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Item 2. Management’s Discussion and Analysis

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 
 
 Management’s discussion and analysis (“MD&A”) of earnings and related financial data is presented to assist in understanding the financial condition and results of operations of First Citizens BancShares, Inc. (the “Parent Company” and, when including all of its subsidiaries on a consolidated basis, “we,” “us,” “our,” or “BancShares”) and its banking subsidiary, First-Citizens Bank & Trust Company (“FCB”). Unless otherwise noted, the terms “we,” “us,” “our,” and “BancShares” in this section refer to the consolidated financial position and consolidated results of operations for BancShares. 
 
 This MD&A is expected to provide our investors with a view of our financial condition and results of operations from our management’s perspective. This MD&A should be read in conjunction with the unaudited consolidated financial statements and related notes presented within this Quarterly Report on Form 10-Q (this “Form 10-Q”), along with our consolidated financial statements and related MD&A of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”). Throughout this MD&A, references to a specific “Note” refer to Notes to the Consolidated Financial Statements (Unaudited) in Item 1. Financial Statements. 
 
 Intercompany accounts and transactions have been eliminated. Refer to Note 1—Significant Accounting Policies and Basis of Presentation for further information. 
 
 Management uses certain financial measures that are not presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) in its analysis of the financial condition and results of operations of BancShares. Refer to the "Non-GAAP Financial Measurements" section of this MD&A for a reconciliation of these financial measures to the most directly comparable financial measures in accordance with GAAP. 
 
 EXECUTIVE OVERVIEW 
 
 The Parent Company is a bank holding company (“BHC”) and financial holding company. The Parent Company is regulated by the Board of Governors of the Federal Reserve System (“Federal Reserve”) under the U.S. Bank Holding Company Act of 1956, as amended. The Parent Company is also registered under the BHC laws of North Carolina and is subject to supervision, regulation and examination by the North Carolina Office of the Commissioner of Banks (the “NCCOB”). BancShares conducts its banking operations through its wholly owned subsidiary, FCB, a state-chartered bank organized under the laws of the state of North Carolina. FCB is regulated by the NCCOB. In addition, FCB, as an insured depository institution, is supervised by the Federal Deposit Insurance Corporation (the “FDIC”). 
 
 BancShares provides financial services for a wide range of consumer and commercial clients. BancShares offers deposit products, loans, and wealth management and private banking services to consumer clients. BancShares provides lending, leasing, capital markets and other financial and advisory services, to small and middle-market companies across a variety of industries. Additionally, BancShares provides a full suite of financial products and services to private equity firms, venture capital firms, and commercial clients in innovation markets, such as technology, life sciences and healthcare industries. BancShares also provides deposit, cash management and lending to homeowner associations and property management companies and owns a fleet of railcars and locomotives that are leased to railroads and shippers. 
 
 BancShares delivers banking products and services to its customers through an extensive branch network and additionally operates a nationwide digital banking platform that delivers deposit products to consumers (the “Direct Bank”). Services offered at most branches include accepting deposits, cashing checks and providing for consumer and commercial cash needs. Consumer and business customers may also conduct banking transactions through various digital channels. 
 
 In addition to our banking operations, we provide various investment products and services through FCB’s wholly owned subsidiaries, including First Citizens Investor Services, Inc. (“FCIS”), First Citizens Asset Management, Inc. (“FCAM”), and First Citizens Delaware Trust Company, and a non-bank subsidiary, First Citizens Capital Securities, LLC (“FCCS”). As a registered broker-dealer, FCIS provides a full range of investment products, including annuities, brokerage services and third-party mutual funds. As registered investment advisers, FCIS and FCAM provide investment management services and advice. FCCS is a broker-dealer that also provides underwriting and private placement services. We also have other wholly owned subsidiaries, including SVB Wealth LLC, SVB Asset Management, and First Citizens Institutional Asset Management, LLC, which are active investment advisers. 
 
 Refer to Note 18—Segment Information for further information regarding the products and services we provide. 
 
 Refer to the 2025 Form 10-K for a discussion of our strategy. 
 50 

 Recent Events 
 
 Equity Transactions 
 Share Repurchase Programs 
 During the first quarter of 2026, we repurchased 449,845 shares of our Class A common stock for $900 million and paid a dividend of $2.10 per share on our Class A and Class B common stock. Shares repurchased during the first quarter of 2026 represented 4.04% of Class A common stock and 3.71% of total Class A and Class B common stock outstanding at December 31, 2025. From inception of the 2024 share repurchase program (“2024 SRP”) through March 31, 2026, we have repurchased 2,842,948 shares of our Class A common stock for $5.59 billion, representing 21.02% of Class A common stock and 19.57% of total Class A and Class B common stock outstanding as of June 30, 2024. 
 
 From April 1, 2026 through April 30, 2026, BancShares repurchased an additional 102,340 shares of Class A common stock for a total of $203 million and had total capacity remaining under the current share repurchase program (the “2025 SRP”) of $1.71 billion as of April 30, 2026. 
 
 Refer to Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds for first quarter 2026 monthly repurchase activity of Class A common stock. 
 
 Preferred Stock Issuance 
 On February 5, 2026, the Parent Company issued and sold 6.625% non-cumulative perpetual preferred stock, series E for a total of $400 million. Refer to Note 13—Stockholders' Equity for further information, including depositary shares and liquidation preference. 
 
 Debt Transactions 
 Prepayments of the Purchase Money Note 
 In connection with the SVBB Acquisition (as defined in Note 2—Business Combinations), FCB issued a five-year $36.07 billion note payable to the FDIC, maturing March 27, 2028 (the “Purchase Money Note”). The Purchase Money Note had a carrying value of $30.91 billion and $33.39 billion at March 31, 2026 and December 31, 2025, respectively. During the current quarter, we prepaid $2.50 billion of the Purchase Money Note which resulted in an $8 million loss on extinguishment of debt. The outstanding balance of the Purchase Money Note declined from $35.85 billion at September 30, 2025 to $30.91 billion at March 31, 2026. We will continue to monitor the interest rate environment, FCB’s collateral position for the Purchase Money Note, and FCB’s liquidity position to determine the timing and magnitude of further prepayments as discussed below in the Funding, Liquidity and Capital Overview. We expect monthly prepayments to be at least $500 million throughout 2026. In April 2026, we made an additional prepayment of $500 million. 
 
 Debt Issuance 
 On March 3, 2026, the Parent Company issued and sold $500 million aggregate principal amount of its 4.869% Fixed-to-Floating Rate Senior Notes due in 2032 in a public offering (the “Current Quarter Debt Issuance”). 
 
 Pending Branch Acquisition 
 On October 16, 2025, FCB announced the BMO Branch Acquisition (as defined in Note 2—Business Combinations) to acquire 138 branches from BMO Bank N.A.located throughout the Midwest, Great Plains and West regions of the U.S. In connection with the BMO Branch Acquisition, FCB expects to assume approximately $5.3 billion in deposit liabilities and acquire approximately $1.1 billion in loans. We expect the transaction to close in the second half of 2026, subject to customary closing terms and conditions and the receipt of remaining regulatory approvals. 
 
 Commercial Banking Brand Alignment 
 On April 23, 2026, FCB announced plans to expand its commercial banking capabilities and to align brand names later this year. In the fourth quarter of 2026, Silicon Valley Bank (“SVB”), a division of FCB, will rebrand as First Citizens Innovation Banking and First Citizens Fund Banking, and CIT Commercial Services and the Silicon Valley Bank Wine division will rebrand as FCB. 
 51 

 Recent Economic, Industry and Regulatory Developments 
 Economic conditions reflected heightened uncertainty in the first quarter of 2026, as inflationary pressures, due in part to global energy constraints related to the conflicts in the Middle East, contributed to market volatility. We continue to monitor these developments and the broader macroeconomic environment; however, the ultimate effects remain uncertain and dependent on future events. 
 
 Entering 2026, the benchmark federal funds range was between 3.50% - 3.75%. During the January, March, and April 2026 Federal Open Market Committee meetings, the benchmark federal funds rate was left unchanged. 
 
 The U.S. government announced changes to its trade policies in 2025 and significantly increased tariffs on certain imports under emergency authorities, including the International Emergency Economic Powers Act (the “IEEPA”). In February 2026, the Supreme Court ruled that the IEEPA does not authorize the President to impose tariffs. The current tariff environment remains dynamic and uncertain, including with respect to refunds of tariffs paid under the IEEPA and replacement measures under other legal authorities. We continue to closely monitor both the impact and potential impact of such measures on our business, our customers and on overall economic conditions in the United States. 
 
 On March 19, 2026, federal banking regulators issued revised notices of proposed rulemaking to implement the final components of the Basel III accords (the “Basel III proposals”). The proposals include, among other things, a revised standardized approach to calculating risk-weighted assets applicable to Category III and Category IV banking organizations like us, which the Federal Reserve expects to decrease aggregate Common Equity Tier 1 (“CET1”) risk-based capital requirements. Additionally, the revised proposals would eliminate the requirement to deduct mortgage servicing assets from CET1 capital and instead assign a 250% risk weight. We will continue to monitor further developments regarding the proposals and assess potential impacts to our regulatory capital requirements, including enhanced capital flexibility. 
 
 Financial Performance Summary 
 
 The following tables in this MD&A include financial data for the three months ended March 31, 2026 (the “current quarter”), December 31, 2025 (the “linked quarter”) and March 31, 2025 (the “prior year quarter”). In accordance with Item 303(c) of Regulation S-K, we focus our discussion of quarterly results of operations on changes compared to the linked quarter for the narrative discussion and analysis as we believe this provides investors and other users of our data with the most relevant information. We also include commentary comparing current quarter to prior year quarter. 
 
 We focus the discussion of our financial position by comparing balances as of March 31, 2026 to December 31, 2025. Percent changes within this MD&A are based on unrounded amounts and may not recalculate precisely using the displayed rounded balances. 
 
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 Table 1
Selected Financial Data 
 
 dollars in millions, except share data Three Months Ended 
 March 31, 2026 December 31, 2025 March 31, 2025 
 Results of Operations: 
 Interest income $ 2,786 $ 2,940 $ 2,895 
 Interest expense 1,165 1,218 1,232 
 Net interest income 1,621 1,722 1,663 
 Provision for credit losses 72 54 154 
 Net interest income after provision for credit losses 1,549 1,668 1,509 
 Noninterest income 692 715 635 
 Noninterest expense 1,536 1,572 1,493 
 Income before income taxes 705 811 651 
 Income tax expense 171 231 168 
 Net income 534 580 483 
 Preferred stock dividends 26 14 15 
 Net income available to common stockholders $ 508 $ 566 $ 468 
 
 Per Common Share Information: 
 Weighted average common shares outstanding (diluted) 11,924,899 12,363,028 13,575,231 
 Diluted earnings per common share $ 42.63 $ 45.81 $ 34.47 
 
 Key Performance Metrics: 
 Return on average assets 0.93 % 0.99 % 0.87 % 
 Net interest margin (1) 
 3.09 3.20 3.26 
 Net interest margin, excluding purchase accounting accretion or amortization (1) (2) 
 3.01 3.11 3.12 
 
 Select Average Balances: 
 Investment securities $ 41,757 $ 44,306 $ 43,555 
 Total loans and leases (3) 
 149,890 147,047 140,882 
 Operating lease equipment, net 9,660 9,495 9,350 
 Total assets 233,181 233,432 225,449 
 Total deposits 165,927 163,191 156,378 
 Total borrowings 35,334 38,196 37,398 
 Total stockholders’ equity 22,487 22,197 22,457 
 
 Select Ending Balances: 
 Investment securities $ 42,986 $ 41,564 $ 44,319 
 Total loans and leases 148,692 147,930 141,358 
 Operating lease equipment, net 9,685 9,621 9,371 
 Total assets 235,959 229,698 228,822 
 Total deposits 170,842 161,578 159,325 
 Total borrowings 33,962 36,008 38,406 
 Total stockholders’ equity 22,048 22,238 22,295 
 Loan to deposit ratio 87.04 % 91.55 % 88.72 % 
 Noninterest-bearing deposits to total deposits 25.52 25.16 25.59 
 
 Capital Ratios: 
 Total risk-based capital 13.51 % 13.71 % 15.23 % 
 Tier 1 risk-based capital 11.79 11.91 13.35 
 Common equity Tier 1 10.83 11.15 12.81 
 Tier 1 leverage 9.30 9.29 9.75 
 
 Select Asset Quality Metrics: 
 Ratio of nonaccrual loans to total loans 0.96 % 0.88 % 0.85 % 
 Allowance for loan and lease losses to loans ratio 1.05 1.06 1.19 
 
 (1) Calculated net of average credit balances of factoring clients to appropriately reflect the interest-earning portion of factoring receivables. 
 (2) Net interest margin (“NIM”), excluding purchase accounting accretion or amortization (“PAA”), is a non-GAAP financial measure. Refer to the “Net Interest Income (“NII”), NIM, and Interest Income on Loans and Leases, Excluding PAA” discussion in the “Non-GAAP Financial Measurements” section of this MD&A for a reconciliation from the most comparable GAAP measure to the non-GAAP measure. 
 (3) Average loan balances include loans held for sale and nonaccrual loans. 
 
 53 

 Financial highlights are summarized below. Further details are discussed in the “Results of Operations” and “Balance Sheet Analysis” sections of this MD&A. 
 
 Income Statement Highlights (Current Quarter Compared to Linked Quarter) 
 • Net income for the current quarter was $534 million , a decrease of $46 million or 8% from $580 million for the linked quarter. Net income available to common stockholders for the current quarter was $508 million, a decrease of $58 million or 10% from $566 million for the linked quarter. Earnings per basic and diluted common share for the current quarter was $42.63, a decrease from $45.81 for the linked quarter. The decreases in net income and net income available to common stockholders were due to lower NII and noninterest income and higher provision for credit losses, partially offset by lower noninterest expense and lower income tax expense, as further discussed below. 
 • NII for the current quarter was $1.62 billion, a decrease of $101 million or 6% from $1.72 billion for the linked quarter . NIM was 3.09% for the current quarter, a decrease of 11 basis points (“bps”) from 3.20% for the linked quarter. The decreases in NII and NIM were mainly due to lower yields on loans, lower average balances and yields on investment securities and interest-earning deposits at banks, and a higher average balance of interest-bearing deposits, partially offset by the impacts of a higher average balance of loans, lower rate paid on interest-bearing deposits, and a decline in average borrowings largely resulting from prepayments of the Purchase Money Note. 
 ◦ PAA for the current quarter was $39 million, a decrease of $10 million from $49 million for the linked quarter. NIM, excluding PAA (1) was 3.01% for the current quarter, a decrease of 10 bps from 3.11% for the linked quarter. 
 • Noninterest income for the current quarter was $692 million , a decrease of $23 million or 3% from $715 million for the linked quarter, largely due to a decrease in other noninterest income of $15 million, mainly attributable to the linked quarter gain on tax credit investments, an unfavorable change of $9 million in the fair value of marketable equity securities, along with declines of $3 million each in factoring commissions, gain on sale of leasing equipment, and gain on sale of investment securities, partially offset by increases of $7 million in deposit fees and service charges and $5 million in lending-related fees. 
 • Noninterest expense for the current quarter was $1.54 billion, a decrease of $36 million or 2% from $1.57 billion for the linked quarter , mainly due to decreases in acquisition-related expenses of $28 million, other noninterest expense of $16 million and marketing expense of $15 million, partially offset by an increase in personnel cost of $20 million. 
 • Provision for credit losses for the current quarter was $72 million, an increase of $18 million or 33% from $54 million for the linked quarter . The current quarter provision for credit losses primarily included a provision for loan and lease losses of $103 million, partially offset by a benefit for off-balance sheet credit exposure of $32 million. 
 ◦ The provision for loan and lease losses for the current quarter was $103 million compared to $57 million for the linked quarter. The $46 million increase in the provision for loan and lease losses was mainly attributable to the impact of an $8 million reserve release in the current quarter compared to an $86 million reserve release in the linked quarter, partially offset by a decline of $32 million in net charge-offs in the current quarter. The $8 million allowance for loan and lease losses (“ALLL”) reserve release is discussed below in the Balance Sheet Highlights. 
 ◦ The benefit for off-balance sheet credit exposure for the current quarter was $32 million compared to $5 million for the linked quarter, an increase of $27 million, mainly due to changes in the macroeconomic scenarios and trends in the volume of unfunded commitments. 
 • Income tax expense for the current quarter was $171 million, a decrease of $60 million from $231 million for the linked quarter, largely due to return to provision adjustments reflected in the linked quarter. 
 • Return on average assets for the current quarter was 0.93%, a decrease of 6 bps from 0.99% for the linked quarter due to the decrease in net income explained above . 
 
 (1) NIM, excluding PAA is a non-GAAP measure. Refer to the “NII, NIM, and Interest Income on Loans and Leases, Excluding PAA” discussion in the “Non-GAAP Financial Measurements” section of this MD&A for further discussion. 
 
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 Income Statement Highlights (Current Quarter Compared to Prior Year Quarter) 
 • Net income for the current quarter was $534 million, an increase of $51 million or 11% from $483 million for the prior year quarter. Net income available to common stockholders for the current quarter was $508 million, an increase of $40 million or 9% from $468 million for the prior year quarter. Earnings per basic and diluted common share for the current quarter was $42.63, an increase from $34.47 for the prior year quarter. The increases in net income and net income available to common stockholders were due to lower provision for credit losses and higher noninterest income, partially offset by higher noninterest expense and lower NII, as further discussed below. 
 • NII for the current quarter was $1.62 billion, a decrease of $42 million or 3% from $1.66 billion for the prior year quarter. NIM was 3.09% for the current quarter and 3.26% for the prior year quarter. The decreases in NII and NIM were mainly due to lower yields on loans, lower yields and average balances of interest-earning deposits at banks and investment securities, lower PAA, a higher average balance of interest-bearing deposits, and a modest increase in the rate paid on subordinated debt, partially offset by the impacts of a higher average balance of loans and a decline in the rate paid on interest-bearing deposits. 
 ◦ PAA for the current quarter was $39 million, a decrease of $36 million from $75 million for the prior year quarter. NIM, excluding PAA (1) was 3.01% for the current quarter, a decrease of 11 bps from 3.12% for the prior year quarter. 
 • Noninterest income for the current quarter was $692 million, an increase of $57 million or 9% from $635 million for the prior year quarter, largely due to increases in other noninterest income of $24 million, deposit fees and service charges of $12 million, rental income on operating lease equipment of $11 million, along with a favorable change of $8 million in the fair value of marketable equity securities, and an increase of $6 million in the gain on sale of leasing equipment. 
 • Noninterest expense for the current quarter was $1.54 billion, an increase of $43 million or 3% from $1.49 billion for the prior year quarter, mainly due to increases in personnel cost of $51 million, third-party processing fees of $30 million, and maintenance and other operating lease expenses of $7 million, partially offset by decreases in acquisition-related expenses of $37 million and other noninterest expense of $8 million. 
 • Provision for credit losses for the current quarter was $72 million, a decrease of $82 million or 53% from $154 million for the prior year quarter, primarily consisting of the following: 
 ◦ The provision for loan and lease losses for the current quarter was $103 million compared to $148 million for the prior year quarter. The $45 million decrease in the provision for loan and lease losses was mainly attributable to a decrease in net charge-offs of $33 million and a $12 million decline in the reserve release. In the current quarter, the reserve release was $8 million, compared to a $4 million reserve build in the prior year quarter. The $8 million ALLL reserve release for the current quarter is discussed below in the Balance Sheet Highlights. 
 ◦ The benefit for off-balance sheet credit exposure for the current quarter was $32 million compared to a provision for the prior year quarter of $6 million, resulting in a decrease in provision of $38 million, mainly due to changes in the macroeconomic scenarios and trends in the volume of unfunded commitments. 
 • Return on average assets for the current quarter was 0.93%, an increase of 6 bps from 0.87% for the prior year quarter due to the increase in net income explained above . 
 
