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The following discussion and analysis is intended to focus on significant matters impacting and changes in the financial condition and results of operations of the Company during the three and six months ended June 30, 2026 and should be read in conjunction with the consolidated financial statements and notes hereto included in this Quarterly Report on Form 10-Q and BKU's 2025 Annual Report on Form 10-K for the year ended December 31, 2025 (the "2025 Annual Report on Form 10-K").
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect the Company’s current views with respect to, among other things, future events and financial performance. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” "future", "could", and similar expressions identify forward-looking statements. These forward-looking statements are based on the historical performance of the Company or on the Company’s current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by the Company that the future plans, estimates or expectations so contemplated will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to the Company’s operations, financial results, financial condition, business prospects, growth strategy and liquidity, including as impacted by external circumstances outside the Company's direct control, such as (1) an inability to successfully execute our core business strategy; (2) adverse events or conditions impacting the financial services industry, (3) our ability to access capital, including the impact of our credit rating; (4) credit risk inherent in the business of making loans and embedded in our securities portfolio, including inadequate allowance for credit losses and real estate market conditions and valuations; (5) interest rate risk, (6) liquidity risks, (7) risks related to the regulation of our industry, (8) operational risk, including dependence on information technology and third party service providers and the risk of systems failures, interruptions or breaches of security or inability to keep pace with technological change; (9) reputational risk, (10) the impact of conditions in the financial markets and economic conditions generally; (11) ineffective risk management or internal controls; and (12) the selection and application of accounting policies and methods and related assumptions and estimates. If one or more of these or other risks or uncertainties materialize, or if the Company’s underlying assumptions prove to be incorrect, the Company’s actual results may vary materially from those indicated in these statements. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements, including, but not limited to, the risk factors described in Part I, Item 1A of the 2025 Annual Report on Form 10-K and any subsequent Quarterly Report on Form 10-Q or Current Report on Form 8-K. The Company does not undertake any obligation to publicly update or review any forward looking statement, whether as a result of new information, future developments or otherwise.
Executive Overview
Quarterly Highlights
In evaluating our financial performance, we consider (i) the funding mix and the composition of interest earning assets; (ii) the level of and trends in net interest income and the net interest margin; (iii) the cost of deposits, trends in non-interest income and non-interest expense; (iv) performance ratios such as the return on average equity and return on average assets and trends in those metrics; and (v) asset quality metrics, including the level of criticized and classified assets, the ratios of non-performing loans to total loans and non-performing assets to total assets, delinquency and net charge-off rates, as well as trends in those metrics. We analyze these ratios and trends against our own historical performance, our expected performance, our risk appetite and the financial condition and performance of comparable financial institutions.
Second quarter 2026 results compared to first quarter 2026:
•Net income was $70.7 million, or $0.97 per diluted share, up from $61.9 million, or $0.83, per diluted share.
•PPNR, a non-GAAP measure, increased by 3%, to $109.9 million from $106.3 million.
•Annualized ROAA increased to 0.81% from 0.72% and annualized ROAE improved to 9.3% from 8.1%.
•The net interest margin, calculated on a tax-equivalent basis, expanded to 3.06%, up 0.07%, from 2.99%.
•Total deposits, excluding brokered deposits, grew by $1 billion.
•NIDDA increased by $991 million, or 11%, and represented 34% of total deposits; average NIDDA was up 7% or $564 million.
•Wholesale funding, including FHLB advances and brokered deposits, declined by $1.4 billion reflecting continued balance sheet repositioning.
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•Total loans declined by $206 million due to continued purposeful runoff in non-core loans. Average core loans increased by $195 million.
•Total criticized and classified loans increased by $7 million, or 1%, while non-performing loans declined by $51 million, or 19%. The NPA ratio improved to 0.66%, down 0.13%; the annualized net charge-off ratio was 0.11%, down 0.50%.
•The ratio of the ACL to total loans increased to 0.91% from 0.87%; the ratio of the ACL to non-performing loans increased to 97.14% from 75.90%; the provision for credit losses was down $9 million.
•At June 30, 2026, CET1 was 12.3%; the ratio of tangible common equity to tangible assets was 8.4%.
•Book value and tangible book value per common share were, $41.55 and $40.48, respectively, at June 30, 2026, compared to $41.11 and $40.05, respectively, at March 31, 2026.
•The Company repurchased approximately 1.1 million shares of its common stock for an aggregate purchase price of $50.1 million.
Our results for the second quarter of 2026 were driven primarily by continued balance sheet repositioning and improvements in funding mix. Growth in NIDDA and core deposits in general, together with lower brokered deposits and wholesale funding, contributed to lower funding costs and higher net interest margin. Profitability improved during the quarter, as reflected in increases in net income, pre-provision net revenue and returns on average assets and equity. Asset quality metrics also improved, including lower non-performing loan and net charge-off ratios, while capital and tangible book value metrics remained strong.
Results of Operations
Net Interest Income
Net interest income is the difference between interest earned on interest earning assets and interest incurred on interest bearing liabilities and is the primary driver of core earnings. Net interest income is impacted by the mix of interest earning assets and interest bearing liabilities, the ratio of interest earning assets to total assets and of interest bearing liabilities to total funding sources, movements in market interest rates and monetary policy, the shape of the yield curve, levels of non-performing assets and pricing pressure from competitors.
The mix of interest earning assets is influenced by loan demand, market and competitive conditions in our primary lending markets, by management's continual assessment of the rate of return and relative risk associated with various classes of earning assets and liquidity considerations. The mix of funding sources is influenced by the Company's liquidity profile, management's assessment of the desire for lower-cost funding sources weighed against relationships with customers, our ability to attract and retain core deposit relationships, competition for deposits in the Company's markets and the availability and pricing of other sources of funds.
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The following table presents, for the periods indicated, information about (i) average balances, the total dollar amount of taxable equivalent interest income from earning assets and the resultant average yields; (ii) average balances, the total dollar amount of interest expense on interest bearing liabilities and the resultant average rates; (iii) net interest income; (iv) the interest rate spread; and (v) the net interest margin. Non-accrual loans are included in the average balances presented in this table; however, interest income foregone on non-accrual loans is not included. Interest income, yields, spread and margin have been calculated on a tax-equivalent basis for loans and investment securities that are exempt from federal income taxes, at a federal tax rate of 21% (dollars in thousands):
Three Months Ended June 30, Three Months Ended March 31, Three Months Ended June 30,
2026 2026 2025
Average Balance Interest (1) Yield/Rate (1)(2) Average Balance Interest (1) Yield/Rate (1)(2) Average Balance Interest (1) Yield/Rate (1)(2)
Assets:
Interest earning assets:
Loans $ 23,839,310 $ 315,747 5.31 % $ 23,835,417 $ 312,812 5.31 % $ 23,901,218 $ 330,805 5.55 %
Investment securities (3) 9,381,602 108,693 4.64 % 9,471,480 106,953 4.55 % 9,352,504 118,046 5.06 %
Other interest earning assets 682,205 5,916 3.48 % 672,001 5,794 3.49 % 807,721 8,343 4.14 %
Total interest earning assets 33,903,117 430,356 5.09 % 33,978,898 425,559 5.06 % 34,061,443 457,194 5.38 %
Allowance for credit losses (213,533) (218,808) (227,191)
Non-interest earning assets 1,356,431 1,328,791 1,370,990
Total assets $ 35,046,015 $ 35,088,881 $ 35,205,242
Liabilities and Stockholders' Equity:
Interest bearing liabilities:
Interest bearing demand deposits $ 6,365,179 $ 45,432 2.87 % $ 6,033,099 $ 43,294 2.91 % $ 5,407,538 $ 45,689 3.39 %
Savings and money market deposits 10,083,767 72,729 2.89 % 10,245,692 73,278 2.90 % 10,355,700 88,023 3.41 %
Time deposits 3,251,965 28,444 3.51 % 3,751,256 32,122 3.48 % 3,919,526 36,983 3.79 %
Total interest bearing deposits 19,700,911 146,605 2.99 % 20,030,047 148,694 3.01 % 19,682,764 170,695 3.48 %
FHLB advances 2,028,901 18,991 3.75 % 2,193,944 19,897 3.68 % 2,941,264 27,828 3.79 %
Notes and other borrowings 471,725 5,586 4.74 % 366,487 4,608 5.03 % 709,081 9,137 5.16 %
Total interest bearing liabilities 22,201,537 171,182 3.10 % 22,590,478 173,199 3.11 % 23,333,109 207,660 3.57 %
Non-interest bearing demand deposits 9,027,557 8,463,491 7,993,915
Other non-interest bearing liabilities 776,682 930,784 931,879
Total liabilities 32,005,776 31,984,753 32,258,903
Stockholders' equity 3,040,239 3,104,128 2,946,339
Total liabilities and stockholders' equity $ 35,046,015 $ 35,088,881 $ 35,205,242
Net interest income $ 259,174 $ 252,360 $ 249,534
Interest rate spread 1.99 % 1.95 % 1.81 %
Net interest margin 3.06 % 2.99 % 2.93 %
(1)On a tax-equivalent basis where applicable. The tax-equivalent adjustment for tax-exempt loans was $2.8 million for the three months ended June 30, 2026, and $2.7 million for both the three months ended March 31, 2026 and June 30, 2025. The tax-equivalent adjustment for tax-exempt investment securities was $1.1 million for the three months ended June 30, 2026, and $0.7 million for both the three months ended March 31, 2026 and June 30, 2025.
(2)Annualized.
(3)At fair value.
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Six Months Ended June 30,
2026 2025
Average Balance Interest (1) Yield/Rate (1)(2) Average Balance Interest (1) Yield/Rate (1)(2)
Assets:
Interest earning assets:
Loans $ 23,837,373 $ 628,561 5.31 % $ 23,917,488 $ 654,918 5.51 %
Investment securities (3) 9,426,293 215,644 4.59 % 9,229,050 232,636 5.06 %
Other interest earning assets 677,425 11,710 3.49 % 801,797 16,779 4.22 %
Total interest earning assets 33,941,091 855,915 5.07 % 33,948,335 904,333 5.36 %
Allowance for credit losses (216,156) (227,672)
Non-interest earning assets 1,342,393 1,370,321
Total assets $ 35,067,328 $ 35,090,984
Liabilities and Stockholders' Equity:
Interest bearing liabilities:
Interest bearing demand deposits $ 6,200,056 $ 88,726 2.89 % $ 5,111,328 $ 85,582 3.37 %
Savings and money market deposits 10,164,282 146,007 2.89 % 10,593,396 179,802 3.42 %
Time deposits 3,500,231 60,566 3.49 % 4,122,014 79,521 3.89 %
Total interest bearing deposits 19,864,569 295,299 3.00 % 19,826,738 344,905 3.50 %
FHLB advances 2,110,967 38,889 3.72 % 2,966,188 55,034 3.74 %
Notes and other borrowings 419,396 10,193 4.86 % 709,059 18,271 5.16 %
Total interest bearing liabilities 22,394,932 344,381 3.10 % 23,501,985 418,210 3.58 %
Non-interest bearing demand deposits 8,747,082 7,705,120
Other non-interest bearing liabilities 853,307 968,195
Total liabilities 31,995,321 32,175,300
Stockholders' equity 3,072,007 2,915,684
Total liabilities and stockholders' equity $ 35,067,328 $ 35,090,984
Net interest income $ 511,534 $ 486,123
Interest rate spread 1.97 % 1.78 %
Net interest margin 3.03 % 2.87 %
(1)On a tax-equivalent basis where applicable. The tax-equivalent adjustment for tax-exempt loans was $5.4 million for the six months ended June 30, 2026 and 2025. The tax-equivalent adjustment for tax-exempt investment securities was $1.8 million and $1.4 million for the six months ended June 30, 2026 and 2025, respectively.
(2)Annualized.
(3) At fair value.
Three months ended June 30, 2026 compared to the three months ended March 31, 2026
Net interest income on a taxable-equivalent basis was $259.2 million for the three months ended June 30, 2026, compared to $252.4 million for the three months ended March 31, 2026, an increase of $6.8 million, or 2.7%. The increase was driven by a $4.8 million increase in interest income and a $2.0 million decrease in interest expense.
The net interest margin calculated on a tax-equivalent basis, increased to 3.06% for the three months ended June 30, 2026, compared to 2.99% for the immediately preceding three months ended March 31, 2026. Factors impacting the net interest margin for the three months ended June 30, 2026 compared to the three months ended March 31, 2026 included:
•The net interest margin was positively impacted by the increase in average NIDDA as a percentage of both total deposits and total funding. Average NIDDA grew by $564.1 million for the three months ended June 30, 2026, while average interest bearing deposits declined by $329.1 million.
•The average cost of deposits declined to 2.05% for the three months ended June 30, 2026, from 2.12% for the three months ended March 31, 2026. The decrease reflected a reduction of wholesale funding and continued pricing discipline.
•The tax-equivalent yield on investments increased to 4.64% for the three months ended June 30, 2026, from 4.55% for the three months ended March 31, 2026, primarily due to the benefit of securities purchased during the period when spreads widened and there was market volatility.
•The average rate paid on FHLB advances increased to 3.75% for the three months ended June 30, 2026 compared to 3.68% for the three months ended March 31, 2026 primarily due to the maturities of some cash flow hedges.
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Three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025
Net interest income, calculated on a tax-equivalent basis, increased by $10 million and $25 million for the three and six months ended June 30, 2026, respectively. The increase from the prior year for both periods is primarily due to continued improvement in funding mix. Strong growth in NIDDA supported reductions in higher-cost wholesale funding, including brokered deposits and FHLB advances, lowering overall funding costs and improving margin. These benefits were partially offset by lower yields on loans and investments and to a lesser extent lower average balances of interest-earning assets.
The net interest margin, calculated on a tax-equivalent basis, expanded to 3.06% and 3.03% for the three and six months ended June 30, 2026, respectively, from 2.93% and 2.87% for the three and six months ended June 30, 2025, respectively. The increase in the net interest margin for both periods was primarily a result of balance sheet repositioning and particularly an improved funding mix.
For the three and six months ended June 30, 2026 compared to same periods in the prior year, average NIDDA grew by $1.0 billion while average interest bearing liabilities declined by $1.1 billion. Deposit pricing continued to improve, contributing to lower funding costs. The average cost of deposits declined to 2.05% and 2.08% from 2.47% and 2.52% for the three and six months ended June 30, 2026 and 2025, respectively, reflecting the maturity of higher-rate time deposits, reductions in higher cost brokered deposits and the continued execution of targeted deposit repricing initiatives. Partially offsetting these improvements was a decrease in tax-equivalent yields on investment securities and loans as variable rate assets repriced faster than continued improvement in funding cost and funding mix dynamics due to lower SOFR/Fed funds basis.
Provision for Credit Losses
The provision for credit losses is a charge or credit to earnings required to maintain the ACL at a level consistent with management’s estimate of expected credit losses on financial assets carried at amortized cost at the balance sheet date. The amount of the provision is impacted by changes in current economic conditions as well as in management's reasonable and supportable economic forecast, loan originations and runoff, changes in portfolio mix, risk rating migration and portfolio seasoning, changes in specific reserves, changes in expected prepayment speeds and other assumptions. The provision for credit losses also includes amounts related to off-balance sheet credit exposures and may include amounts related to accrued interest receivable and AFS debt securities.
The following table presents the components of the provision for credit losses for the periods indicated (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Amount related to funded portion of loans $ 15,098 $ 15,694 $ 40,200 $ 31,657
Amount related to off-balance sheet credit exposures 461 4 (55) (848)
Total provision for credit losses $ 15,559 $ 15,698 $ 40,145 $ 30,809
The most significant factors impacting the provision for credit losses for the three months ended June 30, 2026 was an increase in specific reserves, changes in the economic forecast, lower net charge-offs and improved asset quality. The most significant factors impacting the provision for credit losses for the six months ended June 30, 2026 was higher net charge-offs and an increase in specific reserves.
The provision for credit losses may be volatile and the level of the ACL may change materially from current levels. Future levels of the ACL could be significantly impacted, in either direction, by changes in factors such as, but not limited to, economic conditions or the economic outlook, the composition of the loan portfolio, the financial condition of our borrowers and collateral values.
The determination of the amount of the ACL is complex and involves a high degree of judgment and subjectivity. See “Analysis of the Allowance for Credit Losses” below for more information about how we determine the appropriate level of the ACL and about factors that impacted the level of the ACL.
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Non-Interest Income
The following table presents a comparison of the categories of non-interest income for the periods indicated (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Deposit service charges and fees $ 6,310 $ 5,323 $ 12,529 $ 10,558
Gain on investment securities, net 941 347 4,231 1,291
Lease financing 3,885 4,612 7,232 8,925
Capital markets income:
Derivative income 6,781 3,648 9,438 6,878
Loan syndication fees 588 3,102 1,179 4,435
Foreign exchange fees 712 373 1,148 708
Total capital markets income 8,081 7,123 11,765 12,021
Other non-interest income 10,022 10,405 18,182 17,285
Total non-interest income $ 29,239 $ 27,810 $ 53,939 $ 50,080
The more significant items included in other non-interest income in the table above typically include commercial card revenue, lending related fees other than origination fees, and BOLI income. Non-interest income increased for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, primarily as a result of higher deposit service charges and capital markets revenue. For the six months ended June 30, 2026, the increase was primarily due to higher deposit service charges and gains on investment securities, partially offset by decrease in lease financing revenue attributable to the continuing decline in the size of the operating lease equipment portfolio.
Non-Interest Expense
The following table presents components of non-interest expense for the periods indicated (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Employee compensation and benefits $ 89,432 $ 83,153 $ 186,121 $ 165,899
Occupancy and equipment 11,192 10,945 22,194 22,288
Deposit insurance expense 5,334 6,976 4,308 14,203
Technology 22,910 23,492 45,325 46,272
Depreciation of operating lease equipment 3,169 3,869 6,535 7,878
Deposit related rebate and commission costs 14,295 14,532 27,524 27,694
Other non-interest expense 28,316 21,360 50,004 40,319
Total non-interest expense $ 174,648 $ 164,327 $ 342,011 $ 324,553
For the three months ended June 30, 2026, the increase in employee compensation and benefits was primarily attributable to increased head count as we invest in the growth of the franchise. In addition, in other non-interest expense were higher deposit related costs of $3.8 million, a loss associated with a single real estate owned asset disposition of $1.1 million and elevated operational losses of $1.3 million.
