,000
7.30% senior notes due 2003............................ 15,000 15,000 15,000
9.15% senior notes due 1999............................ -- 3,000 6,000
8.00% note maturing serially through 2000.............. 248 359 461
ESOP debt guarantee.................................... 8,354 10,794 13,089
Federal Home Loan Bank 5.89% due 2014.................. 3,802 -- --
Federal Home Loan Bank 4.50% due 2009.................. 500 -- --
------- ------- -------
Total long-term debt................................... $37,904 $39,153 $44,550
------- ------- -------
Total borrowed funds................................... $37,904 $39,184 $45,666
======= ======= =======
Long-term debt represents direct, unsecured obligations of the parent
company, secured obligations of affiliate banks and a guarantee by the Company
of debt of the Company's ESOP plan. The senior notes due in 2000 and 2003
cannot be redeemed prior to stated maturity. The senior notes due in 1999
required annual redemptions of $3,000,000 which began in 1995. The ESOP
installment note, secured by shares of the Company's stock, bears interest at
a rate of 6.10% and requires quarterly principal and interest payments of
$763,000 through December 31, 2002. The 5.89% Federal Home Loan Bank note
requires monthly principal and interest payments. The 4.50% Federal Home Loan
Bank note requires monthly interest payments.
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,
1999, was $1,192,013,000 (with accrued interest payable of $376,464). Of that
amount, $32,385,000 represented sales of securities in which the securities
were obtained under reverse repurchase agreements ("resell agreements"). The
remainder of $1,159,628,000 represented sales of U.S. Treasury and agency
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 (in
thousands):
Securities Weighted
--------------------- Average
Carrying Market Repurchase Interest
Maturity of the Repurchase Amount Value Liabilities Rate
Liabilities ---------- ---------- ----------- --------
On demand.......................... $1,144,224 $1,158,189 $1,149,430 3.89%
2 to 30 days....................... 3,038 3,082 3,087 4.53
31 to 90 days...................... 5,387 5,496 5,439 4.83
Over 90 days....................... 1,664 1,691 1,672 4.87
---------- ---------- ---------- ----
Total.............................. $1,154,313 $1,168,458 $1,159,628 3.90%
========== ========== ========== ====
A-34
UMB FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- Continued
REGULATORY REQUIREMENTS
Payment of dividends by the affiliate banks to the parent company is subject
to various regulatory restrictions. For national banks and the state bank in
Oklahoma, 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 bank in Missouri is
subject to state laws permitting dividends to be declared from retained
earnings, provided certain specified capital requirements are met. At December
31, 1999, approximately $15,170,000 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.
Certain affiliate banks maintain reserve balances with the Federal Reserve
Bank as required by law. During 1999, this amount averaged $130,611,000.
The Company is required to maintain minimum amounts of capital to total
"risk weighted" assets, as defined by the banking regulators. At December 31,
1999, 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 14.20% and 14.91%, respectively. The Company's leverage ratio at December
31, 1999, was 7.64%.
As of December 31, 1999, the most recent notification from the Office of
Comptroller of the Currency categorized the Company's most significant
affiliate banks as well-capitalized under the regulatory framework for prompt
corrective action. To be categorized as well-capitalized, the affiliate banks
must maintain total risk-based, Tier 1 risk-based and Tier 1 leverage ratios
of 10.0%, 6.0% and 5.0%, respectively. There are no conditions or events since
that notification that management believes have changed the affiliate banks'
category.
