The following is a list of certain abbreviations and acronyms we use throughout this document. You may find it helpful to refer back to this table. We also include a Glossary of Key Terms in Part 1, Item 2. Management’s Discussion and Analysis.


Acronym	Definition	Acronym	Definition
ACL	Allowance for Credit Losses	LIBOR	London Inter-Bank Offered Rate
AOCI	Accumulated Other Comprehensive Income	LOCOM	Lower of the Cost or Market Value
ASU	Accounting Standards Update	MD&A	Management’s Discussion and Analysis
BHC	Bank Holding Company	MSRs	Mortgage Servicing Rights
BOLI	Bank Owned Life Insurance	NCCOB	North Carolina Commissioner of Banks
bps	Basis point(s); 1bp=0.01%	NII	Net Interest Income
CARES Act	The Coronavirus Aid, Relief, and Economic Security Act	NII Sensitivity	Net Interest Income Sensitivity
CAB	Community Association Banking	NIM	Net Interest Margin
CECL	Current Expected Credit Losses	OREO	Other Real Estate Owned
DPA	Deferred Purchase Agreement	PAA	Purchase Accounting Adjustments
DTAs	Deferred Tax Assets	PB	Primary Beneficiary
ETR	Effective Tax Rate	PCA	Prompt corrective action
EVE Sensitivity	Economic Value of Equity Sensitivity	PCD	Purchased Credit Deteriorated
FASB	Financial Accounting Standards Board	PD	Probability of Obligor Default
FCB	First-Citizens Bank & Trust Company	RMG	Risk Management Group
FDIC	Federal Deposit Insurance Corporation	ROU	Right of Use
FHA	Federal Housing Administration	RSU	Restricted Stock Unit
FHLB	Federal Home Loan Bank	SBA	Small Business Administration
FRB	Federal Reserve System	SBA-PPP	Small Business Administration Paycheck Protection Plan
GAAP	Accounting Principles Generally Accepted in the U.S.	SOFR	Secured Overnight Financing Rate
GDP	Gross Domestic Product	TDRs	Troubled Debt Restructuring
HAMP	Home Affordable Modification Program	UPB	Unpaid Principal Balance
HOA	Home Owner’s Association	VA	Veteran’s Administration
HQSL	High Quality Liquid Securities	VIE	Variable Interest Entity
IRC	Internal Revenue Code



~~Item 6.~~	~~Exhibits~~	52

~~Table of Contents~~

PART I

Item 1.Financial Statements

First Citizens BancShares, Inc. and Subsidiaries

Consolidated Balance Sheets (Unaudited)

(Dollars in thousands, unaudited) March 31, 2021 December 31, 2020
Assets
Cash and due from banks $ 410,495 $ 362,048
Overnight investments 7,588,757 4,347,336
Investment in marketable equity securities (cost of $84,297 at March 31, 2021 and $84,837 at December 31, 2020) 106,886 91,680
Investment securities available for sale (cost of $7,270,552 at March 31, 2021 and $6,911,965 at December 31, 2020) 7,307,122 7,014,243
Investment securities held to maturity (fair value of $2,774,982 at March 31, 2021 and $2,838,499 at December 31, 2020) 2,808,099 2,816,982
Loans held for sale 129,334 124,837
Loans and leases 33,180,851 32,791,975
Allowance for credit losses (210,651) (224,314)
Net loans and leases 32,970,200 32,567,661
Premises and equipment 1,238,874 1,251,283
Other real estate owned 48,512 50,890
Income earned not collected 148,022 145,694
Goodwill 350,298 350,298
Other intangible assets 51,547 50,775
Other assets 750,460 783,953
Total assets $ 53,908,606 $ 49,957,680
Liabilities
Deposits:
Noninterest-bearing $ 20,515,142 $ 18,014,029
Interest-bearing 26,815,855 25,417,580
Total deposits 47,330,997 43,431,609
Securities sold under customer repurchase agreements 680,705 641,487
Federal Home Loan Bank borrowings 648,671 655,175
Subordinated debt 497,153 504,518
Other borrowings 84,502 88,470
FDIC shared-loss payable 0 15,601
Other liabilities 345,178 391,552
Total liabilities 49,587,206 45,728,412
Shareholders’ equity
Common stock:
Class A - $1 par value (16,000,000 shares authorized; 8,811,220 shares issued and outstanding at March 31, 2021 and December 31, 2020) 8,811 8,811
Class B - $1 par value (2,000,000 shares authorized; 1,005,185 shares issued and outstanding at March 31, 2021 and December 31, 2020) 1,005 1,005
Preferred stock - $0.01 par value (10,000,000 shares authorized; 345,000 shares issued and outstanding at March 31, 2021 and December 31, 2020; $1,000 per share liquidity preference) 339,937 339,937
Retained earnings 4,005,318 3,867,252
Accumulated other comprehensive (loss) income (33,671) 12,263
Total shareholders’ equity 4,321,400 4,229,268
Total liabilities and shareholders’ equity $ 53,908,606 $ 49,957,680


dollars in millions, except share data	March 31, 2022		December 31, 2021
Assets
Cash and due from banks	$	523	$	338
Interest-earning deposits at banks	9,285		9,115

Investments in marketable equity securities (cost of $73 million at March 31, 2022 and $73 million at December 31, 2021)	100		98
Investment securities available for sale (cost of $9,726 million at March 31, 2022 and $9,215 million at December 31, 2021)	9,295		9,203
Investment securities held to maturity (fair value of $9,457 million at March 31, 2022 and $3,759 million at December 31, 2021)	10,074		3,809
Assets held for sale	83		99
Loans and leases	65,524		32,372
Allowance for credit losses	(848)		(178)
Loans and leases, net of allowance for credit losses	$	64,676	$	32,194
Operating lease equipment, net	7,972		—
Premises and equipment	1,431		1,233
Bank owned life insurance	1,326		116
Goodwill	346		346
Other intangible assets	156		19
Other assets	3,330		1,739
Total assets	$	108,597	$	58,309
Liabilities
Deposits:
Non-interest-bearing	$	25,898	$	21,405
Interest-bearing	65,699		30,001
Total deposits	$	91,597	$	51,406
Credit balances of factoring clients	1,150		—
Securities sold under customer repurchase agreements	616		589

Federal Home Loan Bank borrowings	639		645
Senior unsecured borrowings	895		—
Subordinated debt	1,058		478
Other borrowings	84		72
Other liabilities	1,988		381
Total liabilities	$	98,027	$	53,571
Stockholders’ equity
Preferred stock - $0.01 par value (10,000,000 shares authorized at March 31, 2022 and December 31, 2021)	$	881	$	340
Common stock:
Class A - $1 par value (16,000,000 shares authorized; 14,996,325 and 8,811,220 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively)	15		9
Class B - $1 par value (2,000,000 shares authorized; 1,005,185 shares issued and outstanding at March 31, 2022 and December 31, 2021)	1		1
Additional paid in capital	5,344		—
Retained earnings	4,634		4,378
Accumulated other comprehensive (loss) income	(305)		10
Total stockholders’ equity	$	10,570	$	4,738
Total liabilities and stockholders’ equity	$	108,597	$	58,309

See accompanying Notes to the Unaudited Consolidated Financial Statements.

~~Table of Contents~~

First Citizens BancShares, Inc. and Subsidiaries

Consolidated Statements of Income (Unaudited)

Three months ended March 31
(Dollars in thousands, except per share data, unaudited) 2021 2020
Interest income
Loans and leases $ 323,023 $ 325,548
Investment securities interest and dividend income 30,852 39,493
Overnight investments 1,448 4,518
Total interest income 355,323 369,559
Interest expense
Deposits 8,793 24,194
Securities sold under customer repurchase agreements 338 442
Federal Home Loan Bank borrowings 2,087 2,984
Subordinated debt 4,188 2,755
Other borrowings 265 784
Total interest expense 15,671 31,159
Net interest income 339,652 338,400
Provision (credit) for credit losses (10,974) 28,355
Net interest income after provision for credit losses 350,626 310,045
Noninterest income
Wealth management services 32,198 26,412
Service charges on deposit accounts 21,536 26,413
Cardholder services, net 19,960 18,160
Mortgage income 12,991 5,224
Merchant services, net 8,917 5,888
Other service charges and fees 8,489 7,792
Insurance commissions 3,998 3,688
ATM income 1,482 1,422
Marketable equity securities gains (losses), net 16,011 (51,408)
Realized gains on investment securities available for sale, net 9,207 19,795
Other 1,860 625
Total noninterest income 136,649 64,011
Noninterest expense
Salaries and wages 147,830 145,255
Employee benefits 35,725 38,511
Occupancy expense 29,743 27,480
Equipment expense 29,803 27,850
Processing fees paid to third parties 13,673 10,372
FDIC insurance expense 3,218 3,466
Collection and foreclosure-related expenses 2,198 4,054
Merger-related expenses 6,819 4,232
Other 26,917 38,751
Total noninterest expense 295,926 299,971
Income before income taxes 191,349 74,085
Income taxes 44,033 16,916
Net income $ 147,316 $ 57,169
Preferred stock dividends 4,636 0
Net income available to common shareholders $ 142,680 $ 57,169
Weighted average common shares outstanding 9,816,405 10,473,119
Earnings per common share $ 14.53 $ 5.46


	Three Months Ended March 31,
dollars in millions, except share and per share data	2022		2021
Interest income
Interest and fees on loans	$	621	$	323
Interest on investment securities	83		30
Other interest and dividends	6		2
Total interest income	$	710	$	355
Interest expense
Deposits	39		9





Borrowings	22		6
Total interest expense	$	61	$	15
Net interest income	649		340
Provision (benefit) for credit losses	464		(11)
Net interest income after provision for credit losses	$	185	$	351
Noninterest income
Rental income on operating leases	208		—
Fee income and other revenue	33		9
Wealth management services	35		32
Gains on leasing equipment, net	6		—
Service charges on deposit accounts	28		22
Factoring commissions	27		—
Cardholder services, net	25		20
Merchant services, net	10		9
Realized gains on investment securities available for sale, net	—		9
Marketable equity securities gains, net	3		16
Gain on acquisition	431		—
Gain on extinguishment of debt	6		—
Other noninterest income	38		20
Total noninterest income	$	850	$	137
Noninterest expense
Depreciation on operating lease equipment	81		—
Maintenance and other operating lease expenses	43		—
Salaries and benefits	352		184
Net occupancy expense	49		30
Equipment expense	52		30
Third-party processing fees	24		14
FDIC insurance expense	12		3
Merger-related expenses	135		7
Intangible asset amortization	6		3
Other noninterest expense	56		26
Total noninterest expense	$	810	$	297
Income before income taxes	225		191
Income tax (benefit) expense	(46)		44
Net income	$	271	$	147
Preferred stock dividends	7		4
Net income available to common stockholders	$	264	$	143
Earnings per common share
Basic	$	16.70	$	14.53
Diluted	$	16.70	$	14.53
Weighted average common shares outstanding
Basic	15,779,153		9,816,405
Diluted	15,779,153		9,816,405

See accompanying Notes to the Unaudited Consolidated Financial Statements.

~~Table of Contents~~

First Citizens BancShares, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

Three months ended March 31
(Dollars in thousands, unaudited) 2021 2020
Net income $ 147,316 $ 57,169
Other comprehensive income
Unrealized (losses) gains on securities available for sale:
Unrealized (losses) gains on securities available for sale arising during the period (56,501) 144,843
Tax effect 12,995 (33,313)
Reclassification adjustment for realized gains on securities available for sale included in income before income taxes (9,207) (19,795)
Tax effect 2,118 4,553
Unrealized (losses) gains on securities available for sale arising during the period, net of tax (50,595) 96,288
Unrealized gains on securities available for sale transferred to held to maturity:
Reclassification adjustment for accretion of unrealized gains on securities available for sale transferred to held to maturity (475) 0
Tax effect 109 0
Total change in unrealized gains on securities available for sale transferred to held to maturity, net of tax (366) 0
Change in pension obligation:
Amortization of actuarial losses 6,529 6,264
Tax effect (1,502) (1,441)
Total change in pension obligation, net of tax 5,027 4,823
Other comprehensive (loss) income (45,934) 101,111
Total comprehensive income $ 101,382 $ 158,280
(Unaudited)


	Three Months Ended March 31,
dollars in millions	2022		2021
Net income	$	271	$	147
Other comprehensive income (loss), net of tax
Net unrealized losses on securities available for sale	(317)		(51)

Net change in pension obligations	2		5


Other comprehensive loss, net of tax	$	(315)	$	(46)
Total comprehensive (loss) income	$	(44)	$	101

See accompanying Notes to the Unaudited Consolidated Financial Statements.

~~Table of Contents~~

First Citizens BancShares, Inc. and Subsidiaries

Consolidated Statements of Changes in ~~Shareholders’~~Stockholders’ Equity (Unaudited)

Three months ended March 31
(Dollars in thousands, unaudited) Class A
Common Stock Class B
Common Stock Preferred
Stock Surplus Retained
Earnings Accumulated
Other
Comprehensive
(Loss) Income Total
Shareholders’
Equity
Balance at December 31, 2019 $ 9,624 $ 1,005 $ 0 $ 44,081 $ 3,658,197 $ (126,723) $ 3,586,184
Cumulative effect of adoption of ASC 326 — — — — 36,943 — 36,943
Net income — — — — 57,169 — 57,169
Other comprehensive income, net of tax — — — — — 101,111 101,111
Issuance of preferred stock — — 339,958 — — — 339,958
Repurchase of 349,390 shares of Class A common stock (349) — — (44,081) (115,274) — (159,704)
Cash dividends declared ($0.40 per common share)
Class A common stock — — — — (3,739) — (3,739)
Class B common stock — — — — (402) — (402)
Balance at March 31, 2020 $ 9,275 $ 1,005 $ 339,958 $ 0 $ 3,632,894 $ (25,612) $ 3,957,520
Balance at December 31, 2020 $ 8,811 $ 1,005 $ 339,937 $ 0 $ 3,867,252 $ 12,263 $ 4,229,268
Net income — — — — 147,316 — 147,316
Other comprehensive loss, net of tax — — — — — (45,934) (45,934)
Cash dividends declared ($0.47 per common share)
Class A common stock — — — — (4,142) — (4,142)
Class B common stock — — — — (472) — (472)
Preferred stock dividends declared — — — — (4,636) — (4,636)
Balance at March 31, 2021 $ 8,811 $ 1,005 $ 339,937 $ 0 $ 4,005,318 $ (33,671) $ 4,321,400


dollars in millions, except share data	Preferred Stock		Class A Common Stock		Class B Common Stock		Additional Paid In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
Balance at December 31, 2021	$	340	$	9	$	1	$	—	$	4,378	$	10	$	4,738
Net income	—		—		—		—		271		—		271
Other comprehensive loss, net of tax	—		—		—		—		—		(315)		(315)
Issued in CIT Merger:
Common stock	—		6		—		5,273		—		—		5,279
Series B preferred stock	334		—				—		—		—		334
Series C preferred stock	207		—		—		—		—		—		207


Stock based compensation	—		—		—		71		—		—		71
Cash dividends declared ($0.47 per common share)
Class A common stock	—		—		—		—		(7)		—		(7)
Class B common stock	—		—		—		—		—		—		—
Preferred stock dividends declared:
Series A ($13.44 per share)	—		—		—		—		(5)		—		(5)

Series C ($0.35 per share)	—		—		—		—		(3)		—		(3)
Balance at March 31, 2022	$	881	$	15	$	1	$	5,344	$	4,634	$	(305)	$	10,570

Balance at December 31, 2020	$	340	$	9	$	1	$	—	$	3,867	$	12	$	4,229
Net income	—		—		—		—		147		—		147
Other comprehensive loss, net of tax	—		—		—		—		—		(46)		(46)
Cash dividends declared ($0.47 per common share)
Class A common stock	—		—		—		—		(4)		—		(4)
Class B common stock	—		—		—		—		—		—		—
Preferred stock dividends declared	—		—		—		—		(5)		—		(5)
Balance at March 31, 2021	$	340	$	9	$	1	$	—	$	4,005	$	(34)	$	4,321

See accompanying Notes to the Unaudited Consolidated Financial Statements.

~~Table of Contents~~

First Citizens BancShares, Inc. and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

Three months ended March 31
(Dollars in thousands, unaudited) 2021 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 147,316 $ 57,169
Adjustments to reconcile net income to cash provided by operating activities:
Provision (credit) for credit losses (10,974) 28,355
Deferred tax expense (benefit) 8,555 (11,485)
Net increase in current tax receivable 26,703 11,829
Depreciation and amortization 27,864 26,879
Net decrease in accrued interest payable (4,264) (4,624)
Net increase in income earned not collected (2,328) (1,914)
Contribution to pension plans 0 (100,000)
Realized gains on investment securities available for sale, net (9,207) (19,795)
Marketable equity securities (gains) losses, net (16,011) 51,408
Origination of loans held for sale (315,451) (205,986)
Proceeds from sale of loans held for sale 279,180 201,886
Gain on sale of loans (9,365) (5,682)
Net (gains) losses on other real estate owned (527) 1,419
Net accretion of premiums and discounts 116 4,674
Amortization of intangible assets 5,795 6,160
Origination of mortgage servicing rights, net of change in valuation allowance (6,567) 1,384
Net change in other assets 17,535 4,067
Net change in other liabilities (33,494) (28,135)
Net cash provided by operating activities 104,876 17,609
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans outstanding (383,507) (202,667)
Purchases of investment securities available for sale (1,737,890) (4,305,818)
Purchases of investment securities held to maturity (207,313) (724,412)
Purchases of marketable equity securities (306) (287,014)
Proceeds from maturities, calls, and principal repayments of investment securities held to maturity 206,282 14,166
Proceeds from maturities, calls, and principal repayments of investment securities available for sale 1,079,216 572,937
Proceeds from sales of investment securities available for sale 351,984 3,156,988
Proceeds from sales of marketable equity securities 1,111 2,438
Net (increase) decrease in overnight investments (3,241,421) 454,455
Cash paid to FDIC for settlement of shared-loss agreement (16,103) (99,468)
Proceeds from sales of other real estate owned 10,011 5,265
Proceeds from sales of premises and equipment 1,143 0
Purchases of premises and equipment (23,544) (26,930)
Business acquisitions, net of cash acquired 0 (1,235)
Other investing activities (8,009) 0
Net cash used in investing activities (3,968,346) (1,441,295)
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in time deposits (159,035) (310,224)
Net increase in demand and other interest-bearing deposits 4,058,956 1,017,371
Net increase (decrease) in short-term borrowings 39,218 (92,871)
Repayment of long-term obligations (17,973) (38,583)
Origination of long-term obligations 0 745,886
Net proceeds from preferred stock issuance 0 339,958
Repurchase of common stock 0 (156,094)
Cash dividends paid (9,249) (4,256)
Net cash provided by financing activities 3,911,917 1,501,187
Change in cash and due from banks 48,447 77,501
Cash and due from banks at beginning of period 362,048 376,719
Cash and due from banks at end of period $ 410,495 $ 454,220
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid (received) during the period for:
Interest $ 19,935 $ 35,783
Income taxes 11 (592)
Significant noncash investing and financing activities:
Transfers of loans to other real estate 2,374 4,560
Dividends declared but not paid 4,614 4,141
Unsettled call of investment securities 3,000 0
Loans held for sale exchanged for investment securities 63,526 0
Reclassification of portfolio loans to loans held for sale 22,655 1,304
Transfers of premises and equipment to other real estate 4,732 1,427
Premises and equipment acquired through finance leases and other financing arrangements 0 1,191
Unsettled common stock repurchases 0 3,610


	Three Months Ended March 31,
dollars in millions	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	271	$	147
Adjustments to reconcile net income to cash provided by operating activities:
Provision (benefit) for credit losses	464		(11)
Deferred tax (benefit) expense	(61)		9
Depreciation, amortization, and accretion, net	126		34
Stock based compensation expense	12		—
Realized gains on investment securities available for sale, net	—		(9)
Marketable equity securities gains, net	(3)		(16)
Net gain on sales of loans	(8)		(9)
Gain on sales of premises and equipment	(1)		—
Net gains on other real estate owned	(2)		(1)
Gain on acquisition	(431)		—

Gain on extinguishment of debt	(6)		—
Net change in assets held for sale	(183)		(15)
Net change in other assets	365		42
Net change in other liabilities	66		(38)
Other operating activities	(209)		(7)
Net cash provided by operating activities	$	400	$	126
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in loans	$	(295)	$	(404)
Purchases of investment securities available for sale	(810)		(1,738)
Purchases of investment securities held to maturity	—		(207)

Proceeds from maturities of investment securities available for sale	330		1,079
Proceeds from maturities of investment securities held to maturity	283		206
Proceeds from sales of investment securities available for sale	—		352
Proceeds from sales of marketable equity securities	—		1
Net decrease (increase) in interest earning deposits at banks	2,705		(3,241)
Net change in securities purchased under resale agreements	—		—
Proceeds from sales of other real estate owned	11		10
Proceeds from sales of loans	260		—
Proceeds from sales of premises and equipment	19		1
Purchases of premises and equipment	(241)		(25)
Acquisition, net of cash acquired	134		—

Other investing activities	(14)		(24)
Net cash (used in) provided by investing activities	$	2,382	$	(3,990)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in time deposits	$	(833)	$	(159)
Net change in demand and other interest-bearing deposits	1,275		4,059
Net increase in short-term borrowings	27		39
Repayment of long-term borrowings	(3,031)		(18)
Proceeds from issuance of long-term borrowings	1		—


Cash dividends paid	(14)		(9)
Other financing activities	(22)		—
Net cash (used in) provided by financing activities	$	(2,597)	$	3,912

Change in cash and due from banks	185		48
Cash and due from banks at beginning of period	338		362
Cash and due from banks at end of period	$	523	$	410


	Three Months Ended March 31,
dollars in millions	2022		2021
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid (refunded) during the period for:
Interest	$	122	$	20
Income taxes	(1)		—
Significant non-cash investing and financing activities:
Transfers of loans to other real estate	1		2
Transfers of premises and equipment to other real estate	4		5

Dividends declared but not paid	1		5
Transfer of assets from held for investment to held for sale	22		44
Transfer of assets from held for sale to held for investment	1		—
Loans held for sale exchanged for investment securities	38		64
Commitments extended during the period on affordable housing investment credits	—		4
Issuance of common stock as consideration for acquisition	5,279		—
Issuance of common stock for stock based compensation	71		—
Issuance of preferred stock as consideration for acquisition	541		—

See accompanying Notes to the Unaudited Consolidated Financial Statements.

~~Table of Contents~~

~~First Citizens BancShares, Inc. and Subsidiaries~~

Notes to the Unaudited Consolidated Financial Statements

NOTE ~~A -~~1 — ACCOUNTING POLICIES AND BASIS OF PRESENTATION

Nature of Operations

First Citizens BancShares, Inc. ~~(“BancShares”~~(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 and conducts operations through its banking subsidiary, First-Citizens Bank & Trust Company (“~~FCB”~~FCB,” or “the Bank”), which is headquartered in Raleigh, North Carolina. BancShares and its subsidiaries operate over 600 branches and serve 22 states, predominantly located in the Southeast, Mid-Atlantic, Midwest and Western United States (the “U.S.”).

~~General~~

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 should be read in conjunction with the Consolidated Financial Statements and Notes to the Consolidated Financial Statements included in BancShares’ Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021 (the “2021 Form 10-K”).

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 (“PB”), if applicable. Assets held in agency or fiduciary capacity are not included in the consolidated financial statements.

Reclassifications

In certain instances, amounts reported in prior ~~periods’~~years’ consolidated financial statements have been reclassified to conform to the current financial statement presentation. Such reclassifications had no effect on previously reported ~~cash flows, shareholders’~~stockholders’ equity or net income.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions ~~which affect~~impacting the amounts reported. Actual results could differ from those estimates. ~~The estimates~~ BancShares considers ~~significant are~~ the allowance for credit losses ~~“ACL”,~~(“ACL”) to be a significant estimate.

Business Combinations

BancShares accounts for all business combinations using the acquisition method of accounting. Under this method, acquired assets and assumed liabilities are included with the acquirer’s accounts at their estimated fair value ~~measurements,~~as of the date of acquisition, with any excess of purchase price over the fair value of the net assets acquired recognized as either finite lived intangibles or capitalized as goodwill. To the extent the fair value of net assets acquired, including other identifiable assets, exceeds the purchase price, a gain on acquisition is recognized. Acquisition-related and ~~income taxes.~~

~~Share Repurchases~~restructuring costs are recognized as period expenses as incurred.

~~During~~

On January 3, 2022, BancShares completed its previously announced merger (the “CIT Merger”) with CIT Group Inc. (“CIT”), pursuant to an Agreement and Plan of Merger, dated as of October 15, 2020, as amended by Amendment No. 1, dated as of September 30, 2021 (as amended, the “Merger Agreement”). Results as of and for the three months ended March 31, 2022 include activity of the combined entity. See Note 2 — Business Combinations, for additional information.

ACCOUNTING POLICIES

Significant accounting policies are described in the 2021 Form 10-K. We have further described relevant updates to the significant accounting policies presented below.

Reportable Segments

As of December 31, 2021, BancShares managed its business and reported its financial results as a single segment. BancShares began reporting multiple segments during the first quarter of ~~2021,~~2022. BancShares ~~did not repurchase shares of Class A common stock. During~~now has 3 operating segments: General Banking, Commercial Banking, and Rail, and a non-operating segment, Corporate. BancShares conformed the ~~first quarter of~~ ~~2020, BancShares purchased a total of 349,390 shares of Class A common stock for $159.7 million at an average cost per share of $457.10.~~

~~During 2020, share repurchases included 45,000 shares of Class A common stock purchased from Ella Ann Holding, as trustee of her revocable trust. Mrs. Holding is~~comparative prior periods presented to reflect the ~~widow~~new segments. The substantial majority of BancShares’ ~~former Executive Vice Chairman, Frank B. Holding,~~operations for historical periods prior to completion of the CIT Merger are included in the General Banking segment. The Commercial Banking and Rail segments primarily relate to operations acquired in the ~~mother~~CIT Merger. Reportable segments are discussed further in Note 22 — Business Segment Information.

Loans and Leases

Loan Classes

We re-evaluated our loan classes to reflect the characteristics of ~~Frank B. Holding, Jr. and Hope H. Bryant,~~ BancShares’ ~~Chairman and Chief Executive Officer and Vice Chairman, respectively.~~

~~Small Business Administration Paycheck Protection Program~~

portfolio. The changes to the loan classes primarily include: (i) reclassifying Small Business Administration Paycheck Protection Program (“SBA-PPP”) loans into the commercial and industrial class, (ii) identifying a separate loan class for leases, and (iii) purchased credit deteriorated loans (“PCD”) are no longer a separate loan class. The following represent our classes of loans as of March 31, 2022. Prior period disclosures have been conformed to the current presentation.

