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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark one)

For the fiscal year ended: December 31, 2003

For the transition period from              to             

Commission file number: 0-4887

UMB FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

(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 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 ¨

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 is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes x  No ¨

As of June 30, 2003, the aggregate market value of common stock outstanding held by nonaffiliates of the registrant was approximately $811,912,690 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.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company’s Proxy Statement relating to the 2004 Annual Meeting of

Shareholders are incorporated in Part III

INDEX

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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. In 2001, the Company elected to become a financial holding company under the Gramm-Leach-Bliley Act of 1999. The Company owns all of the outstanding stock of five commercial banks, a credit card bank, a reinsurance company, a community development corporation, a consulting company and a mutual fund servicing company.

The Company’s five commercial banks are engaged in general commercial banking business entirely in domestic markets. Two of the banks are in Missouri, and the three remaining banks are in Kansas, Colorado and Nebraska. The principal affiliate UMB Bank, n.a., whose charter is in Missouri, also has locations in Illinois, Kansas and Oklahoma. The Banks 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. The table below sets forth the names and locations of the Company’s affiliate banks, as well as their respective total assets, loans, deposits and shareholders’ equity as of December 31, 2003.

SELECTED FINANCIAL DATA OF AFFILIATE BANKS (in thousands)

UMB, U.S.A. n.a. is a credit card bank located in Nebraska. UMB, U.S.A. n.a. services incoming credit card requests, performs data entry services on new card requests and evaluates new and existing credit lines.

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Other subsidiaries of the Company are United Missouri Insurance Company, UMB Community Development Corporation, UMB Consulting Services, Inc., and UMB Fund Services, Inc. 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 rehabbing owner-occupied housing in Missouri, Kansas, Illinois, Nebraska, Oklahoma and Colorado. UMB Consulting Services, Inc. offers regulatory and compliance assistance to regional banks. UMB Fund Services, Inc. (formerly known as Sunstone Financial Group Inc.), located in Milwaukee, Wisconsin, is a nationally recognized mutual fund service provider to nearly 40 mutual funds and fund families.

On a full-time equivalent basis at December 31, 2003, the Company and its subsidiaries employed 3,807 persons.

Competition.    The Company faces intense competition from hundreds of financial service providers in the markets served. The Company competes with other financial service providers including banks, savings and loan associations, finance companies, mutual funds, mortgage banking companies and credit unions. Customers for banking services and other financial services offered by the Company are generally influenced by convenience, quality of service, personal contacts, price of services and availability of products.

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.

Supervision and Regulation.    As a bank holding company and a financial holding company, the Company and its subsidiaries are subject to extensive regulation and are affected by the enactment of federal and state legislation.

The Company is subject to regulation and examination by the Federal Reserve Board and the Federal Reserve Bank of Kansas City. Its subsidiary banks are subject to regulation and examination by the Office of the Comptroller of the Currency (“OCC”). UMB Scout Insurance Services, Inc. is regulated by state agencies in the states in which it operates. The Company’s brokerage affiliate, UMB Scout Brokerage Services, Inc., is regulated by the Securities and Exchange Commission (“SEC”), the National Association of Securities Dealers, Inc., and the Missouri Division of Securities; it is also subject to certain regulations of the various states in which it transacts business. The Company is subject to the Bank Holding Company Act (“BHCA”), which requires the Company to obtain the prior approval of the Federal Reserve Board to (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. The BHCA also imposes significant limitations on the scope and type of activities in which the Company and its subsidiaries may engage. 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 (the “Interstate Banking Act”), 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

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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.

Under the provisions of the Gramm-Leach-Bliley Act of 1999 (GLBA) the Company is eligible to engage in non-banking activities which are financial in nature (or incidental to such financial activity, or in cases where the Federal Reserve Board approves, complimentary to a financial activity) by notifying, or in certain cases obtaining the prior approval of, the Federal Reserve Board. Under the GLBA, subsidiaries of financial holding companies engaged in non-bank activities are supervised and regulated by the federal and state agencies, which normally supervise and regulate such functions outside of the financial holding company context. The Company is also subject to a number of restrictions and requirements imposed by the Sarbanes-Oxley Act of 2002 relating to loans to directors or executive officers of the Corporation, the preparation and certification of the Company’s financial statements, the duties of the Company’s audit committee, relations with and functions performed by the Company’s independent auditors, and various accounting and corporate governance matters.

The Company’s bank subsidiaries are subject to a number of laws regulating depository institutions, including the Federal Deposit Insurance Corporation Improvement Act of 1991, which expanded the regulatory and enforcement powers of the federal bank regulatory agencies, required that these agencies prescribe standards relating to internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits, and mandated annual examinations of banks by their primary regulators. The Company’s bank subsidiaries are also subject to a number of consumer protection laws and regulations of general applicability, as well as the USA Patriot Act, which is designed to identify, prevent and deter international money laundering and terrorist financing.

