Western Alliance Bancorporation: Form 10-Q for the period ended Sep 30, 2026

This discussion is designed to provide insight into management's assessment of significant trends related to the Company's consolidated financial condition, results of operations, liquidity, capital resources, and interest rate sensitivity. This Quarterly Report on Form 10-Q should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2025 and the interim Unaudited Consolidated Financial Statements and Notes to Unaudited Consolidated Financial Statements hereto and financial information appearing elsewhere in this report. Unless the context requires otherwise, the terms "Company," "we," and "our" refer to Western Alliance Bancorporation and its wholly-owned subsidiaries on a consolidated basis.

Forward-Looking Information

Certain statements contained in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2026 are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including without limitation, statements regarding our expectations with respect to our business, financial and operating results, including our deposits and deposit optimization strategy, liquidity and funding, changes in economic conditions and the related impact on the Company's business, and statements that are related to or are dependent on estimates or assumptions relating to expectations, beliefs, projections, future plans and strategies, anticipated events or trends, and similar statements concerning matters that are not historical facts.

The forward-looking statements contained in this Form 10-Q reflect the Company's current views about future events and financial performance and are subject to certain risks, uncertainties, assumptions, and changes in circumstances that may cause the Company's actual results to differ significantly from historical results and those expressed in any forward-looking statement. Risks and uncertainties include those set forth in the Company's filings with the SEC and the following factors that could cause actual results to differ materially from historical or expected results: 1) adverse financial market and economic conditions, including the effects of inflation and any recession in the United States, adverse developments in the financial services industry generally, U.S. and global trade policies and tensions, including changes in, or the imposition of, tariffs and/or trade barriers, and any related impact on customer behavior, the potential impact on borrowers of supply chain disruptions and the economic and market impacts of geopolitical conflicts; 2) changes in interest rates and increased rate competition; 3) the discontinuation of or substantial changes to interest rate benchmarks utilized in our lending, borrowing and hedging activities; 4) exposure of financial instruments to certain market risks that may increase the volatility of earnings and AOCI; 5) the inherent risk associated with accounting estimates, including the impact to the allowance, provision for credit losses, and capital levels; 6) exposure to natural and man-made disasters in markets where we operate and the impact of climate change and sustainability practices on us and our customers; 7) the potential adverse effects of unusual and infrequently occurring events, such as terrorist acts or public health events, and of governmental and societal responses thereto; 8) higher defaults on our loan portfolio than we expect; 9) increased foreclosures and ownership of real property; 10) changes in management's estimate of the adequacy of the allowance for credit losses; 11) dependency on real estate and events that negatively impact the real estate market; 12) concentrations in certain business lines or product types within our loan portfolio; 13) residual risk retained by us on reference pools covered by credit linked notes; 14) exposures related to the properties to which we acquire title; 15) ability to compete in a highly competitive market; 16) expansion strategies through acquisitions or implementation of new lines of business or new products and services that may not be successful and supervisory actions by regulatory agencies which may limit our ability to pursue certain growth opportunities; 17) uncertainty associated with digital payment initiatives; 18) ability to recruit and retain qualified employees and implement adequate succession planning to mitigate the loss of key members of our senior management team; 19) ability to meet capital adequacy and liquidity requirements and the sufficiency of liquidity; 20) dependence on low-cost deposits; 21) risks related to representations and warranties made on third-party loan sales; 22) ability to borrow from the FHLB or the FRB; 23) a change in our creditworthiness; 24) information security breaches; 25) reliance on third parties to provide key components of our infrastructure; 26) perpetration of fraud; 27) ability to implement and improve our controls and processes to keep pace with growth; 28) risk of operating in a highly regulated industry and our ability to remain in compliance; 29) ability to adapt to technological change; 30) technological risks and developments and cyber threats, attacks or events; 31) emerging external focus among regulators and other officials related to risks in connection with the development and use of artificial intelligence; 32) failure to comply with state and federal banking agency laws and regulations; 33) results of any tax audit findings, challenges to our tax positions, or adverse changes or interpretations of tax laws; 34) risks related to ownership and price of our preferred and common stock; 35) ability to continue to declare quarterly dividends; 36) additional regulatory requirements resulting from our continued growth; 37) management's estimates and projections of interest rates and interest rate policies; 38) the execution of our business plan; 39) the outcome of legal proceedings, the amount of funds and/or collateral that may be available for repayment of loans, and any adverse economic or other events impacting the collateral, borrower or guarantors with respect to loans.

For more information regarding risks that may cause the Company's actual results to differ materially from any forward-looking statements, see “Risk Factors” in Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2025, “Risk Factors” in Part II, Item 1A of this Form 10-Q, and related disclosures in other filings with the SEC. All forward-looking statements that are made or attributable to us are expressly qualified in their entirety by this cautionary notice. The forward-looking statements included herein are based only on information currently available to us and speak only as of the date of this Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this Form 10-Q might not occur, and you should not put undue reliance on any forward-looking statements.

Recent Market and Banking Industry Developments

Deposit Optimization Strategy

During the second quarter of 2026, the Company initiated a deposit optimization strategy designed to improve profitability by reducing higher-cost deposit balances. This strategy aims to reposition the Company’s funding mix by lowering deposit costs and improving net interest margin over time. These efforts continued to reduce higher-cost period-end deposits compared with the prior two quarters. During the third quarter of 2026, the Company transitioned out approximately $3.0 billion of higher-cost deposits, bringing the cumulative reduction since the initiative began to approximately $4.5 billion.

CRE Exposure

The Company's loan portfolio includes significant credit exposure to the CRE market, with CRE related loans comprising approximately 27% of total loans at September 30, 2026 and December 31, 2025. Approximately 13% and 14% of CRE loans, excluding construction and land loans, were owner occupied at September 30, 2026 and December 31, 2025, respectively. During the three and nine months ended September 30, 2026, the Company recognized gross charge-offs on CRE non-owner occupied loans totaling $25.7 million and $85.4 million, respectively. As the Company continues to focus on moving nonperforming loans through its standard credit resolution process, the Company took possession of two CRE office properties during the nine months ended September 30, 2026. While the Company believes its reserve levels are adequate, CRE market conditions may worsen, which could result in further deterioration of asset quality in this portfolio.

Legal Disputes Related to Credit Facilities

Cantor Group V, LLC

In August 2025, the Bank initiated a lawsuit in Los Angeles Superior Court against Cantor Group V, LLC and certain individual guarantors in connection with the Bank's note finance revolving credit facility to Cantor Group V, LLC, alleging fraud by the borrower for failing to provide collateral loans in the first position, seeking appointment of a receiver and recovery of funds, and seeking other forms of relief and damages related to claims against the borrower. In addition, under certain circumstances such as fraud, the Bank holds both a limited guaranty and full guaranty from two ultra-high net worth individuals. As of September 30, 2025, the Bank moved the $98.5 million facility to nonaccrual status and established a specific allowance of $29.6 million for this loan. Management reevaluated the existing collateral based on updated “as-is” appraisals and due to the expected duration of the resolution process, recognized a charge-off of $26.1 million from the previously established reserve during the three months ended March 31, 2026.

