UMB Financial Corp (UMBF) 2008 Q3 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the UMB Financial Corporation's third quarter conference call. During today's presentation all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (OPERATOR INSTRUCTIONS) This conference is being recorded today, Wednesday, October 22nd, 2008.

I would now like to turn the conference over to Abby Mayer, Director of Investor Relations. Please go ahead, ma'am.

Good morning, everyone, and thank you for joining us for our conference call and webcast regarding our 2008 third quarter financial results. Before we begin, let me remind you that our comments in this conference call contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E 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 to equity markets, general economic conditions as they relate to the company's loan and fee based customers, competition in the financial services industry, the ability to integrate acquisitions, and other risks and uncertainties which are detailed in our filings with the Securities and Exchange Commission may cause actual results to differ materially from those discussed in this call. UMB has no duty to update such statements and undertakes no obligation to update or supplement forward-looking statements that become untrue because of new information, future events or otherwise.

Our earnings release includes both our GAAP based income statement and reconciliation to the non-GAAP measures discussed in the release, which includes certain pre-tax adjustments to non-interest income and non-interest expense, the tax effect of those adjustments, and adjusted net income. These adjustments comprise a gain on the sale of our securities transfer product, the majority of which was recognized in the third quarter of 2007 with the final contingent payment recognized during the third quarter of 2008. The reconciliation for these items can also be found on our website at 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 what we deem to be a more reliable indicator of ongoing operating performance. By now, we hope most of you on the call or listening to the webcast have had a chance to review our earnings release dated October 21st. If not, you will find it on our website 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. First Mariner will highlight our results and strategies. Then Mike will review the details of our third quarter results. Peter will follow with a discussion of operating performance against our strategies. Following that we'll be happy to answer your questions. Now I'll turn the call over to Mariner Kemper.

Thank you, Abby. Welcome, everyone, and thank you for joining us today. UMB continued to deliver strong net income growth in the third quarter of 2008. Net income totaled $21.8 million or $0.53 per diluted share, a 1.1% increase from $21.5 million or $0.51 per diluted share for the third quarter of 2007. EPS grew 3.9%, while the industry average expected EPS growth was a negative 25%. These results reflect the sale of our securities transfer product, for which we recorded a $1.1 million gain in the third quarter of 2008 and a $6.5 million gain in the third quarter of 2007. Excluding this transaction, UMB reported net income of $21.1 million or growth of 21.3% over the third quarter of 2007. These results illustrate that we continue to manage our business focusing on quality and the long term rather than focusing on short-term earnings. In times like these, our time tested business model allows us to capitalize on our position of strength while others in the industry remain internally focused.

This strong financial performance was driven by a 7.8% revenue growth, which was comprised of net interest income growth of 14.3% and non-interest income growth of 2.9%. Excluding the gain on the securities transfer sale, non- interest income grew 10.8% and total revenue grew 12.4%. We continue to be well capitalized, something we believe is important, especially in the current environment. As evidence of this, our Tier 1 leverage and total risk-based capital ratio as of September 30 were 13.9%, 9.5% and 14.8% respectively. Our credit quality remains solid and our non-performing loans at 0.16% and net charge-offs at 0.21%. These ratios are strong relative to the industry, which at the end of the second quarter reported average net charge-offs of 0.68% and average non-performing loans of 1.8%. The pressure in the financial services industry continues to validate our business model based on our prudent risk profile and uncompromised underwriting standards. With a solid foundation in our core and disciplined execution, we believe our performance is evidence that our growth strategies are working. As a reminder, our first strategy is to focus on yield enhancement, and we continue to make progress optimizing the mix of our earning assets and liabilities. During the third quarter of 2008, end-of-period loans increased 7% over the same period of 2007, representing the 21st consecutive quarter of year-over-year loan growth. We ended the quarter with a record $4.2 billion in loan balances, which reflects continued growth in commercial, credit card and home equity loans. These increases helped offset the decline due to our decision to run off the indirect loan portfolio in August of 2007.

