UMB Financial Corp (UMBF) 2016 Q1 法說會逐字稿

Good morning and welcome to the UMB Financial first-quarter 2016 earnings call and webcast.

(Operator Instructions).

Please note this event is being recorded.

I would now like to turn the conference over to Kay Gregory.

Please go ahead.

Good morning and thank you for joining us for our conference call and webcast regarding our first-quarter 2016 financial results.

Before we begin let me remind you that today's presentation contains forward-looking statements, all of which are subject to assumptions, risks and uncertainties.

Actual results and other future events, circumstances or aspirations may differ materially from those set forth in any forward-looking statement.

Information about factors that may cause them to differ are contained in our 10-K for 2015 and subsequent 10-Qs and other SEC filings.

Forward-looking statements made in today's presentation speak only as of today and we undertake no obligation to update them.

Our earnings press release, as well as our supporting slide deck, is available on our website at UMBFinancial.com under News & Events in the Investors section.

The slides are also available in the webcast link for your reference.

Reconciliations of non-GAAP financial measures have been included in the earnings release and on pages 5 and 6 of the supporting slides.

You will notice that we have updated the format of the press release this quarter in an effort to streamline the reporting of our results and to provide ready access to the financial information you need.

I hope you find this helpful and I would be happy to receive any feedback you may have.

In addition, we have realigned our reportable segments, merging the payment solutions segment into the bank segment.

Financial results in our healthcare and card businesses now roll up within the bank segment and previously reported results have been reclassified to conform to the new structure.

On the call today are Mariner Kemper, Chief Executive Officer, and Mike Hagedorn, CEO of UMB Bank and Interim Chief Financial Officer.

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

Thank you, Kay.

Welcome, everyone, and thank you for joining us.

This morning I will provide commentary on our high level results, which include strong loan growth and ahead of plan progress on our efficiency initiatives.

Also in the first quarter we converted Marquette Financial Companies to our platform and accreted capital to our total risk-based capital ratio for the first time in three quarters.

In all it was a very good quarter.

If you turn to slide for you will see that for the first quarter 2016 net income was $36.2 million or $0.74 per diluted share.

On a non-GAAP basis adjusting for items shown on slide 5, net operating income was $38.6 million or $0.79 per diluted share.

Looking at the balance sheet summary on slide 7, you will see that we continue to deliver solid loan growth.

I am very pleased with these results driven by the efforts of our lending teams across our whole footprint.

At March 31 loans stood at $9.7 billion or an increase of $2.2 billion or 29.4% compared to a year ago.

On a linked quarter basis loan balances increased 2.9% on top of strong loan growth in the fourth quarter of 2015.

Increased loan volume and Marquette's higher yielding loans were the primary drivers for our 33 basis point NIM expansion in this quarter, as Mike will discuss with you later in the call.

On the following slide we've included trends on selected performance metrics.

While it is still early in our efforts, I am happy to see the momentum going in the right direction in several areas.

Our focus on profitable loan growth is an important component to enhancing our performance and so is our emphasis on our efficiency initiatives.

On slide 9 is an update on the progress we have made on the initiatives we announced in 2015.

As a reminder, we recognized $9.5 million of cost savings in 2015 compared to an expected $6.8 million as some of our items we accomplished sooner than anticipated.

In the first quarter of 2016 we recognized an additional $4.9 million in savings.

We remain on track to realize the total annualized savings of $32.9 million beginning with the full year 2017.

And we will continue to report on the progress made.

We also remain committed to looking for ways to operate more efficiently and effectively across the whole organization on an ongoing basis.

Our current year priorities remain focused on improving returns and investing in future growth.

The action items I outlined last quarter are to: build on efficiency initiatives and continue to identify and implement operational improvements specifically within the bank segment; work to grow the combined UMB and Marquette customer base following the full integration completed this quarter; continue the progress we have made in optimizing our balance sheet by shifting earning assets into loans; and by effectively managing capital to enable us to capitalize on profitable business growth and acquisition opportunities.

