The risks and uncertainties that management believes are material to an investment in us are described below. The risks listed are not the only risks that BancShares faces. Additional risks and uncertainties that are not currently known to management or that management does not currently deem material could also have a material adverse impact on our financial condition, and/or the results of our operations or our business. If such risks and uncertainties were to materialize or the likelihoods of the risks were to increase, we could be adversely affected, and the market price of our common stocksecurities could significantly decline.

Safely conducting and growing our business requires that we create and maintain an appropriate operational and organizational control infrastructure. Operational risk can arise in numerous ways, including employee fraud, customer fraud and control lapses in bank operations and information technology. Our dependence on our employees and internal and third party automated systems to record and process transactions may further increase the risk that technical failures or system-tampering will result in losses that are difficult to detect. We may be subject to disruptions of our operating systems arising from events that are wholly or partially beyond our control. Failure to maintain appropriate operational infrastructure and oversight can lead to loss of service to customers, legal actions and noncompliance with various laws and regulations. Weregulations, all of which could have implementeda material adverse impact on our business, financial condition and results of operations. Our internal controls that are designedintended to safeguard and maintain our operational and organizational infrastructure and information. However, all internal control systems, no matter how well designed,information have inherent limitations. Therefore, even those systems determined tolimitations and may not be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.successful.

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. Our businesses rely on the secure processing, transmission, storage and retrieval of confidential, proprietary and other information in our computer and data management systems and networks, and in the computer and data management systems and networks of third parties. In addition, to access our network, products and services, our customers and other third parties may use personal mobile devices or computing devices that are outside of our network environment and are subject to their own cybersecurity risks.risks, which may provide a point of entry for adverse effects on our own network environment.

We, our customers, regulators and other third parties have been subject to, and are likely to continue to be the target of, cyber attacks. These cyber attacks include computer viruses, malicious or destructive code, ransomware, phishing attacks, denial of service or information or other security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary and other information of ours, our employees, our customers or of third parties, damages to systems, or otherwiseother material disruption to our or our customers’ or other third parties’ network access or business operations. As cyber threats continue to evolve, we have been and will likely continue to be required to expend significant resources to continuously enhance our protective measures and may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities or incidents. Despite efforts to protect the integrity of our systems and implement controls, processes, policies and other protective measures, weWe may not be able to anticipate all security breaches, nor may we be able to implement guaranteed preventive measures against such security breaches. Additionally, a security breach may be difficult to detect, even after it occurs, which may compound the issues related to such breach.

Cybersecurity risks for banking organizations have significantly increased in recent years in part because of the proliferation of new technologies and the use of the Internet and telecommunications technologiesinternet to conduct financial transactions. These risks are expected to continue in the future as that proliferation intensifies. For example, we will likely see an increase in cybersecurity risks may increase in the future as we continue to increaseaugment our mobile-payment and other internet-based product offerings and expand our internal usage of web-based products and applications. In addition, cybersecurity risks have significantly increased in recent years in partfinancially motivated attacks remain a challenge from a cybercrime perspective due to the increased sophistication and activities of organized crime groups, hackers, terrorist organizations, hostile foreign governments, disgruntled employees or vendors, activists and other external parties, including those involved in corporate espionage. Even the most advanced internal control environment may be vulnerable to compromise. Additionally, the existenceincrease of cybersupply chain attacks or security breaches atincluding third parties with access to our data such as vendors, may not be disclosed to us in a timely manner.or those providing critical services, remain an emerging operational issue which could adversely affect our business, customers, reputation and operations.

Although to date we haveare not experiencedaware of any material losses or other material consequences relating to technology failure, cyber attacks or other information or security breaches, whether directed at us or third parties, there can be no assurance that we will notmay suffer such losses or other consequences in the future. As a result, cybersecurity and the continued development and enhancement of our controls, processes and practices designed to protect our systems, computers, software, data and networks from attack, damage or unauthorized access remain a priority.

