UMB Financial Corporation (NASDAQ:UMBF)
Q1 2013 Earnings Call
April 24, 2013 09:30 AM ET
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
Peyton Green - Sterne, Agee & Leach
John Barber - KBW
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.
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.
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%.
Commercial real estate loan balances also increased. CRE balances at the end of the first quarter are 1.4 billion, a 5.9% increase over the same period a year ago. For the first quarter, our average loan to deposit ratio was 48%, essentially flat from the same period last year. With our ongoing effort to improve our earning after yield, we have re-launched our equipment lease and special renewed our emphasis on agribusiness lending and expanded PRE lending.
We also are keeping more residential real estate loans on our book for our private wealth management plan, specifically through a 15 year fixed mortgage product launched in the fourth quarter of last year. Balances in this category were up to 28 million or 14% for the first quarter compared to the same time a year ago.
As you come to expect our underwriting standards remain the same. Even as we expanded diversity of our loan portfolio, strong credit quality is a cornerstone of UMB. It served as well and differentiated us from our peers. Overall, non-performing loan at the percent of total loan were 0.46% and net charge-off year-to-date 0.25%.
Our goal is to replace investment securities that roll off the investment portfolio with high quality, higher yielding loans. Pricing remains competitive because we enjoy low cost funding where we are able to compete with other banks that are dependent on spread income to growth.
C&I lending is a relationship business and we are fortunate to have the best lenders and relationship managers in the business.
Before turning the call over to Mike, let me remind you that our priorities for the year remain the same as last year. First, we focus on quality, with strong balance sheet, solid credit metrics and low cost funding and an effective risk management.
Our second strategy is to deliver profitable sustainable growth. Third, is to maintain diversified revenue stream; and fourth we continue to focus on capital management. We remain committed to our proven business model and doing what we believe is right to grow our business. We built this company to perform in all business cycle.
With that I’ll turn the call over to Mike Hagedorn, who will discuss our financial results in further details. Mike?
Thanks Mariner and good morning everyone. This morning I will review our company’s financials and provide a more detailed summary of our four business segments.
During the first quarter, our average balance sheet grew 11.2% and average earning assets increased 11.9% to 13.7 billion. The average balance on our investment portfolio for the quarter is 6.9 billion, 12.4% higher than the first quarter a year ago.
The average yield on securities was 1.98% an increase of two basis points from last quarter and a decrease of 28 basis points from the first quarter of 2012. Activity during the first quarter included the roll off of 413 million in core portfolio of securities at an average yield of 1.98%.
In turn we purchased 769 million of securities at an average yield of 1.31%. The average life is now 43 months up from 40 months last quarter. The average life in the first quarter of 2012 was 36 months. Continued changes in the portfolio along with some modifications to our modeling inputs and tools lengthened the duration slightly to 40 months from 37 months on a linked quarter basis.
Over the next three months, 344 million of core investments with an average yield of 1.94% will cash flow and over the next 12 months 1.4 billion of core investments with an average yield of 1.84% will cash flow. Additionally, 71% of our total loan portfolio is expected to re-price or mature in the next 12 months and 60% will re-price mature or amortize next quarter.
The securities mix in our portfolio remained approximately the same as the fourth quarter of 2012. Mortgage backed securities comprised 48% of the portfolio and municipal securities are at 28%. Allowance for loan losses is 69.9 million and allowance as a percent of total loans is now 1.16% compared to 1.43% a year ago.
Our overall allowance as a percent of loans has decreased. We believe this level is appropriate given the high quality of our loan portfolio and the history of charge-offs. Our coverage is more than two and a half times the amount of non-performing loans or the median industry allowance reported for the fourth quarter would have covered just two-thirds of non-performing loans.
We remain well capitalized with Tier 1 leverage and total risk-based capital ratios of 10.92%, 6.6% and 11.74% respectively. Looking at the liability side of the balance sheet, average deposits for the quarter increased 13% to 11.6 billion. Average non-interest bearing deposits comprised nearly 40% of our total deposits which puts us in the top four percent of the industry according to SNL Financial. Our high percentage of free funds is a competitive advantage and is reflected in our low cost of funds. Our overall cost of funds was 21 basis points for the first quarter whereas 29 basis points a year ago. If you factor in free funds this brings the number down to just 13 basis points.
As you know, we have a substantial public fund business that typically results in a seasonal influx of deposits beginning in the fourth quarter and usually will be peaking in the first quarter. Public fund balances remains slightly higher than what we’ve seen in prior years. We currently estimate that additional balances of 200 million in the same period a year ago.
