What changed in this filing

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Item 1A. Risk Factors

2023-02-24 compared with 2022-02-25 · 196 added, 179 removed, 356 unchanged (51% of the section changed)

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▪ We may be adversely affected by risks associated with completed, pending or any potential future acquisitions.

◦ We may fail to realize all of the anticipated benefits of the CIT Merger, or those benefits may take longer to realize than expected.

We may also encounter significant difficulties in integrating with the acquired operations.

▪ Our future results will suffer if we do not effectively manage our expanded operations following the CIT Merger .

• Operational Risks:

The risks of loss resulting from inadequate or failed processes, people and systems or from external events, including, but not limited to, the COVID-19 pandemic.

The risks of loss resulting from inadequate or failed processes, people and systems or from external events.

▪ We face significant operational risks in our businesses and may fail to maintain appropriate operational infrastructure and oversight.

◦ A cyber attack, information or security breach, or a technology failure of ours or of a third party could adversely affect our ability to conduct our business, manage our exposure to risk, result in the disclosure or misuse of confidential customer or employee data or proprietary information, increase our costs to maintain and update our operational and security systems and infrastructure.

▪ A cyberattack, information or security breach, or a technology outage of ours or of a third party could adversely affect our ability to conduct our business, manage our exposure to risk, result in the disclosure or misuse of confidential customer or employee data or proprietary information, and increase our costs to maintain and update our operational and security systems and infrastructure.

This could adversely impact our results of operations, liquidity and financial condition, as well as cause us legal or reputational harm.

◦ The continued economic impacts of the COVID-19 pandemic are expected to continue to affect our business, financial condition and results of operations.

• Credit Risks:

The risks that a borrower will fail to perform on an obligation or that our risk management processes will fail or be insufficient.

The risks that a borrower, obligor, or counterparty will fail to perform on an obligation or that our risk management processes will fail or be insufficient.

▪ If we fail to effectively manage credit risk, our business and financial condition will suffer.

◦ Our allowance for credit losses may prove to be insufficient to absorb losses in our loan portfolio.

▪ Our allowance for credit losses may prove to be insufficient to absorb losses in our loan portfolios.

• Market Risks:

The risks to our financial condition resulting from adverse movements in market rates or prices, including, but not limited to, interest rates, foreign exchange rates or equity prices.

The risks to our financial condition resulting from adverse movements in domestic and international macroeconomic and political conditions, as well as economic output levels, interest and inflation rates, employment levels, prices of commodities, consumer confidence levels, and changes in consumer spending, international trade policy, and fiscal and monetary policy.

▪ Unfavorable economic or political conditions, as considered through a range of metrics, have and could continue to adversely affect our business.

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• Liquidity Risks:

The risks that we will be unable to meet our obligations as they come due because of an inability to (i) liquidate assets or obtain adequate funding, or (ii) unwind or offset specific exposures without significantly lowering market prices because of inadequate market depth or market disruptions, or that we will not meet the liquidity management requirements we expect to be applicable to us as a Category IV banking organization, subject to the applicable transition periods.

The risks that we will be unable to meet our obligations as they come due because of an inability to (i) liquidate assets or obtain adequate funding, or (ii) unwind or offset specific exposures without significantly lowering market prices because of inadequate market depth or market disruptions, or that we will not meet the liquidity management requirements applicable to us as a Category IV banking organization, subject to the applicable transition periods.

▪ If our current level of balance sheet liquidity were to experience pressure, it could affect our ability to pay deposits and fund our operations.

◦ We expect to be subject to enhanced liquidity risk management requirements as a Category IV banking organization, subject to the applicable transition periods, including reporting, liquidity stress testing, and a liquidity buffer, and failure to meet these requirements could result in regulatory and compliance risks, and possible restrictions on our activities.

▪ We are subject to enhanced liquidity risk management requirements as a Category IV banking organization, subject to the applicable transition periods, including reporting, liquidity stress testing, and a liquidity buffer, as well as resolution planning at the bank level, and failure to meet these requirements could result in regulatory and compliance risks, and possible restrictions on our activities.

• Capital Adequacy Risks:

The risks that our capital levels are inadequate to preserve our safety and soundness, support our ongoing business operations and strategies and provide us with support against unexpected or sudden changes in the business/economic environment.

The risks that our capital levels become inadequate to preserve our safety and soundness, support our ongoing business operations and strategies and provide us with support against unexpected or sudden changes in the business/economic environment, or that we will not meet the capital adequacy requirements applicable to us as a Category IV banking organization, subject to the applicable transition periods.

▪ Our ability to grow is contingent upon access to capital, which may not be readily available to us.

◦ We are subject to capital adequacy and liquidity guidelines and, if we fail to meet these guidelines, our financial condition would be adversely affected.

▪ We and FCB are subject to capital adequacy and liquidity guidelines and, if we fail to meet these guidelines, our financial condition and ability to make capital distributions would be adversely affected.

• Compliance Risks:

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▪ We operate in a highly regulated industry, and the laws and regulations that govern our operations, taxes, corporate governance, executive compensation and financial accounting and reporting, including changes in them or our failure to comply with them, may adversely affect us.

◦ We face compliance risks related to the specialty commercial business lines acquired from CIT.

▪ Information security and data privacy are areas of heightened legislative and regulatory focus.

• Asset Risks:

The risks that the value of our long-lived assets will be lower than expected, resulting in reduced income or depreciation over the remaining life of the asset or a lower sale value.

The risks that the value of our long-lived assets will be lower than expected, resulting in reduced income over the remaining life of the asset or a lower sale value.

▪ We may not be able to realize our entire investment in the equipment that we lease to our customers.

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▪ Our accounting policies and processes are critical to the reporting of our financial condition and results of operations.

They require management to make estimates about matters that are uncertain, and such estimates may be incorrect.

They require management to make estimates about matters that are uncertain, and such estimates may be materially different from actual results.

The risks and uncertainties that management believes are material to an investment in us are described below.

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However, we have pursued and expect to continue to pursue acquisition opportunities that we believe support our business strategies and may enhance our profitability.

For example, on January 3, 2022, we consummated the acquisition of CIT, which added $53.78 billion in total assets, $39.43 billion in deposits and $32.71 billion in loans.

We must generally satisfy a number of material conditions prior to consummating any acquisition including, in many cases, federal and state regulatory approval.

Among other things, our regulators will consider our capital, liquidity, profitability, regulatory compliance and levels of goodwill when considering acquisition and expansion proposals.

We may fail to complete strategic and competitively significant business opportunities as a result of our inability to obtain required regulatory approvals in a timely manner or at all, or the approval for such opportunity could include conditions imposing additional costs or limitations that reduce the anticipated related benefits.

On July 9, 2021, President Biden issued an Executive Order on Promoting Competition in the American Economy encouraging the United States Attorney General along with the federal banking agencies to review the framework for evaluating bank mergers and acquisitions under the BHC Act and the Bank Merger Act.

Additionally, the Director of the CFPB has publicly sought a greater role for the CFPB in the evaluation of bank merger proposals.

On July 9, 2021, President Biden issued the Executive Order, which encouraged federal banking agencies to review the framework for evaluating bank mergers and acquisitions under the BHC Act and the Bank Merger Act.

The Executive Order has received significant public support from members of Congress as well as from members of the board of the FDIC and Federal Reserve and the Acting Comptroller of the Currency.

The Director of the CFPB” has publicly sought a greater role for the CFPB in the evaluation of bank merger proposals.

Any enhanced regulatory scrutiny of bank mergers and acquisitions and revision of the regulatory framework for approval of bank mergers could adversely affect the marketplace for bank merger transactions and could result in potential future acquisitions by us being delayed, impeded or restricted in certain respects and result in new rules that possibly limit the size of financial institutions that we may be able to acquire in the future or alter the terms for such transactions.

We may be unsuccessful in identifying, consummating or integrating any potential acquisitions.

Acquisitions of financial institutions, assets of financial institutions or other operating entities involve operational risks and uncertainties, and acquired companies or assets may have unknown or contingent liabilities, exposure to unexpected asset quality problems that require write downs or write-offs, additional regulatory requirements or difficulty retaining key employees and customers.

Acquisitions of financial institutions, assets of financial institutions or other operating entities involve operational risks and uncertainties.

Acquired companies or assets may have unknown or contingent liabilities, exposure to unexpected asset quality problems that require write downs or write-offs, additional regulatory requirements or difficulty retaining key employees and customers.

Due to these and other issues relating to acquisitions, we may not be able to realize projected cost savings, synergies or other benefits associated with any such acquisition.

Failure to efficiently integrate any acquired entities or assets into our existing operations could significantly increase our operating costs and consequently have material adverse effects on our financial condition and results of operations.

We may fail to realize all of the anticipated benefits of the CIT Merger, or those benefits may take longer to realize than expected.

We may also encounter significant difficulties in integrating with the acquired operations.

The success of the CIT Merger, including anticipated benefits and cost savings, will depend, in substantial part, on our ability to successfully integrate the acquired operations in a manner that results in various benefits, such as anticipated synergies or cost savings, and that does not materially disrupt existing customer relationships or result in decreased revenues due to loss of customers.

