FCNCA 10-Q Quarter ended March 31, 2024

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NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

Nature of Operations

First Citizens BancShares, Inc. (the “Parent Company” and, when including all of its subsidiaries on a consolidated basis, “we,” “us,” “our,” “BancShares”) is a financial holding company organized under the laws of Delaware that conducts operations through its banking subsidiary, First-Citizens Bank & Trust Company (“FCB”), which is headquartered in Raleigh, North Carolina. BancShares and its subsidiaries operate a network of branches and offices, predominantly located in the Southeast, Mid-Atlantic, Midwest and Western United States. BancShares provides various types of commercial and consumer banking services, including lending, leasing, and wealth management services. Deposit services include checking, savings, money market, and time deposit accounts.

Business Combinations

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

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

Refer to Note 2—Business Combinations for additional information.

BASIS OF PRESENTATION

Principles of Consolidation and Basis of Presentation

These consolidated financial statements and notes thereto are presented in accordance with instructions for Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include all information and notes necessary for a complete presentation of financial position, results of operations and cash flow activity required in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, all normal recurring adjustments necessary for a fair presentation of the consolidated financial position and consolidated results of operations have been made. The unaudited interim consolidated financial statements included in this Quarterly Report on Form 10-Q (this “Form 10-Q”) should be read in conjunction with the Consolidated Financial Statements and Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”). Interim results are not necessarily indicative of results for a full year.

The consolidated financial statements of BancShares include the accounts of BancShares and its subsidiaries, certain partnership interests and variable interest entities (“VIEs”) where BancShares is the primary beneficiary, if applicable. All significant intercompany accounts and transactions are eliminated upon consolidation. Assets held in agency or fiduciary capacity are not included in the consolidated financial statements.

See Note 8—Variable Interest Entities and Note 9—Other Assets for additional information.

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Reclassifications

Financial Statements

In certain instances, amounts reported in the 2023 consolidated financial statements have been reclassified to conform to the current financial statement presentation. Such reclassifications had no effect on previously reported stockholders’ equity or net income.

Reportable Segments

At December 31, 2023, BancShares reported its financial results in the General Bank, Commercial Bank, Silicon Valley Bank (“SVB”), and Rail segments. All other financial information was included in the “Corporate” section of the segment disclosures.

We made the following changes to our segment reporting during the first quarter of 2024:

• the private banking and wealth management components of the SVB segment were integrated into the General Bank segment which already included other wealth management activities;

• the SVB segment was renamed SVB Commercial as its customers primarily include commercial clients in key innovation markets, as well as private equity and venture capital clients; and

• the Direct Bank (a nationwide digital banking platform that delivers deposit products to consumers) previously allocated to the General Bank segment was transitioned to Corporate which already included borrowings and brokered deposits.

Segment disclosures for 2023 periods included in this Form 10-Q were recast to reflect the segment reporting changes summarized above.

Refer to Note 20—Business Segment Information for additional information.

Loan Classes

At December 31, 2023, our disclosures for loans and leases and the allowance for loan and lease losses (“ALLL”) were aggregated into Commercial, Consumer, and SVB portfolios, each of which consisted of several loan classes. The SVB portfolio consisted of the following loan classes: global fund banking, investor dependent - early stage, investor dependent - growth stage, innovation Commercial and Industrial (“innovation C&I”) and cash flow dependent, private bank, commercial real estate (“CRE”), and “other.” For further information, refer to Note 1—Significant Accounting Policies and Basis of Presentation in the Notes to the Consolidated Financial Statements included in our 2023 Form 10-K.

During the first quarter of 2024, the private bank, CRE, and “other” loan classes described below, which were mapped to the SVB portfolio at December 31, 2023, were remapped to the applicable loan classes within the Commercial and Consumer portfolios.

• The private bank loan class included loans to clients who are primarily private equity or venture capital professionals and executives in the innovation companies, as well as high net worth clients. This loan class included mortgages, home equity lines of credit, restricted and private stock loans, personal capital call lines of credit, lines of credit against liquid assets, and other secured and unsecured lending products. In addition, this class included owner occupied commercial mortgages and real estate secured loans.

• The CRE loan class consisted generally of acquisition financing loans for commercial properties including office buildings, retail properties, apartment buildings and industrial/warehouse space.

• The “other” loan class included smaller acquired portfolios, such as commercial and industrial, premium wine, and other acquired portfolios.

Certain loans secured by other nonfarm, nonresidential properties, which were mapped to the owner occupied commercial mortgage loan class at December 31, 2023, were remapped to the non-owner occupied commercial mortgage loan class during the first quarter of 2024.

Loan and lease and ALLL disclosures for 2023 periods included in this Form 10-Q were recast to reflect the changes in loan classes summarized above.

Refer to Note 4—Loans and Leases and Note 5—Allowance for Loan and Lease Losses.

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Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions based on available information. These estimates and assumptions impact the amounts reported in the consolidated financial statements and accompanying notes and the disclosures provided, and actual results could differ from those estimates. The significant estimate related to the determination of the ALLL is considered a critical accounting estimate.

SIGNIFICANT ACCOUNTING POLICIES

Significant accounting policies are described in the 2023 Form 10-K. Relevant updates to the significant accounting policies are described below.

Newly Adopted Accounting Standards

As of January 1, 2024, BancShares adopted the following Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”):

ASU 2023-02 – Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method, Issued March 2023

The amendments in this ASU allow entities to elect to account for qualifying tax equity investments using the proportional amortization method (“PAM”), regardless of the program giving rise to the related income tax credits. PAM accounting had been available only for qualifying investments in qualified affordable housing projects. This ASU also requires disclosure of the nature of the investor’s tax equity investments and the effect of income tax credits and other income tax benefits from tax equity investments on the investor’s balance sheet and income statement. These required disclosures are included in Note 8—Variable Interest Entities. Adoption of this ASU did not have a material impact on our consolidated financial statements or disclosures.

ASU 2022-03 – Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, Issued June 2022

The amendments in this ASU clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. This ASU also requires specific disclosures for equity securities subject to contractual sale restrictions. Adoption of this ASU did not have a material impact on our consolidated financial statements or disclosures.

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NOTE 2 — BUSINESS COMBINATIONS

Silicon Valley Bridge Bank Acquisition

FCB completed the SVBB Acquisition on the SVBB Acquisition Date and acquired substantially all loans and certain other assets and assumed all customer deposits and certain other liabilities of SVBB in an FDIC-assisted transaction.

BancShares determined that the SVBB Acquisition constitutes a business combination as defined by Accounting Standards Codification (“ASC”) Topic 805, Business Combinations . Accordingly, the assets acquired and liabilities assumed are presented at their estimated fair values based on valuations as of March 27, 2023. The determination of estimated fair values required management to make certain estimates about discount rates, future expected cash flows, market conditions at the time of the SVBB Acquisition and other future events that are highly subjective in nature.

Management has finalized its fair value estimates for the acquired assets and assumed liabilities. The final fair value estimates included adjustments for information relating to events or circumstances existing at the SVBB Acquisition Date that impacted the preliminary fair value estimates within the allowable period not to exceed one year following the SVBB Acquisition Date (“Measurement Period Adjustments”). We recorded Measurement Period Adjustments during 2023. There were no Measurement Period Adjustments during the three months ended March 31, 2024.

Pursuant to the terms of the SVBB Purchase Agreement, FCB acquired assets with a total fair value of approximately $ 107.54 billion as of the SVBB Acquisition Date, primarily including $ 68.47 billion of loans, net of the initial ALLL for purchased credit deteriorated (“PCD”) loans, and $ 35.31 billion of cash and interest-earning deposits at banks. FCB also assumed liabilities with a total fair value of approximately $ 61.42 billion, primarily including $ 56.01 billion of customer deposits. The deposits were acquired without a premium and the assets were acquired at a discount of approximately $ 16.45 billion pursuant to the terms of the SVBB Purchase Agreement. Further details regarding the fair values of the acquired assets and assumed liabilities are provided in the “Fair Value Purchase Price Allocation” table below.

In connection with the SVBB Purchase Agreement, FCB also entered into a commercial shared loss agreement with the FDIC (the “Shared-Loss Agreement”). The Shared-Loss Agreement covered an estimated $ 60 billion of commercial loans (collectively, the “Covered Assets”) at the time of acquisition. The FDIC will reimburse FCB for 0 % of losses of up to $ 5 billion with respect to Covered Assets and 50 % of losses in excess of $ 5 billion with respect to Covered Assets (“FDIC Loss Sharing”) and FCB will reimburse the FDIC for 50 % of recoveries related to such Covered Assets (“FCB reimbursement”). The Shared-Loss Agreement provides for FDIC Loss Sharing for five years and FCB reimbursement for eight years . The Shared-Loss Agreement extends to loans funded within one year of the SVBB Acquisition Date that were unfunded commitments to loans at the SVBB Acquisition Date. If certain conditions are met pursuant to the Shared-Loss Agreement, FCB has agreed to pay to the FDIC, 45 days after March 31, 2031 (or, if earlier, the time of disposition of all acquired assets pursuant to the Shared-Loss Agreement), a true-up amount up to $ 1.5 billion calculated using a formula set forth in the Shared-Loss Agreement. As noted below, preliminary estimates indicate there is no material value to attribute to the loss indemnification asset or true-up liability.

In connection with the SVBB Acquisition, FCB issued a five -year $ 35 billion note payable to the FDIC (the “Original Purchase Money Note”), and entered into binding terms and conditions for an up to $ 70 billion line of credit provided by the FDIC for related risks and liquidity purposes (the “Initial Liquidity Commitment”). At such time, FCB and the FDIC agreed to negotiate additional terms and documents augmenting and superseding the Original Purchase Money Note and Initial Liquidity Commitment, and on November 20, 2023, FCB and the FDIC entered into new financing agreements for those purposes. On November 20, 2023, the Original Purchase Money Note was amended and restated, dated as of March 27, 2023 and maturing March 27, 2028 (the “Purchase Money Note”), adjusting the principal amount to approximately $ 36.07 billion. FCB and the FDIC, as lender and as collateral agent, also entered into an Advance Facility Agreement, dated as of March 27, 2023, and effective as of November 20, 2023 (the “Advance Facility Agreement”), providing total advances available through March 27, 2025 of up to $ 70 billion (subject to the limits described below) solely to provide liquidity to offset deposit withdrawal or runoff of former SVBB deposit accounts and to fund the unfunded commercial lending commitments acquired in the SVBB Acquisition. Borrowings outstanding under the Advance Facility Agreement are limited to an amount equal to the value of loans and other collateral obtained from SVBB plus the value of any other unencumbered collateral agreed by the parties to serve as additional collateral, reduced by the amount of principal and accrued interest outstanding under the Purchase Money Note and the accrued interest on the Advance Facility Agreement. Interest on any outstanding principal amount accrues at a variable rate equal to the three-month weighted average of the Daily Simple Secured Overnight Financing Rate (“SOFR”) plus 25 basis points (“bps”) (but in no event less than 0.00 %). Obligations of FCB under the Advance Facility Agreement are subordinated to its obligations under the Purchase Money Note. See Pledged Assets section in Note 4—Loans and Leases.

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Purchase Price Consideration for the SVBB Acquisition

As consideration for the SVBB Acquisition, FCB issued the Purchase Money Note with a principal amount of $ 36.07 billion (fair value of $ 35.81 billion). FCB pledged specified assets as collateral security for the Purchase Money Note and the Advance Facility Agreement, including loans purchased from the FDIC as receiver to SVBB, the related loan documents and collections, accounts established for collections and disbursements, any items credited thereto, such additional collateral (if any) as the parties may agree to in the future, and proceeds thereof. The interest rate on the Purchase Money Note accrues at a rate of 3.50 % per annum. There are no scheduled principal payments under the Purchase Money Note. FCB may voluntarily prepay principal under the Purchase Money Note without premium or penalty, twice per month. The principal amount of the Purchase Money Note is based on the carrying value of net assets acquired less the asset discount of $ 16.45 billion pursuant to the terms of the SVBB Purchase Agreement.

In addition, as part of the consideration for the SVBB Acquisition, BancShares issued a Cash Settled Value Appreciation Instrument to the FDIC (the “Value Appreciation Instrument”) in which FCB agreed to make a cash payment to the FDIC equal to the product of (i) 5 million and (ii) the excess amount by which the average volume weighted price of one share of Class A common stock, over the two Nasdaq trading days immediately prior to the date on which the Value Appreciation Instrument is exercised exceeds $ 582.55 ; provided that the settlement amount does not exceed $ 500 million. The FDIC exercised its right under the Value Appreciation Instrument on March 28, 2023 and a $ 500 million payment was made on April 4, 2023.

The following table provides the final purchase price allocation, including Measurement Period Adjustments, to the identifiable assets acquired and liabilities assumed at their estimated fair values as of the SVBB Acquisition Date.

