FIRST CITIZENS BANCSHARES INC /DE/ (FCNCA)

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

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

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

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

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

EXECUTIVE OVERVIEW

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

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

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

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

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

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

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Recent Events

Equity Transactions

Share Repurchase Programs

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

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

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

Preferred Stock Issuance

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

Debt Transactions

Prepayments of the Purchase Money Note

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

Debt Issuance

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

Pending Branch Acquisition

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

Commercial Banking Brand Alignment

On April 23, 2026, FCB announced plans to expand its commercial banking capabilities and to align brand names later this year. In the fourth quarter of 2026, Silicon Valley Bank (“SVB”), a division of FCB, will rebrand as First Citizens Innovation Banking and First Citizens Fund Banking, and CIT Commercial Services and the Silicon Valley Bank Wine division will rebrand as FCB.

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Recent Economic, Industry and Regulatory Developments

Economic conditions reflected heightened uncertainty in the first quarter of 2026, as inflationary pressures, due in part to global energy constraints related to the conflicts in the Middle East, contributed to market volatility. We continue to monitor these developments and the broader macroeconomic environment; however, the ultimate effects remain uncertain and dependent on future events.

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

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

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

Financial Performance Summary

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

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

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s discussion and analysis (“MD&A”) of earnings and related financial data is presented to assist in understanding the financial condition and results of operations of BancShares. Unless otherwise noted, the terms “we,” “us,” “our,” and “BancShares” in this MD&A refer to our consolidated financial condition and results of operations.

This MD&A is expected to provide our investors with a view of our financial condition and results of operations from our management’s perspective. This MD&A should be read in conjunction with the audited consolidated financial statements and Notes to the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data. Throughout this MD&A, references to a specific “Note” refer to the Notes to Consolidated Financial Statements contained in Item 8. Financial Statements and Supplementary Data.

Intercompany accounts and transactions have been eliminated. Although certain amounts for prior years have been reclassified to conform with financial statement presentations for 2025, the reclassifications had no effect on stockholders’ equity or net income as previously reported. Refer to Note 1—Significant Accounting Policies and Basis of Presentation.

Management uses certain financial measures that are not presented in accordance with GAAP in its analysis of the financial condition and results of operations of BancShares. Refer to the "Non-GAAP Financial Measurements" section of this MD&A for a reconciliation of these financial measures to the most directly comparable financial measures in accordance with GAAP.

Comparisons of the financial data as of and for the years ended December 31, 2024 and 2023 are contained in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of BancShares’ Annual Report on Form 10-K as of and for the year ended December 31, 2024 (the “2024 Form 10-K”) filed with the SEC on February 21, 2025 and available through our investor relations website ir.firstcitizens.com or the SEC’s EDGAR database.

EXECUTIVE OVERVIEW

Key Strategic Objectives

BancShares defines strategic priorities to further our vision and align goals to enhance productivity while focusing on risk management throughout the organization. Our strategic priorities center around the themes summarized below.

•Client Focus

▪Expand and grow our capabilities and products while harnessing the scale of the enterprise and maintaining a client-first focus.

•Talent and Culture

▪Attract, retain and develop associates who align with our long-term direction and culture while scaling for continued growth.

•Operational Efficiency

▪Optimize processes and systems to reduce organizational complexity and maximize productivity.

▪Continue to streamline systems to simplify our information technology operating environment and improve our data infrastructure.

•Balance Sheet Optimization

▪Manage our balance sheet prudently to optimize our funding and liquidity profile while driving core deposit growth and enhancing returns.

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Recent Events

Equity Transactions

Share Repurchase Programs

On July 25, 2025, BancShares announced that the Board authorized the 2025 SRP, which allows BancShares to repurchase shares of its Class A common stock in an aggregate amount up to $4.0 billion through December 31, 2026. Repurchases under the 2025 SRP commenced in September 2025 upon the completion of the $3.5 billion 2024 SRP announced in July 2024. During 2025, BancShares repurchased $3.03 billion of its Class A common stock in aggregate under the 2024 SRP and the 2025 SRP. The total capacity remaining under the 2025 SRP was $2.81 billion as of December 31, 2025 and $2.37 billion as of February 13, 2026.