Overall I am pleased with our results this quarter and the progress we are making.

Now before I turn it over to Mike I would like to make a brief comment on an announcement contained in an 8-K we filed yesterday morning.

Scott Stengel, our General Counsel, has announced that he will be leaving UMB after three years to move his family back to the East Coast, which is home for him.

Scott's contributions to UMB are numerous and we wish him well in his new position.

John Pauls, Corporate Legal Counsel, who has been with UMB for more than 22 years and a close advisor to me, will serve in this role on an interim basis while a search is conducted.

Now we will hear from Mike who will discuss our results in more detail and provide a little more color on our segments and drivers.

Then we will be happy to take your questions.

Mike?

Thanks, Mariner, and good morning, everyone.

First I'd like to provide an update on the integration of Marquette.

In December 2014 we announced estimated transaction costs of $23 million in conjunction with our acquisition of Marquette.

On slide 11 you will see that we have recognized acquisition costs of $14.8 million through March 31, 2016.

As we expected, we completed the full conversion during the first quarter, so the largest portion of the expense has been recognized.

Our latest projections indicate that we expect to come in better than anticipated with total transaction costs of approximately $20.2 million.

Our teams have worked hard to make the integration a success and we truly applaud their efforts.

On the cost-saving side, we anticipated acquisition-related synergies of approximately $14 million phased in over the two-year period following the May 31, 2015 closing.

Post conversion our updated analysis shows that savings are estimated to be approximately $15.9 million with $14.8 million realized to date.

We expect the remaining $1.1 million in savings to be phased in throughout 2016 and into mid-2017.

Now turning to our first-quarter results on slide 12 you will see our loan growth history.

As Mariner mentioned, total loans at quarter end stood at $9.7 billion, an increase of 29.4% or $2.2 billion compared to a year ago.

Acquired balances plus production through the legacy Marquette channels comprised $997.9 million of the increase in total loan balances.

The remaining increase of $1.2 billion was generated through legacy UMB lenders for a year-over-year increase of 16%.

Credit quality remains sound with 0.24% net charge-offs and 0.57% nonperforming loans both as a percent of loans.

Total securities available for sale in our investment portfolio stood at $6.9 billion at March 31, nearly flat compared to the end of the fourth quarter 2015 and an increase of $96.3 million or 1.4% from a year ago.

The fact that we were able to hold our securities book to such a minor increase while we added $2.3 billion in deposits over the past year is a direct result of our ongoing strategy to rotate earning assets into loans.

The details related to the composition of our investment portfolio and the past quarter's activities are shown on slide 15.

Turning to the liability side, slide 16 shows deposits for the first quarter of $15.4 billion, a $2.3 billion increase year over year, $744.1 million of which were attributed to the acquisition of Marquette and an increase of $325.6 million compared to the fourth quarter.

The cost of interest-bearing liabilities for the first quarter was 22 basis points and included non-interest-bearing deposits, it was 14 basis points.

Before we leave the balance sheet discussion I would like to touch on our asset and sensitivity and market risk estimations.

The boxes at the bottom of slide 18 show the percentage of our loans with variable rates which at March 31 stood at 48% as well as the repricing details of our loan portfolio.

The projected impact of hypothetical 12-month gradual changes in interest rates, as well as the projected impact of immediate and sustained changes in rates is represented in the chart on that page.

Turning to the income statement, first-quarter net interest income before provision rose 3% on a linked quarter basis and 30.5% year over year to $117.9 million.

First-quarter net interest margin of 2.79% is 33 basis points higher than in the first quarter 2015 driven once again by the growing loan portfolio, the addition of Marquette's higher yielding loans and changes in our earning asset mix.

Loans comprised 53% of average earning assets for the first quarter versus 47.4% for the same period last year.

The linked quarter improvement in noninterest income was driven by $4.8 million in reduced losses and equity earnings on alternative investments.

