UMB Financial Corp
NASDAQ:UMBF
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UMB Financial Corp
Earnings Call Analysis
Q3-2023 Analysis
UMB Financial Corp
Highlighting a quarter of firm financials and strategic success, the management commenced with a sense of positivity. They placed emphasis on robust loan growth, unwavering deposit stability, a thrust in fee-generating sectors, restrained expense growth, steadfast margins, and rigorous asset quality. The company's asset integrity boasts the lowest net charge-offs historically, marking an 18% surge in average loan volumes during the period. The reduction of nonperforming loans and a $5 million provision for credit losses, down from $13 million previously, signify prudent risk management and adept navigation amid economic headwinds.
Despite a negligible dip in the net interest margin to 2.43%, the company benefited from loan repricing and the boon of free funds, though these were somewhat offset by deposit pricing changes. The narrative shifted in noninterest income, with a subtle dance of various factors; while trust and securities processing income leapfrogged by $5.1 million, there was a downtick in company owned life insurance and derivative income. The skilled balancing act in financial maneuvering is apparent in these mixed results.
A decrease in expenses by around $9.9 million was headlined by a significant retreat in salary and benefits costs. What catches the eye is the disciplined approach to cost containment and the optimization of operational losses against the backdrop of fiscal prudence. Moreover, the company benefits from an effective tax rate trimmed down to 18.1% from 18.8%. The focus on income from tax-exempt securities and adept handling of corporate-owned life insurance contributes to this efficiency, with an expected annual tax rate of 17-19% in the offing.
The company divulged a layered approach to balance sheet management. An investment portfolio poised to generate significant cash flows over the next year affords the company considerable flexibility. Notably, they are navigating a landscape marked by unrealized portfolio losses due to broad market influences, yet standing firm with a robust liquidity coverage ratio of 127%. Anchoring this position is a tangible common equity ratio growth to 6.13% and a tangible book value rise to $52.06 per share, up 8% year-on-year. These figures present a tableau of a company resilient in the face of industry volatility and focused on sustained growth.
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Hello, and welcome to today's UMB Financial Third Quarter 2023 Financial Results Conference Call. My name is Elliot, and I'll be coordinating your call today. [Operator Instructions]
I would now like to hand over to Kay Gregory, Investor Relations. The floor is yours. Please go ahead.
Good morning, and welcome to our third quarter 2023 call. Mariner Kemper, President and CEO; and Ram Shankar, CFO, will share a few comments about our results. Jim Rine, CEO of UMB Bank; and Tom Terry, Chief Credit Officer, will also be available for the question-and-answer session.
Today's presentation contains forward-looking statements, which are subject to assumptions, risks and uncertainty. These risks are included in our SEC filings and are summarized on Slide 46 of our presentation. Actual results may differ from those set forth in forward-looking statements, which speak only as of today. We undertake no obligation to update them, except to the extent required by securities laws. All earnings per share metrics discussed on this call are on a diluted share basis. Our presentation materials and press release are available online at investorrelations.umb.com.
Now I'll turn the call over to Mariner Kemper.
Thank you, Kay. Good morning. I'm happy to be here with you today to share the details of our strong third quarter performance. Our results reflect a strong disciplined loan growth, stable deposits, continued momentum in many of our fee-generating businesses, expense control, stable margin and solid asset quality. I continue to be extremely proud of the long track record of prudent underwriting that has produced these asset quality metrics. Our loan portfolio remains healthy with 8 basis points net charge-offs for the third quarter and just 6 basis points year-to-date. Nonperforming loans improved 7 basis points from 9 basis points prior quarter. Provision for credit losses was $5 million for the quarter compared to $13 million in the second quarter, driven largely by changes in macroeconomic variables and general improvement in the watch and classified categories.