We also face indirect technology, cybersecurity and operational risks relating to the customers clients and other third parties with whom we do business or upon whom we rely to facilitate or enable our business activities, including financial counterparties; financial intermediaries such as clearing agents, exchanges and clearing houses; vendors; regulators; and providers of critical infrastructure such as internet access and electrical power. As a result of increasing consolidation, interdependence and complexity of financial entities and technology systems, a technology failure, cyber attack or other information or security breach that significantly degrades, deletes or compromises the systems or data of one or more financial entities could have a material impact on counterparties or other market participants, including us. This consolidation interconnectivity and complexity increases the risk of operational failure, on both individual and industry-wide bases, as disparate systems need to be integrated, often on an accelerated basis. Any third-party technology failure, cyber attack or other information or security breach, termination or constraint could, among other things, adversely affect our ability to effect transactions, service our clients,customers, manage our exposure to risk or expand our businesses.

Cyber attacks or other information or security breaches, whether directed at us or third parties, may result in a material loss or have material consequences. Furthermore, the public perception that a cyber attack on our systems has been successful, whether or not this perception is correct, may damage our reputation with customers and third parties with whom we do business.business and may encourage further cyber attacks. A successful penetration or circumvention of system security could cause us negative consequences, including loss of customers and business opportunities, disruption to our operations and business, misappropriation or destruction of our confidential information and/orand that of our customers, or damage to our customers’ and/orand third parties’ computers or systems, and could result in a violation of applicable data privacy and protection laws and other laws, litigation exposure, regulatory fines, penalties or intervention, loss of confidence in our security measures, reputational damage, reimbursement or other compensatory costs, and additional compliance costs, andany of which could adversely impact our results of operations, liquidity and financial condition.

Beginning in early 2020, COVID-19 spread across most of the world, including the United States. The COVID-19 pandemic, sustained by the spread of new, more-transmissible coronavirus variants, has continued to evolve, criminals are using increasingly more sophisticated techniquescause severe disruptions to committhe United States economy, regional quarantines, business and hide fraudulent activity. Fraudulent activity can come in many forms, including debit card/credit card fraud, check fraud, electronic scanning devices attachedschool shutdowns, high unemployment, disruptions to ATM machines, social engineeringsupply chains and phishing attacks to obtain personal informationoverall economic instability, which has adversely impacted the operations, activities and fraudulent impersonationbusiness of our clients throughcustomers. Effects have generally been felt across all industries, including financial services.

In response to the usenational public health crisis, federal, state and local governments have imposed and continue to impose an array of falsified or stolen credentials. To counterrestrictions on the increased sophisticationway we conduct our operations and on our customers, business partners, vendors and employees. These restrictions, along with other economic factors including inflation risks, oil price volatility and changes in interest rates have and may continue to destabilize financial markets and negatively impact our customers’ business activities and operations, making it difficult for them to satisfy existing debt obligations. They also have led to periods of these fraudulent activities, we haveelevated unemployment and slower consumer spending, which, in turn, has previously temporarily increased our investment in systems, technologiescollection risk as deteriorating economic conditions correlate with lower credit quality metrics and controlshigher customer defaults on loans. Economic pressures and uncertainty have and may continue to detectchange consumer and prevent such fraud. Combating fraudulent activities as they evolve will result in continued ongoing investmentsbusiness behaviors, which, in the future.

The COVID-19 pandemic has significantly reduced demand for goods and service for many customers and other businesses in sectors that we service. In the retail sector, our exposure is primarily in the factoring business, principally in trade receivables, and to a lesser extent in the commercial real estate business. In the hospitality and transportation sectors, we have loan exposures to the restaurant, lodging, gaming, maritime, aviation and rail industries. The significant declines in the price of, or demand for, oil and gas may have negative effects on not only our loan exposures in the exploration and production sector, but may also lead to a decreased demand for our railcars, and could have a significant adverse effect on the demand for ships that are collateral for our loans. Further, we have exposure to small businesses through both equipment loans and leases and through SBA loans, which could be adversely affected by the extensive closure of businesses in many states during the COVID-19 pandemic. We also have exposure to single family residential mortgages, which could be adversely affected by job losses due to the economic dislocation resulting from the COVID-19 pandemic. Further, during the COVID-19 pandemic we implemented several forms of temporary relief to our consumer and commercial customers, including payment deferrals, suspension of foreclosures and evictions, and fee waivers for ATM transactions, overdrafts, and early withdrawal of certificates of deposit, which may adversely affect our revenue and results of operations or result in higher rates of default and increased credit losses in future periods. The effects of the COVID-19 pandemic on economic and market conditions have increased demands on credit facilities that we provide to our customers, present competitive risks.which could have an adverse impact on our liquidity.

