UMB Financial Corporation (UMBF)

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UMB Financial Corporation (UMBF)

Q3 2013 Earnings Call

October 23, 2013 9:30 AM ET


Kay McMillan – Director, IR

Mariner Kemper – CEO

Mike Hagedorn – Vice Chairman, CFO and Chief Administrative Officer

Peter deSilva – President and COO


Chris McGratty – KBW

Erika Najarian – Bank of America



Ladies and gentlemen thank you for standing by. Welcome to the UMB Financial Third Quarter 2013 Financial Results Conference Call. At this time all participants are in a listen-only mode, following the presentation, we will conduct a question-and-answer session and instructions will be provided at that time. (Operator Instructions) I would like to remind everyone that this conference is being recorded today, Wednesday October 23rd, 2013. And I will now turn the conference over to Kay McMillan, Director Investor Relations. Please go ahead.

Kay McMillan

Good morning, everyone, and thank you for joining us for our conference call and webcast regarding our third 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 the Private Securities Litigation Reform Act of ‘95. 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 via webcast have had a chance to review our earnings release, which was issued yesterday afternoon. If not, you will find it on our website at

Also new this quarter we’ve published some supporting slides on our website that contains some of the drivers and metrics we’ll discuss today to make it a bit easier for you to follow along and to review our source. A link to the slides could be found at in the about UMB section or in the Investors section under Presentation.

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’d 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 today. Our third quarter results continue to reflect strong performance by our business units. Net income increased 31.8% to $34.4 million or $0.83 per diluted share, earned on total quarterly revenue of $207.2 million. Net interest income for the third quarter increased 6.5% compared to same quarter last year. Driven primarily by increased balance sheet volume, non-interest income increased 14.4% to a $121.6 million largely due to nearly 22% increase in trust and securities processing revenue.

Non-interest income was 58.07% of total revenue for the quarter. Non-interest expense for the quarter was $153.1 million an increase of 4.9% compared to the same period a year ago. These results combine with our improved revenue, drove an efficiency ratio of 70.8% compared to 74.3% for the third quarter of 2012.

Once again I’m happy to report strong loan growth, total net loans at September 30, 2013 were $6.4 billion, 21% higher than a year ago. On a linked quarter basis, this an increase of 2.6%. This is our 14th consecutive quarter of loan growth and seventh consecutive quarter of year-over-year double-digit loan growth. Utilization continued its upward trend increasing to 31.3% compared to 28.3% a year ago. Compared to the industry, nearly 1,000 regulated financial institutions that had announced results as of October 21st, 2013 reported an increase in loan balances of just 2.6%.

Our reputation in the markets we serve as well as the experience in tenure of our relationship based lenders continued to drive our performance. Loan growth continues to come primarily from increased market shares, 55% of our year-to-date commercial loan growth has come from new client relationships. All of our regions once again reported double-digit year-over-year loan growth. In terms of loan types C&I lending was the primary driver for the quarter with September 30 loan balances of $3.4 billion, a $685 million or 25.5% increase.

Commercial real estate had an impressive third quarter with ending balances of $1.6 billion a 22% increase over the same period a year ago. As you come to expect our underwriting standards remained the same even if our loan portfolio expands. Overall non-performing loans as a percent of total loans were just 0.48%. And net charge-offs as a percent of average loans improved to 0.20% compared to 0.44% a year ago.

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