10-Q – 2026-05-08 – fcnca-20260331.htm

(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 $ 253 million and $ 0 million, respectively, as of March 31, 2026, and $ 252 million and $ 0 million, respectively, as of December 31, 2025.
(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 March 31, 2026 December 31, 2025
Asset Fair Value Liability Fair Value Asset Fair Value Liability Fair Value
Derivatives designated as hedging instruments (Qualifying hedges)
Gross fair value $ 9   $ ( 18 ) $ 19   $ —  
Cleared trades, variation margin netting ( 9 ) 18   ( 19 ) —  
Total derivatives designated as hedging instruments $ —   $ —   $ —   $ —  
Derivatives not designated as hedging instruments (Non-qualifying hedges)
Gross fair value $ 565   $ ( 474 ) $ 596   $ ( 529 )
Cleared trades, variation margin netting ( 67 ) 26   ( 62 ) 35  
Total derivatives not designated as hedging instruments $ 498   $ ( 448 ) $ 534   $ ( 494 )
Gross derivatives fair values presented in the Consolidated Balance Sheets $ 498   $ ( 448 ) $ 534   $ ( 494 )
Amounts subject to master netting agreements (1)
( 100 ) 100   ( 118 ) 118  
Cash collateral pledged (received) subject to master netting agreements (2)
( 266 ) 4   ( 204 ) 62  
Total net derivative fair value $ 132   $ ( 344 ) $ 212   $ ( 314 )

(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 Three Months Ended March 31,
Interest Expense 2026 2025
Gain (loss) on hedging instruments - time deposits Deposits $ —   $ —  
(Loss) gain on hedging instruments - borrowings Borrowings ( 8 ) —  
Gain (loss) on hedged item - time deposits Deposits —   —  
Gain (loss) on hedged item - borrowings Borrowings 8   1  

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

The following table presents the carrying value of hedged items and associated cumulative hedging adjustment related to fair value hedges as of March 31, 2026. 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
March 31, 2026

Long-term borrowings $ 2,329   $ 8   $ —  

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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 accumulated other comprehensive income (“AOCI”) to earnings:

Unrealized Gain on Cash Flow Hedges

dollars in millions Three Months Ended March 31,
2026 2025
Other comprehensive income on cash flow hedge derivatives before reclassifications $ ( 19 ) $ 12  
Amounts reclassified from AOCI to earnings —   ( 3 )
Other comprehensive income on cash flow hedge derivatives $ ( 19 ) $ 9  

The following table presents other information for cash flow hedges:

Other Information for Cash Flow Hedges

dollars in millions March 31, 2026 December 31, 2025
Unrealized gain on cash flow hedge derivatives reported in AOCI, net of income taxes $ —   $ 14  

Estimate to be reclassified from AOCI to earnings during the next 12 months, net of income taxes (1)
$ —   $ 9  
Maximum number of months over which forecasted cash flows are hedged (2)
26 27
(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 March 31, 2026 and December 31, 2025.

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 Three Months Ended March 31,
Amounts Recognized 2026 2025
Interest rate contracts Other noninterest income $ 4   $ ( 1 )
Foreign currency forward contracts (1)
Other noninterest income 19   ( 19 )
Other contracts Other noninterest income 4   ( 1 )
Total non-qualifying hedges - income statement impact $ 27   $ ( 21 )

(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 12 — 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 March 31, 2026
Total Level 1 Level 2 Level 3
Assets
Investment securities available for sale
U.S. Treasury $ 12,442   $ —   $ 12,442   $ —  
Government agency 38   —   38   —  
Residential mortgage-backed securities 17,595   —   17,595   —  
Commercial mortgage-backed securities 3,099   —   3,099   —  
Corporate bonds 128   —   108   20  
Municipal bonds 12   —   12   —  

Total investment securities available for sale $ 33,314   $ —   $ 33,294   $ 20  
Marketable equity securities 130   50   80   —  
Loans held for sale 89   —   89   —  
Loans 24   —   24   —  
Derivative assets (1)

Total qualifying hedge assets $ —   $ —   $ —   $ —  
Interest rate contracts — non-qualifying hedges $ 356   $ —   $ 353   $ 3  
Foreign exchange contracts — non-qualifying hedges 114   —   114   —  
Other derivative contracts — non-qualifying hedges 28   —   —   28  
Total non-qualifying hedge assets $ 498   $ —   $ 467   $ 31  
Total derivative assets $ 498   $ —   $ 467   $ 31  
Liabilities
Derivative liabilities (1)

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

Interest rate contracts — non-qualifying hedges $ 366   $ —   $ 366   $ —  
Foreign exchange contracts — non-qualifying hedges 82   —   82   —  
Other derivative contracts — non-qualifying hedges —   —   —   —  
Total non-qualifying hedge liabilities $ 448   $ —   $ 448   $ —  
Total derivative liabilities $ 448   $ —   $ 448   $ —  
(1) Derivative fair values include accrued interest.

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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.

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 11—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
March 31, 2026 December 31, 2025
Assets
Corporate bonds $ 20   $ 23   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 $ 31   $ 29   Internal valuation model Multiple factors, including but not limited to, private company valuation, illiquidity discount, and estimated life of the instrument.

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 Three Months Ended March 31, 2026 Three Months Ended March 31, 2025
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 $ 23   $ 29   $ —   $ 168   $ 17   $ 1  
Purchases —   1   —   —   2   —  
Changes in fair value included in earnings —   3   —   —   1   —  
Changes in fair value included in comprehensive income —   —   —   —   —   —  

Transfers out —   —   —   —   —   —  
Maturity and settlements ( 3 ) ( 2 ) —   —   ( 1 ) —  
Ending balance $ 20   $ 31   $ —   $ 168   $ 19   $ 1  

Fair Value Option
The following table summarizes the difference between the aggregate fair value and the unpaid principal balance (“UPB”) for residential mortgage loans originated for sale measured at fair value:

Aggregate Fair Value and UPB - Residential Mortgage Loans

dollars in millions March 31, 2026 December 31, 2025
Fair Value Unpaid Principal Balance Difference Fair Value Unpaid Principal Balance Difference
Originated loans held for sale (1)
$ 113   $ 114   $ ( 1 ) $ 109   $ 109   $ —  

(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 three months ended March 31, 2026 and 2025. 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 March 31, 2026 or December 31, 2025.

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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 lower of cost or fair value (“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
Carrying Value Level 1 Level 2 Level 3 Total Gains (Losses)
March 31, 2026
Assets held for sale - loans $ 25   $ —   $ —   $ 25   $ ( 4 )
Loans - collateral dependent loans 192   —   —   192   ( 44 )
Other real estate owned 55   —   —   55   ( 1 )

Total $ 272   $ —   $ —   $ 272   $ ( 49 )
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 )

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 14 %, applied for estimated selling costs and other external factors that may impact the marketability of the property. At March 31, 2026 and December 31, 2025, the weighted average discount applied was 9.84 % and 7.86 %, 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 March 31, 2026
Estimated Fair Value
Carrying Value Level 1 Level 2 Level 3 Total
Financial Assets
Cash and due from banks $ 1,080   $ 1,080   $ —   $ —   $ 1,080  
Interest-earning deposits at banks 23,189   23,189   —   —   23,189  
Securities purchased under agreements to resell 223   —   223   —   223  
Investment in marketable equity securities 130   50   80   —   130  
Investment securities available for sale 33,314   —   33,294   20   33,314  
Investment securities held to maturity 9,542   —   8,360   —   8,360  
Loans held for sale 1,118   —   733   385   1,118  
Net loans 145,170   —   1,487   144,707   146,194  
Accrued interest receivable 955   —   955   —   955  
Federal Home Loan Bank stock 20   —   20   —   20  
Mortgage servicing rights 33   —   —   54   54  

Derivative assets - non-qualifying hedges 498   —   467   31   498  
Financial Liabilities
Deposits with no stated maturity 157,599   —   157,599   —   157,599  
Time deposits 13,243   —   13,223   —   13,223  
Credit balances of factoring clients 1,284   —   —   1,284   1,284  
Securities sold under customer repurchase agreements 170   —   170   —   170  

Long-term borrowings 33,719   —   33,641   —   33,641  
Accrued interest payable 109   —   109   —   109  

Derivative liabilities - non-qualifying hedges 448   —   448   —   448  

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  

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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 March 31, 2026 and December 31, 2025 included $ 194  million and $ 212  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 mortgage servicing rights (“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 March 31, 2026 and December 31, 2025. 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 13 — STOCKHOLDERS' EQUITY

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

Number of Shares of Common Stock

Common Stock Outstanding
Class A Class B
Common stock - December 31, 2025 11,133,974   1,005,185  
Shares repurchased under authorized repurchase plan ( 449,845 ) —  

Common stock - March 31, 2026 10,684,129   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 February 5, 2026, the Parent Company issued and sold 6.625 % non-cumulative perpetual preferred stock, series E, for a total of $ 400  million.

As of March 31, 2026, the Parent Company had Series A, Series B, Series C, Series D, and Series E non-cumulative perpetual preferred stock outstanding (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   %
Series E (5)
February 5, 2026 March 15, 2031 390   0.01   400,000 400 1,000   16,000,000
(1/40 th )
25   6.625   %
Total $ 1,765   9,075,000 $ 1,770  

(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 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.
(5) The initial dividend period will commence on and include the issuance date and will end on and include June 14, 2026. The dividend rate is 6.625 % per annum from the issuance date to, but excluding, the first reset date of March 15, 2031. Thereafter, the dividend rate resets to the five-year treasury rate plus 2.830 % 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.

At its option and subject to any required regulatory approval, the Parent Company may redeem the BancShares Preferred Stock at a redemption price equal to the “Liquidation Preference Per Share” in the table above, plus any applicable dividends, (i) in whole or in part 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.

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NOTE 14 — ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

The following table includes the components of AOCI:

Components of Accumulated Other Comprehensive Loss

dollars in millions March 31, 2026 December 31, 2025
Pretax Income Taxes Net of Income Taxes Pretax Income Taxes Net of Income Taxes
Unrealized loss on securities available for sale $ ( 349 ) $ 73   $ ( 276 ) $ ( 162 ) $ 25   $ ( 137 )
Unrealized loss on securities available for sale transferred to held to maturity ( 5 ) 1   ( 4 ) ( 5 ) 1   ( 4 )
Defined benefit pension items 280   ( 72 ) 208   282   ( 72 ) 210  

Unrealized gain on cash flow hedge derivatives —   —   —   19   ( 5 ) 14  
Total accumulated other comprehensive (loss) income $ ( 74 ) $ 2   $ ( 72 ) $ 134   $ ( 51 ) $ 83  

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, 2025 $ ( 137 ) $ ( 4 ) $ 210   $ 14   $ 83  
AOCI activity before reclassifications ( 139 ) —   ( 2 ) ( 14 ) ( 155 )
Amounts reclassified from AOCI to earnings —   —   —   —   —  
Other comprehensive income for the period ( 139 ) —   ( 2 ) ( 14 ) ( 155 )
Balance as of March 31, 2026 $ ( 276 ) $ ( 4 ) $ 208   $ —   $ ( 72 )

Balance as of December 31, 2024 $ ( 584 ) $ ( 4 ) $ 135   $ 8   $ ( 445 )
AOCI activity before reclassifications 239   —   —   10   249  
Amounts reclassified from AOCI to earnings —   —   —   ( 3 ) ( 3 )
Other comprehensive (loss) income for the period 239   —   —   7   246  
Balance as of March 31, 2025 $ ( 345 ) $ ( 4 ) $ 135   $ 15   $ ( 199 )

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 Three Months Ended March 31,
2026 2025
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:

Other comprehensive (loss) income on securities available for sale $ ( 187 ) $ 48   $ ( 139 ) $ 322   $ ( 83 ) $ 239  

Defined benefit pension items:

Actuarial loss $ ( 2 ) $ —   $ ( 2 ) $ —   $ —   $ —  

Unrealized gain on cash flow hedge derivatives:
AOCI activity before reclassifications $ ( 19 ) $ 5   $ ( 14 ) $ 12   $ ( 2 ) $ 10  
Amounts reclassified from AOCI to earnings —   —   —   ( 3 ) —   ( 3 ) Interest income on loans and leases
Other comprehensive income on cash flow hedge derivatives $ ( 19 ) $ 5   $ ( 14 ) $ 9   $ ( 2 ) $ 7  
Total other comprehensive income $ ( 208 ) $ 53   $ ( 155 ) $ 331   $ ( 85 ) $ 246  

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NOTE 15 — 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
Three Months Ended March 31,
2026 2025
Net income $ 534   $ 483  
Preferred stock dividends 26   15  
Net income available to common stockholders $ 508   $ 468  
Weighted average common shares outstanding
Basic shares outstanding 11,924,899   13,575,231  
Stock-based awards —   —  
Diluted shares outstanding 11,924,899   13,575,231  
Earnings per common share
Basic and diluted $ 42.63   $ 34.47  

NOTE 16 — INCOME TAXES

BancShares’ global effective income tax rates (“ETRs”) were 24.3 % and 25.8 % for the three months ended March 31, 2026 and 2025, respectively. The decrease in the ETR for the three months ended March 31, 2026 compared to 2025 was primarily due to a reduction in the state and local income tax rate and an increase in the benefit from tax credits.

The quarterly income tax expense is based on a projection of BancShares’ annual ETR. This annual ETR is applied to the year-to-date consolidated pretax income to determine the interim provision for income taxes before discrete items. The ETR each period is also impacted by a number of factors, including the relative mix of domestic and international earnings, effects of changes in enacted tax laws, adjustments to the valuation allowances, and discrete items. The currently forecasted ETR may vary from the actual year-end 2026 ETR due to the changes in these factors.

Uncertain Tax Benefits
BancShares recognizes tax benefits when it is more likely than not that the position will prevail, based solely on the technical merits under the tax law of the relevant jurisdiction. BancShares will recognize the tax benefit if the position meets this recognition threshold determined based on the largest amount of the benefit that is more than likely to be recognized.

Deferred Tax Assets and Valuation Adjustments
BancShares’ ability to recognize DTAs is evaluated on a quarterly basis to determine if there are any significant events that would affect our ability to utilize existing DTAs. If events are identified that affect our ability to utilize our DTAs, changes to the valuation allowance may be required.

NOTE 17 — EMPLOYEE BENEFIT PLANS

BancShares sponsors non-contributory defined benefit pension plans and supplemental and executive retirement plans for its qualifying employees. The service cost component of net periodic benefit cost is included in salaries and wages, while all other non-service cost components are included in other noninterest expense.

The components of net periodic benefit cost are as follows:

Net Periodic Benefit Costs

dollars in millions Three Months Ended March 31,
2026 2025
Service cost $ 2   $ 2  
Interest cost 16   16  
Expected return on assets ( 25 ) ( 24 )

Total net periodic benefit $ ( 7 ) $ ( 6 )

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NOTE 18 — SEGMENT INFORMATION

BancShares’ segments include the General Bank, the Commercial Bank, and Rail. All other financial information not included in the segments is reported in the Corporate section of the segment disclosures. We do not aggregate multiple operating segments into a reportable segment. Therefore, each of our operating segments are reportable segments.

Under our segment expense allocation methodology, allocated expenses increase noninterest expense of the applicable segment(s), with an offsetting decrease to Corporate noninterest expense. “All other noninterest expense” in the segment reporting tables below includes the effect of allocated expenses, resulting in a reduction to expense (or “Contra Expense”) for Corporate.

General Bank
The General Bank segment delivers products and services to consumer and small business clients through our extensive network of branches and various digital channels. We offer a full suite of deposit products, loans (primarily residential mortgages and business and commercial loans), cash management, private banking, wealth management, payment services, and treasury services. We offer conforming and jumbo residential mortgage loans throughout the United States that are primarily originated through branches and retail referrals, employee referrals, internet leads, direct marketing and a correspondent lending channel, as well as through our private banking teams. Our wealth and private banking business offers a customized suite of products and services to individuals and institutional clients, as well as private equity and venture capital professionals and executive leaders of the innovation companies they support. Offerings include brokerage, investment advisory, private stock loans, other secured and unsecured lending products and vineyard development loans, as well as planning-based financial strategies, family office, financial planning, tax planning and trust services. The General Bank segment also includes a community association bank business that supports deposit, cash management and lending to homeowner associations and property management companies.