A-35
UMB FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- Continued
Actual capital amounts as well as required and well-capitalized Tier 1, Total
and Tier 1 Leverage ratios as of December 31 for the Company and its largest
banks are as follows:
1999
--------------------------------------------------
To Be Well
Capitalized
Under
Pompt
Corrective
For Capital Action
Actual Adequacy Purposes Provisions
-------------- ------------------- --------------
Amount Ratio Amount Ratio Amount Ratio
-------- ----- ---------- -------- -------- -----
(Dollars in Thousands)
Tier 1 Capital:
UMB Financial Corporation.. $617,361 14.20% $ 173,943 4.00% $260,915 6.00%
UMB Bank, n.a.*............ 460,236 12.75 144,429 4.00 216,643 6.00
UMB National Bank of
America................... 61,237 18.93 12,941 4.00 19,411 6.00
Total Capital:
UMB Financial Corporation.. 648,554 14.91 347,886 8.00 434,858 10.00
UMB Bank, n.a.*............ 483,007 13.38 288,858 8.00 361,072 10.00
UMB National Bank of
America................... 62,850 19.43 25,881 8.00 32,352 10.00
Tier 1 Leverage:
UMB Financial Corporation.. 617,361 7.64 323,234 4.00 404,043 5.00
UMB Bank, n.a.*............ 460,236 6.86 268,253 4.00 335,316 5.00
UMB National Bank of
America................... 61,237 7.50 32,641 4.00 40,802 5.00
1998
--------------------------------------------------
Tier 1 Capital:
UMB Financial Corporation.. $596,273 14.75% $ 161,719 4.00% $242,578 6.00%
UMB Bank, n.a.............. 330,794 13.17 100,492 4.00 150,739 6.00
UMB Bank of St. Louis,
n.a....................... 68,678 12.88 21,326 4.00 31,989 6.00
UMB National Bank of
America................... 54,401 16.68 13,048 4.00 19,572 6.00
Total Capital:
UMB Financial Corporation.. 629,442 15.57 323,438 8.00 404,297 10.00
UMB Bank, n.a.............. 348,537 13.87 200,985 8.00 251,231 10.00
UMB Bank of St. Louis,
n.a....................... 71,864 13.48 42,652 8.00 53,316 10.00
UMB National Bank of
America................... 56,457 17.31 26,096 8.00 32,620 10.00
Tier 1 Leverage:
UMB Financial Corporation.. 596,273 7.85 303,812 4.00 379,765 5.00
UMB Bank, n.a.............. 330,794 7.72 171,393 4.00 214,241 5.00
UMB Bank of St. Louis,
n.a....................... 68,678 5.94 46,211 4.00 57,764 5.00
UMB National Bank of
America................... 54,401 6.30 34,513 4.00 43,142 5.00
- --------
*During 1999, UMB Bank of St. Louis, n.a. merged into UMB Bank, n.a.
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 eligible officers and employees of the Company and its
subsidiaries. Contributions to these plans for the years 1999, 1998 and 1997
were $3,052,000, $3,052,000, and $4,200,000, respectively. In 1996, the
Employee Stock Ownership Plan (ESOP) borrowed $17 million to purchase Common
Stock of the Company. The loan obligation of the ESOP is considered unearned
employee benefit expense and, as such, is recorded as a reduction of the
Company's shareholders' equity. Both the loan obligation and the unearned
benefit expense are reduced by the amount of the loan principal repayments
made by the ESOP. The portion of the Company's ESOP contribution which funded
principal repayments and the payment of interest expense was recorded
accordingly in the consolidated financial statements.
A-36
UMB FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- Continued
The Company has a qualified 401(k) profit sharing plan that permits
participants to make contributions by salary reduction. The Company made a
matching contribution to this plan of $1,745,000 for 1999, $1,671,000 for 1998
and $447,000 for 1997.
Substantially all officers and employees were 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 was to contribute
annually the maximum amount that could be deducted for federal income tax
purposes. Contributions were 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.
During 1998 the Company received approval to terminate the pension plan.
Termination and liquidation of the defined benefit plan occurred during 1998
with a pretax charge of $7.4 million. This one-time charge was required to
fully fund the plan and distribute the assets to plan participants. The
Company elected to fund and liquidate the pension plan and replace it with a
benefit plan more closely tied to Company performance. The distribution of
plan assets will also give participants discretion over investment decisions.
All employees previously covered by the pension plan are now eligible to
receive a partial matching contribution to the Company's qualified 401(k)
plan, as amended.
The following items are components of the net periodic pension expense
(income) for the year ended December 31, 1997 (in thousands):
Year Ended December 31, 1997
----------------------------
Service costs--benefits earned during the year..... $ 1,036
Interest cost on projected benefit obligation...... 1,705
Actual return on plan assets....................... (1,373)
Net amortization and deferral...................... 1,724
-------
Net periodic pension expense..................... $ 3,092
=======
Assumptions used in accounting for the plan were as follows:
1997
----
Weighted average discount rate............................................ 7.00%
Rate of increase in future compensation levels............................ N/A
Expected long-term rate of return on assets............................... 8.00
During 1998, certain assumptions used to calculate the final plan
liquidation liability were changed after the company made the final
determination and received final regulatory approval to terminate the plan.
The following table sets forth the pension plan's funded status, using a
valuation date of September 30, 1997 (in thousands):
A-37
UMB FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- Continued
1997
--------
Actuarial present value of benefit obligation:
Vested benefits..................................................... $(23,309)
Nonvested benefits.................................................. (2,292)
--------
Accumulated benefit obligation...................................... $(25,601)
Additional benefits based on estimated future salary levels......... --
--------
Projected benefit obligation....................................... $(25,601)
Plan assets at fair value, primarily U.S. obligations................ 25,234
--------
Projected benefit obligation in excess of plan assets................ $ (367)
Unrecognized net loss from past experience different from that
assumed............................................................. 198
Prior service cost not yet recognized in net periodic pension cost... 169
Unrecognized net transition asset being recognized over 10.66 years.. --
--------
Prepaid pension cost included in other assets....................... $ --
========
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. Of the options granted prior to 1998, 40% are exercisable two years
from the date of the grant and are thereafter exercisable in 20% increments
annually, or for such periods or vesting increments 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. None of the options granted after 1998 are exercisable until
five years after the grant date. 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.
