UMB Financial Corporation (UMBF) Earnings Call Transcript & Summary

Hello, and welcome to the Annual Meeting of Stockholders of UMB Financial Corporation. Please note that today's meeting is being recorded. [Operator Instructions] It is now my pleasure to turn today's meeting over to Mariner Kemper, Chairman and CEO of UMB Financial Corporation. Mr. Kemper, the floor is yours.

Good morning, and thank you all for joining us today for our annual meeting, which is being held virtually for the first time, a sign of our current environment. Our first concern throughout this pandemic has been the safety of our associates, customers and communities, and I hope all of you are staying safe and healthy as we weather the storm together. After the business portion of our meeting, I'll discuss more about UMB's response and how we're here to help. At the end of my remarks today, there will be time for questions. [Operator Instructions] Even though this year is anything but typical, there is a familiar flow and theme to our conversations. Our continuity and consistency during the last 107 years has shaped who we are today. And in this time of uncertainty is when we benefit from our consistency. Throughout our history, we have endured such times by sticking to our values, working together and never losing sight of our customers' needs. This is a strategy that's served us well in the past, and I expect this situation to be no different. Now I'll move to our business meeting. The rules of the meeting are available for review through the meeting portal. [Operator Instructions] I'll now call the meeting to order. As Chairman of the Board of UMB Financial Corporation, I will preside at the Annual Meeting of the Shareholders, which is held pursuant to the bylaws of the company and written notice to all shareholders. The secretary has delivered an affidavit of mailing from our transfer agent, affirming that a notice of the meeting was duly given, and a copy of that will be included in the meeting minutes. Shareholders of record at the close of business on March 2, 2020, are entitled to vote at the meeting. First, I'd like to introduce our directors and advisory directors of UMB who are in attendance today. You'll see their pictures on Slide 5 of our presentation. We welcome our directors: Robin Beery, K. C. Gallagher, Greg Graves, Sandy Kemper, Gordon Lansford, Tim Murphy, Tammy Peterman, Kris Robbins, Josh Sosland, Paul Uhlmann and Leroy Williams. We also welcome Janine Davidson, nominee for director. Dr. Davidson brings more than 30 years of academic and civilian and military experience to the Board. She's currently the President of Metropolitan State University in Denver, Colorado. And she previously served as the 32nd undersecretary of the U.S. Navy, responsible for much of the operations and budget for the Department of the Navy. More detail on Janine's experience can be found on Slide 6, and we welcome Janine and look forward to adding her expertise to our Board. Our advisory directors include Tom Wood III; and Jim Rine, CEO of UMB Bank. I'd like to thank all of you for your service. Details about each director, their backgrounds and what makes them so valuable to UMB can be found on the proxy statement. Also in attendance at the meeting is Jeff Bierman and Brad Sprong of KPMG, our independent auditors. Although KPMG has indicated that it does not plan to make a statement, Mr. Bierman is available to respond at appropriate time in the presentation if there are questions. In addition, our Lead Director, Greg Graves; and our Chief Financial, Ram Shankar, will be available during the Q&A session. In accordance with our bylaws, I act as Chairman of the meeting, and John Pauls will act as secretary of the meeting. As Chairman, I appoint John Pauls and Megan Mercer from UMB and Ruth Brunette from our transfer agent as inspectors to receive and canvas the votes and certify the results. I request that the inspectors file their oath of office with the secretary to be included in the minutes of the meeting. The secretary has the list of the holders on record of common stock at the close of business, March 2, 2020. The list has been opened for examination for the purpose relevant to this meeting during ordinary business hours for the past 10 days. This list is available for the inspection by any shareholder during this meeting on the meeting website. The secretary will please file a copy of the list of shareholders with the record of the company. Mr. Pauls, will you please present your report of attendance at the meeting so that we may determine whether we have a quorum?

Mr. Chairman, on March 2, 2020, the record date of this annual meeting, there were outstanding and entitled to vote a total of 48,927,927 shares of common stock. I've been informed that over 88% of the shares entitled to vote are at this meeting. The shares so represented exceed 50% of the total vote -- shares entitled to vote at this meeting and thus constitute a quorum.

