Group 1 - UMB Financial's shares have increased by 19% over the past year, driven by strong loan quality and an accretive acquisition [1] - The acquisition is expected to help UMB Financial build scale across key markets and unlock efficiency gains [1]

Core Viewpoint - UMB Financial Corp. reported strong operating earnings in Q1 2025, driven by increased net interest income and non-interest income, despite challenges from weak asset quality and rising non-interest expenses [1][10]. Financial Performance - Operating earnings per share for Q1 2025 were $2.58, exceeding the Zacks Consensus Estimate of $2.21 and up from $2.47 in the same quarter last year [1]. - Net income on a GAAP basis was $81.3 million, reflecting a 26.2% decline year over year [2]. - Quarterly revenues reached $571.3 million, a 41% increase year over year, surpassing the Zacks Consensus Estimate by 2.9% [3]. - Net interest income (NII) on a fully taxable equivalent (FTE) basis was $405.1 million, up 64.7% from the prior-year quarter, with a net interest margin (NIM) of 2.96% compared to 2.48% a year ago [3]. Income and Expenses - Non-interest income totaled $166.2 million, a 4.4% increase year over year, primarily due to growth in trust and securities processing, service charges, and brokerage income [4]. - Non-interest expenses rose to $384.8 million, a 51% increase year over year, driven by higher salaries, legal and consulting expenses, and amortization of intangibles [4]. - The efficiency ratio was 65.19%, up from 63.44% in the prior-year quarter, indicating a decrease in profitability [5]. Loans and Deposits - Average loans and leases as of March 31, 2025, were $32.3 billion, a 27.8% sequential increase, while average deposits rose 32.3% year over year to $50.3 billion [6]. Credit Quality - The ratio of net charge-offs to average loans was 0.45%, significantly higher than 0.05% in the prior-year quarter [7]. - Total non-accrual and restructured loans amounted to $100.9 million, up from $17.8 million a year ago [7]. - The provision for credit losses was $86 million in Q1 2025, compared to $10 million in the same quarter last year [7]. Capital Ratios - As of March 31, 2025, the Tier 1 risk-based capital ratio was 10.35%, down from 11.09% a year earlier, while the Tier 1 leverage ratio improved slightly to 8.47% from 8.39% [8]. - The total risk-based capital ratio decreased to 12.54% from 13.03% in the prior-year quarter [8]. Profitability Ratios - Return on average assets was 0.54%, down from 1.06% in the year-ago quarter [9]. - Operating return on average common equity was 12.47%, compared to 15.44% in the prior-year quarter [9].

Financial Data and Key Metrics Changes - The company reported a strong first quarter with net operating income available to common shareholders of $168.9 million, or $2.58 per share, excluding merger-related and non-recurring charges [9][21] - Average loans increased by 27.8% to $32.3 billion, while average deposits rose by 32.3% to $50.3 billion on a linked quarter basis [9][10] - The operating efficiency ratio improved to 55.6%, and the operating return on assets (ROA) reached 1.14% [8] Business Line Data and Key Metrics Changes - Fee income for the quarter was reported at $166.2 million, impacted by $5.2 million in mark-to-market losses on certain equity investments [21] - Credit and debit card purchase volume increased by 18.6% year-over-year, surpassing $5.4 billion for the first time [13] - Assets under administration in institutional businesses grew by 16% year-over-year, reaching $559 billion, with corporate trust assets increasing by 25% [14] Market Data and Key Metrics Changes - The company noted an 8.3% linked quarter annualized increase in loan balances on a legacy UMB basis, outperforming peer banks that reported a median increase of 3.3% [10] - Nonperforming loans related to legacy UMB were just eight basis points, consistent with prior quarters, while the median NPL ratio for peer banks was reported at 8.45% [12] Company Strategy and Development Direction - The acquisition of Heartland added over $14 billion in deposits and more than doubled the branch presence across 13 states, with a focus on achieving cost synergies and cultural integration [6][7] - The company aims to leverage the lower-cost, granular core deposits from the acquisition to enhance its net interest margin [7][8] - The management expressed confidence in the growth opportunities presented by the acquisition, particularly in new markets and with new clients [68][70] Management's Comments on Operating Environment and Future Outlook - Management is closely monitoring the impact of tariffs and general economic conditions, noting that most clients are currently able to pass on costs [16][17] - The company expects to maintain strong loan growth