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UMB Financial (UMBF - Free Report) reported third-quarter 2019 net operating earnings of $1.27 per share, surpassing the Zacks Consensus Estimate of $1.17. The reported figure also compares favorably with the prior-year quarter’s earnings of $1.16.
Higher revenues, aided by rising loans and deposit balances, supported the company’s results. However, reduction in net interest margin was a major drag. Further, higher provisions and elevated expenses were the undermining factors.
Including certain non-recurring items, the company reported net income of $62.4 million for the third quarter, up from the $57.8 million recorded in the prior-year quarter.
Increase in Revenues, Loans & Deposits Balance, Costs Flare Up
Total revenues for the July-September quarter came in at $271.9 million, up 8.2% year over year. Yet, the revenue figure lagged the Zacks Consensus Estimate of $276.9 million.
Net interest income came in at $168.3 million, reflecting an increase of 11.8% from the year-ago quarter. Growth in average loans and average loan yields, mainly led to this upside. Net Interest Margin (NIM) contracted 9 basis points (bps) to 3.09% from the prior-year quarter reported tally.
Non-interest income totaled $103.6 million, up 2.7% year over year. This upswing resulted from a rise in most of the income components, partly muted by lower service charges on deposit accounts and other income.
Non-interest expenses (GAAP basis) came in at $191.4 million, flaring up 6.1% from the year-ago tally, mainly due to rise in most of the expense components. Adjusted non-interest expenses were $191.2 million, up 6.1% year over year.
Efficiency ratio (GAAP basis) decreased to 70.7% from the prior-year quarter’s 71.27%. Fall in efficiency ratio indicates rose in profitability. Adjusted efficiency ratio was 70.63%, down from the year-earlier quarter’s 71.18%.
As of Sep 30, 2019, average loans and leases were around $12.9 billion, up 2.4% sequentially. Additionally, average deposits climbed 2.7% from the prior-quarter end to $19.3 billion.
Credit Quality: A Mixed Bag
Total non-accrual and restructured loans came in at $71.8 million, up 41.9% year over year. Further, provision for loan losses came in at $7.5 million, up 30.4% from the year-earlier quarter. Yet, the ratio of net charge-offs to average loans was 0.07% in the reported quarter, down 2 bps from the year-ago quarter.
Strong Capital & Profitability Ratios
As of Sep 30, 2019, Tier 1 risk-based capital ratio was 12.53% compared with 13.47% as of Sep 30, 2018. Also, total risk-based capital ratio was 13.51% compared with 14.54% at the end of the prior-year quarter. Tier 1 leverage ratio was 9.62% compared with 10.58% as of Sep 30, 2018.
Adjusted return on average assets at the quarter’s end was 1.04%, down from the year-ago quarter’s 1.11%. Additionally, return on average equity was 9.72% compared with 10.35% witnessed in the prior-year quarter.
Dividend Update
Concurrent with the earnings release, the board of directors announced 31 cents per share quarterly cash dividend, up 3.3%. The new dividend will be paid on Jan 2, 2020, to shareholders of record as of Dec 10, 2019.
Conclusion
UMB Financial put up a decent performance in the quarter. Organic growth is anticipated to continue, backed by higher revenues. Moreover, soaring loan balances will likely be a driving factor. Furthermore, the company’s efficiency ratio has been decent, which signals better profitability over the long run.
Nevertheless, elevated expenses and higher provisions may depress the company’s revenues. In addition, intense competition from other FinTech companies and online service providers is another concern.
UMB Financial Corporation Price, Consensus and EPS Surprise
Bank of Hawaii Corporation (BOH - Free Report) reported a negative earnings surprise of 6.5% in third-quarter 2019. Earnings per share of $1.29 lagged the Zacks Consensus Estimate of $1.38. Further, the reported figure compared unfavorably with $1.36 earned in the prior-year quarter.
Texas Capital Bancshares Inc. (TCBI - Free Report) posted earnings per share of $1.70 in third-quarter 2019, outpacing the Zacks Consensus Estimate of $1.49. Results compared favorably with the prior-year quarter’s $1.65 as well.
PNC Financial (PNC - Free Report) recorded positive earnings surprise of 5% in the third quarter. Earnings per share of $2.94 surpassed the Zacks Consensus Estimate of $2.80. Further, the bottom line reflected a 4.3% jump from the prior-year quarter’s reported figure.
