NBHC 10-K & 10-Q changes, risk factors and insider trading
National Bank Holdings Corp · NYSE · National Commercial Banks · CIK 1475841 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Interest Rate and Credit Risks”
New heading “Liquidity and Capital Risks”
New heading “We may want to raise additional capital in the future to support strategic growth initiatives, and such capital may not be available when desired or at all.”
New heading “Risks from Accounting and Other Estimates”
New heading “Risks Related to our Operations”
New heading “We face significant competition from other financial institutions and financial services providers, both traditional and otherwise, which may materially and adversely affect us.”
New heading “An important and growing portion of our business is dependent upon U.S. federal government programs, and we face specific risks associated with originating loans under these programs, such as changes in the requirements to participate in these programs, the impact of budget appropriations and prolonged government shutdowns.”
New heading “We may not be able to effectively manage our strategic growth or other expansionary activity.”
New heading “Failure to keep pace with technological change could adversely affect our business, and our digital growth strategy may subject us to additional operational, strategic, reputational or regulatory risks.”
New heading “Integrating Vista may be more difficult, costly or time consuming than expected, and we may fail to realize the anticipated benefits and cost savings of the acquisition.”
New heading “Our acquisitions generally will require regulatory approvals and failure to obtain such approvals would restrict our growth plans.”
New heading “If we are unable to identify and consummate attractive acquisitions, or continue to increase loans through organic loan growth, we may be unable to successfully implement our growth strategy, and our results of operations and financial condition could be materially and adversely affected.”
New heading “Projected operating results for businesses acquired by us, inclusive of Vista, may be inaccurate and may vary significantly from actual results. To the extent that we make future acquisitions, we may not be able to realize the value we predict from these assets or make sufficient provision for future losses in the value of, or accurately estimate the future write-downs to be taken in respect of, these assets.”
New heading “General Risk Factors”
Removed heading “We face significant competition from other financial institutions and financial services providers, which may materially and adversely affect us.”
Removed heading “Small Business Administration lending is an important and growing part of our business. Our SBA lending program is dependent upon the U.S. federal government, and we face specific risks associated with originating SBA loans.”
Removed heading “If we violate U.S. Department of Housing and Urban Development (“HUD”) lending requirements or if the federal government shuts down or otherwise fails to fully fund the federal budget, our commercial Federal Housing Administration (“FHA”) origination business could be adversely affected.”
Removed heading “We may not be able to effectively manage our growth or other expansionary activity.”
Removed heading “Our digital growth strategy may subject us to additional operational, strategic, reputational and regulatory risks.”
Removed heading “Our acquisitions generally will require regulatory approvals, and failure to obtain them would restrict our growth.”
Removed heading “If we are unable to identify and consummate attractive acquisitions, or continue to increase loans through organic loan growth, we may be unable to successfully implement our growth strategy, and our results of operations and financial condition could be materially and adversely affected .”
Removed heading “Projected operating results for businesses acquired by us may be inaccurate and may vary significantly from actual results. To the extent that we make future acquisitions, we may not be able to realize the value we predict from these assets or make sufficient provision for future losses in the value of, or accurately estimate the future write-downs to be taken in respect of, these assets.”
Largest changes
“These laws increase our cost of doing business, and if regulators impose new or more restrictive requirements, we may incur significant additional costs to comply with such requirements or such requirements may negatively impact our revenues, which may further adversely affect us. Our failure to comply with these laws and regulations could possibly lead to: civil and criminal liability; damage to our reputation in the industry; fines and penalties and litigation, including class action lawsuits; and administrative or regulatory enforcement actions. …”see in full comparison
“These laws increase our cost of doing business, and if regulators impose new or more restrictive requirements, we may incur significant additional costs to comply with such requirements or such requirements may negatively impact our revenues, which may further adversely affect us. Our failure to comply with these laws and regulations could possibly lead to: civil and criminal liability; damage to our reputation in the industry; fines and penalties and litigation, including class action lawsuits; and administrative enforcement actions. …”see in full comparison
“Delinquencies and losses in the loan portfolios and other assets we acquire may exceed our initial forecasts developed during our due diligence investigation prior to acquisition and, thus, produce lower returns than we believed our purchase price supported. Furthermore, our due diligence investigation may not reveal all material issues. …”see in full comparison
“Delinquencies and losses in the loan portfolios and other assets we acquire may exceed our initial forecasts developed during our due diligence investigation prior to acquisition and, thus, produce lower returns than we believed our purchase price supported. Furthermore, our due diligence investigation may not reveal all material issues. …”see in full comparison
“Projected operating results for businesses acquired by us, inclusive of Vista, may be inaccurate and may vary significantly from actual results. To the extent that we make future acquisitions, we may not be able to realize the value we predict from these assets or make sufficient provision for future losses in the value of, or accurately estimate the future write-downs to be taken in respect of, these assets.”see in full comparison
“Projected operating results for businesses acquired by us may be inaccurate and may vary significantly from actual results. To the extent that we make future acquisitions, we may not be able to realize the value we predict from these assets or make sufficient provision for future losses in the value of, or accurately estimate the future write-downs to be taken in respect of, these assets.”see in full comparison
Full comparison: every changed paragraph (99)
Risks Relating to OurGeneral BankingEconomic Operationsand Market Conditions
Our business and operations are sensitive to general business and economic conditions in the United States and in our core markets of Colorado, theKansas, greaterMissouri, Kansas City region,Texas, Utah, Wyoming, Texas, New Mexico, and Idaho. If the economies in our core markets, or the U.S. economy more generally, experience worsening economic conditions, including industry-specific conditions, we could be materially and adversely affected. Weak economic conditions may be characterized by inflation, fluctuations in debt and equity capital markets, including a lack of liquidity and/or depressed prices in the secondary market for mortgage loans, increased delinquencies on loans, residential and commercial real estate price declines, lower home sales and commercial activity, further or prolonged pressure on energy prices, and high unemployment. The U.S. and our core markets may experience these weak or worsening economic conditions due to the adverse economic effects of natural disasters, severe weather conditions, health emergencies or pandemics, cyberattacks, changes in international trade policies, tariffs, outbreaks of hostilities, terrorism or other geopolitical instabilities. All of these factors would be detrimental to our business. Our business is significantly affected by monetary and related policies of the U.S. federal government, its agencies and government-sponsored entities.GSEs. Changes in any of these policies are influenced by macroeconomic conditions and other factors that are beyond our control and could have a material adverse effect on our financial condition and results of operations.
Interest Rate and Credit Risks
We are focused on growing our loan portfolio while adhering to our established underwriting standards and self-imposed concentration limits. However, as a lender, we are exposed to the risk that our clients will be unable to repay their loans according to their terms and that the collateral securing the payment of their loans (if any) may not be sufficient to assure repayment. TheIn addition to the risk of borrowers being unable to pay their loans, other risks inherent in making any loan include risks with respect to the ability of borrowers to repay their loans and,include, if applicable, the period of time over which the loan is repaid, risks relating to proper loan underwriting and guidelines, risks resulting from changes in economic and industry conditions, risks inherent in dealing with individual borrowers and risks resulting from uncertainties as to the future value of collateral. Similarly, we have credit risk embedded in our securities portfolio. Our credit standards, procedures and policies may not prevent us from incurring substantial credit losses.
A significant portion of our loan portfolio is secured by real estate and any deterioration in real estate values or credit quality or elevated levels of non-performing assets would ultimately have a negative impact on the quality of our loan portfolio. Although we require an appraisal of the property whenever we consider making a loan secured by real property, an appraisal is only an estimate of the value of the property at the time the appraisal is made and requires the exercise of a considerable degree of judgment. Subsequently, there is always a risk that the appraisal, due to unforeseen events, may not accurately reflect the amount that may be obtained upon sale or foreclosure of the property. A decline in residential real estate market prices and reduced levels of home sales could adversely affect the value of collateral securing mortgage loans resulting in greater charge-offs in future periods, as well as adversely impact mortgage loan originations and gains on sale of mortgage loans. In addition, a decline in commercial real estate values would likewise adversely affect the value of collateral securing certain commercial loans and result in greater charge-offs in future periods. Financial stress on borrowers as a result of job losses or other factors,factors could have further adverse effects on borrowers that result in higher delinquencies and greater charge-offs in future periods, which could materially and adversely affect us. In addition, with heightened interest rates and inflationary pressures, our clients could be impacted by the rising costs of goods and services in their households and businesses, which may have a negative impact on their ability to repay their loans with us.
From time to time, we may hold a varying amount of other real estate owned (“OREO”) as a result of the foreclosure process where we take title to the real estate serving as collateral for our loans. While our OREO portfolio is smaller than it has been in recent years, our OREO balance is subject to change, which could negatively affect our earnings as a result of various expenses associated with OREO, including personnel costs, insurance and taxes, completion and repair costs, valuation adjustments and other expenses or potential environmental liabilities associated with property ownership, as well as funding costs associated with OREO assets.
The Company measures its allowance for credit losses using ASU 2016-13, Measurement of Credit Losses on Financial Instruments. The current expected credit loss (“CECL”) impairment model requires an estimate of expected credit losses for financial assets measured over the contractual life of an instrument based on historical experience, current conditions and reasonable and supportable forecasts. The standard provides significant flexibility and requires a high degree of judgment in order to develop an estimate of expected lifetime losses. Providing for lifetime losses for our loan portfolio is a change to the previous method of providing allowances for loan losses that are probable and incurred. It may also result in even small changes to future forecasts having a significant impact on the allowance, which could make the allowance more volatile, and regulators may impose additional capital buffers to absorb this volatility.
The determination of the appropriate level of the allowance for credit losses inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks and future trends, all of which may undergo material changes. Changes in economic conditions affecting borrowers, new information regarding our loans, identification of additional problem loans by us and other factors, both within and outside of our control, may require an increase in the allowance for credit losses. If the real estate markets deteriorate, we expect that we will experience increased delinquencies and credit losses, particularly with respect to construction, land development and land loans. In addition, our regulators periodically review our allowance for credit losses and may require an increase in the allowance for credit losses or the recognition of further loan charge-offs, based on judgments different than those of management. In addition, if charge-offs in future periods exceed the allowance for credit losses, we will need additional provisions to increase the allowance for credit losses. Any increases in the allowance for credit losses will result in a decrease in net income and capital and may have a material adverse effect on our financial condition.
We require liquidity to make loans and to repay deposit and other liabilities as they become due or are demanded by clients. We principally depend on checking, savings and money market deposit account balances and other forms of client deposits as our primary source of funding for our lending activities. As a result of a decline in overall depositor confidence, an increase in interest rates paid by competitors, general interest rate levels, higher returns being available to clients on alternative investments and general economic conditions, a substantial number of our clients could withdraw their bank deposits with us from time to time, resulting in our deposit levels decreasing substantially, and our cash on hand may not be able to cover such withdrawals and our other business needs, including amounts necessary to operate and grow our business. Furthermore, advancements in technology allow clients to withdraw or otherwise access funds very quickly, which could create additional demand for liquidity. This would require us to seek third party funding or other sources of liquidity, such as asset sales. Our access to third party funding sources, including our ability to raise funds through the issuance of additional shares of our common stock or other equity or equity-related securities, incurrence of debt, or federal funds purchased, may be impacted by our financial strength, performance and prospects and may also be impaired by factors that are not specific to us, such as a disruption in the financial markets or negative views and expectations about the prospects for the financial services industry, all of which may make potential funding sources more difficult to access, less reliable and more expensive. We may not have access to third party funding in sufficient amounts on favorable terms, or the ability to undertake asset sales or access other sources of liquidity, when needed, or at all, which could materially and adversely affect us. While the acquisition of Cambr has provided additional liquidity as well as diversification of our sources of liquidity, increased concentration from program deposits or reliance on the Cambr program could have a material adverse effect on us.
Like other financial services institutions, our asset and liability structures are monetary in nature. Such structures are affected by a variety of factors, including changes in interest rates, which can impact our earnings, cash flows, and the value of financial instruments held by us and our mortgage business.
Like other financial services institutions, we have asset and liability structures that are essentially monetary in nature and are directly affected by many factors, including domestic and international economic and political conditions, broad trends in business and finance, legislation and regulation affecting the national and international business and financial communities, monetary and fiscal policies, inflation, currency values, market conditions, the availability and terms (including cost) of short-term or long-term funding and capital, the credit capacity or perceived creditworthiness of clients and counterparties and the level and volatility of trading markets. Such factors can impact clients and counterparties of a financial services institution and may impact the value of financial instruments held by a financial services institution.
An MSR is the right to service a mortgage loan for a fee. Similarly, an SBA servicing right is the right to service SBA loans sold for a fee. We capitalize servicing rights when we originate mortgage or SBA loans and retain the servicing rights after we sell the loans. We carry servicing rights at the lower of amortized cost or estimated fair value. Fair value is the present value of estimated future net servicing income, calculated based on a number of variables, including assumptions about the likelihood of prepayment by borrowers. Changes in interest rates can affect prepayment assumptions. When interest rates fall, borrowers are more likely to prepay their mortgage loans by refinancing them at a lower rate. As the likelihood of prepayment increases, the fair value of our servicing rights can decrease. Each quarter we evaluate our servicing rights for impairment based on the difference between the carrying amount and fair value, and, if a temporary impairment exists, we establish a valuation allowance through a charge that negatively affects our earnings.