The process of integrating operations has resulted in a loss of key personnel and could cause an interruption of, or loss of momentum in, the activities of our business.

Inconsistencies in standards, controls, procedures and policies could adversely affect us.

The diversion of management’s attention and any delays or difficulties encountered in connection with the integration of the acquired operations could have an adverse effect on our business, financial condition, operating results and prospects.

If we experience difficulties in the integration process, including those listed above, we may fail to realize the anticipated benefits of the CIT Merger in a timely manner or at all.

In particular, the impacts of the pandemic caused by COVID-19 and its variants may make the integration more costly or more difficult to effect, which, in turn, may make it more difficult for us to realize anticipated synergies or cost savings in the amounts estimated or in the time frame contemplated or at all.

We have incurred and expect to continue to incur substantial expenses related to the integration of the operations acquired in connection with the CIT Merger.

There are a large number of processes, policies, procedures, operations, technologies and systems that must be integrated in connection with the consummation of the CIT Merger, and integration remains in process and is expected to continue for some time.

While we have attempted to accurately forecast a certain level of expenses that will be incurred in connection with such integration, there are many factors beyond our control that have affected and could continue to affect the total amount and the timing of the integration expenses.

Moreover, many of the integration expenses that will be incurred are, by their nature, difficult to estimate accurately.

These expenses could materially exceed our current estimates and, consequently, could materially adversely affect our future earnings.

Our future results will suffer if we do not effectively manage our expanded operations following the CIT Merger .

Following the consummation of the CIT Merger, the size and geographic and operational scope of our business has increased significantly.

Following the CIT Merger, the size and geographic and operational scope of our business has increased significantly.

The CIT Merger more than doubled our asset size, increased the breadth and complexity of our business with the addition of new business lines in which we have not previously engaged and expanded our geographic scope to new geographic areas.

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We encounter significant competition that may reduce our market share and profitability.

We compete with other banks and specialized financial services providers in our market areas.

We operate in a highly competitive industry and compete with other banks and specialized financial services providers in our market areas.

Our primary competitors include local, regional and national banks;

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Certain characteristics of digital asset transactions, such as the speed with which such transactions can be conducted, the ability to transact without the involvement of regulated intermediaries, the ability to engage in transactions across multiple jurisdictions, and the anonymous nature of the transactions, are appealing to certain consumers.

Accordingly, digital asset service providers—which, at present, are not subject to as extensive regulation as banking organizations and other financial institutions—have become active competitors for our customers’ banking business.

The process of eliminating banks as intermediaries, known as “disintermediation,” could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits.

The loss of these revenue streams and the lower cost of deposits as a source of funds could have a material adverse effect on our financial condition and results of operations.

Certain provisions in our Certificate of Incorporation and Bylaws may prevent a change in management or a takeover attempt a shareholder might consider to be in their best interests.

Certain provisions contained in our Amended and Restated Certificate of Incorporation (our “Certificate of Incorporation) and Amended and Restated Bylaws (our “Bylaws”) could delay or prevent the removal of our directors and other management.

The provisions could also delay or make more difficult a tender offer, merger or proxy contest a shareholder might consider to be in their best interests.

We may fail to realize all of the anticipated benefits of the CIT Merger, or those benefits may take longer to realize than expected.

We may also encounter difficulties in completing the integration of the acquired operations and may incur expenses in excess of those forecasted in connection with the completion.

The success of the CIT Merger, including anticipated benefits and cost savings, depends, in substantial part, on our ability to successfully complete the integration of the acquired operations in a manner that results in various benefits, such as anticipated synergies and cost savings, and that does not materially disrupt existing customer relationships or result in decreased revenues due to loss of customers.

Although our merger integration is substantially complete, the process of integrating operations resulted in a loss of key personnel, and we could still discover inconsistencies in standards, controls, procedures and policies, which could adversely affect us.

While we have attempted to accurately forecast a certain level of expense and expected cost savings in connection with the integration, there are many factors beyond our control that could affect the total amount and the timing of the integration expense and projected cost savings.

In addition, the diversion of management’s attention and any unexpected delays or difficulties encountered in completing the integration of the acquired operations could have an adverse effect on our business, financial condition, operating results and prospects.

Certain provisions in our Certificate of Incorporation and Bylaws may prevent a change in management or a takeover attempt that a stockholder might consider to be in their best interests.

We are a banking holding company incorporated in the state of Delaware.

Certain anti-takeover provisions under Delaware law and certain provisions contained in our Amended and Restated Certificate of Incorporation (our “Certificate of Incorporation) and Amended and Restated Bylaws (our “Bylaws”) could delay or prevent the removal of our directors and other management.

The provisions could also delay or make more difficult a tender offer, merger or proxy contest a stockholder might consider to be in their best interests.

For example, our Certificate of Incorporation and Bylaws:

• allow the Board to issue and set the terms of preferred shares without further shareholder approval;

• limit who can call a special meeting of shareholders;

• establish advance notice requirements for nominations for election to the Board and proposals of other business to be considered at annual meetings of shareholders.

These provisions, as well as provisions of the BHCA and other relevant statutes and regulations that require advance notice and applications for regulatory approval of changes in control of banks and bank holding companies, may discourage bids for our common stock at a premium over market price, adversely affecting the price that could be received by our shareholders for our common stock.

Additionally, the fact that the Holding family holds or controls shares representing approximately 50%, and in the past have held or controlled shares representing more than 50%, of the voting power of our common stock may discourage potential takeover attempts and bids for our common stock at a premium over market price.

Our Bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for substantially all disputes between us and our shareholders.

This could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees or agents.

• allow the Board to issue and set the terms of preferred shares without further stockholder approval;

• limit who can call a special meeting of stockholders;

• establish advance notice requirements for nominations for election to the Board and proposals of other business to be considered at annual meetings of stockholders;

• authorize the issuance of two classes of common stock, one of which, Class B common stock, par value $1 per share (“Class B common stock”), is entitled to cast 16 votes per share.

As of December 31, 2022, approximately 34.1% of the outstanding shares of Class B common stock were owned and entitled to be voted by our directors and executive officers and certain of their affiliates.

These provisions, as well as provisions of the BHC Act and other relevant statutes and regulations that require advance notice and applications for regulatory approval of changes in control of banks and bank holding companies, may discourage bids for our common stock at a premium over market price, adversely affecting the price that could be received by our stockholders for our common stock.

Additionally, the fact that the Holding family and entities related to various family members hold or control shares representing approximately 50%, and in the past have held or controlled shares representing more than 50%, of the voting power of our common stock may discourage potential takeover attempts and bids for our common stock at a premium over market price.

This could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees or agents.

Our Bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of us;

(ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, other employees or shareholder to us or our shareholders;

(ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, other employees or stockholder to us or our stockholders;

(iii) any action asserting a claim against us arising pursuant to any provision of the General Corporation Law of the State of Delaware or as to which the General Corporation Law of the State of Delaware confers jurisdiction on the Court of Chancery of the State of Delaware;

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These choice of forum provisions do not preclude or contract the scope of exclusive federal or concurrent jurisdiction for any actions brought under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

Accordingly, our choice of forum provisions will not relieve us of our duties to comply with the federal securities laws and the rules and regulations thereunder, and our shareholders will not be deemed to have waived our compliance with these laws, rules and regulations.

These choice of forum provisions may limit a shareholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers or other employees or agents, which may discourage lawsuits against us and our directors, officers and other employees or agents.

Accordingly, our choice of forum provisions will not relieve us of our duties to comply with the federal securities laws and the rules and regulations thereunder, and our stockholders will not be deemed to have waived our compliance with these laws, rules and regulations.

These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers or other employees or agents, which may discourage lawsuits against us and our directors, officers and other employees or agents.

If a court were to find the choice of forum provision contained in our Bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations, and financial condition.

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We rely on dividends from FCB for paying dividends on our common and preferred stock and servicing our debt obligations, and FCB’s ability to pay us dividends is restricted.

As a financial holding company, we are a separate legal entity from FCB.

As a FHC, we are a separate legal entity from FCB.

We derive most of our revenue and cash flow from dividends paid by FCB.

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Such events could impact our performance through fewer loans, reduced fee income and fewer deposits, each of which could result in reduced net income.

The COVID-19 pandemic, while disruptive to our customers and the economy, has not led to a significant decline in our products and services to date, but it could if its impact on us and our customers continues or increases in the future.

New technologies, and our ability to efficiently and effectively implement, market and deliver new products and services to our customers present competitive risks.

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Safely conducting and growing our business requires that we create and maintain an appropriate operational and organizational control infrastructure.

Operational risk can arise in numerous ways, including employee fraud, customer fraud and control lapses in bank operations and information technology.

Our dependence on our employees and internal and third party automated systems to record and process transactions may further increase the risk that technical failures or system-tampering will result in losses that are difficult to detect.

We may be subject to disruptions of our operating systems arising from events that are wholly or partially beyond our control.

Failure to maintain appropriate operational infrastructure and oversight can lead to loss of service to customers, legal actions and noncompliance with various laws and regulations, all of which could have a material adverse impact on our business, financial condition and results of operations.

