UMB Financial Corporation (NASDAQ:UMBF) Q1 2026 Earnings Call Transcript

UMB Financial Corporation (NASDAQ:UMBF) Q1 2026 Earnings Call Transcript April 29, 2026

Operator: Thank you for standing by. My name is Rebecca. I will be your conference operator today. At this time, I would like to welcome everyone to the UMB Financial Corporation first quarter 2026 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I will now turn the call over to Kay Gregory, Investor Relations. Please go ahead.

Kay Gregory: Good morning, and welcome to our first quarter 2026 call. J. Mariner Kemper, Chairman and CEO, and Ram Shankar, CFO, will share a few comments about our results. Then we will open the call for questions from equity research analysts. James D. Rine, president of the holding company and CEO of UMB Bank, along with Thomas 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, 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.unb.com and include reconciliations of non-GAAP financial measures. All per-share metrics refer to common shares and are on a diluted share basis. Now I will turn the call over to J. Mariner Kemper.

J. Mariner Kemper: Thank you, Kay, and good morning, everyone. We will share some brief comments and open it up for questions. We reported another strong quarter, with results well ahead of expectations. We had 10.8% linked-quarter annualized loan growth, boosted by $2.3 billion in gross production; nine basis points of core margin expansion, driven by a 24 basis point decrease in the cost of interest-bearing deposits; high-quality credit metrics, including 19 basis points of net charge-offs, and provision of $27 million, driven mostly by the $1.4 billion increase in period-end loan balances; and, finally, continued momentum in our fee businesses, with strong contributions from corporate trust, investment banking, and fund services, where assets under administration increased nearly $20 billion from the prior quarter and stand at $565 billion.

I will let Ram get into more detail around our results in a moment, but first, I would like to address some of the headlines around the private credit industry, which appear to exaggerate exposures and risks at regional banks. Private credit has been around for years and has been, and will continue to be, an important part of capital formation on a global basis. We have heard some concern that, due to our varied lines of business, we may have some outsized exposures that could impact our performance. The fact is that we have negligible exposure to the private credit industry, and what exposure we do have is to high-quality and experienced operators that have diversified holdings, strong credit structures, and low leverage at the fund level, all underwritten to low loan-to-value metrics.

We are proud to partner with a few of the strongest players by providing asset service solutions to their funds. This quarter, we have added additional disclosures to our IR deck to explain what private credit means to us—and, more importantly, what it does not. First, on Slide 31, we have outlined our total NDFI lending exposure, providing additional color to the standard call report categories. As you can see, our total NDFI exposure is $2.6 billion, or just 6.6% of total loans. Within that total, approximately $300 million, or less than 1% of the loans, are to private credit funds. Those loans are subscription lines, which carry an even lower level of risk. As noted earlier, these private credit funds are primarily secured by diversified holdings of senior secured loans, at strong borrowing bases, with minimal exposure to at-risk industries, low leverage, and they have continued to see strong gross inflows.

Just under $1 billion of our NDFI loans are to private equity funds, with the largest portion of these being subscription lines, also known as capital call lines. As you can see from the definition included on page 31, subscription lines inherently carry even lower risk to lenders, as they are short-term lines that are repaid with funds received on capital calls made to investors who are contractually obligated to contribute the capital to the fund upon request. The slide gives other detail and characteristics of our high-quality portfolio, including the fact that over 98% of NDFI balances are pass rated. As you have heard us say before, lending to NDFIs is not a new phenomenon and has long been a part of our C&I portfolio, with minimal historic losses.

Turning to our fee income exposure to private credit funds, we have added some additional detail on the asset service and custody slide on page 36. Approximately $43 billion of our more than $565 billion in assets under administration is related to private credit, representing just 7.6% of the total. More significantly, the AUA tied to private credit funds increased nearly 5% from the end of the prior quarter. The related annual fee income totaled approximately $13 million, or just 1.6% of annualized first quarter fee income. Similarly, any deposit impact from these funds is immaterial. Moving on, our capital levels continue to build, with a March 31 common equity tier 1 ratio of 11.16%, a 20 basis point improvement from December. While our capital priorities remain the same—with organic growth at the top of our list—our board approved an increased share repurchase authorization, and as you can see in our earnings release, we opportunistically repurchased approximately 178,000 shares in March.

