UMB Financial Corp (UMBF) 2009 Q4 法說會逐字稿

Ladies and gentlemen, welcome to the UMB Financial Corporation fourth-quarter conference call on the 27 January, 2010. (Operator Instructions). I will now hand the conference over to Abby Wendel. Please go ahead, madame.

Thank you. Good morning, everyone, and thank you for joining us for our conference call and webcast regarding our year-end and fourth-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 recognized in 2008 that were discussed in the release, which includes pretax adjustments to non-interest income and non-interest expense, tax effect of the adjustments and adjusted net income. The adjustments recognized in 2008 include an $8.9 million gain on the mandatory redemption of Visa Inc. Class B comp stock, a $4 million gain on the covered litigation provision of the Visa-related transaction, and a $1.1 million gain on the sale of our securities transfer product. 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 a more reliable indicator of ongoing 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 January 26. 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 for the year and update the progress on growing loans and deposits, managing capital and delivering fee unparalleled customer experience. Then Mike will provide additional details on our fourth-quarter results. Finally, 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 will turn the call over to Mariner Kemper.

Thank you. Welcome, everyone, and thank you for joining us today. 2009 proved to be a challenging year for the financial services industry, but as you have seen in our press release, our ability to stay focused and execute against our business strategies drove sound results. Even in what is now known as the great recession, UMB continued to meet our customers' credit needs, grow our fee-based businesses, and maintain outstanding credit quality, and sustained a healthy net interest margin, all while growing capital. We were delighted to receive a number of industry accolades this year, particularly to be rated the second best bank in America by Forbes Magazine. We were honored by this recognition and believe this is further validation that prudent business practices lead to positive results and steady growth.

As you know, we strive to do what is right, not what is popular. Our intention is to choose the path that best benefits our shareholders, customers and associates and communities that we serve. We remain focused on the long-term and delivering sound results year after year.

Turning to specific rules for the year, net income was $89.5 million or $2.20 per diluted share. This is a decrease from our 2008 net income of $98.1 million, which included a payment related to the sale of our securities transfer product and transactions related to Visa. Excluding the impact of those non-reoccurring items, 2008 net income was $89.1 million. On a non-GAAP basis, net income for the year was up slightly, which is particularly pronounced given our record year in 2008.

Our 2009 financial performance was driven by a 10.2% increase in net interest income. This growth was primarily due to higher average earning assets and our ability to manage funding costs. To that end interest expense decreased nearly 53%, outpacing the 8.2% decrease in interest income in this historically low interest rate environment.

On a non-GAAP basis, noninterest income increased 2.4% to $310.2 million. We continue to make progress in 2009 toward building scale in our fee-based businesses. Strategic acquisitions in key business segments contributed in part to our achievements this year. Total non-interest income was 50.6% of total revenue in 2009. As a trusted financial services organization, diverse fee and revenue streams is essential to maintaining stability and quality.

A responsible approach to capital management also contributed to our success in 2009. The acquisitions we made this year augmented the product offerings in our corporate trust and fund services businesses. Additionally we bought back nearly 704,000 shares of stock at an average price of $38.22 per share. These acquisitions and share repurchases have been funded from our own equity.

At the end of the fourth quarter, we purchased American National Bank's Corporate Trust business headquartered in Denver. This acquisition provides us an immediate substantial book of business in a growth market. With more than 1400 accounts and nearly $3 billion in assets under administration, this business has been the premier corporate trust service provider in the Rocky Mountain region.

We believe we will continue to be well positioned to serve the market across our footprint. In fact, according to the securities industry and Financial Market Association, expected sales of new municipal bonds will increase nearly 14% in 2010 as compared to the 2009 levels.

Although we have not yet found the right bank acquisition for UMB, we continually evaluate banks and other fee businesses that are a strategic, cultural and financial fit. As we have stated before, our priorities as it relates to capital management are first to invest in growth either through reinvestment in the business or through acquisitions that are a good fit; second, to consider increasing our dividend over time, and third, to repurchase stock when it makes sense to do so.

Turning to our strategy to grow loans and deposits, end of period loans were flat compared to the prior quarter at $4.3 billion and were down slightly from end of period 2008. Excluding the impact of running off our indirect auto portfolio, loans increased 1.7% for the quarter.

