UMB Financial Corp (UMBF) 2018 Q3 法說會逐字稿

Good day, everyone, and welcome to the UMB Financial Third Quarter 2018 Financial Results Conference Call and Webcast.

(Operator Instructions) Please also note, today's event is being recorded.

At this time, I'd like to turn the conference call over to Ms. Kay Gregory, Investor Relations.

Ma'am, please go ahead.

Welcome, and thank you for joining us.

On the call today are Mariner Kemper, President and CEO; and Ram Shankar, CFO.

Jim Rine, President and CEO of UMB Bank, will be available for the question-and-answer session.

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 are 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 security 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 on this call are on a diluted share basis.

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

Thank you, Kay, and thanks to everyone for your interest in UMB.

First, as you saw in our announcement earlier this month, Jim Rine, a 24-year UMB veteran, was promoted to CEO of UMB Bank.

Jim's background includes sales, strategy and credit as well as leadership, coaching his team and helping to develop other leaders within the company.

I think this is a great opportunity for UMB, and I'm excited to have Jim leading all the bank segments.

I'd also like to thank Mike Hagedorn for his contributions over the years and wish him well on his new endeavors.

Now looking at our third quarter results.

We earned $57.8 million or $1.16 per share.

Our results include strong loan growth, with an 11.5% linked-quarter annualized increase in end-of-period balances.

Average loans for the third quarter increased 2.4% or a very strong 9.6% on a linked-quarter annualized basis.

This is nearly 2.5x of Fed H.8 data heading into the quarter.

Top line loan production was very strong coming in at $730 million for the quarter.

C&I, along with our national lending platforms, factoring and asset-based lending, were the biggest contributors to our growth in the quarter.

Those 2 platforms represent 24% of our average loan growth for the year.

For the fourth quarter, our pipeline and top line production outlook remains strong like what we saw going into the third quarter.

Total payoffs and paydowns this quarter represented 3.2% of loans, slightly below our average levels during the recent quarters.

While we can't always predict the exact timing of payoffs and paydowns, we'd expect them to reset higher.

Credit quality remains solid, with net charge-offs of just 0.09% of average loans compared to 0.32% in the second quarter; and nonperforming loans of 0.42% of total loans, down from 0.48%.

Given what we know today about the quality of our portfolio, we'd expect credit quality to remain strong.

While net interest income grew 6.8% compared to the third quarter of 2017, it remains flat on a linked-quarter basis as funding costs, after the initial lag, continued to catch up with levels seen in prior rate cycles.

This is consistent with our comments from last quarter where many in the industry saw an inflection point in deposit pricing.

As we said last quarter, with our loan growth history and pipeline, prudent deposit-gathering activities to fund asset-generation opportunities remains very important.

On average, linked-quarter deposits remain flat.

However, during the quarter, we launched several initiatives that grow end-of-period balances to $17.7 billion, an increase of 8.2%.

Strong growth in average health care, asset servicing and consumer deposits, with the latter partially driven by a money market campaign in September, along with 2 CD promotions, was nearly offset by the seasonal decline in public fund balances and lower institutional deposits.

While there are always other means to fund the balance sheet, including higher-cost borrowings, the consumer deposit campaign was designed to help improve penetration, while building our consumer brand in our underpenetrated markets.

Nearly 90% of the deposit inflows from the money market campaign came from new-to-bank money.

This campaign is part of our longer-term focus to reinvigorate our retail banking business.

To better focus our efforts, we recently separated leadership of our Personal Banking segment, which you will recall combined our consumer and private wealth business.

Abby Wendel, who has served as Chief Strategy Officer for the past 3 years, will lead our consumer banking efforts and build on a recent efficiency improvements and investments we continue to make in this important customer segment.

The separation of these 2 businesses will also allow us to further deepen our private wealth strategy.

Finally, as we announced yesterday afternoon, we've entered into an accelerated stock repurchase agreement to repurchase approximately $50 million of our outstanding shares.

Under the terms of this agreement, we will receive an initial delivery of shares representing approximately 85% of the expected total to be repurchased.

As I shared numerous times, our priorities for use of capital has been organic loan growth, which we've demonstrated, potentially augmented by M&A and thoughtful dividend increases, like the one announced yesterday.

Additionally, we've been opportunistic in the use of our regular repurchase program authorization.

While our capital priorities have not changed, it has been 18 months since we announced the sale of Scout, and we've continued to accrete capital.