Revenue is primarily generated from interest income on loans and leases. Noninterest income is primarily generated from fees for banking and advisory services, including lending-related fees, most of the deposit fees and service charges and cardholder services, along with essentially all of the wealth management services income. We primarily originate loans by utilizing our branch network and industry referrals, as well as direct digital marketing efforts. We derive our SBA loans through a network of SBA originators. We periodically purchase loans on a whole-loan basis. We also invest in community development that supports the construction of affordable housing in our communities in line with our Community Reinvestment Act initiatives.

Commercial Bank
The Commercial Bank segment provides a range of lending, leasing, capital markets, asset management, and other financial and advisory services, primarily tailored to commercial and middle market companies in a wide range of industries, including energy, healthcare, technology media and telecommunications, maritime, and aerospace and defense. Loans offered are primarily senior secured loans collateralized by accounts receivable, inventory, machinery and equipment, transportation equipment, and/or intangibles, and are often used for working capital, plant expansion, acquisitions, or recapitalizations. These loans include revolving lines of credit and term loans and, depending on the nature of the collateral, may be referred to as collateral-backed loans, asset-based loans or cash flow loans. We provide senior secured loans to developers and other commercial real estate professionals. Additionally, we provide business loans and leases, including both capital and operating leases, through a highly automated credit approval, documentation and funding process.

Commercial Bank also includes products and services offered to commercial clients and investors across stages, sectors and regions in the innovation ecosystem, as well as private equity and venture capital firms. Loan products are offered through Global Fund Banking and Technology and Healthcare Banking and consist of capital call lines of credit, investor dependent loans, and commercial and industrial loans made primarily to technology, life science and healthcare companies.

We also provide factoring, receivable management, supply chain financing, and secured financing to businesses that operate in several industries. These include apparel, textile, furniture, home furnishings, and consumer electronics. See further disclosure on factoring in Note 21—Segment Information in our 2025 Form 10-K.

Revenue is primarily generated from interest income on loans and leases. Noninterest income is mostly generated from rental income on operating lease equipment, lending-related fees, including most of the capital market fees and international fees, essentially all of the client investment fees, and other revenue from banking services. Noninterest income also includes all of the commissions earned on factoring-related activities. We derive our commercial lending business through direct marketing to borrowers, lessees, manufacturers, vendors, and distributors, as well as through our private equity and venture capital relationships. We also utilize referrals as a source for commercial lending business and may periodically buy participations or syndications of loans and lines of credit, or purchase loans on a whole-loan basis.
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Rental income and depreciation expense on operating lease equipment is related to small and large ticket equipment we own and lease to others. Rental income is generally influenced by the size of the operating lease portfolio. Operating lease equipment is subject to depreciation expense over the useful life of the small and large ticket equipment, which is generally 3 - 10 years.

We offer a full suite of commercial deposit products and services through online and mobile banking platforms, as well as physical locations.

Rail
The Rail segment offers customized leasing and financing solutions on a fleet of railcars and locomotives to railroads and shippers throughout North America. Railcar types include covered hopper cars used to ship grain and agricultural products, plastic pellets, sand, and cement; tank cars for energy products and chemicals; gondolas for coal, steel coil and mill service products; open-top hopper cars for coal and aggregates; boxcars for paper and auto parts; and centerbeams and flat cars for lumber. Revenue is generated primarily from rental income on operating lease equipment, which is included in noninterest income, and to a lesser extent, gains on sale of leasing equipment. Rental income is generally influenced by the size of the operating lease portfolio, utilization of the railcars, re-pricing of equipment renewed upon lease maturities, and pricing on new leases. Re-pricing refers to the rental rate in the renewed equipment contract compared to the prior contract.

Operating lease equipment is subject to depreciation expense over the useful life of the rail equipment, which is generally longer in duration, 40 - 50 years. The Rail segment leases railcars, primarily pursuant to full-service lease contracts under which we, as lessor, are responsible for railcar maintenance and repair. Maintenance and other operating lease expenses relate to equipment ownership and leasing costs associated with the railcar portfolio and tend to be variable due to timing and the number of railcars coming on or off lease as well as asset condition.

Corporate
All other financial information not included in the segments is reported in Corporate. Corporate contains BancShares’ centralized treasury function, which manages the investment security portfolio, interest-earning deposits at banks and corporate/wholesale funding (e.g., borrowings, Direct Bank deposits and brokered deposits). Corporate deposits are primarily comprised of Direct Bank deposits.

Corporate includes interest income on investment securities and interest-earning deposits at banks; interest expense for borrowings, Direct Bank deposits, and brokered deposits; as well as funds transfer pricing allocations. Noninterest income includes gains or losses on sales of investment securities, fair value adjustments on marketable equity securities, and income from bank owned life insurance. Personnel cost in Corporate includes the personnel costs not allocated to the operating segments. Corporate includes acquisition-related expenses and certain items related to accounting for business combinations, such as gains on acquisitions, and discount accretion income for certain acquired loans. Corporate also includes the offsetting impacts of allocated expenses as discussed above.

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Segment Results and Select Period End Balances
The following tables present the condensed income statements by segment and include the significant segment expenses and measure of segment profit or loss.

dollars in millions Three Months Ended March 31, 2026
General Bank Commercial Bank Rail Corporate (1)
BancShares (2)

Net interest income (expense) $ 813   $ 802   $ ( 58 ) $ 64   $ 1,621  
Rental income on operating lease equipment —   55   226   —   281  
All other noninterest income 172   230   9   —   411  
Total noninterest income 172   285   235   —   692  
Total revenue 985   1,087   177   64   2,313  
Depreciation on operating lease equipment —   43   58   —   101  
Maintenance and other operating lease expenses —   —   65   —   65  
Personnel cost 215   199   8   447   869  
Acquisition-related expenses —   —   —   5   5  
All other noninterest expense (3)
385   404   17   ( 310 ) 496  
Total noninterest expense 600   646   148   142   1,536  

Provision for credit losses 17   55   —   —   72  
Income (loss) before income taxes 368   386   29   ( 78 ) 705  
Income tax expense (benefit) 90   95   7   ( 21 ) 171  
Net income (loss) $ 278   $ 291   $ 22   $ ( 57 ) $ 534  
Select Period End Balances
Loans and leases $ 64,367   $ 84,263   $ 62   $ —   $ 148,692  
Operating lease equipment, net —   717   8,968   —   9,685  
Investment securities —   —   —   42,986   42,986  
Deposits 75,914   47,191   2   47,735   170,842  

Three Months Ended March 31, 2025
General Bank Commercial Bank Rail Corporate (1)
BancShares (2)

Net interest income (expense) $ 788   $ 786   $ ( 52 ) $ 141   $ 1,663  
Rental income on operating lease equipment —   56   214   —   270  
All other noninterest income 164   201   2   ( 2 ) 365  
Total noninterest income 164   257   216   ( 2 ) 635  
Total revenue 952   1,043   164   139   2,298  
Depreciation on operating lease equipment —   44   54   —   98  
Maintenance and other operating lease expenses —   —   58   —   58  
Personnel cost 210   190   8   410   818  
Acquisition-related expenses —   —   —   42   42  
All other noninterest expense (3)
355   420   14   ( 312 ) 477  
Total noninterest expense 565   654   134   140   1,493  

Provision for credit losses 46   108   —   —   154  
Income (loss) before income taxes 341   281   30   ( 1 ) 651  
Income tax expense 88   72   8   —   168  
Net income (loss) $ 253   $ 209   $ 22   $ ( 1 ) $ 483  
Select Period End Balances
Loans and leases $ 64,847   $ 76,449   $ 62   $ —   $ 141,358  
Operating lease equipment, net —   731   8,640   —   9,371  
Investment securities —   —   —   44,319   44,319  
Deposits 74,309   40,014   12   44,990   159,325  

(1) Corporate includes all other financial information that is not included in the reportable segments.

(2) In the segment reporting table above, there are no reconciling differences between BancShares and the aggregate of all reportable segments and Corporate.

(3) All other noninterest expense represents “other segment items” under Accounting Standards Codification 280 and primarily includes allocated expenses, net occupancy expense, equipment expense, professional fees, third-party processing fees, FDIC insurance expense, marketing expense, and intangible amortization. All other noninterest expense is presented net of allocated expenses in the segment reporting table above, resulting in Contra Expense for Corporate as further discussed above.

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NOTE 19 — COMMITMENTS AND CONTINGENCIES

Commitments
To meet the financing needs of its customers, BancShares and its subsidiaries have financial instruments with off-balance sheet risk. These financial instruments involve elements of credit, interest rate or liquidity risk and include commitments to extend credit and standby letters of credit.

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

dollars in millions March 31, 2026 December 31, 2025
Financing Commitments
Financing assets (excluding leases) $ 52,771   $ 51,726  
Letters of Credit
Financial standby letters of credit 2,688   2,583  
Other letters of credit 182   227  
Deferred Purchase Agreements 1,584   1,723  
Purchase and Funding Commitments (1)
145   102  

(1)     BancShares’ purchase and funding commitments relate to the Rail segment commitments to fund railcar manufacturer purchase and upgrade commitments.

Financing Commitments
Commitments to extend credit are legally binding agreements to lend to customers. These commitments generally have fixed expiration dates or other termination clauses and may require payment of fees. Established credit standards control the credit risk exposure associated with these commitments. In some cases, BancShares requires collateral be pledged to secure the commitment, including cash deposits, securities and other assets.

Financing commitments, referred to as net unfunded loan commitments or lines of credit, primarily reflect BancShares’ agreements to lend to its customers, subject to the customers’ compliance with contractual obligations. At March 31, 2026 and December 31, 2025, substantially all undrawn financing commitments were senior facilities. Financing commitments also include $ 299  million and $ 360  million at March 31, 2026 and December 31, 2025, respectively, related to off-balance sheet commitments to fund other tax credit investments and other unconsolidated investments. These off-balance sheet investment commitments are contingent on events that have yet to occur and may be subject to change.

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

The table above excludes uncommitted revolving credit facilities extended by Commercial Services to its clients for working capital purposes. In connection with these facilities, Commercial Services has the sole discretion throughout the duration of these facilities to determine the amount of credit that may be made available to its clients at any time and whether to honor any specific advance requests made by its clients under these credit facilities.

Letters of Credit
Standby letters of credit are commitments to pay the beneficiary thereof if drawn upon by the beneficiary upon satisfaction of the terms of the letter of credit. Those commitments are primarily issued to support public and private borrowing arrangements. To mitigate its risk, BancShares’ credit policies govern the issuance of standby letters of credit. The credit risk related to the issuance of these letters of credit is essentially the same as in extending loans to clients and, therefore, these letters of credit are collateralized when necessary. These financial instruments generate fees and involve, to varying degrees, elements of credit risk in excess of amounts recognized in the Consolidated Balance Sheets.

Deferred Purchase Agreements
A deferred purchase agreement (“DPA”) is provided in conjunction with factoring, whereby a client is provided with credit protection for trade receivables without purchasing the receivables. The trade receivables terms generally require payment in 90 days or less. If the client’s customer is unable to pay an undisputed receivable solely as the result of credit risk, BancShares is then required to purchase the receivable from the client, less any borrowings for such client based on such defaulted receivable. The outstanding amount in the table above, less $ 152 million and $ 211 million at March 31, 2026 and December 31, 2025, respectively, of borrowings for such clients, is the maximum amount that BancShares would be required to pay under all DPAs. This maximum amount would only occur if all receivables subject to DPAs default in the manner described above, thereby requiring BancShares to purchase all such receivables from the DPA clients.
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The table above includes $ 1.58 billion and $ 1.71 billion of DPA exposures at March 31, 2026 and December 31, 2025, respectively, related to receivables on which BancShares has assumed the credit risk. The table also includes $ 4 million and $ 13 million available under DPA credit line agreements provided at March 31, 2026 and December 31, 2025, respectively. The DPA credit line agreements specify a contractually committed amount of DPA credit protection and are cancellable by us only after a notice period, which is typically 90 days or less.

Litigation and Other Contingencies
The Parent Company and certain of its subsidiaries have been named as a defendant in legal actions arising from its normal business activities in which damages in various amounts are claimed. BancShares is also exposed to litigation risk relating to the prior business activities of banks from which assets were acquired and liabilities assumed.

BancShares is involved, and from time to time in the future may be involved, in a number of pending and threatened judicial, regulatory, and arbitration proceedings as well as proceedings, investigations, examinations and other actions brought or considered by governmental and self-regulatory agencies. These matters arise in connection with the ordinary conduct of BancShares’ business. At any given time, BancShares may also be in the process of responding to subpoenas, requests for documents, data and testimony relating to such matters and engaging in discussions to resolve the matters (all of the foregoing collectively being referred to as “Litigation”). While most Litigation relates to individual claims, BancShares may be subject to putative class action claims and similar broader claims and indemnification obligations.

In light of the inherent difficulty of predicting the outcome of Litigation matters and indemnification obligations, particularly when such matters are in their early stages or where the claimants seek indeterminate damages, BancShares cannot state with confidence what the eventual outcome of the pending Litigation will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss, fines, or penalties related to each pending matter will be, if any. In accordance with applicable accounting guidance, BancShares’ establishes reserves for Litigation when those matters present loss contingencies as to which it is both probable that a loss will occur and the amount of such loss can reasonably be estimated. The actual results of resolving such matters may be substantially higher than the amounts reserved.

For certain Litigation matters for which a loss is probable or reasonably possible, BancShares is able to estimate a range of reasonably possible losses in excess of any established reserve, or for which there is no established reserve. Management currently estimates an aggregate range of reasonably possible losses to be up to approximately $ 25 million in excess of any established reserves. This estimate represents reasonably possible losses (in excess of any established reserves) over the life of such Litigation, which may span a currently indeterminable number of years, and is based on information currently available as of March 31, 2026. The Litigation matters underlying the estimated range will change from time to time, and actual results may vary significantly from this estimate. For certain other Litigation matters for which a loss is probable or reasonably possible, BancShares is not able to estimate a range of reasonably possible losses.

Based on information currently available as of March 31, 2026, those Litigation matters for which BancShares is not able to estimate a range of reasonably possible losses or as to which a loss does not appear to be reasonably possible are not included within this estimated range and, therefore, this estimated range does not represent BancShares’ maximum loss exposure.

The foregoing statements about BancShares’ Litigation are based on BancShares’ judgments, assumptions, and estimates and are necessarily subjective and uncertain. In the event of unexpected future developments, it is possible that the ultimate resolution of these cases, matters, and proceedings, if unfavorable, may be material to BancShares’ consolidated financial position in a particular period.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s discussion and analysis (“MD&A”) of earnings and related financial data is presented to assist in understanding the financial condition and results of operations of First Citizens BancShares, Inc. (the “Parent Company” and, when including all of its subsidiaries on a consolidated basis, “we,” “us,” “our,” or “BancShares”) and its banking subsidiary, First-Citizens Bank & Trust Company (“FCB”). Unless otherwise noted, the terms “we,” “us,” “our,” and “BancShares” in this section refer to the consolidated financial position and consolidated results of operations for BancShares.

This MD&A is expected to provide our investors with a view of our financial condition and results of operations from our management’s perspective. This MD&A should be read in conjunction with the unaudited consolidated financial statements and related notes presented within this Quarterly Report on Form 10-Q (this “Form 10-Q”), along with our consolidated financial statements and related MD&A of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”). Throughout this MD&A, references to a specific “Note” refer to Notes to the Consolidated Financial Statements (Unaudited) in Item 1. Financial Statements.

Intercompany accounts and transactions have been eliminated. Refer to Note 1—Significant Accounting Policies and Basis of Presentation for further information.

Management uses certain financial measures that are not presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) in its analysis of the financial condition and results of operations of BancShares. Refer to the "Non-GAAP Financial Measurements" section of this MD&A for a reconciliation of these financial measures to the most directly comparable financial measures in accordance with GAAP.

