Financial Data and Key Metrics Changes - The reported net income available for common shareholders was $215.4 million, which included $13.5 million of acquisition expenses, compared to $53.2 million in the first quarter [6] - The second quarter net operating income was $225.4 million or $2.96 per share, reflecting strong performance [6] - There was a pretax gain of $37.7 million on prior investments, including a $29.4 million gain from Voyager Technologies, resulting in a multiple on invested capital of 5.8 times and an internal rate of return of 59% [7][8] - The core net interest margin expanded by eight basis points, with average loans increasing by 12.7% to $36.4 billion and average deposits increasing by 10.7% to $55.6 billion [9] Business Line Data and Key Metrics Changes - The loan pipeline remains strong, with quarterly top line production reaching a record $1.9 billion in the second quarter, driven by growth in commercial and industrial (C&I) and commercial real estate (CRE) [10] - Average loan balances for legacy UMB increased by 15.3% on an annualized basis from the prior quarter, outpacing many peer banks [9] - Net charge-offs attributed to the legacy UMB portfolio were $9 million, or 13 basis points of average UMB loans for the quarter, with total net charge-offs at 17 basis points [11] Market Data and Key Metrics Changes - Total nonperforming loans to total loans improved by two basis points to 26 basis points, with nonperforming loans related to legacy UMB at just 10 basis points [11] - The company continues to rebuild capital with a CET1 ratio of 10.39%, a 28 basis point increase from March 31 [12] Company Strategy and Development Direction - The company is focused on leveraging its business model, which has proven effective in various economic environments, and is optimistic about future growth opportunities [5][6] - The successful pilot conversion of Heartland's Minnesota franchise onto the core UMB platform positions the company well for full conversion slated for mid-October [12] - The company anticipates achieving all targeted cost savings from the Heartland transaction, with a focus on positive operating leverage [36][47] Management's Comments on Operating Environment and Future Outlook - Management noted that borrower sentiment remains strong despite uncertainties, and they expect charge-off levels to remain near historical averages in the second half of the year [11] - The company is optimistic about the growth potential from the Heartland team, indicating that they are just beginning to see the contributions from this acquisition [90] Other Important Information - The company completed an offering of Series B preferred stock, netting $294 million of Tier one capital [12] - Charitable contributions in the quarter amounted to $8.3 million, compared to $524,000 in the first quarter [18] Q&A Session Summary Question: Can you deconstruct the loan growth and its sources? - Management indicated that the loan production number aligns with expectations, with strong contributions from both Heartland and legacy UMB, expecting similar performance in the next quarter [24][25] Question: What is the impact of HSA changes under the new budget bill? - Management noted that while there is potential for growth, it is expected to be marginal, with a focus on education for newly eligible clients [32][34] Question: How much of the $124 million cost savings have been realized? - Management reported $17 million in quarterly run rate savings so far, with more significant savings expected in the fourth quarter [45] Question: What is the outlook for deposit competition? - Management stated that they can grow commercial and institutional deposits easily, while consumer deposits are expected to grow with increased branch presence and marketing efforts [76][78] Question: What is the current state of credit quality at Heartland? - Management expressed confidence in improving nonperforming loans and charge-offs, expecting continued positive trends in the second half of the year [71][72]