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Third quarter 2015 earnings explained

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We released our third quarter 2015 earnings  recently, and our Chief Financial Officer is here to share the highlights.

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Mr. Walker is the Chief Financial Officer and Chief Accounting Officer at UMB Financial Corporation. He joined UMB in 2007. He earned a Business Administration (Accounting) degree at Kansas State University and his Masters of Business Administration degree at Rockhurst University. In addition to his involvement with several community and charitable organizations, he is also the treasurer for the Big Bash Foundation, a not-for-profit foundation focused on providing financial assistance and increasing visibility for local not-for-profit organizations.



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UMB: Insights – Public Finance

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UMB Industry Insights

UMB has a long and successful history with underwriting municipal bonds for cities, counties, public hospitals and universities. One of the keys is to foster relationships with attorneys, bond counsels, underwriters and the customers. Learn more in this continuation of our UMB: Insights series.

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UMB Financial Corporation (Nasdaq: UMBF) is a diversified financial holding company headquartered in Kansas City, Mo., offering complete banking services, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas, as well as two national specialty-lending businesses. Subsidiaries of the holding company include companies that offer services to mutual funds and alternative-investment entities and registered investment advisors that offer equity and fixed income strategies to institutions and individual investors.



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UMB: Insights – Aviation

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UMB Industry Insights

It’s not just CEOs who utilize private/corporate aircraft, but most often sales teams. Learn more about this critical tool and why it’s an efficient option for many businesses.

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UMB Financial Corporation (Nasdaq: UMBF) is a diversified financial holding company headquartered in Kansas City, Mo., offering complete banking services, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas, as well as two national specialty-lending businesses. Subsidiaries of the holding company include companies that offer services to mutual funds and alternative-investment entities and registered investment advisors that offer equity and fixed income strategies to institutions and individual investors.



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How to manage healthcare costs: now and in retirement

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UMB Bank’s Chief Investment Officer, KC Mathews and Dennis Triplett, Chairman of UMB Healthcare Services, sat down to discuss the rising costs of healthcare and the question on so many minds—how you can adequately plan for medical expenses during and even before retirement begins.

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Dennis Triplett is chairman of UMB Healthcare Services. He has responsibility providing strategic direction and insights to the leadership team. Dennis has more than 29 years of experience in the banking industry. He currently serves as Chairman of American Health Insurance Plan’s (AHIP) HSA Leadership Council, Board Member and past Chairman of the Employer’s Council of Flexible Compensation (ECFC), and a Charter member of the American Bankers Association HSA Council.



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UMB: Insights – What ag means to UMB

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UMB Industry Insights
Beginning with the Kemper family’s love affair with agriculture, UMB has had a rich history with agriculture.

Continuing our UMB: Insights series, Mariner Kemper, our Chairman and CEO, and Bill Watson, president of UMB Bank’s Agribusiness Division, share why we focus on agriculture.

“UMB’s been in agribusiness for all of the years we’ve been in business. It’s part of our roots. It’s part of our connection to the community.”

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UMB Financial Corporation (Nasdaq: UMBF) is a diversified financial holding company headquartered in Kansas City, Mo., offering complete banking services, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas, as well as two national specialty-lending businesses. Subsidiaries of the holding company include companies that offer services to mutual funds and alternative-investment entities and registered investment advisors that offer equity and fixed income strategies to institutions and individual investors.



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What really matters: the drivers of today’s economy

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Every day we are bombarded with data and opinions meant to help investors manage their portfolios. Much of the data can be ignored, because unfortunately most of it is just that—data. As investors, we only want to explore the kind of data that becomes useful information. My team and I will figure out what you need to know to grasp where the market is heading by uncovering what really matters when forecasting economic activity. In a world where a constant stream of economic data and commentary is the norm, it’s crucial to be able to sift through what really matters to make better-informed investment decisions.

The important variables to monitor over the next year will be the U.S. dollar, employment and key global issues.

I visited The Streetrecently to share my insights.

Watch…

 

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The U.S. Dollar

The U.S. dollar (the dollar) has become increasingly important because of two key functions.