Thanks, John. On the basis of the secretary's report, I find the proper notice has been given and a quorum is present. Accordingly, this meeting has been properly convened. The polls for the voting are now open. All UMB shareholders that are entitled to vote at this meeting may do so online. If you have not yet voted or if you want to change your previous vote, please click on the link provided in the meeting center screen. Please remember that if you have already voted by proxy, it is not necessary to vote again. After voting has been completed on all matters in the agenda, we will close the polls, and the inspector of election will provide his preliminary report. We now move to review the proposals. The first proposal to come before the meeting is the election of directors. At this meeting, we will be electing each of the 13 directors for a 1-year term expiring 2021 Annual Shareholders' Meeting. The nominees are Robin Beery; Janine Davidson; K. C. Gallagher; Greg Graves; myself, Mariner Kemper; Sandy Kemper; Gordon Lansford III; Tim Murphy; Tammy Peterman; Kris Robbins; Josh Sosland; Paul Uhlmann III; and Leroy Williams, Jr. Information concerning each of the nominees, including professions, skills and qualifications, is contained in the proxy statement. No other nominations were received prior to the deadline established in the company's bylaws, therefore, no additional nominations may be made at the meeting, and I declare the nominations to be closed. Proposal 2, ask shareholders to approve an advisory resolution on the fiscal 2019 compensation of the named executive officers, all as described in our proxy statement. This proposal is advisory. Although nonbinding, the vote will provide information to our Compensation Committee and our Board of Directors regarding investor sentiment about our executive compensation philosophy, policies and practices, which can be considered when making future executive compensation decisions. The final matter to come before the meeting is the ratification of the appointment of KPMG as the company's independent registered public accounting firm. The Board of Directors recommends the ratification of the appointment of KPMG to serve as the company's accounting firm and to audit financial statements for fiscal year ending December 31, 2020. [Voting]

We now appear to have all the proxies and ballots, and I declare the polls now closed. The inspector of election will now maintain the proxies and the ballots and will count the votes. Mr. Secretary, will you please provide the results?

Mr. Chairman, based on the inspector of election's preliminary report, each of the nominees for director received more than 96% of the votes cast in favor of his or her election and has been elected as a director of the company to serve for 1-year term that will expire in 2021. The resolution on an advisory basis for the compensation of our named executive officers for fiscal 2019 received more than 96% of the votes cast in favor of the proposal and has been approved. Finally, the ratification of the appointment of KPMG as the company's independent registered public accounting firm received more than 99% of the votes in favor, and the appointment has been ratified. We will file a final report of the inspector of election with the records of this meeting. We expect to report the results of the voting on a Form 8-K to be filed with the SEC within 4 days of this meeting.