Commercial Loans and Leases

Commercial Construction - Commercial construction consists of loans to finance land for commercial development of real property and construction of multifamily apartments or other commercial properties. These loans are highly dependent on the supply and demand for commercial real estate as well as the demand for newly constructed residential homes and lots acquired for development. Deterioration in demand could result in decreased collateral values, which could make repayments of outstanding loans difficult for customers.

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

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

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

We provide factoring, receivable management, and ~~Economic Security Act (the “CARES Act”)~~secured financing to businesses (our clients, who are generally manufacturers or importers of goods) that operate in several industries, including apparel, textile, furniture, home furnishings and consumer electronics. Factoring entails the assumption of credit risk with respect to trade accounts receivable arising from the sale of goods by our clients to their customers (generally retailers) that have been factored (i.e., ~~which was passed on March 27, 2020 in response~~sold or assigned to the ~~outbreak~~factor). The most prevalent risk in factoring transactions is customer credit risk, which relates to the financial inability of a ~~novel strain~~customer to pay undisputed factored trade accounts receivable.

Leases – Leases consists of ~~coronavirus (“COVID-19”)~~finance lease arrangements for technology and ~~was supplemented with subsequent legislation. Overseen by the United States (“U.S.”) Treasury Department, the SBA-PPP offers cash-flow assistance to nonprofit~~office equipment and large and small industrial, medical, and transportation equipment.

Consumer Loans

Residential Mortgage- Consumer mortgage consists of loans to purchase, construct, or refinance the borrower’s primary dwelling, secondary residence or vacation home and are often secured by 1-4 family residential properties or undeveloped or partially developed land in anticipation of completing construction of a 1-4 family residential property. Significant and rapid declines in real estate values can result in borrowers having debt levels in excess of the current market value of the collateral. Delays in construction and development projects can cause cost overruns exceeding the borrower’s financial ability to complete the project. Such cost overruns can result in foreclosure of partially completed and unmarketable collateral.

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

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

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

Assets Held for Sale

Assets held for sale primarily consist of residential mortgage loans held for sale of $65 million carried at fair value and commercial loans held for sale of $16 million carried at the lower of the cost or fair market value less disposal costs (“LOCOM”).

Goodwill

BancShares applied the acquisition method of accounting for the CIT Merger. The fair value of the net assets acquired exceeded the purchase price. Consequently, there was a gain on acquisition (and no goodwill) related to the CIT Merger as discussed further in Note 2 — Business Combinations. BancShares had goodwill of $346 million at March 31, 2022 and December 31, 2021. The entire balance of goodwill relates to business ~~employers~~combinations that BancShares completed prior to the CIT Merger. All of the goodwill relates to the General Banking reporting unit. There was no goodwill impairment during the first quarter of 2022. Goodwill and other intangibles are discussed further in Note 7 – Goodwill and Other Intangibles.

Derivative Financial Instruments

BancShares did not have any significant derivative financial instruments prior to completion of the CIT Merger. BancShares has derivative financial instruments at March 31, 2022 as further described in Note 13 — Derivative Financial Instruments. BancShares manages economic risk and exposure to interest rate and foreign currency risk through ~~guaranteed loans~~derivative transactions in over-the-counter markets with other financial institutions. BancShares also offers derivative products to its customers in order for ~~expenses incurred~~them to manage their interest rate and currency risks. BancShares does not enter into derivative financial instruments for speculative purposes.

Derivatives utilized by BancShares may include swaps, forward settlement contracts and options contracts. A swap agreement is a contract between ~~February 15, 2020,~~two parties to exchange cash flows based on specified underlying notional amounts, assets and/or indices. Forward settlement contracts are agreements to buy or sell a quantity of a financial instrument, index, currency or commodity at a predetermined future date, and ~~August 8, 2020. Borrowers~~rate or price. An option contract is an agreement that gives the buyer the right, but not the obligation, to buy or sell an underlying asset from or to another party at a predetermined price or rate over a specific period of time.

BancShares documents, at inception, all relationships between hedging instruments and hedged items, as well as the risk management objectives and strategies for undertaking various hedges. Upon executing a derivative contract, BancShares designates the derivative as either a qualifying hedge or non-qualifying hedge. The designation may change based upon management’s reassessment of circumstances. BancShares does not have any qualifying fair value, cash flow or net investment hedges as of March 31, 2022.

BancShares provides interest rate derivative contracts to support the business requirements of its customers (“customer-related positions”). The derivative contracts include interest rate swap agreements and interest rate cap and floor agreements wherein BancShares acts as a seller of these derivative contracts to its customers. To mitigate the market risk associated with these customer derivatives, BancShares enters into similar offsetting positions with broker-dealers.

BancShares has both bought and sold credit protection in the form of participations in interest rate swaps (risk participations). These risk participations were entered into in the ordinary course of business to facilitate customer credit needs. Swap participations where BancShares has sold credit protection have maturities ranging between 2022 and 2040 and may require BancShares to make payment to the counterparty if the customer fails to make payment on any amounts due to the counterparty upon early termination of the swap transaction.

BancShares uses foreign currency forward contracts, interest rate swaps, and options to hedge interest rate and foreign currency risks arising from its asset and liability mix. These are ~~eligible~~treated as economic hedges.

All derivative instruments are recorded at their respective fair value. BancShares does not offset derivative assets and liabilities and cash collateral under master netting agreements and reports all derivatives on a gross basis in the Consolidated Balance Sheets. Nonqualifying hedges are presented in the Consolidated Balance Sheets in other assets or other liabilities, but with their resulting gains or losses recognized in other noninterest income. For non-qualifying derivatives with periodic interest settlements, BancShares reports such settlements with other changes in fair value in other noninterest income.

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

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

Bank-Owned Life Insurance (“BOLI”)

Banks can purchase life insurance policies on the lives of ~~between eight~~certain officers and ~~24-weeks after the loan is made as long as the borrower retains its~~ employees and ~~their compensation levels. The CARES Act authorized~~are the ~~SBA to temporarily guarantee these loans. The SBA began processing forgiveness payments during~~owner and beneficiary of the ~~fourth quarter~~policies. These policies, known as BOLI, offset the cost of ~~2020.~~

~~The Consolidated Appropriations Act~~providing employee benefits. BancShares had BOLI of $1.3 billion and $116 million at March 31, 2022 and December 31, 2021, ~~was signed into law during~~respectively. BancShares acquired BOLI of $1.2 billion in the ~~fourth quarter of 2020 and contained provisions for a second round of funding of SBA-PPP loans. During the first quarter of 2021,~~CIT Merger. BancShares ~~originated over 9,600 SBA-PPP loans totaling over $1.1 billion.~~

~~Due to the unique nature of these provisions, SBA-PPP loans have been disclosed~~records BOLI as a separate ~~loan class. Origination fees received from~~line item in the ~~SBA are capitalized into~~Consolidated Balance Sheets at each policy’s respective cash surrender value, with changes recorded as other noninterest income in the Consolidated Statements of Income.

Impairment of Operating Lease Equipment

BancShares did not have significant amounts of equipment related to operating leases prior to completion of the CIT Merger. BancShares has operating lease equipment of approximately $8.0 billion, primarily related to the Rail segment, at March 31, 2022. A review for impairment of long-lived assets, such as operating lease equipment, is performed at least annually or when events or changes in circumstances indicate that the carrying amount of long-lived assets may not be recoverable. Impairment of long-lived assets is determined by comparing the ~~loans.~~carrying amount to future undiscounted net cash flows expected to be generated. If a long-lived asset is impaired, the impairment is the amount by which the carrying amount exceeds the fair value of the long-lived asset. Fair value is based upon discounted cash flow analysis and available market data. Current lease rentals, as well as relevant and available market information (including third party sales for similar equipment and published appraisal data), are considered both in determining undiscounted future cash flows when testing for the existence of impairment and in determining estimated fair value in measuring impairment. Depreciation expense is adjusted when the projected fair value is below the projected book value at the end of the depreciable life. Assets to be disposed of are included in assets held for sale in the Consolidated Balance Sheets and are reported at LOCOM.

Stock-Based Compensation

BancShares did not have stock-based compensation awards prior to completion of the CIT Merger. Certain CIT employees received grants of restricted stock unit awards (“CIT RSUs”) or performance stock unit awards (“CIT PSUs”). Upon completion of the CIT Merger and pursuant to the terms of the Merger Agreement, (i) the CIT RSUs and PSUs converted into “BancShares RSUs” based on the 0.062 exchange ratio (the “Exchange Ratio”) and (ii) the BancShares RSUs became subject to the same terms and conditions (including vesting terms, payment timing and rights to receive dividend equivalents) applicable to the CIT RSUs and CIT PSUs, except that vesting for the converted CIT PSUs was no longer subject to any performance goals or metrics. Upon completion of the CIT Merger, the fair value of the BancShares RSUs was determined based on the closing share price of the Parent Company’s Class A Common Stock (the “Class A Common Stock”) on January 3, 2022. The ~~deferred fee income, net~~fair value of ~~origination costs,~~the BancShares RSUs is (i) included in the purchase price consideration for the portion related to employee services provided prior to completion of the CIT Merger and (ii) recognized in expenses for the portion related to employee services to be provided after completion of the CIT Merger. For “graded vesting” awards, each vesting tranche of the award is amortized separately as if each were a separate award. For “cliff vesting” awards, compensation expense is recognized over the ~~life~~requisite service period. BancShares recognizes the effect of forfeitures in compensation expense when they occur. In the event of involuntary termination of employees after the Merger Date, vesting occurs on the employee termination date for BancShares RSUs subject to change in control provisions. Expenses related to stock-based compensation are included in merger-related expenses in the Consolidated Statements of Income. Stock-based compensation is discussed further in Note 21— Employee Benefit Plans.

Members of the ~~loans~~CIT Board of Directors had RSU awards, stock settled annual awards, and deferred stock-settled annual awards (collectively, the “CIT Director Equity Awards”), which vested immediately upon the completion of the CIT Merger. The fair value of the CIT Director Equity Awards was determined based on the Exchange Ratio and the closing share price of the Class A Stock on January 3, 2022 and was included in the purchase price consideration as ~~an adjustment~~discussed further in Note 2 — Business Combinations.

Per Share Data

Earnings per common share is computed by dividing net income available to ~~yield~~common stockholders by the weighted average number of BancShares’ Class A and Class B common shares outstanding during each period. Diluted earnings per common share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding increased by the weighted-average potential impact of dilutive securities. BancShares’ potential dilutive instruments primarily include unvested RSUs assumed in the CIT Merger. The dilutive effect is computed using the ~~effective interest method.~~ treasury stock method, which assumes the conversion of these instruments. However, in periods when there is a net loss, these shares would not be included in the diluted earnings per common share computation as the result would have an anti-dilutive effect. BancShares had no potential dilutive common shares outstanding prior to the CIT Merger and did not report diluted earnings per common share for prior periods.

Defined Benefit Pension Plans and Other Postretirement Benefits

As disclosed in the 2021 Form 10-K, BancShares has both funded and unfunded noncontributory defined benefit pension and postretirement plans covering certain U.S. and non-U.S. employees, each of ~~March 31, 2021, SBA-PPP loans outstanding were $2.8 billion.~~which is designed in accordance with the practices and regulations in the related countries. In conjunction with the CIT Merger, BancShares assumed the funded and unfunded noncontributory defined benefit pension and postretirement plans of CIT. See Note 21 — Employee Benefit Plans, for disclosures related to the plans.

~~Recently Issued~~

Revenue Recognition and Noninterest Income

Descriptions of significant noninterest revenue-generating activities new to BancShares due to the CIT Merger are as follows:

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

Factoring commissions, which are earned in the Commercial Banking segment, are driven by factoring volumes, principally in the retail sectors. We provide factoring to businesses (our clients, who are generally manufacturers or importers of goods) that operate in several industries, including apparel, textile, furniture, home furnishings and consumer electronics. Factoring entails the assumption of credit risk with respect to trade accounts receivable arising from the sale of goods by our clients to their customers (generally retailers) that have been factored (i.e., sold or assigned to the factor). Factoring commissions are charged as a percentage of the invoice amount of the receivables assigned to BancShares. The volume of factoring activity and the commission rates charged impact factoring commission income earned. Factoring commissions are deferred and recognized as income over time based on the underlying terms of the assigned receivables.

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

BOLI income reflects income earned on changes in the cash surrender value of the BOLI.

Other Newly Adopted Accounting ~~Pronouncements~~Standards

~~There were no~~The following pronouncements or Accounting Standards Updates (“ASUs”) were issued ~~during the first quarter of 2021~~ by the Financial Accounting Standards Board (“FASB”) and adopted by BancShares as of January 1, 2022:

ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity - Issued August 2020

The amendments in this ASU reduce the number of models used to account for convertible instruments, amend diluted earnings per share calculations for convertible instruments, amend the requirements for a contract (or embedded derivative) that ~~will~~is potentially settled in an entity’s own shares to be classified in equity, and expand disclosure requirements for convertible instruments. The adoption of this ASU did not have a material impact on BancShares’ consolidated financial ~~statements.~~statements and disclosures as BancShares does not have any convertible instruments within the scope of this ASU.

ASU 2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options - Issued May 2021

The amendments in this ASU clarifies an issuer's accounting for certain modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The ASU requires that such modifications or exchanges be treated as an exchange of the original instrument for a new instrument. An issuer should measure the effect of such modifications or exchanges based on analysis of the difference between the fair value of the modified instrument and the fair value of that instrument immediately before modification or exchange. Recognition of a modification or an exchange of a freestanding equity-classified written call option is then based upon the substance of the transaction. The adoption of this ASU did not have a material impact on BancShares’ consolidated financial statements and disclosures as BancShares currently does not have any freestanding equity-classified written call options within the scope of this ASU.

ASU 2021-05, Leases, (Topic 842), Lessors - Certain Leases with Variable Lease Payments - Issued July 2021

The amendments in this ASU improve lessor accounting for certain leases with variable lease payments so that lessors are no longer required to recognize a day-one selling loss upon lease commencement when specified criteria are met. Specifically, this ASU requires a lessor to classify a lease with variable payments that do not depend on a reference index or a rate as an operating lease if classifying the lease as a sales-type lease or a direct financing lease would result in the recognition of a day-one selling loss at lease commencement. A day-one selling loss is not recognized under operating lease accounting. The adoption of this ASU did not have a material impact on BancShares’ consolidated financial statements and disclosures as BancShares has not originated finance leases which required a day-one selling loss at lease commencement.

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~~Table of Contents~~

NOTE ~~B -~~2 — BUSINESS COMBINATIONS

~~Recently Announced Business Combinations~~

CIT Group Inc.

~~On October 15, 2020,~~ BancShares ~~and~~completed the CIT ~~Group Inc., a Delaware corporation (“CIT”), entered into an Agreement and Plan of~~ Merger on January 3, 2022 (the “Merger Agreement”) by and among BancShares, FCB, FC Merger Subsidiary IX, Inc., a direct, wholly owned subsidiary of FCB (“Merger Sub”), and CIT, the parent company of CIT Bank, N.A., a national banking association (“CIT Bank”Date”). Pursuant to the ~~terms and subject to the conditions set forth in the~~ Merger Agreement, Merger Sub will merge with and into CIT, with CIT as the surviving entity (the “First-Step Merger”), and as soon as reasonably practicable following the effective time of the First-Step Merger, CIT will merge with and into FCB, with FCB as the surviving entity (together with the First-Step Merger, the “Mergers”). The Merger Agreement further provides that immediately following the consummation of the Mergers, CIT Bank will merge with and into FCB, with FCB as the surviving bank (together with the Mergers, the “Transaction”).

The Merger Agreement was unanimously approved by the Board of Directors of each of BancShares and CIT. The Transaction was approved by the North Carolina Commissioner of Banks on February 5, 2021, as well as the shareholders of both companies on February 9, 2021. The parties are continuing to work with other regulators on remaining approvals and anticipate closing in mid-2021 subject to regulatory approval and the satisfaction of customary closing conditions.

~~Upon the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the First-Step Merger (the “Effective Time”),~~ each share of CIT common stock, par value $0.01 per share ~~issued and outstanding immediately prior to the Effective Time~~ (“CIT Common Stock”), issued and outstanding, except for certain shares of CIT Common Stock owned by CIT or BancShares, ~~will be~~was converted into the right to receive ~~0.06200~~0.062 shares of ~~BancShares~~ Class A ~~common stock,~~Common Stock, par value $1.00 per ~~share. Holders of CIT Common Stock will receive~~share, plus, cash in lieu of fractional ~~shares.~~shares of Class A Common Stock. The Parent Company issued approximately 6.1 million shares of its Class A Common Stock in connection with the consummation of the CIT Merger. The closing share price of Class A Common Stock on the Nasdaq Global Select Market was $859.76 on January 3, 2022. The purchase price consideration related to the issuance of Class A Common Stock was $5.3 billion. There were approximately 8,800 fractional shares for which the Parent Company paid cash of $7 million.

~~In addition, at~~

Pursuant to the ~~Effective Time,~~terms of the Merger Agreement, each issued and outstanding share of ~~Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series~~fixed-to-floating rate non-cumulative perpetual preferred stock, series A, par value $0.01 per share, of CIT (“CIT Series A Preferred Stock”) and each issued and outstanding share of 5.625% ~~Non-Cumulative Perpetual Preferred Stock, Series~~non-cumulative perpetual preferred stock, series B, par value $0.01 per share, of CIT ~~issued~~(“CIT Series B Preferred Stock” and ~~outstanding will automatically be~~together with CIT Series A Preferred Stock, “CIT Preferred Stock”), converted into the right to receive 1 share of a newly created series of preferred stock, series B, of the Parent Company (“BancShares Series B ~~of BancShares~~Preferred Stock”) and 1 share of a newly created series of preferred stock, series C, of the Parent Company (“BancShares Series C Preferred Stock” and together with the BancShares Series B Preferred Stock, the “New BancShares Preferred Stock”), respectively, having such rights, preferences, privileges and voting powers, and limitations and restrictions, taken as a whole, that are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers, and limitations and restrictions, taken as a whole, of the CIT Series A Preferred Stock and the CIT Series B Preferred Stock, respectively. The non-callable period for the New BancShares Preferred Stock is January 4, 2027, which is five years from the original issuance date of the New BancShares Preferred Stock. There are 325,000 shares of BancShares ~~respectively.~~Series B Preferred Stock with a liquidation preference of $1,000 per share, resulting in a total liquidation preference of $325 million. There are 8 million shares of BancShares Series C Preferred Stock with a liquidation preference of $25 per share, resulting in a total liquidation preference of $200 million. The New BancShares Preferred Stock qualifies as Tier 1 capital. The purchase price consideration related to the fair value of the New BancShares Preferred Stock was $541 million.

CIT RSUs and PSUs converted to BancShares RSUs and CIT Director Awards and immediately vested upon completion of the CIT Merger as further described in the “Stock-Based Compensation” discussion in Note 1 — Accounting Policies and Basis of Presentation. The aggregate purchase price consideration related to these compensation awards was $81 million.

The CIT Merger ~~Agreement requires that, effective~~has been accounted for as a business combination under the acquisition method of accounting. Accordingly, the assets acquired and liabilities assumed were recorded at their estimated fair values based on initial valuations as of January 3, 2022. The determination of estimated fair values required management to make certain estimates about discount rates, future expected cash flows, market conditions at the ~~Effective Time, the Boards of Directors~~time of the ~~combined company~~merger and other future events that are highly subjective in nature and may require adjustments.

As of March 31, 2022, the ~~combined bank will consist of 14 directors, (i) 11 of whom will be members~~fair value measurements remain preliminary due to the timing of the ~~current Board of Directors of~~Merger Date and BancShares’ Quarterly Report on Form 10-Q. While BancShares ~~and (ii)~~believes that the information available on January 3, ~~of whom will be selected from among~~2022 provided a reasonable basis for estimating fair value, BancShares continues to review information relating to events or circumstances existing at the current Board of Directors of CIT and will include as 1 of those 3 Ellen R. Alemany, Chairwoman and Chief Executive Officer of CIT. BancShares intends to appoint Michael A. Carpenter and Vice Admiral John R. Ryan, USN (Ret.), as the two other members from CIT’s current Board of Directors who will join the Boards of DirectorsMerger Date. Purchase accounting could change until management finalizes its analysis of the ~~combined company~~acquired assets and assumed liabilities, up to one year from the ~~combined bank .~~Merger Date. Management anticipates that this review could result in adjustments to the Merger Date valuation amounts presented herein.

916

The following table provides a preliminary purchase price allocation to the identifiable assets acquired and liabilities assumed at their estimated fair values as of the Merger Date:

Purchase Price Consideration and Net Assets Acquired


dollars in millions, except shares issued and price per share	Purchase Price Allocation
Common share consideration
Shares of Class A Common Stock issued	6,140,010
Price per share on January 3, 2022	$	859.76
Consideration for common stock	5,279
Fair value consideration for preferred stock	541
Consideration for stock-based compensation	81
Cash in lieu of fractional shares and other consideration paid	51
Purchase price consideration	$	5,952
Assets
Cash and interest-earning deposits at banks	3,060
Investment securities	6,561
Assets held for sale	59
Loans and leases	32,714
Operating lease equipment	7,838
Bank-owned life insurance	1,202
Intangible assets	143
Other assets	2,198
Total assets acquired	$	53,775
Liabilities
Deposits	39,428
Borrowings	4,536
Credit balances of factoring clients	1,534
Other liabilities	1,894
Total liabilities assumed	$	47,392
Fair value of net assets acquired	6,383
Preliminary gain on acquisition	$	431

BancShares recorded a preliminary gain on acquisition of $431 million in noninterest income, representing the excess of the fair value of net assets acquired over the purchase price. The preliminary gain on acquisition is not taxable.

The following is a description of the methods used to determine the estimated fair values of significant assets acquired and liabilities assumed as presented above.

Cash and interest-bearing deposits

For financial instruments with a short-term or no stated maturity, prevailing market rates and limited credit risk, carrying amounts approximate fair value.

Investment securities

Fair values for investment securities were based on quoted market prices, where available. If quoted market prices were not available, fair value estimates were based on observable inputs including quoted market prices for similar instruments, quoted market prices that are not in an active market or other inputs that are observable in the market. In the absence of observable inputs, fair value was estimated based on pricing models and/or discounted cash flows methodologies.

Loans held for sale and portfolio loans

Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, fixed or variable interest rate, remaining term, credit quality ratings or scores, amortization status and current discount rate. Selected larger, impaired loans were specifically reviewed to evaluate credit risk. Loans with similar risk characteristics were pooled together when applying various valuation techniques. The discount rates used for loans were based on an evaluation of current market rates for new originations of comparable loans and required rates of return for market participants to purchase similar assets, including adjustments for liquidity and credit quality when necessary.

Purchased loans and leases which reflect a more than insignificant credit deterioration since origination as of the date of acquisition are classified as PCD loans and leases. PCD loans and leases are recorded at acquisition-date amortized cost, which is the purchase price or fair value in a business combination, plus BancShares' initial ACL which results in a gross up of the loan balance (the “PCD Gross-Up”). The difference between the unpaid principal balance (“UPB”) and the acquisition date amortized cost resulting from the PCD Gross-Up is amortized or accreted to interest income over the contractual life of the loan using the effective interest method.

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

The following table presents the UPB and fair value of the loans and leases acquired by BancShares in the CIT Merger. The UPB for PCD loans and leases includes the PCD Gross-Up of $284 million as discussed further in Note 4 — Loans and Leases.

Loans Acquired


	Loans and Leases
dollars in millions	UPB		Fair Value

Non-PCD loans and leases	$	29,542	$	29,481
PCD loans and leases	3,562		3,233
Total loans and leases	$	33,104	$	32,714

Operating Lease Equipment

Operating lease equipment were comprised of two sub-groups: rail and non-rail equipment. Fair values for both were based on the cost approach where market values were not available. The sales approach was used to value rail assets where market information was available, or when replacement cost less depreciation was lower than the current market value. An intangible liability was recorded for net above and below market lease contracts, for which fair value was estimated using the income approach and contemplated market lease rates and other key inputs.

A discount was recorded for net operating lease equipment, which includes railcars and locomotives and other equipment, to reduce it to fair value. This adjustment will reduce depreciation expense over the remaining useful lives of the equipment on a straight line basis. These adjustments (net) will be amortized, thereby increasing rental income (a component of noninterest income) over the remaining lives of the lease agreements on a straight line basis.

Bank Owned Life Insurance

The fair values of BOLI policies were determined by the policy administrator and calculated based on the net present value of investment cash flows. Expected premium payments, death benefits and expected mortality were considered in the net present value calculation. Based upon the administrator’s analysis and management’s review of the analysis, fair value was determined to equate to book value as of the merger date.

Intangible assets

The following table presents the intangible asset recorded in conjunction with the CIT Merger related to the valuation of core deposits:

Intangible Assets

dollars in millions

Fair Value

Estimated Useful Life

Amortization Method

Core deposit intangibles

$143

10 years

Straight-line

Certain core deposits were acquired as part of the CIT Merger, which provide an additional source of funds for BancShares. The core deposit intangibles represent the costs saved by BancShares by acquiring the core deposits rather than sourcing the funds elsewhere. This intangible was valued using the income approach, after-tax cost savings method. This method estimates the fair value by discounting to present value the favorable funding spread attributable to the core deposit balances over their estimated average remaining life. The favorable funding spread is calculated as the difference in the alternative cost of funds and the net deposit cost. Refer to Note 7 — Goodwill and Other Intangibles for further discussion.

Other assets

The following table details other assets acquired:

Other Assets


dollars in millions	Fair Value
Low-income housing tax credit and other equity method investments	$	777
Right of use assets	327
Premises and equipment	230
Fair value of derivative financial instruments	209
Counterparty receivables	133
Other	522
Total other assets	$	2,198

The fair values of the tax credit investments considered the ongoing equity installments that are regularly allocated to each of the underlying tax credit funds comprising the low income housing tax credits investments, along with changes to projected tax benefits and the impact this has on future capital contributions, and an appropriately determined discount rate. The fair value of the investments in unconsolidated entities was valued using the income approach.

