Abby Wendel - Director, Investor Relations Mariner Kemper - Chairman and Chief Executive Officer Peter deSilva - President and Chief Operating Officer Mike Hagedorn - President and Chief Executive Officer, UMB Bank Brian Walker - Chief Financial Officer.

Matt Olney - Stephens Chris McGratty - KBW Peyton Green – Sterne Agee.

Good day, ladies and gentlemen and welcome to the UMB Financial Second Quarter 2014 Financial Results Conference Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Ms. Abby Wendel, Director of Investor Relations. Please go ahead, Ms. Wendel..

Mariner will provide high-level commentary on our results and Brian will review several details from our financials; then Mike and Peter will review results from our business segments. Following that, we will be happy to answer your questions. Now, I will turn the call over to Mariner Kemper..

Thank you, Abby. Good morning, everyone and thank you for joining us today. As Abby mentioned, we announced our financial results for the second quarter yesterday afternoon. As we hope you read in our press release and accompanying slide deck, we finished the first half of the year with another good quarter.

Net income was $34.7 million or $0.76 per diluted share, an increase of 15.8% compared to the second quarter of 2013 on total revenue of $220.2 million. Return on average assets was 0.89%. Return on average equity was 8.77% and our efficiency ratio for the quarter was 73.3%.

To better understand the results for the second quarter, there are several specific items you should be aware of as you have analyzed our numbers. First, we resolved the objections to our calculation of the earn-out amount and related incentive bonus compensation with the sellers of Prairie Capital Management during the quarter.

We added $5.3 million to the contingency reserve bringing the total to $20.3 million for the year. Second, we recorded $3.5 million in unrealized gains on several of Prairie Capital’s investments in the second quarter bringing the total for the past four quarters to $22.5 million.

Unrealized gains in the first quarter of 2014 were $2.5 million and no unrealized gains were recorded in the second quarter of 2013. The difference between the total contingency reserve and the total unrealized gains is $2.2 million in gains, which also represents the return to UMB generated by the initial investment in the underlying funds.

Third, we have recognized a relatively small expense adjustment increase to the contingency consideration liabilities for Reams and Prairie Capital of $800,000 in the quarter. In the second quarter of 2013, we reported a nominal expense adjustment of just 12,000.

Finally, in other income, we recognized a gain of $2.8 million on the sale of a branch property, which brings our total branch locations to 108, down from 136 five years ago. Compared to the second quarter of 2013, average loan balances and non-interest income increased at double-digit levels and credit quality remains excellent.

Deposits increased slightly year-over-year even with the exit of a large institutional depositor that was discussed on our first quarter earnings conference call. To manage the balance sheet, the investment portfolio, shrink slightly in keeping with our strategy to shift our earning asset mix towards loans.

Our performance demonstrates commitment to our business model of diverse revenue sources, high credit quality and strong balance sheet and low cost of funds. Now, let me review a few highlights from the quarter starting with loan growth. Net loans in the second quarter were up a strong 9.2% year-over-year.

On a linked quarter basis net loans increased 2.4%. Average loans were up 12% on year-over-year basis and were 56.2% of average deposits. The second quarter of this year marked our 17th consecutive quarter of loan growth on both year-over-year and linked quarter basis.

C&I and commercial real estate loans continue to make up the majority of loan growth. And we added $124.7 million in construction loans, an increase of more than 100% compared to the same period last year. Loan quality remains outstanding.

Net charge offs as a percentage of average loans were 22 basis points, of which 62% of the charge-offs were related to credit cards. Non-performing loans as a percentage of loans were at 39 basis points. We are making progress towards meeting our objectives to shift earnings assets from fixed income investment portfolio into loans.

Interest income grew during the second because interest from increased loan volume more than offset declines in income due to rate compression. For the second quarter total yield from loans and loan fees dropped 18 basis points compared to the second quarter of 2013 and declined 7 basis points on a linked quarter basis.

Our low cost of funds helps us to win new business, keep existing plans and provide somewhat of a buffer against pricing pressure. Since the low interest rate environment continues loan growth is important as ever as pricing in all categories remains very competitive.

Turning to another bright spot, in our company’s results we achieved record assets under management of $43.7 billion in the second quarter. As a result, trust and securities processing revenue drove non-interest income growth.

