UMB Financial (UMBF) 10-K 2005 FY Annual report

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

For the fiscal year ended: December 31, 2005

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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 incorporation or organization)	(I.R.S. Employer Identification No.)

1010 Grand Boulevard, Kansas City, Missouri	64106
(Address of principal executive offices)	(ZIP Code)

(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 the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yesx  No¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes¨  Nox

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.    Yesx  No¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filerx Accelerated filer¨ Non- accelerated filer¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes¨  Nox

As of June 30, 2005, the aggregate market value of common stock outstanding held by nonaffiliates of the registrant was approximately $849,535,488 based on the NASDAQ closing price of that date.

Indicate the number of shares outstanding of the registrant’s classes of common stock, as of the latest practicable date.

Class	Outstanding at February 28, 2006
Common Stock, $1.00 Par Value	21,430,077

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company’s definitive Proxy Statement to be delivered to shareholders in connection with the Annual Meeting of Shareholders to be held on April 25, 2006, are incorporated by reference into in Part III of this Form 10K.

INDEX

PART I	3
ITEM 1. BUSINESS	3
ITEM 1A. RISK FACTORS	11
ITEM 1B. UNRESOLVED STAFF COMMENTS	13
ITEM 2. PROPERTIES	13
ITEM 3. LEGAL PROCEEDINGS	14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	14
PART II	14
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	14
ITEM 6. SELECTED FINANCIAL DATA	15
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	16
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	40
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	47
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	81
ITEM 9A. CONTROLS AND PROCEDURES	81
ITEM 9B. OTHER INFORMATION	85
PART III	85
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT	85
ITEM 11. EXECUTIVE COMPENSATION	85
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	85
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	86
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES	86
PART IV	86
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES	86
SIGNATURES	89
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT	1
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT	1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002	1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002	1

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PART I

ITEM 1.  BUSINESS

General

UMB Financial Corporation (the “Company”) was organized as a corporation in 1967 under Missouri law for the purpose of becoming a bank holding company registered under the Bank Holding Company Act of 1956. In 2001, the Company elected to become a financial holding company under the Gramm-Leach-Bliley Act of 1999. The Company owns all of the outstanding stock of five commercial banks, a brokerage company, a reinsurance company, a community development corporation, a consulting company, a mutual fund servicing company and fifteen other subsidiaries.

The five commercial banks are engaged in general commercial banking business entirely in domestic markets. Two of the banks are in Missouri, one bank in Kansas, one bank in Colorado, and one bank in Arizona. The principal subsidiary bank, UMB Bank, n.a., whose principal office is in Missouri, also has branches in Illinois, Kansas, Nebraska and Oklahoma. The banks offer a full range of banking services to commercial, retail, government and correspondent bank customers. In addition to standard banking functions, the principal subsidiary bank, UMB Bank, n.a., provides international banking services, investment and cash management services, data processing services for correspondent banks and a full range of trust activities for individuals, estates, business corporations, governmental bodies and public authorities.

The table below sets forth the names and locations of the Company’s affiliate banks, as well as their respective total assets, total loans, deposits and shareholders’ equity as of December 31, 2005.

SELECTED FINANCIAL DATA OF AFFILIATE BANKS (in thousands)

	December 31, 2005
	Number of Locations	Total Assets		Loans		Total Deposits		Shareholders’ Equity
Missouri
UMB Bank, n.a.	120	$	7,094,548	$	2,855,008	$	5,157,828	$	549,325
UMB Bank, Warsaw, n.a.	4		81,642		29,708		56,326		5,687
Colorado
UMB Bank Colorado, n.a.	10	$	521,345	$	295,899	$	417,349	$	37,012
Kansas
UMB National Bank of America, n.a.	5	$	600,412	$	184,936	$	441,808	$	76,423
Arizona
UMB Bank Arizona, n.a.	1	$	17,999	$	16,030	$	1,849	$	9,861
Other Subsidiaries
UMB Community Development Corporation
UMB Banc Leasing Corp.
UMB Scout Brokerage Services, Inc.
UMB Scout Insurance Services, Inc.
UMB Capital Corporation
United Missouri Insurance Company
UMB Trust Company of South Dakota
Scout Investment Advisors, Inc.
UMB Fund Services, Inc.
UMB Consulting Services, Inc.

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UMB Bank and Trust, n.a.

Kansas City Realty Company

Kansas City Financial Corporation

UMB Redevelopment Corporation

UMB Realty Company, LLC

UMB National Sales Corporation

Grand Distribution Services, LLC

UMB Distribution Services, LLC

Warsaw Financial Corporation

UMB Fund Services, Inc. (formerly known as Sunstone Financial Group Inc.), located in Milwaukee, Wisconsin, is a mutual fund service provider to nearly 40 fund groups representing approximately 140 funds and alternative investment companies.

United Missouri Insurance Company, an Arizona corporation, is a reinsurance company that reinsures credit life and disability insurance originated by affiliate banks. UMB Community Development Corporation provides loans to qualified small businesses in low to moderate income areas in Missouri, Kansas, Illinois, Nebraska, Oklahoma and Colorado. UMB Consulting Services, Inc. offers regulatory and compliance assistance to regional banks.

On a full-time equivalent basis at December 31, 2005, the Company and its subsidiaries employed 3,433 persons.

Segment Information.    Financial information regarding the Company’s six segments is included in Note 12 to the Consolidated Financial Statements provided in Item 8, pages 67 through 70 of this report.

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

Monetary Policy and Economic Conditions.    The operations of the Company’s affiliate banks are affected by general economic conditions, as well as the monetary policy of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), which affects interest rates and the supply of money available to commercial banks. Monetary policy measures by the Federal Reserve Board are affected through open market operations in U.S. government securities, changes in the discount rate on bank borrowings and changes in reserve requirements.

Supervision and Regulation.    As a bank holding company and a financial holding company, the Company (and its subsidiaries) are subject to extensive regulation and are affected by numerous federal and state laws and regulations.

Supervision.    The Company is subject to regulation and examination by the Federal Reserve Board (FRB) and the Federal Reserve Bank of Kansas City. Its five subsidiary banks are subject to regulation and examination by the Office of the Comptroller of the Currency (OCC). UMB Scout Insurance Services, Inc. is regulated by state agencies in the states in which it operates. The FRB possesses cease and desist powers over bank holding companies if their actions represent unsafe or unsound practices or violations of law. In addition, the FRB is empowered to impose civil money penalties for violations of banking statutes and regulations. Regulation by the FRB is intended to protect depositors of the Company’s banks, not the Company’s shareholders. The Company is subject to a number of restrictions and requirements imposed by the Sarbanes-Oxley Act of 2002 relating to

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internal controls over financial reporting, disclosure controls and procedures, loans to directors or executive officers of the Corporation and its subsidiaries, the preparation and certification of the Company’s consolidated financial statements, the duties of the Company’s audit committee, relations with and functions performed by the Company’s independent auditors, and various accounting and corporate governance matters. The Company’s brokerage affiliate, UMB Scout Brokerage Services, Inc., is regulated by the Securities and Exchange Commission (SEC), the National Association of Securities Dealers, Inc., and the Missouri Division of Securities; it is also subject to certain regulations of the various states in which it transacts business. It is subject to regulations covering all aspects of the securities business, including sales methods, trade practices among broker/dealers, capital structure of securities firms, uses and safekeeping of customers’ funds and securities, recordkeeping, and the conduct of directors, officers and employees. The SEC and the self-regulatory organizations to which it has delegated certain regulatory authority may conduct administrative proceedings that can result in censure, fines, suspension or expulsion of a broker/dealer, its directors, officers and employees. The principal purpose of regulation of securities broker/dealers is the protection of customers and the securities market, rather than the protection of stockholders of broker/dealers.

Limitation on Acquisitions and Activities.    The Company is subject to the Bank Holding Company Act of 1956 as amended (BHCA), which requires the Company to obtain the prior approval of the Federal Reserve Board to (i) acquire substantially all the assets of any bank, (ii) acquire more than 5% of any class of voting stock of a bank or bank holding company which is not already majority owned, or (iii) merge or consolidate with another bank holding company. The BHCA also imposes significant limitations on the scope and type of activities in which the Company and its subsidiaries may engage. The activities of bank holding companies are generally limited to the business of banking, managing or controlling banks, and other activities that the FRB has determined to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. In addition, under the Gramm-Leach-Bliley Act of 1999 (GLB Act), a bank holding company, all of whose controlled depository institutions are “well-capitalized” and “well-managed” (as defined in federal banking regulations) and which obtains “satisfactory” Community Reinvestment Act ratings, may declare itself to be a “financial holding company” and engage in a broader range of activities.

A financial holding company may affiliate with securities firms and insurance companies and engage in other activities that are financial in nature or incidental or complementary to activities that are financial in nature. “Financial in nature” activities include:

• securities underwriting, dealing and market making;

• sponsoring mutual funds and investment companies;

• insurance underwriting and insurance agency activities;

• merchant banking; and

• activities that the FRB determines to be financial in nature or incidental to a financial activity, or which are complementary to a financial activity and do not pose a safety and soundness risk.

A financial holding company that desires to engage in activities that are financial in nature or incidental to a financial activity but not previously authorized by the FRB must obtain approval from the FRB before engaging in such activity. Also, a financial holding company may seek FRB approval to engage in an activity that is complementary to a financial activity if it shows that the activity does not pose a substantial risk to the safety and soundness of insured depository institutions or the financial system. Under the GLB Act, subsidiaries of financial holding companies engaged in non-bank activities are supervised and regulated by the federal and state agencies which normally supervise and regulate such functions outside of the financial holding company context.

A financial holding company may acquire a company (other than a bank holding company, bank or savings association) engaged in activities that are financial in nature or incidental to activities that are financial in nature without prior approval from the FRB. Prior FRB approval is required, however, before the financial holding

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company may acquire control of more than 5% of the voting shares or substantially all of the assets of a bank holding company, bank or savings association. In addition, under the FRB’s merchant banking regulations, a financial holding company is authorized to invest in companies that engage in activities that are not financial in nature, as long as the financial holding company makes its investment with the intention of limiting the duration of the investment, does not manage the company on a day-to-day basis, and the company does not cross market its products or services with any of the financial holding company’s controlled depository institutions. If any subsidiary bank of a financial holding company receives a rating under the Community Reinvestment Act of less than “satisfactory”, then the financial holding company is limited with respect to its engaging in new activities or acquiring other companies, until the rating is raised to at least “satisfactory.”

Other Regulatory Restrictions & Requirements.    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. FRB policy requires a bank holding company to serve as a source of financial and managerial strength to its subsidiary banks. Under this “source of strength doctrine,” a bank holding company is expected to stand ready to use its available resources to provide adequate capital funds to its subsidiary banks during periods of financial stress or adversity, and to maintain resources and the capacity to raise capital that it can commit to its subsidiary banks. Furthermore, the FRB has the right to order a bank holding company to terminate any activity that the FRB believes is a serious risk to the financial safety, soundness or stability of any subsidiary bank. Also, under cross-guaranty provisions of the Federal Deposit Insurance Act (FDIA), bank subsidiaries of a bank holding company are liable for any loss incurred by the Federal Deposit Insurance Corporation (FDIC) insurance fund in connection with the failure of any other bank subsidiary of the bank holding company.

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

The rate of interest a bank may charge on certain classes of loan is limited by law. At certain times in the past, such limitations have resulted in reductions of net interest margins on certain classes of loans. Federal laws also impose additional restrictions on the lending activities of banks, including the amount that can be loaned to one borrower or related group.

All five of the commercial banks owned by the Company are national banks and are subject to supervision and examination by the Office of the Comptroller of the Currency (OCC). In addition, the national banks are subject to examination by The Federal Reserve System. All such banks are members of, and subject to examination by, the Federal Deposit Insurance Corporation (FDIC).

Payment of dividends by the Company’s affiliate banks to the Company is subject to various regulatory restrictions. For national banks, the OCC must approve the declaration of any dividends generally in excess of the sum of net income for that year and retained net income for the preceding two years. At December 31, 2005, approximately $14,186,000 of the equity of the Company’s banks was available for distribution as dividends to the Company without prior regulatory approval or without reducing the capital of the respective banks below prudent levels.

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Each of the Company’s subsidiary banks are subject to the Community Reinvestment Act (the “CRA”) and implementing regulations. CRA regulations establish the framework and criteria by which the bank regulatory agencies assess an institution’s record of helping to meet the credit needs of its community, including low- and-moderate-income neighborhoods. CRA ratings are taken into account by regulators in reviewing certain applications made by the Company and its bank subsidiaries.

Regulatory Capital Requirements Applicable to the Company.    The FRB has promulgated capital adequacy guidelines for use in its examination and supervision of bank holding companies. If a bank holding company’s capital falls below minimum required levels, then the bank holding company must implement a plan to increase its capital, and its ability to pay dividends and make acquisitions of new bank subsidiaries may be restricted or prohibited. The FRB’s capital adequacy guidelines provide for the following types of capital:

Tier 1 capital, also referred to as core capital, calculated as:

• common stockholders’ equity;

• plus, non-cumulative perpetual preferred stock and any related surplus;

• plus, minority interests in the equity accounts of consolidated subsidiaries;

• less, all intangible assets (other than certain mortgage servicing assets, non-mortgage servicing assets and purchased credit card relationships);

• less, certain credit-enhanced interest-only strips and non-financial equity investments required to be deducted from capital; and

• less, certain deferred tax assets.

Tier 2 capital, also referred to as supplementary capital, calculated as:

• allowances for loan and lease losses (limited to 1.25% of risk-weighted assets);

• plus, unrealized gains on certain equity securities (limited to 45% of pre-tax net unrealized gains);

• plus, cumulative perpetual and long-term preferred stock (original maturity of 20 years or more) and any related surplus;

• plus, auction rate and similar preferred stock (both cumulative and non-cumulative);

• plus, hybrid capital instruments (including mandatory convertible debt securities); and

• plus, term subordinated debt and intermediate-term preferred stock with an original weighted average maturity of five years or more (limited to 50% of Tier 1 capital).

The maximum amount of supplementary capital that qualifies as Tier 2 capital is limited to 100% of Tier 1 capital.

Total capital, calculated as:

• Tier 1 capital;

• plus, qualifying Tier 2 capital;

• less, investments in banking and finance subsidiaries that are not consolidated for regulatory capital purposes;

• less, intentional, reciprocal cross-holdings of capital securities issued by banks; and

• less, other deductions (such as investments in other subsidiaries and joint ventures) as determined by supervising authority.

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The Company is required to maintain minimum amounts of capital to various categories of assets, as defined by the banking regulators. At December 31, 2005, the Company was required to have minimum Tier 1 capital, Total capital, and leverage ratios of 4.00%, 8.00%, and 4.00% respectively. The Company’s actual ratios at that date were 16.14%, 16.99%, and 10.96%, respectively.

Regulatory Capital Requirements Applicable to the Company’s Subsidiary Banks.    In addition to the minimum capital requirements of the FRB applicable to the Company, there are separate minimum capital requirements applicable to its subsidiary national banks

Federal banking laws classify an insured financial institution in one of the following five categories, depending upon the amount of its regulatory capital:

• “well-capitalized” if it has a total Tier 1 leverage ratio of 5% or greater, a Tier 1 risk-based capital ratio of 6% or greater and a total risk-based capital ratio of 10% or greater (and is not subject to any order or written directive specifying any higher capital ratio);

• “adequately capitalized” if it has a total Tier 1 leverage ratio of 4% or greater (or a Tier 1 leverage ratio of 3% or greater, if the bank has a CAMELS rating of 1), a Tier 1 risk-based capital ratio of 4% or greater, and a total risk-based capital ratio of 8% or greater;

• “undercapitalized” if it has a total Tier 1 leverage ratio that is less than 4% (or a Tier 1 leverage ratio that is less than 3%, if the bank has a CAMELS rating of 1), a Tier 1 risk-based capital ratio that is less than 4% or a total risk-based capital ratio that is less than 8%;

• “significantly undercapitalized” if it has a total Tier 1 leverage ratio that is less than 3%, a Tier 1 risk based capital ratio that is less than 3% or a total risk-based capital ratio that is less than 6%; and

• “critically undercapitalized” if it has a Tier 1 leverage ratio that is equal to or less than 2%.

Federal banking laws require the federal regulatory agencies to take prompt corrective action against undercapitalized financial institutions. The Company’s banks must be well-capitalized and well-managed in order for the Company to remain a financial holding company. To be well-capitalized, a bank must maintain a total Tier 1 leverage ratio of 5% or greater, a Tier 1 risk-based capital ratio of 6% or greater and a total risk-based capital ratio of 10% or greater. The capital ratios and classifications of each of the Company’s five banks as of December 31, 2005, are set forth below:

Bank	Total Tier 1 Leverage Ratio (5% or greater)		Tier 1 (6% or greater)		Total Risk-Based (10% or greater)
UMB Bank, n.a.	8.61	%	12.37	%	13.20	%
UMB Bank Colorado, n.a.	7.65	%	9.70	%	10.73	%
UMB National Bank of America, n.a.	13.89	%	31.92	%	32.67	%
UMB Bank Warsaw, n.a.	7.69	%	14.33	%	15.28	%
UMB Bank Arizona, n.a.	95.38	%	59.49	%	60.52	%

The Company is required to maintain minimum balances with the FRB for each of its subsidiary banks, and no interest is paid by the FRB on such balances. These balances are calculated from reports filed with the respective FRB for each affiliate. At December 31, 2005, the Company held $30,020,000 at the FRB.

Deposit Insurance and Assessments.    The deposits of each of the Company’s five subsidiary banks are insured by an insurance fund administered by the FDIC, in general up to a maximum of $100,000 per insured deposit. Under federal banking regulations, insured banks are required to pay semi-annual assessments to the FDIC for deposit insurance. The FDIC’s risk-based assessment system requires members to pay varying assessment rates depending upon the level of the institution’s capital and the degree of supervisory concern over the institution. The FDIC’s assessment rates range from zero cents to 27 cents per $100 of insured deposits. The FDIC has authority to increase the annual assessment rate and there is no cap on the annual assessment rate which the FDIC may impose.

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Limitations on Transactions with Affiliates.    The Company and its non-bank subsidiaries are “affiliates” within the meaning of Sections 23A and 23B of the Federal Reserve Act. The amount of loans or extensions of credit which a bank may make to non-bank affiliates, or to third parties secured by securities or obligations of the non-bank affiliates, are substantially limited by the Federal Reserve Act and the FDIA. Such acts further restrict the range of permissible transactions between a bank and an affiliated company. A bank and subsidiaries of a bank may engage in certain transactions, including loans and purchases of assets, with an affiliated company only if the terms and conditions of the transaction, including credit standards, are substantially the same as, or at least as favorable to the bank as, those prevailing at the time for comparable transactions with non-affiliated companies or, in the absence of comparable transactions, on terms and conditions that would be offered to non-affiliated companies.

Other Banking Activities.    The investments and activities of the Company’s subsidiary banks are also subject to regulation by federal banking agencies, regarding investments in subsidiaries, investments for their own account (including limitations in investments in junk bonds and equity securities), loans to officers, directors and their affiliates, security requirements, anti-tying limitations, anti-money laundering, financial privacy and customer identity verification requirements, truth-in-lending, types of interest bearing deposit accounts offered, trust department operations, brokered deposits, audit requirements, issuance of securities, branching and mergers and acquisitions.

Fiscal & Monetary Policies.    The Company’s business and earnings are affected significantly by the fiscal and monetary policies of the federal government and its agencies. It is particularly affected by the policies of the FRB, which regulates the supply of money and credit in the United States. Among the instruments of monetary policy available to the FRB are: conducting open market operations in United States government securities; changing the discount rates of borrowings of depository institutions; imposing or changing reserve requirements against depository institutions’ deposits; and imposing or changing reserve requirements against certain borrowings by banks and their affiliates. These methods are used in varying degrees and combinations to directly affect the availability of bank loans and deposits, as well as the interest rates charged on loans and paid on deposits. The policies of the FRB have a material effect on the Company’s business, results of operations and financial condition.

Future Legislation.    Various legislation, including proposals to change substantially the financial institution regulatory system, is from time to time introduced in Congress. This legislation may change banking statutes and the Company’s (and its subsidiaries’) operating environment in substantial and unpredictable ways. If enacted, this legislation could increase or decrease the cost of doing business, limit or expand permissible activities, or affect the competitive balance among banks, savings associations, credit unions and other financial institutions. The Company cannot predict whether any of this potential legislation will be enacted and, if enacted, the effect that it, or any implementing regulations, could have on the business, results of operations or financial condition of the Company or its subsidiaries.

The references in the foregoing discussion to various aspects of statutes and regulations are merely summaries which do not purport to be complete and which are qualified in their entirety by reference to the actual statutes and regulations.

Statistical Disclosure.    The information required by Guide 3, “Statistical Disclosure by Bank Holding Companies,” has been included in Items 6, 7, and 7A, pages 15 through 46 of this report.

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Executive Officers of the Registrants.    The following are the executive officers of the Company, each of whom is elected annually, and there are no arrangements or understandings between any of the persons so named and any other person pursuant to which such person was elected as an officer.

Name	Age	Position with Registrant
J. Mariner Kemper	33	Chairman and CEO of the Company since May 2004. Chairman of the Company’s Western Region since January 2004. Chairman and CEO of UMB Bank Colorado, n.a. (a subsidiary of the Company since 2000). President of UMB Bank Colorado from 1997 to 2000.
Peter J. Genovese	59	Vice Chairman of the Eastern Region UMB Bank, n.a. since January 2004. President of the Company from January 2000 to January 2004. Vice Chairman of the Board of the Company since 1982. Chairman and Chief Executive Officer of UMB Bank of St. Louis, n.a. (a former subsidiary of the Company) from 1979 to 1999.
Peter J. deSilva	44	President and Chief Operating Officer of the Company since January 2004 and Chairman and Chief Executive Officer of UMB Bank, n.a. since May 2004. Previously with Fidelity Investments from 1987-2004, the last seven years as Senior Vice President with principal responsibility for brokerage operations.
Bradley J. Smith	50	Executive Vice President of Consumer Services, UMB Bank, n.a. since January 2005. Executive Vice President of Retail and Corporate Services, St. Francis Bank/Mid America Bank, Milwaukee, Wisconsin from 2000 through 2005. Executive Vice President of Retail Banking, St. Francis Bank/Mid America Bank, Milwaukee, Wisconsin from 1997 through 2003.
James A. Sangster	51	President of UMB Bank, n.a. since 1999. Divisional Executive Vice President of UMB Bank, n.a. from 1993 to 1999. Executive Vice President prior thereto.
Douglas F. Page	62	Executive Vice President of the Company since 1984 and Divisional Executive Vice President, Loan Administration, of UMB Bank, n.a. since 1989.
James C. Thompson	63	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.
Dennis R. Rilinger	58	Divisional Executive Vice President and General Counsel of the Company and of UMB Bank, n.a. since 1996.
Joseph G. Gazzoli	53	Executive Vice President of Asset Management Division of UMB Bank, n.a. since June 2004. Executive Vice President of the Company and Chairman of UMB Bank St. Louis since January 2004. President and Chief Executive Officer TIAA-CREF Trust Company, F.S.B. from 1998 through 2004. TIAA-CREF Trust Company, F.S.B. is a subsidiary of TIAA-CREF, a financial services company primarily serving higher education and research.
David D. Kling	59	Divisional Executive Vice President of UMB Bank, n.a. since 1997.
Vince J. Ciavardini	50	Vice Chairman of Board of the Company and President and CEO of Investment Services Group since 2002. President and CEO of PFPC, Inc. 1982 to 2001, which provides fund services to the investment management industry.

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Name	Age	Position with Registrant
Michael D. Hagedorn	39	Executive Vice President and Chief Financial Officer of the Company since March 2005. Senior Vice President and Chief Financial Officer of Wells Fargo, Midwest Banking Group from April 2001 to March 2005. Senior Vice President and Chief Financial Officer of Wells Fargo Bank Iowa, n.a. from April 1999 to April 2001.
Christopher G. Treece	37	Senior Vice President, Controller, and Tax Director of the Company since December 2004. Vice President and Tax Director of the Company from September 2003 to December 2004. Director of RSM McGladery, Inc. from September 1996 to September 2003.

A discussion of recent acquisitions is included in Note 15 to the Consolidated Financial Statements provided in Item 8 on page 72 of this report.

The Company makes available free of charge on its website atwww.umb.com/investor, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports, as soon as reasonably practicable after it electronically files or furnishes such material with or to the SEC.

ITEM 1A.  RISK FACTORS

Our business routinely encounters and addresses risks. Some of such risks may give rise to occurrences that cause our future results to be materially different than we presently anticipate. In the following paragraphs, we describe our present view of certain important strategic risks, although the risks below are not the only risks we face. If any of such risks actually occur, our business, results of operations, financial condition and prospects could be affected materially and adversely. These risk factors should be read in conjunction with our management’s discussion and analysis, beginning on page 16 hereof, and our consolidated financial statements, beginning on page 47 hereof.

General economic conditions, such as economic downturns or recessions, could materially impair our customers’ ability to repay loans, harm our operating results and reduce our volume of new loans.    Our profitability depends significantly on economic conditions. Economic downturns or recessions, either nationally, internationally or in the states within our footprint, could materially reduce our operating results. An economic downturn could negatively impact demand for our loan and deposit products, the demand for insurance and brokerage products, the number of customers who cannot pay interest or principal on their loans and the demand for our other fee-based services. The fee revenue of our asset management segments including income from our Scout Investment Advisors and UMB Fund Services, Inc. subsidiaries, are largely dependent on both inflows to, and the fair value of, assets invested in the UMB Scout Funds and the fund clients to whom we provide services. General economic conditions can affect investor sentiment and confidence in the overall securities markets which could adversely affect asset values, net flows to these funds and other assets under management. Our bankcard revenues are dependent on transaction volumes from consumer and corporate spending to generate interchange fees. An economic downturn could negatively affect the amount of such fee income. Our banking services group is affected by corporate and consumer demand for debt securities which can be adversely affected by changes in general economic conditions. To the extent loan charge-offs exceed our estimates, an increase to the amount of expense provided related to the allowance for loans would reduce income. See “Quantitative and Qualitative Disclosures About Market Risk—Credit Risk” in Part II, Item 7A for a discussion of how we monitor and manage credit risk.

