UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



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

~~For the Quarterly Period Ended September 30, 2017~~



¨ For the Quarterly Period Ended March 31, 2022

OR

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

Commission File Number: ~~0-20293~~

001-39325

ATLANTIC UNION BANKSHARES ~~CORPORATION~~

CORPORATION

(Exact name of registrant as specified in its charter)


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

1051 East Cary Street

Suite 1200

Richmond, Virginia23219

(Address of principal executive offices) (Zip Code)

~~(804)~~

(804) 633-5031

(Registrant’s telephone number, including area code)

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



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

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

☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes x☒ No ¨

☐

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



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

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

Act. ¨

◻

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



	Yes ¨☐ No x ☒

The number of shares of common stock outstanding as of ~~November 1, 2017~~April 28, 2022 was ~~43,732,082.~~75,014,103.

Table of Contents

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, 2022 (unaudited) and December 31, ~~2016~~2021 (audited)		2

		Consolidated Statements of Income (unaudited) for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021		3

		Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021		4

		Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021		5

		Consolidated Statements of Cash Flows (unaudited) for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021		6

		Notes to Consolidated Financial Statements (unaudited)		7 8

		Review Report of Independent Registered Public Accounting Firm		44 47

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		45 48

Item 3.		Quantitative and Qualitative Disclosures About Market Risk		70

Item 4.		Controls and Procedures		72

		PART II - OTHER INFORMATION

Item 1.		Legal Proceedings		73

Item 1A.		Risk Factors		74 73

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		74 73

Item 6.	~~Exhibits~~	Exhibits		75

	~~Signatures~~	Signatures	76	77

Table of Contents

Glossary of Acronyms and Defined Terms



~~2016~~ 2021 Form 10-K	–	Annual Report on Form 10-K for the year ended December 31, ~~2016~~2021
~~AFS~~ Access	–	~~Available for sale~~
~~ALCO~~	–	~~Asset Liability Committee~~
~~ALL~~	–	~~Allowance for loan losses~~
~~ASC~~	–	~~Accounting Standards Codification~~
~~ASU~~	–	~~Accounting Standards Update~~
~~ATM~~	–	~~Automated teller machine~~
~~the Bank~~	–	~~Union Bank & Trust~~
~~BOLI~~	–	~~Bank-owned life insurance~~
~~bps~~	–	~~Basis points~~
~~the Company~~	–	~~Union Bankshares~~ Access National Corporation and its subsidiaries
~~Dodd-Frank Act~~ ACL	–	~~Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010~~ Allowance for credit losses
~~EPS~~ AFS	–	Available for sale
ALCO	–	Asset Liability Committee
ALLL	–	Allowance for loan and lease losses, a component of ACL
AOCI	–	Accumulated other comprehensive income (loss)
ASC	–	Accounting Standards Codification
ASC 820	–	ASC 820, Fair Value Measurements and Disclosures
ASU	–	Accounting Standards Update
ATM	–	Automated teller machine
AUB	–	Atlantic Union Bankshares Corporation
AUBAP	–	Atlantic Union Bankshares Corporation trading symbol
the Bank	–	Atlantic Union Bank (formerly, Union Bank & Trust)
BOLI	–	Bank-owned life insurance
bps	–	Basis points
BVAL	–	Bloomberg Valuation Service
CAA	–	Consolidated Appropriations Act, 2021
CARES Act	–	Coronavirus Aid, Relief, and Economic Security Act
CECL	–	Current expected credit losses
the Company	–	Atlantic Union Bankshares Corporation (formerly, Union Bankshares Corporation) and its subsidiaries
COVID-19	–	COVID-19 global pandemic
depositary shares	–	Depositary shares, each representing a 1/400th ownership interest in a share of the Company’s Series A preferred stock, with a liquidation preference of $10,000 per share of Series A preferred stock (equivalent to $25 per depositary share)
EPS	–	Earnings per common share
Exchange Act	–	Securities Exchange Act of 1934, as amended
FASB	–	Financial Accounting Standards Board
~~FDIC~~ FCMs	–	Futures Commission Merchants
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
~~U.S.~~ FHLMC	–	Federal Home Loan Mortgage Corporation
FNMA	–	Federal National Mortgage Association
FOMC	–	Federal Open Markets Committee
FTE	–	Fully taxable equivalent
GAAP or U.S. 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~~ the Joint Guidance	–	The five federal bank regulatory agencies and the Conference of State Bank Supervisors guidance issued on March 22, 2020 (subsequently revised on April 7, 2020)
LHFI	–	Loans held for investment
LHFS	–	Loans held for sale
LIBOR	–	London Interbank Offered Rate
~~NPA~~ MBS	–	~~Nonperforming assets~~ Mortgage-Backed Securities
~~ODCM~~ NASDAQ	–	~~Old Dominion Capital Management, Inc.~~ National Association of Securities Dealers Automated Quotation exchange
~~OREO~~ NOW	–	Negotiable order of withdrawal

Table of Contents

NPA	–	Nonperforming assets
OCI	–	Other comprehensive income
OREO	–	Other real estate owned
~~OTTI~~ OTC	–	~~Other than temporary impairment~~ Over-the-counter
~~PCI~~ PD/LGD	–	~~Purchased credit impaired~~ Probability of default/loss given default
~~ROA~~ PPP	–	~~Return on average assets~~ Paycheck Protection Program
~~ROE~~ Quarterly Report	–	~~Return~~ Quarterly Report on ~~average common equity~~Form 10-Q for the quarter ended March 31, 2022
~~ROTCE~~ Repurchase Program	–	~~Return~~ The share repurchase program, approved on ~~average tangible~~December 10, 2021 by the Company’s Board of Directors, which authorizes the Company to purchase up to $100.0 million worth of the Company’s common ~~equity~~stock
~~SEC~~ ROU asset	–	Right of Use Asset
RUC	–	Reserve for unfunded commitments
RVI	–	Residual value insurance
SBA	–	Small Business Administration
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
SSFA	–	Simplified supervisory formula approach
TDR	–	Troubled debt restructuring
~~UMG~~ Topic 606	–	~~Union Mortgage~~ ASU No. 2014-09, “Revenue from Contracts with Customers: Topic 606”
Topic 848	–	ASU 2020-04, “Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting”
VFG	–	Virginia Financial Group, Inc.
~~Xenith~~ 2031 Notes	–	~~Xenith Bankshares, Inc.~~ $250.0 million of 2.875% fixed-to-floating rate subordinate notes issued by the Company during the fourth quarter of 2021 with a maturity date of December 15, 2031

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2022 AND DECEMBER 31, 2021

(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,
	2022		2021
ASSETS		(unaudited)		(audited)
Cash and cash equivalents:
Cash and due from banks	$	178,225	$	180,963
Interest-bearing deposits in other banks		213,140		618,714
Federal funds sold		4,938		2,824
Total cash and cash equivalents		396,303		802,501
Securities available for sale, at fair value		3,193,280		3,481,650
Securities held to maturity, at carrying value		756,872		628,000
Restricted stock, at cost		77,033		76,825
Loans held for sale, at fair value		21,227		20,861
Loans held for investment, net of deferred fees and costs		13,459,349		13,195,843
Less: allowance for loan and lease losses		102,591		99,787
Total loans held for investment, net		13,356,758		13,096,056
Premises and equipment, net		130,998		134,808
Goodwill		935,560		935,560
Amortizable intangibles, net		40,273		43,312
Bank owned life insurance		434,012		431,517
Other assets		440,114		413,706
Total assets	$	19,782,430	$	20,064,796
LIABILITIES
Noninterest-bearing demand deposits	$	5,370,063	$	5,207,324
Interest-bearing deposits		11,114,160		11,403,744
Total deposits		16,484,223		16,611,068
Securities sold under agreements to repurchase		115,027		117,870
Long-term borrowings		389,005		388,724
Other liabilities		295,840		237,063
Total liabilities		17,284,095		17,354,725
Commitments and contingencies (Note 7)
STOCKHOLDERS' EQUITY
Preferred stock, $10.00 par value		173		173
Common stock, $1.33 par value		99,651		100,101
Additional paid-in capital		1,786,640		1,807,368
Retained earnings		803,354		783,794
Accumulated other comprehensive income (loss)		(191,483)		18,635
Total stockholders' equity		2,498,335		2,710,071
Total liabilities and stockholders' equity	$	19,782,430	$	20,064,796

Common shares outstanding		75,335,956		75,663,648
Common shares authorized		200,000,000		200,000,000
Preferred shares outstanding		17,250		17,250
Preferred shares authorized		500,000		500,000

See accompanying notes to consolidated financial statements.

-2-

Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2022 AND 2021

(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,
	2022			2021
Interest and dividend income:
Interest and fees on loans	$	114,200		$	128,006
Interest on deposits in other banks		131			77
Interest and dividends on securities:
Taxable		13,666			10,353
Nontaxable		10,459			9,237
Total interest and dividend income		138,456			147,673
Interest expense:
Interest on deposits		4,483			9,128
Interest on short-term borrowings		21	��		48
Interest on long-term borrowings		3,021			3,599
Total interest expense		7,525			12,775
Net interest income		130,931			134,898
Provision for credit losses		2,800			(13,624)
Net interest income after provision for credit losses		128,131			148,522
Noninterest income:
Service charges on deposit accounts		7,596			5,509
Other service charges, commissions and fees		1,655			1,701
Interchange fees		1,810			1,847
Fiduciary and asset management fees		7,255			6,475
Mortgage banking income		3,117			8,255
Bank owned life insurance income		2,697			2,265
Loan-related interest rate swap fees		3,860			1,754
Other operating income		2,163			3,179
Total noninterest income		30,153			30,985
Noninterest expenses:
Salaries and benefits		58,298			52,660
Occupancy expenses		6,883			7,315
Furniture and equipment expenses		3,597			3,968
Technology and data processing		7,796			6,904
Professional services		4,090			4,960
Marketing and advertising expense		2,163			2,044
FDIC assessment premiums and other insurance		2,485			2,307
Other taxes		4,499			4,436
Loan-related expenses		1,776			1,877
Amortization of intangible assets		3,039			3,730
Loss on debt extinguishment		0			14,695
Other expenses		10,695			7,041
Total noninterest expenses		105,321			111,937
Income from continuing operations before income taxes		52,963			67,570
Income tax expense		9,273			11,381
Net income		43,690			56,189
Dividends on preferred stock		2,967			2,967
Net income available to common shareholders	$	40,723		$	53,222

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

See accompanying notes to consolidated financial statements.

-3-

Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2022 AND 2021

(Dollars in thousands)


	Three Months Ended
	March 31,
	2022		2021
Net income	$	43,690	$	56,189
Other comprehensive income (loss):
Cash flow hedges:
Change in fair value of cash flow hedges (net of tax, $6,197 and $380 for the three months ended March 31, 2022 and 2021, respectively)		(23,313)		(1,428)
Reclassification adjustment for gains included in net income (net of tax, $0 and $12 for the three months ended March 31, 2022 and 2021, respectively) ⁽¹⁾		0		(47)
AFS securities:
Unrealized holding losses arising during period (net of tax, $49,700 and $8,806 for the three months ended March 31, 2022 and 2021, respectively)		(186,967)		(33,125)
Reclassification adjustment for gains included in net income (net of tax, $0 and $16 for the three months ended March 31, 2022 and 2021, respectively) ⁽²⁾		0		(62)
HTM securities:
Reclassification adjustment for accretion of unrealized gain on AFS securities transferred to HTM (net of tax, $1 and $1 for the three months ended March 31, 2022 and 2021, respectively) ⁽³⁾		(5)		(5)
Bank owned life insurance:
Reclassification adjustment for losses included in net income ⁽⁴⁾		167		153
Other comprehensive loss		(210,118)		(34,514)
Comprehensive (loss) income	$	(166,428)	$	21,675

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 are generally reported in the interest income and interest expense sections of the Company’s Consolidated Statements of Income with the corresponding income tax effect being reflected as a component of income tax expense.

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

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

⁽⁴⁾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.

-4-

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, 2022 AND ~~2016~~

2021

(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, 2021

100,101

173

1,807,368

783,794

18,635

2,710,071

Net Income

43,690

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

(210,118)

Dividends on common stock ($0.28 per share)

(21,163)

Dividends on preferred stock ($171.88 per share)

(2,967)

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

(837)

(24,181)

(25,018)

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

387

1,044

1,431

Stock-based compensation expense

2,409

Balance - March 31, 2022

99,651

173

1,786,640

803,354

(191,483)

2,498,335


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

See accompanying notes to consolidated financial statements.

-5-

Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2022 AND 2021

(Dollars in thousands)


	2022		2021
Operating activities:
Net income	$	43,690	$	56,189
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation of premises and equipment		3,599		3,969
Writedown of ROU assets and equipment		4,570		1,065
Amortization, net		8,619		7,904
Amortization (accretion) related to acquisitions, net		875		(532)
Provision for credit losses		2,800		(13,624)
Gains on securities transactions, net		0		(78)
BOLI income		(2,697)		(2,265)
Originations and purchases of loans held for sale		(91,957)		(185,885)
Proceeds from sales of loans held for sale		91,434		231,250
Gains on sales of foreclosed properties and former bank premises, net		0		(706)
Losses on debt extinguishment		0		14,695
Stock-based compensation expenses		2,409		2,199
Issuance of common stock for services		217		0
Net decrease in other assets		46,434		42,567
Net increase (decrease) in other liabilities		1,454		(72,375)
Net cash provided by operating activities		111,447		84,373
Investing activities:
Purchases of AFS securities, restricted stock, and other investments		(62,773)		(355,992)
Purchases of HTM securities		(130,533)		0
Proceeds from sales of AFS securities and restricted stock		0		45,436
Proceeds from maturities, calls and paydowns of AFS securities		109,974		124,053
Proceeds from maturities, calls and paydowns of HTM securities		550		432
Net increase in loans held for investment		(258,502)		(250,762)
Net increase in premises and equipment		(797)		(3,520)
Proceeds from BOLI settlements		2,068		556
Proceeds from sales of foreclosed properties and former bank premises		0		2,431
Net cash used in investing activities		(340,013)		(437,366)
Financing activities:
Net increase in noninterest-bearing deposits		162,739		697,696
Net decrease in interest-bearing deposits		(289,594)		(122,424)
Net decrease in short-term borrowings		(2,843)		(77,366)
Repayments of long-term debt		0		(214,695)
Cash dividends paid - common stock		(21,163)		(19,700)
Cash dividends paid - preferred stock		(2,967)		(2,967)
Repurchase of common stock		(25,018)		0
Issuance of common stock		3,804		2,183
Vesting of restricted stock, net of shares held for taxes		(2,590)		(2,148)
Net cash (used in) provided by financing activities		(177,632)		260,579
Decrease in cash and cash equivalents		(406,198)		(92,414)
Cash, cash equivalents and restricted cash at beginning of the period		802,501		493,294
Cash, cash equivalents and restricted cash at end of the period	$	396,303	$	400,880

-6-

Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

~~NINE~~

THREE MONTHS ENDED ~~SEPTEMBER 30, 2017~~MARCH 31, 2022 AND ~~2016~~

2021

(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


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

Supplemental schedule of noncash investing and financing activities
Transfers from bank premises to OREO		0		1,425

See accompanying notes to consolidated financial statements.

-7-

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

The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. ~~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~~2021 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,~~2020, the FASB issued ~~ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements~~Topic 848. This guidance provides temporary, optional guidance to

~~Employee Share-Based Payment Accounting.” This ASU simplifies several aspects~~ ease the potential burden in accounting for reference rate reform associated with the LIBOR transition. LIBOR and other interbank offered rates are widely used benchmark or reference rates that have been used in the valuation of loans, derivatives, and other financial contracts. Topic 848 provides optional expedients and exceptions, subject to meeting certain criteria, for applying current GAAP to contract modifications and hedging relationships, for contracts that reference LIBOR or other reference rates expected to be discontinued. Topic 848 is intended to help stakeholders during the global market-wide reference rate transition period. The amendments are effective as of March 12, 2020 through December 31, 2022 and can be adopted at an instrument level. As of March 31, 2021, the Company utilized the expedient to assert probability of the ~~accounting~~hedged interest, regardless of any expected modification in terms related to reference rate reform 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~~newly executed cash ~~flows.~~flow hedges. The Company ~~adopted this standard in the first quarter~~expects to incorporate other components of ~~2017. The adoption of ASU 2016-09 did~~Topic 848 at a later date. This amendment does not have a material impact on the consolidated financial statements.

