UMB Financial Corp (UMBF) 2018 Q2 法說會逐字稿

Good day, and welcome to the UMB Financial Second Quarter 2018 Financial Results Conference Call.

(Operator Instructions) Please note this event is being recorded.

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

Please go ahead.

Welcome, and thank you for joining us today.

On the call are: Mariner Kemper, President and CEO; Ram Shankar, CFO; and Mike Hagedorn, CEO of UMB Bank.

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 circumstances or aspirations may differ from those set forth in any forward-looking statement.

Details about factors that may cause them to differ is contained in our SEC filings.

Forward-looking statements made speak only as of today.

And we undertake no obligation to update them, except to the extent required by applicable securities laws.

Our earnings materials are available on our website at umbfinancial.com in the Investors section.

Reconciliations of non-GAAP financial measures to the nearest comparable GAAP measures have been included in the release and on Slides 32 and 33 of the supporting materials.

All earnings per share metrics discussed in this call are on a diluted share basis for continuing operations.

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

Thank you, Kay, and welcome, everyone, and thanks for joining us to discuss our second quarter 2018 results.

For the quarter, we earned $56.1 million or $1.12 per share on an operating basis and $55.4 million or $1.11 per share on a GAAP basis.

Highlights include net interest income and margin expansion and a growing loan portfolio with yield improvement and positive year-over-year operating leverage.

Net interest income grew 1.6% and margin expanded by 5 basis points to 3.24% on a linked-quarter basis.

We accomplished this growth with robust calling efforts while maintaining our strong underwriting standards and pricing discipline.

Quarter-end loan balances of $11.6 billion for the second quarter represent a year-over-year increase of 7.2%.

H.8 data for the quarter reported total year-over-year loan growth of 4.3% for the industry.

Compared to the first quarter, our average loans increased 5.6% on an annualized basis with yield improvement of 21 basis points.

Top line loan production for the quarter was very strong at $635 million, surpassing first quarter production of $520 million despite the fact that some of the active deals at the end of the prior quarter were pushed out.

We continue to have a strong pipeline.

And given what we know today, third quarter top line production looks to be as good as some of the better quarters we've seen over the past several years.

Credit quality remains solid as well with net charge-offs of 0.32% of average loans compared to 0.37% in the first quarter and nonperforming loans of 0.48% of total loans, down from 0.59%.

Unlike the first 2 quarters of the year, where we identified a couple of credit issues that impacted our reported charge-offs and nonperformings, we aren't seeing similar issues at this point.

Given the characteristics of our loan book and what we currently know, we'd expect our credit quality to further improve.

While our noninterest income declined from the linked quarter, I am pleased with our performance on operating leverage, driven primarily by nearly flat expense growth.

Finally, we're at an interesting point in the interest rate cycle with the magnitude of increases becoming meaningful enough that deposit pricing changes have gone from one-off requests to increased published rates.

This is to be expected.

And we will continue to be competitive with our deposit pricing to maintain the raw material needed to fund our asset generation opportunities and to defend and grow our market share.

Now I'll turn the call over to Ram for a more detailed discussion of the drivers behind our results.

Then Mike will cover some of the details on the segments before we open it up to your questions.

Ram?

Thanks, Mariner.

For the second quarter, net interest income was $150.2 million, representing a 9.3% increase year-over-year and 1.6% on a linked-quarter basis.

The benefits from mix shift on both sides of the balance sheet and expanding loan yields were partially offset by higher interest costs on deposits.

We continue to benefit from the impact of higher short-term interest rates on our predominantly variable-rate loan portfolio.

But the impact this quarter was partially offset by increases to rates on deposit products across all lines of business.

In the 11 quarters since the Fed started increasing rates, our total earning asset yields have expanded by about 100 basis points after adjusting for the effective tax rate change to 3.79% or a 64% cumulative asset beta.

During the same period, our total cost of funds, including DDA, has risen 44 basis points from 0.13% to 0.57% or a 28% cumulative beta, resulting in NIM expansion of approximately 58 basis points.

During the quarter, our cost of interest-bearing deposits and total cost of deposits increased 16 basis points and 12 basis points, respectively, impacted by pricing changes and a continued mix shift from DDA, driven both by higher ECR rates and lower corporate cash levels.

Noninterest-bearing deposits represented 34.4% of total average deposits for the second quarter compared to 36.1% last quarter.

