-----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, HpPN7FjObYhUn/O95BjiD25rcgPKdT/9Z6zUulBQM1Jqv8ggcz76YGUnfwZ7jWAI euhNP9eJkw2Cp0w4Pe9yWQ== 0000950131-96-001177.txt : 19960322 0000950131-96-001177.hdr.sgml : 19960322 ACCESSION NUMBER: 0000950131-96-001177 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960321 SROS: NASD 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: 1934 Act SEC FILE NUMBER: 000-04887 FILM NUMBER: 96536856 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, 1995 [_] 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, 1996, the aggregate market value of common stock outstanding held by nonaffiliates of the registrant was approximately $500,149,000 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, 1996 Common Stock, $1.00 Par Value 19,386,219 DOCUMENTS INCORPORATED BY REFERENCE Company's 1996 Proxy Statement dated March 12, 1996--Part III - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- INDEX
ITEM PAGE ---- ---- PART I 1. Business.................................................... 1 2. Properties.................................................. 4 3. Legal Proceedings........................................... 4 4. Submission of Matters to a Vote of Security Holders......... 4 PART II Market for the Registrant's Common Equity and Related Stock- 5. holder Matters.............................................. 4 6. Selected Financial Data..................................... 5 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 5 8. Financial Statements and Supplementary Data................. 5 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................................... 5 PART III 10. Directors and Executive Officers of the Registrant.......... 5 11. Executive Compensation...................................... 5 Security Ownership of Certain Beneficial Owners and Manage- 12. ment........................................................ 5 13. Certain Relationships and Related Transactions.............. 6 PART IV Exhibits, Financial Statement Schedules and Reports on Form 14. 8-K......................................................... 6 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 substantially all of the outstanding stock of 16 commercial banks, a consumer credit bank, a bank real estate corporation, a reinsurance company, a community development corporation and a discount brokerage company. The Company's 16 commercial banks are engaged in general commercial banking business entirely in domestic markets. The banks, 11 located in Missouri, 2 in Kansas, one each in Illinois, Colorado and Oklahoma, 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, 1995, is included on page A-46 of the attached Appendix, and is incorporated herein by reference. United Missouri Bank, U.S.A. is a consumer credit bank chartered in Delaware. United Missouri Bank, U.S.A. services all incoming credit card requests, performs data entry services on new card requests and evaluates new and existing credit lines. Other subsidiaries of the Company are UMB Properties, Inc., United Missouri Insurance Company, Scout Brokerage Services, Inc., 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. Scout Brokerage Services, Inc. provides transaction services in a variety of investment securities for the general public. This subsidiary offers brokerage and custodial services to its customers (including affiliate and correspondent banks) through the facilities of National Financial Services Corporation, a wholly-owned subsidiary of Fidelity Brokerage Services, Inc. UMB Community Development Corporation provides low-cost mortgage loans to low- to moderate-income families for acquiring or rehabing owner-occupied housing in Missouri, Kansas, Illinois and Colorado. 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, 1995, UMB Financial Corporation and subsidiaries employed 3,937 persons. COMPETITION The commercial banking business is highly competitive. Affiliate banks compete with other commercial banks and with other financial institutions, including savings and loan associations, finance companies, money market mutual funds, mortgage banking companies and credit unions. In recent years, competition has also increased from institutions not subject to the same geographical and other regulatory restrictions as domestic banks and bank holding companies. MONETARY POLICY AND ECONOMIC CONDITIONS The operations of the Company's affiliate banks are affected by general economic conditions as well as the monetary policy of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board") which affects the supply of money available to commercial banks. Monetary policy measures by the Federal 1 Reserve Board are effected through open market operations in U.S. Government securities, changes in the discount rate on bank borrowings and changes in reserve requirements. SUPERVISION AND REGULATION As a bank holding company, the Company is subject to the Bank Holding Company Act of 1956, as amended (the "BHCA") and to regulation by the Federal Reserve Board. The BHCA requires every bank holding company to obtain the prior approval of the Federal Reserve Board before it may (i) acquire substantially all the assets of any bank, (ii) acquire more than 5% of 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 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. Interstate branching by bank merger will be permitted beginning June 1, 1997. States may "opt out" of interstate branching prior to June 1, 1997, and may "opt in" prior to that date. 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. Three of the banks owned by the Company are national banks and are subject to supervision and examination by the Comptroller of the Currency. United Missouri Bank, U.S.A., a credit card bank, is chartered under the state banking laws of Delaware and is subject to supervision and regular examination by the Office of the State Bank Commissioner of Delaware. This Bank should cease operations in 1996. A new national bank located in Omaha, Nebraska to be known as UMB U.S.A. National Association will open in the first quarter of 1996 to engage in the credit card business. It will be subject to supervision and examination by the Comptroller of the Currency. One of the affiliate banks is chartered under the state banking laws of Colorado and is subject to supervision and regular examination by the Office of the State Bank Commissioner of Colorado. One of the affiliate banks is chartered under the state banking laws of Kansas and is subject to supervision and regular examination by the Kansas Banking Department. 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 remaining 9 banks are chartered under the state banking laws of Missouri and are subject to supervision and regular examination by the Office of the Commissioner of Finance of Missouri. In addition, the national banks and the one state bank that are members of the Federal Reserve System are subject to examination by that agency. All affiliate banks are members of and subject to examination by the Federal Deposit Insurance Corporation. Scout Brokerage Services, Inc. is subject to supervision and regulation by the National Association of Securities Dealers. This subsidiary is also a member of the Securities Investor Protection Corporation. Information regarding capital adequacy standards of Federal banking regulators is included on pages A-14, A-39 and A-40 of the attached Appendix, and is incorporated herein by reference. Information regarding dividend restrictions is on page A-14 of the attached Appendix, incorporated herein by reference. 2 STATISTICAL DISCLOSURE The information required by Guide 3, "Statistical Disclosure by Bank Holding Companies," has been integrated throughout pages A-24 through A-46 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........ 69 Chairman of the Board and Chief Executive Officer since 1972. Chairman and Chief Executive Officer of UMB Bank, n.a. (a subsidiary of the Company) from 1971 through 1995, and as Chairman since January, 1996. Alexander C. Kemper..... 30 President of the Company since January, 1995. President of UMB Bank, n.a. since January 1994 and as President and Chief Executive Officer since January, 1996. He previously served as Divisional Executive Vice President. Peter J. Genovese....... 49 Vice Chairman of the Board since 1982. Chairman and Chief Executive Officer of UMB Bank of St. Louis, n.a. (a subsidiary of the Company) since 1979. Rufus Crosby Kemper III. 45 Vice Chairman of the Board since January 1995. President of UMB Bank of St. Louis, n.a. since 1993. Executive Vice President of UMB Bank, n.a. prior thereto. J. Lyle Wells, Jr. ..... 68 Vice Chairman of the Board of the Company since 1993. Vice Chairman of the Board of UMB Bank, n.a. since 1982. Geoffrey E. Lind........ 47 Vice Chairman of the Board since 1993. Chairman, President and Chief Executive Officer of UMB Bank Colorado (a subsidiary of the Company) since 1991. Executive Vice President of UMB Bank, n.a. prior thereto. Richard A. Renfro....... 61 President of UMB National Bank of America, Salina, Kansas, (a subsidiary of the Company) since 1986. James A. Sangster....... 41 Divisional Executive Vice President of UMB Bank, n.a. since 1993. Executive Vice President prior thereto. William C. Tempel....... 57 President and Chief Executive Officer of UMB Bank Kansas (a subsidiary of the Company) since 1993, having previously served as President. Edward J. McShane, Jr. . 63 Divisional Executive Vice President and Senior Trust Officer of UMB Bank, n.a. since 1989. Executive Vice President and Head of Personal Trust and Custody Division prior thereto. Douglas F. Page......... 52 Executive Vice President of the Company since 1984 and Divisional Executive Vice President, Loan Administration, of UMB Bank, n.a. since 1989. Timothy M. Connealy..... 38 Chief Financial Officer since 1994. Chief Financial Officer of UMB Bank Kansas prior thereto.
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NAME AGE POSITION WITH REGISTRANT - ---- --- ------------------------ James C. Thompson... 53 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....... 51 Executive Vice President of UMB Bank, n.a. since 1985.
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 leased to the Company's principal law firm and principal accounting firm. The banking facility of UMB Bank, n.a. at 928 Grand Avenue principally houses that bank's operations, data processing and other support functions and is connected to the headquarters building by an enclosed pedestrian walkway. At December 31, 1995, the Company's affiliate banks operated a total of 16 main banking houses and 110 detached facilities, the majority of which are owned by them or a non-bank subsidiary of the Company and leased to the respective bank. The Company's affiliate bank in St. Louis leases 40,000 square feet of space in the Equitable Building in the heart of the downtown commercial sector. A full service banking center, operations and administrative offices are housed at this location. The St. Louis affiliate bank provides full service banking at 19 additional offices, which circle the metropolitan area. Additional information with respect to premises and equipment is presented on page A-12 of the attached Appendix, which is incorporated herein by reference. In the opinion of the management of the Company, the physical properties of the Company and its subsidiaries are suitable and adequate and are being fully utilized. ITEM 3. LEGAL PROCEEDINGS In the normal course of business, the Company and its subsidiaries had certain lawsuits pending against them at December 31, 1995. 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, 1995. 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, 1995, the Company had 2,647 shareholders. Dividend and sale prices of stock information, by quarter, for the past two years is contained on page A-43 of the attached Appendix and is hereby incorporated by reference. 4 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-14 of the attached Appendix and is hereby incorporated by reference. ITEM 6. SELECTED FINANCIAL DATA See the "Five-Year Financial Summary" on page A-24 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-25 through A-46 of the attached Appendix, which is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following consolidated financial statements and supplementary data appearing on the indicated pages of the attached Appendix are incorporated herein by reference: Consolidated Financial Statements -- pages A-2 through A-22. Summary of Operating Results by Quarter -- page A-43. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information regarding directors is included in the Company's 1996 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 1996 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 in included in the Company's 1996 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 1996 Proxy Statement under the caption "Stock Beneficially Owned by Directors and Nominees and Executive Officers" and is hereby incorporated by reference. 5 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS This information is included in the Company's 1996 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, 1995, 1994 and 1993................................................ A-2 Consolidated Statement of Income for the Three Years Ended December 31, 1995................................. A-3 Consolidated Statement of Cash Flows for the Three Years Ended December 31, 1995................................. A-4 Consolidated Statement of Shareholders' Equity for the Three Years Ended December 31, 1995..................... A-5 Notes to Financial Statements............................ A-6 to A-22 Independent Auditors' Report............................. A-23
Condensed financial statements for parent company only may be found on page A-22. 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 On December 19, 1995, the Company filed a report on Form 8-K reporting information under Item 5, in regards to an individual stock buy-back agreement. 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 $12.50 per share: Articles III (authorized shares), "X" (amendment of the Bylaws) and XI (amendment of the Articles of Incorporation) of the Articles of Incorporation and Articles II (shareholder meetings), Sections 2 (number and classes of directors) and 3 (Election and Removal of Directors) of Article III, Section 1 (stock certificates) of Article VII and Section 4 (indemnification) of Article VIII of the Bylaws. Note: No long-term debt instrument issued by the Registrant exceeds 10% of the consolidated total assets of the Registrant and its subsidiaries. In accordance with paragraph 4 (iii) of Item 601 of Regulation S-K, the Registrant will furnish to the Commission, upon request, copies of long-term debt instruments and related agreements.
6
EXHIBIT NUMBER DESCRIPTION ------- ----------- (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 and Chief Executive Officer /s/ Timothy M. Connealy _____________________________________ Timothy M. Connealy, Chief Financial Officer Date: March 21 1996 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, Jr.* Director ______________________ Paul D. Bartlett, Jr. Thomas E. Beal* Director ______________________ Thomas E. Beal 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 Charles A. Garney* Director ______________________ Charles A. Garney Peter J. Genovese* Director ______________________ Peter J. Genovese C.N. Hoffman, Jr.* Director ______________________ C.N. Hoffman, Jr.
Alexander C. Kemper* Director ______________________ Alexander C. Kemper R. Crosby Kemper III* Director ______________________ R. Crosby Kemper III Daniel N. League, Jr.* Director ______________________ Daniel N. League, Jr. William J. McKenna* Director ______________________ William J. McKenna Director ______________________ Roy E. Mayes John H. Mize, Jr.* Director ______________________ John H. Mize, Jr. Mary Lynn Oliver* Director ______________________ Mary Lynn Oliver W. L. Orscheln* Director ______________________ W. L. Orscheln Robert W. Plaster* Director ______________________ Robert W. Plaster
8 Thomas A. Ward III Director _______________________________ Thomas A. Ward III Alan W. Rolley* Director _______________________________ Alan W. Rolley E. Jack Webster, Jr.* Director _______________________________ E. Jack Webster, Jr. Joseph F. Ruysser* Director _______________________________ Joseph F. Ruysser Jon Wefald* Director _______________________________ Jon Wefald Thomas D. Sanders* Director _______________________________ Thomas D. Sanders John E. Williams* Director _______________________________ John E. Williams Herman R. Sutherland* Director _______________________________ Herman R. Sutherland
*/s/ R. Crosby Kemper - ------------------------------------- R. Crosby Kemper Attorney-in-Fact for each director Date: March 21, 1996 9 ---------------- THIS PAGE INTENTIONALLY LEFT BLANK ---------------- UMB FINANCIAL CORPORATION INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PAGES ----- Consolidated Balance Sheet........................................ A-2 Consolidated Statement of Income.................................. A-3 Consolidated Statement of Cash Flows.............................. A-4 Consolidated Statement of Shareholders' Equity.................... A-5 Notes to Financial Statements..................................... A-6 to A-22 Independent Auditors' Report...................................... A-23 Selected Financial Data ("Five-Year Financial Summary")........... A-24 Management's Discussion and Analysis of Financial Condition and Results of Operations ("Financial Review")............................................. A-25 to A-46
A-1 UMB FINANCIAL CORPORATION CONSOLIDATED BALANCE SHEET
DECEMBER 31 ---------------------------------- 1995 1994 1993 ---------- ---------- ---------- (IN THOUSANDS) ASSETS Loans: Commercial, financial and agricultural... $1,198,808 $1,135,827 $1,103,306 Consumer................................. 784,481 688,672 591,383 Real estate.............................. 467,570 444,565 466,157 Leases................................... 2,057 2,157 1,627 Unearned interest........................ (390) (1,604) (2,712) Allowance for loan losses................ (32,685) (32,527) (35,590) ---------- ---------- ---------- Net loans................................ $2,419,841 $2,237,090 $2,124,171 Securities available for sale: U.S. Treasury and agencies............... $2,184,383 $2,211,711 $2,615,783 Mortgage-backed.......................... 145,781 55,477 73,472 Equity and other......................... 6,410 8,025 10,957 ---------- ---------- ---------- Total securities available for sale...... $2,336,574 $2,275,213 $2,700,212 Investment securities: State and political subdivisions......... $ 311,757 $ 298,556 $ 278,944 Mortgage-backed.......................... -- 86,278 -- ---------- ---------- ---------- Total investment securities (market value of $313,173, $373,644 and $282,346, respectively)........................... $ 311,757 $ 384,834 $ 278,944 Federal funds sold........................ 55,300 289,414 75,994 Securities purchased under agreements to resell................................... 33,865 244,685 263,181 Trading securities and other.............. 86,011 30,982 83,746 ---------- ---------- ---------- Total earning assets..................... $5,243,348 $5,462,218 $5,526,248 Cash and due from banks................... 696,407 770,813 666,368 Bank premises and equipment, net.......... 147,576 130,261 128,898 Accrued income............................ 79,149 81,219 72,551 Premiums on and intangibles of purchased banks.................................... 74,739 78,091 85,286 Other assets.............................. 40,109 76,418 49,475 ---------- ---------- ---------- Total assets............................. $6,281,328 $6,599,020 $6,528,826 ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest-bearing demand............... $1,634,960 $1,570,478 $1,488,278 Interest-bearing demand and savings...... 1,877,019 2,421,149 2,364,341 Time deposits under $100,000............. 977,666 949,728 1,058,354 Time deposits of $100,000 or more........ 324,038 191,479 250,756 ---------- ---------- ---------- Total deposits........................... $4,813,683 $5,132,834 $5,161,729 Federal funds purchased................... 48,400 139,800 26,210 Securities sold under agreements to repur- chase.................................... 672,940 661,203 598,872 Short-term debt........................... 501 872 1,453 Long-term debt............................ 40,736 46,330 51,529 Accrued expenses and taxes................ 63,135 38,638 56,754 Other liabilities......................... 19,493 22,037 45,636 ---------- ---------- ---------- Total liabilities........................ $5,658,888 $6,041,714 $5,942,183 ---------- ---------- ---------- Common stock repurchase commitment $ 46,481 $ -- $ -- ---------- ---------- ---------- Common stock, $1.00 par. Authorized 23,000,000 shares; 22,547,521 shares is- sued..................................... $ 22,548 $ 20,678 $ 236,579 Capital surplus........................... 522,892 442,606 167,368 Retained earnings......................... 136,943 182,159 208,557 Net unrealized gain (loss) on securities available for sale....................... 3,612 (35,211) 14,333 Treasury stock 1,972,239; 1,676,451; and 1,300,346 shares, at cost, respectively.. (63,555) (52,926) (40,194) Common stock repurchase commitment, 1,068,533 shares at December 31, 1995.... (46,481) -- -- ---------- ---------- ---------- Total shareholders' equity............... $ 575,959 $ 557,306 $ 586,643 ---------- ---------- ---------- Total liabilities and shareholders' equi- ty...................................... $6,281,328 $6,599,020 $6,528,826 ========== ========== ==========
