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YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.02pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-
Not scored
Net-tone change vs last year's 10-K.
MD&A
-0.02pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
No section text extracted for this filing. The 10-K may use a non-standard template that the parser doesn't recognize - the original doc is still linked in the Stats tab.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
loss+21
default+12
losses+8
attrition+6
delinquent+5
Positive rising
effective+5
benefit+4
improvement+2
greater+1
favorable+1
MD&A (Item 7)
58,988 words
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s Discussion and Analysis
This Management’s Discussion and Analysis highlights the material changes in the results of operations and changes in financial condition for each of the three years in the period ended December 31, 2025. It should be read in conjunction with the accompanying Consolidated Financial Statements, Notes to Consolidated Financial Statements, and other financial statistics appearing elsewhere in this Annual Report on Form 10-K. Results of operations for the periods included in this review are not necessarily indicative of results to be attained during any future period.
CAUTIONARY NOTICE ABOUT FORWARD-LOOKING STATEMENTS
From time to time the Company has made, and in the future will make, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “outlook,” “forecast,” “target,” “trend,” “plan,” “goal,” or other words of comparable meaning or future-tense or conditional verbs such as “may,” “will,” “should,” “would,” or “could.” Forward-looking statements convey the Company’s expectations, intentions, or forecasts about future events, circumstances, results, or aspirations , in each case as of the date such forward-looking statements are made.
This report, including any information incorporated by reference in this report, contains forward-looking statements. The Company also may make forward-looking statements in other documents that are filed or furnished with the SEC. In addition, the Company may make forward-looking statements orally or in writing to investors, analysts, members of the media, or others.
All forward-looking statements, by their nature, are subject to assumptions, risks, and uncertainties, which may change over time and many of which are beyond the Company’s control. You should not rely on any forward-looking statement as a prediction or guarantee about the future. Actual future objectives, strategies, plans, prospects, performance, conditions, or results may differ materially from those set forth in any forward-looking statement. While no list of assumptions, risks, or uncertainties could be complete, some of the factors that may cause actual results or other future events, circumstances, or aspirations to differ from those in forward-looking statements include:
local, regional, national, or international business, economic, or political conditions or events;
changes in laws or the regulatory environment, including as a result of financial-services legislation or regulation;
changes in monetary, fiscal, or trade laws or policies, including as a result of actions by central banks or supranational authorities;
the pace and magnitude of interest rate movements;
changes in accounting standards or policies;
shifts in investor sentiment or behavior in the securities, capital, or other financial markets, including changes in market liquidity or volatility or changes in interest or currency rates;
changes in spending, borrowing, or saving by businesses or households;
the Company’s ability to effectively manage capital or liquidity or to effectively attract or deploy deposits;
changes in any credit rating assigned to the Company or its affiliates;
adverse publicity or other reputational harm to the Company;
changes in the Company’s corporate strategies, the composition of its assets, or the way in which it funds those assets;
the Company’s ability to develop, maintain, or market products or services or to absorb unanticipated costs or liabilities associated with those products or services;
the Company’s ability to innovate to anticipate the needs of current or future customers, to successfully compete in its chosen business lines, to increase or hold market share in changing competitive environments, or to deal with pricing or other competitive pressures;
changes in the credit, liquidity, or other condition of the Company’s customers, counterparties, or competitors;
the Company’s ability to effectively deal with economic, business, or market slowdowns or disruptions;
judicial, regulatory, or administrative investigations, proceedings, disputes, or rulings that create uncertainty for, or are adverse to, the Company or the financial-services industry;
the Company’s ability to address changing or stricter regulatory or other governmental supervision or requirements;
the Company’s ability to maintain secure and functional financial, accounting, technology, data processing, or other operating systems or facilities, including its capacity to withstand cyber-attacks;
the adequacy of the Company’s corporate governance, risk-management framework, compliance programs, or internal controls, including its ability to control lapses or deficiencies in financial reporting or to effectively mitigate or manage operational risk;
the efficacy of the Company’s methods or models in assessing business strategies or opportunities or in valuing, measuring, monitoring, or managing positions or risk;
the Company’s ability to keep pace with changes in technology that affect the Company or its customers, counterparties, or competitors, including technology changes with respects to digital assets;
an increase of competitors that provide products or services offered by the Company, including competitors that may be subject to different regulatory standards or requirements;
mergers, acquisitions, or dispositions, including the Company’s ability to integrate acquisitions and divest assets;
the Company’s ability to manage the expenses associated with the merger with HTLF and the impact these expenses may have on the Company’s financial results;
the benefits from the merger with HTLF may not be fully realized or may take longer to realize than expected;
the Company’s ability to promptly and effectively integrate the merger of HTLF;
the adequacy of the Company’s succession planning for key executives or other personnel;
the Company’s ability to grow revenue, control expenses, or attract and retain qualified employees;
natural disasters, war, terrorist activities and geopolitical tensions, including instability in the Middle East, Russia's military action in Ukraine and developments in Latin America, pandemics, and their effects on economic and business environment in which the Company operates;
macroeconomic and adverse developments and uncertainties related to the collateral effects of the collapse of, and challenges for, domestic and international banks, including the impacts to the U.S. and global economies and reputational harm to the U.S. banking system; or
other assumptions, risks, or uncertainties described in the Risk Factors (Item 1A), Management’s Discussion and Analysis of Financial Condition and Results of Operations (Item 7), or the Notes to the Consolidated Financial Statements (Item 8) in this Annual Report on Form 10-K or described in any of the Company’s annual, quarterly or current reports.
Any forward-looking statement made by the Company or on its behalf speaks only as of the date that it was made. The Company does not undertake to update any forward-looking statement to reflect the impact of events, circumstances, or results that arise after the date that the statement was made, except as required by applicable securities laws. You, however, should consult further disclosures (including disclosures of a forward-looking nature) that the Company may make in any subsequent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, or Current Report on Form 8-K.
Results of Operations
Overview
On January 31, 2025, UMBF completed its previously announced acquisition of Heartland Financial, USA, Inc. (HTLF). The acquisition added assets with a fair value of approximately $16.1 billion, $9.7 billion of loans, net of the allowance for credit losses, and $14.3 billion of deposits. The combined company retains its #1 deposit market share in Missouri and now ranks in the top 10 in Colorado, New Mexico, Kansas, and Arizona. The impacts of the acquisition are significant drivers in the results for 2025.
The Company focuses on the following four core financial objectives. Management believes these objectives will guide its efforts to achieve its vision, to deliver the Unparalleled Customer Experience, all while seeking to improve net income and strengthen the balance sheet while undertaking prudent risk management.
The first financial objective is to continuously improve operating efficiencies. The Company has focused on identifying efficiencies that simplify its organizational and reporting structures, streamline back-office functions and take advantage of synergies and newer technologies among various platforms and distribution networks. During the fourth quarter, the Company successfully completed the conversion of the technology and branding of HTLF customers. The Company has identified and expects to continue identifying ongoing efficiencies through the normal course of business that, when combined with increased revenue, will contribute to improved operating leverage. For 2025, total revenue increased 62.8%, and noninterest expense increased 58.1%, as compared to the previous year. Included in noninterest expense for 2025 is $142.0 million in acquisition-related expense. Revenue is also impacted by accretion and amortization of the fair value adjustments discussed in Note 20, “Acquisition” below. The Company continues to invest in technological advances that it believes will help management drive operating leverage in the future through improved data analysis and automation. The Company also continues to evaluate core systems and will invest in enhancements that it believes will yield operating efficiencies.
The second financial objective is to increase net interest income through profitable loan and deposit growth and the optimization of the balance sheet. For 2025, net interest income increased $861.3 million, or 86.1%, as compared to the previous year. The Company has shown increased net interest income primarily driven by rate and mix changes related to the HTLF acquisition. Average earning assets increased $20.1 billion, or 49.2%, compared to 2024. Average loan balances increased $11.9 billion, coupled with an increase in average interest-bearing due from banks of $2.6 billion from the prior year. The funding for these assets was driven primarily by a 62.5% increase in average interest-bearing deposits and a 40.0% increase in noninterest-bearing deposits, partially offset by a 59.8% decrease in average borrowed funds. Net interest margin, on a fully tax-equivalent (FTE) basis, increased 59 basis points compared to the same period in 2024 in large part due to repricing and mix changes of loan balances and interest-bearing liabilities. Net interest spread increased by 84 basis points during the same period. The Company expects to see continued volatility in the economic markets resulting from governmental responses to inflation and recessionary signs in the economy, as well as uncertainty about the impacts of tariffs and related trade disputes. These changing conditions could have impacts on the balance sheet and income statement of the Company for 2026.
The third financial objective is to grow the Company’s revenue from noninterest sources. The Company seeks to grow noninterest revenues throughout all economic and interest rate cycles, while positioning itself to benefit in periods of economic growth. Noninterest income increased $161.9 million, or 25.8%, to $790.1 million for the year ended December 31, 2025, compared to the same period in 2024. The change is driven by increased HTLF-related fee income from trust income, deposit service charges, and bankcard fees. These changes are discussed in greater detail below under Noninterest income. For the year ended December 31, 2025, noninterest income represented 29.8% of total revenues, as compared to 38.6% for 2024. The recent economic changes have impacted fee income, especially those with assets tied to market values and interest rates.
The fourth financial objective is effective capital management. The Company places a significant emphasis on maintaining a strong capital position, which management believes promotes investor confidence, provides access to funding sources under favorable terms, and enhances the Company’s ability to capitalize on business growth and acquisition opportunities. The Company continues to maximize shareholder value through a mix of reinvesting in organic growth, evaluating acquisition opportunities that complement the Company’s strategies, increasing dividends over time, and appropriately utilizing a share repurchase program. At December 31, 2025, the Company had a total risk-based capital ratio of 13.36% and $7.7 billion in total shareholders’ equity, an increase of $4.2 billion, or 121.9%, compared to total shareholders’ equity at December 31, 2024. The Company did not repurchase
shares of common stock during 2025 except for shares acquired pursuant to the Company's share-based incentive programs. In 2025, the Company declared $123.4 million in common dividends, which represents a 60.0% increase compared to dividends declared during 2024. In 2025, the Company declared $17.8 million in preferred dividends. The second quarter of 2025 includes the issuance of 12.0 million depositary shares, each representing a 1/400 th interest in a share of the Company’s 7.75% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series B (the Series B Preferred Stock). During the third quarter of 2025, the Company completed the redemption of all of its outstanding 7.00% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A at the redemption price of $10,000 per share.
Earnings Summary
The Company recorded net income available to common shareholders of $684.6 million for the year ended December 31, 2025. This represents a 55.2% increase over 2024. Net income available to common shareholders for 2024 was $441.2 million, or an increase of 26.1% compared to 2023. Basic earnings per common share for the year ended December 31, 2025, were $9.35 per share compared to $9.05 per common share in 2024, an increase of 3.3%. Basic earnings per common share were $7.22 per share in 2023, or an increase of 25.3% from 2023 to 2024. Fully diluted earnings per common share increased 3.3% from 2024 to 2025 and increased 25.2% from 2023 to 2024. Return on average assets and return on average common shareholder’s equity for the year ended December 31, 2025 were 1.03% and 10.24%, respectively, compared to 1.02% and 13.24%, respectively, for the year ended December 31, 2024. Return on average assets and return on average common shareholder’s equity for the year ended December 31, 2023 were 0.88% and 12.23%, respectively.
The Company’s net interest income increased to $1.9 billion in 2025 compared to $1.0 billion in 2024 and $920.1 million in 2023. In total, net interest income increased $861.3 million, as compared to 2024, primarily driven by the HTLF acquisition, with a favorable volume variance of $611.3 million, a $250.0 million rate variance, and purchase accounting accretion income. See Table 2. The favorable volume variance on earning assets was predominantly driven by an increase of $20.1 billion, or 49.2%, in average earning assets. In 2025, average loan balances increased $11.9 billion, coupled with an increase in average interest-bearing due from banks of $2.6 billion as compared to 2024. Net interest margin, on an FTE basis, increased to 3.10% for 2025, compared to 2.51% for the same period in 2024, driven by repricing and mix changes from the HTLF acquisition, changes in short-term interest rates, and purchase accounting accretion income. Net interest spread increased by 84 basis points during the same period. The Company has seen a decrease in the benefit from interest-free funds as compared to 2024 driven by the changes in short-term interest rates. The impact of this benefit decreased 25 basis points compared to 2024 and is illustrated on Table 3. The magnitude and duration of this impact will be largely dependent upon the FRB’s policy decisions and market movements. See Table 21 in Item 7A for an illustration of the impact of an interest rate increase or decrease on net interest income as of December 31, 2025.
The provision for credit losses totaled $154.5 million for the year ended December 31, 2025, which is an increase of $93.5 million, or 153.1%, compared to the same period in 2024. Provision expense in 2025 included $62.0 million to establish an allowance for credit losses on the acquired loans designated as non-PCD loans at the close of the transaction. See Note 20, “Acquisition” below. The remainder of the increase in provision was driven by loan growth, portfolio credit metric changes, and changes in macro-economic metrics in the current period as compared to the prior periods. See further discussion in “Provision and Allowance for Credit Losses” in this report.
The Company had an increase of $161.9 million, or 25.8%, in noninterest income in 2025, as compared to 2024, and an increase of $86.3 million, or 15.9%, in 2024 compared to 2023. The increase in 2025 is primarily driven by increased trust and securities processing of $52.8 million, increased service charges on deposits of $28.7 million, increased bankcard fees of $26.1 million, and increased investment securities gains, net of $20.2 million. The increase in 2024 is primarily driven by increased trust and securities processing of $33.4 million, increased other income of $14.1 million, increased investment securities gains, net of $13.9 million, and increased bankcard fees of $13.1 million. The change in noninterest income in 2025 from 2024, and 2024 from 2023 is illustrated in Table 6.
Noninterest expense increased in 2025 by $596.1 million, or 58.1%, compared to 2024 and increased by $27.5 million, or 2.8%, in 2024 compared to 2023. The increase in 2025 is primarily driven by increases in salaries and employee benefit expense of $290.0 million, increased amortization of other intangible asset expense of $85.8 million, increased processing fees of $54.9 million, increased other expense of $58.6 million, and increased legal and consulting fees of $46.1 million. The increase in 2024 is primarily driven by increases in salaries and employee benefit expense of $40.5 million, increased legal and consulting fees of $16.2 million, increased processing fees of
$14.8 million, and increased bankcard expense of $11.3 million, partially offset by decreased regulatory fees of $45.1 million related to the FDIC special assessment. The increase in noninterest expense in 2025 from 2024, and 2024 from 2023 is illustrated in Table 7 and below under Noninterest Expense.
Net Interest Income
Net interest income is a significant source of the Company’s earnings and represents the amount by which interest income on earning assets exceeds the interest expense paid on liabilities. The volume of interest earning-assets and the related funding sources, the overall mix of these assets and liabilities, and the interest rates paid on each affect net interest income. Table 2 summarizes the change in net interest income resulting from changes in volume and rates for 2025, 2024 and 2023.
Net interest margin, presented in Table 1, is calculated as net interest income on a fully tax-equivalent basis as a percentage of average earning assets. Net interest income is presented on a tax-equivalent basis to adjust for the tax-exempt status of earnings from certain loans and investments, which are primarily obligations of state and local governments. A critical component of net interest income and related net interest margin is the percentage of earning assets funded by interest-free sources. Table 3 analyzes net interest margin for the three years ended December 31, 2025, 2024 and 2023. Net interest income, average balance sheet amounts and the corresponding yields earned and rates paid for the years 2023 through 2025 are presented in Table 1 below.
The following table presents, for the periods indicated, the average earning assets and resulting yields, as well as the average interest-bearing liabilities and resulting yields, expressed in both dollars and rates.
Table 1
THREE YEAR AVERAGE BALANCE SHEETS/YIELDS AND RATES (tax-equivalent basis)
(in millions)
Average Balance
Interest Income/ Expense (1)
Rate Earned/ Paid (1)
Average Balance
Interest Income/ Expense (1)
Rate Earned/ Paid (1)
ASSETS
Loans and loans held for sale (FTE) (2) (3)
Securities:
Taxable
Tax-exempt (FTE)
Total securities
Federal funds sold and resell agreements
Interest-bearing due from banks
Other earning assets (FTE)
Total earning assets (FTE)
Allowance for credit losses
Cash and due from banks
Other assets
Total assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing demand and savings deposits
Time deposits under $250,000
Time deposits of $250,000 or more
Total interest-bearing deposits
Short-term debt
Long-term debt
Federal funds purchased
Securities sold under agreements to repurchase
Total interest-bearing liabilities
Noninterest-bearing demand deposits
Other
Total
Total shareholders' equity
Total liabilities and shareholders' equity
Net interest income (FTE)
Net interest spread (FTE)
Net interest margin (FTE)
Interest income and yields are stated on an FTE basis, using a federal income tax rate of 21% for 2025, 2024, and 2023. The tax-equivalent interest income and yields give effect to tax-exempt interest income net of the disallowance of interest expense, for federal income tax purposes related to certain tax-free assets. Rates earned/paid may not compute to the rates shown due to presentation in millions. The tax-equivalent interest income totaled $32.9 million, $25.9 million, and $26.4 million in 2025, 2024, and 2023, respectively.
Loan fees are included in interest income. Such fees totaled $24.5 million, $21.4 million, and $17.7 million in 2025, 2024, and 2023, respectively.
Loans on nonaccrual are included in the computation of average balances. Interest income on these loans is also included in loan income.
THREE YEAR AVERAGE BALANCE SHEETS/YIELDS AND RATES (tax-equivalent basis)
(in millions)
Average Balance
Interest Income/ Expense (1)
Rate Earned/ Paid (1)
ASSETS
Loans and loans held for sale (FTE) (2) (3)
Securities:
Taxable
Tax-exempt (FTE)
Total securities
Federal funds sold and resell agreements
Interest-bearing due from banks
Other earning assets (FTE)
Total earning assets (FTE)
Allowance for credit losses
Cash and due from banks
Other assets
Total assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing demand and savings deposits
Time deposits under $250,000
Time deposits of $250,000 or more
Total interest-bearing deposits
Short-term debt
Long-term debt
Federal funds purchased
Securities sold under agreements to repurchase
Total interest-bearing liabilities
Noninterest-bearing demand deposits
Other
Total
Total shareholders' equity
Total liabilities and shareholders' equity
Net interest income (FTE)
Net interest spread (FTE)
Net interest margin (FTE)
Table 2
RATE-VOLUME ANALYSIS (in thousands)
This analysis attributes changes in net interest income either to changes in average balances or to changes in average interest rates for earning assets and interest-bearing liabilities. The change in net interest income that is due to both volume and interest rate has been allocated to volume and interest rate in proportion to the relationship of the absolute dollar amount of the change in each. All interest rates are presented on a tax-equivalent basis and give effect to tax-exempt interest income net of the disallowance of interest expense for federal income tax purposes, related to certain tax-free assets. The loan average balances and rates include nonaccrual loans.
Average Volume
Average Rate
Increase (Decrease)
Volume
Rate
Total
Change in interest earned on:
Loans
Securities:
Taxable
Tax-exempt
Federal funds and resell agreements
Interest-bearing due from banks
Trading securities
Total
Change in interest incurred on:
Interest-bearing deposits
Federal funds purchased
Securities sold under agreements to repurchase
Borrowed Funds
Total
Net interest income
Average Volume
Average Rate
Increase (Decrease)
Volume
Rate
Total
Change in interest earned on:
Loans
Securities:
Taxable
Tax-exempt
Federal funds and resell agreements
Interest-bearing due from banks
Trading securities
Total
Change in interest incurred on:
Interest-bearing deposits
Federal funds purchased
Securities sold under agreements to repurchase
Borrowed Funds
Total
Net interest income
Table 3
ANALYSIS OF NET INTEREST MARGIN (in thousands)
Average earning assets
Interest-bearing liabilities
Interest-free funds
Free funds ratio (interest free funds to average earning assets)
Tax-equivalent yield on earning assets
Cost of interest-bearing liabilities
Net interest spread
Benefit of interest-free funds
Net interest margin
The Company experienced an increase in net interest income of $861.3 million, or 86.1%, for the year ended December 31, 2025, compared to 2024. This follows an increase of $80.8 million, or 8.8%, for the year ended December 31, 2024, compared to 2023. Average earning assets for the year ended December 31, 2025 increased by $20.1 billion, or 49.2%, compared to the same period in 2024. Net interest margin, on a tax-equivalent basis, increased to 3.10% for 2025 compared to 2.51% in 2024.
The Company funds a significant portion of its balance sheet with noninterest-bearing demand deposits. Noninterest-bearing demand deposits represented 28.3%, 31.6% and 33.9% of total outstanding deposits as of December 31, 2025, 2024 and 2023, respectively. The decrease in 2025 is driven by mix shifts in deposits related to the HTLF acquisition. As illustrated in Table 3, the impact from these interest-free funds was 92 basis points in 2025, as compared to 117 basis points in 2024 and 115 basis points in 2023.
The Company experienced an increase in net interest income during 2025 due to a volume variance of $611.3 million and a rate variance of $250.0 million. The average rate on earning assets during 2025 increased by 17 basis points, while the average rate on interest-bearing liabilities decreased by 67 basis points, resulting in a 84 basis-point increase in spread. The volume of loans increased from an average of $24.2 billion in 2024 to an average of $36.1 billion in 2025, driven by the acquisition of HTLF and organic loan growth. The volume of interest-bearing liabilities increased from $29.0 billion in 2024 to $44.4 billion in 2025. The Company expects to see continued volatility in the economic markets and governmental responses to inflation, geopolitical tensions, and supply chain constraints. These changing economic conditions and governmental responses could have impacts on the balance sheet and income statement of the Company in 2025. Loan-related earning assets tend to generate a higher spread than those earned in the Company’s investment portfolio. By design, the Company’s investment portfolio is moderate in duration and liquid in its composition of assets.
During 2026, approximately $2.2 billion of available-for-sale securities are expected to have principal repayments. This includes approximately $669 million that will have principal repayments during the first quarter of 2026. The available-for-sale investment portfolio had an average life of 74.8 months, 56.0 months, and 52.6 months as of December 31, 2025, 2024, and 2023, respectively.
Provision and Allowance for Credit Losses
The ACL represents management’s judgment of total expected losses included in the Company’s loan portfolio as of the balance sheet date. The Company’s process for recording the ACL is based on the evaluation of the Company’s lifetime historical loss experience, management’s understanding of the credit quality inherent in the loan portfolio, and the impact of the current economic environment, coupled with reasonable and supportable economic forecasts.
A mathematical calculation of an estimate is made to assist in determining the adequacy and reasonableness of management’s recorded ACL. To develop the estimate, the Company follows the guidelines in Accounting Standards Codification (ASC) Topic 326, Financial Instruments – Credit Losses (ASC 326). The estimate reserves for assets held at amortized cost and any related credit deterioration in the Company’s available-for-sale debt security portfolio. Assets held at amortized cost include the Company’s loan book and held-to-maturity security portfolio.
The process involves the consideration of quantitative and qualitative factors relevant to the specific segmentation of loans. These factors have been established over decades of financial institution experience and include economic observation and loan loss characteristics. This process is designed to produce a lifetime estimate of the losses, at a reporting date, that includes evaluation of historical loss experience, current economic conditions, reasonable and supportable forecasts, and the qualitative framework outlined by the Office of the Comptroller of the Currency in the published 2020 Interagency Policy Statement. This process allows management to take a holistic view of the recorded ACL reserve and ensure that all significant and pertinent information is considered.
The Company considers a variety of factors to ensure the safety and soundness of its estimate including a strong internal control framework, extensive methodology documentation, credit underwriting standards which encompass the Company’s desired risk profile, model validation, and ratio analysis. If the Company’s total ACL estimate, as determined in accordance with the approved ACL methodology, is either outside a reasonable range based on review of economic indicators or by comparison of historical ratio analysis, the ACL estimate is an outlier and management will investigate the underlying reason(s). Based on that investigation, issues or factors that previously had not been considered may be identified in the estimation process, which may warrant adjustments to estimated credit losses.
The ending result of this process is a recorded consolidated ACL that represents management’s best estimate of the total expected losses included in the loan portfolio, held-to-maturity securities, and credit deterioration in available-for-sale securities.
Table 4 presents the components of the allowance by loan portfolio segment. The Company manages the ACL against the risk in the entire loan portfolio and therefore, the allocation of the ACL to a particular loan segment may change in the future. Management of the Company believes the present ACL is adequate considering the Company’s loss experience, delinquency trends and current economic conditions. Future economic conditions and borrowers’ ability to meet their obligations, however, are uncertainties which could affect the Company’s ACL and/or need to change its current level of provision. For more information on loan portfolio segments and ACL methodology refer to Note 3, “Loans and Allowance for Credit Losses,” in the Notes to the Consolidated Financial Statements.
Table 4
ALLOCATION OF ALLOWANCE FOR CREDIT LOSSES ON LOANS (in thousands)
This table presents an allocation of the allowance for credit losses on loans and percent of loans to total loans by loan portfolio segment, which represents the total expected losses derived by both quantitative and qualitative methods. The amounts presented are not necessarily indicative of actual future charge-offs in any particular category and are subject to change.
At December 31:
Allowance for credit losses
Percent of loans to total loans
Allowance for credit losses
Percent of loans to total loans
Commercial and industrial
Specialty lending
Commercial real estate
Consumer real estate
Consumer
Credit cards
Leases and other
Total allowance for credit losses on loans
Table 5 presents a summary of the Company’s ACL for the years ended December 31, 2025 and 2024. Also, please see “Quantitative and Qualitative Disclosures About Market Risk – Credit Risk Management” in this report for information relating to nonaccrual, past due, restructured loans, and other credit risk matters. For more information on loan portfolio segments and ACL methodology refer to Note 3, “Loans and Allowance for Credit Losses,” in the Notes to the Consolidated Financial Statements.
As illustrated in Table 5 below, the ACL increased as a percentage of total loans to 1.08% as of December 31, 2025, compared to 1.01% as of December 31, 2024. The provision for credit losses, including provision for off-balance sheet credit exposures, totaled $154.5 million for the year ended December 31, 2025, which is an increase of $93.5 million, or 153.1%, compared to the same period in 2024. As noted above, $62.0 million was recorded to establish an allowance for credit losses on the acquired loans designated as non-PCD loans at the close of the HTLF acquisition. See Note 20, “Acquisition” below. The provision for credit losses, including provision for off-balance sheet credit exposures, totaled $61.1 million for the year ended December 31, 2024. This increase is the result of the impacts of loan growth, portfolio metric changes, and changes in macro-economic metrics in the current period as compared to the prior period.
Table 5
ANALYSIS OF ALLOWANCE FOR CREDIT LOSSES (in thousands)
Allowance – January 1
PCD allowance for credit loss at acquisition
Provision for credit losses
Charge-offs:
Commercial
Specialty lending
Commercial real estate
Consumer real estate
Consumer
Credit cards
Leases and other
Total charge-offs
Recoveries:
Commercial and industrial
Specialty lending
Commercial real estate
Consumer real estate
Consumer
Credit cards
Leases and other
Total recoveries
Net charge-offs
Allowance for credit losses – end of period
Allowance for credit losses on loans
Allowance for credit losses on held-to-maturity securities
Loans at end of year, net of unearned interest
Held-to-maturity securities at end of period
Total assets at amortized cost
Average loans, net of unearned interest
Allowance for credit losses on loans to loans at end of period
Allowance for credit losses – end of period to total assets at amortized cost
Allowance as a multiple of net charge-offs
Net charge-offs to average loans
Noninterest Income
A key objective of the Company is the growth of noninterest income to provide a diverse source of revenue not directly tied to interest rates. Fee-based services are typically non-credit related and are not generally affected by fluctuations in interest rates. Noninterest income increased in 2025 by $161.9 million, or 25.8%, compared to 2024 and increased in 2024 by $86.3 million, or 15.9%, compared to 2023. The increase in 2025 is primarily driven by increased trust and securities processing, increased service charges on deposits, increased bankcard fees, and
increased investment securities gains, net. The increase in 2024 is primarily driven by increased trust and securities processing income, other miscellaneous income, investment securities gains, net, and bankcard income. Changes in Noninterest income are presented in Table 6 below.
The Company’s fee-based services offer multiple products and services, which management believes will more closely align with customer product demands. The Company is currently emphasizing fee-based services including trust and securities processing, bankcard, securities trading and brokerage and cash and treasury management. Management believes that it can offer these products and services both efficiently and profitably, as most have common platforms and support structures.
Table 6
SUMMARY OF NONINTEREST INCOME (in thousands)
Year Ended December 31,
Dollar Change
Percent Change
Trust and securities processing
Trading and investment banking
Service charges on deposit accounts
Insurance fees and commissions
Brokerage fees
Bankcard fees
Investment securities gains (losses), net
Other
Total noninterest income
Noninterest income and the year-over-year changes in noninterest income are summarized in Table 6 above. The dollar change and percent change columns highlight the respective net increase or decrease in the categories of noninterest income in 2025 compared to 2024, and in 2024 compared to 2023.
Trust and securities processing income consists of fees earned on personal and corporate trust accounts, custody of securities services, trust investments and wealth management services, and mutual fund assets servicing. This income category increased by $52.8 million, or 18.2% in 2025, compared to 2024, and increased by $33.4 million, or 13.0%, in 2024, compared to 2023. During 2025, wealth management services increased $22.3 million primarily driven by the acquisition of HTLF, fund services income increased $19.5 million, and corporate trust income increased $11.0 million. During 2024, fund services income increased $20.5 million, corporate trust income increased $7.7 million and wealth management services increased $5.1 million. The recent volatile markets have impacted the income in this category. Since trust and securities processing fees are primarily asset-based, which are highly correlated to the change in market value of the assets, the related income will be affected by changes in the securities markets. Management continues to emphasize sales of services to both new and existing clients as well as increasing and improving the distribution channels.
Trading and investment banking income increased $1.1 million, or 4.5%, in 2025 compared to 2024 and increased $4.6 million, or 23.4%, in 2024 compared to 2023. The increase in 2025 compared to 2024 and the increase in 2024 compared to 2023 was driven by increased bond trading income.
Service charges on deposits income increased $28.7 million, or 34.0%, in 2025 compared to 2024 and decreased $0.4 million, or 0.5%, in 2024 compared to 2023. This increase was largely driven by the HTLF acquisition and increased service charge income from acquired deposit accounts. The decrease in 2024 was driven by decreased healthcare services income, offset by increased commercial service charge income.
Brokerage fees increased $18.0 million, or 29.3%, in 2025 compared to 2024 and increased $7.4 million, or 13.8%, in 2024 compared to 2023. The increase in both years was driven by increased 12b-1 and money market fees driven by the increase in short-term interest rates.