Operational risk can arise in numerous ways, including, but not limited to, employee fraud, customer fraud and control lapses in bank operations and information technology.

Our dependence on our employees and internal and third party automated systems and vendors to record and process transactions may further increase the risk that technical failures or system-tampering will result in losses that are difficult to detect.

Our internal controls that are intended to safeguard and maintain our operational and organizational infrastructure and information have inherent limitations and may not be successful.

A cyber attack, information or security breach, or a technology failure of ours or of a third party could adversely affect our ability to conduct our business, manage our exposure to risk, result in the disclosure or misuse of confidential customer or employee data or proprietary information, increase our costs to maintain and update our operational and security systems and infrastructure.

We may be subject to disruptions of our operating systems arising from events that are wholly or partially beyond our control.

In addition, our railcars are used to transport a variety of products including, but not limited to, cement, energy products, chemicals and coal.

An accidental derailment of these railcars could result in personal injury and property damage, which could be significant, as well as potential environmental remediation and restoration obligations and penalties.

Failure to maintain appropriate operational infrastructure and oversight or to safely operate our business can lead to loss of service to customers, reputational harm, legal actions and noncompliance with various laws and regulations, all of which could have a material adverse impact on our business, financial condition and results of operations.

A cyberattack, information or security breach, or a technology outage of ours or of a third party could adversely affect our ability to conduct our business, manage our exposure to risk, result in the disclosure or misuse of confidential customer or employee data or proprietary information, and increase our costs to maintain and update our operational and security systems and infrastructure.

This could adversely impact our results of operations, liquidity and financial condition, as well as cause us legal or reputational harm.

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In addition, to access our network, products and services, our customers and other third parties may use personal mobile devices or computing devices that are outside of our network environment and are subject to their own cybersecurity risks, which may provide a point of entry for adverse effects on our own network environment.

We, our customers, regulators and other third parties have been subject to, and are likely to continue to be the target of, cyber attacks.

These cyber attacks include computer viruses, malicious or destructive code, ransomware, phishing attacks, denial of service or information or other security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary and other information of ours, our employees, our customers or of third parties, damages to systems, or other material disruption to our or our customers’ or other third parties’ network access or business operations.

We, our customers, regulators and other third parties have been subject to, and are likely to continue to be the target of, cyberattacks.

These cyberattacks include computer viruses, malicious or destructive code, ransomware, phishing attacks, denial of service or information or other security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary and other information of ours, our employees, our customers or of third parties, damages to systems, or other material disruption to our or our customers’ or other third parties’ network access or business operations.

As cyber threats continue to evolve, we have been and will likely continue to be required to expend significant resources to continuously enhance our protective measures and may be required to expend significant resources to investigate and remediate any information security vulnerabilities or incidents.

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Additionally, a security breach may be difficult to detect, even after it occurs, which may compound the issues related to such breach.

Cybersecurity risks for banking organizations have significantly increased in recent years in part because of the proliferation of new technologies and the use of the internet to conduct financial transactions.

Continued geographical turmoil, including the ongoing conflict between Russia and Ukraine, has heightened the risk of cyberattack and has created new risk for cybersecurity, and similar concerns.

For example, the United States government has warned that sanctions imposed against Russia by the United States in response to its conflict with Ukraine could motivate Russia to engage in malicious cyber activities against the United States.

If such cyberattacks occurred, it could result in severe costs and disruptions to governmental entities and companies and their operations.

The impact of the conflict and retaliatory measures is continually evolving and cannot be predicted with certainty.

Cybersecurity risks for banking organizations have significantly increased in recent years in part because of the proliferation of new technologies, the use of the internet to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists, nation-states, activists and other external parties.

These risks are expected to continue in the future as that proliferation intensifies.

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Additionally, the increase of supply chain attacks including third parties with access to our data or those providing critical services, remain an emerging operational issue which could adversely affect our business, customers, reputation and operations.

Although to date we are not aware of any material losses or other material consequences relating to technology failure, cyber attacks or other information or security breaches, whether directed at us or third parties, we may suffer such losses or other consequences in the future.

We also face indirect technology, cybersecurity and operational risks relating to the customers and other third parties with whom we do business or upon whom we rely to facilitate or enable our business activities, including financial counterparties;

As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our layers of defense or to investigate and remediate any information security vulnerabilities.

Although to date we are not aware of any material losses or other material consequences relating to technology failure, cyberattacks or other information or security breaches, whether directed at us or third parties, we may suffer such losses or other consequences in the future.

We also face indirect technology, cybersecurity and operational risks relating to customers and other third parties with whom we do business or upon whom we rely to facilitate or enable our business activities, including financial counterparties;

financial intermediaries such as clearing agents, exchanges and clearing houses;

and providers of critical infrastructure such as internet access and electrical power.

As a result of increasing consolidation, interdependence and complexity of financial entities and technology systems, a technology failure, cyber attack or other information or security breach that significantly degrades, deletes or compromises the systems or data of one or more financial entities could have a material impact on counterparties or other market participants, including us.

As a result of increasing consolidation, interdependence and complexity of financial entities and technology systems, a technology failure, cyberattack or other information or security breach that significantly degrades, deletes or compromises the systems or data of one or more financial entities could have a material impact on counterparties or other market participants, including us.

This consolidation interconnectivity and complexity increases the risk of operational failure, on both individual and industry-wide bases, as disparate systems need to be integrated, often on an accelerated basis.

Any third-party technology failure, cyber attack or other information or security breach, termination or constraint could, among other things, adversely affect our ability to effect transactions, service our customers, manage our exposure to risk or expand our businesses.

Cyber attacks or other information or security breaches, whether directed at us or third parties, may result in a material loss or have material consequences.

Furthermore, the public perception that a cyber attack on our systems has been successful, whether or not this perception is correct, may damage our reputation with customers and third parties with whom we do business and may encourage further cyber attacks.

Any third-party technology failure, cyberattack or other information or security breach, termination or constraint could, among other things, adversely affect our ability to effect transactions, service our customers, manage our exposure to risk or expand our businesses.

Cyberattacks or other information or security breaches, whether directed at us or third parties, may result in a material loss or have material consequences.

Furthermore, the public perception that a cyberattack on our systems has been successful, whether or not this perception is correct, may damage our reputation with customers and third parties with whom we do business and may encourage further cyberattacks.

A successful penetration or circumvention of system security could cause us negative consequences, including loss of customers and business opportunities, disruption to our operations and business, misappropriation or destruction of our confidential information and that of our customers, or damage to our customers’ and third parties’ computers or systems, and could result in a violation of applicable data privacy and protection laws and other laws, litigation exposure, regulatory fines, penalties or intervention, loss of confidence in our security measures, reputational damage, reimbursement or other compensatory costs, and additional compliance costs, any of which could adversely impact our results of operations, liquidity and financial condition.

The continued economic impacts of the COVID-19 pandemic are expected to continue to affect our business, financial condition and results of operations.

Beginning in early 2020, COVID-19 spread across most of the world, including the United States.

The COVID-19 pandemic, sustained by the spread of new, more-transmissible coronavirus variants, has continued to cause severe disruptions to the United States economy, regional quarantines, business and school shutdowns, high unemployment, disruptions to supply chains and overall economic instability, which has adversely impacted the operations, activities and business of our customers.

Effects have generally been felt across all industries, including financial services.

In response to the national public health crisis, federal, state and local governments have imposed and continue to impose an array of restrictions on the way we conduct our operations and on our customers, business partners, vendors and employees.

These restrictions, along with other economic factors including inflation risks, oil price volatility and changes in interest rates have and may continue to destabilize financial markets and negatively impact our customers’ business activities and operations, making it difficult for them to satisfy existing debt obligations.

They also have led to periods of elevated unemployment and slower consumer spending, which, in turn, has previously temporarily increased our collection risk as deteriorating economic conditions correlate with lower credit quality metrics and higher customer defaults on loans.

Economic pressures and uncertainty have and may continue to change consumer and business behaviors, which, in the short and long term, could affect borrowers’ creditworthiness and the demand for loans and other products and services we offer.

We are actively monitoring the loan portfolio to identify changes in credit risk within a specific geography, loan class, or within a particular industry concentration;

provision expense could increase as we incorporate these changes into our estimate on the allowance for credit losses.

Additionally, our operations have experienced modification as we continue to operate in a primarily remote working environment for many corporate employees and as we have adjusted branch operations and corporate processes.

With continued uncertainty around outbreak severity and vaccine effectiveness and acceptance, particularly in regards to coronavirus variants, there may be increased absenteeism and lost productivity as a result of the remote workforce.

We have seen an increased incidence of cybersecurity threats and fraud as cyber-criminals look to profit from the disruption and potential strain on information technology relating to a regularly remote working environment.

The COVID-19 pandemic has significantly reduced demand for goods and service for many customers and other businesses in sectors that we service.

In the retail sector, our exposure is primarily in the factoring business, principally in trade receivables, and to a lesser extent in the commercial real estate business.