1) its impact on corporate earnings in the United States.

2) global economic conditions and its ability to provide insight into relative interest rates.

Let’s take a look at the short-term and long-term impact of the dollar on the economy.

Short-term:

With the recently-strengthened dollar, the fast increase is what had a meaningful impact on our economy. A strong dollar makes exported goods and services that are produced in the United States more expensive. Numerous conglomerates have cited the strong dollar as a headwind that has negatively affected corporate earnings, stating that this will be a driver putting downward pressure on earnings and stock prices due to the translation impact1 and competitive concerns2. However, small businesses which typically do not have as much international exposure will not be as negatively affected by a strong dollar. Also, the United States is a net importer; in the first quarter we exported $2.08 trillion and imported $2.63 trillion. Commodities are negatively correlated with the dollar and as it strengthens, commodity prices will fall. This will be a positive for companies that use commodities as an input variable and for the general consumer.  We expect continued strength in the dollar.

Long-term:

We see that the dollar typically strengthens when the U.S. economy is outpacing its peers. In addition, we think the United States will soon be hiking interest rates while lowering rates is popular elsewhere around the world. This would suggest more upside for the dollar. However, we think Europe will show signs of economic growth and this should cause the dollar to stabilize. It is imperative that we pay attention to the dollar. It matters more than investors realize.

To learn more about the value of the U.S. dollar, check out my video from earlier this year.

Employment
Jobs are one of the most important variables to an economy.  As jobs are created, consumer confidence increases and over time, wages increase.

Short-term:

What matters are jobs, jobs and more jobs. Job creation is the critical component in breaking the U.S. economy free from being “stuck in the mediocre-growth-mud.” In the short run, it is not critical what kinds of jobs are created, or whether they are high or low paying. Rather, it’s more important to focus on job growth and a low unemployment rate. Those variables alone will increase consumer confidence and move the markets. This year we expect that an average of 250,000 jobs will be created per month, similar to 2014.

Long-term:

The quality of jobs and wage growth remains in question. It appears there are some structural changes developing.

The U-6 is one of the ways the Bureau of Labor Statistics more critically measures long-term growth. The U-6 is calculated by adding the marginally attached workers (people who have become discouraged and stopped looking for employment) and part-time workers to the unemployment rate. This puts the U-6 at 10.8 percent, almost twice the rate of the unemployment rate (5.5 percent).

The jobs created have been in lower-paying industries, such as retail and leisure and hospitality. In addition, part-time employment due to economic reasons has not improved since 2010. This indicates a skill mismatch and a potential structural change developing.

The labor market appears to be tightening; unemployment has improved significantly since 2009, yet there appears to be limited wage pressure.  We think once the U-6 breaches 10 percent, wage inflation will appear on the horizon. Employment matters.

Global Gross Domestic Product (GDP)
We operate in a global economy.  What happens overseas can have a material impact on the U.S. economy.

Short-term:

All eyes are on Europe. Whether Europe can successfully manage Greece and enter a recovery phase is up in the air. Europe’s economy has been growing very slowly. Similar to the United States in 2009, lower interest rates and quantitative easing by the European Central Bank are now critical to global economic and market activity. Approximately 10 percent of our exports go to the Eurozone. The consensus GDP growth in Europe is 1.5 percent in 2015.  As monetary stimulus and green shoots of growth sprout in Europe, risk-based assets should perform well around the globe.

Long-term:

China is important to the global economy for two primary reasons:

  1. China represents the second largest economy in the world. The U.S., the largest economy, has a $16.8 trillion economy, while China’s economy is only $13.3 trillion.
  2. Even more important than size is growth rate. In 1985, China represented 3 percent of global GDP and the U.S. represented 25 percent. Today, China represents 14 percent and the U.S. has dropped to 19 percent. Even though the Chinese economy is smaller than the U.S. economy, it has been growing at a faster pace.  In 2010, China was growing at a pace of 10.5 percent.  Growth in 2014 slowed to 7.4 percent, although the data from their government has been questioned by many.