Changes in interest rates could affect our results of operations.    A significant portion of our net income is based on the difference between interest earned on earning assets (such as loans and investments) and interest paid on deposits and borrowings. These rates are sensitive to many factors that are beyond our control, such as general economic conditions, policies of various governmental and regulatory agencies, such as the Federal

11

Reserve Bank. Changes in interest rates greatly affect the amount of income earned and the amount of interest paid. Changes in interest rates also affect loan demand, the prepayment speed of loans, the purchase and sale of investment bonds and the generation and retention of customer deposits. A rapid increase in interest rates could result in interest expense increasing faster than interest income because of differences in maturities of assets and liabilities. See “Quantitative and Qualitative Disclosures About Market Risk—Interest Rate Risk” in Part II, Item 7A for a discussion of how we monitor and manage interest rate risk.

We are exposed to operational risk.    Operational risk could adversely affect our profitability. Operational risk includes reputation risk, legal and compliance risk, risk of fraud or theft by employees or outsiders and transaction processing and system errors. We rely on the ability of our employees and systems to properly process a high number of transactions involving large sums of money. In the event of a breakdown in internal control systems, inappropriate access and improper operation of systems or improper employee actions, we could suffer financial loss, face regulatory action or incur damage to our reputation. See “Quantitative and Qualitative Disclosures About Market Risk—Operational Risk” in Part II, Item 7A for a discussion of how we monitor and manage operational risk.

We face strong competition from other financial services firms, which could lead to pricing pressures that could materially adversely affect our revenue and profitability.    In addition to the challenge of competing against local, regional and national banks in attracting and retaining customers, our competitors also include brokers, mortgage bankers, mutual fund sponsors, securities dealers, investment advisors and specialty finance and insurance companies. The financial services industry is intensely competitive, and we expect it to remain so. We compete on the basis of several factors, including transaction execution, products and services, innovation, reputation and price. We may experience pricing pressures as a result of these factors and as some of our competitors seek to increase market share by reducing prices on products and services or increasing rates paid on deposits.

The shift from paper-based to electronic-based payment business may be difficult and negatively affect earnings.    In today’s payment environment, checks continue to be the payment of choice; however, checks as a percent of the total payment volume are declining and the payment volume is shifting to electronic alternatives. Check products are serviced regionally due to the physical constraints of the paper document; however, electronic documents are not bound by the same constraints, thus opening the geographic markets to all providers of electronic services. To address this shift, new systems are being developed and marketed which involve significant software and hardware costs. It is anticipated that we will encounter new competition, and any competitor that attracts the payments business of our existing customers will compete strongly for the remainder of such customers’ banking business.

We are subject to extensive regulation in the jurisdictions in which we conduct our businesses.    We are subject to extensive state and federal regulation, supervision and legislation that govern most aspects of our operations. Laws and regulations, and in particular banking, securities and tax laws, may change from time to time. Such changes may negatively impact our future results of operations and may also have an impact on our ability to achieve our strategic objectives. Actions by regulatory agencies could cause us to devote significant time and resources to compliance and could lead to penalties and withdrawal of certain products or services offered in the market.

Liquidity is essential to our businesses and we rely on the securities market and other external sources to finance a significant portion of our operations.    Liquidity affects our ability to meet our financial commitments. Our liquidity could be substantially negatively affected by an inability to increase deposits or obtain additional funds through borrowing. Factors that we cannot control, such as disruption of the financial markets or negative views about the general financial services industry could impair our ability to raise funding. If we are unable to raise funding using the methods described above, we would likely need to sell assets, such as our investment and trading portfolios, to meet maturing liabilities. We may be unable to sell some of our assets on a timely basis, or we may have to sell assets at a discount from market value, either of which could adversely

12

affect our results of operations. Our liquidity and funding policies have been designed to ensure that we maintain sufficient liquid financial resources to continue to conduct our business for an extended period in a stressed liquidity environment. If our liquidity and funding policies are not adequate, we may be unable to access sufficient financing to service our financial obligations when they come due, which could have a material adverse franchise or business impact. See “Quantitative and Qualitative Disclosures About Market Risk—Liquidity Risk” in Part II, Item 7A for a discussion of how we monitor and manage liquidity risk.

Inability to hire or retain qualified employees could adversely affect our performance.    Our people are our most important resource and competition for qualified employees is intense. Employee compensation is our greatest expense. We rely on key personnel to manage and operate our business, including major revenue generating functions such as our loan and deposit portfolios. The loss of key staff may adversely affect our ability to maintain and manage these portfolios effectively, which could negatively affect our results of operations. If compensation costs required to attract and retain employees become unreasonably expensive, our performance, including our competitive position, could be materially adversely affected.

Changes in accounting standards could impact reported earnings.    The accounting standard setting bodies, including the Financial Accounting Standards Board and other regulatory bodies periodically change the financial accounting and reporting standards affecting the preparation of our consolidated financial statements. These changes are not within our control and could materially impact our consolidated financial statements.

ITEM 1B.  UNRESOLVED STAFF COMMENTS

None

ITEM  2.  PROPERTIES

The Company’s headquarters building, the UMB Bank Building, is located at 1010 Grand Boulevard in downtown Kansas City, Missouri, and was opened in July 1986. Of the 250,000 square feet, 183,000 square feet is occupied by offices of the parent company, UMB Financial Corporation, as well as some customer service functions. The remaining 67,000 square feet of space is either leased or available for lease to third parties. Presently, the Company is seeking to lease 50,000 square feet of the headquarters building.

Other main facilities of UMB Bank, n.a. are located at 928 Grand Boulevard (185,000 square feet), 906 Grand Boulevard (140,000 square feet), and 1008 Oak Street (180,000 square feet) all in downtown Kansas City, Missouri. The 928 Grand and 906 Grand buildings house support functions. The 928 Grand building finished a major rehabilitation during 2004. The 928 building is also connected to the company’s headquarters building by an enclosed elevated pedestrian walkway. The 1008 Oak building, which opened during the second quarter of 1999, houses the Company’s operations, item processing, and data processing functions.

UMB Bank, n.a. is leasing 64,263 square feet in the Equitable Building, which is located in the heart of the commercial sector of downtown St. Louis, Missouri. This location has a full service banking center and is home to operations and administrative support functions as well.

UMB Fund Services, Inc., a subsidiary of the Company, leases 72,135 square feet in Milwaukee, Wisconsin, at which its fund services operations are headquartered.

At December 31, 2005, the Company’s affiliate banks operated a total of five main banking centers with 135 detached facilities, the majority of which are owned by the Company. The ability to obtain strategic new banking facilities in key growth areas within the Company’s footprint could affect future performance.

Additional information with respect to premises and equipment is presented in Note 1 and 8 to the Consolidated Financial Statements in Item 8, pages 52 and 60 of this report.

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ITEM 3.  LEGAL PROCEEDINGS

In the normal course of business, the Company and its subsidiaries are named defendants in various lawsuits and counter-claims. In the opinion of management, after consultation with legal counsel, none of these lawsuits are expected to have a materially adverse effect on the financial position or results of operations 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 ended December 31, 2005.

PART II

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company’s stock is traded on the NASDAQ National Market System under the symbol “UMBF.” As of February 28, 2005, the Company had 1,901 shareholders of record. Company stock information for each full quarter period within the two most recent fiscal years is set forth in the table below.

Per Share	Three Months Ended
2005	March 31		June 30		Sept. 30		Dec. 31
Dividend	$	0.22	$	0.22	$	0.22	$	0.25
Book value		37.68		38.36		38.56		38.78
Market price:
High		58.00		58.48		66.61		68.49
Low		52.89		53.45		56.95		61.50
Close		56.92		57.03		65.68		63.91
Per Share
2004	March 31		June 30		Sept. 30		Dec. 31
Dividend	$	0.21	$	0.21	$	0.21	$	0.22
Book value		38.02		37.18		37.85		37.85
Market price:
High		52.05		52.89		51.99		58.90
Low		46.68		48.01		46.46		47.36
Close		50.70		51.62		47.67		56.66

Information concerning restrictions on the ability of the Registrant to pay dividends and the Registrant’s subsidiaries to transfer funds to the Registrant is contained in Item 1, page 6 and Note 10 to the Consolidated Financial Statements provided in Item 8, pages 62 and 63 of this report. Information concerning securities the Company issued under equity compensation plans is contained in Item 12, page 85 of this report.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table provides information about share repurchase activity by the Company during the quarter ended December 31, 2005:

ISSUER PURCHASE OF EQUITY SECURITIES

Period	(a) Total Number of Shares Purchased	(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
October 1—October 31, 2005	3,057	$	66.73	3,057	861,560
November 1—November 30, 2005	53,529		65.14	53,529	808,031
December 1—December 31, 2005	15,256		65.38	15,256	792,775

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On April 26, 2005 the Company announced a plan to purchase up to one million shares of common stock. This plan will terminate on April 26, 2006. The Company has not made any repurchases other than through this plan. The Company typically executes all share repurchases in accordance with the safe-harbor provisions of Rule 10b-18 of the Exchange Act. Rule 10b-18 provides a safe harbor for purchases in a given day if the Company satisfies the manner, timing and volume conditions of the rule when purchasing its own common shares.

ITEM 6.  SELECTED FINANCIAL DATA

For a discussion of factors that may materially affect the comparability of the information below, please see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, pages 16 through 40, of this report.

FIVE-YEAR FINANCIAL SUMMARY

(in thousands except per share data)

	2005			2004			2003			2002			2001
EARNINGS
Interest Income	$	271,911		$	219,454		$	235,863		$	294,483		$	384,876
Interest Expense		83,621			40,350			42,684			76,452			145,147
Net interest income		188,290			179,104			193,179			218,031			239,729
Provision for loan losses		5,775			5,370			12,005			16,738			14,745
Noninterest income		251,873			228,103			245,919			232,206			223,523
Noninterest expense		358,069			350,102			351,106			360,949			369,373
Minority interest in loss of subsidiary		—			—			—			—			11,800
Net income		56,318			42,839			58,879			57,173			65,230
AVERAGE BALANCES
Assets	$	7,094,319		$	6,927,929		$	7,150,135		$	7,589,065			7,366,444
Loans, net of unearned interest		3,130,813			2,781,084			2,588,794			2,632,850			2,929,061
Securities		2,918,445			3,033,732			3,556,388			3,897,717			3,213,772
Deposits		5,135,968			4,976,037			5,280,203			5,527,836			5,410,264
Long-term debt		34,820			17,579			17,384			27,466			29,049
Shareholders’ equity		829,412			821,556			808,472			794,202			748,739
YEAR-END BALANCES
Assets	$	8,247,789		$	7,805,006		$	7,749,419		$	8,035,559		$	8,730,934
Loans, net of unearned interest		3,393,404			2,869,224			2,722,292			2,657,532			2,814,388
Securities		3,461,983			3,823,931			3,782,463			4,210,043			4,604,422
Deposits		5,920,822			5,388,238			5,636,125			5,846,947			6,375,510
Long-term debt		38,471			21,051			16,280			26,302			27,388
Shareholders’ equity		833,463			819,182			811,923			802,800			768,577
PER SHARE DATA
Earnings—basic	$	2.61		$	1.98		$	2.70		$	2.59		$	2.95
Earnings—diluted		2.60			1.97			2.70			2.58			2.95
Cash Dividends		0.91			0.85			0.81			0.80			0.76
Dividend payout ratio		34.87	%		42.93	%		30.00	%		30.89	%		27.12	%
Book Value	$	38.78		$	37.85		$	37.43		$	36.52		$	34.73
Market price
High		68.49			58.90			51.49			50.10			43.52
Low		52.89			46.46			36.25			36.20			32.86
Close		63.91			56.66			47.54			38.26			40.00
Return on average assets		0.79	%		0.62	%		0.82	%		0.75	%		0.89	%
Return on average equity		6.79			5.21			7.28			7.20			8.71
Average equity to average assets		11.69			11.86			11.31			10.47			10.17
Total risk-based capital ratio		16.99			19.20			20.25			18.88			15.97

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

MANAGEMENT’S DISCUSSION AND ANALYSIS

The following presents management’s discussion and analysis of the Company’s consolidated financial condition, changes in condition, and results of operations. This review highlights the major factors affecting results of operations and any significant changes in financial conditions for the three-year period ended December 31, 2005. It should be read in conjunction with the accompanying Consolidated Financial Statements and other financial statistics appearing elsewhere in the report.

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

The information included or incorporated by reference in this report contains forward-looking statements of expected future developments within the meaning of and pursuant to the safe harbor provisions established by Section 21E of the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995. These forward-looking statements may refer to financial condition, results of operations, plans, objectives, future financial performance and business of the Company, including, without limitation:

• Statements that are not historical in nature;

• Statements preceded by, followed by or that include the words “believes,” “expects,” “may,” “will,” “should,” “could,” “anticipates,” “estimates,” “intends,” or similar words or expressions; and

• Statements regarding the timing of the closing of branch sales and purchases.

Forward-looking statements are not guarantees of future performance or results. You are cautioned not to put undue reliance on any forward-looking statement which speaks only as of the date it was made. Forward-looking statements reflect management’s expectations and are based on currently available data; however, they involve risks, uncertainties and assumptions. Actual results may differ materially from those contemplated by the forward-looking statements due to, among others, the following factors:

• general economic and political conditions, either nationally, internationally or in the Company’s footprint, may be less favorable than expected;

• changes in the interest rate environment;

• changes in the securities markets;

• changes in operations;

• competitive pressures among financial services companies may increase significantly;

• changes in technology may be more difficult or expensive than anticipated;

• legislative or regulatory changes may adversely affect the Company’s business;

• changes in the ability of customers to repay loans;

• changes in loan demand may adversely affect liquidity needs;

• changes in employee costs; and

• changes in accounting rules.

Any forward-looking statements should be read in conjunction with information about risks and uncertainties set forth in this report and in documents incorporated herein by reference. Forward-looking statements speak only as of the date they are made, and the Company does not intend to review or revise any particular forward-looking statement in light of events that occur thereafter or to reflect the occurrence of unanticipated events.

16

Results of Operations

Overview

The average loan to deposit ratio of the Company’s subsidiary banks has been, and is expected to continue be lower than industry average. The Company plans to continue its efforts to further diversify its fee-based operations to help reduce the Company’s exposure to changes in interest rates. This includes asset and treasury management, investment services, deposit service charges and other fee-based services.

As some of the Company’s fee-based businesses are the direct result of the market value of its customers’ investments, the overall health of the equity and financial markets plays an important role in the recognition of fee income, particularly in trust, mutual fund servicing and investment management areas of the Company. To counter this market risk, the Company took action in several areas. In 2005, the Company aligned its brokerage and personal wealth management groups to better position itself to serve its customers. In 2005, the Company added 12 actively managed mutual funds and 14 passively managed investments to its asset management offerings. The Company benefited from record net flows of $842 million into the UMB Scout Funds (which are managed by a subsidiary of the Company) during the year, more than twice the $305 million of net flows registered in 2004, and almost ten times the net flows in 2002. Also, the Company’s mutual fund servicing business had strong sales from both existing and new customers throughout 2005 due to a renewed effort on sales in 2004 and 2005.

During 2005, the Company focused on helping customers transition from paper payment options to electronic payment solutions by providing innovative products and services such as paycard and remote deposit capture. Additionally, the Company is investing in a significantly upgraded treasury management platform in order to enable enhanced information reporting and transaction initiation via the Internet; improve control of service through online self-administration; and strengthen system security. The Company has also adopted a wholesale health savings and flexible spending account strategy focusing on healthcare providers and third-party administrators. This strategy resulted in UMB achieving several prominent customer wins. These items did not have a significant impact on 2005 earnings, but are enabling the Company to position itself with respect to fee-based income in future years.

The interest rate environment has a direct impact on the Company’s net interest income as the Company’s balance sheet is structured to be both very liquid and short in duration. This position adversely impacts the Company’s net interest income in a declining rate environment. As rates increase, liabilities will typically reprice more quickly than assets which puts pressure on overall net interest income. However, in an increasing rate environment, this position should, over time, benefit the Company. Management believes that once rates stabilize at a higher rate, then net interest income will improve. Item 7a, Quantitative and Qualitative Disclosures about Market Risk, discusses in detail the impact of rising and declining rates on net interest income.

On the expense side, management initiated a Voluntary Separation Plan (VSP) in early 2005 for certain individuals to take early retirement. Over 100 associates participated in this plan. Although this plan had a one-time cost of approximately $4.4 million in 2005, ongoing savings are anticipated. At this time, management does not anticipate offering the VSP in 2006 or future years. A comprehensive board-approved incentive plan was also introduced in 2005 to encourage associates to focus on profitable activities.

Additionally, management implemented a branch rationalization strategy in 2005 in which we sold eleven branches, closed five branches and opened four new branches in strategic locations. This had a favorable impact on 2005 income as a result of the net gains from the sales and closures. Along with this strategy, a renewed focus has been placed on the branch distribution network across the Company footprint. This has enabled the Company to experience growth outside of its main headquarters in Kansas City, MO.

The Company is also facing increased competition from other banks in its markets as well as other competitors such as non-bank financial institutions, brokers, insurance companies and investment advisory firms.

17

The Company faces intense local, regional and national competition for retail customers and competes nationally with respect to its trust and asset management business. This increased competition continues to have the impact of compressing margins and income from the Company’s fee based businesses. As this competition is anticipated to continue, management is addressing these competitive concerns through the implementation of new core systems in 2005 and 2006 including customer relationship management; corporate treasury management; imaging and other network improvements.

Earnings Summary

The Company recorded consolidated net income of $56.3 million for the year ended December 31, 2005. This represents a 31.5 percent increase over 2004. Net income for 2004 decreased 27.2 percent compared to 2003. Basic earnings per share for the year ended December 31, 2005 were $2.61 per share compared to $1.98 in 2004 and $2.70 in 2003. Basic earnings per share for 2005 increased 31.8 percent over 2004 per share earnings, which had decreased 26.7 percent over 2003. Fully diluted earnings per share for the year ended December 31, 2005, were $2.60 per share compared to $1.97 in 2004 and $2.70 in 2003.

The Company’s net interest income increased to $188.3 million in 2005 compared to $179.1 million in 2004 and $193.2 million in 2003. The $9.2 million increase in net interest income in 2005 as compared to 2004 is primarily a result of a favorable volume variance partially offset by an unfavorable rate variance. See Table 1 on pages 19 and 20. The volume variance was mostly driven by an 18.3 percent increase in loans and loans held for sale in 2005 as compared to 2004. Although interest rates increased during 2005, the Company experienced an unfavorable rate variance in 2005 as compared to 2004 as its liabilities repriced more quickly than its assets. The Company anticipates that its yields will continue to slowly improve if rates gradually rise or remain stable. The $14.1 million decrease in net interest income in 2004 as compared to 2003 was primarily a result of an unfavorable rate variance caused by margin compression triggered by historically low interest rates. See Table 1 on pages 19 and 20.

The Company had an increase of $23.8 million, or 10.4 percent in noninterest income in 2005 as compared to 2004 and a $17.8 million, or 7.2 percent decrease in 2004 compared to 2003. The increase in 2005 as compared to 2004 is primarily a result of increases in trust and securities processing due to increased inflows into the UMB Scout funds; increases in service charges as a result of a new overdraft program; net gains on the sales and closures of banking facilities and gain on the sale of employee benefit accounts. The decrease in 2004 from 2003 was the result of a few reasons. The Company sold its merchant bankcard discount operation in 2003, which processed credit and debit card activity for commercial and retail merchants, and realized a one-time gain of $8.3 million. Decreases in fee-based income contributed to the remaining decrease in noninterest income for 2004 compared to 2003. The most significant decrease in fee-based income was related to trust and securities processing which experienced a decrease due to the gain recognized from the sale of the employee benefit accounts in early 2004.

Noninterest expense increased in 2005 by $8.0 million, or 2.3 percent compared to 2004 and decreased in 2004 by $1.0 million, or 0.3 percent compared to 2003. The $8.0 million increase from 2004 was partially attributable to a $4.4 million charge for the VSP offered by the Company in 2005. Additionally, there were increases in processing fees (largely due to an increase in shareholder servicing and other administration fees paid to investment advisors related to the Scout Funds); bankcard expenses (linked to enhanced rebate programs for consumer and commercial card customers); and other expense (non-operating charge-offs and charitable contributions). These increases were partially offset by personnel related efficiencies and a decrease in marketing and business development expense. The $1.0 million decrease in 2004 as compared to 2003 was primarily due to lower salaries and employee benefit accounts as fully realized from the sale of the employee benefits business as well as other personnel related efficiencies. This decrease in salaries and benefits was partially offset by increases in occupancy (largely due to the refurbishment of the headquarters’ building in Kansas City and the construction of new branches), equipment, legal and consulting and processing fees (linked to the Company’s upgrading of its core operating systems); and marketing expenses (the Company’s creation of its branding strategy as well as product support).

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Net Interest Income

Net interest income is a significant source of the Company’s earnings and represents the amount by which interest income on earning assets exceeds the interest expense paid on liabilities. The volume of interest earning assets and the related funding sources, the overall mix of these assets and liabilities, and the rates paid on each affect net interest income. Table 1 summarizes the change in net interest income resulting from changes in volume and rates for 2005, 2004 and 2003.

Net interest margin is calculated as net interest income on a fully tax equivalent basis (FTE) as a percentage of average earning assets. A critical component of net interest income and related net interest margin is the percentage of earning assets funded by interest free funding sources. Table 2 analyzes net interest rate margin for the three years ended December 31, 2005, 2004 and 2003. Net interest income, average balance sheet amounts and the corresponding yields earned and rates paid for the years 2001 through 2005 are presented in a table following the footnotes to the Consolidated Financial Statements. Net interest income is presented on a tax-equivalent basis to adjust for the tax-exempt status of earnings from certain loans and investments, which are primarily obligations of state and local governments.

Table 1

RATE-VOLUME ANALYSIS (in thousands)

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

Average Volume			Average Rate				2005 vs. 2004	Increase (Decrease)
2005	2004		2005		2004			Volume			Rate			Total
							Change in interest earned on:
$3,130,813	$	2,781,084	5.66	%	4.91	%	Loans	$	19,765		$	20,792		$	40,557
							Securities:
2,230,559		2,351,227	2.91		2.46		Taxable		(3,506	)		10,567			7,061
629,576		615,176	4.72		4.67		Tax-exempt		739			334			1,073
228,177		280,305	3.50		1.57		Federal funds sold and resell     agreements		(1,823	)		5,414			3,591
60,144		69,163	3.91		3.15		Other		(352	)		527			175
6,279,269		6,096,955	4.49		3.76		Total		14,823			37,634			52,457
							Change in interest incurred on:
3,248,695		3,110,432	1.60		0.87		Interest-bearing deposits		2,217			22,823			25,040
1,029,063		1,050,891	2.85		1.16		Federal funds purchased and     repurchase agreements		(623	)		17,831			17,208
49,368		36,052	4.36		3.13		Other		580			443			1,023
$4,327,126	$	4,197,375	1.93	%	0.96	%	Total		2,174			41,097			43,271
							Net Interest income	$	12,649		$	(3,463	)	$	9,186

19

Average Volume			Average Rate				2004 vs. 2003	Increase (Decrease)
2004	2003		2004		2003			Volume			Rate			Total
							Change in interest earned on:
$2,781,084	$	2,588,794	4.91	%	5.31	%	Loans	$	9,611		$	(10,301	)	$	(690	)
							Securities:
2,351,227		2,771,882	2.46		2.56		Taxable		(10,331	)		(2,793	)		(13,124	)
615,176		735,907	4.67		5.24		Tax-exempt		(3,390	)		(2,531	)		(5,921	)
280,305		146,469	1.57		1.16		Federal funds sold and resell     agreements		2,096			592			2,688
69,163		50,433	3.15		3.04		Other		583			55			638
6,096,955		6,293,485	3.76		3.98		Total		(1,431	)		(14,978	)		(16,409	)
							Change in interest incurred on:
3,110,432		3,492,038	0.87		0.95		Interest-bearing deposits		(3,320	)		(2,795	)		(6,115	)
1,050,891		950,569	1.16		0.87		Federal funds purchased and repurchase agreements		1,161			2,757			3,918
36,052		41,161	3.13		3.07		Other		(160	)		23			(137	)
$4,197,375	$	4,483,768	0.96	%	0.95	%	Total		(2,319	)		(15	)		(2,334	)
							Net Interest income	$	888		$	(14,963	)	$	(14,075	)

Table 2

ANALYSIS OF NET INTEREST MARGIN (in thousands)

	2005			2004			2003
Average earning assets	$	6,279,269		$	6,096,955		$	6,293,485
Interest-bearing liabilities		4,327,126			4,197,375			4,483,768
Interest-free funds	$	1,952,143		$	1,899,580		$	1,809,717
Free funds ratio (free funds to earning assets)		31.09	%		31.16	%		28.76	%
Tax-equivalent yield on earning assets		4.49	%		3.76	%		3.98	%
Cost of interest-bearing liabilities		1.93			0.96			0.95
Net interest spread		2.56	%		2.80	%		3.03	%
Benefit of interest-free funds		0.60			0.30			0.27
Net interest margin		3.16	%		3.10	%		3.30	%

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The Company experienced an increase in net interest income of $9.2 million, or 5.1 percent, for the year 2005 compared to 2004. This followed a decline of $14.1 million, or 7.3 percent, for the year 2004 compared to 2003. As illustrated in Table 1, the 2005 increase is primarily a result of a favorable volume variance due mostly to a $350 million, or 12.6 percent, increase in average loan balances. The increase in interest rates also had a corresponding increase in the rate variance for earning assets. However, the same increase in rates affected liabilities repricing more quickly than asset repricing, causing an overall unfavorable rate variance for 2005 as compared to 2004. As illustrated in Table 1, the 2004 decrease in net interest margin as compared to 2003 is mostly due to an unfavorable rate variance. Interest rates hit a low in mid-2004 before beginning to increase in the second half of 2004. Although the duration of the Company’s portfolio is relatively short, an increase in rates has a more immediate impact on liabilities than it does assets. On the liability side, a significant portion of the Company’s funding sources reprice frequently (in particular, interest-bearing demand and savings and federal funds purchased and repurchase agreements). To illustrate the asset side, at the end of 2005, 57.8 percent of the Company’s loans are fixed rate loans (see Table 17 on page 43) and the average maturity of the investment portfolio is 23 months (see discussion under “Securities” on page 31).