Institutional investment management contributed nearly half of the increase in trust and securities processing and asset servicing another third. Within the banks segment private wealth and institutional asset management comprised 22% of the $9.9 million in growth.

We remain enthusiastic about our fee generating businesses as they are an important component of our business model. We will provide additional detail on those results later in the call. Expenses for the quarter were 10.8% higher than they were in the second quarter of 2013.

For the first half of the year expenses were 12.7% higher than for the first half of 2013. As I have communicated to you in previous conference call, our plan to manage annual expense growth to less than 5% remains in place.

It is important to note for the first six months of the year that the year-over-year increase in non-interest expense include $20.3 million in contingency reserve and $2.1 million more in adjustments to earn out liabilities for the acquisition of Reams Asset Management and Prairie Capital.

With that, I will turn the call over to Brian who will provide more detail on our financials and will round out the balance sheet discussion. Later in the call Mike will talk specifically about the bank segment’s operating results and Peter will talk more about institutional investment management, payment solutions and asset servicing segments.

Brian?.

Thanks Mariner and welcome everyone. Picking up Mariner’s comments on the income statement, net income increased 15.8% year-over-year and 48.1% on the linked quarter basis. Loan growth generated increases in net interest income and our fee based businesses drove the increase in non-interest income.

This is a testament to the strength of our diversified business model. Fee income continues to play an important role to UMB success. Interest income growth came from volume and mix changes in total earning assets even though yield on loans was 3.51% compared to 3.69% a year ago.

As we have discussed in prior conference calls, our loans are tied primarily to short-term interest rate, although we have been willing to extend slightly longer term debt to exchange from modestly higher rate. As of June 30, 68% of our loans were repriced, amortized or mature in the next 12 months.

56% were repriced, amortized or mature in the next quarter. The available for sale portion of our investment portfolio which represents 96% of total securities now has an average life of 46.9 months, down from 48.7 months in the second quarter of 2013 and has a total duration of 42.6 months, down from 46.8 months for the second quarter of 2013.

Shortening the investment portfolio was part of our balance approach to managing our position in the current interest rate environment. We are positioned to take advantage of a rising rate environment while guarding against a continued sustained low rate environment.

In terms of non-interest income, the most significant driver again this quarter was trust and securities processing.

As we have discussed with you in the past, we record revenue associated with out investment management and asset servicing businesses in this line item, scout investments, fund services and the bank’s asset and investment management businesses, including Prairie Capital, private wealth management and corporate trust, all posted double-digit year-over-year revenue growth for the second quarter for a total increase to trust and securities processing of 15.6%.

Peter will discuss the drivers behind these results later in the call. On the expense side, as Mariner described, we added $5.3 million to the contingency reserve and have resolved the objections with the sellers of Prairie Capital Management regarding their earn-outs and related incentive bonus calculations as referenced in our 8-K issued on July 3.

Salaries and employee benefits continued to be the driving force behind the overall increase in non-interest expense. Base salary, bonus expense and the market valuation of deferred compensation l liability increased year-over-year.

It’s also noteworthy to mention that medical expenses within this category increased 17% compared to the same period a year ago. Moving on to the balance sheet, our average balance sheet grew 5% year-over-year and average earning assets increased 5.4% to $14.5 billion.

Provision expense was flat year-over-year and increased 500,000 compared to the first quarter of 2014. Looking at earning assets, the average balance in our investment portfolio for the quarter was $6.9 billion, 2.1% smaller than the second quarter a year ago.

The average yield on total securities was 1.97%, an increase of 2 basis points from the second quarter last year and down 1 basis point compared to the first quarter of 2014. Slide 9 in the supplemental slide deck includes the detail on the available-for-sale portion of the investment portfolio.

Yield was 1.9%, 1 basis point higher than in the second quarter of 2013. While yields have not bottomed, reinvestment yields are trending upward. Our bias remains to take a balanced approach and shorten the portfolio duration to be ready to take advantage of a rising interest rate environment.

Allowance for loan losses was $76.8 million and allowance as a percentage of total loans is now 1.11% compared to 1.13% a year ago. As management has shared in several prior quarter’s calls, there are several components that go into applying the same consistent methodology to calculate provision.

