{"url_path":"/sec/umbf/10-k/2026/item-7a","section_key":"item-7a","section_title":"Item 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-02-26","source_url":"https://www.sec.gov/Archives/edgar/data/101382/0001193125-26-076496-index.html","accession_number":"0001193125-26-076496","cik":"0000101382","ticker":"UMBF","issuer_name":"UMB FINANCIAL CORP","edgar_url":"https://www.sec.gov/Archives/edgar/data/101382/0001193125-26-076496-index.html","primary_entity_key":"0000101382","primary_entity_name":"UMB FINANCIAL CORP"},"word_count":3741,"has_tables":true,"body_markdown":"## ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK\n\nRisk Management\n\nMarket risk is a broad term for the risk of economic loss due to adverse changes in the fair value of a financial instrument. These changes may be the result of various factors, including interest rates, foreign exchange prices, commodity prices, or equity prices. Financial instruments that are subject to market risk can be classified either as held for trading or held for purposes other than trading.\n\nThe Company is subject to market risk primarily through the effect of changes in interest rates of its assets held for purposes other than trading. The following discussion of interest rate risk, however, combines instruments held for trading and instruments held for purposes other than trading because the instruments held for trading represent such a small portion of the Company’s portfolio that the interest rate risk associated with them is immaterial.\n\nInterest Rate Risk\n\nIn the banking industry, a major risk exposure is changing interest rates. To minimize the effect of interest rate changes to net interest income and exposure levels to economic losses, the Company manages its exposure to changes in interest rates through asset and liability management within guidelines established by its Asset Liability Committee (ALCO) and approved by the Board. The ALCO is responsible for approving and ensuring compliance with asset/liability management policies, including interest rate exposure. The Company’s primary method for measuring and analyzing consolidated interest rate risk is the Net Interest Income Simulation Analysis. The Company also uses a Net Portfolio Value model to measure market value risk under various rate change scenarios and a gap analysis to measure maturity and repricing relationships between interest-earning assets and interest-bearing liabilities at specific points in time. On a limited basis, the Company uses hedges such as swaps, rate floors, and futures contracts to manage interest rate risk on certain loans, trading securities, trust preferred securities, and deposits. See further information in Note 17 “Derivatives and Hedging Activities” in the Notes to the Company’s Consolidated Financial Statements.\n\nOverall, the Company attempts to manage interest rate risk by positioning the balance sheet to maximize net interest income while maintaining an acceptable level of interest rate and credit risk, remaining mindful of the relationship among profitability, liquidity, interest rate risk and credit risk.\n\nNet Interest Income Modeling\n\nThe Company’s primary interest rate risk tool, the Net Interest Income Simulation Analysis, measures interest rate risk and the effect of interest rate changes on net interest income and net interest margin. This analysis incorporates all of the Company’s assets and liabilities together with assumptions that reflect the current interest rate environment. Through these simulations, management estimates the impact on net interest income of a 200-basis-point upward or a 300-basis-point downward gradual change (e.g. ramp) and immediate change (e.g. shock) of market interest rates over a two-year period. In ramp scenarios, rates change gradually for a one-year period and remain constant in year two. In shock scenarios, rates change immediately and the change is sustained for the remainder of the two year scenario horizon. Assumptions are made to project rates for new loans and deposits based on historical analysis, management outlook and repricing strategies. Asset prepayments and other market risks are developed from industry estimates of prepayment speeds and other market changes. The results of these simulations can be significantly influenced by assumptions utilized and management evaluates the sensitivity of the simulation results on a regular basis.