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~~	60

~~Table of Contents~~

PART I

Item 1.Financial Statements

First Citizens BancShares, Inc. and Subsidiaries

Consolidated Balance Sheets (Unaudited)

(Dollars in thousands, unaudited) June 30, 2021 December 31, 2020
Assets
Cash and due from banks $ 395,364 $ 362,048
Overnight investments 7,871,382 4,347,336
Investment in marketable equity securities (cost of $84,297 at June 30, 2021 and $84,837 at December 31, 2020) 118,540 91,680
Investment securities available for sale (cost of $7,335,745 at June 30, 2021 and $6,911,965 at December 31, 2020) 7,381,083 7,014,243
Investment securities held to maturity (fair value of $3,377,085 at June 30, 2021 and $2,838,499 at December 31, 2020) 3,394,604 2,816,982
Loans held for sale 107,768 124,837
Loans and leases 32,689,652 32,791,975
Allowance for credit losses (189,094) (224,314)
Net loans and leases 32,500,558 32,567,661
Premises and equipment 1,237,860 1,251,283
Other real estate owned 43,685 50,890
Income earned not collected 133,043 145,694
Goodwill 350,298 350,298
Other intangible assets 47,439 50,775
Other assets 1,593,694 783,953
Total assets $ 55,175,318 $ 49,957,680
Liabilities
Deposits:
Noninterest-bearing $ 20,974,111 $ 18,014,029
Interest-bearing 27,436,485 25,417,580
Total deposits 48,410,596 43,431,609
Securities sold under customer repurchase agreements 692,604 641,487
Federal Home Loan Bank borrowings 646,667 655,175
Subordinated debt 497,290 504,518
Other borrowings 80,531 88,470
FDIC shared-loss payable 0 15,601
Other liabilities 371,140 391,552
Total liabilities 50,698,828 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 June 30, 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 June 30, 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 June 30, 2021 and December 31, 2020; $1,000 per share liquidity preference) 339,937 339,937
Retained earnings 4,148,857 3,867,252
Accumulated other comprehensive (loss) income (22,120) 12,263
Total shareholders’ equity 4,476,490 4,229,268
Total liabilities and shareholders’ equity $ 55,175,318 $ 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 June 30 Six months ended June 30
(Dollars in thousands, except per share data, unaudited) 2021 2020 2021 2020
Interest income
Loans and leases $ 324,288 $ 326,099 $ 647,311 $ 651,647
Investment securities interest and dividend income 35,432 36,605 66,284 76,098
Overnight investments 2,105 553 3,553 5,071
Total interest income 361,825 363,257 717,148 732,816
Interest expense
Deposits 8,542 17,916 17,335 42,110
Securities sold under customer repurchase agreements 356 399 694 841
Federal Home Loan Bank borrowings 2,099 2,472 4,186 5,456
Subordinated debt 4,181 4,677 8,369 7,432
Other borrowings 254 399 519 1,183
Total interest expense 15,432 25,863 31,103 57,022
Net interest income 346,393 337,394 686,045 675,794
Provision (credit) for credit losses (19,603) 20,552 (30,577) 48,907
Net interest income after provision for credit losses 365,996 316,842 716,622 626,887
Noninterest income
Wealth management services 31,753 22,371 63,951 48,783
Service charges on deposit accounts 21,883 17,522 43,419 43,935
Cardholder services, net 22,471 17,587 42,431 35,747
Mortgage income 5,929 9,811 18,920 15,035
Merchant services, net 8,532 5,363 17,449 11,251
Other service charges and fees 8,959 7,145 17,448 14,937
Insurance commissions 3,704 3,189 7,702 6,877
ATM income 1,571 1,395 3,053 2,817
Marketable equity securities gains, net 11,654 64,570 27,665 13,162
Realized gains on investment securities available for sale, net 15,830 13,752 25,037 33,547
Other 1,864 2,697 3,724 3,322
Total noninterest income 134,150 165,402 270,799 229,413
Noninterest expense
Salaries and wages 153,643 146,633 301,473 291,888
Employee benefits 35,298 30,364 71,023 68,875
Occupancy expense 28,439 29,556 58,182 57,036
Equipment expense 28,902 28,774 58,705 56,624
Processing fees paid to third parties 14,427 10,186 28,100 20,558
FDIC insurance expense 3,382 3,731 6,600 7,197
Collection and foreclosure-related expenses 173 3,949 2,371 8,003
Merger-related expenses 5,769 4,369 12,588 8,601
Other 31,545 34,117 58,462 72,868
Total noninterest expense 301,578 291,679 597,504 591,650
Income before income taxes 198,568 190,565 389,917 264,650
Income taxes 45,780 36,779 89,813 53,695
Net income $ 152,788 $ 153,786 $ 300,104 $ 210,955
Preferred stock dividends 4,636 4,790 9,272 4,790
Net income available to common shareholders $ 148,152 $ 148,996 $ 290,832 $ 206,165
Weighted average common shares outstanding 9,816,405 10,105,520 9,816,405 10,289,320
Earnings per common share $ 15.09 $ 14.74 $ 29.63 $ 20.04


	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 June 30 Six months ended June 30
(Dollars in thousands, unaudited) 2021 2020 2021 2020
Net income $ 152,788 $ 153,786 $ 300,104 $ 210,955
Other comprehensive income
Unrealized gains (losses) on securities available for sale:
Unrealized gains (losses) on securities available for sale arising during the period 24,598 28,066 (31,903) 172,909
Tax effect (5,658) (6,455) 7,337 (39,768)
Reclassification adjustment for realized gains on securities available for sale included in income before income taxes (15,830) (13,752) (25,037) (33,547)
Tax effect 3,641 3,163 5,759 7,716
Unrealized gains (losses) on securities available for sale arising during the period, net of tax 6,751 11,022 (43,844) 107,310
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 (785) 0 (1,260) 0
Tax effect 181 0 290 0
Total change in unrealized gains on securities available for sale transferred to held to maturity, net of tax (604) 0 (970) 0
Change in pension obligation:
Amortization of actuarial losses 7,018 6,398 13,547 12,662
Tax effect (1,614) (1,472) (3,116) (2,913)
Total change in pension obligation, net of tax 5,404 4,926 10,431 9,749
Other comprehensive income (loss) 11,551 15,948 (34,383) 117,059
Total comprehensive income $ 164,339 $ 169,734 $ 265,721 $ 328,014
(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 June 30
(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 March 31, 2020 $ 9,275 $ 1,005 $ 339,958 $ 0 $ 3,632,894 $ (25,612) $ 3,957,520
Cumulative effect of adoption of ASC 326 — — — — 0 — 0
Net income — — — — 153,786 — 153,786
Other comprehensive income, net of tax — — — — — 15,948 15,948
Issuance of preferred stock — — (21) — — — (21)
Repurchase of 346,000 shares of Class A common stock (346) — — 0 (126,645) — (126,991)
Cash dividends declared ($0.40 per common share)
Class A common stock — — — — (3,606) — (3,606)
Class B common stock — — — — (402) — (402)
Preferred stock dividends declared — — — — (4,790) — (4,790)
Balance at June 30, 2020 $ 8,929 $ 1,005 $ 339,937 $ 0 $ 3,651,237 $ (9,664) $ 3,991,444
Balance at March 31, 2021 $ 8,811 $ 1,005 $ 339,937 $ 0 $ 4,005,318 $ (33,671) $ 4,321,400
Net income — — — — 152,788 — 152,788
Other comprehensive income, net of tax — — — — — 11,551 11,551
Cash dividends declared ($0.47 per common share)
Class A common stock — — — — (4,141) — (4,141)
Class B common stock — — — — (472) — (472)
Preferred stock dividends declared — — — — (4,636) — (4,636)
Balance at June 30, 2021 $ 8,811 $ 1,005 $ 339,937 $ 0 $ 4,148,857 $ (22,120) $ 4,476,490
Six months ended June 30
(Dollars in thousands, unaudited) Class A
Common Stock Class B
Common Stock Preferred
Stock Surplus Retained
Earnings Accumulated
Other
Comprehensive
Loss 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 — — — — 210,955 — 210,955
Other comprehensive income, net of tax — — — — — 117,059 117,059
Issuance of preferred stock — — 339,937 — — — 339,937
Repurchase of 695,390 shares of Class A common stock (695) — — (44,081) (241,919) — (286,695)
Cash dividends declared ($0.80 per common share)
Class A common stock — — — — (7,345) — (7,345)
Class B common stock — — — — (804) — (804)
Preferred stock dividends declared — — — — (4,790) — (4,790)
Balance at June 30, 2020 $ 8,929 $ 1,005 $ 339,937 $ 0 $ 3,651,237 $ (9,664) $ 3,991,444
Balance at December 31, 2020 $ 8,811 $ 1,005 $ 339,937 $ 0 $ 3,867,252 $ 12,263 $ 4,229,268
Net income — — — — 300,104 — 300,104
Other comprehensive loss, net of tax — — — — — (34,383) (34,383)
Cash dividends declared ($0.94 per common share)
Class A common stock — — — — (8,283) — (8,283)
Class B common stock — — — — (944) — (944)
Preferred stock dividends declared — — — — (9,272) — (9,272)
Balance at June 30, 2021 $ 8,811 $ 1,005 $ 339,937 $ 0 $ 4,148,857 $ (22,120) $ 4,476,490


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)

Six months ended June 30
(Dollars in thousands, unaudited) 2021 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 300,104 $ 210,955
Adjustments to reconcile net income to cash provided by operating activities:
Provision (credit) for credit losses (30,577) 48,907
Deferred tax expense 13,441 17,774
Net (increase) decrease in prepaid and current tax receivable (805,084) 12,122
Depreciation and amortization 54,053 53,806
Net decrease in accrued interest payable (603) (4,012)
Net decrease (increase) in income earned not collected 12,651 (51,784)
Contribution to pension plans 0 (100,000)
Realized gains on investment securities available for sale, net (25,037) (33,547)
Marketable equity securities gains, net (27,665) (13,162)
Origination of loans held for sale (631,104) (503,190)
Proceeds from sale of loans held for sale 562,399 474,153
Gain on sale of loans (19,766) (15,578)
Net (gains) losses on other real estate owned (2,009) 2,475
Net accretion of premiums and discounts 1,490 20,889
Amortization of intangible assets 11,220 12,464
Origination of mortgage servicing rights, net of change in valuation allowance (7,884) 357
Net change in other assets 19,040 (17,459)
Net change in other liabilities (22,724) (14,380)
Net cash (used in) provided by operating activities (598,055) 100,790
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in loans outstanding 136,009 (3,488,854)
Purchases of investment securities available for sale (2,956,016) (5,659,704)
Purchases of investment securities held to maturity (1,012,009) (803,307)
Purchases of marketable equity securities (306) (331,952)
Proceeds from maturities, calls, and principal repayments of investment securities held to maturity 413,600 57,057
Proceeds from maturities, calls, and principal repayments of investment securities available for sale 1,570,492 1,139,291
Proceeds from sales of investment securities available for sale 1,078,187 3,122,454
Proceeds from sales of marketable equity securities 1,111 313,131
Net increase in overnight investments (3,524,046) (1,964,602)
Cash paid to FDIC for settlement of shared-loss agreement (16,103) (99,468)
Proceeds from sales of other real estate owned 20,554 9,263
Proceeds from sales of premises and equipment 1,176 37
Purchases of premises and equipment (51,282) (62,721)
Business acquisitions, net of cash acquired 0 (59,999)
Other investing activities (14,053) 0
Net cash used in investing activities (4,352,686) (7,829,374)
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in time deposits (266,759) (623,833)
Net increase in demand and other interest-bearing deposits 5,246,758 7,649,120
Net increase (decrease) in short-term borrowings 51,117 2,043
Repayment of long-term obligations (23,947) (75,908)
Origination of long-term obligations 0 745,850
Net proceeds from preferred stock issuance 0 339,937
Repurchase of common stock 0 (282,923)
Cash dividends paid (23,112) (13,188)
Net cash provided by financing activities 4,984,057 7,741,098
Change in cash and due from banks 33,316 12,514
Cash and due from banks at beginning of period 362,048 376,719
Cash and due from banks at end of period $ 395,364 $ 389,233
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid (received) during the period for:
Interest $ 31,706 $ 61,061
Income taxes 867,196 38,453
Significant noncash investing and financing activities:
Transfers of loans to other real estate 4,791 7,138
Dividends declared but not paid 0 4,007
Loans held for sale exchanged for investment securities 125,804 0
Reclassification of portfolio loans to loans held for sale 22,655 3,027
Transfers of premises and equipment to other real estate 6,549 2,046
Unsettled common stock repurchases 0 3,772


	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”), 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.

On January 3, 2022, BancShares ~~did not repurchase shares~~completed its previously announced merger (the “CIT Merger”) with CIT Group Inc. (“CIT”), pursuant to an Agreement and Plan of ~~Class A common stock~~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 ~~half of 2021. During the~~ ~~second~~ quarter of ~~2020,~~2022. BancShares ~~purchased~~now has 3 operating segments: General Banking, Commercial Banking, and Rail, and a ~~total of 346,000 shares of Class A common stock for $127.0 million at an average cost per share of $367.03. During~~non-operating segment, Corporate. BancShares conformed the ~~six months ended June 30, 2020, BancShares purchased a total of 695,390 shares of Class A common stock for $286.7 million at an average cost per share of $412.28.~~

~~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~~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 ~~the United States (“U.S.”) Department~~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 ~~Treasury,~~current market value of the ~~SBA-PPP~~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 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 derivative transactions in over-the-counter markets with other financial institutions. BancShares also offers ~~cash-flow assistance~~derivative products to ~~nonprofit~~its customers in order for them to manage their interest rate and ~~small~~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 two parties to exchange cash flows based on specified underlying notional amounts, assets and/or indices. Forward settlement contracts are agreements to buy or sell a quantity of a financial instrument, index, currency or commodity at a predetermined future date, and rate or price. An option contract is an agreement that gives the buyer the right, but not the obligation, to buy or sell an underlying asset from or to another party at a predetermined price or rate over a specific period of time.

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 ~~employers through guaranteed loans~~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 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 ~~certain expenses. Borrowers are eligible 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 ~~United States Small Business Administration (“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 and during the first half of 2021,~~CIT Merger. BancShares ~~originated approximately 12,000 SBA-PPP loans totaling approximately $1.2 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 ~~June 30, 2021, SBA-PPP loans outstanding were $1.7 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.

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.

814

~~Table~~

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 ~~Contents~~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 (

~~Table of Contents~~

~~The following tables represent current credit quality indicators by origination year as of June 30, 2021.~~

June 30, 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 $ 222,124 $ 441,299 $ 281,357 $ 165,495 $ 47,101 $ 13,659 $ 4,395 $ 0 $ 1,175,430
Special Mention 20 218 0 146 72 0 138 0 594
Substandard 0 144 1,056 1,444 5,110 11 140 0 7,905
Total 222,144 441,661 282,413 167,085 52,283 13,670 4,673 0 1,183,929
Owner occupied commercial mortgage
Pass 1,420,375 3,123,179 2,090,297 1,417,269 1,105,141 2,009,482 104,492 116 11,270,351
Special Mention 782 25,052 28,380 33,575 11,938 27,394 3,030 72 130,223
Substandard 9,562 5,902 20,415 10,246 22,560 48,273 8,538 0 125,496
Total 1,430,719 3,154,133 2,139,092 1,461,090 1,139,639 2,085,149 116,060 188 11,526,070
Non-owner occupied commercial mortgage
Pass 312,438 801,110 584,899 300,019 298,984 576,807 32,061 0 2,906,318
Special Mention 783 647 855 10,678 832 2,818 500 0 17,113
Substandard 981 11,897 23,971 10,955 10,696 32,072 1,326 0 91,898
Total 314,202 813,654 609,725 321,652 310,512 611,697 33,887 0 3,015,329
Commercial and industrial and leases
Pass 815,211 1,272,974 798,870 397,616 220,881 392,573 988,180 5,214 4,891,519
Special Mention 2,003 9,274 22,326 5,867 4,587 5,746 7,268 192 57,263
Substandard 6,788 6,220 4,606 4,496 3,155 4,124 20,414 1,351 51,154
Doubtful 0 49 17 0 0 0 1 0 67
Ungraded 0 0 0 0 0 0 67,160 0 67,160
Total 824,002 1,288,517 825,819 407,979 228,623 402,443 1,083,023 6,757 5,067,163
SBA-PPP
Pass 1,157,721 540,695 0 0 0 0 0 0 1,698,416
Total commercial $ 3,948,788 $ 6,238,660 $ 3,857,049 $ 2,357,806 $ 1,731,057 $ 3,112,959 $ 1,237,643 $ 6,945 $ 22,490,907

~~Table of Contents~~

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 $ 1,146,230 $ 1,727,617 $ 779,136 $ 477,386 $ 440,502 $ 1,014,974 $ 21,633 $ 0 $ 5,607,478
30-59 days 1,461 1,343 2,201 1,707 2,098 6,539 38 0 15,387
60-89 days 144 1,025 64 263 451 3,585 73 0 5,605
90 days or greater 0 237 1,694 1,544 3,370 17,143 0 0 23,988
Total 1,147,835 1,730,222 783,095 480,900 446,421 1,042,241 21,744 0 5,652,458
Revolving mortgage
Current 0 0 0 0 0 0 1,736,398 130,873 1,867,271
30-59 days 0 0 0 0 0 0 4,234 3,043 7,277
60-89 days 0 0 0 0 0 0 875 1,282 2,157
90 days or greater 0 0 0 0 0 0 4,245 3,683 7,928
Total 0 0 0 0 0 0 1,745,752 138,881 1,884,633
Construction and land development
Current 100,826 209,612 38,606 13,906 7,060 3,669 1,933 0 375,612
30-59 days 281 0 0 114 0 289 0 0 684
60-89 days 0 0 15 50 4 0 0 0 69
90 days or greater 0 0 0 0 0 127 0 0 127
Total 101,107 209,612 38,621 14,070 7,064 4,085 1,933 0 376,492
Consumer auto
Current 314,523 432,620 262,684 163,836 72,275 34,050 0 0 1,279,988
30-59 days 725 1,516 1,376 925 605 263 0 0 5,410
60-89 days 69 347 367 248 16 51 0 0 1,098
90 days or greater 0 365 415 177 78 10 0 0 1,045
Total 315,317 434,848 264,842 165,186 72,974 34,374 0 0 1,287,541
Consumer other
Current 78,465 38,660 19,115 6,668 5,481 31,966 415,509 0 595,864
30-59 days 12 127 91 25 26 120 2,688 0 3,089
60-89 days 18 22 25 1 0 0 954 0 1,020
90 days or greater 10 37 19 9 0 0 1,067 0 1,142
Total 78,505 38,846 19,250 6,703 5,507 32,086 420,218 0 601,115
Total consumer $ 1,642,764 $ 2,413,528 $ 1,105,808 $ 666,859 $ 531,966 $ 1,112,786 $ 2,189,647 $ 138,881 $ 9,802,239
PCD loans
Current $ 0 $ 24,591 $ 22,834 $ 21,907 $ 23,877 $ 227,641 $ 11,185 $ 17,968 $ 350,003
30-59 days 0 632 469 663 536 9,404 513 455 12,672
60-89 days 0 420 66 539 56 3,553 52 32 4,718
90 days or greater 0 732 2,199 3,433 1,637 19,988 81 1,043 29,113
Total PCD $ 0 $ 26,375 $ 25,568 $ 26,542 $ 26,106 $ 260,586 $ 11,831 $ 19,498 $ 396,506
Total loans and leases $ 5,591,552 $ 8,678,563 $ 4,988,425 $ 3,051,207 $ 2,289,129 $ 4,486,331 $ 3,439,121 $ 165,324 $ 32,689,652

Consumer Loans - Delinquency Status by Class


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

1729

~~Table of Contents~~

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

1830

~~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 June 30, 2021 and December 31, 2020:~~

(Dollars in thousands) June 30, 2021 December 31, 2020
FHLB of Atlanta
Lendable collateral value of pledged non-PCD loans $ 8,900,711 $ 8,637,844
Less: Advances 646,667 652,675
Available borrowing capacity $ 8,254,044 $ 7,985,169
Pledged non-PCD loans $ 12,498,810 $ 12,157,153
FRB
Lendable collateral value of pledged non-PCD loans $ 3,532,492 $ 3,321,762
Less: Advances 0 0
Available borrowing capacity $ 3,532,492 $ 3,321,762
Pledged non-PCD loans $ 4,380,334 $ 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 June 30, 2021, the ACL change since December 31, 2020 was driven by improvement in macroeconomic factors, continued strong credit performance and low net charge-offs. 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, BancShares uses 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. BancShares’ ACL forecast considers a range of economic scenarios from an upside scenario to a severely adverse scenario, but the June 30, 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 BancShares’ strong credit quality, low net charge-offs.

