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UMB Financial (UMBF) Q2 Earnings Beat, Revenues Rise Y/Y

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UMB Financial (UMBF - Free Report) reported a second-quarter 2022 net operating income per share of $2.83, surpassing the Zacks Consensus Estimate of $1.88. The bottom line also compares favorably with the prior-year quarter’s earnings of $1.79.

Results were supported by higher revenues, driven by increases in net interest income (“NII”) and fee income. A rise in average loans was another positive. Yet, increased expenses and deteriorating capital ratios were concerning.

Net income was $137.5 million, rising year over year from $87.4 million.

Revenues and Costs Increase, Average Loans Rise

Second-quarter 2022 total revenues (on a fully tax-equivalent basis or FTE) were $407.4 million, up 20% year over year. The top line beat the Zacks Consensus Estimate of $345.1 million.

NII, on an FTE basis, was $231.1 million, reflecting an increase of 11.25% from the year-ago quarter. Growth in average securities and increased average loans mainly led to the upside. The increases were driven by organic loan growth and excess liquidity. On a FTE basis, the net interest margin (“NIM”) expanded to 2.6% from the prior-year quarter’s 2.56%.

Non-interest income totaled $176.3 million, increasing 34% year over year. The rise mainly resulted from higher trust and securities processing fees, brokerage fees, and investment securities gains.

Non-interest expenses were $214.1 million, up 6.4% from the year-ago quarter’s level mainly due to increases in salaries and employee benefits, legal and consulting expenses, and higher processing expenses.

The efficiency ratio was 53.08% compared with the prior-year quarter’s 60.41%. A decline in the efficiency ratio indicates an increase in profitability.

As of Jun 30, 2022, average loans and leases were $18.3 billion, up 5.5% from the sequential quarter. This included paycheck protection program loan balances.

Average deposits fell 3% from the prior-quarter level to $31.5 billion as of Jun 30, 2022.

Credit Quality Improves

The ratio of net charge-offs to total average loans was 0.62% in the reported quarter, down from 0.68% in the year-ago quarter. The provision for credit losses was $13.4 million compared with $24 million in the prior-year quarter.

Moreover, total non-accrual and restructured loans were $18.1 million, declining from $58.2 million year over year.

Capital Ratios Decline, Profitability Ratios Improve

As of Jun 30, 2022, the Tier 1 risk-based capital ratio was 11.44% compared with 11.91% as of Jun 30, 2021. The total risk-based capital ratio was 13% compared with 13.84% in the year-ago quarter. Tier 1 leverage ratio was 8.17% at the second-quarter end compared with 8% as of Jun 30, 2021.

Return on average assets at the quarter’s end was 1.47% compared with the year-ago quarter’s 1.02%. Also, return on average equity was 20.83% compared with 11.43% witnessed in the prior-year quarter.

Dividend Update

UMB Financial’s board of directors announced a common stock quarterly dividend of 37 cents per share. The dividend will be paid out on Oct 3 to its shareholders of record as of Sep 12, 2022.

Conclusion

UMB Financial put up an impressive performance in the second quarter. The company’s efforts to diversify its non-interest income sources to reduce exposure to interest rates will support revenues in the quarters ahead. A strong balance sheet position and increased revenues in the quarter are other tailwinds.

UMB Financial Corporation Price, Consensus and EPS Surprise

 

UMB Financial Corporation Price, Consensus and EPS Surprise

UMB Financial Corporation price-consensus-eps-surprise-chart | UMB Financial Corporation Quote

UMB Financial currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Performance of Other Banks

Washington Federal’s (WAFD - Free Report) third-quarter fiscal 2022 (ended Jun 30) earnings of 91 cents per share surpassed the Zacks Consensus Estimate of 79 cents. The figure reflects a year-over-year jump of 49.2%.

Results were primarily aided by higher revenues and improving loan balances. However, an increase in expenses and higher provisions were the undermining factors for WAFD.

Commerce Bancshares Inc.’s (CBSH - Free Report) second-quarter 2022 earnings of 96 cents per share beat the Zacks Consensus Estimate by a penny. The bottom line, however, plunged 27.3% from the prior-year quarter.

Results benefited from an improvement in net interest income, a rise in loan balance and a modest increase in non-interest income. However, an increase in non-interest expenses and higher provisions were the major headwinds for CBSH.


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