Good day and welcome to the UMB Financial First Quarter Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Kay Gregory. Please go ahead, ma'am..

Good morning and thank you for joining us. On the call today are Mariner Kemper, President and CEO, Ram Shankar, CFO and Mike Hagedorn, CEO of UMB Bank. Before we begin, let me remind you that today's presentation contains forward-looking statements, all of which are subject to assumptions, risks and uncertainties.

Actual results and other future events, circumstances, or aspirations may differ materially from those set forth in any forward-looking statement. Information about factors that may cause them to differ is contained in our Form 10-K and subsequent Form 10-Q and other SEC filings.

Forward-looking statements made in today's presentation speak only as of today and we undertake no obligation to update them. Our earnings release, as well as our supporting slide deck is available on our website at umbfinancial.com, under news and events in the Investor Section. The slides are also available in the webcast link for your reference.

Reconciliations of non-GAAP financial measures have been included in the earnings release and on Pages 5 and 6 of the supporting slides. With that, I’ll turn the call over to Mariner Kemper..

Thank you, Kay. Welcome everyone and thank you for joining us. I'll start this morning's call with some high level results which reflect strong net interest income, solid growth in our non-interest income and once again double-digit year-over-year loan growth.

Looking at our results of the first quarter on Slide 4, you'll see that net income of $44.2 million or $0.89 per diluted share and on a non-GAAP basis adjusting for the items in the table on Slide 5, net operating income of $44.5 million.

We did see some typical first quarter noise in our results specifically related to employee benefit expense including FICA, medical insurance and other cyclical accruals. Ram will give a more detailed look at both expense and income items in his remarks.

The improvement in net income both on a linked-quarter and year-over-year basis was primarily driven by rising net interest income driven by the recent rate hikes in December and March, as well as our continued efforts to optimize the mix of earning assets on our balance sheet.

These factors combine to drive a nine basis point improvement in NIM over the fourth quarter and a 30 basis point improvement compared to the first quarter of 2016.

As a comparison, the publicly traded banks that had announced first quarter results as of last Friday had a median NIM decrease of one basis point on a linked-quarter basis and four basis points year-over-year.

On Slide 8, you'll see that once again we delivered solid loan growth with average balances for the first quarter increasing 8.3% on a linked-quarter annualized basis and 10.6% compared to the same quarter last year. Our credit quality metrics have remained stay even as we posted outside loan growth for several years.

Non-performing loans improved to 0.53% of loans in the first quarter compared to 0.67% in the fourth quarter with the largest portion of the improvement coming from loans that were paid down or otherwise results of that loss.

And as shown on Slide 9, net charge-offs were just 0.28% of average loans for the first quarter, an averaged 0.29% over the past 13 years shown.

Finally, as you know last week we announced the agreement to sell Scout Investments to Carillon Tower Advisers a subsidiary of Raymond James Financial for consideration of 172.5 million in cash, subject to some adjustments at closing.

The decision to divest Scout Investments came after a detailed strategic review of our business including the capital needs and goals for each of them.

We evaluated our core strengths in the competitive environment which Scout operates and were faced with the decision to either double down and get scale through acquisitions or exit this business and deploy the capital generated into our core banking operations.

Even if the industry has experienced the paradigm shift towards passive management, there remains a robust potential for active managers.

While we are comfortable with this business, we view this transaction as an opportunity to invest in our core banking competencies and capitalize on the runway ahead of us in our banking and asset servicing businesses. At the same time, Scouts partnership with Carillon will be a benefit to them with enhanced distribution capabilities and scale.

As I mentioned in the announcement last week, I want to be clear that the exit from the Scout business does not diminish our commitment to investment management for individuals and institutions. We will continue to offer asset management solutions to our private wealth Prairie Capital Management and Institutional Banking clients.

We have experienced robust growth in these businesses and that growth continued in the first quarter as Mike will share in the bank discussion. Diverse revenue streams continue to be part of our business model and non-interest income for the bank and fund services represented 43% of their combined total revenue for the quarter.

Diversity extend to several aspects of our business geographically with national operations, as well as our core banking franchise across eight states, customer categories ranging from commercial, institutional, healthcare and consumer banking, as well as our diverse set of products and services.

Overall, we're excited for the future of both UMB and Scout and look forward to keeping you updated as we move toward closing the transaction later in 2017. Now I’ll turn the call over to Ram for a discussion on the drivers behind our results and the adjusted look at our segment disclosures.