Fair Value Purchase Price Allocation

dollars in millions															Fair Value Purchase Price Allocation as of March 27, 2023
Purchase price consideration
Purchase Money Note (1)															$	35,808
Value Appreciation Instrument															500
Purchase price consideration															$	36,308
Assets
Cash and due from banks															$	1,310
Interest-earning deposits at banks															34,001
Investment securities available for sale															385
Loans and leases, net of the initial PCD ALLL															68,468
Affordable housing tax credit and other unconsolidated investments															1,273
Premises and equipment															308
Core deposit intangibles															230
Other assets															1,564
Total assets acquired															$	107,539
Liabilities
Deposits															$	56,014
Borrowings															10
Deferred tax liabilities															3,364
Other liabilities															2,035
Total liabilities assumed															$	61,423
Fair value of net assets acquired															46,116
Gain on acquisition, after income taxes (2) (3)															$	9,808
Gain on acquisition, before income taxes (2)															$	13,172

(1) The principal amount of the Purchase Money Note is the carrying value of net assets acquired of approximately $ 52.52 billion less the asset discount of $ 16.45 billion pursuant to the SVBB Purchase Agreement. The $ 35.81 billion above is net of a fair value discount of approximately $ 264 million.

(2) The difference between the gain on acquisition before and after taxes reflects the deferred tax liabilities recorded in the SVBB Acquisition.

(3) The $ 9.81 billion gain on acquisition includes Measurement Period Adjustments, whereas the $ 9.82 billion gain on acquisition in the Consolidated Statements of Income for the three months ended March 31, 2023 was preliminary as Measurement Period Adjustments were recorded after March 31, 2023.

The gain on acquisition of $ 9.81 billion, net of income taxes of $ 3.36 billion, was recorded in noninterest income during the year ended December 31, 2023, and represents the excess of the fair value of net assets acquired over the purchase price.

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

Purchase Money Note

The fair value of the Purchase Money Note was estimated based on the income approach, which includes: (i) projecting cash flows over a certain discrete projection period and (ii) discounting those projected cash flows to present value at a rate of return that considers the relative risk of the cash flows and the time value of money.

Cash and interest-earning deposits at banks

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

Investment securities

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

Loans

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

BancShares’ accounting methods for acquired Non-PCD and PCD loans and leases are discussed in Note 1—Significant Accounting Policies and Basis of Presentation of the Notes to the Consolidated Financial Statements in our 2023 Form 10-K. The following table presents the unpaid principal balance (“UPB”) and fair value of the loans and leases acquired by BancShares in the SVBB Acquisition as of the SVBB Acquisition Date. The fair value of Non-PCD loans and leases was $ 66.42 billion, compared to the UPB of $ 68.72 billion, resulting in a discount of $ 2.30 billion that will be accreted into income over the contractual life of the applicable loan using the effective interest method.

Loans and Leases Acquired

dollars in millions			Loans and Leases
			UPB						Fair Value
Non-PCD loans and leases			$	68,719					$	66,422
PCD loans and leases			2,568						2,046
Total loans and leases, before PCD gross-up			$	71,287					$	68,468

The following table summarizes PCD loans and leases that BancShares acquired in the SVBB Acquisition.

PCD Loans and Leases

dollars in millions			Total PCD Loans from SVBB Acquisition
UPB			$	2,568
Fair value			2,046
Total fair value discount			522
Less: discount for loans with $ 0 fair value at SVBB Acquisition Date			26
Less: PCD gross-up			220
Non-credit discount (1)			$	276

(1) The non-credit discount of $ 276 million will be accreted into income over the contractual life of the applicable loan using the effective interest method.

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Affordable housing tax credit investments

The fair values of the affordable housing tax credit investments were determined based on discounted cash flows. The cash flow projections considered tax credits and net cash flows from operating losses and tax depreciation. The discount rate was determined using observable market data points for similar investments.

Premises and equipment

Fair values for furniture and fixtures, computer software and other equipment were determined using the cost approach.

Core deposit intangible

The following table presents the core deposit intangible recorded related to the valuation of core deposits:

Core Deposit Intangible

dollars in millions

Fair Value

Estimated Useful Life

Amortization Method

Core deposit intangible

$

230

8 years

Effective yield

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

Other assets

The following table details other assets acquired:

Other Assets

dollars in millions			Fair Value
Accrued interest receivable			$	431
Federal Home Loan Bank stock and Federal Reserve Bank stock			320
Fair value of derivative financial instruments			458
Other			355
Total other assets			$	1,564

The fair values of the derivative assets in the table above and derivative liabilities in the table below were valued using prices of financial instruments with similar characteristics and observable inputs. The fair value of accrued interest receivable and the remaining other assets was determined to approximate book value. Refer to further discussion in Note 12—Derivative Financial Instruments and Note 14—Fair Value.

Deposits

Acquired deposits were essentially all transactional deposits. Thus, we determined carrying amounts approximate fair value.

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Deferred tax liability

The SVBB Acquisition is an asset acquisition for tax purposes and is therefore considered a taxable transaction. The deferred tax liability for the SVBB Acquisition was calculated by applying FCB’s deferred tax rate to the book and tax basis differences on the SVBB Acquisition Date for acquired assets and assumed liabilities. Deferred taxes were not recorded for the affordable housing tax credit investments in accordance with the proportional amortization method.

The tax treatment of FDIC-assisted acquisitions is complex and subject to interpretations that may result in future adjustments of deferred taxes as of the SVBB Acquisition Date.

Other liabilities

The following table details other liabilities assumed:

dollars in millions			Fair Value
Commitments to fund tax credit investments			$	715
Fair value of derivative financial instruments			497
Reserve for off-balance sheet credit exposures			253
Accrued interest payable			109
Other			461
Total other liabilities			$	2,035

The fair value of the liability representing our commitment for future capital contributions to the affordable housing tax credit investments was determined based on discounted cash flows. Projected cash flows for future capital contributions were discounted at a rate that represented FCB’s cost of debt.

Shared-loss agreement intangibles

Preliminary estimates indicate there is no material value to attribute to the loss indemnification asset or true-up liability. This is primarily based on evaluation of historical loss experience and the credit quality of the portfolio.

Pro Forma Information - SVBB Acquisition

SVBB was only in operation from March 10 to March 27, 2023 and does not have historical financial information on which we could base pro forma information. Additionally, we did not acquire all assets or assume all liabilities of SVBB and an essential part of the SVBB Acquisition is the federal assistance governed by the SVBB Purchase Agreement and Shared-Loss Agreement, which is not reflected in the previous operations of SVBB. Therefore, it is impracticable to provide unaudited pro forma information on revenues and earnings for the SVBB Acquisition in accordance with ASC 805-10-50-2.

Net interest income, noninterest income and net income of $ 65 million, $ 14 million and $ 35 million, respectively, attributable to the SVBB Acquisition were included in BancShares’ Consolidated Statement of Income for the three months ended March 31, 2023.

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The following tables include the amortized cost and fair value of investment securities at March 31, 2024 and December 31, 2023.

Amortized Cost and Fair Value - Investment Securities

dollars in millions			March 31, 2024
			Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Fair Value
Investment securities available for sale
U.S. Treasury			$	11,907					$	7					$	( 78 )					$	11,836
Government agency			110						—						( 3 )						107
Residential mortgage-backed securities			10,665						42						( 597 )						10,110
Commercial mortgage-backed securities			2,566						2						( 207 )						2,361
Corporate bonds			529						—						( 42 )						487
Municipal bonds			14						—						—						14
Total investment securities available for sale			$	25,791					$	51					$	( 927 )					$	24,915
Investment in marketable equity securities			$	75					$	13					$	( 9 )					$	79
Investment securities held to maturity
U.S. Treasury			$	480					$	—					$	( 42 )					$	438
Government agency			1,508						—						( 150 )						1,358
Residential mortgage-backed securities			4,293						—						( 697 )						3,596
Commercial mortgage-backed securities			3,469						—						( 645 )						2,824
Supranational securities			298						—						( 37 )						261
Other			2						—						—						2
Total investment securities held to maturity			$	10,050					$	—					$	( 1,571 )					$	8,479
Total investment securities			$	35,916					$	64					$	( 2,507 )					$	33,473
			December 31, 2023
			Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Fair Value
Investment securities available for sale
U.S. Treasury			$	10,554					$	34					$	( 80 )					$	10,508
Government agency			120						—						( 3 )						117
Residential mortgage-backed securities			7,154						72						( 540 )						6,686
Commercial mortgage-backed securities			2,319						9						( 197 )						2,131
Corporate bonds			529						—						( 47 )						482
Municipal bonds			12						—						—						12
Total investment securities available for sale			$	20,688					$	115					$	( 867 )					$	19,936
Investment in marketable equity securities			$	75					$	17					$	( 8 )					$	84
Investment securities held to maturity
U.S. Treasury			$	479					$	—					$	( 40 )					$	439
Government agency			1,506						—						( 143 )						1,363
Residential mortgage-backed securities			4,205						—						( 644 )						3,561
Commercial mortgage-backed securities			3,489						—						( 614 )						2,875
Supranational securities			298						—						( 35 )						263
Other			2						—						—						2
Total investment securities held to maturity			$	9,979					$	—					$	( 1,476 )					$	8,503
Total investment securities			$	30,742					$	132					$	( 2,351 )					$	28,523

U.S. Treasury investments include Treasury bills and Notes issued by the U.S. Treasury. Investments in government agency securities represent securities issued by the Small Business Association (“SBA”), Federal Home Loan Bank (“FHLB”) and other U.S. agencies. Investments in residential and commercial mortgage-backed securities represent securities issued by the Government National Mortgage Association, Federal National Mortgage Association and Federal Home Loan Mortgage Corporation. Investments in corporate bonds represent positions in debt securities of other financial institutions. Municipal bonds are general obligation bonds. Investments in marketable equity securities represent positions in common stock of publicly traded financial institutions. Investments in supranational securities represent securities issued by the Supranational Entities & Multilateral Development Banks. Other held to maturity investments include certificates of deposit with other financial institutions.

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BancShares held approximately 354,000 shares of Visa, Inc. (“Visa”) Class B common stock (“Visa Class B common stock”). Effective January 24, 2024, all outstanding shares of Visa Class B common stock were redenominated as Visa Class B-1 common stock (“Visa Class B-1 common stock”) pursuant to Visa’s eighth amended and restated certificate of incorporation. Until the resolution of certain litigation, at which time the Visa Class B-1 common stock will convert to publicly traded Visa Class A common stock, or the potential exchange of Visa Class B-1 common stock for other marketable classes of Visa common stock, these shares are only transferable to other stockholders of Visa Class B-1 common stock or certain new denominations of Visa’s former Class B common stock. As a result, there is limited transfer activity in private transactions between buyers and sellers. Given this limited trading activity and the continuing uncertainty regarding the likelihood, ultimate timing and eventual exchange of Visa Class B-1 common stock for shares of Visa Class A common stock or other marketable classes of Visa common stock, these shares are not considered to have a readily determinable fair value and have no carrying value. BancShares continues to monitor the trading activity in Visa Class B-1 common stock, the status of the resolution of certain litigation matters at Visa, and other potential exchange alternatives that would trigger the conversion of the Visa Class B-1 common stock into Visa Class A common stock or other marketable classes of Visa common stock.

Accrued interest receivable for available for sale and held to maturity debt securities was excluded from the estimate for credit losses. At March 31, 2024, accrued interest receivable for available for sale and held to maturity debt securities was $ 121 million and $ 17 million, respectively. At December 31, 2023, accrued interest receivable for available for sale and held to maturity debt securities was $ 87 million and $ 18 million, respectively. During the three months ended March 31, 2024 and 2023, there was no accrued interest that was deemed uncollectible and written off against interest income.

A security is considered past due once it is 30 days contractually past due under the terms of the agreement. There were no securities past due as of March 31, 2024 or December 31, 2023.

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

Maturities - Debt Securities

dollars in millions			March 31, 2024												December 31, 2023
			Cost						Fair Value						Cost						Fair Value
Investment securities available for sale
Non-amortizing securities maturing in:
One year or less			$	6,086					$	6,049					$	5,674					$	5,658
After one through five years			5,940						5,898						4,996						4,959
After five through 10 years			405						372						408						369
After 10 years			19						18						17						16
Government agency			110						107						120						117
Residential mortgage-backed securities			10,665						10,110						7,154						6,686
Commercial mortgage-backed securities			2,566						2,361						2,319						2,131
Total investment securities available for sale			$	25,791					$	24,915					$	20,688					$	19,936
Investment securities held to maturity
Non-amortizing securities maturing in:
One year or less			$	27					$	26					$	27					$	26
After one through five years			1,638						1,504						1,636						1,508
After five through 10 years			623						529						622						533
Residential mortgage-backed securities			4,293						3,596						4,205						3,561
Commercial mortgage-backed securities			3,469						2,824						3,489						2,875
Total investment securities held to maturity			$	10,050					$	8,479					$	9,979					$	8,503

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

Interest and Dividends on Investment Securities

dollars in millions			Three Months Ended March 31,
			2024						2023
Interest income - taxable investment securities			$	281					$	106
Interest income - nontaxable investment securities			—						—
Dividend income - marketable equity securities			1						1
Interest on investment securities			$	282					$	107

Fair value adjustment on marketable equity securities and net realized losses and gains on sales of investment securities available for sale are presented on the Consolidated Statements of Income. The following table presents the gross realized losses and gains on the sales of investment securities available for sale.

