ATLANTIC UNION BANKSHARES CORPORATION

FORM 10-Q

INDEX


ITEM				PAGE
~~ITEM~~			~~PAGE~~

	PART I - FINANCIAL INFORMATION

Item 1.		Financial Statements

		Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2023 (unaudited) and December 31, ~~2016~~2022 (audited)		2

		Consolidated Statements of Income (unaudited) for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022		3

		Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022		4

		Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022		5

		Consolidated Statements of Cash Flows (unaudited) for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022		6

		Notes to Consolidated Financial Statements (unaudited)		7 8

		Report of Independent Registered Public Accounting Firm		44 51

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		45 52

Item 3.		Quantitative and Qualitative Disclosures About Market Risk		70 76

Item 4.		Controls and Procedures		72 78

		PART II - OTHER INFORMATION

Item 1.		Legal Proceedings		73 80

Item 1A.		Risk Factors		74 80

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		74 81

Item 6.	~~Exhibits~~	Exhibits	75	81

	~~Signatures~~	Signatures	76	83

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.



~~2016~~ 2022 Form 10-K	–	Annual Report on Form 10-K for the year ended December 31, ~~2016~~2022
~~AFS~~ ACL	–	Allowance for credit losses
AFS	–	Available for sale
~~ALCO~~ ALLL	–	~~Asset Liability Committee~~
~~ALL~~	–	Allowance for loan and lease losses, a component of ACL
~~ASC~~ AOCI	–	Accumulated other comprehensive income (loss)
ASC	–	Accounting Standards Codification
ASU	–	Accounting Standards Update
~~ATM~~ AUB	–	~~Automated teller machine~~ Atlantic Union Bankshares Corporation
the Bank	–	Atlantic Union Bank ~~& Trust~~
BOLI	–	Bank-owned life insurance
bps	–	Basis points
BTFP	–	Bank Term Funding Program
CECL	–	Current expected credit losses
CFPB	–	Consumer Financial Protection Bureau
the Company	–	Atlantic Union Bankshares Corporation and its subsidiaries
~~Dodd-Frank Act~~ depositary shares	–	~~Dodd-Frank Wall Street Reform and Consumer Protection Act~~ Depositary shares, each representing a 1/400th ownership interest in a share of ~~2010~~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)
~~EPS~~ 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
FDIC	–	Federal Deposit Insurance Corporation
Federal Reserve	–	Board of Governors of the Federal Reserve System
~~Federal Reserve Bank~~ 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 Market Committee
FTE	–	Fully taxable equivalent
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 ~~or GAAP~~	–	Accounting principles generally accepted in the United States
~~HELOC~~ GNMA	–	~~Home equity line of credit~~ Government National Mortgage Association
HTM	–	Held to maturity
~~IDC~~ ICE	–	~~Interactive~~ Intercontinental Exchange Data ~~Corporation~~Services
~~LIBOR~~ LHFI	–	Loans held for investment
LHFS	–	Loans held for sale
LIBOR	–	London Interbank Offered Rate
~~NPA~~ MBS	–	~~Nonperforming assets~~ Mortgage-Backed Securities
~~ODCM~~ MFC	–	~~Old Dominion Capital Management, Inc.~~ Middleburg Financial Corporation
~~OREO~~ NPA	–	Nonperforming assets
NYSE	–	New York Stock Exchange
OCI	–	Other comprehensive (loss) income
OREO	–	Other real estate owned
~~OTTI~~ PD/LGD	–	~~Other than temporary impairment~~ Probability of default/loss given default

Table of Contents

ROU asset	–	Right of Use Asset
~~PCI~~ RPAs	–	~~Purchased credit impaired~~ Risk Participation Agreements
~~ROA~~ SBA	–	~~Return on average assets~~ Small Business Administration
~~ROE~~ SEC	–	~~Return on average common equity~~
~~ROTCE~~	–	~~Return on average tangible common equity~~
~~SEC~~	–	Securities and Exchange Commission
~~StellarOne~~ Series A preferred stock	–	~~StellarOne Corporation~~ 6.875% Perpetual Non-Cumulative Preferred Stock, Series A, par value $10.00 per share
~~TDR~~ SOFR	–	Secured Overnight Financing Rate
TLM	–	Troubled loan modification
TDR	–	Troubled debt restructuring
~~UMG~~ VFG	–	~~Union Mortgage~~ Virginia Financial Group, Inc.
~~Xenith~~	–	~~Xenith Bankshares, Inc.~~

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2023 AND DECEMBER 31, 2022

(Dollars in thousands, except share data)

September 30,
2017 December 31,
2016
(Unaudited) (Audited)
ASSETS

Cash and cash equivalents:

Cash and due from banks $ 115,776
$ 120,758
Interest-bearing deposits in other banks 60,294
58,030
Federal funds sold 891
449
Total cash and cash equivalents 176,961
179,237
Securities available for sale, at fair value 968,361
946,764
Securities held to maturity, at carrying value 204,801
201,526
Restricted stock, at cost 68,441
60,782
Loans held for sale, at fair value 30,896
36,487
Loans held for investment, net of deferred fees and costs 6,898,729
6,307,060
Less allowance for loan losses 37,162
37,192
Net loans held for investment 6,861,567
6,269,868
Premises and equipment, net 120,808
122,027
Other real estate owned, net of valuation allowance 8,764
10,084
Goodwill 298,191
298,191
Amortizable intangibles, net 16,017
20,602
Bank owned life insurance 181,451
179,318
Other assets 93,178
101,907
Total assets $ 9,029,436
$ 8,426,793
LIABILITIES

Noninterest-bearing demand deposits $ 1,535,149
$ 1,393,625
Interest-bearing deposits 5,346,677
4,985,864
Total deposits 6,881,826
6,379,489
Securities sold under agreements to repurchase 43,337
59,281
Other short-term borrowings 574,000
517,500
Long-term borrowings 434,750
413,308
Other liabilities 54,152
56,183
Total liabilities 7,988,065
7,425,761
Commitments and contingencies (Note 6)

STOCKHOLDERS' EQUITY

Common stock, $1.33 par value, shares authorized 100,000,000; issued and outstanding, 43,729,229 shares and 43,609,317 shares, respectively. 57,708
57,506
Additional paid-in capital 608,884
605,397
Retained earnings 373,468
341,938
Accumulated other comprehensive income 1,311
(3,809 )
Total stockholders' equity 1,041,371
1,001,032
Total liabilities and stockholders' equity $ 9,029,436
$ 8,426,793


	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, 2023 AND 2022

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

Three Months Ended Nine Months Ended
September 30,
2017 September 30,
2016 September 30,
2017 September 30,
2016
Interest and dividend income:
Interest and fees on loans $ 75,948
$ 66,190
$ 216,644
$ 193,884
Interest on deposits in other banks 181
65
367
178
Interest and dividends on securities:
Taxable 5,175
4,732
15,081
13,558
Nontaxable 3,546
3,446
10,620
10,344
Total interest and dividend income 84,850
74,433
242,712
217,964

Interest expense:
Interest on deposits 7,234
4,552
18,410
12,945
Interest on short-term borrowings 1,871
765
4,221
2,098
Interest on long-term borrowings 4,547
2,088
13,316
6,386
Total interest expense 13,652
7,405
35,947
21,429

Net interest income 71,198
67,028
206,765
196,535
Provision for credit losses 3,050
2,472
7,345
7,376
Net interest income after provision for credit losses 68,148
64,556
199,420
189,159

Noninterest income:

Service charges on deposit accounts 5,153
4,965
14,945
14,454
Other service charges and fees 4,529
4,397
13,575
12,971
Fiduciary and asset management fees 2,794
2,844
8,313
7,315
Mortgage banking income, net 2,305
3,207
7,123
8,324
Gains on securities transactions, net 184
—
782
145
Bank owned life insurance income 1,377
1,389
4,837
4,122
Loan-related interest rate swap fees 416
1,303
2,627
3,056
Other operating income 778
845
2,228
2,470
Total noninterest income 17,536
18,950
54,430
52,857

Noninterest expenses:

Salaries and benefits 29,769
30,493
92,499
87,061
Occupancy expenses 4,939
4,841
14,560
14,627
Furniture and equipment expenses 2,559
2,635
7,882
7,867
Printing, postage, and supplies 1,154
1,147
3,710
3,566
Communications expense 798
948
2,580
2,964
Technology and data processing 4,232
3,917
12,059
11,340
Professional services 1,985
1,895
5,734
6,432
Marketing and advertising expense 1,944
1,975
5,963
5,838
FDIC assessment premiums and other insurance 1,141
1,262
2,793
4,003
Other taxes 2,022
639
6,065
3,864
Loan-related expenses 1,349
1,531
3,959
3,638
OREO and credit-related expenses 1,139
503
2,023
1,965
Amortization of intangible assets 1,480
1,843
4,661
5,468
Training and other personnel costs 887
863
2,900
2,512
Merger-related costs 732
—
3,476
—
Other expenses 1,366
2,421
3,957
5,291
Total noninterest expenses 57,496
56,913
174,821
166,436

Income before income taxes 28,188
26,593
79,029
75,580
Income tax expense 7,530
6,192
21,292
18,881
Net income $ 20,658
$ 20,401
$ 57,737
$ 56,699
Basic earnings per common share $ 0.47
$ 0.47
$ 1.32
$ 1.29
Diluted earnings per common share $ 0.47
$ 0.47
$ 1.32
$ 1.29
Dividends declared per common share $ 0.20
$ 0.19
$ 0.60
$ 0.57
Basic weighted average number of common shares outstanding 43,706,635
43,565,937
43,685,045
43,853,548
Diluted weighted average number of common shares outstanding 43,792,058
43,754,915
43,767,502
43,967,725


	Three Months Ended
	March 31,		March 31,
	2023		2022
Interest and dividend income:
Interest and fees on loans	$	189,992	$	114,200
Interest on deposits in other banks		1,493		131
Interest and dividends on securities:
Taxable		16,753		13,666
Nontaxable		9,308		10,459
Total interest and dividend income		217,546		138,456
Interest expense:
Interest on deposits		51,834		4,483
Interest on short-term borrowings		7,563		21
Interest on long-term borrowings		4,706		3,021
Total interest expense		64,103		7,525
Net interest income		153,443		130,931
Provision for credit losses		11,850		2,800
Net interest income after provision for credit losses		141,593		128,131
Noninterest income:
Service charges on deposit accounts		7,902		7,596
Other service charges, commissions and fees		1,746		1,655
Interchange fees		2,325		1,810
Fiduciary and asset management fees		4,262		7,255
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
Noninterest expenses:
Salaries and benefits		60,529		58,298
Occupancy expenses		6,356		6,883
Furniture and equipment expenses		3,752		3,597
Technology and data processing		8,142		7,796
Professional services		3,413		4,090
Marketing and advertising expense		2,351		2,163
FDIC assessment premiums and other insurance		3,899		2,485
Franchise and other taxes		4,498		4,499
Loan-related expenses		1,552		1,776
Amortization of intangible assets		2,279		3,039
Other expenses		11,503		10,695
Total noninterest expenses		108,274		105,321
Income from continuing operations before income taxes		42,947		52,963
Income tax expense		7,294		9,273
Net income		35,653		43,690
Dividends on preferred stock		2,967		2,967
Net income available to common shareholders	$	32,686	$	40,723

Basic earnings per common share	$	0.44	$	0.54
Diluted earnings per common share	$	0.44	$	0.54
Dividends declared per common share	$	0.30	$	0.28
Basic weighted average number of common shares outstanding		74,832,141		75,544,644
Diluted weighted average number of common shares outstanding		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) (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2023 AND 2022

(Dollars in thousands)


	Three Months Ended
	March 31,
	2023		2022
Net income	$	35,653	$	43,690
Other comprehensive income (loss):
Cash flow hedges:
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 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, 2023 and 2022, respectively) ⁽²⁾		(3)		(5)
Bank owned life insurance:
Unrealized holding gains arising during the period		10		—
Reclassification adjustment for losses included in net income ⁽³⁾		(22)		167
Other comprehensive income (loss):		56,353		(210,118)
Comprehensive income (loss)	$	92,006	$	(166,428)

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016

Net income $ 20,658
$ 20,401
$ 57,737
$ 56,699
Other comprehensive income (loss):

Cash flow hedges:

Change in fair value of cash flow hedges 41
(78 ) (766 ) (3,766 )
Reclassification adjustment for losses (gains) included in net income (net of tax, $102 and $83 for the three months and $370 and $233 for the nine months ended September 30, 2017 and 2016, respectively) 189
154
688
433
AFS securities:

Unrealized holding gains (losses) arising during period (net of tax, $1,470 and $604 for the three months and $3,195 and $4,227 for the nine months ended September 30, 2017 and 2016, respectively) (2,729 ) 1,121
5,935
7,851
Reclassification adjustment for losses (gains) included in net income (net of tax, $64 and $0 for the three months and $274 and $51 for the nine months ended September 30, 2017 and 2016, respectively) (119 ) —
(508 ) (95 )
HTM securities:

Reclassification adjustment for accretion of unrealized gain on AFS securities transferred to HTM (net of tax, $88 and $128 for the three months and $273 and $439 for the nine months ended September 30, 2017 and 2016, respectively) (163 ) (237 ) (507 ) (816 )
Bank owned life insurance:
Reclassification adjustment for losses included in net income 84
—
278
—
Other comprehensive income (loss) (2,697 ) 960
5,120
3,607
Comprehensive income $ 17,961
$ 21,361
$ 62,857
$ 60,306

⁽¹⁾The gross amounts reclassified into earnings are reported 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 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.

⁽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'~~STOCKHOLDERS’ EQUITY (UNAUDITED)

~~NINE~~

THREE MONTHS ENDED ~~SEPTEMBER 30, 2017~~MARCH 31, 2023 AND ~~2016~~

2022

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

Common
Stock

Additional
Paid-In
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Income (Loss)
Total

Balance - December 31, 2015 $ 59,159
$ 631,822
$ 298,134
$ 6,252
$ 995,367
Net income - 2016

56,699

56,699
Other comprehensive income (net of taxes of $3,970)

3,607
3,607
Issuance of common stock in regard to acquisition (17,232 shares) 23
430
453
Dividends on common stock ($0.57 per share)

(24,957 )
(24,957 )
Stock purchased under stock repurchase plan (1,411,131 shares) (1,876 ) (31,300 )

(33,176 )
Issuance of common stock under Equity Compensation Plans (54,044 shares) 72
681

753
Issuance of common stock for services rendered (14,576 shares) 19
360

379
Vesting of restricted stock, net of shares held for taxes, under Equity Compensation Plans (35,515 shares) 47
(492 )

(445 )
Stock-based compensation expense
2,284

2,284
Balance - September 30, 2016 $ 57,444
$ 603,785
$ 329,876
$ 9,859
$ 1,000,964

Balance - December 31, 2016 $ 57,506
$ 605,397
$ 341,938
$ (3,809 ) $ 1,001,032
Net income - 2017

57,737

57,737
Other comprehensive income (net of taxes of $3,018)

5,120
5,120
Dividends on common stock ($0.60 per share)

(26,207 )
(26,207 )
Issuance of common stock under Equity Compensation Plans (58,421 shares) 78
891

969
Issuance of common stock for services rendered (16,529 shares) 22
539

561
Vesting of restricted stock, net of shares held for taxes, under Equity Compensation Plans (76,505 shares) 102
(1,415 )

(1,313 )
Stock-based compensation expense
3,472

3,472
Balance - September 30, 2017 $ 57,708
$ 608,884
$ 373,468
$ 1,311
$ 1,041,371

Accumulated

Additional

Other

Common

Preferred

Paid-In

Retained

Comprehensive

Stock

Capital

Earnings

Income (Loss)

Total

Balance - December 31, 2022

98,873

173

1,772,440

919,537

(418,286)

2,372,737

Net Income

35,653

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)

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

2,332

Balance - March 31, 2023

99,072

173

1,773,118

929,806

(361,933)

2,440,236



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, 2023 AND 2022

(Dollars in thousands)


	2023		2022
Operating activities:
Net income	$	35,653	$	43,690
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of premises and equipment		3,427		3,599
Writedown of ROU assets, foreclosed properties and equipment		112		4,570
Amortization, net		6,417		8,619
Amortization related to acquisitions, net		1,288		875
Provision for credit losses		11,850		2,800
Losses on securities transactions		13,400		—
BOLI income		(2,828)		(2,697)
Originations and purchases of LHFS		(286,526)		(91,957)
Proceeds from sales of LHFS		283,316		91,434
Stock-based compensation expenses		2,332		2,409
Issuance of common stock for services		187		217
Net decrease in other assets		18,840		46,434
Net (decrease) increase in other liabilities		(27,901)		1,454
Net cash provided by operating activities		59,567		111,447
Investing activities:
Purchases of AFS securities, restricted stock, and other investments		(45,633)		(62,773)
Purchases of HTM securities		(13,826)		(130,533)
Proceeds from sales of AFS securities and restricted stock		558,466		—
Proceeds from maturities, calls and paydowns of AFS securities		47,338		109,974
Proceeds from maturities, calls and paydowns of HTM securities		5,218		550
Net increase in LHFI		(145,260)		(258,502)
Net increase in premises and equipment		(1,624)		(797)
Proceeds from BOLI settlements		353		2,068
Proceeds from sales of foreclosed properties and former bank premises		533		—
Net cash provided by (used in) investing activities		405,565		(340,013)
Financing activities:
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		(910,077)		(2,843)
Cash dividends paid - common stock		(22,417)		(21,163)
Cash dividends paid - preferred stock		(2,967)		(2,967)
Repurchase of common stock		—		(25,018)
Issuance of common stock		474		3,804
Vesting of restricted stock, net of shares held for taxes		(2,116)		(2,590)
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		319,948		802,501
Cash, cash equivalents and restricted cash at end of the period	$	372,196	$	396,303

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Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

~~NINE~~

THREE MONTHS ENDED ~~SEPTEMBER 30, 2017~~MARCH 31, 2023 AND ~~2016~~

2022

(Dollars in thousands)

2017 2016
Operating activities:

Net income $ 57,737
$ 56,699
Adjustments to reconcile net income to net cash and cash equivalents provided by (used in) operating activities:

Depreciation of premises and equipment 8,307
7,617
Writedown of OREO 845
879
Amortization, net 10,500
10,241
Amortization (accretion) related to acquisition, net (158 ) 1,400
Provision for credit losses 7,345
7,376
Gains on securities transactions, net (782 ) (145 )
BOLI income (3,999 ) (4,122 )
Decrease (increase) in loans held for sale, net 5,591
(10,784 )
Losses (gains) on sales of other real estate owned, net 32
(278 )
Losses on sales of premises, net 51
97
Stock-based compensation expenses 3,472
2,284
Issuance of common stock for services 561
379
Net decrease (increase) in other assets 4,952
(11,169 )
Net increase in other liabilities 909
11,192
Net cash and cash equivalents provided by (used in) operating activities 95,363
71,666
Investing activities:

Purchases of securities available for sale and restricted stock (205,965 ) (159,863 )
Purchases of securities held to maturity (7,836 ) —
Proceeds from sales of securities available for sale and restricted stock 91,911
18,272
Proceeds from maturities, calls and paydowns of securities available for sale 88,675
83,942
Proceeds from maturities, calls and paydowns of securities held to maturity 818
1,841
Net increase in loans held for investment (594,967 ) (479,346 )
Net increase in premises and equipment (7,139 ) (5,102 )
Proceeds from BOLI settlements 2,497
—
Proceeds from sales of other real estate owned 1,028
4,982
Cash paid in acquisition —
(4,077 )
Cash acquired in acquisitions —
207
Net cash and cash equivalents provided by (used in) investing activities (630,978 ) (539,144 )
Financing activities:

Net increase in noninterest-bearing deposits 141,524
69,331
Net increase in interest-bearing deposits 360,813
225,239
Net increase in short-term borrowings 40,556
276,748
Cash paid for contingent consideration (3,003 ) —
Proceeds from issuance of long-term debt 20,000
—
Repayments of long-term debt —
(32,500 )
Cash dividends paid - common stock (26,207 ) (24,957 )
Repurchase of common stock —
(33,176 )
Issuance of common stock 969
753
Vesting of restricted stock, net of shares held for taxes (1,313 ) (445 )
Net cash and cash equivalents provided by (used in) financing activities 533,339
480,993
Increase (decrease) in cash and cash equivalents (2,276 ) 13,515
Cash and cash equivalents at beginning of the period 179,237
142,660
Cash and cash equivalents at end of the period $ 176,961
$ 156,175
Supplemental Disclosure of Cash Flow Information

Cash payments for:

Interest $ 33,947
$ 21,812
Income taxes 19,600
19,800
Supplemental schedule of noncash investing and financing activities

Transfers between loans and other real estate owned $ 585
$ 865
Issuance of common stock in exchange for net assets in acquisition —
453


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

Supplemental schedule of noncash investing and financing activities
Transfer from LHFI to LHFS		7,087		—

See accompanying notes to consolidated financial statements.

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Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

Notes to Consolidated ~~Financial~~Financial Statements (Unaudited)

~~1. ACCOUNTING POLICIES~~

1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

Headquartered in Richmond, Virginia, Atlantic Union Bankshares Corporation (NYSE: AUB) is the holding company for Atlantic Union Bank. Atlantic Union Bank had 109 branches and approximately 125 ATMs located throughout Virginia, and in portions of Maryland and North Carolina as of March 31, 2023. Certain non-bank financial services affiliates of Atlantic Union Bank include: Atlantic Union Equipment Finance, Inc., which provides equipment financing; 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. ~~Significant inter-company accounts and transactions have been eliminated in consolidation.~~

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 ~~(consisting only of normal recurring accruals)~~ 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.~~

~~These~~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 ~~2016~~2022 Form 10-K. Certain prior period amounts have been reclassified to conform to current period presentation.

~~Loans~~

The Company originates commercial and consumer loans to customers. A substantial portion of the loan portfolio is represented by commercial and residential real estate loans (including acquisition and development loans and residential construction loans) throughout its market area. The ability of the Company’s debtors to honor their contracts on such loans is dependent upon the real estate and general economic conditions in those markets, as well as other factors.

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off generally are reported at their outstanding unpaid principal balances adjusted for any charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.

~~Below is a summary of the Company's loan segments:~~

~~Construction and Land Development~~ – construction loans generally made to commercial and residential builders for specific construction projects. The successful repayment of these types of loans is generally dependent upon (a) a commitment for permanent financing from the Company, or (b) from the sale of the constructed property. These loans carry more risk than both types of commercial real estate term loans due to the dynamics of construction projects, changes in interest rates, the long-term financing market, and state and local government regulations. As in commercial real estate term lending, the Company manages risk by using specific underwriting policies and procedures for these types of loans and by avoiding excessive concentrations to any one business or industry.

Also, included in this category are loans generally made to residential home builders to support their lot and home inventory needs. Repayment relies upon the successful performance of the underlying residential real estate project. This type of lending carries a higher level of risk as compared to other commercial lending. This class of lending manages risks related to residential real estate market conditions, a functioning first and secondary market in which to sell residential properties, and the borrower’s ability to manage inventory and run projects. The Company manages this risk by lending to experienced builders and developers by using specific underwriting policies and procedures for these types of loans and by avoiding excessive concentrations with any particular customer or geographic region.

~~Commercial Real Estate – Owner Occupied~~ – term loans made to support owner occupied real estate properties that rely upon the successful operation of the business occupying the property for repayment. General market conditions and economic activity may affect these types of loans. In addition to using specific underwriting policies and procedures for these types of loans, the Company manages risk by avoiding concentrations to any one business or industry.

~~Commercial Real Estate – Non-Owner Occupied~~ – term loans typically made to borrowers to support income producing properties that rely upon the successful operation of the property for repayment. General market conditions and economic activity may impact the performance of these types of loans. In addition to using specific underwriting policies and procedures for these types of loans, the Company manages risk by diversifying the lending to various lines of businesses, such as retail, office, office warehouse, and hotel as well as avoiding concentrations to any one business or industry.

~~Residential 1-4 Family~~ – loans generally made to both commercial and residential borrowers. Residential 1-4 Family loan portfolios carry risks associated with the creditworthiness of the borrower or the tenant and changes in loan-to-value ratios. The Company manages these risks through policies and procedures such as limiting loan-to-value ratios at origination, experienced underwriting, requiring standards for appraisers, and not making subprime loans.

~~Multifamily Real Estate~~ – loans made to real estate investors to support permanent financing for multifamily residential income producing properties that rely on the successful operation of the property for repayment. This management mainly involves property maintenance and collection of rents due from tenants. This type of lending carries a lower level of risk as compared to other commercial lending. In addition, underwriting requirements for multifamily properties are stricter than for other non-owner-occupied property types. The Company manages this risk by avoiding concentrations with any particular customer.

~~Commercial & Industrial~~ – loans generally made to support the Company’s borrowers’ need for equipment/vehicle purchases and short-term or seasonal cash flow needs. Repayment relies upon the successful operation of the business. This type of lending carries a lower level of commercial credit risk as compared to other commercial lending. The Company manages this risk by using general underwriting policies and procedures for these types of loans and by avoiding concentrations to any one business or industry.

~~HELOC~~ – the consumer HELOC portfolio carries risks associated with the creditworthiness of the borrower and changes in loan-to-value ratios. The Company manages these risks through policies and procedures such as limiting loan-to-value ratios at origination, using experienced underwriting, requiring standards for appraisers, and not making subprime loans.

~~Auto~~ – the consumer indirect auto lending portfolio generally carries certain risks associated with the values of the collateral that management must mitigate. The Company focuses its indirect auto lending on one to two year old used vehicles where substantial depreciation has already occurred thereby minimizing the risk of significant loss of collateral values in the future. This type of lending places reliance on computer-based loan approval systems to supplement other underwriting standards.

~~Consumer and all other~~ – portfolios carry risks associated with the creditworthiness of the borrower and changes in the economic environment. The Company manages these risks through policies and procedures such as experienced underwriting, maximum debt to income ratios, and minimum borrower credit scores. Also included in this category are loans that generally support small business lines of credit and agricultural lending, neither of which are a material source of business for the Company.

~~Affordable Housing Entities~~

The Company invests in private investment funds that make equity investments in multifamily affordable housing properties that provide affordable housing tax credits for these investments. The activities of these entities are financed with a combination of invested equity capital and debt. For the three and nine months ended September 30, 2017, the Company recognized amortization of $229,000 and $643,000, respectively, and tax credits of $240,000 and $724,000, respectively, associated with these investments within “Income tax expense” on the Company’s Consolidated Statements of Income. For the three and nine months ended September 30, 2016, the Company recognized amortization of $185,000 and $445,000, respectively, and tax credits of $265,000 and $685,000, respectively. The carrying value of the Company’s investments in these qualified affordable housing projects was $9.1 million and $9.9 million as of September 30, 2017 and December 31, 2016, respectively. At September 30, 2017 and December 31, 2016, the Company's recorded liability totaled $4.0 million and $7.1 million, respectively, for the related unfunded commitments, which are expected to be paid from the second half of 2017 through 2019.

Adoption of New Accounting Standards

In March ~~2016,~~2022, the FASB issued ASU No. ~~2016-09, “Compensation~~2022-01 Derivatives and Hedging (Topic 815): Fair Value Hedging - ~~Stock Compensation (Topic 718): Improvements~~ Portfolio Layer Method to

~~Employee Share-Based Payment Accounting.” This ASU simplifies several aspects of~~ allow nonprepayable financial assets to be included in a closed portfolio hedge using the ~~accounting~~portfolio layer method and to allow multiple hedged layers to be designated for employee share based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The Company adopted this standard in the first quarter of 2017. The adoption of ASU 2016-09 did not have a ~~material impact on the Company’s consolidated financial statements.~~

~~Recent Accounting Pronouncements~~

~~In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers: Topic 606~~.” This ASU revised guidance for the recognition, measurement, and disclosure of revenue from contracts with customers. The original guidance has been amended through subsequent accounting standard updates that resulted in technical corrections, improvements, and a one-year deferral of the effective date to January 1, 2018. The guidance, as amended, is applicable to all entities and, once effective, will replace significant portions of existing industry and transaction-specific revenue recognition rules with a more principles-

based recognition model. Most revenue associated with financial instruments, including interest income, loan origination fees, and credit card fees, is outside the scope of the guidance. Gains and losses on investment securities, derivatives, and salessingle closed portfolio of financial ~~instruments are similarly excluded from the scope. Entities can elect to adopt the guidance either on a full~~assets or modified retrospective basis. Full retrospective adoption will require a cumulative effect adjustment to retained earnings as of the beginning of the earliest comparative period presented. Modified retrospective adoption will require a cumulative effect adjustment to retained earnings as of the beginning of the reporting period in which the entity first applies the new guidance. The Company plans to adopt this guidance on the effective date, January 1, 2018 via the modified retrospective approach. The Company performed its assessment of the adoption of this ASU and the related subsequent technical corrections issued. Based on the completed contracts reviewed thus far, the adoption of this accounting guidance is not expected to have a material impact on the Company's consolidated financial statements.

~~In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).~~” This ASU requires lessees to put most leases on their balance sheets, but recognize expenses in the income statement in a manner similar to today’s accounting. The guidance also eliminates the real estate-specific provisions and changes the guidance on sale-leaseback transactions, initial direct costs, and lease executory costs for all entities. For lessors, the standard modifies the classification criteria and the accounting for sales-type and direct financing leases. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The Company is currently working to identify the complete lease population, including potential embedded leases. The adoption of this standard is expected to result in additional assets and liabilities, as the Company will be required to recognize operating leases on the Consolidated Balance Sheet. Other implementation matters to be addressed include, but are not limited to, the determination of effects on the financial and capital ratios and the quantification of the impacts that this accounting guidance will have on the Company's consolidated financial statements.

~~In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.~~”~~This ASU updates the existing guidance to provide financial statement users with~~one or more ~~decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held~~beneficial interests secured by a ~~reporting entity at each reporting date.~~portfolio of financial instruments. The amendment replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and required consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendment isamendments are effective for fiscal years beginning after December 15, ~~2019. The Company is currently assessing the impact ASU No. 2016-13 will have on its consolidated financial statements.~~

~~In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.~~” This ASU clarifies the definition of a business that appears in ASC 805, Business Combinations. Amendments narrow the definition and provide a framework for making judgments whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendment to the Business Combinations Topic is intended to address concerns that the existing definition of a business has been applied too broadly and has resulted in many transactions being recorded as business acquisitions that in substance are more akin to asset acquisitions. ASU 2017-01 is effective for annual periods beginning after December 15, 2017,2022, including interim periods within those ~~annual periods.~~fiscal years. The Company ~~has~~adopted ASU No. 2022-01 effective January 1, 2023 and concluded ~~the adoption of ASU 2017-01 will~~that it did not have ~~a material~~significant impact on its consolidated financial statements.

In ~~January 2017,~~March 2022, the FASB issued ASU No. ~~2017-03, “Accounting Changes~~2022-02 Financial Instruments- Credit Losses (Topic 326): Troubled Debt Restructurings and Error Corrections (Topic 250) and Investments—Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings (SEC Update).”Vintage Disclosures. This ASU ~~incorporates into~~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 ~~Standards Codification recent SEC~~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 ASC 848, Reference Rate Reform. This guidance ~~about disclosing, under SEC SAB Topic 11.M,~~provides temporary, optional guidance to ease the ~~effect on~~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 ~~statements~~contracts. ASC 848 provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. ASC 848 is intended to help stakeholders during the global market-wide reference rate transition period. The amendments are effective as of ~~adopting the revenue, leases,~~March 12, 2020 through December 31, 2024 and ~~credit losses standards. ASU 2017-03 is effective upon issuance.~~can be adopted at an instrument level. The Company has ~~concluded~~elected the practical expedients provided in ASC 848 related to (1) accounting for contract modifications on its loans and securities tied to LIBOR and (2) asserting probability of the hedged item occurring, regardless of any expected modification in terms related to reference rate reform for the newly executed cash flow hedges. The Company

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

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 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 no longer applies its TDR accounting policy and instead accounts for modifications in 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 ~~2017-03 will not have~~No. 2022-02, see Note 1 “Summary of Significant Accounting Policies” of the Company’s 2022 Form 10-K.

Effective January 1, 2023, the Company refers to modifications to loans where the borrower is 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 ~~material impact on~~combination of the above modifications, as troubled loan modifications, or TLMs. The Company accounts for TLMs consistently with its ~~consolidated financial statements.~~

~~In January 2017, the FASB issued ASU No. 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test~~accounting policy for ~~Goodwill Impairment.” This ASU simplifies~~ accounting for ~~goodwill impairments by eliminating step two (the implied fair value~~loan modifications. The ALLL on TLMs is measured using the same method as all other LHFI. Refer to ~~carrying value~~Note 3 “Loans and Allowance for Loan and Lease Losses” within this Item 1 of ~~goodwill) from the existing goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit's carrying value exceeds its fair value, not~~this Quarterly Report for additional disclosures related to exceed the carrying amount of the goodwill. The effective date and transition requirements for the technical corrections will be effective for the Company for reporting periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. TLMs.

Accrued Interest Receivable

The Company has ~~concluded~~elected to exclude accrued interest from the ~~adoption~~amortized cost basis in its determination of ~~ASU 2017-04~~the ALLL, as well as the ACL reserve for securities. Accrued interest receivable totaled $60.7 million and $58.9 million on LHFI, $6.8 million and $8.6 million on HTM securities, and $9.4 million and $14.2 million on AFS securities at March 31, 2023 and December 31, 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 will not ~~have a~~be able to collect the accrued interest. For the quarters ended March 31, 2023 and March 31, 2022, accrued interest receivable write offs were not material ~~impact on its~~to the Company’s consolidated financial statements.

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~~In February 2017, the FASB issued ASU No. 2017-05, “Other Income—Gains and Losses from the Derecognition~~

Table of ~~Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales~~Contents

~~of Nonfinancial Assets.~~” This ASU conforms the derecognition guidance on nonfinancial assets with the model for transactions in the new revenue standard. The amendments will be effective for the Company for reporting periods beginning after December 15, 2018. The Company concluded that ASU 2017-05 will not have a material impact on its consolidated financial statements.

~~In March 2017, the FASB issued ASU No. 2017-08, “Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities.~~”This ASU focuses on the amortization period for certain purchased callable debt securities held at a premium. The amendments shorten the amortization period for the premium to the earliest call date. The amendments will be effective for the Company for interim and annual periods beginning after December 15, 2018. The Company has concluded the adoption of ASU 2017-08 will not have a material impact on its consolidated financial statements.

~~In May 2017, the FASB issued ASU No. 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting.~~”This ASU relates to changes in the terms or conditions of a share-based payment award. The amendments provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The amendments will be effective for the Company for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. The Company has concluded the adoption of ASU 2017-09 will not have a material impact on its consolidated financial statements.

~~In August 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.~~” This ASU relates to any entity that elects to apply hedge accounting in accordance with current GAAP. The amendment simplifies the application of the hedge accounting guidance and improves the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. The amendments will be effective for the Company for annual periods, and interim periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted. The Company is currently assessing the impact ASU 2017-12 will have on its consolidated financial statements.

2. SECURITIES

Available for Sale

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

The amortized cost, gross unrealized gains and losses, and estimated fair values of AFS securities ~~available for sale~~ as of ~~September 30, 2017 and December~~March 31, ~~2016~~2023 are summarized as follows (dollars in thousands):

Amortized

Gross Unrealized

Estimated

Cost

Gains

(Losses)

Fair Value

March 31, 2023

U.S. government and agency securities

69,474

—

(6,900)

62,574

Obligations of states and political subdivisions

650,328

(127,251)

523,097

Corporate and other bonds ⁽¹⁾

171,899

—

(19,893)

152,006

Commercial MBS

Agency

220,617

156

(37,729)

183,044

Non-agency

80,239

—

(2,636)

77,603

Total commercial MBS

300,856

156

(40,365)

260,647

Residential MBS

Agency

1,394,464

(207,355)

1,187,166

Non-agency

71,552

—

(6,358)

65,194

Total residential MBS

1,466,016

(213,713)

1,252,360

Other securities

1,681

—

1,681

Total AFS securities

2,660,254

233

(408,122)

2,252,365

⁽¹⁾ Other bonds include asset-backed securities.