Ram?.

Thanks Mariner, and good morning everyone. As we noted in last week's announcement, Scout will be reported as discontinued operations beginning in the second quarter. For your reference, we presented this view both of the back of our earnings release and on our investor presentation.

Today's discussion of first quarter results will include Scout in our operations as usual and then in the segment discussion later in the call, I'll share some details to give you greater visibility into the impact of the sale.

Looking first to the income statement, GAAP net interest income of 134.3 million for the quarter represents a linked-quarter increase of 2.2% and a year-over-year increase of 13.9%.

Net interest margin for the first quarter was 3.09% and a nine basis point improvement over the fourth quarter included approximately five basis points related to loan interest driven equally by higher LIBOR and short-term rates, as well as newer volumes at increased yields.

Three basis points related to investment securities as new purchase yield exceeded roll off yield and premium amortization slowed and one basis point related to improvements in other earning asset categories. Compared to the first quarter of 2016, NIM increased 30 basis points.

The average yield on earning assets increased 14 basis points on a linked-quarter basis to 3.31%. Average loan yields top 4% for the first time in 17 quarters, coming in at 4.09% for the quarter. Loans averaged 56% of earning assets during the period. Slide 13 details the change in non-interest income which increased 3.8% on a linked-quarter basis.

This variance was largely driven by a $2.4 million increase in unrealized mark-to-market adjustments on the Company's seat capital held in certain Scout funds which are included in the trading and investment banking line on the income statement.

It is expected that at or near the time of closing the sale of Scout, these investments will be returned to UMB.

Other items driving the linked-quarter increased fee income includes volume related growth in bankcard fees and deposit service charges particularly in our healthcare segment, as well as fees generated by our non-bank qualified and corporate desk which are newer growth engines in our institutional banking division.

This trading and underwriting revenue is also part of the trading and investment banking line item. Details on the primary drivers of the year-over-year increase in non-interest income are included on this slide.

Slide 15 in the press release contain detailed drivers of the changes in non-interest expense which on as stated basis increased 2.4 million or 1.3% compared to the fourth quarter of 2016. The increase was driven by expected higher FICA 401(k) benefits and medical insurance expense in the salaries and benefits line item.

These elevated expenses were partially offset by sequential decline in performance base incentives that Scout reviews marketing expense and legal and consulting expenses which typically are lower in the first quarter.

Finally, our lower effective tax rate of 22.9% resulted largely from an increase in excess tax benefits associated with stock compensation recorded in the first quarter compared to the same period last year. We expect the tax rate for the full-year 2017 to be approximately 24%.

Now turning to the balance sheet, we had a solid quarter of loan growth as Mariner mentioned, and Mike will provide more color on our loan portfolio in the bank segment discussion. Slide 16 shows the composition of our investment portfolio.

The average balance of securities available for sale in the first quarter was 6.5 billion essentially flat from last quarter and a 5.5% decrease from the same period in 2016.

The average yield in our AFS portfolio increased nine basis points to 2.13% compared to 2.04% in the fourth quarter driven by new purchases at accretive yield and lower premium amortization. Details related to the past quarters activity and portfolio statistics are shown on Slide 17.

Turning to liabilities, at 15.6 billion average deposits for the quarter were essentially flat compared to the prior quarter.

At 12% linked-quarter increase in healthcare deposits and increases due to seasonal inflow of public funds deposits was offset by declines in institutional deposit custody to the bank as more funds were deployed into the market.

The cost of interest-bearing deposits for the first quarter was 25 basis points, an increase of four basis points from the prior quarter reflecting mix changes between deposit categories.

Including the impact of DDAs, the cost of our deposit base rose just two basis point, while our all-in cost of funds increased six basis points from the linked-quarter. While we saw some nominal sensitivity with total deposits, the seasonal increases in public fund which are indexed and borrowings drove overall funding sensitivity higher.

Approximately 75% of our funding base is comprised of non-interest-bearing DDAs or other deposit products that have administered rates that are low-cost, or have low sensitivity to market rates. The remainder is either hard or soft index to short-term interest rates and thus have to reprice with higher interest rates.

Moving to segment, you'll see the financials beginning on Slide 21, followed by details on each. Details for Scout begin on Slide 23. I’ll quickly cover net flows and market action for the quarter before moving to the financial impact from the announced divestiture.

