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    UMBF
    Earnings call· Jun 2026(Q2 FY26)

    UMB FINANCIAL Q2 FY26 earnings call UMBF

    Jul 29, 2026 Source

    Executive summary

    UMB Financial Q2 FY26 — Strong Loan Growth and Fee Income Momentum

    UMB Financial delivered strong Q2 FY26 results, marked by robust loan growth, expanding core net interest margin, and significant fee income momentum across institutional banking businesses. Despite seasonal deposit fluctuations, management remains confident in its diverse funding mix and healthy capital position, prioritizing organic growth while returning value to shareholders. The company anticipates continued positive operating leverage and strong pipelines into the second half of the year.

    Highlights

    6

    • Net income of $271.8 million resulted in earnings per share of $3.56.

    • Operating return on tangible common equity reached 20.3% with an operating efficiency ratio of 48.1%.

    • Average loan balances grew 12.6% linked-quarter annualized, driven by a record $2.6 billion in gross production.

    • Core net interest margin expanded by 4 basis points sequentially to 3.09% (excluding accretion).

    • Total fee income increased 19.6% year-over-year, led by Asset Servicing and Corporate Trust, both up over 20% YoY.

    • The common dividend was increased by 16.3% to $0.50 per share, and the CET1 ratio rose 29 basis points to 11.45%.

    Concerns

    4

    • Average deposit balances were flat linked-quarter due to seasonal public funds declines and lower investor solution balances.

    • The third quarter is typically a seasonal low point for deposits.

    • Operating leverage for the full year 2026 is expected to be positive, but with the continuing impact of lower contractual accretion businesses.

    • Loan paydowns increased linked-quarter, though Q1 was noted as an anomaly low.

    Guidance & targets

    5
    CategoryTargetConfidence
    Positive operating leverage
    Positive
    high materiality
    High
    Operating expense
    Approximately $390 million
    medium materiality
    High
    Core Net Interest Margin (NIM)
    Relatively flat
    high materiality
    High
    Effective tax rate
    Between 20% and 22%
    medium materiality
    High
    Loan growth pipeline
    Strong
    high materiality
    High

    Operational metrics

    36
    Operating return on tangible common equity
    20.3%
    Q2 FY26
    Operating efficiency ratio
    48.1%
    Q2 FY26
    Gross loan production
    $2.6 billionrecord
    Q2 FY26
    Nonperforming loans
    31 bpsimproved from 38 bps in Q1
    Q2 FY26
    Core margin expansion
    4 bpslinked-quarter
    Q2 FY26
    Net gains from private investment activity
    $27.1 million
    Q2 FY26
    Total fee income growth
    6%linked-quarter
    Q2 FY26
    Asset Servicing fee income growth
    >20%year-over-year
    Q2 FY26
    Corporate Trust fee income growth
    >20%year-over-year
    Q2 FY26
    Fund Services Assets Under Administration (AUA)
    $622 billionup nearly $57 billion from prior quarter
    Q2 FY26
    Off-balance sheet deposits
    $23.7 billiongrew 3.6% from Q1
    Q2 FY26
    12b-1 fees and money market income increase
    $4.2 million23% increase
    Q2 FY26
    Average deposit balances
    flatlinked-quarter
    Q2 FY26

    Increase in commercial and asset servicing partially offset by seasonal decline in public funds and lower investor solution balances.

    Average cost of interest bearing deposits
    roughly flatlinked-quarter
    Q2 FY26
    Excess cash
    $1.5 billion
    Q2 FY26
    Securities rolling off or maturing
    $2.3 billion
    next 12 months
    Shares repurchased
    38,000 shares
    Q2 FY26

    Opportunistic repurchases.

    Positive operating leverage
    12.2%year-over-year
    H1 FY26
    Net interest income from purchase accounting adjustments
    $35.9 million
    Q2 FY26
    Benefit to net interest margin from total accretion
    23 bps
    Q2 FY26
    Projected contractual accretion
    $46 million
    remainder 2026
    Projected contractual accretion
    $77 million
    FY27
    Noninterest income
    $245.5 millionincrease of $40.7 million or nearly 20% from Q1
    Q2 FY26
    Company-owned life insurance (COLI) income
    $8.7 millionincrease of $11.2 million
    Q2 FY26

    Has a similar offset in increased deferred compensation expense.

    Derivative income from customer swap activity
    $4.1 millionincrease of $1.3 million linked quarter
    Q2 FY26

    Over half of income from former Heartland locations.

    Fee income adjusted for investment gains and mark-to-market on COLI
    approximately $210 million
    Q2 FY26
    Merger-related costs
    $1.7 million
    Q2 FY26
    Total salaries and benefits expense increase
    $7.5 million
    Q2 FY26

    Related to the impact of second quarter merit increases.

    Deferred compensation expense increase
    $12.6 million
    Q2 FY26

    Offset by $12.5 million in expected seasonal decreases in payroll taxes, insurance and 401(k) expense.

    Operational losses
    $4.1 million
    Q2 FY26
    Legal and consulting expenses increase
    $3.6 million
    Q2 FY26

    Timing-related increase.

    C&I balances growth
    nearly 22%annualized
    Q2 FY26

    Led by strong activity across St. Louis, Utah, Texas and Arizona.

    Effective tax rate
    20.8%compared to 21.1% for Q1
    Q2 FY26
    NII sensitivity to 100 bps rate move
    0.7%
    any quarter

    Very modest impact on NII.

    Loan-to-deposit ratio
    under 70%
    Q2 FY26
    Potential CET1 benefit from new capital rules
    50-60 bps
    future

    Net benefit after inclusion of AOCI, depending on RWA changes.

    Industry KPIs

    10
    MetricValueDetails
    Loans12.6%%
    Depositsflat
    Rotce ROE20.3%%
    Cet1 ratio11.45%%
    Capital returns$0.50USD
    Fee income lines$245.5 millionUSD
    Net interest margin3.32%%
    Net charge offs npls16 bpsbps
    Total operating expenses$398 millionUSD
    Efficiency ratio operating leverage48.1%%

    Risks & headwinds

    4
    Seasonal decline in public fundsQ2 FY26

    Partially offset deposit growth

    Mitigation: Strong deposit pipeline expected in the second half of the year.

    Third quarter seasonal low point for depositsQ3 FY26

    Directional

    Mitigation: Management feels good about the deposit pipeline in the second half of the year.

    Continuing impact of lower expected contractual accretion businessesFY26

    Impacts operating leverage

    Mitigation: Still expect positive operating leverage for the full year 2026.

    Increased loan paydownsQ2 FY26

    Increased linked-quarter

    Mitigation: Q1 was an anomaly low; current environment not indicative of accelerated payoffs in the near term, with rate increases more likely by year-end.

    What to watch in Q3 FY26

    5

    Deposit pipeline strength

    H2 FY26
    CurrentSeasonal low in Q3 FY26
    TargetStrong activity in H2 FY26

    Why it matters

    Deposit growth is crucial for funding loan growth and managing net interest margin.

    The third quarter is typically a seasonal low point for deposits, but we feel good about our deposit pipeline in the second half of the year.

    Q&A highlights

    7

    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

    2 min read5 chapters

    Detailed Narrative

    01

    Loan Growth & Market Share

    UMB Financial reported robust loan growth, with average loan balances increasing 12.6% on a linked-quarter annualized basis, driven by a record $2.6 billion in gross production. This growth was broad-based across all regions and verticals, particularly C&I balances, which saw nearly 22% annualized growth. Management emphasized that this performance reflects consistent market share gains rather than solely economic activity, with pipelines remaining strong for the upcoming quarter.

    02

    Fee Income Momentum

    Noninterest income rose by nearly 20% linked-quarter to $245.5 million, primarily due to investment security gains and strong performance in Fund Services and Corporate Trust, which both saw over 20% year-over-year increases. Asset Servicing and Corporate Trust led the growth, with Fund Services' assets under administration reaching $622 billion, up nearly $57 billion from the prior quarter. The company noted its strategy of competing for all types of fund business, including benefiting from platforms democratizing alternative investing.

    03

    Deposit Dynamics & NII

    Average deposit balances were flat linked-quarter, with increases in interest-bearing demand and savings offsetting declines in DDA and time deposits, as well as seasonal public funds outflows. Despite this, the cost of interest-bearing deposits remained roughly flat, contributing to a 4 basis point core margin expansion to 3.09% (excluding purchase accounting). Management highlighted a diverse funding mix, low loan-to-deposit ratio, and healthy liquidity, with a strong deposit pipeline expected in the second half of the year.

    04

    Capital Management & Shareholder Returns

    The company's CET1 ratio increased by 29 basis points from March to 11.45% at June 30, reflecting strong capital accretion. Capital priorities remain focused on supporting organic loan growth. UMB also demonstrated its commitment to shareholder returns by increasing its common dividend by 16.3% to $0.50 per share and opportunistically repurchasing approximately 38,000 shares for $5 million during the quarter.

    05

    Credit Quality

    Credit metrics remained high-quality, with net charge-offs at a low 16 basis points of average loans. Nonperforming loans improved to 31 basis points, down from 38 basis points in the first quarter, indicating continued strength in the loan portfolio. Management noted that the current environment is not indicative of increased loan payoffs, with Q1 being an anomaly low quarter for paydowns.

    AI-generated summary of the company’s earnings call. Not investment advice.