UMB Financial surged past expectations in the fourth quarter. But the same could not be said of the bank UMB is acquiring, Heartland Financial.
In the final three months of 2024, UMB’s net income was $120 million, surpassing analysts’ average estimate of $109 million, according to S&P, and marking a 69% jump from the same period in 2023.
The Kansas City, Missouri-based bank reported diluted earnings per share of $2.44, beating Wall Street’s average estimate of $2.22, per S&P. Total revenue for the quarter was $440.55 million, above estimates of $412.27 million.
Heartland was a different story. In the fourth quarter, net income at the Denver-based bank was $14.0 million, a long way off from analysts’ estimates of $45.0 million. Revenue was $170.5 million, short of Wall Street’s expectation of $179 million. And diluted earnings per share were not $1.04, as analysts predicted, but 32 cents.
During an earnings call on Wednesday, analysts asked UMB’s leaders about the gulf between the two banks’ performances.
“When you just look at Heartland’s last couple quarters, they seem to be shrinking a bit,” said Citi analyst Ben Gerlinger. “When I look at the fourth quarter, I see a pretty big gap. … Can you kind of help me out with squaring that circle?”
UMB CEO Mariner Kemper responded that most of UMB’s expectations for Heartland remained unchanged — except when it comes to loans. In the fourth quarter, Heartland’s loans totaled $11.1 billion, down from $12.0 billion in the same period of 2023.
“The loan balances will, at the front end of this, be a bit of a drag … from our expectations,” Kemper said. “It’s too early to tell what we’ll be able to do with that on a go-forward basis. … We hope to and desire to make up for that with our abilities to leverage our sales force across their footprint and our footprint.”
UMB
“On a retail basis, one of the things we’re really excited about is we’re doubling our footprint, doubling our branch network,” Kemper said. “We’re going to make sure that we fill out the markets where we know we can play, and we’ll be exercising our muscle.”
The deal will allow UMB, which is already Missouri’s largest bank, to become the 46th biggest bank in the country. The Federal Reserve
In contrast to Heartland, UMB’s own loan book showed growth last quarter. In the final three months of 2024, total average loans reached $25.3 billion, compared with $23.1 billion in the same period of 2023.
Three months from now, UMB and Heartland will be reporting their earnings for the first time as one company. Even if Heartland’s loans are still a “drag” at that point, Kemper is optimistic about the future.
“We remain super-excited about the impact that Heartland is going to have,” the UMB CEO said. “When you think about all that we assumed in April, with some puts and takes, some things were better, some things were worse. At the end of the day, the major drivers of this transaction remain very much intact.”