driven by market share gains rather than economic activity, with a robust production pipeline for the upcoming quarters [39][70] - Management emphasized their role as risk managers and their preparedness to navigate periods of uncertainty [17] Other Important Information - The effective tax rate for the first quarter was 12.6%, including a benefit from the remeasurement of deferred tax assets [23] - The company expects second quarter margins to range between 2.75% and 2.8%, influenced by various factors including excess liquidity and Fed rate movements [23][24] Q&A Session Summary Question: Can you help us with the near-term NII trajectory? - Management highlighted that the first quarter EPS included a one-time tax benefit and noted adjustments for share count and mark-to-market impacts, indicating a positive outlook for future quarters [33][34][36] Question: What are the assumptions for core NIM in the second quarter? - Management expects core NIM to remain stable, influenced by additional month contributions from Heartland and potential rate cuts [50][52] Question: Any common thread among HTLF net charge-offs? - Charge-offs were identified through diligence and were part of normal business operations, with expectations for overall performance to align with historical trends [54][56] Question: How will Heartland contribute to loan growth? - The acquisition is expected to enhance growth through a larger deposit base and improved operational efficiency, with a strong pipeline of high-quality deals already emerging [68][70] Question: What is the outlook for deposit growth and DDA? - Management indicated that deposit growth is driven by client acquisition and higher average balances, with expectations for stability in the second quarter [86][90] Question: What is the plan for excess cash and balance sheet management? - The company plans to deploy excess cash into investments over the next three to six months, evaluating opportunities in treasuries and other securities [43][44] Question: How is the company addressing credit quality post-acquisition? - Management is aligning the acquired portfolio with UMB standards, ensuring that underwriting practices maintain high-quality credit performance [108][112]

Financial Data and Key Metrics Changes - The company reported a strong first quarter with net operating income available to common shareholders of $168.9 million, or $2.58 per share, excluding merger-related and non-recurring charges [7] - Average loans increased by 27.8% to $32.3 billion, while average deposits rose by 32.3% to $50.3 billion on a linked quarter basis [7][8] - The operating efficiency ratio improved to 55.6%, and the operating return on assets (ROA) reached 1.14% [6] Business Line Data and Key Metrics Changes - Fee income for the quarter was reported at $166.2 million, impacted by $5.2 million in mark-to-market losses on certain equity investments [19] - Credit and debit card purchase volume increased by 18.6% year-over-year, surpassing $5.4 billion for the first time [11] - Assets under administration in institutional businesses grew by 16% year-over-year, reaching $559 billion, with corporate trust assets increasing by 25% [12] Market Data and Key Metrics Changes - The company noted an 8.3% linked quarter annualized increase in loan balances, outperforming the median annualized increase of 3.3% reported by peer banks [8] - Nonperforming loans related to legacy UMB were just eight basis points, consistent with prior quarters, while the median nonperforming loan ratio for peer banks was reported at 8.45% [10] Company Strategy and Development Direction - The acquisition of Heartland added over $14 billion in deposits and more than doubled the branch presence across 13 states, with a focus on achieving cost synergies and cultural integration [5][6] - The company aims to leverage the lower-cost, granular core deposits from the acquisition to enhance its net interest margin [6] - Future growth is expected to come from market share gains rather than economic activity, with a strong production pipeline anticipated for the second quarter [34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to pass on costs to clients amid tariff uncertainties, indicating that most clients are currently able to manage these costs [15][89] - The company is closely monitoring the evolving tariff situation and its potential impacts on clients, emphasizing a proactive approach to risk management [15] - Overall, management expects the combined companies to perform in line with historical trends, maintaining a focus on high-quality growth [51][104] Other Important Information - The effective tax rate for the first quarter was 12.6%, including a $5 million benefit from the remeasurement of deferred tax assets [21] - The company