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

Three months ended June 30, 2021
(Dollars in thousands) Commercial Consumer PCD Total
Allowance for credit losses:
Balance at April 1 $ 74,864 $ 112,852 $ 22,935 $ 210,651
Provision (credit) 3,279 (17,481) (5,401) (19,603)
Charge-offs (3,044) (4,028) (456) (7,528)
Recoveries 983 2,929 1,662 5,574
Balance at June 30 $ 76,082 $ 94,272 $ 18,740 $ 189,094
Three months ended June 30, 2020
(Dollars in thousands) Commercial Consumer PCD Total
Balance at April 1 $ 72,410 $ 109,933 $ 26,916 $ 209,259
Provision (credit) 6,628 13,682 242 20,552
Charge-offs (4,015) (6,657) (1,392) (12,064)
Recoveries 1,154 2,387 1,162 4,703
Balance at June 30 $ 76,177 $ 119,345 $ 26,928 $ 222,450
Six months ended June 30, 2021
(Dollars in thousands) Commercial Consumer PCD Total
Balance at January 1 $ 80,842 $ 119,485 $ 23,987 $ 224,314
Provision (credit) (643) (22,985) (6,949) (30,577)
Charge-offs (6,375) (8,497) (1,219) (16,091)
Recoveries 2,258 6,269 2,921 11,448
Balance at June 30 $ 76,082 $ 94,272 $ 18,740 $ 189,094
Six months ended June 30, 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) 28,165 23,088 (2,346) 48,907
Initial allowance on PCD loans 0 0 1,193 1,193
Charge-offs (9,384) (14,426) (2,515) (26,325)
Recoveries 2,581 4,818 4,059 11,458
Balance at June 30 $ 76,177 $ 119,345 $ 26,928 $ 222,450

~~Table of Contents~~

~~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 June 30 Six months ended June 30
(Dollars in thousands) 2021 2020 2021 2020
Allowance for credit losses:
Beginning balance $ 11,571 $ 10,512 $ 12,814 $ 1,055
Adoption of ASC 326 0 0 0 8,885
Adjusted beginning balance $ 11,571 $ 10,512 $ 12,814 $ 9,940
Provision (credit) (468) 3,173 (1,711) 3,745
Ending balance 11,103 13,685 11,103 13,685

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

The ~~following table presents information on collateral-dependent~~recorded fair values of Non-PCD loans ~~by class and includes~~acquired in the ~~amortized cost of collateral-dependent loans and leases, the net realizable value~~CIT Merger as of the ~~collateral, the extent to which collateral secures collateral-dependent loans and the associated ACL as~~acquisition date was $29.5 billion, resulting in a PAA discount of ~~June 30, 2021 and December 31, 2020 were as follows:~~$61 million.

June 30, 2021
(Dollars in thousands) Collateral-Dependant Loans Net Realizable Value of Collateral Collateral Coverage Allowance for Credit Losses
Commercial loans:
Construction and land development $ 1,425 $ 1,976 138.7 % $ 0
Owner occupied commercial mortgage 11,288 15,591 138.1 0
Non-owner occupied commercial mortgage 5,405 8,017 148.3 0
Commercial and industrial and leases 7,736 9,672 125.0 230
Total commercial loans 25,854 35,256 136.4 230
Consumer:
Residential mortgage 15,237 23,411 153.6 0
Revolving mortgage 1,385 1,724 124.5 0
Total consumer loans 16,622 25,135 151.2 0
PCD loans 19,894 34,495 173.4 0
Total collateral-dependent loans $ 62,370 $ 94,886 152.1 % $ 230
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

Collateral-dependent nonaccrual loans with no recorded allowance totaled $59.2 million and $57.5 million as of June 30, 2021 and December 31, 2020, respectively. All other nonaccrual loans have a recorded allowance.

~~Table of Contents~~

Troubled Debt ~~Restructurings~~Restructuring

As part of BancShares’ ongoing risk-management practices, BancShares attempts to work with borrowers when necessary to extend or modify loan terms to better align with their current ability to repay. Extensions and modifications are made in accordance with internal policies and guidelines to conform to regulatory guidance. BancShares accounts for certain loan modifications or restructurings as troubled debt restructurings (“TDRs”). In general, ~~the~~a modification or restructuring of a loan is considered a TDR if, for economic or legal reasons related to a borrower’s financial difficulties, a concession is granted to the borrower that creditors would not otherwise consider. BancShares may determine that a borrower is experiencing financial difficulty if the borrower is currently in default on any of its debt, or if is probable that a borrower may default in the foreseeable future. Many aspects of a borrower’s financial situation are assessed when determining whether they are experiencing financial difficulty.

Concessions may relate to the contractual interest rate, maturity date, payment structure or other actions. ~~Within BancShares’ ACL loss models,~~The assessments of whether a borrower is experiencing (or is likely to experience) financial difficulty, and whether a concession has been granted, are subjective in nature and management’s judgment is required when determining whether a modification is classified as a TDR. In accordance with regulatory guidance discussed below, certain loan modifications that might ordinarily have qualified as TDRs ~~are~~were not ~~individually evaluated unless determined to be collateral-dependent. Consumer TDRs are included in the definition of default which provides~~accounted for ~~a 100% probability of default applied within the models. As a result, subsequent changes in credit quality metrics do not impact the calculation of the ACL on consumer~~as TDRs. ~~For commercial TDRs, the TDR distinction does impact the calculation of ACL, as the standard definition of default is utilized.~~

The Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (the “Interagency Statement”) was published by banking regulators in April 2020 to clarify expectations around loan modifications and the determination of TDRs for borrowers experiencing COVID-19-related financial difficulty. The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and Interagency Statement offer some practical expedients for evaluating whether loan modifications that occur in response to the COVID-19 pandemic are TDRs. Any loan modification that meets these practical expedients would not automatically be considered a TDR because the borrower is presumed not to be experiencing financial difficulty ~~due to COVID-19.~~at the time of the loan modification. 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 ~~did~~is not ~~record~~recording these as TDRs.

Modified loans that meet the definition of a TDR are subject to BancShares’ individually reviewed loans policy.

The following ~~tables provides a summary~~table presents amortized cost of ~~total TDRs by accrual status:~~TDRs.

June 30, 2021 December 31, 2020
(Dollars in thousands) Accruing Nonaccruing Total Accruing Nonaccruing Total
Commercial loans:
Construction and land development $ 408 $ 38 $ 446 $ 578 $ 54 $ 632
Owner occupied commercial mortgage 37,216 12,097 49,313 37,574 10,889 48,463
Non-owner occupied commercial mortgage 20,364 3,474 23,838 18,336 1,649 19,985
Commercial and industrial and leases 12,761 8,569 21,330 29,131 3,528 32,659
Total commercial loans 70,749 24,178 94,927 85,619 16,120 101,739
Consumer:
Residential mortgage 21,079 17,220 38,299 29,458 19,380 48,838
Revolving mortgage 18,038 7,196 25,234 20,124 7,128 27,252
Construction and land development 2,482 289 2,771 1,573 9 1,582
Consumer auto 2,134 653 2,787 2,018 696 2,714
Consumer other 841 56 897 955 137 1,092
Total consumer loans 44,574 25,414 69,988 54,128 27,350 81,478
PCD loans 23,981 9,073 33,054 17,617 7,346 24,963
Total loans $ 139,304 $ 58,665 $ 197,969 $ 157,364 $ 50,816 $ 208,180

TDRs


	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


	December 31, 2021
dollars in millions	Accruing		Non-Accruing		Total
Commercial
Commercial construction	$	2	$	—	$	2
Owner occupied commercial mortgage	57		8		65
Non-owner occupied commercial mortgage	26		3		29
Commercial and industrial	12		9		21
Leases	—		1		1
Total commercial	97		21		118
Consumer
Residential mortgage	29		18		47
Revolving mortgage	17		7		24
Consumer auto	2		—		2
Consumer other	1		—		1
Total consumer	49		25		74
Total TDRs	$	146	$	46	$	192

2232

~~Table~~

The following table summarizes the loan restructurings during the quarters ended March 31, 2022 and 2021 that were designated as TDRs. BancShares defines payment default as movement of ~~Contents~~the TDR to nonaccrual status, which is generally 90 days past due, foreclosure or charge-off, whichever occurs first.

Restructurings


	Three months ended March 31,
	2022			2021
dollars in millions (except for number of loans)	Number of loans	Amortized cost at period end			Number of loans	Amortized cost at period end
Loans and leases
Interest only	2	$	—		6	$	7
Loan term extension	35	20			25	4
Below market rates	20	2			53	8
Discharge from bankruptcy	24	2			45	4
Total	81	$	24		129	$	23

There were $1 million and $0.4 million of commitments to lend additional funds to borrowers whose loan terms have been modified in TDRs as of March 31, 2022 and December 31, 2021, respectively.

After a loan is determined to be a TDR, BancShares continues to track its performance under its most recent restructured terms. TDRs that subsequently defaulted during the three months ended March 31, 2022 and 2021, and were classified as TDRs during the applicable 12-month period preceding March 31, 2022 and 2021 were as follows:

TDR Defaults


	Three months ended March 31,
dollars in millions	2022		2021
TDR Defaults	$	2	$	3

Loans Pledged

The following table provides information regarding loans pledged as collateral for borrowing capacity through the FHLB of Atlanta and the Federal Reserve Bank (“FRB”) as of March 31, 2022 and December 31, 2021:

Loans Pledged


dollars in millions	March 31, 2022		December 31, 2021
FHLB of Atlanta
Lendable collateral value of pledged non-PCD loans	$	13,782	$	9,564
Less: Advances	639		645
Available borrowing capacity	$	13,143	$	8,919
Pledged non-PCD loans (contractual balance)	$	19,889	$	14,507

FRB
Lendable collateral value of pledged non-PCD loans	$	4,242	$	3,951
Less: Advances	—		—
Available borrowing capacity	$	4,242	$	3,951
Pledged non-PCD loans (contractual balance)	$	4,982	$	4,806

NOTE 5 — ALLOWANCE FOR CREDIT LOSSES

The ACL for loans and leases is reported in the allowance for credit losses on the Consolidated Balance Sheets, while the ACL for unfunded commitments is reported in other liabilities. The provision or benefit for credit losses related to both (i) loans and leases and (ii) unfunded commitments is reported in the Consolidated Statements of Income as provision or benefit 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. Forecasted economic conditions are developed using third party macroeconomic scenarios and may be adjusted based on management’s expectations over the lives of the portfolios. Significant macroeconomic factors used in estimating the expected losses include unemployment, gross domestic product (“GDP”), home price index, commercial real estate index, corporate profits, and credit spreads.

Due to completion of the CIT Merger, BancShares changed certain aspects of its methodology used to determine the ACL during the period ending March 31, 2022. BancShares made these changes to integrate the ACL methodologies of CIT and BancShares. The most significant changes in the ACL methodology utilized to determine the ACL at March 31, 2022 compared to that utilized to determine the ACL at December 31, 2021 include the following: (i) utilized economic scenario forecasts over the lives of the loan portfolios instead of using a two year reasonable and supportable period with a one year reversion period followed by a historical long run average economic forecast for the remainder of the portfolio life; and (ii) implemented scenario weighting of a range of economic scenarios, including baseline, upside, and downside scenarios instead of utilizing just the consensus baseline scenario as the basis of the quantitative ACL estimate. The results of these changes increased the ACL for total commercial loans by approximately $13.5 million and decreased the ACL for total consumer loans by approximately $18.7 million at March 31, 2022.

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 (the “Initial Non-PCD Provision”). 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 in the scenarios used to determine the ACL. 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.

The activity for the ACL for loans and leases and the ACL for unfunded commitments is summarized in the following tables.

ACL for Loans and Leases


dollars in millions	Commercial		Consumer		Total
Balance at December 31, 2021	$	80	$	98	$	178
Initial PCD ACL(1)	270		14		284
Balance at Initial Non-PCD Provision	432		22		454
Benefit for credit losses - loans and leases	(23)		(30)		(53)
Balance at Total provision (benefit) for credit losses- loans and leases	409		(8)		401
Charge-offs(1)	(28)		(5)		(33)
Balance at Recoveries	12		6		18
Balance at Other	—		—		—
Balance at March 31, 2022	$	743	$	105	$	848

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
Other	—		—		—
Balance at March 31, 2021	$	87	$	124	$	211

(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.

ACL for Unfunded Commitments


	Three months ended March 31,
dollars in millions	2022		2021
Beginning balance	$	12	$	13
Provision (benefit) for credit losses - unfunded commitments	63		(1)
Ending balance	$	75	$	12

For the period ended March 31, 2022, the increase in the ACL for unfunded commitments compared to March 31, 2021 primarily reflected the additional commitments acquired in the CIT Merger.

NOTE 6 — LEASES

Lessee

BancShares leases primarily include administrative offices and bank locations. Substantially all of our lease liabilities relate to United States real estate leases under operating lease arrangements. Our lessee finance leases are not significant. Our real estate leases have remaining lease terms of up to 17 years. Our lease terms may include options to extend or terminate the lease. The options are included in the lease term when it is determined that it is reasonably certain the option will be exercised.

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

Supplemental Lease Information


dollars in millions	Classification	March 31, 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		%

The following table presents components of operating lease expense, which are included in operating expenses:

Components of Operating Lease Expense


		Three months ended March 31,
dollars in millions	Classification	2022		2021
Lease cost
Operating lease cost(1)	Occupancy Expense	$	16	$	4
Finance lease cost
Amortization of leased assets	Equipment expense	1		1
Interest on lease liabilities	Interest expense - Other borrowings	—		—
Variable lease cost	Occupancy Expense	3		1
Sublease income	Occupancy Expense	(1)		—
Net lease cost		$	19	$	6

(1)Includes short-term lease cost, which is not significant.

Variable lease cost includes common area maintenance, property taxes, utilities, and other operating expenses related to leased premises recognized in the period in which the expense was incurred. Certain of our lease agreements also include rental payments adjusted periodically for inflation. While lease liabilities are not remeasured as a result of these changes, these adjustments are treated as variable lease costs and recognized in the period in which the expense is incurred. Sublease income results from leasing excess building space that BancShares is no longer utilizing under operating leases, which have remaining lease terms of up to 14 years.

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

Supplemental Cash Flow Information


	Three months ended March 31,
dollars in millions	2022		2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	14	$	3
Operating cash flows from finance leases	—		—
Financing cash flows from finance leases	—		—
ROU assets obtained in exchange for new lease liabilities	8		3

The following table presents lease liability maturities in the next five years and thereafter at March 31, 2022:

Maturity of Lease Liabilities


dollars in millions
Twelve months ended March 31,	Operating Leases		Finance Leases		Total
2023	$	52	$	2	$	54
2024	52		1		53
2025	49		1		50
2026	44		—		44
2027	42		—		42
Thereafter	189		—		189
Total undiscounted lease payments	$	428	$	4	$	432
Difference between undiscounted cash flows and discounted cash flows	43		—		43
Lease liabilities, at present value	$	385	$	4	$	389

Lessor

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

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

The following table provides the ~~types~~net book value of ~~modifications designated as TDRs during the three and six months ended June 30, 2021 and 2020.~~

Three months ended June 30, 2021 Three months ended June 30, 2020
All restructurings All restructurings
(Dollars in thousands) Number of Loans Recorded investment at period end Number of Loans Recorded investment at period end
Loans and leases
Interest only 4 $ 3,353 7 $ 15,352
Loan term extension 41 4,053 27 2,925
Below market interest rate 37 7,730 69 17,291
Discharged from bankruptcy 39 6,421 43 1,472
Total restructurings 121 $ 21,557 146 $ 37,040
Six months ended June 30, 2021 Six months ended June 30, 2020
All restructurings All restructurings
(Dollars in thousands) Number of Loans Recorded investment at period end Number of Loans Recorded investment at period end
Loans and leases
Interest only 10 $ 10,118 17 $ 19,328
Loan term extension 66 7,700 33 3,657
Below market interest rate 90 15,643 157 25,389
Discharged from bankruptcy 84 10,191 110 5,640
Total restructurings 250 $ 43,652 317 $ 54,014
operating lease equipment (net of accumulated depreciation of $67 million at March 31, 2022 by equipment type.

~~For the six months ended June 30, 2021 and 2020, the pre-modification and post-modification outstanding amortized cost of loans modified as TDRs were not materially different.~~

~~Table of Contents~~

~~NOTE F - OTHER REAL ESTATE OWNED~~

~~The following table explains changes in other real estate owned (“OREO”) during the six months ended June 30, 2021 and 2020:~~Operating Lease Equipment


~~(Dollars~~dollars in ~~thousands)~~millions	~~OREO~~March 31, 2022
~~Balance at December 31, 2020~~Railcars and locomotives	$	~~50,890~~7,251
~~Additions~~Other equipment	~~11,340~~721
Total(1)	$	7,972

(1)Includes off-lease rail equipment of $504 million at March 31, 2022.

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

Components of Net Investment in Finance Leases


dollars in millions	March 31, 2022		December 31, 2021
Lease receivables	$	1,882	$	246
Unguaranteed residual assets	283		25
Total net investment in finance leases	2,165		271
Leveraged lease net investment(1)	55		—
Total	$	2,220	$	271

(1)Leveraged leases are reported net of non-recourse debt of $24 million at March 31, 2022. Our leveraged lease arrangements commenced before the Accounting Standards Codification (“ASC”) 842 effective date and continue to be reported under the leveraged lease accounting model. ASC 842 eliminated leveraged lease accounting for new leases and for existing leases modified on or after the standard’s effective date.

The table that follows presents lease income related to BancShares’ operating and finance leases:

Lease Income


	Three months ended March 31,
dollars in millions	2022		2021
Lease income – Operating leases	$	195	$	—
Variable lease income – Operating leases (1)	13		—
Rental income on operating leases	208		—
Interest income - Sales type and direct financing leases	42		5
Variable lease income included in Other noninterest income (2)	11		—
Leveraged lease income	5		—
Total lease income	$	266	$	5

(1)Primarily includes per diem railcar operating lease rental income earned on a time or mileage usage basis.

(2)Includes leased equipment property tax reimbursements due from customers of $3.2 million for the three months ended March 31, 2022 and an insignificant amount for the three months ended March 31, 2021. Also includes revenue related to insurance coverage on leased equipment of $7.5 million for the three months ended March 31, 2022. There was no revenue related to insurance coverage on leased equipment for the three months ended March 31, 2021.

The following tables present lease payments due on non-cancellable operating leases and lease receivables due on finance leases at March 31, 2022. Excluded from these tables are variable lease payments, including rentals calculated based on asset usage levels, rentals from future renewal and re-leasing activity, and expected sales proceeds from remarketing equipment at lease expiration, all of which are components of lease profitability.

Maturity Analysis of Operating Lease Payments


dollars in millions
Twelve months ended March 31,
2023	$	636
2024	479
2025	323
2026	196
2027	118
Thereafter	262
Total	$	2,014

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


dollars in millions
Twelve months ended March 31,
2023	$	899
2024	588
2025	346
2026	179
2027	75
Thereafter	12
Total undiscounted lease receivables	$	2,099
Difference between undiscounted cash flows and discounted cash flows	217
Lease receivables, at present value	$	1,882

NOTE 7 – GOODWILL AND OTHER INTANGIBLES

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 amount of goodwill relates to business combinations that BancShares completed prior to the CIT Merger. All of the goodwill relates to the General Banking segment. There was no goodwill impairment during the first quarter of 2022.

Other Intangible Assets

Core Deposit Intangibles

Core deposit intangibles represent the estimated fair value of core deposits and other customer relationships acquired. Core deposit intangibles are being amortized over their estimated useful life. The following tables summarize the activity for core deposit intangibles during the quarter ending March 31, 2022.

Core Deposit Intangibles


~~Sales~~dollars in millions	~~(16,600)~~2022
Balance, net of accumulated amortization at January 1	$	19
~~Write-downs/losses~~Core deposit intangibles related to the CIT Merger	~~(1,945)~~143
Amortization for the period	(6)
Balance at ~~June 30, 2021~~March 31, net of accumulated amortization	$	~~43,685~~156

Core Deposit Intangible Accumulated Amortization


dollars in millions	March 31, 2022		December 31, 2021
Gross balance	$	271	$	128
Accumulated amortization	(115)		(109)
Balance, net of accumulated amortization	$	156	$	19

The following table summarizes the expected amortization expense in subsequent periods for core deposit intangibles.

Core Deposit Intangible Expected Amortization


dollars in millions
Twelve months ended March 31,
2023	$	21
2024	19
2025	16
2026	16
2027	15
Thereafter	69
Total	$	156

Intangible Liability

An intangible liability of $52 million was recorded in other liabilities for net below market lessor lease contract rental rates related to the rail portfolio as a result of the CIT Merger. This lease intangible is being accreted on a straight-line over the lease term, thereby increasing rental income (a component of noninterest income) over the remaining lives of the lease agreements.