See Notes to Financial Statements, pages A-6 to A-22. A-2 UMB FINANCIAL CORPORATION CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31 -------------------------------- 1995 1994 1993 ---------- ---------- ---------- (IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA) INTEREST INCOME Loans........................................ $ 217,701 $ 171,905 $ 142,713 Securities available for sale................ 110,549 121,943 116,044 Investment securities: Taxable interest............................ $ 974 $ 954 $ -- Tax-exempt interest......................... 13,276 11,743 11,656 ---------- ---------- ---------- Total investment securities income.......... $ 14,250 $ 12,697 $ 11,656 Federal funds and resell agreements.......... 11,003 13,626 9,888 Trading securities and other................. 3,552 3,089 2,914 ---------- ---------- ---------- Total interest income....................... $ 357,055 $ 323,260 $ 283,215 ---------- ---------- ---------- INTEREST EXPENSE Deposits..................................... $ 121,594 $ 106,958 $ 99,127 Federal funds and repurchase agreements...... 32,685 25,057 16,155 Short-term debt.............................. 48 33 29 Long-term debt............................... 3,460 4,016 4,407 ---------- ---------- ---------- Total interest expense...................... $ 157,787 $ 136,064 $ 119,718 ---------- ---------- ---------- Net interest income.......................... $ 199,268 $ 187,196 $ 163,497 Provision for loan losses.................... 5,090 2,640 3,332 ---------- ---------- ---------- Net interest income after provision......... $ 194,178 $ 184,556 $ 160,165 ---------- ---------- ---------- NONINTEREST INCOME Trust fees................................... $ 35,864 $ 34,992 $ 32,048 Securities processing........................ 10,494 12,460 13,341 Trading and investment banking............... 11,178 9,932 13,629 Service charges on deposit accounts.......... 33,177 32,855 30,168 Other service charges and fees............... 11,272 11,695 11,168 Bankcard fees................................ 33,734 30,845 24,874 Net security gains........................... 1,416 3,632 1,607 Other........................................ 6,843 5,334 4,632 ---------- ---------- ---------- Total noninterest income.................... $ 143,978 $ 141,745 $ 131,467 ---------- ---------- ---------- NONINTEREST EXPENSE Salaries and employee benefits............... $ 122,556 $ 121,304 $ 107,189 Occupancy, net............................... 15,963 15,096 14,809 Equipment.................................... 22,283 20,727 20,319 Supplies and services........................ 19,165 19,189 17,448 Bankcard processing.......................... 32,758 25,777 20,829 Marketing and business development........... 13,079 12,465 11,390 FDIC and regulatory fees..................... 7,636 12,225 10,955 Amortization of intangibles of purchased banks....................................... 7,120 7,128 5,241 Other........................................ 19,973 21,991 22,203 ---------- ---------- ---------- Total noninterest expense................... $ 260,533 $ 255,902 $ 230,383 ---------- ---------- ---------- Income before income taxes................... $ 77,623 $ 70,399 $ 61,249 Income tax provision......................... 25,447 22,585 20,130 ---------- ---------- ---------- Net income.................................. $ 52,176 $ 47,814 $ 41,119 ========== ========== ========== Per Share Data Net income................................... $ 2.52 $ 2.26 $ 2.13 Dividends.................................... $ 0.73 $ 0.69 $ 0.66 Average shares outstanding................... 20,680,255 21,075,750 19,489,265
See Notes to Financial Statements, pages A-6 to A-22. A-3 UMB FINANCIAL CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31 --------------------------------- 1995 1994 1993 ---------- --------- ---------- (IN THOUSANDS) OPERATING ACTIVITIES Net income................................. $ 52,176 $ 47,814 $ 41,119 Adjustments to reconcile net income to net cash provided by (used in) operating ac- tivities: Provision for loan losses.................. 5,090 2,640 3,332 Depreciation and amortization.............. 23,436 22,291 19,222 Deferred income taxes and investment tax credits................................... (3,955) 390 (225) Net (increase) decrease in trading securi- ties...................................... (55,029) 42,860 (34,731) Gains on sales of: Investment securities..................... -- -- (17) Securities available for sale............. (3,734) (3,719) (1,598) Losses on sales of securities available for sale...................................... 2,318 87 8 Amortization of securities premium, net of discount accretion........................ 32,725 44,368 36,853 Changes in: Accrued income............................ 3,353 (8,668) (6,334) Accrued expenses and taxes................ 20,631 (7,013) 9,251 Other, net................................. (678) 371 (632) ---------- --------- ---------- Net cash provided by operating activities.. $ 76,333 $ 141,421 $ 66,248 ---------- --------- ---------- INVESTING ACTIVITIES Proceeds from sales of: Investment securities...................... $ -- $ -- $ 697 Securities available for sale.............. 411,351 150,570 225,587 Proceeds from maturities of: Investment securities...................... 112,173 133,721 131,723 Securities available for sale.............. 1,276,660 844,237 654,769 Purchases of: Investment securities...................... (117,406) (242,492) (158,018) Securities available for sale.............. (1,569,946) (687,722) (1,025,388) Net increase in loans...................... (139,828) (115,559) (146,800) Net (increase) decrease in federal funds sold and resell agreements................ 449,134 (194,924) 113,147 Purchases of bank premises and equipment... (27,884) (16,741) (12,804) Proceeds from sales of bank premises and equipment................................. 551 216 811 Purchases of financial organizations, net of cash received.......................... (11,147) -- 57,211 Other, net................................. 14,728 (13,765) (5,727) ---------- --------- ---------- Net cash provided by (used in) investing activities................................ $ 398,386 $(142,459) $ (164,792) ---------- --------- ---------- FINANCING ACTIVITIES Net increase (decrease) in demand and sav- ings deposits............................. $ (530,827) $ 130,852 $ 400,373 Net increase (decrease) in time deposits... 101,852 (167,903) (131,946) Net increase (decrease) in federal funds purchased and repurchase agreements....... (88,320) 175,921 (115,439) Net decrease in short-term debt............ (371) (581) (689) Proceeds from issuance of long-term debt... -- -- 25,000 Repayments of long-term debt............... (5,594) (5,199) (7,801) Cash dividends............................. (15,114) (14,669) (13,064) Purchases of treasury stock................ (11,098) (13,318) (4,859) Proceeds from issuance of treasury stock... 347 380 508 ---------- --------- ---------- Net cash provided by (used in) financing activities................................ $ (549,125) $ 105,483 $ 152,083 ---------- --------- ---------- Increase (decrease) in cash and due from banks...................................... $ (74,406) $ 104,445 $ 53,539 Cash and due from banks at beginning of year....................................... 770,813 666,368 612,829 ---------- --------- ---------- Cash and due from banks at end of year...... $ 696,407 $ 770,813 $ 666,368 ========== ========= ========== Supplemental disclosures: Income taxes paid.......................... $ 28,717 $ 27,983 $ 20,833 Total interest paid........................ 153,758 134,575 119,407
- -------- Note: Certain noncash transactions regarding the adoption of SFAS No. 115 and common stock issued for acquisitions are disclosed in the accompanying financial statements and notes to financial statements. See Notes to Financial Statements, pages A-6 to A-22. A-4 UMB FINANCIAL CORPORATION CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (IN THOUSANDS)
COMMON CAPITAL RETAINED NET UNREALIZED TREASURY REPURCHASE STOCK SURPLUS EARNINGS HOLDING GAINS (LOSSES) STOCK COMMITMENT -------- -------- -------- --------------------- -------- ---------- Balance -- January 1, 1993................... $184,815 $ 63,046 $180,502 $ -- $(28,684) $ -- Net income.............. -- -- 41,119 -- -- -- Cash dividends ($0.66 per share)............. -- -- (13,064) -- -- -- Issuance for acquisi- tions, net............. 51,764 104,642 -- -- (7,478) -- Purchase of treasury stock.................. -- -- -- -- (4,859) -- Exercise of stock op- tions.................. -- (320) -- -- 827 -- Net unrealized gain on securities available for sale............... -- -- -- 14,333 -- -- -------- -------- -------- -------- -------- -------- Balance -- December 31, 1993................... $236,579 $167,368 $208,557 $ 14,333 $(40,194) $ -- Net income.............. -- -- 47,814 -- -- -- Cash dividends ($0.69 per share)............. -- -- (14,669) -- -- -- Adjust Stock par value.. (217,652) 217,652 -- -- -- -- Stock dividend (10%).... 1,751 57,792 (59,543) -- -- -- Purchase of treasury stock.................. -- -- -- -- (13,318) -- Exercise of stock op- tions.................. -- (206) -- -- 586 -- Net unrealized loss on securities available for sale............... -- -- -- (49,544) -- -- -------- -------- -------- -------- -------- -------- Balance -- December 31, 1994................... $ 20,678 $442,606 $182,159 $(35,211) $(52,926) $ -- Net income.............. -- -- 52,176 -- -- -- Cash dividends ($0.73 per share)............. -- -- (15,114) -- -- -- Stock dividend (10%).... 1,870 80,408 (82,278) -- -- -- Purchase of treasury stock.................. -- -- -- -- (11,098) -- Exercise of stock op- tions.................. -- (122) -- -- 469 -- Net unrealized gain on securities available for sale............... -- -- -- 38,823 -- -- Common stock repurchase commitment............. -- -- -- -- -- (46,481) -------- -------- -------- -------- -------- -------- Balance -- December 31, 1995................... $ 22,548 $522,892 $136,943 $ 3,612 $(63,555) $(46,481) ======== ======== ======== ======== ======== ========
See Notes to Financial Statements, pages A-6 to A-22. A-5 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 financial statements. Intercompany accounts and transactions have been eliminated where significant. ACQUISITIONS -- Banks acquired and recorded under the purchase method are recorded at the fair value of the net assets acquired at the acquisition date, and results of operations are included from that date. Excess of purchase price over the value of net assets acquired is recorded as premiums on purchased banks. Premiums on purchases prior to 1982 are being amortized ratably over 40 years. Premiums on purchases in 1982 and after are being amortized ratably over 15 years. Core deposit intangible assets are being amortized ratably over 10 years. LOANS -- Interest on discount loans is recorded on a method that approximates income at a level rate of return on the principal amount outstanding over the term of the loan. Interest on all other loans is recognized based on the rate times the principal amount outstanding. Interest accrual is discontinued when, in the opinion of management, the likelihood of collection becomes doubtful. Affiliate banks enter into lease financing transactions that are generally recorded under the financing method of accounting. Income is recognized on a basis that results in an approximately level rate of return over the life of the lease. Annual bankcard fees are recognized on a straight-line basis over the period that cardholders may use the card. The adequacy of the allowance 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 as a separate component of shareholders' equity until realized. Realized gains and losses on sales are computed by the specific identification method at the time of disposition and are shown separately as a component on noninterest income. In conjunction with the adoption of the Implementation Guide for SFAS No. 115 issued by the Financial Accounting Standards Board, the Company reassessed its intent to hold some of its mortgage-backed securities to maturity. Accordingly, on December 22, 1995, the Company reclassified its mortgage- backed securities portfolio, with a book value of $86.2 million and a market value of $85.2 million, to available for sale. INVESTMENT SECURITIES -- Investment securities are carried at amortized historical cost based on management's intention, and the Company's ability, to hold them to maturity. The Company classifies securities of state and political subdivisions as investment securities. Certain significant unforeseeable changes in circumstances may cause a change in the intent to hold these securities to maturity. For example, such changes A-6 UMB FINANCIAL CORPORATION NOTES TO FINANCIAL STATEMENTS -- CONTINUED 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. 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. All per share presentations have been restated to give effect to the 10% stock dividend paid January 2, 1996, to the shareholders of record December 12, 1995. The dilutive effect of shares issuable under stock options granted by the Company is immaterial. RECLASSIFICATIONS -- Certain reclassifications were made to the 1994 and 1993 financial statements to conform to the current year presentation. INDUSTRY SEGMENT REPORTING -- The Company operates principally in a single business segment offering general commercial banking services. ACCOUNTING CHANGES ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN -- On January 1, 1995, the Company implemented SFAS No. 114, "Accounting by Creditors for Impairment of a Loan." This Statement requires that impaired loans be measured based on the present value of expected future cash flows discounted at the loan's effective interest rate, at the loan's observable market price or the fair value of collateral if the loan is collateral-dependent. In October 1994, SFAS No. 118 was issued as an amendment to SFAS No. 114 to allow a creditor to use existing methods for recognizing interest income on an impaired loan. The implementation of these Statements did not have a significant effect on the Company's financial position or results of operation. ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED ASSETS -- The Financial Accounting Standards Board issued SFAS No. 121, "Accounting for the Impairment of Long- Lived Assets." This Statement, effective for fiscal years beginning after December 15, 1995, establishes accounting standards for the impairment of long-lived assets, certain intangibles, and goodwill related to those assets. The Company does not expect this Statement to have a material effect on the consolidated financial statements. ACCOUNTING FOR MORTGAGE SERVICING RIGHTS -- The Financial Accounting Standards Board issued SFAS No. 122, "Accounting for Mortgage Servicing Rights," which is an amendment to SFAS No. 65, "Accounting for Certain Mortgage Banking Activities." This Statement establishes accounting standards for originated mortgage servicing rights. Under the new Statement, all capitalized mortgage servicing rights are evaluated for impairment based on the excess of the mortgage servicing rights over their fair value. SFAS No. 122 was adopted by the Company on January 1, 1995 and did not have a significant effect on the Company's financial position or results of operation. ACCOUNTING FOR STOCK-BASED COMPENSATION -- Effective as of January 1, 1996, SFAS No. 123, "Accounting for Stock-Based Compensation," will require increased disclosure of compensation expense arising A-7 UMB FINANCIAL CORPORATION NOTES TO FINANCIAL STATEMENTS -- CONTINUED from both fixed and performance stock compensation plans. Compensation will be measured as the fair value of the award at the date it is granted using an option-pricing model that takes into account the exercise price and expected term of the option, the current price of the underlying stock, its expected volatility, expected dividends on the stock and the expected risk-free rate of return during the term of the option. The compensation cost would be recognized over the service period, usually the period from the grant date to the vesting date. SFAS No. 123 encourages rather than requires companies to adopt a new method that accounts for stock compensation awards based on their estimated fair value at the date they are granted. Companies would be permitted, however, to continue accounting under APB Opinion No. 25 which requires compensation cost for stock-based employee compensation plans be recognized based on the difference, if any, between the quoted market price of the stock and the amount an employee must pay to acquire the stock. The Company will continue to apply APB Opinion No. 25 in its financial statements and will disclose pro forma net income and earnings per share in a footnote to future financial statements, determined as if the Company applied the new method. ACQUISITIONS On December 13, 1995, the Company acquired First Sooner Bancshares, the one- bank holding company of The Oklahoma Bank, Oklahoma City, Oklahoma (now UMB Oklahoma Bank), for $12.7 million. The acquisition was funded with existing working capital. The acquisition of this $139 million bank was recorded as a purchase, with $3.3 million recorded as premium on purchased bank. This acquisition is not deemed to be material in relation to the consolidated results of the Company. As of June 25, 1993, the Company had consummated the acquisitions of eight Kansas bank holding companies (the "Kansas banks"). During 1994, these Kansas banks were merged to form two banks, UMB National Bank of America and UMB Bank Kansas. The eight companies and their subsidiary banks are presented below:
NUMBER OF COMPANY ACQUISITION COMPANY/ ASSETS AS OF SHARES DATE SUBSIDIARY BANKS ACQUISITION ISSUED (NET) CASH ----------- ---------------- ------------ ----------- --------- (IN (IN MILLIONS) THOUSANDS) 3/26/93 Farmers Bancshares, Inc.... $ 57 168,898 $ 2,329 Farmers National Bank 4/30/93 NBA Bankshares, Inc........ 125 276,497 4,986 The National Bank of America 5/14/93 M L Bancshares, Inc........ 159 308,578 6,620 Russell State Bank Security State Bank 5/17/93 Highland Bancshares, Inc... 103 265,754 2,299 Highland Park Bank & Trust 5/17/93 North Plaza Bancshares, 43 -- 7,433 Inc....................... North Plaza State Bank 5/28/93 BellCorp, Inc.............. 110 373,951 2,894 Citizens Bank & Trust Co. 6/14/93 Overland Park Bancshares, 188 1,021,580 -- Inc....................... Overland Park State Bank & Trust Co. 6/25/93 CNB Financial Corporation.. 504 1,526,770 -- Commercial National Bank City National Bank First Bank & Trust, N.A. Security State Bank ------ --------- ------- Total...................... $1,289 3,942,028 $26,561 ====== ========= =======
A-8 UMB FINANCIAL CORPORATION NOTES TO FINANCIAL STATEMENTS -- CONTINUED The cash portion of the purchase prices was obtained principally through the issuance of debt by the Company. On February 24, 1993, the Company issued $10 million in medium-term notes due 2000 at 6.81% and $15 million in medium-term notes due 2003 at 7.30%. The acquisitions of the Kansas banks have been accounted for by the Company under the purchase method of accounting in accordance with Accounting Principles Board Opinion No. 16, "Business Combinations," as amended. Under this method of accounting, the purchase prices have been allocated to assets acquired and liabilities assumed based on their estimated fair values, including applicable income tax effects, at the effective dates of the acquisitions. Income of the combined company does not include income of the acquired companies prior to the effective dates of the acquisitions. The following table presents supplementary information regarding the acquisitions of the Kansas banks (in thousands): Fair values of assets acquired: Securities.......................................................... $ 529,111 Net loans........................................................... 522,111 Federal funds sold and resell agreements............................ 85,207 Core deposit intangible............................................. 12,756 Other............................................................... 140,108 ---------- Total............................................................. $1,289,293 ---------- Fair values of liabilities assumed: Deposits............................................................ $1,062,992 Federal funds purchased and repurchase agreements................... 74,984 Borrowed funds...................................................... 6,103 Other............................................................... 19,190 ---------- Total............................................................. $1,163,269 ---------- Fair value of net assets acquired................................... $ 126,024 ---------- Purchase prices of acquisitions: Issuance of common stock (net of treasury stock acquired)........... $ 148,928 Cash paid........................................................... 26,561 Direct costs of acquisitions........................................ 963 Previous investments in institutions acquired....................... 1,506 ---------- Total............................................................. $ 177,958 ---------- Goodwill (excess of purchase prices over fair value of net assets acquired).......................................................... $ 51,934 ==========
The following unaudited pro forma consolidated financial information gives effect to the Kansas banks as if they were all acquired on January 1, 1993 These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which actually would have resulted had the combinations been in effect on the dates indicated, or which may result in the future.
