UMBF

UMB Financial Corporation (UMBF)

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Exchange: NASDAQ
Industry: Finance
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UMB Financial Corporation (UMBF)

Q1 2013 Earnings Call

April 24, 2013 09:30 AM ET

Executives

Kay McMillan - IR

Mariner Kemper - Chairman of the Board and CEO

Mike Hagedorn - VC of the Management Board, CFO and CAO

Peter deSilva - President and COO

Analysts

Tyler Staff

Peyton Green - Sterne, Agee & Leach

John Barber - KBW

Presentation

Operator

Welcome to the UMB Financial conference call. During today’s presentation, all participants are in a listen-only mode, following the presentation the conference will be open for questions. (Operator Instructions).

I’ll now like to turn the conference over to our host, Ms. Kay McMillan, please go ahead ma’am.

Kay McMillan

Good morning everyone and thank you for joining us for our conference call and webcast regarding our first quarter 2013 financial results. Before we begin, let me remind you that our comments in this conference call contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements rely on a number of assumptions concerning future events and are subject to risks and uncertainties, which could cause actual results to differ materially from those indicated in our statements made during this call.

While the management of UMB believes our assumptions are reasonable, UMB cautions that material changes in interest rates, the equity markets, general economic conditions as they relate to the company’s loan and fee-based customers, competition in the financial services industry, the ability to integrate acquisitions and other risks and uncertainties, which are detailed in our filings with the SEC, may cause actual results to differ materially from those discussed in this call. UMB has no duty to update such statements and undertakes no obligation to update or supplement forward-looking statements that become untrue because of new information, future events or otherwise.

By now, we hope most of you on the call who are listening to the webcast have had a chance to review our earnings release which was issued yesterday. If not, you will find it on our Web site at umb.com.

On the call today are Mariner Kemper, Chairman and Chief Executive Officer; Peter deSilva, President and Chief Operating Officer; and Mike Hagedorn, our Chief Financial Officer. The agenda for today’s call is as follows: Mariner will provide high level commentary on our results and Mike will review the details of our financials. Then Peter will review key fee-income business drivers. Following that we’ll be happy to answer your questions.

Now, I’ll turn the call over to Mariner Kemper.

Mariner Kemper

Thank you Kay, good morning everyone and thank you for joining us on this conference call in our 100th year. I am pleased to report the results for the first quarter showing strong performance by our business units. Net income was $34.9 million or $0.87 per diluted share, earned on total quarterly revenue of $204 million and return on average equity of 11.05%.

Although net income declined 24.6% from same period a year ago, it increased 65.9% from the previous quarter. Net interest income for the first quarter was flat compared to the same period a year an accomplishment in a sluggish economy. And non-interest income was down 8.5% to $121 million. When you take into consideration a gain from sales securities and the accounting change for contingent consideration liabilities on acquisition, these items overshadow the positive improvement in trust and securities processing income, which increased 13.9% from the same period a year ago to 62.3 million, a record for the company. Noninterest income was 60.4% of total revenue for the quarter. Later in the call Mike and Peter will provide more detail on our financial results and drivers however I'd like to highlight a couple of items for you now. Part of the change in noninterest income was because we recognized just 5.9 million in gains on the sale of securities available for sale in the first quarter compared to 16.5 million in the same period a year ago; we also recognized an $8.2 million adjustment in the first quarter of 2012, due to the adoption of new accounting guidance.

Further associate compensation, equipment and processing fees drove the 6% increase in non-expense compared to the same period a year ago, which combined with our income results drove an efficiency ratio of 73.46%. On a lean quarter basis expenses declined 4.8%. We remain focused on improving operating leverage over the long run and when taking into consideration revenue and expense that are directly related to our businesses performance I am pleased with these results. As mentioned earlier trust and securities processing income increased 13.9% from the same period a year ago. Scout investments and fund services contributed significantly to the increase in revenue. Another growth area within noninterest income was bank card fees which increased 11.6% driven primarily by increased healthcare, debit and commercial credit card interchange fee.

Turing to the balance sheet, average net loans at March 31st 2013 were 15.1% higher than a year ago. On a lean quarter basis this is an increase of 6.9%. We’re pleased to note that this is our 12th consecutive quarter of loan growth and fifth consecutive quarter of year over year double digit loan growth. Utilization remains fairly consistent at 29.8% for the quarter compared to the industry and more than 1500 financial regulated financial institutions that have announced results as of April 22nd 2013, reported an increase in loan balances of just 1.3%. I believe our reputation and focus on sound credit quality continue to drive our performance. Loan growth continues to come primarily from increased market share; we continue to see growth in all of our markets led by Kansas City in terms of actual balances followed by Denver and St. Louis. In regions where we have smaller market share, we continue to perform strongly as well. In terms of loan type, at March 31st, C&I lending was a primary diver of growth with loan balances up to $3.2 billion, an increase of $710.6 million or 28.7%.

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