The rapid growtheffects of new digital technologies, including internet services, smart phones and other mobile devices, requires us to continuously evaluate our product and service offerings to ensure they remain competitive. Our success depends in part on our ability to adapt and deliver our products and services in a manner responsive to evolving industry standards and consumer preferences. New technologies by banks and non-bank service providers may create risks if our products and services are no longer competitive with then-current standards,the COVID-19 pandemic will heighten specific risk factors and could negativelyimpact substantially all risk factors described herein. Those effects will adversely affect our ability to attract or maintain a loyal customer base. 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. Our results ofbusiness operations and financial condition could be adversely affected.

We are subject to litigation risks in the ordinary course of our business. 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. During the last credit crisis, we saw the number of cases and our expenses related to those cases increase.increase and expect to see the same in future credit crises. The outcomes of such cases are always uncertain until finally adjudicated or resolved.

We establish reserves for legal claims when payments associated with the claims become probable and our liability can be reasonably estimated. We may still incur legal costs for a matter even if we have not established a reserve. In addition, the actual amount paid in resolution of a legal claim may be substantially higher than any amounts reserved for the matter. The ultimate resolution of a legal proceeding, depending on the remedy sought and any relief granted, could materially adversely affect our results of operations and financial condition.

Substantial legal claims or significant regulatory action against us could have material adverse financial effects or cause significant reputational harm to us, which in turn could seriously harm our business prospects. We may be exposed to substantial uninsured legal liabilities and/orand regulatory actions which could adversely affect our results of operations and financial condition. For additional information, see Note T, “Commitments and Contingencies,”refer to the Notes to the Consolidated Financial Statements, Note T, Commitments and Contingencies, in this Annual Report on Form 10-K.

Natural or man-made disasters (including, but not limited to, earthquakes, hurricanes, tornadoes, floods, fires, pollution, and explosions), global pandemics, acts of war, and 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. In particular, a significant amount of our business is concentrated in North Carolina, and South Carolina, California, Texas, New York and Florida, including coastal areas where our facilities and retail and commercial customers have been and in the future could be

impacted by hurricanes.hurricanes and flooding, earthquakes or wildfires. We also do business in Georgia, Virginia, Nebraska, Arizona, New Jersey, Hawaii, Nevada, as well as in Canada, all of which also include areas significantly exposed to the foregoing risks. We could also suffer adverse results to the extent that disasters, wars, or terrorist activities, riots or civil unrest affect the broader markets or economy.economy or our operations specifically. 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.events, and such quality and ability may be inadequate.

Third party vendors provide key components of our business infrastructure, including certain data processing and information services. Their services could be difficult to quickly replace in the event of failure or other interruption in service. Failures of certain vendors to provide services could adversely affect our ability to deliver products and services to our customers. ExternalThird party vendors also present information security risks. We monitorrisks to us, both directly and indirectly through our customers. Our monitoring of significant vendor risks, including the financial stability of critical vendors.vendors, may be inadequate and incomplete. Vendor risks in particular are compounded by the COVID-19 pandemic, as unexpected disruptions can impact a third party vendor’s operations with little warning. The failure of a critical externalthird party vendor to provide key components of our business infrastructure could substantially disrupt our business and cause us to incur significant expense.expense while harming our relationships with our customers.

Our Data Governance program is reliant on the execution of procedures, process controls and system functionality, and errors may occur. Incomplete, inconsistent, or inaccurate data could lead to non-compliance with regulatory statutesrequirements and result in fines. Additionally, customer impactadverse impacts on customers could result in reputational harm and customer attrition. Inaccurate or incomplete data presents the risk that business decisions relying on such data will prove inefficient, ineffective or harmful to us. Additionally, information we provide to our investors and regulators may be negatively impacted by inaccurate or incomplete data, which could have a wide range of adverse consequences such as legal liability and reputational harm.

Several high-profile cases of employee misconduct have occurred at other financial institutions. Such an event may lead to large regulatory fines, as well as an erosion in customer confidence, which could impact our financial and competitive position. Our employee code of ethics and policies governing our compensation, conduct and sales practices may be inadequate to deter and respond to potential employee misconduct.

