UMB Financial Corp (UMBFO) 2026 Q1 法說會逐字稿

Thank you for standing by. My name is Rebecca, and I will be your conference operator today. (Operator Instructions)

I will now turn the call over to Kay Gregory, Investor Relations. Please go ahead.

Good morning, and welcome to our first-quarter 2026 call. Mariner Kemper, Chairman and CEO; and Ram Shankar, CFO, will share a few comments about our results. Then we'll open the call for questions from equity research analyst. Jim Rhine, President of the Holding Company and CEO of UMB Bank, along with Tom Terry, Chief Credit Officer, will be available for the question-and-answer session.

Before we begin, let me remind you that today's presentation contains forward-looking statements, including the discussion of future financial and operating results, as well as the other opportunities management foresees. Forward-looking statements and any pro forma metrics are subject to assumptions, risks, and uncertainties as outlined in our SEC filings and summarized in our presentation on slide 50. Actual results may differ from those set forth in forward-looking statements, which speak only as of today. We undertake no obligation to update them except to the extent required by securities laws.

Presentation materials are available online at investorrelations.umb.com and include reconciliations of non-GAAP financial measures. All per-share metrics refer to common shares and are on a diluted share basis.

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

Thank you, Kay, and good morning, everyone. We'll share some brief comments and open it up for questions. We reported another strong quarter, with results well ahead of expectations. We had 10.8% linked-quarter annualized loan growth, boosted by $2.3 billion in gross production, 9 basis points of core margin expansion, driven by a 24-basis point decrease in the cost of interest-bearing deposits.

High-quality credit metrics, including 19 basis points of net charge-off and provision of $27 million, driven mostly by the $1.4 billion increase in period-end loan balances and finally, continued momentum in our fee businesses, with strong contributions from corporate trusts, investment banking and fund services, where assets under administration increased nearly $20 billion from the prior quarter and stands at $565 billion.

I'll let Ram get into more detail around our results in a moment, but first, I'd like to address some of the headlines around the private credit industry, which appear to exaggerate exposures and risks at regional banks.Private credit has been around for years and has been and will continue to be an important part of capital formation on a global basis.

We have heard some concern that due to our varied lines of business, we may have some outsized exposures and could impact our performance. The fact is that we have negligible exposure to the private credit industry. And what exposure we do have is to high-quality and experienced operators that have diversified holdings, strong credit structures, and low leverage at the fund level, all underwritten to low loan-to-value metrics.

We are proud to partner with a few of the strongest players by providing asset servicing solutions to their funds. This quarter, we've added additional disclosures to our IR deck to explain what private credit means to us, and more importantly, what it doesn't. First, on slide 31, we have outlined our total NDFI lending exposure, providing additional color to the standard call report categories.

As you can see, our total NDFI exposure is $2.6 billion, or just 6.6% of total loans. Within that total, approximately $300 million, or less than 1% of those loans are subscription lines, which carry an even lower level of risk. As I noted earlier, these private credit funds are primarily secured by diversified holdings of senior secured loans, have strong borrowing basis, minimal exposure to at-risk industries, low leverage, and they have continued to see strong gross inflows.

Just under $1 billion of our NDSI loans are to private equity funds, with the largest portion of these being subscription lines, also known as capital call lines. As you can see from the definition included on page 31, subscription lines inherently carry even lower risk to lenders as they are short-term lines that are repaid with funds received on capital calls made to investors who are contractually obligated to contribute the capital to the fund upon request.

The slide gives other detail and characteristics of our high-quality portfolio, including the fact that over 98% of NDFI balances are past rated. As you have heard us say before, lending to NDFIs is not a new phenomenon and has long been a part of our C&I portfolio with minimal historic losses.

Turning to our fee income exposure to private credit funds, we've added some additional detail on asset servicing and custody slide on page 36. Approximately $43 billion of our more than $565 billion in assets under administration is related to private credit, representing just 7.6% of the total. More significantly, the AUA tied to private credit funds increased nearly 5% from the end of the prior quarter.

The related annual fee income totaled approximately $13 million, or just 1.6% of annualized first quarter fee income. And similarly, any deposit impact from these funds is immaterial.

