UMB Financial Corporation (UMBF)

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UMB Financial Corporation (UMBF)

Q3 2008 Earnings Call Transcript

October 22, 2008 9:30 am ET


Abby Mayer – Director, IR

Mariner Kemper – Chairman and CEO

Mike Hagedorn – CFO

Peter deSilva – President and COO


Charlie Ernst – Sandler O'Neil Asset Management

Peyton Green – FTN Midwest Securities

Christopher McGratty – KBW

Jordan Heimowitz – Philadelphia Financial



Good morning ladies and gentlemen and thank you for standing by. Welcome to the UMB Financial Corporation third-quarter conference call. During today's presentation all parties will be in a listen-only mode. Following the presentation the conference will be open for questions. (Operator instructions). This conference is being recorded today Wednesday, October 22, 2008. I would now like to turn the conference over to Abby Mayer, Director of Investor Relations. Please go ahead ma'am.

Abby Mayer

Good morning everyone and thank you for joining us for our conference call and webcast regarding our 2008 third-quarter 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 each 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 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 Securities and Exchange Commission 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.

Our earnings release includes both our GAAP based income statement and reconciliation to the non-GAAP measures discussed in the release which include certain pre-tax adjustments to noninterest income and noninterest expense, the tax effect of those adjustments and adjusted net income. These adjustments comprise a gain on the sale of our securities transfer product, the majority of which was recognized in the third quarter of 2007 with the final contingent payment recognized during the third quarter of 2008. The reconciliation for these items can also be found on our website at The non-GAAP results are a supplement to the financial statements based upon Generally Accepted Accounting Principles. UMB believes this non-GAAP presentation and the elimination of these items is useful in order to focus on what we deem to be a more reliable indicator of ongoing operating performance.

By now we hope most of you on the call or listening to the webcast have had a chance to review our earnings release dated October 21st. If not, you'll find it on our website at 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. First Mariner will highlight our results and strategies. Then Mike will review the details of our third-quarter results. Peter will follow with a discussion of operating performance against our strategies. Following that, we will be happy to answer your questions. Now, I will turn the call over to Mariner Kemper.

Mariner Kemper

Thank you Abby. Welcome everyone and thank you for joining us today. UMB continued to deliver strong net income growth in the third quarter of 2008. Net income totaled $21.8 million or $0.53 per diluted share, a 1.1% increase from $21.5 million or $0.51 per diluted share for the third quarter of 2007. EPS grew 3.9% while the industry average expected EPS growth was a negative 25%. These results reflect the sale of the securities transfer product for which we recorded a $1.1 million gain in the third quarter of 2008 and a $6.5 million gain in the third quarter of 2007. Excluding this transaction, UMB reported net income of $21.1 million or growth of 21.3% over the third quarter of 2007.

These results illustrate that we continue to manage our business focusing on quality in the long-term rather than focusing on short-term earnings. In times like these our time-tested business model allows us to capitalize on our position of strength while others in the industry remain internally focused. This strong financial performance was driven by a 7.8% revenue growth, which was comprised of net interest income growth of 14.3% and noninterest income growth of 2.9%. Excluding the gain on the securities transfer sale, noninterest income grew 10.8% and total revenue grew 12.4%. We continue to be well capitalized, something we believe is important especially in the current environment.

As evidence of this, our Tier 1 leverage and total risk-based capital ratio as of September 30 were 13.9%, 9.5%, and 14.8% respectively. Our credit quality remains solid and our nonperforming loans at 0.16% and net charge-offs at 0.21%. These ratios are strong relative to the industry, which at the end of the second quarter reported average net charge-offs of 0.68% and average nonperforming loans of 1.8%.

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