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UMB FINANCIAL CORP (UMBF)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered strong underlying performance despite merger costs: operating EPS was $2.70 vs GAAP diluted EPS of $2.36, with total revenue of $678.3M; core margin held at 2.78% with reported NIM of 3.04% .
  • EPS beat S&P Global consensus ($2.50*) on operating basis; revenue was mixed vs consensus depending on definition (S&P “Revenue” $658.3M* vs company “Total revenue” $678.3M), driven by a $38M sequential swing from Voyager mark-to-market and private investment timing .
  • Heartland (HTLF) integration completed in October; record gross loan production of ~$2.1B and double‑digit linked‑quarter annualized C&I growth, with average loans and deposits both +8% annualized QoQ .
  • Merger-related costs rose to $35.6M; operating noninterest expense increased just 1.3% QoQ, and CET1 built to 10.70% with dividend raised 7.5% to $0.43 (23rd increase in 20 years) .
  • Near‑term catalysts: continued fee momentum in institutional banking (AUA ~$642B), Q4 public funds deposit inflows ($1.5–$2.0B), and remaining synergy capture by Q1 2026; management guides Q4 core NIM “flat” and operating expenses of $375–$380M .

What Went Well and What Went Wrong

What Went Well

  • Record production and C&I momentum: “Gross loan production for the third quarter was a record high at $2.1 billion… average commercial and industrial loans increased 14.2% on a linked‑quarter annualized basis” .
  • Fee franchises accelerating: trust and securities processing +$13.7M YoY; pipeline strength across Fund Services and Corporate Trust, with AUA rising and strong awards; “we’re a top player… momentum is very, very strong” .
  • Integration executed: “completed the full systems and brand conversion of all HTLF locations… strong quarter results” ; operating leverage maintained with operating noninterest expense up only 1.3% QoQ .

Management quotes:

  • CEO: “We saw a new record for gross loan production, strong fee income, consistent credit quality, and continued positive operating leverage” .
  • CEO on institutional: “We’re a top player… momentum is very, very strong… marching their way towards aiming towards a trillion in assets under administration” .
  • CFO: “Reported NIM 3.04%… core margin was 2.78%, down 5 bps… expect fourth quarter margin to be essentially flat” .

What Went Wrong

  • Fee income swing: investment securities line swung −$41.8M QoQ due to Voyager IPO mark‑to‑market and fewer monetizations, partially offset by one‑time fees; GAAP noninterest income fell −$18.9M QoQ .
  • Merger-related costs: $35.6M vs $13.5M in Q2; one‑time HTLF contract termination fees ($19.2M) elevated “Other” expenses .
  • NPLs ticked up: nonaccrual loans rose to $132.0M (0.35% of loans) from 0.26% in Q2 due to two legacy HTLF credits, though reserves are substantially adequate and charge‑off outlook remains benign .

Financial Results

MetricQ3 2024Q2 2025Q3 2025
Total Revenue ($USD Millions)$406.1 $689.2 $678.3
GAAP Diluted EPS ($)$2.23 $2.82 $2.36
Operating EPS – Diluted ($)$2.25 $2.96 $2.70
Net Interest Margin (FTE, %)2.46 3.10 3.04
Efficiency Ratio (%)61.69 53.38 58.09
Revenue Detail ($USD Millions)Q3 2024Q2 2025Q3 2025
Net Interest Income$247.4 $467.0 $475.0
Noninterest Income$158.7 $222.2 $203.3
Total Revenue$406.1 $689.2 $678.3
Segments – Net Income ($USD Millions)Q3 2024Q2 2025Q3 2025
Commercial Banking$77.6 $139.8 $144.2
Institutional Banking$35.6 $54.4 $52.0
Personal Banking$(3.6) $23.3 $(7.9)
Total$109.6 $217.4 $188.3
KPIsQ3 2024Q2 2025Q3 2025
Average Loans ($USD Billions)$24.39 $36.41 $37.14
Average Deposits ($USD Billions)$35.29 $55.65 $56.76
End‑of‑Period Loans ($USD Billions)$24.99 $36.81 $37.71
End‑of‑Period Deposits ($USD Billions)$39.70 $59.99 $60.14
Net Charge‑offs (% of Avg Loans)0.14% 0.17% 0.20%
Nonperforming Loans (% of Loans)0.08% 0.26% 0.35%
CET1 Ratio (%)11.22 10.39 10.70
Common Dividend ($/sh)0.39 0.40 0.43

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Core NIM (ex‑accretion)Q4 2025Not previously quantified“Essentially flat” vs 2.78% in Q3 Maintained
Operating Noninterest Expense ($M)Q4 2025Not previously quantified$375–$380 (incl. ~$2M charitable) New range
Effective Tax Rate (%)FY 202519–22 (prior commentary)19–22 (reaffirmed) Maintained
Public Funds Deposit Inflows ($B)Q4 2025–Q1 2026 seasonalityNot previously quantified$1.5–$2.0 expected New detail
Cost Synergies ($M run‑rate remaining)Through Q1 2026~$30 remaining“Fully baked” by end of Q1 2026 Timetable set
CET1 (%)Next 1–2 quartersN/A~11% within 1–2 quarters New target pacing
Common Dividend ($/sh)Q4 2025$0.40 (Q3) $0.43 (Q4 declared) Raised

