What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-24 compared with 2022-02-25 · 2173 added, 1868 removed, 713 unchanged (85% of the section changed)

Financial Statements and Supplementary Data

FINANCIAL SUMMARY AND SELECTED AVERAGE BALANCES AND RATIOS

(Dollars in thousands, except share data) 2021 2020 2019 2018 2017

SUMMARY OF OPERATIONS

Interest income $ 1,451,010 $ 1,484,026 $ 1,404,011 $ 1,245,757 $ 1,103,690

Interest expense 60,676 95,857 92,642 36,857 43,794

Net interest income 1,390,334 1,388,169 1,311,369 1,208,900 1,059,896

(Benefit) provision for credit losses (36,835) 58,352 31,441 28,468 25,692

Net interest income after provision for credit losses 1,427,169 1,329,817 1,279,928 1,180,432 1,034,204

Gain on acquisitions — — — — 134,745

Noninterest income excluding gain on acquisitions 508,002 476,750 415,861 400,149 387,218

Noninterest expense 1,233,510 1,188,685 1,103,741 1,076,971 1,012,469

Income before income taxes 701,661 617,882 592,048 503,610 543,698

Income taxes 154,202 126,159 134,677 103,297 219,946

Net income 547,459 491,723 457,371 400,313 323,752

Net income available to common shareholders $ 528,915 $ 477,661 $ 457,371 $ 400,313 $ 323,752

Net interest income, taxable equivalent (1)

$ 1,392,708 $ 1,390,765 $ 1,314,940 $ 1,212,280 $ 1,064,415

PER SHARE DATA

Net income $ 53.88 $ 47.50 $ 41.05 $ 33.53 $ 26.96

Cash dividends 1.88 1.67 1.60 1.45 1.25

Market price at period end (Class A) 829.84 574.27 532.21 377.05 403.00

Book value at period end 447.95 396.21 337.38 300.04 277.60

SELECTED PERIOD AVERAGE BALANCES

Total assets $ 54,982,821 $ 46,021,438 $ 37,161,719 $ 34,879,912 $ 34,302,867

Investment securities 10,610,750 9,054,933 6,919,069 7,074,929 7,036,564

Loans and leases (2)

32,860,019 31,605,090 26,656,048 24,483,719 22,725,665

Interest-earning assets 51,819,672 43,351,119 34,866,734 32,847,661 32,213,646

Deposits 48,258,586 39,746,616 32,218,536 30,165,249 29,119,344

Interest-bearing liabilities 29,345,838 24,894,309 20,394,815 18,995,727 19,576,353

Securities sold under customer repurchase agreements 660,288 632,362 530,818 555,555 649,252

Other short-term borrowings — 50,549 23,087 58,686 77,680

Long-term borrowings 1,225,661 1,186,145 392,150 304,318 842,863

Common shareholders’ equity 4,120,785 3,684,889 3,551,781 3,422,941 3,206,250

Shareholders’ equity $ 4,460,722 $ 3,954,007 $ 3,551,781 $ 3,422,941 $ 3,206,250

Shares outstanding 9,816,405 10,056,654 11,141,069 11,938,439 12,010,405

SELECTED PERIOD-END BALANCES

Total assets $ 58,308,140 $ 49,957,680 $ 39,824,496 $ 35,408,629 $ 34,527,512

Investment securities 13,110,408 9,922,905 7,173,003 6,834,362 7,180,256

Loans and leases 32,371,522 32,791,975 28,881,496 25,523,276 23,596,825

Deposits 51,406,094 43,431,609 34,431,236 30,672,460 29,266,275

Securities sold under customer repurchase agreements 589,101 641,487 442,956 543,936 586,256

Other short-term borrowings — — 295,277 28,351 107,551

Long-term borrowings 1,194,378 1,248,163 588,638 319,867 870,240

Shareholders’ equity $ 4,737,241 $ 4,229,268 $ 3,586,184 $ 3,488,954 $ 3,334,064

Shares outstanding 9,816,405 9,816,405 10,629,495 11,628,405 12,010,405

SELECTED RATIOS AND OTHER DATA

Rate of return on average assets 1.00 % 1.07 % 1.23 % 1.15 % 0.94 %

Rate of return on average common shareholders’ equity 12.84 12.96 12.88 11.69 10.10

Average equity to average assets ratio 8.11 8.59 9.56 9.81 9.35

Net yield on interest-earning assets (taxable equivalent) 2.66 3.17 3.74 3.66 3.28

Allowance for credit losses to total loans and leases:

PCD 4.38 5.18 1.35 1.51 1.31

Non-PCD 0.51 0.62 0.77 0.86 0.93

Total 0.55 0.68 0.78 0.88 0.94

Ratio of total nonperforming assets to total loans, leases and other real estate owned 0.49 0.74 0.58 0.52 0.61

Total risk-based capital ratio 14.35 13.81 12.12 13.99 14.21

Tier 1 risk-based capital ratio 12.47 11.63 10.86 12.67 12.88

Common equity Tier 1 ratio 11.50 10.61 10.86 12.67 12.88

Leverage capital ratio 7.59 7.86 8.81 9.77 9.47

Dividend payout ratio 3.49 3.52 3.90 4.32 4.64

Average loans and leases to average deposits 68.09 79.52 82.74 81.17 78.04

(1) The taxable-equivalent adjustment was $2.4 million, $2.6 million, $3.6 million, $3.4 million and $4.5 million for the years 2021, 2020, 2019, 2018, and 2017, respectively.

(2) Average loan and lease balances include PCD loans, non-PCD loans and leases, loans held for sale and nonaccrual loans and leases.

SELECTED QUARTERLY DATA

(Dollars in thousands, except share data and ratios) Fourth

Quarter Third

Quarter Second

Quarter First

Quarter Fourth

Quarter Third

Quarter Second

Quarter First

SUMMARY OF OPERATIONS

Interest income $ 372,007 $ 361,855 $ 361,825 $ 355,323 $ 376,876 $ 374,334 $ 363,257 $ 369,559

Interest expense 14,605 14,968 15,432 15,671 18,160 20,675 25,863 31,159

Net interest income 357,402 346,887 346,393 339,652 358,716 353,659 337,394 338,400

(Benefit) provision for credit losses (5,138) (1,120) (19,603) (10,974) 5,403 4,042 20,552 28,355

Net interest income after provision for credit losses 362,540 348,007 365,996 350,626 353,313 349,617 316,842 310,045

Noninterest income 114,259 122,944 134,150 136,649 126,765 120,572 165,402 64,011

Noninterest expense 323,188 312,818 301,578 295,926 305,373 291,662 291,679 299,971

Income before income taxes 153,611 158,133 198,568 191,349 174,705 178,527 190,565 74,085

Income taxes 30,329 34,060 45,780 44,033 36,621 35,843 36,779 16,916

Net income 123,282 124,073 152,788 147,316 138,084 142,684 153,786 57,169

Net income available to common shareholders $ 118,646 $ 119,437 $ 148,152 $ 142,680 $ 133,448 $ 138,048 $ 148,996 $ 57,169

Net interest income, taxable equivalent $ 357,950 $ 347,451 $ 347,035 $ 340,271 $ 359,370 $ 354,256 $ 337,965 $ 339,174

PER COMMON SHARE DATA

Net income $ 12.09 $ 12.17 $ 15.09 $ 14.53 $ 13.59 $ 14.03 $ 14.74 $ 5.46

Cash dividends on common shares 0.47 0.47 0.47 0.47 0.47 0.40 0.40 0.40

Market price at period end (Class A) 829.84 843.17 832.74 835.77 574.27 318.78 405.02 332.87

Book value per share at period-end 447.95 432.07 421.39 405.59 396.21 380.43 367.57 351.90

SELECTED QUARTERLY AVERAGE BALANCES

Total assets $ 58,115,943 $ 55,922,358 $ 54,399,331 $ 51,409,634 $ 49,557,803 $ 48,262,155 $ 45,553,502 $ 40,648,806

Investment securities 11,424,103 10,707,519 10,534,348 9,757,650 9,889,124 9,930,197 8,928,467 7,453,159

Loans and leases (1)

32,488,033 32,707,591 33,166,049 33,086,656 32,964,390 32,694,996 31,635,958 29,098,101

Interest-earning assets 54,601,810 52,371,165 51,519,684 48,715,279 46,922,823 45,617,376 42,795,781 38,004,341

Deposits 51,238,517 49,107,087 47,751,103 44,858,198 43,123,312 41,905,844 39,146,415 34,750,061

Interest-bearing liabilities 30,876,506 29,662,791 28,909,320 27,898,525 26,401,222 25,591,707 24,407,285 23,153,777

Securities sold under customer repurchase agreements 650,123 672,114 677,451 641,236 684,311 710,237 659,244 474,231

Other short-term borrowings — — — — — — 45,549 157,759

Long-term borrowings 1,217,099 1,222,452 1,227,755 1,235,576 1,250,682 1,256,331 1,275,928 961,132

Common shareholders' equity 4,292,981 4,196,655 4,058,236 3,935,267 3,786,158 3,679,138 3,648,284 3,625,975

Shareholders' equity $ 4,632,918 $ 4,536,592 $ 4,398,173 $ 4,275,204 $ 4,126,095 $ 4,019,075 $ 3,988,225 $ 3,682,634

Common shares outstanding 9,816,405 9,816,405 9,816,405 9,816,405 9,816,405 9,836,629 10,105,520 10,473,119

SELECTED QUARTER-END BALANCES

Total assets $ 58,308,140 $ 56,901,977 $ 55,175,318 $ 53,908,606 $ 49,957,680 $ 48,666,873 $ 47,866,194 $ 41,594,453

Investment securities 13,110,408 10,875,354 10,894,227 10,222,107 9,922,905 9,860,594 9,508,476 8,845,197

Loans and leases 32,371,522 32,516,189 32,689,652 33,180,851 32,791,975 32,845,144 32,418,425 29,240,959

Deposits 51,406,094 50,065,762 48,410,596 47,330,997 43,431,609 42,250,606 41,479,245 35,346,711

Securities sold under customer repurchase agreements 589,101 663,575 692,604 680,705 641,487 693,889 740,276 540,362

Other short-term borrowings — — — — — — — 105,000

Long-term borrowings 1,194,378 1,219,229 1,224,488 1,230,326 1,248,163 1,252,016 1,258,719 1,297,132

Shareholders' equity $ 4,737,241 $ 4,581,295 $ 4,476,490 $ 4,321,400 $ 4,229,268 $ 4,074,414 $ 3,991,444 $ 3,957,520

Common shares outstanding 9,816,405 9,816,405 9,816,405 9,816,405 9,816,405 9,816,405 9,934,105 10,280,105

SELECTED RATIOS AND OTHER DATA

Rate of return on average assets (annualized) 0.84 % 0.88 % 1.13 % 1.16 % 1.11 % 1.18 % 1.36 % 0.57 %

Rate of return on average shareholders’ equity (annualized) 10.96 11.29 14.64 14.70 14.02 14.93 16.43 6.34

Net yield on interest-earning assets (taxable equivalent) 2.58 2.61 2.68 2.80 3.02 3.06 3.14 3.55

Allowance for credit losses to total loans and leases:

PCD 4.38 4.94 4.73 5.30 5.18 5.07 5.07 4.80

Non-PCD 0.51 0.51 0.53 0.57 0.62 0.61 0.61 0.64

Total 0.55 0.56 0.58 0.63 0.68 0.68 0.69 0.72

Ratio of total nonperforming assets to total loans, leases and other real estate owned 0.49 0.63 0.71 0.73 0.74 0.73 0.77 0.79

Total risk-based capital ratio 14.35 14.30 14.15 14.14 13.81 13.70 13.63 13.65

Tier 1 risk-based capital ratio 12.47 12.32 12.13 12.02 11.63 11.48 11.38 11.43

Common equity Tier 1 ratio 11.50 11.34 11.14 11.00 10.61 10.43 10.32 10.36

Tier 1 leverage capital ratio 7.59 7.68 7.67 7.84 7.86 7.80 8.07 8.98

Dividend payout ratio 3.89 3.86 3.11 3.23 3.46 2.85 2.71 7.33

Average loans and leases to average deposits 63.41 66.60 69.46 73.76 76.44 78.02 80.81 83.74

(1) Average loan and lease balances include PCI loans, non-PCI loans and leases, loans held for sale and nonaccrual loans and leases.

CONSOLIDATED TAXABLE EQUIVALENT RATE/VOLUME VARIANCE ANALYSIS - FOURTH QUARTER

2021 2020 Increase (decrease) due to:

Interest Interest

Average Income/ Yield/ Average Income/ Yield/ Yield/ Total

(Dollars in thousands, taxable equivalent) Balance Expense Rate Balance Expense Rate Volume Rate Change

Loans and leases (1)(2)

$ 32,488,033 $ 328,781 3.98 % $ 32,964,390 $ 345,300 4.12 % $ (15,137) $ (1,382) $ (16,519)

Investment securities:

Treasury 560,737 1,401 0.99 526,072 250 0.19 17 1,134 1,151

Government agency 832,821 1,381 0.66 695,757 1,574 0.90 310 (503) (193)

Mortgage-backed securities 9,300,971 28,597 1.23 7,981,834 21,130 1.06 3,523 3,944 7,467

Corporate bonds 620,341 7,782 5.02 591,780 7,657 5.18 370 (245) 125

Other investments 109,233 563 2.04 93,681 600 2.55 102 (139) (37)

Total investment securities 11,424,103 39,724 1.39 9,889,124 31,211 1.26 4,322 4,191 8,513

Overnight investments 10,689,674 4,050 0.15 4,069,309 1,019 0.10 1,664 1,367 3,031

Total interest-earning assets 54,601,810 $ 372,555 2.69 % 46,922,823 $ 377,530 3.17 % $ (9,151) $ 4,176 $ (4,975)

Cash and due from banks 336,715 325,890

Premises and equipment 1,239,037 1,262,831

Allowance for credit losses (183,810) (225,339)

Other real estate owned 41,673 50,949

Other assets 2,080,518 1,220,649

Total assets $ 58,115,943 $ 49,557,803

Interest-bearing deposits:

Checking with interest $ 11,993,935 $ 1,382 0.05 % $ 9,688,744 $ 1,533 0.06 % $ 365 $ (516) $ (151)

Savings 4,140,161 324 0.03 3,230,625 306 0.04 86 (68) 18

Money market accounts 10,357,923 2,223 0.09 8,529,816 3,242 0.15 695 (1,714) (1,019)

Time deposits 2,517,265 3,903 0.62 3,017,044 5,976 0.79 (990) (1,083) (2,073)

Total interest-bearing deposits 29,009,284 7,832 0.11 24,466,229 11,057 0.18 156 (3,381) (3,225)

Securities sold under customer repurchase agreements 650,123 260 0.16 684,311 374 0.22 (18) (96) (114)

Other short-term borrowings — — — — — — — — —

Long-term borrowings 1,217,099 6,513 2.12 1,250,682 6,729 2.13 (134) (82) (216)

Total interest-bearing liabilities 30,876,506 14,605 0.19 26,401,222 18,160 0.27 4 (3,559) (3,555)

Demand deposits 22,229,233 18,657,083

Other liabilities 377,286 373,403

Shareholders' equity 4,632,918 4,126,095

Total liabilities and shareholders' equity $ 58,115,943 $ 49,557,803

Interest rate spread 2.50 % 2.90 %

Net interest income and net yield on interest-earning assets $ 357,950 2.58 % $ 359,370 3.02 % $ (9,155) $ 7,735 $ (1,420)

(1) Loans and leases include PCI loans and non-PCI loans, nonaccrual loans and loans held for sale.

Interest income on loans and leases includes accretion income and loan fees.

Loan fees were $32.5 million and $39.8 million for the three months ended December 31, 2021, and 2020, respectively.

(2) Yields related to loans, leases and securities exempt from both federal and state income taxes, federal income taxes only or state income taxes only are stated on a taxable-equivalent basis assuming statutory federal income tax rates of 21.0% as well as state income tax rates of 3.3% and 3.5% for the three months ended December 31, 2021, and 2020, respectively.

The taxable-equivalent adjustment was $548 thousand and $654 thousand for the three months ended December 31, 2021, and 2020, respectively.

REPORT OF PREDECESSOR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of First Citizens BancShares, Inc.

Stockholders and the Board of Directors

First Citizens BancShares, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of First Citizens BancShares, Inc.

and Subsidiaries (the "Company") as of December 31, 2020, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the "consolidated financial statements").

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with U.S.

We have audited the accompanying statements of income, comprehensive income, changes in stockholders’ equity and cash flows of First Citizens BancShares, Inc.

and Subsidiaries (the "Company") for the year ended December 31, 2020, and the related notes (collectively referred to as the "consolidated financial statements").

In our opinion, the consolidated financial statements present fairly, in all material respects, the results of its operations and its cash flows for the year ended December 31, 2020, in conformity with U.S.

generally accepted accounting principles.

Adoption of New Accounting Standard

As discussed in Notes A and E to the consolidated financial statements, the Company changed its method of accounting for credit losses effective January 1, 2020 due to the adoption of Accounting Standards Codification (ASC) Topic 326 Financial Instruments – Credit Losses .

Basis for Opinion

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federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

/s/ Dixon Hughes Goodman LLP

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ FORVIS, LLP (Formerly Dixon Hughes Goodman LLP)

We served as the Company’s auditor from 2004 to 2021.

2 unchanged sentences

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

To the Board of Directors and Stockholders

First Citizens BancShares, Inc.:

1 unchanged sentence

We have audited the accompanying consolidated balance sheet of First Citizens BancShares, Inc.

and subsidiaries (the Company) as of December 31, 2021, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for the year then ended, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the year then ended, in conformity with U.S.

and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with U.S.

generally accepted accounting principles.

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These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion .

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Quantitative component of the allowance for credit losses for loans evaluated on a collective basis

As discussed in Notes A and E to the consolidated financial statements, as of December 31, 2021 the Company had an allowance for credit losses (ACL) of $178.5 million, which includes the quantitative component for loans evaluated on a collective basis (the quantitative collective ACL).

Loans are segregated into pools with similar risk characteristics and each have a model that is utilized to estimate the quantitative collective ACL.

The quantitative collective ACL models estimate the probability of default (PD) and loss given default (LGD) for individual loans within the risk pool based on historical loss experience, borrower characteristics, collateral type, forecasts of relevant economic conditions, expected future recoveries and other factors.

Loan level undiscounted ACL is calculated by applying the modeled PD and LGD to quarterly forecasted loan balances, which are adjusted for contractual payments, pre-payments, and prior defaults.

The Company uses a two-year reasonable and supportable forecast period which incorporates macroeconomic forecasts at the time of the evaluation.

The Company’s ACL forecasts consider a range of economic scenarios from an upside scenario to a severely adverse scenario, but the December 31, 2021 ACL forecast was calculated using the consensus baseline scenario.

A twelve-month straight-line

reversion period to historical averages is used for model inputs, however for the commercial card and certain consumer portfolios immediate reversion to historical net loss rates is utilized.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Quantitative component of the allowance for credit losses for legacy First Citizens BancShares, Inc.

loans and leases evaluated on a collective basis

As discussed in Notes 1 and 5 to the consolidated financial statements, as of December 31, 2022, the Company had an allowance for credit losses (ACL) of $922 million, which includes the quantitative component for loans evaluated on a collective basis for legacy First Citizens BancShares, Inc.

loans and leases (the FCB quantitative collective ACL).

Loans and leases are segregated into pools with similar risk characteristics, and each have a model that is utilized to estimate the quantitative collective ACL.

The FCB quantitative collective ACL models estimate the probability of default (PD) and loss given default (LGD) for individual loans and leases within the risk pool based on historical loss experience, borrower characteristics, collateral type, forecasts of relevant economic conditions, expected future recoveries and other factors.

Loan and lease level undiscounted ACL is calculated by applying the modeled PD and LGD to forecasted loan and lease balances which are adjusted for contractual payments, pre-payments, and prior defaults.

The Company uses a life of loan reasonable and supportable forecast period which incorporates macroeconomic forecasts at the time of the evaluation.

The Company’s ACL forecasts utilize scenario weighting of a range of economic scenarios, including baseline, upside and downside scenarios.

Model outputs may be adjusted through a qualitative assessment to reflect economic conditions and trends not captured within the models including credit quality, concentrations, and significant policy and underwriting changes.

We identified the assessment of the quantitative collective ACL as a critical audit matter.

A high degree of audit effort, including specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment of the quantitative collective ACL due to significant measurement uncertainty.

Specifically, the assessment encompassed the evaluation of the methodology, including the methods and models used to estimate the PD and LGD, as well as the selection of the economic scenario and related economic input variables.

We identified the assessment of the FCB quantitative collective ACL as a critical audit matter.

A high degree of audit effort, including specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment of the FCB quantitative collective ACL due to significant measurement uncertainty.

Specifically, the assessment encompassed the evaluation of the methodology, including the models used to estimate the PD and LGD, the selection of the economic scenarios, and the weighting of each economic scenario.

The assessment also included an evaluation of the conceptual soundness and performance of the PD and LGD models.

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The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s measurement of the quantitative collective ACL including controls related to the:

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s measurement of the FCB quantitative collective ACL including controls related to the:

• development and approval of the ACL methodology

• continued use and appropriateness of changes to the PD and LGD models

• selection of the economic scenario and related economic input variables utilized in the models

• determination and measurement of the factors and assumptions used in the PD and LGD models

• continued use and appropriateness of changes to the PD and LGD models, including the significant assumptions used in the PD and LGD models

• selection of the economic scenarios and the weighting of each economic scenario

• performance monitoring of the PD and LGD models

• analysis of the ACL results, trends, and ratios.

We evaluated the Company’s process to develop the quantitative collective ACL by testing certain sources of data, factors, and assumptions that the Company used, and considered the relevance and reliability of such data, factors, and assumptions.

We evaluated the Company’s process to develop the FCB quantitative collective ACL by testing certain sources of data, factors, and assumptions that the Company used, and considered the relevance and reliability of such data, factors, and assumptions.

In addition, we involved credit risk professionals with specialized skills and knowledge, who assisted in:

• evaluating the Company’s quantitative collective ACL methodology for compliance with U.S.

• evaluating the FCB quantitative collective ACL methodology for compliance with U.S.

generally accepted accounting principles

• evaluating judgments made by the Company relative to the assessment and performance testing of the PD and LGD models by comparing them to relevant Company-specific metrics and trends and the applicable industry and regulatory practices

• assessing the conceptual soundness of the PD and LGD models including the selection and use of the economic scenario and related economic input variables by inspecting the model documentation to determine whether the models are suitable for their intended use.

We also assessed the sufficiency of the audit evidence obtained related to the quantitative collective ACL by evaluating the:

• assessing the conceptual soundness of the PD and LGD models by inspecting the model documentation to determine whether the models are suitable for their intended use

• evaluating the selection of the economic scenarios and the weighting applied to each economic scenario by comparing them to the Company’s business environment and relevant industry practices

We also assessed the sufficiency of the audit evidence obtained related to the FCB quantitative collective ACL by evaluating the:

• cumulative results of the audit procedures

1 unchanged sentence

• potential bias in the accounting estimate.

Quantitative component of the allowance for credit losses for loans and leases evaluated on a collective basis acquired in the merger with CIT as of the date of the merger and as of year-end

As discussed in Notes 1 and 5 to the consolidated financial statements, on January 3, 2022, First Citizens BancShares, Inc.

(the Company) closed on a merger transaction with CIT Group Inc.

The Company’s allowance for credit losses (ACL) on legal day one (LD1) for the CIT acquired loans and leases was $726 million, which includes the quantitative component for loans and leases evaluated on a collective basis at January 3, 2022 (the LD1 CIT quantitative collective ACL).

As discussed in Notes 1 and 5 to the consolidated financial statements, as of December 31, 2022, the Company’s ACL was $922 million, which includes the quantitative component for loans and leases evaluated on a collective basis for legacy CIT Group (together with the LD1 CIT quantitative collective ACL, the CIT quantitative collective ACL).

Loans and leases are segregated into pools with similar risk characteristics, and each have a model that is utilized to estimate the quantitative collective ACL.

The CIT quantitative collective ACL models estimate the probability of default (PD) and loss given default (LGD) for individual loans within the risk pool based on historical loss experience, borrower characteristics, collateral type, forecasts of relevant economic conditions, expected future recoveries, loan grades and other factors.

Loan level undiscounted ACL is calculated by applying the modeled PD and LGD to forecasted loan balances which are adjusted for contractual payments, pre-payments, and prior defaults.

The Company uses a life of loan reasonable and supportable forecast period which incorporates macroeconomic forecasts at the time of the evaluation.

The CIT quantitative collective ACL forecasts utilize scenario weighting of a range of economic scenarios, including baseline, upside and downside scenarios.

We identified the assessment of the CIT quantitative collective ACL as a critical audit matter.

A high degree of audit effort, including specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment due to significant measurement uncertainty.

Specifically, the assessment encompassed the evaluation of the methodology, including the methods and models used to estimate the PD and LGD, the selection of the economic scenarios, and the weighting of each economic scenario.

The assessment also included an evaluation of the conceptual soundness and performance of the PD and LGD models.

In addition, auditor judgment was required to evaluate the sufficiency of the audit evidence obtained.

The following are primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s measurement of the CIT quantitative collective ACL including controls related to the:

• development and approval of the CIT quantitative collective ACL methodology

• continued use and appropriateness of changes to the PD and LGD models, including the significant assumptions used in the PD and LGD models

• selection of the economic scenarios and the weighting of each economic scenario

• performance monitoring of the PD and LGD models

• analysis of the ACL results, trends and ratios

We evaluated the Company’s process to develop the CIT quantitative collective ACL by testing certain sources of data, factors, and assumptions that the Company used, and considered the relevance and reliability of such data, factors, and assumptions.

In addition, we involved credit risk professionals with specialized skills and knowledge, who assisted in:

• evaluating the CIT quantitative collective ACL methodology for compliance with U.S.

generally accepted accounting principles.

• assessing the conceptual soundness of the PD and LGD models by inspecting the model documentation to determine whether the models are suitable for their intended use

• evaluating the selection of the economic scenarios and the weighting applied to each economic scenario by comparing them to the Company’s business environment and relevant industry practices

We also assessed the sufficiency of the audit evidence obtained related to the CIT quantitative collective ACL by evaluating the:

• cumulative results of the audit procedures

• qualitative aspects of the Company’s accounting practices

• potential bias in the accounting estimate

Valuation of loans and leases, rail operating lease equipment and the core deposit intangible acquired in the merger with CIT

As discussed in Note 2 to the consolidated financial statements, on January 3, 2022, First Citizens BancShares, Inc.

(the Company) closed on a merger transaction with CIT Group Inc.

(the Merger).

The assets acquired and liabilities assumed are required to be measured at fair value at the date of acquisition under the purchase method of accounting.

The Company acquired loans and leases with a fair value of $33 billion, rail operating lease equipment of $8 billion and established a core deposit intangible (CDI) asset with a fair value of $143 million.

• The fair value of the acquired loans and leases is based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, fixed or variable interest rate, remaining term, and certain assumptions including market implied credit losses (probability of default, loss given default), discount rates, and prepayment rates.

• The fair value of the rail operating lease equipment is based primarily on a cost approach that considers factors including the railcar type, age, leasing status and certain assumptions including replacement cost, functional and economic obsolescence and salvage values.

For certain rail operating lease equipment, a market approach was used that considers factors including railcar type, age and certain assumptions including estimated sales values and salvage values.

• The fair value of the CDI asset is based on an income approach, after-tax savings method.

This method estimates the fair value by discounting to present value the favorable funding spread attributable to the core deposit balances.

The favorable funding spread is calculated as the difference in the alternative cost of funds and the net deposit cost whereby projected net cash flow benefits are derived from estimating costs to carry deposits compared to alternative funding costs, and certain assumptions including the discount rates, interest costs, deposit attrition rates, alternative costs of funds, and net maintenance costs.

We identified the valuation of the acquired loans and leases, rail operating lease equipment and CDI asset in the Merger as a critical audit matter.

Specifically, the evaluation of the methodologies and the determination of certain assumptions used to estimate the fair values involved a high degree of auditor judgment and specialized skills and knowledge.

Such assumptions included the market implied credit losses, discount rates, and prepayment rates for the loans and leases;

the replacement costs and the functional and economic obsolescence for the rail operating lease equipment;

and the discount rate for the CDI asset.

These assumptions required subjective auditor judgment as changes in the assumptions could have a significant impact on the estimated fair value.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the process to measure the estimate of fair values of the acquired loans and leases, the rail operating lease equipment and the CDI asset, including controls over:

• evaluating the fair value methodologies

• determining the market implied credit losses, discount rates, and prepayment rates for the loans and leases

• determining the replacement costs and the functional and economic obsolescence for the rail operating lease equipment

• determining the discount rate for the CDI asset

We evaluated the Company’s process to develop the fair values of the acquired loans and leases, the rail operating lease equipment and the CDI asset by testing certain sources of data and assumptions that the Company used and considered the relevance and reliability of such data and assumptions.

We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the Company’s estimate of these fair values by:

• evaluating the valuation methodologies used by the Company to estimate the fair values for reasonableness and compliance with U.S.

generally accepted accounting principles

Specific to the acquired loans and leases:

• developing independent ranges of fair value for certain acquired loans and leases, including the development of independent assumptions utilizing market data for implied credit loss, discount rate and prepayment rate assumptions

• assessing the Company’s estimate of fair value for certain acquired loans and leases by comparing them to the independently developed rangesSpecific to the rail operating lease equipment:

• developing independent assumptions for replacement costs on rail operating lease equipment by assessing market information from third-party sources

• evaluating the Company’s process for developing the functional and economic obsolescence, including the criteria used to determine extent of obsolescence, for reasonableness

• developing independent ranges of fair value for certain acquired rail operating lease equipment using multiple approaches and comparing the Company’s estimate to the independently developed estimates

Specific to the CDI asset:

• evaluating the Company’s process for developing the discount rate, by assessing the approach used to derive the assumption, reviewing the peer group used to determine the market beta for comparability, assessing market information from third-party sources and developing the size premium and company specific risk premiums and comparing to those selected by management

We have served as the Company’s auditor since 2021.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

To the Board of Directors and Stockholders

First Citizens BancShares, Inc.:

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In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2021, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for the year then ended, and the related notes (collectively, the consolidated financial statements), and our report dated February 25, 2022 expressed an unqualified opinion on those consolidated financial statements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements), and our report dated February 24, 2023 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

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Consolidated Balance Sheets

(Dollars in thousands, except share data) December 31, 2021 December 31, 2020

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

Cash and due from banks $ 518 $ 338

Overnight investments 9,114,660 4,347,336

Interest-earning deposits at banks 5,025 9,115

Investment in marketable equity securities (cost of $ 75 at December 31, 2022 and $ 73 at December 31, 2021)

97,528 91,680

Investment securities available for sale (cost of $ 9,967 at December 31, 2022 and $ 9,215 at December 31, 2021)

9,203,427 7,014,243

Investment securities held to maturity (fair value of $ 8,795 at December 31, 2022 and $ 3,759 at December 31, 2021)

3,809,453 2,816,982

Loans held for sale 98,741 124,837

Assets held for sale 60 99

Loans and leases 70,781 32,372

Allowance for credit losses ( 922 ) ( 178 )

Net loans and leases 32,193,029 32,567,661

Premises and equipment 1,233,418 1,251,283

Other real estate owned 39,328 50,890

Income earned not collected 134,237 145,694

Loans and leases, net of allowance for credit losses 69,859 32,194

Operating lease equipment, net 8,156 —

Premises and equipment, net 1,456 1,233

Goodwill 346 346

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Total deposits 89,408 51,406

Securities sold under customer repurchase agreements 589,101 641,487

Federal Home Loan Bank borrowings 644,659 655,175

Subordinated debt 477,564 504,518

Other borrowings 72,155 88,470

FDIC shared-loss payable — 15,601

Credit balances of factoring clients 995 —

Short-term borrowings 2,186 589

Long-term borrowings 4,459 1,195

Total borrowings 6,645 1,784

Other liabilities 2,588 381

Total liabilities 99,636 53,571

Shareholders’ equity

Stockholders’ equity

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

Common stock:

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

8,811,220 shares issued and outstanding at December 31, 2021 and December 31, 2020)

13,501,017 and 8,811,220 shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively)

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

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

Preferred stock - $ 0.01 par value and liquidation preference of $ 1,000 per share ( 10,000,000 shares authorized;

345,000 shares issued and outstanding at December 31, 2021 and December 31, 2020)

339,937 339,937

Additional paid in capital 4,109 —

Retained earnings 5,392 4,378

Accumulated other comprehensive income 9,776 12,263

Total shareholders’ equity 4,737,241 4,229,268

Total liabilities and shareholders’ equity $ 58,308,140 $ 49,957,680

Refer to the accompanying Notes to Consolidated Financial Statements.

Accumulated other comprehensive (loss) income ( 735 ) 10

Total stockholders’ equity 9,662 4,738

Total liabilities and stockholders’ equity $ 109,298 $ 58,309

See accompanying Notes to the Consolidated Financial Statements.

First Citizens BancShares, Inc.

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Year ended December 31

(Dollars in thousands, except share and per share data) 2021 2020 2019

dollars in millions, except share and per share data 2022 2021 2020

Interest income

Loans and leases $ 1,294,813 $ 1,332,720 $ 1,217,306

Investment securities interest and dividend income 145,200 144,459 160,460

Overnight investments 10,997 6,847 26,245

Interest and fees on loans $ 2,953 $ 1,295 $ 1,333

Interest on investment securities 354 145 144

Interest on deposits at banks 106 11 7

Total interest income 3,413 1,451 1,484

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Deposits 335 33 67

Securities sold under customer repurchase agreements 1,312 1,610 1,995

Federal Home Loan Bank borrowings 8,410 9,763 5,472

Subordinated debt 16,709 16,074 7,099

Other borrowings 1,005 1,775 1,822

Borrowings 132 28 29

Total interest expense 467 61 96

Net interest income 2,946 1,390 1,388

(Benefit) provision for credit losses ( 36,835 ) 58,352 31,441

Net interest income after (benefit) provision for credit losses 1,427,169 1,329,817 1,279,928

Provision (benefit) for credit losses 645 ( 37 ) 58

Net interest income after provision for credit losses 2,301 1,427 1,330

Noninterest income

Rental income on operating lease equipment 864 — —

Fee income and other service charges 163 42 37

Wealth management services 142 129 103

Service charges on deposit accounts 100 95 88

Factoring commissions 104 — —

Cardholder services, net 102 87 74

Other service charges and fees 35,923 30,911 31,644

Merchant services, net 35 33 24

Mortgage income 30,508 39,592 21,126

Insurance commissions 47 16 15

ATM income 6,002 5,758 6,296

Marketable equity securities gains, net 34,081 29,395 20,625

Realized gains on investment securities available for sale, net 33,119 60,253 7,115

Other 9,445 7,446 18,431

Realized gain on sale of investment securities available for sale, net — 33 60

Fair value adjustment on marketable equity securities, net ( 3 ) 34 29

Bank-owned life insurance 32 3 3

Gain on sale of leasing equipment, net 15 — —

Gain on acquisition 431 — —

Gain on extinguishment of debt 7 — —

Other noninterest income 97 36 44

Total noninterest income 2,136 508 477

Noninterest expense

Salaries and wages 623,194 590,020 551,112

Employee benefits 135,659 132,244 120,501

Occupancy expense 117,180 117,169 111,179

Depreciation on operating lease equipment 345 — —

Maintenance and other operating lease expenses 189 — —

Salaries and benefits 1,396 759 722

Net occupancy expense 194 117 117

Equipment expense 216 119 116

Processing fees paid to third parties 59,743 44,791 29,552

Professional fees 57 20 17

Third-party processing fees 103 60 45

FDIC insurance expense 31 14 13

Collection and foreclosure-related expenses 5,442 13,658 11,994

Marketing expense 53 10 10

Merger-related expenses 231 29 17

Other 129,526 145,117 139,283

Intangible asset amortization 23 12 15

Other noninterest expense 237 94 117

Total noninterest expense 3,075 1,234 1,189

Income before income taxes 1,362 701 618

Income taxes 154,202 126,159 134,677

Income tax expense 264 154 126

Net income $ 1,098 $ 547 $ 492

Preferred stock dividends 50 18 14

Net income available to common shareholders $ 528,915 $ 477,661 $ 457,371

Weighted average common shares outstanding 9,816,405 10,056,654 11,141,069

Net income available to common stockholders $ 1,048 $ 529 $ 478

Earnings per common share

Dividends declared per common share $ 1.88 $ 1.67 $ 1.60

Refer to the accompanying Notes to Consolidated Financial Statements.

Basic $ 67.47 $ 53.88 $ 47.50

Diluted $ 67.40 $ 53.88 $ 47.50

Weighted average common shares outstanding

Basic 15,531,924 9,816,405 10,056,654

Diluted 15,549,944 9,816,405 10,056,654

See accompanying Notes to the Consolidated Financial Statements.

First Citizens BancShares, Inc.

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Year ended December 31

2021 2020 2019

(Dollars in thousands)

dollars in millions 2022 2021 2020

Net income $ 1,098 $ 547 $ 492

Other comprehensive income (loss)

Unrealized (losses) gains on securities available for sale:

Unrealized (losses) gains on securities available for sale arising during the period ( 80,951 ) 155,009 64,644

Tax effect 18,619 ( 35,652 ) ( 14,868 )

Reclassification adjustment for realized gains on securities available for sale included in income before income taxes ( 33,119 ) ( 60,253 ) ( 7,115 )

Tax effect 7,617 13,858 1,636

Unrealized (losses) gains on securities available for sale arising during the period, net of tax ( 87,834 ) 72,962 44,297

Unrealized (losses) gains on securities available for sale transferred to held to maturity:

Unrealized (losses) gains on securities available for sale transferred to held to maturity ( 12,659 ) 5,894 72,512

Tax effect 2,912 ( 1,356 ) ( 16,678 )

Reclassification adjustment for (amortization) accretion of unrealized (losses) gains on securities available for sale transferred to held to maturity ( 1,475 ) ( 495 ) 19,889

Tax effect 339 114 ( 4,574 )

Total change in unrealized (losses) gains on securities available for sale transferred to held to maturity, net of tax ( 10,883 ) 4,157 71,149

Defined benefit pension items:

Actuarial gains (loss) arising during the period 97,880 55,023 ( 20,049 )

Tax effect ( 22,512 ) ( 12,656 ) 4,611

Amortization of actuarial gains (losses) and prior service cost 27,093 25,324 10,981

Tax effect ( 6,231 ) ( 5,824 ) ( 2,525 )

Total change from defined benefit plans, net of tax 96,230 61,867 ( 6,982 )

Other comprehensive (loss) income ( 2,487 ) 138,986 108,464

Other comprehensive (loss) income, net of tax

Net unrealized (loss) gain on securities available for sale ( 730 ) ( 88 ) 73

Net change in unrealized loss on securities available for sale transferred to securities held to maturity 1 ( 11 ) 4

Net change in defined benefit pension items ( 16 ) 97 62

Other comprehensive (loss) income, net of tax $ ( 745 ) $ ( 2 ) $ 139

Total comprehensive income $ 353 $ 545 $ 631

Refer to the accompanying Notes to Consolidated Financial Statements.

See accompanying Notes to the Consolidated Financial Statements.

