UMB Financial Corporation

Hello, everyone. Thank you for attending today's UMB Financial First Quarter 2025 Financial Results Conference Call. My name is Sierra, and I'll be your moderator for today. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. If you would like to ask a question, please press star 1 on your telephone keypad. I would now like to pass the conference over to our host, Kay Gregory, Investor Relations. Please proceed.

Good morning and welcome to our first quarter 2025 call. Meritor Kemper, Chairman and CEO, and Ron Schaufer, CFO, will share a few comments about our results. Then we'll open the call for questions from our 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, benefits, synergies, gains, and costs the company expects to realize from our acquisition, as well as other opportunities management perceives. Forward-looking statements in any pro forma metrics are subject to assumptions, risks, and uncertainties, as outlined in our SEC filings and summarized in our presentation on slide 51. 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 security laws. Presentation materials are available online at investorrelations.umb.com and include reconciliations of non-GAAP financial metrics. All per share metrics are on a diluted share basis. Now, I'll turn the call over to Mariner Cameron.

Thank you, Kay, and good morning, everyone. 2025 is off to a great start strong first quarter, and of course, the closing of our acquisition of Heartland on January 31st. Through the acquisition, we added just over $14 billion in deposits and more than doubled our branch presence across 13 states. We're on track to realize the cost synergies we outlined a year ago when we announced the transaction and plan for systems conversions are well underway at this point. Equally as important, the cultural integration of the two companies is well underway, and we've been pleased with the positive momentum among HDLF bankers as they get up to speed on UMD's framework. There is excitement about the opportunities our capabilities and our greater capacity bring, and we are seeing early encouraging activity in the acquired markets. As we noted a year ago, the primary value proposition of this acquisition hinged on cheaper and granular core deposits. This value is evident and demonstrated by the improvement in our cost of deposits and net interest margin expansion this quarter. Our operating efficiency ratio improved to 55.6% and our operating ROA to 1.14%. While the inclusion of the HDLF results for the first two months of the quarter and the impact of the purchase accounting adjustments makes for a difficult set of comparisons, we reported solid core results. Our reported earnings this quarter included $62.1 million in day one provisioning and $54.2 million in merger-related and other non-recurring charges. Excluding these items, our first quarter net operating income available to common shareholders was $158.9 million, or $2.58 per share. We had both acquisition-related and organic growth on both sides of the balance sheet in the quarter. Average loans increased 27.8% to $32.3 billion, and average deposits increased 32.3% to $50.3 billion on a linked quarter basis. noting that HDLF balances were only included for two-thirds of the quarter. On a legacy UMB basis, we saw an 8.3% linked quarter annualized increase in loan balances, again outpacing many peer banks. Banks that have reported first quarter results so far have reported just 3.3% median annualized increase in loan balances. Legacy UMB average total deposits increased 27.3% on a linked quarter annualized basis. A snapshot of our combined loan book is shown on slide 20. We're very well diversified, both in terms of loan products and geography, and are looking forward to further penetration into these new regions across our footprint. Quarterly loan activity is on the following slide. Total top line loan production exceeded $1.2 billion in the first quarter, while payoffs and paydowns ticked off slightly. Turning to asset quality on page 22, you can see the impact of acquired loans. Charge-offs attributed to legacy UMB loans were just $6.2 million, or only 10 basis points of average loans for the quarter. In fact, excluding credit cards, legacy UMB once again had net recoveries this quarter. For the remainder of 2025, we expect the legacy UMB loan portfolio to perform in line with our historical trends, while we work to align the acquired portfolio within UMB standards. Non-performing loans related to legacy UMB were just eight basis points, consistent with prior quarters. For reference, banks that have reported first quarter results so far have reported 8.45% median NPL ratio. On slide 24, you'll see the details of our first quarter allowance, which stands at $373.4 million, up from $261.7 million at the end of the fourth quarter, $62.1 million of PCD-related allowance, established as a part of the acquisition, and $62 million of day one allowance was established for non-PCD loans through provision expense. Now, just a few highlights on our fee income, then Ron will provide more detail on the first quarter impact of purchase accounting and other drivers of our results. We have continued fee income growth across our segments, despite some of the market-related variances and other noise. The addition of HDLF helped drive $5.4 billion in the first quarter, up 18.6% on a year-over-year basis, and surpassing the $5 billion mark for the first time. This included just over $500 million in spend from HGLF cards in February and March. Over the past 10 years, legacy UMD spending volumes grew from $2.3 billion, a compound annual growth rate of 8.7%. In our institutional businesses, assets under administration continue to expand, increasing 16% year-over-year to stand at $559 billion. Within that segment, corporate trust AUA grew 25% over the last 12 months to $48.6 billion. Our teams continue to bring in new business. Ten years ago, these assets were just under $11 billion, highlighting the accelerated growth we've seen in all areas of corporate trust. We continue to explore new services such as our CLO trustee and loan administration business Launched in 2024, we see a strong pipeline ahead of us in this business, with many cross-sell opportunities with fund services and other parts of the company. Alternative servicing is another fast-growing part of our business. There continues to be a lot of M&A disrupting the space, from which we've seen a lot of benefit. And we are seeing more activity related to the democratization of private investing, and we serve several clients who are leading in those niches. There's a lot of opportunity ahead of us in this space. Before I turn it over to Ram, we've had quite a few conversations around the uncertainty related to tariffs and general economic conditions that have dominated the headlines recently. We are closely monitoring the impact of the evolving tariff situation and engaging regularly with our clients about potential impacts to their business. As a bank with a large commercial customer base, we may have a different view than consumer-heavy banks. While it's really too soon to comment, We're largely a supply chain lender, and most of our clients are telling us they are currently able to pass on the costs and expect to do this in the short run. Of course, the uncertainty increases the longer this goes on. As I said before, anyone who claims to know what's coming is purely speculating. We can't predict the next move, but our job is to be prepared, stay in touch with our customers, and make adjustments as needed. To wrap up, we are risk managers first, and our many years of managing risk together consistent, intentional way have demonstrated that we perform well in periods of uncertainty. Now I'll turn it over to Ron for more detail.