We will continue to remain opportunistic in the second quarter. Finally, our results this quarter drove positive operating leverage of 0.4% on a linked-quarter basis, a 155 basis point improvement in operating ROTCE, and an operating efficiency ratio of 47.6%. We continue to expect positive operating leverage for the full year of 2026, even with the impact of lower expected contractual accretion benefits. I am extremely pleased with the performance of our newer markets, and I am excited to continue the momentum throughout the remainder of this year. And now I will turn it over to Ram for some additional detail on the drivers of our first quarter results. Ram?

Ram Shankar: Thanks, Mariner. The first quarter included $51 million in net interest income from purchase accounting adjustments, $15.1 million of which was related to accelerated accretion from early payoffs 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 approximately $71 million for the remainder of 2026 and $79 million for 2027. These totals do not include any estimates for accelerated payoffs. Slides 12 and 13 include some key highlights and drivers of our quarter-over-quarter variances. Noninterest income for the quarter was $204.8 million, an increase of $6.4 million, or 3.2%. Drivers included strong performance from both fund services and corporate trust, increased deposit service charges, and investment banking revenue, where municipal trading income increased by 39% from fourth quarter levels.

Within the other income category, we had $5.9 million in nonrecurring gains on previously charged-off HCLF loans, a variance of $5.4 million from the fourth quarter. And we had a $3.8 million decline in COLI income, which has a similar offset in reduced deferred compensation expense. Adjusting for investment gains, the nonrecurring items I noted, and mark-to-market on COLI, our fee income for the first quarter was approximately $198 million. On the expense side, we had just $4.4 million in merger-related costs, compared to elevated levels in the prior quarter, when the largest portion of contract termination and conversion expenses were recognized. Excluding the impact of one-time costs, operating noninterest expense was $375.4 million, a reduction of 4.2% compared to the fourth quarter.

The largest drivers included a reduction of $5.9 million in salaries and benefits expense related to lower bonus and commissions accruals following strong fourth quarter performance, and a $3.9 million reduction in deferred compensation expense, partially offset by seasonal increases in payroll taxes, insurance, and 401(k) expense. Compared to the guidance I provided last quarter, the favorability in expenses was driven by timing of marketing and other spend, sooner-than-expected synergies realized on contract terminations, and deferred compensation expense. Looking ahead, we would expect second quarter operating expense to be in line with the current consensus expectations of $383 million. The increase from first quarter primarily reflects one additional salary day, as well as the impact of our merit cycle that went into effect in April.

Turning to the balance sheet, driving the 10.8% annualized growth that Mariner mentioned was 22% annualized growth in average C&I balances, led by strong activity in Texas. Other regions—California, St. Louis, Colorado, and Utah—posted double-digit quarterly growth. It is great to see the momentum building in several of our acquired regions along with Utah, where we opened our first physical bank location in December. Our pipeline remains strong heading into the second quarter. Average deposits, as shown on Slide 25, were essentially flat in the first quarter, as the 10.4% linked-quarter annualized increase in DDAs was largely offset by lower interest-bearing deposit balances. We added a metric this quarter that adds customer repurchase agreement balances, which are deposit surrogates.

Average customer funding increased $702 million, or 1.2% from the prior quarter, and 4.8% on a linked-quarter annualized basis. This balance remix, coupled with the residual impact of the rate cuts in the fourth quarter, drove our cost of total deposits down by 19 basis points to 2.06%, while cost of interest-bearing deposits declined by 24 basis points to 2.79%. We realized a blended beta of 70% on total deposits for the quarter, driven by favorable mix shift as well as continued outperformance for pricing on our soft-index deposits. Reported net interest margin for the first quarter was 3.38%. Excluding the 33 basis points contribution from purchase accounting adjustments, core margin was 3.05%, increasing nine basis points sequentially. The primary drivers of the linked-quarter increase in core net interest margin included benefits of a favorable deposit mix shift and repricing of deposits following the reduction in short-term interest rates, and the positive impact of day count in the quarter, partially offset by loan repricing and lower loan fees, and the impact of liquidity balances and a lower benefit from free funds.