Effectively managing credit risk.risks is essential for the operation of our business. There are credit risks inherent in making any loan, including risks of repayment, risks with respect to the period of time over which the loan may be repaid, risks relating to proper loan underwriting and guidelines, risks resulting from changes in economic and industry conditions, risks inherent in dealing with individual borrowers and risks resulting from uncertainties as to the future value of collateral. There is no assurance that ourOur loan approval procedures and our credit risk monitoring aremay be or will be adequatebecome inadequate to or will reduceappropriately manage the inherent credit risks associated with lending. Our credit administration personnel, policies and procedures may not adequately adapt to changes in economic or other conditions affecting customers and the quality of our loan portfolio. Any failure to manage such credit risks may materially adversely affect our business, and our consolidated results of operations and financial condition.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.

Statutory or regulatory changes relevant to the medical and dental industries, or economic conditions in the market generally, could negatively impact borrowers'these borrowers’ businesses and their ability to repay their loans with us, which could have a material adverse effect on our financial condition and results of operations. Additionally, smaller practices such as those in the dental industry generally have fewer financial resources in terms of capital or borrowing capacity than larger entities, and generally have a heightened vulnerability to negative economic conditions. Consequently, we could be required to increase our allowance for loan lossesACL through additional provisions on our income statement, which would reduce reported net income. See Note D

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. The COVID-19 pandemic has created volatility and uncertainty in the economy, which has and is expected to continue to adversely impact our rail business. As described above, the significant declines in the price of, and demand for, additional discussion.oil and gas may lead to a decreased demand for our railcars.

Real property collateral values may be impacted by economic conditions in the real estate market and may result in losses on loans that, while adequately collateralized at the time of origination, become inadequately collateralized.collateralized over time. Our reliance on junior liens is concentrated in our non-commercialconsumer revolving mortgage loan portfolio. Approximately two-thirds of the non-commercialconsumer 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 that isbecoming effectively unsecured. 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.

Financial services institutions are interrelated as a result of trading, clearing, counterparty and/orand other relationships. We have exposure to numerous financial services providers, including banks, securities brokers and dealers and other financial services providers. Although we monitorOur monitoring of the financial conditions of financial institutions with which we have credit exposure is inherently limited and may be inadequate, and transactions with those institutions expose us to credit risk through the possibility of counterparty default.

Our business is subject to periodic fluctuations based on international, national, regional and local economic conditions. These fluctuations are not predictable, cannot be controlled and have had and may continue to have or further have a material adverse impact on our operations and financial condition. Our banking operations are primarily located within several states but are locally oriented and community based.community-based. Our retail and commercial banking activities are primarily concentrated within the same geographic footprint. OurThe markets includein which we have the Southeast, Mid-Atlantic, Midwest and Western United States, with our greatest presence inare North Carolina, South Carolina, California, Texas, New York, Florida and South Carolina.Canada. Worsening economic conditions within our markets, particularly within North Carolina and South Carolina,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, as well asrail industry conditions and conditions in the local residential and commercial real estate markets we serve. Unfavorable changes in unemployment, real estate values, interest rates, foreign currency exchange rate fluctuations and other factors could weaken the economies of the communities we serve. Economic growthserve and otherwise adversely affect our business. Thus far, this includes declines in fee income and impacts on the fair value of our equity 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 activity have remained relatively stable across a wide range of industriesoperations in certain foreign jurisdictions, and geographic locations, but there can be no assurance that currentwe engage in certain cross border lending and leasing transactions. An economic conditions will continuerecession or that these conditions will not worsen.downturn or business disruption associated with the political environments in the international markets in which we operate could similarly adversely affect us.

In addition, the political environment, the level of United States (U.S.) debt and global economic conditions can have a destabilizing effect on financial markets. Weakness in any of our market areas could have an adverse impact on our earnings, and consequently, our financial condition and capital adequacy.

Our results of operations and cash flows are highly dependent upon net interest income. Interest rates are sensitive to economic and market conditions that are beyond our control, including the actions of the Federal Reserve Board’sReserve’s Federal Open Market Committee (FOMC)(“FOMC”). Changes in monetary policy could influence interest income, interest expense, and the fair value of our financial assets and liabilities. If changes in interest rates on our interest-earning assets are not equal to the changes in interest rates on our interest-bearing liabilities, our net interest income and, therefore, our net income, could be adversely impacted.