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


	Amortized		Gross Unrealized				Estimated
	Cost		Gains		(Losses)		Fair Value
December 31, 2022
U.S. government and agency securities	$	70,196	$	—	$	(8,253)	$	61,943
Obligations of states and political subdivisions		959,999		137		(152,701)		807,435
Corporate and other bonds ⁽¹⁾		243,979		—		(17,599)		226,380
Commercial MBS
Agency		250,186		75		(39,268)		210,993
Non-agency		99,412		—		(4,244)		95,168
Total commercial MBS		349,598		75		(43,512)		306,161
Residential MBS
Agency		1,510,110		81		(233,961)		1,276,230
Non-agency		68,815		—		(6,812)		62,003
Total residential MBS		1,578,925		81		(240,773)		1,338,233
Other securities		1,664		—		—		1,664
Total AFS securities	$	3,204,361	$	293	$	(462,838)	$	2,741,816

Amortized Gross Unrealized Estimated
Cost Gains (Losses) Fair Value
September 30, 2017

Obligations of states and political subdivisions $ 285,921
$ 7,582
$ (1,304 ) $ 292,199
Corporate bonds 114,997
1,241
(816 ) 115,422
Mortgage-backed securities 546,038
4,119
(3,253 ) 546,904
Other securities 13,890
—
(54 ) 13,836
Total available for sale securities $ 960,846
$ 12,942
$ (5,427 ) $ 968,361

December 31, 2016

Obligations of states and political subdivisions $ 274,007
$ 4,962
$ (3,079 ) $ 275,890
Corporate bonds 123,674
892
(2,786 ) 121,780
Mortgage-backed securities 536,031
4,626
(5,371 ) 535,286
Other securities 13,885
—
(77 ) 13,808
Total available for sale securities $ 947,597
$ 10,480
$ (11,313 ) $ 946,764

⁽¹⁾ Other bonds include asset-backed securities.

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Table of Contents

The following table shows the gross unrealized losses and fair value ~~(dollars in thousands)~~ of the Company’s ~~available for sale~~AFS securities with unrealized ~~losses that are not deemed to be other-than-temporarily impaired as of September 30, 2017 and December 31, 2016.~~losses. These are aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss ~~position.~~

position (dollars in thousands).


	Less than 12 months				More than 12 months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value⁽²⁾		Losses		Value		Losses
March 31, 2023
U.S. government and agency securities	$	—	$	—	$	62,541	$	(6,900)	$	62,541	$	(6,900)
Obligations of states and political subdivisions		25,482		(1,225)		490,011		(126,026)		515,493		(127,251)
Corporate and other bonds⁽¹⁾		62,443		(3,586)		87,163		(16,307)		149,606		(19,893)
Commercial MBS
Agency		21,945		(3,119)		150,711		(34,610)		172,656		(37,729)
Non-agency		—		—		77,603		(2,636)		77,603		(2,636)
Total commercial MBS		21,945		(3,119)		228,314		(37,246)		250,259		(40,365)
Residential MBS
Agency		110,848		(5,385)		1,061,695		(201,971)		1,172,543		(207,356)
Non-agency		14,615		(138)		50,580		(6,219)		65,195		(6,357)
Total residential MBS		125,463		(5,523)		1,112,275		(208,190)		1,237,738		(213,713)
Total AFS securities	$	235,333	$	(13,453)	$	1,980,304	$	(394,669)	$	2,215,637	$	(408,122)

December 31, 2022
U.S. government and agency securities	$	2,594	$	(166)	$	59,269	$	(8,087)	$	61,863	$	(8,253)
Obligations of states and political subdivisions		588,668		(86,895)		187,375		(65,806)		776,043		(152,701)
Corporate and other bonds⁽¹⁾		206,861		(15,019)		17,121		(2,580)		223,982		(17,599)
Commercial MBS
Agency		73,362		(7,024)		127,193		(32,244)		200,555		(39,268)
Non-agency		66,618		(2,231)		28,550		(2,013)		95,168		(4,244)
Total commercial MBS		139,980		(9,255)		155,743		(34,257)		295,723		(43,512)
Residential MBS
Agency		328,590		(27,769)		929,581		(206,192)		1,258,171		(233,961)
Non-agency		18,939		(1,288)		43,064		(5,524)		62,003		(6,812)
Total residential MBS		347,529		(29,057)		972,645		(211,716)		1,320,174		(240,773)
Total AFS securities	$	1,285,632	$	(140,392)	$	1,392,153	$	(322,446)	$	2,677,785	$	(462,838)

Less than 12 months More than 12 months Total

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses
September 30, 2017

Obligations of states and political subdivisions $ 55,319
$ (700 ) $ 9,338
$ (604 ) $ 64,657
$ (1,304 )
Mortgage-backed securities 283,466
(2,708 ) 42,481
(545 ) 325,947
(3,253 )
Corporate bonds and other securities 21,128
(353 ) 32,674
(517 ) 53,802
(870 )
Total available for sale securities $ 359,913
$ (3,761 ) $ 84,493
$ (1,666 ) $ 444,406
$ (5,427 )

December 31, 2016

Obligations of states and political subdivisions $ 108,440
$ (3,007 ) $ 588
$ (72 ) $ 109,028
$ (3,079 )
Mortgage-backed securities 316,469
(4,979 ) 42,096
(392 ) 358,565
(5,371 )
Corporate bonds and other securities 47,388
(1,537 ) 40,468
(1,326 ) 87,856
(2,863 )
Total available for sale securities $ 472,297
$ (9,523 ) $ 83,152
$ (1,790 ) $ 555,449
$ (11,313 )

⁽¹⁾ Other bonds include asset-backed securities.

⁽²⁾ Comprised of ~~September 30, 2017, there were $84.5 million, or 36 issues,~~752 and 363 individual securities as of ~~individual available for sale~~March 31, 2023 and December 31, 2022, respectively.

The Company has evaluated AFS securities ~~that had been~~ in ~~a continuous~~an unrealized loss position for ~~more than 12 months. These securities had an unrealized loss of $1.7 million~~credit related impairment at March 31, 2023 and ~~consisted of municipal obligations, mortgage-backed securities, and corporate bonds. As of~~ December 31, ~~2016, there were $83.2 million, or 30 issues,~~2022 and concluded no impairment existed based on several factors which included: (1) the majority of individual securities that had been in a continuous loss position for more than 12 months. These securities had an unrealized loss of $1.8 million and consisted of municipal obligations, mortgage-backed securities, and corporate bonds. The Company has determined that these securities are ~~temporarily impaired as~~ of ~~September 30, 2017 and December 31, 2016 for the reasons set out below:~~

~~Mortgage-backed securities.~~ ~~This category’s~~high credit quality, (2) unrealized losses are primarily the result of ~~interest rate fluctuations. Because the decline~~market volatility and increases in market ~~value is attributable to changes in~~ interest rates, ~~and not credit quality,~~(3) the Company does not intend to sell the investments, and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired. Also, the majority of the Company’s mortgage-backed securities are agency-backed securities, which have a government guarantee.

~~Obligations of state and political subdivisions.~~ This category’s unrealized losses are primarily the result of interest rate fluctuations and also a certain few ratings downgrades brought about by the impact of the credit crisis on states and political subdivisions. The contractual terms of the investments do not permit the ~~issuer~~issuer(s) to settle the securities at a price less than the cost basis of each ~~investment. Because~~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, which may be maturity,~~basis.

Additionally, the ~~Company does not consider these investments to be other-than-temporarily impaired.~~

~~Corporate bonds.~~ ~~The Company’s unrealized losses in corporate debt securities are related to both interest rate fluctuations and ratings downgrades for a limited number of securities. The~~ majority of the ~~securities remain investment grade~~Company’s MBS are issued by FNMA, FHLMC, and ~~the Company’s analysis did not indicate the existence of a credit loss. The contractual terms of the investments~~GNMA and do not ~~permit~~have credit risk given the ~~issuer to settle~~implicit and explicit government guarantees associated with these agencies. In addition, the non-agency mortgage-backed and asset-backed securities generally received a 20% 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 ~~price less than~~pre-tax loss of $13.4 million and used the ~~cost basis of each investment. Because~~net proceeds to reduce existing high costing FHLB borrowings. The deleverage strategy provides the Company ~~does not intend to sell any~~with improved liquidity, enhanced tangible common equity, and additional run rate earnings.

-11-

Table 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, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired.Contents

The following table presents the amortized cost and estimated fair value of ~~available for sale~~AFS securities as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~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.

September 30, 2017 December 31, 2016

Amortized
Cost

Estimated
Fair Value

Amortized
Cost

Estimated
Fair Value
Due in one year or less $ 23,387
$ 23,510
$ 21,403
$ 21,517
Due after one year through five years 128,261
130,107
108,198
109,778
Due after five years through ten years 267,492
271,830
300,552
301,888
Due after ten years 541,706
542,914
517,444
513,581
Total securities available for sale $ 960,846
$ 968,361
$ 947,597
$ 946,764

~~For~~


	March 31, 2023				December 31, 2022
	Amortized		Estimated		Amortized		Estimated
	Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	52,594	$	51,912	$	42,447	$	41,735
Due after one year through five years		122,772		113,380		158,063		152,523
Due after five years through ten years		204,347		180,610		343,303		312,935
Due after ten years		2,280,541		1,906,463		2,660,548		2,234,623
Total AFS securities	$	2,660,254	$	2,252,365	$	3,204,361	$	2,741,816

Refer to Note 7 "Commitments and Contingencies" within this Item 1 of this Quarterly Report for information regarding the estimated fair value of ~~available for sale~~AFS securities ~~which~~that were pledged to secure public deposits, repurchase agreements, and for other purposes as permitted or required by law as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016, see Note 6 “Commitments and Contingencies.”~~

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 no securities past due or on non-accrual at March 31, 2023 and December 31, 2022.

The Company reports HTM securities ~~held to maturity~~ 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 ~~accumulated other comprehensive income~~AOCI prior to reclassifying the securities from AFS securities ~~available for sale~~ to securities held to maturity. Investment securities transferred into the held to maturity category from the available for sale category are recorded at fair value at the date of transfer. The unrealized holding gain or loss at the date of transfer is retained in accumulated other comprehensive income and in the carrying value of the securities held to maturity. Such unrealized gains or losses are accreted over the remaining life of the security with no impact on future net income.

HTM securities.

The carrying value, gross unrealized gains and losses, and estimated fair values of HTM securities ~~held to maturity~~ as of ~~September 30, 2017 and December~~March 31, ~~2016~~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

Carrying Gross Unrealized Estimated

Value ⁽¹⁾
Gains (Losses) Fair Value
September 30, 2017

Obligations of states and political subdivisions $ 204,801
$ 5,111
$ (77 ) $ 209,835

December 31, 2016

Obligations of states and political subdivisions $ 201,526
$ 1,617
$ (828 ) $ 202,315

⁽¹⁾ Other bonds include asset-backed securities.

-12-

~~(1)~~

Table of Contents

The carrying value, ~~includes $4.0 million as~~gross unrealized gains and losses, and estimated fair values of ~~September 30, 2017 and $5.2 million~~HTM securities as of December 31, ~~2016~~2022 are summarized as follows (dollars in thousands):


	Carrying		Gross Unrealized				Estimated
	Value		Gains		(Losses)		Fair Value
December 31, 2022
U.S. government and agency securities	$	687	$	—	$	(56)	$	631
Obligations of states and political subdivisions		705,990		2,218		(35,957)		672,251
Corporate and other bonds⁽¹⁾		5,159		—		(10)		5,149
Commercial MBS
Agency		29,025		—		(4,873)		24,152
Non-agency		13,736		—		(126)		13,610
Total commercial MBS		42,761		—		(4,999)		37,762
Residential MBS
Agency		42,699		—		(6,427)		36,272
Non-agency		50,436		—		(614)		49,822
Total residential MBS		93,135		—		(7,041)		86,094
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 ~~net unrealized gains present~~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 ~~time~~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 ~~transfer from available~~credit quality for ~~sale~~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 ~~net~~with credit risk are obligations of ~~any accretion.~~states and political subdivisions.

-13-

Table of Contents

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


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

⁽¹⁾ Generally considered not to have credit risk given the ~~Company’s held to maturity securities~~government guarantees associated with ~~unrealized losses that are not deemed to be other-than-temporarily impaired as of September 30, 2017~~these agencies.

⁽²⁾Non-agency mortgage-backed and ~~December 31, 2016. These are aggregated by investment category and length of time that the individual~~asset-backed securities have ~~been in~~limited credit risk, supported by most receiving a ~~continuous unrealized loss position.~~

Less than 12 months More than 12 months Total

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses
September 30, 2017

Obligations of states and political subdivisions $ 5,130
$ (53 ) $ 638
$ (24 ) $ 5,768
$ (77 )

December 31, 2016
Obligations of states and political subdivisions $ 92,841
$ (747 ) $ 648
$ (81 ) $ 93,489
$ (828 )

As of September 30, 2017, there was $638,000, or one issue, of an individual held to maturity security that had been in a continuous loss position for more than 12 months and had an unrealized loss of $24,000. As of December 31, 2016, there was $648,000, or one issue, of an individual held to maturity security that had been in a continuous loss position for more than 12 months and had an unrealized loss of $81,000. This security is a municipal bond with minimal credit exposure and is credit enhanced with a guarantee from the local school board. For this reason, the Company has determined that this security in a loss position is temporarily impaired as of September 30, 2017 and December 31, 2016. Because the Company does not intend to sell this investment and the accounting standard of “more likely than not” has not been met for the Company to be required to sell the investment before recovery of its amortized cost basis, which may be maturity, the Company does not consider this investment to be other-than-temporarily impaired.

20% simplified supervisory formula approach rating.

The following table presents the amortized cost and estimated fair value of ~~held to maturity~~HTM securities as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~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.

September 30, 2017 December 31, 2016

Carrying
Value ⁽¹⁾

Estimated
Fair Value

Carrying
Value ⁽¹⁾

Estimated
Fair Value
Due in one year or less $ 5,879
$ 5,902
$ 4,403
$ 4,440
Due after one year through five years 41,196
41,959
28,383
28,763
Due after five years through ten years 65,893
67,444
51,730
51,522
Due after ten years 91,833
94,530
117,010
117,590
Total securities held to maturity $ 204,801
$ 209,835
$ 201,526
$ 202,315

~~(1)The carrying value includes $4.0 million as~~


	March 31, 2023				December 31, 2022
	Carrying		Estimated		Carrying		Estimated
	Value		Fair Value		Value		Fair Value
Due in one year or less	$	2,051	$	2,044	$	2,010	$	2,006
Due after one year through five years		36,675		36,745		35,044		35,014
Due after five years through ten years		28,128		28,355		19,941		20,239
Due after ten years		788,564		755,955		790,737		744,628
Total HTM securities	$	855,418	$	823,099	$	847,732	$	801,887

Refer to Note 7 "Commitments and Contingencies" within this Item 1 of ~~September 30, 2017 and $5.2 million as of December 31, 2016 of net unrealized gains present at the time of transfer from available~~this Quarterly Report for ~~sale securities, net of any accretion.~~

~~For~~ information regarding the estimated fair value of ~~held to maturity~~HTM securities ~~which~~that were pledged to secure public deposits as permitted or required by law as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016, see Note 6 “Commitments and Contingencies.”~~

2022.

Restricted Stock, at cost

Due to restrictions placed upon the Bank’s common stock investment in the ~~Federal Reserve Bank~~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. At ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016, the FHLB required the Bank to maintain~~2022, restricted stock ~~in an amount equal to 4.25%~~consists of outstanding borrowings and a specific percentage of the Bank’s total assets. The Federal Reserve Bank required the Bank to maintain stock with a par value equal to 6% of its outstanding capital at both September 30, 2017 and December 31, 2016. Restricted equity securities consist of Federal Reserve BankFRB stock in the amount of ~~$27.6~~$67.0 million, ~~and $23.8 million for September 30, 2017 and December 31, 2016~~respectively, and FHLB stock in the amount of ~~$40.9~~$20.6 million and ~~$37.0~~$53.2 million, asrespectively.

-14-

Table of ~~September 30, 2017 and December 31, 2016, respectively.~~Contents

~~Other-Than-Temporary-Impairment~~

During each quarter, the Company conducts an assessment of the securities portfolio for OTTI consideration. The assessment considers factors such as external credit ratings, delinquency coverage ratios, market price, management’s judgment, expectations of future performance, and relevant industry research and analysis. An impairment is other-than-temporary if any of the following conditions exist: the entity intends to sell the security; it is more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis; or the entity does not expect to recover the security’s entire amortized cost basis (even if the entity does not intend to sell). If a credit loss exists, but an entity does not intend to sell the impaired debt security and is not more likely than not to be required to sell before recovery, the impairment is other-than-temporary and should be separated into a credit portion to be recognized in earnings and the remaining amount relating to all other factors recognized as other comprehensive loss. Based on the assessment for the three and nine months ended September 30, 2017, and in accordance with the guidance, no OTTI was recognized.

For the year ended December 31, 2015, the Company determined that a municipal security in the available for sale portfolio incurred credit-related OTTI of $300,000. During the quarter ended March 31, 2016, the municipal security was sold. As a result, the Company recognized an additional loss on sale of the previously written down security.

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 ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 (dollars in thousands).


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

Proceeds from sales of securities	$	558,466	$	—

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

Three Months Ended
September 30, 2017 Nine Months Ended September 30, 2017
Realized gains (losses):

Gross realized gains $ 296
$ 958
Gross realized losses (112 ) (176 )
Net realized gains $ 184
$ 782

Proceeds from sales of securities $ 39,284
$ 91,911

-15-

Three Months Ended
September 30, 2016 Nine Months Ended
September 30, 2016
Realized gains (losses):

Gross realized gains $ —
$ 242
Gross realized losses —
(97 )
Net realized gains $ —
$ 145

Proceeds from sales of securities $ 2,848
$ 18,272

Table of Contents

3. LOANS AND ALLOWANCE FOR LOAN AND LEASE LOSSES

~~Loans~~

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 ~~consist~~consisted of the following at ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016~~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

September 30, 2017 December 31, 2016
Construction and Land Development $ 841,738
$ 751,131
Commercial Real Estate - Owner Occupied 903,523
857,805
Commercial Real Estate - Non-Owner Occupied 1,748,039
1,564,295
Multifamily Real Estate 368,686
334,276
Commercial & Industrial 554,522
551,526
Residential 1-4 Family 1,083,112
1,029,547
Auto 276,572
262,071
HELOC 535,446
526,884
Consumer and all other 587,091
429,525
Total loans held for investment, net ⁽¹⁾
$ 6,898,729
$ 6,307,060

⁽¹⁾~~Loans, as presented, are net of~~Total loans included unamortized premiums and discounts, and unamortized deferred fees and costs totaling ~~$335,000~~$47.3 million and ~~$1.8~~$50.4 million as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~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 ~~segment,~~class, at ~~September 30, 2017~~December 31, 2022 (dollars in thousands):

30-59 Days
Past Due

60-89 Days
Past Due

Greater than 90
Days and still
Accruing
PCI Nonaccrual Current Total Loans
Construction and Land Development $ 7,221
$ 100
$ 54
$ 3,026
$ 5,671
$ 825,666
$ 841,738
Commercial Real Estate - Owner Occupied 1,707
689
679
17,668
2,205
880,575
903,523
Commercial Real Estate - Non-Owner Occupied 909
571
298
14,376
2,701
1,729,184
1,748,039
Multifamily Real Estate —
—
—
77
—
368,609
368,686
Commercial & Industrial 1,558
255
101
625
1,252
550,731
554,522
Residential 1-4 Family 5,633
1,439
2,360
14,077
6,163
1,053,440
1,083,112
Auto 2,415
293
143
—
174
273,547
276,572
HELOC 1,400
628
709
982
1,791
529,936
535,446
Consumer and all other 3,469
1,445
188
210
165
581,614
587,091
Total loans held for investment $ 24,312
$ 5,420
$ 4,532
$ 51,041
$ 20,122
$ 6,793,302
$ 6,898,729

~~The following table shows the aging of the Company’s loan portfolio, by segment, at December 31, 2016 (dollars in thousands):~~

30-59 Days
Past Due

60-89 Days
Past Due

Greater than 90
Days and still
Accruing
PCI Nonaccrual Current Total Loans
Construction and Land Development $ 1,162
$ 232
$ 76
$ 2,922
$ 2,037
$ 744,702
$ 751,131
Commercial Real Estate - Owner Occupied 1,842
109
35
18,343
794
836,682
857,805
Commercial Real Estate - Non-Owner Occupied 2,369
—
—
17,303
—
1,544,623
1,564,295
Multifamily Real Estate 147
—
—
2,066
—
332,063
334,276
Commercial & Industrial 759
858
9
1,074
124
548,702
551,526
Residential 1-4 Family 7,038
534
2,048
16,200
5,279
998,448
1,029,547
Auto 2,570
317
111
—
169
258,904
262,071
HELOC 1,836
1,140
635
1,161
1,279
520,833
526,884
Consumer and all other 2,522
1,431
91
223
291
424,967
429,525
Total loans held for investment $ 20,245
$ 4,621
$ 3,005
$ 59,292
$ 9,973
$ 6,209,924
$ 6,307,060

~~The following table shows the PCI loan portfolios, by segment and their delinquency status, at September 30, 2017 (dollars in thousands):~~

30-89 Days Past
Due

Greater than 90
Days
Current Total
Construction and Land Development $ 62
$ —
$ 2,964
$ 3,026
Commercial Real Estate - Owner Occupied 463
643
16,562
17,668
Commercial Real Estate - Non-Owner Occupied 318
1,032
13,026
14,376
Multifamily Real Estate —
—
77
77
Commercial & Industrial —
—
625
625
Residential 1-4 Family 949
1,125
12,003
14,077
HELOC 132
128
722
982
Consumer and all other 34
—
176
210
Total $ 1,958
$ 2,928
$ 46,155
$ 51,041

~~The following table shows the PCI loan portfolios, by segment and their delinquency status, at December 31, 2016 (dollars in thousands):~~

30-89 Days Past
Due

Greater than 90
Days
Current Total
Construction and Land Development $ —
$ 84
$ 2,838
$ 2,922
Commercial Real Estate - Owner Occupied 271
519
17,553
18,343
Commercial Real Estate - Non-Owner Occupied 409
126
16,768
17,303
Multifamily Real Estate —
—
2,066
2,066
Commercial & Industrial 44
56
974
1,074
Residential 1-4 Family 1,298
945
13,957
16,200
HELOC 175
121
865
1,161
Consumer and all other —
—
223
223
Total $ 2,197
$ 1,851
$ 55,244
$ 59,292

~~The Company measures the amount of impairment by evaluating loans either in their collective homogeneous pools or individually.~~


										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	$	1,099,555		$	1,253		$	45		$	100		$	307		$	1,101,260
Commercial Real Estate - Owner Occupied		1,970,323			2,305			635			2,167			7,178			1,982,608
Commercial Real Estate - Non-Owner Occupied		3,993,091			1,121			48			607			1,263			3,996,130
Multifamily Real Estate		801,694			1,229			—			—			—			802,923
Commercial & Industrial		2,980,008			824			174			459			1,884			2,983,349
Residential 1-4 Family - Commercial		534,653			1,231			—			275			1,904			538,063
Residential 1-4 Family - Consumer		919,833			5,951			1,690			1,955			10,846			940,275
Residential 1-4 Family - Revolving		577,993			1,843			511			1,384			3,453			585,184
Auto		589,235			2,747			450			344			200			592,976
Consumer		151,958			351			125			108			3			152,545
Other Commercial		773,738			—			—			91			—			773,829
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		99.60	%		0.13	%		0.03	%		0.05	%		0.19	%		100.00	%

The following table shows the Company’s ~~impaired~~amortized cost basis of loans ~~excluding PCI~~on nonaccrual status and loans ~~by segment at September 30, 2017~~past due 90 days and ~~December~~still accruing as of March 31, ~~2016~~2023 (dollars in thousands):



	Nonaccrual		Nonaccrual With No ALLL		90 Days Past due and still Accruing
Construction and Land Development	$	363	$	—	$	249
Commercial Real Estate - Owner Occupied		6,174		3,451		2,133
Commercial Real Estate - Non-Owner Occupied		1,481		—		1,032
Commercial & Industrial		4,815		2,647		633
Residential 1-4 Family - Commercial		1,907		—		232
Residential 1-4 Family - Consumer		10,540		—		859
Residential 1-4 Family - Revolving		3,449		—		1,766
Auto		347		—		137
Consumer		6		—		137
Other Commercial		—		—		66
Total LHFI	$	29,082	$	6,098	$	7,244

-17-

Table of Contents

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

There was no interest income recognized on nonaccrual loans 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 Form 10-K for additional information on the Company’s policies for nonaccrual loans.

-18-

September 30, 2017 December 31, 2016

Recorded
Investment

Unpaid
Principal
Balance

Related
Allowance

Recorded
Investment

Unpaid
Principal
Balance

Related
Allowance
Loans without a specific allowance

Construction and Land Development $ 13,889
$ 13,981
$ —
$ 13,877
$ 14,353
$ —
Commercial Real Estate - Owner Occupied 5,238
5,378
—
5,886
6,042
—
Commercial Real Estate - Non-Owner Occupied 5,548
5,636
—
1,399
1,399
—
Commercial & Industrial 1,632
1,880
—
648
890
—
Residential 1-4 Family 9,510
10,523
—
8,496
9,518
—
HELOC 1,651
1,741
—
1,017
1,094
—
Consumer and all other 521
631
—
230
427
—
Total impaired loans without a specific allowance $ 37,989
$ 39,770
$ —
$ 31,553
$ 33,723
$ —

Loans with a specific allowance

Construction and Land Development $ 1,347
$ 1,444
$ 113
$ 1,395
$ 1,404
$ 107
Commercial Real Estate - Owner Occupied 2,118
2,132
157
646
646
4
Commercial Real Estate - Non-Owner Occupied 2,032
2,032
42
2,809
2,809
474
Commercial & Industrial 2,511
2,562
909
857
880
14
Residential 1-4 Family 4,421
4,543
249
3,335
3,535
200
Auto 174
235
1
169
235
1
HELOC 766
800
56
323
433
15
Consumer and all other 242
310
43
62
298
1
Total impaired loans with a specific allowance $ 13,611
$ 14,058
$ 1,570
$ 9,596
$ 10,240
$ 816
Total impaired loans $ 51,600
$ 53,828
$ 1,570
$ 41,149
$ 43,963
$ 816

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, 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 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, 2023, the Company did not have any significant loans either individually or in the aggregate that went into default that have been modified and designated as TLMs.

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

The following tables show the ~~average recorded investment and interest income recognized for the Company’s impaired loans, excluding PCI loans,~~ALLL activity by loan segment for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 (dollars in thousands):


	Three Months Ended March 31, 2023						Three Months Ended March 31, 2022
	Commercial		Consumer		Total		Commercial		Consumer		Total
Balance at beginning of period	$	82,753	$	28,015	$	110,768	$	77,902	$	21,885	$	99,787
Loans charged-off		(5,007)		(719)		(5,726)		(759)		(750)		(1,509)
Recoveries credited to allowance		515		652		1,167		726		787		1,513
Provision charged to operations		9,825		478		10,303		1,902		898		2,800
Balance at end of period	$	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

The Company’s primary credit quality indicator for the Commercial segment is risk rating categories of Pass, Watch, Special Mention, Substandard, and Doubtful. The primary credit quality indicator for the Consumer segment is delinquency bands of Current, 30-59, 60-89, 90+, and Nonaccrual. See Note 3 “Loans and 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 quality indicators.

Commercial Loans

The table below details the amortized cost and gross writeoffs of the classes of loans within the Commercial segment by risk level and year of origination as of March 31, 2023 (dollars in thousands):

-21-

Three Months Ended
September 30, 2017 Nine Months Ended
September 30, 2017

Average
Investment

Interest Income
Recognized

Average
Investment

Interest Income
Recognized
Construction and Land Development $ 15,654
$ 128
$ 15,378
$ 368
Commercial Real Estate - Owner Occupied 7,354
62
7,407
245
Commercial Real Estate - Non-Owner Occupied 7,597
57
7,584
185
Commercial & Industrial 4,139
36
4,203
121
Residential 1-4 Family 14,218
94
14,358
261
Auto 192
—
223
2
HELOC 2,460
7
2,492
29
Consumer and all other 800
8
690
20
Total impaired loans $ 52,414
$ 392
$ 52,335
$ 1,231

Table of Contents


		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)

-22-

Three Months Ended
September 30, 2016 Nine Months Ended
September 30, 2016
Average
Investment Interest Income
Recognized Average
Investment Interest Income
Recognized
Construction and Land Development $ 28,195
$ 464
$ 27,645
$ 1,346
Commercial Real Estate - Owner Occupied 7,691
72
7,862
230
Commercial Real Estate - Non-Owner Occupied 3,777
33
3,759
98
Commercial & Industrial 4,628
42
4,964
134
Residential 1-4 Family 13,106
89
13,439
267
Auto 271
—
289
4
HELOC 2,118
7
2,185
35
Consumer and all other 453
—
620
6
Total impaired loans $ 60,239
$ 707
$ 60,763
$ 2,120

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, 2022 (dollars in thousands):


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


	2022		2021		2020		2019		2018		Prior		Revolving Loans		Total
Construction and Land Development
Pass	$	357,688	$	499,738	$	107,559	$	17,191	$	33,801	$	36,335	$	34,345	$	1,086,657
Watch		242		1,637		—		—		115		1,669		—		3,663
Special Mention		2,843		411		—		—		—		93		—		3,347
Substandard		1,254		3,148		40		211		1,345		1,595		—		7,593
Total Construction and Land Development	$	362,027	$	504,934	$	107,599	$	17,402	$	35,261	$	39,692	$	34,345	$	1,101,260

Commercial Real Estate - Owner Occupied
Pass	$	258,953	$	215,414	$	257,740	$	282,110	$	228,410	$	624,238	$	17,190	$	1,884,055
Watch		1,060		176		2,437		9,567		9,736		31,331		916		55,223
Special Mention		—		256		—		93		1,332		18,766		132		20,579
Substandard		—		2,565		474		4,728		1,591		12,979		414		22,751
Total Commercial Real Estate - Owner Occupied	$	260,013	$	218,411	$	260,651	$	296,498	$	241,069	$	687,314	$	18,652	$	1,982,608

Commercial Real Estate - Non-Owner Occupied
Pass	$	496,079	$	661,977	$	385,084	$	517,834	$	373,126	$	1,389,507	$	34,804	$	3,858,411
Watch		—		2,151		2,091		11,915		19,550		20,683		2		56,392
Special Mention		232		—		—		25,578		702		7,381		—		33,893
Substandard		—		—		10,460		3,083		29,012		4,879		—		47,434
Total Commercial Real Estate - Non-Owner Occupied	$	496,311	$	664,128	$	397,635	$	558,410	$	422,390	$	1,422,450	$	34,806	$	3,996,130

Commercial & Industrial
Pass	$	849,547	$	536,982	$	262,093	$	182,263	$	67,648	$	120,326	$	846,059	$	2,864,918
Watch		1,399		1,305		18,682		5,039		12,843		1,984		41,836		83,088
Special Mention		—		222		393		2,145		354		1,773		12,380		17,267
Substandard		94		513		112		2,911		1,449		1,339		11,658		18,076
Total Commercial & Industrial	$	851,040	$	539,022	$	281,280	$	192,358	$	82,294	$	125,422	$	911,933	$	2,983,349

Multifamily Real Estate
Pass	$	111,798	$	90,952	$	204,159	$	47,240	$	59,883	$	231,745	$	52,025	$	797,802
Watch		—		—		—		350		442		416		—		1,208
Special Mention		—		—		—		3,826		—		87		—		3,913
Total Multifamily Real Estate	$	111,798	$	90,952	$	204,159	$	51,416	$	60,325	$	232,248	$	52,025	$	802,923

Residential 1-4 Family - Commercial
Pass	$	58,534	$	86,881	$	77,110	$	50,721	$	38,090	$	199,783	$	803	$	511,922
Watch		500		—		539		852		1,532		5,378		113		8,914
Special Mention		—		—		94		7,771		582		2,630		—		11,077
Substandard		—		632		1,400		463		473		2,883		299		6,150
Total Residential 1-4 Family - Commercial	$	59,034	$	87,513	$	79,143	$	59,807	$	40,677	$	210,674	$	1,215	$	538,063

Other Commercial
Pass	$	197,454	$	211,438	$	149,567	$	119,795	$	3,522	$	69,243	$	14,177	$	765,196
Watch		5,095		—		—		12		—		3,435		—		8,542
Substandard		—		—		—		—		—		—		91		91
Total Other Commercial	$	202,549	$	211,438	$	149,567	$	119,807	$	3,522	$	72,678	$	14,268	$	773,829

Total Commercial
Pass	$	2,330,053	$	2,303,382	$	1,443,312	$	1,217,154	$	804,480	$	2,671,177	$	999,403	$	11,768,961
Watch		8,296		5,269		23,749		27,735		44,218		64,896		42,867		217,030
Special Mention		3,075		889		487		39,413		2,970		30,730		12,512		90,076
Substandard		1,348		6,858		12,486		11,396		33,870		23,675		12,462		102,095
Total Commercial	$	2,342,772	$	2,316,398	$	1,480,034	$	1,295,698	$	885,538	$	2,790,478	$	1,067,244	$	12,178,162

-23-

Table of Contents

Consumer Loans

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, 2023 (dollars in thousands):


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


	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total
Residential 1-4 Family - Consumer
Current	$	32,610	$	221,919	$	268,051	$	158,016	$	34,748	$	236,018	$	13	$	951,375
30-59 Days Past Due		—		648		1,730		2,532		127		6,542		—		11,579
60-89 Days Past Due		—		—		—		—		63		95		—		158
90+ Days Past Due		—		—		—		—		—		859		—		859
Nonaccrual		—		—		585		—		306		9,649		—		10,540
Total Residential 1-4 Family - Consumer	$	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	$	10,726	$	63,001	$	13,036	$	4,837	$	1,451	$	1,223	$	487,849	$	582,123
30-59 Days Past Due		—		14		—		—		—		—		1,370		1,384
60-89 Days Past Due		—		138		—		—		—		—		931		1,069
90+ Days Past Due		—		—		—		—		—		29		1,737		1,766
Nonaccrual		—		87		149		54		—		—		3,159		3,449
Total Residential 1-4 Family - Revolving	$	10,726	$	63,240	$	13,185	$	4,891	$	1,451	$	1,252	$	495,046	$	589,791
Current period gross writeoff	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Auto
Current	$	54,750	$	270,291	$	142,237	$	73,589	$	38,687	$	18,299	$	—	$	597,853
30-59 Days Past Due		—		624		595		356		274		177		—		2,026
60-89 Days Past Due		—		86		103		80		4		22		—		295
90+ Days Past Due		—		94		33		5		5		—		—		137
Nonaccrual		—		98		72		81		94		2		—		347
Total Auto	$	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	$	5,082	$	32,914	$	14,495	$	10,178	$	21,327	$	31,412	$	29,068	$	144,476
30-59 Days Past Due		—		76		42		10		58		101		8		295
60-89 Days Past Due		—		35		31		5		67		36		2		176
90+ Days Past Due		—		49		40		17		20		8		3		137
Nonaccrual		—		—		3		—		3		—		—		6
Total Consumer	$	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	$	103,168	$	588,125	$	437,819	$	246,620	$	96,213	$	286,952	$	516,930	$	2,275,827
30-59 Days Past Due		—		1,362		2,367		2,898		459		6,820		1,378		15,284
60-89 Days Past Due		—		259		134		85		134		153		933		1,698
90+ Days Past Due		—		143		73		22		25		896		1,740		2,899
Nonaccrual		—		185		809		135		403		9,651		3,159		14,342
Total Consumer	$	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)

-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, 2022 (dollars in thousands):


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


	2022		2021		2020		2019		2018		Prior		Revolving Loans		Total
Residential 1-4 Family - Consumer
Current	$	212,697	$	263,734	$	162,826	$	36,197	$	22,629	$	221,738	$	12	$	919,833
30-59 Days Past Due		174		2,169		89		46		220		3,253		—		5,951
60-89 Days Past Due		—		—		—		—		413		1,277		—		1,690
90+ Days Past Due		—		—		—		64		—		1,891		—		1,955
Nonaccrual		—		423		—		307		940		9,176		—		10,846
Total Residential 1-4 Family - Consumer	$	212,871	$	266,326	$	162,915	$	36,614	$	24,202	$	237,335	$	12	$	940,275

Residential 1-4 Family - Revolving
Current	$	68,434	$	13,810	$	4,997	$	1,672	$	801	$	476	$	487,803	$	577,993
30-59 Days Past Due		90		—		—		—		—		—		1,753		1,843
60-89 Days Past Due		—		—		—		—		—		—		511		511
90+ Days Past Due		—		—		—		—		—		—		1,384		1,384
Nonaccrual		—		149		57		—		13		—		3,234		3,453
Total Residential 1-4 Family - Revolving	$	68,524	$	13,959	$	5,054	$	1,672	$	814	$	476	$	494,685	$	585,184

Auto
Current	$	285,036	$	154,904	$	81,710	$	44,086	$	15,974	$	7,525	$	—	$	589,235
30-59 Days Past Due		808		772		451		456		134		126		—		2,747
60-89 Days Past Due		65		129		146		76		30		4		—		450
90+ Days Past Due		169		—		111		32		12		20		—		344
Nonaccrual		—		113		18		62		2		5		—		200
Total Auto	$	286,078	$	155,918	$	82,436	$	44,712	$	16,152	$	7,680	$	—	$	592,976

Consumer
Current	$	36,513	$	15,897	$	11,019	$	23,838	$	16,084	$	19,070	$	29,537	$	151,958
30-59 Days Past Due		61		27		36		113		34		61		19		351
60-89 Days Past Due		43		17		10		11		14		21		9		125
90+ Days Past Due		22		—		9		12		32		—		33		108
Nonaccrual		—		3		—		—		—		—		—		3
Total Consumer	$	36,639	$	15,944	$	11,074	$	23,974	$	16,164	$	19,152	$	29,598	$	152,545

Total Consumer
Current	$	602,680	$	448,345	$	260,552	$	105,793	$	55,488	$	248,809	$	517,352	$	2,239,019
30-59 Days Past Due		1,133		2,968		576		615		388		3,440		1,772		10,892
60-89 Days Past Due		108		146		156		87		457		1,302		520		2,776
90+ Days Past Due		191		—		120		108		44		1,911		1,417		3,791
Nonaccrual		—		688		75		369		955		9,181		3,234		14,502
Total Consumer	$	604,112	$	452,147	$	261,479	$	106,972	$	57,332	$	264,643	$	524,295	$	2,270,980

The Company ~~considers~~did not have any significant revolving loans convert to term during the three months ended March 31, 2023 or the year ended December 31, 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 ~~to be impaired~~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 ~~modification of~~TDR occurs when a ~~loan’s terms constitutes a TDR if the creditor~~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 to the borrower for economic or legal reasons related to the borrower’s financial difficulties.~~consider. All loans that are considered to be TDRs are evaluated for ~~impairment~~credit losses in accordance with the Company’s ~~allowance for loan loss methodology and are included in the preceding impaired loan tables.~~ALLL methodology. For the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2022, the recorded investment in TDRs prior to modifications was not materially impacted by the ~~modification.~~

modifications.

