10-K – 2026-02-24 – fcnca-20251231.htm

Other Securities
Membership in the Federal Home Loan Bank (“FHLB”) network requires ownership of FHLB restricted stock. This stock is restricted as it may only be sold to the FHLB and all sales must be at par. Accordingly, the FHLB restricted stock is carried at cost, less any applicable impairment charges and is recorded within other assets. Additionally, BancShares holds shares of Visa Inc. (“Visa”) Class B common stock. Refer to Note 3—Investment Securities for additional information.

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Affordable Housing Tax Credit and Unconsolidated Investments
Unconsolidated VIEs include limited partnership interests and joint ventures where BancShares’ involvement is limited to an investor interest and BancShares does not have the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance or obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

Affordable Housing Tax Credit Investments
BancShares has investments in qualified affordable housing projects primarily for the purposes of fulfilling Community Reinvestment Act (“CRA”) requirements and obtaining tax credits and other tax benefits. These investments are accounted for using the proportional amortization method (“PAM”) if certain conditions are met. Under PAM, the initial cost of the investment is amortized in proportion to the tax credits and other tax benefits received, the net investment performance, and impairment, if any, is recognized in the statements of income as a component of income tax expense. All of our investments in qualified affordable housing projects are accounted for under PAM.

Other Tax Credit Investments
Certain tax credit investments not eligible for PAM, such as investments in renewable energy projects, are accounted for under the hypothetical liquidation at book value method (“HLBVM”) which is applied to equity investments in investees for which distributions vary at different points in time and are not directly linked to an equity holder’s ownership percentage. Under the HLBVM, we calculate our share of earnings or losses based on the change in our claim on the net assets of the investee assuming the investee is liquidated at book value at the end of each reporting period. The pretax results from applying the HLBVM are reported in other noninterest income. We elected the Deferral Method for the tax credits and deferred tax assets (“DTAs”) related to these tax credit investments. Under the Deferral Method, we reduce the carrying value of our investment and income taxes payable upon receipt of the tax credits when the underlying project is placed in service.

Equity Method Investments
Under the equity method, we record our proportionate share of the profits or losses of the investment entity as an adjustment to the carrying value of the investment and as a component of other noninterest income. Dividends and distributions from these investments are recorded as reductions to the carrying value of the investments. Unconsolidated investments accounted for under the equity method are evaluated for impairment, with any impairment recorded in noninterest income. The recorded impairment is the excess of the investment carrying value over the fair value.

Refer to Note 10—Variable Interest Entities for additional information.

Assets Held for Sale
Assets held for sale (“AHFS”) consist of: (i) loans we previously held for investment that were transferred to held for sale at the lower of the cost or fair value (“LOCOM”) at the date we made a formal decision and plan to sell, (ii) residential mortgage loans that we originated with the intent to sell and for which we elected to apply the fair value option, and (iii) operating lease equipment (which we previously leased as the lessor) that was transferred to held for sale at LOCOM at the date we made a formal decision and plan to sell.

Loans and Leases
Originated loans for which management has the intent and ability to hold for the foreseeable future are classified as held for investment and carried at the principal amount outstanding net of any unearned income, charge-offs and unamortized fees and costs. Nonrefundable fees collected and certain direct costs incurred related to loan originations are deferred and recorded as an adjustment to loans outstanding. The net amount of the nonrefundable fees and costs is amortized to interest income over the contractual lives as an adjustment to yield using methods that approximate a constant yield, as applicable, or the straight-line method for revolving lines of credit.

BancShares extends credit to commercial customers through a variety of financing arrangements including term loans, revolving credit facilities, finance leases and operating leases. BancShares also extends credit through consumer loans, including residential mortgages and auto loans. Our loan classes as of December 31, 2025 are described below.

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Commercial Loans and Leases
Commercial and Industrial – Commercial and industrial loans consist of loans or lines of credit to finance accounts receivable, inventory or other general business needs, and business credit cards. The primary risk associated with commercial and industrial loans is the ability of borrowers to achieve business results consistent with those projected at origination. Failure to achieve these projections presents risk that the borrower will be unable to service the debt consistent with the contractual terms of the loan.

Commercial and industrial includes loans that borrowers use to assist a select group of private equity sponsors with the acquisition of businesses. These loans are larger in size, and repayment is generally dependent upon the cash flows of the combined entities. Acquired companies are typically established, later-stage businesses of scale, and characterized by reasonable levels of leverage with loan structures that include meaningful financial covenants.

Commercial and industrial includes loans to non-depository financial institutions (“NDFIs”), except for capital call lines which is a separate loan class since it is our largest NDFI portfolio. In addition to capital call lines, loans to NDFIs include the following:
• The net asset value (“NAV”) portfolio 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 limited partner (“LP”) interests in private funds and/or co-investment vehicles.
• Leveraged fund lines are lines of credit provided to private credit funds and are collateralized by portfolios of the underlying assets, primarily first lien loans.
• Warehouse lines 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 includes asset-based lending facilities to lenders that are primarily investing in first lien senior debt.

We provide factoring, receivable management, and secured financing to businesses (our clients, who are generally manufacturers or importers of goods) that operate in several industries, including apparel, textile, furniture, home furnishings and consumer electronics. Factoring entails the assumption of credit risk with respect to trade accounts receivable arising from the sale of goods by our clients to their customers (generally retailers) that have been factored (i.e., sold or assigned to the factor). The most prevalent risk in factoring transactions is customer credit risk, which relates to the financial inability of a customer to pay undisputed factored trade accounts receivable. We also provide supply chain financing to our clients on the supply and demand sides of the supply chain. Supply chain financing could include purchasing our clients’ accounts receivable and subsequently collecting from our clients’ customers, or paying our clients’ accounts payable and subsequently collecting directly from our client. Factoring and supply chain finance receivables are primarily included in the commercial and industrial loan class.

Commercial and industrial also includes leases, which consists of finance lease arrangements for technology and office equipment and large and small industrial, medical, and transportation equipment.

Capital Call Lines – The primary source of repayment for capital call lines is the capital commitments of the underlying 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.

Owner Occupied Commercial Mortgage – Owner occupied commercial mortgage consists of loans to purchase or refinance owner occupied nonresidential properties. This includes office buildings, other commercial facilities, and farmland. Commercial mortgages secured by owner occupied properties are primarily dependent on the ability of borrowers to achieve business results consistent with those projected at loan origination. While these loans are collateralized by real property in an effort to mitigate risk, it is possible the liquidation of collateral will not fully satisfy the obligation.

Investor Dependent – The investor dependent class includes loans made primarily to technology, life science and healthcare industry borrowers that typically have modest or negative cash flows and rarely have an established record of profitable operations. Repayment of these loans may be dependent upon receipt by borrowers of additional equity financing from venture capital firms or other investors, or in some cases, a successful sale to a third party or an initial public offering. Investor dependent includes lending to: (i) pre-revenue, development-stage companies and companies that are in the early phases of commercialization, with revenues of up to $ 5  million, (ii) companies with revenues between $ 5  million and $ 15  million, or pre-revenue clinical-stage biotechnology companies, and (iii) companies with revenues in excess of $ 15  million.

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Commercial Real Estate – Commercial Real Estate primarily includes the following portfolios: non-owner occupied commercial mortgage, commercial construction, and other loans for the purpose of acquiring, constructing or developing real estate. Residential construction loans are also included in commercial real estate.

Non-owner occupied commercial mortgage consists of loans to purchase or refinance investment nonresidential properties. This includes office buildings and other facilities rented or leased to unrelated parties, as well as farmland and multifamily properties. The primary risk associated with income producing commercial mortgage loans is the ability of the income-producing property that collateralizes the loan to produce adequate cash flow to service the debt. While these loans are collateralized by real property in an effort to mitigate risk, it is possible the liquidation of collateral will not fully satisfy the obligation.

Commercial construction consists of loans to finance land for commercial development of real property and construction of multifamily apartments or other commercial properties. Delays in construction and development projects can cause cost overruns exceeding the borrower’s financial ability to complete the project. Such cost overruns can result in foreclosure of partially completed and unmarketable collateral. These loans are highly dependent on the supply and demand for commercial real estate. Deterioration in demand could result in decreased collateral values, which could make repayments of outstanding loans difficult.

Residential construction consists of loans to developers or consumers to finance construction of 1-4 family residential property or to purchase undeveloped or partially developed land in anticipation of completing construction of 1-4 family residential property. These loans are subject to risks of the supply chain and fluctuations in construction and development costs, as well as the demand for newly constructed residential homes and lots acquired for development. When construction is complete, consumer borrowers often convert or refinance the residential construction loan into a residential mortgage loan.

Consumer Loans
Residential Mortgage – Residential mortgage primarily consists of loans to purchase or refinance the borrower’s primary dwelling, secondary residence or vacation home and are often secured by 1-4 family residential properties. Significant and rapid declines in real estate values can result in borrowers having debt levels in excess of the current market value of the collateral.

Revolving Mortgage – Revolving mortgage consists of home equity lines of credit and other lines of credit or loans secured by first or second liens on the borrower’s primary residence. These loans are secured by both senior and junior liens on the residential real estate and are particularly susceptible to declining collateral values. This risk is elevated for loans secured by junior liens as a substantial decline in value could render the junior lien position effectively unsecured.

Auto – Auto loans consist of installment loans to finance purchases of vehicles. These loans include direct auto loans originated in bank branches, as well as indirect auto loans originated through agreements with auto dealerships. The value of the underlying collateral within this class is at risk of potential rapid depreciation, which could result in unpaid balances in excess of the collateral, if any.

Other Consumer – Other consumer loans consist of loans to finance unsecured home improvements, student loans, and revolving lines of credit that can be secured or unsecured, including personal credit cards. The value of the underlying collateral, if any, within this class is at risk of potential rapid depreciation, which could result in unpaid balances in excess of the collateral.

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

Non-Purchased Credit Deteriorated Loans and Leases
Non-Purchased Credit Deteriorated (“Non-PCD”) loans and leases do not reflect more than insignificant credit deterioration since origination at the date of acquisition. These loans are recorded at fair value and an increase to the ALLL is recorded with a corresponding increase to the provision for credit losses at the date of acquisition. The difference between fair value and the unpaid principal balance (“UPB”) at the acquisition date is amortized or accreted to interest income over the contractual life of the loan using the effective interest method.
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Purchased Credit Deteriorated Loans and Leases
Purchased loans and leases that reflect a more than insignificant credit deterioration since origination at the date of acquisition are classified as PCD loans and leases. PCD loans and leases are recorded at acquisition date amortized cost, which is the purchase price or fair value in a business combination, plus BancShares' initial ALLL, which results in a gross up of the loan balance (the “PCD Gross-Up”). The initial ALLL for PCD loans and leases (the “Initial PCD ALLL”) is established through the PCD Gross-Up and there is no corresponding increase to the provision for credit losses. The difference between the UPB and the acquisition date amortized cost resulting from the PCD Gross-Up is amortized or accreted to interest income over the contractual life of the loan using the effective interest method. Refer to Note 6—Allowance for Loan and Lease Losses for additional information.

Past Due and Non-Accrual Loans and Leases
Loans and leases are classified as past due when the payment of principal and interest based upon contractual terms is 30 days or greater delinquent. Loans and leases are generally placed on nonaccrual when principal or interest becomes 90 days past due or when it is probable the principal or interest is not fully collectible. When loans are placed on nonaccrual, previously uncollected accrued interest is reversed from interest income and the ongoing accrual of interest is discontinued. All payments received thereafter are applied as a reduction of the outstanding balance until the account is collected, charged-off or returned to accrual status. Loans and leases are generally removed from nonaccrual status when they become current for a sustained period of time and there is no longer concern as to the collectability of principal and interest.

Loan Charge-Offs and Recoveries
Loan charge-offs are recorded after considering such factors as the borrower’s financial condition, the value of underlying collateral, guarantees, and the status of collection activities. Loan balances considered uncollectible are charged-off against the ALLL and deducted from the carrying value of the related loans. Consumer loans are subject to mandatory charge-off at specified delinquency dates in accordance with regulatory guidelines. The value of the underlying collateral for consumer loans is considered when determining the charge-off amount if repossession is reasonably assured and in process. Refer to Note 5—Loans and Leases for additional information. Realized recoveries of amounts previously charged-off are credited to the ALLL.

Allowance for Loan and Lease Losses
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 using the current expected credit loss (“CECL”) methodology in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 326 Financial Instruments - Credit Losses . Adjustments to the ALLL are recorded with a corresponding entry to the provision or benefit for credit losses.

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 have a model that is utilized to estimate the ALLL. These ALLL models estimate the probability of obligor default (“PD”) and loss given default (“LGD”) for individual loans and leases within each risk pool based on historical loss experience, borrower characteristics, collateral type, forecasts of future economic conditions, expected future recoveries and other factors. The loan and lease level undiscounted ALLL is calculated by applying the modeled PD and LGD to monthly forecasted loan and lease balances (or exposure at default), which are adjusted for contractual payments, prior defaults, and prepayments. Prepayment assumptions were developed through a review of BancShares’ historical prepayment activity and considered forecasts of future economic conditions. Forecasted LGDs are adjusted for expected recoveries.

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.

The ALLL models utilize economic variables, including unemployment, gross domestic product, home price index, commercial real estate (“CRE” index, corporate profits, and credit spreads. These economic variables are based on macroeconomic scenario forecasts with a forecast horizon that covers the lives of the loan portfolios. Due to the inherent uncertainty in the macroeconomic forecasts, BancShares utilizes baseline, upside, and downside macroeconomic scenarios and probability weights the scenarios based on review of variable forecasts for each scenario and comparison to expectations.

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When loans do not share risk characteristics similar to others in the pool, the ALLL is evaluated on an individual basis. Given that BancShares’ CECL models are loan level models, the number of loans individually evaluated is not significant and consists primarily of loans greater than an established threshold. A specific ALLL is established (or charge-off recorded) for the shortfall, if any, between the present value of future cash flows (or fair value of the collateral, less estimated costs to sell) and the amortized cost of the loan.

Risk pools for estimating the ALLL, along with loans evaluated on an individual basis, are aggregated into commercial and consumer loan portfolios for reporting purposes in Note 6—Allowance for Loan and Lease Losses.

Accrued Interest Receivable
BancShares' accounting policies and credit monitoring provide that uncollectible accrued interest is reversed or written off against interest income in a timely manner. Therefore, BancShares elected to not measure an ALLL for accrued interest receivable. Accrued interest receivable is recorded in other assets and is excluded from the amortized cost basis of loans, investment securities available for sale, and investment securities held to maturity.

Unfunded Commitments
A reserve for off-balance sheet exposures is established for unfunded commitments such as unfunded balances for existing lines of credit, deferred purchase agreements (“DPAs”), commitments to extend future credit, as well as both standby and commercial letters of credit, when there is a contractual obligation to extend credit and when this extension of credit is not unconditionally cancellable (i.e. commitment cannot be canceled at any time). These unfunded commitments are assessed to determine both the probability of funding as well as the expectation of future losses. BancShares estimates the expected funding amounts and applies its PD and LGD models to those expected funding amounts to estimate the reserve for off-balance sheet exposures. We do not recognize an ALLL for commitments that are unconditionally cancellable at our discretion.

Refer to Note 6—Allowance for Loan and Lease Losses for the provision for off-balance sheet credit exposure.

Leases

Lessor Arrangements
Operating lease equipment is carried at cost less accumulated depreciation. Operating lease equipment is depreciated to its estimated residual value using the straight-line method over the lease term or estimated useful life of the asset. Rail equipment has estimated useful lives of 40 - 50 years and the useful lives of other equipment are generally 3 - 10 years.

When AHFS accounting criteria are met for operating lease equipment, the equipment is marked to LOCOM and classified as AHFS and depreciation is no longer recognized. Equipment received at the end of the lease that will be sold is marked to LOCOM, with the adjustment recorded in other noninterest income. Initial direct costs are amortized over the lease term.

Sales-type and direct financing leases are carried at the aggregate of lease payments receivable and estimated residual value of the leased property, if applicable, less unearned income. Interest income is recognized over the term of the leases to achieve a constant periodic rate of return on the outstanding investment. Our finance lease activity primarily relates to leasing of new equipment with the equipment purchase price equal to fair value and therefore there is no selling profit or loss at lease commencement.

Lease components are separated from non-lease components that transfer a good or service to the customer, and the non-lease components in our lease contracts are accounted for in accordance with ASC 310 Receivables . BancShares utilizes the operating lease practical expedient for its Rail portfolio leases to not separate non-lease components of railcar maintenance services from associated lease components, and as a result rental income includes the maintenance non-lease component. This practical expedient is available when both of the following are met: (i) the timing and pattern of transfer of the non-lease components and associated lease component are the same and (ii) the lease component, if accounted for separately, would be classified as an operating lease.

We manage and evaluate residual risk by performing periodic reviews of estimated residual values and monitoring levels of residual realizations. A change in estimated operating lease residual values would result in a change in future depreciation expense. A change in estimated finance lease residual values during the lease term impacts the ALLL as the lessor considers both the lease receivable and the unguaranteed residual asset when determining the finance lease ALLL.

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Impairment of Operating Lease Equipment
A review for impairment of our operating lease equipment is performed at least annually or when events or changes in circumstances indicate that the carrying amount of these long-lived assets may not be recoverable. Impairment of long-lived assets is determined by comparing the carrying amount to future undiscounted net cash flows expected to be generated. If a long-lived asset is impaired, the impairment is the amount by which the carrying amount exceeds the fair value of the long-lived asset. Depreciation expense is adjusted when the projected fair value is below the projected book value at the end of the depreciable life.

Lessee Arrangements
BancShares leases certain branch locations, administrative offices, and equipment. Operating lease right of use (“ROU”) assets are included in other assets and the associated lease obligations are included in other liabilities. Finance leases are included in premises and equipment and other borrowings. Refer to Note 12—Borrowings for additional information. Leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets; BancShares instead recognizes lease expense for these leases on a straight-line basis over the lease term.

ROU assets represent BancShares' right to use an underlying asset for the lease term and lease liabilities represent BancShares' corresponding obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets also include initial direct costs and pre-paid lease payments made less any lease incentives received. As most of BancShares' leases do not provide an implicit rate, BancShares uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate is determined using secured rates for new FHLB advances under similar terms as the lease at inception.

Most leases include one or more options to renew. The exercise of lease renewal options is at BancShares' sole discretion. When it is reasonably certain BancShares will exercise its option to renew or extend the lease term, the option is included in calculating the value of the ROU asset and lease liability. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

Goodwill and Other Intangible Assets
Goodwill is defined below in the “Business Combinations” section. BancShares’ evaluates goodwill for impairment annually as of July 31, or more frequently if events occur or circumstances change that may trigger a decline in the value of the reporting unit or otherwise indicate that a potential impairment exists.

