UMB Financial Q1 2026 Earnings Call - Loan Growth and Margin Expansion Outpace Expectations

Brian Foran, Equity Research Analyst, Truist2: Thank you for standing by. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welcome everyone to the UMB Financial First Quarter 2026 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I will now turn the call over to Kay Gregory, Investor Relations. Please go ahead.

Kay Gregory, Investor Relations, UMB Financial: Good morning, and welcome to our first quarter 2026 call. Mariner Kemper, Chairman and CEO, and Ram Shankar, CFO, will share a few comments about our results. We’ll open the call for questions from equity research analysts. Jim Rine, President of the holding company and CEO of UMB Bank, along with Tom Terry, Chief Credit Officer, will be available for the question and answer session. Before we begin, let me remind you that today’s presentation contains forward-looking statements, including the discussion of future financial and operating results, as well as other opportunities management foresees. Forward-looking statements and any pro forma metrics are subject to assumptions, risks, and uncertainties as outlined in our SEC filings and summarized in our presentation on slide 50. Actual results may differ from those set forth in forward-looking statements which speak only as of today.

We undertake no obligation to update them except to the extent required by securities laws. Presentation materials are available online at investorrelations.umb.com and include reconciliations of non-GAAP financial measures. All per share metrics refer to common shares and are on a diluted share basis. Now I’ll turn the call over to Mariner Kemper.

Brian Foran, Equity Research Analyst, Truist0: Thank you, Kay. Good morning, everyone. We’ll share some brief comments, then open it up for questions. We reported another strong quarter with results well ahead of expectations. We had 10.8% linked quarter annualized loan growth boosted by $2.3 billion in gross production, nine basis points of core margin expansion driven by a 24 basis point decrease in the cost of interest-bearing deposits, high quality credit metrics, including 19 basis points of net charge-off and provision of $27 million, driven mostly by the $1.4 billion increase in period-end loan balances. Finally, continued momentum in our fee businesses with strong contributions from corporate trust, investment banking, and fund services, where assets under administration increased nearly $20 billion from the prior quarter and stand at $565 billion.

I’ll let Ram get into more detail around our results in a moment. First, I’d like to address some of the headlines around the private credit industry, which appear to exaggerate exposures and risks at regional banks. Private credit has been around for years and has been and will continue to be an important part of capital formation on a global basis. We have heard some concern that due to our varied lines of business, we may have some outsized exposures and could impact our performance. The fact is that we have negligible exposure to the private credit industry, and what exposure we do have is to high quality and experienced operators that have diversified holdings, strong credit structures, and low leverage at the fund level, all underwritten to low loan-to-value metrics.

We are proud to partner with a few of the strongest players by providing asset servicing solutions to their funds. This quarter, we’ve added additional disclosures to our IR deck to explain what private credit means to us and more importantly, what it doesn’t. First, on slide 31, we have outlined our total MDFI lending exposure, providing additional color to the standard call report categories. As you can see, our total MDFI exposure is $2.6 billion or just 6.6% of total loans. Within that total, approximately $300 million or less than 1% of the loans are to private credit funds. Further, a third of those loans are subscription lines which carry an even lower level of risk.

As I noted earlier, these private credit funds are primarily secured by diversified holdings of senior secured loans, have strong borrowing bases, minimal exposure to at-risk industries, low leverage, and they have continued to see strong gross inflows. Just under $1 billion of our MDFI loans are to private equity funds, with the largest portion of these being subscription lines, also known as capital call lines. As you can see from the definition included on page 31, subscription lines inherently carry even lower risk to lenders as they are short-term lines that are repaid with funds received on capital calls made to investors who are contractually obligated to contribute the capital to the fund upon request. The slide gives other detail and characteristics of our high quality portfolio, including the fact that over 98% of MDFI balances are pass rated.

As you have heard us say before, lending to MDFIs is not a new phenomenon and has long been a part of our C&I portfolio with minimal historic losses. Turning to our fee income exposure to private credit funds, we’ve added some additional detail on asset servicing and custody slide on page 36. Approximately $43 billion of our more than $565 billion in assets under administration is related to private credit, representing just 7.6% of the total. More significantly, the AUA tied to private credit funds increased nearly 5% from the end of the prior quarter. The related annual fee income totaled approximately $13 million, or just 1.6% of annualized first quarter fee income. Similarly, any deposit impact from these funds is immaterial.

Moving on, our capital levels continue to build with March 31 CET1 ratio of 11.16%, a 20 basis point improvement from December. While our capital priorities remain the same with organic growth at the top of our list, our Board approved an increased share repurchase authorization. As you can see in our earnings release, we opportunistically repurchased approximately 178,000 shares in March. We will continue to remain opportunistic in the second quarter. Finally, our results this quarter drove positive operating leverage of 6.4% on a linked quarter basis, a 155 basis point improvement in operating ROTCE, and an operating efficiency ratio of 47.6%. We continue to expect positive operating leverage for the full year of 2026, even with the impact of lower expected contractual accretion benefits.