Bankcard fees increased $26.1 million, or 29.8%, in 2025 compared to 2024, and increased $13.1 million, or 17.5%, in 2024 compared to 2023. The increase in 2025 was driven by higher interchange income, partially offset
by higher rebate and reward costs primarily related to purchase volume from the HTLF acquisition. The increase in 2024 was primarily driven by increased interchange income.
Investment securities gains, net increased $20.2 million in 2025 compared to 2024 and increased $13.9 million in 2024 compared to 2023. The increase in 2025 was primarily driven by the net gains from the Company's investment in Voyager Technologies, Inc., which completed its initial public offering in June 2025. The increase in 2024 was primarily driven by a gain on the sale of one of the Company's securities without readily determinable fair value in 2024, coupled with the impairment of one available-for-sale debt security in 2023.
Other noninterest income increased $15.3 million, or 22.6%, in 2025 compared to 2024 and increased $14.1 million, or 26.4%, in 2024 compared to 2023. The increase in 2025 is driven by increases of $5.3 million in bank-owned life insurance income, $4.1 million in derivative income, a $2.5 million legal settlement recorded in the third quarter of 2025, and $2.4 million in increased syndication income. The increase in 2024 was primarily driven by the gain on the sale of UMB Distribution Services, LLC, a legal settlement, and gains on the sale of other assets during 2024, coupled with increased bank-owned life insurance income.
Noninterest Expense
Noninterest expense increased in 2025 by $596.1 million, or 58.1%, compared to 2024 and increased in 2024 by $27.5 million, or 2.8%, compared to 2023. From 2024 to 2025 the increase was driven primarily by increased salaries and employee benefits expense, amortization of other intangible assets, processing fees, legal and consulting expense, and other expense. From 2023 to 2024 the increase was driven primarily by increased salaries and employee benefits expense, legal and consulting expense, and processing fees, partially offset by a decrease in regulatory fees. Table 7 below summarizes the components of noninterest expense and the respective year-over-year changes for each category.
Table 7
SUMMARY OF NONINTEREST EXPENSE (in thousands)
Year Ended December 31,
Dollar Change
Percent Change
Salaries and employee benefits
Occupancy, net
Equipment
Supplies and services
Marketing and business development
Processing fees
Legal and consulting
Bankcard
Amortization of other intangible assets
Regulatory fees
Other
Total noninterest expense
Salaries and employee benefits expense increased $290.0 million, or 48.8%, in 2025 compared to 2024 and $40.5 million, or 7.3%, in 2024 compared to 2023. In 2025, bonus and commission expense increased $108.3 million, or 78.9%, salaries and wage expense increased $143.7 million, or 40.7% and employee benefits expense increased $38.0 million, or 36.8%. The 2025 variances in salaries and employee benefits are primarily driven by increased severance, retention bonuses, and change in control payments made to HTLF associates, as well as higher bonus expense due to higher company performance. In 2024, bonus and commission expense increased $22.4 million, or 19.5%, salaries and wage expense increased $14.0 million, or 4.1% and employee benefits expense increased $4.1 million, or 4.1%.
Occupancy expense increased $26.2 million, or 55.1%, in 2025 compared to 2024, and decreased $0.1 million, or 2.0%, from 2023 to 2024. The increase in 2025 was driven by higher volume of activity from the HTLF acquisition.
Processing fees expense increased $54.9 million, or 46.6%, in 2025 compared to 2024, and increased $14.8 million, or 14.4%, in 2024 compared to 2023. The increase in 2025 was primarily due to increased software subscription costs driven by legacy-HTLF software subscriptions. The increase in 2024 was primarily driven by higher software subscription costs due to the transition to cloud computing solutions and ongoing investments in digital channel and integrated platform solutions to support business growth.
Legal and consulting expense increased $46.1 million, or 99.8%, in 2025 compared to 2024 and increased $16.2 million, or 54.0%, in 2024 compared to 2023. The increase in 2025 was primarily due to non-recurring transaction costs associated with the acquisition. The increase in 2024 was driven by expenses incurred related to the announced acquisition of HTLF.
Amortization of other intangible assets expense increased $85.8 million, or 1,113.8%, in 2025 compared to 2024 and decreased $0.1 million, or 10.3%, in 2024 compared to 2023. The increase in 2025 is primarily due to amortization of the core deposit intangible, customer list and purchased credit card relationship intangibles recognized from the HTLF acquisition.
Regulatory fees decreased $3.2 million, or 9.9%, in 2025 compared to 2024 and decreased $45.1 million, or 58.6%, in 2024 compared to 2023. The decrease in 2025 and the decrease in 2024 was driven by the FDIC special assessment of $52.8 million recorded in 2023.
Other noninterest expense increased $58.6 million, or 191.7%, in 2025 compared to 2024 and decreased $3.7 million, or 10.8%, in 2024 compared to 2023. The increase in 2025 was primarily due to fees for termination of legacy HTLF contracts, coupled with higher operational losses, increased contribution expense, and increased expenses related to the HTLF acquisition for property taxes and insurance. The decreases in 2024 was driven by lower charitable contribution expenses and operational losses.
Income Taxes
Income tax expense totaled $172.6 million, $100.0 million, and $71.6 million in 2025, 2024, and 2023 respectively. These amounts equate to effective tax rates of 19.7%, 18.5%, and 17.0% for 2025, 2024 and 2023, respectively. The increase in the effective tax rate from 2024 to 2025 is primarily attributable to a smaller proportion of pre-tax income being earned from tax-exempt municipal securities, lower federal tax credits, net of related amortization, and higher state and local taxes. The increase was partially offset by more favorable discrete tax items in 2025, including a benefit from remeasuring deferred tax assets after the HTLF acquisition increased the state marginal tax rate. The increase in the effective tax rate from 2023 to 2024 is primarily attributable to a smaller proportion of pre-tax income being earned from tax-exempt municipal securities and higher non-deductible acquisition costs in 2024. These increases were partially offset by an increase in federal tax credits, net of related amortization.
On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law in the U.S., which contains a broad range of tax reform provisions affecting businesses, including restoring 100% bonus depreciation, removing the requirement to capitalize and amortize domestic research and development expenditures, and a 25% exclusion of interest income on loans secured by rural or agricultural real property. The legislation has multiple effective dates, with certain provisions effective in 2025 and others being phased in through 2027. The effective provisions of the OBBBA were reflected in the Company's financial results for the year ended December 31, 2025, and did not have a material impact on its Consolidated Financial Statements.
For further information on income taxes refer to Note 16, “Income Taxes,” in the Notes to the Consolidated Financial Statements.
Business Segments
The Company has strategically aligned its operations into the following three reportable segments: Commercial Banking, Institutional Banking, and Personal Banking (collectively, the Business Segments). Senior executive officers regularly evaluate Business Segment financial results produced by the Company’s internal reporting system in deciding how to allocate resources and assess performance for individual Business Segments. The management accounting system assigns balance sheet and income statement items to each Business Segment using methodologies that are refined on an ongoing basis. For comparability purposes, amounts in all periods are
based on methodologies in effect at December 31, 2025. Previously reported results have been reclassified in this Form 10-K to conform to the Company’s current organizational structure.
Table 8
COMMERCIAL BANKING OPERATING RESULTS (in thousands)
Year Ended
December 31,
Dollar
Change
Percent
Change
Net interest income
Provision for credit losses
Noninterest income
Noninterest expense
Income before taxes
Income tax expense
Net income
For the year ended December 31, 2025, Commercial Banking net income increased $184.5 million, or 59.1%, to $497.0 million compared to the same period in 2024. Net interest income increased $622.9 million, or 93.2%, for the year ended December 31, 2025, compared to the same period last year, primarily driven by the acquisition of HTLF, as well as continued organic loan growth and earning asset mix changes. Provision for credit losses increased $74.8 million, or 144.4%, as compared to 2024, driven by the acquisition of HTLF as well as portfolio metric changes, and changes in macro-economic metrics in 2025 as compared to 2024. Noninterest income increased $45.1 million, or 33.5%, over the same period in 2024. This increase was primarily due to increases of $19.6 million in deposit service charges, $15.7 million in other income driven by increased derivative income, recoveries of loans previously charged off by HTLF, a legal settlement during 2025, and increased syndication income, and $15.6 million in bankcard fees. These increases were partially offset by a decrease of $11.0 million in investment security gains. Noninterest expense increased $358.0 million, or 97.5%, as compared to the same period in 2024. This increase was driven by an increase of $219.3 million in technology, service, and overhead expenses, and an increase of $105.6 million in salaries and employee benefit expense, both driven by the acquisition. Additionally, there were increases of $10.0 million in marketing and business development, $7.1 million in regulatory fees, and $5.4 million in processing fees.
Table 9
INSTITUTIONAL BANKING OPERATING RESULTS (in thousands)
Year Ended
December 31,
Dollar
Change
Percent
Change
Net interest income
Provision for credit losses
Noninterest income
Noninterest expense
Income before taxes
Income tax expense
Net income
For the year ended December 31, 2025, Institutional Banking net income increased $56.6 million, or 35.9%, to $214.3 million compared to the same period last year. Net interest income increased $61.1 million, or 31.0%, compared to the same period last year, due to an increase in funds transfer pricing resulting from higher deposit balances. Provision for credit losses increased $0.7 million as compared to 2024, driven by loan growth, portfolio metric changes, and changes in the macro-economic metrics in 2025 as compared to 2024. Noninterest income increased $50.5 million, or 12.8%, primarily due to increases of $30.4 million in trust and securities processing income driven by higher fund services and corporate trust revenue, an increase of $15.2 million in brokerage income, and $5.1 million in deposit service charges. These increases are partially offset by a decrease of $3.4 million in other income driven by the gain on the sale of UMB Distribution Services, LLC in 2024. Noninterest
expense increased $36.7 million, or 9.2% as compared to 2024, primarily driven by increases of $26.5 million in salaries and employee benefits expense, $8.8 million in processing fees, and $2.9 million in bankcard expense.
Table 10
PERSONAL BANKING OPERATING RESULTS (in thousands)
Year Ended
December 31,
Dollar
Change
Percent
Change
Net interest income
Provision for credit losses
Noninterest income
Noninterest expense
Loss before taxes
Income tax benefit
Net loss
For the year ended December 31, 2025, Personal Banking net lossimproved $20.1 million, or 69.4%, to a net loss of $8.8 million as compared to the same period last year. Net interest income increased $177.3 million, or 130.8%, compared to the same period last year, driven by the acquisition of HTLF, as well as organic loan growth and earning asset mix changes. Provision for credit losses increased $18.0 million, or 221.7%, for the period, driven by the acquisition of HTLF as well as by portfolio metric changes and changes in macro-economic metrics in 2025 as compared to 2024. Noninterest income increased $66.3 million, or 66.5%, for the same period primarily driven by increases of $29.7 million in investment securities gains, $19.6 million in trust and securities processing income, $7.3 million in bankcard fees, $4.1 million in deposit service charges, and $2.8 million in brokerage income. Noninterest expense increased $201.4 million, or 76.8%, primarily due to increases of $102.3 million in technology, service, and overhead expenses, and $62.5 million in salaries and employee benefits, both driven by the HTLF acquisition. Additionally, there were increases of $10.6 million in other expense driven by increased charitable contributions, $7.2 million in supplies and services, $5.6 million in processing fees, $3.4 million in regulatory fees, $3.4 million in equipment, and $3.3 million in marketing and business development.
Balance Sheet Analysis
Loans and Loans Held For Sale
Loans represent the Company’s largest source of interest income. Loan balances held for investment increased by $13.1 billion, or 51.2%, in 2025. This increase was primarily driven by an increase of $6.2 billion, or 61.6%, in commercial real estate loans, $5.3 billion, or 48.0%, in commercial and industrial loans, and $1.2 billion, or 39.2% in consumer real estate loans. A significant driver in the increases in loans was the acquisition of HTLF and its loan portfolio with an acquired fair value of $9.7 billion at January 31, 2025.
Commercial and industrial loans and commercial real estate loans continue to represent the largest segments of the Company’s loan portfolio, comprising approximately 42.0% and 42.2%, respectively, of total loans and loans held for sale at the end of 2025 and 42.5% and 39.5%, respectively, of total loans and loans held for sale at the end of 2024.
As a percentage of total loans, commercial real estate comprised 42.2% of total loans compared to 39.5% in 2024. Commercial real estate loans generally involve a greater degree of credit risk than consumer real estate loans because they typically have larger balances and are more affected by adverse conditions in the economy. Because payments on loans secured by commercial real estate often depend upon the successful operation and management of the properties and the businesses which operate from within them, repayment of such loans may be affected by factors outside the borrower’s control, such as adverse conditions in the real estate market or the economy or changes in government regulations. In recent years, commercial real estate markets have been particularly impacted by the economic disruption resulting from the COVID-19 pandemic. The COVID-19 pandemic has also been a catalyst for the evolution of various remote work options, which could impact the long-term performance of some types of office properties within our commercial real estate portfolio. Due to these risks, the Company is actively monitoring its exposure to commercial real estate.
Generally, these loans are made for investment and real estate development or working capital and business expansion purposes and are primarily secured by real estate with a maximum loan-to-value of 80%. Most of these properties are non-owner occupied and have guarantees as additional security. The Company’s investment CRE portfolio (which includes non-owner occupied and construction loans) totaled 27.5% and 28.5% of total Company loans as of December 31, 2025 and December 31, 2024, respectively. The average investment CRE loan was approximately $3.6 million and $7.2 million, as of December 31, 2025 and December 31, 2024, respectively.
The properties securing the commercial real estate portfolio are diverse in terms of type and geographic location. This diversity helps reduce exposure to adverse economic events that affect any single market or industry. Notwithstanding, commercial real estate loans, in general, may be more adversely impacted by conditions in the real estate market or the economy.
The following table presents the Company’s investment CRE (which includes non-owner occupied and construction loans) by industry. The table separately discloses the top five industries as a percentage of the Company’s loan portfolio as of either period presented, while the remainder are included in “Other.”
Table 11
Investment CRE loans by industry as a percentage of total Company Loans
December 31, 2025
December 31, 2024
Industrial
Multifamily
Office building
Retail
Hotel
Other
Total Investment CRE
The following table presents the Company’s investment CRE (which includes non-owner occupied and construction loans) by state. The table separately discloses all states that represent at least 5.0% of the Company’s investment CRE portfolio as of either period presented, while the remainder are included in “All Others.”
Table 12
Investment CRE loans by State
December 31, 2025
December 31, 2024
Missouri
Arizona
Texas
Colorado
California
Utah
Florida
All others
Total Investment CRE
Nonaccrual, past due and restructured loans are discussed under “Quantitative and Qualitative Disclosure about Market Risk – Credit Risk Management” in Item 7A of this report.
Investment Securities
The Company’s investment portfolio contains trading, available-for-sale (AFS), and held-to-maturity (HTM) securities as well as FRB stock, Federal Home Loan Bank (FHLB) stock, and other miscellaneous investments. Investment securities totaled $20.1 billion as of December 31, 2025 and $13.7 billion as of December 31, 2024 and comprised 29.9% and 28.5% of the Company’s earning assets, respectively, as of those dates. A significant driver in
the increase in the Company's investment portfolio was the acquisition of HTLF and its bond portfolio, which added total securities with an acquired fair value of $3.6 billion at January 31, 2025.
The Company’s AFS securities portfolio comprised 68.1% of the Company’s investment securities portfolio at December 31, 2025, compared to 56.9% at December 31, 2024. The Company’s AFS securities portfolio provides liquidity as a result of the composition and average life of the underlying securities. This liquidity can be used to fund loan growth or to offset the outflow of traditional funding sources. The average life of the AFS securities portfolio increased from 56.0 months at December 31, 2024 to 74.8 months at December 31, 2025. In addition to providing a potential source of liquidity, the AFS securities portfolio can be used as a tool to manage interest rate sensitivity. The Company’s goal in the management of its AFS securities portfolio is to maximize return within the Company’s parameters of liquidity goals, interest rate risk and credit risk.
Management expects collateral pledging requirements for public funds, loan demand, and deposit funding to be the primary factors impacting changes in the level of AFS securities. There were $13.4 billion and $10.5 billion of securities pledged to secure U.S. Government deposits, other public deposits, certain trust deposits, derivative transactions, and repurchase agreements at December 31, 2025 and December 31, 2024, respectively.
The Company’s HTM securities portfolio consists of U.S. Treasury securities, U.S. agency-backed securities, mortgage-backed securities, general obligation bonds, and private placement bonds. The Company’s HTM portfolio, net of the ACL totaled $5.7 billion as of December 31, 2025, an increase of $346.3 million from December 31, 2024. The average life of the HTM portfolio was 8.5 years at December 31, 2025, compared to 9.1 years at December 31, 2024.
The securities portfolio generates the Company’s second largest component of interest income. The AFS, HTM, and Other securities portfolios achieved an average yield on a tax-equivalent basis of 3.68% for 2025, compared to 2.96% in 2024.
At December 31, 2025, securities available for sale had a net unrealized loss of $290.8 million, or 2.1%, of the $14.0 billion amortized cost value, an improvement of $342.6 million compared to a net unrealized loss of $633.3 million the preceding year. This market value change primarily reflects the impact of decreasing market interest rates as of December 31, 2025, compared to December 31, 2024. These amounts are reflected, on an after-tax basis, in the Company’s Accumulated other comprehensive income (loss) (AOCI) in shareholders’ equity, as an unrealized loss of $221.4 million at year-end 2025, compared to an unrealized loss of $478.5 million for 2024. The AFS securities portfolio contains securities that have unrealized losses (see the table of these securities in Note 4, “Securities,” in the Notes to the Consolidated Financial Statements). The unrealized losses in the Company’s investments were caused by changes in interest rates, and not from a decline in credit of the underlying issuers. The U.S. Treasury, U.S. Agency, and Government Sponsored Entity (GSE) mortgage-backed securities are all considered to be agency-backed securities with no risk of loss as they are either explicitly or implicitly guaranteed by the U.S. government. The changes in fair value in the agency-backed portfolios are solely driven by change in interest rates caused by changing economic conditions. The Company has no knowledge of any underlying credit issues and the cash flows underlying the debt securities have not changed and are not expected to be impacted by changes in interest rates. As of December 31, 2025, the Company does not believe the decline in value in these portfolios is related to credit impairments and instead is due to increasing market interest rates. For the State and political subdivision portfolio, the majority of the Company’s holdings are in general obligation bonds, which have a very low historical default rate due to issuers generally having unlimited taxing authority to service the debt. For the State and political, Corporates, and Collateralized loan obligations portfolios, the Company has a robust process for monitoring credit risk, including both pre-purchase and ongoing post-purchase credit reviews and analysis. The Company monitors credit ratings of all bond issuers in these segments and reviews available financial data, including market and sector trends. The Company does not have the intent to sell these securities and does not believe it is more likely than not that the Company will be required to sell these securities before a recovery of amortized cost. As of December 31, 2025, there is no ACL related to the Company’s available-for-sale securities as the decline in fair value did not result from credit issues.
Securities held to maturity had a net unrealized loss of $473.8 million or 8.3% of the $5.7 billion amortized cost value as of December 31, 2025, compared to a net unrealized loss of $630.0 million at December 31, 2024. During 2022, the Company transferred securities with an amortized cost balance of $4.1 billion and a fair value of $3.8 billion from the AFS category to the HTM category. The transfer of securities was made at fair value at the time of transfer. The remaining balance of unrealized pre-tax losses related to transferred securities was $139.2 million as of December 31, 2025 and $171.3 million as of December 31, 2024, and was included in the amortized
cost balance of HTM securities. See further information in Note 4, "Securities" in the Notes to Consolidated Financial Statements.
Included in Tables 13 and 14 are analyses of the fair value and average yield (tax-equivalent basis) of securities available for sale and securities held to maturity.
Table 13
SECURITIES AVAILABLE FOR SALE (in thousands)
U.S. Treasury Securities
U.S. Agency Securities
December 31, 2025
Fair Value
Weighted
Average Yield
Fair Value
Weighted
Average Yield
Due in one year or less
Due after 1 year through 5 years
Due after 5 years through 10 years
Due after 10 years
Total
Mortgage-backed Securities
State and Political
Subdivisions
December 31, 2025
Fair Value
Weighted
Average Yield
Fair Value
Weighted
Average Yield
Due in one year or less
Due after 1 year through 5 years
Due after 5 years through 10 years
Due after 10 years
Total
Corporates
Collateralized Loan Obligations
December 31, 2025
Fair Value
Weighted
Average Yield
Fair Value
Weighted
Average Yield
Due in one year or less
Due after 1 year through 5 years
Due after 5 years through 10 years
Due after 10 years
Total
U.S. Treasury Securities
U.S. Agency Securities
December 31, 2024
Fair Value
Weighted
Average Yield
Fair Value
Weighted
Average Yield
Due in one year or less
Due after 1 year through 5 years
Due after 5 years through 10 years
Due after 10 years
Total
Mortgage-backed Securities
State and Political
Subdivisions
December 31, 2024
Fair Value
Weighted
Average Yield
Fair Value
Weighted
Average Yield
Due in one year or less
Due after 1 year through 5 years
Due after 5 years through 10 years
Due after 10 years
Total
Corporates
Collateralized Loan Obligations
December 31, 2024
Fair Value
Weighted
Average Yield
Fair Value
Weighted
Average Yield
Due in one year or less
Due after 1 year through 5 years
Due after 5 years through 10 years
Due after 10 years
Total
Table 14
SECURITIES HELD TO MATURITY (in thousands)
U.S. Treasury Securities
Mortgage-backed Securities
December 31, 2025
Fair Value
Weighted
Average
Yield/Average
Maturity
Fair Value
Weighted
Average
Yield/Average
Maturity
Due in one year or less
Due after 1 year through 5 years
Due after 5 years through 10 years
Due over 10 years
Total
State and Political Subdivisions
December 31, 2025
Fair Value
Weighted
Average
Yield/Average
Maturity
Due in one year or less
Due after 1 year through 5 years
Due after 5 years through 10 years
Due over 10 years
Total
U.S. Agency Securities
Mortgage-backed Securities
December 31, 2024
Fair Value
Weighted
Average
Yield/Average
Maturity
Fair Value
Weighted
Average
Yield/Average
Maturity
Due in one year or less
Due after 1 year through 5 years
Due after 5 years through 10 years
Due over 10 years
Total
State and Political Subdivisions
December 31, 2024
Fair Value
Weighted
Average
Yield/Average
Maturity
Due in one year or less
Due after 1 year through 5 years
Due after 5 years through 10 years
Due over 10 years
Total
The table below provides detailed information for Other securities at December 31, 2025 and 2024:
Table 15
OTHER SECURITIES (in thousands)
December 31,
FRB and FHLB stock
Equity securities with readily determinable fair values
Equity securities without readily determinable fair values
Total
Equity securities with readily determinable fair values are generally traded on an exchange and market prices are readily available. Equity securities without readily determinable fair values are generally carried at cost less impairment. Unrealized gains or losses on equity securities with and without readily determinable fair values are recognized in the Investment Securities gains, net line of the Company’s Consolidated Statements of Income.
For further information on the Company’s investment securities, refer to Note 4, “Securities,” in the Notes to the Consolidated Financial Statements.
Other Earning Assets
Federal funds transactions essentially are overnight loans between financial institutions, which allow for either the daily investment of excess funds or the daily borrowing of another institution’s funds in order to meet short-term liquidity needs. The net borrowed position was $32.1 million at December 31, 2025 compared to $70.4 million at December 31, 2024.
The Bank buys and sells federal funds as agent for non-affiliated banks. Because the transactions are pursuant to agency arrangements, these transactions do not appear on the balance sheet and averaged $215.3 million in 2025 and $161.7 million in 2024.
At December 31, 2025, the Company held securities purchased under agreements to resell of $1.5 billion compared to $545.0 million at December 31, 2024. The Company uses these instruments as short-term secured investments, in lieu of selling federal funds, or to acquire securities required for collateral purposes. Balances will
fluctuate based on the Company’s liquidity and investment decisions as well as the Company’s correspondent bank borrowing levels. These investments averaged $776.8 million in 2025 and $303.0 million in 2024.
The Company also maintains an active securities trading inventory. The average holdings in the securities trading inventory in 2025 were $17.2 million, compared to $22.3 million in 2024, and were recorded at fair market value. As discussed in “Quantitative and Qualitative Disclosures About Market Risk – Trading Account” in Part II, Item 7A, the Company offsets the trading account securities by the sale of exchange-traded financial futures contracts, with both the trading account and futures contracts marked to market daily.
Interest-bearing due from banks totaled $6.9 billion as of December 31, 2025 compared to $8.0 billion as of December 31, 2024 and includes amounts due from the FRB and interest-bearing accounts held at other financial institutions. The amount due from the FRB averaged $6.0 billion and $3.4 billion during the years ended December 31, 2025 and 2024, respectively. The increase in the FRB balance at December 31, 2025 compared to the prior year is primarily related to the acquisition of HTLF. The interest-bearing accounts held at other financial institutions totaled $121.1 million and $110.8 million at December 31, 2025 and 2024, respectively.
Deposits and Borrowed Funds
Deposits represent the Company’s primary funding source for its asset base. In addition to the core deposits garnered by the Company’s retail branch structure, the Company continues to focus on its cash management services, as well as its asset management and mutual fund servicing businesses in order to attract and retain additional core deposits. Management believes a strong core deposit composition is one of the Company's key strengths given its competitive product mix. Deposits totaled $60.7 billion at December 31, 2025 and $43.1 billion at December 31, 2024, an increase of $17.5 billion, or 40.6%. There were $590.4 million and $1.0 billion of brokered deposits as of December 31, 2025 and December 31, 2024, respectively. Deposits averaged $55.1 billion in 2025, and $35.3 billion in 2024. A significant driver in the increases in the Company's deposits was the acquisition of HTLF, which added total deposits with an acquired fair value of $14.3 billion at January 31, 2025.
Noninterest-bearing demand deposits averaged $14.1 billion in 2025 and $10.1 billion in 2024. These deposits represented 25.6% of average deposits in 2025, compared to 28.5% in 2024. The Company’s large commercial customer base provides a significant source of noninterest-bearing deposits. Many of these commercial accounts do not earn interest; however, they receive an earnings credit to offset the cost of other services provided by the Company.
Table 16
MATURITIES OF UNINSURED TIME DEPOSITS (in thousands)
December 31,
Maturing within 3 months
After 3 months but within 6 months
After 6 months but within 12 months
After 12 months
Total
As of December 31, 2025, there were an estimated $39.7 billion of uninsured deposits, as compared to $31.0 billion as of December 31, 2024. Estimated uninsured deposits comprised approximately 65.4% and 72.0% of total deposits as of December 31, 2025 and December 31, 2024, respectively. A portion of these uninsured deposits represent affiliate deposits and collateralized deposits. Affiliate deposits represent deposit accounts owned by the wholly owned subsidiaries of UMB Financial Corporation that are on deposit at the Bank. Collateralized deposits are public fund deposits or corporate trust deposits that are collateralized by high quality securities within the investment portfolio. Excluding affiliate deposits of $2.9 billion and collateralized deposits of $7.6 billion, the adjusted estimated uninsured deposits were $29.2 billion as of December 31, 2025. Excluding affiliate deposits of $2.4 billion and collateralized deposits of $6.0 billion, the adjusted estimated uninsured deposits were $22.7 billion as of December 31, 2024. The adjusted ratio of estimated uninsured deposits, excluding affiliate and collateralized deposits, as a percentage of total deposits was approximately 48.1% and 52.6% as of December 31, 2025, and December 31, 2024, respectively.
The Company participates in the IntraFi Cash Service program, which allows its customers to place deposits into the program to receive reciprocal FDIC insurance coverage. As of December 31, 2025 and December 31, 2024, the Company had $3.5 billion and $1.3 billion of deposits in the program, respectively.
Table 17
ANALYSIS OF AVERAGE DEPOSITS (in thousands)
December 31,
Amount:
Noninterest-bearing demand
Interest-bearing demand and savings
Time deposits under $250,000
Total core deposits
Time deposits of $250,000 or more
Total deposits
As a % of total deposits:
Noninterest-bearing demand
Interest-bearing demand and savings
Time deposits under $250,000
Total core deposits
Time deposits of $250,000 or more
Total deposits
Capital Resources and Liquidity
The Company places a significant emphasis on the maintenance of a strong capital position, which it believes promotes investor confidence, provides access to funding sources under favorable terms, and enhances the Company’s ability to capitalize on business growth and acquisition opportunities. Higher levels of liquidity, however, bear corresponding costs, measured in terms of lower yields on short-term, more liquid earning assets, and higher expenses for extended liability maturities. The Company manages capital for each subsidiary based upon the subsidiary’s respective risks and growth opportunities as well as regulatory requirements.
Total shareholders’ equity increased $4.2 billion, or 121.9% to $7.7 billion at December 31, 2025 as compared to December 31, 2024, driven by the acquisition of HTLF. Total common shareholders' equity was $7.4 billion as of December 31, 2025. Total accumulated other comprehensive loss was $261.5 million at December 31, 2025, which is an improvement of $311.5 million as compared to December 31, 2024. During the second quarter of 2025, the Company issued 12.0 million depositary shares, each representing a 1/400th interest in a share of the Company's 7.75% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series B. During the third quarter of 2025, the Company completed the redemption of all of its outstanding 7.00% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A at the redemption price of $10,000 per share.
The Board authorized, at its April 29, 2025 and April 30, 2024 meetings, the repurchase of up to one million shares of the Company's common stock during the twelve months following the meeting (a Repurchase Authorization). On July 25, 2023, the Board authorized the repurchase of up to one million shares of the Company's stock, which terminated on April 30, 2024. During 2025 and 2024, the Company did not repurchase shares of common stock pursuant to any of its announced Repurchase Authorizations, but did acquire shares pursuant to the Company's share-based incentive programs.
On April 28, 2024, the Company entered into the Merger Agreement with HTLF, a Delaware corporation and Blue Sky Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of the Company. The Merger Agreement and the merger were unanimously approved by the boards of directors of the Company and HTLF. Pending regulatory approval and approval by the shareholders of the Company and HTLF, and the merger closed on January 31, 2025. Under the terms of the Merger Agreement, HTLF stockholders received a fixed exchange ratio of
0.55 shares of the Company’s common stock for each share of HTLF stock, with a total market value of approximately $2.8 billion.
Additionally, on April 29, 2024, the Company also announced that in connection with the execution of the Merger Agreement, it entered into a forward sale agreement with BofA Securities, Inc. or its affiliate to issue 2.8 million shares of its common stock. The underwriters were granted an option to purchase up to an additional 420 thousand shares of the Company's common stock exercisable within 30 days of April 28, 2024. The underwriters exercised this option in full on April 30, 2024, upon which the Company entered into an additional forward sale agreement relating to the 420 thousand shares of the Company's common stock. The forward sale agreements are classified as an equity instrument under ASC 815-40, Contracts in Entity’s Own Equity . The Company received net proceeds of $235.1 million from the sale of shares of common stock and settlement of the forward sale agreements.