The average charge-off ratio for the 5-quarter period shown in our debt is the lowest in our history, impressive, considering the 18% increase in average loan balances during that same time period. We saw improvement in the levels of both past watch loans and classified loans, which declined 13% and 6%, respectively, from the second quarter. Our watch list levels fluctuate from time to time as we manage the book. And historically, we've seen very little migration to loss.
Our current historical credit performance has been achieved through our focus on risk management and consistent approach that comes from having the same team working together for multiple cycles and decades. We continue to closely monitor macroeconomic trends and have regular conversations with our clients across our footprint, something we do in all economic environments. Despite uncertainty from the brewing geopolitical crisis, as well as the volatility in interest rates, our commercial clients remain cautiously optimistic.
Now I'll cover a few highlights from the quarter, and Ram will follow up a few details and drivers. GAAP net income for the third quarter was $96.6 million or $1.98 per share. Operating net income was $98.4 million or $2.02 per share. Net interest income decreased 1.5% from the second quarter as loan growth improved and asset mix and yields were offset by an increase in deposit costs. While net interest income for the industry continues to be impacted by higher funding costs, our net interest margin in the third quarter was essentially flat on a linked-quarter basis.
The flexibility on the asset side of our balance sheet helps mitigate the continued impact of liability pricing. We have a loan to profit ratio lower than our peers and industry medians and largely variable asset base and strategically planned cash flows. In fee income, we saw solid results in several lines of this. Trust and Securities Processing income increased 8.2%, driven by growth in all businesses contributing to this line, Fund Services, Corporate Trust and Private Wealth. In Fund Services, assets under administration reached $400 billion in the third quarter. Year-to-date, our team has added nearly 50 new clients, which helped drive a [ 9.2% ] increase in revenues we saw on a linked quarter basis. Our noninterest expense levels fell by over 3.8% and included variances in deferred compensation expense related to the reduced COLI income. Additionally, severance expense declined along with salary and wage expense reflecting the ongoing efforts to control operating expenses. Ram will provide more additional color on these various drivers shortly.
Turning to the balance sheet. The driver behind our 10.1% annualized growth in average loan balances this quarter are shown on Slide 24. For comparison, the banks that have reported results through October 20 had a median linked-quarter annualized increase of 5.3%. The Federal Reserve H.8 data have predicted an increase in industry-wide average loan balances of just 0.4% or 1.6% annualized. Despite some caution surrounding the current environment, our relationship banking model continues to build a pipeline of quality clients.
And given what we've seen today, we expect some continued outperformance relative to the industry and loan growth metrics. Total top line loan production as seen on Slide 25, was $649 million, with payoffs and paydowns declining slightly, representing 3.2% of loans for the quarter. Credit quality strong across our book, and the CRE portfolio remains well diversified by property classification, tenant type and geography, as shown on the slide on Page 36 and 37.
Looking ahead to the fourth quarter, we see opportunity across our various lending verticals and geographic regions. We have continued to evaluate the best use of our capital, and we remain disciplined on pricing, further emphasizing lending opportunities accompanied by meaningful deposit relationships. On the other side of the balance sheet, average total deposits were essentially flat versus the second quarter.
Declines in broker CD balances and difficult seasonal reductions in public funds were offset by growth in commercial deposit balances, we expect public fund balances will begin to rebuild again in the fourth quarter. As we've noted previously, the deposit balances will naturally ebb and flow as our largely commercial customer base uses funds for typical business purposes, including payroll, dividends and other activity.
Finally, we strengthened our liquidity and capital positions even further during the quarter, as depicted on Slide 32. Our quarter-end CET1 and total capital ratios were 10.77% and 12.68%, improved by 12 and 9 basis points, respectively, from June 30. Our CET1 ratio compares favorably to the peer median. And in our press release, we announced that the Board had approved a 2.6% increase in our dividend, bringing it to $0.39 per share payable in January. As we've shown on Slide 15 of our presentation, our quarterly dividend has increased 283% over the past 20 years. There were 23 individual dividend increases during that period.