Average loan balances for the year grew by 4.5% to $4.4 billion compared to average loans of $4.2 billion for 2008. There has been a lot of discussion lately in Washington regarding contraction of available credit in the marketplace. If our position is reflective at all of the market conditions, so lack of lending is more about the lack of demand than supply. For example, the utilization rate for our commercial lines of credit declined by nearly 8% from the end of 2008 to the end of 2009. However, our new business generation efforts have resulted in increased commercial commitments of approximately $300 million. At UMB we continue to extend credit, and we're meeting our customers' needs.

As the economy recovers, we anticipate credit demand will likely increase across the board within our footprint. Even in these challenging economic times, our credit quality remains stable, largely because of our underwriting practices are among the strongest in the industry. While we have seen an increase in our nonperforming loans and net charge-offs, we are still well below third-quarter industry averages of 3.28% and 1.11% respectively.

For the fourth quarter of 2009, UMB's nonperforming loans increased from 0.20% to 0.54%. This increase is attributed to a single shared national credit participation that was placed on nonaccrual last quarter. Net charge-offs were 0.57% of average loans compared to 0.35% a year ago with credit card charge-offs representing 61% of that total. Total credit card charge-offs were 4.31%.

According to Fitch Ratings Services, 2009 industry credit card charge-offs averaged 11.9%, almost triple our charge-off rate.

In our commercial loan portfolio, outstanding balances decreased 7.8% compared to last year. The reduction is attributed mainly to the decrease in our commercial line utilization rate mentioned earlier. As the economy recovers, we believe our business generation efforts and the new credit commitments UMB has gained throughout the past year will position us well to continue to grow our loans as customers gain more confidence in the economy and utilize their lines of credit.

Turning to real estate loans, balances increased $200 million at the end of the fourth-quarter 2009 compared to the same period a year ago. Growth was driven by an increase in two loan categories.

First, commercial real estate loans grew $111 million or 12.8% to $987 million. Second, balances in our home equity lines of credit portfolio increased $64 million or 17.8% compared to the fourth quarter of 2008. Similar to our other portfolios, credit quality in this category is outstanding. December delinquencies in our HELOC portfolio were 0.09% for 30 days past due compared to 3.26% for the industry in the third quarter. Quality underwriting is a core focus and competency for us in all of our loan categories.

Turning to liabilities, average deposits for 2009 were $7.6 billion, up 16.1% from 2008. End of period deposits were $8.5 billion, an increase of 10.5% compared to the end of 2008. Average non-interest-bearing deposits increased 22.5% at the end of the quarter and amounted to 32.5% of total deposits, well above the industry average for non-interest-bearing deposits of 14% of total.

Core deposit funding is a key component of our franchise. In addition to our traditional sources of deposits, we have developed three new deposit generators over the past few years that contribute to our core funding strength. Healthcare services, small business banking and private banking have combined deposits exceeding $921 million for the quarter, which is 64% higher than this time a year ago.

Just four years ago the balances in these three business were a combined $28 million. This group will continue to be a key area of focus for our Company.

Success is not defined by strong financials alone. At the foundation of everything we do is attracting and retaining the best people, sustaining a performance culture and building our brand. 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 detail on our financial results for the quarter. Thank you. Mike?

Thanks, Mariner, and welcome, everyone. In this continued historical low interest rate environment, we have maintained a healthy net interest margin even as the duration of our investment portfolio remains relatively short. One of the advantages of having a low cost of funds is that we don't have to stretch for earning asset yield, thereby putting our good credit quality in jeopardy. We will continue to analyze our investment portfolio and make decisions that we believe will position us better for future rate environments.

As an example in 2009 we sold securities, experienced a total gain of $9.7 million to capitalize on a market opportunity. These actions were taken to modestly shorten our duration that in turn should position us well for a rising interest rate environment.

