Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following management’s discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes as of and for the years ended December 31, 2025, 2024, and 2023, and with the other financial and statistical data presented in this annual report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions that may cause actual results to differ materially from management’s expectations. Factors that could cause such differences are discussed in the section entitled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” and should be read herewith.
Management’s discussion focuses on 2025 results compared to 2024. For a discussion of 2024 results compared to 2023, refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
All amounts are in thousands, except share and per share data, or as otherwise noted.
Overview
Our focus is on building relationships by creating a win-win scenario for our clients and our Company. We believe in providing solutions and services to our clients that are based on fairness and simplicity. We have established a solid financial services franchise with a sizable presence for deposit gathering and building client relationships necessary for growth. We have executed on strategic acquisition opportunities to expand our presence in attractive markets and to diversify our revenue streams. Additionally, we are innovating through 2UniFi with the goal of delivering a comprehensive digital financial ecosystem for our clients. We are focused on providing small- and medium-sized businesses with alternative digital access to address borrowing, depository and cash management needs, while also providing information management and access to digital payment tools, under the safety of a regulated bank. We believe that our established presence in our core markets of Colorado, the greater Kansas City region, Texas, Utah, Wyoming, New Mexico and Idaho, as well as our ongoing investment in digital solutions and strategic acquisitions, position us well for growth opportunities. As of December 31, 2025, we had $9.9 billion in assets, $7.4 billion in loans, $8.3 billion in deposits, $1.4 billion in equity and $1.3 billion in assets under management in our trust and wealth management business.
Operating Highlights
Strategic execution
The Company closed the acquisition of Vista on January 7, 2026, which further strengthens the Company’s presence in Texas, acquiring banking centers in Dallas-Ft. Worth, Austin, and Lubbock, as well as one banking center in Palm Beach, Florida. At December 31, 2025, Vista held $2.5 billion in total assets, $1.9 billion in loans and $2.2 billion in deposits. The aggregate consideration paid at the time of acquisition was $377.7 million, consisting of $89.0 million in cash with the remainder paid in 7.3 million shares of NBHC common stock, based on the closing price of $39.51 on January 6, 2026. The system conversion for this transaction will be completed during the third quarter of 2026.
At December 31, 2025, common book value per share was $36.67. Tangible common book value per share increased $2.52, or 10.0%, to $27.80, during the year ended December 31, 2025, primarily driven by the year’s earnings.
In July 2025, the Company launched the initial phase of 2UniFi, an innovative financial ecosystem built to empower business entrepreneurs with treasury management depository capabilities and a streamlined SBA loan offering. In conjunction with the continued investment in the 2UniFi buildout, the Company incurred $21.6 million and $13.0 million of non-interest expense during the years ended December 31, 2025 and 2024, respectively, primarily within salaries and benefits, occupancy and equipment, and professional fees.
During the year ended December 31, 2025, the Company repurchased 416,795 shares of common stock for $15.2 million at a weighted average price per share of $36.40 as part of our capital strategy.
The Company prudently manages liquidity and maintains a profile focused on core deposits and stable, long-term and diversified funding sources, including access to Cambr platform deposits. The Company maintains an investment portfolio with a short average duration and targets a neutral interest rate position.
Table of Contents
Profitability and returns
Net income totaled $109.6 million, or $2.85 per diluted share, for the year ended December 31, 2025, compared to net income of $118.8 million, or $3.08 per diluted share, for the year ended December 31, 2024. During the year ended December 31, 2025, acquisition-related expenses totaled $7.2 million. During 2025 and 2024, the Company sold $57.8 million and $132.1 million, respectively, of AFS investment securities on the open market as part of the Company’s strategic balance sheet management resulting in pre-tax losses of $3.3 million and $6.6 million, respectively. Adjusting for the items above, net income totaled $117.6 million and $123.9 million, and diluted earnings per share totaled $3.06 and $3.22 during the years ended December 31, 2025 and 2024, respectively.
Pre-provision net revenue FTE totaled $159.3 million and $159.1 million for the years ended December 31, 2025 and 2024, respectively. Adjusting for acquisition-related expenses in 2025 and the loss on AFS security sales included in 2025 and 2024, pre-provision net revenue FTE increased $4.1 million, or 2.5%, to $169.8 million for the year ended December 31, 2025, compared to 2024.
The return on average assets totaled 1.11% and 1.20% for the years ended December 31, 2025 and 2024, respectively. Adjusting for acquisition-related expenses in 2025 and the loss on AFS security sales, the return on average tangible assets for the years ended December 31, 2025 and 2024 totaled 1.30% and 1.36%, respectively.
The return on average equity was 8.08% and 9.41% for the years ended December 31, 2025 and 2024, respectively. Adjusting for acquisition-related expenses in 2025 and the loss on AFS security sales, the return on average tangible common equity totaled 12.15% and 14.20% for the years ended December 31, 2025 and 2024, respectively.
Loan portfolio
Loans totaled $7.4 billion at December 31, 2025, compared to $7.8 billion at December 31, 2024.
During the year ended December 31, 2025, the Company generated loan fundings totaling $1.6 billion, including $591.0 million during the fourth quarter of 2025, with a weighted average new loan origination rate of 6.4% during the fourth quarter of 2025.
The Company maintained a conservatively structured loan portfolio represented by diverse industries and concentrations with industry sector concentrations at 15% or less of total loans and all concentration levels remain well below our self-imposed limits.
Non-owner occupied CRE loans, which are comprised of multiple industry sectors, were 127.1% of the Company’s risk based capital, or 21.3% of total loans, and no specific property type comprised more than 7.0% of total loans at December 31, 2025.
The Company maintains a low level of non-owner occupied CRE retail properties and office properties. Including available credit, non-owner occupied CRE retail properties and office properties comprised 1.9% and 1.2% of total loans, respectively, at December 31, 2025.
Multifamily loans totaled $298.5 million, or 4.0% of total loans as of December 31, 2025.
We do not originate high-dollar non-amortizing or balloon payment mortgage loans to our clients.
Credit quality
Allowance for credit losses totaled 1.18% of total loans at December 31, 2025, compared to 1.22% at December 31, 2024.
The Company continued to prudently manage credit risk in 2025, further strengthening our credit profile. Non-performing loans improved 12 basis points to 0.34% of total loans at December 31 2025, compared to 0.46% at December 31, 2024.
Criticized loans decreased $70.4 million, or 18.3%, to $314.3 million as of the year ended December 31, 2025, compared to 2024.
Provision expense for credit losses totaled $17.8 million and $6.8 million during the years ended December 31, 2025 and 2024, respectively.
Net charge-offs of $25.2 million and $9.8 million were recorded during 2025 and 2024, respectively. Net charge-offs to average total loans totaled 0.34% and 0.13% for 2025 and 2024, respectively.
Table of Contents
Deposits
Average total deposits totaled $8.2 billion and $8.3 billion for the years ended December 31, 2025 and 2024, respectively.
Average transaction deposits totaled $7.1 billion and $7.3 billion for the years ended December 31, 2025 and 2024, respectively.
The mix of transaction deposits to total deposits was 86.1% and 87.6% at December 31, 2025 and 2024, respectively.
Cost of deposits improved 21 basis points to 2.02% during the year ended December 31, 2025, as a result of our disciplined deposit pricing over the last 12 months as the FRB lowered rates.
Approximately 76% of our deposits were FDIC insured as of December 31, 2025.
Liquidity
On-balance sheet liquidity totaled $884.0 million as of December 31, 2025 and was comprised of $417.1 million of cash and $466.9 million of unencumbered investments.
Liquidity is monitored and managed to ensure that sufficient funds are available on demand to meet our business needs. At December 31, 2025, the Company’s available secured and committed borrowing capacity at the FHLB and FRB totaled $3.0 billion. The Company also accesses a variety of other short-term and long-term unsecured funding sources, which include access to Cambr platform deposits, multiple brokered deposit platform options and lines of credit.
Our investment securities portfolio has a short average duration and is largely backed by U.S. government agencies or GSEs, which we believe mitigates the risk of material losses. Regarding the fair value of investment securities, our accumulated other comprehensive loss does not have a material impact on our capital position.
The ratio of total shareholders’ equity to total assets was 14.0% at December 31, 2025, compared to 13.3% at December 31, 2024. Our tangible common equity capital ratio, which includes the accumulated other comprehensive loss, totaled 11.0% at December 31, 2025, compared to 10.2% at December 31, 2024.
Revenues
Net interest income FTE increased $3.9 million to $356.4 million during the year ended December 31, 2025, compared to $352.5 million for 2024.
The net interest margin FTE expanded nine basis points to 3.94% for the year ended December 31, 2025, compared to 2024, driven by a 22 basis point improvement in the cost of funds and partially offset by a 13 basis point decrease in earning asset yields. The cost of funds was 2.05% for the year ended December 31, 2025, compared to 2.27% for the year ended December 31, 2024.
During the year ended December 31, 2025, non-interest income increased $6.3 million, or 10.3%, to $67.6 million, compared to the prior year. The Company executed strategic balance sheet actions in both 2025 and 2024, which resulted in security sale losses of $3.3 million and $6.6 million, in the respective periods. Excluding these items, non-interest income increased $3.1 million primarily driven by $3.9 million of unrealized gains on partnership investments, a $0.9 million increase in gains on sales of previously consolidated banking center properties, and a $0.8 million increase in trust income. These increases were partially offset by decreases in SBA loan sale gains and swap fee income.
Expenses
During the year ended December 31, 2025, non-interest expense totaled $264.6 million, which included $7.2 million of expenses from the Vista acquisition, compared to non-interest expense of $254.6 million in the prior year. Excluding the acquisition-related expenses, which are primarily professional fees, the current year non-interest expense totaled $257.5 million. Occupancy and equipment expense increased $5.9 million, primarily driven by the 2UniFi capitalized asset depreciation in connection with the launch of 2UniFi in the third quarter of 2025. This increase was partially offset by a $4.1 million improvement in other non-interest expense resulting from diligent expense management.
Table of Contents
The FTE efficiency ratio, excluding other intangible assets amortization and adjusted for acquisition-related expenses and loss on security sales, improved 0.26% to 58.43% during the year ended December 31, 2025, compared to 58.69% during the year ended December 31, 2024.
Income tax expense totaled $24.1 million during the year ended December 31, 2025, compared to $26.4 million during the year ended December 31, 2024. The effective tax rate for the year ended December 31, 2025 was 18.0%, compared to 18.2% for the year ended December 31, 2024.
Capital
The Company paid dividends of $1.20 per common share during the year ended December 31, 2025, and declared a quarterly dividend of $0.32 per common share during the first quarter of 2026.
On January 27, 2026, the Company’s Board of Directors authorized a new stock repurchase program under which the Company may repurchase up to $100.0 million of the Company’s stock. This new program replaces the old stock repurchase program approved in May of 2023 in its entirety.