Relative to the first quarter adjusted margin of 3.05% that excludes accretion, we expect second quarter margin to be relatively flat, as the benefits from fixed asset repricing are offset by day effects and stable deposit costs and mix shift. I will add my typical caveat that net interest income will depend on the levels of DDA growth and excess liquidity, any SOFR movements, and mix shift within the lending and funding portfolios. Finally, our effective tax rate was 21.1% for the first quarter compared to 20.3% for the fourth quarter. Looking ahead, our tax rate is expected to be between 20–22% for 2026. Now I will turn it back over to the operator to begin the question-and-answer session.

Q&A Session

Operator: At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. Your first question comes from the line of Jon Arfstrom with RBC Capital Markets. Your line is open.

J. Mariner Kemper: Hey, good morning to everyone.

Jon Glenn Arfstrom: Maybe Mariner or Jim, for you guys on the pipelines. Good number, the $2.3 billion—maybe there is a little seasonality in there—but do you expect that to continue to grow from here? And you flagged this in the release, but have you seen any impact on pipelines from some of the geopolitical risks or higher energy costs?

J. Mariner Kemper: I will take that first. James, feel free to add anything. I think this is a good news story, which is that I do not really have anything new to tell you from being in the seat for 22 years. It is the same thing every quarter for 22 years, which is the next quarter looks pretty good. It is not seasonal at all. We continue to book loans based on our strategy—bottoms-up capability, capacity of the officer, and market share opportunity in the markets that we are in and in the verticals we are in—and there is a very long runway for us across our entire footprint, including some new, very big markets like California.

James D. Rine: The only thing I would add is it continues to be strong, and it is from a cross-section from all markets.

Jon Glenn Arfstrom: Okay. And then anything on the payoffs and paydowns slowing? I know that number jumps around, but it was a pretty big step down in the quarter. Is there anything you would flag on that?

J. Mariner Kemper: No. Actually, I would say that the anticipated payoffs and paydowns in the first quarter actually materialized, so what we expected to happen happened. It can bump around. The reality as we look forward—if we are going to be higher for longer instead of seeing rates come down—we are not likely to see as much payoff/paydown for the rest of the year if that is going to be the case, which seems to be the prevailing thought. We do not anticipate any rates coming down anytime soon.

Jon Glenn Arfstrom: Okay. Alright. Thank you very much. Appreciate it.

J. Mariner Kemper: Thanks, Jon.

Operator: Your next question comes from the line of Jared Shaw with Barclays. Your line is open.

Jared David Shaw: Thank you. Good morning.

J. Mariner Kemper: Morning, Jared.

Jared David Shaw: Just looking at the fee income lines—you had some really good strength there this quarter. How should we think about the income for the year and for the second quarter, building off what we saw this quarter?

J. Mariner Kemper: We do not give specific guidance on expectations for growth in fee income, other than to point backwards. We continue to expect the same kind of performance from the team, and the pipelines across all those businesses remain very strong, to include the two that drive it and have for some time, which would be fund services and corporate trust. We have been giving you a little color over the last couple years on the success we have had with our private investment group, and we expect to continue to see exits and successes periodically there as well. Without giving you specific guidance, expectations continue to be as strong as they have been. Pipelines are good, activity is strong, and we are taking share across the board in all those businesses.

Jared David Shaw: At the time of the Heartland deal, you talked about the opportunity of corporate trust in some of those new markets. Are you seeing any activity there yet, or is that still more in the future as you build out those markets and capabilities?

J. Mariner Kemper: The message intended with that is that corporate trust is a very local business, and it is a brand business. The brand extension—having offices and signs and visibility across California and other places, and places for lawyers to meet together in offices and things like that—is brand extension and pushes the business further. It is hard to point directly to Heartland specifically, but we know that the brand extension with those locations is helpful. We also did a lift out—you know, we talked about that last quarter—from Wilmington Trust in California. I would call it mostly brand extension. It helps.

James D. Rine: This is James, Jared. As Mariner mentioned, we continue to add to the team in all markets, so we look for that to do nothing but grow.

Jared David Shaw: Okay. Thanks. And then if I could just follow up on the deposits. Ram, you called out the impact to NIM from potential deposit mix shift and DDA growth. If we look at average DDAs versus end of period, it feels like there could be some good growth built in there. How should we think about DDA balances growing from here, or is there just a lot of quarter-end variability?