BancShares applied the acquisition method of accounting for the SVBB Acquisition (as defined in Note 2—Business Combinations) and the fair values of the net assets acquired and core deposit intangibles exceeded the purchase price for each transaction. Consequently, there was a gain on acquisition (and no goodwill) related to the SVBB Acquisition.

Other finite-lived intangible assets, such as core deposit intangibles, are initially recorded at fair value and are amortized over their average estimated useful lives. Intangible assets are evaluated for impairment when events or changes in circumstances indicate a potential impairment exists.

Refer to further discussion in Note 2—Business Combinations and Note 9—Goodwill and Core Deposit Intangibles.

Other Real Estate Owned
Other Real Estate Owned (“OREO”) includes foreclosed real estate property and closed branch properties. Foreclosed real estate property in OREO is initially recorded at the asset’s estimated fair value less costs to sell. Any excess in the recorded investment in the loan over the estimated fair value less costs to sell is charged-off against the ALLL at the time of foreclosure. If the estimated value of the OREO exceeds the recorded investment of the loan, the difference is recorded as a gain within other income.

OREO is subsequently carried at LOCOM less estimated selling costs and is evaluated at least annually. The periodic evaluations are generally based on the appraised value of the property and may include additional adjustments based upon management’s review of the valuation estimate and specific knowledge of the property. Routine maintenance costs, income and expenses related to the operation of the foreclosed asset, subsequent declines in market value and net gains or losses on disposal are included in collection and foreclosure-related expense.

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Premises and Equipment
Premises and equipment are carried at cost less accumulated depreciation. Land is carried at cost. Depreciation expense is generally computed using the straight-line method over the estimated useful lives of the assets. Leasehold improvements and finance lease ROU assets are amortized on a straight-line basis over the lesser of the lease terms or the estimated useful lives of the assets. BancShares reviews premises and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, and when an impairment loss is recognized the adjusted carrying amount will be its new cost basis to depreciate over the remaining useful life of the asset.

Derivative Assets and Liabilities
BancShares manages economic risk and exposure to interest rate and foreign currency risk through derivative transactions in over-the-counter markets with other financial institutions. BancShares also offers derivative products to its customers in order for them to manage their interest rate and currency risks. BancShares does not enter into derivative financial instruments for speculative purposes.

Derivatives utilized by BancShares may include swaps, forward settlement contracts, options contracts, and risk participations. A swap agreement is a contract between two parties to exchange cash flows based on specified underlying notional amounts, assets and/or indices. Forward settlement contracts are agreements to buy or sell a quantity of a financial instrument, index, currency or commodity at a predetermined future date, and rate or price. An option contract is an agreement that gives the buyer the right, but not the obligation, to buy or sell an underlying asset from or to another party at a predetermined price or rate over a specific period of time. A risk participation is a financial guarantee, in exchange for a fee, that gives the buyer the right to be made whole in the event of a predefined default event.

At inception, BancShares documents all relationships between hedging instruments and hedged items, including effectiveness as well as the risk management objectives and strategies for undertaking various hedges. Upon executing a derivative contract, BancShares designates the derivative as either a qualifying hedge or nonqualifying hedge (each as defined below). The designation may change based upon management’s reassessment of circumstances. BancShares assesses hedge effectiveness at inception and on an ongoing basis.

In order to manage its interest rate exposure, BancShares enters into fair value hedges of certain fixed rate debt and deposits. BancShares recognizes the changes in the fair values of the hedging instrument and hedged item in interest expense for borrowings and deposits in the Consolidated Statements of Income.

BancShares also utilizes floating-rate loan portfolio cash flow hedges. The changes in fair value of the hedging instrument in a cash flow hedge are reported in AOCI and subsequently reclassified to earnings during the periods in which the hedged cash flows affect earnings. The recognized gains and losses on loan portfolio cash flow hedges are reported in “interest income on loans and leases” on the Consolidated Statements of Income when reclassified from AOCI to earnings.

If an accounting hedge (“qualifying hedge”) subsequently ceases to qualify as an effective hedge or the forecasted cash flows are no longer probable of occurring in a cash flow hedge within the specified period, hedge accounting will be discontinued. Any amounts in AOCI related to a discontinued cash flow hedge will be reclassified to earnings over the same periods in which the hedged cash flows affect earnings. However, if it becomes probable that the forecasted cash flows will not occur within the specified period, any related amounts in AOCI will be reclassified to earnings immediately.

Derivatives not designated as hedging instruments (“nonqualifying hedges”) are presented in the Consolidated Balance Sheets in other assets or other liabilities, with resulting gains or losses and periodic interest settlements and other changes in fair value reported in other noninterest income.

BancShares provides interest rate derivative contracts to support the business requirements of its customers. The derivative contracts include interest rate swap agreements and interest rate cap and floor agreements wherein BancShares acts as a seller of these derivative contracts to its customers. The carrying amount of these customer derivatives is net of the credit valuation allowance for counterparty credit risk. To mitigate the market risk associated with these customer derivatives, BancShares enters into back-to-back positions with other financial institutions.

We have purchased and sold risk participation agreements associated with borrowers’ interest rate swaps. We purchase risk participation agreements from other institutions in an effort to mitigate the credit risk associated with interest rate swap agreements with borrowers to whom we have provided loans structured with interest rate swaps. Additionally, we sell risk participation agreements to other institutions as a means of sharing the credit risk associated with borrowers’ interest rate swaps. Risk participation agreements we sold have maturities ranging between 2026 and 2048 and may require us to make payment to the counterparty if the customer fails to make payment on any amounts due to the counterparty upon early termination of the swap transaction.
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BancShares uses foreign currency forward contracts, interest rate swaps, and options to hedge interest rate and foreign currency risks arising from its asset and liability mix. These are treated as economic hedges, which are nonqualifying hedges.

All derivative instruments are recorded at their respective fair value. BancShares reports all derivatives on a gross basis in the Consolidated Balance Sheets and does not offset derivative assets and liabilities and cash collateral under master netting agreements except for swap contracts cleared by the Chicago Mercantile Exchange and LCH Clearnet. These swap contracts are accounted as “settled-to-market” and cash variation margin paid or received is characterized as settlement of the derivative exposure. Variation margin balances are offset against the corresponding derivative asset and liability balances on the balance sheet.

Fair value is based on dealer quotes, pricing models, discounted cash flow methodologies, or similar techniques for which the determination of fair value may require significant management judgment or estimation. Valuations of derivative assets and liabilities reflect the value of the instrument including BancShares’ and the counterparty’s credit risk.

BancShares is exposed to credit risk to the extent that the counterparty fails to perform under the terms of a derivative agreement. Losses related to credit risk would be reflected in other noninterest income. BancShares manages this credit risk by requiring that all derivative transactions entered into as hedges be conducted with counterparties rated investment grade at the initial transaction by nationally recognized rating agencies, and by setting limits on the exposure with any individual counterparty. In addition, pursuant to the terms of the Credit Support Annexes between BancShares and its counterparties, BancShares may be required to post collateral or may be entitled to receive collateral in the form of cash or highly liquid securities depending on the valuation of the derivative instruments as measured on a daily basis. Refer to Note 13—Derivative Financial Instruments for additional information.

Foreign Exchange Contracts
FCB has foreign exchange forwards and swaps contracts with clients involved in foreign activities, either as the purchaser or seller, depending upon the clients’ needs. These are structured as back-to-back contracts to mitigate the risk of fluctuations in currency rates. The foreign exchange forward contracts are with correspondent banks to economically reduce our foreign exchange exposure related to certain foreign currency denominated instruments.

Equity Warrant Assets
In connection with negotiating credit facilities and certain other services, FCB may obtain rights that include an option to purchase a position in a client company's stock in the form of an equity warrant. The equity warrant assets are primarily in private, venture-backed companies in the technology, life science and healthcare industries and are generally categorized as Level 3 on the fair value hierarchy due to lack of direct observable pricing and a general lack of liquidity due to the private nature of the associated underlying company.

Mortgage Servicing Rights
Mortgage servicing rights (“MSRs”) represent the right to provide servicing under various loan servicing contracts when servicing is retained in connection with a loan sale or acquired in a business combination. MSRs are initially recorded at fair value and subsequently carried at LOCOM. MSRs are amortized in proportion to, and over the period of, the future net servicing income of the underlying loan. At each reporting period, MSRs are evaluated for impairment based upon the fair value of the rights as compared to the carrying value. Therefore, MSRs are carried at fair value only when fair value is less than the amortized cost.

Securities Sold Under Customer Repurchase Agreements
BancShares enters into sales of securities under agreements to repurchase which are treated as financings, with the obligation to repurchase securities sold reflected as short-term borrowings. Refer to Note 12—Borrowings for additional information.

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Fair Values

Fair Value Hierarchy
BancShares measures the fair value of its financial assets and liabilities in accordance with ASC 820 Fair Value Measurement , which defines fair value, establishes a consistent framework for measuring fair value, and requires disclosures about fair value measurements. BancShares categorizes its financial instruments based on the significance of inputs to the valuation techniques according to the following three-tier fair value hierarchy:
• Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities that are accessible at the measurement date. Level 1 assets and liabilities include equity securities that are traded in an active exchange market.
• Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include certain commercial loans, debt and equity securities with quoted prices that are traded less frequently than exchange-traded instruments or using a third-party pricing service, borrowings, time deposits, deposits with no stated maturity, securities sold under customer repurchase agreements and derivative contracts whose values are determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data.
• Level 3 - Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments such as collateral dependent commercial and consumer loans, as well as loans held for sale, certain available for sale corporate securities and derivative contracts, such as equity warrants, whose values are determined using valuation models, discounted cash flow methodologies or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. Refer to Note 14—Fair Value for additional information.

Per Share Data
Earnings per common share is computed by dividing net income available to common stockholders by the weighted average number of Class A common stock, par value $ 1 (“Class A common stock”), and Class B common stock, par value $ 1 (“Class B common stock”), outstanding during each period. Diluted earnings per common share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding increased by the weighted-average potential impact of dilutive shares. BancShares’ potential dilutive instruments include unvested restricted stock units (“RSUs”). The dilutive effect is computed using the treasury stock method, which assumes the conversion of these instruments. However, in periods when there is a net loss, these shares would not be included in the diluted earnings per common share computation as the result would have an anti-dilutive effect. Refer to Note 18—Earnings Per Common Share for additional information.

Income Taxes
Income taxes are accounted for using the asset and liability approach as prescribed in ASC 740, Income Taxes . Under this method, a DTA or deferred tax liability is determined based on the currently enacted tax rates applicable to the period in which the differences between the financial statement carrying amounts and tax basis of existing assets and liabilities are expected to be reported in BancShares’ income tax returns. The effect on deferred taxes of a change in tax rates is recognized in income in the period which includes the enactment date. BancShares has adopted the portfolio approach for purposes of releasing residual tax effects within AOCI.

BancShares has unrecognized tax benefits (“UTBs”) related to the uncertain portion of tax positions BancShares has taken or expects to take. The potential impact of current events on the estimates used to establish income tax expenses and income tax liabilities is continually monitored and evaluated. Income tax positions based on current tax law, positions taken by various tax auditors within the jurisdictions where income tax returns are filed, as well as potential or pending audits or assessments by such tax auditors are evaluated on a periodic basis. BancShares files a consolidated federal income tax return and various combined and separate company state tax returns.

Refer to Note 19—Income Taxes for additional disclosures.

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Bank-Owned Life Insurance
Banks can purchase life insurance (“BOLI”) policies on the lives of certain officers and employees and are the owner and beneficiary of the policies. These BOLI policies offset the cost of providing employee benefits. BancShares records BOLI at each policy’s respective cash surrender value (“CSV”), with changes in the CSV recorded as noninterest income in the Consolidated Statements of Income.

Defined Benefit Pension Plans and Other Postretirement Benefits
BancShares has both funded and unfunded noncontributory defined benefit pension and postretirement plans covering certain employees. The calculation of the obligations and related expenses under the plans require the use of actuarial valuation methods and assumptions. Actuarial assumptions used in the determination of future values of plan assets and liabilities are subject to management judgment and may differ significantly if different assumptions are used. All assumptions are reviewed annually for appropriateness. The discount rate assumption used to measure the plan obligations is based on a yield curve developed from high-quality corporate bonds across a full maturity spectrum. The projected cash flows of the pension plans are discounted based on this yield curve, and a single discount rate is calculated to achieve the same present value. The assumed rate of future compensation increases is based on actual experience and future salary expectations. BancShares also estimates a long-term rate of return on pension plan assets used to estimate the future value of plan assets. In developing the long-term rate of return, BancShares considers such factors as the actual return earned on plan assets, historical returns on the various asset classes in the plans and projections of future returns on various asset classes. Refer to Note 20—Employee Benefit Plans for disclosures related to the plans.

Stock-Based Compensation
All previously issued stock-based compensation awards vested during 2024 and there were no unvested RSUs as of December 31, 2025 and 2024. The fair value of the RSUs issued in BancShares merger (the “CIT Merger”) with CIT Group Inc. (“CIT”) on January 3, 2022 (the “CIT Merger Date”) was determined based on the closing share price of the Parent Company’s Class A common stock on the CIT Merger Date. The fair value of the RSUs was (i) included in the purchase price consideration for the portion related to employee services provided prior to completion of the CIT Merger and (ii) recognized in expenses for the portion related to employee services to be provided after completion of the CIT Merger.

Expenses related to stock-based compensation were included in acquisition-related expenses in the Consolidated Statements of Income. Stock-based compensation is briefly discussed further in Note 20—Employee Benefit Plans.

Common Stock Repurchases
Repurchased common stock is immediately retired upon repurchase, resulting in a reduction to common stock at par value. The excess cost of repurchased common stock over the par amount is recorded as a reduction to additional paid-in capital (“APIC”). When APIC is reduced to zero, then the remainder of the excess cost of repurchased common stock over the par amount is recorded as a reduction to retained earnings. Direct costs, including excise taxes, are included in the cost of the repurchased shares.

Revenue Recognition
Interest income on held for investment loans is recognized using the effective interest method or on a basis approximating a level rate of return over the life of the asset. Interest income includes components of accretion of the fair value discount on loans and lease receivables recorded in connection with purchase accounting adjustments, which are accreted using the effective interest method as a yield adjustment over the remaining contractual term of the loan and recorded in interest income. If the loan is subsequently classified as held for sale, accretion (amortization) of the discount (premium) will cease. Interest income on loans held for investment and held for sale is included in interest income on loans and leases in the Consolidated Statements of Income.

Interest on investment securities and interest on interest-earning deposits at banks is recognized in interest income on an accrual basis. Amortization of premiums and accretion of discounts for investment securities are included in interest on investment securities. Dividends received from marketable equity securities are recognized within interest on investment securities.

BancShares generally acts in a principal capacity, on its own behalf, in its contracts with customers. In these transactions, BancShares recognizes revenues and the related costs to generate those revenues on a gross basis. In certain, circumstances, BancShares acts in an agent capacity, on behalf of the customers with other entities, and recognizes revenues and the related costs to provide BancShares' services on a net basis. BancShares acts as an agent when providing certain cardholder and merchant, insurance, investment management, and brokerage services.

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Descriptions of our noninterest revenue-generating activities are summarized below:

Rental income on operating lease equipment – Rental income is recognized on a straight-line basis over the lease term for lease contract fixed payments and is included in noninterest income. Rental income also includes variable lease income which is recognized as earned. The accrual of rental income on operating leases is suspended when the collection of substantially all rental payments is no longer probable and rental income for such leases is recognized when cash payments are received. In the period we conclude that collection of rental payments is no longer probable, accrued but uncollected rental revenue is reversed against rental income.

Lending-related fees – These include, but are not limited to, fees on lines and letters of credit, capital market-related fees and commercial loan service fees. The performance obligation is fulfilled and revenue is recognized at the point in time the requested service is provided to the customer.

Deposit fees and service charges – These deposit account-related fees and service charges include monthly account maintenance and transaction-based service fees, such as overdraft fees, stop payment fees and charges for issuing cashier’s checks and money orders. Other fees include, but are not limited to, internet banking fees, wire transfer fees, and safe deposit fees. For account maintenance services, revenue is recognized at the end of the statement period when BancShares' performance obligation has been satisfied. Other revenues from transaction-based services are recognized at a point in time when the performance obligation has been completed.

Client investment fees – These are earned from discretionary investment management and related transaction-based services. For discretionary investment management services, revenue is recognized monthly based on the clients’ assets under management. Transaction-based fees are earned when transactions are executed. Amounts paid to third-party providers are not reflected in the transaction price because FCB is an agent for such services.

Wealth management services – These primarily represent sales commissions on various product offerings, transaction fees and trust and asset management fees. The performance obligation for wealth management services is the provision of services to place annuity products issued by the counterparty to investors and the provision of services to manage the client’s assets, including brokerage custodial and other management services. Revenue from wealth management services is recognized over the period in which services are performed, and is based on a percentage of the value of the assets under management/administration.

International fees – These primarily include foreign exchange fees. Foreign exchange fees represent the difference between foreign currency's purchase and sale price in spot contracts. These fees are recognized when contracts are executed with our clients. Fees related to other foreign exchange contracts are recognized outside the scope of ASC 606, Revenue from Contracts with Customers , because they are considered derivatives.

Factoring commissions – These are earned in the Commercial Bank segment and generally correlate with factoring volumes, principally in the retail sectors. Factoring commissions are charged as a percentage of the invoice amount of the receivables assigned to BancShares. The volume of factoring activity and the commission rates charged impact factoring commission income earned. Factoring commissions are deferred and recognized as income over time based on the underlying terms of the assigned receivables. Refer to Commercial Loans and Leases section for additional commentary on factoring.

Cardholder and Merchant Services – These represent interchange fees from customer debit and credit card transactions earned when a cardholder engages in a transaction with a merchant as well as fees charged to merchants for providing them the ability to accept and process the debit and credit card transaction. Revenue is recognized when the performance obligation has been satisfied, which is upon completion of the card transaction. As BancShares is acting as an agent for the customer and transaction processor, costs associated with cardholder and merchant services transactions are netted against the fee income.

Insurance commissions – These include revenue from insurance on equipment leased to customers, which is recognized over the policy period. We also earn commissions on the issuance of insurance products and services. The commission performance obligation is generally satisfied upon the issuance of the insurance policy and revenue is recognized when the commission payment is remitted by the insurance carrier or policy holder depending on whether the billing is performed by BancShares or the carrier.

Realized gain or loss on sale of investment securities, net – This reflects the net gain or loss realized from sales based on the difference between sales price and amortized cost.

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Fair value adjustments on marketable equity securities, net – This reflects changes in market prices of underlying portfolio investments.