As of September 30th, 2008, our indirect loan portfolio balances stood at $329 million, a 46% decrease over September 30, 2007. Our commercial loan portfolio continued to perform well in the third quarter, with a 12% increase in balances over the prior year. Our credit card portfolio increased nearly 23% year-over-year, with all of our segments, consumer, commercial and private label recording strong double digit growth in balances. Our home equity loans grew 41%, continuing a strong trend over the past three years. We've increased HELOC loans for 1.1% of our total loan portfolio at the end of 2002 to 8.4% of our loan portfolio at the end of the third quarter 2008. The credit quality of this portfolio remains excellent. We continue to focus on our existing and prospective customer base within our footprint to generate this growth. We are extremely pleased with the growth in each of our loan segments, especially in light of the current environment. And as always, we achieved this growth without wavering from our credit underwriting standards.

Turning to deposits, our average deposits increased 14.8% over the same period in 2007 and our end of period deposits growth was 19.6%. Non-interest bearing deposits were 32.3% of our total deposits, well above the industry average, and grew 7.6% on an average basis quarter-over-quarter. Gathering core deposits is key to our strategy for our deposit franchise. This deposit base provides us with liquidity and competitive advantage in the current marketplace, allowing us much flexibility. Our core investment portfolio average life was 32 months at the end of the third quarter 2008 compared to 37 months at the end of the third quarter of 2007. Due to the current rate environment, we expect our core investment portfolio average life to become somewhat shorter as we avoid locking in low rates for longer periods of time. Our second strategy is to grow our fee based businesses. Non-interest income represented approximately 54% of total revenue in the third quarter of 2008 and grew 2.9% compared to the same period in 2007. On a non-GAAP basis, non-interest income grew 10.8% over the third quarter 2007. Trust and securities processing income and deposit services charges income drove our fee income growth for the quarter. Peter will discuss that further in his comments.

Our third strategy is to leverage our distribution network. During the quarter, we opened one branch leaving our branch network at 136 locations. Utilizing our branches to drive customer growth, we ran a Grab a Great Rate campaign that generated more than $400 million in new deposits. Through this campaign we acquired more than 2,000 new core customers and are very pleased with our ability to cross sell into those relationships. Also important to our distribution network, we expect to close on our announced acquisition of the Citadel Bank in Colorado Springs in the fourth quarter. Citadel and UMB are a great cultural fit. Citadel's lending policies are very similar to ours. Additionally, it has a similar deposit composition to ours and the acquisition will allow us to build out our existing distribution and add $82 million in deposits and approximately $25 million in loans to our Colorado Springs franchise. Given the current market environment, we recognized a unique opportunity to tell our story to the marketplace with a print campaign during the third quarter. The campaign focused on keywords such as "strong," "time tested" and "reliable" and tells our customers and non-customer s why in all times it's good to be with UMB.

Our fourth strategy is to strengthen our asset management business. During the third quarter trust and securities processing income increased 9.1% to $31.5 million. The improvement was primarily driven by increased assets under management and higher revenue from UMB Fund Services Group. Peter will also discuss this later in his comments. Finally our fifth strategy is to focus on capital management. Our priorities to this regard have not changed. They are, first, to invest in growth, either through reinvestment in the business or through acquisitions that are good, strategic, financial, operational and cultural fit. Citadel is another great example of that fit. Second, to consider increasing our dividend over time and, third, to repurchase stock when it makes sense to do so. To that end in the third quarter we repurchased 26,017 at an average price of $54.44 per share for a total cost of $1.4 million. This brings our year-to-date total to 562,851,000 shares at an average price of $40.11 for a total cost of $22.6 million. Also yesterday, the Board increased the regular quarterly dividend -- cash dividend by 6%, taking it to $0.175 per share. This is the eighth increase in our quarterly dividend since July 2003 with a total increase over this period of 75%, a reflection of our earnings performance and strong capital levels.

These five strategies along with our focus on efficiency will continue to drive performance in the remainder of 2008 and beyond. With safety and soundness at our core, we remain committed to growing revenue, while managing expense growth and maintaining prudent credit quality standards. Now, I'll turn it over to Mike Hagedorn, our CFO. Mike?

Thanks, Mariner, and welcome, everyone. As Mariner indicated we reported quarterly earnings of $21.8 million or $0.53 per diluted share for the third quarter, up 1.1% from $21.5 million or $0.51 per share in the same period last year. Excluding the securities transfer gains in each quarter, net income would have been $21.1 million in the third quarter of 2008 and $17.4 million in the third quarter of 2007, an increase of 21.3%. The key driver of our net income was our ability to effectively manage our funding costs. Net interest income for the quarter increased $8.3 million or 14.3% over the same period in 2007. As rates fell, our interest income declined 9.9%. However, this decline was more than offset by a 40.6% decrease in our total interest expense, leading to the 14.3% increase in our net interest income. Net interest margin increased 9 basis points to 3.57% from 3.48% in the third quarter of 2007. This improvement was primarily due to the lower cost of interest bearing liabilities. In the third quarter of 2008, the cost of interest bearing liabilities decreased to 1.88% compared to 3.51% in the third quarter of 2007, a decline of 163 basis points. This offsets the 111 basis point decrease in average earning asset yields.

