What changed in this filing

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Item 1. Financial Statements

2022-08-05 compared with 2022-05-10 · 428 added, 350 removed, 1701 unchanged (31% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets (Unaudited)

dollars in millions, except share data March 31, 2022 December 31, 2021

dollars in millions, except share data June 30, 2022 December 31, 2021

Cash and due from banks $ 583 $ 338

Interest-earning deposits at banks 6,476 9,115

Investments in marketable equity securities (cost of $ 73 million at March 31, 2022 and $ 73 million at December 31, 2021)

Investment securities available for sale (cost of $ 9,726 million at March 31, 2022 and $ 9,215 million at December 31, 2021)

Investment securities held to maturity (fair value of $ 9,457 million at March 31, 2022 and $ 3,759 million at December 31, 2021)

Investments in marketable equity securities (cost of $ 73 million at June 30, 2022 and December 31, 2021)

Investment securities available for sale (cost of $ 9,857 million at June 30, 2022 and $ 9,215 million at December 31, 2021)

Investment securities held to maturity (fair value of $ 8,812 million at June 30, 2022 and $ 3,759 million at December 31, 2021)

Assets held for sale 38 99

3 unchanged sentences

Operating lease equipment, net 7,971 —

Premises and equipment 1,431 1,233

Premises and equipment, net 1,415 1,233

Bank-owned life insurance 1,334 116

3 unchanged sentences

Total assets $ 107,673 $ 58,309

Non-interest-bearing $ 25,898 $ 21,405

Noninterest-bearing $ 26,645 $ 21,405

Interest-bearing 62,684 30,001

9 unchanged sentences

Stockholders’ equity

Preferred stock - $ 0.01 par value ( 10,000,000 shares authorized at March 31, 2022 and December 31, 2021)

Preferred stock - $ 0.01 par value ( 10,000,000 shares authorized at June 30, 2022 and December 31, 2021)

Common stock:

Class A - $ 1 par value ( 16,000,000 shares authorized;

14,996,325 and 8,811,220 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively)

14,997,202 and 8,811,220 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively)

Class B - $ 1 par value ( 2,000,000 shares authorized;

1,005,185 shares issued and outstanding at March 31, 2022 and December 31, 2021)

1,005,185 shares issued and outstanding at June 30, 2022 and December 31, 2021)

Additional paid in capital 5,345 —

7 unchanged sentences

Consolidated Statements of Income (Unaudited)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

dollars in millions, except share and per share data 2022 2021 2022 2021

2 unchanged sentences

Interest on investment securities 89 36 172 66

Other interest and dividends 6 2

Interest on deposits at banks 13 2 19 4

Total interest income 757 362 1,467 717

8 unchanged sentences

Rental income on operating leases 213 — 421 —

Fee income and other revenue 33 9

Fee income and other service charges 39 10 74 21

Wealth management services 37 32 72 64

Gains on leasing equipment, net 6 —

Service charges on deposit accounts 28 21 56 43

2 unchanged sentences

Merchant services, net 9 8 19 17

Realized gains on investment securities available for sale, net — 9

Marketable equity securities gains, net 3 16

Insurance commissions 11 4 23 8

Realized gain on sales of investment securities available for sale, net — 16 — 25

Fair value adjustment on marketable equity securities, net ( 6 ) 12 ( 3 ) 28

Bank-owned life insurance 9 — 17 1

Gain on sales of leasing equipment, net 5 — 11 —

Gain on acquisition — — 431 —

8 unchanged sentences

Equipment expense 54 29 106 59

Professional fees 15 4 31 8

Third-party processing fees 26 14 50 28

FDIC insurance expense 9 4 21 7

Marketing 9 2 17 4

Merger-related expenses 34 6 169 13

3 unchanged sentences

Income before income taxes 337 199 562 390

Income tax (benefit) expense ( 46 ) 44

Income tax expense 82 46 36 90

Net income $ 255 $ 153 $ 526 $ 300

11 unchanged sentences

Consolidated Statements of Comprehensive Income (Unaudited)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

dollars in millions 2022 2021 2022 2021

1 unchanged sentence

Other comprehensive income (loss), net of tax

Net unrealized losses on securities available for sale ( 317 ) ( 51 )

Net unrealized loss (gain) on securities available for sale ( 163 ) 7 ( 481 ) ( 44 )

Net change in unrealized loss on securities available for sale transferred to securities held to maturity — — 1 —

Net change in pension obligations 3 5 5 10

Other comprehensive loss, net of tax $ ( 315 ) $ ( 46 )

Total comprehensive (loss) income $ ( 44 ) $ 101

Other comprehensive (loss) income, net of tax $ ( 160 ) $ 12 $ ( 475 ) $ ( 34 )

Total comprehensive income $ 95 $ 165 $ 51 $ 266

See accompanying Notes to the Unaudited Consolidated Financial Statements.

2 unchanged sentences

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

Three Months Ended June 30,

dollars in millions, except share data Preferred Stock Class A Common Stock Class B Common Stock Additional Paid in Capital Retained Earnings Accumulated Other Comprehensive (Loss) Income Total Stockholders' Equity

Balance at March 31, 2022 $ 881 $ 15 $ 1 $ 5,344 $ 4,634 $ ( 305 ) $ 10,570

Net income — — — — 255 — 255

Other comprehensive loss, net of tax — — — — — ( 160 ) ( 160 )

Stock based compensation — — — 1 — — 1

Cash dividends declared ($ 0.47 per common share):

Class A common stock — — — — ( 7 ) — ( 7 )

Class B common stock — — — — — — —

Preferred stock dividends declared:

Series A — — — — ( 5 ) — ( 5 )

Series B — — — — ( 9 ) — ( 9 )

Series C — — — — ( 3 ) — ( 3 )

Balance at June 30, 2022 881 15 1 5,345 4,865 ( 465 ) 10,642

Balance at March 31, 2021 340 9 1 — 4,005 ( 34 ) 4,321

Net income — — — — 153 — 153

Other comprehensive income, net of tax — — — — — 12 12

Cash dividends declared ($ 0.47 per common share):

Class A common stock — — — — ( 4 ) — ( 4 )

Class B common stock — — — — — — —

Preferred stock dividends declared — — — — ( 5 ) — ( 5 )

Balance at June 30, 2021 $ 340 $ 9 $ 1 $ — $ 4,149 $ ( 22 ) $ 4,477

Six Months Ended June 30,

dollars in millions, except share data Preferred Stock Class A Common Stock Class B Common Stock Additional Paid in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity

11 unchanged sentences

Preferred stock dividends declared:

Series A ($ 13.44 per share)

— — — — ( 5 ) — ( 5 )

Series C ($ 0.35 per share)

— — — — ( 3 ) — ( 3 )

Balance at March 31, 2022 $ 881 $ 15 $ 1 $ 5,344 $ 4,634 $ ( 305 ) $ 10,570

Series A — — — — ( 9 ) — ( 9 )

Series B — — — — ( 9 ) — ( 9 )

Series C — — — — ( 6 ) — ( 6 )

Balance at June 30, 2022 881 15 1 5,345 4,865 ( 465 ) 10,642

Balance at December 31, 2020 340 9 1 — 3,867 12 4,229

5 unchanged sentences

Preferred stock dividends declared — — — — ( 9 ) — ( 9 )

Balance at March 31, 2021 $ 340 $ 9 $ 1 $ — $ 4,005 $ ( 34 ) $ 4,321

Balance at June 30, 2021 $ 340 $ 9 $ 1 $ — $ 4,149 $ ( 22 ) $ 4,477

See accompanying Notes to the Unaudited Consolidated Financial Statements.

2 unchanged sentences

Consolidated Statements of Cash Flows (Unaudited)

Three Months Ended March 31,

Six Months Ended June 30,

dollars in millions 2022 2021

1 unchanged sentence

Net income $ 526 $ 300

Adjustments to reconcile net income to cash provided by operating activities:

Adjustments to reconcile net income to cash provided by (used in) operating activities:

Provision (benefit) for credit losses 506 ( 31 )

Deferred tax (benefit) expense ( 61 ) 9

Deferred tax expense 14 13

Depreciation, amortization, and accretion, net 271 67

Stock based compensation expense 14 —

Realized gains on investment securities available for sale, net — ( 9 )

Marketable equity securities gains, net ( 3 ) ( 16 )

Net gain on sales of loans ( 8 ) ( 9 )

Gain on sales of premises and equipment ( 1 ) —

Net gains on other real estate owned ( 2 ) ( 1 )

Realized gain on sales of investment securities available for sale, net — ( 25 )

Fair value adjustment on marketable equity securities, net 3 ( 28 )

Gain on sales of loans, net ( 13 ) ( 20 )

Gain on sales of operating lease equipment, net ( 4 ) —

Gain on sales of premises and equipment, net ( 4 ) —

Gain on other real estate owned, net ( 6 ) ( 2 )

Gain on acquisition ( 431 ) —

Gain on extinguishment of debt ( 6 ) —

Net change in assets held for sale ( 183 ) ( 15 )

Origination of loans held for sale ( 342 ) ( 597 )

Proceeds from sales of loans held for sale 386 562

Net change in other assets 371 ( 773 )

1 unchanged sentence

Other operating activities ( 308 ) ( 8 )

Net cash provided by operating activities $ 400 $ 126

Net cash provided by (used in) operating activities 1,243 ( 565 )

CASH FLOWS FROM INVESTING ACTIVITIES

5 unchanged sentences

Proceeds from sales of investment securities available for sale — 1,078

Proceeds from sales of marketable equity securities — 1

Proceeds from sales of investments in marketable equity securities — 1

Net decrease (increase) in interest-earning deposits at banks 5,514 ( 3,524 )

Net change in securities purchased under resale agreements — —

Proceeds from sales of other real estate owned 22 21

1 unchanged sentence

Proceeds from sales of premises and equipment 12 1

Proceeds from sales of operating lease equipment 40 —

Purchases of premises and equipment ( 39 ) ( 51 )

Purchases of operating lease equipment ( 339 ) —

Acquisition, net of cash acquired 134 —

Other investing activities ( 71 ) ( 30 )

Net cash (used in) provided by investing activities $ 2,382 $ ( 3,990 )

Net cash provided by (used in) investing activities 2,680 ( 4,386 )

CASH FLOWS FROM FINANCING ACTIVITIES

10 unchanged sentences

Cash and due from banks at end of period $ 583 $ 395

Three Months Ended March 31,

Six Months Ended June 30,

dollars in millions 2022 2021

19 unchanged sentences

First Citizens BancShares, Inc.

(the “Parent Company” and, when including all of its subsidiaries on a consolidated basis, “we,” “us,” “our,” “BancShares”) is a financial holding company organized under the laws of Delaware and conducts operations through its banking subsidiary, First-Citizens Bank & Trust Company (“FCB,” or “the Bank”), which is headquartered in Raleigh, North Carolina.

BancShares and its subsidiaries operate over 600 branches and serve 22 states, predominantly located in the Southeast, Mid-Atlantic, Midwest and Western United States (the “U.S.”).

(the “Parent Company” and, when including all of its subsidiaries on a consolidated basis, “we,” “us,” “our,” “BancShares”) is a financial holding company organized under the laws of Delaware that conducts operations through its banking subsidiary, First-Citizens Bank & Trust Company (“FCB,” or “the Bank”), which is headquartered in Raleigh, North Carolina.

BancShares and its subsidiaries operate more than 550 branches in 22 states, predominantly located in the Southeast, Mid-Atlantic, Midwest and Western United States.

BASIS OF PRESENTATION

9 unchanged sentences

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions impacting the amounts reported.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions impacting the amounts reported in the consolidated financial statements and accompanying notes.

Actual results could differ from those estimates.

8 unchanged sentences

1, dated as of September 30, 2021 (as amended, the “Merger Agreement”) .

Results as of and for the three months ended March 31, 2022 include activity of the combined entity.

Results as of and for the three and six months ended June 30, 2022 include activity of the combined entity.

See Note 2 — Business Combinations, for additional information.

14 unchanged sentences

The changes to the loan classes primarily include:

(i) reclassifying Small Business Administration Paycheck Protection Program (“SBA-PPP”) loans into the commercial and industrial class, (ii) identifying a separate loan class for leases, and (iii) purchased credit deteriorated loans (“PCD”) are no longer a separate loan class.

The following represent our classes of loans as of March 31, 2022.

(i) reclassifying Small Business Administration Paycheck Protection Program (“SBA-PPP”) loans into the commercial and industrial class, (ii) identifying a separate loan class for leases, and (iii) purchased credit deteriorated (“PCD”) loans are no longer a separate loan class.

The following represent our classes of loans as of June 30, 2022.

Prior period disclosures have been conformed to the current presentation.

6 unchanged sentences

Commercial mortgages secured by owner occupied properties are primarily dependent on the ability of borrowers to achieve business results consistent with those projected at loan origination.