Activity in the 1992 Plan for the three years ended December 31, 1999, is
summarized in the following table:
Number of Option Price Weighted Average
Stock Options Under the 1992 Plan Shares Per Share Price Per Share
- --------------------------------- --------- ---------------- ----------------
Outstanding--January 1, 1997....... 109,458 $23.55 to $36.07 $29.09
Granted........................... 35,288 45.35 to 50.35 46.03
Canceled.......................... (1,365) 21.75 to 32.79 30.84
Exercised......................... (5,078) 23.59 to 32.65 27.27
------- ---------------- ------
Outstanding--December 31, 1997..... 138,303 $23.55 to $50.35 $33.47
Granted........................... 45,128 40.85 to 44.94 41.07
Canceled.......................... (6,103) 23.55 to 45.77 35.11
Exercised......................... (4,800) 23.55 to 32.60 27.74
------- ---------------- ------
Outstanding--December 31, 1998..... 172,528 $23.55 to $50.35 $35.55
Granted........................... 50,529 36.66 to 40.33 36.86
Canceled.......................... (3,685) 23.69 to 50.35 35.19
Exercised......................... (7,929) 23.65 to 31.92 26.35
------- ---------------- ------
Outstanding--December 31, 1999..... 211,443 $23.59 to $50.35 $36.19
------- ---------------- ------
Exercisable--December 31, 1999..... 82,042 $23.59 to $50.35 $31.52
======= ================ ======
A-38
UMB FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- Continued
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, 1999, is summarized in the following table:
Number of Option Price Weighted Average
Stock Options Under the 1981 Plan Shares Per Share Price Per Share
- --------------------------------- --------- ---------------- ----------------
Outstanding--January 1, 1997....... 59,776 $15.90 to $21.94 $17.66
Exercised......................... (12,280) 15.90 to 19.69 18.55
------- ---------------- ------
Outstanding--December 31, 1997..... 47,496 $15.93 to $21.94 $17.84
Canceled.......................... (493) 15.94 to 19.63 17.19
Exercised......................... (12,169) 15.93 to 19.70 16.55
------- ---------------- ------
Outstanding--December 31, 1998..... 34,834 $16.08 to $21.94 $18.30
Canceled.......................... (1,613) 16.11 to 19.70 17.90
Exercised......................... (12,314) 19.63 to 21.93 19.78
------- ---------------- ------
Outstanding--December 31, 1999..... 20,907 $16.08 to $21.94 $17.45
------- ---------------- ------
Exercisable--December 31, 1999..... 20,907 $16.08 to $21.94 $17.45
======= ================ ======
Options Outstanding Options Exercisable
------------------------------------- --------------------
Weighted Average Weighted Weighted
Number Remaining Average Number Average
Range of Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices at 12/31/99 Life Price at 12/31/99 Price
---------------- ----------- ---------------- -------- ----------- --------
$16.08 to $16.14 16,063 1 year $16.10 16,063 16.10
21.93 to 21.94 4,844 2 years 21.93 4,844 21.93
25.17 to 25.25 9,319 3 years 25.21 9,319 25.21
25.42 to 25.59 11,092 4 years 25.48 11,092 25.48
23.59 to 23.77 13,524 5 years 23.71 13,524 23.71
32.64 to 36.07 23,699 6 years 33.22 18,959 33.22
31.66 to 35.03 27,018 7 years 32.21 16,211 32.21
45.58 to 50.35 32,343 8 years 46.05 12,937 46.05
40.84 to 44.92 43,919 9 years 41.08 -- --
36.66 to 40.33 50,529 10 years 36.86 -- --
------- -------
232,350 102,949
======= =======
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations in accounting for
its plans. Accordingly, no compensation cost has been recognized for the stock
option plans. Had compensation costs for the Company's plans been determined
based upon the fair value at the grant date for awards under these plans
consistent with the methodology prescribed under Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation," the
Company's net income and earnings per share would have been respectively,
$63,826 and $2.93 for the year ended December 31, 1999, $54,030 and $2.41 for
the year ended December 31, 1998 and $61,573 and $2.74 for the year ended
December 31, 1997.
For options granted during the year ended December 31, 1999, the estimated
fair value of options granted using the Black-Scholes pricing model under the
Company's plans was based on a weighted average risk-free interest rate of
6.23%, expected option life of 8.75 years, expected volatility of 18.60% and
an expected dividend
A-39
UMB FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- Continued
yield of 2.25%. For options granted during the year ended December 31, 1998,
the estimated fair value of options granted under the Company's plans was
based on a weighted average risk-free interest rate of 4.79%, expected option
life of 8.75 years, expected volatility of 18.20% and an expected dividend
yield of 1.81%. For options granted during the year ended December 31, 1997,
the estimated fair value of options granted under the Company's plans was
based on a weighted average risk-free interest rate of 6.08%, expected option
life of 8.75 years, expected volatility of 16.00% and an expected dividend
yield of 1.42%.
