UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, ~~2022~~2023

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-39325

ATLANTIC UNION BANKSHARES ~~CORP~~~~ORATION~~CORPORATION

(Exact name of registrant as specified in its charter)


Virginia	54-1598552
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

1051 East Cary Street

Suite 1200

Richmond, Virginia 23219

(Address of principal executive offices) (Zip Code)

(804) 633-5031

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $1.33 per share	AUB	The ~~NASDAQ Global Select Market~~New York Stock Exchange
Depositary Shares, Each Representing a 1/400^th Interest in a Share of 6.875% Perpetual Non-Cumulative Preferred Stock, Series A	~~AUBAP~~AUB.PRA	The ~~NASDAQ Global Select Market~~New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐
		Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


	Yes ☐ No ☒

The number of shares of common stock outstanding as of April ~~28, 2022~~27, 2023 was ~~75,014,103.~~74,994,600.

Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION

FORM 10-Q

INDEX


ITEM		PAGE

	PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets as of March 31, ~~2022~~2023 (unaudited) and December 31, ~~2021~~2022 (audited)	2

	Consolidated Statements of Income (unaudited) for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022	3

	Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022	4

	Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022	5

	Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022	6

	Notes to Consolidated Financial Statements (unaudited)	8

	~~Review~~ Report of Independent Registered Public Accounting Firm	4751

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4852

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	7076

Item 4.	Controls and Procedures	7278

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	7380

Item 1A.	Risk Factors	7380

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7381

Item 6.	Exhibits	7581

	Signatures	7783

Table of Contents

Glossary of Acronyms and Defined Terms

In this Form 10-Q, unless the context suggests otherwise, the terms “we”, “us”, and “our” refer to Atlantic Union Bankshares Corporation and its direct and indirect subsidiaries, including Atlantic Union Bank.


~~2021~~2022 Form 10-K	–	Annual Report on Form 10-K for the year ended December 31, ~~2021~~
~~Access~~	–	~~Access National Corporation and its subsidiaries~~2022
ACL	–	Allowance for credit losses
AFS	–	Available for sale
~~ALCO~~	–	~~Asset Liability Committee~~
ALLL	–	Allowance for loan and lease losses, a component of ACL
AOCI	–	Accumulated other comprehensive income (loss)
ASC	–	Accounting Standards Codification
~~ASC 820~~	–	~~ASC 820,~~ ~~Fair Value Measurements and Disclosures~~
ASU	–	Accounting Standards Update
~~ATM~~	–	~~Automated teller machine~~
AUB	–	Atlantic Union Bankshares Corporation
~~AUBAP~~	–	~~Atlantic Union Bankshares Corporation trading symbol~~
the Bank	–	Atlantic Union Bank ~~(formerly, Union Bank & Trust)~~
BOLI	–	Bank-owned life insurance
bps	–	Basis points
~~BVAL~~BTFP	–	~~Bloomberg Valuation Service~~
~~CAA~~	–	~~Consolidated Appropriations Act, 2021~~
~~CARES Act~~	–	~~Coronavirus Aid, Relief, and Economic Security Act~~Bank Term Funding Program
CECL	–	Current expected credit losses
CFPB	–	Consumer Financial Protection Bureau
the Company	–	Atlantic Union Bankshares Corporation ~~(formerly, Union Bankshares Corporation)~~ and its subsidiaries
~~COVID-19~~	–	~~COVID-19 global pandemic~~
depositary shares	–	Depositary shares, each representing a 1/400th ownership interest in a share of the Company’s Series A preferred stock, with a liquidation preference of $10,000 per share of Series A preferred stock (equivalent to $25 per depositary share)
DHFB	–	Dixon, Hubard, Feinour & Brown, Inc.
EPS	–	Earnings per common share
Exchange Act	–	Securities Exchange Act of 1934, as amended
FASB	–	Financial Accounting Standards Board
~~FCMs~~	–	~~Futures Commission Merchants~~
FDIC	–	Federal Deposit Insurance Corporation
Federal Reserve	–	Board of Governors of the Federal Reserve System
FRB	–	Federal Reserve Bank of Richmond
FHLB	–	Federal Home Loan Bank of Atlanta
FHLMC	–	Federal Home Loan Mortgage Corporation
FNB	–	FNB Corporation
FNMA	–	Federal National Mortgage Association
FOMC	–	Federal Open ~~Markets~~Market Committee
FTE	–	Fully taxable equivalent
~~GAAP or~~FR Y9-C	–	Consolidated financial statements for a U.S. bank holding company, a savings and loan holding company, a U.S. intermediate holding company, and a securities holding company
GAAP	–	Accounting principles generally accepted in the United States
GNMA	–	Government National Mortgage Association
HTM	–	Held to maturity
ICE	–	Intercontinental Exchange Data Services
~~the Joint Guidance~~	–	~~The five federal bank regulatory agencies and the Conference of State Bank Supervisors guidance issued on March 22, 2020 (subsequently revised on April 7, 2020)~~
LHFI	–	Loans held for investment
LHFS	–	Loans held for sale
LIBOR	–	London Interbank Offered Rate
MBS	–	Mortgage-Backed Securities
~~NASDAQ~~MFC	–	~~National Association of Securities Dealers Automated Quotation exchange~~Middleburg Financial Corporation
~~NOW~~	–	~~Negotiable order of withdrawal~~

~~Table of Contents~~

NPA	–	Nonperforming assets
NYSE	–	New York Stock Exchange
OCI	–	Other comprehensive (loss) income
OREO	–	Other real estate owned
~~OTC~~	–	~~Over-the-counter~~
PD/LGD	–	Probability of default/loss given default
~~PPP~~	–	~~Paycheck Protection Program~~
~~Quarterly Report~~	–	~~Quarterly Report on Form 10-Q for the quarter ended March 31, 2022~~
~~Repurchase Program~~	–	~~The share repurchase program, approved on December 10, 2021 by the Company’s Board of Directors, which authorizes the Company to purchase up to $100.0 million worth of the Company’s common stock~~

Table of Contents

ROU asset	–	Right of Use Asset
~~RUC~~RPAs	–	~~Reserve for unfunded commitments~~
~~RVI~~	–	~~Residual value insurance~~Risk Participation Agreements
SBA	–	Small Business Administration
SEC	–	Securities and Exchange Commission
Series A preferred stock	–	6.875% Perpetual Non-Cumulative Preferred Stock, Series A, par value $10.00 per share
SOFR	–	Secured Overnight Financing Rate
~~SSFA~~TLM	–	~~Simplified supervisory formula approach~~Troubled loan modification
TDR	–	Troubled debt restructuring
~~Topic 606~~	–	~~ASU No. 2014-09,~~ ~~“Revenue from Contracts with Customers: Topic 606”~~
~~Topic 848~~	–	~~ASU 2020-04~~~~, “Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting”~~
VFG	–	Virginia Financial Group, Inc.
~~2031 Notes~~	–	~~$250.0 million of 2.875% fixed-to-floating rate subordinate notes issued by the Company during the fourth quarter of 2021 with a maturity date of December 15, 2031~~

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, ~~2022~~2023 AND DECEMBER 31, ~~2021~~2022

(Dollars in thousands, except share data)

March 31,

December 31,

2022

2021
ASSETS

(unaudited)

(audited)
Cash and cash equivalents:

Cash and due from banks
$
178,225

$
180,963
Interest-bearing deposits in other banks

213,140

618,714
Federal funds sold

4,938

2,824
Total cash and cash equivalents

396,303

802,501
Securities available for sale, at fair value

3,193,280

3,481,650
Securities held to maturity, at carrying value

756,872

628,000
Restricted stock, at cost

77,033

76,825
Loans held for sale, at fair value

21,227

20,861
Loans held for investment, net of deferred fees and costs

13,459,349

13,195,843
Less: allowance for loan and lease losses

102,591

99,787
Total loans held for investment, net

13,356,758

13,096,056
Premises and equipment, net

130,998

134,808
Goodwill

935,560

935,560
Amortizable intangibles, net

40,273

43,312
Bank owned life insurance

434,012

431,517
Other assets

440,114

413,706
Total assets
$
19,782,430

$
20,064,796
LIABILITIES

Noninterest-bearing demand deposits
$
5,370,063

$
5,207,324
Interest-bearing deposits

11,114,160

11,403,744
Total deposits

16,484,223

16,611,068
Securities sold under agreements to repurchase

115,027

117,870
Long-term borrowings

389,005

388,724
Other liabilities

295,840

237,063
Total liabilities

17,284,095

17,354,725
Commitments and contingencies (Note 7)

STOCKHOLDERS' EQUITY

Preferred stock, $10.00 par value

173

173
Common stock, $1.33 par value

99,651

100,101
Additional paid-in capital

1,786,640

1,807,368
Retained earnings

803,354

783,794
Accumulated other comprehensive income (loss)

(191,483)

18,635
Total stockholders' equity

2,498,335

2,710,071
Total liabilities and stockholders' equity
$
19,782,430

$
20,064,796

Common shares outstanding

75,335,956

75,663,648
Common shares authorized

200,000,000

200,000,000
Preferred shares outstanding

17,250

17,250
Preferred shares authorized

500,000

500,000


	March 31,		December 31,
	2023		2022
ASSETS		(unaudited)		(audited)
Cash and cash equivalents:
Cash and due from banks	$	187,106	$	216,384
Interest-bearing deposits in other banks		184,371		102,107
Federal funds sold		719		1,457
Total cash and cash equivalents		372,196		319,948
Securities available for sale, at fair value		2,252,365		2,741,816
Securities held to maturity, at carrying value		855,418		847,732
Restricted stock, at cost		87,616		120,213
Loans held for sale		14,213		3,936
Loans held for investment, net of deferred fees and costs		14,584,280		14,449,142
Less: allowance for loan and lease losses		116,512		110,768
Total loans held for investment, net		14,467,768		14,338,374
Premises and equipment, net		116,466		118,243
Goodwill		925,211		925,211
Amortizable intangibles, net		24,482		26,761
Bank owned life insurance		443,537		440,656
Other assets		544,098		578,248
Total assets	$	20,103,370	$	20,461,138
LIABILITIES
Noninterest-bearing demand deposits	$	4,578,009	$	4,883,239
Interest-bearing deposits		11,877,901		11,048,438
Total deposits		16,455,910		15,931,677
Securities sold under agreements to repurchase		163,760		142,837
Other short-term borrowings		245,000		1,176,000
Long-term borrowings		390,150		389,863
Other liabilities		408,314		448,024
Total liabilities		17,663,134		18,088,401
Commitments and contingencies (Note 7)
STOCKHOLDERS' EQUITY
Preferred stock, $10.00 par value		173		173
Common stock, $1.33 par value		99,072		98,873
Additional paid-in capital		1,773,118		1,772,440
Retained earnings		929,806		919,537
Accumulated other comprehensive loss		(361,933)		(418,286)
Total stockholders' equity		2,440,236		2,372,737
Total liabilities and stockholders' equity	$	20,103,370	$	20,461,138

Common shares outstanding		74,989,228		74,712,622
Common shares authorized		200,000,000		200,000,000
Preferred shares outstanding		17,250		17,250
Preferred shares authorized		500,000		500,000

See accompanying notes to consolidated financial statements.

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Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

THREE MONTHS ENDED MARCH 31, ~~2022~~2023 AND ~~2021~~2022

(Dollars in thousands, except share and per share data)


	Three Months Ended					Three Months Ended
	March 31,			March 31,		March 31,		March 31,
	2022			2021		2023		2022
Interest and dividend income:
Interest and fees on loans	$	114,200		$	128,006	$	189,992	$	114,200
Interest on deposits in other banks		131			77		1,493		131
Interest and dividends on securities:
Taxable		13,666			10,353		16,753		13,666
Nontaxable		10,459			9,237		9,308		10,459
Total interest and dividend income		138,456			147,673		217,546		138,456
Interest expense:
Interest on deposits		4,483			9,128		51,834		4,483
Interest on short-term borrowings		21	��		48		7,563		21
Interest on long-term borrowings		3,021			3,599		4,706		3,021
Total interest expense		7,525			12,775		64,103		7,525
Net interest income		130,931			134,898		153,443		130,931
Provision for credit losses		2,800			(13,624)		11,850		2,800
Net interest income after provision for credit losses		128,131			148,522		141,593		128,131
Noninterest income:
Service charges on deposit accounts		7,596			5,509		7,902		7,596
Other service charges, commissions and fees		1,655			1,701		1,746		1,655
Interchange fees		1,810			1,847		2,325		1,810
Fiduciary and asset management fees		7,255			6,475		4,262		7,255
Mortgage banking income		3,117			8,255		854		3,117
Loss on sale of securities							(13,400)		—
Bank owned life insurance income		2,697			2,265		2,828		2,697
Loan-related interest rate swap fees		3,860			1,754		1,439		3,860
Other operating income		2,163			3,179		1,672		2,163
Total noninterest income		30,153			30,985		9,628		30,153
Noninterest expenses:
Salaries and benefits		58,298			52,660		60,529		58,298
Occupancy expenses		6,883			7,315		6,356		6,883
Furniture and equipment expenses		3,597			3,968		3,752		3,597
Technology and data processing		7,796			6,904		8,142		7,796
Professional services		4,090			4,960		3,413		4,090
Marketing and advertising expense		2,163			2,044		2,351		2,163
FDIC assessment premiums and other insurance		2,485			2,307		3,899		2,485
Other taxes		4,499			4,436
Franchise and other taxes							4,498		4,499
Loan-related expenses		1,776			1,877		1,552		1,776
Amortization of intangible assets		3,039			3,730		2,279		3,039
Loss on debt extinguishment		0			14,695
Other expenses		10,695			7,041		11,503		10,695
Total noninterest expenses		105,321			111,937		108,274		105,321
Income from continuing operations before income taxes		52,963			67,570		42,947		52,963
Income tax expense		9,273			11,381		7,294		9,273
Net income		43,690			56,189		35,653		43,690
Dividends on preferred stock		2,967			2,967		2,967		2,967
Net income available to common shareholders	$	40,723		$	53,222	$	32,686	$	40,723

Basic earnings per common share	$	0.54		$	0.67	$	0.44	$	0.54
Diluted earnings per common share	$	0.54		$	0.67	$	0.44	$	0.54
Dividends declared per common share	$	0.28		$	0.25	$	0.30	$	0.28
Basic weighted average number of common shares outstanding		75,544,644			78,863,468		74,832,141		75,544,644
Diluted weighted average number of common shares outstanding		75,556,127			78,884,235		74,835,514		75,556,127

See accompanying notes to consolidated financial statements.

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Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) ~~INCOME~~ (UNAUDITED)

THREE MONTHS ENDED MARCH 31, ~~2022~~2023 AND ~~2021~~2022

(Dollars in thousands)

Three Months Ended

March 31,

2022

2021

2023

2022

Net income

43,690

56,189

35,653

43,690

Other comprehensive income (loss):

Cash flow hedges:

Change in fair value of cash flow hedges (net of tax, $6,197 and $380 for the three months ended March 31, 2022 and 2021, respectively)

(23,313)

(1,428)

Reclassification adjustment for gains included in net income (net of tax, $0 and $12 for the three months ended March 31, 2022 and 2021, respectively) ⁽¹⁾

(47)

Change in fair value of cash flow hedges (net of tax, $3,645 and $6,197 for the three months ended March 31, 2023 and 2022, respectively)

13,714

(23,313)

AFS securities:

Unrealized holding losses arising during period (net of tax, $49,700 and $8,806 for the three months ended March 31, 2022 and 2021, respectively)

(186,967)

(33,125)

Reclassification adjustment for gains included in net income (net of tax, $0 and $16 for the three months ended March 31, 2022 and 2021, respectively) ⁽²⁾

(62)

Unrealized holding gains (losses) arising during period (net of tax, $8,525 and $49,700 for the three months ended March 31, 2023 and 2022, respectively)

32,068

(186,967)

Reclassification adjustment for losses included in net income (net of tax, $2,814 and $0 for the three months ended March 31, 2023 and 2022, respectively) ⁽¹⁾

10,586

—

HTM securities:

Reclassification adjustment for accretion of unrealized gain on AFS securities transferred to HTM (net of tax, $1 and $1 for the three months ended March 31, 2022 and 2021, respectively) ⁽³⁾

(5)

(5)

Reclassification adjustment for accretion of unrealized gain on AFS securities transferred to HTM (net of tax, $1 and $1 for the three months ended March 31, 2023 and 2022, respectively) ⁽²⁾

(3)

(5)

Bank owned life insurance:

Unrealized holding gains arising during the period

—

Reclassification adjustment for losses included in net income ⁽⁴⁾⁽³⁾

167

153

(22)

167

Other comprehensive loss

(210,118)

(34,514)

Comprehensive (loss) income

(166,428)

21,675

Other comprehensive income (loss):

56,353

(210,118)

Comprehensive income (loss)

92,006

(166,428)

⁽¹⁾ The gross amounts reclassified into earnings are ~~generally~~ reported ~~in the interest income and interest expense sections of~~as "Other operating income" on the Company’s Consolidated Statements of Income with the corresponding income tax effect being reflected as a component of income tax expense.

⁽²⁾The gross amounts reclassified into earnings are reported as "Gains on securities transactions" on the Company’s Consolidated Statements of Income with the corresponding income tax effect being reflected as a component of income tax expense.

⁽³⁾ The gross amounts reclassified into earnings are reported within interest income on the Company’s Consolidated Statements of Income with the corresponding income tax effect being reflected as a component of income tax expense.

⁽⁴⁾⁽³⁾ Reclassifications in earnings are reported in "Salaries and benefits" expense on the Company’s Consolidated Statements of Income.

See accompanying notes to consolidated financial statements.

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Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

THREE MONTHS ENDED MARCH 31, ~~2022~~2023 AND ~~2021~~2022

(Dollars in thousands, except share and per share amounts)

Accumulated

Additional

Other

Additional

Other

Common

Preferred

Paid-In

Retained

Comprehensive

Common

Preferred

Paid-In

Retained

Comprehensive

Stock

Capital

Earnings

Income (Loss)

Total

Stock

Capital

Earnings

Income (Loss)

Total

Balance - December 31, 2021

100,101

173

1,807,368

783,794

18,635

2,710,071

Balance - December 31, 2022

98,873

173

1,772,440

919,537

(418,286)

2,372,737

Net Income

43,690

35,653

Other comprehensive loss (net of taxes of $49,701)

(210,118)

Dividends on common stock ($0.28 per share)

(21,163)

Other comprehensive income (net of taxes of $14,983)

56,353

Dividends on common stock ($0.30 per share)

(22,417)

Dividends on preferred stock ($171.88 per share)

(2,967)

Stock purchased under stock repurchase plan (629,691 shares)

(837)

(24,181)

(25,018)

Issuance of common stock under Equity Compensation Plans, stock issuance for services rendered, and vesting of restricted stock, net of shares held for taxes (291,723 shares)

387

1,044

1,431

Issuance of common stock under Equity Compensation Plans, stock issuance for services rendered, and vesting of restricted stock, net of shares held for taxes (149,684 shares)

199

(1,654)

(1,455)

Stock-based compensation expense

2,409

2,332

Balance - March 31, 2022

99,651

173

1,786,640

803,354

(191,483)

2,498,335

Balance - March 31, 2023

99,072

173

1,773,118

929,806

(361,933)

2,440,236

Balance - December 31, 2020

$
104,169

$
173

$
1,917,081

$
616,052

$
71,015

$
2,708,490
Net Income

56,189

56,189
Other comprehensive loss (net of taxes of $8,835)



(34,514)

(34,514)
Dividends on common stock ($0.25 per share)



(19,700)

(19,700)
Dividends on preferred stock ($171.88 per share)

(2,967)

(2,967)
Issuance of common stock under Equity Compensation Plans, stock issuance for services rendered, and vesting of restricted stock, net of shares held for taxes (243,884 shares)

324

(289)

35
Stock-based compensation expense



2,199

2,199
Balance- March 31, 2021

$
104,493

$
173

$
1,918,991

$
649,574

$
36,501

$
2,709,732



Balance - December 31, 2021	$	100,101	$	173	$	1,807,368	$	783,794	$	18,635	$	2,710,071
Net Income								43,690				43,690
Other comprehensive loss (net of taxes of $49,701)										(210,118)		(210,118)
Dividends on common stock ($0.28 per share)								(21,163)				(21,163)
Dividends on preferred stock ($171.88 per share)								(2,967)				(2,967)
Stock purchased under stock repurchase plan (629,691 shares)		(837)				(24,181)						(25,018)
Issuance of common stock under Equity Compensation Plans, stock issuance for services rendered, and vesting of restricted stock, net of shares held for taxes (291,723 shares)		387				1,044						1,431
Stock-based compensation expense						2,409						2,409
Balance - March 31, 2022	$	99,651	$	173	$	1,786,640	$	803,354	$	(191,483)	$	2,498,335

See accompanying notes to consolidated financial statements.

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Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, ~~2022~~2023 AND ~~2021~~2022

(Dollars in thousands)


	2022		2021		2023		2022
Operating activities:
Net income	$	43,690	$	56,189	$	35,653	$	43,690
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of premises and equipment		3,599		3,969		3,427		3,599
Writedown of ROU assets and equipment		4,570		1,065
Writedown of ROU assets, foreclosed properties and equipment						112		4,570
Amortization, net		8,619		7,904		6,417		8,619
Amortization (accretion) related to acquisitions, net		875		(532)
Amortization related to acquisitions, net						1,288		875
Provision for credit losses		2,800		(13,624)		11,850		2,800
Gains on securities transactions, net		0		(78)
Losses on securities transactions						13,400		—
BOLI income		(2,697)		(2,265)		(2,828)		(2,697)
Originations and purchases of loans held for sale		(91,957)		(185,885)
Proceeds from sales of loans held for sale		91,434		231,250
Gains on sales of foreclosed properties and former bank premises, net		0		(706)
Losses on debt extinguishment		0		14,695
Originations and purchases of LHFS						(286,526)		(91,957)
Proceeds from sales of LHFS						283,316		91,434
Stock-based compensation expenses		2,409		2,199		2,332		2,409
Issuance of common stock for services		217		0		187		217
Net decrease in other assets		46,434		42,567		18,840		46,434
Net increase (decrease) in other liabilities		1,454		(72,375)
Net (decrease) increase in other liabilities						(27,901)		1,454
Net cash provided by operating activities		111,447		84,373		59,567		111,447
Investing activities:
Purchases of AFS securities, restricted stock, and other investments		(62,773)		(355,992)		(45,633)		(62,773)
Purchases of HTM securities		(130,533)		0		(13,826)		(130,533)
Proceeds from sales of AFS securities and restricted stock		0		45,436		558,466		—
Proceeds from maturities, calls and paydowns of AFS securities		109,974		124,053		47,338		109,974
Proceeds from maturities, calls and paydowns of HTM securities		550		432		5,218		550
Net increase in loans held for investment		(258,502)		(250,762)
Net increase in LHFI						(145,260)		(258,502)
Net increase in premises and equipment		(797)		(3,520)		(1,624)		(797)
Proceeds from BOLI settlements		2,068		556		353		2,068
Proceeds from sales of foreclosed properties and former bank premises		0		2,431		533		—
Net cash used in investing activities		(340,013)		(437,366)
Net cash provided by (used in) investing activities						405,565		(340,013)
Financing activities:
Net increase in noninterest-bearing deposits		162,739		697,696
Net decrease in interest-bearing deposits		(289,594)		(122,424)
Net (decrease) increase in noninterest-bearing deposits						(305,230)		162,739
Net increase (decrease) in interest-bearing deposits						829,449		(289,594)
Net decrease in short-term borrowings		(2,843)		(77,366)		(910,077)		(2,843)
Repayments of long-term debt		0		(214,695)
Cash dividends paid - common stock		(21,163)		(19,700)		(22,417)		(21,163)
Cash dividends paid - preferred stock		(2,967)		(2,967)		(2,967)		(2,967)
Repurchase of common stock		(25,018)		0		—		(25,018)
Issuance of common stock		3,804		2,183		474		3,804
Vesting of restricted stock, net of shares held for taxes		(2,590)		(2,148)		(2,116)		(2,590)
Net cash (used in) provided by financing activities		(177,632)		260,579
Decrease in cash and cash equivalents		(406,198)		(92,414)
Net cash used in financing activities						(412,884)		(177,632)
Increase (decrease) in cash and cash equivalents						52,248		(406,198)
Cash, cash equivalents and restricted cash at beginning of the period		802,501		493,294		319,948		802,501
Cash, cash equivalents and restricted cash at end of the period	$	396,303	$	400,880	$	372,196	$	396,303

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ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, ~~2022~~2023 AND ~~2021~~2022

(Dollars in thousands)


	2022		2021		2023		2022
Supplemental Disclosure of Cash Flow Information
Cash payments for:
Interest	$	5,393	$	11,502	$	58,678	$	5,393

Supplemental schedule of noncash investing and financing activities
Transfers from bank premises to OREO		0		1,425
Transfer from LHFI to LHFS						7,087		—

See accompanying notes to consolidated financial statements.

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ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

Headquartered in Richmond, Virginia, Atlantic Union Bankshares Corporation ~~(Nasdaq:~~(NYSE: AUB) is the holding company for Atlantic Union Bank. Atlantic Union Bank ~~has 114~~had 109 branches and approximately ~~130~~125 ATMs located throughout Virginia, and in portions of Maryland and North Carolina as of March 31, ~~2022.~~2023. Certain non-bank financial services affiliates of Atlantic Union Bank include: Atlantic Union Equipment Finance, Inc., which provides equipment financing; ~~Dixon, Hubard, Feinour & Brown, Inc., which provides investment advisory services;~~ Atlantic Union Financial Consultants, LLC, which provides brokerage services; and Union Insurance Group, LLC, which offers various lines of insurance products.

The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. The unaudited consolidated financial statements have been prepared in accordance with ~~U.S.~~ GAAP for interim financial information and follow general practice within the banking industry. Accordingly, the unaudited consolidated financial statements do not include all the information and footnotes required by ~~U.S.~~ GAAP for complete financial statements; however, in the opinion of management all adjustments necessary for a fair presentation of the results of the interim periods presented have been made. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year or any other period.

The unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s ~~2021~~2022 Form 10-K. Certain prior period amounts have been reclassified to conform to current period presentation.

Adoption of New Accounting Standards

In March 2022, the FASB issued ASU No. 2022-01 Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method to allow nonprepayable financial assets to be included in a closed portfolio hedge using the portfolio layer method and to allow multiple hedged layers to be designated for a single closed portfolio of financial assets or one or more beneficial interests secured by a portfolio of financial instruments. The amendments are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted ASU No. 2022-01 effective January 1, 2023 and concluded that it did not have significant impact on its consolidated financial statements.

In March 2022, the FASB issued ASU No. 2022-02 Financial Instruments- Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. This ASU eliminates the accounting guidance for TDRs by creditors and instead requires that an entity evaluate whether a loan modification represents a new loan or a continuation of an existing loan, consistent with the accounting for other loan modifications. The amendment also introduces new disclosure requirements for modifications to loans made to a borrower experiencing financial difficulty in the form of principal forgiveness, interest rate reductions, term extensions, or other-than-insignificant payment delays. The Company refers to these modifications to borrowers experiencing financial difficulty as Troubled Loan Modifications, or TLMs. In addition, the amendments require that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20. The amendments are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted the amendments of ASU 2022-02 effective January 1, 2023 on a prospective basis. See below in Note 1 “Summary of Significant Accounting Policies” within this Item 1 of this Quarterly Report for discussion of the Company’s accounting policy for Loan Modifications and Note 3 “Loans and Allowance for Loan and Lease Losses” within this Item 1 of this Quarterly Report for more information.

In March 2020, the FASB issued ~~Topic 848.~~ASC 848, Reference Rate Reform. This guidance provides temporary, optional guidance to ease the potential burden in accounting for reference rate reform associated with the LIBOR transition. LIBOR and other interbank offered rates are widely used benchmark or reference rates that have been used in the valuation of loans, derivatives, and other financial contracts. ~~Topic~~ASC 848 provides optional expedients and exceptions ~~subject to meeting certain criteria,~~ for applying ~~current~~ GAAP to contract modifications and hedging relationships, ~~for contracts~~subject to meeting certain criteria, that reference LIBOR or ~~other~~another reference ~~rates~~rate expected to be discontinued. ~~Topic~~ASC 848 is intended to help stakeholders during the global market-wide reference rate transition period. The amendments are effective as of March 12, 2020 through December 31, ~~2022~~2024 and can be adopted at an instrument level. ~~As of March 31, 2021,~~The Company has elected the ~~Company utilized the expedient~~practical expedients provided in ASC 848 related to ~~assert~~(1) accounting for contract modifications on its loans and securities tied to LIBOR and (2) asserting probability of the hedged ~~interest,~~item occurring, regardless of any expected modification in terms related to reference rate reform for the newly executed cash flow hedges. The Company ~~expects to~~

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may incorporate other components of ~~Topic~~ASC 848 at a later date. This amendment ~~does~~did not have a ~~material~~significant impact on the Company’s consolidated financial statements.

~~Cash and Cash Equivalents~~

~~For purposes~~Loan Modifications

The Company evaluates all loan modifications according to the accounting guidance for loan refinancing and restructuring to determine whether the modification should be accounted for as a new loan or a continuation of ~~reporting cash flows,~~the existing loan. If the modification meets the criteria to be accounted for as a new loan, any deferred fees and costs remaining prior to the modification are recognized in income and any new deferred fees and costs are recorded on the loan as part of the modification. If the modification does not meet the criteria to be accounted for as a new loan, any new deferred fees and costs resulting from the modification are added to the existing amortized cost basis of the loan.

The Company adopted the accounting guidance in ASU No. 2022-02 on January 1, 2023 that eliminates the recognition and measurement of TDRs. Upon adoption of this guidance, the Company ~~defines cash~~no longer applies its TDR accounting policy and ~~cash equivalents as cash, cash due from banks, interest-bearing deposits~~instead accounts for modifications in ~~other banks, short-term money market investments, other interest-bearing deposits, and federal funds sold.~~accordance with its loan modifications policy stated in the preceding paragraph. For the Company’s policy for accounting for TDRs prior to the adoption of ASU No. 2022-02, see Note 1 “Summary of Significant Accounting Policies” of the Company’s 2022 Form 10-K.

~~Restricted cash~~Effective January 1, 2023, the Company refers to modifications to loans where the borrower is ~~disclosed~~experiencing financial difficulty and the modification is in the form of principal forgiveness, interest rate reductions, term extensions, other-than-insignificant payment delays, or a combination of the above modifications, as troubled loan modifications, or TLMs. The Company accounts for TLMs consistently with its accounting policy for accounting for loan modifications. The ALLL on TLMs is measured using the same method as all other LHFI. Refer to Note ~~7 “Commitments~~3 “Loans and ~~Contingencies” in Part I,~~Allowance for Loan and Lease Losses” within this Item I1 of this Quarterly Report ~~and is comprised of cash maintained at various correspondent banks as collateral~~ for ~~the Company’s derivative portfolio and is included in interest-bearing deposits in other banks in the Company’s Consolidated Balance Sheets. In addition, the Company is required~~additional disclosures related to maintain reserve balances with the FRB based on the type and amount of deposits; however, on March 15, 2020 the Federal Reserve announced that reserve requirement ratios would be reduced to zero percent effective March 26, 2020 due to economic conditions, which eliminated the reserve requirement for all depository institutions. The reserve requirement is still at zero percent as of March 31, 2022.TLMs.

Accrued Interest Receivable

The Company has elected to exclude accrued interest from the amortized cost basis in its determination of the ALLL, as well as the ACL reserve for securities. Accrued interest receivable totaled ~~$42.5~~$60.7 million and ~~$43.3~~$58.9 million on LHFI ~~$6.2~~, $6.8 million and ~~$7.0~~$8.6 million on HTM securities, and ~~$13.8~~$9.4 million and ~~$14.5~~$14.2 million on AFS securities at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, and is included in “Other assets” on the Company’s Consolidated Balance Sheets. The Company’s policy is to write off accrued interest receivable through reversal of interest income when it becomes probable the Company

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will not be able to collect the accrued interest. For the quarters ended March 31, ~~2022~~2023 and March ~~30, 2021,~~31, 2022, accrued interest receivable write offs were not material to the Company’s consolidated financial statements.

~~Segment Reporting~~

Operating segments are components of a business about which separate financial information is available and evaluated regularly by the chief operating decision makers in deciding how to allocate resources and assessing performance. The Bank is the Company’s only reportable operating segment upon which management makes decisions regarding how to allocate resources and assess performance. While the Company’s chief operating decision makers do have some limited financial information about its various financial products and services, that information is not complete since it does not include a full allocation of revenue, costs, and capital from key corporate functions; therefore, the Company evaluates financial performance on the Company-wide basis. Management continues to evaluate these business units for separate reporting as facts and circumstances change.

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2. SECURITIES

Available for Sale

The Company’s AFS investment portfolio is generally highly-rated or agency backed. All AFS securities were current with 0no securities past due or on non-accrual as of March 31, ~~2022~~2023 and December 31, ~~2021.~~2022.

The amortized cost, gross unrealized gains and losses, and estimated fair values of AFS securities as of March 31, ~~2022~~2023 are summarized as follows (dollars in thousands):

Amortized

Gross Unrealized

Estimated

Amortized

Gross Unrealized

Estimated

Cost

Gains

(Losses)

Fair Value

Cost

Gains

(Losses)

Fair Value

March 31, 2022

March 31, 2023

U.S. government and agency securities

72,068

—

(4,029)

68,039

69,474

—

(6,900)

62,574

Obligations of states and political subdivisions

967,219

8,336

(87,255)

888,300

650,328

(127,251)

523,097

Corporate and other bonds ⁽¹⁾

185,884

802

(2,763)

183,923

171,899

—

(19,893)

152,006

Commercial MBS

Agency

342,966

978

(15,592)

328,352

220,617

156

(37,729)

183,044

Non-agency

108,462

—

(2,323)

106,139

80,239

—

(2,636)

77,603

Total commercial MBS

451,428

978

(17,915)

434,491

300,856

156

(40,365)

260,647

Residential MBS

Agency

1,634,860

2,401

(103,848)

1,533,413

1,394,464

(207,355)

1,187,166

Non-agency

86,876

(3,413)

83,469

71,552

—

(6,358)

65,194

Total residential MBS

1,721,736

2,407

(107,261)

1,616,882

1,466,016

(213,713)

1,252,360

Other securities

1,645

1,681

—

1,681

Total AFS securities

3,399,980

12,523

(219,223)

3,193,280

2,660,254

233

(408,122)

2,252,365

⁽¹⁾ Other bonds include asset-backed ~~securities~~securities.

The amortized cost, gross unrealized gains and losses, and estimated fair values of AFS securities as of December 31, ~~2021~~2022 are summarized as follows (dollars in thousands):


	Amortized		Gross Unrealized				Estimated		Amortized		Gross Unrealized				Estimated
	Cost		Gains		(Losses)		Fair Value		Cost		Gains		(Losses)		Fair Value
December 31, 2021
December 31, 2022
U.S. government and agency securities	$	73,830	$	179	$	(160)	$	73,849	$	70,196	$	—	$	(8,253)	$	61,943
Obligations of states and political subdivisions		971,126		39,343		(2,073)		1,008,396		959,999		137		(152,701)		807,435
Corporate and other bonds ⁽¹⁾		150,201		3,353		(178)		153,376		243,979		—		(17,599)		226,380
Commercial MBS
Agency		361,806		6,761		(4,215)		364,352		250,186		75		(39,268)		210,993
Non-agency		107,087		139		(421)		106,805		99,412		—		(4,244)		95,168
Total commercial MBS		468,893		6,900		(4,636)		471,157		349,598		75		(43,512)		306,161
Residential MBS
Agency		1,691,651		15,180		(24,337)		1,682,494		1,510,110		81		(233,961)		1,276,230
Non-agency		91,443		243		(948)		90,738		68,815		—		(6,812)		62,003
Total residential MBS		1,783,094		15,423		(25,285)		1,773,232		1,578,925		81		(240,773)		1,338,233
Other securities		1,640		0		0		1,640		1,664		—		—		1,664
Total AFS securities	$	3,448,784	$	65,198	$	(32,332)	$	3,481,650	$	3,204,361	$	293	$	(462,838)	$	2,741,816

⁽¹⁾ Other bonds include asset-backed ~~securities~~securities.

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The following table shows the gross unrealized losses and fair value of the Company’s AFS securities with unrealized ~~losses for which an ACL has not been recorded at March 31, 2022 and December 31, 2021 and that are not deemed to be impaired as of those dates.~~losses. These are aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position (dollars in thousands).


	Less than 12 months				More than 12 months				Total				Less than 12 months				More than 12 months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses		Value		Losses		Value⁽²⁾		Losses		Value		Losses
March 31, 2022
March 31, 2023
U.S. government and agency securities	$	64,366	$	(3,972)	$	3,604	$	(57)	$	67,970	$	(4,029)	$	—	$	—	$	62,541	$	(6,900)	$	62,541	$	(6,900)
Obligations of states and political subdivisions		533,491		(79,311)		31,225		(7,944)		564,716		(87,255)		25,482		(1,225)		490,011		(126,026)		515,493		(127,251)
Corporate and other bonds⁽¹⁾		112,253		(2,763)		0		0		112,253		(2,763)		62,443		(3,586)		87,163		(16,307)		149,606		(19,893)
Commercial MBS
Agency		175,651		(11,545)		40,654		(4,047)		216,305		(15,592)		21,945		(3,119)		150,711		(34,610)		172,656		(37,729)
Non-agency		87,127		(1,526)		19,013		(797)		106,140		(2,323)		—		—		77,603		(2,636)		77,603		(2,636)
Total commercial MBS		262,778		(13,071)		59,667		(4,844)		322,445		(17,915)		21,945		(3,119)		228,314		(37,246)		250,259		(40,365)
Residential MBS
Agency		1,016,786		(71,954)		333,594		(31,894)		1,350,380		(103,848)		110,848		(5,385)		1,061,695		(201,971)		1,172,543		(207,356)
Non-agency		63,140		(2,550)		12,162		(863)		75,302		(3,413)		14,615		(138)		50,580		(6,219)		65,195		(6,357)
Total residential MBS		1,079,926		(74,504)		345,756		(32,757)		1,425,682		(107,261)		125,463		(5,523)		1,112,275		(208,190)		1,237,738		(213,713)
Total AFS securities	$	2,052,814	$	(173,621)	$	440,252	$	(45,602)	$	2,493,066	$	(219,223)	$	235,333	$	(13,453)	$	1,980,304	$	(394,669)	$	2,215,637	$	(408,122)

December 31, 2021
December 31, 2022
U.S. government and agency securities	$	64,474	$	(115)	$	3,900	$	(45)	$	68,374	$	(160)	$	2,594	$	(166)	$	59,269	$	(8,087)	$	61,863	$	(8,253)
Obligations of states and political subdivisions		249,701		(2,020)		2,123		(53)		251,824		(2,073)		588,668		(86,895)		187,375		(65,806)		776,043		(152,701)
Corporate and other bonds⁽¹⁾		21,134		(177)		703		(1)		21,837		(178)		206,861		(15,019)		17,121		(2,580)		223,982		(17,599)
Commercial MBS
Agency		175,588		(4,053)		3,172		(162)		178,760		(4,215)		73,362		(7,024)		127,193		(32,244)		200,555		(39,268)
Non-agency		33,759		(313)		11,029		(108)		44,788		(421)		66,618		(2,231)		28,550		(2,013)		95,168		(4,244)
Total commercial MBS		209,347		(4,366)		14,201		(270)		223,548		(4,636)		139,980		(9,255)		155,743		(34,257)		295,723		(43,512)
Residential MBS
Agency		1,140,701		(21,147)		106,104		(3,190)		1,246,805		(24,337)		328,590		(27,769)		929,581		(206,192)		1,258,171		(233,961)
Non-agency		48,392		(584)		12,716		(364)		61,108		(948)		18,939		(1,288)		43,064		(5,524)		62,003		(6,812)
Total residential MBS		1,189,093		(21,731)		118,820		(3,554)		1,307,913		(25,285)		347,529		(29,057)		972,645		(211,716)		1,320,174		(240,773)
Total AFS securities	$	1,733,749	$	(28,409)	$	139,747	$	(3,923)	$	1,873,496	$	(32,332)	$	1,285,632	$	(140,392)	$	1,392,153	$	(322,446)	$	2,677,785	$	(462,838)

⁽¹⁾ Other bonds include asset-backed ~~securities~~securities.