Two of these items are historic losses and portfolio size. As the portfolio grows, the losses are applied to a larger phase of loans in the calculation, a larger base of loans in the calculation. We believe this level is appropriate given the high quality of our loan portfolio and history of charge-offs.

Our coverage is more than two and three quarters the amount of non-performing loans, while the median industry allowance reported for the first quarter would have covered only two-thirds of non-performing loans. We remain well capitalized with Tier 1 leverage and total risk-based capital ratios of 13.81%, 8.7% and 14.62% respectively.

Looking at the liability side of the balance sheet, average deposits for the quarter compared to the same period last year increased 6% to $12.3 billion. On a linked quarter basis, average deposit decreased $856.3 million or 6.5% as a result of the large depositor exiting our balance sheet and the anticipated runoff of public funds.

This impact from the depositors’ departure was $928 million on average and the impact from the public funds was $300 million. Average non-interest bearing deposits comprised 42% of total deposits, which puts us in the top 3% of the industry according to SNL Financial.

A high percentage of free funds is a competitive advantage and is reflected in our low cost of funds. Our overall cost of funds was 17 basis points for the second quarter versus 18 basis points a year ago. If you factor in free funds, this brings the number down to just 10 basis points.

Average shareholder equity was $1.6 billion, a 22.9% increase from the same period a year ago due largely to the impact from the capital raise conducted in the third quarter of 2013.

Now, I will turn the call over to Mike who will review the results of the bank segment, Mike?.

Good morning everyone and thank you for joining us for our second quarter conference call. I am happy to talk with you this morning about the bank segment’s financials and business drivers which can be found starting on Slide 12 in the supplemental materials.

For the second quarter 2014 compared to the second quarter 2013, net interest income increased 2.7% to $72.5 million driven by loan growth. The bank share provision for second quarter increased $1.1 million in accordance with the methodology Brian described. Total non-interest income increased to $56 million from $46.4 million a year ago.

There are two items to mention here. First the equity earnings and alternative investments managed by Prairie Capital fall into the bank segment. The gain for the quarter was $3.5 million compared to no gains recorded in the second quarter 2013.

Second we completed the sale of a branch property in the second quarter resulting in a gain of $2.8 million, which is included in the other non-interest income line in our income statement. We also had $2.6 million in gains on the sale of securities compared to $1.5 million in the second quarter 2013.

Non-interest expense increased 9.1% to $100.9 million due mainly to the $5.3 million additional contingency reserve that Mariner mentioned and higher salary and benefit expense. Net income before tax was $24.9 million and the pretax profit margin for the bank was 19.4%. Performance in the bank segment’s ongoing operations was strong on several fronts.

First, the C&I loan portfolio increased $207.5 million or 6.2% compared to the period ended June 30, 2013. Second, commercial real estate loans also contributed to overall loan growth with an increase of $160.2 million or 10.2% compared to CRE loan balances on June 30, 2013. And real estate construction loans increased $124.7 million.

We continue to seek opportunities to diversify our loan mix without sacrificing credit quality. As you will see on Slide 15 in the deck, the regions within our footprint that are growing loans the fastest are outside of Kansas City. That said the majority of our loan growth in dollars remains in Kansas City.

For the second quarter, 33.5% of the $666.7 million in average commercial loan growth came from Kansas City followed by Colorado, Arizona and Texas. Speaking of Texas, we are pleased to announce that we hired a local team of bankers in Fort Worth to launch a loan production office and complement our presence in Dallas.

Moving to the asset management businesses within the bank where we focused on institutions and high net worth individuals, I am pleased to announce assets under management has surpassed $11 billion. Assets stood at $11.3 billion at quarter end, an increase of 18.4%.

Assets managed by Prairie Capital increase $854.3 million and assets managed by private wealth and institutional asset management increased $810.4 million. And finally in consumer banking HELOC balances increased 6.2% year-over-year to $584.1 million. Our HELOC portfolio continues to perform with the utilization rate of 45.1% for the second quarter.

With that I will turn the call over to Peter to finish up with the discussion on fee business performance..

Thanks Mike. Good morning everyone. For the final part of our call, I will review results from our three fee based business segments. Starting with institutional investment management, which as you know is comprised of Scout Investment.