At the Company's quarterly board meeting, the Board declared a $0.43 per common share quarterly cash dividend payable on April 1, 2026, to common shareholders of record at the close of business on March 10, 2026. Additionally, the Board declared a dividend of $193.75 per share of the Company's Series B Preferred Stock, which results in a dividend of $0.484375 per depositary share. The Series B Preferred Stock dividend is payable on April 15, 2026 to stockholders of record of the Series B Preferred Stock as of the close of business on March 31, 2026.
Risk-based capital guidelines established by regulatory agencies set minimum capital standards based on the level of risk associated with a financial institution’s assets. The Company has implemented the Basel III regulatory capital rules adopted by the FRB. Basel III capital rules include a minimum ratio of common equity tier 1 capital to risk-weighted assets of 4.5% and a minimum tier 1 risk-based capital ratio of 6%. A financial institution’s total capital is also required to equal at least 8% of risk-weighted assets.
The risk-based capital guidelines indicate the specific risk weightings by type of asset. Certain off-balance sheet items (such as standby letters of credit and binding loan commitments) are multiplied by credit conversion factors to translate them into balance sheet equivalents before assigning them specific risk weightings. The Company is also required to maintain a leverage ratio equal to or greater than 4%. The leverage ratio is tier 1 core capital to total average assets less goodwill and intangibles. The Company's capital position as of December 31, 2025 is summarized in the table below and exceeded regulatory requirements.
Table 18
RISK-BASED CAPITAL (in thousands)
This table computes risk-based capital in accordance with current regulatory guidelines. These guidelines as of December 31, 2025, excluded net unrealized gains or losses on securities available for sale and net unrealized losses on securities held to maturity transferred from the available-for-sale category from the computation of regulatory capital and the related risk-based capital ratios.
Risk-Weighted Category
Total
Risk-Weighted Assets
Loans held for sale
Loans and leases
Securities available for sale
Securities held to maturity
Trading securities
Cash and due from banks
All other assets
Category totals
Risk-weighted totals
Off-balance-sheet items (4)
Total risk-weighted assets
Total
Regulatory Capital
Shareholders’ equity
Less adjustments (1)
Common equity Tier 1/Tier 1 capital
Additional Tier 1 capital (2)
Tier 1 capital
Tier 2 capital (3)
Total capital
Company
Capital ratios
Common Equity Tier 1 capital to risk-weighted assets
Tier 1 capital to risk-weighted assets
Total capital to risk-weighted assets
Leverage ratio (Tier 1 capital to total average assets less adjustments (1) )
Adjustments include a portion of goodwill and intangibles as well as unrealized gains/losses on available-for-sale securities, cash flow hedges, and the impact of the Company’s election to use the five-year CECL transition.
Includes the Company’s preferred stock.
Includes the Company’s ACL (inclusive of the reserve for off-balance sheet arrangements), subordinated long-term debt, and trust preferred subordinated notes.
After credit conversion factor and risk weighting is applied.
For further discussion of regulatory capital requirements, see Note 10, “Regulatory Requirements” within the Notes to Consolidated Financial Statements under Item 8.
Repurchase agreements are transactions involving the exchange of investment funds by the customer for securities by the Company, under an agreement to repurchase the same issues at an agreed-upon price and date. Securities sold under agreements to repurchase and federal funds purchased totaled $3.3 billion at December 31, 2025, and $2.6 billion at December 31, 2024. Repurchase agreements and federal funds purchased averaged $2.8 billion in 2025 and $2.3 billion in 2024. The Company enters into these transactions with its downstream correspondent banks, commercial customers, and various trust, mutual fund, and local government relationships.
The Company is a member bank with the FHLB of Des Moines, and through this relationship, the Company owns FHLB stock and has access to additional liquidity and funding sources through FHLB advances. The Company’s borrowing capacity is dependent upon the amount of collateral the Company places at the FHLB. As of December 31, 2025, and December 31, 2024, the Company owned $10.3 million and $10.2 million of FHLB stock, respectively.
The Company had no outstanding advances at the FHLB of Des Moines as of December 31, 2025 or December 31, 2024. As of December 31, 2025, the Company had four letters of credit outstanding with the FHLB of Des Moines to secure deposits. These letters of credit have an aggregate amount of $261.0 million and have various maturity dates through March 10, 2026. The Company's remaining borrowing capacity with the FHLB was $2.2 billion as of December 31, 2025. During 2024, the FHLB of Des Moines issued a letter of credit for $150.0 million on behalf of the Company to secure deposits. The letter of credit outstanding as of December 31, 2024 expired in January 2025 and was subsequently renewed with an expiration date in March 2025.
In addition to the borrowing capacity with the FHLB as described above, the Company had additional liquidity of $35.1 billion available via cash, unpledged bond collateral, the federal funds market, the Federal Reserve Discount Window, and the IntraFi Cash Service program as of December 31, 2025.
Long-term debt totaled $474.2 million at December 31, 2025, compared to $385.3 million at December 31, 2024. The increase in long-term debt in 2025 was driven by the acquisition of HTLF, which added total long-term
debt with an acquired fair value of $278.0 million at January 31, 2025, partially offset by the repayment of the Company's 2020 subordinated notes during the third quarter of 2025.
In September 2022, the Company issued $110.0 million in aggregate subordinated notes due in September 2032. The Company received $107.9 million, after deducting underwriting discounts and commissions and offering expenses, and used the proceeds from the offering for general corporate purposes, including, among other uses, contributing Tier 1 capital into the Bank. The subordinated notes were issued with a fixed-to-fixed rate of 6.25% and an effective rate of 6.64% due to issuance costs, with an interest rate reset date of September 2027.
In September 2020, the Company issued $200.0 million in aggregate subordinated notes due in September 2030. The Company received $197.7 million, after deducting underwriting discounts and commissions and offering expenses, and used the proceeds from the offering for general corporate purposes, including, among other uses, contributing Tier 1 capital into the Bank. The subordinated notes were issued with a fixed-to-fixed rate of 3.70% and an effective rate of 3.93%, due to issuance costs. During the first quarter of 2025, the Company purchased and subsequently retired $11.1 million of its 2020 subordinated notes. During the third quarter of 2025, the Company redeemed the remainder of the outstanding 2020 subordinated notes.
As part of the acquisition of HTLF, the Company acquired $150.0 million in aggregate subordinated notes due in September 2031. The subordinated notes have a fixed interest rate of 2.75% until September 2026, at which time the interest rate will reset quarterly. The subordinated notes had an acquired fair value of $138.8 million as of January 31, 2025.
The remainder of the Company’s long-term debt was assumed from the acquisitions of Marquette Financial Companies in 2015 and HTLF in 2025 and consists of debt obligations payable to 19 unconsolidated trusts that previously issued trust preferred securities. These long-term debt obligations had an aggregate contractual balance of $262.9 million and had a carrying value of $220.0 million at December 31, 2025. As of December 31, 2024, the debt obligations related to the four unconsolidated trusts acquired from Marquette had an aggregate contractual balance of $103.1 million and had a carrying value of $76.8 million. Interest rates on trust preferred securities are tied to the three-month term SOFR with spreads ranging from 133 basis points to 365 basis points and reset quarterly. The trust preferred securities have maturity dates ranging from September 2032 to September 2037. For further information on long-term debt refer to Note 9, “Borrowed Funds,” in the Notes to the Consolidated Financial Statements.
The Company has material off-balance sheet arrangements in the form of loan commitments, commercial and standby letters of credit, futures contracts and forward exchange contracts, which have maturity dates rather than payment due dates. These commitments and contingent liabilities are not required to be recorded on the Company’s balance sheet. Since commitments associated with letters of credit and lending and financing arrangements may expire unused, the amounts shown do not necessarily reflect the actual future cash funding requirements. See Table 19 below, as well as Note 15, “Commitments, Contingencies and Guarantees” in the Notes to Consolidated Financial Statements under Item 8 for detailed information and further discussion of these arrangements. Management does not anticipate any material losses from its off-balance sheet arrangements.
Table 19
COMMITMENTS, MATERIAL CASH REQUIREMENTS AND OFF-BALANCE SHEET ARRANGEMENTS (in thousands)
The table below details the commitments, material cash requirements, and off-balance sheet arrangements for the Company as of December 31, 2025 and includes principal payments only. The Company has no capital leases or long-term purchase obligations.
Payments due by Period
Total
Less than 1 year
1-3 years
3-5 years
More than 5 years
Material Cash Requirements
Federal funds purchased and repurchase agreements
Long-term debt obligations
Operating lease obligations
Time deposits
Total
Maturities due by Period
Total
Less than 1 year
1-3 years
3-5 years
More than 5 years
Commitments, Contingencies and Guarantees
Commitments to extend credit for loans (excluding credit card loans)
Commitments to extend credit under credit card loans
Commercial letters of credit
Standby letters of credit
Forward contracts
Spot foreign exchange contracts
Commitments to extend credit for securities purchased under agreements to resell
Total
For further discussion of capital and liquidity, see the “Quantitative and Qualitative Disclosures about Market Risk – Liquidity Risk” in Item 7A of this report.
Critical Accounting Policies and Estimates
Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses the Company’s Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of these Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to customers and suppliers, allowance for credit losses, bad debts, investments, financing operations, long-lived assets, taxes, other contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which have formed the basis for making such judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Under different assumptions or conditions, actual results may differ from the recorded estimates.
Management believes that the Company’s critical accounting policies and estimates are those relating to the allowance for credit losses and certain purchase accounting fair value estimates including the fair value of loans acquired in, and the core deposit intangibles associated with, the acquisition of HTLF.
Allowance for Credit Losses
The Company’s ACL represents management’s judgment of the total expected losses included in the Company’s assets held at amortized cost. The Company’s process for recording the ACL is based on the evaluation of the Company’s lifetime historical loss experience, management’s understanding of the credit quality inherent in the loan portfolio, and the impact of the current economic environment, coupled with reasonable and supportable economic forecasts.
A mathematical calculation of an estimate is made to assist in determining the adequacy and reasonableness of management’s recorded ACL. To develop the estimate, the Company follows the guidelines in ASC Topic 326, Financial Instruments – Credit Losses . The estimate reserves for assets held at amortized cost, which include the Company’s loan and held-to-maturity security portfolios.
The estimation process involves the consideration of quantitative and qualitative factors relevant to the specific segmentation of loans. These factors have been established over decades of financial institution experience and include economic observation and loan loss characteristics. This process is designed to produce a lifetime estimate of the losses, at a reporting date, that is based on evaluation of historical loss experience, current economic conditions, reasonable and supportable forecasts, and the qualitative framework outlined by the Office of the Comptroller of the Currency in the published 2020 Interagency Policy Statement. This process allows management to take a holistic view of the recorded ACL reserve and ensure that all significant and pertinent information is considered in its estimate.
The Company considers a variety of factors to ensure the safety and soundness of its estimate including a strong internal control framework, extensive methodology documentation, credit underwriting standards which encompass the Company’s desired risk profile, model validation, and ratio analysis. If the Company’s total ACL estimate, as determined in accordance with the approved ACL methodology, is either outside a reasonable range based on review of economic indicators or by comparison of historical ratio analysis, the ACL estimate is an outlier and management will investigate the underlying reason(s). Based on that investigation, issues or factors that previously had not been considered may be identified in the estimation process, which may warrant adjustments to estimated credit losses.
The ending result of this process is a recorded consolidated ACL that represents management’s best estimate of the total expected losses included in the loan and held-to-maturity security portfolios considering available information, from internal and external sources, relevant to assessing exposure to credit loss over the contractual term of the instrument. While management utilizes its best judgment and information available, the ultimate adequacy of the ACL is dependent upon a variety of factors beyond the Company’s control, including the performance of its portfolios, the economy, and changes in interest rates. As such, significant downturns in circumstances relating to loan quality and economic conditions could result in a requirement for additional allowance. Likewise, an upturn in loan quality and improved economic conditions may allow a reduction in the required allowance. In either instance, unanticipated changes could have a significant impact on the Company’s Provision for credit losses and ACL reported in its Consolidated Income Statements and Consolidated Balance Sheets, respectively.
For more information on loan portfolio segments, the Company’s ACL methodology, and management’s assumptions in estimating the ACL, refer to the section captioned “Allowance for Credit Losses” within Note 3, “Loans and Allowance for Credit Losses,” in the Notes to the Consolidated Financial Statements.
Purchase Accounting Fair Value Estimates
Assets acquired and liabilities assumed in a business combination are recorded at their fair values as of the date of acquisition. The determination of estimated fair values required management to make certain estimates about discount rates, expected future cash flows, market conditions at the time of acquisition, and other future events that are highly subjective in nature and may require adjustments. The fair values for these items are further discussed in Note 1, “Summary of Significant Accounting Policies” and Note 20, “Acquisition,” in the Notes to the Consolidated Financial Statements. Fair values of loans acquired in and core deposit intangibles associated with the acquisition of HTLF are considered critical accounting estimates and are further discussed below.
Loans
The fair value for acquired loans was based on a discounted cash flow method that considered the loans’ underlying characteristics including account type, remaining terms of loans, annual interest rates or coupon, fixed or variable interest rate, past delinquencies, risk rating, timing of principal and interest payments, current market rates, loan to value ratios, loss exposure, more specifically the probability of default and loss given default, and remaining balance. Loans were aggregated according to similar characteristics when applying the valuation method.
Core Deposit Intangibles
Core deposit intangibles represent the value of relationships with deposit clients and the cost savings derived from available core deposits relative to an alternative funding source. The fair value of the core deposit intangible was estimated using a net cost savings method, a variation of the income approach. This approach considers expected client attrition rates, average life and balance inflation, alternative cost of funds, the interest cost and net maintenance cost associated with the client deposit base, and a discount rate used to discount the future economic benefits of the core deposit intangible asset to present value.
ITEM 7A. QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK
Risk Management
Market risk is a broad term for the risk of economic loss due to adverse changes in the fair value of a financial instrument. These changes may be the result of various factors, including interest rates, foreign exchange prices, commodity prices, or equity prices. Financial instruments that are subject to market risk can be classified either as held for trading or held for purposes other than trading.
The Company is subject to market risk primarily through the effect of changes in interest rates of its assets held for purposes other than trading. The following discussion of interest rate risk, however, combines instruments held for trading and instruments held for purposes other than trading because the instruments held for trading represent such a small portion of the Company’s portfolio that the interest rate risk associated with them is immaterial.
Interest Rate Risk
In the banking industry, a major risk exposure is changing interest rates. To minimize the effect of interest rate changes to net interest income and exposure levels to economic losses, the Company manages its exposure to changes in interest rates through asset and liability management within guidelines established by its Asset Liability Committee (ALCO) and approved by the Board. The ALCO is responsible for approving and ensuring compliance with asset/liability management policies, including interest rate exposure. The Company’s primary method for measuring and analyzing consolidated interest rate risk is the Net Interest Income Simulation Analysis. The Company also uses a Net Portfolio Value model to measure market value risk under various rate change scenarios and a gap analysis to measure maturity and repricing relationships between interest-earning assets and interest-bearing liabilities at specific points in time. On a limited basis, the Company uses hedges such as swaps, rate floors, and futures contracts to manage interest rate risk on certain loans, trading securities, trust preferred securities, and deposits. See further information in Note 17 “Derivatives and Hedging Activities” in the Notes to the Company’s Consolidated Financial Statements.
Overall, the Company attempts to manage interest rate risk by positioning the balance sheet to maximize net interest income while maintaining an acceptable level of interest rate and credit risk, remaining mindful of the relationship among profitability, liquidity, interest rate risk and credit risk.
Net Interest Income Modeling
The Company’s primary interest rate risk tool, the Net Interest Income Simulation Analysis, measures interest rate risk and the effect of interest rate changes on net interest income and net interest margin. This analysis incorporates all of the Company’s assets and liabilities together with assumptions that reflect the current interest rate environment. Through these simulations, management estimates the impact on net interest income of a 200-basis-point upward or a 300-basis-point downward gradual change (e.g. ramp) and immediate change (e.g. shock) of market interest rates over a two-year period. In ramp scenarios, rates change gradually for a one-year period and remain constant in year two. In shock scenarios, rates change immediately and the change is sustained for the remainder of the two year scenario horizon. Assumptions are made to project rates for new loans and deposits based on historical analysis, management outlook and repricing strategies. Asset prepayments and other market risks are developed from industry estimates of prepayment speeds and other market changes. The results of these simulations can be significantly influenced by assumptions utilized and management evaluates the sensitivity of the simulation results on a regular basis.
Table 20 shows the net interest income percentage increase or decrease over the next twelve- and twenty-four-month periods as of December 31, 2025 and 2024 based on hypothetical changes in interest rates and a constant sized balance sheet with runoff being replaced.
Table 20
MARKET RISK
Hypothetical change in interest rate – Rate Ramp
Year One
Year Two
December 31,
December 31,
December 31,
December 31,
(basis points)
Percentage change
Percentage change
Percentage change
Percentage change
Static
Hypothetical change in interest rate – Rate Shock
Year One
Year Two
December 31,
December 31,
December 31,
December 31,
(basis points)
Percentage change
Percentage change
Percentage change
Percentage change
Static
The Company is positioned relatively neutral to changes in interest rates in the next year. Net interest income is predicted to increase in the 200-basis-point upward shock scenario. Net interest income is predicted to decrease in the 100-basis-point upward shock scenario and all upward rate ramp scenarios. In down rate scenarios net interest income is predicted to increase in all scenarios. In year two, net interest income is predicted to increase in all rising rate scenarios and decrease in all falling rate scenarios. The Company’s ability to price deposits consistent with its historical approach is a key assumption in these scenarios.
Repricing Mismatch Analysis
The Company also evaluates its interest rate sensitivity position in an attempt to maintain a balance between the amount of interest-bearing assets and interest-bearing liabilities which are expected to mature or reprice at any point in time. While a traditional repricing mismatch analysis (gap analysis) provides a snapshot of interest rate risk, it does not take into consideration that assets and liabilities with similar repricing characteristics may not, in fact, reprice at the same time or the same degree. Also, it does not necessarily predict the impact of changes in general levels of interest rates on net interest income.
Table 21 is a static gap analysis, which presents the Company’s assets and liabilities, based on their repricing or maturity characteristics and reflecting principal amortization. Table 22 presents the break-out of fixed and variable rate loans by repricing or maturity characteristics for each loan class.
Table 21
INTEREST RATE SENSITIVITY ANALYSIS (in millions)
Over 5
Days
Days
Days
Total
Years
Years
Total
December 31, 2025 Earning assets
Loans
Securities
Federal funds sold and resell agreements
Other
Total earning assets
% of total earning assets
Funding sources
Interest-bearing demand and savings
Time deposits
Federal funds purchased and repurchase agreements
Long term debt
Noninterest-bearing sources
Total funding sources
% of total earning assets
Interest sensitivity gap
Cumulative gap
As a % of total earning assets
Ratio of earning assets to funding sources
Cumulative ratio of earning assets to funding sources
Table 22
Maturities and Sensitivities to Changes in Interest Rates
This table details loan maturities by variable and fixed rates as of December 31, 2025 (in thousands):
Due in one year or less
Due after one year through five years
Due after five years through fifteen years
Due after fifteen years
Total
Variable Rate
Commercial and industrial
Specialty lending
Commercial real estate
Consumer real estate
Consumer
Credit cards
Leases and other
Total variable rate loans
Fixed Rate
Commercial and industrial
Specialty lending
Commercial real estate
Consumer real estate
Consumer
Credit cards
Leases and other
Total fixed rate loans
Total loans and loans held for sale
Trading Account
The Company carries securities in a trading account that is maintained in accordance with Board-approved policy and procedures. The policy limits the amount and type of securities that can be carried in the trading account and requires compliance with any limits under applicable law and regulations, and mandates the use of a value-at-risk methodology to manage price volatility risks within financial parameters. The risk associated with the carrying of trading securities is offset by utilizing financial instruments including exchange-traded financial futures as well as short sales of U.S. Treasury and Corporate securities. The trading securities and related hedging instruments are marked-to-market daily. The trading account had a balance of $22.3 million as of December 31, 2025, compared to $28.5 million as of December 31, 2024. Securities sold not yet purchased (i.e., short positions) totaled $4.1 million at December 31, 2025 and $7.1 million at December 31, 2024 and are classified within the Other liabilities line of the Company's Consolidated Balance Sheets.
The Company is subject to market risk primarily through the effect of changes in interest rates of its assets held for purposes other than trading. The discussion in Table 21 above of interest rate risk, however, combines instruments held for trading and instruments held for purposes other than trading, because the instruments held for trading represent such a small portion of the Company’s portfolio that the interest rate risk associated with them is immaterial.
Other Market Risk
The Company has minimal foreign currency risk as a result of foreign exchange contracts. See Note 10, “Commitments, Contingencies and Guarantees” in the Notes to the Consolidated Financial Statements.
Credit Risk Management
Credit risk represents the risk that a customer or counterparty may not perform in accordance with contractual terms. The Company utilizes a centralized credit administration function, which provides information on the Bank’s
risk levels, delinquencies, an internal risk grading system and overall credit exposure. Loan requests are centrally reviewed to ensure the consistent application of the loan policy and standards. In addition, the Company has an internal loan review staff that operates independently of the Bank. This review team performs periodic examinations of the Bank’s loans for credit quality, documentation and loan administration. The respective regulatory authority of the Bank also reviews loan portfolios.
A primary indicator of credit quality and risk management is the level of nonperforming loans. Nonperforming loans include both nonaccrual loans and restructured loans on nonaccrual. The Company’s nonperforming loans increased $125.4 million to $144.7 million at December 31, 2025, compared to December 31, 2024. The increase is attributable to additional non-performing loans related to the acquisition of HTLF. There was an immaterial amount of interest recognized on nonperforming loans during 2025, 2024, and 2023.
The Company had $4.8 million and $1.6 million of other real estate owned as of December 31, 2025 and December 31, 2024, respectively. Other repossessed assets totaled $26.8 million as of December 31, 2024. Loans past due more than 90 days and still accruing interest totaled $18.4 million as of December 31, 2025, compared to $7.6 million as of December 31, 2024.
A loan is generally placed on nonaccrual status when payments are past due 90 days or more and/or when management has considerable doubt about the borrower’s ability to repay on the terms originally contracted. The accrual of interest is discontinued and recorded thereafter only when actually received in cash.
Certain loans are restructured to provide a reduction or deferral of interest or principal due to deterioration in the financial condition of the respective borrowers. The Company had $169 thousand of restructured loans at December 31, 2025 and $196 thousand at December 31, 2024.
Table 23
LOAN QUALITY (in thousands)
December 31,
Nonaccrual loans
Restructured loans on nonaccrual
Total non-performing loans
Other real estate owned
Other repossessed assets
Total non-performing assets
Loans past due 90 days or more
Restructured loans accruing
Allowance for credit losses on loans
Ratios
Non-performing loans as a % of loans
Non-performing assets as a % of loans plus other real estate owned and other repossessed assets
Non-performing assets as a % of total assets
Loans past due 90 days or more as a % of loans
Allowance for credit losses on loans as a % of loans
Allowance for credit losses on loans as a multiple of non-performing loans
Table 24
SUMMARY OF NET CHARGE-OFFS (in thousands)
Net Charge-Offs (Recoveries)
Average Loans Outstanding
Net Charge-Offs (Recoveries) to Average Loans Outstanding
Net Charge-Offs (Recoveries)
Average Loans Outstanding
Net Charge-Offs (Recoveries) to Average Loans Outstanding
At December 31:
Commercial and industrial
Specialty lending
Commercial real estate
Consumer real estate
Consumer real estate
Credit cards
Leases and other
Total
Net charge-offs for the year ended December 31, 2025 were $82.4 million, compared to $23.3 million for the year ended December 31, 2024.
Liquidity Risk
Liquidity represents the Company’s ability to meet financial commitments through the maturity and sale of existing assets or availability of additional funds. The Company believes that the most important factor in the preservation of liquidity is maintaining public confidence that facilitates the retention and growth of a large, stable supply of core deposits and wholesale funds. Ultimately, the Company believes public confidence is generated through profitable operations, sound credit quality and a strong capital position. The primary source of liquidity for the Company is regularly scheduled payments on and maturity of assets, which include $13.7 billion of high-quality securities available for sale. The liquidity of the Company and the Bank is also enhanced by its activity in the federal funds market and by its core deposits. Additionally, management believes it can raise debt or equity capital on favorable terms in the future, should the need arise.
Another factor affecting liquidity is the amount of deposits and customer repurchase agreements that have pledging requirements. All customer repurchase agreements require collateral in the form of a security. The U.S. Government, other public entities, and certain trust depositors require the Company to pledge securities if their deposit balances are greater than the FDIC-insured deposit limitations. These pledging requirements affect liquidity risk in that the related security cannot otherwise be disposed due to the pledging restriction. At December 31, 2025, $13.4 billion, or 68.8%, of securities were pledged or used as collateral, compared to $10.5 billion, or 80.1%, at December 31, 2024.
The Company also has other commercial commitments that may impact liquidity. These commitments include unused commitments to extend credit, standby letters of credit and financial guarantees, and commercial letters of credit. The total amount of these commercial commitments at December 31, 2025 was $24.3 billion. Since many of these commitments expire without being drawn upon, the total amount of these commercial commitments does not necessarily represent the future cash requirements of the Company.
The Company’s cash requirements consist primarily of dividends to shareholders, debt service, operating expenses, and treasury stock purchases. Management fees and dividends received from bank and non-bank subsidiaries traditionally have been sufficient to satisfy these requirements and are expected to be sufficient in the future. The declaration and payment of dividends to shareholders, as well as the amount thereof, are subject to the discretion of the Board and depend on the Company’s results of operations, financial condition, capital levels, cash requirements, future prospects, regulatory requirements and other factors deemed relevant by the Board. There can be no assurance the Company will declare and pay dividends to shareholders. The Bank is subject to various rules regarding payment of dividends to the Company. For the most part, the Bank can pay dividends at least equal to its current year’s earnings without seeking prior regulatory approval. The Company also uses cash to inject capital into the Bank and its non-Bank subsidiaries to maintain adequate capital as well as to fund strategic initiatives.
In September 2022, the Company issued $110.0 million in aggregate subordinated notes due in September 2032. The Company received $107.9 million, after deducting underwriting discounts and commissions and offering expenses, and used the proceeds from the offering for general corporate purposes, including, among other uses, contributing Tier 1 capital into the Bank. The subordinated notes were issued with a fixed-to-fixed rate of 6.25% and an effective rate of 6.64%, due to issuance costs, with an interest rate reset date of September 2027.
In September 2020, the Company issued $200.0 million in aggregate subordinated notes due in September 2030. The Company received $197.7 million, after deducting underwriting discounts and commissions and offering expenses, and used the proceeds from the offering for general corporate purposes, including, among other uses, contributing Tier 1 capital into the Bank. The subordinated notes were issued with a fixed-to-fixed rate of 3.70% and an effective rate of 3.93%, due to issuance costs. During the first quarter of 2025, the Company purchased and subsequently retired $11.1 million of its 2020 subordinated notes. During the third quarter of 2025, the Company redeemed the remainder of the outstanding 2020 subordinated notes.
As part of the acquisition of HTLF, the Company acquired $150.0 million in aggregate subordinated notes due September 2031. The subordinated notes have a fixed interest rate of 2.75% until September 2026, at which time the interest rate will reset quarterly. The subordinated notes had an acquired fair value of $138.8 million as of January 31, 2025.
The Company is a member bank with the FHLB of Des Moines, and through this relationship, the Company owns FHLB stock and has access to additional liquidity and funding sources through FHLB advances. The Company’s borrowing capacity is dependent upon the amount of collateral the Company places at the FHLB. As of December 31, 2025, and December 31, 2024, the Company owned $10.3 million and $10.2 million of FHLB stock, respectively.
The Company had no outstanding advances at the FHLB of Des Moines as of December 31, 2025 or December 31, 2024. As of December 31, 2025, the Company had four letters of credit outstanding with the FHLB of Des Moines to secure deposits. These letters of credit have an aggregate amount of $261.0 million and have various maturity dates through March 10, 2026. The Company's remaining borrowing capacity with the FHLB was $2.2 billion as of December 31, 2025. During 2024, the FHLB of Des Moines issued a letter of credit for $150.0 million on behalf of the Company to secure deposits. The letter of credit outstanding as of December 31, 2024 expired in January 2025 and was subsequently renewed with an expiration date in March 2025.
In addition to the borrowing capacity with the FHLB as described above, the Company had additional liquidity of $35.1 billion available via cash, unpledged bond collateral, the federal funds market, the Federal Reserve Discount Window, and the IntraFi Cash Service program as of December 31, 2025.
Operational Risk
Operational risk generally refers to the risk of loss resulting from the Company’s operations, including those operations performed for the Company by third parties. This would include but is not limited to the risk of fraud by employees or persons outside the Company, the execution of unauthorized transactions by employees or others, errors relating to transaction processing, breaches of the internal control system and compliance requirements, and unplannedinterruptions in service. This risk of loss also includes the potential legal or regulatory actions that could arise as a result of an operational deficiency, or as a result of noncompliance with applicable regulatory standards.
The Company operates in many markets and relies on the ability of its employees and systems to properly process a high number of transactions. In the event of a breakdown in internal control systems, improper operation of systems or improper employee actions, the Company could suffer financial loss, face regulatory action and sufferdamage to its reputation. In order to address this risk, management maintains a system of internal controls with the objective of providing proper transaction authorization and execution, safeguarding of assets from misuse or theft, and ensuring the reliability of financial and other data.
The Company maintains systems of internal controls that provide management with timely and accurate information about the Company’s operations. These systems have been designed to manage operational risk at appropriate levels given the Company’s financial strength, the environment in which it operates, and considering factors such as competition and regulation. The Company has also established procedures that are designed to ensure that policies relating to conduct, ethics and business practices are followed on a uniform basis. In certain cases, the Company has experienced losses from operational risk. Such losses have included the effects of operational errors
that the Company has discovered and included as expense in the statement of income. While there can be no assurance that the Company will not suffer such losses in the future, management continually monitors and works to improve its internal controls, systems and corporate-wide processes and procedures.