J. Mariner Kemper: I will take that too. We try to guide you to think about averages rather than point in time because of the episodic nature of our institutional businesses and some of our larger corporate business—things such as dividends and tax payments that can happen from quarter to quarter. That is true, but also, as I mentioned a moment ago, picking up the Wilmington Trust team in California and adding team members across the country in our New York and LA offices in corporate trust, and the momentum we have with fund services, the addition of more clients in between those episodes allows the base to grow over time. The expectation, without knowing the exact timing, is that the DDA baseline grows over time due to the success and momentum we have in client acquisition that takes place in between those episodes.

Jared David Shaw: Okay. Thanks.

J. Mariner Kemper: Yep.

Ram Shankar: Thanks, Jared.

Operator: Your next question comes from the line of Brendan Nosal with Hovde Group. Your line is open.

Brendan Nosal: Hey. Good morning, everybody. Hope you are doing well.

Ram Shankar: Good morning.

Brendan Nosal: Kicking off on capital, have you any early read on the updated capital rules overall, and then specifically, how it ties into how you think about $100 billion, and then you pair that alongside the increased activity we saw in the buyback this quarter?

Ram Shankar: I will take this. On our preliminary read, it is a net positive for us—obviously a lot of relief from risk-weighted assets. We are still studying it—going from 100% to 95% on some of the commercial relationships and LTV-based assignments on risk for mortgages—and the negative is just the inclusion of AOCI. I still think it is a net positive for us in terms of what it means to our CET1 and total capital ratios.

J. Mariner Kemper: I would just add that we are very efficient and accreting capital very quickly on top of all that. It is a beautiful position to be in. We are likely to have more flexibility with capital with all of the things that Ram just said, along with our ability to accrete and grow capital, which is going to give us flexibility as we look into getting closer to $100 billion. We feel well positioned. We also believe, because of the quality of our assets, we benefit from likely being able to support lower levels of capital than our peers anyway, long term.

Brendan Nosal: Alright. That is fantastic. Maybe pivoting to a top-level question on the overall return profile. There has been a pretty meaningful step-up in ROA over the past couple of quarters. Things can move around period to period, but conceptually, are we at a level that you can more or less maintain going forward, or are there environmental pressures that kind of ease that somewhat?

J. Mariner Kemper: We expect to continue to perform at that level.

Ram Shankar: We do not give long-term guidance on our growth targets, but even if you exclude some of the purchase accounting things that go through our income statement, our performance has been increasing because of strong operating leverage, good balance sheet growth, and good margin trajectory. We feel pretty good about it. To add to your previous question on capital, we still have almost $600 million of pretax accretion left to take through our income statement for the next two to three years. That is roughly $6 of EPS and close to 100 basis points of capital, on top of the regular outperformance that we see in our legacy operations, before all the purchase accounting benefits. We are pretty excited. The denominator is growing at a fast clip, and that is why you saw what we did this quarter, including doing some buybacks before our quiet period ended.

Obviously, we had $1.4 billion of loan growth, and you heard the comments about the pipeline looking pretty strong. Then we will be more active about looking at our dividend and other opportunities. I would also add, as a reminder, one of the reasons we did Heartland was to gain strength in our retail business.

J. Mariner Kemper: We doubled our branch network and doubled our granular, low-cost deposits, and that is a really nice leverage point going forward for us. Our retail business was a bit more of a drag on those profitability metrics, and that has gotten a lot more efficient. We expect it to continue to do so as it grows.

Brendan Nosal: Okay. Fantastic. Thanks for taking my questions.

Ram Shankar: Thanks, Brendan.

Operator: Your next question comes from the line of Casey Haire with Autonomous Research. Your line is open.

Casey Haire: Great, thanks. Good morning, guys. I wanted to touch on the NIM outlook from the loan yield side of things. Where are new money yields versus that 6.52% level in the first quarter?

Ram Shankar: If you look at our loan yields excluding accretion, we show that the loan yields are close to under 6% if you exclude the accretion benefit from loans. For the first quarter, our production yields are somewhere between 6% and 6.25%, so they are pretty accretive on new money coming in. Then there is the fixed asset repricing that happens within the loan portfolio as well. We have close to $3 billion of loans that have some 5% rates that are repricing higher in today’s environment.

Casey Haire: Okay. Great, understand that the core will be impacted. And then apologies if I missed this on the expenses—very good discipline here in the first quarter. Just some color on what drove that $10 million of surprise versus your guidance, and with the guide being up in the second quarter, what are some of the drivers there? I think there were some seasonal roll-offs.

