UMB FINANCIAL CORP Q3 FY2024 earnings call

• Loan Growth: Record loan production of $1.4 billion, near double-digit annualized loan growth, with commercial real estate and C&I driving growth.
• Fee Income: Strong growth in trust, securities processing, investment banking, and brokerage; private wealth team added $1B net new assets YTD.
• Credit Quality: Excellent, with net charge-offs at 8 basis points YTD and non-performing loans at 8 basis points of total loans.
• Deposit Growth: Average total deposits grew 11.1% annualized, with commercial DDA up 11%.
• Acquisition: On track to complete acquisition of Heartland Financial, with integration planning underway and legal day one anticipated in Q1 2025.

Loan Performance: Average loan balances had a 9.8% link quarter annualized increase. Loan growth was led by commercial real estate (multifamily balances up 13% link quarter) and C&I, with record top line loan production of $1.4 billion. Deposit Performance: Average total deposits grew $951 million or 11.1% on an annualized basis, with commercial DDA balances increasing 11% annually. Fee Income Performance: Strong fee income growth from various areas, including trust and securities processing, investment banking, brokerage; institutional assets under administration exceeded $0.5 trillion; private wealth team brought in $1 billion in net new assets year-to-date.

• Net Interest Margin: Expected to improve a few basis points in Q4 2024 due to wholesale funding maturities and repricing of index deposits.
• Earnings: GAAP earnings of $109.6 million or $2.23 per share, operating earnings $2.25 per share.
• Tax Rate: For 2025, preliminary estimate including HTLF acquisition is an effective tax rate of 21%-23%.

• Interest Rate Fluctuations: Impact on net interest margin and deposit betas, depending on timing and pace of rate cuts.
• Competition: Intense competition in lending and deposit markets affecting market share and pricing.
• Regulatory Changes: Potential impact on acquisitions and operations, e.g., FDIC proposal on public hearings for banks over $50B assets.

Q: Ben Gerlinger asked about deposit pricing, specifically indexed vs soft indexed deposits and pushback from clients.

A: Ram Shankar and Mariner Kemper discussed deposit betas, with 35% hard indexed, 18% soft indexed, and no significant pushback on indexed rates.

Q: Jared Shaw inquired about loan growth prospects in 2025 and NII accretion.

A: Mariner Kemper stated no impediments to growth seen, and Ram Shankar mentioned fourth quarter NII expected to be stronger due to repricing of index deposits.

Q: Nathan Race asked about HTLF acquisition cost synergy and FDIC proposal.

A: Mariner Kemper stated no delay expected from FDIC proposal, and they remain comfortable with the 27.5% cost-save target.

Q: David Long asked about deposit pricing rationality and lending appetite with rate cuts.

A: Mariner Kemper and Ram Shankar discussed deposit pricing rationality and that stronger economic activity could marginally increase lending appetite.

Q: Chris McGratty inquired about balance sheet optimization and deposit betas.

A: Ram Shankar discussed deposit betas and no plans to restructure earning assets beyond initial acquisition plans.

Q: Nathan Race followed up on Heartland Financial acquisition and FDIC proposal.

A: Mariner Kemper stated no delay expected in closing the acquisition in Q1 2025.