Refer to Part II, Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities for additional information regarding repurchases of Class A common stock.

Preferred Stock Issuances

On November 18, 2025, the Parent Company issued and sold 7.000% non-cumulative perpetual preferred stock, series D, for a total of $500 million. In February 2026, the Parent Company issued and sold 6.625% non-cumulative perpetual preferred stock, series E for a total of $400 million. Refer to Note 15—Stockholders' Equity for further information, including depositary shares and liquidation preference.

Debt Transactions

Partial Prepayments of the Purchase Money Note

In connection with the SVBB Acquisition (as defined and described in Note 2—Business Combinations), FCB issued a five-year, 3.50% fixed rate Purchase Money Note (as defined in Note 2—Business Combinations), which had a carrying value of $33.39 billion and $35.82 billion at December 31, 2025 and 2024, respectively. During December 2025, FCB prepaid $2.49 billion of the Purchase Money Note (the “Partial Prepayment of the Purchase Money Note”), which resulted in a $9 million loss on extinguishment of debt. We will continue to monitor the interest rate environment and FCB’s collateral position for the Purchase Money Note and assess further prepayments as discussed below in the Funding, Liquidity and Capital Overview. In both January 2026 and February 2026, we made additional prepayments of approximately $500 million.

Debt Redemption

On June 15, 2025, the Parent Company executed a callable feature and redeemed all $350 million aggregate principal amount of its 3.375% Fixed-to-Floating Rate Subordinated Notes due in 2030 (when combined with the Purchase Money Note Partial Prepayment, the “2025 Debt Redemptions”).

Debt Issuances

The Parent Company issued and sold the following during 2025 (together the “2025 Debt Issuances”) in public offerings:

•On September 5, 2025, $600 million aggregate principal amount of its 5.600% Fixed Rate Reset Subordinated Notes due in 2035, and

•On March 12, 2025, $500 million aggregate principal amount of its 5.231% Fixed-to-Floating Rate Senior Notes due in 2031 and $750 million aggregate principal amount of its 6.254% Fixed-to-Fixed Rate Subordinated Notes due in 2040.

Pending Branch Acquisition

On October 16, 2025, FCB announced the BMO Branch Acquisition to acquire 138 branches from BMO Bank N.A. located throughout the Midwest, Great Plains and West regions of the U.S. In connection with the BMO Branch Acquisition, FCB expects to assume approximately $5.7 billion in deposit liabilities and acquire approximately $1.1 billion in loans. We expect the transaction to close in the second half of 2026, subject to customary closing terms and conditions and regulatory approvals.

Termination of the Shared-Loss Agreement with the FDIC

On April 7, 2025, FCB and the FDIC entered into an agreement (the “Shared-Loss Termination Agreement”) to terminate the Shared-Loss Agreement (as defined in Note 2—Business Combinations). As a result of entering into the Shared-Loss Termination Agreement, all rights and obligations of the parties under the Shared-Loss Agreement terminated as of the date of the Shared-Loss Termination Agreement, including FCB’s reporting covenants and obligations related to FDIC Loss Sharing and FCB reimbursement (each as defined in Note 2—Business Combinations). The decision to enter into the Shared-Loss Termination Agreement was motivated, in part, by FCB’s determination that the likelihood of reaching the $5 billion loss threshold during the five-year period covered by the Shared-Loss Agreement was remote. Additionally, the Shared-Loss Termination Agreement eliminated the reporting responsibilities associated with the Shared-Loss Agreement. There was no impact to our consolidated balance sheets or statements of income resulting from the Shared-Loss Termination Agreement

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because there was no loss indemnification asset or true-up liability associated with the Shared-Loss Agreement, primarily based on evaluation of historical loss experience and the credit quality of the Covered Assets (as defined in Note 2—Business Combinations).

The impacts to the Risk-Based Capital Ratios resulting from the Shared-Loss Termination Agreement are discussed in the “Capital” section of this MD&A.