The following tables summarize the activity for the intangible liability during the quarter ending March 31, 2022.

Intangible Liability


dollars in millions	2022
Balance at ~~December 31, 2019~~January 1	$	~~46,591~~
~~Additions~~	~~9,184~~—
Acquired in ~~business combinations~~CIT Merger	~~9,813~~52
~~Sales~~Amortization	~~(9,497)~~
~~Write-downs/losses~~	~~(2,241)~~(4)
Balance at ~~June 30, 2020~~March 31, net of accumulated amortization	$	~~53,850~~48

~~At June 30, 2021 and December 31, 2020, BancShares had $6.1 million and $5.8 million, respectively, of foreclosed residential real estate property~~

Intangible Liability Accumulated Amortization


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

The following table summarizes the expected accretion in OREO. The recorded investment in consumer mortgage loans collateralized by residential real estate property in the process of foreclosure was $27.1 million and $29.4 million at June 30, 2021 and December 31, 2020, respectively. Net gains recorded on the sale of OREO properties were $3.8 millionsubsequent periods for the ~~six months ended June 30, 2021. Net losses recorded on the sale of OREO properties were $0.2 million for the six months ended June 30, 2020.~~intangible liability.

Intangible Liability


dollars in millions
Twelve months ended March 31,
2023	$	15
2024	11
2025	5
2026	3
2027	3
Thereafter	11
Total	$	48

NOTE ~~G -~~8 – MORTGAGE SERVICING RIGHTS

BancShares originates certain residential mortgages loans to sell in the secondary market. BancShares’ portfolio of residential mortgage loans serviced for third parties was approximately $3.4 billion as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020. These~~2021. For certain loans, ~~are~~the originated ~~and~~loans are sold to third parties on a non-recourse basis with servicing rights retained. The retained servicing rights are recorded as a servicing asset and are reported in other ~~intangible~~ assets. The associated amortization expense and any changes in the valuation allowance recognized ~~are~~were included as a reduction of mortgage income. Mortgage servicing rights (“MSRs”) are initially recorded at fair value and then carried at the lower of amortized cost or fair value.

Contractually specified mortgage servicing fees, late fees and ancillary fees earned are reported in mortgage income and were ~~$2.1~~$2 million for ~~each of~~ the three month periods ~~ended June 30, 2021~~ending March 31, 2022 and 2020, and are reported in mortgage income. For the six months ended June 30, 2021 and 2020, mortgage servicing fees, late fees and ancillary fees earned were $4.2 million and $4.3 million, respectively.2021.

The following table presents changes in the servicing asset during the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:

Three months ended June 30 Six months ended June 30
(Dollars in thousands) 2021 2020 2021 2020
Beginning balance $ 22,745 $ 19,756 $ 18,426 $ 22,963
Servicing rights originated 3,101 2,096 6,545 3,679
Amortization (2,077) (2,119) (4,325) (3,942)
Valuation allowance decrease (increase) (1,784) (1,069) 1,339 (4,036)
Ending balance $ 21,985 $ 18,664 $ 21,985 $ 18,664

Servicing Asset


	Three months ended March 31,
dollars in millions	2022		2021
Beginning balance	$	23	$	18
Servicing rights originated	2		4
Servicing rights obtained in CIT Merger	3		—
Amortization	(1)		(2)
Valuation allowance decrease	1		3
Ending balance	$	28	$	23

The following table presents the activity in the servicing asset valuation ~~allowance for the three and six months ended June 30, 2021 and 2020:~~allowance:

Three months ended June 30 Six months ended June 30
(Dollars in thousands) 2021 2020 2021 2020
Beginning balance $ 1,242 $ 3,189 $ 4,365 $ 222
Valuation allowance (decrease) increase 1,784 1,069 (1,339) 4,036
Ending balance $ 3,026 $ 4,258 $ 3,026 $ 4,258

Servicing Asset Valuation Allowance


	Three months ended March 31,
dollars in millions	2022		2021
Beginning balance	$	1	$	4
Valuation allowance decrease	(1)		(3)
Ending balance	$	—	$	1


~~(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 June 30, 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 ~~June 30, 2021~~March 31, 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.

June 30, 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 $ 45,338 $ 10,428 $ 34,910 $ 102,278 $ 23,524 $ 78,754
Unrealized gains on securities available for sale transferred to held to maturity 4,139 952 3,187 5,399 1,242 4,157
Defined benefit pension items (78,204) (17,987) (60,217) (91,751) (21,103) (70,648)
Total $ (28,727) $ (6,607) $ (22,120) $ 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 and six months ended June 30, 2021 and 2020:~~Condensed Consolidated Statements of Income:

Three months ended June 30, 2021
(Dollars in thousands, net of tax) Unrealized gains (losses) on securities available for sale Unrealized gains on securities available for sale transferred to held to maturity Defined benefit pension items Total
Beginning balance $ 28,159 $ 3,791 $ (65,621) $ (33,671)
Net unrealized gains arising during period 18,940 0 0 18,940
Amounts reclassified from accumulated other comprehensive loss (12,189) (604) 5,404 (7,389)
Net current period other comprehensive (loss) income 6,751 (604) 5,404 11,551
Ending balance $ 34,910 $ 3,187 $ (60,217) $ (22,120)
Three months ended June 30, 2020
(Dollars in thousands, net of tax) Unrealized gains (losses) on securities available for sale Unrealized gains on securities available for sale transferred to held to maturity Defined benefit pension items Total
Beginning balance $ 102,080 $ 0 $ (127,692) $ (25,612)
Net unrealized gains arising during period 21,611 0 0 21,611
Amounts reclassified from accumulated other comprehensive loss (10,589) 0 4,926 (5,663)
Net current period other comprehensive income 11,022 0 4,926 15,948
Ending balance $ 113,102 $ 0 $ (122,766) $ (9,664)

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	$	—

2645

~~Table of Contents~~

Six months ended June 30, 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 (24,566) 0 0 (24,566)
Amounts reclassified from accumulated other comprehensive income (19,278) (970) 10,431 (9,817)
Net current period other comprehensive (loss) income (43,844) (970) 10,431 (34,383)
Ending balance $ 34,910 $ 3,187 $ (60,217) $ (22,120)
Six months ended June 30, 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 133,141 0 0 133,141
Amounts reclassified from accumulated other comprehensive loss (25,831) 0 9,749 (16,082)
Net current period other comprehensive income 107,310 0 9,749 117,059
Ending balance $ 113,102 $ 0 $ (122,766) $ (9,664)
NOTE 14 — OTHER LIABILITIES

~~Table of Contents~~

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 six months ended June 30, 2021 and 2020:~~CIT Merger.

~~(Dollars in thousands)~~

~~Three months ended June 30, 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~~

~~15,830~~

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

~~(3,641)~~

~~Income taxes~~

~~12,189~~

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

~~785~~

~~Net interest income~~

~~(181)~~

~~Income taxes~~

~~604~~

~~Amortization of defined benefit pension actuarial losses~~

~~(7,018)~~

~~Other noninterest expense~~

~~1,614~~

~~Income taxes~~

~~(5,404)~~

~~Total reclassifications for the period~~

~~7,389~~

~~(Dollars in thousands)~~

~~Three months ended June 30, 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~~

~~13,752~~

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

~~(3,163)~~

~~Income taxes~~

~~10,589~~

~~Amortization of defined benefit pension actuarial losses~~

~~(6,398)~~

~~Other noninterest expense~~

~~1,472~~

~~Income taxes~~

~~(4,926)~~

~~Total reclassifications for the period~~

~~5,663~~

~~Six months ended June 30, 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~~

~~25,037~~

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

~~(5,759)~~

~~Income taxes~~

~~19,278~~

~~Amortization of unrealized losses on securities available for sale transferred to held to maturity~~

~~1,260~~

~~Net interest income~~

~~(290)~~

~~Income taxes~~

~~970~~

~~Amortization of defined benefit pension actuarial losses~~

~~(13,547)~~

~~Other noninterest expense~~

~~3,116~~

~~Income taxes~~

~~(10,431)~~

~~Total reclassifications for the period~~

~~9,817~~

~~Six months ended June 30, 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~~

~~33,547~~

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

~~(7,716)~~

~~Income taxes~~

~~25,831~~

~~Amortization of defined benefit pension actuarial losses~~

~~(12,662)~~

~~Other noninterest expense~~

~~2,913~~

~~Income taxes~~

~~(9,749)~~

~~Total reclassifications for the period~~

~~16,082~~

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

~~Table of Contents~~

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~~

Assets and ~~similar techniques.~~Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes BancShares’ ~~management reviews any changes to its valuation methodologies to ensure they are appropriate~~assets and ~~supportable, and refines valuation methodologies as more market-based data becomes available. Accuracy of the levels of the~~liabilities measured at estimated fair value ~~hierarchy are validated~~on a recurring basis.

Assets and ~~transfers between levels of the~~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 ~~value hierarchy are recognized at the end of the reporting period.~~values include accrued interest.

The ~~methodologies~~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. ~~Transfers occur when management intends to sell a pool of~~When available, the fair values for the transferred loans inare based on quoted prices from the ~~secondary market. This typically occurs when a firm commitment to~~ 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.

~~Table of Contents~~

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 ~~June 30, 2021~~March 31, 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.

~~The table presents the carrying values and estimated fair values for financial instruments as of June 30, 2021 and December 31, 2020:~~

(Dollars in thousands) June 30, 2021 December 31, 2020
Carrying value Fair value Carrying value Fair value
Assets
Cash and due from banks $ 395,364 $ 395,364 $ 362,048 $ 362,048
Overnight investments 7,871,382 7,871,382 4,347,336 4,347,336
Investment in marketable equity securities 118,540 118,540 91,680 91,680
Investment securities available for sale 7,381,083 7,381,083 7,014,243 7,014,243
Investment securities held to maturity 3,394,604 3,377,085 2,816,982 2,838,499
Loans held for sale 107,768 107,768 124,837 124,837
Net loans and leases 32,500,558 32,786,935 32,567,661 33,298,166
Income earned not collected 133,043 133,043 145,694 145,694
Federal Home Loan Bank stock 40,450 40,450 45,392 45,392
Mortgage and other servicing rights 22,702 23,155 19,628 20,283
Liabilities
Deposits with no stated maturity 45,789,354 45,789,354 40,542,596 40,542,596
Time deposits 2,621,242 2,626,322 2,889,013 2,905,577
Securities sold under customer repurchase agreements 692,604 692,604 641,487 641,487
Federal Home Loan Bank borrowings 646,667 662,606 655,175 677,579
Subordinated debt 497,290 523,423 504,518 525,610
Other borrowings 80,531 81,201 88,470 89,263
FDIC shared-loss payable 0 0 15,601 15,843
Accrued interest payable 8,811 8,811 9,414 9,414

~~Table of Contents~~

~~For assets and liabilities carried at fair value on a recurring basis, the following table provides fair value information as of June 30, 2021 and December 31, 2020:~~

June 30, 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 $ 825,450 $ 0 $ 825,450 $ 0
Residential mortgage-backed securities 4,785,256 0 4,785,256 0
Commercial mortgage-backed securities 1,148,530 0 1,148,530 0
Corporate bonds 621,847 0 296,399 325,448
Total investment securities available for sale $ 7,381,083 $ 0 $ 7,055,635 $ 325,448
Marketable equity securities $ 118,540 $ 49,293 $ 69,247 $ 0
Loans held for sale $ 107,768 $ 0 $ 107,768 $ 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

~~The following tables summarize activity for Level 3 assets carried at fair value on a recurring basis:~~

Corporate bonds
Three months ended June 30 Six months ended June 30
(Dollars in thousands) 2021 2020 2021 2020
Beginning balance $ 318,116 $ 67,016 $ 316,624 $ 69,685
Purchases 7,000 100,595 7,000 100,595
Unrealized net losses (gains) included in other comprehensive income 1,340 2,449 3,491 (1,917)
Amounts included in net income 92 (83) 183 (168)
Transfers in 0 0 0 1,782
Sales / Calls (1,100) 0 (1,850) 0
Ending balance $ 325,448 $ 169,977 $ 325,448 $ 169,977

During the three months ended June 30, 2021 and 2020, there were 0 transfers between levels. During the six months ended June 30, 2021 there were no transfers from Level 2 to Level 3, compared to $1.8 million for the same period of 2020. 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 June 30, 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)~~

~~June 30, 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~~

~~325,448~~

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)

3154

~~Table~~

Other Comprehensive Income

The amounts included in the Condensed Consolidated Statements of ~~Contents~~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

~~Fair Value Option~~


	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 gains of $0.4 million and $2.4~~paid to the Parent Company amounted to $30 million for the three months ended ~~June 30, 2021~~March 31, 2022. Payment of dividends is made at the discretion of FCB’s Board of Directors and 2020, respectively. The changes in fair value included a loss of $2.3 million and a gain of $3.6 million for six months ended June 30, 2021 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 ~~the aggregate unpaid principal balance for residential real estate originated for sale measured at fair value as of June 30, 2021 and December 31, 2020:~~diluted earnings per common share:

June 30, 2021
(Dollars in thousands) Fair value Aggregate unpaid principal balance Difference
Originated loans held for sale $ 107,768 $ 104,167 $ 3,601
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 for sale were 90 or more days past due or on nonaccrual status as of June 30, 2021 or December 31, 2020.~~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 may be required to measure certain financial assets at fair value on a nonrecurring basis. These adjustments to fair value usually result from the application of lower of amortized cost or fair value accounting or write-downs of individual assets due to impairment.

~~The population of loans measured at fair value on a non-recurring basis is limited to collateral-dependent loans evaluated individually. These collateral-dependent loans~~RSUs are ~~deemed to be at fair value if there is an associated ACL or if a charge-off has been recorded~~discussed in the previous 12 months. A large majority of collateral for these loans is real property. Collateral values are determined using appraisals or other third-party value estimates of the subject property discounted based on estimated selling costs, generally between 5% 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 to real estate collateral was 7.88%.

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 June 30, 2021, the weighted average discount applied was 6%. 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 ordered to ensure the reported values reflect the most current information.

~~For financial assets and liabilities carried at fair value on a nonrecurring basis, the following table provides fair value information as of June 30, 2021 and December 31, 2020:~~

June 30, 2021
Fair value measurements using:
(Dollars in thousands) Fair value Level 1 inputs Level 2 inputs Level 3 inputs
Collateral-dependent loans $ 6,183 $ 0 $ 0 $ 6,183
Other real estate owned 32,128 0 0 32,128
Mortgage servicing rights 20,045 0 0 20,045
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 June 30, 2021 and December 31, 2020.~~Note 21— Employee Benefit Plans.

3256

~~Table of Contents~~

NOTE ~~L -~~20 — INCOME TAXES

BancShares’ global effective income tax rate was (20.4)% for the three months ended March 31, 2022, and 23.0% for the three months ended March 31, 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.

The quarterly income tax expense is based on a 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 the valuation allowances, and discrete items. The currently forecasted effective tax rate may vary from the actual year-end 2022 effective tax rate due to the changes in these factors.

Uncertain Tax Benefits

BancShares’ recognizes tax benefits when it is more likely than not that the position will prevail, based solely on the technical merits under the tax law of the relevant jurisdiction. BancShares will recognize the tax benefit if the position meets this recognition threshold determined based on the largest amount of the benefit that is more than likely to be 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 quarterly basis to determine if there are any significant events that would affect our ability to utilize existing DTAs. If events are identified that affect our ability to utilize our DTAs, valuation adjustments may be adjusted accordingly.

NOTE 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 ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the components of net periodic benefit cost are as follows:


		Three months ended June 30				Six months ended June 30					Three months ended March 31,
(Dollars in thousands)		2021		2020		2021		2020
dollars in millions										dollars in millions	2022		2021
Service cost	Service cost	$	4,023	$	3,682	$	7,676	$	7,139	Service cost	$	3	$	4
Interest cost	Interest cost	7,528		8,568		14,932		17,099		Interest cost	11		7
Expected return on assets	Expected return on assets	(19,621)		(16,435)		(39,216)		(32,844)		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	7,018		6,398		13,547		12,662		Amortization of net actuarial loss	3		7
Net periodic (benefit) cost		$	(1,052)	$	2,213	$	(3,061)	$	4,056
Net periodic benefit										Net periodic benefit	$	(5)	$	(2)

~~NaN~~

No discretionary contribution was made to the pension plans during the ~~six~~three months ended ~~June 30, 2021. A discretionary contribution of $100.0 million was made to the pension plans during the six months ended June 30, 2020.~~March 31, 2022. The funding policy of the pension plans is to contribute an amount each year to meet all Employee Retirement Income Security Act minimum requirements, including amounts to meet quarterly funding requirements, avoid “at-risk” status and avoid any benefit restrictions. BancShares may also contribute additional voluntary amounts each year (up to the maximum tax-deductible amount) in order to achieve certain target funding levels in the plans, with consideration also given to current and future cash flow and tax positions. No contributions are currently expected for the year ending December 31, ~~2021.~~2022.

Certain retirement benefit plans and stock-based awards of CIT Group Inc. were acquired by BancShares upon the closing of the CIT Merger.

CIT had both funded and unfunded noncontributory defined benefit pension and postretirement plans covering certain U.S. and non-U.S. employees, each of which was designed in accordance with the practices and regulations in the related countries. CIT maintained a frozen U.S. non-contributory pension plan (the "Plan") qualified under the Internal Revenue Code (“IRC”). CIT also maintained a frozen U.S. non-contributory supplemental retirement plan (the "Supplemental Plan”), and an Executive Retirement Plan, which had been closed to new members since 2006, and whose participants were all inactive. Accumulated balances under the Plan and the Supplemental Plan continue to receive periodic interest, subject to certain government limits. Fair value of the plan assets and benefit obligation at December 31, 2021 were $387 million and $409 million, respectively.

CIT provided healthcare and life insurance benefits to eligible retired employees. For most eligible retirees, healthcare was contributory and life insurance was non-contributory. All postretirement benefit plans were funded on a pay-as-you-go basis. These plans were terminated in the first quarter of 2022, effective April 1, and BancShares recognized a reduction in other noninterest expenses of approximately $27 million in the first quarter of 2022 related to amounts previously accrued.

CIT had a defined contribution retirement plan covering certain of its U.S. employees that qualifies under section 401(k) of the IRC, and was assumed by BancShares. Under this plan employees may contribute a portion of their eligible compensation, as defined, subject to regulatory limits and plan provisions, and BancShares matches these contributions up to a threshold. Participants are also eligible for an additional discretionary company contribution.

In February 2016, CIT adopted the CIT Group Inc. 2016 Omnibus Incentive Plan (the "2016 Plan"), which provided for grants of stock-based awards to employees, executive officers and directors. The BancShares RSUs are the only outstanding awards subject to the terms of the 2016 Plan and no further awards will be made under the 2016 Plan. Compensation expense is recognized over the vesting period or the requisite service period, which is generally three years for BancShares RSUs, under the graded vesting method, whereby each vesting tranche of the award is amortized separately as if each were a separate award.

CIT had compensation awards that either converted to BancShares RSUs or immediately vested at completion of the CIT Merger as further described in the “Stock-Based Compensation” discussion in Note 1 — Accounting Policies and Basis of Presentation. The following table presents the unvested BancShares RSUs at March 31, 2022, which have vesting periods through 2024. There were no grants of stock-based compensation awards during the quarter ended March 31, 2022.

Stock-Settled Awards Outstanding


	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

NOTE ~~M - LEASES~~22 — BUSINESS SEGMENT INFORMATION

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 2022. BancShares now has 3 operating segments: General Banking, Commercial Banking, and Rail, and a non-operating segment, Corporate. BancShares conformed the comparative prior periods presented to reflect the new segments. The substantial majority of BancShares’ 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 CIT Merger. BancShares' reportable segments are primarily based upon industry categories, target markets, distribution channels and customers served, and, to a lesser extent, the core competencies relating to product origination, operations and servicing and the nature of their regulatory environment. Segment reporting is reflective of BancShares' internal reporting structure and is consistent with the presentation of financial information to the chief operating decision maker. Each of the segments are described below.

General Banking

General Banking delivers services to individuals and businesses through an extensive branch network, digital banking, telephone banking and various ATM networks, including a full suite of deposit products, loans (primarily residential mortgages and commercial loans), and various fee-based services. General Banking also provides: a variety of wealth management products and services to individuals and institutional clients, including brokerage, investment advisory, and trust services; and deposit, cash management and lending to homeowner associations (“HOA”) and property management companies. As part of the CIT Merger, Community Association Banking (“CAB”) products were added that will drive the associated HOA deposit channel. Revenue is primarily generated from interest earned on residential mortgages, small business loans and fees for banking services.