Capital ratios continue to be well in excess of federal bank regulatory agency “well capitalized” thresholds. At December 31, 2025, our consolidated tier 1 leverage ratio was 11.56%, and our consolidated common equity tier 1 and tier 1 risk based capital ratios were 14.89%.
Key Challenges
Macroeconomic pressures have resulted in volatility and uncertainty in the banking industry and many other industries. The prolonged elevated interest rate environment is drawing increased scrutiny on financial institutions. Liquidity within the financial services sector remains tight, and we expect the intense competition for deposits throughout our markets to continue. While these are widespread challenges for the banking industry, the Company has not experienced a material impact to our financial condition, operations, client base, liquidity, capital position or risk profile.
Additionally, we face continual challenges implementing our business strategy. These include growing our assets, particularly loans, and deposits amidst intense competition, changing interest rates, adhering to changes in the regulatory environment and identifying and consummating disciplined acquisition and other expansionary opportunities in a very competitive and inflationary environment. We will continue to make investments in our digital growth strategy and our digital financial ecosystem 2UniFi, and may also seek to partner with third parties to accelerate growth. 2UniFi may prove difficult to successfully scale and may require additional operational and control systems to manage fraud, cybersecurity, operational, legal and compliance risks.
Future growth in our interest income will ultimately be dependent on our ability to originate high-quality loans and source other high-quality earning assets such as investment securities as well as our ability to access liquidity and manage our cost of funds. During the year ended December 31, 2024, the Federal Reserve decreased the prevailing interest rates by a total of 100 basis points, and, during 2025, the Federal Reserve decreased the prevailing interest rates by 75 basis points. While further cuts remain unclear, our future earnings will be impacted by the Federal Reserve’s future interest rate policy decisions. Management employs risk management policies to monitor and limit exposure to changes in market rates, which is discussed in more detail in the Asset/Liability Management and Interest Rate Risk section of Management’s Discussion and Analysis.
Summary of Selected Historical Consolidated Financial Data
The following table sets forth a summary of selected historical financial information derived from our audited consolidated financial statements as of and for the five years ended December 31, 2025. This information should be read together with the related notes thereto included elsewhere in this annual report. Such information is not necessarily indicative of anticipated future results. All amounts are presented in thousands, except share and per share data, or as otherwise noted.
Table of Contents
Consolidated Statements of Financial Condition Data:
December 31,
December 31,
December 31,
December 31,
December 31,
Cash and cash equivalents
Investment securities available-for-sale (at fair value)
Investment securities held-to-maturity
Other securities
Loans (1)
Allowance for credit losses
Loans, net
Loans held for sale
Other real estate owned
Premises and equipment, net
Goodwill and other intangible assets, net
Other assets
Total assets
Deposits
Long-term debt, net
Other liabilities
Total liabilities
Total shareholders’ equity
Total liabilities and shareholders’ equity
Total loans are net of unearned discounts and deferred fees and costs.
Table of Contents
Consolidated Statements of Operations Data:
As of and for the years ended
December 31,
December 31,
December 31,
December 31,
December 31,
Interest income
Interest expense
Net interest income
Provision expense (release) for credit losses
Net interest income after provision for credit losses
Non-interest income
Non-interest expense
Income before income taxes
Income tax expense
Net income
Adjusted net income (non-GAAP) (1)
Share Information:
Earnings per share, basic
Earnings per share, diluted
Adjusted earnings per share - diluted (non-GAAP) (1)
Dividends paid
Book value per share
Tangible common book value per share (2)
Total shareholders’ equity to total assets
Tangible common equity to tangible assets (2)
Weighted average common shares outstanding, basic
Weighted average common shares outstanding, diluted
Common shares outstanding
Represents a non-GAAP financial measure. See non-GAAP reconciliation on page 52.
Tangible book value per share and tangible common equity to tangible assets are non-GAAP financial measures. We believe that the most directly comparable GAAP financial measures are book value per share and total shareholders’ equity to total assets. See the reconciliation under “About Non-GAAP Financial Measures.”
Table of Contents
Key Metrics
As of and for the years ended
December 31,
December 31,
December 31,
December 31,
December 31,
Return on average assets
Return on average tangible assets (1)
Return on average tangible assets, adjusted (1)(2)
Return on average equity
Return on average tangible common equity (1)
Return on average tangible common equity, adjusted (1)(2)
Loan to deposit ratio (end of period) (3)
Non-interest bearing deposits to total deposits (end of period)
Net interest margin (4)
Net interest margin FTE (4)(5)
Interest rate spread FTE (5)(6)
Yield on earning assets (7)
Yield on earning assets FTE (5)(7)
Cost of funds
Cost of deposits
Non-interest income to total revenue FTE (5)(8)
Efficiency ratio
Efficiency ratio excluding other intangible assets amortization, adjusted FTE (2)(5)
Pre-provision net revenue FTE (1)(5)
Pre-provision net revenue FTE, adjusted (1)(2)(5)
Total Loans Asset Quality Data (3)(9)(10)
Non-performing loans to total loans
Non-performing assets to total loans and OREO
Allowance for credit losses to total loans
Allowance for credit losses to non-performing loans
Net charge-offs to average loans
Represents a non-GAAP financial measure. See non-GAAP reconciliations below.
Ratios are adjusted for acquisition-related expenses during 2025 and loss on security sales in 2025 and 2024. See non-GAAP reconciliation below.
Total loans are net of unearned discounts and fees.
Net interest margin represents net interest income, including accretion income on interest earning assets, as a percentage of average interest earning assets.
Presented on an FTE basis using the statutory rate of 21% for all periods presented. The taxable equivalent adjustments included above are $7,866, $7,094, $6,099, $5,512 and $5,161 for the years ended December 31, 2025, 2024, 2023, 2022 and 2021, respectively.
Interest rate spread represents the difference between the weighted average yield on interest earning assets, including FTE income, and the weighted average cost of interest bearing liabilities. Ratio represents non-GAAP financial measure.
Interest earning assets include assets that earn interest/accretion or dividends. Any market value adjustments on investment securities or loans are excluded from interest-earning assets.
Non-interest income to total revenue represents non-interest income divided by the sum of net interest income FTE and non-interest income.
Non-performing loans consist of non-accruing loans.
Non-performing assets include non-performing loans and OREO.
Table of Contents
About Non-GAAP Financial Measures
Certain financial measures and ratios presented are supplemental measures that are not required by, or are not presented in accordance with, U.S. GAAP. We refer to these financial measures and ratios as “non-GAAP financial measures.” We consider the use of select non-GAAP financial measures and ratios to be useful for financial and operational decision making and useful in evaluating period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenditures or assets that we believe are not indicative of our primary business operating results. We believe that management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, analyzing and comparing past, present and future periods.
These non-GAAP financial measures should not be considered a substitute for financial information presented in accordance with GAAP and you should not rely on non-GAAP financial measures alone as measures of our performance. The non-GAAP financial measures we present may differ from non-GAAP financial measures used by our peers or other companies. We compensate for these differences by providing the equivalent GAAP measures whenever we present the non-GAAP financial measures and by including a reconciliation of the impact of the components adjusted for in the non-GAAP financial measure so that both measures and the individual components may be considered when analyzing our performance.
A reconciliation of our GAAP financial measures to the comparable non-GAAP financial measures is as follows:
Tangible Common Book Value Ratios
December 31,
December 31,
December 31,
December 31,
December 31,
Total shareholders’ equity
Less: goodwill and other intangible assets, net
Add: deferred tax liability related to goodwill
Tangible common equity (non-GAAP)
Total assets
Less: goodwill and other intangible assets, net
Add: deferred tax liability related to goodwill
Tangible assets (non-GAAP)
Tangible common equity to tangible assets calculations:
Total shareholders’ equity to total assets
Less: impact of goodwill and other intangible assets, net
Tangible common equity to tangible assets (non-GAAP)
Tangible common book value per share calculations:
Tangible common equity (non-GAAP)
Divided by: ending shares outstanding
Tangible common book value per share (non-GAAP)
Table of Contents
Return on Average Tangible Assets and Return on Average Tangible Equity
As of and for the years ended
December 31,
December 31,
December 31,
December 31,
December 31,
Net income
Add: adjustments, after tax (non-GAAP) (1)
Net income adjusted for acquisition-related expenses and loss on security sales, after tax (non-GAAP) (1)
Net income
Add: impact of other intangible assets amortization expense, after tax (non-GAAP)
Net income excluding the impact of other intangible assets amortization expense, after tax (non-GAAP)
Net income excluding the impact of other intangible assets amortization expense, after tax (non-GAAP)
Add: adjustments, after tax (non-GAAP) (1)
Net income excluding the impact of other intangible assets amortization expense, adjusted for acquisition-related expenses and loss on security sales, after tax (non-GAAP) (1)
Average assets
Less: average goodwill and other intangible assets, net of deferred tax liability related to goodwill (non-GAAP)
Average tangible assets (non-GAAP)
Average shareholders’ equity
Less: average goodwill and other intangible assets, net of deferred tax liability related to goodwill (non-GAAP)
Average tangible common equity (non-GAAP)
Return on average assets
Return on average tangible assets (non-GAAP)
Return on average tangible assets, adjusted (non-GAAP) (1)
Return on average equity
Return on average tangible common equity (non-GAAP)
Return on average tangible common equity, adjusted (non-GAAP) (1)
(1) Adjustments:
Provision expense adjustments:
Day 1 CECL provision expense
Non-interest income adjustments:
Loss on security sales (non-GAAP)
Non-interest expense adjustments:
Acquisition-related expenses (non-GAAP)
Total adjustments before tax (non-GAAP)
Tax benefit impact
Total adjustments after tax (non-GAAP)
Table of Contents
Efficiency Ratio and Pre-Provision Net Revenue
As of and for the years ended
December 31,
December 31,
December 31,
December 31,
December 31,
Net interest income FTE (1)
Non-interest income
Add: loss on security sales (non-GAAP)
Non-interest income adjusted for loss on security sales (non-GAAP)
Non-interest expense
Less: other intangible assets amortization (non-GAAP)
Less: acquisition-related expenses (non-GAAP)
Non-interest expense excluding other intangible assets amortization and adjusted for acquisition-related expenses (non-GAAP)
Non-interest expense
Less: acquisition-related expenses (non-GAAP)
Non-interest expense adjusted for acquisition-related expenses (non-GAAP)
Efficiency ratio FTE (1)
Efficiency ratio excluding other intangible assets amortization, adjusted for acquisition-related expenses and loss on security sales FTE (non-GAAP) (1)
Net income
Add: income tax expense
Add: provision expense (release) for credit losses
Add: impact of taxable equivalent adjustment
Pre-provision net revenue, FTE (non-GAAP) (1)
Pre-provision net revenue, FTE (non-GAAP) (1)
Add: loss on security sales (non-GAAP)
Add: acquisition-related expenses (non-GAAP)
Pre-provision net revenue FTE, adjusted for acquisition-related expenses and loss on security sales (non-GAAP) (1)
Presented on an FTE basis using the statutory tax rate of 21% for all periods presented. The taxable equivalent adjustments included above are $7,866, $7,094, $6,099, $5,512 and $5,161 for the years ended December 31, 2025, 2024, 2023, 2022 and 2021, respectively.