With the backdrop of the current industry valuations, we feel that this is an opportune time to return incremental value to our shareholders at a reasonable price.

As always, we will continue to be good stewards and consider various ways to optimize capital.

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

Ram?

Thanks, Mariner.

For the third quarter, net interest income was $150.5 million, representing a 6.8% increase year-over-year and a modest increase on a linked-quarter basis.

The positive impacts of our strong loan growth and an additional day of interest during the quarter were offset by increased deposit costs, driven by the cumulative effect of recent increases in short-term rates and, to a lesser extent, the deposit acquisition campaigns Mariner mentioned.

While we still benefit from repricing in our variable-rate loan book and from higher reinvestment rates in our securities portfolio, the spread between our earning asset betas and the total funding betas has narrowed as we move further into this rate cycle.

However, cycle to date, our asset mix has driven betas higher than those of funding costs.

In the last 12 quarters since the Fed started increasing rates, our earning asset yield has expanded by about 110 basis points to 3.89% for a 63% cumulative asset beta.

During the same period, our total cost of funds has risen 62 basis points from 0.13% to 0.75% for a 35% cumulative beta.

A more tempered move in LIBOR in the third quarter compared to prior quarters [than] had reacted well in advance of rate hikes, constrained asset repricing that might have been anticipated.

The yield on earning assets increased 10 basis points from last quarter for a beta of 48%, compared to a beta of 67% in the second quarter and 59% in the first quarter.

As a reminder, about 38% of our total loans are tied to LIBOR.

During the quarter, our cost of interest-bearing deposits and total cost of deposits increased 25 basis points and 17 basis points, respectively, impacted by pricing changes in part related to the promotional campaigns as well as increased sharing arrangements with our HSA partners.

Noninterest-bearing deposits represented 33.6% of total average deposits for the third quarter compared to 34.4% last quarter.

This mix shift was driven in part by the deposit campaigns as well as by continued lower corporate cash levels.

Net interest margin for the quarter was 3.18%, down 6 basis points from the prior quarter.

Margin was impacted by the lag in LIBOR rates ahead of the September rate hike, lower loan fee income and the impact of the deposit campaigns, as well as the carry cost of excess liquidity.

In the fourth quarter, we expect some additional modest margin compression, reflecting the full quarter impact of the September deposit campaign and some excess liquidity offset in part by additional asset repricing.

However, looking ahead to 2019, we would expect some margin expansion as we put our excess liquidity to work.

Slide 14 shows the composition of our investment portfolio along with roll-off and reinvestment rates.

The average balance in our AFS portfolio decreased $139.3 million on a linked-quarter basis and the average yield increased 3 basis points to 2.16%.

During the quarter, we reinvested approximately 87% of the roll-off, deploying the remainder into loans.

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

Moving back to the income statement, Slides 18 and 19 show the composition and drivers of our noninterest income, which was $100.9 million for the third quarter, essentially flat when compared to the second quarter.

Our wealth management businesses had a strong quarter, and along with Corporate Trust and Investor Solutions, helped drive the increase in Trust and Securities Processing income.

Additionally, the Other line income was positively impacted by $1 million of increased derivative fees related to back-to-back swaps.

The bond markets continue to lag, contributing to the reduced trading and investment banking income for the quarter.

Slide 20 contains detailed drivers of the changes in noninterest expense, which on a non-GAAP operating basis, increased $3.8 million or 2.1% compared to the second quarter to $180.2 million.

Salaries and benefits expense fell by $1.2 million during the quarter, largely driven by lower medical expense.

Offsetting this decrease were increased consulting expenses related to our ongoing investments in digital channel, integrated platform solutions in our asset servicing business to support growth and other initiatives.

These expenses can be lumpy and there might be timing-related variances quarter-to-quarter.

Finally, our effective tax rate was 11.3% for the quarter and 14.2% year-to-date.

During the quarter, we recognized a discrete tax benefit of $3 million related to a 2017 provision to return adjustment.

For the full year 2018, we expect our tax rate to be between 14% and 16%.

Our segment results are included in the press release, and additional details on each of them begin on Slide 21.

In the interest of time, I won't cover these here but we'll be happy to take your questions.

That concludes our prepared remarks, and I'll now turn it back over to the operator to begin the Q&A portion of the call.

(Operator Instructions) Our first question today comes from Chris McGratty from KBW.

Mariner or Ram, on capital, the ASR that was announced last night, I'm interested in kind of the logistics of that.

I think you said 85% of the shares will be delivered.