Commercial Banking

Commercial Banking provides lending, leasing and other financial and advisory services, primarily to small and middle-market companies across select industries. Commercial Banking also provides asset-based lending, factoring, receivables management products and supply chain financing. Revenue is primarily generated from interest earned on loans, rents on equipment leased, fees and other revenue from lending and leasing activities and banking services, along with capital markets transactions and commissions earned on factoring and related activities.

Rail

Rail offers customized leasing and financing solutions on a fleet of railcars and locomotives to railroads and shippers throughout North America. Railcar types include covered hopper cars used to ship grain and agricultural products, plastic pellets, sand, and cement; tank cars for energy products and chemicals; gondolas for coal, steel coil and mill service products; open hopper cars for coal and aggregates; boxcars for paper and auto parts, and centerbeams and flat cars for lumber. Revenue is primarily from operating lease income.

Corporate

Certain items are not allocated to operating segments and are included in the Corporate segment. Some of the more significant and recurring items include interest income on investment securities, a portion of interest expense primarily related to corporate funding costs (including brokered deposits), income on BOLI (other noninterest income), merger-related costs, as well as certain unallocated costs and intangible asset amortization expense (operating expenses). Corporate also includes certain significant items that are infrequent, such as: the Initial Non-PCD Provision for loans and leases and unfunded commitments; and the preliminary gain on acquisition, each of which are related to the CIT Merger.

Segment Profit (Loss) and Select Period End Balances

The following table presents ~~right-of-use lease assets and liabilities as of June 30, 2021 and December 31, 2020:~~the condensed income statement by segment.

(Dollars in thousands) Classification June 30, 2021 December 31, 2020
Assets:
Operating Other assets $ 65,090 $ 68,048
Finance Premises and equipment 5,394 6,478
Total leased assets $ 70,484 $ 74,526
Liabilities:
Operating Other liabilities $ 65,659 $ 68,343
Finance Other borrowings 5,519 6,308
Total lease liabilities $ 71,178 $ 74,651


	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	—		—		—		—		—

NOTE ~~N -~~23 — COMMITMENTS AND CONTINGENCIES

Commitments

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

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


dollars in millions	March 31, 2022		December 31, 2021
Financing Commitments
Financing assets (excluding leases)	$	21,807	$	13,011
Letters of credit
Standby letters of credit	325		92
Other letters of credit	41		24
Deferred purchase agreements	2,097		—
Purchase and Funding Commitments
Lessor commitments(1)	513		—

(1)BancShares’ purchase and funding commitments relate to the equipment leasing businesses’ commitments to fund finance leases and operating leases, and Rail’s railcar manufacturer purchase commitments.

Financing Commitments

Commitments to extend credit are legally binding agreements to lend to customers. These commitments generally have fixed expiration dates or other termination clauses and may require payment of fees. ~~Since many of these commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future liquidity requirements.~~ Established credit standards control the credit risk exposure associated with these commitments. In some cases, BancShares requires collateral be pledged to secure the commitment, including cash deposits, securities and other assets.

Financing commitments, referred to as loan commitments or lines of credit, primarily reflect BancShares’ agreements to lend to its customers, subject to the customers’ compliance with contractual obligations. At March 31, 2022, substantially all undrawn financing commitments were senior facilities. Most of the undrawn and available financing commitments are in the Commercial Banking segment.

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

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

Letters of Credit

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

Deferred Purchase Agreements (“DPA”)

A DPA is provided in conjunction with factoring, whereby a client is provided with credit protection for trade receivables without purchasing the receivables. The trade receivables terms generally require payment in 90 days or less. If the client’s customer is unable to pay an undisputed receivable solely as the result of credit risk, BancShares is then required to purchase the receivable from the client, less any borrowings for such client based on such defaulted receivable. The outstanding amount in the table above, less $161 million at March 31, 2022 of borrowings for such clients, is the maximum amount that BancShares would be required to pay under all DPAs. This maximum amount would only occur if all receivables subject to DPAs default in the manner described above, thereby requiring BancShares to purchase all such receivables from the DPA clients.

The ~~following~~ table ~~presents the commitments~~above includes $2.0 billion of DPA exposures at March 31, 2022, related to ~~extend credit and standby letters of credit as of June 30, 2021 and December 31, 2020:~~

(Dollars in thousands) June 30, 2021 December 31, 2020
Unused commitments to extend credit $ 12,354,224 $ 12,098,417
Standby letters of credit 132,338 129,819

~~Table of Contents~~

receivables on which BancShares has ~~investments in qualified affordable housing projects primarily for~~assumed the ~~purposes~~credit risk. The table also includes $115 million available under DPA credit line agreements provided at March 31, 2022. The DPA credit line agreements specify a contractually committed amount of ~~fulfilling Community Reinvestment Act requirements~~DPA credit protection and ~~obtaining tax credits. Affordable housing project investments were $167.9 million~~are cancellable by us only after a notice period, which is typically 90 days or less.

Litigation and ~~$163.9 million as~~other Contingencies

The Parent Company and certain of June 30, 2021 and December 31, 2020, respectively, and were recorded in other assets. Unfunded commitments to fund future investments in affordable housing projects totaled $54.7 million and $53.7 million as of June 30, 2021 and December 31, 2020, respectively, and were recorded in other liabilities.

~~BancShares and various~~its subsidiaries have been named as ~~defendants~~a defendant in legal actions arising from ~~their~~its normal business activities in which damages in various amounts ~~were~~are claimed. BancShares ~~has~~is also ~~been~~ exposed to litigation risk relating to the prior business activities of banks from which assets were acquired and liabilities assumed.

As part of the CIT Merger, BancShares assumed litigation in which CIT and CIT Bank were named as defendants in an existing lawsuit brought as a qui tam (i.e., whistleblower) action by a former OneWest Bank N.A. (“One-West”) employee on behalf of the U.S. government. The lawsuit asserts claims related to OneWest’s participation in the ~~various merger transactions. Although~~Home Affordable Modification Program (“HAMP”) administered by the United States Treasury Department, as well as FHA and Veterans Administration (“VA”) programs. On October 15, 2019, the plaintiff filed a second amended complaint in the United States District Court for the Eastern District of Texas alleging that, beginning in 2009, CIT (and its predecessor, OneWest) falsely certified its compliance with HAMP, submitted false claims for incentive payments for loan modifications, submitted false claims for FHA and VA insurance payments, and failed to self-report these violations. Plaintiff seeks the return of all U.S. government payments to CIT under the HAMP, FHA, and VA programs. CIT has received approximately $93 million in servicer incentives under HAMP, and the government has paid more than $440 million in the aggregate in borrower, servicer, and investor incentives in connection with loans modified by OneWest or CIT under HAMP. The Department of Justice has declined to intervene in this case. CIT has filed motions for summary judgment seeking dismissal of the HAMP and FHA claims. The

Court has denied those motions. CIT also has filed a motion for summary judgment seeking a dismissal of the VA claim, which the Court has not yet decided. A Final Pretrial Conference has been rescheduled for June 15, 2022, with a jury trial to commence on June 20, 2022. On May 5, 2022, the parties reached an agreement in principle to settle all claims for $18.5 million, subject to required approvals by the United States Government and memorializing the agreement in a formal writing (the “Agreement in Principle”). Based upon the Agreement in Principle, the parties also made a motion to vacate the existing pretrial conference date and trial date so that the parties can devote resources to the completion of the steps necessary to execute a formal settlement agreement. The existing accruals in BancShares’ consolidated financial statements as of and for the three month period ending March 31, 2022 include estimates that were materially consistent with the amount of $18.5 million included in the Agreement in Principle.

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

In light of the inherent difficulty of predicting the outcome of Litigation matters and indemnification obligations, particularly when such matters are in their early stages or where the claimants seek indeterminate damages, BancShares cannot state with confidence what the eventual outcome of the pending Litigation will be, ~~determined, in~~what the ~~opinion~~timing of ~~management, any~~the ultimate resolution of these matters will be, or what the eventual loss, fines, or penalties related to each pending matter will be, if any. In accordance with applicable accounting guidance, BancShares’ establishes reserves for Litigation when those matters present loss contingencies as to which it is both probable that a loss will occur and the amount of such ~~liability~~loss can reasonably be estimated. Based on currently available information, BancShares believes that the outcome of Litigation that is currently pending will not have a material adverse effect on BancShares’ financial condition, but may be material to BancShares’ operating results or cash flows for any particular period, depending in part on its operating results for that period. The actual results of resolving such matters may be substantially higher than the amounts reserved.

For certain Litigation matters in which BancShares is involved, BancShares is able to estimate a range of reasonably possible losses in excess of established reserves and insurance. For other matters for which a loss is probable or reasonably possible, such an estimate cannot be determined. For Litigation and other matters where losses are reasonably possible, management currently estimates an aggregate range of reasonably possible losses of up to $10 million in excess of any established reserves and any insurance we reasonably believe we will collect related to those matters. This estimate represents reasonably possible losses (in excess of established reserves and insurance) over the life of such Litigation, which may span a currently indeterminable number of years, and is based on information currently available as of March 31, 2022. The Litigation matters underlying the estimated range will change from time to time, and actual results may vary significantly from this estimate.

Those Litigation matters for which an estimate is not reasonably possible or as to which a loss does not appear to be reasonably possible, based on current information, are not included within this estimated range and, therefore, this estimated range does not represent BancShares’ maximum loss exposure.

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

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NOTE 24 – CERTAIN RELATIONSHIPS AND RELATED TRANSACTION

CIT Northbridge Credit LLC (“Northbridge”) is an asset-based-lending joint venture between FCB (as successor to CIT Bank) and Allstate Insurance Company and its subsidiary (“Allstate”) that extends credit in asset-based lending middle-market loans. FCB holds a 20% equity investment in Northbridge, and CIT Asset Management LLC, a non-bank subsidiary of ~~Contents~~FCB, acts as an investment advisor and servicer of the loan portfolio. Allstate is an 80% equity investor. FCB’s investment was $31 million at March 31, 2022, with the expectation of additional investment as the joint venture grows. Management fees were earned on loans under management. The joint venture is not consolidated, and the investment is being accounted for using the equity method.

BancShares invests in various trusts, partnerships, and limited liability corporations established in conjunction with structured financing transactions of equipment, power and infrastructure projects and workout transactions. BancShares’ interests in these entities were entered into in the ordinary course of business. Other assets included $702 million at March 31, 2022 and $156 million at December 31, 2021, of tax credit investments and investments in non-consolidated entities relating to such transactions that are accounted for under the equity or cost methods.

The combination of investments in and loans to non-consolidated entities represents BancShares’ maximum exposure to loss, as BancShares does not provide guarantees or other forms of indemnification to non-consolidated entities.

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

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

This MD&A is expected to provide our investors with a view of BancShares’ financial condition and results of operations from our management’s perspective. This discussion and analysis should be read in conjunction with the unaudited consolidated financial statements and related notes presented within this Quarterly Report on Form 10-Q along with our financial statements and related MD&A of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 (“~~2020~~2021 Annual Report”). Intercompany accounts and transactions have been eliminated. Although certain amounts for prior years have been reclassified to conform to statement presentations for ~~2021,~~2022, the reclassifications had no effect on ~~shareholders’~~stockholders’ equity or net income as previously reported. ~~Unless otherwise noted, the terms “we,” “us” and “BancShares” refer~~

Throughout this MD&A we reference specific "Notes" to our financial statements. These are Notes to the consolidated financial ~~position~~statements in Part One, Item 1. Financial Statements.

Management uses certain non-GAAP financial measures in its analysis of the financial condition and ~~consolidated~~ results of operations of BancShares. See "Non-GAAP Financial Measurements" for ~~BancShares.~~a reconciliation of these financial measures to the most directly comparable financial measures in accordance with GAAP.

On January 3, 2022, BancShares completed its largest acquisition to date with the merger with CIT Group Inc. (“CIT”) and its subsidiary CIT Bank, N.A., a national banking association (“CIT Bank”), pursuant to the terms and subject to the conditions set forth in the Agreement and Plan of Merger (as amended, the “Merger Agreement”) (such acquisition, the CIT Merger). CIT had consolidated total assets of approximately $53.2 billion as of December 31, 2021. The CIT Merger is described further below and in Note 2 — Business Combinations. Financial data for periods prior to the CIT Merger do not include any CIT related data, and therefore are not directly comparable to the three months ended March 31, 2022.

EXECUTIVE OVERVIEW

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

BancShares’ earnings and cash flows are primarily derived from ~~our~~its commercial and retail banking activities. We expanded our products and services with the CIT Merger, and now have leased assets, primarily rail-related, and offer factoring services. We gather deposits from retail and commercial customers and also secure funding through various non-deposit sources. We invest the liquidity generated from these funding sources in interest-earning assets, including loans and leases, investment securities and ~~overnight investments.~~interest-earning deposits at banks. We also invest in bank premises, hardware, software, furniture and equipment used to conduct our commercial and retail banking business. We provide treasury services products, cardholder and merchant services, wealth management services and various other products and services typically offered by ~~commercial~~ banks. The fees and service charges generated from these products and services are primary sources of noninterest income, which is an essential component of our total revenue.

We are focused on expanding our position in legacy and target markets through organic growth and strategic acquisitions. We believe our franchise is positioned for continued growth as a result of our client centric banking principles, disciplined lending standards, and our people.

Refer to our ~~2020~~2021 Annual Report for further discussion of our strategy.

~~RECENT ECONOMIC AND INDUSTRY DEVELOPMENTS~~

~~During~~

Significant Events in 2022

As discussed in detail in Note 2 — Business Combinations, the CIT Merger closed on January 3, 2022.

Significant items related to the CIT Merger are as follows:

•The fair value of total assets acquired was $53.8 billion, which mainly consisted of approximately $32.7 billion of loans, $7.8 billion of operating lease equipment and approximately $6.6 billion of investment securities. Loans consisted of commercial and industrial loans, commercial real estate loans and finance leases, which are included in our Commercial Banking segment, and consumer loans (primarily residential mortgages), which are in our General Banking segment, as further discussed below. Acquired rail assets were mostly operating lease equipment that are in the new Rail segment.

•The fair value of deposits acquired was $39.4 billion that included deposits derived from online banking and HOA deposits related to CAB, and commercial deposits. The transaction also included approximately 80 bank branches, about 60 of which were in Southern California and the remaining primarily in the Southwest, Midwest and Southeast.

•FCB recorded a preliminary gain on acquisition of $431 million, representing the excess of the net assets acquired over the purchase price, and recorded a $143 million core deposit intangible and a $52 million intangible liability for net below market lessor lease contract rental rates related to the rail portfolio.

Segment Updates

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 ~~2020,~~2022. BancShares now has three operating segments: General Banking, Commercial Banking, and Rail, and a ~~novel strain~~non-operating segment, Corporate. BancShares conformed the comparative prior periods presented to reflect the new segments. The substantial majority of ~~coronavirus (“COVID-19”) spread throughout~~BancShares’ operations for historical periods prior to completion of the world, causing significant disruptions to the domestic and global economies. In response to the outbreak, governments imposed restrictions resulting in business shutdowns, regional quarantines, disruptions of supply chains, changes in consumer behavior and overall economic instability. In recent months, COVID-19 vaccines have been approved andCIT Merger are ~~now generally available for use~~included in the ~~United States~~General Banking segment. The Commercial Banking and ~~certain other countries, however, we cannot predict how widely utilized they will be or whether they will be effective~~Rail segments primarily relate to operations acquired in ~~preventing~~ the ~~spread of COVID-19 (including its variants).~~CIT Merger.

~~Although we cannot predict when or if normal economic activity~~Information about our segments is included Note 22 — Business Segment Information and ~~business operations will resume, we did observe general declines~~ in ~~the level of economic uncertainty and stabilization of macroeconomic forecasts during the first half of 2021. In recent weeks, we have seen an uptick~~Results by Business Segments, later in the number of new cases, although the absolute level of these new cases is significantly below the levels witnessed at the height of the pandemic. We are unable to predict whether these trends will continue and how this will affect the overall economy at the current time. However, we remain vigilant in our review and monitoring efforts around the duration and severity of the COVID-19 pandemic (including any of its variants) and its effects on the overall economy and our financial results.MD&A.

~~During~~Financial Performance Summary

The following table summarizes the second quarter of 2021, the Federal Reserve’s Federal Open Market Committee (“FOMC”) maintained the federal funds rate at a target range of 0.00% to 0.25%. The FOMC acknowledged the economy’s accelerating recovery from COVID-19, but maintained that the recovery is incomplete and economic risks remain. The FOMC expects to maintain this target range, but could see rate hikesBancShares’ results in ~~2023 and possibly earlier.~~

~~In response~~accordance with U.S. GAAP, unless otherwise noted. Refer to the ~~COVID-19 pandemic,~~Non-GAAP Financial Measurements section at the ~~Small Business Administration Paycheck Protection Program (“SBA-PPP”) was established through~~end of the ~~Coronavirus Aid Relief~~MD&A for a reconciliation of non-GAAP measures to the most directly comparable GAAP measures. Additionally, due to the CIT Merger, current quarter ending and ~~Economic Security Act (the “CARES Act”) and~~average balances are not comparable to the ~~Consolidated Appropriations Act 2021 to direct aid via loans to small businesses impacted by the COVID-19 pandemic.~~

~~We completed the first round of SBA-PPP funding~~prior periods. Further discussions are included in the ~~second half 2020. During the second quarter~~remaining sections of 2021, we completed the second round of funding, which resulted in the origination of approximately 12,000 SBA-PPP loans totaling $1.2 billion. We recorded $27.2 million of interest and fee income related to SBA-PPP loans for the quarter. As of June 30, 2021, remaining net deferred fees on SBA-PPP loans were $54.9 million.

With respect to the first round of SBA-PPP, we began accepting and processing applications for forgiveness during the third quarter of 2020. We have received approximately 20,000 forgiveness decisions from the SBA to date, representing over $2.6 billion in forgiveness payments. We originated approximately 23,000 loans during round one totaling $3.2 billion.this MD&A.

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Table 1

~~SBA-PPP LOAN FORGIVENESS STATUS~~Selected Quarterly Data

(Dollars in thousands)
Round One Forgiveness Status at June 30, 2021 $ of Loans % of Round One Total
Received by FCB $ 2,933,046 91.3 %
Submitted to SBA 2,842,312 88.5
Approved by SBA 2,767,706 86.2
Funds Received 2,642,638 82.3


	Three Months Ended March 31,
dollars in millions, except share data	2022			2021
SUMMARY OF OPERATIONS
Interest income	$	710		$	355
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	850			137
Noninterest expense	810			297
Income before income taxes	225			191
Income taxes	(46)			44
Net income	271			147
Preferred stock dividends	7			4
Net income available to common stockholders	$	264		$	143



PER COMMON SHARE DATA
Average diluted common shares	15,779,153			9,816,405
Net income available to common stockholders (diluted)	$	16.70		$	14.53

Book value per common share	605.48			405.59


KEY PERFORMANCE METRICS
Return on average assets (ROA)	1.00		%	1.16		%

Return on average common stockholders' equity (ROE)	11.18		%	14.70		%





Net interest margin (NIM)(1)	2.73		%	2.79		%

SELECTED QUARTERLY AVERAGE BALANCES
Total investments	$	19,492		$	9,757
Total loans and leases(2)	64,144			33,087
Total operating lease equipment (net)	7,924			—
Total assets	109,234			51,409
Total deposits	91,574			44,858
Total common stockholders' equity	9,560			3,935


SELECTED QUARTER-END BALANCES
Total investments	$	19,469		$	10,222
Total loans and leases	65,524			33,181
Total operating lease equipment (net)	7,972			—
Total assets	108,597			53,909
Total deposits	91,597			47,331
Total common stockholders' equity	9,689			4,321

Loan to deposit ratio	71.53		%	70.10		%
Noninterest-bearing deposits to total deposits	28.27		%	43.34		%

CAPITAL RATIOS
Common equity tier 1 ratio	11.34		%	12.02		%
Tier 1 risk-based capital ratio	12.39		%	14.14		%
Total risk-based capital ratio	14.47		%	11.00		%
Tier 1 leverage capital ratio	9.55		%	7.84		%


ASSET QUALITY
Ratio of nonaccrual loans to total loans	0.82		%	0.59		%
Allowance for credit losses to loans ratio	1.29		%	0.63		%
Net charge off ratio	0.09		%	0.03		%

(1)See “Non-GAAP Financial Measures” section for reconciliation of NIM presented to unadjusted NIM (GAAP).

(2)Average loan balances include held for sale and non-accrual loans.

Through June 30, 2021, over 99% of all COVID-19-related loan extensions have begun repayment. Delinquency trends among loans entering repayment are in line with the remainder of the portfolio, and we have not seen significant declines in overall credit quality.

~~SIGNIFICANT EVENTS IN 2021~~

On October 15, 2020, BancShares and CIT Group Inc., a Delaware corporation (“CIT”), entered into an Agreement and Plan of Merger (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”). 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 has been approved by the shareholders of both companies and has received regulatory approval from the North Carolina Commissioner of Banks and the Federal Deposit Insurance Corporation (“FDIC”). Completion of the proposed merger remains subject to approval from the Board of Governors of the Federal Reserve System and closing is expected in the third quarter, subject to such approval and the satisfaction or waiver of other 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”), except for certain shares of CIT Common Stock owned by CIT or BancShares, will be converted into the right to receive 0.06200 shares of BancShares Class A common stock, par value $1.00 per share. Holders of CIT Common Stock will receive cash in lieu of fractional shares.

In addition, at the Effective Time, each share of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series A, par value $0.01 per share, of CIT and 5.625% Non-Cumulative Perpetual Preferred Stock, Series B, par value $0.01 per share, of CIT issued and outstanding will automatically be converted into the right to receive one share of a newly created series of preferred stock, Series B, of BancShares and one share of a newly created series of preferred stock, Series C, of BancShares, respectively.

The Merger Agreement requires that, effective as of the Effective Time, the Boards of Directors of the combined company and the combined bank will consist of 14 directors, (i) 11 of whom will be members of the current Board of Directors of BancShares, and (ii) three of whom will be selected from among the current Board of Directors of CIT and will include as one of those three Ellen R. Alemany, Chairwoman and Chief Executive Officer of CIT. We intend 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 Directors of the combined company and the combined bank.

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~~FINANCIAL PERFORMANCE SUMMARY~~

~~Second~~First Quarter Highlights

•Net income for the ~~second~~first quarter of ~~2021~~2022 was ~~$152.8~~$271 million, ~~a decrease~~an increase of ~~$1.0~~$124 million, or ~~0.6%~~84% compared to the same quarter in ~~2020.~~2021. Net income available to common ~~shareholders~~stockholders totaled ~~$148.2~~$264 million for the ~~second~~first quarter of 2022, an increase of $121 million, or 85% compared to the same quarter in 2021. Net income per common share increased ~~$0.35,~~$2.17, or ~~2.4%~~15%, to ~~$15.09~~$16.70 in the ~~second~~first quarter of ~~2021,~~2022, from ~~$14.74~~$14.53 per share during the ~~comparable~~same quarter in ~~2020.~~2021. The increases are primarily attributed to the CIT Merger.

•Certain notable items and approximate after-tax amounts and impacts on earnings per share included:

◦Current expected credit losses (“CECL”) day 2 provision for loans and leases and unfunded commitments of $513 million ($387 million after tax, $24.50 per common share).

◦Preliminary gain on acquisition of $431 million (non-taxable, $27.34 per common share) in other noninterest income, representing the excess of the fair value of net assets acquired over the purchase price.

◦Gain on debt redemptions in other noninterest income of $6 million ($5 million after tax, $0.29 per common share) from approximately $2.9 billion of borrowings assumed in the CIT Merger.

◦Merger related expenses of $135 million ($102 million after tax, $6.45 per common share) in other noninterest expenses.

◦A reduction in other noninterest expenses of approximately $27 million ($20 million after tax, $1.28 per common share) related to the termination of certain healthcare and life insurance plans of legacy CIT, reflecting amounts previously accrued.

•Return on average assets for the ~~second~~first quarter of ~~2021~~2022 was ~~1.13%~~1.00%, ~~down from 1.36%~~compared to 1.16% in the ~~second~~first quarter of ~~2020. Return on average equity for the second quarter of 2021 was 14.64%, down from 16.43% during the comparable quarter of 2020.~~2021.

•Net interest income (“NII”) was ~~$346.4~~$649 million for the ~~second~~first quarter of ~~2021,~~2022, an increase of ~~$9.0~~$309 million, or ~~2.7%~~91% compared to the same quarter in ~~2020.~~2021. This was primarily due to the CIT Merger, partially offset by lower ~~rates paid on interest-bearing deposits,~~ interest and fee income on SBA-PPP loans, and organic loan growth, partially offset by a decline in the yield on interest-earning assets. SBA-PPP loans contributed $27.2 million in interest and fee income for the second quarter of 2021 compared to $19.0 million in the same quarter of 2020.loans. The ~~taxable-equivalent~~ net interest margin (“NIM”) was ~~2.68%~~2.73% for the ~~second~~first quarter of ~~2021,~~2022, a decrease of ~~46 basis points~~6 bps from ~~3.14%~~2.79% for the ~~second~~first quarter in ~~2020.~~2021.

•Provision for credit losses was $464 million for the first quarter of 2022 compared to a benefit of ~~$19.6~~$11 million ~~for the second quarter of 2021 compared to $20.6 million in expense~~ for the same quarter in ~~2020. The~~2021. While still low, net charge-off ratio was ~~0.02%~~0.09% for the ~~second~~first quarter of ~~2021, down~~2022, up from 0.03% for the first quarter of ~~2021 and 0.09% for the second quarter of 2020.~~2021.

•Noninterest income was ~~$134.2~~$850 million for the ~~second~~first quarter of ~~2021, a decrease of $31.3 million, or 18.9%,~~2022, compared to ~~$165.4~~$137 million for the same quarter of ~~2020.~~2021, benefiting from the CIT Merger. The current quarter includes a preliminary gain on acquisition of $431 million and rental income on operating leases of $208 million. The remaining increase was driven by the added activity due to the CIT Merger.

•Noninterest expense was ~~$301.6~~$810 million for the ~~second~~first quarter of ~~2021, an increase of $9.9~~2022, compared to $297 million ~~or by 3.4% compared to~~in the same quarter of ~~2020.~~

•~~The allowance for credit losses was $189.1 million at June 30, 2021, compared to $210.7 million at March 31,~~ 2021. The ~~$21.6~~increase is primarily associated with the CIT Merger, reflecting higher salaries and benefit costs of $168 million ~~change was~~ due ~~primarily~~ to ~~a reserve release for~~ the ~~three months ended June 30, 2021 driven by continued improvement~~increase in ~~macroeconomic factors, strong credit performance,~~employees, $124 million of depreciation and ~~low net charge-offs.~~maintenance costs associated with the operating lease portfolio and higher merger costs of $128 million.

•Total loans ~~were~~and leases of $65.5 billion increased $32.5 billion from December 31, 2021, reflecting the addition of $32.7 billion ~~as of June 30, 2021, a decrease of $491.2 million, or by 5.9% on an annualized basis, since March 31, 2021. Excluding loans originated under~~from the ~~SBA-PPP, total loans increased $605.6 million, or by 8.0% on an annualized basis, since March 31, 2020.~~CIT Merger.

•Total deposits ~~grew to $48.4~~of $91.6 billion ~~an increase~~increased $40.2 billion from December 31, 2021, reflecting the addition of ~~$1.1~~$39.4 billion ~~or by 9.1% on an annualized basis, since March 31, 2021.~~from the CIT Merger.

•At ~~June 30, 2021,~~March 31, 2022, BancShares remained ~~“well capitalized” as defined by regulatory standards~~well capitalized with a total risk-based capital ratio of ~~14.2%~~14.47%, a Tier 1 risk-based capital of ~~12.1%~~12.39%, a common equity Tier 1 ratio of ~~11.1%~~11.34% and a leverage ratio of ~~7.7%~~9.55%.

3767

~~Table of Contents~~

~~Year~~RESULTS OF OPERATIONS

NET INTEREST INCOME AND NET INTEREST MARGIN

NII reflects our interest income less interest expense and is included as a line item on the Consolidated Statements of Income. NII was $649 million for the three months ended March 31, 2022, up from $340 million in the year-ago quarter.

The following table presents the average balance sheet and related rates, along with disaggregated quarter-over-quarter changes in NII between volume (level of lending or borrowing) and rate (rates charged to ~~Date Highlights~~customers or incurred on borrowings). Volume change is calculated as change in volume times the previous rate, while rate change is calculated as change in rate times the previous volume. The rate/volume change, change in rate times change in volume, is allocated between volume change and rate change. Tax equivalent net interest income was not materially different from NII, therefore we present NII in our analysis.

Table 2

Average Balances and Rates


	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	%

(1)Loans and leases include non-PCD and PCD loans, nonaccrual loans and held for sale. Interest income on loans and leases includes accretion income and loan fees.

(2)The balance and rate presented is calculated net of average credit balances of factoring clients. See “Non-GAAP Financial Measures” section for description of adjusted interest earning assets and why these balances are shown net of credit balances of factoring clients.

First Quarter 2022 compared to First Quarter 2021

•~~Net income~~NII was $649 million for the ~~six~~three months ended ~~June 30, 2021 totaled $300.1 million,~~March 31, 2022, an increase of ~~$89.1~~$309 million ~~or 42.3%~~ compared to the ~~same period in 2020. Net income available to common shareholders totaled $290.8 million. Earnings per share increased $9.59, or 47.9%, to $29.63 for the six months ended June 30,~~first quarter of 2021, ~~from $20.04 during the comparable period in 2020.~~

•Return on average assets for the six months ended June 30, 2021 was 1.14%, up 16 basis points compared to the same period in 2020. Return on average equity for the six months ended June 30, 2021 was 14.67%, up 328 basis points compared to the same period in 2020.

•~~Net interest income for the six months ended June 30, 2021, was $686.0 million, an increase of $10.3 million, or 1.5% compared to the same period of 2020. This was~~ primarily due to ~~lower rates paid on interest-bearing deposits, an increase~~the CIT Merger, as well as loan growth absent the decline in SBA-PPP loans, partially offset by a decline in interest and fee income on SBA-PPP loans and ~~organic loan growth, partially offset by a decline in the yield~~lower yields on other interest-earning assets. SBA-PPP loans contributed $58.1 million in interest and fee income for the six months ended June 30, 2021 compared to $19.0 million in the comparable period in 2020. The taxable-equivalent NIM was 2.74% for the six months ended June 30, 2021, a decrease of 59 basis points from 3.33% during the comparable period of 2020.

•◦Provision for credit losses was a benefit of $30.6 million for the six months ended June 30, 2021, compared to $48.9 million in expense for the same period in 2020. The net charge-off ratio was 0.03% for the six months ended June 30, 2021, a 7 basis point decrease compared to the same period of 2020.

•~~Noninterest~~Interest income ~~was $270.8 million for the six months ended June 30, 2021, an increase of $41.4 million, or 18.0%, compared to $229.4 million for the same quarter of 2020.~~

•~~Noninterest expense was $597.5 million for the six months ended June 30 2021, an increase of $5.9 million or by 1.0% compared to the same quarter of 2020.~~

•The allowance for credit losses was $189.1 million at June 30, 2021, compared to $224.3 million at December 31, 2020. The $35.2 million change was due primarily to a reserve release for the six months ended June 30, 2021 driven by continued improvement in macroeconomic factors, strong credit performance, and low net charge-offs.

•~~Total loans grew to $32.7 billion, a decrease of $102.3 million since December 31, 2020. Excluding SBA-PPP loans, total loans increased $604.7 million, or by 3.7%~~earned on ~~an annualized basis, since December 31, 2020.~~

•~~Total deposits grew to $48.4 billion, an increase of $5.0 billion since December 31, 2020 or by 23.1% on an annualized basis driven by organic growth and the effects of government stimulus.~~

~~Table of Contents~~

~~Table 2~~

~~SELECTED QUARTERLY DATA~~

2021 2020 Six months ended June 30
Second First Fourth Third Second
(Dollars in thousands, except share data) Quarter Quarter Quarter Quarter Quarter 2021 2020
SUMMARY OF OPERATIONS
Interest income $ 361,825 $ 355,323 $ 376,876 $ 374,334 $ 363,257 $ 717,148 $ 732,816
Interest expense 15,432 15,671 18,160 20,675 25,863 31,103 57,022
Net interest income 346,393 339,652 358,716 353,659 337,394 686,045 675,794
Provision (credit) for credit losses (19,603) (10,974) 5,403 4,042 20,552 (30,577) 48,907
Net interest income after provision for credit losses 365,996 350,626 353,313 349,617 316,842 716,622 626,887
Noninterest income 134,150 136,649 126,765 120,572 165,402 270,799 229,413
Noninterest expense 301,578 295,926 305,373 291,662 291,679 597,504 591,650
Income before income taxes 198,568 191,349 174,705 178,527 190,565 389,917 264,650
Income taxes 45,780 44,033 36,621 35,843 36,779 89,813 53,695
Net income 152,788 147,316 138,084 142,684 153,786 300,104 210,955
Net income available to common shareholders $ 148,152 $ 142,680 $ 133,448 $ 138,048 $ 148,996 $ 290,832 $ 206,165
Net interest income, taxable equivalent $ 347,035 $ 340,271 $ 359,370 $ 354,256 $ 337,965 $ 687,306 $ 677,139
PER COMMON SHARE DATA
Net income $ 15.09 $ 14.53 $ 13.59 $ 14.03 $ 14.74 $ 29.63 $ 20.04
Cash dividends on common shares 0.47 0.47 0.47 0.40 0.40 0.94 0.80
Market price at period end (Class A) 832.74 835.77 574.27 318.78 405.02 832.74 405.02
Book value per share at period-end 421.39 405.59 396.21 380.43 367.57 421.39 367.57
SELECTED QUARTERLY AVERAGE BALANCES
Total assets $ 54,399,331 $ 51,409,634 $ 49,557,803 $ 48,262,155 $ 45,553,502 $ 52,912,741 $ 43,101,154
Investment securities 10,534,348 9,757,650 9,889,124 9,930,197 8,928,467 10,148,144 8,190,813
Loans and leases (1)
33,166,049 33,086,656 32,964,390 32,694,996 31,635,958 33,126,572 30,367,030
Interest-earning assets 51,519,684 48,715,279 46,922,823 45,617,376 42,795,781 50,125,228 40,400,061
Deposits 47,751,103 44,858,198 43,123,312 41,905,844 39,146,415 46,312,642 36,948,238
Interest-bearing liabilities 28,909,320 27,898,525 26,401,222 25,591,707 24,407,285 28,406,714 23,780,042
Securities sold under customer repurchase agreements 677,451 641,236 684,311 710,237 659,244 659,444 566,737
Other short-term borrowings — — — — 45,549 — 101,654
Long-term borrowings 1,227,755 1,235,576 1,250,682 1,256,331 1,275,928 1,231,643 1,118,042
Common shareholders' equity 4,058,236 3,935,267 3,786,158 3,679,138 3,648,284 3,996,751 3,637,129
Shareholders’ equity $ 4,398,173 $ 4,275,204 $ 4,126,095 $ 4,019,075 $ 3,988,225 $ 4,336,688 $ 3,835,430
Common shares outstanding 9,816,405 9,816,405 9,816,405 9,836,629 10,105,520 9,816,405 10,289,320
SELECTED QUARTER-END BALANCES
Total assets $ 55,175,318 $ 53,908,606 $ 49,957,680 $ 48,666,873 $ 47,866,194 $ 55,175,318 $ 47,866,194
Investment securities 10,894,227 10,222,107 9,922,905 9,860,594 9,508,476 10,894,227 9,508,476
Loans and leases 32,689,652 33,180,851 32,791,975 32,845,144 32,418,425 32,689,652 32,418,425
Deposits 48,410,596 47,330,997 43,431,609 42,250,606 41,479,245 48,410,596 41,479,245
Securities sold under customer repurchase agreements 692,604 680,705 641,487 693,889 740,276 692,604 740,276
Other short-term borrowings — — — — — — —
Long-term borrowings 1,224,488 1,230,326 1,248,163 1,252,016 1,258,719 1,224,488 1,258,719
Shareholders’ equity $ 4,476,490 $ 4,321,400 $ 4,229,268 $ 4,074,414 $ 3,991,444 $ 4,476,490 $ 3,991,444
Common shares outstanding 9,816,405 9,816,405 9,816,405 9,816,405 9,934,105 9,816,405 9,934,105
SELECTED RATIOS AND OTHER DATA
Return on average assets (annualized) 1.13 % 1.16 % 1.11 % 1.18 % 1.36 % 1.14 % 0.98 %
Return on average common shareholders’ equity (annualized) 14.64 14.70 14.02 14.93 16.43 14.67 11.40
Net yield on interest-earning assets (taxable equivalent) 2.68 2.80 3.02 3.06 3.14 2.74 3.33
Net charge-offs to average loans and leases (annualized) 0.02 0.03 0.06 0.03 0.09 0.03 0.10
Allowance for credit losses to total loans and leases(2):
PCD 4.73 5.30 5.18 5.07 5.07 4.73 5.07
Non-PCD 0.53 0.57 0.62 0.61 0.61 0.53 0.61
Total 0.58 0.63 0.68 0.68 0.69 0.58 0.69
Ratio of total nonperforming assets to total loans, leases and other real estate owned 0.71 0.73 0.74 0.73 0.77 0.71 0.77
Total risk-based capital ratio 14.15 14.14 13.81 13.70 13.63 14.15 13.63
Tier 1 risk-based capital ratio 12.13 12.02 11.63 11.48 11.38 12.13 11.38
Common equity Tier 1 ratio 11.14 11.00 10.61 10.43 10.32 11.14 10.32
Tier 1 leverage capital ratio 7.67 7.84 7.86 7.80 8.07 7.67 8.07
Dividend payout ratio 3.11 3.23 3.46 2.85 2.71 3.17 3.99
Average loans and leases to average deposits 69.46 73.76 76.44 78.02 80.81 71.53 82.19

~~(1)~~ ~~Average loan and lease balances include PCD loans, non-PCD~~ loans and leases ~~loans held for sale and nonaccrual loans and leases.~~

~~(2)~~ Loans originated in relation to the SBA-PPP ($1.7 billion as of June 30, 2021) do not have a recorded ACL. As of June 30, 2021, the ratio of ACL to total Non-PCD loans excluding SBA-PPP loans is 0.56%, while the ratio of ACL to total loans excluding SBA-PPP loans is 0.61%.

~~Table of Contents~~

~~BUSINESS COMBINATIONS~~

~~CIT Group Inc.~~

On October 15, 2020, BancShares and CIT, entered into the Merger Agreement by and among BancShares, FCB, the Merger Sub, and CIT, the parent company of CIT Bank. Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub and CIT will ultimately merge with and into FCB, with FCB as the surviving entity. 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.

~~The Merger Agreement~~ was unanimously approved by the Board of Directors of each of BancShares and CIT. The transaction has been approved by the shareholders of both companies and has received regulatory approval from the North Carolina Commissioner of Banks and the FDIC. Completion of the proposed merger remains subject to approval from the Board of Governors of the Federal Reserve System and closing is expected in the third quarter, subject to such approval and the satisfaction or waiver of other customary closing conditions.

~~Federal Deposit Insurance Corporation Assisted Transactions~~

BancShares completed fourteen FDIC-assisted transactions between 2009 and 2017. Nine of the fourteen FDIC-assisted transactions included shared-loss agreements which, for their terms, protected us from a substantial portion of the credit and asset quality risk we would otherwise incur.

~~For certain FDIC-assisted transactions, the shared-loss agreement included a provision related to a payment owed to the FDIC at the termination of the agreement.As of June 30, 2021, these agreements have been satisfied following a $16.1~~$621 million ~~payment made to the FDIC for the final active agreement during the first quarter of 2021.~~

~~Table of Contents~~

~~Table 3~~

~~CONSOLIDATED QUARTER-TO-DATE AVERAGE TAXABLE-EQUIVALENT BALANCE SHEETS~~

Three months ended June 30
2021 2020
Interest Interest
Average Income/ Yield/ Average Income/ Yield/
(Dollars in thousands) Balance Expense Rate Balance Expense Rate
Assets
Loans and leases $ 33,166,049 $ 324,891 3.89 % $ 31,635,958 $ 326,618 4.10 %
Investment securities:
U.S. Treasury — — — 206,575 679 1.32
Government agency 839,614 1,966 0.94 657,405 1,428 0.87
Mortgage-backed securities 8,968,779 25,273 1.13 7,555,947 28,532 1.51
Corporate bonds 612,516 7,806 5.10 299,250 3,782 5.06
Other investments 113,439 426 1.51 209,290 2,236 4.30
Total investment securities 10,534,348 35,471 1.35 8,928,467 36,657 1.64
Overnight investments 7,819,287 2,105 0.11 2,231,356 553 0.10
Total interest-earning assets 51,519,684 362,467 2.80 42,795,781 363,828 3.38
Cash and due from banks 364,303 404,517
Premises and equipment 1,242,700 1,260,566
Allowance for credit losses (211,913) (209,973)
Other real estate owned 46,074 55,554
Other assets 1,438,483 1,247,057
Total assets $ 54,399,331 $ 45,553,502
Liabilities
Interest-bearing deposits:
Checking with interest $ 10,952,753 $ 1,504 0.06 % $ 8,562,145 $ 1,310 0.06 %
Savings 3,796,686 326 0.03 2,846,557 312 0.04
Money market accounts 9,581,775 2,634 0.11 7,618,883 6,519 0.34
Time deposits 2,672,900 4,078 0.61 3,398,979 9,775 1.16
Total interest-bearing deposits 27,004,114 8,542 0.13 22,426,564 17,916 0.32
Securities sold under customer repurchase agreements 677,451 356 0.21 659,244 399 0.24
Other short-term borrowings — — — 45,549 248 2.16
Long-term borrowings 1,227,755 6,534 2.12 1,275,928 7,300 2.26
Total interest-bearing liabilities 28,909,320 15,432 0.21 24,407,285 25,863 0.42
Noninterest-bearing deposits 20,746,989 16,719,851
Other liabilities 344,849 438,141
Shareholders’ equity 4,398,173 3,988,225
Total liabilities and shareholders’ equity $ 54,399,331 $ 45,553,502
Interest rate spread 2.59 % 2.96 %
Net interest income and net yield on interest-earning assets $ 347,035 2.68 % $ 337,965 3.14 %

Loans and leases include PCD loans, non-PCD loans, nonaccrual loans and loans held for sale. Yields related to loans, leases and securities exempt from both federal and state income taxes, federal income taxes only, or state income taxes only are stated on a taxable-equivalent basis assuming a statutory federal income tax rate of 21.0%, as well as a blended state income tax rate of 3.3% and 3.4%, for the three months ended ~~June 30, 2021 and 2020, respectively. The taxable-equivalent adjustment was $642 thousand and $571 thousand for the three months ended June 30, 2021 and 2020, respectively.~~

~~Table of Contents~~

~~Table 4~~

~~CONSOLIDATED YEAR-TO-DATE AVERAGE TAXABLE-EQUIVALENT BALANCE SHEETS~~

Six months ended June 30
2021 2020
Interest Interest
Average Income/ Yield/ Average Income/ Yield/
(Dollars in thousands) Balance Expense Rate Balance Expense Rate
Assets
Loans and leases $ 33,126,572 $ 648,493 3.91 % $ 30,367,030 $ 652,774 4.27 %
Investment securities:
U.S. Treasury 190,591 172 0.18 253,176 2,356 1.87
Government agency 815,587 3,865 0.95 689,330 5,548 1.61
Mortgage-backed securities 8,428,730 45,880 1.09 6,808,190 59,239 1.74
Corporate bonds 607,726 15,548 5.12 252,377 6,259 4.96
Other investments 105,510 898 1.72 187,740 2,914 3.12
Total investment securities 10,148,144 66,363 1.31 8,190,813 76,316 1.86
Overnight investments 6,850,512 3,553 0.10 1,842,218 5,071 0.55
Total interest-earning assets 50,125,228 718,409 2.86 40,400,061 734,161 3.62
Cash and due from banks 348,772 352,475
Premises and equipment 1,247,097 1,256,268
Allowance for credit losses (217,928) (198,621)
Other real estate owned 47,325 54,455
Other assets 1,362,247 1,236,516
Total assets $ 52,912,741 $ 43,101,154
Liabilities
Interest-bearing deposits:
Checking with interest $ 10,850,059 $ 2,913 0.05 % $ 8,375,564 $ 3,011 0.07 %
Savings 3,630,158 625 0.03 2,720,213 597 0.04
Money market accounts 9,296,667 5,142 0.11 7,317,735 15,628 0.43
Time deposits 2,738,743 8,655 0.64 3,580,097 22,874 1.28
Total interest-bearing deposits 26,515,627 17,335 0.13 21,993,609 42,110 0.39
Securities sold under customer repurchase agreements 659,444 694 0.21 566,737 841 0.30
Other short-term borrowings — — — 101,654 1,052 2.05
Long-term borrowings 1,231,643 13,074 2.12 1,118,042 13,019 2.30
Total interest-bearing liabilities 28,406,714 31,103 0.22 23,780,042 57,022 0.48
Noninterest-bearing deposits 19,797,015 14,954,629
Other liabilities 372,324 531,053
Shareholders’ equity 4,336,688 3,835,430
Total liabilities and shareholders’ equity $ 52,912,741 $ 43,101,154
Interest rate spread 2.64 % 3.14 %
Net interest income and net yield on interest-earning assets $ 687,306 2.74 % $ 677,139 3.33 %

Loans and leases include PCD loans, non-PCD loans, nonaccrual loans and loans held for sale. Yields related to loans, leases and securities exempt from both federal and state income taxes, federal income taxes only, or state income taxes only are stated on a taxable-equivalent basis assuming a statutory federal income tax rate of 21.0%, as well as a blended state income tax rate of 3.3% and 3.4%, for the six months ended June 30, 2021 and 2020, respectively. The taxable-equivalent adjustment was $1.3 million and $1.3 million for the six months ended June 30, 2021 and 2020, respectively.

~~Table of Contents~~

~~Table 5~~

~~CHANGES IN CONSOLIDATED TAXABLE EQUIVALENT NET INTEREST INCOME~~

Three months ended June 30, 2021 Six months ended June 30, 2021
Change from prior year period due to: Change from prior year period due to:
(Dollars in thousands)
Volume(1)
Yield/Rate(1)
Total Change
Volume(1)
Yield/Rate(1)
Total Change
Assets
Loans and leases $ 14,265 $ (15,992) $ (1,727) $ 49,996 $ (54,277) $ (4,281)
Investment securities:
U.S. Treasury (679) — (679) (587) (1,597) (2,184)
Government agency 396 142 538 1,016 (2,699) (1,683)
Mortgage-backed securities 5,259 (8,518) (3,259) 14,066 (27,425) (13,359)
Corporate bonds 3,960 64 4,024 8,812 477 9,289
Other investments (1,025) (785) (1,810) (1,302) (714) (2,016)
Total investment securities 7,911 (9,097) (1,186) 22,005 (31,958) (9,953)
Overnight investments 1,389 163 1,552 13,753 (15,271) (1,518)
Total interest-earning assets $ 23,565 $ (24,926) $ (1,361) $ 85,754 $ (101,506) $ (15,752)
Liabilities
Interest-bearing deposits:
Checking with interest $ 370 $ (176) $ 194 $ 895 $ (993) $ (98)
Savings 105 (91) 14 201 (173) 28
Money market accounts 1,702 (5,587) (3,885) 4,199 (14,685) (10,486)
Time deposits (2,067) (3,630) (5,697) (5,376) (8,843) (14,219)
Total interest-bearing deposits 110 (9,484) (9,374) (81) (24,694) (24,775)
Securities sold under customer repurchase agreements 12 (55) (43) 139 (286) (147)
Other short-term borrowings (248) — (248) (1,052) — (1,052)
Long-term borrowings (271) (495) (766) 1,296 (1,241) 55
Total interest-bearing liabilities (397) (10,034) (10,431) 302 (26,221) (25,919)
Change in net interest income $ 23,962 $ (14,892) $ 9,070 $ 85,452 $ (75,285) $ 10,167
(1) The rate/volume variance is allocated proportionally between the changes in volume and rate.

~~RESULTS OF OPERATIONS~~

~~Net Interest Income and Margin (Taxable-Equivalent Basis)~~

~~Second Quarter 2021 compared to Second Quarter 2020~~

~~Taxable-equivalent net interest income was $347.0 million for the second quarter of 2021,~~March 31, 2022, an increase of ~~$9.1~~$298 million ~~or 2.7%,~~ compared to ~~the second quarter of 2020. This~~2021. The increase was primarily due to the addition of $32.7 billion of loans acquired in the CIT Merger along with growth in loans, excluding SBA-PPP loans. Partially offsetting was lower ~~rates paid on interest-bearing deposits, an increase in~~SBA-PPP interest and fee ~~income on SBA-PPP loans, and organic loan growth, partially offset by a decline in the yield on interest-earning assets.~~income. SBA-PPP loans contributed ~~$27.2~~$9 million in interest and fee income during the ~~second~~first quarter of ~~2021~~2022 compared to ~~$19.0~~$31 million in the ~~second~~first quarter of ~~2020.~~2021.

◦Interest income earned on investment securities was $83 million for the three months ended March 31, 2022, an increase of $53 million compared to 2021. The ~~taxable-equivalent~~ increase was primarily due to the addition of $6.6 billion of securities acquired in the CIT Merger and higher portfolio yield, reflecting the mix of acquired investments and a higher rate environment.

◦Interest expense on interest-bearing deposits was $39 million for the three months ended March 31, 2022, an increase of $30 million compared to 2021. The increase was primarily due to the additional interest-bearing deposits acquired in the CIT Merger, which also carried a higher average rate. Interest expense on borrowings was $22 million for the three months ended March 31, 2022, an increase of $16 million compared to 2021. The increase was primarily due to the assumed borrowings in the CIT Merger. Utilizing excess cash, we redeemed approximately $2.9 billion of the $4.5 billion assumed debt during the quarter.

•NIM was ~~2.68%~~2.73% in the ~~second~~first quarter of ~~2021,~~2022, a decrease of ~~46 basis points~~6 bps from the comparable quarter in the prior year. The margin decline ~~was primarily due to changes in earning asset mix as excess liquidity drove an increase in overnight investments as a percentage of total assets. This was coupled with a decline in the~~reflected higher yield on ~~interest-earning assets and partially~~our investment portfolio, offset by lower SBA-PPP income and purchase accounting accretion, which reduced the loan portfolio yield, and higher rates ~~paid~~ on ~~interest-bearing deposits and the yield on SBA-PPP loans.~~deposits.

•Average interest-earning assets increased ~~by $8.7~~to $95.1 billion ~~to $51.5 billion,~~for the first quarter of 2022, compared to $48.7 billion in the ~~second~~first quarter of ~~2020.~~2021. The primary ~~drivers~~driver for this change ~~were~~was the ~~excess liquidity build up which led to higher~~added assets from the CIT Merger. The following table details the average ~~overnight investments of $5.6 billion, a $1.5 billion increase in average loan balances due to SBA-PPP loans as well as organic loan growth and higher average investment securities of $1.6 billion.~~

The yield on interest-earning assets decreased by 58 basis points to 2.80% when compared to the second quarter of 2020. The yield on loans and leases decreased to 3.89%, or by 21 basis points, as a result of downward rate resets on variable rate loans and lower rates on new fixed rate loans. The yield on overnight investments increased one basis point, but the large increase in average balances resulted in a change ininterest earning asset ~~mix, which contributed to an overall decline in the yield. The yield on investment securities decreased~~ by ~~29 basis points primarily due to increased premium amortization on mortgage-backed securities as a result of higher than expected prepayments.~~category.

Table 3

Average Interest-earning Asset Mix


	% 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	%

•Average interest-bearing liabilities increased ~~by $4.5 billion~~ to ~~$28.9~~$71.4 billion compared to $27.9 billion the ~~second~~first quarter of ~~2020. This increase was driven by an increase in~~2021, reflecting the addition of deposits and borrowings from the CIT Merger. The following table shows our average ~~interest-bearing deposit balances of $4.6 billion driven by strong deposit growth. This was partially offset by a decrease in average long-term borrowings of $48.2 million.~~funding mix.

43Table 4

~~Table~~Noninterest Expense


	Three Months Ended
dollars in millions	March 31, 2022		March 31, 2021
Depreciation on operating lease equipment	$	81	$	—
Maintenance and other operating lease expenses	43		—
Operating expenses
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	56		26
Total operating expenses	$	686	$	297

Depreciation on Operating Lease Equipment

Depreciation expense is driven by rail equipment and small and large ticket equipment we own and lease to others. Operating lease activity is in the Rail and Commercial Banking segments. The useful lives of ~~Contents~~rail equipment is generally longer in duration, 40-50 years, whereas small and large ticket equipment is generally 3-10 years. Refer to the Rail discussion in the Results by Business Segments section for further details.

Maintenance and Other Operating Lease Expenses

Maintenance and other operating lease expenses of $43 million for the three months ended March 31, 2022 related to equipment ownership and leasing costs associated with the Rail portfolio and tend to be variable. Rail provides railcars primarily pursuant to full-service lease contracts under which Rail as lessor is responsible for railcar maintenance and repair. Refer to the Rail discussion in the Results by Business Segmentsection for further details.

Operating Expenses

The primary components of ~~noninterest expense~~operating expenses are salaries and related employee benefits, occupancy and equipment expense.

~~Noninterest expense was $301.6~~

Operating expenses were $686 million during the ~~second~~first quarter of ~~2021, an~~2022. The increase ~~of $9.9 million, or 3.4%,~~ compared to the same quarter in ~~2020.~~2021 was primarily driven by the CIT Merger. The most significant components of the change were as follows:

•~~Personnel expense increased $11.9~~Salaries and benefits, which includes salaries, wages and employee benefits, were up $168 million, ~~driven by an increase in payroll incentives and higher health insurance claims.~~primarily reflecting the added headcount.

•~~Processing fees paid to third parties increased $4.2~~Net occupancy expense includes rent expense on leased office space and depreciation on buildings we own. The $19 million ~~as we continue to make investments in our digital~~increase reflects the added branches and ~~technological capabilities.~~office space from the CIT Merger.

•~~Collection and foreclosure-related expenses decreased $3.8~~Equipment expense increased $22 million, ~~and other noninterest expense decreased by $2.2 million.~~

~~Noninterest expense was $597.5 million~~reflecting the additional costs for the ~~first six months of 2021, compared to $591.7 million for~~IT systems from the ~~same period in 2020, an increase of $5.9 million, or 1.0%. The most significant components of the change were as follows:~~

•~~Personnel expense increased by $11.7 million primarily due to an increase in payroll incentives coupled with the impact of merit increases.~~CIT Merger.

•~~Processing~~Third-party processing fees ~~paid to third parties~~ increased ~~$7.5~~$10 million as ~~we continue to make~~a result of the CIT Merger and our continued investments in ~~our~~ digital and ~~technological capabilities.~~technology to support revenue-generating businesses and improve internal processes.

•Merger-related expenses increased ~~$4.0~~by $128 million, driven by expenses related to the CIT Merger, including severance, retention, consulting and legal costs.

•The $9 million increase in ~~anticipation of~~FDIC insurance expense reflects the ~~upcoming merger with CIT.~~additional deposits acquired in the CIT Merger.

•Intangible amortization was up $3 million, reflecting the additional amortization on the core deposit intangible asset recorded in the CIT Merger. See Note 2 — Business Combinations for additional information.

•Other expense increased by $30 million and consisted of other insurance and taxes (other than income tax), foreclosure, collection and other OREO-related expenses, ~~decreased $11.3~~advertising, consulting, telecommunications and other miscellaneous expenses including travel, postage, supplies, and appraisal expense. The first quarter of 2022 included a $27 million ~~primarily due~~reversal of an accrual related to ~~a decrease in pension expense as a result of higher expected returns on plan assets coupled with improvements in~~legacy CIT postretirement plans that were terminated after the ~~reserve for unfunded commitments.~~acquisition date. See Note 21 — Employee Benefit Plans.

~~Income Taxes~~INCOME TAXES

Table 7

Income ~~tax expense was $45.8 million and $36.8 million for the second quarter of 2021 and 2020, respectively, representing effective tax rates of 23.1% and 19.3% during the periods.~~Tax Data

Income tax expense totaled $89.8 million and $53.7 million for the first six months of 2021 and 2020, respectively, representing effective tax rates of 23.0% and 20.3% for the respective six month periods.


	Three Months Ended
dollars in millions	March 31, 2022			March 31, 2021
Income before income taxes	$	225		$	191
Income taxes	(46)			44
Effective tax rate	(20.4)		%	23.0		%

The effective tax ~~rates~~rate (“ETR”) was (20.4)% in ~~2020 were favorably impacted by~~ the ~~utilization of an allowable alternative for computing our federal income tax liability.~~current quarter, compared to 23.0% in the year-ago quarter. The allowable alternative enabled us to use the federal income tax rate for certain deductible amounts related to prior year FDIC-assisted acquisitions that was applicable when these amounts were originally subjected to tax. Without this alternative, the effective ~~tax~~ rate for the ~~second~~three months ended March 31, 2022 was primarily driven by the non-taxable nature of the preliminary bargain purchase gain arising from the CIT Merger.

The ETR each quarter is impacted by a number of factors, including the relative mix of domestic and ~~first six months~~international earnings, effects of ~~2020 would have been approximately 23%.~~changes in enacted tax laws, adjustments to valuation allowances, and discrete items. The future period’s ETR may vary from the actual 2022 ETR due to changes in these factors.

We monitor and evaluate the potential impact of current events on the estimates used to establish income tax ~~expenses~~expense and income tax liabilities. On a periodic basis, we evaluate our income tax positions based on current tax law, positions taken by various tax auditors within the jurisdictions where BancShares is required to file income tax returns, as well as potential or pending audits or assessments by tax auditors.

~~INTEREST-EARNING ASSETS~~See Note 20 — Income Taxes for additional information.

RESULTS BY BUSINESS SEGMENT

Prior to the CIT Merger, BancShares operated with centralized management and combined reporting, thus, BancShares operated as one consolidated reportable segment. Due to the CIT Merger, we made changes to reflect the inclusion of CIT operations and to reflect how we manage the combined business. As summarized in the sections below, BancShares now reports financial results in three operating segments: General Banking, Commercial Banking, and Rail, and a non-operating segment, Corporate. We conformed prior period comparisons to this new segment presentation. Based on the approach for segment disclosures, the substantial majority of BancShares’ operations for historical periods prior to the CIT Merger are reflected in the General Banking segment. See Note 22 — Business Segments for related disclosures on the segments.

Results in our business segments reflect our funds transfer policy and allocation of expenses. Unallocated balances and, when applicable, certain notable items, are reflected in Corporate.

General Banking

General Banking delivers services to individuals and businesses through an extensive branch network, digital banking, telephone banking and various ATM networks, including a full suite of deposit products, loans (primarily residential mortgages and commercial loans), and various fee-based services. General Banking also provides: a variety of wealth management products and services to individuals and institutional clients, including brokerage, investment advisory, and trust services; and deposit, cash management and lending to homeowner associations and property management companies. As part of the CIT Merger, CAB products were added that will drive the associated HOA deposit channel. Revenue is primarily generated from interest earned on residential mortgages, small business loans and fees for banking services.

Table 8

General Banking: Financial Data and Metrics


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

Results for the quarter reflect the additional activity from the CIT Merger, driving the increase in NII. Noninterest income is driven by fees from services we provide to our customers, such as wealth management and cardholder, plus service charges on deposits. Noninterest expense was higher, primarily due to the additional costs associated with the larger business and additional employees. The results for the three months ended March 31, 2021 reflect the vast majority of the historic operating activity for BancShares only.

Loans and leases increased, reflecting the additional residential mortgages and consumer loans acquired in the CIT Merger, partially offset by run-off of SBA-PPP loans. Deposits include deposits from the branch, online and community association banking channels, most of which were acquired in the CIT Merger. See discussions in Net Interest Income and Deposits sections. The additional branches acquired in the CIT Merger were mostly in California.

Commercial Banking

Commercial Banking provides lending, leasing and other financial and advisory services, primarily to small and middle-market companies across industries. Commercial Banking also provides asset-based lending, factoring, receivables management products and supply chain financing. Revenue is primarily generated from interest earned on loans, rents on equipment leased, fees and other revenue from lending and leasing activities and banking services, along with capital markets transactions and commissions earned on factoring and related activities.

We provide factoring, receivable management, and secured financing to businesses (our clients, who are generally manufacturers or importers of goods) that operate in several industries, including apparel, textile, furniture, home furnishings and consumer electronics. Factoring entails the assumption of credit risk with respect to trade accounts receivable arising from the sale of goods by our clients to their customers (generally retailers) that have been factored (i.e., sold or assigned to the factor).

Table 9

Commercial Banking: Financial Data and Metrics


dollars in millions	Three Months Ended March 31,
Earnings Summary	2022		2021
Net interest income	$	207	$	4
Benefit for credit losses	(34)		—
Net interest income after benefit for credit losses	241		4
Noninterest income	112		—
Noninterest expense	191		1
Segment income before income taxes	162		3
Provision for income taxes	41		1
Segment net income	$	121	$	2
Select Period End Balances
Loans and leases	$	26,672	$	601
Deposits	4,687		54
Factoring volume	6,433		—

Results for the current quarter primarily reflect activity from the former CIT businesses which are not included in the year-ago activity. Noninterest income primarily includes rental income on operating lease equipment of $49 million and factoring commissions of $27 million, plus other fee and income items. Noninterest expense reflects normal operating costs and includes depreciation on operating lease equipment of $40 million.

The increase in loans and leases and deposits for the three months ended March 31, 2022 reflect those acquired in the CIT Merger.