Management believes that the overall outlook in its net interest income is positive. The highest yielding assets, loans, have increased from an average of $2.87 billion at the end of 2004 to an average of $3.39 billion at the end of 2005. Loan-related earning assets tend to have a higher spread than those earned in the Company’s investment portfolio as, by design, its investment portfolio is very short in duration and liquid in its composition of assets. If rates continue to increase, the rate impact on both loans and investment yields will be favorable. Given the term of the Company’s earning assets, a sustained higher rate environment has historically had a positive impact on the Company’s net interest income and management expects that this will occur in the future. Management is continuing a strategic initiative to emphasize commercial and consumer loan growth through marketing, product enhancements and streamlining the approval process for its consumer loan product suite. These efforts are designed to increase volumes of new applications and booked loans.

During 2006, approximately $984 million of securities are expected to mature and be reinvested. Management believes that the securities portfolio continues to be an opportunity for both interest income and yield improvement, depending upon rate changes. In late 2004, management adopted a portfolio modification plan designed to improve interest income by extending the average life of its investment portfolio. The Company intends to continue to implement this extension strategy over the course of the next three to five quarters. The original plan called for a modest extension of 6 to 12 months to the average portfolio life. The total investment portfolio had an average life of 23.0 months and 15.3 months as December 31, 2005 and December 31, 2004, respectively. This increase is a result of implementing the extension strategy. It should be noted that the Company has a significant portfolio of extremely short-term discount notes as of the end of both 2005 and 2004. These securities are held due to the seasonal fluctuation related to public fund deposits which are expected to flow out of the bank in a relatively short period. At December 31, 2005, the amount of such discount notes was approximately $840 million, and without these discount notes, the average life of the core investment portfolio would have been 30.4 months. At December 31, 2004, the amount of such discount notes was approximately $1.0 billion, and without these discount notes, the average life of the core investment portfolio would have been 21.0 months. Therefore, the core investment portfolio, without the short-term discount notes, had an increase in average life of 9.4 months in 2005. Continued implementation of this plan is subject to market conditions including the existing yield curve and a sufficient supply of securities with acceptable risk/reward characteristics. The effectiveness of this plan is uncertain as it is dependent upon future market conditions including interest rate changes.

Overall, if interest rates continue to rise at a measured pace and given the term and changing mix of the Company’s balance sheet, management expects net interest income to increase. Management believes the Company will obtain additional improvement in net interest income once rates stabilize.

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Provision and Allowance for Loan Losses

The allowance for loan losses (“ALL”) represents management’s judgment of the losses inherent in the Company’s loan portfolio. The provision for loan losses is the amount necessary to adjust its ALL to the level considered appropriate by management. The adequacy of the ALL is reviewed quarterly, considering such items as historical loss trends, a review of individual loans, migration analysis, current economic conditions, loan growth and characteristics, industry or segment concentration and other factors. Bank regulatory agencies require that the adequacy of the ALL be maintained on a bank-by-bank basis for each of the Company’s subsidiaries.

In 2004, the Company partially decentralized its loan approval process by increasing the lending authority limits of its regions. However, the Company maintained its centralized credit administration function, which provides information on affiliate bank risk levels, delinquencies, an internal ranking system and overall credit exposure. In addition, larger loan requests are still centrally reviewed to ensure the consistent application of the loan policy and standards.

Management of the Company expensed an additional $0.4 million, or 7.5 percent, related to the provision for loan losses in 2005 as compared to 2004. This compares to a $6.6 million, or 55% decrease in the provision for loan losses in 2004 as compared to 2003. As illustrated on Table 4 below, the ALL decreased from 1.49% of total loans as of December 31, 2004 to 1.20% of total loans as of December 31, 2005. This decrease was due to both a sustained decrease in nonperforming loans as a percentage of total loans in 2005, as well as continued low charge-offs in 2005, 2004 and 2003 (See Table 4 below).

As shown in Table 3, the ALL has been allocated to various loan portfolio segments. The Company manages the ALL against the risk in the entire loan portfolio and therefore, the allocation of the ALL to a particular loan segment may change in the future. In the opinion of management, the ALL is appropriate based on the inherent losses in the loan portfolio at December 31, 2005. Although no assurance can be given, management of the Company believes the present ALL is adequate considering the Company’s loss experience, delinquency trends and current economic conditions, and does not anticipate material increases in the ALL or in the level of provisions to the ALL in the near future. Future economic conditions and borrowers’ ability to meet their obligations, however, are uncertainties which could affect the Company’s ALL and/or need to change its current level of provision.

Table 3

ALLOCATION OF ALLOWANCE FOR LOAN LOSSES (in thousands)

This table presents an allocation of the allowance for loan losses by loan categories. The breakdown is based on a number of qualitative factors; therefore, the amounts presented are not necessarily indicative of actual future charge-offs in any particular category.

	December 31
Loan Category	2005		2004		2003		2002		2001
Commercial	$	28,445	$	17,325	$	22,550	$	20,050	$	18,050
Consumer		10,726		20,806		19,644		16,278		16,587
Real estate		1,572		4,292		1,200		900		900
Agricultural		32		250		50		50		50
Leases		50		50		50		50		50
Total allowance	$	40,825	$	42,723	$	43,494	$	37,328	$	35,637

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Table 4 presents a five-year summary of the Company’s ALL. Also, please see Credit Risk under Risk Management on pages 43 and 44 in this report for information relating to nonaccrual, past due, restructured loans, and other credit risk matters.

Table 4

ANALYSIS OF ALLOWANCE FOR LOAN LOSSES (in thousands)

	2005			2004			2003			2002			2001
Allowance-beginning of year	$	42,723		$	43,494		$	37,328		$	35,637		$	31,998
Provision for loan losses		5,775			5,370			12,005			16,738			14,745
Charge-offs:
Commercial		(2,261	)		(2,150	)		(2,320	)		(8,483	)		(4,764	)
Consumer
Bankcard		(5,925	)		(5,541	)		(6,175	)		(6,118	)		(6,613	)
Other		(1,918	)		(2,050	)		(2,825	)		(3,746	)		(5,378	)
Real estate		(3	)		(4	)		(17	)		(13	)		(5	)
Total charge-offs		(10,107	)		(9,745	)		(11,337	)		(18,360	)		(16,760	)
Recoveries:
Commercial		443			1,257			2,998			457			1,820
Consumer
Bankcard		1,008			1,129			1,097			1,307			1,373
Other		981			1,217			1,294			1,507			2,204
Real estate		2			1			109			21			256
Agricultural		—			—			—			21			1
Total recoveries		2,434			3,604			5,498			3,313			5,654
Net charge-offs		(7,673	)		(6,141	)		(5,839	)		(15,047	)		(11,106	)
Allowance-end of year	$	40,825		$	42,723		$	43,494		$	37,328		$	35,637
Average loans, net of unearned interest	$	3,130,813		$	2,781,084		$	2,558,794		$	2,632,850		$	2,929,061
Loans at end of year, net of unearned interest		3,393,404			2,869,224			2,722,292			2,657,532			2,814,388
Allowance to loans at year-end		1.20	%		1.49	%		1.60	%		1.40	%		1.27	%
Allowance as a multiple of net charge-offs		5.32	x		6.96	x		7.45	x		2.48	x		3.21	x
Net charge-offs to:
Provision for loan losses		132.87	%		114.36	%		48.64	%		89.90	%		75.32	%
Average loans		0.25			0.22			0.23			0.57			0.38

Noninterest Income

A key objective of the Company is the growth of noninterest income to enhance profitability and provide steady income, as fee-based services are non-credit related and are not directly affected by fluctuations in interest rates. Fee-based services provide the opportunity to offer multiple products and services to customers and, therefore, more closely align the customer with the Company. The Company’s ongoing focus is to develop and offer multiple products and services to its customers. Fee-based services that have been emphasized include trust and securities processing, securities trading/brokerage and cash/treasury management. Management believes that it can offer these products and services both efficiently and profitably as most of these are driven off of common platforms and support structures.

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Table 5

SUMMARY OF NONINTEREST INCOME (in thousands)

	Year Ended December 31
	2005			2004		2003
Trust and securities processing	$	82,430		$	75,742	$	86,490
Trading and investment banking		18,240			17,915		20,863
Service charges on deposit accounts		79,420			73,533		70,705
Insurance fees and commissions		3,326			3,487		3,704
Brokerage fees		5,933			7,731		9,637
Bankcard fees		33,362			31,435		31,655
Gain on sales of assets and deposits, net		9,237			2,185		—
Gain on sale of employee benefit accounts		3,600			1,240		233
Gain on sale of merchant discount operation		—			—		8,250
(Losses) Gains on sales of securities available for sale, net		(225	)		141		824
Other		16,550			14,694		13,558
Total noninterest income	$	251,873		$	228,103	$	245,919

Noninterest income (summarized in table 5) increased by $23.8 million, or 10.4 percent, in 2005 as compared to 2004. This compares to a decrease in noninterest income of $17.8 million, or 7.2 percent in 2004 as compared to 2003. The increase in noninterest income in 2005 as compared to 2004 is primarily a result of increases in fee based services including trust and securities processing; service charges on deposits and bankcard fees. Additional increases are a result of significant gains on the sales of assets and deposits, net (due to the sale of certain branch locations during 2005) and the sale of employee benefit accounts (the final earnout payment was received in early 2005).

The decrease in noninterest income in 2004 as compared to 2003 was primarily a result of a decrease in trading and investment banking, the sale of the merchant discount operation in December 2003, and a significant decline in 2004 trust income due to the sale of the employee benefit accounts in 2004. As the sale of the employee benefit accounts enabled the Company to avoid significant capital expenditures, management believes that this sale will not have a significant impact on future earnings.

Trust and securities processing consists of fees earned on personal and corporate trust accounts, custody of securities services, trust investments and money management services, and mutual fund assets servicing. These fees increased $6.7 million in 2005 compared to 2004 and decreased $10.7 million in 2004 compared to 2003. The increase in trust and securities processing fees in 2005 as compared to 2004 was primarily a result of two items. First, there was a $4.3 million increase in fund administration fees from UMB Fund Services as a result of services performed for new clients. The remaining increase is primarily attributable to increases in management fees from the UMB Scout Funds due to $842 million of net inflows into the funds during 2005. As the income from these two segments are mostly linked to the market value of assets, the related income will be affected by changes in the securities markets. Management continues to emphasize sales of services to both new and existing clients as well as increasing and improving the distribution channels which lead to increased inflows into the UMB Scout funds. The decrease in trust and securities processing in 2004 as compared to 2003 is primarily related to the sale of the Company’s employee benefits business and the loss of the assets under management from such employee benefit accounts.

Trading and investment banking consists mostly of fees earned from the sale of bonds to the Company’s correspondent bank and non-financial institution client base. Fees from such activity increased $0.3 million, or 1.8% in 2005 compared to 2004 and as compared to a decrease of $2.9 million, or 14.1 percent in 2004 compared to 2003. The 2004 decrease was mainly market driven as customers changed their positions of mortgaged backed securities, in 2003, due to the heavy refinancing of real estate loans. This returned to more normal trading levels in 2004 and 2005.

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Service charges on deposit accounts increased $5.9 million, or 8.0 percent, in 2005 compared to 2004 and $2.8 million, or 4.0 percent, in 2004 compared to 2003. The increase in 2005 over 2004 was primarily a result of a $7.5 million increase in individual overdraft and return item charges partially offset by a decrease in corporate service charges. The increase in individual overdraft and return item charges is primarily due to pricing increases and changes in overdraft and collection procedures in the second half of 2004. As 2005 was the first full year of these new overdraft and collection procedures, the impact on future years is uncertain as it is greatly affected by customer behavior. This increase from overdraft and return item charges was partially offset by decreases in corporate service charges. Corporate service charge income was adversely affected by increases in earnings credits on compensating balances. Due to the increase in interest rates, the earnings credits on compensating balances also increased correspondingly. Management has implemented a new tiered earnings credit policy in January 2006 which should help mitigate the impact of future increases in interest rates. Another area of potential future growth relates to the Company’s HSA (Health Savings Account) and FSA (Flexible Spending Account) healthcare initiatives where the Company provides the payment mechanisms to support HSAs and FSAs. These accounts could favorably impact fee income, interchange fee from electronic payments and the amount of deposits and assets under management. To date, the Company has entered into agreements with certain major healthcare providers, but the volume of such business and revenues associated with it cannot be reasonably forecast. The increase in service charge income in 2004 as compared to 2003 is also related to the 2004 implementation of new overdraft procedures. Corporate service charge income is also affected by the shift of customer payments from paper to electronic Although the Company has focused significant resources into maintaining its cash management income levels, the external challenges facing the Company make the impact of these changes on its income uncertain.

Brokerage fees continue to decline. Brokerage fee income decreased by $1.8 million, or 23.3 percent in 2005 compared to 2004. Brokerage fee income declined by $1.9 million, or 19.8 percent in 2004 compared to 2003. The primary reason for this decline is the continued decline in retail brokerage fee income due to decreased demand. Management has attempted to address this trend by realigning the brokerage business with its Private Client Services division under new leadership. Management believes that this realignment will enable increases to future brokerage income through better distribution channels, as well as an increased sales focus.

Bankcard fees increased by $1.9 million in 2005 compared to 2004 after remaining relatively flat in 2004 as compared to 2003. The higher fees in 2005 reflect both an increase in overall card volume and the average per transaction dollar amount. In 2005, the credit card rebate programs were modified to encourage increased usage by both consumer and commercial customers. Additionally, the rise in gasoline prices as well as the general health of the economy impacted transaction activity. Continued growth in the commercial card segments and rapid transfer from offline to online debit card activity in the consumer segment is anticipated.

Gains on sales of assets and deposits, net, increased by $7.1 million in 2005 as compared to 2004 net gains of $2.2 million. There were no similar gains in 2003. The 2005 gains were primarily attributable to net gains on the sales of eleven banking facilities. Other gains in 2005 included a $2.4 million gain related to the condemnation sale of a downtown Kansas City banking facility to the city, as well as a $1.2 million gain on the sale of a portion of land related to another Kansas City banking facility. The gain in 2004 was primarily related to the condemnation sale of a downtown Kansas City parking lot.

Gains on sale of employee benefit accounts represent earnout payments received in 2005 and 2004 as a result of the sale of employee benefit accounts announced in May 2003. The accounts were transferred in the first month of 2004 and a gain of $1.2 million was recognized in such year. In the first quarter of 2005, an earnout payment of $3.6 million was received based on the income received during the first twelve months on accounts transferred in 2004.

Gain on sale of merchant discount operation was recorded in December 2003 for $8.3 million. Simultaneous with the sale of the merchant discount operation, a marketing agreement was executed whereby the Company receives a share of future merchant discount income. Therefore, management believes that this sale will not have a significant impact on future earnings.

25

Other income increased $1.9 million, or 12.6 percent, in 2005 compared to 2004 and increased $1.1 million, or 8.4 percent, in 2004 compared to 2003.

Noninterest Expense

Noninterest expense in 2005 increased $8.0 million, or 2.3 percent, compared to 2004, primarily due to a one-time charge related to the VSP, higher processing fees, bankcard fees and other noninterest expense items. These items were partially offset by decreases in salary and benefit costs, as well as a decrease in marketing and business development. Noninterest expense remained relatively flat in 2004 as compared to 2003 by decreasing by 0.3 percent, or $1.0 million. As discussed below, it is anticipated that noninterest expense will increase in 2006 primarily due to investments in technology and personnel.

Table 6

SUMMARY OF NONINTEREST EXPENSE (in thousands)

	Year Ended December 31
	2005		2004		2003
Salaries and employee benefits	$	190,197	$	189,876	$	196,893
Occupancy, net		26,468		26,131		24,720
Equipment		44,031		43,422		42,645
Supplies and services		21,808		22,268		23,291
Marketing and business development		13,309		15,306		13,550
Processing fees		23,594		21,372		20,323
Legal and consulting		8,577		8,825		7,355
Bankcard		11,608		9,116		8,088
Amortization of intangibles		740		742		1,210
Other		17,737		13,044		13,031
Total noninterest expense	$	358,069	$	350,102	$	351,106

Salaries and employee benefits increased a nominal $0.3 million, or 0.2 percent, in 2005 compared to 2004 and decreased $7.0 million in 2004 compared to 2003. Although the overall change in salary and benefit expense from 2004 to 2005 was small, there was a $4.4 million charge for payments made to employees under the VSP. These higher costs were offset by decreases in staffing levels during 2005. To illustrate, the Company’s full time equivalent employees dropped from 3,587 at year-end 2004 to 3,433 in 2005. Further improvements came from a $1.7 million decrease in health insurance related costs due primarily to the implementation of a new partially self-funded insurance program in 2005. In 2006, the implementation of new Statement of Financial Accounting Standards (SFAS) No. 123 (R), “Share-Based Payment” will impact the expense recognized from equity based compensation. It is anticipated that an additional $0.4 million of expense will be recognized in 2006 for stock options outstanding at December 31, 2005. Additional expense will be recognized for additional grants made in 2006. Further, the hiring of certain key strategic sales personnel in late 2005 and the anticipated hiring of additional strategic sales personnel in 2006 will have an unfavorable impact on salary expense in 2006. The decrease in salary and benefits in 2004 was primarily the result of the savings achieved through the reduction of staffing levels due to the sale of the Company’s employee benefit business. The number of full time equivalent employees dropped from 3,807 at year-end 2003 to 3,587 at year end 2004.

Occupancy, net expense remained relatively flat from 2005 as compared to 2004, but had increased by $1.4 million, or 5.7 percent in 2004 as compared to 2003. The increase in 2004 as compared to 2003 was due largely to the amortization of costs associated with the refurbishment of a building in the Company’s downtown Kansas City campus, as well as the construction of new branches. Additionally, rental income from our office buildings decreased significantly during 2004. Whether this decrease will continue into future years depends upon the Company’s ability to fully lease its vacant space, and the timing and conditions of any such leases are currently unknown.

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Equipment costs have increased moderately in both 2005 and 2004. Equipment costs increased $0.6 million, or 1.4 percent, in 2005 compared to 2004 and increased $0.8 million, or 1.8 percent, in 2004 compared to 2003. The increases in 2005 and 2004 are primarily due to software upgrades to core systems. Due to commitments made to acquire or upgrade other core software systems (Check 21 imaging software; commercial treasury management software upgrades; voice over internet protocol software; interactive voice response software upgrades; and customer relationship management software), management anticipates equipment costs to increase during 2006.

Marketing and business development decreased $2.0 million, or 13.1 percent, in 2005 as compared to 2004 due to a management shift in television and other media advertising to more local community sponsorships. It is anticipated that although this decreased level will continue, it will be partially offset by increases in 2006 as a result of new marketing campaigns. Marketing expenses increased by $1.8 million in 2004 over 2003 due to brand positioning, product enhancement and support costs and an increased emphasis on business development.

Processing fees increased $2.2 million, or 10.4 percent, in 2005 compared to 2004 and increased $1.0 million, or 5.2 percent, in 2004 compared to 2003. The 2005 and 2004 increases were primarily the result of an increase in shareholder servicing and other administration fees paid to investment advisors related to the Scout Funds as a result of increases in assets under management for both years. The amount of such fees paid in future years is dependent upon assets under management (affected by both fund inflows as well as market values), and is expected to generally correlate to trends in the equity markets.

Legal and consulting fees were relatively flat in 2005 as compared to 2004, but had increased by $1.5 million, or 20.0 percent, in 2004 compared to 2003. The 2004 increase was primarily attributable to increased on-going legal costs associated with the Scout Funds and with professional fees associated with Sarbanes-Oxley Act of 2002 compliance.

Bankcard expenses increased by $2.5 million, or 27.3 percent, in 2005 as compared to 2004. Bankcard expenses had also increased by $1.0 million, or 12.7 percent, in 2004 as compared to 2003. The increases in both 2005 and 2004 are primarily attributable to the implementation of a new platinum rebate program in 2005 for individual customers and enhancements to the rebate program for corporate customers in 2004.

Other expenses increased $4.7 million, or 36.0 percent, in 2005 compared to 2004 and remained relatively flat in 2004 as compared to 2003. The significant increase in 2005 as compared to 2004 is a result of many items including: a $1.8 million increase in operational charge-offs primarily due to the new overdraft program; a $0.5 million increase in charitable contributions; and the remainder from a variety of non-operating charge-offs. Management does not anticipate that such non-operating charge-offs will repeat in 2006.

Income Taxes

Income tax expense totaled $20.0 million in 2005, compared to $8.9 million in 2004, and compared to $17.1 million in 2003. These expense levels equate to effective rates of 26.2 percent, 17.2 percent, and 22.5 percent for 2005, 2004, and 2003 respectively. The primary reason for the difference between the Company’s effective tax rate and the statutory tax rate is the effect of non-taxable income from municipal securities and state and federal tax credits realized. The increase in the effective tax rate in 2005 as compared to 2004 was a result of a $1.9 million reduction in federal and state rehabilitation tax credits and net tax-exempt income representing a smaller percentage of pre-tax net income. In 2005, tax-exempt income represented approximately 25.0 percent of pre-tax income as compared to 36.7 percent of pre-tax income in 2004. This had a 4.1 percentage point impact on the effective tax rate in 2005 as compared to 2004. The decline in the effective tax rate between 2004 and 2003 resulted mainly from a net $3.7 million reduction in federal and state tax expense as a result of federal and state historic rehabilitation tax credits received the renovation of a downtown Kansas City office building. The net effect of the sale of state historic rehabilitation tax credits was approximately $1.85 million in 2004. Further, the

27

effective income tax rate for 2003 included a reduction in the tax reserve resulting from a reassessment of ongoing risks associated with tax matters. Management believes that the effective tax rate will increase slightly in 2006 as no significant federal or state tax credits are anticipated.

Strategic Segments

The Company’s operations are strategically aligned into six major segments: Commercial Banking and Lending, Corporate Services, Banking Services, Consumer Services, Asset Management, and Investment Services Group. The segments are differentiated by both the customers and the products and services offered. Note 12 to the Consolidated Financial Statements describes how these segments are identified and presents financial results of the segments for the years ended December 31, 2005, 2004 and 2003. The Treasury and Other Adjustments category includes items not directly associated with any other segment.

Commercial Banking and Lending’s 2005 pre-tax net income decreased from 2004 by $1.3 million, or 6.3 percent, to $19.9 million. In 2004, the pre-tax net income increased from 2003 by $7.6 million, or 56.1 percent, to $21.2 million. For 2005, the decrease in net income was driven primarily by a decrease in net interest income of $1.1 million or 2.2 percent over 2004. This decrease was caused by higher funding costs associated with interest rate increases throughout the year. A higher provision for loan losses, due to increases in loan balances, also contributed to the reduction in net income. The net interest income increase in 2004 was due to the sustained low interest rate environment compared to 2003 and the corresponding impact on repricing of earning assets in that environment. The increase should be at a more measured pace than 2005. Slow improvement in net interest income is expected if interest rates continue to gradually rise or level off in 2006.

Corporate Services’ pre-tax net income increased $4.9 million to $29.5 million compared to a decrease of $9.6 million to $24.7 million in 2004. For 2005, the increase is largely due to higher net interest income of $5.8 million or 14.8 percent. The increase in 2005 is related to positive rate and volume variances compared to 2004 as interest rates rise. The decline in margin in 2004 was due to lower yields on deposit balances as interest rates remained at historically low levels last year. Challenges for this segment arise from competitive pressures, as well as the technological challenges due to the movement from paper to electronic processing. If interest rates continue to increase in 2006, pressure will be placed on deposit service charge income which is impacted by earnings credits. The Company has focused significant resources into creating and enhancing products to keep the Company in step with the client’s changing needs. Management believes Corporate Trust will expand its market share in regions where the Company has a physical presence outside of Kansas and Missouri due to an enhanced marketing emphasis. Management believes that the HSA product will be a source for growth in both deposit balances and noninterest income in 2006.

Banking Services’ pre-tax net income was $3.8 million in 2005, a decrease of $4.9 million from 2004. The 2004 net income decreased by $2.7 million from 2003. For 2005, the decrease is primarily attributable to a decrease in net interest income of $2.1 million and an increase in noninterest expense of $2.2 million. Net interest income is down due primarily to a $60 million, or 33%, decline in deposits as the increase in earnings credit rate decreased the required amount of compensating balances. A change in deposit mix from noninterest bearing deposits to interest bearing repurchase agreements also helped fuel this movement. This trend started in 2004 where net interest income decreased $0.5 million from 2003. If this trend continues, future increases in interest rates would have an adverse effect on interest margin. Noninterest expense is up due to VSP expenses as well as Fed pricing increases. Noninterest expense was up $0.4 million in 2004.

Consumer Services’ pre-tax net income increased $17.6 million to $9.5 million, compared to a loss of $8.1 million in 2004. The 2005 increase is attributable to a $12.2 million dollar increase in noninterest income, a $4.8 million increase in net interest income, and a $0.7 million increase in noninterest expense. Fee income increased as a result of net account growth, the implementation of new service charges on depository products and from the sale of banking facilities. The increase in the net interest income occurred as assets repriced in a higher interest rate environment and core deposits lagged. The Company continued to manage noninterest expenses very closely

28

with emphasis on automation and staff efficiency. Management anticipates continued growth in service fee income in 2006. Consumer Services’ ability to increase net interest margin in 2006 will be dependent upon its ability to grow deposits and higher yielding consumer loans. Further, variable-rate consumer loan products such as home equity lines of credit will benefit in a rising interest rate environment. Management believes that noninterest expense will increase in 2006 as a result of planned new branch openings and the investment in new product lines.

Asset Management’s pre-tax net income was $5.8 million, which is a decrease of $0.2 million or 2.5% from 2004. This is compared to a $1.0 million decrease in income from 2003 to 2004. The $1.9 million increase in noninterest income from 2004 to 2005 was offset by a $1.7 million increase in noninterest expense and a $0.4 million decrease in net interest income. Noninterest income increased as a result of increased inflows into the Scout Funds. Noninterest expense also increased related to increased distribution fees from the funds related to the increased inflows of cash. These fees are driven by asset values maintained in the funds. Management has had success in its efforts to increase cash inflows to the UMB Scout Funds and will continue to focus sales efforts to continue this trend. In March 2005, the UMB Scout Funds held a shareholder meeting to approve changes to the individual fund structures and organization. The most significant change related to fee unbundling. In the past, Scout Investment Advisors, a wholly-owned subsidiary of the Company, collected a fee from the funds and was responsible for paying expenses on behalf of the funds. Effective April 1, 2005, Scout Investment Advisors charges an advisory fee and the individual funds pay direct expenses including accounting, administration, transfer agency and audit fees. The Company anticipates the overall decrease in expenses paid by the Company will be greater than the reduced revenue received. Therefore, overall net income should increase.

