UMB Financial's (UMBF) Q4 Earnings Beat, Revenues Increase

UMB Financial (NASDAQ:UMBF) reported fourth-quarter 2019 net operating earnings of $1.36 per share, which surpassed the Zacks Consensus Estimate of $1.16. The bottom line also compared favorably with the prior-year quarter’s earnings of 56 cents per share.

Results reflect higher revenues, aided by rising loan and deposit balances. Also, fall in provisions supported the company’s performance. However, contraction in net interest margin (NIM) and higher expenses were the major drags.

The company reported net income of $66.5 million, up from the $25.5 million recorded in the prior-year quarter.

In 2019, net operating earnings of $4.99 per share improved 23.8% from the prior year. Also, it outpaced the consensus estimate of $4.76. Further, 2019 net income improved 24.6% to $243.6 million.

Revenues, Loans & Deposits Balance Rise, Costs Up

Total revenues for the quarter came in at $282.7 million, up 10.1% year over year. Also, the top line outpaced the Zacks Consensus Estimate of $275.8 million.

In 2019, total revenues were $1.1 billion, up 8.5%. The top line matched the consensus estimate.

Net interest income came in at $172.4 million, reflecting an increase of 6.5% from the year-ago quarter. Growth in average loans and average loan yields mainly led to this upside. NIM contracted 22 basis points (bps) to 3.02%.

Non-interest income totaled $110.4 million, up 16.2% year over year. This upswing resulted from a rise in most of the income components, partly muted by lower service charges on deposit accounts and bankcard fees.

Non-interest expenses (GAAP basis) were $203.5 million, up 10.4% from the year-ago quarter due to rise in almost all the expense components.

Efficiency ratio (GAAP basis) decreased to 71.59% from the prior-year quarter’s 71.26%. Rise in efficiency ratio indicates fall in profitability. Adjusted efficiency ratio was 71.35%, up from the year-earlier quarter’s 70.19%.

As of Dec 31, 2019, average loans and leases were $13.2 billion, up 2.6% sequentially. Additionally, average deposits climbed 5.6% from the prior-quarter end to $20.4 billion.

Credit Quality: A Mixed Bag

Total non-accrual and restructured loans came in at $56.4 million, up 31% year over year. However, provision for loan losses was $2 million, down significantly. Also, the ratio of net charge-offs to average loans was 0.23%, down 128 bps from the year-ago quarter.

Strong Capital & Profitability Ratios

As of Dec 31, 2019, Tier 1 risk-based capital ratio was 12.33% compared with 12.89% as of Dec 31, 2018. Also, total risk-based capital ratio was 13.26% compared with 13.95% at the end of the prior-year quarter. Tier 1 leverage ratio was 9.37% compared with 9.87% as of Dec 31, 2018.

Adjusted return on average assets at the quarter’s end was 1.06%, up from the year-ago quarter’s 0.50%. Additionally, return on average equity was 10.23% compared with 4.95% in the prior-year quarter.

Conclusion

UMB Financial put up an impressive performance in the quarter. Soaring loan and deposit balances reflect a healthy balance sheet position. Also, organic growth is anticipated to continue, backed by higher revenues. Moreover, a strong capital position keeps it well poised to undertake any opportunistic expansions in the future. Nevertheless, expenses are likely to remain elevated due to investments in technology. Also, low interest rates might keep margins under pressure.

Zacks Rank

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 (NYSE:BOH) delivered fourth-quarter 2019 positive earnings surprise of 6.6%. Earnings per share of $1.45 surpassed the Zacks Consensus Estimate of $1.36. Further, the bottom line improved 11.5% from the prior-year quarter.

Texas Capital Bancshares Inc. (NASDAQ:TCBI) reported adjusted earnings per share of $1.44 in fourth-quarter 2019, lagging the Zacks Consensus Estimate of $1.55. However, results compare favorably with the prior-year quarter’s $1.38.

Riding on high revenues, PNC Financial (NYSE:PNC) delivered a positive earnings surprise of 1.7% in fourth-quarter 2019. Earnings per share of $2.97 surpassed the Zacks Consensus Estimate of $2.92. Further, the bottom line reflects an 8% jump from the prior-year quarter’s reported figure.

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