\n\n65\n\n \n\nTable 20 shows the net interest income percentage increase or decrease over the next twelve- and twenty-four-month periods as of December 31, 2025 and 2024 based on hypothetical changes in interest rates and a constant sized balance sheet with runoff being replaced.\n\nTable 20\n\nMARKET RISK\n\n \n\n \n\n \n\nHypothetical change in interest rate – Rate Ramp\n\n \n\n \n\n \n\nYear One\n\n \n\n \n\nYear Two\n\n \n\n \n\n \n\nDecember 31,\n2025\n\n \n\n \n\nDecember 31,\n2024\n\n \n\n \n\nDecember 31,\n2025\n\n \n\n \n\nDecember 31,\n2024\n\n \n\n(basis points)\n\n \n\nPercentage change\n\n \n\n \n\nPercentage change\n\n \n\n \n\nPercentage change\n\n \n\n \n\nPercentage change\n\n \n\n200\n\n \n\n \n\n(2.0\n\n)%\n\n \n\n \n\n(3.9\n\n)%\n\n \n\n \n\n3.8\n\n%\n\n \n\n \n\n1.3\n\n%\n\n100\n\n \n\n \n\n(1.1\n\n)\n\n \n\n \n\n(2.3\n\n)\n\n \n\n \n\n1.3\n\n \n\n \n\n \n\n(0.2\n\n)\n\nStatic\n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n(100)\n\n \n\n \n\n1.8\n\n \n\n \n\n \n\n3.0\n\n \n\n \n\n \n\n(0.9\n\n)\n\n \n\n \n\n0.7\n\n \n\n(200)\n\n \n\n \n\n3.5\n\n \n\n \n\n \n\n6.1\n\n \n\n \n\n \n\n(2.3\n\n)\n\n \n\n \n\n1.6\n\n \n\n(300)\n\n \n\n \n\n5.6\n\n \n\n \n\n \n\n9.1\n\n \n\n \n\n \n\n(2.8\n\n)\n\n \n\n \n\n1.5\n\n \n\n \n\n \n\n \n\nHypothetical change in interest rate – Rate Shock\n\n \n\n \n\n \n\nYear One\n\n \n\n \n\nYear Two\n\n \n\n \n\n \n\nDecember 31,\n2025\n\n \n\n \n\nDecember 31,\n2024\n\n \n\n \n\nDecember 31,\n2025\n\n \n\n \n\nDecember 31,\n2024\n\n \n\n(basis points)\n\n \n\nPercentage change\n\n \n\n \n\nPercentage change\n\n \n\n \n\nPercentage change\n\n \n\n \n\nPercentage change\n\n \n\n200\n\n \n\n \n\n0.2\n\n%\n\n \n\n \n\n(2.7\n\n)%\n\n \n\n \n\n5.0\n\n%\n\n \n\n \n\n3.0\n\n%\n\n100\n\n \n\n \n\n(0.9\n\n)\n\n \n\n \n\n(2.3\n\n)\n\n \n\n \n\n1.7\n\n \n\n \n\n \n\n0.6\n\n \n\nStatic\n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n(100)\n\n \n\n \n\n1.2\n\n \n\n \n\n \n\n3.4\n\n \n\n \n\n \n\n(1.9\n\n)\n\n \n\n \n\n(0.4\n\n)\n\n(200)\n\n \n\n \n\n2.0\n\n \n\n \n\n \n\n6.8\n\n \n\n \n\n \n\n(4.7\n\n)\n\n \n\n \n\n(0.7\n\n)\n\n(300)\n\n \n\n \n\n3.6\n\n \n\n \n\n \n\n9.1\n\n \n\n \n\n \n\n(6.9\n\n)\n\n \n\n \n\n(2.3\n\n)\n\n \n\nThe Company is positioned relatively neutral to changes in interest rates in the next year. Net interest income is predicted to increase in the 200-basis-point upward shock scenario. Net interest income is predicted to decrease in the 100-basis-point upward shock scenario and all upward rate ramp scenarios. In down rate scenarios net interest income is predicted to increase in all scenarios. In year two, net interest income is predicted to increase in all rising rate scenarios and decrease in all falling rate scenarios. The Company’s ability to price deposits consistent with its historical approach is a key assumption in these scenarios.\n\nRepricing Mismatch Analysis\n\nThe Company also evaluates its interest rate sensitivity position in an attempt to maintain a balance between the amount of interest-bearing assets and interest-bearing liabilities which are expected to mature or reprice at any point in time. While a traditional repricing mismatch analysis (gap analysis) provides a snapshot of interest rate risk, it does not take into consideration that assets and liabilities with similar repricing characteristics may not, in fact, reprice at the same time or the same degree. Also, it does not necessarily predict the impact of changes in general levels of interest rates on net interest income.