First Citizens BancShares (NASDAQ: FCNCA) lifts Q1 profit and grows balance sheet
Filing Impact
Filing Sentiment
Form Type
10-Q
First Citizens BancShares, Inc. reports Q1 2026 net income of $534 million, up from $483 million, with net income available to common stockholders of $508 million and earnings per share rising to $42.63 from $34.47 as the share count declined.
Total assets reached $235.96 billion, while loans and leases grew slightly to $148.69 billion and deposits to $170.84 billion. Net interest income eased to $1.62 billion, but the provision for credit losses fell sharply to $72 million from $154 million, and noninterest income increased to $692 million.
Noninterest expense rose to $1.54 billion, including higher personnel and processing costs. The allowance for loan and lease losses stood at $1.56 billion, and nonaccrual loans were $1.43 billion. The company issued $390 million of Series E preferred stock, repurchased $908 million of Class A common stock, and continued to pay common and preferred dividends.
Positive
- None.
Negative
- None.
Key Figures
Net income: $534 million
Earnings per share: $42.63
Total assets: $235.96 billion
+5 more
8 metrics
Net income
$534 million
Three months ended March 31, 2026
Earnings per share
$42.63
Basic and diluted EPS, Q1 2026
Total assets
$235.96 billion
Balance sheet at March 31, 2026
Total loans and leases
$148.69 billion
Outstanding at March 31, 2026
Total deposits
$170.84 billion
Outstanding at March 31, 2026
Provision for credit losses
$72 million
Three months ended March 31, 2026
Series E preferred issuance
$390 million
Preferred stock issued in Q1 2026
Purchase Money Note balance
$30.91 billion
FDIC note outstanding at March 31, 2026
Key Terms
Allowance for Loan and Lease Losses, Purchase Money Note, cash flow hedge derivatives, Variable Interest Entities, +1 more
5 terms
Allowance for Loan and Lease Losses financial
"The significant estimate related to the determination of the allowance for loan and lease losses (“ALLL”) is considered a critical accounting estimate."
A reserve banks and finance companies set aside to cover loans and leases they expect may not be repaid, recorded as a reduction to their loan assets. Think of it as a rainy-day fund for bad loans: a larger allowance signals the lender is preparing for more losses, which can reduce reported profits and weaken capital cushions, so investors watch it to judge credit risk, earnings quality, and the institution’s financial health.
Purchase Money Note financial
"FCB issued a five-year $36.07 billion note payable to the FDIC ... the “Purchase Money Note”."
cash flow hedge derivatives financial
"Net unrealized (loss) gain on cash flow hedge derivatives | ( 14 ) | 7"
Variable Interest Entities financial
"variable interest entities (“VIEs”) where BancShares is the primary beneficiary, if applicable."
A variable interest entity (VIE) is a business that a company controls through contracts or special arrangements instead of owning a majority of its shares, like steering a puppet without holding its ticket. Investors care because these arrangements can hide who really bears the financial risks and rewards, affect how assets and liabilities appear on financial statements, and create extra legal or enforcement uncertainty that can change the value and risk of an investment.
capital call lines financial
"Capital call lines | 32,274 | 31,791"
Capital call lines are short-term loans a fund uses to pay for investments or expenses before it collects committed money from its investors. Think of it like a bridge loan that lets a buyer move quickly while waiting for a promised paycheck; it smooths timing, speeds deal-making, and can reduce the number of immediate requests for cash from investors. For investors, these lines affect a fund’s apparent performance, risk profile, and the timing of when they must provide capital.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________
FORM 10-Q
____________________________________________________
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |||||
For the quarterly period ended | |||||
| or | |||||
| Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |||||
Commission File Number: 001-16715
First Citizens BancShares, Inc.
(Exact name of Registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | ||||||||||
| (Address of principal executive offices) | (Zip code) | ||||||||||
| (Registrant’s telephone number, including area code) | |||||||||||
____________________________________________________
| Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934: | ||||||||
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| Securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934: | ||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and ‘emerging growth company’ in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | Emerging growth company | |||||||||||||||||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Class A Common Stock—10,581,789 shares
Class B Common Stock—1,005,185 shares
(Number of shares outstanding, by class, as of May 4, 2026)
| CONTENTS | |||||||||||
| Page | |||||||||||
| PART I—FINANCIAL INFORMATION | |||||||||||
| Item 1. | Financial Statements | 4 | |||||||||
Consolidated Balance Sheets (Unaudited) | 4 | ||||||||||
Consolidated Statements of Income (Unaudited) | 5 | ||||||||||
Consolidated Statements of Comprehensive Income (Unaudited) | 6 | ||||||||||
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) | 7 | ||||||||||
Consolidated Statements of Cash Flows (Unaudited) | 8 | ||||||||||
Notes to Consolidated Financial Statements (Unaudited) | 10 | ||||||||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 50 | |||||||||
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 99 | |||||||||
| Item 4. | Controls and Procedures | 99 | |||||||||
| PART II—OTHER INFORMATION | |||||||||||
| Item 1. | Legal Proceedings | 100 | |||||||||
| Item 1A. | Risk Factors | 100 | |||||||||
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 100 | |||||||||
| Item 5. | Other Information | 100 | |||||||||
| Item 6. | Exhibits | 101 | |||||||||
Signatures | 102 | ||||||||||
2
GLOSSARY OF ABBREVIATIONS AND ACRONYMS
The following is a list of select abbreviations and acronyms used throughout this document. You may find it helpful to refer back to this table.
| Acronym | Definition | Acronym | Definition | ||||||||
| ALLL | Allowance for Loan and Lease Losses | LGD | Loss Given Default | ||||||||
| AOCI | Accumulated Other Comprehensive Income | LOCOM | Lower of Cost or Fair Value | ||||||||
| ASU | Accounting Standards Update | LP | Limited Partner | ||||||||
| BHC | Bank Holding Company | MD&A | Management’s Discussion and Analysis | ||||||||
| bp or bps | Basis point(s); 1 bp = 0.01% | MSRs | Mortgage Servicing Rights | ||||||||
| CET1 | Common Equity Tier 1 Risk-based Capital | NDFI | Non-Depository Financial Institution | ||||||||
| DPA | Deferred Purchase Agreement | NII | Net Interest Income | ||||||||
| DTAs | Deferred Tax Assets | NII Sensitivity | Net Interest Income Sensitivity | ||||||||
| ETR | Effective Income Tax Rate | NIM | Net Interest Margin | ||||||||
| EVE Sensitivity | Economic Value of Equity Sensitivity | OREO | Other Real Estate Owned | ||||||||
| FCB | First-Citizens Bank & Trust Company | PAA | Purchase Accounting Accretion or Amortization | ||||||||
| FDIC | Federal Deposit Insurance Corporation | PAM | Proportional Amortization Method | ||||||||
| Federal Reserve | Board of Governors of the Federal Reserve System | PCA | Prompt Corrective Action | ||||||||
| FHLB | Federal Home Loan Bank | PCD | Purchased Credit Deteriorated | ||||||||
| FRB | Federal Reserve Bank | PD | Probability of Obligor Default | ||||||||
| GAAP | United States Generally Accepted Accounting Principles | PSL | Purchased Season Loan | ||||||||
| GDP | Gross Domestic Product | ROU | Right of Use | ||||||||
| HLBVM | Hypothetical Liquidation at Book Value Method | SBA | Small Business Administration | ||||||||
| HPI | Home Price Index | SOFR | Secured Overnight Financing Rate | ||||||||
| HQLS | High-Quality Liquid Securities | SRP | Share Repurchase Program | ||||||||
| ISDA | International Swaps and Derivatives Association | UPB | Unpaid Principal Balance | ||||||||
| VIE | Variable Interest Entities | ||||||||||
3
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
First Citizens BancShares, Inc. and Subsidiaries
Consolidated Balance Sheets (Unaudited)
| dollars in millions, except share data | March 31, 2026 | December 31, 2025 | |||||||||
| Assets | |||||||||||
| Cash and due from banks | $ | $ | |||||||||
| Interest-earning deposits at banks | |||||||||||
| Securities purchased under agreements to resell | |||||||||||
Investment in marketable equity securities (cost of $ | |||||||||||
Investment securities available for sale (cost of $ | |||||||||||
Investment securities held to maturity (fair value of $ | |||||||||||
| Assets held for sale | |||||||||||
| Loans and leases | |||||||||||
| Allowance for loan and lease losses | ( | ( | |||||||||
| Loans and leases, net of allowance for loan and lease losses | |||||||||||
| Operating lease equipment, net | |||||||||||
| Premises and equipment, net | |||||||||||
| Goodwill | |||||||||||
| Other intangible assets, net | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities | |||||||||||
| Deposits: | |||||||||||
| Noninterest-bearing | $ | $ | |||||||||
| Interest-bearing | |||||||||||
| Total deposits | |||||||||||
| Credit balances of factoring clients | |||||||||||
| Borrowings: | |||||||||||
| Short-term borrowings | |||||||||||
| Long-term borrowings | |||||||||||
| Total borrowings | |||||||||||
| Other liabilities | |||||||||||
| Total liabilities | |||||||||||
| Stockholders’ equity | |||||||||||
Preferred stock - $ | |||||||||||
| Common stock: | |||||||||||
Class A - $ | |||||||||||
Class B - $ | |||||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive (loss) income | ( | ||||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
See accompanying Notes to the Unaudited Consolidated Financial Statements.
4
First Citizens BancShares, Inc. and Subsidiaries
Consolidated Statements of Income (Unaudited)
| Three Months Ended March 31, | |||||||||||||||||||||||||||||
| dollars in millions, except share and per share data | 2026 | 2025 | |||||||||||||||||||||||||||
| Interest income | |||||||||||||||||||||||||||||
| Loans and leases | $ | $ | |||||||||||||||||||||||||||
| Investment securities | |||||||||||||||||||||||||||||
| Deposits at banks | |||||||||||||||||||||||||||||
| Total interest income | |||||||||||||||||||||||||||||
| Interest expense | |||||||||||||||||||||||||||||
| Deposits | |||||||||||||||||||||||||||||
| Borrowings | |||||||||||||||||||||||||||||
| Total interest expense | |||||||||||||||||||||||||||||
| Net interest income | |||||||||||||||||||||||||||||
| Provision for credit losses | |||||||||||||||||||||||||||||
| Net interest income after provision for credit losses | |||||||||||||||||||||||||||||
| Noninterest income | |||||||||||||||||||||||||||||
| Rental income on operating lease equipment | |||||||||||||||||||||||||||||
| Lending-related fees | |||||||||||||||||||||||||||||
| Deposit fees and service charges | |||||||||||||||||||||||||||||
| Client investment fees | |||||||||||||||||||||||||||||
| Wealth management services | |||||||||||||||||||||||||||||
| International fees | |||||||||||||||||||||||||||||
| Factoring commissions | |||||||||||||||||||||||||||||
| Cardholder services, net | |||||||||||||||||||||||||||||
| Merchant services, net | |||||||||||||||||||||||||||||
| Insurance commissions | |||||||||||||||||||||||||||||
| Fair value adjustment on marketable equity securities, net | ( | ||||||||||||||||||||||||||||
| Gain on sale of leasing equipment, net | |||||||||||||||||||||||||||||
| Loss on extinguishment of debt | ( | ||||||||||||||||||||||||||||
| Other noninterest income | |||||||||||||||||||||||||||||
| Total noninterest income | |||||||||||||||||||||||||||||
| Noninterest expense | |||||||||||||||||||||||||||||
| Depreciation on operating lease equipment | |||||||||||||||||||||||||||||
| Maintenance and other operating lease expenses | |||||||||||||||||||||||||||||
| Personnel cost | |||||||||||||||||||||||||||||
| Net occupancy expense | |||||||||||||||||||||||||||||
| Equipment expense | |||||||||||||||||||||||||||||
| Professional fees | |||||||||||||||||||||||||||||
| Third-party processing fees | |||||||||||||||||||||||||||||
| FDIC insurance expense | |||||||||||||||||||||||||||||
| Marketing expense | |||||||||||||||||||||||||||||
| Acquisition-related expenses | |||||||||||||||||||||||||||||
| Intangible asset amortization | |||||||||||||||||||||||||||||
| Other noninterest expense | |||||||||||||||||||||||||||||
| Total noninterest expense | |||||||||||||||||||||||||||||
| Income before income taxes | |||||||||||||||||||||||||||||
| Income tax expense | |||||||||||||||||||||||||||||
| Net income | $ | $ | |||||||||||||||||||||||||||
| Preferred stock dividends | |||||||||||||||||||||||||||||
| Net income available to common stockholders | $ | $ | |||||||||||||||||||||||||||
| Earnings per common share | |||||||||||||||||||||||||||||
| Basic and diluted | $ | $ | |||||||||||||||||||||||||||
| Weighted average common shares outstanding | |||||||||||||||||||||||||||||
| Basic and diluted | |||||||||||||||||||||||||||||
See accompanying Notes to the Unaudited Consolidated Financial Statements.
5
First Citizens BancShares, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Unaudited)
| Three Months Ended March 31, | |||||||||||||||||||||||||||||
| dollars in millions | 2026 | 2025 | |||||||||||||||||||||||||||
| Net income | $ | $ | |||||||||||||||||||||||||||
| Other comprehensive (loss) income, net of tax | |||||||||||||||||||||||||||||
| Net unrealized (loss) gain on securities available for sale | ( | ||||||||||||||||||||||||||||
| Net change in defined benefit pension items | ( | ||||||||||||||||||||||||||||
| Net unrealized (loss) gain on cash flow hedge derivatives | ( | ||||||||||||||||||||||||||||
| Other comprehensive (loss) income, net of tax | $ | ( | $ | ||||||||||||||||||||||||||
| Total comprehensive income | $ | $ | |||||||||||||||||||||||||||
See accompanying Notes to the Unaudited Consolidated Financial Statements.
6
First Citizens BancShares, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)
| dollars in millions, except per share data | Preferred Stock | Class A Common Stock | Class B Common Stock | Additional Paid in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2025 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||
| Issuance of Series E preferred stock | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
Repurchased | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||
Cash dividends declared ($ | ||||||||||||||||||||||||||||||||||||||||||||
| Class A common stock | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||
| Class B common stock | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||
| Preferred stock dividends declared: | ||||||||||||||||||||||||||||||||||||||||||||
| Series A | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||
| Series B | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||
| Series C | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||
| Series D | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2026 | $ | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Common stock | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Repurchased | — | ( | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||
Cash dividends declared ($ | ||||||||||||||||||||||||||||||||||||||||||||
| Class A common stock | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||
| Class B common stock | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||
| Preferred stock dividends declared: | ||||||||||||||||||||||||||||||||||||||||||||
| Series A | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||
| Series B | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||
| Series C | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2025 | $ | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||
See accompanying Notes to the Unaudited Consolidated Financial Statements.
7
First Citizens BancShares, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
| Three Months Ended March 31, | |||||||||||||||||
| dollars in millions | 2026 | 2025 | |||||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||||||||
| Net income | $ | $ | |||||||||||||||
| Adjustments to reconcile net income to cash provided by operating activities: | |||||||||||||||||
| Provision for credit losses | |||||||||||||||||
| Deferred tax expense (benefit) | ( | ||||||||||||||||
| Depreciation, amortization, and accretion, net | |||||||||||||||||
| Fair value adjustment on marketable equity securities, net | ( | ||||||||||||||||
| Gain on sale of loans, net | ( | ( | |||||||||||||||
| Gain on sale of operating lease equipment, net | ( | ( | |||||||||||||||
| Gain on sale of premises and equipment, net | ( | ||||||||||||||||
| (Gain) loss on other real estate owned, net | ( | ||||||||||||||||
| Loss on extinguishment of debt | |||||||||||||||||
| Origination of loans held for sale | ( | ( | |||||||||||||||
| Proceeds from sale of loans held for sale | |||||||||||||||||
| Impairment of premises and equipment and other assets | |||||||||||||||||
| Net change in other assets | ( | ||||||||||||||||
| Net change in other liabilities | ( | ( | |||||||||||||||
| Other operating activities | ( | ||||||||||||||||
| Net cash provided by operating activities | |||||||||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||||||||
| Net increase in interest-earning deposits at banks | ( | ( | |||||||||||||||
| Purchases of investment securities available for sale | ( | ( | |||||||||||||||
| Proceeds from maturities of investment securities available for sale | |||||||||||||||||
| Proceeds from sales of investment securities available for sale | |||||||||||||||||
| Purchases of investment securities held to maturity | ( | ( | |||||||||||||||
| Proceeds from maturities of investment securities held to maturity | |||||||||||||||||
| Net decrease (increase) in securities purchased under agreements to resell | ( | ||||||||||||||||
| Net increase in loans | ( | ( | |||||||||||||||
| Proceeds from sales of loans | |||||||||||||||||
| Net increase in credit balances of factoring clients | |||||||||||||||||
| Purchases of operating lease equipment | ( | ( | |||||||||||||||
| Proceeds from sales of operating lease equipment | |||||||||||||||||
| Purchases of premises and equipment | ( | ( | |||||||||||||||
| Proceeds from sales of other real estate owned | |||||||||||||||||
| Other investing activities | ( | ( | |||||||||||||||
| Net cash used in investing activities | ( | ( | |||||||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||||||||
| Net increase (decrease) in time deposits | ( | ||||||||||||||||
| Net increase in demand and other interest-bearing deposits | |||||||||||||||||
| Net (decrease) increase in securities sold under agreements to repurchase | ( | ||||||||||||||||
| Repayment of long-term borrowings | ( | ( | |||||||||||||||
| Net proceeds from issuance of long-term borrowings | |||||||||||||||||
| Issuance of Series E preferred stock | |||||||||||||||||
| Repurchase of Class A common stock | ( | ( | |||||||||||||||
| Cash dividends paid | ( | ( | |||||||||||||||
| Net cash provided by financing activities | |||||||||||||||||
| Change in cash and due from banks | ( | ||||||||||||||||
| Cash and due from banks at beginning of period | |||||||||||||||||
| Cash and due from banks at end of period | $ | $ | |||||||||||||||
8
| Three Months Ended March 31, | |||||||||||||||||
| dollars in millions | 2026 | 2025 | |||||||||||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | |||||||||||||||||
| Cash paid during the period for: | |||||||||||||||||
| Interest | $ | $ | |||||||||||||||
| Income taxes | |||||||||||||||||
| Significant non-cash investing and financing activities: | |||||||||||||||||
| Transfers of loans to other real estate | |||||||||||||||||
| Transfer of assets from held for investment to held for sale | |||||||||||||||||
| Transfer of assets from held for sale to held for investment | |||||||||||||||||
| Commitments extended during the period on affordable housing investment credits | |||||||||||||||||
See accompanying Notes to the Consolidated Financial Statements.
9
First Citizens BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Nature of Operations
First Citizens BancShares, Inc. (the “Parent Company” and, when including all of its subsidiaries on a consolidated basis, “we,” “us,” “our,” “BancShares”) is a financial holding company organized under the laws of Delaware that conducts operations through its banking subsidiary, First-Citizens Bank & Trust Company (“FCB”), which is headquartered in Raleigh, North Carolina. BancShares operates a network of branches and offices, predominantly located in the Southeast, Mid-Atlantic, Midwest and Western United States. BancShares provides various types of commercial and consumer banking services, including lending, leasing, and wealth management services. Deposit services include checking, savings, money market, and time deposit accounts.
BASIS OF PRESENTATION
Principles of Consolidation and Basis of Presentation
These consolidated financial statements and notes thereto are presented in accordance with instructions for Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include all information and notes necessary for a complete presentation of financial position, results of operations and cash flow activity required in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, all normal recurring adjustments necessary for a fair presentation of the consolidated financial position and consolidated results of operations have been made. The unaudited interim consolidated financial statements included in this Quarterly Report on Form 10-Q (this “Form 10-Q”) should be read in conjunction with the Consolidated Financial Statements and Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”). Interim results are not necessarily indicative of results for a full year.
The consolidated financial statements of BancShares include the accounts of BancShares and its subsidiaries, certain partnership interests, and variable interest entities (“VIEs”) where BancShares is the primary beneficiary, if applicable. All significant intercompany accounts and transactions are eliminated upon consolidation. Assets held in agency or fiduciary capacity are not included in the consolidated financial statements.
Refer to Note 9—Variable Interest Entities for additional information regarding VIEs.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions based on available information. These estimates and assumptions impact the amounts reported in the consolidated financial statements and accompanying notes and the disclosures provided, and actual results could differ from those estimates. The significant estimate related to the determination of the allowance for loan and lease losses (“ALLL”) is considered a critical accounting estimate.
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SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies are described in the 2025 Form 10-K. There were no material changes to these policies during the three months ended March 31, 2026.
Newly Adopted Accounting Standards
As of January 1, 2026, BancShares adopted the following Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board:
ASU 2025-08—Financial Instruments — Credit Losses (Topic 326): Purchased Loans, Issued November 2025
Under this ASU, purchased seasoned loans (“PSLs” as described below) must be recognized at the purchase price, plus the ALLL at the acquisition date (the “Gross-Up Approach”). Since the ALLL at the acquisition date is established through the Gross-Up Approach, there is no corresponding increase to the provision for loan and lease losses (“Day 2 Provision for Loan and Lease Losses”).
Prior to this ASU, the Gross-Up Approach was only permitted for purchased credit deteriorated (“PCD”) loans, while the initial ALLL for Non-PCD loans was established through the Day 2 Provision for Loan and Lease Losses. Under this ASU, the Gross-Up Approach applies to PCD loans and the following Non-PCD loans which qualify as PSLs: (i) non-credit card loans acquired in a business combination and (ii) non-credit card loans purchased more than 90 days after origination in a non-business combination transaction, provided the acquirer was not involved in the original lending. This ASU specifically excludes credit card loans from the definition of PSLs. This ASU is required to be applied prospectively upon adoption.
We early adopted this ASU as of January 1, 2026 (the “Adoption Date”) on a prospective basis. For PSLs acquired on or after the Adoption Date, this ASU could reduce the Day 2 Provision for Loan and Lease Losses, and the subsequent credit-related loan purchase accounting accretion or amortization that was prevalent for Non-PCD loans acquired prior the Adoption Date. This ASU did not have a material impact on our consolidated financial statements or related disclosures for the three month period ended March 31, 2026.
ASU 2025-05—Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, Issued July 2025
This ASU provides an optional practical expedient which permits an entity to assume that current conditions as of the balance sheet date do not change for the remaining life of the asset when estimating the ALLL for accounts receivable.