Cash and Cash Equivalents

For purposes of reporting cash flows, the Company defines cash and cash equivalents as cash, cash due from banks, interest-bearing deposits in other banks, short-term money market investments, other interest-bearing deposits, and federal funds sold.

Restricted cash is disclosed in Note 7 “Commitments and Contingencies” in Part I, Item I of this Quarterly Report and is comprised of cash maintained at various correspondent banks as collateral for the Company’s derivative portfolio and is included in interest-bearing deposits in other banks in the Company’s Consolidated Balance Sheets. In addition, the Company is required to maintain reserve balances with the FRB based on the type and amount of deposits; however, on March 15, 2020 the Federal Reserve announced that reserve requirement ratios would be reduced to zero percent effective March 26, 2020 due to economic conditions, which eliminated the reserve requirement for all depository institutions. The reserve requirement is still at zero percent as of March 31, 2022.

Accrued Interest Receivable

The Company has elected to exclude accrued interest from the amortized cost basis in its determination of the ALLL, as well as the ACL reserve for securities. Accrued interest receivable totaled $42.5 million and $43.3 million on LHFI, $6.2 million and $7.0 million on HTM securities, and $13.8 million and $14.5 million on AFS securities at March 31, 2022 and December 31, 2021, 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

-8-

Table of Contents

will not be able to collect the accrued interest. For the quarters ended March 31, 2022 and March 30, 2021, accrued interest receivable write offs were not material to 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 sales of financial instruments

Segment Reporting

Operating segments are similarly excluded from the scope. Entities can elect to adopt the guidance either on a full 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 more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. 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 is 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~~components of a business about which separate financial information is available and evaluated regularly by the chief operating decision makers in deciding how to allocate resources and assessing performance. The Bank is the Company’s only reportable operating segment upon which management makes decisions regarding how to allocate resources and assess performance. While the Company’s chief operating decision makers do have some limited financial information about its various financial products and services, that ~~appears in ASC 805, Business Combinations. Amendments narrow the definition~~information is not complete since it does not include a full allocation of revenue, costs, 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, including interim periods within those annual periods. The Company has concluded the adoption of ASU 2017-01 will not have a material impact on its consolidated financial statements.

~~In January 2017, the FASB issued ASU No. 2017-03, “~~Accounting Changes 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).” This ASU incorporates into the Accounting Standards Codification recent SEC guidance about disclosing, under SEC SAB Topic 11.M, the effect on financial statements of adopting the revenue, leases, and credit losses standards. ASU 2017-03 is effective upon issuance. The Company has concluded the adoption of ASU 2017-03 will not have a material impact on its consolidated financial statements.

~~In January 2017, the FASB issued ASU No. 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” This ASU simplifies accounting for goodwill impairments by eliminating step two (the implied fair value to carrying value of goodwill)~~capital 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 to exceed the carrying amount of the goodwill. The effective date and transition requirements for the technical corrections will be effective forkey corporate functions; therefore, 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. The Company has concluded the adoption of ASU 2017-04 will not have a material impact on its consolidatedevaluates financial ~~statements.~~

~~In February 2017, the FASB issued ASU No. 2017-05, “Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales~~

~~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~~performance on the ~~amortization period~~Company-wide basis. Management continues to evaluate these business units 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 interimseparate reporting as facts and ~~annual periods beginning after December 15, 2018. The Company has concluded the adoption~~circumstances change.

-9-

Table of ~~ASU 2017-08 will not have a material impact on its consolidated financial statements.~~Contents

~~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 0 securities past due or on non-accrual as of March 31, 2022 and December 31, 2021.

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~~2022 are summarized as follows (dollars in thousands):

Amortized

Gross Unrealized

Estimated

Cost

Gains

(Losses)

Fair Value

March 31, 2022

U.S. government and agency securities

72,068

—

(4,029)

68,039

Obligations of states and political subdivisions

967,219

8,336

(87,255)

888,300

Corporate and other bonds ⁽¹⁾

185,884

802

(2,763)

183,923

Commercial MBS

Agency

342,966

978

(15,592)

328,352

Non-agency

108,462

—

(2,323)

106,139

Total commercial MBS

451,428

978

(17,915)

434,491

Residential MBS

Agency

1,634,860

2,401

(103,848)

1,533,413

Non-agency

86,876

(3,413)

83,469

Total residential MBS

1,721,736

2,407

(107,261)

1,616,882

Other securities

1,645

Total AFS securities

3,399,980

12,523

(219,223)

3,193,280

⁽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, 2021 are summarized as follows (dollars in thousands):


	Amortized		Gross Unrealized				Estimated
	Cost		Gains		(Losses)		Fair Value
December 31, 2021
U.S. government and agency securities	$	73,830	$	179	$	(160)	$	73,849
Obligations of states and political subdivisions		971,126		39,343		(2,073)		1,008,396
Corporate and other bonds ⁽¹⁾		150,201		3,353		(178)		153,376
Commercial MBS
Agency		361,806		6,761		(4,215)		364,352
Non-agency		107,087		139		(421)		106,805
Total commercial MBS		468,893		6,900		(4,636)		471,157
Residential MBS
Agency		1,691,651		15,180		(24,337)		1,682,494
Non-agency		91,443		243		(948)		90,738
Total residential MBS		1,783,094		15,423		(25,285)		1,773,232
Other securities		1,640		0		0		1,640
Total AFS securities	$	3,448,784	$	65,198	$	(32,332)	$	3,481,650

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

-10-

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 for which an ACL has not been recorded at March 31, 2022 and December 31, 2021 and that are not deemed to be ~~other-than-temporarily~~ impaired as of ~~September 30, 2017 and December 31, 2016.~~those dates. 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		Losses		Value		Losses
March 31, 2022
U.S. government and agency securities	$	64,366	$	(3,972)	$	3,604	$	(57)	$	67,970	$	(4,029)
Obligations of states and political subdivisions		533,491		(79,311)		31,225		(7,944)		564,716		(87,255)
Corporate and other bonds⁽¹⁾		112,253		(2,763)		0		0		112,253		(2,763)
Commercial MBS
Agency		175,651		(11,545)		40,654		(4,047)		216,305		(15,592)
Non-agency		87,127		(1,526)		19,013		(797)		106,140		(2,323)
Total commercial MBS		262,778		(13,071)		59,667		(4,844)		322,445		(17,915)
Residential MBS
Agency		1,016,786		(71,954)		333,594		(31,894)		1,350,380		(103,848)
Non-agency		63,140		(2,550)		12,162		(863)		75,302		(3,413)
Total residential MBS		1,079,926		(74,504)		345,756		(32,757)		1,425,682		(107,261)
Total AFS securities	$	2,052,814	$	(173,621)	$	440,252	$	(45,602)	$	2,493,066	$	(219,223)

December 31, 2021
U.S. government and agency securities	$	64,474	$	(115)	$	3,900	$	(45)	$	68,374	$	(160)
Obligations of states and political subdivisions		249,701		(2,020)		2,123		(53)		251,824		(2,073)
Corporate and other bonds⁽¹⁾		21,134		(177)		703		(1)		21,837		(178)
Commercial MBS
Agency		175,588		(4,053)		3,172		(162)		178,760		(4,215)
Non-agency		33,759		(313)		11,029		(108)		44,788		(421)
Total commercial MBS		209,347		(4,366)		14,201		(270)		223,548		(4,636)
Residential MBS
Agency		1,140,701		(21,147)		106,104		(3,190)		1,246,805		(24,337)
Non-agency		48,392		(584)		12,716		(364)		61,108		(948)
Total residential MBS		1,189,093		(21,731)		118,820		(3,554)		1,307,913		(25,285)
Total AFS securities	$	1,733,749	$	(28,409)	$	139,747	$	(3,923)	$	1,873,496	$	(32,332)

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

As of ~~September 30, 2017,~~March 31, 2022, there were ~~$84.5~~ $440.3 million ~~or 36 issues,~~AFS securities, comprised of individual available for sale securities that had been in a continuous loss position for more than 12 months. These securities had an unrealized loss of $1.7 million and consisted of municipal obligations, mortgage-backed securities, and corporate bonds. As of December 31, 2016, there were $83.2 million, or 30 issues, of106 individual securities that had been in a continuous loss position for more than 12 ~~months. These~~months and had an aggregate unrealized loss of approximately $45.6 million. As of December 31, 2021, there were $139.7 million AFS securities, comprised of 33 individual securities that had been in a continuous loss position for more than 12 months and had an aggregate unrealized loss of $3.9 million.

The Company has evaluated AFS securities in an unrealized loss ~~of $1.8 million~~position for credit related impairment at March 31, 2022 and ~~consisted~~December 31, 2021 and concluded 0 impairment existed based on several factors which included: (1) the majority 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 atgenerally received a ~~price less than the cost basis~~20% SSFA rating.

-11-

Table of each investment. Because 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, 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, 2022 and December 31, ~~2016,~~2021, 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, 2022				December 31, 2021
	Amortized		Estimated		Amortized		Estimated
	Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	23,826	$	23,702	$	18,247	$	18,317
Due after one year through five years		179,752		179,192		180,080		183,981
Due after five years through ten years		344,061		335,913		324,615		331,215
Due after ten years		2,852,341		2,654,473		2,925,842		2,948,137
Total AFS securities	$	3,399,980	$	3,193,280	$	3,448,784	$	3,481,650

Refer to Note 7 "Commitments and Contingencies" in Part I, Item I 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, 2022 and December 31, ~~2016, see Note 6 “Commitments and Contingencies.”~~

2021.

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 0 securities past due or on non-accrual at March 31, 2022 and December 31, 2021.

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

The carrying value, gross unrealized gains and losses, and estimated fair values of HTM securities ~~held to maturity~~ as of ~~September 30, 2017 and December~~March 31, ~~2016~~2022 are summarized as follows (dollars in thousands):

Carrying

Gross Unrealized

Estimated

Value

Gains

(Losses)

Fair Value

March 31, 2022

U.S. government and agency securities

2,483

(74)

2,409

Obligations of states and political subdivisions

684,294

24,828

(17,616)

691,506

Commercial MBS

Agency

31,221

(1,697)

29,524

Total commercial MBS

31,221

(1,697)

29,524

Residential MBS

Agency

38,874

(2,136)

36,738

Total residential MBS

38,874

(2,136)

36,738

Total held-to-maturity securities

756,872

24,828

(21,523)

760,177

-12-

Table of Contents

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)~~

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~~2021 are summarized as follows (dollars in thousands):


	Carrying		Gross Unrealized				Estimated
	Value		Gains		(Losses)		Fair Value
December 31, 2021
U.S. government and agency securities	$	2,604	$	0	$	(29)	$	2,575
Obligations of states and political subdivisions		620,873		65,982		(121)		686,734
Commercial MBS
Agency		4,523		0		(58)		4,465
Total commercial MBS		4,523		0		(58)		4,465
Total held-to-maturity securities	$	628,000	$	65,982	$	(208)	$	693,774

Credit Quality Indicators & Allowance for Credit Losses - HTM

For HTM securities, the Company evaluates the credit risk of ~~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 immaterial at March 31, 2022 and December 31, 2021. 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 Company’s only HTM securities ~~net~~with credit risk are obligations of ~~any accretion.~~

states and political subdivisions.

The following table ~~shows~~presents the ~~gross unrealized losses~~amortized cost of HTM securities as of March 31, 2022 and ~~fair value~~December 31, 2021 by security type and credit rating (dollars in thousands) of the Company’s held to maturity securities with unrealized losses that are not deemed to be other-than-temporarily impaired as of September 30, 2017 and December 31, 2016. These are aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position.


	U.S. Government and Agency		Obligations of states and political		Mortgage-backed		Total HTM
	securities		subdivisions		securities		securities
March 31, 2022
Credit Rating:
AAA/AA/A	$	0	$	684,294	$	0	$	684,294
Not Rated - Agency⁽¹⁾		2,483		0		70,095		72,578
Total	$	2,483	$	684,294	$	70,095	$	756,872
December 31, 2021
Credit Rating:
AAA/AA/A	$	0	$	620,873	$	0	$	620,873
Not Rated - Agency⁽¹⁾		2,604		0		4,523		7,127
Total	$	2,604	$	620,873	$	4,523	$	628,000

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~~

⁽¹⁾ Generally considered not 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 bondhave credit risk given the government guarantees associated 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.

these agencies

The following table presents the amortized cost and estimated fair value of ~~held to maturity~~HTM securities as of ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016,~~2021, by contractual maturity (dollars in thousands). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	March 31, 2022				December 31, 2021
	Carrying		Estimated		Carrying		Estimated
	Value		Fair Value		Value		Fair Value
Due in one year or less	$	5,061	$	5,018	$	3,034	$	3,027
Due after one year through five years		10,381		10,827		5,852		6,065
Due after five years through ten years		15,877		16,537		14,019		15,984
Due after ten years		725,553		727,795		605,095		668,698
Total HTM securities	$	756,872	$	760,177	$	628,000	$	693,774

-13-

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

Table of Contents

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

Refer to Note 7 "Commitments and Contingencies" in Part I, Item I 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, 2022 and December 31, ~~2016, see Note 6 “Commitments and Contingencies.”~~

2021.

Restricted Stock, at cost

Due to restrictions placed upon the Bank’s common stock investment in the ~~Federal Reserve Bank~~FRB and 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 and December 31, 2016, the FHLB required the Bank to maintain~~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 million and $23.8~~$67.0 million for ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016~~2021 and FHLB stock in the amount of ~~$40.9~~$10.0 million and ~~$37.0~~$9.8 million as of ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016,~~2021, respectively.

~~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, 2022 and ~~2016~~2021 (dollars in thousands).


	Three Months Ended		Three Months Ended
	March 31, 2022		March 31, 2021
Realized gains (losses)⁽¹⁾:
Gross realized gains	$	0	$	138
Gross realized losses		0		(60)
Net realized gains	$	0	$	78

Proceeds from sales of securities	$	0	$	45,436

⁽¹⁾ Includes gains (losses) 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

-14-

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~~

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

The Company’s loans are stated at their face amount, net of deferred fees and costs, and consist of the following at ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016~~2021 (dollars in thousands):


	March 31, 2022		December 31, 2021
Construction and Land Development	$	969,059	$	862,236
Commercial Real Estate - Owner Occupied		2,007,671		1,995,409
Commercial Real Estate - Non-Owner Occupied		3,875,681		3,789,377
Multifamily Real Estate		723,940		778,626
Commercial & Industrial⁽¹⁾		2,540,680		2,542,243
Residential 1-4 Family - Commercial		569,801		607,337
Residential 1-4 Family - Consumer		824,163		816,524
Residential 1-4 Family - Revolving		568,403		560,796
Auto		499,855		461,052
Consumer		171,875		176,992
Other Commercial⁽²⁾		708,221		605,251
Total LHFI, net of deferred fees and costs⁽³⁾		13,459,349		13,195,843
Allowance for loan and lease losses		(102,591)		(99,787)
Total LHFI, net	$	13,356,758	$	13,096,056

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

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

⁽³⁾Total loans include unamortized premiums and discounts, and unamortized deferred fees and costs totaling ~~$335,000~~$44.0 million and ~~$1.8~~$49.3 million as of ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016,~~2021, respectively.

