UMB Financial Corp. posted the results of its “stress test” showing how well it would hold up under a gloomy, federally mandated forecast of economic pain.
The Kansas City-based banking company is the second in the area to administer the required self-assessment. Commerce Bancshares Inc. posted its stress test results last week.
These tests are required under reforms following the 2008 financial crisis. Public disclosure of the results is required this year for financial institutions with at least $10 billion in assets.
UMB Financial has $16.7 billion in assets. Its test report said the analysis did not include the assets or financial performance of Marquette Financial Cos., which it recently acquired.
In each test, banks were instructed to assume that the economy suffered a major downturn, that housing prices tumbled, that the stock market plunged, that unemployment shot up, and on and on.
UMB said its test showed it still would post a profit for the test period, which covered 27 months ending Dec. 31, 2016. At $116.4 million, the profit would be less than UMB would expect to make in normal times.
For example, the company earned $288.4 million in the last 27 months.
Earnings in the assumed scenario would suffer from higher loan losses and lower income from fees and other sources not tied to interest earned on loans.
The company’s capital backing would decline slightly during the stressful scenario dictated by rules of the test and as measured by three different capital ratios.
UMB said, however, that “for every ratio in every quarter of the stress period” it and its bank “would maintain regulatory capital in excess of the levels required” by regulators.
The report showed capital ratios would dip in part because UMB Bank would expect to take in more deposits during the harsh economic decline. More deposits would make the bank bigger and lower its ratio of capital to assets.
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