NOTE 2 — BUSINESS COMBINATIONS
Pending Branch Acquisition
On October 16, 2025, FCB announced that it had entered into an agreement to consummate the acquisition of 138 branches from BMO Bank N.A. located throughout the Midwest, Great Plains and West regions of the U.S. (the “BMO Branch Acquisition”). In connection with the BMO Branch Acquisition, FCB expects to assume approximately $5.3 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.
SVBB Acquisition
On March 27, 2023, FCB acquired substantially all loans and certain other assets and assumed all customer deposits and certain other liabilities of Silicon Valley Bridge Bank, N.A. from the Federal Deposit Insurance Corporation (the “FDIC” and such transaction, the “SVBB Acquisition”) and FCB issued a five-year $36.07 billion note payable to the FDIC, maturing March 27, 2028, which was amended and restated on November 20, 2023 (the “Purchase Money Note”) and is collateralized by certain loans. Refer to Note 10—Borrowings for the outstanding carrying value of the Purchase Money Note.
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NOTE 3 — INVESTMENT SECURITIES
The following tables include the amortized cost and fair value of investment securities:
Amortized Cost and Fair Value - Investment Securities
| dollars in millions | March 31, 2026 | ||||||||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||||||||||
| Investment securities available for sale | |||||||||||||||||||||||
| U.S. Treasury | $ | $ | $ | ( | $ | ||||||||||||||||||
| Government agency | ( | ||||||||||||||||||||||
| Residential mortgage-backed securities | ( | ||||||||||||||||||||||
| Commercial mortgage-backed securities | ( | ||||||||||||||||||||||
| Corporate bonds | ( | ||||||||||||||||||||||
| Municipal bonds | |||||||||||||||||||||||
| Total investment securities available for sale | $ | $ | $ | ( | $ | ||||||||||||||||||
| Investment in marketable equity securities | $ | $ | $ | $ | |||||||||||||||||||
| Investment securities held to maturity | |||||||||||||||||||||||
| U.S. Treasury | $ | $ | $ | ( | $ | ||||||||||||||||||
| Government agency | ( | ||||||||||||||||||||||
| Residential mortgage-backed securities | ( | ||||||||||||||||||||||
| Commercial mortgage-backed securities | ( | ||||||||||||||||||||||
| Supranational securities | ( | ||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total investment securities held to maturity | $ | $ | $ | ( | $ | ||||||||||||||||||
| Total investment securities | $ | $ | $ | ( | $ | ||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||||||||||
| Investment securities available for sale | |||||||||||||||||||||||
| U.S. Treasury | $ | $ | $ | ( | $ | ||||||||||||||||||
| Government agency | ( | ||||||||||||||||||||||
| Residential mortgage-backed securities | ( | ||||||||||||||||||||||
| Commercial mortgage-backed securities | ( | ||||||||||||||||||||||
| Corporate bonds | ( | ||||||||||||||||||||||
| Municipal bonds | |||||||||||||||||||||||
| Total investment securities available for sale | $ | $ | $ | ( | $ | ||||||||||||||||||
| Investment in marketable equity securities | $ | $ | $ | $ | |||||||||||||||||||
| Investment securities held to maturity | |||||||||||||||||||||||
| U.S. Treasury | $ | $ | $ | ( | $ | ||||||||||||||||||
| Government agency | ( | ||||||||||||||||||||||
| Residential mortgage-backed securities | ( | ||||||||||||||||||||||
| Commercial mortgage-backed securities | ( | ||||||||||||||||||||||
| Supranational securities | ( | ||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total investment securities held to maturity | $ | $ | $ | ( | $ | ||||||||||||||||||
| Total investment securities | $ | $ | $ | ( | $ | ||||||||||||||||||
U.S. Treasury investments include Treasury bills and Notes issued by the U.S. Treasury. Investments in government agency securities represent securities issued by the Small Business Administration (“SBA”), Federal Home Loan Bank (“FHLB”) and other U.S. agencies. Investments in residential and commercial mortgage-backed securities represent securities issued by the Government National Mortgage Association (“GNMA”), Federal National Mortgage Association (“FNMA”) and Federal Home Loan Mortgage Corporation (“FHLMC”). Investments in corporate bonds represent positions in debt securities of other financial institutions. Municipal bonds are revenue bonds. Investments in marketable equity securities represent positions in common stock of publicly traded financial institutions. Investments in supranational securities represent securities issued by the Supranational Entities & Multilateral Development Banks. Other held to maturity investments include certificates of deposit with other financial institutions.
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BancShares initially held approximately 354,000 shares of Visa, Inc. (“Visa”) Class B common stock (“Visa Class B common stock”). Effective January 24, 2024, all outstanding shares of Visa Class B common stock were redenominated as Visa Class B-1 common stock (“Visa Class B-1 common stock”) pursuant to Visa’s eighth amended and restated certificate of incorporation. BancShares currently holds approximately 354,000 shares of Visa Class B-1 common stock. Until the resolution of certain litigation, at which time the Visa Class B-1 common stock will convert to publicly traded Visa Class A common stock, or the potential exchange of Visa Class B-1 common stock for other marketable classes of Visa common stock, these shares are only transferable to other stockholders of Visa Class B-1 common stock or certain new denominations of Visa’s former Class B common stock. As a result, there is limited transfer activity in private transactions between buyers and sellers. Given this limited trading activity and the continuing uncertainty regarding the likelihood, ultimate timing and eventual exchange of Visa Class B-1 common stock for shares of Visa Class A common stock or other marketable classes of Visa common stock, these shares are not considered to have a readily determinable fair value and have no carrying value. BancShares has not elected to participate in any exchange offers pertaining to its shares of Visa Class B-1 common stock, including the exchange offer Visa commenced on April 13, 2026. BancShares continues to monitor the trading activity in Visa Class B-1 common stock, the status of the resolution of certain litigation matters at Visa, and other potential exchange alternatives that would trigger the conversion of the Visa Class B-1 common stock into Visa Class A common stock or other marketable classes of Visa common stock.
Accrued interest receivable for available for sale and held to maturity debt securities was excluded from the estimate for credit losses. At March 31, 2026, accrued interest receivable for available for sale and held to maturity debt securities was $184 million and $18 million, respectively. At December 31, 2025, accrued interest receivable for available for sale and held to maturity debt securities 157 million and $20 million, respectively. During the three months ended March 31, 2026 and 2025, there was no
A security is considered past due once it is 30 days contractually past due under the terms of the agreement. There were no
The following table provides the amortized cost and fair value by contractual maturity. Expected maturities will differ from contractual maturities on certain securities because borrowers and issuers may have the right to call or prepay obligations with or without prepayment penalties. Residential and commercial mortgage-backed and government agency securities are stated separately as they are not due at a single maturity date.
Maturities - Debt Securities
| dollars in millions | March 31, 2026 | December 31, 2025 | |||||||||||||||||||||
| Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||||||||||
| Investment securities available for sale | |||||||||||||||||||||||
| Non-amortizing securities maturing in: | |||||||||||||||||||||||
| One year or less | $ | $ | $ | $ | |||||||||||||||||||
| After one through five years | |||||||||||||||||||||||
| After five through 10 years | |||||||||||||||||||||||
| After 10 years | |||||||||||||||||||||||
| Government agency | |||||||||||||||||||||||
| Residential mortgage-backed securities | |||||||||||||||||||||||
| Commercial mortgage-backed securities | |||||||||||||||||||||||
| Total investment securities available for sale | $ | $ | $ | $ | |||||||||||||||||||
| Investment securities held to maturity | |||||||||||||||||||||||
| Non-amortizing securities maturing in: | |||||||||||||||||||||||
| One year or less | $ | $ | $ | $ | |||||||||||||||||||
| After one through five years | |||||||||||||||||||||||
| After five through 10 years | |||||||||||||||||||||||
| Residential mortgage-backed securities | |||||||||||||||||||||||
| Commercial mortgage-backed securities | |||||||||||||||||||||||
| Total investment securities held to maturity | $ | $ | $ | $ | |||||||||||||||||||
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The following table presents interest and dividend income on investment securities:
Interest and Dividends on Investment Securities
| dollars in millions | Three Months Ended March 31, | ||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||
Interest income - taxable investment securities (1) | $ | $ | |||||||||||||||||||||||||||
| Dividend income - marketable equity securities | |||||||||||||||||||||||||||||
| Interest on investment securities | $ | $ | |||||||||||||||||||||||||||
(1) Amount includes interest income on securities purchased under agreements to resell.
The following table presents the gross realized gain and loss on sales of investment securities available for sale, and the net realized gain on sale of marketable equity securities:
Realized Gain (Loss) on Sale of Investment Securities, Net
| dollars in millions | Three Months Ended March 31, | ||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||
| Gross realized gain on sale of investment securities available for sale | $ | $ | |||||||||||||||||||||||||||
| Gross realized loss on sale of investment securities available for sale | ( | ||||||||||||||||||||||||||||
| Net realized gain (loss) on sale of investment securities available for sale | ( | ||||||||||||||||||||||||||||
Net realized gain on sale of marketable equity securities | |||||||||||||||||||||||||||||
| Realized gain (loss) on sale of investment securities, net | $ | $ | |||||||||||||||||||||||||||
The following table provides information regarding investment securities available for sale with unrealized losses:
Gross Unrealized Losses on Debt Securities Available For Sale
| dollars in millions | March 31, 2026 | ||||||||||||||||||||||||||||||||||
| Less than 12 months | 12 months or more | Total | |||||||||||||||||||||||||||||||||
| Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||||||||||||||
| Investment securities available for sale | |||||||||||||||||||||||||||||||||||
| U.S. Treasury | $ | $ | ( | $ | $ | $ | $ | ( | |||||||||||||||||||||||||||
| Government agency | ( | ( | |||||||||||||||||||||||||||||||||
| Residential mortgage-backed securities | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Commercial mortgage-backed securities | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Corporate bonds | ( | ( | |||||||||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||||||||||||||
| Less than 12 months | 12 months or more | Total | |||||||||||||||||||||||||||||||||
| Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||||||||||||||
| Investment securities available for sale | |||||||||||||||||||||||||||||||||||
| U.S. Treasury | $ | $ | ( | $ | $ | $ | $ | ( | |||||||||||||||||||||||||||
| Government agency | ( | ( | |||||||||||||||||||||||||||||||||
| Residential mortgage-backed securities | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Commercial mortgage-backed securities | ( | ( | |||||||||||||||||||||||||||||||||
| Corporate bonds | ( | ( | |||||||||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||
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As of March 31, 2026, there were 300 investment securities available for sale with continuous unrealized losses for more than 12 months, of which 285 were government sponsored enterprise-issued mortgage-backed securities including GNMA, FHLMC and FNMA, or government agency securities, and the remaining 15 were corporate bonds. BancShares has the ability and intent to retain these securities for a period of time sufficient to recover all unrealized losses. Given the consistently strong credit rating of the U.S. Treasury, and the long history of no credit losses on debt securities issued by government agencies and government sponsored entities, as of March 31, 2026, no allowance for credit loss was required. For corporate bonds, we analyzed the changes in interest rates relative to when the investment securities were purchased or acquired, and considered other factors including changes in credit ratings, delinquencies, and other macroeconomic factors. As a result of this analysis, we determined that no allowance for credit loss was required for investment securities available for sale as of March 31, 2026.
BancShares’ portfolio of held to maturity debt securities consists of mortgage-backed securities issued by government agencies and government sponsored entities including GNMA, FHLMC and FNMA, U.S. Treasury notes, unsecured bonds issued by government agencies and government sponsored entities, and securities issued by the Supranational Entities & Multilateral Development Banks. Given the consistently strong credit rating of the U.S. Treasury and the Supranational Entities & Multilateral Development Banks, and the long history of no credit losses on debt securities issued by government agencies and government sponsored entities, no allowance for credit loss was required for debt securities held to maturity as of March 31, 2026.
There were no
Investment securities having an aggregate carrying value of $3.59 billion at March 31, 2026, and $3.89 billion at December 31, 2025, were pledged as collateral to secure public funds on deposit, the Purchase Money Note, certain short-term borrowings, and for other purposes as required by law.
NOTE 4 — ASSETS HELD FOR SALE
The composition of assets held for sale is summarized in the following table.
| dollars in millions | March 31, 2026 | December 31, 2025 | |||||||||||||||
| Loans and leases: | |||||||||||||||||
Commercial (1) | $ | $ | |||||||||||||||
| Consumer | |||||||||||||||||
| Loans and leases | |||||||||||||||||
| Operating lease equipment | |||||||||||||||||
| Total assets held for sale | $ | $ | |||||||||||||||
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
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NOTE 5 — LOANS AND LEASES
Loans held for sale are excluded from loans and leases on the Consolidated Balance Sheets and are included in Note 4—Assets Held For Sale. Finance leases for which we are the lessor are included in the commercial and industrial loan class in the following tables. Refer to Note 7—Leases for further information on leases.
The following table summarizes loans by class:
Loans by Class
| dollars in millions | March 31, 2026 | December 31, 2025 | |||||||||
| Commercial | |||||||||||
| Commercial and industrial | $ | $ | |||||||||
| Capital call lines | |||||||||||
| Owner occupied commercial mortgage | |||||||||||
| Investor dependent | |||||||||||
| Commercial real estate | |||||||||||
| Total commercial | |||||||||||
| Consumer | |||||||||||
| Residential mortgage | |||||||||||
| Revolving mortgage | |||||||||||
| Auto | |||||||||||
| Other consumer | |||||||||||
| Total consumer | |||||||||||
| Total loans and leases | $ | $ | |||||||||
At March 31, 2026 and December 31, 2025, accrued interest receivable on loans included in other assets was $639 million and $635 million, respectively, and was excluded from the estimate of the ALLL.
The discount on acquired loans is accreted to interest income over the contractual life of the loan using the effective interest method. Discount accretion income was $48 million for the three months ended March 31, 2026, including $1 million for unfunded commitments. Discount accretion income was $84 million for the three months ended March 31, 2025, including $8 million for unfunded commitments.
The following table presents selected components of the amortized cost of loans, including the unamortized discount on acquired loans.
Components of Amortized Cost
| dollars in millions | March 31, 2026 | December 31, 2025 | |||||||||
| Deferred fees, including unamortized costs and unearned fees on non-PCD loans | $ | ( | $ | ( | |||||||
| Net unamortized discount on acquired loans | |||||||||||
| Non-PCD | $ | $ | |||||||||
| PCD | |||||||||||
| Total net unamortized discount | $ | $ | |||||||||
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The aging and nonaccrual status of the outstanding loans and leases by class at March 31, 2026 and December 31, 2025 are provided in the tables below. Loans and leases less than 30 days past due are considered current, as various grace periods allow borrowers to make payments within a stated period after the due date and remain in compliance with the respective agreement.
Loans and Leases - Delinquency and Nonaccrual Status (1)
| dollars in millions | March 31, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||
| Accruing Loans | |||||||||||||||||||||||||||||||||||||||||||||||
| 30-59 Days Past Due | 60-89 Days Past Due | 90 Days or Greater | Total Past Due | Current | Total Accruing | Nonaccrual Loans (2) | Total | ||||||||||||||||||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Capital call lines | |||||||||||||||||||||||||||||||||||||||||||||||
| Owner occupied commercial mortgage | |||||||||||||||||||||||||||||||||||||||||||||||
| Investor dependent | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate | |||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial | |||||||||||||||||||||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage | |||||||||||||||||||||||||||||||||||||||||||||||
| Revolving mortgage | |||||||||||||||||||||||||||||||||||||||||||||||
| Auto | |||||||||||||||||||||||||||||||||||||||||||||||
| Other consumer | |||||||||||||||||||||||||||||||||||||||||||||||
| Total consumer | |||||||||||||||||||||||||||||||||||||||||||||||
| Total loans and leases | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||
| Accruing Loans | |||||||||||||||||||||||||||||||||||||||||||||||
30-59 Days Past Due | 60-89 Days Past Due | 90 Days or Greater | Total Past Due | Current | Total Accruing | Nonaccrual Loans (2) | Total | ||||||||||||||||||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Capital call lines | |||||||||||||||||||||||||||||||||||||||||||||||
| Owner occupied commercial mortgage | |||||||||||||||||||||||||||||||||||||||||||||||
| Investor dependent | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate | |||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial | |||||||||||||||||||||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage | |||||||||||||||||||||||||||||||||||||||||||||||
| Revolving mortgage | |||||||||||||||||||||||||||||||||||||||||||||||
| Auto | |||||||||||||||||||||||||||||||||||||||||||||||
| Other consumer | |||||||||||||||||||||||||||||||||||||||||||||||
| Total consumer | |||||||||||||||||||||||||||||||||||||||||||||||
| Total loans and leases | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
(1) Accrued interest that was deducted from interest income when the loan was moved to nonaccrual status was $5 million for the three months ended March 31, 2026 and $7 million for the three months ended March 31, 2025.
(2) Nonaccrual loans for which there was no related ALLL totaled $343 million at March 31, 2026 and $415 million at December 31, 2025. Refer to Note 1—Significant Accounting Policies and Basis of Presentation of our 2025 Form 10-K for discussion of loans individually evaluated to determine the ALLL.
Other real estate owned (“OREO”) and repossessed assets were $116 million as of March 31, 2026 and $124 million as of December 31, 2025.
17
Credit Quality Indicators
Loans and leases are monitored for credit quality on a recurring basis. Commercial loans and leases and consumer loans have different credit quality indicators as a result of the unique characteristics of the loan classes being evaluated. The credit quality indicators for commercial loans and leases are developed through a review of individual borrowers on an ongoing basis. Commercial loans are evaluated periodically with more frequent evaluations done on criticized loans. The indicators as of the date presented are based on the most recent assessment performed and are defined below:
Pass – A pass rated asset is not adversely classified because it does not display any of the characteristics for adverse classification.
Special mention – A special mention asset has potential weaknesses which deserve management’s close attention. If left uncorrected, such potential weaknesses may result in deterioration of the repayment prospects or collateral position at some future date. Special mention assets are not adversely classified and do not warrant adverse classification.
Substandard – A substandard asset is inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Assets classified as substandard generally have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. These assets are characterized by the distinct possibility of loss if the deficiencies are not corrected.
Doubtful – An asset classified as doubtful has all the weaknesses inherent in an asset classified substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable on the basis of currently existing facts, conditions and values.
Loss – Assets classified as loss are considered uncollectible and of such little value it is inappropriate to be carried as an asset. This classification is not necessarily equivalent to any potential for recovery or salvage value, but rather it is not appropriate to defer a full charge-off even though partial recovery may be affected in the future.
Ungraded – Ungraded loans represent loans not included in the individual credit grading process due to their relatively small balances or borrower type. The majority of ungraded loans at March 31, 2026 and December 31, 2025, relate to business credit cards. Business credit card loans are subject to automatic charge-off when they become 120 days past due in the same manner as unsecured consumer lines of credit.
The credit quality indicator for consumer loans is based on delinquency status of the borrower as of the end of the period. As the borrower becomes more delinquent, the likelihood of loss increases. An exemption is applied to government guaranteed loans as the principal repayments are insured by the Federal Housing Administration and U.S. Department of Veterans Affairs and thus remain on accrual status regardless of delinquency status.
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The following tables summarize the commercial loans disaggregated by year of origination and by risk rating. The consumer loan delinquency status by year of origination is also presented below. The tables reflect the amortized cost of the loans and include PCD loans.
Commercial Loans - Risk Classifications by Class
| March 31, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Classification: | Term Loans by Origination Year | Revolving Converted to Term Loans | |||||||||||||||||||||||||||||||||||||||||||||||||||
| dollars in millions | 2026 | 2025 | 2024 | 2023 | 2022 | 2021 & Prior | Revolving | Total | |||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ungraded | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial and industrial | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Capital call lines | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total capital call lines | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Owner occupied commercial mortgage | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total owner occupied commercial mortgage | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investor dependent | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Investor dependent | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial real estate | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ungraded | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
19
Consumer Loans - Delinquency Status by Class
| March 31, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Days Past Due: | Term Loans by Origination Year | Revolving Converted to Term Loans | |||||||||||||||||||||||||||||||||||||||||||||||||||
| dollars in millions | 2026 | 2025 | 2024 | 2023 | 2022 | 2021 & Prior | Revolving | Total | |||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Current | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| 30-59 days | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 60-89 days | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 90 days or greater | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total residential mortgage | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revolving mortgage | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Current | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 30-59 days | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 60-89 days | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 90 days or greater | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total revolving mortgage | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Auto | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Current | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 30-59 days | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 60-89 days | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 90 days or greater | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total consumer auto | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other consumer | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Current | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 30-59 days | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 60-89 days | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 90 days or greater | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total consumer other | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total consumer | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
20
The following tables represent current credit quality indicators by origination year as of December 31, 2025:
Commercial Loans - Risk Classifications by Class
| December 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Classification: | Term Loans by Origination Year | Revolving Converted to Term Loans | |||||||||||||||||||||||||||||||||||||||||||||||||||
| dollars in millions | 2025 | 2024 | 2023 | 2022 | 2021 | 2020 & Prior | Revolving | Total | |||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ungraded | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Commercial and industrial | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Capital call lines | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total capital call lines | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Owner occupied commercial mortgage | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total owner occupied commercial mortgage | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investor dependent | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total investor dependent | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial real estate | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ungraded | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
21
Consumer Loans - Delinquency Status by Class
| December 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Days Past Due: | Term Loans by Origination Year | Revolving Converted to Term Loans | |||||||||||||||||||||||||||||||||||||||||||||||||||
| dollars in millions | 2025 | 2024 | 2023 | 2022 | 2021 | 2020 & Prior | Revolving | Total | |||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Current | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| 30-59 days | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 60-89 days | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 90 days or greater | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total residential mortgage | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revolving mortgage | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Current | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 30-59 days | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 60-89 days | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 90 days or greater | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total revolving mortgage | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Auto | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Current | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 30-59 days | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 60-89 days | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 90 days or greater | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total consumer auto | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other consumer | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Current | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 30-59 days | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 60-89 days | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 90 days or greater | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total consumer other | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total consumer | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
22
Gross Charge-offs
Gross charge-off disclosures by origination year and loan class are summarized in the following tables:
| Three Months Ended March 31, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Term Loans by Origination Year | Revolving Converted to Term Loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| dollars in millions | 2026 | 2025 | 2024 | 2023 | 2022 | 2021 & Prior | Revolving | Total | |||||||||||||||||||||||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Capital call lines | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Owner occupied commercial mortgage | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investor dependent | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revolving mortgage | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Auto | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other consumer | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total consumer | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total loans and leases | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended March 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Term Loans by Origination Year | Revolving Converted to Term Loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| dollars in millions | 2025 | 2024 | 2023 | 2022 | 2021 | 2020 & Prior | Revolving | Total | |||||||||||||||||||||||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Capital call lines | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Owner occupied commercial mortgage | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investor dependent | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revolving mortgage | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Auto | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other consumer | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total consumer | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Total loans and leases | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
23
Loan Modifications for Borrowers Experiencing Financial Difficulties
As part of BancShares’ ongoing credit risk management practices, BancShares attempts to work with borrowers when necessary to extend or modify loan terms to better align with the borrowers’ current ability to repay. BancShares’ modifications granted to debtors experiencing financial difficulties typically take the form of term extensions, payment delays, interest rate reductions, principal forgiveness, or a combination thereof. Modifications are made in accordance with internal policies and guidelines to conform to regulatory guidance.
