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UMB Financial (UMBF) Q4 Earnings Beat, Revenues Increase

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UMB Financial UMBF reported fourth-quarter 2020 net operating income of $3.26 per share, surpassing the Zacks Consensus Estimate of $1.48. The bottom line also compares favorably with the prior-year quarter’s earnings of $1.36. Fourth-quarter results include a pre-tax gain of $108.8 million on the company’s investment in Tattooed Chef, Inc.

Higher revenues, aided by rising loans and deposit balances supported the company’s performance. Also, capital position and profitability ratios remained strong. However, higher provisions and expenses were major drags. Further, contraction of net interest margin was an undermining factor.

Including certain non-recurring items, the company reported net income of $156.3 million or $3.24 per share in the fourth quarter, up from $66.5 million or $1.35 per share recorded a year ago.

In full-year 2020, UMB Financial reported net income of $286.5 million or $5.93 per share compared with $243.6 million or $4.96 in 2019.

Revenues, Loans & Deposits Balance Rise, Costs Up

In 2020, the company reported revenues of $1.29 billion, which surpassed the consensus estimate of $1.2 billion. Also, the top line rose 17.6% year over year.

Total revenues (fully tax-equivalent) in the December-ended quarter came in at $423 million, up 49.6% year over year. The revenue figure also outpaced the Zacks Consensus Estimate of $313.3 million.

Net interest income came in at $194.7 million, reflecting an increase of 12.9% from the year-ago quarter. Growth in average loans and investment securities mainly led to this upside, driven by organic loan growth and the company’s participation in the Paycheck Protection Program. Net interest margin contracted 24 basis points (bps) to 2.78% from the prior-year quarter.

Non-interest income totaled $228.3 million, more than doubling year over year. This upsurge mainly resulted from rise in investment securities gains backed by investment in Tattooed Chef. Higher trading and investment banking income, trust and securities processing and other income was partly muted by lower bankcard fees and brokerage fees.

Non-interest expenses (GAAP basis) came in at $226.9 million, up 11.5% from the year-ago quarter, mainly due to higher salaries and employee benefits, processing fees along with equipment expenses. These were partly negated by lower marketing and business development, supplies and services along with occupancy expenses.

Efficiency ratio (GAAP basis) decreased to 53.44% from the prior-year quarter’s 71.59%. Adjusted efficiency ratio was 53.11%, down from the year-earlier quarter’s 71.35%. A fall in efficiency ratio indicates rise in profitability.

As of Dec 31, 2020, average loans and leases were $16 billion, up 2% sequentially. Additionally, average deposits climbed 3.5% from the prior-quarter end to $25 billion.

Credit Quality: A Mixed Bag

During the reported quarter, credit metrics remained a mixed bag. Total non-accrual and restructured loans came in at $87.8 million, up 55.9% year over year. Further, provision for loan losses more than doubled to $5 million.

However, the ratio of net charge-offs to average loans was 0.04% in the reported quarter, down 19 bps from the year-ago quarter.

Strong Capital & Profitability Ratios

As of Dec 31, 2020, Tier 1 risk-based capital ratio was 12.10% compared with 12.33% on Dec 31, 2019. Also, total risk-based capital ratio was 14.26% compared with the 13.26% witnessed at the end of the prior-year quarter. Tier 1 leverage ratio was 8.37% compared with 9.62% as of Sep 30, 2019.

Adjusted return on average assets at the quarter’s end was 2.05%, up from the year-ago quarter’s 1.06%. Additionally, return on average equity was 21.33% compared with the 10.23% witnessed in the prior-year quarter.

Conclusion

UMB Financial put up an impressive performance during the December quarter. Soaring loan balances are likely to be a driving factor in the future. Furthermore, the company’s efficiency ratio has been decent, which signals better profitability over the long run. Nonetheless, higher provisions amid the coronavirus concerns along with margin pressure might weigh on the company’s bottom line.

UMB Financial Corporation Price, Consensus and EPS Surprise

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 carries a Zacks Rank #2 (Buy). 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 reported fourth-quarter 2020 earnings per share of $1.06, which lagged the Zacks Consensus Estimate of $1.11. Also, the bottom line compares unfavorably with $1.45 reported in the prior-year quarter.

BancorpSouth Bank BXS delivered a fourth-quarter 2020 positive earnings surprise of 6.2% on higher interest income. Net operating earnings of 69 cents per share beat the Zacks Consensus Estimate of 64 cents. Also, the bottom line compares favorably with 65 cents reported in year-ago quarter.

People's United Financial PBCT delivered fourth-quarter 2020 operating earnings of 35 cents per share, beating the Zacks Consensus Estimate of 32 cents. The reported figure, however, came in below the prior-year quarter figure of 37 cents.

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