Looking at results for the fourth-quarter 2009, net income was $23.9 million or $0.59 per diluted share, an increase of 18%. Interest income decreased 9.7%, primarily due to the continued low interest rate environment. However, this was partially offset by our larger earning asset base. Interest expense dropped 43.2%, but, as we have mentioned during prior calls, we believe there will be limited opportunities for further funding cost reductions. Net interest margin decreased 25 basis points to 3.41% compared to 3.66% in the fourth quarter of 2008. Average earning asset yields fell 68 basis points to 3.9%, while the cost of funds -- while the cost of interest-bearing liabilities dropped 55 basis points to 0.70%.

Free fund contribution declined to 21 basis points from 33 basis points over the same period last year. Low interest rates continue to make margin management difficult.

In an improving economy, we anticipate our loan portfolio will grow, thus easing the emphasis on our investment portfolio.

Turning to the investment portfolio, $272 million in core portfolio securities rolled off this quarter at an average yield of 3.71%. In turn, we purchased $671 million of securities at an average yield of 2.16%. Purchases were considerably higher than the rolloff this quarter due to the expected public fund inflows. Over the next three months, $359 million to $395 million of core investments with an average yield of 4.12% to 4.18% will roll off.

Over the next 12 months, $1.2 billion to $1.4 billion of core investments with an average yield of 4.02% to 4.06% will roll off. In the current lower rate environment, we expect the repricing of these securities to negatively impact our interest income. In addition, 56% of our total loan portfolio is expected to reprice or mature in the next 12 months. Non-interest income was up 19.7% for the fourth quarter compared to the fourth-quarter 2008 and was driven by trust and securities processing income, bond trading and investment banking and bank card fees.

Also, as noted earlier in the call, we realized 4.5 million in gains during the quarter to better position our investment portfolio. Later in the call Peter will focus or will discuss our fee income in greater detail. Non-interest expense increased to 4.4% compared to the fourth quarter last year to $119.8 million. About half of the increase is due to the acquisition of J.D. Clark & Co. completed in the second quarter of 2009. Regulatory fees increased $2.2 million from $800,000 to $3 million, primarily from higher FDIC deposit insurance premiums and the utilization of FDIC deposit insurance credits.

Also, at the end of the year, we recorded a prepayment of $34.8 million for the next three years of FDIC insurance premiums.

Although our credit quality remains strong, we increased our provision for the fourth quarter to $11.5 million, an increase of $6 million from the fourth quarter of 2008. Our provision model methodology takes into consideration not only the inherent risk in our loan portfolio but also includes a qualitative aspect. The provision as a percent of loans is now 1.49% or 30 basis points higher than in the same period last year. On a linked quarter basis, provision as a percentage of total loans is up 13 basis points.

Turning to the balance sheet, we ended the quarter with more than $11.7 billion in assets and more than $1 billion in equity. UMB remains well capitalized with Tier 1, leverage and total risk-based capital levels of 13.11%, 7.87% and 14.18% 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 fourth quarter of 2009 were 9.22% and 0.91% respectively, up from 8.43% and 0.83% for the same period in 2008. For the year return on average equity was 8.89% and return on average assets was 0.89%, down from 2008 ratios of 10.51% and 1.1% respectively.

For the quarter average loans to average deposits for the fourth quarter decreased to 55.4% from 60.8% in the fourth quarter of 2008. The continued runoff in the indirect auto loan portfolio, lower 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.

Thanks, Mike, and good morning, everyone. Being a well-diversified financial services organization continues to be one of our greatest assets. We continue to strengthen our competitive position in our fee businesses through investments in infrastructure, personnel and key acquisitions. Our fourth-quarter results demonstrate that maintaining a variety of revenue sources continues to serve us exceedingly well.

Trusted securities processing income, the largest component of fee revenue, increased $8 million or 30.4% to $34.4 million from one year ago. Revenue in this segment is largely dependent on three key drivers. One, the acquisition of new business; two, mutual funds; and three, equity market performance. Increased business in both our Fund Services and Asset Management segments were the primary drivers of growth this quarter.

Looking at specific results, trust income from Fund Services increased 60.9% or $5.5 million compared with the fourth quarter of 2008. More than 50% of this growth was the result of our acquisition of J.D. Clark & Co., which closed in the second quarter. As we mentioned previously, J.D. Clark serves the alternative investment marketplace and has added significant scale to our pre-existing alternative investments business.