The following tables present the amortized cost of loan modifications made to debtors experiencing financial difficulty, disaggregated by class and type of loan modification. The tables also provide financial effects by type of such loan modifications for the respective loan class. Loan modifications for principal forgiveness round to less than $1 million for all loan classes in all periods presented and are not presented in the following tables.
Amortized Cost of Loans Modified during the three months ended March 31, 2026
| dollars in millions | Term Extension (1) | Payment Delay | Interest Rate Reduction | Term Extension (1) and Interest Rate Reduction | Term Extension (1) and Payment Delay | Total | Percent of Total Loan Class | ||||||||||||||||||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | $ | $ | $ | $ | $ | % | ||||||||||||||||||||||||||||||||||||||||
| Owner occupied commercial mortgage | |||||||||||||||||||||||||||||||||||||||||||||||
| Investor dependent | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate | |||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial | |||||||||||||||||||||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage | |||||||||||||||||||||||||||||||||||||||||||||||
| Revolving mortgage | |||||||||||||||||||||||||||||||||||||||||||||||
| Auto | |||||||||||||||||||||||||||||||||||||||||||||||
| Other consumer | |||||||||||||||||||||||||||||||||||||||||||||||
| Total consumer | |||||||||||||||||||||||||||||||||||||||||||||||
Total loans and leases | $ | $ | $ | $ | $ | $ | % | ||||||||||||||||||||||||||||||||||||||||
(1) Term extensions include modifications which extended the maturity date or amortization period, and modifications that deferred lump-sum principal payments to a later date.
Amortized Cost of Loans Modified during the three months ended March 31, 2025
| dollars in millions | Term Extension (1) | Payment Delay | Interest Rate Reduction | Term Extension (1) and Interest Rate Reduction | Term Extension (1) and Payment Delay | Total | Percent of Total Loan Class | ||||||||||||||||||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | $ | $ | $ | $ | $ | % | ||||||||||||||||||||||||||||||||||||||||
| Owner occupied commercial mortgage | |||||||||||||||||||||||||||||||||||||||||||||||
| Investor dependent | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate | |||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial | |||||||||||||||||||||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage | |||||||||||||||||||||||||||||||||||||||||||||||
| Revolving mortgage | |||||||||||||||||||||||||||||||||||||||||||||||
| Auto | |||||||||||||||||||||||||||||||||||||||||||||||
| Other consumer | |||||||||||||||||||||||||||||||||||||||||||||||
| Total consumer | |||||||||||||||||||||||||||||||||||||||||||||||
| Total loans and leases | $ | $ | $ | $ | $ | $ | % | ||||||||||||||||||||||||||||||||||||||||
24
Financial Effects of Loan Modifications made during the three months ended March 31, 2026
| Weighted Average Term Extension (in Months) | Weighted Average Interest Rate Reduction | Weighted Average Payment Delay (in Months) | |||||||||||||||||||||
| Commercial | |||||||||||||||||||||||
| Commercial and industrial | 9 | % | 9 | ||||||||||||||||||||
| Owner occupied commercial mortgage | 8 | 10 | |||||||||||||||||||||
| Investor dependent | 12 | 7 | |||||||||||||||||||||
| Commercial real estate | 17 | 9 | |||||||||||||||||||||
| Total commercial | 10 | 9 | |||||||||||||||||||||
| Consumer | |||||||||||||||||||||||
| Residential mortgage | 11 | 4 | |||||||||||||||||||||
| Revolving mortgage | 39 | — | |||||||||||||||||||||
| Auto | 24 | — | |||||||||||||||||||||
| Other consumer | — | — | |||||||||||||||||||||
| Total consumer | 14 | 4 | |||||||||||||||||||||
Total loans and leases | 10 | % | 9 | ||||||||||||||||||||
Financial Effects of Loan Modifications made during the three months ended March 31, 2025
| Weighted Average Term Extension (in Months) | Weighted Average Interest Rate Reduction | Weighted Average Payment Delay (in Months) | |||||||||||||||||||||
| Commercial | |||||||||||||||||||||||
| Commercial and industrial | 17 | % | 10 | ||||||||||||||||||||
| Owner occupied commercial mortgage | 8 | 6 | |||||||||||||||||||||
| Investor dependent | 12 | 5 | |||||||||||||||||||||
| Commercial real estate | 6 | 6 | |||||||||||||||||||||
| Total commercial | 10 | 7 | |||||||||||||||||||||
| Consumer | |||||||||||||||||||||||
| Residential mortgage | 22 | 5 | |||||||||||||||||||||
| Revolving mortgage | 60 | 5 | |||||||||||||||||||||
| Auto | 20 | 4 | |||||||||||||||||||||
| Other consumer | — | — | |||||||||||||||||||||
| Total consumer | 24 | 5 | |||||||||||||||||||||
Total loans and leases | 11 | % | 7 | ||||||||||||||||||||
Note: The financial effects of loan modifications for certain loan classes reported in the tables above were not reported in the preceding tables as the total amortized cost of loans modified during the period for such loan classes rounded to less than $1 million.
Borrowers experiencing financial difficulties are typically identified in our credit risk management process and are consequently addressed in our methodology to estimate the ALLL, which incorporates delinquencies, probability of obligor default, and loss given default. Therefore, a change to the ALLL is generally not recorded upon modification. An assessment of whether a borrower is experiencing financial difficulty is reassessed or performed on the date of a modification. Upon BancShares’ determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is charged off.
At March 31, 2026, there were $174 million of loans modified in the twelve-months ended March 31, 2026, which defaulted subsequent to modification.
25
The following tables present the amortized cost and performance of loans to borrowers experiencing financial difficulties for which the terms of the loan were modified during the referenced periods. The period of delinquency is based on the number of days the scheduled payment is contractually past due.
Modified Loans Payment Status (twelve months ended March 31, 2026)
| dollars in millions | Current | 30–59 Days Past Due | 60–89 Days Past Due | 90 Days or Greater Past Due | Total | ||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||
| Commercial and industrial | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Capital call lines | |||||||||||||||||||||||||||||
| Owner occupied commercial mortgage | |||||||||||||||||||||||||||||
| Investor dependent | |||||||||||||||||||||||||||||
| Commercial real estate | |||||||||||||||||||||||||||||
| Total commercial | |||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||
| Residential mortgage | |||||||||||||||||||||||||||||
| Revolving mortgage | |||||||||||||||||||||||||||||
| Auto | |||||||||||||||||||||||||||||
| Other consumer | |||||||||||||||||||||||||||||
| Total consumer | |||||||||||||||||||||||||||||
Total loans and leases | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Modified Loans Payment Status (twelve months ended March 31, 2025)
| dollars in millions | Current | 30–59 Days Past Due | 60–89 Days Past Due | 90 Days or Greater Past Due | Total | ||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||
| Commercial and industrial | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Capital call lines | |||||||||||||||||||||||||||||
| Owner occupied commercial mortgage | |||||||||||||||||||||||||||||
| Investor dependent | |||||||||||||||||||||||||||||
| Commercial real estate | |||||||||||||||||||||||||||||
| Total commercial | |||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||
| Residential mortgage | |||||||||||||||||||||||||||||
| Revolving mortgage | |||||||||||||||||||||||||||||
| Auto | |||||||||||||||||||||||||||||
| Other consumer | |||||||||||||||||||||||||||||
| Total consumer | |||||||||||||||||||||||||||||
Total loans and leases | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
At March 31, 2026, there were $19 million of commitments to lend additional funds to debtors experiencing financial difficulty for which the terms of the loan were modified during the three months ended March 31, 2026. At December 31, 2025, there were $60 million of commitments to lend additional funds to debtors experiencing financial difficulty for which the terms of the loan were modified during the year ended December 31, 2025.
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Loans Pledged
The following table provides information regarding loans pledged as collateral for borrowing capacity through the FHLB of Atlanta and the Federal Reserve Bank (“FRB”), and loans pledged as collateral for the Purchase Money Note to the FDIC.
Loans Pledged
| dollars in millions | March 31, 2026 | December 31, 2025 | |||||||||
| FHLB of Atlanta | |||||||||||
| Lendable collateral value of pledged non-PCD loans | $ | $ | |||||||||
| Less: advances | |||||||||||
| Less: letters of credit | |||||||||||
| Available borrowing capacity | $ | $ | |||||||||
| Pledged non-PCD loans | $ | $ | |||||||||
| FRB | |||||||||||
| Lendable collateral value of pledged non-PCD loans | $ | $ | |||||||||
| Less: advances | |||||||||||
| Available borrowing capacity | $ | $ | |||||||||
| Pledged non-PCD loans | $ | $ | |||||||||
| FDIC | |||||||||||
| Lendable collateral value of pledged loans | $ | $ | |||||||||
| Less: advances | |||||||||||
| Less: principal amount of the Purchase Money Note | |||||||||||
Available borrowing capacity (1) | $ | $ | |||||||||
Pledged loans (2) | $ | $ | |||||||||
(1) The draw period for the Advance Facility Agreement (an expired funding agreement between FCB and the FDIC in connection with the SVBB Acquisition) ended on March 27, 2025 so there was no available borrowing capacity at March 31, 2026 or December 31, 2025.
(2) Carrying value, net of remaining discount, for loans pledged as collateral for the Purchase Money Note.
As a member of the FHLB, FCB can access financing based on an evaluation of its creditworthiness, statement of financial position, size and eligibility of collateral. FCB may at any time grant a security interest in, sell, convey or otherwise dispose of any of the assets used for collateral, provided that FCB is in compliance with the collateral maintenance requirement immediately following such disposition. There were no
NOTE 6 — ALLOWANCE FOR LOAN AND LEASE LOSSES
The ALLL is reported as a separate line item on the Consolidated Balance Sheets, while the reserve for off-balance sheet credit exposure of $228 million and $260 million at March 31, 2026 and December 31, 2025, respectively, is included in other liabilities. The provision or benefit for credit losses related to (i) loans and leases (ii) off-balance sheet credit exposure, and (iii) other receivables or investment securities available for sale, if any, is reported in the Consolidated Statements of Income as provision or benefit for credit losses.
The ALLL activity for loans and leases is summarized in the following table:
Allowance for Loan and Lease Losses
| 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 | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provision for loan and lease losses | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Charge-offs | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Recoveries | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at end of period | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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The decrease of $8 million in the ALLL at March 31, 2026 compared to December 31, 2025, was 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 following table presents the components of the provision for credit losses:
Provision for Credit Losses
| dollars in millions | Three Months Ended March 31, | ||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||
Provision for loan and lease losses | $ | $ | |||||||||||||||||||||||||||
| (Benefit) provision for off-balance sheet credit exposure | ( | ||||||||||||||||||||||||||||
| Provision for other receivables | |||||||||||||||||||||||||||||
| Provision for credit losses | $ | $ | |||||||||||||||||||||||||||
NOTE 7 — LEASES
Lessee
BancShares’ leases primarily include administrative offices and bank locations. Substantially all of our operating lease liabilities relate to United States real estate leases. Our finance lease liabilities mainly relate to equipment leases, including the lease of certain ATMs. Our real estate leases have remaining lease terms of up to 32 years. Our lease terms may include options to extend or terminate the lease, and our operating leases have renewal terms that can extend from 1 to 25 years. The options are included in the lease term when it is determined that it is reasonably certain the option will be exercised.
The following table presents supplemental balance sheet information and remaining weighted average lease terms and discount rates:
Supplemental Lease Information
| dollars in millions | Classification | March 31, 2026 | December 31, 2025 | ||||||||||||||
| Lease assets: | |||||||||||||||||
| Operating lease ROU assets | Other assets | $ | $ | ||||||||||||||
| Finance leases | Premises and equipment | ||||||||||||||||
| Total lease assets | $ | $ | |||||||||||||||
| Lease liabilities: | |||||||||||||||||
| Operating leases | Other liabilities | $ | $ | ||||||||||||||
| Finance leases | Other borrowings | ||||||||||||||||
| Total lease liabilities | $ | $ | |||||||||||||||
| Weighted-average remaining lease terms: | |||||||||||||||||
| Operating leases | |||||||||||||||||
| Finance leases | |||||||||||||||||
| Weighted-average discount rate: | |||||||||||||||||
| Operating leases | % | % | |||||||||||||||
| Finance leases | |||||||||||||||||
As of March 31, 2026, there were no leases that have not yet commenced that would have a material impact on BancShares’ consolidated financial statements.
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The following table presents components of lease cost:
Components of Net Lease Cost
| dollars in millions | Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||
| Classification | 2026 | 2025 | |||||||||||||||||||||||||||||||||
Operating lease cost | Occupancy expense | $ | $ | ||||||||||||||||||||||||||||||||
| Finance lease ROU asset amortization | Equipment expense | ||||||||||||||||||||||||||||||||||
| Interest on lease liabilities | Interest expense - other borrowings | ||||||||||||||||||||||||||||||||||
Variable lease cost (1) | Occupancy expense | ||||||||||||||||||||||||||||||||||
| Sublease income | Occupancy expense | ( | ( | ||||||||||||||||||||||||||||||||
Net lease cost (1) | $ | $ | |||||||||||||||||||||||||||||||||
(1) Includes short-term lease cost.
Operating lease cost is recognized as a single lease cost on a straight-line basis over the lease term.
For finance leases, the right of use (“ROU”) asset is amortized straight-line over the lease term as equipment expense and interest on the lease liability is recognized separately.
Variable lease cost includes common area maintenance, property taxes, utilities, and other operating expenses related to leased premises recognized in the period in which the expense was incurred. Certain of our lease agreements also include rental payments adjusted periodically for inflation. While lease liabilities are not remeasured because of these changes, these adjustments are treated as variable lease costs and recognized in the period in which the expense is incurred.
Sublease income results from leasing excess building space that BancShares is no longer utilizing under operating leases, which have remaining lease terms of up to 11 years.
The following table presents supplemental cash flow information related to leases:
Supplemental Cash Flow Information
| dollars in millions | Three Months Ended March 31, | ||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||||||||
| Operating cash flows from operating leases | $ | $ | |||||||||||||||
| Operating cash flows from finance leases | |||||||||||||||||
| Financing cash flows from finance leases | |||||||||||||||||
| ROU assets obtained in exchange for new operating lease liabilities | |||||||||||||||||
| ROU assets obtained in exchange for new finance lease liabilities | |||||||||||||||||
Lessor
BancShares leases equipment to commercial end-users under operating lease and finance lease arrangements. The majority of operating lease equipment is long-lived rail equipment, which is typically leased several times over its life. We also lease technology and office equipment, and large and small industrial, medical, and transportation equipment under both operating leases and finance leases.
Our Rail operating leases typically do not include purchase options. Many of our finance leases, and other equipment operating leases, offer the lessee the option to purchase the equipment at fair market value or for a nominal fixed purchase option. Many of the leases that do not have a nominal purchase option include renewal provisions resulting in some leases continuing beyond the initial contractual term. Our leases typically do not include early termination options. Continued rent payments are due if leased equipment is not returned at the end of the lease.
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The following table presents lease income related to BancShares’ equipment leases:
Lease Income
| dollars in millions | Three Months Ended March 31, | ||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||
| Lease income – operating leases | $ | $ | |||||||||||||||||||||||||||
Variable lease income – operating leases (1) | |||||||||||||||||||||||||||||
| Rental income on operating leases | |||||||||||||||||||||||||||||
| Interest income – sales type and direct financing leases | |||||||||||||||||||||||||||||
Variable lease income included in other noninterest income (2) | |||||||||||||||||||||||||||||
| Interest income – leveraged leases | |||||||||||||||||||||||||||||
| Total lease income | $ | $ | |||||||||||||||||||||||||||
(1) Primarily includes per diem railcar operating lease rental income earned on a time or mileage usage basis.
NOTE 8 — GOODWILL AND CORE DEPOSIT INTANGIBLES
Goodwill
BancShares had goodwill of $346 no
Core Deposit Intangibles
Core deposit intangibles represent the estimated fair value of core deposits and other customer relationships acquired. Core deposit intangibles are being amortized over their estimated useful lives. The following tables summarize the activity for core deposit intangibles:
Core Deposit Intangibles
| Three Months Ended March 31, | |||||||||||||||||
| dollars in millions | 2026 | ||||||||||||||||
| Balance at beginning of period, net of accumulated amortization | $ | ||||||||||||||||
| Less: amortization for the period | |||||||||||||||||
| Balance at end of period, net of accumulated amortization | $ | ||||||||||||||||
The following table summarizes the accumulated amortization balance for core deposit intangibles:
Core Deposit Intangible Accumulated Amortization
| dollars in millions | March 31, 2026 | December 31, 2025 | |||||||||
| Gross balance | $ | $ | |||||||||
| Less: accumulated amortization | |||||||||||
| Balance, net of accumulated amortization | $ | $ | |||||||||
The following table summarizes the expected amortization expense as of March 31, 2026 in subsequent periods for core deposit intangibles:
Core Deposit Intangible Expected Amortization
| dollars in millions | |||||
| Remainder 2026 | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| 2031 | |||||
| Balance, net of accumulated amortization | $ | ||||
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NOTE 9 — VARIABLE INTEREST ENTITIES
Unconsolidated VIEs
Unconsolidated VIEs include limited partnership interests and joint ventures. The table below provides a summary of the assets and liabilities included on the Consolidated Balance Sheets associated with unconsolidated VIEs. The maximum exposure to loss for unconsolidated VIEs is generally limited to the sum of the unconsolidated VIE investment balance and off-balance sheet funding commitments. The maximum exposure to loss represents potential losses that would be incurred under hypothetical circumstances, such that the value of BancShares’ interests and any associated collateral declines to zero and assuming no recovery. BancShares believes the possibility is remote under this hypothetical scenario; accordingly, this disclosure is not an indication of expected loss.
Refer to Note 19—Commitments and Contingencies for off-balance sheet commitments to fund other tax credit investments and other unconsolidated investments.
Unconsolidated VIEs Carrying Value and Liabilities for Funding Commitments
| dollars in millions | March 31, 2026 | December 31, 2025 | |||||||||
| Affordable housing tax credit investments | $ | $ | |||||||||
| Other tax credit investments | |||||||||||
| Total tax credit equity investments | $ | $ | |||||||||
| Other unconsolidated investments | |||||||||||
Total unconsolidated VIE investments (1) | $ | $ | |||||||||
Liabilities for commitments to fund tax credit investments (2) | $ | $ | |||||||||
(1) Included in other assets.
(2) Represents commitments to invest in qualified affordable housing investments. These commitments are payable on demand and included in other liabilities.
The table below summarizes the tax benefits, recognized in income tax expense on the Consolidated Statements of Income, for the affordable housing tax credit investments accounted for under the PAM.
Tax Benefits - PAM
| dollars in millions | Three Months Ended March 31, | ||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||
| $ | $ | ||||||||||||||||||||||||||||
| Tax credits from affordable housing tax credit investments | ( | ( | |||||||||||||||||||||||||||
| ( | ( | ||||||||||||||||||||||||||||
Net income tax benefit from affordable housing tax credit investments (2) | $ | ( | $ | ( | |||||||||||||||||||||||||
(1) Amortization is included in depreciation, amortization, and accretion, net, in cash flows from operating activities on the Consolidated Statements of Cash Flows.
(2) The net income tax benefit is included in cash flows from operating activities on the Consolidated Statements of Cash Flows. Changes in income taxes payable are reported in net change in other liabilities in cash flows from operating activities on the Consolidated Statements of Cash Flows.
Other Tax Credit Investments
Other tax credit investments at March 31, 2026 consisted of renewable energy tax credit investments accounted for under the HLBVM. We elected the deferral method for the tax credits and deferred tax assets (“DTAs”) related to HLBVM tax credit investments.
Refer to Note 1—Significant Accounting Policies and Basis of Presentation of our 2025 Form 10-K for further discussion of the PAM, HLBVM, and deferral method.
NOTE 10 — BORROWINGS
Short-term Borrowings
Securities Sold under Agreements to Repurchase
BancShares held $170 million and $224 million at March 31, 2026 and December 31, 2025, respectively, of securities sold under agreements to repurchase that have overnight contractual maturities and are collateralized by government agency securities. The weighted average interest rate for securities sold under agreements to repurchase was 0.33 % and 0.41 % at March 31, 2026 and December 31, 2025, respectively.
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BancShares utilizes securities sold under agreements to repurchase to facilitate the needs for collateralization of commercial customers and secure wholesale funding needs. Repurchase agreements are transactions whereby BancShares offers to sell to a counterparty an undivided interest in an eligible security at an agreed upon purchase price, and which obligates BancShares to repurchase the security at an agreed upon date, repurchase price and interest rate. These agreements are recorded at the amount of cash received in connection with the transactions and are reflected as securities sold under customer repurchase agreements.
BancShares monitors collateral levels on a continuous basis and maintains records of each transaction specifically describing the applicable security and the counterparty’s fractional interest in that security, and segregates the security from general assets in accordance with regulations governing custodial holdings of securities. The primary risk with repurchase agreements is market risk associated with the investments securing the transactions, as additional collateral may be required based on fair value changes of the underlying investments. Securities pledged as collateral under repurchase agreements are maintained with safekeeping agents. The carrying value of investment securities pledged as collateral under repurchase agreements was $207 million and $230 million at March 31, 2026 and December 31, 2025, respectively.
Long-term Borrowings
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 the first quarter of 2026, FCB made prepayments of $2.50 billion on the Purchase Money Note and recognized a loss on extinguishment of debt of $8 million. In April 2026, we made an additional prepayment of $500 million.
