UMB Financial Corporation (UMBF) Earnings

Management highlights

Overall Financial Performance - Delivered strong results with 12.6% linked quarter annualized average loan growth, supported by record gross loan production of $2.6 billion - Maintained high credit quality: net charge-offs of 16 basis points of average loans, non-performing loans improved to 31 basis points from 38 basis points in Q1 - Expanded core margin by 4 basis points via disciplined balance sheet pricing on both assets and liabilities - Generated 12.2% positive operating leverage year-over-year in the first half of 2026 Capital Management and Shareholder Returns - Top capital priority remains supporting organic loan growth, with consistent median 10.5% linked quarter annualized loan growth over the past 10 years - Board approved a 16.3% dividend increase to 50 cents per common share, reflecting management's commitment to returning value to shareholders - Opportunistically repurchased 38,000 shares for $5 million during the quarter - Common equity tier 1 ratio now stands at 11.45%, well above regulatory requirements and ahead of internal targets Credit and Balance Sheet Positioning - Average total deposit balances were flat quarter-over-quarter: growth in commercial and asset servicing deposits was offset by seasonal declines in public funds and lower investor solution balances, which management characterizes as a normal seasonal low point - Maintains a diverse funding mix, with $24 billion in total off-balance sheet client deposits that can be brought onto the balance sheet at market rates if needed; $2.3 billion in securities will mature or roll off within the next 12 months, providing additional balance sheet flexibility - Sensitivity to interest rate movements is very modest: a 100 basis point shift in rates only impacts net interest income by approximately 0.7%

Guidance

- Full-year 2026 positive operating leverage is still expected, even with lower projected contractual accretion from prior acquisitions - Third quarter 2026 operating expense is expected to be in line with current consensus expectations of approximately $390 million - Core net interest margin is expected to be relatively flat in the third quarter compared to Q2's adjusted level of 3.09%; actual NIM and net interest income will depend on DDA growth, excess liquidity levels, SOFR movements, and lending/funding portfolio mix shifts - The 2026 full-year effective tax rate is expected to remain between 20% and 22% - Contractual purchase accounting accretion is projected at approximately $46 million for the remainder of 2026 and $77 billion for 2027 - Management expects the current strong growth trajectory for core fee income (especially in fund services and corporate trust) to continue at mid-teens rates, with possible upside from new business and market share gains - Deposits are expected to hit a seasonal low in the third quarter, then rebuild through the back half of 2026, consistent with historical seasonal patterns

Segment performance

UMB Financial does not break out separate product segment revenue contribution percentages in this transcript. Key segment-level performance highlights are as follows: - Commercial & Industrial (C&I) Lending: Achieved 22% annualized linked quarter growth in average C&I balances, driving the overall 12.6% annualized linked quarter growth in total average loan balances. Gross loan production hit a record $2.6 billion for the quarter, with strong activity across all regional markets including St. Louis, Utah, Texas, and Arizona. - Institutional Banking Fee Business: Total fee income increased 6% linked quarter and 19.6% year-over-year, led by asset servicing and corporate trust, both of which delivered over 20% year-over-year fee income growth. Assets under administration in fund services increased nearly $57 billion from the prior quarter to reach $622 billion. Off-balance sheet deposits grew 3.6% linked quarter to $23.7 billion, driving a 23% ($4.2 million) increase in 12B1 fees and money market income. - Overall Financials: Reported Q2 2026 net income of $271.8 million, with diluted earnings per share of $3.56. Net interest margin (NIM) was 3.32%; excluding purchase accounting accretion, core NIM was 3.09%, up 4% sequentially. Non-interest income hit $245.5 million, up 20% ($40.7 million) from Q1 2026. Operating non-interest expense was $398 million, up 6% linked quarter. Core return on tangible common equity was 20.3%, and the operating efficiency ratio was 48.1%. Common equity tier 1 capital ratio reached 11.45% as of quarter end, up 29 basis points from Q1.

Risks & headwinds

- Forward-looking financial results are subject to material assumptions and uncertainties, including unanticipated changes in interest rates, deposit competition, and market conditions that could cause actual results to differ materially from projected guidance - Intense ongoing industry-wide competition for core deposits creates pressure on deposit costs and balance sheet growth - Non-interest expense is subject to unanticipated volatility from market-driven changes in deferred compensation expense and unexpected operational losses, which created upward pressure on Q2 expenses relative to prior guidance - New regulatory capital rules may introduce changes to risk-weighted asset calculations, though UMB's preliminary analysis indicates a potential 50-60 basis point net CET1 benefit after including AOCI impacts - Unexpected loan paydowns could reduce interest income and accretion, though management does not currently expect material near-term acceleration in paydowns

Analyst Q&A

• Q: What is driving current strong gross loan production, and what is the outlook for loan pipelines? Is growth driven by broader economic strength or market share gains? /

  A: Growth is broad-based across all regions and lending verticals, with C&I lending leading the expansion. The most notable trend is sustained growth in deal activity driven by private equity, family office, and ESOP acquisitions, which is not a new but continues to support steady production. Management confirms the pipeline remains strong, with the next 90 days expected to match the pace of the prior quarter, with most growth coming from market share gains rather than broad economic expansion.\n\nQ: What is the outlook for balance sheet size given strong loan growth, and what is the relationship between on/off balance sheet deposits and fee income? / A: Earning asset size will continue to grow in line with the historical high single-digit to low double-digit loan growth trend, with the size of the treasury portfolio fluctuating based on excess deposit growth. Off-balance sheet deposits grew 3.6% in Q2, and ongoing fee growth is independent of whether deposits are held on or off balance sheet. Moving deposits onto the balance sheet does not impact associated fee income, and a large portion of off-balance sheet deposits can be brought on at market rates if needed.\n\nQ: Why is core net interest margin expected to be flat next quarter, and what is the outlook for loan to deposit ratios and deposit pricing urgency? / A: Flattish margin reflects the dynamic that both loan yields and deposit costs are gradually increasing incrementally, offsetting each other. Loan yields rose 2 basis points and deposit costs rose 1 basis point in Q2, and future shifts depend on the mix of incoming deposits and DDA growth. Interest rate sensitivity is very muted, so rate moves will have negligible impact on net interest income. Management maintains constant urgency around core deposit growth, which is core to long-term company value, and expects to continue delivering steady long-term deposit growth, with no specific target loan-to-deposit ceiling driving urgent deposit pricing actions.\n\nQ: What is the growth outlook for core fee income, and how does capital markets activity impact fee businesses? / A: Management expects the current mid-teens growth trajectory for corporate trust and securities processing fee income to continue, with upside potential from strong pipelines and ongoing market share gains. The fund services business has shifted from relying on small startup funds to winning larger mandates across the size and complexity spectrum, and it has benefited from acting as the administrative backbone for platforms democratizing alternative investing. On the corporate trust side, management has seen a noticeable uptick in activity tied to recovering debt issuance volumes, with growth also supported by ongoing market share gains across all verticals.\n\nQ: What is the potential impact of new regulatory capital rules, and how will capital be deployed going forward? / A: Preliminary analysis indicates new capital rules could result in a 50 to 60 basis point net CET1 benefit after accounting for AOCI changes. The top priority for capital deployment remains supporting organic loan growth, which has a strong ongoing pipeline. Management will maintain a balanced approach to capital deployment, with organic investment as the first priority, supplemented by ongoing dividend increases and opportunistic share repurchases as capital allows.