In the hospitality and transportation sectors, we have loan exposures to the restaurant, lodging, gaming, maritime, aviation and rail industries.

The significant declines in the price of, or demand for, oil and gas may have negative effects on not only our loan exposures in the exploration and production sector, but may also lead to a decreased demand for our railcars, and could have a significant adverse effect on the demand for ships that are collateral for our loans.

Further, we have exposure to small businesses through both equipment loans and leases and through SBA loans, which could be adversely affected by the extensive closure of businesses in many states during the COVID-19 pandemic.

We also have exposure to single family residential mortgages, which could be adversely affected by job losses due to the economic dislocation resulting from the COVID-19 pandemic.

Further, during the COVID-19 pandemic we implemented several forms of temporary relief to our consumer and commercial customers, including payment deferrals, suspension of foreclosures and evictions, and fee waivers for ATM transactions, overdrafts, and early withdrawal of certificates of deposit, which may adversely affect our revenue and results of operations or result in higher rates of default and increased credit losses in future periods.

The effects of the COVID-19 pandemic on economic and market conditions have increased demands on credit facilities that we provide to our customers, which could have an adverse impact on our liquidity.

Market volatility and general uncertainty in the capital markets related to the COVID-19 pandemic may also impact our business.

Our access to capital and liquidity could be limited by market disruptions, which could be exacerbated by delays in customer payments or significant withdrawals from customer deposit accounts.

In addition, the fair value of our assets and liabilities have been and will continue to be impacted by the changing market environment.

This could also increase liquidity and capital adequacy risks, as well as long-lived asset impairment risk.

As the government and its regulatory bodies respond to the COVID-19 pandemic, it increases the burden on our associates to quickly process and respond to changing regulatory guidance.

This increases the risk of noncompliance, which could expose us to liability or other adverse effects.

The effects of the COVID-19 pandemic will heighten specific risk factors and could impact substantially all risk factors described herein.

Those effects will adversely affect our business operations and results at least until the outbreak has subsided to a manageable level, and the negative effects on the economy, our customers and our business and results likely will continue to be felt for some time afterwards.

The full extent of the impact will depend on future developments that are highly uncertain including the duration and spread of the outbreak, its severity, vaccine effectiveness and acceptance, governmental actions to contain the virus (including its variants) and the long-term economic impact, both globally, as well as in our banking markets, which includes the potential for further recession.

The ongoing COVID-19 pandemic, including its variant strains, may continue to adversely affect our business, financial condition and results of operations.

The spread of COVID-19 created a global health-crisis that caused significant economic disruption and continues to cause illness, quarantines, reduced attendance at events and reduced travel, reduced commercial and financial activity, and overall economic and financial market instability.

While the level of disruption caused by the COVID-19 pandemic has generally lessened in 2022, there is no assurance that the pandemic will not worsen again, including as a result of the emergence of new strains of the virus.

Continuation of the COVID-19 pandemic, or a similar crisis, could negatively impact our capital, liquidity, and other financial positions and our business, results of operations, and prospects.

Economic factors stemming from the lasting effects of the pandemic, including inflation risks, oil price volatility and changes in interest rates, have and may continue to destabilize financial markets and negatively impact our customers’ business activities and operations, making it difficult for them to satisfy existing debt obligations.

Moreover, as economic conditions relating to the pandemic have improved and evolved, the Federal Reserve has shifted its focus to limiting the inflationary and other potentially adverse effects of the extensive pandemic-related government stimulus, which signals the potential for a continued period of economic uncertainty.

The duration and severity of the pandemic continues to be impossible to predict, as is the potential for a seasonal or other resurgence.

The full extent of the impact will depend on future developments that are highly uncertain including the duration and spread of any further outbreak, its severity, vaccine effectiveness and acceptance, governmental actions to contain the virus (including its variants) and the long-term economic impact, both globally, as well as in our banking markets, which includes the potential for further recession.

The effects of the COVID-19 pandemic heightened specific risk factors and could still impact substantially all risk factors described herein.

We are subject to litigation and other legal liability risks, and our expenses related to such risks may adversely affect our results.

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In the course of our business, we may foreclose on and take title to real estate that contains or was used in the manufacture or processing of hazardous materials or that is subject to other environmental risks.

In addition, we may lease equipment to our customers that is used to mine, develop, process or transport hazardous materials.

In addition, we may lease equipment to our customers that is used to mine, develop, and process hazardous materials, and our railcars may be used to transport hazardous materials.

As a result, we could be subject to environmental liabilities or claims for negligence, property damage or personal injury with respect to these properties or equipment.

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The costs associated with investigation or remediation activities could be substantial.

In addition, if we are the owner or former

owner of a contaminated site or equipment involved in a hazardous incident, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination, property damage, personal injury or other hazardous risks emanating from the property or related to the equipment.

In addition, if we are the owner or former owner of a contaminated site or equipment involved in a hazardous incident, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination, property damage, personal injury or other hazardous risks emanating from the property or related to the equipment.

We establish reserves for legal claims when payments associated with the claims become probable and our liability can be reasonably estimated.

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We may be exposed to substantial uninsured legal liabilities and regulatory actions which could adversely affect our results of operations and financial condition.

For additional information, refer to the Notes to the Consolidated Financial Statements, Note T, Commitments and Contingencies, in this Annual Report on Form 10-K.

For additional information, refer to the Notes to the Consolidated Financial Statements, Note 24 - Commitments and Contingencies, in this Annual Report on Form 10-K.

We depend on qualified personnel for our success and may not be able to retain or attract such personnel.

Our success depends to a great extent on our ability to attract and retain highly skilled and qualified executive officers and management, financial, compliance, technical, operations, sales, and support employees, which has taken on heightened importance because of the significant expansion of the size and geographic and operational scope of our business that occurred in connection with the CIT Merger.

As a human capital-intensive business, our success depends to a great extent on our ability to attract and retain highly skilled and qualified executive officers and management, financial, compliance, technical, operations, sales, and support employees, which has taken on heightened importance because of the significant expansion of the size and geographic and operational scope of our business that occurred in connection with the CIT Merger.

We face significant competition in the recruitment of qualified executive officers and employees.

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In addition, the Dodd-Frank Act required those agencies, along with the SEC, to adopt rules to require reporting of incentive compensation and to prohibit certain compensation arrangements.

In October 2021, the SEC signaled a renewed interest in its incentive compensation rulemaking initiative by re-opening the comment period on a proposed rule regarding “clawbacks” of incentive-based executive compensation.

If as a result of complying with such rules we are unable to attract and retain qualified employees, or do so at rates necessary to maintain our competitive position, or if the compensation costs required to attract and retain employees become more significant, our performance, including our competitive position, could be materially adversely affected.

Effective January 2023, the SEC adopted final rules requiring national securities exchanges, including The Nasdaq Stock Market Stock Market LLC (“Nasdaq”) where we are currently listed, to establish new listing standards relating to policies for the recovery of erroneously awarded incentive-based compensation, which are often referred to as “clawback policies”.

Among other requirements, these new listing standards will obligate listed companies to recover incentive-based compensation paid to its current or former executive officers in the event the company is required to make certain accounting restatements.

If, as a result of complying with the new rules, we are unable to attract and retain qualified employees, or do so at rates necessary to maintain our competitive position, or if the compensation costs required to attract and retain employees become more significant, our performance, including our competitive position, could be materially adversely affected.

We are exposed to losses related to fraud.

As technology continues to evolve, criminals are using increasingly more sophisticated techniques to commit and hide fraudulent activity.

Fraudulent activity that we are exposed to can come in many forms, including debit card/credit card fraud, check fraud, wire fraud, electronic scanning devices attached to ATM machines, social engineering, digital fraud and phishing attacks to obtain personal information and fraudulent impersonation of our customers through the use of falsified or stolen credentials.

Fraudulent activity that we have been and are likely to continue to be exposed to can come in many forms, including debit card/credit card fraud, check fraud, wire fraud, electronic scanning devices attached to ATM machines, social engineering, digital fraud and phishing attacks to obtain personal information and fraudulent impersonation of our customers through the use of falsified or stolen credentials.

We expect that combating fraudulent activities as they evolve will require continued ongoing investments and attention in the future as significant fraud could cause us direct losses or impair our customer relationships, among other potential consequences, adversely impacting our reputation or results of operation.

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Natural or man-made disasters (including, but not limited to, earthquakes, hurricanes, tornadoes, floods, fires, pollution, and explosions), global pandemics, acts of war, terrorist activities, climate change or other adverse external events could hurt our financial performance (i) directly through damage to our facilities or other impacts to our ability to conduct business in the ordinary course, and (ii) indirectly through such damage or impacts to our customers, suppliers or other counterparties.

In particular, a significant amount of our business is concentrated in North Carolina, South Carolina, California, Texas, New York and Florida, including areas where our facilities and retail and commercial customers have been and in the future could be

impacted by hurricanes and flooding, earthquakes or wildfires.

We also do business in Georgia, Virginia, Nebraska, Arizona, New Jersey, Hawaii, Nevada, as well as in Canada, all of which also include areas significantly exposed to the foregoing risks.