As⁽²⁾ Comprised of 752 and 363 individual securities as of March 31, ~~2022, there were $~~~~440.3~~ ~~million AFS securities, comprised of 106 individual securities that had been in a continuous loss position for more than 12 months~~2023 and ~~had an aggregate unrealized loss of approximately $45.6 million. As of~~ December 31, ~~2021, there were $139.7 million AFS securities, comprised of 33 individual securities that had been in a continuous loss position for more than 12 months and had an aggregate unrealized loss of $3.9~~2022, respectively.

~~million~~.

The Company has evaluated AFS securities in an unrealized loss position for credit related impairment at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 and concluded 0no impairment existed based on several factors which included: (1) the majority of these securities are of high credit quality, (2) unrealized losses are primarily the result of market volatility and increases in market interest rates, (3) the contractual terms of the investments do not permit the issuer(s) to settle the securities at a price less than the cost basis of each investment, (4) issuers continue to make timely principal and interest payments, and (5) the Company does not intend to sell any of the investments and the accounting standard of “more likely than not” has not been met for the Company to be required to sell any of the investments before recovery of its amortized cost basis.

Additionally, the majority of the Company’s MBS are issued by FNMA, FHLMC, and GNMA and do not have credit risk given the implicit and explicit government guarantees associated with these agencies. In addition, the non-agency mortgage-backed and asset-backed securities generally received a 20% ~~SSFA~~simplified supervisory formula approach rating.

In the first quarter of 2023, the Company executed a balance sheet repositioning strategy and sold AFS securities with a total book value of $505.7 million at a pre-tax loss of $13.4 million and used the net proceeds to reduce existing high costing FHLB borrowings. The deleverage strategy provides the Company with improved liquidity, enhanced tangible common equity, and additional run rate earnings.

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The following table presents the amortized cost and estimated fair value of AFS securities as of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, by contractual maturity (dollars in thousands). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	March 31, 2022				December 31, 2021				March 31, 2023				December 31, 2022
	Amortized		Estimated		Amortized		Estimated		Amortized		Estimated		Amortized		Estimated
	Cost		Fair Value		Cost		Fair Value		Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	23,826	$	23,702	$	18,247	$	18,317	$	52,594	$	51,912	$	42,447	$	41,735
Due after one year through five years		179,752		179,192		180,080		183,981		122,772		113,380		158,063		152,523
Due after five years through ten years		344,061		335,913		324,615		331,215		204,347		180,610		343,303		312,935
Due after ten years		2,852,341		2,654,473		2,925,842		2,948,137		2,280,541		1,906,463		2,660,548		2,234,623
Total AFS securities	$	3,399,980	$	3,193,280	$	3,448,784	$	3,481,650	$	2,660,254	$	2,252,365	$	3,204,361	$	2,741,816

Refer to Note 7 "Commitments and Contingencies" ~~in Part I,~~within this Item I1 of this Quarterly Report for information regarding the estimated fair value of AFS securities that were pledged to secure public deposits, repurchase agreements, and for other purposes as permitted or required by law as of March 31, ~~2022~~2023 and December 31, ~~2021.~~2022.

Held to Maturity

The Company’s HTM investment portfolio primarily consists of highly-rated municipal securities. The Company’s HTM securities were all current, with 0no securities past due or on non-accrual at March 31, ~~2022~~2023 and December 31, ~~2021.~~2022.

The Company reports HTM securities on the Company’s Consolidated Balance Sheets at carrying value. Carrying value is amortized cost, which includes any unamortized unrealized gains and losses recognized in AOCI prior to reclassifying the securities from AFS securities to HTM securities. Investment securities transferred into the HTM category from the AFS category are recorded at fair value at the date of transfer. The unrealized holding gains or losses at the date of transfer are retained in AOCI and in the carrying value of the HTM securities. Such unrealized gains or losses are accreted over the remaining life of the security with no impact on future net income.

The carrying value, gross unrealized gains and losses, and estimated fair values of HTM securities as of March 31, 2023 are summarized as follows (dollars in thousands):

Carrying

Gross Unrealized

Estimated

Value

Gains

(Losses)

Fair Value

March 31, 2023

U.S. government and agency securities

684

—

(50)

634

Obligations of states and political subdivisions

702,749

6,078

(26,903)

681,924

Corporate and other bonds⁽¹⁾

5,033

—

(37)

4,996

Commercial MBS

Agency

28,925

—

(4,953)

23,972

Non-agency

27,068

(224)

26,901

Total commercial MBS

55,993

(5,177)

50,873

Residential MBS

Agency

42,302

—

(5,606)

36,696

Non-agency

48,657

(732)

47,976

Total residential MBS

90,959

(6,338)

84,672

Total HTM securities

855,418

6,186

(38,505)

823,099

⁽¹⁾ Other bonds include asset-backed securities.

-12-

Table of Contents

The carrying value, gross unrealized gains and losses, and estimated fair values of HTM securities as of December 31, 2022 are summarized as follows (dollars in thousands):


	Carrying		Gross Unrealized				Estimated		Carrying		Gross Unrealized				Estimated
	Value		Gains		(Losses)		Fair Value		Value		Gains		(Losses)		Fair Value
March 31, 2022
December 31, 2022
U.S. government and agency securities	$	2,483	$	0	$	(74)	$	2,409	$	687	$	—	$	(56)	$	631
Obligations of states and political subdivisions		684,294		24,828		(17,616)		691,506		705,990		2,218		(35,957)		672,251
Corporate and other bonds⁽¹⁾										5,159		—		(10)		5,149
Commercial MBS
Agency		31,221		0		(1,697)		29,524		29,025		—		(4,873)		24,152
Non-agency										13,736		—		(126)		13,610
Total commercial MBS		31,221		0		(1,697)		29,524		42,761		—		(4,999)		37,762
Residential MBS
Agency		38,874		0		(2,136)		36,738		42,699		—		(6,427)		36,272
Non-agency										50,436		—		(614)		49,822
Total residential MBS		38,874		0		(2,136)		36,738		93,135		—		(7,041)		86,094
Total held-to-maturity securities	$	756,872	$	24,828	$	(21,523)	$	760,177
Total HTM securities									$	847,732	$	2,218	$	(48,063)	$	801,887

⁽¹⁾ Other bonds include asset-backed securities.

Credit Quality Indicators & Allowance for Credit Losses - HTM

For HTM securities, the Company evaluates the credit risk of its securities on at least a quarterly basis. The Company estimates expected credit losses on HTM debt securities on an individual basis based on the PD/LGD methodology primarily using security-level credit ratings. The Company’s HTM securities ACL was insignificant at March 31, 2023 and December 31, 2022. The primary indicators of credit quality for the Company’s HTM portfolio are security type and credit rating, which is influenced by a number of factors including obligor cash flow, geography, seniority, and others. The majority of the Company’s HTM securities with credit risk are obligations of states and political subdivisions.

~~-12-~~-13-

Table of Contents

~~The carrying value, gross unrealized gains and losses, and estimated fair values of HTM securities as of December 31, 2021 are summarized as follows (dollars in thousands):~~

Carrying

Gross Unrealized

Estimated


Value

Gains

(Losses)

Fair Value
December 31, 2021








U.S. government and agency securities

$
2,604

$
0

$
(29)

$
2,575
Obligations of states and political subdivisions

620,873

65,982

(121)

686,734
Commercial MBS

Agency

4,523

0

(58)

4,465
Total commercial MBS

4,523

0

(58)

4,465
Total held-to-maturity securities

$
628,000

$
65,982

$
(208)

$
693,774

~~Credit Quality Indicators & Allowance for Credit Losses - HTM~~

For HTM securities, the Company evaluates the credit risk of its securities on at least a quarterly basis. The Company estimates expected credit losses on HTM debt securities on an individual basis based on the PD/LGD methodology primarily using security-level credit ratings. The Company’s HTM securities ACL was immaterial at March 31, 2022 and December 31, 2021. The primary indicators of credit quality for the Company’s HTM portfolio are security type and credit rating, which is influenced by a number of factors including obligor cash flow, geography, seniority, and others. The Company’s only HTM securities with credit risk are obligations of states and political subdivisions.

The following table presents the amortized cost of HTM securities as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 by security type and credit rating (dollars in thousands):


	U.S. Government and Agency		Obligations of states and political		Mortgage-backed		Total HTM		U.S. Government and Agency		Obligations of states and political		Corporate and other		Mortgage-backed		Total HTM
	securities		subdivisions		securities		securities		securities		subdivisions		bonds		securities		securities
March 31, 2022
March 31, 2023
Credit Rating:
AAA/AA/A	$	0	$	684,294	$	0	$	684,294	$	—	$	701,567	$	—	$	10,211	$	711,778
BBB/BB/B										—		1,182		—		—		1,182
Not Rated - Agency⁽¹⁾		2,483		0		70,095		72,578		684		—		—		71,227		71,911
Not Rated - Non-Agency⁽²⁾										—		—		5,033		65,514		70,547
Total	$	2,483	$	684,294	$	70,095	$	756,872	$	684	$	702,749	$	5,033	$	146,952	$	855,418
December 31, 2021
December 31, 2022
Credit Rating:
AAA/AA/A	$	0	$	620,873	$	0	$	620,873	$	—	$	704,803	$	—	$	2,702	$	707,505
BBB/BB/B										—		1,187		—		—		1,187
Not Rated - Agency⁽¹⁾		2,604		0		4,523		7,127		687		—		—		71,725		72,412
Not Rated - Non-Agency⁽²⁾										—		—		5,159		61,469		66,628
Total	$	2,604	$	620,873	$	4,523	$	628,000	$	687	$	705,990	$	5,159	$	135,896	$	847,732

⁽¹⁾ Generally considered not to have credit risk given the government guarantees associated with these ~~agencies~~agencies.

⁽²⁾Non-agency mortgage-backed and asset-backed securities have limited credit risk, supported by most receiving a 20% simplified supervisory formula approach rating.

The following table presents the amortized cost and estimated fair value of HTM securities as of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, by contractual maturity (dollars in thousands). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	March 31, 2022				December 31, 2021				March 31, 2023				December 31, 2022
	Carrying		Estimated		Carrying		Estimated		Carrying		Estimated		Carrying		Estimated
	Value		Fair Value		Value		Fair Value		Value		Fair Value		Value		Fair Value
Due in one year or less	$	5,061	$	5,018	$	3,034	$	3,027	$	2,051	$	2,044	$	2,010	$	2,006
Due after one year through five years		10,381		10,827		5,852		6,065		36,675		36,745		35,044		35,014
Due after five years through ten years		15,877		16,537		14,019		15,984		28,128		28,355		19,941		20,239
Due after ten years		725,553		727,795		605,095		668,698		788,564		755,955		790,737		744,628
Total HTM securities	$	756,872	$	760,177	$	628,000	$	693,774	$	855,418	$	823,099	$	847,732	$	801,887

~~-13-~~

~~Table of Contents~~

Refer to Note 7 "Commitments and Contingencies" ~~in Part I,~~within this Item I1 of this Quarterly Report for information regarding the estimated fair value of HTM securities that were pledged to secure public deposits as permitted or required by law as of March 31, ~~2022~~2023 and December 31, ~~2021.~~2022.

Restricted Stock, at cost

Due to restrictions placed upon the Bank’s common stock investment in the FRB and the FHLB, these securities have been classified as restricted equity securities and carried at cost. These restricted securities are not subject to the investment security classifications and are included as a separate line item on the Company’s Consolidated Balance Sheets. ~~Restricted~~At March 31, 2023 and December 31, 2022, restricted stock consists of FRB stock in the amount of $67.0 million, ~~for March 31, 2022 and December 31, 2021~~respectively, and FHLB stock in the amount of ~~$10.0~~$20.6 million and ~~$9.8~~$53.2 million, asrespectively.

-14-

Table of ~~March 31, 2022 and December 31, 2021, respectively.~~Contents

Realized Gains and Losses

The following table presents the gross realized gains and losses on and the proceeds from the sale of securities during the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 (dollars in thousands):


	Three Months Ended		Three Months Ended		Three Months Ended		Three Months Ended
	March 31, 2022		March 31, 2021		March 31, 2023		March 31, 2022
Realized gains (losses)⁽¹⁾:
Realized (losses) gains⁽¹⁾:
Gross realized gains	$	0	$	138	$	1,346	$	—
Gross realized losses		0		(60)		(14,746)		—
Net realized gains	$	0	$	78
Net realized losses					$	(13,400)	$	—

Proceeds from sales of securities	$	0	$	45,436	$	558,466	$	—

⁽¹⁾ Includes (losses) gains ~~(losses)~~ on sales and calls of ~~securities~~securities.

~~-14-~~

~~Table of Contents~~

~~3. LOANS AND ALLOWANCE FOR LOAN AND LEASE LOSSES~~

The information included below reflects the impact of the CARES Act, as amended by the CAA, and the Joint Guidance. See Note 1 “Summary of Significant Accounting Policies” in the Company’s 2021 Form 10-K for information about COVID-19 and related legislative and regulatory developments.

~~The Company’s loans are stated at their face amount, net of deferred fees and costs, and consist of the following at March 31, 2022 and December 31, 2021 (dollars in thousands):~~

March 31, 2022

December 31, 2021
Construction and Land Development

$
969,059

$
862,236
Commercial Real Estate - Owner Occupied

2,007,671

1,995,409
Commercial Real Estate - Non-Owner Occupied

3,875,681

3,789,377
Multifamily Real Estate

723,940

778,626
Commercial & Industrial⁽¹⁾

2,540,680

2,542,243
Residential 1-4 Family - Commercial

569,801

607,337
Residential 1-4 Family - Consumer

824,163

816,524
Residential 1-4 Family - Revolving

568,403

560,796
Auto

499,855

461,052
Consumer

171,875

176,992
Other Commercial⁽²⁾

708,221

605,251
Total LHFI, net of deferred fees and costs⁽³⁾

13,459,349

13,195,843
Allowance for loan and lease losses

(102,591)

(99,787)
Total LHFI, net

$
13,356,758

$
13,096,056

⁽¹⁾ ~~Commercial & industrial loans include approximately~~ ~~$66.3~~ ~~million and~~ ~~$145.3~~ ~~million in loans from the PPP at March 31, 2022 and December 31, 2021, respectively.~~

⁽²⁾~~Other commercial loans include approximately~~ ~~$1.1~~ ~~million and~~ ~~$5.1~~ ~~million in loans from the PPP at March 31, 2022 and December 31, 2021, respectively.~~

⁽³⁾~~Total loans include unamortized premiums and discounts, and unamortized deferred fees and costs totaling~~ ~~$44.0~~ ~~million and~~ ~~$49.3~~ ~~million as of March 31, 2022 and December 31, 2021, respectively.~~

-15-

Table of Contents

3. LOANS AND ALLOWANCE FOR LOAN AND LEASE LOSSES

During the first quarter of 2023, the Company transferred a nonaccrual commercial real estate loan, totaling $7.1 million, from LHFI to LHFS. The following tables exclude LHFS.

The Company’s LHFI are stated at their face amount, net of deferred fees and costs, and consisted of the following at March 31, 2023 and December 31, 2022 (dollars in thousands):


	March 31, 2023		December 31, 2022
Construction and Land Development	$	1,179,872	$	1,101,260
Commercial Real Estate - Owner Occupied		1,956,585		1,982,608
Commercial Real Estate - Non-Owner Occupied		3,968,085		3,996,130
Multifamily Real Estate		822,006		802,923
Commercial & Industrial		3,082,478		2,983,349
Residential 1-4 Family - Commercial		522,760		538,063
Residential 1-4 Family - Consumer		974,511		940,275
Residential 1-4 Family - Revolving		589,791		585,184
Auto		600,658		592,976
Consumer		145,090		152,545
Other Commercial		742,444		773,829
Total LHFI, net of deferred fees and costs⁽¹⁾		14,584,280		14,449,142
Allowance for loan and lease losses		(116,512)		(110,768)
Total LHFI, net	$	14,467,768	$	14,338,374

⁽¹⁾Total loans included unamortized premiums and discounts, and unamortized deferred fees and costs totaling $47.3 million and $50.4 million as of March 31, 2023 and December 31, 2022, respectively.

The following table shows the aging of the Company’s LHFI portfolio, by class, at March 31, 2023 (dollars in thousands):

Greater than

30-59 Days

60-89 Days

90 Days and

Current

Past Due

still Accruing

Nonaccrual

Total Loans

Construction and Land Development

1,178,445

815

—

249

363

1,179,872

Commercial Real Estate - Owner Occupied

1,945,229

2,251

798

2,133

6,174

1,956,585

Commercial Real Estate - Non-Owner Occupied

3,965,520

—

1,032

1,481

3,968,085

Multifamily Real Estate

822,006

—

822,006

Commercial & Industrial

3,075,988

981

633

4,815

3,082,478

Residential 1-4 Family - Commercial

518,951

1,399

271

232

1,907

522,760

Residential 1-4 Family - Consumer

951,375

11,579

158

859

10,540

974,511

Residential 1-4 Family - Revolving

582,123

1,384

1,069

1,766

3,449

589,791

Auto

597,853

2,026

295

137

347

600,658

Consumer

144,476

295

176

137

145,090

Other Commercial

742,378

—

742,444

Total LHFI, net of deferred fees and costs

14,524,344

20,782

2,828

7,244

29,082

14,584,280

% of total loans

99.59

0.14

0.02

0.05

0.20

100.00

-16-

Table of Contents

The following table shows the aging of the Company’s loan portfolio, by class, at ~~March~~December 31, 2022 (dollars in thousands):


										Greater than																		Greater than
				30-59 Days			60-89 Days			90 Days and												30-59 Days			60-89 Days			90 Days and
	Current			Past Due			Past Due			still Accruing			Nonaccrual			Total Loans			Current			Past Due			Past Due			still Accruing			Nonaccrual			Total Loans
Construction and Land Development	$	968,019		$	170		$	0		$	1		$	869		$	969,059		$	1,099,555		$	1,253		$	45		$	100		$	307		$	1,101,260
Commercial Real Estate - Owner Occupied		1,995,329			5,081			0			2,396			4,865			2,007,671			1,970,323			2,305			635			2,167			7,178			1,982,608
Commercial Real Estate - Non-Owner Occupied		3,870,357			79			223			1,735			3,287			3,875,681			3,993,091			1,121			48			607			1,263			3,996,130
Multifamily Real Estate		723,816			124			0			0			0			723,940			801,694			1,229			—			—			—			802,923
Commercial & Industrial		2,535,815			1,382			745			763			1,975			2,540,680			2,980,008			824			174			459			1,884			2,983,349
Residential 1-4 Family - Commercial		565,606			827			251			878			2,239			569,801			534,653			1,231			—			275			1,904			538,063
Residential 1-4 Family - Consumer		804,069			5,890			1,018			1,147			12,039			824,163			919,833			5,951			1,690			1,955			10,846			940,275
Residential 1-4 Family - Revolving		562,159			1,157			651			1,065			3,371			568,403			577,993			1,843			511			1,384			3,453			585,184
Auto		497,639			1,508			183			192			333			499,855			589,235			2,747			450			344			200			592,976
Consumer		171,083			467			201			70			54			171,875			151,958			351			125			108			3			152,545
Other Commercial		706,856			1,270			95			0			0			708,221			773,738			—			—			91			—			773,829
Total LHFI	$	13,400,748		$	17,955		$	3,367		$	8,247		$	29,032		$	13,459,349
Total LHFI, net of deferred fees and costs																			$	14,392,081		$	18,855		$	3,678		$	7,490		$	27,038		$	14,449,142
% of total loans		99.56	%		0.13	%		0.03	%		0.06	%		0.22	%		100.00	%		99.60	%		0.13	%		0.03	%		0.05	%		0.19	%		100.00	%

The following table shows the ~~aging of the~~ Company’s ~~loan portfolio, by class, at December 31, 2021 (dollars in thousands):~~

Greater than




30-59 Days

60-89 Days

90 Days and

Current

Past Due

Past Due

still Accruing

Nonaccrual

Total Loans

Construction and Land Development

$
857,883

$
1,357

$
0

$
299

$
2,697

$
862,236

Commercial Real Estate - Owner Occupied

1,987,133

1,230

152

1,257

5,637

1,995,409

Commercial Real Estate - Non-Owner Occupied

3,783,211

1,965

127

433

3,641

3,789,377

Multifamily Real Estate

778,429

84

0

0

113

778,626

Commercial & Industrial

2,536,100

1,161

1,438

1,897

1,647

2,542,243

Residential 1-4 Family - Commercial

601,946

1,844

272

990

2,285

607,337

Residential 1-4 Family - Consumer

795,821

3,368

2,925

3,013

11,397

816,524

Residential 1-4 Family - Revolving

554,652

1,493

363

882

3,406

560,796

Auto

458,473

1,866

249

241

223

461,052

Consumer

175,943

689

186

120

54

176,992

Other Commercial

605,214

37

0

0

0

605,251

Total LHFI

$
13,134,805

$
15,094

$
5,712

$
9,132

$
31,100

$
13,195,843

% of total loans

99.54
%

0.11
%

0.04
%

0.07
%

0.24
%

100.00
%

~~-16-~~

~~Table of Contents~~

~~The following table shows the Company’s amortized cost basis of loans on nonaccrual status as of December 31, 2021, as well as~~ amortized cost basis of loans on nonaccrual status and loans past due 90 days and still accruing as of March 31, ~~2022~~2023 (dollars in thousands):

Nonaccrual

December 31, 2021

March 31, 2022

Nonaccrual With No ALLL

90 Days Past due and still Accruing

Nonaccrual

Nonaccrual With No ALLL

90 Days Past due and still Accruing

Construction and Land Development

2,697

869

363

—

249

Commercial Real Estate - Owner Occupied

5,637

4,865

970

2,396

6,174

3,451

2,133

Commercial Real Estate - Non-Owner Occupied

3,641

3,287

1,089

1,735

1,481

—

1,032

Multifamily Real Estate

113

Commercial & Industrial

1,647

1,975

763

4,815

2,647

633

Residential 1-4 Family - Commercial

2,285

2,239

878

1,907

—

232

Residential 1-4 Family - Consumer

11,397

12,039

1,147

10,540

—

859

Residential 1-4 Family - Revolving

3,406

3,371

1,065

3,449

—

1,766

Auto

223

333

192

347

—

137

Consumer

—

137

Other Commercial

—

Total LHFI

31,100

29,032

2,061

8,247

29,082

6,098

7,244

The following table shows the Company’s amortized cost basis of loans on nonaccrual status as of December 31, 2020, as well as amortized cost basis of loans on nonaccrual status and loans past due 90 days and still accruing as of December 31, 2021 (dollars in thousands):

Nonaccrual

December 31, 2020

December 31, 2021

Nonaccrual With No ALLL

90 Days Past due and still Accruing
Construction and Land Development

$
3,072

$
2,697

$
1,985

$
299
Commercial Real Estate - Owner Occupied

7,128

5,637

970

1,257
Commercial Real Estate - Non-Owner Occupied

2,317

3,641

1,089

433
Multifamily Real Estate

33

113

0

0
Commercial & Industrial

2,107

1,647

1

1,897
Residential 1-4 Family - Commercial

9,993

2,285

0

990
Residential 1-4 Family - Consumer

12,600

11,397

0

3,013
Residential 1-4 Family - Revolving

4,629

3,406

0

882
Auto

500

223

0

241
Consumer

69

54

0

120
Total LHFI

$
42,448

$
31,100

$
4,045

$
9,132

There was 0 interest income recognized on nonaccrual loans during the three months ended March 31, 2022 and 2021. See Note 1 “Summary of Significant Accounting Policies” in the Company’s 2021 Form 10-K for additional information on the Company’s policies for nonaccrual loans.

-17-

Table of Contents

~~Troubled Debt Restructurings~~The following table shows the Company’s amortized cost basis of loans on nonaccrual status and loans past due 90 days and still accruing as of December 31, 2022 (dollars in thousands):



	Nonaccrual		Nonaccrual With No ALLL		90 Days Past due and still Accruing
Construction and Land Development	$	307	$	—	$	100
Commercial Real Estate - Owner Occupied		7,178		908		2,167
Commercial Real Estate - Non-Owner Occupied		1,263		—		607
Commercial & Industrial		1,884		1		459
Residential 1-4 Family - Commercial		1,904		—		275
Residential 1-4 Family - Consumer		10,846		—		1,955
Residential 1-4 Family - Revolving		3,453		—		1,384
Auto		200		—		344
Consumer		3		—		108
Other Commercial		—		—		91
Total LHFI	$	27,038	$	909	$	7,490

As of March 31, 2022, the Company has TDRs totaling $19.7 million with an estimated $724,000 of allowance for those loans. As of December 31, 2021, the Company had TDRs totaling $18.0 million with an estimated $~~859,000~~ ~~of allowance for those loans.~~

~~A TDR occurs when a lender, for economic or legal reasons, grants a concession to the borrower related to the borrower’s financial difficulties, that it would not otherwise consider. All~~There was no interest income recognized on nonaccrual loans ~~that are considered to be TDRs are evaluated for credit losses in accordance with the Company’s ALLL methodology. For~~during the three months ended March 31, 2023 and 2022. See Note 1 “Summary of Significant Accounting Policies” in the “Notes to the Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” in the Company’s 2022 ~~and March 31, 2021,~~Form 10-K for additional information on the ~~recorded investment in TDRs prior to modifications was not materially impacted by the modifications.~~Company’s policies for nonaccrual loans.

The following table provides a summary, by class, of TDRs that continue to accrue interest under the terms of the applicable restructuring agreement, which are considered to be performing, and TDRs that have been placed on nonaccrual status, which are considered to be nonperforming, as of March 31, 2022 and December 31, 2021 (dollars in thousands):

March 31, 2022

December 31, 2021


No. of

Recorded

Outstanding

No. of

Recorded

Outstanding

Loans

Investment

Commitment

Loans

Investment

Commitment
Performing












Construction and Land Development

4

$
198

$
0

4

$
201

$
0
Commercial Real Estate - Owner Occupied

2

1,020

0

3

572

0
Residential 1-4 Family - Commercial

2

1,589

0

—

—

0
Residential 1-4 Family - Consumer

76

8,839

0

75

9,021

0
Residential 1-4 Family - Revolving

3

263

4

3

265

4
Consumer

2

14

0

2

15

0
Other Commercial

1

234

0

1

239

0
Total performing

90

$
12,157

$
4

88

$
10,313

$
4
Nonperforming












Commercial Real Estate - Owner Occupied

1

$
17

$
0

2

$
830

$
0
Commercial Real Estate - Non-Owner Occupied

3

1,348

0

3

1,357

0
Commercial & Industrial

3

672

0

3

729

0
Residential 1-4 Family - Commercial

3

383

0

3

388

0
Residential 1-4 Family - Consumer

25

5,031

0

24

4,239

0
Residential 1-4 Family - Revolving

3

101

0

3

99

0
Total nonperforming

38

$
7,552

$
0

38

$
7,642

$
0
Total performing and nonperforming

128

$
19,709

$
4

126

$
17,955

$
4

The Company considers a default of a TDR to occur when the borrower is 90 days past due following the restructure or a foreclosure and repossession of the applicable collateral occurs. During the three months ended March 31, 2022 and 2021, the Company did not have any material loans that went into default that had been restructured in the twelve-month period prior to the time of default.

-18-

Table of Contents

Troubled Loan Modifications

The Company adopted ASU 2022-02 effective January 1, 2023 on a prospective basis. See Note 1 “Summary of Significant Accounting Policies” within this Item 1 of this Quarterly Report for information on the Company’s accounting policy for loan modifications to borrowers experiencing financial difficulty and how the Company defines TLMs.

As of March 31, 2023, the Company had TLMs with an amortized cost basis of $20.5 million with an estimated $296,000 of allowance for those loans. As of March 31, 2023, unfunded commitments on loans modified and designated as TLMs since January 1, 2023 totaled $4.4 million. For the three months ended March 31, 2023, the change in the recorded investment in TLMs due to modifications was not significant.

The following table shows by class and modification type, ~~TDRs~~the amortized cost basis of TLMs as of March 31, 2023 since January 1, 2023 (dollars in thousands):


	As of March 31, 2023
	Amortized Cost		% of Total Class of Financing Receivable
Term Extension
Construction and Land Development	$	1,344	0.11	%
Commercial Real Estate - Non-Owner Occupied		18,792	0.47	%
Residential 1-4 Family - Consumer		168	0.02	%
Total Term Extension	$	20,304
Combination - Term Extension and Interest Rate Reduction
Residential 1-4 Family - Consumer	$	237	0.02	%
Total Combination - Term Extension and Interest Rate Reduction	$	237
Total	$	20,541

The following table describes the financial effects of TLMs on a weighted average basis for TLMs within that ~~occurred during~~loan type for the quarter ended March 31, 2023:


Term Extension
Loan Type				Financial Effect
Construction and Land Development				Added a weighted-average 0.5 years to the life of loans.
Commercial Real Estate - Non-Owner Occupied				Added a weighted-average 0.5 years to the life of loans.
Residential 1-4 Family - Consumer				Added a weighted-average 18.2 years to the life of loans.

Combination - Term Extension and Interest Rate Reduction
Loan Type				Financial Effect
Residential 1-4 Family - Consumer				Added a weighted-average 20.7 years to the life of loans and changed interest rate from variable to fixed rates, which reduced the weighted average contractual interest rate from 7.5% to 7.4%.

The Company considers a default of a TLM to occur when the borrower is 90 days past due following the modification or a foreclosure and repossession of the applicable collateral occurs. During the three months ended March 31, ~~2022~~2023, the Company did not have any significant loans either individually or in the aggregate that went into default that have been modified and ~~2021 (dollars in thousands):~~designated as TLMs.

Three Months Ended March 31, 2022

Three Months Ended March 31, 2021




Recorded



Recorded


No. of

Investment at

No. of

Investment at

Loans

Period End

Loans

Period End

Modified to interest only, at a market rate









Residential 1-4 Family - Commercial

1

$
1,334

0

$
0

Total interest only at market rate of interest

1

$
1,334

0

$
0

Term modification, at a market rate









Commercial Real Estate - Owner Occupied

1

$
778

0

$
0

Residential 1-4 Family - Consumer

0

0

2

105

Total loan term extended at a market rate

1

$
778

2

$
105

Term modification, below market rate









Residential 1-4 Family - Commercial

1

$
256

0

$
0

Residential 1-4 Family - Consumer

6

862

9

472

Consumer

0

0

1

16

Total loan term extended at a below market rate

7

$
1,118

10

$
488

Interest rate modification, below market rate









Residential 1-4 Family - Commercial

0

$
0

1

$
45

Total interest only at below market rate of interest

0

$
0

1

$
45

Total

9

$
3,230

13

$
638

The Company monitors the performance of TLMs in order to determine the effectiveness of the modifications. As of March 31, 2023, no loans that have been modified and designated as TLMs are past due.

-19-

Table of Contents

Allowance for Loan and Lease Losses

ALLL on the loan portfolio is a material estimate for the Company. The Company estimates its ALLL on its loan portfolio on a quarterly basis. The Company models the ALLL using two primary segments, Commercial and Consumer. Each loan segment is further disaggregated into classes based on similar risk characteristics. The Company has identified the following classes within each loan segment:

●

~~Commercial~~Commercial:: Construction and Land Development, Commercial Real Estate – Owner Occupied, Commercial Real Estate – Non-Owner Occupied, Multifamily Real Estate, Commercial & Industrial, Residential 1-4 Family – Commercial, and Other Commercial

●

~~Consumer~~Consumer:: Residential 1-4 Family – Consumer, Residential 1-4 Family – Revolving, Auto, and Consumer

The following ~~table shows~~tables show the ALLL activity by loan segment for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 (dollars in thousands):


	Three Months Ended March 31, 2022						Three Months Ended March 31, 2021						Three Months Ended March 31, 2023						Three Months Ended March 31, 2022
	Commercial		Consumer		Total		Commercial		Consumer		Total		Commercial		Consumer		Total		Commercial		Consumer		Total
Balance at beginning of period	$	77,902	$	21,885	$	99,787	$	117,403	$	43,137	$	160,540	$	82,753	$	28,015	$	110,768	$	77,902	$	21,885	$	99,787
Loans charged-off		(759)		(750)		(1,509)		(1,974)		(1,667)		(3,641)		(5,007)		(719)		(5,726)		(759)		(750)		(1,509)
Recoveries credited to allowance		726		787		1,513		1,606		863		2,469		515		652		1,167		726		787		1,513
Provision charged to operations		1,902		898		2,800		(10,603)		(5,854)		(16,457)		9,825		478		10,303		1,902		898		2,800
Balance at end of period	$	79,771	$	22,820	$	102,591	$	106,432	$	36,479	$	142,911	$	88,086	$	28,426	$	116,512	$	79,771	$	22,820	$	102,591

The increase in net charge offs at March 31, 2023 compared to March 31, 2022 is primarily due to charge-offs associated with two commercial loans.

-20-

Table of Contents

Credit Quality Indicators

~~Credit quality indicators are utilized to help estimate the collectability of each loan class within the Commercial and Consumer loan segments. For classes of loans within the Commercial segment, the~~The Company’s primary credit quality indicator ~~used~~ for ~~evaluating credit quality and estimating~~ the ~~ALLL~~Commercial segment is risk rating categories of Pass, Watch, Special Mention, Substandard, and Doubtful. ~~For classes of loans within the Consumer segment, the~~The primary credit quality indicator ~~used~~ for ~~evaluating credit quality and estimating~~ the ~~ALLL~~Consumer segment is delinquency bands of Current, 30-59, 60-89, 90+, and Nonaccrual. ~~While other credit quality indicators are evaluated~~See Note 3 “Loans and ~~analyzed as part of~~Allowance for Loan and Lease Losses” in the “Notes to the Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” in the Company’s 2022 Form 10-K for additional information on the Company’s policies for further information on the Company’s credit ~~risk management activities, these indicators are primarily used in estimating the ALLL. The Company evaluates the credit risk of its loan portfolio on at least a quarterly basis.~~quality indicators.

Commercial Loans

The ~~Company uses a risk rating system as~~table below details the ~~primary credit quality indicator for~~amortized cost and gross writeoffs of the classes of loans within the Commercial ~~segment. The risk rating system on a scale of 0 through 9 is used to determine~~segment by risk level and year of origination as ~~used~~of March 31, 2023 (dollars in the calculation of the ACL. The risk levels, as described below, do not necessarily follow the regulatory definitions of risk levels with the same name. A general description of the characteristics of the risk levels follows:

~~Pass is determined by the following criteria:~~

●

~~Risk rated 0 loans have little or no risk and are with General Obligation Municipal Borrowers;~~

●

~~Risk rated 1 loans have little or no risk and are generally secured by cash or cash equivalents;~~

●

~~Risk rated 2 loans have minimal risk to well qualified borrowers and no significant questions as to safety;~~

●

~~Risk rated 3 loans are satisfactory loans with strong borrowers and secondary sources of repayment;~~

●

~~Risk rated 4 loans are satisfactory loans with borrowers not as strong as risk rated 3 loans and may exhibit a greater degree of financial risk based on the type of business supporting the loan.~~

~~Watch is determined by the following criteria:~~

●

~~Risk rated 5 loans are watch loans that warrant more than the normal level of supervision and have the possibility of an event occurring that may weaken the borrower’s ability to repay;~~

~~Special Mention is determined by the following criteria:~~

●

Risk rated 6 loans have increasing potential weaknesses beyond those at which the loan originally was granted and if not addressed could lead to inadequately protecting the Company’s credit position.

~~Substandard is determined by the following criteria:~~

●

Risk rated 7 loans are substandard loans and are inadequately protected by the current sound worth or paying capacity of the obligor or the collateral pledged; these have well defined weaknesses that jeopardize the liquidation of the debt with the distinct possibility the Company will sustain some loss if the deficiencies are not corrected.

