Santander Holdings USA, Inc.

NOTE 1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND ACCOUNTING POLICIES

SHUSA is the parent holding company of SBNA, a national banking association; SC, a consumer finance company headquartered in Dallas, Texas; BSI, a wholly-owned subsidiary of SBNA, a financial services company headquartered in Miami, Florida that offers a full range of banking services to foreign individuals and corporations based primarily in Latin America; SanCap, an institutional broker-dealer headquartered in New York which has significant capabilities in market-making via an experienced fixed-income sales and trading team and a focus on structuring and advisory services for asset originators in the real estate and specialty finance markets; SSLLC, a broker-dealer headquartered in Boston, Massachusetts; and several other subsidiaries. SHUSA is headquartered in Boston and SBNA's home office is in Wilmington, Delaware. SSLLC is a registered investment adviser with the SEC. SHUSA's two largest subsidiaries by asset size and revenue are SBNA and SC. SHUSA is a wholly-owned subsidiary of Santander. On December 30, 2025, SBNA filed applications with the FDIC and OCC for approval to merge Santander Consumer USA Holdings Inc., a consumer finance company headquartered in Dallas, Texas and a wholly-owned subsidiary of SHUSA, into SBNA, with SBNA to be the surviving entity.

The Company specializes in banking and consumer finance. Its consumer financing is focused on vehicle finance, servicing of third-party vehicle financing, and delivering service to dealers and customers across the full credit spectrum. This includes indirect origination and servicing of vehicle loans and leases, principally through manufacturer-franchised dealers in connection with their sale of new and used vehicles to retail consumers, origination of vehicle loans through a web-based direct lending program, purchases of vehicle loans from other lenders, and servicing of automobile and recreational and marine vehicle portfolios for other lenders. The Company sells consumer vehicle loans and leases through flow agreements and, when market conditions are favorable, it accesses the ABS market through securitizations of consumer vehicle loans and leases.

In addition to specialized consumer finance, the Company also attracts deposits and provides other retail banking services through its network of retail branches with locations in Connecticut, Delaware, Florida, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, and Rhode Island and originates small business, middle market, large and global commercial loans, multifamily loans, construction loans and other consumer loans and leases throughout the United States, with a focus on the Mid-Atlantic and Northeastern regions. The Company also acquires deposits nationally through SBNA's online Openbank platform. For large institutional investors, the Company provides structured products, emerging markets credit and U.S. investment grade credit, U.S. rates, short-term fixed-income, debt and equity capital markets, investment banking, exchange-traded derivatives, and cash equities, benefiting from a combination of Santander’s global reach and access to financial hubs together with extensive local market knowledge and regional expertise.

NOTE 1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND ACCOUNTING POLICIES (continued)

Agreement to Acquire Webster Financial Corporation

On February 3, 2026, Santander and Webster entered into the Transaction Agreement. Among other things, the Transaction Agreement provides for the merger of Webster with and into Webster Virginia, with Webster Virginia continuing as the surviving corporation in such merger transaction, and, immediately afterwards, the acquisition by Santander of all outstanding shares of Webster Virginia common stock through a statutory share exchange, all subject to the terms and conditions of the Transaction Agreement. The Transaction Agreement is subject to standard governance procedures, including obtaining the approval of Santander's and Webster's shareholders. Following completion of these transactions, Santander and Webster intend for the following transactions to occur:

i. SHUSA and Santander intend to enter into an agreement which, among other things, provides for the contribution of all outstanding shares of Webster Virginia common stock to SHUSA.

ii. SHUSA and Webster Virginia intend to enter into an agreement which among other things, provides for the merger of Webster Virginia with and into SHUSA following the Webster Virginia contribution.

iii. SHUSA, SBNA and Webster Bank intend for (a) the contribution by SHUSA of all of the outstanding shares of capital stock of Webster Bank to SBNA for no considerations; and (b) the merger of Webster Bank with and into SBNA immediately following the Webster Bank contribution, with SBNA being the surviving bank of such merger.

On March 30, 2026, SHUSA, SBNA and Webster Bank entered into an Agreement and Plan of Merger to provide for the Webster Bank contribution to SBNA and subsequent merger into SBNA. Also on March 30, 2026, SBNA submitted a Bank Merger Act application to request approval from the OCC for the bank merger and has received that approval. Regulatory applications have also been submitted to the Federal Reserve and the European Central Bank in connection with the transaction. Approval of Santander's and Webster's shareholders and the European Central Bank has been obtained.

Completion of the merger of Webster Bank into SBNA remains contingent upon the fulfillment of certain conditions at or prior to the event, including that all prior transactions related to the acquisition of Webster by Santander and subsequent contribution of Webster Bank to SBNA have closed and become effective. The transaction is expected to close in the second half of 2026.

Basis of Presentation

These Condensed Consolidated Financial Statements include the accounts of the Company and its consolidated subsidiaries, including certain Trusts that are considered VIEs. The Company generally consolidates VIEs for which it is deemed to be the primary beneficiary and VOEs in which the Company has a controlling financial interest. All significant intercompany balances and transactions have been eliminated in consolidation.

NOTE 1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND ACCOUNTING POLICIES (continued)

These Condensed Consolidated Financial Statements have been prepared in accordance with GAAP and pursuant to SEC regulations. In the opinion of management, the accompanying Condensed Consolidated Financial Statements reflect all adjustments of a normal and recurring nature necessary for a fair statement of the Consolidated Balance Sheets, Statements of Operations, Statements of Comprehensive Income, Statements of Stockholder's Equity and Statement of Cash Flows for the periods indicated, and contain adequate disclosure to make the information presented not misleading.

Certain prior-period amounts have been reclassified to conform to the current period presentation. These reclassifications did not have a material impact on the Company's consolidated financial condition or results of operations.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates, and those differences may be material. The most significant estimates include the ACL, expected end-of-term lease residual values, and goodwill. These estimates, although based on actual historical trends and modeling, may potentially show significant variances over time.

Recently Adopted Accounting Standards

During the fourth quarter of 2025, the Company adopted ASU 2025-08 Financial Instruments - Credit Losses (Topic 326): Purchased Loans. This ASU expands the population of acquired financial assets subject to the gross-up approach currently applied to PCD assets, under which the initial ACL is recorded through an adjustment to the initial amortized cost basis. This update requires certain non-PCD loans (excluding credit cards) acquired in a business combination or purchased at least 90 days after origination (provided the acquirer was not involved in the origination of the loan) to be deemed PSL and accounted for using the gross-up approach at acquisition. The non-credit adjustment to the loans’ basis is amortized to interest income over the remaining term.

Recently Issued Accounting Standards Not Yet Adopted

On November 26, 2024, the FASB issued ASU 2024-03 Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures: Disaggregation of Income Statement Expenses, which requires a breakout of expenses in specific areas including employee compensation, depreciation, and intangible asset amortization. The new disclosure requirements are effective for annual reporting periods beginning in 2027 and interim periods thereafter, with early adoption permitted. The new guidance can be applied either prospectively to reporting periods after the effective date, or retrospectively to any or all prior periods presented. The Company continues to evaluate the disclosure-only impact of this guidance.

On September 18, 2025, the FASB issued ASU 2025-06 Targeted Improvements to the Accounting for Internal-Use Software. This update is intended to modernize the accounting for internal-use software development costs. This update is effective beginning January 1, 2028, with early adoption permitted. The adoption of this ASU will not materially impact the Company’s financial position or results of operations.

On November 25, 2025, the FASB issued ASU 2025-09 Derivatives and Hedging (Topic 815): Hedge Accounting Improvements to enable entities to further align hedge accounting with their risk management strategies by applying hedge accounting to a greater number of highly effective economic hedges. The new guidance is effective for annual reporting periods beginning in 2027 and interim periods thereafter, with early adoption permitted. The amendments are applied prospectively with certain optional transition provisions for existing hedging relationships. The Company is currently evaluating the impact of this update on its consolidated financial statements and related disclosures.

NOTE 2. INVESTMENT SECURITIES

Summary of Investments in Debt Securities - AFS and HTM

The following table presents the amortized cost, gross unrealized gains and losses and approximate fair values of investments in debt securities AFS at the dates indicated:

(1) Represents a 20 percent interest in the Structured LLC to hold and service a pool of multi-family loans.

(2) The Company has entered into fair value hedges of portions of a closed portfolio of AFS debt securities, using the portfolio layer method. Refer to Note 10 for additional information.

The following table presents the amortized cost, gross unrealized gains and losses and approximate fair values of investments in debt securities HTM at the dates indicated:

The following table presents the carrying value of the Company's investment securities pledged as collateral:

At June 30, 2026 and December 31, 2025, the Company had $182.2 million and $157.5 million, respectively, of accrued interest related to investment securities which is included in the Other assets line of the Company's Condensed Consolidated Balance Sheets. No accrued interest related to investment securities was written off during the periods ended June 30, 2026 or December 31, 2025.

Contractual Maturity of Investments in Debt Securities

Contractual maturities of the Company’s investments in debt securities AFS at June 30, 2026 were as follows:

Contractual maturities(1) of the Company’s investments in debt securities HTM at June 30, 2026 were as follows:

(1) Actual maturities may differ from contractual maturities when there is a right to call or prepay obligations with or without call or prepayment penalties.

Gross Unrealized Loss and Fair Value of Investments in Debt Securities AFS and HTM

The following table presents the aggregate amount of unrealized losses on debt securities in the Company’s AFS investment portfolios classified according to the amount of time those securities have been in a continuous loss position as of the dates indicated:

(1) Does not include unallocated fair value hedge basis adjustment.

The following table presents the aggregate amount of unrealized losses on debt securities in the Company’s HTM investment portfolios classified according to the amount of time those securities have been in a continuous loss position as of the dates indicated:

Allowance for credit-related losses on AFS and HTM securities

As discussed in Note 1 to the Company's Annual Report on Form 10-K for 2025, securities for which management expects risk of nonpayment of the amortized cost basis is zero do not have a reserve. Management has performed a review of securities that do not qualify for the zero credit loss expectation exception and concluded that the unrealized losses are not credit-related. As a result, the Company didnot record an allowance for credit-related losses on AFS or HTM securities at June 30, 2026 or December 31, 2025.

Gains (Losses) on Investment and Trading Securities

The realized gains and losses from investment and trading securities were as follows for the periods indicated:

The Company uses the specific identification method to determine the cost of the securities sold and the gain or loss recognized.

Trading Securities

At June 30, 2026 and December 31, 2025, the Company held $17.9 billion and $15.6 billion, respectively, of trading securities. Gains and losses on trading securities are recorded within Securities gains, net on the Company's Condensed Consolidated Statements of Operations. At June 30, 2026 and December 31, 2025, the Company had $16.7 billion and $15.3 billion, respectively, of assets classified as trading securities pledged as collateral to counterparties that have the right to repledge these securities.

