WESTERN ALLIANCE BANCORPORATIONWAL
WESTERN ALLIANCE BANCORPORATION Fair Value Disclosure
19. 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 these Notes to Consolidated Financial Statements.
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. These adjustments may include amounts to reflect counterparty credit quality and the Company’s creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. 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:
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| (in millions) | ||||||||||||||||||||
| Unrealized losses | $ | (6.5) | $ | (1.9) | $ | (0.3) | ||||||||||||||
| Changes included in OCI, net of tax | (4.9) | (1.4) | (0.2) | |||||||||||||||||
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.
Equity securities: Preferred stock and CRA investments are reported at fair value utilizing Level 1 inputs.
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.
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 classified as Level 3 in the fair value hierarchy 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 our 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 public-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 | |||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||
| Available-for-sale debt securities | ||||||||||||||||||||||||||
| Residential MBS issued by GSEs and GNMA | $ | — | $ | 7,230 | $ | — | $ | 7,230 | ||||||||||||||||||
| U.S. Treasury securities | 5,970 | — | — | 5,970 | ||||||||||||||||||||||
| CLO | — | 2,747 | — | 2,747 | ||||||||||||||||||||||
| Private label residential MBS | — | 1,039 | — | 1,039 | ||||||||||||||||||||||
| Tax-exempt | — | 802 | — | 802 | ||||||||||||||||||||||
| Commercial MBS issued by GSEs and GNMA | — | 635 | — | 635 | ||||||||||||||||||||||
| Corporate debt securities | — | 297 | — | 297 | ||||||||||||||||||||||
| Other | 28 | 40 | — | 68 | ||||||||||||||||||||||
| Total AFS debt securities | $ | 5,998 | $ | 12,790 | $ | — | $ | 18,788 | ||||||||||||||||||
| Equity securities | ||||||||||||||||||||||||||
| Preferred stock | $ | 52 | $ | — | $ | — | $ | 52 | ||||||||||||||||||
| CRA investments | 27 | — | — | 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 15. 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.
| 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 | |||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| Available-for-sale debt securities | ||||||||||||||||||||||||||
| Residential MBS issued by GSEs and GNMA | $ | — | $ | 5,831 | $ | — | $ | 5,831 | ||||||||||||||||||
| U.S. Treasury securities | 4,383 | — | — | 4,383 | ||||||||||||||||||||||
| Private label residential MBS | — | 947 | — | 947 | ||||||||||||||||||||||
| Tax-exempt | — | 845 | — | 845 | ||||||||||||||||||||||
| CLO | — | 570 | — | 570 | ||||||||||||||||||||||
| Commercial MBS issued by GSEs and GNMA | — | 437 | — | 437 | ||||||||||||||||||||||
| Corporate debt securities | — | 386 | — | 386 | ||||||||||||||||||||||
| Other | 2 | 67 | — | 69 | ||||||||||||||||||||||
| Total AFS debt securities | $ | 4,385 | $ | 9,083 | $ | — | $ | 13,468 | ||||||||||||||||||
| Equity securities | ||||||||||||||||||||||||||
| Preferred stock | $ | 91 | $ | — | $ | — | $ | 91 | ||||||||||||||||||
| CRA investments | 26 | — | — | 26 | ||||||||||||||||||||||
| Total equity securities | $ | 117 | $ | — | $ | — | $ | 117 | ||||||||||||||||||
| Loans - HFS (2) | $ | — | $ | 2,240 | $ | 4 | $ | 2,244 | ||||||||||||||||||
| Mortgage servicing rights | — | — | 1,127 | 1,127 | ||||||||||||||||||||||
| Derivative assets (1) | — | 198 | 35 | 233 | ||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
| Junior subordinated debt (3) | $ | — | $ | — | $ | 65 | $ | 65 | ||||||||||||||||||
| — | 69 | 7 | 76 | |||||||||||||||||||||||
(1)See "Note 15. Derivatives and Hedging Activities." In addition, the carrying value of loans was decreased by $96 million as of December 31, 2024 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 $72 million and $3 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 | ||||||||||||||||||||
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| (in millions) | ||||||||||||||||||||
| Beginning balance | $ | (64.7) | $ | (62.8) | $ | (62.5) | ||||||||||||||
| Change in fair value (1) | (6.5) | (1.9) | (0.3) | |||||||||||||||||
| Ending balance | $ | (71.2) | $ | (64.7) | $ | (62.8) | ||||||||||||||
(1)Unrealized (losses) gains attributable to changes in the fair value of junior subordinated debt are recorded in OCI, net of tax, and totaled $(4.9) million, $(1.4) million, and $(0.2) million for the years ended December 31, 2025, 2024, and 2023, respectively.