Investment Services Group’s pre-tax net income increased $2.0 million or 30.5 percent to $8.7 million in 2005, compared to a decrease of 24.7% to $6.7 million in 2004 from 2003. For 2005, the increase is mostly due to a $2.3 million increase in net interest income attributable to both higher interest rates and increased volume due to higher deposits. Net interest income was down in 2004 compared to 2003 due to lower average deposits maintained by mutual fund customers. Management believes that increased income from new customers added in 2005 will continue in 2006, depending upon the overall uncertainties within the mutual fund industry and the overall health of the equity markets.

The net loss for the Treasury and Other Adjustments category was $20.9 million for 2005, compared to a net loss of $16.2 million for 2004. The net loss for all years includes unallocated income tax expense for the consolidated Company. This segment includes the gain on the one-time sale of the merchant bankcard discount processing activity that appears as noninterest income in 2003. It also includes the one-time sale of the employee benefits accounts and federal and state rehabilitation tax credits during 2004.

Balance Sheet Analysis

Loans and Loans Held For Sale

Loans represent the Company’s largest source of interest income. Loan balances increased by $524.2 million in 2005 due to management’s effort to focus on new commercial and consumer loan relationships, as well as the overall improvement in the economy. Commercial and real estate loans had the most significant growth in outstanding balances in 2005 as compared to 2004

Included in Table 7 is a five-year breakdown of loans by type. (It should be noted that during the first quarter of 2003 the Company reviewed the classifications of loans to ensure that loans were properly recorded on the loan system, which resulted in the reclassification of $92 million in loans from the commercial category to the commercial real estate category.) Business-related loans continue to represent the largest segment of the Company’s loan portfolio, comprising approximately 62.8 percent and 60.1 percent of total loans at the end of 2005 and 2004, respectively. The Company targets customers that will utilize multiple banking services and products.

29

Table 7

ANALYSIS OF LOANS BY TYPE (in thousands)

	December 31
	2005			2004			2003			2002			2001
Commercial	$	1,419,723		$	1,147,831		$	1,134,633		$	1,300,762		$	1,416,431
Agricultural		77,773			56,797			52,027			47,729			40,777
Leases		6,068			5,154			7,467			8,146			7,454
Real estate construction		47,403			27,205			18,519			13,952			15,267
Real estate—commercial		567,062			471,840			414,915			307,850			281,660
Total business-related		2,118,029			1,708,827			1,627,561			1,678,439			1,761,589
Bankcard		183,380			172,691			161,676			163,808			168,518
Other consumer installment		804,390			774,414			746,425			642,106			718,356
Real estate—residential		268,145			189,264			166,239			155,316			148,695
Total consumer-related		1,255,915			1,136,369			1,074,340			961,230			1,035,569
Loans before allowance and loans held for sale		3,373,944			2,845,196			2,701,901			2,639,669			2,797,158
Allowance for loan losses		(40,825	)		(42,723	)		(43,494	)		(37,328	)		(35,637	)
Net loans before loans held for sale		3,333,119			2,802,473			2,658,407			2,602,341			2,761,521
Loans held for sale		19,460			24,028			20,392			17,863			17,230
Net loans and loans held for sale	$	3,352,579		$	2,826,501		$	2,678,799		$	2,620,204		$	2,778,751
As a % of total loans and loans held for sale
Commercial		41.84	%		40.00	%		41.68	%		48.95	%		50.33	%
Agricultural		2.29			1.98			1.91			1.80			1.45
Leases		0.18			0.18			0.27			0.31			0.26
Real estate construction		1.40			0.95			0.68			0.52			0.54
Real estate—commercial		16.71			16.44			15.24			11.58			10.01
Total business-related		62.42			59.55			59.78			63.16			62.59
Bankcard		5.40			6.02			5.94			6.16			5.99
Other consumer installment		23.71			26.99			27.42			24.17			25.53
Real estate—residential		7.90			6.60			6.11			5.84			5.28
Total consumer-related		37.01			39.61			39.47			36.17			36.80
Loans held for sale		0.57	%		0.84	%		0.75	%		0.67	%		0.61	%
Total loans and loans held for sale		100.00	%		100.00	%		100.00	%		100.00	%		100.00	%

Commercial loans represent the largest percent of total loans. Commercial loans increased in volume as well as percentage of total loans in 2005 from 2004. The increase is primarily a result of several factors including a renewed focus on sales efforts; a new incentive plan for loan officers and increased loan authority for regional presidents. Management anticipates loan growth in 2006 to be at a more measured pace than in 2005.

As a percentage of total loans, commercial real estate and real estate construction loans now comprises 18.1% of total loans, compared to 17.4% at the end of 2004. Generally, these loans are made for working capital or expansion purposes and are primarily secured by real estate with a maximum loan-to-value of 80%. Many of these properties are owner-occupied and have other collateral or guarantees as security.

Bankcard loans have increased overall in 2005 as compared to 2004, but have decreased slightly as a percentage of total loans. The absolute increase in such loans represents the continued emphasis in this segment.

30

The increase in bankcard loans in 2004 was due primarily to increased promotional activity and reward programs. A significant portion of the decrease in volume of bankcard loans in 2003 and 2002 was caused by a reduction in the private label portion of the portfolio. This type of loan is generally less profitable than traditional bankcard loans and is likely to continue to decrease in volume.

Other consumer installment loans have also shown an increase in total amount outstanding, but have decreased as a percentage of loans. As many of these loans are linked to automobile financings, future loan volumes may be affected by the competitive environment including financing terms from auto makers, the overall economy and consumer debt levels. The effects of such factors are uncertain.

Real estate residential loans, although low in overall balances, have grown more rapidly than overall loan growth. The growth in these loans is primarily attributable to home equity lines of credits (HELOC). The HELOC growth is a result of the success of multiple promotions, as well as market penetration within the Company’s current customer base through its current distribution channels. Continued expansion of this portfolio is anticipated.

Nonaccrual, past due and restructured loans are discussed under “Credit Risk” within the Quantitative and Qualitative Disclosure about Market Risk in Item 7A on pages 43 and 44 of this report.

Securities

The Company’s security portfolio provides liquidity as a result of the composition and average life of the underlying securities. This liquidity can be used to fund loan growth or to offset the outflow of traditional funding sources. In addition to providing a potential source of liquidity, the security portfolio can be used as a tool to manage interest rate sensitivity. The Company’s goal in the management of its securities portfolio is to maximize return within the Company’s parameters of liquidity goals, interest rate risk and credit risk. The Company maintains very high liquidity levels while investing in only high-grade securities. The security portfolio generates the Company’s second largest component of interest income.

Securities available for sale and securities held to maturity comprised 46.8% of earning assets as of December 31, 2005, compared to 54.1% at year-end 2004. Securities totaled $3.5 billion at December 31, 2005, compared to $3.8 billion at year-end 2004. Collateral pledging requirements for public funds and loan demand are expected to be the primary factors impacting changes in the level of security holdings.

Securities available for sale comprised 97.6% of the Company’s securities portfolio at December 31, 2005, compared to 95.3% at year-end 2004. In order to improve the yields of the securities portfolio, the Company has altered the mix and duration of its portfolio. The mix has changed by reducing the outstanding balances of U.S. Treasury Notes and moving to Mortgage-Backed Securities of U.S. Agencies and State and Political Subdivisions. Securities available for sale had a net unrealized loss of $33.9 million at year-end, compared to a net unrealized loss of $16.7 million the preceding year. These amounts are reflected, on an after-tax basis, in the Company’s other comprehensive income in shareholders’ equity, net of tax, as an unrealized loss of $21.6 million at year-end 2005, compared to an unrealized loss of $10.6 million for 2004.

The securities portfolio achieved an average yield on a tax-equivalent basis of 3.3% for 2005, compared to 2.9% in 2004 and 3.1% in 2003. The increase in yield is due to the replacement of lower yielding securities with higher yielding securities, as well as an increase in the average life of the portfolio. A significant portion of the investment portfolio must be reinvested each year as a result of its liquidity. The average life of the securities portfolio was 23.0 months at December 31, 2005 compared to 15.3 months at year-end 2004. As discussed above underResults of Operations,Net Interest Income on page 21, Management has adopted a portfolio modification plan designed to improve noninterest margin.

31

Included in Tables 8 and 9 are analyses of the cost, fair value and average yield (tax equivalent basis) of securities available for sale and securities held to maturity.

The securities portfolio contains securities that have unrealized losses and are not deemed to be other-than-temporarily impaired (see the table of these securities in Footnote 4 on page 58 of this document). There are U.S. Treasury obligations, federal agency mortgage backed securities, and municipal securities that have had unrealized losses for greater than 12 months. These unrealized losses are a result of interest rate volatility in the markets and not related to the credit quality of the investments. The Company has the ability and intent to hold these investments until a recovery of fair value is achieved, which may be maturity. Therefore, management does not consider these securities to be other-than-temporarily impaired at December 31, 2005.

Table 8

SECURITIES AVAILABLE FOR SALE (in thousands)

December 31, 2005	Amortized Cost		Fair Value
U.S. Treasury	$	537,399	$	531,798
U.S. Agencies		1,260,924		1,256,227
Mortgage-backed		938,539		920,668
State and political subdivisions		620,193		614,505
Total	$	3,357,055	$	3,323,198

December 31, 2004	Amortized Cost		Fair Value
U.S. Treasury	$	743,268	$	736,632
U.S. Agencies		1,422,965		1,420,532
Mortgage-backed		986,835		978,833
State and political subdivisions		452,578		452,907
Total	$	3,605,646	$	3,588,904

	US Treasury Securities				US Agencies Securities				Mortgage-Backed Securities
December 31, 2005	Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield
Due in one year or less	$	423,504	2.12	%	$	950,979	4.00	%	$	47,117	3.61	%
Due after 1 year through 5 years		108,294	3.13			305,248	4.01			804,561	4.03
Due after 5 years through 10 years		—	—			—	—			68,990	4.67
Due after 10 years		—	—			—	—			—	—
Total	$	531,798	2.33	%	$	1,256,227	4.00	%	$	920,668	4.06	%

	State and Political Subdivisions
December 31, 2005	Fair Value		Weighted Average Yield		Total Fair Value
Due in one year or less	$	163,330	4.16	%	$	1,584,930
Due after 1 year through 5 years		212,320	4.34			1,430,423
Due after 5 years through 10 years		173,921	5.15			242,911
Due after 10 years		64,934	5.88			64,934
Total	$	614,505	4.68	%	$	3,323,198

32

	US Treasury Securities				US Agencies Securities				Mortgage-Backed Securities
December 31, 2004	Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield
Due in one year or less	$	227,483	1.78	%	$	1,215,691	2.24	%	$	235,869	3.06	%
Due after 1 year through 5 years		509,149	2.18			204,841	2.80			742,840	3.44
Due after 5 years through 10 years		—	—			—	—			110	6.25
Due after 10 years		—	—			—	—			14	6.83
Total	$	736,632	2.06	%	$	1,420,532	2.32	%	$	978,833	3.35	%

	State and Political Subdivisions
December 31, 2004	Fair Value		Weighted Average Yield		Total Fair Value
Due in one year or less	$	173,659	2.97	%	$	1,852,702
Due after 1 year through 5 years		200,468	4.10			1,657,298
Due after 5 years through 10 years		78,780	4.77			78,890
Due after 10 years		—	—			14
Total	$	452,907	3.78	%	$	3,588,904

Table 9

SECURITIES HELD TO MATURITY (in thousands)

December 31, 2005	Amortized Cost		Fair Value		Weighted Average Yield/Average Maturity
Due in one year or less	$	29,815	$	29,971	6.50%
Due after 1 year through 5 years		9,953		10,125	6.92%
Due after 5 years through 10 years		7,857		7,857	4.34%
Due over 10 years		19,412		19,412	5.59%
Total	$	67,037	$	67,365	6 yr. 0 mo.
December 31, 2004
Due in one year or less	$	100,500	$	101,445	6.46%
Due after 1 year through 5 years		42,949		44,263	6.57%
Due after 5 years through 10 years		6,924		6,924	4.25%
Due over 10 years		15,692		15,692	4.38%
Total	$	166,065	$	168,324	2 yr. 5 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 the daily borrowing of another institution’s funds in order to meet short-term liquidity needs. The net sold position was $142.5 million at year-end 2005 compared to the net sold position at year-end 2004 of $0.

The Investment Banking Division of the Company’s principal affiliate bank buys and sells federal funds as agent for non-affiliated banks. Because the transactions are pursuant to agency arrangements, these transactions do not appear on the balance sheet and averaged $475.2 million in 2005 and $568.5 million in 2004.

33

At December 31, 2005, the Company held securities bought under agreements to resell of $284.1 million compared to $293.6 million at year-end 2004. The Company used these instruments as short-term secured investments, in lieu of selling federal funds, or to acquire securities required for a repurchase agreement. These investments averaged $110.6 million in 2005 and $253.9 million in 2004.

The Investment Banking Division also maintains an active securities trading inventory. The average holdings in the securities trading inventory in 2005 were $64.4 million, compared to $67.3 million in 2004, and were recorded at market value.

Deposits and Borrowed Funds

Deposits represent the Company’s primary funding source for its asset base. In addition to the core deposits garnered by the Company’s retail branch structure, the Company continues to focus on its cash management services, as well as its trust and mutual fund servicing segments in order to attract and retain additional core deposits. A retail deposit campaign in mid-year was very successful in attracting new dollars and customers. Deposits totaled $5.9 billion at December 31, 2005 and $5.4 billion at year-end 2004. Deposits averaged $5.1 billion in 2005 and $5.0 billion in 2004. The Company continually strives to expand, improve and promote its cash management services in order to attract and retain commercial funding customers.

Noninterest-bearing demand deposits averaged $1.9 billion during both 2005 and 2004. These deposits represented 36.8% of average deposits in 2005, compared to 37.5% in 2004. The Company’s large commercial customer base provides a significant source of noninterest-bearing deposits. Many of these commercial accounts do not earn interest, however, they receive an earnings credit to offset the cost of other services provided by the Company.

Table 10

MATURITIES OF TIME DEPOSITS OF $100,000 OR MORE (in thousands)

	December 31
	2005		2004
Maturing within 3 months	$	344,399	$	225,632
After 3 months but within 6		68,665		34,994
After 6 months but within 12		36,595		25,145
After 12 months		51,355		39,779
Total	$	501,014	$	325,550

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Table 11

ANALYSIS OF AVERAGE DEPOSITS (in thousands)

	2005		2004		2003		2002		2001
Amount
Noninterest-bearing demand	$	1,887,273	$	1,865,605	$	1,788,165	$	1,723,122	$	1,775,720
Interest-bearing demand and savings		2,302,174		2,214,782		2,460,496		2,624,828		2,527,556
Time deposits under $100,000		658,421		668,896		779,473		892,164		823,385
Total core deposits		4,847,868		4,749,283		5,028,134		5,240,114		5,126,661
Time deposits of $100,000 or more		288,100		226,754		252,069		287,722		283,603
Total deposits	$	5,135,968	$	4,976,037	$	5,280,203	$	5,527,836	$	5,410,264

As a % of total deposits
Noninterest-bearing demand	36.75	%	37.49	%	33.87	%	31.17	%	32.82	%
Interest-bearing demand and savings	44.82		44.51		46.60		47.49		46.72
Time deposits under $100,000	12.82		13.44		14.76		16.14		15.22
Total core deposits	94.39		95.44		95.23		94.80		94.76
Time deposits of $100,000 or more	5.61		4.56		4.77		5.20		5.24
Total deposits	100.00	%	100.00	%	100.00	%	100.00	%	100.00	%

Securities sold under agreements to repurchase totaled $1.3 billion at December 31, 2005, and $1.4 billion at year-end 2004. This liability averaged $971.5 million in 2005 and $975.1 million in 2004. Repurchase agreements are transactions involving the exchange of investment funds by the customer for securities by the Company, under an agreement to repurchase the same or similar issues at an agreed-upon price and date. The Company enters into these transactions with its downstream correspondent banks, commercial customers, and various trust, mutual fund and local government relationships.

Table 12

SHORT-TERM DEBT (in thousands)

	2005				2004
	Amount		Rate		Amount		Rate
At December 31:
Federal funds purchased	$	80,000	3.99	%	$	105,865	2.16	%
Repurchase agreements		1,280,942	3.70			1,400,135	1.85
Other		35,091	3.89			39,426	1.88
Total	$	1,396,033	3.72	%	$	1,545,426	1.87	%
Average for year:
Federal funds purchased	$	57,596	3.23	%	$	75,757	1.26	%
Repurchase agreements		971,467	2.83			975,134	1.15
Other		14,548	2.87			18,470	1.00
Total	$	1,043,611	2.85	%	$	1,069,361	1.16	%
Maximum month-end balance:
Federal funds purchased	$	175,000			$	370,214
Repurchase agreements		1,280,942				1,400,135
Other		48,610				69,866

35

The Company has twelve fixed-rate advances at December 31, 2005, from the Federal Home Loan Bank at rates of 3.80% to 7.61%. These advances, collateralized by Company securities, are used to offset interest rate risk of longer term fixed rate loans.

Capital and Liquidity

The Company places a significant emphasis on the maintenance of a strong capital position, which promotes investor confidence, provides access to funding sources under favorable terms, and enhances the Company’s ability to capitalize on business growth and acquisition opportunities. The Company is not aware of any trends, demands, commitments, events or uncertainties that would materially change its capital position or affect its liquidity in the foreseeable future. The Company anticipates an increased level of capital expenditures in the near term with respect to technology. These technology investments are mostly attributable to meeting the demands of a shift in the payments landscape from paper-based to electronic-based. This capital investment which is discussed under Noninterest Expense section of this Item on page 27 is not anticipated to have a material impact on the Company’s overall capital position due to its strong capital and liquidity. Capital is managed for each subsidiary based upon its respective risks and growth opportunities as well as regulatory requirements.

Total shareholders’ equity was $833.5 million at December 31, 2005, compared to $819.2 million one year earlier. During each year, management has the opportunity to repurchase shares of the Company’s stock if it concludes that the applicable price is then such that purchases would enhance overall shareholder value. During 2005 and 2004, the Company acquired 222,519 and 87,364 shares, respectively, of its common stock.

Risk-based capital guidelines established by regulatory agencies establish minimum capital standards based on the level of risk associated with a financial institution’s assets. A financial institution’s total capital is required to equal at least 8% of risk-weighted assets. At least half of that 8% must consist of Tier 1 core capital, and the remainder may be Tier 2 supplementary capital. The risk-based capital guidelines indicate the specific risk weightings by type of asset. Certain off-balance-sheet items (such as standby letters of credit and binding loan commitments) are multiplied by credit conversion factors to translate them into balance sheet equivalents before assigning them specific risk weightings. Due to the Company’s high level of core capital and substantial portion of earning assets invested in government securities, the Tier 1 capital ratio of 16.14% and total capital ratio of 16.99% substantially exceed the regulatory minimums.

For further discussion of capital and liquidity, see the Liquidity Risk section of Item 7A, Quantitative and Qualitative Disclosures about Market Risk on page 45 of this report.

36

Table 13

RISK-BASED CAPITAL(in thousands)

This table computes risk-based capital in accordance with current regulatory guidelines. These guidelines as of December 31, 2005, 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
	0%			20%		50%			100%		Total
Risk-Weighted Assets
Loans:
Residential mortgage	$	—		$	15	$	43,407		$	224,723	$	268,145
All other		—			81,714		—			3,043,545		3,125,259
Total loans		—			81,729		43,407			3,268,268		3,393,404
Securities available for sale:
U. S. Treasury		537,399			—		—			—		537,399
U. S. agencies and mortgage-backed		586,182			1,613,281		—			—		2,199,463
State and political subdivisions		—			588,862		31,331			—		620,193
Commercial paper and other		8,067			—		—			5,193		13,260
Total securities available for sale		1,131,648			2,202,143		31,331			5,193		3,370,315
Securities held to maturity		—			40,854		1,383			24,800		67,037
Trading securities		1,700			52,054		4,734			—		58,488
Federal funds and resell agreements		—			426,578		—			—		426,578
Cash and due from banks		122,492			478,922		—			—		601,414
All other assets		15,025			—		—			325,933		340,958
Category totals		1,270,865			3,282,280		80,855			3,624,194		8,258,194
Risk-weighted totals		—			656,456		40,428			3,624,194		4,321,078
Off-balance-sheet items (risk-weighted)		—			—		896			577,648		578,544
Total risk-weighted assets	$	—		$	656,456	$	41,324		$	4,201,842	$	4,899,622
	Risk-Weighted Category
	Tier1			Tier2		Total
Regulatory Capital
Shareholders’ equity	$	833,463		$	—	$	833,463
Plus: accumulated other comprehensive loss		21,322			—		21,322
Less: premium on purchased banks		(63,805	)		—		(63,805	)
Allowance for loan losses		—			41,571		41,571
Total capital	$	790,980		$	41,571	$	832,551
						Company
Capital ratios
Tier 1 capital to risk-weighted assets							16.14	%
Total capital to risk-weighted assets							16.99	%
Leverage ratio (Tier 1 to total assets less premium on purchased banks)							10.96	%

For further discussion of regulatory capital requirements, see note 10, “Regulatory Requirements” with the Notes to Consolidated Financial Statements under Item 8 on pages 62 and 63.

37

Commitments, Contractual Obligations and Off-balance Sheet Arrangements

The Company’s main off-balance sheet arrangements are loan commitments, commercial and standby letters of credit, futures contracts and forward exchange contracts, which have maturity dates rather than payment due dates. These commitments and contingent liabilities are not required to be recorded on the Company’s balance sheet. Since commitments associated with letters of credit and lending and financing arrangements may expire unused, the amounts shown do not necessarily reflect the actual future cash funding requirements. See Table 14 below, as well as Note 14, “Commitments, Contingencies and Guarantees” in the Notes to Consolidated Financial Statements under Item 8 on pages 71 and 72 for detailed information and further discussion of these arrangements. Management does not anticipate any material losses from its off-balance sheet arrangements.

Table 14

COMMITMENTS, CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS (in thousands)

The table below details the contractual obligations for the Company as of December 31, 2005. The Company has no capital leases or long-term purchase obligations.

	Payments due by period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Contractual Obligations
Short-Term Debt Obligations	$	35,091	$	35,091	$	—	$	—	$	—
Long-Term Debt Obligations		38,471		2,563		5,703		5,528		24,677
Capital Lease Obligations		—		—		—		—		—
Operating Lease Obligations		29,175		4,391		7,590		4,982		12,212
Purchase Obligations		—		—		—		—		—
Other Long-Term Liabilities Reflected on the Registrant’s Balance Sheet under GAAP		—		—		—		—		—
Total	$	102,737	$	42,045	$	13,293	$	10,510	$	36,889
The table below details the commitments, contingencies and guarantees for the Company as of December 31, 2005.
	Maturities due by Period
Commitments, Contingencies and Guarantees
Commitments, to extend credit for loans (excluding credit under credit card loans)	$	1,271,717	$	330,398	$	261,301	$	512,355	$	167,663
Commitments, to extend credit under credit card loans		940,290		940,290		—		—		—
Commercial letters of credit		13,311		12,566		745		—		—
Standby letters of credit		200,232		167,836		20,841		11,555		—
Futures contracts		50,700		50,700		—		—		—
Forward foreign exchange contracts		15,791		15,791		—		—		—
Spot foreign exchange contracts		1,302		1,302		—		—		—
Total	$	2,493,343	$	1,518,883	$	282,887	$	523,910	$	167,663

Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of financial condition and results of operations discusses the Company’s Consolidated Financial Statements, which have been prepared in accordance with accounting

38

principles generally accepted in the United States of America. The preparation of these Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to customers and suppliers, allowance for loan losses, bad debts, investments, financing operations, long-lived assets, taxes, other contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which have formed the basis for making such judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from the recorded estimates under different assumptions or conditions.

Management believes that the Company’s critical accounting policies are those relating to: allowance for loan losses, goodwill and other intangibles, impairment of long-lived assets, revenue recognition, and accounting for stock-based compensation.

Allowance for Loan Losses

The Company’s allowance for loan losses represents management’s judgment of the loan losses inherent in the loan portfolio. The allowance is maintained and computed at each bank at a level that such individual bank management considers adequate. The allowance is reviewed quarterly, considering such items as historical trends, internal ratings, migration analysis, current economic conditions, loan growth and individual impairment testing.

Larger commercial loans are individually reviewed for potential impairment. Those larger commercial loans that management deems probable that the borrower cannot meets its contractual obligations with respect to payment or timing are deemed to be impaired under Statement of Financial Accounting Standards No. 114, “Accounting by Creditors for Impairment of a Loan”. These loans are then reviewed for potential impairment based on management’s estimate of the borrower’s ability to repay the loan given the availability of cash flows, collateral and other legal options. Any allowance related to the impairment of an individually impaired loan is based on the present value of discounted expected future cash flows, the fair value of the underlying collateral, or the fair value of the loan. Based on this analysis, some loans that are classified as impaired under SFAS 114 do not have a specific allowance as there is no related impairment as the discounted expected future cash flows or the fair value of the underlying collateral exceeds the Company’s basis in such impaired loan.

The Company also maintains an internal risk grading system for other loans not subject to individual impairment. An estimate of the inherent loan losses on such risk-graded loans is based on a migration analysis which computes the net charge-off experience related to each risk category.

An estimate of inherent losses is computed on remaining loans based on the type of loan. Each type of loan is segregated into a pool based on the nature of such loans. This includes remaining commercial loans that have a low risk grade, as well as homogenous loans. Homogenous loans include automobile loans; credit card loans and other consumer loans. Allowances are established for each pool based on the loan type using historical loss rates, certain statistical measures and loan growth.

An estimate of the total inherent loss is based on the above three computations. From this an adjustment not to exceed ten percent can be made based on other factors management considers to be important in evaluating the probable losses in the portfolio such as general economic conditions, loan trends, risk management and loan administration and changes in internal policies.