Moving on, our capital levels continue to build with March 31 common equity tier one ratio of 11.16%, a 20-basis point improvement from December. While our capital priorities remain the same, with organic growth at the top of our list, our board approved an increased share repurchase authorization, and as you can see in our earnings release, we opportunistically repurchased approximately 178,000 shares in March. We will continue to remain opportunistic in the second quarter.

Finally, our results this quarter drove positive operating leverage at 6.4% on a linked-quarter basis, a 155-basis point improvement in operating ROATCE, and an operating efficiency ratio of 47.6%. We continue to expect positive operating leverage for the full year of 2026, even with the impact of lower expected contractual accretion benefits. I'm extremely pleased with the performance of our newer markets and I'm excited to continue the momentum throughout the remainder of this year.

And now I'll turn it over to Ram for some additional detail on the drivers of our first quarter results. Ram?

Thank you, Mariner. The first quarter included $51 million in net interest income from purchase accounting adjustments, $15.1 million of which was related to accelerated accretion from early payoffs of acquired loans. The benefit to net interest margin from total accretion was approximately 33 basis points.

On slide 10 is the projected contractual accretion, which is estimated at approximately $71 million for the remainder of 2026 and $79 million for 2027. These totals do not include any estimates for accelerated payoffs.

Slides 12 and 13 include some key highlights and drivers of our quarter-over-quarter variances. Non-interest income for the quarter was $204.8 million, an increase of $6.4 million or 3.2%. Drivers included strong performance from both fund services and corporate trusts, increased deposit service charges, and investment banking revenue, where municipal trading income increased by 39% from fourth quarter levels.

Within the other income category, we had $5.9 million in non-recurring gains on previously charged-off HCLF loans, a variance of $5.4 million from the fourth quarter. And we had a $3.8 million decline in COLI income, which has a similar offset in reduced deferred compensation expense. Adjusting for investment gains, the non-recurring items that I noted, and mark-to-market on COLI, our fee income for the first quarter was approximately $198 million.

On the expense side, we had just $4.4 million in merger-related costs compared to elevated levels in the prior quarter when the largest portion of contract termination and conversion expenses were recognized. Excluding the impact of one-time costs, operating non-interest expense was $375.4 million, a reduction of 4.2% compared to the fourth quarter.

Largest drivers included a reduction of $5.9 million in salaries and benefits expense related to lower bonus and commissions accruals following strong fourth-quarter performance, and a $3.9 million reduction in deferred compensation expense, partially offset by seasonal increases in payroll taxes, insurance, and 401(k) expense.

Compared to the guidance that provided last quarter, the favorability in expenses was driven by timing of marketing and other spend sooner than expected synergies realized on contract terminations and deferred compensation expense.

Looking ahead, we would expect second quarter operating expense to be in line with the current consensus expectations of $383 million. The increase from first quarter primarily reflects one additional salary day as well as the impact of our merit cycle that went into effect in April.

Turning to the balance sheet, driving the 10.8% annualized growth that Mariner mentioned was 22% annualized growth in average C&I balances, led by strong activity in Texas. Other regions, including California, St. Louis, Colorado, and Utah, posted double-digit quarterly growth. It's great to see the momentum building in several of our acquired regions, along with Utah, where we opened our first physical bank location in December. Our pipeline remained strong heading into the second quarter.

Average deposits, as shown on slide 25, were essentially flat in the first quarter as the 10.4% linked-quarter annualized increase in DDAs was largely offset by lower interest-bearing deposit balances. We added a metric this quarter that adds customer repurchase agreement balances, which are deposit surrogates. Average customer funding increased $702 million or 1.2% from the prior quarter and 4.8% on a linked-quarter annualized basis.

This balance remix, coupled with the residual impact of the rate cuts in the fourth quarter, drove our cost of total deposits down by 19 basis points to 2.06%, while the cost of interest-bearing deposits declined by 24 basis points to 2.79%. We realized a blended beta of 70% on total deposits for the quarter, driven by a favorable mix shift, as well as continued on performance for pricing on our soft index deposits.

Reported net interest margin for the first quarter was 3.38%, excluding the 33 basis points contribution from purchase accounting adjustments, core margin was 3.05%, increasing 9 basis points sequentially. The primary drivers of the linked-quarter increase in core net interest margin included benefits of a favorable deposit mix shift and repricing of deposits following the reduction in short-term interest rates and the positive impact of day count in the quarter, partially offset by loan repricing and lower loan fees and the impact of liquidity balances and a lower benefit from free funds.