First Citizens BancShares, Inc.

and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

Common Stock Class B

Common Stock Preferred Stock Surplus Retained

Earnings Accumulated

Comprehensive

Income (Loss) Total

Shareholders’

(Dollars in thousands, except share and per share data)

Consolidated Statements of Changes in Stockholders’ Equity

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

Balance at December 31, 2019 $ — $ 10 $ 1 $ 44 $ 3,658 $ ( 127 ) $ 3,586

Cumulative effect of adoption of ASC 326 — — — — 37 — 37

Net income — — — — 492 — 492

Other comprehensive income, net of tax — — — — — 108,464 108,464

Repurchase of 998,910 shares of Class A common stock

Other comprehensive loss, net of tax — — — — — 139 139

Issuance of preferred stock 340 — — — — — 340

Repurchased 813,090 shares of Class A common stock

— ( 1 ) — ( 44 ) ( 289 ) — ( 334 )

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Class B common stock — — — — ( 2 ) — ( 2 )

Preferred stock dividends declared — — — — ( 14 ) — ( 14 )

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

Cumulative effect of adoption of ASC 326 — — — — 36,943 — 36,943

Net income — — — — 547 — 547

Other comprehensive income, net of tax — — — — — 138,986 138,986

Issuance of preferred stock — — 339,937 — — — 339,937

Repurchase of 813,090 shares of Class A common stock

( 813 ) — — ( 44,081 ) ( 288,861 ) — ( 333,755 )

Other comprehensive loss, net of tax — — — — — ( 2 ) ( 2 )

Cash dividends declared ($ 1.88 per common share):

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Class B common stock — — — — ( 2 ) — ( 2 )

Preferred stock dividends declared ($40.76 per preferred share)

— — — — ( 14,062 ) — ( 14,062 )

Preferred stock dividends declared — — — — ( 18 ) — ( 18 )

Balance at December 31, 2021 340 9 1 — 4,378 10 4,738

1 unchanged sentence

Other comprehensive loss, net of tax — — — — — ( 745 ) ( 745 )

Issued in CIT Merger:

Common stock — 6 — 5,273 — — 5,279

Series B preferred stock 334 — — — — — 334

Series C preferred stock 207 — — — — — 207

Stock-based compensation — — — 75 — — 75

Repurchased 1,500,000 shares of Class A common stock

— ( 1 ) — ( 1,239 ) — — ( 1,240 )

Cash dividends declared ($ 2.16 per common share):

1 unchanged sentence

Class B common stock — — — — ( 2 ) — ( 2 )

Preferred stock dividends declared ($53.75 per preferred share)

— — — — ( 18,544 ) — ( 18,544 )

Preferred stock dividends declared:

Series A — — — — ( 19 ) — ( 19 )

Series B — — — — ( 20 ) — ( 20 )

Series C — — — — ( 11 ) — ( 11 )

Balance at December 31, 2022 $ 881 $ 14 $ 1 $ 4,109 $ 5,392 $ ( 735 ) $ 9,662

Refer to the accompanying Notes to Consolidated Financial Statements.

See accompanying Notes to Consolidated Financial Statements.

First Citizens BancShares, Inc.

2 unchanged sentences

Year Ended December 31,

(Dollars in thousands) 2021 2020 2019

dollars in millions 2022 2021 2020

CASH FLOWS FROM OPERATING ACTIVITIES

Net income $ 1,098 $ 547 $ 492

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

(Benefit) provision for credit losses on loans and leases ( 36,835 ) 58,352 31,441

Deferred tax (benefit) expense ( 7,586 ) ( 25,535 ) 54,598

Net increase in prepaid and current tax receivable ( 731,741 ) ( 5,894 ) ( 19,564 )

Depreciation and amortization 106,585 108,641 103,828

Net (decrease) increase in accrued interest payable ( 1,493 ) ( 8,683 ) 14,412

Net decrease (increase) in income earned not collected 11,457 ( 21,982 ) ( 4,151 )

Contribution to pension plans ( 32 ) ( 100,000 ) ( 3,592 )

Realized gains on investment securities available for sale, net ( 33,119 ) ( 60,253 ) ( 7,115 )

Marketable equity securities gains, net ( 34,081 ) ( 29,395 ) ( 20,625 )

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

Provision (benefit) for credit losses 645 ( 37 ) 58

Deferred tax expense (benefit) 206 ( 8 ) ( 26 )

Depreciation, amortization, and accretion, net 533 143 133

Stock based compensation expense 19 — —

Realized gain on sale of investment securities available for sale, net — ( 33 ) ( 60 )

Fair value adjustment on marketable equity securities, net 3 ( 34 ) ( 29 )

Gain on sale of loans, net ( 22 ) ( 33 ) ( 38 )

Gain on sale of operating lease equipment, net ( 15 ) — —

Loss on sale of premises and equipment, net 5 — —

(Gain) loss on other real estate owned, net ( 14 ) ( 1 ) 4

Gain on acquisition ( 431 ) — —

Gain on extinguishment of debt ( 7 ) — —

Origination of loans held for sale ( 499 ) ( 1,123 ) ( 1,042 )

Proceeds from sale of loans held for sale 562 1,036 1,046

Gain on sale of loans ( 32,719 ) ( 37,594 ) ( 15,183 )

Net (gains) losses on other real estate owned ( 1,207 ) 4,056 2,664

Net amortization (accretion) of premiums and discounts 11,151 ( 8,513 ) ( 27,263 )

Amortization of intangible assets 25,582 32,801 23,861

Origination of mortgage servicing rights, net of change in valuation allowance ( 13,658 ) ( 12,149 ) ( 5,927 )

Net increase in other assets ( 12,910 ) ( 7,286 ) ( 24,274 )

Net increase (decrease) in other liabilities 6,854 ( 6,115 ) ( 15,992 )

Net cash (used in) provided by operating activities ( 283,783 ) 375,819 578,248

Net change in other assets 484 ( 733 ) ( 135 )

Net change in other liabilities 260 5 ( 15 )

Other operating activities ( 36 ) ( 13 ) ( 12 )

Net cash provided by (used in) operating activities 2,791 ( 284 ) 376

CASH FLOWS FROM INVESTING ACTIVITIES

Net decrease (increase) in loans outstanding 423,257 ( 3,850,129 ) ( 1,320,851 )

Purchases of investment securities available for sale ( 6,375,349 ) ( 8,667,406 ) ( 4,705,038 )

Purchases of investment securities held to maturity ( 1,401,220 ) ( 1,633,165 ) ( 223,598 )

Purchases of marketable equity securities ( 1,563 ) ( 333,140 ) ( 26,166 )

Proceeds from maturities, calls, and principal repayments of investment securities held to maturity 809,421 301,347 341,077

Proceeds from maturities, calls, and principal repayments of investment securities available for sale 2,454,722 2,791,291 2,345,512

Proceeds from sales of investment securities available for sale 1,366,909 4,585,002 2,308,856

Proceeds from sales of marketable equity securities 29,796 352,835 56,749

Net increase in overnight investments ( 4,767,324 ) ( 3,204,363 ) ( 65,181 )

Proceeds from sales of loans held for investment — 13,368 24,247

Cash paid to FDIC for settlement of shared-loss agreement ( 16,103 ) ( 99,468 ) —

Proceeds from sales of other real estate owned 40,524 28,280 25,918

Net decrease (increase) in interest-earning deposits at banks 6,965 ( 4,767 ) ( 3,204 )

Purchase of marketable equity securities — ( 2 ) ( 333 )

Proceeds from sales of investments in marketable equity securities — 30 353

Purchase of investment securities available for sale ( 1,985 ) ( 6,375 ) ( 8,667 )

Proceeds from maturities of investment securities available for sale 1,237 2,455 2,791

Proceeds from sale of investment securities available for sale 2 1,367 4,585

Purchase of investment securities held to maturity ( 755 ) ( 1,401 ) ( 1,633 )

Proceeds from maturities of investment securities held to maturity 835 809 301

Net change in loans ( 5,344 ) 423 ( 3,850 )

Proceeds from sale of loans 245 — 13

Net decrease in credit balances of factoring clients ( 538 ) — —

Purchase of operating lease equipment ( 771 ) — —

Proceeds from sale of operating lease equipment 95 — —

Purchase of premises and equipment ( 155 ) ( 107 ) ( 133 )

Proceeds from sales of premises and equipment 13 1 1

Purchases of premises and equipment ( 107,367 ) ( 133,384 ) ( 121,077 )

Proceeds from sales of other real estate owned 48 41 28

Acquisition, net of cash acquired 134 — ( 60 )

Other investing activities 49 ( 42 ) ( 100 )

Business acquisitions, net of cash acquired — ( 59,999 ) ( 236,728 )

Net cash used in investing activities ( 7,568,426 ) ( 9,907,562 ) ( 1,596,148 )

Net cash provided by (used in) investing activities 75 ( 7,568 ) ( 9,908 )

CASH FLOWS FROM FINANCING ACTIVITIES

Net (decrease) increase in time deposits ( 406,226 ) ( 1,010,190 ) 284,611

Net increase in demand and other interest-bearing deposits 8,382,531 9,989,107 1,154,815

Net decrease in short-term borrowings ( 52,386 ) ( 96,746 ) ( 27,703 )

Repayment of long-term obligations ( 54,332 ) ( 86,737 ) ( 73,284 )

Origination of long-term obligations — 400,000 200,000

Net proceeds from subordinated notes issuance — 345,849 —

Net proceeds from preferred stock issuance — 339,937 —

Repurchase of common stock — ( 333,755 ) ( 453,123 )

Net increase (decrease) in time deposits 568 ( 406 ) ( 1,010 )

Net (decrease) increase in demand and other interest-bearing deposits ( 2,259 ) 8,382 9,989

Net decrease in securities sold under customer repurchase agreements ( 153 ) ( 52 ) ( 97 )

Repayment of short-term borrowings ( 1,355 ) — —

Proceeds from issuance of short-term borrowings 3,105 — —

Repayment of long-term borrowings ( 5,099 ) ( 54 ) ( 87 )

Proceeds from issuance of long-term borrowings 3,854 — 746

Net proceeds from issuance of preferred stock — — 340

Repurchase of Class A common stock ( 1,240 ) — ( 334 )

Cash dividends paid ( 83 ) ( 42 ) ( 30 )

Net cash provided by financing activities 7,827,975 9,517,072 1,067,179

Other financing activities ( 24 ) — —

Net cash (used in) provided by financing activities ( 2,686 ) 7,828 9,517

Change in cash and due from banks 180 ( 24 ) ( 15 )

Cash and due from banks at beginning of period 362,048 376,719 327,440

Cash and due from banks at end of period $ 337,814 $ 362,048 $ 376,719

Cash and due from banks at beginning of year 338 362 377

Cash and due from banks at end of year $ 518 $ 338 $ 362

Year Ended December 31,

dollars in millions 2022 2021 2020

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the period for:

Cash paid (refunded) during the period for:

Interest $ 525 $ 62 $ 105

Income taxes ( 551 ) 870 117

Significant noncash investing and financing activities:

Significant non-cash investing and financing activities:

Transfers of loans to other real estate 14 14 12

Transfers of premises and equipment to other real estate 19 14 15

Transfer of investment securities available for sale to held to maturity — 452 1,461

Dividends declared but not paid 1 — 5

Transfer of loans held for sale to loans held for investment 3,574 5,950 —

Transfer of assets from held for investment to held for sale 188 88 49

Transfer of assets from held for sale to held for investment 21 4 6

Loans held for sale exchanged for investment securities 38 231 11

Transfer of loans held for investment to loans held for sale 87,814 48,628 60,005

Transfer of investment securities available for sale to (from) held to maturity 451,684 1,460,745 ( 2,080,617 )

Transfers of premises and equipment to other real estate 13,776 15,187 7,045

Refer to the accompanying Notes to Consolidated Financial Statements.

Commitments extended during the period on affordable housing investment credits 110 15 15

Issuance of common stock as consideration for acquisition 5,279 — —

Stock-based compensation as consideration for acquisition 81 — —

Issuance of preferred stock as consideration for acquisition 541 — —

See accompanying Notes to the Consolidated Financial Statements.

First Citizens BancShares, Inc.

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Notes to Consolidated Financial Statements

ACCOUNTING POLICIES AND BASIS OF PRESENTATION

NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

Nature of Operations

First Citizens BancShares, Inc.

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

BancShares and its subsidiaries operate 529 branches in 19 states predominantly located in the Southeast, Mid-Atlantic, Midwest and Western United States (the “U.S.”).

BancShares seeks to meet the financial needs of individuals and commercial entities in its market areas through a wide range of retail and commercial banking services.

Loan services include various types of commercial, business and consumer lending.

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

BancShares and its subsidiaries operate a network of over 500 branches in 22 states, predominantly located in the Southeast, Mid-Atlantic, Midwest and Western United States.

BancShares provides various types of commercial and consumer banking services, including lending, leasing and wealth management services.

Deposit services include checking, savings, money market and time deposit accounts.

First Citizens Wealth Management provides holistic, goals-based advisory services encompassing a broad range of client deliverables.

These deliverables include wealth planning, discretionary investment advisory services, insurance, brokerage, defined benefit and defined contribution services, private banking, trust, fiduciary, philanthropy and special asset services.

BASIS OF PRESENTATION

Principles of Consolidation and Basis of Presentation

The accounting and reporting policies of BancShares are in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and general practices within the banking industry.

The consolidated financial statements of BancShares include the accounts of BancShares, certain partnership interests and variable interest entities.

The consolidated financial statements of BancShares include the accounts of BancShares and its subsidiaries, certain partnership interests and variable interest entities (“VIEs”) where BancShares is the primary beneficiary, if applicable.

All significant intercompany accounts and transactions are eliminated upon consolidation.

BancShares operates with centralized management and combined reporting;

therefore, BancShares does not have multiple reportable segments.

Variable interest entities (“VIE”) are legal entities that either do not have sufficient equity to finance their activities without the support from other parties or whose equity investors lack a controlling financial interest.

Assets held in agency or fiduciary capacity are not included in the consolidated financial statements.

VIEs are legal entities that either do not have sufficient equity to finance their activities without the support from other parties or whose equity investors lack a controlling financial interest.

BancShares has investments in certain partnerships and limited liability entities that have been evaluated and determined to be VIEs.

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The recorded investment in these entities is reported within other assets.

See Note 10 — Other Assets and Note 12 — Variable Interest Entities for additional information.

Reclassifications

In certain instances, amounts reported in prior years’ consolidated financial statements have been reclassified to conform to the current financial statement presentation.

Such reclassifications had no effect on previously reported shareholders’ equity or net income.

In certain instances, amounts reported in the 2021 and 2020 consolidated financial statements have been reclassified to conform to the 2022 financial statement presentation, primarily reflecting impacts from the CIT Merger (as defined below).

Such reclassifications had no effect on previously reported stockholders’ equity or net income.

Use of Estimates in the Preparation of Financial Statements

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

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

Actual results could differ from those estimates.

BancShares considers the allowance for credit losses to be a significant estimate.

The significant estimates include the allowance for credit losses (“ACL”) and fair value estimates of acquired loans and operating lease equipment and core deposit intangibles.

Business Combinations

BancShares accounts for all business combinations using the acquisition method of accounting.

Under this method, acquired assets and assumed liabilities are included with the acquirer’s accounts as of the date of acquisition, with any excess of purchase price over the fair value of the net assets acquired recognized as either finite lived intangibles or capitalized as goodwill.

In addition, acquisition-related and restructuring costs are recognized as period expenses as incurred.

Refer to Note B, Business Combinations, for additional information.

BancShares accounts for business combinations using the acquisition method of accounting.

Under this method, acquired assets and assumed liabilities are included with the acquirer’s accounts at their estimated fair value as of the date of acquisition, with any excess of purchase price over the fair value of the net tangible and intangible assets acquired recognized as goodwill.

To the extent the fair value of identifiable net assets acquired exceeds the purchase price, a gain on acquisition is recognized.

Merger-related costs are recognized as period expenses as incurred.

On January 3, 2022, BancShares completed its previously announced merger (the “CIT Merger”) with CIT Group Inc.

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

Refer to Note W, Subsequent Events, for further information .

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Overnight Investments

Overnight investments primarily comprise of interest-bearing deposits with banks and federal funds sold.

Interest-bearing cash held at the Federal Reserve at December 31, 2021 and December 31, 2020 was $ 9.03 billion and $ 4.27 billion, respectively.

Overnight investments have initial maturities of three months or less.

The carrying value of overnight investments approximates its fair value due to its short-term nature.

See Note 2 — Business Combinations for additional information.

Reportable Segments

As of December 31, 2021, BancShares managed its business and reported its financial results as a single segment.

BancShares began reporting multiple segments during the first quarter of 2022 and now reports General Banking, Commercial Banking, Rail, and Corporate segments.

BancShares conformed the comparative prior periods presented to reflect the new segments.

The substantial majority of BancShares’ operations for historical periods prior to completion of the CIT Merger are included in the General Banking segment.

The Commercial Banking and Rail segments primarily relate to operations acquired in the CIT Merger.

See Note 23 — Business Segment Information for additional information.

SIGNIFICANT ACCOUNTING POLICIES

Interest-Earning Deposits at Banks

Interest-earning deposits at banks are primarily comprised of interest-bearing deposits with banks and federal funds sold.

Interest-earning deposits at banks have initial maturities of three months or less.

The carrying value of interest-earning deposits at banks approximates its fair value due to its short-term nature.

Debt Securities

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Amortization of premiums and accretion of discounts for debt securities are recorded in interest income.

Realized gains and losses from the sale of debt securities are determined by specific identification on a trade date basis and are included in noninterest income.

Realized gains and losses from the sale of debt securities are included in noninterest income.

BancShares performs pre-purchase due diligence and evaluates the credit risk of AFS and HTM debt securities purchased directly into BancShares' portfolio or via acquisition.

If securities have evidence of more than insignificant credit deterioration since issuance, they are designated as purchased credit deteriorated (“PCD”).

P CD debt securities are recorded at fair value at the date of acquisition, which includes an associated allowance for credit losses (“ACL”) that is added to the purchase price or fair value to arrive at the Day 1 amortized cost basis.

Excluding the ACL, the difference between the purchase price and the Day 1 amortized cost is amortized or accreted to interest income over the contractual life of the securities using the effective interest method.

For AFS debt securities, management performs a quarterly analysis of the investment portfolio to evaluate securities currently in an unrealized loss position for potential credit-related impairment.

If BancShares intends to sell a security, or does not have the intent and ability to hold a security before recovering the amortized cost, the entirety of the unrealized loss is immediately recorded in earnings to the extent that it exceeds the associated allowance for credit losses previously established.

For the remaining securities, an analysis is performed to determine if any portion of the unrealized loss recorded relates to credit impairment.

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This review includes indicators such as changes in credit rating, delinquency, bankruptcy or other significant news event impacting the issuer.

BancShares’ portfolio of HTM debt securities is made up of mortgage-backed securities issued by government agencies and government sponsored entities.

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

Treasury and the long history of no credit losses on debt securities issued by government agencies and government sponsored entities, BancShares determined zero expected credit losses on the HTM portfolio.

BancShares determined that there were no expected credit losses on the HTM or AFS portfolios.

Debt securities are also classified as past due when the payment of principal and interest based upon contractual terms is 30 days delinquent or greater.

Missed interest payments on debt securities are rare.

Management reviews all debt securities with delinquent interest and immediately charges off any accrued interest determined to be uncollectible.

See Note 3 — Investment Securities for additional information.

Equity Securities

Investments in equity securities having readily determinable fair values are stated at fair value.

Realized and unrealized gains and losses on these securities are determined by specific identification and are included in noninterest income.

Realized and unrealized gains and losses on these securities are included in noninterest income.

Non-marketable equity securities are securities with no readily determinable fair values and are measured at cost.

BancShares evaluates its non-marketable equity securities for impairment and recoverability of the recorded investment by considering positive and negative evidence, including the profitability and asset quality of the issuer, dividend payment history and recent redemption experience.

Impairment is assessed at each reporting period and if identified, is recognized in noninterest expense.

Non-marketable equity securities were $ 9.6 million and $ 11.6 million at December 31, 2021 and 2020, respectively, and are included in other assets.

BancShares evaluates its equity securities for impairment and recoverability of the recorded investment by considering positive and negative evidence, including the profitability and asset quality of the issuer, dividend payment history and recent redemption experience.

Impairment is assessed at each reporting period and if identified, is recognized in other noninterest expense.

See Note 10 — Other Assets for amounts of non-marketable equity securities at December 31, 2022 and 2021.

Other Securities

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Accordingly, the FHLB restricted stock is carried at cost, less any applicable impairment charges and is recorded within other assets.

FHLB restricted stock was $ 40.5 million and $ 45.4 million at December 31, 2021 and 2020, respectively.

Additionally, BancShares holds 353,577 shares of Visa Class B common stock.

Visa Class B shares are not considered to have a readily determinable fair value and are recorded at $ 0 .

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Investments in Qualified Affordable Housing Projects

Additionally, BancShares holds shares of Visa Inc.

(“Visa”) Class B common stock.

See Note 3 — Investment Securities and Note 10 — Other Assets for additional information.

Investment in Qualified Affordable Housing Projects

BancShares has investments in qualified affordable housing projects primarily for the purposes of fulfilling Community Reinvestment Act requirements and obtaining tax credits.

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Under the proportional amortization method, the initial cost of the investment is amortized in proportion to the tax credits and other tax benefits received, and the net investment performance is recognized in the income statement as a component of income tax expense.

All investments held in qualified affordable housing projects qualify for the proportional amortization method and totaled $ 156.6 million and $ 163.9 million at December 31, 2021 and 2020, respectively, and are included in other assets.

Loans Held For Sale

BancShares elected to apply the fair value option for residential mortgage loans originated to be sold to investors.

Gains and losses on sales of mortgage loans are recognized within mortgage income.

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

All investments held in qualified affordable housing projects qualify for the proportional amortization method.

See Note 10 — Other Assets and Note 12 — Variable Interest Entities for additional information.

Assets Held for Sale

Assets held for sale (“AHFS”) at December 31, 2022 consist of residential mortgage loans held for sale of $ 4 million carried at fair value and commercial loans held for sale of $ 48 million carried at the lower of the cost or fair value (“LOCOM”).

The remainder related to operating lease equipment held for sale, which is carried at LOCOM.

AHFS at December 31, 2021 consist of residential mortgage loans held for sale of $ 99 million carried at fair value.

Loans and Leases

BancShares’ accounting methods for loans and leases depends on whether they are originated or purchased, and if purchased, whether or not the loans reflect more than insignificant credit deterioration since origination as of the date of acquisition.

Non-Purchased Credit Deteriorated Loans

Non-Purchased Credit Deteriorated (“Non-PCD”) loans consist of loans originated by BancShares and loans purchased from other institutions that do not reflect more than insignificant credit deterioration at acquisition.

Originated loans for which management has the intent and ability to hold for the foreseeable future are classified as held for investment and carried at the principal amount outstanding net of any unearned income, charge-offs and unamortized fees and costs.

Nonrefundable fees collected and certain direct costs incurred related to loan originations are deferred and recorded as an adjustment to loans outstanding.

The net amount of the nonrefundable fees and costs is amortized to interest income over the contractual lives using methods that approximate a constant yield.

Purchased loans which do not reflect more than insignificant credit deterioration at acquisition are classified as non-PCD loans.

These loans are recorded at fair value at the date of acquisition and an initial allowance is recorded on these assets as provision expense at the date of acquisition.

The difference between the fair value and the unpaid principal balance at the acquisition date is amortized or accreted to interest income over the contractual life of the loan using the effective interest method.

Purchased Credit Deteriorated Loans

Purchased loans which reflect a more than insignificant credit deterioration since origination as of the date of acquisition are classified as PCD and are recorded at acquisition-date amortized cost, which is the purchase price or fair value in a business combination, plus BancShares' initial ACL which results in a gross up of the loan balance.

Excluding the ACL, the difference between the unpaid principal balance and the acquisition date amortized cost is amortized or accreted to interest income over the contractual life of the loan using the effective interest method.

The performance of all loans within the BancShares portfolio is subject to a number of external risks, including but not limited to changes in the overall health of the economy, declines in real estate or other collateral values, changes in the demand for products and services and personal events, such as death, disability or change in marital status.

BancShares evaluates and reports its non-PCD and PCD loan portfolios separately, and each non-PCD portfolio is further divided into commercial and consumer segments based on the type of borrower, purpose, collateral and/or BancShares' underlying credit management processes.

Additionally, non-PCD commercial and consumer loans are assigned to loan classes, which further disaggregate the loan portfolio.

PCD loans are reported as a single loan segment and class.

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Upon adoption of Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC” or the “Codification”) 326, owner occupied and non-owner occupied commercial real estate were segregated into separate classes within the commercial segment.

Similarly, consumer auto was segregated into its own class within the consumer segment.

These enhancements were made to capture the unique credit characteristics used in BancShares' current expected credit loss (“CECL”) models.

Information for reporting periods beginning on or after January 1, 2020 are presented in accordance with ASC 326 and reflect changes to the respective classes, while prior period amounts continue to be reported in accordance with previously applicable GAAP and have not been reclassified to conform to the current financial statement presentation.

Small Business Administration Paycheck Protection Program

The Small Business Administration Paycheck Protection Program (“SBA-PPP”) is one of the centerpieces of the Coronavirus Aid Relief and Economic Security Act (the “CARES Act”), which was passed on March 27, 2020 in response to the outbreak of coronavirus (“COVID-19”) and was supplemented with subsequent legislation.

Overseen by the U.S.

Treasury Department, the SBA-PPP offered cash-flow assistance to nonprofit and small business employers through guaranteed loans for expenses incurred between February 15, 2020, and August 8, 2020 (“Round 1”).

Borrowers are eligible for forgiveness of principal and accrued interest on SBA-PPP loans to the extent that the proceeds were used to cover eligible payroll costs, interest costs, rent, and utility costs over a period of between eight and 24-weeks after the loan was made as long as the borrower retains its employees and their compensation levels.

The CARES Act authorized the SBA to temporarily guarantee these loans.

The SBA began processing forgiveness payments during the fourth quarter of 2020.

The Consolidated Appropriations Act 2021 was signed into law during the fourth quarter of 2020 and contained provisions for a second round of funding of SBA-PPP loans (“Round 2”).

BancShares originated a total of $3.2 billion of Round 1 loans and $1.2 billion of Round 2 loans.

As of December 31, 2021, the total remaining balance of SBA-PPP loans was $ 493.8 million, net of deferred fees, compared to $ 2.41 billion as of December 31, 2020.

Forgiveness for SBA-PPP loans was approximately $3.93 billion for the year ended December 31, 2021.

Due to the unique nature of these provisions, SBA-PPP loans have been disclosed as a separate loan class.

Origination fees received from the SBA are capitalized into the carrying amount of the loans.

The deferred fee income, net of origination costs, is recognized over the life of the loan as an adjustment to yield using the effective interest method.

The following represent BancShares' classes of loans beginning January 1, 2020 upon adoption of ASC 326 (with the exception of SBA-PPP, which was added during second quarter 2020):

BancShares extends credit to commercial customers through a variety of financing arrangements including term loans, revolving credit facilities, finance leases and operating leases.

BancShares also extends credit through consumer loans, including residential mortgages and auto loans.

We re-evaluated our loan classes to reflect the characteristics of BancShares’ portfolio.

The changes to the loan classes primarily include:

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

Our loan classes as of December 31, 2022 are described below.

Prior period disclosures have been conformed to the current presentation.

Commercial Loans and Leases

Construction and land development - Construction and land development consists of loans to finance land for commercial development of real property and construction of multifamily apartments or other commercial properties.

Commercial Construction - Commercial construction consists of loans to finance land for commercial development of real property and construction of multifamily apartments or other commercial properties.

These loans are highly dependent on the supply and demand for commercial real estate as well as the demand for newly constructed residential homes and lots acquired for development.

Deterioration in demand could result in decreased collateral values, which could make repayments of outstanding loans difficult for customers.

Owner occupied commercial mortgage - Owner occupied commercial mortgages consists of loans to purchase or refinance owner occupied nonresidential properties.

Deterioration in demand could result in decreased collateral values, which could make repayments of outstanding loans difficult.

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

This includes office buildings, other commercial facilities and farmland.

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

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

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

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

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

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

Commercial and industrial and leases - Commercial and industrial loans consist of loans or lines of credit to finance accounts receivable, inventory or other general business needs, business credit cards, and lease financing agreements for equipment, vehicles, or other assets.

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

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

SBA-PPP - These loans were originated as part of the SBA-PPP to finance payroll and other costs for nonprofit and small businesses impacted by the COVID-19 pandemic.

These loans are guaranteed by the SBA and borrowers have the ability to qualify for loan forgiveness through the U.S.

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

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

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

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

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

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

The most prevalent risk in factoring transactions is customer credit risk, which relates to the financial inability of a customer to pay undisputed factored trade accounts receivable.

Factoring receivables are primarily included in the commercial and industrial loan class.

Leases – Leases consists of finance lease arrangements for technology and office equipment and large and small industrial, medical, and transportation equipment.

Consumer Loans

Residential mortgage - Residential mortgage consists of loans to purchase or refinance the borrower’s primary dwelling, secondary residence or vacation home and are often secured by 1-4 family residential properties.

Residential Mortgage - Consumer mortgage consists of loans to purchase, construct, or refinance the borrower’s primary dwelling, secondary residence or vacation home and are often secured by 1-4 family residential properties or undeveloped or partially developed land in anticipation of completing construction of a 1-4 family residential property.

Significant and rapid declines in real estate values can result in borrowers having debt levels in excess of the current market value of the collateral.

Delays in construction and development projects can cause cost overruns exceeding the borrower’s financial ability to complete the project.

Such cost overruns can result in foreclosure of partially completed and unmarketable collateral.

Revolving Mortgage - Revolving mortgage consists of home equity lines of credit and other lines of credit or loans secured by first or second liens on the borrower’s primary residence.

These loans are secured by both senior and junior liens on the residential real estate and are particularly susceptible to declining collateral values.

This risk is elevated for loans secured by junior lines as a substantial decline in value could render the junior lien position effectively unsecured.

Construction and land development - Construction and land development consists of loans to construct a borrower’s primary or secondary residence or vacant land upon which the owner intends to construct a dwelling at a future date.

These loans are typically secured by undeveloped or partially developed land in anticipation of completing construction of a 1-4 family residential property.

There is risk these construction and development projects can experience delays and cost overruns exceeding the borrower’s financial ability to complete the project.

Such cost overruns can result in foreclosure of partially completed and unmarketable collateral.

Consumer auto loans - Consumer auto loans consist of installment loans to finance purchases of vehicles.

These loans include direct auto loans originated in bank branches, as well indirect auto loans originated through agreements with auto dealerships.

The value of the underlying collateral within this class is at risk of potential rapid depreciation which could result in unpaid balances in excess of the collateral.

Other consumer - Other consumer loans consist of loans to finance unsecured home improvements, student loans and revolving lines of credit that can be secured or unsecured, including personal credit cards.

This risk is elevated for loans secured by junior liens as a substantial decline in value could render the junior lien position effectively unsecured.

Consumer Auto - Consumer auto loans consist of installment loans to finance purchases of vehicles.

These loans include direct auto loans originated in bank branches, as well as indirect auto loans originated through agreements with auto dealerships.

The value of the underlying collateral within this class is at risk of potential rapid depreciation, which could result in unpaid balances in excess of the collateral, if any.

Consumer Other - Other consumer loans consist of loans to finance unsecured home improvements, student loans, and revolving lines of credit that can be secured or unsecured, including personal credit cards.

The value of the underlying collateral within this class is at risk of potential rapid depreciation, which could result in unpaid balances in excess of the collateral.

Loans and Leases - (Prior to Adoption of ASC 326)

Prior to the adoption of ASC 326 on January 1, 2020, BancShares’ accounting methods for loans and leases depended on whether they were originated or purchased, and if purchased, whether or not the loans reflected credit deterioration at the date of acquisition.

Non-Purchased Credit Impaired (“Non-PCI”) Loans

Non-PCI loans consisted of loans originated by BancShares or loans purchased from other institutions that did not reflect credit deterioration at acquisition.

Originated loans for which management had the intent and ability to hold for the foreseeable future were classified as held for investment and carried at the principal amount outstanding net of any unearned income, charge-offs and unamortized fees and costs.

Nonrefundable fees collected and certain direct costs incurred related to loan originations were deferred and recorded as an adjustment to loans outstanding.

The net amount of the nonrefundable fees and costs was amortized to interest income over the contractual lives using methods that approximated a constant yield.

Purchased loans which did not reflect credit deterioration at acquisition were classified as non-PCI loans.

These loans were recorded at fair value at the date of acquisition.

The difference between the fair value and the unpaid principal balance at the acquisition date was amortized or accreted to interest income over the contractual life of the loan using the effective interest method.

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Purchased Credit Impaired (“PCI”) Loans

Purchased loans which reflected credit deterioration since origination, such that it was probable at acquisition that BancShares would be unable to collect all contractually required payments, were classified as PCI loans.

PCI loans were recorded at fair value at the date of acquisition.

If the timing and amount of the future cash flows could be reasonably estimated, any excess of cash flows expected at acquisition over the estimated fair value were recognized as interest income over the life of the loans using the effective yield method.

Subsequent to the acquisition date, increases in cash flows over those expected at the acquisition date were recognized prospectively as interest income.

Decreases in expected cash flows due to credit deterioration were recognized by recording an allowance for loan losses.

In the event of prepayment, the remaining unamortized amount was recognized in interest income.

To the extent possible, PCI loans were aggregated into pools based upon common risk characteristics and each pool was accounted for as a single unit.

The performance of all loans within the BancShares portfolio was subject to a number of external risks, including changes in the overall health of the economy, declines in real estate values, changes in the demand for products and services and personal events, such as death, disability or change in marital status.

BancShares evaluated and reported its non-PCI and PCI loan portfolios separately, and each portfolio was further divided into commercial and non-commercial segments based on the type of borrower, purpose, collateral and/or BancShares' underlying credit management processes.

Nonperforming Assets and Troubled Debt Restructurings

Nonperforming Assets

Nonperforming assets (“NPAs”) include nonaccrual loans, past due debt securities and other real estate owned.

All loans are classified as past due when the payment of principal and interest based upon contractual terms is 30 days or greater delinquent.

Loans are generally placed on nonaccrual when principal or interest becomes 90 days past due or when it is probable the principal or interest is not fully collectible.

When loans are placed on nonaccrual, all previously uncollected accrued interest is reversed from interest income and the ongoing accrual of interest is discontinued.

All payments received thereafter are applied as a reduction of the remaining principal balance as long as doubt exists as to the ultimate collection of the principal.

Originated loans for which management has the intent and ability to hold for the foreseeable future are classified as held for investment (“HFI”) and carried at the principal amount outstanding net of any unearned income, charge-offs and unamortized fees and costs.

Nonrefundable fees collected and certain direct costs incurred related to loan originations are deferred and recorded as an adjustment to loans outstanding.

The net amount of the nonrefundable fees and costs is amortized to interest income over the contractual lives using methods that approximate a constant yield.

Acquired Loans and Leases

BancShares’ accounting methods for acquired loans and leases depends on whether or not the loans reflect more than insignificant credit deterioration since origination at the date of acquisition.

Non-Purchased Credit Deteriorated Loans and Leases

Non-Purchased Credit Deteriorated (“Non-PCD”) loans and leases do not reflect more than insignificant credit deterioration since origination at the date of acquisition.

These loans are recorded at fair value and an increase to the ACL is recorded with a corresponding increase to the provision for credit losses at the date of acquisition.

The difference between the fair value and the unpaid principal balance (“UPB”) at the acquisition date is amortized or accreted to interest income over the contractual life of the loan using the effective interest method.

Purchased Credit Deteriorated Loans and Leases

Purchased loans and leases that reflect a more than insignificant credit deterioration since origination at the date of acquisition are classified as PCD loans and leases.

PCD loans and leases are recorded at acquisition-date amortized cost, which is the purchase price or fair value in a business combination, plus BancShares' initial ACL, which results in a gross up of the loan balance (the “PCD Gross-Up”).

The initial ACL for PCD loans and leases is established through the PCD Gross-Up and there is no corresponding increase to the provision for credit losses.

The difference between the UPB and the acquisition date amortized cost resulting from the PCD Gross-Up is amortized or accreted to interest income over the contractual life of the loan using the effective interest method.

Past Due and Non-Accrual Loans and Leases

Loans and leases are classified as past due when the payment of principal and interest based upon contractual terms is 30 days or greater delinquent.

Loans and leases are generally placed on nonaccrual when principal or interest becomes 90 days past due or when it is probable the principal or interest is not fully collectible.

When loans are placed on nonaccrual, previously uncollected accrued interest is reversed from interest income and the ongoing accrual of interest is discontinued.

All payments received thereafter are applied as a reduction of the outstanding balance until the account is collected, charged-off or returned to accrual status.

Loans and leases are generally removed from nonaccrual status when they become current for a sustained period of time and there is no longer concern as to the collectability of principal and interest.

Debt securities are also classified as past due when the payment of principal and interest based upon contractual terms is 30 days delinquent or greater.

Missed interest payments on debt securities are rare.

Management reviews all debt securities with delinquent interest and immediately charge off any accrued interest determined to be uncollectible.

Troubled Debt Restructurings

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In circumstances where a portion of the loan balance is charged-off, the remaining balance is typically classified as nonaccrual.

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Refer to further discussion in the “Recently Issued Accounting Standards” section of Note 1 — Significant Accounting Policies and Basis of Presentation.

Loan Charge-Offs and Recoveries

Loan charge-offs are recorded after considering such factors as the borrower’s financial condition, the value of underlying collateral, guarantees, and the status of collection activities.

Loan balances considered uncollectible are charged-off against the ACL and deducted from the carrying value of the related loans.

Consumer loans are subject to mandatory charge-off at specified delinquency dates in accordance with regulatory guidelines.

The value of the underlying collateral for consumer loans is considered when determining the charge-off amount if repossession is reasonably assured and in process.

See Note 4 — Loans and Leases for additional information.

Realized recoveries of amounts previously charged-off are credited to the ACL.

Allowance for Credit Losses

Loans within the various reporting classes are segregated into pools with similar risk characteristics and each have a model that is utilized to estimate the ACL.

These loan level ACL models estimate the probability of default (“PD”) and loss given default (“LGD”) for individual loans within the risk pool based on historical loss experience, borrower characteristics, collateral type, forecasts of relevant economic conditions, expected future recoveries and other factors.

Loan level, undiscounted ACL is calculated by applying the modeled PD and LGD to quarterly forecasted loan balances which are adjusted for contractual payments, prepayments and prior defaults.

Pools for estimating the ACL are aggregated into loan classes, as described above, which roll up into commercial and consumer loan segments.

Non-PCD and PCD loans are modeled together within the loan level models using acquired and PCD indicator variables to provide differentiation of individual loan risk.

BancShares uses a two-year reasonable and supportable forecast period which incorporates economic forecasts at the time of evaluation.

For most pools, BancShares uses a 12-month straight-line reversion period to historical averages for model inputs, however for the commercial card and certain consumer portfolios, immediate reversion to historical net loss rates is utilized.

The ACL for SBA-PPP loans originated during 2021 and 2020 are separately evaluated given the explicit government guarantee.

BancShares determined SBA-PPP loans have zero expected credit losses and as such these are excluded from ACL disclosures in Note E, Allowance for Credit Losses.

The ACL represents management’s best estimate of credit losses expected over the life of the loan, adjusted for expected contractual payments and the impact of prepayment expectations.

Prepayment assumptions were developed through a review of BancShares’ historical prepayment activity and considered forecasts of relevant economic conditions, as well as prepayment assumptions utilized in other modeling activities.

Estimates for loan losses are determined by analyzing quantitative and qualitative components present as of the evaluation date.

Adjustments to the ACL are recorded with a corresponding entry to provision for credit losses.

Loan balances considered uncollectible are charged-off against the ACL.