Realized Losses on Debt Securities Available For Sale

dollars in millions			Three Months Ended March 31,
			2024						2023
Gross realized gains on sales of investment securities available for sale			$	—					$	—
Gross realized losses on sales of investment securities available for sale			—						( 14 )
Net realized (losses) gains on sales of investment securities available for sale			$	—					$	( 14 )

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

Gross Unrealized Losses on Debt Securities Available For Sale

dollars in millions			March 31, 2024
			Less than 12 months												12 months or more												Total
			Fair Value						Unrealized Losses						Fair Value						Unrealized Losses						Fair Value						Unrealized Losses
Investment securities available for sale
U.S. Treasury			$	4,516					$	( 9 )					$	1,929					$	( 69 )					$	6,445					$	( 78 )
Government agency			—						—						107						( 3 )						107						( 3 )
Residential mortgage-backed securities			2,976						( 28 )						3,969						( 569 )						6,945						( 597 )
Commercial mortgage-backed securities			568						( 4 )						1,346						( 203 )						1,914						( 207 )
Corporate bonds			71						( 7 )						416						( 35 )						487						( 42 )
Total			$	8,131					$	( 48 )					$	7,767					$	( 879 )					$	15,898					$	( 927 )
			December 31, 2023
			Less than 12 months												12 months or more												Total
			Fair Value						Unrealized Losses						Fair Value						Unrealized Losses						Fair Value						Unrealized Losses
Investment securities available for sale
U.S. Treasury			$	955					$	—					$	1,919					$	( 80 )					$	2,874					$	( 80 )
Government agency			23						—						94						( 3 )						117						( 3 )
Residential mortgage-backed securities			293						( 3 )						4,073						( 537 )						4,366						( 540 )
Commercial mortgage-backed securities			157						( 1 )						1,386						( 196 )						1,543						( 197 )
Corporate bonds			89						( 9 )						393						( 38 )						482						( 47 )
Total			$	1,517					$	( 13 )					$	7,865					$	( 854 )					$	9,382					$	( 867 )

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As of March 31, 2024, there were 504 investment securities available for sale with continuous unrealized losses for more than 12 months, of which 430 were government sponsored enterprise-issued mortgage-backed securities, government agency securities, or U.S. treasury securities and the remaining 74 were corporate bonds. BancShares has the ability and intent to retain these securities for a period of time sufficient to recover all unrealized losses. Given the consistently strong credit rating of the U.S. Treasury, and the long history of no credit losses on debt securities issued by government agencies and government sponsored entities, as of March 31, 2024, no allowance for credit loss was required. For corporate bonds, we analyzed the changes in interest rates relative to when the investment securities were purchased or acquired, and considered other factors including changes in credit ratings, delinquencies, and other macroeconomic factors. As a result of this analysis, we determined that no allowance for credit loss was required for investment securities available for sale as of March 31, 2024.

BancShares’ portfolio of held to maturity debt securities consists of mortgage-backed securities issued by government agencies and government sponsored entities, U.S. Treasury notes, unsecured bonds issued by government agencies and government sponsored entities, and securities issued by the Supranational Entities & Multilateral Development Banks. Given the consistently strong credit rating of the U.S. Treasury, the Supranational Entities & Multilateral Development Banks and the long history of no credit losses on debt securities issued by government agencies and government sponsored entities, no allowance for credit loss was required for debt securities held to maturity as of March 31, 2024. There were no debt securities held to maturity on nonaccrual status as of March 31, 2024 or December 31, 2023.

Investment securities having an aggregate carrying value of $ 3.90 billion at March 31, 2024, and $ 3.77 billion at December 31, 2023, were pledged as collateral to secure public funds on deposit and certain short-term borrowings, and for other purposes as required by law.

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NOTE 4 — LOANS AND LEASES

Unless otherwise noted, loans held for sale are not included in the following tables. Leases in the following tables include finance leases, but exclude operating lease equipment. Refer to Note 2—Business Combinations for discussion of the loans acquired in the SVBB Acquisition.

Loans by Class

dollars in millions			March 31, 2024						December 31, 2023
Commercial
Commercial construction			$	4,062					$	3,918
Owner occupied commercial mortgage			15,979						15,471
Non-owner occupied commercial mortgage			15,329						14,995
Commercial and industrial			30,164						29,794
Leases			2,067						2,054
Total commercial			67,601						66,232
Consumer
Residential mortgage			22,901						22,776
Revolving mortgage			2,240						2,165
Consumer auto			1,476						1,442
Consumer other			1,306						1,176
Total consumer			27,923						27,559
SVB
Global fund banking			26,518						25,553
Investor dependent - early stage			1,293						1,403
Investor dependent - growth stage			2,696						2,897
Innovation C&I and cash flow dependent			9,339						9,658
Total SVB			39,846						39,511
Total loans and leases			$	135,370					$	133,302

As discussed in Note 1—Significant Accounting Policies and Basis of Presentation, certain loan portfolios that were reported in SVB are now included in preexisting loan classes within Commercial and Consumer.

At March 31, 2024 and December 31, 2023, accrued interest receivable on loans included in other assets was $ 633 million and $ 625 million, respectively, and was excluded from the estimate of credit losses.

The discount on acquired loans is accreted to interest income over the contractual life of the loan using the effective interest method. Discount accretion income, which primarily related to the SVBB Acquisition, was $ 163 million, including $ 35 million for unfunded commitments, for the three months ended March 31, 2024.

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

Components of Amortized Cost

dollars in millions			March 31, 2024						December 31, 2023
Deferred fees, including unamortized costs and unearned fees on non-PCD loans			$	( 84 )					$	( 72 )
Net unamortized discount on acquired loans
Non-PCD			$	1,755					$	1,860
PCD			149						176
Total net unamortized discount			$	1,904					$	2,036

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The aging of the outstanding loans and leases by class at March 31, 2024 and December 31, 2023 is provided in the tables below. Loans and leases less than 30 days past due are considered current, as various grace periods allow borrowers to make payments within a stated period after the due date and remain in compliance with the respective agreement.

Loans and Leases - Delinquency Status

dollars in millions			March 31, 2024
			30-59 Days Past Due						60-89 Days Past Due						90 Days or Greater						Total Past Due						Current						Total
Commercial
Commercial construction			$	40					$	—					$	—					$	40					$	4,022					$	4,062
Owner occupied commercial mortgage			37						13						46						96						15,883						15,979
Non-owner occupied commercial mortgage			118						34						369						521						14,808						15,329
Commercial and industrial			191						72						119						382						29,782						30,164
Leases			52						13						12						77						1,990						2,067
Total commercial			438						132						546						1,116						66,485						67,601
Consumer
Residential mortgage			157						38						82						277						22,624						22,901
Revolving mortgage			14						3						10						27						2,213						2,240
Consumer auto			8						2						2						12						1,464						1,476
Consumer other			5						2						4						11						1,295						1,306
Total consumer			184						45						98						327						27,596						27,923
SVB
Global fund banking			—						—						—						—						26,518						26,518
Investor dependent - early stage			30						1						8						39						1,254						1,293
Investor dependent - growth stage			8						1						2						11						2,685						2,696
Innovation C&I and cash flow dependent			1						—						28						29						9,310						9,339
Total SVB			39						2						38						79						39,767						39,846
Total loans and leases			$	661					$	179					$	682					$	1,522					$	133,848					$	135,370
			December 31, 2023
			30-59 Days Past Due						60-89 Days Past Due						90 Days or Greater						Total Past Due						Current						Total
Commercial
Commercial construction			$	43					$	8					$	2					$	53					$	3,865					$	3,918
Owner occupied commercial mortgage			21						10						47						78						15,393						15,471
Non-owner occupied commercial mortgage			100						188						283						571						14,424						14,995
Commercial and industrial			177						49						116						342						29,452						29,794
Leases			55						15						21						91						1,963						2,054
Total commercial			396						270						469						1,135						65,097						66,232
Consumer
Residential mortgage			136						33						73						242						22,534						22,776
Revolving mortgage			15						3						11						29						2,136						2,165
Consumer auto			9						3						2						14						1,428						1,442
Consumer other			8						3						4						15						1,161						1,176
Total consumer			168						42						90						300						27,259						27,559
SVB
Global fund banking			—						—						—						—						25,553						25,553
Investor dependent - early stage			10						12						9						31						1,372						1,403
Investor dependent - growth stage			5						2						7						14						2,883						2,897
Innovation C&I and cash flow dependent			27						3						40						70						9,588						9,658
Total SVB			42						17						56						115						39,396						39,511
Total loans and leases			$	606					$	329					$	615					$	1,550					$	131,752					$	133,302

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The amortized cost by class of loans and leases on nonaccrual status, and loans and leases greater than 90 days past due and still accruing at March 31, 2024 and December 31, 2023 are presented below.

Loans on Nonaccrual Status (1) (2)

dollars in millions			March 31, 2024												December 31, 2023
			Nonaccrual Loans						Loans > 90 Days and Accruing						Nonaccrual Loans						Loans > 90 Days and Accruing
Commercial
Commercial construction			$	1					$	—					$	2					$	1
Owner occupied commercial mortgage			65						10						60						8
Non-owner occupied commercial mortgage			434						124						411						39
Commercial and industrial			275						9						194						59
Leases			30						1						31						7
Total commercial			805						144						698						114
Consumer
Residential mortgage			118						11						127						4
Revolving mortgage			21						—						21						—
Consumer auto			5						—						5						—
Consumer other			1						3						1						3
Total consumer			145						14						154						7
SVB
Global fund banking			—						—						—						—
Investor dependent - early stage			51						—						37						2
Investor dependent - growth stage			37						—						37						—
Innovation C&I and cash flow dependent			36						—						43						—
Total SVB			124						—						117						2
Total loans and leases			$	1,074					$	158					$	969					$	123

(1) Accrued interest that was reversed when the loan went to nonaccrual status was $ 3 million for the three months ended March 31, 2024 and $ 10 million for the year ended December 31, 2023.

(2) Nonaccrual loans for which there was no related ALLL totaled $ 195 million at March 31, 2024 and $ 138 million at December 31, 2023.

Other real estate owned (“OREO”) and repossessed assets were $ 58 million as of March 31, 2024 and $ 62 million as of December 31, 2023.

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Credit Quality Indicators

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

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

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

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

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

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

Ungraded – Ungraded loans represent loans not included in the individual credit grading process due to their relatively small balances or borrower type. The majority of ungraded loans at March 31, 2024 and December 31, 2023, relate to business credit cards. Business credit card loans are subject to automatic charge-off when they become 120 days past due in the same manner as unsecured consumer lines of credit.

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

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

Commercial Loans - Risk Classifications by Class

March 31, 2024
Risk Classification:			Term Loans by Origination Year																																										Revolving Converted to Term Loans
dollars in millions			2024						2023						2022						2021						2020						2019 & Prior						Revolving												Total
Commercial construction
Pass			$	138					$	1,239					$	1,558					$	569					$	212					$	99					$	49					$	4					$	3,868
Special Mention			—						—						41						6						60						58						—						—						165
Substandard			4						—						6						4						—						15						—						—						29
Doubtful			—						—						—						—						—						—						—						—						—
Ungraded			—						—						—						—						—						—						—						—						—
Total commercial construction			142						1,239						1,605						579						272						172						49						4						4,062
Owner occupied commercial mortgage
Pass			819						2,526						2,869						2,842						2,389						3,576						215						29						15,265
Special Mention			2						22						16						20						24						110						1						—						195
Substandard			9						10						95						103						64						226						11						1						519
Doubtful			—						—						—						—						—						—						—						—						—
Ungraded			—						—						—						—						—						—						—						—						—
Total owner occupied commercial mortgage			830						2,558						2,980						2,965						2,477						3,912						227						30						15,979
Non-owner occupied commercial mortgage
Pass			681						3,111						3,058						2,204						1,825						2,925						63						3						13,870
Special Mention			—						12						107						33						66						209						5						—						432
Substandard			1						4						40						27						123						701						—						—						896
Doubtful			—						—						—						2						20						107						—						2						131
Ungraded			—						—						—						—						—						—						—						—						—
Total non-owner occupied commercial mortgage			682						3,127						3,205						2,266						2,034						3,942						68						5						15,329
Commercial and industrial
Pass			3,847						6,269						4,768						3,202						1,621						2,119						5,749						26						27,601
Special Mention			59						79						178						193						32						110						204						—						855
Substandard			35						84						222						141						248						366						338						2						1,436
Doubtful			—						19						56						19						3						34						8						—						139
Ungraded			—						—						—						—						—						—						133						—						133
Total commercial and industrial			3,941						6,451						5,224						3,555						1,904						2,629						6,432						28						30,164
Leases
Pass			247						657						446						251						173						98						—						—						1,872
Special Mention			2						17						27						18						5						3						—						—						72
Substandard			2						32						29						18						18						12						—						—						111
Doubtful			—						3						4						3						1						1						—						—						12
Ungraded			—						—						—						—						—						—						—						—						—
Total leases			251						709						506						290						197						114						—						—						2,067
Total commercial			$	5,846					$	14,084					$	13,520					$	9,655					$	6,884					$	10,769					$	6,776					$	67					$	67,601

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SVB - Risk Classifications by Class