All five of the commercial banks owned by the Company are national banks and are subject to supervision and examination by the OCC. 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 OCC. In addition, the national banks are subject to examination by The Federal Reserve System. All affiliate banks are members of and subject to examination by the Federal Deposit Insurance Corporation.

Payment of dividends by the affiliate banks to the parent company is subject to various regulatory restrictions. For national banks, 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. At December 31, 2003, approximately $19,155,000 of the equity of the affiliate banks was available for distribution as dividends to the parent company without prior regulatory approval or without reducing the capital of the respective affiliate banks below prudent levels.

The Company is required to maintain minimum amounts of capital to total “risk weighted” assets, as defined by the banking regulators. At December 31, 2003, 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 19.13% and 20.25%, respectively. The company’s leverage ratio at December 31, 2003, was 10.69%.

As of December 31, 2003, the most recent notification from the OCC categorized the Company’s most significant affiliate banks as well capitalized under the regulatory framework for prompt corrective action. To be

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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. No conditions or events have occurred since that notification that management believes have changed the affiliate banks’ category.

Segment Information.    Financial information regarding segments is included in Note 12 to the Financial Statements provided in Item 8, pages 53 through 55 of this report.

Statistical Disclosure.    The information required by Guide 3, “Statistical Disclosure by Bank Holding Companies,” has been included in Items 6, 7, and 7A, pages 9 through 33 of this report.

Executive Officer of the Registrants.    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.

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A discussion of recent acquisitions is included in Note 15 to the Financial Statements provided in Item 8 on page 57 of this report.

Our SEC filings are available on our website at www.umb.com/investor.

ITEM 2.  PROPERTIES

The Company’s headquarters building, the UMB Bank Building, is located at 1010 Grand Boulevard 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 accounting firm is a lessee of a portion of the space. The Company is currently looking for a lessee to fill the remaining space.

UMB Fund Services, Inc., a subsidiary of the Company leases 83,315 square feet in Milwaukee, Wisconsin, at which its fund services operations are headquartered.

The banking facility of UMB Bank, n.a. at 928 Grand Boulevard principally houses that bank’s support functions and is connected to the headquarters building by an enclosed pedestrian walkway. UMB Bank, n.a. also

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leases 40,000 square feet of space in the Equitable Building, in the heart of the downtown commercial sector of St. Louis. A full service banking center, operations and administrative offices are housed at this location.

At December 31, 2003, the Company’s affiliate banks operated a total of five main banking houses and 148 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. The Company moved its operational and item processing functions, as well as management information systems, to this building in the second quarter of 1999.

Additional information with respect to premises and equipment is presented in Note 1 and 8 to the Financial Statements in Item 8, pages 39, 47 and 48 of this report.

ITEM 3.  LEGAL PROCEEDINGS

None.

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, 2003.

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 February 17, 2004, the Company had 2,027 shareholders. Company stock information for each full quarter period within the two most recent fiscal years is set forth in the table below.

Information concerning restrictions on the ability of the Registrant to pay dividends and the Registrant’s subsidiaries to transfer funds to the Registrant is contained in Item 1, page 5 and Note 10 to the Financial

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Statements provided in Item 8, pages 49 and 50 of this report. Information concerning securities the Company issued under equity compensation plans is contained in Item 12, pages 68 and 69 of this report.

ITEM 6.  SELECTED FINANCIAL DATA

For a discussion of factors that may materially affect the comparability of the information below, please see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operation, pages 10 through 27, of this report.

FIVE-YEAR FINANCIAL SUMMARY

(in thousands except per share data)

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ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT’S DISCUSSION AND ANALYSIS

The following presents management’s discussion and analysis of the Company’s consolidated financial condition and results of operations. This review highlights the major factors affecting results of operations and any significant changes in financial conditions for the three-year period ended December 31, 2003. It should be read in conjunction with the accompanying consolidated financial statements and other financial statistics appearing elsewhere in the report.

The discussion contains forward-looking statements of expected future developments. We wish to ensure such statements are accompanied by meaningful cautionary statements pursuant to safe harbor established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements may refer to projections of future financial performance and financial items, plans and objectives of future operations, and other matters. These forward-looking statements reflect management’s expectations and are based on currently available data; however, actual future results are subject to future events and uncertainties, which could materially affect actual performance and cause future results to differ materially from those referred to in the forward-looking statements. Such future events and uncertainties include, but are not limited to, changes in: loan demand, the ability of customers to repay loans, consumer saving habits, employee costs, pricing, interest rates, competition, legal or regulatory requirements or restrictions, U.S. or international economic or political conditions such as inflation or fluctuation in interest rates or in the values of securities traded in the equity markets. Any forward-looking statements should be read in conjunction with information about risks and uncertainties set forth in this report. Forward-looking statements speak only as of the date they are made, and the Company does not intend to review or revise any particular forward-looking statement in light of events that occur thereafter or to reflect the occurrence of unanticipated events.

