-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C2vSa7H0nY5TIXxaK25gru4xhRdmpHXln2bm83L2OaBuftLHNUICMb0IoDMHg0um XyOh7iEzhRdta88QZb+98w== 0000950131-00-002164.txt : 20000411 0000950131-00-002164.hdr.sgml : 20000411 ACCESSION NUMBER: 0000950131-00-002164 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UMB FINANCIAL CORP CENTRAL INDEX KEY: 0000101382 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 430903811 STATE OF INCORPORATION: MO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-04887 FILM NUMBER: 583712 BUSINESS ADDRESS: STREET 1: 1010 GRAND AVE CITY: KANSAS CITY STATE: MO ZIP: 64106 BUSINESS PHONE: 8168607000 MAIL ADDRESS: ZIP: ----- FORMER COMPANY: FORMER CONFORMED NAME: UNITED MISSOURI BANCSHARES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: MISSOURI BANCSHARES INC DATE OF NAME CHANGE: 19710915 10-K 1 FORM 10-K - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------- 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 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 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 ---------------- THIS PAGE INTENTIONALLY LEFT BLANK ---------------- 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 EX-11 2 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11 EXHIBIT 11 TO FORM 10-K UMB FINANCIAL CORPORATION Computation of Earnings Per Share
1999 1998 1997 ---- ---- ---- BASIC EARNINGS PER SHARE - ------------------------ Net income divided by $64,077,000 $54,214,000 $61,704,000 Weighted average shares outstanding 21,793,064 22,322,620 22,422,135 Basic earnings per share $2.94 $2.42 $2.75 DILUTED EARNINGS PER SHARE - -------------------------- Net income divided by $64,077,000 $54,214,000 $61,704,000 Weighted average shares outstanding 21,831,444 22,307,000 22,464,595 Basic earnings per share $2.94 $2.41 $2.74
EX-12 3 COMPUTATION OF EARNINGS TO FIXED CHARGES EXHIBIT 12 EXHIBIT 12 TO FORM 10-K UMB FINANCIAL CORPORATION COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
1999 1998 1997 ---- ---- ---- Income before income taxes and change in accounting principle 87,052 75,976 89,801 Add Portion of rents representative of the interest factor 1,417 1,282 761 Interest on indebtedness other than deposits 60,447 48,725 43,844 Amortization of debt expense 65 65 65 --------------------------- Income as adjusted excluding interest on deposits 148,981 126,048 134,471 Add interest on deposits 122,876 138,367 127,950 --------------------------- Income as adjusted including interest on deposits 271,857 264,415 262,421 =========================== Fixed charges Interest on indebtedness other than deposits 60,447 48,725 43,844 Portion of rents representative of the interest factor 1,417 1,282 761 Amortization of debt expense 65 65 65 --------------------------- Fixed charges excluding interest on deposits 61,929 50,072 44,670 Interest on deposits 122,876 138,367 127,950 --------------------------- Fixed charges including interest on deposits 184,805 188,439 172,620 =========================== Ratio of earnings to fixed charges Excluding interest on deposits 2.41 2.52 3.01 ==== ==== ==== Including interest on deposits 1.47 1.40 1.52 ==== ==== ====
EX-21 4 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 TO FORM 10-K UMB FINANCIAL CORPORATION Subsidiaries of the Registrant
Jurisdiction of Subsidiary Organization - ---------- ------------ Missouri Banks UMB Bank, n.a. (Kansas City) U.S. UMB Bank, Warsaw Missouri Colorado Bank UMB Bank Colorado n.a. U.S. Kansas Bank UMB National Bank of America U.S. Nebraska Bank UMB Bank Omaha, n.a. U.S. Oklahoma Banks UMB Oklahoma Bank Oklahoma Charter National Bank U.S. Banking-Related Subsidiaries UMB Community Development Corporation Missouri UMB Consulting Services, Inc. Missouri UMB Data Corporation Missouri UMB Properties, Inc. Missouri UMB, U.S.A. Nebraska United Missouri Insurance Company Arizona Tiered Bank Holding Companies First Sooner Bancshares, Inc. Oklahoma