The right of use asset associated with real estate operating leases were measured at the same amount as the lease liability as adjusted to reflect favorable or unfavorable terms of the lease when compared with market terms. The lease liability was measured at the present value of the remaining lease payments, as if the acquired lease were a new lease of the acquirer at the acquisition date and using BancShares incremental borrowing rate. The lease term was determined for individual leases based on management’s assessment of the probability of exercising the existing renewal, termination and/or purchase option.

Fair values for property, including leasehold improvements, furniture and fixtures, computer software and other digital equipment were determined using the cost approach. Certain tangible assets, that are expected to be sold in the short term were reported at net book, while real estate property such as land and buildings was valued using the sales comparison approach, where sales of comparable properties are adjusted for differences to estimate the value of each subject property.

The fair values of the derivative financial instruments, as well as counterparty receivables, were valued using prices of financial instruments with similar characteristics and observable inputs.

Deposits

The fair values for time deposits were estimated using a discounted cash flow analysis whereby the contractual remaining cash flows were discounted using market rates currently being offered for time deposits of similar maturities. For transactional deposits, carrying amounts approximate fair value.

Borrowings

In connection with the CIT Merger, BancShares assumed the outstanding borrowings of CIT. The fair values of borrowing were estimated based on readily observable prices using reliable market sources.

Credit balances of Factoring Clients

Credit balance amounts represent short-term payables that are tied to the factoring receivables. Due to the short-term nature of these payables and given that amounts are settled at book value, it was determined that the carrying value is equivalent to fair value.

Other Liabilities

Other liabilities include items such as accounts payable and accrued liabilities, lease liabilities, current and deferred taxes, commitments to fund tax credit investments and other miscellaneous liabilities. The fair value of lease liabilities was measured using the present value of remaining lease payments, using BancShares’ discount rate at the merger date. The fair value of the remaining liabilities was determined to approximate book value. For all accrued liabilities and accounts payable, it was determined that the carrying value equals book value.

Unaudited Pro Forma Information

The amount of interest income, noninterest income and net income of $351 million, $297 million and $330 million, respectively, attributable to the acquisition of CIT were included in BancShares’ Consolidated Statement of Income for the three months ended March 31, 2022. CIT’s interest income, noninterest income and net income noted above reflect management’s best estimates, based on information available at the reporting date.

The following table presents certain unaudited pro forma financial information for illustrative purposes only, for the three months ended March 31, 2022 and 2021 as if CIT had been acquired on January 1, 2021. The unaudited estimated pro forma information combines the historical results of CIT with the BancShares’ consolidated historical results and includes certain adjustments for the respective periods. The following key adjustments were made to reflect the pro forma results as if the CIT Merger was completed on January 1, 2021: (i) provision for credit losses of $513 million related to the Non-PCD loans and leases and unfunded commitments; (ii) merger and integration costs of $135 million; (iii) estimated purchase accounting adjustment (“PAA”) accretion and amortization related to fair value adjustments and intangibles associated with the CIT Merger; and (iv) $431 million preliminary gain on acquisition. BancShares expects to achieve operating cost savings and other business synergies as a result of the acquisition that are not reflected in the pro forma amounts that follow. The pro forma information should not be relied upon as being indicative of the historical results of operations that would have occurred had the acquisition taken place on January 1, 2021. Actual results may differ from the unaudited pro forma information presented below and the differences could be significant.

Selected Unaudited Pro Forma Financial Information for Consolidated BancShares


	Three months ended March 31,
dollars in millions	2022		2021
Interest income	$	710	$	726
Noninterest income	418		1,001
Net income	335		417

~~Table of Contents~~

NOTE ~~C - INVESTMENTS~~3 — INVESTMENT SECURITIES

The following tables as of March 31, 2022 include the investment security balances acquired in the CIT Merger, which were recorded at fair value on the acquisition date. The amortized cost and fair value of investment securities at March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, were as follows:

March 31, 2021
(Dollars in thousands) Amortized cost Gross
unrealized
gains Gross unrealized
losses Fair
value
Investment securities available for sale
Government agency $ 852,305 $ 784 $ 6,403 $ 846,686
Residential mortgage-backed securities 4,736,893 47,742 26,046 4,758,589
Commercial mortgage-backed securities 1,096,259 14,619 11,891 1,098,987
Corporate bonds 585,095 18,313 548 602,860
Total investment securities available for sale $ 7,270,552 $ 81,458 $ 44,888 $ 7,307,122
Investment in marketable equity securities 84,297 22,872 283 106,886
Investment securities held to maturity
Residential mortgage-backed securities 1,740,314 5,191 20,510 1,724,995
Commercial mortgage-backed securities 1,065,778 13 17,811 1,047,980
Other 2,007 0 0 2,007
Total investment securities held to maturity 2,808,099 5,204 38,321 2,774,982
Total investment securities $ 10,162,948 $ 109,534 $ 83,492 $ 10,188,990
December 31, 2020
(Dollars in thousands) Amortized cost Gross
unrealized
gains Gross unrealized
losses Fair
value
Investment securities available for sale
U.S. Treasury $ 499,832 $ 101 $ 0 $ 499,933
Government agency 706,241 723 5,573 701,391
Residential mortgage-backed securities 4,369,130 70,283 1,310 4,438,103
Commercial mortgage-backed securities 745,892 25,645 0 771,537
Corporate bonds 590,870 14,437 2,028 603,279
Total investment securities available for sale $ 6,911,965 $ 111,189 $ 8,911 $ 7,014,243
Investment in marketable equity securities 84,837 8,654 1,811 91,680
Investment securities held to maturity
Residential mortgage-backed securities 1,877,692 17,689 0 1,895,381
Commercial mortgage-backed securities 937,034 3,884 56 940,862
Other 2,256 0 0 2,256
Total investment securities held to maturity 2,816,982 21,573 56 2,838,499
Total investment securities $ 9,813,784 $ 141,416 $ 10,778 $ 9,944,422

On November 1, 2020, mortgage-backed securities with an amortized cost of $1.46 billion were transferred from investment securities available for sale to the held to maturity portfolio. At the time of transfer, the mortgage-backed securities had a fair value of $1.47 billionAmortized Cost and a weighted average contractual maturity of 18 years. The unrealized gain on these securities at the date of transfer was $5.9 million, or $4.5 million net of tax, and was reported as a component of AOCI. This unrealized gain is accreted over the remaining expected life of the securities as an adjustment of yield.Fair Value - Debt Securities


	March 31, 2022
dollars in millions	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair value
Investment securities available for sale
U.S. Treasury	$	2,014	$	—	$	(83)	$	1,931
Government agency	206		1		(1)		206
Residential mortgage-backed securities	5,340		—		(288)		5,052
Commercial mortgage-backed securities	1,584		2		(66)		1,520
Corporate bonds	582		8		(4)		586

Total investment securities available for sale	$	9,726	$	11	$	(442)	$	9,295
Investment in marketable equity securities	$	73	$	27	$	—	$	100
Investment securities held to maturity
U.S. Treasury	$	471	$	—	$	(24)	$	447
Government agency	1,541		—		(78)		1,463
Residential mortgage-backed securities	4,776		—		(315)		4,461
Commercial mortgage-backed securities	2,988		—		(183)		2,805
Supranational securities	294		—		(17)		277
Other	4		—		—		4
Total investment securities held to maturity	$	10,074	$	—	$	(617)	$	9,457
Total investment securities	$	19,873	$	38	$	(1,059)	$	18,852

	December 31, 2021
dollars in millions	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair value
Investment securities available for sale
U.S. Treasury	$	2,007	$	—	$	(2)	$	2,005
Government agency	221		1		(1)		221
Residential mortgage-backed securities	4,757		8		(36)		4,729
Commercial mortgage-backed securities	1,648		9		(17)		1,640
Corporate bonds	582		27		(1)		608
State, county and municipal	—		—		—		—
Total investment securities available for sale	$	9,215	$	45	$	(57)	$	9,203
Investment in marketable equity securities	$	73	$	25	$	—	$	98
Investment securities held to maturity
Residential mortgage-backed securities	$	2,322	$	6	$	(22)	$	2,306
Commercial mortgage-backed securities	1,485		—		(34)		1,451
Other	2		—		—		2
Total investment securities held to maturity	$	3,809	$	6	$	(56)	$	3,759
Total investment securities	$	13,097	$	76	$	(113)	$	13,060

Investments in ~~residential and commercial~~ mortgage-backed securities represent securities issued by the Government National Mortgage Association, Federal National Mortgage Association and Federal Home Loan Mortgage Corporation. US Treasury investments represents T-bills and Notes issued by the US Treasury. Investments in government agency securities represent securities issued by the ~~United States~~ Small Business ~~Administration.~~Association (“SBA”), Federal Home Loan Bank (“FHLB”) and other agencies. Investments in supranational securities represent securities issued by the World Bank. Investments in corporate bonds ~~and~~represent positions in debt securities of other financial institutions. Investments in marketable equity securities represent positions in ~~securities~~common stock of ~~other~~publicly traded financial institutions. Other held to maturity investments include certificates of deposit with other financial institutions.

BancShares also holds approximately 354,000 shares of Class B common stock of Visa, Inc. (“Visa”). Until the resolution of certain litigation, at which time the Visa Class B common stock ~~which~~will convert to publicly traded Visa Class A common stock, these shares are only transferable to other stockholders of Visa 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 rate for shares of Visa Class B common stock into shares of Visa Class A common stock, these shares are not considered to have a readily determinable fair value and ~~are recorded~~have no carrying value. BancShares continues to monitor the trading activity in Visa Class B common stock and the status of the resolution of certain litigation matters at ~~$0. BancShares held FHLB~~Visa that would trigger the conversion of the Visa Class B common stock ~~of $40.6 million~~ ~~and~~ ~~$45.4 million~~ ~~and other non-marketable equity securities of~~ ~~$11.4 million~~ ~~and~~ ~~$11.6 millionat March 31, 2021 and December 31, 2020, respectively. These securities are recorded at cost within other assets.~~into Visa Class A common stock.

~~Table of Contents~~

As of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, no ACL was required for available for sale ~~and~~or held to maturity debt securities. Accrued interest receivables for available for sale and held to maturity debt securities were excluded from the estimate for credit losses. At March 31, ~~2021,~~2022, accrued interest ~~receivables~~receivable for available for sale and held to maturity debt securities were ~~$21.3~~$26 million and ~~$5.3~~$16 million, respectively. At December 31, ~~2020,~~2021, accrued interest ~~receivables~~receivable for available for sale and held to maturity debt securities were ~~$17.6~~$22 million and ~~$5.4~~$7 million, respectively. During the three months ended March 31, 2022 and 2021, ~~and 2020, 0~~no accrued interest was deemed uncollectible and written off against interest income.

The following table provides the amortized cost and fair value by contractual ~~maturity for investment securities available for sale and held to~~ maturity. Expected maturities will differ from contractual maturities on certain securities because ~~issuers~~borrowers and ~~borrowers of underlying collateral~~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.

March 31, 2021 December 31, 2020
(Dollars in thousands) Amortized cost Fair
value Amortized cost Fair
value
Investment securities available for sale
Non-amortizing securities maturing in:
One year or less $ 1,020 $ 1,021 $ 500,846 $ 500,954
One through five years 72,340 74,536 72,565 73,881
Five through 10 years 502,757 517,922 508,320 519,570
Over 10 years 8,978 9,381 8,971 8,807
Government agency 852,305 846,686 706,241 701,391
Residential mortgage-backed securities 4,736,893 4,758,589 4,369,130 4,438,103
Commercial mortgage-backed securities 1,096,259 1,098,987 745,892 771,537
Total investment securities available for sale $ 7,270,552 $ 7,307,122 $ 6,911,965 $ 7,014,243
Investment securities held to maturity
Non-amortizing securities maturing in:
One year or less 998 998 1,507 1,507
One through five years 1,009 1,009 749 749
Residential mortgage-backed securities 1,740,314 1,724,995 1,877,692 1,895,381
Commercial mortgage-backed securities 1,065,778 1,047,980 937,034 940,862
Total investment securities held to maturity $ 2,808,099 $ 2,774,982 $ 2,816,982 $ 2,838,499

Maturities - Debt Securities


	March 31, 2022				December 31, 2021
dollars in millions	Cost		Fair value		Cost		Fair value
Investment securities available for sale
Non-amortizing securities maturing in:
One year or less	$	9	$	9	$	—	$	—
After one through five years	2,055		1,972		2,049		2,048
After five through 10 years	515		520		523		548
After 10 years	17		16		17		17

Government agency	206		206		221		221
Residential mortgage-backed securities	5,340		5,052		4,757		4,729
Commercial mortgage-backed securities	1,584		1,520		1,648		1,640
Total investment securities available for sale	$	9,726	$	9,295	$	9,215	$	9,203
Investment securities held to maturity
Non-amortizing securities maturing in:
One year or less	$	4	$	4	$	2	$	2
After one through five years	873		836		—		—
After five through 10 years	1,433		1,351		—		—


Residential mortgage-backed securities	4,776		4,461		2,322		2,306
Commercial mortgage-backed securities	2,988		2,805		1,485		1,451


Total investment securities held to maturity	$	10,074	$	9,457	$	3,809	$	3,759

The following table presents interest and dividend income on investments and other interest-bearing assets:

Other Interest and Dividend Income


	Three months ended March 31,
dollars in millions	2022		2021
Interest income - taxable debt securities	$	83	$	30

Interest income - interest-bearing cash	5		1

Dividend income - marketable equity securities	1		1
Total other interest and dividend income	$	89	$	32

The following table provides the gross realized gains and losses on the sales of investment securities available for ~~sale for the three months ended March 31, 2021 and 2020:~~sale:

Three months ended March 31
(Dollars in thousands) 2021 2020
Gross realized gains on sales of investment securities available for sale $ 9,207 $ 20,474
Gross realized losses on sales of investment securities available for sale 0 (679)
Net realized gains on sales of investment securities available for sale $ 9,207 $ 19,795

Realized Gains on Debt Securities Available For Sale


	Three months ended March 31,
dollars in millions	2022		2021
Gross realized gains on sales of investment securities available for sale	$	—	$	9
Gross realized losses on sales of investment securities available for sale	—		—
Net realized gains on sales of investment securities available for sale	$	—	$	9

The following table provides the realized and unrealized gains and losses on marketable equity ~~securities for the three months ended March 31, 2021~~securities:

Realized and ~~2020:~~Unrealized Gains on Marketable Equity Securities

Three months ended March 31
(Dollars in thousands) 2021 2020
Marketable equity securities gains (losses), net $ 16,011 $ (51,408)
Less net gains recognized on marketable equity securities sold 263 323
Unrealized gains (losses) recognized on marketable equity securities held $ 15,748 $ (51,731)


	Three months ended March 31,
dollars in millions	2022		2021
Marketable equity securities gains, net	$	3	$	16

Unrealized gains recognized on marketable equity securities held for sale	$	3	$	16

~~Table of Contents~~

The following table provides information regarding investment securities available for sale with unrealized losses ~~as of March 31, 2021 and December 31, 2020:~~for which an ACL has not been recorded:

March 31, 2021
Less than 12 months 12 months or more Total
(Dollars in thousands) Fair
value Unrealized
losses Fair
value Unrealized
losses Fair
value Unrealized
losses
Investment securities available for sale
Government agency $ 331,034 $ 3,501 $ 415,379 $ 2,902 $ 746,413 $ 6,403
Residential mortgage-backed securities 2,345,301 26,001 12,495 45 2,357,796 26,046
Commercial mortgage-backed securities 685,575 11,891 0 0 685,575 11,891
Corporate bonds 8,394 14 26,183 534 34,577 548
Total $ 3,370,304 $ 41,407 $ 454,057 $ 3,481 $ 3,824,361 $ 44,888
December 31, 2020
Less than 12 months 12 months or more Total
(Dollars in thousands) Fair
value Unrealized
losses Fair
value Unrealized
losses Fair
value Unrealized
losses
Investment securities available for sale
Government agency $ 268,622 $ 3,197 $ 328,777 $ 2,376 $ 597,399 $ 5,573
Residential mortgage-backed securities 433,816 1,241 23,064 69 456,880 1,310
Corporate bonds 57,715 2,028 0 0 57,715 2,028
Total $ 760,153 $ 6,466 $ 351,841 $ 2,445 $ 1,111,994 $ 8,911

Gross Unrealized Losses on Debt Securities Available For Sale


	March 31, 2022
	Less than 12 months				12 months or more				Total
dollars in millions	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
Investment securities available for sale
U.S. Treasury	$	1,931	$	(83)	$	—	$	—	$	1,931	$	(83)
Government agency	21		—		74		(1)		95		(1)
Residential mortgage-backed securities	4,247		(239)		670		(49)		4,917		(288)
Commercial mortgage-backed securities	744		(42)		485		(24)		1,229		(66)
Corporate bonds	187		(4)		—		—		187		(4)
Total	$	7,130	$	(368)	$	1,229	$	(74)	$	8,359	$	(442)

	December 31, 2021
	Less than 12 months				12 months or more				Total
dollars in millions	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
Investment securities available for sale
U.S. Treasury	$	1,811	$	(2)	$	—	$	—	$	1,811	$	(2)
Government agency	17		—		79		(1)		96		(1)
Residential mortgage-backed securities	3,992		(36)		1		—		3,993		(36)
Commercial mortgage-backed securities	852		(15)		111		(2)		963		(17)
Corporate bonds	52		(1)		—		—		52		(1)
Total	$	6,724	$	(54)	$	191	$	(3)	$	6,915	$	(57)

As of March 31, ~~2021,~~2022, there were 6055 investment securities available for sale with continuous losses for more than 12 months, of which 54all were government sponsored enterprise-issued mortgage-backed securities or government agency ~~securities and 6 were corporate bonds.~~securities.

~~NaN~~

None of the unrealized losses identified as of March 31, ~~2021,~~2022, or December 31, ~~2020,~~2021, relate to the issuer’s ability to honor redemption obligations. Rather, the unrealized losses relate to changes in interest rates relative to when the investment securities were purchased, and do not indicate credit-related impairment. BancShares considered other factors including changes in credit ratings, delinquencies, and other macroeconomic factors in this determination. As a result, ~~NaN~~none of the securities were deemed to require an ~~allowance for credit losses.~~ACL. BancShares has the ability and intent to retain these securities for a period of time sufficient to recover all unrealized losses.

Investment securities having an aggregate carrying value of ~~$4.8~~$5.9 billion at March 31, ~~2021,~~2022, and ~~$4.6~~$5.7 billion at December 31, ~~2020,~~2021, were pledged as collateral to secure public funds on deposit and certain short-term borrowings, and for other purposes as required by law.

BancShares’ portfolio of held to maturity debt securities consists of mortgage-backed securities issued by government agencies and government sponsored ~~entities.~~entities, US Treasury notes, unsecured bonds issued by government agencies and government sponsored entities, securities issued by the World Bank and Federal Deposit Insurance Corporation (“FDIC”) guaranteed CDs with other financial institutions. Given the consistently strong credit rating of the U.S. Treasury, the World Bank and the long history of no credit losses on debt securities issued by government agencies and government sponsored entities, no ~~further credit monitoring is performed~~ACL has been recorded on these ~~portfolios. Should~~securities. In the event there beare downgrades to the credit rating of the U.S. Treasury or the World Bank or losses reported on securities issued by government agencies and government sponsored entities, BancShares will reevaluate its determination of zero expected credit losses on held to maturity debt securities.

~~There were 0 debt securities held to maturity on nonaccrual status as of March 31, 2021.~~

A security is considered past due once it is 30 days contractually past due under the terms of the agreement. ~~There were 0~~The carrying value was zero for securities past due as of March 31, 2022 and December 31, 2021.

There were no debt securities held to maturity on non-accrual status as of March 31, 2022 and December 31, 2021.

Certain investments held by BancShares were recorded in other assets. BancShares held FHLB stock of $39 million and $40 million at March 31, 2022 and December 31, 2021, respectively; these securities are recorded at cost. BancShares held $67 million and $10 million of non-marketable securities without readily determinable fair values measured under the measurement exception at March 31, 2022 and December 31, 2021, respectively. All investments held in qualified affordable housing projects qualify for the proportional amortization method and totaled $533 million and $156 million at March 31, 2022 and December 31, 2021, respectively.

1224

~~Table of Contents~~

NOTE ~~D -~~4 — LOANS AND LEASES

BancShares’ accounting methods for loans and leases depends on whether they are originated or purchased, and if purchased, whether or not the loans reflect more than insignificant credit deterioration since origination, which is determined

The following tables as of March 31, 2022 include loan and lease balances acquired in the acquisition date. Non purchased credit deteriorated (“PCD”) loans consist of loans originated by BancShares and loans purchased from other institutions, that do not reflect more than insignificant credit deterioration at acquisition. Purchased loansCIT Merger, which ~~reflect more than insignificant credit deterioration are classified as PCD and reported as a single loan segment or class. At the date of acquisition, all acquired loans are~~were recorded at fair ~~value.~~value on the Merger Date. Refer to Note 2 — Business Combinations for further information. Refer to Note 1 — Accounting Policies and Basis of Presentation for updates to our accounting policies related to loans.

~~Loans and leases outstanding~~

Unless otherwise noted, loans held for sale are not included in the following ~~at March 31, 2021 and December 31, 2020:~~tables. Leases in the following tables include finance leases, but exclude operating lease equipment.

(Dollars in thousands) March 31, 2021 December 31, 2020
Commercial:
Construction and land development $ 1,022,087 $ 985,424
Owner occupied commercial mortgage 11,340,966 11,165,012
Non-owner occupied commercial mortgage 3,017,898 2,987,689
Commercial and industrial and leases 4,946,445 5,013,644
SBA-PPP 2,769,906 2,406,291
Total commercial loans 23,097,302 22,558,060
Consumer:
Residential mortgage 5,566,026 5,561,686
Revolving mortgage 1,938,422 2,052,854
Construction and land development 336,065 348,123
Consumer auto 1,271,586 1,255,402
Consumer other 538,677 552,968
Total consumer loans 9,650,776 9,771,033
PCD loans 432,773 462,882
Total loans and leases $ 33,180,851 $ 32,791,975

Loans by Class


dollars in millions	March 31, 2022		December 31, 2021
Commercial
Commercial construction	$	2,633	$	1,238
Owner occupied commercial mortgage	13,553		12,099
Non-owner occupied commercial mortgage	9,293		3,041
Commercial and industrial	22,402		5,937
Leases	2,220		271
Total commercial	50,101		22,586
Consumer
Residential mortgage	11,711		6,088
Revolving mortgage	1,840		1,818
Consumer auto	1,320		1,332
Consumer other	552		548
Total consumer	15,423		9,786
Total loans and leases	$	65,524	$	32,372

At March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, accrued interest receivable on loans included in other assets was ~~$103.2~~$135 million and ~~$107.7~~$87 million, respectively, and was excluded from the estimate of credit losses.

Certain residential real estate loans are originated to be sold to investors and are recorded in loans held for sale at fair value. In addition, BancShares may change its strategy for certain portfolio loans and decide to sell them in the secondary market. At that time, portfolio loans are transferred to loans held for sale at fair value. Loans held for sale totaled $129.3 million and $124.8 million at March 31, 2021 and December 31, 2020, respectively.

The following table presents selected components of the amortized cost of loans.

(Dollars in thousands) March 31, 2021 December 31, 2020
Deferred fees, including unearned fees and unamortized costs on non-PCD loans
Net deferred fees related to SBA-PPP loans $ 66,717 $ 41,064
Net deferred fees related to other portfolios 11,932 9,153
Total net deferred fees $ 78,649 $ 50,217
Net unamortized discount on purchased loans
Non-PCD $ 17,009 $ 19,473
PCD 41,141 45,254
Total $ 58,150 $ 64,727

Components of Amortized Cost


dollars in millions	March 31, 2022		December 31, 2021
Deferred fees, including unearned fees and unamortized costs on non-PCD loans	$	38	$	32

Net unamortized discount on purchased loans
Non-PCD	$	75	$	11
PCD	67		29
Total net unamortized discount	$	142	$	40

1325

~~Table of Contents~~

The aging of the outstanding loans and leases, by class, at March 31, ~~2021~~2022 and December 31, ~~2020~~2021 is provided in the tables below. Loans and leases 30 days or less past due ~~less than 30 days~~ are considered current, as various grace periods allow borrowers to make payments within a stated period after the due date and still remain in compliance with the ~~loan~~respective agreement.