While these loans and leases are collateralized by real property in an effort to mitigate risk, it is possible the liquidation of collateral will not fully satisfy the obligation.

While these loans are collateralized by real property in an effort to mitigate risk, it is possible the liquidation of collateral will not fully satisfy the obligation.

Non-owner Occupied Commercial Mortgage - Non-owner occupied commercial mortgage consists of loans to purchase or refinance investment nonresidential properties.

1 unchanged sentence

The primary risk associated with income producing commercial mortgage loans is the ability of the income-producing property that collateralizes the loan to produce adequate cash flow to service the debt.

While these loans and leases are collateralized by real property in an effort to mitigate risk, it is possible the liquidation of collateral will not fully satisfy the obligation.

While these loans are collateralized by real property in an effort to mitigate risk, it is possible the liquidation of collateral will not fully satisfy the obligation.

Commercial and Industrial - Commercial and industrial loans consist of loans or lines of credit to finance accounts receivable, inventory or other general business needs, and business credit cards.

The primary risk associated with commercial and industrial and lease financing loans is the ability of borrowers to achieve business results consistent with those projected at origination.

The primary risk associated with commercial and industrial loans is the ability of borrowers to achieve business results consistent with those projected at origination.

Failure to achieve these projections presents risk the borrower will be unable to service the debt consistent with the contractual terms of the loan.

We provide factoring, receivable management, and secured financing to businesses (our clients, who are generally manufacturers or importers of goods) that operate in several industries, including apparel, textile, furniture, home furnishings and consumer electronics.

Factoring - We provide factoring, receivable management, and secured financing to businesses (our clients, who are generally manufacturers or importers of goods) that operate in several industries, including apparel, textile, furniture, home furnishings and consumer electronics.

Factoring entails the assumption of credit risk with respect to trade accounts receivable arising from the sale of goods by our clients to their customers (generally retailers) that have been factored (i.e., sold or assigned to the factor).

15 unchanged sentences

Assets Held for Sale

Assets held for sale primarily consist of residential mortgage loans held for sale of $ 65 million carried at fair value and commercial loans held for sale of $ 16 million carried at the lower of the cost or fair market value less disposal costs (“LOCOM”).

Assets held for sale at June 30, 2022 primarily consist of residential mortgage loans held for sale of $ 22 million carried at fair value and commercial loans held for sale of $ 13 million carried at the lower of the cost or fair market value less disposal costs (“LOCOM”).

BancShares applied the acquisition method of accounting for the CIT Merger.

1 unchanged sentence

Consequently, there was a gain on acquisition (and no goodwill) related to the CIT Merger as discussed further in Note 2 — Business Combinations.

BancShares had goodwill of $ 346 million at March 31, 2022 and December 31, 2021.

BancShares had goodwill of $ 346 million at June 30, 2022 and December 31, 2021.

The entire balance of goodwill relates to business combinations that BancShares completed prior to the CIT Merger.

All of the goodwill relates to the General Banking reporting unit.

There was no goodwill impairment during the first quarter of 2022.

There was no goodwill impairment during the three or six month periods ended June 30, 2022.

Goodwill and other intangibles are discussed further in Note 7 — Goodwill and Other Intangibles.

1 unchanged sentence

BancShares did not have any significant derivative financial instruments prior to completion of the CIT Merger.

BancShares has derivative financial instruments at March 31, 2022 as further described in Note 13 — Derivative Financial Instruments.

However, BancShares acquired various derivative financial instruments in connection with the CIT Merger as further described in Note 13 — Derivative Financial Instruments.

BancShares manages economic risk and exposure to interest rate and foreign currency risk through derivative transactions in over-the-counter markets with other financial institutions.

8 unchanged sentences

The designation may change based upon management’s reassessment of circumstances.

BancShares does not have any qualifying fair value, cash flow or net investment hedges as of March 31, 2022.

BancShares provides interest rate derivative contracts to support the business requirements of its customers (“customer-related positions”).

BancShares does not have any qualifying fair value, cash flow or net investment hedges as of June 30, 2022.

BancShares provides interest rate derivative contracts to support the business requirements of its customers.

The derivative contracts include interest rate swap agreements and interest rate cap and floor agreements wherein BancShares acts as a seller of these derivative contracts to its customers.

19 unchanged sentences

These policies, known as BOLI, offset the cost of providing employee benefits.

BancShares had BOLI of $ 1.3 billion and $ 116 million at March 31, 2022 and December 31, 2021, respectively.

BancShares had BOLI of $ 1.3 billion and $ 116 million at June 30, 2022 and December 31, 2021, respectively.

BancShares acquired BOLI of $ 1.2 billion in the CIT Merger.

2 unchanged sentences

BancShares did not have significant amounts of equipment related to operating leases prior to completion of the CIT Merger.

BancShares has operating lease equipment of approximately $ 8.0 billion, primarily related to the Rail segment, at March 31, 2022.

BancShares has operating lease equipment of approximately $ 8.0 billion, primarily related to the Rail segment, at June 30, 2022.

A review for impairment of long-lived assets, such as operating lease equipment, is performed at least annually or when events or changes in circumstances indicate that the carrying amount of long-lived assets may not be recoverable.

38 unchanged sentences

Factoring commissions , which are earned in the Commercial Banking segment, are driven by factoring volumes, principally in the retail sectors.

We provide factoring to businesses (our clients, who are generally manufacturers or importers of goods) that operate in several industries, including apparel, textile, furniture, home furnishings and consumer electronics.

, sold or assigned to the factor).

Factoring commissions are charged as a percentage of the invoice amount of the receivables assigned to BancShares.

1 unchanged sentence

Factoring commissions are deferred and recognized as income over time based on the underlying terms of the assigned receivables.

See Commercial Loans and Leases section for additional commentary on factoring.

Gains on leasing equipment are recognized upon completion of sale (sale closing) and transfer of title.

37 unchanged sentences

The determination of estimated fair values required management to make certain estimates about discount rates, future expected cash flows, market conditions at the time of the merger and other future events that are highly subjective in nature and may require adjustments.

As of March 31, 2022, the fair value measurements remain preliminary due to the timing of the Merger Date and BancShares’ Quarterly Report on Form 10-Q.

While BancShares believes that the information available on January 3, 2022 provided a reasonable basis for estimating fair value, BancShares continues to review information relating to events or circumstances existing at the Merger Date.

As of June 30, 2022, the fair value measurements remain preliminary.

The purchase price allocation is considered preliminary as estimates related to certain loan and lease portfolios, certain deposits, deferred tax assets and liabilities and certain other assets and liabilities are subject to continuing refinement, as we identify and assess information regarding the nature of these assets and liabilities and review the associated valuation assumptions and methodologies.

The amounts recorded for current and deferred tax assets and liabilities are considered provisional as we continue to evaluate the nature and extent of permanent and temporary differences between the book and tax bases of the acquired assets and liabilities assumed.

While BancShares believes that the information available on January 3, 2022 provided a reasonable basis for estimating fair value, as mentioned above, BancShares continues to review information relating to events or circumstances existing at the Merger Date.

Purchase accounting could change until management finalizes its analysis of the acquired assets and assumed liabilities, up to one year from the Merger Date.

Management anticipates that this review could result in adjustments to the Merger Date valuation amounts presented herein.

The following table provides a preliminary purchase price allocation to the identifiable assets acquired and liabilities assumed at their estimated fair values as of the Merger Date:

56 unchanged sentences

The sales approach was used to value rail assets where market information was available, or when replacement cost less depreciation was lower than the current market value.

An intangible liability was recorded for net above and below market lease contracts, for which fair value was estimated using the income approach and contemplated market lease rates and other key inputs.

A discount was recorded for net operating lease equipment, which includes railcars and locomotives and other equipment, to reduce it to fair value.

An intangible liability was recorded for net below market lease contracts rental rates, for which fair value was estimated using the income approach and market lease rates and other key inputs.

A discount was recorded for operating lease equipment, which includes railcars, locomotives and other equipment, to reduce it to fair value.

This adjustment will reduce depreciation expense over the remaining useful lives of the equipment on a straight line basis.

These adjustments (net) will be amortized, thereby increasing rental income (a component of noninterest income) over the remaining lives of the lease agreements on a straight line basis.

The intangible liability (see Note 7 — Goodwill and Other Intangibles) will be amortized, thereby increasing rental income (a component of noninterest income) over the remaining term of the lease agreements on a straight line basis.

Bank Owned Life Insurance

15 unchanged sentences

dollars in millions Fair Value

Low-income housing tax credit and other equity method investments $ 777

Low-income housing tax credits and other investments $ 777

Right of use assets 327

9 unchanged sentences

Fair values for property, including leasehold improvements, furniture and fixtures, computer software and other digital equipment were determined using the cost approach.

Certain tangible assets, that are expected to be sold in the short term were reported at net book, while real estate property such as land and buildings was valued using the sales comparison approach, where sales of comparable properties are adjusted for differences to estimate the value of each subject property.

Certain tangible assets that are expected to be sold in the short term were reported at net book.

Real estate property, such as land and buildings, was valued using the sales comparison approach, where sales of comparable properties are adjusted for differences to estimate the value of each subject property.

The fair values of the derivative financial instruments, as well as counterparty receivables, were valued using prices of financial instruments with similar characteristics and observable inputs.

12 unchanged sentences

Unaudited Pro Forma Information

The amount of interest income, noninterest income and net income of $ 351 million, $ 297 million and $ 330 million, respectively, attributable to the acquisition of CIT were included in BancShares’ Consolidated Statement of Income for the three months ended March 31, 2022.

The amount of interest income, noninterest income and net income of $ 728 million, $ 607 million and $ 266 million, respectively, attributable to the acquisition of CIT were included in BancShares’ Consolidated Statement of Income for the six months ended June 30, 2022.

CIT’s interest income, noninterest income and net income noted above reflect management’s best estimates, based on information available at the reporting date.

The following table presents certain unaudited pro forma financial information for illustrative purposes only, for the three months ended March 31, 2022 and 2021 as if CIT had been acquired on January 1, 2021.

The following table presents certain unaudited pro forma financial information for illustrative purposes only, for the three and six months ended June 30, 2022 and 2021 as if CIT had been acquired on January 1, 2021.

The unaudited estimated pro forma information combines the historical results of CIT with the BancShares’ consolidated historical results and includes certain adjustments for the respective periods.

1 unchanged sentence

(i) provision for credit losses of $ 513 million related to the Non-PCD loans and leases and unfunded commitments;

(ii) merger and integration costs of $ 135 million;

(ii) merger and integration costs of $ 34 million and $ 169 million for the three and six months ended June 30, 2022, respectively;

(iii) estimated purchase accounting adjustment (“PAA”) accretion and amortization related to fair value adjustments and intangibles associated with the CIT Merger;

4 unchanged sentences

Selected Unaudited Pro Forma Financial Information for Consolidated BancShares

Three months ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

dollars in millions 2022 2021 2022 2021

3 unchanged sentences

NOTE 3 — INVESTMENT SECURITIES

The following tables as of March 31, 2022 include the investment security balances acquired in the CIT Merger, which were recorded at fair value on the acquisition date.

The amortized cost and fair value of investment securities at March 31, 2022 and December 31, 2021, were as follows:

The following tables as of June 30, 2022 include the investment security balances acquired in the CIT Merger, which were recorded at fair value on the acquisition date.

The amortized cost and fair value of investment securities at June 30, 2022 and December 31, 2021, were as follows:

Amortized Cost and Fair Value - Debt Securities

March 31, 2022

June 30, 2022

dollars in millions Amortized Cost Gross

Gains Gross Unrealized

Losses Fair Value

Investment securities available for sale

18 unchanged sentences

Gains Gross Unrealized

Losses Fair Value

Investment securities available for sale

4 unchanged sentences

Corporate bonds 582 27 ( 1 ) 608

State, county and municipal — — — —

Total investment securities available for sale $ 9,215 $ 45 $ ( 57 ) $ 9,203

7 unchanged sentences

Investments in mortgage-backed securities represent securities issued by the Government National Mortgage Association, Federal National Mortgage Association and Federal Home Loan Mortgage Corporation.

US Treasury investments represents T-bills and Notes issued by the US Treasury.

Treasury investments represents T-bills and Notes issued by the U.S.

Investments in government agency securities represent securities issued by the Small Business Association (“SBA”), Federal Home Loan Bank (“FHLB”) and other agencies.

8 unchanged sentences

BancShares continues to monitor the trading activity in Visa Class B common stock and the status of the resolution of certain litigation matters at Visa that would trigger the conversion of the Visa Class B common stock into Visa Class A common stock.

As of March 31, 2022 and December 31, 2021, no ACL was required for available for sale or held to maturity debt securities.

As of June 30, 2022 and December 31, 2021, no ACL was required for available for sale or held to maturity debt securities.

Accrued interest receivables for available for sale and held to maturity debt securities were excluded from the estimate for credit losses.

