UMB Financial Corp.
1010 Grand Boulevard
Kansas City, Mo. 64106
Meridian Bank Texas
100 N. Lexington St.
Fort Worth 76102
UMB Bank N.A., a subsidiary of publicly traded UMB Financial Corp., officially expanded its footprint in Texas and Arizona with the completion on May 31 of its acquisition of Marquette Financial Companies, a $1.4 billion financial services company owned by the Pohlad family.
The all-stock transaction gives UMBFC 13 new branches in Phoenix and Fort Worth. The 102-year-old, $16.7 billion diversified financial holding company is headquartered in Kansas City, Mo. UMBFC specializes in commercial banking, private wealth management and personal banking. It operates banking and wealth management centers throughout Arizona, Colorado, Illinois, Kansas, Missouri, Nebraska, Oklahoma and Texas.
UMB Bank began its expansion to the Lone Star State in January 2013 with its first location in Dallas and entered the Fort Worth market in July 2014.
The merger adds eight locations of Phoenix-based Meridian Bank N.A., with total assets of $745 million, net loans of $530 million and deposits of $584 million, as of March 31, and five Fort Worth-based Meridian Bank Texas branches in Fort Worth, Dallas and Denton, with total assets of $442 million, net loans of $321 million and deposits of $384 million, as of March 31.
“Everything about the economy in Texas indicates growth. It’s one of the reasons why we’re attracted to and satisfied and happy with getting something done that grows our presence here,” said UMB Bank President and CEO Mike Hagedorn. Hagedorn joined UMB in 2005 and also serves as vice chairman of UMBFC.
The transaction also includes MFC’s portfolio of businesses: Dallas-based Marquette Business Credit, which provides asset-based loans for working capital, recapitalization, growth, and mergers and acquisitions; Marquette Transportation Finance, which provides accounts-receivable financing and factoring for transportation business, and its division, Marquette Commercial Finance; and Marquette Asset Management, which provides private asset management to individuals, families and institutions, based in Minneapolis.
Hagedorn and Tom Terry, executive vice president and chief lending officer, spoke with the Fort Worth Business about UMB’s expansion into Texas, its growth and strategy. Following is an edited excerpt.
Why did UMB acquire Marquette?
Hagedorn: The things we liked the most about this acquisition is, first of all, the strategic fit for us. Texas, as an entire region, and Phoenix were the No. 2 and No. 3 fastest-growing for us. No. 1 is Kansas City, which is our home base. As a percentage growth, Phoenix and Arizona were actually faster growing than Kansas City. Kansas City has got more dollars just because of its size. But that’s the strategic fit: fast-growing, large metropolitan areas.
About three-quarters of our entire loan portfolio is in C&I [commercial and industrial] and commercial real estate. The Meridian Bank part, obviously, opens up these markets in Texas for us in a much bigger way. As of today, UMB is roughly a half-million-dollar bank in Dallas-Fort Worth combined. That’s a big deal for us. But we’ve been here before. We’ve got customers dating back 30 years here. In the last year to 18 months we’ve established our own presence here. This [acquisition] just sped up the process and obviously added a lot of assets we didn’t previously have.
Terry: And a lot of talented people.
Hagedorn: Yes, and a lot of talented people. So that’s the strategic part of this. Then there’s the financial part of it. The thing that’s most interesting about this acquisition is they’re funding because of the loan growth they had in both Meridian Bank in Phoenix and Meridian Bank in Texas. They could not fund themselves. They had to borrow funding. UMB has a 56 percent loan-deposit ratio so we have no trouble having the kind of cash we need to meet the credit needs of our customers. We’ve got lots of liquidity we bring to the table and that makes the acquisition much more economically attractive.
The third thing is the cultural fit. We have the Pohlad family’s involvement in the bank. We have the Kemper family at UMB and I would say that the approach to banking is very similar. We found that out through our due diligence process. That probably manifests itself most obviously in the lending book. When you look at the way they lend money and the way we lend money, we are similar and complementary in many ways.