Gain on sale of leasing equipment, net – These are recognized upon completion of sale (sale closing) and transfer of title. The gain is determined based on sales price less book carrying value (net of accumulated depreciation).

Gain on acquisition – This represents the excess of the fair value of net assets acquired over the purchase price in business combination.

Other noninterest income – This consists of several forms of recurring revenue, such as FHLB dividends and BOLI income. For the remaining transactions, revenue is recognized when, or as, the performance obligation is satisfied. Other items include derivative gains and losses, gain on sales of other assets including OREO, fixed assets and loans, and non-marketable securities, and income from investment tax credit benefits.

Segment Reporting
Our chief operating decision maker (“CODM”) is the Chief Executive Officer. We qualitatively and quantitatively assessed the segment expense items that are regularly provided to the CODM and identified significant segment expenses.

Net income is the primary measure of segment profit or loss and is determined in accordance with the measurement principles most consistent with GAAP, which is required for BancShares’ Consolidated Statements of Income. The CODM periodically reviews comparisons to forecasts and recent prior periods for segment net income to evaluate segment financial performance and determine where to deploy capital, liquidity, and human resources and develop strategies for loan and deposit volumes, fee-based products and services, and expense management.

Refer to Note 21—Segment Information for the segment reporting tables, which include significant segment expenses and the measure of segment profit or loss the CODM uses to assess the financial performance and decide how to allocate resources to each segment, as well as a qualitative description of the components of all other noninterest expense.

Newly Adopted Accounting Standards
As of January 1, 2025, BancShares adopted the following Accounting Standards Update (“ASU”) issued by FASB:

ASU 2023-09—Income Taxes (Topic 740): Improvements to Income Tax Disclosures, Issued December 2023
This ASU enhances income tax disclosure requirements primarily by requiring annual disclosure of specific categories in the rate reconciliation table and disaggregation of income taxes paid by jurisdiction. BancShares applied the required disclosures retrospectively. Aside from complying with the new disclosure requirements, this ASU did not have a material impact on our financial statements. Refer to Note 19—Income Taxes for required disclosures.

As of January 1, 2026, BancShares adopted the following ASU issued by FASB:

ASU 2025-08—Financial Instruments — Credit Losses (Topic 326): Purchased Loans, Issued November 2025
Under this ASU, purchased seasoned loans (“PSLs” as described below) must be recognized at the purchase price, plus the ALLL at the acquisition date (the “Gross-Up Approach”). Since the ALLL at the acquisition date is established through the Gross-Up Approach, there is no corresponding increase to the provision for loan and lease losses (“Day 2 Provision for Loan and Lease Losses”).

Prior to this ASU, the Gross-Up Approach was only permitted for PCD loans, while the initial ALLL for Non-PCD loans was established through the Day 2 Provision for Loan and Lease Losses. Under this ASU, the Gross-Up Approach applies to PCD loans and the following Non-PCD loans which qualify as PSLs: (i) non-credit card loans acquired in a business combination and (ii) non-credit card loans purchased more than 90 days after origination in a non-business combination transaction, provided the acquirer was not involved in the original lending. This ASU specifically excludes credit card loans from the definition of PSLs.

This ASU is effective for annual and interim periods beginning after December 15, 2026. Early adoption is permitted as of the beginning of an interim or annual reporting period. This ASU must be applied prospectively. We early adopted this ASU on January 1, 2026 (the “Adoption Date”). We are currently evaluating the impact of this ASU on our consolidated financial statements and disclosures. For business combinations or loan acquisitions that close after the Adoption Date, this ASU could reduce the Day 2 Provision for Loan and Lease Losses, and the subsequent credit-related loan purchase accounting accretion or amortization that was prevalent for Non-PCD loans acquired prior the Adoption Date.

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Business Combinations
BancShares accounts for business combinations using the acquisition method of accounting. Under this method, acquired assets and assumed liabilities are included with the acquirer’s accounts at their estimated fair value as of the date of acquisition, with any excess of purchase price over the fair values of the net assets acquired and any finite-lived intangible assets established in connection with the business combination recognized as goodwill. To the extent the fair value of identifiable net assets acquired exceeds the purchase price, a gain on acquisition is recognized. Acquisition-related costs are recognized as period expenses as incurred.

NOTE 2 — BUSINESS COMBINATIONS

Pending Branch Acquisition
On October 16, 2025, FCB announced that it had entered into an agreement to consummate the acquisition of 138 branches from BMO Bank N.A. located throughout the Midwest, Great Plains and West regions of the U.S. (the “BMO Branch Acquisition”). In connection with the BMO Branch Acquisition, FCB expects to assume approximately $ 5.7  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 regulatory approvals.

Completed Acquisition
On March 27, 2023 (the “SVBB Acquisition Date”), FCB acquired substantially all loans and certain other assets and assumed all customer deposits and certain other liabilities of Silicon Valley Bridge Bank, N.A. (“SVBB”) from the Federal Deposit Insurance Corporation (the “FDIC”) pursuant to the terms of a purchase and assumption agreement (the “SVBB Purchase Agreement”) by and among FCB, the FDIC, and the FDIC, as receiver of SVBB (the “SVBB Acquisition”).

BancShares determined that the SVBB Acquisition constituted a business combination as defined by ASC Topic 805, Business Combinations . Accordingly, the assets acquired and liabilities assumed were presented at their estimated fair values based on valuations as of March 27, 2023. The gain on acquisition of $ 9.81 billion, net of income taxes of $ 3.36  billion, was recorded in noninterest income during the year ended December 31, 2023, and represented the excess of the fair value of net assets acquired over the purchase price.

In connection with the SVBB Purchase Agreement, FCB entered into a commercial shared loss agreement with the FDIC (the “Shared-Loss Agreement”). The Shared-Loss Agreement covered an estimated $ 60  billion of commercial loans (collectively, the “Covered Assets”) at the time of acquisition. On April 7, 2025, FCB and the FDIC entered into an agreement (the “Shared-Loss Termination Agreement”) to terminate the Shared-Loss Agreement. The Shared-Loss Agreement stipulated the FDIC would have to reimburse FCB for 0 % of losses of up to $ 5  billion with respect to Covered Assets and 50 % of losses in excess of $ 5  billion with respect to Covered Assets (“FDIC Loss Sharing”) and FCB would have to reimburse the FDIC for 50 % of recoveries related to such Covered Assets (“FCB reimbursement”). As a result of entering into the Shared-Loss Termination Agreement, all rights and obligations of the parties under the Shared-Loss Agreement terminated as of the date of the Shared-Loss Termination Agreement, including FCB’s reporting covenants and obligations related to FDIC Loss Sharing and FCB reimbursement. There was no impact to our consolidated balance sheets or statements of income resulting from the Shared-Loss Termination Agreement because there was no loss indemnification asset or true-up liability associated with the Shared-Loss Agreement, primarily based on evaluation of historical loss experience and the credit quality of the Covered Assets.

In connection with the SVBB Acquisition, FCB issued a five-year $ 36.07  billion note payable to the FDIC, maturing March 27, 2028, which was amended and restated on November 20, 2023 (the “Purchase Money Note”). FCB and the FDIC, as lender and as collateral agent, also entered into an Advance Facility Agreement, dated as of the SVBB Acquisition Date, and effective as of November 20, 2023 (the “Advance Facility Agreement”), which provided total advances available through March 27, 2025 of up to $ 70  billion solely to provide liquidity to offset deposit withdrawal or runoff of former SVBB deposit accounts and to fund the unfunded commercial lending commitments acquired in the SVBB Acquisition. There were no amounts outstanding on the facility at the end of the draw period on March 27, 2025.

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NOTE 3 — INVESTMENT SECURITIES

The following tables include the amortized cost and fair value of investment securities:

Amortized Cost and Fair Value - Investment Securities

dollars in millions December 31, 2025
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
Investment securities available for sale
U.S. Treasury $ 10,624   $ 50   $ ( 1 ) $ 10,673  
Government agency 44   —   ( 1 ) 43  
Residential mortgage-backed securities 17,683   263   ( 323 ) 17,623  
Commercial mortgage-backed securities 3,444   28   ( 173 ) 3,299  
Corporate bonds 145   —   ( 5 ) 140  
Municipal bonds 12   —   —   12  

Total investment securities available for sale $ 31,952   $ 341   $ ( 503 ) $ 31,790  
Investment in marketable equity securities $ 83   $ 44   $ —   $ 127  
Investment securities held to maturity
U.S. Treasury $ 388   $ —   $ ( 15 ) $ 373  
Government agency 1,225   —   ( 55 ) 1,170  
Residential mortgage-backed securities 4,450   32   ( 490 ) 3,992  
Commercial mortgage-backed securities 3,337   —   ( 608 ) 2,729  

Supranational securities 246   —   ( 20 ) 226  
Other 1   —   —   1  
Total investment securities held to maturity $ 9,647   $ 32   $ ( 1,188 ) $ 8,491  
Total investment securities $ 41,682   $ 417   $ ( 1,691 ) $ 40,408  

December 31, 2024
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
Investment securities available for sale
U.S. Treasury $ 13,897   $ 33   $ ( 27 ) $ 13,903  
Government agency 79   —   ( 2 ) 77  
Residential mortgage-backed securities 16,161   41   ( 582 ) 15,620  
Commercial mortgage-backed securities 3,869   7   ( 210 ) 3,666  
Corporate bonds 489   —   ( 22 ) 467  
Municipal bonds 17   —   —   17  
Total investment securities available for sale $ 34,512   $ 81   $ ( 843 ) $ 33,750  
Investment in marketable equity securities $ 79   $ 27   $ ( 5 ) $ 101  
Investment securities held to maturity
U.S. Treasury $ 483   $ —   $ ( 31 ) $ 452  
Government agency 1,489   —   ( 115 ) 1,374  
Residential mortgage-backed securities 4,558   2   ( 682 ) 3,878  
Commercial mortgage-backed securities 3,407   —   ( 678 ) 2,729  

Supranational securities 300   —   ( 33 ) 267  
Other 2   —   —   2  
Total investment securities held to maturity $ 10,239   $ 2   $ ( 1,539 ) $ 8,702  
Total investment securities $ 44,830   $ 110   $ ( 2,387 ) $ 42,553  

U.S. Treasury investments include Treasury bills and Notes issued by the U.S. Treasury. Investments in government agency securities represent securities issued by the Small Business Administration (“SBA”), Federal Home Loan Bank (“FHLB”) and other U.S. agencies. Investments in residential and commercial mortgage-backed securities represent securities issued by the Government National Mortgage Association (“GNMA”), Federal National Mortgage Association (“FNMA”) and Federal Home Loan Mortgage Corporation (“FHLMC”). Investments in corporate bonds represent positions in debt securities of other financial institutions. Municipal bonds are revenue bonds. Investments in marketable equity securities represent positions in common stock of publicly traded financial institutions. Investments in supranational securities represent securities issued by the Supranational Entities & Multilateral Development Banks. Other held to maturity investments include certificates of deposit with other financial institutions.
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BancShares initially held approximately 354,000 shares of Visa, Inc. (“Visa”) Class B common stock (“Visa Class B common stock”). Effective January 24, 2024, all outstanding shares of Visa Class B common stock were redenominated as Visa Class B-1 common stock (“Visa Class B-1 common stock”) pursuant to Visa’s eighth amended and restated certificate of incorporation. BancShares currently holds approximately 354,000 shares of Visa Class B-1 common stock. Until the resolution of certain litigation, at which time the Visa Class B-1 common stock will convert to publicly traded Visa Class A common stock, or the potential exchange of Visa Class B-1 common stock for other marketable classes of Visa common stock, these shares are only transferable to other stockholders of Visa Class B-1 common stock or certain new denominations of Visa’s former Class B common stock. As a result, there is limited transfer activity in private transactions between buyers and sellers. Given this limited trading activity and the continuing uncertainty regarding the likelihood, ultimate timing and eventual exchange of Visa Class B-1 common stock for shares of Visa Class A common stock or other marketable classes of Visa common stock, these shares are not considered to have a readily determinable fair value and have no carrying value. BancShares continues to monitor the trading activity in Visa Class B-1 common stock, the status of the resolution of certain litigation matters at Visa, and other potential exchange alternatives that would trigger the conversion of the Visa Class B-1 common stock into Visa Class A common stock or other marketable classes of Visa common stock.

Accrued interest receivable for available for sale and held to maturity debt securities was excluded from the estimate for credit losses. At December 31, 2025, accrued interest receivable for available for sale and held to maturity debt securities was $ 157 million and $ 20 million, respectively. At December 31, 2024, accrued interest receivable for available for sale and held to maturity debt securities was $ 177 million and $ 20  million, respectively. During the year ended December 31, 2025 and 2024, there was no accrued interest that was deemed uncollectible and written off against interest income.

A security is considered past due once it is 30 days contractually past due under the terms of the agreement. There were no securities past due as of December 31, 2025 or 2024.

The following table provides the amortized cost and fair value by contractual maturity. Expected maturities will differ from contractual maturities on certain securities because borrowers and issuers may have the right to call or prepay obligations with or without prepayment penalties. Residential and commercial mortgage-backed and government agency securities are stated separately as they are not due at a single maturity date.

Maturities - Debt Securities

dollars in millions December 31, 2025 December 31, 2024
Amortized Cost Fair Value Amortized Cost Fair Value
Investment securities available for sale
Non-amortizing securities maturing in:
One year or less $ 4,893   $ 4,914   $ 5,090   $ 5,086  
After one through five years 5,853   5,879   8,945   8,949  
After five through 10 years 23   20   346   330  
After 10 years 12   12   22   22  

Government agency 44   43   79   77  
Residential mortgage-backed securities 17,683   17,623   16,161   15,620  
Commercial mortgage-backed securities 3,444   3,299   3,869   3,666  

Total investment securities available for sale $ 31,952   $ 31,790   $ 34,512   $ 33,750  
Investment securities held to maturity
Non-amortizing securities maturing in:
One year or less $ 307   $ 303   $ 429   $ 419  
After one through five years 1,434   1,360   1,299   1,208  
After five through 10 years 119   107   546   468  

Residential mortgage-backed securities 4,450   3,992   4,558   3,878  
Commercial mortgage-backed securities 3,337   2,729   3,407   2,729  

Total investment securities held to maturity $ 9,647   $ 8,491   $ 10,239   $ 8,702  

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

Interest and Dividends on Investment Securities

dollars in millions Year Ended December 31,
2025 2024 2023
Interest income - taxable investment securities (1)
$ 1,687   $ 1,344   $ 642  
Interest income - nontaxable investment securities 1   1   4  
Dividend income - marketable equity securities 2   2   2  
Interest on investment securities $ 1,690   $ 1,347   $ 648  

(1) Amount includes interest income on securities purchased under agreements to resell.

The following table presents the gross realized gain and loss on sales of investment securities available for sale, and the net realized gain on sale of marketable equity securities:

Realized Gain (Loss) on Sale of Investment Securities, Net

dollars in millions Year Ended December 31,
2025 2024 2023
Gross realized gain on sale of investment securities available for sale $ 5   $ 1   $ —  
Gross realized loss on sale of investment securities available for sale ( 3 ) ( 1 ) ( 26 )
Net realized gain (loss) on sale of investment securities available for sale 2   —   ( 26 )
Net realized gain on sale of marketable equity securities
1   6   —  
Realized gain (loss) on sale of investment securities, net $ 3   $ 6   $ ( 26 )

The following table provides information regarding investment securities available for sale with unrealized losses:

Gross Unrealized Losses on Debt Securities Available For Sale

dollars in millions December 31, 2025
Less than 12 months 12 months or more Total
Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
Investment securities available for sale
U.S. Treasury $ 859   $ ( 1 ) $ —   $ —   $ 859   $ ( 1 )
Government agency —   —   43   ( 1 ) 43   ( 1 )
Residential mortgage-backed securities 815   ( 2 ) 3,292   ( 321 ) 4,107   ( 323 )
Commercial mortgage-backed securities 48   —   1,129   ( 173 ) 1,177   ( 173 )
Corporate bonds —   —   123   ( 5 ) 123   ( 5 )

Total $ 1,722   $ ( 3 ) $ 4,587   $ ( 500 ) $ 6,309   $ ( 503 )

December 31, 2024
Less than 12 months 12 months or more Total
Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
Investment securities available for sale
U.S. Treasury $ 3,791   $ ( 12 ) $ 981   $ ( 15 ) $ 4,772   $ ( 27 )
Government agency —   —   77   ( 2 ) 77   ( 2 )
Residential mortgage-backed securities 7,470   ( 61 ) 3,575   ( 521 ) 11,045   ( 582 )
Commercial mortgage-backed securities 1,183   ( 8 ) 1,342   ( 202 ) 2,525   ( 210 )
Corporate bonds 16   —   438   ( 22 ) 454   ( 22 )

Total $ 12,460   $ ( 81 ) $ 6,413   $ ( 762 ) $ 18,873   $ ( 843 )

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As of December 31, 2025, there were 307 investment securities available for sale with continuous unrealized losses for more than 12 months, of which 288 were government sponsored enterprise-issued mortgage-backed securities including GNMA, FHLMC and FNMA, or government agency securities, and the remaining 19 were corporate bonds. BancShares has the ability and intent to retain these securities for a period of time sufficient to recover all unrealized losses. Given the consistently strong credit rating of the U.S. Treasury, and the long history of no credit losses on debt securities issued by government agencies and government sponsored entities, as of December 31, 2025, no allowance for credit loss was required. For corporate bonds, we analyzed the changes in interest rates relative to when the investment securities were purchased or acquired, and considered other factors including changes in credit ratings, delinquencies, and other macroeconomic factors. As a result of this analysis, we determined that no allowance for credit loss was required for investment securities available for sale as of December 31, 2025.

BancShares’ portfolio of held to maturity debt securities consists of mortgage-backed securities issued by government agencies and government sponsored entities including GNMA, FHLMC and FNMA, U.S. Treasury notes, unsecured bonds issued by government agencies and government sponsored entities, and securities issued by the Supranational Entities & Multilateral Development Banks. Given the consistently strong credit rating of the U.S. Treasury and the Supranational Entities & Multilateral Development Banks, and the long history of no credit losses on debt securities issued by government agencies and government sponsored entities, no allowance for credit loss was required for debt securities held to maturity as of December 31, 2025.

There were no debt securities on nonaccrual status as of December 31, 2025 or December 31, 2024.

Investment securities having an aggregate carrying value of $ 3.89 billion at December 31, 2025, and $ 3.94 billion at December 31, 2024, were pledged as collateral to secure public funds on deposit, the Purchase Money Note, certain short-term borrowings, and for other purposes as required by law.

Certain investments held by BancShares are reported in other assets, including FHLB stock and nonmarketable securities without readily determinable fair values that are recorded at cost, investments in qualified affordable housing projects are accounted for under PAM, and renewable energy tax credit investments that utilize the HLBVM. Refer to Note 1—Significant Accounting Policies and Basis of Presentation for descriptions of the accounting methodologies.

NOTE 4 — ASSETS HELD FOR SALE

The composition of AHFS is summarized in the following table.

dollars in millions December 31, 2025 December 31, 2024
Loans and leases:
Commercial (1)
$ 18 $ 27
Consumer 781 55

Loans and leases 799 82
Operating lease equipment 5 3
Total assets held for sale $ 804 $ 85

(1) There were nonaccrual loans held for sale of $ 10 million at December 31, 2025 and $ 0 at December 31, 2024.

Consumer loans held for sale at December 31, 2024 were largely comprised of residential mortgage loans that FCB originated with the intent to sell. In December 2025, FCB management committed to a plan to sell approximately $ 694 million of residential mortgage 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.

Accounting for AHFS is discussed in Note 1—Significant Accounting Policies and Basis of Presentation.
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NOTE 5 — LOANS AND LEASES

Loans held for sale are excluded from loans and leases on the Consolidated Balance Sheets and are included in Note 4—Assets Held For Sale. Finance leases for which we are the lessor are included in the commercial and industrial loan class in the following tables. Disclosures for leases are in Note 7—Leases.

The following table summarizes loans by class:

Loans by Class
dollars in millions December 31, 2025 December 31, 2024
Commercial
Commercial and industrial $ 44,721   $ 43,559  
Capital call lines 31,791   25,501  
Owner occupied commercial mortgage 17,660   16,842  
Investor dependent 2,778   3,193  
Commercial real estate 23,784   23,282  
Total commercial 120,734   112,377  
Consumer
Residential mortgage 21,861   22,768  
Revolving mortgage 2,863   2,567  
Auto 1,416   1,523  
Other consumer 1,056   986  
Total consumer 27,196   27,844  
Total loans and leases $ 147,930   $ 140,221  

Refer to Note 1—Significant Accounting Policies and Basis of Presentation for discussion of the Loan Class Changes.

At December 31, 2025 and 2024, accrued interest receivable on loans included in other assets was $ 635 million and $ 603 million, respectively, and was excluded from the estimate of the ALLL.

The discount on acquired loans is accreted to interest income over the contractual life of the loan using the effective interest method. Discount accretion income was $ 289 million for the year ended December 31, 2025, including $ 19 million for unfunded commitments. Discount accretion income was $ 505 million for the year ended December 31, 2024, including $ 81 million for unfunded commitments. Discount accretion income was $ 733 million for the year ended December 31, 2023, including $ 128 million for unfunded commitments.

The following table presents selected components of the amortized cost of loans, including the unamortized discount on acquired loans.

Components of Amortized Cost

dollars in millions December 31, 2025 December 31, 2024
Deferred fees, including unamortized costs and unearned fees on non-PCD loans $ ( 103 ) $ ( 91 )

Net unamortized discount on acquired loans
Non-PCD $ 1,281 $ 1,504
PCD 45 94  
Total net unamortized discount $ 1,326 $ 1,598

123

The aging and nonaccrual status of the outstanding loans and leases by class at December 31, 2025 and 2024 are provided in the tables below. Loans and leases less than 30 days past due are considered current, as various grace periods allow borrowers to make payments within a stated period after the due date and remain in compliance with the respective agreement.

Loans and Leases - Delinquency and Nonaccrual Status (1)

dollars in millions December 31, 2025
Accruing Loans
30-59 Days
Past Due 60-89 Days
Past Due 90 Days or
Greater Total
Past Due Current Total Accruing Nonaccrual Loans (2)
Total
Commercial
Commercial and industrial $ 232   $ 56   $ 63   $ 351   $ 43,914   $ 44,265   $ 456   $ 44,721  
Capital call lines —   —   —   —   31,791   31,791   —   31,791  
Owner occupied commercial mortgage 78   19   1   98   17,403   17,501   159   17,660  
Investor dependent 11   1   —   12   2,717   2,729   49   2,778  
Commercial real estate 221   31   171   423   22,943   23,366   418   23,784  
Total commercial 542   107   235   884   118,768   119,652   1,082   120,734  
Consumer
Residential mortgage 168   42   7   217   21,465   21,682   179   21,861  
Revolving mortgage 25   4   —   29   2,799   2,828   35   2,863  
Auto 15   3   —   18   1,389   1,407   9   1,416  
Other consumer 5   3   2   10   1,044   1,054   2   1,056  
Total consumer 213   52   9   274   26,697   26,971   225   27,196  
Total loans and leases $ 755   $ 159   $ 244   $ 1,158   $ 145,465   $ 146,623   $ 1,307   $ 147,930  

December 31, 2024
Accruing Loans
30-59 Days
Past Due
60-89 Days
Past Due
90 Days or
Greater
Total
Past Due
Current
Total Accruing Nonaccrual Loans (2)
Total
Commercial
Commercial and industrial $ 203   $ 50   $ 17   $ 270   $ 42,869   $ 43,139   $ 420   $ 43,559  
Capital call lines —   —   —   —   25,501   25,501   —   25,501  
Owner occupied commercial mortgage 30   9   2   41   16,739   16,780   62   16,842  
Investor dependent 11   1   —   12   3,094   3,106   87   3,193  
Commercial real estate 65   30   79   174   22,669   22,843   439   23,282  
Total commercial 309   90   98   497   110,872   111,369   1,008   112,377  
Consumer
Residential mortgage 172   25   7   204   22,421   22,625   143   22,768  
Revolving mortgage 20   4   —   24   2,519   2,543   24   2,567  
Auto 12   3   —   15   1,500   1,515   8   1,523  
Other consumer 5   3   3   11   974   985   1   986  
Total consumer 209   35   10   254   27,414   27,668   176   27,844  
Total loans and leases $ 518   $ 125   $ 108   $ 751   $ 138,286   $ 139,037   $ 1,184   $ 140,221  

(1)     Accrued interest that was deducted from interest income when the loan was moved to nonaccrual status was approximately $ 17 million for the year ended December 31, 2025, and approximately $ 14 million for the year ended December 31, 2024.
(2)     Nonaccrual loans for which there was no related ALLL totaled $ 415 million at December 31, 2025 and $ 303 million at December 31, 2024. Refer to Note 1—Significant Accounting Policies and Basis of Presentation for discussion of loans individually evaluated to determine the ALLL.

OREO and repossessed assets were $ 124 million as of December 31, 2025 and $ 64 million as of December 31, 2024.

124

Credit Quality Indicators
Loans and leases are monitored for credit quality on a recurring basis. Commercial loans and leases and consumer loans have different credit quality indicators as a result of the unique characteristics of the loan classes being evaluated. The credit quality indicators for commercial loans and leases are developed through a review of individual borrowers on an ongoing basis. Commercial loans are evaluated periodically with more frequent evaluations done on criticized loans. The indicators as of the date presented are based on the most recent assessment performed and are defined below:

Pass – A pass rated asset is not adversely classified because it does not display any of the characteristics for adverse classification.

Special mention – A special mention asset has potential weaknesses which deserve management’s close attention. If left uncorrected, such potential weaknesses may result in deterioration of the repayment prospects or collateral position at some future date. Special mention assets are not adversely classified and do not warrant adverse classification.

Substandard – A substandard asset is inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Assets classified as substandard generally have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. These assets are characterized by the distinct possibility of loss if the deficiencies are not corrected.

Doubtful – An asset classified as doubtful has all the weaknesses inherent in an asset classified substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable on the basis of currently existing facts, conditions and values.

Loss – Assets classified as loss are considered uncollectible and of such little value it is inappropriate to be carried as an asset. This classification is not necessarily equivalent to any potential for recovery or salvage value, but rather it is not appropriate to defer a full charge-off even though partial recovery may be affected in the future.

Ungraded – Ungraded loans represent loans not included in the individual credit grading process due to their relatively small balances or borrower type. The majority of ungraded loans at December 31, 2025 and 2024, relate to business credit cards. Business credit card loans are subject to automatic charge-off when they become 120 days past due in the same manner as unsecured consumer lines of credit.

The credit quality indicator for consumer loans is based on delinquency status of the borrower as of the end of the period. As the borrower becomes more delinquent, the likelihood of loss increases. An exemption is applied to government guaranteed loans as the principal repayments are insured by the Federal Housing Administration and U.S. Department of Veterans Affairs and thus remain on accrual status regardless of delinquency status.

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The following tables summarize the commercial loans disaggregated by year of origination and by risk rating. The consumer loan delinquency status by year of origination is also presented below. The tables reflect the amortized cost of the loans and include PCD loans.

Commercial Loans - Risk Classifications by Class

December 31, 2025
Risk Classification: Term Loans by Origination Year Revolving Converted to Term Loans
dollars in millions 2025 2024 2023 2022 2021 2020 & Prior Revolving Total
Commercial and industrial
Pass $ 13,484   $ 7,906   $ 3,552   $ 2,963   $ 1,428   $ 1,539   $ 10,143   $ 76   $ 41,091  
Special Mention 213   264   113   97   143   60   181   —   1,071  
Substandard 451   296   215   475   347   65   416   5   2,270  
Doubtful 18   24   27   35   10   —   32   —   146  
Ungraded —   —   —   —   —   —   143   —   143  
Total commercial and industrial 14,166   8,490   3,907   3,570   1,928   1,664   10,915   81   44,721  
Capital call lines
Pass —   —   —   —   —   —   31,758   33   31,791  

Total capital call lines —   —   —   —   —   —   31,758   33   31,791  
Owner occupied commercial mortgage
Pass 2,816   2,739   2,177   2,430   2,290   3,954   248   28   16,682  
Special Mention 26   34   49   78   24   27   2   —   240  
Substandard 41   55   128   179   88   222   8   3   724  
Doubtful —   4   10   —   —   —   —   —   14  

Total owner occupied commercial mortgage 2,883   2,832   2,364   2,687   2,402   4,203   258   31   17,660  
Investor dependent
Pass 981   648   110   67   —   —   326   —   2,132  
Special Mention 29   78   1   19   —   —   19   —   146  
Substandard 104   164   117   14   4   —   50   —   453  
Doubtful 13   11   16   5   —   —   2   —   47  

Total Investor dependent 1,127   901   244   105   4   —   397   —   2,778  
Commercial real estate
Pass 5,005   4,720   4,512   2,791   1,614   2,631   732   —   22,005  
Special Mention 202   19   139   25   2   31   —   —   418  
Substandard 409   249   221   145   70   193   1   —   1,288  
Doubtful 29   3   —   18   1   22   —   —   73  

Total commercial real estate 5,645   4,991   4,872   2,979   1,687   2,877   733   —   23,784  
Total commercial
Pass 22,286   16,013   10,351   8,251   5,332   8,124   43,207   137   113,701  
Special Mention 470   395   302   219   169   118   202   —   1,875  
Substandard 1,005   764   681   813   509   480   475   8   4,735  
Doubtful 60   42   53   58   11   22   34   —   280  
Ungraded —   —   —   —   —   —   143   —   143  
Total commercial $ 23,821   $ 17,214   $ 11,387   $ 9,341   $ 6,021   $ 8,744   $ 44,061   $ 145   $ 120,734  

126

Consumer Loans - Delinquency Status by Class

December 31, 2025
Days Past Due: Term Loans by Origination Year Revolving Converted to Term Loans
dollars in millions 2025 2024 2023 2022 2021 2020 & Prior Revolving Total
Residential mortgage
Current $ 1,601   $ 1,609   $ 2,512   $ 4,783   $ 4,715   $ 6,295   $ 2   $ —   $ 21,517  
30-59 days 3   4   12   32   32   94   2   —   179  
60-89 days —   1   3   9   3   38   —   —   54  
90 days or greater 1   5   6   10   7   82   —   —   111  
Total residential mortgage 1,605   1,619   2,533   4,834   4,757   6,509   4   —   21,861  
Revolving mortgage
Current —   —   —   —   —   —   2,686   125   2,811  
30-59 days —   —   —   —   —   —   20   9   29  
60-89 days —   —   —   —   —   —   —   6   6  
90 days or greater —   —   —   —   —   —   3   14   17  
Total revolving mortgage —   —   —   —   —   —   2,709   154   2,863  
Auto
Current 504   405   217   157   77   33   —   —   1,393  
30-59 days 3   4   3   3   2   1   —   —   16  
60-89 days —   1   1   1   1   —   —   —   4  
90 days or greater —   1   1   1   —   —   —   —   3  
Total consumer auto 507   411   222   162   80   34   —   —   1,416  
Other consumer
Current 176   100   65   53   15   6   630   —   1,045  
30-59 days 1   1   —   —   —   —   4   —   6  
60-89 days —   —   —   —   —   —   2   —   2  
90 days or greater 1   —   —   —   —   —   2   —   3  
Total consumer other 178   101   65   53   15   6   638   —   1,056  
Total consumer $ 2,290   $ 2,131   $ 2,820   $ 5,049   $ 4,852   $ 6,549   $ 3,351   $ 154   $ 27,196  

 

127

The following tables represent current credit quality indicators by origination year as of December 31, 2024:

Commercial Loans - Risk Classifications by Class

December 31, 2024
Risk Classification: Term Loans by Origination Year Revolving Converted to Term Loans
dollars in millions 2024 2023 2022 2021 2020 2019 & Prior Revolving Total
Commercial and industrial
Pass $ 13,235   $ 6,531   $ 4,814   $ 2,329   $ 1,242   $ 1,394   $ 9,898   $ 69   $ 39,512  
Special Mention 157   253   281   302   33   68   203   —   1,297  
Substandard 177   371   621   353   205   231   461   4   2,423  
Doubtful 6   26   44   17   2   1   97   —   193  
Ungraded —   —   —   —   —   —   134   —   134  
Total Commercial and industrial 13,575   7,181   5,760   3,001   1,482   1,694   10,793   73   43,559  
Capital call lines
Pass —   —   —   —   —   —   25,467   34   25,501  

Total capital call lines —   —   —   —   —   —   25,467   34   25,501  
Owner occupied commercial mortgage
Pass 2,721   2,445   2,747   2,581   2,199   2,988   223   29   15,933  
Special Mention 22   46   70   58   32   61   9   —   298  
Substandard 30   34   136   82   73   245   10   1   611  

Total owner occupied commercial mortgage 2,773   2,525   2,953   2,721   2,304   3,294   242   30   16,842  
Investor dependent
Pass 1,135   640   352   37   —   —   315   3   2,482  
Special Mention 17   28   6   —   —   —   26   —   77  
Substandard 122   173   164   31   1   —   61   —   552  
Doubtful 26   19   28   5   —   —   4   —   82  

Total investor dependent 1,300   860   550   73   1   —   406   3   3,193  
Commercial real estate
Pass 4,336   5,528   4,337   2,569   1,842   2,258   526   3   21,399  
Special Mention —   147   331   49   11   111   —   —   649  
Substandard 13   27   241   58   143   741   —   —   1,223  
Doubtful —   2   —   1   2   6   —   —   11  

Total commercial real estate 4,349   5,704   4,909   2,677   1,998   3,116   526   3   23,282  
Total commercial
Pass 21,427   15,144   12,250   7,516   5,283   6,640   36,429   138   104,827  
Special Mention 196   474   688   409   76   240   238   —   2,321  
Substandard 342   605   1,162   524   422   1,217   532   5   4,809  
Doubtful 32   47   72   23   4   7   101   —   286  
Ungraded —   —   —   —   —   —   134   —   134  
Total commercial $ 21,997   $ 16,270   $ 14,172   $ 8,472   $ 5,785   $ 8,104   $ 37,434   $ 143   $ 112,377  

128

Consumer Loans - Delinquency Status by Class

December 31, 2024
Days Past Due: Term Loans by Origination Year Revolving Converted to Term Loans
dollars in millions 2024 2023 2022 2021 2020 2019 & Prior Revolving Total
Residential mortgage
Current $ 2,024   $ 2,824   $ 5,202   $ 5,135   $ 2,910   $ 4,353   $ 4   $ —   $ 22,452  
30-59 days 2   13   18   23   31   95   —   —   182  
60-89 days 1   2   4   2   1   28   —   —   38  
90 days or greater —   2   6   6   9   73   —   —   96  
Total residential mortgage 2,027   2,841   5,230   5,166   2,951   4,549   4   —   22,768  
Revolving mortgage
Current —   —   —   —   —   —   2,420   108   2,528  
30-59 days —   —   —   —   —   —   16   6   22  
60-89 days —   —   —   —   —   —   1   5   6  
90 days or greater —   —   —   —   —   —   3   8   11  
Total revolving mortgage —   —   —   —   —   —   2,440   127   2,567  
Auto
Current 617   358   277   155   68   27   —   —   1,502  
30-59 days 3   3   3   2   1   1   —   —   13  
60-89 days 1   1   1   1   —   —   —   —   4  
90 days or greater 1   1   1   1   —   —   —   —   4  
Total consumer auto 622   363   282   159   69   28   —   —   1,523  
Other consumer
Current 147   144   99   30   6   18   531   —   975  
30-59 days 1   —   —   —   —   1   3   —   5  
60-89 days —   —   1   —   —   —   2   —   3  
90 days or greater —   —   —   —   —   1   2   —   3  
Total consumer other 148   144   100   30   6   20   538   —   986  
Total consumer $ 2,797   $ 3,348   $ 5,612   $ 5,355   $ 3,026   $ 4,597   $ 2,982   $ 127   $ 27,844  

129

Gross Charge-offs

Gross charge-off disclosures by origination year and loan class are summarized in the following tables:

Year Ended December 31, 2025
Term Loans by Origination Year Revolving Converted to Term Loans
dollars in millions 2025 2024 2023 2022 2021 2020 & Prior Revolving Total
Commercial
Commercial and industrial $ 33   $ 36   $ 66   $ 57   $ 12   $ 7   $ 240   $ 2   $ 453  
Capital call lines —   —   —   —   —   —   —   —   —  
Owner occupied commercial mortgage —   3   —   —   3   1   —   —   7  
Investor dependent 4   31   31   37   7   6   9   —   125  
Commercial real estate 26   41   3   21   —   32   —   —   123  
Total commercial 63   111   100   115   22   46   249   2   708  
Consumer
Residential mortgage —   —   —   —   —   7   —   —   7  
Revolving mortgage —   —   —   —   —   —   —   —   —  
Auto —   2   2   1   —   —   —   —   5  
Other consumer —   2   1   1   —   —   17   —   21  
Total consumer —   4   3   2   —   7   17   —   33  
Total loans and leases $ 63   $ 115   $ 103   $ 117   $ 22   $ 53   $ 266   $ 2   $ 741  

Year Ended December 31, 2024
Term Loans by Origination Year Revolving Converted to Term Loans
dollars in millions 2024 2023 2022 2021 2020 2019 & Prior Revolving Total
Commercial
Commercial and industrial $ 19   $ 54   $ 88   $ 26   $ 8   $ 23   $ 75   $ 1   $ 294  
Capital call lines —   —   —   —   —   —   —   —   —  
Owner occupied commercial mortgage —   —   —   —   —   12   —   —   12  
Investor dependent —   55   103   28   3   6   9   —   204  
Commercial real estate —   —   —   —   36   81   —   —   117  
Total commercial 19   109   191   54   47   122   84   1   627  
Consumer
Residential mortgage —   —   —   —   —   1   —   —   1  
Revolving mortgage —   —   —   —   —   —   —   1   1  
Auto 1   2   2   1   —   —   —   —   6  
Other consumer —   2   1   1   —   1   17   —   22  
Total consumer 1   4   3   2   —   2   17   1   30  
Total loans and leases
$ 20   $ 113   $ 194   $ 56   $ 47   $ 124   $ 101   $ 2   $ 657  

130

Loan Modifications for Borrowers Experiencing Financial Difficulties
As part of BancShares’ ongoing credit risk management practices, BancShares attempts to work with borrowers when necessary to extend or modify loan terms to better align with the borrowers’ current ability to repay. BancShares’ modifications granted to debtors experiencing financial difficulties typically take the form of term extensions, payment delays, interest rate reductions, principal forgiveness, or a combination thereof. Modifications are made in accordance with internal policies and guidelines to conform to regulatory guidance.

The following tables present the amortized cost of loan modifications made to debtors experiencing financial difficulty, disaggregated by class and type of loan modification. The tables also provide financial effects by type of such loan modifications for the respective loan class. Loan modifications for principal forgiveness round to less than $ 1  million for all loan classes in all periods presented and are not presented in the following tables.

Amortized Cost of Loans Modified during the year ended December 31, 2025

dollars in millions Term Extension (1)
Payment Delay Interest Rate Reduction Term Extension (1) and Interest Rate Reduction
Term Extension (1) and Payment Delay
Other Combinations (2)
Total Percent of Total Loan Class
Commercial
Commercial and industrial $ 434   $ 85   $ —   $ 19   $ 27   $ 32   $ 597   1.34   %

Owner occupied commercial mortgage 15   7   —   18   26   —   66   0.38  
Investor dependent 13   53   —   —   11   —   77   2.77  
Commercial real estate 169   9   16   109   40   —   343   1.44  
Total commercial 631   154   16   146   104   32   1,083   0.90  
Consumer
Residential mortgage 15   —   1   3   25   2   46   0.21  
Revolving mortgage 5   —   —   1   —   —   6   0.22  
Auto —   —   —   —   —   —   —   0.03  
Other consumer —   —   —   —   —   —   —   0.03  
Total consumer 20   —   1   4   25   2   52   0.19  
Total loans and leases
$ 651   $ 154   $ 17   $ 150   $ 129   $ 34   $ 1,135   0.77   %

(1) Term extensions include modifications which extended the maturity date or amortization period, and modifications that deferred lump-sum principal payments to a later date.
(2) Consists of $ 26 million of commercial and industrial loans and $ 2 million of residential mortgage loans modified with a payment delay, and interest rate reduction, as well as $ 6 million of commercial and industrial loans modified with a term extension, payment delay, and interest rate reduction.

Amortized Cost of Loans Modified during the year ended December 31, 2024

dollars in millions Term Extension (1)
Payment Delay Interest Rate Reduction Term Extension (1) and Interest Rate Reduction
Term Extension (1) and Payment Delay
Other Combinations (2)
Total Percent of Total Loan Class
Commercial
Commercial and industrial $ 143   $ 97   $ 30   $ 14   $ 2   $ —   $ 286   0.70   %

Owner occupied commercial mortgage 37   10   4   1   2   —   54   0.32  
Investor dependent 7   64   —   —   27   1   99   3.07  
Commercial real estate 195   8   —   9   26   —   238   1.04  
Total commercial 382   179   34   24   57   1   677   0.60  
Consumer
Residential mortgage 10   —   2   2   —   —   14   0.06  
Revolving mortgage 9   —   —   1   —   —   10   0.38  
Auto —   —   —   —   —   —   —   0.01  
Other consumer —   —   —   —   —   —   —   0.03  
Total consumer 19   —   2   3   —   —   24   0.09  
Total loans and leases $ 401   $ 179   $ 36   $ 27   $ 57   $ 1   $ 701   0.50   %
(1) Term extensions include modifications which extended the maturity date or amortization period, and modifications that deferred lump-sum principal payments to a later date.
(2) Consists of $ 1 million of investor dependent loans modified with a term extension, interest rate reduction, and payment delay.

131

Amortized Cost of Loans Modified during the year ended December 31, 2023

dollars in millions Term Extension (1)
Payment Delay Interest Rate Reduction Term Extension (1) and Interest Rate Reduction
Term Extension (1) and Payment Delay
Other Combinations (2)
Total Percent of Total Loan Class
Commercial
Commercial and industrial $ 178   $ 2   $ —   $ 5   $ 7   $ —   $ 192   0.45   %

Owner occupied commercial mortgage 16   —   2   —   —   —   18   0.11  
Investor dependent 11   45   —   —   —   6   62   1.44  
Commercial real estate 262   8   —   40   —   —   310   1.54  
Total commercial 467   55   2   45   7   6   582   0.55  
Consumer
Residential mortgage 8   —   —   3   —   3   14   0.06  
Revolving mortgage 2   —   —   1   —   —   3   0.12  
Auto —   —   —   —   —   —   —   0.01  
Other consumer —   —   —   —   —   —   —   0.02  
Total consumer 10   —   —   4   —   3   17   0.06  
Total loans and leases $ 477   $ 55   $ 2   $ 49   $ 7   $ 9   $ 599   0.45   %

(1) Term extensions include modifications which extended the maturity date or amortization period, and modifications that deferred lump-sum principal payments to a later date.
(2) Consists of $ 6 million of Investor dependent loans modified with a term extension, interest rate reduction, and payment delay as well as $ 3 million of Residential mortgages modified with a payment delay and interest rate reduction.

Financial Effects of Loan Modifications made during the year ended December 31, 2025

Weighted Average Term Extension (in Months) Weighted Average Interest Rate Reduction Weighted Average Payment Delay (in Months)
Commercial
Commercial and industrial 13  0.72   % 11 

Owner occupied commercial mortgage 10  1.88   3 
Investor dependent 10  —   7 
Commercial real estate 16  0.56   10 
Total commercial 14  0.72   9 
Consumer
Residential mortgage 16  2.75   6 
Revolving mortgage 24  4.20   5 
Auto 20  0.31   — 
Other consumer 60  9.72   — 
Total consumer 17  3.26   6 
Total loans and leases
14  0.81   % 9 

Financial Effects of Loan Modifications made during the year ended December 31, 2024

Weighted Average Term Extension (in Months) Weighted Average Interest Rate Reduction Weighted Average Payment Delay (in Months)
Commercial
Commercial and industrial 19  0.79   % 11 

Owner occupied commercial mortgage 30  1.42   7 
Investor dependent 11  2.75   8 
Commercial real estate 20  0.78   39 
Total commercial 20  0.86   13 
Consumer
Residential mortgage 71  1.89   11 
Revolving mortgage 37  4.27   — 
Auto 31  0.53   — 
Other consumer 60  9.66   — 
Total consumer 56  2.73   11 
Total loans and leases
21  1.00   % 13 

132

Financial Effects of Loan Modifications made during the year ended December 31, 2023

Weighted Average Term Extension (in Months) Weighted Average Interest Rate Reduction Weighted Average Payment Delay (in Months)
Commercial
Commercial and industrial 13  2.04   % 6 

Owner occupied commercial mortgage 17  3.52   — 
Investor dependent 9  1.00   5 
Commercial real estate 12  3.00   7 
Total commercial 12  2.71   6 
Consumer
Residential mortgage 79  4.13   6 
Revolving mortgage 59  2.81   — 
Auto 27  0.69   — 
Other consumer 53  9.42   — 
Total consumer 74  4.08   6 
Total loans and leases
14  2.89   % 6 

Note: The financial effects of loan modifications for certain loan classes reported in the tables above were not reported in the preceding tables as the total amortized cost of loans modified during the period for such loan classes rounded to less than $ 1  million.

Borrowers experiencing financial difficulties are typically identified in our credit risk management process and are consequently addressed in our methodology to estimate the ALLL, which incorporates delinquencies, PDs, and LGDs. Therefore, a change to the ALLL is generally not recorded upon modification. An assessment of whether a borrower is experiencing financial difficulty is reassessed or performed on the date of a modification. Upon BancShares’ determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is charged off.

At December 31, 2025, there were $ 166  million of loans modified in the year ended December 31, 2025, which defaulted subsequent to modification. At December 31, 2024 there were $ 62  million of loans modified in the year ended December 31, 2024, which defaulted subsequent to modification.

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The following tables present the amortized cost and performance of loans to borrowers experiencing financial difficulties for which the terms of the loan were modified during the referenced periods. The period of delinquency is based on the number of days the scheduled payment is contractually past due.

Modified Loans Payment Status (year ended December 31, 2025)

dollars in millions Current 30–59 Days Past Due 60–89 Days Past Due 90 Days or Greater Past Due Total
Commercial
Commercial and industrial $ 551   $ 15   $ 1   $ 30   $ 597  
Capital call lines —   —   —   —   —  
Owner occupied commercial mortgage 59   2   3   2   66  
Investor dependent 60   17   —   —   77  
Commercial real estate 246   17   —   80   343  
Total commercial 916   51   4   112   1,083  
Consumer
Residential mortgage 30   3   6   7   46  
Revolving mortgage 6   —   —   —   6  
Auto —   —   —   —   —  
Other consumer —   —   —   —   —  
Total consumer 36   3   6   7   52  
Total loans and leases
$ 952   $ 54   $ 10   $ 119   $ 1,135  

Modified Loans Payment Status (year ended December 31, 2024)

dollars in millions Current 30–59 Days Past Due 60–89 Days Past Due 90 Days or Greater Past Due Total
Commercial
Commercial and industrial $ 252   $ 1   $ 1   $ 33   $ 287  
Capital call lines —   —   —   —   —  
Owner occupied commercial mortgage 51   2   —   —   53  
Investor dependent 87   11   —   —   98  
Commercial real estate 233   6   —   —   239  
Total commercial 623   20   1   33   677  
Consumer
Residential mortgage 8   2   1   3   14  
Revolving mortgage 9   —   —   1   10  
Auto —   —   —   —   —  
Other consumer —   —   —   —   —  
Total consumer 17   2   1   4   24  
Total loans and leases
$ 640   $ 22   $ 2   $ 37   $ 701  

Modified Loans Payment Status (year ended December 31, 2023)

dollars in millions Current 30–59 Days Past Due 60–89 Days Past Due 90 Days or Greater Past Due Total
Commercial
Commercial and industrial $ 147   $ 3   $ 1   $ 41   $ 192  
Capital call lines —   —   —   —   —  
Owner occupied commercial mortgage 17   —   —   —   17  
Investor dependent 58   1   —   4   63  
Commercial real estate 309   —   —   1   310  
Total commercial 531   4   1   46   582  
Consumer
Residential mortgage 12   —   1   1   14  
Revolving mortgage 3   —   —   —   3  
Auto —   —   —   —   —  
Other consumer —   —   —   —   —  
Total consumer 15   —   1   1   17  
Total loans and leases
$ 546   $ 4   $ 2   $ 47   $ 599  

At December 31, 2025, there were $ 60 million of commitments to lend additional funds to debtors experiencing financial difficulty for which the terms of the loan were modified during the year ended December 31, 2025. At December 31, 2024, there were $ 55 million of commitments to lend additional funds to debtors experiencing financial difficulty for which the terms of the loan were modified during the year ended December 31, 2024 .
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Loans Pledged

The following table provides information regarding loans pledged as collateral for borrowing capacity through the FHLB of Atlanta, the FRB and FDIC.

Loans Pledged

dollars in millions December 31, 2025 December 31, 2024
FHLB of Atlanta
Lendable collateral value of pledged non-PCD loans $ 19,225   $ 17,873  
Less: advances —   —  
Less: letters of credit 1,450   1,450  
Available borrowing capacity $ 17,775   $ 16,423  
Pledged non-PCD loans $ 31,713   $ 30,421  

FRB
Lendable collateral value of pledged non-PCD loans $ 12,962   $ 5,475  
Less: advances —   —  
Available borrowing capacity $ 12,962   $ 5,475  
Pledged non-PCD loans $ 13,640   $ 6,309  

FDIC
Lendable collateral value of pledged loans $ 35,705   $ 41,282  
Less: advances —   —  
Less: principal amount of the Purchase Money Note 33,500   35,991  
Available borrowing capacity (1)
$ —   $ 5,291  
Pledged loans (1)
$ 34,465   $ 41,040  

(1) As discussed in Note 2—Business Combinations, the draw period for the Advance Facility Agreement ended on March 27, 2025 so there was no available borrowing capacity at December 31, 2025. Loans remain pledged as collateral for the Purchase Money Note.

As a member of the FHLB, FCB can access financing based on an evaluation of its creditworthiness, statement of financial position, size and eligibility of collateral. FCB may at any time grant a security interest in, sell, convey or otherwise dispose of any of the assets used for collateral, provided that FCB is in compliance with the collateral maintenance requirement immediately following such disposition. There were no outstanding advances from the FHLB at December 31, 2025 or 2024.

Under borrowing arrangements with the FRB, BancShares has access to the FRB Discount Window on a secured basis. There were no outstanding borrowings with the FRB Discount Window at December 31, 2025 or 2024.

In connection with the SVBB Acquisition, FCB and the FDIC entered into financing agreements, including the five-year Purchase Money Note, and the Advance Facility Agreement, which allowed for advances through March 27, 2025. There were no amounts outstanding at the end of the draw period of the facility on March 27, 2025. Subsequently in 2025, we increased our borrowing capacity under agreements with the FRB and FHLB through additional eligible collateral and portfolio growth.

Refer to Note 2—Business Combinations for further discussion of the Purchase Money Note and the Advance Facility agreement and Note 12—Borrowings for the outstanding carrying value of the Purchase Money Note.

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NOTE 6 — ALLOWANCE FOR LOAN AND LEASE LOSSES

The ALLL is reported as a separate line item on the Consolidated Balance Sheets, while the reserve for off-balance sheet credit exposure of $ 260  million and $ 278  million, at December 31, 2025 and December 31, 2024, respectively, is included in other liabilities. The provision or benefit for credit losses related to (i) loans and leases (ii) off-balance sheet credit exposure, and (iii) other receivables or investment securities available for sale, if any, is reported in the Consolidated Statements of Income as provision or benefit for credit losses.

The Initial PCD ALLL for the SVBB Acquisition was established through a PCD Gross-Up and there was no corresponding increase to the provision for credit losses. The PCD Gross-Up is discussed in Note 1—Significant Accounting Policies and Basis of Presentation.

The initial ALLL for Non-PCD loans and leases acquired in the SVBB Acquisition was established through a corresponding increase to the Day 2 Provision for Loan and Lease Losses.

The ALLL activity for loans and leases is summarized in the following table:

Allowance for Loan and Lease Losses

dollars in millions Year Ended December 31, 2025 Year Ended December 31, 2024 Year Ended December 31, 2023
Commercial Consumer Total Commercial Consumer Total Commercial Consumer Total
Balance at beginning of period $ 1,518   $ 158   $ 1,676   $ 1,581   $ 166   $ 1,747   $ 789   $ 133   $ 922  
Initial PCD ALLL —   —   —   —   —   —   217   3   220  
Day 2 Provision for Loan and Lease Losses —   —   —   —   —   —   419   43   462  
Provision (benefit) for loan and lease losses
538   ( 8 ) 530   461   8   469   701   2   703  
Total provision (benefit) for loan and lease losses 538   ( 8 ) 530   461   8   469   1,120   45   1,165  
Charge-offs
( 708 ) ( 33 ) ( 741 ) ( 627 ) ( 30 ) ( 657 ) ( 610 ) ( 28 ) ( 638 )
Recoveries 88   13   101   103   14   117   65   13   78  

Balance at end of period $ 1,436   $ 130   $ 1,566   $ 1,518   $ 158   $ 1,676   $ 1,581   $ 166   $ 1,747  

The decrease of $ 110  million in the ALLL at December 31, 2025 compared to December 31, 2024, mainly driven by loan growth concentrated in capital call lines which have a lower loss rate relative to our other loan portfolios, elimination of the reserves related to Hurricane Helene, a modest shift in our weighting from the downside to baseline economic scenario, improvements in the economic outlook and credit quality, and lower specific reserves for individually evaluated loans. Also, during the year ended December 31, 2025, we updated our PD, LGD, and exposure at default methodology for certain portfolios which contributed to changes in the ALLL compared to prior periods.

The following table presents the components of the provision for credit losses:

Provision for Credit Losses

dollars in millions Year Ended December 31,
2025 2024 2023
Day 2 Provision for Loan and Lease Losses $ —   $ —   $ 462  
Provision for loan and lease losses
530   469   703  
Total provision for loan and lease losses 530   469   1,165  
Day 2 Provision for Off-Balance Sheet Credit Exposure —   —   254  
Benefit for off-balance sheet credit exposure ( 18 ) ( 38 ) ( 44 )
Total (benefit) provision for off-balance sheet credit exposure ( 18 ) ( 38 ) 210  
Provision for other receivables 2   —   —  
Provision for credit losses $ 514   $ 431   $ 1,375  

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NOTE 7 — LEASES

Lessee
BancShares’ leases primarily include administrative offices and bank locations. Substantially all of our operating lease liabilities relate to United States real estate leases. Our finance lease liabilities relate to equipment leases, including the lease of certain ATMs. Our real estate leases have remaining lease terms of up to 32 years. Our lease terms may include options to extend or terminate the lease, and our operating leases have renewal terms that can extend from 1 to 25 years. The options are included in the lease term when it is determined that it is reasonably certain the option will be exercised.

The following table presents supplemental balance sheet information and remaining weighted average lease terms and discount rates:

Supplemental Lease Information

dollars in millions Classification December 31, 2025 December 31, 2024
Lease assets:
Operating lease ROU assets Other assets $ 294   $ 316  
Finance leases Premises and equipment 71   15  
Total lease assets $ 365   $ 331  
Lease liabilities:
Operating leases Other liabilities $ 329   $ 357  
Finance leases Other borrowings 72   15  
Total lease liabilities $ 401   $ 372  
Weighted-average remaining lease terms:
Operating leases 7.2 years 7.4 years
Finance leases 7.7 years 11.7 years
Weighted-average discount rate:
Operating leases 3.10   % 2.94   %
Finance leases 4.20   3.96  

As of December 31, 2025, there were no leases that have not yet commenced that would have a material impact on BancShares’ consolidated financial statements.

The following table presents components of lease cost:

Components of Net Lease Cost

dollars in millions Year Ended December 31,
Classification 2025 2024 2023
Operating lease cost
Occupancy expense $ 72   $ 76   $ 64  

Finance lease ROU asset amortization Equipment expense 9   2   2  
Interest on lease liabilities Interest expense - other borrowings 2   —   —  
Variable lease cost (1)
Occupancy expense 22   28   25  
Sublease income Occupancy expense ( 6 ) ( 6 ) ( 3 )
Net lease cost (1)
$ 99   $ 100   $ 88  

(1) Includes short-term lease cost.

Operating lease cost is recognized as a single lease cost on a straight-line basis over the lease term.

For finance leases, the ROU asset is amortized straight-line over the lease term as equipment expense and interest on the lease liability is recognized separately.

Variable lease cost includes common area maintenance, property taxes, utilities, and other operating expenses related to leased premises recognized in the period in which the expense was incurred. Certain of our lease agreements also include rental payments adjusted periodically for inflation. While lease liabilities are not remeasured because of these changes, these adjustments are treated as variable lease costs and recognized in the period in which the expense is incurred.

Sublease income results from leasing excess building space that BancShares is no longer utilizing under operating leases, which have remaining lease terms of up to 11 years.

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The following table presents supplemental cash flow information related to leases:

Supplemental Cash Flow Information

dollars in millions Year Ended December 31,
2025 2024 2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 77   $ 77   $ 63  
Operating cash flows from finance leases 2   —   —  
Financing cash flows from finance leases 8   2   2  
ROU assets obtained in exchange for new operating lease liabilities 48   28   69  
ROU assets obtained in exchange for new finance lease liabilities 64   8   4  

The following table presents lease liability maturities at December 31, 2025:

Maturity of Lease Liabilities

dollars in millions Operating Leases Finance Leases Total

2026 $ 67   $ 14   $ 81  
2027 62   12   74  
2028 48   12   60  
2029 42   12   54  
2030 35   12   47  
Thereafter 110   23   133  
Total undiscounted lease payments 364   85   449  
Difference between undiscounted cash flows and discounted cash flows 35   13   48  
Lease liabilities, at present value $ 329   $ 72   $ 401  

Lessor
BancShares leases equipment to commercial end-users under operating lease and finance lease arrangements. The majority of operating lease equipment is long-lived rail equipment, which is typically leased several times over its life. We also lease technology and office equipment, and large and small industrial, medical, and transportation equipment under both operating leases and finance leases.

Our Rail operating leases typically do not include purchase options. Many of our finance leases, and other equipment operating leases, offer the lessee the option to purchase the equipment at fair market value or for a nominal fixed purchase option. Many of the leases that do not have a nominal purchase option include renewal provisions resulting in some leases continuing beyond the initial contractual term. Our leases typically do not include early termination options. Continued rent payments are due if leased equipment is not returned at the end of the lease.

The following table includes the net book value of operating lease equipment by equipment type, net of accumulated depreciation of $ 1.18 billion and $ 941 million at December 31, 2025 and December 31, 2024, respectively.

Operating Lease Equipment

dollars in millions December 31, 2025 December 31, 2024
Railcars and locomotives (1)
$ 8,882   $ 8,573  
Other equipment 739   750  
Total (1)
$ 9,621   $ 9,323  
(1) Includes off-lease rail equipment of $ 258 million at December 31, 2025 and $ 219 million at December 31, 2024.

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

Components of Net Investment in Finance Leases

dollars in millions December 31, 2025 December 31, 2024
Lease receivables $ 1,827   $ 1,764  
Unguaranteed residual assets 209   235  
Total net investment in finance leases 2,036   1,999  
Leveraged lease net investment (1)
17   15  
Total (2)
$ 2,053   $ 2,014  

(1) Leveraged leases are reported net of non-recourse debt of $ 1 million at December 31, 2025 and $ 2 million at December 31, 2024. Our leveraged lease arrangements commenced before the ASC 842, Leases, effective date of January 1, 2019, and continue to be reported under the leveraged lease accounting model. ASC 842 eliminated leveraged lease accounting for new leases and for existing leases modified on or after the January 1, 2019.
(2) Included in commercial and industrial in Note 5—Loans and Leases.

The following table presents lease income related to BancShares’ equipment leases:

Lease Income

dollars in millions Year Ended December 31,
2025 2024 2023
Lease income – operating leases $ 1,037   $ 966   $ 895  
Variable lease income – operating leases (1)
59   82   76  
Rental income on operating leases 1,096   1,048   971  
Interest income – sales type and direct financing leases 175   175   171  
Variable lease income included in other noninterest income (2)
58   61   59  
Interest income – leveraged leases 3   4   12  
Total lease income $ 1,332   $ 1,288   $ 1,213  

(1)      Primarily includes per diem railcar operating lease rental income earned on a time or mileage usage basis.
(2) Includes revenue related to insurance coverage on leased equipment and leased equipment property tax reimbursements due from customers.

The following tables present lease payments due on non-cancellable equipment operating leases and lease receivables due on finance leases at December 31, 2025. Excluded from these tables are variable lease payments, including rentals calculated based on asset usage levels, rentals from future renewal and re-leasing activity, and expected sales proceeds from remarketing equipment at lease expiration, all of which are components of lease profitability.

Maturity Analysis of Operating Lease Payments

dollars in millions

2026 $ 864  
2027 721  
2028 547  
2029 364  
2030 216  
Thereafter 349  
Total $ 3,061  

Maturity Analysis of Lease Receivable Payments - Sales Type and Direct Financing Leases

dollars in millions

2026 $ 739  
2027 568  
2028 394  
2029 234  
2030 84  
Thereafter 45  
Total undiscounted lease receivables $ 2,064  
Difference between undiscounted cash flows and discounted cash flows 237  
Lease receivables, at present value $ 1,827  

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NOTE 8 — PREMISES AND EQUIPMENT

Major classifications of premises and equipment at December 31, 2025 and 2024 are summarized as follows:

dollars in millions Useful Life (years) December 31, 2025 December 31, 2024
Land indefinite $ 496   $ 407  
Premises and leasehold improvements 3 - 30
1,808   1,598  
Furniture, equipment and software 2 - 15
2,046   1,629  
Total 4,350   3,634  
Less accumulated depreciation and amortization 1,903   1,628  
Premises and equipment, net $ 2,447   $ 2,006  

Depreciation and amortization expense is included in equipment expense and net occupancy expense in the Consolidated Statements of Income and was $ 314  million, $ 276 million, and $ 225 million for the years ended December 31, 2025, 2024 and 2023, respectively.

For the year ended December 31, 2025, there was $ 6 million of impairment, primarily on software and related projects, recognized in other noninterest expense. For the year ended December 31, 2024, there was $ 22 million of impairment, primarily on software, of which $ 9 million was included in acquisition-related expenses, with the remaining amount included in other non-interest expense.

NOTE 9 — GOODWILL AND CORE DEPOSIT INTANGIBLES

Goodwill
BancShares had goodwill of $ 346 million at December 31, 2025 and 2024. There was no goodwill impairment during the year ended December 31, 2025 or 2024. Goodwill relates to the General Bank reporting segment.

Core Deposit Intangibles
Core deposit intangibles represent the estimated fair value of core deposits and other customer relationships acquired. Core deposit intangibles are being amortized over their estimated useful lives. The following tables summarize the activity for core deposit intangibles:

Core Deposit Intangibles

Year Ended December 31,
dollars in millions 2025 2024
Balance at beginning of period, net of accumulated amortization $ 249   $ 312  

Less: amortization for the period 54   63  
Balance at end of period, net of accumulated amortization $ 195   $ 249  

The following table summarizes the accumulated amortization balance for core deposit intangibles:

Core Deposit Intangible Accumulated Amortization

dollars in millions December 31, 2025 December 31, 2024
Gross balance $ 501   $ 501  
Less: accumulated amortization 306   252  
Balance, net of accumulated amortization $ 195   $ 249  

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The following table summarizes the expected amortization expense as of December 31, 2025 in subsequent periods for core deposit intangibles:

Core Deposit Intangible Expected Amortization

dollars in millions

2026 46  
2027 39  
2028 34  
2029 30  
2030 28  
Thereafter 18  
Balance, net of accumulated amortization $ 195  

NOTE 10 — VARIABLE INTEREST ENTITIES

Unconsolidated VIEs
Unconsolidated VIEs include limited partnership interests and joint ventures.  The table below provides a summary of the assets and liabilities included on the Consolidated Balance Sheets associated with unconsolidated VIEs. The maximum exposure to loss for unconsolidated VIEs is generally limited to the sum of the unconsolidated VIE investment balance and off-balance sheet funding commitments. The maximum exposure to loss represents potential losses that would be incurred under hypothetical circumstances, such that the value of BancShares’ interests and any associated collateral declines to zero and assuming no recovery. BancShares believes the possibility is remote under this hypothetical scenario; accordingly, this disclosure is not an indication of expected loss.

Refer to Note 22—Commitments and Contingencies for off-balance sheet commitments to fund other tax credit investments and other unconsolidated investments.

Unconsolidated VIEs Carrying Value and Liabilities for Funding Commitments

dollars in millions December 31, 2025 December 31, 2024
Affordable housing tax credit investments $ 2,761   $ 2,357  

Other tax credit investments —   2  
Total tax credit equity investments $ 2,761   $ 2,359  
Other unconsolidated investments 194   157  
Total unconsolidated VIE investments (1)
$ 2,955   $ 2,516  
Liabilities for commitments to fund tax credit investments (2)
$ 1,321   $ 1,214  

(1) Included in other assets.
(2)     Represents commitments to invest in qualified affordable housing investments. These commitments are payable on demand and included in other liabilities.

The table below summarizes the tax benefits, recognized in income tax expense on the Consolidated Statements of Income, for the affordable housing tax credit investments accounted for under the PAM.

Tax Benefits - PAM

dollars in millions Year Ended December 31,
2025 2024 2023
Amortization of affordable housing tax credit investments (1)
$ 264   $ 237   $ 169  
Tax credits from affordable housing tax credit investments ( 263 ) ( 231 ) ( 157 )

Other tax benefits from affordable housing tax credit investments ( 73 ) ( 56 ) ( 29 )
Net income tax benefit from affordable housing tax credit investments (2)
$ ( 72 ) $ ( 50 ) $ ( 17 )

(1) Amortization is included in depreciation, amortization, and accretion, net, in cash flows from operating activities on the Consolidated Statements of Cash Flows.
(2) The net income tax benefit is included in cash flows from operating activities on the Consolidated Statements of Cash Flows. Changes in income taxes payable are reported in net change in other liabilities in cash flows from operating activities on the Consolidated Statements of Cash Flows.

Other Tax Credit Investments
During 2025, we received approximately $ 190 million of tax credits related to renewable energy tax credit investments accounted for under the HLBVM and Deferral Method.

Refer to Note 1—Significant Accounting Policies and Basis of Presentation for further discussion of the PAM, HLBVM, and Deferral Method.
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NOTE 11 — DEPOSITS

The following table provides detail on deposit types:

Deposit Types

dollars in millions December 31, 2025 December 31, 2024
Noninterest-bearing $ 40,653   $ 38,633  
Checking with interest 24,377   25,343  
Money market 38,687   35,722  
Savings 46,625   42,278  
Time 11,236   13,253  
Total deposits $ 161,578   $ 155,229  

At December 31, 2025, the scheduled maturities of time deposits were:

Deposit Maturities

dollars in millions
Twelve months ended December 31,
2026 $ 11,002  
2027 159  
2028 31  
2029 19  
2030 25  
Thereafter —  
Total time deposits $ 11,236  

Time deposits with a denomination of $250,000 or more were $ 3.26 billion and $ 3.80 billion at December 31, 2025 and December 31, 2024, respectively.

NOTE 12 — BORROWINGS

Short-term Borrowings
Securities Sold under Agreements to Repurchase
BancShares held $ 224 million and $ 367 million at December 31, 2025 and December 31, 2024, respectively, of securities sold under agreements to repurchase that have overnight contractual maturities and are collateralized by government agency securities. The weighted average interest rate for securities sold under agreements to repurchase was 0.41 % and 0.59 % at December 31, 2025 and 2024, respectively.

BancShares utilizes securities sold under agreements to repurchase to facilitate the needs for collateralization of commercial customers and secure wholesale funding needs. Repurchase agreements are transactions whereby BancShares offers to sell to a counterparty an undivided interest in an eligible security at an agreed upon purchase price, and which obligates BancShares to repurchase the security at an agreed upon date, repurchase price and interest rate. These agreements are recorded at the amount of cash received in connection with the transactions and are reflected as securities sold under customer repurchase agreements.

BancShares monitors collateral levels on a continuous basis and maintains records of each transaction specifically describing the applicable security and the counterparty’s fractional interest in that security, and segregates the security from general assets in accordance with regulations governing custodial holdings of securities. The primary risk with repurchase agreements is market risk associated with the investments securing the transactions, as additional collateral may be required based on fair value changes of the underlying investments. Securities pledged as collateral under repurchase agreements are maintained with safekeeping agents. The carrying value of investment securities pledged as collateral under repurchase agreements was $ 230 million and $ 435 million at December 31, 2025 and 2024, respectively.

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Long-term Borrowings
On September 5, 2025, the Parent Company issued and sold $ 600 million aggregate principal amount of its 5.600 % Fixed Rate Reset Subordinated Notes due in 2035 in a public offering. On March 12, 2025, the Parent Company issued and sold $ 500 million aggregate principal amount of its 5.231 % Fixed-to-Floating Rate Senior Notes due in 2031 and $ 750 million aggregate principal amount of its 6.254 % Fixed-to-Fixed Rate Subordinated Notes due in 2040 in a public offering.

In December 2025, FCB made a partial prepayment of $ 2.49 billion on the outstanding Purchase Money Note and recognized a loss on extinguishment of debt of $ 9 million. On June 15, 2025, the Parent Company redeemed all $ 350 million aggregate principal amount of its 3.375 % Fixed-to-Floating Rate Subordinated Notes due in 2030.

The following table presents long-term borrowings, net of the respective unamortized purchase accounting adjustments and issuance costs:

Long-term Borrowings

dollars in millions Maturity December 31, 2025 December 31, 2024
Parent Company:
Senior:
Fixed-to-Floating Senior Notes at 5.231 % (1)
March 2031 $ 497   $ —  
Subordinated:
Fixed-to-Floating Subordinated Notes at 3.375 % (2)
March 2030 —   350  
Fixed Rate Reset Subordinated Notes at 5.600 % (3)
September 2035 597   —  
Fixed-to-Fixed Subordinated Notes at 6.254 % (4)
March 2040 745   —  
Subsidiaries:
Senior:
Fixed Senior Unsecured Notes at 6.000 %
April 2036 58   58  
Subordinated:
Fixed Subordinated Notes at 6.125 %
March 2028 430   445  
Secured:
Purchase Money Note to FDIC fixed at 3.500 % (5)
March 2028 33,385   35,816  
Capital lease obligations Maturities through May 2057 72   15  
Total long-term borrowings $ 35,784   $ 36,684  

(1) The fixed rate period will end March 12, 2030, and the notes will thereafter bear a floating interest rate equal to a benchmark rate based on the Compounded Secured Overnight Financing Rate (“SOFR”) Index Rate plus 141 basis points (“bps”) per annum until the maturity date (or date of earlier redemption).
(2) The fixed rate period ended on March 15, 2025, and the notes converted to a floating interest rate equal to Three-Month Term SOFR plus 246.5 bps per annum. The notes included a callable feature and were redeemed on June 15, 2025.
(3) The interest rate will reset on September 5, 2030, and the notes will thereafter bear a fixed interest rate equal to the Five-year U.S. Treasury Rate as of the day falling two business days prior to the notes reset date plus 185 bps per annum until the maturity date (or date of earlier redemption).
(4) The interest rate will reset on March 12, 2035, and the notes will thereafter bear a fixed interest rate equal to the Five-year U.S. Treasury Rate as of the day falling two business days prior to the notes reset date plus 197 bps per annum until the maturity date (or date of earlier redemption).
(5)     Refer to Note 2—Business Combinations and Note 5—Loans and Leases.

Contractual maturities of long-term borrowings (borrowings with original maturities of more than one year) at December 31, 2025 are included in the following table.

Long-term Borrowings Maturities (1)

dollars in millions
Year Ended December 31,
2026 $ ( 37 )
2027 ( 39 )
2028 33,889  
2029 ( 1 )
2030 ( 1 )
Thereafter 1,973  
Total long-term borrowings $ 35,784  

(1)     Amounts in this table include amortization of purchase accounting adjustments and deferred issuance cost based on the scheduled periods of recognition.
Pledged Assets
Refer to the “Loans Pledged” section in Note 5—Loans and Leases for information on loans pledged as collateral to secure borrowings. Additionally, interest-earning deposits at banks included $ 212  million and $ 211  million at December 31, 2025 and 2024, respectively, that were required minimum deposits under the Purchase Money Note.
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NOTE 13 — DERIVATIVE FINANCIAL INSTRUMENTS

Our derivatives designated as hedging instruments include interest rate swap contracts utilized to manage our interest rate exposure for items on our Consolidated Balance Sheets. This includes floating-rate loan portfolio cash flow hedges and fair value hedges of our fixed-rate borrowings and deposits.

Our derivatives not designated as hedging instruments mainly include interest rate and foreign exchange contracts that our customers utilized for their risk management needs. We typically manage our exposure to these customer derivatives by entering into offsetting or “back-to-back” interest rate and foreign exchange contracts with third-party dealers.

Derivative instruments that are cleared through certain central counterparty clearing houses are settled-to-market and reported net of collateral positions.

Refer to Note 1—Significant Accounting Policies and Basis of Presentation for accounting policies for derivatives.