Relative to the first quarter adjusted margin of 3.05%, that excludes accretion, we expect second quarter margin to be relatively flat as the benefits from fixed asset repricing are offset by day effect and stable deposit costs and mix shift. I will add my typical caveat that actual margin and net interest income will depend on the levels of DDA growth and excess liquidity, any software movements and mixed shifts within the lending and funding portfolios.

Finally, our effective tax rate was 21.1% for the first quarter compared to 20.3% for the fourth quarter. Looking ahead, our tax rate is expected to be between 20% and 22% for 2026.

Now I'll turn it back over to the operator to begin the question-and-answer session.

(Operator Instructions)

John Ostrom, RBC Capital Markets.

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

I'll take that first, Jim, feel free to add anything. I think this is a good news story, which is that I don't really have anything new to tell you from being in the seat for 22 years. It's the same thing every quarter for 22 years, which is the next quarter looks pretty good, and it is not seasonal at all. And we continue to book loans based on our strategy, bottoms-up capability, capacity of the officer, market share opportunity in the markets that we're in and in the verticals we're in. And there's a very long runway for us across our entire footprint, including some new, very big markets like California. Anything Jim?

The only thing I would add is it continues to be strong and it's from a cross-section from all markets.

Yeah.

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

No, actually, I would say that the anticipated payoffs and paydowns in the first quarter actually materialized, so what we expected to happen happened. And it can bump around. The reality of it as we look forward is we're going to be higher for longer, instead of seeing rates come down, we're not likely to see as much payoff paydown for the rest of the year if that's going to be the case, which seems to be the prevailing thought that we're probably sticking where we are. If not, maybe -- well, we'll just say we don't anticipate any rates coming down anytime soon.

Okay. All right. Thank you very much. Appreciate it.

Thanks, John.

Jared Shaw, Barclays.

Thank you. Good morning.

Good morning, Jared.

Hey, just looking at the fee income lines, you had some really good strength there this quarter. How should we think about fee income going out for the year and for the second quarter, sort of building off of what we saw this quarter.

Yes, I mean, we don't really get -- I can't give you any guidance on expectations for growth in fee income other than the point backwards. We continue to expect the same kind of performance from the team. And the pipelines across all of those businesses remain very strong to include the two that drive it really for our business and have for some time, which would be fund services and corporate trusts.

And then the addition, we've been giving you a little color over the last couple of years of the success we've had with our private investment group. And we expect to continue to see exits and successes periodically there as well. So, yes, I mean, if expectations continue to be without giving you any specific guidance, as strong as they have been, pipelines are good, activity is strong, we're taking share across the board in all those businesses.

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

Yeah, I think what we intended, the message intended with that is that corp trust is a very local business, and it's a brand business. So I think the brand extension, having offices and signs and visibility across California and other places, and places for lawyers to meet together in offices and things like that. It is brand extension and pushes the business further. It's hard really to point directly towards Heartland specifically, but we know that that brand extension with those locations and stuff is helpful.

And we've also done a list out. We talked about that in Glassport or Wilmington Trust in California. I would say it's -- I call it mostly brand extension. It helps.

This is Jim, Jared. We, in what matters to mention, we continue to add to the team in all markets. So we look for that to do nothing but grow in the Heartland markets that we inherit it.

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

So I'm going to take that. Ram can jump in after me. But I think, as we've said many times, there's a couple of dynamics for us. Oftentimes, we try to guide you to thinking about averages rather than points in time. And that's because of a lot of the episodic nature of all of our institutional businesses and some of our larger corporate business with things such as dividends and tax payments and all those kinds of things that can happen from quarter to quarter.

So that's true, but also, I mentioned a moment ago, picking up Wilmington Trust's team in California, adding team members across the country in our New York office, in our LA office, et cetera, in corporate trusts and the momentum we have with fund services. The addition of more clients in between those episodes allows the base to grow over time. So the expectation, without knowing, is that that DBA baseline grows over time due to all the success and momentum we have in client acquisition that takes place in between those episodes.

Okay, thank you.

Thanks, Jared.

Brandon Nosel, Hovey Group.

Hey, good morning, everybody. Hope you're doing well.

Good morning.

