UMB Financial (UMBF) Q2 FY26 earnings call: guidance and Q&A

Can you provide more detail on the strong gross loan production, whether it's economy-driven or specific trends, and the outlook for pipelines?

Management stated that the strong loan production is 'business as usual' with broad-based growth across all regions and verticals, driven by market share gains rather than solely economic activity. Pipelines remain strong and similar to the previous quarter.

“I wish had something exciting and different to tell you, Jon, but it's business as usual. We see growth across all regions, all verticals, very solid across the board.”

asked by Jon Arfstrom · answered by J. Kemper

What are you seeing in terms of deposit competition, and how should we think about deposit trends going forward?

Management acknowledged ongoing competition but clarified that the current low point for deposits is seasonal, with a positive and bullish outlook for the back half of the year due to strong pipelines. They emphasized consistent urgency for core deposit growth.

“It's always competitive from our perspective. This low point for us is just seasonal. And there's nothing really to talk about about our deposit where we remain very positive and bullish about the back half of the year.”

asked by Jon Arfstrom · answered by J. Kemper

How do off-balance sheet deposits relate to deposit fee income, and what's the jumping-off point for fee income in the back half of the year?

Management clarified that fee income growth is largely independent of on/off-balance sheet movements of these deposits. They can pull a large portion of off-balance sheet deposits onto the balance sheet if needed at market rates, without affecting fee income.

“The comment was that we can pull some portion -- a large portion of that on balance sheet if we need it or desire it if we're willing to pay market rates. So I shouldn't -- your question is that we pull it on does it affect our fee income. The answer is no.”

asked by Christopher McGratty · answered by J. Kemper

Can you provide more color on the 'flattish' core NIM outlook, specifically regarding loan yields and deposit costs?

Management explained that the flattish outlook is driven by loan yields trending up (e.g., interest income from loans, excluding PAA, increased from $599 million to $601 million) and interest-bearing deposit costs also increasing (up 2 basis points). The actual NIM will depend on DDA growth and mix shifts, with very modest NII sensitivity to rate changes.

“you're exactly right on the first question is if you look at even this quarter, our loan yields, excluding PAA, went from $599 million to $601 million, and our cost of interest-bearing deposits went up 2 basis points.”

asked by Casey Haire · answered by Ram Shankar

Is the mid-teens+ growth in trust and securities processing fees sustainable, are there new products, or should it moderate?

Management expects to continue the same general growth rate, with possible upside, citing strong pipelines and market share gains. They highlighted the evolution of Fund Services from a start-up focus to competing for all business, benefiting from platforms democratizing alternative investing.

“We expect in that -- in trust and serious processing to be able to continue to have the same general growth rate with possible upside. So we have a very strong pipeline. We continue to gain share.”

asked by Sun Young Lee · answered by J. Kemper

What is the update on potential Basel III Endgame impact and how it affects capital deployment strategy?

Management indicated preliminary reassessment suggests a 50-60 basis points net benefit to CET1 after AOCI inclusion. Organic loan growth remains the #1 priority for capital deployment, but they will take a balanced approach, including dividends and opportunistic buybacks.

“We've done some proven reassessment on that, Adam. And in our early expectations, it could be depending on the RWA changes could be 50 to 60 basis points net benefit after inclusion of AOCI.”

asked by Adam Kroll · answered by Ram Shankar

Can you discuss the increase in paydowns linked-quarter and the outlook for paydown cadence?

Management noted that Q1 was an 'anomaly low' for paydowns, and Q2 was more normalized. They do not expect accelerated paydowns in the near term, as the current rate environment is not conducive to increased payoffs, and rate increases are more likely by year-end.

“So 2 things I'd say. One, if you look at a 3-quarter linked basis there. You'll see that really Q1 is kind of a low point, and Q2 is really more normalized with the previous 3 quarters. And so I would say the last quarter is probably an anomaly low quarter.”

asked by Brian Wilczynski · answered by J. Kemper