Due to the declining rate environment, free funds contribution declined to 49 basis points from 92 basis points in the third quarter of 2007. During the third quarter, $138 million in core portfolio securities rolled off at an average yield of 4.05%. In turn, we purchased $399 million of securities at an average yield of 3.68%. Over the next three months, $157 million of core investments with an average yield of 4.59% will roll off. Over the next 12 months, $810 million of core investments with an average yield of 4.34% will roll off. In the current lower rate environment, we expect the repricing of these securities to negatively impact our interest income. Nevertheless, thanks to the actions we took over the past three years to lengthen our core investment portfolios' average life, we're pleased to have some higher yields locked in for longer periods of time. In addition, 63% of our loan portfolio is expected to reprice through the end of 2009. Non-interest income increased $2.2 million or 2.9% for the quarter ended September 30, 2008 compared with the same period in 2007.

As Mariner mentioned, we had gains in each quarter related to the sale of our securities transfer product. Excluding these gains, non-interest income would have increased by 10.8%. The improvement was primarily due to higher trust and securities processing income as well as higher deposit service charges. Trust and securities processing fees were up 9.1%, primarily due to an 8.8% increase in fee income from UMB Scout Funds and a 15.1% increase in fund administration and custody services. Deposit service charges increased $2.3 million or 11.1%. This is due to the strong core deposit growth compared to the third quarter of 2007. Non-interest expense increased $8.5 million or 8.3% for the third quarter compared with the same period in 2007. The most significant increases were in compensation expenses and processing fees and were primarily related to revenue increases. Salaries and benefits increased $5.7 million or 11.2% as a result of higher commissions and bonuses as well as equity based compensation and employee benefit costs.

Credit quality ratios in the third quarter of 2008 continue to reflect UMB's continued strong committment to high quality lending. Non-performing loans including non-accrual and restructured loans were $6.9 million as of September 30, 2008, or 0.16% of total loans from $5.7 million or 0.14% for the same period last year. Net loan charge-offs increased slightly totaling $2.2 million for the third quarter or 0.21% of average loans when annualized compared with $1.9 million or 0.19% of average loans during the same period last year. Our credit quality continues to remain strong, especially when compared to the industry. As of the end of the second quarter, industry average net charge-offs as a percent of total loans were 0.68%, more than three times our current level. Our provision for loan losses increased to $4.5 million in the third quarter of 2008 from $2.8 million a year earlier. This increase partly reflects the growth experienced in our loan portfolio. Our allowance as a percent of loans increased slightly to 1.19% from 1.17% in the third quarter of 2007.

Now turning to the balance sheet. One of the key performance drivers for the quarter was loan growth. At the end of September, loan balances were $4.2 billion compared with $4 billion a year ago. Total end of period loans grew by 7%, primarily driven by a 12.1% increase in commercial loans, a 41% increase in home equity loans, and a 22.7% increase in credit card balances. This growth was offset by a 46% plan decrease in our indirect auto portfolio. As of September 30, our indirect auto portfolio balance stood at $329 million, down from $613 million at September 30th, 2007. Again, this run-off is part of our yield enhancement strategy that Mariner discussed earlier in his comments. During the third quarter of 2008 average total deposits were $6.5 billion compared with $5.7 billion a year ago, a 14.8% increase. We are particularly pleased with non-interest bearing deposits increasing 7.6% on an average basis.

Return on average equity and return on average assets during the third quarter of 2008 were 9.25% and 1% respectively from 9.7% and 1.09% for the same period in 2007. On a non-GAAP basis, those ratios improved significantly in 2008 to 8.96% and 0.9% respectively from 7.85% and 0.88% for the same period in 2007. We remain focused on continuing to increase our profitability metrics. Finally, for the year-to-date diluted EPS of $1.89 increased 35% compared with $1.40 for the first nine months of 2007. This is based on net income of $77.8 million compared with $58.9 million for the same period last year. Excluding the securities transfer gains in each year as well as the Visa gains in the first quarter, net income would have been $68.9 million for the first nine months of 2008 and $54.8 million for the first nine months of 2007, an increase of 25.8%. With that I'll turn it over to Peter for some additional comments on our operating performance.