Other Investments

Other investments consisted of the following as of the dates indicated:

(1) Includes $4.8 million and $4.4 million of retained interests in structured entities related to off-balance sheet securitizations as of June 30, 2026 and December 31, 2025, respectively, and $23.0 million and $23.0 million of equity securities accounted for at cost less impairment.

(2) Interest-bearing deposits include deposits maturing in more than 90 days with Santander affiliates that are not consolidated.

The Company's FHLB and FRB stock purchases and redemptions were as follows for the period indicated below. There wereno gains or losses associated with these redemptions.

The Company's LIHTC investments are accounted for using the proportional amortization method. Equity securities and retained interests in structured entities are generally measured at fair value with changes in fair value recognized in net income. Certain privately held equity investments without a readily determinable fair value are accounted for at cost less impairment under the measurement alternative in ASC 321.

NOTE 3. LOANS AND ALLOWANCE FOR CREDIT LOSSES

Loan and Lease Portfolio Composition

The Company's LHFI are generally reported at their outstanding principal balances net of any cumulative charge-offs, unamortized deferred fees and costs and unamortized premiums or discounts. Certain LHFI are accounted for at fair value under the FVO. Certain loans are pledged as collateral for borrowings, securitizations, or SPEs. These pledged loans totaled $43.2 billion at June 30, 2026 and $50.1 billion at December 31, 2025.

LHFS includes loans the Company has the intent to sell or securitize in an off-balance sheet securitization and loans that the Company no longer intends to hold to maturity or for the foreseeable future. For a discussion on the composition and valuation of LHFS at fair value, see Note 11 to these Condensed Consolidated Financial Statements.

At June 30, 2026 and December 31, 2025, accrued interest receivable on the Company's loans was $546.5 million and $587.7 million, respectively.

The following presents the composition of loans and leases HFI by portfolio and by rate type as of the dates indicated:

(1) Total LHFI includes unamortized deferred loan fees, net of deferred origination costs; unamortized purchase premiums, net of discounts; unamortized

participation fees; accretable Subvention; as well as purchase accounting adjustments. These items resulted in a net positive adjustment to the loan balances of $530.5 million and $607.1 million as of June 30, 2026 and December 31, 2025, respectively.

During the six-month period ended June 30, 2026, the Company completed a clean-up call of an existing off-balance sheet securitization, which resulted in the repurchase of approximately $205.0 million of gross RICs for which a total reserve of $38.7 million was recorded at the acquisition date. The clean-up call included the purchase of approximately $23.3 million in PCD loans for which a reserve of $9.8 million was recorded at the acquisition date.

Portfolio segments and classes

The Company discloses information about the credit quality of its loans and leases at disaggregated levels, specifically defined as “portfolio segments” and “classes,” based on management’s systematic methodology for determining the ACL. The Company utilizes similar categorization compared to the financial statement categorization of loans to model and calculate the ACL and track the credit quality, delinquency and impairment status of the underlying loan populations. In disaggregating its financing receivables portfolio, the Company’s methodology begins with the commercial and consumer portfolio segments.

The commercial portfolio segmentation reflects line of business distinctions. The CRE line of business includes C&I owner-occupied real estate and specialized lending for investment real estate. C&I includes non-real estate-related commercial loans. "Multifamily" represents loans for multifamily residential housing units. “Other commercial” includes loans to global customer relationships in Latin America which are not defined as commercial or consumer for regulatory purposes as well as the Company's CEVF portfolio.

The Company's portfolio classes are substantially the same as its financial statement categorization of loans for consumer loan populations. “Residential mortgages” includes mortgages on residential property, including single family and 1-4 family units. "Home equity loans and lines of credit" include all organic home equity contracts and purchased home equity portfolios. "RICs and auto loans" includes the Company's direct automobile loan portfolios but excludes RV and marine RICs. "Personal unsecured loans" includes personal revolving loans and credit cards. “Other consumer” includes an acquired portfolio of marine RICs and RV contracts.

ACL Rollforward by Portfolio Segment

The ACL is comprised of the ALLL and the reserve for unfunded lending commitments. The activity in the ACL by portfolio segment was as follows for the periods indicated:

The credit risk in the Company’s loan portfolios is driven by credit and collateral quality and is affected by borrower-specific and economy-wide factors. In general, there is an inverse relationship between the credit quality of loans and projections of impairment losses, so that loans with better credit quality require a lower expected loss reserve. The Company manages this risk through its underwriting, pricing strategies, credit policy standards, and servicing guidelines and practices, as well as the application of geographic and other concentration limits.

The Company estimates CECL based on prospective information as well as account-level models based on historical data. Unemployment, HPI, CRE price index and used vehicle index growth rates, along with loan level characteristics, are the key inputs used in the models for prediction of the likelihood that the borrower will default in the forecasted period (the PD) and the loss in the event of default (the LGD). GDP is also a key input used in the models for the prediction of the likelihood that a borrower will default. The Company has determined the reasonable and supportable period to bethree years, at which time the economic forecasts generally tend to revert to historical averages. The Company also utilizes qualitative adjustments to capture any additional risks that may not be captured in either the economic forecasts or in the historical data, including consideration of several factors such as the interpretation of economic trends and uncertainties, changes in the nature and volume of loan portfolios, trends in delinquency and collateral values, and concentration risk.

The Company generally uses a third-party vendor's consensus baseline macroeconomic scenario for the quantitative estimate and additional positive and negative macroeconomic scenarios to make qualitative adjustments for macroeconomic uncertainty and considers adjustments to macroeconomic inputs and outputs based on market volatility. The baseline scenario was based on the latest consensus forecasts available, which assume an increasing unemployment rate (which is a key driver of losses) and other macroeconomic uncertainties due to tariffs and other trade policies of the U.S. and its global trading partners. Additional downward risks continue to exist due to uncertainties related to increasing consumer indebtedness, restricted job growth undermining consumer spending and growth, broader global trade dynamics and inflationary challenges. Using the weighted average of a range of economic forecast scenarios, we estimated at June 30, 2026 that the unemployment rate is expected to be approximately 5.3% at the end of 2026. In comparison, at December 31, 2025, management estimated the unemployment rate to be 5.5% at the end of 2025. Additionally, the weighted used vehicle index, where a higher number corresponds to a higher used car price at auction, was estimated at June 30, 2026 to be approximately 211 at the end of 2026, compared to our estimate at December 31, 2025 to be approximately 215 at the end of 2025. The scenarios used by the Company are periodically reassessed over a reasonable and supportable time horizon, with weightings assigned by management and approved through the established governance process.

The Company's ACL was $5.9 billion at June 30, 2026, a decrease of $199.5 million from December 31, 2025. The decrease in the ACL was primarily attributable to changes in portfolio composition in RIC and auto loans and lower exposure in the personal unsecured portfolio. The ACL for the consumer portfolio segment decreased by $169.1 million and the ACL for the commercial portfolio segment decreased by $30.4 million at June 30, 2026 compared to December 31, 2025.

Non-accrual loans by Class of Financing Receivable

The amortized cost basis of financing receivables that are non-accrual and other non-performing assets disaggregated by class of financing receivables (as well as the amount of non-accrual loans for which no related allowance is recorded) are as follows at the dates indicated:

Age Analysis of Past Due Loans

The Company generally considers an account delinquent when an obligor fails to pay substantially all (defined as 90%) of the scheduled payment by the due date. When an account is deferred, the loan is returned to accrual status during the deferral period and accrued interest related to the loan is evaluated for collectability.

The amortized cost of past due loans and accruing loans 90 days or greater past due disaggregated by class of financing receivables is summarized as follows at the dates indicated:

(1) CRE loans include $222.6 million of LHFS at June 30, 2026.

(2) C&I loans include $209.6 million of LHFS at June 30, 2026.

(3) Residential mortgages include $1.2 billion of LHFS at June 30, 2026.

(4) RICs and auto loans include $100.2 million of LHFS at June 30, 2026.

(1)CRE loans include $232.4 million of LHFS at December 31, 2025.

(2)C&I loans included $140.8 million of LHFS at December 31, 2025.

(3) Residential mortgages included $1.2 billion of LHFS at December 31, 2025.

Commercial Lending Asset Quality Indicators

The Company's Risk Department performs a credit analysis and classifies certain loans over an internal threshold based on the commercial lending classifications described below:

PASS. Asset is well-protected by the current net worth and paying capacity of the obligor or guarantors, if any, or by the fair value less costs to acquire and sell any underlying collateral in a timely manner.

SPECIAL MENTION. Asset has potential weaknesses that deserve management’s close attention, which, if left uncorrected, may result in deterioration of the repayment prospects for an asset at some future date. Special mention assets are not adversely classified.

SUBSTANDARD. Asset is inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged, if any. A well-defined weakness or weaknesses exist that jeopardize the liquidation of the debt. The loans are characterized by the distinct possibility that the Company will sustain some loss if deficiencies are not corrected.

DOUBTFUL. Exhibits the inherent weaknesses of a substandard credit. Additional characteristics exist that make collection or liquidation in full highly questionable and improbable, on the basis of currently known facts, conditions and values. Possibility of loss is extremely high, but because of certain important and reasonable specific pending factors which may work to the advantage and strengthening of the credit, an estimated loss cannot yet be determined.

LOSS. Credit is considered uncollectible and of such little value that it does not warrant consideration as an active asset. There may be some recovery or salvage value, but there is doubt as to whether, how much or when the recovery would occur.

Each commercial loan is evaluated to determine its risk rating at least annually. The indicators represent the rating for loans as of the date presented based on the most recent assessment performed. Amortized cost basis of loans in the commercial portfolio segment by credit quality indicator, class of financing receivable, and year of origination are summarized as follows:

(1)Loans originated during the six months ended June 30, 2026.

(2)Includes $432.2 million of LHFS at June 30, 2026.

(3)Includes $1.9 million of revolving loans converted to term loans.

(4)Not subject to internal risk rating process.

(1)Loans originated during the year ended December 31, 2025.

(2)Includes $373.3 million of LHFS at December 31, 2025.

(3)Includes $3.8 million of revolving loans converted to term loans.

(4)Not subject to internal risk rating process.

Consumer Lending Asset Quality Indicators-Credit Score

Consumer financing receivables for which either an internal or external credit score is a core component of the allowance model are summarized by credit score determined at origination as follows:

RICs and Auto Loans

(1) Loans originated during the six months ended June 30, 2026.

(1) Loans originated during the year ended December 31, 2025.

Personal Unsecured Loans

(1) Loans originated during the six months ended June 30, 2026.

(1) Loans originated during the year ended December 31, 2025.

Consumer Lending Asset Quality Indicators-FICO and LTV Ratio

For both residential and home equity loans, loss severity assumptions are incorporated in the loan and lease loss reserve models to estimate loan balances that will ultimately charge off. These assumptions are based on recent loss experience within various current LTV bands within these portfolios. LTVs are refreshed quarterly by applying Federal Housing Finance Agency Home price index changes at a state-by-state level to the last known appraised value of the property to estimate the current LTV. The Company's CECL loss calculation incorporates the refreshed LTV information to update the distribution of defaulted loans by LTV as well as the associated LGD for each LTV band. Reappraisals on a recurring basis at the individual property level are not considered cost-effective or necessary; however, reappraisals are performed on certain higher risk accounts to support line management activities, default servicing decisions, or when other situations arise for which, the Company believes the additional expense is warranted.