EXECUTIVE OVERVIEW

The Parent Company is a bank holding company (“BHC”) and financial holding company. The Parent Company is regulated by the Board of Governors of the Federal Reserve System (“Federal Reserve”) under the U.S. Bank Holding Company Act of 1956, as amended. The Parent Company is also registered under the BHC laws of North Carolina and is subject to supervision, regulation and examination by the North Carolina Office of the Commissioner of Banks (the “NCCOB”). BancShares conducts its banking operations through its wholly owned subsidiary, FCB, a state-chartered bank organized under the laws of the state of North Carolina. FCB is regulated by the NCCOB. In addition, FCB, as an insured depository institution, is supervised by the Federal Deposit Insurance Corporation (the “FDIC”).

BancShares provides financial services for a wide range of consumer and commercial clients. BancShares offers deposit products, loans, and wealth management and private banking services to consumer clients. BancShares provides lending, leasing, capital markets and other financial and advisory services, to small and middle-market companies across a variety of industries. Additionally, BancShares provides a full suite of financial products and services to private equity firms, venture capital firms, and commercial clients in innovation markets, such as technology, life sciences and healthcare industries. BancShares also provides deposit, cash management and lending to homeowner associations and property management companies and owns a fleet of railcars and locomotives that are leased to railroads and shippers.

BancShares delivers banking products and services to its customers through an extensive branch network and additionally operates a nationwide digital banking platform that delivers deposit products to consumers (the “Direct Bank”). Services offered at most branches include accepting deposits, cashing checks and providing for consumer and commercial cash needs. Consumer and business customers may also conduct banking transactions through various digital channels.

In addition to our banking operations, we provide various investment products and services through FCB’s wholly owned subsidiaries, including First Citizens Investor Services, Inc. (“FCIS”), First Citizens Asset Management, Inc. (“FCAM”), and First Citizens Delaware Trust Company, and a non-bank subsidiary, First Citizens Capital Securities, LLC (“FCCS”). As a registered broker-dealer, FCIS provides a full range of investment products, including annuities, brokerage services and third-party mutual funds. As registered investment advisers, FCIS and FCAM provide investment management services and advice. FCCS is a broker-dealer that also provides underwriting and private placement services. We also have other wholly owned subsidiaries, including SVB Wealth LLC, SVB Asset Management, and First Citizens Institutional Asset Management, LLC, which are active investment advisers.

Refer to Note 18—Segment Information for further information regarding the products and services we provide.

Refer to the 2025 Form 10-K for a discussion of our strategy.
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Recent Events

Equity Transactions
Share Repurchase Programs
During the first quarter of 2026, we repurchased 449,845 shares of our Class A common stock for $900 million and paid a dividend of $2.10 per share on our Class A and Class B common stock. Shares repurchased during the first quarter of 2026 represented 4.04% of Class A common stock and 3.71% of total Class A and Class B common stock outstanding at December 31, 2025. From inception of the 2024 share repurchase program (“2024 SRP”) through March 31, 2026, we have repurchased 2,842,948 shares of our Class A common stock for $5.59 billion, representing 21.02% of Class A common stock and 19.57% of total Class A and Class B common stock outstanding as of June 30, 2024.

From April 1, 2026 through April 30, 2026, BancShares repurchased an additional 102,340 shares of Class A common stock for a total of $203 million and had total capacity remaining under the current share repurchase program (the “2025 SRP”) of $1.71 billion as of April 30, 2026.

Refer to Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds for first quarter 2026 monthly repurchase activity of Class A common stock.

Preferred Stock Issuance
On February 5, 2026, the Parent Company issued and sold 6.625% non-cumulative perpetual preferred stock, series E for a total of $400 million. Refer to Note 13—Stockholders' Equity for further information, including depositary shares and liquidation preference.

Debt Transactions
Prepayments of the Purchase Money Note
In connection with the SVBB Acquisition (as defined in Note 2—Business Combinations), FCB issued a five-year $36.07 billion note payable to the FDIC, maturing March 27, 2028 (the “Purchase Money Note”). The Purchase Money Note had a carrying value of $30.91 billion and $33.39 billion at March 31, 2026 and December 31, 2025, respectively. During the current quarter, we prepaid $2.50 billion of the Purchase Money Note which resulted in an $8 million loss on extinguishment of debt. The outstanding balance of the Purchase Money Note declined from $35.85 billion at September 30, 2025 to $30.91 billion at March 31, 2026. We will continue to monitor the interest rate environment, FCB’s collateral position for the Purchase Money Note, and FCB’s liquidity position to determine the timing and magnitude of further prepayments as discussed below in the Funding, Liquidity and Capital Overview. We expect monthly prepayments to be at least $500 million throughout 2026. In April 2026, we made an additional prepayment of $500 million.

Debt Issuance
On March 3, 2026, the Parent Company issued and sold $500 million aggregate principal amount of its 4.869% Fixed-to-Floating Rate Senior Notes due in 2032 in a public offering (the “Current Quarter Debt Issuance”).

Pending Branch Acquisition
On October 16, 2025, FCB announced the BMO Branch Acquisition (as defined in Note 2—Business Combinations) to acquire 138 branches from BMO Bank N.A.located throughout the Midwest, Great Plains and West regions of the U.S. In connection with the BMO Branch Acquisition, FCB expects to assume approximately $5.3 billion in deposit liabilities and acquire approximately $1.1 billion in loans. We expect the transaction to close in the second half of 2026, subject to customary closing terms and conditions and the receipt of remaining regulatory approvals.

Commercial Banking Brand Alignment
On April 23, 2026, FCB announced plans to expand its commercial banking capabilities and to align brand names later this year. In the fourth quarter of 2026, Silicon Valley Bank (“SVB”), a division of FCB, will rebrand as First Citizens Innovation Banking and First Citizens Fund Banking, and CIT Commercial Services and the Silicon Valley Bank Wine division will rebrand as FCB.
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Recent Economic, Industry and Regulatory Developments
Economic conditions reflected heightened uncertainty in the first quarter of 2026, as inflationary pressures, due in part to global energy constraints related to the conflicts in the Middle East, contributed to market volatility. We continue to monitor these developments and the broader macroeconomic environment; however, the ultimate effects remain uncertain and dependent on future events.

Entering 2026, the benchmark federal funds range was between 3.50% - 3.75%. During the January, March, and April 2026 Federal Open Market Committee meetings, the benchmark federal funds rate was left unchanged.

The U.S. government announced changes to its trade policies in 2025 and significantly increased tariffs on certain imports under emergency authorities, including the International Emergency Economic Powers Act (the “IEEPA”). In February 2026, the Supreme Court ruled that the IEEPA does not authorize the President to impose tariffs. The current tariff environment remains dynamic and uncertain, including with respect to refunds of tariffs paid under the IEEPA and replacement measures under other legal authorities. We continue to closely monitor both the impact and potential impact of such measures on our business, our customers and on overall economic conditions in the United States.

On March 19, 2026, federal banking regulators issued revised notices of proposed rulemaking to implement the final components of the Basel III accords (the “Basel III proposals”). The proposals include, among other things, a revised standardized approach to calculating risk-weighted assets applicable to Category III and Category IV banking organizations like us, which the Federal Reserve expects to decrease aggregate Common Equity Tier 1 (“CET1”) risk-based capital requirements. Additionally, the revised proposals would eliminate the requirement to deduct mortgage servicing assets from CET1 capital and instead assign a 250% risk weight. We will continue to monitor further developments regarding the proposals and assess potential impacts to our regulatory capital requirements, including enhanced capital flexibility.

Financial Performance Summary

The following tables in this MD&A include financial data for the three months ended March 31, 2026 (the “current quarter”), December 31, 2025 (the “linked quarter”) and March 31, 2025 (the “prior year quarter”). In accordance with Item 303(c) of Regulation S-K, we focus our discussion of quarterly results of operations on changes compared to the linked quarter for the narrative discussion and analysis as we believe this provides investors and other users of our data with the most relevant information. We also include commentary comparing current quarter to prior year quarter.

We focus the discussion of our financial position by comparing balances as of March 31, 2026 to December 31, 2025. Percent changes within this MD&A are based on unrounded amounts and may not recalculate precisely using the displayed rounded balances.

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Table 1
Selected Financial Data

dollars in millions, except share data Three Months Ended
March 31, 2026 December 31, 2025 March 31, 2025
Results of Operations:
Interest income $ 2,786  $ 2,940  $ 2,895 
Interest expense 1,165  1,218  1,232 
Net interest income 1,621  1,722  1,663 
Provision for credit losses 72  54  154 
Net interest income after provision for credit losses 1,549  1,668  1,509 
Noninterest income 692  715  635 
Noninterest expense 1,536  1,572  1,493 
Income before income taxes 705  811  651 
Income tax expense 171  231  168 
Net income 534  580  483 
Preferred stock dividends 26  14  15 
Net income available to common stockholders $ 508  $ 566  $ 468 

Per Common Share Information:
Weighted average common shares outstanding (diluted) 11,924,899  12,363,028  13,575,231 
Diluted earnings per common share $ 42.63  $ 45.81  $ 34.47 

Key Performance Metrics:
Return on average assets 0.93  % 0.99  % 0.87  %
Net interest margin (1)
3.09  3.20  3.26 
Net interest margin, excluding purchase accounting accretion or amortization (1) (2)
3.01  3.11  3.12 

Select Average Balances:
Investment securities $ 41,757  $ 44,306  $ 43,555 
Total loans and leases (3)
149,890  147,047  140,882 
Operating lease equipment, net 9,660  9,495  9,350 
Total assets 233,181  233,432  225,449 
Total deposits 165,927  163,191  156,378 
Total borrowings 35,334  38,196  37,398 
Total stockholders’ equity 22,487  22,197  22,457 

Select Ending Balances:
Investment securities $ 42,986  $ 41,564  $ 44,319 
Total loans and leases 148,692  147,930  141,358 
Operating lease equipment, net 9,685  9,621  9,371 
Total assets 235,959  229,698  228,822 
Total deposits 170,842  161,578  159,325 
Total borrowings 33,962  36,008  38,406 
Total stockholders’ equity 22,048  22,238  22,295 
Loan to deposit ratio 87.04  % 91.55  % 88.72  %
Noninterest-bearing deposits to total deposits 25.52  25.16  25.59 

Capital Ratios:
Total risk-based capital 13.51  % 13.71  % 15.23  %
Tier 1 risk-based capital 11.79  11.91  13.35 
Common equity Tier 1 10.83  11.15  12.81 
Tier 1 leverage 9.30  9.29  9.75 

Select Asset Quality Metrics:
Ratio of nonaccrual loans to total loans 0.96  % 0.88  % 0.85  %
Allowance for loan and lease losses to loans ratio 1.05  1.06  1.19 

(1)      Calculated net of average credit balances of factoring clients to appropriately reflect the interest-earning portion of factoring receivables.
(2)      Net interest margin (“NIM”), excluding purchase accounting accretion or amortization (“PAA”), is a non-GAAP financial measure. Refer to the “Net Interest Income (“NII”), NIM, and Interest Income on Loans and Leases, Excluding PAA” discussion in the “Non-GAAP Financial Measurements” section of this MD&A for a reconciliation from the most comparable GAAP measure to the non-GAAP measure.
(3) Average loan balances include loans held for sale and nonaccrual loans.

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Financial highlights are summarized below. Further details are discussed in the “Results of Operations” and “Balance Sheet Analysis” sections of this MD&A.

Income Statement Highlights (Current Quarter Compared to Linked Quarter)
• Net income for the current quarter was $534 million , a decrease of $46 million or 8% from $580 million for the linked quarter. Net income available to common stockholders for the current quarter was $508 million, a decrease of $58 million or 10% from $566 million for the linked quarter. Earnings per basic and diluted common share for the current quarter was $42.63, a decrease from $45.81 for the linked quarter. The decreases in net income and net income available to common stockholders were due to lower NII and noninterest income and higher provision for credit losses, partially offset by lower noninterest expense and lower income tax expense, as further discussed below.
• NII for the current quarter was $1.62 billion, a decrease of $101 million or 6% from $1.72 billion for the linked quarter . NIM was 3.09% for the current quarter, a decrease of 11 basis points (“bps”) from 3.20% for the linked quarter. The decreases in NII and NIM were mainly due to lower yields on loans, lower average balances and yields on investment securities and interest-earning deposits at banks, and a higher average balance of interest-bearing deposits, partially offset by the impacts of a higher average balance of loans, lower rate paid on interest-bearing deposits, and a decline in average borrowings largely resulting from prepayments of the Purchase Money Note.
◦ PAA for the current quarter was $39 million, a decrease of $10 million from $49 million for the linked quarter. NIM, excluding PAA (1) was 3.01% for the current quarter, a decrease of 10 bps from 3.11% for the linked quarter.
• Noninterest income for the current quarter was $692 million , a decrease of $23 million or 3% from $715 million for the linked quarter, largely due to a decrease in other noninterest income of $15 million, mainly attributable to the linked quarter gain on tax credit investments, an unfavorable change of $9 million in the fair value of marketable equity securities, along with declines of $3 million each in factoring commissions, gain on sale of leasing equipment, and gain on sale of investment securities, partially offset by increases of $7 million in deposit fees and service charges and $5 million in lending-related fees.
• Noninterest expense for the current quarter was $1.54 billion, a decrease of $36 million or 2% from $1.57 billion for the linked quarter , mainly due to decreases in acquisition-related expenses of $28 million, other noninterest expense of $16 million and marketing expense of $15 million, partially offset by an increase in personnel cost of $20 million.
• Provision for credit losses for the current quarter was $72 million, an increase of $18 million or 33% from $54 million for the linked quarter . The current quarter provision for credit losses primarily included a provision for loan and lease losses of $103 million, partially offset by a benefit for off-balance sheet credit exposure of $32 million.
◦ The provision for loan and lease losses for the current quarter was $103 million compared to $57 million for the linked quarter. The $46 million increase in the provision for loan and lease losses was mainly attributable to the impact of an $8 million reserve release in the current quarter compared to an $86 million reserve release in the linked quarter, partially offset by a decline of $32 million in net charge-offs in the current quarter. The $8 million allowance for loan and lease losses (“ALLL”) reserve release is discussed below in the Balance Sheet Highlights.
◦ The benefit for off-balance sheet credit exposure for the current quarter was $32 million compared to $5 million for the linked quarter, an increase of $27 million, mainly due to changes in the macroeconomic scenarios and trends in the volume of unfunded commitments.
• Income tax expense for the current quarter was $171 million, a decrease of $60 million from $231 million for the linked quarter, largely due to return to provision adjustments reflected in the linked quarter.
• Return on average assets for the current quarter was 0.93%, a decrease of 6 bps from 0.99% for the linked quarter due to the decrease in net income explained above .

(1) NIM, excluding PAA is a non-GAAP measure. Refer to the “NII, NIM, and Interest Income on Loans and Leases, Excluding PAA” discussion in the “Non-GAAP Financial Measurements” section of this MD&A for further discussion.