Right. Thanks, John. That concludes the business portion of our meeting, and that meeting is now adjourned. In a typical annual meeting, I would use this time to review the prior year and give you some detail about the great things going on at UMB. I'll just share a few highlights today then focus on how we're protecting and supporting our associates, customers and communities and how we're positioned to operate through this crisis. In 2019, we continued to build on our 2018 milestone of surpassing $1 billion in revenue, increasing it by 8.5% to $1.1 billion with record net income of $243.6 million. We grew loan balances by 10% or $1.2 billion, and deposits used to fund that loan growth increased by $2.3 billion or 13.7%. This kept our loan-to-deposit ratio at a conservative level, which gives us ample ability to step up and help our customers. Our 2019 results helped solidify our strong balance sheet and capital position that we brought into this crisis. You'll see more 2019 facts beginning on Slide 10, and I'd be happy to take questions at the end. But today, 2019 is just a memory. There is no doubt that these past many weeks have been some of the most challenging in our nation and our company's history. We've been serving our clients for more than 107 years, and have seen many crises, from the flu epidemic of 1918 through the Great Depression and the oil embargo in the '70s to the financial crisis of 2008. Through each difficult period, we've learned more about managing risk and preparing for all environments. On the screen, you've seen a few photos and quotes from our long history. We came into this crisis healthy with solid levels of reserve capital, strong income, and as I mentioned, we have a loan-to-deposit ratio lower than many peer banks. While we're often questioned about that, it's times like these that our model proves itself. Others may be stressed for liquidity or worried about how many loans they can handle. That's not something we're concerned with right now. We're proud to have the resources to offer those who need it in the time they need it most. Slide 20 depicts our positioning at year-end as we headed into the crisis. Here, you'll see our capital levels compared to peers as well as several liquidity metrics. We continue to monitor and test our balance sheet as the situation unfolds, and we'll provide updates periodically. But rest assured that we have capital, liquidity, policies and procedures to take care of our associates, customers and shareholders. Another hallmark of UMB that prepares us to weather this crisis is our history of prudent underwriting standards that have produced high-quality credit metrics over the long term. You'll see that history, including our performance during the last financial crisis, as evidenced by the gray bar on Slide 21 (sic) [ Slide 20 ]. Our client process includes close monitoring and review by a 13-member Senior Loan Committee with an average tenure of nearly 21 years at UMB. Many on this team are 25- to 30-year UMB veterans, including our Chief Credit Officer with 34 years at our bank, our CEO at the bank with 26 years and I have just over 25 years. This credit leadership team managed through the 2008 crisis together, where we were -- where we saw peak charge-offs or loss ratio of just 0.51% of loans versus industry that saw 2.5%. There are a lot of unknowns right now, but what we do know is that our rich management practices have brought us through some of the toughest times in history, and we have no reason to expect a different behavior this time. But our focus now is on how we can help and how the relationships we've built come into play. These are difficult times for all of us, and I'm extremely proud of how our teams have stepped up to keep our business operating smoothly. Many of our associates have worked far beyond a typical business day during the past several weeks to make sure our customers, our associates and our communities are getting what they deserve from us: our undivided attention and consideration. And while this experience has been difficult on many different levels, I've been incredibly humbled and amazed to see the sense of community and collaboration amongst our teams and our clients. I'd like to share some of the ways we've begun supporting our customers early in the crisis. You'll see some of that detail on Slide 25 and 26. When stay-at-home orders came out and nonessential businesses were expected to close, we moved quickly. From an operations perspective, we mobilized the task force, even in advance of some of the orders, and that included members of our senior leadership team managing our response to this pandemic. We implemented work from home and other resiliency measures to protect our associates and customers. Approximately 80% of our workforce is now able to do their work remotely, and we've provided additional PTO and an extra $250 bonus per pay period for roles that cannot be performed off-site. UMB is one of the first banks to move our branches to drive-through only. Our teams are focused on service while taking recommended precautions, and customers should not expect to see an interruption in our service. UMB is a proud, founding member of the Kansas City Regional COVID-19 Response and Recovery Fund, and we were able to donate and deliver 2,400 N95 masks to several clients across our footprint, including hospitals and senior living facilities. To help support local communities, we began ordering lunch for associates and branches across our footprint with one stipulation, those lunches were to all be sourced from local restaurants that were UMB customers. So far, we've supported more than 200 restaurant customers. From a customer perspective, our team quickly reached out to all of our business banking clients. And in March, we were able to defer interest and principal payments for 90 days for the entire portfolio. We also launched a 6-month term loan payment deferral option for current small business customers. We continue to work with clients to provide support and advice and have been helping our customers in a variety of ways, including customized payment and flexibility on mortgages, home equity or personal loans and credit cards and a deferral of all foreclosures for 90 days. Following the federal government's launch of the stimulus payments, we have augmented our relief program to ensure bank fees do not reduce stimulus proceeds for eligible customers and have communicated directly with our customers, encouraging them to contact us if they are experiencing financial hardship. When the CARES Act legislation was introduced, we quickly began helping our customers navigate the Paycheck Protection Program. I've been inspired by our associates who have felt that it's their duty and patriotic responsibility to help everyone we can right now. When the program opened, there were some uncertainty. But while some waited for guidance from the government, we jumped right in, in the beginning, working with our customers to make sure they were ready. In the first wave of PPP, we were able to process and get approved more than 3,000 applications for more than $1.4 billion in funded loans to help small businesses weather the storm. The median size of these loans was $122,000. It took UMB 107 years to reach $14 billion in loans, so it's incredible accomplishment to process this amount in such a short period of time. The second wave of the program opened yesterday, and we have another 1,700 applications to submit. Once our team is working around the clock, again, to get these processed through the SBA, and while we've had some concerns with its availability, we'll be ready when it's up and running, Finally, as shown on Slide 27, we've recently launched a new Corporate Citizen Report, which you can find on umb.com, highlighting our efforts and actions related to environmental, social and corporate governance issues. This detail is how we do our business. We continually adapt to find the right balance of implementing sustainable business practices, meeting obligations and using our resources to do good, and this balance helps us guide our response to the COVID-19 crisis. Working together towards a common goal has given us a sense of purpose and has reminded us why our company is special. As some other banks have taken a different and more complicated approach to serving their customers, we've seen some opportunities to step up and help. I'm proud of the way we stepped up for each other and our clients. It has brought everyone together here at UMB during a difficult time. It's once again reinforced what we've always known: relationships matter. In closing, our thoughts remain with the communities, individuals, including health care workers and first responders who are on the front lines of this COVID-19 crisis. Now I'll be happy to take some questions. And as a reminder, [Operator Instructions] Thanks again.

Mr. Kemper, we have no questions.

Okay. At this time, since we have no questions, there will be a replay of this meeting made available on our website, and I want to thank you all again for joining us today. Be safe.