expects to achieve greater than 40% of the identified cost synergies in calendar year 2025 due to the earlier-than-expected close of the Heartland acquisition [20] Q&A Session Summary Question: Comments on bridging the earnings run rate and near-term NII trajectory - Management highlighted that the first quarter EPS included a one-time tax benefit and noted adjustments for share count and mark-to-market impacts [29][30] Question: Outlook for core NIM in the second quarter - Management expects core NIM to range between 2.75% and 2.8%, influenced by additional month of Heartland's deposits and potential rate cuts [44][46] Question: Update on loan growth opportunities with Heartland - Management emphasized the potential for growth from Heartland's lower-cost deposits and larger footprint, with strong early indications from the loan pipeline [60][61] Question: Interest rate sensitivity following the acquisition - Management indicated a liability-sensitive position in the first year but expected to become more asset-sensitive in the second year due to loan repricing dynamics [118][120]

Financial Highlights - UMB Financial Corporation's market capitalization is $7.7 billion[5] - Total assets reached $69.3 billion[5] - Gross loans amounted to $35.9 billion[5] - Total deposits totaled $58.5 billion[5] - Institutional Assets Under Administration (AUA) reached $558.9 billion[5] - The Common Equity Tier 1 Capital Ratio is 10.11%[5] - The Total Risk Based Capital Ratio is 12.54%[5] Q1 2025 Performance - Commercial & Personal Banking Services revenue was $398.9 million, with average deposits of $33.7 billion[9] - Institutional Banking Services revenue was $164.9 million, with average deposits of $16.6 billion[12] - Net Interest Income (NII) was $397.6 million, including Purchase Accounting Adjustments (PAA) accretion of $28.6 million[62] - Net income available to common shareholders (GAAP) was $79.3 million, or $1.21 per diluted share[62]

Core Insights - UMB Financial (UMBF) reported a revenue of $571.34 million for Q1 2025, marking a 41% year-over-year increase and exceeding the Zacks Consensus Estimate by 2.99% [1] - The earnings per share (EPS) for the same quarter was $2.58, up from $2.47 a year ago, representing a surprise of 16.74% over the consensus estimate of $2.21 [1] Financial Performance Metrics - Efficiency Ratio (GAAP) was reported at 65.2%, higher than the average estimate of 59.5% from four analysts [4] - Net interest margin (FTE) stood at 3%, slightly above the average estimate of 2.9% from four analysts [4] - Net loan charge-offs as a percentage of total average loans were 0.5%, exceeding the average estimate of 0.2% from three analysts [4] - Average balance of total earning assets was $55.54 billion, surpassing the average estimate of $53.50 billion from three analysts [4] - Tier 1 risk-based capital ratio was reported at 10.4%, above the average estimate of 9.6% from two analysts [4] - Tier 1 Leverage Ratio was 8.5%, compared to the estimated 8.1% from two analysts [4] - Total Risk-based Capital Ratio was 12.5%, exceeding the average estimate of 11.6% from two analysts [4] - Net interest income (FTE) was $405.14 million, higher than the average estimate of $381.93 million from four analysts [4] - Total noninterest income was $166.20 million, below the average estimate of $177.22 million from four analysts [4] - Bankcard fees reached $26.29 million, exceeding the average estimate of $21.50 million from three analysts [4] - Service charges on deposit accounts were $27.46 million, lower than the average estimate of $32.17 million from three analysts [4] - Trust and securities processing income was $79.78 million, slightly above the average estimate of $79.38 million from three analysts [4] Stock Performance - UMB shares have returned -5.1% over the past month, compared to a -0.8% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]

Company Performance - UMB Financial (UMBF) reported quarterly earnings of $2.58 per share, exceeding the Zacks Consensus Estimate of $2.21 per share, and up from $2.47 per share a year ago, representing an earnings surprise of 16.74% [1] - The company posted revenues of $571.34 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 2.99%, compared to year-ago revenues of $405.19 million [2] - UMB has surpassed consensus EPS estimates for four consecutive quarters and has also topped consensus revenue estimates four times over the last four quarters [2] Stock Outlook - UMB shares have declined approximately 15% since the beginning of the year, while the S&P 500 has decreased by 6% [3] - The current consensus EPS estimate for the upcoming quarter is $2.26 on revenues of $627.87 million, and for the current fiscal year, it is $9.35 on revenues of $2.48 billion [7] - The estimate revisions trend for UMB is currently unfavorable, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [6] Industry Context - The Zacks Industry Rank for Banks - Midwest, to which UMB belongs, is currently in the top 10% of over 250 Zacks industries, suggesting a favorable industry outlook [8]

Financial Data and Key Metrics Changes - The company reported a 26.1% year-over-year increase in net income for 2024, indicating strong balance sheet growth and solid capital metrics [2][3]. Business Line Data and Key Metrics Changes - The acquisition of Heartland Financial, which closed on January 31, 2024, is noted as the largest in the company's history, aimed at expanding core services and capabilities [2][3]. Market Data and Key Metrics Changes - No specific market data or key metrics changes were provided in the meeting [2][3]. Company Strategy and Development Direction - The company is focused on integrating Heartland Financial to create a seamless experience for customers and expand its services into new communities [2][3]. Management's Comments on Operating Environment and Future Outlook - Management described 2024 as a transformational year and expressed optimism about the company's growth trajectory following the acquisition [2][3]. Other Important Information - The company published its 2024 corporate citizenship report, highlighting ongoing initiatives to meet the needs of associates and communities [4]. Q&A Session Summary Question: Are there any questions from shareholders? - There were no questions from shareholders during the meeting [17].

Financial Performance - UMB Financial Corporation reported net income available to common shareholders of $79.3 million, or $1.21 per diluted share, for Q1 2025, down from $120.0 million, or $2.44 per diluted share, in Q4 2024[3]. - Total revenue for Q1 2025 was $563.8 million, an increase of $129.7 million from the linked quarter and $165.2 million from Q1 2024[10]. - Net income available to common shareholders decreased to $79.32 million in Q1 2025 from $110.26 million in Q1 2024, a decline of 28%[43]. - The company reported a net income of $81.33 million for Q1 2025, compared to $110.26 million in Q1 2024, showing a decrease of 26.3% year-over-year[47]. - The return on average assets (GAAP) decreased to 0.54% in Q1 2025 from 1.06% in Q1 2024, indicating a decline in asset efficiency[48]. Asset and Loan Growth - Average loans increased by 27.8% on a linked-quarter basis to $32.3 billion, and by 38.3% compared to Q1 2024, with end-of-period loans reaching $35.9 billion[5]. - Average total assets for Q1 2025 were $60.0 billion, compared to $45.0 billion for the linked quarter and $42.0 billion for the same period in 2024[21]. - Total assets increased to $69.35 billion in Q1 2025, up from $45.34 billion in Q1 2024, representing a growth of 53%[42]. - Net loans rose to $35.57 billion, compared to $23.41 billion in the previous year, marking a 52% increase[42]. - Average total securities increased by 19.1% on a linked-quarter basis and 21.9% compared to Q1 2024, reaching $15.9 billion[23]. Deposit Growth - Average deposits rose by 32.3% on a linked-quarter basis to $50.3 billion, with end-of-period deposits totaling $58.5 billion[5]. - Total deposits for Q1 2025 were $50.3 billion, reflecting a 32.3% increase on a linked-quarter basis and a 50.0% increase compared to Q1 2024[24]. - Total deposits grew to $58.52 billion, up from $36.91 billion, representing a 58% increase[42]. Interest Income and Margin - Net interest income for Q1 2025 was $397.6 million, an increase of 47.8% from the linked quarter, driven by the HTLF acquisition and legacy UMB growth[11]. - Total interest income for Q1 2025 was $737.97 million, a 42% increase from $520.07 million in Q1 2024[43]. - Net interest income after provision for credit losses was $311.64 million, up from $229.43 million, reflecting a 36% increase[43]. - The net interest margin improved to 2.96%, up 39 basis points from the linked quarter, reflecting higher loan yields and a decrease in the cost of interest-bearing liabilities[11]. - The net interest margin improved to 2.96% in Q1 2025 from 2.48% in Q1 2024, indicating better asset yield management[46]. Noninterest Income and Expenses - Noninterest income increased by $1.0 million, or 0.6%, on a linked-quarter basis, primarily due to higher service charges on deposits and bankcard income[14]. - Noninterest income totaled $166.20 million, slightly up from $159.24 million, indicating a 4% increase year-over-year[43]. - GAAP noninterest expense for Q1 2025 was $384.8 million, an increase of $114.4 million, or 42.3%, from the linked quarter and $130.0 million, or 51.0%, from Q1 2024[17]. - Noninterest expense rose significantly to $384,787,000 in Q1 2025 compared to $254,804,000 in Q1 2024, marking