Goodwill and Other Intangibles

Goodwill is tested annually for impairment. Goodwill is assigned to various reporting units based upon those which were expected to benefit from the synergies of the combination at the time of the acquisition. The

39

company tests impairment at the reporting unit level by estimating the fair value of the reporting unit. If management’s estimate of the fair value of the reporting unit exceeds the carrying amount of the goodwill, no impairment is deemed to occur. In order to estimate the fair value of the reporting units, management uses multiples of earnings and assets from recent acquisition of similar banking and fund servicing entities as such entities have comparable operations and economic characteristics. The Company has performed annual impairment tests of goodwill since the inception of SFAS 142, “Accounting for Goodwill.” As a result of such impairment tests, the Company has not recognized an impairment charge.

For customer based identifiable intangibles, the Company is amortizing the intangible over their estimated useful lives of up to ten years.

Impairment of long-lived assets

Long-lived assets, including identifiable intangible assets, premises and equipment, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or group of assets may not be recoverable. The impairment review for long-lived assets includes a comparison of future cash flows expected to be generated by the asset or group of assets to their current carrying value. If the carrying value of the asset or group of assets exceeds expected cash flows (undiscounted and with interest charges), an impairment loss is recognized to the extent the carrying value exceeds its fair value. No events or changes in circumstances occurred in 2003, 2004 or 2005 which would indicate that the carrying amount of an asset or group of assets may not be recoverable.

Revenue Recognition

Revenue recognition is the recording of interest on loans and securities and is recognized based on rate multiplied by the principal amount outstanding. Interest accrual is discontinued when, in the opinion of management, the likelihood of collection becomes doubtful, or, the loan is past due for a period of ninety days or more unless the loan is both well-secured and in the process of collection. Other noninterest income is recognized as services are performed or revenue-generating transactions are executed.

Equity-based Compensation

Stock-based compensation is recognized using the intrinsic value method for disclosure purposes. Pursuant to the requirements of FAS 123, ”Accounting for Stock-Based Compensation”, pro forma net income and earnings per share are disclosed in Note 1 to the Consolidated Financial Statements. The pro forma disclosures reflect the impact on earnings as if the fair value method had been applied to outstanding stock options using the Black-Scholes valuation method. Please see the discussion of FAS 123(R), issued in December 2004, under Note 2, “New Accounting Pronouncements” in the Notes to the Consolidated Financial Statements under Item 8 on page 54.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Risk Management

Market risk is a broad term for the risk of economic loss due to adverse changes in the fair value of a financial instrument. These changes may be the result of various factors, including interest rates, foreign exchange prices, commodity prices or equity prices. Financial instruments that are subject to market risk can be classified either as held for trading or held for purposes other than trading.

The Company is subject to market risk primarily through the effect of changes in interest rates of its assets held for purposes other than trading. The following discussion of interest risk, however, combines instruments held for trading and instruments held for purposes other than trading because the instruments held for trading represent such a small portion of the Company’s portfolio that the interest rate risk associated with them is immaterial.

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Interest Rate Risk

In the banking industry, a major risk exposure is changing interest rates. To minimize the effect of interest rate changes to net interest income and exposure levels to economic losses, the Company manages its exposure to changes in interest rates through asset and liability management within guidelines established by its Funds Management Committee (“FMC”) and approved by the Company’s Board of Directors. The FMC has the responsibility for approving and ensuring compliance with asset/liability management policies, including interest rate exposure. The Company’s primary method for measuring and analyzing consolidated interest rate risk is the Net Interest Income Simulation Analysis. The Company also uses a Net Portfolio Value model to measure market value risk under various rate change scenarios and a gap analysis to measure maturity and repricing relationships between interest-earning assets and interest-bearing liabilities at specific points in time. The Company does not use hedges or swaps to manage interest rate risk except for limited use of futures contracts to offset interest rate risk on certain securities held in its trading portfolio.

Overall, the Company manages interest rate risk by positioning the balance sheet to maximize net interest income while maintaining an acceptable level of interest rate and credit risk, remaining mindful of the relationship among profitability, liquidity, interest rate risk and credit risk.

Net Interest Income Modeling

The Company’s primary interest rate risk tool, the Net Interest Income Simulation Analysis, measures interest rate risk and the effect of interest rate changes on net interest income and net interest margin. This analysis incorporates substantially all of the Company’s assets and liabilities together with forecasted changes in the balance sheet and assumptions that reflect the current interest rate environment. Through these simulations management estimates the impact on net interest income of a 200 basis point upward or downward gradual change (e.g. ramp) of market interest rates over a one year period. Assumptions are made to project rates for new loans and deposits based on historical analysis, management outlook and repricing strategies. Asset prepayments and other market risks are developed from industry estimates of prepayment speeds and other market changes. Since the results of these simulations can be significantly influenced by assumptions utilized, management evaluates the sensitivity of the simulation results to changes in assumptions.

Table 15 shows the net interest income increase or decrease over the next twelve months as of December 31, 2005 and 2004.

Table 15

MARKET RISK (in thousands)

	Net Interest Income
Rates in Basis       Points	December 31, 2005 Amount of Change			December 31, 2004 Amount of Change
200	$	2,689		$	4,753
100		1,344			2,377
Static		—			—
(100)		(2,185	)		(3,160	)
(200)		(4,370	)		(6,320	)

The Company is less sensitive to an increase or decrease in rates than a year ago. This is due to the fact that overall rates were higher in 2005 than in 2004, the Company’s average life of the investment portfolio has gradually lengthened and the Company has more time-deposits than a year ago. Overall, the Company remains susceptible to a decrease in interest rates because of this increase in time-deposits as well as an increase in the amount of variable rate loans. These variable rate loans could reprice downward in a falling interest rate environment (See Table 17 below). However, this same asset sensitivity projects the Company to be favorably affected by a gradual increase in interest rates.

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Repricing Mismatch Analysis

The Company also evaluates its interest rate sensitivity position in an attempt to maintain a balance between the amount of interest-bearing assets and interest-bearing liabilities which are expected to mature or reprice at any point in time. While a traditional repricing mismatch analysis (“gap analysis”) provides a snapshot of interest rate risk, it does not take into consideration that assets and liabilities with similar repricing characteristics may not, in fact, reprice at the same time or the same degree. Also, it does not necessarily predict the impact of changes in general levels of interest rates on net interest income.

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 16 is a static gap analysis, which presents the Company’s assets and liabilities, based on their repricing or maturity characteristics. This analysis shows that the Company is in a positive gap position because assets maturing or repricing exceed liabilities.

Table 16

INTEREST RATE SENSITIVITY ANALYSIS (in millions)

December 31, 2005	1-90 Days			91-180 Days			181-365 Days			Total			1-5 Years			Over 5 Years			Total
Earning assets
Loans	$	1,767.2		$	153.3		$	228.4		$	2,148.9		$	1,151.0		$	93.4		$	3,393.3
Securities		1,164.8			222.6			451.0			1,838.4			1,092.3			472.9			3,403.6
Federal funds sold and resell agreements		426.6			—			—			426.6			—			—			426.6
Other		60.3			—			—			60.3			—			—			60.3
Total earning assets	$	3,418.9		$	375.9		$	679.4		$	4,474.2		$	2,243.3		$	566.3		$	7,283.8
% of total earning assets		46.9	%		5.2	%		9.3	%		61.4	%		30.8	%		7.8	%		100.0	%
Funding sources
Interest-bearing demand and savings	$	670.4		$	31.3		$	62.6		$	764.3		$	369.8		$	1,520.5		$	2,654.6
Time deposits		567.9			217.7			147.5			933.1			260.1			21.1			1,214.3
Federal funds purchased and repurchase agreements		1,360.9			—			—			1,360.9			—			—			1,360.9
Borrowed funds		53.4			0.3			0.6			54.3			5.7			13.6			73.6
Noninterest-bearing sources		530.7			18.2			36.3			585.2			163.4			1,231.8			1,980.4
Total funding sources	$	3,183.3		$	267.5		$	247.0		$	3,697.8		$	799.0		$	2,787.0		$	7,283.8
% of total earning assets		43.7	%		3.7	%		3.4	%		50.8	%		11.0	%		38.2	%		100.0	%
Interest sensitivity gap	$	237.6		$	108.4		$	432.4		$	776.4		$	1,444.3		$	(2,220.7	)
Cumulative gap		237.6			345.9			778.3			776.4			2,220.7			—
As a % of total earning assets		3.2	%		4.7	%		10.7	%		10.7	%		30.5	%		—
Ratio of earning assets to funding sources		1.07			1.41			2.75			1.21			2.81			0.20
Cumulative ratio of Earning Assets . .  2005		1.07			1.10			1.21			1.21			1.49			1.00
to Funding Sources . .  2004		1.21			1.21			1.32			1.32			1.61			1.00

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Table 17

LOAN MATURITIES AND SENSITIVITIES TO CHANGES IN INTEREST RATES (in thousands)

	Due in one year or less		Due after one year through five years		Due after five years		Total
Variable Rate
Commercial, financial and agricultural	$	394,162	$	241,697	$	239,133	$	874,992
Real estate construction		19,898		1,043		549		21,490
All other loans		55,104		226,656		252,399		534,159
Total Variable Rate Loans		469,164		469,396		492,081		1,430,641
Fixed Rate
Commercial, financial and agricultural		347,098		232,358		49,116		628,572
Real estate construction		22,757		2,742		414		25,913
All other loans		72,354		1,045,854		190,070		1,308,278
Total Fixed Rate Loans		442,209		1,280,954		239,600		1,962,763
Total Loans and Loans Held for Sale	$	911,373	$	1,750,350	$	731,681	$	3,393,404
Allowance for Loan Losses								(40,825	)
Net Loans and Loans Held for Sale							$	3,352,579

Trading Account

The Company’s subsidiary UMB Bank, n.a. carries taxable governmental securities in a trading account that is maintained according to a Board-approved policy and relevant procedures. The policy limits the amount and type of securities that can be carried in the trading account as well as requiring that any limits under applicable law and regulations also be complied with, and mandates the use of a value at risk methodology to manage price volatility risks within financial parameters. The risk associated with the carrying of trading securities is offset by the sale of exchange traded financial futures contracts, with both the trading account and futures contracts marked to market daily.

This account had a balance of $58.5 million as of December 31, 2005, compared to $59.9 million as of December 31, 2004.

The Manager of the Investment Banking Division of UMB Bank, n.a. presents documentation of the methodology used in determining value at risk at least annually to the Board for approval in compliance with OCC Banking Circular 277, Risk Management of Financial Derivatives, and other banking laws and regulations. The aggregate value at risk is reviewed quarterly. The aggregate value at risk in the trading account was negligible as of December 31, 2005 and 2004.

Other Market Risk

The Company does not have material commodity price risks or derivative risks.

Credit Risk

Credit risk represents the risk that a customer or counterparty may not perform in accordance with contractual terms. Credit risk is inherent in the financial services business and results from extending credit to customers. The Company utilizes a centralized credit administration function, which provides information on affiliate bank risk levels, delinquencies, an internal ranking system and overall credit exposure. In addition, loan requests are centrally reviewed to insure the consistent application of the loan policy and standards. In addition,

43

the Company has an internal loan review staff that operates independently of the affiliate banks. This review team performs periodic examinations of each bank’s loans for credit quality, documentation and loan administration. The respective regulatory authority of each affiliate bank also reviews loan portfolios.

Another means of ensuring loan quality is diversification of the portfolio. 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 only 16.7% of total loans, with no history of significant losses. The Company has no significant exposure to highly leveraged transactions and has no foreign credits in its loan portfolio.

The allowance for loan losses, (“ALL”) is discussed on pages 22 and 23. Also, please see Table 4 for a five-year analysis of the ALL. The adequacy of the ALL is reviewed quarterly, considering such items as historical loss trends including a migration analysis, a review of individual loans, current economic conditions, loan growth and characteristics, industry or segment concentration and other factors. A primary indicator of credit quality and risk management is the level of nonperforming loans. Nonperforming loans include both nonaccrual loans and restructured loans. The Company’s nonperforming loans decreased $4.6 million at December 31, 2005, compared to a decrease of $2.7 million a year earlier. The major portion of nonperforming loans is due to three commercial loan customers. The Company’s nonperforming loans have not exceeded 0.50% of total loans in any of the last five years. While the Company plans to increase its loan portfolio, management does not intend to compromise the Company’s high credit standards as it grows its loan portfolio. The impact of future loan growth on the allowance for loan losses is uncertain as it is dependent on many factors including asset quality and changes in the overall economy.

The Company had no other real estate owned as of December 31, 2005 and 2004. Loans past due more than 90 days totaled $4.8 million at December 31, 2005, compared to $3.0 million at December 31, 2004.

A loan is generally placed on nonaccrual status when payments are past due 90 days or more and/or when management has considerable doubt about the borrower’s ability to repay on the terms originally contracted. The accrual of interest is discontinued and recorded thereafter only when actually received in cash.

Certain loans are restructured to provide a reduction or deferral of interest or principal due to deterioration in the financial condition of the respective borrowers. The Company had no restructured loans at December 31, 2005, compared to $298,000 at December 31, 2004.

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Table 18

LOAN QUALITY (in thousands)

	December 31
	2005			2004			2003			2002			2001
Nonaccrual loans	$	5,439		$	9,752		$	12,431		$	9,723		$	5,375
Restructured loans		—			298			365			989			1,904
Total nonperforming loans	$	5,439		$	10,050		$	12,796		$	10,712		$	7,279
Other real estate owned		—			—			78			4,989			6,466
Total nonperforming assets	$	5,439		$	10,050		$	12,874		$	15,701		$	13,745
Loans past due 90 days or more	$	4,829		$	3,028		$	3,131		$	7,672		$	11,031
Reserve for Loans Losses		40,825			42,723			47,494			37,328			35,637
Ratios
Nonperforming loans as a % of loans		0.16	%		0.35	%		0.47	%		0.40	%		0.26	%
Nonperforming assets as a % of loans plus other real estate owned		0.16			0.35			0.47			0.59			0.49
Nonperforming assets as a % of total assets		0.07			0.13			0.17			0.20			0.16
Loans past due 90 days or more as a % of loans		0.14			0.11			0.12			0.29			0.39
Allowance for Loan Losses as a % of loans		1.20			1.49			1.60			1.40			1.27
Allowance for Loan Losses as a multiple of nonperforming loans		7.51	x		4.38	x		3.40	x		3.48	x		4.9	x

Liquidity Risk

Liquidity represents the Company’s ability to meet financial commitments through the maturity and sale of existing assets or availability of additional funds. The Company believes that the most important factor in the preservation of liquidity is maintaining public confidence that facilitates the retention and growth of a large, stable supply of core deposits and wholesale funds. Ultimately, public confidence is generated through profitable operations, sound credit quality and a strong capital position. The primary source of liquidity for the Company is regularly scheduled payments on and maturity of assets, which include $3.3 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. Neither the Company nor its subsidiaries are active in the debt market. The traditional funding source for the Company’s subsidiary banks has been core deposits. The Company has not issued any debt since 1993 when $15 million of medium-term notes were issued to fund bank acquisitions. Prior to being paid off in February 2003, these notes were rated A3 by Moody’s Investor Service and A- by Standard and Poor’s. Based upon regular contact with investment banking firms, management is confident in its ability to raise debt or equity capital on favorable terms, should the need arise.

The Company also has other commercial commitments that may impact liquidity. These commitments include unused commitments to extend credit, standby letters of credit, and commercial letters of credit. The total amount of these commercial commitments at December 31, 2005, was $2.4 billion. The Company believes that since many of these commitments expire without being drawn upon, the total amount of these commercial commitments does not necessarily represent the future cash requirements of the Company.

The 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 sufficient in the future. The Company’s subsidiary banks are subject to various rules regarding payment of dividends to the Company. For the most part, all banks can pay dividends at least equal to their current year’s earnings without seeking prior regulatory approval. From time to time, approvals have been requested to allow a subsidiary bank to pay a dividend in excess of its current earnings. All such requests have been approved.

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Operational Risk

The Company is exposed to numerous types of operational risk. Operational risk generally refers to the risk of loss resulting from the Company’s operations, including, but not limited to: the risk of fraud by employees or persons outside the Company; the execution of unauthorized transactions by employees or others; errors relating to transaction processing and systems; and breaches of the internal control system and compliance requirements. This risk of loss also includes the potential legal or regulatory actions that could arise as a result of an operational deficiency, or as a result of noncompliance with applicable regulatory standards. Included in the legal and regulatory issues with which the Company must comply are a number of recently imposed rules resulting from the enactment of the Sarbanes-Oxley Act of 2002.

The Company operates in many markets and places reliance on the ability of its employees and systems to properly process a high number of transactions. In the event of a breakdown in the internal control systems, improper operation of systems or improper employee actions, the Company could suffer financial loss, face regulatory action and suffer damage to its reputation. In order to address this risk, management maintains a system of internal controls with the objective of providing proper transaction authorization and execution, safeguarding of assets from misuse or theft, and ensuring the reliability of financial and other data.

The Company maintains systems of controls that provide management with timely and accurate information about the Company’s operations. These systems have been designed to manage operational risk at appropriate levels given the Company’s financial strength, the environment in which it operates, and considering factors such as competition and regulation. The Company has also established procedures that are designed to ensure that policies relating to conduct, ethics and business practices are followed on a uniform basis. In certain cases, the Company has experienced losses from operational risk. Such losses have included the effects of operational errors that the Company has discovered and included as expense in the statement of income. While there can be no assurance that the Company will not suffer such losses in the future, management continually monitors and works to improve its internal controls, systems and corporate-wide processes and procedures.

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ITEM 8.CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CONSOLIDATED BALANCE SHEETS

UMB FINANCIAL CORPORATION AND SUBSIDIARIES

(in thousands, except share data)

	December 31,
	2005			2004
ASSETS
Loans:
Commercial, financial and agricultural	$	1,497,496		$	1,204,628
Real estate construction		47,403			27,205
Consumer		987,770			947,105
Real estate		835,207			661,104
Leases		6,068			5,154
Allowance for loan losses		(40,825	)		(42,723	)
Net loans		3,333,119			2,802,473
Loans held for sale		19,460			24,028
Securities available for sale:
U. S. Treasury		95,687			407,735
U. S. Treasury pledged to creditors		436,111			328,897
U. S. Agencies		403,723			340,701
U. S. Agencies pledged to creditors		852,504			1,079,831
State and political subdivisions		614,505			452,907
Mortgage-backed		920,668			978,833
Total securities available for sale		3,323,198			3,588,904
Securities held to maturity
State and political subdivisions (market value of $67,365 and $168,324, respectively)		67,037			166,065
Federal Reserve Bank and other stock		13,260			9,042
Federal funds sold		142,524			—
Securities purchased under agreements to resell		284,054			293,599
Interest bearing due from banks		1,834			1,834
Trading securities		58,488			59,920
Total earning assets		7,242,974			6,945,865
Cash and due from banks		599,580			497,427
Bank premises and equipment, net		236,038			226,239
Accrued income		51,848			36,584
Goodwill on purchased affiliates		59,727			59,115
Other intangibles		4,078			4,859
Other assets		53,544			34,917
Total assets	$	8,247,789		$	7,805,006
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand	$	2,051,922		$	1,993,281
Interest-bearing demand and savings		2,654,637			2,438,419
Time deposits under $100,000		713,249			630,988
Time deposits of $100,000 or more		501,014			325,550
Total deposits		5,920,822			5,388,238
Federal funds purchased and repurchase agreements		1,360,942			1,506,000
Short-term debt		35,091			39,426
Long-term debt		38,471			21,051
Accrued expenses and taxes		39,247			21,530
Other liabilities		19,753			9,579
Total liabilities		7,414,326			6,985,824
Shareholders’ Equity:
Common stock, $1.00 par, 33,000,000 shares authorized; 27,528,365 shares issued; 21,490,561 and 21,641,053 shares outstanding, respectively		27,528			27,528
Capital surplus		728,108			726,595
Unearned compensation		(1,904	)		—
Retained earnings		342,675			305,986
Accumulated other comprehensive loss		(21,550	)		(10,619	)
Treasury stock, 6,037,804 and 5,887,312 shares, respectively, at cost		(241,394	)		(230,308	)
Total shareholders’ equity		833,463			819,182
Total liabilities and shareholders’ equity	$	8,247,789		$	7,805,006

See Notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENTS OF INCOME

UMB FINANCIAL CORPORATION AND SUBSIDIARIES

(in thousands, except share and per share data)

	Year Ended December 31
	2005			2004		2003
INTEREST INCOME
Loans	$	176,842		$	136,285	$	136,975
Securities:
Available for sale—taxable interest		64,784			57,684		70,730
Available for sale—tax exempt interest		14,622			8,798		9,372
Held to maturity—taxable interest		23			62		140
Held to maturity—tax exempt interest		5,374			10,125		15,472
Total securities income		84,803			76,669		95,714
Federal funds and resell agreements		7,980			4,389		1,701
Trading securities and other		2,286			2,111		1,473
Total interest income		271,911			219,454		235,863
INTEREST EXPENSE
Deposits		52,099			27,059		33,174
Federal funds and repurchase agreements		29,371			12,163		8,245
Short-term debt		418			185		193
Long-term debt		1,733			943		1,072
Total interest expense		83,621			40,350		42,684
Net interest income		188,290			179,104		193,179
Provision for loan losses		5,775			5,370		12,005
Net interest income after provision for loan losses		182,515			173,734		181,174
NONINTEREST INCOME
Trust and securities processing		82,430			75,742		86,490
Trading and investment banking		18,240			17,915		20,863
Service charges on deposit accounts		79,420			73,533		70,705
Insurance fees and commissions		3,326			3,487		3,704
Brokerage fees		5,933			7,731		9,637
Bankcard fees		33,362			31,435		31,655
Gain on sale of assets and deposits, net		9,237			2,185		—
Gain on sale of employee benefit accounts		3,600			1,240		233
Gain on sale of merchant discount operation		—			—		8,250
(Losses) gains on sales of securities available for sale, net		(225	)		141		824
Other		16,550			14,694		13,558
Total noninterest income		251,873			228,103		245,919
NONINTEREST EXPENSE
Salaries and employee benefits		190,197			189,876		196,893
Occupancy, net		26,468			26,131		24,720
Equipment		44,031			43,422		42,645
Supplies and services		21,808			22,268		23,291
Marketing and business development		13,309			15,306		13,550
Processing fees		23,594			21,372		20,323
Legal and consulting		8,577			8,825		7,355
Bankcard		11,608			9,116		8,088
Amortization of intangibles		740			742		1,210
Other		17,737			13,044		13,031
Total noninterest expense		358,069			350,102		351,106
Income before income taxes		76,319			51,735		75,987
Income tax expense		20,001			8,896		17,108
Net income	$	56,318		$	42,839	$	58,879
Net income per share—basic	$	2.61		$	1.98	$	2.70
Net income per share—diluted		2.60			1.97		2.70
Weighted average shares outstanding		21,554,768			21,668,749		21,783,354

See Notes to Consolidated Financial Statements.

48

CONSOLIDATED STATEMENTS OF CASH FLOWS

UMB FINANCIAL CORPORATION AND SUBSIDIARIES

(in thousands)

	Year Ended December 31
	2005			2004			2003
OPERATING ACTIVITIES
Net Income	$	56,318		$	42,839		$	58,879
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		5,775			5,370			12,005
Depreciation and amortization		30,956			31,577			32,422
Deferred income taxes		3,259			6,362			(5,440	)
Net decrease in trading securities and other earning assets		1,432			600			10,955
Losses (Gains) on sales of securities available for sale		225			(141	)		(824	)
Gains on sales of assets and deposits, net		(9,237	)		(2,185	)		—
Amortization of securities premiums, net of discount accretion		14,900			28,104			25,598
Net decrease (increase) in loans held for sale		4,568			(3,636	)		(2,529	)
Stock based compensation		422			—			—
Changes in:
Accrued income		(15,264	)		3,844			17,833
Accrued expenses and taxes		17,717			(3,289	)		37
Other assets and liabilities, net		(5,799	)		(574	)		6,868
Net cash provided by operating activities		105,272			108,871			155,804
INVESTING ACTIVITIES
Proceeds from maturities of securities held to maturity		106,582			140,335			123,894
Proceeds from sales of securities available for sale		15,964			11,612			51,617
Proceeds from maturities of securities available for sale		9,738,612			9,842,020			13,076,115
Purchases of securities held to maturity		(12,382	)		(1,780	)		(29,893	)
Purchases of securities available for sale		(9,520,729	)		(10,084,035	)		(12,878,371	)
Net (increase) decrease in loans		(536,829	)		(149,437	)		(51,816	)
Net (increase) decrease in fed funds and resell agreements		(132,979	)		(16,884	)		(158,884	)
Investment in consolidated subsidiary		(612	)		(1,687	)		(2,659	)
Purchases of bank premises and equipment		(45,429	)		(41,623	)		(20,081	)
Cash paid for branch deposits sold, net of cash received		(100,875	)		—			—
Proceeds from sales of bank premises and equipment		8,232			6,198			266
Net cash provided by (used in) investing activities		(480,445	)		(295,281	)		110,188
FINANCING ACTIVITIES
Net increase (decrease) in demand and savings deposits		348,803			(118,603	)		5,026
Net increase (decrease) in time deposits		291,410			(129,284	)		(215,848	)
Net increase (decrease) in fed funds/repurchase agreements		(145,058	)		332,073			(35,843	)
Net change in short-term debt		(4,335	)		(31,178	)		(24,117	)
Proceeds from long-term debt		20,110			8,980			5,995
Repayment of long-term debt		(2,690	)		(4,209	)		(16,017	)
Cash dividends paid		(19,015	)		(18,203	)		(17,618	)
Proceeds from exercise of stock options and sales of treasury shares		1,295			1,042			431
Purchases of treasury stock		(13,194	)		(4,411	)		(12,074	)
Net cash provided by (used in) financing activities		477,326			36,207			(310,065	)
Increase (decrease) in cash and due from banks		102,153			(150,203	)		(44,073	)
Cash and due from banks at beginning of year		497,427			647,630			691,703
Cash and due from banks at end of year	$	599,580		$	497,427		$	647,630
Supplemental disclosures:
Income taxes paid	$	10,950		$	11,346		$	19,818
Total interest paid		76,339			40,839			46,790

See Notes to Consolidated Financial Statements.