March 31, 2021
(Dollars in thousands) 30-59 days
past due 60-89 days
past due 90 days or greater Total past
due Current Total loans
and leases
Commercial:
Construction and land development $ 277 $ 0 $ 1,595 $ 1,872 $ 1,020,215 $ 1,022,087
Owner occupied commercial mortgage 13,153 2,996 11,028 27,177 11,313,789 11,340,966
Non-owner occupied commercial mortgage 5,046 303 8,917 14,266 3,003,632 3,017,898
Commercial and industrial and leases 13,284 4,771 3,249 21,304 4,925,141 4,946,445
SBA-PPP 0 0 0 0 2,769,906 2,769,906
Total commercial loans 31,760 8,070 24,789 64,619 23,032,683 23,097,302
Consumer:
Residential mortgage 34,350 7,396 30,789 72,535 5,493,491 5,566,026
Revolving mortgage 6,222 1,603 8,531 16,356 1,922,066 1,938,422
Construction and land development 266 944 652 1,862 334,203 336,065
Consumer auto 4,432 1,014 860 6,306 1,265,280 1,271,586
Consumer other 2,246 1,213 1,516 4,975 533,702 538,677
Total consumer loans 47,516 12,170 42,348 102,034 9,548,742 9,650,776
PCD loans 11,250 4,322 33,694 49,266 383,507 432,773
Total loans and leases $ 90,526 $ 24,562 $ 100,831 $ 215,919 $ 32,964,932 $ 33,180,851
December 31, 2020
(Dollars in thousands) 30-59 days
past due 60-89 days
past due 90 days or greater Total past
due Current Total loans
and leases
Commercial:
Construction and land development $ 956 $ 527 $ 1,603 $ 3,086 $ 982,338 $ 985,424
Owner occupied commercial mortgage 8,757 2,232 14,082 25,071 11,139,941 11,165,012
Non-owner occupied commercial mortgage 12,370 0 5,973 18,343 2,969,346 2,987,689
Commercial and industrial and leases 14,532 2,842 3,243 20,617 4,993,027 5,013,644
SBA-PPP 0 0 0 0 2,406,291 2,406,291
Total commercial loans 36,615 5,601 24,901 67,117 22,490,943 22,558,060
Consumer:
Residential mortgage 43,218 8,364 31,690 83,272 5,478,414 5,561,686
Revolving mortgage 11,977 2,626 7,415 22,018 2,030,836 2,052,854
Construction and land development 932 77 330 1,339 346,784 348,123
Consumer auto 6,825 1,835 1,076 9,736 1,245,666 1,255,402
Consumer other 3,610 1,464 1,505 6,579 546,389 552,968
Total consumer loans 66,562 14,366 42,016 122,944 9,648,089 9,771,033
PCD loans 18,322 6,076 31,026 55,424 407,458 462,882
Total loans and leases $ 121,499 $ 26,043 $ 97,943 $ 245,485 $ 32,546,490 $ 32,791,975

Loans and Leases - Delinquency Status


	March 31, 2022
dollars in millions	30-59 days past due		60-89 days past due		90 days or greater		Total Past Due		Current		Total
Commercial
Commercial construction	$	55	$	—	$	2	$	57	$	2,576	$	2,633
Owner occupied commercial mortgage	22		16		13		51		13,502		13,553
Non-owner occupied commercial mortgage	20		—		60		80		9,213		9,293
Commercial and industrial	73		15		23		111		22,291		22,402
Leases	40		13		13		66		2,154		2,220
Total commercial loans	210		44		111		365		49,736		50,101
Consumer
Residential mortgage	63		12		59		134		11,577		11,711
Revolving mortgage	6		2		9		17		1,823		1,840
Consumer auto	6		1		1		8		1,312		1,320
Consumer other	2		2		1		5		547		552
Total consumer loans	77		17		70		164		15,259		15,423
Total loans and leases	$	287	$	61	$	181	$	529	$	64,995	$	65,524

	December 31, 2021
dollars in millions	30-59 days past due		60-89 days past due		90 days or greater		Total Past Due		Current		Total
Commercial
Commercial construction	$	1	$	—	$	2	$	3	$	1,235	$	1,238
Owner occupied commercial mortgage	21		1		9		31		12,068		12,099
Non-owner occupied commercial mortgage	3		—		2		5		3,036		3,041
Commercial and industrial	8		3		5		16		5,921		5,937
Leases	—		1		1		2		269		271
Total commercial loans	33		5		19		57		22,529		22,586
Consumer
Residential mortgage	24		6		23		53		6,035		6,088
Revolving mortgage	6		2		6		14		1,804		1,818
Consumer auto	6		1		1		8		1,324		1,332
Consumer other	2		2		1		5		543		548
Total consumer loans	38		11		31		80		9,706		9,786
Total loans and leases	$	71	$	16	$	50	$	137	$	32,235	$	32,372

1426

~~Table of Contents~~

The amortized cost, by class, of loans and leases on nonaccrual status, and loans and leases greater than 90 days past due and still accruing at March 31, ~~2021~~2022 and December 31, ~~2020,~~2021 are presented below.

Loans on Non-Accrual Status (1) (2)


	March 31, 2022				December 31, 2021
dollars in millions	Non-Accrual Loans		Loans > 90 days and Accruing		Non-Accrual Loans		Loans > 90 days and Accruing
Commercial
Commercial construction	$	21	$	—	$	4	$	—
Owner occupied commercial mortgage	30		6		18		5
Non-owner occupied commercial mortgage	122		—		5		—
Commercial and industrial	229		9		15		1
Leases	24		5		3		—
Total commercial	426		20		45		6
Consumer
Residential mortgage	86		13		54		—
Revolving mortgage	22		—		18		—
Consumer auto	3		—		3		—
Consumer other	1		1		1		1
Total consumer	112		14		76		1
Total loans and leases	$	538	$	34	$	121	$	7

(1)Accrued interest that was reversed when the loan went to non-accrual status was $1 million for the three months ended March 31, 2022.

(2)Non-accrual loans for which there was no related ACL totaled $35 million at March 31, 2022 and $15 million at December 31, 2021.

Other real estate owned (“OREO”) and repossessed assets were $43 million as ~~follows:~~of March 31, 2022 and $40 million as of December 31, 2021.

March 31, 2021 December 31, 2020
(Dollars in thousands) Nonaccrual
loans and
leases Loans and
leases > 90
days and
accruing Nonaccrual
loans and
leases Loans and
leases > 90
days and
accruing
Commercial:
Construction and land development $ 1,648 $ 0 $ 1,661 $ 0
Owner occupied commercial mortgage 22,796 1,400 23,103 3,625
Non-owner occupied commercial mortgage 10,939 2,211 7,932 147
Commercial and industrial and leases 15,718 607 10,626 540
Total commercial loans 51,101 4,218 43,322 4,312
Consumer:
Residential mortgage 61,907 29 66,345 0
Revolving mortgage 23,952 0 22,236 0
Construction and land development 566 543 652 0
Consumer auto 3,027 0 3,166 0
Consumer other 816 1,155 823 1,195
Total consumer loans 90,268 1,727 93,222 1,195
PCD loans 53,165 1,432 54,939 355
Total loans and leases $ 194,534 $ 7,377 $ 191,483 $ 5,862

Credit ~~Quality~~quality indicators

Loans and leases are monitored for credit quality on a recurring basis. Commercial and consumer loans and leases have different credit quality indicators as a result of the unique characteristics of the loan segments being evaluated. The credit quality indicators for Non-PCD commercial loans and leases are ~~borrower risk classifications~~ developed through a review of individual borrowers on an ongoing basis. Commercial loans are evaluated ~~at least annually,~~periodically with more frequent evaluations done on criticized loans. Commercial loans are also updated if there is evidence of potential credit deterioration, such as delinquency. Commercial credit cards are included in the Commercial and industrial and leases segment, but are evaluated based primarily upon delinquency status. The ~~risk classifications~~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 ~~that~~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 ~~that~~ 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 ~~that~~ 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 ~~that are~~ 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, 2022 and December 31, 2021, 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 remaining balance is comprised of a small amount of commercial mortgage, lease financing and other commercial real estate loans.

The credit quality ~~indicators~~indicator for consumer ~~and PCD~~ loans ~~are~~is based on delinquency status of the borrower as of the date presented. 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 (“FHA”) and U.S. Department of Veterans Affairs and thus remain on accrual status regardless of delinquency status.

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

Commercial Loans - Risk Classifications by Class


March 31, 2022
Risk Classification:	Term Loans by Origination Year														Revolving Converted to Term Loans
dollars in millions	2022		2021		2020		2019		2018		2017 & Prior		Revolving				Total
Commercial construction
Pass	$	300	$	775	$	790	$	439	$	102	$	85	$	15	$	—	$	2,506
Special Mention	2		—		30		25		28		—		—		—		85
Substandard	1		1		—		30		2		5		—		—		39
Doubtful	—		—		—		3		—		—		—		—		3
Ungraded	—		—		—		—		—		—		—		—		—
Total commercial construction	303		776		820		497		132		90		15		—		2,633
Owner occupied commercial mortgage
Pass	642		3,311		3,176		2,080		1,213		2,499		143		—		13,064
Special Mention	3		3		44		37		19		74		4		—		184
Substandard	2		26		37		37		74		124		4		—		304
Doubtful	—		—		—		—		—		1		—		—		1
Ungraded	—		—		—		—		—		—		—		—		—
Total owner occupied commercial mortgage	647		3,340		3,257		2,154		1,306		2,698		151		—		13,553
Non-owner occupied commercial mortgage
Pass	532		1,731		1,844		1,953		936		1,510		39		—		8,545
Special Mention	—		1		—		95		3		37		—		—		136
Substandard	2		16		26		324		60		166		1		—		595
Doubtful	—		—		—		5		—		12		—		—		17
Ungraded	—		—		—		—		—		—		—		—		—
Total non-owner occupied commercial mortgage	534		1,748		1,870		2,377		999		1,725		40		—		9,293
Commercial and industrial
Pass	3,525		5,292		2,865		2,244		1,277		1,389		4,100		50		20,742
Special Mention	32		19		117		113		103		38		52		—		474
Substandard	26		63		109		181		162		239		247		1		1,028
Doubtful	—		3		1		2		14		36		18		—		74
Ungraded	—		—		—		—		—		—		84		—		84
Total commercial and industrial	3,583		5,377		3,092		2,540		1,556		1,702		4,501		51		22,402
Leases
Pass	182		635		581		355		168		146		—		—		2,067
Special Mention	2		15		15		13		8		3		—		—		56
Substandard	3		28		22		21		12		4		—		—		90
Doubtful	—		3		1		1		1		1		—		—		7
Ungraded	—		—		—		—		—		—		—		—		—
Total leases	187		681		619		390		189		154		—		—		2,220
Total commercial	$	5,254	$	11,922	$	9,658	$	7,958	$	4,182	$	6,369	$	4,707	$	51	$	50,101

1528

~~Table of Contents~~

~~The following tables represent current credit quality indicators~~

Consumer Loans - Delinquency Status by ~~origination year as of March 31, 2021.~~Class

March 31, 2021
Commercial Loans Amortized Cost Basis by Origination Year
Classification: 2021 2020 2019 2018 2017 Prior Revolving Revolving converted to term loans Total
(Dollars in thousands)
Construction and land development
Pass $ 46,039 $ 399,172 $ 310,753 $ 168,534 $ 48,089 $ 28,797 $ 12,548 $ 0 $ 1,013,932
Special Mention 0 232 0 181 85 0 145 0 643
Substandard 0 225 590 1,447 5,170 80 0 0 7,512
Total 46,039 399,629 311,343 170,162 53,344 28,877 12,693 0 1,022,087
Owner occupied commercial mortgage
Pass 632,239 3,202,842 2,166,465 1,521,886 1,206,771 2,249,426 106,579 101 11,086,309
Special Mention 687 10,398 29,975 39,868 12,074 37,441 2,974 72 133,489
Substandard 3,564 9,322 14,441 9,287 26,702 49,856 7,996 0 121,168
Total 636,490 3,222,562 2,210,881 1,571,041 1,245,547 2,336,723 117,549 173 11,340,966
Non-owner occupied commercial mortgage
Pass 158,815 809,647 603,274 332,010 319,514 638,882 35,835 0 2,897,977
Special Mention 794 676 880 10,778 1,440 2,918 500 0 17,986
Substandard 75 12,018 22,293 12,643 8,762 44,396 1,748 0 101,935
Total 159,684 822,341 626,447 355,431 329,716 686,196 38,083 0 3,017,898
Commercial and industrial and leases
Pass 424,035 1,423,941 884,987 442,129 251,356 445,265 874,664 5,150 4,751,527
Special Mention 102 10,601 22,183 8,335 6,160 7,764 11,376 194 66,715
Substandard 5,507 15,179 4,398 5,572 3,950 5,597 24,608 1,410 66,221
Doubtful 0 0 0 0 0 0 2 0 2
Ungraded 0 0 0 0 0 0 61,980 0 61,980
Total 429,644 1,449,721 911,568 456,036 261,466 458,626 972,630 6,754 4,946,445
SBA-PPP
Pass 936,012 1,833,894 0 0 0 0 0 0 2,769,906
Total commercial $ 2,207,869 $ 7,728,147 $ 4,060,239 $ 2,552,670 $ 1,890,073 $ 3,510,422 $ 1,140,955 $ 6,927 $ 23,097,302
Consumer and PCD Loans Amortized Cost Basis by Origination Year
Days Past Due: 2021 2020 2019 2018 2017 Prior Revolving Revolving converted to term loans Total
(Dollars in thousands)
Residential mortgage
Current $ 521,849 $ 1,810,979 $ 889,902 $ 561,267 $ 518,205 $ 1,166,958 $ 24,331 $ 0 $ 5,493,491
30-59 days 2,367 2,193 236 9,619 4,113 15,567 255 0 34,350
60-89 days 0 256 1,012 1,040 558 4,530 0 0 7,396
90 days or greater 0 286 1,455 838 3,797 24,384 29 0 30,789
Total 524,216 1,813,714 892,605 572,764 526,673 1,211,439 24,615 0 5,566,026
Revolving mortgage
Current 0 0 0 0 0 0 1,772,173 149,893 1,922,066
30-59 days 0 0 0 0 0 0 3,877 2,345 6,222
60-89 days 0 0 0 0 0 0 699 904 1,603
90 days or greater 0 0 0 0 0 0 4,112 4,419 8,531
Total 0 0 0 0 0 0 1,780,861 157,561 1,938,422
Construction and land development
Current 40,360 209,701 52,406 16,883 8,037 5,241 1,575 0 334,203
30-59 days 0 108 15 61 30 52 0 0 266
60-89 days 0 240 138 59 366 141 0 0 944
90 days or greater 0 543 0 0 59 50 0 0 652
Total 40,360 210,592 52,559 17,003 8,492 5,484 1,575 0 336,065


March 31, 2022
Days Past Due:	Term Loans by Origination Year														Revolving Converted to Term Loans
dollars in millions	2022		2021		2020		2019		2018		2017 & Prior		Revolving				Total
Residential mortgage
Current	$	783	$	3,819	$	2,325	$	943	$	531	$	3,156	$	20	$	—	$	11,577
30-59 days	2		11		4		4		5		37		—		—		63
60-89 days	—		1		1		—		2		8		—		—		12
90 days or greater	—		1		1		4		4		49		—		—		59
Total residential mortgage	785		3,832		2,331		951		542		3,250		20		—		11,711
Revolving mortgage
Current	—		—		—		—		—		—		1,680		143		1,823
30-59 days	—		—		—		—		—		—		3		3		6
60-89 days	—		—		—		—		—		—		1		1		2
90 days or greater	—		—		—		—		—		—		2		7		9
Total revolving mortgage	—		—		—		—		—		—		1,686		154		1,840
Consumer auto
Current	145		540		305		171		100		51		—		—		1,312
30-59 days	—		2		1		1		1		1		—		—		6
60-89 days	—		—		1		—		—		—		—		—		1
90 days or greater	—		—		1		—		—		—		—		—		1
Total consumer auto	145		542		308		172		101		52		—		—		1,320
Consumer other
Current	36		116		20		10		4		29		332		—		547
30-59 days	—		—		—		—		—		—		2		—		2
60-89 days	—		—		—		—		—		—		2		—		2
90 days or greater	—		—		—		—		—		—		1		—		1
Total consumer other	36		116		20		10		4		29		337		—		552
Total consumer	$	966	$	4,490	$	2,659	$	1,133	$	647	$	3,331	$	2,043	$	154	$	15,423

1629

~~Table of Contents~~

Consumer auto
Current 155,101 484,026 302,622 191,055 87,139 45,337 0 0 1,265,280
30-59 days 0 1,327 962 1,054 703 386 0 0 4,432
60-89 days 0 433 197 253 117 14 0 0 1,014
90 days or greater 0 294 134 217 129 86 0 0 860
Total 155,101 486,080 303,915 192,579 88,088 45,823 0 0 1,271,586
Consumer other
Current 20,879 45,239 22,631 8,552 6,246 34,873 395,282 0 533,702
30-59 days 3 131 100 106 1 0 1,905 0 2,246
60-89 days 0 95 7 10 0 0 1,101 0 1,213
90 days or greater 0 14 114 6 0 0 1,382 0 1,516
Total 20,882 45,479 22,852 8,674 6,247 34,873 399,670 0 538,677
Total consumer $ 740,559 $ 2,555,865 $ 1,271,931 $ 791,020 $ 629,500 $ 1,297,619 $ 2,206,721 $ 157,561 $ 9,650,776
PCD loans
Current $ 0 $ 28,056 $ 24,347 $ 26,763 $ 24,879 $ 247,606 $ 11,788 $ 20,068 $ 383,507
30-59 days 0 344 390 407 300 9,423 19 367 11,250
60-89 days 0 51 88 0 165 3,896 0 122 4,322
90 days or greater 0 1,294 2,404 4,412 1,826 22,504 105 1,149 33,694
Total PCD $ 0 $ 29,745 $ 27,229 $ 31,582 $ 27,170 $ 283,429 $ 11,912 $ 21,706 $ 432,773
Total loans and leases $ 2,948,428 $ 10,313,757 $ 5,359,399 $ 3,375,272 $ 2,546,743 $ 5,091,470 $ 3,359,588 $ 186,194 $ 33,180,851

The following tables represent current credit quality indicators by origination year as of December 31, ~~2020.~~2021.

December 31, 2020
Commercial Loans Amortized Cost Basis by Origination Year
Classification: 2020 2019 2018 2017 2016 Prior Revolving Revolving converted to term loans Total
(Dollars in thousands)
Construction and land development
Pass $ 342,183 $ 341,233 $ 190,429 $ 50,776 $ 23,969 $ 11,306 $ 10,969 $ 0 $ 970,865
Special Mention 246 0 6,421 5,342 0 0 153 0 12,162
Substandard 229 629 1,450 0 8 81 0 0 2,397
Total 342,658 341,862 198,300 56,118 23,977 11,387 11,122 0 985,424
Owner occupied commercial mortgage
Pass 3,183,467 2,201,165 1,625,141 1,301,412 1,049,858 1,454,020 101,556 133 10,916,752
Special Mention 6,274 20,702 36,739 12,387 17,699 25,693 5,115 72 124,681
Substandard 10,280 19,052 9,842 20,928 13,736 41,303 8,438 0 123,579
Total 3,200,021 2,240,919 1,671,722 1,334,727 1,081,293 1,521,016 115,109 205 11,165,012
Non-owner occupied commercial mortgage
Pass 865,514 609,975 378,136 331,800 282,810 391,517 32,149 0 2,891,901
Special Mention 569 905 10,794 1,808 5,121 3,279 483 0 22,959
Substandard 2,899 18,546 12,296 8,764 14,087 15,427 810 0 72,829
Total 868,982 629,426 401,226 342,372 302,018 410,223 33,442 0 2,987,689
Commercial and industrial and leases
Pass 1,620,622 983,852 504,463 310,468 234,735 286,996 899,978 5,520 4,846,634
Special Mention 3,146 17,065 7,265 5,393 3,307 4,912 9,152 189 50,429
Substandard 17,811 4,095 4,370 4,257 2,548 3,801 22,384 983 60,249
Ungraded 0 0 0 0 0 0 56,332 0 56,332
Total 1,641,579 1,005,012 516,098 320,118 240,590 295,709 987,846 6,692 5,013,644
SBA-PPP
Pass 2,406,291 0 0 0 0 0 0 0 2,406,291
Total commercial $ 8,459,531 $ 4,217,219 $ 2,787,346 $ 2,053,335 $ 1,647,878 $ 2,238,335 $ 1,147,519 $ 6,897 $ 22,558,060

Commercial Loans - Risk Classifications by Class


December 31, 2021
Risk Classification:	Term Loans by Origination Year														Revolving Converted to Term Loans
dollars in millions	2021		2020		2019		2018		2017		2016 & Prior		Revolving				Total
Commercial construction
Pass	$	540	$	400	$	189	$	29	$	48	$	11	$	10	$	—	$	1,227
Special Mention	—		—		—		—		—		1		—		—		1
Substandard	2		—		1		2		4		1		—		—		10
Doubtful	—		—		—		—		—		—		—		—		—
Ungraded	—		—		—		—		—		—		—		—		—��
Total commercial construction	542		400		190		31		52		13		10		—		1,238
Owner occupied commercial mortgage
Pass	3,045		3,022		1,873		1,194		963		1,572		125		—		11,794
Special Mention	3		35		37		22		13		33		5		—		148
Substandard	31		16		18		12		18		56		6		—		157
Doubtful	—		—		—		—		—		—		—		—		—
Ungraded	—		—		—		—		—		—		—		—		—
Total owner occupied commercial mortgage	3,079		3,073		1,928		1,228		994		1,661		136		—		12,099
Non-owner occupied commercial mortgage
Pass	644		737		578		263		266		412		37		—		2,937
Special Mention	1		—		—		3		3		10		—		—		17
Substandard	9		11		24		12		7		22		1		—		86
Doubtful	—		—		—		—		1		—		—		—		1
Ungraded	—		—		—		—		—		—		—		—		—
Total non-owner occupied commercial mortgage	654		748		602		278		277		444		38		—		3,041
Commercial and industrial
Pass	2,107		1,018		599		257		149		281		1,342		5		5,758
Special Mention	9		7		20		2		4		5		5		—		52
Substandard	20		7		3		4		2		2		16		1		55
Doubtful	—		—		—		—		—		—		—		—		—
Ungraded	—		—		—		—		—		—		72		—		72
Total commercial and industrial	2,136		1,032		622		263		155		288		1,435		6		5,937
Leases
Pass	93		68		38		42		17		8		—		—		266
Special Mention	—		1		—		—		—		—		—		—		1
Substandard	2		1		—		1		—		—		—		—		4
Doubtful	—		—		—		—		—		—		—		—		—
Ungraded	—		—		—		—		—		—		—		—		—
Total leases	95		70		38		43		17		8		—		—		271
Total commercial	$	6,506	$	5,323	$	3,380	$	1,843	$	1,495	$	2,414	$	1,619	$	6	$	22,586

1730

~~Table of Contents~~

Consumer and PCD Loans Amortized Cost Basis by Origination Year
Days Past Due: 2020 2019 2018 2017 2016 Prior Revolving Revolving converted to term loans Total
(Dollars in thousands)
Residential mortgage
Current $ 1,882,683 $ 978,298 $ 655,798 $ 596,309 $ 461,719 $ 878,634 $ 24,973 $ 0 $ 5,478,414
30-59 days 2,278 4,573 11,463 3,772 8,613 12,299 220 0 43,218
60-89 days 30 100 1,246 1,449 834 4,705 0 0 8,364
90 days or greater 282 4,831 3,150 4,015 5,689 13,723 0 0 31,690
Total 1,885,273 987,802 671,657 605,545 476,855 909,361 25,193 0 5,561,686
Revolving mortgage
Current 0 0 0 0 0 0 1,879,968 150,868 2,030,836
30-59 days 0 0 0 0 0 0 8,241 3,736 11,977
60-89 days 0 0 0 0 0 0 527 2,099 2,626
90 days or greater 0 0 0 0 0 0 2,301 5,114 7,415
Total 0 0 0 0 0 0 1,891,037 161,817 2,052,854
Construction and land development
Current 215,112 85,707 24,860 10,269 6,093 2,218 2,525 0 346,784
30-59 days 0 420 121 370 0 21 0 0 932
60-89 days 0 0 0 9 0 68 0 0 77
90 days or greater 0 0 0 0 0 330 0 0 330
Total 215,112 86,127 24,981 10,648 6,093 2,637 2,525 0 348,123
Consumer auto
Current 521,719 340,594 219,597 104,280 49,872 9,604 0 0 1,245,666
30-59 days 2,175 1,873 1,257 842 544 134 0 0 6,825
60-89 days 329 689 312 351 109 45 0 0 1,835
90 days or greater 170 527 217 57 102 3 0 0 1,076
Total 524,393 343,683 221,383 105,530 50,627 9,786 0 0 1,255,402
Consumer other
Current 53,842 27,117 10,911 7,159 2,980 29,336 415,044 0 546,389
30-59 days 322 114 77 18 11 7 3,061 0 3,610
60-89 days 102 20 13 18 3 23 1,285 0 1,464
90 days or greater 53 84 8 0 0 0 1,360 0 1,505
Total 54,319 27,335 11,009 7,195 2,994 29,366 420,750 0 552,968
Total consumer $ 2,679,097 $ 1,444,947 $ 929,030 $ 728,918 $ 536,569 $ 951,150 $ 2,339,505 $ 161,817 $ 9,771,033
PCD loans
Current $ 31,475 $ 25,425 $ 27,183 $ 27,955 $ 28,995 $ 232,186 $ 13,212 $ 21,027 $ 407,458
30-59 days 999 925 801 718 1,341 12,637 156 745 18,322
60-89 days 447 81 312 695 97 4,098 9 337 6,076
90 days or greater 721 2,325 4,755 1,208 897 19,963 111 1,046 31,026
Total PCD $ 33,642 $ 28,756 $ 33,051 $ 30,576 $ 31,330 $ 268,884 $ 13,488 $ 23,155 $ 462,882
Total loans and leases $ 11,172,270 $ 5,690,922 $ 3,749,427 $ 2,812,829 $ 2,215,777 $ 3,458,369 $ 3,500,512 $ 191,869 $ 32,791,975
Consumer Loans - Delinquency Status by Class


December 31, 2021
Days Past Due:	Term Loans by Origination Year														Revolving Converted to Term Loans
dollars in millions	2021		2020		2019		2018		2017		2016 & Prior		Revolving				Total
Residential mortgage
Current	$	2,139	$	1,663	$	627	$	368	$	349	$	867	$	22	$	—	$	6,035
30-59 days	2		3		2		2		1		14		—		—		24
60-89 days	—		—		—		1		1		4		—		—		6
90 days or greater	1		1		1		2		1		17		—		—		23
Total residential mortgage	2,142		1,667		630		373		352		902		22		—		6,088
Revolving mortgage
Current	—		—		—		—		—		—		1,678		126		1,804
30-59 days	—		—		—		—		—		—		4		2		6
60-89 days	—		—		—		—		—		—		—		2		2
90 days or greater	—		—		—		—		—		—		2		4		6
Total revolving mortgage	—		—		—		—		—		—		1,684		134		1,818
Consumer auto
Current	597		343		198		119		48		19		—		—		1,324
30-59 days	1		2		1		1		—		1		—		—		6
60-89 days	—		—		—		—		—		1		—		—		1
90 days or greater	—		—		—		—		—		1		—		—		1
Total consumer auto	598		345		199		120		48		22		—		—		1,332
Consumer other
Current	131		24		11		4		2		29		342		—		543
30-59 days	—		—		—		—		—		—		2		—		2
60-89 days	1		—		—		—		—		—		1		—		2
90 days or greater	—		—		—		—		—		—		1		—		1
Total consumer other	132		24		11		4		2		29		346		—		548
Total consumer	$	2,872	$	2,036	$	840	$	497	$	402	$	953	$	2,052	$	134	$	9,786

Purchased loans and leases

The following table ~~provides information regarding loans pledged as collateral for borrowing capacity through the FHLB of Atlanta and the Federal Reserve Bank (“FRB”) as of March 31, 2021 and December 31, 2020:~~

(Dollars in thousands) March 31, 2021 December 31, 2020
FHLB of Atlanta
Lendable collateral value of pledged non-PCD loans $ 8,847,178 $ 8,637,844
Less: Advances 648,671 652,675
Available borrowing capacity $ 8,198,507 $ 7,985,169
Pledged non-PCD loans $ 12,327,626 $ 12,157,153
FRB
Lendable collateral value of pledged non-PCD loans $ 3,367,466 $ 3,321,762
Less: Advances 0 0
Available borrowing capacity $ 3,367,466 $ 3,321,762
Pledged non-PCD loans $ 4,181,520 $ 4,104,866

~~Table of Contents~~

~~NOTE E - ALLOWANCE FOR CREDIT LOSSES~~

The ACL is calculated using a variety of factors, including, but not limited to, charge-off and recovery activity, loan growth, changes in macroeconomic factors, collateral type, estimated loan life and changes in credit quality. For the period ended March 31, 2021, the primary reason for the ACL change since December 31, 2020 was improvement in macroeconomic factors. Forecasted economic conditions are developed using third party macroeconomic scenarios adjusted based on management’s expectations over a forecast period of two years. For most pools, we use a 12-month straight-line reversion period to historical averages for model inputs; however for the consumer other, consumer card and commercial card pools, immediate reversion to historical net loss rates is utilized. Significant macroeconomic factors used in estimating the expected losses include unemployment, gross domestic product, home price index and commercial real estate index. Our ACL forecast considers a range of economic scenarios from an upside scenario to a severely adverse scenario, but the March 31, 2021 ACL forecast was calculated using the consensus baseline scenario. This scenario showed improvements in the most significant economic factors compared to what was used to generate the December 31, 2020 ACL. These loss estimates were also influenced by our strong credit quality, low net charge-offs and recent credit trends, which remained stable through the quarter ended March 31, 2021, despite potential impacts from COVID-19.