Average shareholder equity was 1.3 billion and 5.7% increase from the same period a year ago. Additionally total shareholder return over the past five years was 30.7% for the same period returns from S&P 500 and S&L U.S. bank index with 32.6% and negative 20.3% respectively.
We’re doing other financial highlights return on average assets was 0.96% for the quarter and from 1.4% in the first quarter of 2012. Return average equity for the first quarter was 11.05% compared to 15.37% a year ago.
By now you will have seen that yesterday we filed the Shelf Registration statement on Form S-3 with the Securities and Exchange Commission. Registration statement when declared effective by the SEC will allow the company to issue common stock, preferred stock, depository shares, warrants or debt securities. Although, we currently have no specific plans to offer additional securities, the shelf registration continues to provide capital flexibility in the event an opportunity should arise.
Turning to the income statement for the first quarter 2013, noninterest income was virtually unchanged of less than 1% to 75.5 million. As I mentioned the average earning asset balances increased 11.9% are over the changing mix resulted in a lower overall yield of 2.64%, down 30 basis points on 2.94% for the first quarter of 2012.
Average net margin for the quarter decreased 26 basis points to 2.51%. Provision expense decreased 2.5 million or 55.6% compared to the first quarter of 2012. As we’ve discussed in several prior quarter calls, our provision expenses is a reflection of our consistent methodology which considers the inherent risk in our loan portfolio as well as other qualitative factors.
Noninterest income decreased 8.5% to a 121 million a decline compared to 132.3 million for the first quarter 2012. The decrease in non-interest income was driven largely by a 64.4% decrease and gains on the sale of securities which for the quarter was 5.9 million compared to 16.5 million for the first quarter of 2012. For the first quarter of ’12, we also recognized 8.2 million contingent consideration liabilities due to the adoption of new accounting guidance. On a very positive note, revenue in trust and securities processing, service charges on deposits and bank card fees all increased for the first quarter of 2013 demonstrating the strength of our fee business; details on those businesses follow later in our call.
For the first quarter of 2013 non-interest expense increased 6% or 8.5 million to 150.4 million this increase was driven primarily by higher selling of benefit expense of 3.8 million. Other expense increase 2.6 million primarily due to a 3.5 million fair value adjustment related to our earn out agreements namely due to the final payment of our acquisition of JD Clark & Company in the same period in 2012 these adjustments totaled 1.2 million. We will continue to monitor these liabilities and we will likely have some future adjustments on our remaining acquisition either up or down throughout the earn-out period.
Now, we will review the results of our four business segments and Peter will provide more detail on the drivers in those segments later in the call. Looking first at institutional investment management for the first quarter non-interest income was 28.6 million, an increase of 9.3% versus 26.1 million in the first quarter of 2012. Non-interest expense increased 10% to 19 million compared to the first quarter a year ago. Net income before tax was 9.6 million an increase of 7.3% when compared to 8.9 million in the first quarter of 2012 the pre-tax profit margin for institutional investment management declined slightly from 34.2% in the first quarter of 2012 to 33.6%.
Moving to asset servicing for the first quarter, total non-interest income for the segment was unchanged at 20.3 million. Non-interest income increased 18.7% to 19.9 million compared to the first quarter of 2012. The majority of the contingent liability adjustment impacts expenses in this segment. Net income before tax decreased 2.7 million to 1 million for the quarter and resulted in the pre-tax profit margin for asset servicing going from or resulting in 4.9% for the first quarter declining from 18.3% a year ago.
In payment solutions for the first quarter total noninterest income increased 20.7% to 19.4 million. Net interest income increased 7.7% to 11.5 million and noninterest expense increased 35.4% to 20.1 million compared to the first quarter of 2012.
As a reminder in the fourth quarter of 2012, we assumed the first data resources check in ACH processing business for institutional broker dealers. Expense increase was first primarily salary and benefits for these newly added positions and income before tax was 9.2 million a decrease of 1.7% from a year ago and the pre-tax profit margin for payment solutions was 29.7% for the first quarter 2013 compared to 34.9% for the first quarter 2012.
Finally, our fourth segment the bank for the first quarter had total noninterest income declining from 52 declining to 52.7 million from 69.9 million to primarily the last year’s gain on the sale securities. Net interest income for the segment fell slightly from 68 million in the first quarter of 2012 to 67.3 million in this quarter.
Noninterest expense decreased 1.7% to 91.4 million compared to 93.1 million a year ago. Net income before tax was 28.3 million for the quarter compared to 42.9 million a year and the pre-tax profit margin for the bank was 23.6% for the quarter compared to 31.1% for the first quarter 2012.
