UMB FINANCIAL CORP Q1 FY2025 earnings call

• The acquisition of Heartland on January 31 added over $14 billion in deposits and more than doubled branch presence across 13 states, with cost synergies on track and systems conversion underway.
• Cultural integration of the two companies is progressing well, with HTLF bankers adapting to UMB's framework.
• Loan balances saw growth, with total top-line loan production exceeding $1.2 billion in Q1. Asset quality was strong, with legacy UMB loan charge offs low and non-performing loans at 8 basis points.
• Fee income showed growth across segments, including from wealth assets, trust and securities processing, and card volume. The institutional business saw assets under administration expand 16% year-over-year.
• Monitored impact of tariffs and economic conditions, with clients generally able to pass on costs currently.

For the first quarter, average loans increased 27.8% to $32.3 billion and average deposits increased 32.3% to $50.3 billion on a linked quarter basis. On a legacy UMB basis, loan balances had an 8.3% linked quarter annualized increase, and average total deposits increased 27.3% on a linked quarter annualized basis. Fee income saw growth across segments, with HTLF contributing fees from trust and security processing, interchange, and other sources. HTLF added approximately $17 million in fees for the two months it closed, with credit and debit card purchase volume at $5.4 billion in the first quarter, up 18.6% year-over-year.

• Second quarter core margin expected to be between 2.75% and 2.80%.
• On target to achieve cost synergies, with $17 million of quarterly run rate savings already achieved.
• Effective tax rate expected to average between 19% and 20% for full year 2025.
• March 31 common equity Tier 1 ratio in line with expectations at 10.1%.

• Uncertainty related to tariffs and general economic conditions, with impact on clients and potential long-term effects if uncertainty persists.
• Regulatory and market uncertainties that could affect financial performance and operations.

Q: Big picture question on NII trajectory and balance sheet flexibility.

A: Ram discussed data points like discrete tax items, share count, accretion, cost saves, and deployment of excess liquidity. Mariner noted strong loan growth pipeline.

Q: On core NIM outlook for second quarter.

A: Ram mentioned factors like additional month of Heartland's deposits, DDA impact, expected rate cut, and excess liquidity deployment.

Q: On credit charge offs from HTLF.

A: Mariner stated charge offs were normal course of business, with overall performance expected to be in line with historical trends and better on combined basis.

Q: On loan growth with Heartland.

A: Mariner discussed the thesis of the acquisition, new footprint opportunities, pent-up demand, and high-quality deals being seen in the Heartland footprint.

Q: On deposits and DDA growth.

A: Ram and Mariner discussed deposit base, delevering of brokered CDs, and combination of client growth and market fluctuations driving DDA.

Q: On interest rate sensitivity and reserve ratio.

A: Ram discussed interest rate sensitivity based on deposit and loan repricing, and reserve ratio based on CECL methodology and monitoring of macroeconomic variables.

Q: On non-interest income trends and card business.

A: Mariner and Ram discussed fee income trajectory, mark-to-market impacts, and growth opportunities in card business and institutional fee segments.

Q: On integration of Heartland and bank M&A interest.

A: Mariner discussed immediate cultural integration and momentum, technical conversion in October, and focus on maximizing current acquisition before considering future M&A.