Assets under management stood at $27.9 billion at March 31, an increase of 2.2% during the quarter. Scout experienced total net outflows of just $1.8 million and positive market impact of $592 million gaining ground in both equity and fixed income strategies.

As shown on Slide 24, net inflows of $89 million into separately managed accounts nearly offset $91 million of outflows from the Scout funds. Strong performance in several strategies continues and the Scout MidCap fund received a 2017 Lipper Fund Award as the best MidCap Core Fund for the 10 year period ending November 30, 2016.

Scout Associates will continue to focus on performance, as well as leveraging institutional, intermediary and sub advisory distributional channels. Now I'd like to share some detail about what our agreement to divest the Scout business means for our financials going forward.

As Mariner mentioned, the cash purchase price is 172.5 million and is subject to customary closing conditions and purchase price adjustments. As I noted last week, the actual gain on sale may vary due to the purchase price adjustments.

However based on assumptions as announcement, we estimate the benefit to regulatory capital ratios to be approximately 80 million to 100 million including the deconsolidation of approximately 55 million in intangible assets.

On Slide 26, we provided a view of how our reported GAAP financials would have appeared if presented in a discontinued operations format to help you understand the impact of the sale on UMB's ongoing business.

As shown here, net income attributed to the Scout business that would have moved to discontinued operations would have been 5.5 million for the full year 2016 and 2.3 million for the first quarter of 2017.

It's important to note that in 2016 there were some one-time items that reduced net income namely the 2.7 million in pre-tax costs related to the termination of the marketing contracts and 2 million in pre-tax severance expense.

As I mentioned earlier, it's expected that our seat capital in this Scout Funds will be returned to us at or near the close of sale reducing some of the volatility that the unrealized gain or loss brings to our continuing operations non-interest income.

The adjustment in the first quarter was a positive 1.4 million and for the full-year 2016 it was a positive 449,000. Turning to asset servicing or fund services segment on Slide 27. Assets under administration stood at 191.6 billion at quarter end compared to 180.7 billion a year ago.

The pre-tax margin for the quarter was 16.5% compared to 19.3% for the fourth quarter. This decrease reflects steady to growing revenue offset by higher first quarter expenses related to employee salaries and benefits.

As we shared at our Investor Day last year, our fund services teams have developed solutions to serve the high growth market segment including a white label solution to accommodate exchange traded funds.

In the private equity space, we currently serviced approximately 13 billion in assets and our investment managers series trust provide a turnkey, cost-effective method for advisors to get into liquid alternatives businesses. UMB Fund Services is ranked as the 7th largest mutual fund custodian in the U.S.

based on 40 Act Fund Assets and is regularly recognized as an industry leader in client service. I'll now hand it to Mike to cover the details and drivers for the bank, then we will be happy to take your questions.

Mike?.

Thanks Ram. The bank segment posted pre-tax net income of $51.6 million for the quarter, a 1.6% increase on a linked-quarter basis.

The solid improvement in revenue was partially offset by increased expenses which include the lion share of the higher employee benefit costs Ram discussed earlier, as well as increased equipment expense related to investments in cyber-security, disaster recovery readiness, and the ongoing modernization of our core systems to support our future growth.

Average loan balances increased 8.3% on a linked-quarter annualized basis with average yields on those loans rising by 13 basis points. Approximately seven basis points of that increase was related to increased LIBOR and Prime rates, nine basis points to net growth and existing loans and four basis points to new loans booked during the quarter.

Offsets include reductions from loans paid off during the quarter and lower deferred loan fees received this quarter versus fourth quarter. Turning to Slide 32, we saw gross loan production of $594 million in the first quarter.

Total payoffs and paydowns for the quarter were $345 million slightly lower than the average of 368 million we experienced over the prior four quarters. As our CRE in construction book seasons, we do expect some volatility in the level of payoffs. Trends are hard to predict but precision can often be lumpy.

As we look ahead, strong topline production from a robust pipeline could be somewhat muted depending on the timing of payoffs. The composition of our loan book and a regional view are shown on Slides 33 and 34.

Our commercial banking teams continue to lead in terms of loan growth with average balances in CRE and construction loans increasing $187 million or 5% during the first quarter. Industrial and multi-family projects were the fastest growing categories of new loans during the quarter followed by senior housing and retail.