March 31, 2024
Risk Classification:			Term Loans by Origination Year																																										Revolving Converted to Term Loans
dollars in millions			2024						2023						2022						2021						2020						2019 & Prior						Revolving												Total
Global fund banking
Pass			$	341					$	649					$	192					$	30					$	20					$	16					$	25,184					$	66					$	26,498
Special Mention			—						—						—						—						—						—						—						—						—
Substandard			—						—						7						8						4						—						1						—						20
Doubtful			—						—						—						—						—						—						—						—						—
Ungraded			—						—						—						—						—						—						—						—						—
Total global fund banking			341						649						199						38						24						16						25,185						66						26,518
Investor dependent - early stage
Pass			71						361						336						51						2						—						111						4						936
Special Mention			—						13						15						1						—						—						—						—						29
Substandard			2						72						119						30						2						—						52						—						277
Doubtful			—						14						29						4						—						1						3						—						51
Ungraded			—						—						—						—						—						—						—						—						—
Total investor dependent - early stage			73						460						499						86						4						1						166						4						1,293
Investor dependent - growth stage
Pass			235						897						747						129						6						1						202						5						2,222
Special Mention			—						15						32						18						—						—						—						—						65
Substandard			1						106						189						57						3						—						17						—						373
Doubtful			10						—						12						8						—						—						6						—						36
Ungraded			—						—						—						—						—						—						—						—						—
Total investor dependent - growth stage			246						1,018						980						212						9						1						225						5						2,696
Innovation C&I and cash flow dependent
Pass			565						2,334						1,931						703						274						78						2,294						—						8,179
Special Mention			54						59						72						19						31						—						41						—						276
Substandard			24						50						248						216						97						—						215						—						850
Doubtful			4						—						—						—						—						7						23						—						34
Ungraded			—						—						—						—						—						—						—						—						—
Total innovation C&I and cash flow dependent			647						2,443						2,251						938						402						85						2,573						—						9,339
Total SVB			$	1,307					$	4,570					$	3,929					$	1,274					$	439					$	103					$	28,149					$	75					$	39,846

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Consumer Loans - Delinquency Status by Class

March 31, 2024
Days Past Due:			Term Loans by Origination Year																																										Revolving Converted to Term Loans
dollars in millions			2024						2023						2022						2021						2020						2019 & Prior						Revolving												Total
Residential mortgage
Current			$	485					$	3,131					$	5,517					$	5,445					$	3,121					$	4,913					$	12					$	—					$	22,624
30-59 days			—						8						22						19						11						97						—						—						157
60-89 days			—						1						3						3						1						30						—						—						38
90 days or greater			—						1						3						3						6						69						—						—						82
Total residential mortgage			485						3,141						5,545						5,470						3,139						5,109						12						—						22,901
Revolving mortgage
Current			—						—						—						—						—						—						2,116						97						2,213
30-59 days			—						—						—						—						—						—						11						3						14
60-89 days			—						—						—						—						—						—						1						2						3
90 days or greater			—						—						—						—						—						—						5						5						10
Total revolving mortgage			—						—						—						—						—						—						2,133						107						2,240
Consumer auto
Current			177						487						387						233						114						66						—						—						1,464
30-59 days			—						2						2						2						1						1						—						—						8
60-89 days			—						—						1						1						—						—						—						—						2
90 days or greater			—						1						1						—						—						—						—						—						2
Total consumer auto			177						490						391						236						115						67						—						—						1,476
Consumer other
Current			62						217						134						47						8						73						754						—						1,295
30-59 days			—						1						—						—						—						1						3						—						5
60-89 days			—						—						—						—						—						—						2						—						2
90 days or greater			—						—						—						—						—						2						2						—						4
Total consumer other			62						218						134						47						8						76						761						—						1,306
Total consumer			$	724					$	3,849					$	6,070					$	5,753					$	3,262					$	5,252					$	2,906					$	107					$	27,923

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The following tables represent current credit quality indicators by origination year as of December 31, 2023:

Commercial Loans - Risk Classifications by Class

December 31, 2023
Risk Classification:			Term Loans by Origination Year																																										Revolving Converted to Term Loans
dollars in millions			2023						2022						2021						2020						2019						2018 & Prior						Revolving												Total
Commercial construction
Pass			$	1,062					$	1,615					$	620					$	226					$	63					$	57					$	39					$	4					$	3,686
Special Mention			—						10						6						81						47						—						—						—						144
Substandard			—						47						5						31						—						5						—						—						88
Doubtful			—						—						—						—						—						—						—						—						—
Ungraded			—						—						—						—						—						—						—						—						—
Total commercial construction			1,062						1,672						631						338						110						62						39						4						3,918
Owner occupied commercial mortgage
Pass			2,544						2,859						2,902						2,467						1,666						2,107						193						31						14,769
Special Mention			26						19						24						28						43						72						1						—						213
Substandard			7						91						99						61						45						176						10						—						489
Doubtful			—						—						—						—						—						—						—						—						—
Ungraded			—						—						—						—						—						—						—						—						—
Total owner occupied commercial mortgage			2,577						2,969						3,025						2,556						1,754						2,355						204						31						15,471
Non-owner occupied commercial mortgage
Pass			3,132						3,150						2,212						1,860						1,148						1,930						80						3						13,515
Special Mention			14						45						33						96						171						90						9						—						458
Substandard			2						48						27						127						365						330						—						—						899
Doubtful			—						—						2						13						67						39						2						—						123
Ungraded			—						—						—						—						—						—						—						—						—
Total non-owner occupied commercial mortgage			3,148						3,243						2,274						2,096						1,751						2,389						91						3						14,995
Commercial and industrial
Pass			8,472						4,858						3,347						1,660						952						1,351						6,818						34						27,492
Special Mention			105						134						149						89						69						26						194						—						766
Substandard			92						236						144						217						127						258						264						4						1,342
Doubtful			2						19						5						—						12						20						13						—						71
Ungraded			—						—						—						—						—						—						123						—						123
Total commercial and industrial			8,671						5,247						3,645						1,966						1,160						1,655						7,412						38						29,794
Leases
Pass			732						499						290						209						91						35						—						—						1,856
Special Mention			18						22						20						7						4						1						—						—						72
Substandard			28						32						21						19						6						8						—						—						114
Doubtful			3						4						3						1						1						—						—						—						12
Ungraded			—						—						—						—						—						—						—						—						—
Total leases			781						557						334						236						102						44						—						—						2,054
Total commercial			$	16,239					$	13,688					$	9,909					$	7,192					$	4,877					$	6,505					$	7,746					$	76					$	66,232

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SVB - Risk Classifications by Class

December 31, 2023
Risk Classification:			Term Loans by Origination Year																																										Revolving Converted to Term Loans
			2023						2022						2021						2020						2019						2018 & Prior						Revolving												Total
Global fund banking
Pass			$	453					$	202					$	40					$	36					$	14					$	3					$	24,702					$	66					$	25,516
Special Mention			—						—						—						—						—						—						—						—						—
Substandard			—						7						9						3						—						—						18						—						37
Doubtful			—						—						—						—						—						—						—						—						—
Ungraded			—						—						—						—						—						—						—						—						—
Total global fund banking			453						209						49						39						14						3						24,720						66						25,553
Investor dependent - early stage
Pass			421						453						85						4						1						—						99						2						1,065
Special Mention			8						14						1						—						—						—						—						—						23
Substandard			40						138						51						3						—						—						51						—						283
Doubtful			12						12						3						—						—						1						4						—						32
Ungraded			—						—						—						—						—						—						—						—						—
Total investor dependent - early stage			481						617						140						7						1						1						154						2						1,403
Investor dependent - growth stage
Pass			1,034						967						217						25						8						2						198						5						2,456
Special Mention			6						25						—						—						—						—						—						—						31
Substandard			66						192						83						7						1						—						27						—						376
Doubtful			—						12						20						—						—						—						2						—						34
Ungraded			—						—						—						—						—						—						—						—						—
Total investor dependent - growth stage			1,106						1,196						320						32						9						2						227						5						2,897
Innovation C&I and cash flow dependent
Pass			2,370						2,238						833						293						80						44						2,598						—						8,456
Special Mention			99						103						36						66						—						—						92						—						396
Substandard			51						185						254						76						25						—						175						—						766
Doubtful			—						—						—						—						—						10						30						—						40
Ungraded			—						—						—						—						—						—						—						—						—
Total innovation C&I and cash flow dependent			2,520						2,526						1,123						435						105						54						2,895						—						9,658
Total SVB			$	4,560					$	4,548					$	1,632					$	513					$	129					$	60					$	27,996					$	73					$	39,511

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Consumer Loans - Delinquency Status by Class

December 31, 2023
Days Past Due:			Term Loans by Origination Year																																										Revolving Converted to Term Loans
dollars in millions			2023						2022						2021						2020						2019						2018 & Prior						Revolving												Total
Residential mortgage
Current			$	3,155					$	5,588					$	5,521					$	3,174					$	1,381					$	3,702					$	13					$	—					$	22,534
30-59 days			3						16						15						7						10						85						—						—						136
60-89 days			1						1						5						4						1						21						—						—						33
90 days or greater			1						4						2						6						1						59						—						—						73
Total residential mortgage			3,160						5,609						5,543						3,191						1,393						3,867						13						—						22,776
Revolving mortgage
Current			—						—						—						—						—						—						2,056						80						2,136
30-59 days			—						—						—						—						—						—						11						4						15
60-89 days			—						—						—						—						—						—						1						2						3
90 days or greater			—						—						—						—						—						—						6						5						11
Total revolving mortgage			—						—						—						—						—						—						2,074						91						2,165
Consumer auto
Current			525						427						261						131						56						28						—						—						1,428
30-59 days			1						3						2						1						1						1						—						—						9
60-89 days			1						1						1						—						—						—						—						—						3
90 days or greater			—						1						1						—						—						—						—						—						2
Total consumer auto			527						432						265						132						57						29						—						—						1,442
Consumer other
Current			215						170						52						8						5						21						690						—						1,161
30-59 days			1						1						—						—						—						—						6						—						8
60-89 days			—						—						—						—						—						1						2						—						3
90 days or greater			—						—						—						—						—						2						2						—						4
Total consumer other			216						171						52						8						5						24						700						—						1,176
Total consumer			$	3,903					$	6,212					$	5,860					$	3,331					$	1,455					$	3,920					$	2,787					$	91					$	27,559

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Gross Charge-offs

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

Three Months Ended March 31, 2024
			Term Loans by Origination Year																																										Revolving Converted to Term Loans
dollars in millions			2024						2023						2022						2021						2020						2019 & Prior						Revolving												Total
Commercial
Non-owner occupied commercial mortgage			$	—					$	—					$	—					$	—					$	—					$	29					$	—					$	—					$	29
Commercial and industrial			1						8						8						2						1						2						14						—						36
Leases			—						2						4						2						1						1						—						—						10
Total commercial			1						10						12						4						2						32						14						—						75
Consumer
Consumer auto			—						1						1						—						—						—						—						—						2
Consumer other			—						—						1						—						—						—						4						—						5
Total consumer			—						1						2						—						—						—						4						—						7
SVB
Investor dependent - early stage			—						4						13						6						—						—						1						—						24
Investor dependent - growth stage			—						2						4						7						1						—						—						—						14
Innovation C&I and cash flow dependent			—						3						—						—						—						—						5						—						8
Total SVB			—						9						17						13						1						—						6						—						46
Total loans and leases			$	1					$	20					$	31					$	17					$	3					$	32					$	24					$	—					$	128

Three Months Ended March 31, 2023
			Term Loans by Origination Year																																										Revolving Converted to Term Loans
dollars in millions			2023						2022						2021						2020						2019						2018 & Prior						Revolving												Total
Commercial
Non-owner occupied commercial mortgage			$	—					$	—					$	—					$	—					$	—					$	12					$	—					$	—					$	12
Commercial and industrial			—						14						9						4						2						1						8						—						38
Leases			—						2						1						1						—						—						—						—						4
Total commercial			—						16						10						5						2						13						8						—						54
Consumer
Residential mortgage			—						—						—						—						—						2						—						—						2
Consumer other			—						—						—						—						—						—						3						—						3
Total consumer			—						—						—						—						—						2						3						—						5
SVB
Total SVB			—						—						—						—						—						—						—						—						—
Total loans and leases			$	—					$	16					$	10					$	5					$	2					$	15					$	11					$	—					$	59

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Loan Modifications for Borrowers Experiencing Financial Difficulties

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

The following tables present the amortized cost of loan modifications made to debtors experiencing financial difficulty, disaggregated by class and type of loan modification. The tables also provide financial effects by type of such loan modifications for the respective loan class.