But is there a period, given the weakness in your stock this morning and recently, that you guys could be more aggressive with the buyback in the coming months?

Chris, thanks for the question, this is Ram.

So we've entered into an agreement with the broker-dealer, and they execute the transaction for us.

So once we sign the agreement on October 29 when we come out of our blackout, it's their call really on how they go to market.

Obviously, I'm sure they'll look at the opportunities in the market today to be more opportunistic there.

But we have very little control over what price it gets executed at.

Okay.

And maybe...

And the window is over a 3-month period as well from an agreement standpoint.

Okay.

So the longest should be 3 months.

Given the capital ratios continue to be all the -- you talked about Scout and tax reform, how should we be thinking about targeted capital levels for the company?

And kind of -- I'm wondering if you can kind of reconcile the capital priorities.

I think in the past, you've talked about M&A but I'm wondering if Mike leaving and the stock where it is, does that prohibit you looking at deals right now?

Or is that something you might consider?

Well, so -- this is Mariner.

I'll try to take that at high level, you kind of mixed some things up in there by including Mike.

But I think the message would be the same related to what we've been saying about use of capital.

I mean, what we're doing with the ASR would be included in that.

We continue to look for opportunities.

I think on the banking front, the way the market dynamics and valuations are, it can be a challenge to find and do a deal in the banking industry right now.

However, we do continue to look and we're also looking in the other areas of focus in our fee-based businesses.

And so, I guess, it'd be the same story about how we want to use our capital as it has been in the past, put it to work in loans, do acquisitions, look at opportune times to take action with our stock, et cetera.

Just to add...

Okay.

And just the comfort on the tangible ratio, maybe Ram, what's the range you guys are thinking that you need to operate in?

We haven't disclosed specifics.

But let me go back to your earlier question, right?

So the ASR, if executed in full, will have a 35 basis point impact on our capital ratios.

And if you look at our capital ratios a year back before the sale of Scout, it used to be 100 basis points below that and we still have a lot of potential on the organic growth side.

So no specific targets disclosed.

The tangible capital ratio is a little bit more difficult to manage because of the AFS portfolio we have and the mark-to-market adjustments that go with it.

But it's a secondary metric that we focus on, we focus on total risk-based and the regulatory capital ratios.

And the ASR does give us immediate EPS impact too, so.

Correct.

Sure.

Sure.

Thanks for the color.

If I could add one more.

Mariner, in the past, you've talked about operating leverage being a focus.

I guess maybe going through the moving pieces of the P&L and kind of factoring in the impact of Scout, is positive operating leverage still the goal for the near term?

And I think in the past you've talked about the efficiency ratio at or around 70%, I'm just wondering if there are any updates there.

Yes.

So absolutely, operating leverage is something that we focus on, we laser in on.

We -- from 1 quarter to the next, there's a lot of noise from time to time.

But over the longer haul and over -- we absolutely are focused on operating leverage, and you should expect to see that from us in future periods.

I can't remember what the other -- if there was another question there.

Just as it relates to the efficiency ratio.

The efficiency ratio, yes.

So again, I mean, obviously there's a relationship there, so we will -- we think there's room to continue to improve on our efficiency ratio as well.

Our next question comes from Nathan Race from Piper Jaffray.

Ram, I appreciate your comments on the margin for the fourth quarter.

And just curious, to what extent do you guys expect to continue some of the deposit-gathering promotions that you guys enacted during the quarter?

And to what extent do you expect that to kind of impact the margin as we move into due 2019 as well?

And I'm just curious if your 2019 guidance for the margins to expand assumes any additional Fed increases.

Yes, this is Mariner.

I'll take a first stab at that, and the 2 gentlemen can jump in if they want to add something.

But I think it's important to recognize that from our comments, obviously, the campaign was designed for a couple of reasons.

One, to make sure that we continue to be out in front with funding for our expected loan growth.

Second, we are investing in our retail business, and I expect to see that business expand, grow, out-solds, cross-sells, et cetera, in '19 and beyond, with our investment in Abby Wendel and the technology investments we're making, et cetera.

This campaign was on the forefront of that to return some of our muscle memory as we rebuild that business.

It was a very successful campaign.

We actually ended up raising more money than we expected.

We raised approximately $1 billion, and it was more than we expected.

So we think that's a good thing given our expectations for loan growth as we look into '19.

We do not have any other campaigns currently planned.

We'll take that in stride as it relates to loan growth and other dynamics in the economy.