The real risk is if China’s economic activity slows to less than 6 percent growth. For a country with 1.4 billion people a slowdown would send a ripple throughout the world’s economy, as China’s imports will wane. We operate in a worldwide economy and ignoring these global variables is not an option.

Remember to check back for “What Doesn’t Matter: The non-drivers of the economy” next week!

[1] Translation is negatively impacted because sales generated outside the U.S. must be converted into dollars for financial reporting purposes. Therefore, a higher dollar = lower sales in dollars. So focus on sales ex-currency impacts.

[1] Example: Airbus, a European airline manufacturer, becomes price competitive versus Boeing, a U.S. airline manufacturer when the Euro weakens relative to the Dollar.

 

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.

 

DISCLOSURE AND IMPORTANT CONSIDERATIONS:

UMB Private Wealth Management is a division within UMB Bank, n.a. that manages active portfolios for employee benefit plans, endowments and foundations, fiduciary accounts and individuals.  UMB Financial Services Inc * is a wholly owned subsidiary of UMB Bank, n.a. UMB Bank, n.a., is an affiliate within the UMB Financial Corporation. Banking and trust services offered through UMB Private Wealth Management, a division within UMB Bank, n.a.

This report is provided for informational purposes only and contains no investment advice or recommendations to buy or sell any specific securities. Statements in this report are based on the opinions of UMB Private Wealth Management and the information available at the time this report was published.

All opinions represent our judgments as of the date of this report and are subject to change at any time without notice. You should not use this report as a substitute for your own judgment, and you should consult professional advisors before making any tax, legal, financial planning or investment decisions. This report contains no investment recommendations and you should not interpret the statements in this report as investment, tax, legal, or financial planning advice. UMB Private Wealth Management obtained information used in this report from third-party sources it believes to be reliable, but this information is not necessarily comprehensive and UMB Private Wealth Management does not guarantee that it is accurate.

All investments involve risk, including the possible loss of principal. This information is not intended to be a forecast of future events and this is no guarantee of any future results. Neither UMB Private Wealth Management nor its affiliates, directors, officers, employees or agents accepts any liability for any loss or damage arising out of your use of all or any part of this report.

“UMB” – Reg. U.S. Pat. & Tm. Off. Copyright © 2012. UMB Financial Corporation. All Rights Reserved.

*Securities offered through UMB Financial Services, Inc. member FINRA, SIPC, or the Investment Banking Division of UMB Bank, n.a.

Insurance products offered through UMB Insurance, Inc. You may not have an account with all of these entities. Contact your UMB representative if you have any questions.

Securities and Insurance products are:

NOT FDIC INSURED * NO BANK GUARANTEE * NOT A DEPOSIT * NOT INSURED BY ANY GOVERNMENT AGENCY * MAY LOSE VALUE


K.C. Mathews joined UMB in 2002. As executive vice president and chief investment officer, Mr. Mathews is responsible for the development, execution and oversight of UMB’s investment strategy. He is chairman of the Trust Investment, Asset Allocation and Trust Policy Committees. Mr. Mathews has more than 20 years of diverse experience in the investment industry. Prior to joining UMB, he served as vice president and manager of the portfolio management group at Bank of Oklahoma for nine years. Mr. Mathews earned a bachelor’s degree from the University of Minnesota and a master’s degree in business administration from the University of Notre Dame. Mr. Mathews attended the ABA National Trust School at Northwestern University and is a Chartered Financial Analyst and member of the CFA Institute. He is past president of the Kansas City CFA Society and a past president of the Oklahoma Society of Financial Analysts.



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Second quarter 2015 earnings explained

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We released our second quarter 2015 earnings  recently, and our Chief Financial Officer is here to share the highlights, including the much-anticipated acquisition of Marquette Financial Companies.


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Mr. Walker is the Chief Financial Officer and Chief Accounting Officer at UMB Financial Corporation. He joined UMB in 2007. He earned a Business Administration (Accounting) degree at Kansas State University and his Masters of Business Administration degree at Rockhurst University. In addition to his involvement with several community and charitable organizations, he is also the treasurer for the Big Bash Foundation, a not-for-profit foundation focused on providing financial assistance and increasing visibility for local not-for-profit organizations.