For the second quarter of 2014 versus the same period a year ago, non-interest income was $34 million, an increase of 16.6%. Non-interest expense increased 17.3% to $22.1 million. Reflective of those two components net income before tax was $11.9 million, an increase of $15.5%, and the pretax profit margin still at 35%.

Revenue in this segment is driven by average mutual fund and institutional and other managed accounts assets under management, the mix of those assets, net flows and finally equity and fixed income market performance.

Strong net inflows to our fixed income strategies and positive market impact offset by net outflows from our equity strategies provides the context for Scout’s results this quarter. At quarter end assets under management were $32.4 billion, an increase of 23.1% compared to second quarter of 2013.

For a breakdown of AUM by asset class, please reference Slide 19 in the company material. We look at close separated by equity and fixed income strategies across all Scout products. Slide 18 in the supporting materials shows the drivers of the change in assets under management both net flows and market impact.

For the quarter, the Scout funds flow rate was a negative 7.7%. However, flows in the separate and other managed accounts were positive 4.8%. Year-to-date, the Scout funds had a negative flow rate of 7.1% and separate and other accounts was a positive 8.9%. In the second quarter, net flows for Scout equity strategies were negative $1.3 billion.

The outflows were primarily driven by the international fund. Turning to fixed income, Scout fixed income strategies had positive flows of $908.9 million during the second quarter. The core plus and unconstrained strategies led the way capturing the majority of the flows.

As you can see from the slide both the equity and fixed income markets moved favorably, increasing assets under management by $455.4 billion and $153.4 million respectively. Combining both flows and market effect, AUM and our equity strategies decreased $831.6 million and AUM in our fixed income strategies increased $1.06 billion.

As a reminder, Scout received approval for a UCITS structure in the first quarter and it’s launched the unconstrained strategy within the structure. We’re pleased with the early traction of product is received abroad. After just three months in existence, the vehicle has attracted $82 million in assets under management. Similar to the U.S.

mutual fund structures, UCITS allowed Scout to distribute these strategies internationally in a commingled product format. As we mentioned, expanded international distribution of our strategies is a key component of our goals to grow assets under management overtime. Next step is the payment solution segment.

For the second quarter of 2014 compared to the second quarter of 2013, net interest income increased 10.7% to $12.4 million. Total non-interest income increased 13.8% to $21.2 million. Non-interest expense increased 12.6% to $24.6 million.

Net income before tax was $6.7 million, an increase of 45.2% from a year ago and the pre-tax profit margin for payment solutions was 19.9%. On our last conference call, I’ll walk it through the ways and which the segment contributes to our results.

As a quick refresher on the business, there are three business units within the segment, healthcare services, credit and debit card related activities, and a unit that provides treasury management products to the broker/dealer and mutual fund industry we call institutional banking and investor services or IBIS.

Healthcare services divide each product offering in the three categories, HSA custodial services, benefit cards and healthcare payments. Custodial services revenue contributes right income after deposits in the HSA accounts and generates per account fees and interchange revenues.

Benefit cards were attached to a flexible spending arrangement and are used by clients to access their funds, also generating interchange revenue. Healthcare payment is a relatively new product line for us. It is a way for payers and providers to efficiently and quickly settle healthcare related services.

It is a very high volume product that generates a lower rate of interchange on transactions. As you can see in the supplemental materials on slide 21, second quarter purchase volume were strong in $2.2 billion, an increase of 27% compared to the same quarter a year ago.

Interchange revenue for the quarter was $18.4 million, up 7.2% from the second quarter a year ago. There is couple of primary reasons why interchange revenue was not growing as fast as purchase volume. First as you can see on slide 22, the payer to provide a product that I mentioned earlier continues to gain traction.

Second, also within healthcare, we maintained numerous third-party relationships with distribution partners with whom we share a portion of the growth interchange revenue. That being said remained very enthusiastic about this segment of our business and its future prospects.

As noted in our press release, HSA deposits increased 36.4% from a year ago to $760.8 million. Feature of HSA accounts allows customers to move a portion of their dollars to investment vehicles. When they do, these monies move off balance sheet and are considered HSA assets. For the second quarter of ’14 HSA assets increased 63.5% to $62.9 million.

