Earnings call transcript: UMB Financial Q2 2025 sees strong earnings beat

UMB Financial Corporation reported robust second-quarter earnings, significantly surpassing analyst expectations. The company recorded earnings per share (EPS) of $2.96, beating the forecast of $2.37 by 24.89%. Revenue reached $689.21 million, exceeding the projected $635.86 million. Following the announcement, UMB Financial’s stock rose by 3.46% in after-hours trading, reflecting investor confidence in the company’s performance. With a market capitalization of $8.58 billion, UMB has demonstrated strong momentum, as highlighted by InvestingPro data showing a 13.44% revenue growth over the last twelve months.

Key Takeaways

• UMB Financial’s EPS of $2.96 exceeded forecasts by 24.89%.
• Revenue was 8.39% higher than expected, at $689.21 million.
• Stock price increased by 3.46% in after-hours trading.
• Significant gains from private investment entities contributed to earnings.
• Loan growth outpaced peers, with a notable increase in average loan balances.

Company Performance

UMB Financial demonstrated strong performance in the second quarter of 2025, driven by strategic investments and product innovations. The company’s net income available for common shareholders was $215.4 million, bolstered by gains from private investment entities and the successful pilot conversion of Heartland’s Minnesota franchise. UMB’s strategic focus on expanding mortgage products and acquiring new clients in fund services also contributed to its robust financial results. InvestingPro analysis reveals that UMB has maintained dividend payments for 55 consecutive years, with 32 years of consecutive dividend increases, demonstrating remarkable financial stability. Get access to 8 more exclusive InvestingPro Tips and comprehensive financial metrics with an InvestingPro subscription.

Financial Highlights

• Revenue: $689.21 million, up from forecasts
• Earnings per share: $2.96, a significant increase over the expected $2.37
• Net income: $215.4 million for common shareholders
• Average loans: Increased by 12.7% to $36.4 billion
• Average deposits: Increased by 10.7% to $55.6 billion

Earnings vs. Forecast

UMB Financial’s second-quarter earnings per share of $2.96 exceeded the forecast of $2.37 by 24.89%, marking a substantial earnings surprise. Revenue also surpassed expectations, reaching $689.21 million, an 8.39% surprise compared to the projected $635.86 million. This performance reflects the company’s strategic investments and operational improvements.

Market Reaction

Following the earnings announcement, UMB Financial’s stock price rose by 3.46%, closing at $110.21 in after-hours trading. This increase reflects positive investor sentiment, driven by the company’s strong financial results and promising outlook. Trading at a P/E ratio of 14.5x and currently sitting near its 52-week high of $129.94, InvestingPro’s Fair Value analysis suggests the stock is slightly overvalued at current levels. The stock’s movement contrasts with the broader market trends, showcasing UMB’s resilience and growth potential, supported by three analysts recently revising their earnings estimates upward for the upcoming period.

Outlook & Guidance

Looking ahead, UMB Financial anticipates continued positive operating leverage and expects full realization of projected $124 million in cost savings. The company projects third-quarter operating expenses to range between $380 million and $385 million, with an effective tax rate of 19-21%. UMB remains focused on leveraging its business model to navigate varying economic environments.

Executive Commentary

Mariner Kemper, CEO, emphasized the company’s strategic focus, stating, "We remain focused on what we can control, leveraging our business model, which is proven in all economic environments." CFO Ram Chonker highlighted the company’s approach to deposit pricing, noting, "Our deposit pricing doesn’t change unless the Fed starts cutting rates."

Risks and Challenges

• Economic fluctuations may impact loan growth and borrower sentiment.
• Changes in interest rates could affect deposit pricing and profitability.
• Competitive pressures in the banking sector may challenge market share expansion.
• Regulatory changes could affect operational strategies and cost structures.

Q&A

During the earnings call, analysts inquired about the drivers behind UMB’s loan growth, which was attributed to both legacy UMB and Heartland teams. Questions also focused on the impact of HSA market changes and the company’s strategy for deposit growth, primarily from institutional and commercial segments.

Full transcript - UMB Financial Corporation (UMBF) Q2 2025:

Jaylen, Conference Moderator: Good morning. Thank you for joining today’s UMB Financial Second Quarter twenty twenty five Financial Results Conference Call. My name is Jaylen, and I’ll be your moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the conference over to our host, Kay Gregory with Investor Relations.