ITEM 8. FINANCIAL STATEMEN TS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors
UMB Financial Corporation:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of UMB Financial Corporation and subsidiaries (the Company) as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2025, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 26, 2026 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Allowance for credit losses on certain loans evaluated on a collective basis
As discussed in Notes 1 and 3 to the consolidated financial statements, the Company’s total allowance for credit losses on loans was $419.5 million as of December 31, 2025, a substantial portion of which related to the allowance for credit losses for loans evaluated on a collective basis for the commercial and industrial and commercial real estate segments (the collective ACL). The collective ACL includes the measure of expected credit losses on a pool basis for loans where similar risk characteristics exist and is determined using relevant available information from internal and external sources related to historical credit loss experience, current
conditions, and reasonable and supportable economic forecasts. The Company uses probability of default (PD) and loss given default (LGD) models for the commercial and industrial and commercial real estate segments. For the commercial and industrial segment, the collective ACL is calculated by modeling PD over future periods multiplied by historical LGD multiplied by contractual exposure at default minus any estimated prepayments and charge offs. For the commercial real estate segment, the collective ACL is calculated by modeling PD over future periods based on peer bank data. The PD loss rate is then multiplied by historical LGD multiplied by contractual exposure at default minus any estimated prepayments and charge offs. Primary risk drivers are segment specific and include macro-economic variables and risk ratings of the individual loans within the commercial and industrial and commercial real estate loan segments. After the reasonable and supportable forecast periods, the Company reverts to historical loss experience for each portfolio using a cliff or straight-line reversion method. A portion of the collective ACL is comprised of qualitative factors which represent adjustments to historical loss experience.
We identified the assessment of the collective ACL as a critical audit matter. A high degree of audit effort, including specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment of the collective ACL. Specifically, the assessment encompassed the evaluation of the collective ACL methodology, including the methods and models used to estimate (1) the PD and LGD and historical loss rates and their significant assumptions, including average prepayment rates, the economic forecast scenario, macro-economic variables, the reasonable and supportable forecast periods, lengths of time and methods of reversion, and risk ratings, and (2) the qualitative factors and their significant assumptions. The assessment also included an evaluation of the conceptual soundness and performance of the PD and LGD and historical loss rate models.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the measurement of the collective ACL, including controls related to the:
design of the collective ACL methodology
continued use of the PD and LGD and historical loss rate models
determination and measurement of the significant assumptions used in the PD and LGD and historical loss rate models
continued use of the qualitative factors
performance monitoring of the PD and LGD and historical loss rate models
analysis of the overall ACL results, trends, and ratios
risk ratings assigned to loans.
We evaluated the Company’s process to develop the collective ACL estimate by testing certain sources of data, factors, and assumptions that the Company used, and considered the relevance and reliability of such data, factors, and assumptions. In addition, we involved credit risk professionals with specialized skills and knowledge, who assisted in:
evaluating the Company’s collective ACL methodology for compliance with U.S. generally accepted accounting principles
evaluating judgments made by the Company relative to the continued use and performance monitoring of the PD and LGD and historical loss rate models by comparing them to relevant Company specific metrics and trends and the applicable industry and regulatory practices
assessing the conceptual soundness and performance testing of the PD and LGD and historical loss rate models by inspecting the model documentation to determine whether the models are suitable for their intended use
evaluating the methodology used to develop the economic forecast scenario and underlying assumptions by comparing it to the Company’s business environment and relevant industry practices
testing the historical credit cycle period and evaluating the length of the reasonable and supportable forecast period by comparing to specific portfolio risk characteristics and trends
testing individual risk ratings for a selection of commercial and industrial and commercial real estate loans by evaluating the financial performance of the borrower, sources of repayment, and any relevant guarantees or underlying collateral
evaluating the methodology used to develop the qualitative factors and the effect of those factors on the collective ACL compared with relevant credit risk factors and consistency with credit trends and identified limitations of the underlying quantitative models.
Fair value measurement of acquired loans and the core deposit intangible in the acquisition of Heartland Financial USA, Inc. (HTLF)
As discussed in Note 20 to the consolidated financial statements, on January 31, 2025, the Company completed its acquisition of Heartland Financial USA, Inc. The transaction was accounted for as a business combination and the assets acquired and liabilities assumed are required to be measured at fair value at the date of acquisition under the purchase method of accounting. The Company acquired loans with a fair value of $9.8 billion and established a core deposit intangible (CDI) asset with a fair value of $474.1 million. The fair value of the acquired loans is based on a discounted cash flow method that considered the loans’ underlying characteristics including account type, remaining terms of loan, annual interest rates or coupon, fixed or variable interest rates, past delinquencies, risk ratings, timing of principal and interest payments, current market rates, loan to value ratios, loss exposure, more specifically the probability of default and loss given default, and remaining balance. The fair value of the CDI asset is estimated using a net cost savings method, a variation of the income approach. This approach considers expected client attrition rates, average life and balance inflation, alternative cost of funds, the interest cost and net maintenance cost associated with the client deposit base, and a discount rate used to discount the future economic benefits of the core deposit intangible asset to present value.
We identified the evaluation of the fair value measurement of the acquired loans and CDI asset as a critical audit matter. A high degree of audit effort, including specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment of the fair value measurements due to significant measurement uncertainty. Specifically, the assessment of the fair value measurements involved an evaluation of the valuation methods and certain assumptions, including the risk ratings, probability of default rates, and loss given default rates for the acquired loans; and the expected client attrition rates for the CDI asset. Changes in the assumptions could have a significant impact on the estimated fair values.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the fair value measurement of the acquired loans and the CDI asset, including controls related to the:
development of the valuation methods
determination of the risk ratings, probability of default rates, and loss given default rates for the acquired loans
determination of the expected client attrition rates for the CDI asset.
We evaluated the Company’s process to develop the fair values of the acquired loans and the CDI asset by testing certain sources of data and assumptions that the Company used and considered the relevance and reliability of such data and assumptions. We involved valuation and credit risk professionals with specialized skills and knowledge, who assisted in evaluating the valuation methods used by the Company to estimate the fair values of acquired loans and CDI asset for compliance with U.S. generally accepted accounting principles:
Specific to the acquired loans:
developing independent ranges of fair value for acquired loans, including the development of independent assumptions for probability of default rates and loss given default rates
assessing the Company’s estimate of fair value for acquired loans by comparing them to the independently developed ranges
testing individual risk ratings for a selection of acquired loans by evaluating the financial performance of the borrower, sources of repayment, and any relevant guarantees or underlying collateral.
Specific to the CDI asset:
evaluating the expected client attrition rates by comparing historical experience and the specific facts and circumstances of the acquisition to market information from third-party sources.
/s/ KPMG LLP
We have served as the Company’s auditor since 2014.
Kansas City, Missouri
February 26, 2026
UMB FINANCIAL CORPORATION
CONSOLIDATED B ALANCE SHEETS
(dollars in thousands, except share and per share data)
December 31,
ASSETS
Loans
Allowance for credit losses on loans
Net loans
Loans held for sale
Securities:
Available for sale (amortized cost of $ 13,999,900 and $ 8,407,676 , respectively)
Held to maturity, net of allowance for credit losses of $ 1,684 and $ 2,645 , respectively (fair value of $ 5,250,465 and $ 4,748,938 , respectively)
Trading securities
Other securities
Total securities
Federal funds sold and securities purchased under agreements to resell
Interest-bearing due from banks
Cash and due from banks
Premises and equipment, net
Accrued income
Goodwill
Other intangibles, net
Other assets
Total assets
LIABILITIES
Deposits:
Noninterest-bearing demand
Interest-bearing demand and savings
Time deposits under $250,000
Time deposits of $250,000 or more
Total deposits
Federal funds purchased and repurchase agreements
Long-term debt
Accrued expenses and taxes
Other liabilities
Total liabilities
SHAREHOLDERS’ EQUITY
Series B Fixed-Rate Reset Non-Cumulative Perpetual Preferred stock, $ 0.01 par value; 30,000 authorized, issued and outstanding
Common stock, $ 1.00 par value; 160,000,000 and 80,000,000 shares authorized; 78,665,809 and 55,056,730 shares issued, 75,960,675 and 48,814,177 shares outstanding, at December 31, 2025 and December 2024, respectively
Capital surplus
Retained earnings
Accumulated other comprehensive loss, net
Treasury stock, 2,705,134 and 6,242,553 shares, at cost, respectively
Total shareholders' equity
Total liabilities and shareholders' equity
See Notes to Consolidated Financial Statements.
UMB FINANCIAL CORPORATION
CONSOLIDATED STAT EMENTS OF INCOME
(dollars in thousands, except share and per share data)
Year Ended December 31,
INTEREST INCOME
Loans
Securities:
Taxable interest
Tax-exempt interest
Total securities income
Federal funds and resell agreements
Interest-bearing due from banks
Trading securities
Total interest income
INTEREST EXPENSE
Deposits
Federal funds and repurchase agreements
Other
Total interest expense
Net interest income
Provision for credit losses
Net interest income after provision for credit losses
NONINTEREST INCOME
Trust and securities processing
Trading and investment banking
Service charges on deposit accounts
Insurance fees and commissions
Brokerage fees
Bankcard fees
Investment securities gains (losses), net
Other
Total noninterest income
NONINTEREST EXPENSE
Salaries and employee benefits
Occupancy, net
Equipment
Supplies and services
Marketing and business development
Processing fees
Legal and consulting
Bankcard
Amortization of other intangible assets
Regulatory fees
Other
Total noninterest expense
Income before income taxes
Income tax expense
NET INCOME
Less: Preferred dividends
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS
PER SHARE DATA
Net income per common share – basic
Net income per common share – diluted
Dividends per common share
Weighted average common shares outstanding – basic
Weighted average common shares outstanding – diluted
See Notes to Consolidated Financial Statements.
UMB FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands)
Year Ended December 31,
Net income
Other comprehensive income (loss), before tax:
Unrealized gains and losses on debt securities:
Change in unrealized holding gains and losses, net
Less: Reclassification adjustment for net (gains) losses included in net income
Amortization of net unrealized loss on securities transferred from available-for-sale to held-to-maturity
Change in unrealized gains and losses on debt securities
Unrealized gains and losses on derivative hedges:
Change in unrealized gains and losses on derivative hedges, net
Less: Reclassification adjustment for net losses (gains) included in net income
Change in unrealized gains and losses on derivative hedges
Other comprehensive income (loss), before tax
Income tax (expense) benefit
Other comprehensive income (loss)
Comprehensive income
See Notes to Consolidated Financial Statements.
UMB FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CHA NGES IN SHAREHOLDERS' EQUITY
(dollars in thousands, except per share data)
Preferred
Stock
Common
Stock
Capital
Surplus
Retained
Earnings
Accumulated Other Comprehensive (Loss) Income
Treasury
Stock
Total
Balance January 1, 2023
Total comprehensive income
Common dividends ($ 1.53 per share)
Purchase of treasury stock
Issuances of equity awards, net of forfeitures
Recognition of equity-based compensation
Sale of treasury stock
Exercise of stock options
Balance December 31, 2023
Total comprehensive income (loss)
Common dividends ($ 1.57 per share)
Purchase of treasury stock
Issuances of equity awards, net of forfeitures
Recognition of equity-based compensation
Sale of treasury stock
Exercise of stock options
Common stock issuance costs
Balance December 31, 2024
UMB FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(dollars in thousands, except per share data)
Preferred
Stock
Common
Stock
Capital
Surplus
Retained
Earnings
Accumulated Other Comprehensive (Loss) Income
Treasury
Stock
Total
Balance January 1, 2025
Total comprehensive income
Cash dividends declared:
Preferred dividends Series A ($ 350.00 per share)
Preferred dividends Series B ($ 458.54 per share)
Common dividends ($ 1.63 per share)
Purchase of treasury stock
Issuances of equity awards, net of forfeitures
Recognition of equity-based compensation
Sale of treasury stock
Exercise of stock options
Common stock issuance
Preferred stock issuance, net of issuance costs
Preferred stock redemption
Stock issuance for acquisition, net of issuance costs
Balance December 31, 2025
See Notes to Consolidated Financial Statements.
UMB FINANCIAL CORPORATION
CONSOLIDATED STATEM ENTS OF CASH FLOWS
(dollars in thousands)
Year Ended December 31,
OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses
Net (accretion) amortization of premiums and discounts from acquisition
Depreciation and amortization
Amortization of debt issuance costs
Deferred income tax expense (benefit)
Net decrease (increase) in trading securities and other earning assets
(Gains) losses on investment securities, net
Losses (gains) on sales of assets
Amortization of securities premiums, net of discount accretion
Originations of loans held for sale
Gains on sales of loans held for sale, net
Proceeds from sales of loans held for sale
Equity-based compensation
Changes in:
Accrued income
Accrued expenses and taxes
Other assets and liabilities, net
Net cash provided by operating activities
INVESTING ACTIVITIES
Securities held to maturity:
Maturities, calls and principal repayments
Purchases
Securities available for sale:
Sales
Maturities, calls and principal repayments
Purchases
Equity securities with readily determinable fair values:
Sales
Purchases
Equity securities without readily determinable fair values:
Sales
Maturities, calls and principal repayments
Purchases
Payment of tax equity investment commitments
Net increase in loans
Net (increase) decrease in fed funds sold and resell agreements
Net cash activity from acquisitions and divestitures
Net decrease (increase) in interest-bearing balances due from other financial institutions
Net purchases of bank premises and equipment
Purchases of bank-owned and company-owned life insurance
Proceeds from bank-owned and company-owned life insurance death benefit
Net cash used in investing activities
FINANCING ACTIVITIES
Net increase in demand and savings deposits
Net increase (decrease) increase in time deposits
Net increase (decrease) in fed funds purchased and repurchase agreements
Proceeds from short-term debt
Repayment of short-term debt
Repayment of long-term debt
Cash dividends paid
Payment of common stock issuance costs
Proceeds from exercise of stock options and sales of treasury shares
Purchases of treasury stock
Common stock issuance
Preferred stock issuance
Preferred stock redemption
Net cash provided by financing activities
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental disclosures:
Income tax payments
Total interest payments
Noncash disclosures:
Acquisition of tax equity investments
Commitment to fund tax equity investments
Transfer of loans to other real estate owned
Transfer of loans to other repossessed assets
Issuance of common stock as consideration for acquisition
Issuance of preferred stock as consideration for acquisition
Stock based compensation as consideration for acquisition
See Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
UMB Financial Corporation is a bank holding company, which offers a wide range of banking and other financial services to its customers through its branches and offices primarily in the Midwestern, Southwestern, and Western regions of the United States. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. These estimates and assumptions also impact reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Following is a summary of the more significant accounting policies to assist the reader in understanding the financial presentation.
Consolidation
The Company and its wholly owned subsidiaries are included in the Consolidated Financial Statements (references hereinafter to the Company in these Notes to Consolidated Financial Statements include wholly owned subsidiaries). Intercompany accounts and transactions have been eliminated in consolidation.
Business Combinations
The Company accounts for business combinations using the purchase method of accounting in accordance with FASB ASC Topic 805, Business Combinations , which requires assets acquired and liabilities assumed to be recognized at fair value as of the acquisition date.
On January 31, 2025 (Acquisition Date), the Company acquired Heartland Financial USA, Inc. (HTLF) pursuant to an Agreement and Plan of Merger, dated as of April 28, 2024 . See Note 20, “Acquisition” for additional information.
Revenue Recognition
Interest on loans and securities is recognized based on rate multiplied by the principal amount outstanding. This includes the impact of amortization of premiums and discounts. Interest accrual is discontinued when, in the opinion of management, the likelihood of collection becomes doubtful. Noninterest income is recognized when performance obligations are satisfied.
Cash and cash equivalents
Cash and cash equivalents include Cash and due from banks and amounts due from the FRB. Cash on hand, cash items in the process of collection, and amounts due from correspondent banks are included in Cash and due from banks. Amounts due from the FRB are interest-bearing for all periods presented and are included in the Interest-bearing due from banks line on the Company’s Consolidated Balance Sheets.
This table provides a summary of cash and cash equivalents as presented on the Consolidated Statements of Cash Flows as of December 31, 2025 and 2024 (in thousands) :
December 31,
Due from the FRB
Cash and due from banks
Cash and cash equivalents at end of year
Also included in the Interest-bearing due from banks line, but not considered cash and cash equivalents are interest-bearing accounts held at other financial institutions, which totaled $ 121.1 million and $ 110.8 million at December 31, 2025 and 2024 , respectively.
Loans and Loans Held for Sale
Loans are classified by the portfolio segments of commercial and industrial, specialty lending, commercial real estate, consumer real estate, consumer, credit cards, and leases and other.
A loan is considered to be collateral dependent when management believes it is probable that it will be unable to collect all principal and interest due according to the contractual terms of the loan. If a loan is collateral dependent, the Company records a valuation allowance equal to the carrying amount of the loan in excess of the present value of the estimated future cash flows discounted at the loan’s effective rate, based on the loan’s observable market price or the fair value of the collateral.
A loan is accounted for as a modification made to a borrower experiencing financial difficulty when a modification has been granted that is deemed concessionary and not temporary to a debtor experiencing financial difficulty. The Company’s modifications generally include interest rate adjustments, principal reductions, and amortization and maturity date extensions. These modifications allow the debtor short-term cash relief to allow them to improve their financial condition. If a loan modification is determined to be made to a borrower experiencing financial difficulty, the loan is considered to be collateral dependent and is evaluated for credit loss as part of the allowance for credit loss analysis.
Loans, including those that are considered to be collateral dependent, are evaluated regularly by management. Loans are considered delinquent when payment has not been received within 30 days of its contractual due date. Loans are placed on nonaccrual status when the collection of interest or principal is 90 days or more past due unless the loan is adequately secured and in the process of collection. When a loan is placed on nonaccrual status, any interest previously accrued but not collected is reversed against current income. Loans may be returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Interest payments received on nonaccrual loans are applied to principal unless the remaining principal balance has been determined to be fully collectible.
The adequacy of the ACL on loans is based on management’s judgment and continuous evaluation of the pertinent factors underlying the credit quality inherent in the loan portfolio. Consideration of quantitative and qualitative factors relevant to each specific segmentation of loans includes lifetime historical loss experience, the impact of the current economic environment, reasonable and supportable forecasts, and detailed analysis of loans determined to be collateral dependent. The actual losses incurred over the lifetime of the portfolio, notwithstanding such considerations, however, could differ from the amounts estimated by management.
The Company maintains an allowance for off-balance sheet credit exposures, to address the credit risk to which the Company is exposed via a contractual obligation to extend credit, unless that obligation is unconditionally cancelable by the Company. The allowance for off-balance sheet credit exposure is included in the Accrued expenses and taxes line item in the Consolidated Balance Sheets. In order to maintain the allowance for off-balance sheet items at an appropriate level, a provision to increase or reduce the allowance is included in the Provision for credit losses line item in the Company’s Consolidated Statements of Income. The allowance for off-balance sheet credit exposure is calculated by applying portfolio segment expected credit loss rates to the expected amount to be funded.
Loans held for sale are carried at the lower of aggregate cost or market value. Loan fees (net of certain direct loan origination costs) on loans held for sale are deferred until the related loans are sold or repaid. Gains or losses on loan sales are recognized at the time of sale and determined using the specific identification method.
Acquired Loans
Acquired loans are initially recorded at fair value. The Company’s accounting methods for acquired loans depends on whether or not the loan reflects more than insignificant credit deterioration since origination at the date of acquisition.
Non-Purchased Credit Deteriorated Loans
Non-purchased credit deteriorated (Non-PCD) loans do not reflect more than insignificant credit deterioration since origination at the date of acquisition. These loans are recorded at fair value and an increase to the allowance for credit losses (ACL) is recorded with a corresponding increase to the provision for credit losses at the date of
acquisition. The difference between fair value and the unpaid principal balance at the acquisition date is amortized or accreted to interest income over the contractual life of the loan using the effective interest method.
Purchased Credit Deteriorated Loans
Purchased loans that reflect a more than insignificant credit deterioration since origination at the date of acquisition are classified as purchased credit deteriorated (PCD) loans. PCD loans are recorded at fair value plus the ACL expected at the time of acquisition. Under this method, there is no provision for credit losses on acquisition of PCD loans. The non-credit-related difference between fair value and the unpaid principal balance at the acquisition date is amortized or accreted to interest income over the contractual life of the loan using the effective interest method.
Securities
Debt securities available for sale principally include U.S. Treasury and Agency securities, GSE mortgage-backed securities, certain securities of state and political subdivisions, corporates, and collateralized loan obligations. Debt securities classified as available for sale are measured at fair value. Unrealized holding gains and losses are excluded from earnings and reported in AOCI until realized.
Securities held to maturity are carried at amortized historical cost, net of the allowance for credit losses, based on management’s intention, and the Company’s ability to hold them to maturity. The Company classifies certain U.S. Treasury and Agency securities, GSE mortgage-backed securities, and securities of state and political subdivisions as held to maturity.
Trading securities, acquired for subsequent sale to customers, are carried at fair value. Market adjustments, fees and gains or losses on the sale of trading securities are considered to be a normal part of operations and are included in trading and investment banking income.
The gain or loss realized on the sale of securities classified as available for sale, as determined using the specific identification method for determining the cost of the securities sold, is computed with reference to its amortized cost and is included in current earnings.
Securities may be transferred from the available-for-sale classification to the held-to-maturity classification when the Company has the positive intent and ability to hold these securities to maturity. Transfers of securities are made at fair value at the time of transfer. The unrealized holding gain or loss at the time of transfer is retained in AOCI and amortized over the remaining life of the securities, offsetting the related amortization of discount or premium on the transferred securities. No gains or losses are recognized at the time of the transfer.
Equity-method investments
The Company accounts for certain other investments using equity-method accounting. For equity securities without readily determinable fair values, the Company’s proportionate share of the income or loss is recognized on a one-quarter lag. When transparency in pricing exists, other investments are considered equity securities with readily determinable fair values.
Goodwill and Other Intangibles
Goodwill is tested for impairment annually and more frequently whenever events or changes in circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying value. To test goodwill for impairment, the Company performs a qualitative assessment of each reporting unit. If the Company determines, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not greater than the carrying amount, the quantitative impairment test is not required. Otherwise, the Company compares the fair value of its reporting units to their carrying amounts to determine if an impairment exists and the amount of impairmentloss. An impairmentloss is measured as the excess of the carrying value of a reporting unit’s goodwill over its fair value.
No goodwill impairments were recognized in 2025, 2024, or 2023 . Other intangible assets, which relate to core deposits, non-compete agreements, and customer relationships, are amortized over their useful life. Intangible assets are evaluated for impairment when events or circumstances dictate. No intangible asset impairments were recognized in 2025, 2024, or 2023 . The Company does no t have any indefinite lived intangible assets.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation, which is computed primarily on the straight-line method. Premises are depreciated over 7 to 40 year lives, while equipment is depreciated over lives of 3 to 25 years . Gains and losses from the sale of Premises and equipment are included in Other noninterest income and Other noninterest expense, respectively.
Impairment of Long-Lived Assets
Long-lived assets, including Premises and equipment, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or group of assets may not be recoverable. The impairment review includes a comparison of future cash flows expected to be generated by the asset or group of assets to their current carrying value. If the carrying value of the asset or group of assets exceeds expected cash flows (undiscounted and without interest charges), an impairmentloss is recognized to the extent the carrying value exceeds fair value. No impairments were recognized in 2025, 2024, or 2023 .
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are measured based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the periods in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The provision for deferred income taxes represents the change in the deferred income tax accounts during the year excluding the tax effect of the change in net unrealized gain (loss) on securities available for sale and certain derivative items.
The Company records deferred tax assets to the extent these assets will more likely than not be realized. All available evidence is considered in making such determination, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. A valuation allowance is recorded for the portion of deferred tax assets that are not more-likely-than-not to be realized, and any changes to the valuation allowance are recorded in income tax expense.
The Company records the financial statement effects of an income tax position when it is more likely than not, based on the technical merits, that it will be sustained upon examination. A tax position that meets the more-likely-than-not recognition threshold is measured and recorded as the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with a taxing authority. Previously recognized tax positions are derecognized in the first period in which it is no longer more likely than not that the tax position will be sustained. The benefit associated with previously unrecognized tax positions are generally recognized in the first period in which the more-likely-than-not threshold is met at the reporting date, the tax matter is ultimately settled through negotiation or litigation, or when the related statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired. When the Company determines that an unrecognized tax benefit liability is no longer necessary, the liability is reversed, and a tax benefit is recognized in the period in which it is determined that the unrecognized tax benefit liability is no longer necessary. The recognition, derecognition and measurement of tax positions are based on management’s best judgment given the facts, circumstance and information available at the reporting date.
The Company recognizes accrued interest related to unrecognized tax benefits in interest expense and penalties in other noninterest expense. Accrued interest and penalties are included within the related liability lines in the Consolidated Balance Sheets. For the year ended December 31, 2025 , the Company has recognized an immaterial amount in interest and penalties related to the unrecognized tax benefits.
Derivatives
The Company records all derivatives on the Consolidated Balance Sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Currently, 15 of the Company’s derivatives are designated in qualifying hedging relationships. The remainder of the Company’s derivatives are not
designated in qualifying hedging relationships, as the derivatives are not used to manage risks within the Company’s assets or liabilities. All changes in fair value of the Company’s non-designated derivatives and fair value hedges are recognized directly in earnings. Changes in fair value of the Company’s cash flow hedges are recognized in AOCI and are reclassified to earnings when the hedged transaction affects earnings.
Per Share Data
Basic net income per common share is computed using net income available to common shareholders and the weighted average number of shares of common stock outstanding during each period. Diluted net income per common share is determined using net income available to common shareholders and the weighted average common shares and assumed incremental common shares issued.
The following table provides the amounts used in the determination of basic and diluted net income per common share at December 31, 2025, 2024, and 2023 (in thousands, except share and per share data) :
December 31,
Net income
Less: Preferred dividends
Net income available to common shareholders
Weighted average common shares outstanding for basic earnings per share
Assumed incremental common shares issued upon vesting of outstanding restricted stock units
Weighted average common shares for diluted earnings per share
Net income per common share – basic
Net income per common share – diluted
Number of antidilutive restricted stock units excluded from diluted earnings per share computation
Number of antidilutive stock options excluded from diluted earnings per share computation
Accounting for Stock-Based Compensation
The Company measures the cost of employee services received in exchange for an award of equity instruments based on the fair value of the award on the date of the grant. For stock options, restricted stock, and service-based restricted stock unit awards, the grant date fair value is estimated using either an option-pricing model which is consistent with the terms of the award or an observed market price, if such a price exists. For performance-based restricted stock unit awards, the grant date fair value is based on the quoted price of the Company’s common stock on the grant date less the present value of expected dividends not received during the vesting period. Such cost is generally recognized over the vesting period during which an employee is required to provide service in exchange for the award and, in some cases, when performance metrics are met. The Company accounts for forfeitures of stock-based compensation on an actual basis as they occur.
2. NEW ACCOUNTING PRONOUNCEMENTS
Segment Reporting In November 2023, the FASB issued Accounting Standards Update (ASU) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” The ASU requires expanded segment disclosures, including disclosure of significant segment expenses and other segment items on an annual and interim basis. The Company adopted the amended guidance for the annual financial statements in 2024 and the interim disclosure requirements will be effective for interim periods beginning January 1, 2025. The adoption of this amendment did not have any impact on the Consolidated Financial Statements aside from additional disclosures. See Note 12, “Business Segment Reporting” for related disclosures.
Income Taxes In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The ASU is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in this update require additional disclosures primarily related to the rate
reconciliation and income taxes paid information. The amendments in this update are effective for fiscal years beginning after December 15, 2024. The amendments in this update were adopted on January 1, 2025. The adoption of this accounting pronouncement had no impact on the Consolidated Financial Statements aside from additional disclosures. See Note 16, “Income Taxes” for related disclosures.
3. LOANS AND ALLOWANCE FOR CREDIT LOSSES
Loan Origination/Risk Management
The Company has certain lending policies and procedures in place that are designed to minimize the level of risk within the loan portfolio. Diversification of the loan portfolio manages the risk associated with fluctuations in economic conditions. Authority levels are established for the extension of credit to ensure consistency throughout the Company. It is necessary that policies, processes, and practices implemented to control the risks of individual credit transactions and portfolio segments are sound and adhered to. The Company maintains an independent loan review department that reviews and validates the risk assessment on a continual basis. Management regularly evaluates the results of the loan reviews. The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel, as well as the Company’s policies and procedures.
Commercial and industrial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably and prudently expand its business. Commercial loans are made based on the identified cash flows of the borrower and on the underlying collateral provided by the borrower. The cash flows of the borrower, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts from its customers. Beginning with the third quarter 2025, commercial and industrial loans include all loans to Non-Depository Financial Institutions (NDFIs), which includes a wide range of financial entities that provide services similar to those of traditional banks but do not accept deposits from the general public and are not regulated by the same federal banking agencies. Previously reported balances have been reclassified for purposes of comparability.
Specialty lending loans include Asset-based loans, which are offered primarily in the form of revolving lines of credit to commercial borrowers that do not generally qualify for traditional bank financing. Asset-based loans are underwritten based primarily upon the value of the collateral pledged to secure the loan, rather than on the borrower’s general financial condition. The Company utilizes pre-loan due diligence techniques, monitoring disciplines, and loan management practices common within the asset-based lending industry to underwrite loans to these borrowers.
Commercial real estate loans are subject to underwriting standards and processes similar to commercial loans, in addition to those of real estate loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts, and the repayment of these loans is largely dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. The Company requires that an appraisal of the collateral be made at origination and on an as-needed basis, in conformity with current market conditions and regulatory requirements. The underwriting standards address both owner and non-owner-occupied real estate. Also included in Commercial real estate are Construction loans that are underwritten using feasibility studies, independent appraisal reviews, sensitivity analysis or absorption and lease rates, and financial analysis of the developers and property owners. Construction loans are based upon estimates of costs and value associated with the complete project. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their repayment being sensitive to interest rate changes, governmental regulation of real property, economic conditions, completion of the construction project, and the availability of long-term financing.
Consumer real estate loans, including residential real estate and home equity loans, are underwritten based on the borrower’s loan-to-value percentage, collection remedies, and overall credit history.
Consumer loans are underwritten based on the borrower’s repayment ability. The Company monitors delinquencies on all of its consumer loans and leases. The underwriting and review practices combined with the relatively small loan amounts that are spread across many individual borrowers, minimizes risk. Consumer loans and leases that are 90 days past due or more are considered non-performing.
Credit cards include both commercial and consumer credit cards. Commercial credit cards are generally unsecured and are underwritten with criteria similar to commercial loans, including an analysis of the borrower’s cash flow, available business capital, and overall creditworthiness of the borrower. Consumer credit cards are underwritten based on the borrower’s repayment ability. The Company monitors delinquencies on all of its consumer credit cards and periodically reviews the distribution of credit scores relative to historical periods to monitor credit risk on its consumer credit card loans. During the first quarter of 2024, the Company purchased a co-branded credit card portfolio. The purchase included $ 109.4 million in credit card receivables.
Credit risk is a potential loss resulting from nonpayment of either the primary or secondary exposure. Credit risk is mitigated with formal risk management practices and a thorough initial credit-granting process including consistent underwriting standards and approval process. Control factors or techniques to minimize credit risk include knowing the client, understanding total exposure, analyzing the client and debtor’s financial capacity, and monitoring the client’s activities. Credit risk and portions of the portfolio risk are managed through concentration considerations, average risk ratings, and other aggregate characteristics.
The loan portfolio is comprised of loans originated by the Company and purchased loans in connection with the Company’s acquisition of HTLF on January 31, 2025. The purchased loans were recorded at estimated fair value at the Acquisition Date with no carryover of the related allowance. As of the Acquisition Date, loans from the HTLF acquisition had a fair value of $ 9.7 billion, net of allowance for credit losses on PCD loans. See Note 20, “Acquisition” for additional information.
Loan Aging Analysis
The following tables provide a summary of loan classes and an aging of past due loans at December 31, 2025 and 2024 (in thousands):
December 31, 2025
Days Past
Due and
Accruing
Greater
than 90
Days Past
Due and
Accruing
Nonaccrual
Loans
Total
Past Due
Current
Total
Loans
Loans
Commercial and industrial
Specialty lending
Commercial real estate
Consumer real estate
Consumer
Credit cards
Leases and other
Total loans
December 31, 2024
Days Past
Due and
Accruing
Greater
than 90
Days Past
Due and
Accruing
Nonaccrual
Loans
Total
Past Due
Current
Total
Loans
Loans
Commercial and industrial
Specialty lending
Commercial real estate
Consumer real estate
Consumer
Credit cards
Leases and other
Total loans
The Company sold consumer real estate loans with proceeds of $ 105.4 million, $ 91.1 million, and $ 67.9 million in the secondary market without recourse during the periods ended December 31, 2025, 2024, and 2023, respectively.
The Company has ceased the recognition of interest on loans with a carrying value of $ 144.7 million and $ 19.3 million at December 31, 2025 and 2024 , respectively. Restructured loans totaled $ 169 thousand and $ 196 thousand at December 31, 2025 and 2024, respectively. Loans 90 days past due and still accruing interest amounted to $ 18.4 million and $ 7.6 million at December 31, 2025 and 2024, respectively. All interest accrued but not received for loans placed on nonaccrual is reversed against interest income. There was an insignificant amount of interest reversed related to loans on nonaccrual during 2025 and 2024. Nonaccrual loans with no related allowance for credit losses total ed $ 76.8 million and $ 19.3 million at December 31, 2025 and 2024, respectively.
The following tables provide the amortized cost of nonaccrual loans with no related allowance for credit losses by loan class at December 31, 2025 and 2024 (in thousands):
December 31, 2025
Nonaccrual
Loans
Amortized Cost of Nonaccrual Loans with no related Allowance
Loans
Commercial and industrial
Specialty lending
Commercial real estate
Consumer real estate
Consumer
Credit cards
Leases and other
Total loans
December 31, 2024
Nonaccrual
Loans
Amortized Cost of Nonaccrual Loans with no related Allowance
Loans
Commercial and industrial
Specialty lending
Commercial real estate
Consumer real estate
Consumer
Credit cards
Leases and other
Total loans
Amortized Cost
The following tables provide a summary of the amortized cost balance of each of the Company’s loan classes disaggregated by collateral type and origination year as of December 31, 2025 and 2024 as well as the gross charge-offs by loan class and origination year for the year ended December 31, 2024 (in thousands):
December 31, 2025
Amortized Cost Basis by Origination Year - Term Loans
Loan Segment
and Type
Prior
Amortized Cost - Revolving Loans
Amortized Cost - Revolving Loans Converted to Term Loans
Total
Commercial and industrial:
Equipment/Accounts Receivable/Inventory
Agriculture
NDFIs
Overdrafts
Total Commercial and industrial
Current period charge-offs
Specialty lending:
Asset-based lending
Total Specialty lending
Current period charge-offs
Commercial real estate:
Owner-occupied
Non-owner-occupied
Farmland
5+ Multi-family
1-4 Family construction
General construction
Total Commercial real estate
Current period charge-offs
Consumer real estate:
HELOC
First lien: 1-4 family
Junior lien: 1-4 family
Total Consumer real estate
Current period charge-offs
Consumer:
Revolving line
Auto
Other
Total Consumer
Current period charge-offs
Credit cards:
Consumer
Commercial
Total Credit cards
Current period charge-offs
Leases and other:
Leases
Other
Total Leases and other
Current period charge-offs
Total loans
December 31, 2024
Amortized Cost Basis by Origination Year - Term Loans
Loan Segment
and Type
Prior
Amortized Cost - Revolving Loans
Amortized Cost - Revolving Loans Converted to Term Loans
Total
Commercial and industrial:
Equipment/Accounts Receivable/Inventory
Agriculture
NDFIs
Overdrafts
Total Commercial and industrial
Specialty lending:
Asset-based lending
Total Specialty lending
Commercial real estate:
Owner-occupied
Non-owner-occupied
Farmland
5+ Multi-family
1-4 Family construction
General construction
Total Commercial real estate
Consumer real estate:
HELOC
First lien: 1-4 family
Junior lien: 1-4 family
Total Consumer real estate
Consumer:
Revolving line
Auto
Other
Total Consumer
Credit cards:
Consumer
Commercial
Total Credit cards
Leases and other:
Leases
Other
Total Leases and other
Total loans
Accrued interest on loans totaled $ 176.1 mi llion and $ 125.7 million as of December 31, 2025 and 2024, respectively, and is included in the Accrued income line on the Company’s Consolidated Balance Sheets. The total amount of accrued interest is excluded from the amortized cost basis of loans presented above. Further, the Company has elected not to measure an allowance for credit losses for accrued interest receivable.
Credit Quality Indicators
As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to the risk grading of specified classes of loans, net charge-offs, non-performing loans, and general economic conditions.
The Company utilizes a risk grading matrix to assign a rating to each of its commercial, commercial real estate, and construction real estate loans. Changes in credit risk are monitored on a continuous basis and changes in risk ratings are made when identified. The loan ratings are summarized into the following categories: Pass, Special Mention, Substandard, and Doubtful. Any loan not classified in one of the categories described below is considered to be a Pass loan. A description of the general characteristics of the loan rating categories is as follows:
Special Mention – This rating reflects a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or the borrower’s credit position at some future date. The rating
is not adversely classified and does not expose an institution to sufficient risk to warrant adverse classification.
Substandard – This rating represents an asset inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Loans in this category are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified as substandard.
Doubtful – This rating represents an asset that has all the weaknesses inherent in an asset classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, based on currently existing facts, conditions and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors, which may work to the advantage of strengthening the asset, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors include proposed merger, acquisition, liquidation procedures, capital injection, or perfecting liens.
Commercial and industrial
A discussion of the credit quality indicators that impact each type of collateral securing Commercial and industrial loans is included below:
Equipment, accounts receivable, and inventory General commercial and industrial loans are secured by working capital assets and non-real estate assets. The general purpose of these loans is for financing capital expenditures and current operations for commercial and industrial entities. These assets are short-term in nature. In the case of accounts receivable and inventories, the repayment of debt is reliant upon converting assets into cash or through goods and services being sold and collected. Collateral-based risk is due to aged short-term assets, which can be indicative of underlying issues with the borrower and lead to the value of the collateral being overstated.
Agriculture Agricultural loans are secured by non-real estate agricultural assets. These include shorter-term assets such as equipment, crops, and livestock. The risks associated with loans to finance crops or livestock include the borrower’s ability to successfully raise and market the commodity. Adverse weather conditions and other natural perils can dramatically affect farmers’ or ranchers’ production and ability to service debt. Volatile commodity prices present another significant risk for agriculture borrowers. Market price volatility and production cost volatility can affect both revenues and expenses.
Non-Depository Financial Institutions NDFI loans are secured by working capital assets and non-real estate assets. The general purpose of these loans is for financing capital expenditures and current operations. The repayment of debt is reliant upon converting assets into cash or through services being sold and collected. Collateral-based risk is due to aged short-term assets, which can be indicative of underlying issues with the borrower and lead to the value of the collateral being overstated. Other risks consist of collateral that is secured by the stock of a NDFI, which can be unlisted stock with a limited market for the stock, or volatility of asset values driven by market performance.
Overdrafts Commercial overdrafts are typically short-term and unsecured. Some commercial borrowers tie their overdraft obligation to their line of credit, so any draw on the line of credit will satisfy the overdraft.
Based on the factors noted above for each type of collateral, the Company assigns risk ratings to borrowers based on their most recently assessed financial position.
The following tables provide a summary of the amortized cost balance by collateral type and risk rating as of December 31, 2025 and 2024 (in thousands):
December 31, 2025
Amortized Cost Basis by Origination Year - Term Loans
Risk by Collateral
Prior
Amortized Cost - Revolving Loans
Amortized Cost - Revolving Loans Converted to Term Loans
Total
Equipment/Accounts Receivable/Inventory
Pass
Special Mention
Substandard
Doubtful
Total Equipment/Accounts Receivable/Inventory
Agriculture
Pass
Special Mention
Substandard
Doubtful
Total Agriculture
NDFIs
Pass
Special Mention
Substandard
Doubtful
Total NDFIs
December 31, 2024
Amortized Cost Basis by Origination Year - Term Loans
Risk by Collateral
Prior
Amortized Cost - Revolving Loans
Amortized Cost - Revolving Loans Converted to Term Loans
Total
Equipment/Accounts Receivable/Inventory
Pass
Special Mention
Substandard
Doubtful
Total Equipment/Accounts Receivable/Inventory
Agriculture
Pass
Special Mention
Substandard
Doubtful
Total Agriculture
NDFIs
Pass
Special Mention
Substandard
Doubtful
Total NDFIs
Specialty lending
A discussion of the credit quality indicators that impact each type of collateral securing Specialty loans is included below:
Asset-based lending General asset-based loans are secured by accounts receivable, inventory, equipment, and real estate. The purpose of these loans is for financing current operations for commercial customers. The repayment of debt is reliant upon collection of the accounts receivable within 30 to 90 days or converting assets into cash or through goods and services being sold and collected. The Company tracks each individual borrower credit risk based on their loan to collateral position. Any borrower position where the underlying value of collateral is below the fair value of the loan is considered out-of-margin and inherently higher risk.
The following table provides a summary of the amortized cost balance by risk rating for asset-based loans as of December 31, 2025 and 2024 (in thousands):
Asset-based lending
Risk
December 31, 2025
December 31, 2024
In-margin
Out-of-margin
Total
Commercial real estate
A discussion of the credit quality indicators that impact each type of collateral securing Commercial real estate loans is included below:
Owner-occupied Owner-occupied loans are secured by commercial real estate. These loans are often longer tenured and susceptible to multiple economic cycles. The loans rely on the owner-occupied operations to service debt which cover a broad spectrum of industries. Real estate debt can carry a significant amount of leverage for a borrower to maintain.
Non-owner-occupied Non-owner-occupied loans are secured by commercial real estate. These loans are often longer tenured and susceptible to multiple economic cycles. The key element of risk in this type of lending is the cyclical nature of real estate markets. Although national conditions affect the overall real estate industry, the effect of national conditions on local markets is equally important. Factors such as unemployment rates, consumer demand, household formation, and the level of economic activity can vary widely from state to state and among metropolitan areas. In addition to geographic considerations, markets can be defined by property type. While all sectors are influenced by economic conditions, some sectors are more sensitive to certain economic factors than others.
Farmland Farmland loans are secured by real estate used for agricultural purposes such as crop and livestock production. Assets used as collateral are long-term assets that carry the ability to have longer amortizations and maturities. Longer terms carry the risk of added susceptibility to market conditions. The limited purpose of some Agriculture-related collateral affects credit risk because such collateral may have limited or no other uses to support values when loan repayment problems emerge.
5+ Multi-family 5+ multi-family loans are secured by a multi-family residential property. The primary risks associated with this type of collateral are largely driven by economic conditions. The national and local market conditions can change with unemployment rates or competing supply of multi-family housing. Tenants may not be able to afford their housing or have better options and this can result in increased vacancy. Rents may need to be lowered to fill apartment units. Increased vacancy and lower rental rates not only drive the borrower’s ability to repay debt but also contribute to how the collateral is valued.
1-4 Family construction 1-4 family construction loans are secured by 1-4 family residential real estate and are in the process of construction or improvements being made. The predominant risk inherent to this portfolio is the risk associated with a borrower’s ability to successfully complete a project on time and within budget. Market conditions also play an important role in understanding the risk profile. Risk from adverse changes in market conditions from the start of development to completion can result in deflated collateral values.
General construction General construction loans are secured by commercial real estate in process of construction or improvements being made and their repayment is dependent on the collateral’s completion. Construction lending presents unique risks not encountered in term financing of existing real estate. The predominant risk inherent to this portfolio is the risk associated with a borrower’s ability to successfully complete a project on time and within budget. Commercial properties under construction are susceptible to market and economic conditions. Demand from prospective customers may erode after construction begins because of a general economic slowdown or an increase in the supply of competing properties.
Based on the factors noted above for each type of collateral, the Company assigns risk ratings to borrowers based on their most recently assessed financial position.
The following tables provide a summary of the amortized cost balance by collateral type and risk rating as of December 31, 2025 and 2024 (in thousands):
December 31, 2025
Amortized Cost Basis by Origination Year - Term Loans
Risk by Collateral
Prior
Amortized Cost - Revolving Loans
Amortized Cost - Revolving Loans Converted to Term Loans
Total
Owner-occupied
Pass
Special Mention
Substandard
Doubtful
Total Owner-occupied
Non-owner-occupied
Pass
Special Mention
Substandard
Doubtful
Total Non-owner-occupied
Farmland
Pass
Special Mention
Substandard
Doubtful
Total Farmland
5+ Multi-family
Pass
Special Mention
Substandard
Doubtful
Total 5+ Multi-family
1-4 Family construction
Pass
Special Mention
Substandard
Doubtful
Total 1-4 Family construction
General construction
Pass
Special Mention
Substandard
Doubtful
Total General construction
December 31, 2024
Amortized Cost Basis by Origination Year - Term Loans
Risk by Collateral
Prior
Amortized Cost - Revolving Loans
Amortized Cost - Revolving Loans Converted to Term Loans
Total
Owner-occupied
Pass
Special Mention
Substandard
Doubtful
Total Owner-occupied
Non-owner-occupied
Pass
Special Mention
Substandard
Doubtful
Total Non-owner-occupied
Farmland
Pass
Special Mention
Substandard
Doubtful
Total Farmland
5+ Multi-family
Pass
Special Mention
Substandard
Doubtful
Total 5+ Multi-family
1-4 Family construction
Pass
Special Mention
Substandard
Doubtful
Total 1-4 Family construction
General construction
Pass
Special Mention
Substandard
Doubtful
Total General construction
Consumer real estate
A discussion of the credit quality indicators that impact each type of collateral securing Consumer real estate loans is included below:
HELOC HELOC loans are revolving lines of credit secured by 1-4 family residential property. The primary risk is the borrower’s inability to repay debt. Revolving notes are often associated with HELOCs that can be secured by real estate without a 1st lien priority. Collateral is susceptible to market volatility impacting home values or economic downturns.
First lien: 1-4 family First lien 1-4 family loans are secured by a first lien on 1-4 family residential property. These term loans carry longer maturities and amortizations. The longer tenure exposes the borrower to multiple economic cycles, coupled with longer amortizations that result in smaller principal reduction early in the life of the loan. Collateral is susceptible to market volatility impacting home values.
Junior lien: 1-4 family Junior lien 1-4 family loans are secured by a junior lien on 1-4 family residential property. The Company’s primary risk is the borrower’s inability to repay debt and not being in a first lien position. Collateral is susceptible to market volatility impacting home values or economic downturns.
A borrower is considered non-performing if the Company has ceased the recognition of interest and the loan is placed on non-accrual. Charge-offs and borrower performance are tracked on a loan origination vintage basis. Certain vintages, based on their maturation cycle, could be at higher risk due to collateral-based risk factors.
The following tables provide a summary of the amortized cost balance by collateral type and risk rating as of December 31, 2025 and 2024 (in thousands):
December 31, 2025
Amortized Cost Basis by Origination Year - Term Loans
Risk by Collateral
Prior
Amortized Cost - Revolving Loans
Amortized Cost - Revolving Loans Converted to Term Loans
Total
HELOC
Performing
Non-performing
Total HELOC
First lien: 1-4 family
Performing
Non-performing
Total First lien: 1-4 family
Junior lien: 1-4 family
Performing
Non-performing
Total Junior lien: 1-4 family
December 31, 2024
Amortized Cost Basis by Origination Year - Term Loans
Risk by Collateral
Prior
Amortized Cost - Revolving Loans
Amortized Cost - Revolving Loans Converted to Term Loans
Total
HELOC
Performing
Non-performing
Total HELOC
First lien: 1-4 family
Performing
Non-performing
Total First lien: 1-4 family
Junior lien: 1-4 family
Performing
Non-performing
Total Junior lien: 1-4 family
Consumer
A discussion of the credit quality indicators that impact each type of collateral securing Consumer loans is included below:
Revolving line Consumer Revolving lines of credit are secured by consumer assets other than real estate. The primary risk associated with this collateral is related to market volatility and the value of the underlying financial assets.
Auto Direct consumer auto loans are secured by new and used consumer vehicles. The primary risk with this collateral class is the rate at which the collateral depreciates.
Other This category includes Other consumer loans made to an individual. The primary risk for this category is for those loans where the loan is unsecured. This collateral type also includes other unsecured lending such as consumer overdrafts.
A borrower is considered non-performing if the Company has ceased the recognition of interest and the loan is placed on non-accrual. Charge-offs and borrower performance are tracked on a loan origination vintage basis. Certain vintages, based on their maturation cycle, could be at higher risk due to collateral-based risk factors.
The following tables provide a summary of the amortized cost balance by collateral type and risk rating as of December 31, 2025 and 2024 (in thousands):
December 31, 2025
Amortized Cost Basis by Origination Year - Term Loans
Risk by Collateral
Prior
Amortized Cost - Revolving Loans
Amortized Cost - Revolving Loans Converted to Term Loans
Total
Revolving line
Performing
Non-performing
Total Revolving line
Auto
Performing
Non-performing
Total Auto
Other
Performing
Non-performing
Total Other
December 31, 2024
Amortized Cost Basis by Origination Year - Term Loans
Risk by Collateral
Prior
Amortized Cost - Revolving Loans
Amortized Cost - Revolving Loans Converted to Term Loans
Total
Revolving line
Performing
Non-performing
Total Revolving line
Auto
Performing
Non-performing
Total Auto
Other
Performing
Non-performing
Total Other
Credit cards
A discussion of the credit quality indicators that impact Credit card loans is included below:
Consumer Consumer credit card loans are revolving loans made to individuals. The primary risk associated with this collateral class is credit card debt which is generally unsecured; therefore, repayment depends primarily on a borrower’s willingness and capacity to repay. The highly competitive environment for credit card lending provides consumers with ample opportunity to hold several credit cards from different issuers and to pay only minimum monthly payments on outstanding balances. In such an environment, borrowers may become over-extended and unable to repay, particularly in times of an economic downturn or a personal catastrophic event.
The consumer credit card portfolio is segmented by borrower payment activity. Transactors are defined as accounts that pay off their balance by the end of each statement cycle. Revolvers are defined as an account that carries a balance from one statement cycle to the next. These accounts incur monthly finance charges, and, sometimes, late fees. Revolvers are inherently higher risk and are tracked by credit score.
As of December 31, 2025 , a co-branded credit card portfolio is also segmented between current and significantly delinquent loans, with accounts being considered significantly delinquent after 60 days . Current loans are segmented by borrower payment activity as described above. Significantly delinquent loans are tracked by the number of cycles past due.
Commercial Commercial credit card loans are revolving loans made to small and commercial businesses. The primary risk associated with this collateral class is credit card debt which is generally unsecured; therefore,
repayment depends primarily on a borrower’s willingness and capacity to repay. Borrowers may become over-extended and unable to repay, particularly in times of an economic downturn or a catastrophic event.
The commercial credit card portfolio is segmented by current and past due payment status. A borrower is past due after 30 days. In general, commercial credit card customers do not have incentive to hold a balance resulting in paying interest on credit card debt as commercial customers will typically have other debt obligations with lower interest rates in which they can utilize for capital.
The following table provides a summary of the amortized cost balance of consumer credit cards by risk rating as of December 31, 2025 and 2024 (in thousands):
Consumer
Risk
December 31, 2025
December 31, 2024
Transactor accounts
Revolver accounts (by Credit score):
Less than 600
Total
The following table provides a summary of the amortized cost balance of consumer credit cards considered significantly delinquent for a co-branded portfolio by delinquent cycles as of December 31, 2025 (in thousands):
Consumer
Risk
December 31, 2025
61-90 Days
91-120 Days
121-150 Days
151-180 Days
Total
The following table provides a summary of the amortized cost balance of commercial credit cards by risk rating as of December 31, 2025 and 2024 (in thousands):
Commercial
Risk
December 31, 2025
December 31, 2024
Current
Past Due
Total
Leases and other
A discussion of the credit quality indicators that impact each type of collateral securing Leases and other loans is included below:
Leases Leases are either loans to individuals for household, family and other personal expenditures or are loans related to all other direct financing and leveraged leases on property for leasing to lessees other than for household, family and other personal expenditure purposes. All leases are secured by the lease between the lessor and the lessee. These assignments grant the creditor a security interest in the rent stream from any lease, an important source of cash to pay the note in case of the borrower’s default.
Other Other loans are loans that are obligations of states and political subdivisions in the U.S., loans for purchasing or carrying securities, or all other non-consumer loans. Risk associated with other loans is tied to the underlying collateral by each type of loan. Collateral is generally equipment, accounts receivable, inventory, 1-4 family residential construction and is susceptible to the same risks mentioned with those collateral types previously.
Based on the factors noted above for each type of collateral, the Company assigns risk ratings to borrowers based on their most recently assessed financial position.
The following table provides a summary of the amortized cost balance by collateral type and risk rating as of December 31, 2025 and 2024 (in thousands):
Leases
Other
Risk
December 31, 2025
December 31, 2024
December 31, 2025
December 31, 2024
Pass
Special Mention
Substandard
Doubtful
Total
Allowance for Credit Losses
The ACL is a valuation account that is deducted from loans’ and HTM securities’ amortized cost bases to present the net amount expected to be collected on the instrument. Loans and HTM securities are charged off against the ACL when management believes the balance has become uncollectible. Expected recoveries are included in the allowance and do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.
Management estimates the allowance balance using relevant available information, from internal and external sources, related to past events, current conditions, and reasonable and supportable economic forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses and is tracked over an economic cycle to capture a ‘through the cycle’ loss history. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in portfolio industry-based segmentation, risk rating and credit score changes, average prepayment rates, changes in environmental conditions, or other relevant factors. For economic forecasts, the Company uses the Moody’s baseline scenario. The Company has developed a dynamic reasonable and supportable forecast period that ranges from one to three years and changes based on economic conditions. The Company’s reasonable and supportable forecast period is one year . After the reasonable and supportable forecast period, the Company reverts to historical losses. The reversion method applied to each portfolio can either be cliff in which the Company reverts immediately to historical losses or straight-line over four quarters.
The ACL is measured on a collective (pool) basis when similar risk characteristics exist. The ACL also incorporates qualitative factors which represent adjustments to historical credit loss experience for items such as concentrations of credit and results of internal loan review. The Company has identified the following portfolio segments and measures the allowance for credit losses using the following methods. The Company’s portfolio segmentation consists of Commercial and industrial, Specialty lending, Commercial real estate, Consumer real estate, Consumer, Credit cards, Leases and other, and Held-to-maturity securities. Multiple modeling techniques are used to measure credit losses based on the portfolio.
The ACL for Commercial and industrial and Leases and other segments are measured using a probability of default and loss given default method. Primary risk drivers within the segment are risk ratings of the individual loans along with changes of macro-economic variables. The economic variables utilized are typically comprised of leading and lagging indicators. The ACL for Commercial and industrial loans is calculated by modeling probability of default (PD) over future periods multiplied by historical loss given default rates (LGD) multiplied by contractual exposure at default minus any estimated prepayments and charge offs.
Collateral positions for Specialty lending loans are continuously monitored by the Company and the borrower is required to continually adjust the amount of collateral securing the loan. Credit losses are measured for any position where the amortized cost basis is greater than the fair value of the collateral. The ACL for specialty lending loans is calculated by using a bottom-up approach comparing collateral values to outstanding balances.
The ACL for the Commercial real estate segment is measured using a PD and LGD method. Primary risk characteristics within the segment are risk ratings of the individual loans, along with changes of macro-economic variables, such as interest rates, CRE price index, median household income, construction activity, farm income, and vacancy rates. The ACL for Commercial real estate loans is calculated by modeling PD over future periods based on peer bank data. The PD loss rate is then multiplied by historical LGD multiplied by contractual exposure at default minus any estimated prepayments and charge offs.
The ACL for the Consumer real estate and Consumer segments are measured using an origination vintage loss rate method applied to the loans’ amortized cost balance. The primary risk driver within the segments is year of origination along with changes of macro-economic variables such as unemployment and the home price index.
The Credit card segment contains both consumer and commercial credit cards. The ACL for Consumer credit cards is measured using a PD and LGD method for Revolvers and average historical loss rates across a defined lookback period for Transactors. The PD and LGD method used for Revolvers is similar in nature to the method used in the Commercial and industrial and Commercial real estate segments. Primary risk drivers within the segment are credit ratings of the individual card holders along with changes of macro-economic variables such as unemployment and retail sales. The ACL for Commercial credit cards is measured using roll-rate loss rate method based on days past due.
The ACL for the State and political HTM securities segment is measured using a loss rate method based on historical bond rating transitions. Primary risk drivers within the segment are bond ratings in the portfolio along with changes of macro-economic conditions. There is no ACL for the U.S. Treasury, U.S. Agency, and GSE mortgage-backed HTM securities portfolios as they are considered to be agency-backed securities with no risk of loss as they are either explicitly or implicitly guaranteed by the U.S. government. For further discussion on these securities, including the aging and amortized cost balance of HTM securities, see Note 4, “Securities.”
See the credit quality indicators presented previously for a summary of current risk in the Company’s portfolio. Changes in economic forecasts will affect all portfolio segments, updated financial records from borrowers will affect portfolio segments by risk rating, updated credit scores will affect consumer credit cards, payment performance will affect consumer and commercial credit card portfolio segments, and updated bond credit ratings will affect held-to-maturity securities. The Company actively monitors all credit quality indicators for risk changes that will influence the current estimate.
Expected credit losses are estimated over the contractual term of the loans, adjusted for prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a concessionary loan term has been granted to a borrower experiencing financial difficulty or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancelable by the Company.
Credit card receivables do not have stated maturities. In determining the estimated life of a credit card receivable, management first estimates the future cash flows expected to be received and then applies those expected future cash flows to the credit card balance. Expected credit losses for credit cards are determined by estimating the amount and timing of principal payments expected to be received as payment for the balance outstanding as of the reporting period until the expected payments have been fully allocated. The ACL is recorded for the excess of the balance outstanding as of the reporting period over the expected principal payments.
Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually include loans on nonaccrual, loans that include modifications deemed concessionary made to borrowers experiencing financial difficulty, or any loans specifically identified, and are excluded from the collective evaluation. When it is determined that payment of interest or recovery of all principal is questionable, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for undiscounted selling costs as appropriate. All loans are classified as collateral dependent if placed on non-accrual or include modifications made to borrowers experiencing financial difficulty.
ALLOWANCE FOR CREDIT LOSSES AND RECORDED INVESTMENT IN LOANS
The following tables provide a rollforward of the allowance for credit losses by portfolio segment for the year ended December 31, 2025, 2024, and 2023 (in thousands):
Year Ended December 31, 2025
Commercial and industrial
Specialty lending
Commercial real estate
Consumer real estate
Consumer
Credit cards
Leases and other
Total - Loans
HTM
Total
Allowance for credit losses:
Beginning balance
PCD allowance for credit loss at acquisition
Charge-offs
Recoveries
Provision
Ending balance - ACL
Allowance for credit losses on off-balance sheet credit exposures:
Beginning balance
Initial allowance for credit loss at acquisition
Provision
Ending balance - ACL on off-balance sheet
Year Ended December 31, 2024
Commercial and industrial
Specialty lending
Commercial real estate
Consumer real estate
Consumer
Credit cards
Leases and other
Total - Loans
HTM
Total
Allowance for credit losses:
Beginning balance
Charge-offs
Recoveries
Provision
Ending balance - ACL
Allowance for credit losses on off-balance sheet credit exposures:
Beginning balance
Provision
Ending balance - ACL on off-balance sheet
Year Ended December 31, 2023
Commercial and industrial
Specialty lending
Commercial real estate
Consumer real estate
Consumer
Credit cards
Leases and other
Total - Loans
HTM
Total
Allowance for credit losses:
Beginning balance
Charge-offs
Recoveries
Provision
Ending balance - ACL
Allowance for credit losses on off-balance sheet credit exposures:
Beginning balance
Provision
Ending balance - ACL on off-balance sheet
Purchased loans that reflect a more than insignificant credit deterioration since origination at the date of acquisition are classified as PCD loans. PCD loans are recorded at fair value plus the ACL expected at the time of acquisition. The Company recorded $ 85.3 million to establish the PCD ACL related to the acquisition of HTLF.
The allowance for credit losses on off-balance sheet credit exposures is recorded in the Accrued expenses and taxes line of the Company’s Consolidated Balance Sheets, see Note 15 “Commitments, Contingencies and Guarantees.”
Collateral Dependent Financial Assets
The following tables provide the amortized cost balance of financial assets considered collateral dependent as of December 31, 2025 and 2024 (in thousands):
December 31, 2025
Loan Segment and Type
Amortized Cost of Collateral Dependent Assets
Related Allowance for Credit Losses
Amortized Cost of Collateral Dependent Assets with no related Allowance
Commercial and industrial:
Equipment/Accounts Receivable/Inventory
Agriculture
NDFIs
Total Commercial and industrial
Specialty lending:
Asset-based lending
Total Specialty lending
Commercial real estate:
Owner-occupied
Non-owner-occupied
Farmland
5+ Multi-family
1-4 Family construction
General construction
Total Commercial real estate
Consumer real estate:
HELOC
First lien: 1-4 family
Junior lien: 1-4 family
Total Consumer real estate
Consumer:
Revolving line
Auto
Other
Total Consumer
Leases and other:
Leases
Other
Total Leases and other
Total loans
December 31, 2024
Loan Segment and Type
Amortized Cost of Collateral Dependent Assets
Related Allowance for Credit Losses
Amortized Cost of Collateral Dependent Assets with no related Allowance
Commercial and industrial:
Equipment/Accounts Receivable/Inventory
Agriculture
NDFIs
Total Commercial and industrial
Specialty lending:
Asset-based lending
Total Specialty lending
Commercial real estate:
Owner-occupied
Non-owner-occupied
Farmland
5+ Multi-family
1-4 Family construction
General construction
Total Commercial real estate
Consumer real estate:
HELOC
First lien: 1-4 family
Junior lien: 1-4 family
Total Consumer real estate
Consumer:
Revolving line
Auto
Other
Total Consumer
Leases and other:
Leases
Other
Total Leases and other
Total loans
Modifications made to Borrowers Experiencing Financial Difficulty
In the normal course of business, the Company may execute loan modifications with borrowers. These modifications are analyzed to determine whether the modification is considered concessionary, long term and made to a borrower experiencing financial difficulty. The Company’s modifications generally include interest rate adjustments, principal reductions, and amortization and maturity date extensions. These modifications allow the borrower short-term cash relief to allow them to improve their financial condition. If a loan modification is determined to be made to a borrower experiencing financial difficulty, the loan is considered collateral dependent and evaluated as part of the ACL as described above in the Allowance for Credit Losses section of this note.