I’m extremely pleased with the performance of our newer markets and I’m excited to continue the momentum throughout the remainder of this year. Now I’ll turn it over to Ram for some additional detail on the drivers of our first quarter results. Ram?

Brian Foran, Equity Research Analyst, Truist3: Thanks, Mariner. The first quarter included $51 million in net interest income from purchase accounting adjustments, $15.1 million of which was related to accelerated accretion from early payoffs of acquired loans. The benefit to net interest margin from total accretion was approximately 33 basis points. On slide 10 is the projected contractual accretion, which is estimated at approximately $71 million for the remainder of 2026 and $79 million for 2027. These totals do not include any estimates for accelerated payoffs. Slides 12 and 13 include some key highlights and drivers of our quarter-over-quarter variances. Non-interest income for the quarter was $204.8 million, an increase of $6.4 million or 3.2%.

Drivers included strong performance from both fund services and corporate trust, increased deposit service charges and investment banking revenue, where municipal trading income increased by 39% from fourth quarter levels. Within the other income category, we had $5.9 million in non-recurring gains on previously charged off HTLF loans, a variance of $5.4 million from the fourth quarter. We had a $3.8 million decline in COLI income, which has a similar offset in reduced deferred compensation expense. Adjusting for investment gains, the non-recurring items I noted, and mark-to-market on COLI, our fee income for the first quarter was approximately $198 million. On the expense side, we had just $4.4 million in merger-related costs compared to elevated levels in the prior quarter when the largest portion of contract termination and conversion expenses were recognized.

Excluding the impact of one-time costs, operating non-interest expense was $375.4 million, a reduction of 4.2% compared to the fourth quarter. The largest drivers included a reduction of $5.9 million in salaries and benefits expense related to lower bonus and commissions accruals following strong fourth quarter performance, and a $3.9 million reduction in deferred compensation expense, partially offset by seasonal increases in payroll taxes, insurance, and 401(k) expense. Compared to the guidance I provided last quarter, the favorability in expenses was driven by timing of marketing and other spend, sooner than expected synergies realized on contract terminations and deferred compensation expense. Looking ahead, we would expect second quarter operating expense to be in line with the current consensus expectations of $383 million.

The increase from first quarter primarily reflects 1 additional salary day, as well as the impact of our merit cycle that went into effect in April. Turning to the balance sheet, driving the 10.8% annualized growth that Mariner mentioned was 22% annualized growth in average C&I balances, led by strong activity in Texas. Other regions, including California, St. Louis, Colorado, and Utah, posted double-digit quarterly growth. It’s great to see the momentum building in several of our acquired regions, along with Utah, where we opened our first physical bank location in December. Our pipeline remains strong heading into the second quarter. Average deposits, as shown on slide 25, were essentially flat in the first quarter as the 10.4% linked quarter annualized increase in DDAs was largely offset by lower interest-bearing deposit balances.

We added a metric this quarter that adds customer repurchase agreement balances, which are deposit surrogates. Average customer funding increased $702 million, or 1.2% from the prior quarter and 4.8% on a linked quarter annualized basis. This balance remix, coupled with the residual impact of the rate cuts in the fourth quarter, drove our cost of total deposits down by 19 basis points to 2.06%, while cost of interest-bearing deposits declined by 24 basis points to 2.79%. We realized a blended beta of 70% on total deposits for the quarter, driven by favorable mix shift as well as continued outperformance for pricing on our SOFR index deposits. Reported net interest margin for the first quarter was 3.38%.

Excluding the 33 basis points contribution from purchase accounting adjustments, core margin was 3.05%, increasing 9 basis points sequentially. The primary drivers of the linked quarter increase in core net interest margin included benefits of a favorable deposit mix shift and repricing of deposits following the reduction in short-term interest rates and the positive impact of day count in the quarter, partially offset by loan repricing and lower loan fees and the impact of liquidity balances and a lower benefit from free funds. Relative to the first quarter adjusted margin of 3.05% that excludes accretion, we expect second quarter margin to be relatively flat as the benefits from fixed asset repricing are offset by day effect and stable deposit costs and mix shift.

I will add my typical caveat that actual margin and net interest income will depend on the levels of DDA growth and excess liquidity, any SOFR movements, and mix shift within the lending and funding portfolios. Finally, our effective tax rate was 21.1% for the first quarter compared to 20.3% for the fourth quarter. Looking ahead, our tax rate is expected to be between 20%-22% for 2026. Now I’ll turn it back over to the operator to begin the question and answer session.

Brian Foran, Equity Research Analyst, Truist2: Your first question comes from the line of Jon Arfstrom with RBC Capital Markets.

Jon Arfstrom, Equity Research Analyst, RBC Capital Markets: Hey, good morning to everyone.

Brian Foran, Equity Research Analyst, Truist3: Morning, Jon.