Adjusted Net Income and Earnings Per Share
As of and for the years ended
December 31,
December 31,
December 31,
December 31,
December 31,
Adjustments to net income:
Net income
Add: acquisition-related expenses, after tax (non-GAAP)
Add: loss on security sales, after tax (non-GAAP)
Adjusted net income (non-GAAP)
Adjustments to earnings per share:
Earnings per share - diluted
Add: acquisition-related expenses, after tax (non-GAAP)
Add: loss on security expenses, after tax (non-GAAP)
Adjusted earnings per share - diluted (non-GAAP)
Table of Contents
Application of Critical Accounting Policies and Significant Estimates
We use accounting principles and methods that conform to GAAP and general banking practices. We are required to apply significant judgment and make material estimates in the preparation of our financial statements and with regard to various accounting, reporting and disclosure matters. Assumptions and estimates are required to apply these principles where actual measurement is not possible or practical. The most significant of these estimates relate to the determination of the ACL and accounting for acquired loans. See additional discussion of our ACL policy in note 2 – Summary of Significant Accounting Policies in the notes to our consolidated financial statements for the year ended December 31, 2025.
Allowance for credit losses
The determination of the ACL, which represents management’s estimate of lifetime credit losses inherent in our loan portfolio at the balance sheet date, involves a high degree of judgment and complexity. The Company estimates the ACL by first disaggregating the loan portfolio into segments based upon broad characteristics such as primary use and underlying collateral. Within these segments, the portfolio is further disaggregated into classes of loans with similar attributes and risk characteristics. The ACL is determined at the class level, analyzing loss history based upon specific loss drivers and risk factors affecting each loan class. The Company utilizes a DCF model developed within a third-party software tool that incorporates forecasts of certain national macroeconomic factors (reasonable and supportable forecasts) which drive the losses predicted in establishing the Company’s ACL. Management accounts for the inherent uncertainty of the underlying economic forecast by reviewing and weighting alternate forecast scenarios. For periods beyond the reasonable and supportable forecast period, the Company reverts to historical long-term average loss rates on a straight-line basis. Additionally, the ACL calculation includes subjective adjustments for qualitative risk factors that are likely to cause estimated credit losses to differ from historical experience. Changes in these assumptions, estimates or the conditions surrounding them may have a material impact on our financial condition. For further discussion of the ACL, see notes 2 and 7 to our consolidated financial statements.
Future Accounting Pronouncements
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270) : Narrow-scope Improvements . The update amends the guidance in ASC 270 to improve the required interim disclosures and clarify when that guidance is applicable as well as clarify disclosures that should be provided in interim reporting periods. The guidance also requires entities to disclose events taking place after the end of the last annual reporting period that have a material impact. The standard is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact from ASU 2025-11 and does not expect the adoption of this pronouncement to have a material impact on its financial statements.
In November 2025, the FASB issued ASU 2025-09, Derivatives and Hedging (Topic 815) : Hedge Accounting Improvements . The update includes targeted changes to the guidance in ASC 815 to better reflect risk management, reduce complexity and align with economic reality. The update will allow grouping of hedged items for forecasts with similar risk, more flexibility for variable-rate debt and simplified accounting for certain complex hedges, including swaps and options. It primarily affects cash flow hedges. The standard is effective for interim and annual reporting periods beginning after December 15, 2026. Early adoption is permitted. The guidance must be adopted on a prospective basis, and there are transition provisions designed to assist in migrating existing hedging relationships to the new guidance. The Company is currently evaluating the impact from ASU 2025-09 and does not expect the adoption of this pronouncement to have a material impact on its financial statements.
In November 2025, the FASB issued ASU 2025-08, Financial Instruments - Credit Losses (Topic 326): Purchased Loans . The update amends the guidance in ASC 326 on the accounting for certain purchased loans. Under the ASU, entities must account for acquired loans that meet certain criteria at acquisition by recognizing them at their purchase price plus an allowance for expected credit losses. The ASU’s amendments align the accounting for those purchased loans with the treatment of financial assets purchased with more-than-insignificant credit deterioration since origination. The amendments in this update are effective for fiscal years and interim reporting periods beginning after December 15, 2026 and are required to be applied prospectively. Early adoption is permitted. The Company is currently evaluating the impact from ASU 2025-08.
Table of Contents
In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Topic 350): Targeted Improvements to the Accounting for Internal-Use Software . The update will eliminate the accounting consideration of software project development stages and enhance the guidance around the threshold for cost capitalization. The amendments in this update are effective for fiscal years and interim reporting periods beginning after December 15, 2027 and can be applied using a prospective transition approach, a modified transition approach or a retrospective transition approach. The Company has evaluated the impact from ASU 2025-06 and does not expect the adoption of this pronouncement to have a material impact on its financial statements.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets . The update is related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC Topic 606. It allows all entities to elect a practical expedient that assumes current conditions as of the balance sheet date do not change for the remaining life of the asset. The update also allows for an accounting policy election, which is not applicable to public business entities. Entities are required to disclose whether they have elected to use the practical expedient and, if applicable, the accounting policy election. The amendments in this update are effective for fiscal years and interim reporting periods beginning after December 15, 2025 and are to be applied on a prospective basis. The Company has evaluated the impact from ASU 2025-05 and does not expect the adoption of this pronouncement to have a material impact on its financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Topic 220) : Disaggregation of Income Statement Expenses . The update requires public business entities to disclose specific components of certain expense categories. This includes expense categories such as employee compensation, depreciation, and intangible asset amortization. The amendments in this update are effective for fiscal years beginning after December 15, 2026 and are to be applied on a prospective basis with an option for retrospective application. Early adoption is permitted. The Company has evaluated the impact from ASU 2024-03 and does not expect the adoption of this pronouncement to have a material impact on its financial statements apart from the inclusion of additional disclosures.
Financial Condition
Total assets were $9.9 billion at December 31, 2025, increasing $75.8 million from December 31, 2024. Cash and cash equivalents increased $289.2 million to $417.1 million at December 31, 2025, compared to December 31, 2024, and investment securities increased $119.7 million to $1.2 billion. Loans totaled $7.4 billion and $7.8 billion at December 31, 2025 and December 31, 2024, respectively, and the allowance for credit losses totaled $87.4 million and $94.5 million at December 31, 2025 and December 31, 2024, respectively. Lower-cost transaction deposits totaled $7.1 billion and $7.2 billion at December 31, 2025 and December 31, 2024, respectively. Total deposits increased $54.7 million to $8.3 billion at December 31, 2025, compared to December 31, 2024.
Investment securities
Available-for-sale
Total investment securities available-for-sale were $528.6 million at December 31, 2025, compared to $527.5 million at December 31, 2024. During the years ended December 31, 2025 and 2024, purchases of available-for-sale securities totaled $160.5 million and $185.7 million, respectively. During 2025 and 2024, the Company sold $57.8 million and $132.1 million, respectively, of available-for-sale investment securities on the open market as part of the Company’s strategic balance sheet management resulting in pre-tax losses of $3.3 million and $6.6 million, respectively. Proceeds from the sale were redeployed into higher yielding assets. Maturities and paydowns of available-for-sale securities during 2025 and 2024 totaled $132.6 million and $157.5 million, respectively.
Table of Contents
Available-for-sale investment securities are summarized in the following table as of the dates indicated. The weighted average yield was calculated based on amortized cost. Yields on tax exempt securities have not been adjusted for tax exempt status.
December 31, 2025
December 31, 2024
Weighted
Weighted
Amortized
Fair
Percent of
average
Amortized
Fair
Percent of
average
cost
value
portfolio
yield
cost
value
portfolio
yield
Treasury securities
Mortgage-backed securities:
Residential mortgage pass-through securities issued or guaranteed by U.S. government agencies or sponsored enterprises
Other residential MBS issued or guaranteed by U.S. government agencies or sponsored enterprises
Corporate debt
Other securities
Total investment securities available-for-sale
As of December 31, 2025 and 2024, nearly all the available-for-sale investment portfolio was backed by mortgages. The residential mortgage pass-through securities portfolio is comprised of both fixed rate and adjustable rate FHLMC, FNMA and GNMA securities. The other MBS are comprised of securities backed by FHLMC, FNMA and GNMA securities.
Mortgage-backed securities may have actual maturities that differ from contractual maturities depending on the repayment characteristics and experience of the underlying financial instruments. The estimated weighted average life of the available-for-sale mortgage-backed securities portfolio was 4.6 years and 5.3 years at December 31, 2025 and December 31, 2024, respectively. This estimate is based on assumptions and actual results may differ. At December 31, 2025 and December 31, 2024, the duration of the total available-for-sale investment portfolio was 3.9 years and 4.3 years, respectively.
At December 31, 2025 and 2024, adjustable rate securities comprised 0.6% and 5.9%, respectively, of the available-for-sale MBS portfolio. The remainder of the portfolio was comprised of fixed rate amortizing securities with 10- to 30-year contractual maturities, with a weighted average coupon of 2.30% per annum and 2.31% per annum at December 31, 2025 and 2024, respectively.
The available-for-sale investment portfolio included $60.2 million of unrealized losses and $2.9 million of unrealized gains at December 31, 2025. At December 31, 2024, the available-for-sale investment portfolio included $90.9 million of unrealized losses and $0.5 million of unrealized gains. We believe any unrealized losses are a result of prevailing interest rates, and as such, we do not believe that any of the securities with unrealized losses were impaired. Management believes that default of the available-for-sale securities is highly unlikely. FHLMC, FNMA and GNMA guaranteed mortgage-backed securities and U.S. Treasury securities have a long history of zero credit losses, an explicit guarantee by the U.S. government (although limited for FNMA and FHLMC securities) and yields that generally trade based on market views of prepayment and liquidity risk rather than credit risk.
Our investment security portfolio consists of high-quality securities, which are largely backed by either U.S. government agencies or GSEs. We regularly model liquidity stress scenarios to assess potential liquidity issues.
Held-to-maturity
At December 31, 2025, we held $651.7 million of held-to-maturity investment securities, compared to $533.1 million at December 31, 2024. Purchases of held-to-maturity securities totaled $260.3 million and $10.5 million during 2025 and 2024, respectively. Paydowns and maturities of held-to-maturity securities totaled $143.2 million and $63.1 million during 2025 and 2024, respectively.