~~Doubtful is determined by the following criteria:~~

●

Risk rated 8 loans are doubtful of collection and the possibility of loss is high but pending specific borrower plans for recovery, its classification as a loss is deferred until its more exact status is determined;

●

~~Risk rated 9 loans are loss loans which are considered uncollectable and of such little value that their continuance as bankable assets is not warranted.~~

thousands):

-21-

Table of Contents

~~The table below details the amortized cost of the classes of loans within the Commercial segment by risk level and year of origination as of March 31, 2022 (dollars in thousands):~~

March 31, 2022

Term Loans Amortized Cost Basis by Origination Year

2022

2021

2020

2019

2018

Prior

Revolving Loans

Total
Construction and Land Development

Pass

$
61,043

$
485,263

$
228,686

$
43,377

$
38,969

$
46,520

$
22,398

$
926,256
Watch

0

552

237

10,876

126

3,151

0

14,942
Special Mention

0

0

0

0

0

658

0

658
Substandard

279

3,673

1

218

19,434

3,598

0

27,203
Total Construction and Land Development

$
61,322

$
489,488

$
228,924

$
54,471

$
58,529

$
53,927

$
22,398

$
969,059

Commercial Real Estate - Owner Occupied

Pass

$
91,850

$
216,755

$
273,443

$
311,840

$
246,729

$
720,355

$
18,716

$
1,879,688
Watch

700

182

4,012

13,611

10,452

56,869

701

86,527
Special Mention

650

0

286

9,672

607

9,337

500

21,052
Substandard

0

200

0

2,877

1,648

15,037

642

20,404
Total Commercial Real Estate - Owner Occupied

$
93,200

$
217,137

$
277,741

$
338,000

$
259,436

$
801,598

$
20,559

$
2,007,671

Commercial Real Estate - Non-Owner Occupied

Pass

$
184,450

$
640,903

$
407,354

$
519,513

$
395,907

$
1,488,880

$
40,029

$
3,677,036
Watch

0

2,152

833

25,867

20,593

50,796

13

100,254
Special Mention

310

0

10,583

18,854

20,754

9,394

0

59,895
Substandard

0

0

0

23,195

400

14,749

152

38,496
Total Commercial Real Estate - Non-Owner Occupied

$
184,760

$
643,055

$
418,770

$
587,429

$
437,654

$
1,563,819

$
40,194

$
3,875,681

Commercial & Industrial

Pass

$
152,567

$
654,531

$
406,607

$
270,464

$
106,522

$
167,277

$
691,191

$
2,449,159
Watch

373

1,166

5,951

2,556

14,315

4,014

6,583

34,958
Special Mention

0

492

1,284

7,278

481

1,008

5,493

16,036
Substandard

0

451

6,548

4,304

15,398

1,730

12,096

40,527
Total Commercial & Industrial

$
152,940

$
656,640

$
420,390

$
284,602

$
136,716

$
174,029

$
715,363

$
2,540,680

Multifamily Real Estate

Pass

$
2,165

$
63,181

$
189,952

$
65,004

$
113,421

$
284,473

$
1,553

$
719,749
Watch

0

0

0

357

454

436

0

1,247
Special Mention

0

0

2,235

618

0

91

0

2,944
Substandard

0

0

0

0

0

0

0

0
Total Multifamily Real Estate

$
2,165

$
63,181

$
192,187

$
65,979

$
113,875

$
285,000

$
1,553

$
723,940

Residential 1-4 Family - Commercial

Pass

$
11,521

$
104,567

$
87,934

$
58,117

$
42,770

$
232,124

$
893

$
537,926
Watch

0

0

2,033

879

7,464

7,930

117

18,423
Special Mention

0

0

96

0

429

3,440

0

3,965
Substandard

0

92

0

3,222

528

5,346

299

9,487
Total Residential 1-4 Family - Commercial

$
11,521

$
104,659

$
90,063

$
62,218

$
51,191

$
248,840

$
1,309

$
569,801

Other Commercial

Pass

$
70,632

$
222,540

$
162,150

$
118,741

$
5,508

$
78,886

$
43,320

$
701,777
Watch

0

0

0

0

567

5,548

0

6,115
Special Mention

0

0

0

0

0

0

95

95
Substandard

0

0

0

0

0
��

234

0

234
Total Other Commercial

$
70,632

$
222,540

$
162,150

$
118,741

$
6,075

$
84,668

$
43,415

$
708,221

Total Commercial

Pass

$
574,228

$
2,387,740

$
1,756,126

$
1,387,056

$
949,826

$
3,018,515

$
818,100

$
10,891,591
Watch

1,073

4,052

13,066

54,146

53,971

128,744

7,414

262,466
Special Mention

960

492

14,484

36,422

22,271

23,928

6,088

104,645
Substandard

279

4,416

6,549

33,816

37,408

40,694

13,189

136,351
Total Commercial

$
576,540

$
2,396,700

$
1,790,225

$
1,511,440

$
1,063,476

$
3,211,881

$
844,791

$
11,395,053


		March 31, 2023
		Term Loans Amortized Cost Basis by Origination Year
	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total
Construction and Land Development
Pass	$	56,060	$	431,758	$	461,280	$	93,920	$	17,082	$	52,347	$	33,793	$	1,146,240
Watch		—		277		21,347		—		325		1,025		—		22,974
Special Mention		—		3,029		628		—		—		1,350		149		5,156
Substandard		—		1,249		2,605		39		209		1,400		—		5,502
Total Construction and Land Development	$	56,060	$	436,313	$	485,860	$	93,959	$	17,616	$	56,122	$	33,942	$	1,179,872
Current period gross writeoff	$	—	$	—	$	—	$	—	$	—	$	(10)	$	—	$	(10)

Commercial Real Estate - Owner Occupied
Pass	$	21,667	$	248,670	$	206,053	$	252,784	$	277,820	$	829,793	$	25,356	$	1,862,143
Watch		—		1,050		624		3,377		8,201		37,841		892		51,985
Special Mention		—		—		255		469		434		9,145		546		10,849
Substandard		226		—		2,565		—		4,259		24,558		—		31,608
Total Commercial Real Estate - Owner Occupied	$	21,893	$	249,720	$	209,497	$	256,630	$	290,714	$	901,337	$	26,794	$	1,956,585
Current period gross writeoff	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial Real Estate - Non-Owner Occupied
Pass	$	57,700	$	506,109	$	668,543	$	381,043	$	515,413	$	1,647,468	$	37,429	$	3,813,705
Watch		—		—		—		12,234		6,464		74,783		8		93,489
Special Mention		—		—		2,151		—		19,369		9,294		—		30,814
Substandard		—		231		—		—		6,005		23,841		—		30,077
Total Commercial Real Estate - Non-Owner Occupied	$	57,700	$	506,340	$	670,694	$	393,277	$	547,251	$	1,755,386	$	37,437	$	3,968,085
Current period gross writeoff	$	—	$	—	$	—	$	—	$	—	$	(2,941)	$	—	$	(2,941)

Commercial & Industrial
Pass	$	213,690	$	825,599	$	508,969	$	240,528	$	150,660	$	187,067	$	824,112	$	2,950,625
Watch		—		810		586		13,416		23,323		4,212		11,927		54,274
Special Mention		—		432		212		6,921		1,346		1,662		45,138		55,711
Substandard		—		135		490		111		3,266		3,988		13,878		21,868
Total Commercial & Industrial	$	213,690	$	826,976	$	510,257	$	260,976	$	178,595	$	196,929	$	895,055	$	3,082,478
Current period gross writeoff	$	—	$	—	$	—	$	—	$	—	$	—	$	(1,281)	$	(1,281)

Multifamily Real Estate
Pass	$	1,193	$	116,785	$	110,179	$	203,176	$	46,976	$	278,186	$	60,282	$	816,777
Watch		—		—		—		—		348		1,000		—		1,348
Special Mention		—		—		—		—		3,795		86		—		3,881
Total Multifamily Real Estate	$	1,193	$	116,785	$	110,179	$	203,176	$	51,119	$	279,272	$	60,282	$	822,006
Current period gross writeoff	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Residential 1-4 Family - Commercial
Pass	$	6,078	$	55,830	$	86,098	$	75,639	$	49,757	$	230,887	$	616	$	504,905
Watch		50		—		—		533		840		7,305		112		8,840
Special Mention		—		—		—		—		—		2,503		—		2,503
Substandard		—		—		627		1,585		632		3,369		299		6,512
Total Residential 1-4 Family - Commercial	$	6,128	$	55,830	$	86,725	$	77,757	$	51,229	$	244,064	$	1,027	$	522,760
Current period gross writeoff	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Other Commercial
Pass	$	1,965	$	195,697	$	197,300	$	140,029	$	120,288	$	69,752	$	8,385	$	733,416
Watch		102		4,995		—		—		8		3,857		—		8,962
Substandard		—		—		—		—		—		—		66		66
Total Other Commercial	$	2,067	$	200,692	$	197,300	$	140,029	$	120,296	$	73,609	$	8,451	$	742,444
Current period gross writeoff	$	—	$	—	$	—	$	—	$	—	$	(775)	$	—	$	(775)

Total Commercial
Pass	$	358,353	$	2,380,448	$	2,238,422	$	1,387,119	$	1,177,996	$	3,295,500	$	989,973	$	11,827,811
Watch		152		7,132		22,557		29,560		39,509		130,023		12,939		241,872
Special Mention		—		3,461		3,246		7,390		24,944		24,040		45,833		108,914
Substandard		226		1,615		6,287		1,735		14,371		57,156		14,243		95,633
Total Commercial	$	358,731	$	2,392,656	$	2,270,512	$	1,425,804	$	1,256,820	$	3,506,719	$	1,062,988	$	12,274,230
Total current period gross writeoff	$	—	$	—	$	—	$	—	$	—	$	(3,726)	$	(1,281)	$	(5,007)

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Table of Contents

The table below details the amortized cost of the classes of loans within the Commercial segment by risk level and year of origination as of December 31, ~~2021~~2022 (dollars in thousands):


		December 31, 2021																December 31, 2022
		Term Loans Amortized Cost Basis by Origination Year																Term Loans Amortized Cost Basis by Origination Year


	2021		2020		2019		2018		2017		Prior		Revolving Loans		Total		2022		2021		2020		2019		2018		Prior		Revolving Loans		Total
Construction and Land Development
Pass	$	430,764	$	218,672	$	39,937	$	40,128	$	11,299	$	50,908	$	22,996	$	814,704	$	357,688	$	499,738	$	107,559	$	17,191	$	33,801	$	36,335	$	34,345	$	1,086,657
Watch		395		185		12,923		129		349		4,026		0		18,007		242		1,637		—		—		115		1,669		—		3,663
Special Mention		0		0		0		0		0		735		0		735		2,843		411		—		—		—		93		—		3,347
Substandard		3,541		1		221		19,264		198		5,565		0		28,790		1,254		3,148		40		211		1,345		1,595		—		7,593
Total Construction and Land Development	$	434,700	$	218,858	$	53,081	$	59,521	$	11,846	$	61,234	$	22,996	$	862,236	$	362,027	$	504,934	$	107,599	$	17,402	$	35,261	$	39,692	$	34,345	$	1,101,260

Commercial Real Estate - Owner Occupied
Pass	$	222,079	$	279,165	$	321,503	$	263,422	$	179,994	$	555,540	$	19,705	$	1,841,408	$	258,953	$	215,414	$	257,740	$	282,110	$	228,410	$	624,238	$	17,190	$	1,884,055
Watch		185		18		7,959		10,875		14,648		57,466		702		91,853		1,060		176		2,437		9,567		9,736		31,331		916		55,223
Special Mention		0		932		11,826		610		1,052		19,480		507		34,407		—		256		—		93		1,332		18,766		132		20,579
Substandard		200		153		7,455		2,538		1,935		14,834		626		27,741		—		2,565		474		4,728		1,591		12,979		414		22,751
Total Commercial Real Estate - Owner Occupied	$	222,464	$	280,268	$	348,743	$	277,445	$	197,629	$	647,320	$	21,540	$	1,995,409	$	260,013	$	218,411	$	260,651	$	296,498	$	241,069	$	687,314	$	18,652	$	1,982,608

Commercial Real Estate - Non-Owner Occupied
Pass	$	642,386	$	421,063	$	520,035	$	377,176	$	374,949	$	1,102,193	$	36,568	$	3,474,370	$	496,079	$	661,977	$	385,084	$	517,834	$	373,126	$	1,389,507	$	34,804	$	3,858,411
Watch		2,152		841		35,721		39,356		18,242		101,797		14		198,123		—		2,151		2,091		11,915		19,550		20,683		2		56,392
Special Mention		0		10,609		25,691		20,119		12,741		4,775		0		73,935		232		—		—		25,578		702		7,381		—		33,893
Substandard		0		0		23,376		11,369		0		7,952		252		42,949		—		—		10,460		3,083		29,012		4,879		—		47,434
Total Commercial Real Estate - Non-Owner Occupied	$	644,538	$	432,513	$	604,823	$	448,020	$	405,932	$	1,216,717	$	36,834	$	3,789,377	$	496,311	$	664,128	$	397,635	$	558,410	$	422,390	$	1,422,450	$	34,806	$	3,996,130

Commercial & Industrial
Pass	$	770,662	$	450,478	$	287,926	$	110,710	$	38,395	$	170,857	$	619,583	$	2,448,611	$	849,547	$	536,982	$	262,093	$	182,263	$	67,648	$	120,326	$	846,059	$	2,864,918
Watch		1,233		9,641		2,766		31,635		1,370		4,405		17,220		68,270		1,399		1,305		18,682		5,039		12,843		1,984		41,836		83,088
Special Mention		206		935		8,477		1,023		564		561		3,249		15,015		—		222		393		2,145		354		1,773		12,380		17,267
Substandard		379		575		3,636		1,965		463		1,639		1,690		10,347		94		513		112		2,911		1,449		1,339		11,658		18,076
Total Commercial & Industrial	$	772,480	$	461,629	$	302,805	$	145,333	$	40,792	$	177,462	$	641,742	$	2,542,243	$	851,040	$	539,022	$	281,280	$	192,358	$	82,294	$	125,422	$	911,933	$	2,983,349

Multifamily Real Estate
Pass	$	63,431	$	187,616	$	108,402	$	114,077	$	66,562	$	228,013	$	1,548	$	769,649	$	111,798	$	90,952	$	204,159	$	47,240	$	59,883	$	231,745	$	52,025	$	797,802
Watch		0		0		359		459		0		522		0		1,340		—		—		—		350		442		416		—		1,208
Special Mention		44		2,248		624		4,517		0		91		0		7,524		—		—		—		3,826		—		87		—		3,913
Substandard		0		0		0		0		0		113		0		113
Total Multifamily Real Estate	$	63,475	$	189,864	$	109,385	$	119,053	$	66,562	$	228,739	$	1,548	$	778,626	$	111,798	$	90,952	$	204,159	$	51,416	$	60,325	$	232,248	$	52,025	$	802,923

Residential 1-4 Family - Commercial
Pass	$	108,259	$	94,184	$	65,682	$	46,267	$	55,995	$	196,052	$	550	$	566,989	$	58,534	$	86,881	$	77,110	$	50,721	$	38,090	$	199,783	$	803	$	511,922
Watch		0		2,041		4,887		7,483		2,415		7,573		311		24,710		500		—		539		852		1,532		5,378		113		8,914
Special Mention		0		96		0		436		391		4,126		0		5,049		—		—		94		7,771		582		2,630		—		11,077
Substandard		93		0		3,494		536		1,291		4,876		299		10,589		—		632		1,400		463		473		2,883		299		6,150
Total Residential 1-4 Family - Commercial	$	108,352	$	96,321	$	74,063	$	54,722	$	60,092	$	212,627	$	1,160	$	607,337	$	59,034	$	87,513	$	79,143	$	59,807	$	40,677	$	210,674	$	1,215	$	538,063

Other Commercial
Pass	$	226,595	$	167,497	$	98,848	$	5,620	$	25,723	$	44,114	$	30,445	$	598,842	$	197,454	$	211,438	$	149,567	$	119,795	$	3,522	$	69,243	$	14,177	$	765,196
Watch		0		0		0		581		1,246		4,341		0		6,168		5,095		—		—		12		—		3,435		—		8,542
Special Mention		0		0		0		0		2		0		0		2
Substandard		—		—		—		—		—		239		—		239		—		—		—		—		—		—		91		91
Total Other Commercial	$	226,595	$	167,497	$	98,848	$	6,201	$	26,971	$	48,694	$	30,445	$	605,251	$	202,549	$	211,438	$	149,567	$	119,807	$	3,522	$	72,678	$	14,268	$	773,829

Total Commercial
Pass	$	2,464,176	$	1,818,675	$	1,442,333	$	957,400	$	752,917	$	2,347,677	$	731,395	$	10,514,573	$	2,330,053	$	2,303,382	$	1,443,312	$	1,217,154	$	804,480	$	2,671,177	$	999,403	$	11,768,961
Watch		3,965		12,726		64,615		90,518		38,270		180,130		18,247		408,471		8,296		5,269		23,749		27,735		44,218		64,896		42,867		217,030
Special Mention		250		14,820		46,618		26,705		14,750		29,768		3,756		136,667		3,075		889		487		39,413		2,970		30,730		12,512		90,076
Substandard		4,213		729		38,182		35,672		3,887		35,218		2,867		120,768		1,348		6,858		12,486		11,396		33,870		23,675		12,462		102,095
Total Commercial	$	2,472,604	$	1,846,950	$	1,591,748	$	1,110,295	$	809,824	$	2,592,793	$	756,265	$	11,180,479	$	2,342,772	$	2,316,398	$	1,480,034	$	1,295,698	$	885,538	$	2,790,478	$	1,067,244	$	12,178,162

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Table of Contents

Consumer Loans

~~For Consumer loans, the Company evaluates credit quality based on the delinquency status of the loan.~~ The following table details the amortized cost of the classes of loans within the Consumer segment based on their delinquency status and year of origination as of March 31, ~~2022~~2023 (dollars in thousands):


		March 31, 2022																March 31, 2023
		Term Loans Amortized Cost Basis by Origination Year																Term Loans Amortized Cost Basis by Origination Year


	2022		2021		2020		2019		2018		Prior		Revolving Loans		Total		2023		2022		2021		2020		2019		Prior		Revolving Loans		Total
Residential 1-4 Family - Consumer
Current	$	54,254	$	245,445	$	167,608	$	42,408	$	26,370	$	267,973	$	11	$	804,069	$	32,610	$	221,919	$	268,051	$	158,016	$	34,748	$	236,018	$	13	$	951,375
30-59 Days Past Due		0		0		972		289		752		3,877		0		5,890		—		648		1,730		2,532		127		6,542		—		11,579
60-89 Days Past Due		0		0		249		66		0		703		0		1,018		—		—		—		—		63		95		—		158
90+ Days Past Due		0		0		0		45		0		1,102		0		1,147		—		—		—		—		—		859		—		859
Nonaccrual		0		436		0		113		870		10,620		0		12,039		—		—		585		—		306		9,649		—		10,540
Total Residential 1-4 Family - Consumer	$	54,254	$	245,881	$	168,829	$	42,921	$	27,992	$	284,275	$	11	$	824,163	$	32,610	$	222,567	$	270,366	$	160,548	$	35,244	$	253,163	$	13	$	974,511
Current period gross writeoff																	$	—	$	—	$	—	$	—	$	—	$	(29)	$	—	$	(29)

Residential 1-4 Family - Revolving
Current	$	30,547	$	16,011	$	8,979	$	1,869	$	916	$	482	$	503,355	$	562,159	$	10,726	$	63,001	$	13,036	$	4,837	$	1,451	$	1,223	$	487,849	$	582,123
30-59 Days Past Due		0		0		0		0		0		0		1,157		1,157		—		14		—		—		—		—		1,370		1,384
60-89 Days Past Due		0		0		0		0		0		0		651		651		—		138		—		—		—		—		931		1,069
90+ Days Past Due		0		0		0		0		0		0		1,065		1,065		—		—		—		—		—		29		1,737		1,766
Nonaccrual		0		0		61		0		17		0		3,293		3,371		—		87		149		54		—		—		3,159		3,449
Total Residential 1-4 Family - Revolving	$	30,547	$	16,011	$	9,040	$	1,869	$	933	$	482	$	509,521	$	568,403	$	10,726	$	63,240	$	13,185	$	4,891	$	1,451	$	1,252	$	495,046	$	589,791
Current period gross writeoff																	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Auto
Current	$	75,173	$	201,289	$	111,697	$	64,359	$	27,115	$	18,006	$	0	$	497,639	$	54,750	$	270,291	$	142,237	$	73,589	$	38,687	$	18,299	$	—	$	597,853
30-59 Days Past Due		96		371		288		256		160		337		0		1,508		—		624		595		356		274		177		—		2,026
60-89 Days Past Due		0		0		54		107		15		7		0		183		—		86		103		80		4		22		—		295
90+ Days Past Due		0		47		40		40		36		29		0		192		—		94		33		5		5		—		—		137
Nonaccrual		0		55		163		43		24		48		0		333		—		98		72		81		94		2		—		347
Total Auto	$	75,269	$	201,762	$	112,242	$	64,805	$	27,350	$	18,427	$	0	$	499,855	$	54,750	$	271,193	$	143,040	$	74,111	$	39,064	$	18,500	$	—	$	600,658
Current period gross writeoff																	$	—	$	(135)	$	(32)	$	(69)	$	(49)	$	(32)	$	—	$	(317)

Consumer
Current	$	14,212	$	21,042	$	14,440	$	33,778	$	26,135	$	25,747	$	35,729	$	171,083	$	5,082	$	32,914	$	14,495	$	10,178	$	21,327	$	31,412	$	29,068	$	144,476
30-59 Days Past Due		0		21		56		115		113		150		12		467		—		76		42		10		58		101		8		295
60-89 Days Past Due		0		3		15		48		106		29		0		201		—		35		31		5		67		36		2		176
90+ Days Past Due		0		3		0		10		40		0		17		70		—		49		40		17		20		8		3		137
Nonaccrual		0		0		0		0		0		54		0		54		—		—		3		—		3		—		—		6
Total Consumer	$	14,212	$	21,069	$	14,511	$	33,951	$	26,394	$	25,980	$	35,758	$	171,875	$	5,082	$	33,074	$	14,611	$	10,210	$	21,475	$	31,557	$	29,081	$	145,090
Current period gross writeoff																	$	—	$	—	$	(22)	$	(182)	$	(12)	$	(117)	$	(40)	$	(373)

Total Consumer
Current	$	174,186	$	483,787	$	302,724	$	142,414	$	80,536	$	312,208	$	539,095	$	2,034,950	$	103,168	$	588,125	$	437,819	$	246,620	$	96,213	$	286,952	$	516,930	$	2,275,827
30-59 Days Past Due		96		392		1,316		660		1,025		4,364		1,169		9,022		—		1,362		2,367		2,898		459		6,820		1,378		15,284
60-89 Days Past Due		0		3		318		221		121		739		651		2,053		—		259		134		85		134		153		933		1,698
90+ Days Past Due		0		50		40		95		76		1,131		1,082		2,474		—		143		73		22		25		896		1,740		2,899
Nonaccrual		0		491		224		156		911		10,722		3,293		15,797		—		185		809		135		403		9,651		3,159		14,342
Total Consumer	$	174,282	$	484,723	$	304,622	$	143,546	$	82,669	$	329,164	$	545,290	$	2,064,296	$	103,168	$	590,074	$	441,202	$	249,760	$	97,234	$	304,472	$	524,140	$	2,310,050
Total current period gross writeoff																	$	—	$	(135)	$	(54)	$	(251)	$	(61)	$	(178)	$	(40)	$	(719)

~~The Company did not have any material revolving loans convert to term during the three months ended March 31, 2022.~~

-24-

Table of Contents

The following table details the amortized cost of the classes of loans within the Consumer segment based on their delinquency status and year of origination as of December 31, ~~2021~~2022 (dollars in thousands):


		December 31, 2021																December 31, 2022
		Term Loans Amortized Cost Basis by Origination Year																Term Loans Amortized Cost Basis by Origination Year


	2021		2020		2019		2018		2017		Prior		Revolving Loans		Total		2022		2021		2020		2019		2018		Prior		Revolving Loans		Total
Residential 1-4 Family - Consumer
Current	$	248,904	$	174,459	$	47,905	$	33,809	$	44,179	$	246,554	$	11	$	795,821	$	212,697	$	263,734	$	162,826	$	36,197	$	22,629	$	221,738	$	12	$	919,833
30-59 Days Past Due		0		157		143		807		460		1,801		0		3,368		174		2,169		89		46		220		3,253		—		5,951
60-89 Days Past Due		0		0		0		624		107		2,194		0		2,925		—		—		—		—		413		1,277		—		1,690
90+ Days Past Due		0		0		46		20		304		2,643		0		3,013		—		—		—		64		—		1,891		—		1,955
Nonaccrual		444		0		117		884		1,330		8,622		0		11,397		—		423		—		307		940		9,176		—		10,846
Total Residential 1-4 Family - Consumer	$	249,348	$	174,616	$	48,211	$	36,144	$	46,380	$	261,814	$	11	$	816,524	$	212,871	$	266,326	$	162,915	$	36,614	$	24,202	$	237,335	$	12	$	940,275

Residential 1-4 Family - Revolving
Current	$	16,546	$	9,511	$	2,230	$	1,056	$	0	$	484	$	524,825	$	554,652	$	68,434	$	13,810	$	4,997	$	1,672	$	801	$	476	$	487,803	$	577,993
30-59 Days Past Due		0		0		0		0		0		0		1,493		1,493		90		—		—		—		—		—		1,753		1,843
60-89 Days Past Due		0		0		0		0		0		0		363		363		—		—		—		—		—		—		511		511
90+ Days Past Due		0		0		0		0		0		0		882		882		—		—		—		—		—		—		1,384		1,384
Nonaccrual		0		63		0		18		0		0		3,325		3,406		—		149		57		—		13		—		3,234		3,453
Total Residential 1-4 Family - Revolving	$	16,546	$	9,574	$	2,230	$	1,074	$	0	$	484	$	530,888	$	560,796	$	68,524	$	13,959	$	5,054	$	1,672	$	814	$	476	$	494,685	$	585,184

Auto
Current	$	207,229	$	123,848	$	72,427	$	31,745	$	16,020	$	7,204	$	0	$	458,473	$	285,036	$	154,904	$	81,710	$	44,086	$	15,974	$	7,525	$	—	$	589,235
30-59 Days Past Due		299		382		518		259		245		163		0		1,866		808		772		451		456		134		126		—		2,747
60-89 Days Past Due		45		29		95		33		36		11		0		249		65		129		146		76		30		4		—		450
90+ Days Past Due		55		101		42		20		23		0		0		241		169		—		111		32		12		20		—		344
Nonaccrual		0		81		55		27		27		33		0		223		—		113		18		62		2		5		—		200
Total Auto	$	207,628	$	124,441	$	73,137	$	32,084	$	16,351	$	7,411	$	0	$	461,052	$	286,078	$	155,918	$	82,436	$	44,712	$	16,152	$	7,680	$	—	$	592,976

Consumer
Current	$	25,084	$	16,059	$	38,594	$	30,890	$	12,853	$	16,929	$	35,534	$	175,943	$	36,513	$	15,897	$	11,019	$	23,838	$	16,084	$	19,070	$	29,537	$	151,958
30-59 Days Past Due		31		94		201		186		63		26		88		689		61		27		36		113		34		61		19		351
60-89 Days Past Due		11		13		62		60		34		0		6		186		43		17		10		11		14		21		9		125
90+ Days Past Due		1		4		33		72		8		0		2		120		22		—		9		12		32		—		33		108
Nonaccrual		0		0		0		0		0		54		0		54		—		3		—		—		—		—		—		3
Total Consumer	$	25,127	$	16,170	$	38,890	$	31,208	$	12,958	$	17,009	$	35,630	$	176,992	$	36,639	$	15,944	$	11,074	$	23,974	$	16,164	$	19,152	$	29,598	$	152,545

Total Consumer
Current	$	497,763	$	323,877	$	161,156	$	97,500	$	73,052	$	271,171	$	560,370	$	1,984,889	$	602,680	$	448,345	$	260,552	$	105,793	$	55,488	$	248,809	$	517,352	$	2,239,019
30-59 Days Past Due		330		633		862		1,252		768		1,990		1,581		7,416		1,133		2,968		576		615		388		3,440		1,772		10,892
60-89 Days Past Due		56		42		157		717		177		2,205		369		3,723		108		146		156		87		457		1,302		520		2,776
90+ Days Past Due		56		105		121		112		335		2,643		884		4,256		191		—		120		108		44		1,911		1,417		3,791
Nonaccrual		444		144		172		929		1,357		8,709		3,325		15,080		—		688		75		369		955		9,181		3,234		14,502
Total Consumer	$	498,649	$	324,801	$	162,468	$	100,510	$	75,689	$	286,718	$	566,529	$	2,015,364	$	604,112	$	452,147	$	261,479	$	106,972	$	57,332	$	264,643	$	524,295	$	2,270,980

The Company did not have any ~~material~~significant revolving loans convert to term during the three months ended March 31, 2023 or the year ended December 31, ~~2021.~~2022.

-25-

Table of Contents

Prior to the adoption of ASU 2022-02

Troubled Debt Restructurings

As of December 31, 2022, the Company had TDRs totaling $14.2 million with an estimated $739,000 of allowance for those loans. TDRs that occurred during the quarter ended March 31, 2022 were not significant.

A TDR occurs when a lender, for economic or legal reasons, grants a concession to the borrower related to the borrower’s financial difficulties, that it would not otherwise consider. All loans that are considered to be TDRs are evaluated for credit losses in accordance with the Company’s ALLL methodology. For the three months ended March 31, 2022, the recorded investment in TDRs prior to modifications was not materially impacted by the modifications.


	December 31, 2022
	No. of	Recorded		Outstanding
	Loans	Investment		Commitment
Performing
Construction and Land Development	3	$	155	$	—
Commercial Real Estate - Owner Occupied	2		997		—
Commercial & Industrial	1		93		—
Residential 1-4 Family - Consumer	83		7,761		—
Residential 1-4 Family - Revolving	3		254		5
Consumer	1		13		—
Total performing	93	$	9,273	$	5
Nonperforming
Commercial Real Estate - Owner Occupied	1	$	15	$	—
Commercial Real Estate - Non-Owner Occupied	2		233		—
Commercial & Industrial	2		375		—
Residential 1-4 Family - Commercial	3		332		—
Residential 1-4 Family - Consumer	23		3,869		—
Residential 1-4 Family - Revolving	3		93		—
Total nonperforming	34	$	4,917	$	—
Total performing and nonperforming	127	$	14,190	$	5

The Company considers a default of a TDR to occur when the borrower is 90 days past due following the restructure or a foreclosure and repossession of the applicable collateral occurs. During the three months ended March 31, 2022 and the year ended December 31, 2022, the Company did not have any material loans that went into default that had been restructured in the twelve-month period prior to the time of default.

-26-

Table of Contents

4. GOODWILL AND INTANGIBLE ASSETS

The Company’s intangible assets consist of core deposits, goodwill, and other intangibles arising from acquisitions. The Company has determined that core deposit intangibles have finite lives and amortizes them over their estimated useful lives. Core deposit intangibles are being amortized over the period of expected benefit, which ranges from 4four years to 10ten years, using an accelerated method. Other amortizable intangible assets are being amortized over the period of expected benefit, which ranges from 4four years to 10ten years, using various methods.

The Company ~~determined that~~concluded there was 0no impairment to ~~its~~the Company’s goodwill or intangible ~~assets.~~assets as of the balance sheet date. In the normal course of business, the Company routinely monitors the impact of the changes in the financial markets and includes these assessments in the Company’s ~~goodwill~~ impairment process.

Effective January 1, 2023, the Company made an organizational change to move certain lines of business in the wealth management division that primarily serve Wholesale Banking customers from the Consumer Banking segment to the Wholesale Banking segment. As a result, the Company re-allocated $9.6 million and $1.6 million of goodwill and intangible assets, respectively, from the Consumer Banking segment to the Wholesale Banking segment. The Company ~~analyzed~~determined that there was no impairment to the Bank’s goodwill prior to or after re-allocating goodwill. The Company restated its goodwill and intangible assets atsegment information for the year ended December 31, 2022 based on this organizational change.

The following table presents the Company’s goodwill and intangible assets by operating segment as of March 31, 2023 and December 31, 2022 (dollars in thousands):


	Wholesale Banking		Consumer Banking		Corporate Other		Total
As of March 31, 2023
Goodwill	$	639,180	$	286,031	$	—	$	925,211
Intangible assets		1,494		69		22,919		24,482
As of December 31, 2022
Goodwill	$	639,180	$	286,031	$	—	$	925,211
Intangible assets		1,558		75		25,128		26,761

Refer to Note 12 “Segment Reporting and ~~concluded 0 impairment existed as of~~Revenue” for additional information on the ~~balance sheet date.~~ Company’s reportable operating segment changes.

Amortization expense of intangibles for the three months ended March 31, 2023 and 2022 ~~and 2021~~ totaled ~~$3.0~~$2.3 million and ~~$3.7~~$3.0 million, respectively.

As of March 31, ~~2022,~~2023, the estimated remaining amortization expense of intangibles is as follows for the years ending (dollars in thousands):


For the remaining nine months of 2022	$	8,452
2023		9,687
For the remaining nine months of 2023			$	6,239
2024		7,820		6,753
2025		6,221		5,155
2026		4,420		3,559
2027				1,986
Thereafter		3,673		790
Total estimated amortization expense	$	40,273	$	24,482

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Table of Contents

5. LEASES

The Company enters into both lessor and lessee arrangements and determines if an arrangement is a lease at inception. As both a lessee and lessor, the Company elected the practical expedient permitted under the transition guidance within the standard to account for lease and non-lease components as a single lease component for all asset classes.

Lessor Arrangements

The Company’s lessor arrangements consist of sales-type and direct financing leases for ~~equipment. Lease payment terms are fixed~~equipment, including vehicles and ~~are typically payable in monthly installments~~machinery, with terms ranging from 14 months to 125 months. The lease arrangements may contain renewal options and purchase options that allow the lessee to purchase the leased equipment at the end of the lease term. The leases generally do not contain non-lease components. The Company has no material sale leaseback transactions and 0 lease transactions with related parties.

At lease inception the Company estimates the expected residual value of the leased property at the end of the lease term by considering both internal and third-party appraisals. In certain cases, the Company obtains lessee-provided residual value guarantees and third-party ~~RVI~~residual value insurance to reduce its residual asset risk. At March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the carrying value of residual assets covered by residual value guarantees and ~~RVI~~residual value insurance was ~~$23.8~~$45.9 million and ~~$23.0~~$44.3 million, respectively.

The net investment in sales-type and direct financing leases consists of the carrying amount of the lease receivables plus unguaranteed residual assets, net of unearned income and any deferred selling profit on direct financing leases. The lease receivables include the lessor’s right to receive lease payments and the guaranteed residual asset value the lessor expects to derive from the underlying assets at the end of the lease term. The Company’s net investment in sales-type and direct financing leases are included in “Loans held for investment, net of deferred fees and costs” For more information on the Company’s ~~Consolidated Balance Sheets. Lease income is recorded~~lessor arrangements, refer to Note 1 “Summary of Significant Accounting Policies” in ~~“Interest and fees on loans” on~~ the Company’s ~~Consolidated Statements of Income.~~2022 Form 10-K.

Total net investment in sales-type and direct financing leases consists of the following (dollars in thousands):


	March 31, 2022		December 31, 2021		March 31, 2023		December 31, 2022
Sales-type and direct financing leases:
Lease receivables, net of unearned income and deferred selling profit	$	196,601	$	199,423	$	257,643	$	266,380
Unguaranteed residual values, net of unearned income and deferred selling profit		8,840		8,911		15,269		15,159
Total net investment in sales-type and direct financing leases	$	205,441	$	208,334	$	272,912	$	281,539

Lessee Arrangements

The Company’s lessee arrangements consist of operating and finance leases; however, the majority of the leases have been classified as non-cancellable operating leases and are primarily for real estate leases with remaining lease terms of up to ~~24 years. The~~23 years. For more information on the Company’s ~~real estate lease agreements do not contain residual value guarantees and most agreements do not contain restrictive covenants. The Company does not have any material~~lessee arrangements, ~~where~~refer to Note 1 “Summary of Significant Accounting Policies” in the ~~Company is in a sublease contract.~~Company’s 2022 Form 10-K.

~~Lessee arrangements with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets.~~ The ~~ROU assets and lease liabilities associated with operating and finance leases greater than 12 months are recorded in~~tables below provide information about the Company’s ~~Consolidated Balance Sheets; ROU assets within “Other assets”~~lessee lease portfolio and other supplemental lease liabilities within “Other liabilities”. ROU assets represent the Company’s right to use an underlying asset over the course of the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The initial measurement of lease liabilities and ROU assets are the same for operating and finance leases. Lease liabilities are recognized at the commencement date based on the present value of the remaining lease payments, discounted using the incremental borrowing rate. As most of the Company’s leases do not provide an implicit rate, the Company uses aninformation (dollars in thousands):


	March 31, 2023						December 31, 2022
	Operating			Finance			Operating			Finance
ROU assets	$	34,520		$	5,358		$	35,729		$	5,588
Lease liabilities		45,897			7,983			47,696			8,288
Lease Term and Discount Rate of Operating leases:
Weighted-average remaining lease term (years)		6.70			5.83			6.80			6.08
Weighted-average discount rate ⁽¹⁾		2.96	%		1.17	%		2.91	%		1.17	%

⁽¹⁾ An incremental borrowing rate is used based on ~~the~~ information available at commencement date ~~in determining the present value~~ of lease ~~payments. ROU assets are recognized~~or at commencement date based on the initial measurement of the lease liability, any lease payments made excluding lease incentives, and any initial direct costs incurred. Most of the Company’s operating leases include one or more options to renew and if the Company is reasonably certain to exercise those options, it would be included in the measurement of the operating ROU assets and lease liabilities.remeasurement date.


	Three months ended March 31,
	2023		2022
Cash paid for amounts included in measurement of lease liabilities:
Operating Cash Flows from Finance Leases	$	24	$	27
Operating Cash Flows from Operating Leases		2,812		2,891
Financing Cash Flows from Finance Leases		306		294
ROU assets obtained in exchange for lease obligations:
Operating leases	$	852	$	143

~~-27-~~-28-

Table of Contents

Lease expense for operating lease payments is recognized on a straight-line basis over the lease term and recorded in “Occupancy expenses” on the Company’s Consolidated Statements of Income. Finance lease expenses consist of straight-line amortization expense of the ROU Assets recognized over the lease term and interest expense on the lease liability. Total finance lease expenses for the amortization of the ROU assets are recorded in “Occupancy expenses” on the Company’s Consolidated Statements of Income and interest expense on the finance lease liability is recorded in “Interest on long-term borrowings” on the Company’s Consolidated Statements of Income.

~~The tables below provide information about the Company’s lessee lease portfolio and other supplemental lease information (dollars in thousands):~~

March 31, 2022

December 31, 2021

Operating

Finance

Operating

Finance

ROU assets

$
35,237

$
6,277

$
40,653

$
6,506

Lease liabilities

48,304

9,183

50,742

9,477

Lease Term and Discount Rate of Operating leases:

Weighted-average remaining lease term (years)

6.62

6.83

6.75

7.08

Weighted-average discount rate ⁽¹⁾

2.58
%

1.17
%

2.57
%

1.17
%

⁽¹⁾~~An incremental borrowing rate is used based on information available at commencement date of lease or at remeasurement date~~

Three months ended March 31,

2022

2021
Cash paid for amounts included in measurement of lease liabilities:

Operating Cash Flows from Finance Leases

$
27

$
30
Operating Cash Flows from Operating Leases

2,891

3,015
Financing Cash Flows from Finance Leases

294

283
ROU assets obtained in exchange for lease obligations:

Operating leases

$
143

$
1,820


	Three months ended March 31,				Three months ended March 31,
		2022		2021		2023		2022
Net Operating Lease Cost	$	2,309	$	2,541	$	2,240	$	2,309
Finance Lease Cost:
Amortization of right-of-use assets		230		230		230		230
Interest on lease liabilities		27		30		24		27
Total Lease Cost	$	2,566	$	2,801	$	2,494	$	2,566

The maturities of lessor and lessee arrangements outstanding ~~at March 31, 2022~~ are presented in the table below (dollars in thousands):

March 31, 2022

March 31, 2023

Lessor

Lessee

Lessor

Lessee

Sales-type and Direct Financing

Operating

Finance

Sales-type and Direct Financing

Operating

Finance

For the remaining nine months of 2022

37,728

8,515

971

2023

47,004

10,400

1,325

For the remaining nine months of 2023

49,822

8,243

996

2024

45,782

9,274

1,358

66,025

10,394

1,358

2025

33,791

7,017

1,392

55,221

8,214

1,392

2026

18,920

4,494

1,427

43,834

5,711

1,427

2027

33,152

4,450

1,462

Thereafter

30,846

13,326

3,088

38,814

14,129

1,626

Total undiscounted cash flows

214,071

53,026

9,561

286,868

51,141

8,261

Less: Adjustments ⁽¹⁾

17,470

4,722

378

29,225

5,244

278

Total ⁽²⁾

196,601

48,304

9,183

257,643

45,897

7,983

⁽¹⁾ Lessor – unearned income and unearned guaranteed residual value; Lessee – imputed ~~interest~~interest.

⁽²⁾ Represents lease receivables for lessor arrangements and lease liabilities for lessee ~~arrangements~~arrangements.

