← Back to ZION filing summaryOriginal filing text · Part I
Item 2 — Management's Discussion and Analysis
Zions Bancorporation, National Association · 10-Q · Q2 FY2026 · Period ended Jun 30, 2026
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FORWARD-LOOKING INFORMATION
This quarterly report contains “forward-looking statements” as defined under the Private Securities Litigation Reform Act of 1995. These statements reflect management’s current expectations and assumptions regarding future events and outcomes. However, they are inherently subject to known and unknown risks, uncertainties, and other factors that could cause actual results, performance, achievements, industry developments, or regulatory outcomes to differ materially from those expressed or implied. Forward-looking statements may include, among others:
•Statements concerning the beliefs, plans, objectives, goals, targets, commitments, designs, guidelines, expectations, anticipations, and future financial condition, operating results, and performance of Zions Bancorporation, National Association, and its subsidiaries (collectively “Zions Bancorporation, N.A.,” “the Bank,” “we,” “our,” “us”); and
•Statements preceded or followed by, or that include, terminology such as “may,” “might,” “can,” “continue,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “forecast,” “expect,” “intend,” “target,” “commit,” “design,” “plan,” “project,” “will,” or similar words and expressions, including their negative forms.
Forward-looking statements are not guarantees and should not be relied upon as representing management’s views as of any subsequent date. Actual results and outcomes may differ materially from those expressed or implied. Factors that could cause such differences include, but are not limited to:
•Changes in the quality, composition, and concentrations of our loan and investment securities portfolios;
•Changes in economic, political, and market conditions nationally and within our key markets in the Western United States, including changes in interest rates, inflation, monetary policy, fiscal, trade, and tax policies, government actions, and other macroeconomic factors that affect our financial results, customer activity, credit demand, and borrower performance;
•Changes in deposit levels and composition, access to wholesale funding, and the availability and cost of liquidity sources;
•Changes in our credit ratings;
•Competition from traditional and nonbank financial service providers, including credit unions, financial technology companies (“fintechs”), private credit funds, special-purpose charters, and other new and evolving industry participants;
•Our ability to execute strategic initiatives, manage expenses, attract and retain talent, and achieve our business objectives;
•Geopolitical developments, including wars, global conflicts, and environmental or catastrophic events, such as fires, natural disasters, pandemics, and other disruptions that may affect our operations and customers;
•Increased demand for and risks associated with the adoption and integration of emerging technologies and products, including tokenized deposits, stablecoins, blockchain, and artificial intelligence (“AI”);
•The occurrence of fraud, theft, or other forms of misconduct perpetrated by external parties, including customers and business partners, or by our own employees;
•Our ability to develop, maintain, and secure resilient technology systems and effective controls to detect and respond to fraud, cybersecurity threats, data breaches, and other operational disruptions, including increasingly sophisticated AI-enabled attacks;
•Our ability to effectively oversee third party providers and mitigate risks arising from supplier performance failures, cybersecurity incidents, technology disruptions, data breaches, or other operational deficiencies;
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•Changes in accounting standards, asset valuations and impairments, and our ability to access capital and funding markets on favorable terms;
•The impact of existing and proposed laws and regulations, supervisory expectations, and the outcome of legal or regulatory proceedings;
•Adverse developments affecting the banking industry that may negatively impact depositor, investor, or market confidence and public opinion; and
•Other assumptions, risks, and uncertainties described in this quarterly report and our other SEC filings.
Factors that could cause actual results or outcomes to differ materially from those expressed or implied in forward-looking statements are described in our 2025 Form 10-K and subsequent filings with the Securities and Exchange Commission (“SEC”), available at www.zionsbancorporation.com and www.sec.gov.
We caution against placing undue reliance on forward-looking statements, as they reflect our views only as of the date they are issued. Except as required by law, we expressly disclaim any obligation to update any factors or publicly announce revisions to forward-looking statements to reflect future events or developments.
RESULTS OF OPERATIONS
Comparisons discussed below are based on the current quarter relative to the same prior year period, unless otherwise noted. Explanations for changes in the current year-to-date period compared with the same prior year period are generally consistent with the quarter-to-date discussion, unless otherwise indicated. Growth rates of 100% or greater are considered not meaningful (“NM”), as they typically reflect a low starting point.
Second Quarter 2026 Financial Performance
Net Earnings Applicable to Common Shareholders (in millions) Diluted EPS Adjusted PPNR(in millions) 1 Efficiency Ratio 1
1 For information on non-GAAP financial measures, see page 39.
Executive Summary
Our financial performance in the second quarter of 2026 reflected meaningful year-over-year improvement in net earnings applicable to common shareholders, diluted earnings per share (“EPS”), and adjusted pre-provision net revenue (“PPNR”). Diluted EPS increased to $3.05 from $1.63 in the second quarter of 2025, primarily driven by continued growth in noninterest income, including two notable gains, as well as higher net interest income.
Noninterest income benefited from $252 million of pre-tax net gains, which contributed approximately $1.31 per diluted share (after-tax) and resulted in reported diluted EPS of $3.05. These gains included a $215 million gain from the sale of Visa Class B-1 shares and $37 million of net unrealized gains from Small Business Investment Company (“SBIC”) investments.
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In the prior year quarter, noninterest income included $9 million of net unrealized gains from SBIC investments, which contributed approximately $0.05 per diluted share (after-tax) and resulted in reported diluted EPS of $1.63. These favorable items were partially offset by higher noninterest expense. The efficiency ratio remained stable at 62.2%, unchanged from the prior year quarter, and improved from 65.0% in the preceding quarter.
•Net interest income increased $29 million, or 4%, compared with the prior year period, primarily driven by lower funding costs. This growth also benefited from an improved mix of average interest-earning assets, reflecting growth in higher-yielding loans and a decline in lower-yielding investment securities. As a result, the net interest margin increased to 3.27%, up from 3.17% in the prior year period, and remained unchanged from the previous quarter.
◦Average interest-earning assets increased $788 million, or 1%, compared with the prior year period. This was driven by a $1.4 billion increase in average loans and leases, partially offset by a $708 million decline in average investment securities.
◦Average interest-bearing liabilities declined $2.1 billion, or 4%, compared with the prior year period. This decline was primarily attributable to a $2.7 billion reduction in average borrowed funds, largely reflecting lower short-term borrowings. The decrease was partially offset by an increase in average long-term debt, resulting from senior note issuances over the past year, as well as a $571 million increase in average interest-bearing deposits.
•The provision for credit losses was $3 million, compared with negative $1 million in the prior year period.
•Customer-related noninterest income increased $18 million, or 11%, reflecting broad-based growth across multiple revenue streams. This increase was largely due to higher capital markets fees and income, as well as growth in loan-related fees and income and commercial account fees.
•Noncustomer-related noninterest income increased $252 million, primarily driven by the aforementioned notable gains.
•Noninterest expense increased $24 million, or 5%, primarily due to higher professional and legal services expense, increased salary and employee benefit costs reflecting higher incentive compensation, and increased technology, telecom, and information processing expenses. Additional increases in credit-related and occupancy and equipment costs were partially offset by a decline in deposit insurance and regulatory expense, reflecting a lower Federal Deposit Insurance Corporation (“FDIC”) special assessment estimate and higher prior-year costs.
•Total loans and leases increased $1.7 billion, or 3%, resulting from growth in the commercial and industrial portfolio and the term commercial real estate portfolio.
◦Net loan and lease charge-offs totaled $9 million, or 0.06% of average loans and leases annualized, compared with $10 million, or 0.07%, in the prior year quarter.
◦Nonperforming assets totaled $298 million, or 0.48% of total loans and leases and other real estate owned, compared with $313 million, or 0.51%. The decrease was primarily attributable to improvement in the term commercial real estate loan portfolio. Classified loans totaled $2.3 billion, or 3.72% of total loans and leases, compared with $2.7 billion, or 4.43%, in the prior year quarter.
•Total deposits increased $2.8 billion, or 4%, compared with the prior year quarter, primarily driven by a $2.0 billion increase in interest-bearing deposits, largely reflecting the impact of focused deposit growth initiatives. Customer deposits, excluding brokered deposits, totaled $72.7 billion, compared with $69.9 billion.
•Total borrowed funds decreased $3.6 billion, or 53%, compared with the prior year quarter, primarily reflecting a $4.6 billion reduction in short-term borrowings, driven by a decrease in short-term Federal Home Loan Bank (“FHLB”) advances. This decline was partially offset by increases in federal funds purchased, security repurchase agreements, and $1.0 billion of senior notes issued over the past year.
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On July 31, 2026, we completed our previously disclosed acquisition of Basis Multifamily Finance I, LLC, the agency lending platform and subsidiary of Basis Investment Group. The acquisition includes the platform’s experienced team, capabilities, and associated mortgage servicing rights. This transaction expands our product suite through participation in the Fannie Mae DUS® program and the Freddie Mac Optigo® Conventional and Small Balance Loan programs, enhancing our ability to meet the financing needs of multifamily owners, operators, and developers nationwide, and further strengthens our commercial real estate and capital markets businesses.
Net Interest Income and Net Interest Margin
NET INTEREST INCOME AND NET INTEREST MARGIN
Three Months Ended June 30, Amount change Percent change Six Months Ended June 30, Amount change Percent change
(Dollar amounts in millions) 2026 2025 2026 2025
Interest and fees on loans 1 $ 859 $ 875 $ (16) (2) % $ 1,700 $ 1,725 $ (25) (1) %
Interest on money market investments 43 50 (7) (14) 82 103 (21) (20)
Interest on securities 117 126 (9) (7) 233 251 (18) (7)
Total interest income 1,019 1,051 (32) (3) 2,015 2,079 (64) (3)
Interest on deposits 281 312 (31) (10) 556 638 (82) (13)
Interest on short- and long-term borrowings 61 91 (30) (33) 120 169 (49) (29)
Total interest expense 342 403 (61) (15) 676 807 (131) (16)
Net interest income $ 677 $ 648 $ 29 4 $ 1,339 $ 1,272 $ 67 5
Average interest-earning assets $ 84,354 $ 83,566 $ 788 1 % $ 83,874 $ 83,286 $ 588 1 %
Average interest-bearing liabilities $ 55,179 $ 57,305 $ (2,126) (4) $ 54,854 $ 57,313 $ (2,459) (4)
bps bps
Net interest margin 2 3.27% 3.17% 10 3.27% 3.14% 13
1 Includes interest income recoveries of less than $1 million and $2 million for the three months ended, and $1 million and $6 million for the six months ended June 30, 2026, and 2025, respectively.
2 Taxable-equivalent rates used where applicable.
Net interest income accounted for 60% of net revenue (defined as the sum of net interest income and noninterest income) in the second quarter of 2026, compared with 77% in the second quarter of 2025. The decline primarily reflects the impact of previously noted pre-tax net gains.
Net interest income increased $29 million, or 4%, compared with the prior year period, primarily driven by lower funding costs. This growth was further supported by an improved mix of average interest-earning assets, reflecting growth in higher-yielding loans and a reduction in lower-yielding investment securities. As a result, the net interest margin increased to 3.27%, up from 3.17% in the prior year period, and was unchanged from the previous quarter.
Yields on Interest-earning Assets
The following chart presents the changes in yields on average interest-earning assets:
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The yield on average interest-earning assets, net of hedging activity, declined 21 basis points (“bps”) in the second quarter of 2026, compared with the prior year period, reflecting the impact of lower interest rates. The net yield on average loans and leases decreased 25 bps, while the net yield on average investment securities declined 12 bps. Additionally, the yield on average money market investments decreased 65 bps, as the short-term nature of these assets resulted in quicker repricing in the declining interest rate environment.
Rates Paid on Interest-bearing Liabilities
The following chart presents the changes in rates paid on average interest-bearing liabilities:
The total cost of deposits declined 20 bps, while the average rate paid on total deposits and interest-bearing liabilities decreased 28 bps during the second quarter of 2026, compared with the prior year period, reflecting the lower interest rate environment. Rates paid on interest-bearing deposits declined 27 bps, while rates paid on total borrowed funds increased 13 bps.
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Interest-earning Assets
Average interest-earning assets increased $788 million, or 1%, compared with the prior year period. This was driven by a $1.4 billion increase in average loans and leases, partially offset by a $708 million decline in average investment securities.