Table of Contents
Held-to-maturity investment securities are summarized as follows as of the dates indicated:
December 31, 2025
December 31, 2024
Weighted
Weighted
Amortized
Fair
Percent of
average
Amortized
Fair
Percent of
average
cost
value
portfolio
yield
cost
value
portfolio
yield
Treasury securities
Mortgage-backed securities:
Residential mortgage pass-through securities issued or guaranteed by U.S. government agencies or sponsored enterprises
Other residential MBS issued or guaranteed by U.S. government agencies or sponsored enterprises
Total investment securities held-to-maturity
The residential mortgage pass-through and other residential MBS held-to-maturity investment portfolios are comprised of fixed rate FHLMC, FNMA and GNMA securities.
The fair value of the held-to-maturity investment portfolio included $57.3 million of unrealized losses and $3.0 million of unrealized gains at December 31, 2025. At December 31, 2024, the held-to-maturity investment portfolio included $81.8 million of unrealized losses and $0.1 million of unrealized gains.
The Company does not measure expected credit losses on a financial asset, or groups of financial assets, in which historical credit loss information adjusted for current conditions and reasonable and supportable forecasts results in an expectation that nonpayment of the amortized cost basis is zero. Management evaluated held-to-maturity securities noting they are backed by loans guaranteed by either U.S. government agencies or GSEs, and management believes that default is highly unlikely given this governmental backing and long history without credit losses. Additionally, management notes that yields on which the portfolio generally trades are based upon market views of prepayment and liquidity risk and not credit risk. The Company has no intention to sell the securities and believes it will not be required to sell the securities before the recovery of their amortized cost.
Mortgage-backed securities may have actual maturities that differ from contractual maturities depending on the repayment characteristics and experience of the underlying financial instruments. The estimated weighted average expected life of the held-to-maturity mortgage-backed securities portfolio as of December 31, 2025 and December 31, 2024 was 4.3 years and 5.6 years, respectively. This estimate is based on assumptions and actual results may differ. The duration of the total held-to-maturity investment portfolio was 3.6 years and 4.4 years as of December 31, 2025 and December 31, 2024, respectively.
Other securities
The carrying balances of other securities are summarized as follows as of the dates indicated:
December 31, 2025
December 31, 2024
Federal Reserve Bank stock
Federal Home Loan Bank stock
Convertible preferred stock
Equity method investments
Equity securities with readily determinable fair values
Total
Other securities included FRB stock, FHLB stock, convertible preferred stock, equity method investments and equity securities with readily determinable fair values. During the year ended December 31, 2025, purchases of other securities totaled $51.2 million, and proceeds from redemptions and sales of other securities totaled $51.0 million. During the year ended December 31, 2024, purchases of other securities totaled $44.9 million, and proceeds from redemptions and sales of other securities totaled $57.5 million. Purchases consisted primarily of FHLB stock, and proceeds consisted primarily of
Table of Contents
redemptions of FHLB stock. Changes in the Company’s FHLB stock holdings were directly correlated to FHLB line of credit advances and paydowns.
FRB and FHLB stock
At December 31, 2025 and December 31, 2024, the Company held FRB stock and FHLB stock for regulatory or debt facility purposes. These are restricted securities which, lacking a market, are carried at cost. There have been no identified events or changes in circumstances that may have an adverse effect on the FRB and FHLB stock carried at cost.
Convertible preferred stock
Other securities include convertible preferred stock without a readily determinable fair value. During the year ended December 31, 2025, there were no purchases of convertible preferred stock. One convertible preferred stock investment in our portfolio underwent an initial public offering and was reclassified as an equity security with a readily determinable fair value during the third quarter of 2025. During the year ended December 31, 2024, the Company purchased $0.4 million of convertible preferred stock. The Company recorded $3.9 million of impairment on convertible preferred stock related to venture capital investments, included in other non-interest income in the Company’s consolidated statements of operations, during the year ended December 31, 2024. The Company also sold convertible preferred stock totaling $1.0 million, during the year ended December 31, 2024, which generated realized gains of $0.1 million recorded in other non-interest income in the Company’s consolidated statements of operations.
Equity method investments
Other securities also include equity method investments totaling $32.4 million and $28.0 million at December 31, 2025 and December 31, 2024, respectively. The increase was primarily due to a $5.0 million investment. The Company sold equity method investments totaling $1.9 million, during the year ended December 31, 2025, which generated realized gains of $0.6 million recorded in other non-interest income in the Company’s consolidated statements of operations. The Company recorded net unrealized gains on equity method investments totaling $0.8 million and $1.0 million for the years ended December 31, 2025 and 2024, respectively, which are recorded in other non-interest income in the Company’s consolidated statements of operations. The Company recorded no impairment related to equity method investments for the years ended December 31, 2025 or 2024. Purchases of equity method investments during the years ended December 31, 2025 and 2024 totaled $0.6 million and $1.5 million, respectively.
Equity securities with readily determinable fair values
As noted above, one convertible preferred stock investment underwent an initial public offering and was reclassified as an equity security with a readily determinable fair value totaling $5.1 million at December 31, 2025. Equity securities with readily determinable fair values are generally traded on an exchange and market prices are readily available. Unrealized gains or losses on equity securities with readily determinable fair values are recognized in other non-interest income in the Company’s consolidated statements of operations. During the year ended December 31, 2025, the Company recorded $3.1 million of unrealized gains from equity securities with readily determinable fair values.
Table of Contents
Loans overview
At December 31, 2025, our loan portfolio was comprised of loans originated by the Company and loans that were acquired in connection with the Company’s acquisitions.
The table below shows the loan portfolio composition at the respective dates:
December 31, 2025 vs.
December 31, 2024
December 31, 2025
December 31, 2024
% Change
Originated:
Commercial:
Commercial and industrial
Municipal and non-profit
Owner-occupied commercial real estate
Food and agribusiness
Total commercial
Commercial real estate non-owner occupied
Residential real estate
Consumer
Total originated
Acquired:
Commercial:
Commercial and industrial
Municipal and non-profit
Owner-occupied commercial real estate
Food and agribusiness
Total commercial
Commercial real estate non-owner occupied
Residential real estate
Consumer
Total acquired
Total loans
The Company maintains a granular and well-diversified loan portfolio with self-imposed concentration limits. At December 31, 2025, loans totaled $7.4 billion, compared to $7.8 billion at December 31, 2024.
Our commercial and industrial loan portfolio is highly diversified across industry sectors and geography. At December 31, 2025, there were no industry sectors representing more than 15.0% of our total loan portfolio. Key sectors included government/non-profit loans of $994.7 million, or 13.4% of total loans, and health care/hospital loans of $498.9 million, or 6.7% of total loans. The commercial and industrial portfolio also includes loans to companies that operate in the transportation industry. The transportation industry, trucking in particular, has experienced recent economic challenges. As a result of these industry challenges, some of the transportation loans may be subject to higher credit risk. The Company’s exposure to this industry is small, consisting of $134.8 million, or 1.8% of total loans, at December 31, 2025.
Non-owner occupied CRE loans were 127.1% of the Company’s risk based capital, or 21.3% of total loans, and no specific property type comprised more than 7.0% of total loans. The Company maintains little exposure to non-owner occupied CRE retail properties and office properties, comprising 1.9% and 1.2% of total loans, respectively, including available credit. Multifamily loans totaled $300.7 million, including available credit, or 3.5% of total loans, including available credit, as of December 31, 2025.
The agriculture industry continues to be impacted by volatile commodity prices and generally by higher input costs, combining to stress margins. Our food and agribusiness portfolio is 3.1% of total loans and is well-diversified across food production, crop and livestock types. Crop and livestock loans represent 1.2% of total loans. We have maintained relationships with food and agribusiness clients that generally possess low leverage and, correspondingly, low bank debt to assets, minimizing potential credit losses in the future.
Table of Contents
New loan origination is a direct result of our ability to recruit and retain top banking talent, connect with clients in our markets and provide needed services at competitive rates. Loan fundings totaled $1.6 billion over the trailing 12 months, led by commercial loan fundings of $1.1 billion. Fundings are defined as closed end funded loans and revolving lines of credit advances, net of any current period paydowns. Management utilizes this more conservative definition of fundings to better approximate the impact of fundings on loans outstanding and ultimately net interest income.
The following tables represent new loan fundings during 2025 and 2024:
Fourth quarter
Third quarter
Second quarter
First quarter
Total
Commercial:
Commercial and industrial
Municipal and non-profit
Owner occupied commercial real estate
Food and agribusiness
Total commercial
Commercial real estate non-owner occupied
Residential real estate
Consumer
Total
Included in fundings are net fundings (paydowns) under revolving lines of credit totaling $95,774, ($1,591), $15,490 and $21,752 for the dates noted in the table above, respectively.
Fourth quarter
Third quarter
Second quarter
First quarter
Total
Commercial:
Commercial and industrial
Municipal and non-profit
Owner occupied commercial real estate
Food and agribusiness
Total commercial
Commercial real estate non-owner occupied
Residential real estate
Consumer
Total
Included in the table above are quarterly net fundings (paydowns) under revolving lines of credit totaling $64,375, $16,302, $19,281 and ($59,523) for the dates noted in the table above, respectively.
The tables below show the contractual maturities of our total loans for the dates indicated:
December 31, 2025
Due within
Due after 1 but
Due after 5 but
Due after
1 year
within 5 years
within 15 years
15 years
Total
Commercial:
Commercial and industrial
Municipal and non-profit
Owner occupied commercial real estate
Food and agribusiness
Total commercial
Commercial real estate non-owner occupied
Residential real estate
Consumer
Total loans
Table of Contents
December 31, 2024
Due within
Due after 1 but
Due after 5 but
Due after
1 year
within 5 years
within 15 years
15 years
Total
Commercial:
Commercial and industrial
Municipal and non-profit
Owner occupied commercial real estate
Food and agribusiness
Total commercial
Commercial real estate non-owner occupied
Residential real estate
Consumer
Total loans
The stated interest rate (which excludes the effects of non-refundable loan origination and commitment fees, net of costs and the accretion of fair value marks) of total loans with maturities over one year is as follows at the dates indicated:
December 31, 2025
Fixed
Variable
Total
Weighted
Weighted
Weighted
Balance
average rate
Balance
average rate
Balance
average rate
Commercial:
Commercial and industrial
Municipal and non-profit (1)
Owner occupied commercial real estate
Food and agribusiness
Total commercial
Commercial real estate non-owner occupied
Residential real estate
Consumer
Total loans with > 1 year maturity
December 31, 2024
Fixed
Variable
Total
Weighted
Weighted
Weighted
Balance
average rate
Balance
average rate
Balance
average rate
Commercial:
Commercial and industrial
Municipal and non-profit (1)
Owner occupied commercial real estate
Food and agribusiness
Total commercial
Commercial real estate non-owner occupied
Residential real estate
Consumer
Total loans with > 1 year maturity
Included in municipal and non-profit fixed rate loans are loans totaling $365,224 and $348,473 that have been swapped to variable rates at current market pricing at December 31, 2025 and 2024, respectively. Included in the municipal and non-profit segment are tax exempt loans totaling $1,013,078 and $920,425 with an FTE weighted average rate of 4.79% and 4.68% at December 31, 2025 and 2024, respectively.