Forecasted LGDs are adjusted for expected recoveries and realized recoveries of amounts previously charged-off are credited to the ACL.

A primary component of determining the ACL on loans is the actual net loss history of the various loan pools.

For commercial pools, key factors utilized in the models include delinquency trends as well as macroeconomic variables such as unemployment and commercial real estate price index.

For consumer pools, key factors include delinquency trends and the borrower’s original credit score, as well as other macroeconomic variables such as unemployment, gross domestic product, home price index, and commercial real estate index.

As the models project losses over the life of the loans, prepayment assumptions also serve as inputs.

Within BancShares’ ACL model, TDRs meet the definition of default and are given a 100% probability of default rating.

TDRs are not individually evaluated unless determined to be collateral-dependent.

Loans and Leases

The ACL represents management’s best estimate of credit losses expected over the life of the loan or lease, adjusted for expected contractual payments and the impact of prepayment expectations.

Estimates for loan and lease losses are determined by analyzing quantitative and qualitative components present as of the evaluation date.

Adjustments to the ACL are recorded with a corresponding entry to the provision or benefit for credit losses in accordance with FASB Accounting Standard Codification (“ASC”) 326 Financial Instruments- Credit Losses (“ASC 326”).

ASC 326 introduced the current expected credit losses methodology (“CECL”) for the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology.

BancShares adopted ASC 326 on January 1, 2020 and CECL is applied for all periods presented in these consolidated financial statements.

The ACL is calculated based on a variety of considerations, including, but not limited to actual net loss history of the various loan and lease pools, delinquency trends, changes in forecasted economic conditions, loan growth, estimated loan life, and changes in portfolio credit quality.

Loans and leases are segregated into pools with similar risk characteristics and each have a model that is utilized to estimate the ACL.

These ACL models estimate the probability of default (“PD”) and loss given default (“LGD”) for individual loans and leases within each risk pool based on historical loss experience, borrower characteristics, collateral type, forecasts of future economic conditions, expected future recoveries and other factors.

The loan and lease level, undiscounted ACL is calculated by applying the modeled PD and LGD to monthly forecasted loan and lease balances which are adjusted for contractual payments, prior defaults, and prepayments.

Prepayment assumptions were developed through a review of BancShares’ historical prepayment activity and considered forecasts of future economic conditions.

Forecasted LGDs are adjusted for expected recoveries.

Model outputs may be adjusted through a qualitative assessment to reflect trends not captured within the models, which could include economic conditions, credit quality, concentrations, and significant policy and underwriting changes.

Risk pools for estimating the ACL are aggregated into commercial and consumer loan classes for reporting purposes in Note 5 — Allowance for Credit Losses.

The ACL models utilize economic variables, including unemployment, gross domestic product (“GDP”), home price index, commercial real estate index, corporate profits, and credit spreads.

These economic variables are based on macroeconomic scenario forecasts with a forecast horizon that covers the lives of the loan portfolios.

Due to the inherent uncertainty in the macroeconomic forecasts, BancShares utilizes baseline, upside, and downside macroeconomic scenarios and weights the scenarios based on review of variable forecasts for each scenario and comparison to expectations.

When loans do not share risk characteristics similar to others in the pool, the ACL is evaluated on an individual basis.

Given that BancShares' CECL models are loan level models, the population of loans evaluated individually is minimal and consists primarily of loans greater than $ 500 thousand and determined to be collateral-dependent.

BancShares elected the practical expedient allowed under ASC 326 to assess the collectability of these loans, where repayment is expected to be provided substantially through operation or sale of collateral, based on the fair value of the underlying collateral.

The fair value of the collateral is estimated using appraised and market values (appropriately adjusted for an assessment of the sales and marketing costs when applicable).

A specific allowance is established, or partial charge-off is recorded, for the difference between the excess amortized cost of loan and the collateral’s estimated fair value.

Given that BancShares' CECL models are loan level models, the population of loans evaluated individually is not significant and consists primarily of loans greater than $500 thousand.

A specific ACL is established, or partial charge-off is recorded, for the difference between the excess amortized cost of loan and the loan’s estimated fair value.

Certain aspects of BancShares’ ACL methodology were changed during the first quarter of 2022 in order to integrate the methodologies of BancShares and CIT.

The changes include the following:

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

and (ii) implementing scenario weighting of baseline, upside, and downside macroeconomic scenarios instead of utilizing just the consensus baseline scenario as the basis of the quantitative ACL estimate.

Accrued Interest Receivable

BancShares has elected not to measure an ACL for accrued interest receivable and has excluded it from the amortized cost basis of loans and held to maturity debt securities as BancShares' accounting policies and credit monitoring provide that uncollectible accrued interest is reversed or written off against interest income in a timely manner.

BancShares' accounting policies and credit monitoring provide that uncollectible accrued interest is reversed or written off against interest income in a timely manner.

Therefore, BancShares elected to not measure an ACL for accrued interest receivable and it is excluded from the amortized cost basis of loans and HTM debt securities.

Unfunded Commitments

A reserve for unfunded commitments is established for off-balance sheet exposures such as unfunded balances for existing lines of credit, commitments to extend future credit, as well as both standby and commercial letters of credit when there is a contractual obligation to extend credit and when this extension of credit is not unconditionally cancellable (i.e.

A reserve for unfunded commitments is established for off-balance sheet exposures such as unfunded balances for existing lines of credit, deferred purchase agreements, commitments to extend future credit, as well as both standby and commercial letters of credit when there is a contractual obligation to extend credit and when this extension of credit is not unconditionally cancellable (i.e.

commitment cannot be canceled at any time).

These unfunded commitments are assessed to determine both the probability of funding as well

FIRST CITIZENS BANCSHARES, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

the expectation of future losses.

The expected funding balance is used in the PD and LGD models to determine the reserve.

The reserve for unfunded commitments was $ 11.8 million at December 31, 2021, and is recorded within other liabilities with changes recorded through other noninterest expense.

Allowance for Loan and Lease Losses (Prior to Adoption of ASC 326)

Prior to adoption of ASC 326 on January 1, 2020, management calculated estimated loan losses through the allowance for loan and lease losses (“ALLL”).

The ALLL represented management’s best estimate of inherent credit losses within the loan and lease portfolio at the balance sheet date.

Management determined the ALLL based on an ongoing evaluation of the loan portfolio.

Estimates for loan losses were determined by analyzing quantitative and qualitative components, such as:

economic conditions, historical loan losses, historical loan migration to charge-off experience, current trends in delinquencies and charge-offs, expected cash flows on PCI loans, current assessment of impaired loans, and changes in the size, composition and/or risk within the loan portfolio.

Adjustments to the ALLL were recorded with a corresponding entry to provision for loan and lease losses.

Loan balances considered uncollectible were charged-off against the ALLL.

Recoveries of amounts previously charged-off were generally credited to the ALLL.

A primary component of determining the allowance on non-PCI loans collectively evaluated was the actual loss history of the various loan classes.

Loan loss factors were based on historical experience and, when necessary, were adjusted for significant factors, that in management’s judgment, affect the collectability of principal and interest at the balance sheet date.

Loan loss factors were monitored quarterly and, when necessary, adjusted based on changes in the level of historical net charge-offs and updates by management, such as the number of periods included in the calculation of loss factors, loss severity, loss emergence period and portfolio attrition.

For commercial non-PCI loans, management incorporated historical net loss data to develop the applicable loan loss factors.

General reserves for collective impairment were based on incurred loss estimates for the loan class based on average loss rates by credit quality indicators, which were estimated using historical loss experience and credit risk rating migrations.

Credit quality indicators include borrower classification codes and facility risk ratings.

Incurred loss estimates were adjusted through a qualitative assessment to reflect current economic conditions and portfolio trends including credit quality, concentrations, aging of the portfolio and significant policy and underwriting changes.

For noncommercial non-PCI loans, management incorporated specific loan class and delinquency status trends into the loan loss factors.

General reserve estimates of incurred losses were based on historical loss experience and the migration of loans through the various delinquency pools applied to the current risk mix.

Non-PCI loans were considered to be impaired when, based on current information and events, it was probable that a borrower would be unable to pay all amounts due according to the contractual terms of the loan agreement.

Generally, management considered the following loans to be impaired:

all TDR loans and all loan relationships which were on nonaccrual or 90+ days past due and greater than $500,000.

Non-PCI impaired loans greater than $500,000 were evaluated individually for impairment while others were evaluated collectively.

The impairment assessment and determination of the related specific reserve for each impaired loan was based on the loan’s characteristics.

Impairment measurement for loans dependent on borrower cash flow for repayment was based on the present value of expected cash flows discounted at the interest rate implicit in the original loan agreement.

Impairment measurement for most real estate loans, particularly when a loan was considered to be a probable foreclosure, was based on the fair value of the underlying collateral.

Collateral was appraised and market value (appropriately adjusted for an assessment of the sales and marketing costs) was used to calculate a fair value estimate.

A specific valuation allowance was established or partial charge-off was recorded for the difference between the excess recorded investment in the loan and the loan’s estimated fair value less costs to sell.

The ALLL for PCI loans was estimated based on the expected cash flows over the life of the loan.

BancShares estimated and updated cash flows expected to be collected on individual loans or pools of loans sharing common risk characteristics.

BancShares compared the carrying value of all PCI loans to the present value at each balance sheet date.

If the present value was less than the carrying value, the shortfall reduced the remaining credit discount and if it was in excess of the remaining credit discount, an ALLL was recorded through the recognition of provision expense.

The ALLL for PCI loans with subsequent increases in expected cash flows to be collected was reduced and any remaining excess was recorded as an adjustment to the accretable yield over the loan’s or pool’s remaining life.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

These unfunded commitments are assessed to determine both the probability of funding as well as the expectation of future losses.

BancShares estimates the expected funding amounts and applies its PD and LGD models to those expected funding amounts to estimate the reserve for unfunded commitments.

See Note 5 — Allowance for Credit Losses for additional information.

Lessor Arrangements

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

At December 31, 2022, BancShares has operating lease equipment of $ 8.16 billion, primarily related to the Rail segment.

Operating lease equipment is carried at cost less accumulated depreciation.

Operating lease equipment is depreciated to its estimated residual value using the straight-line method over the lease term or estimated useful life of the asset.

Rail equipment has estimated useful lives of 40 - 50 years and the useful lives of other equipment are generally 3 - 10 years.

Where management’s intention is to sell the operating lease equipment, it is marked to LOCOM and classified as AHFS.

Depreciation is no longer recognized, and the assets are evaluated for impairment, with any further marks to LOCOM recorded in other noninterest income.

Equipment received at the end of the lease to be sold, is marked to LOCOM with the adjustment recorded in other noninterest income.

Initial direct costs are amortized over the lease term.

Sales-type and direct financing leases are carried at the aggregate of lease payments receivable and estimated residual value of the leased property, if applicable, less unearned income.

Interest income is recognized over the term of the leases to achieve a constant periodic rate of return on the outstanding investment.

Our finance lease activity primarily relates to leasing of new equipment with the equipment purchase price equal to fair value and therefore there is no selling profit or loss at lease commencement.

Lease components are separated from non-lease components that transfer a good or service to the customer;

and the non-lease components in our lease contracts are accounted for in accordance with ASC 310 Receivables .

BancShares utilizes the operating lease practical expedient for its Rail portfolio leases to not separate non-lease components of railcar maintenance services from associated lease components, and as a result rental income includes the maintenance non-lease component.

This practical expedient is available when both of the following are met:

(i) the timing and pattern of transfer of the non-lease components and associated lease component are the same and (ii) the lease component, if accounted for separately, would be classified as an operating lease.

We manage and evaluate residual risk by performing periodic reviews of estimated residual values and monitoring levels of residual realizations.

A change in estimated operating lease residual values would result in a change in future depreciation expense.

A change in estimated finance lease residual values during the lease term impacts the ACL as the lessor considers both the lease receivable and the unguaranteed residual asset when determining the finance lease net investment allowance.

Impairment of Operating Lease Equipment

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

Impairment of long-lived assets is determined by comparing the carrying amount to future undiscounted net cash flows expected to be generated.

If a long-lived asset is impaired, the impairment is the amount by which the carrying amount exceeds the fair value of the long-lived asset.

Fair value is based upon discounted cash flow analysis and available market data.

Current lease rentals, as well as relevant and available market information (including third party sales for similar equipment and published appraisal data), are considered both in determining undiscounted future cash flows when testing for the existence of impairment and in determining estimated fair value in measuring impairment.

Depreciation expense is adjusted when the projected fair value is below the projected book value at the end of the depreciable life.

Lessee Arrangements

BancShares leases certain branch locations, administrative offices and equipment.

Operating lease right of use assets (“ROU assets”) are included in other assets and the associated lease obligations are included in other liabilities.

Finance leases are included in premises and equipment and other borrowings.

See Note 13 — Borrowings for additional information.

Leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets;

BancShares instead recognizes lease expense for these leases on a straight-line basis over the lease term.

ROU assets represent BancShares' right to use an underlying asset for the lease term and lease liabilities represent BancShares' corresponding obligation to make lease payments arising from the lease.

ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

ROU assets also include initial direct costs and pre-paid lease payments made, excluding lease incentives.

As most of BancShares' leases do not provide an implicit rate, BancShares uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

The incremental borrowing rate is determined using secured rates for new FHLB advances under similar terms as the lease at inception.

Most leases include one or more options to renew, with renewal terms that can extend the lease term from 1 to 25 years.

The exercise of lease renewal options is at BancShares' sole discretion.

When it is reasonably certain BancShares will exercise its option to renew or extend the lease term, the option is included in calculating the value of the ROU asset and lease liability.

The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

BancShares determines if an arrangement is a lease at inception.

BancShares’ lease agreements do not contain any material residual value guarantees or material restrictive covenants.

BancShares does not lease any properties or facilities from any related party.

As of December 31, 2022, there were no leases that have not yet commenced that would have a material impact on BancShares’ consolidated financial statements.

See Note 6 — Leases for additional information.

Goodwill and Other Intangible Assets

Goodwill represents the excess of the purchase price of an acquired entity over the fair value of the identifiable assets acquired.

Goodwill is not amortized, but is evaluated at least annually for impairment during the third quarter, or when events or changes in circumstances indicate a potential impairment exists.

Other acquired intangible assets with finite lives, such as core deposit intangibles, are initially recorded at fair value and are amortized over their average estimated useful lives.

Intangible assets are evaluated for impairment when events or changes in circumstances indicate a potential impairment exists.

See Note 8 — Goodwill and Other Intangibles for additional information .

Other Real Estate Owned

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Routine maintenance costs, income and expenses related to the operation of the foreclosed asset, subsequent declines in market value and net gains or losses on disposal are included in collection and foreclosure-related expense.

Payable to the Federal Deposit Insurance Corporation for Shared-Loss Agreements

The purchase and assumption agreements for certain Federal Deposit Insurance Corporation (“FDIC”) assisted transactions include payments that may be owed to the FDIC at the termination of the shared-loss agreements .

The payment is due to the FDIC if actual cumulative losses on acquired covered assets are lower than the cumulative losses originally estimated by the FDIC at the time of acquisition.

The liability is calculated by discounting estimated future payments and is reported as FDIC shared-loss payable.

The ultimate settlement amount of the payment is dependent upon the performance of the underlying covered loans, recoveries, the passage of time and actual claims submitted to the FDIC.

Premises and Equipment

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Leasehold improvements and capitalized leases are amortized on a straight-line basis over the lesser of the lease terms or the estimated useful lives of the assets.

Goodwill and Other Intangible Assets

Goodwill represents the excess of the purchase price of an acquired entity over the fair value of the identifiable assets acquired.

Goodwill is not amortized, but is evaluated at least annually for impairment during the third quarter, or when events or changes in circumstances indicate a potential impairment exists.

Other acquired intangible assets with finite lives, such as core deposit intangibles, are initially recorded at fair value and are amortized on an accelerated basis typically between five to twelve years over their estimated useful lives.

Intangible assets are evaluated for impairment when events or changes in circumstances indicate a potential impairment exists.

BancShares reviews premises and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, and when an impairment loss is recognized the adjusted carrying amount will be its new cost basis to depreciate over the remaining useful life of the asset.

Derivative Financial Instruments

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

However, BancShares acquired various derivative financial instruments in connection with the CIT Merger as further described in Note 14 — Derivative Financial Instruments.

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

BancShares also offers derivative products to its customers in order for them to manage their interest rate and currency risks.

BancShares does not enter into derivative financial instruments for speculative purposes.

Derivatives utilized by BancShares may include swaps, forward settlement contracts, options contracts and risk participations.

A swap agreement is a contract between two parties to exchange cash flows based on specified underlying notional amounts, assets and/or indices.

Forward settlement contracts are agreements to buy or sell a quantity of a financial instrument, index, currency or commodity at a predetermined future date, and rate or price.

An option contract is an agreement that gives the buyer the right, but not the obligation, to buy or sell an underlying asset from or to another party at a predetermined price or rate over a specific period of time.

A risk participation is a financial guarantee, in exchange for a fee, that gives the buyer the right to be made whole in the event of a predefined default event.

BancShares documents, at inception, all relationships between hedging instruments and hedged items, as well as the risk management objectives and strategies for undertaking various hedges.

Upon executing a derivative contract, BancShares designates the derivative as either a qualifying hedge or non-qualifying hedge.

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

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

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

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

To mitigate the market risk associated with these customer derivatives, BancShares enters into similar offsetting positions with broker-dealers.

BancShares has both bought and sold credit protection in the form of participations in interest rate swaps (risk participations).

These risk participations were entered into in the ordinary course of business to facilitate customer credit needs.

Swap participations where BancShares has sold credit protection have maturities ranging between 2023 and 2036 and may require BancShares to make payment to the counterparty if the customer fails to make payment on any amounts due to the counterparty upon early termination of the swap transaction.

BancShares uses foreign currency forward contracts, interest rate swaps, and options to hedge interest rate and foreign currency risks arising from its asset and liability mix.

These are treated as economic hedges.

All derivative instruments are recorded at their respective fair value.

BancShares reports all derivatives on a gross basis in the Consolidated Balance Sheets and does not offset derivative assets and liabilities and cash collateral under master netting agreements except for swap contracts cleared by the Chicago Mercantile Exchange and LCH Clearnet.

These swap contracts are accounted as “settled-to-market” and cash variation margin paid or received is characterized as settlement of the derivative exposure.

Variation margin balances are offset against the corresponding derivative asset and liability balances on the balance sheet.

Nonqualifying hedges are presented in the Consolidated Balance Sheets in other assets or other liabilities, with their resulting gains or losses recognized in other noninterest income.

For non-qualifying derivatives with periodic interest settlements, BancShares reports such settlements with other changes in fair value in other noninterest income.

Fair value is based on dealer quotes, pricing models, discounted cash flow methodologies, or similar techniques for which the determination of fair value may require significant management judgment or estimation.

Valuations of derivative assets and liabilities reflect the value of the instrument including BancShares’ and the counterparty’s credit risk.

BancShares is exposed to credit risk to the extent that the counterparty fails to perform under the terms of a derivative agreement.

Losses related to credit risk are reflected in other noninterest income.

BancShares manages this credit risk by requiring that all derivative transactions entered into as hedges be conducted with counterparties rated investment grade at the initial transaction by nationally recognized rating agencies, and by setting limits on the exposure with any individual counterparty.

In addition, pursuant to the terms of the Credit Support Annexes between BancShares and its counterparties, BancShares may be required to post collateral or may be entitled to receive collateral in the form of cash or highly liquid securities depending on the valuation of the derivative instruments as measured on a daily basis.

See Note 14 — Derivative Financial Instruments for additional information.

Mortgage Servicing Rights

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At each reporting period, MSRs are evaluated for impairment based upon the fair value of the rights as compared to the carrying value.

The fair value of financial instruments and the methods and assumptions used in estimating fair value amounts and financial assets and liabilities for which fair value was elected are detailed in Note P , Estimated Fair Values.

See Note 9 — Mortgage Servicing Rights for additional information.

Fair Value Hierarchy

BancShares measures the fair value of its financial assets and liabilities in accordance with ASC 820 Fair Value Measurement , which defines fair value, establishes a consistent framework for measuring fair value and requires disclosures about fair value measurements.

BancShares categorizes its financial instruments based on the significance of inputs to the valuation techniques according to the following three-tier fair value hierarchy:

• Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities that are accessible at the measurement date.

Level 1 assets and liabilities include equity securities that are traded in an active exchange market.

• Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 2 assets and liabilities include certain commercial loans, debt and equity securities with quoted prices that are traded less frequently than exchange-traded instruments, borrowings, time deposits, securities sold under customer repurchase agreements and derivative contracts whose values are determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data.

• Level 3 - Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.

Level 3 assets and liabilities include financial instruments such as collateral dependent commercial and consumer loans, as well as loans held for sale, certain available for sale corporate securities and derivative contracts whose values are determined using valuation models, discounted cash flow methodologies or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

See Note 16 — Fair Value for additional information.

Per Share Data

Earnings per common share is computed by dividing net income available to common stockholders by the weighted average number of Class A Common Stock and Class B Common Stock outstanding during each period.

Diluted earnings per common share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding increased by the weighted-average potential impact of dilutive shares.

BancShares’ potential dilutive instruments include unvested RSUs assumed in the CIT Merger.

The dilutive effect is computed using the treasury stock method, which assumes the conversion of these instruments.

However, in periods when there is a net loss, these shares would not be included in the diluted earnings per common share computation as the result would have an anti-dilutive effect.

BancShares had no potential dilutive common shares outstanding prior to the CIT Merger and did not report diluted earnings per common share for prior periods.

See Note 20 — Earnings Per Common Share for additional information.

Income taxes are accounted for using the asset and liability approach as prescribed in ASC 740, Income Taxes .

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The effect on deferred taxes of a change in tax rates is recognized in income in the period which includes the enactment date.

The potential impact of current events on the estimates used to establish income tax expenses and income tax liabilities is

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continually monitored and evaluated.

Income tax positions based on current tax law, positions taken by various tax auditors within the jurisdictions where income tax returns are filed, as well as potential or pending audits or assessments by such tax auditors are evaluated on a periodic basis.

BancShares has unrecognized tax benefits related to the uncertain portion of tax positions BancShares has taken or expects to take.

A liability may be created or an amount refundable may be reduced for the amount of unrecognized tax benefits.

These uncertainties result from the application of complex tax laws, rules, regulations and interpretations, primarily in state taxing jurisdictions.

Unrecognized tax benefits are assessed quarterly and may be adjusted through current income tax expense in future periods based on changing facts and circumstances, completion of examinations by taxing authorities or expiration of a statute of limitations.

Estimated penalties and interest on uncertain tax positions are recognized in income tax expense.

The potential impact of current events on the estimates used to establish income tax expenses and income tax liabilities is continually monitored and evaluated.

BancShares files a consolidated federal income tax return and various combined and separate company state tax returns.

Refer to Note O, Income Taxes, for additional disclosures.

Per Share Data

Earnings per common share is computed by dividing net income available to common shareholders by the weighted average number of both classes of common shares outstanding during each period.

BancShares had no potential dilutive common shares outstanding in any period and did not report diluted earnings per common share.

Cash dividends per share apply to both Class A and Class B common stock.

Shares of Class A common stock carry one vote per share, while shares of Class B common stock carry 16 votes per share.

Defined Benefit Pension Plans

BancShares maintains noncontributory defined benefit pension plans covering certain qualifying employees.

As a result of the Inflation Reduction Act of 2022, 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.

Refer to Note 21 — Income Taxes, for additional disclosures.

Bank-Owned Life Insurance (“BOLI”)

Banks can purchase life insurance policies on the lives of certain officers and employees and are the owner and beneficiary of the policies.

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

BancShares records BOLI at each policy’s respective cash surrender value (“CSV”), with changes in the CSV recorded as noninterest income in the Consolidated Statements of Income.

Stock-Based Compensation

BancShares did not have stock-based compensation awards prior to completion of the CIT Merger.

Certain CIT employees received grants of restricted stock unit awards (“CIT RSUs”) or performance stock unit awards (“CIT PSUs”).

Upon completion of the CIT Merger and pursuant to the terms of the Merger Agreement, (i) the CIT RSUs and CIT PSUs converted into “BancShares RSUs” based on the 0.062 exchange ratio (the “Exchange Ratio”) and (ii) the BancShares RSUs became subject to the same terms and conditions (including vesting terms, payment timing and rights to receive dividend equivalents) applicable to the CIT RSUs and CIT PSUs, except that vesting for the converted CIT PSUs was no longer subject to any performance goals or metrics.

Upon completion of the CIT Merger, the fair value of the BancShares RSUs was determined based on the closing share price of the Parent Company’s Class A Common Stock (the “Class A Common Stock”) on January 3, 2022.

The fair value of the BancShares RSUs is (i) included in the purchase price consideration for the portion related to employee services provided prior to completion of the CIT Merger and (ii) recognized in expenses for the portion related to employee services to be provided after completion of the CIT Merger.

For “graded vesting” awards, each vesting tranche of the award is amortized separately as if each were a separate award.

For “cliff vesting” awards, compensation expense is recognized over the requisite service period.

BancShares recognizes the effect of forfeitures in compensation expense when they occur.

In the event of involuntary termination of employees after the Merger Date (as defined below), vesting occurs on the employee termination date for BancShares RSUs subject to change in control provisions.

Expenses related to stock-based compensation are included in merger-related expenses in the Consolidated Statements of Income.

Stock-based compensation is discussed further in Note 22 — Employee Benefit Plans.

Members of the CIT Board of Directors had RSU awards, stock settled annual awards, and deferred stock-settled annual awards (collectively, the “CIT Director Equity Awards”), which vested immediately upon the completion of the CIT Merger.

The fair value of the CIT Director Equity Awards was determined based on the Exchange Ratio and the closing share price of the Class A Common Stock on January 3, 2022, and was included in the purchase price consideration disclosed in Note 2 — Business Combinations.

Defined Benefit Pension Plans and Other Postretirement Benefits

BancShares has both funded and unfunded noncontributory defined benefit pension and postretirement plans covering certain employees.

The calculation of the obligations and related expenses under the plans require the use of actuarial valuation methods and assumptions.

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In developing the long-term rate of return, BancShares considers such factors as the actual return earned on plan assets, historical returns on the various asset classes in the plans and projections of future returns on various asset classes.

Refer to Note Q, Employee Benefit Plans, for disclosures related to BancShares’ defined benefit pension plans.

BancShares leases certain branch locations, administrative offices and equipment.

Operating lease ROU assets are included in other assets and the associated lease obligations are included in other liabilities.

Sales-type and direct financing leases are included in premises and equipment and other borrowings.

Leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets;

BancShares instead recognizes lease expense for these leases on a straight-line basis over the lease term.

Operating and finance lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

The operating and finance lease ROU asset also includes initial direct costs and pre-paid lease payments made, excluding lease incentives.

The incremental borrowing rate is determined using secured rates for new FHLB advances under similar terms as the lease at inception.

BancShares utilizes the implicit or incremental borrowing rate at the effective date of a modification not accounted for as a separate contract or a change in the lease terms to determine the present value of lease payments.

For operating leases commencing prior to January 1, 2019, BancShares used the incremental borrowing rate as of that date.

Most leases include one or more options to renew, with renewal terms that can extend the lease term from 1 to 25 years.

The exercise of lease renewal options is at BancShares' sole discretion.

When it is reasonably certain BancShares will exercise its option to renew or extend the lease term, the option is included in calculating the value of the ROU asset and lease liability.

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

BancShares determines if an arrangement is a lease at inception.

BancShares’ lease agreements do not contain any material residual value guarantees or material restrictive covenants.

BancShares does not lease any properties or facilities from any related party.

As of December 31, 2021, there were no leases that have not yet commenced that would have a material impact on BancShares’ consolidated financial statements.

Sales-type and direct financing leases are carried at the aggregate of lease payments receivable and estimated residual value of the leased property, if applicable, less unearned income.

Interest income is recognized over the term of the leases.

Refer to Note R, Leases, for additional disclosures.

In conjunction with the CIT Merger, BancShares assumed the funded and unfunded noncontributory defined benefit pension and postretirement plans of CIT.

The postretirement plans acquired were terminated during the year.

See Note 22 — Employee Benefit Plans for disclosures related to the plans.

Revenue Recognition

Interest income on HFI loans is recognized using the effective interest method or on a basis approximating a level rate of return over the life of the asset.

Interest income includes components of accretion of the fair value discount on loans and lease receivables recorded in connection with purchase accounting adjustments (“PAA”), which are accreted using the effective interest method as a yield adjustment over the remaining contractual term of the loan and recorded in interest income.

If the loan is subsequently classified as held for sale, accretion (amortization) of the discount (premium) will cease.

Interest income on loans HFI and held for sale is included in interest and fees on loans in the Consolidated Statements of Income.

Interest on investment securities and interest on interest-earning deposits at banks is recognized in interest income on an accrual basis.

Amortization of premiums and accretion of discounts for investment securities are included in interest on investment securities.

Dividends received from marketable equity securities are recognized within interest on investment securities.

BancShares generally acts in a principal capacity, on its own behalf, in its contracts with customers.

In these transactions, BancShares recognizes revenues and the related costs to generate those revenues on a gross basis.

In certain, circumstances, BancShares acts in an agent capacity, on behalf of the customers with other entities, and recognize revenues and the related costs to provide BancShares' services on a net basis.

In certain, circumstances, BancShares acts in an agent capacity, on behalf of the customers with other entities, and recognizes revenues and the related costs to provide BancShares' services on a net basis.

BancShares acts as an agent when providing certain cardholder and merchant, insurance, and brokerage services.

Descriptions of BancShares' noninterest revenue-generating activities are broadly segregated as follows:

Rental income on operating leases – Rental income is recognized on a straight-line basis over the lease term for lease contract fixed payments and is included in noninterest income.

Rental income also includes variable lease income which is recognized as earned.

The accrual of rental income on operating leases is suspended when the collection of substantially all rental payments is no longer probable and rental income for such leases is recognized when cash payments are received.

In the period we conclude that collection of rental payments is no longer probable, accrued but uncollected rental revenue is reversed against rental income.

Cardholder and Merchant Services – These represent interchange fees from customer debit and credit card transactions earned when a cardholder engages in a transaction with a merchant as well as fees charged to merchants for providing them the ability to accept and process the debit and credit card transaction.

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Revenue from wealth management services is recognized over the period in which services are performed, and is based on a percentage of the value of the assets under management/administration.

Other service charges and fees - These include, but are not limited to, check cashing fees, international banking fees, internet banking fees, wire transfer fees and safe deposit fees.

Fees and other service charges – These include, but are not limited to, check cashing fees, international banking fees, internet banking fees, wire transfer fees, safe deposit fees, as well as capital market-related fees and fees on lines and letters of credit.

The performance obligation is fulfilled and revenue is recognized at the point in time the requested service is provided to the customer.

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Revenue is recognized at the time of the transaction as the performance obligation of rendering the ATM service has been met.

Other - This consists of several forms of recurring revenue, such as FHLB dividends and income earned on changes in the cash surrender value of bank-owned life insurance.

For the remaining immaterial transactions, revenue is recognized when, or as, the performance obligation is satisfied.

Refer to Note N, Other Noninterest Income and Other Noninterest Expense, for additional disclosures on other noninterest income.

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Recently Adopted Accounting Pronouncements

The following pronouncements or Accounting Standard Updates (“ASUs”) were issued by the FASB and adopted by BancShares as of January 1, 2021.

FASB ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes

The amendments in this ASU add new guidance to simplify accounting for income taxes, change the accounting for certain income tax transactions and make minor improvements to the Codification.

BancShares adopted this ASU as of January 1, 2021 and the adoption did not have a material impact on its consolidated financial statements or disclosures.

FASB ASU 2020-01 - Clarifying the Interactions between I nvestments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)

The amendments in this ASU clarify certain interactions between the guidance to account for certain equity securities under ASC 321, the guidance to account for investments under the equity method of accounting in ASC 323, and the guidance in ASC 815, which could change how an entity accounts for an equity security under the measurement alternative or a forward contract or purchased option to purchase securities that, upon settlement of the forward contract or exercise of the purchased option, would be accounted for under the equity method of accounting or the fair value option in accordance with ASC 825, Financial Instruments.

BancShares adopted this ASU as of January 1, 2021 and the adoption did not have a material impact on its consolidated financial statements or disclosures.

FASB ASU 2020-08, Codification Improvements to Subtopic 310-20, Receivables - Nonrefundable Fees and Other Costs

The amendments in this ASU shorten the amortization period for certain callable debt securities held at a premium.

Under the new guidance, premiums on callable debt securities that have explicit, non-contingent call features that are callable at fixed prices and on preset dates must be amortized to the earliest call date, rather than the maturity date.

The new guidance does not require an accounting change for securities held at a discount;

the discount continues to be amortized to maturity.

BancShares adopted this ASU as of January 1, 2021 and the adoption did not have a material impact on its consolidated financial statements or disclosures.

ASU 2020-10, Codification Improvements

The amendments in this ASU improve the Codification by ensuring that all guidance that requires or provides an option for an entity to provide information in the notes to financial statements is codified in the Disclosure Section of the Codification.

Certain amendments in this ASU are varied in nature and clarifies the previously issued guidance, in cases where it may have been unclear.

BancShares adopted this ASU as of January 1, 2021 and the adoption did not have a material impact on its consolidated financial statements and disclosures.

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

BUSINESS COMBINATIONS

Each business combination is accounted for under the acquisition method of accounting and, accordingly, assets acquired and liabilities assumed are recorded at their estimated fair values on the acquisition date.

Fair values are subject to refinement for up to one year after the closing date of the acquisition as additional information regarding closing date fair value becomes available.

As part of the accounting for each acquisition, BancShares performs an analysis of the acquired bank’s loan portfolio and based on such credit factors as past due status, nonaccrual status, life-to-date charge-offs and other quantitative and qualitative considerations segregate the acquired loans into PCD loans and non-PCD loans.

Additionally, BancShares performs an analysis of the acquired bank’s portfolio of debt securities to determine if any debt securities should be designated PCD.

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

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

The volume of factoring activity and the commission rates charged impact factoring commission income earned.

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

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

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

The gain is determined based on sales price less book carrying value (net of accumulated depreciation).

BOLI income – This reflects income earned on changes in the CSV of the BOLI policies.

Other – This consists of several forms of recurring revenue, such as FHLB dividends.

For the remaining transactions, revenue is recognized when, or as, the performance obligation is satisfied.

Newly Adopted Accounting Standards

The following pronouncements or ASUs were issued by the FASB and adopted by BancShares as of January 1, 2022.

ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity - Issued August 2020

The amendments in this ASU reduce the number of models used to account for convertible instruments, amend diluted earnings per share calculations for convertible instruments, amend the requirements for a contract (or embedded derivative) that is potentially settled in an entity’s own shares to be classified in equity, and expand disclosure requirements for convertible instruments.

The adoption of this ASU did not have a material impact on BancShares’ consolidated financial statements and disclosures as BancShares does not have any convertible instruments within the scope of this ASU.

ASU 2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options - Issued May 2021

The amendments in this ASU clarify an issuer's accounting for certain modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange.

The ASU requires that such modifications or exchanges be treated as an exchange of the original instrument for a new instrument.

An issuer should measure the effect of such modifications or exchanges based on analysis of the difference between the fair value of the modified instrument and the fair value of that instrument immediately before modification or exchange.

Recognition of a modification or an exchange of a freestanding equity-classified written call option is then based upon the substance of the transaction.

The adoption of this ASU did not have a material impact on BancShares’ consolidated financial statements and disclosures as BancShares currently does not have any freestanding equity-classified written call options within the scope of this ASU.

ASU 2021-05, Leases, (Topic 842), Lessors - Certain Leases with Variable Lease Payments - Issued July 2021

The amendments in this ASU improve lessor accounting for certain leases with variable lease payments so that lessors are no longer required to recognize a day-one selling loss upon lease commencement when specified criteria are met.

Specifically, this ASU requires a lessor to classify a lease with variable payments that do not depend on a reference index or a rate as an operating lease if classifying the lease as a sales-type lease or a direct financing lease would result in the recognition of a day-one selling loss at lease commencement.

A day-one selling loss is not recognized under operating lease accounting.

The adoption of this ASU did not have a material impact on BancShares’ consolidated financial statements and disclosures as BancShares has not originated finance leases which required a day-one selling loss at lease commencement.

Recently Issued Accounting Standards

ASU 2022-02 Financial Instruments—Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures- Issued March 2022

For creditors that have adopted CECL, the amendments in this ASU:

(i) eliminate the previous recognition and measurement guidance for TDRs, (ii) require new disclosures for loan modifications when a borrower is experiencing financial difficulty (the “Modification Disclosures”) and (iii) require disclosures of current period gross charge-offs by year of origination in the vintage disclosures (the “Gross Charge-off Vintage Disclosures”).

The Modification Disclosures apply to the following modification types:

principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions, or a combination thereof.

Creditors will be required to disclose the following by loan class:

(i) amounts and relative percentages of each modification type, (ii) the financial effect of each modification type, including the amount of principal forgiveness and reduction in weighted average interest rate, (iii) the performance of the loan in the 12 months following the modification and (iv) qualitative information discussing how the modifications factored into the determination of the ACL.

BancShares adopted ASU 2022-02 as of January 1, 2023 and elected to apply the modified retrospective transition method for ACL recognition and measurement.

As a result of adopting this ASU, BancShares does not expect a material change to its ACL related to loans previously modified as a TDR and, therefore, does not expect a material cumulative effect adjustment to retained earnings as of January 1, 2023.

The Modification Disclosures and Gross Charge-off Vintage Disclosures are required to be applied prospectively, beginning in BancShares’ Quarterly Report on Form 10-Q as of and for the three months ending March 31, 2023.

NOTE 2 — BUSINESS COMBINATIONS

CIT Group Inc.

On January 3, 2022, BancShares completed the CIT Merger.

Refer to Note W, Subsequent Events, for further information .

Community Financial Holding Company, Inc.

On February 1, 2020, BancShares completed the merger of Duluth, Georgia-based Community Financial Holding Company, Inc.

(“Community Financial”) and its bank subsidiary, Gwinnett Community Bank.

BancShares concluded the completed business combination of Community Financial was not material to BancShares’ consolidated financial statements, individually or in aggregate, and therefore, pro forma financial data has not been included.

The transaction was accounted for under the acquisition method of accounting and, accordingly, assets acquired and liabilities assumed were recorded at their estimated fair values on the acquisition date.

Fair values were subject to refinement for up to one year after the closing date of the acquisition.

The measurement period ended on December 30, 2020.

The fair value of the assets acquired was $ 221.4 million, including $ 110.6 million in non-PCD loans, $ 23.4 million in PCD loans, net of an ACL of $ 1.2 million, and $ 536 thousand in a core deposit intangible.

No debt securities purchased in the transaction were designated PCD.

Liabilities assumed were $ 219.8 million, of which $ 209.3 million were deposits.

As a result of the transaction, BancShares recorded $ 686 thousand of goodwill.

The amount of goodwill represents the excess purchase price over the estimated fair value of the net assets acquired.

The premium paid reflects the increased market share and related synergies expected to result from the acquisition.

None of the goodwill was deductible for income tax purposes as the merger was accounted for as a qualified stock purchase.

The Community Financial transaction resulted in merger-related expenses of $ 3.5 million for the year ended December 31, 2020.

Additionally, loan-related interest income generated was approximately $ 5.3 million from the acquisition date through December 31, 2020.

The ongoing contribution of this transaction to BancShares’ financial statements is not considered material, and therefore pro forma financial data is not included.

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The amortized cost and fair value of investment and marketable equity securities at December 31, 2021 and 2020, were as follows:

December 31, 2021

(Dollars in thousands) Cost Gross

BancShares completed the CIT Merger on January 3, 2022 (the “Merger Date”).