To wrap it up, we're pleased with our results this quarter. The timing have varying opinions, but it seems clear that inflation level, however you want to measure it, haven't reached the Federal Reserve's expectations. All indications are that a data-dependent set will pause on further interest rate hikes. The variables now are win rate cuts may begin and how quickly they may happen. But we fully expect a higher per longer scenario, at least through 2024.
Such a scenario would be favorable for our balance sheet as the pressure on deposit costs largely abated while asset repricing continues through that period. Additionally, earning asset yields will improve as we use cash flows from our securities portfolio to fund higher-yielding loans. With the uncertainty in the macro and geopolitical environment, we feel that our business model is prepared for a wide range of outcomes. It has proven itself over time as we've adapted to a changing environment and set of circumstances.
Now I'll turn it over to Ram for a more detailed look at our results. Ram?
Thanks, Mariner. I'll share a few additional drivers of our third quarter results, then I'll discuss some key balance sheet items. Net interest margin for the third quarter was 2.43%, a decrease of just 1 basis point from the linked quarter. The largest drivers included a positive impact of approximately 16 basis points from loan repricing and mix and 11 basis points from the benefit of free funds. These positives were mostly offset by a reduction of 25 basis points from changes in interest-bearing deposit pricing. Cycle to date, our earning asset beta has been 51%, keeping pace with the total cost of funds beta of 51%.
Our deposit remix showed some signs of slowing this quarter, and we ended the quarter with 32% of total average deposits in DDA. This level is in line with the low point during the 2015, 2017 tightening cycle, and although it's difficult to know for certain, we expect we are approaching the bottom. The decline and the DDA balances largely reflects corporate trust activity, which can be episodic. Commercial DDA balances increased approximately 1% over the linked quarter. With the current consensus that the Fed will hold rates for the time being, we continue to expect the terminal beta approximately 50% of total deposits and 60% per loan through the end of this cycle.
Looking ahead to the fourth quarter, we expect NII to trend flat to slightly up, while we'll see some additional modest margin compression, driven by mix shift as rate-bearing public funds come on the balance sheet. Our reported noninterest income of $133.3 million contains the market-related variances to second quarter levels including a $3.5 million decrease in company-owned life insurance income and $896,000 decrease in customer-related derivative income as well as the impact of the $4 million gain on the sale of assets we discussed last quarter. These decreases were offset by a $5.1 million increase in trust and securities processing income driven largely by the new client acquisition in our Fund Services and Corporate Trust businesses.
The detailed drivers of our $231.4 million in noninterest expense are shown in our slides and press release. A few items of note. We recorded $133.4 million in salary and benefits expense, a decrease of $9.9 million compared to the second quarter, included where just $425,000 in deferred compensation expense, a reduction of $2.8 million from the prior quarter.
This is the offset to decreased COLI income. $2.4 million in severance expense, a reduction of $2.5 million, a $1.6 million decrease in salary and wages and $1.3 million reduction in various other employee benefit costs. These decreases were partially offset by a $1.3 million increase in operational losses. Considering the impact of $2.4 million of severance along with the deferred compensation expense and typical timing variances, we would put our quarterly starting point for expenses close to $228 million.
Looking ahead, we expect we'll make a typical fourth quarter charitable contribution of approximately [ $2 billion ]. Our effective tax rate was 18.1% year-to-date compared to 18.8% in the same period in 2022. The decreased rate was driven primarily by a larger portion of income from tax exempt securities and variations in level of COLI income. For the full year 2023, we continue to expect a tax rate between 17% and 19%.
Now turning to more detail on the balance sheet. I'll start with our investment portfolio, shown on Slides 28 and 29. Our average investment security balances declined 2.7% from the second quarter to $12.3 billion. The held-to-maturity book included $1.2 billion of industrial revenue bonds. During the quarter, $240 million of securities with an average yield of 1.90% rolled up. The yield on our total AFS portfolio increased to 2.74% and has a duration of just over 4 years.