\n\n66\n\n \n\nTable 21 is a static gap analysis, which presents the Company’s assets and liabilities, based on their repricing or maturity characteristics and reflecting principal amortization. Table 22 presents the break-out of fixed and variable rate loans by repricing or maturity characteristics for each loan class.\n\nTable 21\n\nINTEREST RATE SENSITIVITY ANALYSIS (in millions)\n\n \n\n \n\n \n\n1-90\n\n \n\n \n\n91-180\n\n \n\n \n\n181-365\n\n \n\n \n\n \n\n \n\n \n\n1-5\n\n \n\n \n\nOver 5\n\n \n\n \n\n \n\n \n\n \n\n \n\nDays\n\n \n\n \n\nDays\n\n \n\n \n\nDays\n\n \n\n \n\nTotal\n\n \n\n \n\nYears\n\n \n\n \n\nYears\n\n \n\n \n\nTotal\n\n \n\nDecember 31, 2025 Earning assets\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nLoans\n\n \n\n$\n\n26,031.2\n\n \n\n \n\n$\n\n1,032.1\n\n \n\n \n\n$\n\n1,528.2\n\n \n\n \n\n$\n\n28,591.5\n\n \n\n \n\n$\n\n8,166.9\n\n \n\n \n\n$\n\n2,023.0\n\n \n\n \n\n$\n\n38,781.4\n\n \n\nSecurities\n\n \n\n \n\n1,459.5\n\n \n\n \n\n \n\n628.7\n\n \n\n \n\n \n\n1,058.9\n\n \n\n \n\n \n\n3,147.1\n\n \n\n \n\n \n\n7,832.0\n\n \n\n \n\n \n\n9,130.6\n\n \n\n \n\n \n\n20,109.7\n\n \n\nFederal funds sold and resell agreements\n\n \n\n \n\n1,548.1\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n1,548.1\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n1,548.1\n\n \n\nOther\n\n \n\n \n\n6,962.9\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n6,962.9\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n6,962.9\n\n \n\nTotal earning assets\n\n \n\n$\n\n36,001.7\n\n \n\n \n\n$\n\n1,660.8\n\n \n\n \n\n$\n\n2,587.1\n\n \n\n \n\n$\n\n40,249.6\n\n \n\n \n\n$\n\n15,998.9\n\n \n\n \n\n$\n\n11,153.6\n\n \n\n \n\n$\n\n67,402.1\n\n \n\n% of total earning assets\n\n \n\n \n\n53.4\n\n%\n\n \n\n \n\n2.5\n\n%\n\n \n\n \n\n3.8\n\n%\n\n \n\n \n\n59.7\n\n%\n\n \n\n \n\n23.7\n\n%\n\n \n\n \n\n16.6\n\n%\n\n \n\n \n\n100.0\n\n%\n\nFunding sources\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nInterest-bearing demand and savings\n\n \n\n$\n\n39,752.6\n\n \n\n \n\n$\n\n—\n\n \n\n \n\n$\n\n—\n\n \n\n \n\n$\n\n39,752.6\n\n \n\n \n\n$\n\n—\n\n \n\n \n\n$\n\n—\n\n \n\n \n\n$\n\n39,752.6\n\n \n\nTime deposits\n\n \n\n \n\n2,106.9\n\n \n\n \n\n \n\n749.0\n\n \n\n \n\n \n\n758.8\n\n \n\n \n\n \n\n3,614.7\n\n \n\n \n\n \n\n144.0\n\n \n\n \n\n \n\n2.2\n\n \n\n \n\n \n\n3,760.9\n\n \n\nFederal funds purchased and repurchase agreements\n\n \n\n \n\n3,324.9\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n3,324.9\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n3,324.9\n\n \n\nLong term debt\n\n \n\n \n\n220.0\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n144.9\n\n \n\n \n\n \n\n364.9\n\n \n\n \n\n \n\n109.3\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n474.2\n\n \n\nNoninterest-bearing sources\n\n \n\n \n\n17,143.4\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n17,143.4\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n2,946.1\n\n \n\n \n\n \n\n20,089.5\n\n \n\nTotal funding sources\n\n \n\n$\n\n62,547.8\n\n \n\n \n\n$\n\n749.0\n\n \n\n \n\n$\n\n903.7\n\n \n\n \n\n$\n\n64,200.5\n\n \n\n \n\n$\n\n253.3\n\n \n\n \n\n$\n\n2,948.3\n\n \n\n \n\n$\n\n67,402.1\n\n \n\n% of total earning assets\n\n \n\n \n\n92.8\n\n%\n\n \n\n \n\n1.1\n\n%\n\n \n\n \n\n1.3\n\n%\n\n \n\n \n\n95.2\n\n%\n\n \n\n \n\n0.4\n\n%\n\n \n\n \n\n4.4\n\n%\n\n \n\n \n\n100.0\n\n%\n\nInterest sensitivity gap\n\n \n\n$\n\n(26,546.1\n\n)\n\n \n\n$\n\n911.8\n\n \n\n \n\n$\n\n1,683.4\n\n \n\n \n\n$\n\n(23,950.9\n\n)\n\n \n\n$\n\n15,745.6\n\n \n\n \n\n$\n\n8,205.3\n\n \n\n \n\n \n\n \n\nCumulative gap\n\n \n\n \n\n(26,546.1\n\n)\n\n \n\n \n\n(25,634.3\n\n)\n\n \n\n \n\n(23,950.9\n\n)\n\n \n\n \n\n(23,950.9\n\n)\n\n \n\n \n\n(8,205.3\n\n)\n\n \n\n \n\n—\n\n \n\n \n\n \n\n \n\nAs a % of total earning assets\n\n \n\n \n\n(39.4\n\n)%\n\n \n\n \n\n(38.0\n\n)%\n\n \n\n \n\n(35.5\n\n)%\n\n \n\n \n\n(35.5\n\n)%\n\n \n\n \n\n(12.2\n\n)%\n\n \n\n \n\n—\n\n%\n\n \n\n \n\n \n\nRatio of earning assets to funding sources\n\n \n\n \n\n0.58\n\n \n\n \n\n \n\n2.22\n\n \n\n \n\n \n\n2.86\n\n \n\n \n\n \n\n0.63\n\n \n\n \n\n \n\n63.16\n\n \n\n \n\n \n\n3.78\n\n \n\n \n\n \n\n \n\nCumulative ratio of earning assets to funding sources\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n2025\n\n \n\n \n\n0.58\n\n \n\n \n\n \n\n0.60\n\n \n\n \n\n \n\n0.63\n\n \n\n \n\n \n\n0.63\n\n \n\n \n\n \n\n0.87\n\n \n\n \n\n \n\n1.00\n\n \n\n \n\n \n\n \n\n2024\n\n \n\n \n\n0.58\n\n \n\n \n\n \n\n0.60\n\n \n\n \n\n \n\n0.62\n\n \n\n \n\n \n\n0.62\n\n \n\n \n\n \n\n0.87\n\n \n\n \n\n \n\n1.00\n\n \n\n \n\n \n\n \n\n \n\n67\n\n \n\nTable 22\n\nMaturities and Sensitivities to Changes in Interest Rates\n\nThis table details loan maturities by variable and fixed rates as of December 31, 2025 (in thousands):\n\n \n\n \n\n \n\nDue in one year or less\n\n \n\n \n\nDue after one year through five years\n\n \n\n \n\nDue after five years through fifteen years\n\n \n\n \n\nDue after fifteen years\n\n \n\n \n\nTotal\n\n \n\nVariable Rate\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nCommercial and industrial\n\n \n\n$\n\n12,796,916\n\n \n\n \n\n$\n\n125,919\n\n \n\n \n\n$\n\n8,951\n\n \n\n \n\n$\n\n—\n\n \n\n \n\n$\n\n12,931,786\n\n \n\nSpecialty lending\n\n \n\n \n\n518,237\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n518,237\n\n \n\nCommercial real estate\n\n \n\n \n\n9,982,792\n\n \n\n \n\n \n\n504,883\n\n \n\n \n\n \n\n11,094\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n10,498,769\n\n \n\nConsumer real estate\n\n \n\n \n\n1,057,762\n\n \n\n \n\n \n\n733,182\n\n \n\n \n\n \n\n243,066\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n2,034,010\n\n \n\nConsumer\n\n \n\n \n\n174,272\n\n \n\n \n\n \n\n114\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n174,386\n\n \n\nCredit cards\n\n \n\n \n\n700,525\n\n \n\n \n\n \n\n208\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n700,733\n\n \n\nLeases and other\n\n \n\n \n\n213,745\n\n \n\n \n\n \n\n1,036\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n214,781\n\n \n\nTotal variable rate loans\n\n \n\n \n\n25,444,249\n\n \n\n \n\n \n\n1,365,342\n\n \n\n \n\n \n\n263,111\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n27,072,702\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nFixed Rate\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nCommercial and industrial\n\n \n\n \n\n868,424\n\n \n\n \n\n \n\n2,309,459\n\n \n\n \n\n \n\n160,809\n\n \n\n \n\n \n\n42\n\n \n\n \n\n \n\n3,338,734\n\n \n\nSpecialty lending\n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\nCommercial real estate\n\n \n\n \n\n1,647,823\n\n \n\n \n\n \n\n3,473,889\n\n \n\n \n\n \n\n749,788\n\n \n\n \n\n \n\n5,970\n\n \n\n \n\n \n\n5,877,470\n\n \n\nConsumer real estate\n\n \n\n \n\n592,037\n\n \n\n \n\n \n\n970,589\n\n \n\n \n\n \n\n682,562\n\n \n\n \n\n \n\n159,300\n\n \n\n \n\n \n\n2,404,488\n\n \n\nConsumer\n\n \n\n \n\n31,742\n\n \n\n \n\n \n\n32,181\n\n \n\n \n\n \n\n502\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n64,425\n\n \n\nCredit cards\n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\nLeases and other\n\n \n\n \n\n7,271\n\n \n\n \n\n \n\n15,476\n\n \n\n \n\n \n\n871\n\n \n\n \n\n \n\n1\n\n \n\n \n\n \n\n23,619\n\n \n\nTotal fixed rate loans\n\n \n\n \n\n3,147,297\n\n \n\n \n\n \n\n6,801,594\n\n \n\n \n\n \n\n1,594,532\n\n \n\n \n\n \n\n165,313\n\n \n\n \n\n \n\n11,708,736\n\n \n\nTotal loans and loans held for sale\n\n \n\n$\n\n28,591,546\n\n \n\n \n\n$\n\n8,166,936\n\n \n\n \n\n$\n\n1,857,643\n\n \n\n \n\n$\n\n165,313\n\n \n\n \n\n$\n\n38,781,438\n\n \n\n \n\nTrading Account\n\nThe Company carries securities in a trading account that is maintained in accordance with Board-approved policy and procedures. The policy limits the amount and type of securities that can be carried in the trading account and requires compliance with any limits under applicable law and regulations, and mandates the use of a value-at-risk methodology to manage price volatility risks within financial parameters. The