For the year ended December 31, 2025 , the Company had seven modifications on residential real estate loans made to borrowers experiencing financial difficulty with a total pre-modification loan balance of $ 1.6 million and a total post-modification balance of $ 1.6 million. For the year ended December 31, 2024 , the Company had five
modifications on residential real estate loans made to borrowers experiencing financial difficulty with a total pre-modification loan balance of $ 1.1 million and a total post-modification balance of $ 1.1 million. For the year ended December 31, 2023, the Company did not modify any loans made to borrowers experiencing financial difficulty.
The Company had no c ommitments to lend to borrowers experiencing financial difficulty for which the Company has modified an existing loan as of December 31, 2025 and 2024. The Company monitors loan payments on an on-going basis to determine if a loan is considered to have a payment default. Determination of payment default involves analyzing the economic conditions that exist for each customer and their ability to generate positive cash flows during the loan term. For the years ended December 31, 2025, 2024, and 2023, the Company had no lo an modifications made to borrowers experiencing financial difficulty for which there was a payment default within the 12 months following the modification date.
4. SECURITIES
Securities Available for Sale
This table provides detailed information about securities available for sale at December 31, 2025 and 2024 (in thousands):
Gross
Gross
Amortized
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Value
U.S. Treasury
U.S. Agencies
Mortgage-backed
State and political subdivisions
Corporates
Collateralized loan obligations
Total
Gross
Gross
Amortized
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Value
U.S. Treasury
U.S. Agencies
Mortgage-backed
State and political subdivisions
Corporates
Collateralized loan obligations
Total
The following table presents contractual maturity information for securities available for sale at December 31, 2025 (in thousands):
Amortized
Fair
Cost
Value
Due in 1 year or less
Due after 1 year through 5 years
Due after 5 years through 10 years
Due after 10 years
Total
Mortgage-backed securities
Total securities available for sale
Securities may be disposed of before contractual maturities due to sales by the Company or because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
During 2025, related to the acquisition of HTLF, the Company acquired securities available for sale with an Acquisition Date fair value of $ 3.1 billion.
The following table presents the sales of securities available for sale for the years ended December 31, 2025, 2024, and 2023 (in thousands):
Year Ended December 31,
Proceeds from sales
Gross realized gains
Gross realized losses
There were $ 13.4 billion and $ 10.5 billion of securities pledged to secure U.S. Government deposits, other public deposits, certain trust deposits, derivative transactions, and repurchase agreements at December 31, 2025 and December 31, 2024, respectively.
Accrued interest on securities available for sale totaled $ 82.9 million and $ 43.1 million as of December 31, 2025 and 2024, respectively, and is included in the Accrued income line on the Company’s Consolidated Balance Sheets. The total amount of accrued interest is excluded from the amortized cost of available-for-sale securities presented above. Further, the Company has elected not to measure an ACL for accrued interest receivable.
The following table shows the Company’s available-for-sale investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2025 and 2024 (in thousands):
Less than 12 months
12 months or more
Total
Count
Fair Value
Unrealized
Losses
Count
Fair Value
Unrealized
Losses
Count
Fair Value
Unrealized
Losses
Description of Securities
U.S. Treasury
U.S. Agencies
Mortgage-backed
State and political subdivisions
Corporates
Collateralized loan obligations
Total
Less than 12 months
12 months or more
Total
Count
Fair Value
Unrealized
Losses
Count
Fair Value
Unrealized
Losses
Count
Fair Value
Unrealized
Losses
Description of Securities
U.S. Treasury
U.S. Agencies
Mortgage-backed
State and political subdivisions
Corporates
Collateralized loan obligations
Total
The unrealized losses in the Company’s investments were caused by changes in interest rates, and not from a decline in credit of the underlying issuers. The U.S. Treasury, U.S. Agency, and GSE mortgage-backed securities
are all considered to be agency-backed securities with no risk of loss as they are either explicitly or implicitly guaranteed by the U.S. government. The changes in fair value in the agency-backed portfolios are solely driven by change in interest rates caused by changing economic conditions. The Company has no knowledge of any underlying credit issues and the cash flows underlying the debt securities have not changed and are not expected to be impacted by changes in interest rates.
For the State and political subdivision portfolio, the majority of the Company’s holdings are in general obligation bonds, which have a very low historical default rate due to issuers generally having unlimited taxing authority to service the debt. For the State and political, Corporates, and Collateralized loan obligations portfolios, the Company has a robust process for monitoring credit risk, including both pre-purchase and ongoing post-purchase credit reviews and analysis. The Company monitors credit ratings of all bond issuers in these segments and reviews available financial data, including market and sector trends.
During the year ended December 31, 2023, the Company recorded a $ 4.9 million impairment on one Corporate available-for-sale security.
As of both December 31, 2025 and 2024, there was no ACL related to the Company’s available-for-sale securities as the decline in fair value did not result from credit issues.
Securities Held to Maturity
The following table provides detailed information about securities held to maturity at December 31, 2025 and 2024, respectively (in thousands):
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
Allowance for Credit Losses
Net Carrying Amount
U.S. Treasury
U.S. Agency
Mortgage-backed
State and political subdivisions
Total
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
Allowance for Credit Losses
Net Carrying Amount
U.S. Agency
Mortgage-backed
State and political subdivisions
Total
The following table presents contractual maturity information for securities held to maturity at December 31, 2025 (in thousands):
Amortized
Fair
Cost
Value
Due in 1 year or less
Due after 1 year through 5 years
Due after 5 years through 10 years
Due after 10 years
Total
Mortgage-backed securities
Total securities held to maturity
Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
During 2025, related to the acquisition of HTLF, the Company acquired securities held to maturity with an Acquisition Date fair value of $ 438.9 million.
There were no sales of securities held to maturity during 2025, 2024, or 2023.
During the year ended December 31, 2022, securities with an amortized cost of $ 4.1 billion and a fair value of $ 3.8 billion were transferred from the available-for-sale classification to the held-to-maturity classification as the Company has the positive intent and ability to hold these securities to maturity. The transfers of securities were made at fair value at the time of transfer. The unrealized holding gain or loss at the time of transfer is retained in AOCI and will be amortized over the remaining life of the securities, offsetting the related amortization of discount or premium on the transferred securities. No gains or losses were recognized at the time of the transfers. The amortized cost balance of securities held to maturity in the tables above includes a net unamortized unrealized loss of $ 139.2 million and $ 171.3 million at December 31, 2025 and 2024, respectively.
Accrued interest on securities held to maturity to taled $ 28.0 millio n and $ 25.6 million as of December 31, 2025 and 2024, respectively, and is included in the Accrued income line on the Company’s Consolidated Balance Sheets. The total amount of accrued interest is excluded from the amortized cost of held-to-maturity securities presented above. Further, the Company has elected not to measure an ACL for accrued interest receivable.
The following table shows the Company’s held-to-maturity investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2025 and 2024 (in thousands):
Less than 12 months
12 months or more
Total
Count
Fair Value
Unrealized Losses
Count
Fair Value
Unrealized Losses
Count
Fair Value
Unrealized Losses
U.S. Treasury
U.S. Agency
Mortgage-backed
State and political subdivisions
Total
Less than 12 months
12 months or more
Total
Count
Fair Value
Unrealized Losses
Count
Fair Value
Unrealized Losses
Count
Fair Value
Unrealized Losses
U.S. Agency
Mortgage-backed
State and political subdivisions
Total
The unrealized losses in the Company’s held-to-maturity portfolio were caused by changes in the interest rate environment. The U.S. Treasury, U.S. Agency and GSE mortgage-backed securities are considered to be agency-backed securities with no risk of loss as they are either explicitly or implicitly guaranteed by the U.S. government. Therefore, the Company’s expected lifetime loss for these portfolios is zero and there is no ACL recorded for these portfolios. The Company has no knowledge of any underlying credit issues and the cash flows underlying the debt securities have not changed and are not expected to be impacted by changes in interest rates.
For the State and political subdivision portfolio, the Company’s holdings are in general obligation bonds as well as private placement bonds, which have very low historical default rates due to issuers generally having unlimited taxing authority to service the debt. The Company has a robust process for monitoring credit risk, including both pre-purchase and ongoing post-purchase credit reviews and analysis. The Company monitors credit ratings of all bond issuers in these segments and reviews available financial data, including market and sector trends. The underlying bonds are evaluated for credit losses in conjunction with management’s estimate of the ACL based on credit rating.
The following table shows the amortized cost basis by credit rating of the Company’s held-to-maturity State and political subdivisions bond investments at December 31, 2025 and 2024 (in thousands):
Amortized Cost Basis by Credit Rating - HTM Debt Securities
AAA
BBB
CCC-C
Total
State and political subdivisions:
Competitive
Utilities
Total state and political subdivisions
Amortized Cost Basis by Credit Rating - HTM Debt Securities
AAA
BBB
CCC-C
Total
State and political subdivisions:
Competitive
Utilities
Total state and political subdivisions
Competitive held-to-maturity securities include not-for-profit enterprises that provide public functions such as housing, higher education, or healthcare, but do so in a competitive environment. It also includes project financings that can have relatively high enterprise risk, such as deals backed by revenues from sports or convention facilities or start-up transportation revenues.
Utilities are public enterprises providing essential services with a monopoly or near-monopoly over the service area. This includes environmental utilities (water, sewer, solid waste), power utilities (electric distribution and generation, gas), and transportation utilities (airports, parking, toll roads, mass transit, ports).
All held-to-maturity securities were current and not past due at December 31, 2025 and 2024.
Trading Securities
There was a net unrealized gain of $ 3 thousand on trading securities as of December 31, 2025 . There was no net unrealized gains or losses on trading securities as of December 31, 2024 and the net unrealized gain on trading securities was $ 272 thousand as of December 31, 2023. Net unrealized gains and losses are included in trading and investment banking income on the Consolidated Statements of Income. Securities sold not yet purchased totaled $ 4.1 million and $ 7.1 million at December 31, 2025 and 2024, respectively, and are classified within the Other liabilities line of the Company’s Consolidated Balance Sheets.
Other Securities
The table below provides detailed information for Other securities at December 31, 2025 and 2024 (in thousands):
December 31,
FRB and FHLB stock
Equity securities with readily determinable fair values
Equity securities without readily determinable fair values
Total
Investment in FRB stock is based on the capital structure of the investing bank, and investment in FHLB stock is mainly tied to the level of borrowings from the FHLB. These holdings are carried at cost. Equity securities with
readily determinable fair values are generally traded on an exchange and market prices are readily available. Equity securities without readily determinable fair values include equity investments which are held by a subsidiary qualified as a Small Business Investment Company, as well as investments in low-income housing partnerships within the areas the Company serves. Unrealized gains or losses on equity securities with and without readily determinable fair values are recognized in the Investment securities gains, net line of the Company’s Consolidated Statements of Income.
During 2025, related to the acquisition of HTLF, the Company acquired other securities with an acquired fair value of $ 99.8 million as of the Acquisition Date, including $ 2.0 million of FRB and FHLB stock and $ 97.8 million of equity securities without readily determinable fair values.
The table below presents the changes in equity securities without readily determinable fair values for the years ended December 31, 2025 and 2024 (in thousands):
Year Ended December 31,
Balance – beginning of year
Heartland acquisition
Purchases of securities
Observable upward price adjustments
Observable downward price adjustments
Sales of securities and other activity
Balance – end of year
Investment Securities Gains, Net
The following table presents the components of Investment securities gains (losses), net for the years ended December 31, 2025, 2024, and 2023 (in thousands):
Year Ended December 31,
Investment securities gains (losses), net
Available-for-sale debt securities:
Gains realized on sales
Losses realized on sales
Impairment on AFS security
Equity securities with readily determinable fair values:
Fair value adjustments, net
Equity securities without readily determinable fair values:
Fair value adjustments, net
Sales
Total investment securities gains (losses), net
5. SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL
The Company regularly enters into agreements for the purchase of securities with simultaneous agreements to resell (resell agreements). The agreements permit the Company to sell or repledge these securities. Resell agreements were $ 1.6 billion and $ 545.0 million at December 31, 2025 and 2024 , respectively. The Company obtains possession of collateral with a market value equal to or in excess of the principal amount loaned under resell agreements.
6. LOANS TO OFFICERS AND DIRECTORS
Certain executive officers and directors of the Company and the Bank, including companies in which those persons are principal holders of equity securities or are general partners, borrow in the normal course of business from the Bank. All such loans have been made on substantially the same terms, including interest rates and
collateral, as those prevailing at the same time for comparable transactions with unrelated parties. In addition, all such loans are current as to repayment terms.
For the years 2025 and 2024, an analysis of activity with respect to such aggregate loans to related parties appears below (in thousands):
Year Ended December 31,
Balance – beginning of year
New loans
Repayments
Addition due to change in reportable loans
Reduction due to change in reportable loans
Balance – end of year
7. GOODWILL AND OTHER INTANGIBLES
Changes in the carrying amount of goodwill for the years ended December 31, 2025 and December 31, 2024 by operating segment are as follows (in thousands):
Commercial Banking
Institutional Banking
Personal Banking
Total
Balances as of January 1, 2025
Acquisition of HTLF
Balances as of December 31, 2025
Balances as of January 1, 2024
Balances as of December 31, 2024
Following are the intangible assets that continue to be subject to amortization as of December 31, 2025 and 2024 (in thousands) :
As of December 31, 2025
Core Deposit Intangible Assets
Customer Relationships
Total
Gross carrying amount
Accumulated amortization
Net carrying amount
As of December 31, 2024
Core Deposit Intangible Assets
Customer Relationships
Total
Gross carrying amount
Accumulated amortization
Net carrying amount
Related to the acquisition of HTLF, the Company recognized $ 1.6 billion of goodwill, a $ 474.1 million core deposit intangible asset, wealth customer list of $ 26.0 million, and purchased credit card relationships of $ 10.9 million. See Note 20, “Acquisition” for additional information.
On September 2, 2025, the Company acquired a healthcare savings account business, which included $ 32.5 million of deposits. The purchase resulted in recognition of a $ 4.8 million core deposit intangible asset.
The weighted average life of core deposit intangible assets and customer relationships acquired during the year ended December 31, 2025 was 10.0 years and 5.8 years, respectively. The weighted average life of all intangible assets acquired during the year ended December 31, 2025 was 9.7 years.
Amortization expense for the years ended December 31, 2025, 2024, and 2023 was $ 93.5 million, $ 7.7 million, and $ 8.6 million, respectively.
The following table discloses the estimated amortization expense of intangible assets in future years (in thousands):
For the year ending December 31, 2026
For the year ending December 31, 2027
For the year ending December 31, 2028
For the year ending December 31, 2029
For the year ending December 31, 2030
8 . PREMISES, EQUIPMENT, AND LEASES
Premises and equipment consisted of the following (in thousands):
December 31,
Land
Buildings and leasehold improvements
Equipment
Software
Total
Accumulated depreciation
Accumulated amortization
Premises and equipment, net
Premises and equipment depreciation and amortization expenses were $ 44.0 million in 2025 , $ 40.8 million in 2024 , and $ 46.5 million in 2023.
The Company primarily has leases of real estate, including buildings, or portions of buildings, used for bank branches or general office operations. These leases have remaining lease terms that range from less than one year to 22 years and most leases include one or more options to renew, with renewal terms that can extend the lease term from one year to 40 years or more. The exercise of lease renewal options is at the Company’s sole discretion. No renewal options were included in the Company’s calculation of its lease liabilities or right of use assets since it is not reasonably certain that the Company will exercise these options. No leases include options to purchase the leased property. The lease agreements do not contain any material residual value guarantees or material restrictive covenants. An insignificant number of leases include variable lease payments that are based on the Consumer Price Index (CPI). For the calculation of the lease liability and right of use asset for these leases, the Company has included lease payments based on CPI as of the effective date of ASC 842 or the date a new lease or amendment was entered into, whichever is later. The Company has made the election not to separate lease and non-lease components for existing real estate leases when determining consideration within the lease contract. All of the Company’s lease agreements are classified as operating leases under ASC 842.
As of December 31, 2025 and 2024 , right-of-use assets of $ 63.5 million and $ 47.6 million, respectively, were included as part of Other assets on the Company’s Consolidated Balance Sheets. In addition, lease liabilities of $ 72.7 million and $ 55.1 million were included as part of Other liabilities on the Company’s Consolidated Balance Sheets as of December 31, 2025 and 2024, respectively. For the years ended December 31, 2025, 2024, and 2023 , lease expense of $ 16.6 million, $ 10.5 million, and $ 11.1 million, respectively, was recognized as part of Occupancy expense on the Company’s Consolidated Statements of Income. For the years ended December 31, 2025, 2024, and 2023, cash payments of $ 17.4 million, $ 12.2 million, and $ 12.2 million, respectively, were made for leases included in the measurement of lease liabilities and are classified as cash flows from operating activities in the Company’s Consolidated Statements of Cash Flows. For the years ended December 31, 2025 and 2024, leased assets obtained in exchange for new operating lease liabilities were $ 32.0 million and $ 4.8 million, respectively. As of December 31, 2025 and 2024 , the weighted average remaining lease terms of the Company’s leases were 5.5 years and 6.1 years, respectively, and the weighted average discount rates were 3.86 % and 3.36 %, respectively.
As of December 31, 2025, future minimum lease payments under non-cancelable operating leases were as follows (in thousands):
Thereafter
Total lease payments
Less: Interest
Present value of lease liabilities
9. BORROWED FUNDS
The components of the Company's long-term debt are as follows (in thousands):
December 31,
Long-term debt:
Trust preferred securities
Subordinated notes 3.70 %, net of issuance costs
Subordinated notes 6.25 %, net of issuance costs
Subordinated notes 2.75 %
Total long-term debt
Total borrowed funds
The following table presents details of outstanding trust preferred securities as of December 31, 2025 (in thousands):
Amount Outstanding
Issuance Date
Interest Rate
Interest Rate as of December 31, 2025
Maturity Date
Marquette Capital Trust I
1.33 % over 3-month term SOFR
Marquette Capital Trust II
1.33 % over 3-month term SOFR
Marquette Capital Trust III
1.50 % over 3-month term SOFR
Marquette Capital Trust IV
1.60 % over 3-month term SOFR
Heartland Financial Statutory Trust IV
2.75 % over 3-month term SOFR
Heartland Financial Statutory Trust V
1.33 % over 3-month term SOFR
Heartland Financial Statutory Trust VI
1.48 % over 3-month term SOFR
Heartland Financial Statutory Trust VII
1.48 % over 3-month term SOFR
Morrill Statutory Trust I
3.25 % over 3-month term SOFR
Morrill Statutory Trust II
2.85 % over 3-month term SOFR
Sheboygan Statutory Trust I
2.95 % over 3-month term SOFR
CBNM Capital Trust I
3.25 % over 3-month term SOFR
Citywide Capital Trust III
2.80 % over 3-month term SOFR
Citywide Capital Trust IV
2.20 % over 3-month term SOFR
Citywide Capital Trust V
1.54 % over 3-month term SOFR
OCGI Statutory Trust III
3.65 % over 3-month term SOFR
OCGI Statutory Trust IV
2.50 % over 3-month term SOFR
BVBC Capital Trust II
3.25 % over 3-month term SOFR
BVBC Capital Trust III
1.60 % over 3-month term SOFR
Total trust preferred securities
The aggregate contractual repayment of long-term debt of $ 522.9 million is due after December 31, 2030.
In September 2020, the Company issued $ 200.0 million of 3.70 % fixed-to-fixed rate subordinated notes that were to mature on September 17, 2030 . The notes bore interest at the rate of 3.70 % per annum, payable semi-annually on each March 17 and September 17. Unamortized debt issuance costs related to these notes totaled $ 0.3 million as of December 31, 2024 . Proceeds from the issuance of the notes were used for general corporate purposes, including contributing Tier 1 capital into the Bank. During the first quarter of 2025, the Company purchased and subsequently retired $ 11.1 million of its 2020 subordinated notes. During the third quarter of 2025, the Company redeemed the remainder of the outstanding 2020 subordinated notes.
In September 2022, the Company issued $ 110.0 million of 6.25 % fixed-to-fixed rate subordinated notes that mature on September 28, 2032 . The notes bear interest at the rate of 6.25 % per annum, payable semi-annually on
each March 28 and September 28. The Company may redeem the notes, in whole or in part, on September 28, 2027 , or on any interest payment date thereafter. Unamortized debt issuance costs related to these notes totaled $ 0.7 million and $ 1.2 million as of December 31, 2025 and 2024, respectively. Proceeds from the issuance of the notes were used for general corporate purposes, including contributing Tier 1 capital into the Bank.
As part of the acquisition of HTLF, the Company acquired $ 150.0 million of 2.75 % fixed-to-fixed rate subordinated notes that mature on September 15, 2031 . The notes bear interest at the rate of 2.75 % per annum, payable semi-annually on each March 15 and September 15. The Company may redeem the notes, in whole or in part, on September 15, 2026, or on any interest payment date thereafter. The subordinated notes had an acquired fair value of $ 138.8 million as of the Acquisition Date.
The remainder of the Company’s long-term debt was assumed from the acquisitions of Marquette Financial Companies in 2015 and HTLF in 2025 and consists of debt obligations payable to 19 unconsolidated trusts that previously issued trust preferred securities, as summarized in the table above. These long-term debt obligations had an aggregate contractual balance of $ 262.9 million and a carrying value of $ 220.0 million as of December 31, 2025. As of December 31, 2024 , the debt obligations related to the four unconsolidated trusts acquired from Marquette had an aggregate contractual balance of $ 103.1 million and had a carrying value of $ 76.8 million.
The Company is a member bank of the FHLB of Des Moines and through this relationship, the Company owns FHLB stock and has access to additional liquidity and funding sources through FHLB advances. The Company’s borrowing capacity is dependent upon the amount of collateral the Company places at the FHLB. As of December 31, 2025 and December 31, 2024 the Company owned $ 10.3 million and $ 10.2 million of FHLB stock, respectively. The Company had no outstanding advances at the FHLB of Des Moines as of December 31, 2025 or December 31, 2024. As of December 31, 2025 , the Company had four letters of credit outstanding with the FHLB of Des Moines to secure deposits. These letters of credit have an aggregate amount of $ 261.0 million and have various maturity dates through March 10, 2026 . The Company’s borrowing capacity with the FHLB was $ 2.2 billion as of December 31, 2025. During 2024, the FHLB of Des Moines issued a letter of credit for $ 150.0 million on behalf of the Company to secure deposits. The letter of credit outstanding as of December 31, 2024 expired in January 2025 and was subsequently renewed with an expiration date in March 2025.
The Company enters into sales of securities with simultaneous agreements to repurchase (repurchase agreements). The Company utilizes repurchase agreements to facilitate the needs of customers and to facilitate secured short-term funding needs. Repurchase agreements are stated at the amount of cash received in connection with the transaction. The Company monitors collateral levels on a continuous basis and may be required to provide additional collateral based on the fair value of the underlying securities. Securities pledged as collateral under repurchase agreements are maintained with the Company’s safekeeping agents. The amounts received under these agreements represent short-term borrowings. The amount outstanding at December 31, 2025, was $ 3.3 billion, with accrued interest payable of $ 2.2 million. The amount outstanding at December 31, 2024 , was $ 2.5 billion, with accrued interest payable of $ 1.7 million.
The carrying amounts and market values of the securities and the related repurchase liabilities and weighted average interest rates of the repurchase liabilities (grouped by maturity of the repurchase agreements) were as follows as of December 31, 2025 and 2024 (in thousands):
As of December 31, 2025
Securities Fair Market Value
Repurchase
Liabilities
Weighted Average
Interest Rate
Maturity of the Repurchase Liabilities
2 to 29 days
30 to 90 Days
Over 90 Days
Total
As of December 31, 2024
Securities Fair Market Value
Repurchase
Liabilities
Weighted Average
Interest Rate
Maturity of the Repurchase Liabilities
2 to 29 days
30 to 90 Days
Over 90 Days
Total
The table below presents the remaining contractual maturities of repurchase agreements outstanding at December 31, 2025 and 2024, in addition to the various types of marketable securities that have been pledged as collateral for these borrowings (in thousands):
As of December 31, 2025
Remaining Contractual Maturities of the Agreements
2-29 days
30-90 days
Over 90 Days
Total
Repurchase agreements, secured by:
U.S. Treasury
U.S. Agency
Total repurchase agreements
As of December 31, 2024
Remaining Contractual Maturities of the Agreements
2-29 days
30-90 days
Over 90 Days
Total
Repurchase agreements, secured by:
U.S. Treasury
U.S. Agency
Total repurchase agreements
10. REGULATORY REQUIREMENTS
Payment of dividends by the Bank to the parent company is subject to various regulatory restrictions. For national banks, the governing regulatory agency must approve the declaration of any dividends generally in excess of the sum of net income for that year and retained net income for the preceding two years.
The Bank maintains a reserve balance with the FRB as required by law. During 2025 , this amount averaged $ 5.8 billion, compared to $ 3.4 billion in 2024.
At December 31, 2025, the Company is required to have minimum common equity tier 1, tier 1, and total capit al ratios of 4.5 %, 6.0 % and 8.0 %, respectively. The Company’s actual ratios at that date were 10.96 %, 11.55 % and 13.36 %, respectively. The Company is required to have a minimum leverage ratio of 4.0 %, and the leverage ratio at December 31, 2025 , was 8.54 %.
As of December 31, 2025 , the most recent notification from the OCC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well-capitalized the Bank must maintain total risk-based, tier 1 risk-based, common equity tier 1, and tier 1 leverage ratios of 10.0 %, 8.0 %, 6.5 %, and 5.0 %, respectively. There are no conditions or events that have occurred since the receipt of the most recent notification that management believes have changed the Bank’s categorization.
In addition, under amendments to the BHCA introduced by the Dodd-Frank Act and commonly known as the Volcker Rule, the Company and its subsidiaries are subject to extensive limits on proprietary trading and on owning or sponsoring hedge funds and private-equity funds. The limits on proprietary trading are largely focused on purchases or sales of financial instruments by a banking entity as principal primarily for the purpose of short-term resale, benefiting from actual or expected short-term price movements, or realizing short-term arbitrage profits. The limits on owning or sponsoring hedge funds and private-equity funds are designed to ensure that banking entities
generally maintain only small positions in managed or advised funds and are not exposed to significant losses arising directly or indirectly from them. The Volcker Rule also provides for increased capital charges, quantitative limits, rigorous compliance programs, and other restrictions on permitted proprietary trading and fund activities, including a prohibition on transactions with a covered fund that would constitute a covered transaction under Sections 23A and 23B of the Federal Reserve Act. The fund activities of the Company and its subsidiaries are in conformance with the Volcker Rule.
Actual capital amounts as well as required and well-capitalized common equity tier 1, tier 1, total and tier 1 leverage ratios as of December 31, 2025 and 2024 for the Company and the Bank are as follows (in thousands):
Actual
For Capital Adequacy Purposes
To Be Well Capitalized Under Prompt Corrective Action Framework
Amount
Ratio
Amount
Ratio
Amount
Ratio
Common Equity Tier 1 Capital:
UMB Financial Corporation
UMB Bank, n. a.
Tier 1 Capital:
UMB Financial Corporation
UMB Bank, n. a.
Total Capital:
UMB Financial Corporation
UMB Bank, n. a.
Tier 1 Leverage:
UMB Financial Corporation
UMB Bank, n. a.
Common Equity Tier 1 Capital:
UMB Financial Corporation
UMB Bank, n. a.
Tier 1 Capital:
UMB Financial Corporation
UMB Bank, n. a.
Total Capital:
UMB Financial Corporation
UMB Bank, n. a.
Tier 1 Leverage:
UMB Financial Corporation
UMB Bank, n. a.
11. EMPLOYEE BENEFITS
The Company has a discretionary noncontributory profit-sharing plan, which features an employee stock ownership plan. This plan is for the benefit of substantially all eligible officers and employees of the Company and its subsidiaries. The Company recognized expense related to such contributions of $ 2.0 million for the years ended December 31, 2024 and 2023.
The Company has a qualified 401(k) profit sharing plan that permits participants to make contributions by salary deduction, to which the Company makes matching contributions. The Company recognized expense related to matching contributions of $ 21.0 million, $ 15.2 million, and $ 15.2 million for the years ended December 31, 2025, 2024 and 2023, respectively.
The Company recognized $ 35.9 million, $ 21.3 million, and $ 16.2 million in expense related to outstanding restricted stock unit grants for the years ended December 31, 2025, 2024 and 2023 , respectively. The Company recognized $ 306 thousand in expense related to outstanding stock options for the year ended December 31, 2025.
The corresponding income tax benefit recognized was $ 1.3 million, $ 267 thousand, and $ 1.6 million f or the years ended December 31, 2025, 2024, and 2023, respectively. The Company had $ 27.8 million of unrecognized compensation expense related to outstanding restricted stock unit grants and $ 86 thousand of unrecognized compensation expense related to outstanding options at December 31, 2025. The tax benefit realized for stock options exercised wa s $ 50 thousand, $ 322 thousand, and $ 49 thousand for the years ended December 31, 2025, 2024, and 2023, respectively.
Long-Term Incentive Compensation Plan
At the April 26, 2005 shareholders’ meeting, the shareholders of the Company approved the UMB Financial Corporation Long-Term Incentive Compensation Plan (LTIP) which became effective as of January 1, 2005. The LTIP permits the issuance to selected officers of the Company service-based restricted stock grants, performance-based restricted stock grants and non-qualified stock options. Service-based restricted stock grants contain a service requirement. The performance-based restricted grants contain performance and service requirements. The non-qualified stock option grants contain a service requirement.
At the April 23, 2013 shareholders’ meeting, the shareholders of the Company approved amendments to the LTIP Plan, including increasing the number of shares of the Company’s stock reserved for issuance under the Plan from 5.25 million shares to 7.44 million shares. Additionally, the shareholders approved increasing the maximum benefits any one eligible employee may receive under the plan during any one fiscal year from $ 1 million to $ 2 million taking into account the value of all stock options and restricted stock received.