As interest rates rise, our interest expense will increase and our net interest margins may decrease, negatively impacting our performance and potentially, our financial condition. To the extent banks and other financial services providers compete for interest-bearing deposit accounts through higher interest rates, our deposit base could be reduced if we are unwilling to pay those higher rates. If we decide to compete with those higher interest rates, our cost of funds could increase and our net interest margins could be reduced. Additionally, higher interest rates willmay impact our ability to originate new loans. Increases in interest rates could adversely affect the ability of our borrowers to meet higher payment obligations. If this occurred, it could cause an increase in nonperforming assets and net charge-offs, which could adversely affect our business and financial condition.charge-offs.

The forecasts of future net interest income by our interest rate risk monitoring system are estimates and may be inaccurate. Actual interest rate movements may differ from our forecasts, and unexpected actions by the FOMC may have a direct impact on market interest rates. In response to the economic conditions resulting from the outbreak of the COVID-19 pandemic, the Federal Reserve’s target federal funds rate has been reduced nearly to 0%. Stimulus payments related to the COVID-19 pandemic made by the federal government to businesses, non-profit organizations, taxpayers and others have had the incidental

We have loans, borrowings and other financial instruments with attributes that are either directly or indirectly dependent on the London Interbank Offered Rate (“LIBOR”). In 2017, the United Kingdom’s Financial Conduct Authority (the “FCA”) announced that after 2021 it would no longer compel banks to submit the rates required to calculate LIBOR. In November 2020, to facilitate an orderly LIBOR transition, the London Interbank OfferedOffice of the Comptroller of the Currency, the FDIC and the Federal Reserve jointly announced that entering into new contracts using LIBOR as a reference rate after December 31, 2021, would create a safety and soundness risk. On March 5, 2021, the FCA announced that all LIBOR settings will either cease to be provided by any administrator or no longer be representative immediately after December 31, 2021, in the case of 1-week and 2-month United States dollar LIBOR, and immediately after June 30, 2023, in the case of the remaining United States dollar LIBOR settings. In the United States, efforts to identify a set of alternative United States dollar reference interest rates are ongoing, and the Alternative Reference Rate Committee (the “ARRC”) has recommended the use of a Secured Overnight Funding Rate (“LIBOR”SOFR”). This announcement indicatesSOFR is different from LIBOR in that it is a backward-looking secured rate rather than a forward-looking unsecured rate. These differences could lead to a greater disconnect between the continuation of LIBORBank’s costs to raise funds for SOFR as compared to LIBOR. For cash products and loans, the ARRC has also recommended Term SOFR, which is a forward-looking SOFR based on the current basis cannotSOFR futures and will not be guaranteed after 2021. Consequently, atmay in part reduce differences between SOFR and LIBOR. To further reduce differences between replacement indices and substitute indices, some market practitioners have also gravitated towards credit sensitive alternative reference rates besides SOFR. At this time, it is not possible to predict whether and to what extent banks will continue to provide submissions for the calculation of LIBOR. Similarly, itthere is not possible to predict whether LIBORstill uncertainty around how quickly replacement reference rates will continue to be viewed as an acceptable market benchmark, what rate or rates may become accepted alternatives to LIBOR,develop sufficient liquidity and industry-wide usage, or what the effect of any such changes in views or alternatives may be on the markets for LIBOR-indexed financial instruments.

The transition from LIBOR couldis complex and is expected to create additional costs and risks. Since proposed alternativereplacement reference rates, such as SOFR, are calculated differently, payments under contracts referencing newsuch rates will differ from those referencing LIBOR. If LIBOR rates are no longer available, and we are required to implement replacement reference rates for the calculation of interest rates under our loan agreements with borrowers, we may incur significant expense in effecting the transition and may be subject to disputes or litigation with our borrowers over the appropriateness or comparability to LIBOR of the replacement reference rates. Consequently, failure to adequately manage this transition process with our customers could adversely impact our reputation and potentially introduce additional legal risks. The replacement reference rates could also result in a reduction in our interest income. We may also receive inquiries and other actions from regulators with respect to our preparation and readiness for the replacement of LIBOR with replacement reference rates. The transition will change our market risk profiles, requiring changes to risk and pricing models, systems, contracts, valuation tools and product design. Furthermore, design, and

failure to adequately manage this transition process with our customers could adversely impact our reputation. Although we are currently unable to assess what the ultimate impact of the transition from LIBOR will be, failure to adequately manage the transition couldconsequently have a material adverse effect on our business, financial condition and results of operations.