YEAR ENDED DECEMBER 31, 1993 -------------------- (IN THOUSANDS EXCEPT PER SHARE DATA) Net interest income........................................ $180,663 Noninterest income......................................... 137,937 Net income................................................. 44,715 Net income per share....................................... 2.09
A-9 UMB FINANCIAL CORPORATION NOTES TO FINANCIAL STATEMENTS -- CONTINUED ALLOWANCE FOR LOAN LOSSES The table below provides an analysis of the allowance for loan losses for the three years ended December 31, 1995 (in thousands):
YEAR ENDED DECEMBER 31 ------------------------- 1995 1994 1993 ------- ------- ------- Allowance -- beginning of year...................... $32,527 $35,590 $24,456 Allowances of acquired banks........................ 485 -- 12,076 Additions (deductions): Charge-offs........................................ $(8,090) $(8,269) $(7,135) Recoveries......................................... 2,673 2,566 2,861 ------- ------- ------- Net charge-offs................................... $(5,417) $(5,703) $(4,274) Provision charged to expense........................ 5,090 2,640 3,332 ------- ------- ------- Allowance -- end of year............................ $32,685 $32,527 $35,590 ======= ======= =======
At December 31, 1995, the amount of loans that were considered to be impaired under SFAS No. 114 was $1,069,000. All of the loans were on a nonaccrual or restructured basis. Included in the impaired loans was $385,000 of loans for which the related allowance was $141,000. The remaining $684,000 of impaired loans did not have an allowance for loan losses as a result of write-downs and supporting collateral value. The average recorded investment in impaired loans during the year ended December 31, 1995, was approximately $1,008,000. The Company had no material amount recorded as interest income on its impaired loans for the year ended December 31, 1995. SECURITIES AVAILABLE FOR SALE The table below provides detailed information for securities available for sale at December 31, 1995, 1994 and 1993 (in thousands):
DECEMBER 31 ------------------------------------------- AMORTIZED UNREALIZED UNREALIZED COST GAINS LOSSES FAIR VALUE ---------- ---------- ---------- ---------- 1995 U.S. Treasury....................... $1,679,881 $ 8,928 $ (2,493) $1,686,316 U.S. Agencies....................... 498,310 679 (922) 498,067 Mortgage-backed..................... 147,194 162 (1,575) 145,781 Federal Reserve Bank Stock.......... 3,656 -- -- 3,656 Equity.............................. 1,713 1,028 -- 2,741 Other............................... 13 -- -- 13 ---------- ------- -------- ---------- Total.............................. $2,330,767 $10,797 $ (4,990) $2,336,574 ========== ======= ======== ========== 1994 U.S. Treasury....................... $2,197,912 $ 76 $(55,571) $2,142,417 U.S. Agencies....................... 69,774 115 (595) 69,294 Mortgage-backed..................... 57,969 57 (2,549) 55,477 Federal Reserve Bank Stock.......... 3,656 -- -- 3,656 Equity.............................. 2,764 1,544 (60) 4,248 Other............................... 121 -- -- 121 ---------- ------- -------- ---------- Total.............................. $2,332,196 $ 1,792 $(58,775) $2,275,213 ========== ======= ======== ========== 1993 U.S. Treasury....................... $2,518,436 $23,457 $ (2,414) $2,539,479 U.S. Agencies....................... 76,585 -- (281) 76,304 Mortgage-backed..................... 73,293 328 (149) 73,472 Federal Reserve Bank Stock.......... 4,620 -- -- 4,620 Equity.............................. 3,940 2,187 (60) 6,067 Other............................... 270 -- -- 270 ---------- ------- -------- ---------- Total.............................. $2,677,144 $25,972 $ (2,904) $2,700,212 ========== ======= ======== ==========
A-10 UMB FINANCIAL CORPORATION NOTES TO FINANCIAL STATEMENTS -- CONTINUED The following table presents contractual maturity information for securities available for sale at December 31, 1995. 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.................................... $1,183,017 $1,181,901 Due after 1 year through 5 years......................... 992,239 999,604 Due after 5 years through 10 years....................... 2,935 2,878 ---------- ---------- Total................................................... $2,178,191 $2,184,383 ---------- ---------- Mortgage-backed securities............................... 147,194 145,781 Equity securities and other.............................. 5,382 6,410 ---------- ---------- Total securities available for sale..................... $2,330,767 $2,336,574 ========== ==========
Securities available for sale with a market value of $1,784,018,000 at December 31, 1995, $1,476,231,000 at December 31, 1994, and $1,554,257,000 at December 31, 1993, were pledged to secure U.S. Government deposits, other public deposits and certain trust deposits as required by law. During 1995, proceeds from the sales of securities available for sale were $411,351,000 compared to $150,570,000 for 1994. Securities transactions resulted in gross realized gains of $3,734,000 for 1995 and $3,719,000 for 1994. The gross realized losses were $2,318,000 for 1995 and $87,000 for 1994. The net unrealized holding gain (loss) on trading securities at December 31, 1995 and 1994, was $77,000 and $(39,000), respectively, and was included in trading and investment banking income. INVESTMENT SECURITIES The table below provides detailed information for investment securities at December 31, 1995, 1994 and 1993 (in thousands):
DECEMBER 31 ----------------------------------------- AMORTIZED UNREALIZED UNREALIZED FAIR 1995 COST GAINS LOSSES VALUE --------- ---------- ---------- -------- State and political subdivisions...... $ 311,757 $ 2,435 $ (1,019) $313,173 ========= ========== ========== ======== 1994 Mortgage-backed....................... $ 86,278 $ -- $ (5,340) $ 80,938 State and political subdivisions...... 298,556 823 (6,673) 292,706 --------- ---------- ---------- -------- Total............................... $ 384,834 $ 823 $ (12,013) $373,644 ========= ========== ========== ======== 1993 State and political subdivisions...... $ 278,944 $ 4,111 $ (709) $282,346 ========= ========== ========== ========
A-11 UMB FINANCIAL CORPORATION NOTES TO FINANCIAL STATEMENTS -- CONTINUED The following table presents contractual maturity information for investment securities at December 31, 1995. 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.
AMORTIZED FAIR COST VALUE --------- -------- (IN THOUSANDS) Due in 1 year or less....................................... $ 95,686 $ 95,586 Due after 1 year through 5 years............................ 168,755 169,800 Due after 5 years through 10 years.......................... 46,917 47,360 Due after 10 years.......................................... 399 427 -------- -------- Total investment securities............................... $311,757 $313,173 ======== ========
There were no sales of investment securities during 1995 and 1994. During 1993, proceeds from sales of investment securities were $697,000 and gross realized gains were $17,000. There were no gross realized losses on such sales for 1993. Investment securities with a market value of $36,627,000 at December 31, 1995, $1,190,000 at December 31, 1994 and $5,356,000 at December 31, 1993, were pledged to secure U.S. Government deposits, other public deposits and certain trust deposits as required by law. LOANS TO MANAGEMENT Certain Company and principal affiliate bank executive officers and directors, including companies in which those persons are principal holders of equity securities or are general partners, borrow in the normal course of business from affiliate banks of the Company. All such loans have been made on the same terms, including interest rates and collateral, as those prevailing at the same time for comparable transactions with other persons. In addition, all such loans are current as to repayment terms. For the years 1995, 1994 and 1993, an analysis of activity with respect to such aggregate loans to related parties appears below (in thousands):
YEAR ENDED DECEMBER 31 ------------------------------- 1995 1994 1993 --------- --------- --------- Balance -- beginning of year................... $ 158,330 $ 111,921 $ 142,880 New loans..................................... 798,688 458,400 377,601 Repayments.................................... (778,579) (411,991) (408,560) --------- --------- --------- Balance -- end of year......................... $ 178,439 $ 158,330 $ 111,921 ========= ========= =========
BANK PREMISES AND EQUIPMENT Bank premises and equipment are stated at cost less accumulated depreciation, which is computed primarily on an accelerated method. Bank premises are depreciated over a 20- to 40-year life span, while equipment is depreciated over a life span of 3 to 20 years. Bank premises and equipment consisted of the following (in thousands):
DECEMBER 31 ------------------------------- 1995 1994 1993 --------- --------- --------- Land........................................... $ 31,975 $ 29,873 $ 27,622 Buildings and leasehold improvements........... 146,411 134,401 133,651 Equipment...................................... 138,558 122,025 111,571 --------- --------- --------- $ 316,944 $ 286,299 $ 272,844 Accumulated depreciation....................... (169,368) (156,038) (143,946) --------- --------- --------- Bank premises and equipment, net............... $ 147,576 $ 130,261 $ 128,898 ========= ========= =========
A-12 UMB FINANCIAL CORPORATION NOTES TO FINANCIAL STATEMENTS -- CONTINUED Consolidated rental and operating lease expenses were $2,820,000 in 1995, $2,522,000 in 1994 and $2,932,000 in 1993. Minimum rental commitments as of December 31, 1995, for all noncancelable operating leases are: 1996 -- $2,321,000; 1997 -- $2,095,000; 1998 -- $2,033,000; 1999-- $1,637,000; 2000 -- $851,000; and thereafter -- $10,666,000. BORROWED FUNDS The components of the Company's short-term and long-term debt were as follows (in thousands):
DECEMBER 31 ----------------------- 1995 1994 1993 ------- ------- ------- SHORT-TERM DEBT U.S. Treasury demand notes and other................... $ 501 $ 872 $ 1,453 ------- ------- ------- 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............................ 12,000 15,000 15,000 7.50% notes maturing serially through 1997............. 3,093 4,639 6,186 8.00% note maturing serially through 2000.............. 643 724 799 8.83% senior notes due 1996............................ -- 890 4,462 7.50% note maturing serially through 2015.............. -- 77 82 ------- ------- ------- Total long-term debt................................. $40,736 $46,330 $51,529 ------- ------- ------- Total borrowed funds................................. $41,237 $47,202 $52,982 ======= ======= =======
Long-term debt represents direct, unsecured obligations of the parent company. The senior notes due in 2000 and 2003 cannot be redeemed prior to stated maturity. The senior notes due in 1996 required annual redemptions of $3,572,000. Optional prepayments without premiums were made on the senior notes due in 1996 of $2,678,000 in 1993 and $3,572,000 in 1992. The senior notes due in 1999 require annual redemptions of $3,000,000 beginning in 1995. The 7.50% notes that mature in 1997 require annual principal payments of $1,546,000. The senior notes contain financial covenants relating to the issuance of additional debt, payment of dividends, reacquisition of common stock and maintenance of minimum tangible capital. Under the most restrictive covenant, approximately $102,848,000 was available for the payment of dividends at December 31, 1995. 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, 1995, was $672,940,000 (with accrued interest payable of $926,000). Of that amount, $1,970,000 represented sales of securities in which the securities were obtained under reverse repurchase agreements ("resell agreements"). The remainder of $670,970,000 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 MATURITY OF THE CARRYING MARKET REPURCHASE INTEREST REPURCHASE LIABILITIES AMOUNT VALUE LIABILITIES RATE - ---------------------- -------- -------- ----------- -------- On demand................................ $516,541 $535,838 $526,064 4.87% 2 to 30 days............................. 83,867 86,368 80,507 5.19 31 to 90 days............................ 23,231 24,136 23,628 5.39 Over 90 days............................. 39,823 41,581 40,771 5.57 -------- -------- -------- ---- Total................................... $663,462 $687,923 $670,970 4.97% ======== ======== ======== ====
A-13 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, state banks that are Federal Reserve members and state banks in Colorado and 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 banks in Missouri, Kansas and Illinois are subject to state laws permitting dividends to be declared from retained earnings, provided certain specified capital requirements are met. At December 31, 1995 approximately $25,384,000 of the equity of the affiliate banks was available for distribution as dividends to the parent company without prior regulatory approval or without reducing the capital of the respective affiliate banks below prudent levels. The Company is required to maintain minimum amounts of capital to total "risk weighted" assets, as defined by the banking regulators. At December 31, 1995, 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 15.17% and 16.16%, respectively. The Company's leverage ratio at December 31, 1995, was 8.02%. Certain affiliate banks maintain reserve balances with the Federal Reserve Bank as required by law. During 1995, this amount averaged $137,259,000. EMPLOYEE BENEFITS The Company has a noncontributory profit sharing plan, which features an employee stock ownership plan. These plans are for the benefit of substantially all officers and employees of the Company and its subsidiaries. Contributions to these plans for the years 1995, 1994 and 1993 were $5,000,000, $3,983,000, and $3,542,00, respectively. 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 $144,000 for 1995. Substantially all officers and employees are covered by a noncontributory defined benefit pension plan. Under the plan, retirement benefits are based on years of service and the average of the employee's highest 120 consecutive months of compensation. The Company's funding policy is to contribute annually the maximum amount that can be deducted for federal income tax purposes. Contributions are intended to provide not only for benefits attributed to service to date but also for those expected to be earned in the future. To the extent that these requirements are fully covered by assets in the plan, a contribution may not be made in a particular year. The pension plan was amended in January 1995 whereby the plan would not accept any new participants. This change was made with consideration given to discontinuing the current plan at a future date. New employees of the Company that are not eligible to participate in the pension plan will receive a partial matching contribution to the qualified 401(k) plan, as amended. The following items are components of the net periodic pension expense (income) for the three years ended December 31, 1995 (in thousands):
YEAR ENDED DECEMBER 31 ------------------------- 1995 1994 1993 ------- ------- ------- Service costs -- benefits earned during the year..... $ 2,234 $ 1,998 $ 1,463 Interest cost on projected benefit obligation........ 2,330 2,100 2,059 Actual return on plan assets......................... (2,130) 70 (2,208) Net amortization and deferral........................ (789) (3,343) (1,626) ------- ------- ------- Net periodic pension expense (income).............. $ 1,645 $ 825 $ (312) ======= ======= =======
A-14 UMB FINANCIAL CORPORATION NOTES TO FINANCIAL STATEMENTS -- CONTINUED Assumptions used in accounting for the plan were as follows:
1995 1994 1993 ---- ---- ---- Weighted average discount rate................................ 7.00% 7.50% 7.50% Rate of increase in future compensation levels................ 4.25 4.25 4.25 Expected long-term rate of return on assets................... 8.00 8.00 8.00
The following table sets forth the pension plan's funded status, using valuation dates of September 30, 1995, 1994 and 1993 (in thousands):
1995 1994 1993 -------- -------- -------- Actuarial present value of benefit obligation: Vested benefits................................. $(26,588) $(24,395) $(20,177) Nonvested benefits.............................. (1,008) (1,198) (1,027) -------- -------- -------- Accumulated benefit obligation.................. $(27,596) $(25,593) $(21,204) Additional benefits based on estimated future salary levels.................................. (7,738) (6,677) (7,804) -------- -------- -------- Projected benefit obligation................... $(35,334) $(32,270) $(29,008) Plan assets at fair value, primarily U.S. obliga- tions........................................... 31,109 31,874 34,701 -------- -------- -------- Plan assets in excess (deficiency) of projected benefit obligation.............................. $ (4,225) $ (396) $ 5,693 Unrecognized net loss from past experience dif- ferent from that assumed........................ 11,268 10,120 6,028 Prior service cost not yet recognized in net pe- riodic pension cost............................. 327 361 260 Unrecognized net transition asset being recog- nized over 10.66 years.......................... (1,778) (2,848) (3,919) -------- -------- -------- Prepaid pension cost included in other assets.... $ 5,592 $ 7,237 $ 8,062 ======== ======== ========
On April 16, 1992, the shareholders of the Company approved the 1992 Incentive Stock Option Plan ("the 1992 Plan"), which provides incentive options to certain key employees for up to 500,000 common shares of the Company. The options are not exercisable for two years from the date of the grant and are thereafter exercisable for such periods as the Board of Directors, or a committee thereof, specify (which may not exceed 10 years), provided that the optionee has remained in the employment of the Company or its subsidiaries. The Board or the committee may accelerate the exercise period for an option upon the optionee's disability, retirement or death. All options expire at the end of the exercise period. The Company makes no recognition in the balance sheet of the options until such options are exercised and no amounts applicable thereto are reflected in net income. Options are granted at not less than 100% of fair market value at date of grant. Activity in the 1992 Plan for the three years ended December 31, 1995, is summarized in the following table:
NUMBER OF OPTION PRICE STOCK OPTIONS UNDER THE 1992 PLAN SHARES PER SHARE - --------------------------------- --------- ---------------- Outstanding -- January 1, 1993...................... 17,733 $30.57 to $33.64 Granted............................................ 18,726 30.88 to 33.96 Canceled........................................... (484) to 30.57 ------ ---------------- Outstanding -- December 31, 1993.................... 35,975 $30.57 to $33.96 Granted............................................ 17,888 28.74 to 31.62 Canceled........................................... (5,082) 30.57 to 30.88 ------ ---------------- Outstanding -- December 31, 1994.................... 48,781 $28.74 to $33.97 Granted............................................ 22,627 39.76 to 43.74 Canceled........................................... (3,432) 28.74 to 33.97 ------ ---------------- Outstanding -- December 31, 1995.................... 67,976 $28.74 to $43.74 ====== ================ Exercisable -- December 31, 1995.................... 13,894 $30.52 to $33.97
All figures have been restated to reflect the 10% stock dividend paid January 2, 1996. A-15 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, 1995, is summarized in the following table:
NUMBER OF OPTION PRICE STOCK OPTIONS UNDER THE 1981 PLAN SHARES PER SHARE - --------------------------------- --------- ---------------- Outstanding -- January 1, 1993....................... 181,514 $ 9.76 to $29.28 Canceled............................................ (3,594) 19.30 to 26.61 Exercised........................................... (35,642) 9.76 to 23.85 ------- ---------------- Outstanding -- December 31, 1993..................... 142,278 $12.01 to $29.28 Canceled............................................ (25,422) 16.97 to 24.22 Exercised........................................... (23,532) 12.01 to 26.23 ------- ---------------- Outstanding -- December 31, 1994..................... 93,324 $17.03 to $29.28 Canceled............................................ (18,401) 17.05 to 26.62 Exercised........................................... (6,665) 17.03 to 21.48 ------- ---------------- Outstanding -- December 31, 1995..................... 68,258 $19.28 to $29.28 ======= ================ Exercisable -- December 31, 1995..................... 66,602 $19.28 to $29.28
All figures have been restated to reflect the 10% stock dividend paid January 2, 1996. COMMON STOCK The following table summarizes the share transactions for the three years ended December 31, 1995:
SHARES SHARES SHARES IN SUBJECT TO ISSUED TREASURY REPURCHASE ---------- ---------- ---------- Balance -- January 1, 1993................... 14,785,172 (1,003,700) -- Issued (received) in acquisitions........... 4,141,135 (199,107) -- Purchase of treasury stock.................. -- (126,996) -- Issued in stock options..................... -- 29,457 -- ---------- ---------- ---------- Balance -- December 31, 1993................. 18,926,307 (1,300,346) -- Stock dividend (10%)........................ 1,751,251 -- -- Purchase of treasury stock.................. -- (396,984) -- Issued in stock options..................... -- 20,879 -- ---------- ---------- ---------- Balance -- December 31, 1994................. 20,677,558 (1,676,451) -- Stock dividend (10%)........................ 1,869,963 -- -- Purchase of treasury stock.................. -- (312,517) -- Issued in stock options..................... -- 16,729 -- Common stock repurchase commitment.......... -- -- (1,068,533) ---------- ---------- ---------- Balance -- December 31, 1995................. 22,547,521 (1,972,239) (1,068,533) ========== ========== ==========
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 A-16 UMB FINANCIAL CORPORATION NOTES TO FINANCIAL STATEMENTS -- CONTINUED 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 sheet. The contract or notional amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit, commercial letters of credit and standby letters of credit is represented by the contract or notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. For futures contracts, the contract or notional amounts do not represent exposure to credit loss. 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, interest 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. The contract amount of open positions in financial futures contracts at December 31, 1995 was $59.1 milion and $36.0 million at December 31, 1994. Open futures contract positions averaged $42.6 million and $44.5 million during the years ended December 31, 1995 and 1994, respectively. Net futures activity resulted in losses of $3.4 million for 1995 and gains of $2.7 million for 1994. 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-17 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. The Company had foreign exchange contracts at December 31, 1995 of $4.5 million and no foreign exchange contracts at December 31, 1994. During 1995 contracts to purchase and to sell foreign currency averaged approximately $1.7 million, compared to $1.2 million during 1994. The gain or loss on these foreign exchange contracts for 1995 and 1994 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 and Illinois. At December 31, 1995, 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 -------------------------- 1995 1994 1993 -------- -------- -------- (IN THOUSANDS) Financial instruments whose contract amounts repre- sent credit risk: Commitments to extend credit for loans (excluding credit card plans)............................... $637,696 $568,017 $592,395 Commitments to extend credit under credit card plans............................................ 850,006 729,417 715,188 Commercial letters of credit...................... 14,864 16,047 17,281 Standby letters of credit......................... 69,492 72,718 74,046 Financial instruments whose notional or contract amounts exceed the amount of credit risk: Futures contracts................................. $ 59,100 $ 36,000 $ 58,500
COMMON STOCK REPURCHASE COMMITMENT On December 14, 1995, the Company and its Employee Stock Ownership Plan (ESOP) entered into a commitment to repurchase 1,581,133 shares of common stock of the Company at a price of $43.50 per share. On January 2, 1996, a total of 1,068,533 of those shares were acquired from the Seller. The Company acquired 688,533 of such shares for treasury stock purposes using existing working capital. The remaining 380,000 shares were purchased by the ESOP and funded by a seven-year, 6.1% fixed rate loan, which is guaranteed by the Company. The accompanying balance sheet at December 31, 1995 reflects the shares acquired in January as temporary equity with a corresponding reduction of shareholders' equity. The remaining 512,600 common shares to be purchased are not presently owned by the Seller, but are subject to an option agreement with a third-party financial institution. Due to uncertainties surrounding the transfer of such options to the Company and continued regulatory approval, the remaining shares, which will be purchased in equal installments in March and June of 1996, have not been recorded as temporary equity. A-18 UMB FINANCIAL CORPORATION NOTES TO FINANCIAL STATEMENTS -- CONTINUED INCOME TAXES Income taxes as set forth below produce effective federal income tax rates of 30.77% in 1995, 29.78% in 1994 and 30.17% in 1993. 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 ------------------------- 1995 1994 1993 ------- ------- ------- Federal Currently payable.................................... $26,885 $19,512 $18,000 Deferred............................................. (3,698) 770 (232) ------- ------- ------- Total federal tax provision........................ $23,187 $20,282 $17,768 State Currently payable.................................... 2,517 2,683 2,355 Deferred............................................. (257) (380) 7 ------- ------- ------- Total tax provision................................ $25,447 $22,585 $20,130 ======= ======= ======= Tax effect of security gains included above.......... $ 496 $ 1,271 $ 562
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 ------------------------- 1995 1994 1993 ------- ------- ------- Provision at statutory rate......................... $27,168 $24,640 $21,437 Tax-exempt interest income.......................... (5,698) (5,016) (4,966) Disallowed interest expense......................... 642 484 474 State and local income taxes, net of federal tax benefits........................................... 1,470 1,497 1,582 Amortization of intangibles of purchased banks...... 1,877 1,881 1,420 Other............................................... (12) (901) 183 ------- ------- ------- Total tax provision............................... $25,447 $22,585 $20,130 ======= ======= =======
Deferred taxes are recorded based upon differences between the financial statement and tax basis of assets and liabilities. A-19 UMB FINANCIAL CORPORATION NOTES TO FINANCIAL STATEMENTS -- CONTINUED Temporary differences which comprise a significant portion of deferred tax assets and liabilities at December 31, 1995, 1994 and 1993 were as follows (in thousands):
1995 1994 1993 -------- -------- -------- Deferred tax liabilities: Net unrealized gain of securities available for sale............................................ $ 2,195 $ -- $ 8,735 Asset revaluations on purchased banks............ 6,981 6,557 8,130 Depreciation..................................... 5,262 5,269 5,001 Pension.......................................... 2,106 2,765 3,078 Insurance........................................ 1 1,945 -- Tax allowance for loan losses.................... 346 823 1,484 Miscellaneous.................................... 93 165 54 -------- -------- -------- Total deferred tax liabilities................. $ 16,984 $ 17,524 $ 26,482 -------- -------- -------- Deferred tax assets: Net unrealized loss on securities available for sale............................................ $ -- $(21,771) $ -- Allowance for loan losses........................ (12,390) (12,349) (13,480) Miscellaneous.................................... (875) (849) (333) -------- -------- -------- Total deferred tax assets...................... $(13,265) $(34,969) $(13,813) -------- -------- -------- Net deferred tax liability (asset)............... $ 3,719 $(17,445) $ 12,669 ======== ======== ========
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS SFAS No. 107, "Disclosure about Fair Value of Financial Instruments," requires disclosures about the fair value of all financial instruments, whether or not recognized in the balance sheet. The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: CASH AND SHORT-TERM INVESTMENTS -- The carrying amounts of cash and due from banks, federal funds sold and resell agreements are reasonable estimates of their fair values. SECURITIES AVAILABLE FOR SALE AND INVESTMENT SECURITIES -- Fair values are based on quoted market prices or dealer quotes, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. TRADING SECURITIES -- Fair values for trading securities (including 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 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, 1995, 1994 and 1993. 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. A-20 UMB FINANCIAL CORPORATION NOTES TO FINANCIAL STATEMENTS -- CONTINUED 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 on 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, 1995, 1994 and 1993 are as follows (in millions):
1995 1994 1993 ------------------ ------------------ ------------------ CARRYING FAIR CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE -------- -------- -------- -------- -------- -------- Financial assets: Cash and short-term in- vestments............. $ 785.6 $ 785.6 $1,305.0 $1,305.0 $1,005.6 $1,005.6 Securities available for sale.............. 2,336.6 2,336.6 2,275.2 2,275.2 2,700.2 2,700.2 Investment securities.. 311.8 313.2 384.8 373.6 278.9 282.4 Trading securities..... 86.0 86.0 31.0 31.0 83.7 83.7 Loans.................. $2,452.5 $2,438.2 $2,269.6 $2,209.6 $2,159.7 $2,156.8 Less: allowance for loan losses........... (32.7) -- (32.5) -- (35.6) -- -------- -------- -------- -------- -------- -------- Net loans............ $2,419.8 $2,438.2 $2,237.1 $2,209.6 $2,124.1 $2,156.8 -------- -------- -------- -------- -------- -------- Total financial as- sets................ $5,939.8 $5,959.6 $6,233.1 $6,194.4 $6,192.5 $6,228.7 ======== ======== ======== ======== ======== ======== Financial liabilities: Demand and savings de- posits................ $3,512.0 $3,512.0 $3,991.6 $3,991.6 $3,852.6 $3,852.6 Time deposits.......... 1,301.7 1,299.9 1,141.2 1,132.9 1,309.1 1,314.1 Federal funds and re- purchase.............. 721.4 721.4 801.0 801.0 625.1 625.1 Short-term debt........ .5 .5 .9 .9 1.5 1.5 Long-term debt......... 40.7 39.0 46.3 45.6 51.5 53.9 -------- -------- -------- -------- -------- -------- Total financial lia- bilities............ $5,576.3 $5,572.8 $5,981.0 $5,972.0 $5,839.8 $5,847.2 ======== ======== ======== ======== ======== ========
The fair value estimates presented herein are based on pertinent information available to management as of December 31, 1995, 1994 and 1993. 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-21 UMB FINANCIAL CORPORATION NOTES TO FINANCIAL STATEMENTS -- CONTINUED PARENT COMPANY FINANCIAL INFORMATION
DECEMBER 31 ---------------------------- 1995 1994 1993 -------- -------- -------- (IN THOUSANDS) BALANCE SHEET Assets: Investment in subsidiaries: Banks........................................... $589,846 $567,381 $605,148 Non-banks....................................... 8,692 8,336 7,616 -------- -------- -------- Total investment in subsidiaries.............. $598,538 $575,717 $612,764 Premiums on purchased banks..................... 12,768 14,278 15,803 Securities available for sale and other......... 69,349 21,530 16,511 -------- -------- -------- Total assets.................................. $680,655 $611,525 $645,078 ======== ======== ======== Liabilities and Shareholders' Equity: Dividends payable............................... $ 3,789 $ 3,804 $ 3,536 Notes payable to others......................... 40,093 45,529 50,647 Accrued expenses and other...................... 14,333 4,886 4,252 -------- -------- -------- Total liabilities............................. $ 58,215 $ 54,219 $ 58,435 Common stock repurchase commitment.............. 46,481 -- -- Shareholders' equity............................ 575,959 557,306 586,643 -------- -------- -------- Total liabilities and shareholders' equity.... $680,655 $611,525 $645,078 ======== ======== ======== STATEMENT OF INCOME Income: Dividends received from affiliate banks......... $ 53,114 $ 38,781 $ 41,285 Service fees from subsidiaries.................. 9,790 4,882 7,101 Net security gains.............................. 426 618 249 Other........................................... 762 298 371 -------- -------- -------- Total income.................................. $ 64,092 $ 44,579 $ 49,006 -------- -------- -------- Expense: Salaries and employee benefits.................. $ 3,834 $ 3,624 $ 3,188 Interest on notes payable: Affiliate bank.................................. 21 9 46 Other........................................... 3,399 3,952 4,334 Services from affiliate banks................... 654 662 870 Other........................................... 11,149 11,624 11,032 -------- -------- -------- Total expense................................. $ 19,057 $ 19,871 $ 19,470 -------- -------- -------- Income before income taxes and equity in undis- tributed earnings of subsidiaries.............. $ 45,035 $ 24,708 $ 29,536 Income tax benefit.............................. (2,356) (4,417) (3,639) -------- -------- -------- Income before equity in undistributed earnings of subsidiaries................................ $ 47,391 $ 29,125 $ 33,175 Equity in undistributed earnings of subsidiar- ies: Banks........................................... 5,031 18,220 7,498 Non-banks....................................... (246) 469 446 -------- -------- -------- Net income.................................... $ 52,176 $ 47,814 $ 41,119 ======== ======== ======== STATEMENT OF CASH FLOWS Operating Activities: Net income...................................... $ 52,176 $ 47,814 $ 41,119 Equity in earnings of subsidiaries.............. (57,899) (57,470) (49,229) Gains from sales of securities available for sale........................................... (426) (618) (249) Other........................................... 477 1,329 766 -------- -------- -------- Net cash used by operating activities.......... $ (5,672) $ (8,945) $ (7,593) -------- -------- -------- Investing Activities: Increase in Commercial Paper.................... $(39,955) $ -- $ -- Proceeds from sales of securities available for sale........................................... 1,665 1,687 319 Proceeds from maturities of securities held to maturity....................................... 12,650 -- -- Purchases of securities available for sale...... (20,141) -- -- Net increase in repurchase agreements........... (4,000) (5,500) (2,160) Net capital investment in affiliate banks....... 32,778 6,819 (29,789) Dividends received from subsidiaries............ 53,114 38,781 41,285 Net capital expenditures for premises and equip- ment........................................... (80) (211) (159) -------- -------- -------- Net cash provided by investing activities....... $ 36,031 $ 41,576 $ 9,496 -------- -------- -------- Financing Activities: Issuance of long-term debt...................... $ -- $ -- $ 25,000 Repayments of long-term debt.................... (5,436) (5,118) (7,797) Net increase in short-term debt................. -- -- (500) Cash dividends paid............................. (15,114) (14,669) (13,064) Net purchase of treasury stock.................. (10,751) (12,938) (4,351) -------- -------- -------- Net cash used by financing activities........... $(31,301) $(32,725) $ (712) -------- -------- -------- Net increase (decrease) in cash.................. $ (942) $ (94) $ 1,191 ======== ======== ========
A-22 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, 1995, 1994 and 1993, 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, 1995, 1994 and 1993, and the results of their operations and their cash flows for the years then ended, in conformity with generally accepted accounting principles. As discussed in the Accounting Policies note to the consolidated financial statements, the Company changed its method of accounting for certain investments in debt and equity securities effective December 31, 1993, to conform with Statement of Financial Accounting Standards No. 115. /s/ Deloitte & Touche LLP Kansas City, Missouri January 16, 1996 A-23 UMB FINANCIAL CORPORATION FIVE-YEAR FINANCIAL SUMMARY