Regionally Texas, Kansas and Colorado combined represented more than two-thirds of our CRE and construction loan production. We monitor our portfolio concentrations and continue to apply the same disciplined underwriting standards to investment CRE as we do with all lending activity.

Currently multi-family and other investment CRE represents 31% of the total CRE and construction loans on our balance sheet and just under 12% of our total loan portfolio. In the factoring business, we added 10 new borrowers during the first quarter and increased average balances by 34% compared to the fourth quarter of 2016.

Deal flow in commercial finance remains strong and now represents more than half of our total factoring portfolio.

Transportation finance show an improvement in the first quarter and trucking clients are seeing positive trends in inventory to sales ratios which along with the rising manufacturing index could point to an improved freight environment in the second half of the year.

Quarter end balances and asset base lending were 8.6% higher year-over-year and our business development teams continue to build the pipeline. Pending client commitments at the end of March were nearly 50% of both March 2016 levels.

Our personal banking division, private wealth and consumer continues to provide approximately a third of our funding with deposits averaging 5.3 billion for the first quarter. Private banking deposits exceeded 1 billion during the quarter.

Slide 37 takes the assets under management and our private wealth institutional asset management, brokerage and Prairie Capital Management businesses that are within the bank segment. Combined AUM now stands at $13.9 billion representing a five year CAGR of 10.1% for the first quarter of 2012 AUM of $8.6 billion.

Although UMB is largely a commercial bank, a natural extension of those relationships its wealth and investment management. Our commitment to asset management for the families and institutions we serve is unchanged and is as strong as ever. On the consumer side, we continue to make changes to improve efficiency.

During the first quarter, we consolidated two branch locations bringing the total to 104 banking centers and three commercial and private wealth facilities. Eight locations are scheduled for consolidation for the remainder of 2017.

In institutional banking, our non-bank channel sales teams have had phenomenal results with underwriting income from non-DQ municipal bonds increasing 307% compared to the first quarter of 2016. Additionally, our newly established corporate debt underwriting desk made a solid contribution to bond trading income this quarter.

I’m also happy to announce that UMB was named the best Investment Bank in the Midwest by Global Finance magazine based on criteria such as market share, deal size, service and advice, and structuring capabilities.

This is a testament to the expertise, and commitment of our institutional banking associates, as well as a realization of a strategy to further diversify our bond trading capabilities. The number of HSA accounts and healthcare services increased 20% year-over-year to stand at 992,000 at the end of the quarter.

Combined deposits and assets reached the 2 billion mark at the end of the first quarter following a strong open enrollment and funding season. On Slide 41 of the updated year-end 2016 rankings released by Devenir Research in February, and UMB moved up one spot to rank fifth in the U.S. in terms of accounts and six in terms of deposits and assets.

Our previously announced acquisition of the bank course HSA portfolio is expected to close in the second quarter adding approximately 40,000 accounts with 76 million deposits and assets.

On the right side of the slide, you'll see that Devenir reported an industry wide growth of deposits and assets of 22% in 2016 compared to the 37% achieved by UMB healthcare services. We continue to watch developments in Washington related to healthcare reform and are optimistic about the future of this business.

Finally, you will see our credit and debit card purchase volume trends on Slide 43. Total card spending increased 18.6% from the fourth quarter to a record 2.8 billion driven by seasonally strong healthcare debit spending, as well as steady growth in commercial card purchases.

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

[Operator Instructions] Today's first question comes from Chris McGratty of KBW. Please go ahead..

Hi, good morning. Thanks for taking the questions. Ram, let me start with you on the divestiture of Scout. I am looking to try to reconcile Slide 26, which show this quarter had about 3 million pre-tax contribution and Slide 21, which shows around 1.6 million.

I see the expenses and the fees associated with around on Slide 21, but I’m hoping you can fully round out the impact to get to that $3 million, so we can get the right revenues and expenses on the model? Thanks..

Yes, sure Chris. In terms of ongoing not impact of the divesture I would stick to Slide 26, the difference between Slide 26 and 21 is 21 is on a segment basis. So, as I said on the April 20 call, the segment results have some allocations due to corporate overhead as also the quality assets mark-to-market and is also the deferred conduit.