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

Yeah, I'll take this. And just as a bit on our preliminary read, it's a net positive for us. Obviously, a lot of relief from risk-plated assets. We're still studying it going from 100% to 95% on some of the commercial relationships and LTV-based assignments on residential mortgages. And the negative is just the inclusion of AOCI. So I still think it's a net positive for us in terms of what it means to our CET1, our total capital ratios.

That, I would just add, with the addition of Heartland and how efficient we've become, we're accreting capital very quickly on top of all that. So it's just a beautiful position to be in. We're in a position to have likely more flexibility with capital. All of the things that Ram just said, along with our ability to accrete and grow capital, it's going to give us flexibility as we look into getting closer to $100 billion. So we feel well positioned. And then again, we also believe because of the quality of our assets, we benefit from likely being able to support lower levels of capital than our peers anyway long-term.

All right. Fantastic. It'd be pivoting to more of a top-level question on just the overall return profile, pretty meaningful step-up in ROA over the past couple of quarters. And I guess that things can move around period to period. But just conceptually, are we at a level that you can more or less maintain going forward? Or are there environmental pressures that kind of ease that somewhat?

We expect to continue to perform, Ram, I don't know if you have any other color?

Yes, we don't give long-term guidance on our growth targets, but even if you exclude some of the purchase accounting things that go through our income statement, if you exclude that, our performance has been increasing because of strong operating leverage, good balance sheet growth, good margin trajectory. So we feel pretty good about it. And then just to add to your previous question on capital, we still have almost $600 million of pre-tax accretion left to take through our income statement for the next two, three years, right? So that's $6 of EPS and close to 100 basis points of capital.

So that's on top of the regular outperformance that we see in our legacy operations before all the purchase accounting benefits. So we're pretty excited. So it's the denominator that's growing at a fast flip. And so that's why you saw what we did this quarter, including doing some buybacks before our quiet period ended. Obviously, we had $1.4 billion of loan growth, and you've heard the comments about the pipeline looking pretty strong. And then we will be more opportunistic about looking at our dividend and other opportunities.

I would also just add, as a reminder, one of the reasons we did Heartland was to gain strength in our retail business, which we've doubled our branch network and doubled our granular low-cost deposits. And that is a really nice leverage point going forward for us. Our retail business was a bit more of a drag on those profitability metrics. And that has gotten a lot more efficient, and we expect it to continue to do so as it grows.

Okay, fantastic. Thanks for taking my questions.

Thanks, Brandon.

Casey Hare, Autonomous Research.

I wanted to touch on the NIM outlook from the loan yield side of things, just where are new money yields versus that 6.52% level in the first quarter?

So you've got to look at our loan yields excluding accretion, right? So if you look at one of our pages, we show. That the loan yields are close to just 6%, under 6%, if you exclude the accretion benefit from loans. And for the first quarter, our production yields are somewhere between 6% and 6 .25%, so they're pretty aggressive on new money coming in. And then there's the whole fixed asset repricing that happens within the loan portfolio as well. We have close to $3 billion of loans that have, some 5% rates that are repricing higher in today's environment.

Okay, great. Yeah. I understand that (inaudible). And then apologies if I missed this on the expenses, very good discipline here in the first quarter. Just I guess some color on what drove that $10 million of surprise versus your guidance. And with the guide being up in the second quarter, what are some of the drivers there? Because I think there was some seasonal roll-off into the care. So just a little color on what's going on with the expenses.

Yes, some of it was just I explained it in my prepared comments, but I'll beat it. Some of it was just timing of when we expected some of the marketing spend to happen. So that didn't happen as I had anticipated in the first quarter when I gave my guidance. The other one is we also did a great job doing the expense saves from some of the contract terminations. So they happen sooner than what would be expected. That was part of our $385 million to $390 million guidance that I gave last quarter.

And then the step-up in the second quarter is one more day, and then it's the merit cycle that goes into effect in April for our associate base. So those are the two drivers that take $375 million. We also had an expense credit, if you will, of $3 million from our deferred comps. So if you add that, our first quarter baseline is more like $378 million, and what I guided to was about $383 million that seems to step up because of the merit cycle and one more day.

Got you. Thank you.

Thanks, Casey.

Janet Lee, TD Cowell.

Good morning.

Good morning, Janet.