-15-

Table of Contents

The following table shows the aging of the Company’s loan portfolio, by ~~segment,~~class, at ~~September 30, 2017~~March 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

Greater than

30-59 Days

60-89 Days

90 Days and

Current

Past Due

still Accruing

Nonaccrual

Total Loans

Construction and Land Development

968,019

170

869

969,059

Commercial Real Estate - Owner Occupied

1,995,329

5,081

2,396

4,865

2,007,671

Commercial Real Estate - Non-Owner Occupied

3,870,357

223

1,735

3,287

3,875,681

Multifamily Real Estate

723,816

124

723,940

Commercial & Industrial

2,535,815

1,382

745

763

1,975

2,540,680

Residential 1-4 Family - Commercial

565,606

827

251

878

2,239

569,801

Residential 1-4 Family - Consumer

804,069

5,890

1,018

1,147

12,039

824,163

Residential 1-4 Family - Revolving

562,159

1,157

651

1,065

3,371

568,403

Auto

497,639

1,508

183

192

333

499,855

Consumer

171,083

467

201

171,875

Other Commercial

706,856

1,270

708,221

Total LHFI

13,400,748

17,955

3,367

8,247

29,032

13,459,349

% of total loans

99.56

0.13

0.03

0.06

0.22

100.00

The following table shows the aging of the Company’s loan portfolio, by ~~segment,~~class, at December 31, ~~2016~~2021 (dollars in thousands):


										Greater than
				30-59 Days			60-89 Days			90 Days and
	Current			Past Due			Past Due			still Accruing			Nonaccrual			Total Loans
Construction and Land Development	$	857,883		$	1,357		$	0		$	299		$	2,697		$	862,236
Commercial Real Estate - Owner Occupied		1,987,133			1,230			152			1,257			5,637			1,995,409
Commercial Real Estate - Non-Owner Occupied		3,783,211			1,965			127			433			3,641			3,789,377
Multifamily Real Estate		778,429			84			0			0			113			778,626
Commercial & Industrial		2,536,100			1,161			1,438			1,897			1,647			2,542,243
Residential 1-4 Family - Commercial		601,946			1,844			272			990			2,285			607,337
Residential 1-4 Family - Consumer		795,821			3,368			2,925			3,013			11,397			816,524
Residential 1-4 Family - Revolving		554,652			1,493			363			882			3,406			560,796
Auto		458,473			1,866			249			241			223			461,052
Consumer		175,943			689			186			120			54			176,992
Other Commercial		605,214			37			0			0			0			605,251
Total LHFI	$	13,134,805		$	15,094		$	5,712		$	9,132		$	31,100		$	13,195,843
% of total loans		99.54	%		0.11	%		0.04	%		0.07	%		0.24	%		100.00	%

-16-

Table of Contents

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.~~

The following table shows the Company’s ~~impaired~~amortized cost basis of loans ~~excluding PCI loans, by segment at September 30, 2017 and~~on nonaccrual status as of December 31, ~~2016~~2021, as well as amortized cost basis of loans on nonaccrual status and loans past due 90 days and still accruing as of March 31, 2022 (dollars in thousands):

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

Nonaccrual

December 31, 2021

March 31, 2022

Nonaccrual With No ALLL

90 Days Past due and still Accruing

Construction and Land Development

2,697

869

Commercial Real Estate - Owner Occupied

5,637

4,865

970

2,396

Commercial Real Estate - Non-Owner Occupied

3,641

3,287

1,089

1,735

Multifamily Real Estate

113

Commercial & Industrial

1,647

1,975

763

Residential 1-4 Family - Commercial

2,285

2,239

878

Residential 1-4 Family - Consumer

11,397

12,039

1,147

Residential 1-4 Family - Revolving

3,406

3,371

1,065

Auto

223

333

192

Consumer

Total LHFI

31,100

29,032

2,061

8,247

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


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

There was 0 interest income recognized ~~for~~on nonaccrual loans during the three months ended March 31, 2022 and 2021. See Note 1 “Summary of Significant Accounting Policies” in the Company’s ~~impaired loans, excluding PCI loans, by segment~~2021 Form 10-K for additional information on the ~~three and nine months ended September 30, 2017 and 2016 (dollars in thousands):~~Company’s policies for nonaccrual loans.

-17-

Table of Contents

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

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

~~The~~

Troubled Debt Restructurings

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

A ~~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 and March 31, 2021, 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~~March 31, 2022 and December 31, ~~2016~~2021 (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
$ —


	March 31, 2022					December 31, 2021
	No. of	Recorded		Outstanding		No. of	Recorded		Outstanding
	Loans	Investment		Commitment		Loans	Investment		Commitment
Performing
Construction and Land Development	4	$	198	$	0	4	$	201	$	0
Commercial Real Estate - Owner Occupied	2		1,020		0	3		572		0
Residential 1-4 Family - Commercial	2		1,589		0	—		—		0
Residential 1-4 Family - Consumer	76		8,839		0	75		9,021		0
Residential 1-4 Family - Revolving	3		263		4	3		265		4
Consumer	2		14		0	2		15		0
Other Commercial	1		234		0	1		239		0
Total performing	90	$	12,157	$	4	88	$	10,313	$	4
Nonperforming
Commercial Real Estate - Owner Occupied	1	$	17	$	0	2	$	830	$	0
Commercial Real Estate - Non-Owner Occupied	3		1,348		0	3		1,357		0
Commercial & Industrial	3		672		0	3		729		0
Residential 1-4 Family - Commercial	3		383		0	3		388		0
Residential 1-4 Family - Consumer	25		5,031		0	24		4,239		0
Residential 1-4 Family - Revolving	3		101		0	3		99		0
Total nonperforming	38	$	7,552	$	0	38	$	7,642	$	0
Total performing and nonperforming	128	$	19,709	$	4	126	$	17,955	$	4

The Company considers a default of a TDR to occur when the borrower is 90 days past due following the restructure or a foreclosure and repossession of the applicable collateral occurs. 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 2021, 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.~~

-18-

Table of Contents

The following table shows, by ~~segment~~class and modification type, TDRs that occurred during the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 and 2021 (dollars in thousands):


	Three Months Ended March 31, 2022			Three Months Ended March 31, 2021
		Recorded			Recorded
	No. of	Investment at		No. of	Investment at
	Loans	Period End		Loans	Period End
Modified to interest only, at a market rate
Residential 1-4 Family - Commercial	1	$	1,334	0	$	0
Total interest only at market rate of interest	1	$	1,334	0	$	0

Term modification, at a market rate
Commercial Real Estate - Owner Occupied	1	$	778	0	$	0
Residential 1-4 Family - Consumer	0		0	2		105
Total loan term extended at a market rate	1	$	778	2	$	105

Term modification, below market rate
Residential 1-4 Family - Commercial	1	$	256	0	$	0
Residential 1-4 Family - Consumer	6		862	9		472
Consumer	0		0	1		16
Total loan term extended at a below market rate	7	$	1,118	10	$	488

Interest rate modification, below market rate
Residential 1-4 Family - Commercial	0	$	0	1	$	45
Total interest only at below market rate of interest	0	$	0	1	$	45

Total	9	$	3,230	13	$	638

-19-

Table of Contents

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

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

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

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~~ALLL activity by loan ~~loss activity, balances for allowance for loan losses, and loan balances based on impairment methodology by~~ segment for the ~~nine~~three months ended March 31, 2022 and as 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 categories2021 (dollars in thousands):


	Three Months Ended March 31, 2022						Three Months Ended March 31, 2021
	Commercial		Consumer		Total		Commercial		Consumer		Total
Balance at beginning of period	$	77,902	$	21,885	$	99,787	$	117,403	$	43,137	$	160,540
Loans charged-off		(759)		(750)		(1,509)		(1,974)		(1,667)		(3,641)
Recoveries credited to allowance		726		787		1,513		1,606		863		2,469
Provision charged to operations		1,902		898		2,800		(10,603)		(5,854)		(16,457)
Balance at end of period	$	79,771	$	22,820	$	102,591	$	106,432	$	36,479	$	142,911

-20-

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

Loans collectively evaluated for

deteriorated credit quality

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

●

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

●

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

●

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

●

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

Watch is determined by ~~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~~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;

•~~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 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.

•~~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.

•~~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.

•~~Risk rated 8~~

-21-

Table of Contents

The table below details the amortized cost of the classes of loans ~~are doubtful of collection and~~within 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,~~Commercial segment by ~~segment with their related~~ risk level and year of origination as of ~~September 30, 2017~~March 31, 2022 (dollars in thousands):

March 31, 2022

Term Loans Amortized Cost Basis by Origination Year

2022

2021

2020

2019

2018

Prior

Revolving Loans

Total

Construction and Land Development

Pass

61,043

485,263

228,686

43,377

38,969

46,520

22,398

926,256

Watch

552

237

10,876

126

3,151

14,942

Special Mention

658

Substandard

279

3,673

218

19,434

3,598

27,203

Total Construction and Land Development

61,322

489,488

228,924

54,471

58,529

53,927

22,398

969,059

Commercial Real Estate - Owner Occupied

Pass

91,850

216,755

273,443

311,840

246,729

720,355

18,716

1,879,688

Watch

700

182

4,012

13,611

10,452

56,869

701

86,527

Special Mention

650

286

9,672

607

9,337

500

21,052

Substandard

200

2,877

1,648

15,037

642

20,404

Total Commercial Real Estate - Owner Occupied

93,200

217,137

277,741

338,000

259,436

801,598

20,559

2,007,671

Commercial Real Estate - Non-Owner Occupied

Pass

184,450

640,903

407,354

519,513

395,907

1,488,880

40,029

3,677,036

Watch

2,152

833

25,867

20,593

50,796

100,254

Special Mention

310

10,583

18,854

20,754

9,394

59,895

Substandard

23,195

400

14,749

152

38,496

Total Commercial Real Estate - Non-Owner Occupied

184,760

643,055

418,770

587,429

437,654

1,563,819

40,194

3,875,681

Commercial & Industrial

Pass

152,567

654,531

406,607

270,464

106,522

167,277

691,191

2,449,159

Watch

373

1,166

5,951

2,556

14,315

4,014

6,583

34,958

Special Mention

492

1,284

7,278

481

1,008

5,493

16,036

Substandard

451

6,548

4,304

15,398

1,730

12,096

40,527

Total Commercial & Industrial

152,940

656,640

420,390

284,602

136,716

174,029

715,363

2,540,680

Multifamily Real Estate

Pass

2,165

63,181

189,952

65,004

113,421

284,473

1,553

719,749

Watch

357

454

436

1,247

Special Mention

2,235

618

2,944

Substandard

Total Multifamily Real Estate

2,165

63,181

192,187

65,979

113,875

285,000

1,553

723,940

Residential 1-4 Family - Commercial

Pass

11,521

104,567

87,934

58,117

42,770

232,124

893

537,926

Watch

2,033

879

7,464

7,930

117

18,423

Special Mention

429

3,440

3,965

Substandard

3,222

528

5,346

299

9,487

Total Residential 1-4 Family - Commercial

11,521

104,659

90,063

62,218

51,191

248,840

1,309

569,801

Other Commercial

Pass

70,632

222,540

162,150

118,741

5,508

78,886

43,320

701,777

Watch

567

5,548

6,115

Special Mention

Substandard

��

234

Total Other Commercial

70,632

222,540

162,150

118,741

6,075

84,668

43,415

708,221

Total Commercial

Pass

574,228

2,387,740

1,756,126

1,387,056

949,826

3,018,515

818,100

10,891,591

Watch

1,073

4,052

13,066

54,146

53,971

128,744

7,414

262,466

Special Mention

960

492

14,484

36,422

22,271

23,928

6,088

104,645

Substandard

279

4,416

6,549

33,816

37,408

40,694

13,189

136,351

Total Commercial

576,540

2,396,700

1,790,225

1,511,440

1,063,476

3,211,881

844,791

11,395,053

-22-

Table of Contents

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~~below details the ~~recorded investment in all~~amortized cost of the classes of loans ~~excluding PCI loans,~~within the Commercial segment by ~~segment with their related~~ risk level and year of origination as of December 31, ~~2016~~2021 (dollars in thousands):


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


	2021		2020		2019		2018		2017		Prior		Revolving Loans		Total
Construction and Land Development
Pass	$	430,764	$	218,672	$	39,937	$	40,128	$	11,299	$	50,908	$	22,996	$	814,704
Watch		395		185		12,923		129		349		4,026		0		18,007
Special Mention		0		0		0		0		0		735		0		735
Substandard		3,541		1		221		19,264		198		5,565		0		28,790
Total Construction and Land Development	$	434,700	$	218,858	$	53,081	$	59,521	$	11,846	$	61,234	$	22,996	$	862,236

Commercial Real Estate - Owner Occupied
Pass	$	222,079	$	279,165	$	321,503	$	263,422	$	179,994	$	555,540	$	19,705	$	1,841,408
Watch		185		18		7,959		10,875		14,648		57,466		702		91,853
Special Mention		0		932		11,826		610		1,052		19,480		507		34,407
Substandard		200		153		7,455		2,538		1,935		14,834		626		27,741
Total Commercial Real Estate - Owner Occupied	$	222,464	$	280,268	$	348,743	$	277,445	$	197,629	$	647,320	$	21,540	$	1,995,409

Commercial Real Estate - Non-Owner Occupied
Pass	$	642,386	$	421,063	$	520,035	$	377,176	$	374,949	$	1,102,193	$	36,568	$	3,474,370
Watch		2,152		841		35,721		39,356		18,242		101,797		14		198,123
Special Mention		0		10,609		25,691		20,119		12,741		4,775		0		73,935
Substandard		0		0		23,376		11,369		0		7,952		252		42,949
Total Commercial Real Estate - Non-Owner Occupied	$	644,538	$	432,513	$	604,823	$	448,020	$	405,932	$	1,216,717	$	36,834	$	3,789,377

Commercial & Industrial
Pass	$	770,662	$	450,478	$	287,926	$	110,710	$	38,395	$	170,857	$	619,583	$	2,448,611
Watch		1,233		9,641		2,766		31,635		1,370		4,405		17,220		68,270
Special Mention		206		935		8,477		1,023		564		561		3,249		15,015
Substandard		379		575		3,636		1,965		463		1,639		1,690		10,347
Total Commercial & Industrial	$	772,480	$	461,629	$	302,805	$	145,333	$	40,792	$	177,462	$	641,742	$	2,542,243

Multifamily Real Estate
Pass	$	63,431	$	187,616	$	108,402	$	114,077	$	66,562	$	228,013	$	1,548	$	769,649
Watch		0		0		359		459		0		522		0		1,340
Special Mention		44		2,248		624		4,517		0		91		0		7,524
Substandard		0		0		0		0		0		113		0		113
Total Multifamily Real Estate	$	63,475	$	189,864	$	109,385	$	119,053	$	66,562	$	228,739	$	1,548	$	778,626

Residential 1-4 Family - Commercial
Pass	$	108,259	$	94,184	$	65,682	$	46,267	$	55,995	$	196,052	$	550	$	566,989
Watch		0		2,041		4,887		7,483		2,415		7,573		311		24,710
Special Mention		0		96		0		436		391		4,126		0		5,049
Substandard		93		0		3,494		536		1,291		4,876		299		10,589
Total Residential 1-4 Family - Commercial	$	108,352	$	96,321	$	74,063	$	54,722	$	60,092	$	212,627	$	1,160	$	607,337

Other Commercial
Pass	$	226,595	$	167,497	$	98,848	$	5,620	$	25,723	$	44,114	$	30,445	$	598,842
Watch		0		0		0		581		1,246		4,341		0		6,168
Special Mention		0		0		0		0		2		0		0		2
Substandard		—		—		—		—		—		239		—		239
Total Other Commercial	$	226,595	$	167,497	$	98,848	$	6,201	$	26,971	$	48,694	$	30,445	$	605,251

Total Commercial
Pass	$	2,464,176	$	1,818,675	$	1,442,333	$	957,400	$	752,917	$	2,347,677	$	731,395	$	10,514,573
Watch		3,965		12,726		64,615		90,518		38,270		180,130		18,247		408,471
Special Mention		250		14,820		46,618		26,705		14,750		29,768		3,756		136,667
Substandard		4,213		729		38,182		35,672		3,887		35,218		2,867		120,768
Total Commercial	$	2,472,604	$	1,846,950	$	1,591,748	$	1,110,295	$	809,824	$	2,592,793	$	756,265	$	11,180,479

-23-

Table of Contents

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

Consumer Loans

For Consumer loans, the Company evaluates credit quality based on the delinquency status of the loan. The following table ~~shows~~details the ~~recorded investment in only PCI~~amortized cost of the classes of loans bywithin the Consumer segment ~~with~~based on their ~~related risk level~~delinquency status and year of origination as of ~~September 30, 2017~~March 31, 2022 (dollars in thousands):


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


	2022		2021		2020		2019		2018		Prior		Revolving Loans		Total
Residential 1-4 Family - Consumer
Current	$	54,254	$	245,445	$	167,608	$	42,408	$	26,370	$	267,973	$	11	$	804,069
30-59 Days Past Due		0		0		972		289		752		3,877		0		5,890
60-89 Days Past Due		0		0		249		66		0		703		0		1,018
90+ Days Past Due		0		0		0		45		0		1,102		0		1,147
Nonaccrual		0		436		0		113		870		10,620		0		12,039
Total Residential 1-4 Family - Consumer	$	54,254	$	245,881	$	168,829	$	42,921	$	27,992	$	284,275	$	11	$	824,163

Residential 1-4 Family - Revolving
Current	$	30,547	$	16,011	$	8,979	$	1,869	$	916	$	482	$	503,355	$	562,159
30-59 Days Past Due		0		0		0		0		0		0		1,157		1,157
60-89 Days Past Due		0		0		0		0		0		0		651		651
90+ Days Past Due		0		0		0		0		0		0		1,065		1,065
Nonaccrual		0		0		61		0		17		0		3,293		3,371
Total Residential 1-4 Family - Revolving	$	30,547	$	16,011	$	9,040	$	1,869	$	933	$	482	$	509,521	$	568,403

Auto
Current	$	75,173	$	201,289	$	111,697	$	64,359	$	27,115	$	18,006	$	0	$	497,639
30-59 Days Past Due		96		371		288		256		160		337		0		1,508
60-89 Days Past Due		0		0		54		107		15		7		0		183
90+ Days Past Due		0		47		40		40		36		29		0		192
Nonaccrual		0		55		163		43		24		48		0		333
Total Auto	$	75,269	$	201,762	$	112,242	$	64,805	$	27,350	$	18,427	$	0	$	499,855

Consumer
Current	$	14,212	$	21,042	$	14,440	$	33,778	$	26,135	$	25,747	$	35,729	$	171,083
30-59 Days Past Due		0		21		56		115		113		150		12		467
60-89 Days Past Due		0		3		15		48		106		29		0		201
90+ Days Past Due		0		3		0		10		40		0		17		70
Nonaccrual		0		0		0		0		0		54		0		54
Total Consumer	$	14,212	$	21,069	$	14,511	$	33,951	$	26,394	$	25,980	$	35,758	$	171,875

Total Consumer
Current	$	174,186	$	483,787	$	302,724	$	142,414	$	80,536	$	312,208	$	539,095	$	2,034,950
30-59 Days Past Due		96		392		1,316		660		1,025		4,364		1,169		9,022
60-89 Days Past Due		0		3		318		221		121		739		651		2,053
90+ Days Past Due		0		50		40		95		76		1,131		1,082		2,474
Nonaccrual		0		491		224		156		911		10,722		3,293		15,797
Total Consumer	$	174,282	$	484,723	$	304,622	$	143,546	$	82,669	$	329,164	$	545,290	$	2,064,296

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

-24-

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

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.