So, on a go forward reporting basis, how our financials will look will mimic Slide 26, so the impact of Scout's divestitures or Scout will be 2.5 million in the first quarter.

But, as I said, in the prepared remarks, it was about 5 million, and in all of 2016, but the 5 million also included the two one-time items for the contract termination and the severance expenses..

That’s helpful. Just maybe on the 3.1 million of pre-tax, what are the estimated or ballpark fees and expenses to get to that number because I see it all below line..

So, the impacted fees would be on the trust securities and processing line and the way you can get it is, if you look at our GAAP financial statements of fee income of 120 million and the discontinuing operations number of 102 million, that difference kind of gives you the Scout impact, the same way you can get to the expenses as well, if you have any follow-up questions Kay can walk you through the models..

Talked about 18 million of fees is what..

Yes, you got them exactly..

Okay, that's great. Thank you. Maybe another one on the margins, you are certainly benefiting from the higher short-end of the curve, I am interested maybe Ram in new production yields, you talk about the 409 that's on your average balance sheet.

Where is new loan production coming on, is it materially accretive to that 409?.

We are not able to kind of predict that for you going forward. I mean obviously we are benefiting from higher rate environment and we've talked in the past about our discipline. So we are being more disciplined and you also have our efforts around remixing. So you are seeing more real estate in term which is also driving that..

Okay. Maybe if I could sneak one more in on the credit quality. Anything in the commercial portfolio - you had a little bit of a tick-up in charge offs, again, very low rates altogether. But anything in the commercial portfolio that either sector or segment that you might be watching little bit more closely. Thanks..

This is Mariner again, that's nothing material, nothing unusual kind of regular course of businesses, business as usual with our quality and our sector analysis..

Okay.

So there was no sector specification on the charge-offs in the quarter? Any color you can give there?.

No..

Okay. Thanks a lot..

And our next question today comes from Steve Moss of FBR. Please go ahead..

Good morning. Following up on the margin here, last quarter you had a couple of benefits from purchase accounting accretion and fees that was about five basis points. I was kind of wondering this quarter how much came from purchase accounting fees and how much just came from the feds rate hike..

So I'd say of the nine basis points, maybe one basis point, Steve, is from these unusual accounting items. We had four or five basis points in the fourth quarter. So as I said in the remarks, most of it was because of repricing, because of movement in short-term rates, because of new volumes at accretive wheels, unusual margins..

Okay, perfect. And then in terms of the HSA growth this quarter was solid.

Are you seeing more business opportunities here post election, or is that just more normal seasonality?.

It’s Mike. I’d say it's more normal seasonality. I don't see any impact yet in the business as it relates to any proposed action that Trump or anybody else from Congress has done at this point..

And you just see from quarter to quarter though, the year to year rather, really the maturity of the relationships with the clients. So there’s a kind of a pickup at the corporate level, at each account level of sort of funding as the business matures..

Okay, great. Thank you very much..

[Operator Instructions] Our next question is a follow-up from Chris McGratty, KBW. Please go ahead..

Great, thanks for taking the question. Ram, on the Scout accounting, just I want to make sure I got the numbers right on the equity adjustments. You walked through and you said 80 to 100 benefit on rate cap which includes $55 million reduction in the intangibles.

Number one, is that the right way to - did I get those numbers right? And then secondarily - go ahead..

So as I said, the gain or the impact or the benefit to regulatory capital ratios will be 80 to 100, subject to all the adjustments we outlined in our 8-K. So that includes both the gain and the deconsolidation of intangible assets attributed to Scout..

Okay. And the same will be kind of assumption for kind of just regular book value. Okay. The question I have maybe more strategically is, with the proceeds that you guys - maybe this is a question for you, Mariner. With the proceeds that you're going to get, you talked about reinvesting or continuing to investment more in the bank.

Does this suggest at all kind of a more better prospects for M&A? Or is this you’re going to continue to grow organically over the next year or two. Thanks..

Thanks for the question. So we obviously, as we said in the past have an active M&A group as we have. So we will continue to pursue and build relationships with potential bank partners, as well as the number of other sort of business lines within the bank and outside of bank, i.e. fund services.

So we will continue to work those opportunities build those relationships. There are number of other things we can do at the capital. Obviously our loan growth continues to be strong and there are others various thesis for capital to build our business and invest in our people and technology..

Great, thank you..

Ladies and gentlemen, our next question comes from Matt Olney with Stephens Inc. Please go ahead..