For the six months ended June 30, 2026, higher employee compensation and benefits was primarily due to routine salary increases and increased employee headcount. The decrease in deposit insurance expense was primarily attributable to a $6.7 million release of FDIC special assessment accrual during the six months ended June 30, 2026. A lower base assessment rate for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, also contributed to the decline in deposit insurance expense. In addition, included in other non-interest expense was $6.3 million in higher deposit related costs and higher operational losses of $1.1 million.
Analysis of Financial Condition
We have continued to execute on our organic balance sheet transformation strategy, focused on improving both the funding profile and asset mix. For the six months ended June 30, 2026, NIDDA increased by $825 million from 31% to 34% of total deposits, while non-brokered deposits increased by $1.4 billion over the same period. Year-over-year, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, average NIDDA increased by $1.0 billion, consistent with
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continued progress in improving our funding profile. Wholesale funding, including FHLB advances, brokered deposits, and federal funds purchased, declined by $1.5 billion for the six months ended June 30, 2026.
Total loans declined by $345 million for the six months ended June 30, 2026, primarily due to continued runoff of non-core loans. Core loans increased by $14 million while the residential and franchise and equipment finance portfolios declined by a combined $358 million, consistent with our balance sheet repositioning strategy. The loan-to-deposit ratio was 82.9% at June 30, 2026 compared to 82.7% at December 31, 2025. The securities portfolio grew by $54 million for the six months ended June 30, 2026.
Investment Securities
The following table shows the amortized cost and carrying value, which is fair value, of investment securities at the dates indicated (in thousands):
June 30, 2026 December 31, 2025
Amortized Cost Carrying Value Amortized Cost Carrying Value
U.S. Treasury securities $ 318,809 $ 307,677 $ 275,966 $ 268,653
U.S. Government agency and sponsored enterprise residential MBS 2,227,612 2,229,375 2,562,702 2,563,027
U.S. Government agency and sponsored enterprise commercial MBS 796,610 750,700 576,295 534,363
Private label residential MBS and CMOs 2,727,024 2,526,164 2,683,881 2,490,828
Private label commercial MBS 2,380,423 2,364,360 2,182,983 2,168,110
Single family real estate-backed securities 184,725 182,795 227,711 225,892
Collateralized loan obligations 773,119 772,056 780,847 780,944
Non-mortgage asset-backed securities 57,483 56,498 59,942 58,765
State and municipal obligations 74,326 69,703 115,193 109,520
SBA securities 54,008 52,534 59,526 57,815
$ 9,594,139 $ 9,311,862 $ 9,525,046 $ 9,257,917
Marketable equity securities 5,752 5,734
$ 9,317,614 $ 9,263,651
Our investment strategy is focused on ensuring adequate liquidity, maintaining a suitable balance of high credit quality, diverse assets, managing interest rate risk, and generating acceptable returns given our established risk parameters. We have sought to maintain liquidity by investing a significant portion of the portfolio in high quality liquid securities including U.S. Treasury and U.S. Government Agency and sponsored enterprise securities. We have also invested in highly-rated structured products, including private-label commercial and residential MBS, CLOs, single family real estate-backed securities and non-mortgage asset-backed securities that, while somewhat less liquid, are generally pledgeable at either the FHLB or the FRB and provide us with attractive yields. Investment grade municipal securities provide liquidity and attractive tax-equivalent yields. We remain committed to keeping the duration of our securities portfolio short; relatively short effective portfolio duration helps mitigate interest rate risk. The estimated effective duration of the investment portfolio was 2.02 years and the estimated weighted average life of the portfolio was 5.4 years as of June 30, 2026. Approximately 65% of the securities portfolio was floating rate at June 30, 2026.
The investment securities AFS portfolio was in a net unrealized loss position of $282.3 million at June 30, 2026, increasing by $15.2 million compared to a net unrealized loss position of $267.1 million at December 31, 2025. Net unrealized losses at June 30, 2026 included $22.1 million of gross unrealized gains and $304.4 million of gross unrealized losses. Investment securities available for sale in unrealized loss positions at June 30, 2026 had an aggregate fair value of $5.2 billion. The unrealized losses resulted primarily from a sustained period of higher interest rates, and in some cases, wider spreads compared to the levels at which securities were purchased. None of the unrealized losses were attributable to credit loss impairments.
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The external ratings distribution of our AFS securities portfolio at the dates indicated is depicted in the charts below:
June 30, 2026 December 31, 2025
We evaluate the credit quality of individual securities in the portfolio quarterly to determine whether we expect to recover the amortized cost basis of the investments in unrealized loss positions. This evaluation considers, but is not necessarily limited to, the following factors, the relative significance of which varies depending on the circumstances pertinent to each individual security:
•Whether we intend to sell the security prior to recovery of its amortized cost basis;
•Whether it is more likely than not that we will be required to sell the security prior to recovery of its amortized cost basis;
•The extent to which fair value is less than amortized cost;
•Adverse conditions specifically related to the security, a sector, an industry or geographic area;
•Changes in the financial condition of the issuer or underlying loan obligors;
•The payment structure and remaining payment terms of the security, including levels of subordination or over-collateralization;
•Failure of the issuer to make scheduled payments;
•Changes in external credit ratings;
•Relevant market data; and
•Estimated prepayments, defaults, and the value and performance of underlying collateral at the individual security level.
We regularly engage with bond managers to monitor trends in underlying collateral, including potential downgrades and subsequent cash flow diversions, liquidity, ratings migration, and any other relevant developments.
We have not sold, and do not anticipate the need to sell, securities in unrealized loss positions to generate liquidity. At June 30, 2026, the Company did not have an intent to sell securities that were in significant unrealized loss positions, and it was not more likely than not that the Company would be required to sell these securities before recovery of the amortized cost basis, which may be at maturity. The substantial majority of our investment securities are eligible to be pledged at either the FHLB or FRB.
The majority of our investment securities are classified within level 2 of the fair value hierarchy. U.S. Treasury securities and marketable equity securities are classified within level 1 of the hierarchy. For additional disclosure related to the fair values of investment securities, see Note 8 to the consolidated financial statements.
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The following table shows the weighted average prospective yields based on current rates, categorized by scheduled maturity, for AFS investment securities as of June 30, 2026. Scheduled maturities have been adjusted for anticipated prepayments when applicable. Yields on tax-exempt securities have been calculated on a tax-equivalent basis, based on a federal income tax rate of 21%:
Within One Year After One Year Through Five Years After Five Years Through Ten Years After Ten Years Total
U.S. Treasury securities — % 2.50 % 4.15 % — % 3.68 %
U.S. Government agency and sponsored enterprise residential MBS 4.73 % 4.67 % 4.72 % 4.81 % 4.71 %
U.S. Government agency and sponsored enterprise commercial MBS 4.22 % 3.29 % 3.30 % 4.93 % 3.75 %
Private label residential MBS and CMOs 4.55 % 4.43 % 3.71 % 4.02 % 4.16 %
Private label commercial MBS 4.54 % 5.31 % 4.05 % 3.21 % 5.17 %
Single family real estate-backed securities 3.86 % 4.18 % — % — % 3.98 %
Collateralized loan obligations 5.47 % 5.49 % 5.54 % — % 5.50 %
Non-mortgage asset-backed securities 3.10 % 4.51 % 2.55 % — % 4.38 %
State and municipal obligations 4.22 % 4.47 % 4.34 % — % 4.37 %
SBA securities 4.58 % 4.56 % 4.44 % 4.22 % 4.53 %
4.55 % 4.84 % 4.16 % 4.32 % 4.61 %
Loans
The following table shows the composition of the loan portfolio at the dates indicated (dollars in thousands):
June 30, 2026 December 31, 2025
Amortized Cost Percent of Total Loans Amortized Cost Percent of Total Loans
Non-owner occupied commercial real estate $ 6,327,275 26.4 % $ 6,105,207 25.2 %
Construction and land 679,626 2.8 % 705,664 2.9 %
Owner occupied commercial real estate 2,039,523 8.5 % 2,020,572 8.3 %
Commercial and industrial 6,641,643 27.8 % 7,008,903 28.8 %
Mortgage warehouse lending 876,771 3.7 % 728,241 3.0 %
Pinnacle - municipal finance 636,945 2.7 % 619,374 2.6 %
Total core loans 17,201,783 71.9 % 17,187,961 70.8 %
Franchise and equipment finance 71,740 0.3 % 102,746 0.4 %
Total commercial 17,273,523 72.2 % 17,290,707 71.2 %
1-4 single family residential 5,807,912 24.3 % 6,091,959 25.1 %
Government insured residential 847,638 3.5 % 891,041 3.7 %
Total residential 6,655,550 27.8 % 6,983,000 28.8 %
Total loans 23,929,073 100.0 % 24,273,707 100.0 %
Allowance for credit losses (217,516) (219,825)
Loans, net $ 23,711,557 $ 24,053,882
Commercial loans and leases
Commercial loans include a diverse portfolio of commercial and industrial loans and lines of credit, loans secured by owner-occupied commercial real-estate, income-producing non-owner occupied commercial real estate, construction loans, SBA loans, mortgage warehouse lines of credit, municipal loans and leases and franchise and equipment finance loans and leases.