Financial Reporting Updates

Changes to Reportable Segments

As of December 31, 2025, our reportable segments included the General Bank, the Commercial Bank, and Rail. All other financial information not included in the segments is reported in the Corporate section of the segment disclosures. During 2025, we made the following Segment Reporting Updates:

•All components previously reported in the SVB Commercial segment and certain components of the General Bank segment were consolidated into the Commercial Bank segment.

•We made minor updates to our segment expense allocations.

Segment disclosures for the years ended December 31, 2024 and 2023 included in this Form 10-K were recast to conform with the Segment Reporting Updates summarized above.

Loan Class Changes

At December 31, 2025, our commercial loan classes included: commercial and industrial, capital call lines, owner occupied commercial mortgage, investor dependent, and commercial real estate, while our consumer loan classes included: residential mortgage, revolving mortgage, auto, and other consumer.

During 2025, we changed our loan classes (“Loan Class Changes”) from the loan classes in the 2024 Form 10-K. The Loan Class Changes recast capital call lines and commercial real estate into separate loan classes, and recast SVB loan classes into the commercial loan classes. Additionally, investor dependent - early stage and investor dependent - growth stage were combined into a single investor dependent loan class.

The Loan Class Changes are further discussed in Note 1—Significant Accounting Policies and Basis of Presentation. Loan and lease and ALLL disclosures for all periods presented in this Form 10-K were recast to reflect the Loan Class Changes.

Recent Economic, Industry and Regulatory Developments

Entering 2025, the FOMC had reduced the benchmark federal funds rate to a range between 4.25% - 4.50% and maintained this level until its September meeting. During each of its September, October and December meetings in 2025, the FOMC reduced the benchmark federal funds rate by a quarter-point, to a range between 3.50% - 3.75% as of December 31, 2025. During the January 2026 FOMC meeting, the benchmark federal funds rate was left unchanged.

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

On July 4, 2025, President Trump signed into law H.R. 1, referred to as the One Big Beautiful Bill Act (the “OBBBA”). The OBBBA contains several provisions that impact corporate taxation. The enactment of the OBBBA did not have a material impact on our tax rate or results of operations.

Financial Performance Summary

The following tables in this MD&A include financial data as of and for the year ended December 31, 2025 (the “current year”), December 31, 2024 (the “prior year”) and December 31, 2023. We focus the discussion of our financial position by comparing balances as of December 31, 2025 to December 31, 2024. Percent changes within this MD&A are based on unrounded amounts and may not recalculate precisely using the displayed rounded balances.

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Table 1

Selected Financial Data

(1)     Calculated net of average credit balances of factoring clients to appropriately reflect the interest-earning portion of factoring receivables.

(2)     Net interest margin (“NIM”), excluding purchase accounting accretion or amortization (“PAA”), is a non-GAAP financial measure. Refer to the “NII, NIM, and Interest Income on Loans and Leases, Excluding PAA” discussion in the “Non-GAAP Financial Measurements” section of this MD&A for a reconciliation from the most comparable GAAP measure to the non-GAAP measure.

(3) Average loan balances include loans held for sale and nonaccrual loans.

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

Income Statement Highlights

•Net income for the current year was $2.21 billion, a decrease of $571 million or 21%, from $2.78 billion for the prior year. Net income available to common stockholders for the current year was $2.15 billion, a decrease of $567 million or 21%, from $2.72 billion for the prior year. Earnings per diluted common share for the current year was $165.24, a decrease from $189.41 for the prior year. The decrease in net income and net income available to common stockholders was due to lower NII, higher noninterest expense and provision for credit losses, partially offset by higher noninterest income and lower income tax expense, as further discussed below.

•NII for the current year was $6.81 billion, a decrease of $329 million or 5%, from $7.14 billion for the prior year. NIM for the current year was 3.25%, a decrease of 29 bps, from 3.54% for the prior year. The decreases in NII and NIM were mainly due to lower yields on loans, lower average balance and yields on interest-earning deposits at banks, and lower PAA, partially offset by the impacts of a decline in the rate paid on interest-bearing deposits and a higher average balance of loans and investment securities.

◦PAA for the current year was $251 million, a decrease of $230 million, from $481 million for the prior year. NIM, excluding PAA,(1) for the current year was 3.13%, a decrease of 17 bps, from 3.30% for the prior year.