SEGMENT REPORTING
Public enterprises are required to report certain information concerning its
operating segments in annual and interim financial statements. Beginning in
1998, the Company began preparing periodic reporting on its operating
segments. Operating segments are considered to be components of or enterprises
for which separate financial information is available and evaluated regularly
by key decision-makers for purposes of allocating resources and assessing
performance. The Company has defined its operations into the following
segments:
Commercial Banking. Providing a full range of lending and cash management
services to commercial and governmental entities through the commercial
division of the Company's lead bank.
Trust & Securities Processing. Providing estate planning, trust, employee
benefit, asset management and custodial services to individuals and corporate
customers.
Investment Banking and Brokerage. Providing commercial and retail brokerage,
investment accounting and safekeeping services to individuals and corporate
customers. This segment includes the Company's investment portfolio.
Community Banking. Providing a full range of banking services to retail and
corporate customers through the Company's affiliate bank and branch network.
Other. The Other category consists primarily of Overhead and Support
departments of the Company. The net revenues and expenses of these departments
are allocated to the other segments of the organization in the Company's
periodic segment reporting.
Reported segment revenues, net income and average assets include revenue and
expense distributions for services performed for other segments within the
Company as well as balances due from other segments within the Company. Such
intercompany transactions and balances are eliminated in the Company's
consolidated financial statements.
A-40
UMB FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- Continued
The table below lists selected financial information by business segment as
of and for the two years ended December 31, 1999 (in thousands):
1999 1998
---------- ----------
Revenues
Commercial............................................. $ 91,794 $ 92,324
Trust/Securities Processing............................ 67,940 60,558
Investment Banking/Brokerage........................... 33,717 28,723
Community Banking...................................... 225,781 216,993
Other.................................................. 14,782 15,355
Less: Intersegment revenues............................ (40,915) (45,703)
---------- ----------
Total................................................. $ 393,099 $ 368,250
========== ==========
Net Income
Commercial............................................. $ 29,075 $ 28,255
Trust/Securities Processing............................ 14,580 12,298
Investment Banking/Brokerage........................... 4,981 4,607
Community Banking...................................... 20,951 15,662
Other.................................................. -- --
Less: Intersegment net income.......................... (5,510) (6,608)
---------- ----------
Total................................................. $ 64,077 $ 54,214
========== ==========
Total Average Assets
Commercial............................................. $1,719,508 $1,798,334
Trust/Securities Processing............................ 19,503 14,626
Investment Banking/Brokerage........................... 2,017,986 1,720,832
Community Banking...................................... 3,822,964 3,813,421
Other.................................................. 401,824 245,002
Less: Intersegment balances............................ (542,374) (574,798)
---------- ----------
Total................................................. $7,439,411 $7,017,417
========== ==========
COMMON STOCK
The following table summarizes the share transactions for the three years
ended December 31, 1999:
Shares Shares in
Issued Treasury
---------- ----------
Balance--January 1, 1997................................. 23,503,084 (3,424,176)
Stock dividend (5%)..................................... 987,105 --
Purchase of treasury stock.............................. -- (328,335)
Issued in stock options................................. -- 15,081
---------- ----------
Balance--December 31, 1997............................... 24,490,189 (3,737,430)
Purchase of treasury stock.............................. -- (235,215)
Issued in stock options................................. -- 15,427
---------- ----------
Balance--December 31, 1998............................... 24,490,189 (3,957,218)
Stock dividend (10%).................................... 1,981,850 --
Purchase of treasury stock.............................. -- (926,537)
Issued in stock options................................. -- 18,553
Acquisition of Charter National Bank.................... -- 162,353
========== ==========
Balance--December 31, 1999............................... 26,472,039 (4,702,849)
========== ==========
A-41
UMB FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- Continued
COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company is a party to financial
instruments with off-balance-sheet risk in order to meet the financing needs
of its customers and to reduce its own exposure to fluctuations in interest
rates. These financial instruments include commitments to extend credit,
commercial letters of credit, standby letters of credit, 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 sheets. 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. The Company controls the credit risk of
its 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 rate. If the commitment has
a fixed interest rate, the rate is generally not set until such time as credit
is extended. For 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 a large portion 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.
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 and gains and losses on
futures contracts are settled in cash daily. Any changes in the market value
are recognized in trading and investment banking income.
The Company's use of futures contracts is very limited. The Company uses
contracts to offset interest rate risk on specific securities held in the
trading portfolio. Open futures contract positions averaged $46.2 million and
$41.4 million during the years ended December 31, 1999 and 1998, respectively.