At the April 24, 2018 shareholders’ meeting, the shareholders of the Company approved the UMB Financial Corporation Omnibus Incentive Compensation Plan which became effective as of April 24, 2018 and replaced the LTIP plan. No service-based restricted stock grants, performance-based restricted stock grants or non-qualified stock options have been issued under the LTIP since 2018. There were no restricted stock grants outstanding under the LTIP as of December 31, 2025, 2024, or 2023.
The non-qualified stock options issued under the LTIP carry a service requirement and grants issued prior to 2016 vested 50% after three years , 75% after four years and 100% after five years , while grants issued in 2016 through 2018 vested 50% after two years , 75% after three years and 100% after four years .
The table below discloses the information relating to non-qualified option activity in 2025 under the LTIP:
Number of Shares
Weighted Average Price Per Share
Weighted Average Remaining Contractual Term
Aggregate Intrinsic Value
Stock Options Under the LTIP
Outstanding - December 31, 2024
Granted
Canceled
Expired
Exercised
Outstanding - December 31, 2025
Exercisable - December 31, 2025
There were no options granted during 2025, 2024, or 2023. The total intrinsic value of options exercised during the years ended December 31, 2025, 2024, and 2023 , was $ 619 thousand, $ 2.3 million and $ 640 thousand, respectively. As of December 31, 2025, there was no unrecognized compensation cost related to nonvested options.
Cash received from options exercised under all share-based compensation plans was $ 615 thousand , $ 4.1 million, and $ 1.9 million for the years ended December 31, 2025, 2024, and 2023, respectively.
The Company has no specific policy to repurchase common shares to mitigate the dilutive impact of options. See a description of the Company’s Repurchase Authorizations in Note 14, “Common Stock and Earnings Per Share,” in the Notes to the Consolidated Financial Statements provided in Item 8 of this report.
Omnibus Incentive Compensation Plan
At the April 24, 2018 shareholders’ meeting, the shareholders of the Company approved the UMB Financial Corporation Omnibus Incentive Compensation Plan (OICP) which became effective as of April 24, 2018. The OICP permits the issuance to key employees of the Company various types of awards, including stock options, restricted stock and restricted stock units, performance awards and other stock-based awards. Service-based restricted stock unit awards contain a service requirement and the performance-based restricted stock unit awards contain performance and service requirements. The number of shares of the Company’s stock reserved for issuance under the OICP is 5.40 million shares.
At the April 30, 2024 shareholders’ meeting, the shareholders of the Company approved an amendment to the OICP pursuant to which, the aggregate number of shares of the Company’s stock available for issuance under the OICP increased by 1.85 million shares. This increased the number of shares of the Company’s stock reserved for issuance under the OICP from 5.40 million shares to 7.25 million shares.
The service-based restricted stock unit awards are payable in shares of stock and contain a service requirement with grants issued prior to 2023 having a four-year graded vesting schedule in which 50% of the units are vested after two years , 75% are vested after three years , and 100% are vested after four years . Grants of service-based restricted stock units made beginning in 2023 contain a service requirement with a three-year pro-rata vesting schedule.
The performance-based restricted stock unit awards are payable in shares of stock and contain a service and a performance requirement. The performance requirement is based on two predetermined performance requirements over a three-year period. The service requirement portion is a three-year cliff vesting. If the minimum performance requirement is not met, the participants do not receive the shares. Due to the impact of the acquisition of HTLF on the level of achievement of minimum performance requirements for the open performance periods applicable to outstanding awards, on January 27, 2025, certain non-vested performance-based restricted stock unit awards were deemed to be earned at a percentage of target based on results through December 31, 2024, and will vest solely based on the time-based vesting conditions.
The dividends on service-based restricted stock units are treated as two separate transactions. First, cash dividends are paid on the restricted stock units. Those cash dividends are then paid to purchase additional shares of restricted stock units. Dividends earned as additional shares of restricted stock units have the same terms as the associated grant. The dividends paid on the stock are recorded as a reduction to retained earnings, similar to all dividend transactions. Dividends are not paid on performance-based restricted stock units.
The table below summarizes the activity of the service-based restricted stock units during 2025:
Number of Units
Weighted Average Price Per Unit
Service-Based Restricted Stock Units Under the OICP
Nonvested - December 31, 2024
Granted
Canceled
Vested
Nonvested - December 31, 2025
As of December 31, 2025, there was $ 16.4 mil lion of unrecognized compensation cost related to the nonvested service-based restricted stock units. The cost is expected to be recognized over a period of 1.8 years.
Total fair value of units vested during the years ended December 31, 2025, 2024, and 2023 was $ 19.2 million, $ 14.1 million, and $ 9.7 million, respectively.
The table below summarizes the activity of the performance-based restricted stock units during 2025:
Number of Units
Weighted Average Price Per Unit
Performance-Based Restricted Stock Units Under the OICP
Nonvested - December 31, 2024
Granted
Canceled
Vested
Performance-based adjustment
Nonvested - December 31, 2025
As of December 31, 2025 , there was $ 8.6 million of unrecognized compensation cost related to the nonvested performance-based restricted stock units. The cost is expected to be recognized over a period of 1.9 years. The fair value of units vested during the years ended December 31, 2025, 2024 and 2023 was $ 14.1 million, $ 8.2 million, and $ 11.1 million, respectively.
HTLF Long-Term Incentive Plan
In connection with the acquisition of HTLF, certain outstanding and unvested restricted stock unit awards and stock options granted under the Heartland Financial USA, Inc. 2020 Long-Term Incentive Plan or the Heartland Financial USA, Inc. 2024 Long-Term Incentive Plan (collectively, the HTLF Plan) were assumed and converted to restricted stock unit and stock option awards issued by the Company. The number of shares of the Company's common stock subject to each award equals the shares of HTLF common stock subject to the HTLF award multiplied by the exchange ratio, rounded down to the nearest whole share. For performance-based restricted stock unit awards, the conversion assumed performance at target. The assumed awards are subject to the same vesting terms and conditions as previously set out in the respective grant agreements.
The service-based restricted stock unit awards are payable in shares of stock and contain a service requirement with a three-year pro-rata vesting schedule. The performance-based restricted stock units, converted at target performance, are also payable in shares of stock and contain a three-year service requirement with a cliff vesting. Restricted stock units granted prior to 2023 are not entitled to dividend equivalents; most restricted stock unit grants beginning in 2023 accrue dividends, which are paid without interest only upon vesting of the associated grant.
The table below summarizes the activity of the service-based restricted stock units during 2025:
Number of Units
Weighted Average Price Per Unit
Service-Based Restricted Stock Units Under the HTLF Plan
Nonvested - December 31, 2024
HTLF replacement awards
Canceled
Vested
Nonvested - December 31, 2025
As of December 31, 2025 , there was $ 2.8 million of unrecognized compensation cost related to nonvested service-based restricted stock units. The cost is expected to be recognized over a period of 1.2 years. The fair value of units vested during the year ended December 31, 2025 was $ 21.1 million.
The non-qualified stock options contain a service requirement with a four-year pro-rata vesting schedule. The exercise price of the stock options is the exercise price at grant divided by the exchange ratio.
The table below discloses the information relating to non-qualified option activity in 2025 under the HTLF Plan:
Number of Shares
Weighted Average Price Per Share
Weighted Average Remaining Contractual Term
Aggregate Intrinsic Value
Stock Options Under the HTLF Plan
Outstanding - December 31, 2024
HTLF replacement awards
Canceled
Expired
Exercised
Outstanding - December 31, 2025
Exercisable - December 31, 2025
There were no options granted during 2025. The total intrinsic value of options exercised during the year ended December 31, 2025 was $ 561 thousand. As of December 31, 2025 , there was $ 86 thousand of unrecognized compensation cost related to nonvested options. The cost is expected to be recognized over a period of 0.9 years.
12. BUSINESS SEGMENT REPORTING
The Company has strategically aligned its operations into the following three reportable segments: Commercial Banking, Institutional Banking, and Personal Banking (collectively, the Business Segments, and each, a Business Segment). These segments reflect the type of customer served, how products and services are provided, how executive management responsibilities are assigned, and reflect the manner in which financial information is evaluated by the chief operating decision maker (CODM). The Company’s CODM is comprised of a group of senior executive officers led by the Company's chief executive officer, chief administrative officer, chief financial officer, and the Bank's chief executive officer .
Business Segment financial information is produced using an internal reporting system which is based on a series of management estimates for funds transfer pricing (FTP), and allocations of noninterest expense and income taxes. The process for determining FTP is based on a number of factors and assumptions, including prevailing market interest rates, the expected lives of various assets and liabilities, and the Company’s broader funding profile. These estimates and allocations are periodically reviewed and refined. The CODM uses the Business Segment net income in deciding how to allocate resources and assess performance for individual Business Segments, including evaluating the cost or opportunity value of funds within each Business Segment and identifying areas of focus for organic growth or acquisition. For comparability purposes, amounts in all periods are based on methodologies in effect at December 31, 2025. Previously reported results have been reclassified in this filing to conform to the current organizational structure.
The following summaries provide information about the activities of each Business Segment:
Commercial Banking serves the commercial banking and treasury management needs of the Company’s small to middle-market businesses through a variety of products and services. Such services include commercial loans, commercial real estate financing, commercial credit cards, letters of credit, loan syndication services, and consultative services. In addition, the Company’s specialty lending group offers a variety of business solutions including asset-based lending, mezzanine debt and minority equity investments. Treasury management services include depository services, account reconciliation and cash management tools such as, accounts payable and receivable solutions, electronic fund transfer and automated payments, controlled disbursements, lockbox services, and remote deposit capture services.
Institutional Banking is a combination of banking services, fund services, asset management services, and healthcare services provided to institutional clients. This segment also provides fixed income sales, trading and underwriting, corporate trust and escrow services, as well as institutional custody. Institutional Banking includes UMBFS, which provides fund administration and accounting, investor services and transfer agency, and other services to mutual funds and alternative investment groups. Healthcare services provides healthcare payment
solutions including custodial services for health savings accounts (HSAs) and private label, multipurpose debit cards to insurance carriers, third-party administrators, software companies, employers, and financial institutions.
Personal Banking combines consumer banking and wealth management services offered to clients and delivered through personal relationships and the Company’s bank branches, ATM network and internet banking. Products offered include deposit accounts, retail credit cards, private banking, installment loans, home equity lines of credit, and residential mortgages. The range of client services extends from a basic checking account to estate planning and trust services and includes private banking, brokerage services, and insurance services in addition to a full spectrum of investment advisory, trust, and custody services.
BUSINESS SEGMENT INFORMATION
S egment financial results were as follows (in thousands):
Year Ended December 31, 2025
Commercial Banking
Institutional Banking
Personal Banking
Total
Net interest income
Provision for credit losses
Noninterest income
Salaries and employee benefits
Processing fees
Bankcard
Amortization of other intangible assets
Allocated technology, service, overhead
Other segment items*
Noninterest expense
Income (loss) before taxes
Income tax expense (benefit)
Net income (loss)
Average assets
*Other segment items include occupancy, equipment, supplies and services, marketing and business development costs, legal and consulting, and regulatory fees.
Year Ended December 31, 2024
Commercial Banking
Institutional Banking
Personal Banking
Total
Net interest income
Provision for credit losses
Noninterest income
Salaries and employee benefits
Processing fees
Bankcard
Amortization of other intangible assets
Allocated technology, service, overhead
Other segment items*
Noninterest expense
Income (loss) before taxes
Income tax expense (benefit)
Net income (loss)
Average assets
Year Ended December 31, 2023
Commercial Banking
Institutional Banking
Personal Banking
Total
Net interest income
Provision for credit losses
Noninterest income
Salaries and employee benefits
Processing fees
Bankcard
Amortization of other intangible assets
Allocated technology, service, overhead
Other segment items*
Noninterest expense
Income before taxes
Income tax expense
Net income
Average assets
1 3. REVENUE RECOGNITION
The following is a description of the principal activities from which the Company generates revenue that are within the scope of ASC 606, Revenue from Contracts with Customers :
Trust and securities processing – Trust and securities processing income consists of fees earned on personal and corporate trust accounts, custody of securities services, trust investments and wealth management services, and mutual fund and alternative asset servicing. The performance obligations related to this revenue include items such as performing full bond trustee service administration, investment advisory services, custody and record-keeping services, and fund administrative and accounting services. These fees are part of long-term contractual agreements and the performance obligations are satisfied upon completion of service and fees are generally a fixed flat monthly rate or based on a percentage of the account’s market value per the contract with the customer. These fees are primarily recorded within the Company’s Institutional and Personal Banking segments.
Trading and investment banking – Trading and investment banking income consists of income earned related to the Company’s trading securities portfolio, including futures hedging, dividends, bond underwriting, and other securities incomes. The vast majority of this revenue is recognized in accordance with ASC 320, Investments–Debt Securities, and ASC 321, Investments–Equity Securities , and is out of the scope of ASC 606. A portion of trading and investment banking represents fees earned for management fees, commissions, and underwriting of corporate bond issuances. The performance obligations related to these fees include reviewing the credit worthiness of the customer, ensuring appropriate regulatory approval and participating in due diligence. The fees are fixed per the bond prospectus and the performance obligations are satisfied upon registration approval of the bonds by the applicable regulatory agencies. Revenue is recognized at the point in time upon completion of service and when approval is granted by the regulators.
Service charges on deposits – Service charges on deposit accounts represent monthly analysis fees recognized for the services related to customer deposit accounts, including account maintenance and depository transactions processing fees. Commercial Banking and Institutional Banking depository accounts charge fees in accordance with the customer’s pricing schedule while Personal Banking account holders are generally charged a flat service fee per month. Deposit service charges for the healthcare accounts included in the Institutional Banking segment are priced according to either standard pricing schedules with individual account holders or according to service agreements between the Company and employer groups or third-party administrators. The Company satisfies the performance obligation related to providing depository accounts monthly as transactions are processed and deposit service charge revenue is recorded monthly. These fees are recognized within all Business Segments.
Insurance fees and commissions – Insurance fees and commissions includes all insurance-related fees earned, including commissions for individual life, variable life, group life, health, group health, fixed annuity, and variable
annuity insurance contracts. The performance obligations related to these revenues primarily represent the placement of insurance policies with the insurance company partners. The fees are based on the contracts with insurance company partners and the performance obligations are satisfied when the terms of the policy have been agreed to and the insurance policy becomes effective.
Brokerage fees – Brokerage fees represent income earned related to providing brokerage transaction services, including commissions on equity and commodity trades, and fees for investment management, advisory and administration. The performance obligations related to transaction services are executing the specified trade and are priced according to the customer’s fee schedule. Such income is recognized at a point in time as the trade occurs and the performance obligation is fulfilled. The performance obligations related to investment management, advisory and administration include allocating customer assets across a wide range of mutual funds and other investments, on-going account monitoring and re-balancing of the portfolio. These performance obligations are satisfied over time and the related revenue is calculated monthly based on the assets under management of each customer. All material performance obligations are satisfied as of the end of each accounting period.
Bankcard fees – Bankcard fees primarily represent income earned from interchange revenue from MasterCard and Visa for the Company’s processing of debit, credit, HSA, and flexible spending account transactions. Additionally, the Company earns income and incentives related to various referrals of customers to card programs. The performance obligation for interchange revenue is the processing of each transaction through the Company’s access to the banking system. This performance obligation is completed for each individual transaction and income is recognized per transaction in accordance with interchange rates established by MasterCard and Visa. The performance obligations for various referral and incentive programs include either referring customers to certain card products or issuing exclusively branded cards for certain customer segments. The pricing of these incentive and referral programs are in accordance with the agreement with the individual card partner. These performance obligations are completed as the referrals are made or over a period of time when the Company is exclusively issuing branded cards. For the years ended December 31, 2025, 2024 and 2023 , the Company also had $ 51.4 million, $ 39.4 million, and $ 39.7 million of expense, respectively, recorded within the Bankcard fees line on the Company’s Consolidated Statements of Income related to rebates and rewards programs that are outside of the scope of ASC 606. All material performance obligations are satisfied as of the end of each accounting period.
Investment securities gains, net – In the regular course of business, the Company recognizes gains and losses on the sale of available-for-sale securities. Additionally, the Company recognizes gains and losses on equity securities with readily determinable fair values and equity securities without readily determinable fair values. These gains and losses are recognized in accordance with ASC 320, Investments–Debt Securities, and ASC 321, Investments–Equity Securities , and are outside of the scope of ASC 606.
Other income – The Company recognizes other miscellaneous income through a variety of other revenue streams, the most material of which include letter of credit fees, certain loan origination fees, gains on the sale of assets, derivative income, and bank-owned and company-owned life insurance income. These revenue streams are outside of the scope of ASC 606 and are recognized in accordance with the applicable U.S. GAAP. The remainder of Other income is primarily earned through transactions with personal banking customers, including wire transfer service charges, stop payment charges, and fees for items like money orders and cashier’s checks. The performance obligations of these types of fees are satisfied as transactions are completed and revenue is recognized upon transaction execution according to established fee schedules with the customers.
The Company had no material contract assets, contract liabilities, or remaining performance obligations as of December 31, 2025 or 2024. Total receivables from revenue recognized under the scope of ASC 606 were $ 116.1 million and $ 100.2 million as of December 31, 2025 and December 31, 2024, respectively. These receivables are included as part of the Other assets line on the Company’s Consolidated Balance Sheets.
The following tables depict the disaggregation of revenue according to revenue stream and Business Segment for the three years ended December 31, 2025, 2024, and 2023. As stated in Note 12, “Business Segment Reporting,” for comparability purposes, amounts in all periods are based on methodologies in effect at December 31, 2025 and previously reported results have been reclassified in this filing to conform to the current organizational structure.
Disaggregated revenue is as follows (in thousands):
Year Ended December 31, 2025
NONINTEREST INCOME
Commercial Banking
Institutional Banking
Personal Banking
Revenue (Expense) out of Scope of ASC 606
Total
Trust and securities processing
Trading and investment banking
Service charges on deposit accounts
Insurance fees and commissions
Brokerage fees
Bankcard fees
Investment securities gains, net
Other
Total noninterest income
Year Ended December 31, 2024
NONINTEREST INCOME
Commercial Banking
Institutional Banking
Personal Banking
Revenue (Expense) out of Scope of ASC 606
Total
Trust and securities processing
Trading and investment banking
Service charges on deposit accounts
Insurance fees and commissions
Brokerage fees
Bankcard fees
Investment securities gains, net
Other
Total noninterest income
Year Ended December 31, 2023
NONINTEREST INCOME
Commercial Banking
Institutional Banking
Personal Banking
Revenue (Expense) out of Scope of ASC 606
Total
Trust and securities processing
Trading and investment banking
Service charges on deposit accounts
Insurance fees and commissions
Brokerage fees
Bankcard fees
Investment securities losses, net
Other
Total noninterest income
14. COMMON STOCK
The following table summarizes the share transactions for the three years ended December 31, 2025 (in thousands, except for share data):
Shares Issued
Shares in Treasury
Balance January 1, 2023
Purchase of Treasury Stock
Sale of Treasury Stock
Issued for stock options and restricted stock
Balance December 31, 2023
Purchase of Treasury Stock
Sale of Treasury Stock
Issued for stock options and restricted stock
Balance December 31, 2024
Common stock issuance
Purchase of Treasury Stock
Sale of Treasury Stock
Issued for stock options and restricted stock
Balance December 31, 2025
The Board authorized, at its July 25, 2023, April 30, 2024, and April 29, 2025 meetings, the repurchase of up to one million shares of the Company’s common stock. The July 2023 Repurchase Authorization terminated on April 30, 2024, the April 2024 Repurchase Authorization terminated on April 29, 2025 , and the April 2025 Repurchase Authorization will terminate on April 28, 2026. All share purchases pursuant to the Repurchase Authorizations are intended to be within the scope of Rule 10b-18 promulgated under the Exchange Act. Rule 10b-18 provides a safe harbor for purchases in a given day if the Company satisfies the manner, timing and volume conditions of the rule when purchasing its own common shares. The Company has not made any repurchase of its securities other than pursuant to the Repurchase Authorizations , but did acquire shares pursuant to the Company’s share-based incentive programs.
15. COMMITMENTS, CONTINGENCIES AND GUARANTEES
In the normal course of business, the Company is a party to financial instruments with off-balance-sheet risk in order to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit, commercial letters of credit, standby letters of credit, and futures contracts. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Balance Sheets. The contract or notional amount of those instruments reflects the extent of involvement the Company has in particular classes of financial instruments. Many of the commitments expire without being drawn upon; therefore, the total amount of these commitments does not necessarily represent the future cash requirements of the Company.
The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit, commercial letters of credit, and standby letters of credit is represented by the contract or notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the agreement. These conditions generally include, but are not limited to, each customer being current as to repayment terms of existing loans and no deterioration in the customer’s financial condition. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The interest rate is generally a variable rate. If the commitment has a fixed interest rate, the rate is generally not set until such time as credit is extended. For credit card customers, the Company has the right to change or terminate terms or conditions of the credit card account at any time. Since a large portion of the commitments and unused credit card lines are never actually drawn upon, the total commitment amount does not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on an individual basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s
credit evaluation. Collateral pledged by customers varies but may include accounts receivable, inventory, real estate, plant and equipment, stock, securities and certificates of deposit.
Commercial letters of credit are issued specifically to facilitate trade or commerce. Under the terms of a commercial letter of credit, as a general rule, drafts will be drawn when the underlying transaction is consummated as intended.
Standby letters of credit are conditional commitments issued by the Company payable upon the non-performance of a customer’s obligation to a third party. The Company issues standby letters of credit for terms ranging from three months to six years . The Company generally requires the customer to pledge collateral to support the letter of credit. The maximum liability to the Company under standby letters of credit at December 31, 2025 and 2024 , was $ 468.4 million and $ 404.7 million, respectively. As of December 31, 2025 and 2024, standby letters of credit totaling $ 5.4 million and $ 26.7 million, respectively, were with related parties to the Company.
The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities. The Company holds collateral supporting those commitments when deemed necessary. Collateral varies but may include such items as those described for commitments to extend credit.
Futures contracts are contracts for delayed delivery of securities or money market instruments in which the seller agrees to make delivery at a specified future date, of a specified instrument, at a specified yield. Risks arise from the possible inability of counterparties to meet the terms of their contracts and from movement in securities values and interest rates. Instruments used in trading activities are carried at fair value and gains and losses on futures contracts are settled in cash daily. Any changes in the fair value are recognized in trading and investment banking income.
The Company uses contracts to offset interest rate risk on specific securities held in the trading portfolio. As of December 31, 2025 and 2024, there were no notional amounts outstanding for these contracts. There were no open futures contract positions during the years ended December 31, 2025 or 2024. There was no net futures activity for the years ended December 31, 2025, 2024 or 2023. The Company controls the credit risk of its futures contracts through credit approvals, limits and monitoring procedures.
The Company also enters into foreign exchange contracts on a limited basis. For operating purposes, the Company maintains certain balances in foreign banks. Foreign exchange contracts are purchased on a monthly basis to avoid foreign exchange risk on these foreign balances. The Company will also enter into foreign exchange contracts to facilitate foreign exchange needs of customers. The Company will enter into a contract to buy or sell a foreign currency at a future date only as part of a contract to sell or buy the foreign currency at the same future date to a customer. During 2025, contracts to purchase and to sell foreign currency averaged approximately $ 78.3 million compared to $ 46.8 million during 2024. The net gains on these foreign exchange contracts for the years ended December 31, 2025, 2024 and 2023 were $ 7.4 million, $ 6.1 million and $ 4.2 million, respectively.
With respect to group concentrations of credit risk, most of the Company’s business activity is with customers in the states of Missouri, Kansas, Colorado, Arizona, Texas, and Utah. At December 31, 2025, the Company did not have any significant credit concentrations in any particular industry.
The following table summarizes the Company’s off-balance sheet financial instruments as described above (in thousands):
Contract or Notional Amount December 31,
Commitments to extend credit for loans (excluding credit card loans)
Commitments to extend credit under credit card loans
Commercial letters of credit
Standby letters of credit
Forward contracts
Spot foreign exchange contracts
Commitments to extend credit for securities purchased under agreements to resell
Allowance for Credit Losses on Off-Balance Sheet Credit Exposure
The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancelable by the Company. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The estimate is based on expected utilization rates by portfolio segment. Utilization rates are influenced by historical trends and current conditions. The expected utilization rates are applied to the total commitment to determine the expected amount to be funded. The allowance for off-balance sheet credit exposure is calculated by applying portfolio segment expected credit loss rates to the expected amount to be funded.
The following categories of off-balance sheet credit exposures have been identified:
Revolving Lines of Credit: includes commercial, construction, agricultural, personal, and home-equity. Risk inherent to revolving lines of credit often are related to the susceptibility of an individual or business experiencing unpredictable cash flow or financial troubles, thus leading to payment default. During these financial troubles, the borrower could have less than desirable assets collateralizing the revolving line of credit. The financial strain the borrower is experiencing could lead to drawing against the line without the ability to pay the line down.
Non-Revolving Lines of Credit: include commercial and personal. Lines that do not carry a revolving feature are generally associated with a specific expenditure or project, such as to purchase equipment or the construction of real estate. The predominate risk associated with non-revolving lines is the diversion of funds for other expenditures. If the funds get diverted, the contributory value to collateral suffers.
Letters of Credit: includes standby letters of credit. Generally, a standby letter of credit is established to provide assurance to the beneficiary that the applicant will perform certain obligations arising out of a separate transaction between the beneficiary and the applicant. These obligations might be the performance of a service or delivery of a product. If the obligations are not met, it gives the beneficiary the right to draw on the letter of credit.
The ACL for off-balance sheet credit exposures was $ 5.7 million and $ 4.1 million as of December 31, 2025 and 2024 , respectively, and was recorded in the Accrued expenses and taxes line of the Company’s Consolidated Balance Sheets. Reductions of $ 2.0 million and $ 950 thousand of provision for off-balance sheet credit exposures were recorded for the years ended December 31, 2025 and December 31, 2024 , respectively. Provision of $ 2.0 million was recorded for off-balance sheet credit exposures for the year ended December 31, 2023 . Provision for off-balance sheet credit exposures is recorded in the Provision for credit losses line of the Company’s Consolidated Statements of Income.
16. INCOME TAXES
Income taxes as set forth below produce effective income tax rates of 19.7 % in 2025 , 18.5 % in 2024 , and 17.0 % in 2023. These percentages are computed by dividing Income tax expense by Income before income taxes.
Income tax expense includes the following components (in thousands):
Year Ended December 31,
Current tax
Federal
State
Total current tax expense
Deferred tax
Federal
State
Total deferred tax expense (benefit)
Total tax expense
Federal
State
Total tax expense
The reconciliation between the income tax expense and the amount computed by applying the statutory federal tax rate of 21 % for income before income taxes is as follows (in thousands):
Year Ended December 31,
Amount
Percent
Amount
Percent
Amount
Percent
U.S federal statutory income tax rate
Domestic federal:
Federal tax credits, net of amortization (as applicable)
Nontaxable and nondeductible items:
Tax-exempt interest income
Other
Domestic state and local income taxes, net of federal income tax effect (1)
Changes in unrecognized tax benefits
Other reconciling items
Total tax expense
(1) In general, state and local taxes in California, Colorado, Illinois, Minnesota and New York City made up the majority (greater than 50 %) of the tax effect in this category.
The income taxes paid, net of refunds, is as follows (in thousands):
Year Ended December 31,
U.S. federal
U.S. state and local:
Illinois
Other
Foreign
Total income taxes paid, net of refunds
*The amount of income taxes paid, net of refunds received, during the year does not meet the 5% disaggregation threshold.
In preparing its tax returns, the Company is required to interpret tax laws and regulations to determine its taxable income. Periodically, the Company is subject to examinations by various taxing authorities that may give rise to differing interpretations of these laws. Upon examination, agreement of tax liabilities between the Company and the multiple tax jurisdictions in which the Company files tax returns may ultimately be different. The Company is in the examination process with two state tax authorities for various years between tax years 2021 and 2023. The
Company believes the aggregate amount of any additional liabilities that may result from these examinations, if any, will not have a material adverse effect on the financial condition, results of operations, or cash flows of the Company.
Deferred income taxes result from differences between the carrying value of assets and liabilities measured for financial reporting and the tax basis of assets and liabilities for income tax return purposes.
The significant components of deferred tax assets and liabilities are reflected in the following table (in thousands):
December 31,
Deferred tax assets:
Net unrealized loss on securities available for sale
Net unrealized loss on cash flow hedges
Loans, principally due to allowance for credit losses
Securities
Equity-based compensation
Accrued expenses
Deferred compensation
Net operating loss carryovers
Miscellaneous
Total deferred tax assets before valuation allowance
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Net unrealized gain on fair value hedges
Net unrealized gain on cash flow hedges
Securities
Land, buildings and equipment
Prepaid expenses
Partnership investments
Trust preferred securities
Intangibles
Miscellaneous
Total deferred tax liabilities
Net deferred tax asset
As of December 31, 2025 , the Company’s gross federal net operating loss carryovers, acquired through the HTLF acquisition and subject to annual utilization limitations under Section 382 of the Internal Revenue Code, totaled $ 93.7 million. The deferred tax asset associated with these federal net operating loss carryovers was $ 19.7 million at December 31, 2025 , and the Company established a valuation allowance of $ 2.1 million to reflect expected net operating loss expirations. A majority of these federal net operating losses have an indefinite carryforward period, while others expire at various times between 2026 and 2035 . The Company also had gross state net operating loss carryovers of $ 531.5 million, for which a deferred tax asset of $ 23.8 million was recorded at December 31, 2025 . A majority of these state net operating loss carryovers were acquired through the HTLF acquisition and are subject to annual utilization limitations. Most of these state net operating losses expire at various times between 2026 and 2045 and some have an indefinite carryforward. As of December 31, 2025 and 2024 , the Company had a valuation allowance of $ 15.2 million and $ 2.5 million, respectively, for certain state net operating losses as they are not expected to be realized. In addition, as of December 31, 2025 and 2024 , the Company had a valuation allowance of $ 21.7 million and $ 8.6 million, respectively, to reduce certain other state deferred tax assets to the amount management believes will be more likely than not realized.
The net deferred tax asset at December 31, 2025 and December 31, 2024 are included in the Other assets line of the Company’s Consolidated Balance Sheets.
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for tax years prior to 2020 in the jurisdictions in which it files.