Earnings Call Themes & Trends

TopicQ1 2025Q2 2025Q3 2025Trend
HTLF integrationDeal closed; systems plan on track; HTLF added ~$17.9B assets Minnesota conversion completed; October conversion planned Full systems/brand conversion completed in October Completed; synergy capture ongoing
Margin/NIM outlookNIM +39bps to 2.96%; deposit mix benefit NIM 3.10%; purchase accretion benefit NIM 3.04; core margin 2.78 and guided flat for Q4 Stable core; modest headwinds vs deposit mix
Institutional fee growthTrust/securities +$7M YoY +$13M YoY; Voyager gain helped total fees +$13.7M YoY; derivatives and BOLI/COLI support Structural growth; market‑sensitive items volatile
Credit qualityDay‑1 provision on HTLF; NCOs 0.45% (HTLF‑driven) NCOs improved to 0.17%; NPL 0.26% NCOs 0.20%; NPL 0.35% from two legacy HTLF loans with PCD reserves Normalizing, well‑reserved
Capital & dividendsCET1 10.11%; TBV $56.40 CET1 10.39%; $0.40 dividend CET1 10.70%; CET1 ~11% in 1–2 quarters; dividend to $0.43 Building capital; shareholder returns rising
M&A postureClosed HTLF; strategic focus on deposit franchises Integration; funding base benefits Optional; deposit‑accretive deals preferred; disciplined profitability Opportunistic, not required

Management Commentary

  • Strategic integration and growth: “Successfully executed the systems and brand conversion… record loan production… strong fee income, stable credit quality, and continued positive operating leverage” — Mariner Kemper, CEO .
  • Fee engines: “We’re a top player… momentum is very, very strong… democratization of private investing partnerships are driving growth” — CEO on Fund Services .
  • Margin/expenses: “Reported NIM 3.04%… core margin 2.78%… expect fourth quarter margin to be essentially flat… operating expense $375–$380M” — Ram Shankar, CFO .
  • Capital trajectory: “Our capital build to get back to 11% [CET1] will happen within one or two quarters… ahead of schedule” — CFO .
  • Credit: “We continue to expect charge‑off levels to remain near or below historical averages… two legacy HTLF loans are secured with reserves” — Management .

Q&A Highlights

  • Sustainability of production: Management emphasized “runway and penetration” across both legacy and HTLF markets; early wins in California, Rockford, Wisconsin, and New Mexico support multi‑year growth .
  • Expense outlook and synergies: Remaining ~$30M of cost saves to be fully captured by end of Q1 2026; Q4 operating expense guided to $375–$380M .
  • Margin mix and deposits: Public funds inflows of $1.5–$2.0B expected seasonally; index deposits reprice down with cuts, helping cost of funds; asset‑servicing deposits priced off Fed funds can compress margin near‑term .
  • Accretion/asset churn: Contractual accretion disclosed; accelerated accretion driven by prepayments is hard to predict; positive churn expected from securities (2.1B rolling at ~3.60% to 4.50% reinvest) and fixed‑rate loans ($3B repricing <5%) .
  • M&A stance: Deposit‑accretive deals prioritized; branch divestitures less attractive; disciplined profitability filter; fee franchise preservation emphasized .

Estimates Context

Metric (S&P Global Consensus)Q3 2025 ConsensusQ3 2025 Actual
Primary EPS Consensus Mean ($)2.50*2.70 (Operating EPS)
Revenue Consensus Mean ($USD)661.1M*658.3M* (S&P “Revenue”); Company Total Revenue $678.3M

Notes:

  • EPS beat the Street’s $2.50* with $2.70 operating EPS, aided by stronger NII and fee contributions despite Voyager mark‑to‑market pressure .
  • Revenue comparisons differ: S&P’s “Revenue” ($658.3M*) vs company “Total revenue” ($678.3M); the delta reflects classification of investment gains/losses and bank‑specific revenue definitions .
  • Primary EPS – # of Estimates: 13*; Revenue – # of Estimates: 8*.
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Underlying earnings power intact: operating EPS $2.70 and core margin guided flat signal resilient NII despite index‑deposit mix headwinds; fee engines in Fund Services and Corporate Trust are structural growth drivers .
  • Temporary fee volatility likely: Voyager mark‑to‑market and private investment monetization timing can swing reported fees; exclude these to assess run‑rate (~$190M other fee run rate per CFO waterfall) .
  • Credit normalization manageable: NPL increase tied to legacy HTLF credits with PCD reserves; NCOs remain low; guidance for charge‑offs near/below historical averages reduces tail‑risk .
  • Capital and returns improving: CET1 10.70% trending to ~11% in 1–2 quarters; dividend raised to $0.43; expect synergy capture to further improve operating efficiency by Q2 2026 “clean quarter” .
  • Near‑term setup: seasonal public funds inflows ($1.5–$2.0B) and deposit repricing after rate cuts should support funding costs and margin stability in Q4 .
  • Medium‑term thesis: multi‑year loan growth runway across expanded footprint; disciplined, deposit‑accretive M&A optionality; fee diversity lowers cyclicality vs peers .
  • Trading implications: Consider upside from continued operating leverage and fee momentum vs near‑term fee volatility; watch Q4 expense realization and any incremental accretion/prepay activity for EPS sensitivity .