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Income Statement Highlights (Current Quarter Compared to Prior Year Quarter)
• Net income for the current quarter was $534 million, an increase of $51 million or 11% from $483 million for the prior year quarter. Net income available to common stockholders for the current quarter was $508 million, an increase of $40 million or 9% from $468 million for the prior year quarter. Earnings per basic and diluted common share for the current quarter was $42.63, an increase from $34.47 for the prior year quarter. The increases in net income and net income available to common stockholders were due to lower provision for credit losses and higher noninterest income, partially offset by higher noninterest expense and lower NII, as further discussed below.
• NII for the current quarter was $1.62 billion, a decrease of $42 million or 3% from $1.66 billion for the prior year quarter. NIM was 3.09% for the current quarter and 3.26% for the prior year quarter. The decreases in NII and NIM were mainly due to lower yields on loans, lower yields and average balances of interest-earning deposits at banks and investment securities, lower PAA, a higher average balance of interest-bearing deposits, and a modest increase in the rate paid on subordinated debt, partially offset by the impacts of a higher average balance of loans and a decline in the rate paid on interest-bearing deposits.
◦ PAA for the current quarter was $39 million, a decrease of $36 million from $75 million for the prior year quarter. NIM, excluding PAA (1) was 3.01% for the current quarter, a decrease of 11 bps from 3.12% for the prior year quarter.
• Noninterest income for the current quarter was $692 million, an increase of $57 million or 9% from $635 million for the prior year quarter, largely due to increases in other noninterest income of $24 million, deposit fees and service charges of $12 million, rental income on operating lease equipment of $11 million, along with a favorable change of $8 million in the fair value of marketable equity securities, and an increase of $6 million in the gain on sale of leasing equipment.
• Noninterest expense for the current quarter was $1.54 billion, an increase of $43 million or 3% from $1.49 billion for the prior year quarter, mainly due to increases in personnel cost of $51 million, third-party processing fees of $30 million, and maintenance and other operating lease expenses of $7 million, partially offset by decreases in acquisition-related expenses of $37 million and other noninterest expense of $8 million.
• Provision for credit losses for the current quarter was $72 million, a decrease of $82 million or 53% from $154 million for the prior year quarter, primarily consisting of the following:
◦ The provision for loan and lease losses for the current quarter was $103 million compared to $148 million for the prior year quarter. The $45 million decrease in the provision for loan and lease losses was mainly attributable to a decrease in net charge-offs of $33 million and a $12 million decline in the reserve release. In the current quarter, the reserve release was $8 million, compared to a $4 million reserve build in the prior year quarter. The $8 million ALLL reserve release for the current quarter is discussed below in the Balance Sheet Highlights.
◦ The benefit for off-balance sheet credit exposure for the current quarter was $32 million compared to a provision for the prior year quarter of $6 million, resulting in a decrease in provision of $38 million, mainly due to changes in the macroeconomic scenarios and trends in the volume of unfunded commitments.
• Return on average assets for the current quarter was 0.93%, an increase of 6 bps from 0.87% for the prior year quarter due to the increase in net income explained above .

(1) NIM, excluding PAA is a non-GAAP measure. Refer to the “NII, NIM, and Interest Income on Loans and Leases, Excluding PAA” discussion in the “Non-GAAP Financial Measurements” section of this MD&A for further discussion.
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Balance Sheet Highlights
• Loans and leases at March 31, 2026 were $148.69 billion, an increase of $762 million or 1% from $147.93 billion at December 31, 2025. Commercial Bank segment loan growth of $1.35 billion, mainly concentrated in Global Fund Banking, was partially offset by a decrease in General Bank segment loans of $591 million, primarily due to the transfer of $364 million Small Business Administration (“SBA”) loans to held for sale in March 2026.
• Investment securities at March 31, 2026 were $42.99 billion, an increase of $1.42 billion or 3% from $41.56 billion at December 31, 2025, as purchases of short duration available for sale U.S. treasury and agency mortgage-backed securities were partially offset by maturities and paydowns.
• Deposits at March 31, 2026 were $170.84 billion, an increase of $9.26 billion or 6% from $161.58 billion at December 31, 2025. As further discussed and shown in Table 2 below, the increase from December 31, 2025 was attributable to deposit growth in the Commercial Bank segment of $5.66 billion, Corporate of $2.49 billion, and the General Bank segment of $1.12 billion. Noninterest-bearing deposits grew by $2.95 billion or 7% compared to December 31, 2025, and represented 25.5% of total deposits as of March 31, 2026, compared to 25.2% at December 31, 2025.
• Borrowings at March 31, 2026 were $33.96 billion, a decrease of $2.05 billion or 6% from $36.01 billion at December 31, 2025. The decrease was primarily due to prepayments of $2.50 billion on the Purchase Money Note during the current quarter, partially offset by the $500 million Current Quarter Debt Issuance.
• The ALLL was $1.56 billion at March 31, 2026, compared to $1.57 billion at December 31, 2025, resulting in an ALLL reserve release of $8 million for the current quarter, largely due to loan growth concentrated in capital call lines, which have a significantly lower loss rate relative to our other loan portfolios, and changes in the macroeconomic scenarios, partially offset by higher reserves for individually evaluated loans. The ALLL as a percentage of loans was 1.05% at March 31, 2026, a decrease of 1 bp from 1.06% at December 31, 2025.
• Interest-earning deposits at banks were $23.19 billion at March 31, 2026, an increase of $3.39 billion compared to $19.80 billion at December 31, 2025, a function of the balance sheet trends discussed above.
• At March 31, 2026, BancShares remained well capitalized with a total risk-based capital ratio of 13.51%, a Tier 1 risk-based capital ratio of 11.79%, a CET1 ratio of 10.83% and a Tier 1 leverage ratio of 9.30%.

Funding, Liquidity and Capital Overview

Deposit Composition and Trends
We fund our business primarily through deposits. Deposits represented 83% of total funding at March 31, 2026.

Table 2
Deposit Trends

dollars in millions Deposit Balance

March 31, 2026 December 31, 2025
General Bank segment $ 75,914  $ 74,796 
Commercial Bank segment 47,191  41,532 

Corporate and Rail segment 47,737  45,250 
Total deposits $ 170,842  $ 161,578 

Deposit trends for the segments and Corporate at March 31, 2026 compared to December 31, 2025 are discussed below:
• Commercial Bank segment deposit growth of $5.66 billion was mainly in Gl obal Fund Banking and Technology and Healthcare Banking. A portion of this deposit growth stems from large short-term deposits which we expect to outflow or move off-balance sheet shortly after March 31, 2026. Most of the growth was in noninterest-bearing demand and money-market deposits.
• Corporate deposit growth of $2.49 billion was primarily due to brokered and Direct Bank deposit increases of $1.83 billion and $606 million, respectively. We utilized brokered deposits more prevalently in the current quarter as rates were favorable relative to Direct Bank deposits. We will continue to monitor the rate environments for brokered and Direct Bank deposits to determine the target growth for these deposit channels.
• General Bank segment deposit growth of $1.12 billion was primarily concentrated in our Branch Network and Community Association Banking (“CAB”). Deposit growth was mostly in money market and interest checking.

Total uninsured deposits were $65.44 billion or 38% of total deposits at March 31, 2026 and $61.81 billion or 38% at December 31, 2025.

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Refer to the “Balance Sheet Analysis—Interest-bearing Liabilities—Deposits” section of this MD&A for further discussion of deposits.

Liquidity Position
We strive to maintain a strong liquidity position and our risk appetite for liquidity is low. At March 31, 2026, we had $60.72 billion in high-quality liquid assets consisting of $22.14 billion in cash and interest-earning deposits at banks (primarily held at the Federal Reserve Bank (“FRB”)) and $38.58 billion in high-quality liquid securities (“HQLS”), mainly comprised of U.S. agency mortgage-backed and U.S. Treasury investment securities. Additionally, we have unused borrowing capacity with the Federal Home Loan Bank (“FHLB”) and FRB of $17.35 billion and $12.94 billion, respectively. Refer to the “Risk Management—Liquidity Risk” section of this MD&A for further discussion.

In connection with the SVBB Acquisition, FCB issued a five-year, 3.50% fixed rate Purchase Money Note, which had a carrying value of $30.91 billion at March 31, 2026. While scheduled principal payments are not required until maturity in March 2028, FCB may voluntarily prepay principal without a premium or penalty. FCB prepaid $2.50 billion of the Purchase Money Note during the current quarter and previously prepaid $2.49 billion in December 2025, which reduced the outstanding balance from $35.85 billion at September 30, 2025 to $30.91 billion at March 31, 2026. Additionally, we prepaid $500 million in April 2026. We will continue to monitor the interest rate environment, FCB’s collateral position for the Purchase Money Note, and FCB’s liquidity position to determine the timing and magnitude of further voluntary prepayments. We expect monthly prepayments to be at least $500 million throughout 2026. Potential sources that could fund voluntary prepayments or the amount due at maturity include excess liquidity (primarily comprised of interest-earning deposits at banks and proceeds from maturities and paydowns of investment securities), deposit growth including brokered deposits, loan sales or securitizations, FHLB advances, and issuance of perpetual preferred stock, unsecured debt or other borrowings. At the time of any further voluntary prepayment or maturity, the interest rates for the potential interest-bearing sources of prepayment could be higher than the 3.50% rate.

Investment Securities Duration
At March 31, 2026, our investment securities portfolio primarily consisted of debt securities available for sale and held to maturity as summarized below. We manage debt security market risk by monitoring the average duration of our investment securities portfolio. The duration of our investment securities was 2.6 years at March 31, 2026. The investment securities available for sale portfolio had an average duration of 2.2 years and the held to maturity portfolio had an average duration of 4.0 years. Refer to the “Balance Sheet Analysis—Interest-earning Assets—Investment Securities” section of this MD&A and Note 3—Investment Securities for further information.

Table 3
Investment Securities Summary

dollars in millions March 31, 2026
Composition (1)
Amortized Cost Fair Value
Fair Value to Amortized Cost

Total investment securities available for sale 79.7  % $ 33,663  $ 33,314  99.0  %
Total investment securities held to maturity 20.0  9,542  8,360  87.6 
Investment in marketable equity securities 0.3  83  130  156.9 
Total investment securities 100  % $ 43,288  $ 41,804 
(1) Calculated as a percentage of the total fair value of investment securities.

Capital Position
At March 31, 2026, all regulatory capital ratios for BancShares and FCB exceeded the prompt corrective action (“PCA”) thresholds, well capitalized thresholds, and Basel III requirements established by the federal banking agencies as further discussed in the “Capital” section of this MD&A.

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RESULTS OF OPERATIONS

Net Interest Income and Net Interest Margin

NII is affected by changes in interest rates and changes in the amount and composition of interest-earning assets and interest-bearing liabilities. Interest income and expense and the respective yields and rates include amortization of premiums, accretion of discounts, and impacts from hedging activities.

The following tables present the average balances of interest-earning assets and interest-bearing liabilities with the associated yields and rates, interest income and expense, and changes therein due to changes in volume and yields or rates. Changes in interest income and expense due to changes in (i) volume (average balances of interest-earning assets and interest-bearing liabilities) and (ii) yields or rates are based on the following:
• The change in NII due to volume is calculated as the change in average balance multiplied by the yield or rate from the prior period.
• The change in NII due to yield or rate is calculated as the change in yield or rate multiplied by the average balance from the prior period.
• The change in NII due to changes in both volume and yield or rate (i.e., portfolio mix) is calculated as the change in rate multiplied by the change in volume. This component is allocated between the changes due to volume and yield or rate based on the ratio each component bears to the absolute dollar amounts of their total.
• Tax equivalent NII was not materially different from NII, therefore we present NII in our analysis.

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Table 4
Average Balances, Yields and Rates, NII, and NIM (Current Quarter Compared to Linked Quarter)

dollars in millions Average Balance Yield / Rate Interest Income / Expense
Three Months Ended Increase (Decrease) Three Months Ended Three Months Ended Increase (Decrease) due to:
Mar 31, 2026 Dec 31, 2025 Mar 31, 2026 Dec 31, 2025 Increase (decrease) bps Mar 31, 2026 Dec 31, 2025 Increase (Decrease) Volume (1)
Yield /Rate (1)

Loans and leases (1) (2)
$ 148,666  $ 145,689  $ 2,977  2.0  % 6.01  % 6.24  % (23) $ 2,206  $ 2,290  $ (84) $ 30  $ (114)
Investment securities 41,757  44,306  (2,549) (5.8) 3.67  3.80  (13) 382  421  (39) (25) (14)
Securities purchased under agreements to resell 305  285  20  7.0  3.65  4.00  (35) 2  3  (1) —  (1)
Interest-earning deposits at banks 21,824  23,014  (1,190) (5.2) 3.64  3.90  (26) 196  226  (30) (13) (17)
Total interest-earning assets (2)
$ 212,552  $ 213,294  $ (742) (0.3) 5.30  5.48  (18) $ 2,786  $ 2,940  $ (154) $ (8) $ (146)

Noninterest-earning assets 20,629  20,138  491  2.4 
Total assets $ 233,181  $ 233,432  $ (251) (0.1)

Interest-bearing deposits
Checking with interest $ 25,341  $ 23,907  $ 1,434  6.0  % 1.52  % 1.57  % (5) $ 95  $ 94  $ 1  $ 4  $ (3)
Money market 41,196  39,792  1,404  3.5  2.38  2.59  (21) 242  260  (18) 6  (24)
Savings 46,720  46,618  102  0.2  3.46  3.51  (5) 398  412  (14) —  (14)
Time deposits 11,946  11,116  830  7.5  3.31  3.38  (7) 98  95  3  5  (2)
Total interest-bearing deposits 125,203  121,433  3,770  3.1  2.70  2.81  (11) 833  861  (28) 15  (43)
Borrowings:

Short-term borrowings 197  265  (68) (25.6) 0.37  0.52  (15) —  —  —  —  — 

Senior unsecured borrowings 718  556  162  29.3  5.23  5.27  (4) 10  7  3  3  — 
Subordinated debt 1,771  1,774  (3) (0.2) 5.28  5.20  8 23  24  (1) (1) — 
Other borrowings 32,648  35,601  (2,953) (8.3) 3.66  3.67  (1) 299  326  (27) (27) — 
Long-term borrowings 35,137  37,931  (2,794) (7.4) 3.78  3.76  2 332  357  (25) (25) — 
Total borrowings 35,334  38,196  (2,862) (7.5) 3.76  3.74  2 332  357  (25) (25) — 
Total interest-bearing liabilities $ 160,537  $ 159,629  $ 908  0.6  2.93  3.03  (10) $ 1,165  $ 1,218  $ (53) $ (10) $ (43)

Noninterest-bearing liabilities $ 50,157  $ 51,606  $ (1,449) (2.8)
Stockholders' equity 22,487  22,197  290  1.3 
Total liabilities and stockholders’ equity $ 233,181  $ 233,432  $ (251) (0.1)

Net interest spread (2)
2.37  % 2.45  % (8)
Net interest margin and net interest income (2)
3.09  % 3.20  % (11) $ 1,621  $ 1,722  $ (101)

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

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

(1) Refer to the “NII, NIM, and Interest Income on Loans and Leases, Excluding PAA” discussion in the “Non-GAAP Financial Measurements” section of this MD&A for further information.

