LEASES

3 Months Ended

Mar. 31, 2026

NOTE 7 — LEASES

Lessee

BancShares’ leases primarily include administrative offices and bank locations. Substantially all of our operating lease liabilities relate to United States real estate leases. Our finance lease liabilities mainly relate to equipment leases, including the lease of certain ATMs. Our real estate leases have remaining lease terms of up to 32 years. Our lease terms may include options to extend or terminate the lease, and our operating leases have renewal terms that can extend from 1 to 25 years. The options are included in the lease term when it is determined that it is reasonably certain the option will be exercised.

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

Supplemental Lease Information


dollars in millions	Classification	March 31, 2026			December 31, 2025
Lease assets:
Operating lease ROU assets	Other assets	$	285		$	294
Finance leases	Premises and equipment	71			71
Total lease assets		$	356		$	365
Lease liabilities:
Operating leases	Other liabilities	$	317		$	329
Finance leases	Other borrowings	73			72
Total lease liabilities		$	390		$	401
Weighted-average remaining lease terms:
Operating leases		7.0 years			7.2 years
Finance leases		7.4 years			7.7 years
Weighted-average discount rate:
Operating leases		3.10		%	3.10		%
Finance leases		4.21			4.20

As of March 31, 2026, there were no leases that have not yet commenced that would have a material impact on BancShares’ consolidated financial statements.

The following table presents components of lease cost:

Components of Net Lease Cost


dollars in millions		Three Months Ended March 31,
	Classification	2026		2025
Operating lease cost	Occupancy expense	$	17	$	18

Finance lease ROU asset amortization	Equipment expense	3		1
Interest on lease liabilities	Interest expense - other borrowings	1		—
Variable lease cost (1)	Occupancy expense	5		7
Sublease income	Occupancy expense	(1)		(2)
Net lease cost (1)		$	25	$	24

(1) Includes short-term lease cost.

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

For finance leases, the right of use (“ROU”) asset is amortized straight-line over the lease term as equipment expense and interest on the lease liability is recognized separately.

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

Sublease income results from leasing excess building space that BancShares is no longer utilizing under operating leases, which have remaining lease terms of up to 11 years.

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

Supplemental Cash Flow Information


dollars in millions	Three Months Ended March 31,
	2026		2025
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	19	$	19
Operating cash flows from finance leases	1		—
Financing cash flows from finance leases	2		1
ROU assets obtained in exchange for new operating lease liabilities	6		3
ROU assets obtained in exchange for new finance lease liabilities	3		22

Lessor

BancShares leases equipment to commercial end-users under operating lease and finance lease arrangements. The majority of operating lease equipment is long-lived rail equipment, which is typically leased several times over its life. We also lease technology and office equipment, and large and small industrial, medical, and transportation equipment under both operating leases and finance leases.

Our Rail operating leases typically do not include purchase options. Many of our finance leases, and other equipment operating leases, offer the lessee the option to purchase the equipment at fair market value or for a nominal fixed purchase option. Many of the leases that do not have a nominal purchase option include renewal provisions resulting in some leases continuing beyond the initial contractual term. Our leases typically do not include early termination options. Continued rent payments are due if leased equipment is not returned at the end of the lease.

The following table presents lease income related to BancShares’ equipment leases:

Lease Income


dollars in millions	Three Months Ended March 31,
	2026		2025
Lease income – operating leases	$	268	$	254
Variable lease income – operating leases (1)	13		16
Rental income on operating leases	281		270
Interest income – sales type and direct financing leases	42		43
Variable lease income included in other noninterest income (2)	14		14
Interest income – leveraged leases	1		1
Total lease income	$	338	$	328

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

(2) Includes revenue related to insurance coverage on leased equipment and leased equipment property tax reimbursements due from customers.

LEASES