 (1) NIM, excluding PAA is a non-GAAP measure. Refer to the “NII, NIM, and Interest Income on Loans and Leases, Excluding PAA” discussion in the “Non-GAAP Financial Measurements” section of this MD&A for further discussion. 
 55 

 Balance Sheet Highlights 
 • Loans and leases at March 31, 2026 were $148.69 billion, an increase of $762 million or 1% from $147.93 billion at December 31, 2025. Commercial Bank segment loan growth of $1.35 billion, mainly concentrated in Global Fund Banking, was partially offset by a decrease in General Bank segment loans of $591 million, primarily due to the transfer of $364 million Small Business Administration (“SBA”) loans to held for sale in March 2026. 
 • Investment securities at March 31, 2026 were $42.99 billion, an increase of $1.42 billion or 3% from $41.56 billion at December 31, 2025, as purchases of short duration available for sale U.S. treasury and agency mortgage-backed securities were partially offset by maturities and paydowns. 
 • Deposits at March 31, 2026 were $170.84 billion, an increase of $9.26 billion or 6% from $161.58 billion at December 31, 2025. As further discussed and shown in Table 2 below, the increase from December 31, 2025 was attributable to deposit growth in the Commercial Bank segment of $5.66 billion, Corporate of $2.49 billion, and the General Bank segment of $1.12 billion. Noninterest-bearing deposits grew by $2.95 billion or 7% compared to December 31, 2025, and represented 25.5% of total deposits as of March 31, 2026, compared to 25.2% at December 31, 2025. 
 • Borrowings at March 31, 2026 were $33.96 billion, a decrease of $2.05 billion or 6% from $36.01 billion at December 31, 2025. The decrease was primarily due to prepayments of $2.50 billion on the Purchase Money Note during the current quarter, partially offset by the $500 million Current Quarter Debt Issuance. 
 • The ALLL was $1.56 billion at March 31, 2026, compared to $1.57 billion at December 31, 2025, resulting in an ALLL reserve release of $8 million for the current quarter, largely due to loan growth concentrated in capital call lines, which have a significantly lower loss rate relative to our other loan portfolios, and changes in the macroeconomic scenarios, partially offset by higher reserves for individually evaluated loans. The ALLL as a percentage of loans was 1.05% at March 31, 2026, a decrease of 1 bp from 1.06% at December 31, 2025. 
 • Interest-earning deposits at banks were $23.19 billion at March 31, 2026, an increase of $3.39 billion compared to $19.80 billion at December 31, 2025, a function of the balance sheet trends discussed above. 
 • At March 31, 2026, BancShares remained well capitalized with a total risk-based capital ratio of 13.51%, a Tier 1 risk-based capital ratio of 11.79%, a CET1 ratio of 10.83% and a Tier 1 leverage ratio of 9.30%. 
 
 Funding, Liquidity and Capital Overview 
 
 Deposit Composition and Trends 
 We fund our business primarily through deposits. Deposits represented 83% of total funding at March 31, 2026. 
 
 Table 2
Deposit Trends 
 
 dollars in millions Deposit Balance 
 
 March 31, 2026 December 31, 2025 
 General Bank segment $ 75,914 $ 74,796 
 Commercial Bank segment 47,191 41,532 
 
 Corporate and Rail segment 47,737 45,250 
 Total deposits $ 170,842 $ 161,578 

 Deposit trends for the segments and Corporate at March 31, 2026 compared to December 31, 2025 are discussed below: 
 • Commercial Bank segment deposit growth of $5.66 billion was mainly in Gl obal Fund Banking and Technology and Healthcare Banking. A portion of this deposit growth stems from large short-term deposits which we expect to outflow or move off-balance sheet shortly after March 31, 2026. Most of the growth was in noninterest-bearing demand and money-market deposits. 
 • Corporate deposit growth of $2.49 billion was primarily due to brokered and Direct Bank deposit increases of $1.83 billion and $606 million, respectively. We utilized brokered deposits more prevalently in the current quarter as rates were favorable relative to Direct Bank deposits. We will continue to monitor the rate environments for brokered and Direct Bank deposits to determine the target growth for these deposit channels. 
 • General Bank segment deposit growth of $1.12 billion was primarily concentrated in our Branch Network and Community Association Banking (“CAB”). Deposit growth was mostly in money market and interest checking. 
 
 Total uninsured deposits were $65.44 billion or 38% of total deposits at March 31, 2026 and $61.81 billion or 38% at December 31, 2025. 
 
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 Refer to the “Balance Sheet Analysis—Interest-bearing Liabilities—Deposits” section of this MD&A for further discussion of deposits. 
 
 Liquidity Position 
 We strive to maintain a strong liquidity position and our risk appetite for liquidity is low. At March 31, 2026, we had $60.72 billion in high-quality liquid assets consisting of $22.14 billion in cash and interest-earning deposits at banks (primarily held at the Federal Reserve Bank (“FRB”)) and $38.58 billion in high-quality liquid securities (“HQLS”), mainly comprised of U.S. agency mortgage-backed and U.S. Treasury investment securities. Additionally, we have unused borrowing capacity with the Federal Home Loan Bank (“FHLB”) and FRB of $17.35 billion and $12.94 billion, respectively. Refer to the “Risk Management—Liquidity Risk” section of this MD&A for further discussion. 
 
 In connection with the SVBB Acquisition, FCB issued a five-year, 3.50% fixed rate Purchase Money Note, which had a carrying value of $30.91 billion at March 31, 2026. While scheduled principal payments are not required until maturity in March 2028, FCB may voluntarily prepay principal without a premium or penalty. FCB prepaid $2.50 billion of the Purchase Money Note during the current quarter and previously prepaid $2.49 billion in December 2025, which reduced the outstanding balance from $35.85 billion at September 30, 2025 to $30.91 billion at March 31, 2026. Additionally, we prepaid $500 million in April 2026. We will continue to monitor the interest rate environment, FCB’s collateral position for the Purchase Money Note, and FCB’s liquidity position to determine the timing and magnitude of further voluntary prepayments. We expect monthly prepayments to be at least $500 million throughout 2026. Potential sources that could fund voluntary prepayments or the amount due at maturity include excess liquidity (primarily comprised of interest-earning deposits at banks and proceeds from maturities and paydowns of investment securities), deposit growth including brokered deposits, loan sales or securitizations, FHLB advances, and issuance of perpetual preferred stock, unsecured debt or other borrowings. At the time of any further voluntary prepayment or maturity, the interest rates for the potential interest-bearing sources of prepayment could be higher than the 3.50% rate. 
 
 Investment Securities Duration 
 At March 31, 2026, our investment securities portfolio primarily consisted of debt securities available for sale and held to maturity as summarized below. We manage debt security market risk by monitoring the average duration of our investment securities portfolio. The duration of our investment securities was 2.6 years at March 31, 2026. The investment securities available for sale portfolio had an average duration of 2.2 years and the held to maturity portfolio had an average duration of 4.0 years. Refer to the “Balance Sheet Analysis—Interest-earning Assets—Investment Securities” section of this MD&A and Note 3—Investment Securities for further information. 
 
 Table 3
Investment Securities Summary 
 
 dollars in millions March 31, 2026 
 Composition (1) 
 Amortized Cost Fair Value 
 Fair Value to Amortized Cost 
 
 Total investment securities available for sale 79.7 % $ 33,663 $ 33,314 99.0 % 
 Total investment securities held to maturity 20.0 9,542 8,360 87.6 
 Investment in marketable equity securities 0.3 83 130 156.9 
 Total investment securities 100 % $ 43,288 $ 41,804 
 (1) Calculated as a percentage of the total fair value of investment securities. 
 
 Capital Position 
 At March 31, 2026, all regulatory capital ratios for BancShares and FCB exceeded the prompt corrective action (“PCA”) thresholds, well capitalized thresholds, and Basel III requirements established by the federal banking agencies as further discussed in the “Capital” section of this MD&A. 
 
 57 

 RESULTS OF OPERATIONS 
 
 Net Interest Income and Net Interest Margin 
 
 NII is affected by changes in interest rates and changes in the amount and composition of interest-earning assets and interest-bearing liabilities. Interest income and expense and the respective yields and rates include amortization of premiums, accretion of discounts, and impacts from hedging activities. 
 
 The following tables present the average balances of interest-earning assets and interest-bearing liabilities with the associated yields and rates, interest income and expense, and changes therein due to changes in volume and yields or rates. Changes in interest income and expense due to changes in (i) volume (average balances of interest-earning assets and interest-bearing liabilities) and (ii) yields or rates are based on the following: 
 • The change in NII due to volume is calculated as the change in average balance multiplied by the yield or rate from the prior period. 
 • The change in NII due to yield or rate is calculated as the change in yield or rate multiplied by the average balance from the prior period. 
 • The change in NII due to changes in both volume and yield or rate (i.e., portfolio mix) is calculated as the change in rate multiplied by the change in volume. This component is allocated between the changes due to volume and yield or rate based on the ratio each component bears to the absolute dollar amounts of their total. 
 • Tax equivalent NII was not materially different from NII, therefore we present NII in our analysis. 
 
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 Table 4
Average Balances, Yields and Rates, NII, and NIM (Current Quarter Compared to Linked Quarter) 
 
 dollars in millions Average Balance Yield / Rate Interest Income / Expense 
 Three Months Ended Increase (Decrease) Three Months Ended Three Months Ended Increase (Decrease) due to: 
 Mar 31, 2026 Dec 31, 2025 Mar 31, 2026 Dec 31, 2025 Increase (decrease) bps Mar 31, 2026 Dec 31, 2025 Increase (Decrease) Volume (1) 
 Yield /Rate (1) 
 
 Loans and leases (1) (2) 
 $ 148,666 $ 145,689 $ 2,977 2.0 % 6.01 % 6.24 % (23) $ 2,206 $ 2,290 $ (84) $ 30 $ (114) 
 Investment securities 41,757 44,306 (2,549) (5.8) 3.67 3.80 (13) 382 421 (39) (25) (14) 
 Securities purchased under agreements to resell 305 285 20 7.0 3.65 4.00 (35) 2 3 (1) — (1) 
 Interest-earning deposits at banks 21,824 23,014 (1,190) (5.2) 3.64 3.90 (26) 196 226 (30) (13) (17) 
 Total interest-earning assets (2) 
 $ 212,552 $ 213,294 $ (742) (0.3) 5.30 5.48 (18) $ 2,786 $ 2,940 $ (154) $ (8) $ (146) 
 
 Noninterest-earning assets 20,629 20,138 491 2.4 
 Total assets $ 233,181 $ 233,432 $ (251) (0.1) 
 
 Interest-bearing deposits 
 Checking with interest $ 25,341 $ 23,907 $ 1,434 6.0 % 1.52 % 1.57 % (5) $ 95 $ 94 $ 1 $ 4 $ (3) 
 Money market 41,196 39,792 1,404 3.5 2.38 2.59 (21) 242 260 (18) 6 (24) 
 Savings 46,720 46,618 102 0.2 3.46 3.51 (5) 398 412 (14) — (14) 
 Time deposits 11,946 11,116 830 7.5 3.31 3.38 (7) 98 95 3 5 (2) 
 Total interest-bearing deposits 125,203 121,433 3,770 3.1 2.70 2.81 (11) 833 861 (28) 15 (43) 
 Borrowings: 
 
 Short-term borrowings 197 265 (68) (25.6) 0.37 0.52 (15) — — — — — 
 
 Senior unsecured borrowings 718 556 162 29.3 5.23 5.27 (4) 10 7 3 3 — 
 Subordinated debt 1,771 1,774 (3) (0.2) 5.28 5.20 8 23 24 (1) (1) — 
 Other borrowings 32,648 35,601 (2,953) (8.3) 3.66 3.67 (1) 299 326 (27) (27) — 
 Long-term borrowings 35,137 37,931 (2,794) (7.4) 3.78 3.76 2 332 357 (25) (25) — 
 Total borrowings 35,334 38,196 (2,862) (7.5) 3.76 3.74 2 332 357 (25) (25) — 
 Total interest-bearing liabilities $ 160,537 $ 159,629 $ 908 0.6 2.93 3.03 (10) $ 1,165 $ 1,218 $ (53) $ (10) $ (43) 
 
 Noninterest-bearing liabilities $ 50,157 $ 51,606 $ (1,449) (2.8) 
 Stockholders' equity 22,487 22,197 290 1.3 
 Total liabilities and stockholders’ equity $ 233,181 $ 233,432 $ (251) (0.1) 
 
 Net interest spread (2) 
 2.37 % 2.45 % (8) 
 Net interest margin and net interest income (2) 
 3.09 % 3.20 % (11) $ 1,621 $ 1,722 $ (101) 

 (1) Loans and leases include nonaccrual loans and loans held for sale. Interest income on loans and leases includes accretion income and loan fees. 
 (2) The average balances and yields for loans and leases are calculated net of average credit balances of factoring clients to appropriately reflect the interest-earning portion of factoring receivables. 
 
 59 

 NII and NIM (Current Quarter Compared to Linked Quarter) 
 The table above quantifies the increases or decreases for the current quarter compared to the linked quarter for NII and NIM, as well as average balances of interest-earning assets and interest-bearing liabilities, and the respective yields earned and rates paid. The main reasons for the increases and decreases are explained below: 
 • NII for the current quarter was $1.62 billion, a decrease of $101 million or 6% from $1.72 billion for the linked quarter. NII, excluding PAA, (1) was $1.58 billion for the current quarter, a decrease of $91 million, from $1.67 billion for the linked quarter. The main reasons for the decreases in NII and NII, excluding PAA, (1) are explained below: 
 ◦ Interest income on loans and leases for the current quarter was $2.21 billion, a decrease of $84 million or 4% from $2.29 billion for the linked quarter, mainly due to a lower yield and lower loan PAA, partially offset by the impact of a higher average balance. 
 ◦ Interest income on loans and leases, excluding loan PAA, (1) was $2.16 billion for the current quarter, a decrease of $73 million from $2.23 billion for the linked quarter . 
 ◦ Loan PAA was $48 million in the current quarter, a decrease of $11 million or 19% from $59 million in the linked quarter. 
 ◦ Interest income on investment securities (including securities purchased under agreements to resell) for the current quarter was $384 million, a decrease of $40 million or 9% from $424 million for the linked quarter, due to decreases in the average balance and yield. 
 ◦ Interest income on interest-earning deposits at banks for the current quarter was $196 million, a decrease of $30 million or 14% from $226 million for the linked quarter, due to a lower average balance and a decline in yield. 
 ◦ Interest expense on interest-bearing deposits for the current quarter was $833 million, a decrease of $28 million or 3% from $861 million for the linked quarter, as a lower rate paid was partially offset by the impact of a higher average balance. 
 ◦ Interest expense on borrowings for the current quarter was $332 million, a decrease of $25 million or 7% from $357 million for the linked quarter, mainly due to a lower average balance as a result of prepayments of the Purchase Money Note. 
 • NIM for the current quarter was 3.09%, a decrease of 11 bps from 3.20% for the linked quarter. The decline in NIM was mainly due to a lower yield on loans, lower average balances and yields on investment securities and interest-earning deposits at banks, and a higher average balance of interest-bearing deposits, partially offset by the impacts of a higher average balance of loans, a lower rate paid on interest-bearing deposits, and a lower average balance of borrowings. NIM, excluding PAA, (1) was 3.01% for the current quarter, a decrease of 10 bps from 3.11% for the linked quarter. 
 ◦ The yield on average interest-earning assets for the current quarter was 5.30%, a decrease of 18 bps from 5.48% for the linked quarter, mainly due the following: 
 ▪ A lower loan yield resulting from lower interest rates and a decline in loan PAA, partially offset by the impact of a higher average balance. 
 ▪ A lower yield on investment securities resulting from a lower average balance and lower interest rates. 
 ▪ A lower yield on interest-earning deposits at banks resulting from a lower average balance and a decline in the federal funds rate. 
 ◦ The rate paid on average interest-bearing liabilities for the current quarter was 2.93%, a decrease of 10 bps from 3.03% for the linked quarter, primarily due to a lower rate paid on interest-bearing deposits and a lower average balance of borrowings, partially offset by the impact of a higher average balance of interest-bearing deposits. 
 
 (1) Refer to the “NII, NIM, and Interest Income on Loans and Leases, Excluding PAA” discussion in the “Non-GAAP Financial Measurements” section of this MD&A for further information. 
 
 Refer to the “Executive Overview—Financial Performance Summary—Balance Sheet Highlights,” “Balance Sheet Analysis—Interest-earning Assets,” and “Balance Sheet Analysis—Interest-bearing Liabilities” sections of this MD&A for discussions of balance sheet trends that impact average interest-earning assets, average interest-bearing liabilities, and the related yields and rates paid. 
 60 

 Table 5
Average Balances, Yields and Rates, NII, and NIM (Current Quarter Compared to Prior Year Quarter) 
 
 dollars in millions Average Balance Yield / Rate Interest Income / Expense 
 Three Months Ended Increase (Decrease) Three Months Ended Three Months Ended Increase (Decrease) due to: 
 Mar 31, 2026 Mar 31, 2025 Mar 31, 2026 Mar 31, 2025 Increase (decrease) bps Mar 31, 2026 Mar 31, 2025 Increase (Decrease) Volume (1) 
 Yield /Rate (1) 
 
 Loans and leases (1) (2) 
 $ 148,666 $ 139,491 $ 9,175 6.6 % 6.01 % 6.49 % (48) $ 2,206 $ 2,236 $ (30) $ 141 $ (171) 
 Investment securities 41,757 43,555 (1,798) (4.1) 3.67 3.79 (12) 382 411 (29) (16) (13) 
 Securities purchased under agreements to resell 305 283 22 8.0 3.65 4.37 (72) 2 3 (1) — (1) 
 Interest-earning deposits at banks 21,824 22,699 (875) (3.8) 3.64 4.38 (74) 196 245 (49) (9) (40) 
 Total interest-earning assets (2) 
 $ 212,552 $ 206,028 $ 6,524 3.2 5.30 5.68 (38) $ 2,786 $ 2,895 $ (109) $ 116 $ (225) 
 
 Noninterest-earning assets 20,629 19,421 1,208 6.1 
 Total assets $ 233,181 $ 225,449 $ 7,732 3.4 
 
 Interest-bearing deposits 
 Checking with interest $ 25,341 $ 23,931 $ 1,410 5.9 1.52 % 1.77 % (25) $ 95 $ 104 $ (9) $ 6 $ (15) 
 Money market 41,196 36,760 4,436 12.1 2.38 2.83 (45) 242 257 (15) 28 (43) 
 Savings 46,720 43,918 2,802 6.4 3.46 3.85 (39) 398 417 (19) 25 (44) 
 Time deposits 11,946 12,615 (669) (5.3) 3.31 3.71 (40) 98 115 (17) (5) (12) 
 Total interest-bearing deposits 125,203 117,224 7,979 6.8 2.70 3.09 (39) 833 893 (60) 54 (114) 
 Borrowings: 
 
 Short-term borrowings 197 428 (231) (53.9) 0.37 0.52 (15) — 1 (1) (1) — 
 
 Senior unsecured borrowings 718 169 549 325.6 5.23 4.88 35 10 2 8 8 — 
 Subordinated debt 1,771 959 812 84.6 5.28 3.36 192 23 8 15 9 6 
 Other borrowings 32,648 35,842 (3,194) (8.9) 3.66 3.66 — 299 328 (29) (29) — 
 Long-term borrowings 35,137 36,970 (1,833) (5.0) 3.78 3.66 12 332 338 (6) (12) 6 
 Total borrowings 35,334 37,398 (2,064) (5.5) 3.76 3.62 14 332 339 (7) (13) 6 
 Total interest-bearing liabilities $ 160,537 $ 154,622 $ 5,915 3.8 2.93 3.22 (29) $ 1,165 $ 1,232 $ (67) $ 41 $ (108) 
 
 Noninterest-bearing liabilities $ 50,157 $ 48,370 $ 1,787 3.7 
 Stockholders' equity 22,487 22,457 30 0.1 
 Total liabilities and stockholders’ equity $ 233,181 $ 225,449 $ 7,732 3.4 
 
 Net interest spread (2) 
 2.37 % 2.46 % (9) 
 Net interest margin and net interest income (2) 
 3.09 % 3.26 % (17) $ 1,621 $ 1,663 $ (42) 

 (1) Loans and leases include nonaccrual loans and loans held for sale. Interest income on loans and leases includes accretion income and loan fees. 
 (2) The average balances and yields for loans and leases are calculated net of average credit balances of factoring clients to appropriately reflect the interest-earning portion of factoring receivables. 
 