Refer to the “Executive Overview—Financial Performance Summary—Balance Sheet Highlights,” “Balance Sheet Analysis—Interest-earning Assets,” and “Balance Sheet Analysis—Interest-bearing Liabilities” sections of this MD&A for discussions of balance sheet trends that impact average interest-earning assets, average interest-bearing liabilities, and the related yields and rates paid.
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Table 5
Average Balances, Yields and Rates, NII, and NIM (Current Quarter Compared to Prior Year Quarter)

dollars in millions Average Balance Yield / Rate Interest Income / Expense
Three Months Ended Increase (Decrease) Three Months Ended Three Months Ended Increase (Decrease) due to:
Mar 31, 2026 Mar 31, 2025 Mar 31, 2026 Mar 31, 2025 Increase (decrease) bps Mar 31, 2026 Mar 31, 2025 Increase (Decrease) Volume (1)
Yield /Rate (1)

Loans and leases (1) (2)
$ 148,666  $ 139,491  $ 9,175  6.6  % 6.01  % 6.49  % (48) $ 2,206  $ 2,236  $ (30) $ 141  $ (171)
Investment securities 41,757  43,555  (1,798) (4.1) 3.67  3.79  (12) 382  411  (29) (16) (13)
Securities purchased under agreements to resell 305  283  22  8.0  3.65  4.37  (72) 2  3  (1) —  (1)
Interest-earning deposits at banks 21,824  22,699  (875) (3.8) 3.64  4.38  (74) 196  245  (49) (9) (40)
Total interest-earning assets (2)
$ 212,552  $ 206,028  $ 6,524  3.2  5.30  5.68  (38) $ 2,786  $ 2,895  $ (109) $ 116  $ (225)

Noninterest-earning assets 20,629  19,421  1,208  6.1 
Total assets $ 233,181  $ 225,449  $ 7,732  3.4 

Interest-bearing deposits
Checking with interest $ 25,341  $ 23,931  $ 1,410  5.9  1.52  % 1.77  % (25) $ 95  $ 104  $ (9) $ 6  $ (15)
Money market 41,196  36,760  4,436  12.1  2.38  2.83  (45) 242  257  (15) 28  (43)
Savings 46,720  43,918  2,802  6.4  3.46  3.85  (39) 398  417  (19) 25  (44)
Time deposits 11,946  12,615  (669) (5.3) 3.31  3.71  (40) 98  115  (17) (5) (12)
Total interest-bearing deposits 125,203  117,224  7,979  6.8  2.70  3.09  (39) 833  893  (60) 54  (114)
Borrowings:

Short-term borrowings 197  428  (231) (53.9) 0.37  0.52  (15) —  1  (1) (1) — 

Senior unsecured borrowings 718  169  549  325.6  5.23  4.88  35 10  2  8  8  — 
Subordinated debt 1,771  959  812  84.6  5.28  3.36  192 23  8  15  9  6 
Other borrowings 32,648  35,842  (3,194) (8.9) 3.66  3.66  — 299  328  (29) (29) — 
Long-term borrowings 35,137  36,970  (1,833) (5.0) 3.78  3.66  12 332  338  (6) (12) 6 
Total borrowings 35,334  37,398  (2,064) (5.5) 3.76  3.62  14 332  339  (7) (13) 6 
Total interest-bearing liabilities $ 160,537  $ 154,622  $ 5,915  3.8  2.93  3.22  (29) $ 1,165  $ 1,232  $ (67) $ 41  $ (108)

Noninterest-bearing liabilities $ 50,157  $ 48,370  $ 1,787  3.7 
Stockholders' equity 22,487  22,457  30  0.1 
Total liabilities and stockholders’ equity $ 233,181  $ 225,449  $ 7,732  3.4 

Net interest spread (2)
2.37  % 2.46  % (9)
Net interest margin and net interest income (2)
3.09  % 3.26  % (17) $ 1,621  $ 1,663  $ (42)

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

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NII and NIM ( Current Quarter Compared to Prior Year Quarter )
The table above quantifies the increases or decreases for the current quarter compared to the prior year quarter for NII and NIM, as well as average balances of interest-earning assets and interest-bearing liabilities, and the respective yields earned and rates paid. The main reasons for the increases and decreases are explained below:
• NII for the current quarter was $1.62 billion, a decrease of $42 million or 3% from $1.66 billion in the prior year quarter. NII, excluding PAA, (1) was $1.58 billion for the current quarter, a decrease of $6 million from $1.59 billion for the prior year quarter. The main reasons for the decreases in NII and NII, excluding PAA, (1) are explained below:
◦ Interest income on interest-earning deposits at banks for the current quarter was $196 million, a decrease of $49 million or 20% from $245 million for the prior year quarter, due to a decline in the federal funds rate and a lower average balance.
◦ Interest income on loans and leases for the current quarter was $2.21 billion, a decrease of $30 million or 4% from $2.24 billion for the prior year quarter, mainly due to a lower yield and lower loan PAA, partially offset by the impact of a higher average balance.
• Interest income on loans and leases, excluding loan PAA, (1) was $2.16 billion for the current quarter, an increase of $6 million from $2.15 billion for the prior year quarter .
• Loan PAA was $48 million in the current quarter, a decrease of $36 million or 43% from $84 million in the prior year quarter.
◦ Interest income on investment securities (including securities purchased under agreements to resell) for the current quarter was $384 million, a decrease of $30 million or 7% from $414 million for the prior year quarter, due to a lower average balance and a decline in the yield.
◦ Interest expense on interest-bearing deposits for the current quarter was $833 million, a decrease of $60 million or 7% from $893 million for the prior year quarter, as a lower rate paid was partially offset by the impact of a higher average balance.
◦ Interest expense on borrowings for the current quarter was $332 million, a decrease of $7 million or 2% from $339 million for the prior year quarter, due to a lower average balance, partially offset by a higher rate paid.
• NIM for the current quarter was 3.09%, a decrease of 17 bps from 3.26% for the prior year quarter. The decline in NIM was mainly due to lower yields on loans, lower average balances and yields on interest-earning deposits at banks and investment securities, lower PAA, a higher average balance of interest-bearing deposits, and a higher rate paid on borrowings, partially offset by the impact of a decline in the rate paid on interest-bearing deposits, a higher average balance of loans, and a lower average balance of borrowings. NIM, excluding PAA, (1) was 3.01% for the current quarter, a decrease of 11 bps from 3.12% for the prior year quarter.
◦ The yield on average interest-earning assets for the current quarter was 5.30%, a decrease of 38 bps from 5.68% for the prior year quarter, mainly due to a decline in yield on loans and interest-earning deposits at banks, as well as lower loan PAA, partially offset by a higher volume of loans.
◦ The rate paid on average interest-bearing liabilities for the current quarter was 2.93%, a decrease of 29 bps from 3.22% for the prior year quarter, primarily due to a lower rate paid on interest-bearing deposits and a lower average balance of borrowings, partially offset by the impacts of a higher average balance of interest-bearing deposits and a higher rate paid for borrowings.

(1) Refer to the “NII, NIM, and Interest Income on Loans and Leases, Excluding PAA” discussion in the “Non-GAAP Financial Measurements” section of this MD&A for further information.

The following table shows the types of average interest-earning assets as a percentage of total average interest-earning assets.

Table 6
Average Interest-earning Asset Mix

Three Months Ended
March 31, 2026 December 31, 2025 March 31, 2025
Loans and leases 70  % 68  % 68  %
Investment securities 20  21  21 

Interest-earning deposits at banks 10  11  11 
Total interest-earning assets 100  % 100  % 100  %

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The following table shows the average interest-bearing liabilities as a percentage of total average interest-bearing liabilities.

Table 7
Average Interest-bearing Liability Mix

Three Months Ended
March 31, 2026 December 31, 2025 March 31, 2025
Total interest-bearing deposits 78  % 76  % 76  %

Long-term borrowings 22  24  24 
Total interest-bearing liabilities 100  % 100  % 100  %

Provision for Credit Losses

Table 8
Provision for Credit Losses

dollars in millions Three Months Ended Increase (Decrease) from Linked Quarter Increase (Decrease) from Prior Year Quarter
March 31, 2026 December 31, 2025 March 31, 2025

Provision for loan and lease losses
$ 103  $ 57  $ 148  $ 46  77.4  % (45) (30.2) %

(Benefit) provision for off-balance sheet credit exposure (32) (5) 6  (27) (529.3) (38) (636.6)

Provision for other receivables 1  2  —  (1) (16.0) 1  100.0 
Provision for credit losses $ 72  $ 54  $ 154  $ 18  33.4  % $ (82) (53.4) %

The provision for credit losses for the current quarter was $72 million, an increase of $18 million or 33%, from $54 million for the linked quarter . The current quarter provision for credit losses primarily included a provision for loan and lease losses of $103 million, partially offset by a benefit for off-balance sheet credit exposure of $32 million.
• The provision for loan and lease losses for the current quarter was $103 million, an increase of $46 million from $57 million for the linked quarter, mainly attributable to a decrease in net charge-offs of $32 million, as well as the impact of a $8 million reserve release in the current quarter compared to an $86 million reserve release in the linked quarter.
◦ Net charge-offs were $111 million (0.30% of average loans) for the current quarter, compared to $143 million (0.39% of average loans) for the linked quarter. The $32 million decrease was primarily related to lower net charge-offs in commercial real estate and investor dependent portfolios.
◦ The decrease of $8 million in the ALLL at March 31, 2026 compared to December 31, 2025 primarily reflected loan growth concentrated in capital call lines, which have a significantly lower loss rate relative to our other loan portfolios, and changes in the macroeconomic scenarios, partially offset by higher reserves for individually evaluated loans.
◦ The $86 million reserve release in the linked quarter was driven by lower specific reserves for individually evaluated loans, loan growth concentrated in capital call lines, and improvements in the macroeconomic scenarios and credit quality.
• The benefit for off-balance sheet credit exposure for the current quarter was $32 million compared to $5 million in the linked quarter. The $27 million increase in the benefit for off-balance sheet credit exposure was mainly due to changes in the macroeconomic scenarios and trends in the volume of unfunded commitments.

Pr ovision for credit losses for the current quarter was $72 million, a decrease of $82 million or 53% from $154 million for the prior y ear quarter, primarily consisting of the following:
• The provision for loan and lease losses for the current quarter was $103 million compared to $148 million for the prior year quarter. The $45 million decrease in the provision for loan and lease losses was mainly attributable to lower net charge- offs of $33 million, as well as the impact of an $8 million reserve release in the current quarter compared to a $4 million reserve build in the prior year quarter.
◦ The benefit for off-balance sheet credit exposure for the current quarter was $32 million compared to a provision for the prior year quarter of $6 million, resulting in a decrease in provision of $38 million, mainly due to changes in the macroeconomic scenarios and trends in the volume of unfunded commitments.

The ALLL and net charge-offs are further discussed in the “Risk Management—Credit Risk” section of this MD&A and in Note 6—Allowance for Loan and Lease Losses.
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Noninterest Income

The following table presents noninterest income:

Table 9
Noninterest Income

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

Loss on extinguishment of debt (8) (9) —  1  10.6  (8) (100.0)
Other noninterest income 38  53  14  (15) (29.8) 24  180.8 

Total noninterest income $ 692  $ 715  $ 635  $ (23) (3.2) % $ 57  8.9  %

Noninterest income for the current quarter was $692 million, a decrease of $23 million or 3% from $715 million for the linked quarter, primarily due to the following:
• The decrease in other noninterest income of $15 million was mainly attributable to the linked quarter gain on tax credit investments as a large renewable energy project was placed in service.
• The unfavorable change of $9 million in the fair value of marketable equity securities was due to lower market prices for the underlying securities.
• The increase of $7 million in deposit fees and service charges was primarily due to an increase in overdraft fees.
• The increase of $5 million in lending-related fees was primarily due to higher capital market fees, partially offset by a decrease in fees on lines of credit due to lower unused lines.
• The loss on extinguishment of debt for the current and linked quarters relates to prepayments of the Purchase Money Note.

Noninterest income for the current quarter was $692 million, an increase of $57 million or 9% from $635 million for the prior year quarter as further discussed below:
• The increase in other noninterest income of $24 million was mainly attributable to higher derivative income and higher other real estate owned (“OREO”) income due to a write down in the prior year quarter.
• The increase of $12 million in deposit fees and service charges was primarily due to an increase in overdraft fees implemented during the current quarter, as well as higher volume-related service charges for commercial clients.
• The increase in rental income on operating lease equipment of $11 million was mainly the result of growth in the railcar portfolio.
• The favorable change of $8 million in the fair value of marketable equity securities was due to higher market prices for the underlying securities.
• The increase of $6 million in gain on sale of leasing equipment was primarily the result of higher volume of rail equipment sales.
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Noninterest Expense

The following table presents noninterest expense:

Table 10
Noninterest Expense

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

Total noninterest expense $ 1,536  $ 1,572  $ 1,493  $ (36) (2.3) % $ 43  2.9  %

Noninterest expense for the current quarter was $1.54 billion, a decrease of $36 million or 2% from $1.57 billion for the linked quarter as further discussed below:
• The decrease in acquisition-related expenses of $28 million is summarized in Table 11 and discussed below.
• The decrease in other noninterest expense of $16 million was mainly due to timing of charitable contributions.
• The decrease in marketing expense of $15 million was primarily related to fewer marketing promotions for Direct Bank deposits, as costs are contingent on the timing of our marketing initiatives.
• The decrease in professional fees of $10 million was mostly due to lower consulting service costs.
• The increase in personnel cost of $20 million was largely due to seasonal increases in employee benefits and payroll taxes, partially offset by lower life and health insurance premiums, which are generally higher in the fourth quarter due to employees reaching their annual deductibles.
• The increase in FDIC insurance expense of $11 million was primarily due to the linked quarter including a reversal of a previously accrued $11 million special assessment charge.
• The increase of $18 million in third party processing fees was largely offset by a decrease of $15 million in equipment expense as technology platforms shift to cloud computing.

Noninterest expense for the current quarter was $1.54 billion, an increase of $43 million or 3% from $1.49 billion for the prior year quarter as further discussed below:
• The increase in personnel cost of $51 million was mainly due to higher salaries, reflecting net staff additions and higher merit and promotion costs, in addition to higher employee benefit costs.
• The increase in third-party processing fees of $30 million was largely due to our transition to more cloud-based computing services.
• The increase of $7 million in maintenance and other operating lease expenses reflect timing and the number of railcars coming on or off lease as well as asset condition. Refer to the “Results by Segment—Rail” section of this MD&A for further information.
• The decrease in acquisition-related expenses of $37 million is summarized in Table 11 and discussed below.
• The decrease in other noninterest expense of $8 million was mainly due to the prior year quarter including capitalized software impairment and higher charitable contributions, partially offset by higher operating costs for foreclosed and repossessed assets in the current quarter.
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Table 11
Acquisition-related Expenses

dollars in millions Three Months Ended
March 31, 2026 December 31, 2025 March 31, 2025
Personnel cost $ 1  $ 15  $ 15 
Professional fees 1  16  26 

Other acquisition-related expense 3  2  1 
Total acquisition-related expense $ 5  $ 33  $ 42 

The current quarter acquisition-related expenses relate to the pending BMO Branch Acquisition. Acquisition-related expenses for the linked and prior year quarters include costs related to previous acquisitions.

Acquisition-related personnel cost primarily includes severance and retention costs for employees associated with business combinations. These amounts are recognized over the requisite service period, if any.

Acquisition-related professional fees mainly include consulting, legal and accounting costs associated with business combinations and the related integration, optimization, and business process reengineering, including enhancements to technology. These amounts are expensed as incurred.

Income Taxes

Table 12
Income Tax Data

dollars in millions Three Months Ended
March 31, 2026 December 31, 2025 March 31, 2025
Income before income taxes $ 705  $ 811  $ 651 
Income tax expense $ 171  $ 231  $ 168 
Effective income tax rate 24.3  % 28.4  % 25.8  %

The effective income tax rate (“ETR”) was 24.3% for the current quarter compared to 28.4% for the linked quarter and 25.8% for the prior year quarter. The higher tax expense and ETR for the linked quarter was primarily driven by the return to provision adjustments reflected therein. The decrease in the ETR compared to the prior year quarter was primarily due to a reduction in the state and local income tax rate and an increase in the benefit from tax credits.

The ETR is impacted by a number of factors, including the relative mix of domestic, state, and international earnings, effects of changes in enacted tax laws, adjustments to valuation allowances, and discrete items. The ETR in future periods may vary from the current quarter ETR due to changes in these factors.

BancShares monitors and evaluates the potential impact of current events on the estimates used to establish income tax expense and income tax liabilities. On a periodic basis, we evaluate our income tax positions based on current tax law and positions taken by various tax auditors within the jurisdictions where BancShares is required to file income tax returns, as well as potential or pending audits or assessments by tax auditors. Refer to Note 16—Income Taxes for additional information.

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RESULTS BY SEGMENT

BancShares’ segments include the General Bank, the Commercial Bank, and Rail. All other financial information not included in the segments is reported in the Corporate section of the segment disclosures.

Refer to Note 18—Segment Information for descriptions of segment products and services.

General Bank

Table 13
General Bank: Financial Data

dollars in millions Three Months Ended Increase (Decrease) from Linked Quarter Increase (Decrease) from Prior Year Quarter
Earnings Summary March 31, 2026 December 31, 2025 March 31, 2025
Net interest income $ 813  $ 841  $ 788  $ (28) (3.4) % $ 25  3.2  %
Total noninterest income 172  170  164  2  0.9  8  4.7 
Total revenue 985  1,011  952  (26) (2.7) 33  3.4 
Personnel cost 215  211  210  4  2.0  5  2.3 

All other noninterest expense 385  393  355  (8) (2.2) 30  8.4 
Total noninterest expense 600  604  565  (4) (0.7) 35  6.2 

Provision for credit losses 17  17  46  —  —  (29) (63.0)
Income before income taxes 368  390  341  (22) (5.9) 27  8.0 
Income tax expense 90  82  88  8  9.5  2  2.4 
Net income $ 278  $ 308  $ 253  $ (30) (10.0) $ 25  10.0 

Select Period End Balances
Loans and leases $ 64,367  $ 64,958  $ 64,847  $ (591) (0.9) % $ (480) (0.7) %

Deposits 75,914  74,796  74,309  1,118  1.5  1,605  2.2 

General Bank segment net income for the current quarter decreased $30 million from the linked quarter, primarily due to a $28 million decrease in NII, mainly due to the impact of growth in interest-bearing deposits. General Bank segment deposits were $75.91 billion at March 31, 2026, compared to $74.80 billion at December 31, 2025. Deposit growth of $1.12 billion was mostly concentrated in our Branch Network and CAB.

