UMB Financial (UMBF)

Regional banking company UMB Financial (NASDAQ:UMBF) announced better-than-expected revenue in Q3 CY2025, with sales up 67% year on year to $678.2 million. Its non-GAAP profit of $2.70 per share was 8% above analysts’ consensus estimates.

Company Overview

With roots dating back to 1913 and a name derived from "United Missouri Bank," UMB Financial (NASDAQ:UMBF) is a financial holding company that provides banking, asset management, and fund services to commercial, institutional, and individual customers.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

UMB Financial competes with regional banks like Commerce Bancshares (NASDAQ:CBSH), Bank of Hawaii (NYSE:BOH), and Cullen/Frost Bankers (NYSE:CFR), as well as larger national institutions including U.S. Bancorp (NYSE:USB) and Truist Financial (NYSE:TFC). In its fund services business, it competes with State Street (NYSE:STT) and Northern Trust (NASDAQ:NTRS).

Two primary revenue streams drive bank earnings. While net interest income, which is earned by charging higher rates on loans than paid on deposits, forms the foundation, fee-based services across banking, credit, wealth management, and trading operations provide additional income. Thankfully, UMB Financial’s 15.5% annualized revenue growth over the last five years was incredible. Its growth beat the average banking company and shows its offerings resonate with customers, a helpful starting point for our analysis.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. UMB Financial’s annualized revenue growth of 27.2% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, UMB Financial reported magnificent year-on-year revenue growth of 67%, and its $678.2 million of revenue beat Wall Street’s estimates by 3.6%.

Net interest income made up 62.8% of the company’s total revenue during the last five years, meaning lending operations are UMB Financial’s largest source of revenue.

While banks generate revenue from multiple sources, investors view net interest income as the cornerstone - its predictable, recurring characteristics stand in sharp contrast to the volatility of non-interest income.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

UMB Financial’s EPS grew at an astounding 20.4% compounded annual growth rate over the last five years, higher than its 15.5% annualized revenue growth. However, we take this with a grain of salt because its efficiency ratio didn’t improve and it didn’t repurchase its shares, meaning the delta came from factors we consider non-core or less sustainable over the long term.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

Although it performed well, UMB Financial’s two-year annual EPS growth of 16.3% lower than its 27.2% two-year revenue growth.

We can take a deeper look into UMB Financial’s earnings to better understand the drivers of its performance. A two-year view shows UMB Financial has diluted its shareholders, growing its share count by 56.6%. This has led to lower per share earnings. Taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q3, UMB Financial reported adjusted EPS of $2.70, up from $2.25 in the same quarter last year. This print beat analysts’ estimates by 8%. Over the next 12 months, Wall Street expects UMB Financial’s full-year EPS of $10.73 to grow 3.8%.

The balance sheet drives banking profitability since earnings flow from the spread between borrowing and lending rates. As such, valuations for these companies concentrate on capital strength and sustainable equity accumulation potential.

This is why we consider tangible book value per share (TBVPS) the most important metric to track for banks. TBVPS represents the real, liquid net worth per share of a bank, excluding intangible assets that have debatable value upon liquidation. On the other hand, EPS is often distorted by mergers and flexible loan loss accounting. TBVPS provides clearer performance insights.

UMB Financial’s TBVPS grew at a sluggish 2.8% annual clip over the last five years. However, TBVPS growth has accelerated recently, growing by 10.4% annually over the last two years from $52.06 to $63.40 per share.

Over the next 12 months, Consensus estimates call for UMB Financial’s TBVPS to grow by 15.9% to $73.50, elite growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, UMB Financial has averaged a Tier 1 capital ratio of 10.9%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity (ROE) reveals the profit generated per dollar of shareholder equity, which represents a key source of bank funding. Banks maintaining elevated ROE levels tend to accelerate wealth creation for shareholders via earnings retention, buybacks, and distributions.

Over the last five years, UMB Financial has averaged an ROE of 13.2%, excellent for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired. This shows UMB Financial has a strong competitive moat.

We enjoyed seeing UMB Financial beat analysts’ revenue expectations this quarter. We were also happy its tangible book value per share outperformed Wall Street’s estimates. On the other hand, its net interest income was in line. Overall, this print had some key positives. The stock traded up 4.8% to $117.88 immediately after reporting.

Updated: December 4, 2025 at 11:26 PM EST

When considering an investment in UMB Financial, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

We think UMB Financial is a good business. First off, its revenue growth was impressive over the last five years, and analysts believe it can continue growing at these levels. And while its net interest margin limits its operating profit potential compared to other banks that can earn more, all else equal., its estimated net interest income growth for the next 12 months is great. On top of that, its expanding net interest margin shows its loan book is becoming more profitable.

UMB Financial’s P/B ratio based on the next 12 months is 1.2x. When scanning the banking space, UMB Financial trades at a fair valuation. If you believe in the company and its growth potential, now is an opportune time to buy shares.

Wall Street analysts have a consensus one-year price target of $137.69 on the company (compared to the current share price of $115.49), implying they see 19.2% upside in buying UMB Financial in the short term.