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UMB Financial NASDAQ: UMBF reported what management described as a strong finish to 2025, highlighted by record full-year earnings, continued organic balance sheet growth, and the integration of its Heartland Financial acquisition. On the company’s fourth quarter 2025 earnings call, executives pointed to improving profitability metrics, solid credit performance, and ongoing momentum in fee-generating businesses, while also outlining expectations for expenses and net interest margin as the company moves into 2026.
Fourth quarter profitability and earnings
Chairman and CEO Mariner Kemper said UMB closed 2025 with “another year of record earnings,” noting progress in profitability and efficiency. For the fourth quarter, net income available to common shareholders was $209.5 million, or $2.74 per diluted share, up 16.1% from the third quarter. Full-year 2025 earnings were $684.6 million, or $9.29 per diluted share.
Kemper highlighted several key metrics for the quarter:
- Return on average assets of 1.20%, up from 1.04% in the third quarter
- Return on average common equity of 11.27%, up from 10.14%
- Efficiency ratio of 55.5, improving from 58.1 in the third quarter and 61.8 a year earlier
The quarter included $39.7 million of acquisition expenses, compared with $35.6 million in the prior quarter. Excluding acquisition costs and “smaller non-recurring items,” Kemper said net operating income was $235.2 million, or $3.08 per diluted share.
Net interest income, purchase accounting, and margin outlook
Chief Financial Officer Ram Shankar said fourth quarter net interest income totaled $522.5 million, up 10% sequentially, driven by double-digit growth in loans and non-interest bearing deposits (DDAs), as well as the effect of lower rates on index deposits. The quarter included $52.7 million of net interest income from purchase accounting adjustments; $12.3 million of that was tied to accelerated accretion from early payoff of acquired loans. Shankar said total accretion added about 33 basis points to net interest margin.
Reported net interest margin was 3.29% in the fourth quarter. Excluding purchase accounting adjustments, Shankar said core margin was 2.96%, up 18 basis points from the prior quarter. Drivers included a non-recurring 4 basis point benefit from interest recapture on non-accrual loans that became current during the quarter, favorable basis dynamics between Fed target rates and one-month SOFR, deposit and asset mix shifts (including a 24.9% linked-quarter annualized increase in DDA balances), and loan fee trends, partially offset by lower benefits from fee funds.
Looking ahead, Shankar said the company expects first quarter margin to be “relatively flat” versus the fourth quarter adjusted margin (excluding accretion and the non-recurring 4 basis points), with outcomes dependent on DDA levels, excess liquidity, SOFR movements, and portfolio mix. He added the company had not assumed margin upside from additional first quarter rate cuts.
Shankar also provided contractual accretion expectations of $126 million for 2026 and $92 million for 2027, excluding any accelerated payoffs.
Loan and deposit growth trends
UMB posted 13% linked-quarter annualized growth in average loans and 5.6% growth in average deposits. Kemper said quarterly top-line loan production reached $2.6 billion. Commercial and industrial lending was described as the strongest contributor in the quarter, with 27% annualized growth over third quarter average balances. Net payoffs and paydowns were 3.9% of total loans, and management said loan activity and pipeline remained strong entering the first quarter.
In the Q&A session, management attributed loan growth to broad-based performance across markets and verticals, with Kemper emphasizing that roughly half of growth comes from new customer acquisition and market share gains. He cited strength in energy and M&A/family office-related transactional activity, while President Jim Rine added that the HDL Life acquisition contributed through franchise lending and that California ag lending was another bright spot.
On deposits, Shankar said DDA growth in the quarter was boosted by new customer acquisitions in corporate trust and the “episodic nature” of some deposit inflows. He also noted about $1 billion of public funds inflows in December that continued to build in January, followed by an expected $1 billion outflow in the second half of February tied to tax payments. Due to these dynamics, management repeatedly cautioned about limited visibility into short-term movements in DDA and period-end deposit measures.