~~-28-~~-29-

Table of Contents

6. BORROWINGS

Short-term Borrowings

The Company classifies all borrowings that will mature within a year from the date on which the Company enters into them as short-term borrowings. Total short-term borrowings consist primarily of securities sold under agreements to repurchase, which are secured transactions with customers and generally mature the day following the date sold, advances from the FHLB, federal funds purchased (which are secured overnight borrowings from other financial institutions), and other lines of credit.

Total short-term borrowings consist of the following as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (dollars in thousands):


	March 31,			December 31,			March 31,			December 31,
	2022			2021			2023			2022
Securities sold under agreements to repurchase	$	115,027		$	117,870		$	163,760		$	142,837
Federal Funds Purchased		0			0			—			160,000
FHLB Advances		0			0			245,000			1,016,000
Total short-term borrowings	$	115,027		$	117,870		$	408,760		$	1,318,837

Average outstanding balance during the period	$	113,500		$	113,030		$	724,065		$	302,060
Average interest rate during the period		0.08	%		0.10	%		4.24	%		1.79	%
Average interest rate at end of period		0.09	%		0.07	%		4.40	%		3.89	%

The Bank maintains federal funds lines with several correspondent ~~banks,~~banks; the available balance was ~~$997.0 million~~$1.0 billion at ~~both~~ March 31, ~~2022~~2023 and December 31, ~~2021.~~2022, respectively. The Company maintains an alternate line of credit at a correspondent bank; the available balance was $25.0 million at both March 31, ~~2022~~2023 and December 31, ~~2021.~~2022. The Company has certain restrictive covenants related to certain asset quality, capital, and profitability metrics associated with these lines and is in compliance with these covenants as of March 31, ~~2022~~2023 and December 31, ~~2021.~~2022. Additionally, the Company ~~had~~has a collateral dependent line of credit with the FHLB of up to $~~6.0~~6.1 billion and $6.0 billion at ~~both~~ March 31, ~~2022~~2023 and December 31, ~~2021.~~2022, respectively. The remaining credit availability on the collateral dependent line of credit with the FHLB was $5.9 billion and $4.9 billion at March 31, 2023 and December 31, 2022, respectively.

Starting in the first quarter of 2023, the Company is eligible to borrow from the Federal Reserve's BTFP, which provides additional contingent liquidity through the pledging of certain qualifying securities. The BTFP is a one-year program ending March 11, 2024, and the Company can borrow any time during the term and can repay the obligation at any time without penalty. As of March 31, 2023, liquidity of $548.6 million was available based on the par-value of qualifying securities from BTFP. The Company did not utilize the available funds from BTFP as of March 31, 2023.

Long-term Borrowings

During the fourth quarter of 2021, the company issued the 2031 Notes. The 2031 Notes were sold at par resulting in net proceeds, after underwriting discounts and offering expenses, of approximately $246.9 ~~million. The Company used a portion of the net proceeds from the 2031 Notes issuance to repay its outstanding~~ ~~$150 million of 5.00% fixed-to-floating rate subordinated notes that were due in 2026.~~

In connection with several previous bank acquisitions, the Company issued $58.5 million and acquired ~~$87.0~~$92.0 million of trust preferred capital notes. ~~Most recently, in connection with the acquisition of Access on February 1, 2019, the Company acquired additional trust preferred capital notes totaling $5.0~~ ~~million.~~ The remaining fair value discount on all acquired trust preferred capital notes was ~~$13.1~~$12.3 million and ~~$13.3~~$12.5 million at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

~~-29-~~-30-

Table of Contents

Total long-term borrowings consist of the following as of March 31, ~~2022~~2023 (dollars in thousands):

Spread to

Principal

3-Month LIBOR

Rate ⁽¹⁾

Maturity

Investment ⁽²⁾

Principal

3-Month LIBOR

Rate ⁽¹⁾

Maturity

Investment ⁽²⁾

Trust Preferred Capital Securities

Trust Preferred Capital Note - Statutory Trust I

22,500

2.75

3.71

6/17/2034

696

22,500

2.75

7.94

6/17/2034

696

Trust Preferred Capital Note - Statutory Trust II

36,000

1.40

2.36

6/15/2036

1,114

36,000

1.40

6.59

6/15/2036

1,114

VFG Limited Liability Trust I Indenture

20,000

2.73

3.69

3/18/2034

619

20,000

2.73

7.92

3/18/2034

619

FNB Statutory Trust II Indenture

12,000

3.10

4.06

6/26/2033

372

12,000

3.10

8.29

6/26/2033

372

Gateway Capital Statutory Trust I

8,000

3.10

4.06

9/17/2033

248

8,000

3.10

8.29

9/17/2033

248

Gateway Capital Statutory Trust II

7,000

2.65

3.61

6/17/2034

217

7,000

2.65

7.84

6/17/2034

217

Gateway Capital Statutory Trust III

15,000

1.50

2.46

5/30/2036

464

15,000

1.50

6.69

5/30/2036

464

Gateway Capital Statutory Trust IV

25,000

1.55

2.51

7/30/2037

774

25,000

1.55

6.74

7/30/2037

774

MFC Capital Trust II

5,000

2.85

3.81

1/23/2034

155

5,000

2.85

8.04

1/23/2034

155

Total Trust Preferred Capital Securities

150,500

4,659

150,500

4,659

Subordinated Debt⁽³⁾⁽⁴⁾

2031 Subordinated Debt

250,000

2.875

12/15/2031

250,000

—

2.875

12/15/2031

Total Subordinated Debt⁽⁵⁾

250,000

Fair Value Discount⁽⁶⁾

(16,154)

(15,009)

Investment in Trust Preferred Capital Securities

4,659

Total Long-term Borrowings

389,005

390,150

⁽¹⁾Rate as of March 31, ~~2022.~~2023. Calculated using non-rounded numbers.

⁽²⁾~~The total of~~ Represents the ~~trust preferred capital securities and investments in the respective trusts represents the principal asset of the Company’s~~ junior subordinated ~~debt securities with like maturities~~debentures owned by the Company in trust and ~~like interest rates to the capital securities. The Company’s investment in the trusts~~ is reported in "Other assets" on the Company’s Consolidated Balance ~~Sheets.~~Sheets.

⁽³⁾The remaining issuance discount as of March 31, ~~2022~~2023 is $~~3.0~~2.7 million.

⁽⁴⁾Subordinated notes qualify as Tier 2 capital for the Company for regulatory purposes.

⁽⁵⁾Fixed-to-floating rate notes. On December 15, 2026, the interest rate changes to a floating rate of the then current Three-Month Term SOFR plus a spread of 186 bps through its maturity ~~date.~~date or earlier redemption. The notes may be redeemed before maturity on any interest payment date occurring on or after December 15, 2026.

⁽⁶⁾Remaining discounts of $~~13.1~~12.3 million and $~~3.0~~2.7 million on Trust Preferred Capital Securities and Subordinated Debt, respectively.

~~-30-~~-31-

Table of Contents

Total long-term borrowings consist of the following as of December 31, ~~2021~~2022 (dollars in thousands):


			Spread to									Spread to
	Principal		3-Month LIBOR		Rate ⁽¹⁾		Maturity	Investment ⁽²⁾		Principal		3-Month LIBOR		Rate ⁽¹⁾		Maturity	Investment ⁽²⁾
Trust Preferred Capital Securities
Trust Preferred Capital Note - Statutory Trust I	$	22,500	2.75	%	2.96	%	6/17/2034	$	696	$	22,500	2.75	%	7.52	%	6/17/2034	$	696
Trust Preferred Capital Note - Statutory Trust II		36,000	1.40	%	1.61	%	6/15/2036		1,114		36,000	1.40	%	6.17	%	6/15/2036		1,114
VFG Limited Liability Trust I Indenture		20,000	2.73	%	2.94	%	3/18/2034		619		20,000	2.73	%	7.50	%	3/18/2034		619
FNB Statutory Trust II Indenture		12,000	3.10	%	3.31	%	6/26/2033		372		12,000	3.10	%	7.87	%	6/26/2033		372
Gateway Capital Statutory Trust I		8,000	3.10	%	3.31	%	9/17/2033		248		8,000	3.10	%	7.87	%	9/17/2033		248
Gateway Capital Statutory Trust II		7,000	2.65	%	2.86	%	6/17/2034		217		7,000	2.65	%	7.42	%	6/17/2034		217
Gateway Capital Statutory Trust III		15,000	1.50	%	1.71	%	5/30/2036		464		15,000	1.50	%	6.27	%	5/30/2036		464
Gateway Capital Statutory Trust IV		25,000	1.55	%	1.76	%	7/30/2037		774		25,000	1.55	%	6.32	%	7/30/2037		774
MFC Capital Trust II		5,000	2.85	%	3.06	%	1/23/2034		155		5,000	2.85	%	7.62	%	1/23/2034		155
Total Trust Preferred Capital Securities	$	150,500						$	4,659	$	150,500						$	4,659
Subordinated Debt⁽³⁾⁽⁴⁾
2031 Subordinated Debt		250,000	-	%	2.875	%	12/15/2031				250,000	—	%	2.875	%	12/15/2031
Total Subordinated Debt⁽⁵⁾	$	250,000								$	250,000
Fair Value Discount⁽⁶⁾		(16,435)									(15,296)
Investment in Trust Preferred Capital Securities		4,659									4,659
Total Long-term Borrowings	$	388,724								$	389,863

⁽¹⁾ Rate as of December 31, ~~2021.~~2022. Calculated using non-rounded numbers.

⁽²⁾⁽²⁾ ~~The total of~~Represents the ~~trust preferred capital securities and investments in the respective trusts represents the principal asset of the Company’s~~ junior subordinated ~~debt securities with like maturities~~debentures owned by the Company in trust and ~~like interest rates to the capital securities. The Company’s investment in the trusts~~ is reported in "Other assets" on the Company’s Consolidated Balance Sheets.

⁽³⁾The remaining issuance discount as of December 31, ~~2021~~2022 is $~~3.1~~2.8 million.

⁽⁴⁾ Subordinated notes qualify as Tier 2 capital for the Company for regulatory purposes.

⁽⁵⁾Fixed-to-floating rate notes. On December 15, 2026, the interest changes to a floating rate of the then current Three-Month Term SOFR plus a spread of 186 bps through its maturity ~~date.~~date or earlier redemption. The notes may be redeemed before maturity on any interest payment date occurring on or after December 15, 2026.

⁽⁶⁾ Remaining discounts of $~~13.3~~12.5 million and $~~3.1~~2.8 million on Trust Preferred Capital Securities and Subordinated Debt, respectively.

As of March 31, ~~2022,~~2023, the contractual maturities of long-term debt are as follows for the years ending (dollars in thousands):

Trust

Preferred

Total

Preferred

Total

Capital

Subordinated

Fair Value

Long-term

Capital

Subordinated

Fair Value

Long-term

Notes

Debt

Discount ⁽¹⁾

Borrowings

Notes

Debt

Discount ⁽¹⁾

Borrowings

For the remaining nine months of 2022

(858)

2023

(1,162)

For the remaining nine months of 2023

—

(875)

2024

(1,187)

—

(1,187)

2025

(1,211)

—

(1,211)

2026

(1,236)

—

(1,236)

2027

—

(1,263)

Thereafter

155,159

250,000

(10,500)

394,659

155,159

250,000

(9,237)

395,922

Total long-term borrowings

155,159

250,000

(16,154)

389,005

155,159

250,000

(15,009)

390,150

⁽¹⁾ Includes discount on ~~issued subordinated notes.~~Trust Preferred Capital Securities and Subordinated Debt.

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7. COMMITMENTS AND CONTINGENCIES

Litigation and Regulatory Matters

In the ordinary course of its operations, the Company and its subsidiaries are ~~involved in various~~subject to loss contingencies related to legal and regulatory proceedings. The Company establishes accruals for those matters when a loss contingency is considered probable and the related amount ~~if any,~~is reasonably estimable. When it is practicable, the Company estimates possible loss contingencies, whether or not there is an accrued probable loss. When the Company is able to estimate such losses and when it is reasonably possible that the Company could incur losses in excess of the ~~ultimate~~amounts accrued, the Company discloses the aggregate estimation of such possible losses.

As previously disclosed, on February 9, 2022, pursuant to the CFPB’s Notice and Opportunity to Respond and Advise process, the CFPB Office of Enforcement notified the Bank that it is considering recommending that the CFPB take legal action against the Bank in connection with alleged violations of Regulation E, 12 C.F.R. § 1005.17, and the Consumer Financial Protection Act, 12 U.S.C. §§ 5531 and 5536, in connection with the Bank’s overdraft practices and policies. In March 2023, the CFPB commenced settlement discussions with the Company to resolve the matter.

As of March 31, 2023, the Company has recorded a probable and estimable liability in connection with this matter. In addition, the Company believes that it is reasonably possible that the Company may experience losses in connection with this matter in excess of what the Company has accrued; however, the Company cannot reasonably estimate any loss beyond the estimated liability that has been recorded.

The Company cannot provide assurance whether a settlement will be reached, the final terms or timing of any such settlement, or the final amount of loss (potentially including both restitution and a civil money penalty) with respect to such matters cannot be determined. Despite the uncertainties of such litigation and investigations, and based on the information presently available, and after consultation with legal counsel, management believes that the ultimate outcome in such proceedings in the aggregate will not have a material adverse effect on the business, financial condition, or results of operations ofthis matter. If the Company ~~subject to~~and the ~~potential outcomes of disclosed matters. There have been no material changes with respect to~~CFPB do not reach a settlement, the ~~Company’s previously disclosed proceedings.~~CFPB may commence litigation against the Company.

Financial Instruments with Off-Balance Sheet Risk

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit and letters of credit. These instruments involve elements of credit and interest rate risk in excess of the amount recognized on the Company’s Consolidated Balance Sheets. The contractual amounts of these instruments reflect the extent of the Company’s involvement in particular classes of financial instruments.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and letters of credit written is represented by the contractual amount of these instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Unless noted otherwise, the Company does not require collateral or other security to support off-balance sheet instruments with credit risk. The Company considers credit losses related to off-balance sheet commitments by undergoing a similar process in evaluating losses for loans that are carried on the balance sheet. The Company considers historical loss and funding information, current and future economic conditions, risk ratings, and past due status among other factors in the consideration of expected credit losses in the Company’s off-balance sheet commitments to extend credit. The Company also records an indemnification reserve based on historical statistics and loss rates related to mortgage loans previously sold. At both March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company’s ~~RUC~~reserve for unfunded commitments and indemnification reserve ~~was $8.4 million.~~totaled $15.6 million and $14.1 million, respectively.

Commitments to extend credit are agreements to lend to customers as long as there are no violations of any conditions established in the contracts. Commitments generally have fixed expiration dates or other termination clauses and may require

-33-

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payment of a fee. Because many of the commitments may expire without being completely drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Letters of credit are conditional commitments issued by the Company to guarantee the performance of customers to third parties. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers.

The following table presents the balances of commitments and contingencies as of the following dates (dollars in thousands):


	March 31, 2022		December 31, 2021		March 31, 2023		December 31, 2022
Commitments with off-balance sheet risk:
Commitments to extend credit ⁽¹⁾	$	6,140,109	$	5,825,557	$	5,485,988	$	5,229,252
Letters of credit		159,740		152,506		155,878		156,459
Total commitments with off-balance sheet risk	$	6,299,849	$	5,978,063	$	5,641,866	$	5,385,711
⁽¹⁾Includes unfunded overdraft protection.

⁽¹⁾ Includes unfunded overdraft protection.

As of March 31, ~~2022,~~2023, the Company had approximately ~~$218.8~~$213.2 million in deposits in other financial institutions of which ~~$147.4~~$162.3 million served as collateral for cash flow and loan swap derivatives. As of December 31, ~~2021,~~2022, the Company had approximately ~~$187.4~~$273.5 million in deposits in other financial institutions of which ~~$82.3~~$196.2 million served as collateral for the Company’s ~~derivative interest rate contracts.~~cash flow and loan swap derivatives. The Company had approximately $~~67.9~~$47.5 million and ~~$102.0~~$74.0 million in deposits in other financial institutions that were uninsured at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. At least annually, the Company’s management evaluates the loss risk of its uninsured deposits in financial counterparties.

For asset/liability management purposes, the Company uses interest rate contracts to hedge various exposures or to modify the interest rate characteristics of various balance sheet accounts. For the ~~OTC~~over-the-counter derivatives cleared with the central clearinghouses, the variation margin is treated as a settlement of the related derivatives fair values. Refer to Note 8 “Derivatives” ~~in Part I,~~within this Item I1 of this Quarterly Report for additional information.

As part of the Company’s liquidity management strategy, it pledges collateral to secure various financing and other activities that occur during the normal course of business. The following tables present the types of collateral pledged at March 31, 2023 and December 31, 2022 (dollars in thousands):

Pledged Assets as of March 31, 2023

AFS

HTM

Cash

Securities ⁽¹⁾

Loans ⁽²⁾

Total

Public deposits

—

778,257

623,009

—

1,401,266

Repurchase agreements

—

181,670

—

181,670

FHLB advances

—

58,078

—

2,598,273

2,656,351

Derivatives

162,329

58,405

—

220,734

Fed Funds ⁽³⁾

—

440,955

18,273

485,569

944,797

Other purposes

—

23,399

—

23,399

Total pledged assets

162,329

1,540,764

641,282

3,083,842

5,428,217

⁽¹⁾ Balance represents market value.

⁽²⁾ Balance represents book value.

⁽³⁾ Includes AFS and HTM securities pledged under the BTFP program.

~~-32-~~-34-

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The Company pledges collateral to secure various financing and other activities that occur during the normal course of business as part of the liquidity management strategy. The following tables present the types of collateral pledged at March 31, 2022 and December 31, 2021 (dollars in thousands):

Pledged Assets as of March 31, 2022




AFS

HTM




Cash

Securities ⁽¹⁾

Securities ⁽¹⁾

Loans ⁽²⁾

Total
Public deposits

$
0

$
619,431

$
527,412

$
0

$
1,146,843
Repurchase agreements

0

116,260

0

0

116,260
FHLB advances

0

40,919

0

2,966,527

3,007,446
Derivatives

147,411

61,255

0

0

208,666
Fed Funds

0

0

0

424,875

424,875
Other purposes

0

19,018

915

0

19,933
Total pledged assets

$
147,411

$
856,883

$
528,327

$
3,391,402

$
4,924,023

Pledged Assets as of December 31, 2021




AFS

HTM




Cash

Securities ⁽¹⁾

Securities ⁽¹⁾

Loans ⁽²⁾

Total
Public deposits

$
0

$
703,489

$
472,243

$
0

$
1,175,732
Repurchase agreements

0

130,217

0

0

130,217
FHLB advances

0

43,722

0

4,263,259

4,306,981
Derivatives

82,299

65,053

0

0

147,352
Fed Funds

0

0

0

392,067

392,067
Other purposes

0

22,003

985

0

22,988
Total pledged assets

$
82,299

$
964,484

$
473,228

$
4,655,326

$
6,175,337

⁽¹⁾Balance represents market value.

⁽²⁾Balance represents book value.


	Pledged Assets as of December 31, 2022
			AFS		HTM
	Cash		Securities ⁽¹⁾		Securities ⁽¹⁾		Loans ⁽²⁾		Total
Public deposits	$	—	$	713,761	$	579,550	$	—	$	1,293,311
Repurchase agreements		—		159,221		—		—		159,221
FHLB advances		—		36,039		—		2,679,316		2,715,355
Derivatives		196,180		57,114		—		—		253,294
Fed Funds		—		—		—		458,680		458,680
Other purposes		—		27,311		865		—		28,176
Total pledged assets	$	196,180	$	993,446	$	580,415	$	3,137,996	$	4,908,037

⁽¹⁾ Balance represents market value.

⁽²⁾ Balance represents book value.

~~-33-~~-35-

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8. DERIVATIVES

The Company is exposed to economic risks arising from its business operations and uses derivatives primarily to manage risk associated with changing interest rates, and to assist customers with their risk management objectives. The Company designates certain derivatives as hedging instruments in a qualifying hedge accounting relationship (cash flow or fair value hedge). The remaining are classified as free-standing derivatives that do not qualify for hedge accounting and consist of interest rate contracts, which include loan swaps and interest rate cap agreements, as well as interest rate lock commitments.

Derivatives Counterparty Credit Risk

Derivative instruments contain an element of credit risk that arises from the potential failure of a counterparty to perform according to the terms of the contract. The Company’s exposure to derivative counterparty credit risk, at any point in time, is equal to the amount reported as a derivative asset on the Company’s Consolidated Balance Sheets, assuming no recoveries of underlying collateral. The Company clears certain ~~OTC~~over-the-counter derivatives with central clearinghouses through ~~FCMs~~futures commission merchants due to applicable regulatory requirements, which reduces the Company’s counterparty risk.

The Company also enters into legally enforceable master netting agreements and collateral agreements, where possible, with certain derivative counterparties to mitigate the risk of default on a bilateral basis. These bilateral agreements typically provide the right to offset exposures and require one counterparty to post collateral on derivative instruments in a net liability position to the other counterparty. For the ~~OTC~~over-the-counter derivatives cleared with central clearinghouses, the variation margin is treated as settlement of the related derivatives fair values.

Cash Flow Hedges

The Company designates derivatives as cash flow hedges when they are used to manage exposure to variability in cash flows related to forecasted transactions on variable rate financial instruments. The Company uses interest rate swap agreements as part of its hedging strategy by exchanging a notional amount, equal to the principal amount of the borrowings or commercial loans, for fixed-rate interest based on benchmarked interest rates. The original terms and conditions of the interest rate swaps vary ~~and~~in range inand length. Amounts receivable or payable are recognized as accrued under the terms of the agreements.

All swaps were entered into with counterparties that met the Company’s credit standards, and the agreements contain collateral provisions protecting the at-risk party. The Company concluded that the credit risk inherent in the contract is not significant.

For derivatives designated and qualifying as cash flow hedges, ineffectiveness is not measured or separately disclosed. Rather, as long as the hedging relationship continues to qualify for hedge accounting, the entire change in the fair value of the hedging instrument is recorded in OCI and recognized in earnings as the hedged transaction affects earnings. Derivative amounts affecting earnings are recognized consistent with the classification of the hedged item.

At March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company had interest rate swaps designated and qualifying as cash flow hedges of the Company’s forecasted variable interest receipts on variable rate loans due to changes in the interest rate with a notional amount of ~~$500~~$900 million. For each agreement, the Company receives interest at a fixed rate and pays at a variable rate.

Fair Value Hedges

Derivatives are designated as fair value hedges when they are used to manage exposure to changes in the fair value of certain financial assets and liabilities, referred to as the hedged items, which fluctuate in value as a result of movements in interest rates.

Loans: During the normal course of business, the Company enters into swap agreements to convert certain long-term fixed-rate loans to floating rates to hedge the Company’s exposure to interest rate risk. The Company pays a fixed interest rate to the counterparty and receives a floating rate from the same counterparty calculated on the aggregate notional amount. At March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the aggregate notional amount of the related hedged items for certain long-term fixed rate loans totaled ~~$87.4~~$82.0 million and ~~$88.6~~$83.6 million, respectively, and the fair value of the swaps associated with the derivative related to hedged items was an unrealized gain of ~~$4.3~~$9.2 million and ~~an unrealized loss of $620,000,~~$11.0 million, respectively.

~~-34-~~-36-

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AFS Securities: The Company has ~~entered into~~ a swap agreement to hedge the interest rate risk on a portion of its fixed rate AFS securities. At March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the aggregate notional amount of the related hedged items of the AFS securities totaled $50.0 million and the fair value of the swaps associated with the derivative related to hedged items was an unrealized ~~loss~~gain of $1.2 million and ~~$4.1~~$1.9 million, respectively.

The Company applies hedge accounting in accordance with ASC 815, Derivatives and Hedging, and the fair value hedge and the underlying hedged item, attributable to the risk being hedged, are recorded at fair value with unrealized gains and losses being recorded on the Company’s Consolidated Statements of Income. The Company assesses the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows on the derivative hedging instrument with the changes in fair value or cash flows on the designated hedged item or transactions for the risk being hedged. If a hedging relationship ceases to qualify for hedge accounting, the relationship is discontinued and future changes in the fair value of the derivative instrument are recognized in current period earnings. For a discontinued or terminated fair value hedging relationship, all remaining basis adjustments to the carrying amount of the hedged item are amortized to interest income or expense over the remaining life of the hedged item consistent with the amortization of other discounts or premiums. Previous balances deferred in AOCI from discontinued or terminated cash flow hedges are reclassified to interest income or expense as the hedged transactions affect earnings or over the originally specified term of the hedging relationship. The Company’s hedges continue to be highly effective and had no material impact on the Consolidated Statements of Income.

Interest Rate Contracts

During the normal course of business, the Company enters into interest rate contracts with borrowers to help meet their financing needs. Upon entering into interest rate contracts, the Company enters into offsetting positions with a third party in order to minimize interest rate risk. These interest rate contracts qualify as financial derivatives with fair values as reported in “Other assets” and “Other liabilities” on the Company’s Consolidated Balance Sheets.

RPAs:The Company enters into RPAs where it may either sell or assume credit risk related to a borrower’s performance under certain non-hedging interest rate derivative contracts on participated loans. The Company manages its credit risk under RPAs by monitoring the creditworthiness of the borrowers based on the Company’s normal credit review process. RPAs are carried at fair value with changes in fair value recorded in “Other operating income” on the Company’s Consolidated Statements of Income.

The following table summarizes key elements of the Company’s derivative instruments as of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, segregated by derivatives that are considered accounting hedges and those that are not (dollars in thousands):

March 31, 2022

December 31, 2021

Derivative ⁽²⁾

Derivative ⁽²⁾


Notional or





Notional or




Contractual

Contractual

Amount ⁽¹⁾

Assets

Liabilities

Amount ⁽¹⁾

Assets

Liabilities
Derivatives designated as accounting hedges:

Interest rate contracts: ⁽³⁾








Cash flow hedges

$
500,000

$
0

$
—

$
500,000

$
0

$
0
Fair value hedges

137,410

597

1,397

138,606

0

5,387
Derivatives not designated as accounting hedges:

Interest rate contracts⁽³⁾

5,324,908

23,506

90,632

5,017,574

73,696

49,051

March 31, 2023

December 31, 2022

Derivative ⁽²⁾

Notional or

Contractual

Amount ⁽¹⁾

Assets

Liabilities

Amount ⁽¹⁾

Assets

Liabilities

Derivatives designated as accounting hedges:

Interest rate contracts: ⁽³⁾

Cash flow hedges

900,000

2,838

2,158

900,000

1,163

6,599

Fair value hedges

131,976

2,938

—

133,576

4,117

—

Derivatives not designated as accounting hedges:

Interest rate contracts⁽³⁾⁽⁴⁾

6,002,395

67,954

195,375

5,820,005

75,030

229,401

⁽¹⁾Notional amounts are not recorded on the Company’s Consolidated Balance Sheets and are generally used only as a basis on which interest and other payments are determined.

⁽²⁾Balances represent fair value of derivative financial instruments.

⁽³⁾The Company’s cleared derivatives are classified as a single-unit of accounting, resulting in the fair value of the designated swap being reduced by the variation margin, which is treated as settlement of the related derivatives fair value for accounting purposes.

⁽⁴⁾ Includes RPAs.

~~-35-~~-37-

Table of Contents

The following table summarizes the carrying value of the Company’s hedged assets in fair value hedges and the associated cumulative basis adjustments included in those carrying values as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (dollars in thousands):

March 31, 2022

December 31, 2021

March 31, 2023

December 31, 2022

Cumulative

Amount of Basis

Adjustments

Included in the

Carrying Amount

Carrying

Carrying Amount

Carrying

Carrying Amount

Carrying

Carrying Amount

Carrying

of Hedged

Amount of the

of Hedged

Amount of the

of Hedged

Amount of the

of Hedged

Amount of the

Assets/(Liabilities)

Hedged

Assets/(Liabilities)

Hedged

Assets/(Liabilities)

Hedged

Assets/(Liabilities)

Hedged

Amount ⁽¹⁾

Assets/(Liabilities)

Amount ⁽¹⁾

Assets/(Liabilities)

Amount ⁽¹⁾

Assets/(Liabilities)

Amount ⁽¹⁾

Assets/(Liabilities)

Line items on the Consolidated Balance Sheets in which the hedged item is included:

Securities available-for-sale ^{(1) (2)}

105,162

1,154

112,562

4,051

88,891

(1,226)

91,388

(1,889)

Loans(3)

87,410

(4,369)

88,606

546

81,976

(9,007)

83,576

(10,832)

⁽¹⁾These amounts include the amortized cost basis of the investment securities designated in hedging relationships for which the hedged item is the last layer expected to be remaining at the end of the hedging relationship. At March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the amortized cost basis of this portfolio was $~~105~~88.9 million and $~~113~~91 million, respectively, and the cumulative basis adjustment associated with this hedge was $1.2 million and $~~4.1~~1.9 million, respectively. The amount of the designated hedged item at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 totaled $50 million.

⁽²⁾Carrying value represents amortized cost.

⁽³⁾The fair value of the swaps associated with the derivative related to hedged items at March 31, 2023 and December 31, 2022 was an unrealized gain of $9.2 million and $11.0 million, respectively.

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9. STOCKHOLDERS’ EQUITY

~~Series A Preferred Stock~~

On June 9, 2020, the Company issued and sold 6,900,000 depositary shares, each representing a 1/400th ownership interest in a share of its Series A preferred stock, with a liquidation preference of $10,000 per share of Series A preferred stock (equivalent to $25 per depositary share), including 900,000 depositary shares pursuant to the exercise in full by the underwriters of their option to purchase additional depositary shares. The total net proceeds to the Company were approximately $166.4 million, after deducting the underwriting discount and other offering expenses payable by the Company.

Repurchase Programs

~~On December 10, 2021,~~As of March 31, 2023, the Company does not have an active share repurchase program. The Company’s ~~Board of Directors authorized a new~~prior share ~~Repurchase Program (the “Repurchase Program”) to purchase up to $100.0 million of the Company’s common stock through~~repurchase plan expired on December 9, 2022 in open market transactions or privately negotiated transactions, including pursuant to a trading plan in accordance with Rule 10b5-1 and / or Rule 10b-18 under the Exchange Act. During the quarter ended March 31, 2022, the Company repurchased an aggregate of approximately 630,000 shares (or $25.0 million), at an average price of $39.73. NaN shares were repurchased during the quarter ended December 31, 2021.2022.

Accumulated Other Comprehensive Income (Loss)

The change in AOCI for the three months ended March 31, 2023 is summarized as follows, net of tax (dollars in thousands):

Unrealized Gains

(Losses)

Unrealized

for AFS

Unrealized

(Losses)

Securities

Change in Fair

Gains

on AFS

Transferred to

Value of Cash

(Losses) on

Securities

HTM

Flow Hedge

BOLI

Total

AOCI (loss) - December 31, 2022

(363,919)

(54,610)

226

(418,286)

Other comprehensive income (loss):

Other comprehensive income before reclassification

32,068

—

13,714

45,792

Amounts reclassified from AOCI into earnings

10,586

(3)

—

(22)

10,561

Net current period other comprehensive income (loss)

42,654

(3)

13,714

(12)

56,353

AOCI (loss) - March 31, 2023

(321,265)

(40,896)

214

(361,933)

The change in AOCI for the three months ended March 31, 2022 is summarized as follows, net of tax (dollars in thousands):

Unrealized Gains






(Losses)

Unrealized

for AFS

Unrealized

Gains (Losses)

Securities

Change in Fair

Gains

on AFS

Transferred to

Value of Cash

(Losses) on

Securities

HTM

Flow Hedge

BOLI

Total
Balance - December 31, 2021

$
22,763

$
35

$
(1,567)

$
(2,596)

$
18,635
Other comprehensive income (loss):


Other comprehensive loss before reclassification

(186,967)

0

(23,313)

0

(210,280)
Amounts reclassified from AOCI into earnings

0

(5)

0

167

162
Net current period other comprehensive income (loss)

(186,967)

(5)

(23,313)

167

(210,118)
Balance - March 31, 2022

$
(164,204)

$
30

$
(24,880)

$
(2,429)

$
(191,483)

~~The change in AOCI for the three months ended March 31, 2021 is summarized as follows, net of tax (dollars in thousands):~~


			Unrealized Gain
			(Losses)
	Unrealized		for AFS				Unrealized
	Gains (Losses)		Securities		Change in Fair		Gains
	on AFS		Transferred to		Value of Cash		(Losses)
	Securities		HTM		Flow Hedge		on BOLI		Total
AOCI - December 31, 2021	$	22,763	$	35	$	(1,567)	$	(2,596)	$	18,635
Other comprehensive (loss) income:
Other comprehensive loss before reclassification		(186,967)		—		(23,313)		—		(210,280)
Amounts reclassified from AOCI into earnings		—		(5)		—		167		162
Net current period other comprehensive (loss) income		(186,967)		(5)		(23,313)		167		(210,118)
AOCI (loss) - March 31, 2022	$	(164,204)	$	30	$	(24,880)	$	(2,429)	$	(191,483)

Unrealized Gain






(Losses)

Unrealized

for AFS

Unrealized

Gains (Losses)

Securities

Change in Fair

Gains

on AFS

Transferred to

Value of Cash

(Losses)

Securities

HTM

Flow Hedge

on BOLI

Total
Balance - December 31, 2020

$
74,161

$
55

$
0

$
(3,201)

$
71,015
Cumulative effects from adoption of new accounting standard

Other comprehensive income (loss):

Other comprehensive loss before reclassification

(33,125)

0

(1,428)

0

(34,553)
Amounts reclassified from AOCI into earnings

(62)

(5)

(47)

153

39
Net current period other comprehensive income (loss)

(33,187)

(5)

(1,475)

153

(34,514)
Balance - March 31, 2021

$
40,974

$
50

$
(1,475)

$
(3,048)

$
36,501

~~-37-~~-39-

Table of Contents

10. FAIR VALUE MEASUREMENTS

The Company follows ASC 820,Fair Value Measurement to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. ASC 820 clarifies that fair value of certain assets and liabilities is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants.

ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. The three levels of the fair value hierarchy under ASC 820 based on these two types of inputs are as follows:

Level 1 Valuation is based on quoted prices in active markets for identical assets and liabilities.

Level 2 Valuation is based on observable inputs including quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities in less active markets, and model-based valuation techniques for which significant assumptions can be derived primarily from or corroborated by observable data in the markets.

Level 3 Valuation is based on model-based techniques that use one or more significant inputs or assumptions that are unobservable in the market. These unobservable inputs reflect the Company’s assumptions about what market participants would use and information that is reasonably available under the circumstances without undue cost and effort.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following describes the valuation techniques used by the Company to measure certain financial assets and liabilities recorded at fair value on a recurring basis in the financial statements.

Derivative Instruments

As discussed in Note 8 “Derivatives”, within this Item 1 of this Quarterly Report, the Company records derivative instruments at fair value on a recurring basis. The Company utilizes derivative instruments as part of the management of interest rate risk to modify the re-pricing characteristics of certain portions of the Company’s interest-bearing assets and ~~liabilities.~~liabilities, as well as to manage the Company’s exposure to credit risk related to borrower's performance under interest rate derivatives. The Company has contracted with a third-party vendor to provide valuations for derivatives using standard valuation techniques and therefore classifies such valuations as Level 2. ~~Third party~~Third-party valuations are validated by the Company using ~~BVAL~~the Bloomberg Valuation Service’s derivative pricing functions. No ~~material~~significant differences were identified during the validation as of March 31, ~~2022~~2023 and December 31, ~~2021.~~2022. The Company has considered counterparty credit risk in the valuation of its derivative assets and has considered its own credit risk in the valuation of its derivative liabilities. Mortgage banking derivatives as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 did not have a ~~material~~significant impact on the Company’s Consolidated Financial Statements.

AFS Securities

AFS securities are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data (Level 2). If the inputs used to provide the evaluation for certain securities are unobservable and/or there is little, if any, market activity, then the security would fall to the lowest level of the hierarchy (Level 3).

The Company’s investment portfolio is primarily valued using fair value measurements that are considered to be Level 2. The Company has contracted with a third-party portfolio accounting service vendor for valuation of its securities portfolio. The vendor’s primary source for security valuation is ICE, which evaluates securities based on market data. ICE utilizes evaluated pricing models that vary by asset class and include available trade, bid, and other market information. Generally, the methodology includes broker quotes, proprietary models, vast descriptive terms and conditions databases, as well as extensive quality control programs.

~~-38-~~-40-

Table of Contents

The vendor utilizes proprietary valuation matrices for valuing all municipals securities. The initial curves for determining the price, movement, and yield relationships within the municipal matrices are derived from industry benchmark curves or sourced from a municipal trading desk. The securities are further broken down according to issuer, credit support, state of issuance, and rating to incorporate additional spreads to the industry benchmark curves.

The Company primarily uses ~~BVAL~~the Bloomberg Valuation Service, an independent information source that draws on quantitative models and market data contributed from over 4,000 market participants, to validate third party valuations. Any ~~material~~significant differences between valuation sources are researched by further analyzing the various inputs that are utilized by each pricing source. No ~~material~~significant differences were identified during the validation as of March 31, ~~2022~~2023 and December 31, ~~2021.~~2022.

The carrying value of restricted FRB and FHLB stock approximates fair value based on the redemption provisions of each entity and is therefore excluded from the table below.

Loans Held for Sale

Residential loans originated for sale in the open market are carried at fair value. Fair value is based on the price secondary markets are currently offering for similar loans using observable market data which is not materially different than cost due to the short duration between origination and sale (Level 2). Gains and losses on the sale of loans are recorded in current period earnings as a component of "Mortgage banking income" on the Company’s Consolidated Statements of Income.

The following table presents the balances of financial assets and liabilities measured at fair value on a recurring basis at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (dollars in thousands):

Fair Value Measurements at March 31, 2022 using

Fair Value Measurements at March 31, 2023 using

Significant

Quoted Prices in

Other

Significant

Quoted Prices in

Other

Significant

Active Markets for

Observable

Unobservable

Active Markets for

Observable

Unobservable

Identical Assets

Inputs

Identical Assets

Inputs

Level 1

Level 2

Level 3

Balance

Level 1

Level 2

Level 3

Balance

ASSETS

AFS securities:

U.S. government and agency securities

60,702

7,337

68,039

57,906

4,668

—

62,574

Obligations of states and political subdivisions

888,300

—

523,097

—

523,097

Corporate and other bonds⁽¹⁾

183,923

—

152,006

—

152,006

MBS

2,051,373

—

1,513,007

—

1,513,007

Other securities

1,645

—

1,681

—

1,681

LHFS(3)

21,227

—

7,126

—

7,126

Derivatives:

Interest rate contracts

23,506

Fair value hedges

597

Financial Derivatives⁽²⁾

—

73,730

—

73,730

LIABILITIES

Derivatives:

Interest rate contracts

90,632

Fair value hedges

1,397

Financial Derivatives⁽²⁾

—

197,533

—

197,533

⁽¹⁾ Other bonds include asset-backed securities.

⁽²⁾ Includes hedged and non-hedged derivatives.

⁽³⁾Excludes a LHFS measured using a non-recurring basis.