Overview

Management believes the two factors having the greatest impact on the Company’s earnings are the sustained low rate environment, and the overall health of the equity and financial markets.

The sustained low interest rate environment adversely impacts the Company’s net interest income as our balance sheet is structured to be both very short in duration and liquid. Management believes that strong liquidity and capital are necessary given the types of products and services the Company offers, particularly as it relates to treasury and cash management products and services. A strong liquidity and capital position provide assurances that the cash needs of the Company can be met. This position adversely impacts the Company’s net interest income in a declining rate environment. However, in an increasing rate environment, this position should benefit the Company. Management believes that we will be entering into a period of rising interest rate given the overall expansion of the economy and the size of both the Federal and trade deficits. Item 7a, Quantitative Disclosures about Market Risk discusses in detail the impact of rising and declining rates on net interest income.

Net interest income is a main source of revenue for the Company. Net interest income is negatively impacted by smaller spreads between the yield on earning assets and the interest-free sources of funds. As the yields on loans and investments declined, interest-free sources of funds could not, by definition, be lowered to match the decrease in yield on earning assets. In addition, a competitive deposit pricing environment prevented the lowering of rates on interest bearing deposits to match the decrease in yields on earning assets. A sustained low rate environment will continue to put pressure on the Company’s net interest income. Table 2 appearing in the “Results of Operations—Net Interest Income” section of the Management’s Discussion and Analysis shows the impact of the declining rate environment and also shows the declining benefits derived from the Company’s interest free source of funds.

Management continues to focus on diversifying the revenue sources so that the net income of the Company is less susceptible to changes in interest rates. Management has also focused on reducing expenses that are not necessary to the delivery of products and services to the Company’s customer base.

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As some of the Company’s fee-based business is the direct result of the market value of its customer’s investments, the overall health of the equity and financial markets plays an important role in the recognition of fee income, particularly in the trust, mutual fund servicing and investment management areas of the Company. As the overall equity and financial markets improve, the basis on which certain fee income is calculated should grow.

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 growth in the new markets it entered during 2001 and 2000. There has been a demand in these markets for bank services delivered with a customer-centric focus. The Company will continue to focus its efforts to attract a customer base that values the advantages of banking with a company headquartered in their market while still possessing the products and services of a much larger institution.

Earnings Summary

The Company recorded consolidated net income of $58.9 million for the year ended December 31, 2003. This represents a 3.0% increase over 2002. Net income for 2002 decreased 12.4% compared to 2001. Earnings per share for the year ended December 31, 2003, were $2.70 per share compared to $2.59 in 2002 and $2.95 in 2001. Earnings per share for 2003 increased 4.2% over 2002 per share earnings, which had decreased 12.2% over 2001.

The Federal Reserve Board reduced the interest rate 11 times in 2001 for a total of 475 basis points (4.75%) and an additional 50 basis points in 2002 and 25 basis points in 2003. These reductions caused repricing pressures on loans and securities and thus contributed significantly to a decrease in interest income for 2003 and 2002. Although, this decrease in interest income was positively offset by a decrease in interest expense, the Company’s net interest income declined to $197.1 million in 2003 compared to $218.0 million in 2002 and $239.7 million in 2001.

The Company had an increase of 5.8% in noninterest income in 2003 as compared to 2002 and a 3.9% increase in 2002 compared to 2001. In 2003, the Company sold its merchant discount operation, which processes credit and debit card activity for commercial and retail merchants, for $8.25 million. This sale plus increases in trading and investment banking income and service charges on deposit accounts contributed to the increase in noninterest income for 2003 compared to 2002. A contributing factor to the increase in 2002 was the acquisition of Sunstone Financial Group, Inc. (now known as UMB Fund Services, Inc.) in 2001.

Noninterest expense declined in 2003 by 1.7% compared to 2002 and decreased in 2002 by 2.3% compared to 2001. The decrease in 2003 compared to 2002 was primarily due to lower salaries and employee benefits and employment costs as described below. The decrease in 2002 compared to 2001 was due to a year-end charge in 2001 of approximately $3.8 million related to the write-off of certain non-strategic assets, primarily real estate. Amortization of goodwill was also discontinued in 2002 due to the issuance of Statement of Financial Accounting Standards SFAS No. 142 “Goodwill and Other Intangible Assets”. This change in accounting standards resulted in a reduction of expense of $5.65 million in 2002.