Thanks, Mike. Good morning, everyone. Let me take a moment to provide some additional details on our growth and operational strategies, starting with our focus on growing our fee businesses. A significant strength of ours is that total revenue is split almost evenly between net interest income and non- interest income. This diversification allows us not to be beholden to the winds of interest rates, equity markets, or exclusively to other market forces. This quarter, non-interest income accounted for 54% of total revenues. Driving improvement in these businesses continues to be a core strategy. We are pleased to report non-interest income growth of 2.9% during the quarter and 10.8% on a non-GAAP basis.

During the quarter, we continue to add to our position of strength in the healthcare services space. Specifically, we are focused on the administration, custody, and card processing for health savings accounts and flexibility spending accounts. We're committed to maintaining our leadership position by adding new HSA and FSA savings and investment accounts and their associated debit cards. The number of accounts grew 56% in the third quarter, with deposits and assets increasing 45% compared with the same period last year. At the end of the quarter, we had nearly 832,000 HSA and FSA accounts and nearly $139 million in deposits and investment assets. Additionally, we had $140.3 million in healthcare debit card purchase dollars, bringing our year-to-date card purchase volume to $521.4 million. We are pleased with the continued growth of this business segment.

Growing our card businesses is another part of our fee income strategy. A critical element of this effort is to grow our commercial card -- credit card program. Card holder volume increased 11.1% over the same period last year. Private label purchase volume also showed strong growth for the third quarter of 2008, increasing 20.8% over the same period last year. We continue to focus on growing our commercial and consumer credit card programs, both organically and through the acquisition of portfolios that fit our credit quality criteria. In keeping with this strategy, we acquired two portfolios in the third quarter which totaled $6.7 million in outstanding balances. UMB Funds Services continued to report strong double digit revenue and earnings growth. Non-interest income increased 14.8% for the third quarter of 2008 over the same period in 2007, due in part to deepening relationships with existing customers as well as new customer growth, all resulting in higher fee income. Higher revenue, coupled with increased efficiencies and better leverage of existing scale, led to earnings growth of 184% for the third quarter.

I'd also like to take a moment to talk about our strategy to grow our asset management business. Total assets under management remain relatively flat when compared to the third quarter of 2007 at $10.7 billion. Strong net fund flows of $1.01 billion through the third quarter have allowed us to maintain our assets under management levels despite a 23.8% decrease in the broader equity markets. Another important part of our asset management strategy has been private banking. Launched in 2007 with ten client managers, private banking now has almost $90 million in loans and more than $201 million in deposits, almost double the $43 million in loans and $106 million in deposits during the same period last year. And our corporate trust team continues to expand with the opening of our newest office in Indianapolis. During the quarter, we also announced that Tom Chulick was named as Chairman and CEO of UMB St. Louis. Tom joined us about a year ago from Banc of America and has done a wonderful job helping us to grow in that critically important market. Additionally our enterprise risk management efforts paid off for us, as we had no exposure to Lehman Brothers credits or other stressed counterparties.

We continue to focus on enhancing our operating efficiencies. Revenue growth of 7.8% lead to an efficiency ratio of 73.9%. We are pleased with the progress this metric continues to show. Just three years ago in the third quarter of 2005, our efficiency ratio was 80.2%. We also continue to see improvements in our key productivity metrics. For example, average deposits per FTE and revenue per FTE increased 16.8% and 9.7% respectively from the same period last year. Our FTE's decreased by 80 to 3,296 at September 30, 2008. Our operating strategies and focus continue to deliver strong results for UMB. During the third quarter we received numerous favorable press mentions. Jim Moffett was named leading contender the Morning Star International Fund Manager of the Year category for the third time in the last four years. Also Smart Money Magazine included UMB in an article that called us, "the envy of the banking industry." We're honored by these recent recognitions. With that, I'd like to turn it back to Mariner for some concluding remarks. Mariner?