Kay, please proceed.

Kay Gregory, Investor Relations, UMB Financial: Good morning, and welcome to our second quarter twenty twenty five call. Mariner Kemper, Chairman and CEO and Ram Chonker, CFO, will share a few comments about our results, then we will open the call for questions from our equity research analysts. Jim Rine, President of the Holding Company and CEO of UMB Bank, along with Tom Terry, Chief Credit Officer, will be available for the question and answer session. Before we begin, let me remind you that today’s presentation contains forward looking statements, including the discussion of future financial and operating results, benefits, synergies, gains and costs that the company expects to realize from the acquisition as well as other opportunities management foresees. Forward looking statements and any pro form a metrics are subject to assumptions, risks and uncertainties as outlined in our SEC filings and summarized in our presentation on Slide 50.

Actual results may differ from those set forth in forward looking statements, which speak only as of today. We undertake no obligation to update them except to the extent required by securities laws. Presentation materials are available online at investorrelations.umb.com and include reconciliations of non GAAP financial measures. All per share metrics refer to common shares and are on a diluted share basis. Now, I’ll turn the call over to Mariner Kemper.

Mariner Kemper, Chairman and CEO, UMB Financial: Thank you, Kay, and good morning, everyone. Thank you for joining us to discuss our second quarter results. We’ll share some brief comments then open up for questions. Compared to ninety days ago, the business environment and economic landscape remains positive as perceived real headwinds post Liberation Day have largely subsided. While there are still some uncertainties and ever brewing geopolitical tension, the sticker shock from the headlines seems to be wearing off.

Borrower sentiment continues to be strong, especially as you consider the financial strength of our customer base. Regardless of uncertainties, we remain focused on what we can control, leveraging our business model, which is proven in all economic environments, which you can see in our strong performance in the quarter. Our reported net income available for common shareholders of $215,400,000 included $13,500,000 of acquisition expense compared to $53,200,000 in the first quarter. Excluding these and some smaller nonrecurring items, our second quarter net operating income was $225,400,000 or $2.96 per share. One of these drivers for the quarter’s strong results was a $37,700,000 pretax gain on prior investments made through our various private investment entities.

Included was a pretax gain of $29,400,000 on an investment in Voyager Technologies, which went public in June. This equates to a multiple on invested capital of 5.8 times and an internal rate of return of 59%. This investment made over the past five years is another success story from our private investment team. Through this team, UMB partners with private businesses that have strong long term growth potential by taking equity, subordinated or mezzanine positions. We have a successful track record of financing businesses and have invested more than $200,000,000 across more than 50 businesses to date.

Other highlights of the quarter include an eight basis point expansion in our core net interest margin, double digit balance sheet growth, solid credit metrics and strong positive operating leverage. On a linked quarter basis, average loans increased 12.7% to $36,400,000,000 while average deposits increased 10.7% to 55,600,000,000.0 This reflects solid organic growth as well as the impact of the additional month of Heartland operations in the second quarter. Legacy UMB average loan balances increased 15.3% on an annualized basis from the prior quarter, once again outpacing many peer banks. Banks that have reported second quarter results so far have reported a 5.2% median annualized increase in average loan balances. Our loan balances were relatively flat quarter over quarter as top line production was offset by elevated payoff activity as we continue to align the portfolio to our standards.

Looking ahead into the third quarter, the loan pipeline remains strong both in legacy UMB and in card loan markets. Quarterly top line production was a new record coming in at $1,900,000,000 in the second quarter. We saw strong growth in C and I and CRE as well as an 11% increase in residential mortgage balances as we begin offering mortgage products in our new regions. We’ve been encouraged by the activity and production of our new Heartland associates. Net charge offs attributed to the legacy UMB portfolio in the second quarter were $9,000,000 or just 13 basis points of average UMB loans for the quarter, with the largest portion being credit card.

Total net charge offs for the quarter, including acquired loans, were 17 basis points. Given what we know today, we continue to expect charge off levels to remain near or below our historical averages in the second half of the year. Total nonperforming loans to total loans improved two basis points from the prior quarter to 26 basis points. Nonperforming loans related to legacy UMB were just 10 basis points. For reference, banks that have reported second quarter results so far have reported a 0.5% median NPL ratio.

