UMB Financial Corporation

Hello and welcome to today's UMB Financial First Quarter 2022 Financial Results Conference Call. My name is Elliot and I'll be coordinating your call today. If you would like to register a question during the presentation, you may do so by pressing star followed by one on your telephone keypad. I would now like to hand over to Kay Gregory, Investor Relations. Please go ahead when you're ready.

Good morning and welcome to our first quarter call. Mariner Kemper, President and CEO, and Ram Shankar, CFO, will share a few comments about our results. Jim Rhind, CEO of UMB Bank, and Tom Terry, Chief Credit Officer, will also 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 43 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. 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 to everyone for joining us today. 2022 is off to a great start. Solid performance in the first quarter included 19.1% linked quarter annualized growth in average loans, And we posted a $6.5 million provision release reflecting the quality of our loan portfolio. Additionally, we had strong fee income combined with expense levels that moderated from the previous quarter. For the first quarter, net income was $106 million or $2.17 per share. Pre-tax, pre-provision income on an FTE basis was $125.7 million or $2.57 per share. First quarter net interest income was relatively flat on a linked quarter basis. The positive impact from asset growth and balance sheet moves we made was offset by the sale of our factoring portfolio and the continued runoff of PPP balances, along with fewer days in the quarter. Non-interest income for the quarter totaled $123.7 million, an increase of 4.1% compared to the fourth quarter. Ron will share more detail on the various drivers, but we saw positives across many of our fee businesses. highlighted in the line of business update in our presentation. In the current economic and regulatory environment, there are a few items that position us well from a fee income perspective. First, we don't rely on mortgage gain on sale income, which is likely to be a drag for some of our peers heading into a raising rate environment. Second, NSF and OD fees are a very small portion of our deposit service charges and represent well less than 1% of total revenues. And while early, we've begun to see a return of 12B1 fees as interest rates rise. For the full year 2019, brokerage income, where those fees are booked, was $31.3 million. As rates fell in subsequent years, that total dropped to just $12.2 million in 2021. A normalization of that income stream is a tailwind for us. Total non-interest expense fell 3.5% on a link order basis, as some of the higher than typical expenses we discussed in the fourth quarter moderated. Excluding contributions from PPP, we generated positive operating leverage in the first quarter of 2022 of 6.2% on a length quarter basis and 7.8% versus first quarter of last year. Moving to the balance sheet, slide 24 is a snapshot of our loan portfolio showing the drivers behind loan growth I mentioned. Average loans for the first quarter, excluding PPP balances, increased 15.6% year-over-year and more than 19% on a linked quarter annualized basis. We saw phenomenal growth in CNI balances, with balances increasing 35% on a linked quarter annualized basis. Commercial real estate loan demand is strong, particularly in industrial projects, although developers are closely monitoring the cost of materials and labor. Most of our year-to-date activity in real estate has been in our Salt Lake City, Kansas City, Denver, and St. Louis markets. Average residential mortgage balances grew 4.4% from the fourth quarter to just over $2 billion. As I mentioned, we don't rely heavily on mortgage gain on sale revenue. However, we continue to grow our own portfolio and recently implemented a new down payment assistance program. The program, launched in December of 2021, is geared towards underserved markets, and it had 47 new applicants just in the first quarter. Total top-line loan production, as shown on slide 25, was again very strong, coming in at $1.1 billion for the quarter. Payoffs and paydowns were 5.1% of loans in line with recent quarters. While estimating payoffs can be unpredictable, we continue to see opportunities across all verticals in the second quarter. Based on what we see now, gross loan production is likely to be stronger than the first quarter. Asset quality, as shown on slide 26 and 27, remains strong, with net charge-offs of 20 basis points for the first quarter, consistent with our outlook and our historical averages. We did see an increase in non-accruals from the fourth quarter levels, which is largely driven by one relationship. At this time, we feel like we're in a good position there and expect a favorable resolution in the coming weeks. As we head into this cycle, I've looked back on prior periods and how our credit metrics have performed. The real test of quality comes when conditions are negative. Back to the balance sheet, strong deposit growth continued in the quarter, with average balances increasing nearly 12% on a linked quarter annualized basis. Despite our strong loan growth, our average loan to deposit ratio remains low at just 53% for the first quarter. This provides us with flexibility in a raising rate environment. We have plenty of opportunity to fund growth potential we see in our pipeline. Yesterday, our board approved the quarterly dividend of 37 cents per share and renewed the standard annual 2 million share repurchase authorization. These remain important in our toolkit for capital deployment in addition to opportunistic M&A. Finally, our latest corporate citizen report has just been published. and is available on our website. It highlights our continued efforts and actions related to environmental, social, and corporate governance issues. Our strong first quarter results position us well for the rest of the year, and we are encouraged by the activity we've seen so far in the second quarter. Now, I'll turn it over to Ram. Ram?