Jon Arfstrom, Equity Research Analyst, RBC Capital Markets: Hey, good morning. Maybe, Marin or Jim, for you guys on the pipelines, a good number, the $2.3 billion, maybe it’s a little seasonality in there. Do you expect that to continue to grow from here? You flagged this in the release, but have you seen any impact on pipelines from some of the geopolitical risks or higher energy costs?

Brian Foran, Equity Research Analyst, Truist0: I’ll take that first. Jim, feel free to add anything. You know, I think this is a good news story, which is that I don’t really have anything new to tell you know, from being in this seat for 22 years. It’s the same thing every quarter for 22 years, which is, you know, the next quarter looks pretty good, and it is not seasonal at all. You know, we continue to book loans based on our strategy, bottoms up, capability, capacity of the officer, market share opportunity in the markets that we’re in and in the verticals we’re in. There is a very long runway for us across our entire footprint, including some new, very big markets like California. Anything you-

Jim Rine, President of Holding Company and CEO of UMB Bank, UMB Financial: The only thing I would add is it’s continues to be strong, and it’s from a cross-section from all markets.

Brian Foran, Equity Research Analyst, Truist0: Yeah.

Jon Arfstrom, Equity Research Analyst, RBC Capital Markets: Okay. Anything on the payoffs and pay downs slowing? I know that that number jumps around, but it was a pretty big step down in the quarter. Is there anything you would flag on that?

Brian Foran, Equity Research Analyst, Truist0: No, actually, I would say that the anticipated payoffs and pay downs in the first quarter actually materialized. What we expected to happen happened. It can kind of bump around. The reality of it as we look forward is, you know, we’re going to be higher for longer. Instead of seeing rates come down, we’re not likely to see as much payoff and pay down for the rest of the year if that’s going to be the case, which seems to be, you know, the prevailing thought that we’re probably sticking where we are. If not, you know, maybe. We’ll just say we don’t anticipate any rates coming down anytime soon.

Jon Arfstrom, Equity Research Analyst, RBC Capital Markets: Yep. Okay. All right. Thank you very much. Appreciate it.

Brian Foran, Equity Research Analyst, Truist3: Thanks, Jon.

Brian Foran, Equity Research Analyst, Truist2: Your next question comes to the line of Jared Shaw with Barclays. Your line is open.

Jared Shaw, Equity Research Analyst, Barclays: Thank you. Good morning.

Brian Foran, Equity Research Analyst, Truist3: Morning, Jared.

Jared Shaw, Equity Research Analyst, Barclays: Hey, just, you know, looking at the fee income lines, you had some really good strength there this quarter. How should we think about fee income for the year and for the second quarter, you know, sort of building off of what we saw this quarter?

Brian Foran, Equity Research Analyst, Truist0: Yeah, I mean, you know, we like, I can’t give you any guidance on expectations for growth and fee income other than to point, you know, backwards. We continue to expect the same kind of performance from the team. The pipelines across all those businesses remain very strong to include the two that drive it really for our business and have for some time, which would be fund services and corporate trust. You know, the addition, we’ve been giving you a little color over the last couple of years of the success we’ve had with our private investment group. You know, we expect to continue to see exits and successes periodically there as well.

Yeah, I mean, expectations continue to be, without giving you any specific guidance, you know, as strong as they have been. Pipelines are good. Activity is strong. We’re taking share across the board in all those businesses.

Jared Shaw, Equity Research Analyst, Barclays: On the, you know, at the time of the Heartland deal, you talked about the opportunity of corporate trust in some of those new markets. Are you seeing any activity there yet? Is that still more in the future as you build out those markets and capabilities?

Brian Foran, Equity Research Analyst, Truist0: Yeah, I think what we intended, the message intended with that is that corporate trust is a very local business, and it’s a brand business. I think the brand extension, having offices and signs and visibility across California and other places. And you know, places for lawyers to meet together in offices and things like that. You know, it is brand extension and pushes the business further. It’s hard really to point directly towards, you know, Heartland specifically. We know that that brand extension with those locations and stuff is, you know, helpful. We’ve also done a list out. You know, we talked about that I think last quarter, Wilmington Trust in California. I would say it’s, I’d call it mostly brand extension. It, you know, it helps.

Jim Rine, President of Holding Company and CEO of UMB Bank, UMB Financial: This is Jim. Jared, in what Mariner Kemper just mentioned, we’ve continued to add to the team in all markets. We look for that to do nothing but grow in the Heartland markets that we inherited.

Jared Shaw, Equity Research Analyst, Barclays: Okay, thanks. If I could just follow up on the deposits. You know, Rami, you’d called out sort of the impact to NIM from potential deposit mix shift and DDA growth. You know, if we look at average DDAs versus end of period, you know, it feels like there could be some good growth built in there. How should we think about sort of that DDA balance growing from here? Is there just a sort of a lot of quarter end variability?

Brian Foran, Equity Research Analyst, Truist0: I’m gonna take that. Jim, Ram can jump in after me. I think as we’ve said many times, there’s a couple dynamics for us. Oftentimes we try to guide you to thinking about averages rather than points in time. That’s because of a lot of the episodic nature of all of our institutional businesses and some of our larger corporate business, with, you know, things such as dividends and tax payments and all those kinds of things that can happen from quarter to quarter. That’s true.