The health and maturity portfolio exclusive of the IRB bond mentioned had an average yield of 2.31% for the third quarter. Additionally, the portfolio is expected to generate more than $1.6 billion of cash flows in the next 12 months, providing further funding flexibility. The roll-off of these securities, which have a blended rate of 2.18% will also improve our AOCI position over that period.
As of September 30, the unrealized pretax loss on the AFS portfolio was $918 million or 12.7% of the amortized cost. For the HTM portfolio, this loss was $876 million including the IRB loss. Slide 32 highlights our liquidity position, along with contingent sources of funding. As of September 30, we had $18.1 billion in available liquidity sources. Liquidity coverage of adjusted uninsured deposits increased 127% at quarter end. Our tangible common equity ratio was 6.13% at September 30. When excluding the impact of AOCI, that ratio improved to 8.06%.
Tangible book value was $52.06 per share, an increase of 8% compared to the same period a year ago. Since September 30, 2018, we have experienced a 5.3% annualized growth rate in tangible book value per share. As we noted last quarter, we maintained our focus as a growth company while positioning our balance sheet to support that growth and provide the flexibility to address uncertainty in the industry.
That concludes our prepared remarks, and I'll now turn it back over to the operator to begin the Q&A portion of the call.
[Operator Instructions] First question today comes from Nathan Race with Piper Sandler.
Ram, in terms of kind of the expectations for NII to be kind of flat to slightly down in the quarter. Curious kind of what that contemplates in terms of the size of the earning asset base in the fourth quarter. It looks like you guys were able to reduce some wholesale sources in the quarter, and you also have about $1.9 billion maturing in the fourth quarter. So just trying to think how we should think about the trajectory of the earning asset base...
Yes, sure, Nate. No material change in our investment portfolio other than cash flows that will continue to rotate out into the loan portfolio. So you'll see that in one of our slide decks, we have, what the expected cash flows from the portfolio is going to be. We still haven't purchased any new securities as you see in that disclosure as well. And then everything else on the earning asset side is going to be largely loan growth. So no material changes in the fed account balances. Yes, we did bring down our liquidity balances from the second quarter to the third quarter, but don't expect it to change materially from where it was.
I would just add that as we've done in the past, we expect loan growth in the fourth quarter would be like in strength to the quarter we just ended, that was strong.
Got it. That's helpful. [indiscernible] think about fee income going forward, obviously, you had nice growth in fund services revenue, corporate and institutional asset management. Just curious how that pipeline looks in terms of new client win opportunities and if kind of the rate of growth that we saw in 3Q versus 2Q is kind of sustainable going forward?
Yes. That -- the strength remains very good. Fund services, in particular, we mentioned in our deck is we've had 50 new clients year-to-date which represents, I think, it gives us over 10% growth in the segment. The pipeline remains very strong for that business. There's been a lot of dislocation, continues to be a lot of dislocation in the space as the private equity firms have gotten into the business and acquired our competitors has been very good for our business, and we expect that to continue to be the case. Corporate Trust, the money has been unlocked, projects are getting done, the public and private projects are getting done. And that's unlocking value for us there.
Everyone's seen what's happened with airline activity of being up and strong and moving again. So there -- we continue to and expect in the coming quarters for that revenue to unlock in our aviation vertical within Corporate Trust. Our health care business continues to be strong as we continue to focus more on direct sales on our customer base. Our card spend, we expect to continue to be strong going forward, whether it's health care spend or it's commercial. So kind of all cylinders, really, we feel like there's a nice profile of growth across all of our noninterest income verticals and continue to feel good about that. As you know, in the second quarter, we had that [indiscernible] sale of about $4 million. So if you take that out, the trajectory from quarter-to-quarter and looking forward, it's pretty strong.