The following table provides a summary, by ~~segment,~~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 ~~September 30, 2017 and~~ December 31, ~~2016~~2022 (dollars in thousands):

September 30, 2017 December 31, 2016

No. of
Loans

Recorded
Investment

Outstanding
Commitment

No. of
Loans

Recorded
Investment

Outstanding
Commitment
Performing

Construction and Land Development 7
$ 2,841
$ —
8
$ 3,793
$ —
Commercial Real Estate - Owner Occupied 7
2,934
—
7
3,106
—
Commercial Real Estate - Non-Owner Occupied 3
2,196
—
2
2,390
—
Commercial & Industrial 12
2,112
—
3
533
—
Residential 1-4 Family 34
5,941
—
28
4,145
—
Consumer and all other 1
495
—
—
—
—
Total performing 64
$ 16,519
$ —
48
$ 13,967
$ —

Nonperforming

Construction and Land Development 5
$ 400
$ —
2
$ 215
$ —
Commercial Real Estate - Owner Occupied 2
142
—
2
156
—
Commercial & Industrial 5
1,062
—
1
116
—
Residential 1-4 Family 8
1,095
—
8
948
—
Consumer and all other 1
26
—
—
—
—
Total nonperforming 21
$ 2,725
$ —
13
$ 1,435
$ —

Total performing and nonperforming 85
$ 19,244
$ —
61
$ 15,402
$ —


	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. The following table shows, by segment, TDRs that were identified by the Company as going into default during the period shown that were restructured in the prior twelve-month period (dollars in thousands):

Three Months Ended
September 30, 2017 Nine Months Ended
September 30, 2017

No. of
Loans

Recorded
Investment

No. of
Loans

Recorded
Investment
Construction and Land Development —
$ —
2
$ 198
Commercial Real Estate - Owner Occupied —
—
1
469
Commercial & Industrial 1
350
1
350
Residential 1-4 Family 2
187
4
605
Total 3
$ 537
8
$ 1,622

During the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2022 and the year ended December 31, 2022, the Company ~~identified one loan, totaling approximately $23,000,~~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. ~~This loan was a commercial real estate - owner occupied loan that had a term modification at a market rate.~~

-26-

~~The following table shows, by segment and modification type, TDRs that occurred during the three and nine months ended September 30, 2017 (dollars in thousands):~~

Three Months Ended
September 30, 2017 Nine Months Ended
September 30, 2017

No. of
Loans

Recorded
Investment at
Period End

No. of
Loans

Recorded
Investment at
Period End
Modified to interest only, at a market rate
Commercial & Industrial 3
$ 936
8
$ 1,596
Total interest only at market rate of interest 3
$ 936
8
$ 1,596

Term modification, at a market rate

Construction and Land Development 1
$ 160
4
$ 1,150
Commercial Real Estate - Owner Occupied 1
380
1
380
Commercial Real Estate - Non-Owner Occupied 1
571
3
2,196
Commercial & Industrial —
—
4
969
Residential 1-4 Family 3
1,647
8
2,574
Consumer and all other 1
26
2
522
Total loan term extended at a market rate 7
$ 2,784
22
$ 7,791

Term modification, below market rate
Commercial Real Estate - Owner Occupied —
$ —
1
$ 841
Commercial & Industrial —
—
3
179
Residential 1-4 Family 1
40
8
1,143
Total loan term extended at a below market rate 1
$ 40
12
$ 2,163

Total 11
$ 3,760
42
$ 11,550

~~The following table shows, by segment and modification type, TDRs that occurred during the three and nine months ended September 30, 2016 (dollars in thousands):~~

Three Months Ended
September 30, 2016 Nine Months Ended
September 30, 2016

No. of
Loans

Recorded
Investment at
Period End

No. of
Loans

Recorded
Investment at
Period End
Term modification, at a market rate

Construction and Land Development —
$ —
1
$ 1,177
Commercial Real Estate - Owner Occupied —
—
2
739
Commercial & Industrial 1
457
1
457
Residential 1-4 Family —
—
2
474
Total loan term extended at a market rate 1
$ 457
6
$ 2,847

Term modification, below market rate
Residential 1-4 Family —
$ —
1
$ 36
Total loan term extended at a below market rate —
$ —
1
$ 36

Interest rate modification, below market rate
Commercial & Industrial —
$ —
1
$ 125
Total interest only at below market rate of interest —
$ —
1
$ 125

Total 1
$ 457
8
$ 3,008

~~The following table shows the allowance for loan loss activity, balances for allowance for loan losses, and loan balances based on impairment methodology by segment for the nine months ended and as~~

Table of September 30, 2017. The table below includes the provision for loan losses. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories (dollars in thousands):

Allowance for loan losses

Balance,
beginning of the
year

Recoveries
credited to
allowance

Loans charged
off

Provision
charged to
operations

Balance, end of
period
Construction and Land Development $ 10,055
$ 193
$ (2,115 ) $ 535
$ 8,668
Commercial Real Estate - Owner Occupied 3,801
84
(46 ) (620 ) 3,219
Commercial Real Estate - Non-Owner Occupied 6,622
2
(1,181 ) 1,825
7,268
Multifamily Real Estate 1,236
—
—
(136 ) 1,100
Commercial & Industrial 4,627
451
(1,241 ) 1,526
5,363
Residential 1-4 Family 6,399
332
(815 ) (35 ) 5,881
Auto 946
352
(761 ) 398
935
HELOC 1,328
240
(861 ) 675
1,382
Consumer and all other 2,178
905
(2,929 ) 3,192
3,346
Total $ 37,192
$ 2,559
$ (9,949 ) $ 7,360
$ 37,162

Loans individually evaluated
for impairment Loans collectively evaluated for
impairment Loans acquired with
deteriorated credit quality Total
Loans ALL Loans ALL Loans ALL Loans ALL
Construction and Land Development $ 15,236
$ 113
$ 823,476
$ 8,555
$ 3,026
$ —
$ 841,738
$ 8,668
Commercial Real Estate - Owner Occupied 7,356
157
878,499
3,062
17,668
—
903,523
3,219
Commercial Real Estate - Non-Owner Occupied 7,580
42
1,726,083
7,226
14,376
—
1,748,039
7,268
Multifamily Real Estate —
—
368,609
1,100
77
—
368,686
1,100
Commercial & Industrial 4,143
909
549,754
4,454
625
—
554,522
5,363
Residential 1-4 Family 13,931
249
1,055,104
5,632
14,077
—
1,083,112
5,881
Auto 174
1
276,398
934
—
—
276,572
935
HELOC 2,417
56
532,047
1,326
982
—
535,446
1,382
Consumer and all other 763
43
586,118
3,303
210
—
587,091
3,346
Total loans held for investment, net $ 51,600
$ 1,570
$ 6,796,088
$ 35,592
$ 51,041
$ —
$ 6,898,729
$ 37,162

The following table shows the allowance for loan loss activity, balances for allowance for loan losses, and loan balances based on impairment methodology by segment for the nine months ended and as of September 30, 2016. In addition, a $175,000 provision was recognized during the nine months ended September 30, 2016 for unfunded loan commitments for which the reserves are recorded as a component of “Other Liabilities” on the Company’s Consolidated Balance Sheets. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories (dollars in thousands):

Allowance for loan losses

Balance,
beginning of the
year

Recoveries
credited to
allowance

Loans charged
off

Provision
charged to
operations

Balance, end of
period
Construction and Land Development $ 6,040
$ 165
$ (869 ) $ 5,464
$ 10,800
Commercial Real Estate - Owner Occupied 4,614
112
(772 ) (770 ) 3,184
Commercial Real Estate - Non-Owner Occupied 6,929
3
(1 ) (813 ) 6,118
Multifamily Real Estate 1,606
—
—
(658 ) 948
Commercial & Industrial 3,163
422
(1,301 ) 3,119
5,403
Residential 1-4 Family 5,414
466
(741 ) 518
5,657
Auto 1,703
243
(815 ) (260 ) 871
HELOC 2,934
229
(1,272 ) (534 ) 1,357
Consumer and all other 1,644
382
(957 ) 1,135
2,204
Total $ 34,047
$ 2,022
$ (6,728 ) $ 7,201
$ 36,542

Loans individually evaluated
for impairment

Loans collectively evaluated for
impairment

Loans acquired with
deteriorated credit quality
Total
Loans ALL Loans ALL Loans ALL Loans ALL
Construction and Land Development $ 27,241
$ 123
$ 745,984
$ 10,677
$ 3,205
$ —
$ 776,430
$ 10,800
Commercial Real Estate - Owner Occupied 7,612
5
830,466
3,179
19,064
—
857,142
3,184
Commercial Real Estate - Non-Owner Occupied 3,792
1
1,432,895
6,117
18,141
—
1,454,828
6,118
Multifamily Real Estate —
—
337,234
948
2,079
—
339,313
948
Commercial & Industrial 3,448
642
505,264
4,761
1,145
—
509,857
5,403
Residential 1-4 Family 12,673
115
969,860
5,542
16,828
—
999,361
5,657
Auto 231
1
254,957
870
—
—
255,188
871
HELOC 2,053
17
520,546
1,340
1,498
—
524,097
1,357
Consumer and all other 451
88
431,865
2,116
386
—
432,702
2,204
Total loans held for investment, net $ 57,501
$ 992
$ 6,029,071
$ 35,550
$ 62,346
$ —
$ 6,148,918
$ 36,542

The Company uses a risk rating system and past due status as the primary credit quality indicators for the loan categories. The risk rating system on a scale of 0 through 9 is used to determine risk level as used in the calculation of the allowance for loan losses; on those loans without a risk rating, the Company uses past due status to determine risk level. 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; or~~

•~~Loans that are not risk rated but that are 0 to 29 days past due.~~

~~Special Mention 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;~~

•~~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; or~~

•~~Loans that are not risk rated but that are 30 to 89 days past due.~~

~~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; or~~

•~~Loans that are not risk rated but that are 90 to 149 days past due.~~

~~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; or~~

•~~Loans that are not risk rated but that are over 149 days past due.~~

~~The following table shows the recorded investment in all loans, excluding PCI loans, by segment with their related risk level as of September 30, 2017 (dollars in thousands):~~

Pass Special Mention Substandard Doubtful Total
Construction and Land Development $ 768,206
$ 57,190
$ 13,201
$ 115
$ 838,712
Commercial Real Estate - Owner Occupied 834,265
47,019
4,571
—
885,855
Commercial Real Estate - Non-Owner Occupied 1,702,500
23,764
7,399
—
1,733,663
Multifamily Real Estate 361,175
7,434
—
—
368,609
Commercial & Industrial 534,594
16,400
2,903
—
553,897
Residential 1-4 Family 1,045,736
15,878
4,480
2,941
1,069,035
Auto 273,446
2,910
143
73
276,572
HELOC 530,263
2,427
1,051
723
534,464
Consumer and all other 583,728
2,618
530
5
586,881
Total $ 6,633,913
$ 175,640
$ 34,278
$ 3,857
$ 6,847,688

~~The following table shows the recorded investment in all loans, excluding PCI loans, by segment with their related risk level as of December 31, 2016 (dollars in thousands):~~

Pass Special Mention Substandard Doubtful Total
Construction and Land Development $ 667,018
$ 69,311
$ 11,857
$ 23
$ 748,209
Commercial Real Estate - Owner Occupied 801,565
32,364
5,533
—
839,462
Commercial Real Estate - Non-Owner Occupied 1,505,153
37,631
4,208
—
1,546,992
Multifamily Real Estate 312,711
19,499
—
—
332,210
Commercial & Industrial 539,999
9,391
1,062
—
550,452
Residential 1-4 Family 986,973
18,518
4,813
3,043
1,013,347
Auto 258,188
3,648
135
100
262,071
HELOC 519,928
4,225
969
601
525,723
Consumer and all other 425,520
3,491
40
251
429,302
Total $ 6,017,055
$ 198,078
$ 28,617
$ 4,018
$ 6,247,768

~~The following table shows the recorded investment in only PCI loans by segment with their related risk level as of September 30, 2017 (dollars in thousands):~~

Pass Special Mention Substandard Doubtful Total
Construction and Land Development $ 1,460
$ 1,311
$ 255
$ —
$ 3,026
Commercial Real Estate - Owner Occupied 5,521
8,237
3,910
—
17,668
Commercial Real Estate - Non-Owner Occupied 10,676
2,435
1,265
—
14,376
Multifamily Real Estate —
77
—
—
77
Commercial & Industrial 94
309
222
—
625
Residential 1-4 Family 7,498
4,227
1,577
775
14,077
HELOC 722
132
6
122
982
Consumer and all other 154
46
10
—
210
Total $ 26,125
$ 16,774
$ 7,245
$ 897
$ 51,041

~~The following table shows the recorded investment in only PCI loans by segment with their related risk level as of December 31, 2016 (dollars in thousands):~~

Pass Special Mention Substandard Doubtful Total
Construction and Land Development $ 1,092
$ 1,432
$ 398
$ —
$ 2,922
Commercial Real Estate - Owner Occupied 5,520
8,889
3,934
—
18,343
Commercial Real Estate - Non-Owner Occupied 10,927
4,638
1,738
—
17,303
Multifamily Real Estate 343
1,723
—
—
2,066
Commercial & Industrial 107
480
487
—
1,074
Residential 1-4 Family 8,557
4,455
2,672
516
16,200
HELOC 857
183
7
114
1,161
Consumer and all other 166
37
20
—
223
Total $ 27,569
$ 21,837
$ 9,256
$ 630
$ 59,292

Loans acquired are originally recorded at fair value, with certain loans being identified as impaired at the date of purchase. The fair values were determined based on the credit quality of the portfolio, expected future cash flows, and timing of those expected future cash flows.

~~The following shows changes in the accretable yield for loans accounted for under ASC 310-30,~~ ~~Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality,~~ ~~for the periods presented (dollars in thousands):~~

For the Nine Months Ended
September 30,
2017 2016
Balance at beginning of period $ 19,739
$ 22,139
Accretion (4,896 ) (4,232 )
Reclass of nonaccretable difference due to improvement in expected cash flows 2,175
3,580
Other, net ⁽¹⁾
(452 ) (1,149 )
Balance at end of period $ 16,566
$ 20,338

~~(1)~~This line item represents changes in the cash flows expected to be collected due to the impact of non-credit changes such as prepayment assumptions, changes in interest rates on variable rate PCI loans, and discounted payoffs that occurred in the quarter.

The carrying value of the Company’s PCI loan portfolio, accounted for under ASC 310-30, totaled $51.0 million at September 30, 2017 and $59.3 million at December 31, 2016. The outstanding balance of the Company’s PCI loan portfolio totaled $62.8 million at September 30, 2017 and $73.6 million at December 31, 2016. The carrying value of the Company’s acquired performing loan portfolio, accounted for under ASC 310-20, ~~Receivables – Nonrefundable Fees and Other Costs~~, totaled $942.0 million at September 30, 2017 and $1.1 billion at December 31, 2016; the remaining discount on these loans totaled $14.6 million at September 30, 2017 and $16.9 million at December 31, 2016.

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 ~~intangible assets~~intangibles are being amortized over the period of expected benefit, which ranges from 4four years to 14ten years, using an accelerated method. Other amortizable intangible assets are being amortized over the period of expected benefit, which ranges from 5four years to 10ten years, using ~~a straight-line method.~~

various methods. The Company concluded there was no impairment to the Company’s goodwill or intangible assets as of the balance sheet date. In ~~accordance with ASC 350,~~ ~~Intangibles-Goodwill and Other,~~the normal course of business, the Company ~~reviews~~routinely monitors the ~~carrying value~~impact of ~~indefinite lived~~the changes in the financial markets and includes these assessments in the Company’s 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, ~~at least annually or more frequently if certain impairment indicators exist.~~respectively, from the Consumer Banking segment to the Wholesale Banking segment. The Company ~~performed its annual impairment testing in the second quarter of 2017 and~~ determined that there was no impairment to the Bank’s goodwill prior to or after re-allocating goodwill. The Company restated its goodwill orand intangible ~~assets.~~

assets segment 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 Revenue” for additional information on the Company’s reportable operating segment changes.

Amortization expense of ~~core deposit~~ intangibles for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and 2022 totaled ~~$1.4~~$2.3 million and ~~$4.3~~$3.0 million, ~~respectively; and the three and nine months ended September 30, 2016 totaled $1.7 million and $5.3 million,~~ respectively. ~~Amortization expense of other intangibles for the three and nine months ended September 30, 2017 totaled $120,000 and $360,000, respectively and $160,000 for the~~ ~~boththree and nine months ended September 30, 2016.~~

As of ~~September 30, 2017,~~March 31, 2023, the estimated remaining amortization expense of intangibles is as follows for the years ending (dollars in thousands):


For the remaining nine months of 2023	$	6,239
2024		6,753
2025		5,155
2026		3,559
2027		1,986
Thereafter		790
Total estimated amortization expense	$	24,482

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5. LEASES

Lessor Arrangements

The Company’s lessor arrangements consist of sales-type and direct financing leases for equipment, including vehicles and machinery, with terms ranging from 14 months to 125 months. 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 residual value insurance to reduce its residual asset risk. At March 31, 2023 and December 31, 2022, the carrying value of residual assets covered by residual value guarantees and residual value insurance was $45.9 million and $44.3 million, respectively. For more information on the Company’s lessor arrangements, refer to Note 1 “Summary of Significant Accounting Policies” in the Company’s 2022 Form 10-K.

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


	March 31, 2023		December 31, 2022
Sales-type and direct financing leases:
Lease receivables, net of unearned income and deferred selling profit	$	257,643	$	266,380
Unguaranteed residual values, net of unearned income and deferred selling profit		15,269		15,159
Total net investment in sales-type and direct financing leases	$	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 23 years. For more information on the Company’s lessee arrangements, refer to Note 1 “Summary of Significant Accounting Policies” in the Company’s 2022 Form 10-K.

The tables below provide information about the Company’s lessee lease portfolio and other supplemental lease information (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	%

For the remaining three months of 2017 $ 1,420
For the year ending December 31, 2018 4,664
For the year ending December 31, 2019 3,599
For the year ending December 31, 2020 2,509
For the year ending December 31, 2021 1,481
Thereafter 2,344
Total estimated amortization expense $ 16,017

⁽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,
	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

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

The maturities of lessor and lessee arrangements outstanding are presented in the table below (dollars in thousands):


	March 31, 2023
	Lessor		Lessee
		Sales-type and Direct Financing	Operating		Finance
For the remaining nine months of 2023	$	49,822	$	8,243	$	996
2024		66,025		10,394		1,358
2025		55,221		8,214		1,392
2026		43,834		5,711		1,427
2027		33,152		4,450		1,462
Thereafter		38,814		14,129		1,626
Total undiscounted cash flows		286,868		51,141		8,261
Less: Adjustments ⁽¹⁾		29,225		5,244		278
Total ⁽²⁾	$	257,643	$	45,897	$	7,983

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

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

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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. ~~Also included in total short-term borrowings are securities sold under agreements to repurchase, which are secured transactions with customers and generally mature the day following the date sold.~~

Total short-term borrowings consist of the following as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016~~2022 (dollars in thousands):

September 30,
2017 December 31,
2016
Securities sold under agreements to repurchase $ 43,337
$ 59,281
Other short-term borrowings ⁽¹⁾
574,000
517,500
Total short-term borrowings $ 617,337
$ 576,781

Maximum month-end outstanding balance $ 696,529
$ 678,262
Average outstanding balance during the period 606,441
590,074
Average interest rate (year-to-date) 0.93 % 0.49 %
Average interest rate at end of period 1.15 % 0.60 %

⁽¹⁾~~As of September 30, 2017 and December 31, 2016 , all other short-term borrowings were FHLB advances.~~


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

Average outstanding balance during the period	$	724,065		$	302,060
Average interest rate during the period		4.24	%		1.79	%
Average interest rate at end of period		4.40	%		3.89	%

The Bank maintains federal funds lines with several correspondent banks; the ~~remaining~~ available balance was ~~$185.0 million and $175.0 million~~$1.0 billion at ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, respectively. The Company maintains an alternate line of credit at a correspondent bank; the available balance was $25.0 million at both ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016.~~2022. The Company has certain restrictive covenants related to certain asset quality, capital, and profitability metrics associated with these lines and is ~~considered to be~~ in compliance with these ~~covenants.~~covenants as of March 31, 2023 and December 31, 2022. Additionally, the Company ~~had~~has a collateral dependent line of credit with the FHLB of up to ~~$2.7~~$6.1 billion and ~~$2.4~~$6.0 billion at ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~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

In connection with ~~two~~several previous bank acquisitions, ~~prior to 2006,~~ the Company issued $58.5 million and acquired $92.0 million of trust preferred capital ~~notes to fund the cash portion of those acquisitions, collectively totaling $58.5 million. In connection with the acquisition of StellarOne, the Company~~notes. The remaining fair value discount on all acquired trust preferred capital notes ~~totaling $32.0~~was $12.3 million ~~with a remaining fair value discount of $6.5~~and $12.5 million at ~~September 30, 2017.~~ March 31, 2023 and December 31, 2022, respectively.

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

Spread to

Principal

3-Month LIBOR

Rate ⁽¹⁾

Maturity

Investment ⁽²⁾

Trust Preferred Capital Securities

Trust Preferred Capital Note - Statutory Trust I

22,500

2.75

7.94

6/17/2034

696

Trust Preferred Capital Note - Statutory Trust II

36,000

1.40

6.59

6/15/2036

1,114

VFG Limited Liability Trust I Indenture

20,000

2.73

7.92

3/18/2034

619

FNB Statutory Trust II Indenture

12,000

3.10

8.29

6/26/2033

372

Gateway Capital Statutory Trust I

8,000

3.10

8.29

9/17/2033

248

Gateway Capital Statutory Trust II

7,000

2.65

7.84

6/17/2034

217

Gateway Capital Statutory Trust III

15,000

1.50

6.69

5/30/2036

464

Gateway Capital Statutory Trust IV

25,000

1.55

6.74

7/30/2037

774

MFC Capital Trust II

5,000

2.85

8.04

1/23/2034

155

Total Trust Preferred Capital Securities

150,500

4,659

Subordinated Debt⁽³⁾⁽⁴⁾

2031 Subordinated Debt

250,000

—

2.875

12/15/2031

Total Subordinated Debt⁽⁵⁾

250,000

Fair Value Discount⁽⁶⁾

(15,009)

Investment in Trust Preferred Capital Securities

4,659

Total Long-term Borrowings

390,150

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

⁽²⁾ Represents the junior subordinated debentures owned by the Company in trust and is reported in "Other assets" on the Company’s Consolidated Balance Sheets.

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

⁽⁴⁾Subordinated notes qualify as Tier 2 capital ~~notes currently qualify~~ for ~~Tier 1 capital of~~ the Company for regulatory purposes.

Trust
Preferred
Capital
Securities ⁽¹⁾

Investment ⁽¹⁾

Spread to
3-Month LIBOR
Rate Maturity
Trust Preferred Capital Note - Statutory Trust I $ 22,500,000
$ 696,000
2.75 % 4.08 % 6/17/2034
Trust Preferred Capital Note - Statutory Trust II 36,000,000
1,114,000
1.40 % 2.73 % 6/15/2036
VFG Limited Liability Trust I Indenture 20,000,000
619,000
2.73 % 4.06 % 3/18/2034
FNB Statutory Trust II Indenture 12,000,000
372,000
3.10 % 4.43 % 6/26/2033
Total $ 90,500,000
$ 2,801,000

~~(1)~~The total of 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 and like interest rates to the capital securities. The Company's investment in the trusts is reported in "Other Assets" on the Consolidated Balance Sheets.

~~During the fourth quarter of 2016, the Company issued $150.0 million of fixed-to-floating~~

⁽⁵⁾Fixed-to-floating rate ~~subordinated notes with an initial fixed interest rate of 5.00% through~~notes. On December 15, ~~2021. The~~2026, the interest rate ~~then~~ changes to a floating rate of ~~LIBOR~~

the then current Three-Month Term SOFR plus ~~3.175%~~a spread of 186 bps through its maturity date inor earlier redemption. The notes may be redeemed before maturity on any interest payment date occurring on or after December 15, 2026. ~~At September 30, 2017~~

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

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Total long-term borrowings consist of the following as of December 31, ~~2016,~~2022 (dollars in thousands):


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

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

⁽²⁾ Represents the ~~carrying value of the~~junior subordinated ~~debt was $150.0 million, with a remaining discount of $1.8 million, respectively.~~

~~On August 23, 2012,~~debentures owned by the Company ~~modified its fixed rate FHLB advances to floating rate advances, which resulted~~ in ~~reducing the Company’s FHLB borrowing costs. In connection with this modification, the Company incurred a prepayment penalty of $19.6 million on the original advances, which~~trust and is ~~included as a component of long-term borrowings~~reported in "Other assets" on the Company’s Consolidated Balance Sheets. ~~In accordance with ASC 470-50,~~ ~~Modifications and Extinguishments, the Company is amortizing this prepayment penalty over the term of the modified advances using the effective rate method.~~

⁽³⁾The ~~amortization expense is included~~remaining issuance discount as a component of interest expense on long-term borrowings on the Company’s Consolidated Statements of Income. Amortization expense for the three and nine months ended September 30, 2017 and 2016 was $486,000 and $1.4 million and $474,000 and $1.4 million, respectively.

In connection with the StellarOne acquisition, the Company assumed $70.0 million in long-term borrowings with the FHLB of which there is $20.0 million remaining at September 30, 2017 that had a remaining fair value premium of $223,000.

~~As of September 30, 2017, the Company had long-term advances from the FHLB consisting of the following (dollars in thousands):~~

Long-term Type
Spread to
3-Month LIBOR

Interest Rate ⁽¹⁾
Maturity Date Advance Amount
Adjustable Rate Credit 0.44 % 1.77 % 8/23/2022 $ 55,000
Adjustable Rate Credit 0.45 % 1.79 % 11/23/2022 65,000
Adjustable Rate Credit 0.45 % 1.79 % 11/23/2022 10,000
Adjustable Rate Credit 0.45 % 1.79 % 11/23/2022 10,000
Fixed Rate —
3.62 % 11/28/2017 10,000
Fixed Rate —
3.75 % 7/30/2018 5,000
Fixed Rate —
3.97 % 7/30/2018 5,000
Fixed Rate Hybrid —
0.99 % 10/19/2018 30,000
Fixed Rate Hybrid —
1.58 % 5/18/2020 20,000

$ 210,000
(1)Interest rates calculated using non-rounded numbers.

As of December 31, ~~2016,~~2022 is $2.8 million.

⁽⁴⁾ Subordinated notes qualify as Tier 2 capital for the Company ~~had long-term advances from~~for regulatory purposes.

⁽⁵⁾Fixed-to-floating rate notes. On December 15, 2026, the ~~FHLB consisting~~interest changes to a floating rate of the ~~following (dollars in thousands):~~

Long-term Type
Spread to
3-Month LIBOR

Interest Rate ⁽¹⁾
Maturity Date Advance Amount

Adjustable Rate Credit 0.44 % 1.44 % 8/23/2022 $ 55,000
Adjustable Rate Credit 0.45 % 1.45 % 11/23/2022 65,000
Adjustable Rate Credit 0.45 % 1.45 % 11/23/2022 10,000
Adjustable Rate Credit 0.45 % 1.45 % 11/23/2022 10,000
Fixed Rate —
3.62 % 11/28/2017 10,000
Fixed Rate —
3.75 % 7/30/2018 5,000
Fixed Rate —
3.97 % 7/30/2018 5,000
Fixed Rate Hybrid —
0.99 % 10/19/2018 30,000

$ 190,000
(1)Interest rates calculated using non-rounded numbers.

~~For information~~then current Three-Month Term SOFR plus a spread of 186 bps through its maturity date or earlier redemption. The notes may be redeemed before maturity on ~~the carrying value~~any interest payment date occurring on or after December 15, 2026.

⁽⁶⁾ Remaining discounts of ~~loans~~$12.5 million and ~~securities pledged as collateral~~$2.8 million on ~~FHLB advances as of September 30, 2017~~Trust Preferred Capital Securities and ~~December 31, 2016, refer to Note 6 "Commitments and Contingencies".~~

Subordinated Debt, respectively.

As of ~~September 30, 2017,~~March 31, 2023, the contractual maturities of long-term debt are as follows for the years ending (dollars in thousands):

Trust

Preferred

Total

Capital

Subordinated

Fair Value

Long-term

Notes

Debt

Discount ⁽¹⁾

Borrowings

For the remaining nine months of 2023

—

(875)

2024

—

(1,187)

2025

—

(1,211)

2026

—

(1,236)

2027

—

(1,263)

Thereafter

155,159

250,000

(9,237)

395,922

Total long-term borrowings

155,159

250,000

(15,009)

390,150

Trust
Preferred
Capital
Notes

Subordinated
Debt

FHLB
Advances

Fair Value
Premium
(Discount)

Prepayment
Penalty

Total Long-term
Borrowings
For the remaining three months of 2017 $ —
$ —
$ 10,000
$ (21 ) $ (488 ) $ 9,491
2018 —
—
40,000
(343 ) (1,970 ) 37,687
2019 —
—
—
(486 ) (2,018 ) (2,504 )
2020 —
—
20,000
(501 ) (2,074 ) 17,425
2021 —
—
—
(516 ) (2,119 ) (2,635 )
Thereafter 93,301
150,000
140,000
(6,308 ) (1,707 ) 375,286
Total Long-term borrowings $ 93,301
$ 150,000
$ 210,000
$ (8,175 ) $ (10,376 ) $ 434,750

⁽¹⁾ Includes discount on Trust Preferred Capital Securities and Subordinated Debt.

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7. COMMITMENTS AND CONTINGENCIES

Litigation ~~Matters~~

On September 7, 2017, Paul Parshall, a purported shareholder of Xenith, filed a putative class action lawsuit (the “Parshall Lawsuit”) in the United States District Court for the Eastern District of Virginia against Xenith, its current directors, and the Company on behalf of all public shareholders of Xenith. The plaintiff in the action alleged that the Company’s registration statement on Form S-4 filed with the SEC, as amended, relating to the Pending Merger omitted certain material information in violation of Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder, and further that the individual defendants were liable for those omissions under Section 20(a) of the Exchange Act. The relief sought in the lawsuit included preliminary and permanent injunction to prevent the completion of the Pending Merger, rescission or rescissory damages if the Pending Merger were completed, costs and attorneys’ fees. On November 6, 2017, Mr. Parshall filed a notice of voluntary dismissal, terminating the Parshall Lawsuit without prejudice.

On September 19, 2017, Shannon Rowe, a purported shareholder of Xenith, filed a putative class action lawsuit (the “Rowe Lawsuit”), also in the United States District Court for the Eastern District of Virginia, against Xenith and its current directors. The Company is not named as a defendant in the Rowe Lawsuit. The allegations in the Rowe Lawsuit are similar to the allegations in the Parshall Lawsuit.

At this time, it is not possible to predict the outcome of the proceeding in the Rowe Lawsuit or its impact on Xenith, the Company, or the Pending Merger. The Company believes that the claims in the Rowe Lawsuit are without merit and has been advised that Xenith and the Xenith board of directors also believe that the claims in the Rowe Lawsuit are without merit and that Xenith and the Xenith board of directors intend to defend vigorously against them.

Regulatory Matters

In ~~addition to the Rowe Lawsuit, in~~ the ordinary course of its operations, the Company and its subsidiaries are ~~parties~~subject to ~~various other~~loss contingencies related to legal and regulatory proceedings. ~~Based~~The Company establishes accruals for those matters when a loss contingency is considered probable and the related amount 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 amounts accrued, the Company discloses the aggregate estimation of such possible losses.