Leucadia Asset Management LLC and Jefferies Financial Group

In May 2026, the Bank and its collateral agent filed an amended complaint in New York Supreme Court against Jefferies Financial Group, Leucadia Asset Management LLC, and affiliates (collectively, the "Defendants") alleging breach of contract, fraud, negligence, promissory estoppel, and unjust enrichment in connection with a trade finance loan extended by the Bank, seeking declaratory and injunctive relief for the recovery of funds, and other forms of relief and damages related to claims against the Defendants. This loan was secured by accounts receivable the Bank's borrower purchased from First Brands Group, which filed for bankruptcy in September 2025. The loan entered default status following the identification of servicing failures, including lapses in UCC filings, and in October 2025, the Bank entered into a forbearance agreement pursuant to which the Defendants agreed to cause full repayment of the loan by March 31, 2026. Defendants then made payments pursuant to the forbearance agreement from October 2025 to January 15, 2026. In late February 2026, after the Company was notified the remaining principal balance of the loan would not be repaid as agreed and with the Defendants' failure to make the payment due that month, the Company recorded a charge‑off of $126.4 million for the remaining loan balance. The Company continues to pursue recovery through litigation and other available remedies. Any future recoveries will be recognized when realized or realizable.

Financial Overview and Highlights

WAL is a bank holding company headquartered in Phoenix, Arizona, incorporated under the laws of the state of Delaware. WAL provides a full spectrum of customized loan, deposit and treasury management capabilities, including funds transfer and other digital payment offerings, through its wholly-owned banking subsidiary, WAB.

The Company also provides an array of specialized financial services across the country, including mortgage banking services through AmeriHome, treasury management services to the homeowner's association sector, and digital payment services for the class action legal industry.

Financial Results Highlights for the Third Quarter of 2026

Profitability

• Net income available to common stockholders of $266.9 million and diluted earnings per share of $2.45, increased 6.7% and 7.5%, respectively, from $250.2 million and $2.28, respectively, for the third quarter 2025
• Net revenue of $1.0 billion, increased 8.1% from $938.2 million for the third quarter 2025, while non-interest expense of $595.1 million increased 9.3% from $544.4 million over the same period
• PPNR1 of $419.1 million, increased 6.4% from $393.8 million in the third quarter 2025
• Efficiency ratio1 increased to 58.1% from 57.4% in the third quarter 2025, while the efficiency ratio, adjusted for deposit costs1 increased to 50.0% from 47.8% over the same period
• Net interest margin increased 4 basis points to 3.57% from 3.53% in the third quarter 2025

Balance Sheet Performance

• Loans HFI increased $2.9 billion, or 4.9%, to $61.5 billion from December 31, 2025
• Deposits increased $4.6 billion, or 6.0%, to $81.8 billion from December 31, 2025

Credit Quality

• Nonaccrual loans to funded HFI loans improved to 0.79% from 0.85% at December 31, 2025
• Nonperforming assets (nonaccrual loans and repossessed assets) improved to 0.66% of total assets from 0.69% at December 31, 2025
• Allowance for loan losses to funded HFI loans ratio increased 5 basis points to 0.83% from 0.78% at December 31, 2025
• Allowance for loan losses to nonaccrual loans ratio increased to 106% from 92% at December 31, 2025
• Annualized net loan charge-offs to average loans outstanding were 0.30%, compared to 0.22% for the third quarter 2025

Capital and Shareholder Returns

• Total equity of $7.9 billion, flat from December 31, 2025
• CET1 ratio of 10.9% and tangible common equity ratio1 of 6.9%, compared to 11.0% and 7.3%, respectively, at December 31, 2025
• Book value per common share increased $0.94, or 1.4%, to $68.14 from $67.20 at December 31, 2025
• Tangible book value per share, net of tax1, increased $0.93, or 1.5%, to $62.22 from $61.29 at December 31, 2025
• Share repurchases of $92.1 million or 1.2 million shares at an average price per share of $79.78

The impact to the Company from these items, and others of both a positive and negative nature, are discussed in more detail below as they pertain to the Company’s overall comparative performance for the three and nine months ended September 30, 2026.

1 See Non-GAAP Financial Measures section beginning on page 65.

Asset Quality

Asset quality is a key factor in assessing a banking institution’s overall financial condition and results of operations. The Company measures asset quality in terms of nonaccrual loans as a percentage of gross loans and net charge-offs as a percentage of average loans. Net charge-offs are calculated as the difference between charged-off loans and recovery payments received on previously charged-off loans. The following table summarizes the Company's key asset quality metrics for loans HFI:

(dollars in millions)

(1) Annualized on an actual/actual basis for the three months ended September 30, 2026. Actual year-to-date for the year ended December 31, 2025.

Results of Operations and Financial Condition

As a bank holding company, management focuses on key ratios in evaluating the Company's financial condition and results of operations.

A summary of the Company's results of operations, financial condition, and selected metrics are included in the following tables:

(dollars in millions, except per share amounts)

(1) See Non-GAAP Financial Measures section beginning on page 65.

(in millions)

(1) See Non-GAAP Financial Measures section beginning on page 65.

RESULTS OF OPERATIONS

The following table sets forth a summary financial overview:

(dollars in millions, except per share amounts)

64

Non-GAAP Financial Measures

The following discussion and analysis contains financial information determined by methods other than those prescribed by GAAP. The Company's management uses these non-GAAP financial measures in their analysis of the Company's performance. Management believes presentation of these non-GAAP financial measures provides useful supplemental information that is essential to a complete understanding of the operating results of the Company. Since the presentation of these non-GAAP performance measures and their impact differ between companies, these non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

Pre-Provision Net Revenue

Banking regulations define PPNR as the sum of net interest income and non-interest income less expenses before adjusting for loss provisions and income taxes. Management believes this is an important metric as it illustrates the underlying performance of the Company, enables investors and others to assess the Company's ability to generate capital to cover credit losses through the credit cycle, and provides consistent reporting with a key metric used by bank regulatory agencies.

The following table shows the components used in the calculation of PPNR:

(in millions)

Efficiency Ratio

The following table shows the components used in the calculation of the efficiency ratio, which measures non-interest expense as a ratio of net revenue on a tax equivalent basis. Management uses this ratio as a metric for assessing cost efficiency:

(dollars in millions)

65

Tangible Common Equity and Return on Average Tangible Common Equity

The following tables present financial measures related to tangible common equity. Tangible common equity represents total equity reduced by goodwill and intangible assets, preferred stock, and noncontrolling interest in subsidiary. Management believes tangible common equity financial measures are useful in evaluating the Company's capital strength, financial condition, and ability to manage potential losses.