Asset quality
Asset quality is fundamental to our success and remains a strong point, driven by our disciplined adherence to our self-imposed concentration limits across industry sector and real estate property type. Accordingly, for the origination of loans, we
Table of Contents
have established a credit policy that allows for responsive, yet controlled lending with credit approval requirements that are scaled to loan size. Within the scope of the credit policy, each prospective loan is reviewed in order to determine the appropriateness and the adequacy of the loan characteristics and the security or collateral prior to making a loan. We have established underwriting standards and loan origination procedures that require appropriate documentation, including financial data and credit reports. For loans secured by real property, we require property appraisals, title insurance or a title opinion, hazard insurance and flood insurance, in each case where appropriate.
Additionally, we have implemented procedures to timely identify loans that may become problematic in order to ensure the most beneficial resolution for the Company. Asset quality is monitored by our credit risk management department and evaluated based on quantitative and subjective factors such as the timeliness of contractual payments received. Additional factors that are considered, particularly with commercial loans over $500,000, include the financial condition and liquidity of individual borrowers and guarantors, if any, and the value of our collateral. To facilitate the oversight of asset quality, loans are categorized based on the number of days past due and on an internal risk rating system, as discussed in more detail below.
Our internal risk rating system uses a series of grades which reflect our assessment of the credit quality of loans based on an analysis of the borrower’s financial condition, liquidity and ability to meet contractual debt service requirements. Loans that are perceived to have acceptable risk are categorized as “Pass” loans. “Special mention” loans represent loans that have potential credit weaknesses that deserve close attention. Special mention loans include borrowers that have potential weaknesses or unwarranted risks that, unless corrected, may threaten the borrower’s ability to meet debt service requirements. However, these borrowers are still believed to have the ability to respond to and resolve the financial issues that threaten their financial situation. Loans classified as “Substandard” have a well-defined credit weakness and are inadequately protected by the current paying capacity of the obligor or of the collateral pledged, if any. Although these loans are identified as potential problem loans, they may never become non-performing. Substandard loans have a distinct possibility of loss if the deficiencies are not corrected. “Doubtful” loans are loans that management believes that collection of payments in accordance with the terms of the loan agreement are highly questionable and improbable. Doubtful loans are deemed impaired and put on non-accrual status.
The Company’s policy is to review each prospective credit to determine the appropriateness and the adequacy of security or collateral prior to making a loan. In the event of borrower default, the Company seeks recovery in compliance with lending laws, the respective loan agreements, and credit monitoring and remediation procedures that may include modifying a loan to provide a concession by the Company to the borrower from their original terms due to borrower financial difficulties in order to facilitate repayment. Loan modifications may include principal forgiveness, interest rate reductions, other-than-insignificant-payment delays, term extensions or any combination thereof. Modified loans are discussed further in note 6 of our consolidated financial statements. Assets that have been foreclosed on or acquired through deed-in-lieu of foreclosure are classified as OREO until sold, and are carried at the fair value of the collateral less estimated costs to sell, with any initial valuation adjustments charged to the ACL and any subsequent declines in carrying value charged to impairments on OREO.
Non-performing assets and past due loans
Non-performing assets consist of non-accrual loans and OREO. Interest income that would have been recorded had non-accrual loans performed in accordance with their original contract terms during 2025 and 2024 was $2.4 million and $2.0 million, respectively.
Past due status is monitored as an indicator of credit deterioration. Loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement remains unpaid after the due date of the scheduled payment. Loans that are 90 days or more past due are put on non-accrual status unless the loan is well secured and in the process of collection.
Table of Contents
The following table sets forth the non-performing assets and past due loans as of the dates presented:
December 31, 2025
December 31, 2024
December 31, 2023
December 31, 2022
December 31, 2021
Non-performing loans
OREO
Total non-performing assets
Loans 30-89 days past due and still accruing interest
Loans 90 days or more past due and still accruing interest
Non-accrual loans
Total past due and non-accrual loans
Accruing modified loans (1)
Allowance for credit losses
Non-performing loans to total loans
Total 90 days past due and still accruing interest and non-accrual loans to total loans
Total non-performing assets to total loans and OREO
ACL to non-performing loans
Reflects loan modifications as defined under ASU 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures adopted in the first quarter of 2023. The prior periods include troubled debt restructured loans consistent with historical disclosures.
During 2025, non-performing loans decreased $11.1 million, or 30.8%, to $24.9 million, compared to 2024. During 2025 and 2024, accruing modified loans totaled $43.8 million and $15.3 million, respectively. Total non-performing assets to total loans and OREO totaled 0.36% and 0.47% at December 31, 2025 and 2024, respectively.
Loans 30-89 days past due and still accruing interest were 0.16% and 0.30% of total loans at December 31, 2025 and December 31, 2024, respectively. Loans 90 days or more past due and still accruing interest were 0.21% and 0.19% of total loans for December 31, 2025 and 2024, respectively.
Allowance for credit losses
The ACL represents the amount that we believe is necessary to absorb estimated lifetime credit losses inherent in the loan portfolio at the balance sheet date and involves a high degree of judgment and complexity. The Company utilizes a DCF model developed within a third-party software tool to establish expected lifetime credit losses for the loan portfolio. The ACL is calculated as the difference between the amortized cost basis and the projections from the DCF analysis. The DCF model allows for individual lifetime loan cash flow modeling, excluding extensions and renewals, using loan-specific interest rates and repayment schedules including estimated prepayment rates and loss recovery timing delays. The model incorporates forecasts of certain national macro-economic factors, including unemployment rates, HPI, retail sales and GDP, which drive correlated loss rates. The determination and application of the ACL accounting policy involves judgments, estimates and uncertainties that are subject to change. For periods beyond the reasonable and supportable forecast period, the Company reverts to historical long-term average loss rates on a straight-line basis.
We measure expected credit losses for groups of loans included in segments with similar risk characteristics. We have identified four primary loan segments within the ACL model that are further stratified into 11 loan classes to provide more granularity in analyzing loss history and to allow for more definitive qualitative adjustments based upon specific risk factors affecting each loan class. Generally, the underlying risk of loss for each of these loan segments will follow certain norms/trends in various economic environments. Loans that do not share risk characteristics are evaluated on an individual
Table of Contents
basis and are not included in the collective evaluation. Following are the loan classes within each of the four primary loan segments:
Non-owner occupied
Commercial
commercial real estate
Residential real estate
Consumer
Commercial and industrial
Construction
Senior lien
Consumer
Owner occupied commercial real estate
Acquisition and development
Junior lien
Food and agribusiness
Multifamily
Municipal and non-profit
Non-owner occupied
Loans on non-accrual, in bankruptcy and modified loans with a balance greater than $250 thousand are excluded from the pooled analysis and are evaluated individually. If management determines that foreclosure is probable, expected credit losses are evaluated based on the criteria listed below, adjusted for selling costs as appropriate. Typically, these loans consist of commercial, commercial real estate and agriculture loans and exclude homogeneous loans such as residential real estate and consumer loans. Specific allowances are determined by collectively analyzing:
the borrower’s resources, ability and willingness to repay in accordance with the terms of the loan agreement;
the likelihood of receiving financial support from any guarantors;
the adequacy and present value of future cash flows, less disposal costs, of any collateral; and
the impact current economic conditions may have on the borrower’s financial condition and liquidity or the value of the collateral.
The resulting ACL for loans is calculated as the sum of the general reserves, specific reserves on individually evaluated loans, and qualitative factor adjustments. While these amounts are calculated by individual loan or by segment and class, the entire ACL is available for any loan that, in our judgment, should be charged off. The determination and application of the ACL accounting policy involves judgments, estimates, and uncertainties that are subject to change. Changes in these assumptions, estimates or the conditions surrounding them may have a material impact on our financial condition, liquidity or results of operations.
At December 31, 2025 and 2024, the allowance for credit losses totaled $87.4 million and $94.5 million, respectively. The decrease during 2025 was primarily driven by the resolution of non-performing loans. Specific reserves on loans totaled $8.1 million at December 31, 2025, compared to $6.4 million at December 31, 2024.
During the years ended December 31, 2025 and 2024, net charge-offs totaled $25.2 million and $9.8 million, respectively. Charge-offs during 2025 were recorded primarily due to proactive credit actions taken on three credits during the fourth quarter and an $8.9 million charge-off from one credit during the first quarter due to suspected fraud by the borrower, which the Company believes is an isolated circumstance within the loan portfolio. The ratio of net charge-offs to average total loans totaled 0.34% and 0.13% for the years ended December 31, 2025 and 2024, respectively.
The Company has elected to exclude AIR from the ACL calculation. As of December 31, 2025 and 2024, AIR from loans totaled $38.3 million and $41.5 million, respectively. When a loan is placed on non-accrual, any recorded AIR is reversed against interest income.
Total ACL
After considering the above-mentioned factors, we believe that the ACL of $87.4 million is adequate to cover estimated lifetime losses inherent in the loan portfolio at December 31, 2025. However, it is likely that future adjustments to the ACL will be necessary. Any changes to the underlying assumptions, circumstances or estimates, including but not limited to changes in the underlying macro-economic forecast, used in determining the ACL, could negatively or positively affect the Company’s results of operations, liquidity or financial condition.
Table of Contents
The following schedule presents, by class stratification, the changes in the ACL during the years listed:
As of and for the years ended
December 31, 2025
December 31, 2024
December 31, 2023
December 31, 2022
December 31, 2021
Total ACL
% NCOs (1)
Total ACL
% NCOs (1)
Total ACL
% NCOs (1)
Total ACL
% NCOs (1)
Total ACL
% NCOs (1)
Beginning allowance for credit losses
Day 1 CECL provision expense (2)
PCD allowance for credit loss at acquisition
Charge-offs:
Commercial
Commercial real estate non owner-occupied
Residential real estate
Consumer
Total charge-offs
Recoveries
Net charge-offs
Provision expense for credit losses
Ending allowance for credit losses
Ratio of ACL to total loans outstanding at period end
Ratio of ACL to total non-performing loans at period end
Total loans
Average total loans outstanding during the period
Non-performing loans
Ratio of net charge-offs to average total loans.
Related to the Day 1 allowance reserve recorded as part of the RCB and BOJH acquisitions.