On a year-over-year basis the 7.1% reduction in noninterest income was driven primarily by lower revenue from Scout.

Year-over-year improvements in brokerage fees driven by growing money market balances and increased 12 B-1 fees and higher bank card fees due to record card purchase volume slightly offset the reductions.

Slides 19 and 20 illustrate the components of the first-quarter changes in noninterest income.

Looking at first-quarter expenses on slide 21, total noninterest expense increased $16.3 million or 9.9% year over year.

The largest driver of the increase, salary and benefits expense, rose $8.6 million and included $8.3 million in Marquette salary and benefits that were not present in the first quarter 2015, $800,000 in Marquette-related severance and $500,000 of non-Marquette-related severance.

On a non-GAAP basis operating noninterest expense, which excludes the impact of those severances and other items as described in the reconciliation was $177.1 million, an increase of $2.2 million or 1.3% compared to the fourth quarter 2015 and $11.6 million or 7% compared to the first quarter of last year.

Again, please see slides 5 and 6 for additional detail regarding the non-GAAP reconciliations.

Now turning to the segments, I will cover just a few highlights.

The financials and drivers of performance for each segment are in the slides and press release.

The bank segment results begin on slide 23 in the deck.

Net interest income, both on a linked quarter basis and year-over-year basis, benefited from increased loan balances as well as from higher average earning asset yields which came in at 2.93% for the first quarter compared to 2.88% for the fourth quarter 2015 and 2.56% for the first quarter of 2015.

As a reminder, the largest portion of acquisition expense as well as ongoing Marquette salaries and benefit expense are recognized in the bank segment.

Turning to slide 24, we saw strong loan production in the first quarter with lenders across all of UMB's lines of business adding $531.8 million in loans.

Total payoffs and pay downs for the quarter were $283.5 million which is slightly lower than the average of $318 million we saw over the prior four quarters.

Another metric we pay attention to is pay offs and pay downs as a percent of our loan portfolio which has remained fairly steady.

The composition of our loan book and a regional view are shown on slides 25 and 26.

We added $104.5 million in CRE loans and $80.9 million in construction loans during the quarter.

By property type, office building and industrial projects were the largest growing categories.

Activity in Arizona was strong during the quarter surpassing Missouri as the leader in new CRE commitments thanks to strong production by our newly combined UMB and Meridian teams.

In addition, our agriculture lending group continues to have success adding 136 million in loans over the last 12 months, an increase of 33.8%.

Ag loans stood at $538 million at quarter end.

Finally, we've added some additional detail on slide 27 related to our outstanding oil and gas related loans.

At quarter end these loans stood at $318.2 million and represented 3.3% of our total loan portfolio distributed by sector as shown on the slide.

As of March 31, 2016 we had reserves of approximately 3.1% against our total outstanding oil and gas portfolio.

Total Company classified loans were $234.6 million at March 31.

Of those $61.9 million, or 26.5%, were oil and gas related credits.

Reserves against those classified oil and gas loans were approximately 11.4%.

While overall oil and gas exposure remains relatively low, and while we apply the same strong underwriting principles to these loans, we may have increased risk of loss on certain credits if oil prices do not normalize in the near-term and we are closely watching market conditions and our borrowers' financial positions.

Moving on from lending I will turn to healthcare services which, along with our credit and debit card products, is now part of the bank segment.

The number of HSA accounts grew to 826,000 at March 31 for a 36.7% year-over-year growth rate.

And you will see on slide 32 at quarter end healthcare deposits stood at $1.4 billion and total HSA investment assets reached $140.4 million.

Following open enrollment periods in the fourth quarter of each year we typically see balances build quickly in the first quarter as those accounts are funded.

Total HSA deposits and assets grew 22% or $284.9 million from year end 2015.

We remain very enthusiastic about our healthcare business and its future prospects.

Lastly, looking at our total card purchase volumes on slide 34, you will see the components of the $2.7 billion first-quarter card spend, the highest volume quarter to date for UMB.