At March 31, 2022, accrued interest receivable for available for sale and held to maturity debt securities were $ 26 million and $ 16 million, respectively.

At December 31, 2021, accrued interest receivable for available for sale and held to maturity debt securities were $ 22 million and $ 7 million, respectively.

During the three months ended March 31, 2022 and 2021, no accrued interest was deemed uncollectible and written off against interest income.

At June 30, 2022, accrued interest receivables for available for sale and held to maturity debt securities were $ 25 million and $ 17 million, respectively.

At December 31, 2021, accrued interest receivables for available for sale and held to maturity debt securities were $ 22 million and $ 7 million, respectively.

During the three and six months ended June 30, 2022 and 2021, no accrued interest was deemed uncollectible and written off against interest income.

The following table provides the amortized cost and fair value by contractual maturity.

2 unchanged sentences

Maturities - Debt Securities

March 31, 2022 December 31, 2021

dollars in millions Cost Fair

value Cost Fair

June 30, 2022 December 31, 2021

dollars in millions Cost Fair Value Cost Fair Value

Investment securities available for sale

16 unchanged sentences

Total investment securities held to maturity $ 9,832 $ 8,812 $ 3,809 $ 3,759

T he following table presents interest and dividend income on investments and other interest-bearing assets:

Other Interest and Dividend Income

Three months ended March 31,

T he following table presents interest and dividend income on investment securities.

Interest and Dividends on Investment Securities

Three Months Ended June 30, Six Months Ended June 30,

dollars in millions 2022 2021 2022 2021

Interest income - taxable debt securities $ 83 $ 30

Interest income - interest-bearing cash 5 1

Interest income - taxable investment securities $ 89 $ 36 $ 171 $ 65

Dividend income - marketable equity securities — — 1 1

Total other interest and dividend income $ 89 $ 32

Interest on investment securities $ 89 $ 36 $ 172 $ 66

The following table provides the gross realized gains and losses on the sales of investment securities available for sale:

Realized Gains on Debt Securities Available For Sale

Three months ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

dollars in millions 2022 2021 2022 2021

2 unchanged sentences

Net realized gains on sales of investment securities available for sale $ — $ 16 $ — $ 25

The following table provides the realized and unrealized gains and losses on marketable equity securities:

Realized and Unrealized Gains on Marketable Equity Securities

Three months ended March 31,

The following table provides the fair value adjustment on marketable equity securities:

Fair Value Adjustment on Marketable Equity Securities

Three Months Ended June 30, Six Months Ended June 30,

dollars in millions 2022 2021 2022 2021

Marketable equity securities gains, net $ 3 $ 16

Unrealized gains recognized on marketable equity securities held for sale $ 3 $ 16

Fair value adjustment on marketable equity securities, net $ ( 6 ) $ 12 $ ( 3 ) $ 28

The following table provides information regarding investment securities available for sale with unrealized losses for which an ACL has not been recorded:

Gross Unrealized Losses on Debt Securities Available For Sale

March 31, 2022

June 30, 2022

Less than 12 months 12 months or more Total

23 unchanged sentences

Total $ 6,724 $ ( 54 ) $ 191 $ ( 3 ) $ 6,915 $ ( 57 )

As of March 31, 2022, there were 55 investment securities available for sale with continuous losses for more than 12 months, of which all were government sponsored enterprise-issued mortgage-backed securities or government agency securities.

None of the unrealized losses identified as of March 31, 2022, or December 31, 2021, relate to the issuer’s ability to honor redemption obligations.

As of June 30, 2022, there were 53 investment securities available for sale with continuous unrealized losses for more than 12 months, of which all were government sponsored enterprise-issued mortgage-backed securities or government agency securities.

None of the unrealized losses identified as of June 30, 2022, or December 31, 2021, relate to the issuer’s ability to honor redemption obligations.

Rather, the unrealized losses relate to changes in interest rates relative to when the investment securities were purchased, and do not indicate credit-related impairment.

2 unchanged sentences

BancShares has the ability and intent to retain these securities for a period of time sufficient to recover all unrealized losses.

Investment securities having an aggregate carrying value of $ 5.9 billion at March 31, 2022, and $ 5.7 billion at December 31, 2021, were pledged as collateral to secure public funds on deposit and certain short-term borrowings, and for other purposes as required by law.

BancShares’ portfolio of held to maturity debt securities consists of mortgage-backed securities issued by government agencies and government sponsored entities, US Treasury notes, unsecured bonds issued by government agencies and government sponsored entities, securities issued by the World Bank and Federal Deposit Insurance Corporation (“FDIC”) guaranteed CDs with other financial institutions.

Investment securities having an aggregate carrying value of $ 5.2 billion at June 30, 2022, and $ 5.7 billion at December 31, 2021, were pledged as collateral to secure public funds on deposit and certain short-term borrowings, and for other purposes as required by law.

BancShares’ portfolio of held to maturity debt securities consists of mortgage-backed securities issued by government agencies and government sponsored entities, U.S.

Treasury notes, unsecured bonds issued by government agencies and government sponsored entities, securities issued by the World Bank and Federal Deposit Insurance Corporation (“FDIC”) guaranteed CDs with other financial institutions.

Given the consistently strong credit rating of the U.S.

3 unchanged sentences

A security is considered past due once it is 30 days contractually past due under the terms of the agreement.

The carrying value was zero for securities past due as of March 31, 2022 and December 31, 2021.

There were no debt securities held to maturity on non-accrual status as of March 31, 2022 and December 31, 2021.

There were no securities past due as of June 30, 2022 and December 31, 2021.

There were no debt securities held to maturity on non-accrual status as of June 30, 2022 and December 31, 2021.

Certain investments held by BancShares were recorded in other assets.

BancShares held FHLB stock of $ 39 million and $ 40 million at March 31, 2022 and December 31, 2021, respectively;

BancShares held FHLB stock of $ 83 million and $ 40 million at June 30, 2022 and December 31, 2021, respectively;

these securities are recorded at cost.

BancShares held $ 67 million and $ 10 million of non-marketable securities without readily determinable fair values measured under the measurement exception at March 31, 2022 and December 31, 2021, respectively.

All investments held in qualified affordable housing projects qualify for the proportional amortization method and totaled $ 533 million and $ 156 million at March 31, 2022 and December 31, 2021, respectively.

BancShares held $ 69 million and $ 10 million of non-marketable securities without readily determinable fair values measured under the measurement exception at June 30, 2022 and December 31, 2021, respectively.

All investments held in qualified affordable housing projects qualify for the proportional amortization method and totaled $ 538 million and $ 156 million at June 30, 2022 and December 31, 2021, respectively.

NOTE 4 — LOANS AND LEASES

The following tables as of March 31, 2022 include loan and lease balances acquired in the CIT Merger, which were recorded at fair value on the Merger Date.

The following tables as of June 30, 2022 include loan and lease balances acquired in the CIT Merger, which were recorded at fair value on the Merger Date.

Refer to Note 2 — Business Combinations for further information.

3 unchanged sentences

Loans by Class

dollars in millions March 31, 2022 December 31, 2021

dollars in millions June 30, 2022 December 31, 2021

Commercial construction $ 2,783 $ 1,238

10 unchanged sentences

Total loans and leases $ 67,735 $ 32,372

At March 31, 2022 and December 31, 2021, accrued interest receivable on loans included in other assets was $ 135 million and $ 87 million, respectively, and was excluded from the estimate of credit losses.

At June 30, 2022 and December 31, 2021, accrued interest receivable on loans included in other assets was $ 142 million and $ 87 million, respectively, and was excluded from the estimate of credit losses.

The following table presents selected components of the amortized cost of loans.

Components of Amortized Cost

dollars in millions March 31, 2022 December 31, 2021

dollars in millions June 30, 2022 December 31, 2021

Deferred fees, including unearned fees and unamortized costs on non-PCD loans $ 48 $ 32

2 unchanged sentences

Total net unamortized discount $ 138 $ 40

The aging of the outstanding loans and leases, by class, at March 31, 2022 and December 31, 2021 is provided in the tables below.

Loans and leases 30 days or less past due are considered current, as various grace periods allow borrowers to make payments within a stated period after the due date and still remain in compliance with the respective agreement.

The aging of the outstanding loans and leases, by class, at June 30, 2022 and December 31, 2021 is provided in the tables below.

Loans and leases less than 30 days past due are considered current, as various grace periods allow borrowers to make payments within a stated period after the due date and still remain in compliance with the respective agreement.

Loans and Leases - Delinquency Status

March 31, 2022

June 30, 2022

dollars in millions 30-59 Days

8 unchanged sentences

Leases 37 21 14 72 2,106 2,178

Total commercial loans 210 44 111 365 49,736 50,101

Total commercial 142 59 124 325 51,152 51,477

Residential mortgage 67 11 87 165 12,276 12,441

2 unchanged sentences

Consumer other 3 1 1 5 581 586

Total consumer loans 77 17 70 164 15,259 15,423

Total consumer 85 16 97 198 16,060 16,258

Total loans and leases $ 227 $ 75 $ 221 $ 523 $ 67,212 $ 67,735

10 unchanged sentences

Leases — 1 1 2 269 271

Total commercial loans 33 5 19 57 22,529 22,586

Total commercial 33 5 19 57 22,529 22,586

Residential mortgage 24 6 23 53 6,035 6,088

2 unchanged sentences

Consumer other 2 2 1 5 543 548

Total consumer loans 38 11 31 80 9,706 9,786

Total consumer 38 11 31 80 9,706 9,786

Total loans and leases $ 71 $ 16 $ 50 $ 137 $ 32,235 $ 32,372

The amortized cost, by class, of loans and leases on nonaccrual status, and loans and leases greater than 90 days past due and still accruing at March 31, 2022 and December 31, 2021 are presented below.

The amortized cost, by class, of loans and leases on non-accrual status, and loans and leases greater than 90 days past due and still accruing at June 30, 2022 and December 31, 2021 are presented below.

Loans on Non-Accrual Status (1) (2)

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

dollars in millions Non-Accrual Loans Loans >

12 unchanged sentences

Total loans and leases $ 513 $ 100 $ 121 $ 7

(1) Accrued interest that was reversed when the loan went to non-accrual status was $ 1 million for the three months ended March 31, 2022.

(2) Non-accrual loans for which there was no related ACL totaled $ 35 million at March 31, 2022 and $ 15 million at December 31, 2021.

Other real estate owned (“OREO”) and repossessed assets were $ 43 million as of March 31, 2022 and $ 40 million as of December 31, 2021.

(1) Accrued interest that was reversed when the loan went to non-accrual status was $ 2 million for the six months ended June 30, 2022.

(2) Non-accrual loans for which there was no related ACL totaled $ 51 million at June 30, 2022 and $ 15 million at December 31, 2021.

Other real estate owned (“OREO”) and repossessed assets were $ 45 million as of June 30, 2022 and $ 40 million as of December 31, 2021.

Credit quality indicators

Loans and leases are monitored for credit quality on a recurring basis.

Commercial and consumer loans and leases have different credit quality indicators as a result of the unique characteristics of the loan segments being evaluated.

Commercial loans and leases and consumer loans have different credit quality indicators as a result of the unique characteristics of the loan classes being evaluated.

The credit quality indicators for Non-PCD commercial loans and leases are developed through a review of individual borrowers on an ongoing basis.

12 unchanged sentences

Ungraded – Ungraded loans represent loans not included in the individual credit grading process due to their relatively small balances or borrower type.

The majority of ungraded loans at March 31, 2022 and December 31, 2021, relate to business credit cards.

The majority of ungraded loans at June 30, 2022 and December 31, 2021, relate to business credit cards.

Business credit card loans are subject to automatic charge-off when they become 120 days past due in the same manner as unsecured consumer lines of credit.

The remaining balance is comprised of a small amount of commercial mortgage, lease financing and other commercial real estate loans.

The credit quality indicator for consumer loans is based on delinquency status of the borrower as of the date presented.

6 unchanged sentences

Commercial Loans - Risk Classifications by Class

March 31, 2022

June 30, 2022

Risk Classification:

37 unchanged sentences

Consumer Loans - Delinquency Status by Class

March 31, 2022

June 30, 2022

Days Past Due:

118 unchanged sentences

Any loan modification that meets these practical expedients would not automatically be considered a TDR because the borrower is presumed not to be experiencing financial difficulty at the time of the loan modification.

BancShares applied this regulatory guidance during its TDR identification process for short-term loan forbearance agreements as a result of COVID-19 and in most cases is not recording these as TDRs.

BancShares applied this regulatory guidance during its TDR identification process through January 1, 2022 for short-term loan forbearance agreements as a result of COVID-19 and in most cases did not record these as TDRs.

Modified loans that meet the definition of a TDR are subject to BancShares’ individually reviewed loans policy.

The following table presents amortized cost of TDRs.

