UMB Financial Q2 Earnings in Line with Estimates, Rises Y/Y - Analyst Blog

UMB Financial Corporation's (UMBF) second-quarter 2014 earnings per share came in at 76 cents, in line with the Zacks Consensus Estimate. However, earnings compared favorably with the prior-year quarter figure of 74 cents.

Strong top-line performance and a robust capital position were the positives. Moreover, improvement in loans and deposits exhibited organic growth of the company. However, elevated non-interest expenses reflected undisciplined expense management.

The company's net income stood at $34.7 million in the reported quarter, up from the year-ago quarter figure of $29.9 million.

Quarter in Detail

UMB Financial's net interest income came in at $86.2 million, up 4.7% year over year. The rise was mainly due to higher average earnings assets. However, net interest margin (NIM) declined 3 basis points year over year to 2.53%.

Non-interest income climbed 18% year over year to $134 million. The upsurge was mainly due to higher trust and securities processing income and other non-interest revenues.

UMB Financial's non-interest expense surged 10.8% year over year to $166.5 million. This was mainly due to higher salaries and employee benefits costs.

Credit Quality

UMB Financial's credit metrics was a mixed bag in the reported quarter. Provision for loan losses was $5 million, in line with the prior-year quarter. As a percentage of loans, nonperforming loans decreased to 0.39% as of Jun 30, 2014, dipping from 0.40% as of Jun 30, 2013.

However, as of Jun 30, 2014, UMB Financial's nonperforming loans were $27.2 million, up from $25.5 million as of Jun 30, 2013. Allowance for loan losses totaled $76.8 million, or 1.11% of loans, up from $71.6 million or 1.13% as of Jun 30, 2013.

Capital Position

As of Jun 30, 2014, total deposits stood at $12.2 billion, up 4.3% year over year, while net loans rose 7.9% to $6.8 billion. Total assets under management (AUM) were recorded at $43.7 billion, up 21.9% year over year. Shareholders' equity was $1.6 billion, up from $1.2 billion in the prior-year quarter.

Our Viewpoint

Overall, UMB Financial's results reflected a commendable quarter for the company. While there are lingering concerns over the prevalent stringent regulatory landscape and mounting expenses, we believe that improvement in the company's fee-based business will help it navigate through the current cycle.

Moreover, organic growth of the company is expected to significantly drive earnings in the coming quarters. Currently, UMB Financial carries a Zacks Rank #3 (Hold).

Among other finance stocks, Popular, Inc. (BPOP) and United Community Banks, Inc. (UCBI) are expected to release June-quarter end results on Jul 24 while HomeTrust Bancshares, Inc. (HTBI) on Jul 28.

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