Interchange revenue generated in the first quarter was $20.7 million, an increase of 12.6% from the first quarter 2015.

Now I will turn to the institutional investment management segment, our Scout investments business, with details beginning on slide 35.

Assets under management remained steady at $27.3 billion as of March 31, 2016.

During the first quarter Scout experienced net outflows of $701.1 million, a slowdown of 14.1% compared with the previous quarter.

Robust fixed-income markets provided a lift of $811 million.

The components of equity and fixed income AUM changes are shown on slide 37.

The revenue declines shown for the segment continue to be primarily driven by net outflows in the Scout funds over the past several quarters primarily in the international fund and the resulting shift in AUM mix which is currently 20% equity and 80% fixed income.

We are focused on leveraging our Scout distribution channels in the institutional, intermediary and sub advisory space and on continuing to improve performance which is the best way to stem future outflows and ultimately return to net inflows.

Several of our funds have experienced strong relative performance on a one- and three-year basis, as you can see on slide 39.

Five of the nine Scout funds rated by Morningstar have overall ratings of four stars and one, our Scout Core Plus Bond fund has an overall rating of five stars.

On that slide and the following slide are some important disclosures related to those ratings.

Final segment I will discuss today is our asset servicing segment, UMB Fund Services, which ended the first quarter with $180.7 billion in total assets under administration.

The financials for the segment are shown on slide 41.

While revenue in the segment comes from a variety of sources including number of accounts and transaction fees, the largest driver is average AUA which is greatly impacted by the health of the equity markets.

Our investment manager series trusts continue to gain ground with assets of $13.1 billion, 83 active funds and a strong pipeline.

Slides 41 and 42 of the supporting materials show some additional metrics for our various products within fund services.

With that I will conclude our prepared remarks and turn it back over to the operator who will open up the line for questions.

(Operator Instructions).

Chris McGratty, KBW.

Mike, the color on the energy was really helpful.

I just had a couple questions about where those numbers might have been last quarter.

I think you said in your remarks that about 62 of the classified were in energy.

Where was that number I guess last quarter?

The classified number was about the same, the total -- the percentage of the totals is slightly down actually of energy.

I think it went from about [35] to [33]?

Correct.

Okay.

And then maybe on that portfolio, many of the banks that we have talked to this quarter have talked about the shared national credit exam.

I guess number one, can you remind us the -- of your energy exposure what is kind of self originated versus syndicated?

And if you went through the exam maybe what you may have learned and any kind of changes quarter on quarter?

So the vast majority of -- we will talk about the unfunded commitments before we talk about the shared national credit portion of it.

The vast majority of our unfunded commitments are actually with large publicly traded non-criticized borrowers.

So we know that in listening to other folk's calls and concerns by the sell side that there is at least some concern around how much more can your classified loans borrow or how much is available to them.

And one of the things we want to make sure that we are being clear with everybody is the majority of that right now is with these large publicly traded non-criticized borrowers.

So, we don't believe there is going to be a significant amount of borrowing, because there is not much availability left for those classified credits.

On the shared national credit portion of it, about $197 million is shared national credits.

And if I could, a follow up, Mike.

Of this quarter's provision, I guess you talked about ag exposure and you talked about energy on your prepared remarks.

How much of the provision this quarter was to fund what was really good loan growth versus to address some of these minor issues with these two portfolios?

Yes, I wish it were really that simple.

Unfortunately it is not as easy as just funding growth.

I mean both the quantitative and qualitative aspects we use to come up with our provision take into account everything in the portfolio.

So improving credit quality as an example could mute any effect you would have in the growth of the portfolio.

So it is really not either one of those.

It is a complicated algorithm that includes just about everything from -- and the better the history obviously the -- history is a big part of that algorithm.

And so the better the history the less you put against it.

Okay, thank you for that.

Just one and I'll step back.

On the buyback announcement last quarter -- or last night, I think every year you kind of redo this kind of 2 million shares.