Liquidity and Capital Risks
We require liquidity to make loans and to repay deposit and other liabilities as they become due or are demanded by clients. We principally depend on checking, savings and money market deposit account balances and other forms of client deposits as our primary source of funding for our lending activities. If a substantial number of our clients withdraw their bank deposits as a result of a decline in overall depositor confidence, an increase in interest rates paid by competitors, general interest rate levels, higher returns being available to clients on alternative investments or general economic conditions, and our deposit levels decrease substantially, our cash on hand may not be able to cover such withdrawals or our other business needs, including amounts necessary to operate and grow our business. Furthermore, advancements in technology allow clients to withdraw or otherwise access funds very quickly, which could create additional demand for liquidity. This could require us to seek third-party funding or other sources of liquidity, such as asset sales. Our access to third-party funding sources, including our ability to raise funds through the issuance of additional shares of our common stock or other equity or equity-related securities, incurrence of debt, or federal funds purchased, may be impacted by our financial strength, performance and prospects and may also be impaired by factors that are not specific to us, such as a disruption in the financial markets or negative views and expectations about the prospects for the financial services industry, all of which may make potential funding sources more difficult to access, less reliable and more expensive. We may not have access to third-party funding in sufficient amounts on favorable terms, or the ability to undertake asset sales or access other sources of liquidity, when needed or at all, which could materially and adversely affect us. While Cambr provides additional liquidity, as well as diversification of our sources of liquidity, increased concentration from program deposits or reliance on the Cambr program could have a material adverse effect on us.
We may want to raise additional capital in the future to support strategic growth initiatives, and such capital may not be available when desired or at all.
As a publicly traded company, a likely source of additional funds, should we desire for growth initiatives or otherwise, is the capital markets, accomplished generally through the issuance of equity, both common and preferred stock, and the issuance of debt. Our ability to raise additional capital, if desired, will depend on, among other things, obtaining and maintaining a favorable rating, conditions in the capital markets at that time, which are outside of our control, and our financial performance.
We cannot provide any assurance that access to such capital will be available to us on acceptable terms or at all. Any occurrence that may limit our access to the capital markets, such as a decline in the confidence of debt purchasers or counterparties participating in the capital markets, may materially and adversely affect our capital costs and our ability to raise capital and, in turn, our liquidity. If we need to raise capital in the future, we may have to do so when many other financial institutions are also seeking to raise capital and would then have to compete with those institutions for investors. The inability to raise additional capital on acceptable terms when needed could have a materially adverse effect on our business, financial condition or results of operations.
Risks from Accounting and Other Estimates
We have historically taken a conservative investment strategy with our securities portfolio, with concentrations of securities that are primarily backed by government sponsored enterprises (“GSE”).GSEs. A portion of our non-marketableother securities portfolio is comprised of non-liquid fund investments and direct investments in our fintech partners. Non-marketableOther securities also include direct investments in convertible preferred stock.stock, As the convertible preferred stock does not have a readily determinable fair value, itwhich is carried at cost. We periodically evaluate our non-marketableother securities investments for impairment. The results of testing our investments for potential impairment may be adversely affected by a variety of factors, including market conditions, regulatory expectations, general economic conditions and unfavorable changes in the businesses underlying the investments, which may lead to a partial or full impairment of our fintech investments. Impairments or write-downs of these assets may result in charges that adversely affect our results of operations.
Our investments in financial2UniFi technologyand companiesother fintechs and initiatives subject us to material financial, reputational and strategic risks.
Our investments in various financial technology companies, both directly through our development of 2UniFi (which is included within premises and equipment, net on our balance sheet) and indirectly through passive investments (which are included within other securities on our balance sheet), may have a significant impact on our results of operations or financial condition.
The vision for 2UniFi is an integrated and seamless financial marketplace that will increase access to financial services while reducing the cost of banking services. After several years of development, 2UniFi had its initial launch in 2025 with two essential capabilities for small business owners. Development of further capabilities is needed for the platform to reach its full potential and may require additional investment or a strategic partner.
Our investments in various financial technology companies, included within non-marketable securities on our balance sheet, may have a significant impact on our results of operations. Investments where we have the ability to exercise significant influence but not control over the operating and financial policies of the investee are accounted for using the equity method of accounting. For investments accounted for under the equity method, we increase or decrease our investment by our proportionate share of the investee’s net income or loss.
TheAdditionally, the financial technology companies in which we invest are often early stage companies and have the need for substantial additional capital to support expansion or to achieve or maintain a competitive position. Less established companies tend to have lower capitalization and fewer resources and, therefore, are often more vulnerable to financial failure. These companies may be dependent upon the success of one product or service, a unique distribution channel, or the effectiveness of a manager or management team. The failure of this one product, service or distribution channel, or the loss or ineffectiveness of a key executive or executives within the management team may have a materially adverse impact on such companies.companies, which in turn could adversely impact our investment in 2UniFi or these other passive investments.
The possibility that 2UniFi or the other companies in which we invest will not be able to commercialize their technology or product concept presents a risk that our investment may become impaired. These companies tend to lack management depth, to have limited or no history of operations and to not have attained profitability. Additionally, although 2UniFi and some of these companies may already have a commercially successful product or product line at the time of investment,line, technology products and services often have a more limited market or life span than products in other industries. Thus, the ultimate success of these companies may depend on their ability to continually innovate in increasingly competitive markets. Most2UniFi, as well as most of the companies in which we investinvest, will require substantial additional equity financingcapital to satisfy their continuing growth and working capital requirements. EachWith respect to 2UniFi, the Company is continuing to evaluate the allocation of additional capital or other alternative paths, including potential strategic partnerships. With respect to the Company’s passive investments, each round of venture financing is typically intended to provide a company with enough capital to reach the next stage of development. The circumstances or market conditions under which such companies will seek additional capital are unpredictable. It is possible that one or more of such companies will not be able to raise additional financing or may be able to do so only at a price or on terms which are unfavorable.
Additionally, with respect to our passive investments, where we have the ability to exercise significant influence but not control over the operating and financial policies of the investee, such investments are accounted for using the equity method of accounting. Although we are unable to control such companies, where these investments are accounted for under the equity method, we increase or decrease our investment by our proportionate share of the investee’s net income or loss.
The Company measures its ACL using ASU 2016-13, Measurement of Credit Losses on Financial Instruments. The CECL impairment model requires an estimate of expected credit losses for financial assets measured over the contractual life of an instrument based on historical experience, current conditions and reasonable and supportable forecasts. The standard provides significant flexibility and requires a high degree of judgment in order to develop an estimate of expected lifetime losses. Providing for lifetime losses for our loan portfolio is a change to the previous method of providing allowances for loan losses that are probable and incurred. It may also result in even small changes to future forecasts having a significant impact on the allowance, which could make the allowance more volatile, and regulators may impose additional capital buffers to absorb this volatility.
The determination of the appropriate level of the ACL inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks and future trends, all of which may undergo material changes. Changes in economic conditions affecting borrowers, new information regarding our loans, identification of additional problem loans by us and other factors, both within and outside of our control, may require an increase in the ACL. If the real estate markets deteriorate, we expect that we will experience increased delinquencies and credit losses, particularly with respect to construction, land development and land loans. In addition, our regulators periodically review our ACL and may require an increase in the allowance for credit losses or the recognition of further loan charge-offs, based on judgments different than those of management. In addition, if charge-offs in future periods exceed the ACL, we will need additional provisions to increase the allowance for credit losses. Any increases in the ACL will result in a decrease in net income and capital and may have a material adverse effect on our financial condition.
The execution of our strategy depends in large part on the skills of our executive management team and our ability to motivate and retain these and other key personnel, including key personnel added through mergers and acquisitions. Accordingly, the loss of service of one or more of our executive officers or key personnel could reduce our ability to successfully implement our growth strategy and materially and adversely affect us. Our success also depends on the experience of our banking center managers and relationship managers and on their relationships with the clients and communities they serve. The loss of these key personnel could negatively impact our banking operations. Surges in illnesses, or outbreaks, may increase the risk of maintaining adequate staffing in our banking centers and other key areas.
We provide our clients with the ability to bank remotely, including via online, mobile and phone. The secure transmission of confidential information over the internet and other remote channels is a critical element of remote banking.
Our systems and network are subject to ongoing cyber incidents such as unauthorized access, loss or destruction of data, account takeovers, unavailability of service, computer viruses or other malicious code, phishing schemes, ransomware and other similar events. Third parties with whom we do business are also sources of cybersecurity risks. We have spent and may be required to spend additional significant capital and other resources to protect against the threat of security breaches and computer viruses, or to alleviate problems caused by potential security breaches or viruses. Given the increasingly high volume of our transactions, certain errors may be repeated or compounded before they can be discovered and rectified.
To the extent that our activities or the activities of our clients involve the storage and transmission of confidential information, security breaches and viruses could cause serious negative consequences, including reputational damage, litigation exposure and regulatory scrutiny, and could result in a violation of applicable privacy and data protection laws or other breach reporting obligations. Any inability to prevent security breaches or computer viruses could also cause prospective and existing clients to lose confidence in our systems and could materially and adversely affect us. Our risk and exposure to these matters remains heightened because of the evolving nature and complexity of the threats from organized cybercriminals and hackers, and our plans to continue to provide digital banking products and services to our clients.
We also face risks related to cyberattacks and other security breaches in connection with credit or debit card, including ATM-related, transactions that typically involve the transmission of sensitive information regarding our clients through various third parties, including merchant acquiring banks, payment processors, payment card networks (e.g., Visa, MasterCard) and our third-party processors. Some of these parties have in the past been the target of security breaches and cyberattacks, and because the transactions involve third parties and environments such as the point of sale that we do not control or secure, future security breaches or cyberattacks affecting any of these third parties could impact us through no fault of our own, and in some cases we may have exposure and suffer losses for breaches or attacks relating to them. We also rely significantly on numerous other third party service providers to conduct other aspects of our business operations and face similar risks relating to them. While many of our agreements with third parties contain indemnification provisions, we may not be able to recover sufficiently, or at all, under the provisions to offset any losses we may incur from third-party cyber incidents.
Our business is highly dependent on the increasing use of the internet, mobile devices and cloud technologies. Further, we have and will continue to be subject to an increasing risk of operational disruption and information security incidents as a result. These events can arise from a variety of sources, many of which are not under our control because of our reliance on third party vendors and technology systems and outsourcing services for key processes including data processing, loan servicing and deposit processing; and for key services including internet, and mobile technology. Potential causes for incidents may include human error, electrical or telecommunication outages, hardware failures, and malicious activity. Any of these events could cause interruption to the Company’s operations, as well as the operations of our clients. If significant, sustained or repeated, these events could compromise our ability to operate effectively, damage our reputation, result in a loss of client business, and/or subject us to additional regulatory scrutiny and possible financial liability, any of which could have a material adverse effect on our results of operations or financial condition.
As a financial institution, we may be the target of fraudulent activity that may result in financial losses to us or our clients, privacy breaches against our clients or damage to our reputation and regulatory relationships. Such fraudulent activity may take many forms, including check fraud, electronic fraud, wire fraud, phishing, unauthorized intrusion into or use of our systems, ATM skimming or jackpotting, and other dishonest acts. Nationally, reported incidents of fraud and other financial crimes have increased. In addition, the widespread use of artificial intelligence also has increased potential for fraud and misuse. While we have also experienced losses due to apparent fraud or other crimes, thus far such losses have been relatively insignificant. Although we have implemented and maintained several robust policies, procedures, and trainings to prevent such losses, and have additional fraud tools and resources, such measures may not be able to prevent significant financial losses as a result of fraudulent activity.
We face significant competition from other financial institutions and financial services providers, which may materially and adversely affect us.
Consumer and commercial banking is highly competitive. Our markets contain a large number of community and regional banks as well as a significant presence of the country’s largest commercial banks. We compete with other state and national financial institutions, including savings and loan associations, savings banks and credit unions, for deposits and loans. In addition, we compete with financial intermediaries, such as consumer finance companies, mortgage banking companies, insurance companies, securities firms, trust companies, mutual funds and several government agencies, as well as major retailers, in providing various types of loans and other financial services. Some of these competitors have a long history of successful operations in our markets, greater ties to local businesses and more expansive banking relationships, as well as better established depositor bases. Some of our competitors also have greater resources and access to capital and possess an advantage by being capable of maintaining numerous banking locations in more convenient sites, operating more ATMs and conducting extensive promotional and advertising campaigns or operating a more developed online banking platform. Competitors may also exhibit a greater tolerance for risk and behave more aggressively with respect to pricing in order to increase their market share. In addition, the effects of disintermediation can also impact the banking business because of the fast growing body of fintech companies that use software to deliver mortgage lending, payment services and other financial services. We expect competition to intensify due to financial institution consolidation, technological changes, and the emergence of alternative banking services and service providers.
Small Business Administration lending is an important and growing part of our business. Our SBA lending program is dependent upon the U.S. federal government, and we face specific risks associated with originating SBA loans.
As an approved participant in the SBA Preferred Lender’s Program (an “SBA Preferred Lender”), we enable our clients to obtain SBA loans without being subject to the potentially lengthy SBA approval process necessary for lenders that are not SBA Preferred Lenders. The SBA periodically reviews the lending operations of participating lenders to assess, among other things, whether the lender exhibits prudent risk management. When weaknesses are identified, the SBA may request corrective actions or impose enforcement actions, including revocation of the lender’s SBA Preferred Lender status.
If we violate U.S. Department of Housing and Urban Development (“HUD”) lending requirements or if the federal government shuts down or otherwise fails to fully fund the federal budget, our commercial Federal Housing Administration (“FHA”) origination business could be adversely affected.
We originate, sell and service loans under FHA insurance programs, and make certifications regarding compliance with applicable requirements and guidelines. If we were to violate these requirements and guidelines, or other applicable laws, or if the FHA loans we originate show a high frequency of loan defaults, we could be subject to monetary penalties and indemnification claims, and could be declared ineligible for FHA programs. Any inability to engage in our commercial FHA origination and servicing business would lead to a decrease in our net income.
In addition, disagreement over the federal budget has caused the U.S. federal government to shut down for periods of time in recent years. Federal governmental entities, such as HUD, that rely on funding from the federal budget, could be adversely affected in the event of a government shutdown, which could have a material adverse effect on our commercial FHA origination business and our results of operations.