Table 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 4 to 1410 years, using an accelerated method. Other amortizable intangible assets are being amortized over the period of expected benefit, which ranges from 54 to 10 years, using ~~a straight-line method.~~

~~In accordance with ASC 350,~~ ~~Intangibles-Goodwill and Other,~~ ~~the Company reviews the carrying value of indefinite lived intangible assets at least annually or more frequently if certain impairment indicators exist.~~ various methods.

The Company ~~performed its annual impairment testing in the second quarter of 2017 and~~ determined that there was no0 impairment to its goodwill or intangible assets.

In the normal course of business, the Company routinely monitors the impact of the changes in the financial markets and includes these assessments in the Company’s goodwill impairment process.

The Company analyzed its intangible assets at March 31, 2022 and concluded 0 impairment existed as of the balance sheet date. Amortization expense of ~~core deposit~~ intangibles for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 and 2021 totaled ~~$1.4~~$3.0 million and ~~$4.3~~$3.7 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, 2022, the estimated remaining amortization expense of intangibles is as follows for the years ending (dollars in thousands):


For the remaining nine months of 2022	$	8,452
2023		9,687
2024		7,820
2025		6,221
2026		4,420
Thereafter		3,673
Total estimated amortization expense	$	40,273

-26-

Table of Contents

5. LEASES

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

Lessor Arrangements

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

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

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

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


	March 31, 2022		December 31, 2021
Sales-type and direct financing leases:
Lease receivables, net of unearned income and deferred selling profit	$	196,601	$	199,423
Unguaranteed residual values, net of unearned income and deferred selling profit		8,840		8,911
Total net investment in sales-type and direct financing leases	$	205,441	$	208,334

Lessee Arrangements

The Company’s lessee arrangements consist of operating and finance leases; however, the majority of the leases have been classified as non-cancellable operating leases and are primarily for real estate leases with remaining lease terms of up to 24 years. The Company’s real estate lease agreements do not contain residual value guarantees and most agreements do not contain restrictive covenants. The Company does not have any material arrangements where the Company is in a sublease contract.

Lessee arrangements with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets. The ROU assets and lease liabilities associated with operating and finance leases greater than 12 months are recorded in the Company’s Consolidated Balance Sheets; ROU assets within “Other assets” and lease liabilities within “Other liabilities”. ROU assets represent the Company’s right to use an underlying asset over the course of the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The initial measurement of lease liabilities and ROU assets are the same for operating and finance leases. Lease liabilities are recognized at the commencement date based on the present value of the remaining lease payments, discounted using the incremental borrowing rate. As most of the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. ROU assets are recognized at commencement date based on the initial measurement of the lease liability, any lease payments made excluding lease incentives, and any initial direct costs incurred. Most of the Company’s operating leases include one or more options to renew and if the Company is reasonably certain to exercise those options, it would be included in the measurement of the operating ROU assets and lease liabilities.

-27-

Table of Contents

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

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


	March 31, 2022						December 31, 2021
	Operating			Finance			Operating			Finance
ROU assets	$	35,237		$	6,277		$	40,653		$	6,506
Lease liabilities		48,304			9,183			50,742			9,477
Lease Term and Discount Rate of Operating leases:
Weighted-average remaining lease term (years)		6.62			6.83			6.75			7.08
Weighted-average discount rate ⁽¹⁾		2.58	%		1.17	%		2.57	%		1.17	%

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


	Three months ended March 31,
	2022		2021
Cash paid for amounts included in measurement of lease liabilities:
Operating Cash Flows from Finance Leases	$	27	$	30
Operating Cash Flows from Operating Leases		2,891		3,015
Financing Cash Flows from Finance Leases		294		283
ROU assets obtained in exchange for lease obligations:
Operating leases	$	143	$	1,820

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


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

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


	March 31, 2022
	Lessor		Lessee
		Sales-type and Direct Financing	Operating		Finance
For the remaining nine months of 2022	$	37,728	$	8,515	$	971
2023		47,004		10,400		1,325
2024		45,782		9,274		1,358
2025		33,791		7,017		1,392
2026		18,920		4,494		1,427
Thereafter		30,846		13,326		3,088
Total undiscounted cash flows		214,071		53,026		9,561
Less: Adjustments ⁽¹⁾		17,470		4,722		378
Total ⁽²⁾	$	196,601	$	48,304	$	9,183

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

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

-28-

Table of Contents

6. BORROWINGS

Short-term Borrowings

The Company classifies all borrowings that will mature within a year from the date on which the Company enters into them as short-term borrowings. Total short-term borrowings consist primarily of securities sold under agreements to repurchase, which are secured transactions with customers and generally mature the day following the date sold, advances from the FHLB, federal funds purchased (which are secured overnight borrowings from other financial institutions), and other lines of credit. ~~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, 2022 and December 31, ~~2016~~2021 (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,
	2022			2021
Securities sold under agreements to repurchase	$	115,027		$	117,870
Federal Funds Purchased		0			0
FHLB Advances		0			0
Total short-term borrowings	$	115,027		$	117,870

Average outstanding balance during the period	$	113,500		$	113,030
Average interest rate during the period		0.08	%		0.10	%
Average interest rate at end of period		0.09	%		0.07	%

The Bank maintains federal funds lines with several correspondent ~~banks;~~banks, the ~~remaining~~ available balance was ~~$185.0 million and $175.0~~$997.0 million at ~~September 30, 2017~~both March 31, 2022 and December 31, ~~2016, respectively.~~2021. 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, 2022 and December 31, ~~2016.~~2021. 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, 2022 and December 31, 2021. Additionally, the Company had a collateral dependent line of credit with the FHLB of up to ~~$2.7 billion and $2.4~~$6.0 billion at ~~September 30, 2017~~both March 31, 2022 and December 31, ~~2016, respectively.~~

2021.

Long-term Borrowings

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

In connection with ~~two~~several previous bank acquisitions, ~~prior to 2006,~~ the Company issued $58.5 million and acquired $87.0 million of trust preferred capital ~~notes to fund the cash portion of those acquisitions, collectively totaling $58.5 million. In~~notes. Most recently, in connection with the acquisition of ~~StellarOne,~~Access on February 1, 2019, the Company acquired additional trust preferred capital notes totaling $5.0 million. The remaining fair value discount on all acquired trust preferred capital notes ~~totaling $32.0~~was $13.1 million ~~with a remaining fair value discount of $6.5~~and $13.3 million at ~~September 30, 2017. The trust preferred capital notes currently qualify for Tier 1 capital~~March 31, 2022 and December 31, 2021, respectively.

-29-

Table of Contents

Total long-term borrowings consist of the ~~Company for regulatory purposes.~~

following as of March 31, 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

3.71

6/17/2034

696

Trust Preferred Capital Note - Statutory Trust II

36,000

1.40

2.36

6/15/2036

1,114

VFG Limited Liability Trust I Indenture

20,000

2.73

3.69

3/18/2034

619

FNB Statutory Trust II Indenture

12,000

3.10

4.06

6/26/2033

372

Gateway Capital Statutory Trust I

8,000

3.10

4.06

9/17/2033

248

Gateway Capital Statutory Trust II

7,000

2.65

3.61

6/17/2034

217

Gateway Capital Statutory Trust III

15,000

1.50

2.46

5/30/2036

464

Gateway Capital Statutory Trust IV

25,000

1.55

2.51

7/30/2037

774

MFC Capital Trust II

5,000

2.85

3.81

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⁾

(16,154)

Investment in Trust Preferred Capital Securities

4,659

Total Long-term Borrowings

389,005

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⁾Rate as of March 31, 2022. Calculated using non-rounded numbers.

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

~~During the fourth quarter~~

⁽³⁾The remaining issuance discount as of ~~2016,~~March 31, 2022 is $3.0 million.

⁽⁴⁾Subordinated notes qualify as Tier 2 capital for the Company ~~issued $150.0 million of fixed-to-floating~~for regulatory purposes.

⁽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 in~~date. The notes may be redeemed before maturity on or after December 15, 2026. ~~At September 30, 2017~~

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

-30-

Table of Contents

Total long-term borrowings consist of the following as of December 31, ~~2016, the carrying value~~2021 (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	%	2.96	%	6/17/2034	$	696
Trust Preferred Capital Note - Statutory Trust II		36,000	1.40	%	1.61	%	6/15/2036		1,114
VFG Limited Liability Trust I Indenture		20,000	2.73	%	2.94	%	3/18/2034		619
FNB Statutory Trust II Indenture		12,000	3.10	%	3.31	%	6/26/2033		372
Gateway Capital Statutory Trust I		8,000	3.10	%	3.31	%	9/17/2033		248
Gateway Capital Statutory Trust II		7,000	2.65	%	2.86	%	6/17/2034		217
Gateway Capital Statutory Trust III		15,000	1.50	%	1.71	%	5/30/2036		464
Gateway Capital Statutory Trust IV		25,000	1.55	%	1.76	%	7/30/2037		774
MFC Capital Trust II		5,000	2.85	%	3.06	%	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⁾		(16,435)
Investment in Trust Preferred Capital Securities		4,659
Total Long-term Borrowings	$	388,724

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

⁽²⁾ 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 ~~was $150.0 million,~~securities with ~~a remaining discount of $1.8 million, respectively.~~

~~On August 23, 2012,~~like maturities and like interest rates to the ~~Company modified its fixed rate FHLB advances to floating rate advances, which resulted~~capital securities. The Company’s investment 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~~trusts 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,~~2021 is $3.1 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. The notes may be redeemed before maturity on ~~the carrying value~~or after December 15, 2026.

⁽⁶⁾ Remaining discounts of ~~loans~~$13.3 million and ~~securities pledged as collateral~~$3.1 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, 2022, 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 2022

(858)

2023

(1,162)

2024

(1,187)

2025

(1,211)

2026

(1,236)

Thereafter

155,159

250,000

(10,500)

394,659

Total long-term borrowings

155,159

250,000

(16,154)

389,005

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 issued subordinated notes.

-31-

Table of Contents

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.

In ~~addition to the Rowe Lawsuit, in~~ the ordinary course of its operations, the Company and its subsidiaries are ~~parties~~involved in various legal and regulatory proceedings. The amount, if any, of the ultimate liability with respect to ~~various other legal proceedings. Based~~such matters cannot be determined. Despite the uncertainties of such litigation and investigations, and based on the information presently available, and after consultation with legal counsel, management believes that the ultimate outcome in such ~~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.~~

Company, subject to the potential outcomes of disclosed matters. There have been no material changes with respect to the Company’s previously disclosed proceedings.

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, 2022 and December 31, ~~2016,~~2021, the ~~Company's reserves for off-balance sheet credit risk~~Company’s RUC and indemnification ~~were $1.1 million and are reported as a component of "Other Liabilities" on the Company's Consolidated Balance Sheets.~~

reserve was $8.4 million.

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 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):

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.


	March 31, 2022		December 31, 2021
Commitments with off-balance sheet risk:
Commitments to extend credit ⁽¹⁾	$	6,140,109	$	5,825,557
Letters of credit		159,740		152,506
Total commitments with off-balance sheet risk	$	6,299,849	$	5,978,063
⁽¹⁾Includes unfunded overdraft protection.

As of ~~September 30, 2017,~~March 31, 2022, the Company had approximately ~~$45.4~~$218.8 million in deposits in other financial institutions of which ~~$23.8~~$147.4 million served as collateral for cash flow and loan swap derivatives. As of December 31, 2021, the Company had approximately $187.4 million in deposits in other financial institutions of which $82.3 million served as collateral for the Company’s derivative interest rate contracts. The Company had approximately ~~$20.3~~$67.9 million and $102.0 million in deposits in other financial institutions that were uninsured at ~~September 30, 2017.~~March 31, 2022 and December 31, 2021, 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 OTC 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” in Part I, Item I of this Quarterly Report for additional information.

-32-

~~As part~~

Table of ~~the Company's liquidity management strategy, it~~Contents

The Company pledges collateral to secure various financing and other activities that occur during the normal course of ~~business.~~business as part of the liquidity management strategy. The following tables present the types of collateral pledged at ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016~~2021 (dollars in thousands):


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


	Pledged Assets as of December 31, 2021
			AFS		HTM
	Cash		Securities ⁽¹⁾		Securities ⁽¹⁾		Loans ⁽²⁾		Total
Public deposits	$	0	$	703,489	$	472,243	$	0	$	1,175,732
Repurchase agreements		0		130,217		0		0		130,217
FHLB advances		0		43,722		0		4,263,259		4,306,981
Derivatives		82,299		65,053		0		0		147,352
Fed Funds		0		0		0		392,067		392,067
Other purposes		0		22,003		985		0		22,988
Total pledged assets	$	82,299	$	964,484	$	473,228	$	4,655,326	$	6,175,337

⁽¹⁾Balance represents market value.
⁽²⁾Balance represents book value.

-33-

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

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 OTC derivatives with central clearinghouses through FCMs due to applicable regulatory requirements, which reduces the Company’s counterparty risk.

The Company also enters into legally enforceable master netting agreements and collateral agreements, where possible, with certain derivative counterparties to mitigate the risk of default on a bilateral basis. These bilateral agreements typically provide the right to offset exposures and require one counterparty to post collateral on derivative instruments in a net liability position to the other counterparty. For the OTC 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 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, 2022 and December 31, 2021, 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.~~

$500 million. For each agreement, the Company receives interest at a fixed rate and pays at a variable rate.

Fair Value ~~Hedge~~

Table of Contents

AFS Securities: The Company has entered into a swap agreement to hedge the interest rate risk on a portion of its fixed rate AFS securities. At March 31, 2022 and December 31, 2021, the aggregate notional amount of the related hedged items of the AFS securities totaled $50.0 million and the fair value of the swaps associated with the derivative related to hedged items was an unrealized loss of ~~$597,000~~$1.2 million and ~~$890,000,~~$4.1 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 Company enters into commitments to originate mortgage loans whereby the interest rate on 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 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” on the Company’s Consolidated Balance Sheets; the 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 recorded in current period earnings as a component of “Mortgage banking income, net” 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, 2022 and December 31, ~~2016,~~2021, segregated by derivatives that are considered accounting hedges and those that are not (dollars in thousands):

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
—

March 31, 2022

December 31, 2021

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

500,000

—

500,000

Fair value hedges

137,410

597

1,397

138,606

5,387

Derivatives not designated as accounting hedges:

Interest rate contracts⁽³⁾

5,324,908

23,506

90,632

5,017,574

73,696

49,051

⁽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.