I also might add -- I think it's important, as I read some of the notes from last night, I think there's, in my mind, a little bit of misunderstanding as it relates to the analyst community and what takes place with deposit betas.

This -- our deposit beta is actually better this cycle than it was in 2004.

In 2004 through third quarter of '07, we got to a 59% beta, and the Fed went from 1% to 5.25%.

This current cycle, we're actually running behind that at 43% beta.

And if you were to include DDA, which we do, so what we think about it, it's actually a 29% beta.

So we believe this is a natural part of the cycle, natural to the business.

We're a little confused why everybody's so focused on it.

But -- so we're actually pleased with the way that's going.

We also are a little bit more commercial than a lot of our peers are, we have a larger deposit -- retail deposit base.

So at retail banks, it's going to lag in their deposit beta increases over a commercial bank.

We're going to be out front a little bit.

So as we go into the fourth quarter, the deposit beta impact from the campaign, we're going to see -- still see a little bit of that.

But as Ram said, as we look into '19, with the additional raises from the Fed, we should see margin expansion again and -- through both what's happened on the asset beta side, which we also don't seem to get that across when we talk about the successes we have with our asset beta and how short our repricing is in our loan book.

So we're pleased with the way the deposit beta is going.

We think it's natural and it's actually better than the last cycle, and that's how we look at it.

Okay.

That's great color.

I appreciate that.

Just kind of changing gears a little bit and thinking about the trading and Public Finance line.

Obviously, you know that business has been going through some structural challenges in the wake of tax reform and so forth.

So just curious how you guys are seeing that business trend in the fourth quarter and has kind of stepped down, and fees we saw this quarter is probably a good run rate to assume going forward.

Well, high level, I'd say that we're certainly suffering there along with all of our peers that are in the business.

We see that as a positive looking forward because it is kind of latent earnings power for us on a year-to-date basis, Ram, what are we...

$6 million year-to-date.

$6 million year-over-year.

And so we've been investing in that business.

We've invested in people.

We've invested in technology.

We've opened several offices.

We expect that when the interest rate environment is more conducive to a higher -- to a different trading environment.

We will capitalize and be a leader in that space when that comes.

So we look at that as positive future earnings, latent earnings power.

But our numbers, as we look at our peers, are just right in line with the rest of the group that has a trading desk.

Our next question comes from Matt Olney from Stephens.

Ram, you mentioned the LIBOR headwinds in the third quarter, and UMBF's are now alone with that respect as far as LIBOR headwinds.

Have you looked to see how much of that drove your margin compression in the third quarter?

I'm just trying to figure out how much of your margin compression was from LIBOR versus liquidity bill?

I would say it's a couple of basis points from the lag LIBOR, a couple basis points from the excess liquidity.

So if you look at our period-end balance sheet, on a Fed Funds sold position, we have close to $500 million of excess liquidity.

So the carry cost of that relative to where our margin, Fed Funds sold on an average yield about 2 20 versus margin of 3 20.

So it's 2 basis points each on the liquidity and lag LIBOR rate.

I'd also add on the margin compression that our loan growth was back-end loaded also in the quarter.

So we didn't really benefit in the third quarter from our loan -- from the loan growth.

Got it.

Okay, that's helpful.

And then I guess for Mariner, it seems like UMBF has a long history of being a grow fees financial institution?

And I'm just curious longer term in the next several years, I'm curious which businesses you are mostly investing in today?

And which business are you most optimistic about at UMBF?

Well, we're optimistic about all of them and that's -- and we're investing in all the businesses that we're in right now.

I would say that as far as being a growth company, we did have industry-leading loan growth, we have for some time and expect to in the future.

So being a commercial bank with industry-leading loan growth, that's certainly, obviously, a centerpiece to our growth story.

We are very excited about our fund services business, about the prospects there, and we are -- on a revenue basis over the last year, we're up there.

We're being -- we've been investing in systems there right now, so we're -- we just signed a contract to sort of upgrade our sort of operating and our go-to-market platforms in our fund services business to give us a competitive edge in that business over the next couple and full years.

And so we're excited about that.

We've invested in sales force.

And on the Corporate Trust side, we are an industry leader there and continue to look for consolidation opportunities.

As it relates to previous questions about M&A., we'd love to continue to find those consolidation opportunities.

I mentioned our consumer business and the investments we're making there, both in leadership and in technology.

So through our technology road map, we expect, by summer of this coming year, to have a really upgraded platform for our retail customers.

Our card business, we're investing in our card business, which we're very excited about.