In addition, various consumer lending laws have been adopted to prohibit or restrict certain practices such as steering borrowers away from more affordable products, selling unnecessary insurance to borrowers, repeatedly refinancing loans and making loans without a reasonable expectation that the borrowers will be able to repay the loans irrespective of the value of the underlying property. Despite our efforts to comply with such laws, we may still face liability with respect to our lending and loan investment activities.
These laws increase our cost of doing business, and if regulators impose new or more restrictive requirements, we may incur significant additional costs to comply with such requirements or such requirements may negatively impact our revenues, which may further adversely affect us. Our failure to comply with these laws and regulations could possibly lead to: civil and criminal liability; damage to our reputation in the industry; fines and penalties and litigation, including class action lawsuits; and administrative enforcement actions. Any of these outcomes could materially and adversely affect us. There is also uncertainty regarding what legislative or regulatory changes may occur as a result of changes in government leadership resulting from elections, or, if changes occur, the ultimate effect they would have upon our financial condition or results of operations.
A mortgage servicing right (“MSR”) is the right to service a mortgage loan for a fee. Similarly, an SBA servicing right is the right to service SBA loans sold for a fee. We capitalize servicing rights when we originate mortgage or SBA loans and retain the servicing rights after we sell the loans. We carry servicing rights at the lower of amortized cost or estimated fair value.
Fair value is the present value of estimated future net servicing income, calculated based on a number of variables, including assumptions about the likelihood of prepayment by borrowers. Changes in interest rates can affect prepayment assumptions. When interest rates fall, borrowers are more likely to prepay their mortgage loans by refinancing them at a lower rate. As the likelihood of prepayment increases, the fair value of our servicing rights can decrease. Each quarter we evaluate our servicing rights for impairment based on the difference between the carrying amount and fair value, and, if a temporary impairment exists, we establish a valuation allowance through a charge that negatively affects our earnings.
Risks Related to our Operations
We provide our clients with the ability to bank remotely. The secure transmission of confidential information over the internet and other remote channels is a critical element of remote banking.
Our systems and network are subject to ongoing cyber incidents such as unauthorized access, loss or destruction of data, account takeovers, denial of services attacks or general unavailability of service, computer viruses or other malicious code, phishing schemes, ransomware and other similar events. Third parties with whom we do business are also sources of cybersecurity risks. We have spent and may be required to spend additional significant capital and other resources to protect against the threat of security incidents or breaches, or to alleviate problems caused by potential security breaches or viruses. Given the increasingly high volume of our transactions, certain errors may be repeated or compounded before they can be discovered and rectified.
To the extent that our activities or the activities of our clients involve the storage and transmission of confidential information, security breaches and viruses could cause serious negative consequences, including reputational damage, litigation exposure and regulatory scrutiny, and could result in a violation of applicable privacy and data protection laws or other breach reporting obligations. Any inability to prevent security breaches or computer viruses could also cause prospective and existing clients to lose confidence in our systems and could materially and adversely affect us. Our risk and exposure to these matters remain heightened because of the evolving nature and complexity of the threats from organized cybercriminals and hackers, and our plans to continue to provide digital banking products and services to our clients.
We also face risks related to cyberattacks and other security breaches in connection with credit or debit card, including ATM-related, transactions that typically involve the transmission of sensitive information regarding our clients through various third parties, including merchant acquiring banks, payment processors, payment card networks (e.g., Visa, MasterCard) and our third-party processors. Some of these parties have in the past been the target of security breaches and cyberattacks, and because the transactions involve third parties and environments such as the point of sale that we do not control or secure, future security breaches or cyberattacks affecting any of these third parties could impact us through no fault of our own, and in some cases we may have exposure and suffer losses for breaches or attacks relating to them. We also rely significantly on numerous other third-party service providers to conduct other aspects of our business operations and face similar risks relating to them. While many of our agreements with third parties contain indemnification provisions and insurance requirements, we may not be able to recover sufficiently, or at all, under the provisions to offset any losses we may incur from third-party cyber incidents.
Our business is highly dependent on the increasing use of the internet, mobile devices and cloud technologies. Further, we have and will continue to be subject to an increasing risk of operational disruption and information security incidents as a result. These events can arise from a variety of sources, many of which are not under our control because of our reliance on third-party vendors and technology systems and outsourcing services for key processes including data processing, loan servicing and deposit processing; and for key services including internet, and mobile technology. Potential causes for incidents may include human error, electrical or telecommunication outages, software and hardware failures, and malicious activity. Any of these events could cause interruption to the Company’s operations, as well as the operations of our clients. If significant, sustained or repeated, these events could compromise our ability to operate effectively, damage our reputation, result in a loss of client business, and/or subject us to additional regulatory scrutiny and possible financial liability, any of which could have a material adverse effect on our results of operations or financial condition.
As a financial institution, we may be the target of fraudulent activity that may result in financial losses to us, our associates or our clients, privacy breaches against our clients or damage to our reputation and regulatory relationships. Such fraudulent activity may take many forms, including account takeovers, check fraud, electronic fraud such as phishing, wire fraud, unauthorized intrusion into or use of our systems, ATM skimming or jackpotting, and other dishonest acts. Nationally, reported incidents of fraud and other financial crimes have increased. In addition, the widespread use of artificial intelligence also has increased potential for fraud and misuse. While we have also experienced losses due to apparent fraud or other crimes, we continue to implement and maintain robust policies, procedures, fraud detection tools, and trainings to prevent such losses. Accordingly, we have had limited losses due to fraud; however, such measures may not be able to prevent significant financial losses as a result of fraudulent activity in the future.
We face significant competition from other financial institutions and financial services providers, both traditional and otherwise, which may materially and adversely affect us.
Consumer and commercial banking is highly competitive. Our markets contain a large number of community and regional banks as well as a significant presence of the country’s largest commercial banks. We compete with other state and national financial institutions, including savings and loan associations, savings banks and credit unions, for deposits and loans. In addition, we compete with financial intermediaries, such as consumer finance companies, mortgage banking companies, securities firms, trust companies, mutual funds and several government agencies, as well as major retailers, in providing various types of loans and other financial services. Furthermore, the industry may become increasingly competitive due to the increasing participation of fintechs in traditional banking activities – or even securing their own bank charters – as well as disruption to the banking industry due to the GENIUS Act. Some of these competitors have a long history of successful operations in our markets, greater ties to local businesses and more expansive banking relationships, as well as better established depositor bases. Some of our competitors also have greater resources and access to capital and possess an advantage by being capable of maintaining numerous banking locations in more convenient sites, operating more ATMs and conducting extensive promotional and advertising campaigns, operating a more developed online banking platform, or otherwise having more expertise with new fintech operations or systems. Competitors may also exhibit a greater tolerance for risk and behave more aggressively with respect to pricing in order to increase their market share. In addition, the effects of disintermediation can also impact the banking business because of the fast-growing body of fintechs that use software to deliver mortgage lending, payment services and other financial services. We expect competition to intensify due to financial institution consolidation, technological and regulatory changes, the emergence of alternative banking services and service providers, and new participants in the industry.
An important and growing portion of our business is dependent upon U.S. federal government programs, and we face specific risks associated with originating loans under these programs, such as changes in the requirements to participate in these programs, the impact of budget appropriations and prolonged government shutdowns.
We originate loans under programs administered by U.S. federal agencies, including the SBA and the HUD through FHA insurance programs. Our SBA lending program is an important and growing part of our business and depends on our continued participation in the SBA Preferred Lender Program, which enables our clients to obtain SBA loans without being subject to the potentially lengthy SBA approval process necessary for lenders that are not otherwise SBA Preferred Lenders. The SBA periodically reviews the lending operations of participating lenders to assess, among other things, whether the lender exhibits prudent risk management. If deficiencies are identified, the SBA may require corrective actions or impose sanctions, including revocation of our SBA Preferred Lender status, which could adversely affect our ability to originate SBA loans.
Similarly, our FHA origination and services business requires compliance with applicable HUD and FHA requirements and guidelines. If we were to violate these requirements and guidelines, or other applicable laws, or if the FHA loans we originate show a high frequency of loan defaults, we could be subject to monetary penalties, indemnification claims, or loss of eligibility to participate in FHA programs. Any inability to engage in our commercial FHA or SBA origination and servicing business would lead to a decrease in our net income.
In addition, both SBA and FHA programs are subject to budget appropriations. Disagreement over the U.S. federal budget has caused the U.S. federal government to shut down for periods of time in recent years. Prolonged government shutdowns or funding delays could materially disrupt our ability to originate and service loans under these programs or negatively impact the financial performance of certain clients and their access to certain loan and guaranty programs, which could have a material adverse effect on our business, financial condition and results of operations.
Furthermore, various consumer lending laws have been adopted to prohibit or restrict certain practices such as steering borrowers away from more affordable products, repeatedly refinancing loans and making loans without a reasonable expectation that the borrowers will be able to repay the loans irrespective of the value of the underlying property. Despite our efforts to comply with such laws, we may still face liability with respect to our lending and loan investment activities.
Management's Discussion & Analysis (MD&A)
New heading “Net interest income”
Removed heading “Client deposit funded balance sheet”
Removed heading “Strong capital position”
Removed heading “Fully Taxable Equivalent Yield on Earning Assets and Net Interest Margin”
Largest changes
“On March 6, 2024, the SEC adopted a new set of rules that require a wide range of climate-related disclosures. The disclosures will include material climate-related risks, information on any climate-related targets or goals that are material to the registrant’s business, results of operations, or financial condition, Scope 1 and Scope 2 Greenhouse Gas emissions and disclosure of the financial statement effects of severe weather events and other natural conditions including costs and losses. …”see in full comparison
“Fully Taxable Equivalent Yield on Earning Assets and Net Interest Margin”see in full comparison
see in full comparisonNon-marketableOther securities also include equity method investments totaling$26.2$32.4 million and$24.6$28.0 million at December 31,20242025 and December 31,2023,2024,respectively,respectively.andThe increase was primarily due to a $5.0 million investment. The Company sold equity method investmentswithout a readily determinable fair valuetotaling$1.8$1.9million and zero at December 31, 2024 and December 31, 2023, respectively. Purchases of equity method investmentsmillion, during theyearsyear ended December 31,20242025,andwhich2023generatedtotaled $1.5 million and $3.6 million, respectively. During the years ended December 31, 2024 and 2023, the Company recorded net unrealizedrealized gainstotalingof$1.0$0.6 millionand net unrealized losses totaling $35 thousand, respectively, on equity method investments. These gains and losses wererecorded in other non-interest income in the Company’s consolidated statements of operations.CarryingThevaluesCompanyofrecorded net unrealized gains on equity method investmentswithouttotalinga$0.8readilymilliondeterminableandfair$1.0valuemillion for the years ended December 31, 2025 and 2024, respectively, which areupdatedrecordedperiodicallyinandotherimpairmentsnon-interestmayincomebeintakenthetoCompany’sreflectconsolidatedastatementsnewofbasis.operations. The Company recorded no impairment related to equity method investmentswithout a readily determinable fair valuefor the years ended December 31,20242025 or2023.2024. Purchases of equity method investments during the years ended December 31, 2025 and 2024 totaled $0.6 million and $1.5 million, respectively.
“Other securities include convertible preferred stock without a readily determinable fair value. During the year ended December 31, 2025, there were no purchases of convertible preferred stock. One convertible preferred stock investment in our portfolio underwent an initial public offering and was reclassified as an equity security with a readily determinable fair value during the third quarter of 2025. During the year ended December 31, 2024, the Company purchased $0.4 million of convertible preferred stock. …”see in full comparison
“Non-marketable securities include convertible preferred stock without a readily determinable fair value. During the years ended December 31, 2024 and 2023, the Company purchased $0.4 million of convertible preferred stock. During the year ended December 31, 2024, convertible preferred stock was redeemed upon the sale of a single investment position that totaled $1.0 million, which generated realized gains of $0.1 million recorded in other non-interest income in the Company’s consolidated statements of operations. …”see in full comparison
“In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Topic 350): Targeted Improvements to the Accounting for Internal-Use Software. The update will eliminate the accounting consideration of software project development stages and enhance the guidance around the threshold for cost capitalization. …”see in full comparison
Full comparison: every changed paragraph (101)
Our focus is on building relationships by creating a win-win scenario for our clients and our Company. We believe in providing solutions and services to our clients that are based on fairness and simplicity. We have established a solid financial services franchise with a sizable presence for deposit gathering and building client relationships necessary for growth. We have executed on strategic acquisition opportunities to expand our presence in attractive markets and to diversify our revenue streams. Additionally, we are innovating andthrough building strategic fintech partnerships2UniFi with the goal of delivering a comprehensive digital financial ecosystem for our clients. We are focused on providing smallsmall- and medium-sized businesses with alternative digital access to address borrowing, depository and cash management needs, while also providing information management and access to digital payment tools, under the safety of a regulated bank. We believe that our established presence in our core markets of Colorado, the greater Kansas City region, Texas, Utah, Wyoming, Texas, New Mexico and Idaho, as well as our ongoing investment in digital solutions and strategic acquisitions, position us well for growth opportunities. As of December 31, 2024,2025, we had $9.8$9.9 billion in assets, $7.8$7.4 billion in loans, $8.2$8.3 billion in deposits, $1.3$1.4 billion in equity and $994.3$1.3 millionbillion in assets under management in our trust and wealth management business.
Client deposit funded balance sheet
Capital
Strong capital position
Macroeconomic pressures have resulted in volatility and uncertainty in the banking industry.industry and many other industries. The sustainedprolonged higher-interestelevated interest rate environment,environment declines in the fair value of securities, lack of available funding, uninsured deposits and risk from concentrations in loan and deposit segments along with declines in commercial real estate property values areis drawing increased scrutiny on financial institutions. Liquidity within the financial services sector hasremains tightened,tight, and we expect the intense competition for deposits throughout our markets to continue. While these are widespread challenges for the banking industry, the Company has not experienced a material impact to our financial condition, operations, client base, liquidity, capital position or risk profile.