J. Mariner Kemper: And, you know, with the guide being up in the second quarter, what are some of the drivers there? Because I think there were some seasonal roll-offs earlier in the year.

Ram Shankar: Some of it was just timing of when we expected some of the marketing spend to happen, so that did not happen as I had anticipated in the first quarter when I gave my guidance. We also did a great job achieving expense saves from some of the contract terminations, so they happened sooner than expected, which was part of our $385 million to March guidance that I gave last quarter. The step-up in the second quarter is one more day and then the merit cycle that goes into effect in April for our associate base. Those are the two drivers that take us higher. We also had an expense credit of $3 million from our deferred comps. If you add that back, our quarter baseline is more like $378 million, and what I guided to is about $383 million, which steps up because of the merit cycle and one more day.

Casey Haire: Gotcha. Thank you.

Ram Shankar: Thanks.

Operator: Your next question comes from the line of Janet Lee with TD Cowen. Your line is open.

Janet Lee: Good morning. On deposits, I want to better understand the reason for the muted deposit growth in the quarter. I thought 1Q has seasonal public fund inflows. Even on an average basis on page 25, I see commercial balances decline, although other parts have been growing. Is this just timing or seasonality, or was there something else that attributes to somewhat muted deposit growth for the quarter?

J. Mariner Kemper: Thanks. I tried to address that a moment ago. It is complex. We have many lines of business that make it harder to understand. We like to describe it so that you think about averages rather than point in time. We have a lot of episodic activity that goes through many of those business lines that you see on that page. Public funds have a seasonal drawdown in the quarter because of tax payments and such. The rest are more episodic, and that is why you have to think about averages. I also like to point to page 42 because you really need to think about what is happening to our deposits over time, not even just averages for a single quarter. We have a very long-term track record of adding clients. In between quarters, you can see tax payments and dividend payments and putting money to work—all those kinds of things that can bump things around.

You should think about multiple linked quarters and year-over-year growth in what we are able to do as a company. We have an exceptional deposit-generating machine. There is nothing to read into at the end of the quarter; it is business as usual. Client count is good and growing.

Ram Shankar: In a nutshell, we did not lose any business.

Janet Lee: Great. Thanks for the color. You have already touched on total fees, and I appreciate all the color you gave on the private credit exposure on Slide 36. Does this mean that, at least from either deposit or fee perspective on the trust and security processing fees, you have been growing at a very strong pace? You are not seeing any disruption to that flow, and the trajectory of that line item should be continued growth since you are not seeing any outflows on AUA and the fee income side of the business. Is that fair?

J. Mariner Kemper: Yes, that is absolutely correct. One of the things that is really important to note about this business for us is that, from time to time, investors will ask—there was a time when hedge funds were leading the way, and, as you are all aware, hedge funds became out of favor. During that same time, we got the same set of questions: what is going to happen to your assets under administration as the hedge fund business slides away? The answer is that private investing is still leading the way. In our business, as you go from hedge funds to private equity, and within private equity, intervals come out, then the popular vehicle becomes private credit, and then private credit has this conversation taking place. It does not mean all this money goes to public investing; it means it redistributes back through the other verticals within private investing.

We are the beneficiary regardless, as that money moves around within the private investing universe. We have benefited handsomely over time regardless of which one of those verticals is accumulating capital at the time.

Janet Lee: Got it. Thanks for all the color.

J. Mariner Kemper: Thanks.

Operator: Your next question comes from the line of Nathan Race with Piper Sandler. Your line is open.

Nathan James Race: Morning, everyone. Thanks for taking my questions. Going back to the capital discussion—given you are generating a lot of capital internally and obviously eclipsed your CET1 target this quarter—given that capital’s ability is so strong, even with double-digit balance sheet growth, how are you thinking about using the buyback authorization as more of a continuous tool to manage excess capital? It has been more episodic in the past, but are you thinking about buybacks as a more consistent component to excess capital management?

J. Mariner Kemper: We have a long-tested philosophy around that. As long as we are able to do what we have been able to do and expect to continue to do, the first and highest, best use of our capital is to put it into loans, and we are very successful at it. We do not see that fading away. We have an excellent team, a deep pipeline, long-tenured associates, and big new markets to pursue, having lots of success—really across the board. Wisconsin for us is on fire. Minneapolis has really turned on. California is doing great. New Mexico—I could go on and on. The new markets are really performing, and we are still early days in getting the benefit out of them. So first and foremost, loans. Then it is a combination of other capital uses based on lots of variables: how our currency is trading relative to others, what is going on in the economy.

On M&A, we still think it makes sense for us to do tuck-in acquisitions that meet our test for low-cost, granular, under-levered deposits—well-run smaller banks that fit into markets we are already operating in. That is investing in the business, so that would probably be next. Then the next two on the list are going to be buybacks and dividends. We will be opportunistic on the buyback side, as we have been. On the dividend side, U.S. investors should expect—as long as we are performing—that you should see an increase in our dividend every year. We will first think about investing in our business, and then think about buybacks.

Nathan James Race: Understood. That makes sense. Maybe a bigger-picture question: it seems like you are firing on all cylinders. Are there any segments or businesses where that is not working, where you are seeing opportunities for greater efficiency or operational improvement going forward?

J. Mariner Kemper: Anybody who is not trying to leverage technology to make their business more efficient should have their heads examined. We are always looking at ways to operate better, and machine learning is being deployed across the whole organization to get smarter, better, faster, and bolder. AI is an overused term for being smart using technology to make your business better. We are looking for ways to do that all the time, and I think you will see us do that successfully going forward. Otherwise, it is making sure the salesforce has everything they need and we are staying out of the way, and letting our exceptional, tenured team get out there and build our business. We think we have a tremendous opportunity to take the feel of “local national”—from Illinois to California, from Milwaukee and the Twin Cities down to New Mexico and throughout Texas. We think we can be the go-to bank with the team that is in place and has deep pipelines.

Nathan James Race: Great. I appreciate all the color. Thanks, Mariner.

J. Mariner Kemper: Thanks, Nathan.

Operator: Your next question comes from the line of Brian Wilczynski with Morgan Stanley. Your line is open.

Brian Wilczynski: Hi, good morning.

Ram Shankar: Morning, Brian.

Brian Wilczynski: Just wanted to follow up on the core net interest margin guidance for the second quarter. Ram, you mentioned that new loan growth is accretive to core loan yields. You talked about the fixed-rate asset repricing. Can you elaborate on some of the puts and takes and any headwinds that keep core NIM stable in 2Q as opposed to up?

Ram Shankar: It is the incremental cost of deposits relative to what we can make on the asset side. If you look at our cost of interest-bearing deposits, in the last quarter it was about 2.80%. We have, as Mariner said, a very diversified funding mix, and it depends on where it comes from—whether it comes from DDAs or some other verticals. Interest-bearing costs or deposit costs can vary from one quarter to another, depending on where it is coming from. There are no specific headwinds; it is the absence of the tailwinds we had with rate cuts. Our internal view is there might be one rate cut later this year—maybe not. So there are no more tailwinds from that standpoint that benefit our beta. We expect deposit costs to be stable and some accretion on the lending side because of new money yields and fixed assets repricing.

J. Mariner Kemper: Stable, with the opportunity of outperformance on demand deposits. Again, I say opportunity—that is a possibility for us. Otherwise, it would be stable.

Brian Wilczynski: Got it. And on the deposit side, you had really strong growth this quarter in the corporate trust deposits. Can you remind us of some of the drivers for that business? I know UMB has an aviation business and a relatively new CLO business. Can you talk about what is working there and the environment right now for corporate trust?

J. Mariner Kemper: It sounds like you could list them—yes, exactly. The aviation business is hitting on all cylinders. Our CLO business is firing up really well on a national basis, so lots of opportunity there. Infrastructure spending is finally happening on a national basis, so our offices on the coasts have really started to pick up. We did this lift out, which we have talked about a couple of times on the call already, which is allowing for growth. It is a big list on the infrastructure side. It is across all those verticals. There are a couple of relatively new verticals as well. We are number two and number three in the country by number of issues now, and our coastal offices are relatively new, so I think there is a huge runway for what we are able to do in Orange County and New York—up and down the coasts.

Brian Wilczynski: Got it. Really appreciate all the color and thank you for taking my questions.

Ram Shankar: Thank you, Brian.

Operator: Your next question comes from the line of Chris McGratty with KBW. Your line is open.