I'm interested if any of it was -- it didn't look like there was much movement in the share count in the first quarter.

Did you guys buy stock in the first quarter?

And if so could you tell us what that is and maybe how you are thinking about the buyback at these levels with the stock up about 20% [this year]?

Thanks.

We did buy stock back.

This is Mariner -- we did buy stock back in the first quarter, approximately 13 million and 10 million of that would have been a specific effort to buyback our stock in the first quarter, the remainder would have been what we do on a regular recurring basis.

Out of our employee stock plans.

And given the stock movement, should we be assuming that those 2 million shares will be used kind of consistently through the year?

Or is it less of a priority given where the stock is?

You know, all I can really tell you is that we certainly think we are very thoughtful about how we think about how to deploy our capital.

And based on where the stock price is and what our options are around M&A activity and other uses of our capital, we certainly look at repurchasing our stock as one of those uses.

I know you want more but that is about all I can give you.

No, that is fine.

Thanks, Mariner.

David Long, Raymond James.

I wanted to follow up with Chris' question on the energy portfolio and I think you said that $197 million of your outstanding is shared.

That is 60%-some.

And when I look at your peers I see reserve levels at the low end at 6%, high end 10% and you guys are at 3%.

I just want to understand why you may still be at 3% when most of the things that have energy exposure have 6% to 10% reserve levels at this point.

So, there is two different numbers we gave you.

The 3% number was against the entire oil and gas portfolio.

We are reserved on the criticized -- at the criticized level at over 11% -- classified level.

Right.

But that 3% level compares to 6% to 10% on the books for your peers.

I am just trying to figure out why you can run with a reserve level of half of your peers and especially when you have -- such a large number of that is shared.

I think, you know we look at this all the time just like you do.

And I think people use -- different banks are using different metrics to quote what they are reserving whether it is criticized or whether it is critical or whether it is against the total portfolio.

I am not sure -- we may be talking apples and oranges.

3.3% as I understand it, looking at the whole industry against the portfolio itself, not against criticized, is actually a pretty good number as we look at the peer group.

So we are more focused on what we have reserved against criticized, which is over 11%.

Got it, okay.

And then just one other question shifting gears here on the securities portfolio.

Pretty nice increase in the yields there.

And just can you maybe talk about what you are buying in this quarter and maybe what the yields you are putting on versus what was rolling off?

So the mix hasn't changed all that much, maybe a little bit of a bias towards municipal securities, but we obviously have always held a lot of municipals relative to the total portfolio and total peers.

We are still buying CMOs in pools as well, so probably those are the two largest categories.

And obviously the buy yield on those is slightly over 2%.

And as we have said before, the roll off the yields are considerably less and it changes in any one quarter.

But for this quarter a lot of what is rolling off is less than 1.5%.

So obviously we're going to pick up some nice spread just through the normal reinvestment activities.

Thanks for the color, guys.

Dave, I would like to point you -- just in case we have any more oil and gas questions, I would like to point everybody back to page 28 -- 27 and 28 but particularly 28 just for perspective if you think about potential losses and our overall charge-off and nonperforming numbers.

So keep in mind, I think it is important to note that even in 2011, which was our peak of losses and sort of the peak of the crisis, our charge-offs on the commercial side reached $11.8 million, and on a total basis our net charge-offs never got over 0.51 of total loans.

And as you fast-forward to the first quarter, we took some -- whatever charges we took in the first quarter of 2016 amounted 2.24.

So, I think it is good to know really -- keep it in perspective also to think about the fact that of our -- on an as stated basis $9.7 billion in balances to have exposure of $318 million in oil and gas is a pretty small number.

So just I think it is important to keep it in perspective.

Matt Olney, Stephens.

I want to go back to the discussion on capital.

You already addressed the stock buyback question, but at this point what about M&A?

I mean it sounds like you have been very pleased with the Marquette acquisition, the stock is trading at more favorable levels now.

What is the update on the M&A appetite from here?

Yes, this is Mike.

As we said earlier, we are thrilled with the way Marquette has gone, picked up a lot of great people, integration has been -- done very well, the system conversions are over with.

So we have learned a lot through that process.

And as we said in the prior quarter calls, we are an active buyer, we are out looking in the marketplace.

We are interested in whole bank transactions, but we will look at specialty lending operations, things within the healthcare space.

Strategic areas that we have talked about before that we would like to grow.

And so, we are absolutely out looking and we will continue to do so.

We are looking for good financial fits, strategy fits, geographically balance sheet fits and then culture.

And we found all of that with Marquette.

It is an active effort.

We have been talking about it for some time and so we have a concerted effort around it and we will keep looking.

Okay, thanks, that is helpful.

And then shifting over towards the trust securities item, that line has been under pressure for a while now.

I am trying to get a better idea of when you expect trust securities to stabilize.

And can you just remind us kind of what the big drivers of that are and your expectations of when we'll see stabilization?

Right.

So the biggest driver obviously is going to be institutional, which is Scout.

And in Mike's prepared remarks he mentioned that on a linked quarter basis we are down 14% and on a linked quarter basis on outflows.

And I would say additionally our one- and three-year performance numbers pretty much across the family are much improved and in most cases either top quartile or top decile, those are referenced also in the accompanying deck.

It is hard to give you much more than we have directional positive changes.

As a matter fact, for the first time in five quarters in Scout we saw a net improvement in assets under management up about $108 million, mostly from market actions, I want to make sure you understand that that is mostly market action with a little bit of reduction in outflow momentum.

So again, a good performance particularly on the fixed income side and a turnaround on most of the equity products.

It will take some time; I think the real answer to your question is it is likely to take some time for it to be a meaningful contributor again.

But at the detraction side we feel good about the fact that it might be moderating and coming close to a bottom.

Hard to totally predict that because we can't control the markets, etc.

But we feel good about the direction, feel good about the momentum, pipeline activity, sales activity looks strong and so we remain positive about the outlook for Scout.

Thanks, Mariner.

And as a follow-up, any color on the equity flows throughout the year so far, just in the first few months?

Has it been slowing or still relatively steady in terms of the equity flows year to date?

No, no, I -- so we had net outflows in the first quarter.

So maybe I misspoke.

But we are not seeing yet positive flows pretty much across the -- well, we are seeing some on the fixed income side.

But as a family we saw net outflows of over $700 million in the first quarter.

So, we are still in a net outflow mode; we were able to grow assets under management in the first quarter through market action of over $800 million.

So a little over $100 million in positive AUM trajectory in the first quarter mostly through market action.

And I think it is important to note that the whole industry is in sort of net outflow mode and passive products seem to be garnering the positive asset flows at this point for the industry.

This is Mike.

In my prepared remarks I made the comment that we had a slowdown on a linked quarter basis of 14%.

Right.

So Mariner is exactly right that we don't want to lead you to believe there was inflows, it was net outflows but it was slowing.

Right.

Slowed outflows.

So back to my point of momentum; the momentum seems to be changing.

We are feeling good about the momentum.

Thank you.

(Operator Instructions).

John Rodis, FIG Partners.

Mike, a question for you, and maybe I missed this, but just on the energy portfolio what were unfunded commitments at the end of the quarter?

Yes, so within the oil and gas category we have $545 million in commitments of which $318 million are outstanding, so $227 million are unfunded.

And the vast majority of that $227 million are concentrated in non-problem credits.

So they are not ranked.

Okay.

And what is sort of the redetermination process for those unfunded commitments?

Is that sort of a monthly review, a semi-annual review or how does that work?

Well, it really depends on --.

Flow of information.

Yes.

I mean availability and flow of information.

And as soon as information is made available to us we -- it is incumbent upon us to take action.

Okay, so it sounds like it is pretty -- on a daily or monthly basis, okay.

Again, whenever the information is available.