-35-

~~For information regarding collateral pledged on derivative instruments, see Note 6 “Commitments~~

Table of Contents

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

March 31, 2022

December 31, 2021

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)}

105,162

1,154

112,562

4,051

Loans

87,410

(4,369)

88,606

546

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

⁽²⁾Carrying value represents amortized cost.

-36-

Table of Contents

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

9. STOCKHOLDERS’ EQUITY

Series A Preferred Stock

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

Repurchase Programs

On December 10, 2021, the Company’s Board of Directors authorized a new share Repurchase Program (the “Repurchase Program”) to purchase up to $100.0 million of the Company’s common stock through December 9, 2022 in open market transactions or privately negotiated transactions, including pursuant to a trading plan in accordance with Rule 10b5-1 and / or Rule 10b-18 under the Exchange Act. During the quarter ended March 31, 2022, the Company repurchased an aggregate of approximately 630,000 shares (or $25.0 million), at an average price of $39.73. NaN shares were repurchased during the quarter ended December 31, 2021.

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, 2022 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

Gains (Losses)

Securities

Change in Fair

Gains

on AFS

Transferred to

Value of Cash

(Losses) on

Securities

HTM

Flow Hedge

BOLI

Total

Balance - December 31, 2021

22,763

(1,567)

(2,596)

18,635

Other comprehensive income (loss):

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 income (loss)

(186,967)

(5)

(23,313)

167

(210,118)

Balance - March 31, 2022

(164,204)

(24,880)

(2,429)

(191,483)

The change in ~~accumulated other comprehensive income (loss)~~AOCI for the three ~~and nine~~ months ended ~~September 30, 2016~~March 31, 2021 is summarized as follows, net of tax (dollars in thousands):


			Unrealized Gain
			(Losses)
	Unrealized		for AFS				Unrealized
	Gains (Losses)		Securities		Change in Fair		Gains
	on AFS		Transferred to		Value of Cash		(Losses)
	Securities		HTM		Flow Hedge		on BOLI		Total
Balance - December 31, 2020	$	74,161	$	55	$	0	$	(3,201)	$	71,015
Cumulative effects from adoption of new accounting standard
Other comprehensive income (loss):
Other comprehensive loss before reclassification		(33,125)		0		(1,428)		0		(34,553)
Amounts reclassified from AOCI into earnings		(62)		(5)		(47)		153		39
Net current period other comprehensive income (loss)		(33,187)		(5)		(1,475)		153		(34,514)
Balance - March 31, 2021	$	40,974	$	50	$	(1,475)	$	(3,048)	$	36,501

-37-

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~~, 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”, 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. 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 valuations are validated by the Company using ~~Bloomberg Valuation Service’s~~BVAL derivative pricing functions. No material differences were identified during the validation as of March 31, 2022 and December 31, 2021. 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, 2022 and December 31, ~~2016. The interest rate lock commitments are recorded as~~2021 did not have a ~~component of “Other Assets”~~material 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.

-38-

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 ~~Bloomberg Valuation Service,~~BVAL an independent information source that draws on quantitative models and market data contributed from over 4,000 market participants, to validate third party valuations. Any material differences between valuation sources are researched by further analyzing the various inputs that are utilized by each pricing source. No material differences were identified during the validation as of ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016.~~

2021.

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, 2022 and December 31, ~~2016~~2021 (dollars in thousands):

Fair Value Measurements at March 31, 2022 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

60,702

7,337

68,039

Obligations of states and political subdivisions

888,300

Corporate and other bonds⁽¹⁾

183,923

MBS

2,051,373

Other securities

1,645

LHFS

21,227

Derivatives:

Interest rate contracts

23,506

Fair value hedges

597

LIABILITIES

Derivatives:

Interest rate contracts

90,632

Fair value hedges

1,397

⁽¹⁾ Other bonds include asset-backed securities.

-39-

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

~~Other real estate owned~~

Cash and ~~cash equivalents~~

~~Held to Maturity~~

HTM Securities

Table of Contents

The Company primarily uses ~~Bloomberg Valuation Service,~~BVAL, an independent information source that draws on quantitative models and market data contributed from over 4,000 market participants, to validate third party valuations. Any material differences between valuation sources are researched by further analyzing the various inputs that are utilized by each pricing source. No material differences were identified during the validation as of ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016.~~

2021. The Company’s Level 3 securities are a result of the Access 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 considerations for the complexity of the instrument, likelihood it will be called and credit ratings. The Company reviews the valuation of both security types for reasonableness in the context of market conditions and to similar bonds in the Company’s portfolio. Any material differences between valuation sources are researched by further analyzing the various inputs that are utilized by each pricing source. No material differences were identified during the validation as of March 31, 2022 and December 31, 2021.

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, 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.

-41-

Table of Contents

The carrying values and estimated fair values of the Company’s financial instruments at ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016~~2021 are as follows (dollars in thousands):

Fair Value Measurements at March 31, 2022 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

396,303

AFS securities

3,193,280

60,702

3,132,578

3,193,280

HTM securities

756,872

753,401

6,776

760,177

Restricted stock

77,033

LHFS

21,227

Net loans

13,356,758

13,122,875

Derivatives:

Interest rate contracts

23,506

Fair value hedges

597

Accrued interest receivable

62,852

BOLI

434,012

LIABILITIES

Deposits

16,484,223

16,499,674

Borrowings

504,032

488,385

Accrued interest payable

2,774

Derivatives:

Interest rate contracts

90,632

Fair value hedges

1,397


	Fair Value Measurements at December 31, 2021 using
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable		Total Fair
			Identical Assets		Inputs		Inputs		Value
	Carrying
	Value		Level 1		Level 2		Level 3		Balance
ASSETS
Cash and cash equivalents	$	802,501	$	802,501	$	0	$	0	$	802,501
AFS securities		3,481,650		64,474		3,417,176		0		3,481,650
HTM securities		628,000		0		686,733		7,041		693,774
Restricted stock		76,825		0		76,825		0		76,825
LHFS		20,861		0		20,861		0		20,861
Net loans		13,096,056		0		0		12,861,274		12,861,274
Derivatives:
Interest rate contracts		73,696		0		73,696		0		73,696
Accrued interest receivable		65,015		0		65,015		0		65,015
BOLI		431,517		0		431,517		0		431,517

LIABILITIES
Deposits	$	16,611,068	$	0	$	16,630,087	$	0	$	16,630,087
Borrowings		506,594		0		488,796		0		488,796
Accrued interest payable		933		0		933		0		933
Derivatives:
Interest rate contracts		49,051		0		49,051		0		49,051
Fair value hedges		5,387		0		5,387		0		5,387

-42-

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

Table of Contents

11. REVENUE

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

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

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

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


	Three Months Ended
	March 31,		March 31,
	2022		2021
Noninterest income:
Deposit Service Charges ⁽¹⁾:
Overdraft fees	$	4,994	$	3,081
Maintenance fees & other		2,602		2,428
Other service charges, commissions, and fees ⁽¹⁾		1,655		1,701
Interchange fees⁽¹⁾		1,810		1,847
Fiduciary and asset management fees ⁽¹⁾:
Trust asset management fees		3,391		2,908
Registered advisor management fees		2,660		2,327
Brokerage management fees		1,204		1,240
Mortgage banking income		3,117		8,255
Bank owned life insurance income		2,697		2,265
Loan-related interest rate swap fees		3,860		1,754
Other operating income		2,163		3,179
Total noninterest income	$	30,153	$	30,985

⁽¹⁾Income within scope of Topic 606.

~~10.~~

-44-

Table of Contents

12. 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, 2022 and ~~2016~~2021 (dollars in thousands except per share data):


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


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

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

-45-

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. SEGMENT REPORTING DISCLOSURES~~

~~UNION BANKSHARES CORPORATION AND SUBSIDIARIES~~

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

Table of Contents

~~Review~~

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, 2022, 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, 2022 and ~~2016, and~~2021, the consolidated statements of changes in ~~stockholders’ equity and~~ cash flows for the ~~nine-month~~three-month periods ended ~~September 30, 2017~~March 31, 2022 and ~~2016. These~~2021, 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, 2021, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes (not presented herein); and in our report dated February 25, 2022, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2021, 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 5, 2022

~~November 7, 2017~~

-47-

Table of Contents

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 of ~~Union Bankshares Corporation and its subsidiaries (collectively,~~ the ~~“Company”).~~Company. This discussion and analysis should be read 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~~2021 Form 10-K, including ~~management’s discussion~~the “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 U.S. GAAP. These non-GAAP financial measures are a supplement to GAAP, which is used to prepare the Company’s financial statements, and should not be considered in isolation or as a substitute for comparable measures calculated in accordance with GAAP. In addition, the Company’s non-GAAP financial measures may not be comparable to non-GAAP financial measures of other companies. The Company 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 financial measures in accordance with GAAP.

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 future interest rate environments and potential impacts on the Company’s net interest margin, future economic conditions, and the impacts of the COVID-19 pandemic, 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,” or words of similar meaning or other statements concerning opinions or judgment of the Company and its management about future events. Although the Company believes that its expectations with respect to forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual future results, performance, or achievements of, or trends affecting, the Company 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 the impacts on macroeconomic conditions, customer and client behavior and the Company’s funding costs;

●

higher inflation and its impacts;

●

general economic and financial market conditions, in the United States generally and particularly in the markets in which the Company operates and which its loans are concentrated, including the effects of declines in real estate values, an increase in unemployment levels and slowdowns in economic growth, including as a result of COVID-19;

●

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

●

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

●

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

●

the effectiveness of expense reduction plans;

●

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

●

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

-48-

Table of Contents

●

real estate values in the Bank’s lending area;

●

an insufficient ACL;

●

changes in accounting principles, including, without limitation, relating to the CECL methodology;

●

the Company’s liquidity and capital positions;

●

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;

●

the Company’s 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;

●

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

●

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

●

the discontinuation of LIBOR and its impact on the financial markets, and the Company’s 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 the Company’s counterparties or vendors;

●

deposit flows;

●

the availability of financing and the terms thereof;

●

the level of prepayments on loans and MBS;

●

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

●

potential claims, damages, and fines related to litigation or government actions, including litigation or actions arising from the Company’s participation in and administration of programs related to COVID-19, including, among other things, under the CARES Act, as amended by the CAA, and other legislative and regulatory reactions to COVID-19;

●

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

●

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

●

changes to applicable accounting principles and guidelines; and

●

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

Please refer to the ~~possibility that any~~“Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections 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~~2021 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 should be considered in evaluating forward-looking statements, all of the forward-looking statements made in this report are expressly qualified by the cautionary statements contained or referred to in this Quarterly Report. The actual results or developments anticipated may not be realized or, even if substantially realized, they may not have the expected consequences to or effects on the Company or its 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~~Forward-looking statements speak only as of the date they are made, and the Company does 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

AND ESTIMATES

The 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 estimates, assumptions, and judgments made to arrive at the carrying value of

-49-

Table of Contents

assets and liabilities and amounts reported for revenues, expenses, and related disclosures. Different assumptions in the application of these policies could result in material changes in the Company’s consolidated financial position and/or results of operations. The Company evaluates its critical accounting estimates and assumptions on an ongoing basis and updates them as needed. Management has discussed the Company’s critical accounting policies and estimates with the Audit Committee of the Board of ~~Directors.~~

Directors of the Company.

The critical accounting and reporting policies include the Company’s accounting for the ~~allowance for loan losses,~~ALLL, acquired loans, and ~~goodwill and intangible assets.~~goodwill. 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~~2021 Form 10-K.

The Company provides additional information on its critical accounting policies and estimates ~~listed above~~ under ~~“Management's~~“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” in its ~~2016~~2021 Form 10-K and in Note 1 “Summary of Significant Accounting Policies” in Part I, Item 1 of this Quarterly Report.

RECENT ACCOUNTING PRONOUNCEMENTS (ISSUED BUT NOT FULLY ADOPTED)

In March 2022, the FASB issued ASU No. 2022-02 “Financial Instruments- Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures.” This guidance eliminates the accounting guidance for TDRs by creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. In addition, for public business entities, the amendments require disclosure of current period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20. The amendments are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption of the amendments is permitted if ASU 2016-13 has been adopted, including adoption in an interim period. The Company is evaluating the impact ASU No. 2022-02 will have on its consolidated financial statements.

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

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

The Company may incorporate other components of Topic 848 at a later date as it continues to evaluate the remaining components of Topic 848 and its impact to the Company.

ABOUT ATLANTIC UNION BANKSHARES CORPORATION

Headquartered in Richmond, Virginia, Atlantic Union Bankshares Corporation ~~is the largest community banking organization headquartered in Virginia and operates in all major banking markets of the Commonwealth. Union Bankshares Corporation~~(Nasdaq: 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~~114 branches and approximately ~~173 ATMs. Non-bank~~130 ATMs located throughout Virginia, and in

-50-

Table of Contents

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; Dixon, Hubard, Feinour & Brown, Inc., which provides investment advisory services; Atlantic Union Financial Consultants, LLC, which provides brokerage services; and Union Insurance Group, LLC, which offers various lines of insurance ~~products; and Old Dominion Capital Management, Inc., which provides investment advisory services.~~

products.

Shares of the Company’s common stock are traded on the ~~NASDAQ~~Nasdaq Global Select Market 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.

RESULTS OF OPERATIONS

~~Executive Overview~~

~~For~~

SIGNIFICANT ACTIVITIES

Strategic Initiatives

During the fourth quarter of 2021, the Company took certain actions to reduce expenses in light of the period's prevailing and expected operating environment, including the closure of the Company’s operations center and consolidation of 16 branches, all of which were completed in March 2022. These actions resulted in restructuring expenses in the first quarter of 2022 of approximately $5.5 million, compared to $16.5 million in the quarter ended ~~September 30, 2017,~~December 31, 2021. Restructuring expenses in the first quarter of 2022 primarily related to lease and other asset write downs, as well as severance costs.

Share Repurchase Program

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

COVID-19 UPDATE

The Company’s financial performance generally, and in particular the ability of its borrowers to repay their loans, the value of collateral securing those loans, as well as demand for loans and other products and services the Company ~~reported net income~~offers, is highly dependent on the business environment in its primary markets where it operates and in the United States as a whole. COVID has had, and may have in the future, a wide range of ~~$20.7 million~~economic impacts nationally and ~~earnings per share~~in the Company’s primary markets. The Company will carefully monitor any future economic impacts attributable to the COVID-19 pandemic and potential impact on the Company’s borrowers and their ability to repay loans.

Since the start of ~~$0.47. Excluding after-tax merger-related costs~~the pandemic, the Company has taken and is continuing to take precautions to protect the safety and well-being of ~~$661,000, net~~the Bank’s employees and customers during COVID-19. The Bank has implemented additional safety policies and procedures and follows guidance issued by the Centers for Disease Control and Prevention, state health authorities, and state and local executive orders where our branches and corporate offices are located. The Bank remains very focused on the safety and well-being of its employees and customers during COVID-19 and is committed to safely and responsibly operating ~~earnings~~⁽¹⁾ ~~were $21.3 million~~its branch network and ~~operating earnings per share~~⁽¹⁾ ~~were $0.49 for~~maintaining appropriate staffing in each branch.

COVID-19 has adversely affected the ~~third~~Company’s business, financial condition, and results of operations since the first quarter of ~~2017.~~2020. The ~~Company's net operating earnings~~duration, nature and ~~operating earnings per share for~~severity of future impacts of COVID-19 on the ~~third~~Company’s operational and financial performance will depend on future developments with respect to COVID-19, many of which remain highly uncertain and cannot be predicted.