The following table presents long-term borrowings, net of the respective unamortized purchase accounting adjustments and issuance costs:
Long-term Borrowings
| dollars in millions | Maturity | March 31, 2026 | December 31, 2025 | ||||||||||||||
| Parent Company: | |||||||||||||||||
| Senior: | |||||||||||||||||
Fixed-to-Floating Senior Notes at | March 2031 | $ | $ | ||||||||||||||
Fixed-to-Floating Senior Notes at | March 2032 | ||||||||||||||||
| Subordinated: | |||||||||||||||||
Fixed Rate Reset Subordinated Notes at | September 2035 | ||||||||||||||||
Fixed-to-Fixed Subordinated Notes at | March 2040 | ||||||||||||||||
| Subsidiaries: | |||||||||||||||||
| Senior: | |||||||||||||||||
Fixed Senior Unsecured Notes at | April 2036 | ||||||||||||||||
| Subordinated: | |||||||||||||||||
Fixed Subordinated Notes at | March 2028 | ||||||||||||||||
| Secured: | |||||||||||||||||
Purchase Money Note to FDIC fixed at | March 2028 | ||||||||||||||||
| Capital lease obligations | Maturities through May 2057 | ||||||||||||||||
| Total long-term borrowings | $ | $ | |||||||||||||||
(1) The fixed rate period will end March 12, 2030, and the notes will thereafter bear a floating interest rate equal to a benchmark rate based on the Compounded Secured Overnight Financing Rate (“SOFR”) Index Rate plus 141 basis points (“bps”) per annum until the maturity date (or date of earlier redemption).
(2) The fixed rate period will end March 3, 2031, and the notes will thereafter bear a floating interest rate equal to a benchmark rate based on the Compounded SOFR Index Rate plus 148.7 bps per annum until the maturity date (or date of earlier redemption).
(3) The interest rate will reset on September 5, 2030, and the notes will thereafter bear a fixed interest rate equal to the Five-year U.S. Treasury Rate as of the day falling two business days prior to the notes reset date plus 185 bps per annum until the maturity date (or date of earlier redemption).
(4) The interest rate will reset on March 12, 2035, and the notes will thereafter bear a fixed interest rate equal to the Five-year U.S. Treasury Rate as of the day falling two business days prior to the notes reset date plus 197 bps per annum until the maturity date (or date of earlier redemption).
(5) Issued in connection with the SVBB Acquisition. The unamortized discount was $95 million and $115 million at March 31, 2026 and December 31, 2025, respectively. Refer to Note 5—Loans and Leases for further information on loans pledged as collateral to secure borrowings.
Pledged Assets
Refer to the “Loans Pledged” section in Note 5—Loans and Leases for information on loans pledged as collateral to secure borrowings. Additionally, interest-earning deposits at banks included $194 million and $212 million at March 31, 2026 and December 31, 2025, respectively, that were required minimum deposits under the Purchase Money Note.
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NOTE 11 — DERIVATIVE FINANCIAL INSTRUMENTS
Our derivatives designated as hedging instruments include interest rate swap contracts utilized to manage our interest rate exposure for items on our Consolidated Balance Sheets. This includes floating-rate loan portfolio cash flow hedges and fair value hedges of our fixed-rate borrowings.
Our derivatives not designated as hedging instruments mainly include interest rate and foreign exchange contracts that our customers utilized for their risk management needs. We typically manage our exposure to these customer derivatives by entering into offsetting or “back-to-back” interest rate and foreign exchange contracts with third-party dealers.
Derivative instruments that are cleared through certain central counterparty clearing houses are settled-to-market and reported net of collateral positions.
Refer to Note 1—Significant Accounting Policies and Basis of Presentation of our 2025 Form 10-K for accounting policies for derivatives.
The following table presents notional amounts and fair values of derivative financial instruments:
Notional Amount and Fair Value of Derivative Financial Instruments
| dollars in millions | March 31, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||||||
| Notional Amount | Asset Fair Value | Liability Fair Value | Notional Amount | Asset Fair Value | Liability Fair Value | ||||||||||||||||||||||||||||||
| Derivatives designated as hedging instruments (Qualifying hedges) | |||||||||||||||||||||||||||||||||||
| Fair Value Hedges | |||||||||||||||||||||||||||||||||||
Interest rate contracts hedging long-term borrowings | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Cash Flow Hedges | |||||||||||||||||||||||||||||||||||
Interest rate contracts hedging loans (1) (2) | |||||||||||||||||||||||||||||||||||
| Total derivatives designated as hedging instruments | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Derivatives not designated as hedging instruments (Non-qualifying hedges) | |||||||||||||||||||||||||||||||||||
Interest rate contracts (1) (2) | $ | $ | $ | ( | $ | $ | $ | ( | |||||||||||||||||||||||||||
Foreign exchange contracts (3) | ( | ( | |||||||||||||||||||||||||||||||||
Other contracts (4) | |||||||||||||||||||||||||||||||||||
| Total derivatives not designated as hedging instruments | $ | $ | $ | ( | $ | $ | $ | ( | |||||||||||||||||||||||||||
| Gross derivatives fair values presented in the Consolidated Balance Sheets | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||
| Less: gross amount offset in the Consolidated Balance Sheets | |||||||||||||||||||||||||||||||||||
| $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||||
(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.
33
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 | $ | $ | ( | $ | $ | ||||||||||||||||||
| Cleared trades, variation margin netting | ( | ( | |||||||||||||||||||||
| Total derivatives designated as hedging instruments | $ | $ | $ | $ | |||||||||||||||||||
| Derivatives not designated as hedging instruments (Non-qualifying hedges) | |||||||||||||||||||||||
| Gross fair value | $ | $ | ( | $ | $ | ( | |||||||||||||||||
| Cleared trades, variation margin netting | ( | ( | |||||||||||||||||||||
| Total derivatives not designated as hedging instruments | $ | $ | ( | $ | $ | ( | |||||||||||||||||
| Gross derivatives fair values presented in the Consolidated Balance Sheets | $ | $ | ( | $ | $ | ( | |||||||||||||||||
Amounts subject to master netting agreements (1) | ( | ( | |||||||||||||||||||||
Cash collateral pledged (received) subject to master netting agreements (2) | ( | ( | |||||||||||||||||||||
| Total net derivative fair value | $ | $ | ( | $ | $ | ( | |||||||||||||||||
(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 | ( | |||||||||||||||||||||||||||||||||
| Gain (loss) on hedged item - time deposits | Deposits | ||||||||||||||||||||||||||||||||||
| Gain (loss) on hedged item - borrowings | Borrowings | ||||||||||||||||||||||||||||||||||
| Net gain (loss) on fair value hedges | Total interest expense | $ | $ | ||||||||||||||||||||||||||||||||
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 | $ | $ | $ | ||||||||||||||
34
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 | $ | ( | $ | ||||||||||||||||||||||||||
| Amounts reclassified from AOCI to earnings | ( | ||||||||||||||||||||||||||||
| Other comprehensive income on cash flow hedge derivatives | $ | ( | $ | ||||||||||||||||||||||||||
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 | $ | $ | |||||||||||||||
Estimate to be reclassified from AOCI to earnings during the next 12 months, net of income taxes (1) | $ | $ | |||||||||||||||
Maximum number of months over which forecasted cash flows are hedged (2) | |||||||||||||||||
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 | $ | $ | ( | |||||||||||||||||||||||||||||||
Foreign currency forward contracts (1) | Other noninterest income | ( | |||||||||||||||||||||||||||||||||
| Other contracts | Other noninterest income | ( | |||||||||||||||||||||||||||||||||
| Total non-qualifying hedges - income statement impact | $ | $ | ( | ||||||||||||||||||||||||||||||||
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.
35
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 | $ | $ | $ | $ | ||||||||||||||||||||||
| Government agency | ||||||||||||||||||||||||||
| Residential mortgage-backed securities | ||||||||||||||||||||||||||
| Commercial mortgage-backed securities | ||||||||||||||||||||||||||
| Corporate bonds | ||||||||||||||||||||||||||
| Municipal bonds | ||||||||||||||||||||||||||
| Total investment securities available for sale | $ | $ | $ | $ | ||||||||||||||||||||||
| Marketable equity securities | ||||||||||||||||||||||||||
| Loans held for sale | ||||||||||||||||||||||||||
| Loans | ||||||||||||||||||||||||||
Derivative assets (1) | ||||||||||||||||||||||||||
| Total qualifying hedge assets | $ | $ | $ | $ | ||||||||||||||||||||||
| Interest rate contracts — non-qualifying hedges | $ | $ | $ | $ | ||||||||||||||||||||||
| Foreign exchange contracts — non-qualifying hedges | ||||||||||||||||||||||||||
| Other derivative contracts — non-qualifying hedges | ||||||||||||||||||||||||||
| Total non-qualifying hedge assets | $ | $ | $ | $ | ||||||||||||||||||||||
| Total derivative assets | $ | $ | $ | $ | ||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||
Derivative liabilities (1) | ||||||||||||||||||||||||||
| Interest rate contracts — qualifying hedges | $ | $ | $ | $ | ||||||||||||||||||||||
| Interest rate contracts — non-qualifying hedges | $ | $ | $ | $ | ||||||||||||||||||||||
| Foreign exchange contracts — non-qualifying hedges | ||||||||||||||||||||||||||
| Other derivative contracts — non-qualifying hedges | ||||||||||||||||||||||||||
| Total non-qualifying hedge liabilities | $ | $ | $ | $ | ||||||||||||||||||||||
| Total derivative liabilities | $ | $ | $ | $ | ||||||||||||||||||||||
(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 | $ | $ | $ | $ | ||||||||||||||||||||||
| Government agency | ||||||||||||||||||||||||||
| Residential mortgage-backed securities | ||||||||||||||||||||||||||
| Commercial mortgage-backed securities | ||||||||||||||||||||||||||
| Corporate bonds | ||||||||||||||||||||||||||
| Municipal bonds | ||||||||||||||||||||||||||
| Total investment securities available for sale | $ | $ | $ | $ | ||||||||||||||||||||||
| Marketable equity securities | ||||||||||||||||||||||||||
| Loans held for sale | ||||||||||||||||||||||||||
| Loans | ||||||||||||||||||||||||||
Derivative assets (1) | ||||||||||||||||||||||||||
| Total qualifying hedge assets | $ | $ | $ | $ | ||||||||||||||||||||||
| Interest rate contracts — non-qualifying hedges | $ | $ | $ | $ | ||||||||||||||||||||||
| Foreign exchange contracts — non-qualifying hedges | ||||||||||||||||||||||||||
| Other derivative contracts — non-qualifying hedges | ||||||||||||||||||||||||||
| Total non-qualifying hedge assets | $ | $ | $ | $ | ||||||||||||||||||||||
| Total derivative assets | $ | $ | $ | $ | ||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||
Derivative liabilities (1) | ||||||||||||||||||||||||||
| Interest rate contracts — qualifying hedges | $ | $ | $ | $ | ||||||||||||||||||||||
| Interest rate contracts — non-qualifying hedges | $ | $ | $ | $ | ||||||||||||||||||||||
| Foreign exchange contracts — non-qualifying hedges | ||||||||||||||||||||||||||
| Other derivative contracts — non-qualifying hedges | ||||||||||||||||||||||||||
| Total non-qualifying hedge liabilities | $ | $ | $ | $ | ||||||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||||||
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.
37
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 | $ | $ | 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 | $ | $ | 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 | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Purchases | |||||||||||||||||||||||||||||||||||
| Changes in fair value included in earnings | |||||||||||||||||||||||||||||||||||
| Changes in fair value included in comprehensive income | |||||||||||||||||||||||||||||||||||
| Transfers out | |||||||||||||||||||||||||||||||||||
| Maturity and settlements | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
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) | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||
(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.
38
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 | $ | $ | $ | $ | $ | ( | |||||||||||||||||||||||
| Loans - collateral dependent loans | ( | ||||||||||||||||||||||||||||
| Other real estate owned | ( | ||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ( | |||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||||||||
| Assets held for sale - loans | $ | $ | $ | $ | $ | ( | |||||||||||||||||||||||
| Loans - collateral dependent loans | ( | ||||||||||||||||||||||||||||
| Other real estate owned | |||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ( | |||||||||||||||||||||||
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.
39
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 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Interest-earning deposits at banks | |||||||||||||||||||||||||||||
| Securities purchased under agreements to resell | |||||||||||||||||||||||||||||
| Investment in marketable equity securities | |||||||||||||||||||||||||||||
| Investment securities available for sale | |||||||||||||||||||||||||||||
| Investment securities held to maturity | |||||||||||||||||||||||||||||
| Loans held for sale | |||||||||||||||||||||||||||||
| Net loans | |||||||||||||||||||||||||||||
| Accrued interest receivable | |||||||||||||||||||||||||||||
| Federal Home Loan Bank stock | |||||||||||||||||||||||||||||
| Mortgage servicing rights | |||||||||||||||||||||||||||||
| Derivative assets - non-qualifying hedges | |||||||||||||||||||||||||||||
| Financial Liabilities | |||||||||||||||||||||||||||||
| Deposits with no stated maturity | |||||||||||||||||||||||||||||
| Time deposits | |||||||||||||||||||||||||||||
| Credit balances of factoring clients | |||||||||||||||||||||||||||||
| Securities sold under customer repurchase agreements | |||||||||||||||||||||||||||||
| Long-term borrowings | |||||||||||||||||||||||||||||
| Accrued interest payable | |||||||||||||||||||||||||||||
| Derivative liabilities - non-qualifying hedges | |||||||||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||||||||
| Estimated Fair Value | |||||||||||||||||||||||||||||
| Carrying Value | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
| Financial Assets | |||||||||||||||||||||||||||||
| Cash and due from banks | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Interest-earning deposits at banks | |||||||||||||||||||||||||||||
| Securities purchased under agreements to resell | |||||||||||||||||||||||||||||
| Investment in marketable equity securities | |||||||||||||||||||||||||||||
| Investment securities available for sale | |||||||||||||||||||||||||||||
| Investment securities held to maturity | |||||||||||||||||||||||||||||
| Loans held for sale | |||||||||||||||||||||||||||||
| Net loans | |||||||||||||||||||||||||||||
| Accrued interest receivable | |||||||||||||||||||||||||||||
| Federal Home Loan Bank stock | |||||||||||||||||||||||||||||
| Mortgage servicing rights | |||||||||||||||||||||||||||||
| Derivative assets - non-qualifying hedges | |||||||||||||||||||||||||||||
| Financial Liabilities | |||||||||||||||||||||||||||||
| Deposits with no stated maturity | |||||||||||||||||||||||||||||
| Time deposits | |||||||||||||||||||||||||||||
| Credit balances of factoring clients | |||||||||||||||||||||||||||||
| Securities sold under customer repurchase agreements | |||||||||||||||||||||||||||||
| Long-term borrowings | |||||||||||||||||||||||||||||
| Accrued interest payable | |||||||||||||||||||||||||||||
| Derivative liabilities - non-qualifying hedges | |||||||||||||||||||||||||||||
40
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.
41
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 | |||||||||||||||||||||||
| Shares repurchased under authorized repurchase plan | ( | ||||||||||||||||||||||
| Common stock - March 31, 2026 | |||||||||||||||||||||||
Common Stock
The Parent Company has Class A common stock and Class B common stock, each with a par value of $1 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 | $ | $ | $ | $ | 13,800,000 (1/40th) | $ | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Series B (3) | January 3, 2022 | January 4, 2027 | n/a | n/a | SOFR + | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series C | January 3, 2022 | January 4, 2027 | n/a | n/a | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Series D (4) | November 18, 2025 | December 15, 2030 | 500,000 (1/100th) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Series E (5) | February 5, 2026 | March 15, 2031 | 16,000,000 (1/40th) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(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.
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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 | $ | ( | $ | $ | ( | $ | ( | $ | $ | ( | |||||||||||||||||||||||||
| 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 | $ | ( | $ | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||||
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 | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||
| AOCI activity before reclassifications | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Amounts reclassified from AOCI to earnings | |||||||||||||||||||||||||||||||||||
| Other comprehensive income for the period | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Balance as of March 31, 2026 | $ | ( | $ | ( | $ | $ | $ | ( | |||||||||||||||||||||||||||
| Balance as of December 31, 2024 | $ | ( | $ | ( | $ | $ | $ | ( | |||||||||||||||||||||||||||
| AOCI activity before reclassifications | |||||||||||||||||||||||||||||||||||
| Amounts reclassified from AOCI to earnings | ( | ( | |||||||||||||||||||||||||||||||||
| Other comprehensive (loss) income for the period | |||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2025 | $ | ( | $ | ( | $ | $ | $ | ( | |||||||||||||||||||||||||||
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 | $ | ( | $ | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Defined benefit pension items: | |||||||||||||||||||||||||||||||||||||||||
| Actuarial loss | $ | ( | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||
| Unrealized gain on cash flow hedge derivatives: | |||||||||||||||||||||||||||||||||||||||||
| AOCI activity before reclassifications | $ | ( | $ | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Amounts reclassified from AOCI to earnings | ( | ( | Interest income on loans and leases | ||||||||||||||||||||||||||||||||||||||
| Other comprehensive income on cash flow hedge derivatives | $ | ( | $ | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Total other comprehensive income | $ | ( | $ | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||
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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 | $ | $ | |||||||||||||||||||||||||||
| Preferred stock dividends | |||||||||||||||||||||||||||||
| Net income available to common stockholders | $ | $ | |||||||||||||||||||||||||||
| Weighted average common shares outstanding | |||||||||||||||||||||||||||||
| Basic shares outstanding | |||||||||||||||||||||||||||||
| Stock-based awards | |||||||||||||||||||||||||||||
| Diluted shares outstanding | |||||||||||||||||||||||||||||
| Earnings per common share | |||||||||||||||||||||||||||||
| Basic and diluted | $ | $ | |||||||||||||||||||||||||||
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
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 | $ | $ | |||||||||||||||||||||||||||
| Interest cost | |||||||||||||||||||||||||||||
| Expected return on assets | ( | ( | |||||||||||||||||||||||||||
| Total net periodic benefit | $ | ( | $ | ( | |||||||||||||||||||||||||
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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) | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||
| Rental income on operating lease equipment | |||||||||||||||||||||||||||||
| All other noninterest income | |||||||||||||||||||||||||||||
| Total noninterest income | |||||||||||||||||||||||||||||
| Total revenue | |||||||||||||||||||||||||||||
| Depreciation on operating lease equipment | |||||||||||||||||||||||||||||
| Maintenance and other operating lease expenses | |||||||||||||||||||||||||||||
| Personnel cost | |||||||||||||||||||||||||||||
| Acquisition-related expenses | |||||||||||||||||||||||||||||
All other noninterest expense (3) | ( | ||||||||||||||||||||||||||||
| Total noninterest expense | |||||||||||||||||||||||||||||
| Provision for credit losses | |||||||||||||||||||||||||||||
| Income (loss) before income taxes | ( | ||||||||||||||||||||||||||||
| Income tax expense (benefit) | ( | ||||||||||||||||||||||||||||
| Net income (loss) | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||
| Select Period End Balances | |||||||||||||||||||||||||||||
| Loans and leases | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Operating lease equipment, net | |||||||||||||||||||||||||||||
| Investment securities | |||||||||||||||||||||||||||||
| Deposits | |||||||||||||||||||||||||||||
| Three Months Ended March 31, 2025 | |||||||||||||||||||||||||||||
| General Bank | Commercial Bank | Rail | Corporate (1) | BancShares (2) | |||||||||||||||||||||||||
| Net interest income (expense) | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||
| Rental income on operating lease equipment | |||||||||||||||||||||||||||||
| All other noninterest income | ( | ||||||||||||||||||||||||||||
| Total noninterest income | ( | ||||||||||||||||||||||||||||
| Total revenue | |||||||||||||||||||||||||||||
| Depreciation on operating lease equipment | |||||||||||||||||||||||||||||
| Maintenance and other operating lease expenses | |||||||||||||||||||||||||||||
| Personnel cost | |||||||||||||||||||||||||||||
| Acquisition-related expenses | |||||||||||||||||||||||||||||
All other noninterest expense (3) | ( | ||||||||||||||||||||||||||||
| Total noninterest expense | |||||||||||||||||||||||||||||
| Provision for credit losses | |||||||||||||||||||||||||||||
| Income (loss) before income taxes | ( | ||||||||||||||||||||||||||||
| Income tax expense | |||||||||||||||||||||||||||||
| Net income (loss) | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||
| Select Period End Balances | |||||||||||||||||||||||||||||
| Loans and leases | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Operating lease equipment, net | |||||||||||||||||||||||||||||
| Investment securities | |||||||||||||||||||||||||||||
| Deposits | |||||||||||||||||||||||||||||
(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) | $ | $ | |||||||||
| Letters of Credit | |||||||||||
| Financial standby letters of credit | |||||||||||
| Other letters of credit | |||||||||||
| Deferred Purchase Agreements | |||||||||||
Purchase and Funding Commitments (1) | |||||||||||
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
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
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 Global 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
Investment Securities Summary
| dollars in millions | March 31, 2026 | ||||||||||||||||||||||||||||||||||||||||
Composition (1) | Amortized Cost | Fair Value | Fair Value to Amortized Cost | ||||||||||||||||||||||||||||||||||||||
| Total investment securities available for sale | 79.7 | % | $ | 33,663 | $ | 33,314 | 99.0 | % | |||||||||||||||||||||||||||||||||
| Total investment securities held to maturity | 20.0 | 9,542 | 8,360 | 87.6 | |||||||||||||||||||||||||||||||||||||
| Investment in marketable equity securities | 0.3 | 83 | 130 | 156.9 | |||||||||||||||||||||||||||||||||||||
| Total investment securities | 100 | % | $ | 43,288 | $ | 41,804 | |||||||||||||||||||||||||||||||||||
(1) Calculated as a percentage of the total fair value of investment securities. | |||||||||||||||||||||||||||||||||||||||||
Capital Position
At March 31, 2026, all regulatory capital ratios for BancShares and FCB exceeded the prompt corrective action (“PCA”) thresholds, well capitalized thresholds, and Basel III requirements established by the federal banking agencies as further discussed in the “Capital” section of this MD&A.
57
RESULTS OF OPERATIONS
Net Interest Income and Net Interest Margin
NII is affected by changes in interest rates and changes in the amount and composition of interest-earning assets and interest-bearing liabilities. Interest income and expense and the respective yields and rates include amortization of premiums, accretion of discounts, and impacts from hedging activities.
The following tables present the average balances of interest-earning assets and interest-bearing liabilities with the associated yields and rates, interest income and expense, and changes therein due to changes in volume and yields or rates. Changes in interest income and expense due to changes in (i) volume (average balances of interest-earning assets and interest-bearing liabilities) and (ii) yields or rates are based on the following:
•The change in NII due to volume is calculated as the change in average balance multiplied by the yield or rate from the prior period.