What are your short- and long-term goals for the Dallas-Fort Worth market?
Hagedorn: The short-term goal is to get through the next week after announcing the completion of the acquisition and then getting through the conversion process. We want to make sure there’s no ambiguity with our customer base. If you’re a Meridian Bank Texas customer today, nothing changed.
Will the name change?
Hagedorn: The name isn’t changing today. The signage isn’t changing. Clearly, at some point when we convert all of this, there will be a name change. And there will be a conversion change to the systems that we currently run at UMB. We’re still evaluating that. We may keep some of their systems we like.
So your long-term goal is what?
Hagedorn: As I said, Texas is becoming the fastest-growing region for us out of eight states, which tells you how important Texas is for us. There’s a lot of folks that live in Texas. This is a robust economy. I think this is one of the brightest markets that we have. The synergy with the market overlap probably couldn’t be better. The places where we were already operating, we could add scale to it. They’re fast growing and urban, too. When you’re a C&I lender, urban means density so lots of businesses and lots of employers. It’s a great fit.
How do you compete against bigger banks?
Hagedorn: That’s a great question, especially for somebody who worked at Wells Fargo for a lot of years, 17 years to be exact. When you think about the banking landscape today you have the community banks. Technically UMB is not a community bank, but with the way we operate customers feel like we’re a community bank. Then there’s the midsize banks, which we’re a part of, and then there are the ‘too big to fail,’ the largest banks out there that have specific designations by the regulators.
The good news about UMB is that we have all of the products and services to compete with the big guys. I would challenge folks to find things we don’t do. By and large, we’re going to compete with the largest banks with all the products and services customers want and that fit with the size we want to serve. We have those products and services to compete with community banks as well.
What sets UMB apart?
Hagedorn: The thing that makes us unique is we’re not completely focused on just lending. Our revenue streams are about 60 percent noninterest income and 40 percent interest income. It’s a unique diversified financial services model that we run. UMB manages over $40 billion in assets under management (AUM) across the nation and some overseas. We’re actually a global asset manager. You probably aren’t going to find another midsize bank that runs $40 billion-plus of AUM.
In our fund services business, we are right up against $200 billion that we administer in hedge funds private equity. We’re over $12 billion in private wealth assets across the United States that we manage. So it isn’t just about banking. We complete all the needs as the big guys do but we also have these other businesses that make us unique.
Another thing that we compete on and that makes us unique is our mission statement, what we call TUCE, ‘the unparalleled customer experience.’ Folks at Meridian will become very aware of it. Every business promises you things: great service or good products, but a lot of times you don’t get that. We challenge our associates to fill that [promise] with the unparalleled customer experience. It’s a simple thing. Don’t say no to customers. Say yes. Find ways to help the customer. At the end of the day our money is not greener than anyone else’s. But we can deliver it in a way that shows we’re there for the customers. One of our challenges is how to keep that as we get bigger and bigger.
Terry: When you ask how we compete with the smaller banks and the larger banks, we’re a flat organization so we make decisions quickly. We don’t get bogged down in the process. We try to approach every customer and every opportunity with that in mind. We try to be responsive. That gives us a competitive advantage because a lot of our competitors get bogged down in the process. We work hard not to be that way – and successful.
Hagedorn: It’s a culture thing. As Tom is rightly pointing out, the responsiveness we have is something we pride ourselves on.
This year got off to a good start for UMB. Your first quarter financials were positive, with loans increasing and total deposits up.
Hagedorn: It’s a tough economy. Without an interest rate increase, it’s pretty tough. We haven’t had that since the financial crisis. Everyone is waiting for that. We feel good about our businesses. We’re one of the few banks to see double-digit loan growth for 19 consecutive quarters and 11 consecutive quarters of double-digit growth. That is unique in the bank space. Our health care deposits are growing 35 to 40 percent a year. And we still have a 56 percent loan-deposit ration so we have lots of dry powder. That doesn’t happen without a concerted effort and hiring talented people.