Okay. Great. And then just lastly, turning to credit quality. It's great to see improvement across the board in 3Q. I think one thing that we've seen from some of your peers thus far in the earnings season is some greater scrutiny on shared national credits. So just curious if you could remind us how large that portfolio is and to what degree you guys agent any club dealers shared national credits within the portfolio?
Yes. This is Tom Terry, Chief Credit Officer. The shared national credits that we have about $2.5 billion, maybe closer to $3 billion, almost all of those related to other businesses. So for example, our fund services business, we have large health insurance companies as clients, and we will participate in their shared national credits to support the fee income that we get on the fund services side. So we're not interested in shared national credits for the sake of being in them. The lion's share are ones to support their business and they're high-quality -- as far as agent thing, are majorly very few of those. So does that answer your question.
Yes it does.
I think about [ national credit ] outstanding will be much, much slower -- lower.
Yes, the $3 billion is the commitment has gone out.
Most I would say a lot of the comment on those fund service-related lines, there are sort of really back up lines, [ Tuesday ] lines, et cetera. They don't really get used for the most part.
So utilization of that $3 billion is like 50% in terms of funded.
The balance is -- Nate, the balances at [ $930 million ] were about just under $500 million. So yes, the utilization tends to be pretty low, as Tom said, these are other clients that we have outstanding lines to but don't get tapped. Just to make sure commitments are larger and balances are under $500 million.
Got it. And you really haven't seen any negative credit migration within that portfolio recently?
Not at all.
None of them are on the watch list.
Correct.
Our next question comes from Chris McGratty with KBW.
Mariner, maybe a question for you, you've talked and done a really good job historically on operating leverage. Expenses were really well controlled this quarter. How should we be thinking about operating leverage in this increasingly tough environment for revenue?
Well, I think you kind of hit the nail on the head there, the environment with really pretty much what's happened with interest costs, right? It's a story line there. It's more challenging in this environment. to accomplish, really, I would guess what any of us want to accomplish. We are still laser-focused on it. And it's -- obviously, we don't give guidance, but it will be hard for us to point you in any one direction, it's kind of early in the year as we think about the budget for next year to really be able to talk intelligently about where that might head. But we are operating leverage and as opposed to efficiency ratio is definitely where we put our emphasis. And we'll continue to be focused on it.
Okay. And then I think -- I want to make sure I heard you on the fourth quarter loan growth. Was the expectation moderation from this quarter? Or I might have missed that?
Similar in strength.
Okay. Got it. And then finally, in terms of the balance sheet, some of your peers are thinking about retooling some of the investment portfolio given the move in rates. I mean, any appetite to move things around in the bond portfolio. Obviously, you're not reinvesting, but any kind of restructuring that might be contemplated?
Chris, as you know, we routinely evaluate these kinds of opportunities. But at this time, very little appetite desire or need really to do any of that.
We now turn to Tim Braziler with Wells Fargo Securities.
Maybe just following up on that last line of questioning. With the seasonal inflow expected on the public funds. I guess what's the expectation for the bond book and size next quarter? Are you going to be reinvesting some of those proceeds that are rolling off? Or is the bond book and remain a source of funds for the loan growth you're seeing?
It will remain a source of funds through the end of the year and maybe early into next year. And then we'll have to evaluate based on loan production and deposit goals and whatnot. But at this point, we're still going to let it fund our balance sheet growth or loan growth, I should say.
Okay. And then looking at the loan growth, the CRE construction growth remains pretty impressive. I'm just wondering how much of that is contractual as some of these loans start to fund up on schedule and what that pipeline looks like over the next couple of quarters?
It's a mix. A lot of the funding we've seen certainly are deals that we approved over the last 6 and 12 months that are now hitting the construction phase. There's still activity. We're still seeing loan demand for multifamily and for industrial, albeit it's probably slowed a little bit, but there's still demand still seeing activity. So its comprehensive to answer your question specifically in terms of funding, though it's a mix of what we've approved over the last 6 to 12 months.