As previously disclosed, on February 9, 2022, pursuant to the ~~information presently available,~~CFPB’s Notice and ~~after consultation~~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 ~~legal counsel, management~~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 ~~ultimate outcome~~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 ~~other legal proceedings, in the aggregate, will not have a material adverse effect on the business~~settlement, or the ~~financial condition or results~~final amount of ~~operations of~~loss (potentially including both restitution and a civil money penalty) with respect to this matter. If the Company and the CFPB do not reach a settlement, the 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 ~~standby~~ 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

~~financial~~ 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 ~~rates,~~and funding information, current and future economic conditions, risk ratings, and past due status among other factors in the consideration of ~~whether~~expected credit losses ~~are inherent~~ in the Company’s off-balance sheet commitments to extend credit. The Company also records an indemnification reserve ~~that includes balances relating to mortgage loans previously sold~~ based on historical statistics and loss ~~rates. As of~~rates related to mortgage loans previously sold. At both ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, the ~~Company's reserves~~Company’s reserve for ~~off-balance sheet credit risk~~unfunded commitments and indemnification ~~were $1.1~~reserve totaled $15.6 million and ~~are reported as a component of "Other Liabilities" on the Company's Consolidated Balance Sheets.~~

$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

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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, 2023		December 31, 2022
Commitments with off-balance sheet risk:
Commitments to extend credit⁽¹⁾	$	5,485,988	$	5,229,252
Letters of credit		155,878		156,459
Total commitments with off-balance sheet risk	$	5,641,866	$	5,385,711

September 30, 2017 December 31, 2016
Commitments with off-balance sheet risk:

Commitments to extend credit ⁽¹⁾
$ 2,085,103
$ 1,924,885
Standby letters of credit 119,977
84,212
Total commitments with off-balance sheet risk $ 2,205,080
$ 2,009,097

⁽¹⁾Includes unfunded overdraft ~~protection.~~

The Company must maintain a reserve against its deposits in accordance with Regulation D of the Federal Reserve Act. For the final weekly reporting period in the period ended September 30, 2017, the aggregate amount of daily average required reserves was approximately $73.1 million and was satisfied by vault cash holdings and deposits maintained with the Federal Reserve Bank.

protection.

As of ~~September 30, 2017,~~March 31, 2023, the Company had approximately ~~$45.4~~$213.2 million in deposits in other financial institutions of which ~~$23.8~~$162.3 million served as collateral for cash flow and loan swap derivatives. As of December 31, 2022, the Company had approximately $273.5 million in deposits in other financial institutions of which $196.2 million served as collateral for the Company’s cash flow and loan swap derivatives. The Company had approximately ~~$20.3~~$47.5 million and $74.0 million in deposits in other financial institutions that were uninsured at ~~September 30, 2017.~~March 31, 2023 and December 31, 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 ~~swap agreements~~contracts to hedge various exposures or to modify the interest rate characteristics of various balance sheet accounts. ~~See~~For the 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 78 “Derivatives” within this Item 1 of this Quarterly Report for additional information.

As part of the ~~Company's~~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 ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016~~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

Pledged Assets as of September 30, 2017
Cash
AFS Securities ⁽¹⁾

HTM Securities ⁽¹⁾

Loans ⁽²⁾
Total
Public deposits $ —
$ 224,153
$ 206,878
$ —
$ 431,031
Repurchase agreements —
88,257
—
—
88,257
FHLB advances —
1,022
—
2,404,355
2,405,377
Derivatives 23,831
3,898
—
—
27,729
Other purposes —
15,580
—
—
15,580
Total pledged assets $ 23,831
$ 332,910
$ 206,878
$ 2,404,355
$ 2,967,974

⁽¹⁾Balance represents market value.

⁽²⁾Balance represents book value.

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

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	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

Pledged Assets as of December 31, 2016
Cash
AFS Securities ⁽¹⁾

HTM Securities ⁽¹⁾

Loans ⁽²⁾
Total
Public deposits $ —
$ 210,546
$ 197,889
$ —
$ 408,435
Repurchase agreements —
108,208
—
—
108,208
FHLB advances —
1,475
—
1,959,929
1,961,404
Derivatives 33,595
4,376
—
—
37,971
Other purposes —
17,499
—
—
17,499
Total pledged assets $ 33,595
$ 342,104
$ 197,889
$ 1,959,929
$ 2,533,517

⁽¹⁾Balance represents market value.

⁽²⁾Balance represents book value.

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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~~free-standing derivatives ~~consisting of customer accommodation loan swaps and interest rate lock commitments~~ that do not qualify for hedge ~~accounting.~~

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 over-the-counter derivatives with central clearinghouses through 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 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 ~~borrowings, such as trust preferred capital notes, FHLB borrowings, and prime commercial loans.~~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 in range and ~~range in length with a maximum hedging time through November 2022.~~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 ~~believes~~concluded that the credit risk inherent in the contract is not significant.

~~The Company assesses~~

For derivatives designated and qualifying as cash flow hedges, ineffectiveness is not measured or separately disclosed. Rather, as long as the ~~effectiveness of each~~ hedging relationship ~~on a periodic basis using statistical regression analysis. The Company also measures~~continues to qualify for hedge accounting, the ~~ineffectiveness of each hedging relationship using the~~entire change in ~~variable cash flows method which compares~~ the ~~cumulative changes in cash flows~~fair value of the hedging instrument ~~relative to cumulative changes~~is recorded in OCI and recognized in earnings as the hedged ~~item’s cash flows. In accordance~~transaction affects earnings. Derivative amounts affecting earnings are recognized consistent with ~~ASC 815,~~ ~~Derivatives and Hedging~~, the ~~effective portions~~classification of the derivatives’ unrealized gains or losses are recorded as a component of other comprehensive income. Based on the Company’s assessment, its cash flow hedges are highly effective, but to the extent that any ineffectiveness exists in the hedge relationships, the amounts would be recorded in interest income or interest expense on the Company’s Consolidated Statements of Income.

~~On June 13, 2016,~~hedged item.

At March 31, 2023 and December 31, 2022, the Company ~~terminated three~~had interest rate swaps designated and qualifying as cash flow hedges ~~prior~~of the Company’s forecasted variable interest receipts on variable rate loans due to ~~their respective maturity dates. The unrealized gain of $1.3 million within Accumulated Other Comprehensive Income will be reclassified into earnings over~~changes in the interest rate with a ~~three year period using the effective interest method. The estimated net~~notional amount of ~~gains expected to be reclassified into earnings by September 30, 2018 is $395,000.~~

$900 million. For each agreement, the Company receives interest at a fixed rate and pays at a variable rate.

Fair Value ~~Hedge~~

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 ~~interest rate swaps~~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 ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, the aggregate notional amount of the related hedged items for certain long-term fixed rate loans totaled $82.0 million and ~~$65.9~~$83.6 million, respectively, and the fair value of the swaps associated with the derivative related to hedged items was an unrealized ~~loss~~gain of ~~$597,000~~$9.2 million and ~~$890,000,~~$11.0 million, respectively.

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AFS Securities: The Company has a swap agreement to hedge the interest rate risk on a portion of its fixed rate AFS securities. At March 31, 2023 and December 31, 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 gain of $1.2 million and $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. ~~Statistical regression analysis is used to assess hedge~~The Company assesses the effectiveness ~~both at inception~~ of ~~the~~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 ~~on an ongoing basis. The regression analysis involves regressing~~future changes in the ~~periodic change in~~ fair value of the ~~hedging~~derivative instrument ~~against the periodic changes~~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 ~~asset being~~ hedged ~~due~~item are amortized to ~~changes in~~interest income or expense over the remaining life of the hedged ~~risk.~~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 ~~fair value~~ hedges continue to be highly effective and had no material impact on the Consolidated Statements of ~~Income, but if any ineffectiveness exists, portions of the unrealized gains or losses would be recorded in interest income or interest expense on the Company’s Consolidated Statements of~~ Income.

~~Loan Swaps~~

Interest Rate Contracts

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

~~Interest Rate Lock Commitments~~

~~During the normal course of business, the~~

RPAs:The Company enters into ~~commitments~~RPAs where it may either sell or assume credit risk related to ~~originate mortgage loans whereby the~~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 loan is determined prior to funding (“rate lock commitments”). Rate lock commitments on mortgage loans that are intended to be sold in the secondary market are considered to be derivatives. The period of time between issuance of a loan

~~commitment, closing, and sale~~creditworthiness of the loan generally ranges from 30 to 120 days. The Company protects itself from changes in interest rates through the use of best efforts forward delivery commitments, whereby the Company commits to sell a loan at the time the borrower commits to an interest rate with the intent that the buyer has assumed interest rate risk on the loan. The correlation between the rate lock commitments and the best efforts contracts is high due to their similarity.

The market values of rate lock commitments and best efforts forward delivery commitments is not readily ascertainable with precision because rate lock commitments and best efforts contracts are not actively traded in stand-alone markets. The Company determines the fair value of rate lock commitments and best efforts contracts by measuring the change in the value of the underlying asset, while taking into consideration the probability that the rate lock commitments will close. The fair value of the rate lock commitments is reported as a component of “Other Assets”borrowers based on the Company’s ~~Consolidated Balance Sheets; the~~normal credit review process. RPAs are carried at fair value ~~of the Company’s best efforts forward delivery commitments is recorded as a component of “Other Liabilities” on the Company’s Consolidated Balance Sheets. Any impact to income is~~with changes in fair value recorded in ~~current period earnings as a component of “Mortgage banking income, net”~~“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 ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, segregated by derivatives that are considered accounting hedges and those that are not (dollars in thousands):

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

September 30, 2017 December 31, 2016

Derivative ⁽²⁾

Derivative⁽²⁾

Notional or
Contractual
Amount ⁽¹⁾
Assets Liabilities
Notional or
Contractual
Amount ⁽¹⁾
Assets Liabilities
Derivatives designated as accounting hedges:

Interest rate contracts:

Cash flow hedges $ 152,500
$ 120
$ 9,460
$ 188,500
$ 211
$ 9,619

Fair value hedges 81,965
1,253
371
65,920
1,437
296

Derivatives not designated as accounting hedges:

Loan Swaps

Pay fixed - receive floating interest rate swaps 506,056
3,051
—
373,355
—
1,005

Pay floating - receive fixed interest rate swaps 506,056
—
3,051
373,355
1,005
—

Other contracts:

Interest rate lock commitments 50,311
685
—
48,743
610
—

Best efforts forward delivery commitments 80,307
245
—
85,400
1,469
—

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

⁽²⁾Balancesrepresent 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.

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~~For information regarding collateral pledged~~

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, 2023 and December 31, 2022 (dollars in thousands):

March 31, 2023

December 31, 2022

Cumulative

Amount of Basis

Adjustments

Included in the

Carrying Amount

Carrying

Carrying Amount

Carrying

of Hedged

Amount of the

of Hedged

Amount of the

Assets/(Liabilities)

Hedged

Assets/(Liabilities)

Hedged

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)}

88,891

(1,226)

91,388

(1,889)

Loans⁽³⁾

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, 2023 and December 31, 2022, the amortized cost basis of this portfolio was $88.9 million and $91 million, respectively, and the cumulative basis adjustment associated with this hedge was $1.2 million and $1.9 million, respectively. The amount of the designated hedged item at March 31, 2023 and December 31, 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

Repurchase Programs

As of March 31, 2023, the Company does not have an active share repurchase program. The Company’s prior share repurchase plan expired on ~~derivative instruments, see Note 6 “Commitments and Contingencies.”~~

~~8. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)~~

December 9, 2022.

Accumulated Other Comprehensive Income (Loss)

The change in ~~accumulated other comprehensive income (loss)~~AOCI for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 is summarized as follows, net of tax (dollars in thousands):

Unrealized
Gains (Losses)
on AFS
Securities Unrealized Gain
for AFS
Securities
Transferred to
HTM Change in Fair
Value of Cash
Flow Hedge Unrealized Gains (Losses) on BOLI Total
Balance - June 30, 2017 $ 7,733
$ 3,033
$ (5,487 ) $ (1,271 ) $ 4,008
Other comprehensive income (loss) (2,729 ) —
41
—
(2,688 )
Amounts reclassified from accumulated other comprehensive income (119 ) (163 ) 189
84
(9 )
Net current period other comprehensive income (loss) (2,848 ) (163 ) 230
84
(2,697 )
Balance - September 30, 2017 $ 4,885
$ 2,870
$ (5,257 ) $ (1,187 ) $ 1,311

Unrealized
Gains (Losses)
on AFS
Securities

Unrealized Gain
for AFS
Securities
Transferred to
HTM

Change in Fair
Value of Cash
Flow Hedge
Unrealized Gains (Losses) on BOLI Total
Balance - December 31, 2016 $ (542 ) $ 3,377
$ (5,179 ) $ (1,465 ) $ (3,809 )
Other comprehensive income (loss) 5,935
—
(766 ) —
5,169
Amounts reclassified from accumulated other comprehensive income (508 ) (507 ) 688
278
(49 )
Net current period other comprehensive income (loss) 5,427
(507 ) (78 ) 278
5,120
Balance - September 30, 2017 $ 4,885
$ 2,870
$ (5,257 ) $ (1,187 ) $ 1,311

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 ~~accumulated other comprehensive income (loss)~~AOCI for the three ~~and nine~~ months ended ~~September 30, 2016~~March 31, 2022 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)

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Table of Contents

Unrealized
Gains (Losses)
on AFS
Securities Unrealized Gain
for AFS
Securities
Transferred to
HTM Change in Fair
Value of Cash
Flow Hedge Total
Balance - June 30, 2016 $ 14,412
$ 3,853
$ (9,366 ) $ 8,899
Other comprehensive income (loss) 1,121
—
(78 ) 1,043
Amounts reclassified from accumulated other comprehensive income —
(237 ) 154
(83 )
Net current period other comprehensive income (loss) $ 1,121
$ (237 ) $ 76
$ 960
Balance - September 30, 2016 $ 15,533
$ 3,616
$ (9,290 ) $ 9,859

Unrealized Gains
(Losses) on AFS
Securities

Unrealized Gain
for AFS
Securities
Transferred to
HTM

Change in Fair
Value of Cash
Flow Hedge
Total
Balance - December 31, 2015 $ 7,777
$ 4,432
$ (5,957 ) $ 6,252
Other comprehensive income (loss) 7,851
—
(3,766 ) 4,085
Amounts reclassified from accumulated other comprehensive income (95 ) (816 ) 433
(478 )
Net current period other comprehensive income (loss) 7,756
(816 ) (3,333 ) 3,607
Balance - September 30, 2016 $ 15,533
$ 3,616
$ (9,290 ) $ 9,859

Reclassifications of unrealized gains (losses) on available for sale securities are reported on the Company’s Consolidated Statements of Income as “Gains on securities transactions, net” with the corresponding income tax effect being reflected as a component of income tax expense. The Company reported gains of $184,000 and $782,000 for the three and nine months ended September 30, 2017, respectively, and $0 and $145,000 for the three and nine months ended September 30, 2016, respectively, related to the sale of securities. The tax effects of these transactions during the three and nine months ended September 30, 2017 were $64,000 and $274,000, respectively, and were $0 and $51,000 during the three and nine months ended September 30, 2016, respectively, which amounts were included as a component of income tax expense.

During the second quarter of 2015, the Company transferred securities, which it intends and has the ability to hold until maturity, with a fair value of $201.8 million on the date of transfer, from securities available for sale to securities held to maturity. The securities included net pre-tax unrealized gains of $8.1 million at the date of transfer. Reclassifications of the unrealized gains on transferred securities are reported over time as accretion 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. The Company recorded accretion of $251,000 and $780,000 for the three and nine months ended September 30, 2017, respectively, and $365,000 and $1.3 million for the three and nine months ended September 30, 2016, respectively. The tax effect of these transactions during the three and nine months ended September 30, 2017 were $88,000 and $273,000, respectively, and were $128,000 and $439,000 for the three and nine months ended September 30, 2016, respectively, which were included as a component of income tax expense.

Reclassifications of the change in fair value of cash flow hedges are reported in interest income and interest expense on the Company’s Consolidated Statements of Income with the corresponding income tax effect being reflected as a component of income tax expense. The Company reported net interest expense of $291,000 and $1.1 million for the three and nine months ended September 30, 2017, respectively, and $237,000 and $666,000 for the three and nine months ended September 30, 2016, respectively. The tax effects of these transactions during the three and nine months ended September 30, 2017 were $102,000 and $370,000, respectively, and were $83,000 and $233,000 during the three and nine months ended September 30, 2016, which were included as a component of income tax expense.

Reclassifications of unrealized losses on BOLI are reported in salaries and benefits expense on the Company's Consolidated Statements of Income. The Company reported expenses of $84,000 and $278,000 for the three and nine months ended September 30, 2017, respectively, and $0 for the both three and nine months ended September 30, 2016.

10. FAIR VALUE MEASUREMENTS

The Company follows ASC 820, Fair Value ~~Measurements and Disclosures~~,Measurement to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. ~~This codification~~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.

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~~

Instruments

As discussed in Note 78 “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~~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 the Bloomberg Valuation Service’s derivative pricing functions. No significant differences were identified during the validation as of March 31, 2023 and December 31, 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.

During the ordinary course of business, the Company enters into interest rate lock commitments related to the origination of mortgage loans held for sale, as well as best effort forward delivery commitments to mitigate interest rate risk; these instruments are recorded at estimated fair value based on the value of the underlying loan, which in turn is based on quoted prices for similar loans in the secondary market. This value, however, is adjusted by a pull-through rate, which considers the likelihood that the loan in a lock position will ultimately close. The pull-through rate is derived from the Company’s internal data and is adjusted using significant management judgment. The pull-through rate is largely dependent on the loan processing stage that a loan is currently in and the change in prevailing interest rates from the time of the rate lock. As such, interest rate lock commitments are classified as Level 3. An increase in the pull-through rate utilized in the fair value measurement of the interest rate lock commitment derivative will result in positive fair value adjustments, while a decrease in the pull-through rate will result in a negative fair value adjustment. The Company’s weighted average pull-through rate was approximately 80% Mortgage banking derivatives as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016. The interest rate lock commitments are recorded as~~2022 did not have a ~~component of “Other Assets”~~significant impact on the Company’s Consolidated ~~Balance Sheets.~~

Financial Statements.

AFS Securities ~~available for sale~~

~~Securities available for sale~~

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~~third-party portfolio accounting service vendor for valuation of its securities portfolio. The vendor’s primary source for security valuation is ~~Interactive Data Corporation (“IDC”),~~ICE, which evaluates securities based on market data. ~~IDC~~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 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 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 ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016.~~

2022.

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

table below.

Loans ~~held~~Held for ~~sale~~

~~Loans held for sale are carried at fair value. These loans currently consist of residential~~Sale

Residential loans originated for sale in the ~~secondary market.~~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 ~~within the mortgage segment and are reported on~~in current period earnings as a ~~separate line item~~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 ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016~~2022 (dollars in thousands):

Fair Value Measurements at March 31, 2023 using

Significant

Quoted Prices in

Other

Significant

Active Markets for

Observable

Unobservable

Identical Assets

Inputs

Level 1

Level 2

Level 3

Balance

ASSETS

AFS securities:

U.S. government and agency securities

57,906

4,668

—

62,574

Obligations of states and political subdivisions

—

523,097

—

523,097

Corporate and other bonds⁽¹⁾

—

152,006

—

152,006

MBS

—

1,513,007

—

1,513,007

Other securities

—

1,681

—

1,681

LHFS⁽³⁾

—

7,126

—

7,126

Financial Derivatives⁽²⁾

—

73,730

—

73,730

LIABILITIES

Financial Derivatives⁽²⁾

—

197,533

—

197,533

Fair Value Measurements at September 30, 2017 using

Quoted Prices in
Active Markets for
Identical Assets

Significant
Other
Observable
Inputs

Significant
Unobservable
Inputs

Level 1 Level 2 Level 3 Balance
ASSETS

Securities available for sale:

Obligations of states and political subdivisions $ —
$ 292,199
$ —
$ 292,199
Corporate and other bonds —
115,422
—
115,422
Mortgage-backed securities —
546,904
—
546,904
Other securities —
13,836
—
13,836
Loans held for sale —
30,896
—
30,896
Derivatives:

Interest rate swap —
3,051
—
3,051
Cash flow hedges —
120
—
120
Fair value hedges —
1,253
—
1,253
Interest rate lock commitments —
—
685
685
Best efforts forward delivery commitments —
—
245
245

LIABILITIES

Derivatives:

Interest rate swap $ —
$ 3,051
$ —
$ 3,051
Cash flow hedges —
9,460
—
9,460
Fair value hedges —
371
—
371

⁽¹⁾ Other bonds include asset-backed securities.

⁽²⁾ Includes hedged and non-hedged derivatives.

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

-41-

Table of Contents


	Fair Value Measurements at December 31, 2022 using
			Significant
	Quoted Prices in		Other		Significant
	Active Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs
	Level 1		Level 2		Level 3		Balance
ASSETS
AFS securities:
U.S. government and agency securities	$	56,606	$	5,337	$	—	$	61,943
Obligations of states and political subdivisions		—		807,435		—		807,435
Corporate and other bonds⁽¹⁾		—		226,380		—		226,380
MBS		—		1,644,394		—		1,644,394
Other securities		—		1,664		—		1,664
LHFS		—		3,936		—		3,936
Financial Derivatives⁽²⁾		—		80,310		—		80,310

LIABILITIES
Financial Derivatives⁽²⁾	$	—	$	236,000	$	—	$	236,000

Fair Value Measurements at December 31, 2016 using

Quoted Prices in
Active Markets for
Identical Assets

Significant
Other
Observable
Inputs

Significant
Unobservable
Inputs

Level 1 Level 2 Level 3 Balance
ASSETS

Securities available for sale:

Obligations of states and political subdivisions $ —
$ 275,890
$ —
$ 275,890
Corporate and other bonds —
121,780
—
121,780
Mortgage-backed securities —
535,286
—
535,286
Other securities —
13,808
—
13,808
Loans held for sale —
36,487
—
36,487
Derivatives:

Interest rate swap —
1,005
—
1,005
Cash flow hedges —
211
—
211
Fair value hedges —
1,437
—
1,437
Interest rate lock commitments —
—
610
610
Best efforts forward delivery commitments —
—
1,469
1,469

LIABILITIES

Derivatives:

Interest rate swap $ —
$ 1,005
$ —
$ 1,005
Cash flow hedges —
9,619
—
9,619
Fair value hedges —
296
—
296

⁽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.~~

assets after they are evaluated for impairment. The ~~following describes the valuation techniques used by the Company to measure certain~~primary assets ~~recorded~~accounted for at fair value on a nonrecurring basis inare related to foreclosed properties, former bank premises, and collateral-dependent loans that are individually assessed. When the ~~financial statements.~~

~~Impaired loans~~

~~Loans are designated as impaired when, in~~asset is secured by real estate, the judgment of management based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreements will not be collected. The measurement of loss associated with impaired loans can be based on either the observable market price of the loan orCompany measures the fair value of the collateral. Collateral dependent loans are reported at the fair value of the underlying collateral if repayment is solely from the underlying value of the collateral. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. The vast majority of the Company’s collateral is real estate. The value of real estate collateral is determined utilizing an income or market valuation approach based on an appraisal conducted by an independent, licensed appraiser using observable market data. ~~When evaluating~~Management may discount the value from the appraisal in determining the fair value ~~management may discount the appraisal further~~ if, based on ~~their~~its understanding of the market conditions, ~~it is determined~~ the collateral ~~is further~~had been impaired below the appraised value (Level 3). ~~At September 30, 2017 and December 31, 2016, the Level 3 weighted average~~The nonrecurring valuation adjustments ~~related to impaired loans were 3.3% and 1.5%, respectively. The value of business equipment is based upon an outside appraisal, of one year or less, if deemed~~for these assets did not have a significant or the net book value on the applicable business’s financial statements if not considered significant using observable market data. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level 3). Collateral dependent impaired loans allocated to the allowance for loan losses are measured at fair value on a nonrecurring basis. Any fair value adjustments are recorded in the period incurred as provision for loan lossesimpact on the Company’s ~~Consolidated Statements~~consolidated financial statements.

Fair Value of ~~Income.~~

~~Other real estate owned~~

OREO is evaluated for impairment at least quarterly by the Bank’s Special Asset Loan Committee and any necessary write downs to fair values are recorded as impairment and included as a component of noninterest expense. Fair values of OREO are carried at fair value less selling costs. Fair value is based upon independent market prices, appraised values of the collateral, or management’s estimation of the value of the collateral. When an appraised value is not available or management determines the

fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the foreclosed asset as Level 3 valuation. At September 30, 2017 and December 31, 2016, the Level 3 weighted average adjustments related to OREO were approximately 25.1% and 25.1%, respectively.

Total valuation expenses related to OREO properties for the three months ended September 30, 2017 and 2016 totaled $588,000 and $479,000, respectively. Total valuation expenses related to OREO properties for the nine months ended September 30, 2017 and 2016 totaled $845,000 and $879,000, respectively.

~~The following tables summarize the Company’s financial assets that were measured at fair value on a nonrecurring basis at September 30, 2017 and December 31, 2016 (dollars in thousands):~~

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~~

Cash Equivalents

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

~~Held to Maturity~~

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 IDC, which evaluates securities based on market data. IDC 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.

The Company primarily uses 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 ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016.~~2022.

The Company’s Level 3 HTM securities are a result of a prior acquisition and are comprised of asset-backed securities and municipal bonds. Valuations of the asset-backed securities are provided by a 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 valuations obtained for any material differences between valuation sources by analyzing the various inputs and results utilized by each pricing source. No significant differences were identified during the validation as of March 31, 2023 and December 31, 2022.

-42-

~~Loans~~

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 isand leases were estimated ~~by discounting expected future~~through use of discounted cash ~~flows using a yield curve that is constructed by adding a loan spread to a market yield curve. Loan spreads are~~flows. Credit loss assumptions were based on ~~spreads currently observed in the~~ market PD/LGD for ~~loans of similar type~~loan and ~~structure.~~lease cohorts. The discount rate was based primarily on recent market origination rates. Fair value ~~for impaired~~of loans and leases individually assessed and their respective ~~level~~levels within the fair value hierarchy are described in the previous ~~disclosure~~section related to fair value measurements of assets that are measured on a nonrecurring basis.

~~Bank-owned life insurance~~

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 ~~deposit is estimated by discounting the future~~deposits were valued using a discounted cash ~~flows using the rates currently offered for deposits of similar remaining maturities.~~

~~Borrowings~~

~~The carrying value~~flow calculation that includes a market rate analysis of the ~~Company’s repurchase agreements is a reasonable estimate~~current rates offered by market participants for certificates of ~~fair value. Other borrowings are discounted using the current yield curve for~~deposits that mature in the same type of borrowing. For borrowings with embedded optionality, a third party source is used to value the instrument. The Company validates all third party valuations for borrowings with optionality using Bloomberg Valuation Service’s derivative pricing functions.

period.

Accrued ~~interest~~

Interest

The carrying amounts of accrued interest approximate fair value.

The carrying values and estimated fair values of the Company’s financial instruments at ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016~~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

Fair Value Measurements at September 30, 2017 using

Quoted Prices
in Active
Markets for
Identical Assets

Significant
Other
Observable
Inputs

Significant
Unobservable
Inputs

Total Fair
Value
Carrying Value Level 1 Level 2 Level 3 Balance
ASSETS

Cash and cash equivalents $ 176,961
$ 176,961
$ —
$ —
$ 176,961
Securities available for sale 968,361
—
968,361
—
968,361
Held to maturity securities 204,801
—
209,835
—
209,835
Restricted stock 68,441
—
68,441
—
68,441
Loans held for sale 30,896
—
30,896
—
30,896
Net loans 6,861,567
—
—
6,873,609
6,873,609
Derivatives:

Interest rate swap 3,051
—
3,051
—
3,051
Cash flow hedge 120
—
120
—
120
Fair value hedge 1,253
—
1,253
—
1,253
Interest rate lock commitments 685
—
—
685
685
Best efforts forward delivery commitments 245
—
—
245
245
Accrued interest receivable 25,279
—
25,279
—
25,279
Bank owned life insurance 181,451
—
181,451
—
181,451

LIABILITIES

Deposits $ 6,881,826
$ —
$ 6,873,124
$ —
$ 6,873,124
Borrowings 1,052,087
—
1,031,983
—
1,031,983
Accrued interest payable 4,372
—
4,372
—
4,372
Derivatives:

Interest rate swap 3,051
—
3,051
—
3,051
Cash flow hedges 9,460
—
9,460
—
9,460
Fair value hedges 371
—
371
—
371

⁽¹⁾ Includes hedged and non-hedged derivatives.

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	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

Fair Value Measurements at December 31, 2016 using

Quoted Prices
in Active
Markets for
Identical Assets

Significant
Other
Observable
Inputs

Significant
Unobservable
Inputs

Total Fair
Value
Carrying Value Level 1 Level 2 Level 3 Balance
ASSETS

Cash and cash equivalents $ 179,237
$ 179,237
$ —
$ —
$ 179,237
Securities available for sale 946,764
—
946,764
—
946,764
Held to maturity securities 201,526
—
202,315
—
202,315
Restricted stock 60,782
—
60,782
—
60,782
Loans held for sale 36,487
—
36,487
—
36,487
Net loans 6,269,868
—
—
6,265,443
6,265,443
Derivatives:

Interest rate swap 1,005
—
1,005
—
1,005
Cash flow hedges 211
—
211
—
211
Fair value hedges 1,437
—
1,437

—
1,437
Interest rate lock commitments 610
—
—
610
610
Best efforts forward delivery commitments 1,469
—
—
1,469
1,469
Accrued interest receivable 23,448
—
23,448
—
23,448
Bank owned life insurance 179,318
—
179,318
—
179,318

LIABILITIES

Deposits $ 6,379,489
$ —
$ 6,370,457
$ —
$ 6,370,457
Borrowings 990,089
—
970,195
—
970,195
Accrued interest payable 2,320
—
2,230
—
2,230
Derivatives:

Interest rate swap 1,005
—
1,005
—
1,005
Cash flow hedges 9,619
—
9,619
—
9,619
Fair value hedges 296
—
296
—
296

⁽¹⁾ Includes hedged and non-hedged derivatives.

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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~~10.~~

11. EARNINGS PER SHARE

Basic EPS is computed by dividing net income available to common ~~stockholders~~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 ~~is a reconciliation of the denominators of the~~table presents basic and diluted EPS ~~computations~~calculations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 (dollars in thousands except per share data):


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


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

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

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Net Income Available to
Common Stockholders
(Numerator)

Weighted
Average
Common Shares
(Denominator)

Per Share
Amount
Three months ended September 30, 2017

Basic 20,658
43,707
$ 0.47
Add: potentially dilutive common shares - stock awards —
85
—
Diluted $ 20,658
43,792
$ 0.47
Three months ended September 30, 2016

Basic 20,401
43,566
$ 0.47
Add: potentially dilutive common shares - stock awards —
189
—
Diluted $ 20,401
43,755
$ 0.47
Nine months ended September 30, 2017
Basic 57,737
43,685
$ 1.32
Add: potentially dilutive common shares - stock awards —
83
—
Diluted $ 57,737
43,768
$ 1.32
Nine months ended September 30, 2016
Basic 56,699
43,854
$ 1.29
Add: potentially dilutive common shares - stock awards —
114
—
Diluted $ 56,699
43,968
$ 1.29

~~11.~~

12. SEGMENT REPORTING ~~DISCLOSURES~~

~~The~~AND REVENUE

Operating Segments

Prior to the third quarter of 2022, the Company ~~has~~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 ~~segments:~~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 ~~traditional full service community bank~~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 ~~a mortgage loan origination business segment. The community bank~~restated its prior segment ~~includes one subsidiary bank,~~information for the ~~Bank, which provides loan, deposit, investment,~~year ended December 31, 2022, based on this organizational change. Goodwill was evaluated for impairment prior to and ~~trust services~~immediately following the organizational change. Refer to ~~retail~~Note 4 “Goodwill and ~~commercial customers throughout its 111 retail locations in Virginia as~~Intangible Assets” within this Item 1 “Financial Statements” of ~~September 30, 2017. The mortgage segment includes UMG, which provides a variety~~this Quarterly Report for additional information.

As of mortgage loan products principally in Virginia, North Carolina, Maryland, and the Washington D.C. metro area. These loans are originated and sold primarily in the secondary market through purchase commitments from investors, which serves to mitigateMarch 31, 2023, the Company’s ~~exposure to interest rate risk.~~

~~Profit and loss~~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 ~~measured by net income after taxes including realized gains and losses~~based on a “management approach” as described in Note 1 “Summary of Significant Accounting Policies” of the Company’s ~~investment portfolio. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies.~~2022 Form 10-K. Inter-segment transactions are recorded at cost and eliminated as part of the consolidation process.

Both of the Company’s reportable segments are service-based. The mortgage segment's business is a primarily fee-based business, while the community bank segment is driven principally by net interest income. The community bank segment provides a distribution and referral network through its customers for the mortgage loan origination business. The mortgage segment offers a more limited referral network for the bank segment.

The community bank segment provides the mortgage segment with the short-term funds needed to originate mortgage loans through a warehouse line of credit and charges the mortgage banking segment interest. The interest rate on the warehouse line of credit for the three and nine months ended September 30, 2017 and 2016 was the three month LIBOR rate plus 0.15% with no floor. These transactions are eliminated in 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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~~Information about reportable segments and reconciliation~~

Table of ~~such information to~~Contents

Segment Results

The following tables present the ~~consolidated financial statements~~Company’s operating segment results for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016 is as follows~~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

~~UNION BANKSHARES CORPORATION AND SUBSIDIARIES~~

~~SEGMENT FINANCIAL INFORMATION~~

Community Bank Mortgage Eliminations Consolidated
Three Months Ended September 30, 2017

Net interest income $ 70,718
$ 480
$ —
$ 71,198
Provision for credit losses 3,056
(6 ) —
3,050
Net interest income after provision for credit losses 67,662
486
—
68,148
Noninterest income 15,121
2,527
(112 ) 17,536
Noninterest expenses 55,133
2,475
(112 ) 57,496
Income before income taxes 27,650
538
—
28,188
Income tax expense 7,339
191
—
7,530
Net income $ 20,311
$ 347
$ —
$ 20,658
Total assets $ 9,020,486
$ 97,154
$ (88,204 ) $ 9,029,436

Three Months Ended September 30, 2016

Net interest income $ 66,605
$ 423
$ —
$ 67,028
Provision for credit losses 2,455
17
—
2,472
Net interest income after provision for credit losses 64,150
406
—
64,556
Noninterest income 15,589
3,501
(140 ) 18,950
Noninterest expenses 54,353
2,700
(140 ) 56,913
Income before income taxes 25,386
1,207
—
26,593
Income tax expense 5,770
422
—
6,192
Net income $ 19,616
$ 785
$ —
$ 20,401
Total assets $ 8,251,351
$ 90,692
$ (83,813 ) $ 8,258,230

Nine Months Ended September 30, 2017

Net interest income $ 205,534
$ 1,231
$ —
$ 206,765
Provision for credit losses 7,344
1
—
7,345
Net interest income after provision for credit losses 198,190
1,230
—
199,420
Noninterest income 47,080
7,743
(393 ) 54,430
Noninterest expenses 167,643
7,571
(393 ) 174,821
Income before income taxes 77,627
1,402
—
79,029
Income tax expense 20,791
501
—
21,292
Net income $ 56,836
$ 901
$ —
$ 57,737
Total assets $ 9,020,486
$ 97,154
$ (88,204 ) $ 9,029,436

Nine Months Ended September 30, 2016

Net interest income $ 195,508
$ 1,027
$ —
$ 196,535
Provision for credit losses 7,215
161
—
7,376
Net interest income after provision for credit losses 188,293
866
—
189,159
Noninterest income 44,137
9,185
(465 ) 52,857
Noninterest expenses 158,964
7,937
(465 ) 166,436
Income before income taxes 73,466
2,114
—
75,580
Income tax expense 18,145
736
—
18,881
Net income $ 55,321
$ 1,378
$ —
$ 56,699
Total assets $ 8,251,351
$ 90,692
$ (83,813 ) $ 8,258,230

⁽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.

~~Review~~

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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 4, 2023, the date the financial statements were issued.

On May 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, 2023 to preferred shareholders of record as of May 17, 2023.

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

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Report of Independent Registered Public Accounting Firm

~~The~~

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”)~~Company) as of ~~September 30, 2017, and~~March 31, 2023, the related consolidated statements of income, ~~and~~ comprehensive income, and stockholders’ equity for the ~~three and nine-month~~three-month periods ended ~~September 30, 2017~~March 31, 2023 and ~~2016, and~~2022, the consolidated statements of changes in ~~stockholders’ equity and~~ cash flows for the ~~nine-month~~three-month periods ended ~~September 30, 2017~~March 31, 2023 and ~~2016. These~~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 ~~are the responsibility of the Company's management.~~

for them to be in conformity with U.S. generally accepted accounting principles.