•Noninterest income for the current year was $2.73 billion, an increase of $112 million or 4%, from $2.62 billion for the prior year, mostly due to increases in rental income on operating lease equipment of $48 million, wealth management services of $18 million, international fees of $17 million, other noninterest income of $12 million, deposit fees and service charges of $11 million, and lending related fees of $9 million, partially offset by a modest decrease in cardholder services.

•Noninterest expense for the current year was $6.06 billion, an increase of $321 million or 6% from $5.74 billion for the prior year, mostly due to increases in personnel cost of $216 million, marketing expense of $66 million, equipment expense of $51 million, third-party processing fees of $38 million, and maintenance and other operating lease expenses of $25 million, partially offset by a decrease in acquisition-related expenses of $69 million.

•Provision for credit losses for the current year was $514 million, an increase of $83 million or 19%, from $431 million for the prior year. The current year provision for credit losses included a provision for loan and lease losses of $530 million, partially offset by a benefit for off-balance sheet credit exposure of $18 million.

◦The provision for loan and lease losses for the current year was $530 million, an increase of $61 million, from $469 million for the prior year, mainly attributable to an increase in net charge-offs of $100 million, which included a charge-off of $82 million on a single supply chain finance client, partially offset by an ALLL reserve release that increased $39 million compared to the prior year. The reserve release in the current year was $110 million, compared to $71 million in the prior year. The ALLL reserve release is discussed below in the Balance Sheet Highlights.

◦The benefit for off-balance sheet credit exposure for the current year was $18 million, compared to $38 million for the prior year.

•Income tax expense for the current year was $765 million, a decrease of $50 million, from $815 million for the prior year, largely due to lower income before income taxes.

•Return on average assets for the current year was 0.96%, compared to 1.26% for the prior year due to the decrease in net income explained above.

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

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Balance Sheet Highlights

•Loans and leases at December 31, 2025 were $147.93 billion, an increase of $7.71 billion or 6% from $140.22 billion at December 31, 2024. Loan growth in the Commercial Bank segment of $7.64 billion was mainly in Global Fund Banking and other industry verticals, primarily technology media and telecommunications (“TMT”) and Healthcare. Loan growth of $71 million in the General Bank segment was primarily in Wealth, SBA and Community Association Banking portfolios, partially offset by a transfer of $694 million residential mortgage loans to held for sale in December 2025.

•Investment securities at December 31, 2025 were $41.56 billion, a decrease of $2.53 billion or 6% from $44.09 billion at December 31, 2024, as maturities and sales offset the purchase of short duration available for sale U.S. treasury and agency mortgage-backed securities. Investment securities were a primary funding source for the $2.49 billion Partial Prepayment of the Purchase Money Note in December 2025.

•Deposits at December 31, 2025 were $161.58 billion, an increase of $6.35 billion or 4% from $155.23 billion at December 31, 2024. As shown in Table 2 below, the increase from December 31, 2024 was attributable to deposit growth in Corporate of $3.02 billion (which primarily includes the Direct Bank), the General Bank segment of $1.84 billion and the Commercial Bank segment of $1.51 billion. Noninterest-bearing deposits grew by $2.02 billion or 5% compared to December 31, 2024 and represented 25.2% of total deposits as of December 31, 2025, compared to 24.9% at December 31, 2024.

•Borrowings at December 31, 2025 were $36.01 billion, a decrease of $1.04 billion or 3%, from $37.05 billion at December 31, 2024. The decrease was primarily due to the 2025 Debt Redemptions with an aggregate principal amount of $2.84 billion, which includes the $2.49 billion Partial Prepayment of the Purchase Money Note, partially offset by the 2025 Debt Issuances with aggregate principal amounts totaling $1.85 billion.

•The ALLL was $1.57 billion at December 31, 2025, compared to $1.68 billion at December 31, 2024, resulting in an ALLL reserve release of $110 million in the current year, mainly driven by loan growth concentrated in capital call lines which have a lower loss rate relative to our other loan portfolios, elimination of the reserves related to Hurricane Helene, a modest shift in our weighting from the downside to baseline economic scenario (as further discussed in the “Critical Accounting Estimates” section of this MD&A), improvements in the economic outlook and credit quality, and lower specific reserves for individually evaluated loans. The ALLL reserve release was $71 million in the prior year. The ALLL as a percentage of loans was 1.06% at December 31, 2025, a decrease of 14 bps from 1.20% at December 31, 2024.

