Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

UMB Financial Corporation (NASDAQ:UMBF)

Q3 2009 Earnings Call Transcript

October 28, 2009 9:30 am ET

Executives

Abby Wendel – IR

Mariner Kemper – Chairman and CEO

Mike Hagedorn – CFO

Peter deSilva – President and COO

Analysts

Chris McGratty – Keefe, Bruyette & Woods

Julienne Cassarino – Prospector Partners

Peyton Green – Sterne, Agee & Leach

Jay Daniel – Eagle Asset Management

Operator

Ladies and gentlemen, thank you for standing by and welcome to the UMB Financial Corporation third quarter conference call on 28 October 2009. Throughout today’s recorded presentation all participants will be in a listen-only mode, after the presentation there will be an opportunity to ask questions. (Operator instructions)

I will now hand the conference over to Abby Wendel, please go ahead.

Abby Wendel

Thank you. Good morning everyone and thank you for joining us for our conference call and webcast regarding our 2009 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 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 a reconciliation to the non-GAAP measures discussed in the release, which includes a pre-tax adjustment to non-interest income and non-interest expense, the tax effect of the adjustment and adjusted net income. The adjustment was a $1.1 million gain on the sale of our securities transfer product. The reconciliation for these items can be found on our Web site at www.umb.com.

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 more reliable indicators of ongoing operating performance.

By now we hope most of you on the call who are listening to webcast have had a chance to review our earnings release dated October 27. If not, you will find it on our Web site at www.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. First Mariner will highlight our results and update the progress on growing loans and deposits, managing capital and delivering the unparalleled customer experience, then Mike will provide additional details on our third quarter results. Peter will discuss results relating to our strategies of accelerating fee-income growth and increasing efficiencies followed by closing comments from Mariner. Following that we will be happy to answer your questions.

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

Mariner Kemper

Thank you, Abby. Welcome everyone and thank you for joining us today. As you have seen in our Press Release, UMB delivered solid financial performance in the third quarter. Double-digit earnings growth is particularly pronounced given what has been happening in the industry and compared to our earnings in the third quarter of 2008. We have a strong diverse revenue base which gives us earnings strength in a challenging economic cycle.

Compared to the same period a year ago, loans and deposits have increased, noninterest income is higher, our efficiency ratio is lower, and we have returned capital to shareholders through share buybacks and a higher dividend. The economic environment remains challenging however we believe that staying true to our tradition of operating with great liquidity and high asset quality coupled with our core deposits franchise serves us well regardless of the economic conditions. Rather than fixing internal problems, we have been able to focus externally on new business generation.

Turning to specific results, net income increased 10.2% to $24 million or $0.59 per diluted share, an increase from $21.8 million or $0.53 per diluted share for the third quarter of 2008. On a non-GAAP basis, net income increased 13.9% due to last year’s final $1.1 million pretax contingent payment from the sale of our securities transfer product. Our third quarter financial performance was driven by a 14.5% increase in net interest income primarily due to a higher average earning asset base. Noninterest income increased 1.8% and amounted to 51.5% of total revenue. Our diversity in revenue is essential to maintaining stability and quality.

Now, I would like to discuss the results against our strategy to grow loans and deposits. End of period loans increased 2.1% to $4.3 billion, excluding indirect auto this is an increase of 6.6%. During the quarter, $166 million in indirect auto loans balances ran off. Following the decision to run off this portfolio in August 2007, we have seen a steady decline in indirect auto balances. Even in these challenging economic times, our credit quality remained stable largely because our underwriting practices are among the strongest in the industry and remain unchanged. While we have seen a modest increase in our nonperforming loans and net charge-offs, we are still well below our peer averages.

For the third quarter of 2009, nonperforming loans increased 36 basis points to 0.52%. The majority of this increase is attributable to a single credit placed on nonaccrual this quarter as part of a shared national credit review. Net charge-offs were 0.42% of average loans compared to 0.21% a year ago. Of our total net charge-offs, credit card charge-offs made up 60% and were 4.26% of total credit card loans in the third quarter. In comparison, credit card portfolio industry wide charge-offs were 10.9%.