SUMMARY OF QUARTERLY FINANCIAL RESULTS

Net Income and Performance Metrics

●

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

-51-

Table of Contents

●

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

Balance Sheet

●

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

●

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

●

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

Net Interest Income


	For the Three Months Ended
	March 31,
	2022			2021			Change

	(Dollars in thousands)
Average interest-earning assets	$	17,885,018		$	17,692,095		$	192,923
Interest and dividend income	$	138,456		$	147,673		$	(9,217)
Interest and dividend income (FTE) ⁽⁺⁾	$	141,792		$	150,726		$	(8,934)
Yield on interest-earning assets		3.14	%		3.39	%		(25)	bps
Yield on interest-earning assets (FTE) ⁽⁺⁾		3.22	%		3.46	%		(24)	bps
Average interest-bearing liabilities	$	11,797,999		$	12,065,807		$	(267,808)
Interest expense	$	7,525		$	12,775		$	(5,250)
Cost of interest-bearing liabilities		0.26	%		0.43	%		(17)	bps
Cost of funds		0.18	%		0.30	%		(12)	bps
Net interest income	$	130,931		$	134,898		$	(3,967)
Net interest income (FTE) ⁽⁺⁾	$	134,267		$	137,951		$	(3,684)
Net interest margin		2.97	%		3.09	%		(12)	bps
Net interest margin (FTE) ⁽⁺⁾		3.04	%		3.16	%		(12)	bps

For the first quarter of 2017 represent an increase of $918,000, or 4.5%, over net income and an increase of $0.02, or 4.3%, over earnings per share, in each case compared to the third quarter of 2016. These increases are primarily attributable to increases in2022, net interest income ~~driven by higher average loan balances partially offset by~~was $130.9 million, a decrease of $4.0 million from the ~~impact~~first quarter of 2021. For the ~~decline in~~first quarter of 2022, net interest ~~margin.~~

~~For the nine months ended September 30, 2017, the Company reported net~~ income (FTE)⁽⁺⁾ was $134.3 million, a decrease of ~~$57.7~~$3.7 million ~~and earnings per share of $1.32. Excluding after-tax merger-related costs of $3.0 million, net operating earnings~~⁽¹⁾ ~~were $60.8 million and operating earnings per share~~⁽¹⁾ ~~were $1.39 for~~from the first ~~nine months~~quarter of ~~2017. The Company's net operating earnings and operating earnings per share for~~2021. In the first ~~nine months~~quarter of ~~2017 represent an increase~~2022, net interest margin decreased 12 bps to 2.97% from 3.09% in the first quarter of ~~$4.1 million, or 7.2%, over~~2021, and net ~~income and an increase of $0.10, or 7.8%, over earnings per share, in each case~~interest margin (FTE)⁽⁺⁾ also decreased 12 bps 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:~~

2021. 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.


•	Net income for the community bank segment was $20.3 million, or $0.46 per share, for the third 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.~~


•	Net income for the community bank segment was $56.8 million, or $1.30 per share, for the nine months ended September 30, 2017 compared to $55.3 million, or $1.26 per share, for 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 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 compared to 1.00% for the third quarter of 2016. Operating ROA~~⁽¹⁾ ~~for the quarter ended September 30, 2017 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%.~~


•	~~ROE was 7.90% for the quarter ended September 30, 2017 compared to 8.14% for the third quarter 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%.~~

•

~~ROTCE was 11.34% for the quarter ended September 30, 2017 compared to 12.00% for the third quarter 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 compared to 11.25% for the nine months ended September 30, 2016. Operating ROTCE~~⁽¹⁾ ~~for the nine months ended September 30, 2017 was 11.47%.~~

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 to 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 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 measure 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 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, net interest income was $71.2 million, an increase of $4.2 million from the third quarter of 2016. For the third quarter 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 decreasesdeclines in net interest margin and ~~tax-equivalent~~ net interest margin (FTE)⁽⁺⁾measures were primarily the result of a decline in loan yields driven by ~~the 26 basis point increase in cost of funds,~~lower PPP interest income and fees and lower prepayment activity, which drove lower accretion from acquisition accounting fair value adjustments. These decreases were partially offset by higher investment interest income due to growth in the ~~9 basis point increase in interest-earning asset yields. The increase~~average balance of the investment portfolio and by a decrease in the cost of funds ~~was primarily attributable~~driven by a reduction in deposit costs and lower borrowing costs.

On March 16, 2022, the FOMC increased its Federal Funds target rates to ~~subordinated debt that the Company issued in the fourth quarter~~its current range 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~~0.25% 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~~0.5%, which was the first ~~nine months of 2017, net interest income was $206.8 million,~~increase since December 2018. The FOMC also forecasted potential further increases throughout the year. The Company anticipates that this will result in 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, bothexpansion on its net interest margin due to the Company’s asset-sensitive position at March 31, 2022. Refer to “Quantitative and ~~tax-equivalent net~~Qualitative Disclosures about Market Risk” in Part II, Item 3 of this Quarterly Report for additional information about the Company’s interest ~~margin decreased 18 basis points compared the first nine months~~rate sensitivity.

-52-

Table 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.Contents

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:

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


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

	(Dollars in thousands)
Assets:
Securities:
Taxable	$	2,617,156	$	13,666	2.12	%	$	1,906,585	$	10,353	2.20	%
Tax-exempt		1,581,426		13,240	3.40	%		1,302,792		11,693	3.64	%
Total securities		4,198,582		26,906	2.60	%		3,209,377		22,046	2.79	%
Loans, net ⁽³⁾		13,300,789		114,602	3.49	%		14,064,123		128,122	3.69	%
Other earning assets		385,647		284	0.30	%		418,595		558	0.54	%
Total earning assets		17,885,018	$	141,792	3.22	%		17,692,095	$	150,726	3.46	%
Allowance for credit losses		(100,342)						(157,802)
Total non-earning assets		2,135,692						2,152,561
Total assets	$	19,920,368					$	19,686,854
Liabilities and Stockholders' Equity:
Interest-bearing deposits:
Transaction and money market accounts	$	8,376,766	$	1,324	0.06	%	$	8,060,328	$	2,152	0.11	%
Regular savings		1,142,854		55	0.02	%		940,369		59	0.03	%
Time deposits		1,766,657		3,104	0.71	%		2,490,432		6,917	1.13	%
Total interest-bearing deposits		11,286,277		4,483	0.16	%		11,491,129		9,128	0.32	%
Other borrowings		511,722		3,042	2.41	%		574,678		3,647	2.57	%
Total interest-bearing liabilities		11,797,999	$	7,525	0.26	%		12,065,807	$	12,775	0.43	%
Noninterest-bearing liabilities:
Demand deposits		5,228,098						4,583,521
Other liabilities		233,287						317,585
Total liabilities		17,259,384						16,966,913
Stockholders' equity		2,660,984						2,719,941
Total liabilities and stockholders' equity	$	19,920,368					$	19,686,854
Net interest income			$	134,267					$	137,951
Interest rate spread					2.96	%					3.03	%
Cost of funds					0.18	%					0.30	%
Net interest margin					3.04	%					3.16	%

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.

-53-

~~(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 interest income 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 (dollars in thousands):

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 in interest income on loans includes the impact of higher accretion of the acquisition-related fair market value adjustments of $324,000 and $996,000 for the three- and nine-month change, respectively.

~~(2)~~ The rate-related change in interest expense on other borrowings includes 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.


	Three Months Ended
	March 31, 2022 vs. March 31, 2021
	Increase (Decrease) Due to Change in:
	Volume		Rate		Total
Earning Assets:
Securities:
Taxable	$	3,724	$	(411)	$	3,313
Tax-exempt		2,373		(826)		1,547
Total securities		6,097		(1,237)		4,860
Loans, net		(6,765)		(6,755)		(13,520)
Other earning assets		(40)		(234)		(274)
Total earning assets	$	(708)	$	(8,226)	$	(8,934)
Interest-Bearing Liabilities:
Interest-bearing deposits:
Transaction and money market accounts	$	81	$	(909)	$	(828)
Regular savings		11		(15)		(4)
Time Deposits		(1,684)		(2,129)		(3,813)
Total interest-bearing deposits		(1,592)		(3,053)		(4,645)
Other borrowings		(384)		(221)		(605)
Total interest-bearing liabilities		(1,976)		(3,274)		(5,250)
Change in net interest income	$	1,268	$	(4,952)	$	(3,684)

The Company’s ~~fully taxable equivalent~~ net interest margin (FTE)⁽⁺⁾ includes the impact of acquisition accounting fair value adjustments. The impact of net accretion related to acquisition accounting fair value adjustments for the first ~~three quarters~~quarter of ~~2017 as well as~~2021, and the ~~remaining estimated net accretion~~first quarter of 2022 are reflected in the following table (dollars in thousands):

Loan

Deposit

Borrowings

Accretion

Accretion (Amortization)

Amortization

Total

For the quarter ended March 31, 2021

4,287

(198)

4,109

For the quarter ended March 31, 2022

2,253

(10)

(203)

2,040

-54-

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

~~NM - Not meaningful~~


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

	(Dollars in thousands)
Noninterest income:
Service charges on deposit accounts	$	7,596	$	5,509	$	2,087	37.9	%
Other service charges, commissions, and fees		1,655		1,701		(46)	(2.7)	%
Interchange fees		1,810		1,847		(37)	(2.0)	%
Fiduciary and asset management fees		7,255		6,475		780	12.0	%
Mortgage banking income		3,117		8,255		(5,138)	(62.2)	%
Bank owned life insurance income		2,697		2,265		432	19.1	%
Loan-related interest rate swap fees		3,860		1,754		2,106	120.1	%
Other operating income		2,163		3,179		(1,016)	(32.0)	%
Total noninterest income	$	30,153	$	30,985	$	(832)	(2.7)	%

Noninterest income ~~declined $1.4 million,~~decreased $832,000 or ~~7.5%,~~2.7% to ~~$17.5~~$30.2 million for the quarter ended ~~September 30, 2017~~March 31, 2022, compared to $31.0 million for the quarter ended ~~September 30, 2016.~~March 31, 2021. The ~~decline~~decrease was primarily ~~due to lower~~driven by a decrease in mortgage banking income of ~~$902,000, driven by declines~~$5.1 million due to a decline in mortgage ~~loan originations compared to the third quarter of 2016~~origination volumes and ~~unrealized losses on mortgage banking derivatives~~a decline in ~~the third quarter of 2017 compared to~~ unrealized gains on ~~mortgage banking derivatives~~equity method investments of $487,000 included within other operating income. These noninterest income declines were partially offset by an increase in ~~the third quarter of 2016. Loan-related~~loan-related interest 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~~of $2.1 million due to ~~increases~~higher transaction volumes, a $2.1 million increase in ~~overdraft~~service charges on deposit accounts, and ~~debit card interchange fees, and gains on sales of securities were $184,000 higher,~~a $780,000 increase 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~~

Table of 2016. Mortgage banking income 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.Contents

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~~

Expense


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

	(Dollars in thousands)
Noninterest expense:
Salaries and benefits	$	58,298	$	52,660	$	5,638	10.7	%
Occupancy expenses		6,883		7,315		(432)	(5.9)	%
Furniture and equipment expenses		3,597		3,968		(371)	(9.3)	%
Technology and data processing		7,796		6,904		892	12.9	%
Professional services		4,090		4,960		(870)	(17.5)	%
Marketing and advertising expense		2,163		2,044		119	5.8	%
FDIC assessment premiums and other insurance		2,485		2,307		178	7.7	%
Other taxes		4,499		4,436		63	1.4	%
Loan-related expenses		1,776		1,877		(101)	(5.4)	%
Amortization of intangible assets		3,039		3,730		(691)	(18.5)	%
Loss on debt extinguishment		—		14,695		(14,695)	(100.0)	%
Other expenses		10,695		7,041		3,654	51.9	%
Total noninterest expense	$	105,321	$	111,937	$	(6,616)	(5.9)	%

Noninterest expense ~~increased $583,000,~~decreased $6.6 million or ~~1.0%,~~5.9% to ~~$57.5~~$105.3 million for the quarter ended ~~September 30, 2017~~March 31, 2022, compared to ~~$56.9~~$111.9 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%,~~March 31, 2021. Excluding amortization of intangible assets ($3.0 million for the quarter ended March 31, 2022 compared to $3.7 million for the ~~third~~ quarter ended March 31, 2021), losses related to balance sheet repositioning ($0 for the quarter ended March 31, 2022 compared to $14.7 million for the quarter ended March 31, 2021), and branch closing and facility consolidation costs ($5.5 million for the quarter ended March 31, 2022 compared to $924,000 for the quarter ended March 31, 2021) adjusted operating noninterest expense⁽⁺⁾ for the quarter ended March 31, 2022 increased by $4.2 million or 4.5% from the prior year quarter. The increase was mainly due to an increase of ~~2016. Salaries~~$5.6 million in salaries and benefits ~~expenses declined~~primarily driven by ~~$724,000 primarily related to decreases~~an increase in ~~benefits~~salaries, wages, and variable incentive compensation, ~~offset~~and an increase of $892,000 in technology and data processing expense primarily driven by ~~increases related to annual merit adjustments. Declines~~an increase in ~~other expenses primarily related to lower fraud-related~~software licensing and ~~other losses of $364,000 as well as $400,000 in nonrecurring branch closing costs recognized in the third quarter of 2016.~~maintenance expenses. These ~~decreases~~noninterest expense category increases were partially offset by a ~~nonrecurring reduction~~decrease of $870,000 in professional services expenses, ~~of approximately $900,000 in other taxes related to historic tax credits realized in the third quarter of 2016 related to the Company's investment in~~ a historic rehabilitation project that was completed in that quarter 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 2016 as well as higher valuation adjustments compared to 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 million, or 5.0%, to $174.8 million for the nine months ended September 30, 2017 compared to $166.4 million for the first nine month of 2016. Excluding merger-related costs of $3.5 million, noninterest expense for the nine months ended September 30, 2017 increased $4.9 million, or 2.9%, compared to the first nine months of 2016. Salaries and benefits expenses increased by $5.4 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 increase in other taxes was partially offset by the$432,000 decrease in FDIC expenses, including assessment premiums and other insurance, due to the impact of the issuance of subordinated debt in the fourth quarter of 2016. The remaining 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, 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 were partially offset by lower intangible amortization expense of $807,000, declines in professional fees of $698,000 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.

~~SEGMENT INFORMATION~~

~~Community Bank Segment~~

For the three months ended September 30, 2017, the community bank segment reported net income of $20.3 million, which was an increase of $695,000 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 an 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 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 were partially offset by 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 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 2016 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%, 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 insuranceoccupancy expenses, and ~~other taxes was primarily related to~~ a ~~nonrecurring reduction~~$371,000 decrease 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 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 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.

equipment expenses.

~~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, 2022 and ~~2016~~2021 was ~~26.7%~~17.5% and ~~23.3%, respectively; the effective tax rate for the nine months ended September 30, 2017 and 2016 was 26.9% and 25.0%~~16.8%, respectively. The increase in the effective tax ~~rate~~rates is primarily ~~related~~due to the lower 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.~~2022.

-56-

Table of Contents

~~BALANCE SHEET~~

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

Overview

Assets

At ~~September 30, 2017,~~March 31, 2022, total assets were ~~$9.0~~$19.8 billion, ~~an increase~~a decrease of ~~$602.6~~$282.4 million or ~~9.6%~~approximately 5.7% (annualized), from ~~$8.4~~$20.1 billion at December 31, ~~2016.~~2021. The ~~increase~~decrease in assets was ~~mostly~~primarily a result of a decrease in cash and cash equivalents related to the deployment of excess liquidity to fund loan ~~growth.~~

~~Loans held for~~growth and deposit run-off. In addition, the Company incurred a decrease in the investment ~~net~~securities portfolio primarily due to a decline in the market value of the AFS securities portfolio, reflecting the impact of a rise in the interest rates.

LHFI (net of deferred fees and ~~costs,~~costs) were ~~$6.9~~$13.5 billion, including $67.4 million in PPP loans, at ~~September 30, 2017,~~March 31, 2022, an increase of ~~$591.7~~$263.5 million or ~~12.5%~~8.1% (annualized), from December 31, ~~2016. Loan growth occurred across all categories. Quarterly average loans~~2021. Excluding the effects of the PPP⁽⁺⁾, LHFI (net of deferred fees and costs) at March 31, 2022 increased ~~$788.8~~$346.4 million or ~~13.1%~~10.8% (annualized) from December 31, 2021. Average loans decreased $763.3 million from March 31, 2021. Excluding the effects of the PPP⁽⁺⁾, the average loan balances at March 31, 2022 increased $443.0 million or 3.5% from March 31, 2021. Refer to "Loan Portfolio" within Item 2 and Note 3 "Loans and Allowance for ~~the quarter ended September 30, 2017 compared to the quarter ended September 30, 2016. For~~Loan and Lease Losses" in Part I, Item 1 of this Quarterly Report for additional information on the Company’s loan ~~activity, please refer~~activity.

Liabilities and Stockholders’ Equity

At March 31, 2022, total liabilities were $17.3 billion, a decrease of $70.6 million from $17.4 billion at December 31, 2021.

Total deposits at March 31, 2022 were $16.5 billion, a decrease of $126.8 million or approximately 3.1% (annualized) from December 31, 2021. For the quarter ended March 31, 2022, quarterly average deposits increased $439.7 million or 2.7% compared to ~~“Loan Portfolio”~~the quarter ended March 31, 2021 primarily due to additional liquidity of bank customers since the start of COVID-19 and increased savings. Refer to “Deposits” within this Item 2 for further discussion on this topic.