~~Activity in the ACL by portfolio segment is summarized as follows:~~

Three months ended March 31, 2021
(Dollars in thousands) Commercial Consumer PCD Total
Balance at January 1 $ 80,842 $ 119,485 $ 23,987 $ 224,314
Provision (credit) (3,922) (5,504) (1,548) (10,974)
Charge-offs (3,331) (4,469) (763) (8,563)
Recoveries 1,275 3,340 1,259 5,874
Balance at March 31 $ 74,864 $ 112,852 $ 22,935 $ 210,651
Three months ended March 31, 2020
(Dollars in thousands) Commercial Consumer PCD Total
Balance at December 31 $ 142,369 $ 75,236 $ 7,536 $ 225,141
Adoption of ASC 326 (87,554) 30,629 19,001 (37,924)
Balance at January 1 54,815 105,865 26,537 187,217
Provision (credit) 21,537 9,406 (2,588) 28,355
Initial allowance on PCD loans 0 0 1,193 1,193
Charge-offs (5,369) (7,769) (1,123) (14,261)
Recoveries 1,427 2,431 2,897 6,755
Balance at March 31 $ 72,410 $ 109,933 $ 26,916 $ 209,259

~~BancShares records an allowance for credit losses on unfunded commitments within other liabilities. Activity in the allowance for credit losses for unfunded commitments is summarized as follows:~~

Three months ended March 31
(Dollars in thousands) 2021 2020
Allowance for credit losses:
Beginning balance $ 12,814 $ 1,055
Adoption of ASC 326 0 8,885
Adjusted beginning balance $ 12,814 $ 9,940
Provision (credit) (1,243) 572
Ending balance 11,571 10,512

BancShares individually reviews loans greater than $500 thousand that are determined to be collateral-dependent. These collateral-dependent loans are evaluated based on the fair value of the underlying collateral as repayment of the loan is expected to be made through the operation or sale of the collateral. Commercial and industrialsummarizes PCD loans and leases ~~are collateralized by business assets, while~~that BancShares acquired in the ~~remaining loan classes are collateralized by real property.~~CIT Merger.

PCD Loans and Leases - CIT Merger


dollars in millions	Total PCD from CIT Merger
UPB	$	3,562
Initial PCD ACL	(284)
Fair value discount, net of the PCD Gross-Up	(45)
Purchase price	$	3,233


~~(Dollars in thousands)~~	~~Total~~
~~Balance at December 31, 2020~~	$	~~15,601~~
~~Accretion~~	~~502~~
~~Payment made to the FDIC to settle shared-loss agreement~~	~~(16,103)~~
~~Balance at March 31, 2021~~	$	0

Long-term borrowings maturing in each of the five years subsequent to March 31, 2022 and thereafter include:

~~Table of Contents~~

Long-term Borrowings Maturities

~~NOTE J - ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME~~


dollars in millions
Twelve months ended March 31,
2023	$	94
2024	166
2025	517
2026	330
2027	17
Thereafter	1,552
Total long-term borrowings	$	2,676

~~Accumulated other comprehensive (loss) income~~

Senior Unsecured Notes

Senior unsecured notes included the following as of March 31, ~~2021~~2022:

•Variable-rate senior unsecured notes totaled $64 million at 1-month LIBOR plus 1.10%.

•Fixed-rate senior unsecured notes outstanding totaled $866 million and the weighted average coupon rate was 3.70%. These notes were assumed by FCB as part of the CIT Merger.On February 24, 2022, FCB completed a redemption of approximately $2.9 billion of senior unsecured notes that were assumed in the CIT Merger, resulting in a gain of approximately $6 million.

Subordinated Unsecured Notes

Subordinated unsecured notes included the following as of March 31, 2022:

•$350 million aggregate principal amount of its 3.375% fixed-to-floating rate subordinated notes due 2030 and redeemable at the option of BancShares starting with the interest payment due March 15, 2025.

•$400 million aggregate principal amount of 6.125% fixed rate subordinated notes with a maturity date of March 9, 2028 and $100 million aggregate principal amount of 4.125% fixed-to-fixed rate subordinated notes with a maturity date of November 13, 2029, which were assumed by BancShares as part of the CIT Merger.

•$132 million in junior subordinated debentures representing obligations to FCB/NC Capital Trust III, FCB/SC Capital Trust II, SCB Capital Trust I and Macon Capital Trust I special purpose entities and grantor trusts (the “Trusts”) for trust preferred securities. The Trusts had outstanding trust preferred securities of $128 million at March 31, 2022 and December 31, ~~2020:~~2021, which mature in 2036, 2034, 2034 and 2034, respectively, and may be redeemed at par in whole or in part at any time. BancShares has guaranteed all obligations of FCB/NC Capital Trust III, FCB/SC Capital Trust II, SCB Capital Trust I and Macon Capital Trust I.

March 31, 2021 December 31, 2020
(Dollars in thousands) Accumulated
other
comprehensive
income (loss) Deferred
tax
expense
(benefit) Accumulated
other
comprehensive
income (loss),
net of tax Accumulated
other
comprehensive
income (loss) Deferred
tax
expense
(benefit) Accumulated
other
comprehensive
income (loss),
net of tax
Unrealized gains on securities available for sale $ 36,570 $ 8,411 $ 28,159 $ 102,278 $ 23,524 $ 78,754
Unrealized gains on securities available for sale transferred from (to) held to maturity 4,924 1,133 3,791 5,399 1,242 4,157
Defined benefit pension items (85,222) (19,601) (65,621) (91,751) (21,103) (70,648)
Total $ (43,728) $ (10,057) $ (33,671) $ 15,926 $ 3,663 $ 12,263

Secured Borrowings

At March 31, 2022, BancShares had pledged $24.9 billion of consumer loans to several financing facilities.

Notes Payable to FHLB

As a member of the FHLB, FCB can access financing based on an evaluation of its creditworthiness, statement of financial position, size and eligibility of collateral. Pledged assets related to these financings totaled $19.9 billion at March 31, 2022. FCB may at any time grant a security interest in, sell, convey or otherwise dispose of any of the assets used for collateral, provided that FCB is in compliance with the collateral maintenance requirement immediately following such disposition.

Other Secured Financings

Other secured (other than FHLB) financings were not significant and totaled $15 million at March 31, 2022. Pledged assets related to these financings totaled $15 million. These transactions do not meet accounting requirements for sales treatment and are recorded as secured borrowings.

At March 31, 2022, BancShares had other unused credit lines allowing contingent access to borrowings of up to $75 million on an unsecured basis.

Under borrowing arrangements with the FRB of Richmond, BancShares has access to an additional $4.2 billion on a secured basis. There were no outstanding borrowings with the FRB Discount Window at March 31, 2022 and December 31, 2021.

NOTE 13 — DERIVATIVE FINANCIAL INSTRUMENTS

BancShares acquired various derivative financial instruments in the CIT Merger. The following table presents notional amount and fair value of derivative financial instruments on a gross basis.

Notional Amount and Fair Value of Derivative Financial Instruments


	March 31, 2022
dollars in millions	Notional Amount		Asset Fair Value		Liability Fair Value




Derivatives not designated as hedging instruments (Non-qualifying hedges)
Interest rate contracts(1)(3)	$	20,211	$	106	$	(199)
Foreign exchange contracts	181		4		(4)
Other contracts(2)	822		—		(1)
Total derivatives not designated as hedging instruments	21,214		110		(204)
Gross derivatives fair values presented in the Consolidated Balance Sheets	$	21,214	110		(204)
Less: Gross amounts offset in the Consolidated Balance Sheets			—		—
Net amount presented in the Consolidated Balance Sheet			110		(204)
Less: Amounts subject to master netting agreements(4)			(13)		13
Less: Cash collateral pledged(received) subject to master netting agreements(5)			(29)		2
Total net derivative fair value			$	68	$	(189)

(1)Fair value balances include accrued interest.

(2)Other derivative contracts not designated as hedging instruments include risk participation agreements.

(3)BancShares accounts for swap contracts cleared by the Chicago Mercantile Exchange and LCH Clearnet as “settled-to-market”. As a result, variation margin payments are characterized as settlement of the derivative exposure and variation margin balances are netted against the corresponding derivative mark-to-market balances. Gross amounts of recognized assets and liabilities were lowered by $191 million and $60 million, respectively at March 31, 2022.

(4)BancShares’ derivative transactions are governed by International Swaps and Derivatives Association (“ISDA”) agreements that allow for net settlements of certain payments as well as offsetting of all contracts with a given counterparty in the event of bankruptcy or default of one of the two parties to the transaction. BancShares believes its ISDA agreements meet the definition of a master netting arrangement or similar agreement for purposes of the above disclosure.

(5)In conjunction with the ISDA agreements described above, BancShares has entered into collateral arrangements with its counterparties, which provide for the exchange of cash depending on change in the market valuation of the derivative contracts outstanding. Such collateral is available to be applied in settlement of the net balances upon an event of default of one of the counterparties. Collateral pledged or received is included in other assets or other liabilities, respectively.

Non-Qualifying Hedges

The following table ~~highlights changes in accumulated other comprehensive (loss) income by component for~~presents gains (losses) of non-qualifying hedges recognized on the ~~three months ended March 31, 2021 and 2020:~~Condensed Consolidated Statements of Income:

Three months ended March 31, 2021
(Dollars in thousands, net of tax) Unrealized gains on securities available for sale Unrealized gains on securities available for sale transferred to held to maturity Defined benefit pension items Total
Beginning balance $ 78,754 $ 4,157 $ (70,648) $ 12,263
Net unrealized losses arising during period (43,506) 0 0 (43,506)
Amounts reclassified from accumulated other comprehensive income (7,089) (366) 5,027 (2,428)
Net current period other comprehensive (loss) income (50,595) (366) 5,027 (45,934)
Ending balance $ 28,159 $ 3,791 $ (65,621) $ (33,671)
Three months ended March 31, 2020
(Dollars in thousands, net of tax) Unrealized gains on securities available for sale Unrealized gains on securities available for sale transferred to held to maturity Defined benefit pension items Total
Beginning balance $ 5,792 $ 0 $ (132,515) $ (126,723)
Net unrealized gains arising during period 111,530 0 0 111,530
Amounts reclassified from accumulated other comprehensive loss (15,242) 0 4,823 (10,419)
Net current period other comprehensive income 96,288 0 4,823 101,111
Ending balance $ 102,080 $ 0 $ (127,692) $ (25,612)

Gains (Losses) on Non-Qualifying Hedges


		Three Months Ended March 31,
dollars in millions	Amounts Recognized	2022		2021
Interest rate contracts	Other noninterest income	$	4	$	—

Other contracts	Other noninterest income	—		—
Total non-qualifying hedges - income statement impact		$	4	$	—

2445

~~Table of Contents~~

NOTE 14 — OTHER LIABILITIES

The following table presents the ~~amounts reclassified~~components of other liabilities. The increases from ~~accumulated~~December 31, 2021 primarily reflect the other ~~comprehensive (loss) income and the line item affected~~liabilities assumed in the ~~statement where net income is presented for the three and three months ended March 31, 2021 and 2020:~~CIT Merger.

~~(Dollars in thousands)~~

Other Liabilities


dollars in millions	March 31, 2022		December 31, 2021
Accrued expenses and accounts payable	$	534	$	5
Reserve for off-balance sheet credit exposure	75		12
Lease liabilities	385		65
Commitments to fund investments in tax credits	242		43
Fair value of derivative financial instruments	204		—
Accrued interest payable	24		8
Deferred taxes	160		33
Other	364		215
Total other liabilities	$	1,988	$	381

~~Three months ended March 31, 2021~~

~~Details about accumulated other comprehensive income (loss)~~

~~Amounts reclassified from accumulated other comprehensive income (loss)~~

~~Affected line item in the statement where net income is presented~~

~~Unrealized gains on securities available for sale~~

~~9,207~~

~~Realized gains on investment securities available for sale, net~~

~~(2,118)~~

~~Income taxes~~

~~7,089~~

~~Accretion of unrealized gains on securities available for sale transferred to held to maturity~~

~~475~~

~~Net interest income~~

~~(109)~~

~~Income taxes~~

~~366~~

~~Amortization of defined benefit pension actuarial losses~~

~~(6,529)~~

~~Other noninterest expense~~

~~1,502~~

~~Income taxes~~

~~(5,027)~~

~~Total reclassifications for the period~~

~~2,428~~

~~(Dollars in thousands)~~

~~Three months ended March 31, 2020~~

~~Details about accumulated other comprehensive income (loss)~~

~~Amounts reclassified from accumulated other comprehensive income (loss)~~

~~Affected line item in the statement where net income is presented~~

~~Unrealized gains on securities available for sale~~

~~19,795~~

~~Realized gains on investment securities available for sale, net~~

~~(4,553)~~

~~Income taxes~~

~~15,242~~

~~Amortization of defined benefit pension actuarial losses~~

~~(6,264)~~

~~Other noninterest expense~~

~~1,441~~

~~Income taxes~~

~~(4,823)~~

~~Total reclassifications for the period~~

~~10,419~~

NOTE ~~K - ESTIMATED~~15 — FAIR ~~VALUES~~VALUE

Fair Value Hierarchy

BancShares measures certain financial assets and liabilities at fair value. Fair value ~~estimates are intended to represent~~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 ~~as of~~at the measurement date. ~~Where there is no active market for~~U.S. GAAP also establishes a ~~financial instrument, BancShares has made estimates using discounted cash flows or other valuation techniques. Inputs used in these~~fair value hierarchy, which prioritizes the inputs to valuation techniques ~~are subjective in nature, involve uncertainties and require significant judgment and therefore can only be derived within a range of precision. Accordingly, the derived~~used to measure fair value ~~estimates presented below are not necessarily indicative of the amounts BancShares would realize in a current market exchange.~~into three levels.

~~ASC 820,~~
~~Fair Value Measurements and Disclosures, indicates that assets~~

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 ~~highest~~lowest level of input ~~that is~~ significant to the fair value measurement ~~(with~~with Level 1 inputs considered highest and Level 3 inputs considered ~~lowest).~~lowest. A brief description of each input level follows:

•Level 1 ~~values~~inputs are ~~based on~~ quoted prices in active markets for identical ~~instruments in active markets.~~assets and liabilities.

•Level 2 ~~values~~inputs are ~~based on~~ quoted prices for similar ~~instruments~~assets or liabilities in active markets, quoted prices for identical or similar ~~instruments~~assets or liabilities in markets that are not active and ~~model-based valuation techniques~~inputs other than quoted prices observable for ~~which all significant assumptions are observable in~~ the ~~market.~~assets or liabilities and market corroborated inputs.

•Level 3 ~~values~~inputs are ~~derived from valuation techniques in which one~~unobservable inputs for the asset or ~~more significant inputs or assumptions are not observable in the market.~~liability. These unobservable inputs and assumptions reflect the estimates ~~that~~ market participants would use in pricing the asset or liability. ~~Valuation techniques include the use of discounted cash flow models and similar techniques.~~

BancShares’ management reviews any changes to its valuation methodologies to ensure they are appropriate and supportable, and refines valuation methodologies as more market-based data becomes available. Accuracy of the levels of the fair value hierarchy are validated and transfers between levels of the fair value hierarchy are recognized at the end of the reporting period.

2546

~~Table of Contents~~

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The ~~methodologies~~following table summarizes BancShares’ assets and liabilities measured at estimated fair value on a recurring basis.

Assets and Liabilities Measured at Fair Value - Recurring Basis (dollars in millions)


	March 31, 2022
dollars in millions	Total		Level 1		Level 2		Level 3
Assets
Investment securities available for sale
U.S. Treasury	$	1,931	$	—	$	1,931	$	—
Government agency	206		—		206		—
Residential mortgage-backed securities	5,052		—		5,052		—
Commercial mortgage-backed securities	1,520		—		1,520		—
Corporate bonds	586		—		400		186

Total investment securities available for sale	$	9,295	$	—	$	9,109	$	186
Marketable equity securities	100		33		67		—
Loans held for sale	65		—		65		—
Derivative assets(1)
Interest rate contracts — non-qualifying hedges	106		—		105		1
Other derivative — non-qualifying hedges	4		—		4		—
Total derivative assets	$	110	$	—	$	109	$	1
Liabilities
Derivative liabilities(1)
Interest rate contracts — non-qualifying hedges	$	199	$	—	$	199	$	—
Other derivative— non-qualifying hedges	5		—		4		1
Total derivative liabilities	$	204	$	—	$	203	$	1

	December 31, 2021
dollars in millions	Total		Level 1		Level 2		Level 3
Assets
Investment securities available for sale
U.S. Treasury	$	2,005	$	—	$	2,005	$	—
Government agency	221		—		221		—
Residential mortgage-backed securities	4,729		—		4,729		—
Commercial mortgage-backed securities	1,640		—		1,640		—
Corporate bonds	608		—		401		207
Total investment securities available for sale	$	9,203	$	—	$	8,996	$	207
Marketable equity securities	98		34		64		—
Loans held for sale	99		—		99		—

(1)Derivative fair values include accrued interest.

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

Investment securities available for sale ~~and held to maturity~~. The fair value of U.S. Treasury, government agency, ~~and~~ mortgage-backed securities, ~~municipal securities, as well as~~and a portion of the corporate bonds isare generally estimated using a ~~third party~~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~~third-party provider evaluates securities based on comparable investments with trades and market data and will utilize pricing models ~~that~~which use a variety of inputs, such as benchmark yields, reported trades, ~~broker-dealer quotes,~~ 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 ~~which are unadjusted and~~using inputs that are not directly observable. These securities are ~~considered~~classified as Level 3.

~~Investment in marketable~~

Marketable equity securities. Equity securities are measured at fair value using observable closing ~~prices and~~prices. The valuation also considers the amount of market ~~activity.~~activity by examining the trade volume of each security. Equity securities are classified as Level 1 if they are traded in an active market and as Level 2 if the observable closing price is from a less than active market.

Loans held for sale. ~~Management elects the fair value option on certain~~Certain residential real estate loans originated to be sold to ~~investors. The loans~~investors are carried at fair value based on quoted market prices for similar types of loans. Accordingly, the inputs used to calculate fair value of originated residential real estate loans held for sale are ~~classified as~~considered Level 2 inputs.

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

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

Quantitative Information About Level 3 Fair Value Measurements - Recurring Basis

dollars in millions

Financial Instrument

Estimated
Fair Value

Valuation
Technique(s)

Significant
Unobservable
Inputs

Range of
Inputs

Weighted
Average

March 31, 2022

Assets

Corporate bonds

186

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

Not material

Liabilities

Interest rate & other derivative — non-qualifying hedges

Internal valuation model

Not material

December 31, 2021

Assets

Corporate bonds

207

Indicative bid provided by broker

Multiple factors, including but not limited to, current operations, financial condition, cash flows, and recently executed financing transactions related to the issuer

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

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


	Three months ended March 31, 2022						Three months ended March 31, 2021
dollars in millions	Corporate Bonds		Other Derivative Assets — Non-Qualifying		Other Derivative Liabilities — Non-Qualifying		Corporate Bonds
Beginning balance	$	207	$	—	$	—	$	317
Purchases	—		—		1		—
Included in earnings	—		1		—		—
Included in comprehensive income	(7)		—		—		2
Transfers in	—		—		—		—
Transfers out	(14)		—		—		—
Maturity and settlements	—		—		—		(1)
Ending balance	$	186	$	1	$	1	$	318

Fair Value Option

The following table summarizes the difference between the aggregate fair value and the UPB for residential real estate loans

originated for sale measured at fair value as of March 31, 2022 and December 31, 2021.


	March 31, 2022
dollars in millions	Fair Value		Unpaid Principal Balance		Difference
Originated loans held for sale	$	65	$	65	$	—

	December 31, 2021
	Fair Value		Unpaid Principal Balance		Difference
Originated loans held for sale	$	99	$	96	$	3

BancShares has elected the fair value option for residential real estate loans originated for sale. This election reduces certain timing differences in the Consolidated Statements of Income and better aligns with the management of the portfolio from a business perspective. The changes in fair value were recorded as a component of mortgage income and included a loss of $3 million and a loss of $3 million for the three months ended March 31, 2022 and 2021, respectively. Interest earned on loans held for sale is recorded within interest income on loans and leases in the Consolidated Statements of Income.

No originated loans held for sale were 90 or more days past due or on non-accrual status as of March 31, 2022 or December 31, 2021.

Assets Measured at Estimated Fair Value on a Non-recurring Basis

Certain assets or liabilities are required to be measured at estimated fair value on a non-recurring basis subsequent to initial recognition. Generally, these adjustments are the result of LOCOM or other impairment accounting. The following table presents carrying value of assets measured at estimated fair value on a non-recurring basis for which gains and losses from a non-recurring fair value adjustment 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


	Fair Value Measurements
dollars in millions	Total		Level 1		Level 2		Level 3		Total Gains (Losses)
March 31, 2022
Assets held for sale - loans	$	2	$	—	$	—	$	2	$	—
Loans - collateral dependent loans	109		—		—		109		(8)
Other real estate owned	39		—		—		39		2
Mortgage servicing rights	1		—		—		1		1
Total	$	151	$	—	$	—	$	151	$	(5)
December 31, 2021
Other real estate owned	$	34	$	—	$	—	$	34	$	(4)
Loans - collateral dependent loans	3		—		—		3		(2)
Mortgage servicing rights	22		—		—		22		3
Total	$	59	$	—	$	—	$	59	$	(3)

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

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

Assets held for sale - loans. Loans held for investment subsequently transferred to held for sale are carried at the lower of cost or market. When available, the fair ~~value when a firm commitment to~~values for the transferred loans are based on quoted prices from the purchase ~~from a counterparty exists.~~commitments for the individual loans being transferred and are considered Level 1 inputs. The fair value of Level 2 assets was primarily estimated based on prices of recent trades of similar assets. For other loans held for sale, the ~~transferred~~fair value of Level 3 assets was primarily measured under the income approach using the discounted cash flow model based on Level 3 inputs including discount rate or the price of committed trades.

Loans - collateral dependent loans. The population of Level 3 loans measured at fair value on a non-recurring basis includes collateral-dependent loans evaluated individually. Collateral values are determined using appraisals or other third-party value estimates of the subject property discounted based on estimated selling costs, and immaterial adjustments for other external factors that may impact the marketability of the collateral.

Other real estate owned. OREO is carried at the lower of cost or fair value. OREO asset valuations are determined by using appraisals or other third-party value estimates of the subject property with discounts, generally between 6% and 15%, applied for estimated selling costs and other external factors that may impact the marketability of the property. At March 31, 2022 and December 31, 2021, the weighted average discount applied was 8.13% and 8.79%, respectively. Changes to the value of the assets between scheduled valuation dates are monitored through continued communication with brokers and monthly reviews by the asset manager assigned to each asset. If there are any significant changes in the market or the subject property, valuations are adjusted or new appraisals are ordered to ensure the reported values reflect the most current information.

Mortgage servicing rights. MSRs are carried at the lower of amortized cost or market and are, therefore, carried at fair value only when fair value is less than amortized cost. The fair value of MSRs is determined using a pooling methodology. Similar loans are pooled together and a discounted cash flow model, which takes into consideration discount rates, prepayment rates, and the weighted average cost to service the loans, is ~~based on~~used to determine the ~~quoted prices~~fair value.

Financial Instruments Fair Value

The table below presents the carrying values and ~~is considered a Level 1 input.~~estimated fair values for financial instruments. The carrying values and estimated fair values of financial instruments exclude leases and certain other assets and liabilities, which were not required for disclosure.

Carrying Values and Fair Values of Financial Assets and Liabilities


	March 31, 2022
			Estimated Fair Value
dollars in millions	Carrying Value		Level 1		Level 2		Level 3		Total
Financial Assets
Cash and due from banks	$	523	$	523	$	—	$	—	$	523
Interest earning deposits at banks	9,285		9,285		—		—		9,285
Investment securities available for sale	9,295		—		9,109		186		9,295
Investment securities held to maturity	10,074		—		9,457		—		9,457
Investment in marketable equity securities	100		33		67		—		100
Loans held for sale	81		—		65		16		81
Net loans	62,489		—		1,574		59,757		61,331
Income earned not collected	247		—		247		—		247
Federal Home Loan Bank stock	39		—		39		—		39

Mortgage and other servicing rights	28		—		—		35		35
Derivative assets	110		—		109		1		110
Financial Liabilities
Deposits	91,597		—		91,572		—		91,572
Securities sold under customer repurchase agreements	616		—		616		—		616

Long-term borrowings	2,672		—		2,606		15		2,621
Credit balances of factoring clients	1,150		—		—		1,150		1,150
Accrued interest payable	24		—		24		—		24
Derivative liabilities	204		—		203		1		204

	December 31, 2021
			Estimated Fair Value
dollars in millions	Carrying Value		Level 1		Level 2		Level 3		Total
Financial Assets
Cash and due from banks	$	338	$	338	$	—	$	—	$	338
Interest earning deposits at banks	9,115		9,115		—		—		9,115
Investment securities available for sale	9,203		—		8,996		207		9,203
Investment securities held to maturity	3,809		—		3,759		—		3,759
Investment in marketable equity securities	98		34		64		—		98
Loans held for sale	99		—		99		—		99
Net loans	32,193		—		—		31,890		31,890
Income earned not collected	134		—		134		—		134
Federal Home Loan Bank stock	40		—		40		—		40

Mortgage and other servicing rights	23		—		—		23		23
Financial Liabilities
Deposits with no stated maturity	48,925		—		48,925		—		48,925
Time deposits	2,481		—		2,471		—		2,471
Securities sold under customer repurchase agreements	589		—		589		—		589

Long-term borrowings	1,195		—		1,222		—		1,222



Accrued interest payable	8		—		8		—		8

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

Net loans. The carrying value of net loans ~~and leases.~~ ~~Fair value~~ is ~~estimated based on discounted future~~net of the ACL. Loans are generally valued by discounting expected cash flows using market inputs with adjustments based on cohort level assumptions for certain loan types as well as internally developed estimates at a business segment level. Due to the ~~current interest rates~~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 ~~loans~~approximates their fair value and classified as Level 3.