a 50.9% increase[49]. Credit Quality and Provision for Losses - Net charge-offs for Q1 2025 totaled $35,872 thousand, representing 0.45% of average loans, compared to $8,935 thousand or 0.14% in Q4 2024[27][31]. - Provision for credit losses rose to $86,000 thousand in Q1 2025, a significant increase of $67,000 thousand from the linked quarter[31]. - Provision for credit losses in Q1 2025 was $86.00 million, significantly higher than $10.00 million in Q1 2024, indicating increased risk management measures[47]. - Nonaccrual and restructured loans amounted to $100,885 thousand, representing 0.28% of total loans as of Q1 2025[27]. Capital and Shareholder Returns - Total equity increased to $6,748,434 thousand as of March 31, 2025, up from $3,466,541 thousand in the previous year[25]. - Common equity Tier 1 capital ratio decreased to 10.11% as of March 31, 2025, down from 11.29% in the previous quarter[25]. - The company declared a quarterly cash dividend of $0.40 per share, payable on July 1, 2025[28]. - The company approved a share repurchase program for up to 1,000,000 shares of common stock[29]. - Total common shareholders' equity (GAAP) rose to $6,637,730,000 as of March 31, 2025, compared to $3,152,816,000 in 2024, an increase of 110.4%[51].

Workforce and Diversity - The Company employed 3,698 associates across the country as of December 31, 2024[22] - Nearly 20% of the Company's associates participate in one or more Business Resource Groups (BRGs) aimed at enhancing diversity and inclusion[24] - The Company emphasizes community involvement through associate volunteerism and corporate philanthropy initiatives[25] Regulatory Environment - The Company is subject to regulatory frameworks at federal, state, and local levels, impacting its operations and financial activities[32] - The Federal Reserve's policies significantly influence the availability and demand for loans and deposits, affecting the Company's pricing and market conditions[30] - The Company must receive prior approval from the Federal Reserve to acquire ownership of 5% or more of any class of voting securities of an unaffiliated bank[41] - The Company is required to maintain a capital conservation buffer under Basel III standards, which restricts dividend declarations if breached[46] - The Company remains exempt from the Federal Reserve Board's enhanced prudential standards due to its asset size being below $100 billion[50] - The Company is subject to the Volcker Rule, which imposes limits on proprietary trading and ownership of hedge funds and private-equity funds[49] - The Anti-Money Laundering Act of 2020 may increase compliance costs for the Company as it develops enhanced customer due diligence procedures[65] - The Company is subject to various federal, state, and local laws regarding data privacy and cybersecurity, including the Gramm-Leach-Bliley Act (GLBA), which mandates periodic disclosure of privacy policies and practices[68] - The Cyber Incident Reporting for Critical Infrastructure Act (CIRCIA) requires companies to report significant cyber incidents to the Cybersecurity and Infrastructure Agency (CISA) within 72 hours[69] - The Company is subject to the Securities Act of 1933 and the Securities Exchange Act of 1934, as well as NASDAQ listing rules[74] Financial Performance and Capital Management - As of December 31, 2024, UMB Financial Corporation's Common Equity Tier 1 Capital Ratio is 11.29%, exceeding the minimum regulatory requirement of 4.50%[53] - UMB Bank, n.a. has a Total Risk-Based Capital Ratio of 12.24%, above the minimum requirement of 8.00%[53] - The Bank is categorized as well capitalized under the Prompt Corrective Action framework as of December 31, 2024[54] - The Company continues to conduct internal stress tests as part of its risk management and capital planning process despite being exempt from formal stress testing requirements[50] - The proposed Basel III endgame rules could significantly increase capital requirements for banking organizations with $100 billion or more in assets, potentially impacting the Company[55] - The Company may need to raise additional capital to meet regulatory requirements, which could be dilutive and affect its financial performance[110] - The ability to raise capital on favorable terms is uncertain and depends on market conditions and the Company's financial performance[111] Credit and Market Risks - The Company’s fee-based banking and investment-management businesses are significantly affected by economic conditions, with potential adverse impacts from economic downturns and market disruptions[90] - Increased delinquencies or defaults could arise from adopting more liberal origination or underwriting standards, which may negatively impact the Company's credit risk management[88] - Economic