Amortized Cost of Loans Modified during the three months ended March 31, 2024

dollars in millions			Term Extension (1)						Payment Delay						Interest Rate Reduction						Term Extension (1) and Interest Rate Reduction						Term Extension (1) and Payment Delay						Other Combinations						Total						Percent of Total Loan Class
Commercial
Commercial construction			$	3					$	—					$	—					$	—					$	—					$	—					$	3					0.08		%
Owner occupied commercial mortgage			15						—						1						1						9						—						26						0.16
Non-owner occupied commercial mortgage			38						—						—						—						27						—						65						0.42
Commercial and industrial			23						—						—						8						—						—						31						0.11
Leases			—						—						—						—						—						—						—						—
Total commercial			79						—						1						9						36						—						125						0.19
Consumer
Residential mortgage			6						—						—						2						—						—						8						0.03
Revolving mortgage			1						—						—						1						—						—						2						0.08
Consumer auto			—						—						—						—						—						—						—						—
Consumer other			—						—						—						—						—						—						—						—
Total consumer			7						—						—						3						—						—						10						0.03
SVB
Global fund banking			—						—						—						—						—						—						—						—
Investor dependent - early stage			—						6						—						—						2						—						8						0.63
Investor dependent - growth stage			—						24						—						—						10						—						34						1.25
Innovation C&I and cash flow dependent			18						—						—						—						7						—						25						0.27
Total SVB			18						30						—						—						19						—						67						0.17
Total loans and leases			$	104					$	30					$	1					$	12					$	55					$	—					$	202					0.15		%

(1) Term extensions include modifications in which the balloon principal payment was deferred to a later date or the loan amortization period was extended.

Amortized Cost of Loans Modified during the three months ended March 31, 2023

dollars in millions			Term Extension (1)						Payment Delay						Interest Rate Reduction						Term Extension (1) and Interest Rate Reduction						Other Combinations (2)						Total						Percent of Total Loan Class
Commercial
Commercial construction			$	1					$	—					$	—					$	—					$	—					$	1					0.02		%
Owner occupied commercial mortgage			10						—						—						—						—						10						0.06
Non-owner occupied commercial mortgage			53						—						—						—						—						53						0.51
Commercial and industrial			12						—						—						6						3						21						0.09
Total commercial			76						—						—						6						3						85						0.16
Consumer
Residential mortgage			1						—						—						—						—						1						0.01
Total consumer			1						—						—						—						—						1						0.01
SVB
Investor dependent - growth stage			6						—						—						—						—						6						0.14
Total SVB			6						—						—						—						—						6						0.01
Total loans and leases			$	83					$	—					$	—					$	6					$	3					$	92					0.07		%

(1) Term extensions include modifications in which the balloon principal payment was deferred to a later date or the loan amortization period was extended.

(2) Consists of $ 3 million of C&I loans modified with a term extension and payment delay.

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Financial Effects of Loan Modifications made during the three months ended March 31, 2024

dollars in millions			Weighted Average Term Extension (in Months)						Weighted Average Interest Rate Reduction						Weighted Average Payment Delay (in Months)						Amount of Principal Forgiven
Commercial
Commercial construction			22						2.49		%				—						$	—
Owner occupied commercial mortgage			23						0.79						20						—
Non-owner occupied commercial mortgage			27						—						48						—
Commercial and industrial			9						1.39						4						—
Leases			—						—						—						—
Total commercial			21						1.31						41						—
Consumer
Residential mortgage			52						1.52						—						—
Revolving mortgage			59						4.15						—						—
Consumer auto			30						0.26						—						—
Consumer other			49						9.19						—						—
Total consumer			53						2.41						—						—
SVB
Global fund banking			—						—						—						—
Investor dependent - early stage			6						—						7						—
Investor dependent - growth stage			19						—						10						—
Innovation C&I and cash flow dependent			12						—						6						—
Total SVB			14						—						9						—
Total loans and leases			21						1.52		%				22						$	—

Financial Effects of Loan Modifications made during the three months ended March 31, 2023

dollars in millions			Weighted Average Term Extension (in Months)						Weighted Average Interest Rate Reduction						Weighted Average Payment Delay (in Months)						Amount of Principal Forgiven
Commercial
Commercial construction			9						—		%				—						$	—
Owner occupied commercial mortgage			12						3.85						—						—
Non-owner occupied commercial mortgage			3						—						—						—
Commercial and industrial			6						1.17						8						—
Leases			—						—						—						—
Total commercial			5						1.29						8						—
Consumer
Residential mortgage			29						—						—						—
Revolving mortgage			60						0.39						—						—
Consumer auto			—						—						—						—
Consumer other			—						9.72						—						—
Total consumer			31						2.51						—						—
SVB
Global fund banking			—						—						—						—
Investor dependent - early stage			—						—						—						—
Investor dependent - growth stage			6						—						—						—
Innovation C&I and cash flow dependent			—						—						—						—
Total SVB			6						—						—						—
Total loans and leases			5						1.31		%				8						$	—

Borrowers experiencing financial difficulties are typically identified in our credit risk management process before loan modifications occur. An assessment of whether a borrower is experiencing financial difficulty is reassessed or performed on the date of a modification. Since the effect of most modifications made to borrowers experiencing financial difficulty is already included in the ALLL because of the measurement methodologies used to estimate the ALLL, a change to the ALLL is generally not recorded upon modification. Upon BancShares’ determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is charged off.

At March 31, 2024, there were $ 84 million of loans modified in the twelve months ended March 31, 2024 which defaulted subsequent to modification.

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

Modified Loans Payment Status (twelve months ended March 31, 2024)

dollars in millions			Current						30–59 Days Past Due						60–89 Days Past Due						90 Days or Greater Past Due						Total
Commercial
Commercial construction			$	4					$	—					$	—					$	—					$	4
Owner occupied commercial mortgage			26						2						—						1						29
Non-owner occupied commercial mortgage			314						39						—						—						353
Commercial and industrial			107						5						2						1						115
Total commercial			451						46						2						2						501
Consumer
Residential mortgage			15						1						—						1						17
Revolving mortgage			4						—						—						—						4
Total consumer			19						1						—						1						21
SVB
Investor dependent - early stage			22						2						—						3						27
Investor dependent - growth stage			63						—						—						—						63
Innovation C&I and cash flow dependent			56						—						—						28						84
Total SVB			141						2						—						31						174
Total loans and leases			$	611					$	49					$	2					$	34					$	696

Modified Loans Payment Status (three months ended March 31, 2023)

dollars in millions			Current						30–59 Days Past Due						60–89 Days Past Due						90 Days or Greater Past Due						Total
Commercial
Commercial construction			$	1					$	—					$	—					$	—					$	1
Owner occupied commercial mortgage			10						—						—						—						10
Non-owner occupied commercial mortgage			53						—						—						—						53
Commercial and industrial			21						—						—						—						21
Total commercial			85						—						—						—						85
Consumer
Residential mortgage			1						—						—						—						1
Total consumer			1						—						—						—						1
SVB			—						—						—						—						—
Investor dependent - growth stage			6						—						—						—						6
Total SVB			6						—						—						—						6
Total loans and leases			$	92					$	—					$	—					$	—					$	92

At March 31, 2024, there were $ 25 million of commitments to lend additional funds to debtors experiencing financial difficulty for which the terms of the loan were modified during the three months ended March 31, 2024. At December 31, 2023, there were $ 13 million of commitments to lend additional funds to debtors experiencing financial difficulty for which the terms of the loan were modified during the year ended December 31, 2023 .

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Loans Pledged

The following table provides information regarding loans pledged as collateral for borrowing capacity through the FHLB of Atlanta, the Board of Governors of the Federal Reserve System (“FRB”) and FDIC as of March 31, 2024 and December 31, 2023.

Loans Pledged

dollars in millions			March 31, 2024						December 31, 2023
FHLB of Atlanta
Lendable collateral value of pledged non-PCD loans			$	15,882					$	15,072
Less: advances			—						—
Less: letters of credit			1,450						1,450
Available borrowing capacity			$	14,432					$	13,622
Pledged non-PCD loans (contractual balance)			$	26,431					$	25,370
FRB
Lendable collateral value of pledged non-PCD loans			$	5,514					$	5,115
Less: advances			—						—
Available borrowing capacity			$	5,514					$	5,115
Pledged non-PCD loans (contractual balance)			$	6,671					$	6,273
FDIC
Lendable collateral value of pledged loans			$	48,921					$	51,179
Less: advances			—						—
Less: Purchase Money Note			36,072						36,072
Available borrowing capacity			$	12,849					$	15,107
Pledged loans (contractual balance)			$	48,921					$	51,179

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

Under borrowing arrangements with the FRB of Richmond, BancShares has access to the FRB Discount Window on a secured basis. There were no outstanding borrowings with the FRB Discount Window at March 31, 2024 or December 31, 2023.

In connection with the SVBB Acquisition, FCB and the FDIC entered into financing agreements, including the five-year Purchase Money Note of approximately $ 36.07 billion, and the Advance Facility Agreement, providing total advances available through March 27, 2025 of up to $ 70 billion. Refer to Note 2—Business Combinations for further discussion of these agreements and related collateral requirements and limits on usage.

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NOTE 5 — ALLOWANCE FOR LOAN AND LEASE LOSSES

The ALLL is reported as a separate line item on the Consolidated Balance Sheets, while the reserve for off-balance sheet credit exposure is included in other liabilities, presented in Note 13—Other Liabilities. The provision or benefit for credit losses related to (i) loans and leases (ii) off-balance sheet credit exposure, and (iii) investment securities available for sale is reported in the Consolidated Statements of Income as provision or benefit for credit losses.

The initial ALLL for PCD loans and leases acquired in the SVBB Acquisition (the “Initial PCD ALLL”) was established through a PCD gross-up and there was no corresponding increase to the provision for credit losses.

The initial ALLL for Non-PCD loans and leases acquired in the SVBB Acquisition was established through a corresponding increase to the provision for credit losses (the “day 2 provision for loan and lease losses”).

The initial reserve for off-balance sheet credit exposure acquired in the SVBB Acquisition was established through a corresponding increase to the provision for off-balance sheet credit exposure (the “day 2 provision for off-balance sheet credit exposure”).

The accounting policy for loans and off-balance sheet credit exposure acquired in a business combination is further discussed in Note 1—Significant Accounting Policies and Basis of Presentation in the Notes to the Consolidated Financial Statements included in our 2023 Form 10-K.

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

Allowance for Loan and Lease Losses

dollars in millions			Three Months Ended March 31, 2024																								Three Months Ended March 31, 2023
			Commercial						Consumer						SVB						Total						Commercial						Consumer						SVB						Total
Balance at beginning of period			$	1,126					$	166					$	455					$	1,747					$	789					$	133					$	—					$	922
Initial PCD ALLL			—						—						—						—						10						3						187						200
Day 2 provision for loan and lease losses			—						—						—						—						50						32						380						462
Provision (benefit) for loan and lease losses			59						( 6 )						40						93						57						14						—						71
Total provision (benefit) for loan and lease losses			59						( 6 )						40						93						107						46						380						533
Charge-offs			( 75 )						( 7 )						( 46 )						( 128 )						( 54 )						( 8 )						—						( 62 )
Recoveries			10						2						13						25						8						4						—						12
Balance at end of period			$	1,120					$	155					$	462					$	1,737					$	860					$	178					$	567					$	1,605

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

Provision for Credit Losses

dollars in millions			Three Months Ended March 31,
			2024						2023
Day 2 provision for loan and lease losses			$	—					$	462
Provision for loan and lease losses			93						71
Total provision for loan and lease losses			93						533
Day 2 provision for off-balance sheet credit exposure			—						254
Benefit from off-balance sheet credit exposure			( 29 )						( 8 )
Total (benefit) provision for off-balance sheet credit exposure			( 29 )						246
Provision for investment securities available for sale credit losses			—						4
Provision for credit losses			$	64					$	783

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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 real estate leases have remaining lease terms of up to 33 years. Our lease terms may include options to extend or terminate the lease, and our operating leases have renewal terms that can extend from 1 to 25 years. The options are included in the lease term when it is determined that it is reasonably certain the option will be exercised.

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

Supplemental Lease Information

dollars in millions			Classification						March 31, 2024						December 31, 2023
Lease assets:
Operating lease ROU assets			Other assets						$	355					$	354
Finance leases			Premises and equipment						8						9
Total lease assets									$	363					$	363
Lease liabilities:
Operating leases			Other liabilities						$	397					$	396
Finance leases			Other borrowings						8						9
Total lease liabilities									$	405					$	405
Weighted-average remaining lease terms:
Operating leases									7.9 years						8.1 years
Finance leases									15.7 years						15.4 years
Weighted-average discount rate:
Operating leases									2.76		%				2.70		%
Finance leases									3.55						3.52

As of March 31, 2024, there were no leases that have not yet commenced that would have a material impact on BancShares’ consolidated financial statements.

The following table presents components of lease cost:

Components of Net Lease Cost

dollars in millions									Three Months Ended March 31,
			Classification						2024						2023
Operating lease cost			Occupancy expense						$	18					$	13
Finance lease ROU asset amortization			Equipment expense						1						—
Variable lease cost (1)			Occupancy expense						9						4
Sublease income			Occupancy expense						( 1 )						( 1 )
Net lease cost (1)									$	27					$	16

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

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

For finance leases, the right of use (“ROU”) asset is amortized straight-line over the lease term as equipment expense and interest on the lease liability is recognized separately; however, interest on the lease liability was less than $ 1 million per year and is therefore not presented in the table above.

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

Sublease income results from leasing excess building space that BancShares is no longer utilizing under operating leases, which have remaining lease terms of up to 13 years.

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

Supplemental Cash Flow Information

dollars in millions			Three Months Ended March 31,
			2024						2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases			$	18					$	13
ROU assets obtained in exchange for new operating lease liabilities			17						4

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.