(dollars and shares in millions)

(dollars in millions)

66

The adjusted non-GAAP revenue, earnings and return metrics presented below for the nine months ended September 30, 2026 exclude, as applicable, the provision for credit losses related to the charge-off of the remaining Leucadia Asset Management LLC loan balance and gains on investment security sales executed during the three months ended March 31, 2026 as part of the Company's mitigation strategy.

Net Revenue and Pre-Provision Net Revenue, As Adjusted

(in millions)

Earnings per Share, As Adjusted

(in millions, except per share data)

Return on Average Assets, As Adjusted

(dollars in millions)

Return on Average Tangible Common Equity, As Adjusted

(dollars in millions)

67

Regulatory Capital

The following table presents certain financial measures related to regulatory capital under Basel III, which includes CET1 and total capital. The FRB and other banking regulators use CET1 and total capital as a basis for assessing a bank's capital adequacy; therefore, management believes it is useful to assess financial condition and capital adequacy using this same basis. Specifically, the CET1, tier 1 capital, and total capital ratios take into consideration the risk levels of assets and off-balance sheet financial instruments. In addition, management believes that the classified assets to CET1 plus allowance measure is an important regulatory metric for assessing asset quality.

(dollars in millions)

68

Net Interest Margin

The net interest margin is reported on a TEB. A tax equivalent adjustment is added to reflect interest earned on certain securities and loans that are exempt from federal and state income tax. The following tables set forth the average balances, interest income, interest expense, and average yield (on a fully TEB) for the periods indicated:

(dollars in millions)

(1) Yields on loans and securities have been adjusted to a tax equivalent basis. The taxable-equivalent adjustment was $10.4 million and $9.7 million for the three months ended September 30, 2026 and 2025, respectively.

(2) Included in the yield computation are net loan fees of $23.9 million and $28.1 million for the three months ended September 30, 2026 and 2025, respectively.

(3) Interest income includes a reduction for earnings credits totaling $56.7 million and $64.9 million for the three months ended September 30, 2026 and 2025, respectively.

(4) Includes nonaccrual loans.

(5) Net interest margin is computed by dividing net interest income on a tax equivalent basis by total average earning assets, annualized on an actual/actual basis.

(dollars in millions)

(1) Yields on loans and securities have been adjusted to a tax equivalent basis. The taxable-equivalent adjustment was $30.7 million and $30.1 million for the nine months ended September 30, 2026 and 2025, respectively.

(2) Included in the yield computation are net loan fees of $73.3 million and $77.4 million for the nine months ended September 30, 2026 and 2025, respectively.

(3) Interest income includes a reduction for earnings credits totaling $157.9 million and $184.3 million for the nine months ended September 30, 2026 and 2025, respectively.

(4) Includes nonaccrual loans.

(5) Net interest margin is computed by dividing net interest income on a tax equivalent basis by total average earning assets, annualized on an actual/actual basis.

(in millions)

(1) Changes attributable to both volume and rate are designated as volume changes.

Comparison of interest income, interest expense and net interest margin

The Company's primary source of revenue is interest income. For the three months ended September 30, 2026, interest income totaled $1.3 billion, an increase of $31.8 million, or 2.6%, from the same period in 2025. The increase primarily reflected $20.0 million in higher interest income from loans HFI and $13.2 million from loans HFS, driven by increases in average balances of $4.6 billion and $849 million, respectively.

For the nine months ended September 30, 2026, interest income totaled $3.7 billion, an increase of $201.9 million, or 5.8%, from $3.5 billion for the same period in 2025. This increase was primarily the result of higher interest income from investment securities, loans HFI, and loans HFS, which increased by $102.2 million, $57.4 million, and $37.7 million, respectively, largely due to higher average balances for each of these asset categories of $3.4 billion, $4.6 billion, and $936 million, respectively.

For the three months ended September 30, 2026, interest expense totaled $449.7 million, a decrease of $25.4 million, or 5.3%, compared to $475.1 million for the same period in 2025. The decrease was driven by lower interest expense on long-term debt and deposits, which declined $18.9 million and $15.7 million, respectively. The decrease in interest expense on long-term debt was due to a $1.3 billion reduction in the average balance, while lower rates drove the decline in interest expense on deposits. These decreases were partially offset by an increase in interest expense on qualifying debt of $11.1 million as a result of a $389 million increase in the average balance and higher interest rates.

For the nine months ended September 30, 2026, interest expense totaled $1.3 billion, a decrease of $70.3 million, or 5.1%, compared to $1.4 billion for the same period in 2025. The decline was driven by lower interest expense on long-term debt and deposits, which declined $55.1 million and $40.6 million, respectively. The decrease in interest expense on long-term debt was due to a $1.3 billion reduction in the average balance, while lower rates drove the decline in interest expense on deposits. These decreases were partially offset by an increase in interest expense on qualifying debt of $20.5 million, as a result of a $272 million increase in the average balance and higher rates.

For the three months ended September 30, 2026, net interest income totaled $807.6 million, an increase of $57.2 million, or 7.6%, compared to $750.4 million for the same period in 2025. The increase in net interest income was driven by an increase in average interest earning assets of $5.5 billion and lower rates on interest bearing deposits, partially offset by lower yields on interest earning assets and higher average interest bearing liability balances. Net interest margin improved 4 basis points to 3.57%, as lower funding costs driven by the lower-rate environment compared to the third quarter of 2025 more than offset the impact of declining yields on interest earning assets.

For the nine months ended September 30, 2026, net interest income totaled $2.4 billion, an increase of $272.2 million, or 13.0%, compared to $2.1 billion for the same period in 2025. The increase in net interest income was driven by an increase in average interest earning assets of $9.5 billion and lower rates on interest bearing deposits, partially offset by lower yields on interest earning assets and higher average interest bearing liability balances. Net interest margin improved 4 basis points to 3.55%, as lower funding costs more than offset the impact of lower yields on interest earning assets.

Provision for Credit Losses

The provision for credit losses in each period is reflected as a reduction in earnings for that period and includes amounts related to funded loans, unfunded loan commitments, and investment securities. The provision is equal to the amount required to maintain the ACL at a level adequate to absorb estimated lifetime credit losses in the loan and investment securities portfolios based on remaining contractual maturity, adjusted for estimated prepayments as of each period end. The Company's CECL models incorporate historical experience, current conditions, and reasonable and supportable forecasts in measuring expected credit losses. For the three and nine months ended September 30, 2026, the Company recorded a provision for credit losses of $80.0 million and $373.6 million, compared to $80.0 million and $151.1 million for the three and nine months ended September 30, 2025. The provision for credit losses for the three and nine months ended September 30, 2026 is primarily reflective of net loan charge-offs of $45.8 million and $309.3 million, respectively, as well as loan growth and provisioning for macroeconomic risks associated with the higher interest rate environment. Loan charge-offs for the nine months ended September 30, 2026 included $126.4 million for the remaining balance of the Leucadia Asset Management LLC loan and $26.1 million from the specific reserve previously established on the Cantor Group V, LLC loan.