risk associated with the carrying of trading securities is offset by utilizing financial instruments including exchange-traded financial futures as well as short sales of U.S. Treasury and Corporate securities. The trading securities and related hedging instruments are marked-to-market daily. The trading account had a balance of $22.3 million as of December 31, 2025, compared to $28.5 million as of December 31, 2024. Securities sold not yet purchased (i.e., short positions) totaled $4.1 million at December 31, 2025 and $7.1 million at December 31, 2024 and are classified within the Other liabilities line of the Company's Consolidated Balance Sheets.\n\nThe Company is subject to market risk primarily through the effect of changes in interest rates of its assets held for purposes other than trading. The discussion in Table 21 above of interest rate risk, however, combines instruments held for trading and instruments held for purposes other than trading, because the instruments held for trading represent such a small portion of the Company’s portfolio that the interest rate risk associated with them is immaterial.\n\nOther Market Risk\n\nThe Company has minimal foreign currency risk as a result of foreign exchange contracts. See Note 10, “Commitments, Contingencies and Guarantees” in the Notes to the Consolidated Financial Statements.\n\nCredit Risk Management\n\nCredit risk represents the risk that a customer or counterparty may not perform in accordance with contractual terms. The Company utilizes a centralized credit administration function, which provides information on the Bank’s\n\n68\n\n \n\nrisk levels, delinquencies, an internal risk grading system and overall credit exposure. Loan requests are centrally reviewed to ensure the consistent application of the loan policy and standards. In addition, the Company has an internal loan review staff that operates independently of the Bank. This review team performs periodic examinations of the Bank’s loans for credit quality, documentation and loan administration. The respective regulatory authority of the Bank also reviews loan portfolios.\n\nA primary indicator of credit quality and risk management is the level of nonperforming loans. Nonperforming loans include both nonaccrual loans and restructured loans on nonaccrual. The Company’s nonperforming loans increased $125.4 million to $144.7 million at December 31, 2025, compared to December 31, 2024. The increase is attributable to additional non-performing loans related to the acquisition of HTLF. There was an immaterial amount of interest recognized on nonperforming loans during 2025, 2024, and 2023.\n\nThe Company had $4.8 million and $1.6 million of other real estate owned as of December 31, 2025 and December 31, 2024, respectively. Other repossessed assets totaled $26.8 million as of December 31, 2024. Loans past due more than 90 days and still accruing interest totaled $18.4 million as of December 31, 2025, compared to $7.6 million as of December 31, 2024.\n\nA loan is generally placed on nonaccrual status when payments are past due 90 days or more and/or when management has considerable doubt about the borrower’s ability to repay on the terms originally contracted. The accrual of interest is discontinued and recorded thereafter only when actually received in cash.\n\nCertain loans are restructured to provide a reduction or deferral of interest or principal due to deterioration in the financial condition of the respective borrowers. The Company had $169 thousand of restructured loans at December 31, 2025 and $196 thousand at December 31, 2024.\n\nTable 23\n\nLOAN QUALITY (in thousands)\n\n \n\n \n\n \n\nDecember 31,\n\n \n\n \n\n \n\n2025\n\n \n\n \n\n2024\n\n \n\nNonaccrual loans\n\n \n\n$\n\n144,640\n\n \n\n \n\n$\n\n19,241\n\n \n\nRestructured loans on nonaccrual\n\n \n\n \n\n26\n\n \n\n \n\n \n\n41\n\n \n\nTotal non-performing loans\n\n \n\n \n\n144,666\n\n \n\n \n\n \n\n19,282\n\n \n\nOther real estate owned\n\n \n\n \n\n4,800\n\n \n\n \n\n \n\n1,612\n\n \n\nOther repossessed assets\n\n \n\n \n\n—\n\n \n\n \n\n \n\n26,779\n\n \n\nTotal non-performing assets\n\n \n\n$\n\n149,466\n\n \n\n \n\n$\n\n47,673\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nLoans past due 90 days or more\n\n \n\n$\n\n18,403\n\n \n\n \n\n$\n\n7,602\n\n \n\nRestructured loans accruing\n\n \n\n \n\n143\n\n \n\n \n\n \n\n155\n\n \n\nAllowance for credit losses on loans\n\n \n\n \n\n419,478\n\n \n\n \n\n \n\n259,089\n\n \n\nRatios\n\n \n\n \n\n \n\n \n\n \n\n \n\nNon-performing loans as a % of loans\n\n \n\n \n\n0.37\n\n%\n\n \n\n \n\n0.08\n\n%\n\nNon-performing assets as a % of loans plus other real estate owned and other repossessed assets\n\n \n\n \n\n0.39\n\n \n\n \n\n \n\n0.19\n\n \n\nNon-performing assets as a % of total assets\n\n \n\n \n\n0.20\n\n \n\n \n\n \n\n0.09\n\n \n\nLoans past due 90 days or more as a % of loans\n\n \n\n \n\n0.05\n\n \n\n \n\n \n\n0.03\n\n \n\nAllowance for credit losses on loans as a % of loans\n\n \n\n \n\n1.08\n\n \n\n \n\n \n\n1.01\n\n \n\nAllowance for credit losses on loans as a multiple of non-performing loans\n\n \n\n2.90x\n\n \n\n \n\n13.44x\n\n \n\n \n\n69\n\n \n\nTable 24\n\nSUMMARY OF NET CHARGE-OFFS (in thousands)\n\n \n\n \n\n \n\n2025\n\n \n\n \n\n2024\n\n \n\n \n\n \n\nNet Charge-Offs (Recoveries)\n\n \n\n \n\nAverage Loans Outstanding\n\n \n\n \n\nNet Charge-Offs (Recoveries) to Average Loans Outstanding\n\n \n\n \n\nNet Charge-Offs (Recoveries)\n\n \n\n \n\nAverage Loans Outstanding\n\n \n\n \n\nNet Charge-Offs (Recoveries) to Average Loans Outstanding\n\n \n\nAt December 31:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nCommercial and industrial\n\n \n\n$\n\n44,138\n\n \n\n \n\n$\n\n14,437,140\n\n \n\n \n\n \n\n0.31\n\n%\n\n \n\n$\n\n3,551\n\n \n\n \n\n$\n\n10,169,805\n\n \n\n \n\n \n\n0.03\n\n%\n\nSpecialty lending\n\n \n\n \n\n—\n\n \n\n \n\n \n\n549,409\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n(4\n\n)\n\n \n\n \n\n497,301\n\n \n\n \n\n \n\n(0.00\n\n)\n\nCommercial real estate\n\n \n\n \n\n11,596\n\n \n\n \n\n \n\n15,789,274\n\n \n\n \n\n \n\n0.07\n\n \n\n \n\n \n\n250\n\n \n\n \n\n \n\n9,517,745\n\n \n\n \n\n \n\n0.00\n\n \n\nConsumer real estate\n\n \n\n \n\n1,766\n\n \n\n \n\n \n\n4,188,867\n\n \n\n \n\n \n\n0.04\n\n \n\n \n\n \n\n(216\n\n)\n\n \n\n \n\n3,036,136\n\n \n\n \n\n \n\n(0.01\n\n)\n\nConsumer real estate\n\n \n\n \n\n2,693\n\n \n\n \n\n \n\n254,889\n\n \n\n \n\n \n\n1.06\n\n \n\n \n\n \n\n1,283\n\n \n\n \n\n \n\n166,278\n\n \n\n \n\n \n\n0.77\n\n \n\nCredit cards\n\n \n\n \n\n22,157\n\n \n\n \n\n \n\n744,939\n\n \n\n \n\n \n\n2.97\n\n \n\n \n\n \n\n18,397\n\n \n\n \n\n \n\n587,958\n\n \n\n \n\n \n\n3.13\n\n \n\nLeases and other\n\n \n\n \n\n21\n\n \n\n \n\n \n\n101,435\n\n \n\n \n\n \n\n0.02\n\n \n\n \n\n \n\n1\n\n \n\n \n\n \n\n234,324\n\n \n\n \n\n \n\n0.00\n\n \n\nTotal\n\n \n\n$\n\n82,371\n\n \n\n \n\n$\n\n36,065,953\n\n \n\n \n\n \n\n0.23\n\n%\n\n \n\n$\n\n23,262\n\n \n\n \n\n$\n\n24,209,547\n\n \n\n \n\n \n\n0.10\n\n%\n\n \n\nNet charge-offs for the year ended December 31, 2025 were $82.4 million, compared to $23.3 million for the year ended December 31, 2024.\n\nLiquidity Risk\n\nLiquidity represents the Company’s ability to meet financial commitments through the maturity and sale of existing assets or availability of additional funds. The Company believes that the most important factor in the preservation of liquidity is maintaining public confidence that facilitates the retention and growth of a large, stable supply of core deposits and wholesale funds. Ultimately, the Company believes public confidence is generated through profitable operations, sound credit quality and a strong capital position. The primary source of liquidity for the Company is regularly scheduled payments on and maturity of assets, which include $13.7 billion of high-quality securities available for sale. The liquidity of the Company and the Bank is also enhanced by its activity in the federal funds market and by its core deposits. Additionally, management believes it can raise debt or equity capital on favorable terms in the future, should the need arise.\n\nAnother factor affecting liquidity is the amount of deposits and customer repurchase agreements that have pledging requirements. All customer repurchase agreements require collateral in the form of a security. The U.S. Government, other public entities, and certain trust depositors require the Company to pledge securities if their deposit balances are greater than the FDIC-insured deposit limitations. These pledging requirements affect liquidity risk in that the related security cannot otherwise be disposed due to the pledging restriction. At December 31, 2025, $13.4 billion, or 68.8%, of securities were pledged or used as collateral, compared to $10.5 billion, or 80.1%, at December 31, 2024.\n\nThe Company also has other commercial commitments that may impact liquidity. These commitments include unused commitments to extend credit, standby letters of credit and financial guarantees, and commercial letters of credit. The total amount of these commercial commitments at December 31, 2025 was $24.3 billion. Since many of these commitments expire without being drawn upon, the total amount of these commercial commitments does not necessarily represent the future cash requirements of the Company.\n\nThe Company’s cash requirements consist primarily of dividends to shareholders, debt service, operating expenses, and treasury stock purchases. Management fees and dividends received from bank and non-bank subsidiaries traditionally have been sufficient to satisfy these requirements and are expected to be sufficient in the future. The declaration and payment of dividends to shareholders, as well as the amount thereof, are subject to the discretion of the Board and depend on the Company’s results of operations, financial condition, capital levels, cash requirements, future prospects, regulatory requirements and other factors deemed relevant by the Board. There can be no assurance the Company will declare and pay dividends to shareholders. The Bank is subject to various rules regarding payment of dividends to the Company. For the most part, the Bank can pay dividends at least equal to its current year’s earnings without seeking prior regulatory approval. The Company also uses cash to inject capital into the Bank and its non-Bank subsidiaries to maintain adequate capital as well as to fund strategic initiatives.\n\n70\n\n \n\nIn September 2022, the Company issued $110.0 million in aggregate subordinated notes due in September 2032. The Company received $107.9 million, after deducting underwriting discounts and commissions and offering expenses, and used the proceeds from the offering for general corporate purposes, including, among other uses, contributing Tier 1 capital into the Bank. The subordinated notes were issued with a fixed-to-fixed rate of 6.25% and an effective rate of 6.64%, due to issuance costs, with an interest rate reset date of September 2027.\n\nIn September 2020, the Company issued $200.0 million in aggregate subordinated notes due in September 2030. The Company received $197.7 million, after deducting underwriting discounts and commissions and offering expenses, and used the proceeds from the offering for general corporate purposes, including, among other uses, contributing Tier 1 capital into the Bank. The subordinated notes were issued with a fixed-to-fixed rate of 3.70% and an effective rate of 3.93%, due to issuance costs. During the first quarter of 2025, the Company purchased and subsequently retired $11.1 million of its 2020 subordinated notes. During the third quarter of 2025, the Company redeemed the remainder of the outstanding 2020 subordinated notes.\n\n \n\nAs part of the acquisition of HTLF, the Company acquired $150.0 million in aggregate subordinated notes due September 2031. The subordinated notes have a fixed interest rate of 2.75% until September 2026, at which time the interest rate will reset quarterly. The subordinated notes had an acquired fair value of $138.8 million as of January 31, 2025.\n\nThe Company is a member bank with the FHLB of Des Moines, and through this relationship, the Company owns FHLB stock and has access to additional liquidity and funding sources through FHLB advances. The Company’s borrowing capacity is dependent upon the amount of collateral the Company places at the FHLB. As of December 31, 2025, and December 31, 2024, the Company owned $10.3 million and $10.2 million of FHLB stock, respectively.\n\nThe Company had no outstanding advances at the FHLB of Des Moines as of December 31, 2025 or December 31, 2024. As of December 31, 2025, the Company had four letters of credit outstanding with the FHLB of Des Moines to secure deposits. These letters of credit have an aggregate amount of $261.0 million and have various maturity dates through March 10, 2026. The Company's remaining borrowing capacity with the FHLB was $2.2 billion as of December 31, 2025. During 2024, the FHLB of Des Moines issued a letter of credit for $150.0 million on behalf of the Company to secure deposits. The letter of credit outstanding as of December 31, 2024 expired in January 2025 and was subsequently renewed with an expiration date in March 2025.\n\nIn addition to the borrowing capacity with the FHLB as described above, the Company had additional liquidity of $35.1 billion available via cash, unpledged bond collateral, the federal funds market, the Federal Reserve Discount Window, and the IntraFi Cash Service program as of December 31, 2025.\n\nOperational Risk\n\nOperational risk generally refers to the risk of loss resulting from the Company’s operations, including those operations performed for the Company by third parties. This would include but is not limited to the risk of fraud by employees or persons outside the Company, the execution of unauthorized transactions by employees or others, errors relating to transaction processing, breaches of the internal control system and compliance requirements, and unplanned interruptions in service. This risk of loss also includes the potential legal or regulatory actions that could arise as a result of an operational deficiency, or as a result of noncompliance with applicable regulatory standards.\n\nThe Company operates in many markets and relies on the ability of its employees and systems to properly process a high number of transactions. In the event of a breakdown in internal control systems, improper operation of systems or improper employee actions, the Company could suffer financial loss, face regulatory action and suffer damage to its reputation. In order to address this risk, management maintains a system of internal controls with the objective of providing proper transaction authorization and execution, safeguarding of assets from misuse or theft, and ensuring the reliability of financial and other data.\n\nThe Company maintains systems of internal controls that provide management with timely and accurate information about the Company’s operations. These systems have been designed to manage operational risk at appropriate levels given the Company’s financial strength, the environment in which it operates, and considering factors such as competition and regulation. The Company has also established procedures that are designed to ensure that policies relating to conduct, ethics and business practices are followed on a uniform basis. In certain cases, the Company has experienced losses from operational risk. Such losses have included the effects of operational errors\n\n71\n\n \n\nthat the Company has discovered and included as expense in the statement of income. While there can be no assurance that the Company will not suffer such losses in the future, management continually monitors and works to improve its internal controls, systems and corporate-wide processes and procedures.\n\n72"}