Liabilities Associated With Unrecognized Tax Benefits
The gross amount of unrecognized tax benefits totaled $ 8.9 million and $ 8.3 million at December 31, 2025 and 2024 , respectively. The total amount of unrecognized tax benefits, net of associated deferred tax benefit, that would impact the effective tax rate, if recognized, would be $ 7.1 million and $ 6.5 million at December 31, 2025 and December 31, 2024, respectively. The unrecognized tax benefits relate to state tax positions that have a corresponding federal tax benefit.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
December 31,
Unrecognized tax benefits - opening balance
Gross increases - tax positions in prior period
Gross decreases - tax positions in prior period
Gross increases - current-period tax positions
Gross increases - acquisitions
Lapse of statute of limitations
Unrecognized tax benefits - ending balance
Investments in Affordable Housing and Renewable Energy
The Company has invested in affordable housing and renewable energy projects sponsored by third parties, commonly referred to as tax equity investments. The primary return on these investments is derived from the realization of federal tax credits and deductions. Tax equity investments are recorded net of accumulated amortization using the proportional amortization method. These investments are included in Other securities on the Consolidated Balance Sheets and totaled $ 290.3 million and $ 251.0 million as of December 31, 2025 and 2024 , respectively. Unfunded tax equity obligations are included in Other liabilities on the Consolidated Balance Sheets, and totaled $ 124.9 million and $ 116.5 million as of December 31, 2025 and 2024, respectively.
The following table summarizes the amortization expense and tax benefit recognized for the Company’s affordable housing projects and other tax credit investments (in thousands):
Year Ended December 31,
Amortization Expense (1)
Tax Benefit Recognized (2)
Amortization Expense (1)
Tax Benefit Recognized (2)
Amortization Expense (1)
Tax Benefit Recognized (2)
Low-income housing tax credit
Historic tax credit
New markets tax credit
Renewable energy
Total
The credit programs disclosed above met the conditions to apply the proportional amortization method. The amortization expense is included in Income tax expense in the Consolidated Statements of Income and Amortization of securities premiums, net of discount accretion in the Consolidated Statements of Cash Flows. There were no credit programs that were not eligible for the proportional amortization method.
The tax benefit recognized primarily reflects the Federal tax credits generated from the investment, which are included in Income tax expense in the Consolidated Statements of Income.
17. DERIVATIVES AND HEDGING ACTIVITIES
Risk Management Objective of Using Derivatives
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s loans and borrowings. The Company also has interest rate derivatives that result from a service provided to certain qualifying customers and, therefore, are not used to manage interest rate risk of the Company’s assets or liabilities. The Company has entered into an offsetting position for each of these derivative instruments with a matching instrument from another financial institution in order to minimize its net risk exposure resulting from such transactions.
Fair Values of Derivative Instruments on the Consolidated Balance Sheets
The table below presents the fair value of the Company’s derivative financial instruments as of December 31, 2025 and 2024. The Company’s derivative assets and derivative liabilities are located within Other assets and Other liabilities, respectively, on the Company’s Consolidated Balance Sheets.
Derivative fair values are determined using valuation techniques including discounted cash flow analysis on the expected cash flows from each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, foreign exchange rates, and implied volatilities. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.
This table provides a summary of the fair value of the Company’s derivative assets and liabilities as of December 31, 2025 and December 31, 2024 (in thousands) :
Derivative Assets
Derivative Liabilities
December 31,
December 31,
Fair Value
Interest Rate Derivatives:
Derivatives not designated as hedging instruments
Derivatives designated as hedging instruments
Total interest rate derivatives
Commodity Derivatives:
Derivatives not designated as hedging instruments
Total commodity derivatives
Total
Fair Value Hedges of Interest Rate Risk
The Company is exposed to changes in the fair value of certain of its fixed-rate assets and liabilities due to changes in interest rates. Interest rate swaps designated as fair value hedges involve making fixed rate payments to a counterparty in exchange for the Company receiving variable rate payments over the life of the agreements without the exchange of the underlying notional amount. As of both December 31, 2025 and December 31, 2024 , the Company did no t have any interest rate swaps that were designated as fair value hedges of interest rate risk.
During 2022 and 2023, the Company terminated 10 fair value hedges of interest rate risk associated with the Company's municipal bond securities. For the years ended December 31, 2025 and 2024 the Company reclassified $ 4.8 million and $ 6.1 million, respectively, from AOCI to Interest income in connection with these terminated hedges. The unrealized gain on the terminated fair value hedges remaining in AOCI was $ 46.7 million net of tax, and $ 50.4 million net of tax, as of December 31, 2025 and 2024, respectively. The hedging adjustments will be amortized through the contractual maturity date of each respective hedged item.
For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in Interest income in the Consolidated Statements of Income.
Cash Flow Hedges of Interest Rate Risk
The Company’s objective in using interest rate derivatives is to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps, floors, and floor spreads as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. As of December 31, 2025 and 2024 , the Company had two interest rate swaps that were designated as cash flow hedges of interest rate risk associated with the Company’s variable-rate subordinated debentures issued by Marquette Capital Trusts III and IV. These swaps had an aggregate notional amount of $ 51.5 million at both December 31, 2025 and 2024.
Interest rate floors designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty if interest rates fall below the strike rate on the contract in exchange for an upfront premium. Interest rate floor spreads designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty if interest rates fall below the purchased floor rate on the contract in exchange for an upfront premium, and involve payment of variable-rate amounts to the counterparty if interest rates fall below the sold floor rate on the contract. As of December 31, 2025 and 2024 , the Company had 13 interest rate floors and floor spreads with an aggregate notional amount of $ 3.0 billion that were designated as cash flow hedges of interest rate risk.
For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in AOCI and is subsequently reclassified into interest expense and interest income in the period during which the hedged forecasted transaction affects earnings. Amounts reported in AOCI related to interest rate swap derivatives will be reclassified to Interest expense as interest payments are received or paid on the Company’s hedged items. Amounts reported in AOCI related to interest rate floor and floor spread derivatives will be reclassified to Interest income as interest payments are received or paid on the Company’s items. The Company expects to reclassify $ 0.5 million from AOCI as a reduction to Interest expense and $ 3.8 million from AOCI as an increase to Interest income during the next 12 months. As of December 31, 2025 , the Company is hedging its exposure to the variability in future cash flows for forecasted transactions over a maximum period of 10.7 years.
Non-designated Hedges
The remainder of the Company’s derivatives are not designated in qualifying hedging relationships. Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain customers.
Interest Rate Derivatives
The Company executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously offset by interest rate swaps that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. The changes in the fair value of both the customer swaps and the offsetting swaps are recognized in Other noninterest expense in the Consolidated Statements of Income. As of December 31, 2025 , the Company had 830 interest rate swaps with an aggregate notional amount of $ 11.7 billion related to this program. The acquisition of HTLF included 478 interest rate swaps with an aggregate notional amount of $ 4.2 billion as of the Acquisition Date. As of December 31, 2024 , the Company had 298 interest rate swaps with an aggregate notional amount of $ 5.5 billion.
Commodity Derivatives
The Company executes commodity swap and option contracts with commercial banking customers to facilitate their respective risk management strategies. The Company simultaneously enters into an offsetting contract with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the commodity swaps and option contracts associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. The changes in the fair value of both the customer swaps and the offsetting swaps are recognized in Other noninterest expense in the Consolidated Statements of Income. As of December 31, 2025 , the Company had 26 commodity swaps and option contracts with an aggregate remaining volume of 2.1 million oil barrels and 3.6 million British Thermal Units related to this program.
Effect of Derivative Instruments on the Consolidated Statements of Income and Accumulated Other Comprehensive Income
This table provides a summary of the amount of gain or loss recognized in Interest income and Other noninterest expense in the Consolidated Statements of Income for the years ended December 31, 2025, 2024, and 2023 related to the Company’s derivative assets and liabilities (in thousands):
Amount of Gain (Loss) Recognized
For the Year Ended December 31,
Interest Rate Derivatives
Derivatives not designated as hedging instruments
Total
Interest Rate Derivatives
Derivatives designated as hedging instruments:
Fair value adjustments on derivatives
Fair value adjustments on hedged items
Total
Commodity Derivatives
Derivatives not designated as hedging instruments
Total
These tables provide a summary of the effect of hedges on AOCI in the Consolidated Statements of Comprehensive Income for the years ended December 31, 2025, 2024, and 2023 related to the Company’s derivative assets and liabilities (in thousands):
For the Year Ended December 31, 2025
Derivatives in Cash Flow Hedging Relationships
Gain (Loss) Recognized in OCI on Derivative
Gain (Loss) Recognized in OCI Included Component
Loss Recognized in OCI Excluded Component
(Loss) Gain Reclassified from AOCI into Earnings
(Loss) Gain Reclassified from AOCI into Earnings Included Component
Loss Reclassified from AOCI into Earnings Excluded Component
Interest rate floors and floor spreads
Interest rate swaps
Total
For the Year Ended December 31, 2024
Derivatives in Cash Flow Hedging Relationships
(Loss) Gain Recognized in OCI on Derivative
(Loss) Gain Recognized in OCI Included Component
Gain Recognized in OCI Excluded Component
Gain Reclassified from AOCI into Earnings
Gain Reclassified from AOCI into Earnings Included Component
Loss Reclassified from AOCI into Earnings Excluded Component
Interest rate floors and floor spreads
Interest rate swaps
Total
For the Year Ended December 31, 2023
Derivatives in Cash Flow Hedging Relationships
Gain Recognized in OCI on Derivative
Gain Recognized in OCI Included Component
Loss Recognized in OCI Excluded Component
Gain Reclassified from AOCI into Earnings
Gain Reclassified from AOCI into Earnings Included Component
Loss Reclassified from AOCI into Earnings Excluded Component
Interest rate floors and floor spreads
Interest rate swaps
Total
Credit-risk-related Contingent Features
The Company has agreements with certain of its derivative counterparties that contain a provision that if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations.
As of December 31, 2025, the termination value of derivatives in a net liability position, which includes accrued interest, related to these agreements was $ 3.7 million. The Company has minimum collateral posting thresholds with certain of its derivative counterparties. As of December 31, 2025, the Com pany had posted $ 4.5 million of collateral . If the Company had breached any of these provisions at December 31, 2025 , it could have been required to settle its obligations under the agreements at the termination value.
18. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2025 and 2024 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value.
Fair values determined by Level 1 inputs utilize quoted prices in active markets for identical assets and liabilities that the Company has the ability to access. Fair values determined by Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the hierarchy. In such cases, the fair value is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
Assets and liabilities measured at fair value on a recurring basis as of December 31, 2025 and 2024 (in thousands):
Fair Value Measurement at December 31, 2025 Using
Description
December 31,
Quoted Prices in Active Markets for Identical Assets (Level 1)
Significant Other Observable Inputs (Level 2)
Significant Unobservable Inputs (Level 3)
Assets
U.S. Treasury
U.S. Agencies
State and political subdivisions
Corporates
Trading – other
Trading securities
U.S. Treasury
U.S. Agencies
Mortgage-backed
State and political subdivisions
Corporates
Collateralized loan obligations
Securities available for sale
Equity securities with readily determinable fair values
Derivatives
Total
Liabilities
Derivatives
Securities sold not yet purchased
Total
Fair Value Measurement at December 31, 2024 Using
Description
December 31,
Quoted Prices in Active Markets for Identical Assets (Level 1)
Significant Other Observable Inputs (Level 2)
Significant Unobservable Inputs (Level 3)
Assets
U.S. Treasury
U.S. Agencies
State and political subdivisions
Corporates
Trading – other
Trading securities
U.S. Treasury
U.S. Agencies
Mortgage-backed
State and political subdivisions
Corporates
Collateralized loan obligations
Securities available for sale
Equity securities with readily determinable fair values
Derivatives
Total
Liabilities
Derivatives
Securities sold not yet purchased
Total
Valuation methods for instruments measured at fair value on a recurring basis
The following methods and assumptions were used to estimate the fair value of each class of financial instruments measured on a recurring basis:
Trading Securities Fair values for trading securities (including financial futures), are based on quoted market prices where available. If quoted market prices are not available, fair values are based on quoted market prices for similar securities.
Securities Available for Sale Fair values are based on quoted market prices or dealer quotes, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. Prices are provided by third-party pricing services and are based on observable market inputs. On an annual basis, the Company compares a sample of these prices to other independent sources for the same securities. Additionally, throughout the year, if securities are sold, comparisons are made between the pricing services prices and the market prices at which the securities were sold. Variances are analyzed, and, if appropriate, additional research is conducted with the third-party pricing services. Based on this research, the pricing services may affirm or revise their quoted price. No significant adjustments have been made to the prices provided by the pricing services. The pricing services also provide documentation on an ongoing basis that includes reference data, inputs and methodology by asset class, which is reviewed to ensure that security placement within the fair value hierarchy is appropriate.
Equity securities with readily determinable fair values Fair values are based on quoted market prices.
Derivatives Fair values are determined using valuation techniques including discounted cash flow analysis on the expected cash flows from each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, foreign exchange rates, and implied volatilities. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the
Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.
Securities sold not yet purchased Fair values are based on quoted market prices or dealer quotes, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. Prices are provided by third-party pricing services and are based on observable market inputs.
Assets measured at fair value on a non-recurring basis as of December 31, 2025 and 2024 (in thousands):
Fair Value Measurement at December 31, 2025 Using
Description
December 31,
Quoted Prices in Active Markets for Identical Assets (Level 1)
Significant Other Observable Inputs (Level 2)
Significant Unobservable Inputs (Level 3)
Total (Losses) Gains Recognized During the Twelve Months Ended December 31
Collateral dependent assets
Other real estate owned
Other repossessed assets
Total
Fair Value Measurement at December 31, 2024 Using
Description
December 31,
Quoted Prices in Active Markets for Identical Assets (Level 1)
Significant Other Observable Inputs (Level 2)
Significant Unobservable Inputs (Level 3)
Total Losses Recognized During the Twelve Months Ended December 31
Collateral dependent assets
Other real estate owned
Other repossessed assets
Total
Valuation methods for instruments measured at fair value on a non-recurring basis
The following methods and assumptions were used to estimate the fair value of each class of financial instruments measured on a non-recurring basis:
Collateral Dependent Assets Collateral dependent assets are assets evaluated as part of the ACL on an individual basis. Those assets for which there is an associated allowance are considered financial assets measured at fair value on a non-recurring basis. Adjustments are recorded on certain assets to reflect write-downs that are based on the external appraised value of the underlying collateral. The external appraisals are generally based on recent sales of comparable properties which are then adjusted for the unique characteristics of the property being valued. In the case of non-real estate collateral, reliance is placed on a variety of sources, including external estimates of value and judgments based on the experience and expertise of internal specialists within the Company’s property management group and the Company’s credit department. The valuation of collateral dependent assets are reviewed on a quarterly basis. Because many of these inputs are not observable, the measurements are classified as Level 3.
Other real estate owned and Other repossessed assets Other real estate owned and other repossessed assets consist of loan collateral which has been repossessed through foreclosure. This collateral is comprised of commercial and residential real estate and other non-real estate property, including auto, recreational and marine vehicles. Other real estate owned and other repossessed assets are recorded as held for sale initially at the fair value of the collateral less estimated selling costs. The initial valuation of the foreclosed property is obtained through an appraisal process similar to the process described in the collateral dependent assets paragraph above. Subsequent to foreclosure, valuations are reviewed quarterly and updated periodically, and the assets may be marked down further,
reflecting a new cost basis. Fair value measurements may be based upon appraisals, third-party price opinions, or internally developed pricing methods and those measurements are classified as Level 3.
Fair value disclosures require disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis.
The estimated fair value of the Company’s financial instruments at December 31, 2025 and 2024 are as follows (in thousands):
Fair Value Measurement at December 31, 2025 Using
Carrying Amount
Quoted Prices in Active Markets for Identical Assets (Level 1)
Significant Other Observable Inputs (Level 2)
Significant Unobservable Inputs (Level 3)
Total Estimated Fair Value
FINANCIAL ASSETS
Cash and short-term investments
Securities available for sale
Securities held to maturity (exclusive of allowance for credit losses)
Trading securities
Other securities
Loans (exclusive of allowance for credit losses)
Derivatives
FINANCIAL LIABILITIES
Time deposits
Other borrowings
Long-term debt
Derivatives
OFF-BALANCE SHEET ARRANGEMENTS
Commitments to extend credit for loans
Commitments to extend resell agreements
Commercial letters of credit
Standby letters of credit
Fair Value Measurement at December 31, 2024 Using
Carrying Amount
Quoted Prices in Active Markets for Identical Assets (Level 1)
Significant Other Observable Inputs (Level 2)
Significant Unobservable Inputs (Level 3)
Total Estimated Fair Value
FINANCIAL ASSETS
Cash and short-term investments
Securities available for sale
Securities held to maturity (exclusive of allowance for credit losses)
Trading securities
Other securities
Loans (exclusive of allowance for credit losses)
Derivatives
FINANCIAL LIABILITIES
Time deposits
Other borrowings
Long-term debt
Derivatives
OFF-BALANCE SHEET ARRANGEMENTS
Commitments to extend credit for loans
Commitments to extend resell agreements
Commercial letters of credit
Standby letters of credit
Cash and short-term investments The carrying amounts of cash and due from banks, federal funds sold and resell agreements are reasonable estimates of their fair values.
Securities held to maturity For U.S. Agency and mortgage-backed securities, as well as general obligation bonds in the State and political subdivision portfolio, fair values are based on quoted market prices or dealer quotes, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. Prices are provided by third-party pricing services and are based on observable market inputs. On an annual basis, the Company compares a sample of these prices to other independent sources for the same securities. Variances are analyzed, and, if appropriate, additional research is conducted with the third-party pricing services. Based on this research, the pricing services may affirm or revise their quoted price. No significant adjustments have been made to the prices provided by the pricing services. The pricing services also provide documentation on an ongoing basis that includes reference data, inputs and methodology by asset class, which is reviewed to ensure that security placement within the fair value hierarchy is appropriate. For private placement bonds in the State and political subdivision portfolio, fair values are estimated by discounting the future cash flows using current market rates.
Other securities Amount consists of FRB and FHLB stock held by the Company, equity securities with readily determinable fair values, and equity securities without readily determinable fair values, including equity-method investments and other miscellaneous investments. The carrying amount of the FRB and FHLB stock equals its fair value because the shares can only be redeemed by the FRB and FHLB at their carrying amount. Equity securities with readily determinable fair values are measured at fair value using quoted market prices. Equity securities without readily determinable fair values are carried at cost, which approximates fair value.
Loans Fair values are estimated for portfolios with similar financial characteristics. Loans are segregated by type, such as commercial, real estate, consumer, and credit card. Each loan category is further segmented into fixed and variable interest rate categories. The fair value of loans is estimated by discounting the future cash flows. The discount rates used are estimated using comparable market rates for similar types of instruments adjusted to be commensurate with the credit risk, overhead costs, and optionality of such instruments.
Time deposits The fair value of fixed-maturity certificates of deposit is estimated by discounting the future cash flows using the rates that are currently offered for deposits of similar remaining maturities.
Other borrowings The carrying amounts of federal funds purchased, repurchase agreements and other short-term debt are reasonable estimates of their fair value because of the short-term nature of their maturities. Federal funds purchased are classified as Level 1 based on availability of quoted market prices and repurchase agreements and other short-term debt are classified as Level 2.
Long-term debt Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate fair value of existing debt.
Other off-balance sheet instruments The fair value of loan commitments and letters of credit are determined based on the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreement and the present creditworthiness of the counterparties. Neither the fees earned during the year on these instruments nor their fair value at period-end are significant to the Company’s consolidated financial position.
19. PARENT COMPANY FINANCIAL INFORMATION
UMB FINANCIAL CORPORATION
BALANCE SHEETS (in thousands)
December 31,
ASSETS
Investment in subsidiaries:
Banks
Non-banks
Total investment in subsidiaries
Goodwill on purchased affiliates
Cash
Investment securities and other
Total assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Long-term debt
Accrued expenses and other
Total liabilities
Shareholders' equity
Total liabilities and shareholders' equity
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (in thousands)
Year Ended December 31,
INCOME
Dividends and income received from subsidiaries
Service fees from subsidiaries
Other
Total income
EXPENSE
Salaries and employee benefits
Other
Total expense
Income before income taxes and equity in undistributed earnings of subsidiaries
Income tax expense (benefit)
Income before equity in undistributed earnings of subsidiaries
Equity in undistributed earnings of subsidiaries:
Banks
Non-Banks
Net income
Other comprehensive income (loss)
Comprehensive income
STATEMENTS OF CASH FLOWS (in thousands)
Year Ended December 31,
OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to cash provided by operating activities:
Equity in earnings of subsidiaries
Dividends received from subsidiaries
Depreciation and amortization
Amortization of debt issuance costs
Equity based compensation
Changes in other assets and liabilities, net
Net cash provided by operating activities
INVESTING ACTIVITIES
Net capital investment in subsidiaries
Net cash activity from acquisitions and divestitures
Net increase in investment securities
Net cash (used in) provided by investing activities
FINANCING ACTIVITIES
Cash dividends paid
Repayment from long-term debt
Common stock issuance
Payment of common stock issuance costs
Proceeds from exercise of stock options and sales of treasury stock
Purchases of treasury stock
Preferred stock issuance
Preferred stock redemption
Net cash provided by (used in) by financing activities
Net increase (decrease) in cash
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
20. Acquisition
On January 31, 2025 (Acquisition Date), the Company acquired all of the outstanding stock of Heartland Financial USA, Inc., a Delaware corporation (HTLF), in an all-stock transaction, issuing a total of 23.6 million shares of the Company’s common stock and 4.6 million depositary shares, each representing a 1/400th interest in a share of the Company’s 7.00 % Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A (the Series A preferred stock). Pursuant to the Agreement and Plan of Merger, dated as of April 28, 2024 , (i) HTLF merged with and into the Company, with the Company continuing as the surviving corporation and (ii) one day after the closing date of the acquisition of HTLF by the Company, HTLF’s wholly owned bank subsidiary, a Colorado-chartered bank (HTLF Bank), merged with and into UMB Bank, National Association, the Company’s national bank subsidiary (the Bank), with the Bank continuing as the surviving bank.
Total consideration for the acquisition was $ 2.9 billion, consisting of the Company’s common stock valued at $ 2.8 billion (based on the Company’s common stock price of $ 117.90 ) and the Company’s Series A preferred stock valued at $ 115.2 million (based on the Company’s Series A preferred stock price of $ 25.05 ) as of close of business on the Acquisition Date. Each HTLF common stock share was converted into 0.55 shares of the Company’s common stock. Each HTLF preferred stock share was converted into a share of the Company’s Series A preferred stock.
The acquisition of HTLF was accounted for as a business combination using the purchase method of accounting in accordance with FASB ASC Topic 805, Business Combinations. Accordingly, the purchase price was
allocated based on the estimated fair market values of the assets and liabilities acquired.
The following table summarizes the net assets acquired (at fair value) and consideration transferred for HTLF as of January 31, 2025 (in thousands, except for per share data):
Fair Value
January 31, 2025
Assets
Loans, net of allowance for credit losses on loans
Investment securities
Interest-bearing due from banks
Cash and due from banks
Premises and equipment, net
Identifiable intangible assets
Other assets
Total assets acquired
Liabilities
Noninterest-bearing deposits
Interest-bearing deposits
Long-term debt
Other liabilities
Total liabilities assumed
Net identifiable assets acquired
Preliminary goodwill
Net assets acquired
Consideration
Common stock consideration:
Company's common shares issued
Purchase price per share of the Company's common stock
Fair value of common stock consideration
Preferred stock consideration
Stock-based compensation consideration
Fair value of total consideration transferred
The fair value of the acquired assets and liabilities noted in the table above is preliminary as of December 31, 2025, pending a final adjustment to the valuation allowance against certain state deferred tax assets, as described below. During the preliminary period (Measurement Period), which may last up to twelve months subsequent to the Acquisition Date, the Company will continue to review information relating to events and circumstances existing as of the Acquisition Date that could impact the preliminary fair value estimates of the acquired assets and liabilities. In the table of acquired net assets above, the amount of net assets acquired reflect Measurement Period adjustments made since Acquisition Date that resulted in a net decrease in net assets acquired of $ 41.4 million. This decrease was primarily driven by a decrease in the value of various investment securities of $ 29.7 million, based on indicative market pricing determined to be in existence as of the Acquisition Date and increases of $ 23.1 million in the ACL for PCD loans based on credit factors that were determined to be in existence as of the Acquisition Date, partially offset by an increase of $ 10.2 million in the related deferred tax assets. The Company has been completing a comprehensive review of the fair value of the acquired assets and liabilities, including an evaluation of all facts and circumstances that existed as of the Acquisition Date. As of the date of this report, this process is complete and the Company has finalized its analysis. After December 31, 2025, but before the end of the Measurement Period, the Company recorded an adjustment of $ 2.2 million to the valuation allowance against certain state deferred tax assets.
The amount of goodwill arising from the acquisition reflects the Company’s increased market share and related synergies that are expected to result from combining the operations of UMB and HTLF. In accordance with ASC 350, Intangibles-Goodwill and Other , goodwill will not be amortized, but will be subject to at least an annual
impairment test. The Company has approximately $ 44.0 million of tax-deductible goodwill that arose in previous transactions completed by HTLF which carries over. The remaining goodwill related to the acquisition is not expected to be deductible for tax purposes. Of the $ 1.6 billion in goodwill arising from the acquisition, $ 979.5 million was assigned to the Commercial Banking segment and $ 653.0 million was assigned to the Personal Banking segment. The fair value of the acquired identifiable intangible assets of $ 511.0 million is comprised of a core deposit intangible of $ 474.1 million, a customer list of $ 26.0 million and purchased credit card relationships of $ 10.9 million.
The following is a description of the methods used to determine the fair values of significant assets and liabilities presented above.
Loans A valuation of the loans was performed by a third party as of the Acquisition Date to assess the fair value. The fair value of loans was based on a discounted cash flow method that considered the loans’ underlying characteristics including account type, remaining terms of loan, annual interest rates or coupon, fixed or variable interest rate, past delinquencies, risk rating, timing of principal and interest payments, current market rates, loan to value ratios, loss exposure, more specifically the probability of default and loss given default, and remaining balance. Loans were aggregated according to similar characteristics when applying the valuation method.
The Company's accounting methods for acquired Non-PCD and PCD loans are discussed in Note 1, "Summary of Significant Accounting Policies". At the Acquisition Date, the fair value of Non-PCD loans was $ 6.7 billion, compared to the unpaid principal balance of $ 7.1 billion.
The following table presents the unpaid principal balance and fair value of the loans acquired in the HTLF acquisition as of the Acquisition Date (in thousands):
Unpaid Principal Balance
Fair Value
Non-PCD loans
PCD loans
Total loans
At the Acquisition Date, of the $ 9.7 billion of loans acquired from HTLF, $ 3.0 billion were accounted for as PCD loans.
The following table provides a summary of PCD loans purchased as part of the HTLF acquisition as of the Acquisition Date (in thousands) :
January 31, 2025
Principal of PCD loans acquired
PCD ACL at acquisition
Non-credit discount on PCD loans
Fair value of PCD Loans
Investment securities The portion of the investment securities portfolio that was classified as available-for-sale was valued utilizing third-party pricing services for those securities retained and valued using the actual sales prices for those securities that were sold shortly after the close of the acquisition. The portion of the investment securities portfolio that was classified as held-to-maturity as of the Acquisition Date were priced by a third party using a discounted cash flow methodology similar to the methodology described above for the valuation of loans.
Interest-bearing due from banks and Cash and due from banks The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of these assets.
Core deposit intangible Core deposit intangibles represent the value of relationships with deposit clients and the cost savings derived from available core deposits relative to an alternative funding source. The fair value of the core deposit intangible was estimated using a net cost savings method, a variation of the income approach. This approach considers expected client attrition rates, average life and balance inflation, alternative cost of funds, the interest cost and net maintenance cost associated with the client deposit base, and a discount rate used to discount the future economic benefits of the core deposit intangible asset to present value.
Deposits The fair value for demand and savings deposits is the amount payable on demand at the Acquisition Date. The fair value for time deposits was valued by a third party using a discounted cash flow calculation that applied interest rates currently being offered to the contractual interest rates on such time deposits.
Long-term debt The fair value of long-term debt instruments was valued by a third party based on quoted market prices for the instrument if available, or for similar instruments if not available, or by using discounted cash flow analyses, based on current incremental borrowing rates for similar types of instruments.
The Company assumed long-term debt obligations with an aggregate balance of $ 159.8 million and an aggregate fair value of $ 139.3 million as of the Acquisition Date payable to fifteen unconsolidated trusts that have issued trust preferred securities. The interest rates on the acquired trust preferred securities ranged from 5.89 % to 8.21 % as of the Acquisition Date and reset quarterly. The acquired trust preferred securities have maturity dates ranging from September 2032 to September 2037 .
The Company assumed $ 150.0 million in aggregate subordinated notes due September 2031 . The subordinated notes have a fixed interest rate of 2.75 % until September 2026, at which time the interest rate will reset quarterly. The subordinated notes had an acquired fair value of $ 138.8 million as of January 31, 2025.
The results of HTLF are included in the results of the Company subsequent to the Acquisition Date. Transaction costs incurred after the Acquisition Date totaled $ 140.1 million, primarily in Salaries and employee benefits and Legal and consulting in the Consolidated Statements of Income, as well as $ 62.0 million in Provision expense to establish an ACL on the HTLF loans designated as non-PCD as of the Acquisition Date (Day 1 Provision expense). Additional transaction and integration costs will be expensed in future periods as incurred.
The following unaudited pro forma information combines the historical results of HTLF and the Company. The unaudited pro forma financial information does not include the potential impacts of possible business model changes, current market conditions, revenue enhancements, expense efficiencies, or other factors. If the HTLF acquisition had been completed on January 1, 2024, total revenue would have been approximately $ 2.7 billion and $ 2.5 billion for the year ended December 31, 2025 and December 31, 2024, respectively. Net income available to common shareholders would have been approximately $ 843.3 million and $ 504.0 million, respectively, for the same periods. Basic earnings per share would have been $ 11.20 and $ 6.96 for the same periods, respectively.
The unaudited pro forma information above reflects adjustments made to exclude the impact of acquisition-related expenses of $ 142.0 million for the year ended December 31, 2025 and include such expenses in the year ended December 31, 2024. Day 1 provision expense of $ 62.0 million was included in 2024 to reflect the assumption of the acquisition timing noted above. Adjustments also included adjusting net interest income by the estimated net accretion of fair value marks on acquired loans, HTM securities, time deposits and long-term debt of $ 12.8 million and $ 153.1 million for the years ended December 31, 2025 and December 31, 2024, respectively, and adjusting noninterest expense for the estimated net amortization of intangibles and fair value marks on premises and equipment of $ 8.0 million and $ 96.0 million for the years ended December 31, 2025 and December 31, 2024, respectively.
The unaudited pro forma information is theoretical in nature and not necessarily indicative of future consolidated results of operations of the Company or the consolidated results of operations which would have resulted had the Company acquired HTLF during the periods presented.
The Company has determined that it is impractical to report the amounts of revenue and earnings of legacy HTLF since the Acquisition Date due to the integration of operations shortly after the Acquisition Date. Accordingly, reliable and separate complete revenue and earnings information is no longer available. In addition, such amounts would require significant estimates related to the proper allocation of merger cost savings that cannot be objectively made.
