FIRST CITIZENS BANCSHARES INC /DE/ (FCNCA) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from FIRST CITIZENS BANCSHARES INC /DE/'s 10-K for fiscal year 2024. Filing date: 2025-02-21. Report date: 2024-12-31. Accession: 0000798941-25-000010.

This page reproduces the company's own Item 7 MD&A text from the linked SEC filing. It is filer text, not grepcent analysis, scoring, or investment advice.

Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high.

Company profile: FCNCA · All MD&A years: index · Previous year: FY 2023 · Next year: FY 2025

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 BancShares’ financial condition and results of operations. 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 2024, 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, 2023 and 2022 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, 2023 filed with the SEC on February 23, 2024 and included in a Current Report on Form 8-K filed on August 14, 2024 to reflect segment reporting changes summarized in Note 1—Significant Accounting Policies and Basis of Presentation 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

▪Enhance 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.

Recent Events

Share Repurchase Program

On July 25, 2024, BancShares announced that the Board authorized an SRP, which allows BancShares to repurchase shares of its Class A common stock in an aggregate amount up to $3.50 billion through 2025. During 2024, we repurchased approximately $1.66 billion of our Class A common stock. Refer to Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities for additional information regarding repurchase activity.

Under the authorized SRP, shares of BancShares’ Class A common stock may be purchased from time to time on the open market or in privately negotiated transactions, including through a Rule 10b5-1 plan, but the Board’s action does not obligate BancShares to repurchase any minimum or particular number of shares, and repurchases may be suspended or discontinued at any time (subject to the terms of any Rule 10b5-1 plan in effect) without prior notice.

Hurricanes Helene and Milton

On September 26, 2024, Hurricane Helene (“Helene”) made landfall in the Big Bend area of the Florida Gulf Coast as a Category 4 hurricane. Helene's most significant impacts were across the Southern Appalachians, where widespread and severe flooding occurred. On October 9, 2024, Hurricane Milton (“Milton”) made landfall in the central west coast of Florida and caused extensive damage and flooding across the Florida peninsula. The operations of our branches and offices were not significantly affected. At December 31, 2024, our estimated loan loss reserve related to Helene was $20 million and there was no estimated loan loss reserve for Milton. We will continue to assess the impacts of Helene and Milton as further information becomes available.

Southern California Wildfires

In January 2025, several wildfires broke out in Southern California, causing widespread damage to the affected areas. One of our leased bank branches in Southern California was destroyed. We expect the financial impact of the destroyed branch to be immaterial. The Southern California wildfires did not significantly impact our operations.

Segment Updates

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 and 2022 periods included in this Annual Report on Form 10-K were recast to reflect the segment reporting changes. BancShares’ segments include the General Bank, the Commercial Bank, SVB Commercial, and Rail. All other financial information not included in the segments is reported in the “Corporate” section of the segment disclosures. Refer to Note 22—Segment Information for the segment descriptions and the section entitled “Results by Segment” in this MD&A.

Updates to Loan Classes

We updated our loan classes during the first quarter of 2024 as further discussed in Note 1—Significant Accounting Policies and Basis of Presentation. Loan and lease and ALLL disclosures for 2023 and 2022 periods included in this Annual Report on Form 10-K were recast to reflect the changes in loan classes.

Recent Economic, Industry and Regulatory Developments

During its September 2024 meeting, the FOMC reduced the benchmark federal funds rate to a range between 4.75% - 5.00%. In its statement, the FOMC said it gained greater confidence that inflation is moving sustainably toward 2 percent, and therefore lowered the target range for the federal funds rate by 0.50%. The FOMC followed this with further 0.25% reductions at its November and December 2024 meetings to reduce the benchmark federal funds rate to a range between 4.25% - 4.50%, but cautioned further reductions in 2025 may be fewer than initially expected due to continued inflation pressures. As such, the FOMC maintained the range for the benchmark federal funds rate at its January 2025 meeting.

During 2023, the FDIC finalized an NPR covering an industry-wide special assessment to recover losses associated with protecting uninsured depositors following the closures of Silicon Valley Bank, Signature Bank, and First Republic Bank. We accrued a FDIC insurance special assessment charge of $64 million in 2023 and an additional expense of approximately $11 million in 2024.

Also in 2023, the federal banking agencies issued an NPR related to enhanced capital and another for long-term debt requirements for banking organizations with $100 billion or more in total consolidated assets. We are in the process of evaluating the proposals and the potential impacts. However, if the long-term debt requirement NPR is finalized as proposed, we expect we would need to issue additional long-term debt to satisfy the requirements.

These NPRs are discussed above in Item 1. Business in the section entitled “Regulatory Considerations.”

Financial Performance Summary

The following tables in this MD&A include financial data as of and for the year ended December 31, 2024 (“Current Year”), December 31, 2023 (“Prior Year”) and December 31, 2022. The operations acquired in the SVBB Acquisition (the “Acquired SVBB Operations”) were included in our results of operations for all of the Current Year, but only from the SVBB Acquisition Date through December 31, 2023 (the “Partial Prior Year”). Certain Current Year comparisons to the Prior Year in this MD&A highlight the impact of including the Acquired SVBB Operations for the entire Current Year and only the Partial Prior Year (the “Timing of the SVBB Acquisition”).

We primarily focus the discussion of our financial position by comparing balances as of December 31, 2024 to December 31, 2023, but the tables also provide December 31, 2022 balances.

The following table summarizes BancShares’ results:

Table 1

Selected Financial Data

dollars in millions, except share data
	2024		2023		2022
Results of Operations:
Interest income	$	12,353			$	10,391			$	3,413
Interest expense	5,210			3,679			467
Net interest income	7,143			6,712			2,946
Provision for credit losses	431			1,375			645
Net interest income after provision for credit losses	6,712			5,337			2,301
Noninterest income	2,615			12,075			2,136
Noninterest expense	5,735			5,335			3,075
Income before income taxes	3,592			12,077			1,362
Income tax expense	815			611			264
Net income	2,777			11,466			1,098
Preferred stock dividends	61			59			50
Net income available to common stockholders	$	2,716			$	11,407			$	1,048
Per Common Share Information:
Weighted average common shares outstanding (diluted)	14,342,655			14,539,613			15,549,944
Diluted earnings per common share	$	189.41			$	784.51			$	67.40
Key Performance Metrics:
Return on average assets	1.26	%		5.90	%		1.01	%
Net interest margin (1)	3.54			3.92			3.16
Net interest margin, excluding purchase accounting accretion (1)(3)	3.30			3.50			3.05
Select Average Balances:
Investment securities	$	37,029			$	23,112			$	19,166
Total loans and leases (2)	137,546			119,234			67,787
Operating lease equipment, net	9,003			8,495			7,982
Total assets	219,800			194,281			108,915
Total deposits	151,004			130,590			89,916
Total stockholders’ equity	22,297			17,937			10,276
Select Ending Balances:
Investment securities	$	44,090			$	29,999			$	19,369
Total loans and leases	140,221			133,302			70,781
Operating lease equipment, net	9,323			8,746			8,156
Total assets	223,720			213,758			109,298
Total deposits	155,229			145,854			89,408
Total stockholders’ equity	22,228			21,255			9,662
Loan to deposit ratio	90.33	%		91.39	%		79.17	%
Noninterest-bearing deposits to total deposits	24.89			27.29			27.87
Capital Ratios:
Total risk-based capital	15.04	%		15.75	%		13.18	%
Tier 1 risk-based capital	13.53			13.94			11.06
Common equity Tier 1	12.99			13.36			10.08
Tier 1 leverage	9.90			9.83			8.99
Asset Quality:
Ratio of nonaccrual loans to total loans	0.84	%		0.73	%		0.89	%
Allowance for loan and lease losses to loans ratio	1.20			1.31			1.30
Net charge off ratio	0.39			0.47			0.12

(1) Calculated net of average credit balances and deposits of factoring clients.

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

(3) Net interest margin (“NIM”), excluding purchase accounting accretion or amortization (“PAA”), is a non-GAAP financial measure. Refer to the “NII, NIM, and Interest and Fees on Loans, Excluding PAA” item 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.

Financial highlights are summarized below. Further details are discussed in the “Results of Operations” section of this MD&A.

Income Statement Highlights

•Net income for the Current Year was $2.78 billion, a decrease of $8.69 billion or 76% from $11.47 billion for the Prior Year. Net income available to common stockholders for the Current Year was $2.72 billion, a decrease of $8.69 billion from $11.41 billion for the Prior Year. Earnings per diluted common share for the Current Year was $189.41, a decrease from $784.51 for the Prior Year. The decreases were largely due to the gain on acquisition of $9.81 billion in the Prior Year, partially offset by the Timing of the SVBB Acquisition and a lower provision for credit losses.

•The Current Year included the following select items:

◦Acquisition-related expenses of $210 million, and

◦Additional FDIC insurance special assessment of $11 million.

•The Prior Year included the following select items:

◦Gain on acquisition of $9.81 billion for the SVBB Acquisition,

◦Day 2 Provision for Credit Losses of $716 million for the SVBB Acquisition,

◦Acquisition-related expenses of $470 million, and

◦FDIC insurance special assessment of $64 million.

•Return on average assets for the Current Year was 1.26% compared to 5.90% for the Prior Year, which benefited from the gain on acquisition.

•NIM for the Current Year was 3.54%, a decrease of 38 bps from 3.92% for the Prior Year. The decline was due to a higher average balance of interest-bearing deposits and the Purchase Money Note, a higher average rate paid on deposits, and lower PAA, partially offset by higher average balances and yields on loans and investment securities. NIM, excluding PAA, was 3.30% for the Current Year compared to 3.50% for the Prior Year. Refer to the “NII, NIM, and Interest and Fees on Loans, Excluding PAA” discussion in the “Non-GAAP Financial Measurements” section of this MD&A for further discussion.

•Noninterest income for the Current Year was $2.62 billion, a decrease of $9.46 billion from $12.08 billion for the Prior Year. The decrease was mostly due to the gain on acquisition of $9.81 billion in the Prior Year, partially offset by increases in rental income on operating lease equipment, realized gain on sales of investment securities, and the impact of the Timing of the SVBB Acquisition.

•Noninterest expense for the Current Year was $5.74 billion, an increase of $400 million or 8% from $5.34 billion for the Prior Year, mainly due to the Timing of the SVBB Acquisition, but also reflecting net staff additions and continued investments in technology, partially offset by lower acquisition-related expenses.

•Provision for credit losses for the Current Year was $431 million, a decrease of $944 million from $1.38 billion for the Prior Year. The decrease was mostly related to the provision for non-purchased credit deteriorated (“Non-PCD”) loans and leases and the unfunded commitments acquired in the SVBB Acquisition (collectively, the “Day 2 Provision for Credit Losses”) of $716 million in the Prior Year, along with the ALLL decrease in the Current Year versus an increase in the Prior Year as summarized below in the Balance Sheet Highlights.

Balance Sheet Highlights

•Loans and leases at December 31, 2024 were $140.22 billion, an increase of $6.92 billion or 5% from $133.30 billion at December 31, 2023, due to loan growth in each of our segments. Loan growth in the General Bank segment was primarily related to business and commercial loans in our Branch Network. Loan growth in the Commercial Bank segment was mainly in the technology media and telecommunications (“TMT”) and the healthcare industry verticals. Loan growth in the SVB Commercial segment was concentrated in the global fund banking portfolio.

•ALLL at December 31, 2024 was $1.68 billion, representing a decrease of $71 million from $1.75 billion at December 31, 2023, mainly due to changes in loan mix, improvements in the macroeconomic forecast, and decreases in specific reserves for individually evaluated loans. The mix shift was mostly within SVB loans and reflected increases in the global fund banking portfolio, which has a lower loss rate relative to the rest of our portfolios, and decreases in the investor dependent portfolios, which have higher loss rates. These decreases were partially offset by increases related to loan growth and a $20 million loan loss reserve for Helene.

•Investment securities at December 31, 2024 were $44.09 billion, an increase of $14.09 billion or 47% from $30.00 billion at December 31, 2023, primarily due to purchases of short-duration U.S. agency mortgage-backed and U.S. Treasury investment securities, partially offset by payments and maturities.

•Deposits at December 31, 2024 were $155.23 billion, an increase of $9.38 billion or 6% from $145.85 billion at December 31, 2023, reflecting deposit growth in our Branch Network in the General Bank segment, the Direct Bank in Corporate, and the SVB Commercial segment.

•Borrowings at December 31, 2024 were $37.05 billion, a decrease of $603 million from $37.65 billion at December 31, 2023, mostly due to redemptions of our senior unsecured borrowings and subordinated debentures.

•At December 31, 2024, BancShares remained well capitalized with a total risk-based capital ratio of 15.04%, a Tier 1 risk-based capital ratio of 13.53%, a CET1 ratio of 12.99% and a Tier 1 leverage ratio of 9.90%.

Funding, Liquidity and Capital Overview

Deposit Composition and Trends

We fund our business primarily through deposits. Deposits represented approximately 81% of total funding at December 31, 2024. The following table summarizes the composition, average size and uninsured percentages of our deposits:

Table 2

Select Deposit Data

	Deposits as of December 31, 2024
	Ending Balance (in millions)		Average Size (in thousands)		Uninsured %
General Bank segment	$	73,062			$	36		34	%
Commercial Bank segment	3,283			281		86
SVB Commercial segment	36,637			519		71
Corporate and Rail segment(1)	42,247			58		13
Total	$	155,229			54		38

(1) The average size is reflective of the Direct Bank deposits and excludes brokered deposits and rail.

The General Bank segment mainly includes deposits from our Branch Network, which deploys a relationship-based approach to deposit gathering. The Commercial Bank segment includes deposits of commercial customers, and the SVB Commercial segment includes deposits related to its commercial customer base. Deposits in Corporate mainly included $41.09 billion in our Direct Bank, with the remaining primarily comprised of brokered deposits.

As displayed in the table above, the average size of deposits varies across our business segments. The uninsured percentage is the percentage of uninsured deposits to total deposits at period end for the respective segments and Corporate. Total uninsured deposits were approximately $59.51 billion or 38% of total deposits at December 31, 2024 and $54.15 billion or 37% at December 31, 2023.

Table 3

Deposit Trends

dollars in millions	Deposit Balance
	December 31, 2024		December 31, 2023		December 31, 2022
General Bank segment	$	73,062			$	68,729		$	67,894
Commercial Bank segment	3,283			3,228			3,219
SVB Commercial segment	36,637			34,730			—
Corporate and Rail segment	42,247			39,167			18,295
Total deposits	$	155,229			$	145,854		$	89,408

From December 31, 2023 to December 31, 2024, General Bank segment and Corporate deposits increased, primarily due to deposit growth in our Branch Network and Direct Bank, respectively. SVB Commercial segment deposits increased from December 31, 2023 to December 31, 2024, mainly due to growth in money market deposits and interest-bearing checking, partially offset by declines in noninterest-bearing checking. Refer to the Deposits section later in this MD&A for additional information on deposits.

Liquidity Position

We strive to maintain a strong liquidity position and our risk appetite for liquidity is low. At December 31, 2024, we had $59.34 billion in high-quality liquid assets consisting of $20.55 billion in cash and interest-earning deposits at banks (primarily held at the FRB) and $38.79 billion in high-quality liquid securities (“HQLS”). Additionally, we have unused borrowing capacity with the FHLB and FRB of $16.42 billion and $5.48 billion, respectively.

In connection with the SVBB Acquisition, FCB and the FDIC, as lender and as collateral agent, entered into the Advance Facility Agreement providing total advances available through March 27, 2025 of up to $70 billion, subject to limits subsequently described in this MD&A as referenced below. The immediate available capacity of the Advance Facility Agreement was $5.29 billion at December 31, 2024. The draw period under the Advance Facility Agreement ends March 27, 2025, thus we will no longer have access to advance funds under the agreement after this date. However, we are actively working to increase 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 “Liquidity Risk” section of this MD&A for further discussion.

In connection with the SVBB Acquisition, FCB issued a five-year Purchase Money Note with carrying value of $35.82 billion at December 31, 2024. While scheduled principal payments are not required under the Purchase Money Note until maturity, FCB may voluntarily prepay principal without premium or penalty. We will continue to monitor the interest rate environment and assess whether any voluntary prepayments are prudent considering the fixed rate of 3.50% on the Purchase Money Note. Potential sources that could fund voluntary prepayments of the Purchase Money Note 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, and issuance of unsecured debt or other borrowings. At the time of voluntary prepayment or maturity, the interest rates for the potential interest-bearing sources of repayment could be higher than the 3.50% rate on the Purchase Money Note.