And the [indiscernible]
And the new [indiscernible]
Okay. And then just on the construction component specifically, any ill effects from the broader environment? Are you hearing that borrowers are taking more of a wait-and-see approach, whether it's rates or just economic uncertainty? I guess any kind of color you can provide on some of the early-stage building conversations you're having?
I think I'll echo the comments, Mariner, that Tom said, which is that there's plenty of opportunity. The mix is changing, right? So multifamily and industrial remained very strong, while obviously, office and other categories are winning significantly. So with a higher interest rate environment and a lower supply, housing supply in the marketplace, there's still very strong interest and demand for multifamily there are pockets in the country that isn't the case.
There are places where there's over investment. There are places where people are building Class A when the need is Class B, et cetera. So we pay attention to those kinds of issues to stay away from problems, but there is strong demand that we understand for multifamily and industrial continues to be strong because there's a real need for the last mile distribution and tilted buildings to support the Amazonification of America and delivery and then all of the businesses that the support Amazon or compete with Amazon.
So there's a pretty significant build-out underway that we believe and understand still to support the way consumers receive delivery of goods in America. So we think those 2 things continue to present strong high-quality opportunities for us. The real shift in our book going forward in the environment we're in with excess liquidity going from the system is we're more focused on making sure we reserve our capital for customers and people who do business with us and are willing to put their deposits and broaden the relationship with us.
So that would be the only difference as you think about the landscape of opportunity we still see quite a bit of opportunity and really, really about us owning in that and making sure that we're observing that for people who really want to deepen their relationships with us.
Great. And then just last for me. On the expense side, I appreciate the guide for fourth quarter. Maybe as we look into '24 and again parlaying on Chris' question, how much of -- how much leverage is there on the expense base in order to drive positive operating leverage. Should we expect expenses to grind higher through '24? Or is there confidence that those can be fairly well maintained and be a positive source of operating leverage?
We certainly think we can continue to maintain at a minimum maintain what we've been able to accomplish, it's too early to tell what else -- and we don't give any guidance. But there's always room to improve and to be better I would think at any company, and we continue to look for those opportunities to be -- to do business, I would say, to do business smarter. And we're always looking for those opportunities. And I think we'll forever uncover them.
We have a follow-up question from Nathan Race at Piper Sandler.
Yes. Just kind of curious thinking about how you guys are thinking about the margin trajectory next year and a higher for longer rate environment. Obviously, you're seeing less pressure on the index deposits under that scenario and you have some kind of lagging repricing in terms of the duration of the portfolio of itself on the loan side of things. So any kind of preliminary thoughts on how you guys are thinking about the margin and NII trajectory next year under those frameworks?
We appreciate the opportunity to make our case for our investment thesis. Yes, we do believe that under a higher prolonger scenario, it's the Fed stops, which that would be the scenario where we would anticipate in under that scenario, the deposits the pressure on the deposits would alleviate and new and repricing credit would continue to add value along with the roll-off of the investment portfolio into higher-yielding assets. So that is the expectation if the Fed does stop.
Okay. Great. And I know it's difficult to predict future provisioning impacts under CECL. But just kind of any thoughts on kind of how you guys are thinking about providing for growth and assuming you're not really seeing any material credit issues on the horizon?
Yes. That's a million-dollar question, Nate. So as you've seen in the last few quarters, given our credit quality, most of our provisions really came from both macroeconomic variables changing in this past quarter because -- move towards more of a soft landing, our provision was low compared and then our charge-offs are low as well. .
So it really depends on what level of loan growth that we have and what happens to the macroeconomic variables as Mariner said, we had [ 13% ] decline in quarter-over-quarter on our past lot loans and 6% in our classified. So from a portfolio health perspective, there's not a lot of pressure. But as we've said, the magic math that we have to work sometimes is trying to get our coverage ratio at or close to 1%, right? That's kind of what we would like entering any kind of cycle whether it's good or bad.