•The change in NII due to yield or rate is calculated as the change in yield or rate multiplied by the average balance from the prior period.
•The change in NII due to changes in both volume and yield or rate (i.e., portfolio mix) is calculated as the change in rate multiplied by the change in volume. This component is allocated between the changes due to volume and yield or rate based on the ratio each component bears to the absolute dollar amounts of their total.
•Tax equivalent NII was not materially different from NII, therefore we present NII in our analysis.
58
Table 4
Average Balances, Yields and Rates, NII, and NIM (Current Quarter Compared to Linked Quarter)
Average Balances, Yields and Rates, NII, and NIM (Current Quarter Compared to Linked Quarter)
| dollars in millions | Average Balance | Yield / Rate | Interest Income / Expense | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Increase (Decrease) | Three Months Ended | Three Months Ended | Increase (Decrease) due to: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mar 31, 2026 | Dec 31, 2025 | Mar 31, 2026 | Dec 31, 2025 | Increase (decrease) bps | Mar 31, 2026 | Dec 31, 2025 | Increase (Decrease) | Volume(1) | Yield /Rate(1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans and leases (1) (2) | $ | 148,666 | $ | 145,689 | $ | 2,977 | 2.0 | % | 6.01 | % | 6.24 | % | (23) | $ | 2,206 | $ | 2,290 | $ | (84) | $ | 30 | $ | (114) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Investment securities | 41,757 | 44,306 | (2,549) | (5.8) | 3.67 | 3.80 | (13) | 382 | 421 | (39) | (25) | (14) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Securities purchased under agreements to resell | 305 | 285 | 20 | 7.0 | 3.65 | 4.00 | (35) | 2 | 3 | (1) | — | (1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-earning deposits at banks | 21,824 | 23,014 | (1,190) | (5.2) | 3.64 | 3.90 | (26) | 196 | 226 | (30) | (13) | (17) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total interest-earning assets (2) | $ | 212,552 | $ | 213,294 | $ | (742) | (0.3) | 5.30 | 5.48 | (18) | $ | 2,786 | $ | 2,940 | $ | (154) | $ | (8) | $ | (146) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Noninterest-earning assets | 20,629 | 20,138 | 491 | 2.4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total assets | $ | 233,181 | $ | 233,432 | $ | (251) | (0.1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-bearing deposits | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Checking with interest | $ | 25,341 | $ | 23,907 | $ | 1,434 | 6.0 | % | 1.52 | % | 1.57 | % | (5) | $ | 95 | $ | 94 | $ | 1 | $ | 4 | $ | (3) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Money market | 41,196 | 39,792 | 1,404 | 3.5 | 2.38 | 2.59 | (21) | 242 | 260 | (18) | 6 | (24) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Savings | 46,720 | 46,618 | 102 | 0.2 | 3.46 | 3.51 | (5) | 398 | 412 | (14) | — | (14) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Time deposits | 11,946 | 11,116 | 830 | 7.5 | 3.31 | 3.38 | (7) | 98 | 95 | 3 | 5 | (2) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total interest-bearing deposits | 125,203 | 121,433 | 3,770 | 3.1 | 2.70 | 2.81 | (11) | 833 | 861 | (28) | 15 | (43) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Borrowings: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Short-term borrowings | 197 | 265 | (68) | (25.6) | 0.37 | 0.52 | (15) | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior unsecured borrowings | 718 | 556 | 162 | 29.3 | 5.23 | 5.27 | (4) | 10 | 7 | 3 | 3 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subordinated debt | 1,771 | 1,774 | (3) | (0.2) | 5.28 | 5.20 | 8 | 23 | 24 | (1) | (1) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other borrowings | 32,648 | 35,601 | (2,953) | (8.3) | 3.66 | 3.67 | (1) | 299 | 326 | (27) | (27) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Long-term borrowings | 35,137 | 37,931 | (2,794) | (7.4) | 3.78 | 3.76 | 2 | 332 | 357 | (25) | (25) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total borrowings | 35,334 | 38,196 | (2,862) | (7.5) | 3.76 | 3.74 | 2 | 332 | 357 | (25) | (25) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total interest-bearing liabilities | $ | 160,537 | $ | 159,629 | $ | 908 | 0.6 | 2.93 | 3.03 | (10) | $ | 1,165 | $ | 1,218 | $ | (53) | $ | (10) | $ | (43) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Noninterest-bearing liabilities | $ | 50,157 | $ | 51,606 | $ | (1,449) | (2.8) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders' equity | 22,487 | 22,197 | 290 | 1.3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 233,181 | $ | 233,432 | $ | (251) | (0.1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net interest spread (2) | 2.37 | % | 2.45 | % | (8) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net interest margin and net interest income (2) | 3.09 | % | 3.20 | % | (11) | $ | 1,621 | $ | 1,722 | $ | (101) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1) Loans and leases include nonaccrual loans and loans held for sale. Interest income on loans and leases includes accretion income and loan fees.
(2) The average balances and yields for loans and leases are calculated net of average credit balances of factoring clients to appropriately reflect the interest-earning portion of factoring receivables.
59
NII and NIM (Current Quarter Compared to Linked Quarter)
The table above quantifies the increases or decreases for the current quarter compared to the linked quarter for NII and NIM, as well as average balances of interest-earning assets and interest-bearing liabilities, and the respective yields earned and rates paid. The main reasons for the increases and decreases are explained below:
•NII for the current quarter was $1.62 billion, a decrease of $101 million or 6% from $1.72 billion for the linked quarter. NII, excluding PAA,(1) was $1.58 billion for the current quarter, a decrease of $91 million, from $1.67 billion for the linked quarter. The main reasons for the decreases in NII and NII, excluding PAA,(1) are explained below:
◦Interest income on loans and leases for the current quarter was $2.21 billion, a decrease of $84 million or 4% from $2.29 billion for the linked quarter, mainly due to a lower yield and lower loan PAA, partially offset by the impact of a higher average balance.
◦Interest income on loans and leases, excluding loan PAA,(1) was $2.16 billion for the current quarter, a decrease of $73 million from $2.23 billion for the linked quarter.
◦Loan PAA was $48 million in the current quarter, a decrease of $11 million or 19% from $59 million in the linked quarter.
◦Interest income on investment securities (including securities purchased under agreements to resell) for the current quarter was $384 million, a decrease of $40 million or 9% from $424 million for the linked quarter, due to decreases in the average balance and yield.
◦Interest income on interest-earning deposits at banks for the current quarter was $196 million, a decrease of $30 million or 14% from $226 million for the linked quarter, due to a lower average balance and a decline in yield.
◦Interest expense on interest-bearing deposits for the current quarter was $833 million, a decrease of $28 million or 3% from $861 million for the linked quarter, as a lower rate paid was partially offset by the impact of a higher average balance.
◦Interest expense on borrowings for the current quarter was $332 million, a decrease of $25 million or 7% from $357 million for the linked quarter, mainly due to a lower average balance as a result of prepayments of the Purchase Money Note.
•NIM for the current quarter was 3.09%, a decrease of 11 bps from 3.20% for the linked quarter. The decline in NIM was mainly due to a lower yield on loans, lower average balances and yields on investment securities and interest-earning deposits at banks, and a higher average balance of interest-bearing deposits, partially offset by the impacts of a higher average balance of loans, a lower rate paid on interest-bearing deposits, and a lower average balance of borrowings. NIM, excluding PAA,(1) was 3.01% for the current quarter, a decrease of 10 bps from 3.11% for the linked quarter.
◦The yield on average interest-earning assets for the current quarter was 5.30%, a decrease of 18 bps from 5.48% for the linked quarter, mainly due the following:
▪A lower loan yield resulting from lower interest rates and a decline in loan PAA, partially offset by the impact of a higher average balance.
▪A lower yield on investment securities resulting from a lower average balance and lower interest rates.
▪A lower yield on interest-earning deposits at banks resulting from a lower average balance and a decline in the federal funds rate.
◦The rate paid on average interest-bearing liabilities for the current quarter was 2.93%, a decrease of 10 bps from 3.03% for the linked quarter, primarily due to a lower rate paid on interest-bearing deposits and a lower average balance of borrowings, partially offset by the impact of a higher average balance of interest-bearing deposits.
(1) Refer to the “NII, NIM, and Interest Income on Loans and Leases, Excluding PAA” discussion in the “Non-GAAP Financial Measurements” section of this MD&A for further information.
Refer to the “Executive Overview—Financial Performance Summary—Balance Sheet Highlights,” “Balance Sheet Analysis—Interest-earning Assets,” and “Balance Sheet Analysis—Interest-bearing Liabilities” sections of this MD&A for discussions of balance sheet trends that impact average interest-earning assets, average interest-bearing liabilities, and the related yields and rates paid.
60
Table 5
Average Balances, Yields and Rates, NII, and NIM (Current Quarter Compared to Prior Year Quarter)
Average Balances, Yields and Rates, NII, and NIM (Current Quarter Compared to Prior Year Quarter)
| dollars in millions | Average Balance | Yield / Rate | Interest Income / Expense | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Increase (Decrease) | Three Months Ended | Three Months Ended | Increase (Decrease) due to: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mar 31, 2026 | Mar 31, 2025 | Mar 31, 2026 | Mar 31, 2025 | Increase (decrease) bps | Mar 31, 2026 | Mar 31, 2025 | Increase (Decrease) | Volume(1) | Yield /Rate(1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans and leases (1) (2) | $ | 148,666 | $ | 139,491 | $ | 9,175 | 6.6 | % | 6.01 | % | 6.49 | % | (48) | $ | 2,206 | $ | 2,236 | $ | (30) | $ | 141 | $ | (171) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Investment securities | 41,757 | 43,555 | (1,798) | (4.1) | 3.67 | 3.79 | (12) | 382 | 411 | (29) | (16) | (13) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Securities purchased under agreements to resell | 305 | 283 | 22 | 8.0 | 3.65 | 4.37 | (72) | 2 | 3 | (1) | — | (1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-earning deposits at banks | 21,824 | 22,699 | (875) | (3.8) | 3.64 | 4.38 | (74) | 196 | 245 | (49) | (9) | (40) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total interest-earning assets (2) | $ | 212,552 | $ | 206,028 | $ | 6,524 | 3.2 | 5.30 | 5.68 | (38) | $ | 2,786 | $ | 2,895 | $ | (109) | $ | 116 | $ | (225) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Noninterest-earning assets | 20,629 | 19,421 | 1,208 | 6.1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total assets | $ | 233,181 | $ | 225,449 | $ | 7,732 | 3.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-bearing deposits | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Checking with interest | $ | 25,341 | $ | 23,931 | $ | 1,410 | 5.9 | 1.52 | % | 1.77 | % | (25) | $ | 95 | $ | 104 | $ | (9) | $ | 6 | $ | (15) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Money market | 41,196 | 36,760 | 4,436 | 12.1 | 2.38 | 2.83 | (45) | 242 | 257 | (15) | 28 | (43) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Savings | 46,720 | 43,918 | 2,802 | 6.4 | 3.46 | 3.85 | (39) | 398 | 417 | (19) | 25 | (44) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Time deposits | 11,946 | 12,615 | (669) | (5.3) | 3.31 | 3.71 | (40) | 98 | 115 | (17) | (5) | (12) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total interest-bearing deposits | 125,203 | 117,224 | 7,979 | 6.8 | 2.70 | 3.09 | (39) | 833 | 893 | (60) | 54 | (114) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Borrowings: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Short-term borrowings | 197 | 428 | (231) | (53.9) | 0.37 | 0.52 | (15) | — | 1 | (1) | (1) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior unsecured borrowings | 718 | 169 | 549 | 325.6 | 5.23 | 4.88 | 35 | 10 | 2 | 8 | 8 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subordinated debt | 1,771 | 959 | 812 | 84.6 | 5.28 | 3.36 | 192 | 23 | 8 | 15 | 9 | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other borrowings | 32,648 | 35,842 | (3,194) | (8.9) | 3.66 | 3.66 | — | 299 | 328 | (29) | (29) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Long-term borrowings | 35,137 | 36,970 | (1,833) | (5.0) | 3.78 | 3.66 | 12 | 332 | 338 | (6) | (12) | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total borrowings | 35,334 | 37,398 | (2,064) | (5.5) | 3.76 | 3.62 | 14 | 332 | 339 | (7) | (13) | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total interest-bearing liabilities | $ | 160,537 | $ | 154,622 | $ | 5,915 | 3.8 | 2.93 | 3.22 | (29) | $ | 1,165 | $ | 1,232 | $ | (67) | $ | 41 | $ | (108) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Noninterest-bearing liabilities | $ | 50,157 | $ | 48,370 | $ | 1,787 | 3.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders' equity | 22,487 | 22,457 | 30 | 0.1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 233,181 | $ | 225,449 | $ | 7,732 | 3.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net interest spread (2) | 2.37 | % | 2.46 | % | (9) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net interest margin and net interest income (2) | 3.09 | % | 3.26 | % | (17) | $ | 1,621 | $ | 1,663 | $ | (42) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1) Loans and leases include nonaccrual loans and loans held for sale. Interest income on loans and leases includes accretion income and loan fees.
(2) The average balances and yields for loans and leases are calculated net of average credit balances of factoring clients to appropriately reflect the interest-earning portion of factoring receivables.
61
NII and NIM (Current Quarter Compared to Prior Year Quarter)
The table above quantifies the increases or decreases for the current quarter compared to the prior year quarter for NII and NIM, as well as average balances of interest-earning assets and interest-bearing liabilities, and the respective yields earned and rates paid. The main reasons for the increases and decreases are explained below:
•NII for the current quarter was $1.62 billion, a decrease of $42 million or 3% from $1.66 billion in the prior year quarter. NII, excluding PAA,(1) was $1.58 billion for the current quarter, a decrease of $6 million from $1.59 billion for the prior year quarter. The main reasons for the decreases in NII and NII, excluding PAA,(1) are explained below:
◦Interest income on interest-earning deposits at banks for the current quarter was $196 million, a decrease of $49 million or 20% from $245 million for the prior year quarter, due to a decline in the federal funds rate and a lower average balance.
◦Interest income on loans and leases for the current quarter was $2.21 billion, a decrease of $30 million or 4% from $2.24 billion for the prior year quarter, mainly due to a lower yield and lower loan PAA, partially offset by the impact of a higher average balance.
•Interest income on loans and leases, excluding loan PAA,(1) was $2.16 billion for the current quarter, an increase of $6 million from $2.15 billion for the prior year quarter.
•Loan PAA was $48 million in the current quarter, a decrease of $36 million or 43% from $84 million in the prior year quarter.
◦Interest income on investment securities (including securities purchased under agreements to resell) for the current quarter was $384 million, a decrease of $30 million or 7% from $414 million for the prior year quarter, due to a lower average balance and a decline in the yield.
◦Interest expense on interest-bearing deposits for the current quarter was $833 million, a decrease of $60 million or 7% from $893 million for the prior year quarter, as a lower rate paid was partially offset by the impact of a higher average balance.
◦Interest expense on borrowings for the current quarter was $332 million, a decrease of $7 million or 2% from $339 million for the prior year quarter, due to a lower average balance, partially offset by a higher rate paid.
•NIM for the current quarter was 3.09%, a decrease of 17 bps from 3.26% for the prior year quarter. The decline in NIM was mainly due to lower yields on loans, lower average balances and yields on interest-earning deposits at banks and investment securities, lower PAA, a higher average balance of interest-bearing deposits, and a higher rate paid on borrowings, partially offset by the impact of a decline in the rate paid on interest-bearing deposits, a higher average balance of loans, and a lower average balance of borrowings. NIM, excluding PAA,(1) was 3.01% for the current quarter, a decrease of 11 bps from 3.12% for the prior year quarter.
◦The yield on average interest-earning assets for the current quarter was 5.30%, a decrease of 38 bps from 5.68% for the prior year quarter, mainly due to a decline in yield on loans and interest-earning deposits at banks, as well as lower loan PAA, partially offset by a higher volume of loans.
◦The rate paid on average interest-bearing liabilities for the current quarter was 2.93%, a decrease of 29 bps from 3.22% for the prior year quarter, primarily due to a lower rate paid on interest-bearing deposits and a lower average balance of borrowings, partially offset by the impacts of a higher average balance of interest-bearing deposits and a higher rate paid for borrowings.
(1) Refer to the “NII, NIM, and Interest Income on Loans and Leases, Excluding PAA” discussion in the “Non-GAAP Financial Measurements” section of this MD&A for further information.
The following table shows the types of average interest-earning assets as a percentage of total average interest-earning assets.
Table 6
Average Interest-earning Asset Mix
Average Interest-earning Asset Mix
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| March 31, 2026 | December 31, 2025 | March 31, 2025 | |||||||||||||||||||||||||||||||||
| Loans and leases | 70 | % | 68 | % | 68 | % | |||||||||||||||||||||||||||||
| Investment securities | 20 | 21 | 21 | ||||||||||||||||||||||||||||||||
| Interest-earning deposits at banks | 10 | 11 | 11 | ||||||||||||||||||||||||||||||||
| Total interest-earning assets | 100 | % | 100 | % | 100 | % | |||||||||||||||||||||||||||||
62
The following table shows the average interest-bearing liabilities as a percentage of total average interest-bearing liabilities.
Table 7
Average Interest-bearing Liability Mix
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
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.
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 lower net charge- offs of $33 million, as well as the impact of an $8 million reserve release in the current quarter compared to a $4 million reserve build in the prior year quarter.
◦The benefit for off-balance sheet credit exposure for the current quarter was $32 million compared to a provision for the prior year quarter of $6 million, resulting in a decrease in provision of $38 million, mainly due to changes in the macroeconomic scenarios and trends in the volume of unfunded commitments.
The ALLL and net charge-offs are further discussed in the “Risk Management—Credit Risk” section of this MD&A and in Note 6—Allowance for Loan and Lease Losses.
63
Noninterest Income
The following table presents noninterest income:
Table 9
Noninterest Income
Noninterest Income
| dollars in millions | Three Months Ended | Increase (Decrease) from Linked Quarter | Increase (Decrease) from Prior Year Quarter | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| March 31, 2026 | December 31, 2025 | March 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Rental income on operating lease equipment | $ | 281 | $ | 281 | $ | 270 | $ | — | — | % | $ | 11 | 4.0 | % | |||||||||||||||||||||||||||||||||||||||||||||
| Lending-related fees | 69 | 64 | 66 | 5 | 9.3 | 3 | 5.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Deposit fees and service charges | 70 | 63 | 58 | 7 | 11.5 | 12 | 21.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Client investment fees | 53 | 54 | 53 | (1) | (3.1) | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Wealth management services | 59 | 61 | 56 | (2) | (2.7) | 3 | 5.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| International fees | 35 | 37 | 32 | (2) | (3.6) | 3 | 9.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Factoring commissions | 17 | 20 | 17 | (3) | (15.5) | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cardholder services, net | 38 | 37 | 41 | 1 | 0.3 | (3) | (7.1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Merchant services, net | 13 | 13 | 14 | — | — | (1) | (10.1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Insurance commissions | 13 | 12 | 14 | 1 | 8.0 | (1) | (5.9) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Realized gain on sale of investment securities, net | — | 3 | — | (3) | (100.0) | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value adjustment on marketable equity securities, net | 3 | 12 | (5) | (9) | (72.8) | 8 | 162.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gain on sale of leasing equipment, net | 11 | 14 | 5 | (3) | (20.3) | 6 | 98.8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loss on extinguishment of debt | (8) | (9) | — | 1 | 10.6 | (8) | (100.0) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other noninterest income | 38 | 53 | 14 | (15) | (29.8) | 24 | 180.8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total noninterest income | $ | 692 | $ | 715 | $ | 635 | $ | (23) | (3.2) | % | $ | 57 | 8.9 | % | |||||||||||||||||||||||||||||||||||||||||||||
Noninterest income for the current quarter was $692 million, a decrease of $23 million or 3% from $715 million for the linked quarter, primarily due to the following:
•The decrease in other noninterest income of $15 million was mainly attributable to the linked quarter gain on tax credit investments as a large renewable energy project was placed in service.
•The unfavorable change of $9 million in the fair value of marketable equity securities was due to lower market prices for the underlying securities.
•The increase of $7 million in deposit fees and service charges was primarily due to an increase in overdraft fees.
•The increase of $5 million in lending-related fees was primarily due to higher capital market fees, partially offset by a decrease in fees on lines of credit due to lower unused lines.
•The loss on extinguishment of debt for the current and linked quarters relates to prepayments of the Purchase Money Note.
Noninterest income for the current quarter was $692 million, an increase of $57 million or 9% from $635 million for the prior year quarter as further discussed below:
•The increase in other noninterest income of $24 million was mainly attributable to higher derivative income and higher other real estate owned (“OREO”) income due to a write down in the prior year quarter.
•The increase of $12 million in deposit fees and service charges was primarily due to an increase in overdraft fees implemented during the current quarter, as well as higher volume-related service charges for commercial clients.
•The increase in rental income on operating lease equipment of $11 million was mainly the result of growth in the railcar portfolio.
•The favorable change of $8 million in the fair value of marketable equity securities was due to higher market prices for the underlying securities.
•The increase of $6 million in gain on sale of leasing equipment was primarily the result of higher volume of rail equipment sales.
64
Noninterest Expense
The following table presents noninterest expense:
Table 10
Noninterest Expense
Noninterest Expense
| dollars in millions | Three Months Ended | Increase (Decrease) from Linked Quarter | Increase (Decrease) from Prior Year Quarter | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| March 31, 2026 | December 31, 2025 | March 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Depreciation on operating lease equipment | $ | 101 | $ | 102 | $ | 98 | $ | (1) | (0.5) | % | $ | 3 | 2.3 | % | |||||||||||||||||||||||||||||||||||||||||||||
| Maintenance and other operating lease expenses | 65 | 64 | 58 | 1 | 1.4 | 7 | 12.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Personnel cost | 869 | 849 | 818 | 20 | 2.3 | 51 | 6.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net occupancy expense | 60 | 61 | 58 | (1) | (2.1) | 2 | 4.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equipment expense | 136 | 151 | 136 | (15) | (9.9) | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Professional fees | 24 | 34 | 25 | (10) | (28.1) | (1) | (4.3) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Third-party processing fees | 93 | 75 | 63 | 18 | 25.1 | 30 | 48.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| FDIC insurance expense | 38 | 27 | 38 | 11 | 42.6 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Marketing expense | 30 | 45 | 32 | (15) | (33.6) | (2) | (5.5) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition-related expenses | 5 | 33 | 42 | (28) | (86.5) | (37) | (89.3) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Intangible asset amortization | 13 | 13 | 15 | — | — | (2) | (15.8) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other noninterest expense | 102 | 118 | 110 | (16) | (14.8) | (8) | (7.8) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total noninterest expense | $ | 1,536 | $ | 1,572 | $ | 1,493 | $ | (36) | (2.3) | % | $ | 43 | 2.9 | % | |||||||||||||||||||||||||||||||||||||||||||||
Noninterest expense for the current quarter was $1.54 billion, a decrease of $36 million or 2% from $1.57 billion for the linked quarter as further discussed below:
•The decrease in acquisition-related expenses of $28 million is summarized in Table 11 and discussed below.
•The decrease in other noninterest expense of $16 million was mainly due to timing of charitable contributions.
•The decrease in marketing expense of $15 million was primarily related to fewer marketing promotions for Direct Bank deposits, as costs are contingent on the timing of our marketing initiatives.
•The decrease in professional fees of $10 million was mostly due to lower consulting service costs.
•The increase in personnel cost of $20 million was largely due to seasonal increases in employee benefits and payroll taxes, partially offset by lower life and health insurance premiums, which are generally higher in the fourth quarter due to employees reaching their annual deductibles.
•The increase in FDIC insurance expense of $11 million was primarily due to the linked quarter including a reversal of a previously accrued $11 million special assessment charge.
•The increase of $18 million in third party processing fees was largely offset by a decrease of $15 million in equipment expense as technology platforms shift to cloud computing.
Noninterest expense for the current quarter was $1.54 billion, an increase of $43 million or 3% from $1.49 billion for the prior year quarter as further discussed below:
•The increase in personnel cost of $51 million was mainly due to higher salaries, reflecting net staff additions and higher merit and promotion costs, in addition to higher employee benefit costs.
•The increase in third-party processing fees of $30 million was largely due to our transition to more cloud-based computing services.
•The increase of $7 million in maintenance and other operating lease expenses reflect timing and the number of railcars coming on or off lease as well as asset condition. Refer to the “Results by Segment—Rail” section of this MD&A for further information.
•The decrease in acquisition-related expenses of $37 million is summarized in Table 11 and discussed below.
•The decrease in other noninterest expense of $8 million was mainly due to the prior year quarter including capitalized software impairment and higher charitable contributions, partially offset by higher operating costs for foreclosed and repossessed assets in the current quarter.
65
Table 11
Acquisition-related Expenses
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
Income Tax Data
| dollars in millions | Three Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| March 31, 2026 | December 31, 2025 | March 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income before income taxes | $ | 705 | $ | 811 | $ | 651 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income tax expense | $ | 171 | $ | 231 | $ | 168 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Effective income tax rate | 24.3 | % | 28.4 | % | 25.8 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||
The effective income tax rate (“ETR”) was 24.3% for the current quarter compared to 28.4% for the linked quarter and 25.8% for the prior year quarter. The higher tax expense and ETR for the linked quarter was primarily driven by the return to provision adjustments reflected therein. The decrease in the ETR compared to the prior year quarter was primarily due to a reduction in the state and local income tax rate and an increase in the benefit from tax credits.
The ETR is impacted by a number of factors, including the relative mix of domestic, state, and international earnings, effects of changes in enacted tax laws, adjustments to valuation allowances, and discrete items. The ETR in future periods may vary from the current quarter ETR due to changes in these factors.
BancShares monitors and evaluates the potential impact of current events on the estimates used to establish income tax expense and income tax liabilities. On a periodic basis, we evaluate our income tax positions based on current tax law and positions taken by various tax auditors within the jurisdictions where BancShares is required to file income tax returns, as well as potential or pending audits or assessments by tax auditors. Refer to Note 16—Income Taxes for additional information.
66
RESULTS BY SEGMENT
BancShares’ segments include the General Bank, the Commercial Bank, and Rail. All other financial information not included in the segments is reported in the Corporate section of the segment disclosures.
Refer to Note 18—Segment Information for descriptions of segment products and services.
General Bank
Table 13
General Bank: Financial Data
General Bank: Financial Data
| dollars in millions | Three Months Ended | Increase (Decrease) from Linked Quarter | Increase (Decrease) from Prior Year Quarter | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Summary | March 31, 2026 | December 31, 2025 | March 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest income | $ | 813 | $ | 841 | $ | 788 | $ | (28) | (3.4) | % | $ | 25 | 3.2 | % | |||||||||||||||||||||||||||||||||||||||||||||
| Total noninterest income | 172 | 170 | 164 | 2 | 0.9 | 8 | 4.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total revenue | 985 | 1,011 | 952 | (26) | (2.7) | 33 | 3.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Personnel cost | 215 | 211 | 210 | 4 | 2.0 | 5 | 2.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| All other noninterest expense | 385 | 393 | 355 | (8) | (2.2) | 30 | 8.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total noninterest expense | 600 | 604 | 565 | (4) | (0.7) | 35 | 6.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Provision for credit losses | 17 | 17 | 46 | — | — | (29) | (63.0) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income before income taxes | 368 | 390 | 341 | (22) | (5.9) | 27 | 8.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income tax expense | 90 | 82 | 88 | 8 | 9.5 | 2 | 2.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | $ | 278 | $ | 308 | $ | 253 | $ | (30) | (10.0) | $ | 25 | 10.0 | |||||||||||||||||||||||||||||||||||||||||||||||
| Select Period End Balances | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans and leases | $ | 64,367 | $ | 64,958 | $ | 64,847 | $ | (591) | (0.9) | % | $ | (480) | (0.7) | % | |||||||||||||||||||||||||||||||||||||||||||||
| Deposits | 75,914 | 74,796 | 74,309 | 1,118 | 1.5 | 1,605 | 2.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
General Bank segment net income for the current quarter decreased $30 million from the linked quarter, primarily due to a $28 million decrease in NII, mainly due to the impact of growth in interest-bearing deposits. General Bank segment deposits were $75.91 billion at March 31, 2026, compared to $74.80 billion at December 31, 2025. Deposit growth of $1.12 billion was mostly concentrated in our Branch Network and CAB.
General Bank segment loans were $64.37 billion at March 31, 2026, a decrease of $591 million compared to $64.96 billion at December 31, 2025, primarily due to a transfer of $364 million of SBA loans to held for sale in March 2026.
General Bank segment net income for the current quarter increased $25 million compared to the prior year quarter, primarily due to lower provision for credit losses, higher NII, and higher noninterest income, partially offset by higher noninterest expense.
•The $29 million decrease in provision for credit losses was largely due to the impact of a reserve release in the current quarter compared to a reserve build in the prior year quarter.
•The $25 million increase in NII was largely due to a decline in the rates paid on interest-bearing deposits.
•The $8 million increase in total noninterest income was mostly due to higher deposit fees and service charges, including overdraft fees.
•The $35 million increase in total noninterest expense was mainly due to a $30 million increase in all other noninterest expense, which includes allocated expenses.
67
Commercial Bank
Table 14
Commercial Bank: Financial Data
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)
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
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)
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)
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
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
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.
72
The following table presents the investment securities portfolio, segregated by major category:
Table 21
Investment Securities
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
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
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
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
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
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.
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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
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.
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The following table presents borrowings, net of the respective unamortized purchase accounting adjustments, premiums, discounts, and issuance costs:
Table 28
Borrowings
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
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
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
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
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
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
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
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
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
Delinquencies and Nonaccrual Loans
| dollars in millions | March 31, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accruing Loans | Accruing loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
30-59 Days Past Due | 60-89 Days Past Due | Total 30-89 Days Past Due | 90 Days or Greater | Nonaccrual Loans | 30-59 Days Past Due | 60-89 Days Past Due | Total 30-89 Days Past Due | 90 Days or Greater | Nonaccrual Loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | 222 | $ | 29 | $ | 251 | $ | 35 | $ | 461 | $ | 232 | $ | 56 | $ | 288 | $ | 63 | $ | 456 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Capital call lines | 31 | — | 31 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Owner occupied commercial mortgage | 65 | 24 | 89 | 16 | 162 | 78 | 19 | 97 | 1 | 159 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investor dependent | 8 | — | 8 | — | 37 | 11 | 1 | 12 | — | 49 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate | 87 | 10 | 97 | 185 | 524 | 221 | 31 | 252 | 171 | 418 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial | 413 | 63 | 476 | 236 | 1,184 | 542 | 107 | 649 | 235 | 1,082 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage | 148 | 25 | 173 | 7 | 196 | 168 | 42 | 210 | 7 | 179 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revolving mortgage | 24 | 3 | 27 | — | 38 | 25 | 4 | 29 | — | 35 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Auto | 10 | 2 | 12 | — | 10 | 15 | 3 | 18 | — | 9 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other consumer | 4 | 2 | 6 | 2 | 1 | 5 | 3 | 8 | 2 | 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total consumer | 186 | 32 | 218 | 9 | 245 | 213 | 52 | 265 | 9 | 225 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 599 | $ | 95 | $ | 694 | $ | 245 | $ | 1,429 | $ | 755 | $ | 159 | $ | 914 | $ | 244 | $ | 1,307 | |||||||||||||||||||||||||||||||||||||||||||||||||||
The decrease of $220 million in accruing loans that are 30 to 89 days past due is largely attributable to decreases of $155 million in commercial real estate, $37 million in commercial and industrial and $37 million in residential mortgage, partially offset by a net increase of $9 million in all other loan classes. Accruing loans that are 30 to 89 days past due are early stage delinquencies that are not showing signs of significant credit deterioration. Delinquency status is considered in the estimate of the ALLL.
The increase of $1 million in accruing loans that are 90 days or greater past due is primarily attributable to increases of $15 million in owner occupied commercial mortgage and $14 million in commercial real estate, partially offset by a decrease of $28 million in commercial and industrial. Loans 90 days or greater past due are assigned a more severe PD in accordance with our ALLL methodology.
Nonaccrual loans and leases at March 31, 2026 were $1.43 billion (0.96% of loans), an increase of $122 million compared to $1.31 billion (0.88% of loans) at December 31, 2025, largely concentrated in a small number of commercial real estate loans that were individually evaluated, contributing to the increase in specific reserves. Nonaccrual loans over an established threshold are individually evaluated for specific ALLL reserves as discussed in Note 1—Significant Accounting Policies and Basis of Presentation of the 2025 Form 10-K.
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Commercial Real Estate Portfolio Composition
Our commercial real estate portfolio is diversified across various property types. The following table provides an overview of the property type exposures within our commercial real estate portfolio:
Table 38
Commercial Real Estate Portfolio
Commercial Real Estate Portfolio
| dollars in millions | March 31, 2026 | ||||||||||||||||||||||||||||||||||
| Balance | % to Total Loans and Leases | ||||||||||||||||||||||||||||||||||
| Multi-family | $ | 5,219 | 3.5 | % | |||||||||||||||||||||||||||||||
| Medical office | 3,538 | 2.4 | |||||||||||||||||||||||||||||||||
| Industrial, including warehouses | 3,005 | 2.0 | |||||||||||||||||||||||||||||||||
| Data center | 2,531 | 1.7 | |||||||||||||||||||||||||||||||||
| General office | 1,951 | 1.3 | |||||||||||||||||||||||||||||||||
| Healthcare | 1,825 | 1.2 | |||||||||||||||||||||||||||||||||
| Retail | 1,573 | 1.0 | |||||||||||||||||||||||||||||||||
| Hotel and motel | 867 | 0.6 | |||||||||||||||||||||||||||||||||
| Other | 3,198 | 2.2 | |||||||||||||||||||||||||||||||||
| Total | $ | 23,707 | 15.9 | % | |||||||||||||||||||||||||||||||
Evolving macroeconomic and social conditions (including the shift to hybrid work arrangements) may result in changes for general office demand moving forward. Our general office portfolio has experienced more negative credit quality trends relative to our other commercial real estate portfolios. Our general office portfolio is 1.31% of total loans and leases and 8.23% of total commercial real estate at March 31, 2026. Select metrics for our general office portfolio are summarized in the following table:
Table 39
General Office Portfolio
General Office Portfolio
| dollars in millions | March 31, 2026 | ||||||||||||||||
| General office as a percentage of total loans and leases | 1.31 | % | |||||||||||||||
| General office as a percentage of commercial real estate loans | 8.23 | % | |||||||||||||||
| Net charge-offs as a percentage of general office | 0.56 | % | |||||||||||||||
| Percentage of general office 30 days or more past due | 8.08 | % | |||||||||||||||
Nonaccrual loans as a percentage of general office | 9.25 | % | |||||||||||||||
| ALLL as a percentage of general office | 4.52 | % | |||||||||||||||
Concentration
We strive to minimize the risks associated with large concentrations within specific geographic areas, collateral types or industries. Despite our focus on diversification, several characteristics of our loan portfolio subject us to concentration risk. Loan concentration for our commercial and consumer loans is summarized below.
Commercial Loan Concentration
Industry Concentration
The following table summarizes the industry concentration of our commercial loans and leases based the obligors’ industries:
Table 40
Commercial Loans and Leases - Industry
Commercial Loans and Leases - Industry
| dollars in millions | March 31, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||
| Finance and insurance | $ | 39,540 | 32.4 | % | $ | 38,417 | 31.8 | % | |||||||||||||||||||||||||||||||||||||||
| Real estate | 17,678 | 14.5 | 17,911 | 14.8 | |||||||||||||||||||||||||||||||||||||||||||
| Healthcare | 11,196 | 9.2 | 11,155 | 9.2 | |||||||||||||||||||||||||||||||||||||||||||
| Information | 10,015 | 8.2 | 9,699 | 8.0 | |||||||||||||||||||||||||||||||||||||||||||
| Business services | 9,584 | 7.9 | 9,601 | 8.0 | |||||||||||||||||||||||||||||||||||||||||||
| Transportation, communication, gas, utilities | 7,631 | 6.3 | 7,567 | 6.3 | |||||||||||||||||||||||||||||||||||||||||||
| Manufacturing | 7,134 | 5.8 | 7,137 | 5.9 | |||||||||||||||||||||||||||||||||||||||||||
| Retail | 4,466 | 3.7 | 4,329 | 3.6 | |||||||||||||||||||||||||||||||||||||||||||
| Service industries | 4,271 | 3.5 | 4,274 | 3.5 | |||||||||||||||||||||||||||||||||||||||||||
| Wholesale | 3,622 | 3.0 | 3,571 | 3.0 | |||||||||||||||||||||||||||||||||||||||||||
| Other | 6,813 | 5.5 | 7,073 | 5.9 | |||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 121,950 | 100.0 | % | $ | 120,734 | 100.0 | % | |||||||||||||||||||||||||||||||||||||||
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Loans to non-depository financial institutions (“NDFIs”)
Loans to borrowers in the finance and insurance industry were $39.54 billion or 32.4% of commercial loans and leases at March 31, 2026, compared to $38.42 billion or 31.8% of commercial loans and leases at December 31, 2025. Loans to NDFIs comprised 98.1% of our loans to borrowers in the finance and insurance industry at March 31, 2026. Our NDFI portfolio composition is described below.
As of March 31, 2026, loans to NDFIs were $38.78 billion. Capital call lines comprise $32.27 billion, or 83%, of the NDFI portfolio. The primary source of repayment for capital call lines is the capital commitments of the underlying limited partner (“LP”) investors in funds managed by certain private equity and venture capital firms. Capital calls are contractual obligations of the LPs and are not subject to the performance of the underlying portfolio of investments. Capital call lines are typically governed by financial covenants oriented towards ensuring that the funds’ remaining callable capital is sufficient to repay the loan, and larger commitments (typically provided to larger private equity funds) are typically secured by an assignment of the general partner's right to call capital from the fund's LP investors. The credit quality is strong for capital call lines based on the structural protection provided by the funds and the underlying investors. Capital call lines have a significantly lower loss rate relative to our other loan portfolios. As of March 31, 2026, the ALLL was 0.09% of capital call lines, compared to 1.05% of total loans.
The loans to NDFIs that are not capital call lines (the “Other NDFI Portfolios”) have balances totaling $6.51 billion at March 31, 2026, and the largest portfolios are described below:
•The net asset value portfolio ($2.24 billion) consists of: (i) loans to private equity funds collateralized by the funds’ portfolios of direct equity investments in private companies, and (ii) loans to predominantly secondary funds collateralized by the funds’ portfolios of investments in LP interests in private funds and/or co-investment vehicles.
•Leveraged fund lines ($1.4 billion) are lines of credit provided to private credit funds and are collateralized by portfolios of the underlying assets, primarily first lien loans.
•Warehouse lines ($918 million) are asset-based lines of credit that finance cash flows for large pools of assets, such as accounts receivable and loans, that the borrower (or sponsor) typically sell or transfer to special purpose vehicle entities.
•Specialty finance ($617 million) includes asset-based lending facilities to lenders that are primarily investing in first lien senior debt.
The Other NDFI Portfolios are included in commercial and industrial loans and leases. As of March 31, 2026, the ALLL was 1.77% of commercial and industrial loans and leases.
Through our credit risk management practices and our targeted analysis of the NDFI portfolios, we determined that the ALLL was appropriate.
NDFIs could be subject to a less stringent regulatory environment than FDIC-insured depository institutions or BHCs as further discussed in Item 1A. Risk Factors of the 2025 Form 10-K. We strive to mitigate the credit risk of our loans to NDFIs through our underwriting and credit monitoring processes. As discussed above, 83% of our NDFI portfolio at March 31, 2026 is comprised of capital call lines which have strong credit quality based on the structural protection provided by the funds and the underlying investors. Additionally, we establish advance rates (the percentage of the collateral value FCB will lend to the borrower) for loans in the Other NDFI Portfolios commensurate with the risks of the underlying collateral type, structural protection of the funds or investors, diversification of the funds, and financial strength of the borrower (or sponsor).
Real estate secured loans
Our commercial real estate portfolio comprises the vast majority of the real estate industry loans in the table above, which is based on the industry of the obligor. Additionally, we have commercial real estate and owner occupied commercial mortgage loans that are secured by real estate, but are categorized in other industries in the table above. At March 31, 2026, the combined balances of our commercial real estate and owner occupied commercial mortgage loans were $41.21 billion, or 34% of commercial loans and leases, compared to $41.44 billion or 34% at December 31, 2025. We have historically carried a concentration of real estate secured loans, but actively mitigate exposure through underwriting policies, which primarily rely on borrower cash flow rather than underlying collateral values. When we do rely on underlying real property values, we prefer financing secured by owner-occupied real property.
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Healthcare and information industries
The healthcare and information industries in the table above largely consist of the healthcare, life sciences, and technology sectors, which include clients in our Commercial Finance, Global Fund Banking, and Technology and Healthcare Banking within our Commercial Bank segment. Loans and leases to borrowers in medical, dental or other healthcare fields were $11.20 billion as of March 31, 2026, which represents 9.2% of commercial loans and leases, compared to $11.16 billion or 9.2% of commercial loans and leases at December 31, 2025. Loans and leases to borrowers in the information industry were $10.02 billion as of March 31, 2026, which represents 8.2% of commercial loans and leases, compared to $9.70 billion or 8.0% of commercial loans and leases at December 31, 2025. We actively mitigate credit risk exposure of these industry concentrations through our underwriting policies that emphasize reliance on adequate levels of borrower repayment sources.
Larger Balance Loans
The following table provides a summary of commercial loans by loan size and loan class as of March 31, 2026:
Table 41
Commercial Loans by Size and Class
Commercial Loans by Size and Class
| dollars in millions | Less Than $10 Million | $10 Million to $30 Million | Greater Than $30 Million | Total Commercial Loans | |||||||||||||||||||
| Commercial and industrial | $ | 16,182 | $ | 11,850 | $ | 17,721 | $ | 45,753 | |||||||||||||||
| Capital call lines | 1,311 | 3,344 | 27,619 | 32,274 | |||||||||||||||||||
| Owner occupied commercial mortgage | 14,629 | 2,304 | 569 | 17,502 | |||||||||||||||||||
| Investor dependent | 1,612 | 748 | 354 | 2,714 | |||||||||||||||||||
| Commercial real estate | 8,370 | 6,604 | 8,733 | 23,707 | |||||||||||||||||||
| Total | $ | 42,104 | $ | 24,850 | $ | 54,996 | $ | 121,950 | |||||||||||||||
Most of our loans greater than $30 million at March 31, 2026 are capital call lines which are described above in “Risk Management—Credit Risk—Concentration—Loans to non-depository financial institutions (“NDFIs”).”
Geographic Concentrations
The following table summarizes geographic concentrations based on the location of the real estate collateral for owner occupied commercial mortgage and commercial real estate loans, and based on the obligor address for all other commercial loans.
Table 42
Commercial Loans and Leases - Geography
Commercial Loans and Leases - Geography
| dollars in millions | March 31, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||
| State | |||||||||||||||||||||||||||||||||||||||||||||||
| California | $ | 25,324 | 20.8 | % | $ | 26,056 | 21.6 | % | |||||||||||||||||||||||||||||||||||||||
| New York | 12,129 | 9.9 | 12,193 | 10.1 | |||||||||||||||||||||||||||||||||||||||||||
| North Carolina | 11,258 | 9.2 | 11,005 | 9.1 | |||||||||||||||||||||||||||||||||||||||||||
| Texas | 9,570 | 7.9 | 8,811 | 7.3 | |||||||||||||||||||||||||||||||||||||||||||
| Massachusetts | 7,484 | 6.1 | 7,325 | 6.1 | |||||||||||||||||||||||||||||||||||||||||||
| Florida | 6,259 | 5.1 | 6,175 | 5.1 | |||||||||||||||||||||||||||||||||||||||||||
| All other states | 46,900 | 38.5 | 46,093 | 38.2 | |||||||||||||||||||||||||||||||||||||||||||
| Total U.S. | $ | 118,924 | 97.5 | % | $ | 117,658 | 97.5 | % | |||||||||||||||||||||||||||||||||||||||
| Total international | 3,026 | 2.5 | 3,076 | 2.5 | |||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 121,950 | 100.0 | % | $ | 120,734 | 100.0 | % | |||||||||||||||||||||||||||||||||||||||
Consumer Loan Concentration
Loan concentrations may exist when multiple borrowers could be similarly impacted by economic or other conditions. The following table summarizes state concentrations greater than 5.0% of consumer loans based on customer address:
Table 43
Consumer Loans - Geography
Consumer Loans - Geography
| dollars in millions | March 31, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||
| State | |||||||||||||||||||||||||||||||||||||||||||||||
| California | $ | 7,950 | 29.7 | % | $ | 8,118 | 29.8 | % | |||||||||||||||||||||||||||||||||||||||
| North Carolina | 6,695 | 25.0 | 6,736 | 24.8 | |||||||||||||||||||||||||||||||||||||||||||
| South Carolina | 3,471 | 13.0 | 3,502 | 12.9 | |||||||||||||||||||||||||||||||||||||||||||
| Massachusetts | 1,486 | 5.6 | 1,597 | 5.9 | |||||||||||||||||||||||||||||||||||||||||||
| Other states | 7,140 | 26.7 | 7,243 | 26.6 | |||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 26,742 | 100.0 | % | $ | 27,196 | 100.0 | % | |||||||||||||||||||||||||||||||||||||||
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Market Risk
Market risk is the risk arising from changes in interest rates, foreign exchange, fixed income, commodity, or equity prices which can result in financial loss, or adverse impact to earnings and capital.
Interest rate risk management
BancShares is exposed to the risk that changes in market conditions may affect interest rates and negatively impact earnings. The risk arises from the nature of BancShares’ business activities, the composition of BancShares’ balance sheet, and changes in the level or shape of the yield curve. BancShares manages this inherent risk strategically based on prescribed guidelines and approved limits.
Interest rate risk can arise from many of BancShares’ business activities, such as lending, leasing, investing, deposit taking, derivatives, and funding activities. We evaluate and monitor interest rate risk primarily through two metrics.
•Net Interest Income Sensitivity (“NII Sensitivity”) measures the net impact of hypothetical changes in interest rates on forecasted NII; and
•Economic Value of Equity (“EVE”) Sensitivity (“EVE Sensitivity”) measures the net impact of these hypothetical changes on the value of equity by assessing the economic value of assets, liabilities and off-balance sheet instruments.
BancShares uses a holistic process to measure and monitor both short term and long term risks, which includes, but is not limited to, gradual and immediate parallel rate shocks, changes in the shape of the yield curve, and changes in the relationship of various yield curves. NII Sensitivity generally focuses on shorter term earnings risk, while EVE Sensitivity assesses the longer-term risk of the existing balance sheet.
Our exposure to NII Sensitivity is guided by the Risk Appetite Policy and Statement and a range of risk metrics, and BancShares may utilize tools across the balance sheet to adjust its interest rate risk exposures, including through business line actions and actions within the investment, funding and derivative portfolios.
The composition of our interest rate sensitive assets and liabilities generally results in a net asset-sensitive position for NII Sensitivity, whereby our assets will reprice faster than our liabilities. A component of our interest rate risk management strategy is the use of derivative instruments to mitigate fluctuations in earnings caused by changes in market interest rates. Interest rate swaps are the primary type of derivative instrument that we use as part of our interest rate risk management strategy. These derivatives hedge interest income variability of floating rate loans indexed to secured overnight financing rate (“SOFR”), as well as fair value changes of fixed rate long-term debt. Refer to Note 11—Derivative Financial Instruments for further information on our derivative portfolio.
Our funding sources consist primarily of deposits, and we also support our funding needs through wholesale funding sources (including unsecured and secured borrowings).
The deposit rates we offer are influenced by market conditions and competitive factors. Market rates are the key factors of deposit costs, and we continue to optimize deposit costs by improving our deposit mix. Changes in interest rates, expected funding needs, as well as actions by competitors, can affect our deposit taking activities and deposit pricing. We believe our targeted non-maturity deposit customer retention is strong and we remain focused on optimizing our mix of deposits. We regularly assess the effect of deposit rate changes on our balances and seek to achieve optimal alignment between assets and liabilities.
The following table summarizes the results of 12-month NII Sensitivity simulations produced by our asset/liability management system. These simulations assume static balance sheet replacement with like products and implied forward market rates, and also incorporate additional internal models and assumptions, which we may update periodically, including rate dependent prepayment for certain loans and securities and repricing of interest-bearing non-maturity deposits. The below simulations assume an immediate 100 and 200 bps parallel increase and decrease from current interest rates.
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Table 44
NII Sensitivity Simulation Analysis
NII Sensitivity Simulation Analysis
| Estimated (Decrease) Increase in NII | ||||||||||||||||||||||||||
| Change in interest rate (bps) | March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||||
| -200 | (12.1) | % | (11.3) | % | ||||||||||||||||||||||
| -100 | (6.4) | (5.8) | ||||||||||||||||||||||||
| +100 | 6.7 | 6.5 | ||||||||||||||||||||||||
| +200 | 14.0 | 13.6 | ||||||||||||||||||||||||
NII Sensitivity metrics at March 31, 2026, compared to December 31, 2025, were primarily affected by deposit growth, resulting in a higher cash position and compositional changes, partially offset by impacts from increased hedges.
As of March 31, 2026, BancShares continues to have an asset sensitive interest rate risk profile and the potential exposure to forecasted earnings was largely due to the composition of the balance sheet (primarily due to floating rate commercial loans and cash), as well as estimates of modest future deposit betas. 65.6% of our loans have floating contractual reference rates, indexed primarily to SOFR and the U.S. prime rate. Deposit betas are currently modeled to have a portfolio average of 35%-40% over the twelve-month forecast horizon, including 50%-55% for interest-bearing non-maturity deposits. Deposit beta is the portion of a change in the federal funds rate that is passed on to the deposit rate. Actual deposit betas may be different than modeled, depending on various factors, including liquidity requirements, deposit mix and competitive pressures. Impacts to NII Sensitivity may change due to actual results differing from modeled expectations.
As noted above, EVE Sensitivity supplements NII simulations as it estimates risk exposures beyond a twelve-month horizon. EVE Sensitivity measures the change in EVE due to changes in assets, liabilities, and off-balance sheet instruments in response to a change in interest rates. EVE Sensitivity was calculated by estimating the change in the net present value of assets, liabilities, and off-balance sheet items under various rate movements, including utilizing a dynamic rate level dependent modeling approach for our deposit attrition assumption. In addition to interest rate changes, other key assumptions used in our EVE Sensitivity simulations include asset prepayments, as well as balance attrition and pricing of non-maturity deposits.
The below simulations assume an immediate 100 and 200 bps parallel increase and decrease from current interest rates and the estimated impact on our EVE profile based on our current modeling approach:
Table 45
EVE Modeling Analysis
EVE Modeling Analysis
| Estimated Increase (Decrease) in EVE | ||||||||||||||||||||||||||
| Change in interest rate (bps) | March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||||
| -200 | 7.2 | % | 6.7 | % | ||||||||||||||||||||||
| -100 | 4.4 | 4.3 | ||||||||||||||||||||||||
| +100 | (4.3) | (4.2) | ||||||||||||||||||||||||
| +200 | (7.8) | (8.2) | ||||||||||||||||||||||||
In addition to the above reported sensitivities, a wide variety of potential interest rate scenarios are simulated within our asset/liability management system. Scenarios that impact balance sheet composition or the sensitivity to key assumptions are also evaluated.
We use results of our various interest rate risk analyses to formulate and implement asset and liability management strategies, in coordination with the Asset and Liability Committee, to achieve the desired risk profile, while managing our objectives for market risk and other strategic objectives. Specifically, we may manage our interest rate risk position through certain pricing strategies and product design for loans and deposits, our investment portfolio, funding portfolio, or by using derivatives to mitigate earnings volatility.
The above sensitivities provide an estimate of our interest rate sensitivity; however, they do not account for potential changes in credit quality, size, mix, or changes in the competition for business in the industries we serve. They also do not account for other business developments and other actions. Accordingly, we can give no assurance that actual results would not differ materially from the estimated outcomes of our simulations.
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Loan Maturity and Loan Interest Rate Sensitivity
The following table provides loan maturity distribution information:
Table 46
Loan Maturity Distribution
Loan Maturity Distribution
| dollars in millions | At March 31 2026, Maturing | ||||||||||||||||||||||||||||
| Within One Year | One to Five Years | Five to 15 Years | After 15 Years | Total | |||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||
| Commercial and industrial | $ | 12,831 | $ | 27,390 | $ | 4,749 | $ | 783 | $ | 45,753 | |||||||||||||||||||
| Capital call lines | 31,762 | 512 | — | — | 32,274 | ||||||||||||||||||||||||
| Owner occupied commercial mortgage | 2,115 | 9,294 | 5,812 | 281 | 17,502 | ||||||||||||||||||||||||
| Investor dependent | 1,217 | 1,497 | — | — | 2,714 | ||||||||||||||||||||||||
| Commercial real estate | 5,999 | 13,856 | 2,660 | 1,192 | 23,707 | ||||||||||||||||||||||||
| Total commercial | 53,924 | 52,549 | 13,221 | 2,256 | 121,950 | ||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||
| Residential mortgage | 825 | 2,798 | 7,774 | 10,301 | 21,698 | ||||||||||||||||||||||||
| Revolving mortgage | 50 | 183 | 1,117 | 1,513 | 2,863 | ||||||||||||||||||||||||
| Consumer auto | 335 | 900 | 97 | — | 1,332 | ||||||||||||||||||||||||
| Consumer other | 199 | 539 | 106 | 5 | 849 | ||||||||||||||||||||||||
| Total consumer | 1,409 | 4,420 | 9,094 | 11,819 | 26,742 | ||||||||||||||||||||||||
| Total loans and leases | $ | 55,333 | $ | 56,969 | $ | 22,315 | $ | 14,075 | $ | 148,692 | |||||||||||||||||||
As noted above, 65.6% of our total loans have floating contractual reference rates, indexed primarily to SOFR and the U.S. prime rate. The following table provides information regarding fixed and variable interest rate loans and leases maturing one year or after, as of March 31, 2026:
Table 47
Fixed and Variable Interest Rate Loans
Fixed and Variable Interest Rate Loans
| dollars in millions | Loans Maturing One Year or After with | ||||||||||
| Fixed Interest Rates | Variable Interest Rates | ||||||||||
| Commercial | |||||||||||
| Commercial and industrial | $ | 9,945 | $ | 22,977 | |||||||
| Capital call lines | — | 512 | |||||||||
| Owner occupied commercial mortgage | 13,724 | 1,663 | |||||||||
| Investor dependent | 5 | 1,492 | |||||||||
| Commercial real estate | 7,897 | 9,811 | |||||||||
| Total commercial | 31,571 | 36,455 | |||||||||
| Consumer | |||||||||||
| Residential mortgage | 8,262 | 12,611 | |||||||||
| Revolving mortgage | 22 | 2,791 | |||||||||
| Consumer auto | 997 | — | |||||||||
| Consumer other | 281 | 369 | |||||||||
| Total consumer | 9,562 | 15,771 | |||||||||
| Total loans and leases | $ | 41,133 | $ | 52,226 | |||||||
Liquidity Risk
Liquidity risk is the risk arising from BancShares being unable to meet its obligations as they come due because of an inability to: (i) liquidate assets or obtain adequate funding, or (ii) unwind or offset specific exposures without significantly lowering market prices because of inadequate market depth or market disruptions. This may result in impairment of safety and soundness.
Our liquidity risk management and monitoring process is designed to ensure the availability of adequate cash and collateral resources and funding capacity to meet our obligations. Our overall liquidity management strategy is intended to ensure appropriate liquidity to meet expected and contingent funding needs under both normal and stressed environments. Consistent with this strategy, we maintain sufficient amounts of available cash and HQLS. Additional sources of liquidity include committed credit facilities, repurchase agreements, brokered certificates of deposit issuances, unsecured debt issuances, and cash collections generated by portfolio asset sales to third parties.
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We utilize measurement tools to assess and monitor the level and adequacy of our liquidity position, liquidity conditions and trends. We measure and forecast liquidity and liquidity risks under different hypothetical scenarios and across different horizons. We use a liquidity stress testing framework to better understand the range of potential risks and their impacts to which BancShares is exposed. Stress test results inform our business strategy, risk appetite, levels of liquid assets, and contingency funding plans. Also included among our liquidity measurement tools are key risk indicators that assist in identifying potential liquidity risk and stress events.
BancShares maintains a framework to establish liquidity risk tolerances, monitoring, and breach escalation protocol to alert management of potential funding and liquidity risks and to initiate mitigating actions as appropriate. Further, BancShares maintains a contingent funding plan, which details protocols and potential actions to be taken under liquidity stress conditions.
Liquidity includes available cash and HQLS. At March 31, 2026 we had $60.72 billion of high-quality liquid assets (25.7% of total assets) and $30.29 billion of contingent liquidity sources available. Some of the more significant changes from December 31, 2025 included higher available cash and HQLS due to balance sheet changes discussed above in “Executive Overview—Financial Performance Summary—Balance Sheet Highlights.”
Table 48
Liquidity
Liquidity
| dollars in millions | March 31, 2026 | December 31, 2025 | ||||||||||||||||||
Available cash | $ | 22,142 | $ | 19,111 | ||||||||||||||||
High-quality liquid securities (1) | 38,580 | 36,895 | ||||||||||||||||||
| High-quality liquid assets | $ | 60,722 | $ | 56,006 | ||||||||||||||||
Current Capacity (2) of Credit Facilities: | ||||||||||||||||||||
FHLB facility (3) | $ | 17,349 | $ | 17,775 | ||||||||||||||||
| FRB facility | 12,944 | 12,962 | ||||||||||||||||||
| Total contingent sources | $ | 30,293 | $ | 30,737 | ||||||||||||||||
| Total liquid assets and contingent sources | $ | 91,015 | $ | 86,743 | ||||||||||||||||
| Total uninsured deposits | $ | 65,439 | $ | 61,809 | ||||||||||||||||
| Coverage ratio of total liquid assets and contingent sources to uninsured deposits | 139 | % | 140 | % | ||||||||||||||||
(1) Consists of readily marketable, unpledged securities, as well as securities pledged but not drawn against at the FHLB and available for sale, and generally is comprised of U.S. Treasury and U.S. agency investment securities held outright or via reverse repurchase agreements.
(2) Current capacity is based on the amount of collateral pledged and available for use at March 31, 2026 and December 31, 2025.
(3) Refer to Table 49 for additional details.
We fund our operations through deposits and borrowings. Our primary source of liquidity is derived from our various deposit channels, including our Branch Network and Direct Bank. Total deposits at March 31, 2026 were $170.84 billion, an increase of $9.26 billion or 6% from $161.58 billion at December 31, 2025.
We use borrowings to diversify the funding of our business operations. In addition to the Purchase Money Note and FHLB advances, borrowings also include senior unsecured notes, securities sold under customer repurchase agreements, and subordinated notes. Total borrowings at March 31, 2026 were $33.96 billion, a decrease of $2.05 billion or 6% from $36.01 billion at December 31, 2025. Refer to details of debt prepayments and issuance in the “Executive Overview—Recent Events” section of this MD&A. We continually monitor our capital needs and market conditions in an effort to diversify our borrowing base and capital mix when appropriate.
FHLB Capacity
A source of available funds is advances from the FHLB of Atlanta. We may pledge assets for secured borrowing transactions, which include borrowings from the FHLB or FRB, or for other purposes as required or permitted by law. The debt issued in conjunction with these transactions is collateralized by certain discrete receivables, securities, loans, leases and underlying equipment. Certain related cash balances are restricted.
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Table 49
FHLB Balances
FHLB Balances
| dollars in millions | March 31, 2026 | December 31, 2025 | |||||||||||||||||||||
| Total borrowing capacity | $ | 18,799 | $ | 19,225 | |||||||||||||||||||
| Less: | |||||||||||||||||||||||
| Advances | — | — | |||||||||||||||||||||
Letters of credit (1) | 1,450 | 1,450 | |||||||||||||||||||||
| Available capacity | $ | 17,349 | $ | 17,775 | |||||||||||||||||||
| Pledged Non-PCD loans | $ | 31,368 | $ | 31,713 | |||||||||||||||||||
FRB Capacity
Under borrowing arrangements with the FRB, FCB has access to $12.94 billion on a secured basis at March 31, 2026. Loans pledged are disclosed in Note 5—Loans and Leases. There were no outstanding borrowings with the FRB Discount Window at March 31, 2026 and December 31, 2025.
Contractual Obligations and Commitments
The following table includes significant contractual obligations and commitments as of March 31, 2026, representing required and potential cash outflows, including impacts from purchase accounting adjustments and deferred fees. Refer to Note 19—Commitments and Contingencies for additional information regarding commitments. Financing commitments, letters of credit and deferred purchase commitments are presented at contractual amounts and do not necessarily reflect future cash outflows, as many are expected to expire unused or partially used.
Table 50
Contractual Obligations and Commitments
Contractual Obligations and Commitments
| dollars in millions | Payments Due by Period | ||||||||||||||||||||||||||||
| Less than 1 year | 1-3 years | 4-5 years | Thereafter | Total | |||||||||||||||||||||||||
| Contractual obligations: | |||||||||||||||||||||||||||||
| Time deposits | $ | 13,042 | $ | 158 | $ | 43 | $ | — | $ | 13,243 | |||||||||||||||||||
| Short-term borrowings | 170 | — | — | — | 170 | ||||||||||||||||||||||||
Long-term borrowings (1) (2) | (35) | 31,362 | 501 | 1,964 | 33,792 | ||||||||||||||||||||||||
| Total contractual obligations | $ | 13,177 | $ | 31,520 | $ | 544 | $ | 1,964 | $ | 47,205 | |||||||||||||||||||
| Commitments: | |||||||||||||||||||||||||||||
Financing commitments | $ | 26,688 | $ | 10,430 | $ | 8,203 | $ | 7,450 | $ | 52,771 | |||||||||||||||||||
Letters of credit | 2,136 | 481 | 169 | 84 | 2,870 | ||||||||||||||||||||||||
| Deferred purchase agreements | 1,584 | — | — | — | 1,584 | ||||||||||||||||||||||||
| Purchase and funding commitments | 145 | — | — | — | 145 | ||||||||||||||||||||||||
Affordable housing partnerships (1) | 574 | 586 | 27 | 46 | 1,233 | ||||||||||||||||||||||||
| Total commitments | $ | 31,127 | $ | 11,497 | $ | 8,399 | $ | 7,580 | $ | 58,603 | |||||||||||||||||||
(1) Long-term borrowings are presented net of purchase accounting adjustments of $62 million. On-balance sheet commitments for affordable housing partnerships are included in other liabilities and presented net of a purchase accounting adjustment of $11 million.
(2) Balance in parenthesis represents the estimated amortization of the purchase accounting adjustment and deferred costs in excess of any principal balance.
Long-term Borrowings
As displayed above in Table 50, we do not have any significant long-term debt obligations due until the Purchase Money Note matures. While scheduled principal payments are not required until maturity in March 2028, FCB may voluntarily prepay principal without a premium or penalty. As noted earlier in “Executive Overview—Recent Events,” FCB made prepayments of the Purchase Money Note in the first quarter of 2026 totaling $2.50 billion and previously made a prepayment of $2.49 billion in December 2025. We will continue to monitor the interest rate environment, FCB’s collateral position for the Purchase Money Note, and FCB’s liquidity position to determine the timing and magnitude of further voluntary prepayments. We expect monthly prepayments to be at least $500 million throughout 2026. Potential sources that could fund voluntary prepayments or the amount due at maturity include excess liquidity (primarily comprised of interest-earning deposits at banks and proceeds from maturities and paydowns of investment securities), deposit growth including brokered deposits, loan sales or securitizations, FHLB advances, and issuance of perpetual preferred stock, unsecured debt or other borrowings. At the time of any further voluntary prepayment or maturity, the interest rates for the potential interest-bearing sources of prepayment could be higher than the 3.50% rate.
Refer to the respective “Deposits” and “Borrowings” discussions in the “Balance Sheet Analysis—Interest-bearing Liabilities” section of this MD&A for further details.
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CAPITAL
Capital requirements applicable to BancShares are discussed in the “Regulatory Considerations” section in Item 1. Business of the 2025 Form 10-K.
Common and Preferred Stock Dividends
During the current quarter, we paid quarterly dividends of $2.10 per share on the Class A common stock and Class B common stock. In April 2026, the Board declared a quarterly dividend on the Class A common stock and Class B common stock of $2.10 per common share. The dividends are payable on June 15, 2026 to stockholders of record as of May 29, 2026.
During the current quarter, we paid quarterly dividends on our Series A, Series B, Series C, and Series D Preferred Stock as disclosed in Note 13—Stockholders' Equity. In April 2026, the Board declared dividends on our Series A, Series B, Series C, Series D, and Series E Preferred Stock in accordance with their terms. The dividends are payable on June 15, 2026.
Capital Composition and Ratios
As discussed earlier in the “Executive Overview—Recent Events” section of this MD&A, during the current quarter, we repurchased 449,845 shares of our Class A common stock. Refer to Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds for additional information regarding repurchases of Class A common stock for current quarter monthly repurchase activity.
The following table summarizes the change in outstanding Class A common stock through March 31, 2026. Refer to Note 13—Stockholders' Equity for additional information.
Table 51
Changes in Shares of Class A Common Stock Outstanding
Changes in Shares of Class A Common Stock Outstanding
| Three Months Ended March 31, 2026 | ||||||||||||||||||||
| Class A common stock shares outstanding at beginning of period | 11,133,974 | |||||||||||||||||||
| Shares repurchased under authorized repurchase plan | (449,845) | |||||||||||||||||||
| Class A common stock shares outstanding at end of period | 10,684,129 | |||||||||||||||||||
We also had 1,005,185 Class B common stock outstanding at March 31, 2026 and December 31, 2025.
We are committed to effectively managing our capital to protect our depositors, creditors and stockholders. We continually monitor the capital levels and ratios for BancShares and FCB to ensure they exceed the minimum requirements imposed by regulatory authorities and to ensure they are appropriate given growth projections, risk profile and potential changes in the regulatory or external environment. Failure to meet certain capital requirements may result in actions by regulatory agencies that could have a material impact on our operations or consolidated financial statements.
In accordance with GAAP, the unrealized gains and losses on certain assets and liabilities, net of deferred taxes, are included in AOCI within stockholders’ equity. These amounts are excluded from the calculation of our regulatory capital ratios under current regulatory guidelines. Refer to details of Basel III proposals in the “Executive Overview—Recent Events” section of this MD&A.