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

Lease Income

dollars in millions			Three Months Ended March 31,
			2024						2023
Lease income – Operating leases			$	237					$	214
Variable lease income – Operating leases (1)			18						19
Rental income on operating leases			255						233
Interest income – Sales type and direct financing leases			43						41
Variable lease income included in Other noninterest income (2)			16						15
Interest income – Leveraged leases			1						5
Total lease income			$	315					$	294

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

NOTE 7 — GOODWILL AND CORE DEPOSIT INTANGIBLES

Goodwill

BancShares had goodwill of $ 346 million at March 31, 2024 and December 31, 2023. There was no goodwill impairment during the three months ended March 31, 2024 or 2023.

Core Deposit Intangibles

Core deposit intangibles represent the estimated fair value of core deposits and other customer relationships acquired. Core deposit intangibles are being amortized over their estimated useful lives. The following tables summarize the activity for core deposit intangibles during the three months ended March 31, 2024:

Core Deposit Intangibles

dollars in millions			2024
Balance at January 1, net of accumulated amortization			$	312
Less: amortization for the period			17
Balance at March 31, net of accumulated amortization			$	295

The following tables summarize the accumulated amortization balance for core deposit intangibles at March 31, 2024 and December 31, 2023:

Core Deposit Intangible Accumulated Amortization

dollars in millions			March 31, 2024						December 31, 2023
Gross balance			$	501					$	501
Less: accumulated amortization			206						189
Balance, net of accumulated amortization			$	295					$	312

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The following table summarizes the expected amortization expense as of March 31, 2024 in subsequent periods for core deposit intangibles:

Core Deposit Intangible Expected Amortization

dollars in millions
Remainder 2024			$	46
2025			54
2026			46
2027			39
2028			34
2029			30
Thereafter			46
Balance, net of accumulated amortization			$	295

NOTE 8 — VARIABLE INTEREST ENTITIES

Refer to Note 1—Significant Accounting Policies and Basis of Presentation for additional information on accounting for VIEs.

Consolidated VIEs

At March 31, 2024 and December 31, 2023, there were no consolidated VIEs.

Unconsolidated VIEs

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

The table below provides a summary of the assets and liabilities included on the Consolidated Balance Sheets associated with unconsolidated VIEs. The table also presents our maximum exposure to loss which consists of outstanding book basis and unfunded commitments for future investments, and represents potential losses that would be incurred under hypothetical circumstances, such that the value of BancShares’ interests and any associated collateral declines to zero and assuming no recovery. BancShares believes the possibility is remote under this hypothetical scenario; accordingly, this disclosure is not an indication of expected loss.

Unconsolidated VIEs Carrying Value

dollars in millions			March 31, 2024						December 31, 2023
Affordable housing tax credit investments			$	1,942					$	1,887
Other tax credit equity investments			3						3
Total tax credit equity investments			$	1,945					$	1,890
Other unconsolidated investments			154						162
Total assets (maximum loss exposure) (1)			$	2,099					$	2,052
Liabilities for commitments to tax credit investments (2)			$	982					$	947

(1) Included in other assets.

(2) Represents commitments to invest in qualified affordable housing investments and other investments qualifying for community reinvestment tax credits. These commitments are payable on demand and are included in other liabilities.

BancShares has investments in qualified affordable housing projects primarily for the purposes of fulfilling Community Reinvestment Act of 1977 (“CRA”) requirements and obtaining tax credits. These investments are accounted for using PAM and provide tax benefits to investors in the form of tax deductions from operating losses and tax credits. Under PAM, the initial cost of the investment is amortized in proportion to the tax credits and other tax benefits received, and the net investment performance is recognized in the income statement as a component of income tax expense.

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The table below summarizes the amortization of our affordable housing tax credit investments and the related tax credits and other tax benefits that are recognized in income tax expense.

Tax Credit Investments Recognized in Income Tax Expense

dollars in millions			Three Months Ended March 31,
			2024						2023
Amortization of affordable housing tax credit investments (1)			$	59					$	18
Tax credits from affordable housing tax credit investments			( 57 )						( 15 )
Other tax benefits from affordable housing tax credit investments			( 11 )						—
Net income tax (benefit) expense from affordable housing tax credit investments (2) (3)			$	( 9 )					$	3

(1) On the Consolidated Statements of Cash Flows, this amortization is included in depreciation, amortization, and accretion, net as an adjustment to reconcile net income to net cash provided by (used in) operating activities.

(2) On the Consolidated Statements of Cash Flows, the net tax expense impact is included in net income in cash flows from operating activities. Changes in income taxes payable are reported in the net change in other liabilities as an adjustment to reconcile net income to net cash provided by (used in) operating activities.

(3) On the Consolidated Statements of Income, this is included in income tax expense (benefit).

NOTE 9 — OTHER ASSETS

The following table includes the components of other assets.

Other Assets

dollars in millions			March 31, 2024						December 31, 2023
Affordable housing tax credit and other unconsolidated investments (1)			$	2,099					$	2,052
Accrued interest receivable			914						832
Fair value of derivative financial instruments			659						640
Pension assets			480						474
Right of use assets for operating leases, net			355						354
Income tax receivable			103						209
Counterparty receivables			79						114
Bank-owned life insurance			106						105
Nonmarketable equity securities			107						103
Other real estate owned			56						58
Mortgage servicing rights			25						25
Federal Home Loan Bank stock			20						20
Other			828						871
Total other assets			$	5,831					$	5,857

(1) Refer to Note 8—Variable Interest Entities for additional information.

NOTE 10 — DEPOSITS

The following table provides detail on deposit types.

Deposit Types

dollars in millions			March 31, 2024						December 31, 2023
Noninterest-bearing demand			$	39,276					$	39,799
Checking with interest			24,244						23,754
Money market			31,393						30,611
Savings			37,688						35,258
Time			17,008						16,432
Total deposits			$	149,609					$	145,854

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At March 31, 2024, the scheduled maturities of time deposits were:

Deposit Maturities

dollars in millions
Twelve months ended March 31,
2025			$	15,831
2026			1,065
2027			66
2028			28
2029			18
Thereafter			—
Total time deposits			$	17,008

NOTE 11 — BORROWINGS

Short-term Borrowings

Securities Sold under Agreements to Repurchase

BancShares held $ 395 million and $ 485 million at March 31, 2024 and December 31, 2023, respectively, of securities sold under agreements to repurchase that have overnight contractual maturities and are collateralized by government agency securities.

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

BancShares monitors collateral levels on a continuous basis and maintains records of each transaction specifically describing the applicable security and the counterparty’s fractional interest in that security, and segregates the security from general assets in accordance with regulations governing custodial holdings of securities. The primary risk with repurchase agreements is market risk associated with the investments securing the transactions, as additional collateral may be required based on fair value changes of the underlying investments. Securities pledged as collateral under repurchase agreements are maintained with safekeeping agents. The carrying value of investment securities pledged as collateral under repurchase agreements was $ 487 million and $ 502 million at March 31, 2024 and December 31, 2023, respectively.

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Long-term Borrowings

Long-term borrowings at March 31, 2024 and December 31, 2023 include:

Long-term Borrowings

dollars in millions			Maturity						March 31, 2024						December 31, 2023
Parent Company:
Subordinated:
Fixed-to-Floating subordinated notes at 3.375 %			March 2030						$	350					$	350
Junior subordinated debentures (FCB/SC Capital Trust II) (1)			June 2034						—						20
Subsidiaries:
Senior:
Senior unsecured fixed-to-floating rate notes at 2.969 %			September 2025						315						316
Fixed senior unsecured notes at 6.00 %			April 2036						51						51
Subordinated:
Fixed subordinated notes at 6.125 %			March 2028						400						404
Fixed-to-Fixed subordinated notes at 4.125 %			November 2029						100						100
Junior subordinated debentures (SCB Capital Trust I) (1)			April 2034						—						10
Secured:
Purchase Money Note to FDIC fixed at 3.50 % (2)			March 2028						36,072						36,072
Capital lease obligations			Maturities through May 2057						8						9
Unamortized purchase accounting adjustments									( 151 )						( 163 )
Total long-term borrowings									$	37,145					$	37,169

(1) The borrowings were called during the first quarter of 2024, resulting in a $ 2 million loss on extinguishment of debt for the three months ended March 31, 2024.

(2) Issued in connection with the SVBB Acquisition and secured by collateral. See Note 2—Business Combinations and Note 4—Loans and Leases.

Pledged Assets

NOTE 12 — DERIVATIVE FINANCIAL INSTRUMENTS

Our derivatives that are designated as hedging instruments include interest rate swaps that we utilize to manage our interest rate exposure on certain fixed-rate borrowings and deposits included on our Consolidated Balances Sheets.

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

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

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

Notional Amount and Fair Value of Derivative Financial Instruments

dollars in millions			March 31, 2024																		December 31, 2023
			Notional Amount						Asset Fair Value						Liability Fair Value						Notional Amount						Asset Fair Value						Liability Fair Value
Derivatives designated as hedging instruments (Qualifying hedges)
Interest rate contracts – fair value hedges (1) (4)			$	1,149					$	—					$	—					$	815					$	—					$	—
Derivatives not designated as hedging instruments (Non-qualifying hedges)
Interest rate contracts (1) (4)			$	25,623					$	573					$	( 590 )					$	24,548					$	530					$	( 518 )
Foreign exchange contracts (2)			8,630						78						( 63 )						9,142						104						( 117 )
Other contracts (3)			1,145						8						( 1 )						983						6						( 1 )
Total derivatives not designated as hedging instruments			$	35,398					$	659					$	( 654 )					$	34,673					$	640					$	( 636 )
Gross derivatives fair values presented in the Consolidated Balance Sheets									$	659					$	( 654 )											$	640					$	( 636 )
Less: gross amounts offset in the Consolidated Balance Sheets									—						—												—						—
Net amount presented in other assets and other liabilities in the Consolidated Balance Sheets									659						( 654 )												640						( 636 )
Less: amounts subject to master netting agreements (5)									( 61 )						61												( 97 )						97
Less: cash collateral pledged (received) subject to master netting agreements (6)									( 534 )						8												( 405 )						39
Total net derivative fair value									$	64					$	( 585 )											$	138					$	( 500 )

(1) Fair value balances include accrued interest.

(2) The foreign exchange contracts exclude foreign exchange spot contracts. The notional and net fair value amounts of these contracts were $ 324 million and $ 1 million, respectively, as of March 31, 2024, and $ 179 million and $ 0 million, respectively, as of December 31, 2023.

(3) Other derivative contracts not designated as hedging instruments include risk participation agreements and equity warrants.

(4) 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 $ 83 million and $ 26 million, respectively, at March 31, 2024, which includes $ 0 million and $ 0 million relating to qualifying hedges, respectively. Gross amounts of recognized assets and liabilities were lowered by $ 66 million and $ 37 million, respectively, at December 31, 2023, which includes $ 4 million and $ 0 million relating to qualifying hedges, respectively.

(5) 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.

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

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Qualifying Hedges

The following table represents the impact of fair value hedges on the Consolidated Statements of Income:

Gains (Losses) on Qualifying Hedges

dollars in millions									Three Months Ended March 31,
			Amounts Recognized						2024						2023
Recognized on derivatives			Interest expense - borrowings						$	( 5 )					$	—
Recognized on hedged item			Interest expense - borrowings						5						—
Total qualifying hedges - income statement impact									$	—					$	—

The following table presents the carrying value of hedged items and associated cumulative hedging adjustment related to fair value hedges:

dollars in millions									Cumulative Fair Value Hedging Adjustment Included in the Carrying Value of Hedged Items
			Carrying Value of Hedged Items						Currently Designated						No Longer Designated
March 31, 2024
Long-term borrowings			$	871					$	—					$	—
Time deposits - brokered			$	334					$	—					$	—
December 31, 2023
Long-term borrowings			$	879					$	5					$	—

Non-Qualifying Hedges

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

Gains (Losses) on Non-Qualifying Hedges

dollars in millions									Three Months Ended March 31,
			Amounts Recognized						2024						2023
Interest rate contracts			Other noninterest income						$	8					$	21
Foreign currency forward contracts			Other noninterest income						12						( 2 )
Other contracts			Other noninterest income						( 1 )						—
Total non-qualifying hedges - income statement impact									$	19					$	19

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NOTE 13 — OTHER LIABILITIES

The following table includes the components of other liabilities:

Other Liabilities

dollars in millions			March 31, 2024						December 31, 2023
Deferred taxes (1)			$	3,545					$	3,579
Commitments to fund tax credit investments			982						947
Incentive plan liabilities			283						676
Fair value of derivative financial instruments			654						636
Accrued expenses and accounts payable			549						351
Lease liabilities			397						396
Reserve for off-balance sheet credit exposure			287						316
Accrued interest payable			141						137
Other			849						868
Total other liabilities			$	7,687					$	7,906

(1) Primarily includes deferred taxes associated with the SVBB Acquisition. See Note 2—Business Combinations.

NOTE 14 — FAIR VALUE

Fair Value Hierarchy

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

Assets and liabilities are recorded at fair value according to a fair value hierarchy comprised of three levels. The levels are based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. The level within the fair value hierarchy for an asset or liability is based on the lowest level of input significant to the fair value measurement with Level 1 inputs considered highest and Level 3 inputs considered lowest. A brief description of each input level follows:

• Level 1 inputs are quoted prices in active markets for identical assets and liabilities.