Net futures activity resulted in gains of $1.7 million for 1999, losses of
$1.0 million for 1998 and losses of $1.2 million for 1997.
The Company also enters into foreign exchange contracts on a limited basis.
For operating purposes the Company maintains certain balances in foreign
banks. Foreign exchange contracts are purchased on a monthly
A-42
UMB FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- Continued
basis to avoid foreign exchange risk on these foreign balances. The Company
will also enter into foreign exchange contracts to facilitate foreign exchange
needs of customers. The Company will enter into a contract to buy or sell a
foreign currency at a future date only as part of a contract to sell or buy
the foreign currency at the same future date to a customer. During 1999
contracts to purchase and to sell foreign currency averaged approximately
$17.4 million, compared to $1.4 million during 1998. The gain or loss on these
foreign exchange contracts for 1999 and 1998 was not significant.
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, Oklahoma, Nebraska and Illinois. At December 31, 1999, the Company
did not have any significant credit concentrations in any particular industry.
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
--------------------------------
1999 1998 1997
---------- ---------- ----------
(in thousands)
Financial instruments whose contract amounts
represent credit risk:
Commitments to extend credit for loans
(excluding credit card loans).............. $1,259,489 $1,539,463 $1,226,141
Commitments to extend credit under credit
card loans................................. 782,112 698,514 786,456
Commercial letters of credit................ 24,947 22,024 18,593
Standby letters of credit................... 234,021 88,233 72,293
Financial instruments whose notional or
contract amounts exceed the amount of credit
risk:
Futures contracts........................... $ 56,400 $ 18,900 $ 46,900
ACQUSITIONS
On November 22, 1999 the Company acquired Charter National Bank, Oklahoma
City, Oklahoma for $10 million. The acquisition was funded with existing
working capital. The acquisition of this $51.2 million bank was recorded as a
purchase. The acquisition was not deemed to be material in relation to the
consolidated results of the Company. Income of the combined Company does not
include income of the acquired Company prior to the effective date of the
acquisition.
INCOME TAXES
Income taxes as set forth below produce effective federal income tax rates
of 25.47% in 1999, 27.26% in 1998, and 30.80% in 1997. 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
-----------------------
1999 1998 1997
------- ------- -------
Federal Currently payable.............................. $16,857 $19,401 $27,277
Deferred............................................... 5,035 918 184
------- ------- -------
Total federal tax provision.......................... $21,892 $20,319 $27,461
State Currently payable................................ $ 504 $ 1,340 $ 151
Deferred............................................... 579 103 485
------- ------- -------
Total state tax provision............................ $ 1,083 $ 1,443 $ 636
------- ------- -------
Total tax provision.................................. $22,975 $21,762 $28,097
======= ======= =======
A-43
UMB FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- Continued
The reconciliation between the income tax provision and the amount computed
by applying the statutory federal tax rate of 35% to income before income
taxes is as follows (in thousands):
Year Ended December 31
--------------------------
1999 1998 1997
-------- ------- -------
Provision at statutory rate........................ $ 30,468 $26,592 $31,430
Tax-exempt interest income......................... (11,378) (9,219) (6,487)
Disallowed interest expense........................ 1,354 1,148 807
State and local income taxes, net of federal tax
benefits.......................................... 703 938 414
Amortization of intangibles of purchased banks..... 1,909 1,901 1,926
Other.............................................. (81) 402 7
-------- ------- -------
Total tax provision.............................. $ 22,975 $21,762 $28,097
======== ======= =======
Deferred taxes are recorded based upon differences between the financial
statement and tax basis of assets and liabilities.
Temporary differences which comprise a significant portion of deferred tax
assets and liabilities at December 31, 1999, 1998 and 1997 were as follows (in
thousands):
1999 1998 1997
-------- -------- --------
Deferred tax assets
Net unrealized loss on securities available for
sale.......................................... $ 7,664 $ -- $ --
Allowance for loan losses...................... 11,573 12,346 12,422
Nondeductible accruals......................... -- 382 1,814
Miscellaneous.................................. -- 984 931
-------- -------- --------
Total deferred tax assets.................... $ 19,237 $ 13,712 $ 15,167
Deferred tax liabilities
Net unrealized gain on securities available for
sale.......................................... $ -- $ (7,499) $ (2,276)
Asset revaluations on purchased banks.......... (4,417) (4,556) (5,228)
Depreciation................................... (11,787) (8,340) (7,615)
Miscellaneous.................................. (748) -- (496)
-------- -------- --------
Total deferred tax liabilities............... $(16,952) $(20,395) $(15,615)
-------- -------- --------
Net deferred tax asset (liability)............. $ 2,285 $ (6,683) $ (448)
======== ======== ========
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
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
financial futures), 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
A-44
UMB FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- Continued
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, 1999, 1998 and 1997.
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.