March 31, 2022

June 30, 2022

dollars in millions Accruing Non-Accruing Total

23 unchanged sentences

Total TDRs $ 146 $ 46 $ 192

The following table summarizes the loan restructurings during the quarters ended March 31, 2022 and 2021 that were designated as TDRs.

BancShares defines payment default as movement of the TDR to nonaccrual status, which is generally 90 days past due, foreclosure or charge-off, whichever occurs first.

The following table summarizes the loan restructurings during the three and six months ended June 30, 2022 and 2021 that were designated as TDRs.

BancShares defines payment default as movement of the TDR to non-accrual status, which is generally 90 days past due, foreclosure or charge-off, whichever occurs first.

Restructurings

Three months ended March 31,

Three Months Ended June 30,

dollars in millions (except for number of loans) Number of Loans Amortized Cost at Period End Number of Loans Amortized Cost at Period End

5 unchanged sentences

Total 90 $ 15 121 $ 22

There were $ 1 million and $ 0.4 million of commitments to lend additional funds to borrowers whose loan terms have been modified in TDRs as of March 31, 2022 and December 31, 2021, respectively.

Six Months Ended June 30,

Number of Loans Amortized Cost at Period End Number of Loans Amortized Cost at Period End

Loans and leases

Interest only 8 $ 6 10 $ 10

Loan term extension 76 23 66 8

Below market rates 45 5 90 16

Discharge from bankruptcy 42 4 84 10

Total 171 $ 38 250 $ 44

There were $ 1 million and $ 0.4 million of commitments to lend additional funds to borrowers whose loan terms have been modified in TDRs as of June 30, 2022 and December 31, 2021, respectively.

After a loan is determined to be a TDR, BancShares continues to track its performance under its most recent restructured terms.

TDRs that subsequently defaulted during the three months ended March 31, 2022 and 2021, and were classified as TDRs during the applicable 12-month period preceding March 31, 2022 and 2021 were as follows:

Three months ended March 31,

TDRs that subsequently defaulted during the three and six months ended June 30, 2022 and 2021, and were classified as TDRs during the applicable 12-month period preceding June 30, 2022 and 2021 were as follows:

Three Months Ended June 30,

dollars in millions 2022 2021

TDR Defaults $ 1 $ 1

Six Months Ended June 30,

TDR Defaults $ 3 $ 5

Loans Pledged

The following table provides information regarding loans pledged as collateral for borrowing capacity through the FHLB of Atlanta and the Federal Reserve Bank (“FRB”) as of March 31, 2022 and December 31, 2021:

The following table provides information regarding loans pledged as collateral for borrowing capacity through the FHLB of Atlanta and the Federal Reserve Bank (“FRB”) as of June 30, 2022 and December 31, 2021:

Loans Pledged

dollars in millions March 31, 2022 December 31, 2021

dollars in millions June 30, 2022 December 31, 2021

FHLB of Atlanta

1 unchanged sentence

Advances 1,785 645

Letters of Credit 750 —

Available borrowing capacity $ 11,562 $ 8,919

9 unchanged sentences

Significant macroeconomic factors used in estimating the expected losses include unemployment, gross domestic product (“GDP”), home price index, commercial real estate index, corporate profits, and credit spreads.

Due to completion of the CIT Merger, BancShares changed certain aspects of its methodology used to determine the ACL during the period ending March 31, 2022.

The processes and methodologies we utilized to determine the ACL at June 30, 2022 were consistent with those utilized to determine the ACL at March 31, 2022.

As previously disclosed in our Quarterly Report on Form 10-Q as of and for the three month period ended March 31, 2022, we changed certain aspects of our ACL methodology during the three month period ended March 31, 2022.

BancShares made these changes to integrate the ACL methodologies of CIT and BancShares.

The most significant changes in the ACL methodology utilized to determine the ACL at March 31, 2022 compared to that utilized to determine the ACL at December 31, 2021 include the following:

The most significant changes in the ACL methodology compared to that utilized to determine the ACL at December 31, 2021 include the following:

(i) utilized economic scenario forecasts over the lives of the loan portfolios instead of using a two year reasonable and supportable period with a one year reversion period followed by a historical long run average economic forecast for the remainder of the portfolio life;

and (ii) implemented scenario weighting of a range of economic scenarios, including baseline, upside, and downside scenarios instead of utilizing just the consensus baseline scenario as the basis of the quantitative ACL estimate.

The results of these changes increased the ACL for total commercial loans by approximately $ 13.5 million and decreased the ACL for total consumer loans by approximately $ 18.7 million at March 31, 2022.

The initial ACL for PCD loans and leases acquired in the CIT Merger (the “Initial PCD ACL”) was $ 284 million.

The Initial PCD ACL was established through the PCD Gross-Up and there was no corresponding increase to the provision for credit losses.

The ACL at June 30, 2022 increased slightly compared to March 31, 2022 due to the impacts of loan growth and mild deterioration in the macroeconomic forecast (primarily related to GDP, home prices, commercial real estate prices, and higher interest rates) were partially offset by improvements in credit quality and a $ 12 million decrease in the initial ACL for PCD loans and leases acquired in the CIT Merger (the “Initial PCD ACL”).

The remaining changes in the ACL for the six month period ending June 30, 2022 were primarily related to the CIT Merger.

The Initial PCD ACL of $ 272 million was established through the PCD Gross-Up and there was no corresponding increase to the provision for credit losses.

The PCD Gross-Up is discussed further in Note 2 — Business Combinations.

The initial ACL for Non-PCD loans and leases acquired in the CIT Merger was established through a corresponding increase of $ 454 million to the provision for credit losses (the “Initial Non-PCD Provision”).

For the period ended March 31, 2022, the ACL increase since December 31, 2021 was primarily driven by the Initial PCD ACL and Initial Non-PCD ACL discussed above, partially offset by improvements in macroeconomic factors in the scenarios used to determine the ACL.

The scenarios showed improvements in the most significant economic factors compared to what was used to generate the December 31, 2021 ACL and estimate the Initial PCD ACL and Initial Non-PCD Provision at the Merger Date.

These loss estimates were also influenced by BancShares’ strong credit quality and low net charge-offs.

The activity for the ACL for loans and leases and the ACL for unfunded commitments is summarized in the following tables.

The ACL activity for loans and leases and the ACL for unfunded commitments is summarized in the following tables.

ACL for Loans and Leases

dollars in millions Commercial Consumer Total

Balance at December 31, 2021 $ 80 $ 98 $ 178

Three Months Ended June 30, 2022 Six Months Ended June 30, 2022

dollars in millions Commercial Consumer Total Commercial Consumer Total

Balance at beginning of period $ 743 $ 105 $ 848 $ 80 $ 98 $ 178

Initial PCD ACL (1)

Balance at Initial Non-PCD Provision 432 22 454

Benefit for credit losses - loans and leases

( 12 ) — ( 12 ) 258 14 272

Balance at Total provision (benefit) for credit losses- loans and leases 409 ( 8 ) 401

Initial Non-PCD Provision — — — 432 22 454

Provision (benefit) for credit losses - loans and leases

33 3 36 10 ( 27 ) ( 17 )

Total provision (benefit) for credit losses- loans and leases 33 3 36 442 ( 5 ) 437

Charge-offs (1)

( 36 ) ( 5 ) ( 41 ) ( 64 ) ( 10 ) ( 74 )

Balance at Recoveries 12 6 18

Balance at Other — — —

Balance at March 31, 2022 $ 743 $ 105 $ 848

Balance at December 31, 2020 $ 92 $ 133 $ 225

Benefit for credit losses - loans and leases ( 3 ) ( 8 ) ( 11 )

Recoveries 12 7 19 24 13 37

Balance at June 30, 2022 $ 740 $ 110 $ 850 $ 740 $ 110 $ 850

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021

Commercial Consumer Total Commercial Consumer Total

Balance at beginning of period $ 86 $ 124 $ 210 $ 92 $ 133 $ 225

Provision (benefit) for credit losses - loans and leases 1 ( 20 ) ( 19 ) ( 3 ) ( 28 ) ( 31 )

Charge-offs ( 3 ) ( 4 ) ( 7 ) ( 7 ) ( 9 ) ( 16 )

Recoveries 2 3 5 4 7 11

Balance at March 31, 2021 $ 87 $ 124 $ 211

Balance at June 30, 2021 $ 86 $ 103 $ 189 $ 86 $ 103 $ 189

(1) The Initial PCD ACL related to the CIT Merger was $ 272 million, net of an additional $ 243 million for loans that CIT charged-off prior to the Merger Date (whether full or partial) which met BancShares’ charge-off policy at the Merger Date.

The $ 12 million reflects second quarter adjustment to the original amount recorded on the Merger Date, with an equal adjustment to the UPB of PCD loans.

There was no income statement impact or adjustment to the purchase price.

ACL for Unfunded Commitments

Three months ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

dollars in millions 2022 2021 2022 2021

2 unchanged sentences

Ending balance $ 81 $ 11 $ 81 $ 11

For the period ended March 31, 2022, the increase in the ACL for unfunded commitments compared to March 31, 2021 primarily reflected the additional commitments acquired in the CIT Merger.

For the period ended June 30, 2022, the increase in the ACL for unfunded commitments compared to June 30, 2021 primarily reflected the additional commitments acquired in the CIT Merger.

NOTE 6 — LEASES

1 unchanged sentence

Substantially all of our lease liabilities relate to United States real estate leases under operating lease arrangements.

Our lessee finance leases are not significant.

Our real estate leases have remaining lease terms of up to 17 years.

3 unchanged sentences

Supplemental Lease Information

dollars in millions Classification March 31, 2022 December 31, 2021

dollars in millions Classification June 30, 2022 December 31, 2021

Operating leases Other assets $ 378 $ 64

11 unchanged sentences

Finance leases 3.10 % 3.12 %

The following table presents components of operating lease expense, which are included in operating expenses:

Components of Operating Lease Expense

Three months ended March 31,

The following table presents components of lease cost:

Components of Net Lease Cost

Three Months Ended June 30, Six Months Ended June 30,

dollars in millions Classification 2022 2021 2022 2021

8 unchanged sentences

(1) Includes short-term lease cost, which is not significant.

(2) In addition, for the three and six months ended June 30, 2022, approximately $ 4 million of costs related to leased branches to be closed or subleased for branch closings was included in merger-related expenses in the consolidated statements of income.

Variable lease cost includes common area maintenance, property taxes, utilities, and other operating expenses related to leased premises recognized in the period in which the expense was incurred.

4 unchanged sentences

Supplemental Cash Flow Information

Three months ended March 31,

Six Months Ended June 30,

dollars in millions 2022 2021

4 unchanged sentences

ROU assets obtained in exchange for new lease liabilities 15 3

The following table presents lease liability maturities in the next five years and thereafter at March 31, 2022:

The following table presents lease liability maturities for the remainder of 2022 through 2027 and thereafter at June 30, 2022:

Maturity of Lease Liabilities

dollars in millions

Twelve months ended March 31, Operating Leases Finance Leases Total

2023 $ 52 $ 2 $ 54

dollars in millions Operating Leases Finance Leases Total

Remainder of 2022 $ 27 $ 1 $ 28

Thereafter 164 — 164

10 unchanged sentences

and continued rent payments are due if leased equipment is not returned at the end of the lease.

The following table provides the net book value of operating lease equipment (net of accumulated depreciation of $ 67 million at March 31, 2022 by equipment type.

The following table provides the net book value of operating lease equipment (net of accumulated depreciation of $ 111 million at June 30, 2022) by equipment type.

Operating Lease Equipment

dollars in millions March 31, 2022

dollars in millions June 30, 2022

Railcars and locomotives (1)

Other equipment 724

(1) Includes off-lease rail equipment of $ 504 million at March 31, 2022.

(1) Includes off-lease rail equipment of $ 492 million at June 30, 2022.

The following table presents the components of the finance lease net investment on a discounted basis:

Components of Net Investment in Finance Leases

dollars in millions March 31, 2022 December 31, 2021

dollars in millions June 30, 2022 December 31, 2021

Lease receivables $ 1,839 $ 246

3 unchanged sentences

Total $ 2,178 $ 271

(1) Leveraged leases are reported net of non-recourse debt of $ 24 million at March 31, 2022.

(1) Leveraged leases are reported net of non-recourse debt of $ 24 million at June 30, 2022.

Our leveraged lease arrangements commenced before the Accounting Standards Codification (“ASC”) 842 effective date and continue to be reported under the leveraged lease accounting model.

1 unchanged sentence

The table that follows presents lease income related to BancShares’ operating and finance leases:

Three months ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

dollars in millions 2022 2021 2022 2021

7 unchanged sentences

(1) Primarily includes per diem railcar operating lease rental income earned on a time or mileage usage basis.

(2) Includes leased equipment property tax reimbursements due from customers of $ 3.2 million for the three months ended March 31, 2022 and an insignificant amount for the three months ended March 31, 2021.

Also includes revenue related to insurance coverage on leased equipment of $ 7.5 million for the three months ended March 31, 2022.