Also, you know, I mentioned a moment ago picking up Wilmington Trust’s team in California, adding team members across the country in our New York office and our L.A. office, et cetera, in corporate trust and the momentum we have with fund services. The addition of more clients in between those episodes allows the base to grow over time. The expectation without knowing is that that DDA baseline grows over time, due to all the success and momentum we have in client acquisition that takes place in between those episodes.

Jared Shaw, Equity Research Analyst, Barclays: Okay. Thanks.

Brian Foran, Equity Research Analyst, Truist0: Yeah.

Brian Foran, Equity Research Analyst, Truist3: Thanks, Jared.

Brian Foran, Equity Research Analyst, Truist2: Your next question comes to the line of Brendan Nosal with Hovde Group. Your line is open.

Brendan Nosal, Equity Research Analyst, Hovde Group: Hey, good morning, everybody. Hope you’re doing well.

Brian Foran, Equity Research Analyst, Truist3: Good morning.

Brendan Nosal, Equity Research Analyst, Hovde Group: Maybe just kicking off here on capital. Any early read on the updated capital rules overall, and then specifically how it ties into how you think about $100 billion? Maybe pair that alongside, you know, the increased activity we saw in the buyback this quarter.

Brian Foran, Equity Research Analyst, Truist3: Yeah. I’ll take this. Just as based on our preliminary read, it’s a net positive for us. Obviously a lot of relief from risk-weighted assets. We’re still studying it on, you know, going from 100% to 95% on some of the commercial relationships and LTV-based assignments on residential mortgages. The negative is just the inclusion of AOCI. I still think it’s a net positive for us in terms of what it means to our CET1, our total capital ratios.

Brian Foran, Equity Research Analyst, Truist0: That I would just add with the addition of Heartland and how efficient we’ve become, we’re accreting capital very quickly on top of all that. It’s just a beautiful position to be in. We’re in a position to have likely more flexibility with capital. All of the things that Ram just said, along with our ability to accrete and grow capital is gonna give us flexibility as we look into getting closer to 100. We feel well positioned. Again, we also believe because of the quality of our assets, we benefit from likely being able to support lower levels of capital than our peers anyway, long term.

Brendan Nosal, Equity Research Analyst, Hovde Group: Okay. All right. That’s fantastic. maybe pivoting to more of a top level question on just the overall return profile. you know, pretty meaningful step up in ROA over the past couple of quarters. I get that things can move around, you know, period to period. Just conceptually, are we at a level that you can more or less maintain going forward? Are there environmental pressures that kind of ease that back somewhat?

Brian Foran, Equity Research Analyst, Truist0: We expect to continue to perform that. Ram, I don’t know if you any other color you.

Brian Foran, Equity Research Analyst, Truist3: Yeah. We don’t give long-term guidance on our growth targets, you know, even if you exclude some of the purchase accounting things that go through our income statement, if you exclude that, our performance has been increasing because of strong operating leverage, good balance sheet growth, good margin trajectory. We feel pretty good about it. To just add to your previous question on capital, we still have almost $600 million of pre-tax accretion left to take through our income statement for the next, you know, 2-3 years, right? That’s $6 of EPS and close to 100 basis points of capital. That’s on top of the regular outperformance that we see in our legacy operations before all the purchase accounting benefits. We’re pretty excited.

It’s the denominator that’s growing at a fast clip, and so that’s why you saw what we did this quarter, including, you know, doing some buybacks before our quiet period ended. Obviously we had $1.4 billion of loan growth, and you heard the comments about the pipeline looking pretty strong. We will be more opportunistic about looking at our dividend and other opportunities.

Brian Foran, Equity Research Analyst, Truist0: I would also just add as a reminder, one of the reasons we did Heartland was to gain strength in our retail business, which, you know, we’ve doubled our branch network, doubled our granular low-cost deposits. That is, you know, a really nice leverage point going forward for us. You know, our retail business was a bit more of a drag on those profitability metrics. That has gotten a lot more efficient, and we expect it to continue to do so as it grows, as it grows. Okay. Fantastic. Thanks for taking my questions. Thanks, Brandon Berman.

Brian Foran, Equity Research Analyst, Truist2: Your next question comes to the line of Casey Haire with Autonomous Research. Your line is open.

Casey Haire, Equity Research Analyst, Autonomous Research: Yeah, great, thanks. Good morning, guys.

Brian Foran, Equity Research Analyst, Truist0: Morning, Casey.

Casey Haire, Equity Research Analyst, Autonomous Research: wanted to touch on the NIM outlook from the loan yield side of things. Just where are new money yields versus that 6.52 level in the first quarter?

