Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- UMB Financial Corp (UMBF, Financial) reported strong fee business performance with a near double-digit annualized loan growth driven by record top line loan production of $1.4 billion.
- The company achieved GAAP earnings of $109.6 million or $2.23 per share, with operating earnings slightly higher at $2.25 per share.
- UMB Financial Corp (UMBF) saw a significant increase in fee income, particularly in institutional business, with assets under administration exceeding half a trillion dollars.
- The company reported excellent credit quality with just eight basis points of net charge-offs year-to-date and non-performing loans also at eight basis points of total loans.
- UMB Financial Corp (UMBF) is on track to complete its pending acquisition of Hartland Financial, which is expected to accelerate growth strategy and further diversify its business model.
Negative Points
- The company's net interest margin decreased by five basis points sequentially to 2.46%, largely due to a decline in average DDA balances.
- UMB Financial Corp (UMBF) experienced a higher provision expense in the quarter, reflecting the impact of loan growth and some general portfolio trends.
- The cost of interest-bearing deposits increased quarter over quarter due to new institutional deposit growth.
- There was a decrease of $601 million in DDA balances, impacting net interest margin by five basis points.
- The company noted that its consumer credit card portfolio, acquired recently, had a different credit profile than normally underwritten, leading to higher net charge-offs.
Q & A Highlights
Q: Can you discuss the pricing of deposits and any trends you've observed as we move into the fourth quarter?
A: About 35% of our deposits are hard-indexed, adjusting immediately with market rates, and another 18% are soft-indexed, negotiated at prevailing rates. We achieved close to 90% beta on our index deposits following the recent rate cut. Additionally, the third quarter is typically a low point for DDAs due to seasonality, so we expect some build-up in the fourth quarter. β Ram Shankar, CFO
Q: Are you seeing any pushback from clients when lowering deposit rates, especially on negotiated components?
A: There is no pushback on the index deposits and very little on the soft index. Clients generally expect rates to drop, and we haven't encountered significant challenges in this area. β Mariner Kemper, President & CEO
Q: With strong fee income performance, is the current level sustainable going into 2025?
A: We feel confident about our fee income trajectory. All our fee income businesses are performing well, with significant growth in off-balance sheet deposits, fund services, and trading and investment banking income. The only non-core item was a $1.1 million gain on the sale of a building. β Ram Shankar, CFO
Q: Could you provide an update on the expected accretion as part of net interest income for 2025?
A: We don't typically refresh our accretion analysis until close. However, given the current direction of rates, we expect a positive impact on interest rate marks and capital. β Ram Shankar, CFO
Q: How do you view the competitive landscape for loan growth, and are there any changes in terms of structure or rates?
A: The competitive landscape remains consistent, with no new changes. We continue to focus on quality and are confident in our ability to win business. β Mariner Kemper, President & CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