Similar to what others in the industry have experienced, our cycle-to-date deposit betas have remained fairly favorable.

However, as Mariner mentioned, we're approaching an inflection point where deposit costs may be more impacted more by changes in short-term rates.

We still expect our betas over this interest rate cycle to conform to historical levels assumed in our interest rate models.

However, just as the betas in the last 75 basis points of rate moves were higher than the first 100 basis point increase, we would expect the next 100 basis point rate increase to have an accelerated impact on interest-bearing deposit cost.

In our consumer business, our efforts to retain and grow households and improve share in our underpenetrated markets include attractive and longer-term duration promotions.

In Healthcare Services, we continue to leverage our early-mover advantage and are focused on growing market share.

While betas have remained near 0 thus far this cycle, the impact of higher interest rates, increased competition from traditional and nontraditional participants and industry consolidations will likely result in higher interest expense paid to our partners.

On the earning asset side, repricing in our variable-rate loan book, along with reinvestment of cash flow from our securities portfolio at higher rates, will also continue to drive earning asset betas higher.

Net-net, we expect our margin for the upcoming quarter to be relatively stable compared to the second quarter levels.

Turning to balance sheet highlights on Slide 10.

Total average deposits decreased 1.7% to $16.5 billion as linked-quarter increases in Asset Servicing and health care deposits were offset by decreased commercial and institutional deposits and the seasonal decline in public funds.

Our average loan-to-deposit ratio for the second quarter was just under 70%, up from 67% in the first quarter.

Looking again on loan balances.

Slide 11 shows the strong production that Mariner mentioned, along with payoff and paydown details.

Top line production for the quarter was $635 million.

Total payoffs and paydowns of $419 million for the quarter represented 3.6% of loans, slightly below our average levels over recent quarters.

Slide 14 shows the composition of our investment portfolio.

The average balance in our AFS portfolio decreased $127.4 million on a linked-quarter basis as the average yield increased 4 basis points to 2.13%.

During the quarter, we reinvested approximately 60% of the roll-off, deploying the remainder into funding loans.

This is a part of our active balance sheet management, positioning earning assets to help counter higher liability costs.

Moving back to the income statement.

Slide 18 shows noninterest income of $100.3 million for the second quarter, a reduction of $5.2 million or 5% compared to the first quarter.

Drivers include a decline of $1.8 million in equity earnings on alternative investments and $1.1 million in the fair value of company-owned life insurance, both included in other noninterest income.

Both of these are market-driven revenues and have near-equal offsets in noninterest expense.

Additionally, the deposit service charges line item included a $1.2 million reduction related to a repricing of a large broker-dealer customer contract in the Institutional Banking segment, which allows us to maintain a significant relationship.

Finally, Trust and Securities Processing revenue was impacted by a $1.3 million decline in Asset Servicing revenue, also part of Institutional Banking segment.

Mike will provide more detail in the segment discussion.

Slide 20 contains detailed drivers of the changes to the noninterest expense, which on a non-GAAP operating basis, increased $2.5 million or 1.4% compared to the first quarter to $176.4 million.

As I noted on last quarter's call, we saw increased legal, consulting and business development expense related to the technology and growth investments, offset by lower FICA, payroll taxes and 401(k) expense.

We continue to anticipate increases in performance-related incentive compensation over time.

Now I'll turn it over to Mike for a few segment results and drivers.

Mike?

Thanks, Ram.

The segment disclosures begin on Slide 21, and I'll start with Commercial Banking, which provided 67% of the company's pretax income for the quarter.

Linked-quarter noninterest income in the segment was impacted by a $1.1 million increase in card rebate and reward expense recorded as an offset to Bankcard fees due to higher card spending volume and a reduction of $521,000 in derivative income related to new customer swaps.

Commercial real estate and construction lending once again lead in terms of loan production for the quarter with industrial, medical and office projects among the top categories.

The CRE environment remains competitive.

And although the high cost of construction is impacting the industry, we continue to see strong development activity in our core markets.

Our pipeline has remained consistent over the past several quarters and asset quality has been stable.

Our national lending platforms, factoring and asset-based lending have represented nearly 23% of our loan growth over the past year.

In our factoring business, both the commercial finance and transportation finance portfolios have benefited from the turnaround in the general economy.

A significant amount of our growth has come from funding acquisitions and financing companies that have outgrown their bank lines.