~~-39-~~-41-

Table of Contents


	Fair Value Measurements at December 31, 2021 using								Fair Value Measurements at December 31, 2022 using
			Significant								Significant
	Quoted Prices in		Other		Significant				Quoted Prices in		Other		Significant
	Active Markets for		Observable		Unobservable				Active Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs				Identical Assets		Inputs		Inputs
	Level 1		Level 2		Level 3		Balance		Level 1		Level 2		Level 3		Balance
ASSETS
AFS securities:
U.S. government and agency securities	$	64,474	$	9,375	$	0	$	73,849	$	56,606	$	5,337	$	—	$	61,943
Obligations of states and political subdivisions		0		1,008,396		0		1,008,396		—		807,435		—		807,435
Corporate and other bonds⁽¹⁾		0		153,376		0		153,376		—		226,380		—		226,380
MBS		0		2,244,389		0		2,244,389		—		1,644,394		—		1,644,394
Other securities		0		1,640		0		1,640		—		1,664		—		1,664
LHFS		0		20,861		0		20,861		—		3,936		—		3,936
Derivatives:
Interest rate contracts		0		73,696		0		73,696
Financial Derivatives⁽²⁾										—		80,310		—		80,310

LIABILITIES
Derivatives:
Interest rate contracts	$	0	$	49,051	$	0	$	49,051
Fair value hedges		0		5,387		0		5,387
Financial Derivatives⁽²⁾									$	—	$	236,000	$	—	$	236,000

⁽¹⁾Other bonds include asset-backed securities.

⁽²⁾Includes hedged and non-hedged derivatives.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets are measured at fair value on a nonrecurring basis in accordance with ~~U.S.~~ GAAP. Adjustments to the fair value of these assets usually result from the application of lower-of-cost-or-market accounting or write-downs of individual assets after they are evaluated for impairment. The primary assets accounted for at fair value on a nonrecurring basis are related to foreclosed properties, former bank premises, and collateral-dependent loans that are individually assessed. When the asset is secured by real estate, the Company measures the fair value utilizing an income or market valuation approach based on an appraisal conducted by an independent, licensed appraiser using observable market data. Management may discount the value from the appraisal in determining the fair value if, based on its understanding of the market conditions, the collateral had been impaired below the appraised value (Level 3). The ~~assets for which a nonrecurring fair value measurement was recorded was~~ ~~$11.3~~ ~~million during both the periods ended March 31, 2022 and December 31, 2021. The~~ nonrecurring valuation adjustments for these assets did not have a ~~material~~significant impact on the Company’s consolidated financial statements.

Fair Value of Financial Instruments

ASC 825, Financial Instruments, requires disclosure about fair value of financial instruments for interim periods and excludes certain financial instruments and all non-financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

Cash and Cash Equivalents

For those short-term instruments, the carrying amount is a reasonable estimate of fair value.

HTM Securities

The Company’s HTM investment portfolio is primarily valued using fair value measurements that are considered to be Level ~~2. The Company has contracted~~2, utilizes the same valuation approach as described above with ~~a third-party portfolio accounting service vendor for valuation of its~~the AFS securities portfolio. The vendor’s primary source for security valuation is ICE, which evaluates securities based on market data. ICE utilizes evaluated pricing models that vary by asset class and include available trade, bid, and other market information. Generally, the methodology includes broker quotes, proprietary models, vast descriptive terms and conditions databases, as well as extensive quality control programs.

~~-40-~~

~~Table of Contents~~

The Company primarily uses BVAL, an independent information source that draws on quantitative models and market data contributed from over 4,000 market participants, to validate third party valuations. Any ~~material~~significant differences between valuation sources are researched by further analyzing the various inputs that are utilized by each pricing source. No ~~material~~significant differences were identified during the validation as of March 31, ~~2022~~2023 and December 31, ~~2021.~~ 2022.

The Company’s Level 3 HTM securities are a result of ~~the Access~~a prior acquisition and are comprised of asset-backed securities and municipal bonds. Valuations of the asset-backed securities are provided by a ~~third~~third- party vendor specializing in the SBA markets and are based on underlying loan pool information, market data, and recent trading activity for similar securities. Valuations of the municipal bonds are provided by a third party vendor that specializes in hard-to-value securities and are based on a discounted cash flow model and incorporates considerations for the complexity of the instrument, likelihood it will be called, and credit ratings. The Company reviews the ~~valuation of both security types~~valuations obtained for ~~reasonableness in the context of market conditions and to similar bonds in the Company’s portfolio. Any~~any material differences between valuation sources ~~are researched~~ by ~~further~~ analyzing the various inputs ~~that are~~and results utilized by each pricing source. No ~~material~~significant differences were identified during the validation as of March 31, ~~2022~~2023 and December 31, ~~2021.~~2022.

-42-

Table of Contents

Loans and Leases

The fair value of loans and leases were estimated using an exit price, representing the amount that would be expected to be received if the Company sold the loans and leases. The fair value of performing loans and leases were estimated through use of discounted cash flows. Credit loss assumptions were based on market PD/LGD for loan and lease cohorts. The discount rate was based primarily on recent market origination rates. Fair value of loans and leases individually assessed and their respective levels within the fair value hierarchy are described in the previous section related to fair value measurements of assets that are measured on a nonrecurring basis.

Bank Owned Life Insurance

The carrying value of BOLI approximates fair value. The Company records these policies at their cash surrender value, which is estimated using information provided by insurance carriers.

Deposits

The fair value of demand deposits, savings accounts, brokered deposits, and certain money market deposits is the amount payable on demand at the reporting date. The fair value of certificates of deposits were valued using a discounted cash flow calculation that includes a market rate analysis of the current rates offered by market participants for certificates of deposits that mature in the same period.

Accrued Interest

The carrying amounts of accrued interest approximate fair value.

The carrying values and estimated fair values of the Company’s financial instruments at March 31, 2023 and December 31, 2022 are as follows (dollars in thousands):

Fair Value Measurements at March 31, 2023 using

Quoted Prices

Significant

in Active

Other

Significant

Markets for

Observable

Unobservable

Total Fair

Identical Assets

Inputs

Value

Carrying

Value

Level 1

Level 2

Level 3

Balance

ASSETS

Cash and cash equivalents

372,196

—

372,196

AFS securities

2,252,365

57,906

2,194,459

—

2,252,365

HTM securities

855,418

—

820,007

3,092

823,099

Restricted stock

87,616

—

87,616

—

87,616

LHFS

14,213

—

14,213

—

14,213

LHFI, net of deferred fees and costs

14,584,280

—

14,200,627

Financial Derivatives⁽¹⁾

73,730

—

73,730

—

73,730

Accrued interest receivable

78,088

—

78,088

—

78,088

BOLI

443,537

—

443,537

—

443,537

LIABILITIES

Deposits

16,455,910

—

16,455,439

—

16,455,439

Borrowings

798,910

—

735,301

—

735,301

Accrued interest payable

10,392

—

10,392

—

10,392

Financial Derivatives⁽¹⁾

197,533

—

197,533

—

197,533

⁽¹⁾ Includes hedged and non-hedged derivatives.

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Table of Contents


	Fair Value Measurements at December 31, 2022 using
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable		Total Fair
			Identical Assets		Inputs		Inputs		Value
	Carrying
	Value		Level 1		Level 2		Level 3		Balance
ASSETS
Cash and cash equivalents	$	319,948	$	319,948	$	—	$	—	$	319,948
AFS securities		2,741,816		56,606		2,685,210		—		2,741,816
HTM securities		847,732		—		798,778		3,109		801,887
Restricted stock		120,213		—		120,213		—		120,213
LHFS		3,936		—		3,936		—		3,936
LHFI, net of deferred fees and costs		14,449,142		—		—		13,974,926		13,974,926
Financial Derivatives⁽¹⁾		80,310		—		80,310		—		80,310
Accrued interest receivable		81,953		—		81,953		—		81,953
BOLI		440,656		—		440,656		—		440,656

LIABILITIES
Deposits	$	15,931,677	$	—	$	15,927,361	$	—	$	15,927,361
Borrowings		1,708,700		—		1,645,095		—		1,645,095
Accrued interest payable		5,268		—		5,268		—		5,268
Financial Derivatives⁽¹⁾		236,000		—		236,000		—		236,000

~~The carrying values~~⁽¹⁾ Includes hedged and ~~estimated fair values of the Company’s financial instruments at March 31, 2022 and December 31, 2021 are as follows (dollars in thousands):~~non-hedged derivatives.

Fair Value Measurements at March 31, 2022 using




Quoted Prices

Significant




in Active

Other

Significant

Markets for

Observable

Unobservable

Total Fair

Identical Assets

Inputs

Inputs

Value

Carrying

Value

Level 1

Level 2

Level 3

Balance
ASSETS

Cash and cash equivalents

$
396,303

$
396,303

$
0

$
0

$
396,303
AFS securities

3,193,280

60,702

3,132,578

0

3,193,280
HTM securities

756,872

0

753,401

6,776

760,177
Restricted stock

77,033

0

77,033

0

77,033
LHFS

21,227

0

21,227

0

21,227
Net loans

13,356,758

0

0

13,122,875

13,122,875
Derivatives:










Interest rate contracts

23,506

0

23,506

0

23,506
Fair value hedges

597

0

597

0

597
Accrued interest receivable

62,852

0

62,852

0

62,852
BOLI

434,012

0

434,012

0

434,012

LIABILITIES










Deposits

$
16,484,223

$
0

$
16,499,674

$
0

$
16,499,674
Borrowings

504,032

0

488,385

0

488,385
Accrued interest payable

2,774

0

2,774

0

2,774
Derivatives:










Interest rate contracts

90,632

0

90,632

0

90,632
Fair value hedges

1,397

0

1,397

0

1,397

Fair Value Measurements at December 31, 2021 using

Quoted Prices

Significant

in Active

Other

Significant

Markets for

Observable

Unobservable

Total Fair

Identical Assets

Inputs

Inputs

Value

Carrying

Value

Level 1

Level 2

Level 3

Balance
ASSETS

Cash and cash equivalents

$
802,501

$
802,501

$
0

$
0

$
802,501
AFS securities

3,481,650

64,474

3,417,176

0

3,481,650
HTM securities

628,000

0

686,733

7,041

693,774
Restricted stock

76,825

0

76,825

0

76,825
LHFS

20,861

0

20,861

0

20,861
Net loans

13,096,056

0

0

12,861,274

12,861,274
Derivatives:










Interest rate contracts

73,696

0

73,696

0

73,696
Accrued interest receivable

65,015

0

65,015

0

65,015
BOLI

431,517

0

431,517

0

431,517

LIABILITIES










Deposits

$
16,611,068

$
0

$
16,630,087

$
0

$
16,630,087
Borrowings

506,594

0

488,796

0

488,796
Accrued interest payable

933

0

933

0

933
Derivatives:










Interest rate contracts

49,051

0

49,051

0

49,051
Fair value hedges

5,387

0

5,387

0

5,387

~~-42-~~

~~Table of Contents~~

The Company assumes interest rate risk (the risk that general interest rate levels will change) as a result of its normal operations. As a result, the fair values of the Company’s financial instruments will change when interest rate levels change and that change may be either favorable or unfavorable to the Company. Management attempts to match maturities of assets and liabilities to the extent believed necessary to minimize interest rate risk. Borrowers with fixed rate obligations, however, are less likely to prepay in a rising rate environment and more likely to prepay in a falling rate environment. Conversely, depositors who are receiving fixed rates are more likely to withdraw funds before maturity in a rising rate environment and less likely to do so in a falling rate environment. Management monitors rates and maturities of assets and liabilities and attempts to minimize interest rate risk by adjusting terms of new loans and deposits and by investing in securities with terms that mitigate the Company’s overall interest rate risk.

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Table of Contents

11. ~~REVENUE~~

The majority of the Company’s noninterest income comes from short term contracts associated with fees for services provided on deposit accounts, credit cards, and wealth management accounts and is being accounted for in accordance with Topic 606. Typically, the duration of a contract does not extend beyond the services performed; therefore, the Company concluded that discussion regarding contract balances is immaterial.

The Company’s performance obligations on revenue from interchange fees and deposit accounts are generally satisfied immediately, when the transaction occurs, or by month-end. Performance obligations on revenue from fiduciary and asset management fees are generally satisfied monthly or quarterly. For a majority of fee income on deposit accounts, the Company is a principal, controlling the promised good or service before transferring it to the customer. For the majority of income related to wealth management income, the Company is an agent, responsible for arranging for the provision of goods and services by another party.

Mortgage banking income is earned when the originated loans are sold to an investor on the secondary market. The loans are classified as LHFS prior to being sold. Additionally, the changes in fair value of the LHFS, loan commitments, and related derivatives are included in mortgage banking income.

~~Noninterest income disaggregated by major source for the three months ended March 31, 2022 and 2021, consisted of the following (dollars in thousands):~~

Three Months Ended

March 31,

March 31,

2022

2021
Noninterest income:




Deposit Service Charges ⁽¹⁾:




Overdraft fees

$
4,994

$
3,081
Maintenance fees & other

2,602

2,428
Other service charges, commissions, and fees ⁽¹⁾

1,655

1,701
Interchange fees⁽¹⁾

1,810

1,847
Fiduciary and asset management fees ⁽¹⁾:

Trust asset management fees

3,391

2,908
Registered advisor management fees

2,660

2,327
Brokerage management fees

1,204

1,240
Mortgage banking income

3,117

8,255
Bank owned life insurance income

2,697

2,265
Loan-related interest rate swap fees

3,860

1,754
Other operating income

2,163

3,179
Total noninterest income

$
30,153

$
30,985

⁽¹⁾~~Income within scope of Topic 606.~~

~~-44-~~

~~Table of Contents~~

~~12.~~ EARNINGS PER SHARE

Basic EPS is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS is computed using the weighted average number of common shares outstanding during the period, including the effect of dilutive potential common shares outstanding attributable to stock awards.

The following table presents basic and diluted EPS calculations for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 (dollars in thousands except per share data):


	Three Months Ended				Three Months Ended
	March 31,				March 31,
	2022		2021		2023		2022
Net Income:
Net Income	$	43,690	$	56,189	$	35,653	$	43,690
Less: Preferred Stock Dividends		2,967		2,967		2,967		2,967
Net income available to common shareholders	$	40,723	$	53,222	$	32,686	$	40,723


Weighted average shares outstanding, basic		75,545		78,863		74,832		75,545
Dilutive effect of stock awards		11		21		3		11
Weighted average shares outstanding, diluted		75,556		78,884		74,835		75,556

Earnings per common share, basic	$	0.54	$	0.67	$	0.44	$	0.54
Earnings per common share, diluted	$	0.54	$	0.67	$	0.44	$	0.54

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Table of Contents

12. SEGMENT REPORTING AND REVENUE

Operating Segments

Prior to the third quarter of 2022, the Company had one reportable operating segment, the Bank; however, in the third quarter of 2022, the Company completed system conversions that allow its chief operating decision makers to evaluate the business, establish the overall business strategy, allocate resources, and assess business performance within two reportable operating segments—Wholesale Banking and Consumer Banking—while corporate support functions such as corporate treasury and others will be included in Corporate Other. As a result, the Company restated its segment information for the three months ended March 31, 2022 and under the new basis with two reportable operating segments.

Effective January 1, 2023, the Company made an organizational change to move certain lines of business in the wealth management division that primarily serve Wholesale Banking customers from the Consumer Banking segment to the Wholesale Banking segment. As a result, the Company re-allocated $9.6 million of goodwill from the Consumer Banking segment to the Wholesale Banking segment and restated its prior segment information for the year ended December 31, 2022, based on this organizational change. Goodwill was evaluated for impairment prior to and immediately following the organizational change. Refer to Note 4 “Goodwill and Intangible Assets” within this Item 1 “Financial Statements” of this Quarterly Report for additional information.

As of March 31, 2023, the Company’s operating segments include the following:

●

Wholesale Banking: The Wholesale Banking segment provides loan and deposit services, as well as treasury management, SBA lending, and capital market services to wholesale customers primarily throughout Virginia, Maryland, North Carolina, and South Carolina. These customers include commercial real estate and commercial and industrial customers. This segment also includes the Company’s public finance subsidiary and the equipment finance subsidiary, which has nationwide exposure. The private banking and trust businesses also reside in the Wholesale Banking segment.

●

Consumer Banking: The Consumer Banking segment provides loan and deposit services to consumers and small businesses throughout Virginia, Maryland, and North Carolina. Consumer Banking includes the home loan division and investment management and advisory services businesses.

●

Corporate Other: Corporate Other includes the Company’s Corporate Treasury functions, such as management of the investment securities portfolio, long-term debt, short-term liquidity and funding activities, balance sheet risk management, and other corporate support functions, as well as intercompany eliminations.

Segment Reporting Methodology

The Company’s segment reporting is based on a “management approach” as described in Note 1 “Summary of Significant Accounting Policies” of the Company’s 2022 Form 10-K. Inter-segment transactions are recorded at cost and eliminated as part of the consolidation process. A management fee for operations and administrative support services is charged to all subsidiaries and eliminated in the consolidated totals. For additional information on the methodologies used in preparing the operating segment results, refer to Note 17 “Segment Reporting and Revenue” in the Company’s 2022 Form 10-K.

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Table of Contents

Segment Results

The following tables present the Company’s operating segment results for the three months ended March 31, 2023 and 2022 (dollars in thousands):


	Wholesale Banking		Consumer Banking		Corporate Other		Total
Three Months Ended March 31, 2023
Net interest income	$	67,540	$	63,145	$	22,758	$	153,443
Provision for credit losses		10,487		1,340		23		11,850
Net interest income after provision for credit losses		57,053		61,805		22,735		141,593
Noninterest income		7,414		12,178		(9,964)		9,628
Noninterest expenses		42,314		57,055		8,905		108,274
Income before income taxes	$	22,153	$	16,928	$	3,866	$	42,947
Three Months Ended March 31, 2022
Net interest income	$	71,424	$	48,132	$	11,375	$	130,931
Provision for credit losses		1,617		1,183		—		2,800
Net interest income after provision for credit losses		69,807		46,949		11,375		128,131
Noninterest income		9,187		16,619		4,347		30,153
Noninterest expenses		40,008		55,333		9,980		105,321
Income before income taxes	$	38,986	$	8,235	$	5,742	$	52,963

The following table presents the Company’s operating segment results for key balance sheet metrics as of March 31, 2023 and December 31, 2022 (dollars in thousands):


	Wholesale Banking		Consumer Banking		Corporate Other		Total
As of March 31, 2023
LHFI, net of deferred fees and costs ⁽¹⁾	$	11,608,884	$	2,991,423	$	(16,027)	$	14,584,280
Goodwill		639,180		286,031		—		925,211
Deposits		6,164,567		9,843,565		447,778		16,455,910
As of December 31, 2022
LHFI, net of deferred fees and costs ⁽¹⁾⁽²⁾	$	11,476,258	$	2,990,017	$	(17,133)	$	14,449,142
Goodwill ⁽³⁾		639,180		286,031		—		925,211
Deposits ⁽⁴⁾		6,128,729		9,724,598		78,350		15,931,677

⁽¹⁾Corporate Other includes acquisition accounting fair value adjustments.

⁽²⁾Wholesale Banking includes a $136.6 million reallocation from Consumer Banking due to the January 1, 2023 organizational change discussed above.

⁽³⁾Wholesale Banking includes a $9.6 million reallocation from Consumer Banking due to the January 1, 2023 organizational change discussed above.

⁽⁴⁾Wholesale Banking includes a $258.7 million reallocation from Consumer Banking due to the January 1, 2023 organizational change discussed above.

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Revenue

The majority of the Company’s noninterest income is being accounted for in accordance with ASC 606, Revenue from Contracts with Customers and comes from short term contracts associated with fees for services provided on deposit accounts and credit cards from the Consumer and Wholesale Banking segments, as well as fiduciary and asset management fees from the Consumer Banking and Wholesale Banking segments. Refer to Note 17 “Segment Reporting and Revenue” in the Company’s 2022 Form 10-K for additional information on the Company’s contract balances, performance obligations, and mortgage banking income.

Noninterest income disaggregated by major source for the three months ended March 31, 2023 and 2022, consisted of the following (dollars in thousands):


	Three Months Ended
	March 31,		March 31,
	2023		2022
Noninterest income:
Deposit Service Charges ⁽¹⁾:
Overdraft fees	$	4,823	$	4,994
Maintenance fees & other		3,079		2,602
Other service charges, commissions, and fees ⁽¹⁾		1,746		1,655
Interchange fees⁽¹⁾		2,325		1,810
Fiduciary and asset management fees ⁽¹⁾:
Trust asset management fees		3,107		3,391
Registered advisor management fees		—		2,660
Brokerage management fees		1,155		1,204
Mortgage banking income		854		3,117
Loss on sale of securities		(13,400)		—
Bank owned life insurance income		2,828		2,697
Loan-related interest rate swap fees		1,439		3,860
Other operating income		1,672		2,163
Total noninterest income	$	9,628	$	30,153

⁽¹⁾Income within scope of ASC 606, Revenue from Contracts with Customers.

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The following tables present noninterest income disaggregated by reportable operating segment for the three months ended March 31, 2023 and 2022 (dollars in thousands):


	Wholesale Banking		Consumer Banking		Corporate Other ⁽¹⁾		Total
Three Months Ended March 31, 2023
Noninterest income:
Deposit service charges	$	1,975	$	5,927	$	—	$	7,902
Other service charges and fees		445		1,301		—		1,746
Fiduciary and asset management fees		3,035		1,227		—		4,262
Mortgage banking income		—		854		—		854
Other income		1,959		2,869		(9,964)		(5,136)
Total noninterest income	$	7,414	$	12,178	$	(9,964)	$	9,628
Three Months Ended March 31, 2022
Noninterest income:
Deposit service charges	$	1,565	$	6,031	$	—	$	7,596
Other service charges and fees		435		1,220		—		1,655
Fiduciary and asset management fees		3,316		3,939		—		7,255
Mortgage banking income		—		3,117		—		3,117
Other income		3,871		2,312		4,347		10,530
Total noninterest income	$	9,187	$	16,619	$	4,347	$	30,153

⁽¹⁾ For the three months ended March 31, 2023, other income includes $13.4 million of losses incurred on the sale of AFS securities. In addition to the loss on sale of AFS securities, other income primarily consists of income from BOLI and equity method investments.

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13. SUBSEQUENT EVENTS

The Company’s management has evaluated subsequent events through May ~~5, 2022,~~4, 2023, the date the financial statements were issued.

On May ~~3, 2022,~~2, 2023, the Company’s Board of Directors declared a quarterly dividend on the outstanding shares of its Series A preferred stock. The Series A preferred stock is represented by depositary shares, each representing a 1/400^th ownership interest in a share of Series A preferred stock. The dividend of $171.88 per share (equivalent to $0.43 per outstanding depositary share) is payable on June 1, ~~2022~~2023 to preferred shareholders of record as of May 17, ~~2022.~~2023.

The Company’s Board of Directors also declared a quarterly dividend of ~~$0.28~~$0.30 per share of common stock. The common stock dividend is payable on June ~~3, 2022~~2, 2023 to common shareholders of record as of May ~~20, 2022.~~19, 2023.

~~As discussed in Note 9 “Stockholders’ Equity,” the Company has an active Repurchase Program. Subsequent to the quarter ended March 31, 2022, as part of the Repurchase Program, approximately~~ ~~524,000 shares (or $18.9~~ ~~million) were repurchased between April 1, 2022 and May 4, 2022. As of May 4, 2022, the Company is authorized under the Repurchase Program to repurchase approximately~~ ~~$56.1 million of additional shares of the Company’s common stock.~~

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Atlantic Union Bankshares Corporation

Results of Review of Interim Financial Statements

We have reviewed the accompanying consolidated balance sheet of Atlantic Union Bankshares Corporation (the Company) as of March 31, ~~2022,~~2023, the related consolidated statements of income, comprehensive income, and stockholders’ equity for the three-month periods ended March 31, ~~2022~~2023 and ~~2021,~~2022, the consolidated statements of changes in cash flows for the three-month periods ended March 31, ~~2022~~2023 and ~~2021,~~2022, and the related notes (collectively referred to as the “consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, ~~2021,~~2022, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes (not presented herein); and in our report dated February ~~25, 2022,~~23, 2023, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, ~~2021,~~2022, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

These financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ Ernst & Young LLP

Richmond, Virginia

May ~~5, 2022~~4, 2023

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ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis is presented to aid the reader in understanding and evaluating the ~~financial condition and~~ results of operations, financial condition, liquidity, and capital resources of the ~~Company.~~Company and its subsidiaries. This discussion and analysis should be read in conjunction with the Company’s consolidated financial statements, the notes to the financial statements, and the other financial data included in this report, as well as the Company’s ~~2021~~2022 Form 10-K, including ~~the~~under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section therein. Highlighted in the discussion are material changes from prior reporting periods and identifiable trends materially affecting the Company. Results of operations for the interim periods are not necessarily indicative of results that may be expected for the full year or for any other period. Amounts are rounded for presentation purposes; however, some of the percentages presented are computed based on unrounded amounts.

In management’s discussion and analysis, the Company provides certain financial information determined by methods other than in accordance with ~~U.S.~~ GAAP. These non-GAAP financial measures are a supplement to GAAP, which is used to prepare the Company’s financial statements, and should not be considered in isolation or as a substitute for comparable measures calculated in accordance with GAAP. In addition, the Company’s non-GAAP financial measures may not be comparable to non-GAAP financial measures of other companies. The Company uses the non-GAAP financial measures discussed herein in its analysis of the Company’s performance. The Company’s management believes that these non-GAAP financial measures provide additional understanding of ongoing operations, enhance comparability of results of operations with prior periods and show the effects of significant gains and charges in the periods presented without the impact of items or events that may obscure trends in the Company’s underlying performance. Non-GAAP financial measures may be identified with the symbol ⁽⁺⁾ and may be labeled as adjusted. Refer to the “Non-GAAP Financial Measures” section within this Item 2 for more information about these non-GAAP financial measures, including a reconciliation of these measures to the most directly comparable GAAP financial ~~measures in accordance with GAAP.~~measures.

FORWARD-LOOKING STATEMENTS

Certain statements in this report may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that include, without limitation, statements regarding our expectations with regard to our business, financial and operating results, including our deposit base and funding and the impact of future economic conditions, anticipated changes in the interest rate environments and ~~potential~~the related impacts on the Company’s net interest margin, ~~future~~changes in economic conditions, management’s belief regarding liquidity and capital resources, estimates with respect to the ~~impacts of the COVID-19 pandemic,~~earn back period related to our recent balance sheet repositioning, and statements that include other projections, predictions, expectations, or beliefs about future events or results or otherwise are not statements of historical fact. Such forward-looking statements are based on certain assumptions as of the time they are made, and are inherently subject to known and unknown risks, uncertainties, and other factors, some of which cannot be predicted or quantified, that may cause actual results, performance, or achievements to be materially different from those expressed or implied by such forward-looking statements. Forward-looking statements are often characterized by the use of qualified words (and their derivatives) such as “expect,” “believe,” “estimate,” “plan,” “project,” “anticipate,” “intend,” “will,” “may,” “view,” “opportunity,” “potential,” “continue,” “confidence,” or words of similar meaning or other statements concerning opinions or judgment of the Company and ~~its~~our management about future events. Although ~~the Company believes~~we believe that ~~its~~our expectations with respect to forward-looking statements are based upon reasonable assumptions within the bounds of ~~its~~our existing knowledge of ~~its~~our business and operations, there can be no assurance that actual future results, performance, or achievements of, or trends affecting, ~~the Company~~us will not differ materially from any projected future results, performance, achievements or trends expressed or implied by such forward-looking statements. Actual future results, performance, achievements or trends may differ materially from historical results or those anticipated depending on a variety of factors, including, but not limited to, the effects of or changes in:

●

market interest ~~rates;~~rates and ~~the~~their related impacts on macroeconomic conditions, customer and client behavior, our funding costs and ~~the Company’s funding costs;~~our loan and securities portfolios;

●

~~higher~~ inflation and its ~~impacts;~~impacts on economic growth and customer and client behavior;

●

adverse developments in the financial industry generally, such as the recent bank failures, responsive measures to mitigate and manage such developments, related supervisory and regulatory actions and costs, and related impacts on customer and client behavior;

●

the sufficiency of liquidity;

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●

general economic and financial market conditions, in the United States generally and particularly in the markets in which ~~the Company operates~~we operate and which ~~its~~our loans are concentrated, including the effects of declines in real estate values, an increase in unemployment levels and slowdowns in economic ~~growth,~~growth;

●

monetary and fiscal policies of the U.S. government, including ~~as a result~~policies of ~~COVID-19;~~the U.S. Department of the Treasury and the Federal Reserve;

●

the quality or composition of ~~the~~our loan or investment portfolios and changes therein;

●

demand for loan products and financial services in ~~the Company’s~~our market ~~area;~~areas;

●

~~the Company’s~~our ability to manage ~~its~~our growth or implement ~~its~~our growth strategy;

●

the effectiveness of expense reduction plans;

●

the introduction of new lines of business or new products and services;

●

~~the Company’s~~our ability to recruit and retain key employees;

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●

real estate values in ~~the Bank’s~~our lending area;

●

~~an insufficient ACL;~~

●

changes in accounting principles, ~~including, without limitation, relating to~~standards, rules, and interpretations, and the ~~CECL methodology;~~related impact on our financial statements;

●

an insufficient ACL or volatility in the ~~Company’s~~ACL resulting from the CECL methodology, either alone or as that may be affected by inflation, changing interest rates, or other factors;

●

our liquidity and capital positions;

●

concentrations of loans secured by real estate, particularly commercial real estate;

●

the effectiveness of ~~the Company’s~~our credit processes and management of ~~the Company’s~~our credit risk;

●

~~the Company’s~~our ability to compete in the market for financial services and increased competition from fintech companies;

●

technological risks and developments, and cyber threats, attacks, or events;

●

operational, technological, cultural, regulatory, legal, credit, and other risks associated with the exploration, consummation and integration of potential future acquisitions, whether involving stock or cash considerations;

●

the potential adverse effects of unusual and infrequently occurring events, such as weather-related disasters, terrorist acts, geopolitical conflicts ~~(such as the ongoing conflict between Russia and Ukraine)~~ or public health events, ~~(such as COVID-19),~~ and of governmental and societal responses thereto; these potential adverse effects may include, without limitation, adverse effects on the ability of ~~the Company's~~our borrowers to satisfy their obligations to ~~the Company,~~us, on the value of collateral securing loans, on the demand for the ~~Company's~~our loans or ~~its~~our other products and services, on supply chains and methods used to distribute products and services, on incidents of cyberattack and fraud, on ~~the Company’s~~our liquidity or capital positions, on risks posed by reliance on third-party service providers, on other aspects of ~~the Company's~~our business operations and on financial markets and economic growth;

●

the effect of steps the Company takes in response to COVID-19, the severity and duration of the pandemic, the uncertainty regarding new variants of COVID-19 that have emerged, the speed and efficacy of vaccine and treatment developments, the impact of loosening or tightening of government restrictions, the pace of recovery when the pandemic subsides and the heightened impact it has on many of the risks described herein;

●

the discontinuation of LIBOR and its impact on the financial markets, and ~~the Company’s~~our ability to manage operational, legal, and compliance risks related to the discontinuation of LIBOR and implementation of one or more alternate reference ~~rates,~~rates;

●

performance by ~~the Company’s~~our counterparties or vendors;

●

deposit flows;

●

the availability of financing and the terms thereof;

●

the level of prepayments on loans and ~~MBS;~~mortgage-backed securities;

●

legislative or regulatory changes and ~~requirements, including the impact of the CARES Act, as amended by the CAA, and other legislative and regulatory reactions to COVID-19;~~requirements;

●

actual or potential claims, damages, and fines related to litigation or government actions, ~~including litigation or actions arising from the Company’s participation~~which may result in, ~~and administration of programs related to COVID-19, including,~~ among other things, ~~under the CARES Act, as amended by the CAA, and~~additional costs, fines, penalties, restrictions on our business activities, reputational harm, or other ~~legislative and regulatory reactions to COVID-19;~~adverse consequences;

●

the effects of changes in federal, state or local tax laws and regulations;

●

~~monetary and fiscal policies~~any event or development that would cause us to conclude that there was an impairment of ~~the U.S. government,~~any asset, including ~~policies of the U.S. Department of the Treasury and the Federal Reserve;~~

●

~~changes to applicable accounting principles and guidelines;~~intangible assets, such as goodwill; and

●

other factors, many of which are beyond ~~the control of the Company.~~our control.

Please also refer to ~~the~~such other factors as discussed throughout Part I, Item 1A, “Risk Factors” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” ~~sections~~ of the ~~2021~~2022 Form 10-K and related disclosures in other filings, which have been filed with the SEC and are available on the SEC’s website at www.sec.gov. All risk factors and uncertainties described herein and therein should be considered in evaluating forward-looking statements, and all of the forward-looking statements made in this report are expressly qualified by the cautionary statements contained or referred to ~~in this Quarterly Report.~~herein and therein. The actual results or developments anticipated may not be realized or, even if substantially realized, they may not have the expected consequences to or effects on the Company or ~~its~~our businesses or operations. Readers are cautioned not to rely too heavily on the forward-looking statements contained in this Quarterly Report, and undue reliance should not be placed on such forward-looking statements. Forward-looking statements speak only as of the date they are ~~made, and the Company does~~made.

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We do not intend or assume any obligation to update, revise or clarify any forward-looking statements that may be made from time to time by or on behalf of the Company, whether as a result of new information, future events or otherwise.

CRITICAL ACCOUNTING ~~POLICIES AND~~ ESTIMATES

The Company’s consolidated financial statements are prepared based on the application of accounting and reporting policies ~~of the Company are~~ in accordance with ~~U.S.~~ GAAP and conform to general practices within the banking industry. The Company’s financial position and results of operations are affected by management’s application of accounting policies, ~~including~~which require the use of estimates, assumptions, and judgments, ~~made~~which may prove inaccurate or are subject to ~~arrive at the carrying value of~~

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~~assets and liabilities and amounts reported for revenues, expenses, and related disclosures. Different~~variations. Changes in underlying factors, estimates, assumptions ~~in the application of these policies~~or judgements could result in material changes in the Company’s consolidated financial position and/or results of operations.

Certain accounting policies inherently have a greater reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. The Company has identified the allowance for loan and lease losses and fair value measurements as accounting policies that require the most difficult, subjective or complex judgments and, as such, could be most subject to revision as new or additional information becomes available or circumstances change. Therefore, the Company evaluates ~~its~~these accounting policies and related critical accounting estimates ~~and assumptions~~ on an ongoing basis and updates them as needed. Management has discussed ~~the Company’s critical~~these accounting policies and critical accounting estimates summarized below with the Audit Committee of the Board of ~~Directors of the Company.~~Directors.

The Company provides additional information on its critical accounting estimates in Note 1 “Summary of Significant Accounting Policies” in Part I, Item 1 of this Quarterly Report and ~~reporting policies include the Company’s accounting for the ALLL, acquired loans,~~under “Management’s Discussion and ~~goodwill.~~Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” in its 2022 Form 10-K. The ~~Company’s accounting policies are fundamental to understanding the Company’s consolidated financial position and consolidated results of operations. Accordingly, the~~ Company’s significant accounting policies are discussed in detail in Note 1 “Summary of Significant Accounting Policies” in the “Notes to the Consolidated Financial Statements” contained in Item 8 "Financial Statements and Supplementary Data" of the Company’s ~~2021~~2022 Form 10-K.

The Company provides additional information on its critical accounting policies and estimates under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” in its 2021 Form 10-K and in Note 1 “Summary of Significant Accounting Policies” in Part I, Item 1 of this Quarterly Report.

RECENT ACCOUNTING PRONOUNCEMENTS (ISSUED BUT NOT FULLY ADOPTED)

In March ~~2022,~~2023, the FASB issued ASU No. ~~2022-02~~ 2023-02 ~~“Financial Instruments-~~Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit ~~Losses (Topic 326): Troubled Debt Restructurings~~Structures Using the Proportional Amortization Method. Prior to the issuance of ASU 2023-02, companies could only apply the proportional amortization method to low-income-housing tax credit structures. Topic 323 allows for the expansion of use of the proportional amortization method to all tax equity investments that meet certain conditions. Under the proportional amortization method, the initial cost of the investment is amortized in proportion to the income tax credits and ~~Vintage Disclosures.”~~ ~~This guidance eliminates the accounting guidance for TDRs by creditors, while enhancing disclosure requirements for certain loan refinancings~~other income tax benefits received and ~~restructurings by creditors when~~presents this net amount as a ~~borrower is experiencing financial difficulty. In addition, for public business entities, the amendments require disclosure~~component of ~~current period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20.~~income tax expense (benefit). The amendments are effective for fiscal years beginning after December 15, ~~2022,~~2023, including interim periods within those fiscal years. Early adoption ~~of the amendments~~ is ~~permitted if ASU 2016-13 has been adopted, including adoption in an interim period.~~permitted. The Company is evaluating the impact ASU No. ~~2022-02~~2023-02 will have on its consolidated financial statements.

~~In March 2022, the FASB issued ASU No. 2022-01~~ ~~“Derivatives and Hedging (Topic 815): Fair Value Hedging- Portfolio Layer Method”~~ to allow nonprepayable financial assets to be included in a closed portfolio hedge using the portfolio layer method and to allow multiple hedged layers to be designated for a single closed portfolio of financial assets or one or more beneficial interests secured by a portfolio of financial instruments. The amendments are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption of the amendments is permitted if the amendments in ASU 2017-12 have been adopted for the corresponding period. The Company is evaluating the impact ASU No. 2022-01 will have on its consolidated financial statements.

~~In March 2020, the FASB issued ASU No. 2020-04~~ ~~“Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.”~~ This guidance provides temporary, optional guidance to ease the potential burden in accounting for reference rate reform associated with the LIBOR transition. LIBOR and other interbank offered rates are widely used benchmark or reference rates that have been used in the valuation of loans, derivatives, and other financial contracts. Global capital markets are going to be required to move away from LIBOR and other interbank offered rates and toward rates that are more observable or transaction based and less susceptible to manipulation. Topic 848 provides optional expedients and exceptions, subject to meeting certain criteria, for applying current GAAP to contract modifications and hedging relationships, for contracts that reference LIBOR or another reference rate expected to be discontinued. Topic 848 is intended to help stakeholders during the global market-wide reference rate transition period. The amendments are effective as of March 12, 2020 through December 31, 2022 and can be adopted at an instrument level. As of March 31, 2021, the Company utilized the expedient to assert probability of hedged interest as detailed in Note 1 “Summary of Significant Accounting Policies” in the “Notes to the Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” of the Company’s 2021 Form 10-K. The Company may incorporate other components of Topic 848 at a later date as it continues to evaluate the remaining components of Topic 848 and its impact to the Company.

ABOUT ATLANTIC UNION BANKSHARES CORPORATION

Headquartered in Richmond, Virginia, Atlantic Union Bankshares Corporation ~~(Nasdaq: AUB)~~(NYSE: AUB) is the holding company for Atlantic Union Bank. Atlantic Union Bank has ~~114~~109 branches and approximately ~~130~~125 ATMs located throughout Virginia and in

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portions of Maryland and North Carolina. Certain non-bank financial services affiliates of Atlantic Union Bank include: Atlantic Union Equipment Finance, Inc., which provides equipment financing; ~~Dixon, Hubard, Feinour & Brown, Inc., which provides investment advisory services;~~ Atlantic Union Financial Consultants, LLC, which provides brokerage services; and Union Insurance Group, LLC, which offers various lines of insurance products.