In our commercial loan portfolio, balances exceeded $2 billion despite a reduction in commercial line utilization. We have the capacity to lend and have grown our commitments by more than $600 million compared to the same quarter last year. Do you believe the drop in line utilization is due to the recessionary impact on our customers as we are seeing fewer businesses draw down on the lines of credit.

Looking at other aspects of our loan portfolio, real estate loans increased $258 million or 17.2% driven by growth in our commercial real estate and home equity loan categories. Although commercial real estate is an area of weakness in the industry, UMB’s nonperforming commercial real estate loans were only 0.34% of total loans at the end of the quarter. Our commercial real estate portfolio is largely made up of owner occupied real estate. It is not our practice to underwrite speculative [ph] real estate or development projects.

Turning to liabilities, at the end of the period deposits increased 11.4% to $7.9 billion. Noninterest bearing deposits increased 13.4% and amounted to one-third of total deposits, well above the industry average of 14%. Core deposit funding is a key component of our franchise. In addition to our traditional source of deposits, we are developing unique group of businesses that contribute to our core funding strength including healthcare services, small businesses banking and private banking. Combined deposits in these businesses exceeded $832 million this quarter, which is 69% higher than this time a year ago. Just four years ago, the balances in these businesses were a combined $28 million. This group will continue to be a key area of focus for the company.

Turning to capital management, our priorities have not changed. They are first to invest in growth either through a reinvestment in a business of ours through acquisitions that are a good fit both strategically and financially, second to consider increasing our dividend over time and third to repurchase stock when it makes sense to do so. In the third quarter we repurchased 226,796 shares at an average price of $39.83 for a total cost of $9 million. Year to date, we have repurchased 689,743 shares at an average price of $38.18. Also yesterday our Board increased the regular quarterly dividend by 5.7% to $18.05 per share equating to a 31.4% dividend pay out ratio based on third quarter diluted EPS. We are unique in this environment and I believe one of the few to be able to increase this dividend. It marks the ninth increase in our quarterly dividend since July of 2003 with a total increase over this period of 85%, a reflection of our consistent earning performance and strong capital levels.

Success is not defined only by financial results alone. At the foundation of everything we do is attracting and retaining the best quality people, sustaining a performance culture, and building our brands. We deliver the unparalleled customer experience through focus on our people, our customers and our communities.

With that, I will turn it over to Mike Hagedorn, our CFO to provide additional details on our financial results for the quarter. Mike?

Mike Hagedorn

Thanks Mariner and welcome everyone. As Mariner discussed core funding is an important part of UMB’s business model. This quarter our cost of funds was 81 basis points well below the industry average of 191 basis points. Low funding costs coupled with higher average earning assets allowed UMB to maintain a net interest margin of 3.51% without reaching out on the yield curve materially altering the duration or mix of our securities portfolio or changing the quality of our loan portfolio.

Net interest income increased 14.5% the primary driver of our double-digit earnings growth. The low interest rate environment resulted in a decline of 4.8% in interest income but this decline was more than offset by a 51.9% decrease in our net interest expense effectively managing deposit rates and a 16.9% increase in average earning assets contributed to the net interest income performance. Looking forward we expect fewer reductions in our funding costs.

Net interest margin decreased 6 basis points to 3.51% compared to the third quarter of 2008. Average earning asset yields fell 88 basis points to 4.08% while the cost of interest bearing liabilities dropped 107 basis points to 0.81%. Free funds contribution declined to 24 basis points from 49 basis points over the same period last year and was the primary reason for the net interest margin decline. Despite historically low rates, net interest spread increased 19 basis points to 3.27%. Compared to the second quarter improving CNI [ph] yields combined with slight changes in our investment portfolio mix lifted margin 9 basis points.

Turning to the investment portfolio, $290 million in core portfolio securities rolled off this quarter at an average yield of 3.82%. In turn, we purchased $719 million of securities at an average yield of 2.66%. Purchases were considerably higher than the roll off this quarter as we reduced our overnight position with the Fed. Over the next three months, $252 million to $310 million of core investments with an average yield of 3.74% to 3.97% will roll off. Over the next 12 months, $1.1 billion to $1.4 billion of core investments with an average yield of 3.98% to 4.13% will roll off. In the current lower rate environment, we expect the re-pricing of these securities to negatively impact our interest income.