Rail

Table 10

Rail: Financial Data and Metrics


dollars in millions	Three Months Ended March 31,
Earnings Summary	2022		2021
Rental income on operating leases	$	159	$	—
Depreciation on operating lease equipment	41		—
Maintenance and other operating lease expenses	43		—
Net revenue on operating leases(1)	75		—
Interest expense, net	19		—
Noninterest income	3		—
Noninterest expense	16		—
Segment income before income taxes	43		—
Provision for income taxes	11		—
Segment net income	$	32	$	—
Select Period End Balances
Operating lease equipment, net	$	7,251	$	—

(1)Net revenue on operating leases is a non-GAAP measure. See the “Non-GAAP Financial Measures” section for a reconciliation from the GAAP measure (segment net income) to the non-GAAP measure (net revenue on operating leases).

Net income and net revenue on operating leases are utilized to measure the profitability of our Rail segment. Net revenue on operating leases reflects rental income on operating lease equipment less depreciation on operating lease equipment and maintenance and other operating lease expenses. Due to the nature of our portfolio, which is essentially all operating lease equipment, certain financial measures commonly used by banks, such as NII, are not as meaningful for this business. NII is not used because it includes the impact of debt costs of our operating lease assets but excludes the associated rental income.

Net income and net revenue on operating leases for the three months ended March 31, 2022, were $32 million and $75 million, respectively. Our fleet is diverse and pricing on new leases averaged 108% of the previous rate, strengthened by various railcar types during the quarter. Our railcar utilization, including commitments to lease, was 95.5% at March 31, 2022, representing improvement in many railcar types.

Depreciation is recognized on railcars. Maintenance and other operating lease expenses tend to be variable. Maintenance costs relate to freight and storage costs, reflecting railcars returned, and costs to put cars back on lease.

Portfolio

Rail customers include all of the U.S. and Canadian Class I railroads (i.e., railroads with annual revenues of approximately $500 million and greater), other railroads, as well as manufacturers and commodity shippers. At March 31, 2022 our total operating lease fleet consisted of approximately 119,600 railcars. The following table reflects the proportion of railcars by type based on units and net investment, respectively:

Table 11

Operating lease Railcar Portfolio by Type as of March 31, 2022 (units and net investment)


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	%

Table 12

Rail Operating Lease Equipment by Obligor Industry


dollars in millions	March 31, 2022
Manufacturing	$	2,879	40	%
Rail	2,306		32	%
Wholesale	945		13	%
Oil and gas extraction / services	447		6	%
Energy and utilities	224		3	%
Other	450		6	%
Total	$	7,251	100	%

Corporate

Table 13

Corporate: Financial Data and Metrics


dollars in millions	Three Months Ended March 31,
Earnings Summary	2022		2021
Net interest income (expense)	$	24	$	(8)
Provision for credit losses	513		—
Net interest expense after provision for credit losses	(489)		(8)
Noninterest income	453		27
Noninterest expense	110		6
Segment (loss) income before income taxes	(146)		13
(Benefit) provision for income taxes	(138)		3
Segment net (loss) income	$	(8)	$	10

Results for the three months ended March 31, 2022 were driven by impacts from the CIT Merger. Results in the current quarter included notable items of $513 million related to the Initial Non-PCD Provision, a preliminary gain on acquisition of $431 million (noninterest income) and $135 million of merger related expenses.

BALANCE SHEET ANALYSIS

Interest-earning Assets

Interest-earning assets include ~~overnight investments,~~interest-bearing cash, investment securities, loans and leases, and loans and leases held for sale, all of which reflect varying interest rates based on the risk level and repricing characteristics of the underlying asset. ~~Riskier~~Higher risk investments typically carry a higher interest rate but expose us to higher levels of market and/or credit risk. We strive to maintain a high level of interest-earning assets relative to total assets, while keeping non-earning assets at a minimum.

Interest-earning ~~assets~~Deposits at Banks

Interest-bearing cash totaled ~~$51.6 billion and $47.2~~$9.3 billion at ~~June 30, 2021 and~~March 31, 2022, up from $9.1 billion at December 31, ~~2020, respectively. The $4.4~~2021, reflecting lending and deposit levels, and the timing of investment maturities. While the CIT Merger added nearly $2.9 billion ~~increase~~at the time of the merger, that was ~~primarily composed of a $3.5 billion increase in overnight investments and a $971.3 million increase in investment securities, partially~~ offset by ~~a $102.3 million decrease in loans.~~the use of cash for the redemption of approximately $2.9 billion of assumed debt.

~~Table of Contents~~

Investment Securities

The primary objective of the investment portfolio is to generate incremental income by deploying excess funds into securities ~~with~~that have minimal liquidity ~~and credit~~ risk and low to moderate interest rate risk and credit risk. Other objectives include acting as a stable source of liquidity, serving as a tool for asset and liability management and maintaining an interest rate risk profile compatible with BancShares’ objectives. Additionally, purchases of equities and corporate bonds in other financial institutions have been made largely under a long-term earnings optimization strategy. Changes in the total balance of our investment securities portfolio result from trends in balance sheet funding and market performance. Generally, when inflows arising from deposit and treasury services products exceed loan and lease demand, we invest excess funds into the securities portfolio ~~and~~or into overnight investments. Conversely, when loan demand exceeds growth in deposits and short-term borrowings, we allow any overnight investments to decline and use proceeds from maturing securities and prepayments to fund loan demand. See Note ~~C -~~1 — Accounting Policies and Basis of Presentation, and Note 3 — Investments, for additional ~~disclosures.~~disclosures regarding investment securities.

The carrying value of investment securities totaled ~~$10.9~~$19.5 billion at ~~June 30, 2021,~~March 31, 2022, an increase of ~~$971.3 million~~$6.4 billion compared to December 31, ~~2020.~~2021, primarily reflecting the CIT Merger, which added $6.6 billion at the time of the merger. The ~~increase~~remaining activity in the portfolio ~~was primarily attributable to a strong liquidity position, resulting in~~included investment securities purchases of ~~$4.1~~$0.8 billion, partially offset by ~~sales of $1.1 billion and~~ maturities and paydowns of ~~$2.0~~$0.6 billion.

Available for sale securities are reported at fair value and unrealized gains and losses are included as a component of AOCI, net of deferred taxes. As of ~~June 30, 2021,~~March 31, 2022, investment securities available for sale had a net pre-tax unrealized ~~gain~~loss of ~~$45.3~~$431 million, compared to a net pre-tax unrealized ~~gain~~loss of ~~$102.3~~$12 million as of December 31, ~~2020.~~2021. Management evaluated the available for sale securities in an unrealized loss position and concluded that the unrealized losses ~~relate~~related to changes in interest rates relative to when the securities were purchased, and therefore, no ~~allowance for credit losses~~ACL was ~~recorded~~needed at ~~June 30, 2021 or December~~March 31, ~~2020.~~2022.

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 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 ~~allowance for credit losses~~ACL was needed at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020.~~

~~Table 8~~

~~INVESTMENT SECURITIES~~

June 30, 2021 December 31, 2020
(Dollars in thousands)
Composition(1)
Amortized cost Fair
value
Composition(1)
Amortized cost Fair
value
Investment securities available for sale
U.S. Treasury — % $ — $ — 5.0 % $ 499,832 $ 499,933
Government agency 7.6 824,216 825,450 7.0 706,241 701,391
Residential mortgage-backed securities 44.0 4,770,205 4,785,256 44.5 4,369,130 4,438,103
Commercial mortgage-backed securities 10.5 1,144,024 1,148,530 7.9 745,892 771,537
Corporate bonds 5.7 597,300 621,847 6.1 590,870 603,279
Total investment securities available for sale 67.8 7,335,745 7,381,083 70.5 6,911,965 7,014,243
Investment in marketable equity securities 1.1 84,297 118,540 0.9 84,837 91,680
Investment securities held to maturity
Residential mortgage-backed securities 20.2 2,208,496 2,202,874 19.1 1,877,692 1,895,381
Commercial mortgage-backed securities 10.8 1,184,101 1,172,204 9.4 937,034 940,862
Other 0.1 2,007 2,007 0.1 2,256 2,256
Total investment securities held to maturity 31.1 3,394,604 3,377,085 28.6 2,816,982 2,838,499
Total investment securities 100.0 % $ 10,814,646 $ 10,876,708 100.0 % $ 9,813,784 $ 9,944,422
(1) Calculated as a percent of the total fair value of investment securities.
2021.

4776

~~Table of Contents~~

Table 914presents the investment securities portfolio at March 31, 2022 and December 31, 2021, segregated by major category.

Table 14

Investment Securities


	March 31, 2022						December 31, 2021
dollars in millions	Composition(1)		Amortized cost		Fair value		Composition(1)		Amortized cost		Fair value
Investment securities available for sale
U.S. Treasury	10.2	%	$	2,014	$	1,931	15.4	%	$	2,007	$	2,005
Government agency	1.1	%	206		206		1.7	%	221		222
Residential mortgage-backed securities	26.8	%	5,340		5,052		36.2	%	4,757		4,728
Commercial mortgage-backed securities	8.1	%	1,584		1,520		12.6	%	1,648		1,640
Corporate bonds	3.1	%	582		586		4.7	%	582		608

Total investment securities available for sale	49.3	%	$	9,726	$	9,295	70.6	%	$	9,215	$	9,203
Investment in marketable equity securities	0.5	%	$	73	$	100	0.7	%	$	73	$	98
Investment securities held to maturity
U.S. Treasury	2.4	%	$	471	$	447	—	%	$	—	$	—
Government agency	7.8	%	1,541		1,463		—	%	—		—
Residential mortgage-backed securities	23.6	%	4,776		4,461		17.7	%	2,323		2,307
Commercial mortgage-backed securities	14.9	%	2,988		2,805		11.0	%	1,485		1,451
Supranational securities	1.5	%	294		277		—	%	—		—
Other investments	—	%	4		4		—	%	2		2
Total investment securities held to maturity	50.2	%	$	10,074	$	9,457	28.7	%	$	3,810	$	3,760
Total investment securities	100	%	$	19,873	$	18,852	100	%	$	13,098	$	13,061
(1) Calculated as a percent of the total fair value of investment securities.

Table 15 presents the weighted average ~~taxable-equivalent~~ yields for investment securities available for sale and held to maturity at ~~June 30, 2021~~March 31, 2022, segregated by major category with ranges of contractual maturities. The weighted average yield on the portfolio is calculated using security-level annualized yields.

Table 915

~~WEIGHTED AVERAGE YIELD ON INVESTMENT SECURITIES~~Weighted Average Yield on Investment Securities


		June 30, 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)	—	%	—	%	—	%	1.13	%	1.13	%	Residential mortgage-backed securities(1)	—	%	3.36	%	7.67	%	1.74	%	1.74	%
Commercial mortgage-backed securities(1)	Commercial mortgage-backed securities(1)	—		—		—		1.35		1.35		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	0.81		1.17		—		—		0.94		Other investments	0.59	%	—	%	—	%	—	%	0.59	%
Total investment securities held to maturity	Total investment securities held to maturity	0.81	%	1.17	%	—	%	1.21	%	1.21	%	Total investment securities held to maturity	0.59	%	1.25	%	1.63	%	1.78	%	1.71	%

~~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 accordance with the comprehensive Risk Management Framework and Risk Appetite Framework.

Counterparty credit ~~quality. Through June 30, 2021, over 99%~~exposure or counterparty risk is a primary risk of ~~all COVID-19~~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 ~~extensions have begun repayment.~~underwriting and reporting processes.

~~Additionally, we participated in both rounds~~

ASSET RISK

Asset risk is a form of ~~funding~~price risk and is a primary risk of our leasing businesses related to the risk to earning of capital arising from changes in the ~~SBA-PPP program,~~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 quarterly financial and asset quality review. Reviews for impairment are performed at least annually.

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 regulatory requirements on different types of 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 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 June 30, 2021, BancShares had $1.7 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 June 30, 2021~~the market-based forward curve for March 31, 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)	June 30, 2021		December 31, 2020		Change in interest rate (basis points)	March 31, 2022		December 31, 2021
-100	-100	(5.93)	%	(6.24)	%	-100	(6.10)	%	(5.77)	%
-25						-25	(1.50)	%	(1.15)	%
+25						+25	1.60	%	1.05	%
+100	+100	7.82		8.09		+100	6.10	%	3.21	%
+200	+200	14.48		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 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


	June 30, 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	$	301,934	$	3,040	$	124,577	$	707	$	426,511	$	3,747
Residential mortgage-backed securities	1,849,194		14,305		2,068		19		1,851,262		14,324
Commercial mortgage-backed securities	648,803		8,196		0		0		648,803		8,196
Corporate bonds	2,502		0		14,268		217		16,770		217

Total	$	2,802,433	$	25,541	$	140,913	$	943	$	2,943,346	$	26,484







	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


(Dollars in thousands, unaudited)	June 30, 2021		December 31, 2020
Assets
Cash and due from banks	$	395,364	$	362,048
Overnight investments	7,871,382		4,347,336
Investment in marketable equity securities (cost of $84,297 at June 30, 2021 and $84,837 at December 31, 2020)	118,540		91,680
Investment securities available for sale (cost of $7,335,745 at June 30, 2021 and $6,911,965 at December 31, 2020)	7,381,083		7,014,243
Investment securities held to maturity (fair value of $3,377,085 at June 30, 2021 and $2,838,499 at December 31, 2020)	3,394,604		2,816,982
Loans held for sale	107,768		124,837
Loans and leases	32,689,652		32,791,975
Allowance for credit losses	(189,094)		(224,314)
Net loans and leases	32,500,558		32,567,661
Premises and equipment	1,237,860		1,251,283
Other real estate owned	43,685		50,890
Income earned not collected	133,043		145,694
Goodwill	350,298		350,298
Other intangible assets	47,439		50,775
Other assets	1,593,694		783,953
Total assets	$	55,175,318	$	49,957,680
Liabilities
Deposits:
Noninterest-bearing	$	20,974,111	$	18,014,029
Interest-bearing	27,436,485		25,417,580
Total deposits	48,410,596		43,431,609
Securities sold under customer repurchase agreements	692,604		641,487

Federal Home Loan Bank borrowings	646,667		655,175
Subordinated debt	497,290		504,518
Other borrowings	80,531		88,470
FDIC shared-loss payable	0		15,601
Other liabilities	371,140		391,552
Total liabilities	50,698,828		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 June 30, 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 June 30, 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 June 30, 2021 and December 31, 2020; $1,000 per share liquidity preference)	339,937		339,937

Retained earnings	4,148,857		3,867,252
Accumulated other comprehensive (loss) income	(22,120)		12,263
Total shareholders’ equity	4,476,490		4,229,268
Total liabilities and shareholders’ equity	$	55,175,318	$	49,957,680


	Three months ended June 30				Six months ended June 30
(Dollars in thousands, except per share data, unaudited)	2021		2020		2021		2020
Interest income
Loans and leases	$	324,288	$	326,099	$	647,311	$	651,647
Investment securities interest and dividend income	35,432		36,605		66,284		76,098
Overnight investments	2,105		553		3,553		5,071
Total interest income	361,825		363,257		717,148		732,816
Interest expense
Deposits	8,542		17,916		17,335		42,110
Securities sold under customer repurchase agreements	356		399		694		841

Federal Home Loan Bank borrowings	2,099		2,472		4,186		5,456
Subordinated debt	4,181		4,677		8,369		7,432
Other borrowings	254		399		519		1,183
Total interest expense	15,432		25,863		31,103		57,022
Net interest income	346,393		337,394		686,045		675,794
Provision (credit) for credit losses	(19,603)		20,552		(30,577)		48,907
Net interest income after provision for credit losses	365,996		316,842		716,622		626,887
Noninterest income
Wealth management services	31,753		22,371		63,951		48,783
Service charges on deposit accounts	21,883		17,522		43,419		43,935
Cardholder services, net	22,471		17,587		42,431		35,747
Mortgage income	5,929		9,811		18,920		15,035
Merchant services, net	8,532		5,363		17,449		11,251
Other service charges and fees	8,959		7,145		17,448		14,937
Insurance commissions	3,704		3,189		7,702		6,877
ATM income	1,571		1,395		3,053		2,817
Marketable equity securities gains, net	11,654		64,570		27,665		13,162
Realized gains on investment securities available for sale, net	15,830		13,752		25,037		33,547


Other	1,864		2,697		3,724		3,322
Total noninterest income	134,150		165,402		270,799		229,413
Noninterest expense
Salaries and wages	153,643		146,633		301,473		291,888
Employee benefits	35,298		30,364		71,023		68,875
Occupancy expense	28,439		29,556		58,182		57,036
Equipment expense	28,902		28,774		58,705		56,624
Processing fees paid to third parties	14,427		10,186		28,100		20,558
FDIC insurance expense	3,382		3,731		6,600		7,197
Collection and foreclosure-related expenses	173		3,949		2,371		8,003
Merger-related expenses	5,769		4,369		12,588		8,601
Other	31,545		34,117		58,462		72,868
Total noninterest expense	301,578		291,679		597,504		591,650
Income before income taxes	198,568		190,565		389,917		264,650
Income taxes	45,780		36,779		89,813		53,695
Net income	$	152,788	$	153,786	$	300,104	$	210,955
Preferred stock dividends	4,636		4,790		9,272		4,790
Net income available to common shareholders	$	148,152	$	148,996	$	290,832	$	206,165
Weighted average common shares outstanding	9,816,405		10,105,520		9,816,405		10,289,320
Earnings per common share	$	15.09	$	14.74	$	29.63	$	20.04


	Three months ended June 30
(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 March 31, 2020	$	9,275	$	1,005	$	339,958	$	0	$	3,632,894	$	(25,612)	$	3,957,520
Cumulative effect of adoption of ASC 326	—		—		—		—		0		—		0
Net income	—		—		—		—		153,786		—		153,786
Other comprehensive income, net of tax	—		—		—		—		—		15,948		15,948
Issuance of preferred stock	—		—		(21)		—		—		—		(21)
Repurchase of 346,000 shares of Class A common stock	(346)		—		—		0		(126,645)		—		(126,991)

Cash dividends declared ($0.40 per common share)
Class A common stock	—		—		—		—		(3,606)		—		(3,606)
Class B common stock	—		—		—		—		(402)		—		(402)
Preferred stock dividends declared	—		—		—		—		(4,790)		—		(4,790)
Balance at June 30, 2020	$	8,929	$	1,005	$	339,937	$	0	$	3,651,237	$	(9,664)	$	3,991,444

Balance at March 31, 2021	$	8,811	$	1,005	$	339,937	$	0	$	4,005,318	$	(33,671)	$	4,321,400

Net income	—		—		—		—		152,788		—		152,788
Other comprehensive income, net of tax	—		—		—		—		—		11,551		11,551



Cash dividends declared ($0.47 per common share)
Class A common stock	—		—		—		—		(4,141)		—		(4,141)
Class B common stock	—		—		—		—		(472)		—		(472)
Preferred stock dividends declared	—		—		—		—		(4,636)		—		(4,636)
Balance at June 30, 2021	$	8,811	$	1,005	$	339,937	$	0	$	4,148,857	$	(22,120)	$	4,476,490

	Six months ended June 30
(Dollars in thousands, unaudited)	Class A Common Stock		Class B Common Stock		Preferred Stock		Surplus		Retained Earnings		Accumulated Other Comprehensive Loss		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	—		—		—		—		210,955		—		210,955
Other comprehensive income, net of tax	—		—		—		—		—		117,059		117,059
Issuance of preferred stock	—		—		339,937		—		—		—		339,937
Repurchase of 695,390 shares of Class A common stock	(695)		—		—		(44,081)		(241,919)		—		(286,695)

Cash dividends declared ($0.80 per common share)
Class A common stock	—		—		—		—		(7,345)		—		(7,345)
Class B common stock	—		—		—		—		(804)		—		(804)
Preferred stock dividends declared	—		—		—		—		(4,790)		—		(4,790)
Balance at June 30, 2020	$	8,929	$	1,005	$	339,937	$	0	$	3,651,237	$	(9,664)	$	3,991,444

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

Net income	—		—		—		—		300,104		—		300,104
Other comprehensive loss, net of tax	—		—		—		—		—		(34,383)		(34,383)



Cash dividends declared ($0.94 per common share)
Class A common stock	—		—		—		—		(8,283)		—		(8,283)
Class B common stock	—		—		—		—		(944)		—		(944)
Preferred stock dividends declared	—		—		—		—		(9,272)		—		(9,272)
Balance at June 30, 2021	$	8,811	$	1,005	$	339,937	$	0	$	4,148,857	$	(22,120)	$	4,476,490


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


	June 30, 2021
(Dollars in thousands)	Amortized cost(1)		Gross unrealized gains		Gross unrealized losses		Fair value
Investment securities available for sale

Government agency	$	824,216	$	4,981	$	3,747	$	825,450
Residential mortgage-backed securities	4,770,205		29,375		14,324		4,785,256
Commercial mortgage-backed securities	1,144,024		12,702		8,196		1,148,530
Corporate bonds	597,300		24,764		217		621,847

Total investment securities available for sale	$	7,335,745	$	71,822	$	26,484	$	7,381,083
Investment in marketable equity securities	84,297		34,415		172		118,540
Investment securities held to maturity
Residential mortgage-backed securities	2,208,496		6,567		12,189		2,202,874
Commercial mortgage-backed securities	1,184,101		525		12,422		1,172,204
Other	2,007		0		0		2,007
Total investment securities held to maturity	3,394,604		7,092		24,611		3,377,085
Total investment securities	$	10,814,646	$	113,329	$	51,267	$	10,876,708

	December 31, 2020
(Dollars in thousands)	Amortized cost(1)		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
(1)Amortized cost includes any recorded ACL.