 61 

 NII and NIM ( Current Quarter Compared to Prior Year Quarter ) 
 The table above quantifies the increases or decreases for the current quarter compared to the prior year quarter for NII and NIM, as well as average balances of interest-earning assets and interest-bearing liabilities, and the respective yields earned and rates paid. The main reasons for the increases and decreases are explained below: 
 • NII for the current quarter was $1.62 billion, a decrease of $42 million or 3% from $1.66 billion in the prior year quarter. NII, excluding PAA, (1) was $1.58 billion for the current quarter, a decrease of $6 million from $1.59 billion for the prior year quarter. The main reasons for the decreases in NII and NII, excluding PAA, (1) are explained below: 
 ◦ Interest income on interest-earning deposits at banks for the current quarter was $196 million, a decrease of $49 million or 20% from $245 million for the prior year quarter, due to a decline in the federal funds rate and a lower average balance. 
 ◦ Interest income on loans and leases for the current quarter was $2.21 billion, a decrease of $30 million or 4% from $2.24 billion for the prior year quarter, mainly due to a lower yield and lower loan PAA, partially offset by the impact of a higher average balance. 
 • Interest income on loans and leases, excluding loan PAA, (1) was $2.16 billion for the current quarter, an increase of $6 million from $2.15 billion for the prior year quarter . 
 • Loan PAA was $48 million in the current quarter, a decrease of $36 million or 43% from $84 million in the prior year quarter. 
 ◦ Interest income on investment securities (including securities purchased under agreements to resell) for the current quarter was $384 million, a decrease of $30 million or 7% from $414 million for the prior year quarter, due to a lower average balance and a decline in the yield. 
 ◦ Interest expense on interest-bearing deposits for the current quarter was $833 million, a decrease of $60 million or 7% from $893 million for the prior year quarter, as a lower rate paid was partially offset by the impact of a higher average balance. 
 ◦ Interest expense on borrowings for the current quarter was $332 million, a decrease of $7 million or 2% from $339 million for the prior year quarter, due to a lower average balance, partially offset by a higher rate paid. 
 • NIM for the current quarter was 3.09%, a decrease of 17 bps from 3.26% for the prior year quarter. The decline in NIM was mainly due to lower yields on loans, lower average balances and yields on interest-earning deposits at banks and investment securities, lower PAA, a higher average balance of interest-bearing deposits, and a higher rate paid on borrowings, partially offset by the impact of a decline in the rate paid on interest-bearing deposits, a higher average balance of loans, and a lower average balance of borrowings. NIM, excluding PAA, (1) was 3.01% for the current quarter, a decrease of 11 bps from 3.12% for the prior year quarter. 
 ◦ The yield on average interest-earning assets for the current quarter was 5.30%, a decrease of 38 bps from 5.68% for the prior year quarter, mainly due to a decline in yield on loans and interest-earning deposits at banks, as well as lower loan PAA, partially offset by a higher volume of loans. 
 ◦ The rate paid on average interest-bearing liabilities for the current quarter was 2.93%, a decrease of 29 bps from 3.22% for the prior year quarter, primarily due to a lower rate paid on interest-bearing deposits and a lower average balance of borrowings, partially offset by the impacts of a higher average balance of interest-bearing deposits and a higher rate paid for borrowings. 
 
 (1) Refer to the “NII, NIM, and Interest Income on Loans and Leases, Excluding PAA” discussion in the “Non-GAAP Financial Measurements” section of this MD&A for further information. 
 
 The following table shows the types of average interest-earning assets as a percentage of total average interest-earning assets. 
 
 Table 6
Average Interest-earning Asset Mix 
 
 Three Months Ended 
 March 31, 2026 December 31, 2025 March 31, 2025 
 Loans and leases 70 % 68 % 68 % 
 Investment securities 20 21 21 
 
 Interest-earning deposits at banks 10 11 11 
 Total interest-earning assets 100 % 100 % 100 % 

 62 

 The following table shows the average interest-bearing liabilities as a percentage of total average interest-bearing liabilities. 
 
 Table 7
Average Interest-bearing Liability Mix 
 
 Three Months Ended 
 March 31, 2026 December 31, 2025 March 31, 2025 
 Total interest-bearing deposits 78 % 76 % 76 % 
 
 Long-term borrowings 22 24 24 
 Total interest-bearing liabilities 100 % 100 % 100 % 

 Provision for Credit Losses 
 
 Table 8
Provision for Credit Losses 
 
 dollars in millions Three Months Ended Increase (Decrease) from Linked Quarter Increase (Decrease) from Prior Year Quarter 
 March 31, 2026 December 31, 2025 March 31, 2025 
 
 Provision for loan and lease losses 
 $ 103 $ 57 $ 148 $ 46 77.4 % (45) (30.2) % 
 
 (Benefit) provision for off-balance sheet credit exposure (32) (5) 6 (27) (529.3) (38) (636.6) 
 
 Provision for other receivables 1 2 — (1) (16.0) 1 100.0 
 Provision for credit losses $ 72 $ 54 $ 154 $ 18 33.4 % $ (82) (53.4) % 

 The provision for credit losses for the current quarter was $72 million, an increase of $18 million or 33%, from $54 million for the linked quarter . The current quarter provision for credit losses primarily included a provision for loan and lease losses of $103 million, partially offset by a benefit for off-balance sheet credit exposure of $32 million. 
 • The provision for loan and lease losses for the current quarter was $103 million, an increase of $46 million from $57 million for the linked quarter, mainly attributable to a decrease in net charge-offs of $32 million, as well as the impact of a $8 million reserve release in the current quarter compared to an $86 million reserve release in the linked quarter. 
 ◦ Net charge-offs were $111 million (0.30% of average loans) for the current quarter, compared to $143 million (0.39% of average loans) for the linked quarter. The $32 million decrease was primarily related to lower net charge-offs in commercial real estate and investor dependent portfolios. 
 ◦ The decrease of $8 million in the ALLL at March 31, 2026 compared to December 31, 2025 primarily reflected loan growth concentrated in capital call lines, which have a significantly lower loss rate relative to our other loan portfolios, and changes in the macroeconomic scenarios, partially offset by higher reserves for individually evaluated loans. 
 ◦ The $86 million reserve release in the linked quarter was driven by lower specific reserves for individually evaluated loans, loan growth concentrated in capital call lines, and improvements in the macroeconomic scenarios and credit quality. 
 • The benefit for off-balance sheet credit exposure for the current quarter was $32 million compared to $5 million in the linked quarter. The $27 million increase in the benefit for off-balance sheet credit exposure was mainly due to changes in the macroeconomic scenarios and trends in the volume of unfunded commitments. 
 
 Pr ovision for credit losses for the current quarter was $72 million, a decrease of $82 million or 53% from $154 million for the prior y ear quarter, primarily consisting of the following: 
 • The provision for loan and lease losses for the current quarter was $103 million compared to $148 million for the prior year quarter. The $45 million decrease in the provision for loan and lease losses was mainly attributable to lower net charge- offs of $33 million, as well as the impact of an $8 million reserve release in the current quarter compared to a $4 million reserve build in the prior year quarter. 
 ◦ The benefit for off-balance sheet credit exposure for the current quarter was $32 million compared to a provision for the prior year quarter of $6 million, resulting in a decrease in provision of $38 million, mainly due to changes in the macroeconomic scenarios and trends in the volume of unfunded commitments. 
 
 The ALLL and net charge-offs are further discussed in the “Risk Management—Credit Risk” section of this MD&A and in Note 6—Allowance for Loan and Lease Losses. 
 63 

 Noninterest Income 
 
 The following table presents noninterest income: 
 
 Table 9
Noninterest Income 
 
 dollars in millions Three Months Ended Increase (Decrease) from Linked Quarter Increase (Decrease) from Prior Year Quarter 
 March 31, 2026 December 31, 2025 March 31, 2025 
 Rental income on operating lease equipment $ 281 $ 281 $ 270 $ — — % $ 11 4.0 % 
 Lending-related fees 69 64 66 5 9.3 3 5.3 
 Deposit fees and service charges 70 63 58 7 11.5 12 21.9 
 Client investment fees 53 54 53 (1) (3.1) — — 
 Wealth management services 59 61 56 (2) (2.7) 3 5.0 
 International fees 35 37 32 (2) (3.6) 3 9.4 
 Factoring commissions 17 20 17 (3) (15.5) — — 
 Cardholder services, net 38 37 41 1 0.3 (3) (7.1) 
 Merchant services, net 13 13 14 — — (1) (10.1) 
 Insurance commissions 13 12 14 1 8.0 (1) (5.9) 
 Realized gain on sale of investment securities, net — 3 — (3) (100.0) — — 
 Fair value adjustment on marketable equity securities, net 3 12 (5) (9) (72.8) 8 162.7 
 Gain on sale of leasing equipment, net 11 14 5 (3) (20.3) 6 98.8 
 
 Loss on extinguishment of debt (8) (9) — 1 10.6 (8) (100.0) 
 Other noninterest income 38 53 14 (15) (29.8) 24 180.8 
 
 Total noninterest income $ 692 $ 715 $ 635 $ (23) (3.2) % $ 57 8.9 % 

 Noninterest income for the current quarter was $692 million, a decrease of $23 million or 3% from $715 million for the linked quarter, primarily due to the following: 
 • The decrease in other noninterest income of $15 million was mainly attributable to the linked quarter gain on tax credit investments as a large renewable energy project was placed in service. 
 • The unfavorable change of $9 million in the fair value of marketable equity securities was due to lower market prices for the underlying securities. 
 • The increase of $7 million in deposit fees and service charges was primarily due to an increase in overdraft fees. 
 • The increase of $5 million in lending-related fees was primarily due to higher capital market fees, partially offset by a decrease in fees on lines of credit due to lower unused lines. 
 • The loss on extinguishment of debt for the current and linked quarters relates to prepayments of the Purchase Money Note. 
 
 Noninterest income for the current quarter was $692 million, an increase of $57 million or 9% from $635 million for the prior year quarter as further discussed below: 
 • The increase in other noninterest income of $24 million was mainly attributable to higher derivative income and higher other real estate owned (“OREO”) income due to a write down in the prior year quarter. 
 • The increase of $12 million in deposit fees and service charges was primarily due to an increase in overdraft fees implemented during the current quarter, as well as higher volume-related service charges for commercial clients. 
 • The increase in rental income on operating lease equipment of $11 million was mainly the result of growth in the railcar portfolio. 
 • The favorable change of $8 million in the fair value of marketable equity securities was due to higher market prices for the underlying securities. 
 • The increase of $6 million in gain on sale of leasing equipment was primarily the result of higher volume of rail equipment sales. 
 64 

 Noninterest Expense 
 
 The following table presents noninterest expense: 
 
 Table 10
Noninterest Expense 
 
 dollars in millions Three Months Ended Increase (Decrease) from Linked Quarter Increase (Decrease) from Prior Year Quarter 
 March 31, 2026 December 31, 2025 March 31, 2025 
 Depreciation on operating lease equipment $ 101 $ 102 $ 98 $ (1) (0.5) % $ 3 2.3 % 
 Maintenance and other operating lease expenses 65 64 58 1 1.4 7 12.7 
 Personnel cost 869 849 818 20 2.3 51 6.3 
 Net occupancy expense 60 61 58 (1) (2.1) 2 4.4 
 Equipment expense 136 151 136 (15) (9.9) — — 
 Professional fees 24 34 25 (10) (28.1) (1) (4.3) 
 Third-party processing fees 93 75 63 18 25.1 30 48.1 
 FDIC insurance expense 38 27 38 11 42.6 — — 
 Marketing expense 30 45 32 (15) (33.6) (2) (5.5) 
 Acquisition-related expenses 5 33 42 (28) (86.5) (37) (89.3) 
 Intangible asset amortization 13 13 15 — — (2) (15.8) 
 Other noninterest expense 102 118 110 (16) (14.8) (8) (7.8) 
 
 Total noninterest expense $ 1,536 $ 1,572 $ 1,493 $ (36) (2.3) % $ 43 2.9 % 

 Noninterest expense for the current quarter was $1.54 billion, a decrease of $36 million or 2% from $1.57 billion for the linked quarter as further discussed below: 
 • The decrease in acquisition-related expenses of $28 million is summarized in Table 11 and discussed below. 
 • The decrease in other noninterest expense of $16 million was mainly due to timing of charitable contributions. 
 • The decrease in marketing expense of $15 million was primarily related to fewer marketing promotions for Direct Bank deposits, as costs are contingent on the timing of our marketing initiatives. 
 • The decrease in professional fees of $10 million was mostly due to lower consulting service costs. 
 • The increase in personnel cost of $20 million was largely due to seasonal increases in employee benefits and payroll taxes, partially offset by lower life and health insurance premiums, which are generally higher in the fourth quarter due to employees reaching their annual deductibles. 
 • The increase in FDIC insurance expense of $11 million was primarily due to the linked quarter including a reversal of a previously accrued $11 million special assessment charge. 
 • The increase of $18 million in third party processing fees was largely offset by a decrease of $15 million in equipment expense as technology platforms shift to cloud computing. 
 
 Noninterest expense for the current quarter was $1.54 billion, an increase of $43 million or 3% from $1.49 billion for the prior year quarter as further discussed below: 
 • The increase in personnel cost of $51 million was mainly due to higher salaries, reflecting net staff additions and higher merit and promotion costs, in addition to higher employee benefit costs. 
 • The increase in third-party processing fees of $30 million was largely due to our transition to more cloud-based computing services. 
 • The increase of $7 million in maintenance and other operating lease expenses reflect timing and the number of railcars coming on or off lease as well as asset condition. Refer to the “Results by Segment—Rail” section of this MD&A for further information. 
 • The decrease in acquisition-related expenses of $37 million is summarized in Table 11 and discussed below. 
 • The decrease in other noninterest expense of $8 million was mainly due to the prior year quarter including capitalized software impairment and higher charitable contributions, partially offset by higher operating costs for foreclosed and repossessed assets in the current quarter. 
 65 

 Table 11
Acquisition-related Expenses 
 
 dollars in millions Three Months Ended 
 March 31, 2026 December 31, 2025 March 31, 2025 
 Personnel cost $ 1 $ 15 $ 15 
 Professional fees 1 16 26 
 
 Other acquisition-related expense 3 2 1 
 Total acquisition-related expense $ 5 $ 33 $ 42 

 The current quarter acquisition-related expenses relate to the pending BMO Branch Acquisition. Acquisition-related expenses for the linked and prior year quarters include costs related to previous acquisitions. 
 
 Acquisition-related personnel cost primarily includes severance and retention costs for employees associated with business combinations. These amounts are recognized over the requisite service period, if any. 
 
 Acquisition-related professional fees mainly include consulting, legal and accounting costs associated with business combinations and the related integration, optimization, and business process reengineering, including enhancements to technology. These amounts are expensed as incurred. 
 
 Income Taxes 
 
 Table 12
Income Tax Data 
 
 dollars in millions Three Months Ended 
 March 31, 2026 December 31, 2025 March 31, 2025 
 Income before income taxes $ 705 $ 811 $ 651 
 Income tax expense $ 171 $ 231 $ 168 
 Effective income tax rate 24.3 % 28.4 % 25.8 % 

 The effective income tax rate (“ETR”) was 24.3% for the current quarter compared to 28.4% for the linked quarter and 25.8% for the prior year quarter. The higher tax expense and ETR for the linked quarter was primarily driven by the return to provision adjustments reflected therein. The decrease in the ETR compared to the prior year quarter was primarily due to a reduction in the state and local income tax rate and an increase in the benefit from tax credits. 
 
 The ETR is impacted by a number of factors, including the relative mix of domestic, state, and international earnings, effects of changes in enacted tax laws, adjustments to valuation allowances, and discrete items. The ETR in future periods may vary from the current quarter ETR due to changes in these factors. 
 
 BancShares monitors and evaluates the potential impact of current events on the estimates used to establish income tax expense and income tax liabilities. On a periodic basis, we evaluate our income tax positions based on current tax law and positions taken by various tax auditors within the jurisdictions where BancShares is required to file income tax returns, as well as potential or pending audits or assessments by tax auditors. Refer to Note 16—Income Taxes for additional information. 
 
 66 

 RESULTS BY SEGMENT 
 
 BancShares’ segments include the General Bank, the Commercial Bank, and Rail. All other financial information not included in the segments is reported in the Corporate section of the segment disclosures. 
 
 Refer to Note 18—Segment Information for descriptions of segment products and services. 
 
 General Bank 
 
 Table 13
General Bank: Financial Data 
 
 dollars in millions Three Months Ended Increase (Decrease) from Linked Quarter Increase (Decrease) from Prior Year Quarter 
 Earnings Summary March 31, 2026 December 31, 2025 March 31, 2025 
 Net interest income $ 813 $ 841 $ 788 $ (28) (3.4) % $ 25 3.2 % 
 Total noninterest income 172 170 164 2 0.9 8 4.7 
 Total revenue 985 1,011 952 (26) (2.7) 33 3.4 
 Personnel cost 215 211 210 4 2.0 5 2.3 
 
 All other noninterest expense 385 393 355 (8) (2.2) 30 8.4 
 Total noninterest expense 600 604 565 (4) (0.7) 35 6.2 
 
 Provision for credit losses 17 17 46 — — (29) (63.0) 
 Income before income taxes 368 390 341 (22) (5.9) 27 8.0 
 Income tax expense 90 82 88 8 9.5 2 2.4 
 Net income $ 278 $ 308 $ 253 $ (30) (10.0) $ 25 10.0 
 
 Select Period End Balances 
 Loans and leases $ 64,367 $ 64,958 $ 64,847 $ (591) (0.9) % $ (480) (0.7) % 
 
 Deposits 75,914 74,796 74,309 1,118 1.5 1,605 2.2 

 General Bank segment net income for the current quarter decreased $30 million from the linked quarter, primarily due to a $28 million decrease in NII, mainly due to the impact of growth in interest-bearing deposits. General Bank segment deposits were $75.91 billion at March 31, 2026, compared to $74.80 billion at December 31, 2025. Deposit growth of $1.12 billion was mostly concentrated in our Branch Network and CAB. 
 
 General Bank segment loans were $64.37 billion at March 31, 2026, a decrease of $591 million compared to $64.96 billion at December 31, 2025, primarily due to a transfer of $364 million of SBA loans to held for sale in March 2026. 
 