The Company continued to prudently manage credit risk in 2025, further strengthening our credit profile through proactive monitoring of credit. During the year ended December 31, 2025, the Company recorded provision expense for credit losses totaling $17.8 million, including $18.2 million provision expense for funded loans and $0.4 million of provision release for unfunded loan commitments. During the year ended December 31, 2024, the Company recorded provision expense for credit losses totaling $6.8 million, including $6.3 million of provision expense for funded loans and $0.5 million of provision expense for unfunded loan commitments.
Table of Contents
The following tables present the allocation of the ACL and the percentage of the total amount of loans in each loan category listed as of the dates presented:
December 31, 2025
ACL as a %
Total loans
% of total loans
Related ACL
of total ACL
Commercial
Commercial real estate non-owner occupied
Residential real estate
Consumer
Total
December 31, 2024
ACL as a %
Total loans
% of total loans
Related ACL
of total ACL
Commercial
Commercial real estate non-owner occupied
Residential real estate
Consumer
Total
December 31, 2023
ACL as a %
Total loans
% of total loans
Related ACL
of total ACL
Commercial
Commercial real estate non-owner occupied
Residential real estate
Consumer
Total
December 31, 2022
ACL as a %
Total loans
% of total loans
Related ACL
of total ACL
Commercial
Commercial real estate non-owner occupied
Residential real estate
Consumer
Total
December 31, 2021
ACL as a %
Total loans
% of total loans
Related ACL
of total ACL
Commercial
Commercial real estate non-owner occupied
Residential real estate
Consumer
Total
Table of Contents
Deposits
Deposits from banking clients serve as a primary funding source for our banking operations and our ability to gather and manage deposit levels is critical to our success. Deposits not only provide a lower-cost funding source for our loans, but also provide a foundation for the client relationships that are critical to future loan growth. We maintain a granular and well diversified deposit base with no exposure to venture capital or crypto deposits. The following table presents information regarding our deposit composition at December 31, 2025 and 2024:
Increase (decrease)
December 31, 2025
December 31, 2024
Amount
% Change
Non-interest bearing demand deposits
Interest bearing demand deposits
Savings accounts
Money market accounts
Total transaction deposits
Time deposits < $250,000
Time deposits ≥ $250,000
Total time deposits
Total deposits
The following table shows uninsured time deposits by scheduled maturity as of December 31, 2025:
December 31, 2025
Three months or less
Over 3 months through 6 months
Over 6 months through 12 months
Thereafter
Total uninsured time deposits
At December 31, 2025 and 2024, time deposits that were scheduled to mature within 12 months totaled $1.0 billion and $822.6 million, respectively. Of the time deposits scheduled to mature within 12 months at December 31, 2025, $301.7 million were in denominations of $250 thousand or more, and $704.5 million were in denominations less than $250 thousand. Approximately 76% of our total deposits were FDIC insured at December 31, 2025. Additionally, the Company participates in the IntraFi Cash Service program, which allows depositors to receive reciprocal FDIC insurance coverage. The Company had $0.8 billion and $1.0 billion of deposits in the program at December 31, 2025 and 2024, respectively.
Long-term debt
In 2021, the Company issued and sold a fixed-to-floating rate subordinated note totaling $40.0 million. The balance on the note at December 31, 2025, net of long-term debt issuance costs totaling $0.1 million, totaled $39.9 million. Interest expense totaling $1.2 million was recorded in the consolidated statements of operations during the years ended December 31, 2025 and 2024.
The note is subordinated, unsecured and matures on November 15, 2031. Payments consist of interest only. Interest expense on the note is payable semi-annually in arrears and will bear interest at 3.00% per annum until November 15, 2026 (or any earlier redemption date). From November 15, 2026 until November 15, 2031 (or any earlier redemption date) payments will be made quarterly in arrears, and the interest rate will reset quarterly to an interest rate per annum equal to the then current three-month term SOFR plus 203 basis points. The Company deployed the net proceeds from the sale of the note for general corporate purposes. Prior to November 5, 2026, the Company may redeem the note only under certain limited circumstances. Beginning on November 5, 2026 through maturity, the note may be redeemed, at the Company’s option, on any scheduled interest payment date. Any redemption by the Company would be at a redemption price equal to 100% of the principal
Table of Contents
amount of the note being redeemed, together with any accrued and unpaid interest on the note being redeemed up to but excluding the date of redemption. The note is not subject to redemption at the option of the holder.
As part of the acquisition of BOJH on October 1, 2022, the Company assumed three subordinated note purchase agreements to issue and sell fixed-to-floating rate notes totaling $15.0 million. The balance on the notes at December 31, 2025, net of a fair value adjustment related to the acquisition totaling $0.1 million, totaled $14.9 million. Interest expense related to the notes totaling $0.6 million was recorded in the consolidated statements of operations during the years ended December 31, 2025 and 2024.
The three notes, containing similar terms, are subordinated, unsecured and mature on June 15, 2031. Payments consist of interest only. Interest expense on the notes is payable semi-annually in arrears and will bear interest at 3.75% per annum until June 15, 2026 (or any earlier redemption date). From June 15, 2026 until June 15, 2031 (or any earlier redemption date) payments will be made quarterly in arrears, and the interest rate shall reset quarterly to an interest rate per annum equal to the then current three-month term SOFR plus 306 basis points. Prior to June 15, 2026, the Company may redeem the notes only under certain limited circumstances. Beginning on June 15, 2026 through maturity, the notes may be redeemed, at the Company’s option, on any scheduled interest payment date. Any redemption by the Company would be at a redemption price equal to 100% of the principal amount of the notes being redeemed, together with any accrued and unpaid interest on the notes being redeemed up to but excluding the date of redemption. The notes are not subject to redemption at the option of the holder.
Other borrowings
At December 31, 2025 and December 31, 2024, the Company sold securities under agreements to repurchase totaling $17.4 million and $18.9 million, respectively. In addition, as a member of the FHLB, the Company has access to a line of credit and term financing from the FHLB with total available credit of $1.5 billion and $1.7 billion at December 31, 2025 and 2024, respectively. The Company may utilize the FHLB line of credit as a funding mechanism for originated loans and loans held for sale. At December 31, 2025 and December 31, 2024, NBH Bank had zero and $50.0 million, respectively, of outstanding borrowings with the FHLB. The Company may pledge investment securities and loans as collateral for FHLB advances. There were no investment securities pledged at December 31, 2025 or December 31, 2024. Loans pledged were $2.4 billion and $2.6 billion at December 31, 2025 and 2024, respectively. The Company incurred $2.7 million and $4.6 million of interest expense related to FHLB advances or other short-term borrowings for the years ended December 31, 2025 and 2024, respectively.
Regulatory Capital
Our subsidiary banks and the holding company are subject to the regulatory capital adequacy requirements of the Federal Reserve Board and the FDIC, as applicable. Failure to meet the minimum capital requirements can initiate certain mandatory and possibly further discretionary actions by regulators that could have a material adverse effect on us. At December 31, 2025 and 2024, our subsidiary banks and the consolidated holding company exceeded all capital ratio requirements under prompt corrective action and other regulatory requirements, as further detailed in note 13 of our consolidated financial statements.
Results of Operations
Our net income depends largely on net interest income, which is the difference between interest income from interest earning assets and interest expense on interest bearing liabilities. Our results of operations are also affected by provisions for credit losses and non-interest income, such as service charges, bank card income, swap fee income, and gain on sale of mortgages. Our primary operating expenses, aside from interest expense, consist of salaries and benefits, occupancy costs, telecommunications data processing expense, FDIC deposit insurance and intangible assets amortization. Any expenses related to the resolution of problem assets are also included in non-interest expense.
Overview of results of operations
Net income totaled $109.6 million, $2.85 per diluted share, during the year ended December 31, 2025. During the year ended December 31, 2024, net income totaled $118.8 million, $3.08 per diluted share. Pre-provision net revenue FTE increased $0.2
Table of Contents
million to $159.3 million during the year ended December 31, 2025, compared to 2024. The return on average tangible assets was 1.22% during the year ended December 31, 2025, and the return on average tangible common equity was 11.36%. During the year ended December 31, 2024, the return on average tangible assets was 1.30%, and the return on average tangible common equity was 13.65%.
Adjusting for pre-tax acquisition-related expenses totaling $7.2 million and loss on security sales totaling $3.3 million, net income totaled $117.6 million, $3.06 per diluted share, during the year ended December 31, 2025. The adjusted return on average tangible assets was 1.30% during the year ended December 31, 2025, and the adjusted return on average tangible common equity was 12.15%.
Net interest income
We regularly review net interest income metrics to provide us with indicators of how the various components of net interest income are performing. We regularly review (i) our loan mix and the yield on loans; (ii) the investment portfolio and the related yields; (iii) our deposit mix and the cost of deposits; and (iv) net interest income simulations for various forecast periods.
The effects of trade-date accounting of investment securities for which the cash had not settled are not considered interest earning assets and are excluded from this presentation for timeframes prior to their cash settlement, as are the market value adjustments on the investment securities available-for-sale and loans.
Table of Contents
The table below presents the components of net interest income on an FTE basis for the years ended December 31, 2025, 2024 and 2023.
For the year ended
For the year ended
For the year ended
December 31, 2025
December 31, 2024
December 31, 2023
Average balance
Interest
Average rate
Average balance
Interest
Average rate
Average balance
Interest
Average rate
Interest earning assets:
Originated loans FTE (1)(2)(3)
Acquired loans
Loans held for sale
Investment securities available-for-sale
Investment securities held-to-maturity
Other securities
Interest earning deposits
Total interest earning assets FTE (2)
Cash and due from banks
Other assets
Allowance for credit losses
Total assets
Interest bearing liabilities:
Interest bearing demand, savings and money market deposits
Time deposits
Federal Home Loan Bank advances
Other borrowings (4)
Long-term debt, net
Total interest bearing liabilities
Demand deposits
Other liabilities
Total liabilities
Shareholders’ equity
Total liabilities and shareholders’ equity
Net interest income FTE (2)
Interest rate spread FTE (2)
Net interest earning assets
Net interest margin FTE (2)
Average transaction deposits
Average total deposits
Ratio of average interest earning assets to average interest bearing liabilities
Originated loans are net of deferred loan fees, less costs, which are included in interest income over the life of the loan.
Presented on an FTE basis using the statutory tax rate of 21% for all periods presented. The taxable equivalent adjustments included above are $7,866, $7,094 and $6,099 for the years ended December 31, 2025, 2024 and 2023, respectively.
Loan fees included in interest income totaled $12,747, $13,484 and $13,905 during 2025, 2024 and 2023, respectively.
Other borrowings includes securities sold under agreements to repurchase and cash collateral received from counterparties in connection with derivative swap agreements.
