UMB Financial Corp (UMBF) 2012 Q2 法說會逐字稿

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the UMB Financial second-quarter 2012 financial results conference call. (Operator Instructions). This conference is being recorded today, July 25, 2012.

I would now like to turn the conference over to Kay McMillan, Director of Investor Relations. Please go ahead, ma'am.

Good morning, everyone, and thank you for joining us for our conference call and webcast regarding our second-quarter 2012 financial results.

Before we begin, let me remind you that our comments in this conference call contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements rely on a number of assumptions concerning future events and are subject to risks and uncertainties which could cause actual results to differ materially from those indicated in our statements made during this call.

While the management of UMB believes our assumptions are reasonable, UMB cautions that material changes in interest rates, in equity markets, general economic conditions as they relate to the Company's loans and fee-based customers; competition in the Financial Services industry; the ability to integrate acquisitions; and other risks and uncertainties which are detailed in our filings with the Securities and Exchange Commission may cause actual results to differ materially from those discussed in this call.

UMB has no duty to update such statements and undertakes no obligation to update or supplement forward-looking statements that become un-true because of new information, future events or otherwise. By now, we hope most of you on the call or listening via webcast have had a chance to review our earnings release issued yesterday. If not, you will find it on our website at UMB.com.

On the call today are Mariner Kemper, Chairman and Chief Executive Officer; Peter deSilva, President and Chief Operating Officer; and Mike Hagedorn, our Chief Financial Officer. The agenda for today's call is as follows. Mariner will provide high-level commentary on our results, and Mike will review the details of our financials. Then Peter will review key fee income business drivers. Following that, we will be happy to answer your questions.

Now I will turn the call over to Mariner Kemper.

Thank you, Kay. Welcome, everyone, and thank you for joining us today. I'm very pleased to talk with you about our second-quarter results. We reported net income of $29.2 million, a 10.8% increase over the second quarter of 2011. This equates to $0.72 per diluted share on total revenue of $190.6 million. Non-interest income increased 2.2% to $110.2 million for the quarter and represented 57.8% of total revenue. The strong revenue from our fee businesses means we do not have to rely entirely on spread income to grow the Company, an advantage especially in this interest rate environment.

On our first-quarter call, we announced a realignment of our segments to better reflect how we run the business. As a reminder, those segments are Institutional Investment Management, our Scout Investments business; Assets Servicing, which is UMB Fund Services; Payment Solutions, which is our card business, institutional cash management, and healthcare services businesses; our Bank, which is largely comprised of commercial banking, consumer banking and asset management.

Also on the call I shared our priorities for the year. To quickly recap, those four priorities are, first, a focus on quality through a strong balance sheet, solid credit metrics, low-cost funding and effective risk management; second, an emphasis on diversity in both revenue and earnings; third, a commitment to growth achieved through accelerated fee business, loans, improved sales leverage and maximized efficiencies; and lastly, an effective deployment of capital.

Commercial banking remains the core of everything we do at UMB and is part of our commitment to growth. As such, in the second quarter, we increased loan balances for the ninth consecutive quarter. Within commercial banking, C&I loan balances were $2.6 billion, up nearly 31% from just over $2 billion a year ago. Total Company net loans at June 30 were 12.5% higher than in the prior year.

Compared to the industry, the more than 1,100 regulated depositories that had announced second-quarter results as of July 20 reported a median increase in loan balances of just 0.08%. Competition is very intense for quality loans, placing pressure on pricing, and we have seen some loosening of terms and conditions within our markets. However, one of our strengths is our low-cost funding, which allows us the ability to effectively compete for the very best loans. Loan growth for the most part is coming from taking market share rather than customer expansion.

Over the past 12 months, our commercial lending teams have added $887 million in new commitments. However, while commitments at June 30 had increased 17.1% compared to the same point in time a year ago, utilization rates remained lower than historical averages, coming in at 29% for the quarter.

Credit quality at UMB remains strong and continues to differentiate us from our peers. Overall nonperforming loans as a percent of total loans were 0.58%, and net charge-offs for the quarter were 0.41%.

With that, I will turn the call over to Mike Hagedorn, who by the way was recently named CFO of the Year by the Kansas City Business Journal. This is the second time Mike has received this recognition, and I'm very proud to have him on our team.

Mike?