 General Bank segment net income for the current quarter increased $25 million compared to the prior year quarter, primarily due to lower provision for credit losses, higher NII, and higher noninterest income, partially offset by higher noninterest expense. 
 • The $29 million decrease in provision for credit losses was largely due to the impact of a reserve release in the current quarter compared to a reserve build in the prior year quarter. 
 • The $25 million increase in NII was largely due to a decline in the rates paid on interest-bearing deposits. 
 • The $8 million increase in total noninterest income was mostly due to higher deposit fees and service charges, including overdraft fees. 
 • The $35 million increase in total noninterest expense was mainly due to a $30 million increase in all other noninterest expense, which includes allocated expenses. 
 
 67 

 Commercial Bank 
 
 Table 14
Commercial Bank: Financial Data 
 
 dollars in millions Three Months Ended Increase (Decrease) from Linked Quarter Increase (Decrease) from Prior Year Quarter 
 Earnings Summary March 31, 2026 December 31, 2025 March 31, 2025 
 Net interest income $ 802 $ 834 $ 786 $ (32) (3.9) % $ 16 2.0 % 
 Noninterest Income 
 Rental income on operating lease equipment 55 55 56 — — (1) (1.2) 
 
 All other noninterest income 230 241 201 (11) (5.0) 29 14.6 
 Total noninterest income 285 296 257 (11) (3.9) 28 11.2 
 
 Total revenue 1,087 1,130 1,043 (43) (3.9) 44 4.3 
 
 Noninterest Expense 
 Personnel cost 199 180 190 19 10.2 9 4.6 
 
 Depreciation on operating lease equipment 43 44 44 (1) (1.2) (1) (2.1) 
 All other noninterest expense 404 432 420 (28) (6.8) (16) (3.5) 
 Total noninterest expense 646 656 654 (10) (1.7) (8) (1.1) 
 
 Provision for credit losses 55 37 108 18 48.3 (53) (49.2) 
 Income before income taxes 386 437 281 (51) (11.6) 105 37.3 
 Income tax expense 95 102 72 (7) (5.8) 23 30.3 
 Net income $ 291 $ 335 $ 209 $ (44) (13.4) $ 82 39.8 
 
 Select Period End Balances 
 Loans and leases $ 84,263 $ 82,910 $ 76,449 $ 1,353 1.6 % $ 7,814 10.2 % 
 Operating lease equipment, net 717 739 731 (22) (3.0) (14) (1.8) 
 
 Deposits 47,191 41,532 40,014 5,659 13.6 7,177 17.9 

 Table 15
Adjusted Rental Income on Operating Lease Equipment (non-GAAP) 
 
 dollars in millions Three Months Ended Increase (Decrease) from Linked Quarter Increase (Decrease) from Prior Year Quarter 
 March 31, 2026 December 31, 2025 March 31, 2025 
 Rental income on operating leases (GAAP) $ 55 $ 55 $ 56 $ — — % $ (1) (1.2) % 
 Less: depreciation on operating lease equipment 43 44 44 (1) (1.2) (1) (2.1) 
 
 Adjusted rental income on operating lease equipment (non-GAAP) (1) 
 $ 12 $ 11 $ 12 $ 1 9.1 $ — — 

 (1) Adjusted rental income on operating lease equipment is a non-GAAP measure. Refer to the “Non-GAAP Financial Measurements” section of this MD&A for a reconciliation from the most comparable GAAP measure to the non-GAAP measure. 
 
 Commercial Bank segment net income for the current quarter decreased $44 million compared to the linked quarter, primarily due to lower NII, higher provision for credit losses, and lower noninterest income, partially offset by lower noninterest expense. 
 • The $32 million decrease in NII was mostly due to a lower yield on loans and the impact of growth in interest-bearing deposits, partially offset by the impact of loan growth and a lower rate paid on interest-bearing deposits. 
 • The $18 million increase in provision for credit losses was largely due to higher reserves for individually evaluated loans. 
 • The $11 million decrease in total noninterest income was largely attributable to a lower gain on renewable energy tax credit investments, as a large project was placed in service during the linked quarter, and decreases in the gain on sale of leasing equipment and factoring commissions, partially offset by higher lending-related fees. 
 • The $10 million decrease in total noninterest expense mainly included a $28 million decrease in all other noninterest expense, which includes allocated expenses, partially offset by an increase of $19 million in personnel cost. 
 
 Commercial Bank segment loans were $84.26 billion at March 31, 2026, an increase of $1.35 billion from $82.91 billion at December 31, 2025, mainly concentrated in Global Fund Banking. 
 
 Commercial Bank deposits were $47.19 billion at March 31, 2026, an increase of $5.66 billion from $41.53 billion at December 31, 2025. Deposit growth was primarily in Global Fund Banking and Technology and Healthcare Banking. 
 68 

 Commercial Bank segment net income for the current quarter increased $82 million compared to the prior year quarter, primarily due to lower provision for credit losses, higher noninterest income, higher NII, and lower noninterest expense. 
 • The $53 million decrease in provision for credit losses was largely due to lower net charge-offs. 
 • The $28 million increase in total noninterest income was largely due to the prior year quarter including a write-down of a held for sale asset. Additionally, the current quarter reflected increases in lending-related fees and derivative income. 
 • The $16 million increase in NII was largely due to the impact of loan growth and a lower rate paid on interest-bearing deposits, partially offset by a lower yield on loans and the impact of deposit growth. 
 • The $8 million decrease in total noninterest expense was mainly due to a $16 million decrease in all other noninterest expense, which includes allocated expenses, partially offset by an increase of $9 million in personnel cost. 
 
 Rail 
 
 Table 16
Rail: Financial Data 
 
 dollars in millions Three Months Ended Increase (Decrease) from Linked Quarter Increase (Decrease) from Prior Year Quarter 
 Earnings Summary March 31, 2026 December 31, 2025 March 31, 2025 
 Net interest income (expense) $ (58) $ (53) $ (52) $ (5) (9.1) % $ (6) (11.9) % 
 Noninterest Income 
 Rental income on operating lease equipment 226 226 214 — — 12 5.4 
 
 All other noninterest income 9 9 2 — — 7 325.3 
 Total noninterest income 235 235 216 — — 19 8.6 
 
 Total revenue 177 182 164 (5) (2.5) 13 7.6 
 
 Noninterest Expense 
 Personnel cost 8 6 8 2 21.7 — — 
 
 Depreciation on operating lease equipment 58 58 54 — — 4 5.8 
 Maintenance and other operating lease expenses 65 64 58 1 1.4 7 12.7 
 All other noninterest expense 17 16 14 1 10.8 3 13.1 
 Total noninterest expense 148 144 134 4 2.7 14 9.2 
 
 Income before income taxes 29 38 30 (9) (21.6) (1) (1.3) 
 Income tax expense 7 9 8 (2) (15.7) (1) (4.1) 
 Net income $ 22 $ 29 $ 22 $ (7) (23.3) % $ — — 
 
 Select Period End Balances 
 Loans and leases $ 62 $ 62 $ 62 $ — — % $ — — % 
 Operating lease equipment, net 8,968 8,882 8,640 86 1.0 328 3.8 
 
 Deposits 2 2 12 — — (10) (80.5) 

 Table 17
Adjusted Rental Income on Operating Lease Equipment (non-GAAP) 
 
 dollars in millions Three Months Ended Increase (Decrease) from Linked Quarter Increase (Decrease) from Prior Year Quarter 
 March 31, 2026 December 31, 2025 March 31, 2025 
 Rental income on operating leases (GAAP) $ 226 $ 226 $ 214 $ — — % $ 12 5.4 % 
 Less: depreciation on operating lease equipment 58 58 54 — — 4 5.8 
 Less: maintenance and other operating lease expenses 65 64 58 1 1.4 7 12.7 
 Adjusted rental income on operating lease equipment (non-GAAP) (1) 
 $ 103 $ 104 $ 102 $ (1) (1.0) $ 1 1.0 
 
 (1) Adjusted rental income on operating lease equipment is a non-GAAP measure. Refer to the “Non-GAAP Financial Measurements” section of this MD&A for a reconciliation from the most comparable GAAP measure to the non-GAAP measure. 
 69 

 Rail segment net income for the current quarter decreased $7 million compared to the linked quarter, mostly due to higher net interest expense of $5 million, largely a result of higher funding costs and an increase in operating lease equipment. 
 
 Rail segment net income for the current quarter was unchanged compared to the prior year quarter, as higher rental income on operating lease equipment and other noninterest income was offset by higher total noninterest expense and higher net interest expense. 
 • The $12 million increase in rental income on operating lease equipment reflected portfolio growth and strong repricing. 
 • The $7 million increase in all other noninterest income reflects higher gains on sales of operating lease equipment. 
 • The $6 million increase in net interest expense was primarily due to higher funding costs and an increase in operating lease equipment. 
 • Depreciation on operating lease equipment increased $4 million, reflective of growth in operating lease equipment, and maintenance and other operating lease expenses increased $7 million. Maintenance and other operating lease expenses tend to be variable due to timing and the number of railcars coming on or off lease as well as asset condition. 
 
 Railcar Portfolio 
 Our fleet is diverse and the average re-pricing of equipment upon lease maturities was 118% of the average prior or expiring lease rate during the current quarter. Railcar utilization, including commitments to lease, was 96.2% at both March 31, 2026 and December 31, 2025. 
 
 Rail segment customers include all of the U.S. and Canadian Class I railroads (i.e., railroads with annual revenues of approximately $500 million and greater) and other railroads, as well as manufacturers and commodity shippers. Our total operating lease fleet at March 31, 2026 consisted of 128,580 railcars and locomotives. 
 
 The following tables reflect the proportion of railcars by type based on units and net investment, and rail operating lease equipment by obligor industry: 
 
 Table 18
Operating Lease Railcar Portfolio by Type (units and net investment) 
 
 March 31, 2026 December 31, 2025 
 Railcar Type Total Owned 
Fleet - % Total Units Total Owned 
Fleet - % Total
Net Investment Total Owned 
Fleet - % Total Units Total Owned 
Fleet - % Total
Net Investment 
 Covered hoppers 45 % 41 % 45 % 41 % 
 Tank cars 28 39 28 39 
 Mill/ coil gondolas 8 6 8 6 
 Coal 6 1 6 1 
 Boxcars 5 5 5 5 
 Other 8 8 8 8 
 Total 100 % 100 % 100 % 100 % 

 Table 19
Rail Operating Lease Equipment by Obligor Industry 
 
 dollars in millions March 31, 2026 December 31, 2025 
 Manufacturing $ 3,908 44 % $ 3,782 43 % 
 Rail 2,010 22 2,047 23 
 Wholesale 1,582 18 1,554 18 
 Oil and gas extraction / services 475 5 487 5 
 Energy and utilities 198 2 206 2 
 Other 795 9 806 9 
 Total $ 8,968 100 % $ 8,882 100 % 

 70 

 Corporate 
 
 Table 20
Corporate: Financial Data 
 
 dollars in millions Three Months Ended Increase (Decrease) from Linked Quarter Increase (Decrease) from Prior Year Quarter 
 Earnings Summary March 31, 2026 December 31, 2025 March 31, 2025 
 Net interest income $ 64 $ 100 $ 141 $ (36) (35.5) % $ (77) (54.3) % 
 Total noninterest income — 14 (2) (14) (98.3) 2 114.2 
 Total revenue 64 114 139 (50) (42.9) (75) (53.6) 
 Personnel cost 447 452 410 (5) (0.9) 37 9.2 
 Acquisition-related expenses 5 33 42 (28) (86.5) (37) (89.3) 
 All other noninterest expense (1) 
 (310) (317) (312) 7 2.4 2 (0.8) 
 Total noninterest expense 142 168 140 (26) (15.0) 2 2.0 
 
 Provision for credit losses — — — — — — — 
 Loss before income taxes (78) (54) (1) (24) (43.1) (77) NM 
 Income tax (benefit) expense (21) 38 — (59) (151.7) (21) NM 
 Net loss $ (57) $ (92) $ (1) $ 35 38.2 % $ (56) NM 
 
 Select Period End Balances 
 
 Deposits 47,735 45,248 44,990 2,487 5.5 % 2,745 6.1 % 

 (1) Under our segment expense allocation methodology, allocated expenses increase noninterest expense of the applicable segment(s), with an offsetting decrease to Corporate noninterest expense. “All other noninterest expense” in the Corporate table above includes the effect of allocated expenses, resulting in a reduction to expense (i.e., contra expense). 
 
 The Corporate loss before income taxes for the current quarter increased $24 million compared to the linked quarter, mainly due to the following: 
 • NII decreased $36 million mainly due to the impacts of lower average balances and yields on interest-earning deposits at banks and investment securities, a higher average balance of interest-bearing deposits, and lower loan PAA, partially offset by the impacts of a lower rate paid on interest-bearing deposits and a lower average balance of borrowings, mainly due to prepayments of the Purchase Money Note. 
 • Acquisition-related expenses decreased $28 million as presented in Table 11 and further discussed in the “Noninterest Expense” discussion in the “Results of Operations” section of this MD&A. 
 • The $14 million decrease in total noninterest income was largely due to the unfavorable change in the fair value of marketable equity securities due to lower market prices for the underlying securities. 
 
 Corporate deposits were $47.74 billion at March 31, 2026, an increase of $2.49 billion compared to $45.25 billion at December 31, 2025, as brokered and Direct Bank deposits increased $1.83 billion and $606 million, respectively. At March 31, 2026, Corporate deposits primarily included $45.41 billion of Direct Bank deposits, the vast majority of which are savings, and $1.83 billion of brokered deposits, which are further discussed in the Funding, Liquidity and Capital section of this MD&A. 
 
 The Corporate loss before income taxes for the current quarter increased $77 million compared to the prior year quarter, primarily reflecting lower NII, which declined $77 million mainly due to the impacts of lower average balances and yields on interest-earning deposits at banks and investment securities, a higher average balance of interest-bearing deposits, and lower loan PAA, partially offset by the impacts of a lower rate paid on interest-bearing deposits and a lower average balance of borrowings, mainly due to prepayments of the Purchase Money Note. 
 
 71 

 BALANCE SHEET ANALYSIS 
 
 The following discussion provides additional information about the major components of our balance sheet. Information regarding our ALLL is included in the “Risk Management—Credit Risk—ALLL Methodology” section of this MD&A and in Note 6—Allowance for Loan and Lease Losses. Information regarding our capital and regulatory capital is included in the “Capital” section of this MD&A. 
 
 Interest-earning Assets 
 
 Interest-earning assets include interest-earning deposits at banks, securities purchased under agreements to resell, investment securities, loans held for sale, and loans and leases, all of which reflect varying interest rates based on the risk level and repricing characteristics of the underlying asset. Higher-risk investments typically carry a higher interest rate, but could expose us to higher levels of market and/or credit risk. We strive to maintain a high level of interest-earning assets relative to total assets. 
 
 Interest-earning Deposits at Banks 
 Interest-earning deposits at banks are primarily comprised of interest-earning deposits at the FRB. Interest-earning deposits at banks as of March 31, 2026 totaled $23.19 billion, an increase of $3.39 billion or 17% from $19.80 billion at December 31, 2025. The increase from December 31, 2025 is a function of the balance sheet trends discussed above in “Executive Overview—Financial Performance Summary—Balance Sheet Highlights.” 
 
 Securities Purchased Under Agreements to Resell 
 Securities purchased under agreements to resell at March 31, 2026 totaled $223 million, a decrease of $9 million from $232 million at December 31, 2025. 
 
 Investment Securities 
 The primary objective of the investment portfolio is to generate incremental income by deploying excess funds into securities that have minimal liquidity risk and low to moderate interest rate risk and credit risk. Other objectives include acting as a stable source of liquidity, serving as a tool for asset and liability management and maintaining an interest rate risk profile compatible with our objectives. Changes in the total balance of our investment securities portfolio result from trends in balance sheet funding and market performance. Generally, when inflows arising from deposit and treasury services products exceed loan and lease demand, we invest excess funds into the securities portfolio or into interest-earning deposits at banks. Conversely, when loan demand exceeds growth in deposits and short-term borrowings, we allow interest-earning deposits at banks to decline and use proceeds from maturing securities and prepayments to fund loan growth. Also refer to Note 3—Investment Securities and “Funding, Liquidity and Capital Overview” in the “Executive Overview” section of this MD&A for additional disclosures regarding investment securities. 
 
 The carrying value of investment securities at March 31, 2026 totaled $42.99 billion, an increase of $1.42 billion or 3% from $41.56 billion at December 31, 2025. The increase mainly resulted from purchases of $2.89 billion, which were primarily short duration available for sale U.S. treasury and agency mortgage-backed securities, partially offset by maturities, sales, and prepayments totaling $1.33 billion. 
 
 Our portfolio of investment securities available for sale consists of mortgage-backed securities issued by government agencies and government sponsored entities, U.S. Treasury securities, corporate bonds, and municipal bonds. Investment securities available for sale are reported at fair value and unrealized gains and losses are included as a component of accumulated other comprehensive income (“AOCI”), net of deferred taxes. As of March 31, 2026, investment securities available for sale had a pretax net unrealized loss of $349 million, compared to $162 million as of December 31, 2025, primarily reflecting changes in interest rates. The fair value of investment securities is impacted by interest rates, credit spreads, market volatility and liquidity conditions. The fair value of the investment securities portfolio generally increases when interest rates decrease or when credit spreads tighten. 
 
 Our portfolio of investment securities held to maturity 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, and by the Supranational Entities & Multilateral Development Banks. 
 
 72 

 The following table presents the investment securities portfolio, segregated by major category: 
 
 Table 21
Investment Securities 
 
 dollars in millions March 31, 2026 December 31, 2025 
 Amortized Cost Fair Value 
 Composition (1) 
 Amortized Cost Fair Value 
 Composition (1) 
 
 Investment securities available for sale: 
 U.S. Treasury $ 12,439 $ 12,442 29.8 % $ 10,624 $ 10,673 26.4 % 
 Government agency 39 38 0.1 44 43 0.1 
 Residential mortgage-backed securities 17,782 17,595 42.1 17,683 17,623 43.6 
 Commercial mortgage-backed securities 3,259 3,099 7.4 3,444 3,299 8.2 
 Corporate bonds 132 128 0.3 145 140 0.3 
 Municipal bonds 12 12 — 12 12 — 
 
 Total investment securities available for sale $ 33,663 $ 33,314 79.7 % $ 31,952 $ 31,790 78.6 % 
 Investment in marketable equity securities $ 83 $ 130 0.3 % $ 83 $ 127 0.3 % 
 Investment securities held to maturity: 
 U.S. Treasury $ 389 $ 374 0.9 % $ 388 $ 373 0.9 % 
 Government agency 1,205 1,150 2.8 1,225 1,170 2.9 
 Residential mortgage-backed securities 4,395 3,926 9.4 4,450 3,992 9.9 
 Commercial mortgage-backed securities 3,305 2,682 6.4 3,337 2,729 6.8 
 
 Supranational securities 246 226 0.5 246 226 0.6 
 Other 2 2 — 1 1 — 
 Total investment securities held to maturity $ 9,542 $ 8,360 20.0 % $ 9,647 $ 8,491 21.1 % 
 Total investment securities $ 43,288 $ 41,804 100.0 % $ 41,682 $ 40,408 100.0 % 
 (1) Calculated as a percentage of the total fair value of investment securities. 
 
 The following table presents the weighted average yields for investment securities available for sale and held to maturity at March 31, 2026, segregated by major category with ranges of contractual maturities. The weighted average yields represent the yields of the underlying securities as of the specified date, March 31, 2026, within the specified maturity range. The weighted average yield on the portfolio was calculated using security-level annualized yields based on book yield to maturity and takes into account amortization of premiums and accretion of discounts. The total weighted average yields for investment securities available for sale and held to maturity are based on the underlying weighted average amortized cost. 
 