On deposits. I want to better understand the reason for the decline or the muted deposit growth in the quarter. I thought 1 was -- there's a seasonal public fund inflows and even if I look at it on an average basis on page 25, I see commercial balances decline, although other parts have been growing. So I just wanted to see whether this is just timing or seasonality or whether there was something else that attributes to somewhat muted deposit growth for the quarter?

Yeah, thanks, Janet. I tried to address that a moment ago. It's complex, so I get it. We have so many lines of business that make it harder to understand. The reality, so how we like to describe it for you is that you need to think about it on average as a set of point in time anyway in general, and that we have a lot of episodic stuff that goes through a lot of those business lines that you see on that page -- is that 36, 35?

25.

On 25, most of those businesses, other than public funds, business seasonal deals, so that's a drawdown in the quarter because of tax payments and such. The rest of them are more episodic. And so that's why you have to think about averages. And I also like to point to 42, because you really need to think about. What's happening to our deposits over time, not even just averages for a single quarter.

We have a very long-term track record of adding clients. So in between on a quarter-to-quarter basis, you can see tax payments and dividend payments and putting money to work and all those kinds of things that can kind of bump things around a little bit. But you really need to think about kind of multiple linked-quarters and kind of year-over-year growth and what we're able to do as a company.

And that's the way I think about it. That's the way I would like to think you all should think about it. What is our long-term ability to grow deposits? And we have an exceptional deposit-generating machine. And so that's the way I would look at it. And so there's nothing -- I guess what I would end with is there's nothing to pick up from at the end of the quarter. It's just business as usual, business activity, client account is good, client account is growing, nothing to read into with those numbers.

It was not (multiple speakers) in a nutshell, we did not lose any business. Yeah.

Great. Thanks for the color. And you've already touched on it earlier on total fees and really appreciate all the color you gave on the private credit exposure on slide 36. So this means that you're, at least from either deposit or for the fee perspective on the trust and security processing fees, which have been growing at a very strong pace, you're not seeing any disruption to that flow and the trajectory of that line item should just be continued growth since you're not really seeing any outflows on AUA and the fee income side of the business. Is that a fair way to put it?

Yeah. That's absolutely correct. And one of the things I think is really important to know about this business for us is from time to time, investors will ask, I'm going to take you down a little history lane here for a second. There was a time when hedge funds were leading the way, and as you're all aware, hedge funds became out of favor. And during that same time, we got the same set of questions. Oh what's going to happen to your assets under administration as the hedge fund business slides away?

Well, the answer to that is private investing is still leading the way, and so with our business, basically, as you go from hedge funds to private equity and private within private equity intervals come out, and that's a pop popular vehicle, then private credit comes along and then private credit has you know this this conversation that's taking place with private credit It doesn't mean all this money goes to public investing. It means it redistributes back through the other verticals and private investing.

So we are the benefit -- beneficiary regardless as that money moves around within the private and that investing universe. So we have benefited handsomely over time, regardless of which one of those verticals is accumulating capital costs.

Got it. Thanks for all the color.

Thanks, Janet.

Nathan Race, Piper Sandler.

Good morning, everyone. Thanks for taking questions. Just going back to the capital discussion, to your earlier point, if you're generating a lot of capital internally just given the profitability profile and you obviously eclipse your CET1 target this quarter and just given that the capital is really up to strong clips, even with double-digit balance sheet growth. How are you guys thinking about using the buyback authorization as more of a kind of a continuous tool to manage excess capital? I know it's been more episodic in the past, but I'm just curious how you're thinking about buybacks as more of a kind of consistent component to excess capital management.

Yeah, I'm going to repeat myself here. Sorry, Nathan. We have a long-tested philosophy around that, which is, as long as we're able to do what we've been able to do and expect to continue to do, the first and highest best use of our capital is put it into loans, and we're very successful at it. We don't see that fading away. We've got an excellent team, a big, deep pipeline. We've got long tenured associates, big new markets to pursue, having lots of success. Really across the board, Wisconsin for us was on fire, Minneapolis has really turned on, California is doing great, New Mexico, I mean, I could go on and on.

So the new markets are really performing and just we're kind of early days getting the benefit out of the new markets. So I think they're not even operating at their highest level. So first and foremost, loans and then. Then it's the combination of the other capital use is based on lots of variables, right? What's -- how's our currency trading within all the other currencies and what's going on in the economy? M&A, we still think it makes sense for us to tuck in acquisitions that meet our test for a low-cost granular, under-levered deposits, well-run, smaller banks that fit into the markets we're already operating in.