Pursuant to the Merger Agreement, each share of CIT common stock, par value $ 0.01 per share (“CIT Common Stock”), issued and outstanding, except for certain shares of CIT Common Stock owned by CIT or BancShares, was converted into the right to receive 0.062 shares of Class A Common Stock, par value $ 1.00 per share, plus cash in lieu of fractional shares of Class A Common Stock.

The Parent Company issued approximately 6.1 million shares of Class A Common Stock in connection with the consummation of the CIT Merger.

The closing share price of Class A Common Stock on the Nasdaq Global Select Market was $ 859.76 on January 3, 2022.

The purchase price consideration related to the issuance of Class A Common Stock was $ 5.3 billion.

There were approximately 8,800 fractional shares for which the Parent Company paid cash of $ 7 million.

Pursuant to the terms of the Merger Agreement, each issued and outstanding share of fixed-to-floating rate non-cumulative perpetual preferred stock, series A, par value $ 0.01 per share, of CIT (“CIT Series A Preferred Stock”) and each issued and outstanding share of 5.625 % non-cumulative perpetual preferred stock, series B, par value $ 0.01 per share, of CIT (“CIT Series B Preferred Stock” and together with CIT Series A Preferred Stock, “CIT Preferred Stock”), converted into the right to receive one share of a newly created series of preferred stock, series B, of the Parent Company (“BancShares Series B Preferred Stock”) and one share of a newly created series of preferred stock, series C, of the Parent Company (“BancShares Series C Preferred Stock” and together with the BancShares Series B Preferred Stock, the “New BancShares Preferred Stock”), respectively, having such rights, preferences, privileges and voting powers, and limitations and restrictions, taken as a whole, that are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers, and limitations and restrictions, taken as a whole, of the CIT Series A Preferred Stock and the CIT Series B Preferred Stock, respectively.

The non-callable period for the New BancShares Preferred Stock is January 4, 2027, which is five years from the original issuance date of the New BancShares Preferred Stock.

There are 325,000 shares of BancShares Series B Preferred Stock with a liquidation preference of $ 1,000 per share, resulting in a total liquidation preference of $ 325 million.

There are 8 million shares of BancShares Series C Preferred Stock with a liquidation preference of $ 25 per share, resulting in a total liquidation preference of $ 200 million.

The New BancShares Preferred Stock qualifies as Tier 1 capital.

The purchase price consideration related to the fair value of the New BancShares Preferred Stock was $ 541 million.

CIT RSUs and PSUs converted to BancShares RSUs, and CIT Director Equity Awards immediately vested upon completion of the CIT Merger, as further described in the “Stock-Based Compensation” discussion in Note 1 — Significant Accounting Policies and Basis of Presentation.

The aggregate purchase price consideration related to these compensation awards was $ 81 million.

The CIT Merger has been accounted for as a business combination under the acquisition method of accounting.

Accordingly, the assets acquired and liabilities assumed were recorded at their estimated fair values based on the acquisition date.

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

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

As of December 31, 2022, fair value measurements were finalized.

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

Purchase Price Consideration and Net Assets Acquired

dollars in millions, except shares issued and price per share Purchase Price Allocation

Common share consideration

Shares of Class A Common Stock issued 6,140,010

Price per share on January 3, 2022 $ 859.76

Common stock consideration $ 5,279

Preferred stock consideration 541

Stock-based compensation consideration 81

Cash in lieu of fractional shares and other consideration paid 51

Purchase price consideration $ 5,952

Cash and interest-earning deposits at banks $ 3,060

Investment securities 6,561

Assets held for sale 59

Loans and leases 32,714

Operating lease equipment 7,838

Bank-owned life insurance 1,202

Intangible assets 143

Other assets 2,198

Total assets acquired $ 53,775

Deposits $ 39,428

Borrowings 4,536

Credit balances of factoring clients 1,534

Other liabilities 1,894

Total liabilities assumed $ 47,392

Fair value of net assets acquired 6,383

Gain on acquisition $ 431

BancShares recorded a gain on acquisition of $ 431 million in noninterest income, representing the excess of the fair value of net assets acquired over the purchase price.

The gain on acquisition is not taxable.

The following is a description of the methods used to determine the estimated fair values of significant assets acquired and liabilities assumed as presented above.

Cash and interest-earning deposits at banks

For financial instruments with a short-term or no stated maturity, prevailing market rates and limited credit risk, carrying amounts approximate fair value.

Investment securities

Fair values for investment securities were based on quoted market prices, where available.

If quoted market prices were not available, fair value estimates were based on observable inputs including quoted market prices for similar instruments, quoted market prices that are not in an active market or other inputs that are observable in the market.

In the absence of observable inputs, fair value was estimated based on pricing models and/or discounted cash flows methodologies.

Assets held for sale and loans and leases

Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, fixed or variable interest rate, remaining term, credit quality ratings or scores, amortization status and current discount rate.

Selected larger, impaired loans were specifically reviewed to evaluate credit risk.

Loans with similar risk characteristics were pooled together when applying various valuation techniques.

The discount rates used for loans were based on an evaluation of current market rates for new originations of comparable loans and required rates of return for market participants to purchase similar assets, including adjustments for liquidity and credit quality when necessary.

BancShares’ accounting methods for acquired loans and leases are discussed in Note 1 — Significant Accounting Policies and Basis of Presentation.

The following table presents the UPB and fair value of the loans and leases acquired by BancShares in the CIT Merger.

The UPB for PCD loans and leases includes the PCD Gross-Up of $ 272 million as discussed further in Note 4 — Loans and Leases.

Loans Acquired

dollars in millions Loans and Leases

UPB Fair Value

Non-PCD loans and leases $ 29,542 $ 29,481

PCD loans and leases 3,550 3,233

Total loans and leases $ 33,092 $ 32,714

Operating Lease Equipment

Operating lease equipment were comprised of two sub-groups:

rail and non-rail equipment.

Fair values for both were based on the cost approach where market values were not available.

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

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

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

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

The intangible liability (see Note 8 — Goodwill and Other Intangibles) will be amortized, thereby increasing rental income (a component of noninterest income) over the remaining term of the lease agreements on a straight-line basis.

Bank Owned Life Insurance

The fair values of BOLI policies were determined by the policy administrator and calculated based on the net present value of investment cash flows.

Expected premium payments, death benefits and expected mortality were considered in the net present value calculation.

Based upon the administrator’s analysis and management’s review of the analysis, fair value was determined to equate to book value as of the merger date.

Intangible assets

The following table presents the intangible asset recorded in conjunction with the CIT Merger related to the valuation of core deposits:

Intangible Assets

dollars in millions Fair Value Estimated Useful Life Amortization Method

Core deposit intangibles $ 143 10 years Straight-line

Certain core deposits were acquired as part of the CIT Merger, which provide an additional source of funds for BancShares.

The core deposit intangibles represent the costs saved by BancShares by acquiring the core deposits rather than sourcing the funds elsewhere.

This intangible was valued using the income approach, after-tax cost savings method.

This method estimates the fair value by discounting to present value the favorable funding spread attributable to the core deposit balances over their estimated average remaining life.

The favorable funding spread is calculated as the difference in the alternative cost of funds and the net deposit cost.

Refer to Note 8 — Goodwill and Other Intangibles for further discussion.

The following table details other assets acquired:

dollars in millions Fair Value

Low-income housing tax credits and other investments $ 777

Right of use assets 327

Premises and equipment 230

Fair value of derivative financial instruments 209

Counterparty receivables 133

Total other assets $ 2,198

The fair values of the tax credit investments considered the ongoing equity installments that are regularly allocated to each of the underlying tax credit funds comprising the low-income housing tax credits investments, along with changes to projected tax benefits and the impact this has on future capital contributions, and an appropriately determined discount rate.

The fair value of the investments in unconsolidated entities was valued using the income approach.

The right of use asset associated with real estate operating leases were measured at the same amount as the lease liability as adjusted to reflect favorable or unfavorable terms of the lease when compared with market terms.

The lease liability was measured at the present value of the remaining lease payments, as if the acquired lease were a new lease of the acquirer at the acquisition date and using BancShares incremental borrowing rate.

The lease term was determined for individual leases based on management’s assessment of the probability of exercising the existing renewal, termination and/or purchase option.

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

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

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

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

The fair values for time deposits were estimated using a discounted cash flow analysis whereby the contractual remaining cash flows were discounted using market rates currently being offered for time deposits of similar maturities.

For transactional deposits, carrying amounts approximate fair value.

In connection with the CIT Merger, BancShares assumed the outstanding borrowings of CIT.

The fair values of borrowings were estimated based on readily observable prices using reliable market sources.

Credit balances of Factoring Clients

Credit balance amounts represent short-term payables that are tied to the factoring receivables.

Due to the short-term nature of these payables and given that amounts are settled at book value, it was determined that the carrying value is equivalent to fair value.

Other Liabilities

Other liabilities include items such as accounts payable and accrued liabilities, lease liabilities, current and deferred taxes, commitments to fund tax credit investments and other miscellaneous liabilities.

The fair value of lease liabilities was measured using the present value of remaining lease payments, using BancShares’ discount rate at the merger date.

The fair value of the remaining liabilities was determined to approximate book value.

For all accrued liabilities and accounts payable, it was determined that the carrying value equals book value.

Unaudited Pro Forma Information

The amount of interest income, noninterest income and net income of $ 1.75 billion, $ 1.24 billion and $ 587 million, respectively, attributable to the acquisition of CIT were included in BancShares’ Consolidated Statement of Income for the year ended December 31, 2022.

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

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

The unaudited estimated pro forma information combines the historical results of CIT and BancShares and includes certain pro forma adjustments.

The key pro forma adjustments relate to the following items that were recognized in BancShares Consolidated Statement of Income for the year ended December 31, 2022, but were reflected in 2021 for the pro forma financial information:

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

(ii) merger-related expenses of $ 231 million;

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

and (iv) $ 431 million gain on acquisition.

BancShares expects to achieve operating cost savings and other business synergies as a result of the acquisition that are not reflected in the pro forma amounts that follow.

The pro forma information should not be relied upon as being indicative of the historical results of operations that would have occurred had the acquisition taken place on January 1, 2021.

Actual results may differ from the unaudited pro forma information presented below and the differences could be significant.

Selected Unaudited Pro Forma Financial Information for Consolidated BancShares

dollars in millions Year Ended December 31,

Interest income $ 3,413 $ 2,867

Noninterest income 1,705 2,537

Net income 1,225 1,497

NOTE 3 — INVESTMENT SECURITIES

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

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

Amortized Cost and Fair Value - Debt Securities

dollars in millions December 31, 2022

Amortized Cost Gross Unrealized

Gains Gross Unrealized

Losses Fair Value

Investment securities available for sale

7 unchanged sentences

Investment securities held to maturity

Treasury $ 474 $ — $ ( 50 ) $ 424

Government agency 1,548 — ( 186 ) 1,362

Residential mortgage-backed securities 4,605 — ( 723 ) 3,882

Commercial mortgage-backed securities 3,355 — ( 484 ) 2,871

Supranational securities 295 — ( 41 ) 254

Other 2 — — 2

2 unchanged sentences

December 31, 2021

unrealized gains Gross unrealized

Amortized Cost Gross Unrealized

Gains Gross Unrealized

Losses Fair Value

Investment securities available for sale

12 unchanged sentences

Total investment securities $ 13,097 $ 76 $ ( 113 ) $ 13,060

On October 1, 2021, mortgage-backed securities with an amortized cost of $ 451.7 million were transferred from investment securities available for sale to the held to maturity portfolio.

At the time of transfer, the mortgage-backed securities had a fair value of $ 439.0 million and a weighted average remaining contractual maturity of approximately 28 years.

The unrealized loss on these securities at the date of transfer was $ 12.7 million, or $ 9.7 million net of tax, and was reported as a component of AOCI.

This unrealized loss is amortized over the remaining expected life of the securities as an adjustment of yield.

On November 1, 2020, mortgage-backed securities with an amortized cost of $ 1.46 billion were transferred from investment securities available for sale to the held to maturity portfolio.

At the time of transfer, the mortgage-backed securities had a fair value of $ 1.47 billion and a weighted average remaining contractual maturity of approximately 18 years.

The unrealized gain on these securities at the date of transfer was $ 5.9 million, or $ 4.5 million net of tax, and was reported as a component of AOCI.

This unrealized gain is accreted over the remaining expected life of the securities as an adjustment of yield.

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Investments in government agency securities represent securities issued by the SBA.

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

Investments in government agency securities represent securities issued by the Small Business Association, FHLB and other agencies.

Investments in supranational securities represent securities issued by the Supranational Entities and Multilateral Development Banks.

Investments in corporate bonds represent positions in debt securities of other financial institutions.

1 unchanged sentence

Other held to maturity investments include certificates of deposit with other financial institutions.

BancShares also holds approximately 354,000 shares of Class B common stock of Visa, Inc.

Until the resolution of certain litigation, at which time the Visa Class B common stock will convert to publicly traded Visa Class A common stock, these shares are only transferable to other shareholders of Visa Class B common stock.

BancShares also holds approximately 354,000 shares of Class B common stock of Visa.

As a result, there is limited transfer activity in private transactions between buyers and sellers.

1 unchanged sentence

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

BancShares held FHLB stock of $ 40.5 million and $ 45.4 million and other non-marketable equity securities of $ 9.6 million and $ 11.6 million at December 31, 2021 and December 31, 2020, respectively.

These securities are recorded at cost within other assets.

As of December 31, 2021 and December 31, 2020, no ACL was required for available for sale and held to maturity debt securities.

At December 31, 2021, accrued interest receivable for available for sale and held to maturity debt securities were $ 22.3 million and $ 6.6 million, respectively, and were excluded from the estimate of credit losses.

At December 31, 2020, accrued interest receivable for available for sale and held to maturity debt securities were $ 17.6 million and $ 5.4 million, respectively, and were excluded from the estimate of credit losses.

During the years ended December 31, 2021 and December 31, 2020, no accrued interest was deemed uncollectible and written off against interest income.

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

At December 31, 2022, accrued interest receivables for available for sale and held to maturity debt securities were $ 33 million and $ 19 million, respectively.

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

During the year ended December 31, 2022 and 2021, there was no accrued interest that was deemed uncollectible and written off against interest income.

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

1 unchanged sentence

Residential and commercial mortgage-backed and government agency securities are stated separately as they are not due at a single maturity date.

December 31, 2021 December 31, 2020

(Dollars in thousands) Amortized cost Fair

value Amortized cost Fair

Maturities - Debt Securities

dollars in millions December 31, 2022 December 31, 2021

Cost Fair Value Cost Fair Value

Investment securities available for sale

1 unchanged sentence

One year or less $ 37 $ 37 $ — $ —

One through five years 2,049,068 2,048,259 72,565 73,881

Five through 10 years 523,290 547,912 508,320 519,570

Over 10 years 16,650 17,132 8,971 8,807

After one through five years 2,068 1,928 2,049 2,048

After five through 10 years 483 455 523 548

After 10 years 17 14 17 17

Government agency 164 162 221 221

5 unchanged sentences

One year or less $ 51 $ 51 $ 2 $ 2

One through five years — — 749 749

After one through five years 1,479 1,328 — —

After five through 10 years 789 663 — —

Residential mortgage-backed securities 4,605 3,882 2,322 2,306

1 unchanged sentence

Total investment securities held to maturity $ 10,279 $ 8,795 $ 3,809 $ 3,759

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For each year presented, realized gains on investment securities available for sale included the following:

Year ended December 31

(Dollars in thousands) 2021 2020 2019

Gross gains on retirement/sales of investment securities available for sale $ 33,133 $ 60,932 $ 8,993

Gross losses on sales of investment securities available for sale ( 14 ) ( 679 ) ( 1,878 )

Realized gains on investment securities available for sale, net $ 33,119 $ 60,253 $ 7,115

For each year presented, realized and unrealized gains or losses on marketable equity securities included the following:

Year ended December 31

(Dollars in thousands) 2021 2020 2019

Marketable equity securities gains (losses), net $ 34,081 $ 29,395 $ 20,625

Less net gains recognized on marketable equity securities sold 16,261 44,550 16,344

Unrealized gains (losses) recognized on marketable equity securities held $ 17,820 $ ( 15,155 ) $ 4,281

The following table provides information regarding investment securities with unrealized losses as of December 31, 2021 and 2020:

December 31, 2021

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

Interest and Dividends on Investment Securities

dollars in millions Year ended December 31

2022 2021 2020

Interest income - taxable investment securities $ 352 $ 143 $ 140

Dividend income - marketable equity securities 2 2 4

Interest on investment securities $ 354 $ 145 $ 144

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

Realized Gains on Debt Securities Available For Sale

dollars in millions Year ended December 31

2022 2021 2020

Gross realized gains on sales of investment securities available for sale $ — $ 33 $ 61

Gross realized losses on sales of investment securities available for sale — — ( 1 )

Net realized gains on sales of investment securities available for sale $ — $ 33 $ 60

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

Fair Value Adjustment on Marketable Equity Securities

dollars in millions Year ended December 31

2022 2021 2020

Fair value adjustment on marketable equity securities, net $ ( 3 ) $ 34 $ 29

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

Gross Unrealized Losses on Debt Securities Available For Sale

dollars in millions December 31, 2022

Less than 12 months 12 months or more Total

(Dollars in thousands) Fair

Value Unrealized

14 unchanged sentences

Investment securities available for sale

Treasury $ 1,811 $ ( 2 ) $ — $ — $ 1,811 $ ( 2 )

Government agency 17 — 79 ( 1 ) 96 ( 1 )

Residential mortgage-backed securities 3,992 ( 36 ) 1 — 3,993 ( 36 )

Commercial mortgage-backed securities 852 ( 15 ) 111 ( 2 ) 963 ( 17 )

Corporate bonds 52 ( 1 ) — — 52 ( 1 )

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

There were 37 and 39 investment securities available for sale with continuous losses for more than 12 months as of December 31, 2021 and December 31, 2020, respectively, all of which are government sponsored, enterprise-issued mortgage-backed securities or government agency securities.

As of December 31, 2022, there were 151 investment securities available for sale with continuous unrealized losses for more than 12 months, of which 144 were government sponsored enterprise-issued mortgage-backed securities or government agency securities and the remaining seven related to corporate bonds.

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

1 unchanged sentence

BancShares considered other factors including changes in credit ratings, delinquencies, and other macroeconomic factors in this determination.

As a result, none of the securities were deemed to require an allowance for credit losses.

As a result, none of the available for sale securities were deemed to require an ACL.

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

Investment securities having an aggregate carrying value of $ 5.74 billion at December 31, 2021 and $ 4.64 billion at December 31, 2020, were pledged as collateral to secure public funds on deposit and certain short-term borrowings, and for other purposes as required by law.

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

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

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

Treasury and the long history of no credit losses on debt securities issued by government agencies and government sponsored entities, no allowance for credit losses has been recorded on these securities.

In the event there are downgrades to the credit rating of the U.S.

Treasury or losses reported on securities issued by government agencies and government sponsored entities, BancShares will reevaluate its determination of zero expected credit losses on held to maturity debt securities.

There were no debt securities held to maturity on non-accrual status as of December 31, 2021 or December 31, 2020.

Treasury, the Supranational Entities and Multilateral Development Banks and the long history of no credit losses on debt securities issued by government agencies and government sponsored entities, as of December 31, 2022 and 2021, no ACL was required for held to maturity debt securities.

Investment securities having an aggregate carrying value of $ 4.2 billion at December 31, 2022, and $ 5.7 billion at December 31, 2021, were pledged as collateral to secure public funds on deposit and certain short-term borrowings, and for other purposes as required by law.

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

There were no securities past due as of December 31, 2021 or December 31, 2020.

LOANS AND LEASES

BancShares’ accounting methods for loans and leases depends whether they are originated or purchased, and if purchased, whether or not the loans reflect more than insignificant credit deterioration since origination, which is determined as of the acquisition date.

Non-PCD loans consist of loans originated by BancShares and loans purchased from other institutions that do not reflect more than insignificant credit deterioration at acquisition and are reported by loan segments as defined in Note A, Accounting Policies and Basis of Presentation.

Purchased loans which reflect more than insignificant credit deterioration are classified as PCD and reported as a single loan segment or class.

At the date of acquisition, all acquired loans are recorded at fair value.

Loans and leases outstanding include the following at December 31, 2021 and 2020:

(Dollars in thousands) December 31, 2021 December 31, 2020

Construction and land development $ 1,111,797 $ 985,424

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

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

Certain investments held by BancShares were recorded in other assets.

BancShares held FHLB stock of $ 197 million and $ 40 million at December 31, 2022 and 2021, respectively;

these securities are recorded at cost.

BancShares held $ 58 million and $ 1 million of nonmarketable securities without readily determinable fair values, which are measured at cost at December 31, 2022 and December 31, 2021, respectively.

Investments in qualified affordable housing projects, all of which qualify for the proportional amortization method, were $ 598 million and $ 157 million at December 31, 2022 and 2021, respectively.

NOTE 4 — LOANS AND LEASES

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

Refer to Note 2 — Business Combinations for further information and to Note 1 — Significant Accounting Policies and Basis of Presentation for our accounting policies related to loans.

Unless otherwise noted, loans held for sale are not included in the following tables.

Leases in the following tables include finance leases, but exclude operating lease equipment.

Loans by Class

dollars in millions December 31, 2022 December 31, 2021

Commercial construction $ 2,804 $ 1,238

Owner occupied commercial mortgage 14,473 12,099

Non-owner occupied commercial mortgage 9,902 3,041

Commercial and industrial and leases 5,710,652 5,013,644

SBA-PPP 493,821 2,406,291

Total commercial loans and leases 22,280,288 22,558,060

Commercial and industrial 24,105 5,937

Leases 2,171 271

Total commercial 53,455 22,586

Residential mortgage 13,309 6,088

Revolving mortgage 1,951 1,818

Construction and land development 399,570 348,123

Consumer auto 1,414 1,332

Consumer other 652 548

Total consumer loans 9,753,610 9,771,033

Total non-PCD loans and leases 32,033,898 32,329,093

PCD loans 337,624 462,882

Total consumer 17,326 9,786

Total loans and leases $ 70,781 $ 32,372

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Certain residential real estate loans are originated to be sold to investors and are recorded in loans held for sale at fair value.

Loans held for sale totaled $ 98.7 million and $ 124.8 million at December 31, 2021 and 2020, respectively.

We may change our strategy for certain portfolio loans and sell them in the secondary market.

At that time, portfolio loans are transferred to loans held for sale at the lower of cost or market value.

During 2021, total proceeds from sales of residential mortgage loans were $ 1.04 billion.

During 2020, total proceeds from sales of residential mortgage loans were $ 1.05 billion, the majority of which were originated to be sold.

An additional $ 7.6 million related to sales of portfolio loans, which were sold at par.

At December 31, 2022 and 2021, accrued interest receivable on loans included in other assets was $ 203 million and $ 87 million, respectively, and was excluded from the estimate of credit losses.

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

(Dollars in thousands) December 31, 2021 December 31, 2020

Components of Amortized Cost

dollars in millions December 31, 2022 December 31, 2021

Deferred fees, including unearned fees and unamortized costs on Non-PCD loans $ 85 $ 32

Net deferred fees related to SBA-PPP loans $ 14,882 $ 41,064

Net deferred fees related to other portfolios 16,903 9,153

Total net deferred fees $ 31,785 $ 50,217

Net unamortized discount on purchased loans

Non-PCD $ 73 $ 11

PCD 29,008 45,254

Total $ 40,436 $ 64,727

Loans and leases to borrowers in medical, dental or related fields were $ 7.09 billion as of December 31, 2021, which represented 21.9 % of total loans and leases, compared to $ 5.54 billion or 16.9 % of total loans and leases at December 31, 2020.

The credit risk of this industry concentration is mitigated through our underwriting policies, which emphasize reliance on adequate borrower cash flow, rather than underlying collateral value, and our preference for financing secured by owner-occupied real property.

Except for this single concentration, no other industry represented more than 10% of total loans and leases outstanding at December 31, 2021 or 2020.

Similar to FCB’s branch footprint, the collateral of loans secured by real estate is concentrated within North Carolina and South Carolina.

At December 31, 2021, real estate located in North Carolina and South Carolina represented 35.9 % and 15.6 %, respectively, of all real estate used as collateral.

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Total net unamortized discount $ 118 $ 40

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

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

December 31, 2021

(Dollars in thousands) 30-59 days

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

Loans and Leases - Delinquency Status

dollars in millions December 31, 2022

Past Due 60-89 Days

past due 90 days or greater Total past

due Current Total loans

Construction and land development $ 456 $ — $ 2,099 $ 2,555 $ 1,109,242 $ 1,111,797

Past Due 90 Days or

Greater Total

Past Due Current Total

Commercial construction $ 50 $ — $ 1 $ 51 $ 2,753 $ 2,804

Owner occupied commercial mortgage 29 5 25 59 14,414 14,473

Non-owner occupied commercial mortgage 76 144 11 231 9,671 9,902

Commercial and industrial and leases 7,909 3,714 6,238 17,861 5,692,791 5,710,652

SBA-PPP — — — — 493,821 493,821

Total commercial loans 27,773 4,264 17,483 49,520 22,230,768 22,280,288

Commercial and industrial 173 26 53 252 23,853 24,105

Leases 59 17 16 92 2,079 2,171

Total commercial 387 192 106 685 52,770 53,455

Residential mortgage 73 16 52 141 13,168 13,309

Revolving mortgage 9 3 8 20 1,931 1,951

Construction and land development 388 — 41 429 399,141 399,570

Consumer auto 7 1 1 9 1,405 1,414

Consumer other 4 2 3 9 643 652

Total consumer loans 32,382 9,299 21,226 62,907 9,690,703 9,753,610

PCD loans 10,898 2,899 13,160 26,957 310,667 337,624

Total consumer 93 22 64 179 17,147 17,326

Total loans and leases $ 480 $ 214 $ 170 $ 864 $ 69,917 $ 70,781

December 31, 2021

(Dollars in thousands) 30-59 days

Past Due 60-89 Days

past due 90 days or greater Total past

due Current Total loans

Construction and land development $ 956 $ 527 $ 1,603 $ 3,086 $ 982,338 $ 985,424

Past Due 90 Days or

Greater Total

Past Due Current Total

Commercial construction $ 1 $ — $ 2 $ 3 $ 1,235 $ 1,238

Owner occupied commercial mortgage 21 1 9 31 12,068 12,099

Non-owner occupied commercial mortgage 3 — 2 5 3,036 3,041

Commercial and industrial and leases 14,532 2,842 3,243 20,617 4,993,027 5,013,644

SBA-PPP — — — — 2,406,291 2,406,291

Total commercial loans 36,615 5,601 24,901 67,117 22,490,943 22,558,060

Commercial and industrial 8 3 5 16 5,921 5,937

Leases — 1 1 2 269 271

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

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

Revolving mortgage 6 2 6 14 1,804 1,818

Construction and land development 932 77 330 1,339 346,784 348,123

Consumer auto 6 1 1 8 1,324 1,332

Consumer other 2 2 1 5 543 548

Total consumer loans 66,562 14,366 42,016 122,944 9,648,089 9,771,033

PCD loans 18,322 6,076 31,026 55,424 407,458 462,882

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

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

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The amortized cost, by class, of loans and leases on nonaccrual status, and loans and leases greater than 90 days past due and still accruing at December 31, 2021 and December 31, 2020, were as follows:

December 31, 2021 December 31, 2020

(Dollars in thousands) Nonaccrual

leases Loans and

accruing Nonaccrual

leases Loans and

leases > 90 days and accruing

Construction and land development $ 2,128 $ — $ 1,661 $ —

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

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

dollars in millions December 31, 2022 December 31, 2021

Non-Accrual Loans Loans >

Accruing Non-Accrual Loans Loans >

Commercial construction $ 48 $ — $ 4 $ —

Owner occupied commercial mortgage 41 2 18 5

Non-owner occupied commercial mortgage 228 — 5 —

Commercial and industrial and leases 17,384 661 10,626 540

Total commercial loans 35,287 5,431 43,322 4,312

Commercial and industrial 184 41 15 1

Leases 28 7 3 —

Total commercial 529 50 45 6

Residential mortgage 75 10 54 —

Revolving mortgage 18 — 18 —

Construction and land development 482 — 652 —

Consumer auto 4 — 3 —

Consumer other 1 3 1 1

Total consumer loans 55,403 951 93,222 1,195

PCD loans 29,616 543 54,939 355

Total consumer 98 13 76 1

Total loans and leases $ 627 $ 63 $ 121 $ 7

(1) Accrued interest that was reversed when the loan went to non-accrual status was $ 4 million for the year ended December 31, 2022.

(2) Non-accrual loans for which there was no related ACL totaled $ 63 million at December 31, 2022 and $ 15 million at December 31, 2021.

OREO and repossessed assets were $ 47 million as of December 31, 2022 and $ 40 million as of December 31, 2021.

Credit quality indicators

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

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

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

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

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

Commercial loans are evaluated periodically with more frequent evaluations done on criticized loans.

13 unchanged sentences

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

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

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The credit quality indicators for consumer and PCD loans are based on delinquency status of the borrower as of the date presented.

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

As the borrower becomes more delinquent, the likelihood of loss increases.

The following tables represent current credit quality indicators by origination year as of December 31, 2021.

Commercial Loans Amortized Cost Basis by Origination Year

Classification:

2021 2020 2019 2018 2017 Prior Revolving Revolving converted to term loans Total

(Dollars in thousands)

Construction and land development

An exemption is applied to government guaranteed loans as the principal repayments are insured by the Federal Housing Administration and U.S.

Department of Veterans Affairs and thus remain on accrual status regardless of delinquency status.

The following table summarizes the commercial loans disaggregated by year of origination and by risk rating.

The consumer loan delinquency status by year of origination is also presented below.

The tables reflect the amortized cost of the loans and include PCD loans.

Commercial Loans - Risk Classifications by Class

December 31, 2022

Risk Classification:

Term Loans by Origination Year Revolving Converted to Term Loans

dollars in millions 2022 2021 2020 2019 2018 2017 & Prior Revolving Total

Commercial construction

Pass $ 1,140 $ 759 $ 511 $ 157 $ 27 $ 75 $ 42 $ — $ 2,711

1 unchanged sentence

Substandard 2 — — 43 — 5 — — 50

Total 468,533 374,393 178,379 24,985 47,588 8,428 9,491 — 1,111,797

Doubtful — — — 3 — — — — 3

Ungraded — — — — — — — — —

Total commercial construction 1,146 759 529 221 27 80 42 — 2,804

Owner occupied commercial mortgage

2 unchanged sentences

Substandard 24 47 41 28 47 114 6 — 307

Total 3,073,681 3,058,161 1,919,706 1,225,963 989,107 1,590,782 135,040 185 11,992,625

Doubtful — — — — — 1 — — 1

Ungraded — — — — — — — — —

Total owner occupied commercial mortgage 2,830 3,389 3,039 1,886 1,113 2,031 185 — 14,473

Non-owner occupied commercial mortgage

3 unchanged sentences

Doubtful — — — 17 — 20 — — 37

Total 635,569 744,905 600,969 273,212 270,351 410,541 35,846 — 2,971,393

Commercial and industrial and leases

Ungraded — — — — — — — — —

Total non-owner occupied commercial mortgage 2,504 1,670 1,931 1,776 773 1,199 49 — 9,902

Commercial and industrial

Pass 7,695 4,145 2,035 1,533 872 845 5,252 29 22,406

3 unchanged sentences

Ungraded — — — — — — 93 — 93

Total 1,785,254 1,057,168 659,670 304,819 170,782 295,240 1,431,576 6,143 5,710,652

Total commercial and industrial 7,889 4,419 2,311 1,739 1,096 1,029 5,592 30 24,105

Pass 718 466 389 216 80 108 — — 1,977

Special Mention 21 22 17 9 4 — — — 73

Substandard 32 32 27 12 7 1 — — 111

Doubtful 2 3 2 1 1 — — — 9

Ungraded — — — — — 1 — — 1

Total leases 773 523 435 238 92 110 — — 2,171

Total commercial $ 15,142 $ 10,760 $ 8,245 $ 5,860 $ 3,101 $ 4,449 $ 5,868 $ 30 $ 53,455

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Consumer and PCD Loans Amortized Cost Basis by Origination Year

Consumer Loans - Delinquency Status by Class

December 31, 2022

Days Past Due:

2021 2020 2019 2018 2017 Prior Revolving Revolving converted to term loans Total

(Dollars in thousands)

Term Loans by Origination Year Revolving Converted to Term Loans

dollars in millions 2022 2021 2020 2019 2018 2017 & Prior Revolving Total

Residential mortgage

3 unchanged sentences

90 days or greater — 1 1 2 2 46 — — 52

Total 1,967,306 1,563,679 610,344 364,094 341,954 811,720 20,822 — 5,679,919

Total residential mortgage 3,489 3,730 2,106 812 419 2,731 22 — 13,309

Revolving mortgage

3 unchanged sentences

90 days or greater — — — — — — 5 3 8

Total — — — — — — 1,677,049 117,956 1,795,005

Construction and land development

Current 241,692 122,259 20,782 6,665 4,835 1,630 1,278 — 399,141

30-59 days 55 285 27 — 11 10 — — 388

60-89 days — — — — — — — — —

90 days or greater — — — — — 41 — — 41

Total 241,747 122,544 20,809 6,665 4,846 1,681 1,278 — 399,570

Total revolving mortgage — — — — — — 1,851 100 1,951

Consumer auto

3 unchanged sentences

90 days or greater — 1 — — — — — — 1

Total 598,560 345,526 200,172 119,794 48,949 18,387 — — 1,331,388

Total consumer auto 600 402 218 112 60 22 — — 1,414

Consumer other

3 unchanged sentences

90 days or greater — — — — — 1 2 — 3

Total 133,349 24,008 11,079 4,404 2,362 28,125 344,401 — 547,728

Total consumer other 160 82 13 6 2 22 367 — 652

Total consumer $ 4,249 $ 4,214 $ 2,337 $ 930 $ 481 $ 2,775 $ 2,240 $ 100 $ 17,326

Current — 22,154 20,896 20,486 21,739 200,915 10,070 14,407 310,667

30-59 days — 798 98 479 164 9,173 — 186 10,898

60-89 days — 302 143 158 22 2,196 — 78 2,899

90 days or greater — 483 222 275 403 10,697 28 1,052 13,160

Total PCD — 23,737 21,359 21,398 22,328 222,981 10,098 15,723 337,624

Total loans and leases $ 9,354,549 $ 7,357,392 $ 4,222,487 $ 2,345,334 $ 1,898,267 $ 3,387,885 $ 3,665,601 $ 140,007 $ 32,371,522

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables represent current credit quality indicators by origination year as of December 31, 2021.

Commercial Loans Amortized Cost Basis by Origination Year

Classification:

2020 2019 2018 2017 2016 Prior Revolving loans Revolving loans converted to term loans Total

(Dollars in thousands)

Construction and land development

Commercial Loans - Risk Classifications by Class

December 31, 2021

Risk Classification:

Term Loans by Origination Year Revolving Converted to Term Loans

dollars in millions 2021 2020 2019 2018 2017 2016 & Prior Revolving Total

Commercial construction

Pass $ 540 $ 400 $ 189 $ 29 $ 48 $ 11 $ 10 $ — $ 1,227

1 unchanged sentence

Substandard 2 — 1 2 4 1 — — 10

Total 342,658 341,862 198,300 56,118 23,977 11,387 11,122 — 985,424

Doubtful — — — — — — — — —

Ungraded — — — — — — — — —

Total commercial construction 542 400 190 31 52 13 10 — 1,238

Owner occupied commercial mortgage

2 unchanged sentences

Substandard 31 16 18 12 18 56 6 — 157

Total 3,200,021 2,240,919 1,671,722 1,334,727 1,081,293 1,521,016 115,109 205 11,165,012

Doubtful — — — — — — — — —

Ungraded — — — — — — — — —

Total owner occupied commercial mortgage 3,079 3,073 1,928 1,228 994 1,661 136 — 12,099

Non-owner occupied commercial mortgage

2 unchanged sentences

Substandard 9 11 24 12 7 22 1 — 86

Total 868,982 629,426 401,226 342,372 302,018 410,223 33,442 — 2,987,689

Commercial and industrial and leases

Doubtful — — — — 1 — — — 1

Ungraded — — — — — — — — —

Total non-owner occupied commercial mortgage 654 748 602 278 277 444 38 — 3,041

Commercial and industrial

Pass 2,107 1,018 599 257 149 281 1,342 5 5,758

1 unchanged sentence

Substandard 20 7 3 4 2 2 16 1 55

Doubtful — — — — — — — — —

Ungraded — — — — — — 72 — 72

Total 1,641,579 1,005,012 516,098 320,118 240,590 295,709 987,846 6,692 5,013,644

Total commercial and industrial 2,136 1,032 622 263 155 288 1,435 6 5,937

Pass 93 68 38 42 17 8 — — 266

Special Mention — 1 — — — — — — 1

Substandard 2 1 — 1 — — — — 4

Doubtful — — — — — — — — —

Ungraded — — — — — — — — —

Total leases 95 70 38 43 17 8 — — 271

Total commercial $ 6,506 $ 5,323 $ 3,380 $ 1,843 $ 1,495 $ 2,414 $ 1,619 $ 6 $ 22,586

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Consumer and PCD Loans Amortized Cost Basis by Origination Year

Consumer Loans - Delinquency Status by Class

December 31, 2021

Days Past Due:

2020 2019 2018 2017 2016 Prior Revolving loans Revolving loans converted to term loans Total

(Dollars in thousands)

Term Loans by Origination Year Revolving Converted to Term Loans

dollars in millions 2021 2020 2019 2018 2017 2016 & Prior Revolving Total

Residential mortgage

3 unchanged sentences

90 days or greater 1 1 1 2 1 17 — — 23

Total 1,885,273 987,802 671,657 605,545 476,855 909,361 25,193 — 5,561,686

Total residential mortgage 2,142 1,667 630 373 352 902 22 — 6,088

Revolving mortgage

3 unchanged sentences

90 days or greater — — — — — — 2 4 6

Total — — — — — — 1,891,037 161,817 2,052,854

Construction and land development

Current 215,112 85,707 24,860 10,269 6,093 2,218 2,525 — 346,784

30-59 days — 420 121 370 — 21 — — 932

60-89 days — — — 9 — 68 — — 77

90 days or greater — — — — — 330 — — 330

Total 215,112 86,127 24,981 10,648 6,093 2,637 2,525 — 348,123

Total revolving mortgage — — — — — — 1,684 134 1,818

Consumer auto

3 unchanged sentences

90 days or greater — — — — — 1 — — 1

Total 524,393 343,683 221,383 105,530 50,627 9,786 — — 1,255,402

Total consumer auto 598 345 199 120 48 22 — — 1,332

Consumer other

3 unchanged sentences

90 days or greater — — — — — — 1 — 1

Total 54,319 27,335 11,009 7,195 2,994 29,366 420,750 — 552,968

Total consumer other 132 24 11 4 2 29 346 — 548

Total consumer $ 2,872 $ 2,036 $ 840 $ 497 $ 402 $ 953 $ 2,052 $ 134 $ 9,786

Current 31,475 25,425 27,183 27,955 28,995 232,186 13,212 21,027 407,458

30-59 days 999 925 801 718 1,341 12,637 156 745 18,322

60-89 days 447 81 312 695 97 4,098 9 337 6,076

90 days or greater 721 2,325 4,755 1,208 897 19,963 111 1,046 31,026

Total PCD 33,642 28,756 33,051 30,576 31,330 268,884 13,488 23,155 462,882

Total loans and leases $ 11,172,270 $ 5,690,922 $ 3,749,427 $ 2,812,829 $ 2,215,777 $ 3,458,369 $ 3,500,512 $ 191,869 $ 32,791,975

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Purchased loans and leases

The following table summarizes PCD loans and leases that BancShares acquired in the CIT Merger.