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Our ability to minimize the consequences of such events is in significant measure reliant on the quality of our disaster recovery planning and our ability, if any, to forecast the events, and such quality and ability may be inadequate.

There has been increasing political and social attention to the issue of climate change.

There has been increasing political and social attention to the issue of climate change and related environmental sustainability matters.

Federal and state legislators and regulatory agencies have proposed and continue to advance numerous legislative and regulatory initiatives seeking to mitigate the negative effects of climate change.

On October 21, 2021, the Financial Stability Oversight Council published a report identifying climate-related financial risk as an “emerging threat” to financial stability.

On December 16, 2021, the OCC issued proposed principles for climate-related financial risk management for national banks with more than $100 billion in total assets.

On March 30, 2022 and December 2, 2022, the FDIC and Federal Reserve Board issued their own proposed principles, respectively, for climate risk management by larger banking organizations.

To the extent that these initiatives lead to the promulgation of new regulations or supervisory guidance applicable to us, we would expect to experience increased compliance costs and other compliance-related risks.

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We are unable to predict how climate change may impact our financial condition and operations;

however, as a banking organization, the physical effects of climate change may present certain unique risks to us.

however, as a banking organization, the physical effects of climate change may present certain unique risks to us, our customers or third parties on which we rely.

For example, an increase in the frequency or magnitude of natural disasters, shifts in local climates and other disruptions related to climate change may adversely affect the value of real properties securing our loans, which could diminish the value of our loan portfolio.

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Consumers and businesses in communities that we serve may change their behavior and preferences as a result of these issues and new climate change laws and regulations aimed at mitigating climate change.

The impact on our customers will likely vary depending on their specific attributes, including their reliance on or role in carbon intensive activities;

however, we could experience a drop in demand for our products and services, particularly in certain sectors .

The impact on our customers will likely vary depending on their specific attributes, including their reliance on or role in carbon intensive activities and therefore, we could experience a drop in demand for our products and services, particularly in certain sectors .

We may also be subject to adverse action from our regulators or other third parties, such as environmental advocacy organizations, in relation to how our business relates to or has addressed or failed to address climate change-related risks.

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Our monitoring of significant vendor risks, including the financial stability of critical vendors, may be inadequate and incomplete.

Vendor risks in particular are compounded by the COVID-19 pandemic, as unexpected disruptions can impact a third party vendor’s operations with little warning.

The lingering effects of the COVID-19 pandemic and subsequent impacts from variant strains may continue to compound vendor risks, as unexpected disruptions can impact a third party vendor’s operations with little warning.

These effects include the direct impact of disease as well as secondary effects on third party vendors, including pandemic-related changes to how vendors are engaged, onboarded and monitored.

The failure of a critical third party vendor to provide key components of our business infrastructure could substantially disrupt our business and cause us to incur significant expense while harming our relationships with our customers.

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We also expect fluctuations in the ACL due to economic changes nationally as well as locally within the states in which we conduct business.

This is especially true as the economy reacts to the continuation of and potential recovery from the COVID-19 pandemic.

The reserve related to unfunded commitments may not be sufficient to cover actual losses, and future provisions for such losses could also materially and adversely affect our operating results and are also subject to significant uncertainties and fluctuations, particularly in light of the COVID-19 pandemic.

This is especially true as the economy reacts to the continuation of and potential recovery from the impacts from the COVID-19 pandemic and related variant strains.

In addition, the reserve related to unfunded commitments may not be sufficient to cover actual losses, and future provisions for such losses could also materially and adversely affect our operating results and are also subject to significant uncertainties and fluctuations.

As an integral part of their examination process, our banking regulators periodically review the ACL and may require us to increase it by recognizing additional provisions for credit losses charged to expense or to decrease the allowance by recognizing loan charge-offs, net of recoveries.

Any such required additional credit loss provisions or loan charge-offs could have a material adverse effect on our financial condition and results of operations.

Our concentration of loans to borrowers within the medical and dental industries, as well as the rail business, could impair our earnings if those industries experience economic difficulties.

Our concentration of loans and leases to borrowers and lessees within the medical and dental industries, as well as the rail business, could impair our earnings if those industries experience economic difficulties.

Statutory or regulatory changes relevant to the medical and dental industries, or economic conditions in the market generally, could negatively impact these borrowers’ businesses and their ability to repay their loans with us, which could have a material adverse effect on our financial condition and results of operations.

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Due to our substantial concentration in our rail business, if there is a significant downturn in shipping by railcar, it could have a material adverse effect on our business and results of operations.

The COVID-19 pandemic has created volatility and uncertainty in the economy, which has and is expected to continue to adversely impact our rail business.

As described above, the significant declines in the price of, and demand for, oil and gas may lead to a decreased demand for our railcars.

The impacts from the COVID-19 pandemic and variant strains has created volatility and uncertainty in the economy, which has and is expected to continue to adversely impact our rail business.

In addition, volatility in the price of, and demand for oil and gas may have negative effects on not only our loan exposures in the exploration and production section, but may also lead to a decreased demand for our railcars.

Economic conditions in real estate markets impacting collateral values and our reliance on junior liens may adversely impact our business and our results of operations.

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Approximately two-thirds of the consumer revolving mortgage portfolio is secured by junior lien positions, and lower real estate values for collateral underlying these loans may cause the outstanding balance of the senior lien to exceed the value of the collateral, resulting in a junior lien loan becoming effectively unsecured.

Inadequate collateral values, rising interest rates and unfavorable economic conditions could

result in greater delinquencies, write-downs or charge-offs in future periods, which could have a material adverse impact on our results of operations and capital adequacy.

Inadequate collateral values, rising interest rates and unfavorable economic conditions could result in greater delinquencies, write-downs or charge-offs in future periods, which could have a material adverse impact on our results of operations and capital adequacy.

Our financial condition could be adversely affected by the soundness of other financial institutions.

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Our retail and commercial banking activities are primarily concentrated within the same geographic footprint.

The markets in which we have the greatest presence are North Carolina, South Carolina, California, Texas, New York, Florida and Canada.

The markets in which we have the greatest presence are North Carolina, South Carolina, California, Texas, New York, and Florida.

We also do business in Canada, primarily related to our rail portfolio.

Worsening economic conditions within our markets, particularly within those with our greatest presence, could have a material adverse effect on our financial condition, results of operations and cash flows.

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We conduct limited business operations in certain foreign jurisdictions, and we engage in certain cross border lending and leasing transactions.

An economic recession or downturn or business disruption associated with the political environments in the international markets in which we operate could similarly adversely affect us.

An economic recession or downturn or business disruption associated with the political or economic environments in the international markets in which we operate could similarly adversely affect us.

In addition, the political environment, the level of United States debt and global economic conditions can have a destabilizing effect on financial markets.

Weakness in any of our market areas could have an adverse impact on our earnings, and consequently, our financial condition and capital adequacy.

For example, a U.S.

government debt default, threatened default, or downgrade of the sovereign credit ratings of the United States by credit rating agencies, could have an adverse impact on the financial markets, interest rates and economic conditions in the United States and worldwide.

debt ceiling and budget deficit concerns in recent years have increased the possibility of U.S.

government shutdowns, forced federal spending reductions, debt defaults, credit-rating downgrades and an economic slowdown or recession in the United States.

Political tensions may make it difficult for Congress to agree on any further increases to or suspension of the debt ceiling in a timely manner or at all, which may lead to a default by the U.S.

government or downgrades of its credit ratings.

Many of the investment securities held in FCB’s portfolio are issued by the U.S.

government and government agencies and sponsored entities, which are generally viewed as among the most conservative investment options.

While the likelihood may be remote, a government default or threat of default would impact the price and liquidity of U.S.

government securities.

A debt default or further downgrade to the U.S.

government’s sovereign credit rating or its perceived creditworthiness could also adversely affect the ability of the U.S.

government to support the financial stability of Fannie Mae, Freddie Mac, and the FHLBs.

Since banks are sensitive to the risk of downturns, the stock prices of all banks typically decline, sometimes substantially, if the market believes that a downturn has become more likely or is imminent.

This effect can and often does occur indiscriminately, initially without much regard to different risk postures of different banks.

Weakness in any of our market areas could have an adverse impact on our earnings, and consequently, our financial condition and capital adequacy.

Failure to effectively manage our interest rate risk could adversely affect us.

Our results of operations and cash flows are highly dependent upon net interest income.

Interest rates are sensitive to economic and market conditions that are beyond our control, including the actions of the Federal Reserve’s Federal Open Market Committee (“FOMC”).

Changes in monetary policy could influence interest income, interest expense, and the fair value of our financial assets and liabilities.

Interest rates are highly sensitive to many factors that are beyond our control, including general economic and market conditions and policies of various governmental and regulatory agencies, particularly the actions of the Federal Reserve’s Federal Open Market Committee (“FOMC”).

Changes in monetary policy, including changes in interest rates, could influence interest income, interest expense, and the fair value of our financial assets and liabilities.

If changes in interest rates on our interest-earning assets are not equal to the changes in interest rates on our interest-bearing liabilities, our net interest income and, therefore, our net income, could be adversely impacted.