The trucking industry is experiencing a strong year with tight freight capacity driving increased shipping rates.

Institutional Banking, which consists of Investor Solutions, Asset Servicing, Corporate Trust, Distress Debt, Investment Banking and Public Finance, posted pretax net income of $11.8 million for the quarter and was impacted by the reductions in deposit service charges and fund servicing revenue that Ram mentioned earlier.

In Asset Servicing, industry consolidation, along with the move to passive investing, has created increased competition.

Noninterest income in the second quarter, specifically in Trust and Securities Processing, was impacted by the exit of one large customer.

The recent move to align our Asset Servicing business with our other Institutional Banking functions has brought a renewed growth focus and changes that include 2 separate teams with resources targeted to both the alternative investment and registered fund markets.

We've realigned territories, added 4 seasoned sales professionals, updated our incentive structure and launched a new targeted marketing campaign.

We continue to aggressively pursue new clients ranging from startups to larger established funds.

And our teams have closed 77 new deals year-to-date.

We are seeing traction from these changes and have an active pipeline.

Additionally, the strategic infrastructure and technology investments we're making in Asset Servicing will further build our capabilities in all product lines, including exchange traded funds, private equity, alternative investments and registered fund business.

Turning to Healthcare Services on Slide 28.

HSA deposits increased 1.9% during the second quarter and 24.9% year-over-year.

These deposits now represent 14.1% of total UMB deposits.

We continue to see movement into our HSA Saver program and investment assets have increased by more than 70% during the past 12 months.

Slide 30 shows the historical growth trends compared with industry averages.

Finally, Slide 31 depicts purchase volume and interchange revenue across our various card products.

Health care-related card purchase volume continues to represent nearly 60% of total card spend.

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

(Operator Instructions) Our first question comes from Ebrahim Poonawala of Bank of America Merrill Lynch.

I think this first question in terms of -- I was listening to your comments, Mike, around the Asset Servicing business.

When I look back, going back to the last 3 or 4 years, just sequentially I think that business has remained kind of in that $20 million, $22 million quarterly revenue run rate.

As you look at that business today just competitively in terms of the larger players, like are you taking a deeper look in terms of the client mix that you're servicing and a need to maybe restructure that a little bit in terms of where you compete in what might be a more sweet spot for someone like UMB?

Just any thoughts around that would be helpful.

Yes, I'm going to start here.

Ebrahim, it's Mariner.

And then Mike will chime in.

Yes, certainly the way that our business is structured, we have a big part of our business is helping the smaller businesses.

And so there's a lot of [turn] in that and there's a lot of expense in setting that stuff up early on.

Mike mentioned in his comments that we're beefing up our efforts and our sales teams.

And we've also invested in a new platform technology to close up some of our product gaps on the larger end of the client segments.

So we are definitely going to pursue slightly larger and more mature accounts, where the revenue comes earlier on in the cycle.

And we're having some success with that already.

Mike mentioned the 77 clients.

We've sold more business year-to-date than we did last year.

So the business is actually in pretty good shape.

We feel pretty good about its prospects.

We would again, like I said, invest in new platform technology, should allow us to do more things than we've been able to do in the past.

So I don't know if you want to add to that, Mike?

Yes, the only thing I'd add, Ebrahim, is that the majority of the reduction in revenue in this business was one remaining account that was the very largest account, where they decided to combine their service providers with one large entity that they already had business with.

So they weren't dissatisfied with the service that we were providing them.

Quite to the contrary, they just decided to consolidate.

And that was kind of the one last legacy account at that size.

As Mariner points out, one of our competitive advantages is, yes, there is a sweet spot in Asset Servicing around who we service.

But we also need to make sure that we have the ability to grow with those funds as they grow as well.

And that's about the investments that we're making.

And then lastly, just to remind you, all my comments are in a post-Scout world.

So Scout used to be in that revenue mix as well, and obviously is no longer.

So we get great client satisfaction scores.

And we're up more this year than we were last year.

So all is good on that front.

Got it.

And just moving to Ram.

I'm not sure if I heard you correctly.

I think, did you mention that you expect the margin to remain flat quarter-over-quarter in 3Q?

And if so, like if you can just give in terms of expectations around loan-to-deposit sort of trend going forward and what the rate sensitivities to any incremental or additional rate hikes.

So yes, just to recap what I said on the prepared comments, Ebrahim, I said margin for the third quarter should be stable relative to second quarter.