We continue to rebuild capital following the acquisition with a CET1 ratio of 10.39%, a 28 basis point increase from March 31. During the second quarter, we completed an offering of Series B preferred stock netting $294,000,000 of Tier one capital. On July 15, we redeemed £115,000,000 in outstanding Series A preferred that was acquired in the HTLF deal. Finally, over the weekend of July 11, we successfully executed our pilot conversion of Heartland’s Minnesota franchise, bringing it onto the core UMB platform. This initial conversion of a small set of locations allowed us to test our conversion plans and procedures.

The process went smoothly and positions us well for the full conversion slated for mid October. A huge shout out to our teams, especially the technology, product and operations team as well as our client facing associates that have worked tirelessly around the clock enabling the seamless conversion. Now I’ll turn it over to Ram for more detail.

Ram Chonker, CFO, UMB Financial: Thanks, Mariner. I’ll begin with the purchase accounting update included on Slides nine and ten of our materials. On Page nine, you can see that our second quarter results included 42,200,000 in net accretion to net interest income, 13,100,000.0 of which was related to an accelerated accretion from early payoffs of acquired loans. The net benefit to margin from total accretion was approximately 27 basis points. Our operating expenses included $23,400,000 in acquisition related amortization of intangibles.

On Slide 10 is the projected contractual accretion for the rest of 2025 as well as for full years 2026 and 2027. On Slides twelve and thirteen, we’ve included some key highlights and drivers of our quarter over quarter variances as well as breaking out one time costs by expense categories. I hope this is helpful, especially with all the moving pieces related to the acquisition and market related variances. You’ll see the accretion income there along with the investment security gains Mariner mentioned. Other notable items impacting fee income in the second quarter included a $3,500,000 increase in trust and securities processing led by fund services, which brought on several new clients.

Assets under administration and fund services and custody grew to $543,000,000,000 while AUA for all institutional banking businesses topped $600,000,000,000 in the quarter. Additionally, credit and debit card purchase volumes reached $5,600,000,000 with the related interchange income driving a 10.4% increase in bank card fees compared to the first quarter. On the expense side, we had $13,500,000 of merger related costs and we’ve included the line item breakdown for those costs. We remain on track with our announced acquisition related expenses. Excluding the impact of merger and other one time costs, salaries and benefits expense increased by 21,300,000 largely driven by a full quarter of expenses for the new associates from Heartland.

Also as noted, we made charitable contributions of $8,300,000 in the quarter compared to $524,000 in the first quarter. Looking ahead, we would expect third quarter operating expense to be slightly higher in the $380,000,000 to $385,000,000 range, driven primarily by the full impact of the mid second quarter merit increases and increased incentive accruals for strong company performance as well as an additional day count. Our third quarter fee income will be impacted by changes in market value through every quarter end of our 904,000 share ownership in Voyager stock relative to the June 30 closing price of $39.25 This will continue in subsequent periods until we choose to exit our position. Turning to the balance sheet, we had strong deposit growth both organic and related to the full quarter of HTLF balances. Interest bearing and DDA balances increased 11.97.3% respectively from the first quarter.

The cost of interest bearing deposits remained flat at 3.34%, while total deposit costs increased two basis points reflecting the mix shift. Relative to the core margin of 2.83% in the second quarter that excludes all accretion, we expect third quarter margin to be essentially flat. The positive impact from fixed asset repricing on bonds and fixed rate loans will likely be offset by increased interest expense from the strong interest bearing deposit growth I just mentioned combined with a typical third quarter low point for DDA balances. Finally, our preferred dividend in the second quarter was $2,000,000 Dividends on the newly issued Series B shares will commence in the third quarter with a payment of $7,900,000 including a portion for the stub period that spans the issue date of June 12 through the interest payment date of July 15. Subsequent quarter preferred dividends will be $5,800,000 And our effective tax rate for the full year 2025 is expected to be between 1921%.

Now, I’ll turn it back over to the operator to begin the Q and A session.

Jaylen, Conference Moderator: We will now begin our Q and A session. For any reason you would like to remove that question, it is star followed by two. Again, to ask a question, it is star one. As a reminder, if you’re using a speakerphone, please remember to pick up your headset before asking a question. All questions are limited to one question and one follow-up.