General Bank segment loans were $64.37 billion at March 31, 2026, a decrease of $591 million compared to $64.96 billion at December 31, 2025, primarily due to a transfer of $364 million of SBA loans to held for sale in March 2026.

General Bank segment net income for the current quarter increased $25 million compared to the prior year quarter, primarily due to lower provision for credit losses, higher NII, and higher noninterest income, partially offset by higher noninterest expense.
• The $29 million decrease in provision for credit losses was largely due to the impact of a reserve release in the current quarter compared to a reserve build in the prior year quarter.
• The $25 million increase in NII was largely due to a decline in the rates paid on interest-bearing deposits.
• The $8 million increase in total noninterest income was mostly due to higher deposit fees and service charges, including overdraft fees.
• The $35 million increase in total noninterest expense was mainly due to a $30 million increase in all other noninterest expense, which includes allocated expenses.

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Commercial Bank

Table 14
Commercial Bank: Financial Data

dollars in millions Three Months Ended Increase (Decrease) from Linked Quarter Increase (Decrease) from Prior Year Quarter
Earnings Summary March 31, 2026 December 31, 2025 March 31, 2025
Net interest income $ 802  $ 834  $ 786  $ (32) (3.9) % $ 16  2.0  %
Noninterest Income
Rental income on operating lease equipment 55  55  56  —  —  (1) (1.2)

All other noninterest income 230  241  201  (11) (5.0) 29  14.6 
Total noninterest income 285  296  257  (11) (3.9) 28  11.2 

Total revenue 1,087  1,130  1,043  (43) (3.9) 44  4.3 

Noninterest Expense
Personnel cost 199  180  190  19  10.2  9  4.6 

Depreciation on operating lease equipment 43  44  44  (1) (1.2) (1) (2.1)
All other noninterest expense 404  432  420  (28) (6.8) (16) (3.5)
Total noninterest expense 646  656  654  (10) (1.7) (8) (1.1)

Provision for credit losses 55  37  108  18  48.3  (53) (49.2)
Income before income taxes 386  437  281  (51) (11.6) 105  37.3 
Income tax expense 95  102  72  (7) (5.8) 23  30.3 
Net income $ 291  $ 335  $ 209  $ (44) (13.4) $ 82  39.8 

Select Period End Balances
Loans and leases $ 84,263  $ 82,910  $ 76,449  $ 1,353  1.6  % $ 7,814  10.2  %
Operating lease equipment, net 717  739  731  (22) (3.0) (14) (1.8)

Deposits 47,191  41,532  40,014  5,659  13.6  7,177  17.9 

Table 15
Adjusted Rental Income on Operating Lease Equipment (non-GAAP)

dollars in millions Three Months Ended Increase (Decrease) from Linked Quarter Increase (Decrease) from Prior Year Quarter
March 31, 2026 December 31, 2025 March 31, 2025
Rental income on operating leases (GAAP) $ 55  $ 55  $ 56  $ —  —  % $ (1) (1.2) %
Less: depreciation on operating lease equipment 43  44  44  (1) (1.2) (1) (2.1)

Adjusted rental income on operating lease equipment (non-GAAP) (1)
$ 12  $ 11  $ 12  $ 1  9.1  $ —  — 

(1)     Adjusted rental income on operating lease equipment is a non-GAAP measure. Refer to the “Non-GAAP Financial Measurements” section of this MD&A for a reconciliation from the most comparable GAAP measure to the non-GAAP measure.

Commercial Bank segment net income for the current quarter decreased $44 million compared to the linked quarter, primarily due to lower NII, higher provision for credit losses, and lower noninterest income, partially offset by lower noninterest expense.
• The $32 million decrease in NII was mostly due to a lower yield on loans and the impact of growth in interest-bearing deposits, partially offset by the impact of loan growth and a lower rate paid on interest-bearing deposits.
• The $18 million increase in provision for credit losses was largely due to higher reserves for individually evaluated loans.
• The $11 million decrease in total noninterest income was largely attributable to a lower gain on renewable energy tax credit investments, as a large project was placed in service during the linked quarter, and decreases in the gain on sale of leasing equipment and factoring commissions, partially offset by higher lending-related fees.
• The $10 million decrease in total noninterest expense mainly included a $28 million decrease in all other noninterest expense, which includes allocated expenses, partially offset by an increase of $19 million in personnel cost.

Commercial Bank segment loans were $84.26 billion at March 31, 2026, an increase of $1.35 billion from $82.91 billion at December 31, 2025, mainly concentrated in Global Fund Banking.

Commercial Bank deposits were $47.19 billion at March 31, 2026, an increase of $5.66 billion from $41.53 billion at December 31, 2025. Deposit growth was primarily in Global Fund Banking and Technology and Healthcare Banking.
68

Commercial Bank segment net income for the current quarter increased $82 million compared to the prior year quarter, primarily due to lower provision for credit losses, higher noninterest income, higher NII, and lower noninterest expense.
• The $53 million decrease in provision for credit losses was largely due to lower net charge-offs.
• The $28 million increase in total noninterest income was largely due to the prior year quarter including a write-down of a held for sale asset. Additionally, the current quarter reflected increases in lending-related fees and derivative income.
• The $16 million increase in NII was largely due to the impact of loan growth and a lower rate paid on interest-bearing deposits, partially offset by a lower yield on loans and the impact of deposit growth.
• The $8 million decrease in total noninterest expense was mainly due to a $16 million decrease in all other noninterest expense, which includes allocated expenses, partially offset by an increase of $9 million in personnel cost.

Rail

Table 16
Rail: Financial Data

dollars in millions Three Months Ended Increase (Decrease) from Linked Quarter Increase (Decrease) from Prior Year Quarter
Earnings Summary March 31, 2026 December 31, 2025 March 31, 2025
Net interest income (expense) $ (58) $ (53) $ (52) $ (5) (9.1) % $ (6) (11.9) %
Noninterest Income
Rental income on operating lease equipment 226  226  214  —  —  12  5.4 

All other noninterest income 9  9  2  —  —  7  325.3 
Total noninterest income 235  235  216  —  —  19  8.6 

Total revenue 177  182  164  (5) (2.5) 13  7.6 

Noninterest Expense
Personnel cost 8  6  8  2  21.7  —  — 

Depreciation on operating lease equipment 58  58  54  —  —  4  5.8 
Maintenance and other operating lease expenses 65  64  58  1  1.4  7  12.7 
All other noninterest expense 17  16  14  1  10.8  3  13.1 
Total noninterest expense 148  144  134  4  2.7  14  9.2 

Income before income taxes 29  38  30  (9) (21.6) (1) (1.3)
Income tax expense 7  9  8  (2) (15.7) (1) (4.1)
Net income $ 22  $ 29  $ 22  $ (7) (23.3) % $ —  — 

Select Period End Balances
Loans and leases $ 62  $ 62  $ 62  $ —  —  % $ —  —  %
Operating lease equipment, net 8,968  8,882  8,640  86  1.0  328  3.8 

Deposits 2  2  12  —  —  (10) (80.5)

Table 17
Adjusted Rental Income on Operating Lease Equipment (non-GAAP)

dollars in millions Three Months Ended Increase (Decrease) from Linked Quarter Increase (Decrease) from Prior Year Quarter
March 31, 2026 December 31, 2025 March 31, 2025
Rental income on operating leases (GAAP) $ 226  $ 226  $ 214  $ —  —  % $ 12  5.4  %
Less: depreciation on operating lease equipment 58  58  54  —  —  4  5.8 
Less: maintenance and other operating lease expenses 65  64  58  1  1.4  7  12.7 
Adjusted rental income on operating lease equipment (non-GAAP) (1)
$ 103  $ 104  $ 102  $ (1) (1.0) $ 1  1.0 

(1)     Adjusted rental income on operating lease equipment is a non-GAAP measure. Refer to the “Non-GAAP Financial Measurements” section of this MD&A for a reconciliation from the most comparable GAAP measure to the non-GAAP measure.
69

Rail segment net income for the current quarter decreased $7 million compared to the linked quarter, mostly due to higher net interest expense of $5 million, largely a result of higher funding costs and an increase in operating lease equipment.

Rail segment net income for the current quarter was unchanged compared to the prior year quarter, as higher rental income on operating lease equipment and other noninterest income was offset by higher total noninterest expense and higher net interest expense.
• The $12 million increase in rental income on operating lease equipment reflected portfolio growth and strong repricing.
• The $7 million increase in all other noninterest income reflects higher gains on sales of operating lease equipment.
• The $6 million increase in net interest expense was primarily due to higher funding costs and an increase in operating lease equipment.
• Depreciation on operating lease equipment increased $4 million, reflective of growth in operating lease equipment, and maintenance and other operating lease expenses increased $7 million. Maintenance and other operating lease expenses tend to be variable due to timing and the number of railcars coming on or off lease as well as asset condition.

Railcar Portfolio
Our fleet is diverse and the average re-pricing of equipment upon lease maturities was 118% of the average prior or expiring lease rate during the current quarter. Railcar utilization, including commitments to lease, was 96.2% at both March 31, 2026 and December 31, 2025.

Rail segment customers include all of the U.S. and Canadian Class I railroads (i.e., railroads with annual revenues of approximately $500 million and greater) and other railroads, as well as manufacturers and commodity shippers. Our total operating lease fleet at March 31, 2026 consisted of 128,580 railcars and locomotives.

The following tables reflect the proportion of railcars by type based on units and net investment, and rail operating lease equipment by obligor industry:

Table 18
Operating Lease Railcar Portfolio by Type (units and net investment)

March 31, 2026 December 31, 2025
Railcar Type Total Owned
Fleet - % Total Units Total Owned
Fleet - % Total
Net Investment Total Owned
Fleet - % Total Units Total Owned
Fleet - % Total
Net Investment
Covered hoppers 45  % 41  % 45  % 41  %
Tank cars 28  39  28  39 
Mill/ coil gondolas 8  6  8  6 
Coal 6  1  6  1 
Boxcars 5  5  5  5 
Other 8  8  8  8 
Total 100  % 100  % 100  % 100  %

Table 19
Rail Operating Lease Equipment by Obligor Industry

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

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Corporate

Table 20
Corporate: Financial Data

dollars in millions Three Months Ended Increase (Decrease) from Linked Quarter Increase (Decrease) from Prior Year Quarter
Earnings Summary March 31, 2026 December 31, 2025 March 31, 2025
Net interest income $ 64  $ 100  $ 141  $ (36) (35.5) % $ (77) (54.3) %
Total noninterest income —  14  (2) (14) (98.3) 2  114.2 
Total revenue 64  114  139  (50) (42.9) (75) (53.6)
Personnel cost 447  452  410  (5) (0.9) 37  9.2 
Acquisition-related expenses 5  33  42  (28) (86.5) (37) (89.3)
All other noninterest expense (1)
(310) (317) (312) 7  2.4  2  (0.8)
Total noninterest expense 142  168  140  (26) (15.0) 2  2.0 

Provision for credit losses —  —  —  —  —  —  — 
Loss before income taxes (78) (54) (1) (24) (43.1) (77) NM
Income tax (benefit) expense (21) 38  —  (59) (151.7) (21) NM
Net loss $ (57) $ (92) $ (1) $ 35  38.2  % $ (56) NM

Select Period End Balances

Deposits 47,735  45,248  44,990  2,487  5.5  % 2,745  6.1  %

(1) Under our segment expense allocation methodology, allocated expenses increase noninterest expense of the applicable segment(s), with an offsetting decrease to Corporate noninterest expense. “All other noninterest expense” in the Corporate table above includes the effect of allocated expenses, resulting in a reduction to expense (i.e., contra expense).

The Corporate loss before income taxes for the current quarter increased $24 million compared to the linked quarter, mainly due to the following:
• NII decreased $36 million mainly due to the impacts of lower average balances and yields on interest-earning deposits at banks and investment securities, a higher average balance of interest-bearing deposits, and lower loan PAA, partially offset by the impacts of a lower rate paid on interest-bearing deposits and a lower average balance of borrowings, mainly due to prepayments of the Purchase Money Note.
• Acquisition-related expenses decreased $28 million as presented in Table 11 and further discussed in the “Noninterest Expense” discussion in the “Results of Operations” section of this MD&A.
• The $14 million decrease in total noninterest income was largely due to the unfavorable change in the fair value of marketable equity securities due to lower market prices for the underlying securities.

Corporate deposits were $47.74 billion at March 31, 2026, an increase of $2.49 billion compared to $45.25 billion at December 31, 2025, as brokered and Direct Bank deposits increased $1.83 billion and $606 million, respectively. At March 31, 2026, Corporate deposits primarily included $45.41 billion of Direct Bank deposits, the vast majority of which are savings, and $1.83 billion of brokered deposits, which are further discussed in the Funding, Liquidity and Capital section of this MD&A.

The Corporate loss before income taxes for the current quarter increased $77 million compared to the prior year quarter, primarily reflecting lower NII, which declined $77 million mainly due to the impacts of lower average balances and yields on interest-earning deposits at banks and investment securities, a higher average balance of interest-bearing deposits, and lower loan PAA, partially offset by the impacts of a lower rate paid on interest-bearing deposits and a lower average balance of borrowings, mainly due to prepayments of the Purchase Money Note.

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BALANCE SHEET ANALYSIS

The following discussion provides additional information about the major components of our balance sheet. Information regarding our ALLL is included in the “Risk Management—Credit Risk—ALLL Methodology” section of this MD&A and in Note 6—Allowance for Loan and Lease Losses. Information regarding our capital and regulatory capital is included in the “Capital” section of this MD&A.

Interest-earning Assets

Interest-earning assets include interest-earning deposits at banks, securities purchased under agreements to resell, investment securities, loans held for sale, and loans and leases, all of which reflect varying interest rates based on the risk level and repricing characteristics of the underlying asset. Higher-risk investments typically carry a higher interest rate, but could expose us to higher levels of market and/or credit risk. We strive to maintain a high level of interest-earning assets relative to total assets.

Interest-earning Deposits at Banks
Interest-earning deposits at banks are primarily comprised of interest-earning deposits at the FRB. Interest-earning deposits at banks as of March 31, 2026 totaled $23.19 billion, an increase of $3.39 billion or 17% from $19.80 billion at December 31, 2025. The increase from December 31, 2025 is a function of the balance sheet trends discussed above in “Executive Overview—Financial Performance Summary—Balance Sheet Highlights.”

Securities Purchased Under Agreements to Resell
Securities purchased under agreements to resell at March 31, 2026 totaled $223 million, a decrease of $9 million from $232 million at December 31, 2025.

Investment Securities
The primary objective of the investment portfolio is to generate incremental income by deploying excess funds into securities that have minimal liquidity risk and low to moderate interest rate risk and credit risk. Other objectives include acting as a stable source of liquidity, serving as a tool for asset and liability management and maintaining an interest rate risk profile compatible with our objectives. Changes in the total balance of our investment securities portfolio result from trends in balance sheet funding and market performance. Generally, when inflows arising from deposit and treasury services products exceed loan and lease demand, we invest excess funds into the securities portfolio or into interest-earning deposits at banks. Conversely, when loan demand exceeds growth in deposits and short-term borrowings, we allow interest-earning deposits at banks to decline and use proceeds from maturing securities and prepayments to fund loan growth. Also refer to Note 3—Investment Securities and “Funding, Liquidity and Capital Overview” in the “Executive Overview” section of this MD&A for additional disclosures regarding investment securities.

The carrying value of investment securities at March 31, 2026 totaled $42.99 billion, an increase of $1.42 billion or 3% from $41.56 billion at December 31, 2025. The increase mainly resulted from purchases of $2.89 billion, which were primarily short duration available for sale U.S. treasury and agency mortgage-backed securities, partially offset by maturities, sales, and prepayments totaling $1.33 billion.

Our portfolio of investment securities available for sale consists of mortgage-backed securities issued by government agencies and government sponsored entities, U.S. Treasury securities, corporate bonds, and municipal bonds. Investment securities available for sale are reported at fair value and unrealized gains and losses are included as a component of accumulated other comprehensive income (“AOCI”), net of deferred taxes. As of March 31, 2026, investment securities available for sale had a pretax net unrealized loss of $349 million, compared to $162 million as of December 31, 2025, primarily reflecting changes in interest rates. The fair value of investment securities is impacted by interest rates, credit spreads, market volatility and liquidity conditions. The fair value of the investment securities portfolio generally increases when interest rates decrease or when credit spreads tighten.

Our portfolio of investment securities held to maturity consists of mortgage-backed securities issued by government agencies and government sponsored entities, U.S. Treasury notes, unsecured bonds issued by government agencies and government sponsored entities, and by the Supranational Entities & Multilateral Development Banks.

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The following table presents the investment securities portfolio, segregated by major category:

Table 21
Investment Securities

dollars in millions March 31, 2026 December 31, 2025
Amortized Cost Fair Value
Composition (1)
Amortized Cost Fair Value
Composition (1)

Investment securities available for sale:
U.S. Treasury $ 12,439  $ 12,442  29.8  % $ 10,624  $ 10,673  26.4  %
Government agency 39  38  0.1  44  43  0.1 
Residential mortgage-backed securities 17,782  17,595  42.1  17,683  17,623  43.6 
Commercial mortgage-backed securities 3,259  3,099  7.4  3,444  3,299  8.2 
Corporate bonds 132  128  0.3  145  140  0.3 
Municipal bonds 12  12  —  12  12  — 

Total investment securities available for sale $ 33,663  $ 33,314  79.7  % $ 31,952  $ 31,790  78.6  %
Investment in marketable equity securities $ 83  $ 130  0.3  % $ 83  $ 127  0.3  %
Investment securities held to maturity:
U.S. Treasury $ 389  $ 374  0.9  % $ 388  $ 373  0.9  %
Government agency 1,205  1,150  2.8  1,225  1,170  2.9 
Residential mortgage-backed securities 4,395  3,926  9.4  4,450  3,992  9.9 
Commercial mortgage-backed securities 3,305  2,682  6.4  3,337  2,729  6.8 

Supranational securities 246  226  0.5  246  226  0.6 
Other 2  2  —  1  1  — 
Total investment securities held to maturity $ 9,542  $ 8,360  20.0  % $ 9,647  $ 8,491  21.1  %
Total investment securities $ 43,288  $ 41,804  100.0  % $ 41,682  $ 40,408  100.0  %
(1) Calculated as a percentage of the total fair value of investment securities.

The following table presents the weighted average yields for investment securities available for sale and held to maturity at March 31, 2026, segregated by major category with ranges of contractual maturities. The weighted average yields represent the yields of the underlying securities as of the specified date, March 31, 2026, within the specified maturity range. The weighted average yield on the portfolio was calculated using security-level annualized yields based on book yield to maturity and takes into account amortization of premiums and accretion of discounts. The total weighted average yields for investment securities available for sale and held to maturity are based on the underlying weighted average amortized cost.

Table 22
Weighted Average Yield on Investment Securities

March 31, 2026
Within One Year One to Five Years Five to 10 Years After 10 Years Total
Investment securities available for sale:
U.S. Treasury 4.29  % 3.76  % —  % —  % 4.03  %
Government agency —  3.47  —  —  3.47 
Residential mortgage-backed securities (1)
—  4.66  4.05  4.24  4.19 
Commercial mortgage-backed securities (1)
4.33  4.75  4.24  2.70  3.93 
Corporate bonds —  7.79  5.21  —  7.48 
Municipal bonds —  —  —  6.28  6.28 

Total investment securities available for sale 4.29  % 4.06  % 4.05  % 4.10  % 4.12  %

Investment securities held to maturity:
U.S. Treasury —  % 1.43  % —  % —  % 1.43  %
Government agency 1.41  1.70  —  —  1.61 
Residential mortgage-backed securities (1)
—  —  1.07  2.86  2.69 
Commercial mortgage-backed securities (1)
—  1.83  4.65  2.45  2.46 

Supranational securities —  1.64  —  —  1.64 
Other 3.34  —  —  —  3.34 
Total investment securities held to maturity 1.42  % 1.62  % 1.26  % 2.67  % 2.39  %

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

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Assets Held for Sale
Assets held for sale at March 31, 2026 were $1.12 billion, an increase of $318 million from $804 million at December 31, 2025.

The composition of assets held for sale is included in the following table:

Table 23
Assets Held for Sale

dollars in millions March 31, 2026 December 31, 2025 Increase (Decrease)
Loans and leases:
Commercial (1)
$ 385 $ 18 $ 367 NM
Consumer 733 781 (48) (6.1) %

Loans and leases 1,118 799 319 40.0  %
Operating lease equipment 4 5 (1) (31.2) %
Total assets held for sale $ 1,122 $ 804 $ 318 39.5  %

(1) There were nonaccrual loans held for sale of $0 at March 31, 2026 and $10 million at December 31, 2025.
NM - resulting % not meaningful.

In March 2026, FCB management committed to a plan to sell $364 million of SBA commercial loans, which were then transferred from held for investment to held for sale. We did not establish a valuation allowance for the loans transferred to held for sale as the estimated fair value exceeded amortized cost.

Consumer loans held for sale at March 31, 2026 and December 31, 2025 were largely comprised of residential mortgage loans that were transferred from held for investment to held for sale in December 2025. We did not establish a valuation allowance for the loans transferred to held for sale as the estimated fair value exceeded the amortized cost of $644 million and $694 million at March 31, 2026 and December 31, 2025, respectively. In April 2026, the loan sale closed and a gain was recognized as the sale proceeds exceeded the amortized cost of $644 million. Additionally, consumer loans held for sale at March 31, 2026 and December 31, 2025 consisted of residential mortgage loans that FCB originated with the intent to sell.

Loans and Leases
The following table presents loans and leases by loan segment and loan class, and the respective proportion to total loans:

Table 24
Loans and Leases

dollars in millions March 31, 2026 December 31, 2025
Balance % to Total Loans Balance % to Total Loans Increase (Decrease)
Commercial:
Commercial and industrial $ 45,753  31  % $ 44,721  30  % $ 1,032  2.3  %
Capital call lines 32,274  21  31,791  21  483  1.5 
Owner occupied commercial mortgage 17,502  12  17,660  12  (158) (0.9)
Investor dependent 2,714  2  2,778  2  (64) (2.3)
Commercial real estate 23,707  16  23,784  16  (77) (0.3)
Total commercial $ 121,950  82  % $ 120,734  81  % $ 1,216  1.0  %
Consumer:
Residential mortgage $ 21,698  14  % $ 21,861  15  % $ (163) (0.7) %
Revolving mortgage 2,863  2  2,863  2  —  — 
Auto 1,332  1  1,416  1  (84) (5.9)
Other consumer 849  1  1,056  1  (207) (19.6)
Total consumer $ 26,742  18  % $ 27,196  19  % $ (454) (1.7) %
Total loans and leases $ 148,692  100  % $ 147,930  100  % $ 762  0.5  %
Allowance for loan and lease losses (1,558) (1,566)
Net loans and leases $ 147,134  $ 146,364 

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Loans and leases at March 31, 2026 were $148.69 billion, an increase of $762 million or 1% from $147.93 billion at December 31, 2025. Commercial Bank segment loan growth of $1.35 billion, mainly concentrated in Global Fund Banking, was partially offset by a decrease in General Bank segment loans of $591 million, primarily due to the transfer of $364 million SBA loans to held for sale in March 2026.

The unamortized discount related to acquired loans was $1.28 billion at March 31, 2026, a decrease of $45 million from $1.33 billion at December 31, 2025.

Refer to Note 5—Loans and Leases for further information.

Operating Lease Equipment, Net

Our operating lease portfolio mostly relates to the Rail segment, with the remainder included in the Commercial Bank segment as summarized in the following table. Refer to the “Results by Segment” section of this MD&A for further details on the operating lease equipment portfolio in Rail.

Table 25
Operating Lease Equipment, Net

dollars in millions
March 31, 2026 December 31, 2025 Increase (Decrease)
Railcars and locomotives $ 8,968  $ 8,882  $ 86  1.0  %
Other equipment 717  739  (22) (3.0)
Total (1)
$ 9,685  $ 9,621  $ 64  0.7  %

(1)     Includes off-lease rail equipment of $265 million at March 31, 2026 and $257 million at December 31, 2025.

Interest-bearing Liabilities

Interest-bearing liabilities include interest-bearing deposits, securities sold under agreements to repurchase, and borrowings. Interest-bearing liabilities at March 31, 2026 totaled $161.20 billion, an increase of $4.27 billion or 3% from $156.93 billion at December 31, 2025. The increase from December 31, 2025 was mainly due to deposit growth, partially offset by lower borrowings as further discussed below.

Deposits
We strive to maintain a strong liquidity position, and therefore, deposit retention remains a key business objective. We believe traditional bank deposit products remain an attractive option for many customers. As economic conditions change, we recognize that our liquidity position could be adversely affected if bank deposits are withdrawn. Our ability to fund future loan growth is significantly dependent on our success in retaining existing deposits and generating new deposits at a reasonable cost.

The following table summarizes the types of deposits:

Table 26
Deposits

dollars in millions
March 31, 2026 December 31, 2025 Increase (Decrease)
Noninterest-bearing $ 43,606  $ 40,653  $ 2,953  7.3  %
Checking with interest 25,599  24,377  1,222  5.0 
Money market 41,136  38,687  2,449  6.3 
Savings 47,258  46,625  633  1.4 
Time 13,243  11,236  2,007  17.9 
Interest-bearing deposits 127,236  120,925  6,311  5.2 
Total deposits $ 170,842  $ 161,578  $ 9,264  5.7  %
Noninterest-bearing deposits to total deposits 25.5  % 25.2  %

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

75

A portion of the deposit growth in the Commercial Bank segment stems from large short-term deposits which we expect to outflow or move off-balance sheet shortly after March 31, 2026. Deposit growth is also discussed in the “Executive Overview—Funding, Liquidity and Capital Overview” and “Results by Segment” sections of this MD&A.

Deposit Concentrations
BancShares operates a network of branches and offices, predominantly located in the Southeast, Mid-Atlantic, Midwest and Western United States, providing a broad range of financial services to individuals, businesses and professionals. Based on branch location, our top state deposit concentrations as of March 31, 2026 were in North Carolina, South Carolina, and California, which represented 25.7%, 7.4%, and 6.5%, respectively, of total deposits.

The Direct Bank had $45.41 billion or 26.6% of our total deposits as of March 31, 2026. The Direct Bank deposits mainly consist of savings.

Commercial Bank segment deposits as of March 31, 2026 were $47.19 billion or 27.6% of total deposits and are primarily concentrated in online banking. Deposits in the Commercial Bank segment include large dollar accounts with private equity and venture capital clients, primarily in the technology, life science and healthcare industries.

Deposit accounts with balances in excess of $50 million totaled $10.41 billion as of March 31, 2026, compared to $7.09 billion as of December 31, 2025.

Brokered deposits as of March 31, 2026 were $1.83 billion or 1.1% of total deposits. We had no brokered deposits as of December 31, 2025.

Uninsured Deposits
The amount of uninsured deposits is estimated consistent with the methodologies and assumptions utilized in providing information to the FDIC and Federal Reserve. We estimate total uninsured deposits were $65.44 billion, which represented 38.3% of total deposits at March 31, 2026, compared to $61.81 billion or 38.3% of total deposits at December 31, 2025.

Refer to the “Executive Overview—Funding, Liquidity and Capital Overview” and “Results by Segment” sections of this MD&A for further discussion of deposit composition, uninsured deposits, and recent deposit trends.

The following table provides the expected maturity of time deposits with balances in excess of $250,000 as of March 31, 2026:

Table 27
Maturities of Time Deposits In Excess of $250,000

dollars in millions March 31, 2026
Time deposits maturing in:
Three months or less $ 630 
Over three months through six months 546 
Over six months through 12 months 285 
More than 12 months 13 
Total $ 1,474 

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

76

The following table presents borrowings, net of the respective unamortized purchase accounting adjustments, premiums, discounts, and issuance costs:

Table 28
Borrowings

dollars in millions
March 31, 2026 December 31, 2025 Increase (Decrease)
Securities sold under agreements to repurchase $ 170  $ 224  $ (54) (24.0) %

Federal Deposit Insurance Corporation
   3.500% fixed rate note due March 2028 (1)
30,905  33,385  (2,480) (7.4)
Senior Unsecured Borrowings

5.231% fixed-to-floating rate notes due March 2031 497  497  —  — 
   4.869% fixed-to-floating rate notes due March 2032
495  —  495  100.0 
   6.000% fixed rate notes due April 2036 58  58  —  — 
Subordinated debt
6.125% fixed rate notes due March 2028 427  430  (3) (0.7)

5.600% fixed rate reset notes due September 2035 595  597  (2) (0.3)
6.254% fixed-to-fixed rate notes due March 2040 742  745  (3) (0.4)

Capital lease obligations 73  72  1  1.4 
Total borrowings $ 33,962  $ 36,008  $ (2,046) (5.7) %

(1) Issued in connection with the SVBB Acquisition and secured by collateral. Refer to Note 5—Loans and Leases. The unamortized discount was $95 million and $115 million at March 31, 2026 and December 31, 2025, respectively.

The following summarizes debt issuances during 2026 and 2025:

Table 29
Parent Company Notes Issued

Borrowing Type Issuance Date Stated Maturity Date Earliest Par Call Date Par Value Current Interest Rate Current Payment Frequency Rate Reset Date Interest Rate After Reset Payment Frequency After Reset
2026
Fixed-to-Floating Rate Senior Notes March 3, 2026 March 3, 2032 March 3, 2031 $500 4.869% Semiannual March 3, 2031 Compounded SOFR + 148.7 bps Quarterly
2025
Fixed Rate Reset Subordinated Notes September 5, 2025 September 5, 2035 September 5, 2030 $600 5.600% Semiannual September 5, 2030 Five-year U.S. Treasury Rate + 185 bps Semiannual
Fixed-to-Floating Rate Senior Notes March 12, 2025 March 12, 2031 March 12, 2030 $500 5.231% Semiannual March 12, 2030 Compounded SOFR + 141 bps Quarterly
Fixed-to-Fixed Rate Subordinated Notes March 12, 2025 March 12, 2040 December 12, 2034 $750 6.254% Semiannual March 12, 2035 Five-year U.S. Treasury Rate + 197 bps Semiannual

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

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Other Assets and Liabilities    

The following table includes the components of other assets:

Table 30
Other Assets

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

(1)     Refer to Note 9—Variable Interest Entities for additional information.

The following table includes the components of other liabilities:

Table 31
Other Liabilities

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

(1) Includes accruals for annual incentive compensation which is typically paid during the first quarter. Additionally, accrued personnel cost can fluctuate based on timing of the payroll cycle.

A reserve for off-balance sheet credit exposure is established for unfunded commitments and is included in other liabilities. BancShares estimates the expected funding amounts and applies its probability of obligor default (“PD”) and loss given default (“LGD”) models to those expected funding amounts to estimate the reserve. The reserve for off-balance sheet credit exposure was $228 million at March 31, 2026, a decrease of $32 million compared to $260 million at December 31, 2025. Refer to the “Results of Operations—Provision for Credit Losses” section of this MD&A for further discussion. Refer to Note 19—Commitments and Contingencies for information relating to off-balance sheet commitments.

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RISK MANAGEMENT

Risk is inherent in any business. BancShares has defined a moderate risk appetite and a balanced approach to risk taking with a philosophy that does not preclude higher risk business activities commensurate with acceptable returns while meeting regulatory objectives. Through the comprehensive Risk Management Framework and Risk Appetite Policy and Statement, senior management has primary responsibility for day-to-day management of the risks we face with accountability of and support from all associates. Senior management applies various strategies to reduce the risks to which BancShares may be exposed, with effective challenge by independent risk management and oversight by management committees. The Board of Directors of the Parent Company (the “Board”) strives to ensure that risk management is a part of our business culture and that our policies and procedures to identify, assess, respond, and monitor risk are part of the decision-making process. The Board’s role in risk oversight is an integral part of our overall Risk Management Framework and Risk Appetite Policy. The Board administers its risk oversight function primarily through its Risk Committee.