We ~~conducted our review~~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, 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 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, 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 ~~information~~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 ~~Public Company Accounting Oversight Board (United States),~~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.

Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above 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), the consolidated balance sheet of the Company as of December 31, 2016, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for the year then ended, not presented herein, and we expressed an unqualified audit opinion on those consolidated financial statements in our report dated February 28, 2017. In our opinion, the accompanying consolidated balance sheet of the Company as of December 31, 2016, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Ernst & Young LLP

Richmond, Virginia

May 4, 2023

~~November 7, 2017~~

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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 ~~Union Bankshares Corporation~~the Company and its ~~subsidiaries (collectively, the “Company”).~~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 ~~2016~~2022 Form 10-K, including ~~management’s discussion~~under “Management’s Discussion and ~~analysis.~~Analysis of Financial Condition and Results of Operations” section therein. Highlighted in the discussion are material changes from prior reporting periods and ~~any~~ identifiable trends materially affecting the Company. Results of operations for the ~~three and nine months ended September 30, 2017 and 2016~~interim periods are not necessarily indicative of results that may be ~~attained~~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 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.

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 the related impacts on the Company’s net interest margin, changes in economic conditions, management’s belief regarding liquidity and capital resources, estimates with respect to the 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,~~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 ~~uncertainties,~~other factors, some of which cannot be predicted or ~~quantified. Such~~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, ~~the Company~~or trends affecting, us will not differ materially from any projected future results, performance, achievements or ~~achievements~~trends expressed or implied by such forward-looking statements. Actual future results, ~~and~~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 and their related impacts on macroeconomic conditions, customer and client behavior, our funding costs and our loan and securities portfolios;

●

inflation and its 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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~~the possibility~~

Table of Contents

●

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

●

monetary and fiscal policies of the U.S. government, including policies of the U.S. Department of the Treasury and the Federal Reserve;

●

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

●

demand for loan products and financial services in our market areas;

●

our ability to manage our growth or implement our growth strategy;

●

the effectiveness of expense reduction plans;

●

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

●

our ability to recruit and retain key employees;

●

real estate values in our lending area;

●

changes in accounting principles, standards, rules, and interpretations, and the related impact on our financial statements;

●

an insufficient ACL or volatility in the 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 our credit processes and management of our credit risk;

●

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 or public health events, and of governmental and societal responses thereto; these potential adverse effects may include, without limitation, adverse effects on the ability of our borrowers to satisfy their obligations to us, on the value of collateral securing loans, on the demand for the our loans or our other products and services, on supply chains and methods used to distribute products and services, on incidents of cyberattack and fraud, on our liquidity or capital positions, on risks posed by reliance on third-party service providers, on other aspects of our business operations and on financial markets and economic growth;

●

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

●

performance by our counterparties or vendors;

●

deposit flows;

●

the availability of financing and the terms thereof;

●

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

●

legislative or regulatory changes and requirements;

●

actual or potential claims, damages, and fines related to litigation or government actions, which may result in, among other things, additional costs, fines, penalties, restrictions on our business activities, reputational harm, or other adverse consequences;

●

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

●

any event or development that would cause us to conclude that there was an impairment of any asset, including intangible assets, such as goodwill; and

●

other factors, many of which are beyond our control.

Please also refer to 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” of the anticipated benefits of the acquisition of Xenith pursuant to a definitive merger agreement between the Company and Xenith, dated as of May 19, 2017 (the “Pending Merger”) with Xenith will not be realized or will not be realized within the expected time period, the businesses of the Company and Xenith may not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected, the expected revenue synergies and cost savings from the Pending Merger may not be fully realized or realized within the expected time frame, revenues following the Pending Merger may be lower than expected, customer and employee relationships and business operations may be disrupted by the Pending Merger, or completing the Pending Merger on the expected timeframe, may be more difficult, time-consuming or costly than expected,

~~changes in interest rates,~~

~~general economic and financial market conditions,~~

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

~~the incremental cost and/or decreased revenues associated with exceeding $10 billion in assets,~~

~~levels of unemployment in the Bank’s lending area,~~

~~real estate values in the Bank’s lending area,~~

~~an insufficient ALL,~~

~~the quality or composition of the loan or investment portfolios,~~

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

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

~~demand for loan products and financial services in the Company’s market area,~~

~~the Company’s ability to compete in the market for financial services,~~

~~technological risks and developments, and cyber attacks or events,~~

~~performance by the Company’s counterparties or vendors,~~

~~deposit flows,~~

~~the availability of financing and the terms thereof,~~

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

~~legislative or regulatory changes and requirements,~~

~~monetary and fiscal policies of the U.S. government including policies of the U.S. Department of the Treasury and the Board of Governors of the Federal Reserve System, and~~

~~accounting principles and guidelines.~~

~~More information on risk factors that could affect the Company’s forward-looking statements is available on the Company’s website,~~ ~~http://investors.bankatunion.com, or the Company's Annual Report on~~2022 Form 10-K ~~for the year ended December 31, 2016, this Quarterly Report on Form 10-Q for the quarter ended September 30, 2017,~~ and related disclosures in other ~~reports~~filings, which have been filed with the SEC ~~including without limitation the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2017. The information~~and are available on the ~~Company’s~~SEC’s website ~~is not a part of this Form 10-Q.~~at www.sec.gov. All risk factors and uncertainties described ~~in those documents~~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 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 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. ~~The Company does~~Forward-looking statements speak only as of the date they are made.

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Table of Contents

We do not intend or assume any obligation to update, revise or ~~revise~~clarify any forward-looking statements that may be made from time to time by or on behalf of the ~~Company.~~

Company, whether as a result of new information, future events or otherwise.

CRITICAL ACCOUNTING ~~POLICIES~~

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 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.

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 allowance for loan losses, acquired loans,~~under “Management’s Discussion and ~~goodwill~~Analysis of Financial Condition and ~~intangible assets.~~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 ~~2016~~2022 Form 10-K.

RECENT ACCOUNTING PRONOUNCEMENTS (ISSUED BUT NOT FULLY ADOPTED)

In March 2023, the FASB issued ASU No. 2023-02 Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit 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 other income tax benefits received and presents this net amount as a component of income tax expense (benefit). The amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. The Company ~~provides additional information~~is evaluating the impact ASU No. 2023-02 will have on its critical accounting policies and estimates listed above under “Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” in its 2016 Form 10-K.

consolidated financial statements.

ABOUT ATLANTIC UNION BANKSHARES CORPORATION

Headquartered in Richmond, Virginia, Atlantic Union Bankshares Corporation ~~is the largest community banking organization headquartered in Virginia and operates in all major banking markets of the Commonwealth. Union Bankshares Corporation~~(NYSE: AUB) is the holding company for Atlantic Union Bank. Atlantic Union Bank ~~& Trust, which provides banking, trust, and wealth management services and~~ has ~~a statewide presence of 111 bank~~109 branches and approximately ~~173 ATMs. Non-bank~~125 ATMs located throughout Virginia and in portions of Maryland and North Carolina. Certain non-bank financial services affiliates of ~~the holding company~~Atlantic Union Bank include: Atlantic Union ~~Mortgage Group,~~Equipment Finance, Inc., which provides ~~a full line of mortgage products;~~equipment financing; Atlantic Union Financial Consultants, LLC, which provides brokerage services; and Union Insurance Group, LLC, which offers various lines of insurance ~~products; and Old Dominion Capital Management, Inc., which provides investment advisory services.~~

products.

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

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Table of Contents

RESULTS OF OPERATIONS

~~Executive Overview~~

~~For~~

EXECUTIVE OVERVIEW

Recent Events and Industry Developments

In March 2023, the ~~quarter ended September 30, 2017,~~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, ~~reported~~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 2023, the Company’s LHFI, net ~~income~~ of ~~$20.7~~deferred fees and costs, and total deposits increased from the prior quarter by $135.1 million and ~~earnings per share~~$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 ~~$0.47. Excluding after-tax merger-related costs~~$505.7 million of ~~$661,000, net operating earnings~~⁽¹⁾ ~~were $21.3 million and operating earnings per share~~⁽¹⁾ ~~were $0.49 for~~AFS securities during the ~~third~~first quarter of ~~2017. The Company's net operating earnings~~2023. As of March 31, 2023, the Company estimates that approximately 72.1% of the Company’s deposits were insured or collateralized, and ~~operating earnings per share for~~that the ~~third~~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 ~~2017 represent an increase of $918,000, or 4.5%, over net income~~2023, the Company’s and ~~an increase of $0.02, or 4.3%, over earnings per share, in each case compared~~the Bank’s regulatory capital ratios continued to exceed the ~~third quarter of 2016. These increases are primarily attributable~~standards to ~~increases in net interest income, driven by higher average loan balances partially offset by~~be considered well-capitalized under regulatory requirements. See “Capital Resources” within this Item 2 for additional information about the Company’s regulatory capital.

The Company is continually monitoring the impact of other various global and national events on the ~~decline~~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 the Federal Funds target rates throughout 2022 and 2023 to its current range of 5.00% to 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 quarter of 2023. The Company anticipates that the net impact of these factors will result in a continued contraction of its net interest margin.

~~For~~ The timing and impact of inflation, market interest rates, and the ~~nine months ended September 30, 2017,~~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 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 ~~reported net income~~executed a balance sheet repositioning strategy and sold AFS securities with a total book value of ~~$57.7~~$505.7 million at a pre-tax loss of $13.4 million and ~~earnings per share~~used the net proceeds to reduce existing high costing FHLB borrowings. The deleverage strategy provides the Company with

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Table of ~~$1.32. Excluding after-tax merger-related~~Contents

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 ~~of $3.0 million, net operating earnings~~⁽¹⁾ ~~were $60.8 million and operating earnings per share~~⁽¹⁾ ~~were $1.39~~ for the first nine months of 2017. The Company's net operating earnings and operating earnings per share for the first nine months of 2017 represent an increase of $4.1 million, or 7.2%, over net income and an increase of $0.10, or 7.8%, over earnings per share, in each case compared to the first nine months of 2016. These increases are primarily attributable to increases in net interest income, driven by higher average loan balances, as well as higher overall noninterest income.

~~Select highlights for the third~~ quarter of ~~2017 include:~~

The Company entered into a definitive merger agreement during the second quarter of 2017 to acquire Xenith in the Pending Merger, which is expected to close in early January 2018. On October 17, 2017, the Company and Xenith

jointly announced the receipt of regulatory approval from the Federal Reserve Bank and from the Virginia State Corporation Commission to move forward with the Pending Merger. On October 26, 2017, the Company and Xenith jointly announced that stockholders of both Union and Xenith, at separate special meetings, approved the Pending Merger of Xenith with and into Union.

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 ~~community bank segment was $20.3~~first quarter of 2023, compared to $40.7 million ~~or $0.46 per share,~~and $0.54 for the ~~third~~first quarter of ~~2017 compared to $19.6 million, or $0.45 per share, for the third quarter of 2016. Net operating earnings~~⁽¹⁾ ~~for the community bank segment were $21.0 million, or $0.48 per share, for the third quarter of 2017.~~

2022.

•●

~~Net income for~~Excluding a pre-tax loss on the ~~community bank segment was $56.8~~sale of securities of $13.4 million ~~or $1.30 per share, for~~due to the ~~nine months ended September 30, 2017 compared to $55.3~~sale of AFS securities and a $5.0 million ~~or $1.26 per share, for~~legal reserve associated with an ongoing and previously disclosed regulatory matter, the ~~nine months ended September 30, 2016. Net operating earnings~~⁽¹⁾ ~~for the community bank segment were $59.9 million, or $1.37 per share, for the nine months ended September 30, 2017.~~

~~The mortgage segment~~Company reported net income of $347,000 for the third quarter of 2017 compared to net income of $785,000 in the third quarter of 2016. The mortgage segment reported net income of $901,000 for the nine months ended September 30, 2017 compared to $1.4 million for the nine months ended September 30, 2016.

•

~~ROA was 0.91%~~ for the quarter ended ~~September 30, 2017~~March 31, 2023, adjusted operating earnings available to common shareholders⁽⁺⁾of $47.2 million and adjusted diluted operating EPS⁽⁺⁾ of $0.63, compared to ~~1.00%~~adjusted operating earnings available to common shareholders⁽⁺⁾ of $45.1 million and diluted adjusted operating EPS⁽⁺⁾ of $0.60 for the ~~third~~first quarter of ~~2016. Operating ROA~~⁽¹⁾ ~~for~~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 ~~ended September 30, 2017~~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 ~~0.94%. ROA was 0.88% for the nine months ended September 30, 2017 compared to 0.95% for the nine months ended September 30, 2016. Operating ROA~~⁽¹⁾ ~~for the nine months ended September 30, 2017 was 0.93%.~~partially offset by a $135.1 million increase in LHFI, net of deferred fees and costs, driven by loan growth.

•●

~~ROE was 7.90% for the quarter ended September 30, 2017 compared to 8.14% for the third quarter~~Total LHFI, net of ~~2016. Operating ROE~~⁽¹⁾ ~~for the quarter ended September 30, 2017 was 8.15%. ROE was 7.53% for the nine months ended September 30, 2017 compared to 7.64% for the nine months ended September 30, 2016. Operating ROE~~⁽¹⁾ ~~for the nine months ended September 30, 2017 was 7.93%.~~

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.

•●

~~ROTCE was 11.34% for the quarter ended September 30, 2017~~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 ~~12.00% for~~$2.7 billion at December 31, 2022. At March 31, 2023, total net unrealized losses on the ~~third quarter~~AFS securities portfolio were $407.9 million, an improvement of ~~2016. Operating ROTCE~~⁽¹⁾ ~~for the quarter ended September 30, 2017 was 11.70%. ROTCE was 10.90% for the nine months ended September 30, 2017~~$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 ~~11.25% for~~$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 ~~nine months ended September 30, 2016. Operating ROTCE~~⁽¹⁾ ~~for the nine months ended September 30, 2017 was 11.47%.~~

first quarter.

~~Loans held for investment grew $591.7 million, or 12.5% (annualized), from December 31, 2016. Quarterly average loans held for investment increased $788.8 million, or 13.1%, compared~~

●

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 ~~quarter ended September 30, 2016.~~

~~Deposits grew $502.3 million, or 10.5% (annualized), from December 31, 2016. Quarterly average deposits increased $592.9 million, or 9.6%, compared to the quarter ended September 30, 2016.~~

~~(1)For a reconciliation~~principal source of the non-GAAP operating measures that exclude merger-related costs unrelated to the Company’s normal operations, refer to “Non-GAAP Measures” section within this Item 2 of this Form 10-Q. Such costs were only incurred during the second and third quarter of 2017; thus each of these operating measures is equivalent to the corresponding GAAP financial measurerevenue for the ~~three and nine months ended September 30, 2016.~~

~~Net Interest Income~~

For the Three Months Ended
September 30,

2017 2016 Change
(Dollars in thousands)
Average interest-earning assets $ 8,167,919
$ 7,354,684
$ 813,235

Interest income $ 84,850
$ 74,433
$ 10,417

Interest income (FTE) ⁽¹⁾
$ 87,498
$ 76,860
$ 10,638

Yield on interest-earning assets 4.12 % 4.03 % 9
bps
Yield on interest-earning assets (FTE) ⁽¹⁾
4.25 % 4.16 % 9
bps
Average interest-bearing liabilities $ 6,382,452
$ 5,681,102
$ 701,350

Interest expense $ 13,652
$ 7,405
$ 6,247

Cost of interest-bearing liabilities 0.85 % 0.52 % 33
bps
Cost of funds 0.66 % 0.40 % 26
bps
Net interest income $ 71,198
$ 67,028
$ 4,170

Net interest income (FTE) ⁽¹⁾
$ 73,846
$ 69,455
$ 4,391

Net interest margin 3.46 % 3.63 % (17 ) bps
Net interest margin (FTE) ⁽¹⁾
3.59 % 3.76 % (17 ) bps

~~(1)~~ ~~Refer to~~Company, is the ~~“Non-GAAP Measures” section within this Item 2 of this Form 10-Q for more information about this non-GAAP financial measure.~~

~~For the third quarter of 2017,~~amount by which interest income exceeds interest expense. The net interest margin is net interest income ~~was $71.2 million, an increase~~expressed as a percentage of ~~$4.2 million from~~average earning assets. Changes in the ~~third quarter~~volume and mix of ~~2016. For~~interest-earning assets and interest-bearing liabilities, as well as their respective yields and rates, have a significant impact on the ~~third quarter~~level of ~~2017, tax-equivalent~~ net interest income, ~~was $73.8 million, an increase of $4.4 million from~~ the third quarter of 2016. The increases in both net interest income and tax-equivalent net interest income were primarily driven by higher average loan balances. Net accretion related to acquisition accounting increased $190,000 from the third quarter of 2016 to $1.7 million in the third quarter of 2017. In the third quarter of 2017, both net interest margin, and ~~tax-equivalent~~ net interest margin decreased 17 basis points compared to the third quarter of 2016. The net decreases in net interest margin and tax-equivalent net interest margin measures were primarily driven by the 26 basis point increase in cost of funds, offset by the 9 basis point increase in interest-earning asset yields. The increase in the cost of funds was primarily attributable to subordinated debt that the Company issued in the fourth quarter of 2016 as well as increased interest-bearing deposit and short-term borrowing rates.

For the Nine Months Ended
September 30,
2017 2016 Change
(Dollars in thousands)
Average interest-earning assets $ 7,922,944
$ 7,159,813
$ 763,131

Interest income $ 242,712
$ 217,964
$ 24,748

Interest income (FTE) ⁽¹⁾
$ 250,548
$ 225,331
$ 25,217

Yield on interest-earning assets 4.10 % 4.07 % 3
bps
Yield on interest-earning assets (FTE) ⁽¹⁾
4.23 % 4.20 % 3
bps
Average interest-bearing liabilities $ 6,196,663
$ 5,528,833
$ 667,830

Interest expense $ 35,947
$ 21,429
$ 14,518

Cost of interest-bearing liabilities 0.78 % 0.52 % 26
bps
Cost of funds 0.61 % 0.40 % 21
bps
Net interest income $ 206,765
$ 196,535
$ 10,230

Net interest income (FTE) ⁽¹⁾
$ 214,601
$ 203,902
$ 10,699

Net interest margin 3.49 % 3.67 % (18 ) bps
Net interest margin (FTE) ⁽¹⁾
3.62 % 3.80 % (18 ) bps

~~(1)~~ ~~Refer to the “Non-GAAP Measures” section within this Item 2 of this Form 10-Q for more information about this non-GAAP financial measure.~~

For the first nine months of 2017, net interest income was $206.8 million, an increase of $10.2 million from the first nine months of 2016. For the first nine months of 2017, tax-equivalent net interest income was $214.6 million, an increase of $10.7 million from the first nine months of 2016. The increases in both net interest income and tax-equivalent net interest income were primarily driven by higher average loan balances. Net accretion related to acquisition accounting increased $752,000 from the first nine months of 2016 to $4.8 million in the first nine months of 2017. In the first nine months of 2017, both net interest margin and tax-equivalent net interest margin decreased 18 basis points compared the first nine months of 2016. The net decreases in net interest margin and tax-equivalent net interest margin measures were driven by the 21 basis point increase in cost of funds, offset by the 3 basis point increase in interest-earning asset yields. The increase in the cost of funds was primarily attributable to subordinated debt that the Company issued in the fourth quarter of 2016 as well as increased interest-bearing deposit and short-term borrowing rates.

income.

The following ~~tables show~~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-

Table of Contents

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,
	2023						2022
			Interest						Interest
	Average		Income /		Yield /		Average		Income /		Yield /
	Balance		Expense ⁽¹⁾		Rate ⁽¹⁾⁽²⁾		Balance		Expense⁽¹⁾		Rate ⁽¹⁾⁽²⁾
Assets:
Securities:
Taxable	$	2,038,215	$	16,753	3.33	%	$	2,617,156	$	13,666	2.12	%
Tax-exempt		1,429,346		11,782	3.34	%		1,581,426		13,240	3.40	%
Total securities		3,467,561		28,535	3.34	%		4,198,582		26,906	2.60	%
Loans, net ⁽³⁾		14,505,611		191,178	5.35	%		13,300,789		114,602	3.49	%
Other earning assets		264,916		1,621	2.48	%		385,647		284	0.30	%
Total earning assets		18,238,088	$	221,334	4.92	%		17,885,018	$	141,792	3.22	%
Allowance for loan and lease losses		(112,172)						(100,342)
Total non-earning assets		2,258,435						2,135,692
Total assets	$	20,384,351					$	19,920,368
Liabilities and Stockholders' Equity:
Interest-bearing deposits:
Transaction and money market accounts	$	8,344,900	$	38,315	1.86	%	$	8,376,766	$	1,324	0.06	%
Regular savings		1,087,435		364	0.14	%		1,142,854		55	0.02	%
Time deposits		2,291,530		13,155	2.33	%		1,766,657		3,104	0.71	%
Total interest-bearing deposits		11,723,865		51,834	1.79	%		11,286,277		4,483	0.16	%
Other borrowings		1,122,244		12,269	4.43	%		511,722		3,042	2.41	%
Total interest-bearing liabilities		12,846,109	$	64,103	2.02	%		11,797,999	$	7,525	0.26	%
Noninterest-bearing liabilities:
Demand deposits		4,693,347						5,228,098
Other liabilities		421,295						233,287
Total liabilities		17,960,751						17,259,384
Stockholders' equity		2,423,600						2,660,984
Total liabilities and stockholders' equity	$	20,384,351					$	19,920,368
Net interest income			$	157,231					$	134,267
Interest rate spread					2.90	%					2.96	%
Cost of funds					1.42	%					0.18	%
Net interest margin					3.50	%					3.04	%

For the Three Months Ended September 30,
2017 2016
Average
Balance
Interest
Income /
Expense ⁽¹⁾

Yield /
Rate ⁽¹⁾⁽²⁾

Average
Balance

Interest
Income /
Expense⁽¹⁾

Yield /
Rate ⁽¹⁾⁽²⁾
(Dollars in thousands)
Assets:

Securities:

Taxable $ 774,513
$ 5,175
2.65 % $ 768,608
$ 4,732
2.45 %
Tax-exempt 469,391
5,455
4.61 % 449,944
5,302
4.69 %
Total securities 1,243,904
10,630
3.39 % 1,218,552
10,034
3.28 %
Loans, net ^{(3) (4)}
6,822,498
76,333
4.44 % 6,033,723
66,397
4.38 %
Other earning assets 101,517
535
2.09 % 102,409
429
1.67 %
Total earning assets 8,167,919
$ 87,498
4.25 % 7,354,684
$ 76,860
4.16 %
Allowance for loan losses (38,138 )

(35,995 )

Total non-earning assets 844,183

835,262

Total assets $ 8,973,964

$ 8,153,951

Liabilities and Stockholders' Equity:

Interest-bearing deposits:

Transaction and money market accounts $ 3,457,279
$ 3,491
0.40 % $ 3,016,337
$ 1,682
0.22 %
Regular savings 555,153
151
0.11 % 598,232
207
0.14 %
Time deposits 1,289,794
3,592
1.10 % 1,181,936
2,663
0.90 %
Total interest-bearing deposits 5,302,226
7,234
0.54 % 4,796,505
4,552
0.38 %
Other borrowings ⁽⁵⁾
1,080,226
6,418
2.36 % 884,597
2,853
1.28 %
Total interest-bearing liabilities 6,382,452
$ 13,652
0.85 % 5,681,102
$ 7,405
0.52 %
Noninterest-bearing liabilities:

Demand deposits 1,495,614

1,408,453

Other liabilities 58,106

67,728

Total liabilities 7,936,172

7,157,283

Stockholders' equity 1,037,792

996,668

Total liabilities and stockholders' equity $ 8,973,964

$ 8,153,951

Net interest income
$ 73,846

$ 69,455

Interest rate spread

3.40 %

3.64 %
Cost of funds

0.66 %

0.40 %
Net interest margin

3.59 %

3.76 %

⁽¹⁾Income and yields are reported on a taxable equivalent basis using the statutory federal corporate tax rate of ~~35%~~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.

~~(4)~~ Interest income on loans includes $1.7 million and $1.3 million for the three months ended September 30, 2017 and 2016, respectively, in accretion of the fair market value adjustments related to acquisitions.

-58-

~~(5)~~ Interest expense on borrowings includes $47,000 and $181,000 for the three months ended September 30, 2017 and 2016, respectively, in accretion of the fair market value adjustments related to acquisitions.

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

Table of Contents

For the Nine Months Ended September 30,
2017 2016
Average
Balance
Interest
Income /
Expense ⁽¹⁾

Yield /
Rate ⁽¹⁾⁽²⁾
Average
Balance
Interest
Income /
Expense ⁽¹⁾

Yield /
Rate ⁽¹⁾⁽²⁾
(Dollars in thousands)
Assets:

Securities:

Taxable $ 763,276
$ 15,081
2.64 % $ 756,042
$ 13,558
2.40 %
Tax-exempt 463,944
16,338
4.71 % 446,840
15,914
4.76 %
Total securities 1,227,220
31,419
3.42 % 1,202,882
29,472
3.27 %
Loans, net ^{(3) (4)}
6,613,078
217,910
4.41 % 5,869,511
194,839
4.43 %
Other earning assets 82,646
1,219
1.97 % 87,420
1,020
1.56 %
Total earning assets 7,922,944
$ 250,548
4.23 % 7,159,813
$ 225,331
4.20 %
Allowance for loan losses (38,205 )

(35,439 )

Total non-earning assets 846,076

832,467

Total assets $ 8,730,815

$ 7,956,841

Liabilities and Stockholders' Equity:

Interest-bearing deposits:

Transaction and money market accounts $ 3,344,248
$ 8,189
0.33 % $ 2,903,336
$ 4,523
0.21 %
Regular savings 571,735
493
0.12 % 591,699
649
0.15 %
Time deposits 1,250,180
9,728
1.04 % 1,172,856
7,773
0.89 %
Total interest-bearing deposits 5,166,163
18,410
0.48 % 4,667,891
12,945
0.37 %
Other borrowings ⁽⁵⁾
1,030,500
17,537
2.28 % 860,942
8,484
1.32 %
Total interest-bearing liabilities 6,196,663
$ 35,947
0.78 % 5,528,833
$ 21,429
0.52 %
Noninterest-bearing liabilities:

Demand deposits 1,449,555

1,376,001

Other liabilities 59,744

60,910

Total liabilities 7,705,962

6,965,744

Stockholders' equity 1,024,853

991,097

Total liabilities and stockholders' equity $ 8,730,815

$ 7,956,841

Net interest income
$ 214,601

$ 203,902

Interest rate spread

3.45 %

3.68 %
Cost of funds

0.61 %

0.40 %
Net interest margin

3.62 %

3.80 %

~~(1)~~ ~~Income and yields are reported on a taxable equivalent basis using the statutory federal corporate tax rate of 35%.~~

~~(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.~~

~~(4)~~ Interest income on loans includes $4.7 million and $3.7 million for the nine months ended September 30, 2017 and 2016, respectively, in accretion of the fair market value adjustments related to acquisitions.

~~(5)~~ Interest expense on borrowings includes $142,000 and $386,000 for the nine months ended September 30, 2017 and 2016, respectively, in accretion of the fair market value adjustments related to acquisitions.

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, 2023 vs. March 31, 2022
	Increase (Decrease) Due to Change in:
	Volume		Rate		Total
Earning Assets:
Securities:
Taxable	$	(3,505)	$	6,592	$	3,087
Tax-exempt		(1,257)		(201)		(1,458)
Total securities		(4,762)		6,391		1,629
Loans, net⁽¹⁾		11,184		65,392		76,576
Other earning assets		(116)		1,453		1,337
Total earning assets	$	6,306	$	73,236	$	79,542
Interest-Bearing Liabilities:
Interest-bearing deposits:
Transaction and money market accounts	$	(4)	$	36,995	$	36,991
Regular savings		(3)		312		309
Time deposits⁽¹⁾		1,164		8,887		10,051
Total interest-bearing deposits		1,157		46,194		47,351
Other borrowings⁽¹⁾		5,418		3,809		9,227
Total interest-bearing liabilities		6,575		50,003		56,578
Change in net interest income (FTE)⁽⁺⁾	$	(269)	$	23,233	$	22,964

Three Months Ended
September 30, 2017 vs. September 30, 2016
Increase (Decrease) Due to Change in:
Nine Months Ended
September 30, 2017 vs. September 30, 2016
Increase (Decrease) Due to Change in:
Volume Rate Total Volume Rate Total
Earning Assets:

Securities:

Taxable $ 37
$ 406
$ 443
$ 131
$ 1,392
$ 1,523
Tax-exempt 226
(73 ) 153
603
(179 ) 424
Total securities 263
333
596
734
1,213
1,947
Loans, net ⁽¹⁾
8,809
1,127
9,936
24,512
(1,441 ) 23,071
Other earning assets (3 ) 109
106
(58 ) 257
199
Total earning assets $ 9,069
$ 1,569
$ 10,638
$ 25,188
$ 29
$ 25,217
Interest-Bearing Liabilities:
Interest-bearing deposits:
Transaction and money market accounts $ 276
$ 1,533
$ 1,809
$ 769
$ 2,897
$ 3,666
Regular savings (14 ) (42 ) (56 ) (21 ) (135 ) (156 )
Time Deposits 259
670
929
537
1,418
1,955
Total interest-bearing deposits 521
2,161
2,682
1,285
4,180
5,465
Other borrowings ⁽²⁾
742
2,823
3,565
1,930
7,123
9,053
Total interest-bearing liabilities 1,263
4,984
6,247
3,215
11,303
14,518
Change in net interest income $ 7,806
$ (3,415 ) $ 4,391
$ 21,973
$ (11,274 ) $ 10,699

⁽¹⁾The rate-related ~~change~~changes in interest income on loans, ~~includes the impact of higher accretion of the acquisition-related fair market value adjustments of $324,000~~deposits, and ~~$996,000 for the three- and nine-month change, respectively.~~

~~(2)~~ ~~The rate-related change in interest expense on~~ other borrowings ~~includes~~include the impact of lower accretion of the acquisition-related fair market value adjustments, ~~of $134,000 and $244,000 for the three- and nine-month change, respectively.~~

~~The Company’s fully taxable equivalent net interest margin includes the impact of acquisition accounting fair value adjustments.~~ which are detailed below.

The impact of net accretion related to acquisition accounting fair value adjustments for the first ~~three~~ quarters of ~~2017 as well as the remaining estimated net accretion~~2022 and 2023 are reflected in the following table (dollars in thousands):

Loan

Deposit

Borrowings

Accretion

Amortization

Total

For the quarter ended March 31, 2022

2,253

(10)

(203)

2,040

For the quarter ended March 31, 2023

1,106

(14)

(209)

883

-59-

Table of Contents

Loan Accretion Borrowings Accretion (Amortization) Total
For the quarter ended March 31, 2017 $ 1,445
$ 48
$ 1,493
For the quarter ended June 30, 2017 1,570
47
1,617
For the quarter ended September 30, 2017 1,662
47
1,709
For the remaining three months of 2017 (estimated) ⁽¹⁾
1,358
28
1,386
For the years ending (estimated) ⁽¹⁾:

2018 4,842
(143 ) 4,699
2019 3,483
(286 ) 3,197
2020 2,689
(301 ) 2,388
2021 2,187
(316 ) 1,871
2022 1,767
(332 ) 1,435
Thereafter 6,589
(4,974 ) 1,615

⁽¹⁾~~Estimated accretion only includes accretion for previously executed acquisitions. The effects of the Pending Merger are not included in the information above.~~

Noninterest Income

For the Three Months Ended
September 30, Change
2017 2016 $ %
(Dollars in thousands)
Noninterest income:

Service charges on deposit accounts $ 5,153
$ 4,965
$ 188
3.8 %
Other service charges and fees 4,529
4,397
132
3.0 %
Fiduciary and asset management fees 2,794
2,844
(50 ) (1.8 )%
Mortgage banking income, net 2,305
3,207
(902 ) (28.1 )%
Gains on securities transactions, net 184
—
184
NM
Bank owned life insurance income 1,377
1,389
(12 ) (0.9 )%
Loan-related interest rate swap fees 416
1,303
(887 ) (68.1 )%
Other operating income 778
845
(67 ) (7.9 )%
Total noninterest income $ 17,536
$ 18,950
$ (1,414 ) (7.5 )%

Community bank segment $ 15,121
$ 15,589
$ (468 ) (3.0 )%
Mortgage segment 2,527
3,501
(974 ) (27.8 )%
Intercompany eliminations (112 ) (140 ) 28
20.0 %
Total noninterest income $ 17,536
$ 18,950
$ (1,414 ) (7.5 )%

~~NM - Not meaningful~~


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

	(Dollars in thousands)
Noninterest income:
Service charges on deposit accounts	$	7,902	$	7,596	$	306	4.0	%
Other service charges, commissions, and fees		1,746		1,655		91	5.5	%
Interchange fees		2,325		1,810		515	28.5	%
Fiduciary and asset management fees		4,262		7,255		(2,993)	(41.3)	%
Mortgage banking income		854		3,117		(2,263)	(72.6)	%
Loss on sale of securities		(13,400)		—		(13,400)	100.0	%
Bank owned life insurance income		2,828		2,697		131	4.9	%
Loan-related interest rate swap fees		1,439		3,860		(2,421)	(62.7)	%
Other operating income		1,672		2,163		(491)	(22.7)	%
Total noninterest income	$	9,628	$	30,153	$	(20,525)	(68.1)	%

Noninterest income ~~declined $1.4~~decreased $20.5 million ~~or 7.5%,~~ to ~~$17.5~~$9.6 million for the quarter ended ~~September 30, 2017~~March 31, 2023, compared to $30.2 million for the quarter ended March 31, 2022. Excluding, the loss on sale of securities of $13.4 million in 2023, adjusted operating noninterest income⁽⁺⁾for the quarter ended March 31, 2023 decreased $7.1 million or 23.6% compared to the quarter ended ~~September 30, 2016.~~March 31, 2022. The ~~decline~~decrease from the prior year quarter was primarily ~~due to lower mortgage banking income of $902,000,~~ driven by ~~declines~~a $3.0 million decrease in mortgage loan originations compared to the third quarter of 2016 and unrealized losses on mortgage banking derivatives in the third quarter of 2017 compared to unrealized gains on mortgage banking derivatives in the third quarter of 2016. Loan-related swap fees also declined $887,000 in the third quarter of 2017 compared to the third quarter of 2016. Customer-related fee income increased $320,000 primarily related to increases in overdraft and debit card interchange fees, and gains on sales of securities were $184,000 higher, in each case as compared to the third quarter of 2016.