So that fits. That's investing in the business, so that would probably be next. And then the next two on the list are going to be buybacks and dividends, and we'll be opportunistic on the -- ss we have been, we'll be opportunistic on the buyback side. And our expectation on the dividend side is that you, as investors, should expect, as long as we're performing, that you should see an increase in our dividend of the year. So that's the way I think about it is we're first going to be thinking about investing in our business and then think about buybacks.

Understood. That makes sense. And maybe a bigger picture question for you. It seems like to your point, your firing off, so there's good opportunities to grow, share across each vertical and line of business. Are there any segments or businesses where, you're that's not working, where you're seeing opportunities for greater efficiency or operational improvement going forward?

Yeah, I mean, well, first of all, anybody who's not trying to leverage technology to make their business more efficient to have their heads examined, so we're always looking at ways to do to operate better and machine learning is being deployed across the whole organization, get smarter, better, faster, bolder, so we're deploying that, as we always have. I think AI is sort of an overused, misused term for basically being smart and using technology to make your business better.

But so we're looking for ways to do that all the time, and I think you'll see us do that successfully going forward. Otherwise, I would say, really, it's just making sure the sales force has everything they need and we're staying out of the way and letting our exceptional tenured team of investment business folks get out there and build our business. I mean, I think we have a really tremendous opportunity as a company to take the field of local national. So we've been using that term. We really think we can take local national from Illinois to California and from Milwaukee and Twin Cities all the way down to New Mexico and all throughout Texas. We think we can be the go-to, bank with the team that's in place and has deep pipelines.

Okay, great. I appreciate all the color. Thanks, Marner.

Thanks, Nate.

Brian Wilczynski, Morgan Stanley. Your line is open.

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

Yeah, it's just the incremental cost of deposits relative to what we can make on the asset side, right? So if you look at our cost of interest-bearing deposits in the last quarter, it was about 2.80%. We have, as Mariner said, we have very diversified funding mix and it depends on where it comes from, whether it comes from DDAs or some other verticals or interest-bearing cost or cost of deposits can vary from one quarter to another quarter, depending on where it's coming from.

So there are no headwinds in that -- in regard, I think it's the absence of tailwinds that we had with rate cuts, our internal view is there might be one rate cut maybe later this year, maybe not, and so there are no more tailwinds from that standpoint that benefit our beta. So neutral. As I said, we expect our deposit cost to be stable and some accretion on the lending side because of new money yields and fixed assets repricing.

Stable with the opportunity of outperformance on-demand deposit. And again, I say opportunity, right? So that's a possibility for us. Otherwise, it would be stable, right?

Got it. Yeah, really appreciate that color. And then maybe just on the deposit side, you had really strong growth this quarter in the corporate trust deposits. Can you just remind us of some of the drivers for that business? I know UMB has an aviation business. You have a relatively new CLO business. Can you just talk about what's working there and what the environment is right now for a corporate trust? Thanks.

Well, thank you. Well, it sounds like you could. Yes, so yes, exactly. The aviation business is on all cylinders. We have certain our CLO business is firing up really well on a national basis, so lots of opportunity there. Infrastructure spending is finally happening on a national basis. Our offices in the coasts have really started to pick up. We did this lift out, we talked about a couple times on the call already, which is allowing for -- so there's a big lift on the infrastructure side. And so it's really, I would say, across all those verticals. And to your point, there are a couple of relatively new verticals.

And I don't know, Jim, you want to add anything to it? It's really great.

Thank you, I think you can. It's really, it's also across the board, more of what we've always been doing.

Got it, really appreciate, yeah.

We're number two and number three in the country by a number of issues now. And, our coastal offices are relatively new, so I think there's a huge runway for what we're able to do out of Orange County and New York, up and down the coast.

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

Thank you, Brian.

Chris McGratty, KBW.

Oh, great morning.

Morning, Chris.

Ram, I appreciate the commitment to operating leverage this year. You think about the moving pieces over the medium term, you've got the accretion rundown, but it feels like this model is capable of operating leverage for the foreseeable future. I guess any response to that?