•Interest-earning deposits at banks were $19.80 billion at December 31, 2025, a decrease of $1.56 billion, compared to $21.36 billion at December 31, 2024, a function of the balance sheet trends discussed above.

•At December 31, 2025, BancShares remained well capitalized with a total risk-based capital ratio of 13.71%, a Tier 1 risk-based capital ratio of 11.91%, a CET1 ratio of 11.15% and a Tier 1 leverage ratio of 9.29%.

Funding, Liquidity and Capital Overview

Deposit Composition and Trends

We fund our business primarily through deposits. Deposits represented approximately 82% of total funding at December 31, 2025.

Table 2

Deposit Trends

Deposit trends for the segments and Corporate at December 31, 2025 compared to December 31, 2024 are discussed below:

•Corporate deposit growth of $3.02 billion was mainly in the Direct Bank, which consists primarily of savings accounts.

•General Bank segment deposit growth of $1.84 billion was primarily concentrated in our Branch Network. Deposit growth was in money market, partially offset by lower time deposits.

•Commercial Bank segment deposit growth of $1.51 billion was mostly in Global Fund Banking. Most of the growth was in noninterest-bearing demand and money-market, partially offset by a decline in interest-bearing checking.

Total uninsured deposits were approximately $61.81 billion or 38% of total deposits at December 31, 2025 and $59.51 billion or 38% at December 31, 2024.

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Liquidity Position

We strive to maintain a strong liquidity position and our risk appetite for liquidity is low. At December 31, 2025, we had $56.01 billion in high-quality liquid assets consisting of $19.11 billion in cash and interest-earning deposits at banks (primarily held at the FRB and $36.90 billion in high-quality liquid securities (“HQLS”). HQLS are mainly comprised of U.S. agency mortgage-backed and U.S. Treasury investment securities. Additionally, we have unused borrowing capacity with the FHLB and FRB of $17.78 billion and $12.96 billion, respectively.

In connection with the SVBB Acquisition (as defined and described in Note 2—Business Combinations), FCB and the FDIC, as lender and as collateral agent, entered into the Advance Facility Agreement (as defined and described in Note 2—Business Combinations). The draw period under the Advance Facility Agreement ended March 27, 2025, as of which date, FCB had no outstanding amounts under the facility. Subsequently, we increased our borrowing capacity under agreements with the FRB through expansion of the eligible loan population to targeted loans historically not pledged to the FRB. Refer to the “Risk Management—Liquidity Risk” section of this MD&A for further discussion.

Also in connection with the SVBB Acquisition, FCB issued a five-year, 3.50% fixed rate Purchase Money Note (as defined in Note 2—Business Combinations), which had a carrying value of $33.39 billion at December 31, 2025. While scheduled principal payments are not required until maturity in March 2028, FCB may voluntarily prepay principal without a premium or penalty. As noted above in “Executive Overview—Recent Events,” FCB made a $2.49 billion Partial Prepayment of the Purchase Money Note in December 2025 and additional prepayments of $500 million in both January and February 2026. We will continue to monitor the interest rate environment and FCB’s collateral position for the Purchase Money Note and assess whether any further voluntary prepayments are prudent considering the fixed rate of 3.50%. Potential sources that could fund voluntary prepayments or the amount due at maturity include excess liquidity (primarily comprised of interest-earning deposits at banks and proceeds from maturities and paydowns of investment securities), FHLB advances, deposit growth, loan portfolio sales, and issuance of perpetual preferred stock, unsecured debt or other borrowings. At the time of any further voluntary prepayment or maturity, the interest rates for the potential interest-bearing sources of prepayment could be higher than the 3.50% rate.