Our deposit base represents our primary source of core funding and balance sheet liquidity. We normallytypically have the ability to stimulate core deposit growth through reasonable and effective pricing strategies. However, in circumstances where our ability to generate needed liquidity is impaired, we need access to noncorenon-core funding such as borrowings from the Federal Home Loan Bank (FHLB) and the Federal Reserve, Federal Funds purchased lines and brokered deposits. While we maintain access to these noncorenon-core funding sources, some sources are dependent on the availability of collateral as well as the counterparty’s willingness and ability to lend. Failure to access sources of liquidity may affect our ability to pay deposits and fund our operations.

Our primary capital sources have been retained earnings and debt issued through both private and public markets. Rating agencies regularly evaluate our creditworthiness and assign credit ratings to BancSharesus and FCB. The ratings of the agencies are based on a number of factors, some of which are outside our control. In addition to factors specific to our financial strength and performance, the rating agencies also consider conditions generally affecting the financial services industry. There canWe may not be no assurance that we willable to maintain our current credit ratings. Rating reductions could adversely affect our access to funding sources and the cost of obtaining funding.

Based on existing capital levels, BancShareswe and FCB are well-capitalized under current leverage and risk-based capital standards. Our ability to grow is contingent on our ability to generate or otherwise access sufficient capital to remain well-capitalized under current and future capital adequacy guidelines.

Under regulatory capital adequacy guidelines and other regulatory requirements, BancShares,we, together with FCB, must meet certain capital and liquidity guidelines, subject to qualitative judgments by regulators about components, risk weightings and other factors.

We are subject to capital rules issued by the Federal Reserve Bank (FRB) issued capital rules that established a new comprehensive capital framework for U.S. banking institutions and established a more conservative definition of capital. These requirements, known as Basel III, became effective January 1, 2015, and, as a result, we became subject to enhancedincluding required minimum capital and leverage ratios. These requirements could adversely affect our ability to pay dividends, restrict certain business activities or compel us to raise capital, each of which may adversely affect our results of operations or financial condition. In addition,Refer to the costs associated with complying with more stringent capital requirements, such as the requirement to formulate and submit capital plans based on pre-defined stress scenarios on an annual basis, could have an adverse effect on us. See the Supervision and Regulation“Regulatory Considerations” section included in Item 71. Business of this Annual Report on Form 10-K for additional information regarding the capital requirements under the Dodd-Frank Act and Basel III.

We operate in a highly regulated industry and are subject to extensive regulationmany laws, rules, and supervision that govern almost all aspects of our operations. regulations at both the federal and state levels. These broad-based laws, rules, and regulations include, but are not limited to, expectations relating to anti-money laundering, lending limits, client privacy, fair lending, prohibitions against unfair, deceptive or abusive acts or practices, regulatory reporting, and community reinvestment,

In addition, to a multitude of regulations designed to protect customers, depositors and consumers, we must comply with other regulations that protect the deposit insurance fund and the stability of the U.S.United States financial system, including laws and regulations that, among other matters, prescribe minimum capital requirements;requirements, impose limitations on our business activities and investments;investments, limit the dividends or distributions that we can pay;pay, restrict the ability of our bank subsidiaries to guarantee our debt;debt and impose certain specific accounting requirements that may be more restrictive and may result in greater or earlier charges to earnings or reductions in our capital than GAAP. Compliance with laws and regulations can be difficult and costly, and changes in laws and regulations often imposeresult in additional compliance costs.

The Sarbanes-Oxley Act of 2002 and the related rules and regulations issued by the SEC and The Nasdaq Stock Market LLC (“Nasdaq”), as well as numerous other more recently enacted statutes and regulations, including the Dodd-Frank Act, EGRRCPA, and regulations promulgated thereunder, have increased the scope, complexity and cost of corporate governance and reporting and disclosure practices, including the costs of completing our external audit and maintaining our internal controls. Such additional regulation and supervision may limit our ability to pursue business opportunities.opportunities and result in a material adverse impact on our financial condition and results of operations.