• Level 2 inputs are quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and inputs other than quoted prices observable for the assets or liabilities and market corroborated inputs.

• Level 3 inputs are unobservable inputs for the asset or liability. These unobservable inputs and assumptions reflect the estimates market participants would use in pricing the asset or liability.

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Assets and Liabilities Measured at Fair Value - Recurring Basis

dollars in millions			March 31, 2024
			Total						Level 1						Level 2						Level 3
Assets
Investment securities available for sale
U.S. Treasury			$	11,836					$	—					$	11,836					$	—
Government agency			107						—						107						—
Residential mortgage-backed securities			10,110						—						10,110						—
Commercial mortgage-backed securities			2,361						—						2,361						—
Corporate bonds			487						—						326						161
Municipal bonds			14						—						14						—
Total investment securities available for sale			$	24,915					$	—					$	24,754					$	161
Marketable equity securities			79						32						47						—
Loans held for sale			50						—						50						—
Derivative assets (1)
Interest rate contracts — qualifying hedges			$	—					$	—					$	—					$	—
Interest rate contracts — non-qualifying hedges			$	573					$	—					$	572					$	1
Foreign exchange contracts — non-qualifying hedges			78						—						78						—
Other derivative contracts — non-qualifying hedges			8						—						—						8
Total non-qualifying hedge assets			$	659					$	—					$	650					$	9
Total derivative assets			$	659					$	—					$	650					$	9
Liabilities
Derivative liabilities (1)
Interest rate contracts — qualifying hedges			$	—					$	—					$	—					$	—
Interest rate contracts — non-qualifying hedges			$	590					$	—					$	590					$	—
Foreign exchange contracts — non-qualifying hedges			63						—						63						—
Other derivative contracts — non-qualifying hedges			1						—						—						1
Total non-qualifying hedge liabilities			$	654					$	—					$	653					$	1
Total derivative liabilities			$	654					$	—					$	653					$	1
			December 31, 2023
			Total						Level 1						Level 2						Level 3
Assets
Investment securities available for sale
U.S. Treasury			$	10,508					$	—					$	10,508					$	—
Government agency			117						—						117						—
Residential mortgage-backed securities			6,686						—						6,686						—
Commercial mortgage-backed securities			2,131						—						2,131						—
Corporate bonds			482						—						325						157
Municipal bonds			12						—						12						—
Total investment securities available for sale			$	19,936					$	—					$	19,779					$	157
Marketable equity securities			84						36						48						—
Loans held for sale			38						—						38						—
Derivative assets (1)
Interest rate contracts — qualifying hedges			$	—					$	—					$	—					$	—
Interest rate contracts — non-qualifying hedges			$	530					$	—					$	529					$	1
Foreign exchange contracts — non-qualifying hedges			104						—						104						—
Other derivative contracts — non-qualifying hedges			6						—						—						6
Total non-qualifying hedge assets			$	640					$	—					$	633					$	7
Total derivative assets			$	640					$	—					$	633					$	7
Liabilities
Derivative liabilities (1)
Interest rate contracts — qualifying hedges			$	—					$	—					$	—					$	—
Interest rate contracts — non-qualifying hedges			$	518					$	—					$	518					$	—
Foreign exchange contracts — non-qualifying hedges			117						—						117						—
Other derivative contracts — non-qualifying hedges			1						—						—						1
Total non-qualifying hedge liabilities			$	636					$	—					$	635					$	1
Total derivative liabilities			$	636					$	—					$	635					$	1

(1) Derivative fair values include accrued interest.

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

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

Marketable equity securities. Equity securities are measured at fair value using observable closing prices. The valuation also considers the amount of market 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. Certain residential real estate loans originated for sale to investors are carried at fair value based on quoted market prices for similar types of loans. Accordingly, the inputs used to calculate fair value of originated residential real estate loans held for sale are 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 equity warrants and credit derivatives, which were estimated using Level 3 inputs, most derivative instruments were valued using Level 2 inputs based on observed pricing for similar assets and liabilities and model-based valuation techniques for which all significant assumptions are observable in the market. See Note 12—Derivative Financial Instruments for notional 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

March 31, 2024

Assets

Corporate bonds

$

161

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

$

9

Internal valuation model

Multiple factors, including but not limited to, private company valuation, illiquidity discount, and estimated life of the instrument.

Liabilities

Interest rate & other derivative — non-qualifying hedges

$

1

Internal valuation model

Not material

December 31, 2023

Assets

Corporate bonds

$

157

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

$

7

Internal valuation model

Multiple factors, including but not limited to, private company valuation, illiquidity discount, and estimated life of the instrument.

Liabilities

Interest rate & other derivative — non-qualifying hedges

$

1

Internal valuation model

Not material

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

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

dollars in millions			Three Months Ended March 31, 2024																		Three Months Ended March 31, 2023
			Corporate Bonds						Other Derivative Assets — Non-Qualifying						Other Derivative Liabilities — Non-Qualifying						Corporate Bonds						Other Derivative Assets — Non-Qualifying						Other Derivative Liabilities — Non-Qualifying
Beginning balance			$	157					$	7					$	1					$	174					$	—					$	—
Purchases			—						3						—						—						—						—
Changes in fair value included in earnings			—						—						—						—						1						—
Changes in fair value included in comprehensive income			4						—						—						( 5 )						—						—
Transfers in			—						—						—						—						—						1
Transfers out			—						—						—						—						—						—
Maturity and settlements			—						( 1 )						—						( 9 )						—						—
Ending balance			$	161					$	9					$	1					$	160					$	1					$	1

Fair Value Option

The following table summarizes the difference between the aggregate fair value and the UPB for residential mortgage loans originated for sale measured at fair value as of March 31, 2024 and December 31, 2023:

Aggregate Fair Value and UPB - Residential Mortgage Loans

dollars in millions			March 31, 2024
			Fair Value						Unpaid Principal Balance						Difference
Originated loans held for sale			$	50					$	49					$	1
			December 31, 2023
			Fair Value						Unpaid Principal Balance						Difference
Originated loans held for sale			$	38					$	37					$	1

BancShares has elected the fair value option for residential mortgage loans originated for sale. This election reduces certain timing differences in the Consolidated Statements of Income and better aligns with the management of the portfolio from a business perspective. The changes in fair value that were recorded as a component of mortgage income were insignificant for the three months ended March 31, 2024 and 2023. 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 nonaccrual status as of March 31, 2024 or December 31, 2023.

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

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

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Assets Measured at Fair Value - Non-recurring Basis

dollars in millions			Fair Value Measurements
			Total						Level 1						Level 2						Level 3						Total Gains (Losses)
March 31, 2024
Assets held for sale - loans			$	11					$	—					$	—					$	11					$	( 4 )
Loans - collateral dependent loans			157						—						—						157						( 30 )
Other real estate owned			36						—						—						36						3
Total			$	204					$	—					$	—					$	204					$	( 31 )
December 31, 2023
Assets held for sale - loans			$	12					$	—					$	—					$	12					$	( 4 )
Loans - collateral dependent loans			265						—						—						265						( 131 )
Other real estate owned			16						—						—						16						4
Total			$	293					$	—					$	—					$	293					$	( 131 )

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

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

Assets held for sale - loans. Loans held for investment subsequently transferred to held for sale are carried at the LOCOM. When available, the fair values for the transferred loans are based on quoted prices from the purchase commitments for the individual loans being transferred and are considered Level 1 inputs. 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 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 adjustments for other external factors that may impact the marketability of the collateral.

Other real estate owned. OREO is carried at LOCOM. OREO asset valuations are determined by using appraisals or other third-party value estimates of the subject property with discounts, generally between 6 % and 10 %, applied for estimated selling costs and other external factors that may impact the marketability of the property. At March 31, 2024 and December 31, 2023, the weighted average discount applied was 8.24 % and 8.59 %, respectively. Changes to the value of the assets between scheduled valuation dates are monitored through continued communication with brokers and monthly reviews by the asset manager assigned to each asset. If there are any significant changes in the market or the subject property, valuations are adjusted or new appraisals are ordered to ensure the reported values reflect the most current information.

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Financial Instruments Fair Value

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

Carrying Values and Fair Values of Financial Assets and Liabilities

dollars in millions			March 31, 2024
									Estimated Fair Value
			Carrying Value						Level 1						Level 2						Level 3						Total
Financial Assets
Cash and due from banks			$	698					$	698					$	—					$	—					$	698
Interest-earning deposits at banks			30,792						30,792						—						—						30,792
Securities purchased under agreements to resell			394						—						394						—						394
Investment in marketable equity securities			79						32						47						—						79
Investment securities available for sale			24,915						—						24,754						161						24,915
Investment securities held to maturity			10,050						—						8,479						—						8,479
Loans held for sale			83						—						50						34						84
Net loans			131,613						—						1,507						127,057						128,564
Accrued interest receivable			914						—						914						—						914
Federal Home Loan Bank stock			20						—						20						—						20
Mortgage servicing rights			25						—						—						44						44
Derivative assets - qualifying hedges			—						—						—						—						—
Derivative assets - non-qualifying hedges			659						—						650						9						659
Financial Liabilities
Deposits with no stated maturity			132,601						—						132,601						—						132,601
Time deposits			17,008						—						17,013						—						17,013
Credit balances of factoring clients			1,152						—						—						1,152						1,152
Securities sold under customer repurchase agreements			395						—						395						—						395
Long-term borrowings			37,137						—						36,421						—						36,421
Accrued interest payable			141						—						141						—						141
Derivative liabilities - qualifying hedges			—						—						—						—						—
Derivative liabilities - non-qualifying hedges			654						—						653						1						654
			December 31, 2023
									Estimated Fair Value
			Carrying Value						Level 1						Level 2						Level 3						Total
Financial Assets
Cash and due from banks			$	908					$	908					$	—					$	—					$	908
Interest-earning deposits at banks			33,609						33,609						—						—						33,609
Securities purchased under agreements to resell			473						—						473						—						473
Investment in marketable equity securities			84						36						48						—						84
Investment securities available for sale			19,936						—						19,779						157						19,936
Investment securities held to maturity			9,979						—						8,503						—						8,503
Loans held for sale			73						—						38						35						73
Net loans			129,545						—						1,479						125,217						126,696
Accrued interest receivable			832						—						832						—						832
Federal Home Loan Bank stock			20						—						20						—						20
Mortgage servicing rights			25						—						—						42						42
Derivative assets - qualifying hedges			—						—						—						—						—
Derivative assets - non-qualifying hedges			640						—						633						7						640
Financial Liabilities
Deposits with no stated maturity			129,427						—						129,427						—						129,427
Time deposits			16,427						—						16,416						—						16,416
Credit balances of factoring clients			1,089						—						—						1,089						1,089
Securities sold under customer repurchase agreements			485						—						485						—						485
Long-term borrowings			37,160						—						36,816						—						36,816
Accrued interest payable			137						—						137						—						137
Derivative liabilities - qualifying hedges			—						—						—						—						—
Derivative liabilities - non-qualifying hedges			636						—						635						1						636

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

Interest-earning Deposits at Banks. The carrying value of interest-earning deposits at banks approximates its fair value due to its short-term nature. The balances at March 31, 2024 and December 31, 2023 included $ 213 million and $ 211 million, respectively, as a required minimum deposit under the Advance Facility Agreement.

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

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

Investment securities held to maturity. BancShares’ portfolio of debt securities held to maturity consists of mortgage-backed securities issued by government agencies and government sponsored entities, U.S. Treasury notes, unsecured bonds issued by government agencies and government sponsored entities, and securities issued by the Supranational Entities & Multilateral Development Banks. We primarily use prices obtained from pricing services to determine the fair value of securities, which are Level 2 inputs.

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

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

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

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

Short-term borrowed funds. Includes repurchase agreements and certain other short-term borrowings. The fair value approximates carrying value and are classified as Level 2.

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

For all other financial assets and financial liabilities, the carrying value is a reasonable estimate of the fair value as of March 31, 2024 and December 31, 2023. The carrying value and fair value for these assets and liabilities are equivalent because they are relatively short-term in nature and there is no interest rate or credit risk that would cause the fair value to differ from the carrying value. Cash and due from banks, and interest-earning deposits at banks, are classified on the fair value hierarchy as Level 1. Accrued interest receivable and accrued interest payable are classified as Level 2.

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NOTE 15 — STOCKHOLDERS' EQUITY

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

Number of Shares of Common Stock

			March 31, 2024
			Outstanding
			Class A						Class B
Common stock - December 31, 2023			13,514,933						1,005,185
Restricted stock units vested, net of shares held to cover taxes			9,617						—
Common stock - March 31, 2024			13,524,550						1,005,185

Common Stock

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

Non-Cumulative Perpetual Preferred Stock

The following table summarizes BancShares’ non-cumulative perpetual preferred stock:

Preferred Stock

dollars in millions, except per share and par value data
Preferred Stock						Issuance Date						Earliest Redemption Date						Par Value						Shares Authorized, Issued and Outstanding																		Liquidation Preference Per Share						Total Liquidation Preference						Dividend
Series A						March 12, 2020						March 15, 2025						$	0.01					345,000																		$	1,000					$	345					5.375 %
Series B						January 3, 2022						January 4, 2027						0.01						325,000																		1,000						325						SOFR + 3.972 %
Series C						January 3, 2022						January 4, 2027						0.01						8,000,000																		25						200						5.625 %

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 Preferred Stock will accrue and be payable quarterly in arrears on March 15, June 15, September 15, and December 15 of each year. Dividends on the BancShares Preferred Stock will not be cumulative. For further description of BancShares’ Preferred Stock, refer to Note 17—Stockholders’ Equity in the Notes to the Consolidated Financial Statements included in our 2023 Form 10-K.

