It has been about a month since the last earnings report for UMB Financial (UMBF). Shares have lost about 6.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is UMB due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

UMB Financial Q4 Earnings Beat, Revenues Increase

UMB Financial 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 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 in 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.

Outlook

With expectations that the Federal Reserve will hold rates steady, the company anticipates about 4-5 bps NIM compression for the first quarter of 2020.

For 2020, the expected tax rate is 15-16%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 8.15% due to these changes.

VGM Scores

At this time, UMB has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren’t focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise UMB has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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