For the Nine Months Ended
September 30, Change
2017 2016 $ %
(Dollars in thousands)
Noninterest income:

Service charges on deposit accounts $ 14,945
$ 14,454
$ 491
3.4 %
Other service charges and fees 13,575
12,971
604
4.7 %
Fiduciary and asset management fees 8,313
7,315
998
13.6 %
Mortgage banking income, net 7,123
8,324
(1,201 ) (14.4 )%
Gains on securities transactions, net 782
145
637
NM
Bank owned life insurance income 4,837
4,122
715
17.3 %
Loan-related interest rate swap fees 2,627
3,056
(429 ) (14.0 )%
Other operating income 2,228
2,470
(242 ) (9.8 )%
Total noninterest income $ 54,430
$ 52,857
$ 1,573
3.0 %

Community bank segment $ 47,080
$ 44,137
$ 2,943
6.7 %
Mortgage segment 7,743
9,185
(1,442 ) (15.7 )%
Intercompany eliminations (393 ) (465 ) 72
15.5 %
Total noninterest income $ 54,430
$ 52,857
$ 1,573
3.0 %

~~NM - Not meaningful~~

Noninterest income increased $1.6 million, or 3.0%, to $54.4 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. For the first nine months of 2017, customer-related fee income increased $1.1 million primarily related to increases in overdraft and debit card interchange fees; fiduciary and asset management fees ~~were $998,000 higher~~ due to a decrease in assets under management mainly driven by the ~~acquisition of ODCM~~DHFB sale in the second quarter of ~~2016; bank owned life insurance income increased $715,000 primarily related~~2022, and a $2.4 million decrease in loan-related interest rate swap fees due to ~~death benefit proceeds received~~lower transaction volumes, and a $2.3 million decrease in ~~2017; and gains on sales of securities were $637,000 higher, in each case as compared to the first nine months of 2016. Mortgage~~mortgage banking income ~~decreased $1.2 million primarily related~~due to ~~declines~~a decline in mortgage loan ~~originations and lower unrealized gains on mortgage banking derivatives~~origination volumes driven by the rapid increase in ~~the first nine months of 2017 compared to the first nine months of 2016.~~

~~Noninterest expense~~

For the Three Months Ended
September 30, Change
2017 2016 $ %
(Dollars in thousands)
Noninterest expense:

Salaries and benefits $ 29,769
$ 30,493
$ (724 ) (2.4 )%
Occupancy expenses 4,939
4,841
98
2.0 %
Furniture and equipment expenses 2,559
2,635
(76 ) (2.9 )%
Printing, postage, and supplies 1,154
1,147
7
0.6 %
Communications expense 798
948
(150 ) (15.8 )%
Technology and data processing 4,232
3,917
315
8.0 %
Professional services 1,985
1,895
90
4.7 %
Marketing and advertising expense 1,944
1,975
(31 ) (1.6 )%
FDIC assessment premiums and other insurance 1,141
1,262
(121 ) (9.6 )%
Other taxes 2,022
639
1,383
216.4 %
Loan-related expenses 1,349
1,531
(182 ) (11.9 )%
OREO and credit-related expenses 1,139
503
636
126.4 %
Amortization of intangible assets 1,480
1,843
(363 ) (19.7 )%
Training and other personnel costs 887
863
24
2.8 %
Merger-related costs 732
—
732
NM
Other expenses 1,366
2,421
(1,055 ) (43.6 )%
Total noninterest expense $ 57,496
$ 56,913
$ 583
1.0 %

Community bank segment $ 55,133
$ 54,353
$ 780
1.4 %
Mortgage segment 2,475
2,700
(225 ) (8.3 )%
Intercompany eliminations (112 ) (140 ) 28
20.0 %
Total noninterest expense $ 57,496
$ 56,913
$ 583
1.0 %

~~NM - Not meaningful~~

Noninterest expense increased $583,000, or 1.0%, to $57.5 million for the quarter ended September 30, 2017 compared to $56.9 million for the third quarter of 2016. Excluding merger-related costs of $732,000, noninterest expense for the quarter ended September 30, 2017 declined $149,000, or 0.3%, compared to the third quarter of 2016. Salaries and benefits expenses declined by $724,000 primarily related to decreases in benefits and incentive compensation, offset by increases related to annual merit adjustments. Declines in other expenses primarily related to lower fraud-related and other losses of $364,000 as well as $400,000 in nonrecurring branch closing costs recognized in the third quarter of 2016.market interest rates. These decreases were partially offset by a ~~nonrecurring reduction~~$515,000 increase in interchange fees.

-60-

Table of Contents

Noninterest Expense


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

	(Dollars in thousands)
Noninterest expense:
Salaries and benefits	$	60,529	$	58,298	$	2,231	3.8	%
Occupancy expenses		6,356		6,883		(527)	(7.7)	%
Furniture and equipment expenses		3,752		3,597		155	4.3	%
Technology and data processing		8,142		7,796		346	4.4	%
Professional services		3,413		4,090		(677)	(16.6)	%
Marketing and advertising expense		2,351		2,163		188	8.7	%
FDIC assessment premiums and other insurance		3,899		2,485		1,414	56.9	%
Franchise and other taxes		4,498		4,499		(1)	(0.0)	%
Loan-related expenses		1,552		1,776		(224)	(12.6)	%
Amortization of intangible assets		2,279		3,039		(760)	(25.0)	%
Other expenses		11,503		10,695		808	7.6	%
Total noninterest expense	$	108,274	$	105,321	$	2,953	2.8	%

Noninterest expense increased $3.0 million or 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. 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 ~~of approximately $900,000~~($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 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 ~~taxes~~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 ~~historic tax credits realized~~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 ~~2016 related~~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 ~~Company's investment in~~Wholesale Banking segment. As a ~~historic rehabilitation project that was completed in that quarter~~result, the Company re-allocated $9.6 million of goodwill from the Consumer Banking segment to the Wholesale Banking segment and ~~increased OREO~~restated its prior segment information for the year ended December 31, 2022, based on this organizational change. Refer to Note 4 “Goodwill and ~~credit-related expenses due to losses on sales~~Intangible Assets” and Note 12 “Segment Reporting and Revenue” within Part I, Item 1 “Financial Statements” of ~~OREO property in the third quarter of 2017 compared to gains on sales of OREO property in the third quarter of 2016~~this Quarterly Report for additional information.

Wholesale Banking

The Wholesale Banking segment provides loan and deposit services, as well as ~~higher valuation adjustments compared~~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 ~~third quarter of 2016.~~

For the Nine Months Ended
September 30, Change
2017 2016 $ %
(Dollars in thousands)
Noninterest expense:

Salaries and benefits $ 92,499
$ 87,061
$ 5,438
6.2 %
Occupancy expenses 14,560
14,627
(67 ) (0.5 )%
Furniture and equipment expenses 7,882
7,867
15
0.2 %
Printing, postage, and supplies 3,710
3,566
144
4.0 %
Communications expense 2,580
2,964
(384 ) (13.0 )%
Technology and data processing 12,059
11,340
719
6.3 %
Professional services 5,734
6,432
(698 ) (10.9 )%
Marketing and advertising expense 5,963
5,838
125
2.1 %
FDIC assessment premiums and other insurance 2,793
4,003
(1,210 ) (30.2 )%
Other taxes 6,065
3,864
2,201
57.0 %
Loan-related expenses 3,959
3,638
321
8.8 %
OREO and credit-related expenses 2,023
1,965
58
3.0 %
Amortization of intangible assets 4,661
5,468
(807 ) (14.8 )%
Training and other personnel costs 2,900
2,512
388
15.4 %
Merger-related costs 3,476
—
3,476
NM
Other expenses 3,957
5,291
(1,334 ) (25.2 )%
Total noninterest expense $ 174,821
$ 166,436
$ 8,385
5.0 %

Community bank segment $ 167,643
$ 158,964
$ 8,679
5.5 %
Mortgage segment 7,571
7,937
(366 ) (4.6 )%
Intercompany eliminations (393 ) (465 ) 72
15.5 %
Total noninterest expense $ 174,821
$ 166,436
$ 8,385
5.0 %

~~NM - Not meaningful~~

~~Noninterest expense increased $8.4~~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 ~~or 5.0%,~~ to ~~$174.8~~$22.2 million for the ~~nine months~~quarter ended ~~September 30, 2017~~March 31, 2023, compared to ~~$166.4~~$39.0 million for the ~~first nine month of 2016. Excluding merger-related costs of $3.5~~quarter ended March 31, 2022. The decrease was primarily driven by an $8.9 million ~~noninterest expense~~increase in the provision for credit losses, due to increasing uncertainty in the ~~nine months ended September 30, 2017 increased $4.9~~economic outlook and loan growth. Net interest income decreased $3.9 million ~~or 2.9%, compared to~~driven by Paycheck Protection Program loan income in the first ~~nine months~~quarter of ~~2016. Salaries~~2022, and ~~benefits expenses increased~~spread compression on the loan and deposit portfolios driven by ~~$5.4 million primarily related to annual merit adjustments; increases~~the rapid rise in ~~benefits and equity-based compensation; and increased expenses related to investments in the Company's growth, including the acquisition of ODCM. The increase in other taxes~~interest rates. This was partially offset by ~~the~~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 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, 2023, compared to $8.2 million for the quarter ended March 31, 2022. Net interest income increased $15.0 million primarily due to favorable funding credit on deposits and increased interest income attributable to the higher interest rate environment and 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 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 of 2022 and a decrease in mortgage banking income due to a decline in mortgage loan origination volumes driven by the rapid increase in market interest rates during 2022 and continuing into the first quarter of 2023. In addition, noninterest expense increased by $1.7 million primarily due to an increase in FDIC ~~expenses, including~~ assessment premiums and other insurance due to the ~~impact of the issuance of subordinated debt~~increase in the ~~fourth quarter of 2016. The remaining~~FDIC assessment rates, effective January 1, 2023, and an increase in ~~other taxes was primarily related to a nonrecurring reduction in expenses of approximately $900,000 related to the Company's investment in a historic rehabilitation project that was completed,~~salaries and the related historic tax credits realized, in the third quarter of 2016. Technology and data processing costs increased $719,000, mostly due to higher software maintenance and online banking costs due to increased customer activity compared to the nine months ended September 30, 2016. These increases werebenefits expense, partially offset by ~~lower intangible~~a decrease in amortization expense ~~of $807,000, declines in professional fees of $698,000~~ due to ~~lower legal~~the sale of DHFB and ~~consulting~~a decrease in occupancy 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 reallocation of LHFI, net of deferred fees and ~~declines~~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 ~~fraud-related~~Note 12, “Segment Reporting and ~~other losses~~Revenue,” in Part I, Item 1 of ~~$371,000 in each case as~~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 ~~the first nine months of 2016.~~

~~SEGMENT INFORMATION~~

~~Community Bank Segment~~

~~For the three months ended September 30, 2017, the community bank segment reported net income of $20.3~~December 31, 2022.

Consumer Banking deposits increased $119.0 million ~~which was an increase of $695,000~~or 5.0% (annualized) to $9.8 billion at March 31, 2023 compared to the third quarter of 2016. Excluding after-tax merger-related costs of $661,000, net operating earnings for the community bank segment for the quarter ended September 30, 2017 were $21.0 million, which was anDecember 31, 2022. This increase ~~of $1.4 million compared to the net income for the third quarter of 2016. Net interest income increased $4.1 million~~

year-over-year to $70.7 million for the quarter ended September 30, 2017, primarily driven by higher average loan balances. The provision for credit losses for the quarter ended September 30, 2017 was $3.1 million, which was an increase of $601,000 compared to the provision for credit losses for the quarter ended September 30, 2016, driven by higher loan balances and higher levels of charge-offs in the third quarter of 2017.

~~Noninterest income decreased $468,000, or 3.0%, from $15.6 million in the third quarter of 2016 to $15.1 million in the third quarter of 2017. The decline~~ was primarily due to ~~lower loan-related swap fees of $887,000 compared to the third quarter of 2016. Customer-related fee income increased $320,000 primarily related to increases~~an increase in ~~overdraft and debit card interchange fees, and gains on sales of securities were $184,000 higher, in each case as compared to the third quarter of 2016.~~

Noninterest expense increased $780,000, or 1.4%, from $54.4 million for the third quarter of 2016 to $55.1 million for the quarter ended September 30, 2017. Excluding pre-tax merger-related costs of $732,000, noninterest expense for the quarter ended September 30, 2017 remained relatively flat compared to the third quarter of 2016. Salaries and benefits expenses declined by $623,000 primarily related to decreases in benefits and incentive compensation, offset by increases related to annual merit adjustments. Declines in other expenses primarily related to lower fraud-related and other losses of $364,000 as well as $400,000 in nonrecurring branch closing costs recognized in the third quarter of 2016. These decreases weretime deposits, partially offset by a ~~nonrecurring reduction~~decrease in ~~expenses~~demand

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Table of ~~approximately $900,000 related to the Company's investment in a historic rehabilitation project that was completed,~~Contents

deposits, interest checking accounts, and the related historic tax credits realized, in the third quarter of 2016 and increased OREO and credit-related expenses due to losses on sales of OREO property in the third quarter of 2017 compared to gains on sales of OREO property in the third quarter of 2016savings accounts, as ~~well as higher valuation adjustments compared to the third quarter of 2016.~~

For the nine months ended September 30, 2017, the community bank segment reported net income of $56.8 million, which was an increase of $1.5 million compared to the first nine months of 2016. Excluding after-tax merger-related costs of $3.0 million, net operating earnings for the community bank segment for the nine months ended September 30, 2017 were $59.9 million, which was an increase of $4.5 million compared to the net income for the first nine months of 2016. Net interest income increased $10.0 million year-over-year to $205.5 million for the nine months ended September 30, 2017, primarily driven by higher average loan balances. The provision for credit losses for the nine months ended September 30, 2017 was $7.3 million, which was an increase of $129,000 compared to the provision for credit losses for the nine months ended September 30, 2016, primarily ~~driven by higher loan balances and higher levels of charge-offs during 2017~~.

~~Noninterest income increased $3.0 million, or 6.7%,~~customers moved funds from $44.1 million in the first nine months of 2016 to $47.1 million in the first nine months of 2017. For the first nine months of 2017, customer-related fee income increased $1.1 million primarily related to increases in overdraft and debit card interchange fees; fiduciary and asset management fees were $998,000 higher due to the acquisition of ODCM in the second quarter of 2016; bank owned life insurance income increased $715,000 primarily related to death benefit proceeds received in 2017; and gains on sales of securities were $637,000 higher, in each case as compared to the first nine months of 2016.

Noninterest expense increased $8.6 million, or 5.5%, from $159.0 million for the first nine months of 2016 to $167.6 million for the nine months ended September 30, 2017. Excluding merger-related costs of $3.5 million, noninterest expense for the nine months ended September 30, 2017 increased $5.2 million, or 3.3%, compared to the first nine months of 2016. Salaries and benefits expenses increased by $5.6 million primarily related to annual merit adjustments; increases in benefits and equity-based compensation; and increased expenses related to investments in the Company's growth, including the acquisition of ODCM. The net increase in FDIC and other insurance expenses and other taxes was primarily related to a nonrecurring reduction in expenses of approximately $900,000 related to the Company's investment in a historic rehabilitation project that was completed, and the related historic tax credits realized, in the third quarter of 2016. Technology and data processing costs increased $708,000, mostly duelower to higher software maintenance and online banking costs due to increased customer activity compared to the nine months ended September 30, 2016. These increases were partially offset by lower intangible amortization expense of $807,000, declines in professional fees of $792,000 due to lower legal and consulting fees, and declines in fraud-related and other losses of $371,000 in each case as compared to the first nine months of 2016.

yielding deposit products.

~~Mortgage Segment~~

The mortgage segment reported net income of $347,000 for the third quarter of 2017, compared to net income of $785,000 in the third quarter of 2016. Mortgage banking income, net of commissions, decreased $902,000, primarily related to declines in mortgage loan originations and unrealized losses on mortgage banking derivatives in the third quarter of 2017 compared to unrealized gains on mortgage banking derivatives in the third quarter of 2016. Mortgage loan originations decreased $29.4 million, or 18.7%, from $156.7 million for the quarter ended September 30, 2016 to $127.3 million for the quarter ended

September 30, 2017. Noninterest expense decreased $225,000, or 8.3%, when comparing the third quarter of 2017 to the third quarter of 2016, largely a result of declines in personnel-related costs and equipment-related expenses.

The mortgage segment reported net income of $901,000 for the first nine months of 2017, compared to net income of $1.4 million for the first nine months of 2016. Mortgage banking income, net of commissions, decreased $1.2 million, primarily related to declines in mortgage loan originations and lower unrealized gains on mortgage banking derivatives in the first nine months of 2017 compared to the first nine months of 2016. Mortgage loan originations decreased $30.8 million, or 7.8%, from $394.9 million for the nine months ended September 30, 2016 to $364.1 million for the nine months ended September 30, 2017. Noninterest expense decreased $366,000, largely a result of declines in personnel-related costs and equipment-related expenses.

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.

In assessing the ability to realize deferred tax assets, management considers the scheduled reversal of temporary differences, projected future taxable income, and tax planning strategies. Management continues to believe that it is not likely that the Company will realize its deferred tax asset related to net operating losses generated at the state level and accordingly has established a valuation allowance.

The Company’s bank subsidiary is not subject to a state income tax in its primary place of business (Virginia). The Company’s other subsidiaries are subject to state income taxes and have generated losses on a consolidated basis for state income tax purposes which the Company is currently unable to utilize. State net operating loss carryovers will begin to expire after 2026.

~~The~~ effective tax rate for the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 was ~~26.7%~~17.0% and ~~23.3%, respectively; the effective tax rate for the nine months ended September 30, 2017 and 2016 was 26.9% and 25.0%~~17.5%, respectively. The ~~increase~~marginal decrease in the effective tax rate is primarily ~~related~~due to the higher proportion of tax-exempt ~~interest and bank owned life insurance~~ income ~~being a smaller percentage of~~to pre-tax income in ~~2017 compared to 2016 as well as~~ the ~~impact of nondeductible acquisition-related expenses recognized in 2017. Additionally, the Company's effective tax rate in 2016 was lower due to historic tax credits realized in the third~~first quarter of ~~2016 related to the Company's investment in a historic rehabilitation project that was completed in such quarter.~~

2023.

~~BALANCE SHEET~~

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

Overview

Assets

At ~~September 30, 2017,~~March 31, 2023, total assets were ~~$9.0~~$20.1 billion, a decrease of $357.8 million or approximately 7.1% (annualized)

from December 31, 2022. The decrease in total assets was primarily due to a decline in the investment securities portfolio of $514.4 million, primarily due to the sale of AFS securities as part of the Company’s balance sheet repositioning strategy executed during the first quarter of 2023, which was partially offset by an increase in LHFI, net of ~~$602.6 million, or 9.6% (annualized), from $8.4 billion at December 31, 2016. The increase in assets was mostly related to~~deferred fees and costs, driven by loan growth.

~~Loans held for investment,~~

LHFI, net of deferred fees and costs, were ~~$6.9~~$14.6 billion at ~~September 30, 2017,~~March 31, 2023, an increase of ~~$591.7~~$135.1 million or ~~12.5%~~3.8% (annualized), from December 31, ~~2016. Loan growth occurred across all categories. Quarterly~~2022. At March 31, 2023, quarterly average ~~loans~~LHFI, net of deferred fees and costs, increased ~~$788.8~~$388.2 million or ~~13.1%, for the quarter ended September 30, 2017 compared~~11.2% (annualized) from December 31, 2022. Refer to ~~the quarter ended September 30, 2016. For additional information on the Company’s loan activity, please refer to “Loan Portfolio”~~"Loan Portfolio" within this Item 2 orand Note 3 ~~“Loans~~"Loans and Allowance for Loan ~~Losses”~~and Lease Losses" in Part I, Item 1 ~~“Financial Statements”~~ of this ~~report.~~

Quarterly Report for additional information on 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 ~~September 30, 2017,~~March 31, 2023, total liabilities were ~~$8.0~~$17.7 billion, a decrease of $425.3 million from $18.1 billion at December 31, 2022, which was primarily driven by a decrease in borrowings, partially offset by an increase in deposits.

Total deposits at March 31, 2023 were $16.5 billion, an increase of ~~$562.3~~$524.2 million or approximately 13.3% (annualized) from December 31, 2022. For the quarter ended March 31, 2023, quarterly average deposits decreased $194.5 million or 4.7% (annualized) compared to the prior quarter. 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.

Total short-term and long-term borrowings at March 31, 2023 were $798.9 million, a decrease of $909.8 million or 53.2% when compared to $1.7 billion at December 31, 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 additional information on our borrowing activity.

At March 31, 2023, stockholders’ equity was $2.4 billion, an increase of $67.5 million from December 31, ~~2016.~~

~~Total deposits were $6.9 billion at September 30, 2017, an increase of $502.3 million, or 10.5% (annualized), from December 31, 2016. Deposits increased in all categories with~~2022, primarily due to lower unrealized losses within the exception of savings accounts when compared to year-end 2016, but was primarily driven by increases in demand and interest-bearing deposits consisting of NOW and money market accounts. Quarterly average deposits increased $592.9 million, or 9.6%, for the quarter ended September 30, 2017 compared to the quarter ended September 30, 2016. For further discussion on this topic, see “Deposits” within this Item 2.

~~At September 30, 2017, stockholders’ equity was $1.0 billion, an increase of $40.3 million from December 31, 2016. The Company’s~~AFS securities portfolio. Our consolidated regulatory capital ratios continue to exceed the minimum capital requirements and are considered “well-capitalized” for regulatory ~~purposes but have decreased from prior periods primarily due~~purposes. Refer to ~~asset growth. The total risk-based~~“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 our capital ratios at September 30, 2017 and December 31, 2016 were 12.94% and 13.56%, respectively. The Tier 1 risk-based capital ratios were 10.56% and 10.97% at September 30, 2017 and December 31, 2016, respectively. The common equity Tier 1 risk-based capital ratios were 9.40% and 9.72% at September 30, 2017 and December 31, 2016, respectively. The Company’s common equity to total asset ratios at September 30, 2017 and December 31, 2016 were 11.53% and 11.88%, respectively, while its tangible common equity to tangible assets ratios were 8.34% and 8.41%, respectively, atresources.

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Table of Contents

During the ~~same dates.~~

~~Also,~~first quarter of 2023, the Company declared and paid a ~~cash~~quarterly dividend on the outstanding shares of ~~$0.20~~Series A Preferred Stock of $171.88 per share ~~during~~(equivalent to $0.43 per outstanding depositary share), consistent with the ~~third~~fourth quarter of ~~2017,~~2022 and the first quarter of 2022. During the first quarter of 2023, the Company also declared and paid cash dividends of $0.30 per common share, consistent with the fourth quarter of 2022 and an increase of ~~$0.01 per~~$0.02 or approximately 7.1% from the first quarter of 2022 .

At March 31, 2023, the Company had no active share ~~or 5.3%, compared to~~repurchase programs, as the ~~dividend paid during~~most recent share repurchase program expired on December 9, 2022. Under that repurchase program, the ~~same quarter~~Company repurchased an aggregate of approximately 1.3 million shares (or approximately $48.2 million) in ~~the prior year. Dividends for the nine months ended September 30, 2017 were $0.60 compared to $0.57 for the nine months ended September 30, 2016.~~

2022.

Securities

At ~~September 30, 2017,~~March 31, 2023, the Company had total investments ~~in the amount~~ of ~~$1.2~~$3.2 billion, or ~~13.8 %~~15.9% of total assets, as compared to ~~$1.2~~$3.7 billion, or ~~14.3%~~18.1% of total assets, at December 31, ~~2016.~~2022. This decrease was primarily due to 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 Company’s HTM portfolio. The Company seeks to diversify its portfolio to minimize risk. It focuses on purchasing ~~mortgage-backed securities~~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 ~~mortgage-backed~~MBS are agency-backed securities, ~~are investment grade. The investment portfolio has~~which have a ~~high percentage~~government guarantee. For information regarding the hedge transaction related to AFS securities, see Note 8 "Derivatives" in Part I, Item 1 of municipals and mortgage-backed securities; therefore the Company earns a higher taxable equivalent yield on its portfolio as compared to many of its peers. The Company does not engage in structured derivative or hedging activities within the investment portfolio.

this Quarterly Report.

The table below sets forth a summary of the AFS securities, ~~available for sale,~~HTM securities, ~~held to maturity,~~ and restricted stock as of the dates indicated (dollars in thousands):


	March 31,		December 31,
	2023		2022
Available for Sale:
U.S. government and agency securities	$	62,574	$	61,943
Obligations of states and political subdivisions		523,097		807,435
Corporate and other bonds		152,006		226,380
MBS
Commercial		260,647		306,161
Residential		1,252,360		1,338,233
Total MBS		1,513,007		1,644,394
Other securities		1,681		1,664
Total AFS securities, at fair value		2,252,365		2,741,816
Held to Maturity:
U.S. government and agency securities		684		687
Obligations of states and political subdivisions		702,749		705,990
Corporate and other bonds		5,033		5,159
MBS
Commercial		55,993		42,761
Residential		90,959		93,135
Total MBS		146,952		135,896
Total held to maturity securities, at carrying value		855,418		847,732
Restricted Stock:
FRB stock		67,032		67,032
FHLB stock		20,584		53,181
Total restricted stock, at cost		87,616		120,213
Total investments	$	3,195,399	$	3,709,761

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Table of Contents

September 30,
2017

December 31,
2016
Available for Sale:

Obligations of states and political subdivisions $ 292,199
$ 275,890
Corporate and other bonds 115,422
121,780
Mortgage-backed securities 546,904
535,286
Other securities 13,836
13,808
Total securities available for sale, at fair value 968,361
946,764

Held to Maturity:

Obligations of states and political subdivisions, at carrying value 204,801
201,526

Federal Reserve Bank stock 27,559
23,808
Federal Home Loan Bank stock 40,882
36,974
Total restricted stock, at cost 68,441
60,782
Total investments $ 1,241,603
$ 1,209,072

During each quarter and at year end, the Company conducts an assessment of the securities portfolio for OTTI consideration. No OTTI was recognized during the three and nine months ended September 30, 2017. For the year ended December 31, 2015, the Company determined that a municipal security in the available for sale portfolio incurred credit-related OTTI of $300,000. During the quarter ended March 31, 2016, the municipal security was sold. As a result, the Company recognized an additional loss on sale of the previously written down security. The Company monitors the portfolio, which is subject to liquidity needs, market rate changes, and credit risk changes, to determine whether adjustments are needed. 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.

The following table summarizes the ~~contractual maturity of securities available for sale at fair value and their~~ weighted average yields⁽¹⁾ for AFS securities by contractual maturity date of the underlying securities as of ~~September 30, 2017 (dollars in thousands):~~

March 31, 2023:

1 Year or

5 – 10

Over 10

Less

1 - 5 Years

Years

Total

U.S. government and agency securities

—

1.41

5.47

—

1.56

Obligations of states and political subdivisions

3.65

3.01

1.93

2.23

Corporate bonds and other securities

4.03

7.16

3.85

5.15

4.21

MBS:

Commercial

5.82

3.68

2.55

2.34

2.97

Residential

2.50

2.23

2.58

2.18

2.19

Total MBS

5.82

3.08

2.57

2.20

2.32

Total AFS securities

5.57

2.65

3.46

2.22

2.40

1 Year or Less 1 - 5 Years 5 - 10 Years Over 10 Years Total
Mortgage backed securities:

Amortized cost $ 197
$ 82,828
$ 121,469
$ 341,544
$ 546,038
Fair value 202
83,072
121,515
342,115
546,904
Weighted average yield ⁽¹⁾
3.08 % 2.16 % 2.19 % 2.43 % 2.34 %

Obligations of states and political subdivisions:

Amortized cost 11,795
44,929
82,296
146,901
285,921
Fair value 11,968
46,531
85,491
148,209
292,199
Weighted average yield ⁽¹⁾
5.69 % 4.92 % 4.34 % 3.80 % 4.21 %

Corporate bonds and other securities:

Amortized cost 11,395
504
63,727
53,261
128,887
Fair value 11,340
504
64,824
52,590
129,258
Weighted average yield ⁽¹⁾
0.93 % 1.04 % 4.46 % 2.31 % 3.24 %

Total securities available for sale:

Amortized cost 23,387
128,261
267,492
541,706
960,846
Fair value 23,510
130,107
271,830
542,914
968,361
Weighted average yield ⁽¹⁾
3.35 % 3.12 % 3.39 % 2.79 % 3.01 %

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

The following table summarizes the ~~contractual maturity of securities held to maturity at carrying value and their~~ weighted average yields⁽¹⁾ for HTM securities by contractual maturity date of the underlying securitiesas of ~~September 30, 2017 (dollars in thousands):~~

March 31, 2023:

1 Year or

5 – 10

Over 10

Less

1 - 5 Years

Years

Total

U.S. government and agency securities

—

5.23

—

5.23

Obligations of states and political subdivisions

2.38

4.05

3.48

3.49

Corporate bonds and other securities

—

6.72

MBS:

Commercial

—

4.67

Residential

—

5.43

—

3.57

4.06

Total MBS

—

5.43

—

4.07

4.29

Total HTM securities

2.38

4.98

3.48

3.60

3.65

1 Year or Less 1 - 5 Years 5 - 10 Years Over 10 Years Total
Obligations of states and political subdivisions:

Carrying Value $ 5,879
$ 41,196
$ 65,893
$ 91,833
$ 204,801
Fair value 5,902
41,959
67,444
94,530
209,835
Weighted average yield ⁽¹⁾
2.96 % 2.78 % 3.21 % 3.78 % 3.37 %

⁽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 ~~September 30, 2017,~~March 31, 2023, the Company maintained a diversified municipal bond portfolio with approximately ~~75%~~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 ~~12% and issuances within~~19% of the ~~State of Washington and the Commonwealth of Virginia both represented 11% 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~~

Table of Contents

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, ~~loans held for sale,~~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, ~~and a~~ corporate line of credit with a large correspondent ~~bank.~~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 ~~September 30, 2017,~~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.

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 fund its liquidity needs as needed. The Company is also closely tracking the potential impacts on the Company’s liquidity of declines in the fair value of the Company’s securities portfolio due to rising market interest rates and developments in the banking industry that may change the availability of traditional sources of liquidity or market expectations with respect to available sources and amounts of additional liquidity.

As of March 31, 2023, liquid assets totaled ~~$2.6~~$6.0 billion or ~~29.2%,~~30.3% of total assets, and liquid earning assets totaled ~~$2.5~~$5.9 billion or ~~30.6%~~32.4% of total earning assets. Asset liquidity is also provided by managing loan and securities maturities and cash flows. As of ~~September 30, 2017,~~March 31, 2023, loan payments of approximately ~~$2.3~~$5.4 billion or ~~32.9%~~37% of total loans are ~~scheduled to mature~~expected within one year based on contractual ~~maturity,~~terms, adjusted for expected prepayments, and approximately ~~$156.3~~$269.1 million or ~~12.6%~~8.4% of total securities are scheduled to ~~mature~~be paid down within one ~~year.~~

~~Additional sources of liquidity available to the Company include its capacity to borrow additional funds when necessary.~~ 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 56 “Borrowings” in Part I, Item 1 ~~“Financial Statements”~~ of this ~~report.~~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.

-67-

Table of Contents

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, 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⁾		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, 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.

Loan Portfolio

~~Loans held for investment,~~

LHFI, net of deferred fees and costs, ~~were $6.9~~totaled $14.6 billion at ~~September 30, 2017, $6.3~~March 31, 2023 and $14.4 billion at December 31, ~~2016, and $6.1 billion at September 30, 2016, respectively.~~2022. Commercial real estate ~~- non-owner occupied~~and commercial and industrial loans ~~continue to represent~~represented the Company’s largest ~~category, comprising 25.3% of the total~~ loan ~~portfolio~~categories at ~~September 30, 2017.~~

~~The following table presents the Company’s composition of loans held for investment, net of deferred fees~~both March 31, 2023 and ~~costs, in dollar amounts and as a percentage of total gross loans as of the quarter ended (dollars in thousands):~~

September 30, 2017 June 30, 2017 March 31, 2017 December 31, 2016 September 30, 2016
Construction and Land Development $ 841,738
12.2 % $ 799,938
11.8 % $ 770,287
11.8 % $ 751,131
11.9 % $ 776,430
12.6 %
Commercial Real Estate - Owner Occupied 903,523
13.1 % 888,285
13.1 % 870,559
13.3 % 857,805
13.6 % 857,142
13.9 %
Commercial Real Estate - Non-Owner Occupied 1,748,039
25.3 % 1,698,329
25.1 % 1,631,767
24.9 % 1,564,295
24.8 % 1,454,828
23.7 %
Multifamily Real Estate 368,686
5.4 % 367,257
5.4 % 353,769
5.4 % 334,276
5.3 % 339,313
5.5 %
Commercial & Industrial 554,522
8.0 % 568,602
8.4 % 576,567
8.8 % 551,526
8.7 % 509,857
8.3 %
Residential 1-4 Family 1,083,112
15.7 % 1,066,519
15.8 % 1,057,439
16.1 % 1,029,547
16.3 % 999,361
16.3 %
Auto 276,572
4.0 % 274,162
4.0 % 271,466
4.1 % 262,071
4.2 % 255,188
4.2 %
HELOC 535,446
7.8 % 535,088
7.9 % 527,863
8.1 % 526,884
8.4 % 524,097
8.5 %
Consumer and all other 587,091
8.5 % 573,310
8.5 % 494,329
7.5 % 429,525
6.8 % 432,702
7.0 %
Total loans held for investment $ 6,898,729
100.0 % $ 6,771,490
100.0 % $ 6,554,046
100.0 % $ 6,307,060
100.0 % $ 6,148,918
100.0 %

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 ~~September 30, 2017~~March 31, 2023 (dollars in thousands):

Variable Rate Fixed Rate

Total
Maturities

Less than 1
year
Total 1-5 years
More than 5
years
Total 1-5 years
More than 5
years
Construction and Land Development $ 841,738
$ 481,566
$ 220,078
$ 170,885
$ 49,193
$ 140,094
$ 102,639
$ 37,455
Commercial Real Estate - Owner Occupied 903,523
106,283
252,090
31,982
220,108
545,150
384,557
160,593
Commercial Real Estate - Non-Owner Occupied 1,748,039
173,965
601,345
198,386
402,959
972,729
693,236
279,493
Multifamily Real Estate 368,686
29,313
145,063
37,143
107,920
194,310
169,340
24,970
Commercial & Industrial 554,522
165,346
153,500
111,836
41,664
235,676
157,121
78,555
Residential 1-4 Family 1,083,112
76,215
337,860
11,569
326,291
669,037
370,497
298,540
Auto 276,572
2,188
—
—
—
274,384
135,387
138,997
HELOC 535,446
39,610
493,368
46,379
446,989
2,468
2,025
443
Consumer and all other 587,091
54,890
70,097
11,524
58,573
462,104
193,576
268,528
Total loans held for investment $ 6,898,729
$ 1,129,376
$ 2,273,401
$ 619,704
$ 1,653,697
$ 3,495,952
$ 2,208,378
$ 1,287,574

Variable Rate

Fixed Rate

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

Construction and Land Development

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

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

3,968,085

411,939

2,241,470

1,061,768

1,179,645

1,314,676

979,612

326,975

8,089

Multifamily Real Estate

822,006

93,834

515,676

155,298

360,378

—

212,496

159,270

53,226

—

Commercial & Industrial

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

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

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

589,791

25,268

471,868

26,150

124,296

321,422

92,655

5,017

32,105

55,533

Auto

600,658

3,384

—

597,274

238,922

358,352

—

Consumer

145,090

12,446

19,948

17,552

2,086

310

112,696

54,087

40,123

18,486

Other Commercial

742,444

19,813

102,824

14,672

64,029

24,123

619,807

224,507

276,433

118,867

Total LHFI

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. The Company is focused on providing community-based financial services and discourages the origination of portfolio loans outside of its principal trade areas. As reflected in the loan table, at September 30, 2017, the largest components of the Company’s loan portfolio consisted of seeks to mitigate risks attributable to our most highly concentrated portfolios—commercial real estate, ~~loans, residential 1-4 family loans,~~commercial and industrial, and construction and land ~~development loans. The risks attributable to these concentrations are mitigated by the Company’s~~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. ~~UMG primarily serves~~

-68-

Table of Contents

Asset Quality

Overview

At March 31, 2023, NPAs as a ~~secondary mortgage banking operation, selling~~percentage of LHFI increased 1 basis point from the ~~majority~~prior quarter to 0.20% and included nonaccrual LHFI of ~~its loan production~~$29.1 million. Net charge-offs were $4.6 million for the three months ended March 31, 2023, compared to insignificant net charge offs for the same period in the ~~secondary market or selling loans to meet the Bank’s current asset/liability management needs.~~

~~Asset Quality~~

~~Overview~~

~~At September 30, 2017, the Company had higher levels of NPAs compared to~~prior year. The ACL at March 31, 2023 increased $7.3 million from December 31, ~~2016 and September 30, 2016,~~2022 to $131.7 million, due to increasing uncertainty in the increase in nonaccrual loan levels, primarily related to three unrelated credit relationships that were classified as nonaccrual during the first and second quarters of 2017. Partially offsetting this increase, OREO balances declined compared to the same periods. The Company experienced increases in past due loan levels compared to December 31, 2016 and September 30, 2016 due to performing loans not being renewed prior to quarter end. As the Company's NPAs and past due loan

levels have been at historic lows over the last several quarters, certain changes from quarter to quarter might stand out in comparison to one another but have an insignificant impact on the Company's overall asset quality position.