Thanks, Mariner, and welcome, everyone. First, I will review our Company financials and then provide a more detailed summary of our four business segments. Picking up where Mariner left off in his discussion of the balance sheet, average earning assets increased 7.4% to $12.2 billion. The average balance in our investment portfolio increased 13.7% to $6.4 million, and the average yield on securities fell 24 basis points to 2.2%.

Activity during the second quarter included the rolloff of $396 million in core portfolio securities at an average yield of 2.52%. In turn, we purchased $636 million of securities at an average yield of 1.69%. These purchases, along with accelerated paydowns of mortgage-backed securities, shortened the portfolio duration slightly to 28.29 months. The average life is now 35.45 months, down from 36.06 months in the first quarter of 2012.

Over the next three months, $382 million of core investments with an average yield of 2.25% will mature. Over the next 12 months, $1.5 billion of core investments with an average yield of 2.29% will mature. Additionally 73% of our total loan portfolio is expected to reprice or mature in the next 12 months.

Allowance for loan losses is $72.7 million, and allowance as a percent of total loans is now 1.37% compared to 1.53% a year ago. Although our allowance as a percent of loans has decreased, we believe this level is appropriate given the high quality of our loan portfolio and the history of charge-offs. Our coverage is nearly 2.4 times the amount of nonperforming loans, while the median industry allowance reported in the first quarter would cover just over half of nonperforming loans.

We remain well capitalized with Tier 1 leverage and total risk-based capital ratios of 11.63%, 6.92% and 12.59% respectively.

Looking at the liability side of the balance sheet, our average deposits increased by 8.4% to $10.3 billion. Average non-interest-bearing deposits comprised 40% of our total deposits, which puts us in the top 3% of the industry according to SNL Financial. Our high percentage of free funds is a competitive advantage and is reflected in our low overall cost of funds, which was 0.26% for the second quarter versus 0.34% a year ago.

The change in our deposit mix over the past year has positioned us well to benefit in a rising rate environment. We regularly update our models and shock analysis to determine the potential impact of interest rate changes. The amount of the benefit as a percent of projected margin has gone up significantly for all increasing rate scenarios when compared to early 2011, partly due to our rising percentage of demand deposits.

Shareholder equity was $1.3 billion, a 10.5% increase from a year ago. Since the beginning of 2008, equity has increased by 40.6%. We have grown equity consistently, and we have been able to deploy it effectively to make acquisitions. Further, total shareholder return from July 2007 to July 2012 was 49.3%. For the same period, returns from the S&P 500 and SNL US Bank Index were negative 0.9% and negative 53.9% respectively.

Reviewing other financial highlights, return on average assets was 0.89% for the quarter, up from 0.85% in the second-quarter 2011. Return on average equity for the second quarter was 9.42%, a slight increase from 9.37% a year ago.

Turning to the income statement for the second quarter 2012, net interest income was virtually unchanged, up 0.6% to $80.4 million. As I mentioned, average earning assets increased by 7.4%. However, the changing mix resulted in a lower overall yield of 2.99%, down 23 basis points from 3.22% for the second quarter of 2011.

Average net interest margin for the quarter decreased 16 basis points from a year ago to 2.82%. On a linked-quarter basis, we saw a 7 basis point improvement in net interest margin. Provision expense decreased by $1.1 million or 19.6% compared to the second-quarter 2011.

As Mariner mentioned, noninterest income increased 2.2% from the second-quarter 2011 to $110.2 million. Trust and securities processing revenue increased by 4%. This increase was offset by lower gains on the sale of securities during the quarter. As a reminder, we had gains of $6 million in the second quarter of 2011 compared to gains of $3.2 million in the second quarter of 2012.

As we have discussed previously, we harvest gains when interest rates and the economy make this a prudent decision. This is part of an intentional approach to an actively managed investment portfolio. The quality of our portfolio allows us to periodically take gains to help offset lower margin associated with holding shorter duration securities. In effect, we trade one type of risk for another by supplementing what we lose in net interest margin with gains.

As a reminder, last quarter we made a significant fair market value adjustment due to new accounting rules related to our earnout agreements on some of our acquisitions. We review our liabilities related to these earnouts quarterly, and we determined that there was not a need for a material adjustment in the second quarter. We will continue to monitor these liabilities, and you should expect us to have some future adjustments either up or down throughout the earnout period.

For the second quarter, non-interest expense decreased by 0.6% to $144.7 million. The primary driver of this decrease was an escrow account in the amount of $7.8 million established in the second quarter of 2011 for a proposed settlement for an NSF OD class-action lawsuit, mostly offset by a 7% increase in salaries and benefits.