PCD Loans and Leases - CIT Merger

dollars in millions Total PCD from CIT Merger

Initial PCD ACL ( 272 )

Fair value discount, net of the PCD Gross-Up ( 45 )

Purchase price $ 3,233

The recorded fair values of Non-PCD loans acquired in the CIT Merger as of the acquisition date was $ 29.5 billion, resulting in a PAA discount of $ 61 million.

BancShares’ accounting methods for acquired loans and leases are discussed in Note 1 — Significant Accounting Policies and Basis of Presentation.

See Note 2 — Business Combinations for further discussion of the CIT Merger.

Troubled Debt Restructuring

As part of BancShares’ ongoing risk-management practices, BancShares attempts to work with borrowers when necessary to extend or modify loan terms to better align with their current ability to repay.

Extensions and modifications are made in accordance with internal policies and guidelines to conform to regulatory guidance.

BancShares accounts for certain loan modifications or restructurings as TDRs.

In general, a modification or restructuring of a loan is considered a TDR if, for economic or legal reasons related to a borrower’s financial difficulties, a concession is granted to the borrower that creditors would not otherwise consider.

BancShares may determine that a borrower is experiencing financial difficulty if the borrower is currently in default on any of its debt, or if is probable that a borrower may default in the foreseeable future.

Many aspects of a borrower’s financial situation are assessed when determining whether they are experiencing financial difficulty.

Concessions may relate to the contractual interest rate, maturity date, payment structure or other actions.

The assessments of whether a borrower is experiencing (or is likely to experience) financial difficulty, and whether a concession has been granted, are subjective in nature and management’s judgment is required when determining whether a modification is classified as a TDR.

In accordance with regulatory guidance discussed below, certain loan modifications that might ordinarily have qualified as TDRs were not accounted for as TDRs.

The Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (the “Interagency Statement”) was published by banking regulators in April 2020 to clarify expectations around loan modifications and the determination of TDRs for borrowers experiencing COVID-19-related financial difficulty.

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and Interagency Statement offer some practical expedients for evaluating whether loan modifications that occur in response to the COVID-19 pandemic were TDRs.

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

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

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

The following table presents amortized cost of TDRs.

dollars in millions December 31, 2022

Accruing Non-Accruing Total

Commercial construction $ 2 $ 1 $ 3

Owner occupied commercial mortgage 46 9 55

Non-owner occupied commercial mortgage 24 30 54

Commercial and industrial 26 8 34

Total commercial 98 49 147

Residential mortgage 33 17 50

Revolving mortgage 17 5 22

Consumer auto 2 — 2

Consumer other — — —

Total consumer 52 22 74

Total TDRs $ 150 $ 71 $ 221

December 31, 2021

Accruing Non-Accruing Total

Commercial construction $ 2 $ — $ 2

Owner occupied commercial mortgage 57 8 65

Non-owner occupied commercial mortgage 26 3 29

Commercial and industrial 12 9 21

Total commercial 97 21 118

Residential mortgage 29 18 47

Revolving mortgage 17 7 24

Consumer auto 2 — 2

Consumer other 1 — 1

Total consumer 49 25 74

Total TDRs $ 146 $ 46 $ 192

The following table summarizes the loan restructurings during the years ended December 31, 2022, 2021, and 2020 that were designated as TDRs.

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

Restructurings

dollars in millions (except for number of loans) Year ended December 31

2022 2021 2020

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

Loans and leases

Interest only 17 $ 39 20 $ 18 37 $ 32

Loan term extension 128 26 129 16 92 11

Below market rates 86 9 177 20 254 40

Discharge from bankruptcy 106 5 128 10 216 9

Total 337 $ 79 454 $ 64 599 $ 92

There were $ 1.5 million, $ 0.4 million, and $ 0.2 million of commitments to lend additional funds to borrowers whose loan terms have been modified in TDRs as of December 31, 2022, 2021, and 2020 respectively.

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

TDRs that subsequently defaulted during the year ended December 31, 2022, 2021, and 2020 and were classified as TDRs during the applicable 12-month period preceding December 31, 2022, 2021, and 2020 were as follows:

dollars in millions December 31, 2022 December 31, 2021 December 31, 2020

TDR Defaults $ 6 $ 8 $ 9

Loans Pledged

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

(Dollars in thousands) December 31, 2021 December 31, 2020

Loans Pledged

dollars in millions December 31, 2022 December 31, 2021

FHLB of Atlanta

1 unchanged sentence

Advances 4,250 645

Letters of Credit 1,450 —

Available borrowing capacity $ 9,218 $ 8,919

Pledged non-PCD loans $ 14,507,109 $ 12,157,153

Pledged Non-PCD loans (contractual balance) $ 23,491 $ 14,507

Lendable collateral value of pledged non-PCD loans $ 4,203 $ 3,951

Available borrowing capacity $ 4,203 $ 3,951

Pledged non-PCD loans $ 4,806,443 $ 4,104,866

ALLOWANCE FOR CREDIT LOSSES

As noted in Note A, Accounting Polices and Basis of Presentation, BancShares determined SBA-PPP loans have zero expected credit losses and as such these are excluded from the following ACL disclosures.

Upon adoption of ASC 326 on January 1, 2020, BancShares recorded a net decrease of $ 37.9 million in the ACL, which included a decrease of $ 56.9 million in the ACL on non-PCD loans, offset by an increase of $ 19.0 million in the ACL on PCD loans.

The largest changes as a result of adoption were decreases in the ACL on commercial loan segments as these portfolios have exhibited strong historical credit performance and have relatively short average lives.

The reduction in ACL on these segments was partially offset by increases in ACL on our consumer loan segments primarily due to their longer average lives.

The increase in the ACL on PCD loans was primarily the result of reallocating credit discount from loan balances into ACL.

The remaining non-credit related discount continues to amortize into interest.

The ACL is calculated using a variety of factors, including, but not limited to, charge-off and recovery activity, loan growth, changes in macroeconomic factors, collateral type, estimated loan life and changes in credit quality.

The decrease in the ACL as of December 31, 2021 compared to December 31, 2020 was primarily driven by continued strong credit performance, low net charge-offs, and improvement in macroeconomic factors.

Forecasted economic conditions are developed using third party macroeconomic scenarios adjusted based on management’s expectations over a forecast period of two years .

For most pools, BancShares uses a 12-month straight-line reversion period to historical averages for model inputs;

however for the consumer other, consumer card and commercial card pools, immediate reversion to historical net loss rates is utilized.

Significant macroeconomic factors used in estimating the expected losses include unemployment, gross domestic product, home price index and commercial real estate index.

BancShares’ ACL forecasts consider a range of economic scenarios from an upside scenario to a severely adverse scenario, but the December 31, 2021 ACL forecast was calculated using the consensus baseline scenario.

This scenario showed improvements in the most significant economic factors compared to what was used to generate the December 31, 2020 ACL.

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

Refer to Note A, Accounting Policies and Basis of Presentation, for discussion of the accounting treatment of the allowance for loan losses prior to adoption of ASC 326.

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables summarize activity in the allowance for credit losses for the years ended December 31, 2021 and 2020 and the allowance for loan losses for the year ended December 31, 2019.

Year ended December 31, 2021

(Dollars in thousands) Commercial Consumer PCD Total

Balance at January 1 $ 80,842 $ 119,485 $ 23,987 $ 224,314

Benefit ( 1,228 ) ( 21,278 ) ( 14,329 ) ( 36,835 )

Pledged Non-PCD loans (contractual balance) $ 5,697 $ 4,806

NOTE 5 — ALLOWANCE FOR CREDIT LOSSES

The ACL for loans and leases is reported in the allowance for credit losses on the Consolidated Balance Sheets, while the ACL for unfunded commitments is reported in other liabilities.

The provision or benefit for credit losses related to both (i) loans and leases and (ii) unfunded commitments is reported in the Consolidated Statements of Income as provision or benefit for credit losses.

The ACL methodology is discussed in Note 1 — Significant Accounting Policies and Basis of Presentation.

The initial ACL for PCD loans and leases acquired in the CIT Merger (the “Initial PCD ACL”) of $ 272 million was established through the PCD Gross-Up and there was no corresponding increase to the provision for credit losses.

The PCD Gross-Up is discussed further in Note 1 — Significant Accounting Policies and Basis of Presentation.

The initial ACL for Non-PCD loans and leases acquired in the CIT Merger was established through a corresponding increase of $ 454 million to the provision for credit losses (the “Day 2 provision for loans and leases”).

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

The increase in the ACL is primarily related to the CIT Merger, loan growth, and deterioration in the economic outlook.

ACL for Loans and Leases

dollars in millions Year Ended December 31, 2022

Commercial Consumer Total

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

Initial PCD ACL (1)

Day 2 provision for loans and leases 432 22 454

Provision (benefit) for credit losses - loans and leases

Total provision for credit losses- loans and leases 533 18 551

Charge-offs (1)

( 126 ) ( 20 ) ( 146 )

Recoveries 44 23 67

1 unchanged sentence

Year Ended December 31, 2021

(Dollars in thousands) Commercial Consumer PCD Total

Balance at January 1 $ 142,369 $ 75,236 $ 7,536 $ 225,141

Adoption of ASC 326 ( 87,554 ) 30,629 19,001 ( 37,924 )

Balance at January 1 54,815 105,865 26,537 187,217

Provision (benefit) 37,763 27,791 ( 7,202 ) 58,352

Initial allowance on PCD loans — — 1,193 1,193

Commercial Consumer Total

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

(Benefit) for credit losses - loans and leases ( 7 ) ( 30 ) ( 37 )

Charge-offs ( 18 ) ( 18 ) ( 36 )

2 unchanged sentences

Year Ended December 31, 2020

(Dollars in thousands) Commercial Consumer PCI Total

Balance at January 1 $ 139,043 $ 75,525 $ 9,144 $ 223,712

Provision (benefit) 13,386 19,663 ( 1,608 ) 31,441

Commercial Consumer Total

Balance at December 31, 2019 $ 150 $ 75 $ 225

Adoption of ASC 326 ( 84 ) 46 ( 38 )

Balance after adoption of ASC 326 66 121 187

Provision for credit losses - loans and leases 34 24 58

Initial balance on PCD loans 1 1 2

Charge-offs ( 20 ) ( 25 ) ( 45 )

1 unchanged sentence

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

BancShares records an allowance for credit losses on unfunded commitments within other liabilities.

Activity in the allowance for credit losses for unfunded commitments is summarized as follows:

(Dollars in thousands) December 31, 2021 December 31, 2020

Allowance for credit losses:

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

ACL for Unfunded Commitments

dollars in millions Year Ended December 31,

2022 2021 2020

Beginning balance $ 12 $ 13 $ 1

Adoption of ASC 326 — — 9

Adjusted beginning balance $ 12,814 $ 9,940

(Benefit) provision ( 999 ) 2,874

Balance after adoption of ASC 326 12 13 10

Provision (benefit) for credit losses - unfunded commitments (1)

Ending balance $ 106 $ 12 $ 13

BancShares individually reviews loans greater than $ 500 thousand that are determined to be collateral-dependent.

These collateral-dependent loans are evaluated based on the fair value of the underlying collateral as repayment of the loan is expected to be made through the operation or sale of the collateral.

Commercial and industrial loans and leases are collateralized by business assets, while the remaining loan classes are collateralized by real property.

The following table presents information on collateral-dependent loans by class and includes the amortized cost of collateral-dependent loans and leases, the net realizable value of the collateral, the extent to which collateral secures collateral-dependent loans and the associated ACL as of December 31, 2021 and 2020.

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2021

(Dollars in thousands) Collateral-Dependent Loans Net Realizable Value of Collateral Collateral Coverage Allowance for Credit Losses

Commercial loans:

Construction and land development $ 1,424 $ 1,964 137.9 % $ —

Owner occupied commercial mortgage 3,461 4,370 126.3 —

Non-owner occupied commercial mortgage 2,056 2,118 103.0 —

Commercial and industrial and leases 2,665 5,208 195.4 941

Total commercial loans 9,606 13,660 142.2 941

Residential mortgage 5,323 7,353 138.1 —

Total non-PCD loans 14,929 21,013 140.8 941

PCD 4,864 21,099 433.8 —

Total collateral-dependent loans $ 19,793 $ 42,112 212.8 % $ 941

December 31, 2020

(Dollars in thousands) Collateral-Dependent Loans Net Realizable Value of Collateral Collateral Coverage Allowance for Credit Losses

Commercial loans:

Construction and land development $ 1,424 $ 1,795 126.1 % $ —

Owner occupied commercial mortgage 9,792 14,253 145.6 —

Non-owner occupied commercial mortgage 5,556 7,577 136.4 —

Total commercial loans 16,772 23,625 140.9 —

Residential mortgage 23,011 29,775 129.4 131

Total non-PCD loans 39,783 53,400 134.2 131

PCD 19,042 27,872 146.4 —

Total collateral-dependent loans $ 58,825 $ 81,272 138.2 % $ 131

Collateral-dependent nonaccrual loans with no recorded allowance totaled $ 14.8 million and $ 57.5 million as of December 31, 2021 and 2020, respectively.

All other nonaccrual loans have a recorded allowance.

Non-PCI impaired loans less than $ 500,000 that were collectively evaluated was $ 41.0 million at December 31, 2019.

The following table shows the average non-PCI impaired loan balance and the interest income recognized by loan class for the years ended December 31, 2019.

(Dollars in thousands) Average

Balance Interest Income Recognized

Non-PCI impaired loans and leases:

Construction and land development $ 3,915 $ 53

Commercial mortgage 64,363 2,188

Other commercial real estate 919 27

Commercial and industrial and leases 11,884 482

Total commercial 81,477 2,761

Noncommercial:

Residential mortgage 52,045 1,386

Revolving mortgage 29,516 1,009

Construction and land development 3,589 116

Consumer 3,311 138

Total noncommercial 88,461 2,649

Total non-PCI impaired loans and leases $ 169,938 $ 5,410

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Troubled Debt Restructurings

BancShares accounts for certain loan modifications or restructurings as TDRs.

In general, the modification or restructuring of a loan is considered a TDR if, for economic or legal reasons related to a borrower’s financial difficulties, a concession is granted to the borrower that creditors would not otherwise consider.

Concessions may relate to the contractual interest rate, maturity date, payment structure or other actions.

Within BancShares’ ACL loss models, TDRs are not individually evaluated unless determined to be collateral-dependent.

Consumer TDRs are included in the definition of default which provides for a 100% probability of default applied within the models.

As a result, subsequent changes in credit quality metrics do not impact the calculation of the ACL on consumer TDRs.

For commercial TDRs, the TDR distinction does impact the calculation of ACL, as the standard definition of default is utilized.

The Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus was published by banking regulators in April 2020 to clarify expectations around loan modifications and the determination of TDRs for borrowers experiencing COVID-19.

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

The following tables provides a summary of total TDRs by accrual status.

December 31, 2021 December 31, 2020

(Dollars in thousands) Accruing Nonaccruing Total Accruing Nonaccruing Total

Commercial loans:

Construction and land development $ 328 $ 29 $ 357 $ 578 $ 54 $ 632

Owner occupied commercial mortgage 43,593 6,231 49,824 37,574 10,889 48,463

Non-owner occupied commercial mortgage 21,278 2,741 24,019 18,336 1,649 19,985

Commercial and industrial and leases 11,723 9,384 21,107 29,131 3,528 32,659

Total commercial loans 76,922 18,385 95,307 85,619 16,120 101,739

Residential mortgage 20,635 12,262 32,897 29,458 19,380 48,838

Revolving mortgage 16,322 6,395 22,717 20,124 7,128 27,252

Construction and land development 961 259 1,220 1,573 9 1,582

Consumer auto 1,827 455 2,282 2,018 696 2,714

Consumer other 713 76 789 955 137 1,092

Total consumer loans 40,458 19,447 59,905 54,128 27,350 81,478

PCD loans 29,401 9,935 39,336 17,617 7,346 24,963

Total loans $ 146,781 $ 47,767 $ 194,548 $ 157,364 $ 50,816 $ 208,180

December 31, 2019

(Dollars in thousands) Accruing Nonaccruing Total

Commercial loans:

Construction and land development $ 487 $ 2,279 $ 2,766

Commercial mortgage 50,819 11,116 61,935

Other commercial real estate 571 — 571

Commercial and industrial and leases 9,430 2,409 11,839

Other 320 105 425

Total commercial loans 61,627 15,909 77,536

Noncommercial:

Residential mortgage 41,813 16,048 57,861

Revolving mortgage 21,032 7,367 28,399

Construction and land development 1,452 2,430 3,882

Consumer 2,826 688 3,514

Total noncommercial loans 67,123 26,533 93,656

Total loans $ 128,750 $ 42,442 $ 171,192

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes the loan restructurings as of December 31, 2021, 2020 and 2019 that were designated as TDRs.

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

(1) Includes the Day 2 provision for unfunded commitments of $ 59 million related to the CIT Merger.

NOTE 6 — LEASES

BancShares leases primarily include administrative offices and bank locations.

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

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

Our lease terms may include options to extend or terminate the lease.

The options are included in the lease term when it is determined that it is reasonably certain the option will be exercised.

The following table presents supplemental balance sheet information and remaining weighted average lease terms and discount rates.

Supplemental Lease Information

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

Operating leases Other assets $ 345 $ 64

Finance leases Premises and equipment 7 4

Total ROU assets $ 352 $ 68

Lease liabilities:

Operating leases Other liabilities $ 352 $ 64

Finance leases Other borrowings 7 4

Total lease liabilities $ 359 $ 68

Weighted-average remaining lease terms:

Operating leases 9.6 years 8.9 years

Finance leases 4.1 years 3.5 years

Weighted-average discount rate:

Operating leases 2.19 % 3.00 %

Finance leases 2.34 % 3.12 %

The following table presents components of lease cost:

Components of Net Lease Cost

dollars in millions Year ended December 31

Classification 2022 2021 2020

Operating lease cost (1)(2)

Occupancy expense $ 58 $ 14 $ 15

Finance lease cost

Amortization of leased assets Equipment expense 2 2 2

Interest on lease liabilities Interest expense - other borrowings — — —

Variable lease cost Occupancy expense 12 3 3

Sublease income Occupancy expense ( 2 ) — —

Net lease cost $ 70 $ 19 $ 20

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

(2) In addition, approximately $ 6 million of costs related to leased branches to be closed or subleased was included in merger-related expenses in the consolidated statements of income for the year ended December 31, 2022.

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

Certain of our lease agreements also include rental payments adjusted periodically for inflation.

While lease liabilities are not remeasured because of these changes, these adjustments are treated as variable lease costs and recognized in the period in which the expense is incurred.

Sublease income results from leasing excess building space that BancShares is no longer utilizing under operating leases, which have remaining lease terms of up to 14 years.

The following table presents supplemental cash flow information related to leases:

Supplemental Cash Flow Information

dollars in millions Year ended December 31

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases $ 54 $ 13

Operating cash flows from finance leases — —

Financing cash flows from finance leases 2 2

ROU assets obtained in exchange for new operating lease liabilities 19 7

ROU assets obtained in exchange for new finance lease liabilities 5 —

The following table presents lease liability maturities at December 31, 2022:

Maturity of Lease Liabilities

dollars in millions Operating Leases Finance Leases Total

2023 $ 48 $ 2 $ 50

Restructurings Restructurings Restructurings

(Dollars in thousands) Number of loans Amortized cost at period end Number of loans Amortized cost at period end Number of loans Amortized cost at period end

Loans and leases

Interest only period provided

Commercial loans 19 $ 17,847 31 $ 28,145 11 $ 1,595

Consumer loans 1 297 6 4,169 7 4,018

Total interest only 20 18,144 37 32,314 18 5,613

Loan term extension

Commercial loans 23 6,717 26 5,444 16 3,904

Consumer loans 106 8,803 66 5,689 2 342

Total loan term extension 129 15,520 92 11,133 18 4,246

Below market interest rate

Commercial loans 97 17,082 98 33,870 90 13,932

Consumer loans 80 3,188 156 6,074 176 12,458

Total below market interest rate 177 20,270 254 39,944 266 26,390

Discharged from bankruptcy

Commercial loans 32 5,955 30 1,168 25 5,571

Consumer loans 96 3,675 186 8,129 178 10,349

Total discharged from bankruptcy 128 9,630 216 9,297 203 15,920

Total restructurings 454 $ 63,564 599 $ 92,688 505 $ 52,169

As of December 31, 2021, 2020 and 2019, the pre-modification and post-modification outstanding amortized cost of loans modified as TDRs were not materially different.

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

PREMISES AND EQUIPMENT

Thereafter 168 — 168

Total undiscounted lease payments $ 391 $ 7 $ 398

Difference between undiscounted cash flows and discounted cash flows 39 — 39

Lease liabilities, at present value $ 352 $ 7 $ 359

BancShares leases equipment to commercial end-users under operating lease and finance lease arrangements.

The majority of operating lease equipment is long-lived rail equipment, which is typically leased several times over its life.

We also lease technology and office equipment, and large and small industrial, medical, and transportation equipment under both operating leases and finance leases.

Our Rail operating leases typically do not include purchase options.

Many of our finance leases, and other equipment operating leases, offer the lessee the option to purchase the equipment at fair market value or for a nominal fixed purchase option and many of the leases that do not have a nominal purchase option include renewal provisions resulting in some leases continuing beyond the initial contractual term.

Our leases typically do not include early termination options;

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

The following table provides the net book value of operating lease equipment (net of accumulated depreciation of $ 296 million at December 31, 2022) by equipment type.

Operating Lease Equipment

dollars in millions December 31, 2022

Railcars and locomotives (1)

Other equipment 723

(1) Includes off-lease rail equipment of $ 457 million at December 31, 2022.

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

Components of Net Investment in Finance Leases

dollars in millions December 31, 2022 December 31, 2021

Lease receivables $ 1,786 $ 246

Unguaranteed residual assets 317 25

Total net investment in finance leases 2,103 271

Leveraged lease net investment (1)

Total $ 2,171 $ 271

(1) Leveraged leases are reported net of non-recourse debt of $ 11 million at December 31, 2022.

Our leveraged lease arrangements commenced before the ASC 842 effective date and continue to be reported under the leveraged lease accounting model.

ASC 842 eliminated leveraged lease accounting for new leases and for existing leases modified on or after the standard’s effective date.

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

dollars in millions Year ended December 31

2022 2021 2020

Lease income – Operating leases $ 796 $ — $ —

Variable lease income – Operating leases (1)

Rental income on operating leases 864 — —

Interest income - Sales type and direct financing leases 169 18 23

Variable lease income included in Other noninterest income (2)

Interest income - Leveraged leases 20 — —

Total lease income $ 1,104 $ 18 $ 23

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

(2) Includes leased equipment property tax reimbursements due from customers of $ 17 million for the year ended December 31, 2022 and revenue related to insurance coverage on leased equipment of $ 33 million for the year ended December 31, 2022.

There was no revenue related to property tax reimbursements due from customers or insurance coverage on leased equipment during 2021 or 2020.

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

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

Maturity Analysis of Operating Lease Payments

dollars in millions

Thereafter 322

Total $ 2,171

Maturity Analysis of Lease Receivable Payments - Sales Type and Direct Financing Leases

dollars in millions

Thereafter 24

Total undiscounted lease receivables $ 1,989

Difference between undiscounted cash flows and discounted cash flows 203

Lease receivables, at present value $ 1,786

NOTE 7 — PREMISES AND EQUIPMENT

Major classifications of premises and equipment at December 31, 2022 and 2021 are summarized as follows:

(Dollars in thousands) Useful Life ( years )

dollars in millions Useful Life (years) 2022 2021

Land indefinite $ 352 $ 334

5 unchanged sentences

Depreciation and amortization expense was $ 142 million, $ 107 million and $ 109 million for the years ended December 31, 2022, 2021 and 2020, respectively

OTHER REAL ESTATE OWNED

The following table explains changes in other real estate owned (“OREO”) for the years ended December 31, 2021 and 2020.

(Dollars in thousands) 2021 2020

Balance at January 1 $ 50,890 $ 46,591

Additions 27,755 26,822

Acquired in business combinations — 9,813

Sales ( 35,703 ) ( 26,726 )

Write-downs/losses ( 3,614 ) ( 5,610 )

Balance at December 31 $ 39,328 $ 50,890

At December 31, 2021 and 2020, BancShares had $ 2.3 million and $ 5.8 million, respectively, of foreclosed residential real estate property in OREO.

The recorded investment in consumer mortgage loans collateralized by residential real estate property in the process of foreclosure was $ 15.0 million and $ 29.4 million at December 31, 2021, and 2020, respectively.

Gains recorded on the sale of OREO were $ 4.7 million, $ 1.6 million, and $ 1.5 million for the years ended December 31, 2021, 2020 and 2019, respectively.

GOODWILL AND OTHER INTANGIBLE ASSETS

NOTE 8 — GOODWILL AND OTHER INTANGIBLES

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

The fair value of the net assets acquired exceeded the purchase price.

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

BancShares’ annual impairment test, conducted as of July 31 each year, or more frequently if events occur or circumstances change that may trigger a decline in the value of the reporting unit or otherwise indicate that a potential impairment exists, resulted in no indication of goodwill impairment.

Subsequent to the annual impairment test, there were no events or changes in circumstances that would indicate goodwill should be tested for impairment during the interim period between annual tests.

No goodwill impairment was recorded during 2021 or 2020.

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

The entire amount of goodwill relates to business combinations that BancShares completed prior to the CIT Merger and is reported in the General Banking segment.

There was no goodwill impairment during 2022, 2021 or 2020.

The following table presents the changes in the carrying amount of goodwill for the years ending December 31, 2022 and 2021:

Year ended December 31

(Dollars in thousands) 2021 2020

dollars in millions 2022 2021

Balance at January 1 $ 346 $ 350

Recognized in the Community Financial acquisition — 686

Measurement period adjustments (1)

Other adjustment — ( 4 )

Balance at December 31 $ 346 $ 346

(1) Adjustments related to Entegra PCD loans and divested deposits as well as the deferred tax assets related to these items.

(2) Immaterial adjustment related to deferred taxes associated with pensions.

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Other Intangible Assets

Other intangible assets include mortgage servicing rights (“MSRs”) on loans sold to third parties with servicing retained, core deposit intangibles, which represent the estimated fair value of acquired core deposits and other customer relationships, and other intangible assets acquired, such as other servicing rights and noncompete agreements.

Mortgage Servicing Rights

Our portfolio of residential mortgage loans serviced for third parties was $ 3.39 billion, $ 3.31 billion and $ 3.38 billion as of December 31, 2021, 2020 and 2019, respectively.

The majority of these loans were originated by BancShares and sold to third parties on a non-recourse basis with servicing rights retained.

At December 31, 2020, a portion of the MSRs were related to originations by Entegra Financial Corp.

and its subsidiaries (collectively, “Entegra”) prior to acquisition.

These retained servicing rights are recorded as a servicing asset and reported in other intangible assets.

The mortgage servicing rights are initially recorded at fair value and then carried at the lower of amortized cost or fair market value.

The amortization expense related to mortgage servicing rights is included as a reduction of mortgage income.

The weighted average expected life of the mortgage servicing rights established during 2021 is 5.6 years.

The activity of the mortgage servicing asset for the years ended December 31, 2021, 2020 and 2019 is presented in the following table:

(Dollars in thousands) 2021 2020 2019

Core Deposit Intangibles

Core deposit intangibles represent the estimated fair value of core deposits and other customer relationships acquired.

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

The following tables summarize the activity for core deposit intangibles for the year ended December 31, 2022.

Core Deposit Intangibles

Year ended December 31

dollars in millions 2022 2021

Balance, net of accumulated amortization at January 1 $ 19 $ 30

Core deposit intangibles related to the CIT Merger 143 —

Amortization for the period ( 22 ) ( 11 )

Balance at December 31, net of accumulated amortization $ 140 $ 19

Core Deposit Intangible Accumulated Amortization

dollars in millions December 31, 2022 December 31, 2021

Gross balance $ 271 $ 128

Accumulated amortization ( 131 ) ( 109 )

Balance, net of accumulated amortization $ 140 $ 19

The following table summarizes the expected amortization expense as of December 31, 2022 in subsequent periods for core deposit intangibles.

Core Deposit Intangible Expected Amortization

dollars in millions

Thereafter 58

Intangible Liability

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

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

The following tables summarize the activity for the intangible liability for the year ended December 31, 2022.

Intangible Liability

dollars in millions 2022

Balance at January 1 $ —

Acquired in CIT Merger 52

Amortization for the period ( 16 )

Balance at December 31, net of accumulated amortization $ 36

The following table summarizes the expected amortization as of December 31, 2022 in subsequent periods for the intangible liability.

Intangible Liability

dollars in millions

NOTE 9 — MORTGAGE SERVICING RIGHTS

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

BancShares’ portfolio of residential mortgage loans serviced for third parties was approximately $ 3.7 billion and $ 3.4 billion for the year ended December 31, 2022 and 2021, respectively.

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

The retained servicing rights are recorded as a servicing asset and are reported in other assets.

The associated amortization expense and any changes in the valuation allowance recognized were included as a reduction of mortgage income.

MSRs are initially recorded at fair value and then carried at the lower of amortized cost or fair value.

Contractually specified mortgage servicing fees, late fees and ancillary fees earned are reported in mortgage income and were $ 10 million, $ 9 million, and $ 9 million for the year ended December 31, 2022, 2021, and 2020 respectively.

The following table presents changes in the servicing asset during the year ended December 31, 2022 and 2021:

Servicing Asset

dollars in millions Year Ended December 31,

2022 2021 2020

Beginning balance $ 23 $ 18 $ 23

Servicing rights originated 4 11 8

Servicing rights acquired in Entegra transaction — — 1,873

Servicing rights obtained in CIT Merger 3 — —

Amortization ( 6 ) ( 9 ) ( 9 )

Valuation allowance decrease (increase) 3,102 ( 4,143 ) ( 222 )

Balance at December 31 $ 23,357 $ 18,426 $ 22,963

The following table presents the activity in the servicing asset valuation allowance for the years ended December 31, 2021, 2020 and 2019:

(Dollars in thousands) 2021 2020 2019

Valuation allowance benefit (provision) 1 3 ( 4 )

Ending balance $ 25 $ 23 $ 18

The following table presents the activity in the servicing asset valuation allowance:

Servicing Asset Valuation Allowance

dollars in millions Year Ended December 31,

2022 2021 2020

Beginning balance $ 1 $ 4 $ —

Valuation allowance (decrease) increase ( 3,102 ) 4,143 222

Valuation allowance (benefit) provision ( 1 ) ( 3 ) 4

Ending balance $ — $ 1 $ 4

Valuation of mortgage servicing rights is performed using a pooling methodology.

Similar loans are pooled together and evaluated on a discounted earnings basis to determine the present value of future earnings.

Contractually specified mortgage servicing fees, late fees and ancillary fees earned for the years ended December 31, 2021, 2020 and 2019, were $ 8.6 million, $ 8.5 million and $ 7.9 million, respectively, and reported in mortgage income.

Key economic assumptions used to value mortgage servicing rights as of December 31, 2021 and 2020, were as follows:

Discount rate - conventional fixed loans 8.51 % 7.92 %

Discount rate - all loans excluding conventional fixed loans 9.51 % 8.92 %

MSRs valuations are performed using a pooling methodology where loans with similar risk characteristics are grouped together and evaluated using discounted cash flows to estimate the present value of future earnings.

Key economic assumptions used to value MSRs were as follows:

MSRs Valuation Assumptions

December 31, 2022 December 31, 2021

Discount rate 9.62 % 8.55 %

Weighted average constant prepayment rate 6.76 % 15.69 %

Weighted average cost to service a loan $ 81 $ 88

The discount rate is based on the 10-year U.S.

Treasury rate plus 700 basis points for conventional fixed loans and 800 basis points for all other loans.

The 700 and 800 basis points are used as a risk premium when calculating the discount rate.

The prepayment rate is derived from the Public Securities Association Standard Prepayment model, which is compared to actual prepayment rates annually for reasonableness.

The fair value of MSRs are sensitive to changes in assumptions and is determined by estimating the present value of the asset’s future cash flows by utilizing discount rates, prepayment rates, and other inputs.

The discount rates applied to the cash flows in the valuation of MSRs are market-based and provided on a pretax basis.

The prepayment rate is derived from dynamic modeling, which is compared to actual prepayment rates annually for reasonableness.

The average cost to service a loan is based on the number of loans serviced and the total costs to service the loans.

Core Deposit Intangibles

Core deposit intangibles represent the estimated fair value of core deposits and other customer relationships acquired.

They are being amortized on an accelerated basis over their estimated useful lives.

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following information relates to core deposit intangible assets, which are being amortized over their estimated useful lives:

(Dollars in thousands) 2021 2020

Balance at January 1 $ 29,667 $ 43,386

Acquired in Community Financial transaction — 536

Amortization ( 10,948 ) ( 14,255 )

Balance at December 31 $ 18,719 $ 29,667

The gross amount of core deposit intangible assets and accumulated amortization as of December 31, 2021 and 2020, are:

(Dollars in thousands) 2021 2020

Gross balance $ 127,842 $ 127,842

Accumulated amortization ( 109,123 ) ( 98,175 )

Carrying value $ 18,719 $ 29,667

Based on current estimated useful lives and carrying values, BancShares anticipates amortization expense for core deposit intangibles in subsequent periods will be:

(Dollars in thousands)

2026 and subsequent 1,814

Deposits at December 31, 2021 and 2020 were as follows:

(Dollars in thousands) 2021 2020

Demand $ 21,404,808 $ 18,014,029

NOTE 10 — OTHER ASSETS

The following table includes the components of other assets.

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

dollars in millions December 31, 2022 December 31, 2021

Affordable housing tax credit and other unconsolidated investments (1)

Income tax receivable 275 799

Bank-owned life insurance (2)

Right of use assets for operating leases, net 345 64

Pension assets 343 289

Accrued interest receivable 329 134

Counterparty receivables 98 —

Federal Home Loan Bank stock 197 40

Fair value of derivative financial instruments 159 3

Nonmarketable equity securities 58 1

Other real estate owned 47 40

Mortgage servicing assets 25 23

Total other assets $ 4,369 $ 1,855

(1) Refer to Note 12 – Variable Interest Entities for additional information.

(2) In December of 2022, BancShares made the strategic decision to surrender $ 1.25 billion of BOLI policies.

The balance sheet treatment at December 31, 2022 for the surrendered BOLI policies is as follows:

$ 483 million is in BOLI as these policies had not terminated or cash-settled;

$ 607 million is in “Other” as these policies had terminated, but not cash-settled;

and $ 157 million of these policies had terminated and cash-settled.

NOTE 11 — DEPOSITS

The following table provides detail on deposit types.

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

Deposit Types

dollars in millions December 31, 2022 December 31, 2021

Noninterest-bearing demand $ 24,922 $ 21,405

Checking with interest 16,202 12,694

Money market accounts 10,590,106 8,632,713

Money market 21,040 10,590

Savings 16,634 4,236

1 unchanged sentence

Total deposits $ 89,408 $ 51,406

Time deposits with a denomination of $ 250,000 or more were $ 593.0 million and $ 670.4 million at December 31, 2021 and 2020, respectively.

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

(Dollars in thousands) Year ended December 31

2022 $ 1,937,216

2026 and thereafter 179,853

Deposit Maturities

dollars in millions

Year Ended December 31,

Thereafter 126

Total time deposits $ 10,610

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

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Time deposits with a denomination of $250,000 or more were $ 2.22 billion and $ 593 million at December 31, 2022 and 2021, respectively.

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

Deposits (based on branch location) as of December 31, 2022, in North Carolina and South Carolina represented approximately 39.7 % and 13.3 %, respectively, of total deposits.

Additionally, the CIT Merger added deposits that were primarily related to the Digital Bank of $ 16.47 billion or 18.4 % of total FCB deposits as of December 31, 2022.

NOTE 12 — VARIABLE INTEREST ENTITIES

Variable Interest Entities

Described below are the results of BancShares’ assessment of its variable interests in order to determine its current status with regard to being the VIE primary beneficiary.

Refer to Note 1 — Significant Accounting Policies and Basis of Presentation for additional information on accounting for VIEs and investments in qualified affordable housing projects.

Consolidated VIEs

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

Unconsolidated VIEs

Unconsolidated VIEs include limited partnership interests and joint ventures where BancShares’ involvement is limited to an investor interest and BancShares does not have the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance or obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

The table below presents potential losses that would be incurred under hypothetical circumstances, such that the value of BancShares’ interests and any associated collateral declines to zero and assuming no recovery or offset from any economic hedges.

BancShares believes the possibility is remote under this hypothetical scenario;

accordingly, this disclosure is not an indication of expected loss.

Unconsolidated VIEs Carrying Value

dollars in millions December 31, 2022 December 31, 2021

Investment in qualified affordable housing projects (1)

Other tax credit equity investments 5 —

Total tax credit equity investments $ 603 $ 157

Other unconsolidated investments 159 12

Total assets (maximum loss exposure) (2)

Liabilities for commitments to tax credit investments (3)

(1) These investments provide tax benefits to investors in the form of tax deductions from operating losses and tax credits.

During 2022, 2021 and 2020, BancShares recorded $ 60 million, $ 22 million and $ 19 million, respectively, in tax provisions under the proportional amortization method.

During 2022, 2021 and 2020, BancShares recognized total tax benefits of $ 77 million, $ 26 million and $ 23 million, which included tax credits of $ 60 million, $ 22 million and $ 19 million, respectively, recorded in income taxes.

See Note 1 – Significant Accounting Policies and Basis of Presentation for additional information.

(2) Included in other assets in Note 10 – Other Assets.

(3) Represents commitments to invest in qualified affordable housing investments, and other investments qualifying for community reinvestment tax credits.

These commitments are payable on demand and are included in other liabilities in Note 15 – Other Liabilities.

NOTE 13 — BORROWINGS

Short-term Borrowings

Short-term borrowings at December 31, 2021 and 2020 are as follows:

(Dollars in thousands) 2021 2020

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

dollars in millions December 31, 2022 December 31, 2021

Securities sold under customer repurchase agreements $ 436 $ 589

At December 31, 2021, BancShares had unused credit lines allowing contingent access to overnight borrowings of up to $ 556.0 million on an unsecured basis.

Additionally, under borrowing arrangements with the FRB of Richmond and FHLB of Atlanta, BancShares has access to an additional $ 12.87 billion on a secured basis.

Repurchase Agreements

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

Notes payable to FHLB of Atlanta at overnight SOFR plus spreads ranging from 0.19 % to 0.20 %.

Total short-term borrowings $ 2,186 $ 589

Securities Sold under Agreements to Repurchase

At December 31, 2022, BancShares held $ 436 million of securities sold under agreements to repurchase, with overnight contractual maturities, that are collateralized by government agency securities.

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

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

Repurchase agreements are transactions whereby BancShares offers to sell to a counterparty an undivided interest in an eligible security at an agreed upon purchase price, and which obligates BancShares to repurchase the security at an agreed upon date, repurchase price and interest rate.

These agreements are recorded at the amount of cash received in connection with the transaction and are reflected as securities sold under customer repurchase agreements.

These agreements are recorded at the amount of cash received in connection with the transactions and are reflected as securities sold under customer repurchase agreements.