Gosh, Jim Rine is on the phone, he might add to some of that.

I would just say, we are recognized by Visa as one of the fastest-growing commercial card companies in the country.

And we're continuing to add salespeople as well as investing and upgrading our platforms, and we're seeing the results in that space as well.

Okay.

That's great commentary.

And...

I might have missed a few, I mean, we are doing a lot of things here.

But we're pretty bullish on everything we're doing.

Just taking a step back, Mariner, you've got the momentum in loan growth.

I think fees now represent around 39% of revenue.

Is it fair to say that fees as a percent of total revenue may continue to decline given the near-term headwinds of the next year or so?

There's a couple of things, I think, to note there.

You got to make sure you recognize that the percentage coming down has a lot to do with the interest rate environment changing and the improvement in net interest income as, really, the biggest driver in drawing down our noninterest income to total income as a percentage.

So that's the biggest driver.

And then, of course, selling Scout had an impact on a short-term basis.

We fully expect through the investments in our institutional banking, through bolt-on acquisitions into our fee businesses, through investing in our card business, through investing in our consumer business, we fully expect to continue to grow in future periods, our noninterest income and accelerate it from where it is today.

And it will always be -- we believe and our focus on making sure it is a differentiator to our investment thesis for you all as investors.

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

So I guess, Ram, if you can maybe quantify for us like the level of margin compression given the liquidity bill lag LIBOR this quarter, if you expect in 4Q and going forward, like if there's a rule of thumb in terms of how you think about margin expansion relative to additional Fed rate hikes, that would be helpful.

I'm not going to get into that, Ebrahim.

And as I've said, I'll just keep it at the top of the -- it's hard to predict what LIBOR rate will do, much less what the Fed might do, right?

So what I expect is for some additional compression because of the excess liquidity.

And it also depends on the pace of us investing that excess liquidity that we have.

A lot of the bonds that we're buying tend to be more municipal.

They have a longer date to settle or buying TBA bonds on the mortgage-backed securities, they also take a little bit.

So predicting quarter-to-quarter margin movement is going to be a tough exercise.

To an earlier question, we do have 75 basis points of additional rate increase modeled in our published estimates out there.

We do contribute to Bloomberg on that one.

So our internal models are consistent with that thinking that we would another 75 basis points.

And without doing another campaign, which we don't expect to at this point, we would get the lift in '19 against that money we raised.

Got it.

And the loan-to-deposit ratio, any thoughts around whether that can lift higher, maybe you don't need to run as many campaigns looking out into next year?

Or given your muni for deposit exposure-led security requirement, et cetera, you need to be around the 70% mark?

We don't have a magic number.

We're comfortable going higher, and that's probably about all I would tell you.

We have been rotating investments into loans, we've been doing that.

Our investment portfolio is smaller, we will continue to do that.

We don't see any need to do any large deposit campaigns or anything at this point.

But that's all based on projections and projected loan growth and making sure that we're building and growing this company for the long term, and that managing it from 1 quarter to the next.

Deposits are very important.

Long term, it's the raw material of our industry, and we don't ignore it.

And we are building it for the long haul.

Also that money we raised, 90% of it is new money to the bank.

So we're very pleased with that raise, and we're not afraid to do it if the loan growth is there to support it.

And you're right.

Thank you for lumping the HTM bonds, the loan-to-deposit ratio, right?

So it's 78% when you include the HTM bonds in that ratio as well.

And those are -- those tend to look like loans or they behave like loans more so than just bonds.

Good enough.

Noted.

And can you just step back, Mariner, so I get it, you like looking out longer-term in terms of how you're managing the bank.

I'm trying to reconcile your bullishness around the bank with the fact that the stock is where it was 5 years ago.

And from a metrics on ROA/ROE we're below peers.

Like how would you articulate sort of the outlook for UMB, both in terms of like return improvement, which would drive stock performance from a longer-term perspective?

Like should we expect any material change in the return profile of the bank?

Or is it that the bank should hopefully hold up better during this downturn and that's where the outperformance comes from?

Well, I guess, I'm not going to try to make sense of why our stock is trading where it is for you because I don't understand it myself.

But I guess what I would say about our expectations for returns, actual returns, not stock performance returns, which I don't understand right now, I would say that we still plan to do all the same things from a standpoint of return on equity, efficiency ratio, operating leverage.

We expect to be a leading or a strong performer, I guess, and using those metrics against our peer group.

We expect that from ourselves.

And whatever -- you'd have to tell me what's driving our stock price.

