UMB(US:UMBF)2022-10-26 19:20Financial Data and Key Metrics Changes - Net income for Q3 2022 was $88 million or $1.81 per share, with operating pre-tax, pre-provision income at $131.2 million or $2.70 per share [7] - Net interest income increased by 3.9% sequentially, driven by nearly $1 billion increase in average loans and rising rates [7][8] - Average total deposits decreased by 5.7% compared to the previous quarter, but DDA balances increased by 8.7% year-over-year [20][21] Business Line Data and Key Metrics Changes - Private wealth sales reached $874 million year-to-date, surpassing full year 2021 sales [12] - New business volumes increased by 16% in corporate trust and escrow services and 35% in specialty trust and public finance [13] - Fund services and institutional custody assets under administration decreased to $352 billion due to equity market valuations, but over 200 new custody accounts were added year-to-date [13] Market Data and Key Metrics Changes - The company ranks among the top 10 HSA providers in the U.S. and expects to close the acquisition of Old National Bancorp's HSA business, adding $400 million in deposits [14] - Commercial real estate and construction loans posted 20% annualized growth in Q3 [16] - Average residential mortgage balances increased by 23% year-over-year despite rising rates [18] Company Strategy and Development Direction - The company aims to generate positive operating leverage and continues to focus on deposit gathering and client acquisition [11][22] - The management is optimistic about growth opportunities in various verticals and expects continued strong growth in Q4 [20][31] - The company is actively pursuing acquisitions to enhance its franchise [88] Management's Comments on Operating Environment and Future Outlook - Management noted economic uncertainty due to unprecedented Fed tightening, inflation, and geopolitical conflicts, but borrowers remain cautiously optimistic [28][29] - The company expects to experience a short recessionary environment but believes it will not be as destructive as previous cycles [30] - Management anticipates strong loan growth in Q4, with a focus on maintaining asset quality [31][113] Other Important Information - Net charge-offs were just 0.02% of average loans, with non-accrual loans steady at 10 basis points [25] - The company raised $110 million in capital through subordinated notes to support balance sheet growth [26] - The board approved a 2.7% increase in dividends, bringing it to $0.38 per share [27] Q&A Session Summary Question: Expectations on DDA levels post-COVID - Management believes DDA levels will remain strong due to new client additions and the impact of the current rate environment [53][54] Question: Thoughts on deposit beta - Management expects deposit beta to be around 50-52%, similar to previous cycles, and emphasizes the importance of total costs [56][58] Question: Operating leverage outlook - Management is focused on positive operating leverage and expects the efficiency ratio to improve moving forward [84] Question: Provision outlook in the current macro environment - Management anticipates strong loan growth will drive provisions, with a focus on macroeconomic indicators [86] Question: Impact of recent capital raise on M&A - Management remains active in pursuing acquisitions and is optimistic about finding suitable opportunities [88] Question: Clarification on expense adjustments - Management provided details on one-time expenses and suggested a run rate of approximately $223 million for Q3 [96] Question: Reserve build and CECL impact - Management explained that new loans require reserves, and the reserve build was significantly influenced by loan growth [106][108]