With that I’ll turn the call over Peter to discuss the drivers behind business results.
Thank you Mike and good morning everyone. As Mariner mentioned earlier, fee income represented 60.4% of total revenue this quarter this gives us an advantage in an industry with a median level of fee income to total revenue with 19.5% in the fourth quarter according to SNL financial.
To provide additional contact to our result, I would like to discuss the primary drivers of our fee income and highlight some of the development niche of our operating segment.
Let me begin with the institutional investment management segment which is comprised the Scout Investment, equity and fixed income mutual funds and separately managed investment account. Revenue in this segment is driven by average advisory fees paid on mutual funds and separately managed the account asset, the mix of those assets, net flows and equity and fixed income market performance. For the quarter, the S&P 500 increased 10.6% and the MSCI EAFE increased to 5.3%.
Positive financial market along with strong performances and solid net flows combined to contribute to another good quarter for Scout. At quarter end assets under management stood at 25.7 million an increase of 13.6% compared to the first quarter of 2012. Scout mutual funds closed the period with the assets of 12.1 billion, Scout fixed income separately managed accounts totaled $11.4 billion and Scout equity separately managed account totaled $2.3 billion in assets under management. As we discussed last quarter, Scout was awarded its largest ever equity mandate from a large insurance company to sub-advise two midcap accounts. These accounts were funded during the first quarter.
If you look at our flows separated by equity and fixed income across all of Scout products including the Scout fund and separate accounts. In the first quarter, Scout equity strategy posted $1.4 billion in net flows. Net flows for the Scout equity mutual funds were $170 million with positive flows of 181 million for the Scout international fund. First quarter net flows for the equity mutual funds takes in the consideration, the $15 million in outflow associated with the closure of the Scout stock fund.
Scout separately managed equity accounts had net flows of 1.3 billion for the first quarter reflecting the large mid-cap mandate I mentioned earlier. The improvement in the equity market during the quarter positively impacted Scout’s equity assets under management by $590 million. Scout fixed income strategies experienced net flows of $138.9 million for the first quarter. The Scout fixed income funds had net inflows of $161 million lead by the Scout unconstrained bond fund. Scout fixed income separately managed account experienced a modest $22 million in net outflows during the quarter.
Market action had a net positive impact of $44 million on assets in our fixed income fund and separately managed accounts during the quarter.
Our assets servicing segment is comprised with the UMB fund services. As a reminder, the primary drivers of revenue in this segment are new business, transaction volumes in our client funds and account and overall asset valuation. Our fees are based on a variety of factors depending on client agreement including basis points on asset administered, transaction fees or our account fees.
Asset servicing end of the quarter with the $165.4 billion in asset under administration, compared to $156 billion at the end of 2012 and $227 billion in the first quarter of 2012.
We are pleased with the performance with this business segment, especially with JD Clark & Company acquisition for which we completed the final earn out period this quarter. To facilitate the continued growth in that business, we’ve recently named long time UMB fund services leader Ronny McDonald as president. We are confident that Ronny will continue to drive the company’s future.
In our payment solution segment, there are a number of important business drivers including overall credit and debit card purchase volume and the resulting card interchange. HSA deposits, FSA and HSA accounts and ACH wire and check transactions volumes drive this segment. We grew card purchase volume into four major category, commercial credit, consumer credit, consumer debit and healthcare debit. For the first quarter purchase volume across our entire suite of interchanged generating card products increased 13.2% to 1.8 billion when compared to the first quarter of 2012, for the quarter interchange revenue was 16.6 million an increase of 8.3% over the prior year. Increased purchase volumes contributed to the increased revenue in this segment in addition to revenue from the acquisition of the First Data Resources Check and ACH processing business acquired in the fourth quarter of 2012. Spending by our commercial credit card customers increased 7% during the first quarter when compared to a year ago and represented 17% of total card spending.
Purchase volume in this area has grown consistently and commercial credit cards provide the largest portion of our interchange revenue representing more than 40% of our total interchange dollar. Moving now to healthcare services, deposits in our custody accounts stood at 572 million at quarter end an increase of 48.3% compared to the first quarter of 2012. The total number of flexible spending arrangement in health savings accounts increased by 36% from a year ago to 3.1 million accounts. We had another strong quarter in this business with purchase volumes of 881 million an increase of 29% over the same period last year and more than double the purchase volume in the fourth quarter. Interchange revenue from healthcare card purchases increased 36.5% over last year to $3.2 million. Healthcare services continues to be a reliable strategic and low cost source of deposits and a funding source of revenue from several streams including account and transaction fees, card interchange, net interest margin and investment management fees.
