UMB Financial Corporation (NASDAQ:UMBF) Q2 2019 Earnings Conference Call - Final Transcript

Jul 31, 2019 • 09:30 am ET


UMB Financial Corporation (NASDAQ:UMBF) Q2 2019 Earnings Conference Call - Final Transcript


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Mariner Kemper

pricing to help mitigate margin pressure. And with the growth we've experienced on our robust pipeline, we expect to be able to grow net interest income. Ram will share more detail on NIM drivers and the outlook in a few minutes.

On the fee income side, we continue to see opportunity in many of our businesses. In bond trading, both taxable and tax-free trading volumes have picked up. And in corporate trust, we continue to see attractive growth potential. We continue to look for partnerships and bolt-on acquisition opportunities to grow fee income and deepen our product offering.

In June, we announced that our Investor Solutions team, which offers banking services and deposit solutions for broker-dealers, non-bank financial institutions and fintech companies, have partnered with Personal Capital to launch Personal Capital Cash, an account with FDIC insurance that covers balances up to $1.5 million.

Additionally, just after quarter end, we closed on our previously announced strategic Corporate Trust acquisition in Iowa, which immediately gives us the Number 1 market share in the state. Our payment card business continues to grow. Record originations in our consumer book last quarter, along with steady growth in our commercial card products, helped drive card spend 11.3% higher on a year-over-year basis. The $3.1 billion in purchase volume for the second quarter is the strongest we've seen to date.

In summary, prudent balance sheet growth, which has been above peer levels, coupled with momentum in our fee generation, should help mitigate the impact of margin pressure from a lower, flatter yield curve. Our business model is built to weather all economic cycles, driven by the diversity of our revenue sources. After further strengthening our foundational infrastructure through investments such as a dedicated disaster recovery site, a majority of our capital investments are now focused on revenue and customer experience-enhancing projects and should help us gain further traction in each of our business lines. Lastly, we will continue to focus on the efficient use of our capital, whether it is in supporting organic growth, funding potential acquisitions or returning more to shareholder opportunistically.

Now, I'll turn the call over to Ram for a more detailed discussion of our results. Ram?

Ram Shankar

Thanks, Mariner. For the second quarter, net interest income was $166.4 million, representing a 1.6% increase on a linked-quarter basis. Net interest income was favorably impacted by strong loan growth and the impact of an extra day during the quarter. These benefits were partially offset by higher interest-bearing deposit costs. The yield on earning assets was 4.11% for the quarter, an increase of 1 basis points from the first quarter, as increased yields in our AFS portfolio were offset by a 4 basis points reduction in average loan yields. This decrease was driven equally by payoffs of higher-yielding balances, which offset the benefit from new loan volume and by lower loan fees.

We experienced some deceleration in the rate of increasing funding costs this quarter. The cost of interest-bearing liabilities increased 5 basis points on a