UMB(US:UMBF)2022-07-30 15:47Financial Data and Key Metrics Changes - Net income for the quarter was $137.6 million or $2.83 per share, with operating pre-tax pre-provision income at $187.1 million or $3.84 per share [7] - There was a 23% linked quarter annualized increase in average loans and a 6.9% linked quarter increase in net interest income [6][17] - Net interest margin expanded by 25 basis points from the prior quarter, driven by asset repricing and favorable mix shift in earning assets [13][19] Business Line Data and Key Metrics Changes - Private wealth brought in nearly $750 million in new assets year-to-date, significantly outpacing 2021 full-year sales of $836 million [8] - Loan production was strong at $1.3 billion for the quarter, with phenomenal growth in commercial and industrial (C&I) loans, increasing nearly 30% on a linked-quarter annualized basis [10] - Average residential mortgage balances increased 27% over the second quarter of last year, with strong activity in the down payment assistance program [11] Market Data and Key Metrics Changes - Average total deposits for the quarter decreased 3% or 12.2% on an annualized basis compared to the first quarter, while average demand deposit account (DDA) balances increased slightly [12] - The total cost of deposits increased to 20 basis points, up from 8 basis points last quarter [18] - Non-performing loans declined 84% from the prior quarter to 10 basis points of total loans, indicating strong portfolio performance [15] Company Strategy and Development Direction - The company announced the acquisition of Old National Bancorp's HSA business, which will complement organic growth efforts [9] - The focus remains on managing net interest spread and margin while funding organic loan growth [21] - The company is strategically reclassifying securities to the held-to-maturity portfolio to manage tangible capital and reduce the impact of rising rates on equity [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued strong loan growth, with expectations for above-average growth in the third quarter [44][56] - The management noted that while there are macroeconomic uncertainties, they expect to return to historical charge-off levels of 27 to 30 basis points [36][44] - The company anticipates stable to slightly growing deposit levels, supported by the ability to bring on off-balance sheet deposits [47] Other Important Information - The company made a one-time contribution of $5 million to its charitable foundation, included in other expenses [7] - The effective tax rate for the second quarter was 20.8%, with an anticipated full-year rate between 19% and 21% [26] Q&A Session Summary Question: How is the company thinking about funding continued strong loan growth? - Management indicated that they can bring on off-balance sheet deposits and are not worried about deposit levels, focusing on managing spread and margin expansion [32] Question: Can you provide details on the $27.7 million charge-off? - The charge-off was related to a single commercial credit in bankruptcy, and management expects to return to historical charge-off levels [36][44] Question: What are the expectations for operating expenses in the back half of 2022? - Management provided a run rate of $217 million to $218 million for operating expenses, factoring in various adjustments [40] Question: How does the company view loan growth in the back half of 2022? - Management expects favorable loan growth across all categories and regions, with no significant downturn anticipated [54][56] Question: What is the outlook for brokerage fees moving forward? - Management noted that brokerage fees could see modest increases depending on off-balance sheet deposits and market conditions [62]