Investment securities held to maturity. BancShares’ portfolio of held to maturity debt securities consists of mortgage-backed securities issued by government agencies and government sponsored entities, US Treasury notes, unsecured bonds issued by government agencies and government sponsored entities, securities issued by the World Bank and FDIC guaranteed CDs with ~~similar terms would be made~~other financial institutions. We primarily use prices obtained from pricing services to ~~borrowers of similar credit quality. The inputs used in~~determine the fair value ~~measurements for loans and leases~~of securities, which are ~~considered~~ Level 32 inputs.

FHLB ~~stock~~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 ~~believes its~~ investment in FHLB stock is ultimately recoverable at par. The inputs used in the fair value measurement for the FHLB stock are considered Level 2 inputs.

Mortgage and other servicing rights. Mortgage and other servicing rights are initially recorded at fair value and subsequently carried at the lower of amortized cost or ~~market value and~~market. Therefore, servicing rights are ~~therefore,~~ carried at fair value only when fair value is less than the amortized cost. The fair value of mortgage and other servicing rights is ~~performed~~determined using a pooling methodology. Similar loans are pooled together and a model ~~that~~which relies on discount rates, estimates of prepayment rates and the weighted average cost to service the loans is used to determine the fair value. The inputs used in the fair value measurement for mortgage and other servicing rights are considered Level 3 inputs.

Deposits. ~~For non-time~~The estimated fair value of deposits ~~carrying value is a reasonable estimate of fair value.~~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 iswas estimated ~~by discounting future~~based on a discounted cash ~~flows~~flow technique using Level 2 inputs appropriate to the ~~interest rates currently offered for deposits with similar remaining maturities.~~contractual maturity.

Short-term borrowed funds. Includes federal funds purchased, repurchase agreements and certain other short-term borrowings and payables. The ~~inputs used in the~~ fair value ~~measurement for deposits~~approximates carrying value and are ~~considered~~classified as Level ~~2 inputs.~~ 2.

Long-Term Borrowings.For borrowings, the fair values are determined based on recent trades or sales of the actual security, if available. Otherwise, fair values are estimated by discounting future cash flows using current interest rates for similar financial instruments. The inputs used in the fair value measurement for FHLB borrowings, senior and subordinated debentures, and other borrowings are considered Level 2 inputs.

~~Payable to the FDIC for shared-loss agreements.~~ The fair value of ~~the payable to the FDIC for shared-loss agreements~~other secured borrowings was ~~determined~~estimated based on ~~payments to the FDIC in accordance with the shared-loss agreements. Cash flows were discounted using current discount rates to reflect the timing~~unobservable inputs and are classified as Level 3.

Credit balances of factoring clients. The impact of the ~~estimated amounts~~time value of money from the unobservable discount rate for credit balances of factoring clients is inconsequential due to the ~~FDIC. The inputs used in~~short term nature of these balances, therefore, the fair value ~~measurement for~~approximated carrying value, and the ~~payable to the FDIC~~credit balances were ~~considered~~classified as Level ~~3 inputs.~~3.

~~Off-balance-sheet commitments and contingencies.~~ Carrying amounts are reasonable estimates of the fair values for such financial instruments. Carrying amounts include unamortized fee income and, in some cases, reserves for any credit losses from those financial instruments. These amounts are not material to BancShares’ financial position.

For all other financial assets and financial liabilities, the carrying value is a reasonable estimate of the fair value as of March 31, ~~2021~~2022 and December 31, ~~2020.~~2021. The carrying value and fair value for these assets and liabilities are equivalent because they are relatively ~~short term~~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, isand interest earning deposits at banks, are classified on the fair value hierarchy as Level 1. ~~Overnight investments, income~~Income earned not collected ~~securities sold under customer repurchase agreements,~~ and accrued interest payable are ~~considered~~classified as Level 2.

2652

~~Table of Contents~~

~~The table presents the carrying values and estimated fair values for financial instruments as of March 31, 2021 and December 31, 2020:~~

(Dollars in thousands) March 31, 2021 December 31, 2020
Carrying value Fair value Carrying value Fair value
Assets
Cash and due from banks $ 410,495 $ 410,495 $ 362,048 $ 362,048
Overnight investments 7,588,757 7,588,757 4,347,336 4,347,336
Investment in marketable equity securities 106,886 106,886 91,680 91,680
Investment securities available for sale 7,307,122 7,307,122 7,014,243 7,014,243
Investment securities held to maturity 2,808,099 2,774,982 2,816,982 2,838,499
Loans held for sale 129,334 129,334 124,837 124,837
Net loans and leases 32,970,200 33,202,437 32,567,661 33,298,166
Income earned not collected 148,022 148,022 145,694 145,694
Federal Home Loan Bank stock 40,563 40,563 45,392 45,392
Mortgage and other servicing rights 23,728 24,322 19,628 20,283
Liabilities
Deposits with no stated maturity 44,601,552 44,601,552 40,542,596 40,542,596
Time deposits 2,729,445 2,738,244 2,889,013 2,905,577
Securities sold under customer repurchase agreements 680,705 680,705 641,487 641,487
Federal Home Loan Bank borrowings 648,671 664,996 655,175 677,579
Subordinated debt 497,153 517,091 504,518 525,610
Other borrowings 84,502 85,067 88,470 89,263
FDIC shared-loss payable 0 0 15,601 15,843
Accrued interest payable 5,149 5,149 9,414 9,414

~~For assets and liabilities carried at fair value on a recurring basis, the following table provides fair value information as of March 31, 2021 and December 31, 2020:~~

March 31, 2021
Fair value measurements using:
(Dollars in thousands) Fair value Level 1 inputs Level 2 inputs Level 3 inputs
Assets measured at fair value
Investment securities available for sale
Government agency $ 846,686 $ 0 $ 846,686 $ 0
Residential mortgage-backed securities 4,758,589 0 4,758,589 0
Commercial mortgage-backed securities 1,098,987 0 1,098,987 0
Corporate bonds 602,860 0 284,744 318,116
Total investment securities available for sale $ 7,307,122 $ 0 $ 6,989,006 $ 318,116
Marketable equity securities $ 106,886 $ 43,677 $ 63,209 $ 0
Loans held for sale $ 129,334 $ 0 $ 129,334 $ 0
December 31, 2020
Fair value measurements using:
Fair value Level 1 inputs Level 2 inputs Level 3 inputs
Assets measured at fair value
Investment securities available for sale
U.S. Treasury $ 499,933 $ 0 $ 499,933 $ 0
Government agency 701,391 0 701,391 0
Residential mortgage-backed securities 4,438,103 0 4,438,103 0
Commercial mortgage-backed securities 771,537 0 771,537 0
Corporate bonds 603,279 0 286,655 316,624
Total investment securities available for sale $ 7,014,243 $ 0 $ 6,697,619 $ 316,624
Marketable equity securities $ 91,680 $ 32,855 $ 58,825 $ 0
Loans held for sale $ 124,837 $ 0 $ 124,837 $ 0

~~Table of Contents~~

~~The following tables summarize activity for Level 3 assets:~~

Corporate bonds
Three months ended March 31
(Dollars in thousands) 2021 2020
Beginning balance $ 316,624 $ 69,685
Unrealized net losses (gains) included in other comprehensive income 2,333 (4,366)
Amounts included in net income (91) (85)
Transfers in 0 1,782
Sales / Calls (750) 0
Ending balance $ 318,116 $ 67,016

During the three months ended March 31, 2021, there were 0 transfers between levels. During the three months ended March 31, 2020, there were transfers from Level 2 to Level 3 of $1.8 million. The transfers were due to a lack of observable inputs and trade activity for those securities.

~~The following table presents quantitative information about Level 3 fair value measurements for fair value on a recurring basis at March 31, 2021:~~

NOTE 16 — STOCKHOLDERS' EQUITY

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

Number of Shares of Common Stock


	Outstanding
	Class A	Class B
Common stock - December 31, 2021	8,811,220	1,005,185
Common stock issuance - CIT Merger	6,140,010	—
Restricted stock units vested, net of shares held to cover taxes	45,095	—
Common stock - March 31, 2022	14,996,325	1,005,185

Common Stock

The Parent Company has Class A Common Stock and Class B Common Stock. Class A common shares have 1 vote per share, while Class B common shares have 16 votes per share. In connection with the consummation of the CIT Merger, the Parent Company issued approximately 6 million shares of Class A Common Stock as further discussed in Note 2 — Business Combinations.

Restricted Stock Units

Refer to Note 21 — Employee Benefit Plans for discussion of the BancShares RSUs.

Non-Cumulative Perpetual Preferred Stock

On March 12, 2020, BancShares issued and sold an aggregate of 13,800,000 depositary shares (the “Depositary Shares”), each representing a 1/40th interest in a share of 5.375% non-cumulative perpetual preferred stock, series A (“BancShares Series A Preferred Stock”) (equivalent to $1,000 per share of the BancShares Series A Preferred Stock) for a total of $345 million. CIT Preferred Stock was converted into New BancShares Preferred Stock on the Merger Date as further discussed in Note 2 — Business Combinations. The following table summarizes BancShares’ non-cumulative perpetual preferred stock.


dollars in millions, except share and per share data
Preferred Stock	Issuance Date	Earliest Redemption Date	Par Value	Shares Authorized, Issued and Outstanding	Liquidation Preference Per Share		Total Liquidation Preference		Dividend	Dividend Payment Dates
Series A	March 12, 2020	March 15, 2025	$0.01	345,000	$	1,000	$	345	5.375%	Quarterly in arrears, beginning June 15, 2020
Series B	January 3, 2022	January 4, 2027	$0.01	325,000	1,000		325		5.8%, converting to LIBOR + 3.972% beginning June 15, 2022	Semi-annually during the fixed rate period, then quarterly in arrears, beginning June 15, 2022
Series C	January 3, 2022	January 4, 2027	$0.01	8,000,000	25		200		5.625%	Quarterly in arrears, beginning March 15, 2022

As part of the CIT Merger, each issued and outstanding share of CIT Series A Preferred Stock and CIT Series B Preferred Stock automatically converted into the right to receive 1 share of BancShares Series B Preferred Stock and BancShares Series C Preferred Stock, respectively, having such rights, preferences, privileges and voting powers, and limitations and restrictions, taken as a whole, that were not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers, and limitations and restrictions, taken as a whole, of the CIT Series A Preferred Stock and the CIT Series B Preferred Stock, respectively.

Dividends on BancShares Series A, B, and C Preferred Stock (together, “BancShares Preferred Stock”) will be paid when, as, and if declared by the Board of Directors of the Parent Company, or a duly authorized committee thereof, to the extent that the Parent Company has lawfully available funds to pay dividends. If declared, dividends with respect to the BancShares Series A Preferred Stock and BancShares Series C Preferred Stock will accrue and be payable quarterly in arrears on March 15, June 15, September 15, and December 15 of each year, beginning on the “Dividend Payment Dates” in the table above and dividends with respect to the BancShares Series B Preferred Stock will initially accrue and be payable on a semi-annual basis during the fixed rate period, and then quarterly in arrears beginning after June 15, 2022. Dividends on the BancShares Preferred Stock will not be cumulative.


~~(Dollars in thousands)~~

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

NOTE 17 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table details the components of AOCI:

Components of Accumulated Other Comprehensive Income (Loss)


	March 31, 2022						December 31, 2021
dollars in millions	Gross Unrealized		Income Taxes		Net Unrealized		Gross Unrealized		Income Taxes		Net Unrealized
Unrealized (losses) gains on securities available for sale	$	(431)	$	104	$	(327)	$	(12)	$	3	$	(9)
Unrealized (losses) gains on securities available for sale transferred to held to maturity	(8)		2		(6)		(9)		2		(7)
Defined benefit pension items	37		(9)		28		34		(8)		26
Foreign currency translation adjustments	—		—		—		—		—		—
Gains (losses) on hedge derivatives	—		—		—		—		—		—
Total accumulated other comprehensive income (loss)	$	(402)	$	97	$	(305)	$	13	$	(3)	$	10

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

Changes in Accumulated Other Comprehensive Income (Loss) by Component


dollars in millions	Unrealized (losses) gains on securities available for sale		Unrealized net gains (losses) on Available for Sale Securities transferred to Held to Maturity Securities		Net change in Defined Benefit Pension Items		Total AOCI
Balance as of December 31, 2021	$	(9)	$	(7)	$	26	$	10
AOCI activity before reclassifications	(318)		—		—		(318)
Amounts reclassified from AOCI	—		1		2		3
Net current period AOCI	(318)		1		2		(315)
Balance as of March 31, 2022	$	(327)	$	(6)	$	28	$	(305)

Balance as of December 31, 2020	$	79	$	4	$	(71)	$	12
AOCI activity before reclassifications	(44)		—		—		(44)
Amounts reclassified from AOCI	(7)		—		5		(2)
Net current period AOCI	(51)		—		5		(46)
Balance as of March 31, 2021	$	28	$	4	$	(66)	$	(34)

~~March 31, 2021~~

~~Level 3 assets~~

~~Valuation technique~~

~~Significant unobservable input~~

~~Fair Value~~

~~Corporate bonds~~

~~Indicative bid provided by broker~~

~~Multiple factors, including but not limited to, current operations, financial condition, cash flows, and recently executed financing transactions related to the issuer~~

~~318,116~~

~~Fair Value Option~~Other Comprehensive Income

The amounts included in the Condensed 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


	Three Months Ended March 31,
	2022						2021
dollars in millions	Gross Amount		Tax		Net Amount		Gross Amount		Tax		Net Amount		Income Statement Line Item





Net change in pension obligations

Reclassifications out of AOCI	$	3	$	(1)	$	2	$	7	$	(2)	$	5	Other noninterest expense
Net Change	$	3	$	(1)	$	2	$	7	$	(2)	$	5






Unrealized net gains on securities Available for Sale
AOCI activity before reclassification	$	(419)	$	101	$	(318)	$	(57)	$	13	$	(44)
Reclassifications out of AOCI	1		—		1		(9)		2		(7)		Realized gains on investment securities available for sale, net
Net Change	$	(418)	$	101	$	(317)	$	(66)	$	15	$	(51)
Net current period AOCI	$	(415)	$	100	$	(315)	$	(59)	$	13	$	(46)

NOTE 18 — REGULATORY CAPITAL

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

Federal banking agencies approved regulatory capital guidelines (“Basel III”) aimed at strengthening previous capital requirements for banking organizations. Basel III became effective for BancShares on January 1, 2015 and the associated capital conservation buffers of 2.5% were fully phased in by January 1, 2019.

The following table includes the Basel III requirements for regulatory capital ratios.


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

The FDIC also has ~~elected~~Prompt Corrective Action (“PCA”) thresholds for regulatory capital ratios. The regulatory capital ratios for BancShares and FCB are calculated in accordance with the ~~fair value option~~guidelines of the federal banking authorities. The regulatory capital ratios for ~~residential real estate loans originated to be sold. This election reduces certain timing differences~~BancShares and FCB exceed the Basel III requirements and the PCA well-capitalized thresholds as of March 31, 2022 and December 31, 2021 as summarized in the ~~Consolidated Statement~~following table.


					March 31, 2022				December 31, 2021
dollars in millions	Basel III Requirements		PCA well-capitalized thresholds		Amount		Ratio		Amount		Ratio
BancShares
Total risk-based capital	10.50	%	10.00	%	$	12,117	14.47	%	$	5,042	14.35	%
Tier 1 risk-based capital	8.50		8.00		10,377		12.39		4,380		12.47
Common equity Tier 1	7.00		6.50		9,496		11.34		4,041		11.50
Tier 1 leverage	4.00		5.00		10,377		9.55		4,380		7.59
FCB
Total risk-based capital	10.50	%	10.00	%	$	11,925	14.25	%	$	4,858	13.85	%
Tier 1 risk-based capital	8.50		8.00		10,641		12.71		4,651		13.26
Common equity Tier 1	7.00		6.50		10,641		12.71		4,651		13.26
Tier 1 leverage	4.00		5.00		10,641		9.81		4,651		8.07

At March 31, 2022, BancShares and FCB had total risk-based capital ratio conservation buffers of ~~Income~~6.47% and ~~better aligns with the management~~6.25%, respectively, which are in excess of the ~~portfolio~~fully phased in Basel III conservation buffer of 2.50%. At December 31, 2021, BancShares and FCB had total risk-based capital ratio conservation buffers were 6.35% and 5.85%. The capital ratio conservation buffers represent the excess of the regulatory capital ratio as of March 31, 2022 and December 31, 2021 over the Basel III minimum.

Additional Tier 1 capital for BancShares includes preferred stock discussed further in Note 16 — Stockholders’ Equity. Additional Tier 2 capital for BancShares and FCB primarily consists of qualifying ACL and qualifying subordinated debt.

Dividend Restrictions

Dividends paid from ~~a business perspective.~~FCB to the Parent Company are the primary source of funds available to the Parent Company for payment of dividends to its stockholders. The ~~changes~~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 ~~fair value were recorded as a component~~the amount of ~~mortgage income~~$3.6 billion while continuing to meet the requirements for well-capitalized banks at March 31, 2022. Dividends declared by FCB and ~~included a loss of $2.7 million and a gain of $1.2~~paid to the Parent Company amounted to $30 million for the three months ended March 31, ~~2021~~2022. Payment of dividends is made at the discretion of FCB’s Board of Directors and ~~2020, respectively. Interest earned on loans held for sale~~ is ~~recorded within interest income on loans and leases in the consolidated statements of income.~~contingent upon satisfactory earnings as well as projected capital needs.

NOTE 19 — EARNINGS PER COMMON SHARE

The following table ~~summarizes~~sets forth the ~~difference between~~computation of the ~~aggregate fair value~~basic and diluted earnings per common share:

Earnings per Common Share


	Three months ended March 31,
dollars in millions, except share and per share data	2022		2021
Net income	$	271	$	147
Preferred stock dividends	7		4
Net income available to common stockholders	$	264	$	143
Weighted Average Common Shares Outstanding
Basic shares outstanding	15,779,153		9,816,405
Stock-based awards	—		—
Diluted shares outstanding	15,779,153		9,816,405
Basic income per common share	$	16.70	$	14.53
Diluted income per common share	$	16.70	$	14.53

BancShares RSUs are discussed in Note 21— Employee Benefit Plans.

NOTE 20 — INCOME TAXES

BancShares’ global effective income tax rate was (20.4)% for the ~~aggregate unpaid principal balance for residential real estate originated for sale measured at fair value as of~~three months ended March 31, ~~2021~~2022, and ~~December 31, 2020:~~

March 31, 2021
(Dollars in thousands) Fair value Aggregate unpaid principal balance Difference
Originated loans held for sale $ 129,334 $ 126,113 $ 3,221
December 31, 2020
Fair value Aggregate unpaid principal balance Difference
Originated loans held for sale $ 124,837 $ 118,902 $ 5,935

~~NaN originated loans held~~23.0% for ~~sale were 90 or more days past due or on nonaccrual status as of~~the three months ended March 31, ~~2021 or December 31, 2020.~~2021. The decrease in the rate from the year-ago quarter was primarily driven by the non-taxable nature of the bargain purchase gain arising from the CIT Merger.

~~We may be required to measure certain financial assets at fair value~~

The quarterly income tax expense is based on a ~~nonrecurring basis. These~~projection of BancShares’ annual effective tax rate. This annual effective tax rate is applied to the year-to-date consolidated pre-tax income to determine the interim provision for income taxes before discrete items. The effective tax rate 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 ~~fair value usually result~~the valuation allowances, and discrete items. The currently forecasted effective tax rate may vary from the ~~application of lower of amortized cost or fair value accounting or write-downs of individual assets~~actual year-end 2022 effective tax rate due to ~~impairment.~~the changes in these factors.

~~The population~~

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 ~~loans measured at fair value~~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 realized.

Net Operating Loss Carryforwards and Valuation Adjustments

As a result of the CIT Merger, BancShares’ net deferred tax liabilities increased by approximately $297 million. That amount included an increase to deferred tax assets (“DTAs”) primarily from net operating losses, capitalized costs and tax credits net of deferred tax liabilities primarily from operating leases.

BancShares’ ability to recognize DTAs is evaluated on a ~~non-recurring~~quarterly basis ~~is limited~~ to ~~collateral-dependent loans evaluated individually. These collateral-dependent loans are deemed to be at fair value~~determine if there is an associated ACL or if a charge-off has been recorded in the previous 12 months. Collateral values are determined using appraisals or other third-party value estimates of the subject property discounted based on estimated selling costs, generally between 6% and 10%, and immaterial adjustments for other external factors that may impact the marketability of the collateral. The weighted average discount for estimated selling costs applied was 6.81%.

~~Table of Contents~~

OREO acquired or written down within the previous 12 months is deemed to be at fair value. Asset valuations are determined by using appraisals or other third-party value estimates of the subject property with discounts generally between 6% and 15% applied for estimated selling costs and other external factors that may impact the marketability of the property. At March 31, 2021, the weighted average discount applied was 8.76%. 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~~events that would affect our ability to utilize existing DTAs. If events are identified that affect our ability to utilize our DTAs, valuation adjustments may be adjusted ~~or new appraisals ordered to ensure the reported values reflect the most current information.~~accordingly.

~~For financial assets and liabilities carried at fair value on a nonrecurring basis, the following table provides fair value information as of March 31, 2021 and December 31, 2020:~~

March 31, 2021
Fair value measurements using:
(Dollars in thousands) Fair value Level 1 inputs Level 2 inputs Level 3 inputs
Collateral-dependent loans $ 10,247 $ 0 $ 0 $ 10,247
Other real estate owned 36,642 0 0 36,642
Mortgage servicing rights 20,409 0 0 20,409
December 31, 2020
Fair value measurements using:
Fair value Level 1 inputs Level 2 inputs Level 3 inputs
Collateral-dependent loans $ 11,779 $ 0 $ 0 $ 11,779
Other real estate owned 40,115 0 0 40,115
Mortgage servicing rights 16,966 0 0 16,966

~~NaN financial liabilities were carried at fair value on a nonrecurring basis as of March 31, 2021 and December 31, 2020.~~

NOTE ~~L -~~21 – EMPLOYEE BENEFIT PLANS

BancShares sponsors ~~noncontributory~~non-contributory defined benefit pension 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.

For the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, the components of net periodic benefit cost are as follows:


		Three months ended March 31			Three months ended March 31,
(Dollars in thousands)			2021			2020
dollars in millions								dollars in millions	2022		2021
Service cost	Service cost		$	3,653		$	3,457	Service cost	$	3	$	4
Interest cost	Interest cost		7,404			8,531		Interest cost	11		7
Expected return on assets	Expected return on assets		(19,595)			(16,409)		Expected return on assets	(22)		(20)

Amortization of prior service cost								Amortization of prior service cost	—		—
Amortization of net actuarial loss	Amortization of net actuarial loss		6,529			6,264		Amortization of net actuarial loss	3		7
Net periodic (benefit) cost			$	(2,009)		$	1,843
Net periodic benefit								Net periodic benefit	$	(5)	$	(2)

~~Table~~

Given several factors including but not limited to positive internal and external trends, positive risk metrics, effective incident, oversight and monitoring, the Company returned to business as usual operations and lifted internal COVID-19 related restrictions in early April. BancShares will continue to comply with any state and local orders that are in place. Monitoring of ~~Contents~~associated credit and operational risks has now been integrating into normal risk monitoring activities.

Since the filing of our 2021 Annual Report on Form 10-K, BancShares has been assessing the emerging impacts of the rising international tensions that could impact the economy and exacerbate headwinds of rising inflation, global supply chain disruptions, and recessionary pressures as well as operational risks such as those associated with potential cyber-attacks for FCB and third parties upon whom it relies. Assessments have not identified material impacts to date but those assessments will remain ongoing as the condition continues to exist.

~~Credit risk management~~

Due to the CIT Merger, we included additional information on added risks, Asset Risk (due to the operating lease portfolio) and Counterparty Risk (due to the increased use of derivatives).

CREDIT RISK MANAGEMENT

Credit risk is the risk of not collecting payments pursuant to the contractual terms of loans, leases and certain investment securities. 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 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 or write-downs as appropriate and to maintain an ~~adequate~~appropriate ACL that accounts for ~~expected credit~~ losses inherent in the loan and lease portfolio.

Commercial Lending and Leasing

Commercial loans and leases acquired in the CIT Merger, which are primarily within the Commercial Banking segment, are graded according to a rating system that was used by CIT prior to the merger with respect to probability of obligor default (“PD”) and loss given default (severity) based on various risk factors. The PD and severity are derived through historical observations of default and subsequent losses within each risk grading. When these loans and leases were graded at underwriting, or when updated periodically, a model is run to generate a preliminary risk rating. The model incorporates both internal and external historical default and loss data to develop loss rates for each risk rating. The preliminary risk rating assigned by the model can be adjusted as a result of borrower specific facts that in management’s judgment warrant a modification of the modeled risk rating to arrive at the final approved risk ratings.

For small-ticket lending and leasing portfolio acquired in the CIT Merger, automated credit scoring models for origination (scorecards) and re-grading (auto re-grade algorithms) are also employed. These are supplemented by business rules and expert judgment. Adjustments to credit scorecards, auto re-grading algorithms, business rules and lending programs may be made periodically based on these evaluations. A credit approval hierarchy is enforced to ensure that an underwriter with the appropriate level of authority reviews applications.

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, including borrower’s ability to repay the loan, collateral values, and considering the transaction from a judgmental perspective.

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. Non-traditional loans may also be monitored by way of a quarterly review of the borrower’s refreshed credit score. Loans are placed on non-accrual status at 90 days past due or more, except for government guaranteed loans. When warranted an additional review of the underlying collateral’s loan-to-value may be conducted.