Christopher Edward McGratty: Hello. Great morning.

Ram Shankar: Morning, Chris.

Christopher Edward McGratty: Ram, I appreciate the commitment to operating leverage this year. Thinking about the moving pieces over the medium term—you have the accretion rundown—but it feels like this model is capable of operating leverage for the foreseeable future. Any response to that?

Ram Shankar: That is why—even last time—and Mariner said it this time as well: whether there are more private investment gains or less, whether there is more accretion or less, our job is to maintain positive operating leverage as we build scale. Some of our strategic pillars are about building scale in each of the markets. We are doing that very selectively. We are becoming more profitable as we grow into our size as well. This is not an environmental thing. We want to weather all economic environments and achieve positive operating leverage. That is how we judge ourselves.

J. Mariner Kemper: We judge ourselves on operating leverage. Every dollar spent should have positive leverage. That is how we operate the business.

Christopher Edward McGratty: As a follow-up, is there anything magic about the 50% efficiency ratio? You are kind of in the low fifties today. Balancing the need for investments, the benefits from AI, and that dynamic—is there anything magic about 50%?

J. Mariner Kemper: Absolutely nothing magic about 50%. We feel like we are doing really well where we are, given the mix of business. Being at 47% where we are right now is a top-of-class number for just a net interest margin shop, and the fact that we are able to perform at 47% with all of our institutional businesses layered on top—we feel pretty good about that. So no, there is nothing magic about 50%. Thanks, Chris.

Operator: Again, if you would like to ask a question, press star 1 on your telephone keypad. Your next question comes from the line of Brian Foran with Truist. Your line is open.

Brian Foran: Hey. Good morning. Mariner, I appreciated you led with “anyone not using technology to get better needs to be examined.” I thought it was interesting you said AI is overused or overhyped. Can you expand a little bit on where you think doing AI for banks is a little too much?

J. Mariner Kemper: It is not that banks are doing too much. The term is overused. At the end of the day, AI is the use of data to run your business better and make better decisions and move faster. It is not a new subject. TV and the financial press have made a big deal out of it, but it is the use of machine learning to get better, smarter, faster, and bolder—which is not new. I am not saying banks are doing too much or not enough. I am saying you should be doing it—leveraging faster computing and better data to make your business better. If you are not doing that, you should have your head examined.

Brian Foran: Perfect. On M&A, as I am sure you are aware, there became this narrative last year that somehow you were on the list to do a big deal. I thought it was interesting you kept using the word “tuck-in.” Any other parameters you would give on what an ideal tuck-in deal looks like for you, and as an extension, if and when the $100 billion line finally goes up, does the definition of the size of a tuck-in change, or is it really independent of that move in regulation?

J. Mariner Kemper: I am still surprised there was a narrative we were going to do some big deal. We would never give up control of our company, try to merge two management teams, give up half our board, and so on. We have a fantastic management team and a great strategy, and I have no need or desire to do that. The purpose of using the term “tuck-in” is to help define a deal that is not going to affect any of that—where we can tuck it in, it is still our management team, we do not have to give up part of the boardroom, and we do not have to try to merge two cultures. That is what tuck-in is supposed to mean. Our definitions are long used: a smaller deal that would be in-market or contiguous, where we can leverage our people, synergies, and brand.

Really importantly for us would be granular, low-cost deposits that are under-levered. We do not want to do a deal where every next dollar we lend has to be from acquired deposits. We love the idea of an institution that is leverageable, that has deposits we can put to use, because we have the asset-generating machine and we do not want to put that under pressure. Those are the general themes.

Brian Foran: That is helpful. Thank you so much.

J. Mariner Kemper: Yep.

Operator: I will now turn the call back over to management for closing remarks.

J. Mariner Kemper: Thank you, everybody. As always, we appreciate your interest in our company and the time you spend to get to know us better. I hope that page 31 helped dispel some of the misguided understanding of what the private credit topic means to us—less than 1% of our loans, etc. We have a very long track record of lending the same way across every asset class, and you can see on pages 42 and 22 the intersection of growth and quality is what we like to define as rarified air that we live in. We have a long-tenured team and a great track record. We are very excited about what lies ahead, and we appreciate your interest.

Kay Gregory: Thank you, Mariner. As always, if you have follow-up questions, you can reach us at (816) 860-7106. Thank you.

Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.