1995 1994 1993 1992 1991 ---------- ---------- ---------- ---------- ---------- (IN THOUSANDS EXCEPT PER SHARE DATA) EARNINGS Interest income......... $ 357,055 $ 323,260 $ 283,215 $ 253,367 $ 298,199 Interest expense........ 157,787 136,064 119,718 123,786 171,677 Net interest income..... 199,268 187,196 163,497 129,581 126,522 Provision for loan loss- es..................... 5,090 2,640 3,332 2,981 6,044 Noninterest income...... 143,978 141,745 131,467 113,462 98,691 Noninterest expense..... 260,533 255,902 230,383 184,947 165,774 Net income.............. 52,176 47,814 41,119 39,367 39,485 AVERAGE BALANCES Assets.................. $5,899,169 $6,372,607 $5,766,843 $4,622,968 $4,162,583 Loans, net of unearned interest............... 2,346,325 2,148,606 1,786,529 1,337,305 1,356,082 Securities*............. 2,382,248 2,844,306 2,729,270 2,109,121 1,816,711 Deposits................ 4,581,349 5,021,401 4,559,551 3,595,644 3,189,224 Long-term debt.......... 44,450 50,370 53,522 40,966 46,322 Shareholders' equity.... 597,401 572,446 502,614 385,988 355,570 YEAR-END BALANCES Assets.................. $6,281,328 $6,599,020 $6,528,826 $5,003,187 $4,692,053 Loans, net of unearned interest............... 2,452,526 2,269,617 2,159,761 1,483,048 1,349,144 Securities*............. 2,648,331 2,660,047 2,979,156 2,293,438 1,753,563 Deposits................ 4,813,683 5,132,834 5,161,729 3,843,166 3,410,193 Long-term debt.......... 40,736 46,330 51,529 33,531 42,226 Shareholders' equity.... 575,959 557,306 586,643 399,679 372,683 PER SHARE DATA Earnings................ $ 2.52 $ 2.26 $ 2.13 $ 2.35 $ 2.36 Cash dividends.......... 0.73 0.69 0.66 0.66 0.60 Dividend payout ratio... 28.97% 30.53% 30.99% 28.09% 25.42% Book value.............. $ 29.53 $ 26.66 $ 27.50 $ 23.96 $ 22.32 Market price High................... 45.25 31.41 33.68 34.50 30.78 Low.................... 27.27 26.82 30.16 29.95 19.72 Close.................. 35.25 28.41 30.99 33.05 30.78 RATIOS Return on average as- sets................... 0.88% 0.75% 0.71% 0.85% 0.95% Return on average equi- ty..................... 8.73 8.35 8.18 10.20 11.10 Average equity to as- sets................... 10.13 8.98 8.72 8.35 8.54 Total risk-based capital ratio.................. 16.16 17.85 18.50 20.16 21.25
- -------- Per share information restated for 10% stock dividend paid January 2, 1996. *Securities include investment securities and securities available for sale. A-24 UMB FINANCIAL CORPORATION FINANCIAL REVIEW 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, 1995. 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. OVERVIEW The Company recorded consolidated net income of $52.2 million for the year ended December 31, 1995, compared to $47.8 million and $41.1 million for 1994 and 1993, respectively. These operating results represent a 9.1% increase in net income for 1995 as compared to 1994 and a 16.3% increase for 1994 as compared to 1993. Per share earnings for 1995 were $2.52, an 11.5% increase over 1994 per share earnings of $2.26. Per share results for 1994 represented a 6.1% increase over 1993 results of $2.13. All share and per share data have been restated to give effect to a 10 percent stock dividend distributed to shareholders on January 2, 1996. The Company's improved earnings during 1995 over 1994 were primarily driven by an increase in net interest income, along with a slight increase in noninterest income. These increases were partially offset by an increased provision for loan losses and marginally higher noninterest expenses. A significant factor in the increase in the Company's earnings in 1994 as compared to 1993 was the acquisition of 12 banks in the State of Kansas (the Acquired Banks) during 1993. These acquisitions were completed by the second quarter of 1993. Each of the acquisitions was accounted for as a purchase transaction, therefore the results of operations of the Acquired Banks are included in consolidated earnings from the respective date of acquisition. Per share earnings for both 1995 and 1994 also benefited from a reduction in outstanding shares of the Company's common stock resulting from ongoing share repurchases. The Company continues to consider purchases based on availability, price and alternative use of funds. RESULTS OF OPERATIONS NET INTEREST INCOME Net interest income, the Company's principal source of earnings, is the amount of interest income generated by earning assets less interest expense paid on interest-bearing liabilities. Table 1 summarizes the changes in net interest income resulting from changes in volume and rates for the past two years. Net interest income on a fully tax-equivalent basis (FTE), average balance sheet amounts, and the corresponding yields and rates for the years 1991 through 1995 are shown on pages A-44 and A-45. 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 the obligations of states and local governments. For the year ended December 31, 1995, interest income, on a tax-equivalent basis, increased by $34.7 million to $365.1 million, compared to $330.4 million in 1994 and $290.0 million in 1993. For 1995, interest expense increased by $21.7 million to $157.8 million, compared to $136.1 million in 1994 and $119.7 million in 1993. These changes resulted in an increase in the Company's net interest income, on a tax-equivalent basis, of $13.0 million to $207.3 million during 1995 compared to $194.3 million in 1994 and $170.3 million in 1993. A-25 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) --------------------- ---------- -------------------------- 1995 1994 1995 1994 1995 VS. 1994 VOLUME RATE TOTAL ---------- ---------- ---- ---- ------------------------ -------- ------- ------- Change in interest earned on: $2,346,325 $2,148,606 9.33% 8.06% Loans................... $ 16,857 $28,940 $45,797 Securities: 2,076,169 2,555,231 5.32 4.77 Taxable................. (24,498) 13,104 (11,394) 306,079 289,075 6.83 6.41 Tax-exempt.............. 1,124 1,241 2,365 Federal funds sold and 187,836 337,958 5.86 4.03 resell agreements...... (7,410) 4,787 (2,623) 60,239 56,487 6.19 5.65 Other................... 220 315 535 ---------- ---------- ---- ---- -------- ------- ------- $4,976,648 $5,387,357 7.34% 6.13% Total................... $(13,707) $48,387 $34,680 ---------- ---------- ---- ---- -------- ------- ------- Change in interest paid on: Interest-bearing $3,244,545 $3,576,025 3.75% 2.99% deposits............... $(10,587) $25,223 $14,636 Federal funds purchased and repurchase 613,862 664,499 5.32 3.77 agreements............. (2,032) 9,660 7,628 45,570 51,365 7.70 7.88 Other................... (448) (93) (541) ---------- ---------- ---- ---- -------- ------- ------- $3,903,977 $4,291,889 4.04% 3.17% Total................... $(13,067) $34,790 $21,723 ========== ========== ==== ==== -------- ------- ------- Net interest income..... $ (640) $13,597 $12,957 ======== ======= ======= AVERAGE AVERAGE VOLUME RATE INCREASE (DECREASE) --------------------- ---------- -------------------------- 1994 1993 1994 1993 1994 VS. 1993 VOLUME RATE TOTAL ---------- ---------- ---- ---- ------------------------ -------- ------- ------- Change in interest earned on: $2,148,606 $1,786,529 8.06% 8.06% Loans................... $ 29,173 $ (94) $29,079 Securities: 2,555,231 2,468,796 4.77 4.70 Taxable................. 4,106 1,793 5,899 289,075 260,474 6.41 6.53 Tax-exempt.............. 1,839 (320) 1,519 Federal funds sold and 337,958 320,391 4.03 3.09 resell agreements...... 567 3,171 3,738 56,487 58,156 5.65 5.24 Other................... (89) 235 146 ---------- ---------- ---- ---- -------- ------- ------- $5,387,357 $4,894,346 6.13% 5.92% Total................... $ 35,596 $ 4,785 $40,381 ---------- ---------- ---- ---- -------- ------- ------- Change in interest paid on: Interest-bearing $3,576,025 $3,285,879 2.99% 3.02% deposits............... $ 8,685 $ (854) $ 7,831 Federal funds purchased and repurchase 664,499 581,130 3.77 2.78 agreements............. 2,555 6,347 8,902 51,365 54,937 7.88 8.07 Other................... (284) (103) (387) ---------- ---------- ---- ---- -------- ------- ------- $4,291,889 $3,921,946 3.17% 3.05% Total................... $ 10,956 $ 5,390 $16,346 ========== ========== ==== ==== -------- ------- ------- Net interest income..... $ 24,640 $ (605) $24,035 ======== ======= =======
A-26 Net interest margin measures the Company's ability to generate net interest income. It is defined as net interest income (FTE) as a percent of average earning assets. The behavior of the margin depends on the interaction of three factors: 1) net interest spread (defined as the difference between the yield on earning assets and the rate paid on interest-bearing liabilities); 2) yield earned on assets funded by interest-free funding sources (primarily noninterest-bearing demand deposits and equity capital); and 3) percentage of earning assets funded by interest-free funding sources. TABLE 2: ANALYSIS OF NET INTEREST MARGIN
1995 1994 CHANGE ---------- ---------- --------- (IN THOUSANDS) Average earning assets...................... $4,976,649 $5,387,357 $(410,708) Interest-bearing liabilities................ 3,903,977 4,291,889 (387,912) ---------- ---------- --------- Interest-free funds......................... $1,072,672 $1,095,468 $ (22,796) ========== ========== ========= Free funds ratio (free funds to earning as- 21.55% 20.33% 1.22% sets)...................................... ===== ===== ==== Tax-equivalent yield on earning assets...... 7.34% 6.13% 1.21% Cost of interest-bearing liabilities........ 4.04 3.17 0.87 ----- ----- ---- Net interest spread......................... 3.30% 2.96% 0.34% Benefit of interest-free funds.............. 0.87 0.65 0.22 ----- ----- ---- Net interest margin......................... 4.17% 3.61% 0.56% ===== ===== ====
Earning assets averaged $5.0 billion during 1995 compared to $5.4 billion in 1994 and $4.9 billion in 1993. The decrease in average earnings assets during 1995 was primarily the result of a reduction in investment securities which were used to fund a decrease in deposits. The decrease in deposits was primarily related to deposits associated with the Company's mutual fund processing. The increase in average earning assets in 1994 as compared to 1993 was primarily the result of Acquired Banks. The net interest margin earned by the Company during 1995 was 4.17%, compared to 3.61% in 1994 and 3.48% in 1993. The primary factors in the improvement in the Company's net interest margin in 1995 as compared to 1994 were an overall increase in interest rates and a change in the balance sheet mix of the Company. Average loans increased by $198 million in 1995 and comprised 47% of total earning assets as compared to 40% in 1994 and 37% in 1993. The increase in loans, which occurred during a period of increasing interest rates, has benefited the Company because loans generally reprice faster than investment securities. The increase in the Company's net interest income in 1994 as compared to 1993 was primarily driven by an increase in lending activity. The yield on the Company's earning assets during 1995 was 7.34% compared to 6.13% for 1994 and 5.92% for 1993. During 1995, the Company was in a position to benefit from increasing interest rates due to its floating rate loans, which comprise 55.4% of the loan portfolio and the reinvestment of security maturities and short-term investments. The general increase in interest rates in 1995 as compared to 1994 also resulted in an increase in the Company's cost of funds. Cost of funds increased to 4.04% in 1995 from 3.17% in 1994 and 3.05% in 1993. The 87-basis- point increase in cost of funds for 1995 compares to a 121-basis-point increase in the yield on earning assets for 1995. As a result of these changes, the Company's net interest spread increased to 3.30% for 1995 from 2.96% in 1994 and 2.87% in 1993. This represents the largest net interest spread the Company has earned in eight years. This 1995 increase allowed the Company to increase its net interest income even though average earning assets decreased by 7.6% during 1995. As interest rates increase, the impact on the Company's cost of funds has traditionally been delayed or diluted due to the flexibility the Company has in pricing its core deposits, which comprised 87.6% of average funding sources for 1995. A-27 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 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 1995 1994 1993 1992 1991 - ------------- ------- ------- ------- ------- ------- (IN THOUSANDS) Commercial.............................. $16,150 $16,000 $17,500 $13,250 $14,000 Consumer................................ 13,500 13,400 13,500 10,500 11,000 Real estate............................. 2,500 2,500 3,000 500 1,000 Agricultural............................ 450 500 1,000 100 100 Leases.................................. 50 50 50 50 50 Unallocated............................. 35 77 540 56 91 ------- ------- ------- ------- ------- Total allowance........................ $32,685 $32,527 $35,590 $24,456 $26,241 ======= ======= ======= ======= =======
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 and characteristics 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. At December 31, 1995, the Company's ALL was $32.7 million, compared to $32.5 million and $35.6 million at December 31, 1994 and 1993, respectively. At December 31, 1995, the ALL as a percentage of total loans was 1.3% compared to 1.4% and 1.7% at December 31, 1994 and 1993, respectively. At December 31, 1995, the ALL exceeded total nonperforming loans by $29.0 million compared to an excess of $27.2 million at year-end 1994. 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, 1995. The company's provision for loan losses was $5.1 million in 1995, $2.6 million in 1994 and $3.3 million in 1993. The increase in the provision for loan losses in 1995, compared to the prior two years, is primarily a factor of the increase in the Company's average loans and not indicative of a change in the overall credit quality of the loan portfolio. Net charge-offs in 1995 were $5.4 million compared to $5.7 million and $4.3 million in 1994 and 1993, respectively. Charge-offs of bankcard and other consumer loans have increased for the last two years. The overall increase in consumer indebtedness on a national basis has fueled predictions that the quality of consumer debt will deteriorate and therefore increase losses in the industry. The Company has experienced only a marginal increase in bankcard delinquencies over 30 days, which totaled 3.03% of total bankcard loans at December 31, 1995. There has been no change in the Company's underwriting policies and practices in this area. The delinquency rate and loss rate on the bankcard loan portfolio is and should remain well below industry averages. The Company will continue to closely monitor this area and take appropriate actions, including increasing collection efforts, in order to minimize credit losses. Based on a current assessment of the risk in the total loan portfolio and current economic conditions, and absent any unforeseen circumstances, management does not anticipate a material increase in the Company's loan A-28 loss provision for 1996. Any significant increase in the loan loss provision for 1996 would likely be a result of continued increases in the loan portfolio. Table 4 presents a five-year summary of the Company's allowance for loan losses. Net charge-offs as a percentage of average loans for 1995 were 0.23%, which is the lowest level of charge-offs the Company has experienced in over 10 years. TABLE 4: ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
1995 1994 1993 1992 1991 ---------- ---------- ---------- ---------- ---------- (IN THOUSANDS) Allowance -- beginning of year................ $ 32,527 $ 35,590 $ 24,456 $ 26,241 $ 27,268 Provision for loan loss- es..................... 5,090 2,640 3,332 2,981 6,044 Allowances of acquired banks.................. 485 -- 12,076 207 352 Charge-offs: Commercial............. $ (948) $ (2,833) $ (1,717) $ (1,401) $ (3,823) Consumer: Bankcard.............. (5,427) (4,236) (3,983) (4,082) (4,657) Other................. (1,602) (1,018) (836) (890) (864) Real estate............ (113) (182) (578) (175) (81) Agricultural........... -- -- (21) -- (13) ---------- ---------- ---------- ---------- ---------- Total charge-offs... $ (8,090) $ (8,269) $ (7,135) $ (6,548) $ (9,438) Recoveries: Commercial............. $ 947 $ 573 $ 1,051 $ 186 $ 680 Consumer: Bankcard.............. 994 1,102 1,144 956 1,002 Other................. 569 528 469 363 307 Real estate............ 122 118 138 70 19 Agricultural........... 41 245 59 -- 7 ---------- ---------- ---------- ---------- ---------- Total recoveries.... $ 2,673 $ 2,566 $ 2,861 $ 1,575 $ 2,015 ---------- ---------- ---------- ---------- ---------- Net charge-offs......... $ (5,417) $ (5,703) $ (4,274) $ (4,973) $ (7,423) ---------- ---------- ---------- ---------- ---------- Allowance -- end of year................... $ 32,685 $ 32,527 $ 35,590 $ 24,456 $ 26,241 ========== ========== ========== ========== ========== Average loans........... $2,346,325 $2,148,606 $1,786,529 $1,337,305 $1,356,082 Loans at end of year, net of unearned interest............... 2,452,526 2,269,617 2,159,761 1,483,048 1,349,144 Allowance to loans at year-end............... 1.33% 1.43% 1.65% 1.65% 1.95% Allowance as a multiple of net charge-offs 6.03x 5.70x 8.33x 4.92x 3.54x Net charge-offs to: Provision for loan losses................ 106.42% 216.02% 128.27% 166.82% 122.82% Average loans.......... 0.23 0.27 0.24 0.37 0.55