Obviously, different dynamics going on, on both the asset side and the liability side, right?

On the earning asset side, we still have 60% of our loans being variable rate that get the benefit from short-term rates.

If you look at our slide deck we also have the positive impact of roll-on, roll-off, even in our securities portfolio.

Over the next 12 months, the average roll-off rate is about 2%.

And what we are buying today is close to 3.25%.

So that should continue to benefit on the asset side.

And then I'll go back to some of the comments on the prepared side, yes, the betas have started to inflect a little bit.

Mariner talked about the active pipeline, especially looking to the third quarter.

And as we turn our spigots of deposit growth, we'll expect to use both new deposit growth as well as roll-offs from our securities, cash flows from our securities to fund that loan growth.

Got it.

And that's helpful.

And just one last question, tangible common equity close to 10%.

I know we've talked about looking at deals.

But any thoughts around deploying some of that capital towards buyback if you had to if there was continued weakness in the stock relative to what we have seen today?

Well, as we've said before, Ebrahim, we're active -- we're very active in the M&A space.

We would like to do a bank deal.

And there's nothing really new around our efforts there.

I do active calling, building relationships.

We have an M&A team doing their job.

So we continue to look for a deal that culturally fits.

And to the extent we can get that done, that's where the best use of our capital is.

And certainly, if we don't see deals materialize, we have other options.

Our next question comes from Chris McGratty of KBW.

Our next question will now come from Kelly Motta of KBW.

And one moment, we seem to be experiencing a technical error.

(technical difficulty)

Can you hear me now?

Yes.

All right.

You mentioned the change in the posted deposit rates during the quarter.

Do you have about when change occurred?

There was no specific date.

It's just the kind of the evolution of rates changing and reacting to the market and making sure that we're remaining competitive with the marketplace to maintain our current relationships.

Okay.

And then in terms of loan growth, it was mid-single digits this quarter and payoffs were fine.

Do you think this is kind of, looking to the back half of the year, a good assumption for the remainder?

Or do you see growth picking up?

Yes.

So as my prepared comments, I said that we expect the third quarter to be stronger than the second quarter.

So we -- our pipeline looks to be as good as any quarter we've had in the last several years.

Yes, one of the things, Kelly, that Mariner mentioned was some of the deals from the second quarter got pushed into the third quarter as well.

So that should even out for -- between the comparison between the 2 quarters.

Yes.

Also as we stare at the quarter today, payoffs and paydowns look to be slightly lower than they have been in the last couple of quarters.

(Operator Instructions) And our next question comes from Jared Shaw of Wells Fargo Securities.

This is actually Timur Braziler filling in for Jared.

Just one follow-up on the deposit question.

Just looking at the projected growth for the back end of the year and taking that in combination with using some of the securities roll-off to help fund loans, I guess how should we be thinking about loan funding for the remainder of the year?

Is that going to be primarily from the deposit portfolio with a slight increase in -- or a slight benefit from securities roll-off?

Or is that going to be mostly securities with some slight benefit from deposits picking up?

Timur, this is Ram.

It's going to be a combination of all of that, right?

So deposit growth obviously are our raw materials.

That's where our focus is.

And then we're also -- have been on this balance sheet rotation strategy for a while.

So we will use some of these cash flows.

Like in the past quarter, we used 60% of the cash flows from the securities book to buy back securities, so 40% went to funding the loan.

So we'll kind of maintain that kind of trajectory going forward.

So it's a combination of all of those that you mentioned.

Obviously, given the pipeline and the earning asset potential we have, especially on the loan growth side, we would like to continue to fund that.

Obviously, we have a big advantage with our industry low loan-to-deposit ratio as well.

That gives us a lot of dry powder to continue funding this pipeline.

And then I'll just add to that, this is Mike.

As we look forward to fund our growth, first, I would caution everybody not to focus on end-of-period balances.

There can be a lot of volatility in those, including public funds, where the second quarter historically that's been the low point for the year.

And due to our industry low loan-to-deposit ratio that Ram just mentioned, we didn't see in the second quarter the need to be as aggressive in deposit pricing.

But due to the expected third quarter growth that Mariner just mentioned, we do expect to be more aggressive in deposit-gathering activities.

And as we've talked in the past, we have a lot of triggers, lots of relationships and avenues to pursue to do that.

Okay, that's helpful color.