Brian Foran, Equity Research Analyst, Truist0: You, you gotta look at our loan yields excluding the accretion, right? If you look at one of our pages, we show that the loan yields are close to just 6%, under 6%, if you exclude the accretion benefit from loans. For the first quarter, our production yields are somewhere between 6% and 6.25%, so they’re pretty accretive on new money coming in. There’s the whole fixed asset repricing that happens within the loan portfolio as well. We have close to $3 billion of loans that have sub 5% rates that are repricing higher in today’s environment.

Casey Haire, Equity Research Analyst, Autonomous Research: Okay, great. Yeah. Yeah, understand that the core yield impact. Then, apologies if I missed this. On the expenses, very good discipline here in the first quarter. Just, I guess some color on what drove that $10 million of surprise versus your guidance. You know, with the guide being up in the second quarter, what are some of the drivers there? Because I think there was some seasonal, roll-off.

Brian Foran, Equity Research Analyst, Truist0: Yep

Casey Haire, Equity Research Analyst, Autonomous Research: ... in 2 Q, just a little color on what’s going on with the expenses.

Brian Foran, Equity Research Analyst, Truist0: Yeah. Some of it was just, I explained it in my prepared comments, but I’ll repeat it. Some of it was just timing of when we expected some of the marketing spend to happen, so that didn’t happen as I had anticipated in the first quarter when I gave my guidance. The other one is we also did a great job doing the expense saves from some of the contract terminations. They happened sooner than what we expected. That was part of our $385-$390 guidance that I gave last quarter. The step up in the second quarter is 1 more day. It’s the merit cycle that goes into effect in April for our associate base. Those are the two drivers that take $375.

We also had an expense credit, if you will, of $3 million from our deferred comp. If you add that, our first quarter baseline’s more like $378. What I guided to was about $383 that assumes the step up because of the merit cycle and 1 more day.

Casey Haire, Equity Research Analyst, Autonomous Research: Gotcha. Thank you.

Brian Foran, Equity Research Analyst, Truist0: Thanks, Casey.

Brian Foran, Equity Research Analyst, Truist2: Your next question comes from the line of Janet Lee with TD Cowen. Your line is open.

Janet Lee, Equity Research Analyst, TD Cowen: Good morning.

Brian Foran, Equity Research Analyst, Truist0: Morning, Janet.

Janet Lee, Equity Research Analyst, TD Cowen: On deposits, I want to better understand the, the reason for the decline or the muted deposit growth in the quarter. I thought 1Q was there’s a seasonal public fund inflows, and even if I look at it on an average basis on page 25, I see commercial balances decline, although other parts have been growing. Just wanted to see whether this is just timing or seasonality or whether there was something else that attributes to somewhat muted deposit growth for the quarter.

Brian Foran, Equity Research Analyst, Truist0: Thanks, Janet. I tried to address that a moment ago. You know, it’s complex. I get it. We have so many lines of business that, you know, make it harder to understand the reality. How we like to describe it for you is that you need to think about it on averages instead of point in time anyway in general. That we have a lot of episodic stuff that goes through a lot of those business lines that you see on that page. Is that 36, 35? 25. 25. On 25. Most of those businesses other than, you know, public funds is a seasonal deal. That’s a drawdown in the quarter because of tax payments and such. The rest of them are more episodic.

That’s why you have to think about averages. I also like to point to 42, because you really need to think about what’s happening to our deposits over time, not even just averages for a 1 quarter. We have a very long term track record of adding clients. In between, on a quarter-to-quarter basis, you can see tax payments and dividend payments and putting money to work and all those kinds of things that can kind of bump things around a little bit. You really need to think about kind of multiple linked quarters and kind of year-over-year growth and what we’re able to do as a company. That’s, that’s the way I think about it. That’s the way I would like, you know, to think you all should think about it.

What is our long term ability to grow, deposits? We have an exceptional deposit generating machine. That’s the way I would look at it. There’s nothing, I guess, so what I would end with is there’s nothing to pick up from at the end of the quarter. It’s just business as usual. Business activity. Client count is good. Client count is growing. Nothing to read into with those numbers. It was not lost business is what, in a nutshell, we did not lose any business. Yeah.

Janet Lee, Equity Research Analyst, TD Cowen: Great. Thanks for the color. You’ve already touched on it earlier on total fees, and really appreciate all the color you gave on the private credit exposure on slide 36. This means that you’re, at least from either deposit or for the fee perspective on the trust and security processing fees, which have been growing at a very strong pace, you’re not seeing any disruption to that flow. The trajectory of that line item should just be continued growth since you’re not really seeing any outflows on AUA and the fee income side of the business. Is that the fair way to put it?

Brian Foran, Equity Research Analyst, Truist0: Yeah. That’s absolutely correct. You know, one of the things I think is really important to note about this business for us is from time to time, investors will ask, "Oh," you know, I’m gonna take you down a little history lane here for a second. There was a time when hedge funds were leading the way. As you’re all aware, hedge funds became out of favor. During that same time, we got the same set of questions, "Oh, what’s gonna happen to your assets under administration as hedge fund, the hedge fund business, slides away?" Well, the answer to that is private investing is still leading the way.