Shares of the Company’s common stock are traded on the ~~Nasdaq Global Select Market~~ New York Stock Exchange under the symbol "AUB". Additional information is available on the Company’s website at https://investors.atlanticunionbank.com. The information contained on the Company’s website is not a part of or incorporated into this Quarterly Report.

~~RESULTS OF OPERATIONS~~

~~SIGNIFICANT ACTIVITIES~~

~~Strategic Initiatives~~

During the fourth quarter of 2021, the Company took certain actions to reduce expenses in light of the period's prevailing and expected operating environment, including the closure of the Company’s operations center and consolidation of 16 branches, all of which were completed in March 2022. These actions resulted in restructuring expenses in the first quarter of 2022 of approximately $5.5 million, compared to $16.5 million in the quarter ended December 31, 2021. Restructuring expenses in the first quarter of 2022 primarily related to lease and other asset write downs, as well as severance costs.

~~Share Repurchase Program~~

On December 10, 2021, the Company’s Board of Directors authorized a share repurchase program to purchase up to $100.0 million of the Company’s common stock through December 9, 2022 in open market transactions or privately negotiated transactions, including pursuant to a trading plan in accordance with Rule 10b5-1 and / or Rule 10b-18 under the Exchange Act. As part of the Repurchase Program, approximately 630,000 shares (or $25.0 million) were repurchased during the quarter ended March 31, 2022, and no shares were repurchased during the quarter ended December 31, 2021.

~~COVID-19 UPDATE~~

The Company’s financial performance generally, and in particular the ability of its borrowers to repay their loans, the value of collateral securing those loans, as well as demand for loans and other products and services the Company offers, is highly dependent on the business environment in its primary markets where it operates and in the United States as a whole. COVID has had, and may have in the future, a wide range of economic impacts nationally and in the Company’s primary markets. The Company will carefully monitor any future economic impacts attributable to the COVID-19 pandemic and potential impact on the Company’s borrowers and their ability to repay loans.

Since the start of the pandemic, the Company has taken and is continuing to take precautions to protect the safety and well-being of the Bank’s employees and customers during COVID-19. The Bank has implemented additional safety policies and procedures and follows guidance issued by the Centers for Disease Control and Prevention, state health authorities, and state and local executive orders where our branches and corporate offices are located. The Bank remains very focused on the safety and well-being of its employees and customers during COVID-19 and is committed to safely and responsibly operating its branch network and maintaining appropriate staffing in each branch.

COVID-19 has adversely affected the Company’s business, financial condition, and results of operations since the first quarter of 2020. The duration, nature and severity of future impacts of COVID-19 on the Company’s operational and financial performance will depend on future developments with respect to COVID-19, many of which remain highly uncertain and cannot be predicted.

~~SUMMARY OF QUARTERLY FINANCIAL RESULTS~~

~~Net Income and Performance Metrics~~

●

~~Net income available to common shareholders was $40.7 million and basic and diluted EPS was $0.54 for the first quarter of 2022, compared to $53.2 million and $0.67 for the first quarter of 2021.~~

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●

~~Adjusted operating earnings available to common shareholders~~⁽⁺⁾ ~~totaled $45.1 million and diluted adjusted operating EPS~~⁽⁺⁾ ~~was $0.60 for the first quarter of 2022, compared to adjusted operating earnings available to common shareholders~~⁽⁺⁾ ~~of $65.5 million and diluted adjusted operating EPS~~⁽⁺⁾ ~~of $0.83 for the first quarter of 2021.~~

~~Balance Sheet~~

●

At March 31, 2022, total assets were $19.8 billion, a decrease of $282.4 million or approximately 5.7% (annualized) from December 31, 2021. Total assets declined from the prior quarter due to a decrease in cash and cash equivalents of $406.2 million primarily related to the deployment of excess liquidity to fund loan growth and deposit run-off. In addition, the investment securities portfolio decreased $159.5 million primarily due to a decline in the market value of the AFS securities portfolio.

●

~~LHFI (net of deferred fees and costs) were $13.5 billion, including $67.4 million in PPP loans at March 31, 2022, an increase of $263.5 million or 8.1% (annualized) from December 31,~~ ~~2021. Excluding the impact of the PPP~~⁽⁺⁾~~, LHFI (net of deferred fees and costs) increased $346.4 million or 10.8% (annualized) during this period.~~

●

~~Total deposits were $16.5 billion at March 31, 2022, a decrease of $126.8 million or 3.1% (annualized) from December 31, 2021.~~

~~Net Interest Income~~

For the Three Months Ended

March 31,


2022

2021

Change


(Dollars in thousands)

Average interest-earning assets

$
17,885,018

$
17,692,095

$
192,923


Interest and dividend income

$
138,456

$
147,673

$
(9,217)


Interest and dividend income (FTE) ⁽⁺⁾

$
141,792

$
150,726

$
(8,934)


Yield on interest-earning assets

3.14
%

3.39
%

(25)

bps
Yield on interest-earning assets (FTE) ⁽⁺⁾

3.22
%

3.46
%

(24)

bps
Average interest-bearing liabilities

$
11,797,999

$
12,065,807

$
(267,808)


Interest expense

$
7,525

$
12,775

$
(5,250)


Cost of interest-bearing liabilities

0.26
%

0.43
%

(17)

bps
Cost of funds

0.18
%

0.30
%

(12)

bps
Net interest income

$
130,931

$
134,898

$
(3,967)


Net interest income (FTE) ⁽⁺⁾

$
134,267

$
137,951

$
(3,684)


Net interest margin

2.97
%

3.09
%

(12)

bps
Net interest margin (FTE) ⁽⁺⁾

3.04
%

3.16
%

(12)

bps

RESULTS OF OPERATIONS

~~For~~EXECUTIVE OVERVIEW

Recent Events and Industry Developments

In March 2023, the banking industry experienced significant volatility due to two recent high-profile bank failures, and in April 2023, there was a third bank failure that has contributed to additional volatility during April and May. These recent bank failures have resulted in significant concerns within the banking industry related to liquidity, deposit outflows, and unrealized losses on investment securities. These concerns and volatility in the banking industry may persist if other industry participants experience similar high-profile financial challenges or if other banks are closed by federal or state banking regulators. These recent events in the banking industry have reinforced the importance of maintaining access to diverse sources of funding and the benefits of a robust and stable deposit base, but the continuing impact of the volatility and turmoil in the banking industry on the Company, and its financial condition and results of operations for the remainder of 2023, is uncertain and cannot be predicted.

In light of the recent events in the banking industry, a continued rising interest rate environment and persistent concerns about recessionary conditions in the U.S. economy during 2023 or 2024, the Company continues to actively monitor balance sheet trends, deposit flows, and liquidity needs to ensure that the Company and the Bank are able to meet the needs of the Bank’s customers and maintain financial flexibility. During the first quarter of ~~2022,~~2023, the Company’s LHFI, net ~~interest income was $130.9~~of deferred fees and costs, and total deposits increased from the prior quarter by $135.1 million ~~a decrease~~and $524.2 million, respectively, and the Company’s short-term borrowings decreased by $910.1 million from the prior quarter largely driven by repayments funded by the Company’s sale of ~~$4.0~~$505.7 million ~~from~~of AFS securities during the first quarter of ~~2021. For~~2023. As of March 31, 2023, the Company estimates that approximately 72.1% of the Company’s deposits were insured or collateralized, and that the Company maintained available liquidity sources to cover approximately 130% of uninsured and uncollateralized deposits. In addition, to further bolster the Company’s funding position during the first quarter, the Company augmented customer deposit growth by also increasing brokered deposits by approximately $370.5 million from the prior quarter.

Despite the negative developments within the broader banking industry during the first quarter of ~~2022, net interest income (FTE)~~⁽⁺⁾ ~~was $134.3 million, a decrease of $3.7 million from~~2023, the ~~first quarter of 2021. In~~Company’s and the ~~first quarter of 2022, net interest margin decreased 12 bps~~Bank’s regulatory capital ratios continued to ~~2.97% from 3.09% in~~exceed the ~~first quarter of 2021, and net interest margin (FTE)~~⁽⁺⁾ ~~also decreased 12 bps compared~~standards to be considered well-capitalized under regulatory requirements. See “Capital Resources” within this Item 2 for additional information about the ~~first quarter of 2021. The declines in net interest margin and net interest margin (FTE)~~⁽⁺⁾ measures were primarily the result of a decline in loan yields driven by lower PPP interest income and fees and lower prepayment activity, which drove lower accretion from acquisition accounting fair value adjustments. These decreases were partially offset by higher investment interest income due to growth in the average balance of the investment portfolio and by a decrease in the cost of funds driven by a reduction in deposit costs and lower borrowing costs.Company’s regulatory capital.

~~On March 16,~~The Company is continually monitoring the impact of other various global and national events on the Company’s results of operations and financial condition, including inflation, rising interest rates, and geopolitical conflicts (such as the ongoing conflict between Russia and Ukraine). Inflation has risen as a result of growth in economic activity and demand for goods and services, as well as labor shortages and global supply chain issues. As a result, market interest rates began to rise during 2022 after an extended period at historical lows, and the FOMC increased ~~its~~the Federal Funds target rates throughout 2022 and 2023 to its current range of ~~0.25%~~5.00% to ~~0.5%, which was~~5.25%. The FOMC has noted that it will closely monitor incoming information and assess the implications for monetary policy in determining future actions with respect to the target rates and also confirmed the continued reduction to the Federal Reserve’s holdings of U.S. Treasury securities and agency debt and agency MBS. These developments helped drive the meaningful increase in deposit costs and deposit competition that the Company experienced during the first ~~increase since December 2018. The FOMC also forecasted potential further increases throughout the year.~~quarter of 2023. The Company anticipates that ~~this~~the net impact of these factors will result in ~~an expansion on~~a continued contraction of its net interest ~~margin due~~margin. The timing and impact of inflation, market interest rates, and the competitive landscape of deposits on the Company's business and results of operations will depend on future developments, which are highly uncertain and difficult to predict. The Company will continue to deploy various asset liability management strategies to seek to manage the Company's risk related to interest rate fluctuations. Refer to “Liquidity” within this Item 2 for additional information about the Company’s ~~asset-sensitive position at March 31, 2022. Refer to~~liquidity and “Quantitative and Qualitative Disclosures about Market Risk” in Part II, Item 3 of this Quarterly Report for additional information about the Company’s interest rate sensitivity.

Strategic Initiatives

On January 18, 2023, February 9, 2023, and March 6^th through the 9^th of 2023, the Company executed a balance sheet repositioning strategy and sold AFS securities with a total book value of $505.7 million at a pre-tax loss of $13.4 million and used the net proceeds to reduce existing high costing FHLB borrowings. The deleverage strategy provides the Company with

~~-52-~~-55-

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improved liquidity, enhanced tangible common equity, and additional run rate earnings. The Company estimates the loss will be earned back in approximately two years.

During the first quarter of 2022, the Company closed its operations center and consolidated 16 branches, resulting in restructuring expenses in the first quarter of 2022 of approximately $5.5 million, primarily related to real estate lease and other asset write downs, as well as severance costs. There were no significant branch closing and facility consolidation costs for the first quarter of 2023.

SUMMARY OF FINANCIAL RESULTS

Net Income & Performance Metrics

●

Net income available to common shareholders was $32.7 million and basic and diluted EPS was $0.44 for the first quarter of 2023, compared to $40.7 million and $0.54 for the first quarter of 2022.

●

Excluding a pre-tax loss on the sale of securities of $13.4 million due to the sale of AFS securities and a $5.0 million legal reserve associated with an ongoing and previously disclosed regulatory matter, the Company reported for the quarter ended March 31, 2023, adjusted operating earnings available to common shareholders⁽⁺⁾of $47.2 million and adjusted diluted operating EPS⁽⁺⁾ of $0.63, compared to adjusted operating earnings available to common shareholders⁽⁺⁾ of $45.1 million and diluted adjusted operating EPS⁽⁺⁾ of $0.60 for the first quarter of 2022.

Balance Sheet

●

Total assets were $20.1 billion at March 31, 2023, a decrease of $357.8 million or approximately 7.1% (annualized) from December 31, 2022. Total assets decreased during the first quarter primarily due to a decline in the investment securities portfolio of $514.4 million due to the sale of AFS securities as part of the Company’s balance sheet repositioning strategy executed during the quarter. The decrease in assets during the first quarter was partially offset by a $135.1 million increase in LHFI, net of deferred fees and costs, driven by loan growth.

●

Total LHFI, net of deferred fees and costs, were $14.6 billion at March 31, 2023, an increase of $135.1 million or 3.8% (annualized) from December 31, 2022.

●

Total investments were $3.2 billion at March 31, 2023, a decrease of $514.4 million from December 31, 2022. AFS securities totaled $2.3 billion at March 31, 2023, compared to $2.7 billion at December 31, 2022. At March 31, 2023, total net unrealized losses on the AFS securities portfolio were $407.9 million, an improvement of $54.7 million from total net unrealized losses on AFS securities of $462.6 at December 31, 2022. HTM securities are carried at cost and totaled $855.4 million at March 31, 2023, compared to $847.7 million at December 31, 2022 and have net unrealized losses of $32.3 million at March 31, 2023, an improvement of $13.5 million from net unrealized losses on HTM securities of $45.8 at December 31, 2022, due primarily to changes in interest rates and market conditions during the first quarter.

●

At March 31, 2023, total deposits were $16.5 billion, an increase of $524.2 million or approximately 13.3% (annualized) from December 31, 2022, due to a $829.5 million increase in interest-bearing deposits, which includes approximately $377.9 million in brokered deposits, partially offset by a $305.2 million decrease in demand deposits, as customers moved funds from lower to higher yielding deposit products.

Net Interest Income

Net interest income, which represents the principal source of revenue for the Company, is the amount by which interest income exceeds interest expense. The net interest margin is net interest income expressed as a percentage of average earning assets. Changes in the volume and mix of interest-earning assets and interest-bearing liabilities, as well as their respective yields and rates, have a significant impact on the level of net interest income, the net interest margin, and net income.

The following table shows interest income on earning assets and related average yields, as well as interest expense on interest-bearing liabilities and related average rates paid for the periods indicated:

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	For the Three Months Ended
	March 31,
	2023			2022			Change

	(Dollars in thousands)
Average interest-earning assets	$	18,238,088		$	17,885,018		$	353,070
Interest and dividend income	$	217,546		$	138,456		$	79,090
Interest and dividend income (FTE) ⁽⁺⁾	$	221,334		$	141,792		$	79,542
Yield on interest-earning assets		4.84	%		3.14	%		170	bps
Yield on interest-earning assets (FTE) ⁽⁺⁾		4.92	%		3.22	%		170	bps
Average interest-bearing liabilities	$	12,846,109		$	11,797,999		$	1,048,110
Interest expense	$	64,103		$	7,525		$	56,578
Cost of interest-bearing liabilities		2.02	%		0.26	%		176	bps
Cost of funds		1.42	%		0.18	%		124	bps
Net interest income	$	153,443		$	130,931		$	22,512
Net interest income (FTE) ⁽⁺⁾	$	157,231		$	134,267		$	22,964
Net interest margin		3.41	%		2.97	%		44	bps
Net interest margin (FTE) ⁽⁺⁾		3.50	%		3.04	%		46	bps

For the first quarter of 2023, net interest income was $153.4 million, an increase of $22.5 million from the first quarter of 2022. For the first quarter of 2023, net interest income (FTE)⁽⁺⁾ was $157.2 million, an increase of $23.0 million from the first quarter of 2022. In the first quarter of 2023, net interest margin increased 44 bps to 3.41% from 2.97% in the first quarter of 2022, and net interest margin (FTE)⁽⁺⁾ increased 46 bps to 3.50% from 3.04% compared to the same period of 2022. The increases in net interest income and net interest income (FTE)⁽⁺⁾ were primarily driven by higher loan yields due to increased short-term interest rates and higher average loans, as well as increases in investment income primarily due to higher yields on taxable securities, driven by the higher short-term interest rates, partially offset by a decrease in the securities portfolio balance due to the sale of $505.7 million of AFS securities in the first quarter of 2023, as the Company executed a balance sheet repositioning strategy. These increases were partially offset by an increase in interest expense due to higher deposit costs and borrowings due to increased market interest rates, as well as changes in the deposit mix as depositors migrated to higher costing interest bearing deposit accounts at the end of 2022 and into the first quarter of 2023.

-57-

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The following table shows interest income on earning assets and related average yields as well as interest expense on interest-bearing liabilities and related average rates paid for the periods indicated (dollars in thousands):

AVERAGE BALANCES, INCOME AND EXPENSES, YIELDS AND RATES (TAXABLE EQUIVALENT BASIS)


	For the Three Months Ended March 31,												For the Three Months Ended March 31,
	2022						2021						2023						2022
			Interest						Interest						Interest						Interest
	Average		Income /		Yield /		Average		Income /		Yield /		Average		Income /		Yield /		Average		Income /		Yield /
	Balance		Expense ⁽¹⁾		Rate ⁽¹⁾⁽²⁾		Balance		Expense⁽¹⁾		Rate ⁽¹⁾⁽²⁾

	(Dollars in thousands)												Balance		Expense ⁽¹⁾		Rate ⁽¹⁾⁽²⁾		Balance		Expense⁽¹⁾		Rate ⁽¹⁾⁽²⁾
Assets:
Securities:
Taxable	$	2,617,156	$	13,666	2.12	%	$	1,906,585	$	10,353	2.20	%	$	2,038,215	$	16,753	3.33	%	$	2,617,156	$	13,666	2.12	%
Tax-exempt		1,581,426		13,240	3.40	%		1,302,792		11,693	3.64	%		1,429,346		11,782	3.34	%		1,581,426		13,240	3.40	%
Total securities		4,198,582		26,906	2.60	%		3,209,377		22,046	2.79	%		3,467,561		28,535	3.34	%		4,198,582		26,906	2.60	%
Loans, net ⁽³⁾		13,300,789		114,602	3.49	%		14,064,123		128,122	3.69	%		14,505,611		191,178	5.35	%		13,300,789		114,602	3.49	%
Other earning assets		385,647		284	0.30	%		418,595		558	0.54	%		264,916		1,621	2.48	%		385,647		284	0.30	%
Total earning assets		17,885,018	$	141,792	3.22	%		17,692,095	$	150,726	3.46	%		18,238,088	$	221,334	4.92	%		17,885,018	$	141,792	3.22	%
Allowance for credit losses		(100,342)						(157,802)
Allowance for loan and lease losses														(112,172)						(100,342)
Total non-earning assets		2,135,692						2,152,561						2,258,435						2,135,692
Total assets	$	19,920,368					$	19,686,854					$	20,384,351					$	19,920,368
Liabilities and Stockholders' Equity:
Interest-bearing deposits:
Transaction and money market accounts	$	8,376,766	$	1,324	0.06	%	$	8,060,328	$	2,152	0.11	%	$	8,344,900	$	38,315	1.86	%	$	8,376,766	$	1,324	0.06	%
Regular savings		1,142,854		55	0.02	%		940,369		59	0.03	%		1,087,435		364	0.14	%		1,142,854		55	0.02	%
Time deposits		1,766,657		3,104	0.71	%		2,490,432		6,917	1.13	%		2,291,530		13,155	2.33	%		1,766,657		3,104	0.71	%
Total interest-bearing deposits		11,286,277		4,483	0.16	%		11,491,129		9,128	0.32	%		11,723,865		51,834	1.79	%		11,286,277		4,483	0.16	%
Other borrowings		511,722		3,042	2.41	%		574,678		3,647	2.57	%		1,122,244		12,269	4.43	%		511,722		3,042	2.41	%
Total interest-bearing liabilities		11,797,999	$	7,525	0.26	%		12,065,807	$	12,775	0.43	%		12,846,109	$	64,103	2.02	%		11,797,999	$	7,525	0.26	%
Noninterest-bearing liabilities:
Demand deposits		5,228,098						4,583,521						4,693,347						5,228,098
Other liabilities		233,287						317,585						421,295						233,287
Total liabilities		17,259,384						16,966,913						17,960,751						17,259,384
Stockholders' equity		2,660,984						2,719,941						2,423,600						2,660,984
Total liabilities and stockholders' equity	$	19,920,368					$	19,686,854					$	20,384,351					$	19,920,368
Net interest income			$	134,267					$	137,951					$	157,231					$	134,267
Interest rate spread					2.96	%					3.03	%					2.90	%					2.96	%
Cost of funds					0.18	%					0.30	%					1.42	%					0.18	%
Net interest margin					3.04	%					3.16	%					3.50	%					3.04	%

⁽¹⁾ Income and yields are reported on a taxable equivalent basis using the statutory federal corporate tax rate of 21%.

⁽²⁾ Rates and yields are annualized and calculated from actual, not rounded amounts in thousands, which appear above.

⁽³⁾ Nonaccrual loans are included in average loans outstanding.

~~-53-~~-58-

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The Volume Rate Analysis table below presents changes in net interest income (FTE)⁽⁺⁾ and interest expense and distinguishes between the changes related to increases or decreases in average outstanding balances of interest-earning assets and interest-bearing liabilities (volume), and the changes related to increases or decreases in average interest rates on such assets and liabilities (rate). Changes attributable to both volume and rate have been allocated proportionally. Results, on a taxable equivalent basis, are as follows for the quarters ended March 31, 2023 and 2022 (dollars in thousands):

Three Months Ended

March 31, 2022 vs. March 31, 2021

March 31, 2023 vs. March 31, 2022

Increase (Decrease) Due to Change in:

Volume

Rate

Total

Volume

Rate

Total

Earning Assets:

Securities:

Taxable

3,724

(411)

3,313

(3,505)

6,592

3,087

Tax-exempt

2,373

(826)

1,547

(1,257)

(201)

(1,458)

Total securities

6,097

(1,237)

4,860

(4,762)

6,391

1,629

Loans, net(1)

(6,765)

(6,755)

(13,520)

11,184

65,392

76,576

Other earning assets

(40)

(234)

(274)

(116)

1,453

1,337

Total earning assets

(708)

(8,226)

(8,934)

6,306

73,236

79,542

Interest-Bearing Liabilities:

Interest-bearing deposits:

Transaction and money market accounts

(909)

(828)

(4)

36,995

36,991

Regular savings

(15)

(4)

(3)

312

309

Time Deposits

(1,684)

(2,129)

(3,813)

Time deposits⁽¹⁾

1,164

8,887

10,051

Total interest-bearing deposits

(1,592)

(3,053)

(4,645)

1,157

46,194

47,351

Other borrowings(1)

(384)

(221)

(605)

5,418

3,809

9,227

Total interest-bearing liabilities

(1,976)

(3,274)

(5,250)

6,575

50,003

56,578

Change in net interest income

1,268

(4,952)

(3,684)

Change in net interest income (FTE)⁽⁺⁾

(269)

23,233

22,964

⁽¹⁾The rate-related changes in interest income on loans, deposits, and other borrowings include the impact of lower accretion of the acquisition-related fair market value adjustments, which are detailed below.

~~The Company’s net interest margin (FTE)~~⁽⁺⁾ ~~includes the impact of acquisition accounting fair value adjustments.~~ The impact of net accretion related to acquisition accounting fair value adjustments for the first ~~quarter~~quarters of ~~2021,~~2022 and ~~the first quarter of 2022~~2023 are reflected in the following table (dollars in thousands):

Loan

Deposit

Borrowings

Loan

Deposit

Borrowings

Accretion

Accretion (Amortization)

Amortization

Total

Accretion

Amortization

Total

For the quarter ended March 31, 2021

4,287

(198)

4,109

For the quarter ended March 31, 2022

2,253

(10)

(203)

2,040

2,253

(10)

(203)

2,040

For the quarter ended March 31, 2023

1,106

(14)

(209)

883

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Noninterest Income


	For the Three Months Ended								For the Three Months Ended
	March 31,				Change				March 31,				Change
	2022		2021		$		%		2023		2022		$		%

	(Dollars in thousands)								(Dollars in thousands)
Noninterest income:
Service charges on deposit accounts	$	7,596	$	5,509	$	2,087	37.9	%	$	7,902	$	7,596	$	306	4.0	%
Other service charges, commissions, and fees		1,655		1,701		(46)	(2.7)	%		1,746		1,655		91	5.5	%
Interchange fees		1,810		1,847		(37)	(2.0)	%		2,325		1,810		515	28.5	%
Fiduciary and asset management fees		7,255		6,475		780	12.0	%		4,262		7,255		(2,993)	(41.3)	%
Mortgage banking income		3,117		8,255		(5,138)	(62.2)	%		854		3,117		(2,263)	(72.6)	%
Loss on sale of securities										(13,400)		—		(13,400)	100.0	%
Bank owned life insurance income		2,697		2,265		432	19.1	%		2,828		2,697		131	4.9	%
Loan-related interest rate swap fees		3,860		1,754		2,106	120.1	%		1,439		3,860		(2,421)	(62.7)	%
Other operating income		2,163		3,179		(1,016)	(32.0)	%		1,672		2,163		(491)	(22.7)	%
Total noninterest income	$	30,153	$	30,985	$	(832)	(2.7)	%	$	9,628	$	30,153	$	(20,525)	(68.1)	%

Noninterest income decreased ~~$832,000 or 2.7%~~$20.5 million to $9.6 million for the quarter ended March 31, 2023, compared to $30.2 million for the quarter ended March 31, ~~2022, compared to $31.0~~2022. Excluding, the loss on sale of securities of $13.4 million in 2023, adjusted operating noninterest income⁽⁺⁾for the quarter ended March 31, ~~2021.~~2023 decreased $7.1 million or 23.6% compared to the quarter ended March 31, 2022. The decrease from the prior year quarter was primarily driven by a ~~decrease in mortgage banking income of $5.1~~$3.0 million due to a decline in mortgage origination volumes and a decline in unrealized gains on equity method investments of $487,000 included within other operating income. These noninterest income declines were partially offset by an increase in loan-related interest swap fee income of $2.1 million due to higher transaction volumes, a $2.1 million increase in service charges on deposit accounts, and a $780,000 increasedecrease in fiduciary and asset management fees due to ~~market driven increases~~a decrease in assets under ~~management. In future periods, noninterest income could be impacted~~management mainly driven by ~~modifications to~~ the ~~Company’s non-sufficient funds and overdraft policies, which~~DHFB sale in the ~~Company expects to finalize and begin implementing later in~~second quarter of 2022, and ~~which could lead~~a $2.4 million decrease in loan-related interest rate swap fees due to lower transaction volumes, and a $2.3 million decrease in mortgage banking income due to a ~~reduction~~decline in ~~certain service charges on deposit accounts.~~mortgage loan origination volumes driven by the rapid increase in market interest rates. These decreases were partially offset by a $515,000 increase in interchange fees.

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Noninterest Expense


	For the Three Months Ended								For the Three Months Ended
	March 31,				Change				March 31,				Change
	2022		2021		$		%		2023		2022		$		%

	(Dollars in thousands)								(Dollars in thousands)
Noninterest expense:
Salaries and benefits	$	58,298	$	52,660	$	5,638	10.7	%	$	60,529	$	58,298	$	2,231	3.8	%
Occupancy expenses		6,883		7,315		(432)	(5.9)	%		6,356		6,883		(527)	(7.7)	%
Furniture and equipment expenses		3,597		3,968		(371)	(9.3)	%		3,752		3,597		155	4.3	%
Technology and data processing		7,796		6,904		892	12.9	%		8,142		7,796		346	4.4	%
Professional services		4,090		4,960		(870)	(17.5)	%		3,413		4,090		(677)	(16.6)	%
Marketing and advertising expense		2,163		2,044		119	5.8	%		2,351		2,163		188	8.7	%
FDIC assessment premiums and other insurance		2,485		2,307		178	7.7	%		3,899		2,485		1,414	56.9	%
Other taxes		4,499		4,436		63	1.4	%
Franchise and other taxes										4,498		4,499		(1)	(0.0)	%
Loan-related expenses		1,776		1,877		(101)	(5.4)	%		1,552		1,776		(224)	(12.6)	%
Amortization of intangible assets		3,039		3,730		(691)	(18.5)	%		2,279		3,039		(760)	(25.0)	%
Loss on debt extinguishment		—		14,695		(14,695)	(100.0)	%
Other expenses		10,695		7,041		3,654	51.9	%		11,503		10,695		808	7.6	%
Total noninterest expense	$	105,321	$	111,937	$	(6,616)	(5.9)	%	$	108,274	$	105,321	$	2,953	2.8	%

Noninterest expense ~~decreased $6.6~~increased $3.0 million or ~~5.9%~~2.8% to $108.3 million for the quarter ended March 31, 2023, compared to $105.3 million for the quarter ended March 31, ~~2022,~~2022. Excluding, amortization of intangible assets ($2.3 million in 2023 and $3.0 million in 2022), the legal reserve associated with an ongoing and previously disclosed regulatory matter, included within other expenses ($5.0 million in 2023), and strategic branch closing and facility consolidation costs, included within other expenses ($5.5 million in 2022), adjusted operating noninterest expense⁽⁺⁾for the quarter ended March 31, 2023 increased $4.2 million or 4.4%, compared to ~~$111.9~~the quarter ended March 31, 2022. The increase from the prior year quarter in adjusted operating non-interest expense⁽⁺⁾ was primarily driven by a $2.2 million increase in salaries and benefits expense driven by increases in salaries and wages, a $1.4 million increase in FDIC assessment premiums and other insurance primarily due to the increase in the FDIC assessment rates, effective January 1, 2023, and a $1.3 million increase in other expenses, primarily due to an increase in teammate and travel costs and other operational expenses. These increases were partially offset by decreases of $677,000 in professional services related to strategic projects that occurred in the prior year quarter and $527,000 in occupancy expenses.

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Segment Results

As discussed in Note 12, “Segment Reporting and Revenue,” in Part I, Item 1 of this Quarterly Report, effective as of the third quarter of 2022, the Company began segmenting its business into two primary reportable operating segments—Wholesale Banking and Consumer Banking — as these segments reflect how the chief operating decision makers are now evaluating the business, establishing the overall business strategy, allocating resources, and assessing business performance. Included below are the key metrics used by the chief operating decision makers in evaluating the Company’s reportable operating segments.

Effective January 1, 2023, the Company made an organizational change to move certain lines of business in the wealth management division that primarily serve Wholesale Banking customers from the Consumer Banking segment to the Wholesale Banking segment. As a result, the Company re-allocated $9.6 million of goodwill from the Consumer Banking segment to the Wholesale Banking segment and restated its prior segment information for the year ended December 31, 2022, based on this organizational change. Refer to Note 4 “Goodwill and Intangible Assets” and Note 12 “Segment Reporting and Revenue” within Part I, Item 1 “Financial Statements” of this Quarterly Report for additional information.

Wholesale Banking

The Wholesale Banking segment provides loan and deposit services, as well as treasury management, SBA lending, and capital market services to wholesale customers primarily throughout Virginia, Maryland, North Carolina and South Carolina. These customers include commercial real estate and commercial and industrial customers. This segment also includes the Company’s public finance subsidiary and the equipment finance subsidiary, which has nationwide exposure. The private banking and trust businesses also reside in the Wholesale Banking segment.

The following table presents operating results for the three months ended March 31, 2023 and 2022 for the Wholesale Banking segment (dollars in thousands):


	Three Months Ended March 31,
	2023		2022
Net interest income	$	67,540	$	71,424
Provision for credit losses		10,487		1,617
Net interest income after provision for credit losses		57,053		69,807
Noninterest income		7,414		9,187
Noninterest expense		42,314		40,008
Income before income taxes	$	22,153	$	38,986

Wholesale Banking income before income taxes decreased $16.8 million to $22.2 million for the quarter ended March 31, ~~2021. Excluding amortization of intangible assets ($3.0~~2023, compared to $39.0 million for the quarter ended March 31, 2022. The decrease was primarily driven by an $8.9 million increase in the provision for credit losses, due to increasing uncertainty in the economic outlook and loan growth. Net interest income decreased $3.9 million driven by Paycheck Protection Program loan income in the first quarter of 2022, and spread compression on the loan and deposit portfolios driven by the rapid rise in interest rates. This was partially offset by higher income due to higher average loan balances. Noninterest expense increased by $2.3 million primarily due to an increase in salaries and benefits expense driven by increases in salaries and wages, and noninterest income decreased by $1.8 million primarily driven by a decrease in loan-related interest rate swap fees due to lower transaction volumes.

The following table presents the key balance sheet metrics as of March 31, 2023 and December 31, 2022 for the Wholesale Banking segment (dollars in thousands):


	March 31, 2023		December 31, 2022 ⁽¹⁾
LHFI, net of deferred fees and costs	$	11,608,884	$	11,476,258
Total Deposits		6,164,567		6,128,729

⁽¹⁾Includes a reallocation of LHFI, net of deferred fees and costs, and total deposits from the Consumer Banking segment of $136.6 million and $258.7 million, respectively, due to the January 1, 2023 organizational change discussed in Note 12, “Segment Reporting and Revenue,” in Part I, Item 1 of this Quarterly Report.

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LHFI, net of deferred fees and costs, for the Wholesale Banking segment increased $132.6 million or 4.7% (annualized) to $11.6 billion at March 31, 2023 compared to ~~$3.7~~December 31, 2022; growth primarily occurred across the commercial and industrial and construction and land development loan portfolios.

Wholesale banking deposits increased $35.8 million or 2.4% (annualized) to $6.2 billion at March 31, 2023 compared to December 31, 2022. This increase was primarily driven by an increase in interest checking accounts, partially offset by a decrease in money market balances and demand deposits.

Consumer Banking

The Consumer Banking segment provides loan and deposit services to consumers and small businesses throughout Virginia, Maryland, and North Carolina. Consumer Banking includes the home loan division and investment management and advisory services businesses.

The following table presents operating results for the three months ended March 31, 2023 and 2022 for the Consumer Banking segment (dollars in thousands):


	Three Months Ended March 31,
	2023		2022
Net interest income	$	63,145	$	48,132
Provision for credit losses		1,340		1,183
Net interest income after provision for credit losses		61,805		46,949
Noninterest income		12,178		16,619
Noninterest expense		57,055		55,333
Income before income taxes	$	16,928	$	8,235

Consumer Banking income before income taxes increased $8.7 million to $16.9 million for the quarter ended March 31, ~~2021), losses related to balance sheet repositioning ($0 for the quarter ended March 31, 2022~~2023, compared to ~~$14.7~~$8.2 million for the quarter ended March 31, ~~2021),~~2022. Net interest income increased $15.0 million primarily due to favorable funding credit on deposits and ~~branch closing~~increased interest income attributable to the higher interest rate environment and ~~facility consolidation costs ($5.5~~higher average loan balances, offset by lower Paycheck Protection Program loan income and spread compression on loans. This increase was partially offset by a $4.4 million ~~for~~decrease in noninterest income primarily due to a decrease in fiduciary and asset management fees due to a decrease in assets under management primarily driven by the sale of DHFB in the second quarter ~~ended March 31,~~of 2022 ~~compared~~and a decrease in mortgage banking income due to ~~$924,000 for~~a decline in mortgage loan origination volumes driven by the rapid increase in market interest rates during 2022 and continuing into the first quarter ~~ended March 31, 2021) adjusted operating~~of 2023. In addition, noninterest expense⁽⁺⁾ ~~for the quarter ended March 31, 2022~~ increased by ~~$4.2~~$1.7 million ~~or 4.5% from the prior year quarter. The increase was mainly~~primarily due to an increase ~~of $5.6 million~~in FDIC assessment premiums and other insurance due to the increase in the FDIC assessment rates, effective January 1, 2023, and an increase in salaries and benefits ~~primarily driven by an increase in salaries, wages, and variable incentive compensation, and an increase of $892,000 in technology and data processing~~ expense, ~~primarily driven by an increase in software licensing and maintenance expenses. These noninterest expense category increases were~~ partially offset by a decrease in amortization expense due to the sale of ~~$870,000 in professional services expenses,~~DHFB and a ~~$432,000~~ decrease in occupancy ~~expenses,~~expenses.

The following table presents the key balance sheet metrics as of March 31, 2023 and December 31, 2022 for the Consumer Banking segment (dollars in thousands):


	March 31, 2023		December 31, 2022 ⁽¹⁾
LHFI, net of deferred fees and costs	$	2,991,423	$	2,990,017
Total Deposits		9,843,565		9,724,598

⁽¹⁾Includes a ~~$371,000~~reallocation of LHFI, net of deferred fees and costs, and total deposits to the Wholesale Banking segment of $136.6 million and $258.7 million, respectively, due to the January 1, 2023 organizational change discussed in Note 12, “Segment Reporting and Revenue,” in Part I, Item 1 of this Quarterly Report.

LHFI, net of deferred fees and costs, for the Consumer Banking segment increased $1.4 million or 0.2% (annualized) to $3.0 billion at March 31, 2023 compared to December 31, 2022.

Consumer Banking deposits increased $119.0 million or 5.0% (annualized) to $9.8 billion at March 31, 2023 compared to December 31, 2022. This increase was primarily due to an increase in time deposits, partially offset by a decrease in ~~equipment expenses.~~demand

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deposits, interest checking accounts, and savings accounts, as customers moved funds from lower to higher yielding deposit products.

Income Taxes

The provision for income taxes is based upon the results of operations, adjusted for the effect of certain tax-exempt income and non-deductible expenses. In addition, certain items of income and expense are reported in different periods for financial reporting and tax return purposes. The tax effects of these temporary differences are recognized currently in the deferred income tax provision or benefit. Deferred tax assets or liabilities are computed based on the difference between the financial statement and income tax bases of assets and liabilities using the applicable enacted marginal tax rate.

The Company’s effective tax rate for the three months ended March 31, 2023 and 2022 was 17.0% and ~~2021 was~~ 17.5% ~~and 16.8%~~, respectively. The ~~increase~~marginal decrease in the effective tax ~~rates~~rate is primarily due to the ~~lower~~higher proportion of tax-exempt income to pre-tax income in the first quarter of ~~2022.~~2023.

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DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

Overview

Assets

At March 31, ~~2022,~~2023, total assets were ~~$19.8~~$20.1 billion, a decrease of ~~$282.4~~$357.8 million or approximately ~~5.7%~~7.1% (annualized)

from ~~$20.1 billion at~~ December 31, ~~2021.~~2022. The decrease in total assets was primarily a result of a decrease in cash and cash equivalents related to the deployment of excess liquidity to fund loan growth and deposit run-off. In addition, the Company incurred a decrease in the investment securities portfolio primarily due to a decline in the ~~market value~~investment securities portfolio of $514.4 million, primarily due to the sale of AFS securities as part of the ~~AFS securities portfolio, reflecting~~Company’s balance sheet repositioning strategy executed during the ~~impact~~first quarter of ~~a rise~~2023, which was partially offset by an increase in ~~the interest rates.~~

LHFI, ~~(net~~net of deferred fees and ~~costs)~~costs, driven by loan growth.