BancShares monitors collateral levels on a continuous basis and maintains records of each transaction specifically describing the applicable security and the counterparty’s fractional interest in that security, and segregates the security from general assets in accordance with regulations governing custodial holdings of securities.

1 unchanged sentence

Securities pledged as collateral under repurchase agreements are maintained with safekeeping agents.

The carrying value of investment securities pledged as collateral under repurchase agreements was $ 619.1 million and $ 689.3 million at December 31, 2021 and December 31, 2020, respectively.

At December 31, 2021, BancShares held $ 589.1 million of securities sold under agreements to repurchase, with overnight and continuous remaining contractual maturities, made up of $ 508.4 million collateralized by government agency securities and $ 80.7 million collateralized by commercial mortgage-backed securities.

At December 31, 2020, BancShares held $ 641.5 million of securities sold under agreements to repurchase, with overnight and continuous remaining contractual maturities, made up of $ 432.8 million collateralized by government agency securities and $ 208.7 million collateralized by commercial mortgage-backed securities.

The carrying value of investment securities pledged as collateral under repurchase agreements was $ 496 million and $ 619 million at December 31, 2022 and 2021, respectively.

Long-term Borrowings

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

(Dollars in thousands) 2021 2020

Fixed-to-Floating subordinated notes at 3.375 % maturing March 15, 2030

$ 350,000 $ 350,000

Junior subordinated debenture at 3-month LIBOR plus 1.75 % maturing June 30, 2036 (1)

88,145 88,145

Junior subordinated debenture at 3-month LIBOR plus 2.25 % maturing June 15, 2034 (1)

19,588 19,588

Junior subordinated debenture at 3-month LIBOR plus 2.85 % maturing April 7, 2034 (1)

10,310 10,310

Junior subordinated debentures at 3-month LIBOR plus 2.80 % maturing March 30, 2034 (1)

14,433 14,433

Junior subordinated debentures at 7.00 % maturing December 31, 2026 (2)

Junior subordinated debentures at 6.50 % maturing October 1, 2025 (3)

Notes payable to FHLBs of Atlanta and Chicago with rates ranging from 0.75 % to 2.99 % and maturing through March 2032

644,659 655,175

Unsecured term loan at 1-month LIBOR plus 1.10 % maturing September 5, 2022

67,825 82,125

Obligations under capitalized leases extending to December 2050 4,311 6,308

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

Parent Company:

Unsecured term loan at 1-month LIBOR plus 1.10 %

September 2022 $ — $ 68

Subordinated:

Fixed-to-Floating subordinated notes at 3.375 %

March 2030 350 350

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

June 2034 20 20

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

June 2036 88 88

Subsidiaries:

Senior unsecured fixed to floating rate notes at 3.929 % (1)

June 2024 500 —

Senior unsecured fixed to floating rate notes at 2.969 % (1)

September 2025 315 —

Fixed senior unsecured notes at 6.00 % (1)

April 2036 51 —

Subordinated:

Fixed subordinated notes at 6.125 % (1)

March 2028 400 —

Fixed-to-Fixed subordinated notes at 4.125 % (1)

November 2029 100 —

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

March 2034 14 14

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

April 2034 10 10

Notes payable to FHLB of Atlanta at overnight SOFR plus spreads ranging from 0.24 % to 0.34 %.

Maturities through September 2025 2,500 —

Fixed notes payable to FHLB of Atlanta Maturities through March 2032 — 645

Other secured financings (1)

Maturities through January 2024 18 —

Capital lease obligations Maturities through June 2027 7 4

Unamortized issuance costs ( 1 ) ( 2 )

Unamortized purchase accounting adjustments (2)

Other long-term debt 19 37

Total long-term obligations $ 1,194,378 $ 1,248,163

(1) Obligations to capital and grantor trusts for trust preferred securities

(2) Assumed in HomeBancorp acquisition.

(3) Assumed in Biscayne BancShares acquisition.

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

On March 4, 2020, BancShares completed its public offering of $ 350 million aggregate principal amount of its 3.375 % Fixed-to-Floating Rate Subordinated Notes due 2030 and redeemable at the option of BancShares starting with the interest payment due March 15, 2025, subject to obtaining the prior approval of the Federal Reserve to the extent such approval is then required under the rules of the Federal Reserve, or earlier upon the occurrence of certain events.

At December 31, 2021 and 2020, BancShares held $ 132.5 million in junior subordinated debentures representing obligations to FCB/NC Capital Trust III, FCB/SC Capital Trust II, SCB Capital Trust I and Macon Capital Trust I special purpose entities and grantor trusts (the “Trusts”) for trust preferred securities.

The Trusts had outstanding trust preferred securities of $ 128.1 million and $ 128.5 million at December 31, 2021 and 2020 respectively, which may be redeemed at par in whole or in part at any time, in accordance with the applicable transaction documents.

BancShares has guaranteed all obligations of its subsidiaries, FCB Capital Trust III and FCB/SC Capital Trust II.

FCB has guaranteed all obligations of its trust subsidiaries, SCB Capital Trust I and Macon Capital Trust I, which was acquired from Entegra during the fourth quarter of 2019 and has a related obligation of $ 14.4 million.

Total long-term borrowings $ 4,459 $ 1,195

(1) Reflects the remaining outstanding debt securities assumed by the BancShares in connection with the CIT Merger.

On February 24, 2022, BancShares redeemed all of the outstanding (i) 5.00 % senior unsecured notes due 2022, (ii) 5.00 %, senior unsecured notes due 2023;

(iii) 4.750 % senior unsecured notes due 2024;

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

(2) At December 31, 2022 a nd December 31, 2021, unamortized purchase accounting adjustments were $ 69 million and $ 2 million, respectively, for subordinated debentures.

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

(Dollars in thousands) Year ended December 31

2022 $ 82,735

Long-term Borrowings Maturities

dollars in millions

Year Ended December 31,

Thereafter 1,041

Total long-term borrowings $ 4,459

FDIC SHARED-LOSS PAYABLE

Prior to 2020, certain consumer loans were “covered loans” for which BancShares was eligible for reimbursement for a portion of certain future losses with indemnifications provided by the FDIC under loss share agreements (“LSAs”).

The LSAs for two FDIC-assisted transactions included provisions related to payments owed to the FDIC at the termination of the agreements if actual cumulative losses on covered assets are lower than originally estimated by the FDIC at the time of acquisition (“Clawback Liability”).

All of the LSAs relate to transactions that occurred prior to 2020 and have since expired.

There was no Clawback Liability remaining at December 31, 2021 as FCB remitted the final payment of $ 16.1 million to the FDIC during the first quarter of 2021.

At December 31, 2020, the estimated Clawback Liability was $ 15.6 million following a payment of $ 99.5 million to the FDIC during the first quarter of 2020.

The following table includes the changes in the FDIC shared-loss payable for the years ended December 31, 2021 and 2020.

(Dollars in thousands) 2021 2020

Beginning balance $ 15,601 $ 112,395

Accretion 502 2,674

Payment made to the FDIC to settle shared-loss agreement ( 16,103 ) ( 99,468 )

Ending balance $ — $ 15,601

REGULATORY REQUIREMENTS, DIVIDENDS FROM SUBSIDIARIES

BancShares and FCB are subject to various regulatory capital requirements administered by the federal banking agencies.

Failure to meet capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the BancShares’ Consolidated Financial Statements.

Certain activities, such as the ability to undertake new business initiatives, including acquisitions, the access to and cost of funding for new business initiatives, the ability to pay dividends, the ability to repurchase shares or other capital instruments, the level of deposit insurance costs, and the level and nature of regulatory oversight, largely depend on a financial institution’s capital strength.

Federal banking agencies approved regulatory capital guidelines (“Basel III”) aimed at strengthening previous capital requirements for banking organizations.

Basel III became effective for BancShares on January 1, 2015 and the associated

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

capital conservation buffers of 2.5% were fully phased in by January 1, 2019.

The following table includes the Basel III requirements for regulatory capital ratios.

Basel III Minimums Basel III Conservation Buffers Basel III Requirements

Regulatory capital ratios

Total risk-based capital 8.00 % 2.50 % 10.50 %

Tier 1 risk-based capital 6.00 2.50 8.50

Common equity Tier 1 4.50 2.50 7.00

Tier 1 leverage 4.00 — 4.00

The FDIC also has Prompt Corrective Action (“PCA”) thresholds for regulatory capital ratios.

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

The regulatory capital ratios for BancShares and FCB exceed the Basel III requirements and the PCA well-capitalized thresholds as of December 31, 2021 and 2020 as summarized in the following table.

December 31, 2021 December 31, 2020

(Dollars in thousands) Basel III Requirements PCA well-capitalized thresholds Amount Ratio Amount Ratio

Total risk-based capital 10.50 % 10.00 % $ 5,041,686 14.35 % $ 4,577,212 13.81 %

Tier 1 risk-based capital 8.50 8.00 4,380,452 12.47 3,856,086 11.63

Common equity Tier 1 7.00 6.50 4,040,515 11.50 3,516,149 10.61

Tier 1 leverage 4.00 5.00 4,380,452 7.59 3,856,086 7.86

Total risk-based capital 10.50 % 10.00 4,857,960 13.85 4,543,496 13.72

Tier 1 risk-based capital 8.50 8.00 4,651,226 13.26 4,276,870 12.92

Common equity Tier 1 7.00 6.50 4,651,226 13.26 4,276,870 12.92

Tier 1 leverage 4.00 5.00 4,651,226 8.07 4,276,870 8.72

At December 31, 2021, BancShares and FCB had total risk-based capital ratio conservation buffers of 6.35 % and 5.85 %, respectively, which are in excess of the fully phased in Basel III conservation buffer of 2.50%.

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

At December 31, 2021, Tier 2 capital of BancShares included $ 128.1 million of trust preferred capital securities and $ 350.0 million of qualifying subordinated debentures, compared to $ 128.5 million of trust preferred capital securities and $ 377.5 million of qualifying subordinated debentures included at December 31, 2020.

BancShares has Class A and Class B common stock.

Class A common shares have one vote per share, while Class B common shares have 16 votes per share.

Preferred Stock

On March 12, 2020, the Parent Company issued and sold an aggregate of 13,800,000 depositary shares (the “Depositary Shares”), each representing a 1/40th interest in a share of 5.375 % Non-Cumulative Perpetual Preferred Stock, Series A, par value $ 0.01 per share (the “Series A Preferred Stock”), with a liquidation preference of $ 25 per Depositary Share (equivalent to $1,000 per share of the Series A Preferred Stock) for a total of $ 345 million.

The Series A Preferred Stock qualifies as Tier 1 regulatory capital.

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

If declared, dividends will accrue and be payable from the date of issuance at a rate of 5.375 % per annum, payable quarterly in arrears on March 15, June 15, September 15, and December 15 of each year, beginning on June 15, 2020.

Dividends on the Series A Preferred Stock will not be cumulative.

BancShares may redeem the Series A Preferred Stock at its option, and subject to any required regulatory approval, at a redemption price equal to $1,000 per share (equivalent to $ 25 per depositary share), plus any declared and unpaid dividends to, but excluding, the redemption date, (i) in whole or in part, from time to time, on any dividend payment date on or after March

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15, 2025, or (ii) in whole but not in part, at any time within 90 days following a regulatory capital treatment event (as defined in the Certificate of Designation for the Series A Preferred Stock).

Dividends FCB to the Parent Company

Dividends paid from FCB to the Parent Company are the primary source of funds available to the Parent Company for payment of dividends to its shareholders.

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

FCB could have paid additional dividends to the Parent Company in the amount of $ 1.35 billion while continuing to meet the requirements for well-capitalized banks at December 31, 2021.

Dividends declared by FCB and paid to the Parent Company amounted to $ 173.1 million in 2021, $ 229.7 million in 2020 and $ 149.8 million in 2019.

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

Restrictions on Cash and Overnight Investments

Effective March 26, 2020, the Federal Reserve Board suspended the cash reserve requirement.

BancShares’ overnight investments of $ 75 million in U.S.

Bank Money Market accounts require a 30-day notice for withdrawal.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Accumulated other comprehensive income (loss) included the following at December 31, 2021 and 2020:

December 31, 2021 December 31, 2020

(Dollars in thousands) Accumulated

comprehensive income

(loss) Deferred

(benefit) Accumulated

comprehensive

income (loss),

net of tax Accumulated

comprehensive income

(loss) Deferred

(benefit) Accumulated

comprehensive

income (loss),

Unrealized (losses) gains on securities available for sale $ ( 11,792 ) $ ( 2,712 ) $ ( 9,080 ) $ 102,278 $ 23,524 $ 78,754

Unrealized (losses) gains on securities available for sale transferred to held to maturity ( 8,735 ) ( 2,009 ) ( 6,726 ) 5,399 1,242 4,157

Defined benefit pension items 33,223 7,641 25,582 ( 91,751 ) ( 21,103 ) ( 70,648 )

Total $ 12,696 $ 2,920 $ 9,776 $ 15,926 $ 3,663 $ 12,263

The following table highlights changes in accumulated other comprehensive income (loss) by component for the years ended December 31, 2021 and 2020:

(Dollars in thousands) Unrealized gains (losses) on securities available-for-sale (1)

Unrealized gains (losses) on securities available for sale transferred to held to maturity (1)(2)

Defined benefit pension items (1)

Balance at January 1, 2020 $ 5,792 $ — $ ( 132,515 ) $ ( 126,723 )

Net unrealized gains arising during period 119,357 4,538 42,367 166,262

Amounts reclassified from accumulated other comprehensive loss ( 46,395 ) ( 381 ) 19,500 ( 27,276 )

Net current period other comprehensive income 72,962 4,157 61,867 138,986

Balance at December 31, 2020 78,754 4,157 ( 70,648 ) 12,263

Net unrealized (losses) gains arising during the period ( 62,332 ) ( 9,747 ) 75,368 3,289

Amounts reclassified from accumulated other comprehensive income ( 25,502 ) ( 1,136 ) 20,862 ( 5,776 )

Net current period other comprehensive (loss) income ( 87,834 ) ( 10,883 ) 96,230 ( 2,487 )

Balance at December 31, 2021 $ ( 9,080 ) $ ( 6,726 ) $ 25,582 $ 9,776

(1) All amounts are net of tax.

Amounts in parentheses indicate other comprehensive losses, which are debits or decreases to equity.

(2) Unrealized gains (losses) related to the reclassification of investment securities from available for sale to held to maturity.

Refer to Note C, Investments, for additional information.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents the amounts reclassified from accumulated other comprehensive income (loss) and the line item affected in the Consolidated Statements of Income for years ended December 31, 2021 and 2020:

(Dollars in thousands) Year ended December 31, 2021

Details about accumulated other comprehensive income (loss) Amount reclassified from accumulated other comprehensive income (loss) (1)

Affected line item in the Consolidated Statements of Income

Unrealized gains on available for sale securities $ 33,119 Realized gains on investment securities available for sale, net

( 7,617 ) Income taxes

Net accretion of unrealized gains (losses) on securities available for sale transferred to held to maturity $ 1,475 Net interest income

( 339 ) Income taxes

Amortization of actuarial losses on defined benefit pension items $ ( 27,093 ) Other noninterest expense

6,231 Income taxes

Total reclassifications for the period $ 5,776

Year ended December 31, 2020

Details about accumulated other comprehensive (loss) income Amount reclassified from accumulated other comprehensive income (loss) (1)

Affected line item in the statement where net income is presented

Unrealized gains on available for sale securities $ 60,253 Realized gains on investment securities available for sale, net

( 13,858 ) Income taxes

Amortization of unrealized losses on securities available for sale transferred to held to maturity $ 495 Net interest income

( 114 ) Income taxes

Amortization of defined benefit pension items

Actuarial losses ( 25,324 ) Other noninterest expense

5,824 Income taxes

Total reclassifications for the period $ 27,276

(1) Amounts in parentheses represent decreases to net income.

OTHER NONINTEREST INCOME AND OTHER NONINTEREST EXPENSE

Other noninterest income for the years ended December 31, 2021, 2020 and 2019 was $ 9.4 million, $ 7.4 million and $ 18.4 million, respectively.

Prior to the adoption of ASC 326 on January 1, 2020, the most significant item in other noninterest income was recoveries on PCI loans previously charged-off.

BancShares recorded the portion of recoveries related to loans and leases written off prior to the closing of an acquisition as noninterest income rather than as an adjustment to the allowance for loan losses.

These recoveries were $ 17.4 million for the year ended December 31, 2019.

Following the adoption of ASC 326, these recoveries are recorded as an adjustment to the ACL.

Other noninterest income also includes income from bank owned life insurance, FHLB dividends and other various income items.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Other noninterest expense for the years ended December 31, 2021, 2020 and 2019 included the following:

(Dollars in thousands) 2021 2020 2019

Core deposit intangible amortization $ 10,948 $ 14,255 $ 16,346

Consultant expense 12,507 12,751 12,801

Advertising expense 9,763 10,010 11,437

Telecommunications expense 12,714 12,179 9,391

Other 83,594 95,922 89,308

Total other noninterest expense $ 129,526 $ 145,117 $ 139,283

Other expense consists of miscellaneous expenses including travel, postage, supplies, appraisal expense and other operational losses.

Advertising expense related to non-direct response advertisements are expensed as incurred.

At December 31, 2021, 2020 and 2019 income tax expense consisted of the following:

(Dollars in thousands) 2021 2020 2019

Current tax expense

Federal $ 140,405 $ 137,162 $ 68,984

State 21,383 14,532 11,095

Total current tax expense 161,788 151,694 80,079

Deferred tax (benefit) expense

Federal ( 6,234 ) ( 28,535 ) 50,522

State ( 1,352 ) 3,000 4,076

Total deferred tax (benefit) expense ( 7,586 ) ( 25,535 ) 54,598

Total income tax expense $ 154,202 $ 126,159 $ 134,677

Income tax expense differed from the amounts computed by applying the statutory federal income tax rate of 21 % to pretax income as a result of the following:

(Dollars in thousands) 2021 2020 2019

Income taxes at federal statutory rates $ 147,349 $ 129,755 $ 124,330

Increase (reduction) in income taxes resulting from:

Nontaxable income on loans, leases and investments, net of nondeductible expenses ( 1,523 ) ( 1,581 ) ( 1,639 )

Excess tax benefits of compensation 1,507 1,146 1,070

State and local income taxes, including any change in valuation allowance, net of federal income tax benefit 15,825 13,850 11,985

Tax credits net of amortization ( 5,078 ) ( 5,367 ) ( 4,474 )

Repayment of claim of right income ( 2,254 ) ( 13,926 ) —

Other, net ( 1,624 ) 2,282 3,405

Total income tax expense $ 154,202 $ 126,159 $ 134,677

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The net deferred tax liability included the following components at December 31, 2021, and 2020:

(Dollars in thousands) 2021 2020

Allowance for credit losses $ 39,759 $ 52,293

Operating lease liabilities 14,267 15,737

Executive separation from service agreements 7,835 8,989

Net operating loss carryforwards 7,843 9,545

Net unrealized loss included in accumulated other comprehensive income (loss) 4,630 —

Accelerated depreciation 3,645 —

Employee compensation 18,860 16,083

Other reserves 6,135 5,376

Other 5,845 6,898

Deferred tax asset 108,819 114,921

Accelerated depreciation — 14,984

Lease financing activities 7,725 15,265

Operating lease assets 13,996 15,670

Net unrealized gain on securities included in accumulated other comprehensive income (loss) — 24,857

Net deferred loan fees and costs 14,662 13,975

Intangible assets 14,257 13,012

Security, loan and debt valuations 5,960 2,051

FDIC assisted transactions timing differences — 2,393

Pension assets 64,068 44,549

Senior Unsecured Notes

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

• Fixed-rate senior unsecured notes outstanding totaled $ 866 million with a weighted average coupon rate of 3.70 %.

These notes were assumed by FCB as part of the CIT Merger.

On February 24, 2022, FCB completed a redemption of approximately $ 2.9 billion of senior unsecured notes that were assumed in the CIT Merger, resulting in a gain of approximately $ 6 million.

Subordinated Unsecured Notes

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

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

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

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

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

BancShares has guaranteed all obligations of the Trusts.

Secured Borrowings

At December 31, 2022, BancShares had pledged $ 29.2 billion of loans to several financing facilities.

Notes Payable to FHLB

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

Pledged assets related to these financings totaled $ 23.5 billion at December 31, 2022.

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

Other Secured Financings

Other secured (other than FHLB) financings were not significant and totaled $ 18 million at December 31, 2022.

Pledged assets related to these financings totaled $ 18 million.

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

At December 31, 2022, BancShares had other unused credit lines allowing contingent access to borrowings of up to $ 100 million on an unsecured basis.

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

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

Assets pledged to the FRB of Richmond totaled $ 5.7 billion at December 31, 2022.

NOTE 14 — DERIVATIVE FINANCIAL INSTRUMENTS

BancShares acquired various derivative financial instruments in the CIT Merger.

The following table presents notional amount and fair value of derivative financial instruments on a gross basis.

At December 31, 2022, BancShares’ derivatives are not designated as hedging instruments.

Notional Amount and Fair Value of Derivative Financial Instruments

dollars in millions December 31, 2022

Notional Amount Asset Fair Value Liability Fair Value

Derivatives not designated as hedging instruments (Non-qualifying hedges)

Interest rate contracts (1)(3)

$ 18,173 $ 158 $ ( 482 )

Foreign exchange contracts 125 1 ( 4 )

Other contracts (2)

Total derivatives not designated as hedging instruments $ 18,805 159 ( 486 )

Gross derivatives fair values presented in the Consolidated Balance Sheets 159 ( 486 )

Gross amounts offset in the Consolidated Balance Sheets — —

Net amount presented in the Consolidated Balance Sheets 159 ( 486 )

Amounts subject to master netting agreements (4)

Cash collateral pledged(received) subject to master netting agreements (5)

Total net derivative fair value $ 22 $ ( 473 )

( 1) Fair value balances include accrued interest.

(2) Other derivative contracts not designated as hedging instruments include risk participation agreements.

(3) BancShares accounts for swap contracts cleared by the Chicago Mercantile Exchange and LCH Clearnet as “settled-to-market”.

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

Gross amounts of recognized assets and liabilities were lowered by $ 376 million and $ 19 million, respectively, at December 31, 2022.

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

BancShares believes its ISDA agreements meet the definition of a master netting arrangement or similar agreement for purposes of the above disclosure.

(5) In conjunction with the ISDA agreements described above, BancShares has entered into collateral arrangements with its counterparties, which provide for the exchange of cash depending on change in the market valuation of the derivative contracts outstanding.

Such collateral is available to be applied in settlement of the net balances upon an event of default of one of the counterparties.

Collateral pledged or received is included in other assets or other liabilities, respectively.

Non-Qualifying Hedges

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

Gains on Non-Qualifying Hedges

dollars in millions Year ended December 31

Amounts Recognized 2022 2021 2020

Interest rate contracts Other noninterest income $ 12 $ — $ —

Foreign currency forward contracts Other noninterest income 20 — —

Other contracts Other noninterest income 1 — —

Total non-qualifying hedges - income statement impact $ 33 $ — $ —

NOTE 15 — OTHER LIABILITIES

The following table presents the components of other liabilities.

The increases from December 31, 2021 primarily reflect the other liabilities assumed in the CIT Merger.

Other Liabilities

dollars in millions December 31, 2022 December 31, 2021

Accrued expenses and accounts payable $ 313 $ 5

Lease liabilities 352 64

Fair value of derivative financial instruments 486 —

Commitments to fund tax credit investments 295 43

Deferred taxes 286 33

Reserve for off-balance sheet credit exposure 106 12

Incentive plan liabilities 267 84

Accrued interest payable 57 8

Other 426 132

Deferred tax liability 141,666 156,949

Net deferred tax liability $ ( 32,847 ) $ ( 42,028 )

At December 31, 2021, the gross tax benefit related to net operating loss carryforwards was $ 34.7 million and $ 15.9 million related to federal and state taxes, respectively.

The carryforwards expire in years beginning in 2030 and 2024 for federal and state taxes, respectively.

The net operating losses were obtained through various acquisitions and are subject to the annual limitations set forth by Internal Revenue Code Section 382.

No valuation allowance was necessary as of December 31, 2021 or 2020 to reduce BancShares’ gross deferred tax asset to the amount more likely than not to be realized.

Income tax expense for 2021 and 2020 was favorably impacted by $ 2.3 million and $ 13.9 million, respectively, due to BancShares’ decision in the second quarter of 2020 to utilize an allowable alternative for computing its 2021 and 2020 federal income tax liability.

The allowable alternative provides BancShares the ability to use the federal income tax rate for certain current year deductible amounts related to prior year FDIC-assisted acquisitions that was applicable when these amounts were originally subjected to tax.

BancShares regularly adjusts its net deferred tax liability as a result of changes in tax rates in the states where it files tax returns.

These changes in tax rates did not have a material impact on tax expense in 2021, 2020 or 2019.

BancShares federal income tax returns for 2018 through 2020 remain open for examination by the Internal Revenue Service.

Generally, BancShares is no longer subject to examination by state and local taxing authorities for taxable years prior to 2016.

The following table provides a roll forward of BancShares’ gross unrecognized tax benefits, excluding interest and penalties, during the years ended December 31, 2021, 2020 and 2019:

(Dollars in thousands) 2021 2020 2019

Unrecognized tax benefits at the beginning of the year $ 31,375 $ 32,226 $ 28,255

Additions (reductions) related to tax positions taken in prior year ( 321 ) 153 ( 683 )

Additions related to tax positions taken in current year 1,373 1,295 6,554

Settlements ( 1,601 ) ( 1,516 ) —

Reductions related to lapse of statute of limitations ( 394 ) ( 783 ) ( 1,900 )

Unrecognized tax benefits at the end of the year $ 30,432 $ 31,375 $ 32,226

All of the unrecognized tax benefits, if recognized, would affect BancShares’ effective tax rate.

FIRST CITIZENS BANCSHARES, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

BancShares has unrecognized tax benefits relating to uncertain state tax positions in North Carolina and other state jurisdictions resulting from tax filings submitted to the states.

No tax benefit has been recorded for these uncertain tax positions in the consolidated financial statements.

It is reasonably possible that these uncertain state tax positions will be either settled or resolved in the next twelve months.

A range of the reasonably possible change cannot be made.

BancShares recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense.

Accruals and releases of interest and penalties resulted in a benefit of $ 381 thousand and $ 135 thousand for the years ended December 31, 2021 and 2019, respectively, and an expense of $ 467 thousand for the year ended December 31, 2020.

BancShares had $ 515 thousand and $ 896 thousand accrued for the payment of interest and penalties as of December 31, 2021 and 2020, respectively.

ESTIMATED FAIR VALUES

Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date.

BancShares estimates fair value using discounted cash flows or other valuation techniques when there is no active market for a financial instrument.

Inputs used in these valuation techniques are subjective in nature, involve uncertainties and require judgment.

Therefore, the derived fair value estimates presented below are not necessarily indicative of the amounts BancShares would realize in a current market exchange.

Total other liabilities $ 2,588 $ 381

NOTE 16 — FAIR VALUE

Fair Value Hierarchy

BancShares measures certain financial assets and liabilities at fair value.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

GAAP also establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three levels.

Assets and liabilities are recorded at fair value according to a fair value hierarchy comprised of three levels.

The levels are based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

The level within the fair value hierarchy for an asset or liability is based on the lowest level of input significant to the fair value measurement with Level 1 inputs considered highest and Level 3 inputs considered lowest.

A brief description of each input level follows:

• Level 1 inputs are quoted prices in active markets for identical assets and liabilities.

• Level 2 inputs are quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and inputs other than quoted prices observable for the assets or liabilities and market corroborated inputs.

• Level 3 inputs are unobservable inputs for the asset or liability.

These unobservable inputs and assumptions reflect the estimates market participants would use in pricing the asset or liability.

BancShares’ management reviews any changes to its valuation methodologies to ensure they are appropriate and supportable, and refines valuation methodologies as more market-based data becomes available.

Transfers between levels of the fair value hierarchy are recognized at the end of the reporting period.

The methodologies used to estimate the fair value of financial assets and financial liabilities are discussed below.

Investment securities available for sale .

The fair value of U.S.

Treasury, government agency, mortgage-backed and municipal securities and a portion of our corporate bonds are generally estimated using a third-party pricing service.

To obtain an understanding of the processes and methodologies used, management reviews correspondence from the third-party pricing service.

Management also performs a price variance analysis process to corroborate the reasonableness of prices.

The third-party provider evaluates securities based on comparable investments with trades and market data and will utilize pricing models which use a variety of inputs, such as benchmark yields, reported trades, issuer spreads, benchmark securities, bids and offers as needed.

These securities are generally classified as Level 2.

The remaining corporate bonds held are generally measured at fair value based on indicative bids from broker-dealers using inputs that are not directly observable.

These securities are considered Level 3.

Marketable equity securities.

Equity securities are measured at fair value using observable closing prices.

The valuation also considers the amount of market activity by examining the trade volume of each security.

Equity securities are classified as Level 1 if they are traded in an active market and as Level 2 if the observable closing price is from a less than active market.

Loans held for sale.

Certain residential real estate loans originated to be sold to investors are carried at fair value based on quoted market prices for similar types of loans.

Accordingly, the inputs used to calculate fair value of originated residential real estate loans held for sale are considered Level 2 inputs.

Loans held for investment subsequently transferred to held for sale are carried at the lower of cost or market.

The fair values for the transferred loans are based on quoted prices from the purchase commitments for the individual loans being transferred and are considered Level 1 inputs.

FIRST CITIZENS BANCSHARES, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Net loans and leases (Non-PCD and PCD).

Fair value is estimated based on discounted future cash flows using the current interest rates at which loans with similar terms would be made to borrowers of similar credit quality.

The inputs used in the fair value measurements for loans and leases are considered Level 3 inputs.

The carrying amount of FHLB stock is a reasonable estimate of fair value, as these securities are not readily marketable and are evaluated for impairment based on the ultimate recoverability of the par value.

BancShares considers positive and negative evidence, including the profitability and asset quality of the issuer, dividend payment history and recent redemption experience, when determining the ultimate recoverability of the par value.

BancShares’ investment in FHLB stock is ultimately recoverable at par.

The inputs used in the fair value measurement for FHLB stock are considered Level 2 inputs.

Mortgage and other servicing rights.

Mortgage and other servicing rights are initially recorded and fair value and subsequently carried at the lower of amortized cost or market.

Therefore, servicing rights are carried at fair value only when fair value is less than the amortized cost.

The fair value of mortgage and other servicing rights is performed using a pooling methodology.

Similar loans are pooled together and a model which relies on discount rates, estimates of prepayment rates and the weighted average cost to service the loans is used to determine the fair value.

The inputs used in the fair value measurement for mortgage and other servicing rights are considered Level 3 inputs.

For deposits with no stated maturity, the carrying value is a reasonable estimate of fair value.

The fair value of time deposits is estimated by discounting future cash flows using the interest rates currently offered for deposits of similar remaining maturities.

The inputs used in the fair value measurement for deposits are considered Level 2 inputs.

For borrowings, the fair values are determined based on recent trades or sales of the actual security, if available.

Otherwise, fair values are estimated by discounting future cash flows using current interest rates for similar financial instruments.

The inputs used in the fair value measurement for FHLB borrowings, subordinated debentures, and other borrowings are considered Level 2 inputs.

Payable to the FDIC for shared-loss agreements.

The fair value of the payable to the FDIC for shared-loss agreements is determined by the projected cash flows based on expected payments to the FDIC in accordance with the shared-loss agreements.

Cash flows are discounted using current discount rates to reflect the timing of the estimated amounts due to the FDIC.

The inputs used in the fair value measurement for the payable to the FDIC are considered Level 3 inputs.

Off-balance-sheet commitments and contingencies.

Carrying amounts are reasonable estimates of the fair values for such financial instruments.

Carrying amounts include unamortized fee income and, in some cases, reserves for any credit losses from those financial instruments.

These amounts are not material to BancShares’ financial position.

For all other financial assets and financial liabilities, the carrying value is a reasonable estimate of the fair value as of December 31, 2021 and 2020.

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

Cash and due from banks is classified on the fair value hierarchy as Level 1.

Overnight investments, income earned not collected and accrued interest payable are considered Level 2.

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The table below presents the carrying values and estimated fair values for financial instruments as of December 31, 2021 and 2020.

December 31, 2021 December 31, 2020

(Dollars in thousands) Carrying value Fair value Carrying value Fair value

Cash and due from banks $ 337,814 $ 337,814 $ 362,048 $ 362,048

Overnight investments 9,114,660 9,114,660 4,347,336 4,347,336

Investment securities available for sale 9,203,427 9,203,427 7,014,243 7,014,243

Investment securities held to maturity 3,809,453 3,759,650 2,816,982 2,838,499

Investment in marketable equity securities 97,528 97,528 91,680 91,680

Loans held for sale 98,741 98,741 124,837 124,837

Net loans and leases 32,193,029 31,889,594 32,567,661 33,298,166

Income earned not collected 134,237 134,237 145,694 145,694

Federal Home Loan Bank stock 40,450 40,450 45,392 45,392

Mortgage and other servicing rights 23,797 23,784 19,628 20,283

Deposits with no stated maturity 48,925,127 48,925,127 40,542,596 40,542,596

Time deposits 2,480,967 2,471,116 2,889,013 2,905,577

Securities sold under customer repurchase agreements 589,101 589,101 641,487 641,487

Federal Home Loan Bank borrowings 644,659 654,694 655,175 677,579

Subordinated debt 477,564 495,483 504,518 525,610

Other borrowings 72,155 72,476 88,470 89,263

FDIC shared-loss payable — — 15,601 15,843

Accrued interest payable 7,922 7,922 9,414 9,414

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Among BancShares’ assets and liabilities, investment securities available for sale, marketable equity securities and loans held for sale are reported at their fair values on a recurring basis.

For assets and liabilities carried at fair value on a recurring basis, the following table provides fair value information as of December 31, 2021 and 2020.

December 31, 2021

Fair value measurements using:

(Dollars in thousands) Fair value Level 1 Level 2 Level 3

Assets measured at fair value

See Note 1 — Significant Accounting Policies and Basis of Presentation for detailed descriptions.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes BancShares’ assets and liabilities measured at estimated fair value on a recurring basis.

Assets and Liabilities Measured at Fair Value - Recurring Basis

dollars in millions December 31, 2022

Total Level 1 Level 2 Level 3

Investment securities available for sale

7 unchanged sentences

Loans held for sale 4 — 4 —

Derivative assets (1)

Interest rate contracts — non-qualifying hedges $ 158 $ — $ 158 $ —

Other derivative — non-qualifying hedges 1 — 1 —

Total derivative assets $ 159 $ — $ 159 $ —

Derivative liabilities (1)

Interest rate contracts — non-qualifying hedges $ 482 $ — $ 482 $ —

Other derivative— non-qualifying hedges 4 — 4 —

Total derivative liabilities $ 486 $ — $ 486 $ —

December 31, 2021

Fair value measurements using:

Fair value Level 1 Level 2 Level 3

Assets measured at fair value

Total Level 1 Level 2 Level 3

Investment securities available for sale

7 unchanged sentences

Loans held for sale 99 — 99 —

During the year ended December 31, 2021, $ 102.1 million of corporate bonds available for sale were transferred from Level 3 to Level 2.

The transfers were due to the availability of additional observable inputs for those securities.

During the year ended December 31, 2020, $ 1.8 million of corporate bonds available for sale were transferred from Level 2 to Level 3.

The transfers were due to a lack of observable inputs and trade activity for those securities.

The following table summarizes activity for Level 3 assets for the years ended December 31, 2021 and 2020:

(Dollars in thousands) Corporate bonds Corporate bonds

(1) Derivative fair values include accrued interest.

The methods and assumptions used to estimate the fair value of each class of financial instruments measured at fair value on a recurring basis are as follows:

Investment securities available for sale .

The fair value of U.S.

Treasury, government agency, mortgage-backed securities, and a portion of the corporate bonds are generally estimated using a third-party pricing service.

To obtain an understanding of the processes and methodologies used, management reviews correspondence from the third-party pricing service.

Management also performs a price variance analysis process to corroborate the reasonableness of prices.

These securities are generally classified as Level 2.

The remaining corporate bonds held are generally measured at fair value based on indicative bids from broker-dealers using inputs that are not directly observable.

These securities are classified as Level 3.

Marketable equity securities.

Equity securities are measured at fair value using observable closing prices.

The valuation also considers the amount of market activity by examining the trade volume of each security.

Equity securities are classified as Level 1 if they are traded in an active market and as Level 2 if the observable closing price is from a less than active market.

Loans held for sale.

Certain residential real estate loans originated for sale to investors are carried at fair value based on quoted market prices for similar types of loans.

Accordingly, the inputs used to calculate fair value of originated residential real estate loans held for sale are considered Level 2 inputs.

Derivative Assets and Liabilities.

Derivatives were valued using models that incorporate inputs depending on the type of derivative.

Other than the fair value of credit derivatives, which were estimated using Level 3 inputs, most derivative instruments were valued using Level 2 inputs based on observed pricing for similar assets and liabilities and model-based valuation techniques for which all significant assumptions are observable in the market.

See Note 14 — Derivative Financial Instruments for notional amounts and fair values.

The following tables summarize information about significant unobservable inputs related to BancShares’ categories of Level 3 financial assets and liabilities measured on a recurring basis.

Quantitative Information About Level 3 Fair Value Measurements - Recurring Basis

dollars in millions

Financial Instrument Estimated

Fair Value Valuation

Technique(s) Significant Unobservable Inputs

December 31, 2022

Corporate bonds $ 174 Indicative bid provided by broker Multiple factors, including but not limited to, current operations, financial condition, cash flows, and recently executed financing transactions related to the issuer.

December 31, 2021

Corporate bonds $ 207 Indicative bid provided by broker Multiple factors, including but not limited to, current operations, financial condition, cash flows, and recently executed financing transactions related to the issuer.

The following table summarizes the changes in estimated fair value for all assets and liabilities measured at estimated fair value on a recurring basis using significant unobservable inputs (Level 3).

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

dollars in millions Year Ended December 31, 2022 Year Ended December 31, 2021

Corporate Bonds Other Derivative Liabilities — Non-Qualifying Corporate Bonds

Beginning balance $ 207 $ — $ 317

Purchases — 1 31

Unrealized net losses (gains) included in other comprehensive income 6,391 2,898

Amounts included in net income 2,555 ( 336 )

Transfers in — 1,782

Included in earnings — ( 1 ) 2

Included in comprehensive income ( 19 ) — 6

Transfers out ( 14 ) — ( 102 )

Sales / Calls ( 46,981 ) —

Maturity and settlements — — ( 47 )

Ending balance $ 174 $ — $ 207

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents quantitative information about Level 3 fair value measurements for fair value on a recurring basis at December 31, 2021.

(Dollars in thousands) December 31, 2021

Level 3 assets Valuation technique Significant unobservable input Fair Value

Corporate bonds Indicative bid provided by broker Multiple factors, including but not limited to, current operations, financial condition, cash flows, and recently executed financing transactions related to the issuer $ 207,402

Fair Value Option

BancShares has elected the fair value option for residential real estate loans originated for sale.

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

The changes in fair value are recorded as a component of mortgage income and were losses of $ 3.0 million for the year ended December 31, 2021, and gains of $ 3.9 million and $ 289 thousand for the years ended December 31, 2020 and 2019, respectively.

The following table summarizes the difference between the aggregate fair value and the unpaid principal balance for residential real estate loans originated for sale measured at fair value as of December 31, 2021 and 2020.