NOTE 16 — ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

The following table details the components of Accumulated Other Comprehensive (Loss) Income (“AOCI”):

Components of Accumulated Other Comprehensive (Loss) Income

dollars in millions			March 31, 2024																		December 31, 2023
			Pretax						Income Taxes						Net of Income Taxes						Pretax						Income Taxes						Net of Income Taxes
Unrealized loss on securities available for sale			$	( 876 )					$	208					$	( 668 )					$	( 752 )					$	175					$	( 577 )
Unrealized loss on securities available for sale transferred to held to maturity			( 7 )						2						( 5 )						( 7 )						2						( 5 )
Defined benefit pension items			122						( 31 )						91						122						( 31 )						91
Total accumulated other comprehensive loss			$	( 761 )					$	179					$	( 582 )					$	( 637 )					$	146					$	( 491 )

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

Changes in Accumulated Other Comprehensive (Loss) Income by Component

dollars in millions			Unrealized (loss) gain on securities available for sale						Unrealized loss on securities available for sale transferred to held to maturity						Net change in defined benefit pension items																		Total accumulated other comprehensive (loss) income
Balance as of December 31, 2023			$	( 577 )					$	( 5 )					$	91																	$	( 491 )
AOCI activity before reclassifications			( 91 )						—						—																		( 91 )
Amounts reclassified from AOCI to earnings			—						—						—																		—
Other comprehensive loss for the period			( 91 )						—						—																		( 91 )
Balance as of March 31, 2024			$	( 668 )					$	( 5 )					$	91																	$	( 582 )
Balance as of December 31, 2022			$	( 739 )					$	( 6 )					$	10																	$	( 735 )
AOCI activity before reclassifications			45						—						8																		53
Amounts reclassified from AOCI to earnings			13						—						—																		13
Other comprehensive income for the period			58						—						8																		66
Balance as of March 31, 2023			$	( 681 )					$	( 6 )					$	18																	$	( 669 )

Other Comprehensive Income

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

Other Comprehensive Income (Loss) by Component

dollars in millions			Three Months Ended March 31,
			2024																		2023
			Pretax						Income Taxes						Net of Income Taxes						Pretax						Income Taxes						Net of Income Taxes						Income Statement Line Items
Unrealized (loss) gain on securities available for sale:
AOCI activity before reclassifications			$	( 124 )					$	33					$	( 91 )					$	60					$	( 15 )					$	45
Amounts reclassified from AOCI to earnings			—						—						—						18						( 5 )						13						$ 14 million realized loss on sale of investment securities available for sale, net; $ 4 million provision for credit losses
Other comprehensive (loss) gain on securities available for sale			$	( 124 )					$	33					$	( 91 )					$	78					$	( 20 )					$	58
Defined benefit pension items:
Actuarial gain			$	—					$	—					$	—					$	10					$	( 2 )					$	8
Amounts reclassified from AOCI to earnings			—						—						—						—						—						—
Other comprehensive income for defined benefit pension items			$	—					$	—					$	—					$	10					$	( 2 )					$	8
Total other comprehensive (loss) income			$	( 124 )					$	33					$	( 91 )					$	88					$	( 22 )					$	66

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NOTE 17 — EARNINGS PER COMMON SHARE

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

Earnings per Common Share

dollars in millions, except per share data			Three Months Ended March 31,
			2024						2023
Net income			$	731					$	9,518
Preferred stock dividends			15						14
Net income available to common stockholders			$	716					$	9,504
Weighted average common shares outstanding
Basic shares outstanding			14,533,302						14,526,693
Stock-based awards			3,140						13,016
Diluted shares outstanding			14,536,442						14,539,709
Earnings per common share
Basic			$	49.27					$	654.22
Diluted			$	49.26					$	653.64

NOTE 18 — INCOME TAXES

BancShares’ global effective income tax rates (“ETRs”) were 27.2 % and ( 0.5 )% for the three months ended March 31, 2024 and 2023, respectively. The increase in the effective tax rate from ( 0.5 )% in the prior year to 27.2 % for the three months ended March 31, 2024 was primarily due to the effects of the non-taxable nature of the gain on acquisition relating to the SVBB Acquisition in the prior year quarter.

The quarterly income tax expense is based on a projection of BancShares’ annual ETR. This annual ETR is applied to the year-to-date consolidated pretax income to determine the interim provision for income taxes before discrete items. The ETR each period is also impacted by a number of factors, including the relative mix of domestic and international earnings, effects of changes in enacted tax laws, adjustments to the valuation allowances, and discrete items. The currently forecasted ETR may vary from the actual year-end 2024 ETR due to the changes in these factors.

Uncertain Tax Benefits

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

Net Operating Loss Carryforwards and Valuation Adjustments

NOTE 19 — EMPLOYEE BENEFIT PLANS

BancShares sponsors 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.

The components of net periodic benefit cost are as follows:

			Three Months Ended March 31,
			2024						2023
Service cost			$	2					$	2
Interest cost			15						15
Expected return on assets			( 23 )						( 21 )
Net periodic benefit			$	( 6 )					$	( 4 )

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NOTE 20 — BUSINESS SEGMENT INFORMATION

We made changes to our segment reporting during the first quarter of 2024 as further discussed in Note 1—Significant Accounting Policies and Basis of Presentation. Segment disclosures for 2023 periods included in this Form 10-Q were recast to reflect the segment reporting changes.

BancShares’ segments at March 31, 2024 include General Bank, Commercial Bank, SVB Commercial, and Rail. All other financial information not allocated to the segments is included in the “Corporate” section of the segment disclosures. The segment descriptions below reflect the segment reporting changes made during the first quarter of 2024.

General Bank

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

Revenue is generated from interest earned on loans and from fees for banking and advisory services. We primarily originate loans by utilizing our branch network and industry referrals, as well as direct digital marketing efforts. We derive our SBA loans through a network of SBA originators. We periodically purchase loans on a whole-loan basis. We also invest in community development that supports the construction of affordable housing in our communities in line with our CRA initiatives.

Commercial Bank

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

We provide factoring, receivable management, and secured financing to businesses that operate in several industries. These include: 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 from our factoring clients to their customers that have been factored (i.e., sold or assigned to the factor). Our factoring clients, which are generally manufacturers or importers of goods, are the counterparties on factoring, financing, or receivables purchasing agreements to sell trade receivables to us. Our factoring clients’ customers, which are generally retailers, are the account debtors and obligors on trade accounts receivable that have been factored.

Revenue is generated from: interest and fees on loans; rental income on operating lease equipment; fee income and other revenue from banking services and capital markets transactions; and commissions earned on factoring-related activities. We derive most of our commercial lending business through direct marketing to borrowers, lessees, manufacturers, vendors, and distributors. We also utilize referrals as a source for commercial lending business. We may periodically buy participations or syndications of loans and lines of credit and purchase loans on a whole-loan basis.

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SVB Commercial

The SVB Commercial segment offers products and services to commercial clients and investors across stages, sectors and regions in the innovation ecosystem, as well as private equity and venture capital firms. The SVB Commercial segment provides solutions to the financial needs of commercial clients. Loan products consists of capital call lines of credit, investor dependent loans, cash flow dependent loans, and innovation C&I loans made primarily to technology and life science/healthcare companies.

Revenue is primarily generated from interest earned on loans, and fees and other revenue from lending activities and banking services.

Deposit products include business and analysis checking accounts, money market accounts, multi-currency accounts, bank accounts, sweep accounts and positive pay services. Services are provided through online and mobile banking platforms, as well as branch locations.

Rail

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

Corporate

Corporate includes all other financial information not allocated to the segments. Corporate contains BancShares’ centralized Treasury function which manages the investment security portfolio, interest-earning deposits at banks, and corporate/wholesale funding (e.g., borrowings, Direct Bank deposits, and brokered deposits). Corporate deposits are primarily comprised of Direct Bank deposits.

Corporate includes interest income on investment securities and interest-earning deposits at banks; interest expense for borrowings, Direct Bank deposits, and brokered deposits; funds transfer pricing allocations; gains or losses on sales of investment securities; fair value adjustments on marketable equity securities; income from bank-owned life insurance; portions of salaries and benefits expense; and acquisition-related expenses. Corporate also includes certain items related to accounting for business combinations, such as gains on acquisitions, day 2 provisions for credit losses, and discount accretion income for certain acquired loans.

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Segment Results and Select Period End Balances

The following table presents the condensed income statements by segment:

dollars in millions			Three Months Ended March 31, 2024
			General Bank						Commercial Bank						SVB Commercial						Rail						Corporate						Total BancShares
Net interest income (expense)			$	691					$	270					$	546					$	( 43 )					$	353					$	1,817
Provision for credit losses			28						14						22						—						—						64
Net interest income (expense) after provision for credit losses			663						256						524						( 43 )						353						1,753
Noninterest income			145						136						137						202						7						627
Noninterest expense			520						228						384						115						129						1,376
Income before income taxes			288						164						277						44						231						1,004
Income tax expense			78						42						75						11						67						273
Net income			$	210					$	122					$	202					$	33					$	164					$	731
Select Period End Balances
Loans and leases			$	63,732					$	31,730					$	39,846					$	62					$	—					$	135,370
Operating lease equipment, net			—						763						—						8,048						—						8,811
Deposits			71,150						3,023						34,014						14						41,408						149,609
			Three Months Ended March 31, 2023
			General Bank						Commercial Bank						SVB Commercial						Rail						Corporate						Total BancShares
Net interest income (expense)			$	549					$	238					$	37					$	( 28 )					$	54					$	850
Provision for credit losses			10						53						—						—						720						783
Net interest income (expense) after provision for credit losses			539						185						37						( 28 )						( 666 )						67
Noninterest income			118						143						9						177						9,812						10,259
Noninterest expense			398						210						23						120						104						855
Income before income taxes			259						118						23						29						9,042						9,471
Income tax expense (benefit)			60						30						5						7						( 149 )						( 47 )
Net income			$	199					$	88					$	18					$	22					$	9,191					$	9,518
Select Period End Balances
Loans and leases			$	58,101					$	28,405					$	51,702					$	80					$	—					$	138,288
Operating lease equipment, net			—						719						—						7,612						—						8,331
Deposits			71,117						3,042						45,328						14						20,549						140,050

NOTE 21 — 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, 2024						December 31, 2023
Financing Commitments
Financing assets (excluding leases)			$	56,685					$	57,567
Letters of Credit
Standby letters of credit			2,224						2,412
Other letters of credit			104						103
Deferred Purchase Agreements			1,742						2,076
Purchase and Funding Commitments (1)			551						685

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

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Financing Commitments

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

Financing commitments, referred to as 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, 2024 and 2023, substantially all undrawn financing commitments were senior facilities. Financing commitments also include $ 79 million and $ 66 million at March 31, 2024 and December 31, 2023, respectively, related to off-balance sheet commitments to fund equity investments. Commitments to fund equity investments are contingent on events that have yet to occur and may be subject to change.

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

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

Letters of Credit

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

Deferred Purchase Agreements

A deferred purchase agreement (“DPA”) is provided in conjunction with factoring, whereby a client is provided with credit protection for trade receivables without purchasing the receivables. The trade receivables terms generally require payment in 90 days or less. If the client’s customer is unable to pay an undisputed receivable solely as the result of credit risk, BancShares is then required to purchase the receivable from the client, less any borrowings for such client based on such defaulted receivable. The outstanding amount in the table above, less $ 119 million and $ 143 million at March 31, 2024 and December 31, 2023, respectively, of borrowings for such clients, is the maximum amount that BancShares would be required to pay under all DPAs. This maximum amount would only occur if all receivables subject to DPAs default in the manner described above, thereby requiring BancShares to purchase all such receivables from the DPA clients.

The table above includes $ 1.59 billion and $ 1.92 billion of DPA exposures at March 31, 2024 and December 31, 2023, respectively, related to receivables on which BancShares has assumed the credit risk. The table also includes $ 151 million and $ 161 million available under DPA credit line agreements provided at March 31, 2024 and December 31, 2023, respectively. The DPA credit line agreements specify a contractually committed amount of DPA credit protection and are cancellable by us only after a notice period, which is typically 90 days or less.

Litigation and Other Contingencies

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

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

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In light of the inherent difficulty of predicting the outcome of Litigation matters and indemnification obligations, particularly when such matters are in their early stages or where the claimants seek indeterminate damages, BancShares cannot state with confidence what the eventual outcome of the pending Litigation will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss, fines, or penalties related to each pending matter will be, if any. In accordance with applicable accounting guidance, BancShares’ establishes reserves for Litigation when those matters present loss contingencies as to which it is both probable that a loss will occur and the amount of such loss can reasonably be estimated. 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, 2024. 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 position in a particular period.

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