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Commercial Real Estate
Commercial real estate loans include term loans secured by non-owner occupied income producing properties including rental apartments, industrial properties, retail shopping centers, free-standing single-tenant buildings, medical and other office buildings, warehouse facilities, hotels, and real estate secured lines of credit. The Company’s commercial real estate underwriting standards most often provide for loan terms of five to seven years, with amortization schedules of no more than thirty years.
The following tables present the distribution of commercial real estate loans by property type, along with weighted average DSCRs and LTVs at the dates indicated (dollars in thousands):
June 30, 2026
Amortized Cost Percent of Total CRE FL New York Tri-State Other Weighted Average DSCR Weighted Average LTV
Office $ 1,383,143 20 % 54 % 23 % 23 % 1.76 65.6 %
Warehouse/Industrial 1,703,612 24 % 45 % 7 % 48 % 1.82 49.6 %
Multifamily 1,190,305 17 % 39 % 43 % 18 % 1.93 53.0 %
Retail 1,509,453 22 % 39 % 19 % 42 % 1.86 58.0 %
Hotel 437,694 6 % 76 % 11 % 13 % 1.68 47.6 %
Construction and Land 679,626 10 % 54 % 20 % 26 % N/A N/A
Other 103,068 1 % 29 % 3 % 68 % 3.62 48.3 %
$ 7,006,901 100 % 47 % 21 % 32 % 1.85 55.6 %
December 31, 2025
Amortized Cost Percent of Total CRE FL New York Tri-State Other Weighted Average DSCR Weighted Average LTV
Office $ 1,426,728 21 % 61 % 20 % 19 % 1.70 64.8 %
Warehouse/Industrial 1,562,342 23 % 47 % 7 % 46 % 1.86 48.2 %
Multifamily 943,851 14 % 48 % 44 % 8 % 1.91 52.2 %
Retail 1,543,815 23 % 38 % 25 % 37 % 1.80 58.8 %
Hotel 483,267 7 % 78 % 10 % 12 % 1.62 46.9 %
Construction and Land 705,664 10 % 30 % 34 % 36 % N/A N/A
Other 145,204 2 % 49 % 2 % 49 % 2.96 47.0 %
$ 6,810,871 100 % 48 % 22 % 30 % 1.82 55.3 %
Geographic distribution in the table above is based on location of the underlying collateral property. LTVs and DSCRs are based on the most recent available information; if current appraisals are not available, LTVs are adjusted by our models based on current and forecasted sub-market dynamics. DSCRs are calculated based on current contractually required payments, which in some cases may be interest only and on current levels of operating cash flows. DSCR calculations do not include secondary forms of repayment or pro-forma rental payments on in-place leases that are currently in initial rent abatement periods.
Included in New York tri-state multifamily loans in the tables above is approximately $99 million of rent regulated exposure as of June 30, 2026.
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The following table presents information about CRE loans maturing in the next 12 months by property type at June 30, 2026 (dollars in thousands). 13% of the total CRE portfolio, with a weighted average coupon rate of 4.29%, is fixed rate to the borrower and maturing in the next 12 months.
Maturing in the Next 12 Months % Maturing in the Next 12 Months Fixed Rate or Swapped Maturing Next 12 Months Fixed Rate to Borrower Maturing in Next 12 Months as a % of Total Portfolio
Office $ 482,426 35 % $ 282,030 20 %
Warehouse/Industrial 408,291 24 % 179,580 11 %
Multifamily 300,515 25 % 134,093 11 %
Retail 254,935 17 % 177,893 12 %
Hotel 214,397 49 % 143,346 33 %
Construction and Land 250,177 37 % 387 — %
Other 7,407 7 % 7,407 7 %
$ 1,918,148 27 % $ 924,736 13 %
The following table presents scheduled contractual maturities of the CRE portfolio by property type at June 30, 2026 (in thousands):
2026 2027 2028 2029 2030 Thereafter Total
Office $ 334,497 $ 251,910 $ 299,823 $ 340,115 $ 89,397 $ 67,401 $ 1,383,143
Warehouse/Industrial 354,688 287,773 297,735 192,550 323,822 247,044 1,703,612
Multifamily 114,287 366,586 276,724 228,541 100,345 103,822 1,190,305
Retail 239,081 135,762 400,397 147,912 353,492 232,809 1,509,453
Hotel 157,410 56,987 71,532 80,525 57,245 13,995 437,694
Construction and Land 103,361 258,315 88,579 93,878 72,852 62,641 679,626
Other 2 7,406 29,263 8,309 8,048 50,040 103,068
$ 1,303,326 $ 1,364,739 $ 1,464,053 $ 1,091,830 $ 1,005,201 $ 777,752 $ 7,006,901
The office segment totaled $1.4 billion at June 30, 2026. Medical office comprised approximately $343 million or 25% of the total office portfolio.
Non-performing CRE loans, excluding SBA loans, totaled $30 million at June 30, 2026 and were entirely comprised of office exposure. Also see the section entitled "Asset Quality" below.
Commercial and Industrial
Commercial and industrial loans are typically made to small, middle market and larger corporate businesses and not-for-profit entities and include equipment loans, secured and unsecured working capital facilities, formula-based loans, subscription finance lines of credit, trade finance, SBA product offerings, business acquisition finance credit facilities, credit facilities to institutional real estate entities such as REITs and commercial real estate investment funds, and a small amount of commercial credit cards. These loans may be structured as term loans, typically with maturities of five to seven years, or revolving lines of credit which may have multi-year maturities. In addition to financing provided by Pinnacle, the Bank provides financing to state and local governmental entities generally within our primary geographic markets. The Bank makes loans secured by owner-occupied commercial real estate that typically have risk profiles more closely aligned with that of commercial and industrial loans than with other types of commercial real estate loans.
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The following table presents the exposure in the C&I portfolio by industry, at June 30, 2026 (dollars in thousands):
Amortized Cost(1) Percent of Total
Finance and Insurance $ 1,217,671 14.1 %
Health Care 757,086 8.7 %
Utilities 719,805 8.3 %
Wholesale Trade 706,384 8.1 %
Manufacturing 714,446 8.2 %
Construction 709,644 8.2 %
Educational Services 630,687 7.3 %
Transport / Warehousing 685,240 7.9 %
Information 292,961 3.4 %
R/E and Rental & Leasing 470,806 5.4 %
Professional, Scientific, and Technical Services 426,140 4.9 %
Retail Trade 323,216 3.7 %
Other Services 312,426 3.6 %
Public Administration 239,960 2.8 %
Arts, Entertainment, and Recreation 113,046 1.3 %
Administrative and Support and Waste Management 168,563 1.9 %
Accommodation and Food Services 106,506 1.2 %
Other 86,579 1.0 %
$ 8,681,166 100.0 %
(1) Includes $2.0 billion of owner occupied real estate.
The following chart presents the geographic distribution of the commercial and industrial portfolio at June 30, 2026:
C&I Geographic Distribution
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The following chart presents a further breakdown of the NDFI portfolio at June 30, 2026:
NDFI Portfolio Distribution
NDFI exposure totaled $1.3 billion, or 5% of total loans, at June 30, 2026. The "Other" category in the chart above includes primarily REITs, B2C, private equity funds, insurance carriers and investment services. The substantial majority of the NDFI portfolio is pass rated, with two loans totaling $25 million rated non-pass.
The franchise and equipment finance portfolio is comprised of loans originated by Bridge including (i) franchise acquisition, expansion and equipment financing facilities and (ii) transportation equipment finance. We expect balances in these segments will continue to decline.
The Pinnacle portfolio consists of essential-use equipment financing to state and local governmental entities on a national basis directly and through vendor programs and alliances, with financing structures including equipment lease purchase agreements, direct (private placement) bond re-fundings and loan agreements.
Residential mortgages
The following table shows the composition of residential loans at the dates indicated (in thousands):
June 30, 2026 December 31, 2025
1-4 single family residential $ 5,807,912 $ 6,091,959
Government insured residential 847,638 891,041
$ 6,655,550 $ 6,983,000
The 1-4 single family residential loan portfolio, excluding government insured residential loans, is primarily comprised of prime jumbo loans purchased through established correspondent channels. 1-4 single family residential mortgage loans are primarily closed-end, first lien jumbo mortgages for the purchase or re-finance of owner occupied property. The loans have terms ranging from 10 to 30 years, with either fixed or adjustable interest rates. At June 30, 2026, the majority of the 1-4 single family residential loan portfolio, excluding government insured residential loans, was owner-occupied, with 81% primary residence, 5% second homes and 14% investor-owned properties.
The Company acquires non-performing FHA and VA insured mortgages from third parties who have exercised their right to purchase these loans out of GNMA securitizations upon default ("Buyout Loans"). Buyout Loans that re-perform, either through modification or self-cure, may be eligible for re-securitization. The balance of Buyout Loans totaled $814 million at June 30, 2026.