And then just maybe following up on Ebrahim's question, looking at the broader fee income environment, you have the renegotiation of one contract that negatively impacted numbers this quarter.

You had the higher card reward balances.

I guess, I'm -- as we're looking out into the back end of the year, kind of how are fee incomes trending?

Is there additional risk that there's going to be more renegotiation on the broker-dealer side?

And maybe talk to card reward trajectory there.

Let me -- this is Mike.

Let me start with card reward.

As a reminder, we had an adjustment to our card rewards programs because of the change in systems that we use to calculate the future liability of those reward programs last year.

So what you're seeing from a year-over-year perspective, the current rate is a more accurate, if you will, reflection of the ongoing run rate in that business.

So it's not a reduction year-over-year, it's more -- it was more of an adjustment.

And the repricing item is actually one product, one client, no one else.

So there's nothing else to happen in the repricing piece of that.

And on the kind of the other general trends around -- so the loss of account in fund services, again that was the last of its kind.

They had more business with another provider than they did with us.

We were likely to lose that anyway.

So that business, again as we talked earlier, year-to-date, sales are more -- up more this year than they were last year.

So [managed] incoming trends, we had a little bit of noise in the second quarter, but we feel definitely very good about the trends and the direction of all of those businesses.

Another thing I would note, I think it's important directionally, is bond trading, which is a business that has been strong for us historically, is off, right, year-to-date.

And that's because of market dynamics.

When infrastructure spending and the bond market stabilizes, we [stand poised] with latent earnings power in that particular space to be a leader in sort of infrastructure spending, underwriting, sales, escrow work.

And so that's kind of a latent earnings power that we have in the back half of the year.

And we -- I can't tell you when that's going to happen.

But I think everyone believes that spending is going to have to pick up again, and projects are going to need to get done at some point.

And so I point you to that also.

And I would just add one comment to bond trading.

Mariner is 100% right.

You guys understand the industry headwinds that exists there.

We have been investing over the last 9 to 12 months in our ability to underwrite in this space as well, both from a public standpoint and a corporate standpoint.

So it isn't just what we sell product-wise but also our ability to be on the front end and generate new business.

And that's another driver of growth that we have historically not really had.

Yes.

With offices now in Dallas and New York.

And so we're poised for that activity handsomely.

Okay.

And if I could just squeeze one more in there, just maybe looking at the HSA space, really impressive growth on a year-over-year basis.

I'm just wondering how much of that is coming from increased existing balances as customers more greatly utilize the product versus bringing on new relationships?

Yes, clearly the driver of that is the latter.

It is -- remember, we have mostly a wholesale model, about 3/4 of it is wholesale.

So when our partners sign up new employers or large insurance companies, we're the recipient on the back end of those deposits.

So that's the biggest driver.

Our next question comes from Matt Olney of Stephens Inc.

I hopped on a few minutes late, so I apologize if you've covered this.

But on the operating expenses, what's the outlook for that in the back half of the year?

As we're not giving any specific guidance, Matt, one of the comments that I made is it's kind of lower right now because of performance-based incentives.

So as you know, as we've talked about, a large preponderance of our compensation is based on variable rate.

So they are tied to revenue.

So to the earlier question, if bond trading income is down, the commissions related to that are down, too.

So there's some variability in our expense trajectory and forecast.

So obviously, we're focused diligently on operating leverage.

Positive operating leverage is big.

So it depends on what happens on the revenue side.

But independent of that, we call them pretty steady.

I don't expect anything to be unusual in our expense management.

Correct.

You've seen already.

Okay, good.

And then I think I appreciate some of the discussion on the loan growth.

It sounds like the pipelines remain great.

Hopefully, the paydowns, payoffs slow in the third quarter.

I assume most of that is around commercial real estate as far as kind of the optimism from that perspective.

What are you seeing on the C&I side right now?

We see -- without giving specifics, we've seen growth across all of the categories.

CRE is certainly leading the pack just because the deal size, size -- deal-by-deal, they're just larger deals.

But we are -- we have an active C&I pipeline.

Without committing those exact dollars to you, it looks good as does our -- as do the other categories.

I'd just add, I think in the second quarter, we've probably seen in loan committee more C&I deals than in prior quarters.

So it seems like our team is uncovering those opportunities.

And our message on how we go to market resonates.

So that's a good sign.

I would say that most of our loan growth on the C&I side is not related to economic activity, however, just market share gains and perhaps some transaction-based activity.