I’ll pause briefly here as questions are registered. Our first question comes from Jon Arfstrom with the company RBC. Jon, your line is now open.

Ram Chonker, CFO, UMB Financial: Good morning, John. Thank you.

Jon Arfstrom, Analyst, RBC: Good morning. Good morning, everyone. This all looks good. And I just wanted to talk a little bit about loan growth. Maybe Mariner or Jim, that gross loan production number jumped quite a bit.

And can you just deconstruct that a little bit for us? How much of it is Heartland? How much of it is a rebound from ninety days ago? And how you expect that to trend generally going forward?

Mariner Kemper, Chairman and CEO, UMB Financial: Yeah. I I I think what I’d say about it is it’s kind of in line with our expectations. And in in the next quarter, it looks very similar on a combined basis. You know, we’re seeing strong production out of Heartland and just as strong as we ever have been with our own team. So, you know, both a nearly $2,000,000,000 quarter on top line, and we expect a similar number in the second quarter.

It’s coming across all categories, all verticals, all regions. It’s just, you know, the solid same story we’ve been telling for twenty years.

Jim Rine, President of Holding Company and CEO of UMB Bank, UMB Financial: And and we’ve seen nice activity from the Heartland team as well. Yeah. Not just legacy UMB.

Mariner Kemper, Chairman and CEO, UMB Financial: So Yeah. Their their their activity is is very solid, coming through, across across the board. So we’re really excited about what we’re seeing from from their team. I think there was some pent up demand, and, obviously, also, you have, the higher hold limits, etcetera. So, it’s opened the door for them quite a bit.

Jon Arfstrom, Analyst, RBC: Okay. Very good. And then just to to follow-up. Mariner, you made a comment about continuing to align the two portfolios. Curious how much of that is left to do.

And then if you could comment a little bit on payoffs and pay downs if you feel like they’re still a little bit elevated. Thank you.

Mariner Kemper, Chairman and CEO, UMB Financial: Yeah. So, you know, that we do expect without being able to identify any particular number or or credit for you to to to continue to, you know, align being sort of there are some credits that aren’t done the way ours are and that that may be a few that may or may not be here at the end of the year. But the payoffs on a combined basis should be immaterial to the balance sheet on whatever happens. So I guess that’s really the key I would tell you is whatever whatever does come from that realignment will not materially change our payoff levels on a combined basis.

Jaylen, Conference Moderator: Our next question comes from Jared Shaw with the company Barclays. Jared, your line is now open.

Jared Shaw, Analyst, Barclays: Good morning, Jared. Thanks. Good morning. Hey. Maybe first question, just have you given any thought to the impact of the HSA changes under the new budget bill and what that could potentially do for a longer term growth rate in deposits and fees?

Mariner Kemper, Chairman and CEO, UMB Financial: Jim, why don’t you take that?

Jim Rine, President of Holding Company and CEO of UMB Bank, UMB Financial: Yes. Hi, Jared. We have we’ve been monitoring it closely. As you know, originally, it was going to be much more sweeping and would open it up to roughly 20,000,000 folks that have not previously been eligible. Right now, we anticipate that number to be around 7,000,000.

While we do view it as an opportunity, it would be more marginal. There’ll be a lot of education that will go along with the new folks that are newly eligible, but we don’t anticipate it being a huge windfall for HSA business. We feel it will be more on the margin. We do have the sales teams and folks who would be able to provide that education as needed, but we do feel like it would be just more marginal.

Jared Shaw, Analyst, Barclays: Good color. Thanks. And then as my follow-up, just on expenses, if we look at expenses excluding merger costs as we go into 2026 after the integration, how should we think about sort of a longer term expense growth rate, you know, getting the getting the cost saves from the deal, but then offsetting that with some of the investments as you build out commercial? How should we think about sort of a longer term expense rate?

Ram Chonker, CFO, UMB Financial: Ram? Yes. Without giving specific guidance, Jared, I would say, we’ll get the second slug of cost saves from the transaction in the fourth and first quarters as we consolidate vendors and we complete our conversion process. And then I know we don’t specifically give guidance on expense growth rate because of our business model. It’s all about positive operating leverage and we want to keep improving operating leverage based on what the revenue environment is.