	June 30, 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	$	2,049	$	0	$	2,342	$	4,391	$	1,179,538	$	1,183,929
Owner occupied commercial mortgage	11,258		4,071		10,759		26,088		11,499,982		11,526,070
Non-owner occupied commercial mortgage	5,356		3,659		3,353		12,368		3,002,961		3,015,329
Commercial and industrial and leases	11,809		3,370		7,219		22,398		5,044,765		5,067,163
SBA-PPP	0		0		0		0		1,698,416		1,698,416
Total commercial loans	30,472		11,100		23,673		65,245		22,425,662		22,490,907
Consumer:
Residential mortgage	15,387		5,605		23,988		44,980		5,607,478		5,652,458
Revolving mortgage	7,277		2,157		7,928		17,362		1,867,271		1,884,633
Construction and land development	684		69		127		880		375,612		376,492
Consumer auto	5,410		1,098		1,045		7,553		1,279,988		1,287,541
Consumer other	3,089		1,020		1,142		5,251		595,864		601,115
Total consumer loans	31,847		9,949		34,230		76,026		9,726,213		9,802,239
PCD loans	12,672		4,718		29,113		46,503		350,003		396,506
Total loans and leases	$	74,991	$	25,767	$	87,016	$	187,774	$	32,501,878	$	32,689,652

	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


	June 30, 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	$	222,124	$	441,299	$	281,357	$	165,495	$	47,101	$	13,659	$	4,395	$	0	$	1,175,430
Special Mention	20		218		0		146		72		0		138		0		594
Substandard	0		144		1,056		1,444		5,110		11		140		0		7,905


Total	222,144		441,661		282,413		167,085		52,283		13,670		4,673		0		1,183,929
Owner occupied commercial mortgage
Pass	1,420,375		3,123,179		2,090,297		1,417,269		1,105,141		2,009,482		104,492		116		11,270,351
Special Mention	782		25,052		28,380		33,575		11,938		27,394		3,030		72		130,223
Substandard	9,562		5,902		20,415		10,246		22,560		48,273		8,538		0		125,496


Total	1,430,719		3,154,133		2,139,092		1,461,090		1,139,639		2,085,149		116,060		188		11,526,070
Non-owner occupied commercial mortgage
Pass	312,438		801,110		584,899		300,019		298,984		576,807		32,061		0		2,906,318
Special Mention	783		647		855		10,678		832		2,818		500		0		17,113
Substandard	981		11,897		23,971		10,955		10,696		32,072		1,326		0		91,898


Total	314,202		813,654		609,725		321,652		310,512		611,697		33,887		0		3,015,329
Commercial and industrial and leases
Pass	815,211		1,272,974		798,870		397,616		220,881		392,573		988,180		5,214		4,891,519
Special Mention	2,003		9,274		22,326		5,867		4,587		5,746		7,268		192		57,263
Substandard	6,788		6,220		4,606		4,496		3,155		4,124		20,414		1,351		51,154
Doubtful	0		49		17		0		0		0		1		0		67
Ungraded	0		0		0		0		0		0		67,160		0		67,160
Total	824,002		1,288,517		825,819		407,979		228,623		402,443		1,083,023		6,757		5,067,163
SBA-PPP
Pass	1,157,721		540,695		0		0		0		0		0		0		1,698,416





Total commercial	$	3,948,788	$	6,238,660	$	3,857,049	$	2,357,806	$	1,731,057	$	3,112,959	$	1,237,643	$	6,945	$	22,490,907


	Three months ended June 30, 2021
(Dollars in thousands)	Commercial		Consumer		PCD		Total
Allowance for credit losses:
Balance at April 1	$	74,864	$	112,852	$	22,935	$	210,651
Provision (credit)	3,279		(17,481)		(5,401)		(19,603)

Charge-offs	(3,044)		(4,028)		(456)		(7,528)
Recoveries	983		2,929		1,662		5,574
Balance at June 30	$	76,082	$	94,272	$	18,740	$	189,094

	Three months ended June 30, 2020
(Dollars in thousands)	Commercial		Consumer		PCD		Total
Balance at April 1	$	72,410	$	109,933	$	26,916	$	209,259
Provision (credit)	6,628		13,682		242		20,552

Charge-offs	(4,015)		(6,657)		(1,392)		(12,064)
Recoveries	1,154		2,387		1,162		4,703
Balance at June 30	$	76,177	$	119,345	$	26,928	$	222,450

	Six months ended June 30, 2021
(Dollars in thousands)	Commercial		Consumer		PCD		Total
Balance at January 1	$	80,842	$	119,485	$	23,987	$	224,314
Provision (credit)	(643)		(22,985)		(6,949)		(30,577)

Charge-offs	(6,375)		(8,497)		(1,219)		(16,091)
Recoveries	2,258		6,269		2,921		11,448
Balance at June 30	$	76,082	$	94,272	$	18,740	$	189,094

	Six months ended June 30, 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)	28,165		23,088		(2,346)		48,907
Initial allowance on PCD loans	0		0		1,193		1,193
Charge-offs	(9,384)		(14,426)		(2,515)		(26,325)
Recoveries	2,581		4,818		4,059		11,458
Balance at June 30	$	76,177	$	119,345	$	26,928	$	222,450


	June 30, 2021
(Dollars in thousands)	Collateral-Dependant Loans		Net Realizable Value of Collateral		Collateral Coverage		Allowance for Credit Losses
Commercial loans:
Construction and land development	$	1,425	$	1,976	138.7	%	$	0
Owner occupied commercial mortgage	11,288		15,591		138.1		0
Non-owner occupied commercial mortgage	5,405		8,017		148.3		0
Commercial and industrial and leases	7,736		9,672		125.0		230
Total commercial loans	25,854		35,256		136.4		230
Consumer:
Residential mortgage	15,237		23,411		153.6		0
Revolving mortgage	1,385		1,724		124.5		0



Total consumer loans	16,622		25,135		151.2		0
PCD loans	19,894		34,495		173.4		0
Total collateral-dependent loans	$	62,370	$	94,886	152.1	%	$	230

	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


	Three months ended June 30, 2021			Three months ended June 30, 2020
	All restructurings				All restructurings
(Dollars in thousands)	Number of Loans	Recorded investment at period end				Number of Loans	Recorded investment at period end
Loans and leases
Interest only	4	$	3,353			7	$	15,352
Loan term extension	41	4,053				27	2,925
Below market interest rate	37	7,730				69	17,291
Discharged from bankruptcy	39	6,421				43	1,472
Total restructurings	121	$	21,557			146	$	37,040

	Six months ended June 30, 2021			Six months ended June 30, 2020
	All restructurings				All restructurings
(Dollars in thousands)	Number of Loans	Recorded investment at period end				Number of Loans	Recorded investment at period end
Loans and leases
Interest only	10	$	10,118			17	$	19,328
Loan term extension	66	7,700				33	3,657
Below market interest rate	90	15,643				157	25,389
Discharged from bankruptcy	84	10,191				110	5,640
Total restructurings	250	$	43,652			317	$	54,014


	June 30, 2021			December 31, 2020
Discount rate - conventional fixed loans	8.47		%	7.92		%
Discount rate - all loans excluding conventional fixed loans	9.47		%	8.92		%
Weighted average constant prepayment rate	16.57		%	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 June 30, 2021
(Dollars in thousands, net of tax)	Unrealized gains (losses) on securities available for sale		Unrealized gains on securities available for sale transferred to held to maturity		Defined benefit pension items		Total
Beginning balance	$	28,159	$	3,791	$	(65,621)	$	(33,671)


Net unrealized gains arising during period	18,940		0		0		18,940
Amounts reclassified from accumulated other comprehensive loss	(12,189)		(604)		5,404		(7,389)
Net current period other comprehensive (loss) income	6,751		(604)		5,404		11,551
Ending balance	$	34,910	$	3,187	$	(60,217)	$	(22,120)

	Three months ended June 30, 2020
(Dollars in thousands, net of tax)	Unrealized gains (losses) on securities available for sale		Unrealized gains on securities available for sale transferred to held to maturity		Defined benefit pension items		Total
Beginning balance	$	102,080	$	0	$	(127,692)	$	(25,612)


Net unrealized gains arising during period	21,611		0		0		21,611
Amounts reclassified from accumulated other comprehensive loss	(10,589)		0		4,926		(5,663)
Net current period other comprehensive income	11,022		0		4,926		15,948
Ending balance	$	113,102	$	0	$	(122,766)	$	(9,664)


	June 30, 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	$	825,450	$	0	$	825,450	$	0
Residential mortgage-backed securities	4,785,256		0		4,785,256		0
Commercial mortgage-backed securities	1,148,530		0		1,148,530		0
Corporate bonds	621,847		0		296,399		325,448

Total investment securities available for sale	$	7,381,083	$	0	$	7,055,635	$	325,448
Marketable equity securities	$	118,540	$	49,293	$	69,247	$	0
Loans held for sale	$	107,768	$	0	$	107,768	$	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


(Dollars in thousands)
Round One Forgiveness Status at June 30, 2021	$ of Loans		% of Round One Total
Received by FCB	$	2,933,046	91.3	%
Submitted to SBA	2,842,312		88.5
Approved by SBA	2,767,706		86.2
Funds Received	2,642,638		82.3


	Three months ended June 30, 2021						Six months ended June 30, 2021
	Change from prior year period due to:						Change from prior year period due to:
(Dollars in thousands)	Volume(1)		Yield/Rate(1)		Total Change		Volume(1)		Yield/Rate(1)		Total Change
Assets
Loans and leases	$	14,265	$	(15,992)	$	(1,727)	$	49,996	$	(54,277)	$	(4,281)
Investment securities:
U.S. Treasury	(679)		—		(679)		(587)		(1,597)		(2,184)
Government agency	396		142		538		1,016		(2,699)		(1,683)
Mortgage-backed securities	5,259		(8,518)		(3,259)		14,066		(27,425)		(13,359)
Corporate bonds	3,960		64		4,024		8,812		477		9,289

Other investments	(1,025)		(785)		(1,810)		(1,302)		(714)		(2,016)
Total investment securities	7,911		(9,097)		(1,186)		22,005		(31,958)		(9,953)
Overnight investments	1,389		163		1,552		13,753		(15,271)		(1,518)
Total interest-earning assets	$	23,565	$	(24,926)	$	(1,361)	$	85,754	$	(101,506)	$	(15,752)
Liabilities
Interest-bearing deposits:
Checking with interest	$	370	$	(176)	$	194	$	895	$	(993)	$	(98)
Savings	105		(91)		14		201		(173)		28
Money market accounts	1,702		(5,587)		(3,885)		4,199		(14,685)		(10,486)
Time deposits	(2,067)		(3,630)		(5,697)		(5,376)		(8,843)		(14,219)
Total interest-bearing deposits	110		(9,484)		(9,374)		(81)		(24,694)		(24,775)
Securities sold under customer repurchase agreements	12		(55)		(43)		139		(286)		(147)
Other short-term borrowings	(248)		—		(248)		(1,052)		—		(1,052)
Long-term borrowings	(271)		(495)		(766)		1,296		(1,241)		55
Total interest-bearing liabilities	(397)		(10,034)		(10,431)		302		(26,221)		(25,919)
Change in net interest income	$	23,962	$	(14,892)	$	9,070	$	85,452	$	(75,285)	$	10,167
(1) The rate/volume variance is allocated proportionally between the changes in volume and rate.


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


	2021						2020
	Second			First			Fourth			Third			Second
(Dollars in thousands)	Quarter			Quarter			Quarter			Quarter			Quarter
Nonaccrual loans and leases:
Non-PCD	$	136,530		$	141,369		$	136,544		$	130,927		$	135,280
PCD	50,934			53,165			54,939			55,527			62,511
Total nonaccrual loans and leases	187,464			194,534			191,483			186,454			197,791
Other real estate owned	43,685			48,512			50,890			52,789			53,850
Total nonperforming assets	$	231,149		$	243,046		$	242,373		$	239,243		$	251,641

Accruing loans and leases 90 days or more past due
Non-PCD	$	3,413		$	5,945		$	5,507		$	3,587		$	3,644
PCD	363			1,432			355			—			152

Ratio of total nonperforming assets to total loans, leases and other real estate owned	0.71		%	0.73		%	0.74		%	0.73		%	0.77		%
Ratio of nonaccrual loans and leases to total loans and leases	0.57			0.59			0.58			0.57			0.61
Ratio of allowance for credit losses to nonaccrual loans and leases	100.9			108.3			117.1			120.1			112.5


dollars in millions	March 31, 2022
Time deposits maturing in:
Three months or less	$	470
Over three months through six months	346
Over six months through 12 months	456
More than 12 months	319
Total	$	1,591


	Three months ended June 30				Six months ended June 30
($ in thousands, expect per share data)	2021		2020		2021		2020
Number of shares repurchased	—		346,000		—		695,390
Total cost	$	—	$	126,991	$	—	$	286,696
Average price per share	$	—	$	367.03	$	—	$	412.28


	Requirements to be well-capitalized		June 30, 2021				December 31, 2020
(Dollars in thousands)			Amount		Ratio		Amount		Ratio
BancShares
Risk-based capital ratios
Total risk-based capital	10.00	%	$	4,833,501	14.15	%	$	4,577,212	13.81	%
Tier 1 risk-based capital	8.00		4,143,421		12.13		3,856,086		11.63
Common equity Tier 1	6.50		3,803,484		11.14		3,516,149		10.61
Tier 1 leverage ratio	5.00		4,143,421		7.67		3,856,086		7.86

FCB
Risk-based capital ratios
Total risk-based capital	10.00	%	$	4,704,140	13.79	%	$	4,543,496	13.72	%
Tier 1 risk-based capital	8.00		4,468,560		13.10		4,276,870		12.92
Common equity Tier 1	6.50		4,468,560		13.10		4,276,870		12.92
Tier 1 leverage ratio	5.00		4,468,560		8.29		4,276,870		8.72


		Estimated percentage (decrease) increase in EVE					Estimated (decrease) increase in EVE
Change in interest rate (basis points)	Change in interest rate (basis points)	June 30, 2021		December 31, 2020		Change in interest rate (basis points)	March 31, 2022		December 31, 2021
-100	-100	(16.40)	%	(21.20)	%	-100	(7.90)	%	(13.68)	%
-25						-25	(1.80)	%	—	%
+100	+100	8.45		12.18		+100	6.40	%	6.10	%
+200	+200	9.02		15.71		+200	8.40	%	5.93	%


	At March 31, 2022, maturing
dollars in millions	Within One Year		One to Five Years		Five to 15 Years		After 15 years		Total
Commercial
Commercial construction	$	563	$	1,368	$	605	$	97	$	2,633
Owner occupied commercial mortgage	549		3,886		8,623		496		13,554
Non-owner occupied commercial mortgage	2,133		4,966		1,934		259		9,292
Commercial and industrial	6,550		12,362		3,373		117		22,402
Leases	742		1,427		51		—		2,220
Total commercial	$	10,537	$	24,009	$	14,586	$	969	$	50,101
Consumer
Residential mortgage	275		1,085		3,456		6,895		11,711
Revolving mortgage	114		222		95		1,410		1,841
Consumer auto	10		627		683		—		1,320
Consumer other	296		129		88		38		551
Total consumer	$	695	$	2,063	$	4,322	$	8,343	$	15,423
Total loans and leases	$	11,232	$	26,072	$	18,908	$	9,312	$	65,524


	Loans maturing one year or after with
dollars in millions	Fixed interest rates		Variable interest rates
Commercial
Commercial construction	$	853	$	1,217
Owner occupied commercial mortgage	11,353		1,592
Non-owner occupied commercial mortgage	2,608		4,552
Commercial and industrial	6,933		8,979
Leases	1,477		—
Total commercial	$	23,224	$	16,340
Consumer
Residential mortgage	6,912		4,524
Revolving mortgage	38		1,688
Consumer auto	1,311		—
Consumer other	215		40
Total consumer	$	8,476	$	6,252
Total loans and leases	$	31,700	$	22,592


dollars in millions	March 31, 2022
Available Cash	$	9,075
High Quality Liquid Securities	12,457
Liquid Assets	$	21,532

FHLB capacity(1)	$	13,143
FRB capacity	4,242
Line of credit with bank	75
Total contingent sources	$	17,460
Total Liquid Assets and contingent sources	$	38,992


Type of obligation	Payments due by period
dollars in millions	Less than 1 year		1-3 years		4-5 years		Thereafter		Total
Contractual obligations:
Time deposits	$	6,765	$	1,918	$	436	$	123	$	9,242
Short-term borrowings	616		—		—		—		616
Long-term obligations	94		683		347		1,552		2,676
Total contractual obligations	$	7,475	$	2,601	$	783	$	1,675	$	12,534
Commitments:
Financing commitments	$	11,051	$	4,724	$	1,983	$	4,049	$	21,807
Letters of credit	169		98		76		23		366
Deferred purchase agreements	2,097		—		—		—		2,097
Lessor commitments	513		—		—		—		513
Affordable housing partnerships(1)	84		137		14		7		242
Total commitments	$	13,914	$	4,959	$	2,073	$	4,079	$	25,025


						Three months ended March 31, 2022
Class A shares outstanding at beginning of period						8,811,220
Share issuance in conjunction with the CIT Merger						6,140,010
Restricted stock units vested, net of shares held to cover taxes						45,095
Class A shares outstanding at end of period						14,996,325


Standard	Summary of Guidance	Effect on BancShares’ Financial Statements
ASU 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting Issued March 2020 ASU 2021-01 - Reference Rate Reform (Topic 848): Scope Issued January 2021	The amendments in these updates apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. Allows entities to prospectively apply certain optional expedients for contract modifications and removes the requirements to remeasure contract modifications or de-designate hedging relationships. In addition, potential sources of ineffectiveness as a result of reference rate reform may be disregarded when performing certain effectiveness assessments. ASU 2021-01 refines the scope of ASC 848 and clarifies which optional expedients may be applied to derivative instruments that do not reference LIBOR or a reference rate that is expected to be discontinued, but that are being modified in connection with the market-wide transition to new reference rates. Guidance in these ASUs are effective as of March 12, 2020 through December 31, 2022.	The amendments are effective for all entities at issuance date of March 12, 2020, and once adopted will apply to contract modifications made and hedging relationships entered into on or before December 31, 2022. BancShares is in the process of evaluating the optional expedients as applicable for eligible contract modifications and any hedge relationships. However, we do not expect to have a material impact on the financial statements.
ASU 2022-01, Fair Value Hedging - Portfolio Layer Method Issued March 2022	The amendments in this Update allows entities to designate multiple hedged layers of a single closed portfolio, and expands the scope of the portfolio layer method to include non-prepayable financial assets. Provides additional guidance on the accounting for and disclosure of hedge basis adjustments under the portfolio layer method. In addition, as of the adoption date the Update permits reclassification of debt securities from the held-to-maturity category to the available-for-sale category if the entity intends to include those securities in a portfolio designated in a portfolio layer method hedge. Also provides 30 days post adoption to reclassify securities and include them in a hedged closed portfolio.	Effective for BancShares as of January 1, 2023. Early adoption is permitted. The guidance on hedging multiple layers in a closed portfolio is applied prospectively. The guidance on the accounting for fair value basis adjustments is applied on a modified retrospective basis. BancShares is currently evaluating timing of adoption of this guidance and the impact of the guidance on its consolidated financial statements and disclosures.


ASU No. 2022-02, Troubled Debt Restructurings and Vintage Disclosures Issued March 2022 Issued March 2022			The amendments in this ASU eliminates the recognition and measurement guidance for TDRs for creditors that have adopted the CECL model and enhances disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty. The guidance also requires disclosure of current-period gross write-offs by year of origination in the vintage disclosure.			Effective for BancShares as of January 1, 2023. Early adoption is permitted. Provides the option to early adopt the amendments related to TDRs separately from the amendments related to vintage disclosures. Allows adoption using either a prospective or modified retrospective transition methods. Under prospective method, entities are permitted to apply this guidance to modifications occurring after the first day of the fiscal year of adoption. If the modified retrospective transition method is elected, a cumulative effect adjustment to retained earnings is recorded in the period of adoption to recognize any change in the allowance for credit losses that had been recognized for receivables previously modified in a TDR. BancShares is currently evaluating the transition methods and timing of adoption, along with the impact on its consolidated financial statements and disclosures.