UMB's asset management business can be broken into two platforms. One is Scout Investment Advisors, including our Scout mutual fund complex, and the other is personal investment and wealth management.

In our Scout Funds family, assets under management grew $2 billion or 39.1% to $6.9 billion from $4.9 billion at the end of the fourth quarter of 2008. Equity and bond fund flows were $280 million during the quarter and stand at $1 billion for all of 2009. We are pleased to note that our Scout mid-cap fund earned a five-star MorningStar rating in October of this past year for the three-year performance period. We have already begun to see improved fund flows as a result of this recognition.

On the Personal Asset Management side, our investment and wealth management business gained sales leverage in 2009 with new recurring revenue, increasing 11.9% to $3.9 million compared to $3.5 million for all of 2008. Total assets under management at the end of the fourth quarter was $4.5 billion compared to $3.7 billion just one year ago. During 2009 we have invested in this business by hiring seasoned professionals, and we are positioned for further growth in this area.

Also, during the quarter the number of health savings accounts and flexible spending accounts grew 21.6% with deposits and assets increasing 35.7% when compared to the same period last year. At the end of the quarter, we had over 1.3 million HSA and FSA accounts and more than 190 million in deposits and investment assets. 2009 healthcare-related spending on our debit cards increased 42.3% and now makes up more than 50% of our signature-based debit card volume.

As payments continue to shift to electronic transaction, our card businesses are benefiting. Commercial card holder purchase volume posted a strong quarter with total purchase volume of nearly $174 million, an increase of 10.6% when compared to last year. The number of other accounts for this segment increased 11.1%, which is driven by both new and existing customers. We were pleased to add two new large customers from the government and commercial sectors during the period. Gross active accounts from our consumer card area increased 6.3%, due primarily to account growth in our affinity card portfolio. In response to the new requirements imposed by the changes to Regulation E, we are evaluating product alternatives to provide customers with a form of overdraft protection. In accordance with the new rules, we will also be mailing to our customers information about their accounts and the opportunity to opt in or out of our overdraft protection programs.

In addition to growing our fee businesses, we continue to focus on improving operating efficiencies and managing expenses. Throughout the year we have accomplished several cost-containment initiatives. Courier rationalization and implementation of remote branch deposit lead to savings of almost $700,000 in 2009. We also have recognized savings in our telecommunication expenses. Through contract renegotiations and vendor refunds, we have realized $2.2 million in savings on a year-to-date basis. Our banking operation area, which consists of lending support, check cash and customer account services, increased productivity by 7.1% in 2009.

Our efficiency ratio increased slightly to 73.1% from 71.5% last year, primarily due to the one-time gains we had in 2008. Our efforts resulted in improved revenue per FTE and retail cross-sell ratio compared to the same quarter last year. Revenue per FTE increased 6.2% year over year, while our new customer retail cross-sell ratio improved from 3.05% to 3.20% products per customer. Delivering the unparalleled customer experience will continue to improve this ratio over time, and we are pleased with the results in this area so far.

With that, let me turn it back over to Mariner for his concluding remarks. Mariner?

Thank you, Peter. We are watching with great interest the daily news that is coming out of Washington. While we do not have a crystal ball to predict what is in store for us in 2010, we do have the utmost confidence in our time-tested business model. We believe that diversity of revenue will become increasingly important as the industry transforms under the new regulatory environment. Diversity of income has been important in our past, and we believe it will anchor our future. We have the scale and the capacity to win business, provide the unparalleled customer experience, and we have the best people in the business.

That said, we believe the financial services sector is resetting to a new normal. What that will look like is still wide open for debate. But one thing is certain. At UMB we take great pride in helping reshape the customer's perception of the financial services industry, and we have done that for 97 years.

And finally, as we have positioned UMB to compete in the new environment, we have made some changes in our Company to further leverage our unique financial services business model and organize ourselves around our clients' needs into three distinct segments: commercial financial services, personal financial services and institutional financial services.