Got it. So it sounds like absent material macro deterioration, the expectations for you guys to build the reserve close to 1% over the next few quarters just in support of loan growth. I'm assuming charge offs...
We're within spitting this in, we're at 97 basis points coverage. So I'd say plus or minus a few basis points here and there on what our coverage ratio ends up being.
Got it. And then just one last one. I know you guys don't pay a ton of attention to end of period balances. But a full surprise to the noninterest-bearing attrition accelerate versus last quarter. Any thoughts on kind of when that could bottom based on what you see in terms of client spending and so forth.
So if you look at what happened, as I said in the script, our commercial DDA balances, what you're alluding to, the cash usage, that actually was up 1% on an average basis. And the decline in the third quarter DDA balances were more episodic because of some of our corporate trust deals, there's always a seasonal buildup and tax payments go out. So we know and it's very predictable from that standpoint. .
So I would say on the commercial side, things are fairly stabilized. Again, it's really -- as we said, we think we're approaching the bottom in terms of our 32% DDA to total deposits, which was the slightly low from last time. But that's the -- to your earlier question, that's the biggest factor on what can change our margin or net interest income curve from here.
Yes. I mean I would just -- none of us know, right, but I would suggest that the Fed has done -- and the way our income statement is worth and our customer base works, we've said this all summer long, we would go through this first because our customers were largely commercial. We've seen that. I think that's largely done and we predicted that because the last cycle being at 32%, that's done. We're at 32% today. So from here, your guess is as good as ours, using the history and the major patterns, it seems is nowhere near the bottom on that shift.
Okay. Great. And then just in terms of overall deposit expectations, average deposits were flat in the quarter. Just curious based on what you guys see in terms of your pipeline, how you're thinking about overall deposit growth expectations over the next several quarters?
We continue to have a strong pipeline. This all comes down to cost end of the day. We have a very, very strong ability, I think, in a way that most banks our size don't to tax deposits. It's really about paying market rates for them. And then really, it's about after manage liabilities, about our disciplined approach to pricing assets, it's not just the deposits. And so we don't concern ourselves too much with the ability to grow our deposits. We just have to make sure that we're disciplined on the way we manage assets and liabilities and making sure what we've been able to do to date as we bring on loans, we feel very comfortable about our ability to price them appropriately to maintain a respectable market spread.
Yes, I might just remind everybody what we're done just because it has been a -- you started in April with the way the world looked and looked and you get to where we are now. We feel pretty good about our where we sit. And I just want to remind you of a couple of things. I said a moment ago, UMB said early on in the summer and spring that we would get to -- likely get to 32% on noninterest-bearing in total, and that's about where we sit here now. We said we would go through the margin trouble early. And then while others were seeing the declines, we flatten out on a linked quarter basis, you've seen us flatten out margin on a linked-quarter basis. We continue to tell you we're going to have outsized loan growth. We continue to have upside loan growth. We continue to tell the Street about our ability over time to manage asset quality.
And while everybody's asset quality looks good right now, ours look good in the last cycle. So we continue to have excellent asset quality. We've had the best 5 quarters linked together we've had in our history from an asset quality standpoint. And we have the same management team managing credit that we've seen through the last few cycles is still on top of credit this cycle. And we expect that we'll continue to manage our company the way we always have.
And lastly, we're one of the few banks this quarter on a linked quarter basis to show a reduction in expenses of 3.4% in our case. And so really across the board, everything that we can control we've controlled and have performed. And any business, everyone is all for geopolitical reasons or otherwise, their input costs go up. And it's a business's job to manage how you pass on those costs or become more efficient. And we're doing our job, and we're pleased with our results, and we hope you are as well.
Thanks, Mariner. Thanks, everyone, for joining us today. And if you have any follow-up questions can always reach us at (816) 860-7106. Thank you, and have a great day. I'll turn it back to the operator for close the call.
Ladies and gentlemen, today's call has now concluded. We'd like to thank you for your participation. You may now disconnect your lines.