Good morning and welcome to the UMB Financial Corporation Second Quarter 2015 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Kay Gregory. Please go ahead.

Thank you. Good morning, everyone. Thank you for joining us on our conference call and webcast regarding our second quarter 2015 financial results. Before we begin, let me remind you that today’s presentation contains forward-looking statements, all of which are subject to assumptions, risks and uncertainties. Actual results and other future events, circumstances, or aspirations may differ materially from those set forth in any forward-looking statement. Information about factors that may cause them to differ is contained in our 10-K for 2014 and subsequent 10-Qs and other SEC filings. Forward-looking statements made in today’s presentation speak only of today and we undertake no obligation to update them. By now, we hope most of you on the call or listening via webcast, have had a chance to review our earnings press release that was issued yesterday afternoon. If not, the release is available on our website at umbfinancial.com. Also, on our website, we’ve provided supporting slides that contain additional details on some of the drivers and metrics we will discuss today. A link to the slides can be found in the Investor section of umbfinancial.com under News & Events, and Presentations. These will also be available after the call for your reference. Reconciliations of non-GAAP financial measures discussed today have been included in the earnings release and on Page 34 of the supporting slides. On the call today are Mariner Kemper, Chairman and Chief Executive Officer; Brian Walker, Chief Financial Officer; Peter deSilva, President and Chief Operating Officer; and Mike Hagedorn, President and Chief Executive Officer of UMB Bank. The agenda for today’s call is as follows. Mariner will provide high-level commentary and Brian will review details on our financial results. Then Mike and Peter will review our four business segments. Following that, we’ll be happy to answer your questions. I’ll now turn the call over to Mariner Kemper.

Thank you, Kay. Welcome, everyone, and thank you for joining us. I would like to cover two major points with you this morning. Our high-level results for the second quarter in relation to our long-term strategy and recent and near-term actions that are designed to drive future improvements in our results. The highlight of the quarter was closing on our Marquette acquisition. On May 31, throughout our presentation this morning we will mention several ways in which this combination with Marquette and UMB is already producing positive results. The supplement slide deck details the results for the quarter and we will refer to it as we share our prepared remarks. While net interest income grew nicely, noninterest income contracted due primarily to lower income from Scout funds compared to the second quarter of 2014. Expenses were held to a 3.5% increase year-over-year for the quarter, but the bottom line results was $30.2 million a $4.5 million reduction in net income for the quarter year-over-year. Even with current headwinds with a lot to be excited about including yet another quarter of strong loan growth. As you can see on Slide 7, loans increased 28.8% year-over-year to $8.9 billion at June 30, 2015. One of the significant drivers of increased loan balances with the acquisition of Marquette loan portfolio, which on May 31 had an acquired value of $980.3 million. Since, this was the first quarter with combined results I will provide a little more color on loan growth origination, which is detailed on Slide 8. At June 30, acquired loans plus loan production through the legacy market channel comprised $1 billion of the increase in total loan balances. The remaining increase of $1 billion was generated through legacy UMB lenders, for a year-over-year increase of 14.4% and a linked-quarter increase of…

Thanks, Mariner and good morning everyone. My comments will focus on our financial results for the second quarter 2015 compared to the second quarter 2014 with some color describing the linked-quarter changes as well. I'd like to start off with a financial update on the closing of the Marquette acquisitions. The market value of the shares of UMB common stock issued to the Pohlad family when the merger became effective was approximately $179.7 million based on a closing price of $51.79 per share on May 29, 2015. In the December 2014 announcement of the deal, we estimated that the transaction was priced at 1.6 times Marquette’s tangible book value using our stock price at the time of closings the price of Marquette’s tangible book value was 1.5 times subject to post-closing adjustment. Please see our earnings release and Slide 34 in the deck for further explanation and reconciliations of non-GAAP financial measures. The calculation of the credit mark on acquired loans came in at 1.25%. Additional details will be in our 10-Q when it is filed next week. Because the transaction was accounted for using the purchased method of accounting the purchase price was allocated based on the estimated fair market value of the assets and liabilities acquired. On May 31, we acquired assets with an acquired value of $1.3 billion and assume total liabilities with an acquired value of $1.2 billion. Finally, you'll see in the press release that we incurred expenses of 709,000 in this quarter related to the acquisition. Total acquisition related expenses for the fourth quarter 2014 and year-to-date 2015 are $3.4 million. As we get further into integration in the third quarter and beyond, we will discuss how these expenses are tracking against the $23 million in estimated transaction costs that we discussed in the…

Thanks, Brian and I’m happy to talk with you this morning about the Bank segments financials and business drivers which can be found starting on Slide 18. As you can see the Bank's net income for the second quarter was $15.5 million and the pretax profit margin was 15.7%. The 14.2% lift and net interest income in this segment was primarily driven by loan volume including acquired balances and new loan production from legacy market channels. This volume contributed to an improved loan-to-deposit ratio which stood at 61.5% at June 30, 2015 an increased from 56.8% a year ago. Total commercial and industrial loans stood at $4.1 billion an increase of $593.3 million or 16.8% compared to June 30, 2014, included the increased for $105.7 million in loans acquired from Marquette and new loans originated by legacy Marquette businesses. Commercial real estate loans increased $658.2 million, or 38.1% to $2.4 billion compared to balances a year ago. $343.4 million of the increase was attributed to acquired new loans from legacy Marquette. Our commercial lending teams are finding opportunities in all of our markets and across several industries. We've experienced strong ag related demand as well as close several large C&I loans and we’ve been able to take a few big deals from our competition. On the CRE side most new loans we are in the multifamily housing and office complex space. Additionally we're seeing interest in CRE refinancing of business we like as those loans are fully funded right away. Total loan production across all of UMB’s lines of business during the second quarter was a new high of $573.9 million were total pay downs and total pay offs for $315.3 million. The pay down and pay off totals and line changes were $156.6 million increase an existing revolving loan…

Thank you, Mike and good morning. Let me begin with the institutional investment management segment, which is comprised of Scout’s investments equity and fixed income mutual funds and separately managed investment accounts. Details on this segment begin on Slide 23. For the second quarter, Scout’s net income was $5.6 million a decrease of $2.9 million compared to the second quarter of 2014. Revenue for the segment declined $8.3 million due to net outflows primarily in the international fund and the resulting shift in assets under management mix. As Mariner mentioned the revenue reduction was partially offset by an expense decrease in the segment of $3.8 million driven largely by lower processing fees due to lower AUM and equity mutual funds and a $605,000 reduction in contingent liability expense related to the Reams Asset Management earn out. Despite the revenue reduction this quarter the business maintained a pretax profit margin of 28.8%. As showed on Slide 24 assets under management stood at $30 billion on June 30, 2015, which is a decrease of 7.3% compared to assets under management a year ago. You will see a breakdown of our assets on that slide, which as of June 30 were 29% equity and 71% fixed income compared to a 45% and 55% equity fixed income mix at June 30, 2014. For the past several quarters we have reported net outflows from the Scout equity funds driven by significant underperformance from the Scout international fund particularly in 2013. As of June 30, 2015 assets and Scout equity strategies decreased $733.1 million compared to March 31, 2015 driven primarily by net equity outflows of $682.1 million. Page 25 of the supporting materials shows the various components of this change by both net flows and market impacts. Assets under management in Scout’s fixed income strategies…

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Ebrahim Poonawala of Merrill Lynch. Please go ahead.

Good morning guys.

Good morning.

Good morning.

I think if we can start Mariner in terms of just getting a little more detail I know you said we get more inflow on the efficiency initiatives within the next 60 days, but when I look at sort of the second quarter expense growth outside of market also was higher than expected and I'm just trying to understand what – just to levels that expectations what should we expect in terms of the magnitude of these improvements when we look for more details 60 days from now either from the standpoint of the improvement in the efficiency ratio or if you can give some color on dollar expense numbers that could be very helpful?

Sure, Ebrahim. Thanks for the question, what I am able to give you is mostly directional until we have a chance to revisit again in October, but let me try to give a little color here. So you know we’ve talked for some time few of those who have been following the company about our desire to operate closer to 70% efficiency ratio. That remains the case and in the past we've had the good fortune of some really strong tailwinds and performance from the things like Scout that have allowed us to take more measured approach to how we get to that 70% efficiency ratio. Given the current environment and the headwinds and such you know they have highlighted our in efficiencies and therefore waiting is not a strategy and we are committed to getting there you know more quickly than we have in the past. We will complete a process for working on and share that with the investor community in our October call. And that will conclude all that we will be doing on the expense side to get to 70. However, the time it takes to get the 70 will be somewhat dependent on the other side of the equation, which is revenue and mostly around how soon and how fast interest rates come up. So we will conclude and exercise on the expense side in October and share with you those conclusions in that plan in October, but how quickly we get down to 70 will depend on the other side of the equation and the impact of interest rates.

Understood and just look at I am clear when you update in October you’d have gone through the expense side of the equation in terms of what you want to do from an efficiency standpoint. And then it's all about revenue improvement am I understanding that correctly?

Yes, so we will conclude and exercise and share with you what those expense reductions will be and their associated ongoing run rate for 2016 when the October conference call comes around.

Understood and separately so I guess a last question to Peter just in terms of Scout institutional? Can we touch upon in terms of what we are doing from a product strategy standpoint in terms of introducing new equity products and from a sales standpoint to that of shift this negative tied in their business.

Sure, Ebrahim. Good morning so over the last five years we've actually launched six new funds I am pleased that two of them are very close to their three year mark and I think as you know it's a little easier to sell products – even products with terrific near-term performance after they have their three-year credentials. So we are very excited about that we continue to look at new products that we can launched, where we have a reason to believe we can outperform passive strategies and but we can do output to our shareholders. So we continue to look for new ways to offer products we continue to look at lifting out teams. So we can add more bench strength if you will to our product lineup, but as you know the business very well it is basically a performance business and it does have been flow a little bit as performance tends to – as it tends to move around a little bit.

Understood thanks for taking my questions.

Thank you.

The next question comes from Chris McGratty of KBW. Please go ahead.

Hey, good morning everybody.

Good morning.

Good morning, Chris.

Brian maybe to start with you, your security focus is pretty short in the yield about 1.5%. Can you talk about the ability to likes and duration and improve the yields over time? And also in the context that I believe what’s a pretty large proportion of the other public [indiscernible]. Thank you.

I am going to ask you to repeat specifically your question I got a little lost in there, the 1.5% related to what…

Yes, sure no problem. The security yields are about 1.5% and my question is as higher rates approach how do you view extending duration and approving the yield with the context of a securities focus, you know fairly pledged?

Yes, and maybe just as a reminder we continue to evaluate the earning asset mix as a whole and so our strategy is to roll within our loan portfolio, while maintaining the investment portfolio we are seeing that rate start to trough and look for that trajectory to improve here in the latter part of the year with even the minimal low end of the curve rate improvements from the Fed. From a duration perspective yes as we’ve move up that rate profile or that curve profile we’ll look to take advantage of improvements in rates.

On the margin.

On the margin, yes don’t expect us to – length and duration in any material way right now.

Okay, thank you. Maybe one for Peter. There has been a lot of M&A activity in healthcare space recently I’m interested kind of in your high level thoughts potentially as an opportunity and as a rest of the business with lot of consolidation with the HSA businesses?

Sure. So [indiscernible] definitely seeing a lot of the big guys trying to get together and build scale in the industry for sure. Keep in mind that our strategy is a multi-channel strategy and we are not over reliant on any single channel for the business that comes into our healthcare vertical. We do have a wholesale distribution approach through third-party administrators, certainly through health plans although that is not the only way we distribute, we go through technology companies, direct to employers, direct to consumers through a 401(k) platforms et cetera. So it's a multi-channel strategy for us in terms of how we go to market, we’re very closely paying attention to the consolidation going on in the healthcare industry, but don't see it as a major detriment to our growth profile because in fact we have this multi-channel approach.

All right. Thank you.

The next question comes from Matt Olney of Stephens Inc. Please go ahead.

Hey, thanks. Good morning guys.

Good morning.

Good morning, Matt.

Hey, first off congrats on getting the Marquette deal closed into the numbers partially into 2Q. I'm trying to understand the core trends better into 2Q X-Marquette it’s kind of legacy UMBF. So either even more details you can give us as far as the core expenses net income and margin from the legacy UMBF in 2Q, X-Marquette?

I think the best way to think about that is we have given you the overall numbers across the board and you only have one month impact of Marquette in there. So you are largely seeing the legacy improvements in their to margin and loan growth.

Yes, Matt this is Mike. So as a reminder when we announced the deal we provided details around the expected integration cost and those were around $23 million. We have $3 million of that through the pipeline we have $20 million yet to go. And so you are going to see that in our noninterest expense and we’ll give you visibility to that in the coming quarters. As Mariner saidthough one of the important things about this deal was our ability to leverage our much lower cost of funds and you’re starting to see that in the expansion in net interest margin on the holding companies balance sheet and income statement. And the thing it’s important about that as you mentioned is we only have one-month of the second quarter and the numbers and you’ve already seen an uptick in both the earning asset yields and margin due to Marquette.

We’re modeling, we are coming in very close to model on expenses and integration.

So far it’s gone very well, we feel very good about where we’re at this point both the impact on our financial statements and just generally how the integrations is gone.

Loan quality looks better than we expected it through to due diligence. Everything looks really fantastic. Teams are working very well together, seeing loan growth, it’s great, but very pleased.

So that’s helpful. And then as far as the outlook for organic loan growth I'm curious if the Marquette deal changes your overall outlook for loan growth from here.

So in the past I’ve given you a look into the next 90 days around the pipeline. I would say that our pipeline for the third quarter looks as good to slightly better than it did going down – going into the second quarter and about 10% of our expected pipeline is coming from Marquette, legacy Marquette sales energy.

Okay. Thanks, Mariner, it was great color. And then as far as the goal for the efficiency ratio would it get down to 17% did I hear you correctly that you would expect interest rates would need to help you out in order to get there?

Can you ask that again?

Did the 70% efficiency ratio goal assume higher interest rates?

Well, so maybe I’ll rephrase that. So we expect ourselves to get to 70% and what I’m saying is we’ll include our efforts on the expense side and share those with you in October getting the 70% only come through expense reductions, we need revenue improvement also and so what I’m saying is how quickly we get to 70% isn't just depended on all the expense improvements that we make it will require – the rate which we get there will require some sort of analysis around how long it takes interest rates to come up, is that helps.

Yes, that’s helpful. And then lastly from me as far as M&A now that Marquette’s close, what are your thoughts on M&A from here and strategically what types of franchise are you thinking about at this point?

Yes, so we love all the deals you know, we love all four of our businesses and we shared with you before sort of the margin and momentum. So you have a good sense for the margin, profit margin in all of our businesses and we are always sort of stack rank or our M&A activities around where the momentum is coming from or where gross profit margins are so I continues to be the case. We clearly are good at finding quality banks and integrating them and we would like to continue to find those. They are more quickly accretive and have a lower risk profile as supposed, but we are continuing to really look across all four business lines for quality opportunities that we’ve said in the past that meet culturable, financial and strategic thresholds of course being cultural being at the top of the list got to fit into our very unique organization.

Thank you.

The next question comes from John Rodis of FIG Partners. Please go ahead.

Good morning guys.

Hey John.

Hey John.

I guess maybe just let me ask another question on the Marquette I guess operating expense as you guys put in the press release that $3.4 billion in the quarter was from salary and benefits expense related to Marquette. Was there any other expenses in operating expenses related to Marquette for the quarter?

Yes, you have things like brick-and-mortar related costs anything that you have an ongoing costs outside folks like you may use legal departments et cetera that are not related specifically to the acquisition yes, certainly it’s more than just salary and benefits.

Outsource technology providers we do business with et cetera.

Okay, so just to be clear the $3.4 million was just salary and benefits that wasn't total operating expenses for them for the quarter?

Correct.

Correct.

Correct, okay. Maybe Brian just to make sure I heard you correctly to you said the full-year effective tax rate should be around 27.1% is that correct?

That’s correct.

Okay, question on asset quality guys and again asset quality for you guys is always been strong, but and NPAs were up during the quarter was that related to Marquette or was it something else?

Certainly Marquette has an impact, but no it’s just typical regular stuff in/and out from one quarter to next will have an uptick here or there. What I think you should take ways with no trend of lower quality in our loans.

No I mean NPAs is obviously are still very low relative to peers, but just wanted to make sure, okay. Can you guys talk a little bit about or can you give us an update on your energy exposure, the portfolio there at the end of the quarter?

Relatively unchanged yes from where it was last quarter very nominal.

Yes, so as a reminder as it relates specifically to Marquette their total exposure all in their Texas bank was somewhere around 4% and the legacy of their total book of our total legacy UMB book that number was slightly below 3% so not material.

Any trends in that portfolio during the quarters or is it performing as expected so forth?

Yes, I mean we were a high-quality lender and they're all solid companies, we are not out drilling dry holes, it’s a seasoned company’s with big balance sheets.

Okay. And maybe just final question for you Mike. Did you say I think assets are the assets under management of the bank I think you said roughly $700 million of the increase was related to Marquette, is that correct?

That’s correct.

Okay.

Yes, that entity is based in Minneapolis is called Marquette Asset Management.

Okay, and will you consolidate that into yours or I guess on the conversion or…

Not currently right now, we’re evaluating the best way to go to market, but now right now that operates as a separate entity.

Okay. Thanks, guys.

[Operator Instructions] The next question comes from Peyton Green of Piper Jaffray. Please go ahead.

Yes, good morning. I was wondering maybe if you could comment a little bit on deposit growth. I think normally or at least historically 2Q has been a relatively weak quarter for deposits and it’s particularly strong even after backing out the Marquette acquisition. Maybe if you could speak to a little bit about the outlook for solid deposit growth?

I mean I think we haven’t – given the strength of it and Peyton [indiscernible] given the strength of our deposit franchise and what we’re trying to do to optimize the balance sheet and we don't really, we can turn on all sorts of levers over time to increase deposit growth, but right now we’re not contemplating the need to have a higher rate of deposit growth.

Okay.

Yes, and maybe just some more color to add to that. Remember the healthcare related deposits now exceed a $1 billion and so if you are looking at Q2 to Q2 you have to factor that in that’s a significant mover in the total.

So I think you are saying our deposit growth is lower without Marquette and is now into your…

No, I think I mean the deposit growth is backing up Marquette was actually little stronger than the normal 1Q to 2Q seasonality would suggest.

I thought you were saying you expected it be faster and I was explaining why we weren’t pursuing a faster growth rate. Sorry so I didn’t…

No, I thought it was pretty good I mean…

Yes, we’re saying the same thing. I’m happy with our deposit growth rate. I thought I heard you say you expected it to be better.

No, not at all, quite contrary. Maybe secondly in terms of the expense initiative I mean you mentioned that’s you hope to get $3.6 million out of expenses from the initiatives already announced, but I mean to what degree are you comfortable with expense growth continuing to exceed revenue growth?

So I think those reading that are not the intended way so the $3.6 million is from initiatives we’ve already taken so you have not seen the results from the efforts that I’m discussing that we are doing over the next 60 days.

Okay, and so would that be fully faced in? So will the $3.6 million be fully faced in by the third quarter or later?

Yes.

The run rate will change for the full quarter, yes.

Think if it has a rolling 12 full-year run rate.

Okay, and then…

That was just kind of a first step and an initial step just to sort of set the stage for the actual planning process.

Okay, and I may have misunderstood this, but you referenced $3.4 million in personal expenses that were included in your personal expenses from Marquette and then with regard to the integration expenses of $23 million when would you expect those to fall out and remind us kind of the expense cross sales you would expect from Marquette and the realization timeframe of that?

Yes, so as a reminder the integration related costs and I think we’ve made it public that the integrated or the integration timeline is expected to occur in the first quarter probably in the middle of February for next year. By the time we get there assuming that all of our costs through the income statement that would be $23 million. That’s what we estimated the time we announced the deal and that still looks like the right target for us. And the related expense savings, we expect to be around $13 million.

So I’d say earlier we’re on target for the model and shared with you kind of upfront so we are on target with that modeling.

Okay and that would be fully faced in by the second quarter or third quarter?

Well, it may dribble that it will - some of its going to dribbles of some past that – but it’s over the next between now and – between this year and next year.

That’s right. Yes.

So as we talked about during the – our initial discussion about the deal last year its phased in over two years to total closer to $14 million for ongoing cost saves.

Okay.

And one thing I'll add just to make sure that we’re clear and maybe you understand that. But the expense initiative around efficiencies has nothing to do with Marquette, the cost associated with acquisition are completely separate.

Absolutely that’s a good distinction.

Okay great. And then maybe Peter can you talk about Scouts at least on the mutual fund side and maybe, but separate account side how is the traction so for through July?

Well you know interestingly the second quarter of this past year of 2015 was the lowest net outflows we’d experienced since Q1 of 2014. So in fact and this is on the equity side, so in fact we did see a deceleration in outflows in Q2 versus the prior four or five quarters so that's a good news. Outlook our sales guys are out telling the Scout story everyday. We are in all of our channels ensuring that our clients understand that the performance particularly in mid-cap and others to stabilize considerably and we are still getting a lot of works we’re still getting a lot of opportunities on the equity side, but net-net performance needs to stabilize and improve in order to really turn the tide there. On the separate account side that’s primarily fixed income and that pipeline has been good and continues to be good. As you saw we had negative I am sorry we had positive inflows of $262 million in fixed income in the second quarter and that momentum continues to be strong.

Okay great and maybe this is housekeeping question, but in the terms of Prairie I guess splits over in terms of their five year anniversary in the third quarter? Is there anything we should be mindful of in terms of expense movement from one category to another?

No not necessarily well let me think of your question we do go through the process of doing the fair value adjustments as you know and we discussed for five years. As we enter the future those expenses will start to show up in the normal course of compensation for the performance on those funds.

Okay. So you see go from other geographies to personal?

We are shifting from it in/or out obviously to compensation program to intent the principles to continue performing.

Great, thank you for taking my questions. End of Q&A

This concludes our question-and-answer session. I would like to turn the conference back over to Kay Gregory for any closing remarks.

Thank you for your interest in UMB today. This call can be accessed via replay on our website beginning in about two hours and it will run through August 12. As always you can contact UMB Investor Relations with any follow-up questions by calling 816-860-7106. Again, we appreciate your interest and time. Thank you.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.