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The following charts present the distribution of the 1-4 single family residential mortgage portfolio by product type at the dates indicated:
June 30, 2026 December 31, 2025
The following table presents the five states with the largest geographic concentrations of 1-4 single family residential loans, excluding government insured residential loans, at the dates indicated (dollars in thousands):
June 30, 2026 December 31, 2025
Amortized Cost Percent of Total Amortized Cost Percent of Total
California $ 1,739,356 29.9 % $ 1,812,330 29.7 %
New York 1,179,285 20.3 % 1,226,041 20.1 %
Florida 410,656 7.1 % 431,936 7.1 %
Illinois 287,567 5.0 % 307,499 5.0 %
Virginia 272,613 4.7 % 286,358 4.7 %
Others 1,918,435 33.0 % 2,027,795 33.4 %
$ 5,807,912 100.0 % $ 6,091,959 100.0 %
Operating lease equipment, net
Operating lease equipment, net totaled $157 million and $171 million at June 30, 2026 and December 31, 2025, respectively, consisting primarily of railcars and other transportation equipment. We expect the balance of operating lease equipment to continue to decline as this product offering is no longer considered core to our business strategy.
Asset Quality
Commercial Loans
We have a robust credit risk management framework, an experienced team to lead the workout and recovery process for the commercial and commercial real estate portfolios and a dedicated internal credit review function. Loan performance is monitored by our credit administration, portfolio management and workout and recovery departments. Risk ratings are updated continuously; generally, commercial relationships with balances greater than $3 million, are re-evaluated at least annually and more frequently if circumstances indicate that a change in risk rating may be warranted. Homogenous groups of smaller balance commercial loans may be monitored collectively. The credit quality and risk rating of commercial loans as well as our underwriting and portfolio management practices are regularly reviewed by our internal independent credit review department.
We believe internal risk rating is the best indicator of the credit quality of commercial loans. The Company utilizes a 16-grade internal asset risk classification system as part of its efforts to monitor and maintain commercial asset quality. The special mention rating is considered a transitional rating for loans exhibiting potential credit weaknesses that could result in deterioration of repayment prospects at some future date if not checked or corrected and that deserve management’s close attention. These borrowers may exhibit declining cash flows or revenues or increasing leverage. Loans with well-defined credit weaknesses that may result in a loss if the deficiencies are not corrected are assigned a risk rating of substandard. These borrowers may exhibit payment defaults, inadequate cash flows from current operations, operating losses, increasing balance
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sheet leverage, project cost overruns, unreasonable construction delays, exhausted interest reserves, declining collateral values, frequent overdrafts or past due real estate taxes. Loans with weaknesses so severe that collection in full is highly questionable or improbable, but because of certain reasonably specific pending factors have not been charged off, are assigned an internal risk rating of doubtful.
The following table summarizes the Company's commercial credit exposure, based on internal risk rating, at the dates indicated (dollars in thousands):
June 30, 2026 March 31, 2026 December 31, 2025
CRE Total Commercial Percent of Commercial Loans CRE Total Commercial Percent of Commercial Loans CRE Total Commercial Percent of Commercial Loans
Pass $ 6,525,611 $ 16,214,161 93.9 % $ 6,325,495 $ 16,226,229 94.0 % $ 6,145,173 $ 16,092,180 93.1 %
Special mention 33,868 175,198 1.0 % 67,396 177,859 1.0 % 82,147 175,009 1.0 %
Substandard accruing 411,167 686,274 4.0 % 418,033 622,436 3.6 % 474,592 674,368 3.9 %
Substandard non-accruing 36,255 156,208 0.9 % 74,584 211,293 1.2 % 108,959 300,903 1.7 %
Doubtful — 41,682 0.2 % 903 40,758 0.2 % — 48,247 0.3 %
$ 7,006,901 $ 17,273,523 100.0 % $ 6,886,411 $ 17,278,575 100.0 % $ 6,810,871 $ 17,290,707 100.0 %
Total criticized and classified loans decreased by $139 million for the six months ended June 30, 2026, while total criticized and classified CRE loans declined by $184 million for the same period. Non-accrual loans declined by $149 million, or 40%, for the six months ended June 30, 2026.
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The following table provides additional information about special mention and substandard accruing loans at the dates indicated (dollars in thousands). All of these loans are performing. Non-accrual loans are discussed further in the section entitled "Non-performing Assets" below.
June 30, 2026 March 31, 2026 December 31, 2025
Amortized Cost % of Loan Segment Amortized Cost % of Loan Segment Amortized Cost % of Loan Segment
Special mention:
CRE
Hotel $ 17,213 3.9 % $ 17,302 3.7 % $ 26,817 5.5 %
Office — — % 21,370 1.5 % 26,754 1.9 %
Industrial — — % 12,077 0.8 % 12,154 0.8 %
Construction and land 16,655 2.5 % 16,647 2.2 % 16,422 2.3 %
33,868 0.5 % 67,396 1.0 % 82,147 1.2 %
Owner occupied commercial real estate 5,174 0.3 % 20,032 1.0 % 12,400 0.6 %
Commercial and industrial 136,156 2.1 % 90,431 1.3 % 80,462 1.1 %
$ 175,198 $ 177,859 $ 175,009
Substandard accruing:
CRE
Hotel $ 24,777 5.7 % $ 66,245 14.0 % $ 64,530 13.4 %
Retail 56,377 3.7 % 88,312 5.8 % 88,624 5.7 %
Multi-family 98,137 8.2 % 98,940 9.5 % 101,829 10.8 %
Office 127,265 9.2 % 107,356 7.7 % 162,355 11.4 %
Industrial 40,301 2.4 % 28,084 1.8 % 28,263 1.8 %
Construction and land 64,138 9.4 % 28,916 3.9 % 28,905 4.1 %
Other 172 0.2 % 180 0.1 % 86 0.1 %
$ 411,167 5.9 % $ 418,033 6.1 % $ 474,592 7.0 %
Owner occupied commercial real estate 102,941 5.0 % 77,700 3.8 % 72,728 3.6 %
Commercial and industrial 169,203 2.5 % 123,421 1.8 % 112,883 1.6 %
Franchise and equipment finance 2,963 4.1 % 3,282 3.9 % 14,165 13.8 %
$ 686,274 $ 622,436 $ 674,368
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The following charts present criticized and classified CRE loans by property type at the dates indicated (in millions):
June 30, 2026 December 31, 2025
(1)Includes $29 million and $58 million of office exposure at June 30, 2026 and December 31, 2025, respectively.
Residential Loans
Excluding government insured loans, our residential portfolio consists largely of performing jumbo mortgage loans purchased through established correspondent channels with FICO scores above 720, full documentation, current LTVs of 80% or less and are primarily owner-occupied. Loans with LTVs higher than 80% may be extended to selected credit-worthy borrowers. We perform due diligence on the purchased loans for credit, compliance, counterparty, payment history and property valuation.
We have a dedicated residential credit risk management function, and the residential portfolio is monitored by our internal credit review function. Residential mortgage loans are not individually risk rated. Delinquency status is the primary measure we use to monitor the credit quality of these loans. We also consider original LTV and most recently available FICO score to be significant indicators of credit quality for the 1-4 single family residential portfolio, excluding government insured residential loans.
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The following charts present information about the 1-4 single family residential portfolio, excluding government insured loans, by FICO distribution, LTV distribution and vintage at June 30, 2026:
FICO Distribution LTV Distribution Vintage
The following graph presents delinquency trends for residential loans, excluding government insured residential loans, over the periods indicated (in millions):
Residential Delinquencies
FICO scores are generally updated semi-annually and were most recently updated in the first quarter of 2026. LTVs are typically based on valuation at origination.
Note 4 to the consolidated financial statements presents additional information about key credit quality indicators and delinquency status of the loan portfolio.
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Non-Performing Assets
Non-performing assets consist of (i) non-accrual loans, (ii) accruing loans that are more than 90 days contractually past due as to interest or principal, excluding PCD loans for which management has a reasonable basis for an expectation about future cash flows and government insured residential loans, and (iii) OREO and other non-performing assets.
The following table presents information about the Company's non-performing loans and non-performing assets at the dates indicated (dollars in thousands):
June 30, 2026 March 31, 2026 December 31, 2025
Non-accrual loans:
Commercial:
Non-owner occupied commercial real estate $ 29,922 $ 66,946 $ 67,348
Construction and land — — 29,662
Owner occupied commercial real estate 18,375 20,230 23,706
Commercial and industrial 116,395 128,591 187,068
Franchise and equipment finance 1,036 1,140 2,516
Guaranteed portion of SBA 31,835 33,812 37,926
Non-guaranteed portion of SBA 327 1,332 1,516
Total commercial loans 197,890 252,051 349,742
Residential 26,034 22,639 22,876
Total non-accrual loans 223,924 274,690 372,618
Loans past due 90 days and still accruing — 395 —
Total non-performing loans 223,924 275,085 372,618
OREO and other non-performing assets 5,395 4,190 4,829
Total non-performing assets $ 229,319 $ 279,275 $ 377,447
Non-performing loans to total loans 0.94 % 1.14 % 1.54 %
Non-performing loans, excluding the guaranteed portion of non-accrual SBA loans, to total loans 0.81 % 1.00 % 1.38 %
Non-performing assets to total assets 0.66 % 0.79 % 1.08 %
Non-performing assets, excluding the guaranteed portion of non-accrual SBA loans, to total assets 0.57 % 0.69 % 0.97 %
ACL to total loans 0.91 % 0.87 % 0.91 %
Commercial ACL to commercial loans (1) 1.30 % 1.25 % 1.30 %
ACL to non-performing loans 97.14 % 75.90 % 58.99 %
Net charge-offs to average loans (2) 0.11 % 0.61 % 0.42 %
Net charge-offs to average loans, trailing twelve months 0.35 % 0.37 % 0.30 %
(1) For purposes of this ratio, commercial loans includes the C&I and CRE sub-segments, as well as franchise and equipment finance. Due to their unique risk profiles, MWL and municipal finance are excluded from this ratio.