In connection with the CIT Merger, we acquired new business lines that are subject to new compliance risks. Our new rail business line is subject to various laws, rules and regulations administered by authorities in jurisdictions that were not applicable to us prior to the CIT Merger. In the United States, our equipment 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. We are also subject to regulation by governmental agencies in foreign countries in which we do business as a result of the CIT Merger. Our business operations and our equipment financing and leasing portfolios may be adversely impacted by rules and regulations promulgated by governmental and industry agencies, which could require substantial modification, maintenance, or refurbishment of our railcars, ships or other equipment, or could potentially make such equipment inoperable or obsolete. Failure to comply with these variouslaws, rule and regulations could result in sanctions by regulatory agencies (including potential limitations on our future acquisitions or operations, or requirements to forfeit assets), civil money penalties, or reputation damage. Additionally, we may incur significant expenses in our efforts to comply with these laws, rules and regulations, and these laws, rules and regulations.

As a result of consummation of the CIT Merger, our total consolidated assets exceed $100 billion, and therefore we expect to be subject to enhanced prudential standards under Section 165 of the Dodd-Frank Act, as amended by the EGRRCPA, and implemented by the Tailoring Rules, subject to the applicable transition periods. If we fail to develop and maintain at a reasonable cost the systems and processes necessary to comply with the standards and requirements imposed by these rules, it could subject us to restrictionshave a material adverse effect on our business, activities, including mergers and acquisitions, fines and other penalties, any of which could adversely affect ourfinancial condition or results of operations. Additionally, as we grow, and our assets exceed certain thresholds, regulatory requirements that we are subject to, as well as our compliance expenses, will increase. Refer to the “Regulatory Considerations” section of Item 1. Business of this Annual Report on Form 10-K for additional information regarding the Tailoring Rules.

The CFPB has broad rulemaking authority to administer and carry out the priceprovisions of the Dodd-Frank Act with respect to financial institutions that offer covered financial products and services to consumers. The CFPB is responsible for adopting rules identifying practices or acts that are unfair, deceptive or abusive in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service. The CFPB has initiated enforcement actions against a variety of bank and non-bank market participants with respect to a number of consumer financial products and services that has resulted in those participants expending significant time, money and resources to adjust to the initiatives being pursued by the CFPB. The CFPB has pursued a more aggressive enforcement policy in respect of a range of regulatory compliance matters under the Biden Administration. CFPB enforcement actions may serve as precedent for how the CFPB interprets and enforces consumer protection laws, including practices or acts that are deemed to be unfair, deceptive or abusive, with respect to all supervised institutions, which may result in the imposition of higher standards of compliance with such laws. Moreover, we are subject to supervision and examination by the CFPB for compliance with the CFPB’s regulations and policies. The limitations and restrictions that may be placed upon us by the CFPB with respect to our common stock.consumer product offerings and services may produce significant, material effects on our profitability.

Corporate tax rates affect our profitability and capital levels. We are subject to the income tax laws of the United States, its states and their municipalities and to those of the foreign jurisdictions in which we do business. These tax laws are complex and may be subject to different interpretations. We must make judgments and interpretations about the application of these tax laws when determining our provision for income taxes, our deferred tax assets and liabilities and our valuation allowance. Changes to the tax laws, administrative rulings or court decisions could increase our provision for income taxes and reduce our net income. The U.S.United States corporate tax code may be further reformed by the U.S.United States Congress and additional guidance may be issued by the U.S.United States Department of the Treasury relevant to the Tax CutsTreasury. Changes in tax laws and Jobs Act (Tax Act) enacted during 2017. Additional adverse amendments to the Tax Act or other related legislation regulations, and income tax rates in particular,

could have an adverse impact on our financial condition and results of operations.