Allowance for Credit Losses

The ACL was $848 million at March 31, 2022, compared to $178 million at December 31, 2021. The ACL as a percentage of total loans and leases was 1.29% at March 31, 2022, compared to 0.55% at December 31, 2021. The increase in the ACL was primarily due to the impact of the CIT Merger. The initial ACL for PCD loans and leases acquired in the CIT Merger (the “Initial PCD ACL”) was $284 million. The Initial PCD ACL was established through the PCD Gross-Up and there was no corresponding increase to the provision for credit losses. The PCD Gross-Up is discussed further in Note 2 — Business Combinations. The initial ACL for Non-PCD loans and leases acquired in the CIT Merger was established through a corresponding increase of $454 million to the provision for credit losses for the “Initial Non-PCD Provision”.

The ACL is calculated using a variety of factors, including, but not limited to, charge-off and recovery activity, loan growth, changes in macroeconomic factors, collateral type, estimated loan life and changes in credit quality. For the period ended March 31, 2022, the ACL increase since December 31, 2021 was primarily driven by the Initial PCD ACL and Initial Non-PCD ACL discussed above, partially offset by improvements in macroeconomic factors. Forecasted economic conditions are developed using third party macroeconomic scenarios and may be adjusted based on management’s expectations over the life of the portfolio. Significant macroeconomic factors used in estimating the expected losses include unemployment, GDP, home price index, commercial real estate index, corporate profits, and credit spreads. The March 31, 2022 ACL forecast was calculated using scenario weighting of a range of economic scenarios, including a baseline, an upside, and a downside scenario. The scenarios showed improvements in the most significant economic factors compared to what was used to generate the December 31, 2021 ACL and estimate the Initial PCD ACL and Initial Non-PCD Provision at the Merger Date. These loss estimates were also influenced by BancShares’ strong credit quality and low net charge-offs. BancShares determined that an ACL of $848 million was appropriate as of March 31, 2022. In the three months ended March 31, 2022, the ACL on commercial portfolios increased $663 million and the ACL on consumer portfolios increased $7 million, reflecting the CIT Merger.

While management utilizes its best judgment and information available, the ACL is dependent upon factors that are inherently difficult to predict, the most significant being the factors in the economic scenarios. ACL estimates in these scenarios ranged from approximately $625 million to approximately $1.1 billion. BancShares determined that an ACL of $848 million was appropriate as of March 31, 2022.

Table 21

Allowance for Credit Losses


	Three months ended March 31, 2022
dollars in millions	Commercial			Consumer			Total
Balance at December 31, 2021	$	80		$	98		$	178
Initial PCD ACL(1)	270			14			284
Initial Non-PCD Provision	432			22			454
Benefit for credit losses - loans and leases	(23)			(30)			(53)
Total provision (benefit) for credit losses- loans and leases	$	409		$	(8)		$	401
Charge-offs(1)	(28)			(5)			(33)
Recoveries	12			6			18

Balance at March 31, 2022	$	743		$	105		$	848
Annualized net charge-off ratio							0.09		%
Net charge-offs (recoveries)	$	16		$	(1)		$	15
Average loans							$	65,182
Percent of loans in each category to total loans	76		%	24		%	100		%

	Three months ended March 31, 2021
dollars in millions	Commercial			Consumer			Total
Balance at December 31, 2020	$	92		$	133		$	225
Benefit for credit losses - loans and leases	(3)			(8)			(11)
Charge-offs	(4)			(5)			(9)
Recoveries	2			4			6

Balance at March 31, 2021	$	87		$	124		$	211
Annualized net charge-off ratio							0.03		%
Net charge-offs	$	2		$	1		$	3
Average loans							$	32,970
Percent of loans in each category to total loans	70		%	30		%	100		%

(1)The Initial PCD ACL related to the CIT Merger was $284 million, net of an additional $243 million for loans that CIT charged-off prior to the Merger Date (whether full or partial) which met BancShares’ charge-off policy at the Merger Date.

Net charge-offs were $15 million during the first quarter of 2022, compared to $3 million during the first quarter of 2021. On an annualized basis, total net charge-offs as a percentage of total average loans and leases was 0.09% and 0.03% for the first quarter of 2022 and 2021, respectively.

The following table provides trends in the ACL ratios.

Table 22

Allowance for Credit Losses Ratios


dollars in millions	March 31, 2022			December 31, 2021
Allowance for credit losses to total loans and leases:	1.29		%	0.55		%
Allowance for credit losses	$	848		$	178
Total loans and leases	$	65,524		$	32,372
Commercial Loans:
Commercial allowance for credit losses to commercial loans and leases:	1.48		%	0.35		%
Allowance for credit losses - commercial	$	743		$	80
Commercial loans and leases	$	50,101		$	22,586
Consumer Loans:
Consumer allowance for credit losses to consumer loans and leases:	0.69		%	1.01		%
Allowance for credit losses - consumer	$	105		$	98
Consumer loans and leases	$	15,423		$	9,786

The reserve for unfunded loan commitments was $75 million and $12 million at March 31, 2022 and December 31, 2021, respectively. The increase was driven by the additional commitments from the CIT Merger. The additional off-balance sheet commitments primarily reflect loan commitments or lines of credit and DPAs. See Note 23 — Commitments and Contingencies for information relating to off-balance sheet commitments and Note 1 — Accounting Policies and Basis of Presentation for discussion on the ACL for unfunded commitments.

Credit Metrics

Non-performing Assets

Nonperforming assets include non-accrual loans and leases and OREO. At March 31, 2022, BancShares’ nonperforming assets totaled $581 million, an increase of $420 million since December 31, 2021, reflecting the added balances of the CIT Merger portfolio.

The following table presents total nonperforming assets.

Table 23

Non-Performing Assets


dollars in millions	March 31, 2022			December 31, 2021
Non-accrual loans:
Commercial loans	$	426		$	45
Consumer loans	112			76
Total non-accrual loans	$	538		$	121
Other real estate owned	43			40
Total non-performing assets	$	581		$	161

Allowance for credit losses to total loans and leases:	1.29		%	0.55		%
Ratio of total nonperforming assets to total loans, leases and other real estate owned	0.89		%	0.49		%
Ratio of non-accrual loans and leases to total loans and leases	0.82		%	0.37		%
Ratio of allowance for credit losses to non-accrual loans and leases	157.55		%	148.37		%

Non-accrual loans and leases at March 31, 2022 were $538 million, reflecting an increase of $417 million since December 31, 2021. Non-accrual loans and leases as a percentage of total loans and leases was 0.82% and 0.37% at March 31, 2022 and December 31, 2021, respectively. The increases were driven by the CIT Merger. The increase in consumer non-accrual loans primarily reflects the addition of a legacy CIT single family residential loan portfolio. At March 31, 2022, OREO totaled $43 million, representing an increase of $3 million since December 31, 2021. Nonperforming assets as a percentage of total loans, leases and OREO was 0.89% as of March 31, 2022 compared to 0.49% as of December 31, 2021.

Past Due Accounts

The percentage of loans 30 days or more past due was 0.81% of loans at March 31, 2022 and 0.43% at December 31, 2021. Delinquency status of loans is presented in Note 4 — Loans and Leases

Troubled Debt Restructurings

We ~~continue~~selectively agree to ~~actively monitor our~~modify existing loan ~~portfolio~~terms to provide relief to customers who are experiencing financial difficulties or other circumstances that could affect their ability to meet debt obligations. Typical modifications include short-term deferral of interest or modification of payment terms. TDRs not accruing interest at the time of restructure are included as nonperforming loans. TDRs accruing at the time of restructure and continuing to perform based on the restructured terms are considered performing loans.

The Interagency Statement on Loan Modifications and Reporting for ~~areas of increased risk~~Financial Institutions Working with Customers Affected by the Coronavirus was published by banking regulators in April 2020 to clarify accounting and reporting expectations for loan modifications in determining TDR designation for borrowers experiencing COVID-19-related financial difficulty. BancShares applied this regulatory guidance during its TDR identification process for short-term loan forbearance agreements as a result of COVID-19, and in most cases, is not recording these as TDRs.

Table 24

Troubled Debt Restructurings


	March 31, 2022						December 31, 2021
dollars in millions	Commercial		Consumer		Total		Commercial		Consumer		Total
Accruing TDRs	$	103	$	48	$	151	$	97	$	49	$	146
Nonaccruing TDRs	28		24		52		21		25		46
Total TDRs	$	131	$	72	$	203	$	118	$	74	$	192

Concentration Risk

We maintain a well-diversified loan portfolio and seek to ~~date have not seen any significant declines~~minimize the risks associated with large concentrations within specific geographic areas, collateral types or industries.

Commercial Concentrations

Geographic Concentrations

The following table summarizes state concentrations greater than 5.0% of our loans. Data is based on obligor location unless secured by real estate, then data based on property location.

Table 25

Commercial Loans - Geography


dollars in millions	March 31, 2022				December 31, 2021
State
California	$	8,701	17.4	%	$	3,163	14.0	%
North Carolina	7,973		15.9	%	7,181		31.8	%
Texas	3,235		6.5	%	879		3.9	%

Florida	3,020		6.0	%	1,496		6.6	%
South Carolina	2,969		5.9	%	2,855		12.6	%
All other states	22,784		45.5	%	7,012		31.1	%
Total U.S.	$	48,682	97.2	%	$	22,586	100.0	%




Total International	1,419		2.8	%	—		—	%
Total	$	50,101	100.0	%	$	22,586	100.0	%

Industry Concentrations

The following table represents loans by industry of obligor:

Table 26

Commercial Loans - Industry


dollars in millions	March 31, 2022				December 31, 2021

Real Estate	$	11,233	22.4	%	$	4,279	18.9	%
Healthcare	8,311		16.6	%	6,997		31.0	%
Transportation, communication, gas, utilities	4,156		8.3	%	774		3.4	%
Manufacturing	4,092		8.2	%	1,347		6.0	%

Business Services	4,053		8.1	%	2,307		10.2	%
Retail	3,832		7.6	%	1,301		5.8	%

Finance and insurance	3,228		6.4	%	1,361		6.0	%
Service industries	3,199		6.4	%	722		3.2	%
Wholesale	2,198		4.4	%	882		3.9	%



Other	5,799		11.6	%	2,615		11.6	%
Total	$	50,101	100.0	%	$	22,585	100.0	%

Consumer Concentrations

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% based upon property address.

Table 27

Consumer Loans Geographic Concentrations


	March 31, 2022				December 31, 2021
dollars in millions	Net Investment		% of Total		Net Investment		% of Total
State
North Carolina	$	5,013	32.5	%	$	4,931	50.4	%
California	3,616		23.4	%	161		1.6	%
South Carolina	2,682		17.4	%	2,626		26.9	%



Other states	4,112		26.7	%	2,068		21.1	%
Total loans	$	15,423	100.0	%	$	9,786	100.0	%

Counterparty Risk

We enter into interest rate derivatives and foreign exchange forward contracts as part of our overall risk management practices and also on behalf of our clients. We establish risk metrics and evaluate and manage the counterparty risk associated with these derivative instruments in credit quality. As of March 31, 2021, COVID-19 related loan extensions decreased to approximately $132.5 million in outstanding loan balances, representing approximately $4.2 million in payment deferrals. Through March 31, 2021, approximately 98% of all COVID-19 related loan extensions have begun repayment. Delinquency trends among loans entering repayment are in lineaccordance with the ~~remainder~~comprehensive Risk Management Framework and Risk Appetite Framework.

Counterparty credit exposure or counterparty risk is a primary risk of derivative instruments, relating to the ability of a counterparty to perform its financial obligations under the derivative contract. We seek to control credit risk of derivative agreements through counterparty credit approvals, pre-established exposure limits and monitoring procedures, which are integrated with our cash and issuer related credit processes.

The Chief Credit Officer, or delegate, approves each counterparty and establishes exposure limits based on credit analysis of each counterparty. Derivative agreements for BancShares’ risk management purposes and for the hedging of client transactions are executed with major financial institutions and are settled through the major clearing exchanges, which are rated investment grade by nationally recognized statistical rating agencies. Credit exposure is mitigated via the exchange of collateral between the counterparties covering mark-to-market valuations. Client related derivative transactions, which are primarily related to lending activities, are incorporated into our loan underwriting and reporting processes.

ASSET RISK

Asset risk is a form of price risk and is a primary risk of our leasing businesses related to the risk to earning of capital arising from changes in the value of owned leasing equipment. Reflecting the addition of operating lease equipment and additional asset-based lending from the CIT Merger, we are subject to increased asset risk. Asset risk in our leasing business is evaluated and managed in the divisions and overseen by risk management processes. In our asset based lending business, we also use residual value guarantees to mitigate or partially mitigate exposure to end of lease residual value exposure on certain of our finance leases. Our business process consists of: (1) setting residual values at transaction inception, (2) systematic periodic residual value reviews, and (3) monitoring levels of residual realizations. Residual realizations, by business and product, are reviewed as part of the ~~portfolio.~~quarterly financial and asset quality review. Reviews for impairment are performed at least annually.

~~Additionally, we participated~~

In combination with other risk management and monitoring practices, asset risk is monitored through reviews of the equipment markets including utilization rates and traffic flows, the evaluation of supply and demand dynamics, the impact of new technologies and changes in ~~both rounds~~regulatory requirements on different types of ~~funding~~equipment. At a high level, demand for equipment is correlated with GDP growth trends for the markets the equipment serves, as well as the more immediate conditions of those markets. Cyclicality in the ~~SBA-PPP program,~~economy and shifts in trade flows due to specific events represent risks to the earnings that can be realized by these businesses. For instance, in the Rail business, BancShares seeks to mitigate these risks by maintaining a relatively young fleet of assets, which ~~provided much needed funds~~can bolster attractive lease and utilization rates.

MARKET RISK

Interest rate risk management

BancShares is exposed to ~~our existing small~~the risk that changes in market conditions or government policy may affect interest rates and negatively impact earnings. The risk arises from the nature of BancShares’ business ~~customers. We continue to assess both~~activities, the ~~credit~~composition of BancShares’ balance sheet, and ~~operational risks~~changes in the level or shape of the yield curve. BancShares manages this ~~program presents~~inherent risk strategically based on prescribed guidelines and ~~at March 31, 2021, BancShares had $2.8 billion in SBA-PPP loans outstanding.~~approved limits.

Interest rate risk ~~management~~

~~Interest~~can arise from many of the BancShares’ business activities, such as lending, leasing, investing, deposit taking, derivatives, and funding activities. We evaluate and monitor interest rate risk ~~(“IRR”~~primarily through two metrics.

•Net Interest Income Sensitivity (“NII Sensitivity”) ~~results principally from: assets and liabilities maturing or repricing at different points~~measures the net impact of hypothetical changes in ~~time, assets and liabilities repricing at the same point in time but in different amounts, and short-term and long-term~~ interest rates ~~changing in different magnitudes.~~on forecasted NII; and

~~We assess our short-term IRR~~•Economic Value of Equity (“EVE Sensitivity”) measures the net impact of these hypothetical changes on the value of equity by ~~forecasting net interest income over 24 months under various interest rate scenarios~~assessing the economic value of assets, liabilities and ~~comparing those results~~off-balance sheet instruments.

BancShares uses a holistic process to ~~forecasted net interest income, assuming stable rates. IRR scenarios modeled include,~~measure and monitor both short term and long term risks which includes, but ~~are~~is not limited to, gradual and immediate parallel rate shocks, ~~interest rate ramps,~~ changes in the shape of the yield curve, and changes in the ~~relationships~~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 BancShares risk appetite framework 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 activities.

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, which is generally concentrated at the short end of the yield curve.

Our funding sources consist primarily of non-maturity deposits and time deposits. 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 drivers of deposit costs and we continue to ~~market rates. Market~~optimize deposit costs by improving our deposit mix. Changes in interest rates, ~~have increased from year-end driven~~expected funding needs, as well as actions by ~~improving economic conditions. Net interest income deterioration in down~~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 ~~shocks will remain muted due~~changes on our balances and seek to the low absolute value of market interest rates. Assumptions that incorporate customer migration from low rate deposit instruments to intermediate term fixed rate instruments as rates rise have been adjusted based on actual deposit behavior over the last three years during a rising rate cycle.achieve optimal alignment between assets and liabilities.

Table ~~19 provides~~28 below summarizes the ~~impact on net interest income over 24 months resulting~~results of 12-month NII Sensitivity simulations produced our asset/liability management system. These simulations assume static balance sheet replacement with like products and implied forward market rates, but also incorporates additional assumptions, such as, but not limited to prepayment estimates, pricing estimates and deposit behaviors. The below simulations assume an immediate 25, 100 and 200 bps parallel increase and 25 and 100 bps decrease from ~~various instantaneous interest rate shock scenarios as of~~the market-based forward curve for March 31, ~~2021~~2022 and December ~~31, 2020.~~2021.

Table 1928

~~NET INTEREST INCOME SENSITIVITY ANALYSIS~~Net Interest Income Sensitivity Simulation Analysis


		Estimated percentage (decrease) increase in net interest income					Estimated (decrease) increase in net interest income
Change in interest rate (basis points)	Change in interest rate (basis points)	March 31, 2021		December 31, 2020		Change in interest rate (basis points)	March 31, 2022		December 31, 2021
-100	-100	(7.62)	%	(6.24)	%	-100	(6.10)	%	(5.77)	%
-25						-25	(1.50)	%	(1.15)	%
+25						+25	1.60	%	1.05	%
+100	+100	9.06		8.09		+100	6.10	%	3.21	%
+200	+200	16.83		14.57		+200	12.20	%	6.30	%


☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
			For the quarterly period ended March 31, 2022
			or
☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


Delaware			56-1528994
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)

4300 Six Forks Road	Raleigh	North Carolina	27609
(Address of principle executive offices)			(Zip code)

		(919)	716-7000
(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~~Symbol(s)	Name of each exchange on which registered
Class A Common Stock, Par Value $1	FCNCA	Nasdaq Global Select Market
Depositary Shares, Each Representing a 1/40th Interest in a Share of 5.375% Non-Cumulative Perpetual Preferred Stock, Series A	FCNCP	Nasdaq Global Select Market
5.625% Non-Cumulative Perpetual Preferred Stock, Series C	FCNCO	Nasdaq Global Select Market
Securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934:
Class B Common Stock, Par Value $1


(Dollars in thousands, unaudited)	March 31, 2021		December 31, 2020
Assets
Cash and due from banks	$	410,495	$	362,048
Overnight investments	7,588,757		4,347,336
Investment in marketable equity securities (cost of $84,297 at March 31, 2021 and $84,837 at December 31, 2020)	106,886		91,680
Investment securities available for sale (cost of $7,270,552 at March 31, 2021 and $6,911,965 at December 31, 2020)	7,307,122		7,014,243
Investment securities held to maturity (fair value of $2,774,982 at March 31, 2021 and $2,838,499 at December 31, 2020)	2,808,099		2,816,982
Loans held for sale	129,334		124,837
Loans and leases	33,180,851		32,791,975
Allowance for credit losses	(210,651)		(224,314)
Net loans and leases	32,970,200		32,567,661
Premises and equipment	1,238,874		1,251,283
Other real estate owned	48,512		50,890
Income earned not collected	148,022		145,694
Goodwill	350,298		350,298
Other intangible assets	51,547		50,775
Other assets	750,460		783,953
Total assets	$	53,908,606	$	49,957,680
Liabilities
Deposits:
Noninterest-bearing	$	20,515,142	$	18,014,029
Interest-bearing	26,815,855		25,417,580
Total deposits	47,330,997		43,431,609
Securities sold under customer repurchase agreements	680,705		641,487

Federal Home Loan Bank borrowings	648,671		655,175
Subordinated debt	497,153		504,518
Other borrowings	84,502		88,470
FDIC shared-loss payable	0		15,601
Other liabilities	345,178		391,552
Total liabilities	49,587,206		45,728,412
Shareholders’ equity
Common stock:
Class A - $1 par value (16,000,000 shares authorized; 8,811,220 shares issued and outstanding at March 31, 2021 and December 31, 2020)	8,811		8,811
Class B - $1 par value (2,000,000 shares authorized; 1,005,185 shares issued and outstanding at March 31, 2021 and December 31, 2020)	1,005		1,005
Preferred stock - $0.01 par value (10,000,000 shares authorized; 345,000 shares issued and outstanding at March 31, 2021 and December 31, 2020; $1,000 per share liquidity preference)	339,937		339,937

Retained earnings	4,005,318		3,867,252
Accumulated other comprehensive (loss) income	(33,671)		12,263
Total shareholders’ equity	4,321,400		4,229,268
Total liabilities and shareholders’ equity	$	53,908,606	$	49,957,680


	Three months ended March 31
(Dollars in thousands, except per share data, unaudited)		2021		2020
Interest income
Loans and leases		$	323,023	$	325,548
Investment securities interest and dividend income		30,852		39,493
Overnight investments		1,448		4,518
Total interest income		355,323		369,559
Interest expense
Deposits		8,793		24,194
Securities sold under customer repurchase agreements		338		442

Federal Home Loan Bank borrowings		2,087		2,984
Subordinated debt		4,188		2,755
Other borrowings		265		784
Total interest expense		15,671		31,159
Net interest income		339,652		338,400
Provision (credit) for credit losses		(10,974)		28,355
Net interest income after provision for credit losses		350,626		310,045
Noninterest income
Wealth management services		32,198		26,412
Service charges on deposit accounts		21,536		26,413
Cardholder services, net		19,960		18,160
Mortgage income		12,991		5,224
Merchant services, net		8,917		5,888
Other service charges and fees		8,489		7,792
Insurance commissions		3,998		3,688
ATM income		1,482		1,422
Marketable equity securities gains (losses), net		16,011		(51,408)
Realized gains on investment securities available for sale, net		9,207		19,795


Other		1,860		625
Total noninterest income		136,649		64,011
Noninterest expense
Salaries and wages		147,830		145,255
Employee benefits		35,725		38,511
Occupancy expense		29,743		27,480
Equipment expense		29,803		27,850
Processing fees paid to third parties		13,673		10,372
FDIC insurance expense		3,218		3,466
Collection and foreclosure-related expenses		2,198		4,054
Merger-related expenses		6,819		4,232
Other		26,917		38,751
Total noninterest expense		295,926		299,971
Income before income taxes		191,349		74,085
Income taxes		44,033		16,916
Net income		$	147,316	$	57,169
Preferred stock dividends		4,636		0
Net income available to common shareholders		$	142,680	$	57,169
Weighted average common shares outstanding		9,816,405		10,473,119
Earnings per common share		$	14.53	$	5.46


	Three months ended March 31
(Dollars in thousands, unaudited)	Class A Common Stock		Class B Common Stock		Preferred Stock		Surplus		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Total Shareholders’ Equity
Balance at December 31, 2019	$	9,624	$	1,005	$	0	$	44,081	$	3,658,197	$	(126,723)	$	3,586,184
Cumulative effect of adoption of ASC 326	—		—		—		—		36,943		—		36,943
Net income	—		—		—		—		57,169		—		57,169
Other comprehensive income, net of tax	—		—		—		—		—		101,111		101,111
Issuance of preferred stock	—		—		339,958		—		—		—		339,958
Repurchase of 349,390 shares of Class A common stock	(349)		—		—		(44,081)		(115,274)		—		(159,704)

Cash dividends declared ($0.40 per common share)
Class A common stock	—		—		—		—		(3,739)		—		(3,739)
Class B common stock	—		—		—		—		(402)		—		(402)

Balance at March 31, 2020	$	9,275	$	1,005	$	339,958	$	0	$	3,632,894	$	(25,612)	$	3,957,520

Balance at December 31, 2020	$	8,811	$	1,005	$	339,937	$	0	$	3,867,252	$	12,263	$	4,229,268

Net income	—		—		—		—		147,316		—		147,316
Other comprehensive loss, net of tax	—		—		—		—		—		(45,934)		(45,934)



Cash dividends declared ($0.47 per common share)
Class A common stock	—		—		—		—		(4,142)		—		(4,142)
Class B common stock	—		—		—		—		(472)		—		(472)
Preferred stock dividends declared	—		—		—		—		(4,636)		—		(4,636)
Balance at March 31, 2021	$	8,811	$	1,005	$	339,937	$	0	$	4,005,318	$	(33,671)	$	4,321,400


	March 31, 2021
	Commercial Loans Amortized Cost Basis by Origination Year
Classification:	2021		2020		2019		2018		2017		Prior		Revolving		Revolving converted to term loans		Total
(Dollars in thousands)
Construction and land development
Pass	$	46,039	$	399,172	$	310,753	$	168,534	$	48,089	$	28,797	$	12,548	$	0	$	1,013,932
Special Mention	0		232		0		181		85		0		145		0		643
Substandard	0		225		590		1,447		5,170		80		0		0		7,512


Total	46,039		399,629		311,343		170,162		53,344		28,877		12,693		0		1,022,087
Owner occupied commercial mortgage
Pass	632,239		3,202,842		2,166,465		1,521,886		1,206,771		2,249,426		106,579		101		11,086,309
Special Mention	687		10,398		29,975		39,868		12,074		37,441		2,974		72		133,489
Substandard	3,564		9,322		14,441		9,287		26,702		49,856		7,996		0		121,168


Total	636,490		3,222,562		2,210,881		1,571,041		1,245,547		2,336,723		117,549		173		11,340,966
Non-owner occupied commercial mortgage
Pass	158,815		809,647		603,274		332,010		319,514		638,882		35,835		0		2,897,977
Special Mention	794		676		880		10,778		1,440		2,918		500		0		17,986
Substandard	75		12,018		22,293		12,643		8,762		44,396		1,748		0		101,935


Total	159,684		822,341		626,447		355,431		329,716		686,196		38,083		0		3,017,898
Commercial and industrial and leases
Pass	424,035		1,423,941		884,987		442,129		251,356		445,265		874,664		5,150		4,751,527
Special Mention	102		10,601		22,183		8,335		6,160		7,764		11,376		194		66,715
Substandard	5,507		15,179		4,398		5,572		3,950		5,597		24,608		1,410		66,221
Doubtful	0		0		0		0		0		0		2		0		2
Ungraded	0		0		0		0		0		0		61,980		0		61,980
Total	429,644		1,449,721		911,568		456,036		261,466		458,626		972,630		6,754		4,946,445
SBA-PPP
Pass	936,012		1,833,894		0		0		0		0		0		0		2,769,906





Total commercial	$	2,207,869	$	7,728,147	$	4,060,239	$	2,552,670	$	1,890,073	$	3,510,422	$	1,140,955	$	6,927	$	23,097,302

