UMB Financial Corporation

expects to realize from our 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 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 the diluted share basis. Now, I'll turn the call over to Mariner Kemper.

Thank you, Kay, and good morning, everyone. We will share some brief comments about our results, then open up for questions. We reported another strong quarter to close out 2025. with the successful acquisition of Heartland Financial, the opening of our first branch location in Utah, and another year of record earnings. We posted significant improvements in our profitability metrics as we continue to build scale, deliver profitable growth on both sides of the balance sheet, and maintain our unwavering focus on strong asset quality metrics. A few fourth quarter metrics that I want to highlight are return on average assets of 120 compared to 104 in the third quarter, return on average common equity of 11.27 up from 10.14, and an efficiency ratio that improved to 55.5 from 58.1 in the third quarter and 61.8 in the period a year ago. I'm incredibly proud of our associates for delivering strong fundamental and financial performance in 2025 while providing outstanding customer experience, to our existing and newly acquired clients, all of which continue to drive our exceptional results. Reported net income available for common shareholders for the fourth quarter was $209.5 million, or $2.74 per share, an increase of 16.1% from the third quarter. For the full year, we earned $684.6 million, or $9.29 per share. Fourth quarter included $39.7 million of acquisition expenses compared to $35.6 million last quarter. Excluding these and some smaller non-recurring items, our fourth quarter net operating income was $235.2 million, or $3.08 per share. Fourth quarter net interest income totaled $522.5 million, an increase of 10% from the third quarter. This was driven by double-digit growth in loans and DDAs, along with the impact of lower rates on our index deposits benefited net interest income. Our few businesses continued their strong performance in the quarter, while our total non-interest income was impacted by several market-related variances. New business activity from our fund services and private wealth teams continued to drive results, which contributed 4.5 million, or 5.1%, linked quarter increase and trust and security processing income. During the quarter, we exited substantially all of our position in Voyager shares. While we can't predict the future success in our private investment business, our pipeline remains strong and we're likely to see periodic monetization going forward. Looking at the balance sheet, we posted 13% lean quarter annualized growth in average loans and 5.6% in average deposits. Quarterly top-line loan production reached $2.6 billion in the quarter. We are seeing positive activity across our footprint, and I'm excited about our additional opportunities in our acquired markets post-conversion. CNI was, again, our strongest contributor this quarter, with 27% annualized growth over the third quarter average balances. The rate of net payoffs and paydowns as a percentage of total loans of 3.9%, Looking ahead into the first quarter, overall loan activity and pipeline remain strong. Our loan growth has continued to outpace many peer banks. Banks that have reported fourth quarter results so far have posted a 4.9% median annualized increase in average loans compared to our 13%. Total net charge-offs for the fourth quarter were just 13 basis points. For the full year of 2025, net charge-offs were 23 basis points. below a long-term historical average of 27 basis points. Total non-performing loans were 145 million or 37 basis points of loans, while total criticized loan levels improved 9.1% from the prior quarter. Industry-wide MPLs for the banks reported so far were a median of 55 basis points. Our total watch list levels will fluctuate from quarter to quarter as we manage our books. We're quick to recognize trouble, take action, and address any issues. This proactive management has been consistent, and historically, we've seen very little migration to loss as evidenced by our track of history. We're incredibly proud of our history. As I mentioned, for the 20-year period ending with 2025, our annual losses have averaged just 27 basis points. Over that same period, average loan balances have increased from $3 billion to $36 billion, through market and vertical expansion, including our recent acquisition. This equates to a median annual growth rate of 10.4%. We've achieved these results through our focus on risk management and the continuity that comes by having the same team in place managing credit together through all of these cycles. We continue to build capital with December 31st common equity tier one ratio of 10.96%. a 26 basis point increase from September and ahead of the timeline in which we noted in our announcement of our acquisition. Our capital priorities remain the same with organic growth at the top of the list. Many bank management teams have received questions on their fourth quarter calls about their M&A stance, and I'd like to proactively address that topic. As I've said many times, we don't need to do M&A. We have a strong proven ability to generate assets And we continue to take share and grow organically at a pace ahead of our peers, as you saw us demonstrate in this past quarter. And we do that with exceptional asset quality metrics that we are really proud of. We expect these trends to continue, especially given the opportunities we see for penetration in our newly acquired markets and expanding in our existing markets. Organic growth is and always will be our top capital priority. At the same time, we also feel that we're adept at evaluating and integrating acquisitions to bolster our organic growth. We're still answering our phones, building and maintaining relationships, and we expect the tuck-in acquisitions that make financial and strategic sense can be part of our ongoing strategy. We've also been asked about the size of potential deals. Without giving specific parameters, we would be wary of transactions that would put us close to the $100 billion mark. We are in the early stages of assessing what the threshold means to us, and until we are ready, our appetite for any M&A will continue to be measured. While many believe thresholds may move under the current administration, we are operating as though those rules still remain in place. We believe that we've built something very special here at UMP, including one of the best teams in the business. We are not going to put that at risk by pursuing a deal that might dilute our culture, our business model, our organic momentum, or our strong balance sheet. Finally, as we look into 2026, we're excited to continue the momentum we saw in 2025 and capitalize on the opportunities in our newly acquired markets. As always, our primary focus will be on positive operating leverage, no matter what the economic or geopolitical environment brings our way. And I'll turn it over to Ram for more detail.