Additionally, we face continual challenges implementing our business strategy. These include growing our assets, particularly loans, and deposits amidst intense competition, changing interest rates, adhering to changes in the regulatory environment and identifying and consummating disciplined acquisition and other expansionary opportunities in a very competitive and inflationary environment. InWe connectionwill withcontinue to make investments in our digital growth strategy and our digital solutionfinancial ecosystem 2UniFi, we have made and willmay continuealso seek to make investments in and also partner with third partyparties fintechto companies.accelerate The innovations these companies develop for utilization bygrowth. 2UniFi may prove difficult to successfully integrate into our existing operationsscale and may require additional operational and control systems to manage fraud, cybersecurity, operational, legal and compliance risks.
Future growth in our interest income will ultimately be dependent on our ability to originate high-quality loans and source other high-quality earning assets such as investment securities as well as our ability to access liquidity and manage our cost of funds. During the yearsyear ended December 31, 2023 and 2022, the Federal Reserve increased prevailing interest rates by a total of 100 and 425 basis points, respectively. In the second half of 2024, the Federal Reserve decreased the prevailing interest rates by a total of 100 basis points, and, during 2025, the Federal Reserve decreased the prevailing interest rates by 75 basis points. While further cuts in 2025 remain unclear, our future earnings will be impacted by the Federal Reserve’s future interest rate policy decisions. Management employs risk management policies to monitor and limit exposure to changes in market rates, which is discussed in more detail in the Asset/Liability Management and Interest Rate Risk section of Management’s Discussion and Analysis.
Certain of the financial measures and ratios we present, including “tangible assets,” “average tangible assets,” “return on average tangible assets,” “tangible common equity,” “tangible common equity to tangible assets,” “return on average tangible common equity,” “tangible common book value,” “tangible common book value per share,” “tangible common equity to tangible assets,” “tangible common book value, excluding accumulated other comprehensive loss, net of tax,” “tangible common book value per share, excluding accumulated other comprehensive loss, net of tax,” “net income excluding the impact of other intangible assets amortization expense, after tax,” “adjusted net income,” “adjusted net income, after tax,” “adjusted net income excluding the impact of other intangible assets amortization expense, after tax,” “adjusted earnings per share – diluted,” “adjusted return on average tangible assets,” “adjusted return on average tangible common equity,” “efficiency ratio excluding other intangible assets amortization FTE, adjusted,” “efficiency ratio excluding other intangible assets amortization, loss on security sales and acquisition-related expenses FTE,” “pre-provision net revenue,” “pre-provision net revenue FTE, adjusted for loss on security sales and acquisition-related expenses,” “non-interest income adjusted for loss on security sales,” “non-interest expense adjusted for acquisition-related expenses,” “non-interest expense excluding other intangible assets amortization and acquisition-related expenses,” and “fully taxable equivalent” metrics,presented are supplemental measures that are not required by, or are not presented in accordance with, U.S. generally accepted accounting principles (GAAP).GAAP. We refer to these financial measures and ratios as “non-GAAP financial measures.” We consider the use of select non-GAAP financial measures and ratios to be useful for financial and operational decision making and useful in evaluating period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenditures or assets that we believe are not indicative of our primary business operating results or by presenting certain metrics on an FTE basis.results. We believe that management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, analyzing and comparing past, present and future periods.
These non-GAAP financial measures should not be considered a substitute for financial information presented in accordance with GAAP and you should not rely on non-GAAP financial measures alone as measures of our performance. The non-GAAP financial measures we present may differ from non-GAAP financial measures used by our peers or other companies. We compensate for these limitationsdifferences by providing the equivalent GAAP measures whenever we present the non-GAAP financial measures and by including a reconciliation of the impact of the components adjusted for in the non-GAAP financial measure so that both measures and the individual components may be considered when analyzing our performance.
Fully Taxable Equivalent Yield on Earning Assets and Net Interest Margin
We use accounting principles and methods that conform to GAAP and general banking practices. We are required to apply significant judgment and make material estimates in the preparation of our financial statements and with regard to various accounting, reporting and disclosure matters. Assumptions and estimates are required to apply these principles where actual measurement is not possible or practical. The most significant of these estimates relate to the determination of the allowance for credit lossesACL and accounting for acquired loans. See additional discussion of our ACL policy in note 2 – Summary of Significant Accounting Policies in the notes to our consolidated financial statements for the year ended December 31, 2024.2025.
The determination of the ACL, which represents management’s estimate of lifetime credit losses inherent in our loan portfolio at the balance sheet date, involves a high degree of judgment and complexity. The Company estimates the ACL by first disaggregating the loan portfolio into segments based upon broad characteristics such as primary use and underlying collateral. Within these segments, the portfolio is further disaggregated into classes of loans with similar attributes and risk characteristics. The ACL is determined at the class level, analyzing loss history based upon specific loss drivers and risk factors affecting each loan class. The Company utilizes a discounted cash flow (“DCF”) model developed within a third-party software tool that incorporates forecasts of certain national macroeconomic factors (reasonable and supportable forecasts) which drive the losses predicted in establishing the Company’s ACL. Management accounts for the inherent uncertainty of the underlying economic forecast by reviewing and weighting alternate forecast scenarios. For periods beyond the reasonable and supportable forecast period, the Company reverts to historical long-term average loss rates on a straight-line basis. Additionally, the ACL calculation includes subjective adjustments for qualitative risk factors that are likely to cause estimated credit losses to differ from historical experience. Changes in these assumptions, estimates or the conditions surrounding them may have a material impact on our financial condition. For further discussion of the ACL, see notes 2 and 7 to our consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Topic 220): Disaggregation of Income Statement Expenses. The update requires public business entities to disclose specific components of certain expense categories. This includes expense categories such as employee compensation, depreciation, and intangible asset amortization. The amendments in this update are effective for fiscal years beginning after December 15, 2026 and are to be applied on a prospective basis with an option for retrospective application. Early adoption is permitted. The Company is evaluating the impact from ASU 2024-03, and does not expect the adoption of this pronouncement to have a material impact on its financial statements apart from the inclusion of additional disclosures.
In December 2023,2025, the FASB issued ASU 2023-09,2025-11, IncomeInterim TaxesReporting (Topic 740270): ImprovementsNarrow-scope to Income Tax Disclosures.Improvements. The update amends the guidance in ASC 270 to improve the required interim disclosures and clarify when that guidance is applicable as well as clarify disclosures that should be provided in interim reporting periods. The guidance also requires public business entities to disclose specificevents categoriestaking relatedplace toafter ratethe reconciliation.end Itof alsothe requireslast moreannual detailedreporting informationperiod forthat reconcilinghave items,a providedmaterial certain quantitative thresholds are met.impact. The amendmentsstandard in this update areis effective for fiscalinterim yearsreporting periods within annual reporting periods beginning after December 15, 2024 and are to be applied on a prospective basis. Early adoption is permitted.2027. The Company is currently evaluating the impact from ASU 2023-09,2025-11 and does not expect the adoption of this pronouncement to have a material impact on its financial statements apart from the inclusion of additional disclosures.statements.
In MarchNovember 2024,2025, the FASB issued ASU 2024-01,2025-09, CompensationDerivatives –and Stock CompensationHedging (Topic 718815): ScopeHedge ApplicationAccounting ofImprovements. Profits Interest and Similar Awards. ThisThe update improves GAAP by adding an illustrative example that includes fourtargeted fact patternschanges to demonstrate how an entity should apply the scope guidance in paragraphASC 718-10-15-3815 to determinebetter whetherreflect arisk profitmanagement, interestreduce awardcomplexity shouldand bealign accountedwith economic reality. The update will allow grouping of hedged items for in accordanceforecasts with Topicsimilar 718.risk, more flexibility for variable-rate debt and simplified accounting for certain complex hedges, including swaps and options. It primarily affects cash flow hedges. The amendmentsstandard in this update areis effective for interim and annual reporting periods beginning after December 15, 2024, and interim periods within those annual periods.2026. Early adoption is permittedpermitted. forThe bothguidance interimmust be adopted on a prospective basis, and annualthere financialare statementstransition thatprovisions havedesigned notto yetassist beenin issuedmigrating orexisting madehedging availablerelationships forto issuance.the new guidance. The Company is currently evaluating the impact from ASU 2024-01,2025-09 and does not expect the adoption of this pronouncement to have a material impact on its financial statements.
In November 2025, the FASB issued ASU 2025-08, Financial Instruments - Credit Losses (Topic 326): Purchased Loans. The update amends the guidance in ASC 326 on the accounting for certain purchased loans. Under the ASU, entities must account for acquired loans that meet certain criteria at acquisition by recognizing them at their purchase price plus an allowance for expected credit losses. The ASU’s amendments align the accounting for those purchased loans with the treatment of financial assets purchased with more-than-insignificant credit deterioration since origination. The amendments in this update are effective for fiscal years and interim reporting periods beginning after December 15, 2026 and are required to be applied prospectively. Early adoption is permitted. The Company is currently evaluating the impact from ASU 2025-08.
In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Topic 350): Targeted Improvements to the Accounting for Internal-Use Software. The update will eliminate the accounting consideration of software project development stages and enhance the guidance around the threshold for cost capitalization. The amendments in this update are effective for fiscal years and interim reporting periods beginning after December 15, 2027 and can be applied using a prospective transition approach, a modified transition approach or a retrospective transition approach. The Company has evaluated the impact from ASU 2025-06 and does not expect the adoption of this pronouncement to have a material impact on its financial statements.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The update is related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC Topic 606. It allows all entities to elect a practical expedient that assumes current conditions as of the balance sheet date do not change for the remaining life of the asset. The update also allows for an accounting policy election, which is not applicable to public business entities. Entities are required to disclose whether they have elected to use the practical expedient and, if applicable, the accounting policy election. The amendments in this update are effective for fiscal years and interim reporting periods beginning after December 15, 2025 and are to be applied on a prospective basis. The Company has evaluated the impact from ASU 2025-05 and does not expect the adoption of this pronouncement to have a material impact on its financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Topic 220): Disaggregation of Income Statement Expenses. The update requires public business entities to disclose specific components of certain expense categories. This includes expense categories such as employee compensation, depreciation, and intangible asset amortization. The amendments in this update are effective for fiscal years beginning after December 15, 2026 and are to be applied on a prospective basis with an option for retrospective application. Early adoption is permitted. The Company has evaluated the impact from ASU 2024-03 and does not expect the adoption of this pronouncement to have a material impact on its financial statements apart from the inclusion of additional disclosures.
On March 6, 2024, the SEC adopted a new set of rules that require a wide range of climate-related disclosures. The disclosures will include material climate-related risks, information on any climate-related targets or goals that are material to the registrant’s business, results of operations, or financial condition, Scope 1 and Scope 2 Greenhouse Gas emissions and disclosure of the financial statement effects of severe weather events and other natural conditions including costs and losses. Disclosures on Greenhouse Gas emissions will be subject to adoption on a phased-in basis by certain larger registrants when those emissions are material, and an attestation report covering the same will also need to be filed. Compliance dates under the final rule are phased in by registrant category. Multiple lawsuits have been filed challenging the SEC’s new climate rules, which have been consolidated and will be heard in the U.S. Court of Appeals for the Eighth Circuit. On April 4, 2024, the SEC issued an order staying the final rules until judicial review is complete.
Total assets were $9.8 billion at December 31, 2024, compared to $9.9 billion at December 31, 2023.2025, Atincreasing $75.8 million from December 31, 2024,2024. cashCash and cash equivalents decreasedincreased $63.0$289.2 million,million to $417.1 million at December 31, 2025, compared to December 31, 2023,2024, and investment securities decreasedincreased $153.2$119.7 million, or 12.6%, primarily duemillion to sales$1.2 duringbillion. theLoans fourthtotaled quarter$7.4 ofbillion 2024and as$7.8 partbillion of the Company’s strategic balance sheet management. Total loans increased $52.4 million, or 0.7% compared toat December 31, 2023,2025 and December 31, 2024, respectively, and the allowance for credit losses totaled $87.4 million and $94.5 million, or 1.22% of total loans,million at December 31, 2024.2025 Atand December 31, 20242024, respectively. Lower-cost transaction deposits totaled $7.1 billion and 2023,$7.2 lowerbillion costat demand,December savings,31, 2025 and moneyDecember market31, deposits ("transaction deposits") totaled $7.2 billion, representing 87.6% and 88.0% of total deposits,2024, respectively. Total deposits increased $47.5$54.7 million to $8.2$8.3 billion at December 31, 2024,2025, compared to December 31, 2023. FHLB advances totaled $50.0 million at December 31, 2024, compared to $340.0 million at December 31, 2023.2024.
Total investment securities available-for-sale were $528.6 million at December 31, 2025, compared to $527.5 million at December 31, 2024, compared to $628.8 million at December 31, 2023, a decrease of $101.3 million, or 16.1%.2024. During the yearyears ended December 31, 2025 and 2024, purchases of available-for-sale securities totaled $160.5 million and $185.7 million.million, respectively. During 2025 and 2024, the Company sold $132.1$57.8 million and $132.1 million, respectively, of AFSavailable-for-sale investment securities on the open market as part of the Company’s strategic balance sheet management resulting in a pre-tax losslosses of $3.3 million and $6.6 million.million, respectively. Proceeds from the sale have beenwere redeployed into higher yielding securities during the first quarter of 2025. During 2023, the Company did not purchase or sell available-for-sale securities.assets. Maturities and paydowns of available-for-sale securities during 20242025 and 20232024 totaled $157.5$132.6 million and $92.0$157.5 million, respectively.
As of December 31, 20242025 and 2023,2024, nearly all of the available-for-sale investment portfolio was backed by mortgages. The residential mortgage pass-through securities portfolio is comprised of both fixed rate and adjustable rate FederalFHLMC, Home Loan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association (“FNMA”) and Government National Mortgage Association (“GNMA”) securities. The other mortgage-backed securities (“MBS”) are comprised of securities backed by FHLMC, FNMA and GNMA securities.