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To the extent banks and other financial services providers compete for interest-bearing deposit accounts through higher interest rates, our deposit base could be reduced if we are unwilling to pay those higher rates.

If we decide to compete with those higher interest rates, our cost of funds could increase and our net interest margins could be reduced.

If we decide to compete with those higher interest rates, our cost of funds could increase and our net interest margins could be reduced, dependent on the timing and sensitivities of our interest-earning assets and interest-bearing liabilities.

Additionally, higher interest rates may impact our ability to originate new loans.

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If this occurred, it could cause an increase in nonperforming assets and net charge-offs.

We cannot control or predict with certainty changes in interest rates.

The forecasts of future net interest income by our interest rate risk monitoring system are estimates and may be inaccurate.

Actual interest rate movements may differ from our forecasts, and unexpected actions by the FOMC may have a direct impact on market interest rates.

In response to the economic conditions resulting from the outbreak of the COVID-19 pandemic, the Federal Reserve’s target federal funds rate has been reduced nearly to 0%.

Stimulus payments related to the COVID-19 pandemic made by the federal government to businesses, non-profit organizations, taxpayers and others have had the incidental

effect of adding to inflationary pressures.

In an effort to counteract such pressures, the Federal Reserve has signaled its intent to raise interest rates in 2022.

Increased interest rates may increase the cost of deposits and our other funding sources.

The Federal Reserve announced in January of 2022 that it would be slowing the pace of its bond purchasing and increasing the target range for the federal funds rate over time.

The FOMC since has increased the target range seven times throughout 2022.

As of December 31, 2022, the target range for the federal funds rate had been increased to 4.25% to 4.5% and the FOMC signaled that future increases may be appropriate in order to attain a monetary policy sufficiently restrictive to return inflation to more normalized levels.

The higher interest rates increased the cost of deposits and our other funding sources, and may continue to increase costs, dependent on the Federal Reserve actions.

Accounting for acquired assets may result in earnings volatility.

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Post-acquisition credit deterioration results in the recognition of provision expense.

Additionally, the income statement impact of adjustments to the indemnification asset recorded in certain FDIC-assisted transactions may occur over a shorter period of time than the adjustments to the covered assets.

Fair value discount accretion, post-acquisition impairment and adjustments to the indemnification asset may result in significant volatility in our earnings.

Volatility in earnings could unfavorably influence investor interest in our common stock, thereby depressing the market value of our stock and the market capitalization of our company.

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We may be adversely impacted by the transition from LIBOR as a reference rate.

We have loans, borrowings and other financial instruments with attributes that are either directly or indirectly dependent on the London Interbank Offered Rate (“LIBOR”).

We have loans, borrowings and other financial instruments, including our Series B Preferred Stock, with attributes that are either directly or indirectly dependent on the London Interbank Offered Rate (“LIBOR”).

In 2017, the United Kingdom’s Financial Conduct Authority (the “FCA”) announced that after 2021 it would no longer compel banks to submit the rates required to calculate LIBOR.

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On March 5, 2021, the FCA announced that all LIBOR settings will either cease to be provided by any administrator or no longer be representative immediately after December 31, 2021, in the case of 1-week and 2-month United States dollar LIBOR, and immediately after June 30, 2023, in the case of the remaining United States dollar LIBOR settings.

In the United States, efforts to identify a set of alternative United States dollar reference interest rates are ongoing, and the Alternative Reference Rate Committee (the “ARRC”) has recommended the use of a Secured Overnight Funding Rate (“SOFR”).

In addition, on March 15, 2022, the U.S.

Congress passed the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”) as part of the Consolidated Appropriations Act, 2022, which provides protection for contracts without workable fallback provisions and includes safe-harbor provisions to shield parties from liability under potential lawsuits due to the transition away from LIBOR.

The final rule implementing the LIBOR Act was announced by the FRB on December 16, 2022, which among other things, (i) identifies benchmark rates based on the Secured Overnight Funding Rate (“SOFR”) to replace LIBOR settings in multiple categories of legacy contracts;

(ii) specifies benchmark conforming changes related to the calculation, administration and other implementing actions of such benchmark replacements;

and (iii) preempts state and local LIBOR replacement laws relating to the selection or use of a benchmark replacement or related conforming changes.

BancShares anticipates taking advantage of the safe harbors that are afforded under the LIBOR Act and the implementing final rule.

SOFR is different from LIBOR in that it is a backward-looking secured rate rather than a forward-looking unsecured rate.

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Since proposed replacement reference rates, such as SOFR, are calculated differently, payments under contracts referencing such rates will differ from those referencing LIBOR.

If LIBOR rates are no longer available, and we are required to implement replacement reference rates for the calculation of interest rates under our loan agreements with borrowers, we may incur significant expense in effecting the transition and may be subject to disputes or litigation with our borrowers over the appropriateness or comparability to LIBOR of the replacement reference rates.

We may incur significant expense in effecting the transition and may be subject to disputes or litigation with our borrowers over the appropriateness or comparability to LIBOR of the replacement reference rates.

Consequently, failure to adequately manage this transition process with our customers could adversely impact our reputation and potentially introduce additional legal risks.

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We may also receive inquiries and other actions from regulators with respect to our preparation and readiness for the replacement of LIBOR with replacement reference rates.

The transition will change our market risk profiles, requiring changes to risk and pricing models, systems, contracts, valuation tools and product design, and

failure to adequately manage this transition process could consequently have a material adverse effect on our business, financial condition and results of operations.

The transition will change our market risk profiles, requiring changes to risk and pricing models, systems, contracts, valuation tools and product design, and failure to adequately manage this transition process could consequently have a material adverse effect on our business, financial condition and results of operations.

The value of our goodwill may decline in the future.

Our goodwill could become impaired in the future.

At December 31, 2022, we had $346 million of goodwill recorded as an asset on our balance sheet.

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Although publicly traded, our common stock, particularly our Class B common stock, has less liquidity and public float than many other large, publicly traded financial services companies.

Lower liquidity increases the price volatility of our common stock and could make it difficult for our shareholders to sell or buy our common stock at specific prices.

Excluding the impact of liquidity, the market price of our common stock can fluctuate widely in response to other factors, including expectations of financial and operating results, actual operating results, actions of institutional shareholders, speculation in the press or the investment community, market perception of acquisitions, including the CIT Merger, rating agency upgrades or downgrades, stock prices of other companies that are similar to us, general market expectations related to the financial services industry and the potential impact of government actions affecting the financial services industry.

For example, the closing price per share of our Class A common stock on the Nasdaq Global Select Market ranged from a low of $568.46 to a high of $907.04 during the year ended December 31, 2021.

Lower liquidity increases the price volatility of our common stock and could make it difficult for our stockholders to sell or buy our common stock at specific prices.

Excluding the impact of liquidity, the market price of our common stock can fluctuate widely in response to other factors, including expectations of financial and operating results, actual operating results, actions of institutional stockholders, speculation in the press or the investment community, market perception of acquisitions, including the CIT Merger, rating agency upgrades or downgrades, stock prices of other companies that are similar to us, general market expectations related to the financial services industry and the potential impact of government actions affecting the financial services industry.

For example, the closing price per share of our Class A common stock, par value $1 per share (“Class A common stock”) on the Nasdaq Global Select Market ranged from a low of $598.01 to a high of $947.71 during the year ended December 31, 2022.

Liquidity Risks

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Failure to access sources of liquidity may affect our ability to pay deposits and fund our operations.

We expect to be subject to enhanced liquidity risk management requirements as a Category IV banking organization, subject to the applicable transition periods, including reporting, liquidity stress testing, and a liquidity buffer, and failure to meet these requirements could result in regulatory and compliance risks, and possible restrictions on our activities.

As a result of the consummation of the CIT Merger, our total consolidated assets exceed $100 billion, and therefore we expect to be subject to enhanced liquidity risk management requirements as a Category IV banking organization, including reporting, liquidity stress testing and a liquidity buffer, subject to the applicable transition periods.

Were we to meet or exceed certain thresholds for asset size and other risk-based factors, we would become subject to additional requirements under the Tailoring Rules.

We are subject to enhanced liquidity risk management requirements as a Category IV banking organization, subject to the applicable transition periods, including reporting, liquidity stress testing, and liquidity buffer, as well as resolution planning at the bank level, and failure to meet these requirements could result in regulatory and compliance risks, and possible restrictions on our activities.

As a result of the CIT Merger, our total consolidated assets exceed $100 billion, and therefore we became subject to enhanced liquidity risk management requirements as a Category IV banking organization, including reporting, liquidity stress testing, a liquidity buffer and resolution planning, subject to the applicable transition periods.

Were we to meet or exceed certain other thresholds for asset size and other risk-based factors, we would become subject to additional requirements under the Tailoring Rules.

We expect to incur significant expense in continuing to develop policies, programs and systems designed to comply with all such requirements applicable to us.

Failure to develop and maintain an adequate liquidity risk management and monitoring process may lead to adverse regulatory action (including possible restrictions on our activities).

Fee revenues from overdraft and nonsufficient funds programs constitute a significant portion of our non-interest income and may be subject to increased supervisory scrutiny.