The final segment I'll cover today is our bank represented by our commercial banking, consumer banking and private wealth and institutional asset management areas, (inaudible) covered the highlights of our commercial banking business and the strong loan growth there, in consumer banking we reported an increase of 4.3% in home equity lines of credit balance which now stand at 563 million, in first quarter 2008 home equity line commitments have increased nearly 60% and outstanding balances have risen 50%, or at a compounded annual growth rate of 8.5%. Portfolio utilization was approximately 47% at quarter end; the (inaudible) delinquency rate was 0.25% in the first quarter compared to an industry average of 2.8% at the end of the fourth quarter.
Assets under management for individuals and institutions stood at $10 billion at March 31, an increase of 15.4% from a year ago, comprising the $2 billion it’s 6.8 billion in asset under management within our bank asset management group and $3.2 billion in assets managed by portfolio capital management.
With that I will hand the call back over to Mariner who will close our prepared remark and open the line for your questions, Mariner?
Thank you, Peter. As you all know I am incredibly proud of this company especially as we celebrate our 100th year anniversary this month. To mark this milestone we will be opening the market on NASDAQ tomorrow morning and look forward to seeing many of you at our investor day in New York to be held at the NASDAQ market site.
Thanks for your interest and I will turn it over to you questions, to the conference call operator.
We will now begin the question-and-answer session. (Operator Instructions)
Our first question comes from the line of Matt O’Neil with (inaudible), please go ahead.
This is actually Tyler Staff, I am in for Matt. Congrats on the quarter. I guess first, when I look at your core earnings in 2012, and then again in 1Q ’13; it appears that 1Q starts off a little strong and then kind of gradually declines throughout the year. Can you may be remind us if there is any inherent seasonality across the business segments or maybe a revenue or expense mismatch?
Yes, I think the seasonality obviously you see is in net interest margin as a result of the public fund business in the first quarter. But typically in the fourth quarter we see higher expenses too and you saw that in the fourth quarter of ’12. So those would probably be the two biggest items I would point out.
Okay, and then switching gears a bit, and this is probably a few quarters too early to be talking about this but, I was just curious as to your thoughts on UMB in the context of a rising interest rate environment and obviously an increase in rates would benefit the bank, considering that the loan make up. But, I guess specifically, can you talk about may be the potential impact of rising rates on the asset management businesses?
Overall I think for those of you who have been watching our company a while know that we are highly sensitive to a raising rate environment to the positive prepared very well for raising rate environment and should benefit actually handsomely from that. As it relate to our asset management businesses and its impact, Peter you want to take that?
Yes, just a thought or two on that. Clearly with over $11 billion in fixed income, that’s an area we are watching closely and preparing for rising rates somewhere down the road. What we are seeing right now, is a rotation within the fixed income category, it is not a rotation out of fixed income exclusively and I suspect that will continue for some period of time. If you look at the good flows that the equity funds and the equity industry had during the quarter much of it came from money markets and the flows that were predicted out of bond front has not started yet. So, that’s the one real impact that we are monitoring right now. Our equity flows will be driven by sentiment in the markets and where markets go and rates start to rise, which we can't really predict. Obviously while this is datable, you could have a rotation out of equity when rates rise and savers aren't punished. I mean there are a lot of variables here but we generally are poised very well for all raising rate scenarios.
Our next question comes from Peyton Green with Sterne, Agee, please go ahead.
Peyton Green - Sterne, Agee & Leach
Yes, a question with regard to loan growth, I mean that's about as strong as you will ever report it and I was just wondering Mariner, you highlighted that the pipeline was in great shape coming out of the fourth quarter. How does it look going forward?
We continue to maintain a strong pipeline.
Peyton Green - Sterne, Agee & Leach
Was there anything that happened this quarter to I guess I mean is there any reason why the loan growth was so significantly better this quarter compared to the past I am sure that's strong?
No, I wouldn’t say so, Peyton I think the real answer is we are laser focused with a very strong team, pretty nice footprint. Outside of Kansas City we have got a pretty low market share so it’s all opportunity, all execution and we are just I think lucky to have one of the best teams in the business.
Peyton Green - Sterne, Agee & Leach
Okay and then I know one of the goals for this year is the post improved operating leverage from the multitude of investments that you have made over the past several years. The first quarter of this year was very good like the first quarter of last year. How good do you feel about the prospects going forward?
I am sorry will you do that again related to, are we talking about loans or just in general or?