Non-interest Income

The following table presents a summary of non-interest income:

(dollars in millions)

Total non-interest income for the three months ended September 30, 2026 increased $18.8 million, or 10.0%, from the same period in 2025, primarily reflecting higher commercial banking income and related fees and gains on investment securities sales, partially offset by lower net gain on mortgage loan origination and sales activities. Commercial banking income and related fees increased $26.3 million, driven by higher disbursement and other commercial banking fees. Gain on sales of investment securities increased $8.3 million, primarily due to higher securities sales volume. Net gain on mortgage loan origination and sale activities declined $19.8 million, primarily due to lower origination volumes and reduced secondary marketing revenues.

Total non-interest income for the nine months ended September 30, 2026 increased $194.5 million from the same period in 2025, primarily reflecting higher commercial banking income and related fees, gain on sales of investment securities, income from equity investments, and net gain on mortgage loan origination and sale activities. Commercial banking income and related fees rose $108.7 million, driven by higher disbursement and other commercial banking fees. Gain on sales of investment securities increased $48.3 million, reflecting a series of security sales executed by management during the first quarter of 2026 and additional sales thereafter. Income from equity investments increased $27.1 million, primarily driven by certain losses on solar investments in 2025 that did not recur and gains on warrant valuations in the current year. Net gain on mortgage loan origination and sale activities increased $17.4 million, as higher origination volumes boosted production revenue, partially offset by lower secondary marketing revenues. These increases were partially offset by a $25.4 million decrease in net loan servicing revenue, reflecting MSR fair value losses, net of hedging, from elevated market volatility, partially offset by higher servicing revenue from growth in the average servicing portfolio balance.

Non-interest Expense

The following table presents a summary of non-interest expense:

(dollars in millions)

Total non-interest expense for the three months ended September 30, 2026 increased $50.7 million from the same period in 2025, primarily due to higher salaries and employee benefits, partially offset by lower deposit costs. Salaries and employee benefits rose by $32.6 million, reflecting higher average salaries, incentive compensation, and employee headcount. Deposit costs decreased $9.7 million as deposit optimization efforts reduced ECR balances and rates.

Total non-interest expense for the nine months ended September 30, 2026 increased $193.3 million from the same period in 2025, primarily due to higher salaries and employee benefits, deposit costs, and data processing expenses. Salaries and employee benefits rose by $80.1 million, reflecting higher average salaries, incentive compensation, and employee headcount. Deposit costs increased $48.6 million, as average ECR related deposit balances increased approximately $4.4 billion to $30.4 billion. Data processing expenses increased $22.7 million due to higher software-related costs. These increases were partially offset by a decline in insurance expense of $21.3 million due to lower FDIC assessment fees.

Income Taxes

The Company's effective tax rate was 18.3% and 17.0% for the three months ended September 30, 2026 and 2025, respectively, and 18.5% and 18.1% for the nine months ended September 30, 2026 and 2025, respectively. The increase in the effective tax rate for the three months and nine months ended September 30, 2026 compared to the same periods in 2025 was primarily attributable to an increase in pretax income.

Business Segment Results

The Company's operating segments are aggregated with a focus on products and services offered and consist of three reportable segments:

• Commercial: provides commercial banking and treasury management products and services to small and middle-market businesses, specialized banking services to sophisticated commercial institutions and investors within niche industries, as well as financial services to the real estate industry.
• Consumer Related: offers both commercial banking services to enterprises in consumer-related sectors and consumer banking services, such as residential mortgage banking.
• Corporate & Other: consists of the Company's investment portfolio, Corporate borrowings and other related items, income and expense items not allocated to other reportable segments, and inter-segment eliminations.

The following tables present selected reportable segment information:

(in millions)

(in millions)

74

BALANCE SHEET ANALYSIS

Total assets increased $5.3 billion, or 5.7%, to $98.1 billion at September 30, 2026, compared to $92.8 billion at December 31, 2025. Higher deposit levels supported an increase in cash of $1.7 billion, and also funded HFI and HFS loan growth. Loans HFI increased $2.9 billion, or 4.9%, to $61.5 billion as of September 30, 2026, compared to $58.7 billion as of December 31, 2025. By loan type, commercial and industrial, commercial real estate non-owner occupied, and residential real estate loans increased $2.2 billion, $357 million, and $285 million, respectively, from December 31, 2025. Loans HFS increased $453 million, or 13.0%, from $3.5 billion as of December 31, 2025, primarily reflecting increased early buyout activity, partially offset by higher sales activity and unfavorable fair value changes driven by higher interest rates.

Total liabilities increased $5.3 billion to $90.1 billion at September 30, 2026, compared to $84.8 billion at December 31, 2025 as total deposits increased $4.6 billion, or 6.0%, to $81.8 billion. By type, the increase in deposits from December 31, 2025 was driven by increases of $1.7 billion in interest bearing demand deposits, $1.4 billion in non-interest bearing deposits, $859 million in certificates of deposit, and $624 million in savings and money market accounts. Other borrowings increased $373 million from December 31, 2025, primarily due to an increase in overnight borrowings.

Total equity was unchanged at $7.9 billion at September 30, 2026 and December 31, 2025. Net income of $735.2 million for the nine months ended September 30, 2026 was offset by unrealized fair value losses on AFS securities, recorded net of tax in OCI, quarterly dividends totaling $168.6 million to common and preferred stockholders (including REIT preferred stockholders), and $145.7 million in share repurchases.

Investment securities

Debt securities are classified at the time of acquisition as either HTM, AFS, or trading based upon various factors, including asset/liability management strategies, liquidity and profitability objectives, and regulatory requirements. HTM securities are carried at amortized cost, adjusted for amortization of premiums or accretion of discounts. AFS securities are carried at fair value with unrealized gains or losses on these securities recorded in AOCI in stockholders' equity, net of tax. Trading securities are reported at fair value, with unrealized gains and losses on these securities included in current period earnings.

The Company's investment securities portfolio may be utilized as collateral for borrowings, required collateral for public deposits and repurchase agreements, and to manage liquidity, capital, and interest rate risk.

The following table summarizes the carrying value of the Company's investment securities portfolio:

(dollars in millions)

Total debt securities decreased $197 million from December 31, 2025 primarily due to sales of U.S. Treasury securities to secure gains, partially offset by purchases of CLOs during the nine months ended September 30, 2026.

Loans HFS

The Company purchases and originates residential mortgage loans that are held for sale or securitization through its AmeriHome mortgage banking business channel. Loans HFS totaled $4.0 billion at September 30, 2026, an increase of $453 million, or 13.0%, from $3.5 billion at December 31, 2025. The increase was primarily driven by higher early buyout activity, partially offset by increased sales activity and unfavorable fair value changes from higher interest rates.

Loans HFI

The table below summarizes the distribution of the Company’s held for investment loan portfolio:

(dollars in millions)

Loans classified as HFI are stated at the amount of unpaid principal, adjusted for net deferred fees and costs, premiums and discounts on acquired and purchased loans, and an ACL. Net deferred loan fees of $128 million and $120 million reduced the carrying value of loans as of September 30, 2026 and December 31, 2025, respectively. Net unamortized purchase premiums on acquired and purchased loans of $202 million and $186 million increased the carrying value of loans as of September 30, 2026 and December 31, 2025, respectively.

Concentrations of Lending Activities

The Company monitors concentrations of lending activities at the product and borrower relationship level. As of September 30, 2026 and December 31, 2025, no borrower relationships at both the commitment and funded loan level exceeded 5% of total loans HFI.

Commercial and industrial loans made up 49% and 48% of total loans HFI as of September 30, 2026 and December 31, 2025, respectively. A subset of commercial and industrial loans consist of loans to NDFIs, which, as defined by regulatory guidance, are entities that provide services similar to traditional banks but do not accept deposits from the general public and are not regulated by Federal banking agencies.

The following table presents the balance of loans to NDFIs:

(dollars in millions)

76

In addition, the Company's loan portfolio includes significant credit exposure to the CRE market as CRE related loans accounted for approximately 27% of total loans at September 30, 2026 and December 31, 2025. Non-owner occupied CRE loans are loans where the primary source of repayment is rental income generated from the collateral property. Owner occupied CRE loans are loans secured by owner occupied non-farm nonresidential properties where the primary source of repayment (more than 50%) is the cash flow from the ongoing operations and activities conducted by the borrower who owns the property. These CRE loans are secured by multi-family residential properties, professional offices, industrial facilities, retail centers, hotels, and other commercial properties.

The following tables present the composition by property type and weighted average LTV of the Company’s CRE non-owner occupied loans:

(dollars in millions)

(1) If current appraisals are not available, weighted average LTV is based on the most recent available information.

(dollars in millions)

(1) If current appraisals are not available, weighted average LTV is based on the most recent available information.

The following table presents the Company’s CRE non-owner occupied loans by origination year as of September 30, 2026:

(in millions)

77

The following table presents the scheduled maturities of the Company’s CRE non-owner occupied loans as of September 30, 2026:

(in millions)

Approximately $2.3 billion, or 3.7%, of total loans HFI consisted of CRE non-owner occupied office loans as of September 30, 2026, compared to $2.1 billion, or 3.6%, as of December 31, 2025. Of the non-owner occupied office loan balance as of September 30, 2026, $387 million is scheduled to mature in the remainder of 2026.

As of September 30, 2026 and December 31, 2025, 13% and 14% of the Company's CRE loans, excluding construction and land loans, were owner occupied, respectively, with substantially all of these loans secured by first liens and had an initial loan-to-value ratio of generally not more than 75%.

Non-performing Assets

Non-performing loans decreased $8 million, or 1.2%, to $672 million at September 30, 2026, from $680 million at December 31, 2025.

(dollars in millions)

(1) Includes loan modifications to borrowers experiencing financial difficulty of $37 million and $89 million at September 30, 2026 and December 31, 2025, respectively.

(2) Excludes government guaranteed residential mortgage loans of $214 million and $290 million at September 30, 2026 and December 31, 2025, respectively.

Interest income that would have been recorded under the original terms of nonaccrual loans was $9.4 million and $10.4 million for the three months ended September 30, 2026 and 2025, respectively, and $29.1 million and $26.4 million for the nine months ended September 30, 2026 and 2025, respectively.

The composition of nonaccrual loans HFI by loan portfolio segment were as follows:

(dollars in millions)

(dollars in millions)

Restructurings for Borrowers Experiencing Financial Difficulty

The following tables present the amortized cost basis of loans HFI that were modified during the period by loan portfolio segment:

(dollars in millions)

79

(dollars in millions)

The performance of these modified loans is monitored for 12 months following the modification. As of September 30, 2026, modified loans of $129 million were current to 89 days delinquent and $37 million were on nonaccrual status. As of December 31, 2025, modified loans of $114 million were current to 89 days delinquent and $89 million were on nonaccrual status.

In the normal course of business, the Company also modifies EBO loans, which are delinquent FHA, VA, or USDA insured or guaranteed loans repurchased under the terms of the GNMA MBS program and can be repooled or resold when loans are brought current either through the borrower's reperformance or through successful completion of a loss mitigation retention solution. The following tables present the amortized cost basis of such EBO loans modified during the period:

(dollars in millions)

The performance of these modified loans is monitored for 12 months following the modification. As of September 30, 2026, modified EBO loans consisted of $75 million in loans that were current to 89 days delinquent and $9 million in loans 90 days or more delinquent. As of December 31, 2025, modified EBO loans consisted of $27 million in loans that were current to 89 days delinquent and $123 million in loans 90 days or more delinquent.

Allowance for Credit Losses on Loans HFI

The ACL consists of an ACL on loans and on unfunded loan commitments. The ACL on AFS and HTM securities is estimated separately from loans and is discussed within the Investment Securities section.

The following table summarizes the allocation of the ACL on loans HFI by loan portfolio segment:

(dollars in millions)

During the three months ended September 30, 2026 and 2025, annualized net loan charge-offs to average loans outstanding were 0.30% and 0.22%, respectively.

In addition to the ACL on funded loans HFI, the Company maintains a separate ACL related to off-balance sheet credit exposures, including unfunded loan commitments. This allowance balance totaled $61.6 million and $49.6 million at September 30, 2026 and December 31, 2025, respectively, and is included in Other liabilities on the Consolidated Balance Sheet.

Problem Loans

The Company classifies loans consistent with federal banking regulations using a nine category grading system. The following table presents information regarding potential and actual problem loans, consisting of loans graded as Special Mention, Substandard, Doubtful, and Loss, that are still performing and are not individually evaluated for credit losses:

(dollars in millions)

(dollars in millions)

The classification of certain loans as of December 31, 2025, was revised to conform to the loan segmentation presented elsewhere in this Quarterly Report on Form 10‑Q.

Mortgage Servicing Rights

The fair value of the Company's MSRs related to residential mortgage loans totaled $1.6 billion and $1.5 billion as of September 30, 2026 and December 31, 2025, respectively.

The following is a summary of the UPB of loans underlying the Company's MSR portfolio by type:

(in millions)

82

Other Assets Acquired through Foreclosure

Other assets acquired through foreclosure consist primarily of properties acquired through, or in-lieu-of, foreclosure. At September 30, 2026 and December 31, 2025, these assets totaled $165 million and $137 million, respectively, net of a valuation allowance of $4.6 million and $7.6 million, respectively, which consisted primarily of office properties. The Company held 27 properties at September 30, 2026, compared to 15 at December 31, 2025. The increase in the balance of other assets acquired through foreclosure from December 31, 2025 was primarily related to the acquisition of two CRE office properties during the nine months ended September 30, 2026 as the Company advanced nonperforming loans through its standard credit resolution process, with the goal of stabilizing leasing and occupancy, improving rental rates, and funding improvements from the net operating income generated by these properties prior to sale. This increase was partially offset by the transfer of one property with a net carrying value of $39 million to Premises and equipment due to a change in management intent.

Goodwill and Other Intangible Assets

Goodwill represents the excess consideration paid for net assets acquired in a business combination over their fair value. Goodwill and other intangible assets acquired in a business combination that are determined to have an indefinite useful life are not subject to amortization, but are subsequently evaluated for impairment at least annually. The Company has goodwill and intangible assets totaling $642 million and $649 million at September 30, 2026 and December 31, 2025, respectively.

The Company performs its annual goodwill and intangible assets impairment tests as of October 1 each year, or more often if events or circumstances indicate the carrying value may not be recoverable. During the three and nine months ended September 30, 2026 and 2025, there were no events or circumstances that indicated an interim impairment test of goodwill or other intangible assets was necessary.

Deferred Tax Assets

As of September 30, 2026, the net DTA balance totaled $581 million, an increase of $232 million from $349 million at December 31, 2025. The overall increase in the net DTA was primarily the result of an increase in credit carryovers and a decrease in the fair market value of AFS securities.

The Company had no deferred tax valuation allowance as of September 30, 2026 and December 31, 2025.

Deposits

Deposits are the Company's primary source of funding asset growth. Deposits increased $4.6 billion, or 6.0%, to $81.8 billion at September 30, 2026, with growth tempered by the Company's deposit optimization efforts to reduce higher-cost deposits. By deposit type, growth in deposits is attributable to increases of $1.7 billion in interest bearing demand deposits, $1.4 billion in non-interest bearing deposits, $859 million in certificates of deposit, and $624 million in savings and money market accounts.

WAB is a participant in reciprocal deposit networks, such as IntraFi Network, a network that offers deposit placement services such as CDARS and ICS, which offer products that qualify large deposits for FDIC insurance. At September 30, 2026, the Company had $16.6 billion of these reciprocal deposits, compared to $14.4 billion at December 31, 2025. At September 30, 2026 and December 31, 2025, the Company also had wholesale brokered deposits of $5.6 billion and $5.4 billion, respectively.

The average balances and weighted average rates paid on deposits are presented below:

(dollars in millions)

83

(dollars in millions)

In addition, certain customers with non-interest-bearing accounts receive earnings credits that can be used to offset applicable bank charges, and in certain cases, loan interest. The Company also pays referral fees for certain interest bearing or non-interest bearing deposits that are referred to the Bank. Deposits for which the Company provides account holders with excess earnings credits and referral fees totaled $26.7 billion and $25.1 billion at September 30, 2026 and December 31, 2025, respectively. The below table presents the income statement classification for total earnings credit and referral costs incurred on these deposits:

(in millions)

(1) Earnings credits recorded as a reduction to Interest income and Commercial banking income and related fees.

(2) Deposit costs also included other deposit related costs of $7.0 million and $6.0 million for the three months ended September 30, 2026 and 2025, respectively, and $18.9 million and $17.6 million for the nine months ended September 30, 2026 and 2025, respectively, primarily associated with reciprocal deposits.

Other Borrowings

Short-Term Borrowings

The Company utilizes short-term borrowed funds to support short-term liquidity needs. The majority of these short-term borrowed funds consist of advances from the FHLB, repurchase agreements, and federal funds purchased from correspondent banks or the FHLB. The Company’s borrowing capacity with the FHLB is determined based on collateral pledged, generally consisting of securities and loans. In addition, the Company has repurchase facilities, collateralized by securities or loans sold under agreements to repurchase, including assets sold under agreements to repurchase, which are reflected at the amount of cash received in connection with the transaction, and may require additional collateral based on the fair value of the underlying assets. Total short-term borrowings increased $394 million to $4.2 billion at September 30, 2026, from $3.8 billion at December 31, 2025, driven by an increase in short-term FHLB advances.

Long-Term Borrowings

The Company's long-term borrowings consist of long-term FHLB borrowings and credit linked notes, inclusive of issuance costs. Total long-term borrowings of $1.4 billion at September 30, 2026 decreased $21 million from December 31, 2025, primarily due to principal paydowns on credit linked notes.

Equity

Total equity was unchanged at $7.9 billion at September 30, 2026 and December 31, 2025. Net income of $735.2 million for the nine months ended September 30, 2026 was offset by unrealized fair value losses on AFS securities of $393.8 million, recorded net of tax in OCI, quarterly dividends totaling $168.6 million to common and preferred stockholders (including REIT preferred stockholders), and share repurchases.

During the three and nine months ended September 30, 2026, the Company repurchased 1.2 million and 1.9 million shares of its common stock, respectively, at a weighted average price per share of $79.78 and $76.62, respectively. Payments, inclusive of commissions, fees, and taxes, totaled $93.2 million and $145.7 million for the three and nine months ended September 30, 2026, respectively. During the three and nine months ended September 30, 2025, the Company repurchased 0.1 million shares of its common stock at a weighted average price of $88.50, for a total payment of $10.6 million. As of September 30, 2026, the aggregate remaining approved amount under the Company's $300 million stock repurchase program was approximately $87.5 million.

Capital Resources

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements could trigger certain mandatory or discretionary actions that, if undertaken, could have a direct material effect on the Company’s business and financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance sheet items (discussed in "Note 15. Commitments and Contingencies" to the Unaudited Consolidated Financial Statements) as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

As of September 30, 2026 and December 31, 2025, the Company and the Bank exceeded the capital levels necessary to be classified as well-capitalized, as defined by the various banking agencies. The actual capital amounts and ratios for the Company and the Bank are presented in the following tables:

(dollars in millions)

The Company and the Bank are also subject to liquidity and other regulatory requirements as administered by the federal banking agencies. These agencies have broad powers and at their discretion, could limit or prohibit the Company's payment of dividends, payment of certain debt service and issuance of capital stock and debt as they deem appropriate and as such, actions by the agencies could have a direct material effect on the Company’s business and financial statements.

The Company is also required to maintain specified levels of capital to remain in good standing with certain federal government agencies, including FNMA, FHLMC, GNMA, and HUD. These capital requirements are generally tied to the unpaid balances of loans included in the Company's servicing portfolio or loan production volume. Noncompliance with these capital requirements can result in various remedial actions up to, and including, removing the Company's ability to sell loans to and service loans on behalf of the respective agency. The Company believes that it is in compliance with these requirements as of September 30, 2026.

Critical Accounting Estimates

Critical accounting estimates are defined as those that are reflective of significant judgments and uncertainties and could potentially result in materially different results under different assumptions and conditions. The critical accounting estimates upon which the Company's financial condition and results of operations depend, and which involve the most complex subjective decisions or assessments, are included in the discussion entitled "Critical Accounting Policies" in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2025, and all amendments thereto, as filed with the SEC. There were no material changes to the critical accounting policies disclosed in the Annual Report on Form 10-K.

Liquidity

Liquidity is the ongoing ability to accommodate liability maturities and deposit withdrawals, fund asset growth and business operations, and meet contractual obligations through unconstrained access to funding at reasonable market rates. Liquidity management involves forecasting funding requirements and maintaining sufficient capacity to meet the needs and accommodate fluctuations in asset and liability levels due to changes in the Company's business operations or unanticipated events.

The ability to have readily available funds sufficient to repay fully maturing liabilities is of primary importance to depositors, creditors, and regulators. The Company's liquidity, represented by cash and amounts due from banks, loans HFS, and non-pledged marketable securities, is a result of the Company's operating, investing, and financing activities and related cash flows. The Company actively monitors and manages liquidity, and no less than quarterly will estimate probable liquidity needs on a 12-month horizon. Liquidity needs can also be met through short-term borrowings or the disposition of short-term assets.

The Company has borrowing capacity with the FHLB and FRB from pledged loans and securities. The borrowing capacity, outstanding borrowings, and available credit as of September 30, 2026 are presented in the following table:

(in millions)

The Company also maintains uncommitted warehouse borrowing repurchase agreements. As of September 30, 2026, borrowing capacity under these facilities was $2.1 billion, with no outstanding borrowings.

In addition to the funding sources above, the Company may utilize securities repurchase agreements and unsecured federal funds lines to meet its liquidity requirements. There were no outstanding borrowings on the Company's unsecured federal funds lines of credit as of September 30, 2026.

The Company has a formal liquidity policy and, in the opinion of management, its liquid assets are considered adequate to meet financial obligations and support client activity during normal and stressed operating conditions. At September 30, 2026, there were $22.1 billion in liquid assets, comprised of $4.2 billion in cash on deposit at the FRB and $17.9 billion in securities not currently used as collateral for borrowings or other purposes. At December 31, 2025, the Company maintained $19.8 billion in liquid assets, comprised of $1.6 billion in cash on deposit at the FRB and $18.2 billion in liquid securities not currently used as collateral for borrowings or other purposes.

The Parent maintains liquidity that would be sufficient to fund its operations and certain non-bank affiliate operations for an extended period should funding from normal sources be disrupted. In the Company's analysis of Parent liquidity, it is assumed the Parent is unable to generate funds from additional debt or equity issuances, receives no dividend income from subsidiaries and does not pay dividends to stockholders, while continuing to make non-discretionary payments needed to maintain operations and repayment of contractual principal and interest payments owed by the Parent and affiliated companies. Under this scenario, the amount of time the Parent and its non-bank subsidiary can operate and meet all obligations before the current liquid assets are exhausted is considered as part of the Parent liquidity analysis. Management believes the Parent maintains adequate liquidity capacity to operate without additional funding from new sources for over twelve months.

WAB maintains sufficient funding capacity to address large increases in funding requirements, such as deposit outflows. This capacity is comprised of liquidity derived from a reduction in asset levels and various secured funding sources. On a long-term basis, the Company’s liquidity will be met by changing the relative distribution of its asset portfolios (for example, by reducing investment or loan volumes, or selling or encumbering assets). Further, the Company can increase liquidity by soliciting higher levels of deposit accounts through promotional activities and/or borrowing from correspondent banks, the FHLB of San Francisco, and the FRB. At September 30, 2026, the Company's long-term liquidity needs primarily relate to funds required to support loan originations, commitments, and deposit withdrawals, which can be met by cash flows from investment payments and maturities, and investment sales, if necessary.

The Company’s liquidity is comprised of three primary classifications: 1) cash flows from operating activities; 2) cash flows used in investing activities; and 3) cash flows provided by financing activities. Net cash provided by or used in operating activities consists primarily of net income, adjusted for changes in certain other asset and liability accounts and certain non-cash income and expense items, such as the provision for credit losses, investment and other amortization and depreciation. For the nine months ended September 30, 2026 and 2025, net cash used in operating activities totaled $93.4 million and $2.6 billion, respectively.

The Company's primary investing activities are the origination of real estate and commercial loans, the collection of repayments on these loans, and the purchase and sale of securities. The Company's net cash used in investing activities has primarily been influenced by its loan and securities activities. During the nine months ended September 30, 2026 and 2025, the Company's cash balance decreased by $3.3 billion and $3.1 billion, respectively, from a net increase in loans. In addition, net purchases of investment securities drove net cash outflows of $532 million and $3.4 billion during the nine months ended September 30, 2026 and 2025, respectively.

Net cash provided by financing activities was impacted significantly by deposit levels. During the nine months ended September 30, 2026, net deposits increased $4.6 billion, compared to an increase of $10.9 billion during the nine months ended September 30, 2025.

Fluctuations in core deposit levels may increase the Company's need for liquidity as certificates of deposit mature or are withdrawn before maturity, and as non-maturity deposits, such as checking and savings account balances, are withdrawn. Additionally, the Company is exposed to the risk that customers with large deposit balances will withdraw all or a portion of such deposits, due in part to the FDIC limitations on the amount of insurance coverage provided to depositors. To partially mitigate uninsured deposit risk, the Company participates in reciprocal deposit programs, such as CDARS and ICS, which allow an individual customer to invest up to $50 million and $285 million, respectively, through one participating financial institution or, a combined total of $335 million per individual customer, with the entire amount being covered by FDIC insurance. As of September 30, 2026, the Company has $2.1 billion of CDARS and $13.2 billion of ICS deposits.

As of September 30, 2026, the Company had $5.6 billion of wholesale brokered deposits outstanding. Brokered deposits are generally considered to be deposits that have been received from a third party who is engaged in the business of placing deposits on behalf of others. A traditional deposit broker will direct deposits to the banking institution offering the highest interest rate available. Federal banking laws and regulations place restrictions on depository institutions regarding brokered deposits because of the general concern these deposits are not relationship based and are at a greater risk of being withdrawn and placed on deposit at another institution offering a higher interest rate, thus posing liquidity risk for institutions that gather brokered deposits in significant amounts.

Federal and state banking regulations place certain restrictions on dividends paid. The total amount of dividends which may be paid at any date is generally limited to the retained earnings of the bank. Dividends paid by WAB to the Parent would be prohibited if the effect thereof would cause the Bank’s capital to be reduced below applicable minimum capital requirements. During the three and nine months ended September 30, 2026, WAB paid dividends to the Parent totaling $210 million and $550 million, respectively.

Market risk is the risk of loss in a financial instrument arising from adverse changes in market prices and rates, foreign currency exchange rates, commodity prices, and equity prices. The Company's market risk arises primarily from interest rate risk inherent in its lending, investing, and deposit taking activities. To that end, management actively monitors and manages the Company's interest rate risk exposure.

Management uses various strategies to manage the re-pricing characteristics of the Company's assets and liabilities, all of which are designed to ensure that exposure to interest rate fluctuations is within the Company's guidelines of acceptable levels of risk-taking. Hedging strategies, including the terms and pricing of loans and deposits and management of the deployment of its securities, are used to reduce mismatches in interest rate repricing opportunities of portfolio assets and their funding sources. Derivatives in a hedging relationship are also used to minimize the Company's exposure to changes in benchmark interest rates based on impacts to net interest income and EVE, which are reflected in the model results discussed below.

Interest rate risk is governed by ALCO, which includes members of executive management, finance, and operations. ALCO monitors interest rate risk by analyzing the potential impact on EVE and earnings from potential changes in interest rates and considers the impact of alternative strategies or changes in balance sheet structure. The Company manages its balance sheet in part to keep the potential impact on EVE and earnings within acceptable ranges despite changes in interest rates.

The Company's exposure to interest rate risk is reviewed at least quarterly by ALCO. Interest rate risk exposure is measured using interest rate sensitivity analysis to determine its change in both EVE and earnings in the event of hypothetical changes in interest rates. If potential changes to EVE and earnings resulting from hypothetical interest rate changes are not within the limits established by the BOD or, ALCO determines that interest rate exposures should be reduced, ALCO will either take hedging actions or adjust the asset and liability mix to bring interest rate risk within BOD-approved limits or in line with ALCO's proposed reduction. ALCO may also decide the best course of action for a limit breach is to accept the breach and present justification to the BOD. If the BOD does not agree to accept the limit breach, it will direct ALCO to remediate the breach. The Company's EaR and EVE exposure limits are approved by the BOD on an annual basis, or more often if market conditions warrant. During the nine months ended September 30, 2026, there have been no changes to the Company's exposure limits.

Net Interest Income Simulation. To measure interest rate risk at September 30, 2026, the Company used a simulation model to project changes in net interest income resulting from forecasted changes in interest rates. This analysis calculates the difference between a baseline net interest income forecast using forward yield curves, compared to forecasted net interest income results from an immediate, parallel shift in rates upward or downward, along with other scenarios directed by ALCO. The simulation model includes various assumptions regarding repricing relationships for each of the Company's products. Many of the Company's assets are variable rate loans, which are assumed to reprice at the next rate reset period and, proportional to the change in market rates, depending on their contracted index, including the impact of caps or floors. The simulation model also incorporates prepayment assumptions for applicable loans and investments with such optionality. The Company's non-term deposits reprice to underlying market rate changes based on product and line of business level model assumptions. Current non-term deposit repricing assumptions result in a product-level beta range of 54% to 66%, depending on product, with an average beta of 58%.

This analysis illustrates the impact of changes in net interest income for the given set of rate changes and assumptions. It does not account for all factors that could impact the Company's results, including changes by management to mitigate interest rate changes or secondary factors, such as changes to the Company's credit risk profile as interest rates change. The results will also be impacted by seasonality in the balance sheet. Furthermore, loan prepayment rate estimates and spread relationships change regularly. These assumptions are inherently uncertain and as a result, actual results may differ from simulated results due to factors such as timing, magnitude and frequency of interest rate changes as well as changes in market conditions, customer behavior, management strategies, and changes that vary significantly from the modeled assumptions may have a significant effect on the Company's actual net interest income.

The table below presents the changes in net interest income that would occur in response to an instantaneous and sustained increase or decrease (shock) in market interest rates based on a dynamic balance sheet. In addition, the table provides results from additional scenarios in response to gradual, parallel changes (ramp) in market interest rates over twelve months. The Company continues to evaluate the scenarios that are presented as interest rates change and will update these scenario disclosures as appropriate.

Sensitivity of Net Interest Income

Earnings-at-Risk. The Company’s EaR simulation model expands on its net interest income simulation, as described above, by adding certain rate-sensitive non-interest income and expense items also subject to market risk, including mortgage banking and servicing income and certain deposit costs. Mortgage originations and prepayments are sensitive to interest rates and therefore, mortgage banking and servicing income can be impacted by changes in interest rates. In the Company’s EaR simulation model as of September 30, 2026, deposits eligible for ECRs re-price with a beta assumption of 77% to underlying market rate changes, and total non-maturity deposits, inclusive of ECRs, re-price with a weighted average beta assumption of 65%. Both beta estimates include the portion of mortgage warehouse related ECRs that are recorded as a reduction to interest income. At September 30, 2026, the Company’s earnings exposure for the next twelve months related to these hypothetical changes in market interest rates was within the Company’s current limits.

Economic Value of Equity. The Company measures the impact of market interest rate changes on the NPV of estimated cash flows from its assets, liabilities, and off-balance sheet items, defined as EVE, using a simulation model. The Company's simulation model focuses on parallel interest rate shocks and takes into account assumptions related to loan prepayment trends that are sourced using a combination of third-party prepayment models and internal historical experience, terminal maturity for non-maturity deposits, account attrition, and pricing sensitivity derived from the Company's data and other internally-developed analysis and models. These assumptions are reviewed at least annually and are adjusted periodically to reflect changes in market conditions and the Company's balance sheet composition. As simulated model results are based on a number of assumptions outlined above, including forecasted market conditions, actual amounts may differ significantly from the projections set forth below should market conditions vary from the underlying assumptions.

This simulation model assesses the changes in the market value of interest rate sensitive financial instruments that would occur in response to an instantaneous and sustained increase or decrease (shock) in market interest rates. The Company continues to evaluate the scenarios that are presented as interest rates change and will update these scenario disclosures as appropriate.

The following table shows the Company's projected change in EVE for this set of rate shocks at September 30, 2026:

Economic Value of Equity

At September 30, 2026, the Company's EVE exposure related to these hypothetical changes in market interest rates was within the Company's current limits.

Derivative Contracts. In the normal course of business, the Company uses derivative instruments to meet the needs of its customers and manage exposure to fluctuations in interest rates. For additional discussion on how derivatives in a hedging relationship (fair value hedges) are used to manage the Company's interest rate risk, see "Note 12. Derivatives and Hedging Activities" to the Unaudited Consolidated Financial Statements.

Evaluation of Disclosure Controls

Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, the CEO and CFO have concluded disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) are effective to ensure information required to be disclosed by the Company in reports it files or submits under the Exchange Act, as amended, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Additionally, the Company's disclosure controls and procedures were also effective in ensuring information required to be disclosed by the Company in the reports it files or is subject to under the Exchange Act is accumulated and communicated to the Company's management, including the CEO and CFO, to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

There have not been any changes in the Company's internal control over financial reporting during the quarter ended September 30, 2026, which have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

There have not been any material changes to the risk factors previously disclosed in Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2025.