There was no revenue related to insurance coverage on leased equipment for the three months ended March 31, 2021.

The following tables present lease payments due on non-cancellable operating leases and lease receivables due on finance leases at March 31, 2022.

(2) Includes leased equipment property tax reimbursements due from customers of $ 5 million and $ 8 million for the three and six months ended June 30, 2022, respectively and revenue related to insurance coverage on leased equipment of $ 8 million and $ 15 million for the three and six months ended June 30, 2022, respectively.

There was no revenue related to property tax reimbursements due from customers or insurance coverage on leased equipment during 2021.

The following tables present lease payments due on non-cancellable operating leases and lease receivables due on finance leases at June 30, 2022.

Excluded from these tables are variable lease payments, including rentals calculated based on asset usage levels, rentals from future renewal and re-leasing activity, and expected sales proceeds from remarketing equipment at lease expiration, all of which are components of lease profitability.

1 unchanged sentence

dollars in millions

Twelve months ended March 31,

Remainder of 2022 $ 338

Thereafter 214

2 unchanged sentences

dollars in millions

Twelve months ended March 31,

Remainder of 2022 $ 470

Thereafter 13

6 unchanged sentences

Consequently, there was a gain on acquisition (and no goodwill) related to the CIT Merger as discussed further in Note 2 — Business Combinations.

BancShares had goodwill of $ 346 million at March 31, 2022 and December 31, 2021.

BancShares had goodwill of $ 346 million at June 30, 2022 and December 31, 2021.

The entire amount of goodwill relates to business combinations that BancShares completed prior to the CIT Merger.

All of the goodwill relates to the General Banking segment.

There was no goodwill impairment during the first quarter of 2022.

Other Intangible Assets

All of the goodwill is reported in the General Banking segment.

There was no goodwill impairment during 2022.

Core Deposit Intangibles

1 unchanged sentence

Core deposit intangibles are being amortized over their estimated useful life.

The following tables summarize the activity for core deposit intangibles during the quarter ending March 31, 2022.

The following tables summarize the activity for core deposit intangibles during the quarter ending June 30, 2022.

Core Deposit Intangibles

3 unchanged sentences

Amortization for the period ( 12 )

Balance at March 31, net of accumulated amortization $ 156

Balance at June 30, net of accumulated amortization $ 150

Core Deposit Intangible Accumulated Amortization

dollars in millions March 31, 2022 December 31, 2021

dollars in millions June 30, 2022 December 31, 2021

Gross balance $ 271 $ 128

1 unchanged sentence

Balance, net of accumulated amortization $ 150 $ 19

The following table summarizes the expected amortization expense in subsequent periods for core deposit intangibles.

The following table summarizes the expected amortization expense as of June 30, 2022 in subsequent periods for core deposit intangibles.

Core Deposit Intangible Expected Amortization

dollars in millions

Twelve months ended March 31,

Remainder 2022 $ 10

Thereafter 58

1 unchanged sentence

An intangible liability of $ 52 million was recorded in other liabilities for net below market lessor lease contract rental rates related to the rail portfolio as a result of the CIT Merger.

This lease intangible is being accreted on a straight-line over the lease term, thereby increasing rental income (a component of noninterest income) over the remaining lives of the lease agreements.

The following tables summarize the activity for the intangible liability during the quarter ending March 31, 2022.

This lease intangible is being amortized on a straight-line basis over the lease term, thereby increasing rental income (a component of noninterest income) over the remaining term of the lease agreements.

The following tables summarize the activity for the intangible liability during the quarter ending June 30, 2022.

Intangible Liability

3 unchanged sentences

Amortization ( 8 )

Balance at March 31, net of accumulated amortization $ 48

Balance at June 30, net of accumulated amortization $ 44

Intangible Liability Accumulated Amortization

dollars in millions March 31, 2022

dollars in millions June 30, 2022

Gross balance $ 52

1 unchanged sentence

Balance, net of accumulated amortization $ 44

The following table summarizes the expected accretion in subsequent periods for the intangible liability.

The following table summarizes the expected amortization as of June 30, 2022 in subsequent periods for the intangible liability.

Intangible Liability

dollars in millions

Twelve months ended March 31,

Thereafter 11

Remainder 2022 $ 8

NOTE 8 – MORTGAGE SERVICING RIGHTS

BancShares originates certain residential mortgages loans to sell in the secondary market.

BancShares’ portfolio of residential mortgage loans serviced for third parties was approximately $ 3.4 billion as of March 31, 2022 and December 31, 2021.

BancShares’ portfolio of residential mortgage loans serviced for third parties was approximately $ 3.8 billion as of June 30, 2022 and December 31, 2021.

For certain loans, the originated loans are sold to third parties on a non-recourse basis with servicing rights retained.

2 unchanged sentences

Mortgage servicing rights (“MSRs”) are initially recorded at fair value and then carried at the lower of amortized cost or fair value.

Contractually specified mortgage servicing fees, late fees and ancillary fees earned are reported in mortgage income and were $ 2 million for the three month periods ending March 31, 2022 and 2021.

The following table presents changes in the servicing asset during the three months ended March 31, 2022 and 2021:

Contractually specified mortgage servicing fees, late fees and ancillary fees earned are reported in mortgage income and were $ 3 million and $ 2 million for the three months ended June 30, 2022 and 2021, respectively, and $ 5 million and $ 4 million for the six months ended June 30, 2022 and 2021, respectively.

The following table presents changes in the servicing asset during the three and six months ended June 30, 2022 and 2021:

Servicing Asset

Three months ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

dollars in millions 2022 2021 2022 2021

3 unchanged sentences

Amortization ( 1 ) ( 2 ) ( 4 ) ( 4 )

Valuation allowance decrease 1 3

Valuation allowance credit (provision) — ( 2 ) 1 1

Ending balance $ 28 $ 22 $ 28 $ 22

1 unchanged sentence

Servicing Asset Valuation Allowance

Three months ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

dollars in millions 2022 2021 2022 2021

Beginning balance $ — $ 1 $ 1 $ 4

Valuation allowance decrease ( 1 ) ( 3 )

Valuation allowance credit (provision) — 2 ( 1 ) ( 1 )

Ending balance $ — $ 3 $ — $ 3

2 unchanged sentences

MSRs Valuation Assumptions

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Discount rate - conventional fixed loans 9.93 % 8.51 %

11 unchanged sentences

The increases from December 31, 2021 primarily reflect the other assets acquired in the CIT Merger.

dollars in millions March 31, 2022 December 31, 2021

Federal Home Loan Bank stock $ 39 $ 40

Low-income housing tax credit and other equity method investments 702 156

Counterparty receivables 106 —

Fair value of derivative financial instruments 110 —

dollars in millions June 30, 2022 December 31, 2021

Accounts receivable (1)

Low-income housing tax credit and other unconsolidated investments 696 160

Right of use assets 378 64

Pension assets 303 289

Income taxes receivable 834 799

Other real estate owned 43 40

Mortgage servicing rights 28 23

Accrued interest receivable 258 134

Counterparty receivables 90 —

Fair value of derivative financial instruments 80 3

Non-marketable equity securities 69 10

Other real estate owned 45 40

Mortgage servicing assets 28 23

Federal Home Loan Bank stock 83 40

Other 370 114

Total other assets $ 3,339 $ 1,739

(1) Includes income taxes receivable of $ 843 million and $ 799 million at June 30, 2022 and December 31, 2021, respectively.

NOTE 10 — DEPOSITS

The following table provides detail on deposit types.

The deposit balances as of March 31, 2022 reflect those acquired in the CIT Merger, as described in Note 2 — Business Combinations.

The deposit balances as of June 30, 2022 reflect those acquired in the CIT Merger, as described in Note 2 — Business Combinations.

Deposit Types

dollars in millions March 31, 2022 December 31, 2021

Non-interest-bearing demand $ 25,898 $ 21,405

dollars in millions June 30, 2022 December 31, 2021

Noninterest-bearing demand $ 26,645 $ 21,405

Checking with interest 16,285 12,694

3 unchanged sentences

Total deposits $ 89,329 $ 51,406

At March 31, 2022, the scheduled maturities of time deposits were:

At June 30, 2022, the scheduled maturities of time deposits were:

Deposit Maturities

dollars in millions

Twelve months ended March 31,

Twelve months ended June 30,

Thereafter 122

Total time deposits $ 8,381

Time deposits with a denomination of $250,000 or more were $ 1.6 billion and $ 593 million at March 31, 2022 and December 31, 2021, respectively.

Time deposits with a denomination of $250,000 or more were $ 1.4 billion and $ 593 million at June 30, 2022 and December 31, 2021, respectively.

As of December 31, 2021, FCB’s primary deposit markets were North Carolina and South Carolina, which represent approximately 50.8 % and 22.7 %, respectively, of total FCB deposits.

The CIT Merger added deposits that were primarily in California (which also includes its internet banking).

Deposits (based on branch location) as of March 31, 2022, in California, North Carolina and South Carolina represented approximately 41.2 %, 29.2 % and 13.1 %, respectively, of total deposits.

Deposits (based on branch location) as of June 30, 2022, in California, North Carolina and South Carolina represented approximately 39.5 %, 30.2 % and 13.4 %, respectively, of total deposits.

NOTE 11 — VARIABLE INTEREST ENTITIES

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Consolidated VIEs

At March 31, 2022 and December 31, 2021, there were no consolidated VIEs.

At June 30, 2022 and December 31, 2021, there were no consolidated VIEs.

Unconsolidated VIEs

4 unchanged sentences

Unconsolidated VIEs Carrying Value

dollars in millions March 31, 2022 December 31, 2021

dollars in millions June 30, 2022 December 31, 2021

Tax credit equity investments $ 544 $ 157

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Short-term Borrowings

Short-term borrowings are as follows:

dollars in millions March 31, 2022 December 31, 2021

Short-term borrowings at June 30, 2022 and December 31, 2021 include:

dollars in millions June 30, 2022 December 31, 2021

Securities sold under customer repurchase agreements $ 646 $ 589

Total short-term borrowings $ 616 $ 589

Securities Sold under Agreements to Repurchase

At March 31, 2022, BancShares held $ 616 million of securities sold under agreements to repurchase, with overnight contractual maturities, consisting of $ 538 million collateralized by government agency securities and $ 78 million collateralized by commercial mortgage-backed securities.

At December 31, 2021, BancShares held $ 589 million of securities sold under agreements to repurchase, with overnight and continuous remaining contractual maturities, made up of $ 508 million collateralized by government agency securities and $ 81 million collateralized by commercial mortgage-backed securities.

At June 30, 2022, BancShares held $ 646 million of securities sold under agreements to repurchase, with overnight contractual maturities, and are collateralized by government agency securities.

At December 31, 2021, BancShares held $ 589 million of securities sold under agreements to repurchase, with overnight and continuous remaining contractual maturities, of which $ 508 million were collateralized by government agency securities and $ 81 million collateralized by commercial mortgage-backed securities.

BancShares utilizes securities sold under agreements to repurchase to facilitate the needs for collateralization of commercial customers and secure wholesale funding needs.

The carrying value of investment securities pledged as collateral under repurchase agreements was $ 638 million and $ 619 million at March 31, 2022 and December 31, 2021, respectively.

The carrying value of investment securities pledged as collateral under repurchase agreements was $ 658 million and $ 619 million at June 30, 2022 and December 31, 2021, respectively.

Long-term Borrowings

Long-term borrowings at March 31, 2022 and December 31, 2021 include:

dollars in millions Maturity March 31, 2022 December 31, 2021

Long-term borrowings at June 30, 2022 and December 31, 2021 include:

dollars in millions Maturity June 30, 2022 December 31, 2021

Parent Company:

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March 2030 350 350

Junior subordinated debenture at 3-month LIBOR plus 2.25 %

Junior subordinated debenture at 3-month LIBOR plus 2.25 % (FCB/SC Capital Trust II)

June 2034 20 20

Junior subordinated debenture at 3-month LIBOR plus 1.75 %

Junior subordinated debenture at 3-month LIBOR plus 1.75 % (FCB/NC Capital Trust III)

June 2036 88 88

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Subordinated:

Junior subordinated debentures at 3-month LIBOR plus 2.80 %

March 2034 14 14

Junior subordinated debentures at 3-month LIBOR plus 2.85 %

April 2034 10 10

Fixed subordinated notes at 6.125 % (1)

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November 2029 100 —

Notes payable to FHLB of Atlanta with rates ranging from 0.75 % to 2.99 %

Junior subordinated debentures at 3-month LIBOR plus 2.80 % (Macon Capital Trust I)

March 2034 14 14

Junior subordinated debentures at 3-month LIBOR plus 2.85 % (SCB Capital Trust I)

April 2034 10 10

Notes payable to FHLB of Atlanta at overnight SOFR plus spreads ranging from 0.24 % to 0.28 %.

