UMB Financial (UMBF) Q4 Earnings Top, Revenues Rise Y/Y – January 25, 2023

UMB Financial (UMBF Free Report) reported fourth-quarter 2022 net operating income of $2.07 per share, which surpassed the Zacks Consensus Estimate of $2.04. The bottom line also compares favorably with the prior-year quarter’s earnings of $1.62.

Results were aided by higher revenues, expansion of net interest margin (NIM) and increasing loan balances. However, a rise in expenses and provisions adversely impacted UMB Financial’s performance.

UMBF reported GAAP net income of $100.2 million or $2.06 per share in the fourth quarter, up from $78.5 million or $1.61 per share recorded a year ago.

For 2022, net operating earnings per share of $8.88 was up from the prior year’s $7.27 and surpassed the Zacks Consensus Estimate of $8.85. The company reported a net income of $431.7 million or $8.86 per share, up from $353 million or $7.24 per share in 2021.

Revenues & Costs Rise, Average Loans and Deposits Grow

Total revenues for the fourth quarter were $370.7 million, up 12.5% ​​year over year. However, the top line missed the Zacks Consensus Estimate of $375.3 million.

Revenues for 2022 came in at $1.47 billion, lagging the Zacks Consensus Estimate of $1.49 billion. However, the top line increased 15.2%.

Net interest income (NII) on a quarterly basis was $245.2 million, reflecting an increase of 16.4%. Growth in average loans and higher interest rates mainly led to this upside. The NIM expanded to 2.83% from the prior-year quarter’s 2.37%.

Non-interest income was $125.5 million, up 5.7%, mainly due to higher brokerage income, bankcard income and the company-owned life insurance income. These were partially offset by lower investment and securities gain, service charges on deposits and derivative income.

Non-interest expenses were $237.8 million, up 6.9%. Increased salaries and employee benefits expenses, processing fees, marketing and business development expenses, bankcard expenses and occupancy expenses primarily resulted in this upside.

The efficiency ratio decreased to 63.72% from the prior-year quarter’s 67.78%. A decline in the efficiency ratio indicates increase in profitability.

As of Dec 31, 2022, average loans and leases were $20.3 billion, up 5.2% from the sequential quarter’s level.

Average deposits grew 5.3% to $31.4 billion as of Dec 31, 2022.

Credit Quality – A Mixed Bag

The ratio of net charge-offs to average loans was 0.04% in the reported quarter, down 15 basis points from the year-ago quarter’s level. Moreover, total non-accrual and restructured loans were $19.3 million, plunging 79.1%.

The provision for credit losses was $9 million, up from $8.5 million in the prior-year quarter.

Capital & Profitability Ratios Solid

As of Dec 31, 2022, the Tier 1 risk-based capital ratio was 10.62% compared with 12.05% as of Dec 31, 2021. The total risk-based capital ratio was 12.5% ​​compared with 13.88% in the year-ago quarter. The Tier 1 leverage ratio was 8.43% at 2022 end compared with 7.61% as of Dec 31, 2021.

Adjusted return on average assets at the quarter’s end was 1.06% compared with the year-ago quarter’s 0.82%. Additionally, operating return on average equity was 15.16% compared with 9.91% witnessed in the prior-year quarter.

Conclusion

UMB Financial put up an impressive performance in the fourth 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. However, mounting costs and rising provisions on worsening economic outlook are major near-term concerns.

UMB Financial currently carries a Zacks Rank #3 (Hold). 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 fourth-quarter 2022 earnings per share of $1.50, surpassing the Zacks Consensus Estimate of $1.45. The bottom line, however, declined 3.2% from the year-ago quarter’s number.

Revenue growth on higher NII and decent loan demand acted as tailwinds. However, a rise in expenses and provisions were significant drags for BOH.

BankUnited, Inc.‘s (BKU Free Report) fourth-quarter 2022 earnings per share of 82 cents missed the Zacks Consensus Estimate of $1.11 by a considerable margin and declined 41.8% from the prior-year quarter. We had projected earnings per share of 96 cents.

Results of BKU were adversely impacted by subdued fee income performance and an increase in credit costs. However, higher NII, a decent rise in loan balance, increasing rates and a fall in expenses acted as tailwinds.

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