With our business, basically, as you go from hedge funds to private equity and within private equity, intervals come out, and that’s a popular vehicle. Private credit comes along, private credit has, you know, this conversation that’s taking place with private credit. It doesn’t mean all this money goes to public investing. It means it redistributes back through the other verticals within private investing. We are the beneficiary regardless as that money moves around within the private investing universe. We have benefited handsomely over time, regardless of which one of those verticals is accumulating capital costs.

Janet Lee, Equity Research Analyst, TD Cowen: Got it. Thanks for all the color.

Brian Foran, Equity Research Analyst, Truist0: Thanks, Janet Lee.

Brian Foran, Equity Research Analyst, Truist2: Your next question comes to the line of Nathan Race with Piper Sandler. Your line is open.

Brian Foran, Equity Research Analyst, Truist1: Good morning, everyone. Thanks for taking my questions.

Brian Foran, Equity Research Analyst, Truist0: Good morning.

Brian Foran, Equity Research Analyst, Truist1: Just going back to the capital discussion, you know, to your earlier points, you’re generating a lot of capital internally just given the profitability profile. You obviously, you know, eclipsed your CET1 target this quarter. You know, just given that, you know, the capital’s ability is so strong, eclipses even with double-digit balance sheet growth, how are you guys thinking about, you know, using the buyback authorization as more of a kind of a continuous tool to manage excess capital? I know it’s been more episodic in the past, but, you know, just curious how you’re thinking about, you know, buybacks as more of a kind of consistent component to excess capital management.

Brian Foran, Equity Research Analyst, Truist0: Yeah. I would, well, I’m gonna repeat myself here. Sorry, Nathan. We have a long-tested philosophy around that, which is, as long as we’re able to do what we’ve been able to do and expect to continue to do, the first and highest best use of our capital is to put it into loans, and we’re very successful at it. We don’t see that, you know, fading away. We’ve got an excellent team, a big, deep pipeline. We’ve got long-tenured associates. You know, we’ve big new markets to pursue, having lots of success. You know, really across the board. Wisconsin for us is on fire. Minneapolis is really turned on. California is doing great. New Mexico. I mean, I could go on and on.

The new markets are really performing and just early days getting the benefit out of the new markets. I think, you know, they’re not even operating at their highest level. First and foremost, loans. You know, then it’s sort of the combination of the other capital uses based on lots of variables, right? How’s our currency trading within all the other currencies and what’s going on in the economy. M&A, you know, we still think it makes sense for us to tuck in acquisitions that meet our, you know, tests for low cost, granular underlevered deposits. You know, well-run smaller banks that fit into the markets we’re already operating in. That, you know, that fits.

That’s investing in the business, so that would probably be next. The next two on the list are gonna be buybacks and dividends. We’ll be opportunistic on the, as we have been, we’ll be opportunistic on the buyback side. Our expectation on the dividend side is that you as investors should expect, as long as we’re performing, that you should see an increase in our dividend every year. That’s, you know, that’s the way I think about it, is, you know, we’re first gonna be thinking about investing in our business and then think about buybacks.

Brian Foran, Equity Research Analyst, Truist1: Understood. Makes sense. Maybe a bigger picture question for you. you know, it seems like to your point, you’re kind of firing on all cylinders. There’s good opportunities to grow share across each vertical and line of business. You know, are there any segments or businesses where, you know, that’s not working or where you’re seeing opportunities for greater efficiency or operational improvement, going forward?

Brian Foran, Equity Research Analyst, Truist0: Yeah. I mean, well, first of all, anybody who’s not trying to leverage technology to make their business more efficient should have their heads examined. We’re always looking at ways to operate better, and machine learning is being deployed across the whole organization. Get smarter, better, faster, bolder. You know, we’re deploying that as we always have. You know, I think AI is sort of a overused, misused term for basically being smart and using technology to make your business better. We’re looking for ways to do that all the time, and I think you’ll see us do that successfully going forward.

Otherwise, I would say really it’s just, you know, making sure, the sales force is, you know, has everything they need, and we’re staying out of the way and letting our exceptional tenured team of, you know, best in the business folks get out there and build our business. I mean, I think we have a really tremendous opportunity as a company to sort of take the feel of local national. We’ve been using that term. We really think we can take local national, you know, from Illinois to California and from, Milwaukee and Twin Cities all the way down to New Mexico and all throughout Texas. We think we can kind of be the go-to, you know, bank with the team that’s in place and has deep pipelines.

Brian Foran, Equity Research Analyst, Truist4: Okay. Great. I appreciate all the color. Thanks, Mariner.

Brian Foran, Equity Research Analyst, Truist0: Thanks, Nate.

Brian Foran, Equity Research Analyst, Truist2: Your next question comes from the line of Brian Wilczynski with Morgan Stanley. Your line is open.

Brian Wilczynski, Equity Research Analyst, Morgan Stanley: Hi. Good morning.

Brian Foran, Equity Research Analyst, Truist0: Morning, Brian.