Revenues derived from transaction fees associated with overdraft and nonsufficient funds (“NSF”) programs represent a significant portion of our non-interest income.

In 2021, we collected approximately $54.9 million in overdraft and NSF fees, although we expect this amount to be reduced significantly in 2022 due to the reduction in our fees for overdrafts and elimination of NSF fees announced in January 2022.

Fee revenues from overdraft and nonsufficient funds programs may be subject to increased supervisory scrutiny.

Revenues derived from transaction fees associated with overdraft and nonsufficient funds (“NSF”) programs is included in non-interest income.

In 2022, we collected approximately $48 million in overdraft and NSF fees (down from approximately $55 million in 2021), due to the reduction in our fees for overdrafts and elimination of NSF fees announced in January 2022.

In 2021, certain members of Congress and the leadership of the CFPB expressed a heightened interest in bank overdraft and NSF programs.

In December 2021, the CFPB published a report providing data on banks’ overdraft and NSF fee revenues as well as observations regarding consumer protection issues relating

to such programs and in January 2022, the CFPB published an initiative seeking public input on experiences with respect to such fees, among others.

The CFPB has indicated that it intends to pursue enforcement actions against banking organizations, and their executives, that oversee overdraft practices that are deemed to be unlawful.

In December 2021, the CFPB published a report providing data on banks’ overdraft and NSF fee revenues as well as observations regarding consumer protection issues relating to such programs and in October 2022, the CFPB published further guidance concerning unlawful practices related to overdraft fees.

The CFPB has pursued enforcement actions against banking organizations, and their executives, that oversee overdraft practices that are deemed to be unlawful and has indicated that it will continue to do so.

In response to this increased congressional and regulatory scrutiny, and in anticipation of enhanced supervision and enforcement of overdraft practices in the future, certain banking organizations have begun to modify their overdraft programs.

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We may not be able to maintain our current credit ratings.

Rating reductions could adversely affect our access to funding sources and the cost of obtaining funding.

Rating reductions could adversely affect our access to funding sources and increase the cost of obtaining funding.

Based on existing capital levels, we and FCB are well-capitalized under current leverage and risk-based capital standards.

Our ability to grow is contingent on our ability to generate or otherwise access sufficient capital to remain well-capitalized under current and future capital adequacy guidelines.

We are subject to capital adequacy and liquidity guidelines and, if we fail to meet these guidelines, our financial condition would be adversely affected.

We and FCB are subject to capital adequacy and liquidity guidelines and, if we fail to meet these guidelines, our financial condition and ability to make capital distributions would be adversely affected.

Under regulatory capital adequacy guidelines and other regulatory requirements, we, together with FCB, must meet certain capital and liquidity guidelines, subject to qualitative judgments by regulators about components, risk weightings and other factors.

We are subject to capital rules issued by the Federal Reserve including required minimum capital and leverage ratios.

These requirements could adversely affect our ability to pay dividends, restrict certain business activities or compel us to raise capital, each of which may adversely affect our results of operations or financial condition.

We and FCB are subject to capital rules issued by the federal banking agencies including required minimum capital and leverage ratios.

These requirements, and any proposed changes in connection with the federal banking agencies’ plan to implement the final Basel III post-crisis reform standards, could adversely affect our ability to pay dividends, restrict certain business activities, including share repurchases, or compel us to raise capital, each of which may adversely affect our results of operations or financial condition.

Refer to the “Regulatory Considerations” section in Item 1.

Business of this Annual Report on Form 10-K for additional information regarding the capital requirements under the Dodd-Frank Act and Basel III.

We expect to be required to submit an annual capital plan to the Federal Reserve and to be subject to supervisory stress testing under the Federal Reserve’s CCAR process on a biennial basis as a Category IV banking organization, subject to the applicable transition periods.

We are required to submit an annual capital plan to the Federal Reserve and to be subject to supervisory stress testing under the Federal Reserve’s CCAR process on a biennial basis as a Category IV banking organization, subject to the applicable transition periods.

Under the CCAR process, the Federal Reserve will evaluate our planned capital distributions (e.g., dividends) included in our capital plan over the planning horizon (i.e., nine consecutive quarters, beginning with the quarter preceding the quarter in which the capital plan is submitted over which the relevant projections extend) to determine whether we will be able to meet our ongoing capital needs under a range of different economic scenarios.

Failure to obtain a non-objection on our capital plan submitted to the Federal Reserve, or to demonstrate capital adequacy under the CCAR process, could result in restrictions in our ability to make dividends or other capital distributions.

Refer to the “Regulatory Considerations” section of Item 1.

Business of this Annual Report on Form 10-K for additional information regarding the annual capital plan submission to the Federal Reserve and supervisory stress testing under the CCAR process.

In connection with the CIT Merger, we assumed CIT’s outstanding debt obligations and preferred stock, and our resulting level of indebtedness could adversely affect our ability to raise additional capital and to meet our obligations under our existing indebtedness.

In connection with the CIT Merger, we assumed certain of CIT’s outstanding indebtedness and CIT’s obligations related to its outstanding preferred stock.

In February 2022, we redeemed approximately $2.9 billion of outstanding senior unsecured notes that we assumed in the CIT Merger.

Our existing debt, together with any future incurrence of additional indebtedness, and the assumption of CIT’s outstanding notes and preferred stock, could have consequences that are materially adverse to our business, financial condition or results of operations.

Increases to our level of indebtedness could adversely affect our ability to raise additional capital and to meet our obligations.

Our existing debt, together with any future incurrence of additional indebtedness and preferred stock, could have consequences that are materially adverse to our business, financial condition or results of operations.

For example, it could:

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(ii) restrict us from making strategic acquisitions or cause us to make non-strategic divestitures;

(iii) restrict us from paying dividends to our shareholders;

(iii) restrict us from paying dividends to our stockholders;

(iv) increase our vulnerability to general economic and industry conditions;

or (v) require a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness and dividends on the preferred stock, thereby reducing our ability to use cash flows to fund our operations, capital expenditures and future business opportunities.

Refer to the “Business Combinations” and “Borrowings” sections of Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report on Form 10-K for further discussion of the debt we assumed in the CIT Merger, conversion of CIT Preferred Stock into BancShares Preferred Stock, and the redemption of approximately $2.9 billion of debt that we assumed in the CIT Merger.

Refer to the “Borrowings” sections of Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report on Form 10-K for additional information regarding our borrowings.

Compliance Risks

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We are subject to extensive federal and applicable state regulation and supervision, primarily through FCB and certain nonbank subsidiaries.

Banking regulations are primarily intended to protect depositors’ funds, federal deposit insurance funds, and the banking system as a whole, not shareholders.

Banking regulations are primarily intended to protect depositors’ funds, federal deposit insurance funds, and the banking system as a whole, not stockholders.

These regulations affect our lending practices, capital structure, investment practices, dividend policy, and growth, among other things.

Congress and federal regulatory agencies continually review banking laws, regulations, and policies for possible changes.

The Sarbanes-Oxley Act of 2002 and the related rules and regulations issued by the SEC and The Nasdaq Stock Market LLC (“Nasdaq”), as well as numerous other more recently enacted statutes and regulations, including the Dodd-Frank Act, EGRRCPA, and regulations promulgated thereunder, have increased the scope, complexity and cost of corporate governance and reporting and disclosure practices, including the costs of completing our external audit and maintaining our internal controls.

The Sarbanes-Oxley Act of 2002 and the related rules and regulations issued by the SEC and The Nasdaq, as well as numerous other more recently enacted statutes and regulations, including the Dodd-Frank Act, EGRRCPA, and regulations promulgated thereunder, have increased the scope, complexity and cost of corporate governance and reporting and disclosure practices, including the costs of completing our external audit and maintaining our internal controls.

Such additional regulation and supervision may limit our ability to pursue business opportunities and result in a material adverse impact on our financial condition and results of operations.

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Failure to comply with laws, regulations, or policies could result in sanctions by regulatory agencies (including potential limitations on our future acquisitions or operations, or requirements to forfeit assets), civil money penalties, or reputation damage.

We face compliance risks related to the specialty commercial business lines acquired from CIT.

In connection with the CIT Merger, we acquired new business lines that are subject to new compliance risks.

Our new rail business line is subject to various laws, rules and regulations administered by authorities in jurisdictions that were not applicable to us prior to the CIT Merger.

Information security and data privacy are areas of heightened legislative and regulatory focus.

As information security and data privacy risks for banking organizations and the broader financial system have significantly increased in recent years, data privacy and security issues have become the subject of increasing legislative and regulatory focus.

The federal bank regulatory agencies have proposed regulations that would enhance cyber risk management standards, which would apply to a wide range of LFIs and their third-party service providers, including us and FCB, and would focus on cyber risk governance and management, management of internal and external dependencies, and incident response, cyber resilience, and situational awareness.

Several states have also proposed or adopted information security legislation and regulations, which require, among other things, notification to affected individuals when there has been a security breach of their personal data.

We receive, maintain, and store non-public personal information of our customers and counterparties, including, but not limited to, personally identifiable information and personal financial information.

