UMB Financial Corporation

Good morning and welcome to the UMB Financial fourth quarter 2021 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Kay Gregory of Investor Relations. Please go ahead.

Good morning and welcome to our fourth quarter and full year 2021 call. Mariner Kemper, President and CEO, and Ram Chankar, CFO, will share a few comments about our results. And Jim Rhine, CEO of UMB Bank, and 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, which are subject to assumptions, risks, and uncertainties. These risks are included in our SEC filings and are summarized on slide 42 of our presentation. 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. All earnings per share metrics discussed on this call are on a diluted share basis. Our presentation materials and press release are available online at investorrelations.umb.com. Now, I'll turn the call over to Mariner Kemper.

Thank you, Kay, and thanks, everyone, for joining us today. In 2021, we delivered solid operating and financial results with strong growth on both sides of the balance sheet, steady asset quality metrics, and continued momentum in our fee businesses. When many others in our industry struggled to generate meaningful loan growth, we delivered 12.3% increase in average loans in 2021, excluding PPP, largely through market share gains. We're positioned to benefit from the anticipated economic expansion, higher interest rates, and continued investments we're making. In 2022, while others are predicting growth based on a better economic environment, we're confident that we'll continue to garner more than our fair share of that growth. There were a few factors that had outsized impacts on our results in the fourth quarter and the full year. We had higher than typical operating expenses, largely driven by higher incentive compensation for the strong business performance we experienced, along with additional charitable contributions in the quarter. Additionally, we saw some variances in software costs and legal and consulting expenses related to timing of our business investments. We estimate that approximately $10 million of the linked quarter increase in expenses was variable in nature and attributed to timing of spend. Many of these incremental expenses should reset lower in the first quarter. As we've discussed before, we remain focused on delivering positive operating leverage across all environments while we continue to invest prudently in our people and platforms. On the revenue side, in 2020, the gain on our investment in Tattooed Chef and ongoing market-related adjustments impacted year-over-year comparisons. Ram will share more detail on the various drivers shortly, but we expect to generate positive operating leverage in 2022, excluding the impact of PPP, with or without the benefit of higher interest rates. Turning to our fourth quarter results, net income for the quarter was $78.5 million, or $1.61 per share, Pre-tax, pre-provision income on an FTE basis was $113.4 million, or $2.32 per share. Fourth quarter net interest income was $210.6 million and was relatively flat compared to the third quarter, and we saw positive contributions on the fee income side. Fund services total assets under administration have grown nearly 25% from year-end 2020 to stand at an impressive $419 billion. Custody assets crossed the $150 billion threshold driven by organic growth. In specialty trusts and agency solutions, we saw an 149% increase in new business in 2021, and our teams continue to garner industry recognition for service and innovative products. In private wealth, new asset sales for 2021 increased 17% over the prior year, and we continue to build out and strengthen our family office offerings. I'm looking forward to further momentum as we continue to invest in this business. You'll see more detail in the line of business updates in the presentation. Moving to the balance sheet, slide 24 is a snapshot of our loan portfolio, showing the drivers behind the loan growth I mentioned. Average loans for the fourth quarter, excluding PPP balances, increased nearly 13% year over year and nearly 6% on a linked quarter annualized basis. Asset quality remains strong. with net charge-offs of 19 basis points for the quarter and 27 basis points for the full year, consistent with our outlook and our historical averages. Average C&I loans increased 12% on a link quarter annualized basis as we continue to deepen penetration in our markets. Most of our commercial clients are reporting strong pipelines and backlogs across most industries. In general, these are more positive feelings about the direction of 2022 while customers are keeping an eye on supply chain and labor issues impacting so many businesses. And clients have expressed more interest lately in expansion, both organic and through acquisition. In our commercial real estate and construction portfolios, average balances were impacted by payoffs and by typical cycles as completed projects are converted to term loans, sold or refinanced into the secondary market. Average residential mortgage balances grew 6.5% from the third quarter, an annualized increase of nearly 26%. Funded mortgage loans for the quarter were $200 million, including $55 million in the secondary market. In 2021, we saw a 70% increase in secondary market mortgages compared to 2020. Total top-line loan production, as shown on slide 25, was very strong, coming in at $1.4 billion for the quarter, a record level for us. Payoffs and paydowns were 5.6% of loans in line with prior quarter. Many of our recent payoffs have been tied to merger and acquisition activity. More clients have been taking advantage of attractive multiples, often partnering with private equity firms and family offices. At the same time, we continue to see financing opportunities coming from some of these same PE firms and family offices. While estimating payoffs can be unpredictable, we continue to see a robust pipeline. with opportunities across all verticals in the first quarter. Finally, earlier in January, we pursued and executed the sale of our small acquired factoring portfolio to an alternative financing company. Ram will discuss the financial impact of the sale of our factoring portfolio in his prepared remarks. Overall, 2021 was a solid year. Like all of us, I'm hopeful we're nearing the final phase of this pandemic, but no matter what issues we may navigate, I'm proud of our team and the resilience they've shown in serving our customers and keeping UMB moving forward. We're excited for the opportunities we see ahead of us in 2022. Now I'll turn it over to Ram for some additional comments. Ram?