Investment Securities Duration

At December 31, 2024, 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 2.8 years at December 31, 2024. The investment securities available for sale portfolio had an average duration of 2.4 years and the held to maturity portfolio had an average duration of 4.4 years. Refer to the “Interest-earning Assets—Investment Securities” section of this MD&A and Note 3—Investment Securities for further information.

Table 4

Investment Securities

dollars in millions	December 31, 2024
	Composition(1)		Amortized Cost		Fair Value				Fair Value to Amortized Cost
Total investment securities available for sale	79.3	%		$	34,512		$	33,750			97.8	%
Total investment securities held to maturity	20.5			10,239		8,702				85.0
Investment in marketable equity securities	0.2			79		101				127.8
Total investment securities	100	%		$	44,830		$	42,553
(1) Calculated as a percentage of the total fair value of investment securities.

Capital Position

All regulatory capital ratios for BancShares and FCB significantly exceed the PCA well capitalized thresholds and Basel III requirements as further discussed in the “Capital” section of this MD&A.

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, yields on interest-earning assets, rates on interest-bearing liabilities, and changes in NII due to changes in volume and yields or rates. Changes in NII 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.

Table 5

Average Balances and Yields/Rates

dollars in millions	Year Ended
	December 31, 2024		December 31, 2023		Change in NII Due to:
	Average Balance		Income / Expense		Yield / Rate		Average Balance		Income / Expense		Yield / Rate		Volume(1)	Yield /Rate(1)		Total Change
Loans and leases (1)(2)	$	136,026			$	9,528			7.00	%		$	117,708		$	8,187		6.95	%		$	1,278		$	63	$	1,341
Investment securities	37,029			1,334			3.60			23,112			640		2.77		462			232			694
Securities purchased under agreements to resell	247			13			5.18			161			8		5.20		5			—			5
Interest-earning deposits at banks	28,276			1,478			5.23			29,790			1,556		5.22		(79)			1			(78)
Total interest-earning assets (2)	$	201,578			$	12,353			6.12	%		$	170,771		$	10,391		6.08	%		$	1,666		$	296	$	1,962
Operating lease equipment, net	$	9,003							$	8,495
Cash and due from banks	753							879
Allowance for loan and lease losses	(1,748)							(1,495)
All other noninterest-earning assets	10,214							15,631
Total assets	$	219,800							$	194,281
Interest-bearing deposits
Checking with interest	$	24,199			$	526			2.17	%		$	22,296		$	402		1.80	%		$	36		$	88	$	124
Money market	33,107			1,031			3.11			27,583			618		2.24		140			273			413
Savings	38,997			1,663			4.26			26,104			963		3.69		532			168			700
Time deposits	15,202			644			4.23			14,947			514		3.44		10			120			130
Total interest-bearing deposits	111,505			3,864			3.47			90,930			2,497		2.75		718			649			1,367
Borrowings:
Securities sold under customer repurchase agreements	392			2			0.51			455			2		0.35		—			—			—
Short-term FHLB borrowings	—			—			—			108			5		4.79		(6)			1			(5)
Short-term borrowings	392			2			0.51			563			7		1.20		(6)			1			(5)
Federal Home Loan Bank borrowings	—			—			—			2,307			120		5.22		(74)			(46)			(120)
Senior unsecured borrowings	292			8			2.63			608			14		2.21		(8)			2			(6)
Subordinated debt	889			29			3.18			1,043			39		3.65		(5)			(5)			(10)
Other borrowings	35,826			1,307			3.65			27,322			1,002		3.67		310			(5)			305
Long-term borrowings	37,007			1,344			3.63			31,280			1,175		3.75		223			(54)			169
Total borrowings	37,399			1,346			3.60			31,843			1,182		3.71		217			(53)			164
Total interest-bearing liabilities	$	148,904			$	5,210			3.50	%		$	122,773		$	3,679		3.00	%		$	935		$	596	$	1,531
Noninterest-bearing deposits	$	39,499							$	39,660
Credit balances of factoring clients	1,192							1,166
Other noninterest-bearing liabilities	7,908							12,745
Stockholders' equity	22,297							17,937
Total liabilities and stockholders’ equity	$	219,800							$	194,281
Interest rate spread (2)					2.62	%						3.08	%
Net interest income and net interest margin (2)			$	7,143			3.54	%				$	6,712		3.92	%

(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 balance and rate presented are calculated net of average credit balances and deposits of factoring clients.

NII and NIM - 2024 compared to 2023

•NII for the Current Year was $7.14 billion, an increase of $431 million or 6% from $6.71 billion for the Prior Year. While the increase was largely due to the Timing of the SVBB Acquisition, other contributing factors included organic loan growth, purchases of investment securities, and higher yields on interest-earning assets, partially offset by higher interest expense due to higher average balances and rates for interest-bearing deposits, and lower loan PAA. Compared to the Partial Prior Year, NII in the comparable period during the Current Year declined by $536 million as higher interest expense on interest-bearing deposits (driven by both higher rates and average balances), and a decline in loan PAA, more than offset higher interest income (driven by loan and investment portfolio growth and a higher yield on interest-earning assets).

◦NII, excluding PAA, was $6.66 billion for the Current Year and $5.97 billion for the Prior Year, an increase of $690 million. Refer to the “NII, NIM, and Interest and Fees on Loans, Excluding PAA” discussion in the “Non-GAAP Financial Measurements” section of this MD&A for further discussion.

•Interest income on loans and leases for the Current Year was $9.53 billion, an increase of $1.34 billion or 16% from $8.19 billion for the Prior Year. The increase was primarily due to the Timing of the SVBB Acquisition, but also reflected organic loan growth and higher loan yields, partially offset by lower loan PAA. Loan PAA was $505 million for the Current Year and $733 million for the Prior Year, a decrease of $228 million. Interest income on loans, excluding PAA, was $9.02 billion for the Current Year and $7.45 billion for the Prior Year, an increase of $1.57 billion. Refer to the “NII, NIM, and Interest and Fees on Loans, Excluding PAA” discussion in the “Non-GAAP Financial Measurements” section of this MD&A for further discussion.

•Interest income on investment securities for the Current Year was $1.35 billion, an increase of $699 million or 108% from $648 million for the Prior Year. The increase was due to purchases of short duration agency mortgage-backed and U.S. Treasury investment securities available for sale, and to a lesser extent, a higher yield on the purchased investment securities.

•Interest income on interest-earning deposits at banks for the Current Year was $1.48 billion, a decrease of $78 million or 5% from $1.56 billion for the Prior Year. The decrease was mainly the result of a lower average balance due to outflows that funded the purchases of investment securities discussed above, partially offset by a higher average balance due to the Timing of the SVBB Acquisition.

•Interest expense on interest-bearing deposits for the Current Year was $3.86 billion, an increase of $1.37 billion or 55% from $2.50 billion for the Prior Year. The increase was due to a higher average balance due in part to the Timing of the SVBB Acquisition, as well as organic growth in interest-bearing deposits, and higher rates paid on average interest-bearing deposits.

•Interest expense on borrowings for the Current Year was $1.35 billion, an increase of $164 million or 14% from $1.18 billion for the Prior Year, mainly the result of a higher average balance of the Purchase Money Note due to the Timing of the SVBB Acquisition.

•Average interest-earning assets for the Current Year were $201.58 billion, an increase of $30.81 billion or 18% from $170.77 billion for the Prior Year, mostly due to the Timing of the SVBB Acquisition, but also reflecting organic loan growth discussed in the “Loans” section of this MD&A and purchases of investment securities, partially offset by lower interest-earning deposits at banks.

◦The yield on average interest-earning assets was 6.12% in the Current Year, an increase of 4 bps from the Prior Year.

•Average interest-bearing liabilities for the Current Year were $148.90 billion, an increase of $26.13 billion or 21% from $122.77 billion for the Prior Year, mostly due to the Timing of the SVBB Acquisition, but also reflecting organic interest-bearing deposit growth discussed in the “Deposits” section of this MD&A.

◦The rate paid on average interest-bearing liabilities was 3.50%, an increase of 50 bps from the Prior Year, primarily due to a higher rate paid on average interest-bearing deposits, partially offset by the impact of repaying FHLB borrowings in the Prior Year.

•NIM for the Current Year was 3.54%, a decrease of 38 bps from 3.92% for the Prior Year. The decline was due to a higher average balance of interest-bearing deposits and the Purchase Money Note, a higher average rate paid on interest-bearing deposits, and lower PAA, partially offset by higher average balances and yields on loans and investment securities. NIM, excluding PAA, was 3.30% for the Current Year compared to 3.50% for the Prior Year. Refer to the “NII, NIM, and Interest and Fees on Loans, Excluding PAA” discussion in the “Non-GAAP Financial Measurements” section of this MD&A for further discussion.

Table 6

Average Balances and Yields/Rates

dollars in millions	Year Ended
	December 31, 2023		December 31, 2022		Change in NII Due to:
	Average Balance		Income / Expense		Yield / Rate		Average Balance		Income / Expense		Yield / Rate		Volume(1)	Yield /Rate(1)		Total Change
Loans and leases (1)(2)	$	117,708			$	8,187			6.95	%		$	66,303		$	2,953		4.45	%		$	3,035		$	2,199	$	5,234
Investment securities	23,112			640			2.77			19,166			354		1.85		84			202			286
Securities purchased under agreements to resell	161			8			5.20			—			—		—		8			—			8
Interest-earning deposits at banks	29,790			1,556			5.22			7,726			106		1.38		733			717			1,450
Total interest-earning assets (2)	$	170,771			$	10,391			6.08	%		$	93,195		$	3,413		3.66	%		$	3,860		$	3,118	$	6,978
Operating lease equipment, net	$	8,495							$	7,982
Cash and due from banks	879							512
Allowance for loan and lease losses	(1,495)							(875)
All other noninterest-earning assets	15,631							8,101
Total assets	$	194,281							$	108,915
Interest-bearing deposits
Checking with interest	$	22,296			$	402			1.80	%		$	16,323		$	29		0.18	%		$	14		$	359	$	373
Money market	27,583			618			2.24			23,963			125		0.52		22			471			493
Savings	26,104			963			3.69			14,378			117		0.81		158			688			846
Time deposits	14,947			514			3.44			8,934			64		0.72		68			382			450
Total interest-bearing deposits	90,930			2,497			2.75			63,598			335		0.53		262			1,900			2,162
Borrowings:
Securities sold under customer repurchase agreements	455			2			0.35			590			1		0.19		—			1			1
Short-term FHLB borrowings	108			5			4.79			824			28		3.35		(32)			9			(23)
Short-term borrowings	563			7			1.20			1,414			29		2.03		(32)			10			(22)
Federal Home Loan Bank borrowings	2,307			120			5.22			1,414			43		3.01		35			42			77
Senior unsecured borrowings	608			14			2.21			1,348			25		1.89		(15)			4			(11)
Subordinated debt	1,043			39			3.65			1,056			33		3.15		—			6			6
Other borrowings	27,322			1,002			3.67			64			2		3.22		1,000			—			1,000
Long-term borrowings	31,280			1,175			3.75			3,882			103		2.66		1,020			52			1,072
Total borrowings	31,843			1,182			3.71			5,296			132		2.49		988			62			1,050
Total interest-bearing liabilities	$	122,773			$	3,679			3.00	%		$	68,894		$	467		0.68	%		$	1,250		$	1,962	$	3,212
Noninterest-bearing deposits	$	39,660							$	26,318
Credit balances of factoring clients	1,166							1,153
Other noninterest-bearing liabilities	12,745							2,274
Stockholders' equity	17,937							10,276
Total liabilities and stockholders’ equity	$	194,281							$	108,915
Interest rate spread (2)					3.08	%						2.98	%
Net interest income and net yield on interest-earning assets (2)			$	6,712			3.92	%				$	2,946		3.16	%

(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 balance and rate presented are calculated net of average credit balances and deposits of factoring clients.

The following table includes the average interest-earning assets by category:

Table 7

Average Interest-earning Asset Mix

		% of Average Interest-earning Assets
	Year Ended December 31,
		2024		2023		2022
Loans and leases		68	%		69	%	71	%
Investment securities		18			14		21
Interest-earning deposits at banks		14			17		8
Total interest-earning assets		100	%		100	%	100	%

The following table shows the average interest-bearing liability mix:

Table 8

Average Interest-bearing Liability Mix

		% of Average Interest-bearing Liabilities
	Year Ended December 31,
		2024		2023		2022
Total interest-bearing deposits		75	%		74	%	92	%
Securities sold under customer repurchase agreements		—			—		1
Other short-term borrowings		—			—		1
Long-term borrowings		25			26		6
Total interest-bearing liabilities		100	%		100	%	100	%

Provision for Credit Losses

The provision for credit losses for the Current Year was $431 million, a decrease of $944 million or 69% from $1.38 billion for the Prior Year. The decrease was primarily related to the Day 2 Provision for Credit Losses of $716 million in the Prior Year. The decrease in the provision for credit losses was also due to the ALLL decrease in the Current Year, mainly due to changes in loan mix, improvements in the macroeconomic forecast, and decreases in specific reserves for individually evaluated loans. The mix shift was mostly within SVB loans and reflected increases in the global fund banking portfolio, which has a lower loss rate relative to the rest of our portfolios, and decreases in the investor dependent portfolios, which have higher loss rates. These decreases were partially offset by increases related to loan growth and a $20 million loan loss reserve for Helene.

The ALLL and net charge-offs are further discussed in the “Risk Management—Credit Risk—Allowance for Loan and Lease Losses” and “—Credit Metrics” in this MD&A and in Note 5—Allowance for Loan and Lease Losses.

Table 9

Provision for Credit Losses

dollars in millions
	2024		2023		2022
Day 2 Provision for Loan and Lease Losses	$	—			$	462		454
Provision for loan and lease losses	469			703			97
Total provision for loan and lease losses	469			1,165			551
Day 2 Provision for Off-Balance Sheet Credit Exposure	—			254			59
(Benefit) provision for off-balance sheet credit exposure	(38)			(44)			35
Total (benefit) provision for off-balance sheet credit exposure	(38)			210			94
Provision for credit losses	$	431			$	1,375		$	645

Noninterest Income

Noninterest income is an essential part of our total revenue. The primary sources of noninterest income consist of rental income on operating lease equipment, lending-related fees, deposit fees and service charges, client investment fees, wealth management services, international fees, factoring commissions, cardholder and merchant services, and insurance commissions. Descriptions of noninterest income are included in the revenue recognition section in Note 1—Significant Accounting Policies and Basis of Presentation.

Table 10

Noninterest Income

dollars in millions
	2024		2023		2022
Rental income on operating lease equipment	$	1,048			$	971		$	864
Other noninterest income:
Lending-related fees	257			218			103
Deposit fees and service charges	230			200			142
Client investment fees	213			157			—
Wealth management services	211			188			142
International fees	119			91			8
Factoring commissions	75			82			104
Cardholder services, net	163			139			102
Merchant services, net	49			48			35
Insurance commissions	55			54			47
Realized gain (loss) on sale of investment securities, net	6			(26)			—
Fair value adjustment on marketable equity securities, net	13			(11)			(3)
Gain on sale of leasing equipment, net	30			20			15
Gain on acquisition	—			9,808			431
(Loss) gain on extinguishment of debt	(2)			—			7
Other noninterest income	148			136			139
Total other noninterest income	1,567			11,104			1,272
Total noninterest income	$	2,615			$	12,075		$	2,136

Rental Income on Operating Lease Equipment

Rental income on operating lease equipment was $1.05 billion for the Current Year, an increase of $77 million or 8% from $971 million for the Prior Year. The Current Year benefited from growth in rail operating lease equipment, as well as strong re-pricing and utilization rates in the rail portfolio. Rental income is generated primarily in the Rail segment and, to a lesser extent, in the Commercial Bank segment. Revenue is generally dictated by the size of the portfolio, utilization of the railcars, re-pricing of equipment renewed upon lease maturities, and pricing on new leases. Re-pricing refers to the rental rate in the renewed equipment contract compared to the prior contract. Refer to the Rail segment discussion in the “Results by Segment” section of this MD&A for further details.

Total Other Noninterest Income

Total other noninterest income for the Current Year was $1.57 billion, a decrease of $9.54 billion from $11.10 billion for the Prior Year. The decrease was mostly due to the gain on acquisition of $9.81 billion in the Prior Year, offset by the items discussed below.

•Client investment fees increased $56 million, mainly due to the Timing of the SVBB Acquisition, as well as growth in off-balance sheet client fund balances and expanded transaction-based services.

•Lending-related fees increased $39 million, mostly due to the Timing of the SVBB Acquisition, but also reflecting organic loan growth as discussed in the Loans section later in this MD&A. Additionally, capital market fees increased $17 million, due to higher syndication volume in the Current Year.