Mortgage-backed securities may have actual maturities that differ from contractual maturities depending on the repayment characteristics and experience of the underlying financial instruments. The estimated weighted average life of the available-for-sale mortgage-backed securities portfolio was 5.34.6 years and 5.25.3 years at December 31, 20242025 and December 31, 2023,2024, respectively. This estimate is based on assumptions and actual results may differ. At December 31, 20242025 and December 31, 2023,2024, the duration of the total available-for-sale investment portfolio was 3.9 years and 4.3 years.years, respectively.
At December 31, 20242025 and 2023,2024, adjustable rate securities comprised 5.9%0.6% and 13.0%,5.9%, respectively, of the available-for-sale mortgage-backed securityMBS portfolio. The remainder of the portfolio was comprised of fixed rate amortizing securities with 1010- to 30 year30-year contractual maturities, with a weighted average coupon of 2.31%2.30% per annum and 1.73%2.31% per annum at December 31, 20242025 and 2023,2024, respectively.
The available-for-sale investment portfolio included $60.2 million of unrealized losses and $2.9 million of unrealized gains at December 31, 2025. At December 31, 2024, the available-for-sale investment portfolio included $90.9 million of unrealized losses and $0.5 million of unrealized gains at December 31, 2024. At December 31, 2023, the available-for-sale investment portfolio included $99.0 million of unrealized losses and $57 thousand of unrealized gains. We believe any unrealized losses are a result of prevailing interest rates, and as such, we do not believe that any of the securities with unrealized losses were impaired. Management believes that default of the available-for-sale securities is highly unlikely. FHLMC, FNMA and GNMA guaranteed mortgage-backed securities and U.S. Treasury securities have a long history of zero credit losses, an explicit guarantee by the U.S. government (although limited for FNMA and FHLMC securities) and yields that generally trade based on market views of prepayment and liquidity risk rather than credit risk.
Our investment security portfolio consists of high-quality securities, which are largely backed by either U.S. government agencies or U.S. government sponsored entities.GSEs. We regularly model liquidity stress scenarios to assess potential liquidity issues.
At December 31, 2024,2025, we held $533.1$651.7 million of held-to-maturity investment securities, compared to $585.1$533.1 million at December 31, 2023, a decrease of $51.9 million, or 8.9%.2024. Purchases of held-to-maturity securities totaled $10.5$260.3 million and $2.5$10.5 million during 20242025 and 2023,2024, respectively. MaturitiesPaydowns and paydownsmaturities of held-to-maturity securities totaled $63.1$143.2 million and $69.6$63.1 million during 20242025 and 2023,2024, respectively.
The fair value of the held-to-maturity investment portfolio included $57.3 million of unrealized losses and $3.0 million of unrealized gains at December 31, 2025. At December 31, 2024, the held-to-maturity investment portfolio included $81.8 million of unrealized losses and $0.1 million of unrealized gains.
The fair value of the held-to-maturity investment portfolio included $81.8 million of unrealized losses and $51 thousand of unrealized gains at December 31, 2024. At December 31, 2023, the held-to-maturity investment portfolio included $81.0 million of unrealized losses and $0.2 million of unrealized gains.
The Company does not measure expected credit losses on a financial asset, or groups of financial assets, in which historical credit loss information adjusted for current conditions and reasonable and supportable forecasts results in an expectation that nonpayment of the amortized cost basis is zero. Management evaluated held-to-maturity securities noting they are backed by loans guaranteed by either U.S. government agencies or U.S. government sponsored entities,GSEs, and management believes that default is highly unlikely given this governmental backing and long history without credit losses. Additionally, management notes that yields on which the portfolio generally trades are based upon market views of prepayment and liquidity risk and not credit risk. The Company has no intention to sell the securities and believes it will not be required to sell the securities before the recovery of their amortized cost.
The carrying balancebalances of non-marketableother securities are summarized as follows as of the dates indicated:
Non-marketableOther securities included FRB stock, FHLB stock, convertible preferred stockstock, equity method investments and equity methodsecurities investments.with readily determinable fair values. During the year ended December 31, 2025, purchases of other securities totaled $51.2 million, and proceeds from redemptions and sales of other securities totaled $51.0 million. During the year ended December 31, 2024, purchases of non-marketableother securities totaled $44.9 million, and proceeds from redemptions and sales of non-marketableother securities totaled $57.5 million. DuringPurchases theconsisted year ended December 31, 2023, purchasesprimarily of non-marketableFHLB securities totaled $106.2 million,stock, and proceeds fromconsisted primarily of redemptions and sales of non-marketableFHLB securities totaled $100.0 million.stock. Changes in the Company’s FHLB stock holdings were directly correlated to FHLB line of credit advances and paydowns. Purchases consisted primarily of FHLB stock, and proceeds consisted primarily of redemptions of FHLB stock.
Other securities include convertible preferred stock without a readily determinable fair value. During the year ended December 31, 2025, there were no purchases of convertible preferred stock. One convertible preferred stock investment in our portfolio underwent an initial public offering and was reclassified as an equity security with a readily determinable fair value during the third quarter of 2025. During the year ended December 31, 2024, the Company purchased $0.4 million of convertible preferred stock. The Company recorded $3.9 million of impairment on convertible preferred stock related to venture capital investments, included in other non-interest income in the Company’s consolidated statements of operations, during the year ended December 31, 2024. The Company also sold convertible preferred stock totaling $1.0 million, during the year ended December 31, 2024, which generated realized gains of $0.1 million recorded in other non-interest income in the Company’s consolidated statements of operations.
Non-marketable securities include convertible preferred stock without a readily determinable fair value. During the years ended December 31, 2024 and 2023, the Company purchased $0.4 million of convertible preferred stock. During the year ended December 31, 2024, convertible preferred stock was redeemed upon the sale of a single investment position that totaled $1.0 million, which generated realized gains of $0.1 million recorded in other non-interest income in the Company’s consolidated statements of operations. The Company recorded $3.9 million of impairment during the year ended December 31, 2024, compared to $4.0 million during 2023, on convertible preferred stock related to venture capital investments, included in other non-interest income in the Company’s consolidated statements of operations.
Non-marketableOther securities also include equity method investments totaling $26.2$32.4 million and $24.6$28.0 million at December 31, 20242025 and December 31, 2023,2024, respectively,respectively. andThe increase was primarily due to a $5.0 million investment. The Company sold equity method investments without a readily determinable fair value totaling $1.8$1.9 million and zero at December 31, 2024 and December 31, 2023, respectively. Purchases of equity method investmentsmillion, during the yearsyear ended December 31, 20242025, andwhich 2023generated totaled $1.5 million and $3.6 million, respectively. During the years ended December 31, 2024 and 2023, the Company recorded net unrealizedrealized gains totalingof $1.0$0.6 million and net unrealized losses totaling $35 thousand, respectively, on equity method investments. These gains and losses were recorded in other non-interest income in the Company’s consolidated statements of operations. CarryingThe valuesCompany ofrecorded net unrealized gains on equity method investments withouttotaling a$0.8 readilymillion determinableand fair$1.0 valuemillion for the years ended December 31, 2025 and 2024, respectively, which are updatedrecorded periodicallyin andother impairmentsnon-interest mayincome bein takenthe toCompany’s reflectconsolidated astatements newof basis.operations. The Company recorded no impairment related to equity method investments without a readily determinable fair value for the years ended December 31, 20242025 or 2023.2024. Purchases of equity method investments during the years ended December 31, 2025 and 2024 totaled $0.6 million and $1.5 million, respectively.
As noted above, one convertible preferred stock investment underwent an initial public offering and was reclassified as an equity security with a readily determinable fair value totaling $5.1 million at December 31, 2025. Equity securities with readily determinable fair values are generally traded on an exchange and market prices are readily available. Unrealized gains or losses on equity securities with readily determinable fair values are recognized in other non-interest income in the Company’s consolidated statements of operations. During the year ended December 31, 2025, the Company recorded $3.1 million of unrealized gains from equity securities with readily determinable fair values.
At December 31, 2024,2025, our loan portfolio was comprised of new loans thatoriginated weby havethe originatedCompany and loans that were acquired in connection with ourthe Company’s acquisitions.
The Company maintains a granular and well-diversified loan portfolio with self-imposed concentration limits. The loan portfolio increased $52.4 million, or 0.7%, fromAt December 31, 20232025, loans totaled $7.4 billion, compared to $7.8 billion at December 31, 2024, led by an increase in commercial loans of $171.4 million.2024.
Our commercial and industrial loan portfolio is highly diversified across industry sectors and geography. As ofAt December 31, 2024,2025, there were no industry sectors representing more than 15.0% of our total loan portfolio. Key sectors included government/non-profit loans of $825.6$994.7 million, or 10.7%13.4% of total loans, and health care/hospital loans of $584.9$498.9 million, or 7.5%6.7% of total loans. The commercial and industrial portfolio also includes loans to companies that operate in the transportation industry. The transportation industry, trucking in particular, has experienced somerecent economic challenges in 2024.challenges. As a result of these industry challenges, some of the transportation loans may be subject to higher credit risk. The Company’s exposure to this industry is small, consisting of $205.2$134.8 million, or 2.6%1.8% of total loans, at December 31, 2024.2025.
Non-owner occupied CRE loans were 152.6%127.1% of the Company’s risk based capital, or 23.4%21.3% of total loans, and no specific property type comprised more than 10.0%7.0% of total loans. The Company maintains very little exposure to non-owner occupied CRE retail properties and office properties, comprising 2.0%1.9% and 1.3%1.2% of total loans, respectively.respectively, Multi-familyincluding available credit. Multifamily loans totaled $321.8$300.7 million, including available credit, or 4.2%3.5% of total loansloans, including available credit, as of December 31, 2024.2025.
The agriculture industry continues to be impacted by volatile commodity prices and generally by higher input costs, combining to stress margins. Our food and agribusiness portfolio is 3.9%3.1% of total loans and is well-diversified across food production, crop and livestock types. Crop and livestock loans represent 1.1%1.2% of total loans. We have maintained relationships with food and agribusiness clients that generally possess low leverage and, correspondingly, low bank debt to assets, minimizing any potential credit losses in the future.
New loan origination is a direct result of our ability to recruit and retain top banking talent, connect with clients in our markets and provide needed services at competitive rates. Loan fundings totaled $1.5$1.6 billion duringover 2024,the trailing 12 months, led by commercial loan fundings of $1.0$1.1 billion. Fundings are defined as closed end funded loans and revolving lines of credit advancesadvances, net of any current period paydowns. Management utilizes this more conservative definition of fundings to better approximate the impact of fundings on loans outstanding and ultimately net interest income.
Included in fundings are net fundings (paydowns) under revolving lines of credit totaling $64,375,$95,774, $16,302,($1,591), $19,281$15,490 and $(59,523)$21,752 for the dates noted in the table above, respectively.
Included in the table above are quarterly net fundings (paydowns) under revolving lines of credit totaling $16,954,$64,375, ($12,877),$16,302, $13,766$19,281 and ($7,096$59,523) for the dates noted in the table above, respectively.
Additionally, we have implemented procedures to timely identify loans that may become problematic in order to ensure the most beneficial resolution for the Company. Asset quality is monitored by our credit risk management department and evaluated based on quantitative and subjective factors such as the timeliness of contractual payments received. Additional factors that are considered, particularly with commercial loans over $500,000, include the financial condition and liquidity of individual borrowers and guarantors, if any, and the value of our collateral. To facilitate the oversight of asset quality, loans are categorized based on the number of days past due and on an internal risk rating system, and both areas discussed in more detail below.
The Company’s policy is to review each prospective credit to determine the appropriateness and the adequacy of security or collateral prior to making a loan. In the event of borrower default, the Company seeks recovery in compliance with lending laws, the respective loan agreements, and credit monitoring and remediation procedures that may include modifying a loan to provide a concession by the Company to the borrower from their original terms due to borrower financial difficulties in order to facilitate repayment. Such modified loans are considered troubled debtLoan modifications (“TDMs”). TDMs may include principal forgiveness, interest rate reductions, other-than-insignificant-payment delays, term extensions or any combination thereof. Modified loans are discussed further in note 6 of our consolidated financial statements. Assets that have been foreclosed on or acquired through deed-in-lieu of foreclosure are classified as OREO until sold, and are carried at the fair value of the collateral less estimated costs to sell, with any initial valuation adjustments charged to the ACL and any subsequent declines in carrying value charged to impairments on OREO.
During 2024 and 2023, total2025, non-performing loans decreased $11.1 million, or 30.8%, to $24.9 million, compared to 2024. During 2025 and 2024, accruing modified loans totaled $36.0$43.8 million and $28.2 million, respectively. During 2024 and 2023, accruing TDMs totaled $15.3 million and $15.1 million, respectively. Total non-performing assets to total loans and OREO totaled 0.47%0.36% and 0.42%0.47% at December 31, 20242025 and 2023,2024, respectively.
The ACL represents the amount that we believe is necessary to absorb estimated lifetime credit losses inherent in the loan portfolio at the balance sheet date and involves a high degree of judgment and complexity. The Company utilizes a DCF model developed within a third-party software tool to establish expected lifetime credit losses for the loan portfolio. The ACL is calculated as the difference between the amortized cost basis and the projections from the DCF analysis. The DCF model allows for individual lifetime loan cash flow modeling, excluding extensions and renewals, using loan-specific interest rates and repayment schedules including estimated prepayment rates and loss recovery timing delays. The model incorporates forecasts of certain national macro-economic factors, including unemployment rates, home price index (“HPI”),HPI, retail sales and gross domestic product (“GDP”),GDP, which drive correlated loss rates. The determination and application of the ACL accounting policy involves judgments, estimates and uncertainties that are subject to change. For periods beyond the reasonable and supportable forecast period, the Company reverts to historical long-term average loss rates on a straight-line basis.