Commercial financial services covers traditional commercial banking, including lending, treasury management services and regional banking. Personal financial services brings together our consumer bank with our individual investment and wealth management business. The range of services offered to UMB clients extend from a basic checking account to estate planning and trust services. Institutional financial services includes the suite of fee businesses that serve intermediaries. Businesses here include institutional investment management and investment services functions such as our Scout Investment Advisors, UMB Fund Services and Corporate Trust, plus our smaller growth businesses such as credit card and credit card services and UMB Health Services. These changes have been received well by our associates and will support our focused approach to serving our clients' needs.

Thank you all for your participation on the call today and your interest in our Company. With that, I will turn it back over to the conference call operator.

(Operator Instructions). Chris McGratty, KBW.

Maybe you guys could start by talking about the overall strategy with the balance sheet. At current levels securities and loans are essentially equal as a percent of earning assets. I guess maybe you could talk to your expectations for this trend to continue and maybe longer-term what the overall balance sheet strategy -- the balance sheet will look like over the next couple of years.

This is Mike. I will take a stab at that. I think the first thing to note on that is what Mariner mentioned earlier, and that is that the utilization rate on commercial lines of credit is down. So I think when you look at loan to deposit ratio you have to consider that this is not a normal lending environment as it relates to volume. So that is the first thing.

Second, on the investment portfolio, we pre-purchased roughly $200 million in securities in the fourth quarter to lock in higher spreads for the public fund inflows that we always get at the end of the year that carry on into the first quarter of the subsequent year.

So the portfolio growth is slightly exaggerated, I guess is the best way to put it, because we did pre-purchase some of those securities. As those roll off, that non-core portfolio that we have that we block in the spreads on those deposits will roll off as well. And so I think you can see the balance sheet is a little bit larger obviously for those reasons alone.

What is the size of the non-core securities books?

Just slightly over $1 billion.

Okay. And then what is the duration, how quickly can you take that off?

The duration is five months.

I might add I mentioned that commitments were up on the commercial side as well. So you have utilization on the entire portfolio being down into the mid-20s and percentages, and then you also have the commitments that we have made of over approximately $300 million, which also have lower utilization rates. So I think as the economy recovers we are going to have an immediate impact just from the business we have booked, along with our continued growth and market share.

I might also add our deposits that we talked about were up significantly, so you have the dual challenge of a much larger deposit base against a lower demand for credit in the short-term. But we believe that liquidity will get sopped up over the next year or two as the economy improves.

And then a question on the margin. You guys talked about pre-paying or pre-buying some bonds this quarter, but you have been cautious the last few quarters on lower reinvestment rates on securities portfolio. Can you talk a little bit on your expectations for the margin? Will you continue to increase the balance sheet to meet the spread income number, or eventually will this stop and margins have to come down along with spread income?

Well, there are a lot of ways you can go with that one. I think the first thing you have to consider when you look at that is, in the fourth quarter, at least at the end of the fourth quarter and clearly for most of the first quarter of 2010, you are still going to have those public fund balances on. And so the spreads on those dollars are narrow. And so they negatively impact net interest margin, so it is not a normalized net interest margin.

That said, as we disclosed in our pre-comments securities that are rolling off start with a yield that has a floor and new purchases have it, too. So by that very nature, there is going to be margin compression. I think the thing to keep in mind there, though, you are pre-positioning yourself for higher interest rates with slight duration reduction, and we think that is the right strategy right now.

We are making decisions for the long term here with our investment portfolio and not reaching for some yield in the short term to give up the next few years of earnings potential out of our investment portfolio.

Okay. And then just a follow-up on longer-term, kind of how you are thinking about profitability. In terms of the efficiency ratio, certainly it is a little bit elevated, and returns on capital are a little below probably the full earnings potential of the Company. Then you can talk about longer term goals in terms of timing to improve on this.

Well, first of all, what is the new normal for our industry on those ratios. But I think you will see us certainly put our capital to work. We are much more judicious maybe than others about how we use our capital. So we are not tickertape investors, and we are looking for things that add value to our company, and in this environment it has been very hard to come by those things.

You have seen us do some. We did two. For our side of the balance sheet, we did two relatively significant transactions in 2009 from our perspective anyway, and we will continue to look for ways to do bolt-on acquisitions to our fee-based businesses. And we are very, very actively looking for the right bank deals to do. But we're not going to do them just to do them. We are going to do them because they fit and they add long-term value to this Company.