(2) Annualized for the three months ended June 30, 2026, March 31, 2026, and December 31, 2025.
Contractually delinquent government insured residential loans are typically Buyout Loans and are excluded from non-performing loans as defined in the table above due to their government guarantee. The carrying value of such loans contractually delinquent by 90 days or more was $175 million, $197 million and $159 million at June 30, 2026, March 31, 2026 and December 31, 2025, respectively.
The increase in the ACL to non-performing loans coverage ratio reflected overall lower non-performing loan balances at June 30, 2026 compared to December 31, 2025.
The following charts present non-performing CRE loans by property type at the dates indicated (in millions):
June 30, 2026 December 31, 2025
Commercial loans are placed on non-accrual status when (i) management has determined that full repayment of all contractual principal and interest is in doubt, or (ii) the loan is past due 90 days or more as to principal or interest unless the loan is well secured and in the process of collection. Residential loans, other than Buyout Loans, are generally placed on non-accrual status when they are 60 days past due. When a loan is placed on non-accrual status, uncollected interest accrued is reversed and charged to interest income. Commercial loans are returned to accrual status only after all past due principal and interest has been collected and full repayment of remaining contractual principal and interest is reasonably assured. Residential loans are generally returned to accrual status when less than 60 days past due. Past due status of loans is determined based on the contractual next payment due date. Loans less than 30 days past due are reported as current.
Loss Mitigation Strategies
Criticized or classified commercial loans in excess of certain thresholds are reviewed quarterly by the Criticized Asset Committee, which evaluates the appropriate strategy for collection to mitigate the amount of credit losses and considers the appropriate risk rating for these loans. Criticized asset reports for each relationship are presented by the assigned relationship manager and credit officer to the Criticized Asset Committee until such time as the relationships are returned to a satisfactory credit risk rating or otherwise resolved. The Criticized Asset Committee may require the transfer of a loan to our workout and recovery department, which is tasked to effectively manage the loan with the goal of minimizing losses and expenses associated with restructure, collection and/or liquidation of collateral. Commercial loans with a risk rating of substandard, loans on non-accrual status, and assets classified as OREO or repossessed assets are usually transferred to workout and recovery. Oversight of the workout and recovery department is provided by the Criticized Asset Committee.
Our servicers evaluate each residential loan in default to determine the most effective loss mitigation strategy, which may be modification, short sale, or foreclosure, and pursue the alternative most suitable to the consumer and to mitigate losses to the Bank.
Analysis of the Allowance for Credit Losses
The ACL is management's estimate of the amount of expected credit losses over the life of the loan portfolio, or the amount of amortized cost basis not expected to be collected, at the balance sheet date. This estimate encompasses information about historical events, current conditions and reasonable and supportable economic forecasts. Determining the amount of the ACL is complex and requires extensive judgment by management about matters that are inherently uncertain. Given the complexity of the ACL estimate, the level of management judgment required and inherent uncertainty with respect to future developments in the external environment, it is possible that the ACL estimate could change, potentially materially, in future periods. Changes in the ACL may result from changes in current economic conditions, including but not limited to unanticipated changes in interest rates or inflationary pressures, changes in our economic forecast, loan portfolio composition, commercial and residential real estate market dynamics and other circumstances not currently known to us that may impact the financial condition and operations of our borrowers, among other factors.
Expected credit losses are estimated on a collective basis for groups of loans that share similar risk characteristics. For loans that do not share similar risk characteristics with other loans such as collateral dependent loans, expected credit losses are
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estimated on an individual basis. Expected credit losses are estimated over the contractual terms of the loans, adjusted for expected prepayments, generally excluding expected extensions, renewals, and modifications.
For the substantial majority of portfolio segments and subsegments, including residential loans other than government insured loans and most commercial and commercial real estate loans, expected losses are estimated using econometric models.
A single economic scenario or a probability weighted blend of economic scenarios may be used. The models ingest numerous national, regional and MSA level variables and data points. At June 30, 2026 and December 31, 2025, we used a combination of weighted third-party provided economic scenarios in calculating the quantitative portion of the ACL. Each of these externally provided scenarios in fact represents the result of a probability weighting of thousands of individual scenario paths.
See Note 1 to the consolidated financial statements of the Company's 2025 Annual Report on Form 10-K for more detailed information about our ACL methodology and related accounting policies.
The following table provides an analysis of the ACL, the provision for credit losses related to the funded portion of loans and net charge-offs by loan segment for the periods indicated (dollars in thousands):
CRE C&I Pinnacle - Municipal Finance Franchise and Equipment Finance Residential and MWL Total
Balance at December 31, 2024 $ 70,458 $ 137,954 $ 116 $ 2,381 $ 12,244 $ 223,153
Provision for credit losses 1,698 29,324 (17) (1,388) 2,040 31,657
Charge-offs (13,719) (23,089) — — (208) (37,016)
Recoveries 29 4,809 — 90 8 4,936
Balance at June 30, 2025 $ 58,466 $ 148,998 $ 99 $ 1,083 $ 14,084 $ 222,730
Balance at December 31, 2025 $ 58,344 $ 148,637 $ 106 $ 960 $ 11,778 $ 219,825
Provision for credit losses 4,075 35,772 (10) (675) 1,038 40,200
Charge-offs (7,196) (39,990) — — — (47,186)
Recoveries 3,348 1,186 — 143 — 4,677
Balance at June 30, 2026 $ 58,571 $ 145,605 $ 96 $ 428 $ 12,816 $ 217,516
Net Charge-offs to Average Loans
Three Months Ended June 30, 2025 0.33 % 0.34 % — % (0.13) % 0.01 % 0.21 %
Three Months Ended June 30, 2026 0.21 % 0.13 % — % (0.41) % — % 0.11 %
The following table shows the distribution of the ACL at the dates indicated (dollars in thousands):
June 30, 2026 March 31, 2026 December 31, 2025
Total %(1) Total %(1) Total %(1)
CRE $ 58,571 29.2 % $ 55,704 28.6 % $ 58,344 28.1 %
C&I 145,605 36.3 % 141,861 36.7 % 148,637 37.1 %
Pinnacle - municipal finance 96 2.7 % 94 2.6 % 106 2.6 %
Franchise and equipment finance 428 0.3 % 396 0.4 % 960 0.4 %
Total Commercial 204,700 198,055 208,047
Residential and MWL 12,816 31.5 % 10,735 31.7 % 11,778 31.8 %
$ 217,516 100.0 % $ 208,790 100.0 % $ 219,825 100.0 %
(1)Represents percentage of loans receivable in each category to total loans receivable.
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The following table presents the ACL as a percentage of loans at the dates indicated, by portfolio sub-segment:
June 30, 2026 March 31, 2026 December 31, 2025
Commercial:
CRE 0.84 % 0.81 % 0.86 %
C&I 1.68 % 1.60 % 1.65 %
Franchise and equipment finance 0.60 % 0.47 % 0.93 %
Total commercial 1.30 % 1.25 % 1.30 %
Pinnacle - municipal finance 0.02 % 0.02 % 0.02 %
Residential and MWL 0.17 % 0.14 % 0.15 %
0.91 % 0.87 % 0.91 %
ACL to non-performing loans 97.14 % 75.90 % 58.99 %
ACL to CRE office loans 1.98 % 1.69 % 2.03 %
Changes in the ACL during the three months ended June 30, 2026, are depicted in the chart below (dollars in millions):
Changes in the ACL during the three months ended June 30, 2026
As depicted in the chart above, the most significant factors impacting the ACL for the three months ended June 30, 2026, were increases in specific reserves and impact of the changes in the economic forecast, partially offset by net charge-offs and changes in the portfolio composition and borrower financial performance. The ACL was also impacted, although to a lesser extent, by risk rating migration and a decrease in certain qualitative factors.
At June 30, 2026, the ratio of the ACL to loans was 0.91%, compared to 0.87% at March 31, 2026. The commercial ACL ratio, inclusive of C&I, CRE, and franchise and equipment finance was 1.30% at June 30, 2026 compared to 1.25% at March 31, 2026. The ACL to loans ratio for CRE office loans was 1.98% at June 30, 2026 compared to 1.69% at March 31, 2026. Further discussion of changes in the ACL for select portfolio sub-segments follows:
•The ACL for the CRE portfolio sub-segment increased by $2.9 million during the three months ended June 30, 2026, from 0.81% to 0.84% of loans, primarily a result of changes in the economic forecast and increases in specific reserves, partially offset by net charge-offs.
•The ACL for the commercial and industrial sub-segment increased by $3.7 million during the three months ended June 30, 2026, from 1.60% to 1.68% of loans, primarily a result of increases in specific reserves, partially offset by net charge-offs and improvements in borrower financials.
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•The ACL for the residential and MWL segments increased by $2.1 million during the three months ended June 30, 2026, from 0.14% to 0.17% of loans, primarily a result of changes in the portfolio composition.