Without giving specific numbers, would just say, we’re going to achieve all the cost saves that we targeted generally from the Heartland transaction. And then in terms of investments, I mean, we have a pretty robust process in terms of how we intake projects. So there’s not a big pipeline of investments. And if there are investments, they always have a revenue component or an ROI associated with it. So there’s not a lot of pent up demand in that fashion for us to be spending and investing.

Jared Shaw, Analyst, Barclays: Okay. But maybe the way to think then then the way to think of it is is continued positive operating leverage from from the combined operations as we

Mariner Kemper, Chairman and CEO, UMB Financial: Absolutely. Absolutely. Yes. Yeah. And ultimately, operating leverage.

Ram Chonker, CFO, UMB Financial: Right.

Mariner Kemper, Chairman and CEO, UMB Financial: Yeah.

Jaylen, Conference Moderator: Our next question comes from Chris McGrady with the company KBW. Chris, your line is now open.

Ram Chonker, CFO, UMB Financial: Good morning, Chris. Hey, Greg.

Chris McGrady, Analyst, KBW: Good morning.

Mariner Kemper, Chairman and CEO, UMB Financial: Hey, Chris.

Greg, Analyst: Good morning. Ram, on the on the $124,000,000 cost saves that you identified at the time of the announcement, where I guess, how much have you realized so far? And then to Jared’s question or your answer, Q1, you’ll be through most of it. I’m just trying to get a sense of where that expense level before you start going.

Ram Chonker, CFO, UMB Financial: So last quarter, noted that on a run rate basis, we got $17,000,000 on a quarterly basis out of the run rate, which was higher than what we had planned when we announced the transaction. And then as I said last quarter also, in the second and third quarter, there was not a lot of opportunity of additional cost synergies just because the next big slug, as I said earlier, comes from conversion and consolidation of vendors. The big slug of cost saves will be more in the fourth quarter. So there was some cost saves in the second and some in the third, but not material, I would say. So yeah, the January we got on a quarterly basis 17,000,000 of that so far, and then we’ll get the rest of it in the fourth and first quarters.

And then on the and then in 2026, we’ll have some nominal growth in both the legacy and the legacy UMB and Heartland franchises. Again, without giving any specific numbers, we’re going to shoot for improved operating leverage.

Mariner Kemper, Chairman and CEO, UMB Financial: But but we do expect to get the the the we do expect to get the full save that we projected at announcement. Yeah. Absolutely. Yeah.

Greg, Analyst: Okay. And then just on the balance sheet, talked about the DDA hitting the trough in third quarter, think. Can you just remind us the pro form a seasonality with your deposit base? And then also what you plan to do with the investment portfolio, growing the portfolio, funding organic growth? Just trying to put a finer point on that.

Thanks.

Ram Chonker, CFO, UMB Financial: Yeah. If you look at the last couple of years, that’s a good barometer for what might happen with DDAs. We’ve had mid single digit contraction in DDA balances in the third quarter. So that’s probably something that happens very seasonally. Again, with DDAs, there’s a lot of interest in bond payments that go out.

So that’s why it’s very predictable from that standpoint. And then there’s no other big seasonal items in the third quarter. Public funds really starts building up in the fourth and first quarter. So there’s not a lot of other things. But as you saw in our third quarter results and as you guys rightly recap, we saw some strong interest bearing deposit growth in the second quarter, right?

Most of that is business related and we’ll stick on. And then on the bond portfolio side, on a combined basis, so at the quarter end, we had about $10,000,000,000 of cash sitting on our balance sheet earning $440,000,000 We’ve since deployed a lot of that. And today, it’s around $5,000,000,000 So we have continued our overbuy and prebuy activities as part of our bond portfolio purchases. So we’d expect our bond portfolio to be about $17,000,000,000 and then the excess liquidity could be another 6,000,000,007 billion dollars So that kind of rounds out what our earning asset base might look like in the third quarter.

Jaylen, Conference Moderator: Our next question comes from Ben Gurlingen with the company Citi. Ben, your line is now open.

Ben Gurlingen, Analyst, Citi: Hey, Good morning. Just wanted to first, the last answer you gave on security was really helpful. I was kind of curious if we could switch to just the front and back book of deposit pricing itself given that Harlan was added in kind of, let’s call it, the middle of one q and two q. So it’s it’s kind of apples and oranges. When you look at the core margin, Ram, I know you said it was gonna be flat linked quarter, but I just kinda curious.