NONINTEREST INCOME Management has stressed growth of noninterest income to enhance the Company's profitability since fee-based services are non credit related, provide steady income and are not 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 that have been emphasized include trust and securities processing, securities trading, cash management and merchant processing. Fee income (exclusive of net security gains) as a percent of adjusted operating revenues was 40.8% in 1995. Adjusted operating revenues is defined as tax-equivalent net interest income plus noninterest income, excluding net security gains. A-29 Noninterest income, exclusive of net securities gains, was $142.6 million in 1995, compared to $138.1 million in 1994 and $129.9 million in 1993. This represents a 3.2% increase for 1995, compared to 1994. This increase, which is less than the traditional growth rate for the Company, was affected by a reduction in income from mutual fund securities processing and only slight growth in trust fees. Approximately 50% of the increase in noninterest income in 1994 over 1993 was the result of including the Acquired Banks on consolidated results of operation for an entire year in 1994. Trust fees represent the largest component of noninterest income and totaled $35.9 million in 1995, $35.0 million in 1994 and $32.0 million in 1993. The Company has long been identified as a leader in the trust area. Management will continue to aggressively market these services in order to grow and benefit from this recognized strength of the Company. The Company offers a full range of trust services including personal and custody services, investment management and employee benefits. During 1995 the Company began a comprehensive review of the pricing and structure of trust services in order to increase efficiencies. The Company also plans to increase its marketing efforts at the retail level in order to take better advantage of its existing branch network. The aggregate value of managed trust assets at December 31, 1995, was $10.0 billion, compared to $8.7 billion and $9.3 billion at December 31, 1994 and 1993, respectively. The Company's revenue from custodial trust services is primarily related to the mutual fund industry. Revenue from securities processing services decreased to $10.5 million in 1995 from $12.5 million in 1994 and $13.3 million in 1993. The declines in the past two years are primarily the result of changes with what was the Company's largest custody processing customer. During 1993, the customer was given significant price concessions because of competitive pressures. The Company reduced its related operating costs where possible, in order to minimize the effect of the pricing change. In 1994 this same customer was acquired by a competitor of the Company, which resulted in the loss of this custody processing business. The transition period prior to the loss of this business was sufficient to allow for an orderly reduction in operating costs to help offset the effect of this change. The Company is aggressively pursuing new business to replace the above loss. During the last year the Company has established relationships with 10 additional mutual funds companies. The magnitude of the services provided to these new customers varies. This diversification should allow the Company the opportunity to regain its lost market share with reduced concentration risks. Total trust assets under custody were $102.9 billion at December 31, 1995, $189.8 billion at year-end 1994 and $187.1 billion at year-end 1993. Fee income from service charges on deposit accounts was $33.2 million in 1995, compared to $32.9 million in 1994 and $30.2 million in 1993. Other service charge income was $11.3 million in 1995, $11.7 million in 1994 and $11.2 million in 1993. The increase in interest rates in 1995 allowed commercial customers a higher level of earnings credits on demand deposit balances to offset service charges for account activity and other services provided. During 1995, the Company completed a review of all service charge fees and as a result increased fee levels in many areas. These increases did not have a significant impact in 1995, but an entire year's benefit will be realized in 1996. Bankcard fees increased 9.4% in 1995 to $33.7 million from $30.8 million in 1994 and $24.9 million in 1993. The increase in 1995 was primarily the result of a higher volume of merchant transactions. When possible, the fees charged to merchants were adjusted during 1995 in response to an increase in the Company's cost structure resulting from a conversion to a new bankcard merchant processor. The increase in 1994 over 1993 was the result of an increase in merchant transaction volume and the activity related to the Acquired Banks. Trading and investment banking income increased 12.5% during 1995 to $11.2 million compared to $9.9 million in 1994 and $13.6 million in 1993. Transaction volumes increased during 1995 as a result of increased demand for municipal and government-backed securities. The Company's correspondent bank customers experienced an increase in liquidity during 1995 which resulted in higher transaction volumes. The decrease in income during 1994 as compared to 1993 was consistent with the industry norm as demand for mortgage-backed securities decreased significantly and a lack of liquidity by correspondent banks decreased overall volume. A-30 Other income increased to $6.8 million in 1995 from $5.3 million in 1994 and $4.6 million in 1993. Included in other income for 1995 is an approximate $2.5 million gain on the sale of the Company's minority ownership in an unconsolidated subsidiary. The increase in other income in 1994 over 1993 was primarily the result of the Acquired Banks. Net security gains in 1995 were $1.4 million, compared to $3.6 million in 1994 and $1.6 million in 1993. During 1995, the Company generally matched gains with losses when repositioning portions of the available for sale portfolio. Over 80% of the net security gains in 1994 and 1993 was the result of repositioning the investment portfolio. NONINTEREST EXPENSE Noninterest expense increased by less than 2.0% in 1995 to $260.5 million, from $255.9 million in 1994 and $230.4 million in 1993. The most significant items affecting 1995 results were tighter control of staffing costs, a reduction in premiums for deposit insurance and an increase in bankcard processing expense. The majority of the increase in noninterest expense in 1994 over 1993 was the result of the Acquired Banks. Personnel cost is the largest component of noninterest expense as it represents approximately 47% of total operating costs. Salary and employee benefit expense totaled $122.6 million in 1995, compared to $121.3 million in 1994 and $107.2 million in 1993. The minimal increase in staffing costs during 1995 was the result of a reduction in staffing levels which, prior to the December 1995 acquisition of a bank in Oklahoma, were 3,785 at year-end 1995 compared to 4,006 at year-end 1994. This reduction was partially offset by merit salary increases and increased costs associated with the Company's profit sharing and pension plans. The Company intends to continue reviewing its staffing levels and further reductions, net of expansion, will be considered. A primary factor in these considerations will be ensuring that changes do not adversely affect the level of customer service offered by the Company. Premiums paid for deposit insurance and regulatory fees totaled $7.6 million in 1995, $12.2 million in 1994 and $11.0 million in 1993. The decrease in 1995 expense was the result of a mid-year reduction in the assessment rate for deposit insurance. This assessment rate was further reduced for 1996, which should benefit the Company in future years. Deposit insurance expense was also affected by a reduction in average deposits which totaled $4.6 billion in 1995 and $5.0 billion in 1994. Bankcard processing costs increased 27.1% in 1995 to $32.8 million from $25.8 million in 1994 and $20.8 million in 1993. The 1995 change is a result of higher merchant transaction volumes and an increase in costs resulting from a conversion to a new bankcard processor. Prior to 1995 the Company's bankcard processing was performed by a joint venture between the Company, as a minority owner, and two other banking companies. Based on the requests of the majority owners, the operations of this joint venture were sold to the Company's current processor during 1995. The costs associated with converting to the new processing system were greater than expected as were the new ongoing processing costs. Much effort has gone toward better control of the new processing system in order to increase its efficiency. The Company will continue to review its options related to merchant bankcard processing costs and the profitability of the business line. Occupancy costs increased by 5.7% in 1995 to $16.0 million from $15.1 million in 1994 and $14.8 million in 1993. The 1995 increase was the result of costs related to new facilities opened during the year and the outsourcing of certain functions previously performed in-house. The Company's 1995 expansion also impacted equipment costs which increased 7.5% to $22.3 million in 1995 from $20.7 million in 1994 and $20.3 million in 1993. The Company also has higher equipment costs from increased investments in new technology including information and data processing equipment and software. Supplies and services expense was $19.2 million in both 1995 and 1994, compared to $17.4 million in 1993. The increase in 1994 over 1993 was primarily the result of the Acquired Banks. Marketing and business development expense was $13.1 million in 1995, compared to $12.5 million in 1994 and $11.4 million in 1993. A-31 During 1995 the Company continued its practice of identifying selected products or services for special promotional campaigns. Other expenses totaled $20.0 million in 1995, compared to $22.0 million in 1994 and $22.2 million in 1993. The decrease in other expenses during 1995 was the result of a reduction in legal and professional services and overall efforts to reduce operating costs. INCOME TAXES Income tax expense totaled $25.4 million in 1995, compared to $22.6 million in 1994 and $20.1 million in 1993. The effective tax rates were 32.78%, 32.08% and 32.87% for 1995, 1994 and 1993, respectively. The primary reason for the difference between the Company's effective tax rate and the statutory rate is the effect of nontaxable interest income, partially offset by nondeductible goodwill amortization. FINANCIAL CONDITION LOANS As of December 31, 1995, total loans were $2.5 billion, compared to $2.3 billion and $2.2 billion at December 31, 1994 and 1993, respectively. These loan totals represent an 8.1% increase for 1995 and a 5.1% increase in 1994. Average loans were $2.3 billion, $2.1 billion and $1.8 billion for 1995, 1994 and 1993, respectively. The increase in loans for 1995 was prudently diversified between business and consumer loans. The increase in consumer installment loans during 1995 was primarily the result of a targeted loan campaign offered by all of the Company's subsidiary banks. Traditionally, the largest portion of the Company's consumer installment loan portfolio has been indirect automobile loans purchased from automobile dealers. During 1995 the Company aggressively marketed a direct automobile loan program for the dual purpose of making high quality loans and establishing a direct relationship with the borrower. Other retail products were then sold to these new loan customers. There were no changes or compromises to the Company's underwriting standards for purposes of the direct automobile campaign. As noted in Table 5, business-related loans have consistently been the largest segment of the loan portfolio. The Company's subsidiary banks are structured as business banks that target small- to medium-size commercial and manufacturing companies within the trade territory of the bank. The Company's targeted customer base is often a second or third generation, family-owned company that utilizes several credit and noncredit products of the Company. Recent expansion plans for the Company have included loan production offices in cities in which the Company previously had no office or branch. The primary goal of the loan production offices is to market business-related loans and other commercial products to potential customers who may feel displaced or unsatisfied by their current lender. The Company will continue its efforts to increase market share by opportunities brought on by the ongoing consolidation in the banking industry and the competition's increased emphasis on retail business versus commercial. A-32 Commercial real estate loans, which comprise 12.3% of total loans, generally are traditional business loans made for working capital or expansion purposes that are primarily secured by real estate. These loans generally do not exceed a maximum loan-to-value of 80% and often have other collateral or guarantees as security. Many of these properties are owned-occupied, allowing the Company to regularly monitor the condition and market of the real estate. Real estate construction loans made up less than 1% of total loans at year-end 1995. TABLE 5: ANALYSIS OF LOANS BY TYPE
DECEMBER 31 ---------------------------------------------------------- 1995 1994 1993 1992 1991 ---------- ---------- ---------- ---------- ---------- AMOUNT (IN THOUSANDS) - ------ Commercial.............. $1,138,680 $1,066,621 $1,035,159 $ 777,205 $ 652,583 Agricultural............ 60,128 69,206 68,148 28,880 35,035 Leases.................. 2,057 2,157 1,627 1,930 2,595 Real estate -- commer- cial................... 300,493 281,011 280,060 140,278 126,326 ---------- ---------- ---------- ---------- ---------- Total business-relat- ed................... $1,501,358 $1,418,995 $1,384,994 $ 948,293 $ 816,539 ---------- ---------- ---------- ---------- ---------- Bankcard................ $ 201,048 $ 188,374 $ 180,345 $ 145,241 $ 148,361 Other consumer install- ment................... 583,433 500,298 411,037 282,726 279,500 Real estate -- residen- tial................... 167,077 163,554 186,097 110,061 109,547 ---------- ---------- ---------- ---------- ---------- Total consumer-relat- ed................... $ 951,558 $ 852,226 $ 777,479 $ 538,028 $ 537,408 ---------- ---------- ---------- ---------- ---------- Total loans........... $2,452,916 $2,271,221 $2,162,473 $1,486,321 $1,353,947 Unearned interest....... (390) (1,604) (2,712) (3,273) (4,803) Allowance for loan loss- es..................... (32,685) (32,527) (35,590) (24,456) (26,241) ---------- ---------- ---------- ---------- ---------- Net loans............. $2,419,841 $2,237,090 $2,124,171 $1,458,592 $1,322,903 ========== ========== ========== ========== ========== AS A % OF TOTAL LOANS - --------------------- Commercial.............. 46.4% 47.0% 47.9% 52.3% 48.2% Agricultural............ 2.4 3.0 3.2 2.0 2.6 Leases.................. 0.1 0.1 0.1 0.1 0.2 Real estate -- commer- cial................... 12.3 12.4 12.9 9.4 9.3 ---------- ---------- ---------- ---------- ---------- Total business-relat- ed................... 61.2% 62.5% 64.1% 63.8% 60.3% ---------- ---------- ---------- ---------- ---------- Bankcard................ 8.2% 8.3% 8.3% 9.8% 11.0% Other consumer install- ment................... 23.8 22.0 19.0 19.0 20.6 Real estate -- residen- tial................... 6.8 7.2 8.6 7.4 8.1 ---------- ---------- ---------- ---------- ---------- Total consumer-relat- ed................... 38.8% 37.5% 35.9% 36.2% 39.7% ---------- ---------- ---------- ---------- ---------- Total loans........... 100.0% 100.0% 100.0% 100.0% 100.0% ========== ========== ========== ========== ==========
LOAN QUALITY The quality of the loan portfolio has always been an underlying strength of the Company. A measure of the effectiveness of credit risk management is the percentage of the loan portfolio that is classified as nonperforming. Nonperforming loans include nonaccrual loans and restructured loans. The Company's nonperforming loans totaled $3.6 million at December 31, 1995, representing only 0.1% of the loan portfolio, compared to $5.3 million and 0.2% one year earlier. The Company's nonperforming loans have not exceeded 0.5% of total loans in any of the last five years. Nonperforming assets include foreclosed real estate along with the nonaccrual and restructured loans. The Company's nonperforming asset ratio (nonperforming assets divided by loans plus foreclosed real estate) was 0.2% at December 31, 1995, and 0.5% at December 31, 1994. At December 31, 1995, the Company had foreclosed real estate of only $0.6 million compared to $5.4 million at December 31, 1994. A-33 At December 31, 1995, loans over 90 days past due totaled $5.3 million, or 0.2% of total loans, compared to 0.2% of total loans at year-end 1994. Approximately 25% of the year-end 1995 past due amounts were bankcard loans. Key factors of the Company's loan quality program are a sound credit policy combined with periodic and independent credit reviews. All affiliate banks operate under written loan policies. Credit decisions continue to be based on the borrower's cash flow position and the value of underlying collateral, as well as other relevant factors. Each bank is responsible for evaluating its loans by using a ranking system. In addition, the Company has an internal loan review staff that operates independently of the affiliate banks. This review team performs periodic examinations of each bank's loans for credit quality, documentation and loan administration. Another means of ensuring loan quality is diversification. By keeping its loan portfolio diversified, the Company has avoided problems associated with undue concentrations of loans within particular industries. Commercial real estate loans comprise 12.3% of total loans, with a history of no significant losses. The Company has no significant exposure to highly leveraged transactions and has no foreign credits in its loan portfolio. A loan is generally placed on nonaccrual status when payments are past due 90 days or more and when management has considerable doubt about the borrower's ability to repay on the terms originally contracted. The accrual of interest is discontinued and recorded thereafter only when actually received in cash. At year-end 1995, $227,000 of interest due was not recorded as earned, compared to $215,000 for the prior year. Certain loans are restructured to provide a reduction or deferral of interest or principal because of deterioration in the financial condition of the respective borrowers. Management estimates that approximately $25,000 of additional interest would have been earned in 1995 if the terms of these loans were similar to other comparable loans. In certain instances, the Company continues to accrue interest on loans past due 90 days or more. Though the loan payments are delinquent, collection of interest and principal is expected to resume and sufficient collateral is believed to exist to protect the Company from significant loss. Consequently, management considers the ultimate collection of these loans to be reasonable and has recorded $217,000 of interest due as earned for 1995. The comparative figure for 1994 was $54,000. TABLE 6: LOAN QUALITY
DECEMBER 31 ----------------------------------------- 1995 1994 1993 1992 1991 ------ ------- ------- ------- ------ (IN THOUSANDS) Nonaccrual loans.................... $2,664 $ 3,131 $ 4,639 $ 1,887 $4,744 Restructured loans.................. 985 2,149 2,553 1,205 932 ------ ------- ------- ------- ------ Total nonperforming loans......... $3,649 $ 5,280 $ 7,192 $ 3,092 $5,676 Other real estate owned............. 626 5,388 7,187 6,932 2,325 ------ ------- ------- ------- ------ Total nonperforming assets........ $4,275 $10,668 $14,379 $10,024 $8,001 ====== ======= ======= ======= ====== Nonperforming loans as a % of loans. 0.15% 0.23% 0.33% 0.21% 0.42% Allowance as a multiple of nonperforming loans................ 8.96x 6.16x 4.95x 7.91x 4.62x Nonperforming assets as a % of loans plus other real estate owned....... 0.17% 0.47% 0.66% 0.67% 0.59% Loans past due 90 days or more...... $5,270 $ 4,779 $ 6,359 $ 4,507 $5,500 As a % of loans..................... 0.21% 0.21% 0.29% 0.30% 0.41%