 Table 22
Weighted Average Yield on Investment Securities 
 
 March 31, 2026 
 Within One Year One to Five Years Five to 10 Years After 10 Years Total 
 Investment securities available for sale: 
 U.S. Treasury 4.29 % 3.76 % — % — % 4.03 % 
 Government agency — 3.47 — — 3.47 
 Residential mortgage-backed securities (1) 
 — 4.66 4.05 4.24 4.19 
 Commercial mortgage-backed securities (1) 
 4.33 4.75 4.24 2.70 3.93 
 Corporate bonds — 7.79 5.21 — 7.48 
 Municipal bonds — — — 6.28 6.28 
 
 Total investment securities available for sale 4.29 % 4.06 % 4.05 % 4.10 % 4.12 % 
 
 Investment securities held to maturity: 
 U.S. Treasury — % 1.43 % — % — % 1.43 % 
 Government agency 1.41 1.70 — — 1.61 
 Residential mortgage-backed securities (1) 
 — — 1.07 2.86 2.69 
 Commercial mortgage-backed securities (1) 
 — 1.83 4.65 2.45 2.46 
 
 Supranational securities — 1.64 — — 1.64 
 Other 3.34 — — — 3.34 
 Total investment securities held to maturity 1.42 % 1.62 % 1.26 % 2.67 % 2.39 % 

 (1) Residential mortgage-backed and commercial mortgage-backed securities, which are not due at a single maturity date, have been included in maturity groupings based on the contractual maturity at March 31, 2026. The expected life will differ from contractual maturities because borrowers have the right to prepay the underlying loans. 
 
 73 

 Assets Held for Sale 
 Assets held for sale at March 31, 2026 were $1.12 billion, an increase of $318 million from $804 million at December 31, 2025. 
 
 The composition of assets held for sale is included in the following table: 
 
 Table 23
Assets Held for Sale 
 
 dollars in millions March 31, 2026 December 31, 2025 Increase (Decrease) 
 Loans and leases: 
 Commercial (1) 
 $ 385 $ 18 $ 367 NM 
 Consumer 733 781 (48) (6.1) % 
 
 Loans and leases 1,118 799 319 40.0 % 
 Operating lease equipment 4 5 (1) (31.2) % 
 Total assets held for sale $ 1,122 $ 804 $ 318 39.5 % 

 (1) There were nonaccrual loans held for sale of $0 at March 31, 2026 and $10 million at December 31, 2025. 
 NM - resulting % not meaningful. 
 
 In March 2026, FCB management committed to a plan to sell $364 million of SBA commercial loans, which were then transferred from held for investment to held for sale. We did not establish a valuation allowance for the loans transferred to held for sale as the estimated fair value exceeded amortized cost. 
 
 Consumer loans held for sale at March 31, 2026 and December 31, 2025 were largely comprised of residential mortgage loans that were transferred from held for investment to held for sale in December 2025. We did not establish a valuation allowance for the loans transferred to held for sale as the estimated fair value exceeded the amortized cost of $644 million and $694 million at March 31, 2026 and December 31, 2025, respectively. In April 2026, the loan sale closed and a gain was recognized as the sale proceeds exceeded the amortized cost of $644 million. Additionally, consumer loans held for sale at March 31, 2026 and December 31, 2025 consisted of residential mortgage loans that FCB originated with the intent to sell. 
 
 Loans and Leases 
 The following table presents loans and leases by loan segment and loan class, and the respective proportion to total loans: 
 
 Table 24
Loans and Leases 
 
 dollars in millions March 31, 2026 December 31, 2025 
 Balance % to Total Loans Balance % to Total Loans Increase (Decrease) 
 Commercial: 
 Commercial and industrial $ 45,753 31 % $ 44,721 30 % $ 1,032 2.3 % 
 Capital call lines 32,274 21 31,791 21 483 1.5 
 Owner occupied commercial mortgage 17,502 12 17,660 12 (158) (0.9) 
 Investor dependent 2,714 2 2,778 2 (64) (2.3) 
 Commercial real estate 23,707 16 23,784 16 (77) (0.3) 
 Total commercial $ 121,950 82 % $ 120,734 81 % $ 1,216 1.0 % 
 Consumer: 
 Residential mortgage $ 21,698 14 % $ 21,861 15 % $ (163) (0.7) % 
 Revolving mortgage 2,863 2 2,863 2 — — 
 Auto 1,332 1 1,416 1 (84) (5.9) 
 Other consumer 849 1 1,056 1 (207) (19.6) 
 Total consumer $ 26,742 18 % $ 27,196 19 % $ (454) (1.7) % 
 Total loans and leases $ 148,692 100 % $ 147,930 100 % $ 762 0.5 % 
 Allowance for loan and lease losses (1,558) (1,566) 
 Net loans and leases $ 147,134 $ 146,364 

 74 

 Loans and leases at March 31, 2026 were $148.69 billion, an increase of $762 million or 1% from $147.93 billion at December 31, 2025. Commercial Bank segment loan growth of $1.35 billion, mainly concentrated in Global Fund Banking, was partially offset by a decrease in General Bank segment loans of $591 million, primarily due to the transfer of $364 million SBA loans to held for sale in March 2026. 
 
 The unamortized discount related to acquired loans was $1.28 billion at March 31, 2026, a decrease of $45 million from $1.33 billion at December 31, 2025. 
 
 Refer to Note 5—Loans and Leases for further information. 
 
 Operating Lease Equipment, Net 
 
 Our operating lease portfolio mostly relates to the Rail segment, with the remainder included in the Commercial Bank segment as summarized in the following table. Refer to the “Results by Segment” section of this MD&A for further details on the operating lease equipment portfolio in Rail. 
 
 Table 25
Operating Lease Equipment, Net 
 
 dollars in millions 
 March 31, 2026 December 31, 2025 Increase (Decrease) 
 Railcars and locomotives $ 8,968 $ 8,882 $ 86 1.0 % 
 Other equipment 717 739 (22) (3.0) 
 Total (1) 
 $ 9,685 $ 9,621 $ 64 0.7 % 

 (1) Includes off-lease rail equipment of $265 million at March 31, 2026 and $257 million at December 31, 2025. 
 
 Interest-bearing Liabilities 
 
 Interest-bearing liabilities include interest-bearing deposits, securities sold under agreements to repurchase, and borrowings. Interest-bearing liabilities at March 31, 2026 totaled $161.20 billion, an increase of $4.27 billion or 3% from $156.93 billion at December 31, 2025. The increase from December 31, 2025 was mainly due to deposit growth, partially offset by lower borrowings as further discussed below. 
 
 Deposits 
 We strive to maintain a strong liquidity position, and therefore, deposit retention remains a key business objective. We believe traditional bank deposit products remain an attractive option for many customers. As economic conditions change, we recognize that our liquidity position could be adversely affected if bank deposits are withdrawn. Our ability to fund future loan growth is significantly dependent on our success in retaining existing deposits and generating new deposits at a reasonable cost. 
 
 The following table summarizes the types of deposits: 
 
 Table 26
Deposits 
 
 dollars in millions 
 March 31, 2026 December 31, 2025 Increase (Decrease) 
 Noninterest-bearing $ 43,606 $ 40,653 $ 2,953 7.3 % 
 Checking with interest 25,599 24,377 1,222 5.0 
 Money market 41,136 38,687 2,449 6.3 
 Savings 47,258 46,625 633 1.4 
 Time 13,243 11,236 2,007 17.9 
 Interest-bearing deposits 127,236 120,925 6,311 5.2 
 Total deposits $ 170,842 $ 161,578 $ 9,264 5.7 % 
 Noninterest-bearing deposits to total deposits 25.5 % 25.2 % 

 Deposits at March 31, 2026 were $170.84 billion, an increase of $9.26 billion or 6% from $161.58 billion at December 31, 2025. The increase was attributable to an increase in Commercial Bank segment deposits of $5.66 billion, an increase in Corporate deposits of $2.49 billion (which primarily includes the Direct Bank and brokered deposits), and an increase in the General Bank segment of $1.12 billion. Noninterest-bearing deposits grew by $2.95 billion or 7% compared to December 31, 2025 and represented 25.5% of total deposits as of March 31, 2026, compared to 25.2% at December 31, 2025. 
 
 75 

 A portion of the deposit growth in the Commercial Bank segment stems from large short-term deposits which we expect to outflow or move off-balance sheet shortly after March 31, 2026. Deposit growth is also discussed in the “Executive Overview—Funding, Liquidity and Capital Overview” and “Results by Segment” sections of this MD&A. 
 
 Deposit Concentrations 
 BancShares operates a network of branches and offices, predominantly located in the Southeast, Mid-Atlantic, Midwest and Western United States, providing a broad range of financial services to individuals, businesses and professionals. Based on branch location, our top state deposit concentrations as of March 31, 2026 were in North Carolina, South Carolina, and California, which represented 25.7%, 7.4%, and 6.5%, respectively, of total deposits. 
 
 The Direct Bank had $45.41 billion or 26.6% of our total deposits as of March 31, 2026. The Direct Bank deposits mainly consist of savings. 
 
 Commercial Bank segment deposits as of March 31, 2026 were $47.19 billion or 27.6% of total deposits and are primarily concentrated in online banking. Deposits in the Commercial Bank segment include large dollar accounts with private equity and venture capital clients, primarily in the technology, life science and healthcare industries. 
 
 Deposit accounts with balances in excess of $50 million totaled $10.41 billion as of March 31, 2026, compared to $7.09 billion as of December 31, 2025. 
 
 Brokered deposits as of March 31, 2026 were $1.83 billion or 1.1% of total deposits. We had no brokered deposits as of December 31, 2025. 
 
 Uninsured Deposits 
 The amount of uninsured deposits is estimated consistent with the methodologies and assumptions utilized in providing information to the FDIC and Federal Reserve. We estimate total uninsured deposits were $65.44 billion, which represented 38.3% of total deposits at March 31, 2026, compared to $61.81 billion or 38.3% of total deposits at December 31, 2025. 
 
 Refer to the “Executive Overview—Funding, Liquidity and Capital Overview” and “Results by Segment” sections of this MD&A for further discussion of deposit composition, uninsured deposits, and recent deposit trends. 
 
 The following table provides the expected maturity of time deposits with balances in excess of $250,000 as of March 31, 2026: 
 
 Table 27
Maturities of Time Deposits In Excess of $250,000 
 
 dollars in millions March 31, 2026 
 Time deposits maturing in: 
 Three months or less $ 630 
 Over three months through six months 546 
 Over six months through 12 months 285 
 More than 12 months 13 
 Total $ 1,474 

 Borrowings 
 Total borrowings at March 31, 2026 were $33.96 billion, a decrease of $2.05 billion or 6% from $36.01 billion at December 31, 2025. The decrease from December 31, 2025 primarily related to the prepayments of the Purchase Money Note, partially offset by the Current Quarter Debt Issuance. Refer to the “Executive Overview—Recent Events” section earlier in this MD&A for further information related to 2026 borrowings activity. 
 
 76 

 The following table presents borrowings, net of the respective unamortized purchase accounting adjustments, premiums, discounts, and issuance costs: 
 
 Table 28
Borrowings 
 
 dollars in millions 
 March 31, 2026 December 31, 2025 Increase (Decrease) 
 Securities sold under agreements to repurchase $ 170 $ 224 $ (54) (24.0) % 
 
 Federal Deposit Insurance Corporation 
 3.500% fixed rate note due March 2028 (1) 
 30,905 33,385 (2,480) (7.4) 
 Senior Unsecured Borrowings 
 
 5.231% fixed-to-floating rate notes due March 2031 497 497 — — 
 4.869% fixed-to-floating rate notes due March 2032 
 495 — 495 100.0 
 6.000% fixed rate notes due April 2036 58 58 — — 
 Subordinated debt 
 6.125% fixed rate notes due March 2028 427 430 (3) (0.7) 
 
 5.600% fixed rate reset notes due September 2035 595 597 (2) (0.3) 
 6.254% fixed-to-fixed rate notes due March 2040 742 745 (3) (0.4) 
 
 Capital lease obligations 73 72 1 1.4 
 Total borrowings $ 33,962 $ 36,008 $ (2,046) (5.7) % 

 (1) Issued in connection with the SVBB Acquisition and secured by collateral. Refer to Note 5—Loans and Leases. The unamortized discount was $95 million and $115 million at March 31, 2026 and December 31, 2025, respectively. 
 
 The following summarizes debt issuances during 2026 and 2025: 
 
 Table 29
Parent Company Notes Issued 
 
 Borrowing Type Issuance Date Stated Maturity Date Earliest Par Call Date Par Value Current Interest Rate Current Payment Frequency Rate Reset Date Interest Rate After Reset Payment Frequency After Reset 
 2026 
 Fixed-to-Floating Rate Senior Notes March 3, 2026 March 3, 2032 March 3, 2031 $500 4.869% Semiannual March 3, 2031 Compounded SOFR + 148.7 bps Quarterly 
 2025 
 Fixed Rate Reset Subordinated Notes September 5, 2025 September 5, 2035 September 5, 2030 $600 5.600% Semiannual September 5, 2030 Five-year U.S. Treasury Rate + 185 bps Semiannual 
 Fixed-to-Floating Rate Senior Notes March 12, 2025 March 12, 2031 March 12, 2030 $500 5.231% Semiannual March 12, 2030 Compounded SOFR + 141 bps Quarterly 
 Fixed-to-Fixed Rate Subordinated Notes March 12, 2025 March 12, 2040 December 12, 2034 $750 6.254% Semiannual March 12, 2035 Five-year U.S. Treasury Rate + 197 bps Semiannual 

 We continually monitor our capital needs and market conditions in an effort to diversify our borrowing base and capital mix when appropriate. Refer to the “Risk Management—Liquidity Risk” section of this MD&A and Note 10—Borrowings for further information regarding liquidity and borrowings. 
 
 77 

 Other Assets and Liabilities 
 
 The following table includes the components of other assets: 
 
 Table 30
Other Assets 
 
 dollars in millions 
 March 31, 2026 December 31, 2025 Increase (Decrease) 
 Affordable housing tax credit and other unconsolidated investments (1) 
 $ 2,909 $ 2,955 $ (46) (1.5) % 
 Accrued interest receivable 955 912 43 4.8 
 Fair value of derivative financial instruments 498 534 (36) (6.8) 
 Pension and other retirement plan assets 794 784 10 1.3 
 Right of use assets for operating leases, net 285 294 (9) (3.1) 
 Income tax assets 504 510 (6) (1.2) 
 Counterparty receivables 124 124 — — 
 Bank-owned life insurance 107 108 (1) (1.1) 
 Nonmarketable investments 164 167 (3) (1.6) 
 Other real estate owned 110 119 (9) (8.0) 
 Mortgage servicing rights 33 32 1 2.6 
 Federal Home Loan Bank stock 20 20 — — 
 Other 1,010 964 46 4.8 
 Total other assets $ 7,513 $ 7,523 $ (10) (0.1) % 

 (1) Refer to Note 9—Variable Interest Entities for additional information. 
 
 The following table includes the components of other liabilities: 
 
 Table 31
Other Liabilities 
 
 dollars in millions 
 March 31, 2026 December 31, 2025 Increase (Decrease) 
 Income tax liabilities $ 3,825 $ 3,819 $ 6 0.2 % 
 Commitments to fund tax credit investments 1,234 1,321 (87) (6.6) 
 Accrued personnel cost (1) 
 519 1,042 (523) (50.1) 
 Fair value of derivative financial instruments 448 494 (46) (9.3) 
 Lease liabilities 317 329 (12) (3.7) 
 Reserve for off-balance sheet credit exposure 228 260 (32) (12.3) 
 Accrued interest payable 109 140 (31) (22.1) 
 Accounts payable and other 1,143 1,321 (178) (13.4) 
 Total other liabilities $ 7,823 $ 8,726 $ (903) (10.3) % 

 (1) Includes accruals for annual incentive compensation which is typically paid during the first quarter. Additionally, accrued personnel cost can fluctuate based on timing of the payroll cycle. 
 
 A reserve for off-balance sheet credit exposure is established for unfunded commitments and is included in other liabilities. BancShares estimates the expected funding amounts and applies its probability of obligor default (“PD”) and loss given default (“LGD”) models to those expected funding amounts to estimate the reserve. The reserve for off-balance sheet credit exposure was $228 million at March 31, 2026, a decrease of $32 million compared to $260 million at December 31, 2025. Refer to the “Results of Operations—Provision for Credit Losses” section of this MD&A for further discussion. Refer to Note 19—Commitments and Contingencies for information relating to off-balance sheet commitments. 
 
 78 

 RISK MANAGEMENT 
 
 Risk is inherent in any business. BancShares has defined a moderate risk appetite and a balanced approach to risk taking with a philosophy that does not preclude higher risk business activities commensurate with acceptable returns while meeting regulatory objectives. Through the comprehensive Risk Management Framework and Risk Appetite Policy and Statement, senior management has primary responsibility for day-to-day management of the risks we face with accountability of and support from all associates. Senior management applies various strategies to reduce the risks to which BancShares may be exposed, with effective challenge by independent risk management and oversight by management committees. The Board of Directors of the Parent Company (the “Board”) strives to ensure that risk management is a part of our business culture and that our policies and procedures to identify, assess, respond, and monitor risk are part of the decision-making process. The Board’s role in risk oversight is an integral part of our overall Risk Management Framework and Risk Appetite Policy. The Board administers its risk oversight function primarily through its Risk Committee. 
 
 The Risk Committee structure is designed to allow for information flow, effective challenge and timely escalation of risk-related issues. The Risk Committee monitors adherence to our Risk Management Framework and Risk Appetite Policy and Statement and provides quarterly updates to the Board on risk management. Our Chief Risk Officer also provides regular reports to the Risk Committee and the Board. Management and independent risk functions make regular reports to the Risk Committee on key risk areas, including credit, market, capital, liquidity, operational, compliance, and strategic risks. The Risk Committee also reviews reports of examination by and communications from regulatory agencies, the results of internal and third-party testing and qualitative and quantitative assessments related to risk management, and any other matters within the scope of the Risk Committee’s oversight responsibilities. The Risk Committee monitors management’s response to certain risk-related regulatory and audit issues. In addition, the Risk Committee may coordinate with the Board’s Audit Committee, Technology Committee and the Compensation, Nominations and Governance Committee for the review of financial statements and related risks, technology and cybersecurity risk, compensation risk management, and other areas of responsibility. 
 
 BancShares leverages a Three Lines Model to promote clarity of roles and responsibilities in managing risk. The first line is comprised of organizational functions that own or support the management of risk. The second line is led by the Chief Risk Officer, who reports to the Risk Committee of the Board, and is comprised of organizational functions that make up the Risk Management Department which has the responsibility for establishing risk frameworks, policies, standards, and procedures which support the Framework; providing proactive, transparent, and independent oversight and effective challenge of the first line; and identifying, measuring, monitoring, or controlling for aggregate risks. Internal audit is independent of the first and second lines, reporting directly to the Audit Committee of the Board and constitutes the third line. 
 
 In combination with other risk management and monitoring practices, enterprise-wide stress testing activities are conducted within a defined framework. Stress tests are performed for various risks to ensure the financial institution can support continued operations during stressed periods. 
 
 BancShares monitors and stress tests its capital and liquidity consistent with the safety and soundness expectations of the federal regulators. Refer to the “Regulatory Considerations” section of Item 1. Business included in the 2025 Form 10-K for further discussion. 
 
