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Ultra-conservative UMB was scorned by competitors; to date, bank has recorded one mortgage-related loss ($14,000)
Depositors...conservative lending... Sounds like a bizarro world.
Mr. Kemper’s $9 billion-asset UMB is a one-time Wall Street dud known for preaching long-term stability over short-term profits. Now the company is coming off a record year and a relatively rich stock price after refusing to play in the subprime mortgage game that has threatened the stability of many U.S. financial firms.
“A lot of our competitors are driven for short-term benefit,” Mr. Kemper said in an interview at UMB’s Kansas City headquarters. “But we don’t chase anything that is hot or trendy. We make good loans to quality borrowers.
“Now,” he added, “we can cherry-pick while our peers are busy cleaning up their messes.”
UMB, which operates across the U.S. heartland states of Kansas, Missouri, Nebraska, Colorado, Oklahoma, as well as Illinois and Arizona, said it has posted only one residential home lending-related loss in recent years—a home equity loan for $14,000, all of which was recovered.
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... the 95-year-old UMB has largely steered clear of the mess by insisting that borrowers already do business with the bank, have near-spotless credit histories, and can document sufficient income.
The bank is rapidly growing a home equity loan business that now totals $265 million, and is expanding commercial real estate lending, but rarely originates residential loans. Most commercial loans must be approved by committee. UMB generates more than half its revenue from asset management and other fee-based operations.
“Many banks have forgotten they are supposed to be good stewards for their depositors,” UMB President Peter deSilva said. “We know we’re the short-term custodian of other people’s money.”
In the past, such practices have failed to impress Wall Street investors, who demand innovation over plodding. But in the 12 months ended March 31, UMB’s share price rose 9.1%, compared with a 25.9% drop in the KBW regional Bank Index. Its stock has been trading around 23 times expected 2008 earnings, while peer banks have been trading around 12 to 14 times earnings.
Profit last year rose 26% to a record $74 million, or $1.77 a share, while revenue inreased 10% to $521.5 million. Net charge-offs totaled just 0.21% of average loans outstanding.
Others banks like UMB that have eschewed exotic lending products and diversified their credit mix are also betting this is their time to shine.
“Those of us who have been very disciplined in our credit culture will benefit and certainly grow,” said Carl Chaney, chairman of the $6 billion-asset Hancock Holding Co, in Gulfport, Mississippi, another conservative banking company.
“A lot of our competitors are driven for short-term benefit,” Mr. Kemper said in an interview at UMB’s Kansas City headquarters. “But we don’t chase anything that is hot or trendy. We make good loans to quality borrowers.
“Now,” he added, “we can cherry-pick while our peers are busy cleaning up their messes.”
UMB, which operates across the U.S. heartland states of Kansas, Missouri, Nebraska, Colorado, Oklahoma, as well as Illinois and Arizona, said it has posted only one residential home lending-related loss in recent years—a home equity loan for $14,000, all of which was recovered.
[..]
... the 95-year-old UMB has largely steered clear of the mess by insisting that borrowers already do business with the bank, have near-spotless credit histories, and can document sufficient income.
The bank is rapidly growing a home equity loan business that now totals $265 million, and is expanding commercial real estate lending, but rarely originates residential loans. Most commercial loans must be approved by committee. UMB generates more than half its revenue from asset management and other fee-based operations.
“Many banks have forgotten they are supposed to be good stewards for their depositors,” UMB President Peter deSilva said. “We know we’re the short-term custodian of other people’s money.”
In the past, such practices have failed to impress Wall Street investors, who demand innovation over plodding. But in the 12 months ended March 31, UMB’s share price rose 9.1%, compared with a 25.9% drop in the KBW regional Bank Index. Its stock has been trading around 23 times expected 2008 earnings, while peer banks have been trading around 12 to 14 times earnings.
Profit last year rose 26% to a record $74 million, or $1.77 a share, while revenue inreased 10% to $521.5 million. Net charge-offs totaled just 0.21% of average loans outstanding.
Others banks like UMB that have eschewed exotic lending products and diversified their credit mix are also betting this is their time to shine.
“Those of us who have been very disciplined in our credit culture will benefit and certainly grow,” said Carl Chaney, chairman of the $6 billion-asset Hancock Holding Co, in Gulfport, Mississippi, another conservative banking company.
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