•Deposit fees and service charges increased $30 million, primarily due to the Timing of the SVBB Acquisition, but also impacted by deposit growth in the Branch Network and Direct Bank.

•International fees increased $28 million, mainly due to the Timing of the SVBB Acquisition, but also reflecting higher commissions we earned on customer foreign currency transactions.

•Cardholder services, net increased $24 million due to the Timing of the SVBB Acquisition and higher transaction volumes in the Current Year.

•The $24 million increase in fair value adjustment on marketable equity securities reflects higher market prices of the underlying securities.

•Wealth management services increased $23 million due to higher assets under management.

•Factoring commissions decreased $7 million, mainly due to lower factoring volume and surcharges.

•Realized gain on sales of investment securities improved $32 million compared to the Prior Year. We sold investment securities and realized a $6 million gain in the Current Year, whereas the Prior Year included a net loss of $26 million associated with the sale of a single corporate bond of a distressed financial institution and our strategic decision to sell the municipal bonds acquired in the SVBB Acquisition.

•Other noninterest income increased $12 million, primarily related to higher gains on loan sales.

Noninterest Expense

Noninterest expense includes depreciation on operating lease equipment, maintenance and other operating lease expenses, and operating expenses.

Table 11

Noninterest Expense

dollars in millions
	2024		2023		2022
Depreciation on operating lease equipment	$	394			$	371		$	345
Maintenance and other operating lease expenses	219			222			189
Operating expenses:
Personnel cost	3,078			2,636			1,408
Net occupancy expense	242			244			191
Equipment expense	504			422			216
Professional fees	121			71			45
Third-party processing fees	230			205			103
FDIC insurance expense	138			158			31
Marketing expense	76			102			53
Acquisition-related expenses	210			470			231
Intangible asset amortization	63			57			23
Other noninterest expense	460			377			240
Total operating expenses	5,122			4,742			2,541
Total noninterest expense	$	5,735			$	5,335		$	3,075

Depreciation on Operating Lease Equipment

Depreciation expense on operating lease equipment is primarily related to rail equipment and small and large ticket equipment we own and lease to others. The increase in depreciation expense for the Current Year compared to the Prior Year was primarily due to the higher operating lease equipment balance. Operating lease activity is in the Rail and Commercial Bank segments. The useful life of rail equipment is generally longer in duration, 40-50 years, whereas small and large ticket equipment is generally 3-10 years. Refer to the Commercial Bank and Rail segments discussion in the section entitled “Results by Segment” of this MD&A for further details.

Maintenance and Other Operating Lease Expenses

The Rail segment leases railcars, primarily pursuant to full-service lease contracts under which we, as lessor, are responsible for railcar maintenance and repair. Maintenance and other operating lease expenses for the Current Year were $219 million, a decrease of $3 million or 2% from $222 million for the Prior Year. Maintenance and other operating lease expenses relate to equipment ownership and leasing costs associated with the railcar portfolio and tend to be variable due to timing and the number of railcars coming on or off lease as well as asset condition. Refer to the Rail segment discussion in the section entitled “Results by Segment” of this MD&A for further details.

Operating Expenses

Operating expenses for the Current Year were $5.12 billion, an increase of $380 million or 8% compared to $4.74 billion in the Prior Year.

•The $442 million increase in personnel cost was mostly due to the Timing of the SVBB Acquisition, but also reflected net staff additions, as well as higher incentive compensation and benefit costs.

•The $82 million increase in equipment expense was mainly due to the Timing of the SVBB Acquisition, but also reflected continued investments in technology, including software.

•The $50 million increase in professional fees included consulting costs for continued enhancements to our large financial institution regulatory compliance capabilities.

•The $25 million increase in third-party processing fees was due in part to higher transaction volume and expanded services.

•The $26 million decrease in marketing expense was primarily due to reduced marketing campaigns for Direct Bank deposits.

•The $20 million decrease in FDIC insurance expense was largely due to a special assessment of approximately $64 million in the Prior Year compared to $11 million in the Current Year, partially offset by increases as a result of deposit growth.

•The $83 million increase in other noninterest expense was spread across multiple categories, with notable increases in state-related non-income tax, employee training, regulatory agency expense, and charitable contributions, including our support relief efforts for Helene and Milton.

Acquisition-related expenses decreased $260 million from the Prior Year. The following table presents the major components of acquisition-related expenses:

Table 12

Acquisition-related expenses

dollars in millions
	2024		2023		2022
Personnel cost	$	78			$	275		$	167
Professional fees	109			92			36
Asset impairment	9			67			9
Other acquisition-related expense	14			36			19
Total acquisition-related expense	$	210			$	470		$	231

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.

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

Income Taxes

Table 13

Income Tax Data

dollars in millions
	2024		2023		2022
Income before income taxes	$	3,592			$	12,077			$	1,362
Income tax expense	$	815			$	611			$	264
Effective income tax rate	22.7	%		5.1	%		19.4	%

The effective income tax rate (“ETR”) was 22.7% for the Current Year compared to 5.1% for the Prior Year. The higher Current Year ETR compared to the Prior Year was mostly due to the non-taxable nature of the gain on the SVBB Acquisition in the Prior Year.

The ETR is impacted by a number of factors, including the relative mix of domestic 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 20—Income Taxes for additional information.

RESULTS BY SEGMENT

BancShares’ segments include the General Bank, the Commercial Bank, SVB Commercial, and Rail. All other financial information not included in the segments is reported in the Corporate section of the segment disclosures. Certain noninterest expenses are directly incurred by a segment, while others are not. Noninterest expenses not directly incurred by a segment are included in Corporate unless allocated to a segment (“Allocated Expenses”). 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 are presented net of Allocated Expenses, resulting in a reduction to expense (or “Contra Expense”) for Corporate. Refer to Note 22—Segment Information for descriptions of segment products and services.

General Bank

Table 14

General Bank: Financial Data

dollars in millions
Earnings Summary	2024		2023		2022
Net interest income	$	2,980			$	2,580		$	1,830
Noninterest income	612			526			483
Total revenue	3,592			3,106			2,313
Personnel cost	787			725			549
All other noninterest expense	1,244			1,114			909
Total noninterest expense	2,031			1,839			1,458
Provision for credit losses	153			77			11
Income before income taxes	1,408			1,190			844
Income tax expense	362			319			214
Net income	$	1,046			$	871		$	630
Pre-provision net revenue (“PPNR”) (1)	$	1,561			$	1,267		$	855
Select Period End Balances
Loans and leases	$	66,768			$	62,832		$	43,212
Deposits	73,062			68,729			67,894

(1) PPNR is a non-GAAP measure. Refer to the “Non-GAAP Financial Measurements” section of this MD&A for a reconciliation from the most comparable GAAP measure to the non-GAAP measure.

General Bank segment net income for the Current Year increased $175 million compared to the Prior Year. PPNR increased $294 million from the Prior Year. The increases in net income and PPNR were partially due to the Timing of the SVBB Acquisition.

The $400 million increase in NII reflected loan growth discussed below and improved yields, partially offset by higher deposit costs resulting from deposit growth and higher average deposit costs. Noninterest income increased $86 million, benefiting in areas such as higher wealth management services and cardholder services. Personnel cost and all other noninterest expense increased $62 million and $130 million in the Current Year, respectively, mainly due the Timing of the SVBB Acquisition.

The $76 million increase in provision for credit losses in the Current Year was mainly due to reserve increase for loan growth and the $20 million loan loss reserve for Helene.

The $3.94 billion increase in loans and leases compared to the Prior Year was mainly due to growth in commercial and business loans in our Branch Network. Consumer mortgage loans were up modestly as we continue to originate and sell rather than hold for investment.

Deposits in the General Bank segment primarily include deposits from the Branch Network, as well as Wealth and Community Association Banking channels. The $4.33 billion increase in deposits compared to the Prior Year was primarily in money market deposits in the Branch Network.

Commercial Bank

Table 15

Commercial Bank: Financial Data

dollars in millions
Earnings Summary	2024		2023		2022
Net interest income	$	1,100			$	1,015		$	884
Rental income on operating lease equipment	227			231			212
Less: depreciation on operating lease equipment	185			180			169
Net rental income on operating lease equipment (1)	42			51			43
All other noninterest income	315			329			306
Total noninterest income (2)	542			560			518
Noninterest income, net of depreciation (1)	357			380			349
Total revenue	1,457			1,395			1,233
Personnel cost	233			194			171
All other noninterest expense	493			450			405
Total noninterest expense (2)	911			824			745
Noninterest expense, net of depreciation (1)	726			644			576
Provision for credit losses	144			517			121
Income before income taxes	587			234			536
Income tax expense	147			69			128
Net income	$	440			$	165		$	408
PPNR (1)	$	731			$	751		$	657
Select Period End Balances
Loans and leases	$	33,197			$	30,936		$	27,491
Operating lease equipment, net	750			780			723
Deposits	3,283			3,228			3,219

(1) Net rental income on operating lease equipment, noninterest income, net of depreciation, noninterest expense, net of depreciation, and PPNR are non-GAAP measures. Refer to the “Non-GAAP Financial Measurements” section of this MD&A for a reconciliation from the most comparable GAAP measure to the non-GAAP measure.

(2) Total noninterest income and total noninterest expense include depreciation on operating lease equipment.

Commercial Bank segment net income for the Current Year increased $275 million compared to the Prior Year, mainly due to the $373 million decrease in provision for credit losses. The higher provision for credit losses in the Prior Year was mainly due to loan growth and a reserve increase, partially resulting from then unfavorable trends in certain macroeconomic variables.

PPNR decreased $20 million from the Prior Year. Segment NII increased $85 million compared to the Prior Year, primarily due to higher interest income on loans reflective of growth and higher yields, partially offset by higher interest expense on deposits. The $14 million decline in other noninterest income was mostly due to lower factoring commissions and fair value changes in customer derivative positions, partially offset by higher lending-related fees, including capital market fees. The $39 million increase in personnel cost was mainly due to higher incentive compensation. The $43 million increase in all other noninterest expense included items such as higher FDIC insurance expense and impairment on software and related projects.

The $2.26 billion increase in loans and leases compared to the Prior Year reflects loan growth in a number of industry verticals, primarily TMT and healthcare.

Deposits in the Commercial Bank segment increased by $55 million from the Prior Year, as higher noninterest-bearing checking offset declines in interest-bearing deposits.

SVB Commercial

Table 16

SVB Commercial: Financial Data

dollars in millions
Earnings Summary	2024		2023
Net interest income	$	2,274			$	1,647
Noninterest income	565			430
Total revenue	2,839			2,077
Personnel cost	530			401
All other noninterest expense	1,023			883
Total noninterest expense	1,553			1,284
Provision for credit losses	134			65
Income before income taxes	1,152			728
Income tax expense	295			184
Net income	$	857			$	544
PPNR (1)	$	1,286			$	793
Select Period End Balances
Loans and leases	$	40,194			$	39,511
Deposits	36,637			34,730

(1) PPNR is a non-GAAP measure. Refer to the “Non-GAAP Financial Measurements” section of this MD&A for a reconciliation from the most comparable GAAP measure to the non-GAAP measure.

SVB Commercial segment net income for the Current Year increased $313 million compared to the Prior Year. PPNR increased $493 million from the Prior Year. The increases in net income and PPNR were mainly due to the Timing of the SVBB Acquisition.

NII increased $627 million due to higher interest income on loans due to growth and higher yields, partially offset by higher interest expense on deposits due to higher rates and balances, along with a shift to interest-bearing deposits from noninterest-bearing deposits.

The provision for credit losses increased $69 million, which included higher specific reserves in the investor dependent portfolios.

The increase of $683 million in loans was attributed to the global fund banking portfolio, partially offset by declines in investor dependent loans as payments exceeded new originations.

Deposits increased $1.91 billion from the Prior Year, mainly due to growth in money market deposits and interest-bearing checking, partially offset by declines in noninterest-bearing deposits.

Rail

Table 17

Rail: Financial Data

dollars in millions
Earnings Summary	2024		2023		2022
Net interest expense	$	(186)			$	(143)		$	(80)
Rental income on operating lease equipment	821			740			652
Less: depreciation on operating lease equipment	209			191			176
Less: maintenance and other operating lease expenses	219			222			189
Net rental income on operating lease equipment (1)	393			327			287
All other noninterest income	15			5			4
Total noninterest income (2)	836			745			656
Noninterest income, net of depreciation and maintenance (1)	408			332			291
Total revenue	222			189			211
Personnel cost	25			22			20
All other noninterest expense	50			45			42
Total noninterest expense (2)	503			480			427
Noninterest expense, net of depreciation and maintenance (1)	75			67			62
Provision for credit losses	—			—			—
Income before income taxes	147			122			149
Income tax expense	36			32			37
Net income	$	111			$	90		$	112
PPNR (1)	$	147			$	122		$	149
Select Period End Balances
Loans and leases	$	62			$	23		$	78
Operating lease equipment, net	8,573			7,966			7,433
Deposits	18			13			15

(1) Net rental income on operating lease equipment, noninterest income, net of depreciation and maintenance, noninterest expense, net of depreciation and maintenance, and PPNR are non-GAAP measures. Refer to the “Non-GAAP Financial Measurements” section of this MD&A for a reconciliation from the most comparable GAAP measure to the non-GAAP measure.

(2) Total noninterest income and total noninterest expense include depreciation and maintenance on operating lease equipment.

Rail segment net income, rental income on operating leases and net rental income on operating lease equipment are utilized to measure the profitability of our Rail segment. Net rental income on operating lease equipment is calculated as rental income on operating lease equipment reduced by depreciation, maintenance and other operating lease expenses. Railcar depreciation is recognized on a straight-line basis over the estimated useful life of the asset. Maintenance and other operating lease expenses relate to equipment ownership and leasing costs associated with the portfolio and tend to be variable due to timing and number of railcars coming on or off lease and the asset condition. Due to the nature of our portfolio, which is essentially all operating lease equipment, certain financial measures commonly used by banks, such as NII, are not as meaningful for this segment. NII is not used because it includes the impact of debt costs funding our operating lease assets but excludes the associated net rental income.

Rail segment net income for the Current Year compared to the Prior Year increased $21 million. PPNR increased $25 million from the Prior Year. The increases were mostly due to higher rental income on operating leases. Net rental income on operating leases for the Current Year compared to the Prior Year increased $66 million, largely attributable to growth of our railcar fleet, along with strong re-pricing. Noninterest income primarily reflects net gains on sale of leasing equipment. Refer to the “Non-GAAP Financial Measurements” section of this MD&A for a reconciliation from the most comparable GAAP measure to the non-GAAP measure.

Our fleet is diverse and the average re-pricing of equipment upon lease maturities was 128% of the average prior or expiring lease rate during the fourth quarter of 2024. Our fleet remains effectively fully utilized. Railcar utilization, including commitments to lease, was 97.6% at December 31, 2024 and 98.7% at December 31, 2023.

Portfolio

Rail segment customers include all of the U.S. and Canadian Class I railroads (i.e., railroads with annual revenues of approximately $500 million and greater) and other railroads, as well as manufacturers and commodity shippers. Our total operating lease fleet at December 31, 2024 consisted of approximately 126,000 railcars and locomotives.

The following tables reflect the proportion of railcars by type based on units and net investment, and rail operating lease equipment by obligor industry:

Table 18

Operating Lease Railcar Portfolio by Type (units and net investment)

	December 31, 2024				December 31, 2023
Railcar Type	Total Owned Fleet - % Total Units		Total Owned Fleet - % Total Net Investment			Total Owned Fleet - % Total Units	Total Owned Fleet - % Total Net Investment		Total Owned Fleet - % Total Units		Total Owned Fleet - % Total Net Investment
Covered hoppers	45	%		42	%		45	%		42	%	43	%	41	%
Tank cars	27			38			27			38		29		40
Mill/ coil gondolas	8			6			8			7		8		6
Coal	7			1			7			1		8		1
Boxcars	6			6			6			6		6		6
Other	7			7			7			6		6		6
Total	100	%		100	%		100	%		100	%	100	%	100	%

Table 19

Rail Operating Lease Equipment by Obligor Industry

dollars in millions	December 31, 2024			December 31, 2023
Manufacturing	$	3,467		40	%		$	3,281		41	%	$	3,016	41	%
Rail	2,003		23			1,889			24		1,981		27
Wholesale	1,505		18			1,217			15		1,101		15
Oil and gas extraction / services	583		7			573			7		552		7
Energy and utilities	239		3			230			3		242		3
Other	776		9			776			10		541		7
Total	$	8,573		100	%		$	7,966		100	%	$	7,433	100	%

Corporate

Table 20

Corporate: Financial Data

dollars in millions
Earnings Summary	2024		2023		2022
Net interest income	$	975			$	1,613		$	312
Noninterest income	60			9,814			479
Total revenue	1,035			11,427			791
Personnel cost	1,503			1,294			668
Acquisition-related expenses	210			470			231
All other noninterest expense	(976)			(856)			(454)
Total noninterest expense	737			908			445
Provision for credit losses	—			716			513
Income before income taxes	298			9,803			(167)
Income tax expense (benefit)	(25)			7			(115)
Net income	$	323			$	9,796		$	(52)
PPNR (1)	$	298			$	10,519		$	346
Select Period End Balances
Deposits	42,229			39,154			18,280

(1) PPNR is a non-GAAP measure. Refer to the “Non-GAAP Financial Measurements” section of this MD&A for a reconciliation from the most comparable GAAP measure to the non-GAAP measure.