What was, the June core margin? I’m just trying to get a sense of the overall kind of run rate throughout the quarter.

Ram Chonker, CFO, UMB Financial: I don’t know if I have it handy or I don’t know if that’s material, Ben, in terms of what June was. There’s a lot of things that happened in terms of accrual. Obviously, purchase accounting adjustments can happen. I know you asked for core margin. You know, my guidance for flat NIM, you know, as I explained in my prepared comments, is pretty good in a lot of tailwinds and a couple of headwinds including the DDA seasonality that I talked about.

So I’m not sure what else I can add there.

Ben Gurlingen, Analyst, Citi: Gotcha. Okay. And then I know you’ve had some larger, call it, unscheduled, purchase accounting or early payoffs, I should say. Is there something that’s causing that? Because we haven’t seen much rate movement.

I know it’s usual with with deals. Just kinda curious. Is is there an underlying driver?

Mariner Kemper, Chairman and CEO, UMB Financial: Yeah. We just they’re just we we talked about the alignment on the Heartland portfolio. So it’s just moving out a couple credits that you know, earlier in the year than than predicted.

Jaylen, Conference Moderator: Our next question comes from Nathan Rice with the company Piper Sandler. Nathan, your line is now open.

Kay Gregory, Investor Relations, UMB Financial0: Hey, everyone. Good morning. Thanks for taking the

Ram Chonker, CFO, UMB Financial: Good morning, Nathan. Of course. Just going

Kay Gregory, Investor Relations, UMB Financial0: back to the Norwegian discussion, I appreciate the flat guide for the third quarter, but just given that it seemed like both loan and deposit growth is somewhat margin accretive, I know you had benefit from Heartland as well in the quarter, but assuming the Fed remains on pause, you think there is an upward bias to the margin in the fourth quarter and maybe thereafter, again assuming the Fed remains on pause? But even if we got some cuts, imagine the margin could still expand just given what you have repricing on the deposit side.

Ram Chonker, CFO, UMB Financial: Yes, potentially, Nate. And as you know, we have 45% of our deposits are indexed. In the short term, to year. Timing the reasons for pausing that. So so I would say at the margin, not having rate cuts can be neutral to slightly down for for margin expectations because deposit costs won’t move.

Right? And then as we said in the call before, our deposit pricing doesn’t change unless the Fed starts cutting rates. And then in terms of, you know, the other positive headwinds, if you will, for the margin, we’ve talked about fixed asset repricing. If you look at our treasury waterfall that we say in the page 20, we have $1,800,000,000 of cash flows coming from our bond portfolio that are being reinvested 120 basis points higher. We have a similar phenomenon going on with the fixed rate loans that can also go up 200 basis points.

And then as you look at third quarter, the only tailwind besides the day effect, the other day effect on an average can impact our margins by two to three basis points because we have a lot of thirty three sixty products. And then the only thing that can, act negatively or positively is the level of DDAs, which, I talked about. It could be down mid single digits.

Kay Gregory, Investor Relations, UMB Financial0: Right. That’s very helpful. Maybe switching to fee income, and specifically fund services. That revenue line has grown at least at a high single digit pace over the last handful of years. Just curious with the

Mariner Kemper, Chairman and CEO, UMB Financial: law of large numbers maybe catching up with you guys, if you think that rate of growth is still sustainable going forward within fund services? Yeah. I I think absolutely. That’s really great tailwinds for that business. We, you know, have exceptional service ratings from from our client base in the in the in the industry, and the technology stack is great.

There’s a lot of disruption stuff that I’ve been saying, you know, in the calls for some time continues to persist the environment for our team. On the alternative side, there’s a lot of product being built and a lot of of our current so we’re bringing on a lot of business. We’re also benefiting from a a lot of platforms that are doing very, very well. So it’s a combination of the client base doing very well as well as bringing on a lot of new business. The pipeline remains very, very strong.

We are kind of the dominant player in the private space. We win almost everything that, we bid on, and it’s it’s, the tailwinds are excellent.