	Consumer and PCD Loans Amortized Cost Basis by Origination Year
Days Past Due:	2021		2020		2019		2018		2017		Prior		Revolving		Revolving converted to term loans		Total
(Dollars in thousands)
Residential mortgage
Current	$	521,849	$	1,810,979	$	889,902	$	561,267	$	518,205	$	1,166,958	$	24,331	$	0	$	5,493,491
30-59 days	2,367		2,193		236		9,619		4,113		15,567		255		0		34,350
60-89 days	0		256		1,012		1,040		558		4,530		0		0		7,396
90 days or greater	0		286		1,455		838		3,797		24,384		29		0		30,789
Total	524,216		1,813,714		892,605		572,764		526,673		1,211,439		24,615		0		5,566,026
Revolving mortgage
Current	0		0		0		0		0		0		1,772,173		149,893		1,922,066
30-59 days	0		0		0		0		0		0		3,877		2,345		6,222
60-89 days	0		0		0		0		0		0		699		904		1,603
90 days or greater	0		0		0		0		0		0		4,112		4,419		8,531
Total	0		0		0		0		0		0		1,780,861		157,561		1,938,422
Construction and land development
Current	40,360		209,701		52,406		16,883		8,037		5,241		1,575		0		334,203
30-59 days	0		108		15		61		30		52		0		0		266
60-89 days	0		240		138		59		366		141		0		0		944
90 days or greater	0		543		0		0		59		50		0		0		652
Total	40,360		210,592		52,559		17,003		8,492		5,484		1,575		0		336,065


Consumer auto
Current	155,101		484,026		302,622		191,055		87,139		45,337		0		0		1,265,280
30-59 days	0		1,327		962		1,054		703		386		0		0		4,432
60-89 days	0		433		197		253		117		14		0		0		1,014
90 days or greater	0		294		134		217		129		86		0		0		860
Total	155,101		486,080		303,915		192,579		88,088		45,823		0		0		1,271,586
Consumer other
Current	20,879		45,239		22,631		8,552		6,246		34,873		395,282		0		533,702
30-59 days	3		131		100		106		1		0		1,905		0		2,246
60-89 days	0		95		7		10		0		0		1,101		0		1,213
90 days or greater	0		14		114		6		0		0		1,382		0		1,516
Total	20,882		45,479		22,852		8,674		6,247		34,873		399,670		0		538,677
Total consumer	$	740,559	$	2,555,865	$	1,271,931	$	791,020	$	629,500	$	1,297,619	$	2,206,721	$	157,561	$	9,650,776
PCD loans
Current	$	0	$	28,056	$	24,347	$	26,763	$	24,879	$	247,606	$	11,788	$	20,068	$	383,507
30-59 days	0		344		390		407		300		9,423		19		367		11,250
60-89 days	0		51		88		0		165		3,896		0		122		4,322
90 days or greater	0		1,294		2,404		4,412		1,826		22,504		105		1,149		33,694
Total PCD	$	0	$	29,745	$	27,229	$	31,582	$	27,170	$	283,429	$	11,912	$	21,706	$	432,773
Total loans and leases	$	2,948,428	$	10,313,757	$	5,359,399	$	3,375,272	$	2,546,743	$	5,091,470	$	3,359,588	$	186,194	$	33,180,851


	March 31, 2021
(Dollars in thousands)	Collateral-Dependant Loans		Net Realizable Value of Collateral		Collateral Coverage		Allowance for Credit Losses
Commercial loans:
Construction and land development	$	1,424	$	1,795	126.1	%	$	0
Owner occupied commercial mortgage	11,886		16,417		138.1		0
Non-owner occupied commercial mortgage	6,951		9,312		134.0		0
Commercial and industrial and leases	1,256		2,916		232.2		0
Total commercial loans	21,517		30,440		141.5		0
Consumer:
Residential mortgage	21,303		27,279		128.1		120
Revolving mortgage	1,385		1,724		124.5		0



Total consumer loans	22,688		29,003		127.8		120
PCD loans	20,361		35,016		172.0		0
Total collateral-dependent loans	$	64,566	$	94,459	146.3	%	$	120

	December 31, 2020
(Dollars in thousands)	Collateral-Dependant Loans		Net Realizable Value of Collateral		Collateral Coverage		Allowance for Credit Losses
Commercial loans:
Construction and land development	$	1,424	$	1,795	126.1	%	$	0
Owner occupied commercial mortgage	9,792		14,253		145.6		0
Non-owner occupied commercial mortgage	5,556		7,577		136.4		0

Total commercial loans	16,772		23,625		140.9		0
Consumer:
Residential mortgage	23,011		29,775		129.4		131





PCD loans	19,042		27,872		146.4		0
Total collateral-dependent loans	$	58,825	$	81,272	138.2	%	$	131


	March 31, 2022
dollars in millions	Accruing		Non-Accruing		Total
Commercial
Commercial construction	$	2	$	1	$	3
Owner occupied commercial mortgage	54		9		63
Non-owner occupied commercial mortgage	24		4		28
Commercial and industrial	23		13		36
Leases	—		1		1
Total commercial	103		28		131
Consumer
Residential mortgage	28		18		46
Revolving mortgage	17		6		23
Consumer auto	2		—		2
Consumer other	1		—		1
Total consumer	48		24		72
Total TDRs	$	151	$	52	$	203












	Three months ended March 31, 2021						Three months ended March 31, 2020
	All restructurings			Restructurings with payment default			All restructurings			Restructurings with payment default
(Dollars in thousands)	Number of Loans	Recorded investment at period end		Number of Loans	Recorded investment at period end		Number of Loans	Recorded investment at period end		Number of Loans	Recorded investment at period end
Loans and leases
Interest only	6	$	6,947	2	$	42	10	$	3,986	0	$	0
Loan term extension	25	3,863		12	1,749		6	794		3	263
Below market interest rate	53	8,122		20	1,428		88	8,165		29	1,421
Discharged from bankruptcy	45	4,100		12	2,365		68	5,032		28	1,767
Total restructurings	129	$	23,032	46	$	5,584	172	$	17,977	60	$	3,451


dollars in millions	Classification	March 31, 2022			December 31, 2021
ROU assets:
Operating leases	Other assets	$	384		$	64
Finance leases	Premises and equipment	4			4
Total ROU assets		$	388		$	68
Lease liabilities:
Operating leases	Other liabilities	$	385		$	65
Finance leases	Other borrowings	4			4
Total lease liabilities		$	389		$	69
Weighted-average remaining lease terms
Operating leases		9.9 Years			8.9 Years
Finance leases		3.4 Years			3.5 Years
Weighted-average discount rate
Operating leases		2.07		%	3.00		%
Finance leases		3.11		%	3.12		%


~~(Dollars~~dollars in ~~thousands)~~millions	~~OREO~~March 31, 2022
~~Balance at December 31, 2020~~Railcars and locomotives	$	~~50,890~~7,251
~~Additions~~Other equipment	~~7,106~~721
Total(1)	$	7,972


~~Sales~~dollars in millions	~~(8,102)~~2022
Balance, net of accumulated amortization at January 1	$	19
~~Write-downs/losses~~Core deposit intangibles related to the CIT Merger	~~(1,382)~~143
Amortization for the period	(6)
Balance at March 31, ~~2021~~net of accumulated amortization	$	~~48,512~~156


dollars in millions	2022
Balance at ~~December 31, 2019~~January 1	$	~~46,591~~
~~Additions~~	~~5,987~~—
Acquired in ~~business combinations~~CIT Merger	~~9,813~~52
~~Sales~~Amortization	~~(5,321)~~
~~Write-downs/losses~~	~~(1,363)~~(4)
Balance at March 31, ~~2020~~net of accumulated amortization	$	~~55,707~~48


dollars in millions	March 31, 2022
Gross balance	$	52
Accumulated amortization	(4)
Balance, net of accumulated amortization	$	48


	March 31, 2021			December 31, 2020
Discount rate - conventional fixed loans	8.74		%	7.92		%
Discount rate - all loans excluding conventional fixed loans	9.74		%	8.92		%
Weighted average constant prepayment rate	16.54		%	20.62		%
Weighted average cost to service a loan	$	87.58		$	87.58


dollars in millions	Maturity	March 31, 2022		December 31, 2021
Parent Company:
Senior:
Unsecured term loan at 1-month LIBOR plus 1.10%	September 2022	$	64	$	68
Subordinated:


Fixed-to-Floating subordinated notes at 3.375%	March 2030	350		350
Junior subordinated debenture at 3-month LIBOR plus 2.25%	June 2034	20		20
Junior subordinated debenture at 3-month LIBOR plus 1.75%	June 2036	88		88
Subsidiaries:
Senior:
Senior unsecured fixed to floating rate notes at 3.929%(1)	June 2024	500		—
Senior unsecured fixed to floating rate notes at 2.969%(1)	September 2025	315		—
Fixed senior unsecured notes at 6.00%(1)	April 2036	51		—
Subordinated:
Junior subordinated debentures at 3-month LIBOR plus 2.80%	March 2034	14		14
Junior subordinated debentures at 3-month LIBOR plus 2.85%	April 2034	10		10
Fixed subordinated notes at 6.125%(1)	March 2028	400		—
Fixed-to-Fixed subordinated notes at 4.125%(1)	November 2029	100		—
Secured:
Notes payable to FHLB of Atlanta with rates ranging from 0.75% to 2.99%	Maturities through March 2032	639		645

Other secured financings(1)	Maturities through January 2024	16		—
Capital lease obligations	Maturities through August 2026	4		4
Unamortized issuance costs		(2)		(2)
Unamortized purchase accounting adjustments(2)		107		(2)
Total long-term borrowings		$	2,676	$	1,195






















	Three months ended March 31, 2021
(Dollars in thousands, net of tax)	Unrealized gains on securities available for sale		Unrealized gains on securities available for sale transferred to held to maturity		Defined benefit pension items		Total
Beginning balance	$	78,754	$	4,157	$	(70,648)	$	12,263


Net unrealized losses arising during period	(43,506)		0		0		(43,506)
Amounts reclassified from accumulated other comprehensive income	(7,089)		(366)		5,027		(2,428)
Net current period other comprehensive (loss) income	(50,595)		(366)		5,027		(45,934)
Ending balance	$	28,159	$	3,791	$	(65,621)	$	(33,671)

	Three months ended March 31, 2020
(Dollars in thousands, net of tax)	Unrealized gains on securities available for sale		Unrealized gains on securities available for sale transferred to held to maturity		Defined benefit pension items		Total
Beginning balance	$	5,792	$	0	$	(132,515)	$	(126,723)


Net unrealized gains arising during period	111,530		0		0		111,530
Amounts reclassified from accumulated other comprehensive loss	(15,242)		0		4,823		(10,419)
Net current period other comprehensive income	96,288		0		4,823		101,111
Ending balance	$	102,080	$	0	$	(127,692)	$	(25,612)


	March 31, 2021
			Fair value measurements using:
(Dollars in thousands)	Fair value		Level 1 inputs		Level 2 inputs		Level 3 inputs
Assets measured at fair value
Investment securities available for sale

Government agency	$	846,686	$	0	$	846,686	$	0
Residential mortgage-backed securities	4,758,589		0		4,758,589		0
Commercial mortgage-backed securities	1,098,987		0		1,098,987		0
Corporate bonds	602,860		0		284,744		318,116

Total investment securities available for sale	$	7,307,122	$	0	$	6,989,006	$	318,116
Marketable equity securities	$	106,886	$	43,677	$	63,209	$	0
Loans held for sale	$	129,334	$	0	$	129,334	$	0



	December 31, 2020
			Fair value measurements using:
	Fair value		Level 1 inputs		Level 2 inputs		Level 3 inputs
Assets measured at fair value
Investment securities available for sale
U.S. Treasury	$	499,933	$	0	$	499,933	$	0
Government agency	701,391		0		701,391		0
Residential mortgage-backed securities	4,438,103		0		4,438,103		0
Commercial mortgage-backed securities	771,537		0		771,537		0
Corporate bonds	603,279		0		286,655		316,624

Total investment securities available for sale	$	7,014,243	$	0	$	6,697,619	$	316,624
Marketable equity securities	$	91,680	$	32,855	$	58,825	$	0
Loans held for sale	$	124,837	$	0	$	124,837	$	0


	Stock-Settled Awards
per share amounts in whole dollars	Number of Shares	Weighted Average Grant Date Value
Unvested BancShares at December 31, 2021	—	$	—
Unvested CIT RSUs converted to BancShares RSUs at Merger Date	116,958	859.76
Unvested CIT PSUs converted to RSUs at Merger Date	10,678	859.76
Forfeited / cancelled	(411)	859.76
Vested / settled awards	(71,171)	859.76
Vested / unsettled awards	(95)	859.76
Unvested BancShares RSUs at March 31, 2022	55,959	$	859.76


	Three months ended March 31, 2022
dollars in millions	General Banking		Commercial Banking		Rail		Corporate		Total BancShares
Net interest income	$	437	$	207	$	(19)	$	24	$	649
Provision (benefit) for credit losses	(15)		(34)		—		513		464
Net interest income after provision for credit losses	452		241		(19)		(489)		185
Noninterest income	123		112		162		453		850
Noninterest expenses	409		191		100		110		810
Income (loss) before income taxes	166		162		43		(146)		225
Provision (benefit) for income taxes	40		41		11		(138)		(46)
Net income (loss)	$	126	$	121	$	32	$	(8)	$	271
Select Period End Balances

Loans and leases	$	38,778	$	26,672	$	67	$	7	$	65,524
Deposits	85,469		4,687		13		1,428		91,597
Operating lease equipment, net	—		721		7,251		—		7,972

	Three months ended March 31, 2021
dollars in millions	General Banking		Commercial Banking		Rail		Corporate		Total BancShares
Net interest income	$	344	$	4	$	—	$	(8)	$	340
Benefit for credit losses	(11)		—		—		—		(11)
Net interest income (loss) after benefit for credit losses	355		4		—		(8)		351
Noninterest income	110		—		—		27		137
Noninterest expenses	290		1		—		6		297
Income before income taxes	175		3		—		13		191
Provision for income taxes	40		1		—		3		44
Net income	$	135	$	2	$	—	$	10	$	147
Select Period End Balances

Loans and leases	$	32,580	$	601	$	—	$	—	$	33,181
Deposits	47,277		53		—		1		47,331
Operating lease equipment, net	—		—		—		—		—


(Dollars in thousands)
Loan Size	$ of Loans		% of Loans $
Less than $150,000	$	793,559	28.7	%
$150,000 to $2,000,000	1,465,863		52.9
Greater than $2,000,000	510,484		18.4
Total	$	2,769,906	100.0	%


(Dollars in thousands)
Forgiveness Status	$ of Loans		% of Round 1 Total
Received by FCB	$	2,222,139	69.2	%
Submitted to SBA	2,099,988		65.4
Approved by SBA	1,458,983		45.4
Funds Received	1,410,441		43.9


	2021			2020
	First			Fourth			Third			Second			First
(Dollars in thousands, except share data)	Quarter			Quarter			Quarter			Quarter			Quarter
SUMMARY OF OPERATIONS
Interest income	$	355,323		$	376,876		$	374,334		$	363,257		$	369,559
Interest expense	15,671			18,160			20,675			25,863			31,159
Net interest income	339,652			358,716			353,659			337,394			338,400
Provision (credit) for credit losses	(10,974)			5,403			4,042			20,552			28,355
Net interest income after provision for credit losses	350,626			353,313			349,617			316,842			310,045

Noninterest income	136,649			126,765			120,572			165,402			64,011
Noninterest expense	295,926			305,373			291,662			291,679			299,971
Income before income taxes	191,349			174,705			178,527			190,565			74,085
Income taxes	44,033			36,621			35,843			36,779			16,916
Net income	147,316			138,084			142,684			153,786			57,169
Net income available to common shareholders	$	142,680		$	133,448		$	138,048		$	148,996		$	57,169
Net interest income, taxable equivalent	$	340,271		$	359,370		$	354,256		$	337,965		$	339,174
PER COMMON SHARE DATA
Net income	$	14.53		$	13.59		$	14.03		$	14.74		$	5.46
Cash dividends on common shares	0.47			0.47			0.40			0.40			0.40
Market price at period end (Class A)	835.77			574.27			318.78			405.02			332.87
Book value at period-end	405.59			396.21			380.43			367.57			351.90
SELECTED QUARTERLY AVERAGE BALANCES
Total assets	$	51,409,634		$	49,557,803		$	48,262,155		$	45,553,502		$	40,648,806
Investment securities	9,757,650			9,889,124			9,930,197			8,928,467			7,453,159
Loans and leases (1)	33,086,656			32,964,390			32,694,996			31,635,958			29,098,101
Interest-earning assets	48,715,279			46,922,823			45,617,376			42,795,781			38,004,341
Deposits	44,858,198			43,123,312			41,905,844			39,146,415			34,750,061
Interest-bearing liabilities	27,898,525			26,401,222			25,591,707			24,407,285			23,153,777
Securities sold under customer repurchase agreements	641,236			684,311			710,237			659,244			474,231
Other short-term borrowings	—			—			—			45,549			157,759
Long-term borrowings	1,235,576			1,250,682			1,256,331			1,275,928			961,132
Common shareholders' equity	3,935,267			3,786,158			3,679,138			3,648,284			3,625,975
Shareholders’ equity	$	4,275,204		$	4,126,095		$	4,019,075		$	3,988,225		$	3,682,634
Common shares outstanding	9,816,405			9,816,405			9,836,629			10,105,520			10,473,119
SELECTED QUARTER-END BALANCES
Total assets	$	53,908,606		$	49,957,680		$	48,666,873		$	47,866,194		$	41,594,453
Investment securities	10,222,107			9,922,905			9,860,594			9,508,476			8,845,197
Loans and leases	33,180,851			32,791,975			32,845,144			32,418,425			29,240,959
Deposits	47,330,997			43,431,609			42,250,606			41,479,245			35,346,711
Securities sold under customer repurchase agreements	680,705			641,487			693,889			740,276			540,362
Other short-term borrowings	—			—			—			—			105,000
Long-term borrowings	1,230,326			1,248,163			1,252,016			1,258,719			1,297,132
Shareholders’ equity	$	4,321,400		$	4,229,268		$	4,074,414		$	3,991,444		$	3,957,520
Common shares outstanding	9,816,405			9,816,405			9,816,405			9,934,105			10,280,105
SELECTED RATIOS AND OTHER DATA
Return on average assets (annualized)	1.16		%	1.11		%	1.18		%	1.36		%	0.57		%
Return on average common shareholders’ equity (annualized)	14.70			14.02			14.93			16.43			6.34
Net yield on interest-earning assets (taxable equivalent)	2.80			3.02			3.06			3.14			3.55
Net charge-offs to average loans and leases (annualized)	0.03			0.06			0.03			0.09			0.10
Allowance for credit losses to total loans and leases(2):
PCD	5.30			5.18			5.07			5.07			4.80
Non-PCD	0.57			0.62			0.61			0.61			0.64
Total	0.63			0.68			0.68			0.69			0.72
Ratio of total nonperforming assets to total loans, leases and other real estate owned	0.73			0.74			0.73			0.77			0.79
Tier 1 risk-based capital ratio	14.14			13.81			13.70			13.63			13.65
Common equity Tier 1 ratio	12.02			11.63			11.48			11.38			11.43
Total risk-based capital ratio	11.00			10.61			10.43			10.32			10.36
Tier 1 leverage capital ratio	7.84			7.86			7.80			8.07			8.98
Dividend payout ratio	3.23			3.46			2.85			2.71			7.33
Average loans and leases to average deposits	73.76			76.44			78.02			80.81			83.74


	Three Months Ended
	March 31, 2022						March 31, 2021						Change in NII Due to:
dollars in millions	Average Balance		Income / Expense		Yield / Rate		Average Balance		Income / Expense		Yield / Rate		Volume(1)		Yield /Rate(1)		Total Change
Loans and leases (1)(2)	$	64,144	$	621	3.88	%	$	33,087	$	323	3.92	%	$	301	$	(3)	$	298








Total investment securities	19,492		83		1.71		9,757		31		1.27		26		26		52

Interest-earning deposits at banks	11,476		6		0.19		5,871		1		0.10		4		1		5
Total adjusted interest earning assets(2)	$	95,112	$	710	2.99	%	$	48,715	$	355	2.92	%	$	331	$	24	$	355

Operating lease equipment, net (including held for sale)	7,924						—
Cash and due from banks	536						333
Allowance for credit losses	(907)						(224)
All other noninterest bearing assets	6,569						2,585
Total assets	$	109,234					$	51,409

Interest-bearing deposits:
Checking with interest	$	16,605	$	5	0.10	%	$	10,746	$	1	0.05	%	$	3	$	1	$	4
Money market	26,199		15		0.24		9,008		3		0.11		9		3		12
Savings	13,659		9		0.26		3,462		—		0.04		7		2		9
Time deposits	9,794		10		0.43		2,805		5		0.66		7		(2)		5
Total interest-bearing deposits	66,257		39		0.24		26,021		9		0.14		26		4		30
Securities sold under customer repurchase agreements	600		—		0.16		641		—		0.21		—		—		—
Borrowings:
Federal Home Loan Bank borrowings	641		2		1.27		651		2		1.28		—		—		—
Senior unsecured borrowings	2,719		12		1.71		—		—		—		12		—		12
Subordinated debt	1,060		8		2.96		497		4		3.37		4		—		4
Other borrowings	85		—		1.95		88		—		1.22		—		—		—
Total borrowings	4,505		22		1.95		1,236		6		2.12		16		—		16
Total interest-bearing liabilities	$	71,362	$	61	0.35	%	$	27,898	$	15	0.23	%	$	42	$	4	$	46

Noninterest-bearing deposits	25,317						18,837
Other noninterest-bearing liabilities	2,132						399
Stockholders' equity	10,423						4,275
Total liabilities and stockholders' equity	$	109,234					$	51,409

Interest rate spread (2)					2.64	%					2.69	%
Net interest income and net yield on interest-earning assets (2)			$	649	2.73	%			$	340	2.79	%


	Three months ended March 31, 2021
	Change from prior year period due to:
(Dollars in thousands)		Volume(1)		Yield/Rate(1)		Total Change
Assets
Loans and leases		$	47,241	$	(49,794)	$	(2,553)
Investment securities:
U.S. Treasury		451		(1,957)		(1,506)
Government agency		400		(2,621)		(2,221)
Mortgage-backed securities		9,353		(19,453)		(10,100)
Corporate bonds		4,789		476		5,265

Other investments		(278)		72		(206)
Total investment securities		14,715		(23,483)		(8,768)
Overnight investments		13,602		(16,672)		(3,070)
Total interest-earning assets		$	75,558	$	(89,949)	$	(14,391)
Liabilities
Interest-bearing deposits:
Checking with interest		$	529	$	(821)	$	(292)
Savings		95		(81)		14
Money market accounts		2,517		(9,118)		(6,601)
Time deposits		(3,359)		(5,163)		(8,522)
Total interest-bearing deposits		(218)		(15,183)		(15,401)
Securities sold under customer repurchase agreements		155		(259)		(104)
Other short-term borrowings		(804)		—		(804)
Long-term borrowings		1,608		(787)		821
Total interest-bearing liabilities		741		(16,229)		(15,488)
Change in net interest income		$	74,817	$	(73,720)	$	1,097
(1) The rate/volume variance is allocated proportionally between the changes in volume and rate.


	% of Total Interest-earning Assets
	Three months ended
	March 31, 2022		March 31, 2021
Loans and leases	67	%	68	%
Investment securities	21	%	20	%

Interest-bearing cash	12	%	12	%
Total interest earning assets	100	%	100	%


	% of Total Interest-bearing Liabilities
	Three months ended
	March 31, 2022		March 31, 2021
Total interest-bearing deposits	93	%	93	%
Securities sold under customer repurchase agreements	1	%	2	%

Long-term borrowings	6	%	5	%
	100	%	100	%


dollars in millions	Three Months Ended March 31,
Earnings Summary	2022		2021
Net interest income	$	437	$	344
Benefit for credit losses	(15)		(11)
Net interest income after benefit for credit losses	452		355
Noninterest income	123		110
Noninterest expense	409		290
Segment income before income taxes	166		175
Provision for income taxes	40		40
Segment net income	$	126	$	135
Select Period End Balances
Loans and leases	$	38,778	$	32,580
Deposits	85,469		47,277


Railcar Type	Total Owned Fleet - % Total Units		Total Owned Fleet - % Total Net Investment
Covered Hoppers	42	%	40	%
Tank Cars	30	%	41	%
Mill/Coil Gondolas	8	%	6	%
Coal	8	%	1	%
Boxcars	6	%	7	%
Other	6	%	5	%
Total	100	%	100	%


		March 31, 2021											March 31, 2022
		Within One Year		One to Five Years		Five to 10 Years		After 10 Years		Total			Within One Year		One to Five Years		Five to 10 Years		After 10 Years		Total
Investment securities available for sale												Investment securities available for sale
U.S. Treasury												U.S. Treasury	0.11	%	0.96	%	—	%	—	%	0.96	%
Government agency												Government agency	—	%	3.44	%	2.78	%	2.81	%	2.79	%
Residential mortgage-backed securities												Residential mortgage-backed securities	1.70	%	1.84	%	2.18	%	1.50	%	1.51	%
Commercial mortgage-backed securities												Commercial mortgage-backed securities	—	%	3.16	%	4.02	%	2.17	%	2.20	%
Corporate bonds												Corporate bonds	3.54	%	5.88	%	5.43	%	5.28	%	5.46	%

Total investment securities available for sale												Total investment securities available for sale	0.19	%	1.12	%	4.52	%	1.66	%	1.77	%

Investment securities held to maturity	Investment securities held to maturity											Investment securities held to maturity
U.S. Treasury												U.S. Treasury	—	%	1.19	%	1.44	%	—	%	1.38	%
Government agency												Government agency	—	%	1.26	%	1.70	%	—	%	1.49	%
Residential mortgage-backed securities(1)	Residential mortgage-backed securities(1)	—	%	—	%	—	%	1.01	%	1.01	%	Residential mortgage-backed securities(1)	—	%	3.36	%	7.67	%	1.74	%	1.74	%
Commercial mortgage-backed securities(1)	Commercial mortgage-backed securities(1)	—		—		—		1.32		1.32		Commercial mortgage-backed securities(1)	—	%	—	%	2.37	%	1.84	%	1.84	%
Supranational Securities												Supranational Securities	—	%	1.23	%	1.64	%	—	%	1.56	%
Other investments	Other investments	1.09		1.25		—		—		1.17		Other investments	0.59	%	—	%	—	%	—	%	0.59	%
Total investment securities held to maturity	Total investment securities held to maturity	1.09	%	1.25	%	—	%	1.13	%	1.13	%	Total investment securities held to maturity	0.59	%	1.25	%	1.63	%	1.78	%	1.71	%


dollars in millions	March 31, 2022
Railcars and locomotives	$	7,251
Other equipment	721
Total(1)	$	7,972