 BancShares assesses emerging risks on an ongoing basis, such as monitoring economic sentiment and emerging geopolitical issues, inflationary pressures due to rising energy prices among other factors, and the impact of artificial intelligence on various industries. BancShares also continues to assess operational risks such as those associated with potential cyberattacks for FCB and third parties upon whom it relies. Assessments will remain ongoing as the conditions continue to exist and develop. BancShares is also assessing the potential risk of an economic slowdown or recession that could create increased credit and market risk having downstream impacts on earnings, capital, and/or liquidity. Supported by resilient economic conditions, baseline forecasts reflect improving commercial real estate property values and a lower unemployment rate compared to the prior year, which have favorably impacted the ALLL. Key indicators will continue to be monitored, and impacts assessed as part of our ongoing Risk Management Framework. 
 
 79 

 Credit Risk 
 
 Credit risk is the risk arising from a borrower, obligor, or counterparty’s failure to meet the terms of any financial obligation, which can result in financial impact to current or anticipated earnings or capital, or strategic objectives. Loans and leases we originate are underwritten in accordance with our credit policies and procedures and are subject to periodic ongoing reviews. Acquired loans, regardless of whether purchased credit deteriorated (“PCD”) or Non-PCD, are recorded at fair value as of the acquisition date and are subject to periodic reviews to identify any further credit deterioration. Our independent credit review function conducts risk reviews and analyses of both originated and acquired loans to ensure compliance with credit policies and to monitor asset quality trends and borrower financial strength. These reviews include portfolio analysis by geographic location, industry, collateral type, and product. We strive to identify potential problem loans as early as possible, to record charge-offs as appropriate and to maintain an appropriate ALLL that accounts for expected losses over the life of the loan and lease portfolios. 
 
 Commercial Lending and Leasing 
 BancShares employs a credit ratings system where each commercial loan is assigned a PD, LGD, and/or overall credit rating using scorecards developed to rate each type of transaction incorporating assessments of both quantitative and qualitative factors. When commercial loans and leases are graded during underwriting, or when updated periodically thereafter, a model is run to generate a preliminary risk rating. These models incorporate both internal and external historical default and loss data, as well as other borrower and loan characteristics, to assign a risk rating. The preliminary risk rating assigned by the model can be adjusted as a result of borrower specific facts and circumstances that, in management’s judgment, warrant a modification of the modeled risk rating to arrive at the final approved risk ratings. 
 
 Consumer Lending 
 Consumer lending begins with an evaluation of a consumer borrower’s credit profile against published standards. Credit decisions are made after analyzing quantitative and qualitative factors to assess the borrower’s ability to repay the loan, and secondary sources of repayment, such as collateral value. 
 
 Consumer products use traditional and measurable standards to document and assess the creditworthiness of a loan applicant. Credit standards follow industry standard documentation requirements. Performance is largely evaluated based on an acceptable pay history along with a quarterly assessment which incorporates current market conditions. Loans may also be monitored during quarterly reviews of the borrower’s refreshed credit score. When warranted, an additional review of the loan-to-value of the underlying collateral may be conducted. 
 
 ALLL Methodology 
 
 Our ALLL methodology is discussed further in the section entitled “Critical Accounting Estimates” of the MD&A and Note 1—Significant Accounting Policies and Basis of Presentation in the 2025 Form 10-K. The ALLL is also discussed in Note 6—Allowance for Loan and Lease Losses of this Form 10-Q. 
 
 Our ALLL estimate as of March 31, 2026 included extensive reviews of the changes in credit risk associated with the uncertainties around macroeconomic forecasts. These loss estimates consider industry risk and the actual net losses incurred during prior periods of economic stress as well as recent credit trends. 
 
 The ALLL 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. 
 
 The ALLL 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 pool has a model tailored for the applicable risks. 
 
 Macroeconomic Forecasts Utilized in the Estimate of the ALLL 
 While management utilizes its best judgment and information available, the ultimate adequacy of our ALLL is dependent upon a variety of factors beyond our control which are inherently difficult to predict, the most significant being the macroeconomic scenario forecasts that determine the economic variables, including the U.S. unemployment rate, U.S. real gross domestic product (“GDP”), home price index (“HPI”), and commercial real estate price index (“CRE price index”) utilized in the ALLL models. These economic variables are based on macroeconomic scenario forecasts with a forecast horizon that covers the reasonable and supportable period. 
 
 80 

 Due to the inherent uncertainty in the macroeconomic forecasts, BancShares utilizes baseline, upside, and downside macroeconomic scenarios and probability weights the scenarios based on review of variable forecasts for each scenario and comparison to expectations. Our scenario weighting has remained consistent since the second quarter of 2025. We will continue to monitor economic sentiment and emerging geopolitical issues, rising energy prices, and the impact of artificial intelligence on various industries. 
 
 At March 31, 2026, ALLL estimates ranged from $1.32 billion, when weighing the upside scenario 100%, to $1.98 billion when weighting the downside scenario 100%. BancShares management determined that an ALLL of $1.56 billion was appropriate as of March 31, 2026. 
 
 The following table presents the U.S. unemployment rate, U.S. real GDP, HPI, and CRE price index based on the weighted-average scenario forecasts used in determining the ALLL at March 31, 2026 and December 31, 2025. The projected trends in the macroeconomic variables below may fluctuate depending on the underlying scenarios and our scenario weighting assumptions utilized for the applicable period. 
 
 Table 32
Select Variables in ALLL Weighted-average Scenarios 
 
 Assumptions as of March 31, 2026 
 2026 2027 2028 
 U.S. unemployment rate (1) 
 4.9 % 5.3 % 5.0 % 
 U.S. real GDP (2) 
 2.5 % 1.4 % 2.0 % 
 HPI (2) 
 (0.3) % 1.3 % 3.7 % 
 CRE price index (2) 
 0.0 % (2.8) % 3.4 % 
 
 Assumptions as of December 31, 2025 
 2026 2027 2028 
 U.S. unemployment rate (1) 
 5.2 % 5.4 % 5.1 % 
 U.S. real GDP (2) 
 1.5 % 1.6 % 2.0 % 
 HPI (2) 
 (1.4) % 2.2 % 3.5 % 
 CRE price index (2) 
 (3.4) % (1.6) % 4.1 % 
 
 (1) Assumptions represent the projected quarterly averages for the years ending December 31, 2026, 2027, and 2028. 
 (2) Assumptions represent the projected year-over-year percent changes. 
 
 Qualitative Component of the ALLL 
 ALLL model outputs may be adjusted through a qualitative assessment to reflect trends that may not be adequately reflected within the models, which could include economic conditions, uncertainty in macroeconomic forecasts, credit quality, risk to specific industry concentrations, and any significant policy and underwriting changes. These qualitative adjustments are also used to accommodate for the imprecision of certain assumptions and uncertainties inherent in the model calculations. 
 
 Current economic conditions and forecasts can change which could affect the anticipated amount of estimated credit losses and therefore the appropriateness of the ALLL. It is difficult to estimate how potential changes in any one economic factor or input might affect the overall ALLL because a wide variety of factors and inputs are considered in estimating the ALLL and changes in those factors and inputs considered may not occur at the same rate and may not be consistent across all product types. Additionally, changes in factors and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others. 
 
 81 

 The following table summarizes the ALLL for commercial, consumer and total loans. 
 
 Table 33
ALLL 
 
 dollars in millions Three Months Ended March 31, 2026 Three Months Ended March 31, 2025 
 Commercial Consumer Total Commercial Consumer Total 
 Balance at beginning of period $ 1,436 $ 130 $ 1,566 $ 1,518 $ 158 $ 1,676 
 
 Provision for loan and lease losses 97 6 103 138 10 148 
 Charge-offs (123) (9) (132) (159) (8) (167) 
 Recoveries 18 3 21 20 3 23 
 
 Balance at end of period $ 1,428 $ 130 $ 1,558 $ 1,517 $ 163 $ 1,680 
 Net charge-off ratio 0.30 % 0.41 % 
 Net charge-offs $ 105 $ 6 $ 111 $ 139 $ 5 $ 144 
 Average loans $ 149,121 $ 140,780 
 Percent of loans in each category to total loans 82 % 18 % 100 % 80 % 20 % 100 % 

 The ALLL was $1.56 billion at March 31, 2026, compared to $1.57 billion at December 31, 2025, resulting in an ALLL reserve release of $8 million in the current quarter, mainly driven by loan growth concentrated in capital call lines which have a significantly lower loss rate relative to our other loan portfolios, and changes in the macroeconomic scenarios, partially offset by higher reserves for individually evaluated loans. The ALLL increased $4 million from December 31, 2024 to March 31, 2025. The ALLL as a percentage of loans was 1.05% at March 31, 2026, a decrease of 1 bp from 1.06% at December 31, 2025. 
 
 The following table summarizes the ALLL as a percentage of loans for each loan class: 
 
 Table 34
ALLL by Loan Class 
 
 dollars in millions March 31, 2026 December 31, 2025 
 ALLL Loan Balance ALLL as a Percentage of Loans ALLL Loan Balance ALLL as a Percentage of Loans 
 Commercial 
 Commercial and industrial $ 808 $ 45,753 1.77 % $ 807 $ 44,721 1.80 % 
 Capital call lines 29 32,274 0.09 29 31,791 0.09 
 Owner occupied commercial mortgage 52 17,502 0.30 50 17,660 0.28 
 Investor dependent 166 2,714 6.12 181 2,778 6.52 
 Commercial real estate 373 23,707 1.58 369 23,784 1.55 
 
 Total commercial 1,428 121,950 1.17 1,436 120,734 1.19 
 Consumer 
 Residential mortgage 70 21,698 0.32 67 21,861 0.31 
 Revolving mortgage 28 2,863 0.96 26 2,863 0.89 
 Auto 9 1,332 0.70 9 1,416 0.67 
 Other consumer 23 849 2.71 28 1,056 2.62 
 Total consumer 130 26,742 0.48 130 27,196 0.48 
 
 Total $ 1,558 $ 148,692 1.05 % $ 1,566 $ 147,930 1.06 % 

 The ALLL may vary significantly from period to period due to changes in economic conditions, economic forecasts, the composition and credit quality of the loan and lease portfolio, and the related impacts to the ALLL models. We continuously monitor and update our ALLL estimation methodology, as appropriate. 
 
 82 

 Net Charge-Offs 
 The following table summarizes net charge-offs for each loan class: 
 
 Table 35
Net Charge-Offs 
 
 dollars in millions Three Months Ended 
 March 31, 2026 December 31, 2025 March 31, 2025 
 Charge-offs Recoveries Net
charge-offs (recoveries) Charge-offs Recoveries Net
charge-offs (recoveries) Charge-offs Recoveries Net
charge-offs (recoveries) 
 Commercial 
 Commercial and industrial $ 95 $ 11 $ 84 $ 90 $ 14 $ 76 $ 80 $ 15 $ 65 
 
 Owner occupied commercial mortgage 4 — 4 4 — 4 — — — 
 Investor dependent 12 7 5 34 14 20 39 5 34 
 Commercial real estate 12 — 12 40 1 39 40 — 40 
 Total commercial 123 18 105 168 29 139 159 20 139 
 Consumer 
 Residential mortgage — 1 (1) — 1 (1) — — — 
 Revolving mortgage — — — — — — — — — 
 Auto 2 1 1 1 — 1 3 2 1 
 Other consumer 7 1 6 5 1 4 5 1 4 
 Total consumer 9 3 6 6 2 4 8 3 5 
 Total $ 132 $ 21 $ 111 $ 174 $ 31 $ 143 $ 167 $ 23 $ 144 

 Net charge-offs for the current quarter were $111 million, a decrease of $32 million from $143 million for the linked quarter, primarily due to decreases of $27 million in commercial real estate and $15 million in investor dependent, partially offset by an increase of $8 million in commercial and industrial. 
 
 Net charge-offs for the current quarter were $111 million, a decrease of $33 million from $144 million for the prior year quarter, primarily due to decreases of $29 million in investor dependent and $28 million in commercial real estate, partially offset by increases of $19 million in commercial and industrial and $4 million in owner occupied commercial mortgage. 
 
 Nonperforming Assets 
 Nonperforming assets include nonaccrual loans and leases, OREO and repossessed assets. Accounting policies related to nonperforming assets are discussed in Note 1—Significant Accounting Policies and Basis of Presentation of the 2025 Form 10-K. 
 
 Table 36
Non-Performing Assets 
 
 Increase (Decrease) 
 dollars in millions March 31, 2026 December 31, 2025 Change in $ Change in % or bps 
 Nonaccrual loans: 
 Commercial loans $ 1,184 $ 1,082 $ 102 9.4 % 
 Consumer loans 245 225 20 8.7 
 Total nonaccrual loans 1,429 1,307 122 9.3 
 Other real estate owned (1) and repossessed assets 
 116 124 (8) (6.2) 
 Total nonperforming assets $ 1,545 $ 1,431 $ 114 7.9 
 
 Total loans and leases $ 148,692 $ 147,930 $ 762 0.5 % 
 Total loans and leases, other real estate owned, and repossessed assets 148,808 148,054 754 0.5 
 ALLL to total loans and leases 1.05 % 1.06 % (1) 
 Ratio of total nonperforming assets to total loans, leases, other real estate owned and repossessed assets 1.04 0.97 7 
 Ratio of nonaccrual loans and leases to total loans and leases 0.96 0.88 8 
 Ratio of ALLL to nonaccrual loans and leases 109.01 119.80 (1,079) 

 (1) OREO includes former branch property and other non-foreclosed property of $27 million and $26 million as of March 31, 2026 and December 31, 2025, respectively. 
 
 OREO and repossessed assets were $116 million at March 31, 2026 compared to $124 million at December 31, 2025, a decrease of $8 million. 
 83 

 Trends in past due and nonaccrual loans are discussed below. 
 
 Past Due and Nonaccrual Loans 
 Past due and nonaccrual loans by loan class are summarized in the following table: 
 
 Table 37
Delinquencies and Nonaccrual Loans 
 
 dollars in millions March 31, 2026 December 31, 2025 
 Accruing Loans Accruing loans 
 30-59 Days 
 Past Due 
 60-89 Days 
 Past Due 
 Total 30-89 Days Past Due 90 Days or 
 Greater 
 Nonaccrual Loans 30-59 Days 
 Past Due 
 60-89 Days 
 Past Due 
 Total 30-89 Days Past Due 90 Days or 
 Greater 
 Nonaccrual Loans 
 Commercial 
 Commercial and industrial $ 222 $ 29 $ 251 $ 35 $ 461 $ 232 $ 56 $ 288 $ 63 $ 456 
 Capital call lines 31 — 31 — — — — — — — 
 Owner occupied commercial mortgage 65 24 89 16 162 78 19 97 1 159 
 Investor dependent 8 — 8 — 37 11 1 12 — 49 
 Commercial real estate 87 10 97 185 524 221 31 252 171 418 
 Total commercial 413 63 476 236 1,184 542 107 649 235 1,082 
 Consumer 
 Residential mortgage 148 25 173 7 196 168 42 210 7 179 
 Revolving mortgage 24 3 27 — 38 25 4 29 — 35 
 Auto 10 2 12 — 10 15 3 18 — 9 
 Other consumer 4 2 6 2 1 5 3 8 2 2 
 Total consumer 186 32 218 9 245 213 52 265 9 225 
 Total $ 599 $ 95 $ 694 $ 245 $ 1,429 $ 755 $ 159 $ 914 $ 244 $ 1,307 

 The decrease of $220 million in accruing loans that are 30 to 89 days past due is largely attributable to decreases of $155 million in commercial real estate, $37 million in commercial and industrial and $37 million in residential mortgage, partially offset by a net increase of $9 million in all other loan classes. Accruing loans that are 30 to 89 days past due are early stage delinquencies that are not showing signs of significant credit deterioration. Delinquency status is considered in the estimate of the ALLL. 
 
 The increase of $1 million in accruing loans that are 90 days or greater past due is primarily attributable to increases of $15 million in owner occupied commercial mortgage and $14 million in commercial real estate, partially offset by a decrease of $28 million in commercial and industrial. Loans 90 days or greater past due are assigned a more severe PD in accordance with our ALLL methodology. 
 
 Nonaccrual loans and leases at March 31, 2026 were $1.43 billion (0.96% of loans), an increase of $122 million compared to $1.31 billion (0.88% of loans) at December 31, 2025, largely concentrated in a small number of commercial real estate loans that were individually evaluated, contributing to the increase in specific reserves. Nonaccrual loans over an established threshold are individually evaluated for specific ALLL reserves as discussed in Note 1—Significant Accounting Policies and Basis of Presentation of the 2025 Form 10-K. 
 
 84 

 Commercial Real Estate Portfolio Composition 
 Our commercial real estate portfolio is diversified across various property types. The following table provides an overview of the property type exposures within our commercial real estate portfolio: 
 
 Table 38
Commercial Real Estate Portfolio 
 
 dollars in millions March 31, 2026 
 Balance % to Total Loans and Leases 
 Multi-family $ 5,219 3.5 % 
 Medical office 3,538 2.4 
 Industrial, including warehouses 3,005 2.0 
 Data center 2,531 1.7 
 General office 1,951 1.3 
 Healthcare 1,825 1.2 
 Retail 1,573 1.0 
 Hotel and motel 867 0.6 
 Other 3,198 2.2 
 Total $ 23,707 15.9 % 

 Evolving macroeconomic and social conditions (including the shift to hybrid work arrangements) may result in changes for general office demand moving forward. Our general office portfolio has experienced more negative credit quality trends relative to our other commercial real estate portfolios. Our general office portfolio is 1.31% of total loans and leases and 8.23% of total commercial real estate at March 31, 2026. Select metrics for our general office portfolio are summarized in the following table: 
 
 Table 39
General Office Portfolio 
 
 dollars in millions March 31, 2026 
 
 General office as a percentage of total loans and leases 1.31 % 
 General office as a percentage of commercial real estate loans 8.23 % 
 
 Net charge-offs as a percentage of general office 0.56 % 
 Percentage of general office 30 days or more past due 8.08 % 
 Nonaccrual loans as a percentage of general office 
 9.25 % 
 ALLL as a percentage of general office 4.52 % 

 Concentration 
 We strive to minimize the risks associated with large concentrations within specific geographic areas, collateral types or industries. Despite our focus on diversification, several characteristics of our loan portfolio subject us to concentration risk. Loan concentration for our commercial and consumer loans is summarized below. 
 
 Commercial Loan Concentration 
 
 Industry Concentration 
 The following table summarizes the industry concentration of our commercial loans and leases based the obligors’ industries: 
 
 Table 40
Commercial Loans and Leases - Industry 
 
 dollars in millions March 31, 2026 December 31, 2025 
 Finance and insurance $ 39,540 32.4 % $ 38,417 31.8 % 
 Real estate 17,678 14.5 17,911 14.8 
 Healthcare 11,196 9.2 11,155 9.2 
 Information 10,015 8.2 9,699 8.0 
 Business services 9,584 7.9 9,601 8.0 
 Transportation, communication, gas, utilities 7,631 6.3 7,567 6.3 
 Manufacturing 7,134 5.8 7,137 5.9 
 Retail 4,466 3.7 4,329 3.6 
 Service industries 4,271 3.5 4,274 3.5 
 Wholesale 3,622 3.0 3,571 3.0 
 Other 6,813 5.5 7,073 5.9 
 Total $ 121,950 100.0 % $ 120,734 100.0 % 

 85 

 Loans to non-depository financial institutions (“NDFIs”) 
 Loans to borrowers in the finance and insurance industry were $39.54 billion or 32.4% of commercial loans and leases at March 31, 2026, compared to $38.42 billion or 31.8% of commercial loans and leases at December 31, 2025. Loans to NDFIs comprised 98.1% of our loans to borrowers in the finance and insurance industry at March 31, 2026. Our NDFI portfolio composition is described below. 
 