SECURITIES In December 1995, the Company adopted Financial Accounting Standards Board's "A Guide to Implementation of Statement 115 on Accounting for Certain Investments in Debt and Equity Securities." The implementation guide allows for, among other things, the one-time reclassification of securities from the held to A-34 maturity portfolio to the available for sale portfolio, without affecting the classification or accounting treatment for the remainder of the investment portfolio. As a result, the Company reclassified the mortgage-backed securities that had previously been included in the held to maturity portfolio to available for sale. The securities included in this reclassification had a book value of $86.2 million and a market value of $85.2 million. At December 31, 1995, only securities of state and political subdivisions were classified as held to maturity. At December 31, 1995, the Company had total securities of $2.6 billion, compared to $2.7 billion at year-end 1994. Average securities for 1995 were $2.4 billion, compared to $2.8 billion for 1994. The decrease in securities for the year was the result of loan growth and a reduction in deposit totals, primarily those related to the mutual fund processing business. During 1995 securities represented 47.9% of total average earning assets, compared to 52.8% during 1994. At December 31, 1995, 88% of the Company's securities were classified as available for sale, compared to 86% at year-end 1994. At December 31, 1995, U.S. Treasury obligations represented 72.2% of the available for sale portfolio. U.S. Agency obligations represented an additional 21.3% of this classification. At December 31, 1995, securities available for sale had a net unrealized gain of $5.8 million compared to a net unrealized loss of $57.0 million at year-end 1994. These differences between cost and fair value were reflected, on an after-tax basis, in the Company's shareholders' equity as a gain of $3.6 million at December 31, 1995, and a loss of $35.2 million at year-end 1994. This change is primarily a factor of higher interest rates and average life of the security portfolio which allows for the regular reinvestment of maturities at current interest rates. The average yield on a tax-equivalent basis for the entire security portfolio was 5.52% during 1995 compared to 4.94% in 1994 and 4.88% in 1993. The increase in yield during 1995 was the result of higher interest rates which allowed the Company to reinvest maturities into higher yielding securities. The average life of the security portfolio was 18 months at December 31, 1995, and 17 months at year-end 1994. Included in Tables 7 and 8 is an analysis of the cost, fair value and average yield of the Company's securities available for sale and securities held to maturity. TABLE 7: SECURITIES AVAILABLE FOR SALE
AMORTIZED FAIR COST VALUE YIELD ---------- ---------- ----- (IN THOUSANDS) DECEMBER 31, 1995 U.S. Treasury...................................... $1,679,881 $1,686,316 5.53% U.S. Agencies...................................... 498,310 498,067 5.77 Mortgage-backed.................................... 147,194 145,781 5.33 Federal Reserve Bank Stock......................... 3,656 3,656 Equity............................................. 1,713 2,741 Other.............................................. 13 13 ---------- ---------- Total............................................ $2,330,767 $2,336,574 ========== ========== DECEMBER 31, 1994 U.S. Treasury...................................... $2,197,912 $2,142,417 4.99% U.S. Agencies...................................... 69,774 69,294 5.77 Mortgage-backed.................................... 57,969 55,477 5.68 Federal Reserve Bank Stock......................... 3,656 3,656 Equity............................................. 2,764 4,248 Other.............................................. 121 121 ---------- ---------- Total............................................ $2,332,196 $2,275,213 ========== ==========
A-35 TABLE 8: INVESTMENT SECURITIES
YIELD/ AMORTIZED FAIR AVERAGE COST VALUE MATURITY --------- -------- ----------- (IN THOUSANDS) DECEMBER 31, 1995 Due in 1 year or less........................... $ 95,686 $ 95,586 7.65% Due after 1 year through 5 years................ 168,755 169,800 6.96 Due after 5 years through 10 years.............. 46,917 47,360 7.25 Due after 10 years.............................. 399 427 8.79 -------- -------- Total......................................... $311,757 $313,173 2 yr. 9 mo. ======== ======== DECEMBER 31, 1994 Due in 1 year or less........................... $ 99,081 $ 98,564 6.23% Due after 1 year through 5 years................ 243,800 235,357 7.35 Due after 5 years through 10 years.............. 41,485 39,270 7.17 Due after 10 years.............................. 468 453 9.01 -------- -------- Total......................................... $384,834 $373,644 2 yr. 5 mo. ======== ======== DECEMBER 31, 1993 Due in 1 year or less........................... $114,942 $114,274 5.80% Due after 1 year through 5 years................ 134,922 138,462 7.51 Due after 5 years through 10 years.............. 28,544 29,050 7.00 Due after 10 years.............................. 536 560 8.98 -------- -------- Total......................................... $278,944 $282,346 2 yr. 1 mo. ======== ========
OTHER EARNING ASSETS Federal funds transactions essentially are overnight loans between financial institutions which allow for either the daily investment of excess funds or borrowing another institution's funds in order to meet short-term liquidity needs. The net sold position at year-end 1995 was $6.9 million, compared to $149.6 million for year-end 1994. During 1995 and 1994, the Company was a net purchaser of federal funds, and this funding source averaged $55.1 million in 1995, compared to $60.1 million during 1994. 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 $744.9 million in 1995 and $568.6 million in 1994. The Investment Banking Division also maintains an active securities trading inventory. The average holdings in the securities trading inventory in 1995 were $60.1 million, compared to $56.5 million in 1994, and were recorded at market value. TABLE 9: MATURITIES OF TIME DEPOSITS OF $100,000 OR MORE
DECEMBER 31 -------------------------- 1995 1994 1993 -------- -------- -------- (IN THOUSANDS) Maturing within 3 months............................ $208,828 $ 95,514 $160,893 After 3 months but within 6......................... 54,454 39,756 29,482 After 6 months but within 12........................ 28,534 27,124 30,099 After 12 months..................................... 32,222 29,085 30,282 -------- -------- -------- Total............................................. $324,038 $191,479 $250,756 ======== ======== ========
A-36 DEPOSITS AND BORROWED FUNDS Interest-bearing liabilities totaled $3.9 billion at December 31, 1995, compared to $4.4 billion at year-end 1994 and 1993. Average interest-bearing liabilities were $3.9 billion, $4.3 billion and $3.9 billion during 1995, 1994 and 1993, respectively. Year-end and average interest-bearing deposits for 1995 were $3.2 billion compared to year-end and average totals for 1994 of $3.6 billion. Interest- bearing deposits at year-end 1993 were $3.7 billion and averaged $3.3 billion for the year. The most significant cause of the decrease during 1995 was a reduction in deposits related to a large mutual fund processing customer. As noted previously, the Company's largest processing customer was sold to a bank, which resulted in the processing business and related balances leaving the Company. The balances associated with this business varied between $200 and $300 million. Historically, the interest rate paid on these balances was significantly higher than the Company's average cost of funds. Deposit totals have also been affected by the flow of funds from the banking system into mutual funds, including the Company's Scout Funds, which increased by approximately $200 million during 1995. The primary reason for the increase in average interest-bearing deposits in 1994 over 1993 was the inclusion of the Acquired Banks. Noninterest-bearing demand deposits were $1.6 billion at December 31, 1995 and 1994, compared to $1.5 billion at year-end 1993. Average noninterest- bearing liabilities for 1995, 1994 and 1993 were $1.3 billion, $1.4 billion and $1.3 billion, respectively. On average, noninterest-bearing deposits comprised 29.2% of total deposits for 1995, compared to 28.8% during 1994. Repurchase agreements averaged $485.9 million in 1995, compared to $498.4 million in 1994. Repurchase agreements are transactions involving investment funds that are exchanged for securities under an agreement to repurchase the same or similar issues at an agreed-upon price and date. The Investment Banking Division buys and sells repurchase agreements as a principal for nonaffiliated banks. These agreements are reflected on the balance sheet as both an asset ("resell agreement") and a corresponding liability ("repurchase agreement"), since such funds are purchased and then sold to approved dealer banks and primary dealers. The amount of repurchase agreements handled in this manner averaged $115.0 million in 1995, compared to $232.0 million in 1994. At December 31, 1995, these totals were $33.9 million, compared to $244.7 million one year earlier. At year-end 1995, the Company had repurchase agreements of $639.1 million for its own funding needs, compared to $416.5 million at December 31, 1994. The Company's other short-term borrowings consist primarily of U.S. Treasury demand notes. These demand notes represent treasury tax deposits remitted to the Federal Reserve Bank other than daily. The rate paid on these funds is 0.25% below the weekly average federal funds rate. A-37 The Company's long-term borrowings consist of three senior note issues and some installment notes. The Company's ratio of long-term debt to total capital, a measure of debt capacity, was 6.54% at December 31, 1995, which compares very favorably with its peer group. The Company borrowed $25.0 million in 1993 under a medium-term note program to fund the cash portions of the Kansas bank acquisitions. Of the total, $10.0 million of notes were issued with a seven-year maturity at 6.81% and $15.0 million of notes were issued with a 10-year maturity at 7.30%. TABLE 10: ANALYSIS OF AVERAGE DEPOSITS
AMOUNT 1995 1994 1993 1992 1991 - ------ ---------- ---------- ---------- ---------- ---------- (IN THOUSANDS) Noninterest-bearing de- mand................... $1,336,804 $1,445,376 $1,273,672 $ 938,322 $ 731,088 Interest-bearing demand and savings............ 2,059,661 2,365,024 2,092,048 1,559,004 1,274,520 Time deposits under $100,000............... 963,878 1,003,784 957,677 904,970 930,236 ---------- ---------- ---------- ---------- ---------- Total core deposits... $4,360,343 $4,814,184 $4,323,397 $3,402,296 $2,935,844 Time deposits of $100,000 or more....... 221,006 207,217 236,154 193,348 253,380 ---------- ---------- ---------- ---------- ---------- Total deposits........ $4,581,349 $5,021,401 $4,559,551 $3,595,644 $3,189,224 ========== ========== ========== ========== ========== AS A % OF TOTAL DEPOSITS - ------------------------ Noninterest-bearing de- mand................... 29.2% 28.8% 27.9% 26.1% 22.9% Interest-bearing demand and savings............ 45.0 47.1 45.9 43.3 40.0 Time deposits under 21.0 20.0 21.0 25.2 29.2 $100,000............... ----- ----- ----- ----- ----- Total core deposits... 95.2% 95.9% 94.8% 94.6% 92.1% Time deposits of 4.8 4.1 5.2 5.4 7.9 $100,000 or more....... ----- ----- ----- ----- ----- Total deposits........ 100.0% 100.0% 100.0% 100.0% 100.0% ===== ===== ===== ===== =====
TABLE 11: SHORT-TERM DEBT
1995 1994 1993 ------------- ------------- ------------- AMOUNT RATE AMOUNT RATE AMOUNT RATE -------- ---- -------- ---- -------- ---- (IN THOUSANDS) AT YEAR-END - ----------- Federal funds purchased............. $ 48,400 5.75% $139,800 4.80% $ 26,210 3.03% Repurchase agreements............... 672,940 3.76 661,203 2.77 598,872 2.91 Other............................... 501 5.02 872 3.71 1,453 2.76 -------- -------- -------- Total............................. $721,841 4.53% $801,875 3.13% $626,535 2.91% ======== ======== ======== AVERAGE FOR THE YEAR - -------------------- Federal funds purchased............. $127,949 5.77% $166,084 4.04% $ 65,184 2.99% Repurchase agreements............... 485,913 5.21 498,415 3.68 515,945 2.75 Other............................... 1,121 4.31 994 3.26 1,416 2.08 -------- -------- -------- Total............................. $614,983 5.32% $665,493 3.77% $582,545 2.78% ======== ======== ======== MAXIMUM MONTH-END BALANCE - ------------------------- Federal funds purchased............. $196,000 $222,000 $134,000 Repurchase agreements............... 727,393 699,216 598,872 Other............................... 2,104 1,975 2,367 -------- -------- -------- Total............................. $925,497 $923,191 $735,239 ======== ======== ========
A-38 CAPITAL The Company places a significant emphasis on the maintenance of strong capital which helps safeguard our customers' funds, promotes investor confidence, provides access to funding sources under favorable terms, and enhances the ability to capitalize on business growth and acquisition opportunities. Capital is managed for each subsidiary based upon their respective risks and growth opportunities, as well as regulatory requirements. At December 31, 1995, shareholders' equity was $576.0 million, compared to $557.3 million one year earlier. Contributing to this increase was a net unrealized gain on securities available for sale of $3.6 million, compared to a net unrealized loss on these securities of $35.2 million at year-end 1994. In addition, shareholders' equity at December 31, 1995 includes an adjustment to give effect to the January 2, 1996 purchase of 1,068,533 shares of the Company's common stock by the Company and its Employee Stock Ownership Plan. See Common Stock Repurchase Commitment on page A-18 for further details. Also impacting total shareholders' equity for 1995 was the repurchase of 312,517 shares of Company stock for treasury purposes. This compares to repurchases of 396,984 shares in 1994. During the year, management had the opportunity to repurchase shares of the Company's stock at a price which, in management's opinion, would enhance overall shareholder value. Depending on availability, price and cash flow requirements, management will continue to consider treasury stock purchases from time to time. In April, 1994, in order to reduce regulatory expenses, shareholders approved a reduction in the par value of the Company's common stock from $12.50 per share to $1.00 per share. Risk-based capital guidelines established by regulatory agencies set minimum capital standards based on the level of risk associated with a financial institution's assets. A financial institution's total capital is required to equal 8% of risk-weighted assets. At least half of that 8% must consist of Tier 1 core capital, and the remainder may be Tier 2 supplementary capital. The risk-based capital guidelines indicate the specific risk weightings by type of asset. Certain off-balance sheet items (such as standby letters of credit and binding loan commitments) are multiplied by "credit conversion factors" to translate them into balance sheet equivalents before assigning them specific risk weightings. Due to the Company's high level of core capital and substantial portion of earning assets invested in riskless government securities, the Tier 1 capital ratio of 15.17% and Total capital ratio of 16.16% substantially exceed the regulatory minimums. DIVIDENDS The Company's dividend payout ratio was 29.0% in 1995, compared to 30.5% in 1994 and 31.0% in 1993. On January 2, 1996, the Company distributed a 10% stock dividend to shareholders. All per share data has been restated to give effect to this stock dividend for all periods presented. A-39 TABLE 12: RISK-BASED CAPITAL The table below computes risk-based capital in accordance with current regulatory guidelines. These guidelines as of December 31, 1995, 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 0% 20% 50% 100% TOTAL - -------------------- ---------- ---------- -------- ---------- ---------- (IN THOUSANDS) Loans: Residential mortgage... $ -- $ 900 $171,880 $ -- $ 172,780 All other.............. -- 59,017 -- 2,220,729 2,279,746 ---------- ---------- -------- ---------- ---------- Total loans.......... $ -- $ 59,917 $171,880 $2,220,729 $2,452,526 Securities available for sale: U.S. Treasury.......... $1,679,881 $ -- $ -- $ -- $1,679,881 U.S. agencies and mort- gage-backed........... 2,631 642,873 -- -- 645,504 Equity securities and other................. 3,656 369 -- 1,357 5,382 ---------- ---------- -------- ---------- ---------- Total securities available for sale.. $1,686,168 $ 643,242 $ -- $ 1,357 $2,330,767 Investment securities... -- 303,885 7,872 -- 311,757 Trading securities...... 32,799 53,194 -- 18 86,011 Federal funds and resell agreements............. -- 89,165 -- -- 89,165 Cash and due from banks. 213,139 483,268 -- -- 696,407 All other assets........ -- -- -- 266,834 266,834 ---------- ---------- -------- ---------- ---------- Category totals...... $1,932,106 $1,632,671 $179,752 $2,488,938 $6,233,467 ---------- ---------- -------- ---------- ---------- Risk-weighted totals.... $ -- $ 326,534 $ 89,876 $2,488,938 $2,905,348 Off-balance-sheet items (risk-weighted)........ -- 1,543 57 374,124 375,724 ---------- ---------- -------- ---------- ---------- Total risk-weighted assets.............. $ -- $ 328,077 $ 89,933 $2,863,062 $3,281,072 ========== ========== ======== ========== ========== CAPITAL TIER 1 TIER 2 TOTAL - ------- -------- ---------- ---------- Shareholders' equity.......................... $572,347 $ -- $ 572,347 Minority interest in subsidiaries............. 10 -- 10 Less premium on purchased banks............... (74,739) -- (74,739) Allowance for loan losses..................... -- 32,685 32,685 -------- ---------- ---------- Total capital............................... $497,618 $ 32,685 $ 530,303 ======== ========== ========== CAPITAL RATIOS - -------------- Tier 1 capital to risk-weighted assets........ 15.17% Total capital to risk-weighted assets......... 16.16 Leverage ratio (Tier 1 to total assets less premium on purchased banks).................. 8.02
A-40 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. This analysis 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 is the difference 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. 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 15 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, 1996, the Company is in a positive gap position because assets maturing or repricing during this time exceed liabilities. This compares to a negative cumulative gap at this interval one year earlier. At the one-year period the Company has a positive cumulative gap as the ratio of earning assets to paying liabilities is 1.20%, compared to 1.12% at December 31, 1994. 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 retail deposits, approximately 95.2% of total deposits, tends to lag the change in market rates. This lag generally lessens the negative impact of rising interest rates when the Company has more liabilities repricing than assets. In addition, a static analysis ignores the impact of changes in the mix and volume of interest-bearing assets and liabilities. During 1995, the Company's loans increased as a percentage of total earning assets and noninterest-bearing demand deposit accounts represented a larger component of total funding sources. The Company will continue to manage its interest rate risk using static gap analysis along with other tools which help measure the impact of various interest rate scenarios. The Company does not use off-balance-sheet hedges or swaps to manage this risk. TABLE 13: RATE SENSITIVITY AND MATURITY OF LOANS The following table presents the rate sensitivity of certain loans maturing after 1996, compared with the total loan portfolio as of December 31, 1995. Of the $1,396,342,000 of loans due after 1996, $825,036,000 are to individuals for the purchase of residential dwellings and other consumer goods. The remaining $571,306,000 is for all other purposes and reflects maturities of $492,527,000 in 1997 through 2000 and $78,779,000 after 2000.
