UMB Financial Corporation

Hello and welcome to the UMB Financial Third Quarter 2024 Financial Results Conference Call. My name is Harry and I'll be coordinating your call today. All lines are currently in a listen-only mode and there'll be an opportunity for Q&A after management's prepared remarks. If you would like to enter the queue for questions, please dial star followed by one on your telephone keypad. If you change your mind and would like to exit the queue, please dial star followed by two. It is now my pleasure to hand over to Kay Gregory in Best of Relations to begin. Please go ahead.

Good morning, and welcome to our third quarter 2020 floor call. Mariner Kemper, Chairman and CEO, and Ram Shankar, CFO, will share a few comments about our results, and then we'll open the call for questions from our equity research analysts. 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, including the discussion of future financial and operating results benefits, synergies, gains, and costs that the company expects to realize from the pending acquisition, 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 filing and summarized on slides 48 through 50 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. Presentation materials are available online at investorrelations.umb.com and include reconciliations of non-GAAP financial measures. Now, I'll turn the call over to Mariner Kemper.

Thank you, Kay. Good morning, everyone. Thanks for joining us as we discussed our third quarter results announced yesterday afternoon. We had another solid quarter. with strong fee business performance and near double-digit annualized loan growth, driven by record top-line loan production at $1.4 billion. Our line utilization has remained steady at 37% to 39% over the past several quarters, and our loan pipeline remains strong heading into the fourth quarter. Overall, we're pleased with the strength of both sides of our balance sheet, as well as the robust traction we see in many of our fee-income businesses. We reported gap earnings of $109.6 million, or $2.23 per share, driven by continued momentum across our various lines of business. On an operating basis, we earned $2.25 per share. The increase in interest income was driven primarily by continued loan growth and higher levels of liquidity, partially offset by changes in funding mix. The strength of our diversified financial model was evident this quarter with strong fee income growth from several areas, including within our institutional business, where assets under administration exceeded half a trillion dollars. Trading and investment banking volumes increased largely in municipal and mortgage-backed securities, driving a 30% lean quarter increase in fee income. In corporate trusts, higher off-balance sheet money market balances contributed to stronger 12B1 fees in the quarter. And our private wealth teams have brought in $1 billion in net new assets year to date, or 33% ahead of full year 2023 levels. We focus on operating leverage rather than specific expense growth targets. So compared to the third quarter a year ago, we posted positive operating leverage of 4.4% on an operating basis. Rob will provide more detail on income and expense drivers shortly. Balance sheet growth included a 9.8% linked quarter annualized increase in average loan balances, in contrast to many of our peers' comments on anemic loan growth and slowing utilization. In fact, for banks reported so far, the median annualized increase in average loan balances has been just 3.4%. Loan growth was led by commercial real estate with multifamily balances posting 13% lean quarter growth and by construction draws on previously approved lines. We also saw a solid C&I activity with some increased M&A activity among our clients. Credit quality in our loan portfolio remains excellent and a hallmark of our business. As evidenced by just eight basis points of net charge-offs on a year-to-day basis, and non-performing loans of just eight basis points of total loans. Over the past eight quarters, our non-performing ratio has averaged just eight basis points compared to 39 basis points for our peer group and 35 basis points for the industry as a whole. CNI continues to perform well with just three basis points of net charge-offs for the quarter and net recoveries three out of the last four quarters. Credit card is typically the largest component of our net charge-offs. And that was the case again in the third quarter. We have heard some consumer heavy lenders discuss borrowers at risk and several anecdotal comments from retail participants in the retail sector seeming to support that sentiment. For UMB, however, consumer credit card represents just 1% of average total loan balances and typically makes up approximately 5 to 7% of credit card purchase volume. Most of our credit card net charge-offs for the quarter stem from our recent portfolio acquisition, which had a different credit profile than we normally underwrite. For context, these acquired balances averaged $118 million for the third quarter. On the flip side, relative to our original expectation, the portfolio yields on these acquired balances have also outperformed. Excluding losses on credit cards, our net charge-off rate this quarter would have been only two basis points. The higher provision expense in the quarter largely reflects the impact of loan growth along with some general portfolio trends. Our coverage ratio increased to 1% total loans. Average total deposits grew 951 million or 11.1% on a lean quarter annualized basis, including the intentional reduction of broker CD balances. For comparison, banks that have reported their quarter Results so far had a median analyzed growth in deposits of just 4.9%. While commercial DDA balances increased 11% on an annualized basis, overall average DDA balances declined, largely driven by tax payments and other activity in asset servicing and corporate trusts. As we've discussed in the past, these cash distributions by our large institutional clients can be episodic in nature, and there is some seasonality in the balances. especially among municipal and corporate trustee clients. Finally, we're on track to complete our pending acquisition of Heartland Financial, subject to approvals, and have updated milestones and progress on the integration planning in the debt. Our integration teams are collaborating well with HCLF, and we are well on our way with preparations for legal day one, still anticipated for sometime in the first quarter. Again, we believe this transaction will accelerate UMB's growth strategy, further diversify and de-risking our business model. The addition of this high-quality franchise is a great fit from a strategic, financial, and cultural perspective, and we look forward to serving our prospective clients and geographies, as well as welcoming new associates to UMB. Now I'll turn it over to Ron.