HSA and FSA accounts reach $4.6 million for a 45.2% year-over-year growth rate. The final segment I will cover in my prepared remarks is asset servicing. For the second quarter 2014 compared to the same period a year ago, total non-interest income for the segment was $22.8 million, an increase of 17.7%.

Non-interest expense increased 10.6% to $18.9 million. Net income before tax rose to $5.2 million for the quarter. That resulted in a pre-tax profit margin of 21.6% for the second quarter. Asset servicing ended the quarter with $207.9 billion in assets under administration compared to $168 billion at the end of the second quarter of 2013.

As you may recall in 2012, we lost a large custody only client and assets under administration declined nearly $8 billion. We have since added assets under administration and now have the same level of assets, but with a more profitable and diversified mix of customers.

You’ll see this highlighted in Slide 24, we shows the AUA by product type within the business. In the past several months, we have seen an increase in asset managers launching new funds and new structures. This is benefited UMB fund services.

From June 30, 2013 to June 30, 2014, we added 56 new funds in fund accounting and administration, 43 new alternative investment funds, 34 new transfer rate in clients and 38 new custody clients. These results also demonstrate that we are building a more profitable mix of clients and fund service as evidenced by the charts on Slide 24.

The results on each of these segments are important to our overall strategies of furthering sustainable growth and expanding diverse revenue sources. Along with strong quality and effective capital management, we have a unique business model that has stood the test of time in all economic environments. Thank you for joining us today.

We appreciate your interest in our company. With that, I will hand the call back over to the operator who will open the line for your questions..

Thank you. (Operator Instructions) We’ll take our first question from Matt Olney of Stephens. Please go ahead..

Hi, thanks. Good morning guys.

How are you?.

Good morning.

How are you?.

I’ a good, thanks. Hi, thanks for the slide on – Slide 18 the drivers of AUM, that’s helpful. I want to dig into the flows I think negative on the equity front.

I think Peter you highlighted prepared remarks that it was the international fund, anymore commentary on this and can you remind us how big that fund is?.

Sure. So, let’s talk about a little bit of context first the fund is about $8.5 billion fund today. If you look at the equity outflows for the period as you see on that Slide 18, we had about $1.287 billion in equity outflows. The majority of that was the international product.

On a year-to-date basis, we have had $1.7 billion in international outflows partially offset by $246 million in positive flows to our midcap fund. Some of this is resulting in a bit of mix shift, but keep in mind we had an extraordinarily strong fixed income inflows and separate accounts in particular of over $900 million during the quarter.

So, a bit of mix shift taking place overall in the portfolio of all of our products. You will notice in Q2 of ‘14, 55% of our assets are now in fixed income strategies versus 52% in the first quarter and in the second quarter 45% are now in equity strategies versus 48% in the first quarter. So, bit of a shift going on there.

As you know, we earn a little bit less than revenue on our fixed income, but just know that, that’s partially offset by lower distribution cost on our fixed income strategies overall.

On a going forward basis, I can’t really predict what the flows might do on any of our products quite honestly, but our sales pipeline remains strong in the fixed income space in particular. And as for the international fund on a go forward basis, we have not changed our strategy.

We have been doing the same strategy for 20 years of buying high-quality stocks that we think will outperform over different market cycles. Rest assured, the team is squarely focused on improving performance, which is the surest way to ensure that flows turnaround over time..

Okay. Thanks Peter.

And then as a follow-up, Brian I think in your prepared remarks you touched on the portion of loans that are going to reprice over the next 3 and 12 months, do you have any details as far as that the loan floors out there, how much you have today and how many rate movements we could see before we get above those four levels?.

So, this is Mariner, we only have a little over $430 million in loans in total of course. So it’s narrow mind somewhat in a material to the overall mix..

Sure. Okay. Thanks guys..

Thank you. And we will move to our next question from Chris McGratty of KBW. Please go ahead..

Maybe I missed it in your prepared remarks, could you guys provide the commercial loan pipeline at June 30 and compare it to March 31?.

We don’t make our actual pipeline public, what I can tell you will be we have been doing as telling you what – that whether or not our pipeline in the next – in the coming quarter is the strong as the previous quarter and that continues to be the case..

Okay.

So in short-term maybe that comment with loan growth has been kind of 10% to 15% in the first half of the year and there is no reason to believe that similar rate of growth in the back half is likely…?.