Our loans and leases include a significant portion of leased equipment, including, but not limited to, railcars and locomotives, technology and office equipment and medical equipment. The realization of equipment values (residual values) during the life and at the end of the term of a lease is an important element in the profitability of our leasing business. At the inception of each lease, we record a residual value for the leased equipment based on our estimate of the future value of the equipment at the end of the lease term or end of the equipment’s estimated useful life. If the market value of leased equipment decreases at a rate greater than we projected, cost savings, synergieswhether due to rapid technological or economic obsolescence, unusual wear and tear on the equipment, excessive use of the equipment, recession or other benefits associated with anyadverse economic conditions impacting supply and demand, it could adversely affect the current values or the residual values of such acquisition. Failure to efficiently integrate any acquired entities or assets into our existing operations could significantly increase our operating costs and have material adverse effects on our financial condition and results of operations. There can be no assurance that we will be successful in identifying, consummating, or integrating any potential acquisitions.equipment.

FASB and the SEC periodically modify the standards that governgoverning the preparation of our financial statements. The nature of these changes is not predictable and has impacted and could further impact how we record transactions in our financial statements, which had led to and could lead to material changes in assets, liabilities, shareholders’ equity, revenues, expenses and net income. For example, ASU 2016-13 Measurement of Credit Losses on Financial Instruments, became effective January 1, 2020, and substantially changed the accounting for credit losses on loans and other financial assets. In some cases, we could be required to apply new or revised standards retroactively, resulting in changes to previously reported financial results or a cumulative adjustment to retained earnings. ApplicationImplementation of new accounting rules or standards could additionally require us to implement costly technology changes.changes which could impact ongoing earnings.

The following graph comparesand table below compare the cumulative total shareholder return (CTSR)(“CTSR”) of our Class A common stock duringto selected industry and broad-market indices. As a result of a change in the previous five years withtotal return data made available through our vendor provider, our performance graphs going forward will be using indices comparable to those utilized in the CTSR overimmediately preceding fiscal year. The broad-market index is transitioning from the same measurement periodNasdaq US Index to the Nasdaq US Benchmark Total Return Index. The industry index is transitioning from the Nasdaq Bank Index to the KBW Nasdaq Bank Total Return Index, which is composed of the NASDAQ – Bankslargest banking companies and includes all money center banks and regional banks. The Parent Company has decided to begin to use the KBW Nasdaq Bank Total Return Index andsince it is utilized by a number of the NASDAQ – U.S. Index.Parent Company’s industrial peers. Each trend line assumes that $100 was invested on December 31, 2013,2016, and that dividends were reinvested for additional shares. The performance graph represents past performance and should not be considered to be an indication of future performance.

Statements in this report and exhibits relating to plans, strategies, economic performance and trends, projections of results of specific activities or investments, expectations or beliefs about future events or results and other statements that are not descriptions of historical factsAnnual Report on Form 10-K may be forward-looking statementscontain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 Section 27Aregarding the financial condition, results of the Securities Actoperations, business plans and future performance of 1933 and Section 21E of the Securities Exchange Act of 1934.

Because forward-looking statements relate to future results and occurrences, they are subject to inherent risks, uncertainties, changes in circumstances and other factors that are difficult to predict. Many possible events or factors could affect BancShares’ future financial results and performance and could cause the actual results, performance or achievements of BancShares to differ materially from any anticipated results expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to,among others, general competitive, economic, political, and market conditions, the impacts of the global COVID-19 pandemic on BancShares’ business, and customers, the financial success or changing conditions or strategies of ourBancShares’ customers customer acceptance of our services, products and fee structure, the competitive nature of the financial services industry, our ability to compete effectively against other financial institutionsor vendors, fluctuations in our banking markets,interest rates, actions of government regulators, the levelavailability of market interest ratescapital and our abilitypersonnel, the failure to manage our interest rate risk, changesrealize the anticipated benefits of BancShares’ previously announced acquisition transaction(s), including the recently-completed CIT Merger discussed further in general economic conditions that affect our loanthe “Business Combinations” section of this MD&A, and lease portfolio, the abilities of our borrowers to repay their loans and leases, the values of real estate and other collateral, the impact of the FDIC-assisted transactions and/or the risks discussed in Item 1A. Risk Factors aboveof this Annual Report on Form 10-K and other developments or changes in our business that we do not expect.

Except to the extent required by applicable law or regulation, BancShares undertakes nodisclaims any obligation to reviseupdate such factors or updateto publicly announce the results of any revisions to any of the forward-looking statements for any reason.included herein to reflect future events or developments.

The following is a summary of some of the more significant areas in which we apply critical assumptions and estimates:

Significant macroeconomic factors used in estimating the loans.