Thanks, Mariner. Our fourth quarter results included $52.7 million in net interest income from purchase accounting adjustments, $12.3 million of which was related to accelerated accretion from early payoff 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 $126 million for the full year 26 and $92 million for 27. These totals do not include any estimates for accelerated payoffs. Slide 12 and 13 include some key highlights and drivers of our quarter-over-quarter variances, as well as breakout of one-time costs by expense categories. Non-interest income for the quarter included $2.2 million in net investment security gains, comprised of $6.3 million of gains on various equity investments, partially offset by a $4.8 million linked quarter market value loss on Voyager stock. At Mariner noted, we sold substantially all of our Voyager position in the fourth quarter. Since its IPO, our net gain on our investment in Voyager was approximately $17 million on an initial investment of $6 million, translating to an internal rate of return of 30% and a nearly 4x multiple on invested capital. Free income, excluding these valuation changes, was $196.2 million, a decrease of $11.2 million from the third quarter. The largest drivers were $9.2 million in market-related variances in both COLE and BOLI income and a $2.9 million decrease in derivative income from elevated 3Q levels as noted on slide 12. And as previously disclosed, we had a non-recurring benefit in the third quarter of $2.5 million related to illegal settlement. Partially offsetting these decreases was the $4.5 million increase in trust and securities processing income that Mariner mentioned, driven by solid performance in asset servicing and private wealth. Our fund services and custody teams added a total of 15 new fund families in 2025 with a total of 109 new funds. On the expense side, We have $39.7 million of merger-related costs compared to $35.6 million in the prior quarter. As shown, the largest portion of these costs in the past two quarters have been for contract termination and conversion expense that were heavily weighted in the back of the year. Excluding the impact of merger and other one-time costs, operating non-interest expense was $391.8 million, up 1.8% compared to the third quarter. The largest drivers included an additional 10.5 million in incentive comp expense related to our strong fourth quarter and full year out performance, increases of 3.4 million in additional charitable contributions, and 1.1 million in marketing expense, which included some retail advertising campaigns in our new regions. Deferred compensation expense, as shown on slide 12, was 1.6 million for the quarter. Excluding the deferred comp impact, The recalibration of incentive compensation for the fourth quarter outperformance and the additional $2 million in charitable expenses or normalized quarterly expenses were approximately $380 million. Looking ahead, we would expect first quarter operating expense to be in the $385 to $390 million range. This includes an estimated additional $15 million increase in FICA, payroll taxes, and 401k expense driven both by typical seasonal resets and timing of bonus payments, as well as normal inflation in medical and other costs and other investments. Offsets will include day count impact and post-conversion synergy. After the first quarter elevated levels, we would expect FICA and other payroll taxes to decline by approximately 10 million in the second quarter. As Mariner noted, we expect to achieve positive operating leverage in 2026. notwithstanding an estimated $38 million in lower contractual purchase accounting accretion benefit and approximately $30 million benefit from our investment in Voyager and other investment gains recognized in 2025. Turning to the balance sheet and margin, reported net interest margin for the fourth quarter was 3.29%, excluding the 33 basis points contribution from purchase accounting adjustments, core margin was 2.96%, increasing 18 basis points sequentially. The primary drivers of the link order increase in core NIM included a non-recurring four basis points benefit from interest recapture on non-accrual roles that became current during the quarter and a bond repayment, favorable basis risk between set target rates, which impact our funding costs, and one month SOFR, which impact our loan yields, benefits of a favorable mix shift in both earning assets and deposits, including the 24.9% linked quarter annualized increase in DDA balances, repricing of index deposits from the December 10th rate cut, and higher loan fees, partially offset by lower benefits from free funds. Total average deposits in the fourth quarter increased 5.6% on a linked quarter annualized basis. While we expected DDAs to rebound from seasonal lows in the third quarter, The outside growth was driven in large part by new customer acquisitions in our corporate trust business, as well as the often episodic nature of these deposit inflows. As previously noted, we have very limited line of sight into these movements. This balance remix, coupled with the impact of rate cuts, drove our cost of total deposits down by 29 basis points to 2.25%, while cost of interest-bearing deposits declined by 33 basis points to 3.03%. We realized a blended beta of 76% on interest-bearing deposits for the quarter, driven by favorable mix shift, as well as outperformance for repricing on our soft index deposits. On Phase 27, we disclosed our current composition of deposits by rate sensitivity, along with our interest rate simulation that shows us positioned as essentially neutral. relative to the fourth quarter adjusted margin of 2.92% that excludes accretion and the non-recurring core basis points from interest reversals on non-accruals and the bond prepayment that I mentioned, we expect first quarter margin to be relatively flat as pricing on variable rate loans with monthly resets catch up and are offset by positive churn in fixed rate loans and bond reinvestment and day impact. We have not assumed any upside to margin from additional rate cuts in the first quarter based on current implied market probabilities. Actual margin and NII results will depend on levels of DDA growth, levels of excess liquidity, any SOFR movements, and mixed shifts within the lending and funding portfolios. Finally, our effective tax rate was 20.3% for the fourth quarter and 19.7% for the full year. This compares to 18.5% for the full year 2024. Looking ahead, our effective tax rate is expected to be between 20% and 22% for 2026. Now I'll turn it back over to the operator to begin the Q&A session.

Thank you. To ask a question, please press star followed by 1 on your telephone keypad now. If you change your mind, please press star followed by 2. When preparing to ask your question, please ensure your device is unmuted locally. Our first question is from John Armstrong from RBC Capital Markets. Your line is now open. Please go ahead.

Thanks. Good morning, everyone. Good morning, John. Maybe Mariner or Jim, can you give us a little more detail on the drivers of the commercial loan growth in the quarter? Pretty strong, but if you can give us a little more detail on that. And then as a follow-up, just curious if you can talk a little bit more about the Heartland contributions to the growth. You flagged that last quarter about how post-conversion it could be a little bit stronger. Thank you.

Yeah, John, thanks, Mariner. I'd say, you know, fortunately... the story remains the same as it has been for, you know, I've been CEO 22 years now. I would say it's the same as it's been. We're seeing it across really all markets are performing well. Really all verticals is kind of a broad, broad win for us in the quarter as it continues to be. You know, as we've talked before, our growth really comes from 50% of our growth comes from new customer acquisition and that 50% largely comes from market share gains, and that story continues to be the same. A few trends, energy continues to be strong, and the sort of M&A family office transactional work continues to be strong across the footprint with companies being acquired by private equity firms or family offices, or looking for growth capital or transition ownership capital. But otherwise, it's a pretty broad, Jim.

Yeah, I would agree. We've had some real bright spots through the HCLF acquisition. Our franchise lending group has been additive to what we're doing. We've also seen nice growth from the team out in California as it relates to our ag business, which has been a real bright spot. But again, the CNI has been across the board, the real drivers, as Mariner had mentioned.

And it's early still with Heartland. Good, all good signs. It's still early. You know, we converted on Columbus Day. So we think that the benefit from Heartland is still significant and forward-looking. You know, we'll see that benefit in the coming years and just accelerate as time goes on.

Okay, good. Thank you. Tom, a quick one for you. Certainly not worried about credit, but can you touch on the NPL increase and just any likely updated timeline for working through some of the acquired credits? Thanks.

Yeah, the increase was specific to one credit that is fully secured. We don't anticipate any loss from that one. You know, as it relates to the overall portfolio of the NPLs and the watch lists, That's a process and it takes time. We're having a lot of success. I would take you back to our historic charge off numbers and we expect the historical norms to remain the same as we go forward. So with what we know today, we still feel positive and good about the portfolio and we're working through them. But, you know, again, our report card really are net charge offs. We believe with what we know today, we're still going to trend toward that historical norm.

Okay. Thank you very much.

Thanks, John.

Thank you, John. Our next question is from Jarrett Scholl from Barclays. Your line is now open. Please go ahead.

Thanks. Good morning.

Hey, Jarrett. Morning.

Hey. Maybe just looking at deposits, some really good growth in DDAs there, both average and end of period. And I know that You know, there's moving parts that can impact that, you know, at any given day. But, you know, as we start off the year here, how should we think about maybe, you know, average DDA growth quarter over quarter? Is there an opportunity for that to grow?

Yeah, I would say it probably picks up a little if you just historically look at what happens between fourth quarter and first quarter, there's a slight pick up. And then, you know, and then public funds. This is not interest-bearing or not interest-bearing only. It's tight, slight pickup. And as I said in my prepared comments, we did have some new client acquisition, particularly in our corporate trust group. We're excited about the prospects from our newly acquired teams from on the CLO side and other corporate trust teams. And then looking at the public fund side, we had about a billion dollars of inflows coming in in December. continues to build in January. And then in the second half of February, you'll see about a billion dollars go away on the rest of the deposit story due to tax payments. Okay.

Yeah. And then how are early trends on the HSA side? You know, with the benefits from the budget bill, have you been able to look a little more at the potential market impact there? And is there any appetite to, you know, maybe... to a deal to add in that space specifically.

I'll take that high level. And if I miss something, Jim can, Jim can jump in. But, uh, I think that's pretty much business as usual for us. Uh, nice steady growth through the enrollment season and continuing to sell into our customer base. Uh, I think the benefit of the Heartland, uh, footprint and customer base will be additive to our ability to sell direct there. But, um, I wouldn't say anything that elevated one way or the other. It's a nice, steady addition to the book.

Great. Thanks.

Thank you, Jared.

Thank you, Jared. Our next question is from Chris from KBW. Your line is now open. Please go ahead.

Great. Good morning. Good morning, everybody. On the expenses, I hear you on the first quarter and then the normalization thereafter. I guess, are all the cost saves realized? And then I'm interested in kind of where incremental dollars are being put back into the business. You know, you're generating operating leverage, but where are you investing to grow the company? Thanks.

Yeah, definitely 100% of the cost phase that we identified at the time of the announcement of that transaction have been realized as of today. So post-conversion, after a little while, there were the terms, there were contract terminations that are happening right now. You saw that part of our one-time cost in the fourth quarter as well. So as we said today, all those have been acted upon in part of our run rate going forward. And then the other side is just normal inflation, as I said in the prepared comments about medical costs.

Obviously, in the first quarter, because of the timing of our bonus payments and resets of FICA, 401K match, and payroll taxes, there's an elevated spike, us being a larger company and all that. But that should also recede in the second quarter by about $10 million.

And I would just add that I think the thing to focus on, and we've demonstrated it and will continue to, is that we're disciplined. And so the operating leverage is where we're focused. As it relates to expenses going forward, you shouldn't expect to see anything other than coming from, you know, whether we're successful with sales activities, as has been the past, our Our expenses can be elevated because of the activities from the sales side of the business. Otherwise, really, we ought to be able to get investments that we make in the business out of business-as-usual levels of commitment.

Okay, great. As my follow-up, the trust in securities processing line has been a really big source of growth. Admittedly, I keep undershooting the growth rate, but can you help us on, it's a big line item. There's a lot of stuff in there. Can you help on like what would a reasonable growth rate for that business?

Well, you know, I think looking backwards, we don't give guidance, you know, institutional banking year over year had a 12.8% growth rate. And I would just say that the momentum and tailwinds remain strong. And as far as the pieces and parts, Our fund services business, largely coming from the alternative side, which would be the private equity and hedge funds, et cetera, kind of the alternative space leads the way there, as it does in the marketplace, really. And then our corporate trust business. So those are the two. It's coming from all of the businesses that we're in, but those are the two largest drivers with the biggest tailwinds.

Great, thank you. Thank you, Chris.

Thank you, Chris. Our next question is from Ben Gerlinger from Citi. Your line is now open. Please go ahead.

Hi, good morning. I appreciate the color on the gap versus core margin, but kind of I get the commentary for one Q&A. I know you don't give a full year, so I was just kind of thinking just kind of philosophically, if the curve stays the same and there's no more cuts, is the growth you're adding dilutive or accretive to the core margin? Because your growth is great. I'm just trying to think like new money coming on either both sides of the balance sheet together. Would you expect to drift higher or lower on the core margin?

Peter Haslund, yeah generally, I would say, you know the margin will be stable all else being equal right without rate movements without makeshift in dda or earning assets. Peter Haslund, depends what happens on the steepness of the curve obviously we're in a pretty good environment where short term rates which drive our funding or coming down, maybe they won't come until June that's kind of our internal forecast. And then the long end where the reinvestment yields, they've held up pretty well, right? If you look at the last couple of months, they've averaged between four and a quarter and 440 on bond versus bond investments versus the roll off of 360. So those are all tailwinds from the margin that can offset any repricing risk that might happen on the loan book or if the shape of the yield curve stays the same with it, no additional leverage on deposit pricing because the Fed is not cutting rates. I think our margin will be generally consistent with where we are right now.

I might add, environmentally, SOFR has been kind of a tailwind the way it's been priced in recent periods. So that has been a tailwind. So if that continues, that would... Yeah, that's a great point.

Yeah, if you just look at since the Fed started tightening this cycle since September, Fed target has come down 75 basis points and one month sulfur, which tends to lead that, has come down only 68 basis points. So between that and the steepness of the curve, we've seen the benefits that we're seeing in our margin in the fourth quarter and outlook forward as well.

Gotcha. That's really helpful, Collin. And then the second question, I know you guys have kind of shied off on whole bank M&A, but given the market disruption, pretty much throughout your footprint, considering it's a pretty large footprint. Is there opportunities for increased hires throughout 26 via disruption or even team lift outs? I'm just kind of curious on what you guys are approaching as a third party to M&A. Is there anything that's on the table that you consider low hanging fruit?

So you touched off on a few things there. So I guess I would pure M&A, I'd revert you back to my comments. in the script, which are just that we're focused on organic growth and the phone line is open and we maintain relationships otherwise on the M&A side, looking for possibly some tuck-ins along the way, but certainly focused on organic growth. Then you touched on other ways to add things that emulate M&A, I guess, so lift outs and teams and things like that. Again, a similar kind of comment. We love to find good teams, you know, whether they're corporate trust teams or a couple lenders that are just disenfranchised somewhere in a market where we think that can be additive. So we take those calls. We look for those opportunities always. But that's how I'd say, you know, M&A is secondary to organic growth, and then lift outs, we're always looking for those. and if we can find high-quality, talented people, we'll talk to them all day long.

Got you. Thank you. Thanks, Ben.

Thank you, Ben. Our next question is from Brian Wilksinski from Morgan Stanley. Your line is now open. Please go ahead.

Hi, good morning. I wanted to go back to the opportunity with Heartland I was wondering if you could talk about some of the potential revenue synergies on the fee income side in terms of offering capabilities that UMB has that Heartland did not. Is there anything that you're seeing already today, and how should we think about that progressing over time?

Great question. I'll touch on this as quarters have rolled on. The main areas would be mortgage on the fee side. They didn't really have a mortgage product. We have a really fantastic custom mortgage product. And so with the private banking across the footprint, we really think we can excel there in a big way. Credit card, they didn't offer a credit card, so we've already launched that. Again, very early, but the signs are good. The activity is good. And then our corporate trust business is a very local business. We talked about this before. It's kind of lawyers to lawyers, local. So having more signs and more offices across our footprint will help the ability to feel and act local in a lot of these markets and expand into, in particular, California. It's a big market opportunity for us. And some of the other markets that we didn't have a footprint in, whether it would be New Mexico or Wisconsin or Minnesota. So those are really exciting. Treasury management, you know, they had kind of a basic treasury management platform, so we'll be able to benefit from larger corporate opportunities in their footprint. And then lastly, some obvious stuff that started an uptick, which would be our legal lending limit, some deals where they were participants, now we can lead, and we're seeing some really nice Jim mentioned earlier the franchise lending. That's a perfect example where they would take a 25% piece of a really nice, high-quality franchise opportunity, and we've already seen four or five deals just in the last handful of months where we go from being a participant to a lead or taking the whole thing. So we see those kinds of opportunities already pretty frequently. So very, very excited about all that. And so those would be the main. The other one, which this is a thing I say all the time about UMB because of the complexity of our offering. What we've been able to bring the Heartland officers along to understand is that when you're at a cocktail party, every single person at that cocktail party is a target where it isn't the case at most other banks. So whether you're a private equity, you work at a private equity firm or you work in the government or you work at a law firm that does corporate trust and bond counsel stuff, we can do business with literally anybody at a cocktail party. So that's another benefit for them as you're out networking, you're a community event, or you're going somewhere after church, or you're a holiday cocktail party. Everybody's a target.

That's really helpful, Kyler. Thank you. And then as my follow-up on loan growth, another quarter of record production, if I look at slide 31, the line utilization rate, over the past few quarters has been relatively flat. And I know that chart goes back about a year or so, but which is wondering if you could provide some additional context where you are today versus historical levels, what you're seeing and how you expect that to play out over the course of 26.

You know, that's a great question. Uh, high level, it's, it remains relatively flat, um, and can bump a little bit one way or the other from quarter to quarter, uh, You would think, and we would think, you know, that it would be slightly more elevated just because of, you know, the environment that we've had for many years now with the supply chain issues, et cetera. But I think the answer to that for UMB largely is the high-quality nature of our borrower. So we have a, you know, a borrowing base on the CNI side that, It has a strong net worth and a really strong earnings power, which just sort of tamps down the overall line utilization. And it stays pretty dang steady, surprisingly, regardless of what the environment is.

Got it. Really appreciate the call, and thank you for taking my questions.

Thanks, Brian.

Thank you, Brian. Our next question is from . Your line is now open. Please go ahead.

Oh, hi. I have one small one. Hey, good morning. Just one small one and then maybe one bigger picture one. So the small one, I'm looking at slide 36. Definitely understand. you know, this business has great momentum. There was a small tick down in AUA, at least in like the top netted out totals. Was there anything to note there, you know, why the quarter over quarter decline in AUA for the overall business?

Yeah, Brian, this is Mariner. I saw that in your early note, and we all sat around trying to figure out where you came up with that, because it is a In the category of transfer agency, we did have a quarter-linked quarter, slight decline, but I would say that's just a nuance. It pops around a little bit. I would focus you on the top line instead of the transfer agency line because it can move around from quarter to quarter, number of clients, activity, inflows, outflows. So really the better way to think about that is the total assets under administration, which is up on a linked quarter basis. So nothing in there on the trend side. The business has tremendous momentum.

Perfect. And then on the M&A commentary, I wonder if maybe you could go back, you know, with Heartland almost a year under your belt, key lessons learned that maybe inform any future transactions. know one or two things you really felt went great and got right that you'd want to replicate in any future deals and then uh conversely anything that you would have done different uh or would do different uh as you think about you know targeting sourcing integrating uh any it's just you know big picture having done this you know one of the bigger transactions i get the biggest on the first one in a while uh what was the the top one or two lessons learned

Yeah, I got to say, I feel incredibly lucky to be surrounded by probably the best team in the business. And we picked up some fantastic people who know how to do these transactions in Heartland as well, because they had done a bunch of deals themselves. So we have just, and I just, I don't even know, I'm almost speechless about it. The transaction went so well, incredibly well, flawlessly. You know, you have your little tiny lessons to learn along the way, but It was a pretty much flawless transaction, mainly because we have a super committed, dedicated, hardworking, very smart team. We were super committed to a concept called do no harm, which we communicated a ton. We had ambassadors from UMB that were tied to locations and individuals across the company who were there for the conversion to be there to answer questions and help them through the process. customer interactions and experience to keep that where it needed to be. So just all in all, I mean, I pinched myself right now as I'm talking to you. It was a fantastic, fantastic deal. And as far as lessons learned, I mean, gosh, you know, we modeled some deposit runoff, as I think everybody does when they do these deals. We grew our deposits. And then overall, we exceeded our expectations on growth so far. on a combined basis. And we got all of our synergies, got all of our dollars out of the deal. And we've been very received, received very well in communities that we're in. And, you know, like I said, I just pinched myself, I wish I could give you something other than it was fantastic. Because it feels, you know, unrealistic to tell you there weren't any big lessons. But

The only thing I would add that was a real positive coming out of it was there's a lot of built-up muscle memory. The team has a process that has been proven, and Mariner nailed it. It couldn't have gone any better, quite frankly, but the number one rule in any of these is going to be culture. And I think that would be something that not that we wouldn't have before, but just to make sure that we know what we're getting into as it relates to culture and that that needs to be the right fit.

Yeah. I think one of the things we did in this particular case, which is what we would do if we ever did another deal is that it would be small enough that we would maintain control of everything, culture management board. And that, that was very helpful and would be always the case for us. And yeah, I mean, The only thing I would say, you know, being candid and lessons learned would be, and smart, really, is that, you know, between close and conversion, expectations should be more muted for growth out of the acquired company, and we witnessed that. So, UMB outperformed during that period, and so we, on a combined basis, really had great results, but You know, you should expect somewhat more muted growth out of the acquired company, I think. Now I'm just pontificating philosophically with you, but it was a fantastic transaction. I wouldn't wish for anything different. And I just would echo that people, people, people, people. We just have a fantastic team that's super committed, working around the clock, and I feel lucky.

That's a great answer. Thank you so much.

Thanks, Brian.

Thank you, Brian. Our next question is from Janet Lee from TD Cohen. Your line is now open. Please go ahead.

Good morning. Morning, Janet. If I were to just want to make sure that I understand your commentary around NIMH correctly. So basically, Ximena Vargas- Through 2026 you're pretty. Ximena Vargas- neutral to changes and interest rates, so as long as you could maintain that beta on deposits, you could be able to hold that name fairly core name X any that for basis points one of impact in the quarter relatively. Ximena Vargas- slottish and I guess another question would be that. that 76% deposit beta in the quarter was pretty outsized. Do you think you'll be able to maintain that? Or was that a different outsized quarter? Yeah.

I'll take that, Janet. Yeah, so we are pretty useful if you look at our interest rate simulation that we disclose in our pages. So, if you look at it based on 4th quarter results, 33Billion dollars of our earning assets are variable. So that's about 51% of our total earning asset base. And if you look at our funding deposit makes 50% of our deposits are indexed, right? So we run a pretty max both on the asset side and the liability side. So any changes in them from quarter to quarter will largely be predicated on what happens with changes in DDA balances, interest rate, mix of deposits, or when the Fed rate cut happens, right? So if your situation plays out where we don't have any more rate cuts, as I said in my prepared comments, there's potential upside if the June rate cut happens. So our internal view based on market probabilities is still two more rate cuts, one probably at the end of the second quarter and one probably in the fourth quarter. There's additional upside for margin from that because our index deposits will reprice down. But then there's always a catch up in loan yields the following period, right, based on how they reset. So at this point, to answer your first question, yeah, generally, we would expect our NIM to be plus or minus where our core NIM was in the fourth quarter adjusted for that four basis points. I forgot your second question already.

Can you repeat your second one? It's the beta of 76% that's sustainable or outsized.

So for the rate, if the rate cuts happen, yes, our expectation, the team did a great job outperforming on the soft index deposits, like we said, on the prepared comments. So if our outlook is for no more rate cuts, the leverage on the deposit cost side is fairly limited until that happens, right? Index deposits are largely formulaic. In the fourth quarter, reacting to the September, October, and December cuts, we passed along a good 76% of it to our existing clients. So it really comes down to when the rate cut happens. We are looking at the back book, but as you look at our slides, only 30% of our deposits are really non-indexed deposits outside of DDAs. So there's fairly limited leverage on that side to keep doing data until we have another Fed cut.

Got it. Thank you. And just one follow-up. Philosophically, should we think of, in terms of your, loan and deposit growth, should we think of as like deposit growth, you're going to fund your loan growth with deposit growth in the same ballpark by dollar amount or would you, so basically would you, yeah, what would be the ideal sort of loan to deposit ratio? Would you have that going up a little or do you want to maintain at this level? How should we think about that?

So I would say think about it differently. The way we think about loan and deposit ratio is that the value of a franchise in the banking industry is in its deposits. And if we are always focused on bringing in raw material that is cost-effective, core, and granular as possible, and not limiting that in any way, shape, or form, You let the loans end up where they end up. So at the end of the day, it's really we don't guide that. We expect to have exceptional loan growth and exceptional deposit growth. We are fully comfortable at a higher level of loan to deposit ratio. You know, we've been as high as 75% before, very comfortable there. But we're not aiming there and we don't give guidance. We're comfortable at higher levels, but really the focus is on building the franchise through high-quality loans and high-quality granular core deposits, and as much as we can in both. And we let the chips fall where they may. Certainly, we don't want to be overly lent up, and so without giving guidance, we certainly wouldn't want to be in the 90s. Uh, that would be uncomfortable for us.

And the flexibility will just add to that the flexibility of our balance sheet on page 25, right? We have 2.2Billion dollars of cash flows coming from our bond portfolio. We, you know, we're intentional about that. So those are all in the past. We've used that to fund our loan growth to see access opportunities coming out of hard lens. So there's always an opportunity, but. But as Mariner said, deposit is where the focus is.

And the thing about our franchise and the success of our deposit generating capabilities, we keep, what, $20 billion off balance sheet? We have $20 billion off balance sheet for clients that we put into money markets and earn 12B1 fees on. We can bring that on whenever we want based on what kind of loan growth we have if we pay market rates on it. So deposit generation is something we do very, very well. And so we, as an asset generating machine, we are also a deposit generating machine. So this is something we don't worry about.

Very fair. Thank you for taking my questions.

Thanks, Janet.

Thank you, Janet. Our next question is from David Long from Raymond James. Your line is now open. Please go ahead.

Good morning, everyone. On the growth expectations from the HTLF franchise, I understand you're fully one organization now, but when you just look at the HTLF growth that you're expecting from that organization, does it come mostly from the current HTLF team or the legacy HTLF team, those bankers growing into... the UMB model or do you guys have to bring in more veteran bankers from larger institutions in those locations?

The answer is both. So we think there is a lot of opportunity with the middle market team and small business team that they built. And then I would say in places like California, Minnesota, Milwaukee, you know, some places where they are more They are smaller and have not been there as long, et cetera. We have the opportunity over the coming years to add talent. And so it's a combination.

Got it. Thanks, Mariner. And then follow up for Ram. As you look at the cost of deposits, I think you said all in was about two and a quarter, not interest bearing and interest bearing for the quarter. Do you know where that ended the year at, at December 31st?

uh i don't have that dave but you know using any particular month or period end doesn't uh work for us because of the nature of inflows when the timing of the inflows happen right we we could have three four billion dollars of deposits come in and change the average for any month or or a period and so it's hard to judge uh what that is but you know i would say for the december 10th rate cut based on that 76 beta that's still some David Miller- juice left to squeeze on the deposit cost side because you know it's not fully baked in for the for the fourth quarter, so that will still happen, but I don't have specifics and it's not relevant really just to give you one month for us.

David Miller- I know that's that's great appreciate the color there around thanks guys appreciate it.

David Miller- Thank you, David. Our next question is from Nathan Race from Piper Sandler. Your line is now open. Please go ahead.

Hey, everyone. Good morning. Thanks for taking the question. Mariner, the rate of or the level of gross loan production stepped up in each of the last few quarters and even going further back as well. Just curious when you look at the existing capacity across the team and the runway for growth that you've described in the past, do you think that can continue to step up? TAB, Mark McIntyre, In this year, or would we need to see you know some hiring to see maybe a step change function in that gross loan production level.

TAB, Mark McIntyre, No, I think we we you know we try not to give too much guidance there other than you know, a quarter forward look which we do, and so I would say the first quarter looks to be as strong as or near the fourth quarter for production, and then I would just kind of. You know, we're sitting around this table with guys I've been doing this with for 30 years together. And, you know, if you look at page 42 in our deck, it's a 13% 20-year CAGR for loan growth. And that's from grabbing market share and having consistency and continuity and tenure. We don't turn our team over. And we have a huge, huge runway in most of our markets where we still have low penetration. So there's a significant penetration opportunity as long as we keep our people and build our pipelines. So I have no expectation that we can't keep doing what we've been doing and do that on an even bigger base. So our base has gone from, on an average basis, from $24 billion in loans to $36 billion in loans and I don't have any expectation other than we keep doing what we're doing on a bigger base.

Okay, great. That's helpful. And then maybe for Ram, appreciate the expense guys for the first quarter. And then I think you mentioned you're expecting about $10 million in terms of the step down from the seasonal increase in the second quarter. Are there any other kind of offsets in terms of where you're investing or around other areas of expense growth that would mitigate that relief in the second quarter?

Yeah, the $10 million, just to be clear, is only on those seasonal expenses like FICA, payroll, and 401K match, right? No dramatic change in our expense trajectory. No, we would go back to operating leverage. So to the extent that revenue growth exceeds our expectations or exceeds quarter-over-quarter, you might see additional step-up in expenses on commissions paid on widgets sold. but nothing otherwise in terms of, you know, dramatic investments.

We're a disciplined team and we'll stay focused on making sure the intersection is there between what we spend and what the leverage on it is.

Understood. That's helpful. If I could just sneak one more in, you know, appreciate that the focus is on organic and you're, you know, less, inclined to do any depository type acquisitions, but just curious, you know, what the opportunities that may be out there, what the appetite is to maybe acquire, you know, a non-bank entity that could augment, you know, some of your less capital intensive fee businesses to maybe get that fee income proportion, you know, up close to the historical levels around, you know, 35% plus the total revenue.

Well, you kind of asked two questions there. I think when it comes to uh i think i point back to we sold if you remember hey we sold scout and when we sold scout that reduced our fees by over 100 million in one year we replaced all of that through organic growth in 12 months so if i think the way to think about fee income growth for us is not percent of total but absolute loan growth of the group itself so if we can maintain a growth rate over institutional businesses at, I mentioned earlier, 12.8% there and overall fee income of 7 plus percent, which we've demonstrated. That is more important than its percent of total because with interest rates changing from one year to the next, you know, that mix can change just because of what the interest rates are. So we're more focused on making sure the momentum and the strength is there for the businesses themselves as opposed to what the percentage total is. I do think and expect just because of that momentum that it gains back some of that share of total revenue over time. But we have no designed aim for where that ends up. So on the other one, just a pure M&A question, I just want you back to my comments. You know, we're focused on it, you know, the organic growth. phones are open the conversations and stuff you know with people continue but you know we're looking for tuck in smaller additive deals and most importantly if you find those you got to understand we don't want to give up any kind of control we do anything at all so

Nate, this is Jim Ryan. The only other thing I would add to that is what you've seen from us on the institutional side has mainly been through talent, acquiring great people in those markets to accelerate that fee income. And I think that's what you should probably expect in the immediate future.