Thanks, Peter. As everyone knows, we are in unchartered waters economically. We are seeing volatile markets in both the U.S. and abroad. Governments across the globe are intervening in financial systems at unprecedented levels. Despite these difficult times, we demonstrated again this quarter that we've built this bank with strong, stable operating principles that can take us through all types of conditions in the economy. Our focus is on the long term rather than on betting on short-term gains and this kept us from being involved in subprime lending, selling auction rate securities, speculative commercial real estate development and other short lived fads that have plagued the industry. Instead, we're out there talking to our customers, growing all of our lines of business and evolving our company to position us as a well diversified financial services company. You can count on UMB because our diversified revenue stream, our unwavering focus on quality and strength, our commitment to proven underwriting standards, our high capital levels and our strong core deposit franchise, all of which provide us with ample liquidity and flexibility in times like these. Our time tested model gives us the capacity to make loans, service our customers needs and act on strategic opportunities that will arise. During these times, I want to remind you that you can count on more from us. Thank you all for being on the call with us today and with that I'll turn it back over to the conference call operator and open it up for your questions. Thanks again.

Thank you. (OPERATOR INSTRUCTIONS) Our first question comes from the line of Charlie Ernst with Sandler O'Neill Asset Management. Please go ahead.

Good morning guys.

Good morning.

Can you guys add a little bit of color to the trust and securities processing line and just maybe break out the revenue contribution from the mutual fund business versus the trust business versus the processing business? And one other thing is to maybe add a little color as to how the assets in those business lines are priced.

Charlie, hi, it's Peter deSilva. Good morning.

Good morning.

With respect to those businesses, we do break them out in our K's and Q's, but let me give you some general commentary on them. Let me start with our fund servicing business up in Milwaukee. We've had very, very strong quarters there driven by a couple of factors. One, we have seen good, new customer growth in that particular part of our business. Secondly, part of our revenue stream is supported by assets and those assets have been growing over the last few months, last few years, we've seen nice growth there as well. And our asset management business it's largely driven by three things. It's driven by our assets that we manage in the Scout Funds and we were able to hold those assets this quarter due to very, very strong flows, which is not what we're seeing in the marketplace. It's been driven by our corporate trust business which has had a very, very strong last 12 months or so. And it's been driven by our personal investment business if you will, where we've been picking up business in the local marketplaces. So I mean, I think all in all, our trust and securities processing businesses have been performing very, very well. We are seeing some increased cost, particularly in our securities processing businesses where we're -- particularly one client in particular we have is a large international presence and we've had to absorb some cost to support their international activities but, all in all, I think that those businesses have been performing very well and we hope that they will continue to do so.

Is there any color you can give on the breakdown in revenue from the three areas that I mentioned?

Not beyond what's in the information you get from us.

Yes, Charlie, this is Mike. Not beyond the Q which will put fund services separate and put the asset management together. I think what your question is, can you tell me what's personal trust and what's fund services, and all we provide is what's in the Q.

For color obviously, the institutional money management, our mutual fund business is driving most of that growth.

Okay. And then the securities processing business. How do you price that business? Is there a lag?

I'm not quite sure I understand the question.

So you price it off of assets under custody, right?

Yes, generally speaking it's an asset based fee based upon assets under custody.

So is that sort of a real-time pricing or does the pricing lag the market?

No. It does not lag the market. It adjusts daily as the assets move around.

Okay, great. That's what I was looking for. Thank you.

Thank you. (OPERATOR INSTRUCTIONS) Our next question comes from the line of Peyton Green with FTN Midwest Securities. Please go ahead.

Good morning. I had a couple questions for you. I was wondering if you could comment a little bit on the recent cut by the Fed and also what affect that might have on your repricing assets over the next quarter or two and is there any way to get your interest bearing deposit costs down compared to the repricing that occurred in the third quarter? I guess how much of the lack of movement in the third quarter was due to promotional pricing versus normal customer deposits that you just took on?

Obviously, we're going to have margin pressure through our assets repricing and we've done a lot of what we can do with our deposits. There's some left to do, but we will see continued margin pressure.

Okay.

Mike, if you want to add? We do have on the asset side, we obviously have a big home equity portfolio and a credit card portfolio. Those have floors in them. Our commercial loans will reprice certainly and I don't know if there's anything more you want us to add to that. Mike do you want to add?

Maybe two things. I think there are some additional floors that come up now with commercial loans as well, so when there's a chance to re price, that's a new aspect. And at the beginning of next year, we will have the opportunity to reprice some of our current campaigns and that should help somewhat as well.

Okay.

