Ram Shankar, UMB chief financial officer, provides an overview of the third quarter 2023 earnings highlights. For more information, please review the full investor presentation given on October 25, 2023.

Third quarter 2023 earnings highlights

We reported our third quarter results on October 24 and below are highlights from our financial performance.

  • GAAP net income of $96.6 million, or $1.98 per diluted share
  • Net operating income of $98.4 million, or $2.02 per diluted share
  • Average loans increased 10.1% on a linked-quarter, annualized basis, to $22.8 billion, or an 18.0% increase as compared to the third quarter of 2022
  • Deposit balances at September 30, 2023 totaled $33.4 billion, up from $31.8 billion at September 30, 2022, and consistent with June 30, 2023 balances
  • Average deposit balances of $31.3 billion, increased 5.1% as compared to the third quarter of 2022.
  • Net interest margin of 2.43%, consistent with the linked quarter
  • Credit quality remained strong, with net charge-offs of just 0.08% of total loans and non-performing loans representing 0.07% of total loans, compared to 0.09% as of June 30, 2023

UMB earnings summary

UMB produced strong third quarter results, which included disciplined but above-peer loan growth, stable deposit balances and net interest margin, growing fee income, and credit quality metrics that were among the best in the industry.

Despite the volatility earlier in the year, we maintained our focus by actively engaging clients across each line of business, which is evident in our results. Net income for the third quarter was $96.6 million, or $1.98 per share. Adjusting for some non-recurring items, operating net income was $98.4 million, or $2.02 per share. This was ahead of the expectations of equity analysts by a wide margin.

Performance drivers

There were several drivers behind our third quarter results, and I’ll cover a few of them.


We were once again able to grow loans, even as industry-wide loan demand has slowed. Average loan balances increased 10.1% from second quarter on an annualized basis compared to a median increase of 6.1% for our peers. Compared to a year ago, that is an 18% increase in our loans driven across commercial, real estate, construction and residential mortgage balances. We continue to be selective in evaluating lending opportunities, emphasizing those that come with deposit relationships as well.

Asset quality

Even as our loan balances have grown, we’ve maintained the excellent asset quality that has set us apart in the industry. Net charge-offs for the quarter were just 0.08% of average loans. Year-to-date net charge-offs were just 0.06%. For the third quarter, our peers had a median charge-off ratio of 0.24%.

Nonperforming loans improved again this quarter and were just 0.07% of loan balances compared to the peer median of 0.23%.


Our deposit balances remained stable from the prior quarter, as growth in commercial deposits largely offset typical fluctuations in our trust and public funds deposits and allowed us to replace some higher-cost time deposits. On an average basis, our total deposits of $31.3 billion were $1.5 billion higher than the same period last year—a 5% increase.

Noninterest bearing deposits, or demand deposit accounts (DDAs), which typically represent the core operating accounts of our clients, help lower our cost of funding and increase our overall margin, as they are very valuable in a high interest rate environment. As a percentage of total deposits, we remain ahead of peers with third quarter DDA balances of 32% of average deposits compared to a median of 29% for our peers and 27% for the industry. As demonstrated in this data, the industry disruption earlier in 2023 has had no material impact on our ability to serve clients thanks to the strength of our diverse business model and strong and long-entrenched client relationships.

Balance sheet notes

The percentage of loans to deposits on our balance sheet was 68.4% as of September 30, 2023, versus a much higher median of 87% for our peers. A lower level indicates greater flexibility to grow loans and meet customer needs.

Some of the deposit pricing pressure we’ve experienced eased a bit this quarter. We had an increase of 30 basis points from the second quarter 2023, while our peers had a median increase of 45 basis points. As we expected, we experienced pricing increases earlier in the cycle due to our largely commercial and institutional client base. Peers now seem to be catching up, as the speed of our price increases slows.

That slowing of pricing pressure on the liability side, along with increases in our loan and other asset yields kept our net interest margin relatively stable. Net interest margin is the difference between what we earn on our assets and what we pay on our deposits and other funding. Our net interest margin declined by just one basis point from the prior quarter. For comparison, our peers had a median decline of 9 basis points in their net interest margin.

Our noninterest income, or fee income, is driven by a variety of growing lines of business, including Fund Services, corporate trust, private wealth, bond trading and card services. Strong client growth in our funds services business and increased activity in our corporate trust segments were amongst the largest drivers of favorable fee income growth over the prior quarter.

Fee income provides diversity in our revenue sources and helps offset net interest income, which is impacted by varying interest rate environments.  And we’ve long earned a higher portion of noninterest income than many banks. In the third quarter, 37.5% of our revenue came from fee income compared to a median just 20.7% for our peer group.

And finally, our capital levels improved again for the third straight quarter, and we have many available sources of liquidity to support our growth and our operational needs. Capital ratios are an indicator of how well a bank can meet its obligations. Our common equity tier 1 ratio of 10.77% compares favorably to the peer median of 10.25%.

Looking ahead to 2024

Our consistent focus on growth, while maintaining discipline around using our capital, helped drive a solid quarter and positions us well for the future.

Following a period of rapid change, which included 11 interest rate increases since March of 2022, all indications are that the Federal Reserve will pause for the time being. We now expect a higher for longer scenario at least through 2024, which is favorable for UMB. That said, there are many unknowns ahead, such as the economic outlook, including the timing of any rate cuts that may come, and the uncertain geopolitical situation. We will maintain our focus and discipline on pricing and spend as we head into next year.

UMB has a track record of sticking to the business model that has proven itself over time, even as we adapt to changing circumstances.

I look forward to updating you again in January 2024 with our fourth quarter and full-year 2023 results.

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