At least in the coming quarter our pipeline in the third quarter is the strong as it was in the second quarter..

Okay.

On the expenses, I can appreciate the 5% and you guys have been consistent with that, if you look to next year are there any required investments that you see on the horizon that would make the rate of expense growth materially change one way or the other from that 5% (indiscernible)?.

Again we remain committed to accomplishing that we have headwinds and you have probably been hearing this from everybody compliance costs are one of those headwinds. We have been hiring against that. You have seen everybody else’s announcements coming through and we have the same pressures as everybody does.

So that’s the headwind going in the second half of the year that we didn’t come into the year expecting to see at the levels we are, but we do believe that we can – we are still committed to that 5% number..

Okay.

Last question on your margin, I believe your loan yield is 3.51 can you talk about where new production was in the quarter (indiscernible) basis?.

We have that data, I am not sure - I would have to dig it out. I am not sure we have been disclosing that. So at this point I guess we would have to get back to you on that..

Just to make that I think new production. I think what you would see those that the percentage of term debt is nice for us. We have been making head growth there and so we are not just remaining on lines of credit for loan growth..

There is pressure, what I will tell you is that there is definitely pressure on pricing. It seems like renewed pressure on pricing. So we do expect to continue to feel that pricing pressure within our commercial loan book.

But one of the things as Michael just mentioned we are doing to make up for that as we have been successful so far and continue to work for it is the mix more term debt, more real estate debt. On the margin we now are planning to replace the portfolio with that but on the margin to make improvements through the mix change..

Understood and last one the tax rate in this quarter is that the fair assessment going forward?.

It might be slightly high. We had some historic tax credits in 2013 that did not extend into 2014. Our estimated effective tax rate for 2014 is 27%..

Alright. Thank you..

I might cycle back around for you on the loan growth number. I think it’s important to note that the second quarter was unusual for us with pay offs, so we had some activity in the second quarter this year at a heightened level. So our net loan growth was lower because of pay off activity.

So in the second quarter of 2013 approximately $57 million in pay offs, in the second quarter of 2014 we had an additional $100 million in pay offs in the second quarter of ’14. So we got some unusual activity in the second quarter of 2014 related to just economic activity business is selling etcetera..

So I want to make sure we get those numbers to you. So the second quarter 2014 pay offs and pay downs were $276 million, that’s unusual because in the second quarter of 2013 it was $158.7 million, so that’s $100 million difference that Mariner is mentioning..

Thank you. (Operator Instructions) We will move to our next question from Peyton Green of Sterne Agee. Please go ahead..

Yes. Good morning. Peter, I was wondering if you could talk maybe a couple of things about the asset management business.

One is there a lag in the revenue recognition on the international fund AUM versus when you would see the outflows and if so I mean would we see any kind of hangover from the outflows in the third quarter that maybe didn’t hit in the second?.

No, it’s about – it’s a little bit about timing because if you have a large outflow at the last day of a quarter (indiscernible) going to have 190 some of it happened in that particular quarter. So nothing unusual other than the timing at which the flows occurred both in and out during the quarter..

Okay.

And then the unconstrained bond fund currently is subject to – the mutual fund piece is subject to a fairly significant fee and expense waiver that is suffix or was suffixed by on October 31, what’s your thought on, whether that will be renewed or whether that will expire?.

That’s still the case, it is set to expire and we continue to evaluate based upon market conditions and our competitive positioning whether we will continue to enforce the peak out or let some part of it. But we really don’t know just yet Peyton we continue to evaluate it..

Okay.

And then I guess in terms of interest rate sensitivity, you mentioned that you are preparing for higher rates, what does that mean on a plus 100, plus 200 basis point move in rates, another first quarter tends to be overstated because of the liquidity, but how was the interest rate risk sensitivity at June 30?.

Specifically on the investment, can you repeat your question for me, Peyton please?.

Yes.

Just the overall interest rate sensitivity plus 100, plus 200 move in rates whether in the 12-month period like you have in the queue…?.

Yes..

I know in the first quarter it tends to be exaggerated by the short-term nature of the flows from just depositors and the like, but I mean is it about the same as it was at March 30, is it a little bit more assets I am just trying to understand that?.