EX-23 5 CONSENT OF DELOITTE & TOUCHE LLP EXHIBIT 23 TO FORM 10-K UMB FINANCIAL CORPORATION INDEPENDENT AUDITOR'S CONSENT We consent to the incorporation by reference in the Registration Statement No. 33-58312 on Form S-8 of UMB Financial Corporation and Subsidiaries of our report dated January 20, 2000, included in this Annual Report on Form 10-K of UMB Financial Corporation and Subsidiaries for the year ended December 31, 1999. /s/ DELOITTE & TOUCHE LLP Kansas City, Missouri March 29, 2000 EX-24 6 POWERS OF ATTORNEY EXHIBIT 24 TO FORM 10-K UMB FINANCIAL CORPORATION POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints R. Crosby Kemper, David D. Miller and Timothy M. Connealy his true and lawful attorneys-in-fact and agents, each acting alone, with full power of substitution and resubstitution, for and in his name, place and stead, in any and all capacities, to file this report the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto such attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing required and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. 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 in the capacities and on the dates indicated. SIGNATURE AND NAME CAPACITY DATE - ------------------ -------- ---- /s/ PAUL D. BARTLETT Director January 20, 2000 - ---------------------------- Paul D. Bartlett, Jr. /s/ THOMAS E. BEAL Director January 20, 2000 - ---------------------------- Thomas E. Beal /s/ H. ALLAN BELL Director January 20, 2000 - ---------------------------- H. Allan Bell /s/ DAVID R. BRADLEY Director January 20, 2000 - ---------------------------- David R. Bradley /s/ NEWTON A. CAMPBELL Director January 20, 2000 - ---------------------------- Newton A. Campbell /s/ TIMOTHY M. CONNEALY Chief Financial January 20, 2000 - ---------------------------- Officer Timothy M. Connealy /s/ WILLIAM TERRY FULDNER Director January 20, 2000 - ---------------------------- William Terry Fuldner /s/ PETER J. GENOVESE Director, January 20, 2000 - ---------------------------- Vice Chairman Peter J. Genovese Director - ---------------------------- Jack T. Gentry /s/ RICHARD HARVEY Director January 20, 2000 - ---------------------------- Richard Harvey /s/ C. N. HOFFMAN, III Director January 20, 2000 - ---------------------------- C. N. Hoffman, III /s/ ALEXANDER C. KEMPER Director, January 20, 2000 - ---------------------------- President, CEO Alexander C. Kemper /s/ R. CROSBY KEMPER Director, Chairman January 20, 2000 - ---------------------------- R. Crosby Kemper /s/ R. CROSBY KEMPER III Director, January 20, 2000 - ---------------------------- Vice Chairman R. Crosby Kemper III /s/ DANIEL N. LEAGUE, JR. Director January 20, 2000 - ---------------------------- Daniel N. League, Jr. /s/ TOM J. MCDANIEL Director January 20, 2000 - ---------------------------- Tom J. McDaniel /s/ WILLIAM J. MCKENNA Director January 20, 2000 - ---------------------------- William J. McKenna /s/ JOHN H. MIZE, JR. Director January 20, 2000 - ---------------------------- John H. Mize, Jr. /s/ MARY LYNN OLIVER Director January 20, 2000 - ---------------------------- Mary Lynn Oliver Director - ---------------------------- W. L. Orscheln /s/ ROBERT W. PLASTER Director January 20, 2000 - ---------------------------- Robert W. Plaster /s/ ALAN W. ROLLEY Director January 20, 2000 - ---------------------------- Alan W. Rolley /s/ THOMAS D. SANDERS Director January 20, 2000 - ---------------------------- Thomas D. Sanders /s/ L. JOSHUA SOSLAND Director January 20, 2000 - ---------------------------- L. Joshua Sosland Director - ---------------------------- Herman R. Sutherland /s/ E. JACK WEBSTER Director January 20, 2000 - ---------------------------- E. Jack Webster Director - ---------------------------- Jon Welfad /s/ JOHN E. WILLIAMS Director January 20, 2000 - ---------------------------- John E. Williams EX-27 7 FINANCIAL DATA SCHEDULE
9 1,000 12-MOS DEC-31-1999 DEC-31-1999 766,108 4,142,794 132,664 77,074 3,149,135 748,651 738,170 2,841,150 31,193 8,131,321 5,923,935 0 97,128 37,904 0 0 26,472 628,519 8,131,321 212,054 189,305 5,824 407,183 122,876 183,323 223,860 8,659 547 306,047 87,052 87,052 0 0 64,077 2.94 2.94 3.77 4,818 4,998 1,474 0 33,169 14,514 3,169 31,193 31,193 0 0
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