Net charge-offs increased for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, as some of the nonaccrual additions earlier in 2017 were charged off during the third quarter of 2017. The provision for loan losses also increased for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, as a result of the increased charge-offseconomic outlook and loan growth during ~~2017.~~ the first quarter of 2023.

The ~~allowance for~~Company continues to experience historically low levels of NPAs, however, the economic environment in the Company’s footprint could be impacted as persistent inflation, higher interest rates, and the threat of 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 ~~losses at September 30, 2017 was consistent~~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 ~~December 31, 2016.~~

~~All~~initial teaser rates, which are all considered higher risk instruments.

During the first quarter of 2023, the Company transferred a nonaccrual ~~and past due~~commercial real estate loan, ~~metrics discussed below exclude PCI~~totaling $7.1 million, from LHFI to LHFS, resulting in nonaccrual loans totaling ~~$51.0~~$36.2 million ~~(net of fair value mark of $11.7 million)~~ at ~~September 30, 2017.~~

~~Troubled Debt Restructurings~~

March 31, 2023. The ~~total recorded investment in TDRs as of September 30, 2017 was $19.2~~below amounts exclude LHFS.

Nonperforming Assets

At March 31, 2023, NPAs totaled $29.1 million, an increase of ~~$3.8~~$2.0 million or 24.9%, from $15.4 million at December 31, 2016 and an increase of $5.9 million, or 45.0%, from $13.3 million at September 30, 2016. Of the $19.2 million of TDRs at September 30, 2017, $16.5 million, or 85.8%, were considered performing while the remaining $2.7 million were considered nonperforming.

Loans removed from TDR status represent restructured loans with a market rate of interest at the time of the restructuring. These loans have performed in accordance with their modified terms for twelve consecutive months and were no longer considered impaired. Loans removed from TDR status are collectively evaluated for impairment; due to the significant improvement in the expected future cash flows, these loans are grouped based on their primary risk characteristics, which is included in the Company's general reserve. Impairment is measured based on historical loss experience taking into consideration environmental factors. The significant majority of these loans have been subject to new credit decisions due to the improvement in the expected future cash flows, the financial condition of the borrower, and other factors considered during re-underwriting. The TDR activity during the quarter did not have a material impact on the Company’s allowance for loan losses, financial condition, or results of operations.

~~Nonperforming Assets~~

~~At September 30, 2017, NPAs totaled $28.9 million, an increase of $8.8 million, or 44.0%,~~7.4% from December 31, ~~2016 and an increase of $5.6 million, or 24.2%, from September 30, 2016. In addition,~~2022. NPAs as a percentage of total outstanding ~~loans increased 10 basis points to 0.42%~~LHFI at ~~September 30, 2017~~March 31, 2023 were 0.20%, an increase of 1 bp from ~~0.32% at~~ December 31, ~~2016 and increased 4 basis points from 0.38% at September 30, 2016. These increases are due to the higher levels of nonaccrual loans at September 30, 2017 compared to the prior periods.~~

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,
	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	%

-69-

September 30,
2017

June 30,
2017

March 31,
2017

December 31,
2016

September 30,
2016
Nonaccrual loans, excluding PCI loans $ 20,122
$ 24,574
$ 22,338
$ 9,973
$ 12,677
Foreclosed properties 6,449
6,828
6,951
7,430
7,927
Former bank premises 2,315
2,654
2,654
2,654
2,654
Total nonperforming assets 28,886
34,056
31,943
20,057
23,258
Loans past due 90 days and accruing interest 4,532
3,625
2,323
3,005
3,529
Total nonperforming assets and loans past due 90 days and accruing interest $ 33,418
$ 37,681
$ 34,266
$ 23,062
$ 26,787

Performing TDRs $ 16,519
$ 14,947
$ 14,325
$ 13,967
$ 11,824
PCI loans 51,041
56,167
57,770
59,292
62,346

Balances
Allowance for loan losses $ 37,162
$ 38,214
$ 38,414
$ 37,192
$ 36,542
Average loans, net of deferred fees and costs 6,822,498
6,628,011
6,383,905
6,214,084
6,033,723
Loans, net of deferred fees and costs 6,898,729
6,771,490
6,554,046
6,307,060
6,148,918

Ratios
NPAs to total loans 0.42 % 0.50 % 0.49 % 0.32 % 0.38 %
NPAs & loans 90 days past due to total loans 0.48 % 0.56 % 0.52 % 0.37 % 0.44 %
NPAs to total loans & OREO 0.42 % 0.50 % 0.49 % 0.32 % 0.38 %
NPAs & loans 90 days past due and accruing to total loans & OREO 0.48 % 0.56 % 0.52 % 0.37 % 0.43 %
ALL to nonaccrual loans 184.68 % 155.51 % 171.97 % 372.93 % 288.25 %
ALL to nonaccrual loans & loans 90 days past due and accruing 150.73 % 135.52 % 155.77 % 286.58 % 225.48 %

Table of Contents

NPAs include nonaccrual LHFI, which totaled $29.1 million at ~~September 30, 2017 included $20.1 million in nonaccrual loans,~~March 31, 2023, a net increase of ~~$10.1~~$2.0 million or ~~101.8%,~~7.6% from December 31, ~~2016 and a net increase of $7.4 million, or 58.7%, from September 30, 2016.~~2022. The following table shows the activity in nonaccrual ~~loans~~LHFI for the ~~quarter~~quarters ended (dollars in thousands):

September 30, 2017 June 30, 2017 March 31, 2017 December 31, 2016 September 30, 2016
Beginning Balance $ 24,574
$ 22,338
$ 9,973
$ 12,677
$ 10,861
Net customer payments (4,642 ) (1,498 ) (1,068 ) (1,451 ) (1,645 )
Additions 4,114
5,979
13,557
1,094
4,359
Charge-offs (3,376 ) (2,004 ) (97 ) (1,216 ) (660 )
Loans returning to accruing status —
(134 ) (27 ) (1,039 ) (23 )
Transfers to OREO (548 ) (107 ) —
(92 ) (215 )
Ending Balance $ 20,122
$ 24,574
$ 22,338
$ 9,973
$ 12,677

The majority of nonaccrual additions during 2017 relate to three unrelated credit relationships, comprised of commercial real estate - non-owner occupied loans, commercial & industrial loans, and constructions loans.


	March 31,		December 31,
	2023		2022
Beginning Balance	$	27,038	$	26,500
Net customer payments		(1,755)		(1,805)
Additions		4,151		2,935
Charge-offs		(39)		(461)
Loans returning to accruing status		(313)		(131)
Ending Balance	$	29,082	$	27,038

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


	March 31,			December 31,
	2023			2022
Construction and Land Development	$	363		$	307
Commercial Real Estate - Owner Occupied		6,174			7,178
Commercial Real Estate - Non-owner Occupied		1,481			1,263
Commercial & Industrial		4,815			1,884
Residential 1-4 Family - Commercial		1,907			1,904
Residential 1-4 Family - Consumer		10,540			10,846
Residential 1-4 Family - Revolving		3,449			3,453
Auto		347			200
Consumer		6			3
Total	$	29,082		$	27,038
Coverage Ratio⁽¹⁾		400.63	%		409.68	%

September 30, 2017 June 30, 2017 March 31, 2017 December 31, 2016 September 30, 2016
Construction and Land Development $ 5,671
$ 5,659
$ 6,545
$ 2,037
$ 2,301
Commercial Real Estate - Owner Occupied 2,205
1,279
1,298
794
1,609
Commercial Real Estate - Non-owner Occupied 2,701
4,765
2,798
—
—
Commercial & Industrial 1,252
4,281
3,245
124
1,344
Residential 1-4 Family 6,163
6,128
5,856
5,279
5,279
Auto 174
270
393
169
231
HELOC 1,791
2,059
1,902
1,279
1,464
Consumer and all other 165
133
301
291
449
Total $ 20,122
$ 24,574
$ 22,338
$ 9,973
$ 12,677

NPAs at September 30, 2017 also included $8.8 million in OREO, a decline of $1.3 million, or 13.1%, from December 31, 2016 and a decline of $1.8 million, or 17.2%, from September 30, 2016. The following table shows

⁽¹⁾Represents the ~~activity in OREO for the quarters ended (dollars in thousands):~~

September 30, 2017 June 30, 2017 March 31, 2017 December 31, 2016 September 30, 2016
Beginning Balance $ 9,482
$ 9,605
$ 10,084
$ 10,581
$ 13,381
Additions of foreclosed property 621
132
—
859
246
Valuation adjustments (588 ) (19 ) (238 ) (138 ) (479 )
Proceeds from sales (648 ) (272 ) (277 ) (1,282 ) (2,844 )
Gains (losses) from sales (103 ) 36
36
64
277
Ending Balance $ 8,764
$ 9,482
$ 9,605
$ 10,084
$ 10,581

~~The following table presents the composition of the OREO portfolio at the quarter ended (dollars in thousands):~~

September 30, 2017 June 30, 2017 March 31, 2017 December 31, 2016 September 30, 2016
Land $ 2,755
$ 3,205
$ 3,328
$ 3,328
$ 3,440
Land Development 1,993
2,050
2,111
2,379
2,320
Residential Real Estate 1,562
1,399
1,338
1,549
1,806
Commercial Real Estate 139
174
174
174
361
Former Bank Premises ⁽¹⁾
2,315
2,654
2,654
2,654
2,654
Total $ 8,764
$ 9,482
$ 9,605
$ 10,084
$ 10,581

~~(1)Includes closed branch property and land previously held for branch sites.~~

ALLL divided by nonaccrual loans.

Past Due Loans

At ~~September 30, 2017, total accruing~~March 31, 2023 past due ~~loans were $34.3~~LHFI still accruing interest totaled $30.9 million or ~~0.50%~~0.21% of total ~~loans,~~LHFI, compared to ~~$27.9~~$30.0 million or ~~0.44%~~0.21% of total ~~loans,~~LHFI at December 31, ~~2016 and $26.9 million, or 0.44% of total loans, at September 30, 2016.~~2022. Of the total past due ~~loans~~LHFI still accruing interest, ~~at September 30, 2017, $4.5~~$7.2 million or ~~0.07%~~0.05% of total LHFI were loans ~~were~~ past due 90 days or more at March 31, 2023, compared to ~~$3.0~~$7.5 million or 0.05% of total ~~loans,~~LHFI at December 31, ~~2016~~2022.

Troubled Loan Modifications

The Company adopted ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and ~~$3.5~~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 December 31, 2022 was $14.2 million. Of the $14.2 million of TDRs at December 31, 2022, $9.3 million or ~~0.06% of total loans, at September 30, 2016. As~~65.3% were considered performing, while the Company's past due loan levels have been at historic lows over the last several quarters, certain changes from quarter to quarter might stand out in comparison to one another but have an insignificant impact on the Company's overall asset quality position.

remaining $4.9 million were considered nonperforming.

Net Charge-offs

For the first quarter ~~ended September 30, 2017,~~of 2023, net charge-offs were ~~$4.1~~$4.6 million or ~~0.24%~~0.13% of total average ~~loans~~LHFI on an annualized basis, compared to ~~$929,000, or 0.06%,~~net charge-offs of less than 0.01% for the same quarter ~~ended September 30, 2016. Of the~~last year. The majority of net charge-offs in the ~~third~~first quarter of ~~2017,~~2023 related to two commercial loans within the ~~majority were previously considered impaired. For~~commercial and industrial and commercial real estate portfolios.

Provision for Credit Losses

The Company recorded a provision for credit losses of $11.9 million for the ~~nine months ended September 30, 2017, net charge-offs were $7.4~~first quarter of 2023, an increase of $9.1 million ~~or 0.15% of total average loans on annualized basis,~~ compared to ~~$4.7~~the provision for credit losses of $2.8 million ~~or 0.11%, for~~recorded during the same ~~period in 2016. Of the net charge-offs during 2017, the majority were previously considered impaired.~~

~~Provision for Loan Losses~~

quarter of 2022. The provision for ~~loan~~credit losses for the first quarter ~~ended September 30, 2017 was $3.1~~of 2023 reflected a provision of $10.4 million ~~an increase of $653,000 compared with the quarter ended September 30, 2016. The provision~~ for loan losses ~~for the nine months ended September 30, 2017 was $7.4~~and a $1.5 million ~~compared to $7.2 million for the nine months ended September 30, 2016. The~~ provision for unfunded commitments. The increased provision for credit losses is due to increasing uncertainty in the economic outlook and loan ~~losses increased~~growth in the first ~~nine~~three months of ~~2017 compared to the same period in 2016, primarily driven by higher loan balances and higher charge-off levels.~~

2023.

Allowance for ~~Loan~~Credit Losses

At ~~both September 30, 2017~~March 31, 2023, the ACL was $131.7 million and included an ALLL of $116.5 million and a reserve for unfunded commitments of $15.2 million. The ACL at March 31, 2023 increased $7.3 million from December 31, ~~2016,~~2022, due to increasing uncertainty in the allowance for loan losses was $37.2 million. The current level of the allowance for loan losses reflects specific reserves related to nonperforming loans, current risk ratings on loans, net charge-off activity,economic outlook and loan growth ~~delinquency trends, and other credit risk factors that~~during the ~~Company considers important in assessing the adequacy~~first quarter of ~~the allowance for loan losses.~~ 2023.

The ~~allowance for loan losses~~ACL as a percentage of ~~the total loan portfolio was 0.54%~~LHFI increased to 0.90% at ~~September 30, 2017~~March 31, 2023, compared to ~~0.59%~~0.86% at ~~both~~ December 31, ~~2016 and September 30, 2016. The decline is primarily related to lower specific reserves as well as declining historical loss factors.~~

2022.

The following table summarizes ~~activity in~~ the ~~allowance for loan losses~~ACL during the quarters ended (dollars in thousands):


	March 31,			December 31,
	2023			2022
Total ALLL	$	116,512		$	110,768
Total Reserve for Unfunded Commitments		15,199			13,675
Total ACL	$	131,711		$	124,443

ALLL to total LHFI		0.80	%		0.77	%
ACL to total LHFI		0.90	%		0.86	%

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September 30, 2017 June 30, 2017 March 31, 2017 December 31, 2016 September 30, 2016
Balance, beginning of period $ 38,214
$ 38,414
$ 37,192
$ 36,542
$ 35,074
Loans charged-off:
Commercial 684
316
241
620
16
Real estate 3,049
1,595
374
469
929
Consumer 1,256
1,416
1,018
738
518
Total loans charged-off 4,989
3,327
1,633
1,827
1,463
Recoveries:
Commercial 189
123
139
61
67
Real estate 272
306
273
806
303
Consumer 426
398
433
136
164
Total recoveries 887
827
845
1,003
534
Net charge-offs 4,102
2,500
788
824
929
Provision for loan losses 3,050
2,300
2,010
1,474
2,397
Balance, end of period $ 37,162
$ 38,214
$ 38,414
$ 37,192
$ 36,542

ALL to loans 0.54 % 0.56 % 0.59 % 0.59 % 0.59 %
Net charge-offs to average loans 0.24 % 0.15 % 0.05 % 0.05 % 0.06 %
Provision to average loans 0.18 % 0.14 % 0.13 % 0.09 % 0.16 %

The following table ~~shows both an allocation~~summarizes net-charge off activity by loan segment for the periods indicated (dollars in thousands):


	Three months ended,									Three months ended,
	March 31, 2023									March 31, 2022
	Commercial			Consumer			Total			Commercial			Consumer			Total
Loans charged-off	$	(5,007)		$	(719)		$	(5,726)		$	(759)		$	(750)		$	(1,509)
Recoveries		515			652			1,167			726			787			1,513
Net (charge-offs) recoveries	$	(4,492)		$	(67)		$	(4,559)		$	(33)		$	37		$	4
Net charge-offs to average loans⁽¹⁾		0.15	%		0.01	%		0.13	%		0.00	%		(0.01)	%		0.00	%

⁽¹⁾Annualized

The following table summarizes the ACL activity by loan segment and the percentage of the ~~allowance for loan losses among loan categories based upon the loan portfolio’s composition and the ratio of~~LHFI portfolio that the related ~~outstanding loan balances to total loans~~ACL covers as of the quarters ended (dollars in thousands):



	March 31, 2023									December 31, 2022
	Commercial			Consumer			Total			Commercial			Consumer			Total
ACL	$	102,336		$	29,375		$	131,711		$	95,527		$	28,916		$	124,443
Loan %⁽¹⁾		84.2	%		15.8	%		100.0	%		84.3	%		15.7	%		100.0	%
ACL to total LHFI		0.83	%		1.27	%		0.90	%		0.78	%		1.27	%		0.86	%

September 30,
2017

June 30,
2017

March 31,
2017

December 31,
2016

September 30,
2016
$
% ⁽¹⁾
$
% ⁽¹⁾
$
% ⁽¹⁾
$
% ⁽¹⁾
$
% ⁽¹⁾
Commercial $ 5,363
8.0 % $ 5,614
8.4 % $ 5,279
8.8 % $ 4,627
8.7 % $ 5,403
8.3 %
Real estate 27,518
79.5 % 28,450
79.1 % 29,356
79.6 % 29,441
80.3 % 28,064
81.0 %
Consumer 4,281
12.5 % 4,150
12.5 % 3,779
11.6 % 3,124
11.0 % 3,075
10.7 %
Total $ 37,162
100.0 % $ 38,414
100.0 % $ 38,414
100.0 % $ 37,192
100.0 % $ 36,542
100.0 %

⁽¹⁾The ~~percent~~percentage represents the loan balance divided by total 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 three months of 2023.

Deposits

As of ~~September 30, 2017,~~March 31, 2023, total deposits were ~~$6.9~~$16.5 billion, an increase of ~~$502.3~~$524.2 million or ~~10.5% (annualized),~~13.3% annualized from December 31, ~~2016.~~2022. Total interest-bearing deposits consist of ~~NOW,~~Interest checking accounts, money market, savings, and time deposit account balances. Total time deposit balances of ~~$1.3~~$2.2 billion accounted for ~~24.7%~~18.4% of total interest-bearing deposits at ~~September 30, 2017.~~

March 31, 2023, compared to $1.8 billion and 16.4% at December 31, 2022.

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


	March 31, 2023				December 31, 2022
			% of total				% of total
Deposits:	Amount		deposits		Amount		deposits
Interest checking accounts	$	4,714,366	28.6	%	$	4,186,505	26.3	%
Money market accounts		3,547,514	21.6	%		3,922,533	24.6	%
Savings accounts		1,047,914	6.4	%		1,130,899	7.1	%
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⁾	$	16,455,910	100.0	%	$	15,931,677	100.0	%

September 30, 2017 December 31, 2016
Deposits: Amount
% of total
deposits
Amount
% of total
deposits
Non-interest bearing $ 1,535,149
22.3 % $ 1,393,625
21.8 %
NOW accounts 1,851,327
26.9 % 1,765,956
27.7 %
Money market accounts 1,621,443
23.6 % 1,435,591
22.5 %
Savings accounts 553,082
8.0 % 591,742
9.3 %
Time deposits of $100,000 and over 621,070
9.0 % 530,275
8.3 %
Other time deposits 699,755
10.2 % 662,300
10.4 %
Total Deposits $ 6,881,826
100.0 % $ 6,379,489
100.0 %

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⁽¹⁾ Includes estimated uninsured deposits of $5.5 billion and $6.5 billion as of March 31, 2023 and December 31, 2022, respectively, and collateralized deposits of $924.0 million and $951.9 million as of 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.~~as part of its overall liquidity management strategy. As of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, there were ~~$19.4~~$135.6 million and ~~$0,~~$7.5 million, respectively, purchased certificates of deposit included in certificates of deposit on the Company’s Consolidated Balance Sheets.

Maturities of time deposits in excess of FDIC insurance limits as of ~~September 30, 2017~~March 31, 2023 and December 31, 2022 were as follows (dollars in thousands):

Within 3
Months

3 - 12
Months

Over 12
Months
Total
Maturities of time deposits of $100,000 and over $ 57,493
$ 201,742
$ 361,835
$ 621,070
Maturities of other time deposits 62,724
273,340
363,691

699,755
Total time deposits $ 120,217
$ 475,082
$ 725,526
$ 1,320,825



	March 31, 2023		December 31, 2022
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		36,292		78,268
Total	$	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 ~~stockholders.~~

~~In July 2013, the Federal Reserve issued final rules to include technical changes to its market risk capital rules to align them with~~shareholders.

Under the Basel III ~~regulatory~~ capital ~~framework and meet certain requirements of the Dodd-Frank Act. Effective January 1, 2015, the final~~ rules, ~~require~~ the Company and the Bank tomust comply with the following minimum capital ratios: (i) a ~~new~~ common equity Tier 1 capital ratio of ~~4.5%~~7.0% of risk-weighted assets; (ii) a Tier 1 capital ratio of ~~6.0%~~8.5% of risk-weighted ~~assets (increased from the prior requirement of 4.0%);~~assets; (iii) a total capital ratio of ~~8.0%~~10.5% of risk-weighted ~~assets (unchanged from the prior requirement);~~assets; and (iv) a leverage ratio of 4.0% of total ~~assets (unchanged from~~assets. These ratios, with the ~~prior requirement). These capital requirements will be phased in over~~exception of the leverage ratio, include a four-year period. When fully phased in on January 1, 2019, the rules will require the Company and the Bank to maintain (i) a minimum ratio of common equity Tier 1 to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer” (which is added to the 4.5% common equity Tier 1 ratio as that buffer is phased in, effectively resulting in a minimum ratio of common equity Tier 1 to risk-weighted assets of at least 7.0% upon full implementation), (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the 2.5% capital conservation buffer, (which is added to the 6.0% Tier 1 capital ratio as that buffer is phased in, effectively resulting in a minimum Tier 1 capital ratio of 8.5% upon full implementation), (iii) a minimum ratio of total capital to risk-weighted assets of at least 8.0%, plus the 2.5% capital conservation buffer (which is added to the 8.0% total capital ratio as that buffer is phased in, effectively resulting in a minimum total capital ratio of 10.5% upon full implementation), and (iv) a minimum leverage ratio of 4.0%, calculated as the ratio of Tier 1 capital to average assets.

Beginning January 1, 2016, the capital conservation buffer requirement began to be phased in at 0.625% of risk-weighted assets, and will increase by the same amount each year until fully implemented at 2.5% on January 1, 2019. As of September 30, 2017, the capital conservation buffer was 1.25% of risk-weighted assets. The capital conservation bufferwhich 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 the regulatory capital impact as permitted under the aforementioned interim final rule. The CECL transition amount will be phased out of regulatory capital 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 ~~(dollars~~⁽²⁾(dollars in thousands):


	March 31,	December 31,	March 31,
	2023	2022	2022
Common equity Tier 1 capital	1,690,040	1,684,088	$ 1,557,135
Tier 1 capital	1,856,396	1,850,444	1,723,491
Tier 2 capital	489,827	468,716	454,002
Total risk-based capital	2,346,224	2,319,160	2,177,493
Risk-weighted assets	17,049,045	16,930,559	15,795,239
Capital ratios:
Common equity Tier 1 capital ratio	9.91%	9.95%	9.86%
Tier 1 capital ratio	10.89%	10.93%	10.91%
Total capital ratio	13.76%	13.70%	13.79%
Leverage ratio (Tier 1 capital to average assets)	9.38%	9.42%	9.07%
Capital conservation buffer ratio ⁽¹⁾	4.89%	4.93%	4.91%
Common equity to total assets	11.31%	10.78%	11.79%
Tangible common equity to tangible assets ⁽⁺⁾	6.91%	6.43%	7.21%

September 30,
2017

December 31,
2016

September 30,
2016
Common equity Tier 1 capital $ 734,892
$ 699,728
$ 685,329
Tier 1 capital 825,392
790,228
775,829
Tier 2 capital 186,012
185,917
37,032
Total risk-based capital 1,011,404
976,145
812,861
Risk-weighted assets 7,817,079
7,200,778
7,010,112

Capital ratios:

Common equity Tier 1 capital ratio 9.40 % 9.72 % 9.78 %
Tier 1 capital ratio 10.56 % 10.97 % 11.07 %
Total capital ratio 12.94 % 13.56 % 11.60 %
Leverage ratio (Tier 1 capital to average assets) 9.52 % 9.87 % 9.89 %
Capital conservation buffer ratio ⁽¹⁾
4.56 % 4.97 % 3.60 %
Common equity to total assets 11.53 % 11.88 % 12.12 %
Tangible common equity to tangible assets 8.34 % 8.41 % 8.57 %

⁽¹⁾Calculated by subtracting the regulatory minimum capital ratio requirements from the ~~Company's~~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~~Company’s capital conservation buffer ratio.

⁽²⁾All ratios and amounts at March 31, 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” 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 more information about our off-balance sheet obligations and cash requirements, refer to “Liquidity” within this Item 2.

NON-GAAP FINANCIAL MEASURES

In ~~reporting the results of September 30, 2017,~~this Quarterly Report, the Company has provided supplemental performance measures on a tax-equivalent, tangible, ~~and/~~operating, adjusted or ~~operating~~pre-tax pre-provision basis. These non-GAAP financial measures are a supplement to GAAP, which is used to prepare the ~~Company's~~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~~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) and total revenue (FTE), which isare used in computing net interest margin (FTE), ~~provides~~provide valuable additional insight into the net interest margin 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 ~~Company believes tangible common equity is an important indication~~following table reconciles non-GAAP financial measures from the most directly comparable GAAP financial measures for each of ~~its ability to grow organically and through business combinations as well as its ability to pay dividends and to engage~~the periods presented (dollars in ~~various capital management strategies.~~ thousands):


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

Tangible common equity isand tangible assets are used in the calculation of certain profitability, capital, and per share ratios. ~~These~~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.

~~Operating~~ 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.

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,
	2023			2022			2022
Tangible Assets
Ending Assets (GAAP)	$	20,103,370		$	20,461,138		$	19,782,430
Less: Ending goodwill		925,211			925,211			935,560
Less: Ending amortizable intangibles		24,482			26,761			40,273
Ending tangible assets (non-GAAP)	$	19,153,677		$	19,509,166		$	18,806,597
Tangible Common Equity
Ending Equity (GAAP)	$	2,440,236		$	2,372,737		$	2,498,335
Less: Ending goodwill		925,211			925,211			935,560
Less: Ending amortizable intangibles		24,482			26,761			40,273
Less: Perpetual preferred stock		166,357			166,357			166,357
Ending tangible common equity (non-GAAP)	$	1,324,186		$	1,254,408		$	1,356,145
Average equity (GAAP)	$	2,423,600			2,321,208		$	2,660,984
Less: Average goodwill		925,211			925,211			935,560
Less: Average amortizable intangibles		25,588			27,909			41,743
Less: Average perpetual preferred stock		166,356			166,356			166,356
Average tangible common equity (non-GAAP)	$	1,306,445		$	1,201,732		$	1,517,325
Common equity to total assets (GAAP)		11.31	%		10.78	%		11.79	%
Tangible common equity to tangible assets (non-GAAP)		6.91	%		6.43	%		7.21	%
Book value per common share (GAAP)	$	30.53		$	29.68		$	31.12

Adjusted operating measures exclude ~~merger-related~~the losses on sale of securities, a legal reserve associated with an ongoing regulatory matter previously disclosed, as well as strategic branch closure initiatives and related facility consolidation costs ~~unrelated to the Company’s normal operations. Such costs were only incurred during the second~~(principally composed of real estate, leases, and ~~third quarters of 2017; thus each of these operating measures is equivalent to the corresponding GAAP financial measure for the three~~other assets write downs, as well as severance and ~~nine months ended September 30, 2016.~~expense reduction initiatives). The Company believes these non-GAAP adjusted measures ~~are useful to~~provide investors ~~as they exclude certain costs resulting from acquisition activity and allow investors to more clearly see~~with important information about the ~~combined~~continuing economic results of the ~~organization's~~organization’s operations.

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The following table reconciles ~~these~~ non-GAAP financial measures from ~~their respective U.S.~~the most directly comparable GAAP ~~basis~~financial measures for each of the periods presented (dollars in thousands, except per share amounts):

Three Months Ended
September 30,
Nine Months Ended
September 30,
2017 2016 2017 2016
Interest Income (FTE)
Interest Income (GAAP) $ 84,850
$ 74,433
$ 242,712
$ 217,964
FTE adjustment 2,648
2,427
7,836
7,367
Interest Income FTE (non-GAAP) $ 87,498
$ 76,860
$ 250,548
$ 225,331
Average earning assets $ 8,167,919
$ 7,354,684
$ 7,922,944
$ 7,159,813
Yield on interest-earning assets (GAAP) 4.12 % 4.03 % 4.10 % 4.07 %
Yield on interest-earning assets (FTE) (non-GAAP) 4.25 % 4.16 % 4.23 % 4.20 %
Net Interest Income (FTE)
Net Interest Income (GAAP) $ 71,198
$ 67,028
$ 206,765
$ 196,535
FTE adjustment 2,648
2,427
7,836
7,367
Net Interest Income FTE (non-GAAP) 73,846
69,455
214,601
203,902
Average earning assets $ 8,167,919
$ 7,354,684
$ 7,922,944
$ 7,159,813
Net interest margin (GAAP) 3.46 % 3.63 % 3.49 % 3.67 %
Net interest margin (FTE) (non-GAAP) 3.59 % 3.76 % 3.62 % 3.80 %
Tangible Assets
Ending Assets (GAAP) $ 9,029,436
$ 8,258,230
$ 9,029,436
$ 8,258,230
Less: Ending goodwill 298,191
298,191
298,191
298,191
Less: Ending amortizable intangibles 16,017
22,343
16,017
22,343
Ending tangible assets (non-GAAP) $ 8,715,228
$ 7,937,696
$ 8,715,228
$ 7,937,696
Tangible Common Equity

Ending Equity (GAAP) $ 1,041,371
$ 1,000,964
$ 1,041,371
$ 1,000,964
Less: Ending goodwill 298,191
298,191
298,191
298,191
Less: Ending amortizable intangibles 16,017
22,343
16,017
22,343
Ending tangible common equity (non-GAAP) $ 727,163
$ 680,430
$ 727,163
$ 680,430
Average equity (GAAP) $ 1,037,792
$ 996,668
$ 1,024,853
$ 991,097
Less: Average goodwill 298,191
297,707
298,191
295,380
Less: Average amortizable intangibles 16,681
22,653
18,184
22,249
Average tangible common equity (non-GAAP) $ 722,920
$ 676,308
$ 708,478
$ 673,468
ROE (GAAP) 7.90 % 8.14 % 7.53 % 7.64 %
ROTCE (non-GAAP) 11.34 % 12.00 % 10.90 % 11.25 %
Common equity to assets (GAAP) 11.53 % 12.12 % 11.53 % 12.12 %
Tangible common equity to tangible assets (non-GAAP) 8.34 % 8.57 % 8.34 % 8.57 %

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Operating Measures
Net income (GAAP) $ 20,658
$ 20,401
$ 57,737
$ 56,699
Merger-related costs, net of tax 661
—
3,020
—
Net operating earnings (non-GAAP) $ 21,319
$ 20,401
$ 60,757
$ 56,699

Weighted average common shares outstanding, diluted 43,792,058
43,754,915
43,767,502
43,967,725
Earnings per common share, diluted (GAAP) $ 0.47
$ 0.47
$ 1.32
$ 1.29
Operating earnings per common share, diluted (non-GAAP) $ 0.49
$ 0.47
$ 1.39
$ 1.29

Average assets (GAAP) $ 8,973,964
$ 8,153,951
$ 8,730,815
$ 7,956,841
ROA (GAAP) 0.91 % 1.00 % 0.88 % 0.95 %
Operating ROA (non-GAAP) 0.94 % 1.00 % 0.93 % 0.95 %

Average common equity (GAAP) $ 1,037,792
$ 996,668
$ 1,024,853
$ 991,097
ROE (GAAP) 7.90 % 8.14 % 7.53 % 7.64 %
Operating ROE (non-GAAP) 8.15 % 8.14 % 7.93 % 7.64 %

Average tangible common equity (non-GAAP) $ 722,920
$ 676,308
$ 708,478
$ 673,468
ROTCE (non-GAAP) 11.34 % 12.00 % 10.90 % 11.25 %
Operating ROTCE (non-GAAP) 11.70 % 12.00 % 11.47 % 11.25 %

Noninterest expense (GAAP) $ 57,496
$ 56,913
$ 174,821
$ 166,436
Less: Merger-related costs 732
—
3,476
—
Operating noninterest expense (non-GAAP) $ 56,764
$ 56,913
$ 171,345
$ 166,436

Net interest income (GAAP) $ 71,198
$ 67,028
$ 206,765
$ 196,535
Net interest income (FTE) (non-GAAP) 73,846
69,455
214,601
203,902
Noninterest income (GAAP) 17,536
18,950
54,430
52,857

Efficiency ratio (GAAP) 64.80 % 66.19 % 66.93 % 66.74 %
Efficiency ratio (FTE) (non-GAAP) 62.92 % 64.38 % 64.98 % 64.82 %
Operating efficiency ratio (FTE) (non-GAAP) 62.12 % 64.38 % 63.69 % 64.82 %

Community Bank Segment Operating Measures
Community bank segment net income (GAAP) $ 20,311
$ 19,616
$ 56,836
$ 55,321
Merger-related costs, net of tax 661
—
3,020
—
Community bank segment net operating earnings (non-GAAP) $ 20,972
$ 19,616
$ 59,856
$ 55,321

Weighted average common shares outstanding, diluted 43,792,058
43,754,915
43,767,502
43,967,725
Earnings per common share, diluted (GAAP) $ 0.46
$ 0.45
$ 1.30
$ 1.26
Operating earnings per common share, diluted (non-GAAP) $ 0.48
$ 0.45
$ 1.37
$ 1.26

Community bank segment noninterest expense (GAAP) $ 55,133
$ 54,353
$ 167,643
$ 158,964
Less: Merger-related costs 732
—
3,476
—
Community bank segment operating noninterest expense (non-GAAP) $ 54,401
$ 54,353
$ 164,167
$ 158,964


	Three Months Ended
	March 31,
	2023		2022
Adjusted Operating Earnings & EPS
Net income (GAAP)	$	35,653	$	43,690
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)	$	50,189	$	48,041
Less: Dividends on preferred stock		2,967		2,967
Adjusted operating earnings available to common shareholders (non-GAAP)	$	47,222	$	45,074

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

Adjusted operating measures exclude the amortization of intangible assets, losses on sale of 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 these adjusted measures provide investors with important information about the continuing economic results of the organization’s operations. Net interest income (FTE), which is used in computing net interest margin (FTE) provides valuable additional insight into the net interest margin 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 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
	March 31,
	2023		2022
Adjusted Operating Noninterest Expense & Noninterest Income
Noninterest expense (GAAP)	$	108,274	$	105,321
Less: Amortization of intangible assets		2,279		3,039
Less: Legal reserve		5,000		—
Less: Strategic branch closing and facility consolidation costs		—		5,508
Adjusted operating noninterest expense (non-GAAP)	$	100,995	$	96,774
Noninterest income (GAAP)	$	9,628	$	30,153
Plus: Loss on sale of securities		13,400		—
Adjusted operating noninterest income (non-GAAP)	$	23,028	$	30,153

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.~~

~~Interest~~the asset liability committee.