Other 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, 1999, 1998, and 1997 are as follows (in millions):
1999 1998 1997
------------------ ------------------ ------------------
Carrying Fair Carrying Fair Carrying Fair
Amount Value Amount Value Amount Value
-------- -------- -------- -------- -------- --------
Financial assets:
Cash and short-term
investments........... $ 898.8 $ 898.8 $ 911.9 $ 911.9 $ 992.5 $ 992.5
Securities available
for sale.............. 3,149.1 3,149.1 3,052.9 3,052.9 2,431.7 2,431.7
Investment securities.. 748.7 738.2 702.1 711.0 452.8 456.7
Trading securities..... 77.0 77.0 36.0 36.0 60.5 60.5
Loans.................. $2,841.2 $2,753.0 $2,559.2 $2,557.9 $2,786.1 $2,771.1
Less: allowance for
loan losses........... (31.2) -- (33.2) -- (33.3) --
-------- -------- -------- -------- -------- --------
Net loans............. $2,810.0 $2,753.0 $2,526.0 $2,557.9 $2,752.8 $2,771.1
-------- -------- -------- -------- -------- --------
Total financial
assets............... $7,683.6 $7,616.1 $7,228.9 $7,269.7 $6,690.3 $6,712.5
======== ======== ======== ======== ======== ========
Financial liabilities:
Demand and savings
deposits.............. $4,494.1 $4,494.1 $4,423.9 $4,423.9 $4,197.6 $4,197.6
Time deposits.......... 1,429.8 1,428.4 1,472.9 1,479.6 1,349.5 1,340.9
Federal funds and
repurchase............ 1,417.4 1,417.4 922.2 922.2 715.5 715.5
Short-term debt........ -- -- -- -- 1.0 1.0
Long-term debt......... 37.9 34.0 39.2 38.4 44.6 42.4
-------- -------- -------- -------- -------- --------
Total financial
liabilities.......... $7,379.2 $7,373.9 $6,858.2 $6,864.1 $6,308.2 $6,297.4
======== ======== ======== ======== ======== ========
The fair value estimates presented herein are based on pertinent information
available to management as of December 31, 1999, 1998 and 1997. 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-45
UMB FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- Continued
PARENT COMPANY FINANCIAL INFORMATION
December 31
------------------------------
1999 1998 1997
--------- --------- --------
(in thousands)
Balance Sheet
Assets:
Investment in subsidiaries:
Banks......................................... $ 630,357 $ 641,952 $633,224
Non-banks..................................... 7,525 7,481 7,387
--------- --------- --------
Total investment in subsidiaries............ $ 637,882 $ 649,433 $640,611
Premiums on purchased banks................... 7,887 9,299 9,991
Securities available for sale and other....... 50,405 51,205 23,499
--------- --------- --------
Total assets................................ $ 696,174 $ 709,937 $674,101
========= ========= ========
Liabilities and Shareholders' Equity:
Dividends payable............................. $ 4,000 $ 4,106 $ 4,012
Long-term debt................................ 33,602 39,153 44,550
Accrued expenses and other.................... 3,581 3,911 1,303
--------- --------- --------
Total....................................... $ 41,183 $ 47,170 $ 49,865
Shareholders' equity.......................... 654,991 662,767 624,236
--------- --------- --------
Total liabilities and shareholders' equity.. $ 696,174 $ 709,937 $674,101
========= ========= ========
Statement of Income
Income:
Dividends and income received from affiliate
banks........................................ $ 24,762 $ 51,132 $ 32,593
Service fees from subsidiaries................ 13,378 12,041 10,310
Net security gains............................ 14 10 2,246
Other......................................... 1,167 859 706
--------- --------- --------
Total income................................ $ 39,321 $ 64,042 $ 45,855
--------- --------- --------
Expense:
Salaries and employee benefits................ $ 4,632 $ 5,017 $ 4,375
Interest on long-term debt.................... 2,599 3,213 3,277
Services from affiliate banks................. 652 652 671
Other......................................... 14,476 14,537 13,250
--------- --------- --------
Total expense............................... $ 22,359 $ 23,419 $ 21,573
--------- --------- --------
Income before income taxes and equity in un-
distributed earnings of subsidiaries......... $ 16,962 $ 40,623 $ 24,282
Income tax benefit............................ (2,132) (2,893) (2,164)
--------- --------- --------