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UMB Financial's (UMBF) Q3 Earnings Beat, Revenues Improve
UMB Financial (UMBF - Free Report) reported third-quarter 2019 net operating earnings of $1.27 per share, surpassing the Zacks Consensus Estimate of $1.17. The reported figure also compares favorably with the prior-year quarter’s earnings of $1.16.
Higher revenues, aided by rising loans and deposit balances, supported the company’s results. However, reduction in net interest margin was a major drag. Further, higher provisions and elevated expenses were the undermining factors.
Including certain non-recurring items, the company reported net income of $62.4 million for the third quarter, up from the $57.8 million recorded in the prior-year quarter.
Increase in Revenues, Loans & Deposits Balance, Costs Flare Up
Total revenues for the July-September quarter came in at $271.9 million, up 8.2% year over year. Yet, the revenue figure lagged the Zacks Consensus Estimate of $276.9 million.
Net interest income came in at $168.3 million, reflecting an increase of 11.8% from the year-ago quarter. Growth in average loans and average loan yields, mainly led to this upside. Net Interest Margin (NIM) contracted 9 basis points (bps) to 3.09% from the prior-year quarter reported tally.
Non-interest income totaled $103.6 million, up 2.7% year over year. This upswing resulted from a rise in most of the income components, partly muted by lower service charges on deposit accounts and other income.
Non-interest expenses (GAAP basis) came in at $191.4 million, flaring up 6.1% from the year-ago tally, mainly due to rise in most of the expense components. Adjusted non-interest expenses were $191.2 million, up 6.1% year over year.
Efficiency ratio (GAAP basis) decreased to 70.7% from the prior-year quarter’s 71.27%. Fall in efficiency ratio indicates rose in profitability. Adjusted efficiency ratio was 70.63%, down from the year-earlier quarter’s 71.18%.
As of Sep 30, 2019, average loans and leases were around $12.9 billion, up 2.4% sequentially. Additionally, average deposits climbed 2.7% from the prior-quarter end to $19.3 billion.
Credit Quality: A Mixed Bag
Total non-accrual and restructured loans came in at $71.8 million, up 41.9% year over year. Further, provision for loan losses came in at $7.5 million, up 30.4% from the year-earlier quarter. Yet, the ratio of net charge-offs to average loans was 0.07% in the reported quarter, down 2 bps from the year-ago quarter.
Strong Capital & Profitability Ratios
As of Sep 30, 2019, Tier 1 risk-based capital ratio was 12.53% compared with 13.47% as of Sep 30, 2018. Also, total risk-based capital ratio was 13.51% compared with 14.54% at the end of the prior-year quarter. Tier 1 leverage ratio was 9.62% compared with 10.58% as of Sep 30, 2018.
Adjusted return on average assets at the quarter’s end was 1.04%, down from the year-ago quarter’s 1.11%. Additionally, return on average equity was 9.72% compared with 10.35% witnessed in the prior-year quarter.
Dividend Update
Concurrent with the earnings release, the board of directors announced 31 cents per share quarterly cash dividend, up 3.3%. The new dividend will be paid on Jan 2, 2020, to shareholders of record as of Dec 10, 2019.
Conclusion
UMB Financial put up a decent performance in the quarter. Organic growth is anticipated to continue, backed by higher revenues. Moreover, soaring loan balances will likely be a driving factor. Furthermore, the company’s efficiency ratio has been decent, which signals better profitability over the long run.
Nevertheless, elevated expenses and higher provisions may depress the company’s revenues. In addition, intense competition from other FinTech companies and online service providers is another concern.
UMB Financial Corporation Price, Consensus and EPS Surprise
UMB Financial Corporation price-consensus-eps-surprise-chart | UMB Financial Corporation Quote
UMB Financial currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Bank of Hawaii Corporation (BOH - Free Report) reported a negative earnings surprise of 6.5% in third-quarter 2019. Earnings per share of $1.29 lagged the Zacks Consensus Estimate of $1.38. Further, the reported figure compared unfavorably with $1.36 earned in the prior-year quarter.
Texas Capital Bancshares Inc. (TCBI - Free Report) posted earnings per share of $1.70 in third-quarter 2019, outpacing the Zacks Consensus Estimate of $1.49. Results compared favorably with the prior-year quarter’s $1.65 as well.
PNC Financial (PNC - Free Report) recorded positive earnings surprise of 5% in the third quarter. Earnings per share of $2.94 surpassed the Zacks Consensus Estimate of $2.80. Further, the bottom line reflected a 4.3% jump from the prior-year quarter’s reported figure.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
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