LHFI, net of deferred fees and costs, were ~~$13.5~~$14.6 billion ~~including $67.4 million in PPP loans,~~ at March 31, ~~2022,~~2023, an increase of ~~$263.5~~$135.1 million or ~~8.1%~~3.8% (annualized) from December 31, ~~2021. Excluding the effects of the PPP~~⁽⁺⁾,2022. At March 31, 2023, quarterly average LHFI, ~~(net~~net of deferred fees and ~~costs) at March 31, 2022~~costs, increased ~~$346.4~~$388.2 million or ~~10.8%~~11.2% (annualized) from December 31, ~~2021. Average loans decreased $763.3 million~~ ~~from~~ ~~March 31, 2021. Excluding the effects of the PPP~~⁽⁺⁾~~, the average loan balances at March 31, 2022 increased $443.0 million or 3.5% from March 31, 2021.~~2022. Refer to "Loan Portfolio" within this Item 2 and Note 3 "Loans and Allowance for Loan and Lease Losses" in Part I, Item 1 of this Quarterly Report for additional information on ~~the Company’s~~our loan activity.

At March 31, 2023, total investments were $3.2 billion, a decrease of $514.4 million from December 31, 2022. AFS securities totaled $2.3 billion at March 31, 2023, a $489.5 million decrease from December 31, 2022. At March 31, 2023, total net unrealized losses on the AFS securities portfolio were $407.9 million, an improvement of $54.7 million from total net unrealized losses on AFS securities of $462.6 at December 31, 2022. HTM securities totaled $855.4 million at March 31, 2023, a $7.7 million increase from December 31, 2022 and have net unrealized losses of $32.3 million at March 31, 2023, an improvement of $13.5 million from net unrealized losses on HTM securities of $45.8 at December 31, 2022.

Liabilities and Stockholders’ Equity

At March 31, ~~2022,~~2023, total liabilities were ~~$17.3~~$17.7 billion, a decrease of ~~$70.6~~$425.3 million from ~~$17.4~~$18.1 billion at December 31, ~~2021.~~2022, which was primarily driven by a decrease in borrowings, partially offset by an increase in deposits.

Total deposits at March 31, ~~2022~~2023 were $16.5 billion, ~~a decrease~~an increase of ~~$126.8~~$524.2 million or approximately ~~3.1%~~13.3% (annualized) from December 31, ~~2021.~~2022. For the quarter ended March 31, ~~2022,~~2023, quarterly average deposits ~~increased $439.7~~decreased $194.5 million or ~~2.7%~~4.7% (annualized) compared to the prior quarter ~~ended~~. Total deposits at March 31, ~~2021~~ ~~primarily~~2023 increased from December 31, 2022 due to ~~additional liquidity of bank~~a $829.5 million increase in interest-bearing deposits, which includes approximately $377.9 million in brokered deposits, partially offset by a $305.2 million decrease in demand deposits, as customers ~~since the start of COVID-19 and increased savings~~.have moved funds from lower to higher yielding products. Refer to “Deposits” within this Item 2 for ~~further discussion~~additional information on this topic.

Total short-term and long-term borrowings at March 31, ~~2022~~2023 were ~~$504.0~~$798.9 million, a decrease of ~~$2.6~~$909.8 million or ~~0.5%~~53.2% when compared to ~~$506.6 million~~$1.7 billion at December 31, ~~2021.~~2022 as a result of the Company’s execution of the balance sheet repositioning strategy during the first quarter of 2023, which allowed the Company to reduce its short-term borrowings exposure. Refer to Note 6 “Borrowings” in Part I, Item 1, and “Executive Overview” in Part I, Item 2 of this Quarterly Report for ~~further discussion~~additional information on ~~this topic.~~our borrowing activity.

At March 31, ~~2022,~~2023, stockholders’ equity was ~~$2.5~~$2.4 billion, ~~a decrease~~an increase of ~~$211.7~~$67.5 million from December 31, ~~2021.~~2022, primarily due to lower unrealized losses within the AFS securities portfolio. Our consolidated regulatory capital ratios continue to exceed the minimum capital requirements and are considered “well-capitalized” for regulatory purposes. Refer to “Capital Resources” within this Item 2, as well as Note 9 "Stockholders’ Equity" in Part I, Item 1 of this Quarterly Report for additional information on ~~the Company’s~~our capital resources.

~~For information related to the Company’s stock repurchase activity and the Repurchase Program, please refer to Note 9 “Stockholders’ Equity” in Part I, Item 1 and Part II, Item 2~~-64-

Table of ~~this Quarterly Report.~~Contents

During the first quarter of ~~2022,~~2023, the Company declared and paid a quarterly dividend on the outstanding shares of Series A ~~preferred stock~~Preferred Stock of $171.88 per share (equivalent to $0.43 per outstanding depositary share), consistent with the fourth quarter of ~~2021~~2022 and the first quarter of ~~2021.~~2022. During the first quarter of ~~2022,~~2023, the Company also declared and paid a cash ~~dividend~~dividends of ~~$0.28~~$0.30 per common share, consistent with the fourth quarter of ~~2021,~~2022 and an increase of ~~$0.03,~~$0.02 or approximately ~~12.0%, compared to~~7.1% from the first quarter of ~~2021.~~2022 .

At March 31, 2023, the Company had no active share repurchase programs, as the most recent share repurchase program expired on December 9, 2022. Under that repurchase program, the Company repurchased an aggregate of approximately 1.3 million shares (or approximately $48.2 million) in 2022.

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Securities

At March 31, ~~2022,~~2023, the Company had total investments ~~in the amount~~ of ~~$4.0~~$3.2 billion, or ~~20.4%~~15.9% of total assets, as compared to ~~$4.2~~$3.7 billion, or ~~20.9%~~18.1% of total assets, at December 31, ~~2021.~~2022. This ~~decline in the Company’s investment portfolio~~decrease was primarily due to ~~a decline~~the sale of AFS securities as part of the Company’s balance sheet repositioning executed during the first quarter of 2023, which was partially offset by growth in the ~~market value of the AFS securities~~Company’s HTM portfolio. The Company seeks to diversify its portfolio to minimize risk. It focuses on purchasing MBS for cash flow and reinvestment opportunities and securities issued by states and political subdivisions due to the tax benefits and the higher yield offered from these securities. The majority of the Company’s MBS are agency-backed securities, which have a government guarantee. For information regarding the hedge transaction related to AFS securities, see Note 8 "Derivatives" in Part I, Item 1 of this Quarterly Report.

The table below sets forth a summary of the AFS securities, HTM securities, and restricted stock as of the dates indicated (dollars in thousands):

March 31,

December 31,

March 31,

December 31,

2022

2021

2023

2022

Available for Sale:

U.S. government and agency securities

68,039

73,849

62,574

61,943

Obligations of states and political subdivisions

888,300

1,008,396

523,097

807,435

Corporate and other bonds

183,923

153,376

152,006

226,380

MBS

Commercial

434,491

471,157

260,647

306,161

Residential

1,616,882

1,773,232

1,252,360

1,338,233

Total MBS

2,051,373

2,244,389

1,513,007

1,644,394

Other securities

1,645

1,640

1,681

1,664

Total AFS securities, at fair value

3,193,280

3,481,650

2,252,365

2,741,816

Held to Maturity:

U.S. government and agency securities

2,483

2,604

684

687

Obligations of states and political subdivisions

684,294

620,873

702,749

705,990

Corporate and other bonds

5,033

5,159

MBS

Commercial

31,221

4,523

55,993

42,761

Residential

38,874

—

90,959

93,135

Total MBS

70,095

4,523

146,952

135,896

Total held to maturity securities, at carrying value

756,872

628,000

855,418

847,732

Restricted Stock:

FRB stock

67,032

67,032

67,032

67,032

FHLB stock

10,001

9,793

20,584

53,181

Total restricted stock, at cost

77,033

76,825

87,616

120,213

Total investments

4,027,185

4,186,475

3,195,399

3,709,761

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The following table summarizes the weighted average yields⁽¹⁾ for AFS securities by contractual maturity date of the underlying securities as of March 31, ~~2022:~~2023:

1 Year or

5 – 10

Over 10

1 Year or

5 – 10

Over 10

Less

1 - 5 Years

Years

Total

Less

1 - 5 Years

Years

Total

U.S. government and agency securities

—

2.57

1.42

—

1.45

—

1.41

5.47

—

1.56

Obligations of states and political subdivisions

5.00

2.79

2.63

2.77

3.65

3.01

1.93

2.23

Corporate bonds and other securities

0.25

4.54

3.91

2.57

3.74

4.03

7.16

3.85

5.15

4.21

MBS:

Commercial

3.74

3.28

2.40

2.56

2.80

5.82

3.68

2.55

2.34

2.97

Residential

2.41

2.35

2.39

1.97

1.99

2.50

2.23

2.58

2.18

2.19

Total MBS

3.16

3.21

2.39

2.06

2.16

5.82

3.08

2.57

2.20

2.32

Total AFS securities

3.04

3.25

2.88

2.29

2.40

5.57

2.65

3.46

2.22

2.40

⁽¹⁾ Yields on tax-exempt securities have been computed on a tax-equivalent basis.

The following table summarizes the weighted average yields⁽¹⁾ for HTM securities by contractual maturity date of the underlying securities as of March 31, ~~2022:~~2023:

1 Year or

5 – 10

Over 10

1 Year or

5 – 10

Over 10

Less

1 - 5 Years

Years

Total

Less

1 - 5 Years

Years

Total

U.S. government and agency securities

4.14

4.03

4.09

—

5.23

—

5.23

Obligations of states and political subdivisions

2.31

3.86

3.85

3.64

2.38

4.05

3.48

3.49

Corporate bonds and other securities

—

6.72

MBS:

Commercial

—

2.44

—

4.67

Residential

—

2.25

—

5.43

—

3.57

4.06

Total MBS

—

2.34

—

5.43

—

4.07

4.29

Total HTM securities

2.85

3.88

3.85

3.51

3.52

2.38

4.98

3.48

3.60

3.65

⁽¹⁾ Yields on tax-exempt securities have been computed on a tax-equivalent basis.

Weighted average yield is calculated as the tax-equivalent yield on a pro rata basis for each security based on its relative amortized cost.

As of March 31, ~~2022,~~2023, the Company maintained a diversified municipal bond portfolio with approximately ~~65%~~68% of its holdings in general obligation issues and the majority of the remainder primarily backed by revenue bonds. Issuances within the State of Texas represented 19% of the total municipal portfolio; no other state had a concentration above 10%. Substantially all municipal holdings are considered investment grade. When purchasing municipal securities, the Company focuses on strong underlying ratings for general obligation issuers or bonds backed by essential service revenues.

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Liquidity

Liquidity represents an institution’s ability to meet present and future financial obligations through either the sale or maturity of existing assets or the acquisition of additional funds through liability management. The Company’s largest source of liquidity on a consolidated basis is the customer deposit base generated by our wholesale and consumer businesses. These deposits provide relatively stable and low-cost funding. Total deposits at March 31, 2023 were $16.5 billion, an increase of $524.2 million or approximately 13.3% (annualized) from December 31, 2022. Total deposits at March 31, 2023 increased from December 31, 2022 due to a $829.5 million increase in interest-bearing deposits, which includes approximately $377.9 million in brokered deposits, partially offset by a $305.2 million decrease in demand deposits, as customers have moved funds from lower to higher yielding products. Refer to “Deposits” within this Item 2 for additional information on this topic.

Liquid assets include cash, interest-bearing deposits with banks, money market investments, federal funds sold, LHFS, and securities and loans maturing or re-pricing within one year. Additional sources of liquidity available to the Company include its capacity to borrow additional funds when necessary through federal funds lines with several correspondent banks, a line of credit with the FHLB, the Federal Reserve Discount Window, the purchase of brokered certificates of deposit, corporate line of credit with a large correspondent bank, and debt and capital issuance. Management ~~considers~~believes the Company’s overall liquidity to be sufficient to satisfy its depositors’ requirements and to meet its customers’ credit needs.

Starting in the first quarter of 2023, the Company is eligible to borrow from the Federal Reserve's BTFP, which provides additional contingent liquidity through the pledging of certain qualifying securities. The BTFP is a one-year program ending March 11, 2024, and the Company can borrow any time during the term and can repay the obligation at any time without penalty. As of March 31, 2023, liquidity of $548.6 million was available based on the par-value of qualifying securities from BTFP. The Company ~~has continued~~did not utilize the available funds from BTFP as of March 31, 2023.

The Company closely monitors changes in the industry and market conditions that may impact the Company’s liquidity and will use other borrowing means or other liquidity and funding strategies sources to ~~see elevated customer deposit balances~~fund its liquidity needs as ~~a result~~needed. The Company is also closely tracking the potential impacts on the Company’s liquidity of declines in the fair value of the ~~impacts~~Company’s securities portfolio due to rising market interest rates and developments in the banking industry that may change the availability of ~~COVID-19, including as a result~~traditional sources of ~~government stimulus programs. The Company considers a portion~~liquidity or market expectations with respect to available sources and amounts of ~~the increases in customer deposits to be temporary, which it expects will result in outflows in subsequent quarters.~~

additional liquidity.

As of March 31, ~~2022,~~2023, liquid assets totaled ~~$5.1~~$6.0 billion or ~~25.7%~~30.3% of total assets, and liquid earning assets totaled ~~$4.9~~$5.9 billion or ~~27.7%~~32.4% of total earning assets. Asset liquidity is also provided by managing loan and securities maturities and cash flows. As of March 31, ~~2022,~~2023, loan payments of approximately ~~$4.3~~$5.4 billion or ~~32.2%~~37% of total loans are expected within one year based on contractual terms, adjusted for expected prepayments, and approximately ~~$332.8~~$269.1 million or ~~8.3%~~8.4% of total securities are scheduled to be paid down within one year based on contractual terms, adjusted for expected prepayments.

For additional information and the available balances on various lines of credit, please refer to Note 6 “Borrowings” in Part I, Item 1 of this Quarterly Report. In addition to lines of credit, the Bank may also borrow additional funds by purchasing certificates of deposit through a nationally recognized network of financial institutions. For additional information and outstanding balances on purchased certificates of deposits, please refer to “Deposits” within this Item 2. For additional information on cash requirements for known contractual and other obligations, please refer to “Capital Resources” within this Item 2.

Cash Requirements

The Company’s cash requirements, outside of lending transactions, consist primarily of borrowings, debt and capital instruments which are used as part of the Company’s overall liquidity and capital management strategy. Cash required to repay these obligations will be sourced from future debt and capital issuances and from other general liquidity sources as described above under “Liquidity” within this Item 2.

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The following table presents the Company’s contractual obligations related to its major cash requirements and the scheduled payments due at the various intervals over the next year and beyond as of March 31, ~~2022~~2023 (dollars in thousands):

Less than

More than

Total

1 year

1 year
Long-term debt ⁽¹⁾

$
250,000

$
-

$
250,000
Trust preferred capital notes ⁽¹⁾

155,159

-

155,159
Leases ⁽²⁾

214,071

37,728

176,343
Repurchase agreements

115,027

115,027

-
Total contractual obligations

$
734,257

$
152,755

$
581,502


			Less than		More than
	Total		1 year		1 year
Long-term debt ⁽¹⁾	$	250,000	$	—	$	250,000
Trust preferred capital notes ⁽¹⁾		155,159		—		155,159
Leases ⁽²⁾		286,868		49,822		237,046
Repurchase agreements		163,760		163,760		—
Total contractual obligations	$	855,787	$	213,582	$	642,205

~~(1)~~

~~Excludes related unamortized premium/discount and interest payments.~~

~~(2)~~

~~Represents lease payments due on non-cancellable operating leases at March 31, 2022. Excluded from these tables are variable lease payments or renewals.~~

⁽¹⁾ Excludes related unamortized premium/discount and interest payments.

⁽²⁾ Represents lease payments due on non-cancellable operating leases at March 31, 2023. Excluded from these tables are variable lease payments or renewals.

For more information pertaining to the previous table, reference Note 5 “Leases” and Note 6 “Borrowings” in Part I, Item 1 of this Quarterly Report.

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~~Table of Contents~~

Loan Portfolio

LHFI, net of deferred fees and costs, ~~were $13.5~~totaled $14.6 billion at March 31, ~~2022,~~2023 and ~~$13.2~~$14.4 billion at December 31, ~~2021.~~2022. Commercial ~~& industrial loans~~real estate and commercial ~~real estate-non-owner occupied~~and industrial loans represented the Company’s largest loan categories at both March 31, ~~2022. Commercial~~2023 and ~~industrial loans included approximately $66.3 million in loans from the PPP loan program as of March~~December 31, 2022.

The following table presents the remaining maturities, based on contractual maturity, by loan type, and by rate type (variable or fixed), net of deferred fees and costs, as of March 31, ~~2022~~2023 (dollars in thousands):

Variable Rate

Fixed Rate

Variable Rate

Fixed Rate

Total

Less than 1

More than

Total

Less than 1

More than

Maturities

year

Total

1-5 years

5-15 years

15 years

Total

1-5 years

5-15 years

15 years

Maturities

year

Total

1-5 years

5-15 years

15 years

Total

1-5 years

5-15 years

15 years

Construction and Land Development

969,059

361,917

462,982

401,318

60,399

1,265

144,160

84,211

25,101

34,848

1,179,872

368,044

646,171

549,305

93,943

2,923

165,657

83,960

28,277

53,420

Commercial Real Estate - Owner Occupied

2,007,671

185,951

645,878

120,766

506,347

18,765

1,175,842

475,436

669,873

30,533

1,956,585

141,685

615,763

144,060

457,853

13,850

1,199,137

544,329

644,031

10,777

Commercial Real Estate - Non-Owner Occupied

3,875,681

406,424

2,086,321

913,994

1,154,467

17,860

1,382,936

984,951

341,157

56,828

3,968,085

411,939

2,241,470

1,061,768

1,179,645

1,314,676

979,612

326,975

8,089

Multifamily Real Estate

723,940

70,472

427,586

107,912

319,674

—

225,882

158,757

67,125

—

822,006

93,834

515,676

155,298

360,378

—

212,496

159,270

53,226

—

Commercial & Industrial

2,540,680

404,695

1,284,023

1,072,807

204,842

6,374

851,962

530,090

311,456

10,416

3,082,478

487,883

1,587,492

1,458,958

124,981

3,553

1,007,103

642,827

358,934

5,342

Residential 1-4 Family - Commercial

569,801

85,334

113,904

30,156

74,497

9,251

370,563

269,226

89,083

12,254

522,760

47,395

119,447

40,987

73,067

5,393

355,918

277,164

68,526

10,228

Residential 1-4 Family - Consumer

824,163

5,101

177,437

1,978

28,868

146,591

641,625

8,281

71,942

561,402

974,511

1,158

175,979

1,734

28,035

146,210

797,374

8,223

78,099

711,052

Residential 1-4 Family - Revolving

568,403

32,738

480,322

33,433

135,698

311,191

55,343

2,256

16,796

36,291

589,791

25,268

471,868

26,150

124,296

321,422

92,655

5,017

32,105

55,533

Auto

499,855

3,061

—

496,794

189,760

307,034

—

600,658

3,384

—

597,274

238,922

358,352

—

Consumer

171,875

12,644

24,230

21,357

2,180

693

135,001

56,921

52,695

25,385

145,090

12,446

19,948

17,552

2,086

310

112,696

54,087

40,123

18,486

Other Commercial

708,221

67,034

112,152

7,975

71,172

33,005

529,035

156,029

246,938

126,068

742,444

19,813

102,824

14,672

64,029

24,123

619,807

224,507

276,433

118,867

Total LHFI

13,459,349

1,635,371

5,814,835

2,711,696

2,558,144

544,995

6,009,143

2,915,918

2,199,200

894,025

14,584,280

1,612,849

6,496,638

3,470,484

2,508,313

517,841

6,474,793

3,217,918

2,265,081

991,794

The Company remains committed to originating soundly underwritten loans to qualifying borrowers within its markets. ~~As reflected in the loan table, at March 31, 2022, the largest components of the Company’s loan portfolio consisted of~~ The Company seeks to mitigate risks attributable to our most highly concentrated portfolios—commercial real estate, commercial and ~~commercial &~~ industrial, ~~loans. The risks attributable to these concentrations are mitigated by the Company’s~~and construction and land development—through its credit underwriting and monitoring processes, including oversight by a centralized credit administration function and credit policy and risk management committee, as well as through its seasoned bankers ~~focusing their~~that focus on lending to borrowers with proven track records in markets with which the Company is familiar.

~~The Company had no short-term loan modifications related to COVID-19 as of March 31, 2022 and had insignificant short-term loan modifications related to COVID-19 as of December 31, 2021.~~

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Table of Contents

Asset Quality

Overview

At March 31, ~~2022, the Company experienced decreases in~~2023, NPAs ~~compared to December 31, 2021 and decreases in accruing past due loan levels~~ as a percentage of ~~total~~ LHFI ~~compared to the prior year end. Net charge-offs decreased $1.2 million~~increased 1 basis point from the prior ~~year~~quarter to 0.20% and included nonaccrual LHFI of $29.1 million. Net charge-offs were ~~insignificant~~$4.6 million for the ~~quarter~~three months ended March 31, ~~2022.~~2023, compared to insignificant net charge offs for the same period in the prior year. The ACL at March 31, 2023 increased $7.3 million from December 31, ~~2021 primarily~~2022 to $131.7 million, due to ~~increased~~increasing uncertainty in the ~~macroeconomic~~economic outlook and ~~the impact of~~ loan growth induring the first quarter of ~~2022.~~2023.

The Company ~~believes its continued proactive efforts~~continues to ~~effectively manage its loan portfolio, combined with the unprecedented government stimulus and programs and regulatory support, have contributed to the sustained~~experience historically low levels of ~~NPAs. The~~NPAs, however, the economic environment in the Company’s ~~efforts included identifying potential problem credits through early identification~~footprint could be impacted as persistent inflation, higher interest rates, and ~~diligent monitoring~~the threat of ~~specific problem credits where the uncertainty has been realized, or conversely, has been reduced or eliminated.~~a recession looms, which could increase NPAs in future periods. The Company continues to refrain from originating or purchasing loans from foreign entities. The Company selectively originates loans to higher risk borrowers. The Company’s loan portfolio generally does not include exposure to option adjustable rate mortgage products, high loan-to-value ratio mortgages, interest only mortgage loans, subprime mortgage loans or mortgage loans with initial teaser rates, which are all considered higher risk instruments.

During the first quarter of 2023, the Company transferred a nonaccrual commercial real estate loan, totaling $7.1 million, from LHFI to LHFS, resulting in nonaccrual loans totaling $36.2 million at March 31, 2023. The below amounts exclude LHFS.

Nonperforming Assets

At March 31, ~~2022,~~2023, NPAs totaled ~~$30.7~~$29.1 million, ~~a decrease~~an increase of ~~$2.1~~$2.0 million or ~~6.3%~~7.4% from December 31, ~~202~~1.2022. NPAs as a percentage of total outstanding ~~loans~~LHFI at M~~arch~~March 31, ~~2022~~2023 were ~~0.23%~~0.20%, ~~a decrease~~an increase of ~~2 bps~~1 bp from December 31, ~~2021~~.

2022.

The following table shows a summary of asset quality balances and related ratios as of and for the quarters ended (dollars in thousands):

March 31,

December 31,


2022

2021

Nonaccrual loans

$
29,032

$
31,100

Foreclosed properties

1,696

1,696

Total NPAs

30,728

32,796

Loans past due 90 days and accruing interest

8,247

9,132

Total NPAs and loans past due 90 days and accruing interest

$
38,975

$
41,928

Performing TDRs

$
12,157

$
10,313

Balances





Allowance for loan and lease losses

$
102,591

$
99,787

Allowance for credit losses

110,591

107,787

Average loans, net of deferred fees and costs

13,300,789

13,082,412

Loans, net of deferred fees and costs

13,459,349

13,195,843

Ratios





Nonaccrual loans to total loans

0.22
%

0.24
%
NPAs to total loans

0.23
%

0.25
%
NPAs & loans 90 days past due and accruing interest to total loans

0.29
%

0.32
%
NPAs to total loans & foreclosed property

0.23
%

0.25
%
NPAs & loans 90 days past due and accruing interest to total loans & foreclosed property

0.29
%

0.32
%
ALLL to nonaccrual loans

353.37
%

320.86
%
ALLL to nonaccrual loans & loans 90 days past due and accruing interest

275.20
%

248.03
%
ACL to nonaccrual loans

380.93
%

346.58
%


	March 31,			December 31,
	2023			2022
Nonaccrual LHFI	$	29,082		$	27,038
Foreclosed properties		29			76
Total NPAs		29,111			27,114
LHFI past due 90 days and accruing interest		7,244			7,490
Total NPAs and LHFI past due 90 days and accruing interest	$	36,355		$	34,604


Balances
Allowance for loan and lease losses	$	116,512		$	110,768
Allowance for credit losses		131,711			124,443
Average loans, net of deferred fees and costs		14,505,611			13,671,714
LHFI, net of deferred fees and costs		14,584,280			14,449,142

Ratios
Nonaccrual LHFI to total LHFI		0.20	%		0.19	%
NPAs to total LHFI		0.20	%		0.19	%
NPAs & LHFI 90 days past due and accruing interest to total LHFI		0.25	%		0.24	%
NPAs to total LHFI & foreclosed property		0.20	%		0.19	%
NPAs & LHFI 90 days past due and accruing interest to total LHFI & foreclosed property		0.25	%		0.24	%
ALLL to nonaccrual LHFI		400.63	%		409.68	%
ALLL to nonaccrual LHFI & LHFI 90 days past due and accruing interest		320.74	%		320.81	%
ACL to nonaccrual LHFI		452.90	%		460.25	%

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NPAs include nonaccrual LHFI, which totaled $29.1 million at March 31, ~~2022 included $29.0 million in nonaccrual loans,~~2023, a net ~~decrease~~increase of ~~$2.1~~$2.0 million or ~~6.6%~~7.6% from December 31, ~~2021.~~2022. The following table shows the activity in nonaccrual ~~loans~~LHFI for the quarters ended (dollars in thousands):


	March 31,		December 31,		March 31,		December 31,
	2022		2021		2023		2022
Beginning Balance	$	31,100	$	35,472	$	27,038	$	26,500
Net customer payments		(4,132)		(5,068)		(1,755)		(1,805)
Additions		2,087		1,294		4,151		2,935
Charge-offs		(23)		(598)		(39)		(461)
Loans returning to accruing status						(313)		(131)
Ending Balance	$	29,032	$	31,100	$	29,082	$	27,038

The following table presents the composition of nonaccrual ~~loans~~LHFI and the coverage ratio, which is the ALLL expressed as a percentage of nonaccrual ~~loans,~~LHFI, as of (dollars in thousands):


	March 31,			December 31,			March 31,			December 31,
	2022			2021			2023			2022
Construction and Land Development	$	869		$	2,697		$	363		$	307
Commercial Real Estate - Owner Occupied		4,865			5,637			6,174			7,178
Commercial Real Estate - Non-owner Occupied		3,287			3,641			1,481			1,263
Multifamily Real Estate		—			113
Commercial & Industrial		1,975			1,647			4,815			1,884
Residential 1-4 Family - Commercial		2,239			2,285			1,907			1,904
Residential 1-4 Family - Consumer		12,039			11,397			10,540			10,846
Residential 1-4 Family - Revolving		3,371			3,406			3,449			3,453
Auto		333			223			347			200
Consumer		54			54			6			3
Total	$	29,032		$	31,100		$	29,082		$	27,038
Coverage Ratio⁽¹⁾		353.37	%		320.86	%		400.63	%		409.68	%

⁽¹⁾Represents the ALLL divided by nonaccrual loans.

Past Due Loans

At March 31, ~~2022,~~2023 past due ~~loans~~LHFI still accruing interest totaled ~~$29.6~~$30.9 million or ~~0.22%~~0.21% of total LHFI, compared to ~~$29.9~~$30.0 million or ~~0.23%~~0.21% of total LHFI at December 31, ~~202~~1.2022. Of the total past due ~~loans~~LHFI still accruing interest, ~~$8.2~~$7.2 million or ~~0.06%~~0.05% of total LHFI were loans past due 90 days or more at March 31, ~~2022,~~2023, compared to ~~$9.1~~$7.5 million or ~~0.07%~~0.05% of total LHFI at December 31, ~~202~~1.2022.

Troubled Loan Modifications

The Company adopted ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, effective January 1, 2023 on a prospective basis. Refer to Note 1 “Summary of Significant Accounting Policies” in Part I, Item 1 of this Quarterly Report for information on the Company’s accounting policy for loan modifications to borrowers experiencing financial difficulty and how the Company defines TLMs. As of March 31, 2023, the Company had TLMs totaling $20.5 million.

Troubled Debt Restructurings

After the adoption of ASU 2022-02, the Company no longer has TDRs. The below information is presented for December 31, 2022, prior to adoption of ASU 2022-02.

A modification of a loan’s terms constitutes a TDR if the creditor grants a concession that it would not otherwise consider to the borrower for economic or legal reasons related to the borrower’s financial difficulties. Management strives to identify borrowers in financial difficulty early and work with them to modify their loan to more affordable terms before their loan reaches nonaccrual status. These modified terms may include rate reductions, extension of terms that are considered to be

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below market, conversion to interest only, principal forgiveness and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral.

The total recorded investment in TDRs at ~~March~~December 31, 2022 was ~~$19.7 million, an increase of $1.7 million or 9.8% from $18.0 million at December 31, 2021.~~$14.2 million. Of the ~~$19.7~~$14.2 million of TDRs at ~~March~~December 31, 2022, ~~$12.2~~$9.3 million or ~~61.7%~~65.3% were considered performing, while the remaining ~~$7.5~~$4.9 million were considered nonperforming. Of the $18.0 million of TDRs at December 31, 2021, $10.3 million or 57.4% were considered performing while the remaining $7.6 million were considered nonperforming. Loans are removed from TDR status in accordance with the established policy described in Note 1 “Summary of Significant Accounting Policies” in Item 8 “Financial Statements and Supplementary Data” in the Company’s 2021 Form 10-K.

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Net Charge-offs

For the first quarter ~~ended March 31, 2022,~~of 2023, net charge-offs were ~~less than 0.01%~~$4.6 million or 0.13% of total average ~~loans~~LHFI on an annualized basis, compared to ~~$1.2 million or 0.03%~~net charge-offs of less than 0.01% for the same quarter last year. The majority of net charge-offs in the first quarter of ~~2021. The net charge-offs of~~2023 related to two commercial loans ~~continue to be insignificant, driven by benign credit impacts since~~within the ~~pandemic began.~~commercial and industrial and commercial real estate portfolios.

Provision for Credit Losses

The Company recorded a provision for credit losses of ~~$2.8~~$11.9 million for the first quarter ~~ended March 31, 2022,~~of 2023, an increase of ~~$16.4~~$9.1 million compared to the ~~negative~~ provision for credit losses of ~~$13.6~~$2.8 million recorded during the same quarter of ~~2021.~~2022. The provision for credit losses for the first quarter of ~~2022~~2023 reflected a provision of ~~$2.8~~$10.4 million for loan losses and noa $1.5 million provision for unfunded commitments. The increased provision for credit losses is due to increasing uncertainty in the economic outlook and loan growth in the first three months of 2023.

Allowance for Credit Losses

At March 31, ~~2022,~~2023, the ACL was ~~$110.6~~$131.7 million and included an ALLL of ~~$102.6~~$116.5 million and ~~an RUC~~a reserve for unfunded commitments of ~~$8.0~~$15.2 million. The ACL at March 31, 2023 increased ~~$2.8~~$7.3 million from December 31, ~~2021, primarily~~2022, due to ~~increased~~increasing uncertainty in the ~~macroeconomic~~economic outlook and ~~the impact of~~ loan growth induring the first quarter of ~~2022.~~2023.

The ACL as a percentage of ~~the total loan portfolio and as a percentage of total adjusted loans~~⁽⁺⁾~~was 0.82% and 0.83%, respectively,~~LHFI increased to 0.90% at March 31, ~~2022 and~~2023, compared to 0.86% at December 31, ~~2021.~~2022.

The following table summarizes ~~activity in~~ the ~~ALLL~~ACL during the quarters ended (dollars in thousands):


	March 31,			December 31,			March 31,			December 31,
	2022			2021			2023			2022
Total ALLL	$	102,591		$	99,787		$	116,512		$	110,768
Total RUC		8,000			8,000
Total Reserve for Unfunded Commitments								15,199			13,675
Total ACL	$	110,591		$	107,787		$	131,711		$	124,443

ALLL to total loans		0.76	%		0.76	%
ACL to total loans		0.82	%		0.82	%
ALLL to total LHFI								0.80	%		0.77	%
ACL to total LHFI								0.90	%		0.86	%

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Table of Contents

The following table summarizes ~~the~~ net-charge off activity by loan segment for the ~~quarters ended~~periods indicated (dollars in thousands):


	March 31,									March 31,									Three months ended,									Three months ended,
	2022									2021									March 31, 2023									March 31, 2022
	Commercial			Consumer			Total			Commercial			Consumer			Total			Commercial			Consumer			Total			Commercial			Consumer			Total
Loans charged-off	$	(759)		$	(750)		$	(1,509)		$	(1,974)		$	(1,667)		$	(3,641)		$	(5,007)		$	(719)		$	(5,726)		$	(759)		$	(750)		$	(1,509)
Recoveries		726			787			1,513			1,606			863			2,469			515			652			1,167			726			787			1,513
Net charge-offs	$	(33)		$	37		$	4		$	(368)		$	(804)		$	(1,172)
Net (charge-offs) recoveries																			$	(4,492)		$	(67)		$	(4,559)		$	(33)		$	37		$	4
Net charge-offs to average loans⁽¹⁾		0.00	%		(0.01)	%		0.00	%		0.01	%		0.16	%		0.03	%		0.15	%		0.01	%		0.13	%		0.00	%		(0.01)	%		0.00	%

⁽¹⁾Annualized

The following table ~~shows~~summarizes the ACL activity by loan segment and the percentage of the ~~loan~~LHFI portfolio that the related ACL covers as of the quarters ended (dollars in thousands):


	March 31,									December 31,
	2022									2021									March 31, 2023									December 31, 2022
	Commercial			Consumer			Total			Commercial			Consumer			Total			Commercial			Consumer			Total			Commercial			Consumer			Total
ACL	$	87,182		$	23,409		$	110,591		$	85,323		$	22,464		$	107,787		$	102,336		$	29,375		$	131,711		$	95,527		$	28,916		$	124,443
Loan %⁽¹⁾		84.7	%		15.3	%		100.0	%		84.7	%		15.3	%		100.0	%		84.2	%		15.8	%		100.0	%		84.3	%		15.7	%		100.0	%
ACL to total loans		0.77	%		1.13	%		0.82	%		0.76	%		1.11	%		0.82	%
ACL to total LHFI																				0.83	%		1.27	%		0.90	%		0.78	%		1.27	%		0.86	%

⁽¹⁾The percentage represents the loan balance divided by total ~~loans~~loans.

The increase in the ACL for both loan segments is due to increased uncertainty in the macroeconomic outlook and the impact of loan growth in the first ~~quarter~~three months of ~~2022.~~2023.

Deposits

As of March 31, ~~2022,~~2023, total deposits were $16.5 billion, ~~a decrease~~an increase of ~~$126.8~~$524.2 million or ~~3.1%~~13.3% annualized from December 31, ~~2021.~~2022. Total interest-bearing deposits consist of ~~NOW,~~Interest checking accounts, money market, savings, and time deposit account balances. Total time deposit balances of ~~$1.7~~$2.2 billion accounted for ~~15.1%~~18.4% of total interest-bearing deposits at March 31, ~~2022,~~2023, compared to ~~$1.9~~$1.8 billion and ~~16.3%~~16.4% at December 31, ~~2021.~~2022.

The following table presents the deposit balances by major category as of the quarters ended (dollars in thousands):


	March 31, 2022				December 31, 2021				March 31, 2023				December 31, 2022
			% of total				% of total				% of total				% of total
Deposits:	Amount		deposits		Amount		deposits		Amount		deposits		Amount		deposits
Non-interest bearing	$	5,370,063	32.6	%	$	5,207,324	31.3	%
NOW accounts		4,121,257	25.0	%		4,176,032	25.1	%
Interest checking accounts									$	4,714,366	28.6	%	$	4,186,505	26.3	%
Money market accounts		4,151,155	25.2	%		4,249,858	25.6	%		3,547,514	21.6	%		3,922,533	24.6	%
Savings accounts		1,166,922	7.1	%		1,121,297	6.8	%		1,047,914	6.4	%		1,130,899	7.1	%
Time deposits of $250,000 and over		365,796	2.2	%		452,193	2.7	%
Other time deposits		1,309,030	7.9	%		1,404,364	8.5	%
Customer time deposits of $250,000 and over										541,447	3.3	%		405,060	2.5	%
Other customer time deposits										1,648,747	10.0	%		1,396,011	8.8	%
Time Deposits										2,190,194	13.3	%		1,801,071	11.3	%
Total interest-bearing customer deposits										11,499,988	69.9	%		11,041,008	69.3	%
Brokered deposits										377,913	2.3	%		7,430	0.0	%
Total interest-bearing deposits									$	11,877,901	72.2	%	$	11,048,438	69.3	%
Demand deposits										4,578,009	27.8	%		4,883,239	30.7	%
Total Deposits ⁽¹⁾	$	16,484,223	100.0	%	$	16,611,068	100.0	%	$	16,455,910	100.0	%	$	15,931,677	100.0	%

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⁽¹⁾ Includes estimated uninsured deposits of ~~$5.7~~$5.5 billion and ~~$5.9~~$6.5 billion as of March 31, ~~2022~~2023 and December 31, ~~2021, respectively. Amounts are based on estimated amounts~~2022, respectively, and collateralized deposits of ~~uninsured deposits~~$924.0 million and $951.9 million as of ~~the reported period.~~March 31, 2023 and December 31, 2022, respectively.

The Company may also borrow additional funds by purchasing certificates of deposit through a nationally recognized network of financial institutions. The Company utilizes this funding source ~~when rates are more favorable than other funding sources. There~~as part of its overall liquidity management strategy. As of March 31, 2023 and December 31, 2022, there were no$135.6 million and $7.5 million, respectively, purchased certificates of deposit included in certificates of deposit on the Company’s Consolidated Balance

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Sheets as of March 31, 2022 and December 31, 2021. The reduced usage of purchase certificates of deposit as of March 31, 2021 and December 31, 2021, as compared to historical levels, is due to the increase in customer deposits since the beginning of COVID-19. Sheets.

Maturities of ~~uninsured~~ time deposits in excess of FDIC insurance limits as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 were as follows (dollars in thousands):


	March 31, 2022		December 31, 2021
	Amount		Amount		March 31, 2023		December 31, 2022
Within 3 Months	$	19,862	$	42,696
3 - 6 Months		68,788		30,313
6 - 12 Months		85,752		101,942
3 Months or Less					$	125,840	$	14,225
Over 3 Months through 6 Months						120,931		36,907
Over 6 Months through 12 Months						189,297		88,410
Over 12 Months		39,191		104,242		36,292		78,268
Total	$	213,593	$	279,193	$	472,360	$	217,810

Capital Resources

Capital resources represent funds, earned or obtained, over which financial institutions can exercise greater or longer control in comparison with deposits and borrowed funds. The adequacy of the Company’s capital is reviewed by management on an ongoing basis with reference to size, composition, and quality of the Company’s resources and consistency with regulatory requirements and industry standards. Management seeks to maintain a capital structure that will assure an adequate level of capital to support anticipated asset growth and to absorb potential losses, yet allow management to effectively leverage its capital to maximize return to shareholders.