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~~

Earnings Simulation 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. Mortgage loans~~instruments, and ~~mortgage-backed securities~~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. 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.~~rates and futures curves. The analysis assesses the impact on net interest income over a ~~12 month~~12-month time horizon after an immediate increase or “shock” in rates, of 100 ~~basis points~~bps up to 300 basis points. The shock down 200 or 300 basis points analysis is not as meaningful as interest rates across most of the yield curve are near historic lows and cannot decrease another 200 or 300 basis points.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 ~~September 30, 2017~~March 31, 2023, December 31, 2022, and ~~2016 (dollars in thousands):~~

Change In Net Interest Income
September 30,
2017 2016
% $ % $
Change in Yield Curve:

+300 basis points 7.65
23,401
11.25
31,821
+200 basis points 5.24
16,034
7.65
21,636
+100 basis points 2.82
8,634
3.91
11,051
Most likely rate scenario —
—
—
—
-100 basis points (3.21 ) (9,828 ) (3.30 ) (9,338 )
-200 basis points (6.69 ) (20,459 ) (4.66 ) (13,197 )
-300 basis points (7.04 ) (21,528 ) (4.76 ) (13,464 )

~~Asset sensitivity indicates that~~March 31, 2022:


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

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~~and increase in a falling interest rate environment.

From a net interest income ~~would decrease and in a decreasing interest rate environment the Company’s net interest income would increase.~~

~~As of September 30, 2017,~~perspective, the Company was less asset sensitive ~~in a rising interest rate environment scenario when~~as of March 31, 2023, compared to ~~September 30, 2016~~its position as of March 31, 2022. This shift is in part due to the ~~composition~~changing market characteristics of ~~the balance sheet~~certain loan and deposit products and in part due to ~~the market characteristics of certain deposit products.~~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. It should be noted that although net interest income simulation results are presented through the down 300 basis points interest rate environments, the Company does not believe the down 200 and 300 basis point scenarios are plausible given the current level of interest rates.

~~ECONOMIC VALUE SIMULATION~~

deposits.

Economic Value 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.

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 ~~September 30, 2017~~March 31, 2023, December 31, 2022, and ~~2016 (dollars in thousands):~~

Change In Economic Value of Equity
September 30,
2017 2016
% $ % $
Change in Yield Curve:

+300 basis points (1.11 ) (16,200 ) 2.67
35,364
+200 basis points (0.05 ) (800 ) 2.65
35,109
+100 basis points 0.41
5,960
1.85
24,533
Most likely rate scenario —
—
—
—
-100 basis points (2.72 ) (39,795 ) (4.68 ) (61,889 )
-200 basis points (8.27 ) (120,822 ) (8.92 ) (117,988 )
-300 basis points (9.58 ) (139,886 ) (5.86 ) (77,480 )

March 31, 2022:


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

As of ~~September 30, 2017,~~March 31, 2023, the ~~Company was~~Company’s economic value of equity is generally less asset sensitive ~~to market~~in a rising interest rate ~~fluctuations in the shock down 100, shock down 200 and shock up 100, 200, and 300 basis points scenarios when~~environment compared to ~~September 30, 2016. The Company believes that~~its position as of March 31, 2022 primarily due to the ~~shock down 200 or 300 basis points analyses are not as meaningful since interest rates across most~~composition of the ~~yield curve are near historic lows~~Consolidated Balance Sheets and ~~are not likely~~due in part to ~~decrease another 200 or 300 basis points. While management considers this scenario highly unlikely,~~ the ~~natural floor increases the Company's sensitivity in rates down scenarios.~~

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, 2023. The ~~Company maintains~~term “disclosure controls and procedures,” as ~~such term is~~ 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, 2023, the Company’s disclosure controls and procedures were effective at the reasonable assurance level.

In designing and evaluating ~~its~~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.

~~Based on their evaluation as of the end of the period covered by this quarterly report on Form 10-Q, the Company’s Chief Executive Officer and Chief~~

Changes in Internal Control Over Financial ~~Officer have concluded that the disclosure controls and procedures were effective at the reasonable assurance level.~~

~~There was no change in~~Reporting

Management has taken measures to maintain the internal control over financial reporting ~~that occurred~~(as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended ~~September 30, 2017~~March 31, 2023. There have been no changes during the quarter ended March 31, 2023 that ~~has~~have materially affected, or isare reasonably likely to materially affect, the internal control over financial reporting.

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PART II –- OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

~~Pending Merger were completed, costs and attorneys’ fees. On November 6, 2017, Mr. Parshall filed a notice of voluntary dismissal, terminating the Parshall Lawsuit without prejudice.~~

In ~~addition to the Rowe Lawsuit, in~~ the ordinary course of ~~its~~our operations, ~~the Company and its subsidiaries~~we are ~~parties~~party to various ~~other~~ legal proceedings. Based on the information presently available, and after consultation with legal counsel, management believes that the ultimate outcome in such ~~other legal~~ 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, 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 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

~~There~~

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

An investment in the ~~fiscal year ended December 31, 2016~~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 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 ~~Company's Quarterly Report~~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 ~~Form 10-Q for the quarter ended June 30, 2017.~~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.~~

None

(b) Use of Proceeds – Not Applicable.

Stock Repurchase Program; Other Repurchases

On December 10, 2021, our Board of Directors authorized a share repurchase program to purchase up to $100.0 million of 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 permitted management to repurchase shares of our common stock from time to time at management’s discretion. The repurchase program did not obligate 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.

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


Period	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, 2023	1,101	36.33	—	—
February 1 - February 28, 2023	54,279	37.87	—	—
March 1 - March 31, 2023	576	35.16	—	—
Total	55,956	37.81	—

^{_________________________________________}

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

ITEM 6 – EXHIBITS

The following exhibits are filed as part of this ~~Form 10-Q~~Quarterly Report and this list includes the Exhibit Index:



~~Exhibit No.~~		~~Description~~
~~2.01~~		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).
Exhibit No.		Description
~~3.01~~
3.1		Amended and Restated Articles of Incorporation of Atlantic Union Bankshares Corporation, ~~as amended April 25, 2014~~effective May 7, 2020 (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on ~~April 29, 2014)~~May 7, 2020).

~~3.02~~ 3.1.1		~~Bylaws~~Articles of ~~Union Bankshares Corporation, as amended January 21, 2017~~Amendment designating the 6.875% Perpetual Non-Cumulative Preferred Stock, Series A, effective June 9, 2020 (incorporated by reference to Exhibit ~~3.02~~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 ~~28, 2017)~~25, 2020).

~~10.24~~ 10.1		Amended and Restated Virginia Bankers Association Deferred Compensation Plan for Directors and Executives of Atlantic Union Bankshares Corporation, ~~Executive Severance Plan (as amended and~~as restated effective January 1, ~~2018)~~2023.

10.2		Adoption Agreement for the Restated Virginia Bankers Association Nonqualified Supplemental Deferred Compensation Plan of Atlantic Union Bankshares Corporation (for Directors and Executives), effective January 1, 2023.

10.3		Form of Performance Share Unit Agreement under Atlantic Union Bankshares Corporation Stock and Incentive Plan (for awards on or after February 23, 2023) (incorporated by reference to Exhibit ~~10.24~~10.23 to ~~Current~~Annual Report on Form ~~8-K~~10-K filed ~~September 26, 2017)~~on February 24, 2023).

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10.4
~~10.32~~		~~Severance Agreement and Release of Claims, dated October 24, 2017, by and between Union Bankshares Corporation, Union Bank & Trust and Elizabeth M. Bentley~~Management Incentive Plan (incorporated by reference to Exhibit ~~10.32~~10.11 to ~~Current~~Annual Report on Form ~~8-K~~ 10-K filed ~~October~~on February 24, ~~2017)~~2023).

~~15.01~~ 15.1		Letter regarding unaudited interim financial information.

~~31.01~~ 31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

~~31.02~~ 31.2		Certification of Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

~~32.01~~ 32.1		Certification of Principal Executive Officer and Principal Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~101.00~~ 101		Interactive data files formatted in Inline eXtensible Business Reporting Language for the quarter ended ~~September 30, 2017~~March 31, 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 ~~the~~ Consolidated Financial Statements (unaudited).

104		The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 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: ~~November 7, 2017~~May 4, 2023	By:	/s/ John C. Asbury
		John C. Asbury,
		President and Chief Executive Officer
		(principal executive officer)

Date: ~~November 7, 2017~~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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~~-76-~~



¨ For the Quarterly Period Ended March 31, 2023

OR

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


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



Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $1.33 per share	AUB	The 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	AUB.PRA	The New York Stock Exchange



Large accelerated filer	x ☒	Accelerated filer	¨ ☐
Non-accelerated filer	¨ ☐	~~(Do not check if a smaller reporting company)~~
		Smaller reporting company	¨ ☐
		Emerging growth company	¨ ☐



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



	September 30, 2017		December 31, 2016
	(Unaudited)		(Audited)
ASSETS
Cash and cash equivalents:
Cash and due from banks	$	115,776	$	120,758
Interest-bearing deposits in other banks	60,294		58,030
Federal funds sold	891		449
Total cash and cash equivalents	176,961		179,237
Securities available for sale, at fair value	968,361		946,764
Securities held to maturity, at carrying value	204,801		201,526
Restricted stock, at cost	68,441		60,782
Loans held for sale, at fair value	30,896		36,487
Loans held for investment, net of deferred fees and costs	6,898,729		6,307,060
Less allowance for loan losses	37,162		37,192
Net loans held for investment	6,861,567		6,269,868
Premises and equipment, net	120,808		122,027
Other real estate owned, net of valuation allowance	8,764		10,084
Goodwill	298,191		298,191
Amortizable intangibles, net	16,017		20,602
Bank owned life insurance	181,451		179,318
Other assets	93,178		101,907
Total assets	$	9,029,436	$	8,426,793
LIABILITIES
Noninterest-bearing demand deposits	$	1,535,149	$	1,393,625
Interest-bearing deposits	5,346,677		4,985,864
Total deposits	6,881,826		6,379,489
Securities sold under agreements to repurchase	43,337		59,281
Other short-term borrowings	574,000		517,500
Long-term borrowings	434,750		413,308
Other liabilities	54,152		56,183
Total liabilities	7,988,065		7,425,761
Commitments and contingencies (Note 6)
STOCKHOLDERS' EQUITY
Common stock, $1.33 par value, shares authorized 100,000,000; issued and outstanding, 43,729,229 shares and 43,609,317 shares, respectively.	57,708		57,506
Additional paid-in capital	608,884		605,397
Retained earnings	373,468		341,938
Accumulated other comprehensive income	1,311		(3,809		)
Total stockholders' equity	1,041,371		1,001,032
Total liabilities and stockholders' equity	$	9,029,436	$	8,426,793



	Three Months Ended				Nine Months Ended
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016
Interest and dividend income:
Interest and fees on loans	$	75,948	$	66,190	$	216,644	$	193,884
Interest on deposits in other banks	181		65		367		178
Interest and dividends on securities:
Taxable	5,175		4,732		15,081		13,558
Nontaxable	3,546		3,446		10,620		10,344
Total interest and dividend income	84,850		74,433		242,712		217,964

Interest expense:
Interest on deposits	7,234		4,552		18,410		12,945
Interest on short-term borrowings	1,871		765		4,221		2,098
Interest on long-term borrowings	4,547		2,088		13,316		6,386
Total interest expense	13,652		7,405		35,947		21,429

Net interest income	71,198		67,028		206,765		196,535
Provision for credit losses	3,050		2,472		7,345		7,376
Net interest income after provision for credit losses	68,148		64,556		199,420		189,159

Noninterest income:
Service charges on deposit accounts	5,153		4,965		14,945		14,454
Other service charges and fees	4,529		4,397		13,575		12,971
Fiduciary and asset management fees	2,794		2,844		8,313		7,315
Mortgage banking income, net	2,305		3,207		7,123		8,324
Gains on securities transactions, net	184		—		782		145
Bank owned life insurance income	1,377		1,389		4,837		4,122
Loan-related interest rate swap fees	416		1,303		2,627		3,056
Other operating income	778		845		2,228		2,470
Total noninterest income	17,536		18,950		54,430		52,857

Noninterest expenses:
Salaries and benefits	29,769		30,493		92,499		87,061
Occupancy expenses	4,939		4,841		14,560		14,627
Furniture and equipment expenses	2,559		2,635		7,882		7,867
Printing, postage, and supplies	1,154		1,147		3,710		3,566
Communications expense	798		948		2,580		2,964
Technology and data processing	4,232		3,917		12,059		11,340
Professional services	1,985		1,895		5,734		6,432
Marketing and advertising expense	1,944		1,975		5,963		5,838
FDIC assessment premiums and other insurance	1,141		1,262		2,793		4,003
Other taxes	2,022		639		6,065		3,864
Loan-related expenses	1,349		1,531		3,959		3,638
OREO and credit-related expenses	1,139		503		2,023		1,965
Amortization of intangible assets	1,480		1,843		4,661		5,468
Training and other personnel costs	887		863		2,900		2,512
Merger-related costs	732		—		3,476		—
Other expenses	1,366		2,421		3,957		5,291
Total noninterest expenses	57,496		56,913		174,821		166,436

Income before income taxes	28,188		26,593		79,029		75,580
Income tax expense	7,530		6,192		21,292		18,881
Net income	$	20,658	$	20,401	$	57,737	$	56,699
Basic earnings per common share	$	0.47	$	0.47	$	1.32	$	1.29
Diluted earnings per common share	$	0.47	$	0.47	$	1.32	$	1.29
Dividends declared per common share	$	0.20	$	0.19	$	0.60	$	0.57
Basic weighted average number of common shares outstanding	43,706,635		43,565,937		43,685,045		43,853,548
Diluted weighted average number of common shares outstanding	43,792,058		43,754,915		43,767,502		43,967,725



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016

Net income	$	20,658		$	20,401		$	57,737		$	56,699
Other comprehensive income (loss):
Cash flow hedges:
Change in fair value of cash flow hedges	41			(78		)	(766		)	(3,766		)
Reclassification adjustment for losses (gains) included in net income (net of tax, $102 and $83 for the three months and $370 and $233 for the nine months ended September 30, 2017 and 2016, respectively)	189			154			688			433
AFS securities:
Unrealized holding gains (losses) arising during period (net of tax, $1,470 and $604 for the three months and $3,195 and $4,227 for the nine months ended September 30, 2017 and 2016, respectively)	(2,729		)	1,121			5,935			7,851
Reclassification adjustment for losses (gains) included in net income (net of tax, $64 and $0 for the three months and $274 and $51 for the nine months ended September 30, 2017 and 2016, respectively)	(119		)	—			(508		)	(95		)
HTM securities:
Reclassification adjustment for accretion of unrealized gain on AFS securities transferred to HTM (net of tax, $88 and $128 for the three months and $273 and $439 for the nine months ended September 30, 2017 and 2016, respectively)	(163		)	(237		)	(507		)	(816		)
Bank owned life insurance:
Reclassification adjustment for losses included in net income	84			—			278			—
Other comprehensive income (loss)	(2,697		)	960			5,120			3,607
Comprehensive income	$	17,961		$	21,361		$	62,857		$	60,306



	Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total

Balance - December 31, 2015	$	59,159		$	631,822		$	298,134		$	6,252		$	995,367
Net income - 2016							56,699						56,699
Other comprehensive income (net of taxes of $3,970)										3,607			3,607
Issuance of common stock in regard to acquisition (17,232 shares)	23			430									453
Dividends on common stock ($0.57 per share)							(24,957		)				(24,957		)
Stock purchased under stock repurchase plan (1,411,131 shares)	(1,876		)	(31,300		)							(33,176		)
Issuance of common stock under Equity Compensation Plans (54,044 shares)	72			681									753
Issuance of common stock for services rendered (14,576 shares)	19			360									379
Vesting of restricted stock, net of shares held for taxes, under Equity Compensation Plans (35,515 shares)	47			(492		)							(445		)
Stock-based compensation expense				2,284									2,284
Balance - September 30, 2016	$	57,444		$	603,785		$	329,876		$	9,859		$	1,000,964

Balance - December 31, 2016	$	57,506		$	605,397		$	341,938		$	(3,809	)	$	1,001,032
Net income - 2017							57,737						57,737
Other comprehensive income (net of taxes of $3,018)										5,120			5,120
Dividends on common stock ($0.60 per share)							(26,207		)				(26,207		)
Issuance of common stock under Equity Compensation Plans (58,421 shares)	78			891									969
Issuance of common stock for services rendered (16,529 shares)	22			539									561
Vesting of restricted stock, net of shares held for taxes, under Equity Compensation Plans (76,505 shares)	102			(1,415		)							(1,313		)
Stock-based compensation expense				3,472									3,472
Balance - September 30, 2017	$	57,708		$	608,884		$	373,468		$	1,311		$	1,041,371



	2017			2016
Operating activities:
Net income	$	57,737		$	56,699
Adjustments to reconcile net income to net cash and cash equivalents provided by (used in) operating activities:
Depreciation of premises and equipment	8,307			7,617
Writedown of OREO	845			879
Amortization, net	10,500			10,241
Amortization (accretion) related to acquisition, net	(158		)	1,400
Provision for credit losses	7,345			7,376
Gains on securities transactions, net	(782		)	(145		)
BOLI income	(3,999		)	(4,122		)
Decrease (increase) in loans held for sale, net	5,591			(10,784		)
Losses (gains) on sales of other real estate owned, net	32			(278		)
Losses on sales of premises, net	51			97
Stock-based compensation expenses	3,472			2,284
Issuance of common stock for services	561			379
Net decrease (increase) in other assets	4,952			(11,169		)
Net increase in other liabilities	909			11,192
Net cash and cash equivalents provided by (used in) operating activities	95,363			71,666
Investing activities:
Purchases of securities available for sale and restricted stock	(205,965		)	(159,863		)
Purchases of securities held to maturity	(7,836		)	—
Proceeds from sales of securities available for sale and restricted stock	91,911			18,272
Proceeds from maturities, calls and paydowns of securities available for sale	88,675			83,942
Proceeds from maturities, calls and paydowns of securities held to maturity	818			1,841
Net increase in loans held for investment	(594,967		)	(479,346		)
Net increase in premises and equipment	(7,139		)	(5,102		)
Proceeds from BOLI settlements	2,497			—
Proceeds from sales of other real estate owned	1,028			4,982
Cash paid in acquisition	—			(4,077		)
Cash acquired in acquisitions	—			207
Net cash and cash equivalents provided by (used in) investing activities	(630,978		)	(539,144		)
Financing activities:
Net increase in noninterest-bearing deposits	141,524			69,331
Net increase in interest-bearing deposits	360,813			225,239
Net increase in short-term borrowings	40,556			276,748
Cash paid for contingent consideration	(3,003		)	—
Proceeds from issuance of long-term debt	20,000			—
Repayments of long-term debt	—			(32,500		)
Cash dividends paid - common stock	(26,207		)	(24,957		)
Repurchase of common stock	—			(33,176		)
Issuance of common stock	969			753
Vesting of restricted stock, net of shares held for taxes	(1,313		)	(445		)
Net cash and cash equivalents provided by (used in) financing activities	533,339			480,993
Increase (decrease) in cash and cash equivalents	(2,276		)	13,515
Cash and cash equivalents at beginning of the period	179,237			142,660
Cash and cash equivalents at end of the period	$	176,961		$	156,175
Supplemental Disclosure of Cash Flow Information
Cash payments for:
Interest	$	33,947		$	21,812
Income taxes	19,600			19,800
Supplemental schedule of noncash investing and financing activities
Transfers between loans and other real estate owned	$	585		$	865
Issuance of common stock in exchange for net assets in acquisition	—			453



	Amortized		Gross Unrealized					Estimated
	Cost		Gains		(Losses)			Fair Value
September 30, 2017
Obligations of states and political subdivisions	$	285,921	$	7,582	$	(1,304	)	$	292,199
Corporate bonds	114,997		1,241		(816		)	115,422
Mortgage-backed securities	546,038		4,119		(3,253		)	546,904
Other securities	13,890		—		(54		)	13,836
Total available for sale securities	$	960,846	$	12,942	$	(5,427	)	$	968,361

December 31, 2016
Obligations of states and political subdivisions	$	274,007	$	4,962	$	(3,079	)	$	275,890
Corporate bonds	123,674		892		(2,786		)	121,780
Mortgage-backed securities	536,031		4,626		(5,371		)	535,286
Other securities	13,885		—		(77		)	13,808
Total available for sale securities	$	947,597	$	10,480	$	(11,313	)	$	946,764



	Less than 12 months					More than 12 months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
September 30, 2017
Obligations of states and political subdivisions	$	55,319	$	(700	)	$	9,338	$	(604	)	$	64,657	$	(1,304	)
Mortgage-backed securities	283,466		(2,708		)	42,481		(545		)	325,947		(3,253		)
Corporate bonds and other securities	21,128		(353		)	32,674		(517		)	53,802		(870		)
Total available for sale securities	$	359,913	$	(3,761	)	$	84,493	$	(1,666	)	$	444,406	$	(5,427	)

December 31, 2016
Obligations of states and political subdivisions	$	108,440	$	(3,007	)	$	588	$	(72	)	$	109,028	$	(3,079	)
Mortgage-backed securities	316,469		(4,979		)	42,096		(392		)	358,565		(5,371		)
Corporate bonds and other securities	47,388		(1,537		)	40,468		(1,326		)	87,856		(2,863		)
Total available for sale securities	$	472,297	$	(9,523	)	$	83,152	$	(1,790	)	$	555,449	$	(11,313	)



	September 30, 2017				December 31, 2016
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	23,387	$	23,510	$	21,403	$	21,517
Due after one year through five years	128,261		130,107		108,198		109,778
Due after five years through ten years	267,492		271,830		300,552		301,888
Due after ten years	541,706		542,914		517,444		513,581
Total securities available for sale	$	960,846	$	968,361	$	947,597	$	946,764



	Carrying		Gross Unrealized					Estimated
	Value ⁽¹⁾		Gains		(Losses)			Fair Value
September 30, 2017
Obligations of states and political subdivisions	$	204,801	$	5,111	$	(77	)	$	209,835

December 31, 2016
Obligations of states and political subdivisions	$	201,526	$	1,617	$	(828	)	$	202,315



	Yes ¨☐ No x ☒



	September 30, 2017				December 31, 2016
	Carrying Value ⁽¹⁾		Estimated Fair Value		Carrying Value ⁽¹⁾		Estimated Fair Value
Due in one year or less	$	5,879	$	5,902	$	4,403	$	4,440
Due after one year through five years	41,196		41,959		28,383		28,763
Due after five years through ten years	65,893		67,444		51,730		51,522
Due after ten years	91,833		94,530		117,010		117,590
Total securities held to maturity	$	204,801	$	209,835	$	201,526	$	202,315



	Three Months Ended September 30, 2017			Nine Months Ended September 30, 2017
Realized gains (losses):
Gross realized gains	$	296		$	958
Gross realized losses	(112		)	(176		)
Net realized gains	$	184		$	782

Proceeds from sales of securities	$	39,284		$	91,911



	Three Months Ended September 30, 2016		Nine Months Ended September 30, 2016
Realized gains (losses):
Gross realized gains	$	—	$	242
Gross realized losses	—		(97		)
Net realized gains	$	—	$	145

Proceeds from sales of securities	$	2,848	$	18,272



	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days and still Accruing		PCI		Nonaccrual		Current		Total Loans
Construction and Land Development	$	7,221	$	100	$	54	$	3,026	$	5,671	$	825,666	$	841,738
Commercial Real Estate - Owner Occupied	1,707		689		679		17,668		2,205		880,575		903,523
Commercial Real Estate - Non-Owner Occupied	909		571		298		14,376		2,701		1,729,184		1,748,039
Multifamily Real Estate	—		—		—		77		—		368,609		368,686
Commercial & Industrial	1,558		255		101		625		1,252		550,731		554,522
Residential 1-4 Family	5,633		1,439		2,360		14,077		6,163		1,053,440		1,083,112
Auto	2,415		293		143		—		174		273,547		276,572
HELOC	1,400		628		709		982		1,791		529,936		535,446
Consumer and all other	3,469		1,445		188		210		165		581,614		587,091
Total loans held for investment	$	24,312	$	5,420	$	4,532	$	51,041	$	20,122	$	6,793,302	$	6,898,729



	30-89 Days Past Due		Greater than 90 Days		Current		Total
Construction and Land Development	$	62	$	—	$	2,964	$	3,026
Commercial Real Estate - Owner Occupied	463		643		16,562		17,668
Commercial Real Estate - Non-Owner Occupied	318		1,032		13,026		14,376
Multifamily Real Estate	—		—		77		77
Commercial & Industrial	—		—		625		625
Residential 1-4 Family	949		1,125		12,003		14,077
HELOC	132		128		722		982
Consumer and all other	34		—		176		210
Total	$	1,958	$	2,928	$	46,155	$	51,041



	September 30, 2017						December 31, 2016
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
Loans without a specific allowance
Construction and Land Development	$	13,889	$	13,981	$	—	$	13,877	$	14,353	$	—
Commercial Real Estate - Owner Occupied	5,238		5,378		—		5,886		6,042		—
Commercial Real Estate - Non-Owner Occupied	5,548		5,636		—		1,399		1,399		—
Commercial & Industrial	1,632		1,880		—		648		890		—
Residential 1-4 Family	9,510		10,523		—		8,496		9,518		—
HELOC	1,651		1,741		—		1,017		1,094		—
Consumer and all other	521		631		—		230		427		—
Total impaired loans without a specific allowance	$	37,989	$	39,770	$	—	$	31,553	$	33,723	$	—

Loans with a specific allowance
Construction and Land Development	$	1,347	$	1,444	$	113	$	1,395	$	1,404	$	107
Commercial Real Estate - Owner Occupied	2,118		2,132		157		646		646		4
Commercial Real Estate - Non-Owner Occupied	2,032		2,032		42		2,809		2,809		474
Commercial & Industrial	2,511		2,562		909		857		880		14
Residential 1-4 Family	4,421		4,543		249		3,335		3,535		200
Auto	174		235		1		169		235		1
HELOC	766		800		56		323		433		15
Consumer and all other	242		310		43		62		298		1
Total impaired loans with a specific allowance	$	13,611	$	14,058	$	1,570	$	9,596	$	10,240	$	816
Total impaired loans	$	51,600	$	53,828	$	1,570	$	41,149	$	43,963	$	816



	Three Months Ended September 30, 2017				Nine Months Ended September 30, 2017
	Average Investment		Interest Income Recognized		Average Investment		Interest Income Recognized
Construction and Land Development	$	15,654	$	128	$	15,378	$	368
Commercial Real Estate - Owner Occupied	7,354		62		7,407		245
Commercial Real Estate - Non-Owner Occupied	7,597		57		7,584		185
Commercial & Industrial	4,139		36		4,203		121
Residential 1-4 Family	14,218		94		14,358		261
Auto	192		—		223		2
HELOC	2,460		7		2,492		29
Consumer and all other	800		8		690		20
Total impaired loans	$	52,414	$	392	$	52,335	$	1,231



	September 30, 2017					December 31, 2016
	No. of Loans	Recorded Investment		Outstanding Commitment		No. of Loans	Recorded Investment		Outstanding Commitment
Performing
Construction and Land Development	7	$	2,841	$	—	8	$	3,793	$	—
Commercial Real Estate - Owner Occupied	7	2,934		—		7	3,106		—
Commercial Real Estate - Non-Owner Occupied	3	2,196		—		2	2,390		—
Commercial & Industrial	12	2,112		—		3	533		—
Residential 1-4 Family	34	5,941		—		28	4,145		—
Consumer and all other	1	495		—		—	—		—
Total performing	64	$	16,519	$	—	48	$	13,967	$	—

Nonperforming
Construction and Land Development	5	$	400	$	—	2	$	215	$	—
Commercial Real Estate - Owner Occupied	2	142		—		2	156		—
Commercial & Industrial	5	1,062		—		1	116		—
Residential 1-4 Family	8	1,095		—		8	948		—
Consumer and all other	1	26		—		—	—		—
Total nonperforming	21	$	2,725	$	—	13	$	1,435	$	—

Total performing and nonperforming	85	$	19,244	$	—	61	$	15,402	$	—



	Allowance for loan losses
	Balance, beginning of the year		Recoveries credited to allowance		Loans charged off			Provision charged to operations			Balance, end of period
Construction and Land Development	$	10,055	$	193	$	(2,115	)	$	535		$	8,668
Commercial Real Estate - Owner Occupied	3,801		84		(46		)	(620		)	3,219
Commercial Real Estate - Non-Owner Occupied	6,622		2		(1,181		)	1,825			7,268
Multifamily Real Estate	1,236		—		—			(136		)	1,100
Commercial & Industrial	4,627		451		(1,241		)	1,526			5,363
Residential 1-4 Family	6,399		332		(815		)	(35		)	5,881
Auto	946		352		(761		)	398			935
HELOC	1,328		240		(861		)	675			1,382
Consumer and all other	2,178		905		(2,929		)	3,192			3,346
Total	$	37,192	$	2,559	$	(9,949	)	$	7,360		$	37,162



	Loans individually evaluated for impairment				Loans collectively evaluated for impairment				Loans acquired with deteriorated credit quality				Total
	Loans		ALL		Loans		ALL		Loans		ALL		Loans		ALL
Construction and Land Development	$	15,236	$	113	$	823,476	$	8,555	$	3,026	$	—	$	841,738	$	8,668
Commercial Real Estate - Owner Occupied	7,356		157		878,499		3,062		17,668		—		903,523		3,219
Commercial Real Estate - Non-Owner Occupied	7,580		42		1,726,083		7,226		14,376		—		1,748,039		7,268
Multifamily Real Estate	—		—		368,609		1,100		77		—		368,686		1,100
Commercial & Industrial	4,143		909		549,754		4,454		625		—		554,522		5,363
Residential 1-4 Family	13,931		249		1,055,104		5,632		14,077		—		1,083,112		5,881
Auto	174		1		276,398		934		—		—		276,572		935
HELOC	2,417		56		532,047		1,326		982		—		535,446		1,382
Consumer and all other	763		43		586,118		3,303		210		—		587,091		3,346
Total loans held for investment, net	$	51,600	$	1,570	$	6,796,088	$	35,592	$	51,041	$	—	$	6,898,729	$	37,162



	For the Nine Months Ended September 30,
	2017			2016
Balance at beginning of period	$	19,739		$	22,139
Accretion	(4,896		)	(4,232		)
Reclass of nonaccretable difference due to improvement in expected cash flows	2,175			3,580
Other, net ⁽¹⁾	(452		)	(1,149		)
Balance at end of period	$	16,566		$	20,338



For the remaining three months of 2017	$	1,420
For the year ending December 31, 2018	4,664
For the year ending December 31, 2019	3,599
For the year ending December 31, 2020	2,509
For the year ending December 31, 2021	1,481
Thereafter	2,344
Total estimated amortization expense	$	16,017



	Trust Preferred Capital Securities ⁽¹⁾		Investment ⁽¹⁾		Spread to 3-Month LIBOR		Rate		Maturity
Trust Preferred Capital Note - Statutory Trust I	$	22,500,000	$	696,000	2.75	%	4.08	%	6/17/2034
Trust Preferred Capital Note - Statutory Trust II	36,000,000		1,114,000		1.40	%	2.73	%	6/15/2036
VFG Limited Liability Trust I Indenture	20,000,000		619,000		2.73	%	4.06	%	3/18/2034
FNB Statutory Trust II Indenture	12,000,000		372,000		3.10	%	4.43	%	6/26/2033
Total	$	90,500,000	$	2,801,000



Long-term Type	Spread to 3-Month LIBOR		Interest Rate ⁽¹⁾		Maturity Date	Advance Amount
Adjustable Rate Credit	0.44	%	1.77	%	8/23/2022	$	55,000
Adjustable Rate Credit	0.45	%	1.79	%	11/23/2022	65,000
Adjustable Rate Credit	0.45	%	1.79	%	11/23/2022	10,000
Adjustable Rate Credit	0.45	%	1.79	%	11/23/2022	10,000
Fixed Rate	—		3.62	%	11/28/2017	10,000
Fixed Rate	—		3.75	%	7/30/2018	5,000
Fixed Rate	—		3.97	%	7/30/2018	5,000
Fixed Rate Hybrid	—		0.99	%	10/19/2018	30,000
Fixed Rate Hybrid	—		1.58	%	5/18/2020	20,000
						$	210,000
(1)Interest rates calculated using non-rounded numbers.



	Trust Preferred Capital Notes		Subordinated Debt		FHLB Advances		Fair Value Premium (Discount)			Prepayment Penalty			Total Long-term Borrowings
For the remaining three months of 2017	$	—	$	—	$	10,000	$	(21	)	$	(488	)	$	9,491
2018	—		—		40,000		(343		)	(1,970		)	37,687
2019	—		—		—		(486		)	(2,018		)	(2,504		)
2020	—		—		20,000		(501		)	(2,074		)	17,425
2021	—		—		—		(516		)	(2,119		)	(2,635		)
Thereafter	93,301		150,000		140,000		(6,308		)	(1,707		)	375,286
Total Long-term borrowings	$	93,301	$	150,000	$	210,000	$	(8,175	)	$	(10,376	)	$	434,750



	September 30, 2017		December 31, 2016
Commitments with off-balance sheet risk:
Commitments to extend credit ⁽¹⁾	$	2,085,103	$	1,924,885
Standby letters of credit	119,977		84,212
Total commitments with off-balance sheet risk	$	2,205,080	$	2,009,097



	Pledged Assets as of September 30, 2017
	Cash		AFS Securities ⁽¹⁾		HTM Securities ⁽¹⁾		Loans ⁽²⁾		Total
Public deposits	$	—	$	224,153	$	206,878	$	—	$	431,031
Repurchase agreements	—		88,257		—		—		88,257
FHLB advances	—		1,022		—		2,404,355		2,405,377
Derivatives	23,831		3,898		—		—		27,729
Other purposes	—		15,580		—		—		15,580
Total pledged assets	$	23,831	$	332,910	$	206,878	$	2,404,355	$	2,967,974



	Pledged Assets as of December 31, 2016
	Cash		AFS Securities ⁽¹⁾		HTM Securities ⁽¹⁾		Loans ⁽²⁾		Total
Public deposits	$	—	$	210,546	$	197,889	$	—	$	408,435
Repurchase agreements	—		108,208		—		—		108,208
FHLB advances	—		1,475		—		1,959,929		1,961,404
Derivatives	33,595		4,376		—		—		37,971
Other purposes	—		17,499		—		—		17,499
Total pledged assets	$	33,595	$	342,104	$	197,889	$	1,959,929	$	2,533,517



	September 30, 2017							December 31, 2016
			Derivative ⁽²⁾							Derivative⁽²⁾
	Notional or Contractual Amount ⁽¹⁾			Assets		Liabilities		Notional or Contractual Amount ⁽¹⁾			Assets		Liabilities
Derivatives designated as accounting hedges:
Interest rate contracts:
Cash flow hedges	$	152,500		$	120	$	9,460	$	188,500		$	211	$	9,619
Fair value hedges	81,965			1,253		371		65,920			1,437		296
Derivatives not designated as accounting hedges:
Loan Swaps
Pay fixed - receive floating interest rate swaps	506,056			3,051		—		373,355			—		1,005
Pay floating - receive fixed interest rate swaps	506,056			—		3,051		373,355			1,005		—
Other contracts:
Interest rate lock commitments	50,311			685		—		48,743			610		—
Best efforts forward delivery commitments	80,307			245		—		85,400			1,469		—



	Unrealized Gains (Losses) on AFS Securities			Unrealized Gain for AFS Securities Transferred to HTM			Change in Fair Value of Cash Flow Hedge			Unrealized Gains (Losses) on BOLI			Total
Balance - June 30, 2017	$	7,733		$	3,033		$	(5,487	)	$	(1,271	)	$	4,008
Other comprehensive income (loss)	(2,729		)	—			41			—			(2,688		)
Amounts reclassified from accumulated other comprehensive income	(119		)	(163		)	189			84			(9		)
Net current period other comprehensive income (loss)	(2,848		)	(163		)	230			84			(2,697		)
Balance - September 30, 2017	$	4,885		$	2,870		$	(5,257	)	$	(1,187	)	$	1,311