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Welcome Marquette Financial Companies

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Chairman and CEO Mariner Kemper welcomes recently acquired Marquette Financial Companies.

 

 

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Mr. Kemper is the chairman and chief executive officer of UMB Financial Corporation and UMB Bank, n.a. He joined UMB in 1997. Mr. Kemper is active in both civic and philanthropic endeavors. One of the causes he is most passionate about is the arts. He currently serves as a trustee and executive committee member for the Denver Art Museum and is a past board member for The Arts Council of Metropolitan Kansas City.



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Strength of the U.S. Dollar

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Our Chief Investment Officer answers your questions about the strengthening U.S. dollar:

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The Positive Side of a Strong Dollar?
Throughout the past few quarters, the strengthening U.S. dollar has been gaining a lot of investors’ attention. An appreciating dollar can be both a blessing and a curse. I’ve noticed that much of the news has focused on the negative impacts of a strong dollar. Many corporate CEOs have cited the strength of the dollar as a headwind to their earnings growth. Today I will spend a few minutes on a different perspective: the positive side of a strong dollar.

What drives the U.S. Dollar?
The value of the dollar is a function of relative economic strength. So it’s not just about the Federal Reserve action or domestic economic growth, it’s also is a function of global growth. I believe the global economy is the primary driver of the dollar’s recent strength. Historically, faster-growing economies have rising currencies due to capital inflows. A strong dollar has been associated with slower global economic growth, because the dollar remains the reserve currency.

Pros and Cons?
Even though most of the headlines cite a strong dollar as a negative, there are some positive effects.

  • Typically with a strong dollar comes lower commodity prices. This is positive for the consumer, as energy costs decline.  And businesses benefit if commodities are an input variable.
  • The United States is a net importer; we import more goods than we export. Less expensive imported goods and services will increase consumer confidence and spending. Businesses buying imported raw materials or components may increase their margins or pass on savings to consumers.

What does a strong dollar mean to the U.S. economy and markets?
A strong dollar will transfer demand from the U.S. economy to economies around the world. This will negatively impact some industries, where exports represent a significant portion of their business, such as industrial conglomerates. However, other industries, focused on the domestic consumer, will benefit.

Given our forecast of an improving global economy, whether it’s actual green shoots of economic growth in Europe, or the hope of economic stimulus in China, I believe we’ll see the dollar stabilize for the remainder of the year.

I don’t believe a strong dollar will derail our market forecast.  Historically domestic equity markets have performed well in periods of both a strong or weak dollar. The message here is the dollar is not the primary driver of stock prices and I would expect the S&P 500 to post returns in the 7-10 percent range in 2015.


K.C. Mathews joined UMB in 2002. As executive vice president and chief investment officer, Mr. Mathews is responsible for the development, execution and oversight of UMB’s investment strategy. He is chairman of the Trust Investment, Asset Allocation and Trust Policy Committees. Mr. Mathews has more than 20 years of diverse experience in the investment industry. Prior to joining UMB, he served as vice president and manager of the portfolio management group at Bank of Oklahoma for nine years. Mr. Mathews earned a bachelor’s degree from the University of Minnesota and a master’s degree in business administration from the University of Notre Dame. Mr. Mathews attended the ABA National Trust School at Northwestern University and is a Chartered Financial Analyst and member of the CFA Institute. He is past president of the Kansas City CFA Society and a past president of the Oklahoma Society of Financial Analysts.



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First Quarter 2015 Earnings Explained

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We recently released our First Quarter 2015 earnings. Our CFO, Brian Walker, took a moment to explain where we faced headwinds as well as the positive aspects of the last quarter.


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Mr. Walker is the Chief Financial Officer and Chief Accounting Officer at UMB Financial Corporation. He joined UMB in 2007. He earned a Business Administration (Accounting) degree at Kansas State University and his Masters of Business Administration degree at Rockhurst University. In addition to his involvement with several community and charitable organizations, he is also the treasurer for the Big Bash Foundation, a not-for-profit foundation focused on providing financial assistance and increasing visibility for local not-for-profit organizations.



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