The following table presents notional amounts and fair values of derivative financial instruments:

Notional Amount and Fair Value of Derivative Financial Instruments

dollars in millions December 31, 2025 December 31, 2024
Notional Amount Asset Fair Value Liability Fair Value Notional Amount Asset Fair Value Liability Fair Value
Derivatives designated as hedging instruments (Qualifying hedges)
Fair Value Hedges
Interest rate contracts hedging time deposits $ —   $ —   $ —   $ 334   $ —   $ —  
Interest rate contracts hedging long-term borrowings
—   —   —   750   —   —  
Total fair value hedges (1) (2)
—   —   —   1,084   —   —  
Cash Flow Hedges
Interest rate contracts hedging loans (1) (2)
4,000   —   —   3,500   1   —  
Total derivatives designated as hedging instruments $ 4,000   $ —   $ —   $ 4,584   $ 1   $ —  
Derivatives not designated as hedging instruments (Non-qualifying hedges)
Interest rate contracts (1) (2)
$ 28,741   $ 385   $ ( 381 ) $ 26,235   $ 491   $ ( 516 )
Foreign exchange contracts (3)
8,912   122   ( 113 ) 7,843   152   ( 108 )
Other contracts (4)
1,485   27   —   1,316   16   ( 1 )
Total derivatives not designated as hedging instruments $ 39,138   $ 534   $ ( 494 ) $ 35,394   $ 659   $ ( 625 )
Gross derivatives fair values presented in the Consolidated Balance Sheets $ 534   $ ( 494 ) $ 660   $ ( 625 )
Less: gross amount offset in the Consolidated Balance Sheets —   —   —   —  
Net amount included in other assets and other liabilities in the Consolidated Balance Sheets $ 534   $ ( 494 ) $ 660   $ ( 625 )

(1)     Fair value balances include accrued interest.
(2)     BancShares accounts for swap contracts cleared by the Chicago Mercantile Exchange and LCH Clearnet as “settled-to-market.” As a result, the derivative asset and liability fair values in the table above are presented net of the variation margin payments. Refer to the table below for more information.
(3)     The foreign exchange contracts exclude foreign exchange spot contracts. The notional and net fair value amounts of these contracts were $ 252 million and $ 0 million, respectively, as of December 31, 2025, and $ 177 million and $ 0 million, respectively, as of December 31, 2024.
(4)     Other derivative contracts not designated as hedging instruments include risk participation agreements and equity warrants.

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The following table presents the impact of variation margin netting (form of collateral payment when the underlying fair value changes) on derivative assets and liabilities:

Variation Margin Payments

dollars in millions December 31, 2025 December 31, 2024
Asset Fair Value Liability Fair Value Asset Fair Value Liability Fair Value
Derivatives designated as hedging instruments (Qualifying hedges)
Gross fair value $ 19   $ —   $ 15   $ —  
Cleared trades, variation margin netting ( 19 ) —   ( 14 ) —  
Total derivatives designated as hedging instruments $ —   $ —   $ 1   $ —  
Derivatives not designated as hedging instruments (Non-qualifying hedges)
Gross fair value $ 596   $ ( 529 ) $ 742   $ ( 647 )
Cleared trades, variation margin netting ( 62 ) 35   ( 83 ) 22  
Total derivatives not designated as hedging instruments $ 534   $ ( 494 ) $ 659   $ ( 625 )
Gross derivatives fair values presented in the Consolidated Balance Sheets $ 534   $ ( 494 ) $ 660   $ ( 625 )
Amounts subject to master netting agreements (1)
( 118 ) 118   ( 48 ) 48  
Cash collateral pledged (received) subject to master netting agreements (2)
( 204 ) 62   ( 539 ) 2  
Total net derivative fair value $ 212   $ ( 314 ) $ 73   $ ( 575 )

(1)     BancShares’ derivative transactions are governed by International Swaps and Derivatives Association (“ISDA”) agreements that allow for net settlements of certain payments as well as offsetting of all contracts with a given counterparty in the event of bankruptcy or default of one of the two parties to the transaction. BancShares believes its ISDA agreements meet the definition of a master netting arrangement or similar agreement for purposes of the above disclosure.
(2)     In conjunction with the ISDA agreements described above, BancShares has entered into collateral arrangements with its counterparties, which provide for the exchange of cash depending on the change in the market valuation of the derivative contracts outstanding. Such collateral is available to be applied in settlement of the net balances upon an event of default of one of the counterparties. Collateral pledged or received is included in other assets or deposits, respectively.

Fair Value Hedges
The following table presents the impact of fair value hedges recorded in interest expense on the Consolidated Statements of Income:

Recognized Gains (Losses) on Fair Value Hedges

dollars in millions Year Ended December 31,
Interest Expense 2025 2024 2023

(Loss) gain on hedging instruments - borrowings Borrowings $ —   $ ( 4 ) $ 4  
Gain (loss) on hedged item - time deposits Deposits 1   ( 1 ) —  
Gain (loss) on hedged item - borrowings Borrowings 2   3   ( 5 )

Net gain (loss) on fair value hedges Total interest expense $ 3   $ ( 2 ) $ ( 1 )

The following table presents the carrying value of hedged items and associated cumulative hedging adjustment related to fair value hedges as of December 31, 2024. There were no fair value hedges outstanding as of December 31, 2025.

Carrying Value of Hedged Items

dollars in millions Cumulative Fair Value Hedging Adjustment Included in the Carrying Value of Hedged Items
Carrying Value of Hedged Items Currently Designated No Longer Designated

December 31, 2024
Long-term borrowings $ 795   $ 2   $ —  
Deposits 335   1   —  

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Cash Flow Hedges
The following table presents the pretax unrealized gain on hedging instruments in cash flow hedges, which are reported in other comprehensive income, and the pretax amount reclassified from AOCI to earnings:

Unrealized Gain on Cash Flow Hedges

dollars in millions Year Ended December 31,
2025 2024 2023
Other comprehensive income on cash flow hedge derivatives before reclassifications $ 12   $ 11   $ —  
Amounts reclassified from AOCI to earnings ( 4 ) —   —  
Other comprehensive income on cash flow hedge derivatives $ 8   $ 11   $ —  

The following table presents other information for cash flow hedges:

Other Information for Cash Flow Hedges

dollars in millions December 31, 2025 December 31, 2024
Unrealized gain on cash flow hedge derivatives reported in AOCI, net of income taxes $ 14   $ 8  

Estimate to be reclassified from AOCI to earnings during the next 12 months, net of income taxes (1)
$ 9   $ 7  
Maximum number of months over which forecasted cash flows are hedged (2)
27 24
(1) Reclassified amounts could differ from amounts actually recognized due to factors such as changes in interest rates, hedge de-designations and the addition of other hedges.
(2) Maximum number of months is based on the latest maturity date of cash flow hedges outstanding at December 31, 2025 and 2024, respectively.

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

Gains (Losses) on Non-Qualifying Hedges

dollars in millions Year Ended December 31,
Amounts Recognized 2025 2024 2023
Interest rate contracts Other noninterest income $ 14   $ 22   $ 32  
Foreign currency forward contracts (1)
Other noninterest income ( 50 ) 59   ( 8 )
Other contracts Other noninterest income 7   2   1  
Total non-qualifying hedges - income statement impact $ ( 29 ) $ 83   $ 25  

(1) This is primarily related to economic hedges of foreign currency risks arising from loans and other assets denominated in foreign currency. There is an offsetting impact within noninterest income for the foreign exchange revaluation of the associated assets denominated in foreign currency.

NOTE 14 — FAIR VALUE

Fair Value Hierarchy
BancShares measures certain financial assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP also establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three levels.

Assets and liabilities are recorded at fair value according to a fair value hierarchy comprised of three levels. The levels are based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. The level within the fair value hierarchy for an asset or liability is based on the lowest level of input significant to the fair value measurement with Level 1 inputs considered highest and Level 3 inputs considered lowest. A brief description of each input level follows:
• Level 1 inputs are quoted prices in active markets for identical assets and liabilities.
• Level 2 inputs are quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and inputs other than quoted prices observable for the assets or liabilities and market corroborated inputs.
• Level 3 inputs are unobservable inputs for the asset or liability. These unobservable inputs and assumptions reflect the estimates market participants would use in pricing the asset or liability.

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Assets and Liabilities Measured at Fair Value - Recurring Basis
The following table presents assets and liabilities measured at fair value on a recurring basis:

Assets and Liabilities Measured at Fair Value - Recurring Basis

dollars in millions December 31, 2025
Total Level 1 Level 2 Level 3
Assets
Investment securities available for sale
U.S. Treasury $ 10,673   $ —   $ 10,673   $ —  
Government agency 43   —   43   —  
Residential mortgage-backed securities 17,623   —   17,623   —  
Commercial mortgage-backed securities 3,299   —   3,299   —  
Corporate bonds 140   —   117   23  
Municipal bonds 12   —   12   —  

Total investment securities available for sale $ 31,790   $ —   $ 31,767   $ 23  
Marketable equity securities 127   50   77   —  
Loans held for sale 87   —   87   —  
Loans 22   —   22   —  
Derivative assets (1)

Total qualifying hedge assets $ —   $ —   $ —   $ —  
Interest rate contracts — non-qualifying hedges $ 385   $ —   $ 383   $ 2  
Foreign exchange contracts — non-qualifying hedges 122   —   122   —  
Other derivative contracts — non-qualifying hedges 27   —   —   27  
Total non-qualifying hedge assets $ 534   $ —   $ 505   $ 29  
Total derivative assets $ 534   $ —   $ 505   $ 29  
Liabilities
Derivative liabilities (1)

Interest rate contracts — qualifying hedges $ —   $ —   $ —   $ —  

Interest rate contracts — non-qualifying hedges $ 381   $ —   $ 381   $ —  
Foreign exchange contracts — non-qualifying hedges 113   —   113   —  
Other derivative contracts — non-qualifying hedges —   —   —   —  
Total non-qualifying hedge liabilities $ 494   $ —   $ 494   $ —  
Total derivative liabilities $ 494   $ —   $ 494   $ —  
(1) Derivative fair values include accrued interest.

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dollars in millions December 31, 2024
Total Level 1 Level 2 Level 3
Assets
Investment securities available for sale
U.S. Treasury $ 13,903   $ —   $ 13,903   $ —  
Government agency 77   —   77   —  
Residential mortgage-backed securities 15,620   —   15,620   —  
Commercial mortgage-backed securities 3,666   —   3,666   —  
Corporate bonds 467   —   299   168  
Municipal bonds 17   —   17   —  

Total investment securities available for sale $ 33,750   $ —   $ 33,582   $ 168  
Marketable equity securities 101   48   53   —  
Loans held for sale 55   —   55   —  
Derivative assets (1)

Total qualifying hedge assets $ 1   $ —   $ 1   $ —  
Interest rate contracts — non-qualifying hedges $ 491   $ —   $ 490   $ 1  
Foreign exchange contracts — non-qualifying hedges 152   —   152   —  
Other derivative contracts — non-qualifying hedges 16   —   —   16  
Total non-qualifying hedge assets $ 659   $ —   $ 642   $ 17  
Total derivative assets $ 660   $ —   $ 643   $ 17  
Liabilities
Derivative liabilities (1)

Interest rate contracts — qualifying hedges $ —   $ —   $ —   $ —  

Interest rate contracts — non-qualifying hedges $ 516   $ —   $ 516   $ —  
Foreign exchange contracts — non-qualifying hedges 108   —   108   —  
Other derivative contracts — non-qualifying hedges 1   —   —   1  
Total non-qualifying hedge liabilities $ 625   $ —   $ 624   $ 1  
Total derivative liabilities $ 625   $ —   $ 624   $ 1  

(1)      Derivative fair values include accrued interest.

The methods and assumptions used to estimate the fair value of each class of financial instruments measured at fair value on a recurring basis are as follows:

Investment securities available for sale . The fair value of U.S. Treasury, government agency, mortgage-backed securities, municipal bonds, and a portion of the corporate bonds are generally estimated using a third-party pricing service. To obtain an understanding of the processes and methodologies used, management reviews correspondence from the third-party pricing service. Management also performs a price variance analysis process to corroborate the reasonableness of prices. The third-party provider evaluates securities based on comparable investments with trades and market data and will utilize pricing models which use a variety of inputs, such as benchmark yields, reported trades, issuer spreads, benchmark securities, bids and offers as needed. These securities are generally classified as Level 2. The remaining corporate bonds held are generally measured at fair value based on indicative bids from broker-dealers using inputs that are not directly observable. These securities are classified as Level 3.

Marketable equity securities. Equity securities are measured at fair value using observable closing prices. Equity securities are classified as Level 1 if they are traded in an active market and as Level 2 if the observable closing price is from a less than active market.

Loans and Loans held for sale. Certain residential real estate loans originated for sale to investors are carried at fair value based on quoted market prices for similar types of loans, which are considered Level 2 inputs. In instances when loans are not sold and subsequently transferred to portfolio, accounting at fair value is continued.

Derivative Assets and Liabilities. Derivatives were valued using models that incorporate inputs depending on the type of derivative. Other than the fair value of equity warrants and credit derivatives, which were estimated using Level 3 inputs, most derivative instruments were valued using Level 2 inputs based on observed pricing for similar assets and liabilities and model-based valuation techniques for which all significant assumptions are observable in the market. Refer to Note 13—Derivative Financial Instruments for notional amounts and fair values.

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The following tables summarize information about significant unobservable inputs related to BancShares’ categories of Level 3 financial assets and liabilities measured on a recurring basis:

Quantitative Information About Level 3 Fair Value Measurements - Recurring Basis

dollars in millions
Financial Instrument Estimated Fair Value Valuation Technique Significant Unobservable Inputs
December 31, 2025 December 31, 2024
Assets
Corporate bonds $ 23   $ 168   Indicative bid provided by broker Multiple factors, including but not limited to, current operations, financial condition, cash flows, and recently executed financing transactions related to the issuer.
Interest rate & other derivative — non-qualifying hedges $ 29   $ 17   Internal valuation model Multiple factors, including but not limited to, private company valuation, illiquidity discount, and estimated life of the instrument.
Liabilities
Interest rate & other derivative — non-qualifying hedges $ —   $ 1   Internal valuation model Not material

The following table summarizes the changes in estimated fair value for all assets and liabilities measured at estimated fair value on a recurring basis using significant unobservable inputs (Level 3):

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

dollars in millions Year Ended December 31, 2025 Year Ended December 31, 2024
Corporate Bonds Other Derivative Assets — Non-Qualifying Other Derivative Liabilities — Non-Qualifying Corporate Bonds Other Derivative Assets — Non-Qualifying Other Derivative Liabilities — Non-Qualifying
Beginning balance $ 168   $ 17   $ 1   $ 157   $ 7   $ 1  
Purchases —   8   —   —   9   —  
Changes in fair value included in earnings —   5   ( 1 ) ( 1 ) 2   —  
Changes in fair value included in comprehensive income 9   —   —   12   —   —  

Transfers out ( 24 ) —   —   —   —   —  
Maturity and settlements ( 130 ) ( 1 ) —   —   ( 1 ) —  
Ending balance $ 23   $ 29   $ —   $ 168   $ 17   $ 1  

Fair Value Option
The following table summarizes the difference between the aggregate fair value and the UPB for residential mortgage loans originated for sale measured at fair value:

Aggregate Fair Value and UPB - Residential Mortgage Loans

dollars in millions December 31, 2025 December 31, 2024
Fair Value Unpaid Principal Balance Difference Fair Value Unpaid Principal Balance Difference
Originated loans held for sale (1)
$ 109   $ 109   $ —   $ 55   $ 54   $ 1  

(1) Originated loans held for sale include loans held for sale and loans originated for sale but transferred to portfolio and held for investment.

BancShares has elected the fair value option for residential mortgage loans originated for sale. This election reduces certain timing differences in the Consolidated Statements of Income and better aligns with the management of the portfolio from a business perspective. The changes in fair value that were recorded as a component of other noninterest income were insignificant for the years ended December 31, 2025 and 2024. Interest earned on originated loans held for sale is recorded within interest income on loans and leases in the Consolidated Statements of Income.

No originated loans held for sale were 90 or more days past due or on nonaccrual status as of December 31, 2025 or 2024.

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Assets Measured at Estimated Fair Value on a Non-recurring Basis
Certain assets or liabilities are required to be measured at estimated fair value on a non-recurring basis subsequent to initial recognition. Generally, these adjustments are the result of LOCOM or other impairment accounting. The following table presents carrying value of assets measured at estimated fair value on a non-recurring basis for which gains and losses have been recorded in the periods. The gains and losses reflect amounts recorded for the respective periods, regardless of whether the asset is still held at period end.

Assets Measured at Fair Value - Non-recurring Basis

dollars in millions Fair Value Measurements
Total Level 1 Level 2 Level 3 Total Gains (Losses)
December 31, 2025
Assets held for sale - loans $ 5   $ —   $ —   $ 5   $ ( 7 )
Loans - collateral dependent loans 186   —   —   186   ( 157 )
Other real estate owned 104   —   —   104   —  

Total $ 295   $ —   $ —   $ 295   $ ( 164 )
December 31, 2024
Assets held for sale - loans $ 13   $ —   $ —   $ 13   $ ( 7 )
Loans - collateral dependent loans 388   —   —   388   ( 171 )
Other real estate owned 16   —   —   16   6  

Total $ 417   $ —   $ —   $ 417   $ ( 172 )

Certain other assets are adjusted to their fair value on a non-recurring basis, including certain loans, OREO, and goodwill, which are periodically tested for impairment. Most loans held for investment, deposits, and borrowings are not reported at fair value.

The methods and assumptions used to estimate the fair value of each class of financial instruments measured at fair value on a non-recurring basis are as follows:

Assets held for sale - loans. Loans held for investment subsequently transferred to held for sale are carried at the LOCOM. When available, the fair values for the transferred loans are based on quoted prices from the purchase commitments for the individual loans being transferred and are considered Level 1 inputs in instances where there is an active market, or Level 2 when there is no active market. The fair value of Level 2 assets may also be estimated based on prices of recent trades of similar assets. For other loans held for sale, the fair value of Level 3 assets was primarily measured under the income approach using the discounted cash flow model based on Level 3 inputs including discount rate or the price of committed trades. Gains and losses are recorded in noninterest income.

Loans - collateral dependent loans. The population of Level 3 loans measured at fair value that are experiencing financial difficulty and measured on a non-recurring basis includes collateral-dependent loans evaluated individually. Collateral values are determined using appraisals or other third-party value estimates of the subject property discounted based on estimated selling costs, and adjustments for other external factors that may impact the marketability of the collateral. Gains and losses generally reflect the required net provision and charge-offs specific to the loans included in the population for the respective periods and are recorded in the provision for credit losses.

Other real estate owned. OREO is carried at LOCOM. OREO asset valuations are determined by using appraisals or other third-party value estimates of the subject property with discounts, generally between 7 % and 10 %, applied for estimated selling costs and other external factors that may impact the marketability of the property. At December 31, 2025 and 2024, the weighted average discount applied was 7.86 % and 9.45 %, respectively. Changes to the value of the assets between scheduled valuation dates are monitored through continued communication with brokers and monthly reviews by the asset manager assigned to each asset. If there are any significant changes in the market or the subject property, valuations are adjusted or new appraisals are ordered to ensure the reported values reflect the most current information.