Net interest income on an FTE basis increased $3.9 million to $356.4 million during the year ended December 31, 2025, compared to the year ended December 31, 2024. During the year ended December 31, 2025, the FTE net interest margin expanded nine basis points to 3.94%, compared to the year ended December 31, 2024. The cost of funds improved 22 basis points to 2.05%, during the year ended December 31, 2025, partially offset by a 13 basis point decrease in earning asset yields, compared to the year ended December 31, 2024.
Average loans comprised $7.5 billion, or 82.8%, of total average interest earning assets during the year ended December 31, 2025, compared to $7.7 billion, or 84.1%, during the year ended December 31, 2024.
Average investment securities comprised 15.1% and 14.5% of total interest earning assets during the years ended December 31, 2025 and 2024, respectively. Average interest bearing cash balances totaled $132.7 million during the year ended December 31, 2025, compared to $78.8 million for the prior year.
Table of Contents
Average interest bearing liabilities decreased $55.9 million during the year ended December 31, 2025, compared to the year ended December 31, 2024. The decrease was primarily driven by lower interest bearing demand, savings and money market deposits totaling $122.9 million and FHLB advances totaling $25.7 million. The decrease was partially offset by higher time deposits totaling $71.7 million, and other borrowings totaling $20.9 million.
The following table summarizes the changes in net interest income on an FTE basis by major category of interest earning assets and interest bearing liabilities, identifying changes related to volume and changes related to rates for 2025, 2024 and 2023:
The year ended December 31, 2025
The year ended December 31, 2024
compared to
compared to
the year ended December 31, 2024
the year ended December 31, 2023
Increase (decrease) due to
Increase (decrease) due to
Volume
Rate
Net
Volume
Rate
Net
Interest income:
Originated loans FTE (1)(2)(3)
Acquired loans
Loans held for sale
Investment securities available-for-sale
Investment securities held-to-maturity
Other securities
Interest earning deposits
Total interest income
Interest expense:
Interest bearing demand, savings and money market deposits
Time deposits
Federal Home Loan Bank advances
Other borrowings (4)
Long-term debt, net
Total interest expense
Net change in net interest income
Originated loans are net of deferred loan fees, less costs, which are included in interest income over the life of the loan.
Presented on an FTE basis using the statutory tax rate of 21% for all periods presented. The taxable equivalent adjustments included above are $7,866, $7,094 and $6,099 for the years ended December 31, 2025, 2024 and 2023, respectively.
Loan fees included in interest income totaled $12,747, $13,484 and $13,905 for the years ended December 31, 2025, 2024 and 2023, respectively.
Other borrowings includes securities sold under agreements to repurchase and cash collateral received from counterparties in connection with derivative swap agreements.
Below is a breakdown of average deposits and the average rates paid during the periods indicated:
For the three months ended
For the years ended
December 31, 2025
December 31, 2024
December 31, 2025
December 31, 2024
Average
Average
Average
Average
Average
rate
Average
rate
Average
rate
Average
rate
balance
paid
balance
paid
balance
paid
balance
paid
Non-interest bearing demand
Interest bearing demand
Money market accounts
Savings accounts
Time deposits
Total average deposits
Table of Contents
Provision for credit losses
The provision for credit losses represents the amount of expense that is necessary to bring the ACL to a level that we deem appropriate to absorb estimated lifetime losses inherent in the loan portfolio and estimated losses inherent in unfunded loans as of the balance sheet date. The determination of the ACL, and the resultant provision for credit losses, is subjective and involves significant estimates and assumptions.
The Company continued to prudently manage credit risk in 2025, further strengthening our credit profile through proactive monitoring of credit. During the year ended December 31, 2025, the Company recorded provision expense for credit losses totaling $17.8 million, including $18.2 million provision expense for funded loans and $0.4 million of provision release for unfunded loan commitments. Provision expense for credit losses during the year ended December 31, 2025 was recorded primarily due to proactive credit actions taken on three credits during the fourth quarter and a charge-off on one credit during the first quarter due to suspected fraud by the borrower. During the year ended December 31, 2024, the Company recorded provision expense for credit losses totaling $6.8 million, including $6.3 million of provision expense for funded loans and $0.5 million of provision expense for unfunded loan commitments. The allowance for credit losses totaled 1.18% and 1.22% of total loans at December 31, 2025 and 2024, respectively.
Non-interest income
The table below details the components of non-interest income for the years presented:
For the years ended December 31,
Increase (decrease)
Increase (decrease)
Amount
% Change
Amount
% Change
Service charges
Bank card fees
Mortgage banking income
Bank-owned life insurance income
Loss on security sales
Other non-interest income
Total non-interest income
Non-interest income increased $6.3 million, or 10.3%, to $67.6 million for the year ended December 31, 2025, compared to the year ended December 31, 2024. The Company executed strategic balance sheet actions during the years ended December 31, 2025 and 2024, which resulted in security sale losses of $3.3 million and $6.6 million, respectively. Excluding these items, non-interest income increased $3.1 million. Other non-interest income increased $4.3 million, primarily driven by $3.9 million of unrealized gains on partnership investments, a $0.9 million increase in gains on sales of previously consolidated banking center properties, and a $0.8 million increase in trust income. These increases were partially offset by decreases in SBA loan sale gains and swap fee income.
Non-interest expense
The table below details the components of non-interest expense for the years presented:
For the years ended December 31,
Increase (decrease)
Increase (decrease)
Amount
% Change
Amount
% Change
Salaries and benefits
Occupancy and equipment
Data processing
Marketing and business development
FDIC deposit insurance
Bank card expenses
Professional fees
Other non-interest expense
Other intangible assets amortization
Total non-interest expense
Table of Contents
During the year ended December 31, 2025, non-interest expense totaled $264.6 million, which included $7.2 million of expenses from the Vista acquisition, compared to non-interest expense of $254.6 million in the prior year. Excluding the acquisition-related expenses, which are primarily professional fees, the current year non-interest expense totaled $257.5 million. Occupancy and equipment expense increased $5.9 million primarily driven by the 2UniFi capitalized asset depreciation in connection with the launch of 2UniFi in the third quarter of 2025.
Income taxes
Income taxes are accounted for in accordance with ASC Topic 740. Under this guidance, deferred income taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities given the provisions of enacted tax laws. ASC Topic 740 requires the establishment of a valuation allowance against the net deferred tax asset unless it is more-likely-than-not that the tax benefit of the deferred tax asset will be realized. For purposes of projecting whether the deferred tax asset will be realized, we consider tax regulations of the jurisdictions in which we operate, estimates of future taxable income, and available tax planning strategies. If tax regulations, operating results, or the ability to implement tax planning strategies varies, adjustments to the carrying value of the deferred tax assets may be required. We believe that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets.
Income tax expense totaled $24.1 million during 2025, compared to $26.4 million during 2024. The decrease in income tax expense was driven by lower pre-tax income. The effective tax rate for 2025 was 18.0%, compared to 18.2% for 2024. As of December 31, 2025, our marginal tax rate (the rate we pay on each incremental dollar of earnings) was approximately 23%. However, our effective tax rate (income tax expense divided by income before income taxes) for a given period differs from our marginal rate largely due to income and expense items that are non-taxable or non-deductible in the calculation of income tax expense. The lower effective tax rate compared to the federal statutory tax rate was primarily due to interest income from tax-exempt lending, bank-owned life insurance income and the relationship of these items to pre-tax income.
On July 4, 2025, the OBBBA was signed into law, enacting significant changes to U.S. tax regulations, including the restoration of 100% bonus depreciation for qualifying assets placed in service after January 19, 2025, and the immediate deductibility of domestic research and experimentation expenditures for tax years beginning after December 31, 2024. The bill also allows companies to elect to deduct any remaining unamortized domestic research and experimental expenditures previously capitalized under prior law from 2022 to 2024 either fully in 2025 or ratably or two years (2025 and 2026). The Company elected to fully deduct the remaining costs in 2025.
As a result of the enactment of the OBBBA, the Company remeasured its deferred tax assets and liabilities during the third quarter of 2025 and recorded a reduction in net deferred tax assets, primarily driven by the reversal of deferred tax assets related to the capitalization of R&D expenditures (Section 174). The Company has $10.7 million and $35.3 million of net deferred tax assets at December 31, 2025 and December 31, 2024, respectively. The accelerated tax deductions under the new law, which permit immediate expensing, reduced the temporary differences that previously created these deferred tax assets.
Liquidity and Capital Resources
Liquidity
Liquidity risk management is an important element in our asset/liability management. The Company maintains a robust liquidity profile at its holding company and the Banks, collectively as well as separately. The Company is prudently managing liquidity in the current environment and maintains a liquidity profile focused on core deposits and stable long-term funding sources. Liquidity is supplemented with a variety of secured and unsecured wholesale funding sources across the maturity spectrum, which allows for the effective management of concentration and rollover risk. The Company’s corporate treasury team measures liquidity needs through daily cash monitoring, weekly cash projections and monthly liquidity measures reviewed in conjunction with Board-approved liquidity policy limits. The Company also regularly conducts stress tests to its Board-approved contingency funding plan to assess potential liquidity outflows or funding concerns resulting from economic disruptions, volatility in the financial markets, unexpected credit events or other significant occurrences deemed problematic by management. These scenarios are incorporated into the contingency funding plan, which provides the basis for the identification of our liquidity needs and are monitored monthly by our Asset and Liability Committee.
Table of Contents
The Company’s primary sources of funds include revenue from interest income and noninterest income as well as cash flows from loan repayments, payments from securities related to maturities and amortization, the sale of loans, and funds generated by deposits, in addition to the use of funds from private debt offerings.
On-balance sheet liquidity is represented by our cash and cash equivalents, and unencumbered investment securities, and is detailed in the table below as of December 31, 2025 and 2024:
December 31, 2025
December 31, 2024
Cash and due from banks
Unencumbered investment securities, at fair value
Total
Total on-balance sheet liquidity increased $436.2 million at December 31, 2025, compared to December 31, 2024. The increase was due to higher cash and due from banks of $289.2 million and $147.0 million higher unencumbered available-for-sale and held-to-maturity securities balances. As of December 31, 2025, approximately $658.4 million of investment securities were pledged to the Federal Reserve and to secure client deposits and repurchase agreements.
The Company’s investment portfolio remains positioned in liquid and readily marketable instruments and is a significant source of on-balance sheet collateral to secure borrowing capacity. Our investment securities portfolio is evaluated under established Asset and Liability Committee objectives and is structured as a liquidity portfolio, and only security fair values are used for the liquidity assessment. The fair value of total investment securities was $1.1 billion at December 31, 2025, compared to $1.0 billion at December 31, 2024. As of December 31, 2025, the fair value was inclusive of pre-tax net unrealized losses of $57.3 million on the available-for-sale securities portfolio. Additionally, our held-to-maturity securities portfolio had $54.3 million of pre-tax net unrealized losses. The gross unrealized gains and losses are detailed in note 4 of our consolidated financial statements. As of December 31, 2025, our investment securities portfolio consisted primarily of MBS, all of which were issued or guaranteed by U.S. government agencies or sponsored enterprises. The anticipated repayments and marketability of these securities offer substantial resources and flexibility to meet new loan demand, reinvest in the investment securities portfolio, or provide optionality for reductions in our deposit funding base. At December 31, 2025, the duration of the investment securities portfolio was 3.7 years and the weighted average life was 4.4 years.