December 31, 2021

(Dollars in thousands) Fair Value Unpaid Principal Balance Difference

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

dollars in millions December 31, 2022

Fair Value Unpaid Principal Balance Difference

Originated loans held for sale $ 4 $ 4 $ —

2 unchanged sentences

Originated loans held for sale $ 99 $ 96 $ 3

No originated loans held for sale were 90 or more days past due or on non-accrual status as of December 31, 2021 or December 31, 2020.

Certain other assets are adjusted to their fair value on a non-recurring basis, including certain loans, OREO, and goodwill, which are periodically tested for impairment, and mortgage servicing rights, which are carried at the lower of amortized cost or market.

BancShares has elected the fair value option for residential real estate loans originated for sale.

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

The changes in fair value were recorded as a component of mortgage income and included a loss of $ 3 million in each of the year ended December 31, 2022 and 2021.

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

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

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

Certain assets or liabilities are required to be measured at estimated fair value on a non-recurring basis subsequent to initial recognition.

Generally, these adjustments are the result of LOCOM or other impairment accounting.

The following table presents carrying value of assets measured at estimated fair value on a non-recurring basis for which gains and losses have been recorded in the periods.

The gains and losses reflect amounts recorded for the respective periods, regardless of whether the asset is still held at period end.

Assets Measured at Fair Value - Non-recurring Basis

dollars in millions Fair Value Measurements

Total Level 1 Level 2 Level 3 Total Gains

December 31, 2022

Assets held for sale - loans $ 23 $ — $ — $ 23 $ ( 1 )

Loans - collateral dependent loans 149 — — 149 ( 24 )

Other real estate owned 43 — — 43 14

Mortgage servicing rights — — — — 1

Total $ 215 $ — $ — $ 215 $ ( 10 )

December 31, 2021

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

Other real estate owned 34 — — 34 ( 4 )

Mortgage servicing rights 22 — — 22 3

Total $ 59 $ — $ — $ 59 $ ( 3 )

Certain other assets are adjusted to their fair value on a non-recurring basis, including certain loans, OREO, and goodwill, which are periodically tested for impairment, and MSRs, which are carried at the lower of amortized cost or market.

Most loans held for investment, deposits, and borrowings are not reported at fair value.

Following the adoption of ASC 326 on January 1, 2020, the population of loans measured at fair value on a non-recurring basis has greatly diminished and is limited to collateral-dependent loans evaluated individually.

Collateral values are determined using appraisals or other third-party value estimates of the subject property discounted based on estimated selling costs, typically between 5% and 10 %, and immaterial adjustments for other external factors that may impact the marketability of the collateral.

At December 31, 2021, the weighted average discount for estimated selling costs applied was 9.00 %.

OREO is carried at the lower of cost or fair value.

The methods and assumptions used to estimate the fair value of each class of financial instruments measured at fair value on a non-recurring basis are as follows:

Assets held for sale - loans.

Loans held for investment subsequently transferred to held for sale are carried at the lower of cost or market.

When available, the fair values for the transferred loans are based on quoted prices from the purchase commitments for the individual loans being transferred and are considered Level 1 inputs.

The fair value of Level 2 assets was primarily estimated based on prices of recent trades of similar assets.

For other loans held for sale, the fair value of Level 3 assets was primarily measured under the income approach using the discounted cash flow model based on Level 3 inputs including discount rate or the price of committed trades.

Loans - collateral dependent loans.

The population of Level 3 loans measured at fair value on a non-recurring basis includes collateral-dependent loans evaluated individually.

Collateral values are determined using appraisals or other third-party value estimates of the subject property discounted based on estimated selling costs, and adjustments for other external factors that may impact the marketability of the collateral.

Other real estate owned.

OREO is carried at LOCOM.

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

At December 31, 2021, the weighted average discount applied was 8.79 %.

At December 31, 2022 and 2021, the weighted average discount applied was 9.31 % and 8.79 %, respectively.

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

If there are any significant changes in the market or the subject property, valuations are adjusted or new appraisals are ordered to ensure the reported values reflect the most current information.

Mortgage servicing rights are carried at the lower of amortized cost or market and are, therefore, carried at fair value only when fair value is less than amortized cost.

The fair value of mortgage servicing rights is determined using a pooling methodology.

Similar loans are pooled together and a discounted cash flow model, which takes into consideration discount rates, prepayment rates, and the weighted average cost to service the loans, is used to determine the fair value.

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For financial assets carried at fair value on a non-recurring basis, the following table provides fair value information as of December 31, 2021 and December 31, 2020.

December 31, 2021

Fair value measurements using:

(Dollars in thousands) Fair value Level 1 Level 2 Level 3

Collateral-dependent loans $ 3,099 $ — $ — $ 3,099

Other real estate remeasured during the year 34,211 — — 34,211

Mortgage servicing rights.

MSRs are carried at the lower of amortized cost or market and are, therefore, carried at fair value only when fair value is less than amortized cost.

The fair value of MSRs is determined using a pooling methodology.

Financial Instruments Fair Value

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

Carrying Values and Fair Values of Financial Assets and Liabilities

dollars in millions December 31, 2022

Estimated Fair Value

Value Level 1 Level 2 Level 3 Total

Financial Assets

Cash and due from banks $ 518 $ 518 $ — $ — $ 518

Interest earning deposits at banks 5,025 5,025 — — 5,025

Investment in marketable equity securities 95 32 63 — 95

Investment securities available for sale 8,995 — 8,821 174 8,995

Investment securities held to maturity 10,279 — 8,795 — 8,795

Loans held for sale 52 — 4 45 49

Net loans 67,720 — 1,679 62,633 64,312

Accrued interest receivable 329 — 329 — 329

Federal Home Loan Bank stock 197 — 197 — 197

Mortgage and other servicing rights 25 — — 47 47

Derivative assets 159 — 159 — 159

Financial Liabilities

Deposits with no stated maturity 78,798 — 78,798 — 78,798

Time deposits 10,610 — 10,504 — 10,504

Credit balances of factoring clients 995 — — 995 995

Securities sold under customer repurchase agreements 436 — 436 — 436

Other short-term borrowings 1,750 — 1,750 — 1,750

Long-term borrowings 4,452 — 4,312 18 4,330

Accrued interest payable 57 — 57 — 57

Derivative liabilities 486 — 486 — 486

December 31, 2021

Fair value measurements using:

Fair value Level 1 Level 2 Level 3

Collateral-dependent loans $ 11,779 $ — $ — $ 11,779

Other real estate remeasured during the year 40,115 — — 40,115

Mortgage servicing rights 16,966 — — 16,966

No financial liabilities were carried at fair value on a non-recurring basis as of December 31, 2021 and December 31, 2020.

EMPLOYEE BENEFIT PLANS

Estimated Fair Value

Value Level 1 Level 2 Level 3 Total

Financial Assets

Cash and due from banks $ 338 $ 338 $ — $ — $ 338

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

Investment in marketable equity securities 98 34 64 — 98

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

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

Loans held for sale 99 — 99 — 99

Net loans 32,193 — — 31,890 31,890

Accrued interest receivable 134 — 134 — 134

Federal Home Loan Bank stock 40 — 40 — 40

Mortgage and other servicing rights 23 — — 23 23

Financial Liabilities

Deposits with no stated maturity 48,925 — 48,925 — 48,925

Time deposits 2,481 — 2,471 — 2,471

Securities sold under customer repurchase agreements 589 — 589 — 589

Long-term borrowings 1,195 — 1,222 — 1,222

Accrued interest payable 8 — 8 — 8

The methods and assumptions used to estimate the fair value of each class of financial instruments not discussed elsewhere are as follows:

The carrying value of net loans is net of the ACL.

Loans are generally valued by discounting expected cash flows using market inputs with adjustments based on cohort level assumptions for certain loan types as well as internally developed estimates at a business segment level.

Due to the significance of the unobservable market inputs and assumptions, as well as the absence of a liquid secondary market for most loans, these loans are classified as Level 3.

Certain loans are measured based on observable market prices sourced from external data providers and classified as Level 2.

Nonaccrual loans are written down and reported at their estimated recovery value which approximates their fair value and classified as Level 3.

Investment securities held to maturity.

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

Treasury notes, unsecured bonds issued by government agencies and government sponsored entities, securities issued by the Supranational Entities and Multilateral Development Banks and FDIC guaranteed CDs with other financial institutions.

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

BancShares investment in FHLB stock is ultimately recoverable at par.

The inputs used in the fair value measurement for the FHLB stock are considered Level 2 inputs.

Mortgage and other servicing rights.

Mortgage and other servicing rights are initially recorded at fair value and subsequently carried at the lower of amortized cost or market.

Therefore, servicing rights are carried at fair value only when fair value is less than the amortized cost.

The fair value of mortgage and other servicing rights is determined using a pooling methodology.

Similar loans are pooled together and a model which relies on discount rates, estimates of prepayment rates and the weighted average cost to service the loans is used to determine the fair value.

The inputs used in the fair value measurement for mortgage and other servicing rights are considered Level 3 inputs.

The estimated fair value of deposits with no stated maturity, such as demand deposit accounts, money market accounts, and savings accounts was the amount payable on demand at the reporting date.

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

Credit balances of factoring clients.

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

Short-term borrowed funds.

Includes federal funds purchased, repurchase agreements and certain other short-term borrowings and payables.

The fair value approximates carrying value and are classified as Level 2.

Long-term Borrowings.

For certain long-term senior and subordinated unsecured borrowings, the fair values are sourced from a third-party pricing service.

The fair value of other long-term borrowings are determined by discounting future cash flows using current interest rates for similar financial instruments.

The inputs used in the fair value measurement for FHLB borrowings, senior and subordinated debentures, and other borrowings are classified as Level 2.

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

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

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

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

NOTE 17 — STOCKHOLDERS' EQUITY

The common stock activity for the year ended December 31, 2022 is presented in the following table.

There was no common stock activity for the year ended December 31, 2021.

Number of Shares of Common Stock

Class A Class B

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

Common stock issued in CIT Merger 6,140,010 —

Restricted stock units vested, net of shares held to cover taxes 49,787 —

Shares purchased under authorized repurchase plan ( 1,500,000 ) —

Common stock at December 31, 2022 13,501,017 1,005,185

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

Shares of Class A Common Stock have one vote per share, while shares of Class B Common Stock have 16 votes per share.

In connection with the consummation of the CIT Merger, the Parent Company issued approximately 6.1 million shares of Class A Common Stock as further discussed in Note 2 — Business Combinations.

Restricted Stock Units

Refer to Note 22 — Employee Benefit Plans for discussion of the BancShares RSUs.

Non-Cumulative Perpetual Preferred Stock

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

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

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

dollars in millions, except per share and par value data

Preferred Stock Issuance Date Earliest Redemption Date Par Value Shares Authorized, Issued and Outstanding Liquidation Preference Per Share Total Liquidation Preference Dividend Dividend Payment Dates

Series A March 12, 2020 March 15, 2025 $ 0.01 345,000 $ 1,000 $ 345 5.375 % Quarterly in arrears

Series B January 3, 2022 January 4, 2027 0.01 325,000 1,000 325 5.8 %, converted to LIBOR + 3.972 % beginning June 15, 2022

Semi-annually during the fixed rate period, then quarterly in arrears, as of June 15, 2022

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

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

If declared, dividends with respect to the BancShares Series A Preferred Stock and BancShares Series C Preferred Stock will accrue and be payable quarterly in arrears on March 15, June 15, September 15, and December 15 of each year.

Dividends on the BancShares Series B Preferred Stock initially accrued and were payable on a semi-annual basis during the fixed rate period.

Upon expiration of the fixed rate period on June 15, 2022, dividends with respect to the BancShares Series B Preferred Stock, if declared, now accrue and are payable quarterly in arrears on March 15, June 15, September 15, and December 15 of each year.

Dividends on the BancShares Preferred Stock will not be cumulative.

The Parent Company may redeem the BancShares Preferred Stock at its option, and subject to any required regulatory approval, at a redemption price equal to the “Liquidation Preference Per Share” in the table above, plus any declared and unpaid dividends to, but excluding, the redemption date, (i) in whole or in part, from time to time, on any dividend payment date on or after the “Earliest Redemption Date” in the table above, or (ii) in whole but not in part, at any time within 90 days following a regulatory capital treatment event.

NOTE 18 — ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

The following table details the components of accumulated other comprehensive (loss) income:

Components of Accumulated Other Comprehensive (Loss) Income

dollars in millions December 31, 2022 December 31, 2021

Pretax Income

Taxes Net of Income Taxes Pretax Income

Taxes Net of Income Taxes

Unrealized loss on securities available for sale $ ( 972 ) $ 233 $ ( 739 ) $ ( 12 ) $ 3 $ ( 9 )

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

Defined benefit pension items 13 ( 3 ) 10 34 ( 8 ) 26

Total accumulated other comprehensive (loss) income $ ( 967 ) $ 232 $ ( 735 ) $ 13 $ ( 3 ) $ 10

The following table details the changes in the components of accumulated other comprehensive (loss) income, net of income tax:

Changes in Components of Accumulated Other Comprehensive (Loss) Income, net of income tax

dollars in millions Unrealized (loss) gain on securities available for sale Unrealized (loss) gain on securities available for sale transferred to securities held to maturity Net change in defined benefit pension items Total accumulated other comprehensive (loss) income

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

AOCI activity before reclassifications ( 730 ) — ( 25 ) ( 755 )

Amounts reclassified from AOCI — 1 9 10

Other comprehensive (loss) income for the period ( 730 ) 1 ( 16 ) ( 745 )

Balance as of December 31, 2022 $ ( 739 ) $ ( 6 ) $ 10 $ ( 735 )

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

AOCI activity before reclassifications ( 62 ) ( 10 ) 76 4

Amounts reclassified from AOCI ( 26 ) ( 1 ) 21 ( 6 )

Other comprehensive (loss) income for the period ( 88 ) ( 11 ) 97 ( 2 )

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

Other Comprehensive (Loss) Income

The amounts included in the Consolidated Statements of Comprehensive Income are net of income taxes.

The following table presents the pretax and after-tax components of other comprehensive income.

Components of Other Comprehensive (Loss) Income

dollars in millions Year ended December 31

Pretax Income

Taxes Net of Income Taxes Pretax Income

Taxes Net of Income Taxes Income Statement Line Item

Defined benefit pension items

Actuarial (loss) gain $ ( 33 ) $ 8 $ ( 25 ) $ 98 $ ( 22 ) $ 76

Amounts reclassified from AOCI 12 ( 3 ) 9 27 ( 6 ) 21 Other noninterest

Other comprehensive (loss) income for defined benefit pension items $ ( 21 ) $ 5 $ ( 16 ) $ 125 $ ( 28 ) $ 97

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

Amounts reclassified from AOCI $ — $ — $ — $ ( 13 ) $ 3 $ ( 10 )

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

Other comprehensive income (loss) on securities available for sale transferred to securities held to maturity $ 1 $ — $ 1 $ ( 14 ) $ 3 $ ( 11 )

Unrealized loss on securities available for sale

AOCI activity before reclassification $ ( 960 ) $ 230 $ ( 730 ) $ ( 81 ) $ 19 $ ( 62 )

Amounts reclassified from AOCI — — — ( 33 ) 7 ( 26 ) Realized gain on sale of investment securities available for sale, net

Other comprehensive loss on securities available for sale $ ( 960 ) $ 230 $ ( 730 ) $ ( 114 ) $ 26 $ ( 88 )

Total other comprehensive loss $ ( 980 ) $ 235 $ ( 745 ) $ ( 3 ) $ 1 $ ( 2 )

NOTE 19 — REGULATORY CAPITAL

BancShares and FCB are subject to various regulatory capital requirements administered by the federal banking agencies.

Federal banking agencies approved regulatory capital guidelines (“Basel III”) aimed at strengthening previous capital requirements for banking organizations and the associated capital conservation buffers are 2.50%.

The following table includes the Basel III requirements for regulatory capital ratios.

Basel III Minimums Basel III Conservation Buffers Basel III Requirements

Regulatory capital ratios

Total risk-based capital 8.00 % 2.50 % 10.50 %

Tier 1 risk-based capital 6.00 2.50 8.50

Common equity Tier 1 4.50 2.50 7.00

Tier 1 leverage 4.00 — 4.00

The FDIC also has Prompt Corrective Action (“PCA”) thresholds for regulatory capital ratios.

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

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

dollars in millions December 31, 2022 December 31, 2021

Basel III Requirements PCA well-capitalized thresholds Amount Ratio Amount Ratio

Total risk-based capital 10.50 % 10.00 % $ 11,799 13.18 % $ 5,042 14.35 %

Tier 1 risk-based capital 8.50 8.00 9,902 11.06 4,380 12.47

Common equity Tier 1 7.00 6.50 9,021 10.08 4,041 11.50

Tier 1 leverage 4.00 5.00 9,902 8.99 4,380 7.59

Total risk-based capital 10.50 % 10.00 % $ 11,627 12.99 % $ 4,858 13.85 %

Tier 1 risk-based capital 8.50 8.00 10,186 11.38 4,651 13.26

Common equity Tier 1 7.00 6.50 10,186 11.38 4,651 13.26

Tier 1 leverage 4.00 5.00 10,186 9.25 4,651 8.07

At December 31, 2022, BancShares and FCB had risk-based capital ratio conservation buffers of 5.06 % and 4.99 %, respectively, which are in excess of the Basel III conservation buffer of 2.50%.

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

The capital ratio conservation buffers represent the excess of the regulatory capital ratio as of December 31, 2022 and 2021 over the Basel III minimum for the ratio that is the binding constraint.

Additional Tier 1 capital for BancShares includes preferred stock discussed further in Note 17 — Stockholders’ Equity.

Additional Tier 2 capital for BancShares and FCB primarily consists of qualifying ACL and qualifying subordinated debt.

Dividend Restrictions

Dividends paid from FCB to the Parent Company are the primary source of funds available to the Parent Company for payment of dividends to its stockholders.

FCB could have paid additional dividends to the Parent Company in the amount of $ 2.7 billion while continuing to meet the requirements for well-capitalized banks at December 31, 2022.

Dividends declared by FCB and paid to the Parent Company amounted to $ 1.4 billion for the year ended December 31, 2022.

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

NOTE 20 — EARNINGS PER COMMON SHARE

The following table sets forth the computation of the basic and diluted earnings per common share:

Earnings per Common Share

dollars in millions, except per share data

Year ended December 31

2022 2021 2020

Net income $ 1,098 $ 547 $ 492

Preferred stock dividends 50 18 14

Net income available to common stockholders $ 1,048 $ 529 $ 478

Weighted average common shares outstanding

Basic shares outstanding 15,531,924 9,816,405 10,056,654

Stock-based awards 18,020 — —

Diluted shares outstanding 15,549,944 9,816,405 10,056,654

Earnings per common share

Basic $ 67.47 $ 53.88 $ 47.50

Diluted $ 67.40 $ 53.88 $ 47.50

BancShares RSUs are discussed in Note 22 — Employee Benefit Plans.

NOTE 21 — INCOME TAXES

The provision (benefit) for income taxes for the year ended December 31, 2022, 2021 and 2020 is comprised of the following:

Provision (Benefit) for Income Taxes

dollars in millions Year ended December 31

2022 2021 2020

federal income tax provision $ 58 $ 140 $ 137

Deferred U.S.

federal income tax provision / (benefit) 170 ( 6 ) ( 29 )

Total federal income tax provision 228 134 108

Current state and local income tax provision 4 21 15

Deferred state and local income tax provision / (benefit) 23 ( 1 ) 3

Total state and local income tax provision 27 20 18

Total non-U.S.

income tax provision 9 — —

Total provision for income taxes $ 264 $ 154 $ 126

A reconciliation from the U.S.

Federal statutory rate to BancShares’ actual effective income tax rate for the year ended December 31, 2022, 2021 and 2020 is the following:

Percentage of Pretax Income

dollars in millions Effective Tax Rate

2022 2021 2020

Pretax Income Income Tax Expense (Benefit) Percentage of Pretax Income Pretax Income Income Tax Expense (Benefit) Percentage of Pretax Income Pretax Income Income Tax Expense (Benefit) Percentage of Pretax Income

Federal income taxes and rate $ 1,362 $ 286 21.0 % $ 701 $ 147 21.0 % $ 618 $ 130 21.0 %

Increase (decrease) due to:

State and local income taxes, net of federal income tax benefit 53 3.9 % 16 2.2 % 14 2.2 %

Non-taxable bargain purchase gain (1)

( 105 ) ( 7.7 ) % — — % — — %

Domestic tax credits ( 20 ) ( 1.5 ) % ( 5 ) ( 0.7 ) % ( 5 ) ( 0.9 ) %

Effect of BOLI surrender (1)

48 3.5 % — — % — — %

Deferred tax liability adjustment ( 8 ) ( 0.6 ) % — — % — — %

Difference in tax rates applicable to non-U.S.

earnings 1 0.1 % — — % — — %

Repayment of claim of right income — — % ( 2 ) ( 0.3 ) % ( 14 ) ( 2.2 ) %

Valuation allowances ( 5 ) ( 0.4 ) % — — % — — %

Other 14 1.1 % ( 2 ) ( 0.2 ) % 1 0.3 %

Provision for income taxes and effective tax rate $ 264 19.4 % $ 154 22.0 % $ 126 20.4 %

(1) Income tax expense (benefit) includes, if applicable, federal, state, foreign and penalty taxes.

Income tax expense for 2021 and 2020 was favorably impacted by $ 2 million and $ 14 million respectively, due to BancShares’ decision in the second quarter of 2020 to utilize an allowable alternative for computing its 2021 and 2020 federal income tax liability.

As a result of the CIT Merger, BancShares permanently reinvested eligible earnings of certain foreign subsidiaries and accordingly, does not accrue any U.S.

or foreign taxes that would be due if those earnings were repatriated.

As of December 31, 2022, this assertion resulted in an unrecognized net deferred tax liability of $ 18 million on reinvested earnings of $ 665 million.

The tax effects of temporary differences that give rise to deferred income tax assets and liabilities at December 31, 2022 and 2021 are presented below:

Components of Deferred Income Tax Assets and Liabilities

dollars in millions 2022 2021

Deferred Tax Assets:

Net operating loss (NOL) carry forwards $ 358 $ 8

Basis difference in loans 57 —

Allowance for credit losses 252 40

Accrued liabilities and reserves 37 6

Deferred compensation 51 19

Right of use - lease liability 92 14

Domestic tax credits 176 —

Mark to market adjustments 28 —

Capitalized costs 15 —

Unrealized net loss on securities AFS 275 5

Total gross deferred tax assets 1,389 109

Deferred Tax Liabilities:

Operating leases ( 1,311 ) —

Right of use - lease asset ( 86 ) ( 14 )

Loans and direct financing leases ( 43 ) ( 8 )

Deferred BOLI Gain ( 15 ) —

Pension ( 54 ) ( 64 )

Prepaid expenses ( 14 ) —

Market discount accretion ( 35 ) —

Other ( 47 ) ( 56 )

Total deferred tax liabilities ( 1,605 ) ( 142 )

Total net deferred tax liability before valuation allowances ( 216 ) ( 33 )

valuation allowances ( 70 ) —

Net deferred tax liability after valuation allowances $ ( 286 ) $ ( 33 )

Net Operating Loss Carryforwards and Valuation Adjustments

As a result of the CIT Merger, BancShares’ net deferred tax liabilities increased by approximately $ 300 million.

That amount included an increase to deferred tax assets (“DTAs”) primarily from net operating losses, capitalized costs and tax credits net of deferred tax liabilities, primarily from operating leases.

As of December 31, 2022, BancShares has DTAs totaling $ 358 million on its global NOLs.

This includes:

(1) a DTA of $ 192 million relating to its cumulative U.S.

federal NOLs of $ 913 million;

(2) DTAs of $ 150 million relating to cumulative state NOLs of $ 2.8 billion, including amounts of reporting entities that file in multiple jurisdictions, and (3) DTAs of $ 16 million relating to cumulative non-U.S.

NOLs of $ 68 million.

federal NOLs will begin to expire in 2030 and state NOLs will begin to expire in 2024.

As of December 31, 2022, BancShares has deferred tax assets of $ 176 million from its domestic tax credits.

This includes:

(1) DTAs of $ 167 million from federal tax credits and (2) DTAs of $ 9 million from state tax credits.

The federal tax credits begin to expire in 2032 and the state tax credits have an indefinite carryforward.

During 2022, Management updated BancShares’ long-term forecast of future U.S.

federal taxable income.

The updated forecast continues to support the realization of the U.S.

federal DTAs on NOLs and therefore no valuation allowance is necessary.

However, a valuation allowance of $ 67 million was retained on U.S.

state DTAs relating to certain state NOLs as of December 31, 2022.

BancShares maintained a valuation allowance of $ 3 million against certain non-U.S.

reporting entities' net DTAs at December 31, 2022.

There was no valuation allowance at December 31, 2021.

The increase is mainly related to the CIT Merger.

BancShares’ ability to recognize DTAs is evaluated on a quarterly basis to determine if there are any significant events that would affect our ability to utilize existing DTAs.

If events are identified that affect our ability to utilize our DTAs, the respective valuation allowance may be adjusted accordingly.

Liabilities for Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits ("UTBs") is as follows:

Unrecognized Tax Benefits (1)

dollars in millions Liabilities for Unrecognized Tax Benefits Interest / Penalties Total

Balance at December 31, 2021 $ 30 $ 1 $ 31

Effect of CIT Merger 4 2 6

Additions for tax positions related to prior years 1 — 1

Reductions for tax positions of prior years ( 2 ) — ( 2 )

Expiration of statutes of limitations ( 1 ) — ( 1 )

Settlements ( 5 ) — ( 5 )

Balance at December 31, 2022 $ 27 $ 3 $ 30

(1) Tabular rollforward does not present the comparable data for the prior years, as activity in the prior years was not material.

BancShares recognizes tax benefits when it is more likely than not that the position will prevail, based solely on the technical merits under the tax law of the relevant jurisdiction.

BancShares will recognize the tax benefit if the position meets this recognition threshold determined based on the largest amount of the benefit that is more than likely to be recognized.

As a result of the CIT Merger, BancShares’ liabilities for unrecognized tax benefits, including interest and penalties, increased by $ 6 million.

During the year ended December 31, 2022, BancShares recorded a net decrease in UTBs, including interest and penalties.

The net decrease primarily related to settlements, partially offset by the increase resulting from the CIT Merger.

As of December 31, 2022, the accrued liability for interest and penalties is $ 3 million.

BancShares recognizes accrued interest and penalties on UTBs in income tax expense.

BancShares has UTBs relating to uncertain state tax positions in North Carolina and other state jurisdictions resulting from tax filings submitted to the states.

No tax benefit has been recorded for these uncertain tax positions in the consolidated financial statements.

It is reasonably possible that these uncertain tax positions may be settled or resolved in the next twelve months.

No reasonable estimate of the settlement or resolution can be made.

The entire $ 30 million of UTBs including interest and penalties at December 31, 2022, would lower BancShares’ effective tax rate, if realized.

Management believes that it is reasonably possible the total potential liability before interest and penalties may be increased or decreased by $ 10 million within the next twelve months of the reporting date because of anticipated settlement with taxing authorities, resolution of open tax matters, and the expiration of various statutes of limitations.

Income Tax Audits

BancShares is subject to examinations by the U.S.

Internal Revenue Service (“IRS”) and other taxing authorities in jurisdictions where BancShares has significant business operations.

The tax years under examination vary by jurisdiction.

BancShares does not expect completion of those audits to have a material impact on the firm’s financial condition, but it may be material to operating results for a particular period, depending, in part, on the operating results for that period.

The table below presents the earliest tax years that remain subject to examination by major jurisdiction.

Jurisdiction December 31, 2022

New York State and City 2015

North Carolina 2019

California 2017

BancShares and its subsidiaries are subject to examinations by the IRS and other taxing authorities in jurisdictions where BancShares has business operations for years ranging from 2012 through 2022.

Management does not anticipate that the completion of these examinations will have a material impact on the firm’s financial condition, but it may be material to operating results for a particular period, depending, in part, on the operating results for that period.

NOTE 22 — EMPLOYEE BENEFIT PLANS

BancShares sponsors benefit plans for its qualifying employees and former employees of Bancorporation, Inc.

(“Bancorporation”).

The plans include noncontributory defined benefit pension plans, a 401(k) savings plan and an enhanced 401(k) savings plan.

These plans are qualified under the Internal Revenue Code.

The benefit plans include noncontributory defined benefit pension plans and 401(k) savings plans, which are qualified under the Internal Revenue Code.

BancShares also maintains agreements with certain executives providing supplemental benefits paid upon death or separation from service at an agreed-upon age.

Defined Benefit Pension Plans

BancShares employees who were hired prior to April 1, 2007 and qualified under length of service and other requirements are covered by the FCB-North Pension Plan (the “BancShares Pension Plan”), which was closed to new participants as of April 1, 2007.

Discretionary contributions of $ 32 thousand were made to the BancShares Pension Plan in 2021, while discretionary contributions of $ 80 million were made in 2020.

Certain legacy Bancorporation employees that qualified under length of service and other requirements are covered by the FCB-South Pension Plan (the “Bancorporation Pension Plan” and together with the BancShares Pension Plan, the “Plans”), which was closed to new participants as of September 1, 2007.

There were no discretionary contributions made to the legacy Bancorporation Pension Plan for 2021, while discretionary contributions were $ 20 million in 2020.

Participants in the Plans were fully vested after five years of service.

Certain benefit plans of CIT were assumed by BancShares upon closing of the CIT Merger.

CIT sponsored both funded and unfunded noncontributory defined benefit pension and postretirement plans, executive retirement plans, and a 401(k) savings plan covering certain employees as further discussed below.

Retirement and Post-Retirement Plans

Pension Plans

BancShares sponsors three qualified noncontributory defined benefit pension plans (the “Pension Plans”), including the FCB-North Pension Plan (the “BancShares Pension Plan”), FCB-South (“Bancorporation”) Pension Plan (the “Bancorporation Pension Plan”), and a plan assumed upon completion of the CIT Merger (the “CIT Pension Plan”).

BancShares employees who were hired prior to April 1, 2007 and qualified under length of service and other requirements are covered by the BancShares Pension Plan, which was closed to new participants as of April 1, 2007.

There was no discretionary contribution made to the BancShares Pension Plan during 2022, while discretionary contributions of $ 32 thousand were made during 2021.

Certain legacy Bancorporation employees that qualified under length of service and other requirements are covered by the Bancorporation Pension Plan, which was closed to new participants as of September 1, 2007.

There were no discretionary contributions made to the Bancorporation Pension Plan during 2022 or 2021.

Participants in the BancShares Pension Plan and Bancorporation Pension Plan were fully vested after five years of service.

Retirement benefits are based on years of service and highest annual compensation for five consecutive years during the last ten years of employment.

BancShares makes contributions to the Plans in amounts between the minimum required for funding and the maximum amount deductible for federal income tax purposes.

Management evaluates the need for its contributions to the Plans on a periodic basis based upon numerous factors including, but not limited to, funded status, returns on plan assets, discount rates and the current economic environment.

The following tables and disclosures are on a combined basis as the Plans have the same terms in both form and substance.

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

BancShares assumed the CIT Pension Plan upon completion of the CIT Merger.

There was no discretionary contribution made to the CIT Pension Plan during 2022.

BancShares makes contributions to the Pension Plans in amounts between the minimum required for funding and the maximum amount deductible for federal income tax purposes.

Management evaluates the need for its contributions to these plans on a periodic basis based upon numerous factors including, but not limited to, funded status, returns on plan assets, discount rates and the current economic environment.

Supplemental and Executive Retirement Plans

Upon completion of the CIT Merger, BancShares assumed a frozen U.S.

non-contributory supplemental retirement plan (the “Supplemental Retirement Plan”) and an additional retirement plan for certain executives (the “Executive Retirement Plan”), which had been closed to new participants since 2006 and whose participants were all inactive.

There were no discretionary contributions made to the Executive Retirement Plan or the Supplemental Retirement Plan in 2022.

Accumulated balances under the Executive Retirement Plan and the Supplemental Retirement Plan continue to receive periodic interest, subject to certain government limits.

The interest credit was 1.9 % for the year ended December 31, 2022.

Postretirement Benefit Plans

Upon completion of the CIT Merger, BancShares assumed four postretirement benefit plans (the “Postretirement Plans”) that provided healthcare and life insurance benefits to eligible retired employees.

For most eligible retirees, healthcare was contributory and life insurance was non-contributory.

The Postretirement Plans were funded on a “pay-as-you-go” basis.

Certain Postretirement Plans were terminated during the first quarter of 2022.

BancShares recognized a reduction in other noninterest expense of approximately $ 27 million in the first quarter of 2022 related to obligations previously accrued.

Funding for Retirement and Postretirement Plans

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

BancShares may also contribute additional voluntary amounts each year (up to the maximum tax-deductible amount) in order to achieve certain target funding levels in the plans, with consideration also given to current and future cash flow and tax positions.

No contributions are currently expected for the year ending December 31, 2023.

The tables and disclosures below address the following:

(i) the Pension Plans, the Supplemental Retirement Plan, and the Executive Retirement Plan (the “Retirement Plans”) and (ii) the Postretirement Plans (collectively with the Retirement Plans, the “Plans”).

The Supplemental and Executive Retirement Plans are unfunded.

Therefore, the tables and disclosures below regarding plan assets apply to the Pension Plans, which are funded.

Obligations and Funded Status

The following table provides the changes in benefit obligation and plan assets and the funded status of the Plans at December 31, 2021 and 2020.

(Dollars in thousands) 2021 2020

The following table provides the changes in benefit obligations, assets and the funded status of the Plans at December 31, 2022 and 2021.

Obligations and Funded Status

Retirement Plans Postretirement Plans

dollars in millions 2022 2021 2022

Change in benefit obligation

Projected benefit obligation at January 1 $ 1,056 $ 1,078 $ —

Projected benefit obligation of acquired plans 389 — 28

Service cost 14 15 —

Interest cost 43 30 —

Actuarial (gains)/losses ( 30,591 ) 72,080

Actuarial (gain) loss ( 324 ) ( 31 ) —

Benefits paid ( 63 ) ( 36 ) ( 1 )

Plan termination — — ( 27 )

Projected benefit obligation at December 31 1,115 1,056 —

1 unchanged sentence

Fair value of plan assets at January 1 1,345 1,236 —

Actual return on plan assets 145,720 192,792

Employer contributions 32 100,000

Fair value of plan assets of acquired plans 386 — —

Actual (loss) return on plan assets ( 270 ) 145 —

Benefits paid ( 57 ) ( 36 ) —

1 unchanged sentence

Funded status at December 31 $ 289 $ 289 $ —

The amounts recognized in other assets at December 31, 2021 and December 31, 2020 were $ 289.0 million and $ 157.9 million, respectively.

The following table details the amounts recognized in accumulated other comprehensive income at December 31, 2021 and 2020.

(Dollars in thousands) 2021 2020

Net actuarial (gain) loss $ ( 33,223 ) $ 91,751

The accumulated benefit obligation for the Plans at December 31, 2021 and 2020, was $ 972.7 million and $ 985.0 million, respectively.

Information for pension plans with a benefit obligation in excess of plan assets

Projected and accumulated benefit obligations $ 54 $ — $ —

The Consolidated Balance Sheets include $ 343 million and $ 289 million in other assets related to the Pension Plans at December 31, 2022 and 2021, respectively.

The Consolidated Balance Sheet includes $ 54 million in other liabilities at December 31, 2022 for the unfunded Supplemental Retirement and Executive Retirement Plans.

The following table details the amounts recognized in accumulated other comprehensive income, before income taxes, at December 31, 2022 and 2021.

See Note 18 — Accumulated Other Comprehensive (Loss) Income for additional information.

Retirement Plans Postretirement Plans

dollars in millions 2022 2021 2022

Net actuarial gain $ 13 $ 34 $ —

The accumulated benefit obligation for the Plans at December 31, 2022 and 2021 was $ 1.1 billion and $ 973 million, respectively.

The Plans use a measurement date of December 31.

The following table shows the components of periodic benefit cost related to the Plans and changes in plan assets and benefit obligations recognized in other comprehensive income for the years ended December 31, 2021, 2020 and 2019.

Year ended December 31

(Dollars in thousands) 2021 2020 2019

The following table shows the components of periodic benefit cost related to the Plans and changes in assets and benefit obligations of the Plans recognized in other comprehensive income, before income taxes, for the years ended December 31, 2022, 2021 and 2020.

See Note 18 — Accumulated Other Comprehensive (Loss) Income for additional information.

Net Periodic Benefit Costs and Other Amounts Retirement Plans Postretirement Plans

Year ended December 31 Year ended December 31

dollars in millions 2022 2021 2020 2022

Service cost $ 14 $ 15 $ 14 $ —

1 unchanged sentence

Expected return on assets ( 87 ) ( 78 ) ( 65 ) —

Amortization of prior service cost — — 57

Net prior service credit amortization — — — ( 27 )

Amortization of net actuarial loss 12 27 25 —

Total net periodic benefit cost (income) ( 6,122 ) 8,111 ( 1,582 )

Current year actuarial (gain) loss ( 97,880 ) ( 55,023 ) 20,049

Total net periodic (benefit) cost ( 18 ) ( 6 ) 8 ( 27 )

Current year actuarial loss (gain) 33 ( 98 ) ( 55 ) —

Amortization of actuarial loss ( 12 ) ( 27 ) ( 25 ) —

Current year amortization of prior service cost — — — 27

Amortization of prior service cost — — — ( 27 )

Net (gain) loss recognized in other comprehensive income ( 124,973 ) ( 80,347 ) 9,068

Net loss (gain) recognized in other comprehensive income 21 ( 125 ) ( 80 ) —

Total recognized in net periodic benefit cost and other comprehensive income $ 3 $ ( 131 ) $ ( 72 ) $ ( 27 )

Actuarial gains in 2021 and 2020 were primarily driven by return on assets greater than expected, partially offset by the impact of a decreased discount rate.

Service costs and the amortization of prior service costs are recorded in personnel expense, while interest cost, expected return on plan assets and the amortization of actuarial (gains)losses are recorded in other noninterest expense.

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The actuarial loss in 2022 was primarily due to lower than expected return on assets and higher interest crediting rate, partially offset by increased discount rates.

Actuarial gains in 2021 and 2020 were primarily due to return on assets greater than expected, partially offset by the impact of a decreased discount rate.

Service costs and the amortization of prior service costs are recorded in personnel expense, while interest cost, expected return on assets and the amortization of actuarial gains or losses are recorded in other noninterest expense.

The assumptions used to determine the benefit obligations at December 31, 2022 and 2021 are as follows:

Discount rate 3.04 % 2.76 %

Rate of compensation increase 5.60 5.60

Weighted Average Assumptions Retirement Plans Postretirement Plans

2022 2021 2022

Discount rate 5.57 % 3.04 % N/A

Rate of compensation increase 5.60 5.60 N/A

Interest crediting rate (1)

(1) Specific to cash investments in the CIT Pension Plan.

The assumptions used to determine the net periodic benefit cost for the years ended December 31, 2022, 2021 and 2020, are as follows:

Weighted Average Assumptions Retirement Plans Postretirement Plans

2022 2021 2020 2022

Discount rate 3.03 % 2.76 % 3.46 % 3.02 %

Rate of compensation increase 5.60 5.60 5.60

Expected long-term return on plan assets 7.50 7.50 7.50

Rate of compensation increase 5.60 5.60 5.60 N/A

Expected long-term return on plan assets 5.87 7.50 7.50 N/A

Interest crediting rate (1)

1.50 N/A N/A N/A

(1) Specific to cash investments in the CIT Pension Plan.

The estimated discount rate, which represents the interest rate that could be obtained for a suitable investment used to fund the benefit obligations, is based on a yield curve developed from high-quality corporate bonds across a full maturity spectrum.

