UMB Financial’s ( UMBF Quick Quote UMBF - Free Report) operating earnings per share of $1.80 per share outpaced the Zacks Consensus Estimate of $1.74. The bottom line also compares favorably with the prior-year quarter’s $1.33.
Higher revenues, aided by a rise in interest and fee income, supported the company’s performance. However, low interest rates were major drags.
Including certain non-recurring items, the company reported a net income of $87.4 million or $1.79 per share in the second quarter compared with $60.5 million or $1.26 per share recorded in the prior year.
Revenues, Loans & Deposit Balance Rise, Costs Dip
Total revenues (fully tax-equivalent) in the June-ended quarter were $339.3 million, up 9.6% year over year. The revenue figure outpaced the Zacks Consensus Estimate of $312 million.
Net interest income was $201.1 million, reflecting an increase of 12.8% from the year-ago quarter. Growth in organic loans, excess liquidity and the company’s PPP participation mainly led to the upside. Net interest margin contracted to 2.56% from the prior-year quarter’s 2.79%.
Non-interest income totaled $131.6 million, rising 9.2% year over year. The upsurge mainly resulted from a rise in investment securities gains; and services income and corporate trust income, service charges on deposits, and derivative income.
Non-interest expenses were $201.3 million, down 3.5% from the year-ago quarter mainly due to lower deferred compensation expenses recorded in salaries and employee benefits, and software expenses. These were partly negated by higher processing fees, legal and professional expenses, and marketing and business development expenses.
Efficiency ratio decreased to 60.41% from the prior-year quarter’s 70.20%. A fall in efficiency ratio indicates a rise in profitability.
As of Jun 30, 2021, average loans and leases were $16.8 billion, up 3.5% sequentially. Additionally, average deposits climbed 3.6% from the prior-quarter end to $27.8 billion.
Credit Quality Improves
In the reported quarter, credit metrics improved. Total non-accrual and restructured loans came in at $58.2 million, down 29% year over year. The ratio of net charge-offs to average loans was 0.68% in the reported quarter, down 2 basis points from the year-ago quarter.
Provision for loan losses was $24 million compared with $21.5 million seen in the prior-year quarter.
Capital Ratios Decline, Profitability Improves
As of Jun 30, 2021, Tier 1 risk-based capital ratio was 11.91% compared with 11.92% on Jun 30, 2020. Total risk-based capital ratio was 13.84% compared with the 13.17% witnessed at the end of the prior-year quarter. Tier 1 leverage ratio was 8% compared with 8.35% as of Jun 30, 2020.
Adjusted return on average assets at the quarter’s end was 1.02% compared with the year-ago quarter’s 0.87%. Additionally, operating return on average equity was 11.46% compared with 9.44% witnessed in the prior-year quarter.
UMB Financial’s board of directors announced a common stock quarterly dividend of 37 cents per share, indicating a sequential hike of 15.6%. The dividend will be paid out on Oct 1 to shareholders of record as of Sep 10.
UMB Financial put up an impressive performance in the second quarter. Improving loan and deposit balances are likely to be a driving factor in the future. The company’s efficiency ratio has been decent, which signals better profitability over the long run. Nonetheless, margin pressure might weigh on the company’s bottom line.
UMB Financial currently carries a Zacks Rank #3 (Hold). You can see
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