Loans on non-accrual, in bankruptcy and TDMsmodified loans with a balance greater than $250 thousand are excluded from the pooled analysis and are evaluated individually. If management determines that foreclosure is probable, expected credit losses are evaluated based on the criteria listed below, adjusted for selling costs as appropriate. Typically, these loans consist of commercial, commercial real estate and agriculture loans and exclude homogeneous loans such as residential real estate and consumer loans. Specific allowances are determined by collectively analyzing:
At December 31, 20242025 and 2023,2024, the allowance for credit losses totaled $94.5$87.4 million and $97.9$94.5 million, respectively. The decrease during 20242025 was primarily driven by the resolution of non-performing loans and changes in the CECL model’s underlying macro-economic forecast.loans. Specific reserves on loans totaled $8.1 million at December 31, 2025, compared to $6.4 million at December 31, 2024, compared to $8.6 million at December 31, 2023.2024.
During the years ended December 31, 2025 and 2024, net charge-offs totaled $25.2 million and $9.8 million, respectively. Charge-offs during 2025 were recorded primarily due to proactive credit actions taken on three credits during the fourth quarter and an $8.9 million charge-off from one credit during the first quarter due to suspected fraud by the borrower, which the Company believes is an isolated circumstance within the loan portfolio. The ratio of net charge-offs to average total loans totaled 0.34% and 0.13% for the years ended December 31, 2025 and 2024, respectively.
Net charge-offs on loans during the year ended December 31, 2024 totaled $9.8 million, and the ratio of net charge-offs to average total loans totaled 0.13%. Net charge-offs on loans during the year ended December 31, 2023 totaled $1.1 million, and the ratio of net charge-offs to average total loans totaled 0.02%.
The Company has elected to exclude accrued interest receivable (“AIR”) from the ACL calculation. As of December 31, 20242025 and December 31, 2023,2024, AIR from loans totaled $41.5$38.3 million and $42.4$41.5 million, respectively. When a loan is placed on non-accrual, any recorded AIR is reversed against interest income.
After considering the above mentionedabove-mentioned factors, we believe that the ACL of $94.5$87.4 million is adequate to cover estimated lifetime losses inherent in the loan portfolio at December 31, 2024.2025. However, it is likely that future adjustments to the ACL will be necessary. Any changes to the underlying assumptions, circumstances or estimates, including but not limited to changes in the underlying macro-economic forecast, used in determining the ACL, could negatively or positively affect the Company'sCompany’s results of operations, liquidity or financial condition.
The Company continued to prudently manage credit risk in 2025, further strengthening our credit profile through proactive monitoring of credit. During the year ended December 31, 2025, the Company recorded provision expense for credit losses totaling $17.8 million, including $18.2 million provision expense for funded loans and $0.4 million of provision release for unfunded loan commitments. During the year ended December 31, 2024, the Company recorded provision expense for credit losses totaling $6.8 million, including $6.3 million of provision expense for funded loans and $0.5 million of provision expense for unfunded loan commitments.
Deposits
At December 31, 20242025 and 2023,2024, time deposits that were scheduled to mature within 12 months totaled $822.6$1.0 millionbillion and $689.0$822.6 million, respectively. Of the time deposits scheduled to mature within 12 months at December 31, 2024,2025, $248.3$301.7 million were in denominations of $250 thousand or more, and $574.3$704.5 million were in denominations less than $250 thousand. Approximately 78%76% of our total deposits were FDIC insured at December 31, 2024.2025. Additionally, the Company participates in the IntraFi Cash Service program, which allows depositors to receive reciprocal FDIC insurance coverage. The Company had $1.0$0.8 billion and $0.9$1.0 billion of deposits in the program as ofat December 31, 20242025 and 2023,2024, respectively.
Long-term debt
TheIn 2021, the Company holds a subordinated note purchase agreement to issueissued and sellsold a fixed-to-floating rate subordinated note totaling $40.0 million. The balance on the note at December 31, 2024,2025, net of long-term debt issuance costs totaling $0.2$0.1 million, totaled $39.8$39.9 million. Interest expense totaling $1.2 million and $1.2 million was recorded in the consolidated statements of operations during the years ended December 31, 20242025 and 2023, respectively.2024.
What changed in the latest 10-Q
Risk Factors
There have been no material changes to the risk factors disclosed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2025.
No wording changes found in this section.
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Management's Discussion & Analysis (MD&A)
Largest changes
Other securities also include equity method investments totalingsee in full comparison$36.1$37.5 million and $32.4 million atMarchJune31,30, 2026 and December 31, 2025, respectively. Purchases of equity method investments during the three months endedMarchJune31,30, 2026 and 2025 totaled$2.2$1.1 million and zero, respectively. Purchases of equity method investments during the six months ended June 30, 2026 and 2025 totaled $3.4 million and $0.5 million, respectively. The Company recorded net unrealized gains on equity method investments totaling $1.3 million and $1.4 million during the three and six months ended June 30, 2026. During the three and six months endedMarchJune31, 2026 and30, 2025, the Company recorded net unrealized gainstotaling $0.1 million and net unrealized losses totaling $0.3 million, respectively,on equity methodinvestments.investments totaling $0.3 million and $15 thousand, respectively. These gains and losses were recorded in other non-interest income in the Company’s consolidated statements of operations.Carrying values of equity method investments without a readily determinable fair value are updated periodically and impairments may be taken to reflect a new basis.The Company recordedno$0.2 million and zero impairment related to equity method investmentswithout a readily determinable fair valuefor thethreesix months endedMarchJune31,30, 2026orand the year ended December 31,2025.2025, respectively.
“During the six months ended June 30, 2026, non-interest expense increased $66.8 million to $191.8 million, compared to the same period during the prior year due to our recent acquisition. Non-interest expense during the six months ended June 30, 2026 included $26.6 million of acquisition and restructuring expenses. Excluding these items, the current period adjusted non-interest expense totaled $165.2 million, increasing from the same period in the prior year primarily due to our recent acquisition. …”see in full comparison
“Net income totaled $47.3 million, or $1.04 per diluted share, for the six months ended June 31, 2026, compared to net income of $58.3 million, or $1.51 per diluted share, for the six months ended June 30, 2025. During the six months ended June 30, 2026, acquisition and restructuring charges totaled $20.6 million, after tax. Adjusted net income, excluding these items, increased $9.7 million, or 16.6%, to $67.9 million, during the six months ended June 30, 2026. Adjusted earnings per diluted share totaled $1.50 for the six months ended June 30, 2026.”see in full comparison
“Pre-provision net revenue FTE totaled $68.5 million and $85.4 million for the six months ended June 30, 2026 and 2025, respectively. Excluding acquisition and restructuring charges, adjusted pre-provision net revenue FTE increased $9.9 million, or 11.5%, to $95.3 million for the six months ended June 30, 2026, compared to $85.4 million for the same period in the prior year.”see in full comparison
“Adjusting for pre-tax acquisition-related and restructuring expenses totaling $15.3 million, net income totaled $32.6 million, or $0.72 per diluted share, during the three months ended March 31, 2026. The adjusted return on average tangible assets was 1.20% during the three months ended March 31, 2026, and the adjusted return on average tangible common equity was 11.79%.”see in full comparison
“The return on average equity totaled 5.68% for the six months ended June 30, 2026, compared to 8.80% for the six months ended June 30, 2025. Excluding acquisition and restructuring charges, the adjusted return on average tangible common equity for the six months ended June 30, 2026 was 12.11%, compared to 12.44% for the six months ended June 30, 2025”see in full comparison
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The following management’s discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes as of and for the three and six months ended MarchJune 31,30, 2026, and with our annual report on Form 10-K (file number 001-35654), which includes our audited consolidated financial statements and related notes as of and for the years ended December 31, 2025, 2024 and 2023. Our2023.Our acquisition of Vista occurred on January 7, 2026, subsequent to the dates of information in our most recent report on Form 10-K, and comparisons herein to prior quarters or years prior to January 7, 2026 should be reviewed with that context. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions that may cause actual results to differ materially from management’s expectations. Factors that could cause such differences are discussed in the section entitled “Cautionary Note Regarding Forward-Looking Statements” located elsewhere in this quarterly report and in Item 1A“Risk Factors” in the annual report on Form 10-K, referenced above, and should be read herewith.
Our focus is on building relationships by creating a win-win scenario for our clients and our Company. We believe in providing solutions and services for our clients that are based on fairness and simplicity. We have established a solid financial services franchise with a sizable presence for deposit gathering and building client relationships necessary for growth. We have executed on strategic acquisition opportunities to expand our presence in attractive markets and to diversify our revenue streams. Additionally,Our thedigital Companybanking solution, 2UniFiSM, continues to shift from constructing systems for 2UniFi to activating services. 2UniFi is an innovative financial ecosystem with treasury management depository capabilities and a streamlined SBA loan offering. Moving forward, 2UniFi will continue to focus on providing a unified client experience that helps small- and medium-sized business owners manage financial products and services across multiple banks and fintechs. We believe that our established presence in our core markets of Colorado, the greater Kansas City region, Texas, Utah, Wyoming, New Mexico, Idaho and Palm Beach, Florida, as well as our ongoing investment in digital solutions and strategic acquisitions, position us well for growth opportunities. As of MarchJune 31,30, 2026, we had $12.6 billion in assets, $9.6$9.8 billion in loans, $10.5$10.4 billion in deposits, $1.7 billion in equity and $1.4$1.5 billion in assets under management in our trust and wealth management business.
Additionally, we face continual challenges implementing our business strategy. These include growing our assets, particularly loans, and deposits amidst intense competition, changing interest rates, adhering to changes in the regulatory environment and identifying and consummating disciplined acquisition and other expansionary opportunities in a competitive and inflationary environment. We will continue to make investments in our digital growth strategy and our digital financial ecosystem 2UniFi, and may also seek to partner with third parties to accelerate growth. 2UniFi may prove difficult to successfully scale and may require additional operational and control systems to manage fraud, cybersecurity, operational, legal and compliance risks.
We will continue to make investments in our digital growth strategy and our digital financial ecosystem for 2UniFi and may also seek to partner with third parties to accelerate growth. The Company also continues to shift from constructing systems for 2UniFi to activating services. 2UniFi may prove difficult to successfully scale and may require additional operational and control systems to manage fraud, cybersecurity, operational, legal and compliance risks.
WhileThe Vista core system conversion was successfully completed in July 2026 and ongoing integration activities are progressing and remain on track,track. acquisitionAcquisition integrations present operational and execution challenges.challenges Integration activitieswhich require ongoing investments in systems, processes, and personnel. While the acquisition supports our long termlong-term growth strategy, the integration process may be more costly or time consuming than anticipated.
In evaluating our consolidated statements of financial condition and results of operations financial statement line items, we evaluate and manage our performance based on key earnings indicators, balance sheet ratios, asset quality metrics and regulatory capital ratios, among others. The table below presents key performance indicators regularlythat usedwe use to analyze our business for the periods indicated:
Acquired loans
AsAt ofJanuary March 31,7, 2026, the Vista acquisition added $2.5 billion of total assets, including $339.1 million of cash and cash equivalents, $145.5 million of investment securities, $1.9 billion of loans and $29.5$31.9 million of allowance for credit losses. The acquisition also included total deposits of $2.2 billion.
At MarchJune 31,30, 2026, the Company’s total assets, including the additions from the Vista acquisition, were $12.6 billion, increasing $2.7 billion, or 27.6%,27.3%, from December 31, 2025. Cash and cash equivalents increaseddecreased $55.7$36.4 million from December 31, 2025, and investment securities increased $182.1$163.4 million. Loans totaled $9.6$9.8 billion and $7.4 billion at MarchJune 31,30, 2026 and December 31, 2025, respectively, and the allowance for credit losses totaled $113.5$110.3 million and $87.4 million at MarchJune 31,30, 2026 and December 31, 2025, respectively. During the three months ended March 31, 2026, lower-costLower-cost transaction deposits increased $2.0 billion to $9.2$9.1 billion, compared to December 31, 2025. Total deposits increased $2.2$2.1 billion to $10.5$10.4 billion at MarchJune 31,30, 2026, compared to December 31, 2025.
Total investment securities available-for-sale were $605.2$585.5 million at MarchJune 31,30, 2026, compared to $528.6 million at December 31, 2025. During the three months ended March 31, 2026 and 2025, purchasesPurchases of available-for-sale securities during the six months ended June 30, 2026 and 2025 totaled $144.8$154.3 million and $142.2$160.5 million, respectively. During 2026, the Company acquired available-for-sale securities with a fair value of $145.5 million related to the Vista acquisition. Paydowns and maturities totaled $33.3$61.8 million and $48.4$74.6 million during the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. During the threesix months ended MarchJune 31,30, 2026, the Company sold $176.9$176.4 million of available-for-sale securities, primarily related to securities acquired in the Vista securities.acquisition. There were no sales of available-for-sale securities during the threesix months ended MarchJune 31,30, 2025.
Available-for-sale investment securities are summarized in the following table as of the dates indicated. The weighted average yield was calculated based on amortized cost. Yields on tax-exempttax exempt securities have not been adjusted for tax-exempttax exempt status.
As of MarchJune 31,30, 2026 and December 31, 2025, nearly all the available-for-sale investment portfolio was backed by mortgages. The residential mortgage pass-through securities portfolio is comprised of both fixed-ratefixed rate and adjustable-rateadjustable rate FHLMC, FNMA and GNMA securities. The other MBS are comprised of securities backed by FHLMC, FNMA and GNMA securities.
Mortgage-backed securities may have actual maturities that differ from contractual maturities depending on the repayment characteristics and experience of the underlying financial instruments. The estimated weighted average life of the available-for-sale mortgage-backed securities portfolio was 4.34.6 years and 4.6 years at MarchJune 31,30, 2026 and December 31, 2025, respectively. This estimate is based on assumptions and actual results may differ. At MarchJune 31,30, 2026 and December 31, 2025, the duration of the total available-for-sale investment portfolio was 3.63.9 years and 3.9 years, respectively.