The collection, sharing, use, disclosure, and protection of these types of information are governed by federal and state law.

Both personally identifiable information and personal financial information are increasingly subject to legislation and regulation, the intent of which is to increase transparency related to how personal information is processed, choices individuals have to control how their information is used and to protect the privacy of such information.

For example, in June of 2018, the Governor of California signed into law the CCPA.

The CCPA, which became effective on January 1, 2020, and was amended in November 2020 by the CPRA, applies to for-profit businesses that conduct business in California and meet certain revenue or data collection thresholds.

The CPRA, which became effective on January 1, 2023, amends the scope and several of the substantive requirements of the CCPA, as well as certain mechanisms for administration and enforcement of the statute.

Numerous other states have also enacted or are in the process of enacting state-level privacy, data protection and/or data security laws and regulations.

We may become subject to new legislation or regulation concerning information security and/or data privacy.

If security, data privacy, data protection, data transfer, or data retention laws are implemented, interpreted, or applied in a manner inconsistent with our current practices, failure to adapt to changing requirements may subject us to fines, litigation, or regulatory enforcement actions.

However, required changes to our business practices, policies, or systems may also adversely impact our operating results.

We face heightened compliance risks related to certain specialty commercial business lines.

Our rail business line is subject to various laws, rules and regulations administered by authorities in various jurisdictions.

In the United States, our equipment leasing operations, including for railcars, ships, and other equipment, are subject to rules and regulations relating to safety, operations, maintenance and mechanical standards promulgated by various federal and state agencies and industry organizations, including the United States Department of Transportation, the Federal Railroad Administration, the Association of American Railroads, the Maritime Administration, the United States Coast Guard, and the United States Environmental Protection Agency.

We are also subject to regulation by governmental agencies in foreign countries in which we do business as a result of the CIT Merger.

We are also subject to regulation by governmental agencies in foreign countries in which we do business.

Our business operations and our equipment financing and leasing portfolios may be adversely impacted by rules and regulations promulgated by governmental and industry agencies, which could require substantial modification, maintenance, or refurbishment of our railcars, ships or other equipment, or could potentially make such equipment inoperable or obsolete.

Failure to comply with these laws, rule and regulations could result in sanctions by regulatory agencies (including potential limitations on our future acquisitions or operations, or requirements to forfeit assets), civil money penalties, or reputation damage.

Additionally, we may incur significant expenses in our efforts to comply with these laws, rules and regulations, and these laws, rules and regulations.

We expect to be a Category IV banking organization and therefore we expect to be subject to enhanced prudential standards and enhanced supervision under the Dodd-Frank Act, as amended by the EGRRCPA, and implemented by the Tailoring Rules, subject to the applicable transition periods.

As a result of consummation of the CIT Merger, our total consolidated assets exceed $100 billion, and therefore we expect to be subject to enhanced prudential standards under Section 165 of the Dodd-Frank Act, as amended by the EGRRCPA, and implemented by the Tailoring Rules, subject to the applicable transition periods.

Failure to comply with these laws, rules and regulations could result in sanctions by regulatory agencies (including potential limitations on our future acquisitions or operations, or requirements to forfeit assets), civil money penalties, or reputation damage.

Additionally, we may incur significant expenses in our efforts to comply with these laws, rules and regulations.

We are a Category IV banking organization and therefore subject to certain enhanced prudential standards and enhanced supervision by the Federal Reserve under the Dodd-Frank Act, as amended by the EGRRCPA, and implemented by the federal banking agencies’ Tailoring Rules, subject to the applicable transition periods.

After reporting total consolidated assets of $100 billion or more, based on a four-quarter trailing average, we became subject to enhanced prudential standards under Section 165 of the Dodd-Frank Act, as amended by the EGRRCPA, and implemented by the federal banking agencies’ Tailoring Rules, subject to the applicable transition periods.

If we fail to develop and maintain at a reasonable cost the systems and processes necessary to comply with the standards and requirements imposed by these rules, it could have a material adverse effect on our business, financial condition or results of operations.

Additionally, as we grow, and our assets exceed certain thresholds, regulatory requirements that we are subject to, as well as our compliance expenses, will increase.

For example, after reporting $50 billion or more in weighted short-term wholesale funding, we will be subject to modified LCR and NSFR requirements, and we will be subject to full LCR and NSFR requirements after reporting $75 billion or more in weighted short-term wholesale funding in addition to other enhanced prudential standards as a Category III banking organization.

Refer to the “Regulatory Considerations” section of Item 1.

Business of this Annual Report on Form 10-K for additional information regarding the Tailoring Rules.

Business of this Annual Report on Form 10-K for additional information regarding the enhanced prudential standards that we are subject to as a Category IV banking organization, and how our regulatory requirements will change based on our total assets and other risk-based factors under the Tailoring Rules.

The CFPB has reshaped the consumer financial laws through rulemaking and enforcement of the prohibitions against unfair, deceptive and abusive business practices.

Compliance with any such change may impact the business operations of depository institutions offering consumer financial products or services, including FCB.

We are subject to supervision and examination by the CFPB for compliance with the CFPB’s regulations and policies.

The CFPB has broad rulemaking authority to administer and carry out the provisions of the Dodd-Frank Act with respect to financial institutions that offer covered financial products and services to consumers.

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The CFPB has pursued a more aggressive enforcement policy in respect of a range of regulatory compliance matters under the Biden Administration.

CFPB enforcement actions may serve as precedent for how the CFPB interprets and enforces consumer protection laws, including practices or acts that are deemed to be unfair, deceptive or abusive, with respect to all supervised institutions, which may result in the imposition of higher standards of compliance with such laws.

Moreover, we are subject to supervision and examination by the CFPB for compliance with the CFPB’s regulations and policies.

which may result in the imposition of higher standards of compliance with such laws.

The limitations and restrictions that may be placed upon us by the CFPB with respect to our consumer product offerings and services may produce significant, material effects on our profitability.

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The United States corporate tax code may be reformed by the United States Congress and additional guidance may be issued by the United States Department of the Treasury.

Changes in tax laws and regulations, and income tax rates in particular,

could have an adverse impact on our financial condition and results of operations.

In August 2022, Congress enacted the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”), which instituted, among other things, a 1% excise tax on certain corporate stock repurchases which took effect on January 1, 2023.

As a result, effective for tax years beginning after December 31, 2022, BancShares may be subject to a Corporate Alternative Minimum Tax (“CAMT”).

BancShares will treat any CAMT that may be applicable to tax years beginning after December 31, 2022 as a period cost.

Further changes in tax laws and regulations, and income tax rates in particular, could have an adverse impact on our financial condition and results of operations.

These changes could also affect our regulatory capital ratios as calculated in accordance with the Basel III Rules.

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We could also incur additional costs and require additional resources to monitor, report and comply with various ESG practices.

For example, in 2022, the SEC proposed new climate disclosure rules, which if adopted, would require new climate-related disclosure in SEC filings, including certain climate-related metrics and greenhouse gas emissions data, information about climate-related targets and goals, transition plans, if any, and extensive attestation requirements.

Further, we may be exposed to negative publicity based on the identity and activities of those to whom we lend and with which we otherwise do business and the public’s view of the approach and performance of our customers and business partners with respect to ESG matters.

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Accounting standards may change and increase our operating costs or otherwise adversely affect our results.

FASB and the SEC periodically modify the standards governing the preparation of our financial statements.

The nature of these changes is not predictable and has impacted and could further impact how we record transactions in our financial statements, which had led to and could lead to material changes in assets, liabilities, shareholders’ equity, revenues, expenses and net income.

For example, ASU 2016-13 Measurement of Credit Losses on Financial Instruments, became effective January 1, 2020, and substantially changed the accounting for credit losses on loans and other financial assets.

In some cases, we could be required to apply new or revised standards retroactively, resulting in changes to previously reported financial results or a cumulative adjustment to retained earnings.

The Financial Accounting Standards Board (“FASB”) and the SEC periodically modify the standards governing the preparation of our financial statements.

The nature of these changes is not predictable and has impacted and could further impact how we record transactions in our financial statements, which has led to and could lead to material changes in assets, liabilities, stockholders’ equity, revenues, expenses and net income.

Implementation of new accounting rules or standards could additionally require us to implement technology changes which could impact ongoing earnings.

Our accounting policies and processes are critical to the reporting of our financial condition and results of operations.

They require management to make estimates about matters that are uncertain, and such estimates may be incorrect.

They require management to make estimates about matters that are uncertain, and such estimates may be materially different from actual results.

Accounting policies and processes are fundamental to how we record and report our financial condition and results of operations.

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Materially different amounts could be reported under different conditions or using different assumptions or estimates.

Because of the uncertainty surrounding management’s

judgments and the estimates pertaining to these matters, we may be required to adjust accounting policies or restate prior period financial statements.

Because of the uncertainty surrounding management’s judgments and the estimates pertaining to these matters, we may be required to adjust accounting policies or restate prior period financial statements.

Refer to “Critical Accounting Estimates” included in Item 7.

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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-K

Item 1A. Risk Factors