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UMB Financial Corporation (UMBF)
Investor Day Conference Call
April 25, 2013 10:30 am ET
John Mariner Kemper – Chairman and Chief Executive Officer
Michael D. Hagedorn – Chief Financial Officer
Peter J. deSilva – President and Chief Operating Officer
Craig L. Anderson – President Commercial Banking
Andrew J. Iseman – Chief Executive Officer of Scout Investments, Inc
John P. Zader – Chief Executive Officer of UMB Fund Services, Inc
John Mariner Kemper
Previous Statements by UMBF
» UMB Financial Corporation CEO Discusses Q1 2013 Results - Earnings Call Transcript
» UMB Financial Corporation Q4 2009 Earnings Call Transcript
» UMB Financial Corporation Q3 2009 Earnings Call Transcript
So that’s what we are doing, we are here, we are opening the market this morning, and this is our first Investor Day, believe it or not. We’ve done group meetings. We’ve done the tours with our analyst et cetera and started doing conferences last year, but it’s our first analyst, it is our first Investor Day, and by the way for those of you who haven’t know me, I’m Mariner Kemper, I’m CEO, I think I’ve met most everybody, but we’re happy to be here, and the other good news about this is why we are doing this is because of our celebration, you’ve got our entire management team. I normally do all this, I’m going to have a relatively short presentation, and you got it hear from the folks who actually do all the things as we get down every day, so that’s a kind of a special opportunity that you are going to have today.
So with that, I also with the speakers have been come to this side when you come up, so we don’t walk to the middle here. Most of you know us, but a few of you don’t. So I’m going to take us down, a little bit of a trip down memory lane and talk a little bit about our history of our company before we get into the meeting with that. So, for those of you know please bear with me.
As we talk about the history, we, in 2000 or 1913, rather, was the founding of our company. The charter was number 1921 from the State of Missouri and it was a group of local investor in Kansas City. And my great grandfather acquired this failing bank, because it didn’t do so well and so was founded and W.T. Kemper acquired this bank for $20,000 in 1918 and this is a picture of that original charter. And that was the beginning of our story. Just prior to that, I must say there was one more generation present with this bank was my great, great grandfather Rufus Crosby founded the bank Valley Falls, Kansas. So we really have one more generation in that.
So we’ve always been a leader and an innovator, pioneers in our business. This is a picture of what we believe to be the first drive-through in America. It’s certainly the first drive-through in Kansas City. Well, believe it, it with the first one in the United States. Unlike everything else, with innovative companies, there is always room for improvement. You’ll notice that this gentleman has skipped out of this card of transactions; it’s really on the other side of the vehicle.
And then continuing that theme in the 1930s, we were one of the first banks to lend into the automotive industry against car loans. Henry Ford himself called my great grandfather and asked him to lend against their vehicles, because nobody else is doing it. And we became one of the premier lenders on a national basis, my grandfather at that point by interstate securities, which became one of the leading national automotive finance companies in country for a period of time.
Our metal has been tested for those of you know that, if you know that we are very principled with company, who believe that we should it alone and make it alone and don’t ever want to rely on the government, and early on in our 10 year and then coming out of the depression, when the reconstruction organization was offering money to banks in exchange preferred shares down familiar in the recent.
We refused that and actually we are able to sell shares to our own customer base at the time. My grandfather wrote to the Missouri Commissioner, if we were to liquidate the bank today, we can pay our deposit – all of our deposits $100 on the dollar and collect our entire surplus and capital account of $700,000 at that time and a large part of our undervalued profits account. So we’ve never had a need for the government and we never will, and we’ve tested this over and over again. Our company has remained through to its values and the results are evident in our shareholder returns.
You see on this slide, we went public in 1978, and if you put $100 in our stock in 1978 it would be were $6808 at the end of March this year. It’s an annualized rate of return of 13.1%. Compared to the S&P over that same period of time, the annualized growth rate for the S&P over that same period of time is 11.7%, so not a bad place to put your money. An interesting note too over that period of time, if you’d say its $1 of savings away in 1978 it will be worth $0.28 today. So the environment in which we have been investing over this period of time has been very complex for all of you.
So we feel very good about our long-term performance. If you think about more recent period of time over the last 10 years our total shareholder return has been 172.4% against the S&P 500 at 103.9% and for our industry one of the measures SNL Bank index at the same period of time was down 7.7%.
Earnings per share over the last five years, 11.4% against the bank industry median of 1.4% negative and we feel strongly about our dividend and I know investors all have different feelings about dividends, but we are committed to the way we manage this company. I am committed to the way we manage with company. We do what we expect of ourselves. We would like to able to increase our dividend every year. So we want our industrial base to expect that from us.
And recently SNL Financial recognizes us one of only 22 public traded banks to increase our dividend 4% or more over the last five years and our rate being 45.6% against the median for all listed banks being down 42.8%.
So big part of the message I would like to leave you is about our management style is that you know what to expect from us and you don’t have to worry about us, saying one thing and doing another or worrying about changes in the way that we do things. So I believe you can take comfort in knowing the way we operate the company is always the same and you come to expect a certain style of management from us.
We truly do have a different style of management and 100 years from now, the way we do things today, we will do the same way we do things then, which is doing things in right way and that’s the popular way and we believe that brings stability over time to our business model. What is our business model?
Well, at the foundation we are rich managers. We believe as a team that we are at the best risk managers in the business and that’s not just credit metrics that’s the way we manage our operations, that’s the way we manage the transactions that go through our organization. We take risk management very seriously. And because we take risk management very seriously, it has a natural tendency to butt heads with growth.
And as a management team, we decided, we have decided as a management team that we always want to be a growth company. And if you think about our business model, what does that mean, where we have to get our growth in other ways and that is through our division in certain cycle and so like business cycle. So that’s why we’ve invested so heavily in a diverse revenue stream through our fee-based businesses. Coupled with a low cost of funding allows us to have pricing power, which allows us to stay competitive on the lending side of our business. And a strong balance sheet allows us to continue to invest in our business and protect our business and protect our business from having partners like the government.
Credit quality real briefly, again a lot of you’re very familiar with this, but as it relates to the first quarter and you’ve seen us have over 15% loan growth while reducing our NPLs. So in the first quarter, NPLs have gone from nearly 50 basis points, down to 0.46. And peer average at 272 and you can see that. I’d like to slide because not only that orange line the peer average, but the band of the high and low for the whole peer group is that grey line. We don’t even make into the band of the low point of the range. So it’s hard to get our non-performing loans even show up on a chart and we’re really proud of that, coupled with loan growth. And I wouldn’t be quite as impressive right, if we had great NPL and great loan quality without loan growth. To have great asset quality and loan growth that is truly I think something to take note of.
Let’s talk about fee based businesses. The percent of total revenues in fees at the industry medium is 19.8% against our first quarter number up from what was before 58% is now standing at 60.4% of total, three times the industry average, which that gives us more stable earnings if you are well aware and more growth opportunities to even out the bumps in our earnings. Non-interest income; we’ve had CAGR rate since first quarter of ‘05 of 8.4% and in just the asset management business alone, combining all of our different asset management businesses, we’ve had a 20.2% CAGR rates since 2005.
If you think about the way that’s broken down, 51.5% in the first quarter of our total non-interest income, concerned trust and securities processing, a total in the first quarter, being $62.3 million primarily coming from three areas and mostly from two of those three. But first thing $28 million in Scout, which we call here Institutional Investment Management, asset servicing at $19.6 million and then personal institute and institutional asset management, which are all the individual asset management opportunities, we have within our bank group.
Low cost of funding, talked about that briefly, 44.6% of our deposit base is non-interest bearing against the industry at 18.7%, two times the industry with our cost of fund sitting at 0.14. So we are right there able to hang very tough with wealth and be with and compete for the very best business in our lending space.