UMB(US:UMBF)2023-07-26 19:11Financial Data and Key Metrics Changes - GAAP net income for Q2 2023 was $90.1 million or $1.85 per share, while operating net income was $93.8 million or $1.93 per share [7] - Net interest income decreased from the first quarter due to increased deposit costs and liability mix shifts, despite strong loan growth and improved asset yields [7][8] - Net interest margin for Q2 was 2.44%, a decrease of 32 basis points from the linked quarter [14] Business Line Data and Key Metrics Changes - Average quarterly loan growth was 17.3% on a linked quarter annualized basis, with strong asset quality reflected in net recoveries of $139,000 for the quarter [8] - Nonperforming loans were just 0.09% of total loans as of June 30, with a provision for credit losses of $13 million for the quarter [8][9] - Total top line loan production was $986 million, with commercial and industrial lending being a significant driver of growth [10] Market Data and Key Metrics Changes - Average total deposits decreased by $87 million or 1.1% on an annualized basis from the first quarter to $31.5 billion [12] - Deposits stood at $33.5 billion at the end of June, an increase of 5% from March 31 [14] - The cost of total deposits for the quarter was 2.17%, compared to 1.62% in the first quarter [15] Company Strategy and Development Direction - The company aims to maintain flexibility on the asset side of the balance sheet, with a lower loan-to-deposit ratio compared to peers [5] - Focus remains on disciplined pricing of loans and controlling operating expenses while navigating the elevated interest rate environment [6] - The company is pursuing growth opportunities in various lending verticals while maintaining a strong capital and liquidity position [22] Management's Comments on Operating Environment and Future Outlook - Management noted that the economy remains resilient, with expectations that the bulk of the tightening cycle may be behind [6] - There is uncertainty regarding how long the Federal Reserve will maintain elevated rates, but the company remains focused on growth [6] - Management anticipates some modest margin compression in the third quarter due to the timing of the July rate hike [17] Other Important Information - The effective tax rate for Q2 was 18.1%, down from 20.8% in the same period last year, primarily due to a larger portion of income on tax-exempt securities [19] - The company recorded $7.4 million in additional salary and bonus expenses, largely driven by severance costs and higher salaries [18] Q&A Session Summary Question: What is the outlook for net interest income (NII) growth? - Management indicated mid-single-digit growth for NII is reasonable, but many variables could affect this outlook [25][26] Question: How is the company managing deposit pricing pressures? - Management believes they have experienced most of the pain from deposit pricing increases and expects the rate of increase to level off [33] Question: What is the company's strategy regarding capital return? - The company has share repurchase authorization but currently prioritizes loan growth over capital return [30][31] Question: How does the company view the competitive landscape for lending? - Management noted that competitors are pulling back, creating opportunities for the company, which continues to see a strong pipeline [42]