FICO scores are refreshed quarterly, where possible. The indicators disclosed represent the credit scores for loans as of the date presented based on the most recent assessment performed.

Residential mortgage and home equity financing receivables by LTV and FICO range are summarized as follows:

(1) The Company ceased origination of new residential mortgage and home equity loans in 2022.

(2) Balances in the "No LTV available" or "No FICO score available" ranges primarily represent loans serviced by others, in run-off portfolios or for which a current LTV or FICO score is unavailable.

(3) The ALLL model considers LTV for financing receivables in first lien position and CLTV for financing receivables in second lien position for the Company.

(4) Excludes LHFS.

(1) The Company ceased origination of new residential mortgage and home equity loans in 2022.

(2) Balances in the "No LTV available" or "No FICO score available" ranges primarily represent loans serviced by others, in run-off portfolios or for which a current LTV or FICO score is unavailable.

(3) The ALLL model considers LTV for financing receivables in first lien position and CLTV for financing receivables in second lien position for the Company.

(4) Excludes LHFS.

During the six months ended June 30, 2026, the Company reported $0.5 million in gross charge-offs related to other consumer portfolios.

Loan Modifications

Occasionally the Company modifies loans to customers in financial difficulty by providing term extensions, payment deferrals, and interest rate reductions. When a loan is modified, the related unamortized net fees and costs and any prepayment penalties are carried forward and any fees received, and direct loan origination costs associated with the refinancing or restructuring, are deferred. Additionally, the EIR is recalculated based upon the amortized cost basis of the modified loan and its revised contractual cash flows.

All of the Company’s commercial loan modifications are based on the circumstances of the individual customer, including specific customers' complete relationship with the Company. Loan terms are modified to meet each borrower’s specific circumstances at a point in time and may allow for modifications such as term extensions, covenant waivers, payment holidays and interest rate reductions. Commercial loan modifications are generally restructured to allow for an upgraded risk rating and return to accrual status after a sustained period of payment performance has been achieved (typically 12 months for monthly payment schedules). The financial effect of modifications made to commercial loan borrowers through our deferral program is the addition of deferred amounts to the end of the original loan term.

The primary modification program for the Company’s residential mortgage and home equity portfolios is a proprietary program designed to keep customers in their homes and, when appropriate, prevent them from entering into foreclosure. The program is available to all customers facing a financial hardship regardless of their delinquency status. The main goal of the modification program is to review the customer’s entire financial condition to ensure that the proposed modified payment solution is affordable according to a specific DTI ratio range. The main modification benefits of the program allow for term extensions, interest rate reductions, and/or deferment of principal. The Company reviews each customer on a case-by-case basis to determine which benefit or combination of benefits will be offered to achieve the target DTI range.

For RICs and auto loans, the Company at times offers deferrals under which the consumer is allowed to defer a maximum ofthree payments per event to the end of the loan. We limit the frequency of each new deferral that may be granted toone deferral after completion of at least eight payments from origination andeight payments between each extension. The maximum number of months extended for the life of the loan for all automobile RICs iseight for non-natural disaster extensions andtwelve for natural disaster extensions. Some marine and RV contracts also have a maximum oftwelve months' extension to reflect their longer terms. Additionally, we generally limit the granting of deferrals on new accounts until a requisite number of payments has been received. During the deferral period, we continue to accrue and collect interest on the loan in accordance with the terms of the deferral agreement. Some auto loan modifications include a reduction of the interest rate and may include an extension of term to eligible borrowers at risk of default and repossession of the financed vehicle. The financial effect of RIC and auto loan modifications made through our deferral program is that it allows customers to defer payments for up toeight months over the life of the loan and the deferred payments are added to the end of the original loan term. All other modification types, which may include interest rate reductions and maturity date extensions of up to 36 months beyond the current maturity date, result in a reduction of the monthly payment.

When estimating the ACL, the Company uses a statistical methodology based on an expected credit loss approach that focuses on forecasting the expected credit loss components (i.e., PD, payoff, LGD and EAD) on a loan level basis to estimate the expected future lifetime losses. This methodology generally does not change when loans are modified. However, the Company monitors credit quality indicators and delinquency, and adjusts the allowance as those factors change. The Company generally uses a DCF approach for large impaired commercial loans. For all collateral-dependent loans, the Company measures the ACL as the difference between the asset’s amortized cost basis and the fair value of the underlying collateral as of the reporting date, adjusted for expected costs to sell. Refer to Note 1 to the Company's Annual Report on Form 10-K for 2025 for more information on the ACL.

The following table shows the amortized cost basis at the end of the reporting period for loans modified during the reporting period to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of modification granted.

Performance of Modified Loans

The Company monitors the performance of modified loans to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table depicts the performance of loans that have been modified in the 12- month period prior to period-end:

Payment Defaults Which Have Had a Prior Modification

A modified loan is generally considered to have subsequently defaulted if, after modification, the loan becomes 90 DPD. For RICs, a modified loan is considered to have subsequently defaulted after modification at the earlier of the date of repossession or 120 DPD. Upon the Company’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off. See Note 1 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for 2025 for more information on the Company's charge-off policy. The following table provides the amortized cost basis of financing receivables that had a payment default during the period and were modified in the 12-month period prior to default due to the borrower's financial difficulty:

NOTE 4. OPERATING LEASE ASSETS, NET

The Company has operating leases, including leased vehicles, which are included in the Company's Condensed Consolidated Balance Sheets as Operating lease assets, net.

Operating lease assets, net consisted of the following as of the periods indicated:

The following summarizes the future minimum rental payments due to the Company as lessor under operating leases as of June 30, 2026:

NOTE 5. VIEs

The Company transfers RICs and vehicle leases into newly-formed Trusts that then issueone or more classes of notes payable backed by the collateral. The Company’s continuing involvement with these Trusts is in the form of servicing the assets and, generally, through holding residual interests in the Trusts. The Trusts are considered VIEs under GAAP, and the Company may or may not consolidate these VIEs on its Condensed Consolidated Balance Sheets.

The collateral and borrowings under credit facilities and securitization notes payable of the Company’s consolidated VIEs remain on the Condensed Consolidated Balance Sheets. The Company recognizes finance charges, fee income, and provisions for credit losses on the RICs, and leased vehicles and interest expense on the debt. Revolving credit facilities generally also utilize entities that are considered VIEs which are included on the Condensed Consolidated Balance Sheets.

The Company also uses a titling trust to originate and hold its leased vehicles and the associated leases, for administrative efficiency and also to facilitate the pledging of leases to financing facilities or the sale of leases to other parties without incurring the costs and administrative burden of retitling the leased vehicles. In this process, the leases may be transferred to separate legal units within the titling trust to segregate them for ownership purposes, including for securitizations. This does not result in any changes to the accounting for the leases. This titling trust is considered a VIE. Refer to Note 4 to these Condensed Consolidated Financial Statements for further information on the Company's leased vehicles.

On-balance sheet VIEs

The assets and liabilities of consolidated VIEs are presented below. Certain of these assets can be used only to settle obligations of the consolidated VIEs and the liabilities of those entities for which creditors (or beneficial interest holders) do not have recourse to the Company's general credit.

The assets and liabilities of consolidated VIEs included the following at the dates indicated:

(1) As noted above, all leased vehicles are originated through a titling trust. At June 30, 2026 and December 31, 2025, $4.1 billion and $3.7 billion, respectively, of leased vehicle assets included in this amount were in a titling trust, but not in a securitization trust.

The Company services receivables transferred to the Trusts and receives a monthly servicing fee on the outstanding principal balance. Supplemental fees, such as late charges, for servicing the receivables are reflected in Miscellaneous income, net.

As of June 30, 2026 and December 31, 2025, the Company was servicing $19.4 billion and $25.1 billion, respectively, of gross RICs that have been transferred to consolidated Trusts. Certain amounts shown above are greater than the amounts shown in the corresponding line items in the accompanying Condensed Consolidated Balance Sheets due to intercompany eliminations between the VIEs and other entities consolidated by the Company. For example, for most of its securitizations, the Company retains one or more of the lowest tranches of bonds. Rather than showing investment in bonds as an asset and the associated debt as a liability, these amounts are eliminated in consolidation as required by GAAP.

NOTE 5. VIEs (continued)

A summary of the cash flows received from the consolidated Trusts for the respective periods is as follows for the periods indicated:

(1) Includes additional advances on existing securitizations.

(2) These amounts are not reflected in the SCF because the cash flows are between the VIEs and other entities included in theconsolidation.

Off-balance sheet VIEs

At June 30, 2026 and December 31, 2025, the Company was servicing RICs of $1.3 billion and $2.0 billion, respectively, that have been sold in off-balance sheet securitizations and were subject to an optional clean-up call.

A summary of cash flows received from Trusts for the respective periods were as follows for the periods indicated:

NOTE 5. VIEs (continued)

Other than repurchases of sold assets due to claims against standard representations and warranties, the Company's exposure to loss as a result of its involvement with these VIEs is limited to its retained interests in the VIE. The carrying value of this exposure at June 30, 2026 was $789.2 million and $2.9 million of debt and equity investments, respectively, compared to $1.0 billion and $3.9 million at December 31, 2025. These amounts are reported in debt securities HTM and other investments, respectively, in Note 2 to these Condensed Consolidated Financial Statements.

During the six months ended June 30, 2026, the Company securitized $1.9 billion of mortgage LHFS in off-balance transactions. The Company has retained $78.2 million of variable interests in the new securitizations for risk retention purposes.

As of June 30, 2026, SBNA serviced approximately $7.7 billion in multi-family loans for the Structured LLC in which the Company has a beneficial interest and received a market rate servicing fee. For the three months and six months ended June 30, 2026 and June 30, 2025, SBNA recognized $13.1 million and $26.2 million, and $28.3 million and $42.4 million, respectively, in servicing fee income from the servicing of these assets which is recorded in Miscellaneous income, net, in the accompanying Condensed Consolidated Statements of Operations.

NOTE 6. DEPOSITS AND OTHER CUSTOMER ACCOUNTS

Deposits and other customer accounts are summarized as follows at the dates indicated:

(1) Includes foreign deposits, as defined by the FRB, of $5.1 billion and $5.6 billion at June 30, 2026 and December 31, 2025, respectively.

Demand deposit overdrafts that have been reclassified as loan balances were $290.8 million and $394.7 million at June 30, 2026 and December 31, 2025, respectively.

At June 30, 2026 and December 31, 2025, the Company had $5.7 billion and $6.4 billion, respectively, of CDs greater than $250 thousand.

The Company's subsidiaries had outstanding irrevocable letters of credit totaling $120.0 million and $100.0 million from the FHLB of Pittsburgh at June 30, 2026 and December 31, 2025, respectively, used to secure uninsured deposits placed with the Bank by state and local governments and their political subdivisions.