As part of its liquidity management activities, the Company pledges collateral at its secured funding providers to ensure immediate availability of funding, which includes maintaining borrowing capacity at both the FHLB and the Federal Reserve. The Company does not consider borrowing capacity at the Federal Reserve a primary source of funding; however, it could be used as a potential source of funds in a stressed environment or during a market disruption. The amount of available contingent secured borrowing capacity may fluctuate based on the level of borrowings outstanding and level of assets pledged.
The table below details those amounts as of the dates shown:
December 31, 2025
December 31, 2024
Available FHLB borrowing capacity
Federal Reserve Bank discount window
Total off-balance sheet funds available
The Company had pledged $4.3 billion and $3.7 billion of loans as collateral to the FHLB and FRB discount window at December 31, 2025 and December 31, 2024, respectively. FHLB borrowing capacity totaled $1.5 billion and $1.7 billion at December 31, 2025 and December 31, 2024, respectively. At December 31, 2025, there were no outstanding borrowings with the FHLB, leaving undrawn borrowing capacity of $1.5 billion. At December 31, 2024, the Company had $50.0 million of outstanding borrowings with the FHLB, leaving undrawn borrowing capacity of $1.7 billion. At December 31, 2025, the
Table of Contents
Company’s available secured and committed borrowing capacity at the FHLB and Federal Reserve totaled $3.0 billion, compared to $2.6 billion at December 31, 2024.
In addition to core deposit and secured funding, the Company also accesses a variety of other short-term and long-term unsecured funding sources, which includes access to Cambr platform deposits, multiple brokered deposit platform options and lines of credit. Management does not rely on any one source of liquidity and manages availability in response to changing balance sheet needs, as well as within prudently defined concentration and policy limits. The Company executes periodic test trades to assess the level of access and operational processes associated with its secured and unsecured funding sources.
We anticipate that the sources of funds discussed above will provide adequate funding and liquidity for at least a 12-month period and the foreseeable future, and we may utilize any combination of these funding sources for long-term liquidity needs if deemed prudent.
Our primary uses of funds are loan fundings, investment security purchases, withdrawals of deposits, capital expenditures, operating expenses, and share repurchases. Additionally, $89.0 million was paid as consideration in connection with the Vista acquisition on January 7, 2026.
At present, financing activities primarily consist of changes in deposits and repurchase agreements, and advances from the FHLB, in addition to the payment of dividends and the repurchase of our common stock. Maturing time deposits represent a potential use of funds. As of December 31, 2025, $1.0 billion of time deposits were scheduled to mature within 12 months. Based on the current interest rate environment and market conditions, our consumer banking strategy is to focus on attracting and maintaining both lower cost transaction accounts and time deposits.
As previously discussed, during 2021, the Company entered into a subordinated note purchase agreement to issue and sell a fixed-to-floating note. The Company deployed the net proceeds from the sale of the note for general corporate purposes. Additionally, as part of the acquisition of BOJH on October 1, 2022, the Company assumed three subordinated note purchase agreements to issue and sell fixed-to-floating rate notes. The balance on all subordinated notes totaled $54.5 million at December 31, 2025 and 2024.
We enter into contractual obligations that require a future cash settlement. These may include operating lease obligations, purchase obligations, time deposits and issuance of long-term debt. For the year ended December 31, 2025, contractual obligations totaled $1.2 billion with $1.0 billion estimated to be paid within one year. Included within those contractual obligations were time deposits totaling $1.2 billion, with $1.0 billion of that estimated to be paid within one year.
For additional information regarding our operating, investing and financing cash flows, see our consolidated statements of cash flows in the accompanying consolidated financial statements.
Capital
Under the Basel III requirements, at December 31, 2025, the Company, NBH Bank and BOJHT met all capital adequacy requirements, and the Banks had regulatory capital ratios in excess of the levels established for well-capitalized institutions. For more information on regulatory capital, see note 13 in our consolidated financial statements.
Our shareholders’ equity is impacted by earnings, changes in unrealized gains and losses on securities, net of tax, stock-based compensation activity, share repurchases, shares issued in connection with acquisitions and the payment of dividends. On January 7, 2026, the Company issued 7.3 million new shares of common stock as part of the consideration related to the Vista acquisition.
The Board of Directors has authorized multiple programs to repurchase shares of the Company’s common stock from time to time either in the open market or in privately negotiated transactions in accordance with applicable regulations of the SEC. On January 27, 2026, the Company announced that its Board of Directors authorized a new stock repurchase program under which the Company may repurchase up to $100.0 million of its common stock from time to time in the open market or in privately negotiated transactions in accordance with applicable regulations of the SEC. The timing and amount of any share
Table of Contents
repurchases will be determined by the Company’s management based on market conditions and other factors. No time limit was set for completion of the program. This new program replaces in its entirety the stock repurchase program that was authorized by the Board of Directors on May 9, 2023.
During the year ended December 31, 2025, the Company repurchased 416,795 shares of common stock for $15.2 million at a weighted average price per share of $36.40.
On January 22, 2026, our Board of Directors declared a quarterly dividend of $0.32 per issued and outstanding share of common stock, payable on March 13, 2026 to shareholders of record at the close of business on February 27, 2026. All subsequent dividends are subject to review and approval by the Company’s Board of Directors in its discretion. The decision of whether to pay any future dividends and the amount of any such dividends will be based on, among other things, the Company’s financial position, results of operations, cash flows, capital requirements, the requirements of applicable law and any other factors that the Board of Directors may deem relevant.
Asset/Liability Management and Interest Rate Risk
The Board of Directors meets as often as necessary, but no less than quarterly, to review financial statements, significant accounting policy changes, liquidity, interest rate risk and asset and liability management. The Board also oversees the performance of our internal audit function as well as serves as an independent and objective body to monitor and assess our compliance with legal and regulatory requirements as well as internal control systems. Management and the Board of Directors are responsible for managing interest rate risk and employing risk management policies that monitor and limit this exposure. Interest rate risk is measured using net interest income simulations and market value of portfolio equity analyses. These analyses use various assumptions, including the nature and timing of interest rate changes, yield curve shape, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, and reinvestment/replacement of asset and liability cash flows.
Interest rate risk results from the following:
Repricing risk — timing differences in the repricing and maturity of interest-earning assets and interest-bearing liabilities;
Option risk — changes in the expected maturities of assets and liabilities, such as borrowers’ ability to prepay loans at any time and depositors’ ability to redeem certificates of deposit before maturity;
Yield curve risk — changes in the yield curve where interest rates increase or decrease in a nonparallel fashion; and
Basis risk — changes in spread relationships between different yield curves.
The Asset Liability Committee, a cross-functional committee comprised of executive management and senior leaders, meets monthly to review, among other things, the sensitivity of the Company’s assets and liabilities to interest rate changes, local and national market conditions and interest rates. The Asset Liability Committee also reviews the liquidity, capital, deposit mix, loan mix and investment positions of the Company. The Company’s principal objective regarding asset and liability management is to evaluate interest rate risk within the balance sheet and pursue a controlled assumption of interest rate risk while preserving adequate levels of liquidity and capital.
Instantaneous parallel rate shift scenarios are modeled and utilized to evaluate risk and establish exposure limits for acceptable changes in net interest margin. These scenarios, known as rate shocks, simulate an instantaneous change in interest rates and utilize various assumptions, including, but not limited to, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, reinvestment and replacement of asset and liability cash flows.
We also analyze the economic value of equity as a secondary measure of interest rate risk. This is a complementary measure to net interest income where the calculated value is the result of the market value of assets less the market value of liabilities. The economic value of equity is a longer term view of interest rate risk because it measures the present value of the future cash flows. The impact of changes in interest rates on this calculation is analyzed for the risk to our future earnings and is used in conjunction with the analyses on net interest income.
Table of Contents
Our interest rate risk model indicated that the Company was in an asset sensitive position in terms of interest rate sensitivity at December 31, 2025. The table below illustrates the impact of an immediate and sustained 200 and 100 basis point increase and a 100 and 200 basis point decrease in interest rates on net interest income based on the interest rate risk model at the respective dates:
Hypothetical
shift in interest
% change in projected net interest income
rates (in bps)
December 31, 2025
December 31, 2024
Many assumptions are used to calculate the impact of interest rate fluctuations. Actual results may be significantly different than our projections due to several factors, including the timing and frequency of rate changes, market conditions and the shape of the yield curve. The computations of interest rate risk shown above do not include actions that management may undertake to manage the risks in response to anticipated changes in interest rates and actual results may also differ due to any actions taken in response to the changing rates.
As part of the asset/liability management strategy to manage primary market risk exposures expected to be in effect in future reporting periods, management has executed interest rate derivatives primarily using floors and collars. For further discussion of the Company’s derivative contracts refer to note 20. The strategy with respect to liabilities has been to continue to emphasize transaction deposit growth, particularly non-interest or low interest bearing non-maturing deposit accounts while building long-term client relationships. Non-maturing deposit accounts totaled 86.1% of total deposits at December 31, 2025, compared to 87.6% at December 31, 2024.
Impact of Inflation and Changing Prices
An inflationary environment may impact our financial performance and may impact our clients, including but not limited to impacts on assets, earnings, capital levels and growth opportunities. While we plan to continue our disciplined approach to expense management, an inflationary environment may cause wage pressures and general increases in our cost of doing business, which may increase our non-interest expense.
Unlike most industrial companies, virtually all of our assets and liabilities are monetary in nature. As a result, changes in interest rates have a more significant impact on our performance than do changes in the general rate of inflation and changes in prices. Interest rate changes do not necessarily move in the same direction, nor have the same magnitude, as changes in the prices of goods and services.
Off-Balance Sheet Activities
In the normal course of business, we are a party to various contractual obligations, commitments and other off-balance sheet activities that contain credit, market, and operational risk that are not required to be reflected in our consolidated financial statements. The most significant of these are the loan commitments that we enter into to meet the financing needs of clients, including commitments to extend credit, commercial and consumer lines of credit and standby letters of credit. As of December 31, 2025 and 2024, we had loan commitments totaling $1.1 billion and $1.4 billion, respectively, and standby letters of credit totaling $8.0 million and $10.8 million, respectively. Unused commitments do not necessarily represent future credit exposure or cash requirements, as commitments often expire without being drawn upon.