Corporate net income for the Current Year decreased $9.47 billion compared to the Prior Year. PPNR decreased $10.22 billion from the Prior Year. The decreases were mainly due to the SVBB Acquisition impacts in the Prior Year, such as the gain on acquisition of $9.81 billion.

NII decreased $638 million, mainly due to higher deposit interest expense as a result of Direct Bank deposit growth and higher rates, higher borrowing costs for the Purchase Money Note due to the Timing of the SVBB Acquisition, and a decline in loan PAA, partially offset by the increase in interest income on investment securities resulting from continued purchases and higher yields.

Prior Year noninterest income included the previously discussed gain on acquisition and a loss on sales of investment securities of $26 million, while the Current Year benefited from positive fair value adjustments on marketable equity securities and gains on sales of investment securities.

Personnel cost increased due to inclusion of the Timing of the SVBB Acquisition, along with net staff additions and higher incentive compensation. Acquisition-related expenses are further discussed in the “Noninterest Expense” section of this MD&A. All other noninterest expense is presented net of Allocated Expenses, resulting in a Contra Expense for Corporate as further discussed above and in Note 22—Segment Information.

The Prior Year included Day 2 Provision for Credit Losses of $716 million.

The income tax rates for the Current Year were impacted by a change in our estimated state tax rates and other items discussed in the “Income Taxes” section of this MD&A, while the Prior Year was impacted by the gain on acquisition.

Corporate deposits mainly consist of Direct Bank deposits of $41.09 billion, with the remaining primarily brokered deposits. The $3.08 billion increase from the Prior Year was primarily due to higher growth in savings deposits, partially offset by lower time deposits.

2025 Segment Reporting Updates

We updated our segment reporting during the first quarter of 2025 (the “2025 Segment Reporting Updates”) as we integrated certain legacy SVBB components into the Commercial Bank segment. We also updated our segment expense allocation methodology. The 2025 Segment Reporting Updates did not result in the addition or removal of any of our existing segments at December 31, 2024 and the global fund banking and investor dependent loan portfolios, as well as a substantial portion of the innovation commercial and industrial (“innovation C&I”) and cash flow dependent loan portfolios, remain in the SVB Commercial segment. The 2025 Segment Reporting Updates are not reflected in the segment reporting tables above because the updates occurred after December 31, 2024. The changes will be reflected in our Form 10-Q for the quarter ending March 31, 2025, including any prior periods included therein.

BALANCE SHEET ANALYSIS

Interest-earning Assets

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

Interest-earning Deposits at Banks

Interest-earning deposits at banks are primarily comprised of interest-bearing deposits with the FRB. Interest-earning deposits at banks as of December 31, 2024 totaled $21.36 billion, a decrease of $12.25 billion or 36% from $33.61 billion at December 31, 2023. The decrease from December 31, 2023 is related to continued liquidity and funding management as we grew customer deposits and purchased investment securities.

Securities Purchased Under Agreements to Resell

Securities purchased under agreements to resell at December 31, 2024 totaled $158 million, a decrease of $315 million from $473 million at December 31, 2023.

Investment Securities

The primary objective of the investment portfolio is to generate incremental income by deploying excess funds into securities that have minimal liquidity risk and low to moderate interest rate risk and credit risk. Other objectives include acting as a stable source of liquidity, serving as a tool for asset and liability management and maintaining an interest rate risk profile compatible with our objectives. Additionally, purchases of equities and corporate bonds in other financial institutions have been made under a long-term earnings optimization strategy. Changes in the total balance of our investment securities portfolio result from trends in balance sheet funding and market performance. Generally, when inflows arising from deposit and treasury services products exceed loan and lease demand, we invest excess funds into the securities portfolio or into interest-earning deposits at banks. Conversely, when loan demand exceeds growth in deposits and short-term borrowings, we allow interest-earning deposits at banks to decline and use proceeds from maturing securities and prepayments to fund loan growth. Refer to Note 3—Investment Securities and the “Funding, Liquidity and Capital Overview” in the “Executive Overview” section of this MD&A for additional disclosures regarding investment securities.

The carrying value of investment securities at December 31, 2024 totaled $44.09 billion, an increase of $14.09 billion or 47% from $30.00 billion at December 31, 2023. The increase from December 31, 2023 reflected purchases that totaled $23.29 billion, which were primarily U.S agency residential mortgage-backed and short-duration U.S. Treasury investment securities, partially offset by maturities, sales, and payments of $9.52 billion. The change also included non-cash items, such as amortization, accretion, and fair value changes for investment securities available for sale and marketable equity securities.

Our portfolio of investment securities available for sale consists of mortgage-backed securities issued by government agencies and government sponsored entities, U.S. Treasury securities, corporate bonds, and municipal bonds. Investment securities available for sale are reported at fair value and unrealized gains and losses are included as a component of AOCI, net of deferred taxes. As of December 31, 2024, investment securities available for sale had a net pretax unrealized loss of $762 million, compared to a net pretax unrealized loss of $752 million as of December 31, 2023, primarily reflecting changes in interest rates and maturities. The fair value of investment securities is impacted by interest rates, credit spreads, market volatility and liquidity conditions. The fair value of the investment securities portfolio generally increases when interest rates decrease or when credit spreads tighten. 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, no allowance for credit loss was required as of December 31, 2024. 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. We determined no allowance for credit loss was required as of December 31, 2024.

Our portfolio of investment securities held to maturity consists of similar mortgage-backed securities, U.S. Treasury securities and government agency securities described above, as well as securities issued by the Supranational Entities & Multilateral Development Banks and FDIC guaranteed certificates of deposit with other financial institutions. Given the consistently strong credit rating of the U.S. Treasury and the Supranational Entities & Multilateral Development Banks, and the long history of no credit losses on debt securities issued by government agencies and government sponsored entities, we determined that no allowance for credit loss was required for investment securities held to maturity at December 31, 2024.

The following table presents the investment securities portfolio, segregated by major category:

Table 21

Investment Securities

dollars in millions	December 31, 2024				December 31, 2023	December 31, 2022
	Composition(1)		Amortized Cost		Fair Value				Composition(1)	Amortized Cost		Fair Value		Composition(1)	Amortized Cost		Fair Value
Investment securities available for sale:
U.S. Treasury	32.7	%		$	13,897		$	13,903					36.8	%	$	10,554		$	10,508		10.6	%		$	2,035	$	1,898
Government agency	0.2			79		77					0.4			120		117		0.9		164			162
Residential mortgage-backed securities	36.7			16,161		15,620					23.4			7,154		6,686		26.8		5,424			4,795
Commercial mortgage-backed securities	8.6			3,869		3,666					7.5			2,319		2,131		9.0		1,774			1,604
Corporate bonds	1.1			489		467					1.7			529		482		3.0		570			536
Municipal bonds	—			17		17					—			12		12		—		—			—
Total investment securities available for sale	79.3	%		$	34,512		$	33,750					69.8	%	$	20,688		$	19,936		50.3	%		$	9,967	$	8,995
Investment in marketable equity securities	0.2	%		$	79		$	101					0.3	%	$	75		$	84		0.5	%		$	75	$	95
Investment securities held to maturity:
U.S. Treasury	1.1	%		$	483		$	452					1.5	%	$	479		$	439		2.4	%		$	474	$	424
Government agency	3.2			1,489		1,374					4.9			1,506		1,363		7.6		1,548			1,362
Residential mortgage-backed securities	9.1			4,558		3,878					12.5			4,205		3,561		21.7		4,605			3,882
Commercial mortgage-backed securities	6.5			3,407		2,729					10.1			3,489		2,875		16.1		3,355			2,871
Supranational securities	0.6			300		267					0.9			298		263		1.4		295			254
Other	—			2		2					—			2		2		—		2			2
Total investment securities held to maturity	20.5	%		$	10,239		$	8,702					29.9	%	$	9,979		$	8,503		49.2	%		$	10,279	$	8,795
Total investment securities	100.0	%		$	44,830		$	42,553					100.0	%	$	30,742		$	28,523		100.0	%		$	20,321	$	17,885
(1) Calculated as a percentage of the total fair value of investment securities.

The following table presents the weighted average yields for investment securities available for sale and held to maturity at December 31, 2024, segregated by major category with ranges of contractual maturities. The weighted average yield on the portfolio was calculated using security-level annualized yields based on book yield to maturity and takes into account amortization of premiums and accretion of discounts, but does not include the effects of hedging. The total weighted average yields for investment securities available for sale and held to maturity are based on the underlying weighted average amortized cost.

Table 22

Weighted Average Yield on Investment Securities

	December 31, 2024
	Within One Year		One to Five Years		Five to 10 Years	After 10 Years		Total
Investment securities available for sale:
U.S. Treasury	4.13	%		4.35	%	—	%		—	%	4.27	%
Government agency	—			4.58		4.67			—		4.63
Residential mortgage-backed securities (1)	—			4.08		4.71			3.95		4.10
Commercial mortgage-backed securities (1)	4.54			4.69		6.19			3.07		4.15
Corporate bonds	6.40			7.67		5.39			6.13		6.00
Municipal bonds	—			—		—			7.20		7.20
Total investment securities available for sale	4.16	%		4.45	%	4.82	%		3.86	%	4.21	%
Investment securities held to maturity:
U.S. Treasury	1.19	%		1.42	%	1.57	%		—	%	1.38	%
Government agency	1.24			1.51		1.88			—		1.54
Residential mortgage-backed securities (1)	—			—		2.62			2.43		2.43
Commercial mortgage-backed securities (1)	—			2.45		1.82			2.56		2.56
Supranational securities	1.23			1.50		1.68			—		1.56
Other	3.86			—		—			—		3.86
Total investment securities held to maturity	1.24	%		1.49	%	1.79	%		2.49	%	2.27	%

(1) Residential mortgage-backed and commercial mortgage-backed securities, which are not due at a single maturity date, have been included in maturity groupings based on the contractual maturity at December 31, 2024. The expected life will differ from contractual maturities because borrowers have the right to prepay the underlying loans.

Assets Held for Sale

Certain residential mortgage loans and commercial loans are originated with the intent to be sold to investors or lenders, respectively, and are recorded in assets held for sale at fair value. In addition, BancShares may change its strategy for certain loans initially held for investment and decide to sell them in the secondary market. At that time, portfolio loans are transferred to loans held for sale at the lower of cost or fair value (“LOCOM”). When we decide to sell operating lease equipment, it is transferred to assets held for sale at LOCOM.

Assets held for sale at December 31, 2024 were $85 million, an increase of $9 million or 12% from $76 million at December 31, 2023.

Table 23

Assets Held for Sale

dollars in millions	December 31, 2024		December 31, 2023		December 31, 2022
Loans and leases:
Commercial	$	27		$	26	$	48
Consumer	55		38		4
SVB	—		9		—
Loans and leases	82		73		52
Operating lease equipment	3		3		8
Total assets held for sale	$	85		$	76	$	60

Loans and Leases

Loans and leases held for investment at December 31, 2024 were $140.22 billion, an increase of $6.92 billion or 5% from $133.30 billion at December 31, 2023. The increase from December 31, 2023 reflects growth in commercial, consumer, and SVB loans. The increase of $5.57 billion in commercial loans was spread across various industry verticals such as TMT and healthcare, due to strong loan originations. Growth in our real estate portfolio was mainly in multi-family, partially offset by a decline in general office. The consumer loan growth of $669 million was mostly in residential mortgages, reflecting increased origination activity, partially offset by loan sales which were higher in the Current Year. Within SVB loan classes, the $683 million growth was attributed to the global fund banking portfolio, partially offset by declines in investor dependent loans as loan payments exceeded new originations.

Refer to the Note 4—Loans and Leases for further information.

The following table presents loans and leases by loan segment and loan class, and the respective proportion to total loans:

Table 24

Loans and Leases

dollars in millions	December 31, 2024				December 31, 2023
	Balance		% to Total Loans				Balance		% to Total Loans		Balance		% to Total Loans
Commercial:
Commercial construction	$	5,109			4	%				$	3,918			3	%		$	2,804	4	%
Owner occupied commercial mortgage	16,842			12					15,471			12			14,473			20
Non-owner occupied commercial mortgage	16,194			12					14,995			11			9,902			14
Commercial and industrial	31,640			22					29,794			22			24,105			34
Leases	2,014			1					2,054			2			2,171			3
Total commercial	$	71,799			51	%				$	66,232			50	%		$	53,455	75	%
Consumer:
Residential mortgage	$	23,152			16	%				$	22,776			17	%		$	13,309	19	%
Revolving mortgage	2,567			2					2,165			2			1,951			3
Consumer auto	1,523			1					1,442			1			1,414			2
Consumer other	986			1					1,176			1			652			1
Total consumer	$	28,228			20	%				$	27,559			21	%		$	17,326	25	%
SVB:
Global fund banking	$	27,904			20	%				$	25,553			19	%		$	—	—	%
Investor dependent - early stage	997			1					1,403			1			—			—
Investor dependent - growth stage	2,196			2					2,897			2			—			—
Innovation C&I and cash flow dependent	9,097			6					9,658			7			—			—
Total SVB	$	40,194			29	%				$	39,511			29	%		$	—	—	%
Total loans and leases	$	140,221			100	%				$	133,302			100	%		$	70,781	100	%
Allowance for loan and lease losses	(1,676)							(1,747)					(922)
Net loans and leases	$	138,545							$	131,555					$	69,859

The unamortized discount related to acquired loans was $1.60 billion at December 31, 2024, a decrease of $438 million from $2.04 billion at December 31, 2023. The decrease from December 31, 2023 reflects accretion of $505 million, including $81 million for unfunded commitments.

Operating Lease Equipment, Net

As detailed in the following table, our operating lease portfolio mostly relates to the Rail segment, with the remainder included in the Commercial Bank segment. Refer to the “Results by Segment” section of this MD&A for further details on the operating lease equipment portfolio in Rail.

Table 25

Operating Lease Equipment

dollars in millions	December 31, 2024			December 31, 2022
Railcars and locomotives	$	8,573		$	7,966		$	7,433
Other equipment	750		780			723
Total (1)	$	9,323		$	8,746		$	8,156

(1) Includes off-lease rail equipment of $219 million at December 31, 2024, $253 million at December 31, 2023 and $457 million at December 31, 2022.

Interest-bearing Liabilities

Interest-bearing liabilities include interest-bearing deposits, securities sold under agreements to repurchase, and borrowings. Interest-bearing liabilities at December 31, 2024 totaled $153.65 billion, an increase of $9.94 billion or 7% from $143.71 billion at December 31, 2023, mainly due to deposit growth as further discussed below.

Deposits

Total deposits at December 31, 2024 were $155.23 billion, an increase of $9.38 billion or 6% from $145.85 billion at December 31, 2023. The increase from December 31, 2023 was mainly attributable to:

•growth in money market and time deposit accounts in the Branch Network,

•higher savings deposits, partially offset by lower time deposits in the Direct Bank, and

•growth in money market deposits in the SVB Commercial segment.

The following table summarizes the types of deposits:

Table 26

Deposits

dollars in millions	December 31, 2024			December 31, 2022
Noninterest-bearing demand	$	38,633		$	39,799			$	24,922
Checking with interest	25,343		23,754			16,202
Money market	35,722		30,625			21,047
Savings	42,278		35,244			16,827
Time	13,253		16,432			10,410
Interest-bearing deposits	116,596		106,055			64,486
Total deposits	$	155,229		$	145,854			$	89,408
Noninterest-bearing deposits to total deposits	24.9	%	27.3	%		27.9	%

We strive to maintain a strong liquidity position, and therefore, deposit retention remains a key business objective. We believe traditional bank deposit products remain an attractive option for many customers. As economic conditions change, we recognize that our liquidity position could be adversely affected if bank deposits are withdrawn. Our ability to fund future loan growth is significantly dependent on our success in retaining existing deposits and generating new deposits at a reasonable cost.

Deposit Concentrations

BancShares operates a network of branches and offices, predominantly located in the Southeast, Mid-Atlantic, Midwest and Western United States, providing a broad range of financial services to individuals, businesses and professionals. Based on branch location, our top state deposit concentrations as of December 31, 2024 were in North Carolina, California, and South Carolina, which represented approximately 26.1%, 8.5%, and 7.8%, respectively, of total deposits.

The Direct Bank had $41.09 billion or 26.5% of our total deposits as of December 31, 2024. The Direct Bank deposits mainly consist of savings deposit accounts.

SVB Commercial segment deposits as of December 31, 2024 were $36.64 billion or 23.6% of total deposits and are primarily concentrated in online banking. Deposits in the SVB Commercial segment include large dollar accounts with private equity and venture capital clients, primarily in the technology, life science and healthcare industries. Deposit accounts in the SVB Commercial segment with balances in excess of $50 million totaled approximately $5.01 billion as of December 31, 2024.

Brokered deposits, included in time deposits in the preceding table, are a source of deposit funding but remain an immaterial amount of total deposits at less than 1% as of December 31, 2024 and 2023.

Uninsured Deposits

The amount of uninsured deposits is estimated consistent with the methodologies and assumptions utilized in providing information to the FDIC and Federal Reserve. We estimate total uninsured deposits were $59.51 billion, which represented approximately 38.3% of total deposits at December 31, 2024, compared to $54.15 billion or 37.1% of total deposits at December 31, 2023.

Refer to the “Funding, Liquidity and Capital Overview” and “Results by Segment” sections of this MD&A for further discussion of deposit composition, uninsured deposits, and recent deposit trends.

The following table provides the expected maturity of time deposits with balances in excess of $250,000 as of December 31, 2024:

Table 27

Maturities of Time Deposits In Excess of $250,000

dollars in millions	December 31, 2024
Time deposits maturing in:
Three months or less	$	831
Over three months through six months	603
Over six months through 12 months	214
More than 12 months	41
Total	$	1,689

Borrowings

Total borrowings at December 31, 2024 were $37.05 billion, a decrease of $603 million from $37.65 billion at December 31, 2023. The decrease from December 31, 2023 related to the redemptions of our senior unsecured borrowings, Capital Trust debentures, and subordinated debt, along with declines in securities sold under agreements to repurchase and the Purchase Money Note. We redeemed the 2.969% fixed-to-floating rate senior unsecured notes due in September 2025 in September 2024 prior to incurring a higher cost upon conversion to a floating rate. We redeemed the 4.125% fixed-to-fixed rate subordinated notes due in November 2029 in November 2024 prior to incurring a higher cost upon rate reset. Additionally, the carrying amount of the Purchase Money Note decreased $30 million during the Current Year due to a net settlement with the FDIC of $80 million, partially offset by PAA of $50 million.

The following table presents borrowings, net of the respective unamortized purchase accounting adjustments and issuance costs:

Table 28

Borrowings

dollars in millions	December 31, 2024			December 31, 2022
Securities sold under agreements to repurchase	$	367		$	485		$	436
Federal Home Loan Bank borrowings
Floating rate notes due through September 2025	—		—			4,250
Federal Deposit Insurance Corporation
3.500% fixed rate note due March 2028(1)	35,816		35,846			—
Senior Unsecured Borrowings
3.929% fixed-to-floating rate notes due June 2024	—		—			505
2.969% fixed-to-floating rate notes due September 2025(2)	—		318			320
6.000% fixed rate notes due April 2036	58		59			59
Subordinated debt
6.125% fixed rate notes due March 2028	445		460			469
4.125% fixed-to-fixed rate notes due November 2029(3)	—		101			102
3.375% fixed-to-floating rate notes due March 2030	350		349			348
Macon Capital Trust I - floating rate debentures due March 2034	—		—			14
SCB Capital Trust I - floating rate debentures due April 2034(4)	—		10			10
FCB/SC Capital Trust II - floating rate debentures due June 2034(4)	—		18			18
FCB/NC Capital Trust III - floating rate debentures due June 2036	—		—			88
Other borrowings	15		8			26
Total borrowings	$	37,051		$	37,654		$	6,645

(1) Issued in connection with the SVBB Acquisition and secured by collateral. Refer to Note 2—Business Combinations and Note 4—Loans and Leases. The unamortized discount related to this borrowing was $176 million and $226 million at December 31, 2024 and 2023, respectively.

(2) Included a callable feature one year prior to maturity and the debt was redeemed in September 2024.

(3) Included an optional redemption feature five years prior to maturity which was exercised in November 2024.

(4) The borrowings were called during the first quarter of 2024, resulting in a $2 million loss on extinguishment of debt for the year ended December 31, 2024.

We continually monitor our capital needs and market conditions in an effort to diversify our borrowing base when appropriate. Additionally, we continue to monitor the status of the NPR issued by the federal banking agencies discussing, among other items, the proposed requirement to maintain a certain level of long-term debt that would be available to absorb losses in the event of failure as further discussed in the “Regulatory Considerations” section in Item 1. Business.

Refer to the “Liquidity Risk” section of this MD&A and Note 12—Borrowings for further information regarding liquidity and borrowings.

RISK MANAGEMENT

Risk is inherent in any business. BancShares has defined a moderate risk appetite and a balanced approach to risk taking with a philosophy that does not preclude higher risk business activities commensurate with acceptable returns while meeting regulatory objectives. Through the comprehensive Risk Management Framework and Risk Appetite Framework and Statement, senior management has primary responsibility for day-to-day management of the risks we face with accountability of and support from all associates. Senior management applies various strategies to reduce the risks to which BancShares may be exposed, with effective challenge and oversight by management committees. Our Board strives to ensure that risk management is a part of our business culture and that our policies and procedures for identifying, assessing, monitoring, and managing risk are part of the decision-making process. The Board’s role in risk oversight is an integral part of our overall Risk Management Framework and Risk Appetite Framework. The Board administers its risk oversight function primarily through its Risk Committee.

The Risk Committee structure is designed to allow for information flow, effective challenge and timely escalation of risk-related issues. The Risk Committee is directed to monitor and advise the full Board regarding risk exposures, including credit, market, capital, liquidity, operational, compliance, asset, strategic, and reputational risks; review, approve and monitor adherence to the Risk Appetite Statement and supporting risk tolerance levels via a series of established metrics; and evaluate, monitor and oversee the adequacy and effectiveness of the Risk Management Framework and Risk Appetite Framework and Statement. The Risk Committee also reviews reports of examination by and communications from regulatory agencies, the results of internal and third-party testing and qualitative and quantitative assessments related to risk management, and any other matters within the scope of the Risk Committee’s oversight responsibilities. The Risk Committee monitors management’s response to certain risk-related regulatory and audit issues. In addition, the Risk Committee may coordinate with the Audit Committee and the Compensation, Nominations and Governance Committee for the review of financial statements and related risks, compensation risk management and other areas of joint responsibility.

In combination with other risk management and monitoring practices, enterprise-wide stress testing activities are conducted within a defined framework. Stress tests are performed for various risks to ensure the financial institution can support continued operations during stressed periods.

BancShares monitors and stress tests its capital and liquidity consistent with the safety and soundness expectations of the federal regulators. Refer to the “Regulatory Considerations” section of Item 1. Business included in this Annual Report on Form 10-K for further discussion.

BancShares has been assessing the emerging impacts of the international tensions that could impact the economy and exacerbate headwinds of elevated market volatility, global supply chain disruptions, and recessionary pressures as well as operational risks such as those associated with potential cyberattacks for FCB and third parties upon whom it relies. Assessments have not identified material impacts to date, but those assessments will remain ongoing as the conditions continue to exist. BancShares is also assessing the potential risk of an economic slowdown or recession that could create increased credit and market risk having downstream impacts on earnings, capital, and/or liquidity. While economic data continues to be mixed, baseline economic forecasts reflect a decline in CRE property values due to current interest rate levels that impacted the ALLL forecasts. Key indicators will continue to be monitored and impacts assessed as part of our ongoing risk management framework.

Credit Risk

Credit risk is the risk of not collecting payments pursuant to the contractual terms of loans, leases and certain investment securities. Loans and leases we originate are underwritten in accordance with our credit policies and procedures and are subject to periodic ongoing reviews. Acquired loans, regardless of whether PCD or Non-PCD, are recorded at fair value as of the acquisition date and are subject to periodic reviews to identify any further credit deterioration. Our independent credit review function conducts risk reviews and analyses of both originated and acquired loans to ensure compliance with credit policies and to monitor asset quality trends and borrower financial strength. These reviews include portfolio analysis by geographic location, industry, collateral type, and product. We strive to identify potential problem loans as early as possible, to record charge-offs as appropriate and to maintain an appropriate ALLL that accounts for expected losses over the life of the loan and lease portfolios.

Commercial Lending and Leasing

BancShares employs a credit ratings system where each commercial loan is assigned a probability of obligor default (“PD”), loss given default (“LGD”), and/or overall credit rating using scorecards developed to rate each type of transaction incorporating assessments of both quantitative and qualitative factors. When commercial loans and leases are graded during underwriting, or when updated periodically thereafter, a model is run to generate a preliminary risk rating. These models incorporate both internal and external historical default and loss data, as well as other borrower and loan characteristics, to assign a risk rating. The preliminary risk rating assigned by the model can be adjusted as a result of borrower specific facts and circumstances that, in management’s judgment, warrant a modification of the modeled risk rating to arrive at the final approved risk ratings.

Consumer Lending

Consumer lending begins with an evaluation of a consumer borrower’s credit profile against published standards. Credit decisions are made after analyzing quantitative and qualitative factors to assess the borrower’s ability to repay the loan, and secondary sources of repayment, such as collateral value.

Consumer products use traditional and measurable standards to document and assess the creditworthiness of a loan applicant. Credit standards follow industry standard documentation requirements. Performance is largely evaluated based on an acceptable pay history along with a quarterly assessment which incorporates current market conditions. Loans may also be monitored during quarterly reviews of the borrower’s refreshed credit score. When warranted, an additional review of the loan-to-value of the underlying collateral may be conducted.

Allowance for Loan and Lease Losses

We updated our loan classes during the first quarter of 2024 as further discussed in Note 1—Significant Accounting Policies and Basis of Presentation. Loan and lease and ALLL disclosures for 2023 and 2022 periods included in this Form 10-K were recast to reflect the changes in loan classes.

Our ALLL estimate as of December 31, 2024 included extensive reviews of the changes in credit risk associated with the uncertainties around macroeconomic forecasts. These loss estimates consider industry risk and the actual net losses incurred during prior periods of economic stress as well as recent credit trends.

The ALLL at December 31, 2024 was $1.68 billion, representing a decrease of $71 million from $1.75 billion at December 31, 2023. The ALLL as a percentage of total loans and leases at December 31, 2024 was 1.20%, compared to 1.31% at December 31, 2023. The decrease in the ALLL at December 31, 2024 compared to December 31, 2023 was mainly due to changes in loan mix, improvements in the macroeconomic forecast, and decreases in specific reserves for individually evaluated loans. The mix shift was mostly within SVB loans and reflected increases in the global fund banking portfolio, which has a lower loss rate relative to the rest of our portfolios, and decreases in the investor dependent portfolios, which have higher loss rates. These decreases were partially offset by increases related to loan growth and a $20 million loan loss reserve for Helene. Refer to the “Recent Events” section of the Executive Overview in this MD&A.

Our ALLL methodology is discussed further in the section entitled “Critical Accounting Estimates” of this MD&A and Note 1—Significant Accounting Policies and Basis of Presentation.

Table 29

ALLL for Loans and Leases

dollars in millions	Year Ended December 31, 2024
	Commercial		Consumer		SVB		Total
Balance at beginning of period	$	1,126			$	166			$	455		$	1,747
Total provision for loan and lease losses	298			8			163			469
Charge-offs	(407)			(30)			(220)			(657)
Recoveries	46			14			57			117
Balance at end of period	$	1,063			$	158			$	455		$	1,676
Net charge-off ratio							0.39	%
Net charge-offs	$	361			$	16			$	163		$	540
Average loans							$	137,456
Percent of loans in each category to total loans	51	%		20	%		29	%		100	%
	Year Ended December 31, 2023
	Commercial		Consumer		SVB		Total
Balance at beginning of period	$	789			$	133			$	—		$	922
Initial PCD ALLL	14			3			203			220
Day 2 Provision for Loan and Lease Losses	39			43			380			462
Provision for loan and lease losses	651			2			50			703
Total provision for loan and lease losses	690			45			430			1,165
Charge-offs	(414)			(28)			(196)			(638)
Recoveries	47			13			18			78
Balance at end of period	$	1,126			$	166			$	455		$	1,747
Net charge-off ratio							0.47	%
Net charge-offs	$	367			$	15			$	178		$	560
Average loans							$	119,176
Percent of loans in each category to total loans	50	%		21	%		29	%		100	%
	Year Ended December 31, 2022
	Commercial		Consumer		SVB		Total
Balance at beginning of period	$	80			$	98			$	—		$	178
Initial PCD ALLL	258			14			—			272
Day 2 Provision for Loan and Lease Losses	432			22			—			454
Provision (benefit) for loan and lease losses	101			(4)			—			97
Total provision for loan and lease losses	533			18			—			551
Charge-offs	(126)			(20)			—			(146)
Recoveries	44			23			—			67
Balance at end of period	$	789			$	133			$	—		$	922
Net charge-off ratio							0.12	%
Net charge-offs (recoveries)	$	82			$	(3)			$	—		$	79
Average loans							$	67,730
Percent of loans in each category to total loans	76	%		24	%		—	%		100	%

Net charge-offs during the Current Year were $540 million, a decrease of $20 million from $560 million during the Prior Year. Lower net charge-offs in SVB Commercial were primarily related to decreases in investor dependent - growth stage and innovation C&I and cash flow dependent portfolios partially offset by increases in investor dependent - early stage portfolio. The lower net charge-offs within the commercial loans were primarily related to decreases in commercial and industrial portfolio partially offset by increases in owner occupied and non-owner occupied commercial mortgage portfolios.

The following table provides trends in the ALLL ratios:

Table 30

ALLL Ratios

dollars in millions	December 31, 2024			December 31, 2022
ALLL	$	1,676		$	1,747			$	922
Total loans and leases	$	140,221		$	133,302			$	70,781
ALLL to total loans and leases	1.20	%	1.31	%		1.30	%
Commercial loans and leases:
ALLL - commercial	$	1,063		$	1,126			$	789
Commercial loans and leases	$	71,799		$	66,232			$	53,455
Commercial ALLL to commercial loans and leases	1.48	%	1.70	%		1.48	%
Consumer loans:
ALLL - consumer	$	158		$	166			$	133
Consumer loans	$	28,228		$	27,559			$	17,326
Consumer ALLL to consumer loans	0.56	%	0.60	%		0.77	%
SVB loans:
ALLL - SVB	$	455		$	455			$	—
SVB loans	$	40,194		$	39,511			$	—
SVB ALLL to SVB loans	1.13	%	1.15	%		—	%

A reserve for off-balance sheet credit exposure is established for unfunded commitments and is included in other liabilities, presented in Note 14—Other Liabilities. BancShares estimates the expected funding amounts and applies its PD and LGD models to those expected funding amounts to estimate the reserve.

The reserve for off-balance sheet credit exposure was $278 million at December 31, 2024, a decrease of $38 million compared to $316 million at December 31, 2023. The decrease from December 31, 2023 primarily reflects declines in the volumes of SVB Commercial segment unfunded commitments. Refer to Note 23—Commitments and Contingencies for information relating to off-balance sheet commitments.

The following table presents the ALLL by loan class:

Table 31

ALLL by Loan Class

dollars in millions	December 31, 2024				December 31, 2023
	ALLL		ALLL as a Percentage of Loans				ALLL	ALLL as a Percentage of Loans		ALLL		ALLL as a Percentage of Loans
Commercial
Commercial construction	$	53			1.03	%			$	44			1.12	%	$	40	1.43	%
Owner occupied commercial mortgage	51			0.30				47			0.31			61		0.42
Non-owner occupied commercial mortgage	340			2.10				335			2.24			181		1.83
Commercial and industrial	583			1.84				656			2.20			476		1.98
Leases	36			1.80				44			2.12			31		1.41
Total commercial	1,063			1.48				1,126			1.70			789		1.48
Consumer
Residential mortgage	85			0.37				94			0.41			74		0.55
Revolving mortgage	21			0.83				16			0.75			13		0.67
Consumer auto	5			0.35				5			0.34			5		0.37
Consumer other	47			4.75				51			4.31			41		6.32
Total consumer	158			0.56				166			0.60			133		0.77
SVB
Global fund banking	75			0.27				69			0.27			—		—
Investor dependent - early stage	87			8.71				96			6.84			—		—
Investor dependent - growth stage	108			4.91				127			4.40			—		—
Innovation C&I and cash flow dependent	185			2.03				163			1.69			—		—
Total SVB	455			1.13				455			1.15			—		—
Total ALLL	$	1,676			1.20	%			$	1,747			1.31	%	$	922	1.30	%

Credit Metrics

Nonperforming Assets

Nonperforming assets include nonaccrual loans and leases, other real estate owned (“OREO”) and repossessed assets. Accounting for nonperforming assets is discussed in Note 1—Significant Accounting Policies and Basis of Presentation.

The following table presents total nonperforming assets:

Table 32

Non-Performing Assets

dollars in millions	December 31, 2024			December 31, 2022
Nonaccrual loans:
Commercial loans	$	812		$	698			$	529
Consumer loans	181		154			98
SVB loans	191		117			—
Total nonaccrual loans	1,184		969			627
Other real estate owned and repossessed assets	64		62			47
Total nonperforming assets	$	1,248		$	1,031			$	674
ALLL to total loans and leases	1.20	%	1.31	%		1.30	%
Ratio of total nonperforming assets to total loans, leases, other real estate owned and repossessed assets	0.89		0.77			0.95
Ratio of nonaccrual loans and leases to total loans and leases	0.84		0.73			0.89
Ratio of ALLL to nonaccrual loans and leases	141.58		180.15			146.88

Nonaccrual loans and leases at December 31, 2024 were $1.18 billion, an increase of $215 million from $969 million at December 31, 2023. The increase from December 31, 2023 was primarily due to non-owner occupied commercial mortgages, commercial and industrial loans, and innovation C&I and cash flow dependent loans. Refer to the “CRE Portfolio” discussion below for further information and Note 4—Loans and Leases for tabular presentation of nonaccrual loans by loan class.

OREO and repossessed assets at December 31, 2024 and December 31, 2023 were $64 million and $62 million, respectively. Nonperforming assets as a percentage of total loans, leases, OREO and repossessed assets at December 31, 2024 and December 31, 2023 were 0.89% and 0.77%, respectively.

Past Due Accounts

Accruing loans 30 days or more past due were 0.54% and 0.71% of total loans at December 31, 2024 and December 31, 2023, respectively. Delinquency status by loan class is presented in Note 4—Loans and Leases.

CRE Portfolio

Our CRE portfolio is diversified across various property types. The following table provides an overview of the property type exposures within our CRE portfolio:

Table 33

Commercial Real Estate Portfolio (1)

dollars in millions	December 31, 2024				December 31, 2023
	Balance		% to Total Loans and Leases				Balance	% to Total Loans and Leases
Multi-Family	$	5,713			4.07	%			$	4,356		3.27	%
Medical Office	3,707			2.65				3,494			2.62
Industrial/Warehouse	3,604			2.57				2,888			2.07
General Office	2,476			1.77				2,927			2.20
Retail	1,995			1.42				1,828			1.37
Hotel/Motel	876			0.62				792			0.59
Other	4,546			3.24				4,967			3.73
Total	$	22,917			16.34	%			$	21,252		15.94	%

(1) The definition of CRE in this table is aligned with the Federal Reserve and FDIC guidance on CRE and includes the following: construction loans, loans where the primary repayment is from third party rental income, and loans not secured by real estate but for the purpose of real estate. This table excludes the owner occupied commercial mortgage loan class.

Evolving macroeconomic and social conditions (including the shift to more hybrid work arrangements) may result in changes for general office demand moving forward. Select metrics specific to our general office loan portfolio are as follows:

Table 34

Select General Office Loan Metrics

dollars in millions	December 31, 2024
% of total loans and leases	1.77	%	2.20	%
% of CRE loans	10.81	%	13.77	%
Average loan balance	$	2		$	2
Net charge-offs (YTD annualized %)	3.95	%	3.56	%
Delinquencies as a % of general office loans	10.92	%	13.56	%
Non-performing loans as a % of general office loans	12.10	%	11.38	%
ALLL ratio	4.59	%	4.77	%

Concentration Risk

We strive to minimize the risks associated with large concentrations within specific geographic areas, collateral types or industries. Despite our focus on diversification, several characteristics of our loan portfolio subject us to risk, such as our concentrations of real estate secured loans, revolving mortgage loans and healthcare-related loans. Additionally, SVB portfolio loans are concentrated in loans with large balances and loans in certain industries and customer groups, including private equity and venture capital.

Loan concentration data regarding our commercial, consumer, and SVB loan portfolios is summarized below.

Commercial Loan Concentrations

Geographic Concentrations

The following table summarizes state concentrations of 5.0% or greater of our loans. Data is based on obligor location.

Table 35

Commercial Loans and Leases - Geography

dollars in millions	December 31, 2024			December 31, 2023
State
California	$	15,119		21.1	%		$	13,824		20.9	%	$	9,226	17.3	%
North Carolina	10,709		14.9			9,831			14.8		8,699		16.3
Texas	4,487		6.3			4,453			6.7		3,624		6.8
Florida	4,314		6.0			3,831			5.8		3,273		6.1
South Carolina	3,733		5.2			3,287			5.0		3,142		5.9
All other states	31,695		44.1			29,281			44.2		24,243		45.4
Total U.S.	$	70,057		97.6	%		$	64,507		97.4	%	$	52,207	97.8	%
Total International	1,742		2.4			1,725			2.6		1,248		2.2
Total	$	71,799		100.0	%		$	66,232		100.0	%	$	53,455	100.0	%

Industry Concentrations

The following table represents loans by industry of obligor:

Table 36

Commercial Loans and Leases - Industry

dollars in millions	December 31, 2024			December 31, 2023
Real Estate	$	17,898		24.9	%		$	16,610		25.1	%	$	11,684	21.9	%
Healthcare	10,247		14.3			9,259			14.0		8,146		15.2
Business Services	8,173		11.4			7,055			10.7		5,518		10.3
Manufacturing	5,966		8.3			5,845			8.8		4,387		8.2
Transportation, Communication, Gas, Utilities	5,928		8.3			5,814			8.8		5,002		9.4
Service Industries	4,124		5.7			3,498			5.3		4,213		7.9
Retail	3,740		5.2			3,560			5.4		3,462		6.5
Wholesale	3,252		4.5			3,553			5.3		2,605		4.9
Finance and Insurance	3,051		4.3			3,454			5.2		2,604		4.9
Other	9,420		13.1			7,584			11.4		5,834		10.8
Total	$	71,799		100.0	%		$	66,232		100.0	%	$	53,455	100.0	%

We have historically carried a concentration of real estate secured loans, but actively mitigate exposure through underwriting policies, which primarily rely on borrower cash flow rather than underlying collateral values. When we do rely on underlying real property values, we favor financing secured by owner-occupied real property. At December 31, 2024, commercial loans secured by real estate were $38.15 billion, or 53% of commercial loans and leases, compared to $34.38 billion, or 52% at December 31, 2023.

Loans and leases to borrowers in medical, dental or other healthcare fields were $10.25 billion as of December 31, 2024, which represents 14.3% of commercial loans and leases, compared to $9.26 billion or 14.0% of commercial loans and leases at December 31, 2023. We actively mitigate credit risk exposure of this industry concentration through our underwriting policies that emphasize reliance on adequate borrower cash flow, rather than underlying collateral value and our preference for financing secured by owner-occupied real property.

Consumer Loan Concentrations

Loan concentrations may exist when multiple borrowers could be similarly impacted by economic or other conditions. The following table summarizes state concentrations greater than 5.0% based on customer address:

Table 37

Consumer Loans - Geography

dollars in millions	December 31, 2024			December 31, 2023
State
California	$	8,655		30.7	%		$	8,787		31.9	%	$	4,014	23.2	%
North Carolina	6,923		24.5			6,370			23.1		5,702		32.9
South Carolina	3,607		12.8			3,326			12.1		3,001		17.3
Massachusetts	1,692		6.0			1,726			6.2		—		—
Other states	7,351		26.0			7,350			26.7		4,609		26.6
Total	$	28,228		100.0	%		$	27,559		100.0	%	$	17,326	100.0	%

Among consumer real estate secured loans, our revolving mortgage loans (“Home Equity Lines of Credit” or “HELOCs”) present a heightened risk due to long commitment periods during which the financial position of individual borrowers or collateral values may deteriorate significantly. In addition, a large percentage of our HELOCs are secured by junior liens. Substantial declines in collateral values could cause junior lien positions to become effectively unsecured. HELOCs secured by real estate were $2.57 billion, or 9% of total consumer loans, at December 31, 2024, compared to $2.17 billion, or 8%, at December 31, 2023.

Except for loans acquired through mergers and acquisitions, we have not purchased HELOCs, nor have we originated these loans to customers outside of our market areas. Originated HELOCs were underwritten by us based on our standard lending criteria. The HELOC portfolio consists of variable rate lines of credit which allow customer draws during a specified period of the line of credit, with a portion switching to an amortizing term following the draw period. Approximately 74.4% of the revolving mortgage portfolio relates to properties in North Carolina and South Carolina. Approximately 27.3% of the loan balances outstanding are secured by senior collateral positions while the remaining 72.7% are secured by junior liens.

When HELOCs transition from interest-only to requiring principal and interest payments, some borrowers may not be able to afford the higher monthly payments. We have not experienced a significant increase in defaults as a result of these increased payments. In the normal course of business, we will work with each borrower as they approach the revolving period maturity date to discuss options for refinance or repayment.

SVB Loans

SVB loan concentrations may exist when there are borrowers engaged in similar activities or types of loans extended to a diverse group of borrowers that could cause those borrowers or portfolios to be similarly impacted by economic or other conditions.

The SVB portfolio includes global fund banking and innovation banking loans.

Global Fund Banking

The global fund banking loan portfolio includes loans to clients in the private equity and venture capital community. Global fund banking represented 69% of SVB loans and 20% of total loans at December 31, 2024, compared to 65% and 19%, respectively, at December 31, 2023. The vast majority of this portfolio consists of capital call lines of credit, the repayment of which is dependent on the payment of capital calls by the underlying limited partner investors in the funds managed by these firms. These facilities are generally governed by financial covenants oriented towards ensuring that the funds’ remaining callable capital is sufficient to repay the loan, and larger commitments (typically provided to larger private equity funds) are typically secured by an assignment of the general partner's right to call capital from the fund's limited partner investors.

Innovation Banking

Innovation banking primarily includes loans to technology, life science and healthcare industry clients in the various stages of their life cycles. The loans are classified as investor dependent - early stage, investor dependent - growth stage, and innovation C&I and cash flow dependent for reporting purposes.

Investor Dependent - Early Stage loans represented 3% of SVB loans and 1% of total loans at December 31, 2024, compared to 4% and 1%, respectively, at December 31, 2023. These include loans to pre-revenue, development-stage companies and companies that are in the early phases of commercialization, with revenues of up to $5 million. Repayment of these loans may be dependent upon receipt by borrowers of additional equity financing from venture capital firms or other investors, or in some cases, a successful sale to a third-party or an initial public offering.

Investor Dependent - Growth Stage loans represented 5% of SVB loans and 2% of total loans at December 31, 2024, compared to 7% and 2%, respectively, at December 31, 2023. These include loans to growth-stage enterprises. Companies with revenues between $5 million and $15 million, or pre-revenue clinical-stage biotechnology companies, are considered to be mid-stage, and companies with revenues in excess of $15 million are considered to be later-stage.

Innovation C&I and Cash Flow Dependent loans represented 23% of SVB loans and 6% of total loans at December 31, 2024, compared to 24% and 7%, respectively, at December 31, 2023. This portfolio is comprised of two types of loans, innovation C&I and cash flow dependent. Innovation C&I includes loans in innovation sectors such as technology, life science and healthcare industries. These loans are dependent on either the borrower’s cash flows or balance sheet for repayment. Cash flow dependent loans are typically used to assist a select group of private equity sponsors with the acquisition of businesses, and repayment is generally dependent upon the cash flows of the combined entities.

The following table provides a summary of SVB loans by size and class. The breakout below is based on total client balances (individually or in the aggregate) as of December 31, 2024:

Table 38

SVB Loans by Size and Class

dollars in millions	Less Than $5 Million			$10 to $20 Million		$20 to $30 Million	$30 Million
Global fund banking	$	896		$	1,308		$	2,470	$	2,353		$	20,877	$	27,904
Investor dependent - early stage	727		180			90		—	—		997
Investor dependent - growth stage	536		559			662		124	315		2,196
Innovation C&I and cash flow dependent	221		310			753		1,315	6,498		9,097
Total	$	2,380		$	2,357		$	3,975	$	3,792		$	27,690	$	40,194

SVB Loans - State Concentrations

The following table summarizes state concentrations greater than 5.0% within the SVB loans portfolio at December 31, 2024, based on borrower location:

Table 39

SVB Loans - Geography

dollars in millions	December 31, 2024			December 31, 2023
State
California	$	9,372		23.3	%		$	9,458		23.9	%
Massachusetts	7,180		17.9			5,213			13.2
New York	4,691		11.7			7,338			18.6
Texas	4,061		10.1			3,645			9.2
Connecticut	3,972		9.9			3,246			8.2
All other states	10,125		25.1			8,987			22.8
Total U.S.	39,401		98.0			37,887			95.9
Total International	793		2.0			1,624			4.1
Total	$	40,194		100.0	%		$	39,511		100.0	%

Counterparty Risk

We enter into interest rate and foreign exchange derivatives as part of our overall risk management practices and also on behalf of our clients. We establish risk metrics and evaluate and manage the counterparty risk associated with these derivative instruments in accordance with the comprehensive Risk Management Framework and Risk Appetite Framework and Statement.

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

Derivative agreements for BancShares’ risk management purposes and for the hedging of client transactions are primarily executed with investment grade financial institutions, with others cleared through certain central party clearing houses. Credit exposure is mitigated via the exchange of collateral between the counterparties covering mark-to-market valuations. Client related derivative transactions, which are primarily related to lending activities, are incorporated into our loan underwriting and reporting processes.

Asset Risk

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

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

Market Risk

Interest rate risk management

BancShares is exposed to the risk that changes in market conditions may affect interest rates and negatively impact earnings. The risk arises from the nature of BancShares’ business activities, the composition of BancShares’ balance sheet, and changes in the level or shape of the yield curve. BancShares manages this inherent risk strategically based on prescribed guidelines and approved limits.

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

•Net Interest Income Sensitivity (“NII Sensitivity”) measures the net impact of hypothetical changes in interest rates on forecasted NII; and

•Economic Value of Equity (“EVE”) Sensitivity (“EVE Sensitivity”) measures the net impact of these hypothetical changes on the value of equity by assessing the economic value of assets, liabilities and off-balance sheet instruments.

BancShares uses a holistic process to measure and monitor both short term and long term risks, which includes, but is not limited to, gradual and immediate parallel rate shocks, changes in the shape of the yield curve, and changes in the relationship of various yield curves. NII Sensitivity generally focuses on shorter term earnings risk, while EVE Sensitivity assesses the longer-term risk of the existing balance sheet.

Our exposure to NII Sensitivity is guided by the Risk Appetite Framework and Statement and a range of risk metrics and BancShares may utilize tools across the balance sheet to adjust its interest rate risk exposures, including through business line actions and actions within the investment, funding and derivative portfolios.

The composition of our interest rate sensitive assets and liabilities generally results in a net asset-sensitive position for NII Sensitivity, whereby our assets will reprice faster than our liabilities. A component of our interest rate risk management strategy is the use of derivative instruments to manage fluctuations in earnings caused by changes in market interest rates. Interest rate swaps are the primary type of derivative instrument that we use as part of our interest rate risk management strategy. These derivatives hedge interest income variability of floating rate loans indexed to Secured Overnight Financing Rate (“SOFR”), as well as fair value changes of fixed rate time deposits and long-term debt indexed to SOFR. Refer to Note 13—Derivative Financial Instruments for further information on our derivative portfolio.

Our funding sources consist primarily of deposits, and we also support our funding needs through wholesale funding sources (including unsecured and secured borrowings).

The deposit rates we offer are influenced by market conditions and competitive factors. Market rates are the key factors of deposit costs, and we continue to optimize deposit costs by improving our deposit mix. Changes in interest rates, expected funding needs, as well as actions by competitors, can affect our deposit taking activities and deposit pricing. We believe our targeted non-maturity deposit customer retention is strong and we remain focused on optimizing our mix of deposits. We regularly assess the effect of deposit rate changes on our balances and seek to achieve optimal alignment between assets and liabilities.

The following table summarizes the results of 12-month NII Sensitivity simulations produced by our asset/liability management system. These simulations assume static balance sheet replacement with like products and implied forward market rates, and also incorporate additional internal models and assumptions, including rate dependent prepayment for certain loans and securities and repricing of interest-bearing non-maturity deposits. The below simulations assume an immediate 100 and 200 bps parallel increase and decrease from current interest rates.

Table 40

Net Interest Income Sensitivity Simulation Analysis

	Estimated (Decrease) Increase in NII
Change in interest rate (bps)	December 31, 2024		December 31, 2023		December 31, 2022
-200	(10.6)	%		(20.1)	%	(9.0)	%
-100	(6.1)			(10.0)		(4.0)
+100	6.9			9.8		3.4
+200	11.1			19.4		6.7

NII Sensitivity metrics at December 31, 2024, compared to December 31, 2023, were primarily affected by cash deployment into investment securities, and execution of interest rate hedges, as well as other balance sheet compositional changes and refinements to models, primarily related to deposit beta assumptions.

As of December 31, 2024, BancShares continues to have an asset sensitive interest rate risk profile and the potential exposure to forecasted earnings was largely due to the composition of the balance sheet (primarily due to floating rate commercial loans and cash), as well as estimates of modest future deposit betas. Approximately 64% of our loans have floating contractual reference rates, indexed primarily to SOFR and the U.S. prime rate. Deposit betas are currently modeled to have a portfolio average of approximately 35%-45% over the twelve-month forecast horizon, including 50%-60% for interest-bearing non-maturity deposits. Deposit beta is the portion of a change in the federal funds rate that is passed on to the deposit rate. Actual deposit betas may be different than modeled, depending on various factors, including liquidity requirements, deposit mix and competitive pressures. Impacts to NII Sensitivity may change due to actual results differing from modeled expectations.

As noted above, EVE Sensitivity supplements NII simulations as it estimates risk exposures beyond a twelve-month horizon. EVE Sensitivity measures the change in the EVE due to changes in assets, liabilities, and off-balance sheet instruments in response to a change in interest rates. EVE Sensitivity was calculated by estimating the change in the net present value of assets, liabilities, and off-balance sheet items under various rate movements, including utilizing a dynamic rate level dependent modeling approach for our deposit attrition assumption. In addition to interest rate changes, other key assumptions used in our EVE Sensitivity simulations include asset prepayments, as well as balance attrition and pricing of non-maturity deposits.

The below simulations assume an immediate 100 and 200 bps parallel increase and decrease from current interest rates and the estimated impact on our EVE profile based on our current modeling approach:

Table 41

Economic Value of Equity Modeling Analysis

	Estimated Increase (Decrease) in EVE
Change in interest rate (bps)	December 31, 2024		September 30, 2024		June 30, 2024
-200	5.4	%		4.2	%	5.2	%
-100	3.1			3.2		2.7
+100	(3.2)			(3.2)		(2.5)
+200	(7.0)			(5.2)		(4.6)

In addition to the above reported sensitivities, a wide variety of potential interest rate scenarios are simulated within our asset/liability management system. Scenarios that impact balance sheet composition or the sensitivity to key assumptions are also evaluated.

We use results of our various interest rate risk analyses to formulate and implement asset and liability management strategies, in coordination with the Asset and Liability Committee, to achieve the desired risk profile, while managing our objectives for market risk and other strategic objectives. Specifically, we may manage our interest rate risk position through certain pricing strategies and product design for loans and deposits, our investment portfolio, funding portfolio, or by using derivatives to mitigate earnings volatility.

The above sensitivities provide an estimate of our interest rate sensitivity; however, they do not account for potential changes in credit quality, size, mix, or changes in the competition for business in the industries we serve. They also do not account for other business developments and other actions. Accordingly, we can give no assurance that actual results would not differ materially from the estimated outcomes of our simulations.

Loan Maturity and Loan Interest Rate Sensitivity

The following table provides loan maturity distribution information:

Table 42

Loan Maturity Distribution

dollars in millions	At December 31, 2024, Maturing
	Within One Year		One to Five Years		Five to 15 Years		After 15 Years	Total
Commercial
Commercial construction	$	1,589			$	2,736		$	759	$	25	$	5,109
Owner occupied commercial mortgage	2,037			7,615			6,768		422	16,842
Non-owner occupied commercial mortgage	3,745			9,478			2,185		786	16,194
Commercial and industrial	9,932			17,136			3,492		1,080	31,640
Leases	651			1,272			91		—	2,014
Total commercial	17,954			38,237			13,295		2,313	71,799
Consumer
Residential mortgage	949			2,834			7,543		11,826	23,152
Revolving mortgage	73			193			929		1,372	2,567
Consumer auto	340			1,044			139		—	1,523
Consumer other	229			619			129		9	986
Total consumer	1,591			4,690			8,740		13,207	28,228
SVB
Global fund banking	25,781			1,971			152		—	27,904
Investor dependent - early stage	117			880			—		—	997
Investor dependent - growth stage	203			1,993			—		—	2,196
Innovation and cash flow dependent	1,533			7,236			328		—	9,097
Total SVB	27,634			12,080			480		—	40,194
Total loans and leases	$	47,179			$	55,007		$	22,515	$	15,520	$	140,221

As noted above, approximately 64% of our total loans have floating contractual reference rates, indexed primarily to SOFR and the U.S. prime rate. The following table provides information regarding the sensitivity to changes in interest rates of loans and leases maturing one year or after, as of December 31, 2024:

Table 43

Loan Interest Rate Sensitivity

dollars in millions	Loans Maturing One Year or After with
	Fixed Interest Rates		Variable Interest Rates
Commercial
Commercial construction	$	1,369			$	2,151
Owner occupied commercial mortgage	13,163			1,642
Non-owner occupied commercial mortgage	6,296			6,153
Commercial and industrial	10,107			11,601
Leases	1,352			11
Total commercial	32,287			21,558
Consumer
Residential mortgage	8,851			13,352
Revolving mortgage	30			2,464
Consumer auto	1,183			—
Consumer other	292			465
Total consumer	10,356			16,281
SVB
Global fund banking	2			2,121
Investor dependent - early stage	18			862
Investor dependent - growth stage	4			1,989
Innovation and cash flow dependent	—			7,564
Total SVB	24			12,536
Total loans and leases	$	42,667			$	50,375

Liquidity Risk

Our liquidity risk management and monitoring process is designed to ensure the availability of adequate cash and collateral resources and funding capacity to meet our obligations. Our overall liquidity management strategy is intended to ensure appropriate liquidity to meet expected and contingent funding needs under both normal and stressed environments. Consistent with this strategy, we maintain sufficient amounts of available cash and HQLS. Additional sources of liquidity include committed credit facilities, repurchase agreements, brokered certificates of deposit issuances, unsecured debt issuances, and cash collections generated by portfolio asset sales to third parties.

We utilize measurement tools to assess and monitor the level and adequacy of our liquidity position, liquidity conditions and trends. We measure and forecast liquidity and liquidity risks under different hypothetical scenarios and across different horizons. We use a liquidity stress testing framework to better understand the range of potential risks and their impacts to which BancShares is exposed. Stress test results inform our business strategy, risk appetite, levels of liquid assets, and contingency funding plans. Also included among our liquidity measurement tools are key risk indicators that assist in identifying potential liquidity risk and stress events.

BancShares maintains a framework to establish liquidity risk tolerances, monitoring, and breach escalation protocol to alert management of potential funding and liquidity risks and to initiate mitigating actions as appropriate. Further, BancShares maintains a contingent funding plan, which details protocols and potential actions to be taken under liquidity stress conditions.

Liquidity includes available cash and HQLS. At December 31, 2024 we had $59.34 billion of high-quality liquid assets (26.5% of total assets) and $27.29 billion of contingent liquidity sources available. During the first quarter of 2025 we expect to see a change in current capacity. The draw period under the Advance Facility Agreement ends March 27, 2025, thus we will no longer have access to advance funds under the agreement after this date. However, we are actively working to increase our borrowing capacity under agreements with the FRB through expansion of the eligible loan population to targeted loans historically not pledged to the FRB.

Table 44

Liquidity

dollars in millions	December 31, 2024
Available cash	$	20,545
High-quality liquid securities (1)	38,794
High-quality liquid assets	$	59,339
Credit Facilities:	Current Capacity (2)
FDIC facility (3)	$	5,291
FHLB facility (4)	16,423
FRB facility	5,475
Line of credit	100
Total contingent sources	$	27,289
Total liquid assets and contingent sources	$	86,628
Total uninsured deposits	$	59,510
Coverage ratio of total liquid assets and contingent sources to uninsured deposits	146	%

(1) Consists of readily-marketable, unpledged securities, as well as securities pledged but not drawn against at the FHLB and available for sale, and generally is comprised of U.S. Treasury and U.S. Agency investment securities held outright or via reverse repurchase agreements.

(2) Current capacity is based on the amount of collateral pledged and available for use at December 31, 2024.

(3) Advance Facility Agreement with the FDIC obtained in connection with SVBB Acquisition and has a maximum capacity of $70 billion, subject to additional collateral pledge requirements with total advances available through March 27, 2025. See below for additional details and limits on use.

(4) Refer to the following table for additional details.

We fund our operations through deposits and borrowings. Our primary source of liquidity is derived from our various deposit channels, including our Branch Network and Direct Bank. Total deposits at December 31, 2024 were $155.23 billion, an increase of $9.38 billion or 6% from $145.85 billion at December 31, 2023.

We use borrowings to diversify the funding of our business operations. In addition to the Purchase Money Note and FHLB advances, borrowings also include senior unsecured notes, securities sold under customer repurchase agreements, and subordinated notes. Total borrowings at December 31, 2024 were $37.05 billion, a decrease of $603 million from $37.65 billion at December 31, 2023. We continually monitor our capital needs and market conditions in an effort to diversify our borrowing base when appropriate.

FHLB Capacity

A source of available funds is advances from the FHLB of Atlanta. We may pledge assets for secured borrowing transactions, which include borrowings from the FHLB and/or FRB, or for other purposes as required or permitted by law. The debt issued in conjunction with these transactions is collateralized by certain discrete receivables, securities, loans, leases and/or underlying equipment. Certain related cash balances are restricted.

Table 45

FHLB Balances

dollars in millions	December 31, 2024			December 31, 2022
Total borrowing capacity	$	17,873		$	15,072		$	14,918
Less:
Advances	—		—			4,250
Letters of credit (1)	1,450		1,450			1,450
Available capacity	$	16,423		$	13,622		$	9,218
Pledged Non-PCD loans	$	30,421		$	25,370		$	23,491

(1) Letters of credit were established with the FHLB to collateralize public funds.

FRB Capacity

Under borrowing arrangements with the FRB, FCB has access to $5.48 billion on a secured basis. There were no outstanding borrowings with the FRB Discount Window at December 31, 2024 and December 31, 2023.

FDIC Credit Facility

FCB and the FDIC entered into the Advance Facility Agreement, dated as of March 27, 2023, and effective as of November 20, 2023, 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 SOFR plus 25 bps (but in no event less than 0.00%). The facility had a current capacity of $5.29 billion and was not utilized as of December 31, 2024.

Refer to Note 2—Business Combinations for further discussion.

Contractual Obligations and Commitments

The following table includes significant contractual obligations and commitments as of December 31, 2024, representing required and potential cash outflows, including impacts from purchase accounting adjustments and deferred fees. Refer to Note 23—Commitments and Contingencies for additional information regarding commitments. Financing commitments, letters of credit and deferred purchase commitments are presented at contractual amounts and do not necessarily reflect future cash outflows, as many are expected to expire unused or partially used.

Table 46

Contractual Obligations and Commitments

dollars in millions	Payments Due by Period
	Less than 1 year		1-3 years		4-5 years		Thereafter	Total
Contractual obligations:
Time deposits (1)	$	12,724			$	484		$	45	$	—	$	13,253
Short-term borrowings	367			—			—		—	367
Long-term borrowings (1)(2)	(36)			(78)			36,381		417	36,684
Total contractual obligations	$	13,055			$	406		$	36,426	$	417	$	50,304
Commitments:
Financing commitments	$	29,752			$	15,278		$	1,711	$	6,509	$	53,250
Letters of credit	1,669			598			18		6	2,291
Deferred purchase agreements	1,802			—			—		—	1,802
Purchase and funding commitments	178			—			—		—	178
Affordable housing partnerships (1)	558			579			30		47	1,214
Total commitments	$	33,959			$	16,455		$	1,759	$	6,562	$	58,735

(1) Time deposits and long-term borrowings are presented net of purchase accounting adjustments of $1 million and $125 million, respectively. On-balance sheet commitments for affordable housing partnerships are included in other liabilities and presented net of a purchase accounting adjustment of $33 million.

(2) Balances in parenthesis represent the estimated amortization of the purchase accounting adjustment and deferred costs in excess of any principal balance.

Long-term Borrowings

As displayed in Table 46, we do not have any significant long-term debt obligations due until the Purchase Money Note matures in March of 2028. While scheduled principal payments are not required under the Purchase Money Note until maturity, FCB may voluntarily prepay principal without premium or penalty. We will continue to monitor the interest rate environment and assess whether any voluntary prepayments are prudent considering the fixed rate of 3.50% on the Purchase Money Note. Potential sources that could fund voluntary prepayments of the Purchase Money Note 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, and issuance of unsecured debt or other borrowings. At the time of voluntary prepayment or maturity, the interest rates for the potential interest-bearing sources of repayment could be higher than the 3.50% rate on the Purchase Money Note.

Refer to the respective “Deposits” and “Borrowings” discussions in the “Interest-bearing Liabilities” section of this MD&A for further details. The Purchase Money Note is discussed further in Note 2—Business Combinations.

CRA Investment Commitment

BancShares has a community benefit plan, and has agreed to an addendum to SVB’s prior community benefits plan, which were developed in collaboration with representatives of community reinvestment organizations. Refer to the further discussion on CRA, including details on investment commitments, in the subsection “Community Reinvestment Act” in Item 1. Business—Regulatory Considerations.

CAPITAL

Capital requirements applicable to BancShares are discussed in “Regulatory Considerations” section in Item 1. Business of this Annual Report on Form 10-K, including a discussion of an NPR issued by the federal banking agencies regarding enhanced capital requirements.

BancShares’ total consolidated assets are between $100 billion and $250 billion, and, as such, BancShares is required to comply with certain enhanced prudential standards applicable to Category IV banking organizations, subject to the applicable transition periods. However, the NPR released by federal banking agencies could alter the capital framework by implementing new long-term debt requirements for banks with total consolidated assets of $100 billion or more. We are continuing to monitor these proposed rules. For further discussion, refer to the section entitled “Regulatory Considerations—Enhanced Prudential Standards—Proposed Long-Term Debt & Clean Holding Company Requirements” in Item 1. Business.

BancShares maintains a comprehensive capital adequacy process. BancShares establishes internal capital risk limits and warning thresholds, which utilize Risk-Based and Leverage-Based Capital calculations, internal and external early warning indicators, its capital planning process, and stress testing to evaluate BancShares' capital adequacy for multiple types of risk in both normal and stressed environments. The capital management framework requires contingency plans be defined and may be employed at management’s discretion.

Common and Preferred Stock Dividends

During the first three quarters of 2024, we paid quarterly dividends of $1.64 on the Class A common stock and Class B common stock. In the fourth quarter of 2024, the quarterly dividend on the Class A common stock and Class B common stock was increased to $1.95 per common share. In January 2025, our Board declared a quarterly dividend on the Class A common stock and Class B common stock of $1.95 per common share. The dividends are payable on March 17, 2025 to stockholders of record as of February 28, 2025.

During 2024, we paid quarterly dividends on our Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock as disclosed in Note 16—Stockholders' Equity. In January 2025, our Board declared dividends on our Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock in accordance with their terms. The dividends are payable on March 17, 2025.

Capital Composition and Ratios

As discussed earlier in this MD&A, the Board authorized a Class A common SRP in July 2024. During 2024 we repurchased 814,641 shares. Refer to the “Recent Events” section above for more information and Item 5. Market for Registrants Common Equity for additional information related to our monthly repurchase activity.

The following table details the change in outstanding Class A common stock through December 31, 2024. Refer to Note 16—Stockholders' Equity for additional information.

Table 47

Changes in Shares of Class A Common Stock Outstanding

				Year Ended December 31, 2024
Class A common stock shares outstanding at beginning of period				13,514,933
Shares repurchased under authorized repurchase plan				(814,641)
Restricted stock units vested, net of shares held to cover taxes				12,144
Class A common stock shares outstanding at end of period				12,712,436

We also had 1,005,185 Class B common stock outstanding at December 31, 2024 and December 31, 2023.

We are committed to effectively managing our capital to protect our depositors, creditors and stockholders. We continually monitor the capital levels and ratios for BancShares and FCB to ensure they exceed the minimum requirements imposed by regulatory authorities and to ensure they are appropriate given growth projections, risk profile and potential changes in the regulatory or external environment. Failure to meet certain capital requirements may result in actions by regulatory agencies that could have a material impact on our operations or consolidated financial statements.

In accordance with GAAP, the unrealized gains and losses on certain assets and liabilities, net of deferred taxes, are included in accumulated other comprehensive loss within stockholders’ equity. These amounts are excluded from the calculation of our regulatory capital ratios under current regulatory guidelines.

Table 48

Analysis of Capital Adequacy

dollars in millions	Basel III Requirements		PCA Well Capitalized Thresholds		December 31, 2024				December 31, 2022
			Amount		Ratio				Amount		Ratio	Amount	Ratio
BancShares
Risk-based capital ratios
Total risk-based capital	10.50	%		10.00	%	$	24,610		15.04	%				$	23,891		15.75	%	$	11,799	13.18	%
Tier 1 risk-based capital	8.50			8.00		22,137		13.53					21,150			13.94		9,902		11.06
Common equity Tier 1	7.00			6.50		21,256		12.99					20,270			13.36		9,021		10.08
Tier 1 leverage ratio	4.00			5.00		22,137		9.90					21,150			9.83		9,902		8.99
FCB
Risk-based capital ratios
Total risk-based capital	10.50	%		10.00	%	$	23,975		14.66	%				$	23,600		15.56	%	$	11,627	12.99	%
Tier 1 risk-based capital	8.50			8.00		21,852		13.37					21,227			13.99		10,186		11.38
Common equity Tier 1	7.00			6.50		21,852		13.37					21,227			13.99		10,186		11.38
Tier 1 leverage ratio	4.00			5.00		21,852		9.78					21,227			9.88		10,186		9.25

As of December 31, 2024, BancShares and FCB had risk-based capital ratio conservation buffers of 7.04% and 6.66%, respectively, which are in excess of the Basel III conservation buffer of 2.50%. As of December 31, 2023, BancShares and FCB risk-based capital ratio conservation buffers were 7.75% and 7.56%, respectively. The capital ratio conservation buffers represent the excess of the regulatory capital ratios as of December 31, 2024 and December 31, 2023 over the Basel III minimum for the ratio that is the binding constraint. Additional Tier 1 capital for BancShares includes perpetual preferred stock.

Additional Tier 2 capital for BancShares and FCB primarily consists of qualifying ALLL and qualifying subordinated debt.

CRITICAL ACCOUNTING ESTIMATES

The accounting and reporting policies of BancShares are in accordance with GAAP and are described in Note 1—Significant Accounting Policies and Basis of Presentation.

The preparation of financial statements in conformity with GAAP requires us to exercise judgment in determining many of the estimates and assumptions utilized to arrive at the carrying value of assets and liabilities and amounts reported for revenues and expenses. Our financial position and results of operations could be materially affected by changes to these estimates and assumptions.

We consider accounting estimates to be critical to reported financial results if (i) the accounting estimate requires management to make assumptions about matters that are highly uncertain and (ii) different estimates that management reasonably could have used for the accounting estimate in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, could have a material impact on our financial statements. The accounting estimate related to the determination of the ALLL is considered to be a critical accounting estimate because considerable judgment and estimation is applied by management.

ALLL

The ALLL represents management’s best estimate of credit losses expected over the life of the loan or lease, adjusted for expected contractual payments and the impact of prepayment expectations. Estimates for loan and lease losses are determined by analyzing quantitative and qualitative components present as of the evaluation date.

The ALLL is calculated based on a variety of considerations, including, but not limited to actual net loss history of the various loan and lease pools, delinquency trends, changes in forecasted economic conditions, loan growth, estimated loan life, and changes in portfolio credit quality. Loans and leases are segregated into pools with similar risk characteristics and each have a model that is utilized to estimate the ALLL.

The ALLL models utilize economic variables, including unemployment, gross domestic product, home price index, CRE index, corporate profits, and credit spreads. These economic variables are based on macroeconomic scenario forecasts with a forecast horizon that covers the lives of the loan portfolios.

Model outputs may be adjusted through a qualitative assessment to reflect trends that may not be adequately reflected within the models, which could include economic conditions, uncertainty in macroeconomic forecasts, credit quality, risk to specific industry concentrations, and any significant policy and underwriting changes. These qualitative adjustments are also used to accommodate for the imprecision of certain assumptions and uncertainties inherent in the model calculations.

While management utilizes its best judgment and information available, the ultimate adequacy of our ALLL is dependent upon a variety of factors beyond our control which are inherently difficult to predict, the most significant being the macroeconomic scenario forecasts that determine the economic variables utilized in the ALLL models. Due to the inherent uncertainty in the macroeconomic forecasts, BancShares utilizes baseline, upside, and downside macroeconomic scenarios and weights the scenarios based on review of variable forecasts for each scenario and comparison to expectations. At December 31, 2024, ALLL estimates in these scenarios ranged from approximately $1.39 billion, when weighing the upside scenario 100%, to approximately $2.12 billion when weighting the downside scenario 100%. BancShares management determined that an ALLL of $1.68 billion was appropriate as of December 31, 2024.

Current economic conditions and forecasts can change which could affect the anticipated amount of estimated credit losses and therefore the appropriateness of the ALLL. It is difficult to estimate how potential changes in any one economic factor or input might affect the overall ALLL because a wide variety of factors and inputs are considered in estimating the ALLL and changes in those factors and inputs considered may not occur at the same rate and may not be consistent across all product types. Additionally, changes in factors and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others.

Accounting policies related to the ALLL are discussed in Note 1—Significant Accounting Policies and Basis of Presentation. For more information regarding the ALLL, refer to the “Credit Risk — Allowance for Loan and Lease Losses” section of this MD&A and Note 5—Allowance for Loan and Lease Losses.

RECENT ACCOUNTING PRONOUNCEMENTS

The following Accounting Standards Updates (“ASUs”) were issued by FASB but are not yet effective for BancShares:

Standard	Summary of Guidance	Effect on BancShares’ Financial Statements
ASU No. 2023-09 - Income Taxes (Topic 740): Improvements to Income Tax Disclosures Issued December 2023	This ASU enhances income tax disclosure requirements primarily by requiring disclosure of specific categories in the rate reconciliation table and disaggregation of income taxes paid by jurisdiction.	Effective for BancShares beginning with our financial statements for the year ending December 31, 2025. Early adoption is permitted, and this ASU allows for adoption on a prospective basis, with a retrospective option permitted to prior periods presented. We did not elect early adoption. We are continuing to evaluate the impact this ASU will have on our income tax footnote disclosures in our 2025 Annual Report on Form 10-K.
ASU No. 2024-03 - Income Statement -Reporting Comprehensive Income - Expense Disaggregation Disclosures Issued November 2024	This ASU enhances expense disclosures primarily by requiring footnote disaggregation of specified expenses in a tabular format. The ASU does not change the requirements for the presentation of expenses on the face of the income statement.	Effective for BancShares beginning with our financial statements for the year ending December 31, 2027. Early adoption is permitted and the guidance can be applied prospectively or retrospectively. We are currently evaluating the impact of this ASU on our footnote disclosures.

NON-GAAP FINANCIAL MEASUREMENTS

BancShares provides certain non-GAAP information in reporting its financial results to give investors additional data to evaluate its operations. A non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance or financial position that may either exclude or include amounts or is adjusted in some way to the effect of including or excluding amounts, as compared to the most directly comparable measure calculated and presented in accordance with GAAP financial statements. BancShares’ management believes that non-GAAP financial measures, when reviewed in conjunction with GAAP financial information, can provide transparency about, or an alternate means of assessing, its operating results and financial position to its investors, analysts and management. These non-GAAP measures should be considered in addition to, and not superior to or a substitute for, GAAP measures presented in BancShares’ consolidated financial statements and other publicly filed reports. In addition, our non-GAAP measures may be different from or inconsistent with non-GAAP financial measures used by other institutions.

Whenever we refer to a non-GAAP financial measure we will generally define and present the most directly comparable financial measure calculated and presented in accordance with GAAP, along with a reconciliation between the GAAP financial measure and the non-GAAP financial measure. We describe each of these measures below and explain why we believe the measure to be useful.

PPNR

PPNR is a non-GAAP measure of profit or loss calculated as net income plus the provision for credit losses and income tax expense (benefit). PPNR is a measure of segment profit or loss that is meaningful because it enables management and external users of financial statements to assess income before income taxes excluding the provision for credit losses, which can be more volatile when economic conditions are more dynamic.

The following table provides a reconciliation of net income, the comparable GAAP measure, to PPNR:

Table 49

PPNR

dollars in millions	Year Ended December 31, 2024
	General Bank		Commercial Bank		SVB Commercial		Rail	Corporate		Total BancShares
Net income (GAAP)	$	1,046			$	440		$	857		$	111		$	323	$	2,777
Plus: provision for credit losses	153			144			134		—		—		431
Plus: income tax expense (benefit)	362			147			295		36		(25)		815
PPNR (non-GAAP)	$	1,561			$	731		$	1,286		$	147		$	298	$	4,023
	Year Ended December 31, 2023
	General Bank		Commercial Bank		SVB Commercial		Rail	Corporate		Total BancShares
Net income (GAAP)	$	871			$	165		$	544		$	90		$	9,796	$	11,466
Plus: provision for credit losses	77			517			65		—		716		1,375
Plus: income tax expense	319			69			184		32		7		611
PPNR (non-GAAP)	$	1,267			$	751		$	793		$	122		$	10,519	$	13,452
	Year Ended December 31, 2022
	General Bank		Commercial Bank		SVB Commercial		Rail	Corporate		Total BancShares
Net income (loss) (GAAP)	$	630			$	408		$	—		$	112		$	(52)	$	1,098
Plus: provision for credit losses	11			121			—		—		513		645
Plus: income tax expense (benefit)	214			128			—		37		(115)		264
PPNR (non-GAAP)	$	855			$	657		$	—		$	149		$	346	$	2,007

Net Rental Income on Operating Lease Equipment for Commercial Bank and Rail Segments

Net rental income on operating lease equipment is a non-GAAP measure calculated as rental income on operating lease equipment less depreciation on operating lease equipment, as well as maintenance and other operating lease expenses, if any. Presentation of net rental income for the Commercial Bank and Rail segments also results in the noninterest income and noninterest expense subtotals being presented net of depreciation and maintenance. These measures are meaningful because they enable management to monitor the performance and profitability of operating leases after deducting direct expenses.

The following tables reconcile the most comparable GAAP measures to the non-GAAP measures for the Commercial Bank and Rail segments.

Table 50

Commercial Bank Segment

dollars in millions
		2024		2023		2022
Rental income on operating leases (GAAP)		$	227			$	231		$	212
Less: depreciation on operating lease equipment	a	185			180			169
Net rental income on operating lease equipment (non-GAAP)		$	42			$	51		$	43
Total noninterest income (GAAP)	b	$	542			$	560		$	518
Noninterest income, net of depreciation (non-GAAP)	b-a	357			380			349
Total noninterest expense (GAAP)	c	911			824			745
Noninterest expense, net of depreciation (non-GAAP)	c-a	726			644			576

Table 51

Rail Segment

dollars in millions
		2024		2023		2022
Rental income on operating leases (GAAP)		$	821			$	740		$	652
Less: depreciation on operating lease equipment	a	209			191			176
Less: maintenance and other operating lease expenses	b	219			222			189
Net rental income on operating lease equipment (non-GAAP)		$	393			$	327		$	287
Total noninterest income (GAAP)	c	$	836			$	745		$	656
Noninterest income, net of depreciation and maintenance (non-GAAP)	c-a-b	408			332			291
Total noninterest expense (GAAP)	d	503			480			427
Noninterest expense, net of depreciation and maintenance (non-GAAP)	d-a-b	75			67			62

NII, NIM, and Interest and Fees on Loans, Excluding PAA

NII and NIM, excluding PAA, and interest and fees on loans, excluding loan PAA are meaningful metrics as they allow management to analyze NII, NIM and loan interest income trends more directly related to the rates of the underlying interest-earning assets and interest-bearing liabilities. Loan PAA is primarily related to the loan discount in the SVBB Acquisition. Other PAA is primarily related to the discount on the Purchase Money Note and the premium on deposits assumed in the CIT Merger.

The following table reconciles NII to NII, excluding PAA, NIM to NIM, excluding PAA, and interest and fees on loans to interest and fees on loans, excluding PAA:

Table 52

NII, NIM, and Interest and Fees on Loans, Excluding PAA

dollars in millions
		2024		2023		2022
NII (GAAP)	a	$	7,143			$	6,712			$	2,946
Loan PAA	b	505			733			27
Other PAA	c	(24)			7			74
PAA	d = (b+c)	481			740			101
NII, excluding PAA (non-GAAP)	e = (a-d)	$	6,662			$	5,972			$	2,845
Average interest-earning assets	f	$	201,578			$	170,771			$	93,195
NIM (GAAP)	a/f	3.54	%		3.92	%		3.16	%
NIM, excluding PAA (non-GAAP)	e/f	3.30			3.50			3.05
Interest and fees on loans (GAAP)		$	9,528			$	8,187			$	2,953
Less: loan PAA	b	505			733			27
Interest and fees on loans, excluding loan PAA (non-GAAP)		$	9,023			$	7,454			$	2,926

Forward-Looking Statements

Statements in this Annual Report on Form 10-K contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 regarding the financial condition, results of operations, business plans, asset quality, future performance, and other strategic goals of BancShares. Words such as “anticipates,” “believes,” “estimates,” “expects,” “predicts,” “forecasts,” “intends,” “plans,” “projects,” “targets,” “designed,” “could,” “may,” “should,” “will,” “potential,” “continue,” “aims,” “strives” or other similar words and expressions are intended to identify these forward-looking statements. These forward-looking statements are based on BancShares’ current expectations and assumptions regarding BancShares’ business, the economy, and other future conditions.

Because forward-looking statements relate to future results and occurrences, they are subject to inherent risks, uncertainties, changes in circumstances and other factors that are difficult to predict. Many possible events or factors could affect BancShares’ future financial results and performance and could cause actual results, performance or achievements of BancShares to differ materially from any anticipated results expressed or implied by such forward-looking statements. Such risks and uncertainties include, among others, general competitive, economic (including the imposition of tariffs on trading partners), political (including the new makeup of the U.S. Congress and Trump administration), geopolitical (including conflicts in Ukraine and the Middle East), natural disasters and market conditions, including changes in competitive pressures among financial institutions and the impacts related to or resulting from previous bank failures, the risks and impacts of future bank failures and other volatility in the banking industry, public perceptions of our business practices, including our deposit pricing and acquisition activity, the financial success or changing conditions or strategies of BancShares’ vendors or customers, including changes in demand for deposits, loans and other financial services, fluctuations in interest rates, changes in the quality or composition of BancShares’ loan or investment portfolio, actions of government regulators, including the recent interest rate cuts and any changes by the Federal Reserve, changes to estimates of future costs and benefits of actions taken by BancShares, BancShares’ ability to maintain adequate sources of funding and liquidity, the potential impact of decisions by the Federal Reserve on BancShares’ capital plans, adverse developments with respect to U.S. or global economic conditions, including significant turbulence in the capital or financial markets, the impact of any sustained or elevated inflationary environment, the impact of any cyberattack, information or security breach, the impact of implementation and compliance with current or proposed laws, regulations and regulatory interpretations, including potential increased regulatory requirements, limitations, and costs, such as FDIC special assessments, increases to FDIC deposit insurance premiums and the proposed interagency rule on regulatory capital, along with the risk that such laws, regulations and regulatory interpretations may change, the availability of capital and personnel, and the risks associated with BancShares’ previous acquisition transactions, including the SVBB Acquisition and CIT Merger, or any future transactions.

BancShares’ SRP allows BancShares to repurchase shares of its Class A common stock through 2025. BancShares is not obligated under the SRP to repurchase any minimum or particular number of shares, and repurchases may be suspended or discontinued at any time (subject to the terms of any Rule 10b5-1 plan in effect) without prior notice. The authorization to repurchase Class A common stock will be utilized at management’s discretion. The actual timing and amount of Class A common stock that may be repurchased will depend on a number of factors, including the terms of any Rule 10-b5-1 plan then in effect, price, general business and market conditions, regulatory requirements, and alternative investment opportunities or capital needs.

Except to the extent required by applicable laws or regulations, BancShares disclaims any obligation to update forward-looking statements or to publicly announce the results of any revisions to any of the forward-looking statements included herein to reflect future events or developments.

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