v3.26.1
Fair Value Accounting
 3 Months Ended
Mar. 31, 2026
Fair Value Disclosures [Abstract]  
Fair Value Accounting 16. FAIR VALUE ACCOUNTING
The fair value of an asset or liability is the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction occurring in the principal market (or most advantageous market in the absence of a principal market) for such asset or liability. In estimating fair value, the Company utilizes valuation techniques that are consistent with the market approach, the income approach, and/or the cost approach. Such valuation techniques are consistently applied. Inputs to valuation techniques include the assumptions market participants would use in pricing an asset or liability. ASC 825 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 825 are described in "Note 1. Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025.
In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally-developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure financial instruments are recorded at fair value, and are applied consistently over time. These adjustments may include amounts to reflect counterparty credit quality and the Company’s creditworthiness, among other things, as well as unobservable parameters. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. A more detailed description of the valuation methodologies used for assets and liabilities measured at fair value is set forth below.
Under ASC 825, the Company elected the FVO treatment for junior subordinated debt issued by WAL. This election is irrevocable and results in the recognition of unrealized gains and losses on the debt at each reporting date. These unrealized gains and losses are recognized in OCI rather than earnings. The Company did not elect FVO treatment for the junior subordinated debt assumed in the Bridge Capital Holdings acquisition.
The following table presents unrealized gains and losses from fair value changes on junior subordinated debt:
Three Months Ended March 31,
20262025
(in millions)
Unrealized gains$1.3 $1.5 
Changes included in OCI, net of tax1.0 1.1 
Fair value on a recurring basis
Financial assets and financial liabilities measured at fair value on a recurring basis include the following:
AFS debt securities: Securities classified as AFS are reported at fair value utilizing Level 1 and Level 2 inputs. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include quoted prices in active markets, dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the bond’s terms and conditions, among other things.
Independent pricing service: The Company's independent pricing service provides pricing information on the majority of the Company's Level 1 and Level 2 AFS debt securities. For a small subset of securities, other pricing sources are used, including observed prices on publicly-traded securities and dealer quotes. Management independently evaluates the fair value measurements received from the Company's third-party pricing service through multiple review steps. First, management reviews what has transpired in the marketplace with respect to interest rates, credit spreads, volatility, and mortgage rates, among other things, and develops an expectation of changes to the securities' valuations from the previous quarter. Then, management selects a sample of investment securities and compares the values
provided by its primary third-party pricing service to the market values obtained from secondary sources, including other pricing services and safekeeping statements, and evaluates those with notable variances. In instances where there are discrepancies in pricing from various sources and management expectations, management may manually price securities using currently observed market data to determine whether they can develop similar prices or may utilize bid information from broker dealers. Any remaining discrepancies between management’s review and the prices provided by the vendor are discussed with the vendor and/or the Company’s other valuation advisors.
Equity securities: Preferred stock and CRA investments are reported at fair value utilizing Level 1 inputs.
Trading securities and loans HFS: Certain government-insured or guaranteed and agency-conforming 1-4 family residential loans HFS and trading securities are salable into active markets. Accordingly, the fair value of these loans and securities is based primarily on quoted market or contracted selling prices or a market price equivalent, which are categorized as Level 2 in the fair value hierarchy. The Company's loans HFS are classified as Level 3 in the fair value hierarchy and are measured using a weighted average blend of loan values assuming redelivery into GNMA securities and liquidation, each adjusted by the lifetime liquidation probability.
Mortgage servicing rights: MSRs are measured based on valuation techniques using Level 3 inputs. The Company uses a discounted cash flow model that incorporates assumptions market participants would use in estimating the fair value of servicing rights, including, but not limited to, option adjusted spread, conditional prepayment rate, servicing fee rate, recapture rate, and cost to service.
Derivative financial instruments: Forward contracts are measured based on valuation techniques using Level 2 inputs, such as quoted market prices, contracted selling prices, or a market price equivalent. Interest rate and foreign currency contracts are reported at fair value utilizing Level 2 inputs. The Company obtains dealer quotations to value its interest rate contracts. IRLCs are measured based on valuation techniques that consider loan type, underlying loan amount, maturity date, note rate, loan program, and expected settlement date, with Level 3 inputs for the servicing release premium and pull-through rate. These measurements are adjusted at the loan level to consider the servicing release premium and loan pricing adjustment specific to each loan. The base value is then adjusted for estimated pull-through rates. The pull-through rate and servicing fee multiple are unobservable inputs based on historical experience. Equity warrants are measured using a Black-Scholes option pricing model based on contractual strike price, expected term, the risk-free interest rate, volatility assumptions, dividend yields, and underlying stock prices. As a majority of the warrants in the Company's portfolio are with privately-held companies, volatility assumptions used in the Black-Scholes model are based on public company comparables in similar industries. The volatility input is considered Level 3 as the underlying equity is not publicly traded and is determined using comparable publicly traded companies. The asset valuations are further adjusted using a reliability estimate due to the nature of data availability of privately-held companies. In addition to the above, warrants with publicly-held companies utilize the underlying stock price and are further adjusted by applying a discount up to 20 percent if certain sales restrictions are present.
Junior subordinated debt: The Company estimates the fair value of its junior subordinated debt using a discounted cash flow model which incorporates the effect of the Company’s own credit risk in the fair value of the liabilities (Level 3). The Company’s cash flow assumptions are based on contractual cash flows as the Company anticipates it will pay the debt according to its contractual terms.
The fair value of assets and liabilities measured at fair value on a recurring basis was determined using the following inputs: 
Fair Value Measurements at the End of the Reporting Period Using:
Quoted Prices in Active Markets for Identical Assets
(Level 1)		Significant Other Observable Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)		Fair Value
March 31, 2026(in millions)
Assets:
Available-for-sale debt securities
CLO$— $2,966 $— $2,966 
Commercial MBS issued by GSEs and GNMA— 471 — 471 
Corporate debt securities— 297 — 297 
Private label residential MBS— 1,005 — 1,005 
Residential MBS issued by GSEs and GNMA— 7,497 — 7,497 
Tax-exempt— 788 — 788 
U.S. Treasury securities5,610 — — 5,610 
Other28 39 — 67 
Total AFS debt securities$5,638 $13,063 $— $18,701 
Equity securities
CRA investments$28 $— $— $28 
Preferred stock51 — — 51 
Total equity securities$79 $— $— $79 
Loans HFS (2)$— $2,804 $1,011 $3,815 
Mortgage servicing rights— — 1,516 1,516 
Derivative assets (1)— 227 49 276 
Liabilities:
Junior subordinated debt (3)$— $— $70 $70 
Derivative liabilities (1)— 127 12 139 
(1)See "Note 12. Derivatives and Hedging Activities." In addition, the carrying value of loans is decreased by $26 million as of March 31, 2026 for the effective portion of the hedge, which relates to the fair value of the hedges put in place to mitigate against fluctuations in interest rates. Derivative assets and liabilities exclude margin of $260 million and $31 million, respectively.
(2)Includes only the portion of loans HFS that is recorded at fair value at each reporting period pursuant to the election of FVO treatment.
(3)Includes only the portion of junior subordinated debt that is recorded at fair value at each reporting period pursuant to the election of FVO treatment.
 Fair Value Measurements at the End of the Reporting Period Using:
Quoted Prices in Active Markets for Identical Assets
(Level 1)		Significant Other Observable Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)		Fair Value
December 31, 2025(in millions)
Assets:
Available-for-sale debt securities
CLO$— $2,747 $— $2,747 
Commercial MBS issued by GSEs and GNMA— 635 — 635 
Corporate debt securities— 297 — 297 
Private label residential MBS— 1,039 — 1,039 
Residential MBS issued by GSEs and GNMA— 7,230 — 7,230 
Tax-exempt— 802 — 802 
U.S. Treasury securities5,970 — — 5,970 
Other28 40 — 68 
Total AFS debt securities$5,998 $12,790 $— $18,788 
Equity securities
Preferred stock$52 $— $— $52 
CRA investments27 — — 27 
Total equity securities$79 $— $— $79 
Loans - HFS (2)$— $2,664 $700 $3,364 
Mortgage servicing rights— — 1,494 1,494 
Derivative assets (1)— 148 59 207 
Liabilities:
Junior subordinated debt (3)$— $— $71 $71 
Derivative liabilities (1)— 105 1 106 
(1)See "Note 12. Derivatives and Hedging Activities." Derivative assets and liabilities exclude margin of $366 million and $7 million, respectively.
(2)Includes only the portion of loans HFS that is recorded at fair value at each reporting period pursuant to the election of FVO treatment.
(3)Includes only the portion of junior subordinated debt that is recorded at fair value at each reporting period pursuant to the election of FVO treatment.
The change in Level 3 liabilities measured at fair value on a recurring basis included in OCI was as follows:
Junior Subordinated Debt
Three Months Ended March 31,
20262025
(in millions)
Beginning balance$(71.2)$(64.7)
Change in fair value (1)1.3 1.5 
Ending balance$(69.9)$(63.2)
(1)Unrealized gains (losses) attributable to changes in the fair value of junior subordinated debt are recorded in OCI, net of tax, and totaled $1.0 million and $1.1 million for three months ended March 31, 2026 and 2025, respectively.
The significant unobservable inputs used in the fair value measurements of these Level 3 liabilities were as follows:
March 31, 2026Valuation TechniqueSignificant Unobservable InputsInput Value
(in millions)
Junior subordinated debt$70 Discounted cash flowImplied credit rating of the Company5.71 %
 
December 31, 2025Valuation TechniqueSignificant Unobservable InputsInput Value
(in millions)
Junior subordinated debt$71 Discounted cash flowImplied credit rating of the Company5.36 %
The significant unobservable inputs used in the fair value measurement of the Company’s junior subordinated debt as of March 31, 2026 and December 31, 2025 was the implied credit risk for the Company. The implied credit risk spread as of March 31, 2026 and December 31, 2025 was calculated as the difference between the average of the 9 and 10-year 'BB' rated financial indexes over the 5 and 10-year swap indexes.
As of March 31, 2026, the Company estimated the discount rate at 5.71%, which represents an implied credit spread of 3.68% plus three-month SOFR (2.03%). As of December 31, 2025, the Company estimated the discount rate at 5.36%, which was a 1.71% credit spread plus three-month SOFR (3.65%).
The change in Level 3 assets and liabilities measured at fair value on a recurring basis included in income was as follows:
Three Months Ended March 31, 2026
Loans HFSMSRsIRLCs (1)Warrants
(in millions)
Balance, beginning of period$700 $1,494 $19 $39 
Purchases and additions522 295 5,540 2 
Sales and payments(225)(211)— — 
Transfers from Level 2 to Level 32 — — — 
Settlement of IRLCs upon acquisition or origination of loans HFS— — (5,560)— 
Warrant exercises— — — (2)
Change in fair value12 22 (2)1 
Realization of cash flows— (84)— — 
Balance, end of period$1,011 $1,516 $(3)$40 
Changes in unrealized gains for the period (2)$15 $22 $(3)$(1)
Three Months Ended March 31, 2025
Loans HFSMSRsIRLCs (1)Warrants
(in millions)
Balance, beginning of period$3 $1,127 $(2)$30 
Purchases and additions65 260 5,742 3 
Sales and payments(9)(83)— — 
Transfers from Level 2 to Level 32 — — — 
Settlement of IRLCs upon acquisition or origination of loans HFS— — (5,733)— 
Change in fair value2 (20)6 (2)
Realization of cash flows— (43)— — 
Balance, end of period$63 $1,241 $13 $31 
Changes in unrealized gains for the period (2)$1 $(19)$13 $(1)
(1)     IRLC asset and liability positions are presented net.
(2)    Amounts recognized as part of non-interest income.
The significant unobservable inputs used in the fair value measurements of these Level 3 assets and liabilities were as follows:
March 31, 2026
Asset/liabilityKey inputsRangeWeighted average
MSRs:Option adjusted spread (in basis points)
327 - 458
377 
Conditional prepayment rate (1)
5.8% - 13.0%
10.3 %
Recapture rate
0.0% - 55.0%
25.1 %
Servicing fee rate (in basis points)
25.0 - 56.5
39.3 
Cost to service
$77 - $83
$79 
Loans HFS:Lifetime liquidation probability
2.1% to 12.5%
6.7 %
IRLCs:Servicing fee multiple
4.7 - 7.0
5.7 
Pull-through rate
80% - 100%
91.0 %
Equity warrants:Volatility
46.6% - 168.8%
78.1 %
Risk-free interest rate
3.7% - 4.4%
3.9 %
Time to expiration (in years)
1.0 - 10.0
2.8
December 31, 2025
Asset/liabilityKey inputsRangeWeighted average
MSRs:Option adjusted spread (in basis points)
283 - 317
316 
Conditional prepayment rate (1)
6.1% - 14.1%
11.0 %
Recapture rate
0.0% - 55.0%
25.5 %
Servicing fee rate (in basis points)
25.0 - 56.5
38.1 
Cost to service
$77 - $83
$79 
Loans HFS:Lifetime liquidation probability
1.6% - 10.7%
4.6 %
IRLCs:Servicing fee multiple
4.7 - 6.5
5.5 
Pull-through rate
74% - 100%
92.0 %
Equity warrants:Volatility
40.3% - 180.4%
74.7 %
Risk-free interest rate
3.5% - 4.1%
3.6 %
Time to expiration (in years)
1.0 - 10.0
2.9
(1)    Lifetime total prepayment speed annualized.
The following is a summary of the difference between the aggregate fair value and the aggregate UPB of loans HFS for which the FVO has been elected:
March 31, 2026December 31, 2025
Fair valueUPBDifferenceFair valueUPBDifference
(in millions)
Loans HFS:
Current through 89 days delinquent$3,057 $2,996 $61 $2,846 $2,744 $102 
90 days or more delinquent758 732 26 518 501 17 
Total$3,815 $3,728 $87 $3,364 $3,245 $119 
Fair value on a nonrecurring basis
Certain assets are measured at fair value on a nonrecurring basis. That is, the assets are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of credit deterioration). The following table presents such assets carried on the Consolidated Balance Sheet by caption and by level within the ASC 825 hierarchy:
 Fair Value Measurements at the End of the Reporting Period Using
 TotalQuoted Prices in Active Markets for Identical Assets
(Level 1)		Active Markets for Similar Assets
(Level 2)		Unobservable Inputs
(Level 3)
 (in millions)
As of March 31, 2026:
Loans HFI$409 $— $— $409 
Other assets acquired through foreclosure123 — — 123 
As of December 31, 2025:
Loans HFI$395 $— $— $395 
Other assets acquired through foreclosure137 — — 137 
For Level 3 assets measured at fair value on a nonrecurring basis as of period end, the significant unobservable inputs used in the fair value measurements were as follows:
March 31, 2026Valuation Technique(s)Significant Unobservable InputsRange
(in millions)
Loans HFI$409 Collateral methodThird party appraisalCosts to sell
6.0% to 10.0%
Discounted cash flow methodDiscount rateContractual loan rate
3.0% to 8.0%
Scheduled cash collectionsProbability of default
0% to 20.0%
Proceeds from non-real estate collateralLoss given default
0% to 70.0%
Other assets acquired through foreclosure123 Collateral methodThird party appraisalCosts to sell
1.0% to 6.0%
December 31, 2025Valuation Technique(s)Significant Unobservable InputsRange
(in millions)
Loans HFI$395 Collateral methodThird party appraisalCosts to sell
6.0% to 10.0%
Discounted cash flow methodDiscount rateContractual loan rate
3.0% to 8.0%
Scheduled cash collectionsProbability of default
0% to 20.0%
Proceeds from non-real estate collateralLoss given default
0% to 70.0%
Other assets acquired through foreclosure137 Collateral methodThird party appraisalCosts to sell
1.0% to 6.0%
Loans HFI: Loans measured at fair value on a nonrecurring basis include collateral dependent loans. The specific reserves for these loans are based on collateral value, net of estimated disposition costs and other identified quantitative inputs. Collateral value is determined based on independent third-party appraisals or internally-developed discounted cash flow analyses. Appraisals may utilize a single valuation approach or a combination of approaches, including comparable sales and the income approach. Fair value is determined, where possible, using market prices derived from an appraisal or evaluation, which are considered to be Level 2. However, certain assumptions and unobservable inputs are often used by the appraiser, therefore qualifying the assets as Level 3 in the fair value hierarchy. In addition, when adjustments are made to an appraised value to reflect various factors such as the age of the appraisal or known changes in the market or the collateral, such valuation inputs are considered unobservable and the fair value measurement is categorized as a Level 3 measurement. Internal discounted cash flow analyses are also utilized to estimate the fair value of these loans, which considers internally-developed, unobservable inputs such as discount rates, default rates, and loss severity.
Total Level 3 collateral dependent loans had an estimated fair value of $409 million and $395 million at March 31, 2026 and December 31, 2025, respectively, net of a specific ACL of $10 million and $15 million at March 31, 2026 and December 31, 2025, respectively.
Other assets acquired through foreclosure: Other assets acquired through foreclosure consist of properties acquired as a result of, or in-lieu-of, foreclosure. These assets are initially reported at the fair value determined by independent appraisals using appraised value less estimated cost to sell. Such properties are typically re-appraised every 12 months. Costs relating to the development or improvement of the assets are capitalized and costs relating to holding the assets are charged to expense.
Fair value is determined, where possible, using market prices derived from an appraisal or evaluation, which are considered to be Level 2. However, certain assumptions and unobservable inputs are often used by the appraiser, therefore qualifying the assets as Level 3 in the fair value hierarchy. When significant adjustments are based on unobservable inputs, such as when a current appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the resulting fair value measurement has been categorized as a Level 3 measurement. The Company had $123 million and $137 million of such assets at March 31, 2026 and December 31, 2025, respectively.
Fair Value of Financial Instruments
The estimated fair value of the Company’s financial instruments is as follows:
March 31, 2026
Carrying AmountFair Value
Level 1Level 2Level 3Total
(in millions)
Financial assets:
Investment securities:
HTM$1,625 $— $1,450 $— $1,450 
AFS18,701 5,638 13,063 — 18,701 
Equity79 79 — — 79 
Derivative assets (1)276 — 227 49 276 
Loans HFS3,936 — 2,804 1,132 3,936 
Loans HFI, net58,681 — — 57,296 57,296 
Mortgage servicing rights1,516 — — 1,516 1,516 
Accrued interest receivable473 — 473 — 473 
Financial liabilities:
Deposits$82,723 $— $82,749 $— $82,749 
Other borrowings5,610 — 5,610 — 5,610 
Qualifying debt1,072 — 968 85 1,053 
Derivative liabilities (1)139 — 127 12 139 
Accrued interest payable120 — 120 — 120 
(1)    Derivative assets and liabilities exclude margin of $260 million and $31 million, respectively.

December 31, 2025
Carrying AmountFair Value
Level 1Level 2Level 3Total
(in millions)
Financial assets:
Investment securities:
HTM$1,584 $— $1,427 $— $1,427 
AFS18,788 5,998 12,790 — 18,788 
Equity securities79 79 — — 79 
Derivative assets (1)207 — 148 59 207 
Loans HFS3,498 — 2,664 834 3,498 
Loans HFI, net58,216 — — 57,206 57,206 
Mortgage servicing rights1,494 — — 1,494 1,494 
Accrued interest receivable473 — 473 — 473 
Financial liabilities:
Deposits$77,159 $— $77,185 $— $77,185 
Other borrowings5,240 — 5,242 — 5,242 
Qualifying debt1,076 — 981 87 1,068 
Derivative liabilities (1)106 — 105 1 106 
Accrued interest payable116 — 116 — 116 
(1)    Derivative assets and liabilities exclude margin of $366 million and $7 million, respectively.
Interest rate risk
The Company assumes interest rate risk (the risk to the Company’s earnings and capital from changes in interest rate levels) as a result of its normal operations. As a result, the fair values of the Company’s financial instruments, as well as its future net interest income, will change when interest rate levels change and that change may be either favorable or unfavorable to the Company.
Interest rate risk exposure is measured using interest rate sensitivity analysis to determine the Company's change in EVE and net interest income resulting from hypothetical changes in interest rates. If potential changes to EVE and earnings resulting from hypothetical interest rate changes are not within the limits established by the BOD, the BOD may direct management to adjust the asset and liability mix to bring interest rate risk within BOD-approved limits.
WAB has an ALCO charged with managing interest rate risk within the BOD-approved limits. Limits are structured to preclude an interest rate risk profile which does not conform to both management and BOD risk tolerances without BOD and ALCO approval. Interest rate risk is also evaluated at the Parent level, which is reported to the BOD and its Finance and Investment Committee.
Fair value of commitments
The estimated fair value of letters of credit outstanding at March 31, 2026 and December 31, 2025 approximates zero as there have been no significant changes in borrower creditworthiness. Loan commitments on which the committed interest rates are less than the current market rate are insignificant at March 31, 2026 and December 31, 2025.