 As of March 31, 2026, loans to NDFIs were $38.78 billion. Capital call lines comprise $32.27 billion, or 83%, of the NDFI portfolio. The primary source of repayment for capital call lines is the capital commitments of the underlying limited partner (“LP”) investors in funds managed by certain private equity and venture capital firms. Capital calls are contractual obligations of the LPs and are not subject to the performance of the underlying portfolio of investments. Capital call lines are typically governed by financial covenants oriented towards ensuring that the funds’ remaining callable capital is sufficient to repay the loan, and larger commitments (typically provided to larger private equity funds) are typically secured by an assignment of the general partner's right to call capital from the fund's LP investors. The credit quality is strong for capital call lines based on the structural protection provided by the funds and the underlying investors. Capital call lines have a significantly lower loss rate relative to our other loan portfolios. As of March 31, 2026, the ALLL was 0.09% of capital call lines, compared to 1.05% of total loans. 
 
 The loans to NDFIs that are not capital call lines (the “Other NDFI Portfolios”) have balances totaling $6.51 billion at March 31, 2026, and the largest portfolios are described below: 
 • The net asset value portfolio ($2.24 billion) consists of: (i) loans to private equity funds collateralized by the funds’ portfolios of direct equity investments in private companies, and (ii) loans to predominantly secondary funds collateralized by the funds’ portfolios of investments in LP interests in private funds and/or co-investment vehicles. 
 • Leveraged fund lines ($1.4 billion) are lines of credit provided to private credit funds and are collateralized by portfolios of the underlying assets, primarily first lien loans. 
 • Warehouse lines ($918 million) are asset-based lines of credit that finance cash flows for large pools of assets, such as accounts receivable and loans, that the borrower (or sponsor) typically sell or transfer to special purpose vehicle entities. 
 • Specialty finance ($617 million) includes asset-based lending facilities to lenders that are primarily investing in first lien senior debt. 
 
 The Other NDFI Portfolios are included in commercial and industrial loans and leases. As of March 31, 2026, the ALLL was 1.77% of commercial and industrial loans and leases. 
 
 Through our credit risk management practices and our targeted analysis of the NDFI portfolios, we determined that the ALLL was appropriate. 
 
 NDFIs could be subject to a less stringent regulatory environment than FDIC-insured depository institutions or BHCs as further discussed in Item 1A. Risk Factors of the 2025 Form 10-K. We strive to mitigate the credit risk of our loans to NDFIs through our underwriting and credit monitoring processes. As discussed above, 83% of our NDFI portfolio at March 31, 2026 is comprised of capital call lines which have strong credit quality based on the structural protection provided by the funds and the underlying investors. Additionally, we establish advance rates (the percentage of the collateral value FCB will lend to the borrower) for loans in the Other NDFI Portfolios commensurate with the risks of the underlying collateral type, structural protection of the funds or investors, diversification of the funds, and financial strength of the borrower (or sponsor). 
 
 Real estate secured loans 
 Our commercial real estate portfolio comprises the vast majority of the real estate industry loans in the table above, which is based on the industry of the obligor. Additionally, we have commercial real estate and owner occupied commercial mortgage loans that are secured by real estate, but are categorized in other industries in the table above. At March 31, 2026, the combined balances of our commercial real estate and owner occupied commercial mortgage loans were $41.21 billion, or 34% of commercial loans and leases, compared to $41.44 billion or 34% at December 31, 2025. We have historically carried a concentration of real estate secured loans, but actively mitigate exposure through underwriting policies, which primarily rely on borrower cash flow rather than underlying collateral values. When we do rely on underlying real property values, we prefer financing secured by owner-occupied real property. 
 
 86 

 Healthcare and information industries 
 The healthcare and information industries in the table above largely consist of the healthcare, life sciences, and technology sectors, which include clients in our Commercial Finance, Global Fund Banking, and Technology and Healthcare Banking within our Commercial Bank segment. Loans and leases to borrowers in medical, dental or other healthcare fields were $11.20 billion as of March 31, 2026, which represents 9.2% of commercial loans and leases, compared to $11.16 billion or 9.2% of commercial loans and leases at December 31, 2025. Loans and leases to borrowers in the information industry were $10.02 billion as of March 31, 2026, which represents 8.2% of commercial loans and leases, compared to $9.70 billion or 8.0% of commercial loans and leases at December 31, 2025. We actively mitigate credit risk exposure of these industry concentrations through our underwriting policies that emphasize reliance on adequate levels of borrower repayment sources. 
 Larger Balance Loans 
 The following table provides a summary of commercial loans by loan size and loan class as of March 31, 2026: 
 
 Table 41
Commercial Loans by Size and Class 
 
 dollars in millions Less Than $10 Million $10 Million to $30 Million Greater Than $30 Million Total Commercial Loans 
 Commercial and industrial $ 16,182 $ 11,850 $ 17,721 $ 45,753 
 Capital call lines 1,311 3,344 27,619 32,274 
 Owner occupied commercial mortgage 14,629 2,304 569 17,502 
 Investor dependent 1,612 748 354 2,714 
 Commercial real estate 8,370 6,604 8,733 23,707 
 Total $ 42,104 $ 24,850 $ 54,996 $ 121,950 

 Most of our loans greater than $30 million at March 31, 2026 are capital call lines which are described above in “Risk Management—Credit Risk—Concentration—Loans to non-depository financial institutions (“NDFIs”).” 
 Geographic Concentrations 
 The following table summarizes geographic concentrations based on the location of the real estate collateral for owner occupied commercial mortgage and commercial real estate loans, and based on the obligor address for all other commercial loans. 
 
 Table 42
Commercial Loans and Leases - Geography 
 
 dollars in millions March 31, 2026 December 31, 2025 
 State 
 California $ 25,324 20.8 % $ 26,056 21.6 % 
 New York 12,129 9.9 12,193 10.1 
 North Carolina 11,258 9.2 11,005 9.1 
 Texas 9,570 7.9 8,811 7.3 
 Massachusetts 7,484 6.1 7,325 6.1 
 Florida 6,259 5.1 6,175 5.1 
 All other states 46,900 38.5 46,093 38.2 
 Total U.S. $ 118,924 97.5 % $ 117,658 97.5 % 
 Total international 3,026 2.5 3,076 2.5 
 Total $ 121,950 100.0 % $ 120,734 100.0 % 

 Consumer Loan Concentration 
 Loan concentrations may exist when multiple borrowers could be similarly impacted by economic or other conditions. The following table summarizes state concentrations greater than 5.0% of consumer loans based on customer address: 
 
 Table 43
Consumer Loans - Geography 
 
 dollars in millions March 31, 2026 December 31, 2025 
 State 
 California $ 7,950 29.7 % $ 8,118 29.8 % 
 North Carolina 6,695 25.0 6,736 24.8 
 South Carolina 3,471 13.0 3,502 12.9 
 Massachusetts 1,486 5.6 1,597 5.9 
 Other states 7,140 26.7 7,243 26.6 
 Total $ 26,742 100.0 % $ 27,196 100.0 % 

 87 

 Market Risk 
 
 Market risk is the risk arising from changes in interest rates, foreign exchange, fixed income, commodity, or equity prices which can result in financial loss, or adverse impact to earnings and capital. 
 
 Interest rate risk management 
 BancShares is exposed to the risk that changes in market conditions may affect interest rates and negatively impact earnings. The risk arises from the nature of BancShares’ business activities, the composition of BancShares’ balance sheet, and changes in the level or shape of the yield curve. BancShares manages this inherent risk strategically based on prescribed guidelines and approved limits. 
 
 Interest rate risk can arise from many of BancShares’ business activities, such as lending, leasing, investing, deposit taking, derivatives, and funding activities. We evaluate and monitor interest rate risk primarily through two metrics. 
 • Net Interest Income Sensitivity (“NII Sensitivity”) measures the net impact of hypothetical changes in interest rates on forecasted NII; and 
 • Economic Value of Equity (“EVE”) Sensitivity (“EVE Sensitivity”) measures the net impact of these hypothetical changes on the value of equity by assessing the economic value of assets, liabilities and off-balance sheet instruments. 
 
 BancShares uses a holistic process to measure and monitor both short term and long term risks, which includes, but is not limited to, gradual and immediate parallel rate shocks, changes in the shape of the yield curve, and changes in the relationship of various yield curves. NII Sensitivity generally focuses on shorter term earnings risk, while EVE Sensitivity assesses the longer-term risk of the existing balance sheet. 
 
 Our exposure to NII Sensitivity is guided by the Risk Appetite Policy and Statement and a range of risk metrics, and BancShares may utilize tools across the balance sheet to adjust its interest rate risk exposures, including through business line actions and actions within the investment, funding and derivative portfolios. 
 
 The composition of our interest rate sensitive assets and liabilities generally results in a net asset-sensitive position for NII Sensitivity, whereby our assets will reprice faster than our liabilities. A component of our interest rate risk management strategy is the use of derivative instruments to mitigate fluctuations in earnings caused by changes in market interest rates. Interest rate swaps are the primary type of derivative instrument that we use as part of our interest rate risk management strategy. These derivatives hedge interest income variability of floating rate loans indexed to secured overnight financing rate (“SOFR”), as well as fair value changes of fixed rate long-term debt. Refer to Note 11—Derivative Financial Instruments for further information on our derivative portfolio. 
 Our funding sources consist primarily of deposits, and we also support our funding needs through wholesale funding sources (including unsecured and secured borrowings). 
 
 The deposit rates we offer are influenced by market conditions and competitive factors. Market rates are the key factors of deposit costs, and we continue to optimize deposit costs by improving our deposit mix. Changes in interest rates, expected funding needs, as well as actions by competitors, can affect our deposit taking activities and deposit pricing. We believe our targeted non-maturity deposit customer retention is strong and we remain focused on optimizing our mix of deposits. We regularly assess the effect of deposit rate changes on our balances and seek to achieve optimal alignment between assets and liabilities. 
 
 The following table summarizes the results of 12-month NII Sensitivity simulations produced by our asset/liability management system. These simulations assume static balance sheet replacement with like products and implied forward market rates, and also incorporate additional internal models and assumptions, which we may update periodically, including rate dependent prepayment for certain loans and securities and repricing of interest-bearing non-maturity deposits. The below simulations assume an immediate 100 and 200 bps parallel increase and decrease from current interest rates. 
 
 88 

 Table 44
NII Sensitivity Simulation Analysis 
 
 Estimated (Decrease) Increase in NII 
 Change in interest rate (bps) March 31, 2026 December 31, 2025 
 -200 (12.1) % (11.3) % 
 -100 (6.4) (5.8) 
 +100 6.7 6.5 
 +200 14.0 13.6 

 NII Sensitivity metrics at March 31, 2026, compared to December 31, 2025, were primarily affected by deposit growth, resulting in a higher cash position and compositional changes, partially offset by impacts from increased hedges. 
 
 As of March 31, 2026, BancShares continues to have an asset sensitive interest rate risk profile and the potential exposure to forecasted earnings was largely due to the composition of the balance sheet (primarily due to floating rate commercial loans and cash), as well as estimates of modest future deposit betas. 65.6% of our loans have floating contractual reference rates, indexed primarily to SOFR and the U.S. prime rate. Deposit betas are currently modeled to have a portfolio average of 35%-40% over the twelve-month forecast horizon, including 50%-55% for interest-bearing non-maturity deposits. Deposit beta is the portion of a change in the federal funds rate that is passed on to the deposit rate. Actual deposit betas may be different than modeled, depending on various factors, including liquidity requirements, deposit mix and competitive pressures. Impacts to NII Sensitivity may change due to actual results differing from modeled expectations. 
 
 As noted above, EVE Sensitivity supplements NII simulations as it estimates risk exposures beyond a twelve-month horizon. EVE Sensitivity measures the change in EVE due to changes in assets, liabilities, and off-balance sheet instruments in response to a change in interest rates. EVE Sensitivity was calculated by estimating the change in the net present value of assets, liabilities, and off-balance sheet items under various rate movements, including utilizing a dynamic rate level dependent modeling approach for our deposit attrition assumption. In addition to interest rate changes, other key assumptions used in our EVE Sensitivity simulations include asset prepayments, as well as balance attrition and pricing of non-maturity deposits. 
 
 The below simulations assume an immediate 100 and 200 bps parallel increase and decrease from current interest rates and the estimated impact on our EVE profile based on our current modeling approach: 
 
 Table 45
EVE Modeling Analysis 
 
 Estimated Increase (Decrease) in EVE 
 Change in interest rate (bps) March 31, 2026 December 31, 2025 
 -200 7.2 % 6.7 % 
 -100 4.4 4.3 
 +100 (4.3) (4.2) 
 +200 (7.8) (8.2) 
 
 In addition to the above reported sensitivities, a wide variety of potential interest rate scenarios are simulated within our asset/liability management system. Scenarios that impact balance sheet composition or the sensitivity to key assumptions are also evaluated. 
 
 We use results of our various interest rate risk analyses to formulate and implement asset and liability management strategies, in coordination with the Asset and Liability Committee, to achieve the desired risk profile, while managing our objectives for market risk and other strategic objectives. Specifically, we may manage our interest rate risk position through certain pricing strategies and product design for loans and deposits, our investment portfolio, funding portfolio, or by using derivatives to mitigate earnings volatility. 
 
 The above sensitivities provide an estimate of our interest rate sensitivity; however, they do not account for potential changes in credit quality, size, mix, or changes in the competition for business in the industries we serve. They also do not account for other business developments and other actions. Accordingly, we can give no assurance that actual results would not differ materially from the estimated outcomes of our simulations. 
 
 89 

 Loan Maturity and Loan Interest Rate Sensitivity 
 The following table provides loan maturity distribution information: 
 
 Table 46
Loan Maturity Distribution 
 
 dollars in millions At March 31 2026, Maturing 
 Within
One Year One to Five
Years Five to 15
Years After 15 Years Total 
 Commercial 
 Commercial and industrial $ 12,831 $ 27,390 $ 4,749 $ 783 $ 45,753 
 Capital call lines 31,762 512 — — 32,274 
 Owner occupied commercial mortgage 2,115 9,294 5,812 281 17,502 
 Investor dependent 1,217 1,497 — — 2,714 
 Commercial real estate 5,999 13,856 2,660 1,192 23,707 
 Total commercial 53,924 52,549 13,221 2,256 121,950 
 Consumer 
 Residential mortgage 825 2,798 7,774 10,301 21,698 
 Revolving mortgage 50 183 1,117 1,513 2,863 
 Consumer auto 335 900 97 — 1,332 
 Consumer other 199 539 106 5 849 
 Total consumer 1,409 4,420 9,094 11,819 26,742 
 Total loans and leases $ 55,333 $ 56,969 $ 22,315 $ 14,075 $ 148,692 

 As noted above, 65.6% of our total loans have floating contractual reference rates, indexed primarily to SOFR and the U.S. prime rate. The following table provides information regarding fixed and variable interest rate loans and leases maturing one year or after, as of March 31, 2026: 
 
 Table 47
Fixed and Variable Interest Rate Loans 
 
 dollars in millions Loans Maturing One Year or After with 
 Fixed Interest Rates Variable Interest Rates 
 Commercial 
 Commercial and industrial $ 9,945 $ 22,977 
 Capital call lines — 512 
 Owner occupied commercial mortgage 13,724 1,663 
 Investor dependent 5 1,492 
 Commercial real estate 7,897 9,811 
 Total commercial 31,571 36,455 
 Consumer 
 Residential mortgage 8,262 12,611 
 Revolving mortgage 22 2,791 
 Consumer auto 997 — 
 Consumer other 281 369 
 Total consumer 9,562 15,771 
 Total loans and leases $ 41,133 $ 52,226 

 Liquidity Risk 
 
 Liquidity risk is the risk arising from BancShares being unable to meet its obligations as they come due because of an inability to: (i) liquidate assets or obtain adequate funding, or (ii) unwind or offset specific exposures without significantly lowering market prices because of inadequate market depth or market disruptions. This may result in impairment of safety and soundness. 
 
 Our liquidity risk management and monitoring process is designed to ensure the availability of adequate cash and collateral resources and funding capacity to meet our obligations. Our overall liquidity management strategy is intended to ensure appropriate liquidity to meet expected and contingent funding needs under both normal and stressed environments. Consistent with this strategy, we maintain sufficient amounts of available cash and HQLS. Additional sources of liquidity include committed credit facilities, repurchase agreements, brokered certificates of deposit issuances, unsecured debt issuances, and cash collections generated by portfolio asset sales to third parties. 
 90 

 We utilize measurement tools to assess and monitor the level and adequacy of our liquidity position, liquidity conditions and trends. We measure and forecast liquidity and liquidity risks under different hypothetical scenarios and across different horizons. We use a liquidity stress testing framework to better understand the range of potential risks and their impacts to which BancShares is exposed. Stress test results inform our business strategy, risk appetite, levels of liquid assets, and contingency funding plans. Also included among our liquidity measurement tools are key risk indicators that assist in identifying potential liquidity risk and stress events. 
 
 BancShares maintains a framework to establish liquidity risk tolerances, monitoring, and breach escalation protocol to alert management of potential funding and liquidity risks and to initiate mitigating actions as appropriate. Further, BancShares maintains a contingent funding plan, which details protocols and potential actions to be taken under liquidity stress conditions. 
 
 Liquidity includes available cash and HQLS. At March 31, 2026 we had $60.72 billion of high-quality liquid assets (25.7% of total assets) and $30.29 billion of contingent liquidity sources available. Some of the more significant changes from December 31, 2025 included higher available cash and HQLS due to balance sheet changes discussed above in “Executive Overview—Financial Performance Summary—Balance Sheet Highlights.” 
 
 Table 48
Liquidity 
 
 dollars in millions March 31, 2026 December 31, 2025 
 Available cash 
 $ 22,142 $ 19,111 
 High-quality liquid securities (1) 
 38,580 36,895 
 High-quality liquid assets $ 60,722 $ 56,006 
 
 Current Capacity (2) of Credit Facilities: 
 
 FHLB facility (3) 
 $ 17,349 $ 17,775 
 FRB facility 12,944 12,962 
 
 Total contingent sources $ 30,293 $ 30,737 
 Total liquid assets and contingent sources $ 91,015 $ 86,743 
 Total uninsured deposits $ 65,439 $ 61,809 
 Coverage ratio of total liquid assets and contingent sources to uninsured deposits 139 % 140 % 

 (1) Consists of readily marketable, unpledged securities, as well as securities pledged but not drawn against at the FHLB and available for sale, and generally is comprised of U.S. Treasury and U.S. agency investment securities held outright or via reverse repurchase agreements. 
 (2) Current capacity is based on the amount of collateral pledged and available for use at March 31, 2026 and December 31, 2025. 
 (3) Refer to Table 49 for additional details. 
 
 We fund our operations through deposits and borrowings. Our primary source of liquidity is derived from our various deposit channels, including our Branch Network and Direct Bank. Total deposits at March 31, 2026 were $170.84 billion, an increase of $9.26 billion or 6% from $161.58 billion at December 31, 2025. 
 
 We use borrowings to diversify the funding of our business operations. In addition to the Purchase Money Note and FHLB advances, borrowings also include senior unsecured notes, securities sold under customer repurchase agreements, and subordinated notes. Total borrowings at March 31, 2026 were $33.96 billion, a decrease of $2.05 billion or 6% from $36.01 billion at December 31, 2025. Refer to details of debt prepayments and issuance in the “Executive Overview—Recent Events” section of this MD&A. We continually monitor our capital needs and market conditions in an effort to diversify our borrowing base and capital mix when appropriate. 
 
 FHLB Capacity 
 A source of available funds is advances from the FHLB of Atlanta. We may pledge assets for secured borrowing transactions, which include borrowings from the FHLB or FRB, or for other purposes as required or permitted by law. The debt issued in conjunction with these transactions is collateralized by certain discrete receivables, securities, loans, leases and underlying equipment. Certain related cash balances are restricted. 
 