Okay, makes sense.

Mike, a question for you on the margin.

Obviously it was up 3 basis points linked quarter.

You talked about the Marquette acquisition and so forth.

Given I am assuming this quarter did you see the full benefit of December rate hike?

And then assuming no other change by the Fed going forward, do you think you can sort of keep this margin around this level?

Or do you think we see some modest compression just given continued competitive pricing and so forth?

Yes, so let's take the first part.

In the commercial space, to the extent that we have lines of credit that are tied to Fed funds as an index, you are going to get that lift right away and it is going to show up to the extent they also borrow too.

Right.

Now you have other loans that may be tied to the index but have to go through a repricing.

So as an example let's move over to the investment side of the house on the earning asset side.

As we buy additional securities with that 25 basis points we would expect that we would be buying yields that are higher as a result of the Fed increase.

So is it all through?

No, it is not all through because you have got to get through the whole year where you are buying at those higher yields.

On the loan book to the extent that they are indexed they will reprice right away.

And I guess, so you think you can sort of -- with all that in mind do you think you can sort of keep the margin in this $279 million to $280 million range or do you see some modest compression going forward?

So, as far as headwinds, on the lending side that is going to be about competition.

So, if new loans become more competitive -- or maybe a better way to think about this is that the mix changes from variable-rate loans which we said were 48% of the portfolio to fixed rate.

And we have more success in fixed-rate loans, commercial real estate as an example, you'd see that margin expansion.

On the funding side I think we have done an excellent job at 22 basis points in 2014 with pre-fund.

So I don't see a lot of compression there.

I mean to be honest I think directionally you should see improvement.

Where we are we -- every month we have been able to successfully price up on the margin on our loans.

We are very definitely doing a better job of putting more term and real estate debt on as a percentage of the total.

Our Marquette acquisition is definitely driving higher yields there.

And as we expand our book on the asset based lending side and on the factoring side those carry much higher yields in our current book.

The fixed income portfolio of course also is rolling off in the [140s] and rolling back on over 2% currently.

So I would say directionally you should on the margin continue to see actual improvement in margin.

And just to add to that, remember strategically we've been talking about for years rotating assets out of the fixed income book into loans.

We've had success with that; unfortunately it doesn't show up in the loan to deposit ratio because of the strong growth we have had in deposits generally.

But Mariner is exactly right, the trend should be up with all the things that we have going on.

Yes, I think we have some tailwinds on margin expansion.

Okay, thanks, guys.

And then just one other quick question on fees.

And I know these are smaller line items, but insurance fees and then the brokerage fees were both a little higher this quarter than they typically are.

Can you just sort of anything one time in there or what drove the increase?

There is nothing really there other than just regular activity.

Okay, super.

Thanks, guys.

Peyton Green, Piper Jaffray.

Mariner, I was wondering if you could comment maybe about the loan pipeline and how it looks and where you are seeing relative opportunity maybe compared to past quarters.

Sure.

As we have done in the past, given you some look into the next quarter based on what we know about our pipeline.

And fortunately I've got the same news I have had in the past for you is that the second quarter pipeline looks as good as it has been.

And again it is a pipeline of course, but the pipeline looks as good as it has been.

And where is it coming from?

I would say it is coming from really across the board.

Regionally we are seeing nice activity all across our traditional book of business, across the footprint.

Our agribusiness pipeline remains a very, very strong component of our overall loan growth.

That team is doing a really great job.

There seems to be a really interesting void from a competitive standpoint there for us and we have had a nice -- we have got a really nice pipeline in that particular business.

And otherwise I would say it is really for the most part coming from everywhere, good sales activity, we've got an exceptional team.

And then to the extent you can gauge this, I mean how do you feel about payoffs?

I know your payoffs were generally a little lower in the first quarter versus the prior quarter average.

How do you feel about it in the second quarter?

Yes, Mike mentioned that in his prepared comment that they seem to be in line.