Average loans and leases increased $1.4 billion, or 2%, to $61.9 billion, primarily due to growth in average commercial loans.
Average investment securities decreased $708 million, or 4%, to $17.7 billion, primarily due to principal reductions, net of reinvestments. The ongoing runoff of lower-yielding securities improved the earning asset mix and was a meaningful contributor to year-over-year net interest margin expansion.
Interest-bearing Liabilities
Average interest-bearing liabilities decreased $2.1 billion, or 4%, from the prior year quarter, reflecting lower average borrowed funds, partially offset by increases in average long-term debt and interest-bearing deposits.
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Average deposits increased $2.0 billion, or 3%, to $76.2 billion. Average noninterest-bearing deposits grew $1.4 billion, or 6%, primarily reflecting the migration of a consumer interest-bearing product into a new noninterest-bearing offering. As a result, noninterest-bearing deposits represented 34% of total deposits during the quarter, compared with 33% in the same prior year period. Average interest-bearing deposits increased $571 million, or 1%, largely driven by focused deposit growth initiatives.
Average borrowed funds decreased $2.7 billion, or 35%, to $5.1 billion, primarily due to a $3.7 billion, or 54%, reduction in average short-term borrowings. This decrease was partially offset by a $991 million, or 103%, increase in average long-term debt, reflecting the issuance of $500 million of 4.48% Fixed-to-Floating Senior Notes in February 2026 and $500 million of 4.70% Fixed-to-Floating Senior Notes in August 2025.
For more information regarding our investment securities portfolio and borrowed funds, as well as our approach to managing liquidity risk, refer to the “Investment Securities Portfolio” section on page 17 and the “Liquidity Risk Management” section on page 34. For a further discussion of the impacts of market rates on net interest income and our interest rate risk management practices, see the “Interest Rate and Market Risk Management” section on page 32.
Average Balance Sheets, Yields, and Rates
The following schedule summarizes the average balances, the amount of interest earned or paid, and the applicable yields for interest-earning assets and the costs of interest-bearing liabilities.
Effective in the first quarter of 2026, we changed our accounting policy to present qualifying derivative assets and liabilities, along with the associated rights to reclaim or obligations to return cash collateral, on a net basis for all eligible arrangements rather than on a gross basis. The average balance of other short-term borrowings is presented net of derivative cash collateral received of $429 million and $327 million for the three and six months ended June 30, 2026, respectively, while the related interest expense is recorded on a gross basis. As a result, the calculated yield on this line item increased by approximately 66 bps and 47 bps for the three and six months ended June 30, 2026, respectively. There was no impact on average balances from such netting for the three and six months ended June 30, 2025.
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CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS, AND RATES
(Unaudited) Three Months Ended June 30, 2026 Three Months Ended June 30, 2025
(Dollar amounts in millions) Average balance Interest Yield/Rate 1 Average balance Interest Yield/Rate 1
ASSETS
Money market investments:
Interest-bearing deposits $ 1,939 $ 19 4.03 % $ 1,543 $ 17 4.50 %
Federal funds sold and securities purchased under agreements to resell 2,368 24 4.03 2,757 33 4.77
Total money market investments 4,307 43 4.03 4,300 50 4.68
Trading securities 273 3 4.84 244 3 4.77
Investment securities:
Available-for-sale 9,181 69 3.02 9,093 73 3.27
Held-to-maturity 8,555 47 2.19 9,351 52 2.22
Total investment securities 17,736 116 2.62 18,444 125 2.74
Loans held for sale 180 3 NM 118 1 NM
Loans and leases, net of unearned income and fees
Commercial 32,230 453 5.64 31,383 461 5.89
Commercial real estate 13,839 212 6.14 13,612 226 6.64
Consumer 15,789 200 5.10 15,465 198 5.14
Total loans and leases 61,858 865 5.61 60,460 885 5.86
Total interest-earning assets 84,354 1,030 4.90 83,566 1,064 5.11
Cash and due from banks 671 703
Allowance for credit losses on loans and debt securities (665) (694)
Goodwill and intangibles 1,088 1,097
Other assets 4,817 5,313
Total assets $ 90,265 $ 89,985
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits:
Savings and money market $ 40,452 $ 200 1.99 % $ 38,877 $ 208 2.15 %
Time 9,655 81 3.36 10,659 104 3.90
Total interest-bearing deposits 50,107 281 2.25 49,536 312 2.52
Borrowed funds:
Federal funds and security repurchase agreements 585 5 3.66 1,463 15 4.36
Other short-term borrowings 2 2,530 29 4.57 5,340 60 4.48
Long-term debt 1,957 27 5.52 966 16 6.41
Total borrowed funds 5,072 61 4.83 7,769 91 4.70
Total interest-bearing liabilities 55,179 342 2.49 57,305 403 2.82
Noninterest-bearing demand deposits 26,131 24,730
Other liabilities 1,432 1,527
Total liabilities 82,742 83,562
Shareholders’ equity:
Preferred equity 66 66
Common equity 7,457 6,357
Total shareholders’ equity 7,523 6,423
Total liabilities and shareholders’ equity $ 90,265 $ 89,985
Spread on average interest-bearing funds 2.41 % 2.29 %
Net impact of noninterest-bearing sources of funds 0.86 % 0.88 %
Net interest margin $ 688 3.27 % $ 661 3.17 %
Memo: total cost of deposits $ 76,238 281 1.48 % $ 74,266 312 1.68 %
Memo: total deposits and interest-bearing liabilities $ 81,310 342 1.69 % $ 82,035 403 1.97 %
1 Taxable-equivalent rates used where applicable.
2 Derivative netting increased the calculated yield by approximately 66 bps for the three months ended June 30, 2026; there was no comparable impact in 2025. See discussion above for more information.
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(Unaudited) Six Months Ended June 30, 2026 Six Months Ended June 30, 2025
(Dollar amounts in millions) Average balance Interest Yield/Rate 1 Average balance Interest Yield/Rate 1
ASSETS
Money market investments:
Interest-bearing deposits $ 1,906 $ 37 3.91 % $ 1,587 $ 36 4.55 %
Federal funds sold and securities purchased under agreements to resell 2,274 45 4.06 2,863 67 4.74
Total money market investments 4,180 82 3.99 4,450 103 4.67
Trading securities 165 4 4.77 135 3 4.70
Investment securities:
Available-for-sale 9,207 138 3.02 9,097 147 3.27
Held-to-maturity 8,656 94 2.21 9,453 105 2.24
Total investment securities 17,863 232 2.62 18,550 252 2.74
Loans held for sale 171 6 NM 101 2 NM
Loans and leases, net of unearned income and fees
Commercial 32,011 895 5.64 31,209 909 5.87
Commercial real estate 13,687 418 6.16 13,585 446 6.62
Consumer 15,797 400 5.11 15,256 388 5.13
Total loans and leases 61,495 1,713 5.62 60,050 1,743 5.85
Total interest-earning assets 83,874 2,037 4.90 83,286 2,103 5.09
Cash and due from banks 708 704
Allowance for credit losses on loans and debt securities (671) (693)
Goodwill and intangibles 1,089 1,075
Other assets 4,871 5,344
Total assets $ 89,871 $ 89,716
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits:
Savings and money market $ 40,000 $ 391 1.97 % $ 39,259 $ 421 2.16 %
Time 9,690 165 3.43 10,840 217 4.03
Total interest-bearing deposits 49,690 556 2.26 50,099 638 2.57
Borrowed funds:
Federal funds and security repurchase agreements 586 10 3.63 1,591 34 4.36
Other short-term borrowings 2 2,722 59 4.37 4,662 104 4.50
Long-term debt 1,856 51 5.54 961 31 6.39
Total borrowed funds 5,164 120 4.71 7,214 169 4.72
Total interest-bearing liabilities 54,854 676 2.49 57,313 807 2.84
Noninterest-bearing demand deposits 26,161 24,491
Other liabilities 1,464 1,576
Total liabilities 82,479 83,380
Shareholders’ equity:
Preferred equity 66 66
Common equity 7,326 6,270
Total shareholders’ equity 7,392 6,336
Total liabilities and shareholders’ equity $ 89,871 $ 89,716
Spread on average interest-bearing funds 2.41 % 2.25 %
Net impact of noninterest-bearing sources of funds 0.86 % 0.89 %
Net interest margin $ 1,361 3.27 % $ 1,296 3.14 %
Memo: total cost of deposits $ 75,851 556 1.48 % $ 74,590 638 1.72 %
Memo: total deposits and interest-bearing liabilities $ 81,015 676 1.68 % $ 81,804 807 1.98 %
1 Taxable-equivalent rates used where applicable.
2 Derivative netting increased the calculated yield by approximately 47 bps for the six months ended June 30, 2026; there was no comparable impact in 2025. See discussion above for more information.
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The Allowance and Provision for Credit Losses
The allowance for credit losses (“ACL”) comprises both the allowance for loan and lease losses (“ALLL”) and the reserve for unfunded lending commitments (“RULC”). The ALLL represents the estimated current expected credit losses related to the loan and lease portfolio as of the balance sheet date. The RULC represents the estimated reserve for current expected credit losses associated with off-balance sheet commitments. Changes in the ALLL and RULC, net of charge-offs and recoveries, are recognized as the provision for loan and lease losses and the provision for unfunded lending commitments, respectively, on the consolidated statement of income. The ACL for debt securities is estimated separately from loans and is included in “Investment securities” on the consolidated balance sheet.
The ACL was $707 million at June 30, 2026, compared with $732 million at June 30, 2025. The year-over-year decrease in the ACL primarily reflects changes in loan portfolio composition and lower reserves associated with commercial real estate (“CRE”) portfolio-specific risks, partially offset by more adverse economic forecasts and increased lending activity. The ratio of ACL to total loans and leases was 1.13% at June 30, 2026, compared with 1.20% at June 30, 2025.
The following schedule illustrates the primary drivers of changes in the ACL compared with the prior year period:
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Our ACL estimate is derived using econometric loss models that incorporate multiple economic scenarios, including optimistic, baseline, and stressed conditions. These scenarios are weighted to determine the overall credit loss estimate, and management may adjust the weightings based on its assessment of current economic conditions and reasonable and supportable forecasts. The previous schedule summarizes the key drivers of the year-over-year change in the ACL, reflecting the combined effect of economic forecasts, credit quality trends and portfolio-specific risks, and portfolio composition.
The second bar reflects the impact of changes in economic forecasts and current economic conditions, incorporating management’s judgment in determining the scenario weightings for the current period. These changes resulted in a $30 million increase in the ACL compared with the prior year, primarily driven by the increased weighting assigned to more adverse economic scenarios.
The third bar captures changes in credit quality factors, including risk grade migration, portfolio-specific risks, and specific reserves on loans. Collectively, these factors contributed to a $20 million decrease in the ACL, largely driven by reduced CRE portfolio-specific risks.
The fourth bar represents the effect of changes in the composition of the loan portfolio, including shifts in loan balances and mix, the aging of the portfolio, and other qualitative risk factors. These changes resulted in a $35 million decrease in the ACL, largely driven by changes in the loan portfolio mix, partially offset by $1.7 billion in period-end loan growth.
The provision for credit losses, which includes both the provision for loan and lease losses and the provision for unfunded lending commitments, was $3 million in the second quarter of 2026, compared with negative $1 million in the second quarter of 2025. The provision for securities losses was less than $1 million during both the second quarters of 2026 and 2025.
For more information regarding the methodology used to determine the appropriate levels of the ALLL and RULC, see “Credit Risk Management” on page 21 and Note 6 in our 2025 Form 10-K.
Noninterest Income
Noninterest income is comprised of revenue generated from products and services that typically do not bear an associated interest rate or yield. It is categorized as either customer-related or noncustomer-related. Customer-related noninterest income excludes items such as securities gains and losses, dividends, and insurance-related income.
Noninterest income accounted for 40% of total net revenue (defined as the sum of net interest income and noninterest income) in the second quarter of 2026, compared with 23% in the second quarter of 2025. Noninterest income increased $270 million, or 142%, from the prior year period, primarily driven by the previously discussed pre-tax net gains.
The following schedule presents a comparison of the major components of noninterest income:
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NONINTEREST INCOME
Three Months Ended June 30, Amount change Percent change Six Months Ended June 30, Amount change Percent change
(Dollar amounts in millions) 2026 2025 2026 2025
Commercial account fees $ 49 $ 46 $ 3 7 % $ 97 $ 91 $ 6 7 %
Card fees 24 24 — — 46 47 (1) (2)
Retail and business banking fees 20 19 1 5 40 36 4 11
Loan-related fees and income 22 19 3 16 45 36 9 25
Capital markets fees and income 36 28 8 29 64 55 9 16
Wealth management fees 15 14 1 7 31 29 2 7
Other customer-related fees 16 14 2 14 31 28 3 11
Customer-related noninterest income 182 164 18 11 354 322 32 10
Dividends and other income 9 12 (3) (25) 21 19 2 11
Securities gains (losses), net 269 14 255 NM 272 20 252 NM
Noncustomer-related noninterest income 278 26 252 NM 293 39 254 NM
Total noninterest income $ 460 $ 190 $ 270 NM $ 647 $ 361 $ 286 79
Adjusted customer-related noninterest income 1 $ 181 $ 164 $ 17 10 % $ 355 $ 322 $ 33 10 %
1 Net of credit valuation adjustment (“CVA”). For information on non-GAAP financial measures, see page 39.
Customer-related Noninterest Income
Customer-related noninterest income increased $18 million, or 11%, compared with the prior year period, reflecting broad-based growth across nearly all revenue streams. Capital markets fees and income increased $8 million, largely attributable to higher real estate capital markets activity and increased investment banking advisory fees. Loan-related fees and income increased $3 million, supported by higher residential mortgage loan sales activity, while the $3 million increase in commercial account fees was mainly due to growth in account analysis fees.
Noncustomer-related Noninterest Income
Noncustomer-related noninterest income increased $252 million, compared with the prior year period, primarily driven by a $215 million gain on the sale of Class B-1 shares of Visa, Inc., as well as $44 million in unrealized gains within the SBIC investment portfolio. In the prior year period, we recognized an $11 million unrealized gain related to the successful completion of the initial public offering of one of our SBIC investments.
Noninterest Expense
The following schedule presents a comparison of the major components of noninterest expense:
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NONINTEREST EXPENSE
Three Months Ended June 30, Amount change Percent change Six Months Ended June 30, Amount change Percent change
(Dollar amounts in millions) 2026 2025 2026 2025
Salaries and employee benefits $ 344 $ 336 $ 8 2 % $ 705 $ 678 $ 27 4 %
Technology, telecom, and information processing 72 65 7 11 146 135 11 8
Occupancy and equipment, net 44 40 4 10 85 81 4 5
Professional and legal services 22 13 9 69 42 26 16 62
Marketing and business development 14 12 2 17 27 23 4 17
Deposit insurance and regulatory expense 7 20 (13) (65) 22 42 (20) (48)
Credit-related expense 10 6 4 67 15 12 3 25
Other real estate expense, net 1 — 1 NM 1 — 1 NM
Other 37 35 2 6 70 68 2 3
Total noninterest expense $ 551 $ 527 $ 24 5 $ 1,113 $ 1,065 $ 48 5
Adjusted noninterest expense (non-GAAP) $ 546 $ 521 $ 25 5 % $ 1,104 $ 1,054 $ 50 5 %
Noninterest expense increased $24 million, or 5%, compared with the prior year quarter. Professional and legal services expense increased $9 million, primarily reflecting higher outsourced services and technology consulting costs. Salaries and employee benefits expense increased $8 million, largely due to higher incentive compensation accruals aligned with improved profitability, as well as increased employee benefits costs.
Technology, telecom, and information processing expense increased $7 million, driven by higher application software, licensing, and maintenance costs. Credit-related expense rose $4 million, primarily due to increased loan-related legal costs, while occupancy and equipment expense increased $4 million, mainly reflecting higher rental and building maintenance costs. Other noninterest expense increased $2 million, largely due to a higher success fee accrual associated with SBIC investments and higher legal reserves in the prior year quarter, partially offset by reductions in other miscellaneous expenses.
These increases were partially offset by a $13 million decline in deposit insurance and regulatory expense, driven by a $6 million decrease from an updated estimate of the FDIC special assessment, as well as higher FDIC assessment costs in the prior year quarter associated with the level of classified loans.
Adjusted noninterest expense increased $25 million, or 5%, primarily due to the same factors discussed above. The efficiency ratio remained stable at 62.2%, consistent with the prior year quarter, and improved from 65.0% in the preceding quarter. For more information regarding non-GAAP financial measures, see page 39.
Technology Spend
We invest in technology initiatives designed to improve our products and services, increase our operational efficiency, and enable us to remain competitive. We report these investments as technology spend, which includes the following:
•Technology, telecom, and information processing expense — includes current period expenses presented on the consolidated statement of income related to application software licensing and maintenance, telecommunications, and data processing, less related amortization and depreciation of capitalized technology investments;
•Other technology-related expense — includes related noncapitalized salaries and employee benefits, occupancy and equipment, and professional and legal services; and
•Technology investments — includes capitalized technology infrastructure equipment, hardware, and software (both purchased and internally developed).
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The following schedule presents the composition of our technology spend:
TECHNOLOGY SPEND
Three Months Ended June 30, Amount change Percent change Six Months Ended June 30, Amount change Percent change
(Dollar amounts in millions) 2026 2025 2026 2025
Technology, telecom, and information processing expense $ 72 $ 65 $ 7 11 % $ 146 $ 135 $ 11 8 %
Less: related amortization and depreciation (18) (19) 1 (5) (37) (38) 1 (3)
Other technology-related expense 67 62 5 8 132 122 10 8
Capitalized technology investments 10 17 (7) (41) 25 29 (4) (14)
Total technology spend $ 131 $ 125 $ 6 5 $ 266 $ 248 $ 18 7
Total technology spend increased $6 million, or 5%, compared with the prior year quarter. The increase was primarily due to higher technology, telecom, and information processing expenses, reflecting previously noted increases in application software, licensing, and maintenance costs, as well as higher technology-related expense associated with expanded professional and outsourced technology services. These increases were partially offset by a decline in capitalized technology investments, primarily due to higher investment levels in the prior year.
Income Taxes
The following schedule summarizes the income tax expense and effective tax rates for the periods presented:
INCOME TAXES
Three Months Ended June 30, Six Months Ended June 30,
(Dollar amounts in millions) 2026 2025 2026 2025
Income before income taxes $ 583 $ 312 $ 877 $ 551
Income tax expense 130 68 191 137
Effective tax rate 22.3 % 21.8 % 21.8 % 24.9 %
The effective tax rate was 22.3% and 21.8% for the three months ended June 30, 2026 and 2025, respectively, and 21.8% and 24.9% for the six months ended June 30, 2026 and 2025, respectively. The year-over-year decrease in the six-month rate was primarily due to Utah tax legislation enacted in the first quarter of 2025, which required remeasurement of the net deferred tax asset (“DTA”) and resulted in additional tax expense in the prior year period.
For more information about the factors affecting our effective tax rates, as well as details on deferred income tax assets and liabilities, see Note 11 of the Notes to Consolidated Financial Statements.
BALANCE SHEET ANALYSIS
Investment Securities Portfolio
Investment securities are classified as either available-for-sale (“AFS”) or held-to-maturity (“HTM”), and are primarily used to provide balance sheet liquidity. The portfolio largely consists of securities that can be readily converted to cash or used to generate liquidity through secured borrowing agreements, without the need to sell the securities. Our investment securities portfolio also helps to balance the inherent interest rate mismatch between loans and deposits, thereby helping to preserve the economic value of shareholders’ equity. The estimated deposit duration at June 30, 2026 was assumed to be longer than the loan duration (including swaps). At June 30, 2026, the investment securities portfolio had an estimated duration of 3.6 years, compared with 3.8 years at December 31, 2025. The duration, which measures price sensitivity to changes in interest rates, declined modestly during the period, primarily reflecting the natural aging of the portfolio.
For more information about our borrowing capacity associated with the investment securities portfolio and our approach to managing liquidity risk, refer to the “Liquidity Risk Management” section on page 34. For more
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information on fair value measurements and the accounting for our investment securities portfolio, refer to Note 3 and Note 5 of the Notes to Consolidated Financial Statements.
The following schedule presents the major components of our investment securities portfolio:
INVESTMENT SECURITIES PORTFOLIO
June 30, 2026 December 31, 2025
(In millions) Par Value Amortized cost Fair value Par Value Amortized cost Fair value
Available-for-sale
U.S. Treasury securities $ 2,100 $ 2,097 $ 1,978 $ 1,500 $ 1,500 $ 1,411
U.S. Government agencies and corporations:
Agency securities 286 282 267 317 313 298
Agency guaranteed mortgage-backed securities 6,834 6,826 5,830 7,213 7,207 6,223
Small Business Administration loan-backed securities 284 301 288 334 355 341
Municipal securities 835 895 851 884 953 909
Other debt securities 25 25 25 25 25 25
Total available-for-sale 10,364 10,426 9,239 10,273 10,353 9,207
Held-to-maturity
U.S. Government agencies and corporations:
Agency securities 132 132 128 137 137 134
Agency guaranteed mortgage-backed securities 9,544 8,103 8,079 10,008 8,459 8,545
Municipal securities 242 242 233 271 271 261
Total held-to-maturity 9,918 8,477 8,440 10,416 8,867 8,940
Total investment securities $ 20,282 $ 18,903 $ 17,679 $ 20,689 $ 19,220 $ 18,147
The amortized cost of total investment securities decreased $317 million, or 2%, from December 31, 2025, primarily due to principal reductions, net of reinvestments. At both June 30, 2026 and December 31, 2025, approximately 6% of the portfolio consisted of floating-rate instruments. At June 30, 2026, we maintained active pay-fixed interest rate swaps with an aggregate notional amount of $4.6 billion that are designated as fair value hedges of fixed-rate AFS securities and effectively convert the fixed interest income on the hedged portion of the securities to a floating rate.
At June 30, 2026, the AFS investment securities portfolio included approximately $62 million in net premium, distributed across various security categories. Taxable-equivalent premium amortization for these investment securities totaled $11 million for the second quarter of 2026, compared with $12 million in the same prior year period.
For more information regarding our investment securities portfolio, swaps, and related unrealized gains and losses, refer to the “Interest Rate Risk Management” section on page 32, the “Capital Management” section on page 36, and Note 5 of the Notes to Consolidated Financial Statements.
Municipal Investments and Extensions of Credit
We support our communities by offering a range of financial products and services to state and local governments (“municipalities”), including deposit services, lending solutions, and investment banking services. Additionally, we invest in securities issued by municipal entities. Our municipal lending portfolio generally includes obligations that are repaid from, or secured by, the general funds or pledged revenues of municipalities, as well as by real estate or equipment. We also extend credit to private commercial and 501(c)(3) not-for-profit organizations that utilize a pass-through municipal structure to benefit from favorable tax treatment.
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The following schedule presents our total investments and extensions of credit to municipalities:
MUNICIPAL INVESTMENTS AND EXTENSIONS OF CREDIT
(In millions) June 30, 2026 December 31, 2025
Loans and leases $ 4,173 $ 4,294
Unfunded lending commitments 388 384
Available-for-sale securities 851 909
Held-to-maturity securities 242 271
Trading securities 319 64
Total $ 5,973 $ 5,922
Our municipal loans and securities are primarily concentrated within our geographic footprint. Municipal securities are internally risk-graded using methodologies consistent with those applied to loans, with risk-grading frameworks tailored to the size and characteristics of the underlying credit exposure. Internal risk ratings—Pass, Special Mention, and Substandard—align with regulatory risk classifications. At June 30, 2026, all municipal securities were classified as Pass.
For additional information regarding the credit quality of our municipal loans and securities, see Notes 5 and 6 of the Notes to Consolidated Financial Statements.
Loan and Lease Portfolio
We offer a wide range of lending products to commercial customers, primarily small- and medium-sized businesses, as well as other products secured by CRE. Additionally, we provide various retail banking products and services to consumers and small businesses. The following schedule presents the composition of our loan and lease portfolio:
LOAN AND LEASE PORTFOLIO
June 30, 2026 December 31, 2025
(Dollar amounts in millions) Amount % of total loans Amount % of total loans
Commercial:
Commercial and industrial $ 19,131 30.6 % $ 18,111 29.7 %
Owner-occupied 9,336 14.9 9,274 15.2
Municipal 4,173 6.7 4,294 7.1
Total commercial 32,640 52.2 31,679 52.0
Commercial real estate:
Term 11,850 19.0 11,234 18.4
Construction and land development 2,213 3.5 2,162 3.6
Total commercial real estate 14,063 22.5 13,396 22.0
Consumer:
1-4 family residential 10,293 16.5 10,462 17.2
Home equity credit line 4,077 6.5 3,950 6.5
Construction and other consumer real estate 757 1.2 782 1.3
Bankcard and other revolving plans 537 0.9 515 0.8
Other 114 0.2 116 0.2
Total consumer 15,778 25.3 15,825 26.0
Total loans and leases $ 62,481 100.0 % $ 60,900 100.0 %
For the first six months of 2026, loans and leases increased $1.6 billion, or 3%, to $62.5 billion at June 30, 2026, from $60.9 billion at December 31, 2025, primarily driven by growth in commercial and industrial and term commercial real estate loans. As a result, the ratio of loans and leases to total assets increased to 70% from 69% at December 31, 2025. Commercial and industrial loans remained the largest loan segment, representing 31% of total loans at June 30, 2026, compared with 30% at December 31, 2025.
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Other Noninterest-Bearing Investments
Other noninterest-bearing investments consist of equity investments held primarily for capital appreciation, dividends, or to meet certain regulatory requirements. The following schedule presents our related investments.
OTHER NONINTEREST-BEARING INVESTMENTS
(Dollar amounts in millions) June 30, 2026 December 31, 2025 Amount change Percent change
Bank-owned life insurance $ 579 $ 573 $ 6 1 %
Federal Home Loan Bank stock 10 100 (90) (90)
Federal Reserve stock 52 54 (2) (4)
Farmer Mac stock 33 31 2 6
SBIC investments 330 271 59 22
Other 57 47 10 21
Total other noninterest-bearing investments $ 1,061 $ 1,076 $ (15) (1)
Other noninterest-bearing investments decreased $15 million, or 1%, during the first six months of 2026. The decrease was primarily driven by lower holdings of FHLB stock, reflecting a significant reduction in FHLB borrowings. To maintain borrowing capacity, we are required to hold FHLB stock equal to 4% to 5% of outstanding FHLB borrowings. This decrease was partially offset by growth in the SBIC investment portfolio, primarily resulting from valuation adjustments on related investments.
Premises, Equipment, and Software
We continue to invest in lending, deposit, and other customer-focused technology initiatives to further modernize our systems, enhance the customer experience, and improve operational efficiency. For additional information regarding related assets, capitalized costs, and their accounting treatment, see “Premises, Equipment, and Software” in MD&A and Note 9 of the Notes to Consolidated Financial Statements in our 2025 Form 10-K.
Deposits
Deposits are our primary funding source. The following schedule presents the composition of our deposit portfolio:
DEPOSIT PORTFOLIO
June 30, 2026 December 31, 2025
(Dollar amounts in millions) Amount % of total deposits Amount % of total deposits
Deposits by type
Noninterest-bearing demand $ 26,233 34.2 % $ 25,823 34.1 %
Interest-bearing:
Savings and money market 40,657 53.1 39,914 52.8
Time 5,783 7.6 6,070 8.0
Brokered 3,935 5.1 3,837 5.1
Total interest-bearing 50,375 65.8 49,821 65.9
Total deposits $ 76,608 100.0 % $ 75,644 100.0 %
Customer deposits (excludes brokered deposits) $ 72,673 $ 71,807
Deposit-related metrics
Estimated amount of insured deposits $ 42,207 55 % $ 41,228 55 %
Estimated amount of uninsured deposits 34,401 45 34,416 45
Estimated amount of collateralized deposits 1 2,728 4 3,212 4
Loan-to-deposit ratio 82% 81%
1 Includes both insured and uninsured deposits.
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Total deposits increased $1.0 billion, or 1%, from December 31, 2025, reflecting growth in both interest-bearing and noninterest-bearing deposits. Growth in interest-bearing deposits was driven by focused deposit-gathering initiatives, while noninterest-bearing demand deposits increased due to continued growth in more granular depositor balances.
At June 30, 2026, customer deposits, excluding brokered deposits, totaled $72.7 billion, up from $71.8 billion at December 31, 2025. These balances included approximately $6.7 billion and $6.8 billion of reciprocal deposits, respectively.
At June 30, 2026, the estimated amount of uninsured deposits totaled $34.4 billion, or 45% of total deposits, unchanged from December 31, 2025. The loan-to-deposit ratio was 82% at June 30, 2026, compared with 81% at December 31, 2025. For additional information regarding liquidity, including the ratio of available liquidity to uninsured deposits, see “Liquidity Risk Management” on page 34.
RISK MANAGEMENT
We are exposed to a broad range of risks, including credit risk, interest rate and market risk, liquidity risk, strategic and business risk, operational risk, technology risk, cybersecurity risk, capital/financial reporting risk, legal/compliance risk (including regulatory risk), and reputational risk. Oversight of these risks is conducted through various management committees, with the Enterprise Risk Management Committee serving as the primary coordinating body. To address these risks, we employ comprehensive risk management practices designed to promote prudent risk-taking and effective oversight. Risk management is embedded in our operations and functions as a critical driver of overall performance, closely aligned with our key strategic objectives. For a more comprehensive discussion of these risks, see “Risk Factors” in our 2025 Form 10-K.
Credit Risk Management
Credit risk represents the potential for loss resulting from the failure of a borrower, guarantor, or other obligor to perform in accordance with the terms of a credit-related agreement. This risk arises primarily from our lending activities and from off-balance sheet credit instruments.
Our approach to credit risk management is supported by formal credit policies and standards, risk management practices, and independent credit examination functions that together establish a consistent framework for sound underwriting and credit decision-making across our local banking affiliates. We emphasize strong underwriting standards and the early identification of potential problem credits to facilitate timely corrective actions and mitigate potential losses. For a more comprehensive discussion of our credit risk management, see “Credit Risk Management” in our 2025 Form 10-K.
U.S. Government Agency Guaranteed Loans
We participate in several guaranteed lending programs sponsored by United States (“U.S.”) government agencies, including the U.S. Small Business Administration (“SBA”), Federal Housing Authority, U.S. Department of Veterans Affairs, Export-Import Bank of the U.S., and the U.S. Department of Agriculture. At June 30, 2026, approximately $651 million in loans were guaranteed, primarily by the SBA.
The following schedule presents the composition of our U.S. government agency guaranteed loans:
U.S. GOVERNMENT AGENCY GUARANTEED LOANS
June 30, 2026 December 31, 2025
(Dollar amounts in millions) Amount Percent guaranteed Amount Percent guaranteed
Commercial $ 819 76 % $ 766 77 %
Commercial real estate 33 76 31 71
Consumer 4 100 4 100
Total loans $ 856 76 $ 801 77
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Commercial Lending
The following schedule presents the composition of our commercial lending portfolio:
COMMERCIAL LENDING PORTFOLIO
June 30, 2026 December 31, 2025
(Dollar amounts in millions) Amount % of total commercial loans Amount % of total commercial loans Amount change Percent change
Commercial:
Commercial and industrial $ 19,131 58.6 % $ 18,111 57.2 % $ 1,020 5.6 %
Owner-occupied 9,336 28.6 9,274 29.3 62 0.7
Municipal 4,173 12.8 4,294 13.5 (121) (2.8)
Total commercial $ 32,640 100.0 % $ 31,679 100.0 % $ 961 3.0
1 Effective March 31, 2026, balances previously reported as “Leasing” were reclassified to the “Commercial and industrial” loan segment. Prior period amounts have been reclassified to conform to the current presentation. At June 30, 2026 and December 31, 2025, the leasing portfolio totaled $352 million and $367 million, respectively.
Our commercial loan portfolio spans a broad range of industries and generally carries maturities of one to five years, with amortization schedules determined by the nature of the underlying collateral and guarantees. These loans are typically structured to meet diverse financing needs and may take the form of seasonal, term, working capital, or bridge loans, offered as revolving and non-revolving lines of credit, amortizing term loans, guidance facilities, or single-payment loans. Loan agreements typically include covenants requiring borrowers to provide periodic financial statements, enabling ongoing monitoring of business performance, leverage, debt service coverage, and liquidity.
The underwriting process for commercial loans focuses on a comprehensive evaluation of management quality, financial performance, industry dynamics, sponsorship (where applicable), and transaction structure. Credit enhancements are generally secured through collateral and guarantees from the owners or sponsors. Prospective cash flows are stress-tested under various downside scenarios, including revenue decline, margin compression, and interest rate volatility.
The following schedule presents the geographic distribution of our commercial lending portfolio, based on the location of the primary borrower:
COMMERCIAL LENDING BY GEOGRAPHY
June 30, 2026 December 31, 2025
(Dollar amounts in millions) Amount % of total Nonaccrual loans Amount % of total Nonaccrual loans
Commercial:
Arizona $ 2,307 7.1 % $ 5 $ 2,338 7.4 % $ 7
California 6,388 19.6 85 6,351 20.0 68
Colorado 1,682 5.2 3 1,710 5.4 4
Nevada 1,403 4.3 2 1,384 4.4 2
Texas 8,343 25.6 28 7,978 25.2 32
Utah/Idaho 7,013 21.4 19 6,479 20.4 23
Washington/Oregon 1,404 4.3 6 1,425 4.5 8
Other 1 4,100 12.5 4 4,014 12.7 2
Total commercial $ 32,640 100.0 % $ 152 $ 31,679 100.0 % $ 146
1 No other geography exceeded 1.9% and 2.1% for June 30, 2026 and December 31, 2025, respectively.
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The following schedule presents the industry distribution of our commercial lending portfolio, classified based on the North American Industry Classification System:
COMMERCIAL LENDING BY INDUSTRY
June 30, 2026 December 31, 2025
(Dollar amounts in millions) Amount % of total Nonaccrual loans Amount % of total Nonaccrual loans
Real estate, rental, and leasing $ 3,419 10.5 % $ 20 $ 3,321 10.5 % $ 32
Retail trade 2,863 8.8 12 2,810 8.9 6
Manufacturing 2,788 8.5 31 2,591 8.2 20
Finance and insurance 2,519 7.7 9 2,306 7.3 10
Healthcare and social assistance 2,344 7.2 9 2,342 7.4 7
Wholesale trade 2,322 7.1 1 1,870 5.9 1
Public administration 1,829 5.6 — 2,226 7.0 —
Hospitality and food services 1,703 5.2 7 1,423 4.5 2
Transportation and warehousing 1,598 4.9 4 1,567 4.9 6
Utilities 1 1,561 4.8 — 1,591 5.0 —
Construction 1,539 4.7 9 1,529 4.8 13
Educational services 1,305 4.0 5 1,187 3.7 —
Other Services (except Public administration) 1,212 3.7 2 1,098 3.5 2
Mining, quarrying, and oil and gas extraction 1,202 3.7 6 1,284 4.1 —
Professional, scientific, and technical services 1,030 3.2 3 1,071 3.4 3
Other 2 3,406 10.4 34 3,463 10.9 44
Total $ 32,640 100.0 % $ 152 $ 31,679 100.0 % $ 146
1 Includes primarily utilities, power, and renewable energy.
2 No other industry group exceeded 2.9% and 3.2% for June 30, 2026 and December 31, 2025, respectively.
As previously noted, our commercial lending portfolio is well-diversified across both geographic regions and industry sectors. Given ongoing investor interest in loans extended to nondepository financial institutions (“NDFIs”), we provided the following information regarding these exposures within our commercial lending portfolio.
Loans to Nondepository Financial Institutions (NDFIs)
NDFIs are financial entities that provide banking-like services but generally do not accept public deposits and are not subject to federal banking regulation. We provide financing to a diversified range of NDFIs, including mortgage and business credit intermediaries, private equity funds, consumer credit intermediaries, insurance companies, investment firms, and other financial intermediaries. These exposures are actively managed through concentration limits, stress testing, compliance monitoring, and ongoing assessments of portfolio quality, liquidity, and capital adequacy. For a more detailed discussion of these NDFIs, see the corresponding section in our 2025 Form 10-K.
At June 30, 2026, loans to NDFIs totaled $2.5 billion, representing 8% of total commercial loans and 4% of total loans, compared with $2.0 billion, or 6% of total commercial loans and 3% of total loans, at December 31, 2025.
The following schedule presents the composition of our NDFI lending portfolio:
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NDFI LENDING PORTFOLIO
June 30, 2026 December 31, 2025
(Dollar amounts in millions) Amount % of total Nonaccrual loans Amount % of total Nonaccrual loans
Mortgage credit intermediaries $ 547 21.7 % $ 9 $ 352 17.6 % $ 9
Business credit intermediaries 991 39.4 — 968 48.4 —
Private equity funds 219 8.7 — 121 6.1 —
Consumer credit intermediaries 307 12.2 — 303 15.2 —
Other financial institutions 454 18.0 — 253 12.7 1
Total NDFI portfolio $ 2,518 100.0 % $ 9 $ 1,997 100.0 % $ 10
NDFI loan balances increased during the first six months of 2026, primarily due to a second-quarter reclassification of approximately $366 million of commercial loans to the NDFI category based on industry and purpose.
The following schedule presents NDFI credit quality metrics:
NDFI CREDIT QUALITY
(Dollar amounts in millions) June 30, 2026 December 31, 2025
Credit quality metrics
Criticized loan ratio 1.2 % 0.8 %
Classified loan ratio 1.2 % 0.8 %
Nonaccrual loan ratio 0.4 % 0.5 %
Delinquency ratio 0.4 % — %
Annualized ratio of NDFI net charge-offs1 to average loans — % 2.7 %
Ratio of allowance for credit losses to NDFI loans, at period end 1.15 % 1.03 %
1 Ratios are annualized for June 30, 2026, and represent full-year amounts for December 31, 2025. Total NDFI net charge-offs in 2025 included a $50 million charge-off associated with revolving lines of credit extended to two related commercial borrowers to finance the origination and purchase of commercial and residential mortgages.
Commercial Real Estate Lending
The following schedule presents the composition of our CRE lending portfolio:
COMMERCIAL REAL ESTATE LENDING PORTFOLIO
June 30, 2026 December 31, 2025
(Dollar amounts in millions) Amount % of total CRE loans Amount % of total CRE loans Amount change Percent change
Commercial real estate:
Term $ 11,850 84.3 % $ 11,234 83.9 % $ 616 5.5 %
Construction and land development 2,213 15.7 2,162 16.1 51 2.4
Total commercial real estate $ 14,063 100.0 % $ 13,396 100.0 % $ 667 5.0
Term CRE loans typically have maturities ranging from three to seven years and may incorporate full, partial, or non-recourse guarantee structures. Standard term CRE loan arrangements generally include annually tested operating covenants, requiring loan rebalancing based on minimum debt service coverage, debt yield, or loan-to-value (“LTV”) ratios.
Construction and land development loans generally mature within 18 to 36 months and may involve full or partial recourse guarantees. These loans often include one- to five-year extension options or roll-to-permanent features, which commonly convert into term loans upon completion.
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Underwriting for commercial properties primarily emphasizes the economic viability of the project, while also giving considerable weight to the sponsor's creditworthiness and experience. Owners are generally required to contribute their equity prior to any loan advances. Loan agreements frequently include remargining provisions—requiring additional equity infusions if the collateral's value or cash flow declines—as well as sponsor guarantees.
At June 30, 2026, the weighted average LTV ratio for our term CRE portfolio was below 60%. For CRE loans, LTV is calculated as the loan amount divided by the most recent appraised value of the underlying collateral. For a more comprehensive discussion of our CRE loan portfolio, see “Commercial Real Estate Loans” in our 2025 Form 10-K. The following schedule presents the geographic distribution of our commercial real estate lending portfolio, based on the location of the primary collateral:
COMMERCIAL REAL ESTATE LENDING BY GEOGRAPHY
June 30, 2026 December 31, 2025
(Dollar amounts in millions) Amount % of total Nonaccrual loans Amount % of total Nonaccrual loans
Commercial real estate:
Arizona $ 1,779 12.7 % $ — $ 1,709 12.8 % $ —
California 3,569 25.4 30 3,549 26.5 22
Colorado 794 5.6 — 726 5.4 16
Nevada 1,056 7.5 — 1,016 7.6 —
Texas 2,756 19.6 4 2,566 19.2 5
Utah/Idaho 2,472 17.6 — 2,376 17.7 —
Washington/Oregon 1,189 8.4 — 1,122 8.4 30
Other 448 3.2 — 332 2.4 —
Total commercial real estate $ 14,063 100.0 % $ 34 $ 13,396 100.0 % $ 73
The following schedule presents our commercial real estate lending portfolio by the type of collateral:
COMMERCIAL REAL ESTATE LENDING BY COLLATERAL TYPE
June 30, 2026 December 31, 2025
(Dollar amounts in millions) Amount % of total Nonaccrual loans Amount % of total Nonaccrual loans
Commercial property
Multifamily $ 4,209 29.9 % $ — $ 3,994 29.8 % $ —
Industrial 3,197 22.7 9 3,045 22.7 —
Retail 1,734 12.3 — 1,586 11.8 —
Office 1,563 11.1 20 1,675 12.5 67
Hospitality 787 5.6 4 678 5.1 5
Land 301 2.2 — 286 2.1 —
Other 1 1,516 10.8 1 1,436 10.8 —
Residential property 2
Single family 424 3.0 — 398 3.0 1
Land 127 0.9 — 111 0.8 —
Condo/Townhome 29 0.2 — 29 0.2 —
Other 1 176 1.3 — 158 1.2 —
Total $ 14,063 100.0 % $ 34 $ 13,396 100.0 % $ 73
1 Included in the total amount of the “Other” commercial and residential categories was approximately $255 million and $232 million of unsecured loans at June 30, 2026 and December 31, 2025, respectively.
2 Residential property consists primarily of loans provided to commercial homebuilders for land, lot, and single-family housing developments.
As previously noted, our CRE lending portfolio remains well diversified across both geographic markets and collateral types, with multifamily properties representing the largest concentration. Given ongoing investor interest
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in multifamily, industrial, and office collateral types, we have provided additional analysis of these segments within our CRE portfolio below. For CRE loans approaching maturity, we generally expect substantially all borrowers to successfully refinance either with the Bank or other lending institutions. This expectation is supported by strong underlying property cash flows, prudent LTV ratios, sufficient borrower equity contributions, and the financial strength and support of guarantors.
Multifamily CRE
At June 30, 2026 and December 31, 2025, our multifamily CRE loan portfolio totaled $4.2 billion and $4.0 billion, respectively, representing 30% of the total CRE loan portfolio at each period end. Approximately 45% of the multifamily CRE loan portfolio is scheduled to mature within the next 12 months.
Subsequent to quarter-end, on July 31, 2026, we completed our previously disclosed acquisition of Basis Multifamily Finance I, LLC, including its team, capabilities, and related mortgage servicing rights. The acquisition expands our multifamily lending capabilities and strengthens our commercial real estate and capital markets businesses. For more information, see “Executive Summary” and the Subsequent Events section in Note 1 of the Notes to Consolidated Financial Statements.
The following schedule presents the composition of our multifamily CRE loan portfolio, along with related credit quality metrics:
MULTIFAMILY CRE LOAN PORTFOLIO
(Dollar amounts in millions) June 30, 2026 December 31, 2025
Multifamily CRE
Term $ 3,513 $ 3,203
Construction and land development 696 791
Total multifamily CRE $ 4,209 $ 3,994
Credit quality metrics
Criticized loan ratio 16.6 % 17.5 %
Classified loan ratio 13.4 % 15.0 %
Nonaccrual loan ratio — % — %
Delinquency ratio 0.1 % — %
Annualized ratio of multifamily CRE net charge-offs (recoveries) to average loans — % — %
Ratio of allowance for credit losses to multifamily CRE loans, at period end 1.43 % 1.50 %
Weighted average LTV for multifamily term CRE loans 60 % 59 %
Industrial CRE
At June 30, 2026 and December 31, 2025, our industrial CRE loan portfolio totaled $3.2 billion and $3.0 billion, respectively, representing 23% of the total CRE loan portfolio at each period end. Approximately 31% of the industrial CRE loan portfolio is scheduled to mature within the next 12 months.
The following schedule presents the composition of our industrial CRE loan portfolio and other related credit quality metrics:
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INDUSTRIAL CRE LOAN PORTFOLIO
(Dollar amounts in millions) June 30, 2026 December 31, 2025
Industrial CRE
Term $ 2,768 $ 2,720
Construction and land development 429 325
Total industrial CRE $ 3,197 $ 3,045
Credit quality metrics
Criticized loan ratio 10.0 % 11.3 %
Classified loan ratio 8.3 % 10.3 %
Nonaccrual loan ratio 0.3 % — %
Delinquency ratio — % — %
Annualized ratio of industrial CRE net charge-offs (recoveries) to average loans 0.3 % — %
Ratio of allowance for credit losses to industrial CRE loans, at period end 0.78 % 1.48 %
Weighted average LTV for industrial term CRE loans 51 % 63 %
Office CRE
At June 30, 2026 and December 31, 2025, our office CRE loan portfolio totaled $1.6 billion and $1.7 billion, respectively, representing 11% and 13% of the total CRE loan portfolio. Approximately 33% of the office CRE loan portfolio is scheduled to mature within the next 12 months.
The following schedule presents the composition of our office CRE loan portfolio and other related credit quality metrics:
OFFICE CRE LOAN PORTFOLIO
(Dollar amounts in millions) June 30, 2026 December 31, 2025
Office CRE
Term $ 1,536 $ 1,655
Construction and land development 27 20
Total office CRE $ 1,563 $ 1,675
Credit quality metrics
Criticized loan ratio 7.9 % 9.4 %
Classified loan ratio 7.2 % 9.3 %
Nonaccrual loan ratio 1.3 % 4.0 %
Delinquency ratio 0.1 % 1.1 %
Annualized ratio of office CRE net charge-offs (recoveries) to average loans (0.2) % 0.1 %
Ratio of allowance for credit losses to office CRE loans, at period end 2.75 % 2.93 %
Weighted average LTV for office term CRE loans 57 % 57 %
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Consumer Lending
The following schedule presents the composition of our consumer lending portfolio:
CONSUMER LENDING PORTFOLIO
June 30, 2026 December 31, 2025
(Dollar amounts in millions) Amount % of total consumer loans Amount % of total consumer loans Amount change Percent change
Consumer:
1-4 family residential $ 10,293 65.2 % $ 10,462 66.1 % $ (169) (1.6) %
Home equity credit line 4,077 25.8 3,950 25.0 127 3.2
Construction and other consumer real estate 757 4.8 782 4.9 (25) (3.2)
Bankcard and other revolving plans 537 3.4 515 3.3 22 4.3
Other 114 0.8 116 0.7 (2) (1.7)
Total consumer $ 15,778 100.0 % $ 15,825 100.0 % $ (47) (0.3)
The following schedule presents the geographic distribution of our consumer lending portfolio, based on the location of the primary borrower:
CONSUMER LENDING BY GEOGRAPHY
June 30, 2026 December 31, 2025
(Dollar amounts in millions) Amount % of total Nonaccrual loans Amount % of total Nonaccrual loans
Consumer
Arizona $ 1,442 9.2 % $ 7 $ 1,439 9.1 % $ 7
California 3,740 23.7 20 3,683 23.3 15
Colorado 1,374 8.7 13 1,396 8.8 12
Nevada 1,340 8.5 14 1,344 8.5 12
Texas 3,600 22.8 28 3,658 23.1 25
Utah/Idaho 3,488 22.1 19 3,521 22.3 19
Washington/Oregon 321 2.0 3 320 2.0 3
Other 473 3.0 2 464 2.9 3
Total consumer $ 15,778 100.0 % $ 106 $ 15,825 100.0 % $ 96
1-4 Family Residential Mortgages
We originate first-lien residential home mortgage loans considered to be of prime quality. At June 30, 2026, our 1-4 family residential mortgage loan portfolio totaled $10.3 billion, representing 65% of our total consumer loan portfolio, compared with $10.5 billion, or 66%, at December 31, 2025.
At both June 30, 2026 and December 31, 2025, approximately 89% of the portfolio consisted of variable-rate loans. During the second quarter of 2026, we sold approximately $350 million of residential mortgage loans, including both fixed- and variable-rate loans, through a combination of recurring flow sales and portfolio transactions. In connection with these sales, we provided customary representations and warranties regarding compliance with specified underwriting standards and collateral documentation requirements.
Home Equity Credit Lines
We also originate home equity credit lines (“HECLs”). At June 30, 2026 and December 31, 2025, our HECL portfolio totaled $4.1 billion and $4.0 billion, respectively. Approximately 34% of the portfolio was secured by first liens at each date. Since December 31, 2025, there have been no material changes in the portfolio's credit quality, underwriting standards, composition, or overall risk characteristics.
For additional information regarding our HECL portfolio, including underwriting standards, collateral characteristics, and credit quality, see “Home Equity Credit Lines” in our 2025 Form 10-K as well as Note 6 of the Notes to Consolidated Financial Statements.
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Credit Quality
We monitor credit quality by assessing multiple factors, including nonperforming status, internal risk grades, and net charge-offs. These metrics are integral to our overall evaluation of the adequacy of the ACL. For more information on these factors and the ACL, see Note 6 of the Notes to Consolidated Financial Statements.
Nonperforming Assets
Nonperforming assets include nonaccrual loans and other real estate owned (“OREO”), or foreclosed properties. The following schedule presents the composition of our nonperforming assets:
NONPERFORMING ASSETS
(Dollar amounts in millions) June 30, 2026 December 31, 2025
Nonaccrual loans 1 $ 292 $ 315
Other real estate owned 2 6 5
Total nonperforming assets $ 298 $ 320
Ratio of nonperforming assets to net loans and leases1 and other real estate owned 2 0.48 % 0.52 %
Accruing loans past due 90 days or more $ 3 $ 5
Ratio of accruing loans past due 90 days or more to loans and leases 1 — % 0.01 %
Nonaccrual loans1 and accruing loans past due 90 days or more $ 295 $ 320
Ratio of nonperforming assets1 and accruing loans past due 90 days or more to loans and leases1 and other real estate owned 2 0.48 % 0.53 %
Accruing loans past due 30-89 days $ 91 $ 96
Classified loans $ 2,327 $ 2,380
Ratio of classified loans to total loans and leases 3.72 % 3.91 %
Ratio of nonaccrual loans1 current as to principal and interest payments 57.5 % 56.8 %
1 Includes loans held for sale.
2 Does not include banking premises held for sale.
Nonperforming assets totaled $298 million, or 0.48% of total loans and leases and other real estate owned at June 30, 2026, compared with $320 million, or 0.52%, at December 31, 2025. Nonperforming assets decreased primarily within the term CRE loan portfolio. For more information about nonaccrual loans, see Note 6 of the Notes to Consolidated Financial Statements.
Classified Loans
Classified loans are considered loans with well-defined weaknesses and are assigned using our internal risk grade definitions of substandard and doubtful, which are consistent with regulatory risk classifications. The following schedule presents our classified loans by loan segment:
CLASSIFIED LOANS
(Dollar amounts in millions) June 30, 2026 December 31, 2025
Commercial $ 1,109 $ 1,063
Commercial real estate 1,101 1,205
Consumer 117 112
Total classified loans $ 2,327 $ 2,380
Ratio of classified loans to total loans and leases 3.72 % 3.91 %
Classified loans totaled $2.3 billion, or 3.72% of total loans and leases, at June 30, 2026, compared with $2.4 billion, or 3.91%, at December 31, 2025. The decline was primarily driven by reductions in classified CRE exposures, largely attributable to loan payoffs. The loss content of our CRE loan portfolio continues to be mitigated by disciplined underwriting, supported by substantial borrower equity and guarantor support. As a result, our CRE credit performance remains strong, with low levels of nonperforming assets and net charge-offs.
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Allowance for Credit Losses
The ACL comprises both the ALLL and the RULC and represents our estimate of current expected credit losses related to the loan and lease portfolio and unfunded lending commitments as of the balance sheet date.
We estimate current expected credit losses using econometric loss models that incorporate historical credit loss experience, prevailing economic conditions, and multiple forward-looking economic scenarios. These scenarios—including optimistic, baseline, and stressed conditions—are weighted to produce the quantitative component of the ACL, and management may adjust the weightings based on its assessment of current economic conditions and reasonable and supportable forecasts. Because economic forecasts may not always align with observed credit quality trends, changes in the ACL may not necessarily correspond directionally with changes in credit quality.
Additionally, we consider qualitative and environmental factors that may indicate actual losses could differ from amounts estimated by the quantitative models. The influence of these factors on the ACL may vary from quarter to quarter.
During the first six months of 2026, the qualitative component of the ACL declined, primarily reflecting the impact of loss model enhancements and reduced qualitative reserves within the CRE portfolio. These decreases were partially offset by higher qualitative reserves in certain C&I portfolios.
For additional information on the ACL and credit trends by portfolio segment, see “The Allowance and Provision for Credit Losses” section on page 13 and Note 6 of the Notes to Consolidated Financial Statements.
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The following schedule presents the components of the ACL and credit-related balances and metrics:
ACL AND CREDIT-RELATED BALANCES AND METRICS
(Dollar amounts in millions) Six Months Ended June 30, 2026 Twelve Months Ended December 31, 2025 Six Months Ended June 30, 2025
Loans and leases outstanding $ 62,481 $ 60,900 $ 60,813
Average loans and leases outstanding:
Commercial 32,011 31,389 31,209
Commercial real estate 13,687 13,562 13,585
Consumer 15,797 15,470 15,256
Total average loans and leases outstanding $ 61,495 $ 60,421 $ 60,050
Allowance for loan and lease losses:
Balance at beginning of period $ 678 $ 696 $ 696
Provision for loan losses (3) 71 17
Charge-offs:
Commercial 15 103 19
Commercial real estate 3 4 —
Consumer 7 15 5
Total 25 122 24
Recoveries:
Commercial 9 24 7
Commercial real estate 1 4 —
Consumer 2 5 1
Total 12 33 8
Net loan and lease charge-offs 13 89 16
Balance at end of period $ 662 $ 678 $ 697
Reserve for unfunded lending commitments:
Balance at beginning of period $ 46 $ 45 $ 45
Provision for unfunded lending commitments (1) 1 1
Balance at end of period $ 45 $ 46 $ 46
Total allowance for credit losses:
Allowance for loan and lease losses $ 662 $ 678 $ 697
Reserve for unfunded lending commitments 45 46 46
Total allowance for credit losses $ 707 $ 724 $ 743
Ratio of allowance for credit losses to net loans and leases, at period end 1.13 % 1.19 % 1.22 %
Ratio of allowance for credit losses to nonaccrual loans, at period end 242 % 230 % 244 %
Ratio of allowance for credit losses to nonaccrual loans and accruing loans past due 90 days or more, at period end 240 % 226 % 234 %
Ratio of total net charge-offs to average loans and leases 1 0.04 % 0.15 % 0.11 %
Ratio of commercial net charge-offs to average commercial loans 1 0.04 % 0.25 % 0.15 %
Ratio of commercial real estate net charge-offs (recoveries) to average commercial real estate loans 1 0.03 % — % — %
Ratio of consumer net charge-offs to average consumer loans 1 0.06 % 0.06 % 0.11 %
1 Ratios are annualized for the periods presented, except for the period representing the full twelve months.
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Interest Rate and Market Risk Management
Interest rate and market risk refer to the potential for adverse impacts on current or future earnings and capital arising from changes in interest rates and other market conditions. Given our involvement in transactions with a broad range of financial instruments, we are inherently exposed to these risks. For more information on our approach to managing interest rate and market risk, see “Interest Rate and Market Risk Management” in our 2025 Form 10-K.
We actively manage our exposure to interest rate fluctuations by positioning the balance sheet to reduce volatility in both net interest income and the economic value of equity (“EVE”). Given that a significant portion of our balance sheet funding is derived from non-maturity deposit products, we rely on behavioral models and assumptions to forecast the sensitivity of earnings to interest rate movements. These models and assumptions are subject to ongoing performance monitoring and refinement.
When observed deposit behavior diverges from model expectations, the models are updated accordingly, with greater emphasis placed on recently observed behavior. All model changes are independently reviewed by our Model Risk Management function.
Our deposit-behavior models incorporate assumptions about the correlation between the rates paid on interest-bearing deposits and fluctuations in average benchmark interest rates. This is commonly referred to as “deposit beta.” Certificates of deposit are typically modeled with a higher degree of correlation, whereas interest-bearing checking accounts are assumed to exhibit a lower sensitivity to rate changes.
Many consumer and business deposit accounts have historically demonstrated stability and limited sensitivity to rate changes, resulting in a longer duration relative to our loan portfolio. As a result, our balance sheet has typically been “asset-sensitive,” meaning that assets are expected to reprice more quickly or more significantly than our liabilities. Measures of asset sensitivity are particularly influenced by changes in deposit modeling assumptions.
To manage interest rate risk, we regularly employ a combination of interest rate derivatives, investments in fixed-rate securities, and funding strategies. Collectively, these tools help moderate the expected sensitivity of net interest income and EVE to changes in interest rates.
The following schedule presents deposit duration assumptions discussed previously:
DEPOSIT ASSUMPTIONS
June 30, 2026 December 31, 2025
Product Effective duration (-200 bps) Effective duration (unchanged) Effective duration (+200 bps) Effective duration (-200 bps) Effective duration (unchanged) Effective duration (+200 bps)
Demand deposits 4.8% 4.2% 3.7% 4.9% 4.2% 3.7%
Money market 1.8% 1.5% 1.3% 1.9% 1.5% 1.3%
Savings and interest-bearing checking 2.1% 1.7% 1.6% 2.2% 1.8% 1.6%
As previously discussed, we utilize derivative instruments to manage interest rate risk. The following schedule presents derivatives designated in qualifying hedging relationships at June 30, 2026. It includes the average outstanding derivative notional amounts for each reporting period presented and the weighted-average fixed rates paid or received across cash flow and fair value hedge categories. For more information regarding our hedge accounting strategies and the impact of these hedging relationships on interest income and expense, see Note 4 of the Notes to Consolidated Financial Statements.
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DERIVATIVES DESIGNATED IN QUALIFYING HEDGING RELATIONSHIPS AND CERTAIN ECONOMIC HEDGES
2026 2027 Annual Periods
(Dollar amounts in millions) Third Quarter Fourth Quarter First Quarter Second Quarter 2027 2028 2029 2030 2031 2032
Cash flow hedges
Cash flow hedges of assets 1
Average outstanding notional 2 $ 8,650 $ 8,780 $ 8,596 $ 8,357 $ 7,368 $ 759 $ 95 $ — $ — $ —
Weighted-average fixed-rate received 3.44 % 3.45 % 3.46 % 3.55 % 3.56 % 3.85 % 3.79 % — % — % — %
Fair value hedges
Fair value hedges of debt 3
Average outstanding notional $ 1,500 $ 1,500 $ 1,500 $ 1,500 $ 1,314 $ 553 $ 500 $ 500 $ 500 $ 500
Weighted-average fixed-rate received 4.37 % 4.37 % 4.37 % 4.37 % 4.33 % 3.99 % 3.93 % 3.93 % 3.93 % 3.93 %
Fair value hedges of assets 4
Average outstanding notional 2 $ 5,542 $ 5,538 $ 5,533 $ 5,531 $ 5,558 $ 5,269 $ 4,150 $ 2,975 $ 2,408 $ 2,177
Weighted-average fixed-rate paid 3.34 % 3.34 % 3.34 % 3.34 % 3.34 % 3.32 % 3.23 % 3.12 % 3.02 % 2.97 %
1 Cash flow hedges of assets consist of receive-fixed interest rate swaps and purchased three-month SOFR futures that are used to hedge pools of floating-rate loans.
2 Notional amounts for forward-starting derivatives are excluded until the trades become effective.
3 Fair value hedges of debt consist of receive-fixed swaps that hedge fixed-rate subordinated and senior notes.
4 Fair value hedges of assets consist of pay-fixed swaps that hedge fixed-rate AFS securities and fixed-rate commercial loans.
At June 30, 2026, we had $19 million of net losses deferred in accumulated other comprehensive income (“AOCI”) related to terminated cash flow hedges. These deferred amounts are amortized into interest income on a straight-line basis over the original maturity periods of the respective hedges, provided the forecasted transactions are expected to occur. For more information regarding amounts deferred in AOCI from terminated cash flow hedges, see “Interest Rate and Market Risk Management” in our 2025 Form 10-K.
Earnings at Risk (EaR) and Economic Value of Equity (EVE)
Incorporating deposit assumptions, the effects of derivatives designated in qualifying hedging relationships, and certain short-dated economic hedges, the following schedule presents our earnings at risk (“EaR”) and estimated changes in EVE. EaR represents the percentage change in projected 12-month net interest income. Both EaR and EVE are based on a static balance sheet and reflect instantaneous, parallel shifts in interest rates ranging from -200 to +200 bps. These measures are intended to illustrate the sensitivity of net interest income and equity value to changes in interest rates across a range of scenarios and should not be interpreted as forecasts of expected net interest income.
INCOME SIMULATION – CHANGE IN NET INTEREST INCOME AND CHANGE IN ECONOMIC VALUE OF EQUITY
June 30, 2026 December 31, 2025
Parallel shift in rates (in bps) 1 Parallel shift in rates (in bps)
Repricing scenario -200 -100 0 +100 +200 -200 -100 0 +100 +200
Earnings at Risk(EaR) (7.1) % (3.6) % — % 3.6 % 7.2 % (7.8) % (4.0) % — % 4.0 % 7.9 %
Economic Value of Equity(EVE) (2.1) % (0.7) % — % (0.1) % (0.8) % (1.5) % (0.3) % — % (0.5) % (1.4) %
1 Assumes rates do not decline below zero in the negative rate shifts.
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Asset sensitivity, as measured by EaR, decreased during the first six months of 2026, primarily due to increased hedging activity. Based on current deposit assumptions, interest rate risk remained within established policy limits. For interest-bearing deposits with indeterminable maturities, the weighted average modeled beta was 49%.
Prepayment assumptions are a key factor in the management of interest rate risk. Certain assets within our portfolio, including 1-4 family residential mortgages and mortgage-backed securities, are subject to borrower-driven prepayments that can significantly affect projected cash flows. At June 30, 2026 and December 31, 2025, estimated lifetime prepayment speeds for loans were 14.9% and 14.8%, respectively, reflecting the aging of the portfolio, as loans become more seasoned and borrowers are more likely to refinance or repay their loans early over time. Estimated prepayment speeds for mortgage-backed securities were 7.0% for both periods.
Our EaR analysis primarily evaluates the impact of parallel rate shocks across the term structure of benchmark interest rates. Additionally, we perform non-parallel rate shock scenarios to identify potential risks not captured under parallel rate assumptions. In these scenarios, the most significant effects on EaR typically result from movements in short-term interest rates.
Our strategic focus on business banking remains a key component of our asset-liability management strategy. At June 30, 2026, $31.8 billion of commercial and CRE loans were scheduled to reprice within the following six months. To help manage the interest rate risk associated with these variable-rate exposures, we maintained $8.7 billion in aggregate average notional value of active interest rate derivatives during that period, including interest rate swaps and certain short-term interest rate futures designated as cash flow hedges. Additionally, $4.8 billion of variable-rate consumer loans were scheduled to reprice over the same timeframe. For further information regarding derivative instruments, see Notes 3 and 4 of the Notes to Consolidated Financial Statements.
Fixed Income
We are subject to market risk arising from fluctuations in the fair value of financial instruments, including trading securities and interest rate swaps used to hedge interest rate exposure. Our underwriting activities include municipal and corporate securities, and we actively trade in municipal, agency, and U.S. Treasury securities. These activities expose us to potential losses resulting from adverse price movements in fixed-income markets. Changes in the fair value of AFS securities and interest rate swaps that qualify as cash flow hedges are recognized in AOCI each reporting period. For additional information on investment securities and AOCI, refer to the “Capital Management” section on page 36. For more information on the accounting treatment of investment securities, see Note 5 of the Notes to Consolidated Financial Statements.
Equity Investments
Through our equity investment activities, we hold both publicly traded equity securities and non-marketable equity securities in governmental entities and institutions, such as the Federal Reserve Board (“FRB”) and the FHLB. For more information regarding our equity investments, see “Interest Rate and Market Risk Management” in our 2025 Form 10-K.
We hold investments primarily in pre-public companies, largely through a diversified portfolio of SBIC funds. This investment strategy is designed to support the financing, growth, and expansion of a broad range of businesses, primarily within our geographic footprint. At June 30, 2026, and December 31, 2025, our equity exposure to these investments was $330 million and $271 million, respectively.
Occasionally, companies within our SBIC portfolio may complete an initial public offering (“IPO”), which introduces additional market risk due to post-IPO lock-up restrictions. For more information regarding the valuation of our SBIC investments, see Note 3 of the Notes to Consolidated Financial Statements.
Liquidity Risk Management
Liquidity represents our ability to meet cash, contractual, and collateral obligations while effectively managing both anticipated and unanticipated cash flow needs without adversely affecting our operations or financial condition. We manage liquidity to provide sufficient funding for customer credit requirements, financial and contractual
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commitments, and other corporate activities. Our primary sources of contingent liquidity include secured borrowings through repurchase agreements backed by investment securities, as well as other collateral prepositioned with the FHLB and the FRB. In addition, we maintain the capacity to issue brokered certificates of deposit and unsecured debt. For more information regarding our approach to managing liquidity risk, see “Liquidity Risk Management” in our 2025 Form 10-K.
For the first six months of 2026, the primary sources of cash included reductions in money market investments, growth in deposits, net cash provided by operating activities, and proceeds from the issuance of long-term debt. Primary uses of cash during the same period included growth in loans and leases, reductions in short-term borrowings, common stock repurchases, and dividend payments on common and preferred stock. Cash interest payments, which are reflected in operating expenses, totaled $668 million and $829 million for the first six months of 2026 and 2025, respectively.
The FHLB and FRB continue to serve as important sources of contingent liquidity and funding. As a member of the FHLB of Des Moines, we have the ability to borrow against eligible loans and securities to support liquidity and funding needs. To maintain this borrowing capacity, we are required to hold investments in both FHLB and FRB stock. At June 30, 2026, our total investment in FHLB and FRB stock totaled $10 million and $52 million, respectively, compared with $100 million and $54 million, respectively, at December 31, 2025. The decline in FHLB stock holdings reflects a significant reduction in FHLB borrowings.
At June 30, 2026, loans with a carrying value of $25.6 billion and $18.4 billion were pledged to the FHLB and FRB, respectively, as collateral supporting existing and contingent borrowing capacity. This compares with $25.2 billion and $18.0 billion pledged at December 31, 2025.
At June 30, 2026 and December 31, 2025, we had $17.2 billion and $17.5 billion, respectively, of investment securities pledged as collateral to support contingent borrowing capacity. The pledged securities consisted of:
•$8.5 billion and $7.9 billion, respectively, designated for available use under the Fixed Income Clearing Corporation's General Collateral Finance (“GCF”) program and other repurchase agreement programs;
•$4.5 billion at both dates, pledged to the FHLB and FRB in total; and
•$4.2 billion and $5.1 billion, respectively, pledged to secure public and trust deposits, advances, and other collateralized obligations.
A significant portion of these pledged assets is unencumbered, but remains pledged to provide immediate access to contingency funding sources. The following schedule presents our total available liquidity, including unused collateralized borrowing capacity:
AVAILABLE LIQUIDITY
June 30, 2026 December 31, 2025
(Dollar amounts in billions) FHLB FRB 1 GCF 2 Total FHLB FRB 1 GCF 2 Total
Total borrowing capacity $ 17.1 $ 18.8 $ 8.5 $ 44.4 $ 17.4 $ 18.4 $ 8.0 $ 43.8
Borrowings outstanding — — — — 2.0 — 0.1 2.1
Remaining capacity, at period end $ 17.1 $ 18.8 $ 8.5 $ 44.4 $ 15.4 $ 18.4 $ 7.9 $ 41.7
Cash and due from banks $ 0.8 $ 0.7
Interest-bearing deposits 3 1.4 2.2
Total available liquidity $ 46.6 $ 44.6
Ratio of available liquidity to uninsured deposits 135% 130%
1 Represents borrowing capacity and borrowings outstanding at the Federal Reserve Bank discount window.
2 Includes $746 million and $3.1 billion pledged for available use through other repo programs for the periods presented.
3 Represents funds deposited by the Bank primarily at the Federal Reserve Bank.
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At June 30, 2026, our total available liquidity was $46.6 billion, compared with $44.6 billion at December 31, 2025. At June 30, 2026, our sources of liquidity exceeded the estimated amount of uninsured deposits of $34.4 billion without the need to sell any investment securities.
Credit Ratings
General financial market and economic conditions affect our access to, and the cost of, external financing. Our access to funding markets is also influenced by the credit ratings assigned by rating agencies, which affect both our borrowing costs and access to funding sources. All credit rating agencies currently rate our debt at an investment-grade level. In May 2026, Fitch upgraded the Bank’s short-term debt rating to “F1” from “F2.” No other credit rating actions occurred during the period.
The following schedule presents our credit ratings:
CREDIT RATINGS
as of July 31, 2026:
Rating agency Outlook Long-term issuer/senior debt rating Subordinated debt rating Short-term debt rating
Kroll Stable A- BBB+ K2
S&P Stable BBB+ BBB NR
Fitch Stable BBB+ BBB F1
Moody's Stable Baa2 NR P2
We may periodically issue or redeem preferred stock, senior or subordinated notes, or other capital and debt instruments to support our capital requirements, funding needs, asset-liability management objectives, and prevailing market conditions. Certain issuances may require regulatory approval. In February 2026, we issued $500 million of 4.48% Fixed-to-Floating Senior Notes. Previously, in August 2025, we issued $500 million of 4.70% Fixed-to-Floating Senior Notes, and in July 2026, we issued an additional $500 million of 5.24% Fixed-to-Floating Senior Notes.
For additional information regarding our capital actions, see “Capital Management” and in our 2025 Form 10-K.
Capital Management
We believe that maintaining a strong capital position is critical to achieving our key strategic objectives, sustaining long-term profitability, and reinforcing confidence among depositors, creditors, and investors. We focus on: (1) maintaining sufficient capital to support the current needs and growth of our businesses, aligned with our assessment of their potential to deliver shareholder value, and (2) meeting our obligations to depositors and bondholders while prudently managing capital distributions to shareholders through dividends and common stock repurchases.
We utilize stress testing as an important tool to inform our decisions on the appropriate level of capital to maintain, based on hypothetically stressed economic conditions, including the FRB’s supervisory severely adverse scenario. The timing and magnitude of capital actions are influenced by several factors, such as financial performance, business needs, prevailing and anticipated economic conditions, internal stress testing results, and approvals from both the Board of Directors (“Board”) and the Office of the Comptroller of the Currency (“OCC”). Share repurchases may occur periodically in the open market or through privately negotiated transactions.
For a more comprehensive discussion of our capital risk management, see “Capital Management” in our 2025 Form 10-K.
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SHAREHOLDERS' EQUITY
(Dollar amounts in millions) June 30, 2026 December 31, 2025 Amount change Percent change
Shareholders’ equity:
Preferred stock $ 66 $ 66 $ — — %
Common stock and additional paid-in capital 1,602 1,726 (124) (7)
Retained earnings 7,880 7,329 551 8
Accumulated other comprehensive loss (1,867) (1,941) 74 4
Total shareholders' equity $ 7,681 $ 7,180 $ 501 7
Total shareholders’ equity increased $501 million, or 7%, to $7.7 billion at June 30, 2026, compared with $7.2 billion at December 31, 2025. The increase reflected a $124 million decline in common stock and additional paid-in capital, primarily due to common share repurchases.
In May 2026, we announced a plan to repurchase up to $225 million of our common shares outstanding during the remainder of 2026. We repurchased 1.2 million shares for $75 million in the second quarter of 2026 and 1.3 million shares for $77 million in the first quarter, the latter of which included $2 million of shares acquired in connection with our stock compensation plan. In July 2026, we announced a plan to repurchase up to $75 million of common shares outstanding during the third quarter as part of our previously authorized share repurchase target for 2026 of $300 million.
At June 30, 2026, the AOCI balance reflected a net loss of $1.9 billion, primarily attributable to a decline in the fair value of fixed-rate AFS securities driven by changes in interest rates. This amount includes $1.5 billion ($1.1 billion after tax) of unrealized losses associated with securities previously transferred from AFS to HTM.
Absent any sales or credit impairment of the AFS securities, the unrealized losses will not be recognized in earnings. We do not intend to sell any securities in an unrealized loss position, nor do we believe it is more likely than not that we would be required to sell such securities prior to recovering their amortized cost basis. Although changes in AOCI are reflected in shareholders’ equity, they are currently excluded from regulatory capital and therefore do not impact our regulatory ratios. For more information on our investment securities portfolio and related unrealized gains and losses, see Note 5 of the Notes to Consolidated Financial Statements.
CAPITAL DISTRIBUTIONS
Three Months Ended June 30, Six Months Ended June 30,
(In millions, except share amounts) 2026 2025 2026 2025
Capital distributions:
Preferred dividends paid $ 1 $ 1 $ 2 $ 2
Total capital distributed to preferred shareholders 1 1 2 2
Common dividends paid 67 64 134 129
Bank common stock repurchased 1 75 — 152 41
Total capital distributed to common shareholders 142 64 286 170
Total capital distributed to preferred and common shareholders $ 143 $ 65 $ 288 $ 172
Weighted average diluted common shares outstanding (in thousands) 146,210 147,053 146,621 147,210
Common shares outstanding, at period end (in thousands) 145,939 147,603 145,939 147,603
1 Includes amounts related to common shares acquired through our announced plan and those acquired in connection with our stock compensation plan. These shares were acquired from employees to cover their payroll taxes and stock option exercise costs upon the exercise of stock options.
Pursuant to the OCC’s “Earnings Limitation Rule,” dividend payments are limited to the sum of net income for the current fiscal year and retained earnings for the two preceding years, unless prior approval is obtained from the OCC to exceed this threshold. As of July 1, 2026, we had $1.7 billion in retained net profits available for distribution.
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In the second quarters of 2026 and 2025, dividends paid on preferred stock totaled $1 million in each period. Dividends paid on common stock totaled $67 million, or $0.45 per share, during the second quarter of 2026, compared with $64 million, or $0.43 per share, during the second quarter of 2025. In July 2026, the Board declared a quarterly common stock dividend of $0.48 per share, payable on August 20, 2026 to shareholders of record on August 13, 2026. For additional information regarding capital actions, see Note 8 of the Notes to Consolidated Financial Statements.
Basel III
We are subject to the Basel III capital requirements, which include specific minimum regulatory capital ratios. At June 30, 2026, we exceeded all capital adequacy requirements under the Basel III framework. Based on our internal stress testing and other capital adequacy assessments, we believe our capital levels sufficiently exceed both internal and regulatory requirements for well-capitalized institutions. For more information regarding our compliance with Basel III capital requirements, see the “Supervision and Regulation” section and Note 15 of our 2025 Form 10-K.
In March 2026, the federal banking agencies issued proposed Basel III Endgame rules that would revise U.S. regulatory capital requirements, including risk‑weighted asset calculations and the treatment of AOCI. While the proposals remain subject to review and potential revision, we are evaluating their impact and expect to remain well capitalized as we continue to manage our capital position in response to evolving regulatory requirements.
The following schedule presents our capital amounts, capital ratios, and other selected performance ratios:
CAPITAL AMOUNTS AND RATIOS
(Dollar amounts in millions, except per share amounts) June 30, 2026 December 31, 2025 June 30, 2025
Basel III risk-based capital amounts:
Common equity tier 1 capital $ 8,368 $ 7,936 $ 7,570
Tier 1 risk-based 8,434 8,003 7,637
Total risk-based 9,917 9,510 9,243
Risk-weighted assets 70,744 69,142 69,026
Basel III risk-based capital ratios:
Common equity tier 1 capital ratio 11.8 % 11.5 % 11.0 %
Tier 1 risk-based ratio 11.9 % 11.6 % 11.1 %
Total risk-based ratio 14.0 % 13.8 % 13.4 %
Tier 1 leverage ratio 9.4 % 9.0 % 8.5 %
Other ratios:
Average equity to average assets (three months ended) 8.3 % 7.8 % 7.1 %
Return on average common equity (three months ended) 1 24.3 % 14.9 % 15.3 %
Return on average tangible common equity (three months ended) 1 28.6 % 17.9 % 18.7 %
Tangible equity ratio 2 7.5 % 7.0 % 6.3 %
Tangible common equity ratio 2 7.4 % 6.9 % 6.2 %
Tangible book value per common share 2 $ 44.74 $ 40.79 $ 36.81
1 Excluding $252 million of pre-tax net gains ($199 million after tax), return on average common equity and return on average tangible common equity for the three months ended June 30, 2026 would have been approximately 14.0%, and 16.6%, respectively.
2 See “Non-GAAP Financial Measures” on page 39 for more information regarding these ratios.
At June 30, 2026, our common equity tier 1 (“CET1”) capital was $8.4 billion, an increase of 11%, compared with $7.6 billion in the prior year period. The CET1 capital ratio improved to 11.8%, compared with 11.0%. Tangible book value per common share increased 22% to $44.74, mainly due to higher retained earnings and reduced unrealized losses in AOCI. See the section below for more information regarding non-GAAP financial measures.
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NON-GAAP FINANCIAL MEASURES
This Form 10-Q includes certain non-GAAP financial measures in addition to those prepared in accordance with generally accepted accounting principles (“GAAP”). Reconciliations of the non-GAAP measures to the most directly comparable GAAP measures are included in the accompanying schedules. Management uses these non-GAAP measures to evaluate financial results and believes they provide useful supplemental information for period-to-period comparisons.
Non-GAAP financial measures have limitations and may not be directly comparable to similar measures reported by other financial institutions. These measures should not be considered in isolation and should be evaluated in conjunction with the corresponding GAAP measures and related reconciliations. Investors are encouraged to consider GAAP results as the primary basis for assessing our financial condition and results of operations.
Tangible Common Equity and Related Measures
Tangible common equity and related metrics are non-GAAP financial measures that exclude the impact of intangible assets and the related amortization. Management believes these measures provide useful supplemental information in evaluating the use of shareholders’ equity and assessing performance across both acquired and internally developed businesses.
RETURN ON AVERAGE TANGIBLE COMMON EQUITY (NON-GAAP)
Three Months Ended
(Dollar amounts in millions) June 30, 2026 March 31, 2026 June 30, 2025
Net earnings applicable to common shareholders (GAAP) $ 452 $ 232 $ 243
Adjustment, net of tax:
Amortization of core deposit and other intangibles 2 2 2
Net earnings applicable to common shareholders, net of tax (a) $ 454 $ 234 $ 245
Average common equity (GAAP) $ 7,457 $ 7,194 $ 6,357
Average goodwill and intangibles (1,088) (1,090) (1,097)
Average tangible common equity (non-GAAP) (b) $ 6,369 $ 6,104 $ 5,260
Number of days in quarter (c) 91 90 91
Number of days in year (d) 365 365 365
Return on average tangible common equity (non-GAAP) 1 (a/b/c)*d 28.6 % 15.5 % 18.7 %
1 Excluding $252 million of pre-tax net gains ($199 million after tax), return on average tangible common equity for the three months ended June 30, 2026 would have been approximately 16.6%.
TANGIBLE EQUITY RATIO, TANGIBLE COMMON EQUITY RATIO, AND TANGIBLE BOOK VALUE PER COMMON SHARE (ALL NON-GAAP MEASURES)
(Dollar amounts in millions, except shares and per share amounts) June 30, 2026 March 31, 2026 June 30, 2025
Total shareholders’ equity (GAAP) $ 7,681 $ 7,296 $ 6,596
Goodwill and intangibles (1,086) (1,089) (1,096)
Tangible equity (non-GAAP) (a) 6,595 6,207 5,500
Preferred stock (66) (66) (66)
Tangible common equity (non-GAAP) (b) $ 6,529 $ 6,141 $ 5,434
Total assets (GAAP) $ 89,041 $ 87,957 $ 88,586
Goodwill and intangibles (1,086) (1,089) (1,096)
Tangible assets (non-GAAP) (c) $ 87,955 $ 86,868 $ 87,490
Common shares outstanding (in thousands) (d) 145,939 147,077 147,603
Tangible equity ratio (non-GAAP) (a/c) 7.5 % 7.1 % 6.3 %
Tangible common equity ratio (non-GAAP) (b/c) 7.4 % 7.1 % 6.2 %
Tangible book value per common share (non-GAAP) (b/d) $ 44.74 $ 41.75 $ 36.81
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Efficiency Ratio and Adjusted Pre-Provision Net Revenue
The efficiency ratio measures operating expenses relative to revenue and is useful to assess the cost of generating revenue. The adjusted efficiency ratio excludes certain items not generally expected to recur frequently, as described in the accompanying schedule, and is intended to enhance comparability across reporting periods. Adjusted noninterest expense reflects management's effectiveness in managing operating costs, while adjusted pre-provision net revenue is used to evaluate our capacity to generate capital. Taxable-equivalent net interest income is presented to facilitate comparability between revenue earned from taxable and tax-exempt sources.
EFFICIENCY RATIO (NON-GAAP) AND ADJUSTED PRE-PROVISION NET REVENUE (NON-GAAP)
Three Months Ended Six Months Ended Year Ended
(Dollar amounts in millions) June 30, 2026 March 31, 2026 June 30, 2025 June 30, 2026 June 30, 2025 December 31, 2025
Noninterest expense (GAAP) (a) $ 551 $ 562 $ 527 $ 1,113 $ 1,065 $ 2,138
Adjustments:
Severance costs 1 3 2 4 5 16
Other real estate expense, net 1 — — 1 — (2)
Amortization of core deposit and other intangibles 2 2 2 4 4 8
SBIC investment success fee accrual 7 — 2 7 2 5
FDIC special assessment (6) (1) — (7) — (11)
Total adjustments (b) 5 4 6 9 11 16
Adjusted noninterest expense (non-GAAP) (c)=(a-b) $ 546 $ 558 $ 521 $ 1,104 $ 1,054 $ 2,122
Net interest income (GAAP) (d) $ 677 $ 662 $ 648 $ 1,339 $ 1,272 $ 2,627
Fully taxable-equivalent adjustments (e) 11 11 13 22 24 46
Taxable-equivalent net interest income (non-GAAP) (f)=(d+e) 688 673 661 1,361 1,296 2,673
Customer-related noninterest income (non-GAAP) (g) 182 172 164 354 322 662
Net credit valuation adjustment (CVA) (h) 1 (2) — (1) — (9)
Adjusted customer-related noninterest income (non-GAAP) (i)=(g-h) 181 174 164 355 322 671
Noncustomer-related noninterest income (GAAP) (j) 278 15 26 293 39 96
Securities gains (losses), net (k) 269 3 14 272 20 52
Adjusted noncustomer-related noninterest income (non-GAAP) (l)=(j-k) 9 12 12 21 19 44
Combined income (non-GAAP) (m)= (f+g+j) $ 1,148 $ 860 $ 851 $ 2,008 $ 1,657 $ 3,431
Adjusted taxable-equivalent revenue (non-GAAP) (n)= (f+i+l) 878 859 837 1,737 1,637 3,388
Pre-provision net revenue (non-GAAP) (m)-(a) $ 597 $ 298 $ 324 $ 895 $ 592 $ 1,293
Adjusted PPNR (non-GAAP) (n)-(c) 332 301 316 633 583 1,266
Efficiency ratio (non-GAAP) 1 (c/n) 62.2 % 65.0 % 62.2 % 63.6 % 64.4 % 62.6 %
1 Excluding the $15 million charitable contribution, adjusted noninterest expense for the year ended December 31, 2025 would have been $2.11 billion, resulting in an efficiency ratio of 62.2%.
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