Income before equity in undistributed earnings
of subsidiaries.............................. $ 19,094 $ 43,516 $ 26,446
Equity in undistributed earnings of subsidiar-
ies:
Banks......................................... 44,926 10,607 35,409
Non-banks..................................... 57 91 (151)
--------- --------- --------
Net income.................................. $ 64,077 $ 54,214 $ 61,704
========= ========= ========
Statement of Cash Flows
Operating Activities:
Net income.................................... $ 64,077 $ 54,214 $ 61,704
Equity in earnings of subsidiaries............ (69,133) (61,073) (66,958)
Gains from sales of securities available for
sale......................................... (14) (10) (2,246)
Earned ESOP shares............................ 2,501 2,568 2,644
Other......................................... (918) (535) 5,206
--------- --------- --------
Net cash provided by (used in) operating ac-
tivities................................... $ (3,487) $ (4,836) $ 350
--------- --------- --------
Investing Activities:
Proceeds from sales of securities available
for sale..................................... $ 35 $ 25 $ 3,022
Proceeds from maturities of securities held to
maturity..................................... 252,575 99,145 22,049
Purchases of securities available for sale.... (251,235) (109,926) (7,071)
Net (increase) decrease in repurchase agree-
ments........................................ 2,439 6,858 (8,120)
Net capital investment in affiliate banks..... 36,764 -- (3,981)
Dividends received from subsidiaries.......... 24,150 61,360 31,700
Net capital expenditures for premises and
equipment.................................... (43) (166) (320)
--------- --------- --------
Net cash provided by investing activities... $ 64,685 $ 57,296 $ 37,279
--------- --------- --------
Financing Activities:
Repayments of long-term debt.................. $ (5,551) $ (5,397) $ (6,704)
Cash dividends paid........................... (16,035) (16,439) (15,598)
Net purchase of treasury stock................ (38,553) (11,595) (12,656)
--------- --------- --------
Net cash used in financing activities....... $ (60,139) $ (33,431) $(34,958)
--------- --------- --------
Net increase in cash........................... $ 1,059 $ 19,029 $ 2,671
========= ========= ========
A-46
INDEPENDENT AUDITORS' REPORT
To the Shareholders and the Board of Directors of UMB Financial Corporation:
We have audited the accompanying consolidated balance sheets of UMB
Financial Corporation and subsidiaries as of December 31, 1999, 1998 and 1997,
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 UMB Financial Corporation and
subsidiaries as of December 31, 1999, 1998 and 1997, and the results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Kansas City, Missouri
January 20, 2000
A-47
UMB FINANCIAL CORPORATION
FIVE-YEAR AVERAGE BALANCE SHEETS/YIELDS AND RATES
1999 1998
---------------------------- ----------------------------
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)..... $2,616.0 $212.8 8.14% $2,640.9 $228.8 8.66%
Securities:
Taxable................ $2,820.0 $154.3 5.47 $2,448.3 $140.7 5.75
Tax-exempt (FTE)....... 733.8 45.9 6.25 557.0 35.8 6.43
-------- ------ ---- -------- ------ ----
Total securities...... $3,553.8 $200.2 5.63 $3,005.3 $176.5 5.87
Federal funds sold and
resell agreements...... 120.4 5.8 4.84 224.1 12.3 5.49
Other earning assets
(FTE).................. 66.3 3.9 5.68 72.3 4.3 5.87
-------- ------ ---- -------- ------ ----
Total earning assets
(FTE)................ $6,356.5 $422.7 6.65 $5,942.6 $421.9 7.10
Allowance for loan
losses................. (32.9) (33.2)
Cash and due from banks. 691.6 723.7
Other assets............ 424.2 384.3
-------- --------
Total assets.......... $7,439.4 $7,017.4
======== ========
Liabilities and
Shareholders' Equity
Interest-bearing demand
and savings deposits... $2,281.5 $ 61.0 2.67% $2,260.3 $ 69.5 3.07%
Time deposits under
$100,000............... 860.5 40.4 4.69 875.5 44.7 5.11
Time deposits of
$100,000 or more....... 457.5 21.5 4.70 480.3 24.2 5.04
-------- ------ ---- -------- ------ ----
Total interest-bearing
deposits............. $3,599.5 $122.9 3.41 $3,616.1 $138.4 3.83
Short-term borrowings... 3.8 0.1 4.57 0.7 -- 3.55