The Risk Committee structure is designed to allow for information flow, effective challenge and timely escalation of risk-related issues. The Risk Committee monitors adherence to our Risk Management Framework and Risk Appetite Policy and Statement and provides quarterly updates to the Board on risk management. Our Chief Risk Officer also provides regular reports to the Risk Committee and the Board. Management and independent risk functions make regular reports to the Risk Committee on key risk areas, including credit, market, capital, liquidity, operational, compliance, and strategic risks. The Risk Committee also reviews reports of examination by and communications from regulatory agencies, the results of internal and third-party testing and qualitative and quantitative assessments related to risk management, and any other matters within the scope of the Risk Committee’s oversight responsibilities. The Risk Committee monitors management’s response to certain risk-related regulatory and audit issues. In addition, the Risk Committee may coordinate with the Board’s Audit Committee, Technology Committee and the Compensation, Nominations and Governance Committee for the review of financial statements and related risks, technology and cybersecurity risk, compensation risk management, and other areas of responsibility.

BancShares leverages a Three Lines Model to promote clarity of roles and responsibilities in managing risk. The first line is comprised of organizational functions that own or support the management of risk. The second line is led by the Chief Risk Officer, who reports to the Risk Committee of the Board, and is comprised of organizational functions that make up the Risk Management Department which has the responsibility for establishing risk frameworks, policies, standards, and procedures which support the Framework; providing proactive, transparent, and independent oversight and effective challenge of the first line; and identifying, measuring, monitoring, or controlling for aggregate risks. Internal audit is independent of the first and second lines, reporting directly to the Audit Committee of the Board and constitutes the third line.

In combination with other risk management and monitoring practices, enterprise-wide stress testing activities are conducted within a defined framework. Stress tests are performed for various risks to ensure the financial institution can support continued operations during stressed periods.

BancShares monitors and stress tests its capital and liquidity consistent with the safety and soundness expectations of the federal regulators. Refer to the “Regulatory Considerations” section of Item 1. Business included in the 2025 Form 10-K for further discussion.

BancShares assesses emerging risks on an ongoing basis, such as monitoring economic sentiment and emerging geopolitical issues, inflationary pressures due to rising energy prices among other factors, and the impact of artificial intelligence on various industries. BancShares also continues to assess operational risks such as those associated with potential cyberattacks for FCB and third parties upon whom it relies. Assessments will remain ongoing as the conditions continue to exist and develop. BancShares is also assessing the potential risk of an economic slowdown or recession that could create increased credit and market risk having downstream impacts on earnings, capital, and/or liquidity. Supported by resilient economic conditions, baseline forecasts reflect improving commercial real estate property values and a lower unemployment rate compared to the prior year, which have favorably impacted the ALLL. Key indicators will continue to be monitored, and impacts assessed as part of our ongoing Risk Management Framework.

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Credit Risk

Credit risk is the risk arising from a borrower, obligor, or counterparty’s failure to meet the terms of any financial obligation, which can result in financial impact to current or anticipated earnings or capital, or strategic objectives. Loans and leases we originate are underwritten in accordance with our credit policies and procedures and are subject to periodic ongoing reviews. Acquired loans, regardless of whether purchased credit deteriorated (“PCD”) or Non-PCD, are recorded at fair value as of the acquisition date and are subject to periodic reviews to identify any further credit deterioration. Our independent credit review function conducts risk reviews and analyses of both originated and acquired loans to ensure compliance with credit policies and to monitor asset quality trends and borrower financial strength. These reviews include portfolio analysis by geographic location, industry, collateral type, and product. We strive to identify potential problem loans as early as possible, to record charge-offs as appropriate and to maintain an appropriate ALLL that accounts for expected losses over the life of the loan and lease portfolios.

Commercial Lending and Leasing
BancShares employs a credit ratings system where each commercial loan is assigned a PD, LGD, and/or overall credit rating using scorecards developed to rate each type of transaction incorporating assessments of both quantitative and qualitative factors. When commercial loans and leases are graded during underwriting, or when updated periodically thereafter, a model is run to generate a preliminary risk rating. These models incorporate both internal and external historical default and loss data, as well as other borrower and loan characteristics, to assign a risk rating. The preliminary risk rating assigned by the model can be adjusted as a result of borrower specific facts and circumstances that, in management’s judgment, warrant a modification of the modeled risk rating to arrive at the final approved risk ratings.

Consumer Lending
Consumer lending begins with an evaluation of a consumer borrower’s credit profile against published standards. Credit decisions are made after analyzing quantitative and qualitative factors to assess the borrower’s ability to repay the loan, and secondary sources of repayment, such as collateral value.

Consumer products use traditional and measurable standards to document and assess the creditworthiness of a loan applicant. Credit standards follow industry standard documentation requirements. Performance is largely evaluated based on an acceptable pay history along with a quarterly assessment which incorporates current market conditions. Loans may also be monitored during quarterly reviews of the borrower’s refreshed credit score. When warranted, an additional review of the loan-to-value of the underlying collateral may be conducted.

ALLL Methodology

Our ALLL methodology is discussed further in the section entitled “Critical Accounting Estimates” of the MD&A and Note 1—Significant Accounting Policies and Basis of Presentation in the 2025 Form 10-K. The ALLL is also discussed in Note 6—Allowance for Loan and Lease Losses of this Form 10-Q.

Our ALLL estimate as of March 31, 2026 included extensive reviews of the changes in credit risk associated with the uncertainties around macroeconomic forecasts. These loss estimates consider industry risk and the actual net losses incurred during prior periods of economic stress as well as recent credit trends.

The ALLL represents management’s best estimate of credit losses expected over the life of the loan or lease, adjusted for expected contractual payments and the impact of prepayment expectations. Estimates for loan and lease losses are determined by analyzing quantitative and qualitative components present as of the evaluation date.

The ALLL is calculated based on a variety of considerations, including, but not limited to actual net loss history of the various loan and lease pools, delinquency trends, changes in forecasted economic conditions, loan growth, estimated loan life, and changes in portfolio credit quality. Loans and leases are segregated into pools with similar risk characteristics and each pool has a model tailored for the applicable risks.

Macroeconomic Forecasts Utilized in the Estimate of the ALLL
While management utilizes its best judgment and information available, the ultimate adequacy of our ALLL is dependent upon a variety of factors beyond our control which are inherently difficult to predict, the most significant being the macroeconomic scenario forecasts that determine the economic variables, including the U.S. unemployment rate, U.S. real gross domestic product (“GDP”), home price index (“HPI”), and commercial real estate price index (“CRE price index”) utilized in the ALLL models. These economic variables are based on macroeconomic scenario forecasts with a forecast horizon that covers the reasonable and supportable period.

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Due to the inherent uncertainty in the macroeconomic forecasts, BancShares utilizes baseline, upside, and downside macroeconomic scenarios and probability weights the scenarios based on review of variable forecasts for each scenario and comparison to expectations. Our scenario weighting has remained consistent since the second quarter of 2025. We will continue to monitor economic sentiment and emerging geopolitical issues, rising energy prices, and the impact of artificial intelligence on various industries.

At March 31, 2026, ALLL estimates ranged from $1.32 billion, when weighing the upside scenario 100%, to $1.98 billion when weighting the downside scenario 100%. BancShares management determined that an ALLL of $1.56 billion was appropriate as of March 31, 2026.

The following table presents the U.S. unemployment rate, U.S. real GDP, HPI, and CRE price index based on the weighted-average scenario forecasts used in determining the ALLL at March 31, 2026 and December 31, 2025. The projected trends in the macroeconomic variables below may fluctuate depending on the underlying scenarios and our scenario weighting assumptions utilized for the applicable period.

Table 32
Select Variables in ALLL Weighted-average Scenarios

Assumptions as of March 31, 2026
2026 2027 2028
U.S. unemployment rate (1)
4.9  % 5.3  % 5.0  %
U.S. real GDP (2)
2.5  % 1.4  % 2.0  %
HPI (2)
(0.3) % 1.3  % 3.7  %
CRE price index (2)
0.0  % (2.8) % 3.4  %

Assumptions as of December 31, 2025
2026 2027 2028
U.S. unemployment rate (1)
5.2  % 5.4  % 5.1  %
U.S. real GDP (2)
1.5  % 1.6  % 2.0  %
HPI (2)
(1.4) % 2.2  % 3.5  %
CRE price index (2)
(3.4) % (1.6) % 4.1  %

(1) Assumptions represent the projected quarterly averages for the years ending December 31, 2026, 2027, and 2028.
(2) Assumptions represent the projected year-over-year percent changes.

Qualitative Component of the ALLL
ALLL model outputs may be adjusted through a qualitative assessment to reflect trends that may not be adequately reflected within the models, which could include economic conditions, uncertainty in macroeconomic forecasts, credit quality, risk to specific industry concentrations, and any significant policy and underwriting changes. These qualitative adjustments are also used to accommodate for the imprecision of certain assumptions and uncertainties inherent in the model calculations.

Current economic conditions and forecasts can change which could affect the anticipated amount of estimated credit losses and therefore the appropriateness of the ALLL. It is difficult to estimate how potential changes in any one economic factor or input might affect the overall ALLL because a wide variety of factors and inputs are considered in estimating the ALLL and changes in those factors and inputs considered may not occur at the same rate and may not be consistent across all product types. Additionally, changes in factors and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others.

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The following table summarizes the ALLL for commercial, consumer and total loans.

Table 33
ALLL

dollars in millions Three Months Ended March 31, 2026 Three Months Ended March 31, 2025
Commercial Consumer Total Commercial Consumer Total
Balance at beginning of period $ 1,436  $ 130  $ 1,566  $ 1,518  $ 158  $ 1,676 

Provision for loan and lease losses 97  6  103  138  10  148 
Charge-offs (123) (9) (132) (159) (8) (167)
Recoveries 18  3  21  20  3  23 

Balance at end of period $ 1,428  $ 130  $ 1,558  $ 1,517  $ 163  $ 1,680 
Net charge-off ratio 0.30  % 0.41  %
Net charge-offs $ 105  $ 6  $ 111  $ 139  $ 5  $ 144 
Average loans $ 149,121  $ 140,780 
Percent of loans in each category to total loans 82  % 18  % 100  % 80  % 20  % 100  %

The ALLL was $1.56 billion at March 31, 2026, compared to $1.57 billion at December 31, 2025, resulting in an ALLL reserve release of $8 million in the current quarter, mainly driven by loan growth concentrated in capital call lines which have a significantly lower loss rate relative to our other loan portfolios, and changes in the macroeconomic scenarios, partially offset by higher reserves for individually evaluated loans. The ALLL increased $4 million from December 31, 2024 to March 31, 2025. The ALLL as a percentage of loans was 1.05% at March 31, 2026, a decrease of 1 bp from 1.06% at December 31, 2025.

The following table summarizes the ALLL as a percentage of loans for each loan class:

Table 34
ALLL by Loan Class

dollars in millions March 31, 2026 December 31, 2025
ALLL Loan Balance ALLL as a Percentage of Loans ALLL Loan Balance ALLL as a Percentage of Loans
Commercial
Commercial and industrial $ 808  $ 45,753  1.77  % $ 807  $ 44,721  1.80  %
Capital call lines 29  32,274  0.09  29  31,791  0.09 
Owner occupied commercial mortgage 52  17,502  0.30  50  17,660  0.28 
Investor dependent 166  2,714  6.12  181  2,778  6.52 
Commercial real estate 373  23,707  1.58  369  23,784  1.55 

Total commercial 1,428  121,950  1.17  1,436  120,734  1.19 
Consumer
Residential mortgage 70  21,698  0.32  67  21,861  0.31 
Revolving mortgage 28  2,863  0.96  26  2,863  0.89 
Auto 9  1,332  0.70  9  1,416  0.67 
Other consumer 23  849  2.71  28  1,056  2.62 
Total consumer 130  26,742  0.48  130  27,196  0.48 

Total $ 1,558  $ 148,692  1.05  % $ 1,566  $ 147,930  1.06  %

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

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Net Charge-Offs
The following table summarizes net charge-offs for each loan class:

Table 35
Net Charge-Offs

dollars in millions Three Months Ended
March 31, 2026 December 31, 2025 March 31, 2025
Charge-offs Recoveries Net
charge-offs (recoveries) Charge-offs Recoveries Net
charge-offs (recoveries) Charge-offs Recoveries Net
charge-offs (recoveries)
Commercial
Commercial and industrial $ 95  $ 11  $ 84  $ 90  $ 14  $ 76  $ 80  $ 15  $ 65 

Owner occupied commercial mortgage 4  —  4  4  —  4  —  —  — 
Investor dependent 12  7  5  34  14  20  39  5  34 
Commercial real estate 12  —  12  40  1  39  40  —  40 
Total commercial 123  18  105  168  29  139  159  20  139 
Consumer
Residential mortgage —  1  (1) —  1  (1) —  —  — 
Revolving mortgage —  —  —  —  —  —  —  —  — 
Auto 2  1  1  1  —  1  3  2  1 
Other consumer 7  1  6  5  1  4  5  1  4 
Total consumer 9  3  6  6  2  4  8  3  5 
Total $ 132  $ 21  $ 111  $ 174  $ 31  $ 143  $ 167  $ 23  $ 144 

Net charge-offs for the current quarter were $111 million, a decrease of $32 million from $143 million for the linked quarter, primarily due to decreases of $27 million in commercial real estate and $15 million in investor dependent, partially offset by an increase of $8 million in commercial and industrial.

Net charge-offs for the current quarter were $111 million, a decrease of $33 million from $144 million for the prior year quarter, primarily due to decreases of $29 million in investor dependent and $28 million in commercial real estate, partially offset by increases of $19 million in commercial and industrial and $4 million in owner occupied commercial mortgage.

Nonperforming Assets
Nonperforming assets include nonaccrual loans and leases, OREO and repossessed assets. Accounting policies related to nonperforming assets are discussed in Note 1—Significant Accounting Policies and Basis of Presentation of the 2025 Form 10-K.

Table 36
Non-Performing Assets

Increase (Decrease)
dollars in millions March 31, 2026 December 31, 2025 Change in $ Change in % or bps
Nonaccrual loans:
Commercial loans $ 1,184  $ 1,082  $ 102  9.4  %
Consumer loans 245  225  20  8.7 
Total nonaccrual loans 1,429  1,307  122  9.3 
Other real estate owned (1) and repossessed assets
116  124  (8) (6.2)
Total nonperforming assets $ 1,545  $ 1,431  $ 114  7.9 

Total loans and leases $ 148,692  $ 147,930  $ 762  0.5  %
Total loans and leases, other real estate owned, and repossessed assets 148,808  148,054  754  0.5 
ALLL to total loans and leases 1.05  % 1.06  % (1)
Ratio of total nonperforming assets to total loans, leases, other real estate owned and repossessed assets 1.04  0.97  7
Ratio of nonaccrual loans and leases to total loans and leases 0.96  0.88  8
Ratio of ALLL to nonaccrual loans and leases 109.01  119.80  (1,079)

(1) OREO includes former branch property and other non-foreclosed property of $27 million and $26 million as of March 31, 2026 and December 31, 2025, respectively.

OREO and repossessed assets were $116 million at March 31, 2026 compared to $124 million at December 31, 2025, a decrease of $8 million.
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Trends in past due and nonaccrual loans are discussed below.

Past Due and Nonaccrual Loans
Past due and nonaccrual loans by loan class are summarized in the following table:

Table 37
Delinquencies and Nonaccrual Loans

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

The decrease of $220 million in accruing loans that are 30 to 89 days past due is largely attributable to decreases of $155 million in commercial real estate, $37 million in commercial and industrial and $37 million in residential mortgage, partially offset by a net increase of $9 million in all other loan classes. Accruing loans that are 30 to 89 days past due are early stage delinquencies that are not showing signs of significant credit deterioration. Delinquency status is considered in the estimate of the ALLL.

The increase of $1 million in accruing loans that are 90 days or greater past due is primarily attributable to increases of $15 million in owner occupied commercial mortgage and $14 million in commercial real estate, partially offset by a decrease of $28 million in commercial and industrial. Loans 90 days or greater past due are assigned a more severe PD in accordance with our ALLL methodology.