For the first half of 2012, our efficiency ratio was 71.14%, improved from 73.89% in the same period last year. We continue to look for ways to maximize efficiencies; however, as a growth company, we also seek opportunities to make investments in people and technology. We believe investments such as these and progress made on our other growth strategies will positively impact our results over the long run.

Now I will review the results of our four business segments.

Looking first at Institutional Investment Management, net income before tax was $7.4 million, an increase of 54.1% when compared to $4.8 million in the second quarter of 2011. Total noninterest income in this segment increased by 6.8% to $23.7 million, and non-interest expense decreased by 6.3% to $16.3 million compared to the second quarter a year ago.

The pretax profit margin for Institutional Investment Management was 31.3% for the second quarter.

Asset Servicing reported net income before tax for the quarter of $1.9 million compared to $2.3 million in the second quarter last year, an 18% decrease. The decline was primarily due to pricing pressure from one large stand-alone custody client who eventually transferred to another provider. Peter will provide more detail on this in his comments.

Total non-interest income for the segment increased by 3.1% to $18.8 million. And non-interest expense increased by 5.4% to $17.3 million compared to the second quarter a year ago. The pretax profit margin for Asset Servicing was 9.9% for the second quarter.

Payment Solutions had net income before tax of $9 million for the quarter compared to $7.9 million a year ago, an increase of 14.3%. Total noninterest income for the segment increased by 16.2% to $17.2 million, and non-interest expense increased by 13% to $16.5 million compared to a year ago. The pretax profit margin for Payment Solutions was 32.4% for the second quarter.

I am sure everyone is aware of the credit card industry's proposed settlement with retailers. We are reviewing the details and, of course, doing our own internal analysis of what the ramifications to our card businesses might be. Once we have more clarity around the many variables, we will be in a better position to discuss the possible outcomes.

Finally, our fourth segment, the Bank, posted net income before tax of $23.1 million for the quarter compared to $21.6 million a year ago, an increase of 7%. Total non-interest income for the segment decreased by 4% to $50.6 million, and net interest income was up less than 1% to $69.4 million.

As a reminder, the majority of the security gains impact non-interest income in this segment.

Non-interest expense for the Bank decreased by 2.7% to $94.6 million compared to a year ago. The pretax profit margin for the Bank was 19.3% for the quarter.

With that, I will turn the call over to Peter to discuss the drivers behind our business results.

Thanks, Mike. Good morning, everyone. As you have seen in our press release, our results continue to demonstrate the long-term value of being a growth-oriented organization with a diverse business mix. Fee income represented 57.8% of total revenue this quarter, giving us an advantage in an industry where the median level of fee income was 20.9% in the first quarter, according to SNL Financial.

As Mariner mentioned, this reduces our reliance on margin in this persistently low interest rate environment.

To provide additional context to our results, I would like to discuss the primary drivers of our fee income and highlight some of the developments in each of our segments. Let me begin with the Institutional Investment Management segment, which is comprised of Scout Investments, equity and fixed income mutual funds and separately managed investment accounts. Revenue in this segment is driven by mutual fund and separately managed account assets. Net flows, equity and fixed income market performance and new business contribute to our assets under management.

The second quarter was a particularly difficult period for equity markets with both domestic and international indices falling. For the quarter, the S&P 500 was down 2.8%, and MSCI EAFE was down 7.1%. Year-to-date, as of June 30, the S&P 500 increased 9.5%, and the MSCI EAFE increased 3.4%.

Scout ended the quarter with $22.4 billion in assets under management. This represents an increase of just over 8% compared to the second quarter of 2011. Assets and Scout mutual funds closed the quarter at $9.8 billion. Scout's fixed income separately managed accounts ended the quarter with $12 billion in assets under management, and Scout equity separately managed accounts totaled $624 million at quarter's end.

The Scout Funds posted $353.9 million in net inflows for the quarter, driven by the Mid Cap Fund with $178 million, the International Fund with $146 million, and our Bond Funds, which collectively had net flows of $54 million.

Our fixed income separately managed accounts experienced net outflows of $340 million during the quarter, largely as a result of a single client loss. Net inflows for the overall Scout complex were $13.3 million for the quarter. The continued turbulence in the equity markets during the quarter impacted Scout's assets under management by a negative $283 million.

Year-to-date this total Scout complex has had over $1.5 billion in net flows for an overall 2012 year-to-date flow rate of 7.9%. Scout's history of strong investment performance and its diversified distribution efforts have been key in bringing in new business, despite very challenging market conditions.

Our Asset Servicing segment is comprised of UMB Fund Services. The primary drivers of revenue in this segment are new business, transaction volumes in our clients funds and accounts and overall asset valuations. Our fees are based on a variety of factors depending on client agreements, including basis points on assets administered, transaction fees or per-account fees.

Asset Servicing ended the quarter with $147.3 billion in assets under administration compared to $220 billion in the second quarter of 2011. As Mike shared earlier, we had one large custody-only client depart during the quarter. As you may know, the stand-alone custody business is highly competitive, very price-sensitive and carries low profit margins. Net of this one client loss, assets under administration would have increased $21 billion over the second quarter of 2011.

We continue to focus on being a full-service provider, and we are actively targeting clients who are looking to outsource their entire back-office operation to a high-quality service provider.

In our Payment Solutions segment, there were a number of important business drivers, including overall credit and debit card purchase volume and the resulting card interchange, HSA deposits, FSA and HSA accounts, along with ACH, wire and check transactions.

We group card purchase volume into four major categories -- commercial credit, consumer credit, consumer debit and healthcare debit. For the second quarter, purchase volume across our entire suite of card products increased 29.8% to a record $1.8 billion when compared to the second quarter of 2011. Healthcare debit spending increased 16.3% over the same period a year ago, bringing in $1.9 million in interchange revenue for the quarter.

Bank card fees were 2% higher than the same quarter last year. As we disclosed previously, we expect the full-year impact of the Durbin Amendment to be approximately $9.1 million. However, increased volumes are helping to offset the mandated reduction in debit interchange rates. For the quarter, interchange revenue was $15.6 million, a slight decrease of 1.6% from a year ago. Debit card interchange comprised 28% of total interchange.

At the end of the second quarter, deposits in our healthcare services custody accounts stood at $387.8 million, an increase of 35.1% when compared to the second quarter of last year. Flexible spending arrangements and Health Saving Accounts totaled $2.3 million, representing a 12% increase from one year ago. We had another strong quarter in this business, and it continues to be a reliable, strategic and low-cost source of deposit and a growing source of debit card interchange for us.

As Mariner mentioned earlier, UMB is known for strong credit quality, and the quality of our card portfolio is certainly no exception. Credit card quality remains superior to industry averages and has improved over the past several quarters with delinquency rates dropping to 1.3% from 1.7% a year ago.

Total credit card charge-offs were 2.3% of card balances for the second quarter versus 2.8% in the second quarter of 2011. According to Fitch ratings services, first-quarter 2012 industry credit card charge-offs averaged 6%, nearly 3 times our current credit card charge-off rate.

The final and largest segment I will cover today is our Bank, represented by our commercial banking, consumer banking and asset management businesses. Mariner covered the highlights of our commercial banking business and the strong loan growth there.

On consumer banking, we reported an increase of 12.9% in home equity lines of credit balances, which now stand at $550.2 million. More than $120 million in new commitments were added in the past 12 months alone. Portfolio utilization remains at approximately 49% borrowed. The HELOC delinquency rate was 0.25% in the second quarter compared to an industry average of 2.8% at the end of the first quarter.

In small business banking, another important part of our consumer business, average deposits increased 22.7% to $492.3 million, and average loan balances increased by 23.7% to $126.7 million when compared to the second quarter of 2011.

Our Bank asset management business consists of individual wealth management, private banking, corporate trust and banking services, which is comprised of bond trading, investment banking and correspondent banking.

Assets under management for individuals and institutions stood at $8.6 billion at June 30, an increase of 3.5% from a year ago. Comprising the $8.6 billion is $5.6 billion in assets under management within our investment and wealth management group and $3 billion in assets managed by Prairie Capital Management. Prairie Capital's assets have increased by more than 22% since our acquisition of that business in 2010.

Our private banking and wealth advisor teams continue to acquire new clients and deepen relationships with our existing customer base. Private banking deposits at quarter-end increased another 23% to $803 million, and loans increased 38% to $201 million when compared to second quarter of last year. Private banking continues to be a strong and reliable contributor to growth in our HELOC and mortgage product sales.

With that, I will hand the call back over to Mariner who will close our prepared remarks and open the line for your questions. Mariner?

Thank you, Peter. As I referenced in the press release, we are very pleased with this quarter's results, demonstrating growth, discipline and quality. We believe that our four priorities -- the focus on quality through a strong balance sheet; solid credit metrics, low-cost funding and effective risk management; an emphasis on diversity in both revenue and earnings; and a commitment to growth -- show that we are focused on the right things in all types of economic climates.

With that, I will turn it back over to the conference operator for your questions. Thanks for listening today.

(Operator Instructions). Chris McGratty, KBW.

Good morning, guys. Mike or Mariner, the growth numbers have been really nice the last few quarters. Maybe you can just talk about pipelines, where they are at midyear and your expectations? Is double-digit annualized loan growth still achievable given the economic slowdown? Thanks.

This is Mariner. Thanks, Chris. I would say that our commercial pipeline remains very strong. Actually the pipeline itself is up slightly from the second quarter as we look into the third quarter.

So we feel pretty good about where things are going. That pipeline -- the strongest areas in the pipeline are Kansas City and, believe it or not, Omaha. And looking back over the second quarter, we were seeing that growth from Colorado, Oklahoma and Kansas City.

Okay. Just a technical modeling question, the tax rate looked a little bit high, Mike. Should this be a tax rate we assume going forward, or is there something in the numbers that may be a one-timer here?

No, I think it is mainly due to the change in the holdings we have in the municipal portfolio that we have today. While municipals are up in total quarter over quarter and year over year, as a percent of the total, they are actually somewhat down. And so the tax rate is going to be affected by that. I think what you are seeing today is probably closer to what we are going to have on a go forward basis.

So was it 35% or so?

Yes.

Okay. And then the last question, the additional segment disclosure is really helpful. It looks like the Payment Solutions pretax margins are pretty strong at 32%. But just calculating a Bank only efficiency ratio, it feels like you have got some room here to maybe streamline a little bit of efficiency. Any color you can provide on just the Bank itself?

This is Mariner. I mean obviously we are always working on that. I think our biggest headwind there is trying to put our liquidity to work. We have a relatively low loan to deposit ratio, and safety and soundness people still want to put their money with us over other institutions. And we are just having a hard time keeping up with it, even though we have had industry-leading loan growth.

So while it is a challenge, it is an enormous opportunity, and you can see the kind of growth we have had. So we have to -- I think our biggest opportunity really is to put more of our money to work on loans.

Okay. Thank you.

Matt Olney, Stephens.

Good morning, guys. Mariner, on that last point you just made about deploying excess liquidity, it looks like you did that in 2Q to a large degree. Could we see more deployment of excess liquidity in 3Q?

Well, I tried to address that in the pipeline question. We do maintain a strong pipeline going into the third quarter, so we feel good about the loan pipeline. Your guess is as good as mine as far as our deposits end up outpacing our loan growth. But we are certainly doing everything we can, and our pipeline is strong.

Okay. And switching gears over to the asset management business, you mentioned the net flows. It sounds like in aggregate sequentially they were pretty flattish. I think you had some good details in your prepared remarks. You mentioned which funds were positive, but I did not catch which funds were actually negative during 2Q sequentially.

This is Peter deSilva. I will walk you through that real simply. The equity funds, the mutual funds, had $300 million of net inflows, our fixed income funds had $54 million of inflows, and our fixed income separately managed accounts had outflows of $340 million during the quarter for a net of about $13 million positive. And that $340 million fixed income was comprised largely of one large relationship that we lost during the quarter.

Okay. That is helpful, Peter. Thank you. As far as the Institutional Investment Management revenue, it was sequentially down 10%, but I believe the AUM was relatively flattish. So any color as to why the revenue was down in that segment but the AUM was flattish?

Yes, the AUM was actually down about $283 million due to that market action I was describing a bit ago here. So average assets were down. Be careful about when we give you a point in time number, a June 30 number. Those assets move around throughout the quarter. Of course, we get paid on a daily basis based upon average daily assets, and those average daily assets were lower than the ending assets for the quarter, and that is the main driver.

Plus, we had market impact of almost $700 million throughout the quarter based upon the EAFE being down 7% and the S&P being down 3%. So it really is a function of average assets being down more during the quarter than the point in time at June 30.

Okay. That is helpful. And then lastly, bank card fees, very impressive in 2Q. Can you give us any color as to what was the driver behind this? Is there any seasonality there, or is that a pretty good run-rate going forward?

Nothing extraordinary going on. Our healthcare debit has been very, very strong, and there is some seasonality in that, but that has been very, very strong. Our outstanding loans were flat, so there was no major drivers there.