49

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

UMB FINANCIAL CORPORATION AND SUBSIDIARIES

(in thousands, except per share data)

	Common Stock		Capital Surplus		Unearned Compensation			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total
Balance—January 1, 2003	$	27,528	$	726,368	$	—		$	240,295		$	23,678		$	(215,069	)	$	802,800
Comprehensive income/(loss):
Net income		—		—		—			58,879			—			—			58,879
Other comprehensive income/(loss), change in unrealized gains (losses) on securities of ($33,060) net of tax of $12,035; reclassification adjustment gains included in net income of $824 net of tax of $294		—		—		—			—			(20,495	)		—			(20,495	)
Total comprehensive income																		38,384
Dividends declared ($0.80 per share)		—		—		—			(17,618	)		—			—			(17,618	)
Purchase of treasury stock		—		—		—			—			—			(12,074	)		(12,074	)
Sale of treasury stock		—		—		—			—			—			30			30
Exercise of stock options		—		37		—			—			—			364			401
Balance—December 31, 2003		27,528		726,405		—			281,556			3,183			(226,749	)		811,923
Comprehensive income/(loss):
Net income		—		—		—			42,839			—			—			42,839
Other comprehensive income/(loss), change in unrealized gains (losses) on securities of ($21,958) net of tax of $8,066, and the reclassification adjustment gains included in net income of $141 net of tax of $51		—		—		—			—			(13,802	)					(13,802	)
Total comprehensive income																		29,037
Dividends declared ($0.85 per share)		—		—		—			(18,409	)								(18,409	)
Purchase of treasury stock		—		—		—			—						(4,411	)		(4,411	)
Sale of treasury stock		—		30		—			—						45			75
Exercise of stock options		—		160		—			—						807			967
��
Balance—December 31, 2004		27,528		726,595		—			305,986			(10,619	)		(230,308	)		819,182
Comprehensive income/(loss):
Net income		—		—		—			56,318			—			—			56,318
Other comprehensive income/(loss), change in unrealized gains (losses) on securities of ($17,569) net of tax of $6,495; reclassification adjustment losses included in net income of ($225) net of tax of $82		—		—		—			—			(10,931	)		—			(10,931	)
Total comprehensive income																		45,387
Dividends declared ($0.91 per share)		—		—		—			(19,629	)		—			—			(19,629	)
Purchase of treasury stock		—		—		—			—			—			(13,194	)		(13,194	)
Issuance of restricted stock		—		1,140		(2,326	)		—			—			1,186			—
Recognition of restricted stock compensation		—		—		422			—			—			—			422
Sale of treasury stock		—		185		—			—			—			168			353
Exercise of stock options		—		188		—			—			—			754			942
Balance—December 31, 2005	$	27,528	$	728,108	$	(1,904	)	$	342,675		$	(21,550	)	$	(241,394	)	$	833,463

See Notes to Consolidated Financial Statements

50

UMB FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF ACCOUNTING POLICIES

The Company is a multi-bank holding company, which offers a wide range of banking and other financial services to its customers through its branches and offices in the states of Missouri, Kansas, Colorado, Illinois, Oklahoma, Arizona, Nebraska and Wisconsin. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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

The Company and its subsidiaries are included in the consolidated financial statements (reference hereinafter to the “Company” in these Notes to Financial Statements include wholly owned subsidiaries). Intercompany accounts and transactions have been eliminated.

Revenue Recognition

Interest on loans and securities is recognized based on rate times the principal amount outstanding. Interest accrual is discontinued when, in the opinion of management, the likelihood of collection becomes doubtful. Other noninterest income is recognized as services are performed or revenue-generating transactions are executed.

Cash and Due From Banks

Cash on hand, cash items in the process of collection, and amounts due from correspondent banks and the Federal Reserve Bank are included in cash and due from banks.

Loans and Loans Held for Sale

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 approximate level rate of return over the life of the lease.

A loan is considered to be impaired when management believes it is probable that it will be unable to collect all principal and interest due according to the contractual terms of the loan. If a loan is impaired, the Company records a loss valuation allowance equal to the carrying amount of the loan in excess of the present value of the estimated future cash flows discounted at the loan’s effective rate, based on the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. Real estate and consumer loans are collectively evaluated for impairment. Commercial loans are evaluated for impairment on a loan-by-loan basis.

The adequacy for 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 economic conditions, detailed analysis of individual loans for which full collectibility may not be assured, determination of the existence and realizable value of the collateral and guarantees securing such loans. The actual losses, notwithstanding such considerations, however, could differ from the amounts estimated by management.

51

UMB FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Loans held for sale are carried at the lower of aggregate cost or market value. Loan fees (net of certain direct loan origination costs) on loans held for sale are deferred until the related loans are sold or repaid. Gains or losses on loan sales are recognized at the time of sale and determined using the specific identification method.

Securities

Debt securities available for sale principally include U.S. Treasury and agency securities and mortgage-backed securities. Securities classified as available for sale are measured at fair value. Unrealized holding gains and losses are excluded from earnings and reported in accumulated other comprehensive income/(loss) until realized. Realized gains and losses on sales are computed by the specific identification method at the time of disposition and are shown separately as a component of noninterest income.

Securities held to maturity are carried at amortized historical cost based on management’s intention, and the Company’s ability, to hold them to maturity. The Company classifies certain securities of state and political subdivisions as held to maturity. Certain significant unforeseeable changes in circumstances may cause a change in the intent to hold these securities to maturity. For example, such changes may include deterioration in the issuer’s credit-worthiness that is expected to continue or a change in tax law that eliminates the tax-exempt status of interest on the security.

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.

On the Consolidated Statements of Shareholders’ Equity, Accumulated Other Comprehensive Income consists only of unrealized gain (loss) on securities.

Goodwill and Other Intangibles

Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 142 “Goodwill and Other Intangible Assets”. The Company has elected November 30 as its annual measurement date for testing impairment and as a result of the impairment tests performed on that date in 2005, 2004 and 2003, no impairment charge was recorded. Other intangible assets are amortized over a period of up to ten years.

Bank Premises and Equipment

Bank premises and equipment are stated at cost less accumulated depreciation, which is computed primarily on the straight line method. Bank premises are depreciated over 20 to 40 year lives, while equipment is depreciated over lives of 3 to 20 years. Gains and losses from the sale of bank premises and equipment are included in other noninterest expenses.

Impairment of Long-Lived Assets

Long-lived assets, including premises and equipment, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or group of assets may not be recoverable. The impairment review includes a comparison of future cash flows expected to be generated by the asset or group of assets to their current carrying value. If the carrying value of the asset or group of assets exceeds expected cash flows (undiscounted and without interest charges), an impairment loss is recognized to the extent the carrying value exceeds fair value.

52

UMB FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 excluding the tax effect of the change in net unrealized gain/(loss) on securities available for sale.

Per Share Data

Basic income per share is computed based on the weighted average number of shares of common stock outstanding during each period. Diluted income per share includes the diluted effect of issueable stock options outstanding during each year.

Accounting for Stock-Based Compensation

In accordance with SFAS No. 123, “Accounting for Stock-based Compensation”, the Company has elected to account for stock-based compensation using the intrinsic value method under the provisions of Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees”. The following table illustrates the effect on net income and earnings per share, if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation.

	Year Ended December 31
	2005		2004		2003
Net income, as reported	$	56,318	$	42,839	$	58,879
Add: Stock based compensation expense included in reported net income, net of tax		268		—		—
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		1,095		511		414
Pro forma net income	$	55,491	$	42,328	$	58,465

The following table summarizes the weighted average fair value of the granted options, determined using the Black-Scholes option pricing model and the assumptions used in their determination.

Earnings per share:
Basic-as reported		2.61			1.98			2.70
Basic-pro forma		2.57			1.95			2.68
Diluted-as reported		2.60			1.97			2.70
Diluted-pro forma		2.56			1.95			2.68
Black-Scholes pricing model:
Weighted average fair value of the granted options	$	16.05		$	16.55		$	11.98
Weighted average risk-free interest rate		4.32	%		4.20	%		3.21	%
Expected option life in years		7.97			8.75			8.75
Expected volatility		18.62	%		19.35	%		19.92	%
Expected dividend yield		1.53	%		1.47	%		1.70	%

53

UMB FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Reclassifications

Certain reclassifications were made to the 2004 and 2003 Consolidated Financial Statements to conform to the current year presentation.

2.  NEW ACCOUNTING PRONOUNCEMENTS

Share-Based Payment    In December 2004, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 123 (R), “Share-Based Payment”. SFAS No. 123 (R) establishes accounting standards for all transactions in which an entity exchanges its equity instruments for goods and services. SFAS No. 123 (R) focuses primarily on accounting for transactions with employees, and carries forward without change prior guidance for share-based payments for transactions with non-employees.

SFAS No. 123 (R) eliminates the intrinsic value measurement objective in APB Opinion No. 25 and generally requires the Company to measure the cost of employee services received in exchange for an award of equity instruments based on the fair value of the award on the date of the grant. The standard requires the grant date fair value to be estimated using either an option-pricing model which is consistent with the terms of the award or a market observed price, if such a price exists. Such cost must generally be recognized over the vesting period during which an employee is required to provide service in exchange for the award. The standard also requires the Company to estimate the number of instruments that will ultimately be issued, rather than accounting for forfeitures as they occur.

The Company is required to apply SFAS No. 123 (R) to all awards granted, modified or settled after December 31, 2005. The Company is also required to use either the “modified prospective method” or the “modified retrospective method”. Under the modified prospective method, the Company must recognize compensation cost for all awards granted after the Company adopts the standard and for the unvested portion of previously granted awards that are outstanding on that date. The Company has chosen to use the modified prospective method.

The Company is permitted to use either a straight line or an accelerated method to amortize the cost as an expense for awards with graded vesting.

The Company projects the annual net impact to be approximately $404,000 of additional pre-tax stock compensation expense related to the unvested stock options outstanding at December 31, 2005. Such amount would increase if additional options are granted in 2006.

Accounting Changes and Error Correction—a replacement of APB Opinion No. 20 and FASB Statement No. 3    In May, 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Correction—a replacement of APB Opinion No. 20 and FASB Statement No. 3”. This statement replaces APB Opinion No. 20 and SFAS No. 3 and changes the requirements for the accounting for and reporting of a change in accounting principle. This Statement applies to all voluntary changes in accounting principles. It also applies to changes required by an accounting pronouncement in the unusual instance where the pronouncement does not include specific transition provisions. This Statement carries forward the guidance from APB No. 20 for the reporting of an error correction in previously issued financial statements and for a change in accounting estimate. Guidance is also carried forward requiring the justification of a change in accounting principle on the basis of preferability. Management is analyzing the requirements of this new statement and believes that its adoption will not have a significant impact on the Company’s Consolidated Financial Statements.

54

UMB FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

3.  LOANS AND ALLOWANCE FOR LOAN LOSSES

Maturities and Sensitivities to Changes in Interest Rates

This table details loan maturities by variable and fixed rates as of December 31, 2005 (in thousands):

	Due in one year or less		Due after one year through five years		Due after five years		Total
Variable Rate
Commercial, financial and agricultural	$	394,162	$	241,697	$	239,133	$	874,992
Real estate construction		19,898		1,043		549		21,490
All other loans		55,104		226,656		252,399		534,159
Total Variable Rate Loans		469,164		469,396		492,081		1,430,641
Fixed Rate
Commercial, financial and agricultural		347,098		232,358		49,116		628,572
Real estate construction		22,757		2,742		414		25,913
All other loans		72,354		1,045,854		190,070		1,308,278
Total Fixed Rate Loans		442,209		1,280,954		239,600		1,962,763
Total Loans	$	911,373	$	1,750,350	$	731,681		3,393,404
Allowance for Loan Losses								(40,825	)
Net Loans and loans held for sale							$	3,352,579

This table details loan maturities by variable and fixed rates as of December 31, 2004 (in thousands):

	Due in one year or less		Due after one year through five years		Due after five years		Total
Variable Rate
Commercial, financial and agricultural	$	627,176	$	149,411	$	11,837	$	788,424
Real estate construction		10,544		1,404		99		12,047
All other loans		142,192		100,029		87,774		329,995
Total Variable Rate Loans		779,912		250,844		99,710		1,130,466
Fixed Rate
Commercial, financial and agricultural		243,777		164,718		7,710		416,205
Real estate construction		11,131		4,027		—		15,158
All other loans		293,751		932,617		81,027		1,307,395
Total Fixed Rate Loans		548,659		1,101,362		88,737		1,738,758
Total Loans	$	1,328,571	$	1,352,206	$	188,447		2,869,224
Allowance for Loan Losses								(42,723	)
Net Loans and loans held for sale							$	2,826,501

55

UMB FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Allowance for Loan Losses

This table provides a rollforward of the allowance for loan losses for the three years ended December 31, 2005, 2004 and 2003 (in thousands):

	Year Ended December 31
	2005			2004			2003
Allowance—beginning of year	$	42,723		$	43,494		$	37,328
Additions (deductions):
Charge-offs		(10,107	)		(9,745	)		(11,337	)
Recoveries		2,434			3,604			5,498
Net charge-offs		(7,673	)		(6,141	)		(5,839	)
Provision charged to expense		5,775			5,370			12,005
Allowance—end of year	$	40,825		$	42,723		$	43,494

Impaired Loans under SFAS 114

This table provides an analysis of impaired loans for the three years ended December 31, 2005 (in thousands):

	Year Ended December 31
	2005		2004		2003
Total impaired loans as of December 31	$	6,650	$	10,007	$	10,725
Amount of impaired loans which have a related allowance		1,134		2,603		1,898
Amount of related allowance		502		2,330		1,030
Remaining impaired loans with no allowance		5,516		7,404		8,827
Average recorded investment in impaired loans during year		7,690		10,169		10,290

The amount of interest income not recorded on impaired loans was $544,000 for 2005, $705,000 for 2004, and $642,000 for 2003.

4.  SECURITIES

Securities Available for Sale

This table provides detailed information about securities available for sale at December 31, 2005 and 2004 (in thousands):

2005	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
U.S. Treasury	$	537,399	$	—	$	(5,601	)	$	531,798
U.S. Agencies		1,260,924		21		(4,718	)		1,256,227
Mortgage-backed		938,539		25		(17,896	)		920,668
State and political subdivisions		620,193		485		(6,173	)		614,505
Total	$	3,357,055	$	531	$	(34,388	)	$	3,323,198
2004
U.S. Treasury	$	743,268	$	—	$	(6,636	)	$	736,632
U.S. Agencies		1,422,965		131		(2,564	)		1,420,532
Mortgage-backed		986,835		1,031		(9,033	)		978,833
State and political subdivisions		452,578		2,073		(1,744	)		452,907
Total	$	3,605,646	$	3,235	$	(19,977	)	$	3,588,904

56

UMB FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table presents contractual maturity information for securities available for sale at December 31, 2005 (in thousands):

	Amortized Cost		Fair Value
Due in 1 year or less	$	1,542,346	$	1,537,813
Due after 1 year through 5 years		634,623		625,862
Due after 5 years through 10 years		176,065		173,921
Due after 10 years		65,482		64,934
Total		2,418,516		2,402,530
Mortgage-backed securities		938,539		920,668
Total securities available for sale	$	3,357,055	$	3,323,198

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.

Securities available for sale with a market value of $2,693,439,000 at December 31, 2005, and $3,127,425,000 at December 31, 2004, were pledged to secure U.S. Government deposits, other public deposits and certain trust deposits as required by law.

During 2005, proceeds from the sales of securities available for sale were $15,964,000 compared to $11,612,000 for 2004. Securities transactions resulted in gross realized gains of $8,000 for 2005, $148,000 for 2004 and $824,000 for 2003. The gross realized losses were $233,000 for 2005, $7,000 for 2004 and $0 for 2003.

Trading Securities

The net realized gains on trading securities at December 31, 2005 and 2004 were $12,600 and $42,400 respectively, and were included in trading and investment banking income.

Securities Held to Maturity

The table below provides detailed information for securities held to maturity at December 31, 2005 and 2004 (in thousands):

	December 31
2005	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
State and political subdivisions	$	67,037	$	328	$	—		$	67,365
2004
State and political subdivisions	$	166,065	$	2,292	$	(33	)	$	168,324

57

UMB FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table presents contractual maturity information for securities held to maturity at December 31, 2005 (in thousands):

	Amortized Cost		Fair Value
Due in 1 year or less	$	29,815	$	29,971
Due after 1 year through 5 years		9,953		10,125
Due after 5 years through 10 years		7,857		7,857
Due after 10 years		19,412		19,412
Total securities held to maturity	$	67,037	$	67,365

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.

There were no sales of securities held to maturity during 2005 and 2004.

Securities held to maturity and some municipals available for sale with a market value of $389,452,000 at December 31, 2005, and $523,738,000 at December 31, 2004, were pledged to secure U.S. Government deposits, other public deposits and certain Trust deposits as required by law.

The following table shows the Company’s available for sale investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2005 (in thousands).

	Less than 12 months					12 months or more					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury obligations	$	44,361	$	(480	)	$	502,403	$	(5,120	)	$	546,764	$	(5,600	)
Direct obligations of U.S. government agencies		1,039,500		(2,391	)		191,996		(2,327	)		1,231,496		(4,718	)
Federal agency mortgage backed securities		358,339		(5,081	)		539,583		(12,815	)		897,922		(17,896	)
Municipal securities available for sale		295,289		(2,921	)		216,300		(3,253	)		511,589		(6,174	)
Total debt securities available for sale		1,737,489		(10,873	)		1,450,282		(23,515	)		3,187,771		(34,388	)
Total temporarily impaired securities	$	1,737,489	$	(10,873	)	$	1,450,282	$	(23,515	)	$	3,187,771	$	(34,388	)

The unrealized losses in the Company’s investments in U. S. Treasury obligations; direct obligations of U.S. government agencies; federal agency mortgage backed securities and municipal securities were caused by interest rate increases. Because the Company has the ability and intent to hold these investments until a recovery of fair value, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at December 31, 2005.

58

UMB FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

5.  SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL

The Company regularly enters into agreements for the purchase of securities with simultaneous agreements to resell (resell agreements). The agreements permit the Company to sell or repledge these securities. Resell agreements were $284,054,000 and $293,599,000 at December 31, 2005 and 2004, respectively. Of the $284,054,000 amount, $250,000,000 represented sales of securities in which securities were received under reverse repurchase agreements (“resell agreements”) during 2005. In 2004, none of these securities were resold under repurchase agreements.

6.  LOANS TO OFFICERS AND DIRECTORS

Certain Company and principal affiliate bank executive officers and directors, including companies in which those persons are principal holders of equity securities or are general partners, borrow in the normal course of business from affiliate banks of the Company. All such loans have been made on the same terms, including interest rates and collateral, as those prevailing at the same time for comparable transactions with unrelated parties. In addition, all such loans are current as to repayment terms. For the years 2005 and 2004, an analysis of activity with respect to such aggregate loans to related parties appears below (in thousands):

	Year Ended December 31
	2005			2004
Balance—beginning of year	$	132,086		$	132,974
New loans		223,884			118,948
Repayments		(127,589	)		(119,836	)
Balance—end of year	$	228,381		$	132,086

7.  GOODWILL AND OTHER INTANGIBLES

Changes in the carrying amount of goodwill for the years ended December 31, 2005 and 2004 by operating segment are as follows (in thousands):

	Consumer Services			Asset Management		Investment Services Group			Total
Balances as of January 1, 2004	$	34,743		$	10,479	$	12,206		$	57,428
Additional earn-out payment for 2001 acquisition of Sunstone Financial Group, Inc.		—			—		1,456			1,456
Other changes to prior years’ acquisitions		238			—		(7	)		231
Balances as of December 31, 2004		34,981			10,479		13,655			59,115
Additional earn-out payment for 2001 acquisition of Sunstone Financial Group, Inc.		—			—		843			843
Other changes to prior years’ acquisitions		(238	)		—		7			(231	)
Balances as of December 31, 2005	$	34,743		$	10,479	$	14,505		$	59,727

59

UMB FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Intangible assets that continue to be subject to amortization (in thousands):

	As of December 31, 2005
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizing intangible assets
Core deposit intangibles assets	$	16,777	$	16,777	$	—
Other intangible assets		7,200		3,122		4,078
Total	$	23,977	$	19,899	$	4,078
	As of December 31, 2004
Amortizing intangible assets
Core deposit intangibles assets	$	16,777	$	16,727	$	50
Other intangible assets		7,200		2,391		4,809
Total	$	23,977	$	19,118	$	4,859
	Year Ended December 31
	2005		2004		2003
Aggregate amortization expense	$	741	$	742	$	1,210

In 2005, an impairment charge of $40,000 related to the core deposit intangible assets associated with the sales of eleven branch facilities was recorded as a reduction to Gain on Sale of Assets and Deposits, net.

Estimated amortization expense of intangible assets on future years:

For the year ended December 31, 2006	$	730
For the year ended December 31, 2007		730
For the year ended December 31, 2008		730
For the year ended December 31, 2009		730
For the year ended December 31, 2010		730

8.  BANK PREMISES AND EQUIPMENT

Bank premises and equipment consisted of the following (in thousands):

	December 31
	2005			2004
Land	$	37,573		$	38,498
Buildings and leasehold improvements		261,009			249,644
Equipment		136,857			175,606
Software		66,150			72,754
		501,589			536,502
Accumulated depreciation		(216,948	)		(258,182	)
Accumulated amortization		(48,603	)		(52,081	)
Bank premises and equipment, net	$	236,038		$	226,239

60

UMB FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidated rental and operating lease expenses were $5,664,000 in 2005, $5,434,000 in 2004 and $5,808,000 in 2003. Consolidated bank premises and equipment depreciation and amortization expenses were $30,215,000 in 2005, $30,835,000 in 2004 and $31,212,000 in 2003. Minimum rental commitments as of December 31, 2005 for all non-cancelable operating leases are: 2006—$4,391,000; 2007—$4,013,000; 2008—$3,577,000; 2009—$2,958,000; 2010—$2,024,000; and thereafter—$12,212,000.

9.  BORROWED FUNDS

The components of the Company’s short-term and long-tem debt are as follows (in thousands):

	December 31
	2005		2004
Short-term debt:
U. S. Treasury demand notes and other	$	35,091	$	39,426
Long-term debt:
Federal Home Loan Bank 3.80% due 2018		2,225		2,362
Federal Home Loan Bank 4.53% due 2018		1,541		1,632
Federal Home Loan Bank 4.56% due 2019		957		1,009
Federal Home Loan Bank 4.75% due 2018		1,371		1,453
Federal Home Loan Bank 4.86% due 2019		5,295		5,558
Federal Home Loan Bank 4.92% due 2019		688		722
Federal Home Loan Bank 5.00% due 2019		1,456		1,533
Federal Home Loan Bank 5.14% due 2020		108		—
Federal Home Loan Bank 5.47% due 2020		17,407		—
Federal Home Loan Bank 5.97% due 2017		2,004		2,123
Federal Home Loan Bank 5.89% due 2014		2,662		2,889
Federal Home Loan Bank 7.13% due 2010		897		1,071
Federal Home Loan Bank 7.61% due 2015		—		699
Kansas Equity Fund IV, L.P. 0% due 2014		910		—
St. Louis Equity Fund 2005 LLC 0% due 2010		950		—
Total long-term debt		38,471		21,051
Total borrowed funds	$	73,562	$	60,477

Aggregate annual repayments of long-term debt at December 31, 2005 are as follows (in thousands):

2006	$	2,563
2007		2,786
2008		2,917
2009		3,005
2010		2,523
Thereafter		24,677
Total	$	38,471

All of the Federal Home Loan Bank notes are secured by investment securities of the Company. Federal Home Loan Bank notes require monthly principal and interest payments and may require a penalty for payoff prior to the maturity date. The 7.61% FHLB note due in 2015 was paid in June 2005.

61

UMB FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 sheets. The amount outstanding at December 31, 2005, was $1,530,942,000 (with accrued interest payable of $466,000). This amount consists of $250,000,000 represented sales of securities in which securities were received under reverse repurchase agreements (“resell agreements”) and $1,280,942,000 of sales of U.S. Treasury and Agency securities from the Company’s securities portfolio. The amount outstanding at December 31, 2004, was $1,400,135,000 (with accrued interest payable of $25,000). There were no reverse repurchase agreements (“resell agreements”) as of December 31, 2004.

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 as of December 31, 2005(in thousands):

Maturity of the Repurchase Liabilities	Securities Market Value		Repurchase Liabilities		Weighted Average Interest Rate
On Demand	$	61,300	$	60,686	2.56	%
2 to 30 days		1,226,795		1,219,737	3.75
31 to 90 days		481		479	3.25
Over 90 Days		40		40	3.25
Total	$	1,288,616	$	1,280,942	3.70	%

10.  REGULATORY REQUIREMENTS

Payment of dividends by the affiliate banks to the parent company is subject to various regulatory restrictions. For national banks, the governing regulatory agency must approve the declaration of any dividends generally in excess of the sum of net income for that year and retained net income for the preceding two years. At December 31, 2005, approximately $14,186,000 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 minimum levels.

Certain affiliate banks maintain reserve balances with the Federal Reserve Bank as required by law. During 2005, this amount averaged $45,399,000, compared to $71,938,000 in 2004.

The Company is required to maintain minimum amounts of capital to total “risk weighted” assets, as defined by the banking regulators. At December 31, 2005, the Company is required to have minimum Tier 1 and Total capital ratios of 4.0% and 8.0%, respectively. The Company’s actual ratios at that date were 16.2% and 17.0%, respectively. The Company’s leverage ratio at December 31, 2005, was 11.0%.

As of December 31, 2005, the most recent notification from the Office of Comptroller of the Currency categorized all of the affiliate banks as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well-capitalized all of the Company’s affiliate banks must maintain total risk-based, Tier 1 risk-based and Tier 1 leverage ratios of 10.0%, 6.0% and 5.0%, respectively. There are no conditions or events since that notification that management believes have changed the affiliate banks’ category.

