UMB Financial Earnings Rise as Fee Income Offsets Margin Pressure
Record gross loan production reached $2.6 billion, up from $2.3 billion in the preceding quarter.
UMB Financial Corporation (UMBF), the bank holding company, reported a 26.2% increase in second-quarter profit as fee income and loan growth outweighed pressure on its net interest margin.
The results reflected a broader revenue mix as noninterest income increased its share of revenue to 31.6% from 27.7% in the first quarter. Operating pre-tax, pre-provision income rose 4.5% sequentially and 22.9% from a year earlier to $380.1 million.
Revenue rose 12.9% from a year earlier and 5.3% sequentially to $778.0 million. Net income available to common shareholders increased to $271.8 million, or $3.56 a diluted share, from $215.4 million, or $2.82 a share, a year earlier. First-quarter profit was $255.6 million, or $3.35 a share.
Noninterest income climbed 19.9% from the first quarter to $245.5 million, helped by $27.1 million of investment-securities gains. Those gains included $17.9 million from the sale of a nonmarketable security. Trust and securities-processing revenue increased to $98.3 million from $94.7 million sequentially and $83.3 million a year earlier.
Net interest income slipped 0.3% sequentially to $532.5 million as lower purchase-accounting accretion, reduced federal-funds balances and a shift in deposit funding offset organic loan growth. The net interest margin narrowed six basis points to 3.32%, while the core margin excluding purchase-accounting accretion expanded four basis points and core net interest income rose 2.7%.
Average loans grew 3.2% sequentially to $40.6 billion, led by an $894.5 million increase in commercial-and-industrial balances. Average deposits were essentially flat at $57.59 billion, and the noninterest-bearing share declined to 25.5% from 26.2%, reflecting greater use of interest-bearing funding.
Credit quality improved as net charge-offs declined to $15.9 million, or 0.16% of average loans, and nonperforming loans fell 15.7% to $127.5 million. The provision for credit losses nevertheless increased to $28.0 million from $27.0 million in the first quarter.
UMB Financial’s common-equity Tier 1 ratio increased to 11.45% from 11.16% at the end of March. The board raised the quarterly common dividend 16.3% to $0.50 a share, while the company repurchased $5.0 million of stock during the quarter.