Kay Gregory, Investor Relations, UMB Financial0: Very helpful. I appreciate all the color. Thanks, guys.

Mariner Kemper, Chairman and CEO, UMB Financial: Thanks, Nate.

Jaylen, Conference Moderator: Our next question comes from Brian Wojciechowski with the company Morgan Stanley. Brian, your line is now open.

Chris McGrady, Analyst, KBW: Good morning, Hi. Good morning. Hey, I was wondering if we could circle back to credit quality at Heartland. So good to see non performing loans down Q on Q. I was wondering if you could just elaborate on what you’re seeing in that portfolio and how you’re thinking about the path for NCOs as you work through that?

Thanks.

Mariner Kemper, Chairman and CEO, UMB Financial: Yeah. So take the you you hit NPLs and in charge offs. I’ll start with NPLs. You’ll see on a linked quarter basis, they’ve already started coming down. We expect month over month, quarter over quarter for that number to continue to come down as we work the portfolio.

Charge offs, I would just point you back to the overall statement I said about the company. On a combined basis, as we’ve gotten our arms around their portfolio and ours continues to perform, we expect the second half of the year to perform at our at or near our historic averages with with what we know. So we feel very good about getting our arms around their portfolio and and and are are pleased with the path we’re on. And the team that they have is fantastic, so we’re really excited about the production that we’re getting out of the team. So across the board, really good.

And the direction, we feel pretty good about the direction and just kinda month over month, quarter over quarter improvement from kind of where we are on the NPL side.

Chris McGrady, Analyst, KBW: That’s really helpful. Thank you. And then I was wondering if you could comment on what you’re seeing in terms of deposit competition across your markets as the macro environment gets better, maybe industry wide loan growth picks up? Just wondering what you’re seeing and what you’re expecting from a deposit pricing perspective.

Mariner Kemper, Chairman and CEO, UMB Financial: Well, so you’ve got our there’s put it in two buckets, really. You’ve got our commercial and our institutional, and you’ve got our consumer business. And the consumer the the commercial and institutional for us, very easy for us to build, but it comes with pretty much straight down the middle of fairway competitive pricing. So we can bring on as much of that as we want as long as we pay basically institutional money market like rates. So that’s kinda what corporate and institutional looks like.

So that’s kinda ever we can have that grow at whatever rate we want that to grow at. And then on the on the small business and consumer, you know, we’ve we’ve we’ve seen kinda one to 2% growth rate there. That’s obviously we can control that a bit better. And now that we’ve doubled our branch network and we picked up all the Heartland team and we’re doing a complete refresh of the branches. We’re in the market now on a regular basis with campaigns.

We we think we can, you know, get our share of the consumer deposits in the markets that we’re in now. Now that we’ve increased, you know, we’re in six new states with double the branch network. So we’re excited about what we’re able to do. It’s little early to tell you what those results would look like, but being in the market, doing campaigns, with double the branch network, we feel pretty good about getting some lift out of our consumer business.

Jaylen, Conference Moderator: Our next question comes from David Long with the company Raymond James. David, your line is now open.

Ram Chonker, CFO, UMB Financial: Good morning, David.

Kay Gregory, Investor Relations, UMB Financial1: Thank you. Good morning, everyone. Good morning.

Ram Chonker, CFO, UMB Financial: Good morning.

Kay Gregory, Investor Relations, UMB Financial1: With the HCL acquisition, you talked about some of the credit and the loan demand and what have you. But what’s going on in the fee revenue side? Are are you realizing any synergies there from the HDL franchise at this point?

Mariner Kemper, Chairman and CEO, UMB Financial: It’s we’re starting to see the the energy. It’s gonna be a while before we really realize that. We are we we have started selling credit cards. Do you have that committed to your memory?

Jim Rine, President of Holding Company and CEO of UMB Bank, UMB Financial: Credit credit cards, we’ve had additional 270 in mortgage loan applications throughout the HCLF network. We also feel like it’s going to be a great opportunity for corporate trust referrals. So, again, as Mariner said, more to come, but we’re already seeing nice activity.

Mariner Kemper, Chairman and CEO, UMB Financial: Yeah. The energy level and the pipelines are building. Conversations are taking place. Not a lot to report on on the results yet, but feeling good about the activity levels and the direction.