Maturities through July 2024 1,650 —

Fixed notes payable to FHLB of Atlanta with rates ranging from 2.00 % to 2.99 %

Maturities through March 2032 135 645

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and (iv) 5.250 % senior unsecured notes due 2025 that it had assumed in the CIT Merger.

(2) At March 31, 2022 a nd December 31, 2021, unamortized purchase accounting adjustments were $ 78 million and $ 2 million, respectively, for subordinated debentures.

Long-term borrowings maturing in each of the five years subsequent to March 31, 2022 and thereafter include:

(2) At June 30, 2022 a nd December 31, 2021, unamortized purchase accounting adjustments were $ 75 million and $ 2 million, respectively, for subordinated debentures.

Long-term borrowings maturing in each of the five years subsequent to June 30, 2022 and thereafter include:

Long-term Borrowings Maturities

dollars in millions

Twelve months ended March 31,

Twelve months ended June 30,

Thereafter 1,048

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Senior Unsecured Notes

Senior unsecured notes included the following as of March 31, 2022:

Senior unsecured notes included the following as of June 30, 2022:

• Variable-rate senior unsecured notes totaled $ 61 million at 1-month LIBOR plus 1.10 %.

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Subordinated Unsecured Notes

Subordinated unsecured notes included the following as of March 31, 2022:

Subordinated unsecured notes included the following as of June 30, 2022:

• $ 350 million aggregate principal amount of its 3.375 % fixed-to-floating rate subordinated notes due 2030 and redeemable at the option of BancShares starting with the interest payment due March 15, 2025.

• $ 400 million aggregate principal amount of 6.125 % fixed rate subordinated notes with a maturity date of March 9, 2028 and $ 100 million aggregate principal amount of 4.125 % fixed-to-fixed rate subordinated notes with a maturity date of November 13, 2029, which were assumed by BancShares as part of the CIT Merger.

• $ 132 million in junior subordinated debentures representing obligations to FCB/NC Capital Trust III, FCB/SC Capital Trust II, SCB Capital Trust I and Macon Capital Trust I special purpose entities and grantor trusts (the “Trusts”) for trust preferred securities.

The Trusts had outstanding trust preferred securities of $ 128 million at March 31, 2022 and December 31, 2021, which mature in 2036, 2034, 2034 and 2034, respectively, and may be redeemed at par in whole or in part at any time.

BancShares has guaranteed all obligations of FCB/NC Capital Trust III, FCB/SC Capital Trust II, SCB Capital Trust I and Macon Capital Trust I.

• $ 132 million in junior subordinated debentures representing obligations to Macon Capital Trust I, SCB Capital Trust I, FCB/SC Capital Trust II, and FCB/NC Capital Trust III special purpose entities and grantor trusts (the “Trusts”) for trust preferred securities.

The Trusts had outstanding trust preferred securities of $ 128 million at June 30, 2022 and December 31, 2021, which mature in 2034, 2034, 2034 and 2036, respectively, and may be redeemed at par in whole or in part at any time.

BancShares has guaranteed all obligations of the Trusts.

Secured Borrowings

At March 31, 2022, BancShares had pledged $ 24.9 billion of consumer loans to several financing facilities.

At June 30, 2022, BancShares had pledged $ 25.8 billion of consumer loans to several financing facilities.

Notes Payable to FHLB

As a member of the FHLB, FCB can access financing based on an evaluation of its creditworthiness, statement of financial position, size and eligibility of collateral.

Pledged assets related to these financings totaled $ 19.9 billion at March 31, 2022.

Pledged assets related to these financings totaled $ 20.7 billion at June 30, 2022.

FCB may at any time grant a security interest in, sell, convey or otherwise dispose of any of the assets used for collateral, provided that FCB is in compliance with the collateral maintenance requirement immediately following such disposition.

Other Secured Financings

Other secured (other than FHLB) financings were not significant and totaled $ 15 million at March 31, 2022.

Other secured (other than FHLB) financings were not significant and totaled $ 16 million at June 30, 2022.

Pledged assets related to these financings totaled $ 16 million.

These transactions do not meet accounting requirements for sales treatment and are recorded as secured borrowings.

At March 31, 2022, BancShares had other unused credit lines allowing contingent access to borrowings of up to $ 75 million on an unsecured basis.

At June 30, 2022, BancShares had other unused credit lines allowing contingent access to borrowings of up to $ 75 million on an unsecured basis.

Under borrowing arrangements with the FRB of Richmond, BancShares has access to an additional $ 4.2 billion on a secured basis.

There were no outstanding borrowings with the FRB Discount Window at March 31, 2022 and December 31, 2021.

There were no outstanding borrowings with the FRB Discount Window at June 30, 2022 and December 31, 2021.

Assets pledged to the FRB of Richmond totaled $ 5.1 billion at June 30, 2022.

NOTE 13 — DERIVATIVE FINANCIAL INSTRUMENTS

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Notional Amount and Fair Value of Derivative Financial Instruments

March 31, 2022

June 30, 2022

dollars in millions Notional Amount Asset Fair Value Liability Fair Value

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As a result, variation margin payments are characterized as settlement of the derivative exposure and variation margin balances are netted against the corresponding derivative mark-to-market balances.

Gross amounts of recognized assets and liabilities were lowered by $ 191 million and $ 60 million, respectively at March 31, 2022.

Gross amounts of recognized assets and liabilities were lowered by $ 286 million and $ 21 million, respectively at June 30, 2022.

(4) BancShares’ derivative transactions are governed by International Swaps and Derivatives Association (“ISDA”) agreements that allow for net settlements of certain payments as well as offsetting of all contracts with a given counterparty in the event of bankruptcy or default of one of the two parties to the transaction.

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Non-Qualifying Hedges

The following table presents gains (losses) of non-qualifying hedges recognized on the Condensed Consolidated Statements of Income:

Gains (Losses) on Non-Qualifying Hedges

Three Months Ended March 31,

The following table presents gains of non-qualifying hedges recognized on the Condensed Consolidated Statements of Income:

Gains on Non-Qualifying Hedges

Three Months Ended June 30, Six Months Ended June 30,

dollars in millions Amounts Recognized 2022 2021 2022 2021

Interest rate contracts Other noninterest income $ 2 $ — $ 6 $ —

Other contracts Other noninterest income — —

Foreign currency forward contracts Other noninterest income 6 — 6 —

Total non-qualifying hedges - income statement impact $ 8 $ — $ 12 $ —

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Other Liabilities

dollars in millions March 31, 2022 December 31, 2021

dollars in millions June 30, 2022 December 31, 2021

Accrued expenses and accounts payable $ 484 $ 5

Reserve for off-balance sheet credit exposure 75 12

Lease liabilities 384 64

Commitments to fund investments in tax credits 242 43

Fair value of derivative financial instruments 308 1

Accrued interest payable 24 8

Commitments to fund tax credit investments 243 43

Deferred taxes 177 33

Reserve for off-balance sheet credit exposure 81 12

Accrued interest payable 27 8

Other 469 215

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Assets and Liabilities Measured at Fair Value - Recurring Basis (dollars in millions)

March 31, 2022

June 30, 2022

dollars in millions Total Level 1 Level 2 Level 3

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Technique(s) Significant

Inputs Range of

Inputs Weighted

March 31, 2022

June 30, 2022

Corporate bonds $ 180 Indicative bid provided by broker Multiple factors, including but not limited to, current operations, financial condition, cash flows, and recently executed financing transactions related to the issuer.

Interest rate & other derivative — non-qualifying hedges $ 1 Internal valuation model Not material Not material Not material

Interest rate & other derivative — non-qualifying hedges $ 1 Internal valuation model Not material

December 31, 2021

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Changes in Estimated Fair Value of Level 3 Financial Assets and Liabilities - Recurring Basis

Three months ended March 31, 2022 Three months ended March 31, 2021

Six Months Ended June 30, 2022 Six Months Ended June 30, 2021

dollars in millions Corporate Bonds Other Derivative Assets — Non-Qualifying Other Derivative Liabilities — Non-Qualifying Corporate Bonds

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Included in comprehensive income ( 13 ) — — 3

Transfers in — — — —

Transfers out ( 14 ) — — —

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Fair Value Option

The following table summarizes the difference between the aggregate fair value and the UPB for residential real estate loans

originated for sale measured at fair value as of March 31, 2022 and December 31, 2021.

March 31, 2022

The following table summarizes the difference between the aggregate fair value and the UPB for residential real estate loans originated for sale measured at fair value as of June 30, 2022 and December 31, 2021.

June 30, 2022

dollars in millions Fair Value Unpaid Principal Balance Difference

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This election reduces certain timing differences in the Consolidated Statements of Income and better aligns with the management of the portfolio from a business perspective.

The changes in fair value were recorded as a component of mortgage income and included a loss of $ 3 million and a loss of $ 3 million for the three months ended March 31, 2022 and 2021, respectively.

The changes in fair value were recorded as a component of mortgage income and included a gain of $ 1 million and a gain of $ 1 million for the three months ended June 30, 2022 and 2021, respectively.

The changes in fair value were recorded as a component of mortgage income and included a loss of $ 2 million and a loss of $ 2 million for the six months ended June 30, 2022 and 2021, respectively.

Interest earned on loans held for sale is recorded within interest income on loans and leases in the Consolidated Statements of Income.

No originated loans held for sale were 90 or more days past due or on non-accrual status as of March 31, 2022 or December 31, 2021.

No originated loans held for sale were 90 or more days past due or on non-accrual status as of June 30, 2022 or December 31, 2021.

Assets Measured at Estimated Fair Value on a Non-recurring Basis

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dollars in millions Total Level 1 Level 2 Level 3 Total Gains

March 31, 2022

June 30, 2022

Assets held for sale - loans $ 3 $ — $ — $ 3 $ —

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December 31, 2021

Other real estate owned $ 34 $ — $ — $ 34 $ ( 4 )

Loans - collateral dependent loans $ 3 $ — $ — $ 3 $ ( 2 )

Other real estate owned 34 — — 34 ( 4 )

Mortgage servicing rights 22 — — 22 3

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OREO asset valuations are determined by using appraisals or other third-party value estimates of the subject property with discounts, generally between 6 % and 15 %, applied for estimated selling costs and other external factors that may impact the marketability of the property.

At March 31, 2022 and December 31, 2021, the weighted average discount applied was 8.13 % and 8.79 %, respectively.

At June 30, 2022 and December 31, 2021, the weighted average discount applied was 7.95 % and 8.79 %, respectively.

Changes to the value of the assets between scheduled valuation dates are monitored through continued communication with brokers and monthly reviews by the asset manager assigned to each asset.

5 unchanged sentences

Financial Instruments Fair Value

The table below presents the carrying values and estimated fair values for financial instruments.

The carrying values and estimated fair values of financial instruments exclude leases and certain other assets and liabilities, which were not required for disclosure.

The table below presents the carrying values and estimated fair values for financial instruments, excluding leases and certain other assets and liabilities for which these disclosures are not required.

Carrying Values and Fair Values of Financial Assets and Liabilities

March 31, 2022

June 30, 2022

Estimated Fair Value

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Interest earning deposits at banks 6,476 6,476 — — 6,476

Investment in marketable equity securities 94 32 62 — 94

Investment securities available for sale 9,210 — 9,030 180 9,210

Investment securities held to maturity 9,832 — 8,812 — 8,812

Investment in marketable equity securities 100 33 67 — 100

Loans held for sale 35 — 22 15 37

Net loans 64,739 — 1,593 60,550 62,143

Income earned not collected 247 — 247 — 247

Accrued interest receivable 258 — 258 — 258

Federal Home Loan Bank stock 83 — 83 — 83

3 unchanged sentences

Deposits 89,329 — 89,240 — 89,240

Credit balances of factoring clients 1,070 — — 1,070 1,070

Securities sold under customer repurchase agreements 646 — 646 — 646

Long-term borrowings 3,810 — 3,683 16 3,699

Credit balances of factoring clients 1,150 — — 1,150 1,150

Accrued interest payable 27 — 27 — 27

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Interest earning deposits at banks 9,115 9,115 — — 9,115

Investment in marketable equity securities 98 34 64 — 98

Investment securities available for sale 9,203 — 8,996 207 9,203

Investment securities held to maturity 3,809 — 3,759 — 3,759

Investment in marketable equity securities 98 34 64 — 98

Loans held for sale 99 — 99 — 99

Net loans 32,193 — — 31,890 31,890

Income earned not collected 134 — 134 — 134

Accrued interest receivable 134 — 134 — 134

Federal Home Loan Bank stock 40 — 40 — 40

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Investment securities held to maturity.

BancShares’ portfolio of held to maturity debt securities consists of mortgage-backed securities issued by government agencies and government sponsored entities, US Treasury notes, unsecured bonds issued by government agencies and government sponsored entities, securities issued by the World Bank and FDIC guaranteed CDs with other financial institutions.