Peyton Green - Sterne, Agee & Leach
Just in general, just general operating leverage as you manage the collection of businesses. I mean do you feel better about getting improved operating leverage this year?
As we have been saying, we are committed to and feel good about our prospects; we are continuing to reduce expense growth. So we feel good about that and if you look at quarter-over-quarter, you look at pre-tax profit margins in all of our non-bank businesses, they are all expanding and so we are seeing the leverage we are seeing expense reduction almost all expanding, payment is not expanding but the two big drivers Scout and Fund Services are both expanding from pretax margin perspective. So we’re seeing that and we’re seeing expense reduction on a year-over-year basis. So, we continue to feel good about our prospects in doing such.
Don’t lose sight of the fact also that as we reported this morning, this is the last earn out payment on JD Clark, so those negative adjustments they’ve tended to be negative at least for that acquisition, are no longer going to be part of the equation. So that’s going to help operating leverage as well.
Peyton Green – Sterne, Agee & Leach
Okay. And then also in terms of the asset management business, the wind they choke out on the institutional fact was certainly a big one, how does the pipeline for that business look? I know it’s hard to gauge but it’s been two to two and half years of building with sales force and the tax in the market with good solid performance on a consistent basis. How do you feel about gaining share this year?
Well, activity is strong. The pipeline continues to be strong both in Scout, both in the fixed income side and on the equity side. Like every pipeline there is lots of things we’re going openly convert and some we probably won’t but we feel very, very good about the pipelines on both the equity and fixed income side at this point in time.
We just hired a new head of sales to direct our sales up on the both the fixed income and the equity side. We continue to expand the sales forces as we see fit. But our story, our leverage distribution model through the very large pension funds and the platforms and such continues to work for us Peyton and we feel quite comfortable that we are going to get our fair share as we go along.
Peyton Green – Sterne, Agee & Leach
And then Mike for you. On the equipment and occupancy side, are there any major investments initiatives or software technology issues that will cause that line to go up over the course of the year that might take away some of the operating leverage in the quarter?
Yes. We’re making investments as we do all the time in technology and I would say, think about it more like this that there is some lumpiness in that line item relative to when the depreciation for existing stuff comes off the books and new stuff comes on. So, we’re constantly investing, so from time-to-time share could go up.
Peyton Green – Sterne, Agee & Leach
Okay. But no big things necessarily for this year?
Our next question comes from Christopher Mcgratty with KBW. Please go ahead.
John Barber - KBW
Good morning guys its John Barber filling in for Chris. Could you help us just with the expense run rate going forward, what are some of the moving pieces we should be focused on and some of the more variable items?
Well obviously the most variable one would be compensation in FTE levels. so if you look at the fourth quarter as we talked about FDR added I think a little more than 70 new FTEs, so you have to consider that when you specially do the first of ’12 to first quarter of ’13 comparison so that was probably the first one. The second one would be the processing related expenses that we have. For instance bank card volume. More volume is going to drive higher bank card processing fees. We see that in the asset servicing business, the asset management business as well. So, if you see those expenses going up you should likely see the revenue on the other side as well.
John Barber - KBW
Okay that's helpful. How should we think about the stock buyback plan? is that something we should be incorporating in our models?
We have been improving that every year consistently and we look at repurchases in the context of our overall capital planning every year. so there is no specific plan.
John Barber - KBW
And Mike in the earnings release you talked about balancing NII versus maintaining assets sensitivity, it seems like a new disclosure should we think about that as potentially a balance sheet restructuring in the cards or is it more just normal ALCO management?
Well I think it is normal but I do think Mariner talked about this in his prepared remarks that it is more of a subtle rebalancing if you will, assuming that we are able to execute on our strategy you saw our loan growth this quarter and all of the last several years. in fact we have had loan growth for each of the last three years to the extent that we can replace the roll off in the investment portfolio with loans that will continue.
John Barber - KBW
And last one I had was; what's a good effective tax rate to use going forward?
Yes, the bias is going to be slightly down, I mean where we are at today. I know that might sound a little strange but we have two large loan income housing tax credits coming online in 2013 and so it will come down a little bit.
Sir, I am showing no further questions in the queue at this time please continue.
Unidentified Company Representative
Thank you everyone for your interest in UMB today. The call can be accessed via a replay on our website beginning in about two hours and it will run through May 8, as always, you can contact UMB Investor Relations with any follow-up questions by calling 816-860-71. Again we appreciate your time and interest. Thank you.
Ladies and gentlemen, this concludes the conference call. We will like to thank you for your participation. You may now disconnect.
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