A month has gone by since the last earnings report for UMB Financial (UMBF). Shares have added about 13.4% in that time frame, outperforming the S&P 500.

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

UMB Financial Q3 Earnings Beat on Higher NII & Fee Income, Costs Rise

UMB Financial reported third-quarter 2024 operating earnings per share of $2.25, which beat the Zacks Consensus Estimate of $2.16. Also, the bottom line compared favorably with the $2.02 earned in the year-ago quarter.

Results benefited from higher net interest income (NII) and fee income. Rising loan and deposit balances were other positives. However, higher expenses, increased provisions and worsening credit quality acted as spoilsport.
  
The results included a reduction of $31.7 million related to the pre-tax FDIC special assessment expense. After considering these charges, the GAAP net income for UMBF was $109.6 million for the third quarter, up 13.6% year over year.

UMB Financial’s Quarterly Revenues & Costs Rise

Quarterly revenues were $406.1 million, up 14.2% year over year. Also, the top line beat the Zacks Consensus Estimate of $398.8 million.

NII on an FTE basis was $254 million, which increased 11% from the prior-year quarter. On an FTE basis, Net interest margin (NIM) was 2.46%, up from 2.43% reported in the prior-year quarter.

Non-interest income was $158.7 million, up 19.1% year over year. The rise was primarily driven by an increase in almost all components of fee income, except for service charges on deposit accounts. 

Non-interest expenses were $252.5 million, up 9.1% year over year. The rise was primarily driven by higher salaries and employee benefits, processing fees expenses due to increased software subscription costs and legal and consulting expenses related to the announced acquisition of Heartland Financial USA, Inc. These were partially offset by a decrease of $1.5 million in regulatory fees expense and a decline of $1.9 million in operational losses, recorded in other expenses.  The operating non-interest expense was $251.5 million.

The efficiency ratio increased to 61.69%, down from the prior-year quarter’s 64.51%. A decline in the efficiency ratio indicates an increase in profitability.
UMB Financial’s Loans & Deposits Increase

As of Sept. 30, 2024, average loans and leases were $24.4 billion, up 2.4% sequentially. Also, average deposits increased 2.8% to $35.3 billion.

UMB Financial’s Credit Quality Deteriorates

The ratio of net charge-offs to average loans was 0.14% in the reported quarter, up from 0.08% in the prior-year quarter. 

Also, total non-accrual and restructured loans were $19.3 million, up 13.2% year over year.

The provision for credit losses was $18 million for the third quarter of 2024, up significantly from the $5 million reported in the prior-year quarter.

UMB Financial’s Capital Ratios Improve

As of Sept. 30, 2024, the Tier 1 risk-based capital ratio was 11.22%, which rose from 10.77% as of Sept. 30, 2023. The Tier 1 leverage ratio was 8.58%, which increased from 8.55% as of Sept. 30, 2023. The total risk-based capital ratio was 13.14%, which grew from 12.68% in the year-ago quarter.

UMB Financial’s Profitability Ratios: Mixed Bag

Return on average assets at the quarter’s end was 1.01%, which increased from the year-ago quarter’s 0.97%.

The operating return on average equity was 12.71%, down from 13.50% reported in the year-ago quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

The consensus estimate has shifted 5.54% due to these changes.

VGM Scores

At this time, UMB has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, 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 F. 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. Notably, UMB has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

UMB belongs to the Zacks Banks - Midwest industry. Another stock from the same industry, Commerce Bancshares (CBSH), has gained 16.2% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.

Commerce reported revenues of $421.38 million in the last reported quarter, representing a year-over-year change of +7.6%. EPS of $1.07 for the same period compares with $0.91 a year ago.

For the current quarter, Commerce is expected to post earnings of $0.99 per share, indicating a change of +17.9% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.5% over the last 30 days.

Commerce has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

UMB Financial Corporation (UMBF) : Free Stock Analysis Report

Commerce Bancshares, Inc. (CBSH) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research