At MarchJune 31,30, 2026 and December 31, 2025, adjustable-rateadjustable rate securities comprised 2.8%2.6% and 0.6%, respectively, of the available-for-sale MBS portfolio. The remainder of the portfolio was comprised of fixed-ratefixed rate amortizing securities with 10- to 30-year contractual maturities, with a weighted average coupon of 2.46%2.39% per annum and 2.30% per annum at MarchJune 31,30, 2026 and December 31, 2025, respectively.
The available-for-sale investment portfolio included $63.2$64.5 million of unrealized losses and $0.8$362 millionthousand of unrealized gains at MarchJune 31,30, 2026. At December 31, 2025, the available-for-sale investment portfolio included $60.2 million of unrealized losses and $2.9 million of unrealized gains. We believe any unrealized losses are a result of prevailing interest rates, and as such, we do not believe that any of the securities with unrealized losses were impaired. Management believes that default of the available-for-sale securities is highly unlikely. FHLMC, FNMA and GNMA guaranteed mortgage-backed securities and U.S. Treasury securities have a long history of zero credit losses, an explicit guarantee by the U.S. government (although limited for FNMA and FHLMC securities) and yields that generally trade based on market views of prepayment and liquidity risk rather than credit risk.
Held-to-maturity investment securities totaled $757.4$758.2 million at MarchJune 31,30, 2026, compared to $651.7 million at December 31, 2025, an increase of $105.6$106.5 million, or 16.2%.16.3%. Purchases during the threesix months ended MarchJune 31,30, 2026 and 2025 totaled $137.9$202.2 million and $190.6$260.3 million, respectively. Maturities and paydowns of held-to-maturity securities totaled $32.8$96.9 million and $17.0$76.7 million during the threesix months ended MarchJune 31,30, 2026 and 2025, respectively.
The residential mortgage pass-through and other residential MBS held-to-maturity investment portfolios are comprised of fixed-ratefixed rate FHLMC, FNMA and GNMA securities.
The fair value of the held-to-maturity investment portfolio included $59.6$61.9 million of unrealized losses and $1.3$361 millionthousand of unrealized gains at MarchJune 31,30, 2026. At December 31, 2025, the held-to-maturity investment portfolio included $57.3 million of unrealized losses and $3.0 million of unrealized gains.
Mortgage-backed securities may have actual maturities that differ from contractual maturities depending on the repayment characteristics and experience of the underlying financial instruments. The estimated weighted average expected life of the held-to-maturity mortgage-backed securities portfolio as of MarchJune 31,30, 2026 and December 31, 2025 was 3.94.5 years and 4.3 years, respectively. This estimate is based on assumptions and actual results may differ. The duration of the total held-to-maturity investment portfolio was 3.33.8 years and 3.6 years as of MarchJune 31,30, 2026 and December 31, 2025, respectively.
Other securities included FRB stock, FHLB stock, correspondent bank stock, convertible preferred stock, equity method investments and equity securities with readily determinable fair values. During the threesix months ended MarchJune 31,30, 2026, purchases of other securities totaled $12.7$32.6 million, and proceeds from maturities and paydowns of other securities totaled $2.2$2.7 million, and proceeds from sales of other securities totaled $10.4$22.0 million. During the threesix months ended MarchJune 31,30, 2025 ,2025, purchases of other securities totaled $15.9$37.0 millionmillion, and proceeds from other securities totaled $15.7$32.4 million. Purchases consisted primarily of FHLB stock, and proceeds consisted primarily of salesredemptions of FHLB stock. Changes in the Company’s FHLB stock holdings directly correlatecorrelated to FHLB line of credit advances and paydowns.
At MarchJune 31,30, 2026 and December 31, 2025, the Company held FRB, FHLBFRB and correspondent bankFHLB stock for regulatory or debt facility purposes. These are restricted securities which, lacking a market, are carried at cost. There have been no identified events or changes in circumstances that may have an adverse effect on the FRB, FHLBFRB and correspondent bankFHLB stock carried at cost.
Other securities include convertible preferred stock without a readily determinable fair value. During the three and six months ended MarchJune 31,30, 2026 and 2025, the Company had no purchases of convertible preferred stock.
Other securities also include equity method investments totaling $36.1$37.5 million and $32.4 million at MarchJune 31,30, 2026 and December 31, 2025, respectively. Purchases of equity method investments during the three months ended MarchJune 31,30, 2026 and 2025 totaled $2.2$1.1 million and zero, respectively. Purchases of equity method investments during the six months ended June 30, 2026 and 2025 totaled $3.4 million and $0.5 million, respectively. The Company recorded net unrealized gains on equity method investments totaling $1.3 million and $1.4 million during the three and six months ended June 30, 2026. During the three and six months ended MarchJune 31, 2026 and30, 2025, the Company recorded net unrealized gains totaling $0.1 million and net unrealized losses totaling $0.3 million, respectively, on equity method investments.investments totaling $0.3 million and $15 thousand, respectively. These gains and losses were recorded in other non-interest income in the Company’s consolidated statements of operations. Carrying values of equity method investments without a readily determinable fair value are updated periodically and impairments may be taken to reflect a new basis. The Company recorded no$0.2 million and zero impairment related to equity method investments without a readily determinable fair value for the threesix months ended MarchJune 31,30, 2026 orand the year ended December 31, 2025.2025, respectively.
Equity securities with readily determinable fair values are generally traded on an exchange and market prices are readily available. Unrealized gains or losses on equity securities with readily determinable fair values are recognized in other non-interest income in the Company’s consolidated statements of operations. During the threesix months ended MarchJune 31,30, 2026 and 2025,2026, the Company sold $4.6 million and zero, respectively, of equity securities with readily determinable fair values, resulting in a realized loss totaling $0.7 million in the first quarter of 2026.million. During the three and six months ended MarchJune 31,30, 2026 and 2025,2026, the Company recorded $35 thousand and $0.1 million and zero, respectively, of unrealized losses from equity securities with readily determinable fair values.values, respectively. During the three and six months ended June 30, 2025, the Company recorded no unrealized gains or losses from equity securities with readily determinable fair values, respectively.
At MarchJune 31,30, 2026, our loan portfolio was comprised of loans originated by the Company and loans that were acquired in connection with the Company’s acquisitions.
The Company maintains a granular and well-diversified loan portfolio with self-imposed concentration limits. At MarchJune 31,30, 2026, loans totaled $9.6$9.8 billion, compared to $7.4 billion at December 31, 2025. The increase was driven by record quarterly loan fundings totalingof $805.5$1.7 millionbillion during the six months ended June 30, 2026 on top of acquired Vista loans acquired January 7, 2026 totaling $1.9 billion.
Our commercial and industrial loan portfolio is highly diversified across industry sectors and geography. At MarchJune 31,30, 2026, there were no industry sectors representing more than 15.0% of our total loan portfolio. Key sectors included government/non-profit loans of $1.0 billion, or 10.7%10.6% of total loans, and health care/hospital loans of $488.0$494.3 million, or 5.1% of total loans. The commercial and industrial portfolio also includes loans to companies that operate in the transportation industry. The transportation industry, trucking in particular, has experienced recent economic challenges. As a result of these industry challenges, some of the transportation loans may be subject to higher credit risk. The Company has intentionally reduced exposure to this industry to $130.1$114.4 million, or 1.4%1.2%, of total loans, at MarchJune 31,30, 2026.
Non-owner occupied CRE loans were 163.1%171.6% of the Company’s risk based capital, or 26.4%27.1% of total loans, and no specific property type comprised more than 7.0%10.0% of total loans. The Company maintains limited exposure to non-owner occupied CRE retail properties and office properties, comprising 4.0%3.7% and 2.3% of total loans, respectively, including available credit. Multifamily loans totaled $324.9$299.8 million, or 3.1%, of total loans, including available credit, orat 3.4%June of total loans, as of March 31,30, 2026.
The agriculture industry continues to be impacted by volatile commodity prices and generally by higher input costs, combining to stress margins. Our food and agribusiness portfolio is 2.4% of total loans and is well-diversified across food production, crop and livestock types. Crop and livestock loans represent 0.7% of total loans. We have maintained relationships with food and agribusiness clients that generally possess low leverage and, correspondingly, low bank debt to assets, minimizing any potential credit losses in the future.
New loan origination is a direct result of our ability to recruit and retain top banking talent, connect with clients in our markets and provide needed services at competitive rates. Loan fundings totaled $2.1$2.7 billion over the trailing 12 months, led by commercial loan fundings of $1.4$1.6 billion. Loan fundings during the three months ended March 31, 2026 totaled a record $805.5 million. Fundings are defined as closed-end funded loans and revolving lines of credit advances, net of any current period paydowns. Management utilizes this more conservative definition of fundings to better approximate the impact of fundings on loans outstanding and ultimately net interest income.
Included in fundings are net fundings (paydowns) fundings under revolving lines of credit totaling $178,133, $65,273, $95,774,$95,774 ($1,591), $15,490 and $21,752$15,490 for the periodsdates noted in the table above, respectively.
Additionally, we have implemented procedures to timely identify loans that may become problematic in order to ensure the most beneficial resolution for the Company. Asset quality is monitored by our credit risk management department and evaluated based on quantitative and subjective factors such as the timeliness of contractual payments received. Additional factors that are considered, particularly with commercial loans over $500,000, include the financial condition and liquidity of individual borrowers and guarantors, if any, and the value of our collateral. To facilitate the oversight of asset quality, loans are categorized based on the number of days past due and on an internal risk rating system, asand both are discussed in more detail below.
Non-performing assets consist of non-accrual loans and OREO. Interest income that would have been recorded had non-accrual loans performed in accordance with their original contract terms during the three and six months ended MarchJune 31,30, 2026 was $0.7 million and 2025$1.3 wasmillion, respectively, and $0.6 million and $0.7$1.3 million,million during the three and six months ended June 30, 2025, respectively.
At MarchJune 31,30, 2026, non-performing loans to total loans improved three basis points to 0.31%, compared to December 31, 2025. Loans 30-89 days past due and still accruing interest to total loans were 0.22%0.17% andas of June 30, 2026, compared to 0.16% of total loans atas March 31, 2026 andof December 31, 2025, respectively. Loans 90 days or more past due and still accruing interest were 0.28%0.30% and 0.21% of total loans at MarchJune 31,30, 2026 and December 31, 2025, respectively. Non-performing assets to total loans and OREO improved one basis point to 0.35%, during the threesix months ended MarchJune 31,310 2026, compared to December 31, 2025.
At MarchJune 31,30, 2026 and December 31, 2025, the allowance for credit losses totaled $113.5$110.3 million and $87.4 million, respectively. As a result of the Vista acquisition, the Company recorded $29.5$31.9 million of allowance for credit losses for the loans acquired. The remaining increase during the threesix months ended MarchJune 31,30, 2026, excluding net charge-offs, was primarily driven by loan growth. Specific reserves on individually evaluated loans totaled $14.4$14.2 million at MarchJune 31,30, 2026, compared to $8.1 million at December 31, 2025.
Net charge-offs on loans duringDuring the three and six months ended MarchJune 31,30, 20262026, net charge-offs totaled $7.7$6.4 million.million and $14.1 million, respectively. The ratio of annualized net charge-offs to average total loans totaled 0.34%.0.27% and 0.30% for the three and six months ended June 30, 2026, respectively. Net charge-offs on loans during the three and six months ended MarchJune 31,30, 2025 totaled $15.1$1.0 million and $16.1 million, respectively, and the ratio of annualized net charge-offs to average total loans totaled 0.80%.0.05% and 0.43%, respectively.
The Company has elected to exclude AIR from the ACL calculation. As of MarchJune 31,30, 2026 and December 31, 2025, AIR from loans totaled $51.9$47.7 million and $38.3 million, respectively. When a loan is placed on non-accrual, any recorded AIR is reversed against interest income.
Total ACL
After considering the above-mentioned factors, we believe that the ACL of $113.5$110.3 million is adequate to cover estimated lifetime losses inherent in the loan portfolio at MarchJune 31,30, 2026. However, it is likely that future adjustments to the ACL will be necessary. Any changes to the underlying assumptions, circumstances or estimates, including but not limited to changes in the underlying macro-economic forecast, used in determining the ACL, could negatively or positively affect the Company’s results of operations, liquidity or financial condition.
The following scheduleschedules presents,present, by class stratification, the changes in the ACL during the periods listed:
The Company continues to prudently manage credit risk, further strengthening our credit profile through proactive monitoring. During the three months ended March 31, 2026, the Company recorded provision expense for credit losses on loans totaling $4.0 million, including $4.3 million provision expense for funded loans and $0.3 million of provision release for unfunded loan commitments. During the three months ended March 31, 2025, the Company recorded provision expense for credit losses totaling $10.2 million, including $10.9 million of provision expense for funded loans and $0.7 million of provision release for unfunded loan commitments.
Deposits from banking clients serve as a primary funding source for our banking operations, and our ability to gather and manage deposit levels is critical to our success. Deposits not only provide a lower-cost funding source for our loans, but also provide a foundation for the client relationships that are critical to future loan growth. We maintain a granular and well diversified deposit base with no exposure to venture capital or crypto deposits. The following table presents information regarding our deposit composition at MarchJune 31,30, 2026 and December 31, 2025:
The following table shows uninsured time deposits by scheduled maturity as of MarchJune 31,30, 2026:
At MarchJune 31,30, 2026 and December 31, 2025, time deposits that were scheduled to mature within 12 months totaled $1.2 billion and $1.0 billion, respectively. Of the time deposits scheduled to mature within 12 months at MarchJune 31,30, 2026, $363.2$346.5 million were in denominations of $250 thousand or more, and $813.2$816.5 million were in denominations less than $250 thousand. Approximately 63%69% of our total deposits were FDIC insured at MarchJune 31,30, 2026. Additionally, the Company participates in the IntraFi Cash Service program, which allows depositors to receive reciprocal FDIC insurance coverage. The Company had $1.0$1.1 billion and $0.8 billion of deposits in the program asat ofJune March 31,30, 2026 and December 31, 2025, respectively.