In addition 67% of our total loan portfolio is expected to re-price in the next 12 months. Noninterest income grew 1.8% or $1.4 million compared to the third quarter in 2008 despite lower equity markets. As Peter will discuss, trust and securities processing along with trading and investment banking income made up the majority of this increase. Noninterest expense increased 4.9% or $5.4 million to $115.3 million compared to the third quarter last year. The acquisition of JD Clark completed in the second quarter of this year contributed $2.5 million or 46% of the increase to noninterest expense. Salary and benefit expense increased $3 million with JD Clark accounting for $1.2 million of that increase. Regulatory fees increased $2.4 million to $3 million primarily from higher FDIC deposit insurance premiums and the expiration of the FDIC deposit insurance credits.

Although our credit quality remained strong, we felt it prudent to increase our provision this quarter given the economic environment. Our provision model methodology takes into consideration not only the inherent loss in our loan portfolio but also includes the qualitative aspect, which resulted in a $3.8 million increase to our provision this quarter. The provision as a percentage of loans is now 1.36% or 17 basis points higher than in the same period last year.

Turning to the balance sheet, we ended the quarter with more than $10 billion in assets and more than $1 billion in equity. UMB remains well capitalized with tier-one leverage and total risk-based capital levels of 13.5%, 8.2%, and 14.5% respectively. As Mariner mentioned, we continue to buy back shares, increase our dividend and make acquisitions as appropriate all while growing our capital levels. Return on average equity and return on average assets during the third quarter of 2009 were 9.43% and 0.97% respectively from 9.25% and 1% for the same period in 2008. Average loans to average deposits decreased to 58.3% from 64.6%. The continued run off in the indirect auto loan portfolio, commercial line utilization, and higher deposit levels contributed to the decline.

With that I will turn it over to Peter for additional comments on our operating performance.

Peter deSilva

Thanks Mike and good morning everyone. Being a well diversified financial services organization continues to be a great strength for UMB. Our third quarter results demonstrate that well balanced sources of revenues and earnings continues to serve us well.

Trust and securities processing income, which is the largest component of fee income increased by $1.1 million or 3.5% to $32.6 million from the year-ago period. Revenue in this segment is largely dependent on three key drivers, One, new business sold and converted; Scout Mutual Fund flows; and three performance in the equity and fixed income markets. Increased business in both our fund services and asset management segments contributed to the growth this quarter.

Turning to specific results, trust income from UMB Fund Services increased 27.5% or $3 million compared to the third quarter of last year. Most of this growth was a result of our recent acquisition of JD Clark & Company, which closed in the second quarter. As we mentioned previously, JD Clark serves the alternative investment marketplace and has added significant scale to our preexisting alternative investments business. Results today have exceeded our expectations and we could not be more pleased to have JD Clark associates and customers as part of UMB Fund Services.

In our asset management businesses, total assets under management increased 6.2% to $11.3 billion from $10.7 billion in the third quarter of 2008. The primary driver of this growth was our institutional money management business. Total assets in the Scout Funds grew 11.8% to $6.3 billion from $5.7 billion at the end of the third quarter of 2008. Equity and bond fund flows were $274 million during the quarter and stand at $739 million through September 30. Positive equity markets also affected assets under management. As we announced last quarter, we repositioned Scout Investment Advisors to be a subsidiary of UMB Financial Corporation. This is yet another sign of our commitment to growing our institutional money management business. Our focus is to build Scout Investment Advisors into a national premiere money management firm.

In addition to the positive flows, we are seeing other tangible evidence that our focus is beginning to pay off. For example, the number of institutional requests for proposals we have received this year versus last year is greater than we have seen in the past. Winning new mandates is translated into revenue growth of 5.8% in the third quarter of 2009 compared to the same quarter a year ago. Our personal asset management business also continues to perform well. Our investment and wealth management business has gained sales leverage over the past nine months with new recurring sales revenues increasing 24% to $3.3 million compared to $2.6 million for the first nine months of 2008. New revenues increased more than 57% in the third quarter of 2009 when compared to the third quarter of 2008. Total assets under management in this segment were $3.6 billion at the end of the third quarter. During 2009, we have invested in this business by hiring seasoned professionals and we are well positioned for further growth.