Hi, thanks good morning guys. I hopped on the call a few minutes late so I apologize if you address this, but previously on the call, we talked about operating expenses increasing no more than 5% on an annualized basis now with Scout exiting the company can you comment on just the expense outlook from here does that 5% still hold? Thanks..

Yes, I think I'd like to clarify a little bit I think the timeframe for talking about where we might have referenced that, we haven't in recent periods been giving guidance on a specific number that we’re holding ourselves to.

The latest periods, we’ve been talking about is making sure that we’re laser focused on executing on operating leverage and slowing the growth of our expenses. So we remain very committed to that and might it look liked as really answer your question, but I’d stop there and see address this..

This is Mike, I maybe add to what Mariner said, he did mention operating leverage and I think that's really the way you should look at this.

The best example of that in our company today would be healthcare with the speed at which that business is moving fast consolidating it’s almost like a startup you're going to have some difficulty sometimes getting positive operating leverage out of it but you probably and most likely will get a greater bottom line.

And so that's just one of the things that we consider when we look at overall expenses as what’s the return on capital as we make those investments that you might see in our noninterest expense..

Okay, that's helpful. And then going back to a previous question on capital proceeds from the Scout transaction.

Mariner perhaps you could kind of go in more detail and tell us what you're thinking in terms of what's on the table, what's off the table it seems like in the past you’ve had some mixed commentary about traditional banking M&A so as you sit here now what are your thoughts about traditional banking M&A for UMB? Thanks..

So yes, I have commented in the past that I thought that the environment was not conducive to us getting a bank deal done and I guess I would still just say that we are get subject to that environment, but still very interested in finding the right partner and doing a deal we think we’re good at it.

And so I mean we will continue to look for those opportunities whether or not they’ll present themselves and you know be priced out or whatever the case may be that’s yet to be determined but we are definitely interested in looking for the appropriate transaction for that space..

Thank you..

And our next question today comes from Peyton Green with Piper Jaffray. Please go ahead..

Yes, good morning. Mariner just wanted, Mike maybe if you could comment a little bit if we think about the overall banking segment in the pre-tax pre-provision income was about $242 million annualized in the first quarter and that pre-tax pre-provision ROA would be about 130 basis points.

Given the sale of Scout does that put more pressure to generate a more normal banking efficiency ratio in the 60s versus the 70s so which is where the efficiency ratio has been more recently?.

Yes it does sale of Scout imply capital pressure growth wise a more upbeat growth outlook for the bank going forward..

So you can get this information off the UBPR that the bank efficiency ratio is lower than the company so – your belief for your suspicion that it could get to a more normalized your words banking are or efficiency ratio yes that's correct.

And the investments that we’re making on the banking side and the growth that we would expect to occur in the banking side should help drive down that efficiency ratio.

I mean obviously the two biggest movers on the banks efficiency ratio have been Marquette and bring on 1.3 billion in assets and all the related costs that we took off the income statement and the number two just the growth in NIM that mostly affects the bank segment. So you’re on the right path.

I might ask to rephrase your second question because I’m not sure I have fully understood that one..

Okay.

So the bank last time you had capital pressure you raised equity rather than undergo a strategic review of the business lines to potentially sell and improve capital ratio does the sale of the business reflect a stronger growth outlook for balance sheet growth relative to may be what you’ve seen over the past year or two?.

I see you’re trying to tie together I would say that the sales guy was totally independent of any conversations that we’re having about our capital. It was entirely strategic conversations about whether like I said in previous comments whether to double down in Scout or deploy capital elsewhere so..

Okay. And then, okay, so it's really a Scout independent decision. Okay, all right, great. And then maybe Mariner if you could comment a little bit about where you think we are cyclically. I mean obviously the loan yields - been drive very significant improvement in loan yields.

How are credit spreads holding up relative to how you like the price credit?.

Peyton that’s a great question we’re paying a lot of attention to the moving pieces and parts around the economy and global landscape and I would say that our general outlook is pretty good you look across our footprint it’s a little different from one place to next.

As Mike mentioned his comments the real estate growth and the stability in some of that has been coming from places like Texas where we still feel very good about that type of activity. Just examples in Denver we think some of the multifamily stuff is overheated so we’ve moved a little bit of our interest away there.

So we watch these activities and the economic behavior from market-to-market.

As far as pricing goes we are feeling some stability there it feels like we’ve this is somewhat anecdotal because it just seems to be fluid but it does feel like we’ve seen kind of bottom on the pricing side and in terms of still kind of I would describe a little bit the Wild West as we compete and look out there it seems like the peer group still willing to do interesting things on the term side, but pricing seems to be somewhat stable..

Okay. And then last question from me maybe this is better for Ram.

Ram how much did lower premium amortization benefit the bond yield in the quarter relative to the fourth quarter?.

It wasn't material it was probably about 200,000 and 300,000 slowdown from the last quarter..

Okay. So really was just higher roll on yields relative to….

It was higher roll on yields you’ll see that the slide deck the rollout versus roll on we still had a positive gap on that one..

Okay.

And then would you caution us to maybe think of a lower roll on yield going forward given the move down in rates in the back part of the first quarter and so far in the second quarter or what would be your suggestion there?.

We still have a slight positive spread between the roll-off and roll-on obviously the flattening of the curve because of long end doesn't help the reinvestment yields but compared to what's rolling off you’ll see in our – one of our investment security pages we give you what the next 12 months roll-off yield is.

So you’ll see some positive accretion but clearly because of the flattening it's diminished a little bit..

And compared to previous periods as you’ve seen we are rotating more than we have in the past of the total percentage of earning assets into loans than we have in the past. So that’s really the ultimate goal upon our reinvestment security..

Okay. And I apologize one more question Mariner, Mike on the deposit side the deposit growth has decelerated for you’ll relative to historical levels is this really just customer cash utilization improving and then taking money that they may be left on balance sheet with you all longer than would have given a normal cycle.

And what would you expect deposits, are you more hopeful about deposit growth going forward or is this still normalization process?.

Yes so, as I said in my prepared remarks I think that the biggest reduction we've had is just some dollars coming out of the institutional side and going into market so your assumption there is correct.

We’re not doing things right now to necessarily grow certain aspects of our deposits we’re not aggressive in our campaigns so I think if you look forward the majority of our growth is probably going to come from our commercial and industrial side and we’ll see some growth in healthcare balances as well.

Now that's absent as going out in the market with some kind of marketing or more aggressive deposit gathering and honestly with the yield curve the way it is right now and the flattening of the curve, it has made it more difficult..

We are laser focused however deposit growth as you’ve tracked us for a long time Peyton. We pay a lot attention to our core deposits as we believe it's really the franchise value. So we talk a lot about deposits, it comes up in every conversation and we are to super focused on making sure that we do all that we can to grow our deposits..

And Mike as we've said before, in prior quarters the benefit of our free funds wasn't really there when money was essentially zero right, and now you're starting to see that and so our shareholders are seeing a lift in net interest income as a result. That’s one of the positive things impacting margin..

Okay, great. Thank you for taking my questions..

[Operator Instructions] Our next question comes from John Rodis of FIG Partners. Please go ahead..

Good morning, guys. Ram, just a question for you on expenses. You mentioned that FICA 401(k) I think maybe something else was higher in the quarter.

Can you give a dollar amount to that?.

Yes, so it's typical seasonality that you would expect John as the calendar year resets, there is definitely some FICA expenses. I would say typically the first quarter 35% to 40% of the entire year's FICA expenses are incurred in the first quarter. So that's call it $3 million to $4 million increase.

The other two items similar trend with medical expenses and 401(k) match that go into the salaries and new line items..

Okay, thanks. And then maybe one other kind of question, you guys I guess reauthorized your share buyback plan yesterday and obviously you guys really haven't been active with that.

But with the sale of Scout, is there any reason to believe you guys would be more active with that plan?.

John as I mentioned earlier, we're going to be stewards of our capital and look at all our options of course that is one of the many options that we are not committed to any particular use of our capital at this point in time..

Okay. Fair enough, Mariner. Thanks a lot guys..

Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to the management team for the closing remarks..

Thank you for joining us today. This call can be accessed via replay at our website beginning in about two hours and it will run through May 10. And, as always, you can contact UMB Investor Relations with any follow-up questions by calling 816-860-7106. Again, we appreciate your interest and time. Thank you..

Thank you, ma'am. The conference is now concluded and we thank you all for attending today's presentation. You may now disconnect your lines. Have a wonderful day. Thank you..