The significant unobservable inputs used in the fair value measurements of these Level 3 liabilities were as follows:
| December 31, 2025 | Valuation Technique | Significant Unobservable Inputs | Input Value | |||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| Junior subordinated debt | $ | 71 | Discounted cash flow | Implied credit rating of the Company | 5.36 | % | ||||||||||||||||||||
| December 31, 2024 | Valuation Technique | Significant Unobservable Inputs | Input Value | |||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| Junior subordinated debt | $ | 65 | Discounted cash flow | Implied credit rating of the Company | 7.43 | % | ||||||||||||||||||||
The significant unobservable inputs used in the fair value measurement of the Company’s junior subordinated debt as of December 31, 2025 and 2024 was the implied credit risk for the Company. The implied credit risk spread as of December 31, 2025 and 2024 was calculated as the difference between the average of the 10 and 15-year 'BB' rated financial indexes over the corresponding swap indexes.
As of December 31, 2025, the Company estimates the discount rate at 5.36%, which represents an implied credit spread of 1.71% plus three-month SOFR (3.65%). As of December 31, 2024, the Company estimated the discount rate at 7.43%, which was a 3.12% credit spread plus three-month SOFR (4.31%).
The change in Level 3 assets and liabilities measured at fair value on a recurring basis included in income was as follows:
| For the Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||||||||||||||
| Loans HFS | MSRs | IRLCs (1) | Loans HFS | MSRs | IRLCs (1) | |||||||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||||||||
| Balance, beginning of period | $ | 3 | $ | 1,127 | $ | (2) | $ | 3 | $ | 1,124 | $ | 18 | ||||||||||||||||||||||||||
| Purchases and additions | 916 | 1,196 | 24,221 | 93 | 923 | 18,896 | ||||||||||||||||||||||||||||||||
| Sales and payments | (245) | (629) | — | (95) | (905) | — | ||||||||||||||||||||||||||||||||
| Transfers from Level 2 to Level 3 | 6 | — | — | 2 | — | — | ||||||||||||||||||||||||||||||||
| Settlement of IRLCs upon acquisition or origination of loans HFS | — | — | (24,217) | — | — | (18,916) | ||||||||||||||||||||||||||||||||
| Change in fair value | 20 | 10 | 17 | — | 144 | — | ||||||||||||||||||||||||||||||||
| Realization of cash flows | — | (210) | — | — | (159) | — | ||||||||||||||||||||||||||||||||
| Balance, end of period | $ | 700 | $ | 1,494 | $ | 19 | $ | 3 | $ | 1,127 | $ | (2) | ||||||||||||||||||||||||||
| Changes in unrealized gains (losses) for the period (2) | $ | 20 | $ | 7 | $ | 19 | $ | — | $ | 71 | $ | (2) | ||||||||||||||||||||||||||
(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:
| December 31, 2025 | ||||||||||||||||||||
| Asset/liability | Key inputs | Range | Weighted 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 (2) | 1.6% - 10.7% | 4.6 | % | ||||||||||||||||
| IRLCs: | Servicing fee multiple | 4.7 - 6.5 | 5.5 | |||||||||||||||||
| Pull-through rate | 74% - 100% | 92 | % | |||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||
| Asset/liability | Key inputs | Range | Weighted average | |||||||||||||||||
| MSRs: | Option adjusted spread (in basis points) | 21 - 315 | 237 | |||||||||||||||||
| Conditional prepayment rate (1) | 8.4% - 19.0% | 14.0 | % | |||||||||||||||||
| Recapture rate | 20.0% - 20.0% | 20.0 | % | |||||||||||||||||
| Servicing fee rate (in basis points) | 25.0 - 56.5 | 36.4 | ||||||||||||||||||
| Cost to service | $75 - $95 | $82 | ||||||||||||||||||
| Loans HFS: | Whole loan spread to TBA price (in basis points) (2) | (9.0) - 0.0 | (7.0) | |||||||||||||||||
| IRLCs: | Servicing fee multiple | 4.3 - 6.4 | 5.3 | |||||||||||||||||
| Pull-through rate | 76% - 100% | 92 | % | |||||||||||||||||
(1) Lifetime total prepayment speed annualized.
(2) Level 3 loans HFS at December 31, 2025 primarily consisted of EBO loans, which utilized lifetime liquidation probability as a significant unobservable input , whereas at December 31, 2024, these loans were largely non-agency loans that utilized whole loan spread to TBA price as a significant unobservable input.
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:
| December 31, | ||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||||||||||||||
| Fair value | UPB | Difference | Fair value | UPB | Difference | |||||||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||||||||
| Loans HFS: | ||||||||||||||||||||||||||||||||||||||
| Current through 89 days delinquent | $ | 2,846 | $ | 2,744 | $ | 102 | $ | 2,244 | $ | 2,195 | $ | 49 | ||||||||||||||||||||||||||
| 90 days or more delinquent | 518 | 501 | 17 | — | — | — | ||||||||||||||||||||||||||||||||
| Total | $ | 3,364 | $ | 3,245 | $ | 119 | $ | 2,244 | $ | 2,195 | $ | 49 | ||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||
| Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Active Markets for Similar Assets (Level 2) | Unobservable Inputs (Level 3) | |||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| As of December 31, 2025 | ||||||||||||||||||||||||||
| Loans HFI | $ | 395 | $ | — | $ | — | $ | 395 | ||||||||||||||||||
| Other assets acquired through foreclosure | 137 | — | — | 137 | ||||||||||||||||||||||
| As of December 31, 2024 | ||||||||||||||||||||||||||
| Loans HFI | $ | 561 | $ | — | $ | — | $ | 561 | ||||||||||||||||||
| Other assets acquired through foreclosure | 52 | — | — | 52 | ||||||||||||||||||||||
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:
| December 31, 2025 | Valuation Technique(s) | Significant Unobservable Inputs | Range | ||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||
| Loans HFI | $ | 395 | Collateral method | Third party appraisal | Costs to sell | 6.0% to 10.0% | |||||||||||||||||||||||
| Discounted cash flow method | Discount rate | Contractual loan rate | 3.0% to 8.0% | ||||||||||||||||||||||||||
| Scheduled cash collections | Probability of default | 0% to 20.0% | |||||||||||||||||||||||||||
| Proceeds from non-real estate collateral | Loss given default | 0% to 70.0% | |||||||||||||||||||||||||||
| Other assets acquired through foreclosure | 137 | Collateral method | Third party appraisal | Costs to sell | 1.0% to 6.0% | ||||||||||||||||||||||||
| December 31, 2024 | Valuation Technique(s) | Significant Unobservable Inputs | Range | ||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||
| Loans HFI | $ | 561 | Collateral method | Third party appraisal | Costs to sell | 6.0% to 10.0% | |||||||||||||||||||||||
| Discounted cash flow method | Discount rate | Contractual loan rate | 3.0% to 8.0% | ||||||||||||||||||||||||||
| Scheduled cash collections | Probability of default | 0% to 20.0% | |||||||||||||||||||||||||||
| Proceeds from non-real estate collateral | Loss given default | 0% to 70.0% | |||||||||||||||||||||||||||
| Other assets acquired through foreclosure | 52 | Collateral method | Third party appraisal | Costs 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 $395 million and $561 million at December 31, 2025 and 2024, respectively, net of a specific ACL of $15 million and $46 million at December 31, 2025 and 2024, 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 generally 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 $137 million and $52 million of such assets at December 31, 2025 and 2024, respectively.
Fair Value of Financial Instruments
The estimated fair value of the Company’s financial instruments is as follows:
| December 31, 2025 | ||||||||||||||||||||||||||||||||
| Carrying Amount | Fair Value | |||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||
| Financial assets: | ||||||||||||||||||||||||||||||||
| Investment securities: | ||||||||||||||||||||||||||||||||
| HTM | $ | 1,584 | $ | — | $ | 1,427 | $ | — | $ | 1,427 | ||||||||||||||||||||||
| AFS | 18,788 | 5,998 | 12,790 | — | 18,788 | |||||||||||||||||||||||||||
| Equity securities | 79 | 79 | — | — | 79 | |||||||||||||||||||||||||||
| Derivative assets (1) | 207 | — | 148 | 59 | 207 | |||||||||||||||||||||||||||
| Loans HFS | 3,498 | — | 2,664 | 834 | 3,498 | |||||||||||||||||||||||||||
| Loans HFI, net | 58,216 | — | — | 57,206 | 57,206 | |||||||||||||||||||||||||||
| Mortgage servicing rights | 1,494 | — | — | 1,494 | 1,494 | |||||||||||||||||||||||||||
| Accrued interest receivable | 473 | — | 473 | — | 473 | |||||||||||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||||||||||||||
| Deposits | $ | 77,159 | $ | — | $ | 77,185 | $ | — | $ | 77,185 | ||||||||||||||||||||||
| Other borrowings | 5,240 | — | 5,242 | — | 5,242 | |||||||||||||||||||||||||||
| Qualifying debt | 1,076 | — | 981 | 87 | 1,068 | |||||||||||||||||||||||||||
| Derivative liabilities (1) | 106 | — | 105 | 1 | 106 | |||||||||||||||||||||||||||
| Accrued interest payable | 116 | — | 116 | — | 116 | |||||||||||||||||||||||||||
(1) Derivative assets and liabilities exclude margin of $366 million and $7 million, respectively.
| December 31, 2024 | ||||||||||||||||||||||||||||||||
| Carrying Amount | Fair Value | |||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||
| Financial assets: | ||||||||||||||||||||||||||||||||
| Investment securities: | ||||||||||||||||||||||||||||||||
| HTM | $ | 1,526 | $ | — | $ | 1,309 | $ | — | $ | 1,309 | ||||||||||||||||||||||
| AFS | 13,468 | 4,385 | 9,083 | — | 13,468 | |||||||||||||||||||||||||||
| Equity securities | 117 | 117 | — | — | 117 | |||||||||||||||||||||||||||
| 233 | — | 198 | 35 | 233 | ||||||||||||||||||||||||||||
| Loans HFS | 2,286 | — | 2,259 | 27 | 2,286 | |||||||||||||||||||||||||||
| Loans HFI, net | 53,302 | — | — | 53,070 | 53,070 | |||||||||||||||||||||||||||
| Mortgage servicing rights | 1,127 | — | — | 1,127 | 1,127 | |||||||||||||||||||||||||||
| Accrued interest receivable | 362 | — | 362 | — | 362 | |||||||||||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||||||||||||||
| Deposits | $ | 66,341 | $ | — | $ | 66,393 | $ | — | $ | 66,393 | ||||||||||||||||||||||
| Other borrowings | 5,573 | — | 5,545 | — | 5,545 | |||||||||||||||||||||||||||
| Qualifying debt | 899 | — | 789 | 78 | 867 | |||||||||||||||||||||||||||
| Derivative liabilities (1) | 76 | — | 69 | 7 | 76 | |||||||||||||||||||||||||||
| Accrued interest payable | 138 | — | 138 | — | 138 | |||||||||||||||||||||||||||
(1) Derivative assets and liabilities exclude margin of $72 million and $3 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 December 31, 2025 and 2024 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 December 31, 2025 and 2024.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 23, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Mar 2, 2020 | |
| 2018 | Mar 1, 2019 | |
| 2017 | Feb 26, 2018 | |
| 2016 | Feb 28, 2017 | |
| 2015 | Feb 16, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.