The quantitative estimate of the ACL at June 30, 2026, was informed by forecasted economic scenarios published in June 2026, a wide variety of additional economic data, information about borrower financial condition and collateral values, and other relevant information. The quantitative portion of the ACL at June 30, 2026, was modeled using a weighting of baseline, downside and upside third-party economic scenarios, with the highest weighting ascribed to the baseline scenario and lower weightings ascribed to the downside and upside scenarios.
Some of the high-level data points informing the baseline scenario used in estimating the quantitative portion of the ACL at June 30, 2026, included:
•Labor market assumptions, which reflected national unemployment peaking at 4.6% and
•Annualized growth in national GDP averaging 2.1%.
The above unemployment and GDP growth assumptions are provided to give a high level overview of the nature and severity of the baseline economic forecast scenario used in estimating the ACL. Numerous additional variables and assumptions not explicitly stated, including but not limited to detailed commercial and residential property forecasts, projected stock market performance and volatility indices and a variety of additional assumptions about market interest rates and spreads also contributed to the overall impact economic conditions and the economic forecast had on the ACL estimate. Furthermore, while the variables presented above are at the national level, many of the economic variables are regionalized at the market and submarket level in the models.
For additional information about the ACL, see Note 4 to the consolidated financial statements.
Deposits
The composition of deposits at the dates indicated is shown below:
June 30, 2026 December 31, 2025
The Company has a diverse deposit book. At June 30, 2026, our largest industry vertical was title insurance with approximately $4.9 billion in total deposits. Deposits in the HOA vertical totaled $2.4 billion at June 30, 2026. Approximately 75% of our deposits were commercial or municipal deposits at June 30, 2026.
Brokered deposits totaled $3.0 billion and $4.9 billion at June 30, 2026 and December 31, 2025, respectively. Brokered deposits are generally insured and typically a readily available source of funds, however, they are typically higher cost and in some circumstances, credit sensitive. We are strategically focused on reducing the level of brokered deposits in the future.
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The following graph presents trends in the deposit mix and cost of deposits (in millions):
Quarterly average cost of deposits 2.05% 2.12% 2.18%
Non-interest bearing as a % of total deposits 34.4% 30.5% 28.8%
Spot average APY of totaldeposits 1.92% 2.09% 2.10%
Non-interest bearing demand deposits increased by 11%, or $991 million during the three months ended June 30, 2026 and increased by $825 million, 9%, during the six months ended June 30, 2026. Total deposits decreased by $479 million during the three months ended June 30, 2026 and decreased by $472 million during the six months ended June 30, 2026, while non-brokered deposits increased by $1.1 billion during the three months ended June 30, 2026 and increased by $1.4 billion during the six months ended June 30, 2026.
For additional information about Deposits, see Note 10 to the consolidated financial statements.
Borrowings
In addition to deposits, we utilize FHLB advances as a funding source; the advances provide us with additional flexibility in managing both term and cost of funding and in managing interest rate risk. FHLB advances are secured by qualifying residential first mortgage and commercial real estate loans and MBS. The following table presents information about the contractual balance and maturities of outstanding FHLB advances, as of June 30, 2026 (dollars in thousands):
Amount Weighted Average Rate
Maturing in:
2026 - One month or less $ 1,600,000 3.82 %
2026 - Over one month 30,000 3.90 %
Total contractual balance outstanding $ 1,630,000
The table above reflects contractual maturities of outstanding advances and does not incorporate the impact that interest rate swaps designated as cash flow hedges have on the duration or cost of borrowings.
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The table below presents information about outstanding interest rate swaps hedging the variability of interest cash flows on the FHLB advances included in the table above, as of June 30, 2026 (dollars in thousands):
Notional Amount Weighted Average Rate
Cash flow hedges maturing in:
2026 $ 430,000 3.30 %
Thereafter $ 25,000 2.50 %
$ 455,000 3.28 %
See Note 6 to the consolidated financial statements and "Interest Rate Risk" below for more information about derivative instruments.
Outstanding notes payable and other borrowings consisted of the following at the dates indicated (in thousands):
June 30, 2026 December 31, 2025
Subordinated notes:
Principal amount of 5.125% subordinated notes maturing on June 11, 2030 $ 300,000 $ 300,000
Unamortized discount and debt issuance costs (2,825) (3,143)
297,175 296,857
Total notes 297,175 296,857
Finance leases 21,761 22,883
Notes and other borrowings $ 318,936 $ 319,740
Liquidity and Capital Resources
Liquidity
Liquidity involves our ability to generate adequate funds to support planned interest earning asset growth, meet deposit withdrawal and credit line usage requests in both normal operating and stressed environments, maintain reserve requirements, conduct routine operations, pay dividends, service outstanding debt and meet other contractual obligations.
BankUnited's ongoing liquidity needs have historically been met primarily by cash flows from operations, deposit growth, the investment portfolio, its amortizing loan portfolio and FHLB advances. FRB discount window capacity, repurchase agreement capacity and a letter of credit with the FHLB provide additional sources of contingent liquidity.
Same day available liquidity includes cash, secured funding such as borrowing capacity at the Federal Home Loan Bank of Atlanta and the Federal Reserve, and unpledged securities. Additional sources of liquidity include cash flows from operations, wholesale deposits, cash flow from the Bank's amortizing securities and loan portfolios, repurchase agreements and the sale of investment securities. Management also has the ability to exert substantial control over the rate and timing of loan production, and resultant requirements for liquidity to fund new loans.
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The following chart presents the components of same day available liquidity at June 30, 2026 and December 31, 2025 (in millions):
Same Day Available Liquidity
At June 30, 2026, the ratio of estimated insured and collateralized deposits to total deposits was 51% and the ratio of available liquidity to estimated uninsured, uncollateralized deposits was 119%. As a commercially focused bank, due to the inherent nature of commercial deposits and the fact that deposit insurance is designed primarily to protect consumers, a significant portion of our deposits are uninsured.
Our ALM policy establishes limits or operating risk thresholds for a number of measures of liquidity which are monitored at least monthly by the ALCO and quarterly by the Board of Directors. Some of the measures currently used to dimension liquidity risk and manage liquidity are a wholesale funding ratio, the ratio of available liquidity to uninsured/non-collateralized deposits, the ratio of available operational liquidity (which excludes availability at the FRB) to volatile liabilities, a liquidity stress test coverage ratio, the loan to deposit ratio, a one-year liquidity ratio, a measure of available on-balance sheet liquidity, and large depositor concentrations. We also have single depositor relationship limits. Our liquidity management framework incorporates a robust contingency funding plan and liquidity stress testing framework.
The following tables present some of the Company's liquidity measures, where applicable, their related policy limits and operating risk thresholds at the dates indicated:
June 30, 2026 Policy Limit
Wholesale funding/total assets 17.0% <37.5%
June 30, 2026 Operating Threshold
Available operational liquidity/volatile liabilities 2.55x ≥1.50x
Liquidity stress test coverage ratio 2.59x ≥1.50x
One year liquidity ratio 3.33x ≥1.15x
Loan to deposit ratio 82.9% ≤95%
Top 20 uninsured depositors to total deposits (excluding brokered & municipal deposits) 12.5% ≤15%
Available on-balance sheet liquidity 9.3% ≥5%
Available liquidity to uninsured/non-collateralized deposits 119% ≥105%
As a holding company, BankUnited, Inc. is a corporation separate and apart from its banking subsidiary, and therefore, provides for its own liquidity. BankUnited, Inc.’s main sources of funds include management fees and dividends from the Bank and access to capital markets. There are regulatory limitations that may affect the ability of the Bank to pay dividends to BankUnited, Inc. Management believes that such limitations will not impact our ability to meet our ongoing cash obligations.
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Capital
Pursuant to the FDIA, the federal banking agencies have adopted regulations setting forth a five-tier system for measuring the capital adequacy of the financial institutions they supervise. At June 30, 2026 and December 31, 2025, the Company and the Bank had capital levels that exceeded both the regulatory well-capitalized guidelines and all internal capital ratio targets.
We have an active shelf registration statement on file with the SEC that allows the Company to periodically offer and sell in one or more offerings, individually or in any combination, our common stock, preferred stock and other non-equity securities. The shelf registration provides us with flexibility in issuing capital instruments and enables us to more readily access the capital markets as needed to pursue future growth opportunities and to ensure continued compliance with regulatory capital requirements. Our ability to issue securities pursuant to the shelf registration is subject to market conditions.
The following table provides information regarding regulatory capital for the Company and the Bank as of June 30, 2026 (dollars in thousands):
Actual Required to be Considered Well Capitalized Required to be Considered Adequately Capitalized Required to be Considered Adequately Capitalized Including Capital Conservation Buffer
Amount Ratio Amount Ratio Amount Ratio Amount Ratio
BankUnited, Inc.:
Tier 1 leverage $ 3,141,882 8.91 % N/A (1) N/A (1) $ 1,410,047 4.00 % N/A (1) N/A (1)
CET1 risk-based capital $ 3,141,882 12.30 % $ 1,660,314 6.50 % $ 1,149,448 4.50 % $ 1,788,030 7.00 %
Tier 1 risk-based capital $ 3,141,882 12.30 % $ 2,043,463 8.00 % $ 1,532,597 6.00 % $ 2,171,179 8.50 %
Total risk-based capital $ 3,547,261 13.89 % $ 2,554,329 10.00 % $ 2,043,463 8.00 % $ 2,682,045 10.50 %
BankUnited:
Tier 1 leverage $ 3,321,226 9.43 % $ 1,761,626 5.00 % $ 1,409,301 4.00 % N/A N/A
CET1 risk-based capital $ 3,321,226 13.01 % $ 1,659,008 6.50 % $ 1,148,544 4.50 % $ 1,786,624 7.00 %
Tier 1 risk-based capital $ 3,321,226 13.01 % $ 2,041,856 8.00 % $ 1,531,392 6.00 % $ 2,169,472 8.50 %
Total risk-based capital $ 3,546,605 13.90 % $ 2,552,320 10.00 % $ 2,041,856 8.00 % $ 2,679,936 10.50 %
(1)There is no Tier 1 leverage ratio component in the definition of a well-capitalized bank holding company.
Interest Rate Risk
A principal component of the Company’s risk of loss arising from adverse changes in the fair value of financial instruments, or market risk, is interest rate risk, including the risk that assets and liabilities with similar re-pricing characteristics may not reprice at the same time or to the same degree. A primary objective of the Company’s asset/liability management activities is to maximize net interest income, while maintaining acceptable levels of interest rate risk. The ALCO is responsible for establishing policies to manage exposure to interest rate risk, and to ensure procedures are established to monitor compliance with these policies. The policies established by the ALCO are approved at least annually by the Board of Directors and its Risk Committee. The Board of Directors or its Risk Committee monitor compliance with these policies at least quarterly.
Management believes that the simulation of net interest income in different interest rate environments provides the most meaningful measure of interest rate risk. Income simulation analysis is designed to capture not only the potential of all assets and liabilities to mature or reprice, but also the probability that they will do so. Income simulation also attends to the relative interest rate sensitivities of these items, and projects their behavior over an extended period of time. Finally, income simulation permits management to assess the probable effects on the balance sheet not only of changes in interest rates, but also of proposed strategies for responding to them. Simulation of changes in EVE in various interest rate environments is also a meaningful measure of interest rate risk.
Net Interest Income Simulation
The income simulation model analyzes interest rate sensitivity by projecting net interest income over 12- and 24-month periods in a most likely rate scenario based on a consensus forward curve versus net interest income in alternative rate scenarios. Management continually reviews and refines its interest rate risk management processes in response to changes in the interest rate environment, the economic climate and observed customer behavior. Currently, our interest rate risk management framework is based on modeling instantaneous rate shocks to a static balance sheet, assuming that maturing instruments are
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replaced with like instruments at forward rates, of plus and minus 100, 200, 300 and 400 basis point parallel shifts. In lower interest rate environments, we may not model more extreme declining rate scenarios and in certain macro-environments, we may model shocks of more than 400 basis points. Our ALM policy has established limits for the plus and minus 100 and 200 basis points shock scenarios. We also model a variety of dynamic balance sheet scenarios, various yield curve slopes, non-parallel shifts and alternative depositor behavior, beta and decay assumptions. We continually evaluate the scenarios being modeled with a view toward adapting them to changing economic conditions, expectations and trends.
The following table presents the impact on forecasted net interest income compared to a "most likely" scenario, based on the consensus forward curve, in static balance sheet, parallel rate shock scenarios of plus and minus 100 and 200 basis points at the dates indicated:
Down 200 Down 100 Plus 100 Plus 200
Policy Limits:
In year 1 (12) % (8) % (8) % (12) %
In year 2 (15) % (11) % (11) % (15) %
Model Results at June 30, 2026 - increase (decrease)
In year 1 (5.5) % (2.4) % 2.8 % 4.7 %
In year 2 (10.9) % (5.2) % 5.3 % 9.5 %
Model Results at December 31, 2025 - increase (decrease)
In year 1 (4.7) % (1.9) % 1.9 % 3.4 %
In year 2 (8.8) % (3.8) % 3.3 % 6.2 %
EVE Simulation
The following table illustrates the modeled change in EVE in the indicated scenarios at the dates indicated:
Down 200 Down 100 Plus 100 Plus 200
Policy Limits (20.0) % (10.0) % (10.0) % (20.0) %
Model Results at June 30, 2026 - increase (decrease): 5.9 % 4.3 % (3.1) % (7.0) %
Model Results at December 31, 2025 - increase (decrease): 7.1 % 5.3 % (3.5) % (7.8) %
All of the modeled results at June 30, 2026 are within ALM policy limits.
The Company uses many assumptions in estimating the impact of changes in interest rates on forecasted net interest income and EVE. Actual results may not be similar to the Company's projections due to many factors including but not limited to the timing and frequency of market rate changes, market conditions, unanticipated changes in depositor behavior and loan prepayment speeds, the shape of the yield curve, changes in balance sheet composition and the Company's actions in response to changing external and balance sheet dynamics. Some of the more significant assumptions used by the Company in estimating the impact of changes in interest rates on forecasted net interest income and EVE at June 30, 2026 were:
•Prepayment speeds for loans, with CPRs ranging from 7.31% to 15.80% depending on loan characteristics and the magnitude of the modeled rate shock;
•Prepayment speeds for investment securities, with CPRs ranging from 3.67% to 11.88% depending on individual security collateral and characteristics and the magnitude of the modeled rate shock;
•Deposit decay rates ranging between 9.62% and 13.4%, depending on the magnitude of the modeled rate shock; and
•Overall non-maturity interest bearing deposit beta of 80%.
Derivative Financial Instruments and Hedging Activities
Management continually evaluates a variety of hedging strategies that are available to manage interest rate risk.
Interest rate derivatives designated as cash flow or fair value hedging instruments are tools we may use to manage interest rate risk. These derivative instruments are used to mitigate exposure to changes in interest cash flows or the fair value of financial instruments caused by fluctuations in benchmark interest rates, as well as to manage duration of liabilities.
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The following tables provide information about the Company's derivatives designated as cash flow hedges as of June 30, 2026 (dollars in thousands):
Weighted Average Pay Rate / Strike Price Weighted Average Receive Rate / Strike Price Weighted Average Remaining Life in Years
Notional Amount
Hedged Item
Pay-fixed interest rate swaps Variability of interest cash flows on variable rate borrowings $ 455,000 3.28% Daily SOFR 1.0
Pay-variable interest rate swaps Variability of interest cash flows on variable rate loans 2,050,000 Term SOFR 3.80% 0.4
Forward starting pay-variable interest rate swaps Variability of interest cash flows on variable rate loans 1,000,000 Term SOFR 3.09% 2.2
Interest rate collar, indexed to 1-month SOFR Variability of interest cash flows on variable rate loans 125,000 5.58% 1.50% 0.2
$ 3,630,000
Variability of Interest Payment Cash Flows on Variable Rate Loans Variability of Interest Payment Cash Flows on Variable Rate Liabilities
Notional Amount Weighted Average Rate Notional Amount Weighted Average Rate
Cash flows hedges maturing in:
Third quarter 2026 $ 1,125,000 3.68 % $ 230,000 3.32 %
Fourth quarter 2026 750,000 3.96 % 200,000 3.33 %
2027 300,000 3.76 % — — %
2028 1,000,000 3.09 % — — %
Thereafter — — % 25,000 2.50 %
$ 3,175,000 3.57 % $ 455,000 3.28 %
The short duration of our AFS investment portfolio (2.02 at June 30, 2026) also provides a natural offset from an interest rate risk perspective to the longer duration of the residential mortgage portfolio.
See Note 6 to the consolidated financial statements for additional information about derivative financial instruments.
Non-GAAP Financial Measures
Tangible book value per common share is a non-GAAP financial measure. Management believes this measure is relevant to understanding the capital position and performance of the Company. Disclosure of this non-GAAP financial measure also provides a meaningful basis for comparison to other financial institutions as it is a metric commonly used in the banking industry.
PPNR is a non-GAAP financial measure. Management believes this measure is relevant to understanding the performance of the Company attributable to elements other than the provision for credit losses and the ability of the Company to generate earnings sufficient to cover estimated credit losses. This measure also provides a meaningful basis for comparison to other financial institutions since it is commonly employed and is a measure frequently cited by investors and analysts.
The following tables reconcile these non-GAAP financial measurements to the comparable GAAP financial measurements at the dates and for the periods indicated (in thousands except share and per share data):
June 30, 2026 March 31, 2026 December 31, 2025
Total stockholders’ equity $ 3,003,405 $ 3,015,537 $ 3,053,829
Less: goodwill and other intangible assets 77,637 77,637 77,637
Tangible stockholders’ equity $ 2,925,768 $ 2,937,900 $ 2,976,192
Common shares issued and outstanding 72,276,530 73,354,206 74,138,066
Book value per common share $ 41.55 $ 41.11 $ 41.19
Tangible book value per common share $ 40.48 $ 40.05 $ 40.14
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Three Months Ended Six Months Ended
June 30, 2026 March 31, 2026 June 30, 2025 June 30, 2026 June 30, 2025
Income before income taxes $ 94,360 $ 81,738 $ 93,904 $ 176,098 $ 173,976
Provision for credit losses 15,559 24,586 15,698 40,145 30,809
PPNR $ 109,919 $ 106,324 $ 109,602 $ 216,243 $ 204,785
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