There are some -- still going to be a lot of M&A activity in the C&I space.

So we'll benefit from those transactions taking place, things like that.

But economic activity has really -- has not really been driving that for some time.

Okay.

And then on the excess capital discussion, Mariner, you talked about M&A, a few minutes ago.

Can you try to help us out and talk about your preference between bank M&A and fee income M&A?

And given the industry pricing dynamics, where do you see more opportunity for UMBF on the M&A front?

Well, I think -- so these will be similar to comments I've made in the past.

The bank deals can be accretive quicker.

We have a lot of history and comfort in doing them.

We can see the impact faster.

There is opportunity obviously for building synergies, et cetera.

So it remains a priority to do a bank deal.

We also think that it is important in the environment we are in to spread our cost over a bigger organization.

So we're just -- we remain putting that as a priority over the others.

However, we continue to look across the board.

And because you just never know what you're going to come across and how timing is going to work and things like that, so we don't want to lose good opportunities, whether it's in fund services or whether it's a health care-oriented opportunity or further consolidation in our Institutional Banking businesses or wherever it might be.

So we're active across all of it.

It's just our banking that's remained a priority.

And you mentioned pricing.

Pricing is what it is.

So it does give you pause.

And we won't do deals that don't make sense.

But we just remain active, looking, as we have been.

Our next question comes from Robert Beauregard of Global Alpha Capital Management.

My first question is related to the health care savings account business and the disconnect I see between certainly banking analysts and either health care or technology analysts that cover some of your publicly traded peers.

And I wanted to know if you have any strategy to surface that value or certainly make banking analysts more aware of the valuation of that business?

Let me take a stab at that.

Robert, this is Mariner.

I think you might be -- I think what you're asking, and I'll pause and see if I've got you right.

But are you kind of getting at some of the conversations that have taken place in the past around some of the parts and whether or not our HSA business has been valued high enough within our overall valuation?

Is that the question?

That's the question.

I look at HealthEquity, which is on Slide 30 is just about twice the size but has a $5 billion U.S. market cap right now and is up 80% year-to-date but doesn't get covered by the same group of analysts that cover your stock.

So I'm sort of puzzled by the lack of enthusiasm of some of the analysts covering UMB with regards to the value of that business that has been growing a bit nicely.

I mean, I understand your point.

There's not a lot we can do.

We do our best to educate the marketplace.

Maybe you can go on the road for us and educate everybody about us.

But it is -- it's an important part of our business.

I think one of the things that gets disconnected as people talk about it is the value of the deposits and how it's buried within our organization.

We don't really see -- it needs to all stay together really for us to have the kind of value that it has to us.

So anyway, we agree with you.

It is a stable business.

And I don't really know what else to tell you.

I understand what your question is.

But that's up for ..

I understand the value of the deposits for the bank.

But do you -- like is there a way to do a spinoff into different entities, it could still be related when it comes to where the deposits and how the deposits get used.

But I'm pretty sure if it was a separate entity with its own listing that you would surface the value.

We've seen that many times with other companies.

Maybe we can take that offline with you sometime, explain it a little bit more to you.

But I would tell you just high level is it's more complex than that.

It's hard to pull it apart and disconnect it.

Okay.

Well, certainly.

The other question is with, sort of in line with the previous question on efficiency ratio you've had.

If we take year-on-year, certainly nice improvement.

Do you have a number in mind if we were to look in 12 months' time what the efficiency ratio could be?

Sorry, we don't really give guidance there.

We continue to believe that we can improve upon it.

But we don't really give any guidance there, sorry.

And then third question, maybe my last one, is with the home equity line.

Just do you think the decreased utilization is with rates?

Or is there something else that's driving people not to use that equity line of credit?

That's 100% rate-related.

Yes, it's aligned with the tax changes, too.

Okay.

So you still expect that to continue to decrease going forward?

Or you see it pretty stable now?

Yes, I would say in the second market, that probably should be challenged.

But in the first, we do a lot of first in private wealth.

And I think that will still grow.

This concludes our question-and-answer session.

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

Thank you for joining us today.

This call can be accessed via replay at our website and will run through August 10.

As always, you can contact UMB Investor Relations at (816) 860-7106 with any follow-up questions.

Again, we appreciate your interest and time.

Thank you, and have a great day.

The conference has now concluded.

Thank you for attending today's presentation.

You may now disconnect.