Investment Securities Duration

At December 31, 2025, our investment securities portfolio primarily consisted of debt securities available for sale and held to maturity as summarized below. We manage debt security market risk by monitoring the average duration of our investment securities portfolio. The duration of our investment securities was approximately 2.7 years at December 31, 2025. The investment securities available for sale portfolio had an average duration of 2.3 years and the held to maturity portfolio had an average duration of 4.1 years. Refer to the “Balance Sheet Analysis—Interest-earning Assets—Investment Securities” section of this MD&A and Note 3—Investment Securities for further information.

Table 3

Investment Securities Summary

Capital Position

At December 31, 2025, all Regulatory Capital Ratios for BancShares and FCB exceeded the PCA well capitalized thresholds and Basel III requirements as further discussed in the “Capital” section of this MD&A.

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RESULTS OF OPERATIONS

Net Interest Income and Net Interest Margin

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

The following tables present the average balances of interest-earning assets and interest-bearing liabilities with the associated yields and rates, interest income and expense, and changes therein due to changes in volume and yields or rates. Changes in interest income and expense due to changes in (i) volume (average balances of interest-earning assets and interest-bearing liabilities) and (ii) yields or rates are based on the following:

•The change in NII due to volume is calculated as the change in average balance multiplied by the yield or rate from the prior period.

•The change in NII due to yield or rate is calculated as the change in yield or rate multiplied by the average balance from the prior period.

•The change in NII due to changes in both volume and yield or rate (i.e., portfolio mix) is calculated as the change in rate multiplied by the change in volume. This component is allocated between the changes due to volume and yield or rate based on the ratio each component bears to the absolute dollar amounts of their total.

•Tax equivalent NII was not materially different from NII, therefore we present NII in our analysis.

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Table 4

Average Balances, Yields and Rates, NII, and NIM

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

(2)    The average balances and yields for loans and leases are calculated net of average credit balances of factoring clients to appropriately reflect the interest-earning portion of factoring receivables.

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NII and NIM

The table above quantifies the increases or decreases for the current year compared to the prior year for NII and NIM, as well as average balances of interest-earning assets and interest-bearing liabilities, and the respective yields earned and rates paid. The main reasons for the increases and decreases are explained below:

•NII for the current year was $6.81 billion, a decrease of $329 million or 5%, from $7.14 billion for the prior year. NII, excluding PAA,(1) was $6.56 billion for the current year, a decrease of $99 million, from $6.66 billion for the prior year. The main reasons for the decreases in NII and NII, excluding PAA,(1) are explained below:

◦Interest income on interest-earning deposits at banks for the current year was $992 million, a decrease of $486 million or 33%, from $1.48 billion for the prior year, due to a decline in the federal funds rate and a lower average balance.

◦Interest income on loans and leases for the current year was $9.10 billion, a decrease of $432 million or 5%, from $9.53 billion for the prior year, mainly due to a lower yield and lower loan PAA, partially offset by the impact of a higher average balance.

•Interest income on loans and leases, excluding loan PAA,(1) was $8.81 billion for the current year, a decrease of $216 million, from $9.02 billion for the prior year.

•Loan PAA was $289 million in the current year, a decrease of $216 million, from $505 million for the prior year.

◦Interest income on investment securities (including securities purchased under agreements to resell) for the current year was $1.69 billion, an increase of $343 million or 26%, from $1.35 billion for the prior year, mainly due to a higher average balance and a higher yield.

◦Interest expense on interest-bearing deposits for the current year was $3.56 billion, a decrease of $305 million or 8%, from $3.86 billion for the prior year, as a lower rate paid was partially offset by the impact of a higher average balance.

◦Interest expense on borrowings for the current year was $1.41 billion, an increase of $59 million or 4%, from $1.35 billion for the prior year, primarily due to a higher rate paid and a higher average balance, reflecting the 2025 Debt Issuances.

•NIM for the current year was 3.25%, a decrease of 29 bps, from 3.54% for the prior year. The decline in NIM was mainly due to lower yields on loans, lower average balance and yields on interest-earning deposits at banks, and lower PAA, partially offset by the impacts of a decline in the rate paid on interest-bearing deposits and a higher average balance of loans and investment securities. NIM, excluding PAA,(1) was 3.13% for the current year, a decrease of 17 bps, from 3.30% for the prior year.

◦The yield on average interest-earning assets for the current year was 5.61%, a decrease of 51 bps, from 6.12% for the prior year, mainly due to a decline in yield on loans and interest-earning deposits at banks, as well as lower loan PAA, partially offset by a higher yield on investment securities.

◦The rate paid on average interest-bearing liabilities for the current year was 3.15%, a decrease of 35 bps, from 3.50% for the prior year, primarily due to a lower rate paid on interest-bearing deposits, partially offset by the impacts of a higher average balance of interest-bearing deposits, and a higher average balance and rate paid for borrowings as a result of the 2025 Debt Issuances.

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

Refer to the “Executive Overview—Financial Performance Summary—Balance Sheet Highlights,” “Balance Sheet Analysis—Interest-earning Assets,” and “Balance Sheet Analysis—Interest-bearing Liabilities” sections of this MD&A for discussions of balance sheet trends that impact average interest-earning assets, average interest-bearing liabilities, and the related yields and rates paid.

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Table 5

Average Balances, Yields and Rates, NII, and NIM

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

(2)    The average balances and yields for loans and leases are calculated net of average credit balances of factoring clients to appropriately reflect the interest-earning portion of factoring receivables.

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

Table 6

Average Interest-earning Asset Mix

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

Table 7

Average Interest-bearing Liability Mix

Provision for Credit Losses

Table 8

Provision for Credit Losses

(1) As defined and described in Note 6—Allowance for Loan and Lease Losses

The provision for credit losses for the current year was $514 million, an increase of $83 million or 19%, from $431 million for the prior year. The current year provision for credit losses included a provision for loan and lease losses of $530 million, partially offset by a benefit for off-balance sheet credit exposure of $18 million.

•The provision for loan and lease losses for the current year was $530 million, an increase of $61 million, from $469 million for the prior year, mainly attributable to an increase in net charge-offs of $100 million, which included a charge-off of $82 million on a single supply chain finance client, partially offset by an increase in the ALLL reserve release in the current year of $39 million as a result of a $110 million reserve release in the current year, compared to a $71 million reserve release in the prior year.

◦The ALLL was $1.57 billion at December 31, 2025, compared to $1.68 billion at December 31, 2024. The decrease of $110 million was mainly driven by loan growth concentrated in capital call lines which have a lower loss rate relative to our other loan portfolios, elimination of the reserves related to Hurricane Helene, a modest shift in our weighting from the downside to baseline economic scenario (as further discussed in the “Critical Accounting Estimates” section of this MD&A), improvements in the economic outlook and credit quality, and lower specific reserves for individually evaluated loans.

•The benefit for off-balance sheet credit exposure for the current year was $18 million, a decrease of $20 million, compared to $38 million for the prior year. The lower benefit of $20 million was mostly due to trends in the volume of unfunded commitments, partially offset by a modest shift in our weighting from the downside to baseline economic scenario as further discussed in the “Critical Accounting Estimates” section of this MD&A.

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

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Noninterest Income

The following table presents noninterest income:

Table 9

Noninterest Income

Noninterest income for the current year was $2.73 billion. The main reasons for the increase of $112 million, or 4%, from $2.62 billion for the prior year, are discussed below:

•The increase in rental income on operating lease equipment of $48 million was mainly the result of growth in the railcar portfolio.

•The increase in wealth management services of $18 million was largely due to growth in assets under management.

•The increase in international fees of $17 million reflected higher volumes and commissions on foreign currency exchange transactions.

•The increase in other noninterest income of $12 million was largely due to a increases in income on tax credit investments, the favorable change in the fair value of non-marketable equity securities, and mortgage-related income, partially offset by lower derivative income and a write-down of a held for sale asset in the current year.

•The increase in deposit fees and service charges of $11 million was mostly due to higher customer activity and increased transactions due to deposit growth.

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Noninterest Expense

The following table presents noninterest expense:

Table 10

Noninterest Expense

Noninterest expense for the current year was $6.06 billion. The main reasons for the increase of $321 million, or 6%, from $5.74 billion for the prior year, are discussed below:

•The increase in personnel cost of $216 million was mainly due to higher salaries reflecting net staff additions, annual merit increases, promotions, and higher employee benefit costs, partially offset by lower incentive compensation..

•The decrease in acquisition-related expenses of $69 million is summarized in Table 11 below.

•The increase in marketing expense of $66 million was primarily due to marketing for Direct Bank deposits.

•The increase in equipment expense of $51 million was mostly due to higher software-related costs as we continue to scale our technology platforms.

•The increase of $38 million in third-party processing fees was due to higher transaction volume and additional services as we continue to transition to more cloud-based computing services.

•The increase of $25 million in maintenance and other operating lease expenses reflect timing and the number of railcars coming on or off lease as well as asset condition. Refer to the “Results by Segment—Rail” section of this MD&A.

Table 11

Acquisition-related Expenses

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

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

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Income Taxes

Table 12

Income Tax Data

The effective income tax rate (“ETR”) was 25.7% for the current year compared to 22.7% for the prior year. The increase for the current year ETR compared to the prior year was primarily due to the prior year U.S. federal and state provision to return benefit coupled with the revaluation of deferred taxes.

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

BancShares monitors and evaluates the potential impact of current events on the estimates used to establish income tax expense and income tax liabilities. On a periodic basis, we evaluate our income tax positions based on current tax law and positions taken by various tax auditors within the jurisdictions where BancShares is required to file income tax returns, as well as potential or pending audits or assessments by tax auditors. Refer to Note 19—Income Taxes for additional information.

RESULTS BY SEGMENT

We made Segment Reporting Updates during 2025 as discussed in Note 1—Significant Accounting Policies and Basis of Presentation and in the “Executive Overview—Recent Events” section earlier in this MD&A. Segment disclosures for the 2024 and 2023 periods included in this Form 10-K were recast to reflect the changes.

BancShares’ segments at December 31, 2025 include the General Bank, the Commercial Bank, and Rail. All other financial information not included in the segments is reported in the Corporate section of the segment disclosures. Under our segment expense allocation methodology, allocated expenses increase noninterest expense of the applicable segment(s), with an offsetting decrease to Corporate noninterest expense. “All other noninterest expense” in the segment reporting tables below includes the effect of allocated expenses, resulting in a reduction to expense (or “Contra Expense”) for Corporate.

Refer to Note 21—Segment Information for descriptions of segment products and services.

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General Bank

Table 13

General Bank: Financial Data

General Bank segment net income for the current year increased $234 million compared to the prior year, primarily due to higher NII, lower provision for credit losses, and higher noninterest income, partially offset by increases in personnel cost and all other noninterest expense.

•The $348 million increase in NII was mainly due to loan growth and a lower rate paid on interest-bearing deposits, partially offset by the impact of deposit growth.

•The $58 million decrease in provision for credit losses reflects the ALLL build during the prior year, the elimination of reserves related to Hurricane Helene in the current year, and the modest shift in our weighting from the downside to baseline economic scenario as further discussed in the “Critical Accounting Estimates” section of this MD&A.

•The $52 million increase in total noninterest income was mostly due to increases in wealth management services, deposit fees and service charges, and cardholder services.

•The $151 million increase in all other noninterest expense was spread amongst various accounts, including allocated expenses. Refer to the “Noninterest Expense” discussion in the “Results of Operations” section of this MD&A for further information regarding trends in consolidated noninterest expense.

•The $55 million increase in personnel cost was largely due to annual merit increases and promotions.

General Bank segment loans were $64.96 billion at December 31, 2025, an increase of $71 million compared to $64.89 billion at December 31, 2024, as growth in the Wealth, SBA, and Community Association Banking portfolios was mostly offset by a transfer of $694 million residential mortgage loans to held for sale in December 2025.

The General Bank segment mainly includes deposits in our Branch Network, which deploys a relationship-based approach to deposit gathering. General Bank segment deposits were $74.80 billion at December 31, 2025, an increase of $1.84 billion compared to $72.96 billion at December 31, 2024, as growth was primarily concentrated in our Branch Network. Deposit growth was in money market, partially offset by lower time deposits.

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Commercial Bank

Table 14

Commercial Bank: Financial Data

Table 15

Reconciliation of Net Rental Income on Operating Lease Equipment (non-GAAP)