Total short-term and long-term borrowings at March 31, 2022 were $504.0 million, a decrease of $2.6 million or 0.5% when compared to $506.6 million at December 31, 2021. Refer to Note ~~3 “Loans and Allowance~~6 “Borrowings” in Part I, Item I for ~~Loan Losses”~~further discussion on this topic.

At March 31, 2022, stockholders’ equity was $2.5 billion, a decrease of $211.7 million from December 31, 2021. Refer to “Capital Resources” within this Item 2, as well as Note 9 "Stockholders’ Equity" in Part I, Item 1 ~~“Financial Statements”~~ of this ~~report.~~

~~Liabilities~~Quarterly Report for additional information on the Company’s capital resources.

For information related to the Company’s stock repurchase activity and ~~Stockholders’ Equity~~

~~At September 30, 2017, total liabilities were $8.0 billion, an increase~~the Repurchase Program, please refer to Note 9 “Stockholders’ Equity” in Part I, Item 1 and Part II, Item 2 of ~~$562.3 million from December 31, 2016.~~

~~Total deposits were $6.9 billion at September 30, 2017, an increase~~this Quarterly Report.

During the first quarter of ~~$502.3 million, or 10.5% (annualized)~~2022, the Company declared and paid a quarterly dividend on the outstanding shares of Series A preferred stock of $171.88 per share (equivalent to $0.43 per outstanding depositary share), ~~from December 31, 2016. Deposits increased in all categories~~consistent with the ~~exception~~fourth quarter of ~~savings accounts when compared to year-end 2016, but was primarily driven by increases in demand~~2021 and ~~interest-bearing deposits consisting~~the first quarter of ~~NOW and money market accounts. Quarterly average deposits increased $592.9 million, or 9.6%, for~~2021. During the first 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 capital ratios continue to exceed the minimum capital requirements for regulatory purposes but have decreased from prior periods primarily due to asset growth. The total risk-based 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, at the same dates.

~~Also,~~2022, the Company also declared and paid a cash dividend of ~~$0.20~~$0.28 per common share, ~~during~~consistent with the ~~third~~fourth quarter of ~~2017,~~2021, and an increase of ~~$0.01 per share,~~$0.03, or ~~5.3%~~approximately 12.0%, compared to the ~~dividend paid during the same~~first quarter ~~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.~~of 2021.

-57-

~~Securities~~

Table of Contents

Securities

At ~~September 30, 2017,~~March 31, 2022, the Company had total investments in the amount of ~~$1.2~~$4.0 billion, or ~~13.8 %~~20.4% of total assets, as compared to ~~$1.2~~$4.2 billion, or ~~14.3%~~20.9% of total assets, at December 31, ~~2016.~~2021. This decline in the Company’s investment portfolio was primarily due to a decline in the market value of the AFS securities 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,
	2022		2021
Available for Sale:
U.S. government and agency securities	$	68,039	$	73,849
Obligations of states and political subdivisions		888,300		1,008,396
Corporate and other bonds		183,923		153,376
MBS
Commercial		434,491		471,157
Residential		1,616,882		1,773,232
Total MBS		2,051,373		2,244,389
Other securities		1,645		1,640
Total AFS securities, at fair value		3,193,280		3,481,650
Held to Maturity:
U.S. government and agency securities		2,483		2,604
Obligations of states and political subdivisions		684,294		620,873
MBS
Commercial		31,221		4,523
Residential		38,874		—
Total MBS		70,095		4,523
Total held to maturity securities, at carrying value		756,872		628,000
Restricted Stock:
FRB stock		67,032		67,032
FHLB stock		10,001		9,793
Total restricted stock, at cost		77,033		76,825
Total investments	$	4,027,185	$	4,186,475

-58-

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

Weighted average yield ⁽¹⁾

~~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. 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 the Company’s overall liquidity to be sufficient to satisfy its depositors’ requirements and to meet its customers’ credit needs.

The Company has continued to see elevated customer deposit balances as a result of the impacts of COVID-19, including as a result of government stimulus programs. The Company considers a portion of the increases in customer deposits to be temporary, which it expects will result in outflows in subsequent quarters.

As of ~~September 30, 2017,~~March 31, 2022, liquid assets totaled ~~$2.6~~$5.1 billion or ~~29.2%,~~25.7% of total assets, and liquid earning assets totaled ~~$2.5~~$4.9 billion or ~~30.6%~~27.7% 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, 2022, loan payments of approximately ~~$2.3~~$4.3 billion or ~~32.9%~~32.2% of total loans are ~~scheduled to mature~~expected within one year based on contractual ~~maturity,~~terms, adjusted for expected prepayments, and approximately ~~$156.3~~$332.8 million or ~~12.6%~~8.3% 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.

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.

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


			Less than		More than
	Total		1 year		1 year
Long-term debt ⁽¹⁾	$	250,000	$	-	$	250,000
Trust preferred capital notes ⁽¹⁾		155,159		-		155,159
Leases ⁽²⁾		214,071		37,728		176,343
Repurchase agreements		115,027		115,027		-
Total contractual obligations	$	734,257	$	152,755	$	581,502

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

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

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.

-60-

Table of Contents

Loan Portfolio

~~Loans held for investment,~~

LHFI, net of deferred fees and costs, were ~~$6.9~~$13.5 billion at ~~September 30, 2017, $6.3~~March 31, 2022, and $13.2 billion at December 31, ~~2016,~~2021. Commercial & industrial loans and ~~$6.1 billion at September 30, 2016, respectively. Commercial~~commercial real ~~estate - non-owner~~estate-non-owner occupied loans ~~continue to represent~~represented the Company’s largest ~~category, comprising 25.3% of~~categories at March 31, 2022. Commercial and industrial loans included approximately $66.3 million in loans from the ~~total~~PPP loan ~~portfolio at September 30, 2017.~~

~~The following table presents the Company’s composition of loans held for investment, net of deferred fees and costs, in dollar amounts and as a percentage of total gross loans~~program 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 %

March 31, 2022.

The following table presents the remaining maturities, based on contractual maturity, by loan type and by rate type (variable or fixed), as of ~~September 30, 2017~~March 31, 2022 (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

969,059

361,917

462,982

401,318

60,399

1,265

144,160

84,211

25,101

34,848

Commercial Real Estate - Owner Occupied

2,007,671

185,951

645,878

120,766

506,347

18,765

1,175,842

475,436

669,873

30,533

Commercial Real Estate - Non-Owner Occupied

3,875,681

406,424

2,086,321

913,994

1,154,467

17,860

1,382,936

984,951

341,157

56,828

Multifamily Real Estate

723,940

70,472

427,586

107,912

319,674

—

225,882

158,757

67,125

—

Commercial & Industrial

2,540,680

404,695

1,284,023

1,072,807

204,842

6,374

851,962

530,090

311,456

10,416

Residential 1-4 Family - Commercial

569,801

85,334

113,904

30,156

74,497

9,251

370,563

269,226

89,083

12,254

Residential 1-4 Family - Consumer

824,163

5,101

177,437

1,978

28,868

146,591

641,625

8,281

71,942

561,402

Residential 1-4 Family - Revolving

568,403

32,738

480,322

33,433

135,698

311,191

55,343

2,256

16,796

36,291

Auto

499,855

3,061

—

496,794

189,760

307,034

—

Consumer

171,875

12,644

24,230

21,357

2,180

693

135,001

56,921

52,695

25,385

Other Commercial

708,221

67,034

112,152

7,975

71,172

33,005

529,035

156,029

246,938

126,068

Total LHFI

13,459,349

1,635,371

5,814,835

2,711,696

2,558,144

544,995

6,009,143

2,915,918

2,199,200

894,025

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,~~March 31, 2022, the largest components of the Company’s loan portfolio consisted of commercial real estate ~~loans, residential 1-4 family loans,~~ and ~~construction and land development~~commercial & industrial loans. The risks attributable to these concentrations are mitigated by the Company’s credit underwriting and monitoring processes, including oversight by a centralized credit administration function and credit policy and risk management committee, as well as seasoned bankers focusing their lending to borrowers with proven track records in markets with which the Company is familiar. ~~UMG primarily serves~~

The Company had no short-term loan modifications related to COVID-19 as ~~a secondary mortgage banking operation, selling the majority~~ of ~~its~~March 31, 2022 and had insignificant short-term loan ~~production in the secondary market or selling loans~~modifications related to ~~meet the Bank’s current asset/liability management needs.~~COVID-19 as of December 31, 2021.

-61-

Table of Contents

Asset Quality

Overview

At ~~September 30, 2017,~~March 31, 2022, the Company ~~had higher levels of~~experienced decreases in NPAs compared to December 31, ~~2016~~2021 and ~~September 30, 2016, due to the increase~~decreases 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 inaccruing 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~~as a percentage of total LHFI compared to the ~~nine months ended September 30, 2016, as some of~~prior year end. Net charge-offs decreased $1.2 million from the ~~nonaccrual additions earlier in 2017~~prior year and were ~~charged off during the third quarter of 2017. The provision for loan losses also increased~~insignificant for the ~~nine months~~quarter ended ~~September 30, 2017 compared to the nine months ended September 30, 2016, as a result of the~~March 31, 2022. The ACL increased ~~charge-offs and loan growth during 2017. The allowance for loan losses at September 30, 2017 was consistent with December 31, 2016.~~

~~All nonaccrual and past due loan metrics discussed below exclude PCI loans totaling $51.0 million (net of fair value mark of $11.7 million) at September 30, 2017.~~

~~Troubled Debt Restructurings~~

The total recorded investment in TDRs as of September 30, 2017 was $19.2 million, an increase of $3.8 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%,~~ from December 31, ~~2016~~2021 primarily due to increased uncertainty in the macroeconomic outlook and ~~an increase~~the impact of ~~$5.6~~loan growth in the first quarter of 2022.

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

Nonperforming Assets

At March 31, 2022, NPAs totaled $30.7 million, a decrease of $2.1 million or ~~24.2%,~~6.3% from ~~September 30, 2016. In addition,~~December 31, 2021. NPAs as a percentage of total outstanding loans ~~increased 10 basis points to 0.42%~~ at ~~September 30, 2017~~March 31, 2022 were 0.23%, a decrease of 2 bps 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.~~

2021.

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


	March 31,			December 31,
	2022			2021
Nonaccrual loans	$	29,032		$	31,100
Foreclosed properties		1,696			1,696
Total NPAs		30,728			32,796
Loans past due 90 days and accruing interest		8,247			9,132
Total NPAs and loans past due 90 days and accruing interest	$	38,975		$	41,928
Performing TDRs	$	12,157		$	10,313

Balances
Allowance for loan and lease losses	$	102,591		$	99,787
Allowance for credit losses		110,591			107,787
Average loans, net of deferred fees and costs		13,300,789			13,082,412
Loans, net of deferred fees and costs		13,459,349			13,195,843

Ratios
Nonaccrual loans to total loans		0.22	%		0.24	%
NPAs to total loans		0.23	%		0.25	%
NPAs & loans 90 days past due and accruing interest to total loans		0.29	%		0.32	%
NPAs to total loans & foreclosed property		0.23	%		0.25	%
NPAs & loans 90 days past due and accruing interest to total loans & foreclosed property		0.29	%		0.32	%
ALLL to nonaccrual loans		353.37	%		320.86	%
ALLL to nonaccrual loans & loans 90 days past due and accruing interest		275.20	%		248.03	%
ACL to nonaccrual loans		380.93	%		346.58	%

-62-

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 at ~~September 30, 2017~~March 31, 2022 included ~~$20.1~~$29.0 million in nonaccrual loans, a net ~~increase~~decrease of ~~$10.1~~$2.1 million or ~~101.8%,~~6.6% from December 31, ~~2016 and a net increase of $7.4 million, or 58.7%, from September 30, 2016.~~2021. The following table shows the activity in nonaccrual loans 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,
	2022		2021
Beginning Balance	$	31,100	$	35,472
Net customer payments		(4,132)		(5,068)
Additions		2,087		1,294
Charge-offs		(23)		(598)
Ending Balance	$	29,032	$	31,100

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


	March 31,			December 31,
	2022			2021
Construction and Land Development	$	869		$	2,697
Commercial Real Estate - Owner Occupied		4,865			5,637
Commercial Real Estate - Non-owner Occupied		3,287			3,641
Multifamily Real Estate		—			113
Commercial & Industrial		1,975			1,647
Residential 1-4 Family - Commercial		2,239			2,285
Residential 1-4 Family - Consumer		12,039			11,397
Residential 1-4 Family - Revolving		3,371			3,406
Auto		333			223
Consumer		54			54
Total	$	29,032		$	31,100
Coverage Ratio⁽¹⁾		353.37	%		320.86	%

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, 2022, past due loans ~~were $34.3~~still accruing interest totaled $29.6 million or ~~0.50%~~0.22% of total ~~loans,~~LHFI, compared to ~~$27.9~~$29.9 million or ~~0.44%~~0.23% of total ~~loans,~~LHFI at December 31, ~~2016 and $26.9 million, or 0.44% of total loans, at September 30, 2016.~~2021. Of the total past due loans still accruing interest, ~~at September 30, 2017, $4.5~~$8.2 million or ~~0.07%~~0.06% of total ~~loans,~~LHFI were past due 90 days or more at March 31, 2022, compared to ~~$3.0~~$9.1 million or ~~0.05%~~0.07% of total ~~loans,~~LHFI at December 31, ~~2016~~2021.

Troubled Debt Restructurings

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 ~~$3.5~~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 below market, conversion to interest only, principal forgiveness and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral.

The total recorded investment in TDRs at March 31, 2022 was $19.7 million, an increase of $1.7 million or ~~0.06%~~9.8% from $18.0 million at December 31, 2021. Of the $19.7 million of ~~total loans,~~TDRs at ~~September 30, 2016. As~~March 31, 2022, $12.2 million or 61.7% were considered performing, while the ~~Company's past due loan levels have been~~remaining $7.5 million were considered nonperforming. Of the $18.0 million of TDRs at ~~historic lows over~~December 31, 2021, $10.3 million or 57.4% were considered performing while the ~~last several quarters, certain changes~~remaining $7.6 million were considered nonperforming. Loans are removed from ~~quarter to quarter might stand out~~TDR status in ~~comparison to one another but have an insignificant impact on~~accordance with the ~~Company's overall asset quality position.~~established policy described in Note 1 “Summary of Significant Accounting Policies” in Item 8 “Financial Statements and Supplementary Data” in the Company’s 2021 Form 10-K.

-63-

Table of Contents

Net Charge-offs

For the quarter ended ~~September 30, 2017,~~March 31, 2022, net charge-offs were ~~$4.1 million, or 0.24%~~less than 0.01% of average loans on an annualized basis, compared to ~~$929,000,~~$1.2 million or ~~0.06%,~~0.03% for the first quarter of 2021. The net charge-offs of loans continue to be insignificant, driven by benign credit impacts since the pandemic began.

Provision for Credit Losses

The Company recorded a provision for credit losses of $2.8 million for the quarter ended ~~September 30, 2016. Of~~March 31, 2022, an increase of $16.4 million compared to the ~~net charge-offs in~~negative provision for credit losses of $13.6 million recorded during the ~~third~~same quarter of 2017, the majority were previously considered impaired. For the nine months ended September 30, 2017, net charge-offs were $7.4 million, or 0.15% of total average loans on annualized basis, compared to $4.7 million, or 0.11%, for the same period in 2016. Of the net charge-offs during 2017, the majority were previously considered impaired.

~~Provision for Loan Losses~~

2021. The provision for ~~loan~~credit losses for the first quarter ~~ended September 30, 2017 was $3.1~~of 2022 reflected a provision of $2.8 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 million compared to $7.2 million for the nine months ended September 30, 2016. The~~and no provision for unfunded commitments.

Allowance for Credit Losses

At March 31, 2022, the ACL was $110.6 million and included an ALLL of $102.6 million and an RUC of $8.0 million. The ACL increased $2.8 million from December 31, 2021, primarily due to increased uncertainty in the macroeconomic outlook and the impact of loan ~~losses increased~~growth in the first ~~nine months~~quarter of ~~2017 compared to the same period in 2016, primarily driven by higher loan balances and higher charge-off levels.~~

~~Allowance for Loan Losses~~

~~At both September 30, 2017 and December 31, 2016, the allowance for loan losses was $37.2 million.~~ 2022.