In looking at our other fee businesses, we continue to expand our position in healthcare services. We achieved the next evolution of this business this past Monday by launching our newest product Healthcare Exchange. This product combines claims reimbursement with explanation of benefits and payment status into a single Web portal. It allows health plans and third-party administrators to work directly with the financial institution for their claims reimbursement needs. The launch of this innovative product expands our offerings and scale in this business. Also during the quarter, the number of HSA and FSA accounts grew 29% with deposits and assets increasing 33% compared with the same period last year. At the end of the quarter, we had nearly $1.1 million HSA and FSA accounts and more than $185 million in deposits and investment assets. Year to date, healthcare related spending on our healthcare debit cards increased 43% and now makes up more than 50% of our signature based debit card purchase volume.

Also during the quarter, we were pleased to learn that UMB Healthcare Services was selected by Blue Cross and Blue Shield of Kansas City to provide HSA accounts to its policyholders. Our products and services make it easy and convenient for customers to access their accounts for their healthcare expenses. This combined with our leading technology factored into Blue Cross and Blue Shield of Kansas City’s decision to partner with UMB. We cannot be more pleased about partnering with such a reputable health insurance provider.

As payments continued to shift to electronic transactions, our card businesses are also benefitting. Commercial cardholder purchase volume posted a strong quarter with total volume of nearly $168 million, an increase of 4.5% compared to last year. The number of accounts for this segment increased 11.6%. Total accounts from our consumer card area increased 12.6% due primarily to account growth in our affinity card portfolio even as industry head wins exist such as pressure on consumers and interchange fees we believe cards will continue to be a key component of our payments business.

In addition to growing our fee businesses, we continue to focus on improving operational efficiencies and effectively managing expenses. Throughout the year, we have accomplished several cost containment initiatives. A few examples include the outsourcing of statement, printing and mailing and the outsourcing of credit card collections. We have also recognized savings in our telecommunication expenses by renegotiating contracts, migrating to Voice over IP and moving to a new ATM platform. These initiatives along with many others are helping us to become a more efficient organization.

Our efforts in maximizing efficiencies resulted in a reduction in our efficiency ratio to 71.3% from 73.9% a year ago. Our efforts have also resulted in improved revenue for FDE and retail cross sell ratios compared to the same quarter last year. Revenue per FDE increased 8.9% year over year while our new customer cross sell ratio improved 13 basis points to 3.18. Delivering the unparalleled customer experience we will continue to improve this ratio over time. We are pleased with the results in this area thus far.

With that, I turn it over to Mariner for his concluding remarks.

Mariner Kemper

Thank you Peter. As a final note, I would like to mention a couple of recognitions we received in this quarter. I am particularly pleased to see that our focus on running our business the right way is earning us recognition in the industry.

We were recently selected by Sandler O’Neill as the Top Performer in its 2009 Bank and Thrift Sm-All Starts Report. Sandler’s analysis focuses on growth, profitability, credit quality and capital strength. We manage our business for the long run and it is gratifying to see the results of our efforts being recognized in such a manner. Second our Asset Management division was recognized among the nation’s best in Bank Insurance Market Research Groups 2009 Who’s Who in Bank Wealth Management Report. This division was cited as “one of the more robust wealth management businesses in the Mid West.”

I could not be more proud of our achievements. For nearly 96 years, UMB has navigated many difficult credit cycles. The current one is perhaps as challenging as any we have seen in recent memory. And similar to other cycles in the past, we adapt to the changing conditions without losing focus on our core principles.

Thank you all for being on the call with us today and with that I will turn it back over to the conference call operator Carol to open the call for your questions.

Question-and-Answer Session

Operator

Thank you sir. (Operator instructions) Your first question comes from Chris McGratty. Please go ahead.

Chris McGratty – Keefe, Bruyette & Woods

Good morning guys.

Mariner Kemper

Good morning Chris.

Chris McGratty – Keefe, Bruyette & Woods

Just a quick question on the shared national credit exposure, I think you indicated in the Press Release to increase the nonperformers who were SNIC [ph] can you give us the size of the SNIC exposure that you guys have?

Mike Hagedorn

The credit that was referenced in total currently has roughly about $10 million in outstanding. The total SNIC exposure I do not have at my –

Mariner Kemper

It is about $1 billion.

Chris McGratty – Keefe, Bruyette & Woods

Okay on that $1 billion exposure what would you say is the lead on as opposed to a participant?

Mike Hagedorn

We are a lead in one of them.

Mariner Kemper

Yes, we are leading about $150 million credit –

Mike Hagedorn

We are largely a participant.

Chris McGratty – Keefe, Bruyette & Woods

Okay, so $150 million to $1 billion nearly. Okay that is helpful and then geographically and by industry type can you give any color?

Mariner Kemper

Yes, I would say we operated in that state just like we do with everything else we do. It is largely in footprint and a very high quality portfolio.

Chris McGratty – Keefe, Bruyette & Woods

Okay that is helpful. Moving on to the investment portfolio Mike, I guess maybe can you talk to what exactly you have been buying the last few quarters and then maybe talk to the duration today as it compares to the last few quarters?

Mike Hagedorn

Sure. Let me take the latter half of that question first, the duration has not materially changed slightly a little less duration, so a few less months actually in total maturity but not by changing any materially. So you are going to see us hovering around the high 20 months, 28, 29, 30 months at the most. As far as the actual purchases, we are buying a lot of agency debt, in fact within our non-core portfolio 34% of that portfolio is made up of Fannie and Freddie agency debt. We are still buying agency debt in the core portfolio too but that is only 7% of the total holdings.

Chris McGratty – Keefe, Bruyette & Woods

Okay.

Mike Hagedorn

I think what you are seeing behind your question is whether or not there is an issue when the government’s guarantee runs out in 12/31 and our belief is the government is not going to let Fannie and Freddie go down. So we continue to buy those debts both the mortgage backs and agency debt period.

Chris McGratty – Keefe, Bruyette & Woods

Okay and then in terms of funding, I guess funding the purchase maybe you can talk about the funding side of it as well.

Mike Hagedorn

Yes that clearly has not been a problem for us. As we have talked about in the call we had maintained in the second quarter very large Fed fund overnight positions and with the purchases that we made almost $720 million in the third quarter we have eroded some of that overnight position with our core portfolio holding so I do not feel the funding for that is an issue at all.

Chris McGratty – Keefe, Bruyette & Woods

Okay. Then I guess my last question, in terms of (inaudible) as the balance sheet as an aggregates composer how are you positioned asset and liability sensitive?

Mike Hagedorn

Yes I would say over time we have probably been more on the liability sensitive side. Now that liability pricing is going to plateau I do not know how much lower you can actually get your cost of funds once you are now at 81 basis points, it is going to start to switch to being a little more asset sensitive.

Chris McGratty – Keefe, Bruyette & Woods

Okay, thanks guys.

Operator

Thank you. Your next question comes from Julienne Cassarino. Please state your company followed by your question.

Julienne Cassarino – Prospector Partners

Hi, Julienne Cassarino, Prospector Partners. You have $1 billion in SNICs outstanding.

Mariner Kemper

No. It is Julienne, right?

Julienne Cassarino – Prospector Partners

Yes.

Mariner Kemper

Those are commitments.

Julienne Cassarino – Prospector Partners

Okay, you mentioned outstanding.

Mariner Kemper

Between $150 million and $200 million, somewhere around there.

Julienne Cassarino – Prospector Partners

Okay, so $150 million –

Mariner Kemper

And they are largely relationship, we are out purchasing participations, these are companies we have direct relationships with and we have treasury management business with and such. We are not out buying participation.

Julienne Cassarino – Prospector Partners

I realize that I am just trying to size the exposure, you have $150 million to $200 million outstanding on $1 billion of commitments?

Mariner Kemper

Yes.

Julienne Cassarino – Prospector Partners

And you are the lead in all of those?

Mariner Kemper

No, we are only the lead in one of them.

Peter deSilva

We only lead one of these credits and that particular credit is about $150 million credit that we lead, I think we take about $30 million of that $150 million and that is not all drawn. So the key numbers are as Mariner said $1 billion in commitments, $150 million to $200 million in drawn against that and we only lead a single credit, which is a committed credit of $150 million, we only take a portion of that.

Mariner Kemper

Yes.

Julienne Cassarino – Prospector Partners

Okay. In the $1 billion of commitments how many loans is that?

Mariner Kemper

I would have to calculate, if you want more detail on that you can talk with Abby Wendel who is our investor relations person. She will call you.

Julienne Cassarino – Prospector Partners

We are 30 to 89 days past dues.

Mariner Kemper

I have to track that down for you here. I would have to track that down for you, I do not have it on my fingertips. We will get that back to you as well and have Abby follow up with you on that.

Julienne Cassarino – Prospector Partners

Yes.

Mike Hagedorn

Nonperforming within 90 days is 0.52%, yes.

Julienne Cassarino – Prospector Partners

Yes I mean the 30 to 89.

Mariner Kemper

Yes the 30 I do not have in my fingertips.

Julienne Cassarino – Prospector Partners

Okay and what were assets under management at the end of the quarter?

Mariner Kemper

$11.3 billion broken into about $6.5 billion in our mutual fund complex and the rest in a diverse source of assets under management for our trust and wealth management businesses.

Julienne Cassarino – Prospector Partners

Okay and that is up from $10 billion, the $11.3 billion is up from $10 billion?

Mariner Kemper

Up from about $9.7 billion last year [ph].

Julienne Cassarino – Prospector Partners

Up from $9.7 billion, okay, thank you.

Mariner Kemper

Sure.

Operator

Thank you. Your next question comes from Peyton Green. Please state your company followed by your question.

Peyton Green – Sterne, Agee & Leach

Good morning. I had a question for you on the CNIPs, to what degree did you all receive payoffs in the CNI book, did it actually decline linked quarter or kind of what is the outlook in terms of the next quarter or two?

Mariner Kemper

Peyton, it is Mariner. How are you? Our utilization is down certainly borrowers are not using their lines, as I mentioned in my comments, our commitments are up significantly but our balances are relatively flat and the reason for that is utilization is down. I do not know, does that answer your question?

Peyton Green – Sterne, Agee & Leach

Yes, I mean, any idea of the utilization percentage in the change year over year?

Mariner Kemper

Yes, we run normally at 30.5% and we are running at 26.11% right now.

Peyton Green – Sterne, Agee & Leach

Okay great and then in terms of thinking about how the cycle unfolds, it would seem like most banks that we have talked to have had more payoffs on the CNI side this quarter than compared to last several quarters. What is your outlook for CNI growth going forward and it sounds like compared to past cycles you are actually seeing more opportunities to grow and I was just trying to get some understanding of that and your outlook for that.

Mariner Kemper

So far we have been able to outpace lower utilization with new business our hope is to be able to do that. The pipeline looks good. We are definitely seizing a wonderful opportunity, once in a lifetime-type opportunity to pick up market share and so we are seeing that. I cannot project whether we will be able to keep it up but I will say the pipeline looks good.

Peyton Green – Sterne, Agee & Leach

Okay and is this from banks bigger than you, smaller than you or all across?

Mariner Kemper

It is all across, all across the board.

Peyton Green – Sterne, Agee & Leach

Okay and then in terms of the JD Clark acquisition I have your references but I did not catch the numbers, what was the amount of revenue and expense attributable to it in the third quarter?

Mariner Kemper

One second, let me get that back in front of me if I can Peyton. First, I can say it is going exceedingly well. We are very pleased with the way that has come together for us and the overall alternative investment marketplace is exceeding our expectations as well. It came back very strong after the reductions we saw about a year ago. In the third quarter JD Clark contributed noninterest income of $2.9 million and it had expenses of $2.5 million. Of that $2.5 million of expenses, $1.2 million was salary and benefits and $850,000 was amortization related to the purchase.

Peyton Green – Sterne, Agee & Leach

Okay great and then in terms of the RFP process on the asset management business, you mentioned that this was up compared to past levels, any particular type of volume that you might speculate that you might be able to grow the business back compared to times past, you all had pretty strong growth over the years.

Mariner Kemper

It is hard to look forward but I can give you the numbers. In 2007 and 2008 for the full year, we responded to about 39 RFPs in each year. Year to date we have seen 48 RFPs, we expect to see more between now and the end of the year. We attribute this to the seriousness with which we are taking this business, the fact that we are now Global Investment Performance Standards compliant, GIPS compliant and the emphasis that our sales team is putting on getting the word out about Scout Investors and Scout Investment Advisors.

Peyton Green – Sterne, Agee & Leach

Okay great and then in terms of the healthcare services business, you also had pretty fantastic growth in that over the years, with the change I guess the change in your back-end system, what do you think that allows the growth to do going forward?

Mariner Kemper

One of the things we are trying to do is prepare for whatever eventuality Congress comes up with but one thing is for sure, one we believe FSAs in particular will continue to prosper because there is a real need for them and the need to pay for healthcare is going to be done we think through cards in the future. So that is for certain. The new product we were just talking about really enables us for the first time to have explanation of benefits and funding settlement capabilities all tied together through a single web portal and it is hard to project that we have had good receptivity in the marketplace so far. We have been able to sign three relationships pretty quickly here in the last 120 days or so and we are getting good reaction to that capability in the marketplace.

Peyton Green – Sterne, Agee & Leach

Okay and then last question, how much is left on the indirect auto book?

Mariner Kemper

$162 million I believe the number is I was just looking at it.

Mike Hagedorn

Yes we referenced in the call that $166 million had run off in the quarter, it is actually year over year.

Peyton Green – Sterne, Agee & Leach

Okay.

Mike Hagedorn

We are down to $160 million or so.

Mariner Kemper

Yes, $160 million.

Peyton Green – Sterne, Agee & Leach

Okay great thank you very much.

Mariner Kemper

One more question.

Operator

Your next question comes from Jay Daniel. Please state your company followed by your question.

Jay Daniel – Eagle Asset Management

Jay Daniel with Eagle Asset Management. I have actually got three quickies. First is I am wondering what percentage of insider ownership you have right now. Secondly, I am wondering if you have got to get out and publicize your story with investors in the next couple of months and then third, what sort of criteria you might have that would make you interested in a failed bank transaction? Are these things something that you look out as a means of expansion either later this year or into 2010? Thank you.

Mariner Kemper

Thanks for your questions. I am going to answer the first one, ask you to repeat the second and then answer the third. The first one is we are approximately 20% in insiders ownership total. What was the second question?

Mike Hagedorn

Road shows,

Mariner Kemper

Are we going to do road shows?

Mike Hagedorn

How do we get the story out?

Mariner Kemper

We are not big fans of the road show process. We feel like it is our job to just run the company and be transparent. So that is our strategy is to be as transparent as possible through efforts like this. You are certainly welcome to come visit us but as far as road shows go we think it is our job to run the company. The last question about sister deals, we are very active in looking for sister deal transactions of really any kind whether it is a quality institution or one that is under the purview of the government under a letter. So it is either one and so we are very active and we want to make sure that when we do them that they are a strategic and cultural fit and most importantly they do not change our risk profile.

Jay Daniel – Eagle Asset Management

Okay thank you.

Operator

(Operator instructions) You have a follow-up question from Julienne Cassarino. Please go ahead.

Julienne Cassarino – Prospector Partners

Actually I am answered, thank you very much.

Mariner Kemper

Okay alright.

Operator

There appears to be no further questions, please continue.

Abby Wendel

Thank you very much for your interest in UMB. The call can be accessed via a replay on our Web site beginning in about two hours and it will run through November 11 and as always you can contact UMB Investor Relations with any follow-up questions by calling 816 860 1685. Again we appreciate your interest and time. Thank you.

Operator

That concludes the UMB Financial Corporation third quarter conference. Thank you for participating. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: UMB Financial Corporation Q3 2009 Earnings Call Transcript
This Transcript
All Transcripts