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

Carrying Values and Fair Values of Financial Assets and Liabilities

dollars in millions December 31, 2025
Estimated Fair Value
Carrying Value Level 1 Level 2 Level 3 Total
Financial Assets
Cash and due from banks $ 801   $ 801   $ —   $ —   $ 801  
Interest-earning deposits at banks 19,801   19,801   —   —   19,801  
Securities purchased under agreements to resell 232   —   232   —   232  
Investment in marketable equity securities 127   50   77   —   127  
Investment securities available for sale 31,790   —   31,767   23   31,790  
Investment securities held to maturity 9,647   —   8,491   —   8,491  
Loans held for sale 799   —   781   18   799  
Net loans 144,346   —   1,580   143,782   145,362  
Accrued interest receivable 912   —   912   —   912  
Federal Home Loan Bank stock 20   —   20   —   20  
Mortgage servicing rights 32   —   —   50   50  

Derivative assets - non-qualifying hedges 534   —   505   29   534  
Financial Liabilities
Deposits with no stated maturity 150,342   —   150,342   —   150,342  
Time deposits 11,236   —   11,227   —   11,227  
Credit balances of factoring clients 1,148   —   —   1,148   1,148  
Securities sold under customer repurchase agreements 224   —   224   —   224  

Long-term borrowings 35,712   —   35,795   —   35,795  
Accrued interest payable 140   —   140   —   140  

Derivative liabilities - non-qualifying hedges 494   —   494   —   494  

December 31, 2024
Estimated Fair Value
Carrying Value Level 1 Level 2 Level 3 Total
Financial Assets
Cash and due from banks $ 814   $ 814   $ —   $ —   $ 814  
Interest-earning deposits at banks 21,364   21,364   —   —   21,364  
Securities purchased under agreements to resell 158   —   158   —   158  
Investment in marketable equity securities 101   48   53   —   101  
Investment securities available for sale 33,750   —   33,582   168   33,750  
Investment securities held to maturity 10,239   —   8,702   —   8,702  
Loans held for sale 82   —   55   27   82  
Net loans 136,567   —   1,463   133,409   134,872  
Accrued interest receivable 902   —   902   —   902  
Federal Home Loan Bank stock 20   —   20   —   20  
Mortgage servicing rights 27   —   —   47   47  
Derivative assets - qualifying hedges 1   —   1   —   1  
Derivative assets - non-qualifying hedges 659   —   642   17   659  
Financial Liabilities
Deposits with no stated maturity 141,976   —   141,976   —   141,976  
Time deposits 13,253   —   13,247   —   13,247  
Credit balances of factoring clients 1,016   —   —   1,016   1,016  
Securities sold under customer repurchase agreements 367   —   367   —   367  

Long-term borrowings 36,669   —   36,220   —   36,220  
Accrued interest payable 134   —   134   —   134  

Derivative liabilities - non-qualifying hedges 625   —   624   1   625  

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The methods and assumptions used to estimate the fair value of each class of financial instruments not discussed elsewhere are as follows:

Interest-earning Deposits at Banks. The carrying value of interest-earning deposits at banks approximates its fair value due to its short-term nature and is classified on the fair value hierarchy as Level 1. The balances at December 31, 2025 and December 31, 2024 included $ 212  million and $ 211  million, respectively, as a required minimum deposit under the Purchase Money Note.

Net loans. The carrying value of net loans is net of the ALLL. Loans are generally valued by discounting expected cash flows using market inputs with adjustments based on cohort level assumptions for certain loan types as well as internally developed estimates at a business segment level. Due to the significance of the unobservable market inputs and assumptions, as well as the absence of a liquid secondary market for most loans, these loans are classified as Level 3. Certain loans are measured based on observable market prices sourced from external data providers and classified as Level 2. Nonaccrual loans are written down and reported at their estimated recovery value, which approximates their fair value, and classified as Level 3.

Securities Purchased Under Agreements to Resell. The fair value of securities purchased under agreements to resell equal the carrying value due to the short term nature, generally overnight, and therefore present an insignificant risk of change in fair value due to changes in market interest rate, and classified as Level 2.

Investment securities held to maturity. BancShares’ portfolio of debt 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 securities issued by the Supranational Entities & Multilateral Development Banks. We primarily use prices obtained from pricing services to determine the fair value of securities, which are Level 2 inputs.

FHLB stock. The carrying amount of FHLB stock is a reasonable estimate of fair value, as these securities are not readily marketable and are evaluated for impairment based on the ultimate recoverability of the par value. BancShares considers positive and negative evidence, including the profitability and asset quality of the issuer, dividend payment history and recent redemption experience, when determining the ultimate recoverability of the par value. BancShares investment in FHLB stock is ultimately recoverable at par. The inputs used in the fair value measurement for the FHLB stock are considered Level 2 inputs.

Mortgage servicing rights. The fair value of MSRs is determined using a pooling methodology. Similar loans are pooled together and a model which relies on discount rates, estimates of prepayment rates and the weighted average cost to service the loans is used to determine the fair value. The inputs used in the fair value measurement for MSRs are considered Level 3 inputs.

Deposits. The estimated fair value of deposits with no stated maturity, such as demand deposit accounts, money market accounts, and savings accounts was the amount payable on demand at the reporting date. The fair value of time deposits was estimated based on a discounted cash flow technique using Level 2 inputs appropriate to the contractual maturity.

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

Short-term borrowed funds. The fair value of short-term borrowed funds, which includes repurchase agreements, approximates carrying value and are classified as Level 2.

Long-term borrowings. For certain long-term senior and subordinated unsecured borrowings, the fair values are sourced from a third-party pricing service. The fair values of other long-term borrowings are determined by discounting future cash flows using current interest rates for similar financial instruments. The inputs used in the fair value measurement for FHLB borrowings, senior and subordinated debentures, and other borrowings are classified as Level 2.

For all other financial assets and financial liabilities, the carrying value is a reasonable estimate of the fair value as of December 31, 2025 and December 31, 2024. The carrying value and fair value for these assets and liabilities are equivalent because they are relatively short-term in nature and there is no interest rate or credit risk that would cause the fair value to differ from the carrying value. Cash and due from banks is classified as Level 1. Accrued interest receivable and accrued interest payable are classified as Level 2.

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NOTE 15 — STOCKHOLDERS' EQUITY

A roll forward of common stock activity is presented in the following table:

Number of Shares of Common Stock

December 31, 2025 December 31, 2024
Common Stock Outstanding Common Stock Outstanding
Class A Class B Class A Class B

Common stock - beginning of period 12,712,436   1,005,185   13,514,933   1,005,185  
Shares purchased under authorized repurchase plan ( 1,578,462 ) —   ( 814,641 ) —  
Restricted stock units vested, net of shares held to cover taxes —   —   12,144   —  
Common stock - end of period 11,133,974   1,005,185   12,712,436   1,005,185  

Common Stock
The Parent Company has Class A common stock and Class B common stock, each with a par value of $ 1 . Class A common stockholders have one vote per share while Class B common stockholders have 16 votes per share.

Non-Cumulative Perpetual Preferred Stock
On November 18, 2025, the Parent Company issued and sold 7.000 % non-cumulative perpetual preferred stock, series D, for a total of $ 500  million. As of December 31, 2025, the Parent Company had Series A, Series B, Series C, and Series D non-cumulative perpetual preferred stock (together, “BancShares Preferred Stock”) as summarized in the following table:

Preferred Stock

dollars in millions, except per share, depositary share, and per depositary share data
Preferred Stock Issuance Date Earliest Redemption Date Book Value (1)
Par Value Per Share Shares Authorized, Issued and Outstanding Aggregate Liquidation Preference Liquidation Preference Per Share Depositary Shares (Fractional Interest) (2)
Liquidation Preference Per Depositary Share Dividend
Series A March 12, 2020 March 15, 2025 $ 340   $ 0.01   345,000 $ 345   $ 1,000   13,800,000 (1/40 th )
$ 25   5.375   %
Series B (3)
January 3, 2022 January 4, 2027 334 0.01   325,000 325 1,000   n/a n/a SOFR + 3.972 %

Series C January 3, 2022 January 4, 2027 207 0.01   8,000,000 200 25   n/a n/a 5.625   %
Series D (4)
November 18, 2025 December 15, 2030 494 0.01   5,000 500 100,000   500,000 (1/100 th )
1,000   7.000   %
Total $ 1,375   8,675,000 $ 1,370  

(1) The book value is net of direct issuance costs and premiums or discounts.
(2) Each depositary share represents a fractional ownership interest in a share of non-cumulative perpetual preferred stock.
(3) Upon conversion to SOFR in 2023, BancShares began paying a credit spread adjustment in addition to the stated dividend.
(4) The dividend rate is 7.000 % per annum from the original issuance date to, but excluding, the first reset date of December 15, 2030. Thereafter, the dividend rate resets to the five-year treasury rate plus 3.301 % on the fifth anniversary of the preceding reset date.

Dividends on BancShares Preferred Stock will be paid when, as, and if declared by the Board of Directors of the Parent Company, or a duly authorized committee thereof, to the extent that the Parent Company has lawfully available funds to pay dividends. If declared, dividends with respect to the BancShares Preferred Stock will accrue and be payable quarterly in arrears on March 15, June 15, September 15, and December 15 of each year. Dividends on the BancShares Preferred Stock will not be cumulative.

The Parent Company may redeem the BancShares Preferred Stock at its option, and subject to any required regulatory approval, at a redemption price equal to the “Liquidation Preference Per Share” in the table above, plus any declared and unpaid dividends to, but excluding, the redemption date, (i) in whole or in part, from time to time, on any dividend payment date on or after the “Earliest Redemption Date” in the table above, or (ii) in whole but not in part, at any time within 90 days following a regulatory capital treatment event.

Issuance of Series E Non-Cumulative Perpetual Preferred Stock
On February 5, 2026, the Parent Company issued and sold 6.625 % non-cumulative perpetual preferred stock, series E (“Series E Preferred Stock”), for a total of $ 400  million. The issuance and sale included 16,000,000 depositary shares, each representing a 1/40th ownership interest in a share of Series E Preferred Stock with a liquidation preference of $ 1,000 per share (equivalent to $ 25 per depository share).
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NOTE 16 — ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

The following table includes the components of AOCI:

Components of Accumulated Other Comprehensive Loss

dollars in millions December 31, 2025 December 31, 2024
Pretax Income Taxes Net of Income Taxes Pretax Income Taxes Net of Income Taxes
Unrealized loss on securities available for sale $ ( 162 ) $ 25   $ ( 137 ) $ ( 762 ) $ 178   $ ( 584 )
Unrealized loss on securities available for sale transferred to held to maturity ( 5 ) 1   ( 4 ) ( 6 ) 2   ( 4 )
Defined benefit pension items 282   ( 72 ) 210   182   ( 47 ) 135  

Unrealized gain on cash flow hedge derivatives 19   ( 5 ) 14   11   ( 3 ) 8  
Total accumulated other comprehensive income (loss) $ 134   $ ( 51 ) $ 83   $ ( 575 ) $ 130   $ ( 445 )

The following table summarizes the changes in the components of AOCI, net of income taxes:

Changes in Accumulated Other Comprehensive (Loss) Income by Component

dollars in millions Unrealized loss on securities available for sale Unrealized loss on securities available for sale transferred to held to maturity Defined benefit pension items Unrealized gain on cash flow hedge derivatives Total accumulated other comprehensive (loss) income
Balance as of December 31, 2024 $ ( 584 ) $ ( 4 ) $ 135   $ 8   $ ( 445 )
AOCI activity before reclassifications 449   —   75   9   533  
Amounts reclassified from AOCI to earnings ( 2 ) —   —   ( 3 ) ( 5 )
Other comprehensive income for the period 447   —   75   6   528  
Balance as of December 31, 2025 $ ( 137 ) $ ( 4 ) $ 210   $ 14   $ 83  

Balance as of December 31, 2023 $ ( 577 ) $ ( 5 ) $ 91   $ —   $ ( 491 )
AOCI activity before reclassifications ( 7 ) —   44   8   45  
Amounts reclassified from AOCI to earnings —   1   —   —   1  
Other comprehensive (loss) income for the period ( 7 ) 1   44   8   46  
Balance as of December 31, 2024 $ ( 584 ) $ ( 4 ) $ 135   $ 8   $ ( 445 )

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Other Comprehensive Income
The amounts included in the Consolidated Statements of Comprehensive Income are net of income taxes. The following table presents the pretax and after tax components of other comprehensive income:

Other Comprehensive Income (Loss) by Component

dollars in millions Year Ended December 31,
2025 2024
Pretax Income Taxes Net of Income Taxes Pretax Income Taxes Net of Income Taxes Income Statement Line Items
Unrealized loss on securities available for sale:
AOCI activity before reclassifications $ 603   $ ( 154 ) $ 449   $ ( 10 ) $ 3   $ ( 7 )
Amounts reclassified from AOCI to earnings ( 3 ) 1   ( 2 ) —   —   —   Realized gain on sale of investment securities, net
Other comprehensive income (loss) on securities available for sale $ 600   $ ( 153 ) $ 447   $ ( 10 ) $ 3   $ ( 7 )

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

Amounts reclassified from AOCI to earnings $ 1   $ ( 1 ) $ —   $ 1   $ —   $ 1   Interest income on investment securities

Defined benefit pension items:

Actuarial gain $ 100   $ ( 25 ) $ 75   $ 60   $ ( 16 ) $ 44  

Unrealized gain on cash flow hedge derivatives:
AOCI activity before reclassifications $ 12   $ ( 3 ) $ 9   $ 11   $ ( 3 ) $ 8  
Amounts reclassified from AOCI to earnings ( 4 ) 1   ( 3 ) —   —   —   Interest income on loans and leases
Other comprehensive income on cash flow hedge derivatives $ 8   $ ( 2 ) $ 6   $ 11   $ ( 3 ) $ 8  
Total other comprehensive income $ 709   $ ( 181 ) $ 528   $ 62   $ ( 16 ) $ 46  

NOTE 17 — REGULATORY CAPITAL

BancShares and FCB are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on BancShares’ Consolidated Financial Statements. Certain activities, such as the ability to undertake new business initiatives, including acquisitions, the access to and cost of funding for new business initiatives, the ability to pay dividends, the ability to repurchase shares or other capital instruments, the level of deposit insurance costs, and the level and nature of regulatory oversight, largely depend on a financial institution’s capital strength.

Federal banking agencies approved regulatory capital guidelines (“Basel III”) aimed at strengthening previous capital requirements for banking organizations. The following table includes the Basel III requirements for regulatory capital ratios.

Basel III Minimums Basel III Conservation Buffers Basel III Requirements
Regulatory capital ratios
Total risk-based capital 8.00   % 2.50   % 10.50   %
Tier 1 risk-based capital 6.00   2.50   8.50  
Common equity Tier 1 4.50   2.50   7.00  
Tier 1 leverage 4.00   —   4.00  

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The FDIC also has Prompt Corrective Action (“PCA”) thresholds for regulatory capital ratios. The regulatory capital ratios for BancShares and FCB are calculated in accordance with the guidelines of the federal banking authorities. The regulatory capital ratios for BancShares and FCB exceed the Basel III requirements and the PCA well capitalized thresholds as of December 31, 2025 and 2024 as summarized in the following table.

dollars in millions December 31, 2025 December 31, 2024
Basel III Requirements PCA Well Capitalized Thresholds Amount Ratio Amount Ratio
BancShares
Total risk-based capital 10.50   % 10.00   % $ 24,945   13.71   % $ 24,610   15.04   %
Tier 1 risk-based capital 8.50   8.00   21,660   11.91   22,137   13.53  
Common equity Tier 1 7.00   6.50   20,285   11.15   21,256   12.99  
Tier 1 leverage 4.00   5.00   21,660   9.29   22,137   9.90  
FCB
Total risk-based capital 10.50   % 10.00   % $ 24,739   13.62   % $ 23,975   14.66   %
Tier 1 risk-based capital 8.50   8.00   22,796   12.55   21,852   13.37  
Common equity Tier 1 7.00   6.50   22,796   12.55   21,852   13.37  
Tier 1 leverage 4.00   5.00   22,796   9.79   21,852   9.78  

As of December 31, 2025, BancShares and FCB had total risk-based capital ratio conservation buffers of 5.71 % and 5.62 %, respectively, which are in excess of the Basel III conservation buffer of 2.50 %. As of December 31, 2024, BancShares and FCB had total risk-based capital ratio conservation buffers of 7.04 % and 6.66 %, respectively. The capital ratio conservation buffers represent the excess of the regulatory capital ratio as of December 31, 2025 and 2024 over the Basel III minimum for the ratio that is the binding constraint.

Additional Tier 1 capital for BancShares includes preferred stock discussed further in Note 15—Stockholders' Equity. 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 $ 6.57  billion while continuing to meet the requirements for well capitalized banks at December 31, 2025. Dividends declared by FCB and paid to the Parent Company amounted to $ 1.68 billion for the year ended December 31, 2025. 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.

NOTE 18 — EARNINGS PER COMMON SHARE

The following table sets forth the computation of the basic and diluted earnings per common share:

Earnings per Common Share

dollars in millions, except share and per share data
Year Ended December 31,
2025 2024 2023
Net income $ 2,206   $ 2,777   $ 11,466  
Preferred stock dividends 57   61   59  
Net income available to common stockholders $ 2,149   $ 2,716   $ 11,407  
Weighted average common shares outstanding
Basic shares outstanding 13,002,455   14,341,872   14,527,902  
Stock-based awards —   783   11,711  
Diluted shares outstanding 13,002,455   14,342,655   14,539,613  
Earnings per common share
Basic $ 165.24   $ 189.42   $ 785.14  
Diluted $ 165.24   $ 189.41   $ 784.51  

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NOTE 19 — INCOME TAXES

The provision (benefit) for income taxes for the year ended December 31, 2025, 2024 and 2023 is comprised of the following:

Provision (Benefit) for Income Taxes

dollars in millions Year Ended December 31,
2025 2024 2023
Current U.S. federal income tax provision $ 585   $ 649   $ 400  
Deferred U.S. federal income tax (benefit) / provision ( 38 ) 68   46  
Total federal income tax provision 547   717   446  
Current state and local income tax provision 286   157   372  
Deferred state and local income tax benefit ( 79 ) ( 71 ) ( 222 )
Total state and local income tax provision 207   86   150  
Total non-U.S. income tax provision 11   12   15  
Total provision for income taxes $ 765   $ 815   $ 611  

A reconciliation from the U.S. Federal statutory rate to BancShares’ actual effective income tax rate for the year ended December 31, 2025, 2024 and 2023 is presented below. Income tax expense (benefit) includes, if applicable, federal, state and foreign taxes:

Effective Tax Rate Reconciliation

dollars in millions Year Ended December 31,
2025 2024 2023
Amount Percent Amount Percent Amount Percent
Pretax income domestic $ 2,926   $ 3,551   $ 12,043  
Pretax income foreign 45   41   34  
Total pretax income $ 2,971   $ 3,592   $ 12,077