 91 

 Table 49
FHLB Balances 
 
 dollars in millions March 31, 2026 December 31, 2025 
 
 Total borrowing capacity $ 18,799 $ 19,225 
 Less: 
 Advances — — 
 Letters of credit (1) 
 1,450 1,450 
 Available capacity $ 17,349 $ 17,775 
 Pledged Non-PCD loans $ 31,368 $ 31,713 
 
 (1) Letters of credit were established with the FHLB to collateralize public funds. 
 
 FRB Capacity 
 Under borrowing arrangements with the FRB, FCB has access to $12.94 billion on a secured basis at March 31, 2026. Loans pledged are disclosed in Note 5—Loans and Leases. There were no outstanding borrowings with the FRB Discount Window at March 31, 2026 and December 31, 2025. 
 
 Contractual Obligations and Commitments 
 The following table includes significant contractual obligations and commitments as of March 31, 2026, representing required and potential cash outflows, including impacts from purchase accounting adjustments and deferred fees. Refer to Note 19—Commitments and Contingencies for additional information regarding commitments. Financing commitments, letters of credit and deferred purchase commitments are presented at contractual amounts and do not necessarily reflect future cash outflows, as many are expected to expire unused or partially used. 
 
 Table 50
Contractual Obligations and Commitments 
 
 dollars in millions Payments Due by Period 
 Less than 1 year 1-3 years 4-5 years Thereafter Total 
 Contractual obligations: 
 Time deposits $ 13,042 $ 158 $ 43 $ — $ 13,243 
 Short-term borrowings 170 — — — 170 
 Long-term borrowings (1) (2) 
 (35) 31,362 501 1,964 33,792 
 Total contractual obligations $ 13,177 $ 31,520 $ 544 $ 1,964 $ 47,205 
 Commitments: 
 Financing commitments 
 $ 26,688 $ 10,430 $ 8,203 $ 7,450 $ 52,771 
 Letters of credit 
 2,136 481 169 84 2,870 
 Deferred purchase agreements 1,584 — — — 1,584 
 Purchase and funding commitments 145 — — — 145 
 Affordable housing partnerships (1) 
 574 586 27 46 1,233 
 Total commitments $ 31,127 $ 11,497 $ 8,399 $ 7,580 $ 58,603 

 (1) Long-term borrowings are presented net of purchase accounting adjustments of $62 million. On-balance sheet commitments for affordable housing partnerships are included in other liabilities and presented net of a purchase accounting adjustment of $11 million. 
 (2) Balance in parenthesis represents the estimated amortization of the purchase accounting adjustment and deferred costs in excess of any principal balance. 
 
 Long-term Borrowings 
 As displayed above in Table 50, we do not have any significant long-term debt obligations due until the Purchase Money Note matures. While scheduled principal payments are not required until maturity in March 2028, FCB may voluntarily prepay principal without a premium or penalty. As noted earlier in “Executive Overview—Recent Events,” FCB made prepayments of the Purchase Money Note in the first quarter of 2026 totaling $2.50 billion and previously made a prepayment of $2.49 billion in December 2025. We will continue to monitor the interest rate environment, FCB’s collateral position for the Purchase Money Note, and FCB’s liquidity position to determine the timing and magnitude of further voluntary prepayments. We expect monthly prepayments to be at least $500 million throughout 2026. Potential sources that could fund voluntary prepayments or the amount due at maturity include excess liquidity (primarily comprised of interest-earning deposits at banks and proceeds from maturities and paydowns of investment securities), deposit growth including brokered deposits, loan sales or securitizations, FHLB advances, and issuance of perpetual preferred stock, unsecured debt or other borrowings. At the time of any further voluntary prepayment or maturity, the interest rates for the potential interest-bearing sources of prepayment could be higher than the 3.50% rate. 
 
 Refer to the respective “Deposits” and “Borrowings” discussions in the “Balance Sheet Analysis—Interest-bearing Liabilities” section of this MD&A for further details. 
 92 

 CAPITAL 
 
 Capital requirements applicable to BancShares are discussed in the “Regulatory Considerations” section in Item 1. Business of the 2025 Form 10-K . 
 
 Common and Preferred Stock Dividends 
 During the current quarter, we paid quarterly dividends of $2.10 per share on the Class A common stock and Class B common stock. In April 2026, the Board declared a quarterly dividend on the Class A common stock and Class B common stock of $2.10 per common share. The dividends are payable on June 15, 2026 to stockholders of record as of May 29, 2026. 
 
 During the current quarter, we paid quarterly dividends on our Series A, Series B, Series C, and Series D Preferred Stock as disclosed in Note 13—Stockholders' Equity. In April 2026, the Board declared dividends on our Series A, Series B, Series C, Series D, and Series E Preferred Stock in accordance with their terms. The dividends are payable on June 15, 2026. 
 
 Capital Composition and Ratios 
 As discussed earlier in the “Executive Overview—Recent Events” section of this MD&A, during the current quarter, we repurchased 449,845 shares of our Class A common stock. Refer to Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds for additional information regarding repurchases of Class A common stock for current quarter monthly repurchase activity. 
 
 The following table summarizes the change in outstanding Class A common stock through March 31, 2026. Refer to Note 13—Stockholders' Equity for additional information. 
 
 Table 51
Changes in Shares of Class A Common Stock Outstanding 
 
 Three Months Ended March 31, 2026 
 Class A common stock shares outstanding at beginning of period 11,133,974 
 Shares repurchased under authorized repurchase plan (449,845) 
 
 Class A common stock shares outstanding at end of period 10,684,129 

 We also had 1,005,185 Class B common stock outstanding at March 31, 2026 and December 31, 2025. 
 
 We are committed to effectively managing our capital to protect our depositors, creditors and stockholders. We continually monitor the capital levels and ratios for BancShares and FCB to ensure they exceed the minimum requirements imposed by regulatory authorities and to ensure they are appropriate given growth projections, risk profile and potential changes in the regulatory or external environment. Failure to meet certain capital requirements may result in actions by regulatory agencies that could have a material impact on our operations or consolidated financial statements. 
 
 In accordance with GAAP, the unrealized gains and losses on certain assets and liabilities, net of deferred taxes, are included in AOCI within stockholders’ equity. These amounts are excluded from the calculation of our regulatory capital ratios under current regulatory guidelines. Refer to details of Basel III proposals in the “Executive Overview—Recent Events” section of this MD&A. 
 
 93 

 Table 52
Analysis of Capital Adequacy 
 
 dollars in millions Basel III Requirements PCA Well Capitalized Thresholds March 31, 2026 December 31, 2025 
 Amount Ratio Amount Ratio 
 BancShares 
 Risk-based capital ratios 
 Total risk-based capital 10.50 % 10.00 % $ 24,799 13.51 % $ 24,945 13.71 % 
 Tier 1 risk-based capital 8.50 8.00 21,634 11.79 21,660 11.91 
 Common equity Tier 1 7.00 6.50 19,869 10.83 20,285 11.15 
 Tier 1 leverage ratio 4.00 5.00 21,634 9.30 21,660 9.29 
 
 FCB 
 Risk-based capital ratios 
 Total risk-based capital 10.50 % 10.00 % $ 24,892 13.59 % $ 24,739 13.62 % 
 Tier 1 risk-based capital 8.50 8.00 23,064 12.59 22,796 12.55 
 Common equity Tier 1 7.00 6.50 23,064 12.59 22,796 12.55 
 Tier 1 leverage ratio 4.00 5.00 23,064 9.93 22,796 9.79 

 A s of March 31, 2026, BancShares and FCB had total risk-based capital ratio conservation buffers of 5.51% and 5.59%, respectively, which are in excess of the Basel III conservation buffer of 2.50%. As of December 31, 2025, BancShares and FCB’s total risk-based capital ratio conservation buffers were 5.71% and 5.62%, respectively. The capital ratio conservation buffers represent the excess of the regulatory capital ratios as of March 31, 2026 and December 31, 2025 over the Basel III minimum for the applicable ratio. 
 
 Additional Tier 1 capital for BancShares includes perpetual preferred stock. Additional Tier 2 capital for BancShares and FCB primarily consists of qualifying ALLL 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. 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 $6.58 billion while continuing to meet the requirements for well capitalized banks at March 31, 2026. Dividends declared by FCB and paid to the Parent Company amounted to $300 million for the quarter ended March 31, 2026. Payment of dividends is made at the discretion of FCB’s Board of Directors and may be contingent upon satisfactory earnings as well as projected capital needs. 
 
 94 

 CRITICAL ACCOUNTING ESTIMATES 
 
 The accounting and reporting policies of BancShares are described in Note 1—Significant Accounting Policies and Basis of Presentation in the 2025 Form 10-K. 
 
 The ALLL is considered a critical accounting estimate. For more information regarding the ALLL, refer to the “Risk Management—Credit Risk—ALLL Methodology” section of this MD&A and Note 6—Allowance for Loan and Lease Losses. 
 
 RECENT ACCOUNTING PRONOUNCEMENTS 
 The following Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board are not yet effective for BancShares. Refer to Note 1—Significant Accounting Policies and Basis of Presentation for descriptions of ASUs that were adopted as of January 1, 2026. 
 
 ASU Summary Effective Date and Expected Impact 
 
 ASU 2024-03—Income Statement—Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses
Issued November 2024
 This ASU enhances expense disclosures, primarily by requiring footnote disaggregation of specified expenses in a tabular format. This ASU does not change the requirements for the presentation of expenses on the consolidated statements of income. This ASU is effective for annual reporting periods
beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. This ASU may be applied prospectively or retrospectively.
 
 We are currently evaluating the impact of this ASU on our notes to the consolidated financial statements. We do not plan to early adopt this ASU. 
 
 ASU 2025-06—Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software Issued September 2025 This ASU amends certain aspects of the accounting for internal-use software. This ASU eliminated references to software development stages, which were previously determinants of whether internal-use software costs should be capitalized. This ASU also provided more specific criteria to assess when determining whether internal-use software costs should be capitalized. This ASU is effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. Early adoption is permitted as of the beginning of an annual reporting period. This ASU may be applied using either a prospective, retrospective, or modified transition approach.
 
 We are currently evaluating the impact of this ASU on our consolidated financial statements. We did not early adopt this ASU on January 1, 2026, but are considering whether we may early adopt on January 1, 2027. 
 
 ASU 2025-09—Derivatives and Hedging (Topic 815)—Hedge Accounting Improvements Issued November 2025 This ASU clarified certain aspects of hedge accounting to better reflect the economics of risk management activities. For example, this ASU eliminated the requirement that a group of interest payments be based on the same index in order to be hedged as a group, and provided more flexibility for grouping transactions with similar risks for cash flow hedges. This ASU is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted on any date on or after the issuance date of this ASU. Entities are required to apply this ASU on a prospective basis for all hedging relationships. 
 
 We are currently evaluating the impact of this ASU on our consolidated financial statements and considering whether we may early adopt during 2026. 
 
 NON-GAAP FINANCIAL MEASUREMENTS 
 
 BancShares provides certain non-GAAP information in reporting its financial results to give investors additional data to evaluate its operations. A non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance or financial position that may either exclude or include amounts, or is adjusted in some way to the effect of including or excluding amounts, as compared to the most directly comparable measure calculated and presented in accordance with GAAP financial statements. BancShares’ management believes that non-GAAP financial measures, when reviewed in conjunction with GAAP financial information, can provide transparency about, or an alternate means of assessing, its operating results and financial position to its investors, analysts and management. These non-GAAP measures should be considered in addition to, and not superior to or a substitute for, GAAP measures presented in BancShares’ consolidated financial statements and other publicly filed reports. In addition, our non-GAAP measures may be different from or inconsistent with non-GAAP financial measures used by other institutions. 
 
 Whenever we refer to a non-GAAP financial measure we will generally define and present the most directly comparable financial measure calculated and presented in accordance with GAAP, along with a reconciliation between the GAAP financial measure and the non-GAAP financial measure. We describe each of these measures below and explain why we believe the measure to be useful. 
 
 95 

 Adjusted Rental Income on Operating Lease Equipment for Commercial Bank and Rail Segments 
 
 Commercial Bank segment net income, rental income on operating lease equipment, and adjusted rental income on operating lease equipment are utilized to measure profitability. Adjusted rental income on operating lease equipment is a non-GAAP measure calculated as rental income on operating lease equipment less depreciation on operating lease equipment, as well as maintenance and other operating lease expenses, if any. This measure is meaningful because it enables management to monitor the performance and profitability of operating leases after deducting direct expenses. 
 
 The following tables reconcile the most comparable GAAP measures to the non-GAAP measures for the Commercial Bank and Rail segments. 
 
 Table 53
Commercial Bank Segment 
 
 dollars in millions Three Months Ended 
 March 31, 2026 December 31, 2025 March 31, 2025 
 Rental income on operating leases (GAAP) $ 55 $ 55 $ 56 
 Less: depreciation on operating lease equipment 43 44 44 
 
 Adjusted rental income on operating lease equipment (non-GAAP) $ 12 $ 11 $ 12 
 
 Rail segment net income, rental income on operating lease equipment and adjusted rental income on operating lease equipment are utilized to measure profitability. Adjusted rental income on operating lease equipment is calculated as rental income on operating lease equipment reduced by depreciation, maintenance and other operating lease expenses. This measure is meaningful because it enables management to monitor the performance and profitability of operating leases after deducting direct expenses. Due to the nature of the Rail segment portfolio, which is essentially all operating lease equipment, certain financial measures commonly used by banks, such as NII, are not as meaningful for the Rail segment. NII is not used because it includes the impact of debt costs funding our operating lease assets but excludes the associated adjusted rental income. 
 
 Table 54
Rail Segment 
 
 dollars in millions Three Months Ended 
 March 31, 2026 December 31, 2025 March 31, 2025 
 Rental income on operating leases (GAAP) $ 226 $ 226 $ 214 
 Less: depreciation on operating lease equipment 58 58 54 
 Less: maintenance and other operating lease expenses 65 64 58 
 Adjusted rental income on operating lease equipment (non-GAAP) $ 103 $ 104 $ 102 
 
 96 

 NII, NIM, and Interest Income on Loans and Leases, Excluding PAA 
 
 NII and NIM, excluding PAA, and interest income on loans and leases, excluding loan PAA are meaningful metrics as they allow management to analyze NII, NIM and loan and lease interest income trends more directly related to the rates of the underlying interest-earning assets and interest-bearing liabilities. Loan PAA is primarily related to the loan discount in the SVBB Acquisition. Other PAA is primarily related to the discount on the Purchase Money Note and the premium on deposits assumed in the merger with CIT Group Inc. 
 
 The following table reconciles NII to NII, excluding PAA, NIM to NIM, excluding PAA, and interest income on loans and leases to interest income on loans and leases, excluding loan PAA: 
 
 Table 55
NII, NIM, and Interest Income on Loans and Leases, Excluding PAA 
 
 dollars in millions Three Months Ended 
 March 31, 2026 December 31, 2025 March 31, 2025 
 NII (GAAP) a $ 1,621 $ 1,722 $ 1,663 
 Loan PAA b 48 59 84 
 Other PAA c (9) (10) (9) 
 PAA d = (b+c) 39 49 75 
 NII, excluding PAA (non-GAAP) e = (a-d) $ 1,582 $ 1,673 $ 1,588 
 Annualized NII f = a annualized $ 6,575 $ 6,834 $ 6,744 
 Annualized NII, excluding PAA (non-GAAP) g = e annualized 6,416 6,640 6,439 
 Average interest-earning assets h $ 212,552 $ 213,294 $ 206,028 
 NIM (GAAP) f/h 3.09 % 3.20 % 3.26 % 
 NIM, excluding PAA (non-GAAP) g/h 3.01 3.11 3.12 
 
 Interest income on loans and leases (GAAP) $ 2,206 $ 2,290 $ 2,236 
 Less: loan PAA b 48 59 84 
 Interest income on loans and leases, excluding loan PAA (non-GAAP) $ 2,158 $ 2,231 $ 2,152 

 97 

 Forward-Looking Statements 
 
 Statements in this Quarterly Report on Form 10-Q contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 regarding the financial condition, results of operations, business plans, asset quality, future performance, and other strategic goals of BancShares. Words such as “anticipates,” “believes,” “estimates,” “expects,” “predicts,” “forecasts,” “intends,” “plans,” “projects,” “targets,” “designed,” “could,” “may,” “should,” “will,” “potential,” “continue,” “aims,” “strives” or other similar words and expressions are intended to identify these forward-looking statements. These forward-looking statements are based on BancShares’ current expectations and assumptions regarding BancShares’ business, the economy, and other future conditions. 
 
 Because forward-looking statements relate to future results and occurrences, they are subject to inherent risks, uncertainties, changes in circumstances and other factors that are difficult to predict. Many possible events or factors could affect BancShares’ future financial results and performance and could cause actual results, performance or achievements of BancShares to differ materially from any anticipated results expressed or implied by such forward-looking statements. Such risks and uncertainties include, among others, general competitive, economic (including the imposition of tariffs, retaliatory tariff measures, trade barriers on trading partners, and supply chain disruptions), political (including impacts of any U.S. government shutdown), geopolitical events (including conflicts or developments in Ukraine, the Middle East, and Latin America), natural disasters and market conditions, including changes in competitive pressures among financial institutions and the impacts related to or resulting from previous bank failures, the risks and impacts of future bank failures and other volatility in the banking industry, public perceptions of our business practices, including our deposit pricing and acquisition activity, the financial success or changing conditions or strategies of BancShares’ vendors or customers, including changes in demand for deposits, loans and other financial services, fluctuations in interest rates, changes in the quality or composition of BancShares’ loan or investment portfolio, actions of government regulators, including interest rate decisions by the Federal Reserve, changes to estimates of future costs and benefits of actions taken by BancShares, BancShares’ ability to maintain adequate sources of funding and liquidity, the potential impact of decisions by the Federal Reserve on BancShares’ capital plans, adverse developments with respect to U.S. or global economic conditions, including significant turbulence in the capital or financial markets, the impact of any sustained or elevated inflationary environment, the impact of any cyberattack, information or security breach, the impact of implementation and compliance with current or proposed laws, regulations and regulatory interpretations, including potential increased regulatory requirements, limitations, and costs, such as FDIC special assessments, increases to FDIC deposit insurance premiums, changes in regulatory capital requirements, or limitations on credit card interest rates, along with the risk that such laws, regulations and regulatory interpretations may change, the availability of capital and personnel, and the risks associated with BancShares’ previously completed acquisition transactions, the pending BMO Branch Acquisition, or any future transactions. 
 
 BancShares’ 2025 SRP allows BancShares to repurchase shares of its Class A common stock through 2026. BancShares is not obligated under the 2025 SRP to repurchase any minimum or particular number of shares, and repurchases may be suspended or discontinued at any time (subject to the terms of any Rule 10b5-1 plan in effect) without prior notice. The authorization to repurchase Class A common stock pursuant to the 2025 SRP will be utilized at management’s discretion. The actual timing and amount of Class A common stock that may be repurchased under the plan will depend on a number of factors, including the terms of any Rule 10b5-1 plan then in effect, price, general business and market conditions, regulatory requirements, and alternative investment opportunities or capital needs. 
 
 Except to the extent required by applicable laws or regulations, BancShares disclaims any obligation to update forward-looking statements or to publicly announce the results of any revisions to any of the forward-looking statements included herein to reflect future events or developments. Additional factors which could affect the forward-looking statements may be included in BancShares’ other filings with the Securities and Exchange Commission. 
 
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.
FIRST CITIZENS BANCSHARES INC /DE/ 10-Q

Item 2. Management’s Discussion and Analysis