BancShares’ portfolio of held to maturity debt securities consists of mortgage-backed securities issued by government agencies and government sponsored entities, U.S.

Treasury notes, unsecured bonds issued by government agencies and government sponsored entities, securities issued by the World Bank and FDIC guaranteed CDs with other financial institutions.

We primarily use prices obtained from pricing services to determine the fair value of securities, which are Level 2 inputs.

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The fair value of time deposits was estimated based on a discounted cash flow technique using Level 2 inputs appropriate to the contractual maturity.

Credit balances of factoring clients.

The impact of the time value of money from the unobservable discount rate for credit balances of factoring clients is inconsequential due to the short term nature of these balances, therefore, the fair value approximated carrying value, and the credit balances were classified as Level 3

Short-term borrowed funds.

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The fair value of other secured borrowings was estimated based on unobservable inputs and are classified as Level 3.

Credit balances of factoring clients.

For all other financial assets and financial liabilities, the carrying value is a reasonable estimate of the fair value as of March 31, 2022 and December 31, 2021.

For all other financial assets and financial liabilities, the carrying value is a reasonable estimate of the fair value as of June 30, 2022 and December 31, 2021.

The carrying value and fair value for these assets and liabilities are equivalent because they are relatively short-term in nature and there is no interest rate or credit risk that would cause the fair value to differ from the carrying value.

Cash and due from banks, and interest earning deposits at banks, are classified on the fair value hierarchy as Level 1.

Income earned not collected and accrued interest payable are classified as Level 2.

Accrued interest receivable and accrued interest payable are classified as Level 2.

NOTE 16 — STOCKHOLDERS' EQUITY

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Class A Class B

Common stock - March 31, 2022 14,996,325 1,005,185

Restricted stock units vested, net of shares held to cover taxes 877 —

Common stock - June 30, 2022 14,997,202 1,005,185

Class A Class B

Common stock - December 31, 2021 8,811,220 1,005,185

1 unchanged sentence

Restricted stock units vested, net of shares held to cover taxes 45,972 —

Common stock - March 31, 2022 14,996,325 1,005,185

Common stock - June 30, 2022 14,997,202 14,997,202 1,005,185

The Parent Company has Class A Common Stock and Class B Common Stock.

5 unchanged sentences

On March 12, 2020, BancShares issued and sold an aggregate of 13,800,000 depositary shares (the “Depositary Shares”), each representing a 1/40th interest in a share of 5.375 % non-cumulative perpetual preferred stock, series A (“BancShares Series A Preferred Stock”) (equivalent to $ 1,000 per share of the BancShares Series A Preferred Stock) for a total of $ 345 million.

CIT Preferred Stock was converted into New BancShares Preferred Stock on the Merger Date as further discussed in Note 2 — Business Combinations.

As part of the CIT Merger, each issued and outstanding share of CIT Series A Preferred Stock and CIT Series B Preferred Stock automatically converted into the right to receive one share of BancShares Series B Preferred Stock and BancShares Series C Preferred Stock, respectively, having such rights, preferences, privileges and voting powers, and limitations and restrictions, taken as a whole, that were not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers, and limitations and restrictions, taken as a whole, of the CIT Series A Preferred Stock and the CIT Series B Preferred Stock, respectively .

The following table summarizes BancShares’ non-cumulative perpetual preferred stock.

5 unchanged sentences

Series C January 3, 2022 January 4, 2027 $ 0.01 8,000,000 25 200 5.625 % Quarterly in arrears, beginning March 15, 2022

Dividends on BancShares Series A, B, and C Preferred Stock (together, “BancShares Preferred Stock”) will be paid when, as, and if declared by the Board of Directors of the Parent Company, or a duly authorized committee thereof, to the extent that the Parent Company has lawfully available funds to pay dividends.

If declared, dividends with respect to the BancShares Series A Preferred Stock and BancShares Series C Preferred Stock will accrue and be payable quarterly in arrears on March 15, June 15, September 15, and December 15 of each year, beginning on the “Dividend Payment Dates” in the table above and dividends with respect to the BancShares Series B Preferred Stock will initially accrue and be payable on a semi-annual basis during the fixed rate period, and then quarterly in arrears beginning after June 15, 2022.

If declared, dividends with respect to the BancShares Series B Preferred Stock will initially accrue and be payable on a semi-annual basis during the fixed rate period, and then quarterly in arrears beginning after June 15, 2022 beginning on the “Dividend Payment Dates” in the table above.

Dividends on the BancShares Preferred Stock will not be cumulative.

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NOTE 17 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table details the components of AOCI:

The following table details the components of Accumulated Other Comprehensive Income (“AOCI”):

Components of Accumulated Other Comprehensive Income (Loss)

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

dollars in millions Gross

2 unchanged sentences

Unrealized Income

Unrealized (losses) gains on securities available for sale $ ( 431 ) $ 104 $ ( 327 ) $ ( 12 ) $ 3 $ ( 9 )

Unrealized (losses) gains on securities available for sale transferred to held to maturity ( 8 ) 2 ( 6 ) ( 9 ) 2 ( 7 )

Unrealized loss on securities available for sale $ ( 647 ) $ 157 $ ( 490 ) $ ( 12 ) $ 3 $ ( 9 )

Unrealized loss on securities available for sale transferred to securities held to maturity ( 8 ) 2 ( 6 ) ( 9 ) 2 ( 7 )

Defined benefit pension items 41 ( 10 ) 31 34 ( 8 ) 26

Foreign currency translation adjustments — — — — — —

Gains (losses) on hedge derivatives — — — — — —

Total accumulated other comprehensive income (loss) $ ( 614 ) $ 149 $ ( 465 ) $ 13 $ ( 3 ) $ 10

1 unchanged sentence

Changes in Accumulated Other Comprehensive Income (Loss) by Component

dollars in millions Unrealized (losses) gains on securities available for sale Unrealized net gains (losses) on Available for Sale Securities transferred to Held to Maturity Securities Net change in Defined Benefit Pension Items Total AOCI

dollars in millions Unrealized (loss) gain on securities available for sale Unrealized loss on securities available for sale transferred to securities held to maturity Net change in Defined Benefit Pension Items Total AOCI

Balance as of December 31, 2021 $ ( 9 ) $ ( 7 ) $ 26 $ 10

2 unchanged sentences

Net current period AOCI ( 481 ) 1 5 ( 475 )

Balance as of March 31, 2022 $ ( 327 ) $ ( 6 ) $ 28 $ ( 305 )

Balance as of June 30, 2022 $ ( 490 ) $ ( 6 ) $ 31 $ ( 465 )

Balance as of December 31, 2020 $ 79 $ 4 $ ( 71 ) $ 12

2 unchanged sentences

Net current period AOCI ( 44 ) — 10 ( 34 )

Balance as of March 31, 2021 $ 28 $ 4 $ ( 66 ) $ ( 34 )

Balance as of June 30, 2021 $ 35 $ 4 $ ( 61 ) $ ( 22 )

Other Comprehensive Income

2 unchanged sentences

Other Comprehensive Income (Loss) by Component

Three Months Ended March 31,

Three Months Ended June 30,

dollars in millions Gross Amount Tax Net Amount Gross Amount Tax Net Amount Income Statement Line Item

Net change in pension obligations

AOCI activity before reclassification $ — $ — $ — $ — $ — $ —

Reclassifications out of AOCI 4 ( 1 ) 3 6 ( 1 ) 5 Other noninterest

Net Change $ 4 $ ( 1 ) $ 3 $ 6 $ ( 1 ) $ 5

Unrealized net gains on securities Available for Sale

Unrealized (loss) gain on securities available for sale

AOCI activity before reclassification $ ( 216 ) $ 53 $ ( 163 ) $ 25 $ ( 6 ) $ 19

Reclassifications out of AOCI 1 — 1 ( 9 ) 2 ( 7 ) Realized gains on investment securities available for sale, net

Reclassifications out of AOCI — — — ( 16 ) 4 ( 12 ) Realized gain on sales of investment securities available for sale, net

Net Change $ ( 216 ) $ 53 $ ( 163 ) $ 9 $ ( 2 ) $ 7

Net current period AOCI $ ( 212 ) $ 52 $ ( 160 ) $ 15 $ ( 3 ) $ 12

Six Months Ended June 30,

Gross Amount Tax Net Amount Gross Amount Tax Net Amount Income Statement Line Item

Net change in pension obligations

AOCI activity before reclassification $ — $ — $ — $ — $ — $ —

Reclassifications out of AOCI 7 ( 2 ) 5 13 ( 3 ) 10 Other noninterest

Net Change $ 7 $ ( 2 ) $ 5 $ 13 $ ( 3 ) $ 10

Unrealized loss on securities available for sale transferred to securities held to maturity

AOCI activity before reclassification $ — $ — $ — $ — $ — $ —

Reclassifications out of AOCI 1 — 1 — — — Interest on investment securities

Net Change $ 1 $ — $ 1 $ — $ — $ —

Unrealized loss on securities available for sale

AOCI activity before reclassification $ ( 635 ) $ 154 $ ( 481 ) $ ( 32 ) $ 7 $ ( 25 )

Reclassifications out of AOCI — — — ( 25 ) 6 ( 19 ) Realized gain on sales of investment securities available for sale, net

Net Change $ ( 635 ) $ 154 $ ( 481 ) $ ( 57 ) $ 13 $ ( 44 )

Net current period AOCI $ ( 627 ) $ 152 $ ( 475 ) $ ( 44 ) $ 10 $ ( 34 )

NOTE 18 — REGULATORY CAPITAL

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The regulatory capital ratios for BancShares and FCB are calculated in accordance with the guidelines of the federal banking authorities.

The regulatory capital ratios for BancShares and FCB exceed the Basel III requirements and the PCA well-capitalized thresholds as of March 31, 2022 and December 31, 2021 as summarized in the following table.

March 31, 2022 December 31, 2021

The regulatory capital ratios for BancShares and FCB exceed the Basel III requirements and the PCA well-capitalized thresholds as of June 30, 2022 and December 31, 2021 as summarized in the following table.

June 30, 2022 December 31, 2021

dollars in millions Basel III Requirements PCA well-capitalized thresholds Amount Ratio Amount Ratio

7 unchanged sentences

Tier 1 leverage 4.00 5.00 10,899 10.14 4,651 8.07

At March 31, 2022, BancShares and FCB had total risk-based capital ratio conservation buffers of 6.47 % and 6.25 %, respectively, which are in excess of the fully phased in Basel III conservation buffer of 2.50%.

At December 31, 2021, BancShares and FCB had total risk-based capital ratio conservation buffers were 6.35 % and 5.85 %.

The capital ratio conservation buffers represent the excess of the regulatory capital ratio as of March 31, 2022 and December 31, 2021 over the Basel III minimum.

At June 30, 2022, BancShares and FCB had total risk-based capital ratio conservation buffers of 6.46 % and 6.28 %, respectively, which are in excess of the fully phased in Basel III conservation buffer of 2.50%.

At December 31, 2021, BancShares and FCB had total risk-based capital ratio conservation buffers of 6.35 % and 5.85 %, respectively.

The capital ratio conservation buffers represent the excess of the regulatory capital ratio as of June 30, 2022 and December 31, 2021 over the Basel III minimum.

Additional Tier 1 capital for BancShares includes preferred stock discussed further in Note 16 — Stockholders’ Equity.

3 unchanged sentences

The Board of Directors of FCB may approve distributions, including dividends, as it deems appropriate, subject to the requirements of the FDIC and the General Statutes of North Carolina, provided that the distributions do not reduce the regulatory capital ratios below the applicable requirements.

FCB could have paid additional dividends to the Parent Company in the amount of $ 3.6 billion while continuing to meet the requirements for well-capitalized banks at March 31, 2022.

Dividends declared by FCB and paid to the Parent Company amounted to $ 30 million for the three months ended March 31, 2022.

FCB could have paid additional dividends to the Parent Company in the amount of $ 3.7 billion while continuing to meet the requirements for well-capitalized banks at June 30, 2022.

Dividends declared by FCB and paid to the Parent Company amounted to $ 30 million for the six months ended June 30, 2022.

Payment of dividends is made at the discretion of FCB’s Board of Directors and is contingent upon satisfactory earnings as well as projected capital needs.

2 unchanged sentences

Earnings per Common Share

Three months ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

dollars in millions, except share and per share data

2022 2021 2022 2021

Net income $ 255 $ 153 $ 526 $ 300

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NOTE 20 — INCOME TAXES

BancShares’ global effective income tax rate was ( 20.4 )% for the three months ended March 31, 2022, and 23.0 % for the three months ended March 31, 2021.

The decrease in the rate from the year-ago quarter was primarily driven by the non-taxable nature of the bargain purchase gain arising from the CIT Merger.

BancShares’ global effective income tax rate was 24.2 % and 6.3 % for the three and six months ended June 30, 2022, respectively, and 23.1 % and 23.0 % for the three and six months ended June 30, 2021, respectively.

