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Umb Financial Corp (NASDAQ:UMBF)
Q2 2021 Earnings Call
Jul 28, 2021, 9:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to UMB Financial's Second Quarter 2021 Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Kay Gregory, Investor Relations. Please go ahead.

Kay Gregory -- Director of Investor Relations and Senior Vice President

Good morning, and welcome to our second quarter 2021 call. Mariner Kemper, President and CEO; and Ram Shankar, CFO, will share a few comments about our results. Jim Rine, CEO of UMB Bank; and Tom Terry, Chief Credit Officer, will also be available for the question-and-answer session.

Before we begin, let me remind you that today's presentation contains forward-looking statements, all of which are subject to assumptions, risks and uncertainties, including the longer-term potential impacts of the pandemic. The risks are included in our SEC filings and are summarized on slide 43 of our presentation. Actual results may differ from those set forth in any forward-looking statement, and forward-looking statements speak only as of today, and we undertake no obligation to update them, except to the extent required by securities laws. All earnings per share metrics discussed on this call are on a diluted share basis. Our presentation materials and press release are available online at investorrelations.umb.com.

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

Mariner Kemper -- President, Chairman, and Chief Executive Officer

Thank you, Kay. And thanks, everyone, for joining us today. Our strong second quarter results again demonstrate the benefits of our diverse business model and our investment thesis, which includes above peer loan growth and solid net interest income and fee income growth in all environments, something that we've been able to do for many years. Second quarter highlights include 19% average loan growth on a linked-quarter annualized basis, excluding PPP balances, and a 21% increase in fee income.

Additionally, we announced that the Board approved a $0.05 or 15.6% increase in our quarterly dividend. As you saw in our release, our provision expense was higher than previous levels due to strong loan growth and elevated charge-offs, which were driven entirely by one commercial factoring relationship. Excluding this credit event, we would have had net recoveries in the quarter. The underlying quality of our loan portfolio remains strong with nonperforming loan balances down 24.1% from the first quarter. As we've shared in previous quarters, we have refocused our factoring efforts, targeting largely transportation companies and smaller receivables. And we are comfortable with the characteristics of this portfolio.

Looking ahead, with what we know today and the quality we see across our portfolio, we expect charge-offs to come in closer to our historical level of about 25 to 30 basis points for the full year of 2021. Sentiment in our markets continues to move toward more normalized levels, and our customers remain cautiously optimistic. While keeping a close eye on the trajectory of the pandemic, modified loan balances are down to just a handful of loans, and those are slated to be resolved in the coming months.

As with many of our peers, we have begun the transition to return our workforce to the office. Our banking centers have reopened. We've begun to do more face-to-face client meetings and are working toward staggered returns of our nonbranch teams after Labor Day. While we have maintained our high level of productivity and customer service in recent months, much of that was fostered by relationships that have been built over time. I'm excited for the energy, camaraderie and collaboration that comes with seeing each other on a day-to-day basis and with our customers more regularly.

Turning to our second quarter results. Net income was $87.4 million or $1.79 per share. And pre-tax preprovision income on an FTE basis was $138 million or $2.83 a share. slide 18 shows the primary drivers behind our results, and I'll provide some high-level comments, then turn it over to Ram for more detail. Net interest income increased 3.6% from the first quarter as the positive impact and the strong balance sheet growth was mitigated by lower PPP income and some modest margin compression.

On a year-over-year basis, net interest income increased 12.8% despite a 31 basis point decline in earning asset yields. Our track record for relative outperformance in asset growth and the opportunities we see for that to continue should allow us to grow net interest income over time. Fee income for the quarter increased 21% on a linked-quarter basis, impacted largely by a $7.2 million gain in our position in Tattooed Chef compared to a $16.1 million loss in the first quarter. This gain included realized gains from the sale of 3.5 million shares of Tattooed Chef, as well as a mark-to-market adjustment on the remaining 1.2 million shares.

As I noted earlier in the year, equity investments similar to Tattooed Chef are part of our ongoing strategy to provide capital financing to our customer base across all credit structures. And while we don't expect them all to have similar size, we will continue to see liquidity events from time to time, including a couple of smaller pre-tax gains this quarter, which totaled $5.2 million and are included in our $15.5 million in investment security gains. One such investment, a combination of mezzanine debt and equity, yielded an internal rate of return of 41%. This included 114% return on the equity portion of our investment upon the sale to another entity.

Our focus on expanding our fee income business has continued. And we saw success across the company. Institutional banking provided more than half that fee income in 2021. Both of our traditional Corporate Trust and specialty trust teams have experienced phenomenal growth year-to-date, with new business dollar volumes increasing 68% and 109% respectively over the 2020 levels. We've seen a resurgence in aviation financing activity. And our location in Dublin provides additional opportunities to capitalize on these trends internationally. Fund services, assets under administration now stand at $379 billion compared to $286 billion a year ago. And fund services contribution to fee income has increased 30% over that time.

In Investor Solutions, we continue to add fintech partnerships, which we've highlighted on slide 39. And this has been the best six months on record for public finance, with 52 deals closed year-to-date, an increase of 79% compared to 2020. Turning to private wealth, we now have $16 billion in customer assets, and we're on track to exceed sales volumes for 2020, where we're beginning to see activity in our new family office offering and we have a solid pipeline there. Moving to the balance sheet. slide 24 is a snapshot of our loan portfolio, showing strong 19% annualized growth I mentioned earlier.

Growth in C&I came from a variety of industries across our book this quarter. Importantly, approximately 2/3 of that growth was from new borrowers. Commercial line utilization ticked up slightly to 32% following a couple of quarters in the high 20s. In CRE, multifamily and industrial projects led to growth during the quarter. And we continue to make headway in our expansion markets with Utah among the top 3. Average residential mortgage balances increased 6.2% from the first quarter to $1.7 billion. Funded mortgage loans for the quarter increased 33% to $276 million, including $39 million in the secondary market. Total top line loan production for the quarter was $1.3 billion outside of PPP balance changes with payoffs and paydowns of 4.7% of loans.

Looking to the third quarter, we see a robust pipeline in both C&I and CRE, as we see opportunities to continue to gain market share in many of our under-penetrated markets and verticals. On slide 26 we've updated our exposure to sensitive industries. As we've moved further through the pandemic, we've adjusted this list to reflect both the characteristics of our portfolio and the evolving outlook for various categories. Changes this quarter include the removal of retail CRE based on our borrower performance and the composition of our book, which is almost 50% anchored by grocery stores.

Loans in the remaining two categories, hotel and senior living, totaled $928 million or 5.7% of total loans, excluding PPP. After our typical analysis of mitigating factors, including strong sponsors and guarantors, we feel that approximately $472 million or just under 3% of our loans warrant a closer monitoring. As always, we are in constant communication with these borrowers. Our average loan-to-deposit ratio remained 61% for the quarter and was 64%, including our held-in-maturity portfolio, which tends to perform similarly to loans.

Our differentiated customer base, which drives diverse sources of funding and revenue comes with larger deposit balances. And deposit growth this quarter was driven by commercial banking and investor solutions, along with the continued impact of recent stimulus payments. Finally, as I mentioned, the Board approved a 15.6% increase in our quarterly dividend. This will increase our dividend payout ratio while still maintaining our priorities for use of capital.

Our number one focus is to grow shareholder value through investing in growth, both organically and opportunistically through acquisitions. To wrap it up, we continue to see positive momentum across the company. And I'm pleased with our second quarter performance. And I'm excited by the opportunities that we see in the second half of the year.

Now I'll turn it over to Ram for a few additional comments. Ram?

Ram Shankar -- Executive Vice President and Chief Financial Officer

Thank you, Mariner. Net interest income of $201.1 million represented an increase of 3.6% from the first quarter. We realized $9.2 million of PPP fees. And the PPP contribution to the second quarter net interest income was $12.4 million compared to $13.4 million last quarter. At quarter end, our PPP balances stood at $766 million, down from $1.4 billion at March 31. Approximately $18 million in unamortized fees remain at the end of the second quarter. Average earning asset yields decreased four basis points to 2.7% due to six basis point declines in both loan and security yields and asset mix changes, including the $137 million decline in average PPP balances.

Our levels of liquidity remain elevated with our Fed account, reverse repo and cash balances comprising 14% of average earning assets with a yield of 30 basis points, down slightly from 32 basis points in the first quarter. The three basis point decline in net interest margin on a linked-quarter basis was driven by repricing pressure and mix changes in both the loan and securities portfolio as well as the lower PPP income I noted. We continue to deploy a portion of excess liquidity as well as cash flows from our securities book into our AFS portfolio, as evidenced by the $2 billion increase in average balances from last year.

Portfolio composition and activity trends are shown on slide 29. And during the quarter we had cash flows of $437 million at a yield of 1.77%, and we purchased $1.1 billion of securities that yielded 1.4%. So far in 2021 we've executed just over $900 million of fair value hedges with varying delayed starts and seven-year terms on average. These are designed to mitigate earnings and capital impact in a rising rate environment. These hedges are matched to long-dated municipal bonds and fix a portion of index funding costs and involve making fixed rate payments in exchange for receiving variable rate payments over the life of the agreements.

Looking ahead, the margin trajectory will largely depend on levels of liquidity, pace and timing of PPP forgiveness and reinvestment rates on cash flows in the securities portfolio. Overall, we would expect some additional modest margin pressure in the second half of this year. Noninterest income for the second quarter was $131.6 million and contained a $7.2 million pre-tax gain on the valuation of our TTCF investment compared to a $16.1 million pre-tax loss in the first quarter.

Mark-to-market adjustments on the remaining 1.2 million shares will continue to flow through the securities gain and losses line item within fee income. Other drivers to fee income for the quarter were the additional gains from our capital corporate initiatives that Mariner mentioned, along with an increase of $1.4 million in bank card fees, offset by lower trading and investment banking income and $1 million reduction in trust and securities processing income.

As you'll see on slide 22, fund services income increased during the quarter, offset by the impact of the sale of Prairie Capital Management announced last quarter. The full details of our various fee income line items are shown on that slide. And Mariner commented on some of the growth opportunities we have in several of those businesses. Noninterest expense trends are shown on slide 23.

Expenses were essentially flat from the first quarter at $201.3 million as the increases outlined there were largely offset by seasonal decreases in payroll taxes, insurance and 401(k) expense, as well as lower bonus and commissions. Our effective tax rate for the first six months of the year was 17%. For the full year 2021 we anticipate it will be approximately between 16% to 18%. We continue to maintain strong capital ratios with our total risk-based capital at 13.84%, CET1 ratio at 11.91% and leverage ratio at 8%. Our tangible book value per share increased 11.9% during the last 12 months to $59.96 at June 30.

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

Questions and Answers:

Operator

[Operator Instructions] The first question today will come from Jared Shaw with Wells Fargo Securities.

Jared David Wesley Shaw -- Wells Fargo Securities -- Analyst

Good morning, everybody. Maybe just to start, can we start with the factoring loss? Can you give us any details around that? That seems like a larger loss. I'm guessing it's probably not tied to the targeted transportation small receivables, if it's that large. And then after that, could you also let us know what portion of the book is still maybe apart from transportation and smaller receivables after this charge?

Mariner Kemper -- President, Chairman, and Chief Executive Officer

Yes. Thanks, Jared. I guess to sort of, level set the whole deal I'd take you to Page 28, and just for all of those on the call, it's a really great page to sort of summarize what credit really looks like at UMB. And you'll notice on that slide that the past four quarters there were no losses in specialty lending where factoring lives. And that in this recent quarter, without that loss we would have had nine basis points of recovery for the quarter. And as in previous comments we've made about factoring, dating back to the first original loss we had, this was an acquired business. We changed out the management. We've refocused the business, as you said, on transportation and smaller receivables. And so, I guess I'd say that's all still true, still the case. We've refocused the business. This particular creditn was identified back then. And I guess I'd just repoint you to, everything has been changed, altered, and we feel good about the business that's left. It's a very small business. And it is, as you said, we focus on smaller and transportation credits. And really, overall, the reality is significant reductions in our nonperformance of the company, an excellent quarter inclusive of this loss. And we expect to get back to our historic charge-off rate by the end of the year for the full year of 30 basis points or less in charge-offs.

Jared David Wesley Shaw -- Wells Fargo Securities -- Analyst

Okay. Was that loan included in nonperforming or classified loans before the charge-off?

Mariner Kemper -- President, Chairman, and Chief Executive Officer

It was not, it was not. And yes. So that echoes the performance of our nonperforming loans. It is even that much better, sort of describing the whole portfolio. I think -- has a really nice pop of just talking about our long-term trends and track record. On the call with me are the two guys that do that with me. One has been with us 34 years. I'm 25, and Jim's here 27 years. So it's the same team doing the same thing, managing it the same way for a very long time.

Jared David Wesley Shaw -- Wells Fargo Securities -- Analyst

Okay. And then just to finish this component up, are there any other components of factoring that were identified in 2018 that are more along the lines of this loss or the loss back in 2018?

Mariner Kemper -- President, Chairman, and Chief Executive Officer

No. Everything that's left in the portfolio is our conforming factoring loans and are all performing.

Jared David Wesley Shaw -- Wells Fargo Securities -- Analyst

Okay. Maybe shifting a little bit to expenses. It's good to see expenses came in on target from commentary before. Going back to fourth quarter, you had expressed some potential optimism for positive operating leverage this year. Do you think we're on track to potentially see that on a full year basis?

Mariner Kemper -- President, Chairman, and Chief Executive Officer

Yes, if you back out PPP in future periods, yes.

Jared David Wesley Shaw -- Wells Fargo Securities -- Analyst

Back out the revenue? Or?

Mariner Kemper -- President, Chairman, and Chief Executive Officer

Yes, I mean, you don't want to compare next year to this year with the PPP gains, right? So if you back that out, I would say yes.

Jared David Wesley Shaw -- Wells Fargo Securities -- Analyst

Okay. And then I guess, Mariner, can you give any update on expectations or drivers for AUA growth as we go forward through the rest of the year?

Mariner Kemper -- President, Chairman, and Chief Executive Officer

Well, that's at some level hard to predict. A lot of that has to do with what's going on in the marketplace with asset values. If you're talking about new business specifically, the pipelines remain very, very strong across all those businesses. So I would say, pipeline is very strong, asset values is another question. But definitely -

James Dennison Rine -- Vice Chairman

[Speech Overlap] New business and our private wealth management group is up 20%. And that's new business from new customers, not including market action on the organic book. We've seen unexpectedly strong sales activity. And when I say unexpectedly, just because we're still in the COVID environment, which shows our sales forces getting out there and finding new business and being able to have face-to-face appointments, which has been part of what has made it successful over time. So that has been nice to see. The fund services business has continued to be strong. There have been some delays in conversions just due to our clients being back in the office as well. But we have signed contracts. And a strong backlog there also.

Mariner Kemper -- President, Chairman, and Chief Executive Officer

And the only thing I'd add there, without naming names, is a couple of our competitors, major competitors in that space are struggling mightily right now. So the opportunity is fantastic for fund service on a go-forward basis.

Jared David Wesley Shaw -- Wells Fargo Securities -- Analyst

Alright. Thanks a lot. I'll step back. Thanks.

Operator

The next question today will come from Nathan Race with Piper Sandler.

Nathan Race -- Piper Sandler & Co. -- Analyst

Hi guys, good morning. Pretty impressive loan growth in the quarter. And it's encouraging to see apparently C&I line utilization increase in the quarter. And I think that is ahead of what we see from some other of your peers so far in the quarter. So would just love to get some color on just the drivers for the increase in line utilization this quarter and just the overall C&I growth that was again impressive, and just kind of the outlook for overall loan growth in the back half of this year ex PPP?

Mariner Kemper -- President, Chairman, and Chief Executive Officer

Yes. Thanks. It's interesting, the loan growth question. I've been following the comments myself. And actually, I'm just as interested as to why others aren't seeing loan growth, as to why people are interested as why we are seeing loan growth. And my comments around that are, we, as a backdrop you've got huge stimulus in the market. You've got PPP funds at the company level. You got a monster a level of liquidity. You have a recovering economy. And for me, that's a backdrop for loan growth. So I've actually struggled to understand why others are talking about not having loan growth.

So for me, it's just kind of sort of the basic backdrop of a nice recovery as a backdrop for our loan growth, coupled with the fact that what we've said for years now is we're underpenetrated geographically and underpenetrated vertically. And we don't budget our loan growth based on multiple of GDP, like a lot of banks do, we do ours based on the ability of our loan officers to build, to execute on our pipelines and gain market share. So with that backdrop for our pipeline and what we've seen and been able to demonstrate year in and year out, that's what drives our loan growth. It comes across all categories. And as in the prepared comments, the C&I side, 3/4 of that was new business from new customers.

On the line utilization, I wouldn't get too excited one way or the other about that. That's a point in time, that thing can go bounce around a little bit. What I would say is it's stable. I wouldn't point too much one way or the other. It's up slightly on a point-in-time basis, but what I'd say is it's stable. And so those would be my big comments there about it. It's business as usual for us on loan growth. And I think that we typically give you a quarter-ahead look, and James commented on that. It looks as strong as it has been. And just nothing new on the loan growth front.

James Dennison Rine -- Vice Chairman

And we did mention, Nathan, that we anticipated more closings in the first quarter that did roll to second quarter. So that did have some impact on the outsized growth for second quarter. But third quarter remains strong. And we've also seen a lift from our consumer mortgage business that we've placed on balance sheet as well, roughly $100 million. So that's been additive also.

Nathan Race -- Piper Sandler & Co. -- Analyst

Okay. Great. And then just maybe shifting to capital. Would love to get some updated excess capital deployment priorities, what you're seeing in terms of acquisition opportunities as well. And just any thoughts on the buyback with a little bit of a retreat in sectorwide valuations recently?

Mariner Kemper -- President, Chairman, and Chief Executive Officer

So, in our prepared comments we talked about our priorities. The increase in the dividend was really what I would call a catch-up dividend increase to get us kind of level set with the kind of experience that our shareholders have been used to from us. So that's what that was, sort of a catch-up, get us back to our payout ratio that we've historically demonstrated. As far as just the regular use of our capital, we would very much like to find a way to deploy capital to grow our business.

Obviously with the loan growth that we have, that's the place it's going to go first. And secondly, we love to find M&A activity, M&A opportunities. It won't come as a surprise to you that there's nothing to announce to you. But we're active, right? We would very much like to add value to our business through some M&A activity. And all I can say about that is we remain active. We're making phone calls. We're pounding the street, using shoe leather, building relationships and doing everything we can. But we're not going to do something just to do something, right? So it's got to be something that fits culturally and really adds value. We're not going to do what I call a ticker tape acquisition, one just to announce something. It's got to fit.

Nathan Race -- Piper Sandler & Co. -- Analyst

Got it. That's great color. If I could just ask one more on overall balance sheet dynamics. The PPP forgiveness process continues to unfold. It looks like some of your commercial clients are working through excess liquidity and drawn online. Just any expectations for deposit flows and just the overall size of the balance sheet over the back half of 2021 as well?

Mariner Kemper -- President, Chairman, and Chief Executive Officer

Well, that's the million dollar question, isn't it? We debate that ourselves internally. So it's almost hard to answer that one when everybody on the phone on my end would probably give you a different answer. But I think there's definitely excess liquidity on our balance sheet. Whether that's $1 billion, $2 billion or $4 billion is anybody's guess. And so I think there's some excess liquidity on our balance sheet. But from our vantage point, we are always focused on deposit growth, and we always have the ability to bring deposits back on balance sheet that is off balance sheet if that were ever something we needed. The other thing to think about for us which I think is kind of unique in the space is our loan-to-deposit ratio is so low to start with. I'm not sure it really matters how much excess liquidity we have because really if some of it were to roll off, our ratios would just look better anyway.

Nathan Race -- Piper Sandler & Co. -- Analyst

Right, got it. Okay, thanks for all the color.

Operator

[Operator Instructions] The next question will come from Chris McGratty with KBW.

Mariner Kemper -- President, Chairman, and Chief Executive Officer

Good morning, Chris.

Andrew Leisner -- KBW, Inc. -- Analyst

Hey. This is Andrew Leisner on for Chris McGratty.

Mariner Kemper -- President, Chairman, and Chief Executive Officer

Hey there.

Andrew Leisner -- KBW, Inc. -- Analyst

Have some questions. Just wondering, so, I noticed your fee income came up a little higher than expected. Can you just go into, I guess, the pieces of fees this quarter and what that run rate looks like going into the back half of the year? Thank you.

Mariner Kemper -- President, Chairman, and Chief Executive Officer

Yes. I mean high level, and I'll let my team jump in if they want to add color. But high level, I'd say it came really across the board. So in all of our asset-based businesses there was great business development, new client activity. The markets have been stronger than I think we all thought they would be. And certainly in my shop we felt that, we have felt that way. So really across all the asset-backed asset-based businesses, the activity has been very strong. And in our Corporate Trust business, with the economy opening back up, aviation trust businesses come back on. Yes, I mean, just really saw it across the board in all of our businesses. James mentioned strong asset growth, client growth in our private wealth business. You want to add anything else, James, there?

James Dennison Rine -- Vice Chairman

Well, we had additional swap income this quarter commercially. We saw additional growth with the KCA. We announced that in our capital markets group, the KCAS, another win in that group where you saw that fee income on -- what page would that be in the deck, 22?

Mariner Kemper -- President, Chairman, and Chief Executive Officer

An equity return on another investment.

James Dennison Rine -- Vice Chairman

Yes, another private investment, obviously not as large as Tattooed Chef but obviously outsized returns for our investments. And really, and Mariner, it's really across the board. Those would be a couple of the key highlights. And then also fee income on the account fees.

Mariner Kemper -- President, Chairman, and Chief Executive Officer

Yes. I would like to come back to the KCAS. You've seen the returns from Tattooed Chef, we don't expect to see those kinds of returns in that business every time. But you should expect to see us see liquidity events in our equity investments on an ongoing basis and as events by having one in this quarter.

Andrew Leisner -- KBW, Inc. -- Analyst

All right. Great. Thank you. And then just one more on the tax rate. It looks like it came in a little higher than last quarter in the previous two quarters. What do you think is a good run rate for the tax rate going forward? Thanks.

Ram Shankar -- Executive Vice President and Chief Financial Officer

Yes. We would say 16% to 18%, Andrew, for the full year 2021. Every quarter we adjust the tax rate based on just expected earnings and everything else. So, tends to jump around a little bit. But for the full year I would say 16% to 18%.

Andrew Leisner -- KBW, Inc. -- Analyst

Okay. Thank you.

Operator

The next question is a follow-up from Nathan Race with Piper Sandler.

Nathan Race -- Piper Sandler & Co. -- Analyst

Just a question going back to the discussion around fee income. The public finance and trading line continues to perform I think fairly well. And in the past you've talked about the upside of that business with greater infrastructure spending. So I was just wondering if you guys could kind of quantify if an infrastructure bill ends up going done kind of what's the earnings power that's yet to be realized within that line going forward?

Mariner Kemper -- President, Chairman, and Chief Executive Officer

You know, that's really hard to judge. They're still debating it in the first place, then you got to go through appropriations, and it's got to get distributed at the state levels and then they got a side where it's -- I think it's a pretty long path. It's hard to tell you when we might see that. So I don't know when we might see it. Certainly not in the next quarter. I mean, I don't know when we'll see that stuff. It still hasn't even made it out of Washington yet.

James Dennison Rine -- Vice Chairman

We can tell you though that we have approved and we are adding additional associates in that area, and we have seen success that's been documented as far as our activities, and we do anticipate it being beneficial for us.

Mariner Kemper -- President, Chairman, and Chief Executive Officer

Yes. I mean some of what we've seen there too is taxable municipals have made their way into the marketplace in a meaningful way. So, some of the business we've been underwriting is taxable municipals. So the market is changing, and there's a lot of liquidity. I think the real key here is regardless there's an enormous amount of liquidity. So institutions and banks are needing to deploy it. The commissions are different based on the kinds of securities that are being traded and built and sold, but there's a lot of activity still because of the liquidity. And that's what you're seeing. And I think you'll continue to see that probably up till the time through until the time that we do benefit from what might happen from infrastructure.

Nathan Race -- Piper Sandler & Co. -- Analyst

Got it. And just one other question around expenses. With the institutional segment still performing well, I'm curious if there's a shift in the structure of incentive compensation. I believe historically that business has had a higher variable comp component to it historically. So I'm just curious if any of that shifted more recently that kind of supports how expenses have been a little bit more controlled in terms of overall growth recently?

Mariner Kemper -- President, Chairman, and Chief Executive Officer

No. I would actually say the opposite. Some of the expense growth that we do have is from paying out on commissions and sales.

James Dennison Rine -- Vice Chairman

Right.

Mariner Kemper -- President, Chairman, and Chief Executive Officer

It's been more controlled than the other areas and what expense increases we have had is because of sales activities. We've tried to be more balanced over time to make sure that our sales officers are bringing in all the different types of business that we offer. So that's where we continue to tweak our sales incentives, is to make sure that our officers are become more generalists than specialists when it comes to selling all that we have to sell. And James?

James Dennison Rine -- Vice Chairman

Yes, we make sure that our incentives are balanced with what is in the best interest of the bank such as additional incentives for cross. And even though I don't know that the industry likes this term very much anymore as far as cross-sell activities. But we make sure we're partnering with the other lines and exposing different lines of business to different customer bases where they can have referral activity that makes sense. We're rewarding that activity more handsomely than in the past, where it benefits the bank. But just like any organization we constantly evaluate our programs, but they have not changed drastically or we're not seeing pressure from the market to do that. We believe we're extremely competitive, and actually the employer of choice for all our divisions. That was a little plug for UMB, for NA.

Mariner Kemper -- President, Chairman, and Chief Executive Officer

Yes, of course.

Nathan Race -- Piper Sandler & Co. -- Analyst

Very good. Thanks. I appreciate all the color. Again, thanks guys.

Operator

This will conclude today's question-and-answer session. And I would like to turn it back over to management for any closing remarks.

Mariner Kemper -- President, Chairman, and Chief Executive Officer

Well, thanks, we covered it all. Appreciate everybody's time.

Kay Gregory -- Director of Investor Relations and Senior Vice President

Yes. Thanks for joining us today. You can access this replay on our website. And as always, you can contact Investor Relations at (816) 860-7106 with any follow-up questions. Thanks for your interest and your time.

Operator

[Operator Closing Remarks].

Duration: 38 minutes

Call participants:

Kay Gregory -- Director of Investor Relations and Senior Vice President

Mariner Kemper -- President, Chairman, and Chief Executive Officer

Ram Shankar -- Executive Vice President and Chief Financial Officer

James Dennison Rine -- Vice Chairman

Jared David Wesley Shaw -- Wells Fargo Securities -- Analyst

Nathan Race -- Piper Sandler & Co. -- Analyst

Andrew Leisner -- KBW, Inc. -- Analyst

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