Yeah, I mean, that's why we've been last time, and Maren said it this time as well, right? Whether there's more private investment gains or less private investment gains, whether there's more accretion or less accretion, our job is to maintain positive operating leverage as we build scale. Some of our strategic pillars are about building scale in each of the markets, and we're doing that very selectively. And then we're being more profitable as we grow into our size as well. So definitely, this is not an environmental thing. This is always -- we want to weather all economic environments and achieve positive operating leverage that way.

We judge ourselves on operating leverage. We think that's the way to think about it. So every dollar spent should have positive leverage and this is how we operate business.

And as a follow-up, is there anything magic about the 50% efficiency? I mean, you're kind of in the low 50ws today. Kind of balancing the need for investments, the benefits from AI and that. Is there anything magic about 50%?

I would say absolutely nothing magic about 50%. As a matter of fact, we feel like we're doing really well where we are given the mix of business. Being at 47% where we are right now is like a top-of-class number for just the net interest margin shop. And so the fact that we're able to perform at 47% with all of our institutional businesses layered on top of that, we feel pretty good about that. So, no, I think there's nothing magic about 50%.

Thank you.

Thanks, Chris.

(Operator Instructions) Brian Foran, Truist.

Hey, good morning. Mariner, I definitely appreciate you led with anyone not using technology to get better needs to be examined. But I thought it was interesting you, I think you said AI is overused or overhyped or can you just expand a little bit on where you think the AI for banks is a little too much?

No, I know not too much. No, not what I meant. What I said was, I think the term is overused. I think that, (inaudible) this is a big philosophical thing. I just think, at the end of the day, AI is the use of data to run your business better and make better decisions and move faster. And it's not a new subject, is my point. And so we've -- the TV and Bloomberg and CNBC and the Wall Street Journal all really made a big deal out of it, but at the end of the day, it's the use of machine learning to get better, smarter, faster, bolder, which is not a new subject.

And so that's all I was saying. I was saying, thanks for doing too much of it or not enough of it or whatever. I was just saying, you should sure as hell be doing it, leveraging the use of faster computing and better data to make your business better, smarter, faster, bolder. So, if you're not doing that, you should be your head in your head exam. So that, it wasn't people are doing too much for not enough of it. It was, you sure as hell better be doing it.

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

Yeah, well, first I would say, I mean, I'm still surprised that somehow there was some narrative that we were going to go do some big deal. So I've never understood that, we would never give up control of our company, try to merge two management teams, give up half our board, blah, so on and so forth. We've never done that, we're never going to do that. We have a fantastic management team. And a great strategy, and I have no need to do that, no desire to do that.

So the purpose of using the term tuck-in is to help with the definition of doing a deal that's not going to affect any of that, where we can tuck it in, it can still be our management team, don't have to give up and compete with, give up half the boardroom or part of the boardroom or whatever it is and try to merge two cultures, et cetera. So that's what tuck-in's supposed to mean. And so, and again, I think our definitions are long-used, so it's kind of -- I don't understand why my long-used definitions get misused or misunderstood, but what we say is a tuck-in, so a smaller deal, and then it would be. In market or contiguous where we can leverage our people, leverage synergies, leverage brands and all that.

And really importantly for us would be granular low-cost deposits that are under levered. So that's another really important one. We don't really want to do a deal where every next dollar we lend out has to be. From acquired deposits. So we love the idea of an institution that is leverageable, that has deposits that we can put to use. And because we have the asset-generating machine, and we don't want to put that under pressure. So those are kind of the general themes, if that's helpful.

That is. Thank you so much.

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

Well, thank you, everybody. As always, we love your interest in our company and the time we spend to get to know us better. I hope that page 31 helped dispel some of the misguided understanding of what the private credit stuff means to us, less than 1% of our loans, et cetera. And we have a very long track record of being lenders that do the same thing across every asset class.

We lend the same way no matter what we're lending into. And we've got a very long track record, which you can see on 42 and 22 is where the quality is. The intersection of growth on 42 and the quality on 22, it is what we like to define as rarefied air that we live in. And we've got a long tenured team and a great track record. So I just point you to our track record, I guess, as you think about those issues. And we're very excited about the ways ahead, and we appreciate your interest.

Thank you, Mariner. And as always, if you have follow-up questions, you can reach us at 816-860-7106. Thank you.

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