Kay Gregory, Investor Relations, UMB Financial1: Great. Appreciate the color. That’s all that I have. Thanks.

Ben Gurlingen, Analyst, Citi: Thanks, Dave.

Jaylen, Conference Moderator: Our next question comes from Timur Braziler with the company Wells Fargo. Timur, your line is now open.

Ben Gurlingen, Analyst, Citi: What’s up, Timur? How are you?

Kay Gregory, Investor Relations, UMB Financial1: Hi. Good morning. Good morning. Keeping on the Heartland theme, just the contribution to balance sheet growth this quarter was a little surprising as to how fast it came online. I’m just wondering, are they at capacity here?

Is there additional ramp in terms of that growth rate? And ultimately, when it is at full capacity, how much more contribution are you expecting for the balance sheet growth rate from Huddl relative to the two two levels?

Mariner Kemper, Chairman and CEO, UMB Financial: Yeah. I think there’s probably a bit of a miss on on maybe how we’ve talked about that or what that looks like. I think there’s a

Jim Rine, President of Holding Company and CEO of UMB Bank, UMB Financial: we’re at

Mariner Kemper, Chairman and CEO, UMB Financial: the very beginning of what that that can look like. They’re we’re we’re just beginning to see what what can come out of those guys, to be honest. So that so yeah. I mean, we’re we’re barely seeing what’s possible there. They had a good quarter, but we’re just at the beginning.

I mean, there’s there’s a a huge potential out of the the whole the whole franchise. Great team. And I guess that’s what I say is I think I think we we we that’s a bit of a miss on kind of where we are with with what they’re able to contribute. They’re on they’re on the front end of what they’re gonna be able to contribute. Okay.

Kay Gregory, Investor Relations, UMB Financial1: Got it. And then I guess going back to the deposit pricing competition, just looking at the linked quarter change in interest bearing deposit costs, I would have thought the added contribution or the full contribution from Heartland would have brought that down maybe a little bit more. Can you just talk to what core kind of IB deposit, costs increased in 2Q? And as we head into the third quarter, what that expectation is for deposit costs going higher given the seasonality in DDA plus the competition on the commercial deposit side?

Ram Chonker, CFO, UMB Financial: Yeah. Hey, Timur. And the cost didn’t go up or they were stable, right, at $3.34 quarter over quarter. You’re right with the addition of Heartland, it should have maybe gone down a couple of basis points. But as I noted in my prepared comments, we had some really robust interest bearing deposit growth both in the middle market and institutional space.

And those tend to come slightly priced higher than where our current portfolio yield of 3.34% is and versus the new money rates are more like 4%. So it’s not like the costs are increasing. It’s just a mix of getting more of these deposits coming in that change the trajectory of our interest bearing deposit costs.

Mariner Kemper, Chairman and CEO, UMB Financial: More growth of balance sheet than it is Yeah. Competition. I mean Yeah. It’s not,

Ram Chonker, CFO, UMB Financial: yeah, it’s not driven by competition.

Mariner Kemper, Chairman and CEO, UMB Financial: Right? Yeah. We we’re not those those those rates are not up because we’re defending our book. It’s just it’s just pure growth.

Jaylen, Conference Moderator: Again, if you like to ask a question, it is star followed by one on your telephone keypad. Again, that is star followed by one to ask a question. At this time, there are no more questions registered in queue. I’d like to pass the conference over to our management team for closing remarks.

Mariner Kemper, Chairman and CEO, UMB Financial: Thanks everybody for getting on the call with us. We’re really excited about the quarter and results from our perspective were strong across the board really on every level. And the acquisition, we’re very excited about the team, the results. We didn’t end up really talking about capital markets. So I wanna make sure everybody understands that that was that the Voyager gain is is while we can’t predict when these things are gonna come, we do have a very strong private investments team, and we’re excited about continuing to report on things that will come out of that group for you.

And otherwise, thanks for listening, and we’re we’re we’re really excited about how things are coming together with with Harlan.

Kay Gregory, Investor Relations, UMB Financial: Thanks, Mariner, and thanks everyone for joining us today. If you have follow-up questions, you can always reach us at (816) 860-7106. Thank you, and have a great day.

Jaylen, Conference Moderator: That will conclude today’s conference call. Thank you for your participation, and enjoy the rest of your day.

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