The projected cash flows of the Pension Plans are discounted based on this yield curve and a single discount rate is calculated to achieve the same present value.

The weighted average expected long-term rate of return on the Plans’ assets represents the average rate of return expected to be earned on the Plans’ assets over the period the benefits included in the benefit obligation are to be paid.

In developing the expected rate of return, historical and current returns, as well as investment allocation strategies, on the Plans’ assets are considered.

For the Plans, our primary total return objective is to achieve returns over the long term that will fund retirement liabilities and provide desired plan benefits in a manner that satisfies the fiduciary requirements of the Employee Retirement Income Security Act.

The Plans’ assets have a long-term time horizon that runs concurrent with the average life expectancy of the participants.

As such, the Plans can assume a time horizon that extends well beyond a full market cycle and can assume a reasonable level of risk.

The increase in discount rate from the prior year is reflective of the current market conditions.

The weighted average expected long-term rate of return on Pension Plans’ assets represents the average rate of return expected to be earned on the Pension Plans’ assets over the period the benefits included in the benefit obligation are to be paid.

In developing the expected rate of return on the Pension Plans’ assets, historical and current returns, as well as investment allocation strategies, are considered.

Assets of the Pension Plans

For the Pension Plans, our primary total return objective is to achieve returns over the long term that will fund retirement liabilities and provide desired benefits of the Pension Plans in a manner that satisfies the fiduciary requirements of the ERISA.

The Pension Plans’ assets have a long-term time horizon that runs concurrent with the average life expectancy of the participants.

As such, the Pension Plans can assume a time horizon that extends well beyond a full market cycle and can assume a reasonable level of risk.

It is expected, however, that both professional investment management and sufficient portfolio diversification will smooth volatility and help generate a consistent level of return.

1 unchanged sentence

Within approved guidelines and restrictions, the investment manager has discretion over the timing and selection of individual investments.

The Plans’ assets are currently held by the BancShares trust department.

The assets of the BancShares Pension Plan and Bancorporation Pension Plan are held by the BancShares’ trust department.

Assets of the CIT Pension Plan were held by a third party servicer during 2022.

Equity securities are measured at fair value using observable closing prices.

3 unchanged sentences

These securities are generally classified as Level 2.

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The fair values of pension plan assets at December 31, 2021 and 2020, by asset class are as follows:

December 31, 2021

(Dollars in thousands) Market Value Level 1 Level 2

Level 3 Target Allocation Actual %

In the following table, assets of the CIT Pension Plan are primarily included in the Common Collective Trust.

These investments have been measured using the net asset value per share practical expedient and are not required to be classified in the fair value hierarchy.

The following tables summarize the fair values and fair value hierarchy for the assets of the Pension Plans at December 31, 2022 and 2021.

Fair Value Measurements December 31, 2022

dollars in millions Market Value Level 1 Level 2 Level 3 Not Classified (1)

Weighted Average Target Allocation Pension Plans Actual %

Cash and equivalents $ 25 $ 25 $ — $ — $ — 0 - 5 %

6 unchanged sentences

Corporate bonds 233 — 233 — —

Alternative investments 0 - 30 %

Common collective trust, measured at NAV 302 — — — 302

Limited partnerships 1 — — — 1

Total pension assets $ 1,404 $ 670 $ 431 $ — $ 303 100 %

(1) These investments have been measured using the net asset value per share practical expedient and are not required to be classified in the table above.

December 31, 2021

Market Value Level 1 Level 2

Level 3 Target Allocation Actual %

Market Value Level 1 Level 2 Level 3 Target Allocation Actual %

Cash and equivalents $ 17 $ 17 $ — $ — 0 - 5 %

7 unchanged sentences

Total pension assets $ 1,345 $ 841 $ 504 $ — 100 %

There were no direct investments in equity securities of BancShares included in pension plan assets in any of the years presented.

The following are estimated payments to pension plan participants in the indicated periods:

(Dollars in thousands) Estimated Payments

2022 $ 41,051

There were no direct investments in equity securities of BancShares included in the Pension Plans’ assets in any of the years presented.

The following table presents estimated future benefits projected to be paid for the next ten years from the Pension Plans’ assets or from the Company's general assets calculated using current actuarial assumptions.

Actual benefit payments may differ from projected benefit payments.

Projected Benefits

dollars in millions

Retirement Plans

2028-2032 420

401(k) Savings Plans

Certain employees enrolled in the defined benefit plan are also eligible to participate in a 401(k) savings plan through deferral of portions of their salary.

For employees who participate in the 401(k) savings plan who also continue to accrue additional years of service under the defined benefit plans, BancShares makes a matching contribution equal to 100 % of the first 3 % and 50 % of the next 3 % of the participant’s deferral up to and including a maximum contribution of 4.5 % of the participant’s eligible compensation.

Certain employees enrolled in the BancShares or Bancorporation Pension Plans are also eligible to participate in a 401(k) savings plan (the “401(k) Plan”) through deferral of portions of their salary.

For employees who participate in the 401(k) Plan who also continue to accrue additional years of service under the BancShares or Bancorporation Pension Plans, BancShares makes a matching contribution equal to 100 % of the first 3 % and 50 % of the next 3 % of the participant’s deferral up to and including a maximum contribution of 4.5 % of the participant’s eligible compensation.

The matching contribution immediately vests.

At the end of 2007, current employees were given the option to continue to accrue additional years of service under the defined benefit plans or to elect to join an enhanced 401(k) savings plan.

Under the enhanced 401(k) savings plan, BancShares matches

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

up to 100 % of the participant’s deferrals not to exceed 6 % of the participant’s eligible compensation.

At the end of 2007, employees were given the option to continue to accrue additional years of service under the BancShares or Bancorporation Pension Plans or to elect to join an enhanced 401(k) savings plan (the “Enhanced 401(k) Plan”).

Under the Enhanced 401(k) Plan, BancShares matches participants’ contributions in an amount equal to 100 % of the first 6 % of the participant’s eligible compensation.

The matching contribution immediately vests.

In addition to the employer match of the employee contributions, the enhanced 401(k) savings plan provides a required employer non-elective contribution equal to 3 % of the compensation of a participant who remains employed at the end of the calendar year.

In addition to the employer match of the employee contributions, the Enhanced 401(k) Plan provides a required employer non-elective contribution equal to 3 % of the compensation of a participant who remains employed at the end of the calendar year.

Effective January 1, 2023 this non-elective contribution will be discretionary.

This employer contribution vests after three years of service.

Employees who elected to enroll in the enhanced 401(k) savings plan discontinued the accrual of additional years of service under the defined benefit plans and became enrolled in the enhanced 401(k) savings plan effective January 1, 2008.

Eligible employees hired after January 1, 2008, are eligible to participate in the enhanced 401(k) savings plan.

BancShares recognized expense related to contributions to the 401(k) plans of $ 36.2 million, $ 35.6 million and $ 30.8 million during 2021, 2020 and 2019, respectively.

Employees who elected to enroll in the Enhanced 401(k) Plan discontinued the accrual of additional years of service under the BancShares or Bancorporation Pension Plans and became enrolled in the Enhanced 401(k) Plan effective January 1, 2008.

Eligible employees hired after January 1, 2008, are eligible to participate in the Enhanced 401(k) Plan.

CIT sponsored a 401(k) plan (the “CIT 401(k) Plan”), which was assumed by BancShares upon completion of the CIT Merger.

Under the CIT 401(k) Plan, BancShares matched 100 % of the participants’ contributions up to 4 % of the participant’s eligible compensation.

In January 2023, the CIT 401(k) Plan was merged into the Enhanced 401(k) Plan.

BancShares recognized expense related to contributions to all 401(k) plans of $ 55 million, $ 36 million, and $ 36 million during 2022, 2021 and 2020, respectively.

Additional Benefits for Executives, Directors, and Officers

3 unchanged sentences

The following table provides the accrued liability as of December 31, 2022 and 2021, and the changes in the accrued liability during the years then ended:

(Dollars in thousands) 2021 2020

dollars in millions 2022 2021

Accrued liability as of January 1 $ 39 $ 43

Accrued liability of acquired banks 2 —

Discount rate adjustment ( 2 ) ( 1 )

1 unchanged sentence

Benefits paid ( 5 ) ( 5 )

Benefits forfeited — —

Accrued liability as of December 31 $ 36 $ 39

5 unchanged sentences

As of December 31, 2022 and 2021, the accrued liability for incentive compensation was $ 267 million and $ 84 million, respectively.

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Leases under which BancShares is a Lessee

The following table presents lease assets and liabilities as of December 31, 2021 and 2020:

(Dollars in thousands) Classification December 31, 2021 December 31, 2020

Operating Other assets $ 63,207 $ 68,048

Finance Premises and equipment 4,310 6,478

Total leased assets $ 67,517 $ 74,526

Operating Other liabilities $ 64,431 $ 68,343

Finance Other borrowings 4,311 6,308

Total lease liabilities $ 68,742 $ 74,651

The following table presents lease costs for the years ended December 31, 2021 and 2020.

Variable lease cost primarily represents variable payments such as common area maintenance and utilities recognized in the period in which the expense was incurred.

Certain of our lease agreements also include rental payments adjusted periodically for inflation.

While lease liabilities are not remeasured as a result of these changes, these adjustments are treated as variable lease costs and recognized in the period in which the expense is incurred.

(Dollars in thousands) Classification 2021 2020

Operating lease cost (1)

Occupancy expense $ 13,993 $ 15,023

Finance lease cost:

Amortization of leased assets Equipment expense 2,168 2,168

Interest on lease liabilities Interest expense - Other borrowings 162 220

Variable lease cost Occupancy expense 3,110 3,231

Sublease income Occupancy expense ( 355 ) ( 350 )

Net lease cost $ 19,078 $ 20,292

(1) Operating lease cost includes short-term lease cost, which is immaterial.

The following table presents lease liability maturities in the next five years and thereafter:

(Dollars in thousands) Operating Leases Finance Leases Total

2022 $ 12,840 $ 1,876 $ 14,716

2023 11,162 993 12,155

2024 9,356 617 9,973

2025 6,462 635 7,097

2026 5,450 431 5,881

Thereafter 29,236 — 29,236

Total lease payments $ 74,506 $ 4,552 $ 79,058

Interest 10,075 241 10,316

Present value of lease liabilities $ 64,431 $ 4,311 $ 68,742

The following table presents the remaining weighted average lease terms and discount rates as of December 31, 2021:

Weighted average remaining lease term (years):

December 31, 2021

Operating 8.9

Weighted average discount rate:

Operating 3.00 %

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents supplemental cash flow information related to leases for the years ended December 31, 2021 and 2020:

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

In February 2016, CIT adopted the CIT Group Inc.

2016 Omnibus Incentive Plan (the "2016 Plan"), which provided for grants of stock-based awards to employees, executive officers, and directors.

The BancShares RSUs are the only outstanding awards subject to the terms of the 2016 Plan and no further awards will be made under the 2016 Plan.

Compensation expense is recognized over the vesting period or the requisite service period, which is generally three years for BancShares RSUs, under the graded vesting method, whereby each vesting tranche of the award is amortized separately as if each were a separate award.

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

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

The fair value of RSUs that vested and settled in stock during 2022 was $ 64 million.

Stock-Settled Awards Outstanding

share amounts in whole dollars

Stock-Settled Awards

Number of Shares Weighted Average Grant Date Value (1)

Unvested BancShares at December 31, 2021 — $ —

Unvested CIT RSUs converted to BancShares RSUs at Merger Date 116,958 859.76

Unvested CIT PSUs converted to BancShares RSUs at Merger Date 10,678 859.76

Forfeitures ( 5,194 ) 859.76

Vested / settled awards ( 79,453 ) 859.76

Unvested BancShares RSUs at December 31, 2022 42,989 $ 859.76

(1) Represents the share price of BancShares as of the CIT Merger Date.

NOTE 23 — BUSINESS SEGMENT INFORMATION

BancShares began reporting multiple segments during the first quarter of 2022 and now reports General Banking, Commercial Banking, Rail, and Corporate segments, as further discussed in Note 1 — Significant Accounting Policies and Basis of Presentation.

Each of the segments are described below.

General Banking

General Banking delivers products and services to consumers and businesses through an extensive network of branches and various digital channels, including a full suite of deposit products, loans (primarily residential mortgages and business/commercial loans), and various fee-based services.

General Banking also provides a variety of wealth management products and services to individuals and institutional clients, including brokerage, investment advisory, and trust services.

In addition, General Banking has a dedicated business line that supports deposit, cash management and lending to homeowner associations and property management companies nationwide.

Revenue is primarily generated from interest earned on loans and fees for banking and advisory services.

General Banking segment is the primary deposit gathering business of FCB.

Commercial Banking

Commercial Banking provides a range of lending, leasing, capital markets, asset management and other financial and advisory services primarily to small and middle market companies in a wide range of industries.

Loans offered are primarily senior secured loans collateralized by accounts receivable, inventory, machinery and equipment, transportation equipment and/or intangibles, and are often used for working capital, plant expansion, acquisitions or recapitalizations.

These loans include revolving lines of credit and term loans and, depending on the nature of the collateral, may be referred to as collateral-backed loans, asset-based loans or cash flow loans.

Commercial Banking provides senior secured loans to developers and other commercial real estate professionals, and also provides small business loans and leases, including both capital and operating leases, through a highly automated credit approval, documentation and funding process.

Commercial Banking provides factoring, receivable management, and secured financing to businesses that operate in various industries.

Revenue is primarily generated from interest earned on loans, rents on equipment leased, fees and other revenue from lending and leasing activities and banking services, along with capital markets transactions and commissions earned on factoring and related activities.

Rail offers customized leasing and financing solutions on a fleet of railcars and locomotives to railroads and shippers throughout North America.

Railcar types include covered hopper cars used to ship grain and agricultural products, plastic pellets, sand, and cement;

tank cars for energy products and chemicals;

gondolas for coal, steel coil and mill service products;

open hopper cars for coal and aggregates;

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

Revenue is primarily from operating lease income.

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

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

Corporate also includes certain significant items that are infrequent, such as:

the Initial Non-PCD Provision for loans and leases and unfunded commitments;

and the gain on acquisition, each of which are related to the CIT Merger.

Segment Net Income (Loss) and Select Period End Balances

The following table presents the condensed income statements and select period end balances for each segment.

dollars in millions Year Ended December 31, 2022

General Banking Commercial Banking Rail Corporate Total BancShares

Net interest income (expense) $ 1,942 $ 889 $ ( 80 ) $ 195 $ 2,946

Provision for credit losses 11 121 — 513 645

Net interest income (expense) after provision for credit losses 1,931 768 ( 80 ) ( 318 ) 2,301

Noninterest income 472 521 657 486 2,136

Noninterest expense 1,570 746 428 331 3,075

Income (loss) before income taxes 833 543 149 ( 163 ) 1,362

Income tax expense (benefit) 204 128 37 ( 105 ) 264

Net income (loss) $ 629 $ 415 $ 112 $ ( 58 ) $ 1,098

Select Period End Balances

Loans and leases $ 42,930 $ 27,773 $ 78 $ — $ 70,781

Deposits 84,361 3,225 15 1,807 89,408

Operating lease equipment, net — 723 7,433 — 8,156

Year Ended December 31, 2021

(Dollars in thousands) 2021 2020

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases $ 13,054 $ 14,237

Operating cash flows from finance leases 162 220

Financing cash flows from finance leases 1,997 1,922

Right-of-use assets obtained in exchange for new operating lease liabilities 6,535 4,595

Leases under which BancShares is a Lessor

BancShares provides equipment financing using a variety of loan and lease structures.

Typical items financed and leased include commercial equipment and vehicles.

The following table presents the components of the investment in direct or sales type financing leases, included in loans in the consolidated balance sheets as of December 31, 2021 and 2020:

(Dollars in thousands) Year ended December 31

Total minimum lease payment to be received $ 261,469 $ 335,385

Estimated unguaranteed residual value of leased assets 24,472 19,428

Gross investment in direct or sales type financing leases 285,941 354,813

Unearned income ( 18,262 ) ( 23,970 )

Initial direct costs 783 548

Total net investment $ 268,462 $ 331,391

At December 31, 2021, future minimum lease payments to be received under direct or sales type financing leases were as follows:

Years ending December 31

2022 $ 96,974

Thereafter 5,758

Future minimum lease payments $ 261,469

TRANSACTIONS WITH RELATED PERSONS

General Banking Commercial Banking Rail Corporate Total BancShares

Net interest income (expense) $ 1,447 $ 17 $ — $ ( 74 ) $ 1,390

Benefit for credit losses ( 37 ) — — — ( 37 )

Net interest income (expense) after benefit for credit losses 1,484 17 — ( 74 ) 1,427

Noninterest income 433 — — 75 508

Noninterest expense 1,179 3 — 52 1,234

Income (loss) before income taxes 738 14 — ( 51 ) 701

Income tax expense (benefit) 162 3 — ( 11 ) 154

Net income (loss) $ 576 $ 11 $ — $ ( 40 ) $ 547

Select Period End Balances

Loans and leases $ 31,820 $ 552 $ — $ — $ 32,372

Deposits 51,344 62 — — 51,406

Year Ended December 31, 2020

General Banking Commercial Banking Rail Corporate Total BancShares

Net interest income (expense) $ 1,391 $ 15 $ — $ ( 18 ) $ 1,388

Provision for credit losses 58 — — — 58

Net interest income (expense) after provision for credit losses 1,333 15 — ( 18 ) 1,330

Noninterest income 379 — — 98 477

Noninterest expense 1,146 3 — 40 1,189

Income before income taxes 566 12 — 40 618

Income tax expense 116 2 — 8 126

Net income $ 450 $ 10 $ — $ 32 $ 492

Select Period End Balances

Loans and leases $ 32,235 $ 554 $ — $ 3 $ 32,792

Deposits 43,391 40 — 1 43,432

NOTE 24 — COMMITMENTS AND CONTINGENCIES

To meet the financing needs of its customers, BancShares and its subsidiaries have financial instruments with off-balance sheet risk.

These financial instruments involve elements of credit, interest rate or liquidity risk and include commitments to extend credit and standby letters of credit.

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

dollars in millions December 31, 2022 December 31, 2021

Financing Commitments

Financing assets (excluding leases) $ 23,452 $ 13,011

Letters of Credit

Standby letters of credit 436 92

Other letters of credit 44 24

Deferred Purchase Agreements 2,039 —

Purchase and Funding Commitments (1)

Lessor commitments (1)

(1) BancShares’ purchase and funding commitments relate to the equipment leasing businesses’ commitments to fund finance leases and operating leases, and Rail’s railcar manufacturer purchase and upgrade commitments.

Financing Commitments

Commitments to extend credit are legally binding agreements to lend to customers.

These commitments generally have fixed expiration dates or other termination clauses and may require payment of fees.

Established credit standards control the credit risk exposure associated with these commitments.

In some cases, BancShares requires collateral be pledged to secure the commitment, including cash deposits, securities and other assets.

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

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

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

Financing commitments also include approximately $ 66 million related to off-balance sheet commitments to fund equity investments.

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

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

The table above excludes uncommitted revolving credit facilities extended by Commercial Services to its clients for working capital purposes.

In connection with these facilities, Commercial Services has the sole discretion throughout the duration of these facilities to determine the amount of credit that may be made available to its clients at any time and whether to honor any specific advance requests made by its clients under these credit facilities.

Letters of Credit

Standby letters of credit are commitments to pay the beneficiary thereof if drawn upon by the beneficiary upon satisfaction of the terms of the letter of credit.

Those commitments are primarily issued to support public and private borrowing arrangements.

To mitigate its risk, BancShares’ credit policies govern the issuance of standby letters of credit.

The credit risk related to the issuance of these letters of credit is essentially the same as in extending loans to clients and, therefore, these letters of credit are collateralized when necessary.

These financial instruments generate fees and involve, to varying degrees, elements of credit risk in excess of amounts recognized in the Consolidated Balance Sheets.

Deferred Purchase Agreements (“DPA”)

A DPA is provided in conjunction with factoring, whereby a client is provided with credit protection for trade receivables without purchasing the receivables.

The trade receivables terms generally require payment in 90 days or less.

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

The outstanding amount in the table above, less $ 186 million at December 31, 2022 of borrowings for such clients, is the maximum amount that BancShares would be required to pay under all DPAs.

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

The table above includes $ 1.9 billion of DPA exposures at December 31, 2022, related to receivables on which BancShares has assumed the credit risk.

The table also includes $ 138 million available under DPA credit line agreements provided at December 31, 2022.

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

Litigation and other Contingencies

The Parent Company and certain of its subsidiaries have been named as a defendant in legal actions arising from its normal business activities in which damages in various amounts are claimed.

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

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

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

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

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

Plaintiff sought the return of all U.S.

Government payments to CIT under the HAMP, FHA, and VA programs.

CIT has received approximately $ 93 million in servicer incentives under HAMP, and the U.S.

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

OneWest and CIT denied all allegations of liability.

The Department of Justice declined to intervene in the case.

On July 26, 2022, the parties settled all claims for $ 18.5 million and pursuant to the terms of the settlement, the parties filed a joint stipulation of dismissal with prejudice.

The settlement payment of $ 18.5 million was paid on August 4, 2022 and on August 29, 2022, the Court entered an Order dismissing the case.

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

These matters arise in connection with the ordinary conduct of BancShares’ business.

At any given time, BancShares may also be in the process of responding to subpoenas, requests for documents, data and testimony relating to such matters and engaging in discussions to resolve the matters (all of the foregoing collectively being referred to as “Litigation”).

While most Litigation relates to individual claims, BancShares may be subject to putative class action claims and similar broader claims and indemnification obligations.

In light of the inherent difficulty of predicting the outcome of Litigation matters and indemnification obligations, particularly when such matters are in their early stages or where the claimants seek indeterminate damages, BancShares cannot state with confidence what the eventual outcome of the pending Litigation will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss, fines, or penalties related to each pending matter will be, if any.

In accordance with applicable accounting guidance, BancShares’ establishes reserves for Litigation when those matters present loss contingencies as to which it is both probable that a loss will occur and the amount of such loss can reasonably be estimated.

Based on currently available information, BancShares believes that the outcome of Litigation that is currently pending will not have a material adverse effect on BancShares’ financial condition, but may be material to BancShares’ operating results or cash flows for any particular period, depending in part on its operating results for that period.

The actual results of resolving such matters may be substantially higher than the amounts reserved.

For certain Litigation matters in which BancShares is involved, BancShares is able to estimate a range of reasonably possible losses in excess of established reserves and insurance.

For other matters for which a loss is probable or reasonably possible, such an estimate cannot be determined.

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

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

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

Those Litigation matters for which an estimate is not reasonably possible or as to which a loss does not appear to be reasonably possible, based on current information, are not included within this estimated range and, therefore, this estimated range does not represent BancShares’ maximum loss exposure.

The foregoing statements about BancShares’ Litigation are based on BancShares’ judgments, assumptions, and estimates and are necessarily subjective and uncertain.

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

NOTE 25 — CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

FCB holds a 20 % equity investment in Northbridge, and CIT Asset Management LLC, a non-bank subsidiary of FCB, acts as an investment advisor and servicer of the loan portfolio.

Allstate is an 80 % equity investor.

FCB’s investment was $ 43 million at December 31, 2022, with the expectation of additional investment as the joint venture grows.

Management fees were earned on loans under management.

BancShares accounts for Northbridge under the equity method and recognized $ 4 million in the Consolidated Statement of Income for the year ended December 31, 2022 for its proportion of Northbridge’s net income.

BancShares has investments in qualified affordable housing projects primarily for the purposes of fulfilling Community Reinvestment Act requirements and obtaining tax credits.

These investments are accounted for using the proportional amortization method.

BancShares also has investments in various trusts, partnerships, and limited liability corporations established in conjunction with structured financing transactions of equipment, power and infrastructure projects and workout transactions.

BancShares’ interests in these entities were entered into in the ordinary course of business that are accounted for under the equity or cost methods.

Refer to Note 10 – Other Assets and Note 12 – Variable Interest Entities for additional information.

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

BancShares has, and expects to have in the future, banking transactions in the ordinary course of business with directors, officers and their associates (“Related Persons”) and entities controlled by Related Persons.

8 unchanged sentences

Unfunded loan commitments available to Related Persons were $ 2.6 million and $ 2.7 million as of December 31, 2022 and 2021, respectively.

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During the year ended December 31, 2020, the Parent Company repurchased 45,000 shares of its outstanding Class A common stock from Ella Anna Holding, as trustee of her revocable trust.

Holding is the widow of the Parent Company’s former Executive Vice Chairman, Frank B.

Holding, and the mother of Frank B.

Bryant, BancShares’ Chairman and Chief Executive Officer and Vice Chairman, respectively.

No shares were repurchased during the year ended December 31, 2021.

COMMITMENTS AND CONTINGENCIES

To meet the financing needs of its customers, BancShares has financial instruments with off-balance sheet risk.

These financial instruments include commitments to extend credit and standby letters of credit.

These instruments involve elements of credit, interest rate or liquidity risk.

Commitments to extend credit are legally binding agreements to lend to customers.

These commitments generally have fixed expiration dates or other termination clauses and may require payment of fees.

Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future liquidity requirements.

Established credit standards control the credit risk exposure associated with these commitments.

In some cases, BancShares requires collateral be pledged to secure the commitment, including cash deposits, securities and other assets.

Standby letters of credit are commitments guaranteeing performance of a customer to a third party.

These commitments are primarily issued to support public and private borrowing arrangements, and their fair value is not material.

To mitigate its risk, BancShares’ credit policies govern the issuance of standby letters of credit.

The credit risk related to the issuance of these letters of credit is essentially the same as those involved in extending loans to clients and, therefore, these letters of credit are collateralized when necessary.

The following table presents the commitments to extend credit and unfunded commitments as of December 31, 2021 and 2020:

(Dollars in thousands) 2021 2020

Unused commitments to extend credit $ 13,011,154 $ 12,098,417

Standby letters of credit 116,648 129,819

BancShares has investments in qualified affordable housing projects primarily for the purposes of fulfilling Community Reinvestment Act requirements and obtaining tax credits.

Unfunded commitments to fund future investments in affordable housing projects totaled $ 43.4 million and $ 53.7 million as of December 31, 2021 and 2020, respectively, and were recorded within other liabilities.

The Parent Company and certain of its subsidiaries have been named as a defendant in legal actions arising from its normal business activities in which damages in various amounts are claimed.

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

Although the amount of any ultimate liability with respect to such matters cannot be determined, in the opinion of management, any such liability will not have a material effect on BancShares’ consolidated financial statements.

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

PARENT COMPANY FINANCIAL STATEMENTS

NOTE 26 — PARENT COMPANY FINANCIAL STATEMENTS

Parent Company

Condensed Balance Sheets

(Dollars in thousands) December 31, 2021 December 31, 2020

(dollars in millions) December 31, 2022 December 31, 2021

Cash and due from banks $ 119 $ 174

Overnight investments 5,716 1,607

Investments in marketable equity securities 97,528 91,680

Investment securities available for sale — 2,010

Investment in banking subsidiaries 4,987,350 4,621,676

Interest-earning deposits at banks 3 6

Investment in marketable equity securities 93 98

Investment in banking subsidiary 9,935 4,987

Investment in other subsidiaries 34 —

Due from subsidiaries — 786

Other assets 48 44

Total assets $ 10,232 $ 5,309

Liabilities and Shareholders’ Equity

Subordinated debentures $ 453,313 $ 452,350

Liabilities and Stockholders' Equity

Subordinated debt $ 454 $ 453

Borrowings due to banking subsidiary 60 40

Other borrowings — 68

Due to subsidiaries 2,829 —

Other liabilities 56 11

Shareholders’ equity 4,737,241 4,229,268

Total liabilities and shareholders’ equity $ 5,309,424 $ 4,819,307

Total liabilities 570 572

Stockholders’ equity 9,662 4,737

Total liabilities and stockholders’ equity $ 10,232 $ 5,309

Parent Company

Condensed Income Statements

Condensed Statements of Income

Year ended December 31

(Dollars in thousands) 2021 2020 2019

Interest and dividend income $ 2,011 $ 3,952 $ 1,327

(dollars in millions) 2022 2021 2020

Dividends from banking subsidiary $ 1,410 $ 173 $ 230

Other (loss) income ( 2 ) 36 33

Total income 1,408 209 263

Interest expense 19 17 17

Net interest loss ( 14,567 ) ( 12,865 ) ( 5,860 )

Dividends from banking subsidiaries 173,091 229,685 149,819

Marketable equity securities gains, net 34,081 29,395 20,625

Other income 66 574 257

Other operating expense 11,275 13,168 9,497

Income before income tax benefit and equity in undistributed net income of subsidiaries 181,396 233,621 155,344

Other expenses 26 11 12

Total expenses 45 28 29

Income before income taxes and equity in undistributed net income of subsidiaries 1,363 181 234

Income tax expense 44 2 1

Income before equity in undistributed net income of subsidiaries 1,319 179 233

Equity in undistributed net income of subsidiaries 368,152 258,981 302,919

Equity in (distributed) undistributed net income of subsidiaries ( 221 ) 368 259

Net income 1,098 547 492

Preferred stock dividends 50 18 14

Net income available to common shareholders $ 528,915 $ 477,661 $ 457,371

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Net income available to common stockholders $ 1,048 $ 529 $ 478

Parent Company

1 unchanged sentence

Year ended December 31

(Dollars in thousands) 2021 2020 2019

(dollars in millions) 2022 2021 2020

OPERATING ACTIVITIES

Net income $ 1,098 $ 547 $ 492

Undistributed net income of subsidiaries ( 368,152 ) ( 258,981 ) ( 302,919 )

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

Distributed (undistributed) net income of subsidiaries 221 ( 368 ) ( 259 )

Deferred tax expense 48 — —

Net amortization of premiums and discounts 1 1 1

Marketable equity securities gains, net ( 34,081 ) ( 29,395 ) ( 20,625 )

Realized gains on investment securities available for sale, net — — ( 20 )

Fair value adjustment on marketable equity securities, net 6 ( 34 ) ( 29 )

Stock based compensation expense 19 — —

Net change in due to/from subsidiaries — 4 ( 3 )

Change in other assets 6,722 ( 3,074 ) ( 2,001 )

Change in other liabilities 3,265 ( 694 ) 981

Net change in other assets ( 3 ) 7 ( 3 )

Net change in other liabilities ( 2 ) 3 ( 1 )

Net cash provided by operating activities 1,388 160 198

INVESTING ACTIVITIES

Net change in loans — — 100,000

Net change in overnight investments ( 4,109 ) 940 2,162

Purchases of marketable equity securities ( 1,563 ) ( 333,140 ) ( 26,166 )

Net decrease (increase) in interest-earning deposits at banks 3 ( 4 ) 1

Purchase of marketable equity securities — ( 2 ) ( 333 )

Proceeds from sales of marketable equity securities — 30 353

Proceeds from sales, calls, and maturities of securities 2,000 1,000 3,477

Proceeds from sales, calls, and maturities of investment securities — 2 1

Investment in subsidiaries — — ( 423 )

Net cash provided by (used in) investing activities 26,124 ( 400,865 ) 136,222

Net cash paid in acquisition ( 51 ) — —

Net cash (used in) provided by investing activities ( 48 ) 26 ( 401 )

FINANCING ACTIVITIES

Net change in short-term borrowings — ( 40,277 ) 40,277

Repayment of long-term obligations ( 20,300 ) ( 33,300 ) ( 3,575 )

Origination of long-term obligations — — 165,000

Net proceeds from subordinated notes issuance — 345,849 —

Net proceeds from preferred stock issuance — 339,937 —

Repurchase of common stock — ( 333,755 ) ( 453,123 )

Repayment of short-term borrowings — — ( 40 )

Repayment of other borrowings ( 68 ) ( 20 ) ( 33 )

Net proceeds from issuance of subordinated debt — — 346

Proceeds from borrowings due to banking subsidiary 20 — —

Net proceeds from issuance of preferred stock — — 340

Repurchase of Class A common stock ( 1,240 ) — ( 334 )

Cash dividends paid ( 83 ) ( 42 ) ( 31 )

Net cash provided by (used in) financing activities ( 61,912 ) 248,061 ( 269,558 )

Net change in cash 124,003 45,143 ( 2,615 )

Cash balance at beginning of year 49,716 4,573 7,188

Cash balance at end of year $ 173,719 $ 49,716 $ 4,573

CASH PAYMENTS FOR:

Other financing activities ( 24 ) — —

Net cash (used in) provided by financing activities ( 1,395 ) ( 62 ) 248

Net change in cash and due from banks ( 55 ) 124 45

Cash and due from banks at beginning of year 174 50 5

Cash and due from banks at end of year $ 119 $ 174 $ 50

CASH PAYMENTS (REFUNDS) FOR:

Interest $ 18 $ 17 $ 13

Income taxes 810,116 106,618 78,345

The following table presents the primary components of other assets as of December 31, 2021 and 2020:

(Dollars in thousands) 2021 2020

Income taxes receivable $ 798,640 $ 66,465

Pension assets 289,030 157,902

Investment in low-income housing tax credits 156,588 163,866

Cash surrender value of life insurance 113,391 111,671

Right of use assets for operating leases, net of accumulated amortization 63,207 68,048

Federal Home Loan Bank stock 40,450 45,392

Prepaid expenses 37,660 40,489

Other 158,390 130,119

Total other assets $ 1,657,356 $ 783,953

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SUBSEQUENT EVENTS

On January 3, 2022, BancShares closed the CIT Merger pursuant to the Merger Agreement.

The CIT Merger will be accounted for as a business combination.

The assets and liabilities of CIT will be recorded at fair value.

As discussed in Note B, Business Combinations, fair values are subject to refinement for up to one year after the closing date of the acquisition as additional information regarding closing date fair value becomes available.

Due to the timing of the CIT Merger, the fair value estimates of CIT’s assets and liabilities are not available to disclose in these Consolidated Financial Statements as of and for the year ended December 31, 2021.

Pursuant to the Merger Agreement, the Boards of Directors of the Parent Company and FCB now consist of 14 directors, (i) 11 of whom were legacy members of the Board of Directors of the Parent Company, and (ii) three of whom were selected from the former Board of Directors of CIT.

Common Stock Conversion

Pursuant to the Merger Agreement, each share of CIT common stock, par value $ 0.01 per share (“CIT Common Stock”), issued and outstanding, except for certain shares of CIT Common Stock owned by CIT or BancShares, was converted into the right to receive 0.062 shares (the “Exchange Ratio” and such shares, the “Merger Consideration”) of the Parent Company’s Class A Common Stock, par value $ 1.00 per share (“Class A Common Stock”), plus, cash in lieu of fractional shares of Class A Common Stock.

The Parent Company issued approximately 6.1 million shares of its Class A Common Stock in connection with the consummation of the CIT Merger.

The closing share price was $859.76 on the Nasdaq Global Select Market on January 3, 2022.

There were approximately 8,800 fractional shares for which the Parent Company paid cash of approximately $ 7.2 million.

Preferred Stock Conversion

Pursuant to the terms of the Merger Agreement, each issued and outstanding share of fixed-to-floating rate non-cumulative perpetual preferred stock, series A, par value $ 0.01 per share, of CIT (“CIT Series A Preferred Stock”) and each issued and outstanding share of 5.625 % non-cumulative perpetual preferred stock, series B, par value $ 0.01 per share, of CIT (“CIT Series B Preferred Stock”), converted into the right to receive one share of a newly created series of preferred stock, series B, of the Parent Company (“BancShares Series B Preferred Stock”) and one share of a newly created series of preferred stock, series C, of the Parent Company (“BancShares Series C Preferred Stock” and together with the BancShares Series B Preferred Stock, the “New BancShares Preferred Stock”), respectively, having such rights, preferences, privileges and voting powers, and limitations and restrictions, taken as a whole, that are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers, and limitations and restrictions, taken as a whole, of the CIT Series A Preferred Stock and the CIT Series B Preferred Stock, respectively.

The non-callable period for the New BancShares Preferred Stock was extended for five years to January 4, 2027.

There are 325,000 shares of BancShares Series B Preferred Stock with a liquidation preference of $ 1,000 per share, resulting in a total liquidation preference of $ 325 million.

There are 8 million shares of BancShares Series C Preferred Stock with a liquidation preference of $ 25 per share, resulting in a total liquidation preference of $ 200 million.

The New BancShares Preferred Stock qualifies as Tier 1 capital.

Restricted Stock Conversion

Pursuant to the terms of the Merger Agreement, (i) each restricted stock unit (“RSU”) award or performance stock unit (“PSU”) award in respect of shares of CIT Common Stock, including any deferred RSU award (each, a “CIT Award”) outstanding, other than a CIT Director RSU Award (defined below), automatically converted into a RSU in respect of a number of shares of Class A Common Stock (a “BancShares Award”) equal to (a) the number of shares of CIT Common Stock subject to such CIT Award based on target level performance multiplied by (b) the Exchange Ratio, subject to the same terms and conditions applicable to the existing CIT Award (except, in the case of PSU awards, for any performance goals or metrics), and (ii) each RSU award in respect of shares of CIT Common Stock that (a) was outstanding and unvested, (b) was held by a member of the Board of Directors of CIT, (c) automatically vested upon close of the CIT Merger in accordance with its terms, and (d) was not subject to a deferral election (each, a “CIT Director RSU Award”) automatically converted into the right to receive the applicable Merger Consideration.

Updates to Operating Segments

As of December 31, 2021, BancShares managed its business and reported its financial results as a single segment.

Due to the CIT Merger, BancShares will begin reporting multiple segments during the first quarter of 2022.

BancShares plans to report

FIRST CITIZENS BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

financial results in three operating segments:

General Banking, Commercial Banking, and Rail, and a non-operating segment, Corporate.

BancShares will also conform prior period comparisons to any new segment presentation.

Based on the planned approach for segment disclosures to be implemented during the first quarter of 2022, the substantial majority of BancShares’ operations for historical periods prior to the CIT Merger will be reflected in the General Banking segment.

Assumption of Debt Securities

In connection with the CIT Merger, FCB assumed the following issued and outstanding series of CIT debt securities:

(i) $ 1.25 billion 5.00 % Senior Unsecured Notes due 2022 (the “2022 Notes”), (ii) $ 750 million 5.00 % Senior Unsecured Notes due 2023 (the “2023 Notes”);

(iii) $ 500 million 4.750 % Senior Unsecured Notes due 2024 (the “2024 Notes”);

(iv) $ 500 million 3.929 % Senior Unsecured Fixed-to-Floating Rate Notes due 2024;

(v) $ 500 million 5.250 % Senior Unsecured Notes due 2025 (the “2025 Notes”);

(vi) $ 550 million 2.969 % Senior Unsecured Fixed-to-Floating Rate Notes due 2025;

(vii) $ 500 million 6.00 % Senior Notes due 2036;

(viii) $ 400 million 6.125 % Subordinated Notes due 2028;

and (ix) $ 100 million 4.125 % Fixed-to-Floating Rate Subordinated Notes due 2029.

Redemption of Assumed Senior Unsecured Note s

As part of its liability management to reduce higher debt costs, on January 24, 2022 BancShares announced FCB’s intention, and on February 24, 2022, completed, a redemption of approximately $ 2.9 billion of senior unsecured notes that were assumed in the CIT Merger.

Using excess cash from deposit growth, FCB redeemed all of the outstanding $ 1.1 billion aggregate principal amount of the 2022 Notes, $ 750 million aggregate principal amount of the 2023 Notes, $ 500.0 million aggregate principal amount of the 2024 Notes, and $ 500 million aggregate principal amount of the 2025 Notes.

(Refunds) payments for income taxes ( 536 ) 810 107

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 8. Financial Statements and Supplementary Data