Yeah, lift outs in corporate trusts and other places like that. Yeah, we keep an eye out for little We do them all the time. You guys don't even see them, really. We do little announcements, small, tiny little acquisitions, lift outs for our institutional teams. But the pure dollar level of those are immaterial, so they don't really show up on the radar scheme. But they're always additive.

Great. Got it. OK, great. I appreciate all the colleagues. Have a great quarter and year. Thank you.

Thank you, Nathan. Our next question is from Timur Brzeziler from Wells Fargo. Your line is now open. Please go ahead.

Morning, Timur.

That's the easiest question we've answered so far right there. Timur, are you there? You might be on mute.

Your line is now open, Timur. Please ask your question and ensure your device is unmuted locally.

Hi, can you hear me now? Yep. Thanks. Sorry about that. Just one more for me on loan growth. Two-parter, I guess first on the Heartland piece, is that now firing on all cylinders or is there still ability to add capacity there in terms of overall production? And then similarly on loan payoffs, that's been stepping up over the last couple of quarters. I'm just wondering if we're reaching a plateau there or if there's You think another leg higher is ready to move lower?

On the Heartland loan growth capacity and capability, I touched on that a little earlier. It's early days. The traction is good. We think we can get a lot out of the team that exists. And then in some of the markets where they're newer and smaller, we think over time we can add some talent and accelerate that growth. But there's a lot. Um, there's a lot of energy. We're seeing a lot of activity in, in loan committee, um, feel very good about what. Uh, we're going to see from them and are seeing early from them, uh, from, from the team. And, uh, so then the second question about payoffs, there was a slight elevation, but if you look at the combined number of, uh, of all, all of those items was pay downs and payoffs from third quarter to fourth quarter. it remains kind of in line. And so as rates come down, if they come down, there is some expectation that that could accelerate some. You know, we saw on the combined category of all those numbers together in the fourth quarter went from 3.3 to 3.9. So there was a slight tick up, but I would say that's That movement doesn't send a lot of directional or trending to us. But certainly there's a possibility that that could accelerate. There's some pent-up demand for that, for things to go into the secondary market from the construction book. But we haven't seen it yet. And as we look at what we know right now, as we look into the first quarter, for talking to the teams and doing the work we do to project forward, It looks still in line with what we saw in the fourth quarter.

Great. Thank you.

Thank you, Timur. We currently have no further questions, so I will hand back to management for closing remarks.

Yeah, thanks. I've got just a couple things I want to end on because we're pretty excited about where we are coming off the heels of our acquisition and how well it performed. I just want to remind you all, I'm sitting around the table here with Tom and Jim, myself, a few others, but the three of us have been working together for 30 years together. Tom, 40 years. I'm a 31. Jim's a 32. We've been leading this, particularly the credit efforts, but the company, in my case, for 22 years at the helm. I've been doing these calls for 22 years, approaching 100 quarters of doing this with you all. And I know the one thing that I've learned from the investor community is you hate surprises and you hate being alarmed. And so what I'd like to do is take you momentarily to my favorite section in our deck, which is the long-term performance trends, 41 through 47 in our deck, and just remind you of a couple of things. what's happened over the last 20 years for UMB with this team. Two foot two at ease around being surprised and alarmed. We do the same thing year in and year out. So if you look at net interest income over the last 20 years, the CAGR is 12.1%. Revenue, 20 years, 9.4% CAGR. Net loan growth, 20 years CAGR, 13%. Deposit growth, 20 years, 12.6% CAGR. Charge-offs, less than 27 base points over the last 20 years. And particularly during the crisis, you can see from 08 to 12, our line forms the bottom of the chart where the rest of the industry looks like a shark fin. And you fast forward to where we are with $38 billion in loans in the fourth quarter, and we had 13 basis points to charge off compared to 20 years ago with $2.7 billion of loans. We had 22 basis points to charge off with $2.7 billion loans against our $38 billion today and 13 basis points of charge-offs in the fourth quarter. And then you could go to the dividend. For those of you who care about the dividends, you know, 273 percent, 274 percent growth in our dividend over the last 20 years. And in this last year, a 5.5 percent increase year over year. And then, you know, risk-weighted, risk-adjusted returns. You can see that on page 45. So, you know, not only do we do it, but I think as a company, we live at the, we breathe rarefied air at the intersection of industry-leading growth and industry-leading quality. And really the point of all that, as it translated into the last page there, and you see our 20-year compound annual growth rates, So our diluted earnings per share are 7.9% over the last 20 years against the KRX at 4.1%, peer median at 3.2%, and the industry at 3.5%. And then our tangible book value per share, 6.8% over the last 20, against 4.7% for the KRX, 3.7% for the peer, and 4.7% for the industry. So at the end of the day, I guess the thing that I get from all of you the most is you hate being surprised. you hate being alarmed, and you like quality. So if you just spend a few minutes on those pages and reflect on that and you think about the future, you've got the same team telling you when we say something we're going to do, we do what we say and we say what we do, and we've been doing it for a long time. So you can count on us to keep delivering. Thanks for the time. We're real excited about the future. We're excited about what we've done and I love working with this team, and we love talking to you guys. So have a great day.

Thanks, Mariner. As always, if you have follow-ups, you can reach us at 816-860-7106. Thanks for joining us, and have a great day.

Thank you all. This concludes today's UMB Financial's fourth quarter 2025 financial results conference call. Thank you for joining. You may now disconnect your lines.