Long-term debt.......... 40.2 2.8 6.91 42.6 3.2 7.54
Federal funds purchased
and repurchase
agreements............. 1,285.2 57.5 4.47 920.6 45.5 4.94
-------- ------ ---- -------- ------ ----
Total interest-bearing
liabilities.......... $4,928.7 $183.3 3.72 $4,580.0 $187.1 4.08
Noninterest-bearing
demand deposits........ 1,748.9 1,702.3
Other................... 104.5 85.0
-------- --------
Total................. $6,782.1 $6,367.3
-------- --------
Total shareholders'
equity................. $ 657.3 $ 650.1
-------- --------
Total liabilities and
shareholders' equity. $7,439.4 $7,017.4
======== ========
Net interest income
(FTE).................. $239.4 $234.8
Net interest spread..... 2.93% 3.02%
Net interest margin..... 3.77 3.95
- --------
(1) Interest income and yields are stated on a fully tax-equivalent (FTE)
basis, using a rate of 35%. 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
1997 1996 1995 Average
---------------------------------------------------------- ---------------------------- Balance
Five-
Year
Interest Rate Interest Rate Interest Rate Compound
Average Income/ Earned/ Average Income/ Earned/ Average Income/ Earned/ Growth
Balance Expense(1) Paid(1) Balance Expense(1) Paid(1) Balance Expense(1) Paid(1) Rate
-------- ---------- ------- -------- ---------- ------- -------- ---------- ------- --------
$2,649.0 $237.0 8.95% $2,437.8 $221.5 9.09% $2,346.3 $218.9 9.33% 4.02%
$2,166.6 $127.1 5.87 $2,169.8 $122.9 5.66 $2,076.1 $110.6 5.32 1.99
372.1 24.6 6.61 317.8 21.2 6.68 306.1 20.9 6.83 20.48
-------- ------ ---- -------- ------ ---- -------- ------ ---- ------
$2,538.7 $151.7 5.97 $2,487.6 $144.1 5.79 $2,382.2 $131.5 5.52 4.55
138.8 8.4 6.07 185.6 10.0 5.39 187.9 11.0 5.86 (18.65)
83.7 5.1 6.13 69.3 4.3 6.12 60.2 3.7 6.19 3.25
-------- ------ ---- -------- ------ ---- -------- ------ ---- ------
$5,410.2 $402.2 7.43 $5,180.3 $379.9 7.33 $4,976.6 $365.1 7.34 3.36
(32.9) (34.0) (32.1) (0.77)
724.8 646.5 616.9 0.48
380.5 344.4 337.8 4.27
-------- -------- -------- ------
$6,482.6 $6,137.2 $5,899.2 3.14%
======== ======== ======== ======
$2,143.9 $ 65.8 3.07% $2,056.7 $ 59.8 2.91% $2,059.7 $ 61.3 2.98% (0.72)%
898.9 46.7 5.20 948.6 49.3 5.21 963.8 49.0 5.08 (3.03)
310.8 15.4 4.95 276.5 14.0 5.05 221.0 11.3 5.12 17.17
-------- ------ ---- -------- ------ ---- -------- ------ ---- ------
$3,353.6 $127.9 3.82 $3,281.8 $123.1 3.75 $3,244.5 $121.6 3.75 0.13
0.6 -- 5.91 1.0 -- 4.10 1.1 -- 4.31 30.60
48.9 3.4 6.78 55.4 4.0 7.27 44.5 3.5 7.79 (4.42)
800.1 40.5 5.06 771.5 37.5 4.84 613.9 32.7 5.32 14.10
-------- ------ ---- -------- ------ ---- -------- ------ ---- ------
$4,203.2 $171.8 4.09 $4,109.7 $164.6 4.00 $3,904.0 $157.8 4.04 2.81
1,576.2 1,386.2 1,336.8 3.89
104.6 67.0 61.0 10.69
-------- -------- -------- ------
$5,884.0 $5,562.9 $5,301.8 3.18
-------- -------- -------- ------
$ 598.6 $ 574.3 $ 597.4 2.80
-------- -------- -------- ------
$6,482.6 $6,137.2 $5,899.2 3.14%
======== ======== ======== ======
$230.4 $215.3 $207.3
3.34% 3.33% 3.30%
4.26 4.16 4.17
A-49
UMB FINANCIAL CORPORATION
SELECTED FINANCIAL DATA OF AFFILIATE BANKS
December 31, 1999
--------------------------------------------------------
Loans
Number of Total Net of Total Shareholders'
Locations Assets Unearned Deposits Equity
--------- ---------- ---------- ---------- -------------
(in thousands)
Missouri
UMB Bank, n.a........... 122 $6,721,923 $2,283,397 $4,830,053 $474,311
UMB Bank, Warsaw........ 4 70,196 20,999 57,296 4,777
Colorado
UMB Bank Colorado....... 11 $ 374,134 $ 201,052 $ 277,284 $ 27,057
Kansas
UMB National Bank of
America................ 13 $ 825,046 $ 141,528 $ 641,142 $ 68,858
Nebraska
UMB Bank Omaha, n.a..... 4 $ 54,194 $ 50,261 $ 30,629 $ 5,254
Oklahoma
UMB Oklahoma Bank....... 6 $ 146,235 $ 85,403 $ 106,223 $ 16,245
Charter National Bank... 1 59,930 34,650 48,016 9,985
Banking-Related
Subsidiaries
UMB Properties, Inc.....
UMB Community
Development
Corporation............
UMB Banc Leasing
Corporation............
UMB, U.S.A. n.a.........
UMB Scout Brokerage
Services, Inc..........
UMB Scout Insurance
Company................
UMB Capital Corporation.
United Missouri
Insurance Company......
UMB Trust Company of
South Dakota...........
UMB Consulting Services,
Inc....................
UMB Data Corporation....
A-50