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, loan growth, delinquency trends, and other credit risk factors that the Company considers important in assessing the adequacy of the allowance for loan losses. The allowance for loan lossesACL as a percentage of the total loan portfolio and as a percentage of total adjusted loans⁽⁺⁾was ~~0.54%~~0.82% and 0.83%, respectively, at ~~September 30, 2017 compared to 0.59% at both~~March 31, 2022 and December 31, ~~2016 and September 30, 2016. The decline is primarily related to lower specific reserves as well as declining historical loss factors.~~

2021.

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


	March 31,			December 31,
	2022			2021
Total ALLL	$	102,591		$	99,787
Total RUC		8,000			8,000
Total ACL	$	110,591		$	107,787

ALLL to total loans		0.76	%		0.76	%
ACL to total loans		0.82	%		0.82	%

-64-

Table of Contents

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


	March 31,									March 31,
	2022									2021
	Commercial			Consumer			Total			Commercial			Consumer			Total
Loans charged-off	$	(759)		$	(750)		$	(1,509)		$	(1,974)		$	(1,667)		$	(3,641)
Recoveries		726			787			1,513			1,606			863			2,469
Net charge-offs	$	(33)		$	37		$	4		$	(368)		$	(804)		$	(1,172)
Net charge-offs to average loans⁽¹⁾		0.00	%		(0.01)	%		0.00	%		0.01	%		0.16	%		0.03	%

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 %

⁽¹⁾Annualized

The following table shows ~~both an allocation~~the ACL 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~~portfolio that the related ~~outstanding loan balances to total loans~~ACL covers as of the quarters ended (dollars in thousands):


	March 31,									December 31,
	2022									2021
	Commercial			Consumer			Total			Commercial			Consumer			Total
ACL	$	87,182		$	23,409		$	110,591		$	85,323		$	22,464		$	107,787
Loan %⁽¹⁾		84.7	%		15.3	%		100.0	%		84.7	%		15.3	%		100.0	%
ACL to total loans		0.77	%		1.13	%		0.82	%		0.76	%		1.11	%		0.82	%

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.~~

loans

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

Deposits

As of ~~September 30, 2017,~~March 31, 2022, total deposits were ~~$6.9~~$16.5 billion, ~~an increase~~a decrease of ~~$502.3~~$126.8 million or ~~10.5% (annualized),~~3.1% annualized from December 31, ~~2016.~~2021. Total interest-bearing deposits consist of NOW, money market, savings, and time deposit account balances. Total time deposit balances of ~~$1.3~~$1.7 billion accounted for ~~24.7%~~15.1% of total interest-bearing deposits at ~~September 30, 2017.~~

March 31, 2022, compared to $1.9 billion and 16.3% at December 31, 2021.

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


	March 31, 2022				December 31, 2021
			% of total				% of total
Deposits:	Amount		deposits		Amount		deposits
Non-interest bearing	$	5,370,063	32.6	%	$	5,207,324	31.3	%
NOW accounts		4,121,257	25.0	%		4,176,032	25.1	%
Money market accounts		4,151,155	25.2	%		4,249,858	25.6	%
Savings accounts		1,166,922	7.1	%		1,121,297	6.8	%
Time deposits of $250,000 and over		365,796	2.2	%		452,193	2.7	%
Other time deposits		1,309,030	7.9	%		1,404,364	8.5	%
Total Deposits ⁽¹⁾	$	16,484,223	100.0	%	$	16,611,068	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 %

⁽¹⁾ Includes uninsured deposits of $5.7 billion and $5.9 billion as of March 31, 2022 and December 31, 2021, respectively. Amounts are based on estimated amounts of uninsured deposits as of the reported period.

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 of September 30, 2017 and December 31, 2016, there~~There were ~~$19.4 million and $0, respectively,~~no purchased certificates of deposit included in certificates of deposit on the Company’s Consolidated Balance ~~Sheets.~~

-65-

Table of Contents

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

Maturities of uninsured time deposits in excess of FDIC limits as of ~~September 30, 2017~~March 31, 2022 and December 31, 2021 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, 2022		December 31, 2021
	Amount		Amount
Within 3 Months	$	19,862	$	42,696
3 - 6 Months		68,788		30,313
6 - 12 Months		85,752		101,942
Over 12 Months		39,191		104,242
Total	$	213,593	$	279,193

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,~~shareholders.

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

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

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

The Federal Reserve issued final rules to include technical changes to its market risk capital rules to align them with the Basel III regulatory capital framework and meet certain requirements of the Dodd-Frank Act. Effective January 1, 2015, the final rules requirerequires the Company and the Bank to 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. Beginning in 2022, the transition amount will begin to impact regulatory capital by phasing it in over a three-year period ending in 2024.

-66-

Table of Contents

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,
	2022	2021	2021
Common equity Tier 1 capital	$ 1,557,135	$ 1,569,752	$ 1,547,675
Tier 1 capital	1,723,491	1,736,108	1,714,031
Tier 2 capital	454,002	437,435	374,101
Total risk-based capital	2,177,493	2,173,543	2,088,132
Risk-weighted assets	15,795,239	15,336,432	14,651,486
Capital ratios:
Common equity Tier 1 capital ratio	9.86%	10.24%	10.56%
Tier 1 capital ratio	10.91%	11.32%	11.70%
Total capital ratio	13.79%	14.17%	14.25%
Leverage ratio (Tier 1 capital to average assets)	9.08%	9.01%	9.18%
Capital conservation buffer ratio ⁽¹⁾	4.91%	5.32%	5.70%
Common equity to total assets	11.79%	12.68%	12.81%
Tangible common equity to tangible assets ⁽⁺⁾	7.21%	8.20%	8.24%

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 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, 2022 are estimates and subject to change pending the Company’s filing of its FR Y9-C. All other periods are presented as filed.

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

For the quarter ended March 31, 2022, the Company’s common equity to total assets capital ratio and the tangible common equity to tangible assets capital ratio decreased from the prior quarter primarily due to the unrealized losses on the AFS securities portfolio recorded in OCI due to market interest rate increases in the first quarter of 2022.

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

-67-

Table of Contents

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,
	2022			2021
Interest Income (FTE)
Interest and dividend income (GAAP)	$	138,456		$	147,673
FTE adjustment		3,336			3,053
Interest and dividend income FTE (non-GAAP)	$	141,792		$	150,726
Average earning assets	$	17,885,018		$	17,692,095
Yield on interest-earning assets (GAAP)		3.14	%		3.39	%
Yield on interest-earning assets (FTE) (non-GAAP)		3.22	%		3.46	%
Net Interest Income (FTE)
Net interest income (GAAP)	$	130,931		$	134,898
FTE adjustment		3,336			3,053
Net interest income (FTE) (non-GAAP)	$	134,267		$	137,951
Noninterest income (GAAP)		30,153			30,985
Total revenue (FTE) (non-GAAP)	$	164,420		$	168,936
Average earning assets	$	17,885,018		$	17,692,095
Net interest margin (GAAP)		2.97	%		3.09	%
Net interest margin (FTE) (non-GAAP)		3.04	%		3.16	%

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

~~Operating~~

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


	Three Months Ended
	March 31,			December 31,			March 31,
	2022			2021			2021
Tangible Assets
Ending Assets (GAAP)	$	19,782,430		$	20,064,796		$	19,854,612
Less: Ending goodwill		935,560			935,560			935,560
Less: Ending amortizable intangibles		40,273			43,312			53,471
Ending tangible assets (non-GAAP)	$	18,806,597		$	19,085,924		$	18,865,581
Tangible Common Equity
Ending Equity (GAAP)	$	2,498,335		$	2,710,071		$	2,709,732
Less: Ending goodwill		935,560			935,560			935,560
Less: Ending amortizable intangibles		40,273			43,312			53,471
Less: Perpetual preferred stock		166,357			166,357			166,357
Ending tangible common equity (non-GAAP)	$	1,356,145		$	1,564,842		$	1,554,344
Average equity (GAAP)	$	2,660,984		$	2,715,610		$	2,719,941
Less: Average goodwill		935,560			935,560			935,560
Less: Average amortizable intangibles		41,743			44,866			55,450
Less: Average perpetual preferred stock		166,356			166,356			166,356
Average tangible common equity (non-GAAP)	$	1,517,325		$	1,568,828		$	1,562,575
Common equity to total assets (GAAP)		11.79	%		12.68	%		12.81	%
Tangible common equity to tangible assets (non-GAAP)		7.21	%		8.20	%		8.24	%
Book value per share (GAAP)	$	31.12		$	33.80		$	32.37
Tangible book value per share (non-GAAP)	$	18.10		$	20.79		$	19.78

Adjusted operating measures exclude ~~merger-related~~the losses related to balance sheet repositioning (principally composed of losses on debt extinguishment), gains on sale of securities, as well as branch closing and facility consolidation costs ~~unrelated to the Company’s normal operations. Such costs were only incurred during the second~~(principally composed of 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 associated with branch closing and ~~nine months ended September 30, 2016.~~corporate 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. Prior periods in this Quarterly Report have been adjusted for previously announced branch closing and corporate expense reduction initiatives.

-68-

Table of Contents

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

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

Adjusted operating measures exclude the amortization of intangible assets and the losses related to balance sheet repositioning, principally composed of losses on debt extinguishment and gains on sale of securities. The Company believes this adjusted measure provides investors with important information about the combined economic results of the organization’s operations. The adjusted operating efficiency ratio (FTE) excludes the amortization of intangible assets and losses related to balance sheet repositioning (principally composed of losses on debt extinguishment), as well as branch closing and facility consolidation costs. This measure is similar to the measure utilized by the Company when analyzing corporate performance and is also similar to the measure utilized for incentive compensation. Net interest income (FTE) and total adjusted revenue (FTE), which are used in computing net interest margin (FTE) and adjusted operating efficiency ratio (FTE), respectively, provide valuable additional insight into the net interest margin and the efficiency ratio by adjusting for differences in tax treatment of interest income sources. The entire FTE adjustment is attributable to interest income on earning assets, which is used in computing yield on earning assets. Interest expense and the related cost of interest-bearing liabilities and cost of funds ratios are 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,
	2022			2021
Adjusted Operating Noninterest Expense, Noninterest Income & Efficiency Ratio
Noninterest expense (GAAP)	$	105,321		$	111,937
Less: Amortization of intangible assets		3,039			3,730
Less: Losses related to balance sheet repositioning		—			14,695
Less: Branch closing and facility consolidation costs		5,508			924
Adjusted operating noninterest expense (non-GAAP)	$	96,774		$	92,588
Noninterest income (GAAP)	$	30,153		$	30,985
Less: Gains on sale of securities		—			78
Adjusted operating noninterest income (non-GAAP)	$	30,153		$	30,907
Net interest income (FTE) (non-GAAP)	$	134,267		$	137,951
Adjusted operating noninterest income (non-GAAP)		30,153			30,907
Total adjusted revenue (FTE)(non-GAAP)	$	164,420		$	168,858
Efficiency ratio (GAAP)		65.38	%		67.48	%
Adjusted operating efficiency ratio (FTE) (non-GAAP)		58.86	%		54.83	%

-69-

Table of Contents

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

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

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


	Three Months Ended
	March 31,		December 31,		March 31,
	2022		2021		2021
Adjusted Loans
Loans held for investment (net of deferred fees and costs)(GAAP)	$	13,459,349	$	13,195,843	$	14,272,280
Less: PPP adjustments (net of deferred fees and costs)		67,444		150,363		1,512,714
Total adjusted loans (non-GAAP)	$	13,391,905	$	13,045,480	$	12,759,566

Average loans held for investment (net of deferred fees and costs) (GAAP)	$	13,300,789	$	13,082,412	$	14,064,123
Less: Average PPP adjustments (net of deferred fees and costs)		103,041		288,204		1,309,326
Total adjusted average loans (non-GAAP)	$	13,197,748	$	12,794,208	$	12,754,797

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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 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 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 interest rate risk in the Company, the distribution of risk along the yield curve, the level of risk through time, and the amount of exposure to changes in certain interest rate relationships. Static gap, which measures aggregate re-pricing values, is less utilized because it does not effectively measure the options risk impact on the Company and is not addressed here. Earnings simulation and economic value models, which more effectively measure the cash flow and optionality impacts, are utilized by management on a regular basis and are explained 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 Analysis

Management uses simulation analysis 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 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 above.

Assumptions used in the model are derived from historical trends and management’s outlook and include loan and deposit growth rates and projected yields and rates. These assumptions may not materialize and unanticipated events and circumstances may occur. The model also does not take into account any future actions of management to mitigate the impact of interest rate changes. Such assumptions are monitored by management and periodically adjusted as appropriate. All maturities, calls, and prepayments in the securities portfolio are assumed to be reinvested in like instruments. ~~Mortgage loans and mortgage-backed securities~~MBS prepayment assumptions are based on industry estimates of prepayment speeds for portfolios with similar coupon ranges and seasoning. Different interest rate scenarios and yield curves are used to measure the sensitivity of earnings to changing interest rates.

-70-

Table of Contents

Interest rates on different asset and liability accounts move differently when the prime rate changes and 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, 2022, December 31, 2021, 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 )

March 31, 2021:


	Change In Net Interest Income
	March 31,	December 31,	March 31,
	2022	2021	2021
	%	%	%
Change in Yield Curve:
+300 basis points	15.55	30.15	14.71
+200 basis points	10.42	20.39	9.80
+100 basis points	5.36	10.33	4.76
Most likely rate scenario	—	—	—
-100 basis points	(7.40)	(9.20)	(3.92)
-200 basis points	(14.17)	(13.62)	(5.02)

Asset sensitivity indicates that in a rising interest rate environment, the Company’s net interest income would increase and in a decreasing interest rate environment, the Company’s net interest income would decrease. Liability sensitivity indicates that in a rising interest rate environment, the Company’s 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,~~

From a net interest income perspective, the Company was ~~less~~more asset sensitive ~~in a rising interest rate environment scenario when~~as of March 31, 2022, compared to ~~September 30, 2016~~its position as of March 31, 2021. 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 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~~

Economic Value Simulation

Economic value simulation is used to calculate the estimated fair value of assets and liabilities over different interest rate environments. 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 same assumptions are used in the economic value simulation as in the earnings simulation. The economic value simulation uses instantaneous rate shocks to the balance sheet.

-71-

Table of Contents

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, 2022, December 31, 2021, 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, 2021:


	Change In Economic Value of Equity
	March 31,	December 31,	March 31,
	2022	2021	2021
	%	%	%
Change in Yield Curve:
+300 basis points	(9.59)	(6.85)	5.79
+200 basis points	(6.16)	(3.55)	4.58
+100 basis points	(2.90)	(1.22)	2.86
Most likely rate scenario	-	—	—
-100 basis points	0.56	(4.82)	(5.62)
-200 basis points	(3.93)	(12.89)	(7.29)

As of ~~September 30, 2017,~~March 31, 2022, 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, 2021 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, 2022. 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, 2022, 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 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, 2022. There have been no changes during the quarter ended March 31, 2022 that ~~has~~have materially affected, or isare reasonably likely to materially affect, the internal control over financial reporting.

-72-

Table of Contents

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 operations, the Company and its subsidiaries are parties 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.~~

~~ITEM 1A – RISK FACTORS~~

Company, subject to the potential outcomes of previously disclosed proceedings. There have been no material changes with respect to the Company’s previously disclosed proceedings.

ITEM 1A – RISK FACTORS

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

An investment in the ~~fiscal year ended December 31, 2016 and~~Company’s securities involves risks. In addition to the ~~Company's~~other information set forth in this Quarterly Report, ~~on Form 10-Q for~~including the ~~quarter ended June 30, 2017.~~

information addressed under “Forward-Looking Statements,” investors in the Company’s securities should carefully consider the factors discussed in the Company’s 2021 Annual Report. 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.

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

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

-73-

Table of Contents

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


Period	Total number of shares purchased⁽¹⁾	Average price paid per share ($)⁽²⁾	Total number of shares purchased as part of publicly announced plans or programs	Approximate dollar value of shares that may yet be purchased under the plans or programs ($)⁽²⁾
January 1 - January 31, 2022	169,879	39.53	156,303	93,838,742
February 1 - February 28, 2022	245,758	40.31	199,383	85,816,177
March 1 - March 31, 2022	277,980	39.53	274,005	74,981,173
Total	693,617	39.80	629,691

^{_________________________________________}

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

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

-74-



	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



	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



	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