Shankar said deposit remix and rate cuts reduced the cost of total deposits by 29 basis points to 2.25%, while cost of interest-bearing deposits declined by 33 basis points to 3.03%. The company realized a blended beta of 76% on interest-bearing deposits for the quarter, which management said reflected favorable mix shift and repricing performance on “soft index deposits.”
Fee income, investment gains, and institutional momentum
Non-interest income was affected by market-related items during the quarter. Shankar said non-interest income included $2.2 million in net investment security gains, consisting of $6.3 million of gains on various equity investments partially offset by a $4.8 million linked-quarter market value loss on Voyager stock. Management said it exited “substantially all” of its Voyager position in the fourth quarter, and Shankar stated that since Voyager’s IPO, UMB recorded a net gain of approximately $17 million on a $6 million initial investment.
Excluding valuation changes, fee income was $196.2 million, down $11.2 million from the third quarter. Shankar said the largest drivers were $9.2 million in market-related variances in COLI and VOLI income and a $2.9 million decrease in derivative income from elevated third quarter levels. A previously disclosed non-recurring $2.5 million legal settlement benefit in the third quarter also affected comparisons.
Partially offsetting these declines was a $4.5 million, or 5.1%, linked-quarter increase in trust and securities processing income, driven by asset servicing and private wealth activity. Shankar said the fund services and custody teams added 15 new fund families in 2025, totaling 109 new funds.
In response to analyst questions, management pointed to fund services tied to alternatives (including private equity and hedge funds) and corporate trust as key tailwinds behind growth in trust and securities processing. Kemper also described corporate trust as a “local” business where expanded footprint can support growth.
Expenses, synergies, and capital priorities
UMB reported $39.7 million of merger-related costs in the quarter. Excluding merger and other one-time costs, operating non-interest expense was $391.8 million, up 1.8% from the third quarter. Shankar attributed the increase primarily to $10.5 million in additional incentive compensation tied to strong performance, $3.4 million in higher charitable contributions, and $1.1 million in marketing expense, including retail campaigns in new regions. He said “normalized” quarterly expenses were approximately $380 million after adjusting for deferred compensation and certain other items.
For the first quarter, Shankar guided to operating expense of $385 million to $390 million, including about $15 million in seasonal and inflation-related increases (FICA, payroll taxes, 401 expenses, medical costs, and other investments). He said those payroll-related costs are expected to decline by about $10 million in the second quarter.
Management also said all identified cost saves from the Heartland transaction have been realized. Looking into 2026, Shankar said the company expects positive operating leverage despite an estimated $38 million reduction in contractual purchase accounting accretion and approximately $30 million benefit from Voyager and other investment gains recognized in 2025.
On capital, Kemper said common equity Tier 1 ratio was 10.96% at Dec. 31, up 26 basis points from September and “ahead of the timeline” discussed when announcing the Heartland acquisition. Kemper reiterated that organic growth remains the top capital priority, while also saying the company is open to tuck-in deals that make financial and strategic sense. He added that the company would be wary of transactions that move it close to the $100 billion threshold and is operating as though existing rules remain in place.
Management’s effective tax rate was 20.3% for the fourth quarter and 19.7% for the full year, compared to 18.5% for full-year 2024. Shankar said the company expects an effective tax rate of 20% to 22% in 2026.
About UMB Financial NASDAQ: UMBF
UMB Financial Corporation NASDAQ: UMBF is a diversified financial services holding company headquartered in Kansas City, Missouri. Through its principal banking subsidiary, UMB Bank, N.A., the company provides a full suite of commercial and consumer banking services. Key offerings include deposit accounts, commercial and consumer lending, treasury and cash management, as well as online and mobile banking solutions designed to serve businesses, individuals and municipalities.
In addition to its core banking operations, UMB Financial delivers wealth management and trust services, investment advisory, asset management and retirement planning to high-net-worth individuals, families and institutions.
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