UMB(US:UMBF)2020-10-28 21:18Financial Data and Key Metrics Changes - The company reported net income of $73.1 million or $1.52 per share for Q3 2020, with pre-tax pre-provision income increasing by 10.2% quarter-over-quarter and 23.5% year-over-year [13] - Net interest income rose to $184.4 million, an increase of $6.2 million from the previous quarter, driven by strong growth in commercial and consumer real estate loans [27] - Total reserves reached $214.5 million, representing 2.2 times nonperforming assets, compared to a peer median of 1.7 times [10] Business Line Data and Key Metrics Changes - Total fee income was strong at $113 million, although it decreased by $7.5 million from the previous quarter due to market-related adjustments [13][31] - Bank card fees improved by 18.4% or $2.4 million from the second quarter, driven by a 21% increase in card spending volume [33] - New loan production outside of PPP was $924 million, marking the highest origination level year-to-date [16] Market Data and Key Metrics Changes - Average loans, excluding PPP balances, increased by 9.4% on a linked-quarter annualized basis [15] - The company’s exposure to sensitive industries decreased from 10.3% to 9.6% of total loans, with total loans in these categories amounting to $2.6 billion [20] - Average deposits increased by 5.9% on a linked-quarter basis, with DDA balances growing by 7.8% [39] Company Strategy and Development Direction - The company aims for organic growth as its top priority for capital use, with opportunities for deeper penetration in various markets and lending verticals [11] - The company completed its first subordinated debt issuance of $200 million, enhancing its capital levels and reducing overall cost of capital [11] - The management emphasized a focus on maintaining high-quality underwriting standards and solid capital and liquidity levels [8] Management's Comments on Operating Environment and Future Outlook - Management noted that the bulk of reserve build may be behind them, with no material signs of deterioration in their markets to date [10] - The company is prepared for potential economic impacts from the election, stimulus measures, and the duration of the pandemic [10] - Management expressed confidence in their loan book, stating they underwrite with a focus on potential future crises [72] Other Important Information - The board approved a 3.2% dividend increase, continuing a history of uninterrupted annual dividend increases since 2002 [12] - The company’s tangible book value per share increased to $55.19, up 14.5% from a year ago [40] - The company is preparing to accept forgiveness applications for its $1.5 billion PPP loan portfolio [18] Q&A Session Summary Question: Thoughts on expenses and potential rationalizations in 2021 - Management emphasized a focus on efficiency and the use of technology to find efficiencies without providing specific guidance [45] Question: Personnel numbers and forecasting growth - Management indicated that the personnel numbers were influenced by deferred compensation expenses and that the current levels are a good starting point for 2021 [47] Question: Impact of PPP fees on future income - Management stated that current fees are primarily from finance charges and that significant impacts from forgiveness applications are expected in 2021 [48] Question: Tax rate expectations and potential changes - Management anticipates a higher tax rate for Q4, with potential increases in effective tax rates if corporate tax rates rise [50] Question: Credit trends and outlook for 2021 - Management expressed confidence in their loan book while remaining cautious about potential stress in sensitive industries due to the pandemic [76]