DECEMBER 31, 1995 ----------------- (IN THOUSANDS) Loans due in 1996: Residential homes and consumer goods......................... $ 126,522 All other.................................................... 930,052 ---------- Total..................................................... $1,056,574 Loans due after 1996: Variable interest rate....................................... $ 572,345 Fixed interest rate.......................................... 823,997 ---------- Total..................................................... $1,396,342 Unearned interest and allowance for loan losses............... (33,075) ---------- Net loans.................................................. $2,419,841 ==========
A-41 TABLE 14: INTEREST RATE SENSITIVITY ANALYSIS
1-90 DECEMBER 31, 1995 DAYS 91-180 DAYS 181-365 DAYS TOTAL OVER 365 DAYS TOTAL ----------------- -------- ----------- ------------ -------- ------------- -------- (IN MILLIONS) Earning assets Loans................... $1,375.4 $200.2 $237.3 $1,812.9 $ 639.6 $2,452.5 Securities*............. 719.8 197.0 441.7 1,358.5 1,289.8 2,648.3 Federal funds sold and resell agreements...... 89.2 -- -- 89.2 -- 89.2 Other................... 85.9 -- -- 85.9 0.1 86.0 -------- ------ ------ -------- -------- -------- Total earning assets.. $2,270.3 $397.2 $679.0 $3,346.5 $1,929.5 $5,276.0 -------- ------ ------ -------- -------- -------- % of total earning as- sets................. 43.0% 7.5% 12.9% 63.4% 36.6% 100.0% -------- ------ ------ -------- -------- -------- Funding sources Interest-bearing demand and savings............ $1,072.0 $ -- $ -- $1,072.0 $ 805.0 $1,877.0 Time deposits........... 470.0 264.1 249.1 983.2 318.5 1,301.7 Federal funds purchased and repurchase agree- ments.................. 721.3 -- -- 721.3 -- 721.3 Borrowed funds.......... 0.7 4.5 -- 5.2 36.0 41.2 Noninterest-bearing sources................ -- -- -- -- 1,334.8 1,334.8 -------- ------ ------ -------- -------- -------- Total funding sources. $2,264.0 $268.6 $249.1 $2,781.7 $2,494.3 $5,276.0 -------- ------ ------ -------- -------- -------- % of total earning as- sets................. 42.9% 5.1% 4.7% 52.7% 47.3% 100.0% -------- ------ ------ -------- -------- -------- Interest sensitivity gap.................... $ 6.3 $128.6 $429.9 $ 564.8 $ (564.8) Cumulative gap.......... 6.3 134.9 564.8 564.8 -- As a % of total earning assets................. 0.1% 2.6% 10.7% 10.7% --% Ratio of earning assets to funding sources..... 1.00 1.48 2.73 1.20 0.77 Cumulative ratio -- 1995................... 1.00 1.05 1.20 1.20 1.00 -- 1994.......... 0.89 0.95 1.12 1.12 1.00 -- 1993.......... 0.78 0.85 1.02 1.02 1.00
- -------- * Includes securities available for sale based on scheduled maturity dates. 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 maturities of assets along with $2.3 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. 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. On January 2, 1996, the Company acquired 688,533 shares of its common stock at a price of $43.50 per share. The purchase was funded with existing working capital. Also on January 2, 1996, the Company's Employee Stock Ownership Plan acquired 380,000 shares of the Company's common stock. This purchase was funded by a seven-year, fixed rate loan, which is guaranteed by the Company. The Company also has agreed to acquire an additional 256,300 shares in both March and June of 1996 at a price of $43.50 per share. The Company intends to fund these purchases with working capital. A-42 TABLE 15: SUMMARY OF OPERATING RESULTS BY QUARTER (UNAUDITED)
THREE MONTHS ENDED --------------------------------- MARCH 31 JUNE 30 SEPT. 30 DEC. 31 -------- ------- -------- ------- (IN THOUSANDS EXCEPT PER SHARE DATA) 1995 Interest income.............................. $88,574 $88,862 $88,560 $91,059 Interest expense............................. 40,426 39,208 38,689 39,464 ------- ------- ------- ------- Net interest income........................ $48,148 $49,654 $49,871 $51,595 Provision for loan losses.................... 926 925 1,181 2,058 Noninterest income........................... 35,696 36,195 34,544 37,543 Noninterest expense.......................... 63,724 67,090 64,765 64,954 Income tax provision......................... 6,339 5,739 6,189 7,180 ------- ------- ------- ------- Net income................................. $12,855 $12,095 $12,280 $14,946 ======= ======= ======= ======= 1994 Interest income.............................. $76,119 $80,089 $82,306 $84,746 Interest expense............................. 30,886 33,036 35,197 36,945 ------- ------- ------- ------- Net interest income........................ $45,233 $47,053 $47,109 $47,801 Provision for loan losses.................... 382 516 861 881 Noninterest income........................... 35,742 35,088 35,100 35,815 Noninterest expense.......................... 61,509 64,410 64,450 65,533 Income tax provision......................... 5,737 6,107 5,647 5,094 ------- ------- ------- ------- Net income................................. $13,347 $11,108 $11,251 $12,108 ======= ======= ======= ======= THREE MONTHS ENDED --------------------------------- MARCH 31 JUNE 30 SEPT. 30 DEC. 31 -------- ------- -------- ------- PER SHARE 1995 Net income................................... $ 0.62 $ 0.58 $ 0.59 $ 0.73 Dividend..................................... 0.18 0.18 0.18 0.18 Book value................................... 28.01 29.05 29.59 29.53 Market price: High........................................ 28.64 33.41 38.64 45.25 Low......................................... 27.27 27.27 32.50 33.00 Close....................................... 27.27 33.18 38.64 35.25 PER SHARE 1994 Net income................................... $ 0.63 $ 0.53 $ 0.54 $ 0.59 Dividend..................................... 0.16 0.16 0.18 0.18 Book value................................... 27.05 26.80 26.95 26.66 Market price: High........................................ 31.41 31.36 30.91 30.23 Low......................................... 28.93 29.14 29.55 26.82 Close....................................... 29.75 30.68 29.55 28.41
- -------- Per share information restated for the 10% stock dividend paid January 2, 1996. A-43 UMB FINANCIAL CORPORATION FIVE-YEAR AVERAGE BALANCE SHEETS/YIELDS AND RATES
1995 1994 ---------------------------- ---------------------------- (IN MILLIONS) (UNAUDITED) INTEREST RATE INTEREST RATE AVERAGE INCOME/ EARNED/ AVERAGE INCOME/ EARNED/ BALANCE EXPENSE(1) PAID(1) BALANCE EXPENSE(1) PAID(1) -------- ---------- ------- -------- ---------- ------- ASSETS Loans, net of unearned interest (FTE) (2)..... $2,346.3 $218.9 9.33% $2,148.6 $173.1 8.06% Securities: Taxable................ $2,076.1 $110.6 5.32 $2,555.2 $122.0 4.77 Tax-exempt (FTE)....... 306.1 20.9 6.83 289.1 18.5 6.41 -------- ------ ---- -------- ------ ---- Total securities...... $2,382.2 $131.5 5.52 $2,844.3 $140.5 4.94 Federal funds sold and resell agreements...... 187.9 11.0 5.86 338.0 13.6 4.03 Other earning assets (FTE).................. 60.2 3.7 6.19 56.5 3.2 5.65 -------- ------ ---- -------- ------ ---- Total earning assets (FTE)................ $4,976.6 $365.1 7.34 $5,387.4 $330.4 6.13 Allowance for loan losses................. (32.1) (34.2) Cash and due from banks. 616.9 675.3 Other assets............ 337.8 344.1 -------- -------- Total assets.......... $5,899.2 $6,372.6 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Interest-bearing demand and savings deposits... $2,059.7 $ 61.3 2.98% $2,365.0 $ 58.6 2.48% Time deposits under $100,000............... 963.8 49.0 5.08 1,003.8 40.8 4.06 Time deposits of $100,000 or more....... 221.0 11.3 5.12 207.2 7.6 3.62 -------- ------ ---- -------- ------ ---- Total interest-bearing deposits............. $3,244.5 $121.6 3.75 $3,576.0 $107.0 2.99 Short-term borrowings... 1.1 -- 4.31 1.0 -- 3.26 Long-term debt.......... 44.5 3.5 7.79 50.4 4.0 7.97 Federal funds purchased and repurchase agreements............. 613.9 32.7 5.32 664.5 25.1 3.77 -------- ------ ---- -------- ------ ---- Total interest-bearing liabilities.......... $3,904.0 $157.8 4.04 $4,291.9 $136.1 3.17 Noninterest-bearing demand deposits........ 1,336.8 1,445.4 Other liabilities....... 61.0 62.9 -------- -------- Total................. $5,301.8 $5,800.2 -------- -------- Total shareholders' equity................. $ 597.4 572.4 -------- -------- Total liabilities and shareholders' equity. $5,899.2 $6,372.6 ======== ======== ------ ------ Net interest income (FTE).................. $207.3 $194.3 ====== ====== Net interest spread..... 3.30% 2.96% Net interest margin..... 4.17 3.61
- -------- (1) Interest income and yields are stated on a fully tax-equivalent (FTE) basis, using a rate of 34% for 1991 through 1992 and 35% for 1993 through 1995. 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-44
1993 1992 1991 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 -------- ---------- ------- -------- ---------- ------- -------- ---------- ------- -------- $1,786.5 $144.0 8.06% $1,337.3 $120.8 9.03% $1,356.1 $145.8 10.75% 11.70% $2,468.8 $116.0 4.70 $1,868.6 $102.5 5.48 $1,530.9 $114.8 7.50 8.22 260.5 17.0 6.53 240.5 17.8 7.41 285.8 24.3 8.49 6.28 -------- ------ ---- -------- ------ ---- -------- ------ ----- ------ $2,729.3 $133.0 4.88 $2,109.1 $120.3 5.70 $1,816.7 $139.1 7.66 7.96 320.4 9.9 3.09 405.3 14.7 3.63 314.7 17.6 5.58 (13.15) 58.1 3.1 5.24 70.5 4.5 6.42 73.7 5.2 7.08 11.99 -------- ------ ---- -------- ------ ---- -------- ------ ----- ------ $4,894.3 $290.0 5.92 $3,922.2 $260.3 6.63 $3,561.2 $307.7 8.64 7.99 (31.9) (26.1) (26.2) 3.65 604.4 494.1 404.1 8.99 300.0 232.8 223.5 11.35 -------- -------- -------- ------ $5,766.8 $4,623.0 $4,162.6 8.30% ======== ======== ======== ====== $2,092.1 $ 50.9 2.43% $1,559.0 $ 51.1 3.28% $1,274.5 $ 63.6 4.99% 13.25% 957.7 41.4 4.32 905.0 44.8 4.95 930.2 63.6 6.83 2.51 236.1 6.8 2.91 193.3 7.1 3.69 253.4 15.0 5.92 (14.58) -------- ------ ---- -------- ------ ---- -------- ------ ----- ------ $3,285.9 $ 99.1 3.02 $2,657.3 $103.0 3.88 $2,458.1 $142.2 5.78 5.84 1.4 -- 2.08 28.3 1.0 3.66 38.6 2.2 5.77 (49.58) 53.5 4.4 8.23 41.0 3.6 8.65 46.3 4.0 8.67 (2.86) 581.1 16.2 2.78 511.1 16.2 3.17 460.8 23.3 5.06 15.58 -------- ------ ---- -------- ------ ---- -------- ------ ----- ------ $3,921.9 $119.7 3.05 $3,237.7 $123.8 3.82 $3,003.8 $171.7 5.72 6.67 1,273.7 938.3 731.1 12.32 68.6 61.0 72.1 .83 -------- -------- -------- ------ $5,264.2 $4,237.0 $3,807.0 7.85 -------- -------- -------- ------ $ 502.6 $ 386.0 $ 355.6 12.71 -------- -------- -------- ------ $5,766.8 $4,623.0 $4,162.6 8.30% ======== ======== ======== ====== ------ ------ ------ $170.3 $136.5 $136.0 ====== ====== ====== 2.87% 2.81% 2.92% 3.48 3.48 3.82
A-45 UMB FINANCIAL CORPORATION SELECTED FINANCIAL DATA OF AFFILIATE BANKS
DECEMBER 31, 1995 -------------------------------------------------------- LOANS NUMBER OF TOTAL NET OF TOTAL SHAREHOLDERS' LOCATIONS ASSETS UNEARNED DEPOSITS EQUITY --------- ---------- ---------- ---------- ------------- (IN THOUSANDS) WESTERN MISSOURI UMB Bank, n.a. (Kansas City).................. 30 $2,931,553 $1,126,574 $2,350,211 $241,443 UMB Bank, Cass County (Peculiar)............. 1 29,442 9,197 25,723 2,394 UMB Bank, Northwest (St. Joseph)................ 9 173,259 36,553 147,493 12,967 EASTERN MISSOURI AND IL- LINOIS UMB Bank of St. Louis, n.a.................... 19 $ 777,441 $ 339,612 $ 580,230 $ 63,205 UMB Bank, Northeast (Monroe City).......... 2 62,556 24,258 48,124 5,049 UMB First State Bank of Morrisonville (Illinois)............. 1 10,423 1,387 9,339 980 SOUTHWESTERN MISSOURI UMB Bank, Southwest (Springfield).......... 9 $ 355,346 $ 137,944 $ 241,852 $ 22,517 UMB Bank, Warsaw........ 3 65,836 20,158 49,339 8,295 CENTRAL MISSOURI UMB Bank, Boonville..... 2 $ 42,202 $ 14,908 $ 32,594 $ 3,887 UMB Bank, Jefferson City................... 1 71,677 30,035 59,267 3,850 UMB Bank, North Central (Brookfield)........... 4 83,220 21,626 58,917 6,262 UMB Bank, Warrensburg... 4 103,036 24,032 90,063 7,803 COLORADO UMB Bank Colorado....... 8 $ 214,687 $ 110,833 $ 188,099 $ 19,348 KANSAS UMB Bank Kansas......... 17 $ 791,072 $ 250,222 $ 537,972 $101,060 UMB National Bank of America................ 13 432,191 160,492 359,276 56,827 OKLAHOMA UMB Oklahoma Bank....... 3 $ 139,053 $ 50,112 $ 111,678 $ 16,125 BANKING-RELATED SUBSIDI- ARIES UMB Properties, Inc..... UMB Community Development Corporation............ United Missouri Banc Leasing Corporation.... United Missouri Bank, U.S.A.................. Scout Brokerage Servic- es, Inc................ United Missouri Capital Corporation............ United Missouri Insur- ance Company........... UMB Mortgage Company.... United Missouri Trust Company of New York.... UMB Consulting Services, Inc.................... UMB Data Corporation....
A-46 EX-11 2 COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11 TO FORM 10-K UMB FINANCIAL CORPORATION Computation of Earnings Per Share 1995 1994 1993 ---- ---- ---- Net income divided by $52,176,000 $47,814,000 $41,119,000 Weighted average shares outstanding 20,680,255 21,075,750 19,489,265 Earnings per share $2.52 $2.26 $2.13 EX-12 3 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12 TO FORM 10-K UMB FINANCIAL CORPORATION COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
YEAR ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- (DOLLARS IN THOUSANDS) Income before income taxes and change in accounting principle.............................. $ 77,623 $ 70,399 $ 61,249 $ 55,115 $ 53,395 Add Portion of rents representative of the interest factor........................................... 940 840 977 807 715 Interest on indebtedness other than deposits...... 36,193 29,106 20,591 20,763 29,540 Amortization of debt expense...................... 65 48 51 -- -- -------- -------- -------- -------- -------- Income as adjusted excluding interest on deposits.......................................... $114,821 $100,393 $ 82,868 $ 76,685 $ 83,650 Add interest on deposits........................... 121,594 106,958 99,127 103,023 142,137 -------- -------- -------- -------- -------- Income as adjusted including interest on deposits.......................................... $236,415 $207,351 $181,995 $179,708 $225,787 ======== ======== ======== ======== ======== Fixed charges: Interest on indebtedness other than deposits...... $ 36,193 $ 29,106 $ 20,591 $ 20,763 $ 29,540 Portion of rents representative of the interest factor........................................... 940 840 977 807 715 Amortization of debt expense...................... 65 48 51 -- -- -------- -------- -------- -------- -------- Fixed charges excluding interest on deposits....... $ 37,198 $ 29,994 $ 21,619 $ 21,570 $ 30,255 Interest on deposits............................... 121,594 106,958 99,127 103,023 142,137 -------- -------- -------- -------- -------- Fixed charges including interest on deposits....... $158,792 $136,952 $120,746 $124,593 $172,392 ======== ======== ======== ======== ======== Ratio of earnings to fixed charges Excluding interest on deposits.................... 3.09 3.35 3.83 3.56 2.76 ==== ==== ==== ==== ==== Including interest on deposits.................... 1.49 1.51 1.51 1.44 1.31 ==== ==== ==== ==== ====
EX-21 4 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 TO FORM 10-K UMB FINANCIAL CORPORATION Subsidiaries of the Registrant Subsidiary Jurisdiction of ---------- Organization ------------ WESTERN MISSOURI BANKS UMB Bank, n.a. (Kansas City) U.S. UMB Bank, Cass County (Peculiar) Missouri UMB Bank Northwest (St. Joseph) Missouri EASTERN MISSOURI AND ILLINOIS BANKS UMB Bank of St. Louis, n.a. U.S. UMB Bank, Northeast (Monroe City) Missouri UMB First State Bank of Morrisonville (Illinois) Illinois SOUTHWESTERN MISSOURI BANKS UMB Bank, Southwest (Springfield) Missouri UMB Bank, Warsaw Missouri CENTRAL MISSOURI BANKS UMB Bank, Boonville Missouri UMB Bank, Jefferson City Missouri UMB Bank, North Central (Brookfield) Missouri UMB Bank, Warrensburg Missouri COLORADO BANK UMB Bank Colorado Colorado KANSAS BANKS UMB Bank Kansas Kansas UMB National Bank of America U.S. OKLAHOMA BANK UMB National Bank Oklahoma BANKING--RELATED SUBSIDIARIES Scout Brokerage Services, Inc. Missouri UMB Community Development Corporation Missouri UMB Consulting Services, Inc. Missouri UMB Data Corporation Missouri UMB Properties, Inc. Missouri United Missouri Bank, U.S.A. Delaware United Missouri Insurance Company Arizona City Bond and Mortgage Company Missouri TIERED BANK HOLDING COMPANIES FCB Corp. Delaware Valley Bank Holding Co. Colorado United Kansas Bancshares, Inc. Kansas First Sooner Bancshares, Inc. Oklahoma EX-23 5 INDEPENDENT AUDITORS' CONSENT EXHIBIT 23 TO FORM 10-K UMB FINANCIAL CORPORATION INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Registration Statement No. 33-58312 of UMB Financial Corporation and subsidiaries on Form S-8 of our report dated January 16, 1996, incorporated by reference in the Annual Report on Form 10-K of UMB Financial Corporation and subsidiaries for the year ended December 31, 1995. /s/ DELOITTE & TOUCHE LLP Kansas City, Missouri March 21, 1996 EX-24 6 POWER 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, JR. Director January 16, 1996 - -------------------------- Paul D. Bartlett, Jr. /s/ THOMAS E. BEAL Director January 16, 1996 - -------------------------- Thomas E. Beal Director - -------------------------- H. Alan Bell /s/ DAVID R. BRADLEY, JR. Director January 16, 1996 - -------------------------- David R. Bradley, Jr. /s/ NEWTON A. CAMPBELL Director January 16, 1996 - -------------------------- Newton A. Campbell /s/ WILLIAM TERRY FULDNER Director January 16, 1996 - -------------------------- William Terry Fuldner /s/ CHARLES A. GARNEY Director January 16, 1996 - -------------------------- Charles A. Garney /s/ PETER J. GENOVESE Director, Vice Chairman January 16, 1996 - -------------------------- of the Board Peter J. Genovese /s/ C.N. HOFFMAN, JR. Director January 16, 1996 - -------------------------- C.N. Hoffman, Jr. SIGNATURE AND NAME CAPACITY DATE ------------------ -------- ---- /s/ ALEXANDER C. KEMPER Director, President January 16, 1996 - ---------------------------- Alexander C. Kemper /s/ R. CROSBY KEMPER III Director, Vice Chairman January 16, 1996 - ---------------------------- of the Board R. Crosby Kemper III /s/ DANIEL N. LEAGUE, JR. Director January 16, 1996 - ---------------------------- Daniel N. League, Jr. /s/ WILLIAM J. McKENNA Director January 16, 1996 - ---------------------------- William J. McKenna Director - ---------------------------- Roy E. Mayes /s/ JOHN H. MIZE, JR. Director January 16, 1996 - ---------------------------- John H. Mize, Jr. /s/ MARY LYNN OLIVER Director January 16, 1996 - ---------------------------- Mary Lynn Oliver /s/ W.L. ORSCHELIN Director January 16, 1996 - ---------------------------- W.L. Orscheln /s/ ROBERT W. PLASTER Director January 16, 1996 - ---------------------------- Robert W. Plaster /s/ ALAN W. ROLLEY Director January 16, 1996 - ---------------------------- Alan W. Rolley /s/ JOSEPH F. RUYSSER Director January 16, 1996 - ---------------------------- Joseph F. Ruysser /s/ THOMAS D. SANDERS Director January 16, 1996 - ---------------------------- Thomas D. Sanders /s/ HERMAN R. SUTHERLAND Director January 16, 1996 - ---------------------------- Herman R. Sutherland /s/ THOMAS A. WARD III Director January 16, 1996 - ---------------------------- Thomas A. Ward III /s/ E. JACK WEBSTER, JR. Director January 16, 1996 - ---------------------------- E. Jack Webster, Jr. /s/ JON WEFALD Director January 16, 1996 - ---------------------------- Jon Wefald /s/ JOHN E. WILLIAMS Director January 16, 1996 - ---------------------------- John E. Williams EX-27 7 FINANCIAL DATA SCHEDULE
9 1,000 12-MOS DEC-31-1995 DEC-31-1995 696,407 3,178,723 89,165 86,011 2,336,574 311,757 313,173 2,452,526 32,685 6,281,328 4,813,683 501 82,628 40,736 22,548 0 0 599,892 6,281,328 217,701 128,351 11,003 357,055 121,594 157,787 199,268 5,090 1,416 260,533 77,623 77,623 0 0 52,176 2.52 2.52 4.00 2,664 5,270 985 0 32,527 8,090 2,673 32,685 32,685 0 0
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