~~On December 10, 2021,~~Under the Company’s Board of Directors authorized the Repurchase Program to purchase up to $100.0 million of the Company’s common stock through December 9, 2022 in open market transactions or privately negotiated transactions, including pursuant to a trading plan in accordance with Rule 10b5-1 and /or Rule 10b-18 under the Exchange Act. During the quarter ended March 31, 2022, the Company repurchased an aggregate of approximately 630,000 shares (or $25.0 million), at an average price of $39.73. No shares were repurchased during the quarter ended December 31, 2021.

For information about the Company’s stock repurchase activity and the Repurchase Program, please refer to Note 9 “Stockholders’ Equity” in Part I, Item 1 and Part II, Item 2 of this Quarterly Report.

On January 28, 2022, the Company announced that its Board of Directors declared a quarterly dividend on the outstanding shares of its Series A preferred stock. The dividend of $171.88 per share (equivalent to $0.43 per outstanding depositary share) was payable on March 1, 2022 to preferred shareholders of record as of February 14, 2022. The Board also declared a quarterly dividend of $0.28 per share of common stock. The common stock dividend was payable on February 25, 2022 to common shareholders on record as of February 11, 2022.

~~The Federal Reserve requires~~Basel III capital rules, the Company and the Bank tomust comply with the following minimum capital ratios: (i) a common equity Tier 1 capital ratio of 7.0% of risk-weighted assets; (ii) a Tier 1 capital ratio of 8.5% of risk-weighted assets; (iii) a total capital ratio of 10.5% of risk-weighted assets; and (iv) a leverage ratio of 4.0% of total assets. These ratios, with the exception of the leverage ratio, include a 2.5% capital conservation buffer, which is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of common equity Tier 1 to risk-weighted assets above the minimum but below the conservation buffer will face constraints on dividends, equity repurchases, and compensation based on the amount of the shortfall.

On March 27, 2020, the banking agencies issued an interim final rule that allows the Company to phase in the impact of adopting the CECL methodology up to two years, with a three-year transition period to phase out the cumulative benefit to regulatory capital provided during the two-year delay. The Company is allowed to include the impact of the CECL transition, which is defined as the CECL Day 1 impact to capital plus 25% of the Company’s provision for credit losses during 2020, in regulatory capital through 2021. The Company elected to ~~phase-in~~phase in the regulatory capital impact as permitted under the aforementioned interim final rule. ~~Beginning in 2022, the~~The CECL transition amount will ~~begin to impact~~be phased out of regulatory capital ~~by phasing it in~~ over a three-year period, beginning 2022 and ending in 2024.

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The table summarizes the Company’s regulatory capital and related ratios for the periods presented ⁽²⁾(dollars in thousands):


	March 31,	December 31,	March 31,	March 31,	December 31,	March 31,
	2022	2021	2021	2023	2022	2022
Common equity Tier 1 capital	$ 1,557,135	$ 1,569,752	$ 1,547,675	1,690,040	1,684,088	$ 1,557,135
Tier 1 capital	1,723,491	1,736,108	1,714,031	1,856,396	1,850,444	1,723,491
Tier 2 capital	454,002	437,435	374,101	489,827	468,716	454,002
Total risk-based capital	2,177,493	2,173,543	2,088,132	2,346,224	2,319,160	2,177,493
Risk-weighted assets	15,795,239	15,336,432	14,651,486	17,049,045	16,930,559	15,795,239
Capital ratios:
Common equity Tier 1 capital ratio	9.86%	10.24%	10.56%	9.91%	9.95%	9.86%
Tier 1 capital ratio	10.91%	11.32%	11.70%	10.89%	10.93%	10.91%
Total capital ratio	13.79%	14.17%	14.25%	13.76%	13.70%	13.79%
Leverage ratio (Tier 1 capital to average assets)	9.08%	9.01%	9.18%	9.38%	9.42%	9.07%
Capital conservation buffer ratio ⁽¹⁾	4.91%	5.32%	5.70%	4.89%	4.93%	4.91%
Common equity to total assets	11.79%	12.68%	12.81%	11.31%	10.78%	11.79%
Tangible common equity to tangible assets ⁽⁺⁾	7.21%	8.20%	8.24%	6.91%	6.43%	7.21%

⁽¹⁾Calculated by subtracting the regulatory minimum capital ratio requirements from the Company’s actual ratio results for Common equity, Tier 1, and Total ~~risk based~~risk-based capital. The lowest of the three measures represents the Company’s capital conservation buffer ratio.

⁽²⁾All ratios and amounts at March 31, ~~2022~~2023 are estimates and subject to change pending the Company’s filing of its FR Y9-C. All other periods are presented as filed.

⁽⁺⁾ Refer to “Non-GAAP Financial Measures” ~~section~~ within this Item 2 for more information about this non-GAAP financial measure, including a reconciliation of this measure to the most directly comparable financial measure calculated in accordance with GAAP.

For ~~the quarter ended March 31, 2022, the Company’s common equity~~more information about our off-balance sheet obligations and cash requirements, refer to total assets capital ratio and the tangible common equity to tangible assets capital ratio decreased from the prior quarter primarily due to the unrealized losses on the AFS securities portfolio recorded in OCI due to market interest rate increases in the first quarter of 2022.“Liquidity” within this Item 2.

NON-GAAP FINANCIAL MEASURES

In this Quarterly Report, the Company has provided supplemental performance measures on a tax-equivalent, tangible, operating, adjusted or pre-tax pre-provision basis. These non-GAAP financial measures are a supplement to GAAP, which is used to prepare the Company’s financial statements and should not be considered in isolation or as a substitute for comparable measures calculated in accordance with GAAP. In addition, the Company’s non-GAAP financial measures may not be comparable to non-GAAP financial measures of other companies. The Company uses the non-GAAP financial measures discussed herein in its analysis of the Company’s performance. The Company’s management believes that these non-GAAP financial measures provide additional understanding of ongoing operations, enhance comparability of results of operations with prior periods and show the effects of significant gains and charges in the periods presented without the impact of items or events that may obscure trends in the Company’s underlying performance.

Net interest income (FTE)~~, total revenue (FTE)~~ and total ~~adjusted~~ revenue (FTE), which are used in computing net interest margin (FTE) ~~and adjusted operating efficiency ratio (FTE)~~, ~~respectively,~~ provide valuable additional insight into the net interest margin ~~and the efficiency ratio~~ by adjusting for differences in the tax treatment of interest income sources. The entire FTE adjustment is attributable to interest income on earning assets, which is used in computing the yield on earning assets. Interest expense and the related cost of interest-bearing liabilities and cost of funds ratios are not affected by the FTE components.

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The following table reconciles non-GAAP financial measures from the most directly comparable GAAP financial measures for each of the periods presented (dollars in thousands):


	Three Months Ended						Three Months Ended
	March 31,						March 31,
	2022			2021			2023			2022
Interest Income (FTE)
Interest and dividend income (GAAP)	$	138,456		$	147,673		$	217,546		$	138,456
FTE adjustment		3,336			3,053			3,788			3,336
Interest and dividend income FTE (non-GAAP)	$	141,792		$	150,726
Interest and dividend income (FTE) (non-GAAP)							$	221,334		$	141,792
Average earning assets	$	17,885,018		$	17,692,095		$	18,238,088		$	17,885,018
Yield on interest-earning assets (GAAP)		3.14	%		3.39	%		4.84	%		3.14	%
Yield on interest-earning assets (FTE) (non-GAAP)		3.22	%		3.46	%		4.92	%		3.22	%
Net Interest Income (FTE)
Net interest income (GAAP)	$	130,931		$	134,898		$	153,443		$	130,931
FTE adjustment		3,336			3,053			3,788			3,336
Net interest income (FTE) (non-GAAP)	$	134,267		$	137,951		$	157,231		$	134,267
Noninterest income (GAAP)		30,153			30,985			9,628			30,153
Total revenue (FTE) (non-GAAP)	$	164,420		$	168,936		$	166,859		$	164,420
Average earning assets	$	17,885,018		$	17,692,095		$	18,238,088		$	17,885,018
Net interest margin (GAAP)		2.97	%		3.09	%		3.41	%		2.97	%
Net interest margin (FTE) (non-GAAP)		3.04	%		3.16	%		3.50	%		3.04	%

Tangible common equity and tangible assets are used in the calculation of certain profitability, capital, and per share ratios. The Company believes tangible common equity, tangible assets, and the related ratios are meaningful measures of capital adequacy because they provide a meaningful base for period-to-period and company-to-company comparisons, which the Company believes will assist investors in assessing the capital of the Company and its ability to absorb potential losses. The Company believes tangible common equity is an important indication of its ability to grow organically and through business combinations as well as its ability to pay dividends and to engage in various capital management strategies. Tangible common equity is used in the calculation of certain profitability, capital, and per share ratios. The Company believes tangible common equity and related ratios are meaningful measures of capital adequacy because they provide a meaningful basis for period-to-period and company-to-company comparisons, which the Company believes will assist investors in assessing the capital of the Company and its ability to absorb potential losses.

The following table reconciles non-GAAP financial measures from the most directly comparable GAAP financial measures for each of the periods presented (dollars in thousands):


	Three Months Ended									Three Months Ended
	March 31,			December 31,			March 31,			March 31,			December 31,			March 31,
	2022			2021			2021			2023			2022			2022
Tangible Assets
Ending Assets (GAAP)	$	19,782,430		$	20,064,796		$	19,854,612		$	20,103,370		$	20,461,138		$	19,782,430
Less: Ending goodwill		935,560			935,560			935,560			925,211			925,211			935,560
Less: Ending amortizable intangibles		40,273			43,312			53,471			24,482			26,761			40,273
Ending tangible assets (non-GAAP)	$	18,806,597		$	19,085,924		$	18,865,581		$	19,153,677		$	19,509,166		$	18,806,597
Tangible Common Equity
Ending Equity (GAAP)	$	2,498,335		$	2,710,071		$	2,709,732		$	2,440,236		$	2,372,737		$	2,498,335
Less: Ending goodwill		935,560			935,560			935,560			925,211			925,211			935,560
Less: Ending amortizable intangibles		40,273			43,312			53,471			24,482			26,761			40,273
Less: Perpetual preferred stock		166,357			166,357			166,357			166,357			166,357			166,357
Ending tangible common equity (non-GAAP)	$	1,356,145		$	1,564,842		$	1,554,344		$	1,324,186		$	1,254,408		$	1,356,145
Average equity (GAAP)	$	2,660,984		$	2,715,610		$	2,719,941		$	2,423,600			2,321,208		$	2,660,984
Less: Average goodwill		935,560			935,560			935,560			925,211			925,211			935,560
Less: Average amortizable intangibles		41,743			44,866			55,450			25,588			27,909			41,743
Less: Average perpetual preferred stock		166,356			166,356			166,356			166,356			166,356			166,356
Average tangible common equity (non-GAAP)	$	1,517,325		$	1,568,828		$	1,562,575		$	1,306,445		$	1,201,732		$	1,517,325
Common equity to total assets (GAAP)		11.79	%		12.68	%		12.81	%		11.31	%		10.78	%		11.79	%
Tangible common equity to tangible assets (non-GAAP)		7.21	%		8.20	%		8.24	%		6.91	%		6.43	%		7.21	%
Book value per share (GAAP)	$	31.12		$	33.80		$	32.37
Tangible book value per share (non-GAAP)	$	18.10		$	20.79		$	19.78
Book value per common share (GAAP)										$	30.53		$	29.68		$	31.12

Adjusted operating measures exclude the losses ~~related to balance sheet repositioning (principally composed of losses on debt extinguishment), gains~~ on sale of securities, a legal reserve associated with an ongoing regulatory matter previously disclosed, as well as strategic branch ~~closing~~closure initiatives and related facility consolidation costs (principally composed of real estate, leases, and other assets write downs, as well as severance ~~associated with branch closing~~ and ~~corporate~~ expense reduction initiatives). The Company believes these non-GAAP adjusted measures provide investors with important information about the continuing economic results of the organization’s operations. ~~Prior periods in this Quarterly Report have been adjusted for previously announced branch closing and corporate expense reduction initiatives.~~

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The following table reconciles non-GAAP financial measures from the most directly comparable GAAP financial measures for each of the periods presented (dollars in thousands, except per share amounts):


	Three Months Ended				Three Months Ended
	March 31,				March 31,
	2022		2021		2023		2022
Adjusted Operating Earnings & EPS
Net income (GAAP)	$	43,690	$	56,189	$	35,653	$	43,690
Plus: Net loss related to balance sheet repositioning, net of tax		—		11,609
Less: Gain on sale of securities, net of tax		—		62
Less: Gain on Visa, Inc. Class B common stock, net of tax		—		—
Plus: Branch closing and facility consolidation costs, net of tax		4,351		730
Plus: Legal reserve, net of tax						3,950		—
Plus: Strategic branch closing and facility consolidation costs, net of tax						—		4,351
Plus: Loss on sale of securities, net of tax						10,586		—
Adjusted operating earnings (non-GAAP)	$	48,041	$	68,466	$	50,189	$	48,041
Less: Dividends on preferred stock		2,967		2,967		2,967		2,967
Adjusted operating earnings available to common shareholders (non-GAAP)	$	45,074	$	65,499	$	47,222	$	45,074

Weighted average common shares outstanding, diluted		75,556,127		78,884,235		74,835,514		75,556,127
Earnings per common share, diluted (GAAP)	$	0.54	$	0.67	$	0.44	$	0.54
Adjusted operating earnings per common share, diluted (non-GAAP)	$	0.60	$	0.83	$	0.63	$	0.60

Adjusted operating measures exclude the amortization of intangible assets, ~~and the~~ losses ~~related to balance sheet repositioning, principally composed of losses on debt extinguishment and gains~~ on sale of ~~securities.~~securities, a legal reserve associated with an ongoing regulatory matter previously disclosed, as well as strategic branch closure initiatives and related facility consolidation costs (principally composed of real estate, leases, and other assets write downs, as well as severance and expense reduction initiatives). The Company believes ~~this~~these adjusted ~~measure provides~~measures provide investors with important information about the ~~combined~~continuing economic results of the organization’s operations. The adjusted operating efficiency ratio (FTE) excludes the amortization of intangible assets and losses related to balance sheet repositioning (principally composed of losses on debt extinguishment), as well as branch closing and facility consolidation costs. This measure is similar to the measure utilized by the Company when analyzing corporate performance and is also similar to the measure utilized for incentive compensation. Net interest income (FTE) ~~and total adjusted revenue (FTE)~~, which ~~are~~is used in computing net interest margin (FTE) ~~and adjusted operating efficiency ratio (FTE), respectively, provide~~provides valuable additional insight into the net interest margin ~~and the efficiency ratio~~ by adjusting for differences in tax treatment of interest income sources. The entire FTE adjustment is attributable to interest income on earning assets, which is used in computing yield on earning assets. Interest expense ~~and the related cost of interest-bearing liabilities and cost of funds ratios are~~is not affected by the FTE components.

The following table reconciles non-GAAP financial measures from the most directly comparable GAAP financial measures for each of the periods presented (dollars in thousands):


	Three Months Ended						Three Months Ended
	March 31,						March 31,
	2022			2021			2023		2022
Adjusted Operating Noninterest Expense, Noninterest Income & Efficiency Ratio
Adjusted Operating Noninterest Expense & Noninterest Income
Noninterest expense (GAAP)	$	105,321		$	111,937		$	108,274	$	105,321
Less: Amortization of intangible assets		3,039			3,730			2,279		3,039
Less: Losses related to balance sheet repositioning		—			14,695
Less: Branch closing and facility consolidation costs		5,508			924
Less: Legal reserve								5,000		—
Less: Strategic branch closing and facility consolidation costs								—		5,508
Adjusted operating noninterest expense (non-GAAP)	$	96,774		$	92,588		$	100,995	$	96,774
Noninterest income (GAAP)	$	30,153		$	30,985		$	9,628	$	30,153
Less: Gains on sale of securities		—			78
Plus: Loss on sale of securities								13,400		—
Adjusted operating noninterest income (non-GAAP)	$	30,153		$	30,907		$	23,028	$	30,153
Net interest income (FTE) (non-GAAP)	$	134,267		$	137,951
Adjusted operating noninterest income (non-GAAP)		30,153			30,907
Total adjusted revenue (FTE)(non-GAAP)	$	164,420		$	168,858
Efficiency ratio (GAAP)		65.38	%		67.48	%
Adjusted operating efficiency ratio (FTE) (non-GAAP)		58.86	%		54.83	%

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PPP adjustment impact excludes the unforgiven portion of PPP loans. The Company believes LHFI (net of deferred fees and costs), excluding PPP is useful to investors as it provides more clarity on the Company’s organic growth.

~~The following table reconciles non-GAAP financial measures from the most directly comparable GAAP financial measures for each of the periods presented (dollars in thousands):~~

Three Months Ended

March 31,

December 31,

March 31,

2022

2021

2021

Adjusted Loans

Loans held for investment (net of deferred fees and costs)(GAAP)

$
13,459,349

$
13,195,843

$
14,272,280

Less: PPP adjustments (net of deferred fees and costs)

67,444

150,363

1,512,714

Total adjusted loans (non-GAAP)

$
13,391,905

$
13,045,480

$
12,759,566

Average loans held for investment (net of deferred fees and costs) (GAAP)

$
13,300,789

$
13,082,412

$
14,064,123

Less: Average PPP adjustments (net of deferred fees and costs)

103,041

288,204

1,309,326

Total adjusted average loans (non-GAAP)

$
13,197,748

$
12,794,208

$
12,754,797

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Sensitivity

Market risk is the risk of loss arising from adverse changes in the fair value of financial instruments due to changes in interest rates, exchange rates, and equity prices. The Company’s market risk is composed primarily of interest rate risk. The ~~ALCO of the Company~~Company’s asset liability committee is responsible for reviewing the interest rate sensitivity position ~~of the Company~~ and establishing policies to monitor and limit exposure to this risk. The Company’s Board of Directors reviews and approves the guidelines established by ~~ALCO.~~the asset liability committee.

~~Interest~~The Company monitors interest rate risk ~~is monitored~~ through the use of three complementary modeling tools: static gap analysis, earnings simulation modeling, and economic value simulation (net present value estimation). Each of these models measures changes in a variety of interest rate scenarios. While each of the interest rate risk models has limitations, taken together, they represent a reasonably comprehensive view of the magnitude of the Company’s interest rate risk, ~~in the Company,~~ the distribution of risk along the yield

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curve, the level of risk through time, and the amount of exposure to changes in certain interest rate relationships. ~~Static~~The Company’s static gap analysis, which measures aggregate re-pricing values, is utilized less ~~utilized~~often because it does not effectively ~~measure~~take into account the ~~options risk impact on~~optionality embedded into many assets and liabilities and, therefore, the Company ~~and is~~does not ~~addressed~~address it here. ~~Earnings~~The Company uses earnings simulation and economic value simulation models on a regular basis, which more effectively measure the cash flow and optionality impacts, and these models are ~~utilized by management on a regular basis and are explained~~discussed below.

The Company determines the overall magnitude of interest sensitivity risk and then formulates policies and practices governing asset generation and pricing, funding sources and pricing, and off-balance sheet commitments. These decisions are based on management’s expectations regarding future interest rate movements, the states of the national, regional and local economies, and other financial and business risk factors. The Company uses simulation modeling to measure and monitor the effect of various interest rate scenarios and business strategies on net interest income. This modeling reflects interest rate changes and the related impact on net interest income and net income over specified time horizons.

Earnings Simulation ~~Analysis~~Modeling

Management uses earnings simulation ~~analysis~~modeling to measure the sensitivity of net interest income to changes in interest rates. The model calculates an earnings estimate based on current and projected balances and rates. This method is subject to the accuracy of the assumptions that underlie the process, but the Company believes it provides a better analysis of the sensitivity of earnings to changes in interest rates than other analyses, such as the static gap analysis ~~discussed~~noted above.

~~Assumptions~~The Company derives the assumptions used in the model ~~are derived~~ from historical trends and management’s outlook, ~~and include~~including expected loan and deposit growth rates and projected yields and rates. These assumptions may not ~~materialize~~be realized and unanticipated events and circumstances may ~~occur.~~also occur that cause the assumptions to be inaccurate. The model also does not take into account any future actions of management to mitigate the impact of interest rate changes. ~~Such~~The Company monitors the assumptions ~~are monitored by management~~ and periodically ~~adjusted~~adjusts them as deemed appropriate. ~~All~~In the Company’s modeling, it is assumed that all maturities, calls, and prepayments in the securities portfolio are ~~assumed to be~~ reinvested in like ~~instruments.~~instruments, and the Company bases the MBS prepayment assumptions ~~are based~~ on industry estimates of prepayment speeds for portfolios with similar coupon ranges and seasoning. ~~Different~~The Company also uses different interest rate scenarios and yield curves ~~are used~~ to measure the sensitivity of earnings to changing interest rates.

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Interest rates on different asset and liability accounts move differently when the prime rate changes and these differences are reflected in the different rate scenarios.

The Company uses its simulation model to estimate earnings in rate environments where rates are instantaneously shocked up or down around a “most likely” rate scenario, based on implied forward rates and futures curves. The analysis assesses the impact on net interest income over a 12-month time horizon after an immediate increase or “shock” in rates, of 100 bps up to 300 bps. The model, under all scenarios, does not drop the index below zero.

The following table represents the interest rate sensitivity on net interest income for the Company across the rate paths modeled for balances as of March 31, ~~2022,~~2023, December 31, ~~2021,~~2022, and March 31, ~~2021:~~2022:


	Change In Net Interest Income			Change In Net Interest Income
	March 31,	December 31,	March 31,	March 31,	December 31,	March 31,
	2022	2021	2021	2023	2022	2022
	%	%	%	%	%	%
Change in Yield Curve:
+300 basis points	15.55	30.15	14.71	7.91	11.73	15.55
+200 basis points	10.42	20.39	9.80	5.01	8.25	10.42
+100 basis points	5.36	10.33	4.76	2.06	4.65	5.36
Most likely rate scenario	—	—	—	—	—	—
-100 basis points	(7.40)	(9.20)	(3.92)	(4.75)	(3.18)	(7.40)
-200 basis points	(14.17)	(13.62)	(5.02)	(8.94)	(7.40)	(14.17)
-300 basis points				(11.46)	(12.21)	(19.67)

~~Asset sensitivity indicates that~~If an institution is asset sensitive its assets reprice more quickly than its liabilities and net interest income would be expected to increase in a rising interest rate environment, ~~the Company’s~~and decrease in a falling interest rate environment. If an institution is liability

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sensitive its liabilities reprice more quickly than its assets and net interest income would ~~increase and in a decreasing interest rate environment, the Company’s net interest income would decrease. Liability sensitivity indicates that~~be expected to decrease in a rising interest rate environment ~~the Company’s net interest income would decrease~~ and increase in a ~~decreasing~~falling interest rate ~~environment, the Company’s net interest income would increase.~~environment.

From a net interest income perspective, the Company was ~~more~~less asset sensitive as of March 31, ~~2022,~~2023, compared to its position as of March 31, ~~2021.~~2022. This shift is in part due to the changing market characteristics of certain loan and deposit products and in part due to various other balance sheet strategies. The Company would expect net interest income to increase with an immediate increase or shock in market rates. In the decreasing interest rate environments, the Company would expect a decline in net interest income as interest-earning assets re-price ~~at lower rates and~~more quickly than interest-bearing ~~deposits remain at or near their floors.~~deposits.

Economic Value ~~Simulation~~Modeling

Economic value simulation modeling is used to calculate the estimated fair value of assets and liabilities over different interest rate environments. ~~Economic~~The Company calculates the economic values ~~are calculated~~ based on discounted cash flow analysis. The net economic value of equity is the economic value of all assets minus the economic value of all liabilities. The change in net economic value over different rate environments is an indication of the longer-term earnings capability of the balance sheet. The Company uses the same assumptions ~~are used~~ in the economic value simulation model as in the earnings ~~simulation.~~simulation model. The economic value simulation model uses instantaneous rate shocks to the balance sheet.

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The following chart reflects the estimated change in net economic value over different rate environments using economic value simulation for the balances at the quarterly periods ended March 31, ~~2022,~~2023, December 31, ~~2021,~~2022, and March 31, ~~2021:~~2022:


	Change In Economic Value of Equity			Change In Economic Value of Equity
	March 31,	December 31,	March 31,	March 31,	December 31,	March 31,
	2022	2021	2021	2023	2022	2022
	%	%	%	%	%	%
Change in Yield Curve:
+300 basis points	(9.59)	(6.85)	5.79	(11.44)	(12.32)	(9.59)
+200 basis points	(6.16)	(3.55)	4.58	(7.91)	(8.41)	(6.16)
+100 basis points	(2.90)	(1.22)	2.86	(4.05)	(4.25)	(2.90)
Most likely rate scenario	-	—	—	—	—	—
-100 basis points	0.56	(4.82)	(5.62)	3.01	3.55	0.56
-200 basis points	(3.93)	(12.89)	(7.29)	5.30	6.41	(3.93)
-300 basis points				5.90	5.71	(12.13)

As of March 31, ~~2022,~~2023, the Company’s economic value of equity is generally less asset sensitive in a rising interest rate environment compared to its position as of March 31, ~~2021~~2022 primarily due to the composition of the Consolidated Balance Sheets and due in part to the pricing characteristics and assumptions of certain deposits.

ITEM 4 – CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Management, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of March 31, ~~2022.~~2023. The term “disclosure controls and procedures,” as defined in Rule 13a-15(e) under the Exchange Act, means controls and other procedures that are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and to ensure that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, ~~2022,~~2023, the Company’s disclosure controls and procedures were effective at the reasonable assurance level.

In designing and evaluating the Company’s disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, management

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necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Changes in Internal Control Over Financial Reporting

Management has taken measures to maintain the internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, ~~2022~~.2023. There have been no changes during the quarter ended March 31, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

In the ordinary course of ~~its~~our operations, ~~the Company and its subsidiaries~~we are ~~parties~~party to various legal proceedings. Based on the information presently available, and after consultation with legal counsel, management believes that the ultimate outcome in such proceedings, in the aggregate, will not have a material adverse effect on the business or the financial condition or results of operations of the Company, subject to the potential outcomes of the matter discussed below.

As previously disclosed, ~~proceedings. There have been no material changes~~on February 9, 2022, pursuant to the CFPB’s Notice and Opportunity to Respond and Advise process, the CFPB Office of Enforcement notified us that it is considering recommending that the CFPB take legal action against us in connection with alleged violations of Regulation E, 12 C.F.R. § 1005.17, and the Consumer Financial Protection Act, 12 U.S.C. §§ 5531 and 5536, in connection with our overdraft practices and policies. In March 2023, the CFPB commenced settlement discussions with us to resolve the matter. We cannot provide assurance whether a settlement will be reached, the final terms or timing of any such settlement, or the final amount of loss (potentially including both restitution and a civil money penalty) with respect to this matter. Any final loss could be materially different from our current estimate and accrued amount. If the ~~Company’s previously disclosed proceedings.~~Company and the CFPB do not reach a settlement, the CFPB may commence litigation against the Company. See Note 7, “Commitments and Contingencies” in the “Notes to the Consolidated Financial Statements” in Part I, Item I of this Form 10-Q for additional information.

ITEM 1A – RISK FACTORS

During the quarter ended March 31, ~~2022,~~2023, there have been no material changes from the risk factors previously disclosed under Part I, Item 1A. “Risk Factors” in the Company’s ~~2021 Annual Report.~~2022 Form 10-K, except as described below.

An investment in the Company’s securities involves risks. In addition to the other information set forth in this Quarterly Report, including the information addressed in this Item 1A and under “Forward-Looking Statements,” investors in the Company’s securities should carefully consider the factors discussed in the Company’s ~~2021 Annual Report.~~2022 Form 10-K. These factors could materially and adversely affect the Company’s business, financial condition, liquidity, results of operations, and capital position and could cause the Company’s actual results to differ materially from its historical results or the results contemplated by the forward-looking statements contained in this report, in which case the trading price of the Company’s securities could decline.

Risks Related to Our Business, Industry and Markets

Our business, financial condition, and results of operations could be adversely affected by developments impacting the financial services industry, such as recent bank failures or concerns involving liquidity.

Recent events in the financial services industry (including the closures of Silicon Valley Bank, Signature Bank, and First Republic Bank) have caused general uncertainty and concern regarding the adequacy of liquidity of the financial services industry generally. Liquidity is essential to our business. While we rely on different sources of funding to meet potential liquidity demands, our business strategies are largely based on access to funding from customer deposits and supplemental funding provided by wholesale or other secondary liquidity sources. Deposit levels may be affected by various industry factors, including interest rates paid by competitors, general interest rate levels, returns available to customers on alternative investments, conditions in the financial services industry specifically and general economic conditions that impact the amount of liquidity in the economy and savings levels, and also by factors that impact customers’ perception of our financial condition and capital and liquidity levels. In response to the closures of Silicon Valley Bank and Signature Bank, the Secretary of the U.S. Treasury approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank and Signature Bank in a manner that fully protected depositors by utilizing the Deposit Insurance Fund, and the Federal Reserve announced it would make available additional funding for eligible depository institutions to help assure banks have the ability to meet the needs of their depositors. It is uncertain whether these steps by the banking regulators will be sufficient to calm the financial markets and financial services industry generally and reduce the risk of deposit outflows, and particularly sudden deposit outflows, from banks. This uncertainty may drive deposit outflows, increased borrowing and funding costs, and increased competition for liquidity, any of which could have a material adverse impact on our business, financial condition and results of operations.

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ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) Sales of Unregistered Securities – None

(b) Use of Proceeds – Not Applicable.

Stock Repurchase Program; Other Repurchases

On ~~May 4,~~December 10, 2021, ~~the Company’s~~our Board of Directors authorized a share repurchase program to purchase up to $125 million worth of the Company’s common stock through June 30, 2022 in open market transactions or privately negotiated transactions, which was fully utilized as of September 30, 2021. The Company repurchased an aggregate of approximately 3.4 million shares, at an average price of $36.99 per share, pursuant to this program.

~~On December 10, 2021, the Company’s Board of Directors authorized a new share repurchase program (the “Repurchase Program”) to purchase up to~~ $100.0 million of ~~the Company’s~~our common stock through December 9, 2022 in open market transactions or privately negotiated transactions, including pursuant to a trading plan in accordance with Rule 10b5-1 and /or Rule 10b-18 under the Exchange Act. The ~~Repurchase Program permits~~repurchase program permitted management to repurchase shares of ~~the Company’s~~our common stock from time to time at management’s discretion. The actual means and timing of any shares purchased under the Repurchase Program will depend on a variety of factors, including the market price of the Company’s common stock, general market and economic conditions, and applicable legal and regulatory requirements. The Repurchase Program doesrepurchase program did not obligate ~~the Company~~us to purchase any particular number of shares. As part of the repurchase program, approximately 1.3 million shares (or approximately $48.2 million) were repurchased throughout 2022. As of March 31, 2023, the Company does not have an authorized share repurchase program.

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The following information describes the Company’s common stock repurchases for the three months ended March ~~31, 2022:~~31,2023:

Period

Total number of shares purchased⁽¹⁾

Average price paid per share ($)⁽²⁾

Total number of shares purchased as part of publicly announced plans or programs

Approximate dollar value of shares that may yet be purchased under the plans or programs ($)⁽²⁾

Total number of shares purchased⁽¹⁾

Average price paid per share ($)

Total number of shares purchased as part of publicly announced plans or programs

Approximate dollar value of shares that may yet be purchased under the plans or programs ($)

January 1 - January 31, 2022

169,879

39.53

156,303

93,838,742

February 1 - February 28, 2022

245,758

40.31

199,383

85,816,177

March 1 - March 31, 2022

277,980

39.53

274,005

74,981,173

January 1 - January 31, 2023

1,101

36.33

—

February 1 - February 28, 2023

54,279

37.87

—

March 1 - March 31, 2023

576

35.16

—

Total

693,617

39.80

629,691

55,956

37.81

—

^{_________________________________________}

⁽¹⁾For the three months ended March 31, ~~2022, 63,926~~2023, 55,956 shares were withheld upon vesting of restricted shares granted to employees of the Company in order to satisfy tax withholding obligations.

⁽²⁾ ~~These amounts include fees and commissions associated with the shares repurchased.~~

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ITEM 6 – EXHIBITS

The following exhibits are filed as part of this Quarterly Report and this list includes the Exhibit Index:


Exhibit No.		Description

~~2.1~~		Agreement and Plan of Reorganization, dated as of May 19, 2017, by and between Union Bankshares Corporation and Xenith Bankshares, Inc. (incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K filed on May 23, 2017).

~~2.2~~		Agreement and Plan of Reorganization, dated as of October 4, 2018, as amended on December 7, 2018, by and between Union Bankshares Corporation and Access National Corporation (incorporated by reference to Annex A to Form S-4/A Registration Statement filed on December 10, 2018; SEC file no. 333-228455).

3.1		Amended and Restated Articles of Incorporation of Atlantic Union Bankshares Corporation, effective May 7, 2020 (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on May 7, 2020).

3.1.1		Articles of Amendment designating the 6.875% Perpetual Non-Cumulative Preferred Stock, Series A, effective June 9, 2020 (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on June 9, 2020).

3.2		Amended and Restated Bylaws of Atlantic Union Bankshares Corporation, effective as of December 5, 2019 (incorporated by reference to Exhibit 3.3 to Annual Report on Form 10-K filed on February 25, 2020).

10.1		Amended and Restated ~~Management Continuity Agreement between~~Virginia Bankers Association Deferred Compensation Plan for Directors and Executives of Atlantic Union Bankshares Corporation, ~~Atlantic Union Bank and Robert M. Gorman, dated~~as restated effective January ~~14, 2022 (incorporated by reference to Exhibit 10.1 to Annual Report on Form 10-K filed February 25, 2022).~~1, 2023.

10.2		~~Amended and~~Adoption Agreement for the Restated ~~Employment Agreement by and between~~Virginia Bankers Association Nonqualified Supplemental Deferred Compensation Plan of Atlantic Union Bankshares Corporation ~~Atlantic Union Bank~~(for Directors and ~~Robert M. Gorman, dated~~Executives), effective January ~~14, 2022 (incorporated by reference to Exhibit 10.2 to Annual Report on Form 10-K filed February 25, 2022).~~1, 2023.

~~10.9~~		Amended and Restated Employment Agreement by and between Atlantic Union Bankshares Corporation, Atlantic Union Bank and John C. Asbury, dated January 14, 2022 (incorporated by reference to Exhibit 10.9 to Annual Report on Form 10-K filed February 25, 2022).

~~10.10~~		Amended and Restated Management Continuity Agreement by and between Atlantic Union Bankshares Corporation, Atlantic Union Bank and John C. Asbury, dated January 14, 2022 (incorporated by reference to Exhibit 10.10 to Annual Report on Form 10-K filed February 25, 2022).

~~10.25~~		Employment Agreement by and between Atlantic Union Bankshares Corporation, Atlantic Union Bank and Maria Tedesco, dated January 14, 2022 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on January 18, 2022).

~~10.26~~		Management Continuity Agreement by and between Atlantic Union Bankshares Corporation, Atlantic Union Bank and Maria Tedesco, dated January 14, 2022 (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed on January 18, 2022).

~~10.27~~10.3		Form of Performance Share Unit Agreement under Atlantic Union Bankshares Corporation Stock and Incentive Plan (for awards on or after February ~~24, 2022)~~23, 2023) (incorporated by reference to Exhibit ~~10.27~~10.23 to Annual Report on Form 10-K filed on February ~~25, 2022)~~24, 2023).

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~~10.28~~10.4		~~Form of Time-Based Restricted Stock Agreement under Atlantic Union Bankshares Corporation Stock and~~Management Incentive Plan ~~(for awards on or after February 24, 2022)~~ (incorporated by reference to Exhibit ~~10.28~~10.11 to Annual Report on Form 10-K filed on February ~~25, 2022)~~24, 2023).

15.1		Letter regarding unaudited interim financial information.

31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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32.1		Certification of Principal Executive Officer and Principal Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		Interactive data files formatted in Inline eXtensible Business Reporting Language for the quarter ended March 31, ~~2022~~2023 pursuant to Rule 405 of Regulation ~~S-T (1):~~S-T: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income (unaudited), (iii) the Consolidated Statements of Comprehensive Income (Loss) (unaudited), (iv) the Consolidated Statements of Changes in Stockholders’ Equity (unaudited), (v) the Consolidated Statements of Cash Flows (unaudited) and (vi) the Notes to Consolidated Financial Statements (unaudited).

104		The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2022,~~2023, formatted in Inline eXtensible Business Reporting Language (included with Exhibit 101).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Atlantic Union Bankshares Corporation

	(Registrant)

Date: ~~May 5, 2022~~May 4, 2023	By:	/s/ John C. Asbury
		John C. Asbury,
		President and Chief Executive Officer
		(principal executive officer)

Date: ~~May 5, 2022~~May 4, 2023	By:	/s/ Robert M. Gorman
		Robert M. Gorman,
		Executive Vice President and Chief Financial Officer
		(principal financial and accounting officer)

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Balance - December 31, 2020	$	104,169	$	173	$	1,917,081	$	616,052	$	71,015	$	2,708,490
Net Income								56,189				56,189
Other comprehensive loss (net of taxes of $8,835)										(34,514)		(34,514)
Dividends on common stock ($0.25 per share)								(19,700)				(19,700)
Dividends on preferred stock ($171.88 per share)								(2,967)				(2,967)
Issuance of common stock under Equity Compensation Plans, stock issuance for services rendered, and vesting of restricted stock, net of shares held for taxes (243,884 shares)		324				(289)						35
Stock-based compensation expense						2,199						2,199
Balance- March 31, 2021	$	104,493	$	173	$	1,918,991	$	649,574	$	36,501	$	2,709,732


	Nonaccrual
	December 31, 2020		December 31, 2021		Nonaccrual With No ALLL		90 Days Past due and still Accruing
Construction and Land Development	$	3,072	$	2,697	$	1,985	$	299
Commercial Real Estate - Owner Occupied		7,128		5,637		970		1,257
Commercial Real Estate - Non-Owner Occupied		2,317		3,641		1,089		433
Multifamily Real Estate		33		113		0		0
Commercial & Industrial		2,107		1,647		1		1,897
Residential 1-4 Family - Commercial		9,993		2,285		0		990
Residential 1-4 Family - Consumer		12,600		11,397		0		3,013
Residential 1-4 Family - Revolving		4,629		3,406		0		882
Auto		500		223		0		241
Consumer		69		54		0		120
Total LHFI	$	42,448	$	31,100	$	4,045	$	9,132


	Pledged Assets as of March 31, 2022
			AFS		HTM
	Cash		Securities ⁽¹⁾		Securities ⁽¹⁾		Loans ⁽²⁾		Total
Public deposits	$	0	$	619,431	$	527,412	$	0	$	1,146,843
Repurchase agreements		0		116,260		0		0		116,260
FHLB advances		0		40,919		0		2,966,527		3,007,446
Derivatives		147,411		61,255		0		0		208,666
Fed Funds		0		0		0		424,875		424,875
Other purposes		0		19,018		915		0		19,933
Total pledged assets	$	147,411	$	856,883	$	528,327	$	3,391,402	$	4,924,023