So I think you will see us do some deals. We would certainly like to. We are very focused on it. And I think back to the loan to deposit ratio and our liquidity we are going to continue to gain market share as our balance sheet is positioned very strongly and we have got a great deal of liquidity, we don't have the problems that the industry has. So our people are out selling and building, and we are not really focused on our problems. So I think you will see continued improvement across the board.

And I will add one thing to that. Especially when you look at ROE, realize all the things that we did as far as capital management goes in 2009, whether it be buying back shares or acquiring businesses, and yet our equity is higher. And so the denominator in that calculation is growing even while we doing things that really should reduce it. Over time, as you continue to do that, I think you will see higher return on equity numbers.

You will see the value of some of our acquisitions pay off over the next coming years.

Last question. What kind of tax ratio should I use for 2010?

We obviously did some effective tax work in the fourth quarter that reduced our overall rate. Probably in the high 20s would be a more normalized tax rate.

High 20 effective tax rate? Okay.

Peyton Green, Sterne, Agee.

A question just in terms of the overall customer base, when you're out meeting with customers, I mean what gives you the impression that the Fed is going to raise rates? I mean it is like everybody has got a decrease in their loan growth and kind of a decrease in the [app] to borrow due to business conditions. Do you get the impression that that is starting to turn?

Well, if you look at the blue chip and most of the economists, it looks like the second half of the year. We still believe that its rates start to rise in the second half of the year. Your guess is as good as mine if Bernanke's reappointment has any change to the speak that came out in the latter part of last year, but we are still counting. We still believe that the latter part of the year you will see interest rates rise. I don't know if that answers your question.

So what would it take for the kind of bonds that you buy? How much of an increase in yields would you have to see before you would start buying them again?

Well, we are buying them right along.

I think you are talking about buying core portfolio back to the normal purchases?

Sure.

You know, we are probably likely buying somewhere in the -- it depends on the kind of security, too. So it's a hard question to answer, but probably in the three to five-year range. But if you believe that rates are going to be a little bit higher, you would not be buying those bonds today.

Well, I mean I guess my question is this. I mean you got close to $1.1 billion in interest bearing due from banks, up from $600 million a year ago. When does that number go back to normal, I guess?

Your guess is as good as ours.

What does it take for rates to do for that number to go back to normal? I'm just trying to gauge how long if rate do not go up, how long you sit on them.

You are talking crystal ball stuff here. We don't have those answers. We are going to position ourselves to be ready basically for those changes, and outside of that, we do not know when that is going to happen.

Okay. And then I guess back to the customer question. I mean your C&I customers certainly did a good job gaining new business, but the overall spirit there is to reduce leverage. Do you see any signs that that might be turning in the first half of the year?

Not from the data that we have. As a matter of fact, on a linked quarter basis from third quarter to fourth quarter, utilization rates have gone down even further. So I would expect that they certainly stay low for a while until our customers just like us, until we feel like the economy is turning.

We are very focused on sales. We are very focused on winning new business. We have had a lot of success in that regard. Eventually they will borrow, and again some of this excess liquidity will go away, we hope.

Okay. And then last question. It is just in terms of the expense growth year over year. Was there anything in the expense numbers that maybe was unique compared to last year other than the FDIC expense or the regulatory expense?

Short of the ones that you mentioned -- (multiple speakers). This is Mike. Short of the ones that you mentioned -- FDIC being probably the largest -- keep in mind that J.D. Clark, which we closed on an April, I believe, increased our expense base.

We had 8 months of expenses as it related to the acquisition, including what we had to take in terms of the amortization of the purchase premium and such.

Okay. And then I guess just in terms of the processing fees, was there anything artificially high in that in the fourth quarter versus prior quarters?

Yes, it is J.D. Clark -- (multiple speakers). It is the benefit of J.D. Clark, if you are talking about our trust income.

Okay.

It is J.D. Clark hitting the income statement both on the expense side and the revenue side.

(Operator Instructions). And there appear to be no further questions at this time, sir.

Thank you. Thank you very much for your interest in UMB. The call can be accessed via a replay at our website beginning at about two hours, and it will run through February 10. 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 fourth-quarter conference call. Thank you for participating. You may now disconnect.