There's a whole lot of talk about deposit beta when you read analyst reports and such, which I've tried to alleviate in my comments, which I don't really understand those comments or that misunderstanding of how our industry works.

So I don't really have anything else to add.

I think we're actually very pleased with the results -- we're very pleased with our results in the quarter, so it's hard to be [the same].

Yes, my question was more driven by when you look at the ROE/ROA, we had about 20 to 30 basis below the group.

And as you just mentioned, we want to be in line or better than that group.

And I was wondering, not from a stock but from an ROE/ROA perspective, is there a line of sight of when we can get in line or probably even better than the peer group?

Well, the peer group is going to be moving around.

I mean, you tell me where everybody's supposed to be.

But we have an ROA that's north of 1% and ROE that's north of 10%.

I mean, I don't -- where we -- I guess, Ebrahim, we're pretty pleased with our results and we're going to keep improving against them.

That's all that I got for you.

Our next question comes from David Long from Raymond James.

You guys seem pretty optimistic on your loan growth opportunities.

And maybe just if -- could you provide a little bit of color on 2 aspects there.

One, what you are specifically hearing from customers and do you feel like they're incrementally more positive or willing to invest in their business?

And then secondly, how is the -- how are nonbank institutions competing with you guys, and is that a risk?

This is Jim Rine.

We've had -- our customer base is quite positive, actually, throughout our footprint.

We have had -- our contractors have strong backlog that leads out to another 18 months.

We've seen growth in most of our -- the various industries in which we lend money.

As far as the second part of your question regarding the FinTech or the nonbank competitors, in the CRE space, we've seen the life companies become more aggressive again.

But outside of that, as far as the FinTech lenders in the space, in the spaces in which we deal, we have not seen that become a real issue other than in the smaller consumer space.

And most of those players are consumer-oriented and they get a lot of truss but have very, very little impact on the industry at this point.

We do pay attention to them but we're not losing any business to them.

Okay.

And the second question, as it relates to your HSA deposits, it looks like growth there again was pretty good.

What are the costs of those deposits relative to the rest of your deposit base?

And what has been the deposit beta, if you can disclose what it is, on just that part of the deposit base?

We -- so we don't disclose that because, for obvious reasons, it's a competitive space and competitive business out there.

So we don't disclose that.

To date, I haven't seen much movement there.

What we've said on previous calls and we'll say again today, is we do expect movement there over time because of -- there are -- our business is wholesale and we've got larger relationships, and we expect that there will be some upward deposit beta pressure at some point, which we haven't really seen to date.

And the business is strong...

And I would just say, and to echo what Mariner said, the reminder of our model being wholesale, you'll see the growth in those accounts in the latter end of the year in the fourth quarter, based on when the enrollment season starts.

And our final question today comes from John Rodis from FIG Partners.

Most of my questions have been asked and answered.

But Ram, just back to the ASR, you said you signed the agreement on October 29, is that correct?

Well, the agreement goes into effect when our blackout ends, which is October 29.

And the broker that we've engaged has a 90-day window, they could grab it up earlier if the opportunity persists.

But that's the earliest they can go to market to buy this.

The strike price to us is based on -- we lap over the 90-day period or earlier if it terminates earlier.

But they initially deliver 85% of the shares, right?

So does that mean you get roughly 85% of the shares on October 29?

You're right.

That's correct.

Okay, okay, okay.

And then Mariner, just one follow-up question for you on loans.

I think you sort of said that maybe payoff activity, you expect it to be a little bit higher in the fourth quarter, is that correct?

Well, I would just -- I guess, so you mentioned what the history has been, which is 3.4%-ish, 3.2% to 3.4%.

And in the third quarter, we're slightly lower than that.

So we were -- I guess, I'm -- it's really hard to predict what payoffs and paydowns are going to be.

But given the way the third quarter was, we would expect it to be slightly higher.

Don't have any knowledge to that effect but just based on our history, it would be slightly higher, given where third quarter was.

Okay.

So you haven't seen any elevated levels of payoffs in the first couple of weeks of October, I guess, is what I'm getting at?

No.

And ladies and gentlemen, at this time, in showing no additional questions, we'll conclude today's question and answer session.

I'd like to turn the conference call back over to Kay Gregory for any closing remarks.

Thank you for joining us today.

This call can be accessed via replay on our website.

And 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 good day.

Ladies and gentlemen, that does conclude today's conference call.

We do you thank you for attending today's presentation.

You may now disconnect your lines.