Happen, Inc.

Market risk represents the risk of potential losses arising from changes in interest rates, foreign exchange rates, equity prices, commodity prices, and/or other relevant market rates or prices. The primary market risk to which we are exposed is interest rate risk. Interest rate risk arises from financial instruments including loans, securities and borrowings, all entered into for purposes other than trading.

Interest Rate Sensitivity

Our earnings are affected by changes in the level of interest rates, the impact of interest rate fluctuations on asset prepayments, and the level and composition of deposits and liabilities, among other factors.

Loans and securities retained on our balance sheet are funded primarily through our deposit base. The majority of loans and securities are fixed-rate instruments over the term of the assets. As a result, our primary exposure to interest rate risk arises from the impact of fluctuations in loan, security, and deposit rates. We use a sensitivity analysis to assess the impact of hypothetical changes in interest rates on our earnings. The outcome of the analysis is influenced by a variety of assumptions, including the maturity profile and prepayment level of our loans and securities and expected consumer responses to changes in interest rates paid on non-maturity deposit products. Our assumptions are periodically calibrated to observed data and/or expected outcomes. We actively monitor the level of exposure to movements in interest rates and use economic hedging instruments to manage such risk. Interest rate settlements associated with economic hedging instruments are recognized within “Net fair value adjustments” on the Income Statement. See “Notes to Condensed Consolidated Financial Statements – Note 7. Derivative Instruments and Hedging Activities” for additional information.

The following table presents the change in modeled earnings which includes net interest income and interest rate settlements on economic hedges for the next twelve months due to a hypothetical instantaneous parallel change in interest rates relative to current rates:

As illustrated in the table above, earnings from net interest income and interest rate settlements on our economic hedges decreases over the next twelve months during hypothetical rising interest rate environments primarily as a result of higher rates paid on interest-bearing deposits. The decrease is partially offset by higher rates earned on new loans, security purchases, cash and cash equivalents, as well as by higher interest rate settlements on our economic hedges. Conversely, earnings increases over the next twelve months during hypothetical declining interest rate environments. Interest rate sensitivity as of September 30, 2026 compared to December 31, 2025 primarily reflects changes in loan and deposit portfolio composition and interest rate economic hedging activity.

Although we believe that these measurements provide an estimate of our interest rate sensitivity, they do not account for potential changes in credit quality, balance sheet mix, size of our balance sheet, changes in fair value of assets and derivatives due to changes in benchmark and discount rates, or other business developments that could affect net income. Actual results could differ materially from the estimated outcomes of our simulations.

For additional details regarding maturities of loans and leases HFI, see “Part II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risk” in our Annual Report.

For the contractual maturities and weighted-average yields on the Company’s AFS securities portfolio, see “Notes to Condensed Consolidated Financial Statements – Note 3. Securities Available for Sale.”

Happen, Inc.

At the holding company level, we continue to measure interest rate sensitivity by evaluating the change in fair value of certain assets and liabilities due to a hypothetical change in interest rates. Principal payments on our loans continue to reduce the outstanding balance of this portfolio, and, as a result, the fair value impact from changes in interest rates continues to diminish.