downturns could lead to reduced loan demand and increased delinquencies, adversely affecting the Company's financial performance[87] - The Company may face increased delinquencies and credit losses, which could lead to inadequate reserves if expected losses are incorrectly estimated[96] - Rising credit losses and indicators such as higher delinquencies and nonperforming loans may necessitate an increase in the allowance for credit losses, potentially decreasing profitability[97] - Missed payments and defaults are more likely during economic downturns, high unemployment, or if payment burdens increase due to rising interest rates[98] - Insufficient collateral values on secured loans may not adequately compensate for credit losses, especially if real estate values decline[98] - Geographic and industry concentration risks could adversely affect the Company's commercial real estate loan portfolio during regional economic downturns[99] Technology and Cybersecurity - Cybersecurity risks remain high, with potential breaches leading to significant financial and reputational damage[101] - The Company is required to implement a comprehensive cybersecurity program that includes administrative, technical, and physical safeguards to protect customer information[68] - The Bank must notify federal banking agencies within 36 hours of identifying a computer-security incident that materially disrupts its operations[70] - The Company relies on third-party service providers for key operations, and failures in these relationships could lead to significant operational risks[121] - The Company is heavily reliant on technology, and failures in implementing technology initiatives could adversely affect its performance[126] Acquisition and Integration Challenges - The Company issued approximately 23.6 million shares of common stock as merger consideration to HTLF stockholders, which may result in fluctuations in the market price of the Company's common stock[137] - The Company has incurred significant transaction and acquisition-related costs associated with the acquisition of HTLF, including legal, financial advisory, and regulatory fees[136] - The Company expects to realize cost savings and operating efficiencies from the integration of HTLF, but these benefits are subject to uncertainties and may not be achieved in the near term[135] - The acquisition of HTLF has increased the Company's credit risk due to the addition of HTLF's loan portfolio, which has a large concentration of commercial real estate loans[138] - The Company's future success will depend on its ability to effectively manage the expanded operations following the acquisition of HTLF, which may pose challenges related to increased costs and regulatory scrutiny[140] - The Company may face difficulties in integrating HTLF's operations, which could adversely affect relationships with existing clients and customers[132] - The Company is subject to various litigation and proceedings that could adversely affect its business or performance, particularly related to the acquisition of HTLF[148] Environmental, Social, and Governance (ESG) Considerations - Increased scrutiny on Environmental, Social, and Governance (ESG) practices may lead to higher operational costs and regulatory compliance challenges for the Company[156] - The Company may incur significant capital expenditures and operational changes due to new climate change regulations and initiatives, impacting its financial condition[158] - The potential for conflicting state-level anti-ESG initiatives may limit the Company's ability to conduct business and increase operational costs[157] - Climate change may adversely affect the value of real properties securing the Company's loans, impacting its loan portfolio and financial condition[158] - The Company may face increased legal, regulatory, and compliance costs associated with new business initiatives and strategic activities[155] Strategic Growth and Challenges - The Company is focused on long-term growth through strategic activities such as acquisitions and partnerships, but there is no assurance of successfully identifying or financing these opportunities[155] - The Company's growth prospects could be impaired if it is unable to successfully complete acquisitions or strategic initiatives[154] - The evolving financial services industry presents risks in introducing new products or services, which may not be successful on a large scale[155] - Intense competition from other financial services and technology companies could pressure the Company to lower interest rates or fees, impacting its financial condition[130] - The Company may struggle to introduce new products or services on a large scale in response to rapid technological changes in the financial services industry[130]