And I would say I don't really have anything else to add to that, they are relatively in-line at 2.9% for the first quarter and that is pay offs and pay downs as a percent of loans.

And as I look across previous quarters it is pretty well kind of right there right in line.

And looking forward don't see any reason why it wouldn't be maintained being in line, if you will.

Okay.

And then with the seasonal deposit flows that you all normally see, those seem to be -- I mean you had net deposit growth in the first quarter.

How would you expect that volatility to shape out into the second quarter?

Just like it always has.

So we are talking about the public fund deposits come on the balance sheet maybe as early as late November, certainly ramping up in December and January and they will be out of here like they always are in early May.

So that is like clockwork.

The thing that has really changed that I highlighted in my prepared remarks was the healthcare deposits now being at $1.4 billion and that is a nice growth engine.

And it continues to grow at 34% or 35% every year.

Okay, great.

And then, Mike, I think you referenced the salary component of the Marquette expenses.

But if you looked at the first quarter of 2016, how much of the overall expense was related to Marquette?

So you are talking about just total expenses that are just Marquette that are on the income statement?

Yes.

I don't think we have made that public.

I think the best way to think about that, Peyton, is we have disclosed what we expected to be the savings there and those are in line.

And you can refer back to those.

I don't have them in front of me, but I would say that they are in line to slightly better than expected.

Okay.

All right, great, thank you.

Chris McGratty, KBW.

I missed it in your prepared remarks.

Mike, did you provide an outlet for tax rate?

It looked a little light this quarter.

Yes, so the reason that it is light is really two reasons.

One is greater share of our revenue now is coming from municipal securities in our fixed income book.

And then we do have BOLI now on our books, so those gains in our life insurance policies are tax-free as well.

So our projection for the year, mostly based on those two items, is 24.5%.

For the rest of the year, okay.

And then I just want to make sure I got my notes right.

Going back to the classifieds, the $61.9 million.

Is 11.4% reserve on that $61 million or is that on the total classifieds, the $234 million?

$61 million.

The $61 million?

That is the total classified for oil and gas and the 11% is against just that classified number.

Got it, thanks.

Matt Olney, Stephens.

Just want to ask a follow-up on the asset servicing business.

Not a business we talk about too much on the call the last few times, but you gave us some great slides on slides 41 and 42.

It seems like you had some good momentum in this business a few years ago.

Some of it slowed down, it looks like the assets are down.

I'm just trying to get a better idea -- is this business still in growth mode?

Or is this now an opportunity to make this business more profitable at this stage of the cycle?

Thanks.

Yes.

So, obviously there is new business and then there is market action.

So I would say our new business remains very strong and the numbers coming down really are mostly impacted by assets under management related to market action.

So this is a business that kind of is really nice steady growth every year, it is very -- it has been very predictable on the growth side for us on new business.

And it is just temporary -- hopefully temporarily suffering from market action broadly.

As you know kind of the split on the business, the real growth here is on the alternative side for us and some of -- so a little color on the prospects for the business.

We are very excited about some of the things we are doing on the private equity side, building our platform out.

We have a strong private equity platform that we have recently built and are having some success there.

Similarly with our ETF platform we have recently built a ETF platform and are having some good success there.

So as you know, as everyone on the phone is probably aware, there is a current trend, a lot of momentum behind passive products.

And so we are kind of excited about building our platform to support passive products.

So we are pretty bullish on the prospects, really the focus for this business is, like I said, the growth is steady.

They're focused on making sure they can continue to do it more efficiently.

Thank you.

And this concludes our question-and-answer session.

I would now like to turn the call back over to Kay Gregory for any closing remarks.

Thank you.

Before we end the call I would like to again remind you that we will host an Investor Day in New York on May 19.

Please watch for our press release in the coming days.

Today's call can be accessed via replay at our website beginning in about two hours and it will run through May 12.

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.

The conference has now concluded.

Thank you for attending today's presentation.

You may now disconnect your line.

Have a great day.