Brian Wilczynski, Equity Research Analyst, Morgan Stanley: Just wanted to follow up on the core net interest margin guidance for the second quarter. Ram, you mentioned that new loan growth is accretive to core loan yields. You talked about the fixed rate asset repricing. Can you just elaborate on some of the puts and takes and any headwinds that keep core NIM stable in 2Q as opposed to up?

Brian Foran, Equity Research Analyst, Truist3: It’s just the incremental cost of deposits relative to what we can make on the asset side, right? If you look at our cost of interest-bearing deposits in the last quarter was about $2.80. You know, we have as Mariner said, we have very diversified funding mix and, you know, depends on where it comes from, whether it comes from DDAs or some other verticals or interest bearing cost deposits can vary from one quarter to another quarter depending on where it’s coming from. There are no headwinds in that in regard. I think it’s the absence of tailwinds that we had with rate cuts. Our internal view is, you know, there might be one rate cut maybe later this year, maybe not.

Brian Foran, Equity Research Analyst, Truist0: There are no more, you know, tailwinds from that standpoint that benefit our beta.

Brian Foran, Equity Research Analyst, Truist4: Neutral.

Brian Foran, Equity Research Analyst, Truist3: Neutral. I just said we expect our deposit cost to be stable and some accretion on the lending side because of new money yields and fixed assets repricing.

Brian Wilczynski, Equity Research Analyst, Morgan Stanley: Stable, stable with the opportunity of outperformance on demand deposit. Again, I say opportunity, right? That’s a possibility for us, otherwise it would be stable, right?

Brian Foran, Equity Research Analyst, Truist3: Mm-hmm.

Brian Wilczynski, Equity Research Analyst, Morgan Stanley: Got it. Yeah. Really appreciate that color. And maybe just on the deposit side, you had really strong growth this quarter in the corporate trust deposits. Can you just remind us of some of the drivers for that business? I know UMB has an aviation business. You have a relatively new CLO business. Can you sort of just talk about what’s working there and what the environment is right now for corporate trust? Thanks.

Brian Foran, Equity Research Analyst, Truist0: Well, thank you. Well, it sounds like. Yeah, exactly. The aviation business is, you know, hitting on all cylinders. We have certainly our CLO business is firing up really well on a national basis, lots of opportunity there. You know, infrastructure spending is finally happening on a national basis. Our offices in the coasts have really started to pick up. You know, we did this lift out, we talked about a couple times on the call already, which is allowing for. It’s a big lift on the infrastructure side, you know. It’s really, I would say, across all those verticals. To your point, there are a couple of relatively new verticals and, I don’t know, Tim, you want to add anything to that?

Just really great.

Brian Foran, Equity Research Analyst, Truist4: No. I think, yeah, I think you hit it. It’s also across the board. Just we’re more of what we’ve always been doing.

Brian Foran, Equity Research Analyst, Truist0: Mm-hmm.

Brian Wilczynski, Equity Research Analyst, Morgan Stanley: Got it. Really appreciate. Yeah.

Brian Foran, Equity Research Analyst, Truist0: We’re number 2 and number 3, in the country by a number of issues now. You know, our coastal offices are relatively new, so I think there’s a huge runway for what we’re able to do out of Orange County and New York, up and down the coasts.

Brian Wilczynski, Equity Research Analyst, Morgan Stanley: Got it. Really appreciate all the color. Thank you for taking my questions.

Brian Foran, Equity Research Analyst, Truist0: Thank you, Brian.

Brian Foran, Equity Research Analyst, Truist2: Your next question comes to the line of Christopher McGratty with KBW. Your line is open.

Christopher McGratty, Equity Research Analyst, KBW: Oh, great morning.

Brian Foran, Equity Research Analyst, Truist0: Morning, Chris.

Christopher McGratty, Equity Research Analyst, KBW: Ram, I appreciate the commitment to operating leverage this year. You think about the moving pieces over the medium term, you’ve got the accretion rundown. It feels like this model is capable of operating leverage for the foreseeable future. I guess any response to that?

Brian Foran, Equity Research Analyst, Truist3: Yeah. I mean, that’s why even last time, and Mariner said it this time as well, right? Whether there’s more private investment gains or less private investment gains, whether there’s more accretion or less accretion, our job is to maintain positive operating leverage as we build scale. Some of our strategic pillars are about building scale in each of the markets, we’re doing that very selectively. You know, we’re being more profitable as we grow into our size as well. Definitely this is not an environmental thing. This is always, you know, we wanna weather all economic environments and achieve positive operating leverage that way. We judge ourselves on operating leverage. We think that’s the way to think about it. Every dollar spent should have positive leverage, and so we operate business.

Christopher McGratty, Equity Research Analyst, KBW: As a follow-up, is there anything magic about the 50% efficiency? I mean, you’re kind of in the low 50s today, kind of balancing the need for investments, the benefits from AI and that dynamic. Is there anything magic about 50?