Purchase volume is the big thing. It was up another 11.4% on a linked-quarter basis, been up significantly over last year. And so really it comes down to putting more volume through the pipe, and we have been able to do that through most of our card products.

Okay. And then one more question if I can, just looking at the three non-Bank segments that you have got, the Institutional Investment Management, the Asset Servicing and Payment Solutions. It looked like all three showed some good positive operating leverage last quarter; I guess that was year over year. But it looks like the operating leverage was not near as good in 2Q. Do you have any other thoughts on that as to why that would be?

Yes, there are different reasons for the three different segments in Scout, I think, or Institutional Investment Management. It really was flat flows and asset deterioration based upon volatile markets. Fund Services, it was the pricing pressure on the one large client that we ultimately lost.

And I would want to point out that losing a client is never a good thing, but we do remain disciplined on pricing. And there is a point at which we will let a relationship go if pricing gets too irrational, and in this case we believe pricing got a little bit too irrational, and so we allowed it to leave us.

And the Payments business, as we discussed, the Durbin Amendment continues to be a challenge for us as we go forward. So different reasons for different segments in terms of why they might have been down sequentially.

However -- this is Mariner -- I would add that the pipelines remain very good, and the new business looks very good in those businesses.

Yes. There is nothing fundamentally wrong with the business there. It is just a little bit of seasonality and some pricing pressure that we have been adjusting to.

Okay. Very helpful. Thank you, guys.

(Operator Instructions). David Long, Raymond James.

Good morning, guys. A couple things. Looking at the credit quality, obviously you guys have very clean credit relative to peers, but the non-accruals and restructures were up about $5 million. Was that driven by a particular loan or any particular type of geographies or anything I should be thinking about there?

Yes, nonperforming loans were up about 9 basis points from 0.33, and it is about two or three commercial credits that make up most of that. And I would focus you more on the relativity on the balance sheet. So 57% of charge-offs still remain coming from our credit card book, and while we have a couple of credits that have gone into the nonperforming, remember, on a percent basis, we are still in the 50 basis point range. And C&I loans still represent on charge-offs less than $3 million of total.

So we had 31% growth in commercial loans sitting at $2.6 billion, and on a year-to-date basis, we have charged off less than $3 million. So keep that in mind when you think about the quality of our commercial loan portfolio.

Great. Thanks for the color there. And then switching to the nonbanking businesses, the asset management and the securities processing, when we are thinking about the timing of revenue, how should we think about that? Is that business -- is it based on assets under management and assets under administration at the prior quarter-end, or do you guys use average daily valuation or prior month, and how is that business priced?

It is a bit of a mix. So in the Fund Investment Management business, it is daily AUM. It floats up and down. Our fees float up and down based upon the AUM at the end of the day. In our Fund Services business, we have different contracts. Sometimes it is at quarter-end. Sometimes it is at month-end. Sometimes it is average daily assets.

So they really float around a little bit. It would be hard for me to describe it better than that. I think that is the best I can describe it.

Got you. Perfect. And then you talked about the single client that you lost. Let me just make sure I understand that correctly. It sounds like it was a custody-only client in the Servicing business. And just back of the envelope numbers tell me it's maybe a $90 billion relationship? Is that right?

It was roughly $80 billion at the time of its departure. It was a legacy client that we had had for 50 plus years. And, again, we went to an RFP process and priced at what we thought was a fair return for us, and ultimately we got outpriced and the business has moved.

Okay. And then just the last thing then on that, you mentioned going to an RFP process. Was it the services they were wanting, was it simply just to stick with the custody only, or were they looking to expand their relationship?

Yes, it went custody only, which made it hyperaggressive in terms of fees. This particular client insources most of their administration, their accounting and such, and so they were strictly looking for another bank custody provider, which made it very, very difficult to compete on price. And we, again, chose to price it at a level we were comfortable with, and that was not good enough to win in the end.

And I might add that this client is outsized from the type of business that we are actually after, that we tend to win. So the business segment that we are really after, which is a smaller client, we price very strongly and win most of the business we go after.

Got you. Great. Thanks a lot, guys.

Thank you. I am showing no further questions at this time. I would like to turn the call back to Kay McMillan for any closing remarks. Please go ahead.

Thank you very much for your interest in UMB and for being on our call today. This call can be accessed via a replay on our website beginning in about two hours, and it will run through August 8. And, as always, you can contact UMB Investor Relations with any follow-up questions by calling 816-860-7106.

Again, we appreciate your interest and time. Thank you.

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.