UMBF - Earnings call transcript Q3 2021 | UMB Financial Corporation

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Operator

Good morning and welcome to UMB Financial Third Quarter 2021 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note that this event is being recorded.

Now I'd like to turn the call over to Ms. Kay Gregory, Investor Relations. ahead. go Please

Kay Gregory

CEO welcome for Kemper, and will third XXXX will Jim quarter a Terry, and Good Credit question-and-answer Chief and to session. CEO Mariner Officer, Rine, results. our President comments be CFO, UMB and call. Bank few Tom available morning also about our of the Ram share Shankar,

our assumptions, results Before any SEC our are of which all contains forward-looking we begin, statements, summarized risks are let and presentation. forth may These me subject filings remind from risks to on you included of in uncertainties. those set statement. in that and today's presentation XX differ and are forward-looking Slide circumstances Actual

by today we as statements obligation securities only Forward-looking required undertake laws. and speak to of no unless update them

and online Our press available release investorrelations.umb.com. are at presentation materials

I'll over the Mariner call Kemper. turn Now to

Mariner Kemper

you, today. joining and thanks Thank everyone for us Kay

of see income thesis us of key to points the continue growth, We net diverse loan benefits helps which income business contributions. drive strong fee peer solid investment model, our our above and interest

quarter excluding we basis, growth a loan on posted average XX.X% annualized third balances. linked-quarter PPP the For

growth. continues normalized Asset and losses. $X dynamics and demand in move for million provision pricing customer costs across of strong, credit net loan and levels, more led weigh to while markets material seven supply a footprint, basis rising negative our towards with quality just to businesses our remain points, Sentiment charge-offs chain strong on

controlled loan for impacted interest high levels, quarter XX and X.XX% results, drivers net or basis costs. reinvestment pretax core X.X% comments quarter, our more mix million versus third last shows rates, turn was re-pricing. liability Ram was quarter And the and FTE Net Slide pre-provision then by provide earning strong income and $X.XX I'll behind per to Turning to an share. liquidity share. primary continued $X.XX second increased asset margin interest X.XX% and some results, Net growth million on over was it driven level our by income XX.X from details. or income elevated per XXX.X

deploy as We prudently as to as are rate working changes. the the liquidity environment excess possible

income $XX.X positive Trading holdings, for momentum to in and driven adjustments swing services card quarter. quarter. largely was Chef our mark-to-market income a second equity X.X% including fees in in of Tattooed an fell strong second and fund While the during respectively. after saw linked-quarter, income banking declined million increases the on by quarter bank investment and the We trading the X.X% volumes reported non-interest extremely it lower unrealized with position

share our the the than gain a consistent, of drivers growth commercial loan Moving to More in across from Slide loan sheet, came is growth. to balance XX snapshot are growth us C&I our our loan the our markets. player recognizing quarter this led as footprint. as we continue balances in our portfolio customers average of stable behind Prospects new half this quarter. showing

estimating loans were downs companies changes, X.X% quarter We've levels. number outside to had do mortgages companies some acquisition During was market of return private loan XX equity pay payoffs makes off. payoffs building continue, selling Slide to contributes middle Year-to-date and CapEx of as we expect firms And to of success growing in saw while mortgage a Funded able shown including XXXX. period the quarter secondary market market. recent X.X We in market PPP activity among production million we've million XX% for in compared above balance pay to spending. in were XXX relationships loans PE same for and to unpredictable. second the Topline quarter the the those to middle million often seen are from mortgage which quarter the XX participate with in X.X% increased billion. secondary Average firms XXX the balances of on purchases.

However, we updated sensitive On we've exposure opportunities with Slide see industries. all to verticals. quarter a for XX, fourth our across the pipeline robust

We at quarter continue strong of representing mitigating included our to portfolios, excluding end After and million of monitoring. X.X% sponsors or closer approximately which a again this loans of PPP. million we monitor XXX hotel analysis living analysis stood weren't combined XXX feel factors, this at and including loans guarantors, X.X% senior We've quarter.

I'm across reported economy Slide charge-offs for pleased basis However, will this levels points mentioned of show seven And here for see our XX today focus of quality XX and quality XX portfolio, quarter. last forward. to what with charge-offs continues the quarter, of know a come XXXX. improve, the the expect going basis as asset year to full and of the we be we XX less we net to the in I trends. given historical at as points

credit You see to the driven this increase relationship. with line in of loans third This will of loans that ticked one was largely up non-performing quarter X.XX% XXXX. by quarter

as As peaks manage credit, watch valleys track list our we'll MPAs. limited shown see to to we we migration them often, us. about and has or historical talked But moving record

saw compared the our quarter. second strong XX.XX% capital ratios, to we already total improvement in capital, to Moving with in of XX.XX%

these in branch for capital returned augment single capital payment growth. look a acquisitions. And strategic that the conditions our remains market allow, approximate supporting for recently with top in additional with Market. increased deposits City Along through priority we acquisition in we use to While dividend shareholders Kansas announced XXX as strong to announced opportunities the July, lines, we'll continue growth of organic to million

advisor was on and a with planning were wealth Finally, formal of investment of professionals. tax private to management. hiring guidance registered entrepreneurial we focuses We This it we already services sophisticated offering. and many decided time strategies, wealth to the within And Wealth the including providing families dedicated wealth. generational investment offering, announced recently our of launch formalize providing investment Family a is these significant team developing which

alternatives to and our will Family To clients. on focus opportunities we head investments opportunities equity, up, quarter excited it see we with And offering, XXXX. wrap performance. across the holds into Corporation, pleased and Capital we fourth Wealth continue and be positive see which of quarter will UMB And part the private Additionally, our by and SBIC investment momentum as third the for I'm company. our other our direct beyond I'm into

comments. it turn Ram a I'll for to over Now few

Ram Shankar

unamortized Thank our origination you, at balances last XXX.X interest to was income of and million end balances. overall in of to interest the XX.X at X.X yields Mariner. amortized Net acid average XXX to including the quarter Average contribution stood increase XX.X million, third the down decline third million three into fees PPP remain from mix XXX and PPP quarter. decreased million an to million from five Approximately net yields in in We asset increased income PPP PPP basis points at compared June quarter. and end, quarter security million decline changes, due the XX. represented liquidity a a the income quarter. second At point X.X% X.XX% of million million of $X.X fees earning $XXX basis

repo net increased mix loan reverse balances XX% changes last earning cash of drove decline and This account, in of interest with now re-pricing a basis along average XX% comprise quarter points. pressure core assets XX yield liquidity and Fed Our with the margin. compared to

increase cash X from the as of prior of balances well We of securities the our million liquidity and as nearly book to billion continue our from deploy third average to excess XXXX. XXX flows quarter a driving into AFS back compared portion in an quarter portfolio,

XX of reductions, portfolio, factors float overall mix deposit in receive XX% size with our the to our depend of fixed with third modestly and number of rates outlook interest over loan pace the ahead, sensitive Looking portfolio. consensus line year XXXX asset Fed interest increase. when Actual treasury and rate and of within as yields, a any will yield book, are swap source deposits curve on remain actions than for our steepness more a demand shift X internal for of investment liquidity the in tied the nearly include increases number to short-term portfolio rise of in billion pay pertinent free the to of deposits. our current including our do experience We rates, the

As we've with our billion in asset to share to opportunities coupled also our through our earning to ability over redeploy thesis, will noted portfolio our to in peers. market believe potential within our base we excess net outperformance interest liquidity, our add X loan investment relative rotate to grow that gains income

TTCF Slide of market in few our by million XXX.X from our million at purchased for such billion value rates, benefit fee Tattooed driven flows a income corporate our second investment compared third third during portfolio million had in of yielded the that related million on cash of X.X and quarter, in from quarter market composition Additionally, largely million the fees The quarter of XX higher X.X was interest Non-interest trends income We X.XX%. the market securities X.X a resulted yield shown XXX the up adjustments. a in X.XX%. in businesses XXb-X Chef, are quarter. a write down business. of the money to last and XX.X The activity we trust unrealized as loss quarter

from expense quarter quarter, over million on shown trends held noted as investment income from the to Slide drivers are larger quarter liquidity are driven Expenses last Additionally, at XXX.X Slide Non-interest increased Capital related our companies XX. incentive in included million portfolio by X.X% and losses. events fee X.X UMB shown $X Other operational million or expense second performance on Corporation. for million in had gains on XX. second X.X quarter the to fees

third was Our the rate effective for tax XX%. quarter year-to-date both and

to year full XXXX, For XX%. the anticipate it XX% be will approximately we

has operator over XX it per portion the That Our begin the concludes prepared during of $XX.XX remarks at to share September back months to I'll the XX. turn value call. now and Q&A tangible increased book XX% the our to nearly past

Operator

ahead. Instructions] the from First comes question-and-answer begin Wells session. I'll Please go Jared [Operator Fargo question Security. Shaw,

Jared Shaw

Hey, good everybody. morning,

Ram Shankar

Good Jared. morning

Jared Shaw

third off? average slide the basis, we we growth going with good with growth I structural there? first I an Or year? about the with quarter mean, into the strong activity. guess How think PPP of quarter. to growth we the expect how maybe those we growth thinking of quarter headwinds of guess over end payoff impact I rolling versus Should I on pay the about see the - should loan should average and down some can loan be the outlook, see pipelines from

Mariner Kemper

- news Mariner. this Jared. the think I Good is morning Well,

we against news a Coronavirus about, continue expect This is I pay of down And to largely activity our continued last - build the the growth pay I we our talked growth, representative line with from as the But place ex-PPP, continues think loan last similar strong which low up rates do low off what top unknown. look year within and there's be our we've where trends, was, top CRE interest to is think got some our always from line is same rates. we cap strong, activity book. growth. we taking quarter that to to sales obviously, otherwise, already

Jared Shaw

mentioned some with Okay, driving? and lending doing strength with relationship then them? type customers, PE lending that's you'd the Or what's call are firm that of capital you

Mariner Kemper

do do, PE fund lending not but really referencing, some M&A our talking about we lending. we're we're really Well, driven into clients, what more services that's

with So relationships firms in acquisition through kind companies as We're as that participating sold. bought of debt. get in or portfolio or our PE

Jared Shaw

rate And squeeze of more could do stable, maybe yields? you great. overall, little be incremental there bottom similar yields, a Or then here, on looking a we've assuming loan Okay, hit think loan at a that sort environment?

Mariner Kemper

if always do. I you the they competitive, don't I Things Tom, want to as near bottom, add? know remain suppose. We're very

Thomas Terry

Yeah. It's near that? rates still define stabilize competitive how expect We it that. a would still very of aggressive environment. going agree are be always don't the change. to And environment. we to with part bottom, it's but I If may I No, that a

Mariner Kemper

a lot competitive. of but Probably certainly pressure, not remains downward

Jared Shaw

that that for appeal then can then the any CNA [ph] on could detail be what you gives lower whether confidence than on I Okay, thanks. you it's that. the And me, last color guess just sector, in and give final increase content

Mariner Kemper

typically, been for UMB two XX true the true call trouble is, hit to of gentlemen is years, today, quick basis history me is our any it material the the and troubled other take one that for as not And in I manage credits. any in from manage a forward it And time. you the migration, in recognize Tom will and Jim to credits usually credit been there I've peaks trend action, we it's or two. an long Rine few on valleys What really is way time to tell strong to much quick leadership in - credits from it's time. Terry. and credit which on industry we we has different are not as to in as And and has migration we're very trends don't credit. some go mentioned credit, been very loss to a is to always and with about particular never so seeing a expect be they're quick call what one So

Jared Shaw

Okay in this quarter? is that

Mariner Kemper

XX We would our expect within to to of XX basis year charge-offs full tenure remain averages points.

Jared Shaw

and factoring Okay the Unit? in that growth was

Mariner Kemper

not from is factoring. it No,

Jared Shaw

great. Okay, Thank you.

Mariner Kemper

in be It'll core our portfolio.

Operator

you. Thank

from comes question Piper go Next Nathan Please Sandler. ahead. Race,

Nathan Race

Yeah. Hi, Good morning. everyone.

Mariner Kemper

Good morning, Nathan.

Nathan Race

has digit low income of about over to continuing look a growth the those of across growth overall additional last where been couple questions coming and post I you years. that reasonable appreciate But composition few income several pretty And outlook, kind growth range still the lot the unit on over expectation So total funds impressive maybe next lines. here, the see to over Slide on curious, for a think just last guys of is out year? do growth the you from along like Is mid-single the XX fee several to as looks a breakouts XXXX? the quarters, that services quarters the

James Rine

is Hey, Jim Rine. this

up trust We year, finance tell of our business, get business, really fund record area though, great in as of what strong and health growth are to growth can our XXXX, a that I have through fees our see employer future services is additional absent in guidance half institutional additional won't they're services, forward we where add made growth in you we expand through our the to the some in income. on we've year, and fund network environment. Keep already as investments care of XX% due clients. expand new corporate is and there. continued to anticipate over we from is we've the up, rest having coming well had our through area, And the additional expecting other to we're rate fee there for associates We in public area direct area. that services XXb-X mind, the the additional

run XX we roughly million back If fees rate. pre-XXXX, go you XXb-X to had a in on

as again, But providing guidance. fee rates in well. we would income So see that not up, tick as additional do from category that

Mariner Kemper

competitors There's disruption us benefiting of drivers to the been environment be services disruption. strong, for that a businesses And so in strong business. class. real backdrop PE we're of the this fund the a player the asset And handsomely from We've space, continue interest very In lot all right. strong. a in alternatives have in been have rate very strong low our alternatives been

also the recovered, business public to is starting And positive the of rates up. travel within in anticipation aviation up real growth is So sort as it's both trust growth space. then there as lot And are of all our of formation, has activity base. customer a as an in asset some infrastructure, speeding outlook. and well and our headed are infrastructure headed bill And corporate rates see -

slows a down re-fi lot past, across look drivers have is, or for too, we forward. all really lines. also, our business in the business as wide of mortgage on as our us if we've mortgage that's lot if re-fi a level. for So industry - And purchased true business And even the we an runway, of talked of even good

that to we a our in have just volume. purchase and Our within business is the so nascent, opportunity customer of participate lot runway base

is pretty nice spend relative for basis, to down starting company business for slows card rise with And a see rates And our business. our some size card so business is mortgage for re-fi and even our us. we're big for along see and momentum on a revenue which some we legs if driving a business interchange

Nathan Race

gears it, trajectory and that's several helpful reserve of the about very Got color. changing next over just Maybe the quarters. thinking the

kind PPP. here XX within of growth How are we for of that of need forward today kind of provide point forward. range of sit additional the basis kind remain kind thinking pre-pandemic context ex to charge-off about going the guys XX You back relative to in as reserve outlook levels going the you guys below

Mariner Kemper

you want take that. to Ram,

Ram Shankar

not I Yeah, still we're at mean, level. pre-pandemic

XX XXX, one are where was to we're CECL So points number coverage. our on at we today you And look right. basis day close if

environment forecast of to typically, So our they're ratio of Moody's happens we still where because have. gets to down at on lot the the growth point better, pressure your that be coverage But allowance and we macro there's going are. from to outsized loan go the provision, the further

our grow recapture peers on that relative because than to loan on we because I might that, So the balance slower of of be the sheet reserve side. think basis, our continue

And be differentiating a if good factor, so that'll will. you

Nathan Race

one the But sense. one makes that And maybe the loss doesn't for the the in item color appreciate it, driver on here just forward. And Got and me, we'll quarter? there. additional operational expense any line on assume other color last additional going recur just any third I

Mariner Kemper

think you loss. around activities Yeah, will not see type not business operating into of and losses that's bounces and It's one - to business little our something regulatory. quarter other a our that just statements bump I on the It's It's breadth this on is that'll of income depth next bit. based typical regulatory we a business. from a kind

Nathan Race

color. the Got will you it, step I I guys. Thank appreciate back.

Operator

Thank you.

Please Next KBW. comes ahead. question McGratty, go from Chris

Chris McGratty

good Hey, morning.

Mariner Kemper

morning. Hey, Chris. Good

Chris McGratty

kind the versus numbers much sustainable a non-interest strong? just outlook particularly charts. think pretty growth Mariner, deposit How the is bit bearing. an off little flows those been or are of has Ram interested in deposit because I'm transitory for you do

Mariner Kemper

a benefited ours I is us a give right. No, answer, one of get is call? question. we've a business, great of outsized think you - reasons It's mix - And you when the the will we're

institutional a commercial large business. and So we have

a be that's right. so certainly - question driver, the which big less So would transitory,

growth corporate XXb-X of the business environment. the and public new of regular our up and our trust business those business, back aviation if in kind rate trust business, comments asset fees corporate and So coming of picking trust finance, servicing rising around growth our a the so

of on things those liquidity non-transitory All would of levels the part sheet. of our balance be increased the

look it sort four right, everybody less on pre that business internal an sheet. of question liquidity the in half the because sheet. debate something we've and is. excess question, a million the transitory growth believe and how odd Certainly, billion some less? for it's of our But and you there balance our about have the numbers, is, really ourselves The at experts that we post in or of is than certainly income additional sheet some got If just the complexity dollar the statement. right, $X.X the million We there's balance clearly on our lines, and much balance range,

going So on I think complexity a by more know be But to core there. you're looking there's some liquidity certainly that. I lot driven of of is the institutional businesses for But it the in all adding excess than balances.

Chris McGratty

but to your follow of retention recruit. the I'm heard Yeah, a the cost peers this interested business. expenses. you're from would appreciate about retain many guess, and I inflationary I've My also the on it's thinking up Thanks. Okay. pressures, wages in - be run color. quarter, to how just

Mariner Kemper

sort the just for employment. as coasts question, from home through competitive regions of feeling way our the a this. The and pressures they're we're and of all landscape work great Another from right,

the term early, of coming of longer think I understand right implications - it's COVID. to out some of to tell

that inflation I way years. And competitive of from last a would a that some - that unring the working losing say couple we been is have people. we of more culture, can't think, seen do in you landscape, I the transitory bell. were believe think not But wage permanent we and some the But we great have I not implications we've

are Our different through. rate general we've and they voluntary to turnover period turnover not the were than in rates much prior gone

watching So that. we've been

don't strength turnover Competitively on and maintain there's able signs have. side we side, of that's feel of we've where And that been so in looking everybody's we hiring. to look about the like culture the the But we our of any hold company everybody's pretty because consistency the on need. challenge, we the again, people the as hiring feel biggest good and kind and to the

James Rine

peers The flexibility Rine. just Jim I we've Chris, think just our correctly. of that thing one is dealing getting Yeah, with, are dealing most of too been our with also mix

much think to that's going thoughtful, looking are now. we're inflation. what addressing lot wage that's frankly. the where see workplace as in in very changes the a just associates industry, It's like. new of and And that's for something right the looks quite being as environment And work the that putting I what lot really you're in a with also,

Mariner Kemper

a thoughtful Yeah. And space. in leader want we that be to

dig we're some real We're going our to and not to So going then. adapt. heels changes make

Chris McGratty

quarter, for thank - Ram P, that. what's Triple fees on remind just you The in left? then last then and us can you one were be the and that Okay, would the the

Ram Shankar

program Yeah, we so fee the it about $X income, was the fees on XXX interest that quarter, XX includes of quarter of PPP million at origination the balances both million still million end. Chris, left on in have

Chris McGratty

Great, thanks.

Operator

comes from question Please ahead. Long, Raymond David Next go James.

David Long

Good everyone. morning,

Mariner Kemper

good morning Hey, David.

David Long

can and that rate, you rate soon. about at how expect utilization where utilization change end if was here you - the anytime talk here you to quarter The

Mariner Kemper

my take is you the average the low And the way is XXs. XX quarter. as to industry for think of end of about if in an to for environment it of lot system, us a And before liquidity was the would that the XX. XX it our is something that think say higher on first And range. from see gets the I there's spent end low a ranges likely liquidity about it So that at we it's would the where

David Long

you. Got

average quarter? same. accelerated looking Was end didn't some growth or near pretty pay the there but then quarter, end the period loans, there in the in at good the And the downs of balances Okay. the payoffs show

Thomas Terry

Yeah, this is Tom Terry.

of principally, non-recourse either in amount low in greater market, cap As estate Mariner a or are rate lot refinanced seeing comments, due book environments being estate payoffs rates, mentioned commercial there the earlier sales in of are commercial real low a real just properties. of we're to outright our his

are the amount greater seeing a quarter we've we third historically. this so and certainly year, And in of seen than that

Mariner Kemper

point I that time. - averages the point would pay in time literally growth though, just I that's the question and time that's the more in But to point in - just a a - attention

James Rine

And the Dave, Mariner at in XX X.X% on to roll those has of as numbers can little alluded percentage off And a and roll XX, on, you Tom elevated that as and both was a there. see loans of total loans.

David Long

Got it.

all I guys. had. That's Okay. Thanks,

Mariner Kemper

I something tear in it lot our pretty out so of really might spend we're the add doing. week going that on We're We're ESG wasn't it. proud a things a but have our development coming efforts. and of. we're time of We proud asked, it's to sheet on community new a or

of new term As We're that about have about. we I'd a for a always is some fact, that. really as excited matter things ESG say pretty cared really company a

eye an keep out. So

in a fourth been neat lift tear homeownership. our within share communities quarter in doing our of love things efforts and we're forward. we're this we'd we're the December have they to all for reach people And continue you payment fourth help statement. down increase today. investors our new doing to team neighborhoods we're into our see as if a our to is rolling quarter, make or a for statement real with here real doing where an the likely program and keep making that expenses in them everybody we been out our to proud a website, development We're detailing our in some we're in year out getting the think for And And some of the Thanks for what week And what joining for anyway, LMI things. of going at let assistance on where and company's up into help eye look a profits doing. our to recognized take as by those and we've and fourth the go see difference serving. things We're so community sheet quarter, doing doing can You we're you'll lot our website. have in communities we us the sure way

Kay Gregory

further time. contact have questions. replay shortly. with Thank XXX-XXX-XXXX The and up website us. we any you. no Investor our we on as UMB be and you, like looks will always, appreciate Thank follow you It your for can And everybody questions Relations at interest joining

Operator

for is you. Thank presentation. you concluded. Thank today's attending Conference now

You may now disconnect.

UMB Financial (UMBF) 27 Oct 212021 Q3 Earnings call transcript