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Table 52
Analysis of Capital Adequacy
Analysis of Capital Adequacy
| dollars in millions | Basel III Requirements | PCA Well Capitalized Thresholds | March 31, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amount | Ratio | Amount | Ratio | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BancShares | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk-based capital ratios | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total risk-based capital | 10.50 | % | 10.00 | % | $ | 24,799 | 13.51 | % | $ | 24,945 | 13.71 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tier 1 risk-based capital | 8.50 | 8.00 | 21,634 | 11.79 | 21,660 | 11.91 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common equity Tier 1 | 7.00 | 6.50 | 19,869 | 10.83 | 20,285 | 11.15 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tier 1 leverage ratio | 4.00 | 5.00 | 21,634 | 9.30 | 21,660 | 9.29 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FCB | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk-based capital ratios | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total risk-based capital | 10.50 | % | 10.00 | % | $ | 24,892 | 13.59 | % | $ | 24,739 | 13.62 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tier 1 risk-based capital | 8.50 | 8.00 | 23,064 | 12.59 | 22,796 | 12.55 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common equity Tier 1 | 7.00 | 6.50 | 23,064 | 12.59 | 22,796 | 12.55 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tier 1 leverage ratio | 4.00 | 5.00 | 23,064 | 9.93 | 22,796 | 9.79 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As of March 31, 2026, BancShares and FCB had total risk-based capital ratio conservation buffers of 5.51% and 5.59%, respectively, which are in excess of the Basel III conservation buffer of 2.50%. As of December 31, 2025, BancShares and FCB’s total risk-based capital ratio conservation buffers were 5.71% and 5.62%, respectively. The capital ratio conservation buffers represent the excess of the regulatory capital ratios as of March 31, 2026 and December 31, 2025 over the Basel III minimum for the applicable ratio.
Additional Tier 1 capital for BancShares includes perpetual preferred stock. Additional Tier 2 capital for BancShares and FCB primarily consists of qualifying ALLL and qualifying subordinated debt.
Dividend Restrictions
Dividends paid from FCB to the Parent Company are the primary source of funds available to the Parent Company for payment of dividends to its stockholders. The Board of Directors of FCB may approve distributions, including dividends, as it deems appropriate, subject to the requirements of the FDIC and the General Statutes of North Carolina, provided that the distributions do not reduce the regulatory capital ratios below the applicable requirements. FCB could have paid additional dividends to the Parent Company in the amount of $6.58 billion while continuing to meet the requirements for well capitalized banks at March 31, 2026. Dividends declared by FCB and paid to the Parent Company amounted to $300 million for the quarter ended March 31, 2026. Payment of dividends is made at the discretion of FCB’s Board of Directors and may be contingent upon satisfactory earnings as well as projected capital needs.
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CRITICAL ACCOUNTING ESTIMATES
The accounting and reporting policies of BancShares are described in Note 1—Significant Accounting Policies and Basis of Presentation in the 2025 Form 10-K.
The ALLL is considered a critical accounting estimate. For more information regarding the ALLL, refer to the “Risk Management—Credit Risk—ALLL Methodology” section of this MD&A and Note 6—Allowance for Loan and Lease Losses.
RECENT ACCOUNTING PRONOUNCEMENTS
The following Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board are not yet effective for BancShares. Refer to Note 1—Significant Accounting Policies and Basis of Presentation for descriptions of ASUs that were adopted as of January 1, 2026.
| ASU | Summary | Effective Date and Expected Impact | ||||||
| ASU 2024-03—Income Statement—Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses Issued November 2024 | This ASU enhances expense disclosures, primarily by requiring footnote disaggregation of specified expenses in a tabular format. This ASU does not change the requirements for the presentation of expenses on the consolidated statements of income. | This ASU is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. This ASU may be applied prospectively or retrospectively. We are currently evaluating the impact of this ASU on our notes to the consolidated financial statements. We do not plan to early adopt this ASU. | ||||||
| ASU 2025-06—Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software Issued September 2025 | This ASU amends certain aspects of the accounting for internal-use software. This ASU eliminated references to software development stages, which were previously determinants of whether internal-use software costs should be capitalized. This ASU also provided more specific criteria to assess when determining whether internal-use software costs should be capitalized. | This ASU is effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. Early adoption is permitted as of the beginning of an annual reporting period. This ASU may be applied using either a prospective, retrospective, or modified transition approach. We are currently evaluating the impact of this ASU on our consolidated financial statements. We did not early adopt this ASU on January 1, 2026, but are considering whether we may early adopt on January 1, 2027. | ||||||
| ASU 2025-09—Derivatives and Hedging (Topic 815)—Hedge Accounting Improvements Issued November 2025 | This ASU clarified certain aspects of hedge accounting to better reflect the economics of risk management activities. For example, this ASU eliminated the requirement that a group of interest payments be based on the same index in order to be hedged as a group, and provided more flexibility for grouping transactions with similar risks for cash flow hedges. | This ASU is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted on any date on or after the issuance date of this ASU. Entities are required to apply this ASU on a prospective basis for all hedging relationships. We are currently evaluating the impact of this ASU on our consolidated financial statements and considering whether we may early adopt during 2026. | ||||||
NON-GAAP FINANCIAL MEASUREMENTS
BancShares provides certain non-GAAP information in reporting its financial results to give investors additional data to evaluate its operations. A non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance or financial position that may either exclude or include amounts, or is adjusted in some way to the effect of including or excluding amounts, as compared to the most directly comparable measure calculated and presented in accordance with GAAP financial statements. BancShares’ management believes that non-GAAP financial measures, when reviewed in conjunction with GAAP financial information, can provide transparency about, or an alternate means of assessing, its operating results and financial position to its investors, analysts and management. These non-GAAP measures should be considered in addition to, and not superior to or a substitute for, GAAP measures presented in BancShares’ consolidated financial statements and other publicly filed reports. In addition, our non-GAAP measures may be different from or inconsistent with non-GAAP financial measures used by other institutions.
Whenever we refer to a non-GAAP financial measure we will generally define and present the most directly comparable financial measure calculated and presented in accordance with GAAP, along with a reconciliation between the GAAP financial measure and the non-GAAP financial measure. We describe each of these measures below and explain why we believe the measure to be useful.
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Adjusted Rental Income on Operating Lease Equipment for Commercial Bank and Rail Segments
Commercial Bank segment net income, rental income on operating lease equipment, and adjusted rental income on operating lease equipment are utilized to measure profitability. Adjusted rental income on operating lease equipment is a non-GAAP measure calculated as rental income on operating lease equipment less depreciation on operating lease equipment, as well as maintenance and other operating lease expenses, if any. This measure is meaningful because it enables management to monitor the performance and profitability of operating leases after deducting direct expenses.
The following tables reconcile the most comparable GAAP measures to the non-GAAP measures for the Commercial Bank and Rail segments.
Table 53
Commercial Bank Segment
Commercial Bank Segment
| dollars in millions | Three Months Ended | |||||||||||||||||||||||||||||||||||||
| March 31, 2026 | December 31, 2025 | March 31, 2025 | ||||||||||||||||||||||||||||||||||||
| Rental income on operating leases (GAAP) | $ | 55 | $ | 55 | $ | 56 | ||||||||||||||||||||||||||||||||
| Less: depreciation on operating lease equipment | 43 | 44 | 44 | |||||||||||||||||||||||||||||||||||
| Adjusted rental income on operating lease equipment (non-GAAP) | $ | 12 | $ | 11 | $ | 12 | ||||||||||||||||||||||||||||||||
Rail segment net income, rental income on operating lease equipment and adjusted rental income on operating lease equipment are utilized to measure profitability. Adjusted rental income on operating lease equipment is calculated as rental income on operating lease equipment reduced by depreciation, maintenance and other operating lease expenses. This measure is meaningful because it enables management to monitor the performance and profitability of operating leases after deducting direct expenses. Due to the nature of the Rail segment portfolio, which is essentially all operating lease equipment, certain financial measures commonly used by banks, such as NII, are not as meaningful for the Rail segment. NII is not used because it includes the impact of debt costs funding our operating lease assets but excludes the associated adjusted rental income.
Table 54
Rail Segment
Rail Segment
| dollars in millions | Three Months Ended | |||||||||||||||||||||||||||||||||||||
| March 31, 2026 | December 31, 2025 | March 31, 2025 | ||||||||||||||||||||||||||||||||||||
| Rental income on operating leases (GAAP) | $ | 226 | $ | 226 | $ | 214 | ||||||||||||||||||||||||||||||||
| Less: depreciation on operating lease equipment | 58 | 58 | 54 | |||||||||||||||||||||||||||||||||||
| Less: maintenance and other operating lease expenses | 65 | 64 | 58 | |||||||||||||||||||||||||||||||||||
| Adjusted rental income on operating lease equipment (non-GAAP) | $ | 103 | $ | 104 | $ | 102 | ||||||||||||||||||||||||||||||||
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NII, NIM, and Interest Income on Loans and Leases, Excluding PAA
NII and NIM, excluding PAA, and interest income on loans and leases, excluding loan PAA are meaningful metrics as they allow management to analyze NII, NIM and loan and lease interest income trends more directly related to the rates of the underlying interest-earning assets and interest-bearing liabilities. Loan PAA is primarily related to the loan discount in the SVBB Acquisition. Other PAA is primarily related to the discount on the Purchase Money Note and the premium on deposits assumed in the merger with CIT Group Inc.
The following table reconciles NII to NII, excluding PAA, NIM to NIM, excluding PAA, and interest income on loans and leases to interest income on loans and leases, excluding loan PAA:
Table 55
NII, NIM, and Interest Income on Loans and Leases, Excluding PAA
NII, NIM, and Interest Income on Loans and Leases, Excluding PAA
| dollars in millions | Three Months Ended | |||||||||||||||||||||||||||||||||||||
| March 31, 2026 | December 31, 2025 | March 31, 2025 | ||||||||||||||||||||||||||||||||||||
| NII (GAAP) | a | $ | 1,621 | $ | 1,722 | $ | 1,663 | |||||||||||||||||||||||||||||||
| Loan PAA | b | 48 | 59 | 84 | ||||||||||||||||||||||||||||||||||
| Other PAA | c | (9) | (10) | (9) | ||||||||||||||||||||||||||||||||||
| PAA | d = (b+c) | 39 | 49 | 75 | ||||||||||||||||||||||||||||||||||
| NII, excluding PAA (non-GAAP) | e = (a-d) | $ | 1,582 | $ | 1,673 | $ | 1,588 | |||||||||||||||||||||||||||||||
| Annualized NII | f = a annualized | $ | 6,575 | $ | 6,834 | $ | 6,744 | |||||||||||||||||||||||||||||||
| Annualized NII, excluding PAA (non-GAAP) | g = e annualized | 6,416 | 6,640 | 6,439 | ||||||||||||||||||||||||||||||||||
| Average interest-earning assets | h | $ | 212,552 | $ | 213,294 | $ | 206,028 | |||||||||||||||||||||||||||||||
| NIM (GAAP) | f/h | 3.09 | % | 3.20 | % | 3.26 | % | |||||||||||||||||||||||||||||||
| NIM, excluding PAA (non-GAAP) | g/h | 3.01 | 3.11 | 3.12 | ||||||||||||||||||||||||||||||||||
| Interest income on loans and leases (GAAP) | $ | 2,206 | $ | 2,290 | $ | 2,236 | ||||||||||||||||||||||||||||||||
| Less: loan PAA | b | 48 | 59 | 84 | ||||||||||||||||||||||||||||||||||
| Interest income on loans and leases, excluding loan PAA (non-GAAP) | $ | 2,158 | $ | 2,231 | $ | 2,152 | ||||||||||||||||||||||||||||||||
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Forward-Looking Statements
Statements in this Quarterly Report on Form 10-Q contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 regarding the financial condition, results of operations, business plans, asset quality, future performance, and other strategic goals of BancShares. Words such as “anticipates,” “believes,” “estimates,” “expects,” “predicts,” “forecasts,” “intends,” “plans,” “projects,” “targets,” “designed,” “could,” “may,” “should,” “will,” “potential,” “continue,” “aims,” “strives” or other similar words and expressions are intended to identify these forward-looking statements. These forward-looking statements are based on BancShares’ current expectations and assumptions regarding BancShares’ business, the economy, and other future conditions.
Because forward-looking statements relate to future results and occurrences, they are subject to inherent risks, uncertainties, changes in circumstances and other factors that are difficult to predict. Many possible events or factors could affect BancShares’ future financial results and performance and could cause actual results, performance or achievements of BancShares to differ materially from any anticipated results expressed or implied by such forward-looking statements. Such risks and uncertainties include, among others, general competitive, economic (including the imposition of tariffs, retaliatory tariff measures, trade barriers on trading partners, and supply chain disruptions), political (including impacts of any U.S. government shutdown), geopolitical events (including conflicts or developments in Ukraine, the Middle East, and Latin America), natural disasters and market conditions, including changes in competitive pressures among financial institutions and the impacts related to or resulting from previous bank failures, the risks and impacts of future bank failures and other volatility in the banking industry, public perceptions of our business practices, including our deposit pricing and acquisition activity, the financial success or changing conditions or strategies of BancShares’ vendors or customers, including changes in demand for deposits, loans and other financial services, fluctuations in interest rates, changes in the quality or composition of BancShares’ loan or investment portfolio, actions of government regulators, including interest rate decisions by the Federal Reserve, changes to estimates of future costs and benefits of actions taken by BancShares, BancShares’ ability to maintain adequate sources of funding and liquidity, the potential impact of decisions by the Federal Reserve on BancShares’ capital plans, adverse developments with respect to U.S. or global economic conditions, including significant turbulence in the capital or financial markets, the impact of any sustained or elevated inflationary environment, the impact of any cyberattack, information or security breach, the impact of implementation and compliance with current or proposed laws, regulations and regulatory interpretations, including potential increased regulatory requirements, limitations, and costs, such as FDIC special assessments, increases to FDIC deposit insurance premiums, changes in regulatory capital requirements, or limitations on credit card interest rates, along with the risk that such laws, regulations and regulatory interpretations may change, the availability of capital and personnel, and the risks associated with BancShares’ previously completed acquisition transactions, the pending BMO Branch Acquisition, or any future transactions.
BancShares’ 2025 SRP allows BancShares to repurchase shares of its Class A common stock through 2026. BancShares is not obligated under the 2025 SRP to repurchase any minimum or particular number of shares, and repurchases may be suspended or discontinued at any time (subject to the terms of any Rule 10b5-1 plan in effect) without prior notice. The authorization to repurchase Class A common stock pursuant to the 2025 SRP will be utilized at management’s discretion. The actual timing and amount of Class A common stock that may be repurchased under the plan will depend on a number of factors, including the terms of any Rule 10b5-1 plan then in effect, price, general business and market conditions, regulatory requirements, and alternative investment opportunities or capital needs.
Except to the extent required by applicable laws or regulations, BancShares disclaims any obligation to update forward-looking statements or to publicly announce the results of any revisions to any of the forward-looking statements included herein to reflect future events or developments. Additional factors which could affect the forward-looking statements may be included in BancShares’ other filings with the Securities and Exchange Commission.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Market risk is the potential economic loss resulting from changes in market prices and interest rates. This risk can either result in diminished current fair values of financial instruments or reduced NII in future periods. Changes in fair value that result from movement in market rates cannot be predicted with any degree of certainty. Therefore, the impact that future changes in market rates will have on the fair values of financial instruments is uncertain.
The information required by this Item 3. Quantitative and Qualitative Disclosures about Market Risk is set forth in Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations within the “Risk Management” section and in Item 1. Financial Statements within Note 11—Derivative Financial Instruments and Note 12—Fair Value of this Form 10-Q.
Item 4. Controls and Procedures.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Under the supervision of and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that we are able to record, process, summarize and report in a timely manner the information required to be disclosed in the reports we file under the Exchange Act.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
We review our internal controls over financial reporting on an ongoing basis and make changes intended to ensure the quality of our financial reporting. There were no changes in our internal control over financial reporting during the first quarter of 2026 that have materially affected, or are reasonably likely to materially affect, BancShares’ internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
Information relating to legal proceedings is set forth in Note 19—Commitments and Contingencies of the Notes to Consolidated Financial Statements contained in Item 1. Financial Statements, and is incorporated herein by reference.
Item 1A. Risk Factors.
There have been no material changes in the risk factors during 2026 from those reported in our 2025 Form 10-K. For a discussion of the risks and uncertainties that management believes are material to an investment in us, refer to Part I, Item 1A. Risk Factors, of our 2025 Form 10-K, and Forward-Looking Statements of this Form 10-Q.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(c) The following table summarizes our monthly Class A common stock repurchase activity during the three months ended March 31, 2026. Subsequent to March 31, 2026, BancShares purchased an additional 102,340 shares of Class A common stock through April 30, 2026 under the 2025 SRP.
Table 57
Issuer Purchases of Class A Common Stock
Issuer Purchases of Class A Common Stock
| dollars in millions, except per share data | Total Number of Class A Shares Purchased | Average Price Paid per Share | Total Number of Shares Repurchased as Part of Publicly Announced Plan | Approximate Dollar Value of Shares that May Yet be Purchased Under Plan | ||||||||||||||||||||||
| Repurchases from January 1 - 31, 2026 | 139,328 | $ | 2,123.69 | 139,328 | $ | 2,515 | ||||||||||||||||||||
| Repurchases from February 1 - 28, 2026 | 136,470 | 2,050.40 | 136,470 | 2,235 | ||||||||||||||||||||||
| Repurchases from March 1 - 31, 2026 | 174,047 | 1,863.20 | 174,047 | 1,911 | ||||||||||||||||||||||
| Total | 449,845 | $ | 2,000.67 | 449,845 | $ | 1,911 | ||||||||||||||||||||
On July 25, 2025, BancShares announced that the Board authorized the 2025 SRP, which allows BancShares to repurchase shares of its Class A common stock in an aggregate amount up to $4.0 billion through December 31, 2026. Repurchases under the 2025 SRP commenced in September 2025 after the 2024 SRP was completed.
Under the 2025 SRP, shares of BancShares’ Class A common stock may be purchased from time to time on the open market or in privately negotiated transactions, including through a Rule 10b5-1 plan, but the Board’s action does not obligate BancShares to repurchase any minimum or particular number of shares, and repurchases may be suspended or discontinued at any time (subject to the terms of any Rule 10b5-1 plan in effect) without prior notice.
Item 5. Other Information.
(c) Director and Officer Trading Arrangements
During the first quarter of 2026, none of BancShares’ directors or officers adopted terminated
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Item 6. Exhibits.
EXHIBIT INDEX
| 4.1 | Deposit Agreement, dated as of February 5, 2026, among the Registrant, Broadridge Corporate Issuer Solutions, LLC, as depositary, and the holders from time to time of the depositary receipts described therein (incorporated by reference to Exhibit 4.1 to the Registrant's Form 8-K filed February 5, 2026) | |||||||
| 4.2 | Form of Depositary Receipt relating to the Registrant's 6.625% Non-Cumulative Perpetual Preferred Stock, Series E (included as Exhibit A in Exhibit 4.1 hereto) | |||||||
| 4.3 | Instruments defining the rights of holders of long-term debt will be furnished to the SEC upon request. | |||||||
| 10.1 | Amended and Restated Long-Term Incentive Plan of Registrant’s subsidiary, First-Citizens Bank & Trust Company, effective January 1, 2026 (incorporated by reference to Exhibit 10.8 to the Registrant’s Form 10-K for the year ended December 31, 2025) | |||||||
| 31.1 | Certification of Chief Executive Officer (filed herewith) | |||||||
| 31.2 | Certification of Chief Financial Officer (filed herewith) | |||||||
| 32.1 | Certification of Chief Executive Officer (filed herewith) | |||||||
| 32.2 | Certification of Chief Financial Officer (filed herewith) | |||||||
| *101.INS | Inline XBRL Instance Document (filed herewith) | |||||||
| *101.SCH | Inline XBRL Taxonomy Extension Schema (filed herewith) | |||||||
| *101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase (filed herewith) | |||||||
| *101.LAB | Inline XBRL Taxonomy Extension Label Linkbase (filed herewith) | |||||||
| *101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase (filed herewith) | |||||||
| *101.DEF | Inline XBRL Taxonomy Definition Linkbase (filed herewith) | |||||||
| *104 | Cover Page Interactive Data File (embedded within the Inline XBRL document filed as Exhibit 101) | |||||||
| * | Interactive data files are furnished but not filed for purposes of Sections 11 and 12 of the Securities Act of 1933, as amended, and Section 18 of the Securities Exchange Act of 1934, as amended. | |||||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Date: | May 8, 2026 | First Citizens BancShares, Inc. | ||||||||||||
| (Registrant) | ||||||||||||||
| By: | /s/ Craig L. Nix | |||||||||||||
| Craig L. Nix | ||||||||||||||
| Chief Financial Officer | ||||||||||||||
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FAQ
How did First Citizens BancShares (FCNCA) perform in Q1 2026?
First Citizens BancShares earned $534 million in Q1 2026, up from $483 million a year earlier. Net income available to common stockholders was $508 million, and earnings per share rose to $42.63 as the company combined profit growth with a lower average share count.
What happened to net interest income and credit provisions at FCNCA in Q1 2026?
Net interest income was $1.62 billion in Q1 2026, down from $1.66 billion in Q1 2025. However, the provision for credit losses dropped to $72 million from $154 million, reflecting lower provisioning for loans and leases and a benefit from off-balance sheet credit exposure.
How large are First Citizens BancShares’ loans and deposits as of March 31, 2026?
Loans and leases totaled $148.69 billion and total deposits were $170.84 billion as of March 31, 2026. Noninterest-bearing deposits were $43.61 billion and interest-bearing deposits $127.24 billion, supporting the bank’s balance sheet alongside other funding sources and borrowings.
What capital actions did FCNCA take in Q1 2026?
FCNCA issued $390 million of Series E preferred stock and repurchased 449,845 Class A common shares for $908 million. It also paid $2.10 per common share in cash dividends for the quarter across Class A and Class B, plus regular preferred stock dividends.
How did credit quality and reserves look for FCNCA in Q1 2026?
The allowance for loan and lease losses was $1.56 billion at March 31, 2026, slightly below year-end 2025. Nonaccrual loans totaled $1.43 billion, and net charge-offs were $132 million for the quarter, mainly from commercial portfolios, while collateral-dependent loans incurred valuation losses.
What changes occurred in First Citizens BancShares’ long-term borrowings in Q1 2026?
Long-term borrowings declined to $33.79 billion from $35.78 billion, driven by $2.50 billion of prepayments on the FDIC Purchase Money Note. The company also issued $500 million of 4.869% fixed-to-floating senior notes due 2032 and recorded an $8 million loss on extinguishment of debt.
Does FCNCA have any notable pending transactions as of Q1 2026?
FCNCA’s bank subsidiary plans to acquire 138 branches from BMO Bank N.A., expecting to assume about $5.3 billion of deposits and acquire $1.1 billion of loans. The transaction is expected to close in the second half of 2026, subject to customary terms and remaining regulatory approvals.