But we are in the process of rerunning all of our models to not only account for the recent Fed cut but also the expectation that there may be some additional Fed cuts as well.

Okay, and then separately, the loan growth was quite strong. I guess if you back out the indirect, it was around 15% year-over-year. And how much of that was existing customers that utilized lines and how much of it was additional business with existing customers that maybe is not related to line utilization and then how much of it was just new customers that UMB has been hitting on the doors and finally got the business?

It's a good mix, really, of all of the above but mostly from new customers.

Okay.

We had, we've had a wonderful time out there selling. Our team has been able to focus on selling while others have internally focused. It's been an opportunity and we see it continuing that way for market share grab.

Okay, is there anything you're doing differently or is it just your standards are your standards and just the market has moved more towards them?

No. We're doing the same thing day in and day out, blocking and tackling.

Okay, great. Thank you very much.

Thank you. (OPERATOR INSTRUCTIONS) Our next question comes from the line of Christopher McGratty with KBW. Please go ahead.

Good morning.

Good morning.

I was wondering if you could discuss in a little bit more detail your near-term expectations for the margin. I think the fourth and first quarter typically impacted by the public funds flows and I was wondering if you can quantify if you expect similar declines, I guess, in the margin over the next couple quarters as we've seen maybe in similar years. Thank you.

Yes, this is Mike. I'll answer that one. I think you can expect what you've seen in the previous years from UMB and that is that clearly the balances come in. We don't expect different outstanding balances this time than what we've seen in the last couple of years and I think you can expect a similar impact on our margin as you've seen in the previous years as well. And I think that the biggest issue we face bringing in those funds is the ability of the markets to invest those funds with investments that have a positive spread, and some of the markets have significant dislocation. We think we have a plan built for that, but it is something that we're currently clearly working on.

Okay, great. And I guess my second question just on some of your fee based revenues that are tied more to the market and the economy, I was wondering if you could just give a broad based outlook on some of these line items such as trust, trading, card, I was wondering if you seen any softening given the recent weakness in the market.

This is Peter again. No. I think, as you know, they're driven by market forces that we don't control. Our revenues flowed up and down along with markets, if you will, and we're beholden to that to some extent. So nothing specific other than you understand as assets grow and assets shrink, we get paid on basis points and so there's some growth or some shrinkage in those revenues.

Thank you.

Thank you. Our next question comes from the line of Jordan Hymowitz with Philadelphia Financial. Please go ahead.

Hi, guys. I'm sorry, I'm just confused because I'm pretty new to the company, but you said that the margin usually goes up in the fourth quarter historically and last -- I'm sorry, down in the fourth quarter, but last year, it went up like seven or eight basis points. So are you assuming about the same number in the fourth quarter, are you assuming it will be down or can you help me understand what you think or if you just don't do it that way, 50 basis points of cuts (inaudible) will impact the margin how much?

Yes, this is Mike. And of course we aren't going to give guidance on any specific numbers, but I think in our comments, you can tell that the margin is going to be under pressure. And it's not just because of the dollars are going to come in in the fourth quarter related to public funds. It's also related to the interest rate cut that's happened as well. Historically when public funds come in, the balance sheet goes up and the margin goes down slightly and so I think we probably would expect something similar to that to happen again.

Okay, so last year's improvement was an anomaly?

Well, it's a whole mixed bag. It's what we're able to invest the funds in and when they come in and, as you know, investment yields -- our short-term investment yields are down and they were up more last year than they are this year, so it's a myriad of things. The difference between last year and this year basically comes down to what we're able to invest those funds in when they come in and certainly short-term yields are down this year.

Okay. And how much does 50 basis points negatively impact you all else being equal?

We aren't going to give guidance on some specific number, that 50 basis points equals X number of reduction in margin or increase in margin.

But don't you have to do that on the GAAP table?

It will be in the Q as far as interest rate sensitivity, yes.

And Jordan, given the fact that you're new to the company , we would love to have Abby reach out to you and give you a little update on the company.

Yes, I would like that very much actually.

Yes, we'll do that.

Okay.

Thank you. I do not show any further questions at this time. Please continue.

Thank you very much for your interest in UMB. The call can be accessed via replay at our website beginning in about two hours and it will run through November 5th 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.

Ladies and gentlemen, this concludes the UMB Financial Corporation third quarter conference call. You may now disconnect. Thank you for using ACT Conferencing.