Brian Foran, Equity Research Analyst, Truist3: I would say absolutely nothing magic about 50. As a matter of fact, we feel like we’re doing really well where we are given the mix of business. You know, being at 47 where we are right now is like a top of class number for just the net interest margin shop. The fact that we’re able to perform at 47 with all of our institutional businesses layered on top of that, we feel pretty damn good about that. No, I think there’s nothing magic about 50.

Christopher McGratty, Equity Research Analyst, KBW: Thank you.

Brian Foran, Equity Research Analyst, Truist0: Thanks, Chris.

Brian Foran, Equity Research Analyst, Truist2: Again, if you would like to ask a question, press star one on your telephone keypad. Your next question comes from the line of Brian Foran with Truist. Your line is open.

Brian Foran, Equity Research Analyst, Truist: Hey, good morning. Mariner, I definitely appreciate you led with anyone not using technology to get better needs to be examined. I thought it was interesting you I think you said AI is overused or overhyped. Can you just expand a little bit on where you think?

Brian Foran, Equity Research Analyst, Truist0: Sure

Brian Foran, Equity Research Analyst, Truist: maybe the AI for banks is a little too much?

Brian Foran, Equity Research Analyst, Truist0: No. It’s no, not too much. No, not what I meant. What I said was, I think the term is overused. I think that, you know, we think this is a big philosophical thing. I just think, you know, at the end of the day, AI is the use of data to run your business better and make better decisions and move faster. It’s not a new subject is my point. We’ve, you know, the TV and Bloomberg and CNBC and The Wall Street Journal have all really made a big deal out of it. At the end of the day, it’s the use of machine learning to get better, smarter, faster, bolder, which is not a new subject. That’s all I was saying.

I wasn’t saying banks are doing too much of it or not enough of it or whatever. I was just saying, you should sure as hell be doing it, leveraging the use of faster computing and better data to make your business better, smarter, faster, bolder. You know, if you’re not doing that, you should be your head examined. This is what it wasn’t people are doing too much or enough, not enough of it. It was you sure as hell better be doing it.

Brian Foran, Equity Research Analyst, Truist: Perfect. You know, on M&A, as I’m sure you’re aware that there just kind of became this narrative last year that somehow you were on the list to do a big deal. I thought it was interesting you kept using the word tuck in. You know, any other parameters you’d give on, like, what a ideal tuck-in deal looks like for you? Maybe as an extension, if and when the $100 billion line finally goes up, does the definition of, you know, the size of a tuck in change, or is it really independent of that move in regulation?

Brian Foran, Equity Research Analyst, Truist0: Yeah. Yeah. First I would say, I mean, I’m still surprised that somehow there was some narrative that we were gonna go do some big deal. I’ve never understood that. You know, we would never give up control of our company, try to merge two management teams, give up half our board, blah, blah, so on and so forth. We’ve never done that. We’re never gonna do that. We have a fantastic management team and a great strategy, and I have no need to do that, no desire to do that. The purpose of using the term tuck in is sort of a, to help with the definition of doing a deal that’s not going to affect any of that. Where we can tuck it in, it can still be our management team.

Don’t have to give up and compete with, you know, give up half the boardroom or part of the boardroom or whatever it is, and try to, you know, merge two cultures, et cetera. That’s what tuck-in’s supposed to mean. Again, I think our definitions are long-used, so it’s kind of, you know, I don’t understand why my long-used definitions get misused or misunderstood. You know, what we say is a tuck-in, a smaller deal, and then it would be in market or contiguous where we can leverage our people, leverage synergies, leverage brand and all that. Really importantly for us would be a granular low-cost deposits that are underlevered. That’s another really important one.

We don’t really wanna do a deal where every next dollar we lend out has to be from acquired deposits. We love the idea of an institution that is leverageable, that has deposits that we can put to use. ’Cause we have the asset generating machine, and we don’t wanna put that under pressure. Those are kind of the general themes. Is that helpful?

Brian Foran, Equity Research Analyst, Truist: That is. Thank you so much.

Brian Foran, Equity Research Analyst, Truist0: Yep.

Brian Foran, Equity Research Analyst, Truist2: I will now turn the call back over to management for closing remarks.

Brian Foran, Equity Research Analyst, Truist0: Well, thank you, everybody. As always, we love your interest in our company and the time spent to get to know us better. I hope that page 31 helped dispel some of the misguided understanding of what the private credit stuff means to us. You know, less than 1% of our loans, et cetera. That we have, you know, a very long track record of being lenders that do the same thing across every asset class. You know, we lend the same way no matter what we’re lending into, and we’ve got a very long track record, which you can see on 42 and 22 is where the quality. The intersection of growth on 42 and quality on 22, it is what we like to define as rarefied air that we live in.

You know, we’ve got a long tenured team and a great track record. I just point you to our track record, I guess, as you think about those issues. We’re very excited about the ways ahead, and we appreciate your interest.

Kay Gregory, Investor Relations, UMB Financial: Thank you, Mariner. As always, if you have follow-up questions, you can reach us at 816-860-7106. Thank you.

Brian Foran, Equity Research Analyst, Truist2: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.