62

UMB FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Actual capital amounts as well as required and well-capitalized Tier 1, Total and Tier 1 Leverage ratios as of December 31 for the Company and its banks are as follows (in thousands):

	2005
	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
(in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Tier 1 Capital:
UMB Financial Corporation	$	790,980	16.14	%	$	195,985	4.00	%	$	N/A	N/A	%
UMB Bank, n. a.		529,155	12.37			171,137	4.00			256,706	6.00
UMB National Bank of America, n.a.		72,470	31.92			9,082	4.00			13,623	6.00
UMB Bank Colorado, n.a.		36,754	9.70			15,154	4.00			22,731	6.00
UMB Bank, Warsaw		6,150	14.33			1,717	4.00			2,575	6.00
UMB Bank Arizona, n.a.		9,861	59.49			663	4.00			995	6.00
Total Capital:
UMB Financial Corporation		832,551	16.99			391,970	8.00			N/A	N/A
UMB Bank, n. a.		564,553	13.20			342,275	8.00			427,843	10.00
UMB National Bank of America, n.a.		74,185	32.67			18,164	8.00			22,705	10.00
UMB Bank Colorado, n.a.		40,633	10.73			30,307	8.00			37,884	10.00
UMB Bank, Warsaw		6,558	15.28			3,433	8.00			4,292	10.00
UMB Bank Arizona, n.a.		10,032	60.52			1,326	8.00			1,658	10.00
Tier 1 Leverage:
UMB Financial Corporation		790,980	10.96			288,742	4.00			N/A	N/A
UMB Bank, n. a.		529,155	8.61			245,841	4.00			307,301	5.00
UMB National Bank of America, n.a.		72,470	13.89			20,867	4.00			26,084	5.00
UMB Bank Colorado, n.a.		36,754	7.65			19,209	4.00			24,011	5.00
UMB Bank, Warsaw		6,150	7.69			3,197	4.00			3,997	5.00
UMB Bank Arizona, n.a.		9,861	95.38			414	4.00			517	5.00
	2004
Tier 1 Capital:
UMB Financial Corporation	$	765,517	18.20	%	$	168,350	4.00	%	$	N/A	N/A	%
UMB Bank, n. a.		514,959	13.94			147,730	4.00			221,596	6.00
UMB National Bank of America, n.a.		66,509	34.25			7,768	4.00			11,652	6.00
UMB Bank Colorado, n.a.		29,955	9.71			12,334	4.00			18,502	6.00
UMB Bank, Warsaw		5,776	14.56			1,587	4.00			2,380	6.00
Total Capital:
UMB Financial Corporation		808,240	19.20			336,700	8.00			N/A	N/A
UMB Bank, n. a.		551,781	14.94			295,461	8.00			369,326	10.00
UMB National Bank of America, n.a.		68,276	35.16			15,536	8.00			19,420	10.00
UMB Bank Colorado, n.a.		33,688	10.92			24,669	8.00			30,836	10.00
UMB Bank, Warsaw		6,177	15.57			3,173	8.00			3,967	10.00
Tier 1 Leverage:
UMB Financial Corporation		765,517	10.97			279,215	4.00			N/A	N/A
UMB Bank, n. a.		514,959	8.72			236,310	4.00			295,387	5.00
UMB National Bank of America, n.a.		66,509	12.34			21,555	4.00			26,944	5.00
UMB Bank Colorado, n.a.		29,955	6.94			17,259	4.00			21,574	5.00
UMB Bank, Warsaw		5,776	7.50			3,079	4.00			3,849	5.00

63

UMB FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11.  EMPLOYEE BENEFITS

The Company has a discretionary noncontributory profit sharing plan, which features an employee stock ownership plan. This plan is for the benefit of substantially all eligible officers and employees of the Company and its subsidiaries. No contributions were accrued for 2005 or 2004 under this discretionary plan. A $1,500,000 discretionary payment was paid in 2004 for the 2003 year.

The Company has a qualified 401(k) profit sharing plan that permits participants to make contributions by salary deduction. The Company made a matching contribution to this plan of $1,907,966 in 2005 for the year 2004 and $1,993,400 in 2004 for the 2003 year. The Company has accrued and anticipates making a matching contribution of $1,940,291 in March 2006 for the 2005 year.

On April 18, 2002, the shareholders of the Company approved the 2002 Incentive Stock Options Plan (the “2002 Plan”), which provides incentive options to certain key employees for up to 1,000,000 common shares of the Company. All options that are issued under the 2002 plan are in effect for 10 years (except for any option granted to a person holding more than 10% of the Company’s stock, in which case the option is in effect for five years). All options issued prior to 2005 under the 2002 plan cannot be exercised until at least four years 11 months after the date they are granted. Options issued in 2005 under the 2002 plan have a vesting schedule of 50% after three years; 75% after four years and 100% after four years and eleven months. Except under circumstances of death, disability or certain retirements, the options cannot be exercised after the grantee has left the employment of the Company or its subsidiaries. The Board Compensation Committee is empowered to issue such incentive options under an agreement that accelerates the exercise period for an option upon the optionee’s qualified 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. Effective January 1, 2006, SFAS No. 123 (R) requires compensation expense to be recognized on unvested options outstanding. See New Accounting Pronouncements disclosed on page 54 for information on this pronouncement. Options are granted at exercise prices of no less than 100% of the fair market value of the underlying shares at date of grant. The plan terminates April 17, 2012. The table below discloses the information relating to the options granted in 2003 through 2005 under this plan.

Stock Options Under the 2002 Plan	Number of Shares		Option Price Per Share	Weighted Average Price Per Share
Outstanding—January 1, 2003	82,796		$38.11 to $41.93	$38.24
Granted	86,960		48.65 to 53.51	48.76
Canceled	(6,750	)	38.11	38.11
Exercised	(200	)	38.11	38.11
Outstanding—December 31, 2003	162,806		38.11 to 53.51	43.86
Exercisable—December 31, 2003	—		—	—
Granted	97,486		50.85 to 57.85	57.57
Cancelled	(27,156	)	38.11 to 53.51	44.04
Outstanding—December 31, 2004	233,136		38.11 to 57.85	49.57
Exercisable—December 31, 2004	—		—	—
Granted	76,919		55.62 to 65.99	65.71
Canceled	(24,875	)	38.11 to 65.99	49.47
Exercised	(600	)	38.11	38.11
Outstanding—December 31, 2005	284,580		$38.11 to 65.99	$53.96
Exercisable—December 31, 2005	—		—	—

64

UMB FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

On April 16, 1992, the shareholders of the Company approved the 1992 Incentive Stock Option Plan (the “1992 plan”), which provides incentive options to certain key employees for up to 500,000 common shares of the Company. Of the options granted prior to 1998, 40% are exercisable two years from the date of the grant and are thereafter exercisable in 20% increments annually, or for such periods or vesting increments as the Board of Directors, or a committee thereof, specify (which may not exceed 10 years or in the case of a recipient holding more than 10% of the Company’s stock, 5 years), provided that the optionee has remained in the employment of the Company or its subsidiaries. None of the options granted during or after 1998 are exercisable until four years eleven months after the grant date. The exercise period may be accelerated for an option upon the optionee’s qualified 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. Effective January 1, 2006, SFAS No. 123 (R) requires compensation expense to be recognized on unvested options outstanding. See New Accounting Pronouncements disclosed on page 54 for information on this pronouncement. Options are granted at not less than 100% of fair market value at date of grant. No further options may be granted under the 1992 plan.

Activity in the 1992 Plan for the three years ended December 31, 2005 is summarized in the table below:

Stock Options Under the 1992 Plan	Number of Shares		Option Price Per Share	Weighted Average Price Per Share
Outstanding—January 1, 2003	252,351		$22.57 to $ 44.02	$	36.30
Canceled	(20,147	)	24.02 to    44.02		37.10
Exercised	(11,485	)	22.58 to    43.59		31.04
Outstanding—December 31, 2003	220,719		22.57 to    44.02		36.53
Exercisable—December 31, 2003	77,289		22.57 to    44.02		35.83
Cancelled	(19,761	)	22.58 to    43.69		37.09
Exercised	(28,789	)	22.57 to    44.02		33.61
Outstanding—December 31, 2004	172,169		30.17 to    43.69		36.97
Exercisable—December 31, 2004	84,496		30.17 to    43.69		36.62
Cancelled	(7,608	)	30.17 to    43.69		37.79
Exercised	(26,274	)	30.29 to    43.69		35.01
Outstanding—December 31, 2005	138,287		30.17 to    43.69		37.28
Exercisable—December 31, 2005	90,677		$30.17 to  $43.69	$	35.84

65

UMB FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The table below shows the stock options outstanding and exercisable as of December 31, 2005:

	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number Outstanding at 12/31/05	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable at 12/31/05	Weighted Average Exercise Price
$ 30.17 to $ 30.41	8,623	1 year	$	30.33	8,623	$	30.33
43.34 to    43.69	12,673	2 years		43.59	12,673		43.59
38.73 to    38.96	18,178	3 years		38.87	18,178		38.87
34.58 to    35.25	22,642	4 years		34.89	22,642		34.89
32.60 to    32.91	28,561	5 years		32.89	28,561		32.89
40.02 to    40.02	47,610	6 years		40.02	—		—
38.11 to    38.11	55,100	7 years		38.11	—		—
48.65 to    48.65	64,725	8 years		48.65	—		—
50.85 to    57.85	88,036	9 years		57.54	—		—
55.62 to    65.99	76,719	10 years		65.71	—		—
	422,867				90,677

On May 4, 2004, the Company entered into an agreement with Peter J. deSilva, President and Chief Operating Officer of the Company to issue 4,000 shares of Common Stock of the Company (the “Restricted Stock”). The shares vest 20% per year of employment through January 20, 2009. The restricted shares are automatically enrolled in the dividend reinvestment plan of the Company. Dividends paid on the restricted shares are used to purchase new shares which contain the same restriction. If Mr. deSilva terminates employment all non-vested shares are forfeited. The fair market value of the stock on the grant date of May 4, 2004, was $51.03. The Company recorded compensation cost of $79,000 in 2005.

At the April 26, 2005, shareholders’ meeting, the shareholders approved the UMB Financial Corporation Long-Term Incentive Compensation Plan (LTIP) which became effective as of January 1, 2005. The Plan permits the issuance to selected officers of the Company service based restricted stock grants, performance-based restricted stock grants and non-qualified stock options. Service-based restricted stock grants will contain a service requirement. The performance-based restricted grants will contain a performance and service requirements. The non-qualified stock options will contain a service requirement.

The Plan reserves up to 600,000 shares of the Company’s Stock. Of the total no more than 200,000 shares can be issued as restricted stock. These two requirements will be in effect with the 2006 LTIP issuance. In 2005, the service and performance based restricted stock grants were issued out of treasury stock. No one eligible employee may receive more than $1,000,000 in benefits under the Plan during any one fiscal year taking into account the value of all Stock Options and Restricted Stock received during such fiscal year.

The service-based restricted stock grants contain a service requirement. In 2005 the vesting requirement is 50% of the shares after three years of service, 75% after four years of service and 100% after five years of service. In 2005, the Company issued a total of 22,400 of service-based restricted grants to 28 officers at an average cost of $54.17 per grant. The shares will vest through April 28, 2010.

The performance-based restricted stock grants contain a service and a performance requirement. In 2005, the performance requirement is based on a pre-determined performance requirement over a three year period. The service requirement portion is a 3 year cliff vesting. If the performance requirement is not met, the executives do not receive the shares. In 2005, the Company issued a total of 17,746 of performance-based restricted stock grants to 28 officers at an average cost of $54.19 per grant.

66

UMB FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The dividends on service and performance-based restricted stock grants are treated as two separate transactions. First cash dividends are paid on the restricted stock. Those cash dividends are then paid to purchase additional shares of restricted stocks. The dividends paid on the stock are recorded as a reduction to retained earnings (similar to all dividend transactions).

In 2005, the Company recorded $343,000 in compensation cost related to service and performance-based restricted stock grants. Additionally, unearned compensation of $1,904,000 was recorded as a component of capital with respect to the restricted stock grants.

In 2005, the Company issued 67,270 shares of non-qualified stock options to 28 officers. The non-qualified stock options carry a service performance requirement and will vest 50% after three years, 75% after four years and 100% after five years. The options will expire April 28, 2015.

12.  BUSINESS SEGMENT REPORTING

The Company has strategically aligned its operations into six major segments, as shown below (collectively, “Business Segments”). The Business Segments are differentiated based on the products and services provided. Business segment financial results produced by the Company’s internal management accounting system are evaluated regularly by the Executive Committee in deciding how to allocate resources and assess performance per individual Business Segment. The management accounting system assigns balance sheet and income statement items to each business segment using methodologies that are refined on an ongoing basis. The business segments were redefined during the fourth quarter of 2004, breaking Commercial Banking into three separate sectors: Commercial Banking and Lending; Corporate Services and Banking Services. This breakout was done to better reflect how we go to market with our products and services as well as adding more granularity to better identify the primary drivers of our profitability. In addition, the Company merged consumer oriented business lines into the Retail Banking Business Segment and created Consumer Services. Finally, to reflect our desire to focus on both Personal and Institutional segments, our Trust and Wealth Management Business Segment has been renamed Asset Management. For comparability purposes, amounts in all periods are based on methodologies in effect at December 31, 2005 consistent with SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information”.

In determining revenues and expenses associated with each individual business segment, the Company utilizes a funds transfer pricing model. This model records cost of funds or credit for funds using matched maturity funding for certain assets and liabilities, or a blended rate based on various maturities for the remaining assets and liabilities. The allowance for loan losses is allocated using specifically identified reserves assigned to loans where available, with general reserves assigned to the remaining loan portfolio based on historical losses, economic outlook and other factors. The related loan loss provision is assigned based on the amount necessary to maintain reserves adequate for each segment. Noninterest income and noninterest expense directly attributable to a segment is assigned to that segment. Direct expenses incurred by areas whose services support the overall Company are allocated to the Business Segments based on standard unit costs applied to actual volume measurements. Administrative expenses are allocated based on the estimated time expended for each segment. Any remaining expenses, such as corporate overhead, are assigned based on the ratio of an individual business segment’s noninterest expense to total noninterest expense incurred by all business lines. Virtually all interest rate risk is assigned to the Treasury and Other business segment that is the offset to the funds transfer pricing charges and credits assigned to each business segment.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following summaries provide information about the activities of each segment:

Commercial Banking and Lending serves the commercial lending/leasing as well as the capital markets needs of the Company’s mid market businesses and governmental entities by offering various products and services. The commercial loan and leasing group provides commercial loans and lines of credit, letters of credit, and loan syndication services. Capital Markets provides consultative services and offers a variety of financing for companies that need non-traditional banking services. The services provided by Capital Markets include asset based financing, asset securitization, equity and mezzanine financing, factoring, private and public placement of senior debt, as well as merger and acquisition consulting.

Corporate Services meets the treasury management, treasury services, corporate trust, and security transfer needs of our commercial clients. Treasury management products and services include account reconciliation services, automated clearing house, controlled disbursements, lockbox services and various card products and services. Corporate Trust services include serving as corporate and municipal bond trustee as well as the paying agent/registrar for issued bonds and notes. Securities Transfer services include dividend disbursing/reinvestment, employee stock purchase plans, proxy services, as well as acting as transfer agent.

Banking Servicesprovides products and services to both the Company’s customer base as well as selling the same products and services through its correspondent banking network in the Midwest. Products and services include bank stock loans, cash letter collections, FiServ account processing, international payments, foreign exchange, investment portfolio accounting and safekeeping. Additionally, consulting services are provided on a variety of issues including compliance, human resources, management, investment portfolio and asset/liability management.

Consumer Services delivers products and services through the Company’s bank branches, Call Center, Internet Banking and ATM network. These services are distributed over a seven state area, as well as through on-line and telephone banking. Consumer Services is a major provider of funds and assets for the Company. This segment offers a variety of consumer products, including deposit accounts, installment loans, credit cards, home equity lines of credit, residential mortgages, small business loans, and insurance services for individuals.

Asset Management provides a full spectrum of trust and custody services to both personal and institutional clients of the Company focusing on estate planning, trust, retirement planning and investment management services. The private client services division offers full trust and personal banking services to high net worth individuals. The Company’s investment advisory and other services provided to the Company’s proprietary funds, Scout Funds, are also included in this segment.

Investment Services Group provides a full range of services for mutual funds, hedge funds, separate accounts and commingled funds to a wide range of investment advisors, independent money managers, broker/dealers, banks, third-party administrators, insurance companies and other financial service providers. Services provided include administration and fund accounting, investor services and transfer agency, cash management, custody, marketing, and distribution services.

Treasury and Other Adjustments includes asset and liability management activities and miscellaneous other items of a corporate nature not allocated to specific business lines. Corporate eliminations and taxes are also allocated to this segment.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

BUSINESS SEGMENT INFORMATION

Line of business/segment financial results were as follows:

	Year Ended December 31
	Commercial Banking and Lending						Corporate Services
	2005		2004		2003		2005		2004			2003
	(dollars in thousands)
Net interest income	$	47,609	$	48,680	$	43,921	$	45,403	$	39,565		$	48,376
Provision for loan losses		3,643		1,825		4,585		—		—			—
Noninterest income		1,812		1,276		651		62,835		61,723			61,422
Noninterest expense		25,908		26,925		26,401		78,724		76,632			75,583
Net income (loss) before tax	$	19,870	$	21,206	$	13,586	$	29,514	$	24,656		$	34,215
Average assets	$	1,903	$	1,763	$	1,769	$	49	$	138		$	100
Depreciation and amortization		1,450		1,465		1,452		6,498		6,289			5,604
Expenditures for additions to premises and equipment		1,520		1,839		726		11,395		8,903			5,054
	Banking Services						Consumer Services
	2005		2004		2003		2005		2004			2003
	(dollars in thousands)
Net interest income	$	4,111	$	6,224	$	6,750	$	81,392	$	76,632		$	83,755
Provision for loan losses		—		—		—		2,132		3,545			7,420
Noninterest income		30,621		31,193		32,946		73,359		61,176			57,884
Noninterest expense		30,947		28,778		28,392		143,085		142,368			140,094
Net income (loss) before tax	$	3,785	$	8,639	$	11,304	$	9,534	$	(8,105	)	$	(5,875	)
Average assets	$	73	$	97	$	78	$	1,127	$	1,095		$	960
Depreciation and amortization		1,304		1,241		1,078		15,852		16,442			15,869
Expenditures for additions to premises and equipment		1,646		1,371		647		23,308		22,707			8,730
	Asset Management						Investment Services Group
	2005		2004		2003		2005		2004			2003
	(dollars in thousands)
Net interest income	$	99	$	465	$	368	$	8,814	$	6,564		$	7,558
Provision for loan losses		—		—		—		—		—			—
Noninterest income		47,984		46,085		42,884		37,067		33,689			33,321
Noninterest expense		42,293		40,609		36,329		37,169		33,576			32,017
Net income (loss) before tax	$	5,790	$	5,941	$	6,923	$	8,712	$	6,677		$	8,862
Average assets	$	12	$	10	$	8	$	26	$	26		$	21
Depreciation and amortization		1,585		1,475		1,261		2,885		2,539			2,274
Expenditures for additions to premises and equipment		2,224		1,897		1,019		4,672		2,838			2,887

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Treasury and Other Adjustments								Total Consolidated Company
	2005			2004			2003		2005		2004		2003
	(dollars in thousands)
Net interest income	$	862		$	974		$	2,451	$	188,290	$	179,104	$	193,179
Provision for loan losses		—			—			—		5,775		5,370		12,005
Noninterest income		(1,805	)		(7,039	)		16,811		251,873		228,103		245,919
Noninterest expense		(57	)		1,214			12,290		358,069		350,102		351,106
Net income (loss) before tax	$	(886	)	$	(7,279	)	$	6,972	$	76,319	$	51,735	$	75,987
Average assets	$	3,904		$	3,799		$	4,214	$	7,094	$	6,928	$	7,150
Depreciation and amortization		1,382			2,126			4,884		30,956		31,577		32,422
Expenditures for additions to premises and equipment		664			2,068			1,018		45,429		41,623		20,081

13.  COMMON STOCK

The following table summarizes the share transactions for the three years ended December 31, 2005:

	Shares Issued	Shares in Treasury
Balance December 31, 2002	27,528,365	(5,545,396	)
Purchase of Treasury Stock	—	(301,293	)
Sale of Treasury Stock	—	717
Issued for stock options	—	11,685
Balance December 31, 2003	27,528,365	(5,834,287	)
Purchase of Treasury Stock	—	(87,364	)
Sale of Treasury Stock	—	1,550
Issued for stock options	—	32,789
Balance December 31, 2004	27,528,365	(5,887,312	)
Purchase of Treasury Stock	—	(222,519	)
Sale of Treasury Stock	—	5,985
Issued for stock options & restricted stock	—	66,042
Balance December 31, 2005	27,528,365	(6,037,804	)

Basic earnings per share are computed by dividing income available to common shareholders by the weighted average number of shares outstanding during the year. Diluted earnings per share gives effect to all potential common shares that were outstanding during the year. The shares used in the calculation of basic and diluted earnings per share, are shown below.

	For the Years Ended December 31
	2005	2004	2003
Weighted average basic common shares outstanding	21,554,768	21,668,749	21,783,354
Stock options and restricted stock	101,599	75,245	46,239
Weighted average diluted common shares outstanding	21,656,367	21,743,994	21,829,593

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

14.  COMMITMENTS, CONTINGENCIES AND GUARANTEES

In the normal course of business, the Company is a party to financial instruments with off-balance-sheet risk in order to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit, commercial letters of credit, standby letters of credit, and futures contracts. These 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 amount of those instruments reflects 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 instruments 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.

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 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 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 amount does 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 payable upon the non-performance of a customer’s obligation to a third party. The Company issues standby letters of credit for terms ranging from three months to three years. The Company generally requires the customer to pledge collateral to support the letter of credit. The maximum liability to the Company under standby letters of credit at December 31, 2005 and 2004 was $200.2 million and $203.8 million, respectively. As of December 31, 2005 and 2004, standby letters of credit totaling $44.1 million and $47.1 million, respectively were with related parties to the Company.

The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities. 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 movement 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company’s use of futures contracts is very limited. The Company uses contracts to offset interest rate risk on specific securities held in the trading portfolio. Open futures contract positions averaged $45.2 million and $46.2 million during the years ended December 31, 2005 and 2004, respectively. Net futures activity resulted in losses of $0.6 million for 2005, $0.4 million for 2004 and $0.8 million for 2003. The Company controls the credit risk of its futures contracts through credit approvals, limits and monitoring procedures.

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 basis to avoid foreign exchange risk on these foreign balances. The Company will also enter into foreign exchange contracts to facilitate foreign exchange needs of customers. The Company will enter into a contract to buy or sell a foreign currency at a future date only as part of a contract to sell or buy the foreign currency at the same future date to a customer. During 2005, contracts to purchase and to sell foreign currency averaged approximately $19.6 million compared to $15.0 million during 2004. The net gains on these foreign exchange contracts for 2005, 2004 and 2003 were $1.5 million, $1.7 million and $1.7 million, respectively.

With respect to group concentrations of credit risk, most of the Company’s business activity is with customers in the states of Missouri, Kansas, Colorado, Oklahoma, Nebraska and Illinois. At December 31, 2005, 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 counter-claims. In the opinion of management, after consultation with legal counsel, none of these lawsuits are expected to have a materially adverse effect on the financial position, results of operations, or cash flows of the Company.

The following table summarizes the Company’s off-balance sheet financial instruments as described above.

	Contract or Notional Amount December 31
	2005		2004
	(in thousands)
Commitments to extend credit for loans (excluding credit card loans)	$	1,271,717	$	1,061,788
Commitments to extend credit under credit card loans		940,290		900,284
Commercial letters of credit		13,311		12,589
Standby letters of credit		200,232		203,791
Futures contracts		50,700		44,000
Forward foreign exchange contracts		15,791		13,015
Spot foreign exchange contracts		1,302		6,539

15.  ACQUISITIONS

On April 19, 2001, the Company acquired Sunstone Financial Group, Inc. (now known as UMB Fund Services, Inc.) located in Milwaukee, Wisconsin. The purchase price of Sunstone is directly connected to gross revenue targets. The Company paid an initial amount of $8.0 million on April 19, 2001. Subsequently, the Company has made a $2.7 million payment in 2003, a $1.5 million payment in 2004, and a $0.8 million payment in 2005. The Company will make one additional annual payment in 2006 dependent upon gross revenue achieved through 2006. This acquisition was recorded as a purchase and was funded with existing working capital.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

16.  INCOME TAXES

Income taxes as set forth below produce effective income tax rates of 26.2% in 2005, 17.2% in 2004, 22.5% in 2003. These percentages are computed by dividing total income tax by the sum of such tax and net income. Income taxes include the following components (in thousands):

	Year Ended December 31
	2005			2004			2003
Current
Federal provision	$	19,143		$	3,330		$	20,843
State provision (benefit)		(2,401	)		(796	)		1,705
Total current tax provision		16,742			2,534			22,548
Deferred
Federal provision (benefit)		1,305			7,642			(4,777	)
State provision (benefit)		1,954			(1,280	)		(663	)
Total deferred tax provision		3,259			6,362			(5,440	)
Total tax provision	$	20,001		$	8,896		$	17,108

The reconciliation between the income tax provision and the amount computed by applying the statutory federal tax rate of 35% to income taxes is as follows (in thousands):

	Year Ended December 31
	2005			2004			2003
Provision at statutory rate	$	26,712		$	18,107		$	26,595
Tax-exempt interest income		(6,291	)		(6,298	)		(8,744	)
State and local income taxes, net of federal tax benefits		741			501			677
Reduction of estimated income tax accruals		—			—			(1,804	)
Federal tax credits		(700	)		(1,840	)		—
Sale of state tax credits		(946	)		(1,850	)		—
Other		485			276			384
Total tax provision	$	20,001		$	8,896		$	17,108

Investment tax credits are recorded as a component of tax expense in the period that such credits are approved. Investment tax credits related to the acquisition of assets reduce the tax basis of the associated assets and tax depreciation is calculated on this reduced amount. A deferred tax liability is established for the difference between the book and tax basis of such assets.

In 2005 and 2004, state tax credits received for the renovation of an office building were sold under a program with the taxing authority that issued such credits. The sale of these tax credits was recorded as a component of tax expense. A deferred tax liability was established for the gain on the sale of the tax credits.

In preparing the tax return, the Company is required to interpret complex tax laws and regulations to determine its taxable income. Periodically, the Company is subject to examinations by various taxing authorities that may give rise to differing interpretations of these complex laws, regulations, and methods. At December 31, 2005, the Company is in the examination process with various state taxing authorities for tax years dating back to 2001. The Company believes the aggregate amount of any additional liabilities that may result from these examinations, if any, will not have a material adverse effect on the financial condition, results of operations, or cash flows of the Company.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company has various state net operating loss carry-forwards of approximately $11 million and $17 million for 2005 and 2004, respectively. These net operating losses expire at various times through 2024.

Deferred income tax expense (benefit) results from differences between assets and liabilities measured for financial reporting and for income tax purposes. The significant components of deferred tax assets and liabilities are reflected in the following table.