The increase in the rate from a year-ago quarter was primarily driven by the increase in state and local taxes resulting from the CIT Merger.

The decrease in the rate from the year-ago six-month period was primarily driven by the non-taxable nature of the bargain purchase gain arising from the CIT Merger.

The quarterly income tax expense is based on a projection of BancShares’ annual effective tax rate.

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The service cost component of net periodic benefit cost is included in salaries and wages while all other non-service cost components are included in other noninterest expense.

For the three months ended March 31, 2022 and 2021, the components of net periodic benefit cost are as follows:

Three months ended March 31,

The components of net periodic benefit cost are as follows:

Three Months Ended June 30, Six Months Ended June 30,

dollars in millions 2022 2021 2022 2021

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Net periodic benefit $ ( 4 ) $ ( 1 ) $ ( 9 ) $ ( 3 )

No discretionary contribution was made to the pension plans during the three months ended March 31, 2022.

No discretionary contribution was made to the pension plans during the six months ended June 30, 2022.

The funding policy of the pension plans is to contribute an amount each year to meet all Employee Retirement Income Security Act minimum requirements, including amounts to meet quarterly funding requirements, avoid “at-risk” status and avoid any benefit restrictions.

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CIT had compensation awards that either converted to BancShares RSUs or immediately vested at completion of the CIT Merger as further described in the “Stock-Based Compensation” discussion in Note 1 — Accounting Policies and Basis of Presentation.

The following table presents the unvested BancShares RSUs at March 31, 2022, which have vesting periods through 2024.

There were no grants of stock-based compensation awards during the quarter ended March 31, 2022.

The following table presents the unvested BancShares RSUs at June 30, 2022, which have vesting periods through 2024.

There were no grants of stock-based compensation awards during 2022.

Stock-Settled Awards Outstanding

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Vested / settled awards ( 72,533 ) 859.76

Vested / unsettled awards ( 95 ) 859.76

Unvested BancShares RSUs at March 31, 2022 55,959 $ 859.76

Unvested BancShares RSUs at June 30, 2022 50,607 $ 859.76

NOTE 22 — BUSINESS SEGMENT INFORMATION

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open hopper cars for coal and aggregates;

boxcars for paper and auto parts, and centerbeams and flat cars for lumber.

boxcars for paper and auto parts, and center beams and flat cars for lumber.

Revenue is primarily from operating lease income.

Certain items are not allocated to operating segments and are included in the Corporate segment.

Certain items that are not allocated to operating segments are included in the Corporate segment.

Some of the more significant and recurring items include interest income on investment securities, a portion of interest expense primarily related to corporate funding costs (including brokered deposits), income on BOLI (other noninterest income), merger-related costs, as well as certain unallocated costs and intangible asset amortization expense (operating expenses).

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The following table presents the condensed income statement by segment.

Three months ended March 31, 2022

Three Months Ended June 30, 2022

dollars in millions General Banking Commercial Banking Rail Corporate Total BancShares

Net interest income $ 467 $ 204 $ ( 18 ) $ 47 $ 700

Provision (benefit) for credit losses ( 15 ) ( 34 ) — 513 464

Provision for credit losses 7 35 — — 42

Net interest income after provision for credit losses 460 169 ( 18 ) 47 658

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Income (loss) before income taxes 195 119 31 ( 8 ) 337

Provision (benefit) for income taxes 40 41 11 ( 138 ) ( 46 )

Income tax expense 40 24 7 11 82

Net income (loss) $ 155 $ 95 $ 24 $ ( 19 ) $ 255

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Operating lease equipment, net — 724 7,247 — 7,971

Three months ended March 31, 2021

Three Months Ended June 30, 2021

dollars in millions General Banking Commercial Banking Rail Corporate Total BancShares

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Income before income taxes 199 2 — ( 2 ) 199

Provision for income taxes 40 1 — 3 44

Income tax expense 46 — — — 46

Net income $ 153 $ 2 $ — $ ( 2 ) $ 153

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Operating lease equipment, net — — — — —

Six Months Ended June 30, 2022

dollars in millions General Banking Commercial Banking Rail Corporate Total BancShares

Net interest income $ 904 $ 411 $ ( 37 ) $ 71 $ 1,349

(Benefit) provision for credit losses ( 8 ) 1 — 513 506

Net interest income after provision for credit losses 912 410 ( 37 ) ( 442 ) 843

Noninterest income 248 242 322 462 1,274

Noninterest expenses 799 371 211 174 1,555

Income (loss) before income taxes 361 281 74 ( 154 ) 562

Income tax expense (benefit) 80 65 18 ( 127 ) 36

Net income (loss) $ 281 $ 216 $ 56 $ ( 27 ) $ 526

Six Months Ended June 30, 2021

dollars in millions General Banking Commercial Banking Rail Corporate Total BancShares

Net interest income $ 707 $ 8 $ — $ ( 29 ) $ 686

(Benefit) provision for credit losses ( 32 ) 1 — — ( 31 )

Net interest income (loss) after benefit for credit losses 739 7 — ( 29 ) 717

Noninterest income 214 — — 56 270

Noninterest expenses 579 2 — 16 597

Income before income taxes 374 5 — 11 390

Income tax expense 86 1 — 3 90

Net income $ 288 $ 4 $ — $ 8 $ 300

NOTE 23 — COMMITMENTS AND CONTINGENCIES

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The accompanying table summarizes credit-related commitments and other purchase and funding commitments:

dollars in millions March 31, 2022 December 31, 2021

dollars in millions June 30, 2022 December 31, 2021

Financing Commitments

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Financing commitments, referred to as loan commitments or lines of credit, primarily reflect BancShares’ agreements to lend to its customers, subject to the customers’ compliance with contractual obligations.

At March 31, 2022, substantially all undrawn financing commitments were senior facilities.

At June 30, 2022, substantially all undrawn financing commitments were senior facilities.

Most of the undrawn and available financing commitments are in the Commercial Banking segment.

Financing commitments also include approximately $ 75 million related to off-balance sheet commitments to fund equity investments.

Commitments to fund equity investments are contingent on events that have yet to occur and may be subject to change.

As financing commitments may not be fully drawn, may expire unused, may be reduced or canceled at the customer’s request, and may require the customer to be in compliance with certain conditions, total commitment amounts do not necessarily reflect actual future cash flow requirements.

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If the client’s customer is unable to pay an undisputed receivable solely as the result of credit risk, BancShares is then required to purchase the receivable from the client, less any borrowings for such client based on such defaulted receivable.

The outstanding amount in the table above, less $ 161 million at March 31, 2022 of borrowings for such clients, is the maximum amount that BancShares would be required to pay under all DPAs.

The outstanding amount in the table above, less $ 137 million at June 30, 2022 of borrowings for such clients, is the maximum amount that BancShares would be required to pay under all DPAs.

This maximum amount would only occur if all receivables subject to DPAs default in the manner described above, thereby requiring BancShares to purchase all such receivables from the DPA clients.

The table above includes $ 2.0 billion of DPA exposures at March 31, 2022, related to receivables on which BancShares has assumed the credit risk.

The table also includes $ 115 million available under DPA credit line agreements provided at March 31, 2022.

The table above includes $ 1.8 billion of DPA exposures at June 30, 2022, related to receivables on which BancShares has assumed the credit risk.

The table also includes $ 110 million available under DPA credit line agreements provided at June 30, 2022.

The DPA credit line agreements specify a contractually committed amount of DPA credit protection and are cancellable by us only after a notice period, which is typically 90 days or less.

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BancShares is also exposed to litigation risk relating to the prior business activities of banks from which assets were acquired and liabilities assumed.

As part of the CIT Merger, BancShares assumed litigation in which CIT and CIT Bank were named as defendants in an existing lawsuit brought as a qui tam (i.e., whistleblower) action by a former OneWest Bank N.A.

(“One-West”) employee on behalf of the U.S.

The lawsuit asserts claims related to OneWest’s participation in the Home Affordable Modification Program (“HAMP”) administered by the United States Treasury Department, as well as FHA and Veterans Administration (“VA”) programs.

As part of the CIT Merger, BancShares assumed litigation in which CIT and CIT Bank, N.A.

d/b/a OneWest Bank (“OneWest”) were named as defendants in an existing lawsuit brought as a qui tam (i.e., whistleblower) action by a former OneWest employee on behalf of the U.S.

The lawsuit asserts claims related to OneWest’s participation in the Home Affordable Modification Program (“HAMP”) administered by the United States Treasury Department, as well as Federal Housing Administration (“FHA”) and Veterans Administration (“VA”) programs.

On October 15, 2019, the plaintiff filed a second amended complaint in the United States District Court for the Eastern District of Texas alleging that, beginning in 2009, CIT (and its predecessor, OneWest) falsely certified its compliance with HAMP, submitted false claims for incentive payments for loan modifications, submitted false claims for FHA and VA insurance payments, and failed to self-report these violations.

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CIT has received approximately $ 93 million in servicer incentives under HAMP, and the Government has paid more than $ 440 million in the aggregate in borrower, servicer, and investor incentives in connection with loans modified by OneWest or CIT under HAMP.

The Department of Justice has declined to intervene in this case.

CIT has filed motions for summary judgment seeking dismissal of the HAMP and FHA claims.

Court has denied those motions.

CIT also has filed a motion for summary judgment seeking a dismissal of the VA claim, which the Court has not yet decided.

A Final Pretrial Conference has been rescheduled for June 15, 2022, with a jury trial to commence on June 20, 2022.

OneWest and CIT denied all allegations of liability.

The Department of Justice declined to intervene in the case.

On May 5, 2022, the parties reached an agreement in principle to settle all claims for $ 18.5 million, subject to required approvals by the United States Government and memorializing the agreement in a formal writing (the “Agreement in Principle”).

Based upon the Agreement in Principle, the parties also made a motion to vacate the existing pretrial conference date and trial date so that the parties can devote resources to the completion of the steps necessary to execute a formal settlement agreement.

The existing accruals in BancShares’ consolidated financial statements as of and for the three month period ending March 31, 2022 include estimates that were materially consistent with the amount of $ 18.5 million included in the Agreement in Principle.

The parties have now reached a full and final agreement on all settlement terms consistent with the Agreement in Principle, and the United States Government has approved the settlement.

On July 26, 2022, pursuant to the terms of the settlement, the parties filed a joint stipulation of dismissal with prejudice.

On August 4, 2022, BancShares disbursed the funds for the settlement.

The existing accruals in BancShares’ consolidated financial statements as of and for the three and six month periods ended June 30, 2022 include estimates that were consistent with the amount of $ 18.5 million included in the Agreement in Principle.

BancShares is also involved, and from time to time in the future may be involved, in a number of pending and threatened judicial, regulatory, and arbitration proceedings as well as proceedings, investigations, examinations and other actions brought or considered by governmental and self-regulatory agencies.

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For Litigation and other matters where losses are reasonably possible, management currently estimates an aggregate range of reasonably possible losses of up to $ 10 million in excess of any established reserves and any insurance we reasonably believe we will collect related to those matters.

This estimate represents reasonably possible losses (in excess of established reserves and insurance) over the life of such Litigation, which may span a currently indeterminable number of years, and is based on information currently available as of March 31, 2022.

The Litigation matters underlying the estimated range will change from time to time, and actual results may vary significantly from this estimate.

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In the event of unexpected future developments, it is possible that the ultimate resolution of these cases, matters, and proceedings, if unfavorable, may be material to BancShares’ consolidated financial position in a particular period.

NOTE 24 – CERTAIN RELATIONSHIPS AND RELATED TRANSACTION

NOTE 24 – CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

CIT Northbridge Credit LLC (“Northbridge”) is an asset-based-lending joint venture between FCB (as successor to CIT Bank) and Allstate Insurance Company and its subsidiary (“Allstate”) that extends credit in asset-based lending middle-market loans.

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Allstate is an 80 % equity investor.

FCB’s investment was $ 31 million at March 31, 2022, with the expectation of additional investment as the joint venture grows.

FCB’s investment was $ 33 million at June 30, 2022, with the expectation of additional investment as the joint venture grows.

Management fees were earned on loans under management.

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BancShares’ interests in these entities were entered into in the ordinary course of business.

Other assets included $ 702 million at March 31, 2022 and $ 156 million at December 31, 2021, of tax credit investments and investments in non-consolidated entities relating to such transactions that are accounted for under the equity or cost methods.

The combination of investments in and loans to non-consolidated entities represents BancShares’ maximum exposure to loss, as BancShares does not provide guarantees or other forms of indemnification to non-consolidated entities.

Other assets included $ 696 million at June 30, 2022 and $ 160 million at December 31, 2021, of tax credit investments and investments in unconsolidated entities relating to such transactions that are accounted for under the equity or cost methods.

The combination of investments in and loans to unconsolidated entities represents BancShares’ maximum exposure to loss, as BancShares does not provide guarantees or other forms of indemnification to unconsolidated entities.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements