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What changed in FIRST CITIZENS BANCSHARES INC /DE/'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of FIRST CITIZENS BANCSHARES INC /DE/'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+858 added−911 removedSource: 10-K (2025-02-21) vs 10-K (2024-02-23)

Top changes in FIRST CITIZENS BANCSHARES INC /DE/'s 2024 10-K

858 paragraphs added · 911 removed · 517 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

121 edited+111 added−137 removed21 unchanged
Biggest changeAn FHC may engage in or acquire and retain the shares of a company engaged in activities that are “financial in nature” or complementary to a financial activity that does not pose a substantial risk to the safety or soundness of depository institutions or the financial system generally as long as the FHC continues to meet the eligible requirements for FHC status, including that the FHC and its subsidiary IDIs each remain “well capitalized” and “well-managed.” Activities that are “financial in nature” include securities underwriting, dealing and market making, advising mutual funds and investment companies, insurance underwriting and agency, merchant banking, and any other activities determined by the Federal Reserve in consultation with the Secretary of the Treasury to be “financial in nature,” or “complementary” or “incidental” to such financial activity.
Biggest changeTreasury) or (ii) complementary to such financial activity and does not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally (as solely determined by the Federal Reserve). Such activities may include, among other things, securities underwriting or merchant banking.
IDIs that are well capitalized or adequately capitalized and meet certain other criteria are able to exempt from treatment as “brokered” deposits up to $5 billion or 20 percent of the institution’s total liabilities in reciprocal deposits (defined generally as deposits received by a depository institution through a deposit placement network with the same maturity and in the same aggregate amount as deposits placed by the depository institution in other network institutions).
IDIs that are well capitalized or adequately capitalized and meet certain other criteria are able to exempt from treatment as “brokered” deposits up to $5 billion or 20% of the institution’s total liabilities in reciprocal deposits (defined generally as deposits received by a depository institution through a deposit placement network with the same maturity and in the same aggregate amount as deposits placed by the depository institution in other network institutions).
Prior to engaging in any such activities, the banking organization is expected to ensure that the activities are legally permissible under relevant state and federal laws, and ensure that the banking organization has adequate systems, risk management, and controls to ensure that the activities are conducted in a safe and sound manner consistent with applicable laws, including consumer protection laws.
In addition, prior to engaging in any such activities, the banking organization is expected to ensure that the activities are legally permissible under relevant state and federal laws and ensure that the banking organization has adequate systems, risk management, and controls to ensure that the activities are conducted in a safe and sound manner consistent with applicable laws, including consumer protection laws.
Interested parties may also directly access the SEC’s website ( www.sec.gov ), which contains reports, proxy and information statements and other information electronically filed by BancShares. Except as specifically incorporated by reference into this Annual Report on Form 10-K, information on those websites is not part of this report. 21
Interested parties may also directly access the SEC’s website ( www.sec.gov ), which contains reports, proxy and information statements and other information electronically filed by BancShares. Except as specifically incorporated by reference into this Annual Report on Form 10-K, information on those websites is not part of this report. 19
BancShares maintains the Silicon Valley Bank brand as Silicon Valley Bank, a division of FCB. On January 3, 2022 (the “CIT Merger Date”), BancShares completed its merger (the “CIT Merger”) with CIT Group Inc. (“CIT”) and its subsidiary CIT Bank, N.A., a national banking association (“CIT Bank”). BancShares maintains the CIT brand as CIT Group, a division of FCB.
BancShares maintains the Silicon Valley Bank brand as Silicon Valley Bank, a division of FCB. On January 3, 2022, BancShares completed its merger (the “CIT Merger”) with CIT Group Inc. (“CIT”) and its subsidiary CIT Bank, N.A., a national banking association. BancShares maintains the CIT brand as CIT Group, a division of FCB.
The guidance further provides that the regulators may pursue enforcement actions against a banking organization if its incentive compensation and related risk management, control or governance processes pose a risk to the organization’s safe and sound practices.
The guidance further provides that the agencies may pursue enforcement actions against a banking organization if its incentive compensation and related risk management, control or governance processes pose a risk to the organization’s safe and sound practices.
The federal banking regulators have issued joint guidance on executive compensation designed to ensure that the incentive compensation policies of banking organizations take into account risk factors and are consistent with the safety and soundness of the organization.
The federal banking agencies have issued joint guidance on executive compensation designed to ensure that the incentive compensation policies of banking organizations take into account risk factors and are consistent with the safety and soundness of the organization.
Commercial Banking • Provides lending, leasing, capital markets and other financial and advisory services, primarily to small and middle-market companies across a variety of industries. • Provides asset-based lending, factoring, receivables management and secured financing services.
Commercial Bank • Provides lending, leasing, capital markets and other financial and advisory services, primarily to small and middle-market companies across a variety of industries. • Provides asset-based lending, factoring, receivables management and secured financing services.
Available Information We make available on our investor relations website (ir.firstcitizens.com/overview/default.aspx) BancShares’ Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports, free of charge, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC.
Available Information We make available on our investor relations website (ir.firstcitizens.com) BancShares’ Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports, free of charge, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC.
Loan transactions with an affiliate generally must be collateralized and certain transactions between FCB and its affiliates, including the sale of assets, the payment of money or the provision of services, must be on terms and conditions that are substantially the same, or at least as favorable to FCB, as those prevailing for comparable nonaffiliated transactions.
Among other things, loan transactions with an affiliate generally must be collateralized and certain transactions between FCB and its affiliates, including the sale of assets, the payment of money or the provision of services, must be on terms and conditions that are substantially the same, or at least as favorable to FCB, as those prevailing for comparable nonaffiliated transactions.
Any capital loans made by a BHC to any of its subsidiary banks are subordinate in right of payment to depositors and to certain other indebtedness of such subsidiary banks.
Any indebtedness resulting from capital loans made by a BHC to any of its subsidiary banks are subordinate in right of payment to depositors and to certain other indebtedness of such subsidiary banks.
State laws in the U.S. grant insurance regulatory authorities broad administrative powers with respect to, among other things: licensing companies and agents to transact business; establishing statutory capital and reserve requirements and the solvency standards that must be met and maintained; regulating certain premium rates; reviewing and approving policy forms; regulating unfair trade and claims practices, including through the imposition of restrictions on marketing and sales practices, distribution arrangements and payment of inducements; approving changes in control of insurance companies; restricting the payment of dividends and other transactions between affiliates; and regulating the types, amounts and valuation of investments.
Insurance regulatory authorities generally have broad administrative powers with respect to, among other things: licensing companies and agents to transact business; establishing statutory capital and reserve requirements and the solvency standards that must be met and maintained; regulating certain premium rates; reviewing and approving policy forms; regulating unfair trade and claims practices, including through the imposition of restrictions on marketing and sales practices, distribution arrangements and payment of inducements; approving changes in control of insurance companies; restricting the payment of dividends and other transactions between affiliates; and regulating the types, amounts and valuation of investments.
In Europe and in the United Kingdom, both the EU General Data Protection Regulation and the UK General Data Protection Regulation impose extensive obligations on companies that process personal data of individuals in Europe, with the potential for significant fines for non-compliance (up to four percent of total annual worldwide revenue).
For example, in Europe and in the United Kingdom, both the EU General Data Protection Regulation and the UK General Data Protection Regulation impose extensive obligations on companies that process personal data of individuals in Europe, with the potential for significant fines for non-compliance (up to 4% of total annual worldwide revenue).
A BHC is limited to managing or controlling banks, furnishing services to or performing services for its subsidiaries, and engaging in other activities the Federal Reserve determines by regulation or order to be so closely related to banking or managing or controlling banks as to be a proper incident thereto.
The Parent Company is generally limited to managing or controlling banks, furnishing services to or performing services for its subsidiaries, and engaging in other activities the Federal Reserve determines by regulation or order to be so closely related to banking or managing or controlling banks as to be a proper incident thereto.
Federal banking agencies have also adopted guidelines for establishing information security standards and cybersecurity programs for implementing safeguards under the supervision of the board of directors. These guidelines, along with related regulatory materials, increasingly focus on risk management and processes related to information technology and the use of third parties in the provision of financial services.
In addition to the foregoing, federal banking agencies have adopted guidelines for establishing information security standards and cybersecurity programs for implementing safeguards under the supervision of the board of directors. These guidelines and related regulatory materials increasingly focus on risk management and processes related to information technology and the use of third parties in the provision of financial services.
BancShares has expanded through de novo branching and acquisitions and as of December 31, 2023, operates a network of more than 600 branches and offices in 30 states, predominantly located in the Southeast, Mid-Atlantic, Midwest and Western United States, providing a broad range of financial services to individuals, businesses and professionals.
BancShares has expanded through de novo branching and acquisitions and as of December 31, 2024, operates a network of more than 500 branches and offices nationwide, predominantly located in the Southeast, Mid-Atlantic, Midwest, and Western United States, providing a broad range of financial services to individuals, businesses and professionals.
For example, under the BHCA, a BHC must obtain approval from the Federal Reserve prior to directly or indirectly acquiring ownership or control of 5% of the voting shares or substantially all of the assets of another BHC or bank or prior to merging or consolidating with another BHC.
For example, under the BHCA, a BHC must obtain approval from the Federal Reserve prior to directly or indirectly acquiring ownership or control of 5% of the voting shares or substantially all of the assets of another depository institution holding company or IDI, or prior to merging or consolidating with another depository institution holding company.
At December 31, 2023, BancShares had total consolidated assets of $213.76 billion. Throughout its history, the operations of BancShares have been significantly influenced by descendants of Robert P. Holding, who came to control FCB during the 1920s. Robert P.
At December 31, 2024, BancShares had total consolidated assets of $223.72 billion. Throughout its history, the operations of BancShares have been significantly influenced by descendants of Robert P. Holding, who came to control FCB during the 1920s. Robert P.
These laws include the Truth in Lending Act (“TILA”), the Truth in Savings Act, the Electronic Funds Transfer Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act, Real Estate Settlement Procedures Act, Home Mortgage Disclosure Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Fair Housing Act and the Servicemembers Civil Relief Act.
These laws include the Truth in Lending Act (“TILA”), the Truth in Savings Act, the Electronic Funds Transfer Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act, Real Estate Settlement Procedures Act, Home Mortgage Disclosure Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Fair Housing Act and the Servicemembers Civil Relief Act, many of which are enforced by the CFPB.
The two banks larger than FCB based on deposits in both North Carolina and South Carolina were Bank of America and Truist Bank. The additional bank larger than FCB based on deposits in South Carolina was Wells Fargo. These banks collectively held 60.8% and 41.9% of North Carolina and South Carolina deposits, respectively.
The two banks larger than FCB based on deposits in both North Carolina and South Carolina were Bank of America and Truist Bank. The additional bank larger than FCB based on deposits in South Carolina was Wells Fargo. These banks collectively held 64.5% and 40.9% of North Carolina and South Carolina deposits, respectively.
IDIs that are less than well capitalized are not able to accept brokered deposits, and are subject to restrictions on the interest rates paid on deposits.
IDIs that are less than well capitalized generally cannot accept brokered deposits, and are subject to restrictions on the interest rates paid on deposits.
Our Vermont insurance captive subsidiary is required to file reports, generally including detailed annual financial statements, with the insurance regulatory authority, and its operations and accounts are subject to periodic examination by such authorities. 20 Specialty business operations, specifically the rail, maritime, and other equipment financing operations, are subject to various laws, rules, and regulations administered by authorities in jurisdictions where business is conducted.
Our Vermont insurance captive subsidiary is required to file reports, generally including detailed annual financial statements, with the insurance regulatory authority, and its operations and accounts are subject to periodic examination by such authorities. BancShares’ equipment financing and leasing operations are subject to laws, rules, and regulations administered by authorities in jurisdictions where business is conducted.
Pursuant to Sections 23A and 23B of the Federal Reserve Act, Regulation W and Regulation O, the authority of FCB to engage in transactions with related parties or “affiliates” or to make loans to insiders is limited.
Transactions with Insiders and Affiliates Pursuant to the Federal Reserve Act, Regulation W and Regulation O, the authority of FCB to engage in transactions with or make loans to insiders or “affiliates” is limited.
Revenue is generated primarily from rental income on operating lease equipment. Competition The financial services industry is highly competitive and continues to evolve as a result of changes in regulation, technology, product delivery systems, the accelerating pace of consolidation among financial service providers, and the general market and economic climate. BancShares competes with national, regional and local financial services providers.
Competition The financial services industry is highly competitive and continues to evolve as a result of changes in regulation, technology, product delivery systems, the accelerating pace of consolidation among financial service providers, and the general market and economic climate. BancShares competes with national, regional and local financial services providers.
Under the final rule, the assessment base for an IDI will be equal to the institution’s estimated uninsured deposits as of December 31, 2022, adjusted to exclude the first $5 billion in estimated uninsured deposits.
The assessment base for an IDI is equal to the institution’s estimated uninsured deposits as of December 31, 2022, adjusted to exclude the first $5 billion in estimated uninsured deposits.
Corporate (1) • Earning assets primarily include investment securities and interest-earning deposits at banks. • Corporate includes interest income on investment securities and interest-earning deposits at banks; interest expense for corporate funding, including brokered deposits; funds transfer pricing allocations; gains or losses on sales of investment securities; fair value adjustments on marketable equity securities; income from bank-owned life insurance; portions of salaries and benefits expense; and acquisition-related expenses.
Corporate (1) • Earning assets primarily include investment securities and interest-earning deposits at banks. • Corporate includes Direct Bank, a nationwide digital bank. • Corporate includes interest income on investment securities and interest-earning deposits at banks; interest expense for borrowings, Direct Bank deposits, and brokered deposits; funds transfer pricing allocations; gains or losses on sales of investment securities; fair value adjustments on marketable equity securities; income from bank-owned life insurance; portions of personnel cost; and acquisition-related expenses.
Covered institutions would have to comply with the new requirements through a phased-in approach over a three-year period, during which they would need to meet 25% of their long-term requirements by one year after effectiveness of the rule, 50% after two years, and 100% after three years.
Compliance with the new requirements would be required through a phased-in approach over a three-year period, during which banking organizations would need to meet 25% of their long-term requirements by one year after effectiveness of the rule, 50% after two years, and 100% after three years.
In the event of a BHC’s bankruptcy, any commitment by the BHC to a federal banking agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to priority of payment. Safety and Soundness . The federal banking agencies have adopted guidelines prescribing safety and soundness standards.
In the event of a BHC’s bankruptcy, any commitment by the BHC to a federal banking agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to priority of payment.
Geographic Locations As of December 31, 2023, BancShares operated branches in Arizona, California, Colorado, Florida, Georgia, Hawaii, Kansas, Maryland, Massachusetts, Missouri, Nebraska, New Mexico, Nevada, North Carolina, Oklahoma, Oregon, South Carolina, Tennessee, Texas, Virginia, Washington, West Virginia, and Wisconsin. See Concentration Risk section in Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations. Geographic Locations As of December 31, 2024, BancShares operated branches in Arizona, California, Colorado, Florida, Georgia, Hawaii, Kansas, Maryland, Massachusetts, Missouri, Nebraska, New Mexico, Nevada, North Carolina, Oklahoma, Oregon, South Carolina, Tennessee, Texas, Virginia, Washington, West Virginia, and Wisconsin. Refer to the Concentration Risk section in Item 7.
Edge Act corporations are banking organizations that are authorized to engage in international banking and foreign financial transactions, and the U.S. activities of such corporations are generally limited to those that are incidental to their foreign operations.
Edge Act corporations are banking organizations that are authorized to engage in international banking and foreign financial transactions, and the U.S. activities of such corporations are generally limited to those that are incidental to their foreign operations. FC International holds equity interests in foreign companies that support our Rail segment.
Globally Systemically Important Banks) are subject to the most stringent enhanced prudential requirements, and Category IV banking organizations (i.e., between $100 billion and $250 billion in total consolidated assets, and less than $75 billion in nonbank assets, off-balance sheet exposure, cross-jurisdictional activities, and weighted short-term wholesale funding) are subject to the least stringent requirements. 11 Based on our asset size, we are required to comply with certain enhanced prudential standards applicable to Category IV banking organizations, subject to the applicable transition periods.
Globally Systemically Important Banks (“GSIBs”), are subject to the most stringent enhanced prudential requirements, and Category IV banking organizations (i.e., between $100 billion and $250 billion in total consolidated assets, and less than $75 billion in nonbank assets, off-balance sheet exposure, cross-jurisdictional activities, and weighted short-term wholesale funding) are subject to the least stringent requirements.
Corporate also includes certain items related to accounting for business combinations, such as gains on acquisitions, day 2 provisions for credit losses, discount accretion income for acquired loans, and amortization of certain intangible assets.
Corporate also includes certain items related to accounting for business combinations, such as gains on acquisitions, day 2 provisions for credit losses, discount accretion income for certain acquired loans, and the offsetting impacts of noninterest expense allocated to the segments.
The addendum recognizes legacy Silicon Valley Bank relationships but establishes a new $6.5 billion community benefit target with the following components: $2.25 billion in small business lending, $3.6 billion in CRA development lending and investing, and $650 million in residential mortgages to LMI borrowers and in selected LMI census tracts.
Under the addendum, FCB committed to a $6.5 billion community benefit target with the following components: $2.25 billion in small business lending, $3.6 billion in CRA development lending and investing, and $650 million in residential mortgages to LMI borrowers and in selected LMI census tracts.
SEGMENT MARKETS AND SERVICES General Banking • Delivers services to individuals and businesses through an extensive branch network and various digital channels, including a nationwide digital bank, and offers a full suite of deposit products, loans (primarily business/commercial loans and residential mortgages), and various fee-based services. • Provides a variety of wealth management products and services to individuals and institutional clients, including brokerage, investment advisory, and trust services. • Provides deposit, cash management and lending to homeowner associations and property management companies.
SEGMENT MARKETS AND SERVICES General Bank • Delivers services to individuals and businesses through an extensive branch network and various digital channels, and offers a full suite of deposit products, loans (primarily business/commercial loans and residential mortgages), and various fee-based services. • Provides private banking and a range of personal financial solutions for consumers, including private equity and venture capital professionals and executive leaders of the innovation companies they support, and premium wine clients. • Provides a variety of wealth management products and services to individuals and institutional clients, including brokerage, investment advisory, and trust services. • Provides deposit, cash management and lending to homeowner associations and property management companies.
FCB’s deposit market share as of June 30, 2023 in North Carolina and South Carolina was 11.0% and 9.3%, respectively, which makes FCB the third largest bank in North Carolina and the fourth largest bank in South Carolina based on deposit market share according to the FDIC Deposit Market Share Report.
FCB’s largest notable concentration of deposits by market share as of June 30, 2024 were in North Carolina (including our Direct Bank deposits) and South Carolina at 11.3% and 9.3%, respectively, which makes FCB the third largest bank in North Carolina and the fourth largest bank in South Carolina based on deposit market share according to the FDIC Deposit Market Share Report.
The Bank Secrecy Act of 1970 (“BSA”) and subsequent laws and regulations require financial institutions to take steps to prevent the use of their systems to facilitate the flow of illegal or illicit money or terrorist funds and to report certain activity to the government.
(“FC International”), are subject to the Bank Secrecy Act of 1970 (“BSA”) and subsequent laws and regulations, including USA PATRIOT Act of 2001 (the “Patriot Act”), that require financial institutions to take steps to prevent the use of their systems to facilitate the flow of illegal or illicit money or terrorist funds, including AML compliance programs, and to report certain activity to the government.
There are a number of obligations and restrictions imposed on BHCs and their subsidiary banks by law and regulatory policy that are designed to minimize potential loss to the depositors of such depository institutions and to the FDIC insurance fund in the event of a depository institution default.
There are a number of obligations and restrictions imposed on banking organizations by law and regulatory policy that are designed to minimize potential loss to the depositors of such depository institutions and to the DIF in the event of failure of a depository institution.
As a Category IV banking organization, BancShares is required to maintain an enterprise-wide risk management system, governance program, and compliance system commensurate with its size, risks, activities, and complexity. As noted above, BancShares completed the SVBB Acquisition in 2023. BancShares is enhancing its risk management and compliance program post-SVBB Acquisition.
As a Category IV banking organization, subject to the applicable transition provisions, BancShares is required to maintain an enterprise-wide risk management system, governance program, and compliance system commensurate with its size, risks, activities, and complexity.
The Federal Reserve calculates a SCB as the greater of (i) the difference between the firm’s starting and minimum projected common equity Tier 1 risk-based capital ratio under the severely adverse scenario in the supervisory stress test, plus the sum of dollar amount of the firm’s planned common stock dividends for each of the fourth through seventh quarters of the planning horizon as a percentage of risk-weighted assets, or (ii) 2.5 percent.
The SCB is calculated as the greater of (i) the difference between the organization’s starting and minimum projected Risk-Based Capital Ratios under the severely adverse scenario in the supervisory stress test, plus the sum of the dollar amount of the firm’s planned common stock dividends for each of the fourth through seventh quarters of the planning horizon as a percentage of RWA, or (ii) 2.5%, which is equal to the minimum capital conservation buffer under Basel III.
As of December 31, 2023, the Regulatory Capital Ratios of FCB exceeded the applicable Basel III requirements and the well capitalized thresholds as further addressed under “Stockholders’ Equity and Capital Adequacy” in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 15 Covered Insured Depository Institution Contingency Planning Requirements .
As of December 31, 2024, the Regulatory Capital Ratios of the Parent Company and FCB exceeded the applicable Basel III requirements and the PCA well capitalized thresholds as further addressed under “Capital” in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Companies also must include enhanced cybersecurity risk assessment and management, strategy and governance disclosures, including disclosures regarding management’s role in overseeing the public company’s cybersecurity risk management and compliance program, in their annual reports. See Item 1C. Cybersecurity for additional information.
Under SEC rules, companies also must provide enhanced disclosures in their Annual Reports on Form 10-K with respect to cybersecurity risk assessment and management, strategy and governance, including disclosures regarding management’s role in overseeing the public company’s cybersecurity risk management and compliance program. Refer to Item 1C. Cybersecurity for additional information. The U.S.
Based on its asset size and status as a Category IV institution, BancShares is subject to biennial supervisory stress testing by the Federal Reserve under the CCAR process in accordance with the applicable transition provisions. BancShares is also required to develop, maintain, and submit an annual capital plan to the Federal Reserve.
Capital Planning and Stress Testing. As a Category IV banking organization, BancShares is required to submit an annual capital plan to the Federal Reserve and is subject to biennial supervisory stress testing by the Federal Reserve under its Comprehensive Capital Analysis and Review (“CCAR”) process in accordance with the applicable transition provisions.
The increased assessment rate schedules will remain in effect until the reserve ratio meets or exceeds 2 percent, absent further action by the FDIC. On November 16, 2023, the FDIC adopted a final rule to implement a special assessment to recover the loss to the DIF associated with the bank failures in spring of 2023.
The increased assessment rate schedules are expected to remain in effect until the reserve ratio meets or exceeds 2%, absent further action by the FDIC. In addition, FCB is subject to special assessments to recover the loss to the DIF associated with the bank failures in spring of 2023.
The FDIC will collect the special assessment at an annual rate of 13.4 bps beginning with the first quarterly assessment period of 2024, and the agency will continue to collect special assessments for an anticipated total of eight quarterly assessment periods. The special assessment for FCB totaled $64 million at December 31, 2023. Capital Requirements.
The FDIC began collecting the special assessment at an annual rate of 13.4 bps beginning with the first quarterly assessment period of 2024, and the agency is expected to continue to collect special assessments for an anticipated total of eight quarterly assessment periods. We accrued a FDIC insurance special assessment charge of $64 million in 2023.
On August 29, 2023, the federal banking agencies proposed a rule that would require banking organizations with $100 billion or more in total consolidated assets to (1) issue and maintain outstanding a minimum amount of long-term debt that would be available to absorb losses in the event of failure, (2) establish “clean holding company” requirements for these holding companies (e.g., prohibition on engaging in certain activities at the holding company that could complicate its resolution), (3) apply a stringent capital treatment to large U.S. banking organizations’ holdings of long-term debt issued by other large banking organizations, and (4) make certain technical amendments to the FRB’s rules related to total loss-absorbing capacity requirements for U.S. global systemically important banking organizations and intermediate holding companies of foreign banking organizations.
In 2023, the federal banking agencies released the proposed rule which would require BancShares to (1) issue and maintain outstanding a minimum amount of long-term debt that would be available to absorb losses in the event of failure, (2) comply with “clean holding company” requirements for these holding companies (e.g., prohibition on engaging in certain activities at the holding company that could complicate its resolution) and (3) apply a stringent capital treatment to its holdings of long-term debt issued by other large banking organizations to discourage cross-holdings of long-term debt by other banking organizations.
Silicon Valley Banking • Provides products and services to commercial clients in key innovation markets, such as healthcare and technology industries, as well as private equity and venture capital firms. • Provides private banking and wealth management as well as a range of personal financial solutions for consumers, including private equity and venture capital professionals and executive leaders of the innovation companies they support, and premium wine clients. • Offers a full suite of deposit products and positive pay services through online and mobile banking platforms, as well as at branch locations.
SVB Commercial • Provides products and services to commercial clients in key innovation markets, such as healthcare and technology industries, as well as private equity and venture capital firms. • Offers a full suite of deposit products and positive pay services through online and mobile banking platforms, as well as at branch locations.
Financial Statements and Supplemental Data. BancShares delivers products and services to its customers through an extensive branch network and additionally operates a nationwide digital bank. Services offered at most branches include accepting deposits, cashing checks and providing for consumer and commercial cash needs. Consumer and business customers may also conduct banking transactions through various digital channels.
BancShares delivers banking products and services to its customers through an extensive branch network and additionally operates a nationwide digital banking platform that delivers deposit products to consumers (the “Direct Bank”). Services offered at most branches include accepting deposits, cashing checks and providing for consumer and commercial cash needs.
Under the CIDI Rule, depository institutions insured by the FDIC (“IDIs”) with $50 billion or more in total consolidated assets are required to periodically submit Resolution Plans that will enable the FDIC as receiver to resolve the bank in the event of its insolvency under the Federal Deposit Insurance Act (the “FDI Act”) in a manner that ensures that depositors receive access to their insured deposits in a timely manner, maximizes the net present value return from the sale or disposition of its assets, and minimizes the amount of any loss realized by the creditors in the resolution.
The CIDI Rule requires that the Resolution Plans enable the FDIC as receiver to resolve the IDI in the event of its insolvency in a manner that ensures that depositors receive access to their insured deposits in a timely manner, maximizes the net present value return from the sale or disposition of a failed bank’s assets, and minimizes the amount of any loss realized by the creditors in the resolution.
Management’s Discussion and Analysis of Financial Condition and Results of Operations for information on our commercial and consumer loan concentrations by state. Human Capital As of December 31, 2023, BancShares employed approximately 15,715 full-time staff and approximately 306 part-time staff for a total of 16,021 employees.
Management’s Discussion and Analysis of Financial Condition and Results of Operations for information on our commercial and consumer loan concentrations by state. Human Capital As of December 31, 2024, BancShares employed approximately 17,191 full-time staff and approximately 284 part-time staff for a total of 17,475 employees. Our ability to attract, retain, and develop associates is critical to our success.
Banks’ service providers are required under the rule to notify any affected bank to or on behalf of which the service provider provides services “as soon as possible” after determining that it has experienced an incident that materially disrupts or degrades, or is reasonably likely to materially disrupt or degrade, covered services provided to such bank for as much as four hours.
The 36 Hour Rule requires that banking organizations notify their primary federal regulator as soon as possible and no later than 36 hours after the discovery of a computer-security incident that rises to the level of a notification incident under the rule, and that bank service providers notify any affected bank to which, or on behalf of which, the service provider provides services as soon as possible after determining that it has experienced an incident that materially disrupts or degrades, or is reasonably likely to materially disrupt or degrade, covered services provided to such bank for as much as four hours.
In addition, BHCs that qualify and elect to be FHCs and continue to meet the requirements as an FHC as discussed in the Status Requirements section below, may engage in any activity, or acquire and retain the shares of a company engaged in any activity, that is either (i) financial in nature or incidental to such financial activity (as determined by the Federal Reserve in consultation with the Secretary of the Treasury) or (ii) complementary to such financial activity and does not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally (as solely determined by the Federal Reserve).
BHCs that qualify and elect to be FHCs and continue to meet the eligibility requirements as an FHC (discussed below), though still limited in their activities, may more broadly engage in any activity, or acquire and retain the shares of a company engaged in any activity, that is either (i) financial in nature or incidental to such financial activity (as determined by the Federal Reserve in consultation with the Secretary of the U.S.
On October 30, 2023, the Biden Administration issued an Executive Order on the use of and risks associated with artificial intelligence (“AI”) systems, requiring certain federal agencies, including the CFPB, to address potential discrimination in the housing and consumer financial markets relating to the use by financial institutions of AI technologies. Climate-Related Regulation and Risk Management.
In 2023, the Biden Administration issued an Executive Order on Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence (“Executive Order 14110”) that required certain federal agencies, including the CFPB, to address potential discrimination in the housing and consumer financial markets relating to the use by financial institutions of AI technologies.
As BancShares continues to grow, it may cross additional risk-based asset thresholds, subjecting it to additional regulatory requirements. Dodd-Frank Act and the Economic Growth Act .
As BancShares continues to grow, it may cross additional risk-based asset thresholds, subjecting it to additional regulatory requirements and enhanced scrutiny. 8 Basel III .
Our compensation practices are subject to oversight by the Federal Reserve and, with respect to some of our subsidiaries, by other financial regulatory agencies.
New York is considering a law similar to the California CRFRA. 17 Compensation Our compensation practices are subject to oversight by the federal banking agencies, Nasdaq, and, with respect to some of our subsidiaries, by other financial regulatory agencies.
The United States has imposed economic sanctions on transactions with certain designated foreign countries, nationals and others. Failure of a financial institution to maintain and implement adequate BSA, AML and OFAC programs, or to comply with all the relevant laws and regulations, could have serious legal and reputational consequences, including material fines and sanctions.
Failure of a financial institution to maintain and implement adequate compliance programs for the foregoing, or to comply with all the relevant laws and regulations, could have serious legal and reputational consequences, including material fines and sanctions.
In June 2023, the SEC approved the proposed clawback listing standards of the Nasdaq Stock Market, LLC (“Nasdaq”), which now require Nasdaq-listed companies, including BancShares, to (i) adopt and implement a compliant clawback policy; (ii) file the clawback policy as an exhibit to their annual reports; and (iii) provide certain disclosures relating to any compensation recovery triggered by the clawback policy.
Pursuant to SEC rules and the listing standards of the Nasdaq mandated by the Dodd-Frank Act, Nasdaq listed companies are required to (i) adopt and implement a compliant incentive compensation clawback policy; (ii) file the clawback policy as an exhibit to their annual reports; and (iii) provide certain disclosures relating to any compensation recovery triggered by the clawback policy.
Under the LFI rating system, the FRB assigns ratings based on three supervisory components: (i) capital planning and positions, (ii) liquidity risk management and positions, and (iii) governance and controls. The LFI rating system has a four-category, non-numeric rating scale with no single composite rating or scoring.
Under the LFI rating system, the Federal Reserve assigns ratings based on three supervisory components: (i) capital planning and positions, (ii) liquidity risk management and positions, and (iii) governance and controls.
Covered holding companies and their subsidiary banks would be required to maintain a minimum amount of eligible long-term debt equal to the greater of 6 percent of risk weighted assets, 3.5 percent of average total consolidated assets, and for banks subject to the supplementary leverage ratio, 2.5 percent of total leverage exposure under the supplementary leverage ratio.
The minimum amount of eligible long-term debt required to be maintained would be equal to the greater of (i) 6% of the total RWA of the banking organization, (ii) 3.5% of average total consolidated assets of the banking organization, and, (iii) if it were subject to the supplementary leverage ratio, 2.5% of the leverage exposure under the supplementary leverage ratio for the banking organization.
Source of Strength . Under the Dodd-Frank Act, BHCs are required to act as a source of financial and managerial strength to their subsidiary banks. Under this requirement, the Parent Company is expected to commit resources to support FCB, including times when the Parent Company may not be in a financial position to provide such resources.
Pursuant to this requirement, the Parent Company is expected to commit resources to support FCB, including at times when the Parent Company may not be in a financial position to provide such resources.
Under the Tailoring Rules, banking organizations are grouped into four categories, based on asset size, off-balance sheet exposure, nonbank assets, weighted short-term wholesale funding, and cross-jurisdictional activities. Category I banking organizations (i.e., U.S.
The Parent Company and FCB are currently subject to certain enhanced prudential standards as further described below. Tailoring Rules . Under the Tailoring Rules, the Federal Reserve groups banking organizations into four categories based on total consolidated assets, off-balance sheet exposure, nonbank assets, weighted short-term wholesale funding, and cross-jurisdictional activities. Category I banking organizations, which are the U.S.
Other Regulations applicable to the Parent Company and FCB Privacy, Data Protection, and Cybersecurity . As a large financial institution, we are subject to a number of federal, state, local and foreign laws and regulations relating to consumer privacy and data protection.
Privacy, Data Protection, and Cybersecurity BancShares is subject to a number of federal, state, local and foreign laws and regulations relating to consumer privacy and data protection.
In the United States, equipment financing and leasing operations, including for railcars, ships, and other equipment, are subject to rules and regulations relating to safety, operations, maintenance, and mechanical standards promulgated by various federal and state agencies and industry organizations, including the United States Department of Transportation, the Federal Railroad Administration, the Association of American Railroads, the Maritime Administration, the United States Coast Guard, and the United States Environmental Protection Agency.
In the United States, equipment financing and leasing operations are subject to rules and regulations relating to health, safety, operations, maintenance, and mechanical standards promulgated by federal and state agencies and industry organizations.
In addition, FCB generally may not purchase securities issued or underwritten by affiliates. FCB receives management fees from its subsidiaries and the Parent Company for expenses incurred for performing various functions on their behalf. These fees are charged to each company based upon the estimated cost for usage of services by that company.
Additionally, FCB is subject to individual and aggregate lending limits with respect to “extensions of credit” to Insiders. Further, FCB generally may not purchase securities issued or underwritten by affiliates. FCB receives management fees from its subsidiaries and the Parent Company for expenses incurred for performing various functions on their behalf.
The CFPB has launched an initiative aimed at eliminating or restricting a number of fees assessed by financial institutions, including overdraft and non-sufficient funds (“NSF”) fees as well as other transaction- and account management-related fees deemed by the CFPB to be “junk fees.” In January 2024, the CFPB proposed two rules addressing financial institutions’ consumer overdraft and NSF fee practices.
In recent years, the CFPB has been focused on enforcement actions and rulemakings aimed at eliminating or restricting a number of fees assessed by financial institutions such as overdraft and non-sufficient funds (“NSF”) fees as well as other transaction- and account management-related fees deemed by the CFPB to be “junk fees.” In response to this and other legislative and regulatory scrutiny, in January 2022, we announced an elimination of NSF fees and a decrease in overdraft fees.
The final rule will take effect on April 1, 2024; however, compliance with the majority of the final rule’s provisions will not be required until January 1, 2026, and the data reporting requirements of the final rule will not take effect until January 1, 2027.
The effective date of the rule was April 1, 2024, with compliance of the majority of its provisions required by January 1, 2026 and the compliance with data reporting requirements required by January 1, 2027.
(“FCIS”) and First Citizens Asset Management, Inc. (“FCAM”), and a non-bank subsidiary First Citizens Capital Securities, LLC (“FCCS”). As a registered broker-dealer, FCIS provides a full range of investment products, including annuities, brokerage services and third-party mutual funds. As registered investment advisors, FCIS and FCAM provide investment management services and advice.
As a registered broker-dealer, FCIS provides a full range of investment products, including annuities, brokerage services and third-party mutual funds. As registered investment advisers, FCIS and FCAM provide investment management services and advice. FCCS is a broker-dealer that also provides underwriting and private placement services.
These guidelines establish general standards relating to internal controls and information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth and compensation, fees and benefits. In general, the guidelines require, among other things, appropriate systems and practices to identify and manage the risk and exposures specified in the guidelines.
These guidelines establish general standards relating to internal controls and information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth and compensation, fees and benefits. Additional topics include cybersecurity, climate financial-risk management, and compensation, as discussed further below.
These factors include the competitive effects of the proposal in the relevant geographic markets; the financial and managerial resources and future prospects of the companies and banks involved in the transaction; the effect of the transaction on the financial stability of the United States; the organizations' compliance with anti-money laundering (“AML”) laws and regulations; the convenience and needs of the communities to be served; and the records of performance under the CRA of the IDIs involved in the transaction.
These factors include the competitive effects of the proposal in the relevant geographic markets; the financial and managerial resources and future prospects of the companies and banks involved in the transaction; the effect of the transaction on the financial stability of the United States; the organizations' compliance with anti-money laundering (“AML”) laws and regulations; the convenience and needs of the communities to be served; and the records of performance under the Community Reinvestment Act (“CRA”) of the IDIs involved in the transaction. 12 In addition, under the FDI Act as amended by the Bank Merger Act (“BMA”), any IDI must also obtain approval of the FDIC before any merger, acquisition or certain similar transactions with another institution if the resulting institution will be a state chartered bank that is not a member of the Federal Reserve System.
In addition, BancShares owns a fleet of railcars and locomotives that are leased to railroads and shippers. See Business Segments below for more information on markets we serve and products and services we offer. In addition to our banking operations, we provide various investment products and services through FCB’s wholly owned subsidiaries, including First Citizens Investor Services, Inc.
BancShares also owns a fleet of railcars and locomotives that are leased to railroads and shippers. Refer to the Segments section below for more information on markets we serve and products and services we offer.
The proposal would require that debt instruments issued to satisfy the minimum long-term debt requirement meet certain criteria to ensure that the debt instruments can readily absorb losses in resolution, and the proposal would apply a stringent capital treatment to large banking organizations’ holdings of eligible long-term debt issued by other large banking organizations to discourage cross-holdings of long-term debt by other banking organizations.
Debt instruments issued to satisfy the minimum long-term debt requirement would be required to meet certain criteria to ensure that the debt instruments can readily absorb losses in resolution.
This price increase has been instituted to account for extraordinary growth in insured deposits during the first and second quarters of 2020, which caused the Depositors Insurance Fund (“DIF”) reserve ratio to decline below the statutory minimum of 1.35%.
The FDIC increased the base deposit insurance assessments rates following growth in insured deposits during the first and second quarters of 2020 that caused the DIF reserve ratio to decline below the statutory minimum of 1.35%.
We seek individuals with diverse backgrounds that reflect the markets we serve because we understand our differences contribute to a diversity of thought that enhances associate and customer relationships and drives innovation of our products and services. 7 The retention and integration of key legacy Silicon Valley Bank and CIT employees have also been significant initiatives.
We seek individuals with varied backgrounds because we understand that our differences contribute to a diversity of thought that enhances associate and customer relationships and propels innovation in our products and services.
The principles are consistent with the risk management framework in the agencies’ existing rules and regulations, with a focus on addressing physical and transition risks associated with climate change. The principles cover the following areas: strategic planning; governance; policies, procedures, and limits; data, risk measurement and reporting; risk management; and scenario analysis.
The CRFR Banking Principles provide a high-level framework for the safe and sound management of exposures to climate-related financial risks, including physical and transition risks associated with climate change, and cover governance; policies, procedures, and limits; strategic planning; risk management; data, risk measurement, and reporting; and scenario analysis.
A BHC with total consolidated assets of $250 billion or more is subject to enhanced prudential standards under the Dodd-Frank Act, as amended by Economic Growth Act, with the requirements tailored based on risk-based factors identified by the federal banking agencies.
Pursuant to the Economic Growth, Regulatory Relief, and Consumer Protection Act, the Federal Reserve is authorized to apply any enhanced prudential standards to a banking organization with $100 billion or more in total consolidated assets on a tailored basis based on identified risk-based factors.
The CFPB is also authorized to prevent any institution under its authority from engaging in an unfair, deceptive, or abusive act or practice in connection with consumer financial products and services. 17 Under TILA, as implemented by Regulation Z, mortgage lenders are required to make a reasonable and good faith determination based on verified and documented information that a consumer applying for a mortgage loan has a reasonable ability to repay the loan according to its terms.
Under TILA in particular, residential mortgage lenders are required to make a reasonable and good faith determination based on verified and documented information that a consumer applying for a mortgage loan has a reasonable ability to repay the loan according to its terms, based on certain prescribed evaluation alternatives.
FCB has implemented a program designed to facilitate compliance with the full extent of the applicable BSA and OFAC related laws, regulations and related sanctions. On January 1, 2021, Congress passed the National Defense Authorization Act, which enacted the most significant overhaul of the BSA and related AML laws since the Patriot Act.
FCB has implemented a program designed to facilitate compliance with the full extent of the applicable BSA, OFAC and Patriot Act related laws, regulations and related sanctions. 15 Consumer Laws and Regulations FCB is subject to certain laws and regulations designed to protect consumers in transactions with banks.
On October 18, 2022, the FDIC adopted a final rule to increase initial base deposit insurance assessment rate schedules uniformly by 2 basis points (“bps”), beginning in the first quarterly assessment period of 2023.
FDIC Insurance FCB is required to pay the FDIC premiums for deposit insurance according to base deposit insurance assessment rate schedules, which remain elevated following a uniform increase of 2 basis points (“bps”) by the FDIC that began in the first quarterly assessment period of 2023.
The laws and related regulations mandate certain disclosures and regulate the manner in which financial institutions transact business with certain customers.
The foregoing laws and related regulations mandate certain disclosures and regulate the manner in which financial institutions transact business with certain customers. A number of regulatory authorities may enforce consumer laws and regulations. The CFPB is BancShares’ primary federal regulator for the regulation, supervision, and enforcement of the federal consumer protection laws.
(“FC International”), which is a corporation chartered by the Federal Reserve pursuant to Section 25A of the Federal Reserve Act (“Edge Act”) and the Federal Reserve’s Regulation K.
In connection with its Rail segment, BancShares’ maintains a wholly owned subsidiary, FC International, which is a corporation chartered by the Federal Reserve pursuant to Section 25A of the Federal Reserve Act (“Edge Act”).
BancShares first became subject to the enhanced prudential standards in 2022, and BancShares is currently treated as a Category IV banking organization under the Tailoring Rules, as it has over $100 billion in total assets, but less than $250 billion in assets and less than $75 billion in nonbank assets, weighted short-term wholesale funding, off-balance sheet exposure, and cross-jurisdictional activities. • Capital Planning and Stress Testing.
BancShares would become a Category III banking organization under the Tailoring Rules, and would be subject to more stringent enhanced prudential standards, if it had consolidated assets of $250 billion or more, or $100 billion or more in total consolidated assets and $75 billion or more in weighted short-term wholesale funding, nonbank assets, or off-balance sheet exposure, based on a four-quarter trailing average.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThis could adversely impact our results of operations, liquidity and financial condition, as well as cause us legal or reputational harm. • Credit Risks: The risks that a borrower, obligor, or counterparty will fail to perform on an obligation or that our risk management processes will fail or be insufficient. ▪ If we fail to effectively manage credit risk, our business and financial condition will suffer. ▪ Our allowance for credit losses may prove to be insufficient to absorb losses in our credit portfolios. • Market Risks: The risks to our financial condition resulting from adverse movements in domestic and international macroeconomic and political conditions, as well as economic output levels, interest and inflation rates, employment levels, prices of commodities, consumer confidence levels, and changes in consumer spending, international trade policy, and fiscal and monetary policy. ▪ Unfavorable economic or political conditions, as considered through a range of metrics, have and could continue to adversely affect our business. ▪ Failure to effectively manage our interest rate risk could adversely affect us. • Liquidity Risks: The risks that we will be unable to meet our obligations as they come due because of an inability to (i) liquidate assets or obtain adequate funding, or (ii) unwind or offset specific exposures without significantly lowering market prices because of inadequate market depth or market disruptions, or that we will not meet the liquidity management requirements applicable to us as a Category IV banking organization, subject to the applicable transition periods. ▪ If our current level of balance sheet liquidity were to experience pressure, it could affect our ability to pay deposits and fund our operations. ▪ We are subject to enhanced liquidity risk management requirements as a Category IV banking organization, subject to the applicable transition periods, including reporting, liquidity stress testing, and liquidity buffer, as well as resolution planning at the bank level, and failure to meet these requirements could result in regulatory and compliance risks, and possible restrictions on our activities. • Capital Adequacy Risks: The risks that our capital levels become inadequate to preserve our safety and soundness, support our ongoing business operations and strategies and provide us with support against unexpected or sudden changes in the business/economic environment, or that we will not meet the capital adequacy requirements applicable to us as a Category IV banking organization, subject to the applicable transition periods. ▪ Our ability to grow is contingent upon access to capital, which may not be readily available to us. ▪ We and FCB are subject to capital adequacy and liquidity guidelines and, if we fail to meet these guidelines, our financial condition and ability to make capital distributions would be adversely affected. 22 • Compliance Risks: The risks of loss or reputational harm to us resulting from regulatory sanctions, fines, penalties or losses due to our failure to comply with laws, rules, regulations or other supervisory requirements applicable to us. ▪ We operate in a highly regulated industry, and the laws and regulations that govern our operations, taxes, corporate governance, executive compensation and financial accounting and reporting, including changes in them or our failure to comply with them, may adversely affect us. ▪ Information security and data privacy are areas of heightened legislative and regulatory focus. • Asset Risks: The risks that the value of our long-lived assets will be lower than expected, resulting in reduced income over the remaining life of the asset or a lower sale value. ▪ We may not be able to realize our entire investment in the equipment that we lease to our customers. • Financial Reporting Risks: The risks that our financial information is reported incorrectly or incompletely, including through the improper application of accounting standards or other errors or omissions. ▪ Accounting standards may change and increase our operating costs or otherwise adversely affect our results. ▪ Our accounting policies and processes are critical to the reporting of our financial condition and results of operations.
Biggest changeSuch an event could adversely impact our results of operations, liquidity and financial condition, as well as cause us legal or reputational harm. ▪ We depend on the effectiveness and integrity of employees, and the systems and controls for which they are responsible, to manage operational risks. • Credit Risks: The risks that a borrower, obligor, or counterparty will fail to perform on an obligation. ▪ If we fail to effectively manage credit risk, our business and financial condition will suffer. ▪ Our allowance for credit losses may prove to be insufficient to absorb losses in our credit portfolios. ▪ Our concentration of loans and leases in certain industries increases the risk of losses and could impair our earnings if these industries experience economic difficulties. • Market Risks: The risks to our financial condition resulting from adverse movements in domestic and international macroeconomic and political conditions, as well as economic output levels, interest and inflation rates, employment levels, prices of commodities, consumer confidence levels, and changes in consumer spending, international trade policy, and fiscal and monetary policy. ▪ Failure to effectively manage our interest rate sensitivity within our defined risk appetite could adversely affect our earnings. ▪ Unfavorable economic conditions, as considered through a range of metrics, have and could continue to adversely affect our business. 20 • Liquidity Risks: The risks that we will be unable to meet our obligations as they come due because of an inability to (i) liquidate assets or obtain adequate funding, or (ii) unwind or offset specific exposures without significantly lowering market prices because of inadequate market depth or market disruptions, or that we will not meet the liquidity management requirements applicable to us as a Category IV banking organization, subject to the applicable transition periods. ▪ If our current level of balance sheet liquidity were to experience significant pressure, it could affect our ability to pay withdrawals by depositors, repay the Purchase Money Note (defined below) and fund our operations. ▪ We are subject to enhanced liquidity risk management requirements as a Category IV banking organization, and failure to meet these requirements could result in regulatory and compliance risks, and possible restrictions on our activities. • Capital Adequacy Risks: The risks that our capital levels become inadequate to preserve our safety and soundness, support our ongoing business operations and strategies and provide us with support against unexpected or sudden changes in the business/economic environment, or that we will not meet the capital adequacy requirements applicable to us as a Category IV banking organization, subject to the applicable transition periods. ▪ Our ability to grow is contingent upon access to capital, which may not be readily available to us. ▪ If we fail to meet regulatory guidelines, including enhanced capital adequacy, liquidity, stress testing, and capital planning requirements, or are subject to certain other legal limitations, our financial condition and ability to pay dividends or make other payments could be adversely affected. ▪ Increases to our level of indebtedness could adversely affect our ability to raise additional capital and to meet our obligations. • Compliance Risks: The risks of loss or reputational harm to us resulting from regulatory sanctions, fines, penalties or losses due to our failure to comply with laws, rules, regulations or other supervisory requirements applicable to us. ▪ We operate in a highly regulated industry, and the laws and regulations that govern our operations, taxes, corporate governance, executive compensation and financial accounting and reporting, including changes in them or our failure to comply with them, may adversely affect us. ▪ Information security and data privacy are areas of heightened legislative and regulatory focus. • Asset Risks: The risks that the value of our long-lived assets will be lower than expected, resulting in reduced income over the remaining life of the asset or a lower sale value. ▪ We may not be able to realize our entire investment in the equipment that we lease to our customers. ▪ Accounting for acquired assets may result in earnings volatility. • Financial Reporting Risks: The risks that our financial information is reported incorrectly or incompletely, including through the improper application of accounting standards or other errors or omissions. ▪ Accounting standards may change and increase our operating costs or otherwise adversely affect our results. ▪ Our accounting policies and processes are critical to the reporting of our financial condition and results of operations.
We are subject to litigation and other legal liability risks, and our expenses related to such risks may adversely affect our results. We are subject to litigation risks in the ordinary course of our business.
We are subject to litigation and other legal liability risks, and our expenses related to such risks may adversely affect our results. We are subject to litigation and other legal liability risks in the ordinary course of our business.
However, these deposits are subject to fluctuation due to certain factors outside our control, such as increasing competitive pressures for retail or corporate customer deposits, changes in interest rates and returns on other investment classes, or a loss of confidence by customers in us or in the banking sector generally which could result in a significant outflow of deposits within a short period of time, which may have a material adverse effect on our liquidity position.
These deposits are subject to fluctuation due to certain factors outside our control, such as increasing competitive pressures for retail or corporate customer deposits, changes in interest rates and returns on other investment classes, or a loss of confidence by customers in us or in the banking sector generally which could result in a significant outflow of deposits within a short period of time, which may have a material adverse effect on our liquidity position.
Implementation of new accounting rules or standards could additionally require us to implement technology changes which could impact ongoing earnings. Our accounting policies and processes are critical to the reporting of our financial condition and results of operations. They require management to make estimates about matters that are uncertain, and such estimates may be materially different from actual results.
Implementation of new accounting rules or standards could additionally require us to implement technology changes which could impact ongoing earnings. 41 Our accounting policies and processes are critical to the reporting of our financial condition and results of operations. They require management to make estimates about matters that are uncertain, and such estimates may be materially different from actual results.
In addition, volatility in the price of, and demand for oil and gas may have negative effects on not only our loan exposures in the exploration and production section, but may also lead to a decreased demand for our railcars. Deteriorating credit quality and our reliance on junior liens may adversely impact our business and our results of operations.
In addition, volatility in the price of, and demand for, oil and gas may have negative effects on not only our loan exposures in the exploration and production section, but may also lead to a decreased demand for our railcars. 32 Deteriorating credit quality and our reliance on junior liens may adversely impact our business and our results of operations.
In particular, a significant amount of our business is concentrated in North Carolina, South Carolina, California, Texas, New York and Florida, including areas where our facilities and retail and commercial customers have been and in the future could be impacted by hurricanes and flooding, earthquakes wildfires, and rising sea levels.
In particular, a significant amount of our business is concentrated in North Carolina, South Carolina, California, Texas, New York, Massachusetts and Florida, including areas where our facilities and retail and commercial customers have been and, in the future, could be impacted by hurricanes and flooding, earthquakes, wildfires, and rising sea levels.
Such models may be used in many processes including, but not limited to, the pricing of various products and services, classifications of loans, setting interest rates on loans and deposits, quantifying interest rate and other market risks, forecasting losses, measuring capital adequacy and calculating economic and regulatory capital levels.
Such models may be used in many processes including, but not limited to, the pricing of various products and services, classifications and grading of loans, setting interest rates on loans and deposits, quantifying interest rate and other market risks, forecasting losses, measuring capital adequacy and calculating economic and regulatory capital levels.
Thus far, this includes higher unrealized losses on investment securities, but could create additional adverse impacts to provision for credit losses and declines in demand for our products and services. We conduct limited business operations in certain foreign jurisdictions, and we engage in certain cross border lending and leasing transactions.
Thus far, this includes unrealized losses on investment securities, but could create additional adverse impacts to provision for credit losses and declines in demand for our products and services. We conduct limited business operations in certain foreign jurisdictions, and we engage in certain cross border lending and leasing transactions.
Virtually all states have also proposed or adopted information security legislation and regulations, which require, among other things, notification to affected individuals and/or attorneys general, in the event of a data breach. We collect, process, maintain, and store personal information of customers, prospects and employees.
Virtually all states have also proposed or adopted information security legislation and regulations, which require, among other things, notification to affected individuals and/or attorneys general, in the event of a data breach. 38 We collect, process, maintain, and store personal information of customers, prospects and employees.
The failure of a critical third-party vendor to provide key components of our business infrastructure could substantially disrupt our business and cause us to incur significant expense while harming our relationships with our customers. The quality of our data could deteriorate and cause financial or reputational harm to FCB.
The failure of a critical third-party vendor to provide key components of our business infrastructure could substantially disrupt our business and cause us to incur significant expense while harming our relationships with our customers. 30 The quality of our data could deteriorate and cause financial or reputational harm to FCB.
Our retail and commercial banking activities are primarily concentrated within the same geographic footprint. The markets in which we have the greatest presence are North Carolina, South Carolina, California, Texas, New York, and Florida. We also do business in Canada, primarily related to our rail portfolio.
Our retail and commercial banking activities are primarily concentrated within the same geographic footprint. The markets in which we have the greatest presence are North Carolina, South Carolina, California, Texas, New York, Massachusetts and Florida. We also do business in Canada, primarily related to our rail portfolio.
Further changes in tax laws and regulations, and income tax rates in particular, could have an adverse impact on our financial condition and results of operations. These changes could also affect our Regulatory Capital Ratios as calculated in accordance with the Basel III standards.
Further changes in tax laws and regulations, and income tax rates in particular, could have an adverse impact on our financial condition and results of operations. These changes could also affect our Regulatory Capital Ratios as calculated in accordance with the Basel III standards as implemented.
We also test goodwill for impairment when certain events occur, such as a significant decline in our expected future cash flows, a significant adverse change in the business climate or a sustained decline in the price of our common stock.
We would also test goodwill for impairment when certain events occur, such as a significant decline in our expected future cash flows, a significant adverse change in the business climate or a sustained decline in the price of our common stock.
Further, we may be exposed to negative publicity based on the identity and activities of those to whom we lend and with which we otherwise do business and the public’s view of the approach and performance of our customers and business partners with respect to ESG matters.
We may be exposed to negative publicity based on the identity and activities of those to whom we lend and with which we otherwise do business and the public’s view of the approach and performance of our customers and business partners with respect to ESG matters.
As required by GAAP, the SVBB Acquisition was accounted for under the purchase method of accounting and is based upon a preliminary valuation that involves significant estimates that are subject to change.
As required by GAAP, the SVBB Acquisition was accounted for under the purchase method of accounting and is based upon a valuation that involves significant estimates that are subject to change.
Due to our substantial concentration in our rail business, if there is a significant downturn in shipping by railcar, it could have a material adverse effect on our business and results of operations.
Due to our substantial concentration in our Rail segment, if there is a significant downturn in shipping by railcar, it could have a material adverse effect on our business and results of operations.
The provisions could also delay or make more difficult a tender offer, merger or proxy contest a stockholder might consider to be in their best interests.
The provisions could also delay or make more difficult a tender offer, merger or proxy contest that a stockholder might consider to be in their best interests.
In addition, the United States government has warned that Iran may pose an increased cyber threat to U.S. critical infrastructure, such as the financial services sector, as the conflicts in the Middle East continue. If such cyberattacks occur, it could result in severe costs and disruptions to governmental entities and companies and their operations.
In addition, the U.S. government has warned that Iran may pose an increased cyber threat to U.S. critical infrastructure, such as the financial services sector, as the conflicts in the Middle East continue. If such cyberattacks occur, it could result in severe costs and disruptions to governmental entities and companies and their operations.
Any such required additional credit loss provisions or loan charge-offs could have a material adverse effect on our financial condition and results of operations. 32 Our concentration of loans and leases in certain industries increases the risk for losses and could impair our earnings if these industries experience economic difficulties.
Any such required additional credit loss provisions or loan charge-offs could have a material adverse effect on our financial condition and results of operations. Our concentration of loans and leases in certain industries increases the risk of losses and could impair our earnings if these industries experience economic difficulties.
These risks may affect our ability to grow and could reduce our revenue streams from certain products and services, while increasing expenses associated with developing more competitive solutions, which could adversely affect our results of operations and financial condition. We are subject to reputational risks that could harm our business and prospects.
These risks may affect our ability to grow and retain customers and could reduce our revenue streams from certain products and services, while increasing expenses associated with developing more competitive solutions, which could adversely affect our results of operations and financial condition. We are subject to reputational risks that could harm our business and prospects.
Our ability to minimize the consequences of such events is in significant measure reliant on the quality of our disaster recovery planning and our ability, if any, to forecast the events, and such quality and ability may be inadequate. 30 There has been increasing political and social attention to the issue of climate change and related environmental sustainability matters.
Our ability to minimize the consequences of such events is in significant measure reliant on the quality of our disaster recovery planning and our ability, if any, to forecast the events, and such quality and ability may be inadequate. There has been increasing regulatory, political and social attention to the issue of climate change and related environmental sustainability matters.
In addition, our utilization of new technologies may also create risks that our customers may not be ready for or may not adopt such technologies. We may not be able to effectively implement new technology-driven products and services that allow us to remain competitive or be successful in marketing these products and services to our customers.
In addition, our utilization of new technologies may also create risks that our customers may not be ready for or may not adopt such technologies. We may not be able to effectively implement new technology-related products and services that allow us to remain competitive or be successful in marketing these products and services to our customers.
Compliance Risks We operate in a highly regulated industry, and the laws and regulations that govern our operations, taxes, corporate governance, executive compensation and financial accounting and reporting, including changes in them or our failure to comply with them, may adversely affect us.
Compliance Risks We operate in a highly regulated industry, and the laws and regulations that impact our operations, taxes, corporate governance, executive compensation and financial accounting and reporting, including changes in them or our failure to comply with them, may adversely affect us.
Any failure to maintain effective internal controls or to implement any necessary improvement of our internal controls in a timely manner could, among other things, result in losses from fraud or error, harm our reputation or cause investors to lose confidence in our reported financial information, each of which could have a material adverse effect on our results of operations and financial condition and the market value of our common stock. 42 The SVBB Acquisition has been accounted for under the purchase method of accounting and is based upon a preliminary valuation that involves significant estimates that are subject to change.
Any failure to maintain effective internal controls or to implement any necessary improvement of our internal controls in a timely manner could, among other things, result in losses from fraud or error, harm our reputation or cause investors to lose confidence in our reported financial information, each of which could have a material adverse effect on our results of operations and financial condition and the market value of our common stock. 42 The SVBB Acquisition has been accounted for under the purchase method of accounting and is based upon a valuation that involves significant estimates.
The impact on our customers will likely vary depending on their specific attributes, including their reliance on or role in carbon intensive activities and therefore, we could experience a drop in demand for our products and services, particularly in certain sectors .
The impact on our customers will likely vary depending on their geographic location, specific attributes, including their reliance on or role in carbon intensive activities and therefore, we could experience a drop in demand for our products and services, particularly in certain sectors.
In addition, we have exposure to numerous financial services providers, including banks, securities brokers and dealers and other financial services providers.
In addition, we have credit exposure to numerous financial services providers, including banks, securities brokers and dealers and other financial services providers.
An increasing number of states have actual or proposed privacy and information security regulations, the intent of which is to increase transparency related to how personal information is processed, choices individuals have to control how their information is used and to protect the privacy of such information.
An increasing number of states have actual or proposed privacy and information security regulations, the intent of which is to increase transparency related to how personal information is processed, choices individuals have to control how their information is used and to protect the privacy of such information. The U.S.
These choice of forum provisions do not preclude or contract the scope of exclusive federal or concurrent jurisdiction for any actions brought under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Our choice of forum provisions do not preclude or contract the scope of exclusive federal or concurrent jurisdiction for any actions brought under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Cyberattacks involving large financial institutions, including distributed denial of service attacks designed to disrupt external customer-facing services, nation state cyberattacks and ransomware attacks designed to deny organizations access to key internal resources or systems or other critical data, as well as targeted social engineering and phishing email and text message attacks designed to allow unauthorized persons to obtain access to an institution’s information systems and data or that of its customers, are becoming more common and increasingly sophisticated.
Cyberattacks involving LFIs, including distributed denial of service attacks designed to disrupt external customer-facing services, nation state cyberattacks and ransomware attacks designed to deny organizations access to key internal resources or systems or other critical data, as well as targeted social engineering and phishing email and text message attacks designed to allow unauthorized persons to obtain access to an institution’s information systems and data or that of its customers, are becoming more common and increasingly sophisticated.
Our Bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of us; (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, other employees or stockholder to us or our stockholders; (iii) any action asserting a claim against us arising pursuant to any provision of the General Corporation Law of the State of Delaware or as to which the General Corporation Law of the State of Delaware confers jurisdiction on the Court of Chancery of the State of Delaware; or (iv) any action asserting a claim against us governed by the internal affairs doctrine.
Our Bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware, or, if such court lacks jurisdiction, the federal district court of the District of Delaware, will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, other employees or stockholder to us or our stockholders; (iii) any action asserting a claim against us arising pursuant to any provision of the General Corporation Law of the State of Delaware or as to which the General Corporation Law of the State of Delaware confers jurisdiction on the Court of Chancery of the State of Delaware; or (iv) any action asserting a claim against us governed by the internal affairs doctrine.
For example, the United States government has warned that sanctions imposed against Russia by the United States in response to its conflict with Ukraine could motivate Russia to engage in malicious cyber activities against the United States.
For example, the U.S. government has warned that sanctions imposed against Russia by the United States in response to its conflict with Ukraine could motivate Russia to engage in malicious cyber activities against the United States.
Future deposit premiums paid by banks, including FCB, will depend on FDIC rules, which are subject to change, the level of the DIF and the magnitude and cost of future bank failures.
Future insurance premiums paid by banks, including FCB, will depend on FDIC rules, which are subject to change, the level of the DIF and the magnitude and cost of future bank failures.
We anticipate we will continue to experience cyberattacks, and we acknowledge that we cannot implement guaranteed preventive measures against all security threats. Additionally, a security breach may be difficult to detect, even after it occurs, which may compound the issue related to such breach.
We could continue to experience cyberattacks, and we acknowledge that we cannot implement guaranteed preventive measures against all security threats. Additionally, a security breach may be difficult to detect, even after it occurs, which may compound the issue related to such breach.
A significant portion of the loans acquired in the SVBB Acquisition were concentrated within certain industries, including technology, life science and healthcare, and with private equity and venture capital clients, areas in which we did not have significant exposure prior to the SVBB Acquisition.
A significant portion of the loans are concentrated within certain industries, including technology, life science and healthcare, and with private equity and venture capital clients, areas in which we did not have significant exposure prior to the SVBB Acquisition.
In the event FCB is unable to pay dividends to us for an extended period of time, we may not be able to service our debt obligations or pay dividends on our common or preferred stock, and the inability to receive dividends from FCB could consequently have a material adverse effect on our business, financial condition and results of operations.
In the event FCB is unable to pay dividends to us for an extended period of time, the Parent Company may not be able to service its debt obligations or pay dividends on its common or preferred stock, and the inability to receive dividends from FCB could consequently have a material adverse effect on our business, financial condition and results of operations.
Continued competitive pressures from our peers, as well as any adoption by our regulators of new rules or supervisory guidance or more aggressive examination and enforcement policies in respect of banks’ overdraft fee practices, could cause us to further modify our program and practices in ways that may have a negative impact on our revenue and earnings, which, in turn, could have an adverse effect on our financial condition and results of operations.
Continued competitive pressures from our peers, as well as any adoption by our regulators of new rules or supervisory guidance such as recent rules adopted by the CFPB or more aggressive examination and enforcement policies in respect of banks’ overdraft fee practices, could cause us to further modify our program and practices in ways that may have a negative impact on our revenue and earnings, which, in turn, could have an adverse effect on our financial condition and results of operations.
Worsening economic conditions within our markets, particularly within those with our greatest presence, could have a material adverse effect on our financial condition, results of operations and cash flows. Accordingly, we expect to continue to be dependent upon local business conditions, rail industry conditions and conditions in the local residential and commercial real estate markets we serve.
Worsening economic conditions within our markets, particularly within those with our greatest presence, could have a material adverse effect on our financial condition, results of operations and cash flows. Accordingly, we expect to continue to be dependent upon local business conditions, rail industry conditions and conditions in the local residential and CRE markets we serve.
This could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees or agents.
This could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees or stockholders.
Our internal controls that are intended to safeguard and maintain our operational and organizational infrastructure and information, as well as oversee and monitor control effectiveness, have inherent limitations and may not be successful. We may be subject to disruptions of our operating systems arising from events that are wholly or partially beyond our control.
Our internal controls that are intended to safeguard and maintain our operational and organizational infrastructure and information, as well as oversee and monitor control effectiveness, have inherent limitations and may not be successful. We have been, and may in the future be, subject to disruptions of our operating systems arising from events that are wholly or partially beyond our control.
This could adversely impact our results of operations, liquidity and financial condition, as well as cause us legal or reputational harm. Our businesses are highly dependent on the security and efficacy of our infrastructure, computer and data management systems, as well as those of third parties with whom we interact or on whom we rely.
Such an event could adversely impact our results of operations, liquidity and financial condition, as well as cause us legal or reputational harm. Our businesses are highly dependent on the security and efficacy of our infrastructure, computer and data management systems, as well as those of third parties with whom we interact or on whom we rely.
Approximately two-thirds of the consumer revolving mortgage portfolio is secured by junior lien positions, and lower real estate values for collateral underlying these loans may cause the outstanding balance of the senior lien to exceed the value of the collateral, resulting in a junior lien loan becoming effectively unsecured.
Approximately three-quarters of the consumer revolving mortgage portfolio is secured by junior lien positions, and lower real estate values for collateral underlying these loans may cause the outstanding balance of the senior lien to exceed the value of the collateral, resulting in a junior lien loan becoming effectively unsecured.
Our future success depends, in part, upon the ability to manage this expanded business while strengthening our reputation among the venture capital and private equity communities, and other participants in the industries that legacy Silicon Valley Bank served, which will pose substantial challenges for management, including challenges related to the management and monitoring of new and expanded operations and associated increased costs and complexity.
Our future success depends, in part, upon the continued ability to manage this expanded business while strengthening our reputation among the venture capital and private equity communities, and other participants in the industries that legacy Silicon Valley Bank served, which poses challenges for management, including challenges related to the management and monitoring of new and expanded operations and associated increased costs and complexity.
Deposit insurance premiums levied against banks, including FCB, may increase if the number of bank failures increase or the cost of resolving failed banks increases. The FDIC maintains a Deposit Insurance Fund (“DIF”) to protect insured depositors in the event of bank failures. The DIF is funded by fees assessed on IDIs including FCB.
Deposit insurance premiums levied against banks, including FCB, may increase if the number of bank failures increase or the cost of resolving failed banks increases. The FDIC maintains the DIF to protect insured depositors in the event of bank failures. The DIF is funded by insurance premiums assessed on IDIs including FCB.
The higher interest rate environment of recent periods, and our offerings of higher rates to attract or maintain deposits, has increased the cost of deposits, and may continue to do so, dependent on the Federal Reserve actions.
The higher interest rate environment of recent periods, and our offerings of higher rates to attract or maintain deposits, has increased the cost of deposits, and may continue to do so, dependent on the FOMC actions.
Our loans and leases include concentrations in certain industries in healthcare, such as medical and dental industries, as well as the rail business.
Our loans and leases include concentrations in certain industries in healthcare, such as medical and dental industries, as well as the Rail segment.
In particular, there has been an observed increase in the number of distributed denial of service attacks against the financial sector over the past year, which increase is believed to be partially attributable to politically motivated attacks as well as financial demands coupled with extortion . These risks are expected to continue and further intensify in the future.
In particular, there has been an observed increase in the number of distributed denial of service attacks against the financial sector in recent years, which increase is believed to be partially attributable to politically motivated attacks as well as financial demands coupled with extortion. These risks are expected to continue and further intensify in the future.
Natural or man-made disasters (including, but not limited to, earthquakes, hurricanes, tornadoes, floods, tsunamis, fires, pollution, and explosions), global pandemics, acts of war, terrorist activities, climate change or other adverse external events could hurt our financial performance (i) directly through damage to our facilities or other impacts to our ability to conduct business in the ordinary course, and (ii) indirectly through such damage or impacts to our customers, suppliers or other counterparties.
Natural or man-made disasters (including, but not limited to, earthquakes, hurricanes, tornadoes, floods, tsunamis, fires, pollution, and explosions), global pandemics, acts of war, terrorist activities, climate change or other adverse external events, as well as government actions or other restrictions in connection with such events, could hurt our financial performance (i) directly through damage to our facilities or other impacts to our ability to conduct business in the ordinary course, and (ii) indirectly through such damage or impacts to our customers, suppliers or other counterparties.
For further information on risk monitoring, refer to the “Risk Management” section included in Item 7A. Quantitative and Qualitative Disclosure about Market Risk of this Annual Report on Form 10-K. We may fail to maintain an effective system of internal control over financial reporting, which could hinder our ability to prevent fraud and provide reliable financial reports to key stakeholders.
For further information on risk monitoring, refer to the “Risk Management” section included in Item 7A. Quantitative and Qualitative Disclosure about Market Risk. We may fail to maintain an effective system of internal control over financial reporting, which could hinder our ability to prevent fraud and provide reliable financial reports to key stakeholders.
Furthermore, the receivables from the FDIC for the commercial shared loss agreement involve significant estimates that involve uncertainty. In addition, the core deposit intangibles were valued using the after-tax cost savings method under the income approach.
Furthermore, the receivables covered under the commercial shared loss agreement with the FDIC involve significant estimates that involve uncertainty. In addition, the core deposit intangibles were valued using the after-tax cost savings method under the income approach.
In response to the recent bank failures, the United States government has proposed a variety of measures and new regulations designed to strengthen capital levels, liquidity standards, and risk management practices and otherwise restore confidence in financial institutions. Any reforms, if adopted, could have a significant impact on banks and BHCs, including us.
In response to these bank failures, the U.S. government has proposed a variety of measures and new regulations designed to strengthen capital levels, liquidity standards, and risk management practices and otherwise restore confidence in financial institutions. Any reforms, if adopted, could have a significant impact on banks and BHCs, including us.
Repayment of loans in the portfolios for early-stage and mid-stage privately held companies, including those acquired in the SVBB Acquisition, may depend upon receipt by those borrowers of additional financing from venture capitalists or others, or, in some cases, a successful sale to a third-party, public offering or other form of liquidity event.
Repayment of loans in the innovation banking portfolios for early-stage and mid-stage privately held companies, may depend upon receipt by those borrowers of additional financing from venture capitalists or others, or, in some cases, a successful sale to a third-party, public offering or other form of liquidity event.
Sources of reputational risks may include, among others, cyberattacks, legal claims and regulatory action, fraudulent activities aimed at us or parties with whom we do business, inaccurate or incomplete data, insufficient operational infrastructure or oversight, malicious actions by employees, non-compliance with applicable law or regulatory policies by us or parties with whom we do business, any inability to provide reliable financial reports or maintain effective internal controls, failure of our environmental, social and governance (“ESG”) practices to meet investor or stakeholder expectations, and public perceptions of our business practices, including our deposit pricing and acquisition activity.
Sources of reputational risks have included and may in the future include, among others, cyberattacks, legal claims and regulatory action, fraudulent activities aimed at us or parties with whom we do business, inaccurate or incomplete data, insufficient operational infrastructure or oversight, employee misconduct, non-compliance with applicable law or regulatory policies by us or parties with whom we do business, any inability to provide reliable financial reports or maintain effective internal controls, failure of our environmental, social and governance (“ESG”) practices to meet investor or stakeholder expectations, or public perceptions of our business practices, including our deposit pricing and acquisition activity.
However, we have pursued and expect to continue to pursue acquisition opportunities that we believe support our business strategies and may enhance our profitability.
We plan to continue to grow our business organically. However, we have pursued and expect to continue to pursue acquisition opportunities that we believe support our business strategies and may enhance our profitability.
Excluding the impact of liquidity, the market price of our common stock can fluctuate widely in response to other factors, including expectations of financial and operating results, actual operating results, actions of institutional stockholders, speculation in the press or the investment community, market perception of acquisitions, including the CIT Merger and the SVBB Acquisition, rating agency upgrades or downgrades, the anticipated or actual incurrence of additional debt, stock prices of other companies that are similar to us, general market expectations related to the financial services industry and the potential impact of government actions affecting the financial services industry.
Excluding the impact of liquidity, the market price of our common stock has previously fluctuated and may continue to fluctuate widely in response to other factors, including expectations of financial and operating results, actual operating results, actions of institutional stockholders, speculation in the press or the investment community, market perception of acquisitions, including the CIT Merger and the SVBB Acquisition, rating agency upgrades or downgrades, the anticipated or actual incurrence of additional debt, stock prices of other companies that are similar to us, general market expectations related to the financial services industry, status of an SRP, and the potential impact of government actions affecting the financial services industry.
For example, our Certificate of Incorporation and Bylaws: • allow the Board to issue and set the terms of preferred shares without further stockholder approval; • limit who can call a special meeting of stockholders; • establish advance notice requirements for nominations for election to the Board and proposals of other business to be considered at annual meetings of stockholders; and • authorize the issuance of two classes of common stock, one of which, Class B common stock, par value $1 per share (“Class B common stock”), is entitled to cast 16 votes per share.
For example, our Certificate of Incorporation and Bylaws: • allow the Board to issue and set the terms of preferred shares without further stockholder approval, subject to the terms of any class or series of preferred shares; • limit who can call a special meeting of stockholders to the Board, the Chairman of the Board, the Chief Executive Officer, the President, or the Secretary; • establish advance notice requirements for nominations for election to the Board and proposals of other business to be considered at annual meetings of stockholders; and • authorize the issuance of two classes of common stock, one of which, Class B common stock, par value $1 per share (“Class B common stock”), is entitled to cast 16 votes per share.
Credit losses are inherent in the business of making loans and entering into other financial arrangements. Factors that influence our credit losses include overall economic conditions affecting businesses and consumers, generally, but also residential and CRE valuations.
Credit losses are inherent in the business of making loans and entering into other financial arrangements. Factors that influence our credit losses include overall economic conditions affecting businesses and consumers, generally, but also residential and commercial real estate (“CRE”) valuations.
In circumstances where our ability to generate needed liquidity is impaired, we need access to other sources of funding such as borrowings from the FHLBs and the Federal Reserve, Federal Funds purchased lines, and brokered deposits.
In circumstances where our ability to generate needed liquidity is impaired, we may need to access other sources of funding such as borrowings from the FHLBs and the Federal Reserve, federal funds purchased lines, and brokered deposits, or other sources of liquidity including capital markets.
Our primary competitors include local, regional and national banks; credit unions; commercial finance companies; leasing companies; various wealth management providers; independent and captive insurance agencies; mortgage companies; and other non-bank providers of financial services.
Our primary competitors include local, regional and national banks; credit unions; commercial finance companies; leasing companies; various wealth management providers; private equity firms; hedge funds; independent and captive insurance agencies; mortgage companies; and other non-bank providers of financial services.
Accordingly, our choice of forum provisions will not relieve us of our duties to comply with the federal securities laws and the rules and regulations thereunder, and our stockholders will not be deemed to have waived our compliance with these laws, rules and regulations.
Accordingly, our choice of forum provisions do not provide that they will relieve us of our duties to comply with the federal securities laws and the rules and regulations thereunder, nor do they provide that our stockholders will be deemed to have waived our compliance with these laws, rules and regulations.
Our existing debt, together with any future incurrence of additional indebtedness, including under the Advance Facility Agreement and the Purchase Money Note, could have consequences that are materially adverse to our business, financial condition or results of operations.
Our existing debt, together with any future incurrence of additional indebtedness, including under the Advance Facility Agreement, the Purchase Money Note, agreements with the FRB, debt issuance indentures or otherwise, could have consequences that are materially adverse to our business, financial condition or results of operations.
If, as a result of complying with the new rules, we are unable to attract and retain qualified employees, or do so at rates necessary to maintain our competitive position, or if the compensation costs required to attract and retain employees become more significant, our performance, including our competitive position, could be materially adversely affected.
If, because of complying with existing or future rules, we are unable to attract and retain qualified employees, or do so at rates necessary to maintain our competitive position, or if the compensation costs required to attract and retain employees become more significant, our performance, including our competitive position, could be materially adversely affected.
Because of the uncertainty surrounding management’s judgments and the estimates pertaining to these matters, we may be required to adjust accounting policies or restate prior period financial statements. Refer to “Critical Accounting Estimates” included in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report on Form 10-K.
Because of the uncertainty surrounding management’s judgments and the estimates pertaining to these matters, we may be required to adjust accounting policies or restate prior period financial statements. Refer to “Critical Accounting Estimates” included in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Political tensions may make it difficult for Congress to agree on any further increases to or suspension of the debt ceiling in a timely manner or at all, which may lead to a default by the U.S. government or downgrades of its credit ratings.
Congress to agree on any further increases to or suspension of the debt ceiling in a timely manner or at all, which may lead to a default by the U.S. government or downgrades of its credit ratings.
Fraudulent activity that we have been and are likely to continue to be exposed to can come in many forms, including debit card/credit card fraud, check fraud, wire fraud, electronic scanning devices attached to ATM machines, social engineering, digital fraud, malware, and phishing, smishing, or vishing attacks to obtain personal information and fraudulent impersonation of our customers through the use of falsified documents, fake identification, or stolen credentials.
Fraudulent activity that we have been and are likely to continue to be exposed to can come in many forms, including debit card/credit card fraud, check fraud, wire fraud, electronic scanning devices attached to automated teller machines, use of AI to facilitate the perpetration of social engineering and impersonation schemes and identity theft, peer-to-peer payment fraud, social engineering, digital fraud, malware, and phishing, smishing, or vishing attacks to obtain personal information and fraudulent impersonation of our customers through the use of falsified documents, fake identification, or stolen credentials.
We encounter risks as part of the normal course of our business, and our success is dependent on our ability to identify, understand and manage the risks presented by our business activities.
We encounter risks as part of the normal course of our business, and our success is dependent on our ability to identify, understand and manage the risks presented by our business activities. We categorize risks in this Item 1A.
The U.S. debt ceiling and budget deficit concerns in recent years have increased the possibility of U.S. government shutdowns, forced federal spending reductions, debt defaults, credit-rating downgrades and an economic slowdown or recession in the United States.
The U.S. debt ceiling and budget deficit concerns in recent years have increased the possibility of U.S. government shutdowns, forced federal spending reductions, debt defaults, credit-rating downgrades and an economic slowdown or recession in the United States. Political tensions may make it difficult for the U.S.
Any failure to manage such credit risks may materially adversely affect our business, consolidated results of operations and financial condition because it may lead to loans that we make not being paid back in part or in full on a timely basis or at all.
Any failure to manage such credit risks may materially adversely affect our business, consolidated results of operations and financial condition because it may lead to loans that we make not being paid back in part or in full on a timely basis or at all. 31 Our allowance for credit losses may prove to be insufficient to absorb losses in our credit portfolios.
We are exposed to losses related to fraud. As technology continues to evolve, criminals are using increasingly more sophisticated techniques to commit and hide fraudulent activity.
We are exposed to losses related to fraud. As technology continues to evolve, criminals are using increasingly more sophisticated techniques to commit fraud, hide fraudulent activity, and proliferate effective techniques through social media.
Data privacy and security risks have become the subject of increasing legislative and regulatory focus in recent years.
Information security and data privacy are areas of heightened legislative and regulatory focus. Data privacy and security risks have become the subject of increasing legislative and regulatory focus in recent years.
Claims and legal actions, including supervisory actions by our regulators, that have been or may be initiated against us (including against entities that we acquire) from time to time could involve large monetary sums and significant defense costs.
Claims and legal actions, including supervisory actions by our regulators, that have been or may be initiated against us (including against entities that we acquire) or that involve matters for which we have indemnification obligations or other retained liabilities from time to time could involve large monetary sums and significant defense costs.
We face significant competition in the recruitment of qualified executive officers and employees. Losses of, or changes in, our current executive officers or other personnel and their expertise and services, or substantial increases in the costs of employee compensation or benefits, may disrupt our business and could adversely affect our financial condition and results of operations.
Losses of, or changes in, our current executive officers or other key personnel and their expertise and services, or substantial increases in the costs of employee compensation or benefits, may disrupt our business and could adversely affect our financial condition and results of operations.
Such additional regulation and supervision may limit our ability to pursue business opportunities and result in a material adverse impact on our financial condition and results of operations. 38 Changes to statutes, regulations, or regulatory policies, including changes in interpretation or implementation of statutes, regulations, or policies, could affect us in substantial and unpredictable ways.
In addition, changes to statutes, regulations, or regulatory policies, including changes in interpretation or implementation of statutes, regulations, or policies, could affect us in substantial and unpredictable ways, including increased compliance costs that may limit our ability to pursue business opportunities and result in a material adverse impact on our financial condition and results of operations.
Interest rates are highly sensitive to many factors that are beyond our control, including general economic and market conditions and policies of various governmental and regulatory agencies, particularly the actions of the Federal Reserve’s Federal Open Market Committee (“FOMC”).
Our results of operations and cash flows are highly dependent upon net interest income (“NII”). Interest rates are highly sensitive to many factors that are beyond our control, including general economic and market conditions and policies of various governmental and regulatory agencies, particularly the actions of the Federal Reserve’s Federal Open Market Committee (“FOMC”).
Inadequate collateral values, rising interest rates and unfavorable economic conditions could result in greater delinquencies, write-downs or charge-offs in future periods, which could have a material adverse impact on our results of operations and capital adequacy. Our financial condition could be adversely affected by the soundness of other financial institutions.
Inadequate collateral values, rising interest rates and unfavorable economic conditions could result in greater delinquencies, write-downs or charge-offs in future periods, which could have a material adverse impact on our results of operations and capital adequacy.
Our compensation practices are subject to review and oversight by the Federal Reserve, the FDIC and other regulators. The federal banking agencies have issued joint guidance on executive compensation designed to help ensure that a banking organization’s incentive compensation policies do not encourage imprudent risk taking and are consistent with the safety and soundness of the organization.
The federal banking agencies have issued joint guidance on executive compensation designed to help ensure that a banking organization’s incentive compensation policies do not encourage imprudent risk taking and are consistent with the safety and soundness of the organization.
In connection with the SVBB Acquisition, FCB issued the five-year Purchase Money Note of approximately $36 billion payable to the FDIC, which was subsequently amended and restated to adjust the principal amount to approximately $36.07 billion.
Also, in connection with the SVBB Acquisition, FCB issued a five-year note of approximately $35 billion payable to the FDIC (the “Purchase Money Note”) due March 2028, which was subsequently amended and restated to adjust the principal amount to approximately $36.07 billion.
If the market value of leased equipment decreases at a rate greater than we projected, whether due to rapid technological or economic obsolescence, unusual wear and tear on the equipment, excessive use of the equipment, recession or other adverse economic conditions impacting supply and demand, it could adversely affect the current values or the residual values of such equipment. 41 Financial Reporting Risks Accounting standards may change and increase our operating costs or otherwise adversely affect our results.
If the market value of leased equipment decreases at a rate greater than we projected, whether due to rapid technological or economic obsolescence, unusual wear and tear on the equipment, excessive use of the equipment, recession or other adverse economic conditions impacting supply and demand, it could adversely affect the current values or the residual values of such equipment.
We must generally satisfy a number of material conditions prior to consummating any acquisition including, in many cases, federal and state regulatory approval or requirements, and we may be subject to potentially increased regulatory requirements in the future.
We must generally satisfy a number of material conditions prior to consummating any acquisition including, in many cases, federal and state regulatory approval or requirements, and we may be subject to potentially increased regulatory requirements in the future. Further, changes in policies focused on bank acquisitions may interfere or impede future acquisition opportunities.
On August 29, 2023, the federal banking agencies released a notice of proposed rulemaking that requires large banks with total assets of $100 billion or more to maintain a minimum amount of long-term debt that can be used, in the instance of a bank’s failure, to absorb losses and increase options to resolve the failed bank.
In 2023, the federal banking agencies released an NPR, which would require large banks with total consolidated assets of $100 billion or more to maintain a minimum amount of long-term debt that can be used, in the instance of a bank’s failure, to absorb losses and increase options to resolve the failed bank.
These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers or other employees or agents, which may discourage lawsuits against us and our directors, officers and other employees or agents.
These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers or other employees or agents, which may discourage lawsuits against us and our directors, officers and other employees or agents. 24 There is some uncertainty as to whether a court would enforce our exclusive forum provisions.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAdditionally, BancShares has implemented a threat awareness program that includes cross-organizational information sharing capability for threat intelligence and membership and engagement with intelligence communities including the Financial Services Information Sharing and Analysis Center, Federal Bureau of Investigation, United States Department of Homeland Security, and others.
Biggest changeThis mission is supported by policy, standards, and procedures which align to industry frameworks, including the National Institute of Standards and Technology Cybersecurity Framework, and are executed through the firm’s preventive and detective controls. 43 BancShares has implemented a threat awareness program that includes cross-organizational information sharing capabilities for threat intelligence and membership and engagement with intelligence communities, including but not limited to, the Financial Services Information Sharing and Analysis Center, the Financial Services Sector Coordinating Council, the Federal Bureau of Investigation, and the U.S.
Under the Three Lines Model, the ECSO led by our Chief Information Security Officer (the “CISO”), acts as a first line of defense and has primary responsibility for identifying, assessing, monitoring, and managing material risks from cybersecurity threats. Our CISO reports to our Chief Information & Operations Officer (“CIOO”), who reports directly to our Chief Executive Officer.
Under the Three Lines Model, the ECSO, led by our Chief Information Security Officer (the “CISO”), acts as a first line of defense and has primary responsibility for identifying, assessing, monitoring, and managing material risks from cybersecurity threats. Our CISO reports to our Chief Information and Operations Officer (“CIOO”), who reports directly to our Chief Executive Officer.
Management Committees, which include as members the CISO and other cybersecurity leadership, have clear lines of communication with the Board and its committees. The Management Committees are designed with a purpose-driven scope and decision-making authority and are required to provide the Board with regular reporting of management’s current business activities and the potential risk associated with those activities.
Management Committees, which include as members the CISO and other cybersecurity leadership, have clear lines of communication with the Board and its committees. The Management Committees are designed with a purpose-driven scope and decision-making authority and are required to provide the Board with regular reporting of management’s business activities and the potential risk associated with those activities.
The CISO is informed about and monitors the prevention, detection, mitigation, and remediation of cybersecurity by the ECSO through regular reporting and escalations, as required. He, the CIOO, and others report information about material risks from cybersecurity threats to the Board or a committee or subcommittee of the Board, as described below.
The CISO is informed about and monitors the prevention, detection, mitigation, and remediation of cybersecurity by the ECSO through regular reporting and escalations, as required. The CIOO, the CISO, and others, report information about material risks from cybersecurity threats to the Board or a committee or subcommittee of the Board, as described below.
Additionally, the Risk Committee reviews BancShares’ information security policies and program with a focus on whether they are appropriate to protect data, records, and proprietary information of BancShares as well as that of its customers and employees.
Additionally, the Risk Committee reviews BancShares’ information security policy and program with a focus on whether they are appropriate to protect data, records, and proprietary information of BancShares as well as that of its customers and employees. 44
In addition, the Audit Committee of the Board (the “Audit Committee”) monitors internal audit’s coverage of cybersecurity governance, risks, and related controls, including any identified deficiencies, from cybersecurity or other risks, that could adversely affect the ability to record, process, summarize, and report financial data. The Risk Committee coordinates with Audit Committee for review of information security matters, as needed.
In addition, the Audit Committee of the Board monitors internal audit’s coverage of cybersecurity governance, risks, and related controls, including any identified deficiencies, that could adversely affect the ability to record, process, summarize, and report financial data. The Risk Committee coordinates with the Audit Committee for review of information security matters, as needed.
The Risk Committee further oversees cybersecurity and other risks through a subcommittee, the Enterprise Risk Oversight Committee (“EROC”), as well as additional management-level subcommittees beneath the Risk Committee including the Technology & Security Risk Committee (“TSRC”) and the Operational Risk Committee (“ORC” and, together with the EROC and TSRC, the “Management Committees”).
The Risk Committee oversees cybersecurity and other risks through reporting from management, including the Enterprise Risk Oversight Committee (“EROC”), as well as additional management-level subcommittees beneath the Risk Committee including the Technology & Security Risk Committee (“TSRC”) and the Operational Risk Committee (“ORC” and, together with the EROC and TSRC, the “Management Committees”).
The Risk Committee receives information on cybersecurity risk, including risk appetite utilization, breaches and emerging risks, and the control environment, directly or indirectly, from various sources, including each of the CISO, the EROC, Management Committees, the Task Force, the TSRC and the ORC.
The Risk Committee receives information on cybersecurity risk, including risk appetite utilization, breaches and emerging risks, and the control environment, directly or indirectly, from various sources, including the CIOO, CISO, and each of the Management Committees.
Governance The Board retains supervisory oversight responsibility for the organization and its activities, including enterprise risk management and cybersecurity threats, subject to the committee delegation described below. The Board conducts oversight of management through its subcommittees, presentations from senior leadership, and routine board-directed reporting to ensure management continues to operate and conduct business in alignment with Risk Appetite Statements.
Governance The Board retains supervisory oversight responsibility for the organization and its activities, including enterprise risk management and cybersecurity risks. The Board conducts oversight of management through board committees, presentations from senior leadership, and routine Board-directed reporting to ensure management continues to operate and conduct business in alignment with Risk Appetite Statements.
The Task Force is comprised of members of the Board, working closely with management, including the CIOO. 44 The CISO is responsible for assessing and managing material cyber risks. His expertise with assessing and managing material cyber risks is based on more than 20 years of cybersecurity experience with prior roles as a CISO and Global Head of Operations.
The CISO is responsible for assessing and managing material cyber risks. The CISO’s expertise with assessing and managing material cyber risks is based on more than 20 years of cybersecurity experience with prior roles as a CISO and Global Head of Operations.
The Board may from time to time create informal working groups to enable deeper and more detailed discussions related to our technology needs and investments and inform the Board on cybersecurity risks, among other topics.
Management Committees are informed by EIM following the incident management process as per internal policies and standards. The Board may from time to time create informal working groups to enable deeper and more detailed discussions related to our technology needs and investments and inform the Board on cybersecurity risks, among other topics.
BancShares also utilizes external experts and third-party assessors to maximize its risk intelligence coverage and management ability. BancShares engages internal auditors, external assessors, and consultants to benchmark, scale, manage, and identify cybersecurity threats. Consultants also assess BancShares’ cybersecurity systems and complete vulnerability testing. These groups assist the ECSO with cybersecurity risk management and identification.
Department of Homeland Security. BancShares also utilizes external experts and third-party assessors to maximize its risk intelligence coverage and to enhance risk detection and remediation. BancShares engages internal auditors, external assessors, and consultants to benchmark, scale, manage, and identify cybersecurity threats. Consultants also assess BancShares’ cybersecurity systems and complete vulnerability testing.
As a part of the ECSO, Enterprise Incident Management (“EIM”) maintains incident response playbooks (i.e., standard operating procedures) to identify, respond, classify, and analyze incidents and events in accordance with BancShares’ Enterprise Severity Matrix, and our Security Operation Center identifies, assesses, manages, and monitors potential cybersecurity events with EIM.
Within ECSO, the Cyber Security Operation Center identifies, assesses, monitors, and manages potential cybersecurity events in coordination with the Enterprise Incident Management (“EIM”) team, escalating analysis and response to incidents and events in accordance with established procedures and the Enterprise Severity Matrix.
In addition, BancShares maintains a third-party risk management team tasked with evaluating, identifying, and managing risk from all third-party engagements, including from cybersecurity threats.
In addition, BancShares maintains a third-party risk management team tasked with identifying, evaluating, and managing risk posed by all third-party engagements, including from cybersecurity threats. The second-line independent risk management, including compliance, enterprise risk management, and operational risk management, works with the first line ECSO to evaluate, assess, and manage material risks using an established Risk Appetite Framework.
For example, Risk Appetite Statements, top risks, and issues are reported to the Management Committees and the Risk Committee of the Board to monitor progress, identify trends, and escalate issues. BancShares follows a defense-in-depth and layered-control framework to protect the organization against cybersecurity threats and attacks.
BancShares maintains processes for reporting and escalation from each line of defense through management to senior leadership, to management-level committees, and to committees of the Board and the Board, as appropriate. Reporting includes top and emerging risks, and other operational risk metrics. BancShares follows a defense-in-depth and layered-control framework to protect the organization against cybersecurity threats and attacks.
ECSO remains committed to maintaining and improving preventative and detective controls and enhancing our defenses in response to the evolving threat landscape. This mission is supported by policy, standards, and procedures which align to industry standards, including the National Institute of Standards and Technology Cybersecurity Framework, and are enforced through the firm’s preventive and detective controls.
ECSO remains committed to maintaining and improving preventative and detective controls and enhancing our defenses in response to the evolving threat landscape.
The third-line in the Three Lines Model is our internal audit team, which assesses the effectiveness of related controls. 43 We maintain processes for escalation from each line, including processes to report information to management, management-level committees and to committees of the Board and the Board as a whole, as appropriate.
The Risk Appetite Framework requires the cybersecurity organization to document the current risk landscape and the activities undertaken to mitigate risk that exceeds enterprise risk tolerance. The third-line in the Three Lines Model is our internal audit team, which assesses the effectiveness of related controls.
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The second-line independent risk management, including compliance, enterprise risk management, and operational risk management, works with the first line ECSO to evaluate, assess, and manage material risks using an established Risk Appetite Framework that is designed to require that the cybersecurity organization appropriately document the current risk landscape and the activities undertaken to mitigate risk that falls outside of the enterprise risk tolerance.
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Management Committees are informed by EIM following the incident management process as per internal policies and standards.
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For example, our Board recently established and authorized a Task Force on Technology (the “Task Force”) to assist and support the Board in a strategic review of the role of technology in our operations, our current and future investments in technology resources, and the current board oversight of risk, governance, and controls surrounding technology and cybersecurity.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe that these properties are in good condition and well maintained, and are suitable and adequate for our business needs. Additional information relating to leased office space is set forth in Note 6—Leases and additional information relating to premises and equipment is set forth in Note 7—Premises and Equipment, of BancShares’ Notes to Consolidated Financial Statements.
Biggest changeAdditional information relating to leased office space is set forth in Note 6—Leases and additional information relating to premises and equipment is set forth in Note 7—Premises and Equipment of the Notes to Consolidated Financial Statements contained in Item 8. Financial Statements and Supplementary Data.
The addition of SVBB in 2023 and CIT in 2022 primarily increased leased space, as both occupied office space and a branch network. As of December 31, 2023, FCB operated more than 600 branches and offices throughout the United States. FCB owns many of our branch buildings and leases other facilities from third parties.
The addition of SVBB in 2023 and CIT in 2022 primarily increased leased space, as both occupied office space and a branch network. As of December 31, 2024, FCB operated more than 500 branches and offices throughout the United States. FCB owns many of our branch buildings and leases other facilities from third parties.
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We believe that these properties are in good condition, are well maintained, and are suitable and adequate for our business needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAlthough the amount of any ultimate liability with respect to those matters cannot be determined, in the opinion of management, no legal actions currently exist that would be material to BancShares’ consolidated financial statements. Additional information relating to legal proceedings is set forth in Note 24—Commitments and Contingencies, of BancShares’ Notes to Consolidated Financial Statements. 45 PART II
Biggest changeAlthough the amount of any ultimate liability with respect to those matters cannot be determined, in the opinion of management, no legal actions currently exist that would be material to BancShares’ consolidated financial statements. Additional information relating to legal proceedings is set forth in Note 23—Commitments and Contingencies of the Notes to Consolidated Financial Statements contained in Item 8.
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Financial Statements and Supplementary Data. 45 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOn many days there is no trading and, to the extent there is trading, it is generally low volume. Over-the-counter market quotations for BancShares Class B common stock represent inter-dealer prices without retail markup, markdown or commissions, and may not represent actual transaction prices.
Biggest changeOver-the-counter market quotations for BancShares Class B common stock represent inter-dealer prices without retail markup, markdown or commissions, and may not represent actual transaction prices. The average monthly trading volume for the Class A common stock was 1,881,852 shares during the fourth quarter of 2024 and 1,832,633 shares for the year ended December 31, 2024.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Parent Company has two classes of common stock—Class A common stock and Class B common stock. Shares of Class A common stock have one vote per share, while shares of Class B common stock have 16 votes per share.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Parent Company has two classes of common stock—Class A and Class B common stock. Shares of Class A common stock have one vote per share, while shares of Class B common stock have 16 votes per share.
The average monthly trading volume for the Class A common stock was 1,423,077 shares during the fourth quarter of 2023 and 2,468,115 shares for the year ended December 31, 2023. The Class B common stock monthly trading volume averaged 1,150 shares during the fourth quarter of 2023 and 1,838 shares for the year ended December 31, 2023.
The Class B common stock monthly trading volume averaged 2,296 shares during the fourth quarter of 2024 and 2,411 shares for the year ended December 31, 2024.
The performance graph represents past performance and should not be considered to be an indication of future performance. 2018 2019 2020 2021 2022 2023 FCNCA $ 100 $ 142 $ 153 $ 221 $ 203 $ 379 Nasdaq US Benchmark TR 100 131 159 200 161 203 KBW Nasdaq Bank Total Return Index 100 136 122 169 133 132
The performance graph represents past performance and should not be considered to be an indication of future performance. 2019 2020 2021 2022 2023 2024 FCNCA $ 100 $ 108 $ 157 $ 144 $ 268 $ 400 Nasdaq US Benchmark Total Return Index 100 121 153 123 155 193 KBW Nasdaq Bank Total Return Index 100 90 124 98 97 133
As of February 16, 2024, there were aggregates of 986 and 134 active holders of record and individual participants in securities position listings with respect to the Class A common stock and Class B common stock, respectively. The market volume for Class B common stock is extremely limited.
As of February 14, 2025, there were 906 and 128 holders of record with respect to the Class A common stock and Class B common stock, respectively. The market volume for Class B common stock is extremely limited. On many days there is no trading and, to the extent there is trading, it is generally low volume.
The broad-market index comparison is to the Nasdaq US Benchmark Total Return Index and the industry index comparison is to the KBW Nasdaq Bank Total Return Index, which is composed of the largest banking companies and includes all money center banks and regional banks.
The broad-market index comparison is to the Nasdaq US Benchmark Total Return Index and the industry index comparison is to the KBW Nasdaq Bank Total Return Index, which includes banking stocks representing large U.S. national money centers, regional banks and thrift institutions. Each trend line assumes $100 was invested on December 31, 2019, and dividends were reinvested for additional shares.
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There were no repurchases of our stock during the three months ended December 31, 2023. The graph and table below compare the cumulative total shareholder return (“CTSR”) of our Class A common stock to selected industry and broad-market indices.
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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 December 31, 2025.
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Each trend line assumes $100 was invested on December 31, 2018, and dividends were reinvested for additional shares.
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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.
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During the fourth quarter of 2024, we repurchased 461,583 shares of our Class A common stock for $963 million and paid a dividend of $1.95 per share on our Class A and Class B common stock.
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Shares repurchased during the fourth quarter of 2024 represented 3.50% of Class A common shares and 3.26% of total Class A and Class B common shares outstanding at September 30, 2024.
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From inception of the SRP through December 31, 2024, we have repurchased 814,641 shares of our Class A common stock for $1.66 billion, representing 6.02% of Class A common shares and 5.61% of total Class A and Class B common shares outstanding as of June 30, 2024.
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The total capacity remaining under the SRP was $1.84 billion as of December 31, 2024. Subsequent to December 31, 2024, BancShares purchased an additional 140,373 shares of Class A common stock through February 14, 2025. The following table summarizes our monthly Class A common stock repurchase activity during the fourth quarter of 2024.
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Issuer Repurchases of Class A Common Stock dollars in millions, except per share data Total Number of Class A Shares Purchased Average Price Paid per Share Total Number of Shares Repurchased as Part of Publicly Announced Plan Approximate Dollar Value of Shares that May Yet be Purchased Under Plan Repurchases from October 1 - 31, 2024 189,709 $ 1,974.90 189,709 $ 2,425 Repurchases from November 1 - 30, 2024 129,796 2,191.22 129,796 2,141 Repurchases from December 1 - 31, 2024 142,078 2,139.11 142,078 1,837 Total 461,583 $ 2,086.30 461,583 $ 1,837 46 The graph and table below compare the cumulative total shareholder return (“CTSR”) of our Class A common stock to selected industry and broad-market indices.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAccordingly, we can give no assurance that actual results would not differ materially from the estimated outcomes of our simulations. 84 The following table provides loan maturity distribution information: Table 42 Loan Maturity Distribution dollars in millions At December 31, 2023, Maturing Within One Year One to Five Years Five to 15 Years After 15 Years Total Commercial Commercial construction $ 1,122 $ 1,693 $ 639 $ 11 $ 3,465 Owner occupied commercial mortgage 1,702 6,906 6,699 260 15,567 Non-owner occupied commercial mortgage 3,041 6,213 1,651 635 11,540 Commercial and industrial 8,823 15,684 2,377 188 27,072 Leases 574 1,261 219 — 2,054 Total commercial 15,262 31,757 11,585 1,094 59,698 Consumer Residential mortgage 529 2,314 5,101 6,478 14,422 Revolving mortgage 58 200 690 1,059 2,007 Consumer auto 324 993 125 — 1,442 Consumer other 168 395 146 11 720 Total consumer 1,079 3,902 6,062 7,548 18,591 SVB Global fund banking 24,076 1,355 122 — 25,553 Investor dependent - early stage 116 1,287 — — 1,403 Investor dependent - growth stage 277 2,620 — — 2,897 Innovation and cash flow dependent 1,287 8,038 333 — 9,658 Private Bank 216 443 993 8,170 9,822 CRE 239 1,737 646 76 2,698 Other 749 752 861 620 2,982 Total SVB 26,960 16,232 2,955 8,866 55,013 Total loans and leases $ 43,301 $ 51,891 $ 20,602 $ 17,508 $ 133,302 85 The following table provides information regarding the sensitivity of loans and leases to changes in interest rates: 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 $ 950 $ 1,393 Owner occupied commercial mortgage 12,515 1,350 Non-owner occupied commercial mortgage 3,886 4,613 Commercial and industrial 8,802 9,447 Leases 1,467 13 Total commercial 27,620 16,816 Consumer Residential mortgage 7,294 6,599 Revolving mortgage 33 1,916 Consumer auto 1,118 — Consumer other 272 280 Total consumer 8,717 8,795 SVB Global fund banking 7 1,470 Investor dependent - early stage 22 1,265 Investor dependent - growth stage 2 2,618 Innovation and cash flow dependent — 8,371 Private Bank 1,954 7,652 CRE 1,171 1,288 Other 1,447 786 Total SVB 4,603 23,450 Total loans and leases $ 40,940 $ 49,061 Reference Rate Reform The U.S.
Biggest changeAccordingly, we can give no assurance that actual results would not differ materially from the estimated outcomes of our simulations. 85 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.
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 loans are concentrated in loans with large balances and loans in certain industries and customer groups, including private equity and venture capital.
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.
At a high level, demand for equipment is correlated with Gross Domestic Product (“GDP”) growth trends for the markets the equipment serves, as well as the more immediate conditions of those markets. Cyclicality in the economy and shifts in trade flows due to specific events represent risks to the earnings that can be realized by these businesses.
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.
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” section of this MD&A for additional disclosures regarding investment securities.
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.
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.
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.
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.
Additionally, changes in factors and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others. 91 Accounting policies related to the ALLL are discussed in Note 1—Significant Accounting Policies and Basis of Presentation.
Many possible events or factors could affect BancShares’ future financial results and performance and could cause the actual results, performance or achievements of BancShares to differ materially from any anticipated results expressed or implied by such forward-looking statements.
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.
Failure to meet certain capital requirements may result in actions by regulatory agencies that could have a material impact on our 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.
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.
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 21—Income Taxes for additional information.
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.
Our ALLL estimate as of December 31, 2023 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.
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.
BALANCE SHEET ANALYSIS INTEREST-EARNING ASSETS Interest-earning assets include interest-earning deposits at banks, securities purchased under agreement 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.
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.
Key indicators will continue to be monitored and impacts assessed as part of our ongoing risk management framework. 72 CREDIT RISK Credit risk is the risk of not collecting payments pursuant to the contractual terms of loans, leases and certain investment securities.
Key indicators will continue to be monitored and impacts assessed as part of our ongoing risk management framework. 75 Credit Risk Credit risk is the risk of not collecting payments pursuant to the contractual terms of loans, leases and certain investment securities.
Words such as “anticipates,” “believes,” “estimates,” “expects,” “predicts,” “forecasts,” “intends,” “plans,” “projects,” “targets,” “designed,” “could,” “may,” “should,” “will,” “potential,” “continue,” “aims” 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.
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.
BancShares’ total consolidated assets remains 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.
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.
For instance, 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.
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. 83 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.
Commercial Lending and Leasing BancShares employs a credit ratings system where each commercial loan is assigned a probability of default, loss given default, and/or overall credit rating using scorecards developed to rate each type of transaction incorporating assessments of both quantitative and qualitative factors.
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.
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 driven by changes in assets, liabilities, and off-balance sheet instruments in response to a change in interest rates.
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.
Except for loans acquired through mergers and acquisitions, we have not purchased HELOCs in the secondary market, 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.
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.
We strive to identify potential problem loans as early as possible, to record charge-offs or write-downs as appropriate and to maintain an appropriate ALLL that accounts for expected losses over the life of the loan and lease portfolios.
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.
As of December 31, 2023, BancShares continues to have an asset sensitive interest rate risk profile and the potential exposure to forecasted earnings was largely driven by the composition of the balance sheet (primarily due to floating rate commercial loans and cash), as well as estimates of modest future deposit betas.
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.
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 81.9% of the revolving mortgage portfolio relates to properties in North Carolina and South Carolina.
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.
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, GDP, home price index, CRE index, corporate profits, and credit spreads.
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.
The following tables present the average balances, yields on interest-earning assets, rates on interest-bearing liabilities, and changes in NII due to changes in: (i) volume (average balances of interest-earning assets and interest-bearing liabilities) and (ii) yields or rates. • 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 rate/volume change (i.e., portfolio mix) is calculated as the change in rate multiplied by the change in volume.
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.
The ETR in future periods may vary from the actual 2023 ETR due to changes in these factors. 60 BancShares monitors and evaluates the potential impact of current events on the estimates used to establish income tax expense and income tax liabilities.
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.
The following ASUs were issued by the 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.
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.
The deposit rates we offer are influenced by market conditions and competitive factors. Market rates are the key drivers of deposit costs and we continue to 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.
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.
Refer to the Rail segment discussion in the section entitled “Results by Business Segment” of this MD&A for further details. 59 Maintenance and Other Operating Lease Expenses The Rail segment provides railcars, primarily pursuant to full-service lease contracts under which we, as lessor, are responsible for railcar maintenance and repair.
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.
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, of this Annual Report on Form 10-K.
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.
At December 31, 2023, ALLL estimates in these scenarios ranged from approximately $1.39 billion, when weighing the upside scenario 100%, to approximately $2.22 billion when weighting the downside scenario 100%. BancShares management determined that an ALLL of $1.75 billion was appropriate as of December 31, 2023.
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.
The credit risk of this industry concentration is mitigated 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. 78 Consumer Loans Concentrations Loan concentrations may exist when multiple borrowers could be similarly impacted by economic or other conditions.
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 presents borrowings, net of the respective unamortized purchase accounting adjustments and issuance costs: Table 27 Borrowings dollars in millions December 31, 2023 December 31, 2022 December 31, 2021 Securities sold under customer repurchase agreements $ 485 $ 436 $ 589 Federal Home Loan Bank borrowings Floating rate notes due through September 2025 — 4,250 — Fixed rate notes due through March 2032 — — 645 Federal Deposit Insurance Corporation 3.500% fixed rate note due March 2028 (1) 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 318 320 — 6.000% fixed rate notes due April 2036 59 59 — Subordinated debt 6.125% fixed rate notes due March 2028 460 469 — 4.125% fixed-to-fixed rate notes due November 2029 101 102 — 3.375% fixed-to-floating rate notes due March 2030 349 348 347 Macon Capital Trust I - floating rate debentures due March 2034 — 14 14 SCB Capital Trust I - floating rate debentures due April 2034 (2) 10 10 10 FCB/SC Capital Trust II - floating rate debentures due June 2034 (2) 18 18 18 FCB/NC Capital Trust III - floating rate debentures due June 2036 — 88 88 Other borrowings 8 26 73 Total borrowings $ 37,654 $ 6,645 $ 1,784 (1) Purchase Money Note was issued in connection with the SVBB Acquisition.
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, 2023 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.
Our railcar utilization, including commitments to lease, improved from 97.7% at December 31, 2022 to 98.7% at December 31, 2023. 64 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.
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.
This component is allocated between the changes in NII due to volume and yield or rate based on the ratio each component bears to the absolute value of their total. • Tax equivalent NII was not materially different from NII, therefore we present NII in our analysis. 53 Table 5 Average Balances and 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 27,567 618 2.24 23,949 125 0.52 22 471 493 Savings 26,121 963 3.69 14,392 117 0.81 158 688 846 Time deposits 14,946 514 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 Non-PCD and Purchase Credit Deteriorated (“PCD”) loans, nonaccrual loans, and loans held for sale.
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. 57 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.
Table 9 Provision for Credit Losses dollars in millions Year Ended December 31, 2023 2022 2021 Day 2 provision for loan and lease losses $ 462 $ 454 $ — Provision (benefit) for loan and lease losses 703 97 (37) Total provision (benefit) for loan and lease losses 1,165 551 (37) Day 2 provision for off-balance sheet credit exposure 254 59 — (Benefit) provision for off-balance sheet credit exposure (44) 35 — Total provision for off-balance sheet credit exposure 210 94 — Benefit for investment securities available for sale credit losses — — — Provision (benefit) for credit losses $ 1,375 $ 645 $ (37) 57 NONINTEREST INCOME Noninterest Income Noninterest income is an essential part of our total revenue.
Table 9 Provision for Credit Losses dollars in millions Year Ended December 31, 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 59 Noninterest Income Noninterest income is an essential part of our total revenue.
Except to the extent required by applicable law or regulation, BancShares disclaims any obligation to update such factors or to publicly announce the results of any revisions to any of the forward-looking statements included herein to reflect future events or developments.
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.
Select metrics specific to our general office loan portfolio are as follows: Table 33 Select General Office Loan Metrics dollars in millions December 31, 2023 % of total loans and leases 2.20 % % of commercial real estate loans 13.77 % Average loan balance $ 2 Net charge-offs (%) 3.56 % Delinquencies as a % of total CRE loans 13.56 % Non-performing loans as a % of CRE loans 11.38 % ALLL ratio 4.77 % 77 Concentration Risk We strive to minimize the risks associated with large concentrations within specific geographic areas, collateral types or industries.
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 December 31, 2023 % 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.
FRB Capacity Under borrowing arrangements with the FRB of Richmond, FCB has access to $5.12 billion on a secured basis. There were no outstanding borrowings with the FRB Discount Window at December 31, 2023, 2022, and 2021.
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.
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 $2.01 billion, or 11% of total consumer loans, at December 31, 2023, compared to $1.95 billion, or 11%, at December 31, 2022.
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.
While economic data continues to be mixed, baseline economic forecasts currently reflect a more marked decline in CRE properties due to current interest rate levels that impacted the ALLL forecasts.
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.
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 and life science/healthcare industries. These loans are dependent on either the borrower’s cash flows or balance sheet for repayment.
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.
INCOME TAXES Table 12 Income Tax Data dollars in millions Year Ended December 31, 2023 2022 2021 Income before income taxes $ 12,077 $ 1,362 $ 701 Income tax expense $ 611 $ 264 $ 154 Effective tax rate 5.1 % 19.4 % 22.0 % The effective tax rate (“ETR”) was 5.1% for the current year compared to 19.4% in the prior year.
Income Taxes Table 13 Income Tax Data dollars in millions Year Ended December 31, 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.
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, 2023 were $76 million, an increase of $16 million or 27% from $60 million at December 31, 2022.
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.
The capital management framework requires contingency plans be defined and may be employed at management’s discretion . 89 Common and Preferred Stock Dividends During the first, second and third quarters of 2023, we paid quarterly dividends of $0.75 on the Class A common stock and Class B common stock.
The capital management framework requires contingency plans be defined and may be employed at management’s discretion . 89 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.
NII Sensitivity generally focuses on shorter term earnings risk, while EVE Sensitivity assesses the longer-term risk of the existing balance sheet. 82 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.
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.
As of December 31, 2022, BancShares and FCB risk-based capital ratio conservation buffers were 5.06% and 4.99%, respectively. The capital ratio conservation buffers represent the excess of the regulatory capital ratios as of December 31, 2023 and 2022 over the Basel III minimum for the ratio that is the binding constraint.
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.
Treasury securities and government agency securities described above, as well as securities issued by the Supranational Entities and Multilateral Development Banks and FDIC guaranteed certificates of deposit with other financial institutions. Given the consistently strong credit rating of the U.S.
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.
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 $15.11 billion and was not utilized as of December 31, 2023.
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.
Treasury 1.5 $ 479 $ 439 2.4 $ 474 $ 424 — $ — $ — Government agency 4.9 1,506 1,363 7.6 1,548 1,362 — — — Residential mortgage-backed securities 12.5 4,205 3,561 21.7 4,605 3,882 17.7 2,322 2,306 Commercial mortgage-backed securities 10.1 3,489 2,875 16.1 3,355 2,871 11.0 1,485 1,451 Supranational securities 0.9 298 263 1.4 295 254 — — — Other — 2 2 — 2 2 — 2 2 Total investment securities held to maturity 29.9 % $ 9,979 $ 8,503 49.2 % $ 10,279 $ 8,795 28.7 % $ 3,809 $ 3,759 Total investment securities 100.0 % $ 30,742 $ 28,523 100.0 % $ 20,321 $ 17,885 100.0 % $ 13,097 $ 13,060 (1) Calculated as a percentage of the total fair value of investment securities. 67 The following table presents the weighted average yields for investment securities available for sale and held to maturity at December 31, 2023, segregated by major category with ranges of contractual maturities.
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. 70 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.
Table 48 Analysis of Capital Adequacy dollars in millions Requirements to be Well Capitalized December 31, 2023 December 31, 2022 December 31, 2021 Amount Ratio Amount Ratio Amount Ratio BancShares Risk-based capital ratios Total risk-based capital 10.00 % $ 23,891 15.75 % $ 11,799 13.18 % $ 5,042 14.35 % Tier 1 risk-based capital 8.00 21,150 13.94 9,902 11.06 4,380 12.47 Common equity Tier 1 6.50 20,270 13.36 9,021 10.08 4,041 11.50 Tier 1 leverage ratio 5.00 21,150 9.83 9,902 8.99 4,380 7.59 FCB Risk-based capital ratios Total risk-based capital 10.00 % $ 23,600 15.56 % $ 11,627 12.99 % $ 4,858 13.85 % Tier 1 risk-based capital 8.00 21,227 13.99 10,186 11.38 4,651 13.26 Common equity Tier 1 6.50 21,227 13.99 10,186 11.38 4,651 13.26 Tier 1 leverage ratio 5.00 21,227 9.88 10,186 9.25 4,651 8.07 90 A s of December 31, 2023, BancShares and FCB had risk-based capital ratio conservation buffers of 7.75% and 7.56%, respectively, which are in excess of the Basel III conservation buffer of 2.50%.
Table 48 Analysis of Capital Adequacy dollars in millions Basel III Requirements PCA Well Capitalized Thresholds December 31, 2024 December 31, 2023 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 90 A s 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%.
EXECUTIVE OVERVIEW Key Strategic Objectives BancShares defines strategic priorities to further our vision and align goals to drive productivity throughout the organization.
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.
Refer to Note 1—Significant Accounting Policies and Basis of Presentation. Management uses certain non-GAAP financial measures in its analysis of the financial condition and results of operations of BancShares. See 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.
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.
Refer to the “Funding, Liquidity and Capital Overview” and “Results by Business Segment” sections of this MD&A for further discussion of deposit composition, uninsured deposits, and recent deposit trends. 70 The following table provides the expected maturity of time deposits with balances in excess of $250,000 as of December 31, 2023: Table 26 Maturities of Time Deposits In Excess of $250,000 dollars in millions December 31, 2023 Time deposits maturing in: Three months or less $ 515 Over three months through six months 433 Over six months through 12 months 475 More than 12 months 49 Total $ 1,472 Borrowings Total borrowings at December 31, 2023 were $37.65 billion, an increase of $31.01 billion from $6.65 billion at December 31, 2022.
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. 73 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.
Credit decisions are made after analyzing quantitative and qualitative factors, including borrower’s ability to repay the loan, collateral values, and considering the transaction from a judgmental perspective. Consumer products use traditional and measurable standards to document and assess the creditworthiness of a loan applicant. Credit standards follow industry standard documentation requirements.
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.
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, 2023.
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.
We use results of our various interest rate risk analyses to formulate and implement asset and liability management strategies, in coordination with the Asset Liability Committee, to achieve the desired risk profile, while managing our objectives for market risk and other strategic objectives.
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.
When we do rely on underlying real property values, we favor financing secured by owner-occupied real property. At December 31, 2023, commercial loans secured by real estate were $30.57 billion, or 51% of commercial loans and leases, compared to $27.18 billion, or 51% at December 31, 2022.
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.
See Note 2—Business Combinations for further discussion. 88 Contractual Obligations and Commitments The following table includes significant contractual obligations and commitments as of December 31, 2023, representing required and potential cash outflows, including impacts from purchase accounting adjustments and deferred fees. See Note 24—Commitments and Contingencies for additional information regarding commitments.
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.
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.
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.
For corporate bonds and municipal 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.
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.
We seek to control credit risk of derivative agreements through counterparty credit approvals, pre-established exposure limits and monitoring procedures, which are integrated with our cash and issuer related credit processes. The applicable Chief Credit Officer, or delegate, approves each counterparty and establishes exposure limits based on credit analysis of each counterparty.
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.
Business of this Annual Report on Form 10-K , in the section entitled “Regulatory Considerations.” Financial Performance Summary The following tables in this MD&A include financial data for the years ended December 31, 2023 (the “current year”), December 31, 2022 (the “prior year”), and December 31, 2021. Financial position data includes balances as of December 31, 2023, 2022, and 2021.
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.
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.
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.
On October 24, 2023, our Board declared a quarterly dividend on the Class A common stock and Class B common stock of $1.64 per common share that was paid in the fourth quarter. On January 24, 2024, our Board declared a quarterly dividend on the Class A common stock and Class B common stock of $1.64 per common share.
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.
Table 45 FHLB Balances dollars in millions December 31, 2023 December 31, 2022 December 31, 2021 Total borrowing capacity $ 15,072 $ 14,918 $ 9,564 Less: Advances — 4,250 645 Letters of credit (1) 1,450 1,450 — Available capacity $ 13,622 $ 9,218 $ 8,919 Pledged Non-PCD loans (contractual balance) $ 25,370 $ 23,491 $ 14,507 Weighted average rate on advances — % 3.28 % 1.28 % (1) Letters of credit were established with the FHLB to collateralize public funds.
Table 45 FHLB Balances dollars in millions December 31, 2024 December 31, 2023 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.
Effective for BancShares beginning with our financial statement 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 are currently evaluating the impact of this ASU on our income tax footnote disclosures.
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.
Table 11 Noninterest Expense dollars in millions Year Ended December 31, 2023 2022 2021 Depreciation on operating lease equipment $ 371 $ 345 $ — Maintenance and other operating lease expenses 222 189 — Operating expenses: Salaries and benefits 2,636 1,408 759 Net occupancy expense 244 191 117 Equipment expense 422 216 119 Professional fees 73 45 20 Third-party processing fees 203 103 60 FDIC insurance expense 158 31 14 Marketing expense 102 53 10 Acquisition-related expenses 470 231 29 Intangible asset amortization 57 23 12 Other noninterest expense 377 240 94 Total operating expenses 4,742 2,541 1,234 Total noninterest expense $ 5,335 $ 3,075 $ 1,234 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.
Table 11 Noninterest Expense dollars in millions Year Ended December 31, 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 following table summarizes state concentrations greater than 5.0% based on customer address: Table 36 Consumer Loans - Geography dollars in millions December 31, 2023 December 31, 2022 December 31, 2021 State North Carolina $ 6,347 34.2 % $ 5,702 32.9 % $ 4,931 50.4 % California 4,091 22.0 4,014 23.2 161 1.6 South Carolina 3,318 17.8 3,001 17.3 2,626 26.9 Other states 4,835 26.0 4,609 26.6 2,068 21.1 Total $ 18,591 100.0 % $ 17,326 100.0 % $ 9,786 100.0 % 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.
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 December 31, 2022 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.
Treasury 36.8 % $ 10,554 $ 10,508 10.6 % $ 2,035 $ 1,898 15.4 % $ 2,007 $ 2,005 Government agency 0.4 120 117 0.9 164 162 1.7 221 221 Residential mortgage-backed securities 23.4 7,154 6,686 26.8 5,424 4,795 36.2 4,757 4,729 Commercial mortgage-backed securities 7.5 2,319 2,131 9.0 1,774 1,604 12.6 1,648 1,640 Corporate bonds 1.7 529 482 3.0 570 536 4.7 582 608 Municipal bonds — 12 12 — — — — — — Total investment securities available for sale 69.8 % $ 20,688 $ 19,936 50.3 % $ 9,967 $ 8,995 70.6 % $ 9,215 $ 9,203 Investment in marketable equity securities 0.3 % $ 75 $ 84 0.5 % $ 75 $ 95 0.7 % $ 73 $ 98 Investment securities held to maturity: 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.
Table 24 Operating Lease Equipment dollars in millions December 31, 2023 December 31, 2022 December 31, 2021 Railcars and locomotives $ 7,966 $ 7,433 $ — Other equipment 780 723 — Total (1) $ 8,746 $ 8,156 $ — (1) Includes off-lease rail equipment of $253 million at December 31, 2023, and $457 million at December 31, 2022. 69 INTEREST-BEARING LIABILITIES Interest-bearing liabilities include interest-bearing deposits, securities sold under customer repurchase agreements, the Purchase Money Note, FHLB borrowings, senior and subordinated debt, and other borrowings.
Table 25 Operating Lease Equipment dollars in millions December 31, 2024 December 31, 2023 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. 72 Interest-bearing Liabilities Interest-bearing liabilities include interest-bearing deposits, securities sold under agreements to repurchase, and borrowings.
Loans and leases to borrowers in medical, dental or other healthcare fields were $8.96 billion as of December 31, 2023, which represents 15.0% of commercial loans and leases, compared to $8.15 billion or 15.2% of commercial loans and leases at December 31, 2022.
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.
On-balance sheet commitments for affordable housing partnerships are included in other liabilities and presented net of a purchase accounting adjustment of $57 million . (2) Less than 1 year balance represents the estimated amortization of the purchase accounting adjustment and deferred costs in excess of scheduled repayments.
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.
SVB segment deposits as of December 31, 2023 were $38.48 billion or 26.4% of total deposits and are primarily concentrated in online banking. Deposits in the SVB segment included large dollar accounts with private equity and venture capital clients, primarily in the healthcare and technology industries.
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.
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.
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.
Table 1 Selected Financial Data dollars in millions, except share data Year Ended December 31, 2023 2022 2021 Results of Operations: Interest income $ 10,391 $ 3,413 $ 1,451 Interest expense 3,679 467 61 Net interest income 6,712 2,946 1,390 Provision (benefit) for credit losses 1,375 645 (37) Net interest income after provision for credit losses 5,337 2,301 1,427 Noninterest income 12,075 2,136 508 Noninterest expense 5,335 3,075 1,234 Income before income taxes 12,077 1,362 701 Income tax expense 611 264 154 Net income 11,466 1,098 547 Preferred stock dividends 59 50 18 Net income available to common stockholders $ 11,407 $ 1,048 $ 529 Per Common Share Information: Average diluted common shares outstanding 14,539,613 15,549,944 9,816,405 Earnings per diluted common share $ 784.51 $ 67.40 $ 53.88 Key Performance Metrics: Return on average assets 5.90 % 1.01 % 1.00 % Net interest margin (1) 3.92 3.16 2.68 Select Average Balances: Investment securities $ 23,112 $ 19,166 $ 10,611 Total loans and leases (2) 119,234 67,787 32,860 Operating lease equipment, net 8,495 7,982 — Total assets 194,281 108,915 54,983 Total deposits 130,590 89,916 48,258 Total stockholders’ equity 17,937 10,276 4,461 Select Ending Balances: Investment securities $ 29,999 $ 19,369 $ 13,110 Total loans and leases 133,302 70,781 32,372 Operating lease equipment, net 8,746 8,156 — Total assets 213,758 109,298 58,309 Total deposits 145,854 89,408 51,406 Total stockholders’ equity 21,255 9,662 4,738 Loan to deposit ratio 91.39 % 79.17 % 62.97 % Noninterest-bearing deposits to total deposits 27.29 27.87 41.64 Capital Ratios: Common equity Tier 1 13.36 % 10.08 % 11.50 % Tier 1 risk-based capital 13.94 11.06 12.47 Total risk-based capital 15.75 13.18 14.35 Tier 1 leverage 9.83 8.99 7.59 Asset Quality: Ratio of nonaccrual loans to total loans 0.73 % 0.89 % 0.37 % Allowance for loan and lease losses to loans ratio 1.31 1.30 0.55 Net charge off ratio 0.47 0.12 0.03 (1) Calculated net of average credit balances and deposits of factoring clients.
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. 50 The following table summarizes BancShares’ results: Table 1 Selected Financial Data dollars in millions, except share data Year Ended December 31, 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.
Deposit Concentrations Based on branch location, deposits as of December 31, 2023 in North Carolina and South Carolina represented approximately 25.5% and 7.8%, respectively, of total deposits. The Direct Bank, a nationwide digital bank, had $37.67 billion or 25.8% of our total deposits as of December 31, 2023. The Direct Bank deposits mainly consist of savings deposit accounts.
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.
The remainder of the portfolio is made up of CRE and other 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 46% of SVB loans and 19% of total loans at December 31, 2023.
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.
Derivative agreements for BancShares’ risk management purposes and for the hedging of client transactions are executed with major financial institutions and are settled through the major clearing exchanges, which are rated investment grade by nationally recognized statistical rating agencies. Credit exposure is mitigated via the exchange of collateral between the counterparties covering mark-to-market valuations.
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.
Liquidity Position We strive to maintain a strong liquidity position, and our risk appetite for liquidity is low. At December 31, 2023, liquidity metrics remained strong as we had $57.28 billion in liquid assets consisting of $32.69 billion in cash and interest-earning deposits at banks (primarily held at the Federal Reserve) and $24.59 billion in high-quality liquid securities.
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”).
Table 10 Noninterest Income dollars in millions Year Ended December 31, 2023 2022 2021 Rental income on operating lease equipment $ 971 $ 864 $ — Other noninterest income: Fee income and other service charges 268 155 35 Client investment fees 157 — — Wealth management services 188 142 129 International fees 93 10 7 Service charges on deposit accounts 156 98 95 Factoring commissions 82 104 — Cardholder services, net 139 102 87 Merchant services, net 48 35 33 Insurance commissions 54 47 16 Realized (loss) gain on sale of investment securities available for sale, net (26) — 33 Fair value adjustment on marketable equity securities, net (11) (3) 34 Bank-owned life insurance 8 32 3 Gain on sale of leasing equipment, net 20 15 — Gain on acquisition 9,808 431 — Gain on extinguishment of debt — 7 — Other noninterest income 120 97 36 Total other noninterest income 11,104 1,272 508 Total noninterest income $ 12,075 $ 2,136 $ 508 Rental Income on Operating Lease Equipment Rental income on operating lease equipment was $971 million for the current year, an increase of $107 million or 12% from $864 million for the prior year.
Table 10 Noninterest Income dollars in millions Year Ended December 31, 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 a higher number of rail cars owned and leased, as well as higher re-pricing and utilization rates. Rental income is generated primarily in the Rail segment and, to a lesser extent, in the Commercial Banking segment.
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+0 added−0 removed1 unchanged
Biggest changeAs of December 31, 2023, BancShares’ market risk profile had changed since December 31, 2022 primarily due to the SVBB Acquisition. Changes in fair value that result from movement in market rates cannot be predicted with any degree of certainty. Therefore, the impact that future changes in market rates will have on the fair values of financial instruments is uncertain.
Biggest changeChanges in fair value that result from movement in market rates cannot be predicted with any degree of certainty. Therefore, the impact that future changes in market rates will have on the fair values of financial instruments is uncertain. Market risk information is set forth in Item 7.
Market risk information is set forth in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations within the “Risk Management” section and in Item 8. Notes to Consolidated Financial Statements within Note 1—Significant Accounting Policies and Basis of Presentation, Note 14—Derivative Financial Instruments and Note 16—Fair Value. 99
Management’s Discussion and Analysis of Financial Condition and Results of Operations within the “Risk Management” section and in Item 8. Financial Statements and Supplementary Data within Note 1—Significant Accounting Policies and Basis of Presentation, Note 13—Derivative Financial Instruments and Note 15—Fair Value. 95

Other FCNCA 10-K year-over-year comparisons