	2005			2004
Deferred tax assets:
Allowance for loan losses	$	14,697		$	15,542
Net unrealized loss on securities available for sale		12,489			6,123
Accrued expenses		2,463			1,386
Miscellaneous		1,306			3,608
Total deferred tax assets		30,955			26,659
Deferred tax liabilities:
Land, building, and equipment		(19,914	)		(21,255	)
Intangibles		(2,094	)		(1,532	)
Miscellaneous		(4,529	)		(2,561	)
Total deferred tax liabilities		(26,537	)		(25,348	)
Net deferred tax asset included in other assets	$	4,418		$	1,311

17.  DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

Cash and Short-Term Investments    The carrying amounts of cash and due from banks, federal funds sold and resell agreements are reasonable estimates of their fair values.

Securities Available for Sale and Investment Securities    Fair values are based on quoted market prices or dealer quotes, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

Trading Securities    Fair values for trading securities (including financial futures), 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 rating 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, 2005 and 2004. The fair value of fixed-maturity certificates of deposit is estimated by discounting the future cash flows using the rates that are currently offered for deposits of similar remaining maturities.

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NOTES TO CONSOLIDATED 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 value because of the short-term nature of their maturities.

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 loan commitments and letters of credit are 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 nor their fair value at year-end are significant to the Company’s consolidated financial position.

The estimated fair value of the Company’s financial instruments at December 31, 2005 and 2004 are as follows(in millions)

	2005				2004
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
FINANCIAL ASSETS
Cash and short-term investments	$	1,028.0	$	1,028.0	$	792.8	$	792.8
Securities available for sale		3,323.2		3,323.2		3,588.9		3,588.9
Securities held to maturity		67.0		67.4		166.1		168.3
Federal Reserve Bank and other stock		13.3		13.3		9.0		9.0
Trading securities		58.5		58.5		60.2		60.2
Loans (exclusive of allowance for loan loss)		3,393.4		3,377.1		2,869.2		2,803.8
FINANCIAL LIABILITIES
Demand and savings deposits		4,706.6		4,706.6		4,427.2		4,427.1
Time deposits		1,214.3		1,212.9		956.5		959.6
Federal funds and repurchase agreements		1,360.9		1,360.9		1,506.0		1,506.0
Short-term debt		35.1		35.1		39.4		39.4
Long-term debt		38.5		39.5		21.1		21.0
OFF-BALANCE SHEET ARRANGEMENTS
Commitments to extend credit for loans		—		4.0		—		3.5
Commercial letters of credit		—		0.4		—		0.4
Standby letters of credit		0.2		1.4		0.2		1.1

The fair value estimates presented herein are based on pertinent information available to management as of December 31, 2005 and 2004. 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 consolidated financial statements since those dates and, therefore, current estimates of fair value may differ significantly from the amount presented herein.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

18.  PARENT COMPANY FINANCIAL INFORMATION

UMB FINANCIAL CORPORATION

BALANCE SHEETS

	December 31
	2005		2004
	(in thousands)
ASSETS:
Investment in subsidiaries:
Banks	$	677,837	$	652,549
Non-banks		25,164		22,557
Total investment in subsidiaries		703,001		675,106
Goodwill on purchased affiliates		5,011		5,011
Other intangibles		—		51
Cash		33,195		16,344
Securities available for sale and other		98,829		129,431
Total Assets	$	840,036	$	825,943
LIABILITIES AND SHAREHOLDERS’ EQUITY
Dividends payable	$	5,376	$	4,762
Long-term debt		—		—
Accrued expenses and other		1,197		1,999
Total liabilities		6,573		6,761
Shareholders’ equity		833,463		819,182
Total liabilities and shareholders’ equity	$	840,036	$	825,943

STATEMENTS OF INCOME

	Year Ended December 31
	2005			2004			2003
	(in thousands)
INCOME:
Dividends and income received from affiliate banks	$	34,860		$	47,950		$	64,228
Service fees from subsidiaries		11,085			11,321			10,058
Other		2,560			2,001			1,765
Total income		48,505			61,272			76,051
EXPENSE:
Salaries and employee benefits		9,486			7,508			6,604
Interest on long-term debt		—			—			210
Services from affiliate banks		652			652			652
Other		10,111			10,025			9,904
Total expense		20,249			18,185			17,370
Income before income taxes and equity in undistributed earnings of subsidiaries		28,256			43,087			58,681
Income tax benefit		(2,620	)		(2,279	)		(1,949	)
Income before equity in undistributed earnings of subsidiaries		30,876			45,366			60,630
Equity in undistributed earnings of subsidiaries:
Banks		23,678			(2,341	)		(221	)
Non-Banks		1,764			(186	)		(1,530	)
Net income	$	56,318		$	42,839		$	58,879

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

18.  PARENT COMPANY FINANCIAL INFORMATION(Continued)

UMB FINANCIAL CORPORATION

STATEMENTS OF CASH FLOWS

	Year Ended December 31
	2005			2004			2003
	(in thousands)
OPERATING ACTIVITIES:
Adjustments to reconcile net income to cash provided by (used in) operating activities:
Net income	$	56,318		$	42,839		$	58,879
Equity in earnings of subsidiaries		(60,302	)		(45,423	)		(62,249	)
Other		(3,523	)		(58	)		8,001
Net cash provided by (used in) operating activities		(7,507	)		(2,642	)		4,631
INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale		8			—			—
Proceeds from maturities of securities available for sale		52,950			69,500			38,000
Purchases of securities available for sale		(18,825	)		(101,841	)		(90,183	)
Refund of capital investment from closed subsidiary		—			—			4,880
Net capital investment in subsidiaries		(13,343	)		(1,456	)		(6,684	)
Dividends received from subsidiaries		34,860			47,950			64,000
Repayment of loan advances from subsidiary		—			—			2,075
Net capital expenditures for premises and equipment		(378	)		(1,353	)		(368	)
Net cash provided by investing activities		55,272			12,800			11,720
FINANCING ACTIVITIES:
Repayments of long-term debt		—			—			(15,000	)
Cash dividends paid		(19,015	)		(18,203	)		(17,618	)
Net purchase of treasury stock		(11,899	)		(3,369	)		(11,643	)
Net cash used in financing activities		(30,914	)		(21,572	)		(44,261	)
Net increase (decrease) in cash		16,851			(11,414	)		(27,910	)
Cash at beginning of period		16,344			27,758			55,668
Cash at end of period	$	33,195		$	16,344		$	27,758

77

UMB FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

19.  SUMMARY OF OPERATING RESULTS BY QUARTER (unaudited) (in thousands except per share data)

	Three Months Ended
2005	March 31			June 30			Sept 30			Dec 31
Interest income	$	60,593		$	64,607		$	71,417		$	75,294
Interest expense		(16,302	)		(17,486	)		(22,693	)		(27,140	)
Net interest income		44,291			47,121			48,724			48,154
Provision for loan losses		(750	)		(750	)		(1,454	)		(2,821	)
Noninterest income		63,697			62,534			64,736			60,906
Noninterest expense		(91,326	)		(89,901	)		(89,936	)		(86,906	)
Income tax provision		(4,332	)		(5,391	)		(5,900	)		(4,378	)
Net income	$	11,580		$	13,613		$	16,170		$	14,955
2004	March 31			June 30			Sept 30			Dec 31
Interest income	$	54,016		$	52,275		$	55,010		$	58,153
Interest expense		(9,063	)		(8,239	)		(9,775	)		(13,273	)
Net interest income		44,953			44,036			45,235			44,880
Provision for loan losses		(1,802	)		(1,731	)		(1,887	)		50
Noninterest income		58,734			55,861			56,992			56,516
Noninterest expense		(87,948	)		(87,533	)		(86,932	)		(87,689	)
Income tax provision		(3,179	)		(2,219	)		(1,400	)		(2,098	)
Net income	$	10,758		$	8,414		$	12,008		$	11,659
Per Share	Three Months Ended
2005	March 31			June 30			Sept 30			Dec 31
Net income—basic	$	0.54		$	0.63		$	0.75		$	0.69
Net income—diluted		0.53			0.63			0.75			0.69
Dividend		0.22			0.22			0.22			0.25
Book value		37.68			38.36			38.56			38.78
Per Share
2004	March 31			June 30			Sept 30			Dec 31
Net income—basic	$	0.50		$	0.39		$	0.55		$	0.54
Net income—diluted		0.49			0.39			0.55			0.54
Dividend		0.21			0.21			0.21			0.22
Book value		38.02			37.18			37.85			37.85

Reclassifications

Certain reclassifications were made to the 2004 and 2005 quarterly operating results to conform to current year presentation.

78

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of UMB Financial Corporation & Subsidiaries:

We have audited the accompanying consolidated balance sheets of UMB Financial Corporation and Subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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, 2005 and 2004, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005, based on the criteria established inInternal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 8, 2006 expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ Deloitte & Touche LLP

Kansas City, MO

March 8, 2006

79

FIVE YEAR AVERAGE BALANCE SHEETS/YIELDS AND RATES (in millions)

(unaudited)	2005							2004
	Average Balance			Interest Income/ Expense (1)		Rate Earned/ Paid (1)		Average Balance			Interest Income/ Expense (1)		Rate Earned/ Paid (1)
ASSETS
Loans, net of unearned interest (FTE) (2)	$	3,130.8		$	177.1	5.66	%	$	2,781.1		$	136.5	4.91	%
Securities:
Taxable		2,230.6			64.8	2.91			2,351.2			57.8	2.46
Tax-exempt (FTE)		629.6			29.7	4.72			615.2			28.7	4.67
Total securities		2,860.2			94.5	3.30			2,966.4			86.5	2.91
Federal funds sold and resell agreements		228.2			8.0	3.50			280.3			4.4	1.57
Other earning assets (FTE)		60.1			2.4	3.91			69.2			2.2	3.15
Total earning assets (FTE)		6,279.3			282.0	4.49			6,097.0			229.6	3.76
Allowance for loan losses		(40.5	)						(44.3	)
Cash and due from banks		481.5							511.2
Other assets		374.0							364.0
Total assets	$	7,094.3						$	6,927.9
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing demand and savings deposits	$	2,302.2		$	25.8	1.12	%	$	2,214.7		$	9.0	0.41	%
Time deposits under $100,000		658.4			17.9	2.72			668.9			14.3	2.14
Time deposits of $100,000 or more		288.1			8.4	2.92			226.8			3.8	1.68
Total interest bearing deposits		3,248.7			52.1	1.60			3,110.4			27.1	0.87
Short-term debt		14.5			0.4	2.87			18.4			0.2	1.09
Long-term debt		34.8			1.8	4.89			17.7			0.9	5.11
Federal funds purchased and repurchase agreements		1,029.1			29.4	2.85			1,050.9			12.2	1.16
Total interest bearing liabilities		4,327.1			83.7	1.93			4,197.4			40.4	0.96
Noninterest bearing demand deposits		1,887.3							1,865.6
Other		50.5							43.3
Total		6,264.9							6,106.3
Total shareholders’ equity		829.4							821.6
Total liabilities and shareholders’ equity	$	7,094.3						$	6,927.9
Net interest income (FTE)				$	198.3						$	189.2
Net interest spread						2.56	%						2.80	%
Net interest margin						3.16	%						3.10	%

(1) Interest income and yields are stated on a fully tax-equivalent (FTE) basis, using a rate of 35%. The tax-equivalent interest income and yields give effect to 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 are included in interest income. Such fees totaled $7.9 million $9.1 million, $9.8 million, $10.3 million, and $11.7 million in 2005, 2004, 2003, 2002, and 2001, respectively.

(3) Loans on non-accrual are included in the computation of average balances. Interest income on these loans is also included in loan income.

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FIVE YEAR AVERAGE BALANCE SHEETS/YIELDS AND RATES (in millions) (continued)

2003					2002							2001							Average Balance Five-Year Compound Growth Rate
Average Balance	Interest Income/ Expense (1)		Rate Earned/ Paid (1)		Average Balance			Interest Income/ Expense (1)		Rate Earned/ Paid (1)		Average Balance			Interest Income/ Expense (1)		Rate Earned/ Paid (1)
$2,588.8	$	137.6	5.31	%	$	2,632.9		$	161.3	6.13	%	$	2,929.1		$	226.7	7.74	%	0.82	%
2,771.9		70.9	2.56			3,146.0			100.9	3.21			2,480.7			119.6	4.82		1.16
735.9		38.5	5.24			686.5			40.6	5.91			664.5			40.8	6.14		(3.08	)
3,507.8		109.4	3.12			3,832.5			141.5	3.69			3,145.2			160.4	5.10		0.13
146.5		1.7	1.16			185.7			3.1	1.69			195.8			7.6	3.89		(0.08	)
50.4		1.5	3.04			67.0			2.7	4.06			70.4			3.8	5.36		(4.23	)
6,293.5		250.2	3.98			6,718.1			308.6	4.59			6,340.5			398.5	6.28		0.42
(40.8)						(37.2	)						(34.3	)					5.09
512.0						497.1							617.1						(7.74	)
385.4						411.1							440.2						(3.63	)
$7,150.1					$	7,589.1						$	7,363.5						(0.54	)%
$2,460.4	$	9.1	0.37	%	$	2,624.8		$	20.7	0.79	%	$	2,527.5		$	54.1	2.14	%	0.28	%
779.5		19.8	2.54			892.2			31.8	3.56			823.4			40.7	4.95		(4.39	)
252.1		4.3	1.72			287.7			6.9	2.40			283.6			13.1	4.62		(3.70	)
3,492.0		33.2	0.95			3,804.7			59.4	1.56			3,634.5			107.9	2.97		(1.15	)
23.8		0.2	0.84			61.1			0.9	1.44			91.5			3.1	3.36		(19.54	)
17.4		1.1	6.17			27.5			1.9	6.82			28.8			1.9	6.80		3.29
950.6		8.2	0.87			1,107.8			14.2	1.29			973.1			32.2	3.26		(0.42	)
4,483.8		42.7	0.95			5,001.1			76.4	1.53			4,727.9			145.1	3.07		(1.07	)
1,788.1						1,723.1							1,775.7						(0.36	)
69.7						70.7							111.2						(16.50	)
6,341.6						6,794.9							6,614.8						(1.08	)
808.5						794.2							748.7						4.17
$7,150.1					$	7,589.1						$	7,363.5						(0.54	)%
	$	207.5						$	232.2						$	253.4
			3.03	%						3.06	%						3.21	%
			3.30	%						3.46	%						4.00	%

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.  CONTROLS AND PROCEDURES

Disclosure Controls and Procedures    At the end of the period covered by this report on Form 10-K, the Company’s Chief Executive Officer and Chief Financial Officer have each evaluated the effectiveness of the

81

Company’s “Disclosure Controls and Procedures” and have concluded that the Company’s Disclosure Controls and Procedures are reasonably designed to be effective for the purposes for which they are intended and were effective as of the end of the period covered by this report on Form 10-K. As such term is used above, the Company’s Disclosure Controls and Procedures are controls and other procedures of the Company that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities Exchange Commission’s rules and forms. Disclosure Controls and Procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Disclosure Controls and Procedures cannot provide absolute assurance of achieving disclosure objectives because of their inherent limitations. Disclosure Controls and Procedures is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Because of such limitations, there is a risk that errors in meeting the Company’s reporting and disclosure obligations may not be prevented or detected on a timely basis by Disclosure Controls and Procedures. However, these inherent limitations are known features of the disclosure process. Therefore it is possible to design into the process safeguards to reduce, although not eliminate, this risk. The Company’s Disclosure Controls and Procedures include such safeguards. Projections of any evaluation of effectiveness of Disclosure Controls and Procedures in future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or because the degree of compliance with the Company’s policies and procedures may deteriorate.

Management’s Report on Internal Control Over Financial Reporting    Management of the Company is responsible for establishing and maintaining adequate “internal control over financial reporting”, as such term is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934. Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer of the Company, and effected by the Company’s Board of Directors, management and other personnel, an evaluation of the effectiveness of internal control over financial reporting was conducted based on the Committee of Sponsoring Organizations of the Treadway Commission’sInternal Control—Integrated Framework.

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore it is possible to design into the process safeguards to reduce, although not eliminate, this risk. The Company’s internal control over financial reporting includes such safeguards. Projections of any evaluation of effectiveness of internal control over financial reporting in future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or because the degree of compliance with the Company’s policies and procedures may deteriorate.

Based on the evaluation under the framework inInternal Control—Integrated Framework, the Company’s Chief Executive Officer and Chief Financial Officer have each concluded that internal control over financial reporting was effective at the end of the period covered by this report on Form 10-K. Deloitte & Touche LLP, the independent registered public accounting firm that audited the financial statements included within this report, has issued an attestation report on management’s assessment of the effectiveness of internal control over financial reporting at the end of the period covered by this report. Deloitte & Touche LLP’s attestation report is set forth below.

Changes in Internal Control Over Financial Reporting    No changes in the Company’s internal control over financial reporting occurred that has materially affected, or is reasonably likely to materially affect, such controls during the last quarter of the period covered by this report.

82

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of UMB Financial Corporation & Subsidiaries:

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A, that UMB Financial Corporation and Subsidiaries (the “Company”) maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established inInternal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Because management’s assessment and our audit were conducted to meet the reporting requirements of Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA), management’s assessment and our audit of the Company’s internal control over financial reporting included controls over the preparation of the schedules equivalent to the basic financial statements in accordance with the instructions for the Consolidated Financial Statements for Bank Holding Companies (Form FR Y-9C). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing, and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the criteria established inInternal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the criteria established inInternal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

83

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s consolidated balance sheets as of December 31, 2005 and 2004, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2005, and our report dated March 8, 2006 expressed an unqualified opinion on those financial statements.

/s/ Deloitte & Touche LLP

Kansas City, MO

March 8, 2006

84

ITEM 9B.  OTHER INFORMATION

None

PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item relating to executive officers is included in Part I of this Form 10-K (pages 10 and 11) under the caption “Executive Officers of the Registrants.”

The information required by this item regarding Directors is incorporated herein by reference under the caption “Proposal #1: Election of Directors” of the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held on April 25, 2006 (the “2006 Annual Meeting of Shareholders”).

The information required by this item regarding the Audit Committee and the Audit Committee financial expert is incorporated herein by reference under the caption “Corporate Governance—Committees of the Board of Directors—Audit Committee” of the Company’s Proxy Statement for the 2006 Annual Meeting of Shareholders.

The information required by this item concerning Section 16(a) beneficial ownership reporting compliance is incorporated herein by reference under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” of the Company’s Proxy Statement for the 2006 Annual Meeting of Shareholders.

The Company has adopted a code of ethics that applies to all directors, officers and employees, including its chief executive officer, chief financial officer and chief accounting officer. You can find the Company’s code of ethics on its website by going to the following address: www.umb.com/investor. The Company will post any amendments to the code of ethics, as well as any waivers that are required to be disclosed, under the rules of either the SEC or NASDAQ. A copy of the code of ethics will be provided, at no charge, to any person requesting same, by written notice sent to the Company’s Corporate Secretary, 6^th floor, 1010 Grand Blvd., Kansas City, Missouri 64106.

ITEM 11.  EXECUTIVE COMPENSATION

The information required by this item is incorporated herein by reference under the captions “Executive Compensation—Report of the Compensation Committee,” “Executive Compensation—Employment Agreements,” “Executive Compensation—I. Summary Compensation Table,” “Executive Compensation, II. Options Grants in 2005,” “Executive Compensation—III. Aggregated Option Exercises in 2005, and Option Values at December 31, 2005,” “Corporate Governance—Director Compensation,” “Corporate Governance—Compensation Committee Interlocks and Insider Participation,” and “Performance Graph” of the Company’s Proxy Statement for the 2006 Annual Meeting of Shareholders.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Security Ownership of Certain Beneficial Owners

This information is included in the Company’s 2006 Proxy Statement under the caption “Stock Ownership—Principal Shareholders” and is hereby incorporated by reference.

Security Ownership of Management

85

This information is included in the Company’s 2006 Proxy Statement under the caption “Stock Beneficially Owned by Directors and Nominees and Executive Officers” and is hereby incorporated by reference.

	Number of securities to be issued upon exercise of outstanding options, warrants and rights. (a)	Weighted average exercise price of outstanding options, warrants and rights. (b)		Number of securities remaining available for future issuance under equity compensation plan (excluding securities reflected in column (a)) (c)
Plan Category
Equity compensation plans approved by security holders
1992 Incentive Stock Option Plan	138,287	$	37.28	None
2002 Incentive Stock Option Plan	284,580		53.96	655,839
2005 Long-term Incentive Plan Non-Qualified Stock Options	65,286		54.19	534,714
Equity compensation plans not approved by security holders	None		None	None
Total	488,153	$	40.29	1,190,553

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is incorporated herein by reference to the information provided under the caption “Corporate Governance—Certain Transactions” of the Company’s Proxy Statement for the 2006 Annual Meeting of Shareholders.

ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this item is incorporated herein by reference to the information provided under the caption “Proposal #2: Ratification of Selection of Independent Public Accountants” of the Company’s Proxy Statement for the 2006 Annual Meeting of Shareholders.

PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Consolidated Financial Statements and Financial Statement Schedules

The following Consolidated Financial Statements of the Company are included in item 8 of this report.

Consolidated Balance Sheets as of December 31, 2005 and 2004

Consolidated Statements of Income for the Three Years Ended December 31, 2005

Consolidated Statements of Cash Flows for the Three Years Ended December 31, 2005

Consolidated Statements of Shareholders’ Equity for the Three Years Ended December 31, 2005

Notes to Consolidated Financial Statements

Independent Auditors’ Report

Condensed Consolidated Financial Statements for the parent company only may be found in item 8 above. All other schedules have been omitted because the required information is presented in the Consolidated Financial Statements or in the notes thereto, the amounts involved are not significant or the required subject matter is not applicable.

86

Exhibits

The following Exhibit Index lists the Exhibits to Form 10-K

3.1	Articles of Incorporation restated as of March 6, 2003, and filed with the Missouri Secretary of State on April 2, 2003, incorporated by reference to Exhibit 3(i) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, and filed with the Commission on May 12, 2003.
3.2	Bylaws, restated January 25, 2005, and incorporated by reference to Exhibit 3.2 to the Company’s Form 10-K for December 31, 2004, and filed with the Commission on March 14, 2005.
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 following portions of those documents define some of the rights of the holders of the Registrant’s common stock, par value $1.00 per share: Articles III (authorized shares), X (amendment of the Bylaws) and XI (amendment of the Articles of Incorporation) of the Articles of Incorporation and Articles II (shareholder meetings), Sections 2 (number and classes of directors) and 3 (election and removal of directors) of Article III, Section 1(stock certificates) of Article VII and Section 4 (indemnification) of Article IX of the By-laws. 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.
10.1	1992 Incentive Stock Option Plan incorporated by reference to Exhibit 2.8 to Form S-8 Registration Statement filed on February 17, 1993.
10.2	2002 Incentive Stock Option Plan incorporated by reference to Exhibit 4.4 to Form S-8 Registration Statement filed on December 20, 2002.
10.3	UMB Financial Corporation Long-Term Incentive Compensation Plan incorporated by reference to Appendix B of the Company’s Proxy Statement for the Company’s April 26, 2005 Annual Meeting filed with the Commission on March 21, 2005.
10.4	Stock Purchase Agreement by and among UMB Financial Corporation and the Stockholders of Sunstone Financial Group, Inc. dated April 3, 2001 and incorporated by reference to Exhibit 10.4 to Company’s Form 10-K filed on March 12, 2003.
10.5	Modification Agreement dated June 26, 2002 between UMB Financial Corporation and Miriam M. Allison and incorporated by reference to Exhibit 10.5 to Company’s Form 10-K filed on March 12, 2003.
10.6	Deferred Compensation Plan, dated as of April 20, 1995 and incorporated by reference to Exhibit 10.6 to Company’s Form 10-K filed on March 12, 2003.
10.7	UMBF 2005 Short-Term Incentive Plan incorporated by reference to Exhibit 10.7 to the Company’s Form 10-K for December 31, 2004 and filed with the Commission on March 14, 2005
10.8	Employment letter between the Company and Vincent J. Ciavardini dated January 14, 2002.
10.9	Restricted Stock Award Agreement and description of employment arrangement between the Company and Peter J. deSilva, incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, and filed with the Commission of May 7, 2004.
10.10	Employment offer letter between the Company and Michael D. Hagedorn dated February 9, 2005, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated February 9, 2005, and filed with the Commission on February 14, 2005.

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10.11	Employment offer letter between the company and Bradley J. Smith dated January 6, 2005 incorporated by reference to Exhibit 10.10 to the Company’s Form 10-K for December 31, 2004 and filed with the Commission on March 14, 2005.
10.12	Consulting Agreement between the Company and R. Crosby Kemper, Jr. dated November 1, 2004 incorporated by reference to Exhibit 10.11 to the Company’s Form 10-K for December 31, 2004 and filed with the Commission on March 14, 2005.
10.13	Summary of Company’s Executive Compensation Arrangement with Directors and Certain Executive Officers.
21	Subsidiaries of the Registrant.
23	Consent of Independent Auditors
24	Powers of Attorney
31.1	CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act
31.2	CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act
32.1	CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act
32.2	CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

UMB FINANCIAL CORPORATION

/s/    J. MARINER KEMPER

J. Mariner Kemper

Chairman of the Board

/s/    CHRISTOPHER G. TREECE

Christopher G. Treece

Senior Vice President, Controller

and Tax Director

(Chief Accounting Officer)

Date: March 15, 2005

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.

THEODORE M. ARMSTRONG Theodore M. Armstrong	Director
PETER J.DESILVA Peter J. deSilva	Director
Gregory M. Graves	Director
ALEXANDER C. KEMPER Alexander C. Kemper	Director
KRIS A. ROBBINS Kris A. Robbins	Director
L. JOSHUA SOSLAND L. Joshua Sosland	Director
JON M. WEFALD Jon M. Wefald	Director
DAVID R. BRADLEY, JR. David R. Bradley, Jr.	Director
TERRENCE P. DUNN Terrence P. Dunn	Director

89

Richard Harvey	Director
JOHN H. MIZE, JR. John H. Mize, Jr.	Director
THOMAS D. SANDERS Thomas D. Sanders	Director
PAUL UHLMANN III Paul Uhlmann III	Director
THOMAS J. WOOD III Thomas Jr. Wood III	Director
*/s/    J. MARINER KEMPER J. Mariner Kemper Attorney-in-Fact for each director	Director, Chairman of the Board

Date: March 15, 2005

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