NOTE 7. BORROWINGS

Total borrowings and other debt obligations at June 30, 2026 were $32.7 billion, compared to $37.1 billion at December 31, 2025. The Company's debt agreements impose certain limitations on dividend payments and other transactions. The Company is currently in compliance with these limitations.

During the six months ended June 30, 2026, the Company issued the following debt:

•$325.1 million of variable rate CLNs due January 2039. These notes contain a financial guarantee on a reference pool of $1.5 billion in commercial loans owned by the Company. These notes bear an interest at a rate equal to the SOFR index plus 5.25% and re-sets monthly.

•$279.7 million of fixed-rate CLNs due July 2034. These notes contain a financial guarantee on a reference pool of $2.6 billion in auto loans owned by the Company. These notes bear a weighted average interest rate of 6.03%.

•$1.9 billion of secured structured financings in its SDART platform, of which it retained approximately $308.4 million in interests in the VIE.

•$1.0 billion in aggregate principal amount of its 5.04% fixed-to-floating rate senior notes due June 2030.

•$750 million in aggregate principal amount of its 5.22% fixed-to-floating rate senior notes due June 2032.

•$750 million in aggregate principal amount of its 5.70% fixed-to-floating rate senior notes due June 2037.

The Company continues to consolidate these VIEs on its Condensed Consolidated Balance Sheets.

Parent Company and other Subsidiary Borrowings and Debt Obligations

The following table presents the Parent Company and its subsidiaries' borrowings and other debt obligations at the dates indicated:

Warehouse Lines

The following tables present information regarding the Company's warehouse lines at the dates indicated:

The warehouse lines and repurchase facilities are fully collateralized by a designated portion of the Company's RICs, leased vehicles, securitization notes payable, and residuals retained by the Company.

NOTE 7. BORROWINGS (continued)

Secured Structured Financings

The following tables present information regarding the Company's secured structured financings at the dates indicated:

(1) Securitizations executed under Rule 144A of the Securities Act are included within this balance.

(2) Secured structured financings may be collateralized by collateral overages of other issuances.

(3) Excludes securitizations which no longer have outstanding debt and excludes any incremental borrowings.

Most of the Company's secured structured financings are in the form of public, SEC-registered securitizations. The Company also executes private securitizations under Rule 144A of the Securities Act, and periodically issues private term amortizing notes, which are structured similarly to securitizations but are acquired by banks and conduits. The Company's securitizations and private issuances are collateralized by vehicle RICs and loans or leases.

NOTE 8. ACCUMULATED OTHER COMPREHENSIVE INCOME / (LOSS)

The following table presents the components of AOCI / (loss), net of related tax, for the periods indicated.

(1) Net gains/(losses) reclassified into Interest on borrowings and other debt obligations in the Condensed Consolidated Statements of Operations for settlements of interest rate swap contracts designated as cash flow hedges.

(2) Including the computation of net periodic pension costs.

(1) Net gains/(losses) reclassified into Interest on borrowings and other debt obligations in the Condensed Consolidated Statements of Operations for settlements of interest rate swap contracts designated as cash flow hedges.

NOTE 8. ACCUMULATED OTHER COMPREHENSIVE INCOME / (LOSS) (continued)

(1) Net gains/(losses) reclassified into Interest on borrowings and other debt obligations in the Condensed Consolidated Statements of Operations for settlements of interest rate swap contracts designated as cash flow hedges.

(1) Net gains/(losses) reclassified into Interest on borrowings and other debt obligations in the Condensed Consolidated Statements of Operations for settlements of interest rate swap contracts designated as cash flow hedges.

NOTE 9. SECURITIES FINANCING ACTIVITIES

The Company may enter into Securities Financing Activities primarily to deploy the Company’s excess cash and investment positions. Securities Financing Activities are treated as collateralized financings and are included in "Federal funds sold and securities purchased under resale agreements or similar arrangements" and "Federal funds purchased and securities loaned or sold under repurchase agreements" on the Company’s Condensed Consolidated Balance Sheets. Refer to Note 1 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for 2025 for further discussion of accounting for and the offsetting of securities financing assets and liabilities.

Securities borrowed and purchased under agreements to resell, at their respective carrying values, consisted of the following at the dates indicated:

Securities loaned or sold under agreements to repurchase, at their respective carrying values, consisted of the following at the dates indicated:

Securities Financing Activities are generally executed under standard industry agreements, including master agreements that create a single contract under which all transactions between two counterparties are executed, allowing for trade aggregation of receivables and payables into a single net payment or settlement. The amounts of securities financing assets or liabilities qualified for offset in the Condensed Consolidated Balance Sheets were as follows for the dates indicated.

NOTE 9. SECURITIES FINANCING ACTIVITIES (continued)

The following table presents the gross amounts of liabilities associated with Securities Financing Activities by remaining contractual maturity as of the date indicated:

The following table presents the gross amounts of liabilities associated with Securities Financing Activities by class of underlying collateral as of the dates indicated:

The Company enters into securities lending transactions in which it borrows securities from clients and lends those securities to third parties in exchange for collateral and a lending fee. These transactions are accounted for as secured borrowings under ASC 860. Collateral received in these transactions consists primarily of securities and is associated to the nominee account related to client securities held. In certain arrangements, the Company is not permitted to sell or repledge the collateral received. Accordingly, such collateral is not recognized on the balance sheet. Collateral is recognized only when received in the form of cash or securities that the Company is permitted to sell or repledge. As of June 30, 2026, the Company had securities borrowed and lent of $661.8 million and received collateral of $693.6 million under these arrangements. These amounts are not reflected on the consolidated balance sheet. The Company retains exposure to counterparty credit risk in the event that a borrower fails to return the securities. This risk is mitigated through the receipt of collateral and ongoing monitoring of collateral values. Fees earned from borrowers are recorded in non-interest income, while amounts paid to clients are recorded as expense.

NOTE 10. DERIVATIVES

General

Derivatives represent contracts between parties that usually require little or no initial net investment and result in one or both parties delivering cash or another type of asset to the other party based on a notional amount and an underlying asset, index, interest rate or future purchase commitment or option as specified in the contract. Derivative transactions are often measured in terms of notional amount, but this amount is generally not exchanged, is not recorded on the balance sheet and does not represent the Company`s exposure to credit loss. The notional amount is the basis on which the financial obligation of each party to the derivative contract is calculated to determine required payments under the contract. The Company controls the credit risk of its derivative contracts through credit approvals, limits and monitoring procedures. The underlying variable is typically a referenced interest rate (commonly the OIS rate or a SOFR-based rate), security, credit spread or index.

The Company’s capital markets and mortgage banking activities are subject to price risk. The Company employs various tools to measure and manage price risk in its portfolios. In addition, the Board of Directors has established certain limits relative to positions and activities. The level of price risk exposure at any given time depends on the market environment and expectations of future price and market movements and will vary from period to period.

See Note 11 to these Condensed Consolidated Financial Statements for discussion of the valuation methodology for derivative instruments.

Credit Risk Contingent Features

The Company has entered into certain derivative contracts that require the posting of collateral to counterparties when those contracts are in a net liability position. The amount of collateral to be posted is based on the amount of the net liability and thresholds generally related to the Company's long-term senior unsecured credit ratings. In a limited number of instances, counterparties also have the right to terminate their ISDA Master Agreements if the Company's ratings fall below a specified level, typically investment grade. As of June 30, 2026, derivatives in this category had a fair value ofzero. The credit ratings of the Company and SBNA are currently considered investment grade. As of June 30, 2026, no additional collateral would be required if there were a further 1- or 2- notch downgrade by either S&P or Moody's.

As of June 30, 2026 and December 31, 2025, the aggregate fair value of all derivative contracts with credit risk contingent features (i.e., those containing collateral posting or termination provisions based on the Company's ratings) that were in a net liability position totaled $6.0 million and $6.6 million, respectively. The Company had $5.8 million and $6.6 million in cash and securities collateral posted to cover those positions as of June 30, 2026 and December 31, 2025, respectively.

Hedge Accounting

Management uses derivative instruments designated as hedges to mitigate the impact of interest rate and foreign exchange rate movements on the fair value of certain assets and liabilities and on highly probable forecasted cash flows. These instruments primarily include interest rate swaps that have underlying interest rates based on key benchmark indices. The nature and volume of the derivative instruments used to manage interest rate risk depend on the level and type of assets and liabilities on the balance sheet and the risk management strategies for the current and anticipated interest rate environment.

Interest rate swaps are generally used to convert fixed-rate assets and liabilities to variable rate assets and liabilities and vice versa. The Company utilizes interest rate swaps that have a high degree of correlation to the related financial instrument.

Fair Value Hedges

The Company enters into derivatives to hedge the risk of changes in fair value of a portion of its AFS debt securities portfolio and borrowings. These derivatives are designated as fair value hedges at inception. The gains/(losses) from changes in the fair value of the hedging derivative and the offsetting gains/(losses) from changes in the fair value of the related underlying hedged items due to the hedged risk are reported in the same line item in the Condensed Consolidated Statements of Operations as earnings from the hedged items. The cumulative fair value hedge basis adjustments included in the carrying amount of hedged assets is reversed through earnings in future periods as an adjustment to yield. The Company includes gains/(losses) on the hedging derivatives and the related hedged items in the assessment of hedge effectiveness. All of these swaps have been deemed highly effective fair value hedges. The last of the hedges is scheduled to expire in June 2036. The Company has entered into fair value hedges of portions of a closed portfolio of approximately $2.3 billion of AFS debt securities, using the portfolio layer method.

The carrying amount and fair value hedge adjustment of hedged assets at the dates indicated was:

Cash Flow Hedges

The Company has outstanding interest rate swap agreements designed to hedge a portion of the Company’s floating-rate assets and liabilities and forecasted issuances of borrowed funds. The Company also has foreign exchange contracts designed to hedge certain contractual payments in foreign currencies.

Except as noted below, all of these derivatives have been deemed highly effective cash flow hedges. The gain or loss on the derivative instrument is reported as a component of AOCI and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings and is presented in the same Condensed Consolidated Statements of Operations line item as the earnings effect of the hedged item.

The last of the hedges is scheduled to expire in January 2029. The Company includes all components of each derivative's gain or loss in the assessment of hedge effectiveness. As of June 30, 2026, the Company estimated that approximately $4.0 million of unrealized losses included in AOCI would be reclassified to earnings during the subsequent twelve months as the future cash flows occur.

Derivatives Designated in Hedge Relationships – Notional and Fair Values

Derivatives designated as accounting hedges included the following as of the dates indicated:

Other Derivative Activities

The Company also enters into derivatives that are not designated as accounting hedges under GAAP. Although these derivatives are used to hedge risk and are considered economic hedges, they are not designated as accounting hedges because the contracts they are hedging are often carried at fair value on the balance sheet, resulting in generally symmetrical accounting treatment for the hedging instrument and the hedged item.

Customer-related derivatives

The Company offers derivatives to its customers in connection with their risk management requirements related to foreign exchange and lending arrangements. These derivatives primarily consist of interest rate swaps, caps, floors, and foreign exchange contracts. Risk exposure from customer positions is managed through offsetting transactions with other dealers, including Santander. Refer to Note 21 in the Company's Annual Report on Form 10-K for 2025 for related party transactions.

Broker dealer activities

The Company uses exchange-traded options and futures, credit default swaps, and forward-settling securities trades as part of its trading business, as well as to actively manage risk exposures that arise from its trading in cash instruments.

Structured financing activities

In certain circumstances, the Company is required to hedge its interest rate risk on revolving credit and term borrowings related to its secured structured financings. The Company uses interest rate caps to satisfy these requirements and enters into offsetting option contracts.

Foreign exchange activities

The Company uses foreign exchange contracts to manage the foreign exchange risk associated with certain foreign currency-denominated assets and liabilities. Foreign exchange contracts, which include spot and forward contracts as well as cross-currency swaps, represent agreements to exchange the currency of one country for the currency of another country at an agreed-upon price on an agreed-upon settlement date and may or may not be physically settled depending on the Company’s needs. Exposure to gains and losses on these contracts increase or decrease over their respective lives as currency exchange and interest rates fluctuate.

Mortgage Banking Derivatives

The Company retains the servicing rights related to certain residential mortgage loans that have been sold. Most of the Company`s residential MSRs are accounted for at fair value. As deemed appropriate, the Company economically hedges MSRs using interest rate swaps and forward contracts to purchase MBS.

Other derivative activities

Other derivative instruments primarily include forward contracts related to certain investment securities sales, loan sales, an OIS, and a total return swap on Visa, Inc. Class B common shares.

Derivatives Not Designated in Hedge Relationships – Notional and Fair Values

Other derivative activities included the following as of the dates indicated:

Gains (Losses) on all Derivatives

The following Condensed Consolidated Statements of Operations line items were impacted by the Company’s derivative activities for the periods indicated:

(1) Gains are disclosed as positive numbers while losses are shown as a negative number regardless of the line item being affected.

The net amount of change recognized in OCI for cash flow hedge derivatives were losses of $37.7 million and $72.9 million, and gains of $29.3 million and $74.4 million, net of tax, for the three months and six months ended June 30, 2026 and 2025, respectively.

The net amount of changes reclassified from OCI into earnings for cash flow hedge derivatives were gains of $2.0 million and $4.3 million, and $2.6 million and $5.0 million, net of tax, for the three months and six months ended June 30, 2026 and 2025, respectively.

Disclosures about Offsetting Assets and Liabilities

The Company enters into legally enforceable master netting agreements which reduce risk by permitting netting of transactions with the same counterparty on the occurrence of certain events. A master netting agreement allows two counterparties the ability to net-settle amounts under all contracts, including any related collateral posted, through a single payment and in a single currency. The right to offset and certain terms regarding the collateral process, such as valuation, credit events and settlement, are contained in the applicable master agreement. The Company's financial instruments, including resell and repurchase agreements, securities lending arrangements, derivatives, and cash collateral, may be eligible for offset on its Condensed Consolidated Balance Sheets.

The Company has elected to present derivative balances on a gross basis even if the derivative is subject to a legally enforceable nettable ISDA Master Agreement for all trades executed after April 1, 2013. Collateral that is received or pledged for these transactions is disclosed within the “Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets” section of the tables below.

Information about financial assets and liabilities that are eligible for offset on the Condensed Consolidated Balance Sheets was as follows for the dates indicated:

(1)Includes customer-related and other derivatives.

(2)Collateral received includes cash, cash equivalents, and other financial instruments. Cash collateral received is reported in Other liabilities, as applicable, in the Condensed Consolidated Balance Sheets. Financial instruments that are pledged to the Company are not reflected in the accompanying Condensed Consolidated Balance Sheets since the Company does not control or have the ability to re-hypothecate these instruments.

(1)Includes customer-related and other derivatives.

(2)Cash collateral pledged and financial instruments pledged is reported in Other assets in the Condensed Consolidated Balance Sheets. In certain instances, the Company is over-collateralized since the actual amount of collateral pledged exceeds the associated financial liability. As a result, the actual amount of collateral pledged that is reported in Other assets may be greater than the amount shown in the table above.

NOTE 11. FAIR VALUE

The Company estimates the fair value of certain assets and liabilities for both measurement and disclosure purposes. The fair value hierarchy categorizes the underlying assumptions and inputs to valuation techniques that are used to measure fair value into three levels as follows:

•Level 1 inputs are quoted prices in active markets for identical assets or liabilities that can be accessed as of the measurement date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

•Level 2 inputs are those other than quoted prices included in Level 1 that are observable for the assets or liabilities, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

•Level 3 inputs are those that are unobservable or not readily observable for the asset or liability and are used to measure fair value to the extent relevant observable inputs are not available.

Assets and liabilities measured at fair value, by their nature, result in a higher degree of financial statement volatility. See Note 1 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for 2025 for a broad discussion of fair value measurement techniques. When available, the Company uses quoted market prices or matrix pricing in active markets to determine fair value and classifies such items as Level 1 or Level 2 assets or liabilities. If quoted market prices in active markets are not available, fair value is determined using third-party broker quotes and/or DCF models incorporating various assumptions including interest rates, prepayment speeds and credit losses. Assets and liabilities valued using broker quotes and/or DCF models are classified as either Level 2 or Level 3, depending on the lowest level classification of an input that is considered significant to the overall valuation.

The Company values assets and liabilities based on the principal market in which each would be sold (in the case of assets) or transferred (in the case of liabilities). The principal market is the forum with the greatest volume and level of activity. In the absence of a principal market, the valuation is based on the most advantageous market. In the absence of observable market transactions, the Company considers liquidity valuation adjustments to reflect the uncertainty in pricing the instruments.

The fair value of a financial asset is measured on a stand-alone basis and cannot be measured as a group, with the exception of certain financial instruments held and managed on a net portfolio basis. In measuring the fair value of a nonfinancial asset, the Company assumes the highest and best use of the asset by a market participant, not just the intended use, to maximize the value of the asset. The Company also considers whether any credit valuation adjustments are necessary based on the counterparty's credit quality. Any models used to determine fair values or validate dealer quotes based on the descriptions below are subject to review and testing as part of the Company's model validation and internal control testing processes.

The Company's Market Risk Department approves the methodologies used in the estimations of fair value, including the Company's Level 3 assets and liabilities. Price validation procedures are performed, and the results are reviewed for Level 3 assets and liabilities by the Market Risk Department. Price validation procedures performed for these assets and liabilities can include comparing current prices to historical pricing trends by collateral type and vintage, comparing prices by product type to indicative pricing grids published by market makers, and obtaining corroborating dealer prices for significant securities.

The Company reviews the assumptions utilized to determine fair value on a quarterly basis. Any changes in methodologies or significant inputs used in determining fair values are further reviewed to determine if a change in fair value level hierarchy has occurred.

Assets and Liabilities Measured at Fair Value on a Recurring and Nonrecurring Basis

The following tables present the assets and liabilities that are measured at fair value on a recurring and nonrecurring basis by major product category and fair value hierarchy as of the dates indicated:

(1) LHFS disclosed on the Condensed Consolidated Balance Sheets also includes LHFS that are held at the lower of cost or fair value and are not presented within this table.

(2) Refer to Note 2 for the fair value of investment securities and to Note 10 for the fair values of derivative assets and liabilities on a further disaggregated basis.

(3) Certain RICs collateralized by vehicle titles and RV/marine loans.

(4) Residential mortgage loans and commercial mortgage loans.

(5) Approximately $2.2 billion of these financial assets were measured using model-based techniques, or Level 3 inputs, and represented approximately 7.8% of total assets measured at fair value on a recurring basis and approximately 1.3% of total consolidated assets.

Valuation Processes and Techniques - Recurring Fair Value Assets and Liabilities

The following is a description of the valuation techniques used for instruments measured at fair value on a recurring basis:

Investments in debt securities AFS

Investments in debt securities AFS are accounted for at fair value. The Company utilizes a third-party pricing service to value its investment securities portfolios on a global basis. Its primary pricing service has consistently proved to be a high quality third-party pricing provider. For those investments not valued by pricing vendors, other trusted market sources are utilized. The Company monitors and validates the reliability of vendor pricing on an ongoing basis, which can include pricing methodology reviews, performing detailed reviews of the assumptions and inputs used by the vendor to price individual securities, and price validation testing. Price validation testing is performed independently of the risk-taking function and can include corroborating the prices received from third-party vendors with prices from another third-party source, reviewing valuations of comparable instruments, comparison to internal valuations, or by reference to recent sales of similar securities.

The classification of securities within the fair value hierarchy is based upon the activity level in the market for the security type and the observability of the inputs used to determine their fair values. Actively traded quoted market prices for debt securities AFS, such as government agency securities, corporate debt, state and municipal securities, and MBS, are not readily available. The Company's principal markets for its investment securities are the secondary institutional markets with an exit price that is predominantly reflective of bid-level pricing in these markets. These investment securities are priced by third-party pricing vendors. The third-party vendors use a variety of methods when pricing these securities that incorporate relevant observable market data to arrive at an estimate of what a buyer in the marketplace would pay for a security under current market conditions. These investment securities are, therefore, considered Level 2.

Certain ABS are valued using DCF models. The DCF models are obtained from a third-party pricing vendor which uses observable market data and therefore are classified as Level 2.

The Company's beneficial interest in the Structured LLC was acquired in December 2023, and is valued using an internally-developed DCF model and is classified as Level 3 at June 30, 2026. Significant assumptions used in evaluation include, discount spread, loss estimates, and extension of loans. Significant changes in any of these inputs could result in a higher or lower fair value measurement.

LHFI

For certain RICs reported in LHFI, net, the Company has elected the FVO. The estimated fair value of all RICs HFI is estimated using a DCF model and is classified as Level 3.

LHFS

For certain LHFS portfolios, the Company has elected the FVO and the portfolios are measured at fair value on a recurring basis. These loans consisted primarily of loans attributed to CIB whole loan aggregation and bridge lending programs. The fair value of these loans was based on estimated market rates for similar loans and certain forward sale agreements and the loans are considered Level 2. See further discussion below in the section captioned "FVO for Financial Assets and Financial Liabilities."

MSRs

The Company maintains an MSR asset related to residential real estate loans serviced for others. At June 30, 2026 and December 31, 2025, the balance of these loans serviced for others was $6.3 billion and $6.6 billion, respectively. The Company has elected to measure its residential MSRs at fair value to align with its risk management strategy to hedge changes in the fair value of these assets using interest rate swaps and forward contracts. See Note 11 to these Condensed Consolidated Statements of Operations for additional information regarding these derivative instruments. Changes in fair value of the MSR are recorded through Miscellaneous income, net on the Condensed Consolidated Statements of Operations.

Residential MSRs are classified as Level 3 within the fair value hierarchy due to the use of significant unobservable inputs in the valuation process.

The fair value of MSRs is determined using a DCF model that estimates the present value of expected future net servicing cash flows. Significant unobservable inputs used in the valuation include mortgage loan CPRs and discount rates. The assumptions utilized represent management’s best estimates of the assumptions that a market participant would use in valuing the MSRs at the measurement date. In general, increases in prepayment speeds and discount rates, in isolation, would result in a decrease in the fair value of MSRs. Prepayment speeds generally increase when market interest rates decline and decrease when market interest rates rise. Discount rates typically increase when market interest rates increase or when credit and liquidity risks increase, and decrease when market interest rates decline or credit and liquidity conditions improve.

The significant unobservable inputs used in the valuation of MSRs are inherently uncertain, and changes in these inputs may result in materially different fair value estimates. In addition, certain inputs used in the valuation model may be interrelated. Changes in one assumption may result in changes in another assumption, which may either magnify or mitigate the overall impact on the fair value measurement.

The following sensitivity analysis summarizes the estimated impact on the fair value of the residential MSR asset resulting from adverse changes in certain key assumptions as of June 30, 2026:

•A 10% and 20% increase in the CPR speed would decrease the fair value of the residential servicing asset by $2.1 million and $4.2 million, respectively.

•A 10% and 20% increase in the discount rate would decrease the fair value of the residential servicing asset by $2.9 million and $5.5 million.

These sensitivity calculations are hypothetical and should not be considered to be predictive of future performance.

Derivatives

The valuation of these instruments is determined using commonly accepted valuation techniques, including DCF analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable and unobservable market-based inputs. The fair value represents the estimated amount the Company would receive or pay to terminate the contract or agreement, taking into account current interest rates, foreign exchange rates, equity prices and, when appropriate, the current creditworthiness of the counterparties.

The Company incorporates credit valuation adjustments in the fair value measurement of its derivatives to reflect the counterparty's nonperformance risk, except for those derivative contracts with associated credit support annexes which provide credit enhancements, such as collateral postings and guarantees. The Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy. Certain of the Company's derivatives utilize Level 3 inputs, which are primarily related to total return settlement derivative contracts.

The DCF model is utilized to determine the fair value of the total return settlement derivative contracts. The significant unobservable inputs for total return settlement derivative contracts used in the fair value measurement of the Company's liabilities are discount percentages, which are based on comparable financial instruments. See Note 10 to these Condensed Consolidated Financial Statements for a discussion of derivatives activity.

Trading securities and trading liabilities

Trading securities consist of various debt securities, including U.S. treasuries, agency and non-agency MBS, and corporate debt securities. Trading securities are recognized on the trade date and measured at fair value. Trading liabilities consist of securities sold, not yet purchased, and are measured at fair value.

The fair value of Trading securities and trading liabilities is estimated using techniques that are consistent with AFS debt securities discussed above. Debt securities whose fair value measurements incorporate significant unobservable inputs are classified as Level 3.

Equity securities

The Company holds interests in nonmarketable equity investments through the U.K. Limited Partnership formed to invest in early-stage financial technology companies. The valuation of direct and indirect private equity investments requires significant management judgment due to the absence of quoted market prices, inherent lack of liquidity and the long-term nature of such investments. In accordance with ASC 820, Fair Value Measurement, management uses all available information in making fair value estimates of these investments. Various valuation techniques are used for direct investments as appropriate for the nature of the security, including multiples of revenues of the entity, independent appraisals, and recent and anticipated financing and sale transactions with third parties. A multiple of revenue calculation is the valuation technique utilized most frequently and is the most significant unobservable input used in such calculation. In addition, the Company applies a liquidity discount factor to adjust for the inherent inability to convert the underlying investments in early-stage financial technology companies to cash quickly and at a minimal cost.

Management evaluates the reasonableness of these assumptions each reporting period in light of current market conditions, the investee’s financial performance, and other factors that could affect the estimated fair value. The use of different assumptions or methodologies could result in materially different fair value estimates. Significant decreases (increases) in the multiple of earnings could result in a significantly lower (higher) fair value measurement. Generally, direct equity investments are classified as Level 3.

Valuation Processes and Techniques - Nonrecurring Fair Value Assets and Liabilities

The Company may be required to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with GAAP from time to time. These adjustments to fair value usually result from application of lower-of-cost-or-fair value accounting or certain impairment measures.

Impaired commercial LHFI

Impaired commercial LHFI in the table above represents the recorded investment of impaired commercial loans for which the Company measures impairment during the period based on the fair value of the underlying collateral supporting the loan. Written offers to purchase a specific impaired loan are considered observable market inputs, which are considered Level 1 inputs. Appraisals are obtained to support the fair value of the collateral and incorporate measures such as recent sales prices for comparable properties and are considered Level 2 inputs. Loans for which the value of the underlying collateral is determined using a combination of real estate appraisals, field examinations and internal calculations are classified as Level 3. The inputs in the internal calculations may include the loan balance, estimation of the collectability of the underlying receivables held by the customer used as collateral, sale and liquidation value of the inventory held by the customer used as collateral and historical loss-given-default parameters. In cases in which the carrying value exceeds the fair value of the collateral less cost to sell, an impairment charge is recognized.

Foreclosed assets and vehicle inventory

Foreclosed assets represent the recorded investment in assets taken during the period presented in foreclosure of defaulted loans and are primarily comprised of commercial and residential real properties and generally measured at fair value less costs to sell. The fair value of the real property is generally determined using appraisals or other indications of market value based on recent comparable sales of similar properties or assumptions generally observable in the marketplace.

The Company estimates the fair value of its vehicles, which are obtained either through repossession or lease termination, using historical auction rates and current market values of used cars.

LHFS

The Company has LHFS portfolios that are measured at fair value on a nonrecurring basis primarily consisting of commercial loans. The estimated fair value of these LHFS is calculated based on a combination of estimated market rates for similar loans with similar credit risks and a DCF analysis in which the Company uses significant unobservable inputs on key assumptions, including historical default rates and adjustments to reflect voluntary prepayments, prepayment rates, discount rates reflective of the cost of funding, and credit loss expectations. These are classified Level 3.

Auto loans impaired due to bankruptcy

For loans that are considered collateral-dependent, such as certain bankruptcy loans, impairment is measured based on the fair value of the collateral less its estimated cost to sell. For the underlying collateral, the estimated fair value is obtained using historical auction rates and current market levels of the collateral securing the loans.

Goodwill

The estimated fair value of goodwill is calculated using unobservable inputs and is classified as Level 3. Goodwill is written down to fair value when, as a result of an annual or interim goodwill impairment test, an impairment is identified and recognized. Fair value is calculated using widely-accepted valuation techniques, such as the guideline public company market approach (earnings and price-to-tangible book value multiples of comparable public companies) and the income approach (the DCF method). The Company uses a combination of these accepted methodologies to determine the fair valuation of reporting units. Several factors are taken into account, including actual operating results, future business plans, economic projections, and market data. On a quarterly basis, the Company assesses whether or not impairment indicators are present. For information on the Company's goodwill impairment test and the results of the most recent goodwill impairment test, see Note 6 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for 2025 for a further description of the Company's goodwill valuation methodology.

Level 3 Rollforward for Assets and Liabilities Measured at Fair Value on a Recurring Basis

The tables below present the changes in Level 3 balances for those assets and liabilities measured at fair value on a recurring basis for the periods indicated.

(1)Settlements include charge-offs, prepayments, paydowns, sales, and maturities.

Fair Value Adjustments

The following table presents the increases and decreases in value of certain assets that are measured at fair value on a nonrecurring basis for which a fair value adjustment has been included in the Condensed Consolidated Statements of Operations relating to assets held at period-end:

(1) Gains are disclosed as positive numbers while losses are shown as a negative number regardless of the line item being affected.

Level 3 Inputs - Significant Recurring and Nonrecurring Fair Value Assets and Liabilities

The following table presents quantitative information about the significant unobservable inputs within significant Level 3 recurring and nonrecurring assets and liabilities at the dates indicated:

(1) Includes extensions related to workouts and contractual extensions.

(2) Average CPR projected from collateral stratified by loan type and note rate. Weighted average amount was developed by weighting the associated relative UPB.

(3) Average discount rate from collateral stratified by loan type and note rate. Weighted average amount was developed by weighting the associated relative UPB.

(4) Excluded insignificant Level 3 assets and liabilities.

(1), (2), (3), (4) - See corresponding footnotes to the June 30, 2026 Level 3 significant inputs table above.

Fair Value of Financial Instruments

The carrying amounts and estimated fair values, as well as the level within the fair value hierarchy, of the Company's financial instruments which have not previously been disclosed above are as follows as of the dates indicated:

(1) This line item excludes deposit liabilities with no defined or contractual maturities.

(2) This line item includes CDs with a maturity greater than 90 days and equity securities.

(3) This line item includes nonrecurring LHFI.

Valuation Processes and Techniques - Financial Instruments

The preceding tables present disclosures about the fair value of the Company's financial instruments. Those fair values for certain instruments are presented based upon subjective estimates of relevant market conditions at a specific point in time and information about each financial instrument. In cases in which quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. These techniques involve uncertainties resulting in variability in estimates affected by changes in assumptions and risks of the financial instruments at a certain point in time. Therefore, the derived fair value estimates presented above for certain instruments cannot be substantiated by comparison to independent markets. In addition, the fair values do not reflect any premium or discount that could result from offering for sale at one time an entity’s entire holding of a particular financial instrument, nor do they reflect potential taxes and the expenses that would be incurred in an actual sale or settlement. Accordingly, the aggregate fair value amounts presented above do not represent the underlying value of the Company.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments not measured at fair value on the Condensed Consolidated Balance Sheets:

Cash, cash equivalents and restricted cash

Cash and cash equivalents include cash and due from depository institutions, interest-bearing deposits in other banks, federal funds sold, and securities purchased under agreements to resell. The related fair value measurements have been classified as Level 1, since their carrying value approximates fair value due to the short-term nature of the asset.

Restricted cash is related to cash restricted for investment purposes, cash posted for collateral purposes, cash advanced for loan purchases, and lockbox collections. Cash and cash equivalents, including restricted cash, have maturities of three months or less and, accordingly, the carrying amount of these instruments is deemed to be a reasonable estimate of fair value.

Securities Financing Activities

No quoted prices exist for Securities Financing Activities, so fair value is determined using a DCF technique. Cash flows are estimated based on the terms of the contract. These cash flows are discounted using interest rates appropriate to the maturity of the instrument as well as the nature of the underlying collateral. Securities Financing Activities are classified as Level 2. At June 30, 2026, the fair value of the underlying collateral was $45.3 billion before netting of $23.1 billion, all of which was sold or re-pledged.

Investments in debt securities HTM

Investments in debt securities HTM are recorded at amortized cost and are priced by third-party pricing vendors. The third-party vendors use a variety of methods when pricing these securities that incorporate relevant observable market data to arrive at an estimate of what a buyer in the marketplace would pay for a security under current market conditions. These investment securities are, therefore, considered Level 2.

LHFI, net

The fair values of loans are estimated based on groupings of similar loans, including but not limited to stratification by type, interest rate, maturity, and borrower creditworthiness. Discounted future cash flow analyses are performed for these loans incorporating assumptions of current and projected voluntary prepayment speeds. Discount rates are determined using the Company's current origination rates on similar loans, adjusted for changes in current liquidity and credit spreads (if necessary). Because the current liquidity spreads are generally not observable in the market and the expected loss assumptions are based on the Company's experience, these are Level 3 valuations. Impaired loans are valued at fair value on a nonrecurring basis. See further discussion under the section captioned "Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis" above.

Deposits

For deposits with no stated maturity, such as non-interest-bearing and interest-bearing demand deposit accounts, savings accounts, and certain money market accounts, the carrying value approximates fair values. The fair value of fixed-maturity deposits is estimated by discounting cash flows using currently offered rates for deposits of similar remaining maturities and have been classified as Level 2.

Borrowings and other debt obligations

Fair value is estimated by discounting cash flows using rates currently available to the Company for other borrowings with similar terms and remaining maturities. Certain other debt obligation instruments are valued using available market quotes for similar instruments, which contemplates issuer default risk. The related fair value measurements have generally been classified as Level 2. A certain portion of debt relating to revolving credit facilities is classified as Level 3. Management believes that the terms of these credit agreements approximate market terms for similar credit agreements and, therefore, they are considered to be Level 3.

FVO for Financial Assets and Financial Liabilities

RICs HFI

To reduce accounting and operational complexity, the Company elected the FVO for certain of its RICs HFI. These loans consisted primarily of NPLs acquired by the Company under optional clean-up calls from its non-consolidated Trusts.

LHFS

At June 30, 2026 and December 31, 2025, the Company had LHFS for which the FVO has been elected, primarily related to loans that are attributed to CIB whole loan aggregation and bridge lending programs. Electing the FVO allows the Company to record loans in these programs at fair value. The Company may enter into hedges on these LHFS portfolios, These hedges are reported at fair value; as a result, the loans and associated hedges are carried at fair value, reducing earnings volatility.

The following table summarizes the differences between the fair value and the principal balance of financial instruments measured at fair value on a recurring basis as of the dates indicated:

(1) LHFS disclosed on the Condensed Consolidated Balance Sheets also includes $310.9 million and $54.8 million of LHFS valued on a non-recurring basis at June 30, 2026 and December 31, 2025, respectively, that are held at the lower of cost or fair value that are not presented within this table. There were no nonaccrual loans related to the LHFS measured using the FVO.

NOTE 12. NON-INTEREST INCOME

The following table presents the details of the Company's non-interest income for the following periods:

Disaggregation of Revenue from Contracts with Customers

The following table presents the Company's non-interest income disaggregated by revenue source:

(1) Primarily recorded in the Company's Condensed Consolidated Statements of Operations within Consumer and commercial fees.

(2) Primarily recorded in the Company's Condensed Consolidated Statements of Operations within Miscellaneous income, net.

(3) The balance presented excludes certain revenue streams that are considered in-scope and presented above.

NOTE 13. INCOME TAXES

An income tax provision of $174.3 million and $242.9 million was recorded for the three months and six months ended June 30, 2026, compared to an income tax provision of $38.0 million and $54.9 million for the corresponding periods in 2025. This resulted in an ETR of 23.0% and 19.6% for the three months and six months ended June 30, 2026, compared to 7.1% and 6.0% for the corresponding periods in 2025. The increase in ETR for the three months and six months ended June 30, 2026, when compared to the same periods in 2025, was directly impacted by (i) an increase in forecasted pre-tax income in 2026 and (ii) no electric vehicle tax credits in 2026, offset by $44 million of tax benefit resulted from closed audit years recorded in the first quarter of 2026.

The Company is subject to the income tax laws of the U.S., its states and municipalities and certain foreign countries. These tax laws are complex and are potentially subject to different interpretations by the taxpayer and the relevant governmental taxing authorities. In establishing a provision for income tax expense, the Company must make judgments and interpretations about the application of these inherently complex tax laws.

Actual income taxes paid may vary from estimates depending upon changes in income tax laws, actual results of operations, and the final audit of tax returns by taxing authorities. Tax assessments may arise several years after tax returns have been filed. The Company reviews its tax balances quarterly and, as new information becomes available, the balances are adjusted as appropriate. The Company is subject to ongoing tax examinations and assessments in various jurisdictions.

With few exceptions, the Company is no longer subject to federal and non-U.S. income tax examinations by tax authorities for years prior to 2015 and state income tax examinations for years prior to 2010.

The Company applies an aggregate portfolio approach whereby income tax effects from AOCI are released only when an entire portfolio (i.e., all related units of account) of a particular type is liquidated, sold or extinguished.

The Company had a net deferred tax asset balance of $408.4 million at June 30, 2026 (consisting of a federal deferred tax asset balance of $299.7 million and a state deferred tax asset balance of $108.7 million with respect to jurisdictional netting), compared to a net deferred tax asset balance of $379.8 million at December 31, 2025 (consisting of a federal deferred tax asset balance of $285.1 million and a state deferred tax asset balance of $94.7 million). The $28.6 million change in the net deferred tax asset for the period ended June 30, 2026 was primarily due to a decrease in the deferred tax liability related to leasing transactions.

On July 4, 2025, the OBBBA was enacted into law, which the Company has fully incorporated effective for the fiscal year ending 2025. The Company is monitoring the impact of the OBBBA to state and local income tax legislative proposals.

NOTE 14. COMMITMENTS, CONTINGENCIES, AND GUARANTEES

Off-Balance Sheet Risk - Financial Instruments

In the normal course of business, the Company utilizes a variety of financial instruments with off-balance sheet risk to meet the financing needs of its customers and manage its exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit, letters of credit, loans sold with recourse, forward contracts, and interest rate and cross currency swaps, caps, and floors. These financial instruments may involve, to varying degrees, elements of credit, liquidity, and interest rate risk in excess of the amount recognized on the Condensed Consolidated Balance Sheets. The contractual or notional amounts of these financial instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

The Company’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit, letters of credit and loans sold with recourse is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and meeting conditional obligations as it does for on-balance sheet instruments. For forward contracts and interest rate swaps, caps and floors, the contract or notional amounts do not represent exposure to credit loss. The Company controls the credit risk of its forward contracts and interest rate swaps, caps and floors through credit approvals, limits, and monitoring procedures. See Note 10 to these Condensed Consolidated Financial Statements for discussion of all derivative contract commitments.

The following table details the amount of commitments at the dates indicated:

Commitments to Extend Credit

Commitments to extend credit generally have fixed expiration dates, are variable rate, and contain provisions that permit the Company to terminate or otherwise renegotiate the contracts in the event of a significant deterioration in the customer’s credit quality. These arrangements normally require payment of a fee by the customer, the pricing of which is based on prevailing market conditions, credit quality, probability of funding, and other relevant factors. Since many of these commitments are expected to expire without being drawn upon, the contract amounts are not necessarily indicative of future cash requirements.

Included within the reported balances for commitments to extend credit at June 30, 2026 and December 31, 2025 were $3.4 billion and $3.7 billion, respectively, of commitments that can be canceled by the Company without notice.

Commitments to extend credit also include amounts committed by the Company to fund its investments in CRA, LIHTC, and other equity method investments in which it is a limited partner.

Letters of Credit

The Company’s letters of credit meet the definition of a guaranty. Letters of credit commit the Company to make payments on behalf of its customers if specified future events occur. The guarantees are primarily issued to support public and private borrowing arrangements. The weighted average term of these commitments at June 30, 2026 was 8 months. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. In the event of a requested draw by the beneficiary that complies with the terms of the letter of credit, the Company would be required to honor the commitment. The Company has various forms of collateral for these letters of credit, including real estate assets and other customer business assets. The maximum undiscounted exposure related to these commitments at June 30, 2026 was $1.3 billion. The fees related to letters of credit are deferred and amortized over the lives of the respective commitments and were immaterial to the Company’s financial statements at June 30, 2026. Management believes that the utilization rate of these letters of credit will continue to be substantially less than the amount of the commitments, as has been the Company’s experience to date. The credit risk associated with letters of credit is monitored using the same risk rating system utilized within the loan and financing lease portfolio. As of June 30, 2026 and December 31, 2025, the liability related to unfunded lending commitments was $34.1 million and $52.5 million, respectively.

Unsecured Revolving Lines of Credit

Such commitments arise primarily from agreements with customers for unused lines of credit on unsecured revolving accounts and credit cards, provided there is no violation of conditions in the underlying agreement. These commitments, substantially all of which the Company can terminate at any time, and which do not necessarily represent future cash requirements, are reviewed periodically based on account usage, customer creditworthiness and loan qualifications.

Loans Sold with Recourse

The Company has loans sold with recourse that meet the definition of a guaranty. For loans sold with recourse under the terms of its multifamily sales program with the FNMA, the Company retained a portion of the associated credit risk.

Agreements

The Company sells production and investment tax credits to third parties. The Company is obligated to indemnify the purchasers for losses incurred as a result of recapture or reductions of the tax credits. The indemnification expires at the later of the end of the recapture periods or when the purchaser's tax returns are no longer subject to audit. At, June 30, 2026, the Company has approximately $34.2 million of previously sold investment tax credits that it remains obligated to indemnify.

In connection with the sale of RICs through securitizations and other sales, SC and SBNA have made standard representations and warranties customary in the consumer finance industry. Violations of these representations and warranties may require SC or SBNA to repurchase loans previously sold to on or off-balance sheet Trusts or other third parties. As of June 30, 2026, there were no loans that were the subject of a demand to repurchase or replace for breach of representations and warranties for SC's or SBNA's ABS or other sales. In the opinion of management, the potential exposure of other recourse obligations related to RIC sale agreements is not expected to have a material adverse effect on the Company's business, consolidated financial position, results of operations, or cash flows.

Santander has provided guarantees on the covenants, agreements, and obligations of SC under the governing documents of its warehouse facilities and privately issued amortizing notes. These guarantees are limited to the obligations of SC as servicer.

SC is party to a forward flow asset sale agreement with a third party under the terms of which SC is committed to sell $350.0 million in charged-off loan receivables in bankruptcy status on a quarterly basis. However, any sale of more than $275.0 million is subject to a market price check. The remaining aggregate commitment as of June 30, 2026 and December 31, 2025 not subject to a market price check waszero.

Other Off-Balance Sheet Risk

Other off-balance sheet risk stems from financial instruments that do not meet the definition of guarantees under applicable accounting guidance and from other relationships that include items such as indemnifications provided in the ordinary course of business and intercompany guarantees.

Legal and Regulatory Proceedings

The Company, including its subsidiaries, are and in the future periodically expects to be party to, or otherwise involved in, various claims, disputes, lawsuits, investigations, regulatory matters and other legal matters and proceedings that arise in the ordinary course of business. In view of the inherent difficulty of predicting the outcome of any such claim, dispute, lawsuit, investigation, regulatory matter and/or legal proceeding, particularly where the claimants seek very large or indeterminate damages or where the matters present novel legal theories or involve a large number of parties, the Company generally cannot predict the eventual outcome of the pending matters, the timing of the ultimate resolution of the matters, or the eventual loss, fines or penalties related to the matters, if any. Accordingly, except as provided below, the Company is unable to reasonably estimate a range of its potential exposure, if any, to these claims, disputes, lawsuits, investigations, regulatory matters and other legal proceedings at this time. It is reasonably possible that actual outcomes or losses may differ materially from the Company's current assessments and estimates, and any adverse resolution of any of these matters against it could materially and adversely affect the Company's business, financial position, liquidity, and results of operations.

The Company establishes an accrued liability for legal and regulatory proceedings when those matters present material loss contingencies that are both probable and estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued that are reasonably possible.

As of June 30, 2026 and December 31, 2025, the Company accrued aggregate legal and regulatory liabilities of approximately $15.7 million and $16.0 million, respectively. Further, the Company estimates the aggregate range of reasonably possible losses for legal and regulatory proceedings in excess of reserves established of up to approximately $30.2 million and $37.6 million as of June 30, 2026 and December 31, 2025, respectively. Set forth below are descriptions of the significant lawsuits, regulatory matters, and other legal proceedings to which the Company is subject.

Consumer Lending Cases

The Company and its subsidiaries are party to various lawsuits pending in federal and state courts alleging violations of state and federal consumer lending laws, including, without limitation, the Equal Credit Opportunity Act, the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, Section 5 of the Federal Trade Commission Act, the Telephone Consumer Protection Act, the Truth in Lending Act, wrongful repossession laws, usury laws and laws related to unfair and deceptive acts or practices. In general, these cases seek damages and equitable and/or other relief.

Enterprise Financial Group v. SC. EFG, a former service provider to SC that provided a guaranteed asset protection debt insurance program, sued SC for breach of contract, alleging that SC placed non-conforming loans in the program, resulting in EFG losses. The case is pending in Texas District Court, Dallas County, and is captioned Enterprise Financial Group v. SC, Case No. 18-08119. SC asserted a counterclaim against EFG seeking approximately $10.5 million in connection with EFG’s refusal to pay claims. A jury trial concluded on November 2, 2022 and the jury awarded EFG $5 million and SC $4.2 million. On May 9, 2023, the court issued a final judgment awarding EFG approximately $10.6 million, and eliminating the jury award of $4.2 million in favor of SC. On July 17, 2023, the court heard arguments on SC’s motion for judgment notwithstanding the verdict, a new trial and remittitur. The court denied SC's motions for judgment notwithstanding the verdict, new trial, or remittitur. On December 31, 2024, the Court of Appeals for the Fifth District of Texas at Dallas denied SC's appeal of the trial court judgment. SC filed a petition for rehearing with the appellate court on January 14, 2025. On January 31, 2025, the court denied rehearing before the panel that heard the appeal; SC's petition for rehearingen banc remains pending. On June 18, 2025, the court responded by issuing an opinion affirming the trial court's judgment, finding that SC's trial counsel did not properly preserve its objections to jury charges for appeal. SC filed an appeal with the Texas Supreme Court, which appeal is fully briefed and pending with the Court.

This matter is ongoing and could in the future result in the imposition of damages, fines, or other penalties. No assurance can be given that the ultimate outcome of this matter or any resulting proceedings would not materially and adversely affect the Company's business, financial condition, and results of operations.

Regulatory Investigations and Proceedings

The Company is party to, or is periodically otherwise involved in, reviews, investigations, examinations, and proceedings (both formal and informal), and information-gathering requests, by government and self-regulatory agencies, including the FRB of Boston, the CFPB, the DOJ, the SEC, the CFTC, the Federal Trade Commission and various state regulatory and enforcement agencies.

NOTE 15. RELATED PARTY TRANSACTIONS

In the normal course of business, the Company conducts business with Santander and its subsidiaries. Santander policy requires that these transactions occur at prevailing market rates and terms, and, where applicable, these transactions are compliant with United States banking regulations. All extensions of credit by (and certain credit exposures of) the Bank to other Santander affiliates are legally required to be secured by eligible collateral. The following disclosures below are the more significant related party transactions entered into:

On February 3, 2026, Santander and Webster entered into the Transaction Agreement, pursuant to which Santander will acquire Webster. In connection with the acquisition, Santander is expected to contribute Webster Virginia a successor to Webster, to SHUSA and cause Webster Bank to merge with SBNA. Refer to Note 1 to these Condensed Consolidated Financial Statements.

Debt and derivative activities

The Company and its affiliates have various debt and derivative agreements with Santander. For further details of these agreements, see Note 7 and Note 10 to these Condensed Consolidated Financial Statements and Note 21 to the Consolidated Financial Statements of the Company's Annual Report on Form 10-K for 2025.

During the second quarter of 2026, the Company entered into a new fair value hedge with Santander to hedge the Company’s debt issuances.

Mezzanine and Stockholder's Equity

The Company has preferred stock outstanding as discussed in Note 12 to the Consolidated Financial Statements of the Company's Annual Report on Form 10-K for 2025. As of June 30, 2026, Santander was the sole holder of its Series E, F, and G preferred stock.

During the six months ended June 30, 2026, the Company declared and paid dividends to its common stock shareholder, Santander, in the amount of $250.0 million. In addition, during the six months ended June 30, 2026, the Company declared and paid dividends to its preferred stock shareholder, Santander, in the amount of $88.4 million.

During the six months ended June 30, 2026, the Company acquired shares of common stock from Santander to satisfy vested stock awards granted to SHUSA employees. The share price paid to Santander was in excess of the price at the grant date by approximately $31.5 million The excess is recorded as a return of capital to Santander.

Deposit and checking accounts

The Company holds deposits for affiliates that are not consolidated by SHUSA. Refer to Note 6 to these Condensed Consolidated Financial Statements and Note 9 to the Consolidated Financial Statements of the Company's Annual Report on Form 10-K for 2025.

Repurchase Agreements

The Company also enters into intercompany Securities Financing Activities with Santander and its affiliates as discussed in Note 9 to these Consolidated Financial Statements and Note 13 to the Consolidated Financial Statements of the Company's Annual Report on Form 10-K for 2025.

NOTE 16. BUSINESS SEGMENT INFORMATION

Business Segment Products and Services

The Company’s reportable segments are based principally around the customers the Company serves. The Company has identified the following reportable segments: Auto, CBB, C&I, CRE, CIB, and Wealth Management.

•The Auto segment includes the Company's consumer and commercial auto loans and leases and the Company's commercial loans to dealers and dealer floorplan financing products. This includes the Company's specialized consumer finance subsidiary focused on vehicle finance and third-party servicing. The specialized consumer finance subsidiary's primary business is the indirect origination of RICs, principally through manufacturer-franchised dealers in connection with their sale of new and used vehicles to retail consumers. The Company offers a full spectrum of auto financing products and services to captive financing companies. These products and services include consumer RICs and leases, as well as dealer loans for inventory, construction, real estate, working capital and revolving lines of credit. The Company also originates vehicle loans through a web-based direct lending program, purchases vehicle RICs from other lenders, and services automobile, recreational and marine vehicle portfolios for other lenders.

•The CBB segment includes the products and services provided to consumer and small business banking customers, including consumer deposit, small business banking, unsecured lending, and investment services. This segment offers a wide range of products and services to consumers and business banking customers, including demand and interest-bearing demand deposit accounts, money market and savings accounts, CDs, and retirement savings products. It also offers lending products such as credit cards and small business loans such as business lines of credit. In addition, the Company makes investment services available to its retail customers, including products such as annuities, mutual funds, managed accounts, and insurance products through a networking agreement with a consolidated affiliate.

•The C&I segment currently provides commercial lines, loans, letters of credit, receivables financing, commercial credit cards, and cash management and deposit services to lower middle market commercial customers and to medium- and large-sized commercial customers, as well as financing and deposits for government entities. This segment also provides niche product financing for specific industries.

•The CRE segment offers CRE loans, CEVF, and multifamily loans, as well as cash management and deposit services to customers. This category also includes community development finance activities, including originating CRA-eligible loans and making CRA-eligible investments.

•The CIB segment serves the needs of global corporate and institutional customers by leveraging the international footprint of Santander to provide financing and banking services to corporations with over $500 million in annual revenues. CIB's offerings and strategy are based on Santander's local and global capabilities in wholesale banking. CIB also includes the Company's institutional broker-dealer that provides services in investment banking, sales, trading, and equity research reports.

•The Wealth Management segment includes the Company's international private banking, financial operations services, and portfolio management. This includes the full range of banking and asset management services to foreign individuals and corporations based primarily in Latin America and the Company's investment in the U.K. Limited Partnership.

The Company also offers customer-related derivatives across segments to hedge interest rate risk. In the C&I, CRE, and CIB business segments and the dealer commercial lending division of the Auto business segment, the Company offers derivatives relating to foreign exchange and lending arrangements. See Note 10 to these Condensed Consolidated Financial Statements for additional details.

The Other category includes certain immaterial subsidiaries, the unallocated interest expense on the Company's borrowings and other debt obligations and certain unallocated corporate income and indirect expenses.

The Chief Operating Decision Maker is the Company's CEO. The Company's segment results are derived from the Company’s business unit profitability reporting system by specifically attributing managed balance sheet assets, deposits and other liabilities and their related interest income or expense to each of the segments. Funds transfer pricing methodologies are utilized to allocate a cost for funds used or a credit for funds provided to business line deposits, loans and selected other assets using a matched funding concept. The methodology includes a liquidity premium adjustment, which considers an appropriate market participant spread for commercial loans and deposits based on the mix of borrowings available to the Company with comparable maturity periods.

Other income and expenses are managed directly by each reportable segment, including fees, service charges, salaries and benefits, and other direct expenses, as well as certain allocated corporate expenses. These are accounted for within each segment’s financial results. Accounting policies for the lines of business are the same as those used in preparation of these Condensed Consolidated Financial Statements with respect to activities specifically attributable to each business line. However, the preparation of business line results requires management to establish methodologies to allocate funding costs and benefits, expenses, and other financial elements to each line of business. Where practical, the results are adjusted to present consistent methodologies for the segments.

The application and development of management reporting methodologies are dynamic processes and are subject to periodic enhancements. The implementation of these enhancements to the internal management reporting methodology may materially affect the results disclosed for each segment with no impact on consolidated results. Whenever significant changes to management reporting methodologies take place, prior period information is reclassified wherever practical.

Results of Segments

The following tables outline the discrete financial information regularly provided to the CODM.

NOTE 17. SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information for the six months ended June 30, 2026 and 2025 was as follows: