Purchased Loans - ASU 2025-08
Issued November 2025
| • Required effective date of January 1, 2027; early adoption is permitted. • Expands the population of acquired financial assets subject to the gross-up approach, which requires recognition of an ACL for the estimate of credit losses at the acquisition date. • Clarifies that loans (excluding credit cards) acquired without credit deterioration and deemed “seasoned” are purchased seasoned loans and accounted for using the gross-up approach at acquisition. • Requires entities to evaluate whether loans acquired in an asset acquisition (or initially recognized through the consolidation of a VIE) are deemed “seasoned”. A loan is seasoned if it was purchased at least 90 days after origination and the acquirer was not involved in the origination of the loan. All loans that are acquired without credit deterioration through a business combination are deemed “seasoned”. • Requires a prospective transition approach; the ASU is applied to loans that are acquired on or after the initial application date. | • We adopted this ASU on January 1, 2026. • Adoption of this ASU resulted in more acquired loans using the gross-up approach, primarily through our acquisition of FirstBank; under the gross-up approach, a reserve is established through an increase to the loan’s amortized cost basis, thus avoiding the need to provide for a reserve on these acquired loans through Provision for credit losses. See Note 2 Acquisition Activity for more information on our acquisition of FirstBank. Otherwise, this ASU did not materially impact our Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Consolidated Statement of Changes in Equity or Consolidated Statement of Cash Flows. |