It is a little bit more asset sensitive here in the second quarter. We remain neutral to asset sensitive, continuing to focus on our strategy to have a bias toward shortening that investment portfolio, moving into the loan portfolio at higher yields and have shown success on that..

Okay.

And then I guess in terms of the expense side of the equation, I mean looking kind of just the past year going back, the marginal efficiency ratio (indiscernible) what would be called normal expenses, I guess ignoring the contingent liability for earn out, you get to a number that’s closer to 65% of revenue growth in terms of the amount of dollars expanded over the past year, is that a reasonable way to think about how you will do it going forward or is there not any real breaking on expense growth versus contingent pressure on the margin side from the loan portfolio perspective.

I mean, I guess maybe another way to ask it is what loan rate is too low to make the loan, I mean, 3.5 down from over 4 historically and 3.69 a year ago, that seem to be get pretty thin?.

Well, Peyton, it’s a – I get it suppose it’s an alternative question against what our alternatives are. And it also you have to assume we are able to remix, continue to remix and we are getting much better yield as we do remix..

And let me take a stab at this one Peyton, I think that it really (indiscernible) my answer really depends upon what goes out. So for instance in the payment businesses that Peter talks about as revenue or volume goes up in that business so does expense and so the relationship stays roughly the same.

Turning on mix changes between whether it’s as an example debit or credit card or its healthcare and credit, there are reasons that it changes.

Within the bank, however, in a higher interest rate environment expenses – everything else being equal shouldn’t really increase for no other reason than an interest rate increase will drive higher revenue because the net interest income we don’t need new branches, new people, etcetera right. So it depends on what is growing at the time..

Okay.

And then I guess you mentioned that the compliance pattern seems to be going higher, and I guess for a bank like yours I’m already surprised that it would be rising maybe like it is for others?.

Right, you are congressmen..

It’s not ours, but I guess I mean it – I mean where I guess from that perspective I mean is it millions more of dollars that you think you have to spend at the margin, I mean does that take the overall expense growth rate up above the 5% level or is that factored into those 5%?.

We still think that we can do 5%. We are still committed to that. That’s our goal, so we are still committed to that. And as they continue to rise, we can’t tell you at this point, they can’t tell us. We don’t know how much they are going to rise. I wish I could tell you we knew how much they are going rise. We do not know how much they are going to rise.

But we are committed to making changes and to managing that expense on the way up and making changes where we need to make and to control like overall expenses..

Okay, and then.

I think there have been three dimensions, right the three different pressures if you will. There are more people for sure coming into the organization to ensure we are in compliance with all the new rules that are in place. Salaries are going up considerably. The competition for talent in this base is significant.

We had a speaker last night at our board dinner and he talked about the war on talent in this particularly area. So just the cost generally to procure and maintain these folks are going up.

Secondarily there is lot of technology expenses associated with this now enhancing our BSAML programs and any number of programs to ensure that we are in compliance. And then third, we have to use consultants to help us fill in some of the gaps as we needed to.

So people costs, technology costs, consultants and others, Mariner is exactly write it, its going up, but we probably can’t predict exactly how high..

Yes. I think two-thirds of it is unwritten. So it’s an unknown, but we still remain committed to being compliant and making the appropriate expense changes to stay to our goals..

Okay.

And then just with regard to the I know you all filed an 8-K on it, in terms of the Prairie Capital situation, but how I guess ignoring that but I mean because the 8-K has been filed, but what is the outlook for M&A activity, I mean are there opportunities that you are seeing that might be complementary to your business lines or would add scale that might help the expense side out?.

You are not going to like this answer because the same one you got last quarter, which is we remain inquisitive (indiscernible) we would like to do deals that to do exactly what you said, but we have just activity based and of course we have nothing to talk to you about at this point, so..

Okay, alright. Great. Thank you for taking my questions..

Thank you. (Operator Instructions) There are no further questions at this time. Please continue..

Thank you. Thank you very much for your interest in UMB. This call can be accessed via replay at our website beginning in about two hours and it will run through August 8. And as always, you can contact UMB Investor Relations with any follow-up questions by calling 816-860-1685. Again we appreciate your interest and time..

Thank you. Ladies and gentlemen, this does concludes your conference call for today. We thank you for your participation. You may now disconnect your lines and have a great day..