The results of operations for the period January 1, 2001 through May 18, 2001 were affected by the consolidation of the Company’s subsidiary eScout LLC (eScout). The sale of a portion of the company’s ownership in eScout (which operates now as Perfect Commerce subsequent to a merger) for a gain of $1.7 million, on May 18, 2001 put the Company in a minority ownership position. The results of eScout are no longer included in the consolidated results of the Company.

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 liabilities. The volume of interest earning

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assets and the related funding sources, the overall mix of these assets and liabilities and the rates paid on each, affects net interest income. Table 1 summarizes the change in net interest income resulting from changes in volume and rates for 2003, 2002 and 2001. Table 1 also shows the impact of the declining rate environment on net interest income over the last three years.

Net interest margin is calculated as net interest income on a 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. Table 2 analyzes net interest rate margin for the three years ended December 31, 2003, 2002 and 2001. Table 2 also shows the decline in the benefit of interest free funds as a result of the declining interest rate environment over the last three years. Net interest income, average balance sheet amounts and the corresponding yields earned and rates paid for the years 1999 through 2003 are presented in a table following the footnotes to the consolidated financial statements. Net interest income is presented on a tax-equivalent basis to adjust for the tax-exempt status of earnings from certain loans and investments, which are primarily obligations of state and local governments.

TABLE 1

RATE-VOLUME ANALYSIS (in thousands)

This analysis attributes changes in net interest income either to changes in average balances or to changes in average rates for earning assets and interest-bearing liabilities. The change in net interest income is due jointly to both volume and rate and has been allocated to volume and rate in proportion to the relationship of the absolute dollar amount of the change in each. All rates are presented on a tax-equivalent basis and give effect to the disallowance of interest expense, for federal income tax purposes, related to certain tax-free assets. The loan average balances and rates include nonaccrual loans.

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TABLE 2

ANALYSIS OF NET INTEREST MARGIN (in thousands)

The Company experienced lower net interest income of $21.0 million for the year 2003 compared to 2002 and $21.7 million for the year 2002 compared to 2001. The 2003 decline was primarily driven by volume decreases in earning assets and lower rates, while the 2002 decline was primarily driven by lower rates. These decreases in net interest income have occurred due to several factors, primarily a reduction in demand for loans due to the soft economy; a reduction in mutual fund and trust related money market balances largely driven by both economic factors and a residual lack of public confidence impacting the overall securities industry; and an earning asset portfolio that, by design, is very short in duration and has been negatively impacted by the overall decline in interest rates over the past three years.

Management believes that the overall outlook in its net interest income is positive. In the short-term, a recovering economy is expected to spur higher demand for commercial and consumer loans. Loan-related earning assets tend to have a higher spread than those earned in the Company’s investment portfolio. In addition, over the next several quarters, most economists believe that interest rates will rise. Given the term of our earning assets, a rising rate environment would have a positive impact on the Company’s net interest income. Finally,

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management is undertaking a strategic initiative to focus additional efforts on marketing, product enhancements and streamlining the approval process for its consumer loan product suite. These efforts should result in increased volumes of new applications and booked loans.

Provision and Allowance for Loan Losses

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 its 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 economic conditions, loan growth 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.

Management of the Company increased the ALL from 1.27% of total loans as of December 31, 2001 to 1.40% of total loans as of December 31, 2002 and 1.60% of total loans as of December 31, 2003. This increase was due to an increase in nonperforming loans in 2003 and increased charge offs in 2002 caused by the overall softening of the economy in the region that the Company serves.

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 appropriate based on the inherent losses in the loan portfolio at December 31, 2003. Although no assurance can be given, management of the Company believes the present ALL is adequate considering the Company’s loss experience, delinquency trends and current economic conditions.

TABLE 3

ALLOCATION OF ALLOWANCE FOR LOAN LOSSES (in thousands)

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 Company recorded a provision for loan losses of $12.0 million during 2003, compared to $16.7 million during 2002 and $14.7 million during 2001. The decrease in the loan provision in 2003 was primarily due to a $9.2 million decrease in net loan charge-offs, $8.7 million of the decrease is related to a decrease in commercial loans net charge offs. The increase in the loan loss provision in 2002 was primarily due to an increase of commercial loan net charge offs of $5.1 million.

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Table 4 presents a five-year summary of the Company’s ALL. Also, please see Credit Risk under Risk Management on page 32 in this report for information relating to nonaccrual, past due, restructured loans, and other credit risk matters.

TABLE 4

ANALYSIS OF ALLOWANCE FOR LOAN LOSSES (in thousands)