During Februarythe first quarter of 2026, the Company closed a public offering of fixed-to-floating rate subordinated notes totaling $150.0 million. The balance on the notes at MarchJune 31,30, 2026, net of long-term debt issuance costs of $2.7$2.6 million, totaled $147.3$147.4 million. During the three and six months ended MarchJune 31,30, 2026, interest expense totaling $1.2$2.2 million and $3.3 million, respectively, was recorded in the consolidated statements of operations. From the issue date to February 15, 2031, or the date of earlier redemption, the Company will pay interest on the notes semi-annually in arrears on February 15 and August 15 of each year, commencing on August 15, 2026, at a fixed annual interest rate equal to 5.875%. From February 15, 2031 to the maturity date, or the date of earlier redemption, the floating interest rate per annum will be equal to the three-month term SOFR plus a spread of 241 basis points, payable quarterly in arrears on February 15, May 15, August 15 and November 15 of each year, commencing on May 15, 2031. The notes will mature on February 15, 2036. The Company may, at its option, redeem the notes in whole or in part beginning with the interest payment date of February 15, 2031 and on any interest payment date thereafter. The Company deployed the net proceeds from the sale of the notes for general corporate purposes.
The Company also holds a fixed-to-floating rate note totaling $40.0 million. The balance on the note at MarchJune 31,30, 2026 and December 31, 2025, net of long-term debt issuance costs totaling $0.1 million, totaled $40.0 million. Interest expense totaling $0.3 million and $0.6 million was recorded in the consolidated statements of operations for boththe three and six months ended June 30, 2026, respectively. Interest expense totaling $0.3 million and $0.6 million was recorded in the consolidated statements of operations for the three and six months ended MarchJune 31, 2026 and30, 2025. The note is subordinated, unsecured and matures on November 15, 2031. Payments consist ofwere interest only. Interest expense on the note is payable semi-annually in arrears and will bear interest at 3.00% per annum until November 15, 2026 (or any earlier redemption date). From November 15, 2026 until November 15, 2031 (or any earlier redemption date) payments will be made quarterly in arrears, and the interest rate shall reset quarterly to an interest rate per annum equal to the then current three-month term SOFR plus 203 basis points. The Company deployed the net proceeds from the sale of the note for general corporate purposes. Prior to November 5, 2026, the Company may redeem the note only under certain limited circumstances. Beginning on November 5, 2026 through maturity, the note may be redeemed, at the Company’s option, on any scheduled interest payment date. Any redemption by the Company would be at a redemption price equal to 100% of the principal amount of the note being redeemed, together with any accrued and unpaid interest on the note being redeemed up to but excluding the date of redemption. The note is not subject to redemption at the option of the holder.
As part of the acquisition of BOJH on October 1, 2022, the Company assumed three subordinated fixed-to-floating rate notes totaling $15.0 million. The balance on the notes at MarchJune 31,30, 2026 and December 31, 2025, net of the fair value adjustment from the acquisition, totaled $15.0 million. Interest expense related to the notes totaling $0.1 million and $0.3 million was recorded in the consolidated statements of operations during the three and six months ended MarchJune 31,30, 2026 and 2025.2025, respectively. The three notes, containing similar terms, are subordinated, unsecured and mature on June 15, 2031. Payments consist ofwere interest only. Interest expense on the notes is payable semi-annually in arrears and will bearbore interest at 3.75% per annum until June 15, 2026 (or any earlier redemption date). From June 15, 2026 until June 15, 2031 (or any earlier redemption date) payments will be made quarterly in arrears, and the interest rate shall reset quarterly to an interest rate per annum equal to the then current three-month term SOFR plus 306 basis points. Prior to June 15, 2026, the Company may redeem the notes only under certain limited circumstances. Beginning on June 15, 2026 through maturity, the notes may be redeemed, at the Company’s option, on any scheduled interest payment date. Any redemption by the Company would be at a redemption price equal to 100% of the principal amount of the notes being redeemed, together with any accrued and unpaid interest on the notes being redeemed up to but excluding the date of redemption. The notes are not subject to redemption at the option of the holder.
AsAt ofJune March 31,30, 2026 and December 31, 2025, the Company sold securities under agreements to repurchase totaling $17.0$20.2 million and $17.4 million, respectively. In addition, as a member of the FHLB, the Company has access to a line of credit and term financing from the FHLB with total available credit of $2.0 billion at MarchJune 31,30, 2026. The Company may utilize the FHLB line of credit as a funding mechanism for originated loans and loans held for sale. At MarchJune 31,30, 2026 and December 31, 2025, NBH Bank had $125.0 million and no outstanding borrowings fromwith the FHLB.FHLB, respectively. The Company may pledge investment securities and loans as collateral for FHLB advances. There were no investment securities pledged at MarchJune 31,30, 2026 or December 31, 2025. Loans pledged were $3.6 billion and $2.4 billion at MarchJune 31,30, 2026 and December 31, 2025, respectively. The Company incurred $0.1$0.9 million and $1.1$1.0 million of interest expense related to FHLB advances or other short-term borrowings for the three and six months ended MarchJune 31,30, 20262026, respectively. During the three and six months ended June 30, 2025, respectively.the Company incurred $1.2 million and $2.3 million, respectively, of interest expense related to FHLB advances or other short-term borrowings.
Our subsidiary banks and the holding company are subject to the regulatory capital adequacy requirements of the Federal Reserve Board and the FDIC, as applicable. Failure to meet the minimum capital requirements can initiate certain mandatory and possibly further discretionary actions by regulators that could have a material adverse effect on us. At MarchJune 31,30, 2026 and December 31, 2025, our subsidiary banks and the consolidated holding company exceeded all capital ratio requirements under prompt corrective action and other regulatory requirements, as further detailed in note 10 of our consolidated financial statements.
Net income totaled $47.3 million, or $1.04 per diluted share, for the six months ended June 31, 2026, compared to net income of $58.3 million, or $1.51 per diluted share, for the six months ended June 30, 2025. During the six months ended June 30, 2026, acquisition and restructuring charges totaled $20.6 million, after tax. Adjusted net income, excluding these items, increased $9.7 million, or 16.6%, to $67.9 million, during the six months ended June 30, 2026. Adjusted earnings per diluted share totaled $1.50 for the six months ended June 30, 2026.
Pre-provision net revenue FTE totaled $68.5 million and $85.4 million for the six months ended June 30, 2026 and 2025, respectively. Excluding acquisition and restructuring charges, adjusted pre-provision net revenue FTE increased $9.9 million, or 11.5%, to $95.3 million for the six months ended June 30, 2026, compared to $85.4 million for the same period in the prior year.
The return on average assets totaled 0.78% and 1.19% for the six months ended June 30, 2026 and 2025, respectively. Excluding acquisition and restructuring charges, the adjusted return on average tangible assets totaled 1.23% for the six months ended June 30, 2026, compared to 1.29% for the same period in the prior year.
The return on average equity totaled 5.68% for the six months ended June 30, 2026, compared to 8.80% for the six months ended June 30, 2025. Excluding acquisition and restructuring charges, the adjusted return on average tangible common equity for the six months ended June 30, 2026 was 12.11%, compared to 12.44% for the six months ended June 30, 2025
Net income totaled $20.8 million and $24.2 million, or $0.46 and $0.63 per diluted share, during the three months ended March 31, 2026 and 2025, respectively. Pre-provision net revenue FTE totaled $32.1 million and $42.0 million during the three months ended March 31, 2026 and 2025, respectively. The return on average tangible assets was 0.79% and 1.09% during the three months ended March 31, 2026 and 2025, respectively, and the return on average tangible common equity was 7.75% and 10.64%, respectively.
Adjusting for pre-tax acquisition-related and restructuring expenses totaling $15.3 million, net income totaled $32.6 million, or $0.72 per diluted share, during the three months ended March 31, 2026. The adjusted return on average tangible assets was 1.20% during the three months ended March 31, 2026, and the adjusted return on average tangible common equity was 11.79%.
We regularly review net interest income metrics to provide us with indicators of how the various components of net interest income are performing. We regularly review: (i) our loan mix and the yield on loans; (ii) the investment portfolio and the related yields; (iii) our deposit mix and the cost of deposits; and (iv) net interest income simulations for various forecast periods.
The table below presents the components of net interest income on an FTE basis for the three months ended MarchJune 31,30, 2026 and 2025.
Net interest income increased $21.9 million, or 25.0%, to $109.3 million during the three months ended June 30, 2026, compared to the three months ended June 30, 2025. Net interest income on an FTE basis increased $22.2 million to $111.5 million during the three months ended June 30, 2026, compared to the three months ended June 30, 2025. During the three months ended June 30, 2026, the net interest margin FTE totaled 3.94%, compared to 3.95% for the three months ended June 30, 2025. The cost of funds improved eight basis points to 2.01% and was offset by a seven basis point decrease in earning asset yields compared to the three months ended June 30, 2025.
Net interest income on an FTE basis increased $22.4 million, or 25.3%, to $111.0 million during the three months ended March 31, 2026, compared to the same period in the prior year. During the three months ended March 31, 2026, the FTE net interest margin expanded 13 basis points to 4.06%, compared to the three months ended March 31, 2025, driven by a five basis point increase in earning asset yields and a nine basis point improvement in the cost of funds. During the three months ended March 31, 2026, the cost of funds improved nine basis points to 1.98%, compared to the three months ended March 31, 2025.
Average loans comprised $9.3$9.6 billion, or 83.6%,84.9%, of total average interest earning assets during the three months ended MarchJune 31,30, 2026.2026, Duringcompared to $7.6 billion, or 83.2%, during the three months ended MarchJune 31,30, 2025,2025. averageAverage loans comprisedincreased $7.7$2.1 billion,billion ordriven 84.1%,by ofa total$1.6 billion increase in average interest earning assets. Average acquired loans increasedand $1.6$0.5 million of average originated loan growth. Our Vista acquisition added $1.9 billion asin atotal resultloans ofon theJanuary Vista7, acquisition.2026.
NBHC insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 1 filing (1 insider, 1 trade date, 963 shares, about $40.3K). Net open-market shares: -963 (purchases minus sales); net value about -$40.3K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-10-01 | Van Denabeele Nicole |
Shares withheld for tax | 138 | $39.17 | $5.4K |
| 2026-10-01 | Gooden Emily |
Shares withheld for tax | 21 | $39.17 | $823 |
| 2026-08-11 | Laney G. Timothy |
Shares withheld for tax | 31,957 | $43.19 | $1.4M |
| 2026-08-11 | Laney G. Timothy |
Shares withheld for tax | 23,503 | $43.19 | $1.0M |
| 2026-08-11 | Laney G. Timothy |
Option exercise | 37,042 | $32.65 | $1.2M |
| 2026-08-11 | Laney G. Timothy |
Option exercise | 26,683 | $34.04 | $908.3K |
| 2026-06-15 | Steinmetz John |
Shares withheld for tax | 3,127 | $42.92 | $134.2K |
| 2026-05-20 | Spring Maria F |
Open-market sale | 963 | $41.84 | $40.3K |
| 2026-05-07 | Mclaughlin Kirk |
Grant/award | 3,153 | — | — |
| 2026-05-07 | Joseph Fred J. |
Grant/award | 3,153 | — | — |
| 2026-05-07 | Gupta Alka |
Grant/award | 3,153 | — | — |
| 2026-05-07 | Doyle Robin Ann |
Grant/award | 3,153 | — | — |
| 2026-05-07 | Clermont Ralph W |
Grant/award | 3,620 | — | — |
| 2026-05-07 | Zeile Art |
Grant/award | 3,153 | — | — |
| 2026-05-07 | Dean Robert E |
Grant/award | 3,153 | — | — |
| 2026-05-07 | Sobers Patrick G. |
Grant/award | 3,153 | — | — |
| 2026-05-07 | Spring Maria F |
Grant/award | 3,153 | — | — |
| 2026-05-06 | Mclaughlin Kirk |
Shares withheld for tax | 312 | $42.96 | $13.4K |
| 2026-05-06 | Joseph Fred J. |
Shares withheld for tax | 686 | $42.96 | $29.5K |
| 2026-05-06 | Gupta Alka |
Shares withheld for tax | 729 | $42.96 | $31.3K |
| 2026-05-06 | Doyle Robin Ann |
Shares withheld for tax | 663 | $42.96 | $28.5K |
| 2026-05-06 | Clermont Ralph W |
Shares withheld for tax | 807 | $42.96 | $34.7K |
| 2026-05-06 | Zeile Art |
Shares withheld for tax | 686 | $42.96 | $29.5K |
| 2026-05-06 | Dean Robert E |
Shares withheld for tax | 613 | $42.96 | $26.3K |
| 2026-05-06 | Sobers Patrick G. |
Shares withheld for tax | 580 | $42.96 | $24.9K |
| 2026-05-06 | Spring Maria F |
Shares withheld for tax | 696 | $42.96 | $29.9K |
| 2026-04-28 | Petrucci Angela Nicole |
Shares withheld for tax | 1,329 | $43.27 | $57.5K |
| 2026-04-28 | Laney G. Timothy |
Shares withheld for tax | 8,006 | $43.27 | $346.4K |
| 2026-04-28 | Birkans Aldis |
Shares withheld for tax | 3,259 | $43.27 | $141.0K |
| 2026-04-28 | Sznewajs Daniel L |
Shares withheld for tax | 254 | $43.27 | $11.0K |
| 2026-04-28 | Van Denabeele Nicole |
Shares withheld for tax | 679 | $43.27 | $29.4K |
| 2026-04-28 | Newfield Richard U Jr. |
Shares withheld for tax | 1,981 | $43.27 | $85.7K |
| 2026-04-28 | Gooden Emily |
Shares withheld for tax | 232 | $43.27 | $10.0K |
Well-known investors holding NBHC (13F)
None of the 59 investors we track reported a position in their latest 13F.